Riverview Projects Pty Ltd v Elleray & Anor
[2007] VSC 150
•18 May 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 5210 of 2007
| RIVERVIEW PROJECTS PTY LTD (ACN 069 234 000) | Plaintiff |
| v | |
| MARA ELLERAY | First |
| and | Defendant |
REGISTRAR OF TITLES Second
Defendant
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JUDGE: | WILLIAMS J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27April 2007 | |
DATE OF JUDGMENT: | 18 May 2007 | |
CASE MAY BE CITED AS: | Riverview Projects P/L v Elleray & Registrar of Titles | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 150 | |
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REAL PROPERTY – Transfer of Land Act 1958 (Vic) – Application for removal of caveat – Company registered proprietor of property –Cohabitation agreement referring to property – Proceeding by first defendant seeking orders under Part IX of Property Law Act 1958 - Balance of convenience
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G Hardy | The Law Offices of Barry Fried |
| For the First Defendant | Mr K McFarlane | JC Lawyers |
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TABLE OF CONTENTS
The application................................................................................................................................... 2
Section 90(3)......................................................................................................................................... 2
The facts............................................................................................................................................... 2
The County Court proceeding......................................................................................................... 6
Submissions........................................................................................................................................ 7
Conclusion........................................................................................................................................... 8
HER HONOUR:
The application
This is an application by the plaintiff (“Riverview”) under s 90(3) of the Transfer of Land Act 1958 (“the Act”) for the removal of a caveat, lodged on 8 December 2006 by the first defendant (“Ms Elleray”), claiming an interest “pursuant to a constructive or implied trust” in the property known as 46 Hillsyde Parade, Strathmore, Victoria (“the property”).
The second defendant has notified the Court that she does not intend to participate in the proceeding and will abide by the result.
Section 90(3)
The Court has a wide discretion under s 90(3).[1] The onus is on the caveator to justify the maintenance of the caveat[2]. The caveator must persuade the Court that there is a serious question to be tried as to the existence of the equitable interest claimed to support the caveat[3]. If there is a serious question to be tried, the Court will not normally order the removal of the caveat on the basis of affidavit evidence. However, where the balance of convenience favours it, the caveat will be removed.
[1]Commercial Bank of Australia Limited v Shierholter [1981] VR 292 per Young CJ at [295].
[2]Lewenberg & Pryles v Direct Acceptance Corp Limited [1981] VR 344 per O’Bryan J at [347].
[3]Darnel Pty Ltd v Bigic [2003] VSC 13 per Balmford J at [8].
The interest of a beneficiary under a constructive or an implied trust could support a caveat[4].
[4]See: McMahon v McMahon [1979] VR 239.
The facts
A number of factual matters are uncontentious and others are disputed. I will indicate those about which there is no agreement. I note that I have accepted any uncontradicted allegations by either party as common ground.
Riverview was incorporated on 1 May 1995. Mr Paul Schneider, the former partner of Ms Elleray, is one of two directors of Riverview. He is also the company secretary and holds 9 of Riverview’s 10 issued shares. Mr Schneider’s sister, Ms Helene Woods, is the other Riverview director and she holds the remaining single share. Riverview’s principal place of business is shown as the property on relevant ASIC records.
Riverview has been the registered proprietor of the property since 16 March 1998. Before Riverview bought the property, Mr Schneider and Ms Elleray approached the ANZ Bank for a loan to enable them to purchase a residential property in which they would live together. They obtained the bank’s approval for a loan. Ms Elleray found the property and took Mr Schneider to see it. Eventually it was purchased by Riverview.
Mr Schneider and Ms Elleray lived together in a domestic relationship between 1997 and 2006. The property was their primary residence. They each had children from previous relationships and those children lived with them at the property from time to time.
