Super Jacobs Pty Ltd v Esera Faalogo
[2019] VSC 778
•3 December 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST
S ECI 2019 04338
| SUPER JACOBS PTY LTD (ACN 615 977 001) (as Trustee for TEAM JACOBS SELF-MANAGED SUPERANNUATION FUND) | First Plaintiff |
| LEEJEAM PROPERTY PTY LTD (ACN 609 004 971) (as Trustee for LEEJEAM SELF-MANAGED SUPERANNUATION FUND) | Second Plaintiff |
| v | |
| ESERA SONE FAALOGO | First Defendant |
| PALOLO FAALOGO | Second Defendant |
| REGISTRAR OF TITLES | Third Defendant |
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JUDGE: | Daly AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 11 November 2019 |
DATE OF JUDGMENT: | 3 December 2019 |
CASE MAY BE CITED AS: | Super Jacobs Pty Ltd and anor v Esera Faalogo and ors |
MEDIUM NEUTRAL CITATION: | [2019] VSC 778 |
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REAL PROPERTY – Caveats – Application for removal of a caveat lodged by the former registered proprietors – Property transferred to the plaintiffs under a contract of sale – Defendants claimed that they were victims of a fraud, and alleged that the transfer was tainted by fraud – Mere equity is not caveatable until a conclusive finding by a court – Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265, referred to – Any claim to set aside a transfer of land does not confer upon the claimant an equitable interest in the land until the claim is made good – Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672, considered and applied.
SUMMARY RECOVERY OF LAND – Application under Order 53 – Framlingham Aboriginal Trust v McGuinness and Chatfield [2014] VSC 241 and Tajon Pty Ltd v Arvanitis [2017] VSC 130, referred to – Where occupiers remain in occupation without the current registered proprietors’ consent – Summary disposition under Order 53 refused owing to factual dispute between the parties.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr B Harding | TZ Lawyers |
| For the First and Second Defendants | Mr C Hender | Wollerman Shacklock Lawyers |
HER HONOUR:
The plaintiffs are the corporate trustees of two self‑managed superannuation funds. The first and second defendants (‘Faalogos’), a married couple of limited means, are the former registered proprietors and the current occupants of a residential property in Hampton Park (‘Hampton Park property’). The Faalogos lodged a caveat over the title of the Hampton Park property on 13 August 2018, after they discovered that that property had been transferred to the plaintiffs on 26 June 2018.
The Hampton Park property was transferred to the plaintiffs pursuant to a contract of sale dated 15 July 2017. The contract of sale was executed on behalf of the Faalogos by Mr Kenneth Brown, a mortgage broker, under a General Power of Attorney executed by each of the Faalogos on 7 May 2016. The Faalogos do not deny signing the power of attorney, but say that they did so on the instructions of Mr Brown, who they believed was arranging finance for them, with any loans to be secured against the Hampton Park property. It appears that the Faalogos, who are originally from Western Samoa and are not highly educated or familiar with legal or financial matters, may be the victims of a fraud perpetrated by Mr Brown.
The caveat was lodged by a firm of solicitors, Portelli & Co, after Ms Faalogo discovered the transfer after requesting the rates notice from the local council. The caveat seeks to prohibit all dealings with the freehold estate of the property, and specifies the following grounds of claim:
Registered proprietor(s) being entitled to possession of the certificate of title for the land and to prevent improper dealings.
The plaintiffs learned of the lodgement of the caveat in August 2018 after receiving a letter to that effect from the Registrar of Titles (‘Registrar’). Between September 2018 and November 2018 the then solicitors for the parties corresponded regarding the transfer of the Hampton Park property, and the plaintiffs’ demands that the Faalogos vacate the Hampton Park property. The Faalogos advised the plaintiffs that they would not vacate the property, as they were unaware of the sale, and did not receive any funds from the sale.
