Shellie v Davidson
[2010] VSC 575
•1 December 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
PRACTICE COURT
No. 6308 of 2010
| LISA GAYLE SHELLIE | Plaintiff |
| v | |
| JAMES AITKIN DAVIDSON and MORAG DAVIDSON | Defendants |
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JUDGE: | OSBORN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1 December 2010 | |
DATE OF JUDGMENT: | 1 December 2010 | |
CASE MAY BE CITED AS: | Shellie v Davidson | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 575 | |
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PROPERTY LAW – Caveat removal – Triable issue - Balance of convenience – Potential detriment to one party from property sale is outweighed by the potential detriment to all parties from postponement of sale – Costs - Defendants' case not so hopeless that it must necessarily fail – Earlier letter of offer did not comprise a Calderbank letter – Costs awarded on party/party basis - Goldstraw v Goldstraw[2002] VSC 491 (Unreported, Dodds-Streeton J, 14 November 2002).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Black | Wisewould Mahony |
| For the Defendant | Mr M McKillop | McDonald, Slater & Lay |
HIS HONOUR:
The plaintiff in this matter seeks orders that a caveat which the defendants have placed upon the title to her home be removed. The relevant principles are succinctly and carefully summarised in the recent judgment of Macaulay J in Percy & Michele Pty Ltd v Gangemi[1] in which he summarises, amongst other authorities, the statements of principle made by Dodds‑Streeton J in Goldstraw v Goldstraw[2] and by the Chief Justice in Piroshenko v Grojsman.[3]
[1][2010] VSC 530.
[2][2002] VSC 491 (Unreported, 14 November 2002), [23]-[30].
[3][2010] VSC 240 (Unreported, 2 June 2010), [6]-[11].
What the statute requires is that the caveators show that there is at least some probability on the evidence before the Court that they will be found to have the equitable rights or interest asserted by them and that 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 question in accordance with her normal proprietary rights.
In the present case, the defendants claim by their caveat an interest under a constructive trust. As their case has been elaborated by Mr McKillop, it is contended that the trust arises as a result of the expenditure of moneys held by a trustee company on trust in part for the defendants as beneficiaries. The trustee company formerly conducted a tiling business but is now in liquidation pursuant to an order of this Court. It is alleged that the moneys have been spent on the plaintiff’s property first by way of payment for improvements and secondly in reduction of a mortgage.
The claim depends, in the first instance, upon fixing the registered proprietor with knowledge of the unlawful expenditure of the moneys in issue. The affidavit evidence in this respect is weak and there are a series of further difficulties confronting the defendants. First prima facie the liquidator is the proper claimant in respect of any equity resulting from the expenditure of such funds. Secondly, insofar as the defendants can assert a beneficial interest in respect of such funds it is a 30 percent interest only whereas the caveat asserts a constructive interest in the property as proprietors of an estate in fee simple. Thirdly, there is no satisfactory quantification of the moneys which the defendants allege were wrongly applied to the property. Nevertheless, I am not prepared to say that the claim made by the defendants is totally hopeless. It ultimately turns upon issues of detailed contested fact which are difficult to unravel upon a summary hearing in the Practice Court.
It is unnecessary to further address the strength of this claim because I have come to the view that the balance of convenience strongly favours the sale of the property on the basis which has been put forward by the plaintiff.
The plaintiff proposes that the property be sold in order that the National Australia Bank, which is a mortgagee and secured creditor, can be paid out and I accept that if a sale is not undertaken by the plaintiff, it is highly probable that the bank itself will sell the property. The plaintiff proposes that after paying out the bank and the payment of reasonable selling expenses and of agent's commission, the net balance received from the sale be paid into the plaintiff's solicitor's trust account until further order of the court. That order is proposed in the context of proceedings which have been instituted by the defendants seeking to substantiate their interest in the property and which will provide a vehicle for the further resolution of the underlying dispute.
