Seaborne v Lester
[2022] VSC 52
•17 February 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2021 03548
| VELSHA ZENA SEABORNE | Plaintiff |
| v | |
| KAREN BEATRICE LESTER | First Defendant |
| and | |
| REGISTRAR OF TITLES | Second Defendant |
---
JUDGE: | Irving AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 11 November 2021 |
DATE OF JUDGMENT: | 17 February 2022 |
CASE MAY BE CITED AS: | Seaborne v Lester & Anor |
MEDIUM NEUTRAL CITATION: | [2022] VSC 52 |
---
REAL PROPERTY – Caveat – Removal application – Onus on caveator – Caveatable interest – Serious question to be tried – Prime facie case test – Balance of convenience – Transfer of Land Act1958 (Vic), ss 90(1), 118 - Piroshenko v Grojsman & Ors [2010] VSC 240, applied.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P H Caillard of counsel | G&M Lawyers |
| For the First Defendant | Mr P Lennon, solicitor | Lennon Lawyers |
HIS HONOUR:
Introduction
The issue in this proceeding is whether a caveat lodged by the first defendant on the title of a unit owned by the plaintiff should be removed.
The plaintiff, Ms Velsha Seaborne, is the de facto partner of Mr Andrew Lester. She is the registered proprietor of the property known as Unit 5, 22 Abinger Street, Richmond, Victoria, being the land more particularly described as Certificate of Title Volume 10308 Folio 139 (Property). She purchased the Property from her partner, Mr Lester (Vendor) on 11 September 2020.
The first defendant, Ms Karen Lester, is the former wife of the Vendor. On 14 July 2021, some 10 months after Ms Seaborne had purchased the Property from the Vendor, Ms Lester lodged a caveat with dealing number AU576904S on the Property (caveat). The grounds of claim stated in the caveat are ‘implied, resulting or constructive trust’.
For the reasons that follow, I am not satisfied that the first defendant has established that there is a serious question to be tried that an implied, resulting or constructive trust exists in her favour over the Property. Accordingly, I will order removal of the caveat.
Background
The first defendant and the Vendor have now divorced. In April 2018, the first defendant issued proceedings in the Family Court of Australia (Family Court) for property orders pursuant to s 79A of the Family Law Act1975 (Cth) and final orders were made by consent on 14 March 2019 (March Orders).
The March Orders contemplated that the Vendor would pay the first defendant the sum of $2,625,000.
The Vendor failed to comply with the March Orders, prompting the first defendant to issue enforcement proceedings in the Family Court. On 10 June 2020, orders were made by the Family Court by consent (June Orders) which provided:
(a) the Vendor will pay the first defendant the sum of $1,063,000 by way of the following instalments:
(i) an initial payment of $750,000 within 90 days (first payment); and
(ii) a second payment of $313,000 within 90 days of the first payment; and
(b) contemporaneously with the first payment, the:
(i) first defendant will transfer all of her right, title and interest in the Property to the Vendor; and
(ii) the Vendor will discharge the mortgage; and
(c) the first defendant will be permitted to lodge caveats over two properties located in Sale and Hope Island; and
(d) in the event the Vendor defaults in making the first payment, the parties are to place the Property on the market for sale and the sale proceeds are to be distributed in the manner set out in the Court order, including payment of any outstanding amounts owed to the first defendant.
The first defendant alleges that, at the time the parties were negotiating the terms of consent upon which the June Orders would be sought, the Vendor informed the first defendant that he proposed to obtain a loan to secure the funds to make the first payment. The first defendant says that just before the final terms of the June Orders were agreed, the Vendor informed the first defendant:
(a) that he had been unable to obtain a loan; and
(b) of his intention to transfer the Property to the plaintiff so that she would be able to obtain a loan using the Property as security.
It is on this basis, the first defendant alleges, that the plaintiff holds the Property on trust for the Vendor.
The first defendant also says that she was induced to consent to the terms of the June Orders by the plaintiff, who represented to the first defendant that if she consented to the June Orders, the plaintiff would ensure the Vendor paid the first defendant the sums specified in the June Orders.
The plaintiff says that on 11 September 2020, she purchased the Property from the Vendor for approximately $980,000. The plaintiff, by her affidavit affirmed on 22 September 2021, states that the Vendor informed her that he had paid the first defendant the sum of $750,000 as required by the June Orders. On that basis, the plaintiff says that the first defendant had transferred all her right, title and interest in the Property to the Vendor before the Vendor transferred the Property to the plaintiff.