The plaintiffs issued this proceeding on 20 September 2019, seeking orders that the caveat be removed, that the plaintiffs recover possession of the property pursuant to Order 53 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’), and an order that the Faalogos pay the plaintiffs’ costs of this proceeding on an indemnity basis. The plaintiffs say that:
(a) the Faalogos’ asserted interest in the Hampton Park property is not an estate or interest in the land, notwithstanding the availability of their ground of claim in the drop down menu in the Registrar’s electronic lodgement service;
(b) even if the plaintiffs obtained the property by fraud or improper dealing (which they deny), an allegation of fraud is a ‘mere equity’, which does not give rise to a proprietary interest in the property until the successful conclusion of an action to set aside the transaction on the grounds of fraud; and
(c) the balance of convenience favours the plaintiffs, who have been entitled to possession since June 2018. The Faalogos have lived in the Hampton Park property rent free since then, and have taken no action to set aside the transfer in that time.
The Faalogos resist the application to remove the caveat, on the basis that the circumstances of the sale of the Hampton Park property give rise to a prima facie case that there is a serious question to be tried as to whether a fraud has occurred which is able to be brought home to the plaintiffs, such that the transfer is liable to be set aside.[1] Further, given that Mr Brown owed the Faalogos a fiduciary duty, it is arguable that, to the extent that the plaintiffs were aware of Mr Brown’s breach of trust, a constructive trust in favour of the Faalogos arose at the time the plaintiffs took the transfer of the Hampton Park property.
[1]See s 42 of the Transfer of Land Act 1958 (Vic), which provides that the registered proprietor of a property under the Torrens system of land registration has an indefeasible title, save where the registered proprietor has procured the transfer by fraud.
Further, the Faalogos submitted that the balance of convenience clearly favours the Faalogos remaining in the property until the trial of any action to set aside any transfer. Finally, the current case is not an appropriate occasion for the granting of possession on a summary basis pursuant to Order 53 of the Rules.
The Faalogos assert that they have been the victims of a fraud. They had numerous dealings with Mr Brown and his company, Kenergy Finance Pty Ltd, between 2014 and 2016. The Faalogos originally borrowed $24,000 through Mr Brown, but ultimately borrowed $200,000 secured against the Hampton Park property. They signed a number of documents at the request of Mr Brown, without receiving any explanation or advice as to their contents or effect. In May 2018, after they discovered that the Hampton Park property had been sold to the plaintiffs, they received the following note from Mr Brown:
Dear Palolo,
We have had extensive discussions around you borrowing money from me and purchasing the car. Notes have been left with you, writing pads and print outs.
To help you borrow as you have, initially from Mango Finance, you undertook to secure my personal lending and payments.
You undertook to pay $350.00 per week. This became a rental amount when your property was sold to Self Managed Superannuation companies. You agreed that $200,000 would be invested for you as security for future rental payments and that where you could you would make extra payments to increase the balance of your invested funds as suited you. You wanted to be able to buy your home back in the future. This should be possible where you increased your investment balance to allow you to use it as your deposit for that future buy back.
You agreed that your investment would be for no term at no set interest, as it would be used in part for other private property investments to provide you with a good return when those invested properties were sold for a profit.
As provided to you in the past, when possible for you, you should deposit what you can afford into your property manager’s account.
JNK Property Pty Ltd
Bendigo Bank
BSB 633 000
Account 157218652Reference FAALOGO
No repayments have ever been received from you since you had me personally make payments to Mango Credit from 5/3/2015 and then finally to pay out their loan in full at the end of their term. I am not aware of any effort on your part to pay me for your borrowings or the expenses incurred or the motor car you have taken possession of.
You need to pay into that account as provided to bring you back on course so you have the deposit enough to purchase your home back from the Self-Managed Superannuation Funds.
The Faalogos denied ever having any knowledge of or agreement with the matters set out in Mr Brown’s note. In her affidavit sworn on 7 November 2019, Ms Faalogo deposed as follows:
31.In or about July 2017 Kenneth Brown sold our Property to the Plaintiffs without our knowledge. The Property was not sold by way of auction nor was it sold by way of private treaty and it was not advertised. There were no inspections of the Property and nor were we informed that the Property was being sold.