Mr Schneider and Ms Elleray made a cohabitation agreement by a deed dated 20 November 1997 (“the agreement”). The agreement recited that :
·they intended to start living together in “a de facto relationship” on or about 12 December 1997;
·they did not have children together but had children from previous marriages;
·they were entering into the deed because they wanted to maintain separately owned property;
·they wanted to “crystallise other financial matters” between them; and
·each party had been independently advised by a legal representative.
The agreement went on to provide, significantly according to counsel for Riverview, that :
(iii)[Ms Elleray] agrees that she has no claim, right or entitlement of any kind, now or in the future, to the Hillsyde Parade property or any other property held by the owner now or in the future.
The agreement has an annexed “Solicitor’s Certificate”, according to which a solicitor certified that he had advised his client, Ms Elleray, “about the legal effect of this agreement”.
The parties’ respective affidavits give differing accounts as to the events surrounding Riverview’s purchase of the property.
In her affidavit sworn on 24 April 2007, Ms Elleray deposes that she and Mr Schneider agreed to jointly purchase a residential property in which they would live together. Ms Elleray states:
8 Prior to Hillsyde Parade being purchased, Paul advised me that it would be better for him and I if Hillsyde Parade was purchased by him in the name of a company. He told me interest rates would be cheaper for a bank loan to a company. Paul said to me that despite Hillsyde Parade being purchased in the company name, it was “half yours”.
In paragraph 9 of her affidavit, she goes on to allege that Mr Schneider referred to the property to her as being “half yours” and described it to others as “our house” on many subsequent occasions. She goes on to allege that she made “contributions” to the property throughout the relationship - the most significant of which related to its renovation and improvement. She claims to have provided both her labour and design ideas. She says that she cleaned bricks, painted and laid pavers. She claims to have made purchases in relation to the garden at a cost of some $5000. She also claims to have made financial contributions totalling “a few thousand dollars” to Mr Schneider to assist him in making mortgage, rates and insurance payments.
Mr Schneider’s account is different. He deposes that neither he nor Ms Elleray could afford to buy the property and that it was passed in at auction. He states that he discussed the property with his sister, Ms Helene Woods, the other Riverview shareholder. He claims that they agreed that Riverview should purchase the property, as an investment with a view to making a capital gain, if it could be bought cheaply. They agreed to buy it using a line of credit available to the company for that purpose from the Commonwealth Bank.
Mr Schneider disputes the proposition that the interest rate paid by the company was “cheaper” and denies that he made the statements attributed to him in paragraphs 8 and 9 of Ms Elleray’s affidavit. He denies that he referred to the property as “our house” as she alleges, “other than in the context of the house in which we were living as tenants of the Company and pursuant to the co-habitation agreement”.
He maintains that Riverview continues to use the line of credit “for the purpose of its general business.” Mr Schneider claims that the caveat impedes Riverview’s ability to use its line of credit from the Commonwealth Bank for the purpose of the company’s business. (I note, however, that here is no evidence as to Riverview conducting any other business).
Mr Schneider agrees that works were performed on the property. However he contends that their purpose was “to improve our enjoyment as the occupiers of the property, and to improve the Company’s investment in Hillsyde Parade”. He claims that most of the works were done by contractors supervised by him. He states in his 26 April 2007 affidavit that:
12.The First Defendant’s contribution to those works was a normal contribution effected by her as my domestic partner and no more. I do not dispute that she may have a claim against me in relation to any benefit flowing from the improvement of the Company’s assets by the performance of those works, and passing to me as a shareholder in the Company.
Mr Schneider denies that Ms Elleray provided him with financial assistance as she claims. He exhibits cheque butts and company accounts and bank statements as evidence of payments made by Riverview in relation to the improvements of the property. He also refers to a payment of $5000 for electrical works made by Ms Woods and a Mr Mario Muscat.
It is clear that there are significant disputes between the parties as to matters of fact.