By letter dated 4 August 2021, the plaintiff wrote to the first defendant’s solicitors:
(a) noting that the first defendant had lodged a caveat on the Property on 14 July 2021, claiming an interest in the Property as a result of an implied, resulting or constructive trust; and
(b) asserting that the grounds supporting the caveat were misconceived on two bases. The first was that the plaintiff, having acquired the Property for fair value from the Vendor, was a bona fide purchaser with inalienable rights over the Property and its title. The second was that the first defendant’s rights, title and interest in the Property were transferred to the Vendor upon the Vendor making the first payment under the terms of the June Order.
Having received no response, by letter dated 10 September 2021, the plaintiff again wrote to the first defendant putting her on notice that an application under s 90(3) of the Transfer of Land Act1958 (seeking to remove the caveat) had been prepared and that if the first defendant did not set out the basis of her caveatable interest in writing, that application would be filed. The plaintiff’s letter also made reference to statements made by the first defendant during a hearing in the Family Court on 12 August 2021 foreshadowing an application to set aside the transfer of the Property to the plaintiff and the plaintiff’s contention that such application would be misconceived.
Originating motion
On 28 September 2021, the plaintiff filed an originating motion and summons seeking orders for the removal of the caveat and compensation. In her supporting affidavit, the plaintiff says she is not aware of any caveatable interest the first defendant may have in the Property.
On 1 October 2021, the Registrar of Titles, the second defendant, wrote to inform the Court that she did not intend to appear in this proceeding.
The plaintiff’s summons came before the Court on 26 October 2021, at which time the Judicial Registrar ordered the first defendant to file and serve any affidavits upon which she would seek to rely and a proper basis certificate in accordance with the Civil Procedure Act 2010 (Vic) by 5 November 2021. Further orders were made for the plaintiff to file affidavit material by 11 November 2021 and for the proceeding to be heard on 18 November 2021.
The first defendant contends that during the hearing on 26 October 2021, the plaintiff’s counsel made submissions to the Court that there was some urgency in having the application heard, as the plaintiff intended to re-finance her loan obligations and the caveat maintained by the first defendant would prevent that from taking place.
After the directions hearing, the first defendant’s solicitors pressed this issue in correspondence with the plaintiff’s solicitors, requesting the plaintiff produce evidence of her proposed refinancing. On 8 November 2021, the first defendant wrote to the plaintiff, serving a Notice to Produce which sought production of documents relating to her proposal to refinance. The letter foreshadowed that if documents evidencing the proposed refinance were not produced by 10 November 2021, the first defendant intended to seek an adjournment of the hearing. The plaintiff’s solicitors advised the first defendant in reply email correspondence that there were no documents to which the notice applied.
On 11 November 2021, the first defendant’s solicitor Mr Lennon, filed a proper basis certificate he had signed pursuant to s 42(1)(d) of the Civil Procedure Act 2010 (Vic), by which he certified that:
[O]n the factual and legal material available to me at present, there is a proper basis for lodging the caveat (AU576904S) on behalf of the First Defendant.
On 17 November 2021, Mr Marcus, the plaintiff’s solicitor, swore an affidavit setting out email correspondence received from the first defendant’s solicitors. Mr Marcus states:
(a) the first defendant failed to comply with the Court’s order of 26 October 2021 by failing to file the proper basis certificate and affidavits on which the first defendant intended to rely, each due by 5 November 2021;
(b) the first defendant’s solicitor contacted the plaintiff’s solicitor at 4:45pm on 5 November 2021 and advised the first defendant would file and serve affidavits and the proper basis certificate by 4:00pm on 8 November 2021. The first defendant provided no reason for the delay, nor sought the consent of the plaintiff to the extension of time;
(c) at 3:01pm on 9 November 2021, the first defendant’s solicitors again contacted the plaintiff’s solicitors, advising that the first defendant would now file and serve the affidavits and proper basis certificate by 4:00pm on 12 November 2021. The reason given for the delay was that on 8 November 2021, the previous day, the father of the solicitor who had carriage of the matter had passed away; and
(d) although the proper basis certificate was filed on 11 November 2021 (six days late), the first defendant had still not filed or served any affidavit material supporting the interest claimed in the caveat.
Adjournment application
At the commencement of the hearing on 18 November 2021, the first defendant’s solicitor sought an adjournment of one week to file affidavit material in support of her interest claimed in the caveat. The adjournment application was supported by an affidavit sworn by Mr Lennon on 18 November 2021. This affidavit was emailed to my chambers and the plaintiff’s legal representatives less than 10 minutes before the hearing commenced.