32.We only became aware that the Property had been sold in May 2018 when I telephoned the local council to ask why I had not yet received a rates notice and was told that the property was not in my name.[2] We made enquiries from Mr Brown as to what had happened and he provided us with a bundle of documents, which included a note that was marked with the date 10 May 2018, informing us that he had sold the Property I now know for $400,000 notwithstanding that the value of the Property at the time of the sale was in the vicinity of $550,000 to $600,000. The note is totally inaccurate in that:
[2]This evidence is a little curious, as the transfer to the plaintiffs was not registered until June 2018.
a.we never undertook to secure his personal lending and payments;
b.we never agreed to sell the house or invest monies for future rental payments or agree to pay $350.00 per week;
c.we did not agree to an investment at all let alone without interest;
d.we had no knowledge as to who JNK Property Pty Ltd was and what role they had as a property manage account; and
e.no payments had been made in relation to the Mango Credit loan because he had not provided us with account details for payment.
33.My husband and I have not received payment of the $400,000 or any part of that amount which is the alleged purchase price that the Plaintiffs claim that they have paid.
In her affidavit, Ms Faalogo also deposed as to a number of apparently irregular features of the transaction giving rise to the transfer of the Hampton Park property, including:
(a) the power of attorney granted to Mr Brown did not comply with the requirements of the Powers of Attorney Act 2014 (Vic);
(b) there was no real estate agent involved in the sale;
(c) the Hampton Park property was sold at an apparent undervalue;
(d) the same conveyancer acted for both the purchasers and the vendors of the Hampton Park property;
(e) settlement was due on 28 July 2017, but the transfer was registered in June 2018;
(f) the deposit was fifty per cent of the sale price; and
(g) Ms Faalogo deposed as follows:
… my husband and I have not received any money in relation to the purchase price of the property. We have not been provided details as to where the alleged funds were paid and when.
In his written outline of submissions, counsel for the Faalogos referred to the above matters, as well as the following matters as being particularly curious about the transfer of the Hampton Park property to the plaintiffs, including:
(a) the absence of any evidence of payment of the purchase price by the plaintiffs;
(b) the director of the first plaintiff said he became aware of the Hampton Park property because he knew Mr Brown, but he provided no details of how he knew Mr Brown or of the circumstances in which the contract of sale was entered into;
(c) the delay between the execution of the powers of attorney and the execution of the contract of sale, and the delay between the execution of the contract of sale and the transfer of the property; and
(d) the absence of any evidence of any contact between the Faalogos and the plaintiffs prior to the registration of the transfer of land.
Application for the removal of the caveat
The plaintiffs submitted that the above matters do not entitle the Faalogos to maintain the caveat for the following reasons:
(a) upon registration of the transfer, the plaintiffs obtained an indefeasible interest in the Hampton Court property which can only be defeated if fraud can be established on the part of the plaintiffs; (emphasis added)
(b) any procedural or technical defect in the manner in which the plaintiffs obtained registration is cured by the registration of the transfer of land;
(c) any claim by the Faalogos is against Mr Brown, not the plaintiffs; and
(d) an allegation of fraud does not confer a caveatable interest upon the plaintiffs, being a mere equity, rather than a proprietary interest in the Hampton Park property.
The plaintiffs relied upon the decision of the High Court in Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (‘Latec’)[3] and the decision of the Court of Appeal in Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd (‘Swanston Mortgage’)[4] in support of their contention any claim to set aside a transfer of land does not confer upon the claimant an equitable interest in the land until the claim is made good.
[3](1965) 113 CLR 265.
[4][1994] 1 VR 672.
The principles governing applications to remove caveats are well settled, and not in dispute in the current application. In his written outline of submissions, counsel for the plaintiffs referred to the following summary of the relevant principles by John Dixon J in Yamine v Mazloum:[5]
[5][2017] VSC 601.
1. The court’s power under s 90(3) of the Act is discretionary.
2.Section 90(3) is in the nature of a summary procedure and analogous to the determination of interlocutory injunctions.
3.The caveator bears the onus of establishing that there is a serious question to be tried that it does have the estate or interest in land as claimed. What the statute requires is that the caveator 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 in the land asserted by them in the caveat. The court directs its analysis towards the relationship between the caveat that has been lodged and the interest claimed by the caveator.
4.If the caveator establishes a serious question to be tried in relation to the estate or interest claimed, the caveator must further establish that the balance of convenience favours the maintenance of the caveat until trial.
5.As a general rule, when considering the balance of convenience, the court should take whichever course appears to carry the lower risk of injustice if the court should turn out to have been wrong in the sense of declining to order summary removal of a caveat where the caveator fails to establish its right at trial or in failing to order summary removal of a caveat where the registered proprietors succeed at trial.