The County Court proceeding
Ms Elleray lodged the caveat on 6 December 2006. On 28 December 2006 Riverview made an application to the Registrar under s 89A(1) of the Act for its removal. The upshot of that application was that, on 5 February 2007, Ms Elleray issued a proceeding in the County Court: initially against Mr Schneider alone. In the endorsement on the writ, she claimed relief under Part IX of the Act, as well as a declaration that she had an interest in the property by way of a resulting or constructive trust. The Registrar was subsequently notified that proceedings had been commenced to substantiate Ms Elleray’s claimed interest.
Only subsequently did Ms Elleray file an amended pleading with a statement of claim seeking orders under Part IX of the Property Law Act 1958 against both Mr Schneider and Riverview, based on an alleged “domestic relationship” between her and Mr Schneider between 19 December 1997 and 24 November 2006. Ms Elleray purported to serve that amended writ on Riverview under cover of a letter to its solicitors dated 18 April 2007. The letter requested that Riverview discontinue or at least agree to adjourn this application and for the parties to start negotiations. A conference at which financial information could be exchanged was also proposed.
The amended statement of claim annexed to the County Court writ pleads that Ms Elleray and Mr Schneider made an agreement to jointly purchase a property and that Mr Schneider made the alleged statements relating to the purchase of the property in the name of a company. Ms Elleray claims to have made contributions to the relationship and the property. She alleges that she did domestic work, provided care and made financial contributions to household expenses and the improvement of the property.
Ms Elleray also alleges that she and Mr Schneider had a “joint relationship” and pooled resources which were used in part for the purchase and conservation of the property. She claims an interest in the assets of Mr Schneider and Riverview, including the property, by way of a “constructive, implied or resulting trust” which would reflect her contributions to their value. Alternatively, she pleads an estoppel preventing the defendants from denying the alleged trusts, as well as an interest under a joint venture with regard to the purchase of the property. Ms Elleray also claims that Mr Schneider breached the agreement by purchasing the property in Riverview’s name. She seeks declaratory and other relief recognising her alleged interest in the property.
Submissions
Counsel for each of the parties made written and oral submissions to the Court.
Counsel for Riverview acknowledges that the Court must decide whether Ms Elleray arguably has an interest in the property or merely the right as against Mr Schneider, her former domestic partner, to a financial adjustment under Part IX of the Act. He argues that such an interest under Part IX would not support a caveat[5].
[5]Citing Bell v Graham [2000] VSC 145 in which Kellam J said at [19] that a party to a marriage did not have a caveatable interest in land under the Family Law Act 1975 (Cth) before the Family Court made a relevant order.
Counsel for Riverview submits that Ms Elleray has not adduced any evidence to substantiate her allegations in the amended County Court pleading as to the existence of a joint venture.
Counsel for Riverview’s written submissions set out passages from the 6th edition of Jacobs Law of Trusts in Australia relating to the creation of express, implied and constructive trusts. Counsel does not contest the proposition that any such trust could support a caveat.
Counsel for Riverview does argue that there is evidence that Ms Elleray attempted to use the caveat as a bargaining tool and, therefore, for a collateral purpose, misusing the relevant statutory provisions[6]. He cites her solicitors’ letter to Riverview’s solicitors of 18 April 2007.
[6]See : Goldstraw v Goldstraw [2002] VSC 491 at [30] per Dodds-Streeton J.
Counsel for Riverview also contends that the Court should take into account, in relation to the balance of convenience, that the original County Court proceeding was only issued against Mr Schneider and did not therefore seek to substantiate the interest claimed by Ms Elleray in relation to Riverview. He refers to Darnel Pty Ltd v Bigic[7] in which Balmford J took it into account in relation to the balance of convenience that the proceedings issued by the caveator did not contain any claim substantiating the claimed interest.
[7][2003] VSC 13.
Riverview submits that the caveat should be removed on the basis of its proffered undertakings to the Court that it would preserve at least $200,000 of the proceeds of any sale of the property and that it would not draw down more than $300,000 under the line of credit secured by the property.