It is necessary to say a few things about Mr Lennon’s affidavit sworn 18 November 2021. It exhibited the parties’ correspondence concerning his client’s demands for production of documents and deposed to his own personal circumstances since around 24 October 2021 which impeded his capacity to comply with the Court’s orders of 26 October 2021. Mr Lennon’s affidavit also stated, ‘I have now finalised the First Defendant’s Affidavit which is annexed hereto’. An unsworn affidavit of Karen Lester, the first defendant, was exhibited to Mr Lennon’s affidavit (unsworn affidavit).
The unsworn affidavit addresses the history of the Family Court proceedings between the first defendant and the Vendor with respect to parenting, property and financial matters. In this unsworn affidavit, the first defendant refers to the March Orders and June Orders, including her understanding of the discussions giving rise to the June Orders and makes reference (in summary form) to affidavits filed by her and the Vendor in those proceedings and related enforcement proceedings. The affidavits referred to in the unsworn affidavit are not exhibited. Indeed, none of the exhibits referred to in the unsworn affidavit are exhibited in Mr Lennon’s affidavit. Outside of the statement referred to in paragraph 22 above, Mr Lennon’s affidavit makes no mention of the unsworn affidavit.
During the hearing, Mr Lennon made oral submissions that although the unsworn affidavit could be immediately sworn by the first defendant, it had not been so sworn because he was ‘not satisfied with it’ and that it:
needed to be fleshed out and consideration given … to whether an application needs to be made in the Federal Court proceedings.
As far as I am able to discern, the unsworn affidavit asserts:
(a) the Vendor transferred the Property to the plaintiff in order to place this asset beyond the reach of any of his unsecured creditors, including the first defendant;
(b) the Vendor:
clearly has an interest in the Richmond property pursuant to a constructive resulting or implied trust by virtue of the de facto relationship with [the plaintiff] and by virtue of his contributions to the Richmond property, which are obviously significant given that the property was transferred to [the plaintiff] for $1.125 million. Notwithstanding the property being valued in the matrimonial proceedings at a minimum of $1.3 million in 2019, I believe it would be worth somewhere in the vicinity of $1.7 million now. Whichever way the property is valued, [the plaintiff] holds [it] in trust for [the Vendor], at the very least, the additional equity in the Richmond property for which she has not paid proper and/or valuable consideration.
(c) in consenting to the June Orders, the first defendant relied on a representation made by the plaintiff that the plaintiff would do everything she could to ‘get you everything you’re owed’; and
(d) the Vendor, should be joined as a party to these proceedings:
to enable [the first defendant] to prosecute the defence of the application to remove the caveat.
In response, counsel for the plaintiff objected to the first defendant relying on the unsworn affidavit. The basis of this objection was that the affidavit was unsworn and whether it was intended to be sworn was unclear, provided late, and omitted the referenced exhibits. I take the plaintiff’s submissions to challenge the reliability of the unsworn evidence and admissibility of matters supported by unexhibited documents.
I allowed the first defendant to rely on the unsworn affidavit but invited the parties to make submissions on the weight I should attach to its contents, given it was unsworn, did not contain the exhibits and likely not in its final form. For the reasons outlined by the plaintiff, I have given the unsworn affidavit little weight.
The first defendant’s solicitors sought the adjournment on three bases:
(a) first, there could be no prejudice to the plaintiff if the hearing were adjourned as it had been listed on an urgent basis – however, the plaintiff had provided no evidence of the purported urgency;
(b) second, the adjournment should be granted because Mr Lennon’s personal circumstances had not allowed him to prepare the first defendant’s case properly; and
(c) finally, it was submitted that an adjournment was required to ascertain whether the plaintiff should be joined to the ongoing proceedings in the Family Court, or, alternatively, whether the issues raised in that proceeding ought to be incorporated into this proceeding.
The plaintiff opposed the adjournment application. The plaintiff submitted:
(a) there was no basis for the Vendor to be joined to this proceeding because whatever issues existing between the first defendant and the Vendor in the Family Court were irrelevant to the plaintiff’s application seeking removal of the caveat maintained by the first defendant;
(b) the first defendant had not properly set out how her purported reliance on the plaintiff’s alleged representation gave rise to an interest in the Property capable of supporting the caveat;
(c) the first defendant would not be prejudiced from commencing any legal proceeding in relation to the plaintiff’s alleged representation if the caveat removal application was heard and determined; and
(d) the first defendant had ample time to prepare her case and Mr Lennon’s personal circumstances since late October 2021 and did not explain the consistent failure of the first defendant to articulate a caveatable interest in the Property notwithstanding the plaintiff’s requests since 4 August 2021.