6.There is a relationship between the strength of the case in establishing a serious question to be tried and the extent to which the caveator must establish the balance of convenience favours the caveator. The stronger the case in establishing a serious question, the more readily the balance of convenience might be satisfied. It is sufficient that the caveator show a sufficient likelihood of success that in the circumstances justifies the practical effect which the caveat will have on the ability of the registered proprietor to deal with the property in question in accordance with its normal proprietary rights.[6]
[6]Ibid [15].
Counsel for the Faalogos referred to the following observations of Warren CJ in Piroshenko v Grojsman & ors:[7]
Therefore, consistently, in order for a caveator to satisfy the first limb of the test applied by the courts when deciding applications under s 90(3) of the Act, he or she must satisfy the Court that:
1.there is a probability on the evidence before the Court that he or she will be found to have asserted equitable rights or interest; and
2.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.[8]
[7](2010) 27 VR 489.
[8]Ibid [18].
And, in relation to the balance of convenience:
The court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong’, in the sense of granting an injunction to a party who fails to establish his right at trial, or in failing to grant an injunction to a party who succeeds at trial.[9]
[9]Ibid [38], citing Bradto Pty Ltd v Victoria (2006) 15 VR 65 [35].
Here, there is little doubt that the balance of convenience overwhelmingly supports the maintenance of the caveat. The Faalogos claim to be the victims of a serious fraud. The Hampton Park property is their family home. It appears from the historical title search in evidence that at the time the Faalogos first met Mr Brown, the Hampton Park property was unencumbered, although it had been used to secure borrowings in the past. Mr Faalogo is unemployed, and is in poor health, while Mrs Faalogo works part‑time. On the other hand, while the caveat prevents the plaintiffs from dealing with the property, the plaintiffs are self‑managed superannuation funds, which by definition are long term passive investors (none of the directors of either plaintiff being over sixty), and there is no evidence of any specific prejudice to the plaintiffs or either of them, noting that at the very least, they appear to have purchased the property at a favourable price.
Accordingly, the issue in this application is whether the Faalogos’ claim to have the transfer of the Hampton Park property set aside on the grounds that a fraud on the part of the plaintiffs, or a fraud which could be sheeted home to the plaintiffs, is an interest or estate in land capable of supporting the caveat lodged on behalf of the plaintiffs.
As noted above, the plaintiffs rely upon the decision of the High Court in Latec,[10] which has been interpreted in subsequent authorities to mean that where a registered proprietor has a claim to set aside a sale by a mortgagee pursuant to its powers of sale on the basis of fraud, the registered proprietor does not hold an equitable interest in the property until the claim is made good in a court. Until then, all the claimant has is a ‘mere equity’, which is a personal right of action, not a proprietary interest in the land in question.
[10](1965) 113 CLR 265.
The decision in Latec[11] was considered by the Full Court of this Court in Swanston Mortgage,[12] where Brooking J (Southwell and Teague JJ agreeing) held that where, under the Torrens system of land registration, a mortgagee of land sold the land in breach of its duties to the mortgagor, the mortgagor has an equity to set aside the pending transfer of land. However, until the equity was made good by bringing a successful claim in an appropriate court, the mortgagor has no equitable interest in the land, and therefore has no right to lodge a caveat on the title of the land.
[11]Ibid.
[12][1994] 1 VR 672.
Swanston Mortgage[13] has been subject to some academic and judicial[14] criticism, and has not been followed in other Australian jurisdictions.[15] The Court of Appeal in Vasiliou v Westpac Banking Corporation[16] expressed some doubt as to whether the analysis of the judgments in Latec[17] by Brooking J in Swanston Mortgage[18] was correct. However, the Court of Appeal stated:
It may be that the correctness of the Swanston Mortgage decision requires reconsideration. But, unless and until that decision is overruled after a full hearing before a bench of five appellate judges, we are bound by it.[19]
[13]Ibid.
[14]The authors of ‘Australian Property Law’ referred to the decision of the High Court in Breskvar v Wall (1971) 126 CLR 376, where the court found that the right to have a sale set aside because of fraud was an equitable interest. The authors observed [at 3.51] ‘Although valid distinctions can be drawn, the Swanston case is difficult to reconcile with the Latec and Breskvar cases’.