The factors which favour the solution proposed by the plaintiff are as follows: Firstly the net equity of the National Australia Bank is in excess of $1.9 million. The value of the property is estimated to be between $1.9 and $2 million, thus the net yield from any sale will be marginal and any delay in sale may totally destroy any net yield which have been achieved for the benefit of the parties from the sale.
Secondly, more than $1.1 million of the Banks security relates to an overdraft debt owed by the company in liquidation. Accordingly, the sale will directly benefit the defendants insofar as they claim an interest in the property held by the liquidator.
Thirdly, the fact that the sale is now proposed within the coming week and substantial advertising expenses have been incurred and the market expects the property to be sold, all seem to me to favour the completion of the sale. It is difficult to satisfactorily quantify the order of expenses which would be absolutely thrown away if the sale were postponed and it is also difficult to confidentially anticipate what the effect on the potential market would be if the property were withdrawn from sale, but it seems to me that both these matters carry with them considerable potential down side when they are weighed against the order of net yield which is expected from the proposed sale.
Next, the fact that the defendants' objection to sale is essentially limited to the plaintiff's choice of selling agent seems to me to be a further material factor. The objections to the selling agent are that the commission to which he is entitled under his retainer is said to be excessive in terms of the going market rate and he is also said to have no expertise as a local agent. The defendants also depose to a belief that the plaintiff and the agent are parties to some sort of side deal in respect of the commission proposed, but there is no evidence of such a deal and it seems to me this is really no more than a speculative assertion.
The excess commission in issue on the defendants' best case would be in the order of $33,000 and I am satisfied, looking at the circumstances of the matter as a whole, that substantially more than this sum is likely to be lost if the sale is delayed until the expiration of the exclusive agency agreement some 60 days after the proposed auction date. The property would then be readvertised and it is not until that exercise was completed that it could be resold.
Further, I have no real confidence that the bank would not intervene if the property were withdrawn from the market. It seems to me that the position has already been reached where the reality is that the sale is almost wholly for the bank's benefit.
Judgments as to the balance of convenience are always necessarily, to some extent, a matter of global impression, but in the present case I am satisfied that the detriment which the defendants perceive may flow from the proposed sale is substantially outweighed by the potential detriment which may flow to all the parties as a result of postponement of the sale. Accordingly I propose to make orders generally in accordance with those sought by the plaintiff.
(Submissions re orders and costs)
In my view the costs in this matter should follow the event. The plaintiff has succeeded in respect of her application which is dispositive of the proceeding. She succeeded when the terms of relief which she sought were opposed and those terms had, in substance, been offered to the other side prior to the hearing of the matter and indeed prior to the institution of this application.
Mr Black also seeks costs on a special basis, that is on a solicitor/client or indemnity basis. He submits firstly that the defence of the application for withdrawal of the caveat was so unmeritorious that it deserves an award of costs on this basis and, secondly, that an offer was made and refused prior to the institution of these proceedings reflecting appropriate terms on which the withdrawal of caveat should occur.
I am not prepared conclude that defence was so unmeritorious that it warrants an award of costs on a special basis. Whilst as I have recorded in my reasons the defendants' case is, in my view, weak, I have ultimately resolved the matter on the balance of convenience. I have not concluded that the defendants' case was so hopeless that it must necessarily fail because there is no triable issue.
The underlying circumstances are sufficiently complex to make such a conclusion difficult and the balance of convenience has, I accept, as Mr McKillop submitted, only fully emerged in the course of the current proceeding.
Returning to the second basis on which costs are sought on a special basis, it seems to me that although it is true an offer was made to resolve this issue prior to the institution of the current proceedings, it does not seem to me to have been an offer which in substance offered more than has subsequently been achieved and the letter in which it was contained did not foreshadow any application for costs on a special basis nor address the underlying issues in respect of the interest claimed by the defendants. It was, in my view, not a letter which in effect comprised a Calderbank letter and doing the best I can to resolve the matter fairly, I am of the view that the proper order is simply that the defendants pay the plaintiff's costs of this proceeding, including reserved costs and I will make orders to that effect.
(Submission re minutes of orders)
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