I refused the first defendant’s adjournment application. The timetable for the hearing of the plaintiff’s application was set at a directions hearing on 26 August 2021 where both parties were legally represented. Once the Court determined that it was appropriate to fix the matter for hearing on 18 November 2021 and to make orders for the orderly filing of material, the question of whether the plaintiff could substantiate urgency fell away.
Second, the first defendant had not complied with either the orders of the Court nor her proposed varied timetable for the filing of her affidavit material. Nor did she apply to adjourn the hearing or properly put the plaintiff or the Court on notice of her intention to apply for an adjournment - including by filing an application and supporting material in a timely manner.
Finally, I agreed with the plaintiff’s submission that the first defendant had not established that she would be prejudiced in relation to other legal proceedings she may be contemplating if the plaintiff’s application was heard and determined.
I now turn to the plaintiff’s application.
Applicable principles
The plaintiff seeks an order under s 90(3) of the Transfer of Land Act 1958 (TLA) that caveat number AU576904S lodged on Certificate of Title Volume 10308 Folio 139 be removed immediately and an order under s 118 of the TLA that the first defendant pay the plaintiff compensation for having lodged the caveat without reasonable cause.
Section 90(3) of the TLA provides that:
any person who is adversely affected by any … caveat may bring proceedings in a court against the caveator for the removal of the caveat and the court may make such order as the court thinks fit.
Section 118 provides that:
any person lodging with the Registrar without reasonable cause any caveat under this Act shall be liable to make to any person who sustains damage thereby such compensation as a court deems just and orders.
There was no dispute between the parties as to the legal principles applicable to an application to remove a caveat. Those principles were recently summarised by Osborne J in Wright v Insert Pty Ltd[1] and I gratefully adopt his Honour’s summary. Both parties referred me to Piroshenko v Grojsman & Ors,[2] which is authority for the following principles:[3]
[1][2022] VSC 1, [7]-[9].
[2][2010] VSC 240; (2010) VR 489.
[3]Ibid, [7]-[23].
(a) caveats under the Torrens system are treated by the courts as analogous to applications for interlocutory injunctive relief;
(b) on an application for removal of a caveat, the onus falls on the caveator to satisfy the two stage test used by the court when deciding whether to exercise its discretion to grant interlocutory injunctive relief;
(c) the caveator is required to first establish that there is a serious question to be tried that they have the estate or interest which they claim in the land in question; and having done so, to establish that the balance of convenience favours the maintenance of the caveat on the Register of Title until trial;
(d) at both stages of the test, the court must direct its attention to the relationship between the caveat which has been lodged and the interest being claimed by the caveator;
(e) in order to satisfy the first limb of the test, the caveator must satisfy the court that:
(iii) there is a probability on the evidence before the court that the caveator will be found to have the asserted equitable right or interest; and
(iv) that probability is sufficient to justify the practical effect which the caveat has on the ability of the registered proprietor to deal with the property in accordance with their normal proprietary rights;
(f) thus, some consideration of the balance of convenience is necessarily introduced into the assessment of the serious question to be tried, even if that assessment is in a different form to that performed when considering the second limb of the test;
(g) the two-stage test informs but does not restrict or subsume the wide discretion of the court conferred by s 90(3) of the TLA to make such order as it thinks fit in the circumstances of the particular case before it;
(h) caveats are not bargaining chips and it is not sufficient for the caveator to establish a prima facie case that they have contractual, equitable or statutory rights against the caveatee. The claimed interest or rights must attach to the property to which the caveat has been lodged; and
(i) the caveator must collect evidence in support of the interest claimed with due diligence and bring it before the court.
Claimed interest
The first defendant asserted a caveatable interest in the following way.
The Vendor owes the first defendant approximately $200,000, having only paid approximately $2.4 million out of the total $2.6 million due under the Family Court orders. The March Orders required the Vendor to pay the entire settlement sum before the first defendant was required to transfer her interest in the Property to him. The June Orders, which replaced the March Orders, put in place a different regime which allowed the Property to be transferred to the plaintiff. The first defendant says she was induced to consent to the June Orders on the basis that the plaintiff would be able to obtain a loan using the Property as security, and allow the Vendor to use the loaned funds to make the first payment to her and pay out all outstanding amounts owed under the terms of the June Orders.
The Vendor has applied to set aside the June Orders. The first defendant concedes it is unlikely that the transaction in which the plaintiff became the registered proprietor of the Property will be unwound.