[15]See, for example, Patmore v Upton (2004) 13 Tas R 95.
[16](2007) 19 VR 229.
[17](1965) 113 CLR 265.
[18][1994] 1 VR 672.
[19](2007) 19 VR 229.
The decision in Swanston Mortgage[20] has been followed by judges of this Court in Renwarl Pty Ltd v Birky,[21] Law Mortgagees Queensland Pty Ltd v Thirteenth Corp Pty Ltd,[22] Walter v Handberg,[23] Commonwealth Bank of Australia v Kyriackou,[24] and A E Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd.[25]
[20][1994] 1 VR 672.
[21][1998] ANZ Conv R 515 per Chernov J.
[22][1999] VSC 360 per Warren J.
[23][2003] VSCA 122 (Court of Appeal).
[24](2003) V Conv R 54-674 per Coldrey J.
[25][2019] VSC 688 per Ginnane J. See also Ruawai Properties Ltd v Black Developments Ltd (2008) 9 NZCPR 483.
I too am bound by the decision in Swanston Mortgage.[26] If the current case cannot be distinguished from the reasoning in Swanston Mortgage,[27] the plaintiffs’ application to remove the caveat must succeed.
[26][1994] 1 VR 672.
[27]Ibid.
In Schmidt v 28 Myola Street Pty Ltd (‘Schmidt’),[28] Warren CJ considered that the reasoning in Swanston Mortgage[29] was not applicable to the facts of the case before her. In Schmidt,[30] the caveator was a unit holder in two unit trusts which were the registered proprietors of the land in question. Her Honour considered that the langue of s 89 of the Transfer of Land Act 1958 (Vic) should be construed broadly, and that it is not necessary for the equitable interest claimed to be in a registrable form. Her Honour noted that Swanston Mortgage,[31] along with Latec,[32] were cases very much concerned with the characterisation of interests for the purpose of resolving a priorities dispute, which was not an issue before her, noting that an additional distinguishing feature of Latec[33] was (as is the case here) that the transfer sought to be impugned by the mortgagor had been registered, and was thus indefeasible.
[28](2006) 14 VR 447.
[29][1994] 1 VR 672.
[30][1995] 1 VR 672.
[31](2006) 14 VR 447.
[32][1994] 1 VR 672.
[33](1965) 113 CLR 265.
Counsel for the Faalogos submitted that the decision in Swanston Mortgage[34] is distinguishable from the current case because the fraud in the former case was said to be the fraud of the mortgagee in exercising its power of sale, not the (potential) fraud of the donee of a power of attorney, and the (potential) fraud of the purchaser.
[34]Ibid.
Section 89(1) of the Transfer of Land Act 1958 (Vic) provides that a caveat may be lodged by:
Any person claiming any estate or interest in land under any unregistered instrument or dealing or by devolution in law or otherwise …
In Schmidt,[35] Warren CJ stated that the estate or interest in land referred to in s 89(1) as giving rise to the right to lodge a caveat should be construed broadly. The question is, having regard to the decision in Swanston Mortgage,[36] can the term ‘or by devolution in law or otherwise’ (there being no ‘instrument’ giving rise to a caveatable interest in the current case) encompass a claim to invoke the jurisdiction of the court to set aside the transfer? The word ‘devolution’ means:
The act or an instance of transferring one’s rights, duties, or powers to another; the passing of such rights, duties or powers by transfer or succession.[37]
[35](2004) 14 VR 447.
[36][1994] 1 VR 672.
[37]Garner, B.A. Black’s Law Dictionary (8th edition, Thompson West), 484.
No ‘devolution’ of the Faalogos’ rights with respect to the Hampton Park property can occur, given that the transfer to the plaintiffs has been registered, unless and until the transfer is found by a court to have been tainted by a fraud which is capable of being sheeted home to the plaintiffs. This interpretation of the language of s 89(1) is consistent with the reasons in Swanston Mortgage,[38] being that a claim by a mortgagor to set aside a transfer by a mortgagee acting fraudulently is a mere equity, not caveatable until a conclusive finding by a court that the mortgagor is entitled to be reinstated as the registered proprietor of the property.
[38][1994[ 1 VR 672.