Counsel for Ms Elleray responds that she has made out an arguable case that she has an interest of the type claimed in the property. He goes on to argue that the balance of convenience favours the maintenance of the caveat.
Counsel argues that Ms Elleray has adduced evidence of facts which could result in a court recognising that she has an interest in the property under a constructive trust. He refers to her alleged contributions to the improvement of the property and contends that, in all the circumstances of their conversations and their agreement as to its purchase in the company’s name, it would arguably be unconscionable for Riverview to deny that she had the claimed interest.
Counsel for Ms Elleray submits that the caveat should be retained to protect Ms Elleray’s interest vis a vis third parties. He advised the Court that she would co-operate in any proposed sale of the property and would permit drawings up to $300,000 under the line of credit.
Conclusion
I am persuaded that there is evidence in paragraph 8 of Ms Elleray’s affidavit which might be regarded as evidence of an agreement between her and Mr Schneider, on behalf of Riverview to the effect that Riverview would purchase the property upon trust for the two domestic partners. It might also evidence a representation or an agreement that she would have an interest in the property, which she later acted upon to her detriment in making her contributions to its improvement and to the relationship between herself and Mr Schneider, in circumstances in which it would be a fraud for Riverview to deny that she held that interest, giving rise to an implied or constructive trust in her favour; see Muschinski v Dodds[8]. I note in this regard that Mr Schneider is one of Riverview’s two directors and the holder of 9 of its 10 issued shares. His sister, who has supported him in this application, only holds one share in the company.
[8](1984-5) 160 CLR 583 at 593-5 per Gibbs CJ.
Ms Elleray’s claimed interest does not appear to be based solely on any alleged interest in the property under Part IX of the Property Law Act 1958.
Ms Elleray’s account of events is strongly disputed. Notwithstanding the relevant terms of the agreement, which might be thought to militate against the likelihood of her version of events being accepted as true, there is an issue between the parties as to the existence of relevant facts which, in my view, should properly be ventilated in the County Court proceedings. There, oral evidence can be given and tested by cross-examination.
Further, I consider that the balance of convenience favours the caveat being allowed to stand.
Any beneficial interest of Ms Elleray might well be deleteriously affected by the reduction of her equity, if the property were to be used to secure further advances to Riverview under its existing line of credit. However, in his 26 April 2007 affidavit, Mr Schneider cites, as a reason for its removal, the inhibiting effect of the caveat upon Riverview’s ability to utilise the line of credit secured by the bank’s interest in the property. He asserts that Riverview uses the line of credit “for the purpose of its general business”. I note in this regard that there is no evidence that Riverview carries on any business other than that of being the owner of the property. Nor is there any evidence of any need for works to be carried out at the property or improvements made to it, requiring funding under the line of credit. There is no material indicating any other prejudice to Riverview resulting from the maintenance of the caveat. Indeed, Mr Schneider only deposes as to his concern that the company’s access to the line of credit is impeded by the caveat. He does not allege the existence of any additional facts giving rise to his concern.
I have borne in mind as a relevant consideration that the original version of the County Court pleading did not include a claim against Riverview. Nevertheless, the statement of claim did contain allegations by Ms Elleray relating to financial and non-financial contributions to Mr Schneider’s welfare and that of their respective children which might be said to partially underpin her claim against Riverview in the amended pleading. Further, the amended County Court pleadings claim an interest of the type asserted in the caveat. This is not a case, such as that confronting Balmford J in Darnel, in which there was no reference to the facts giving rise to the alleged interest in the proceedings about which the Registrar was advised.
Further, in the circumstances in which she has issued proceedings to defend her position, I am not persuaded that Ms Elleray’s suggestion that the parties negotiate amounted to an attempt to use the caveat for any improper purpose. I also take into account her stated willingness to co-operate with either a sale of the property or the utilisation of the line of credit by Riverview.
Notwithstanding Riverview’s proffered undertakings, I am not persuaded that I should order the removal of the caveat. The application should be dismissed.
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