The first defendant says in all the circumstances, it is reasonable to infer that the plaintiff purchased the Property on behalf of herself and her de facto partner (the Vendor).
The first defendant says the serious issue to be tried is whether the first defendant has an interest in the Property by virtue of it being held by the plaintiff on trust for the Vendor. The first defendant asserts a further serious issue to be tried is whether the first defendant relied on the plaintiff’s representations to transfer the Property.
The first defendant also submitted that she has an interest in the Property by way of remedial constructive trust as a result of her prior financial and non-financial contributions to the purchase and maintenance of the Property and that it would be unconscionable for the caveat to be removed, as that would cause her to lose any right or entitlement to press her claim in respect of that interest.
In relation to the balance of convenience, the first defendant contends that if the caveat is removed, there is a risk that the assets held by the plaintiff on trust for the Vendor could be diminished or removed from the jurisdiction.
In response, the plaintiff submitted that the first defendant’s bare factual assertions in an unsworn affidavit - unsupported by any source documents - were hopelessly insufficient to demonstrate a caveatable interest. The plaintiff pointed out that the first defendant accepts that:
(a) the Vendor paid her $750,000;
(b) the June Orders have not been stayed or set aside; and
(c) she does not challenge that the Property was transferred to the plaintiff, an arms‑length purchaser.
The plaintiff submitted the first defendant, in lodging the caveat, is really seeking to secure a debt of $200,000 she believes to be owed to her by the Vendor. The plaintiff says that an unsecured debt owed by the Vendor to the first defendant does not give the first defendant an interest in the Property capable of sustaining the caveat.
Finally, the plaintiff submitted that the first defendant’s submission regarding the balance of convenience amounted to an argument that first defendant would lose security for a debt of $200,000 against the Vendor, who is not the registered proprietor of the Property. The plaintiff submits that the balance of convenience lies in her favour.
Consideration
The first defendant has not articulated any basis for an equitable right or interest in the Property capable of answering the description claimed by the caveat. At its highest, the first defendant has asserted that she is owed $200,000 by the Vendor pursuant to the terms of the June Orders. How this alleged debt is said to give rise to an interest in the Property held by the first defendant is not explained.
Similarly, the first defendant’s assertion that the plaintiff holds an interest in the Property on trust for the Vendor is not supported by the evidence before the Court. The basis of this assertion is not properly explained, other than that the Court should infer such an interest from the relationship between the plaintiff and the Vendor and the purchase price. No evidence on oath was put forward substantiating the value of the Property at the relevant times or the representations alleged to have been made by the Vendor to the first defendant.
Even assuming that the plaintiff did hold an interest in the Property on trust for the Vendor, how that would give rise to an interest in the Property held by the first defendant remains unarticulated.
I am also not satisfied that there is a serious question to be tried that the first defendant has an interest in the Property by virtue of a remedial constructive trust based on the first defendant’s historical financial and non-financial contributions to the Property. The terms of the June Orders provide that the first defendant transfer her interest in the Property on the payment of the $750,000. It was not in dispute that the Vendor had paid this sum to the first defendant. The first defendant did not articulate how, in these circumstances, a remedial constructive trust is said to subsist. In any event, the first defendant has provided no evidence of the amount or purported value of her previous contributions.
In my view, the first defendant’s caveat resembles an attempt to create a bargaining chip or ‘security’ for the debt allegedly owed by the Vendor to the first defendant.
The first defendant has failed to file any evidence capable of satisfying the Court that she will be found to have the implied, remedial or constructive trust as asserted in the caveat. It follows that the first defendant has not satisfied the Court that there is a sufficient probability to justify the practical effect of the caveat in restricting the plaintiff’s ability to deal with the Property in accordance with her normal proprietary rights.
If I am wrong and the first defendant did establish a prima facie case in respect of the interest claimed by the caveat, I would have found that the balance of convenient falls in favour of the plaintiff. The first defendant has lodged an absolute caveat, notwithstanding that the Vendor’s outstanding debt is limited to approximately $200,000. There was no suggestion that any claim brought by the first defendant could not be met by an award of damages if the caveat was removed.
In all the circumstances, given the dispute between the Vendor and the first defendant concerns a relatively modest amount when compared with the value of the Property and that the Vendor is not the registered proprietor of the Property, there is a lower risk of injustice if the caveat is removed.
Conclusion
For the reasons given above, I will order that the caveat with dealing number AU576904S be removed forthwith.
I will hear the parties on the appropriate terms of the order and on the question of costs.
0
2
0