In my view, there is no material distinction between a claim to set aside a transaction on the grounds of fraud merely because in one case, responsibility for the fraud is said to rest with a mortgagee, and in another, with a purchaser. In both cases, the allegedly defrauded party seeks the same remedy (setting aside a transfer of land) on the same basis (fraud).
It may well be that at some time the Court of Appeal will be called upon to consider the correctness of the decision in Swanston Mortgage.[39] In the meantime, I do not consider that the reasoning in Swanston Mortgage[40] can be narrowly confined to its facts: that is, where a mortgagor has the right to set aside a sale on the grounds of fraud on the part of the mortgagee. In those circumstances, Brooking J held that, under the Torrens System, a mortgagor does not have an equity of redemption, but the right to discharge the mortgage upon payment of the amount owing to the mortgagee. Referring to the decision of Kitto and Menzies JJ in Latec,[41] his Honour concluded that the effect of the fraudulent sale of the property by the mortgagee to a third party was to effect a transfer not of the land but the mortgage, thus reinstating the right of the mortgagor to have a discharge of the mortgage upon payment of the amount owing under the mortgage. Until the sale was set aside, all the mortgagor had was a mere equity. His Honour stated as follows:
… in a case where a mortgagor seeks to set aside the sale before registration of the transfer to the purchaser, it might be said that the equitable interest which will be held to exist if the ‘equity’ is successfully asserted is the equitable interest in the land of which the mortgagor was deprived by the making of the mortgagee’s contract of sale. But the difficulty remains that the ‘equity’ must be successfully asserted before the equitable interest will arise.[42]
[39]Ibid.
[40]Ibid.
[41](1965) 113 CLR 265.
[42]Swanston Mortgage, 679.
Earlier in his reasons, his Honour refers to an equity, or a ‘mere equity’, as ‘a right, usually of a procedural character, which is ancillary to some right of property, and which limits it or qualifies it in some way’.[43] A mere equity is to be contrasted to an equitable interest in property, and the examples referred to by his Honour include the right to have a transaction set aside for fraud or undue influence.
[43]Ibid, 675.
That the reasoning in Swanston Mortgage[44] was not intended to be confined to the right of a mortgagor to set aside a fraudulent sale by a mortgagee is evidenced from the following passage of Brooking J’s reasons:
The conclusion that there was in the present case no right to caveat is supported by Re Pile’s Caveats [1981] Qd R 81, where a married woman lodged caveats on the basis that she had been induced to execute transfers (since registered) of the lands in question to two companies by the fraudulent misrepresentation of her husband that the transfers would not affect her beneficial interests in the lands. At the time of the transfers she and her husband were the registered proprietors of the lands. Dunn J described the wife’s claim as a claim to have the lands retransferred to her on the ground that the original transfers had been procured by fraud. It was the assertion of “a personal equity”. In ordering removal of the caveats, Dunn J observed that a personal equity was to be distinguished from an interest in land, an observation adopted by Kelly J in Ex parte Goodlet & Smith Investments Pty Ltd [1983] 2 Qd R 792, at 793. Re Pile’s Caveats is an example of the characterisation of the equitable right to assail a transfer of land for fraud as a mere equity, not an equitable interest, for the purposes of the right to caveat.[45]
[44]Ibid.
[45]Ibid, 682.
For completeness, I have been unable to locate any other authorities in this jurisdiction apart from Schmidt[46] and Karan v Nicholas[47] which have distinguished the decision in Swanston Mortgage.[48] Whilst its correctness and scope has been doubted,[49] and a different approach has been adopted in New South Wales,[50] I do not consider that Swanston Mortgage[51] can be confined to its facts, and its correctness must be considered elsewhere.
[46](2006) 14 VR 447.
[47][2019] VSC 35.
[48][1994] 1 VR 672.
[49]See Byrne v St George Bank Ltd [1996] ANZ Conv R 405, per Ormiston, Phillips and Hayne JJA.
[50]Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870.
[51][1994] 1 VR 672.
Finally, in Karan v Nicholas,[52] I held that a party who claimed an interest in land pursuant to a ‘common intention’, or Baumgartner[53] constructive trust had a claim to an equitable interest in the relevant property which is caveatable.[54] I accept for present purposes that Mr Brown owed the Faagolos a fiduciary duty, and that as such, if the plaintiffs were knowingly concerned in Mr Brown’s breach of trust, or were a knowing recipient of trust property (being the Hampton Court property), then the plaintiffs may be liable to the Faalogos pursuant to the principles in Barnes v Addy.[55]
[52][2019] VSC 35.
[53]Baumgartner v Baumgartner (1987) 164 CLR 137.
[54][2019] VSC 35 [16]-[17].
[55](1874) LR 9 Ch App 244.
However, as the analysis of the authorities in the decision of the Court of Appeal in McNab and anor v Graham and anor (‘McNab’)[56] demonstrates, there is a material distinction between a trust arising from a proprietary estoppel (or, I would add, a common intention) constructive trust, and a ‘remedial’ constructive trust which might arise where a court finds an accessorial liability in accordance with the principles in Barnes v Addy.[57] In particular, a party estopped from denying a proprietary interest in land, or who is a party to a common intention constructive trust is a trustee of the relevant property from the time the promise was relied upon, or the common intention given effect. For that reason, an equitable interest is said to arise at the time the beneficiary of a promise acts to his or her detriment in reliance upon the promise, or the party to a common intention constructive trust takes steps to give effect to the common intention.
[56](2017) 53 VR 311.
[57](1874) LR 9 Ch App 244.
However, the authorities referred to in McNab[58] make it clear that the liability of a ‘dishonest assister’ or ‘knowing recipient’ of trust property is a personal fault based liability. The wrongdoer may be exposed to equitable remedies, including the imposition of a constructive trust, but any claimant has a personal, rather than proprietary claim.[59] Accordingly, that there is a possibility that any possible claim by the Faalogos against the plaintiffs may have as its remedy the imposition of a remedial constructive trust does not convert the Faalogos’ potential claim into an equitable interest in the Hampton Park property, as opposed to a personal claim against the plaintiffs, does not materially distinguish their claim from the claim in Swanston Mortgage.[60]
[58](2017) 53 VR 311.
[59]Ibid [96]. See also Paragon Finance plc v D B Thakerar & Co (a firm) [1999] 1 All ER 400; Nolan v Nolan [2004] VSCA 404; Williams v Central Bank of Nigeria [2014] AC 1189.
[60][1994] 1 VR 672.
Given the above, it is not necessary for me to consider whether the caveat ought to be removed because the grounds of claim does not refer to an interest in land known to the law. Given the circumstances in which the Faalogos find themselves in, if that was the only deficiency in their argument, I may well have granted leave to amend. But the difficulty with the caveat goes beyond matters of form.
Accordingly, I am bound to order that the caveat be removed. This may seem to be an unduly harsh outcome given that there is unchallenged evidence that the Faalogos have been the victims of a fraud, and the Hampton Park property is their family home. However, this does not mean that the Faalogos have no other remedies. They can apply for injunctive relief to restrain any dealings with the property, although such a step carries with it the disadvantage of having to give an undertaking as to damages.
I will order that the caveat be removed, but will stay the order for at least thirty days (having regard to the time of the year) to enable the Faalogos to consider their options.
Application for possession under Order 53 of the Rules
Order 53 was enacted to facilitate the speedy recovery of land by the person entitled to possession of the land, and is targeted at squatters and other trespassers.
Rule 53.01 of the Rules provides as follows:
… this Order applies where the plaintiff claims the recovery of land which is occupied solely by a person or persons who entered into occupation or, having been a licensee or licensees, remained in occupation without the plaintiff’s licence or consent or that of any predecessor in title of the plaintiff.
The principles in relation to the operation of Order 53 were conveniently summarised by Derham AsJ in Framlingham Aboriginal Trust v McGuinness and Chatfield,[61] as follows:
[61][2014] VSC 241.
(a)It is intended to enable a speedy resolution in favour of the proprietor of land of a dispute whereby trespassers are keeping the proprietor out;
(b)It is intended to apply only in clear cases where there is no question to try;
(c)The existence of a factual dispute does not deny the applicability of Order 53 where it is possible to resolve the dispute readily and fairly;
(d)While an order for possession may be made notwithstanding that there is a factual dispute between the parties, such an order will only be appropriate if the Court is able to satisfy itself as to the material facts that bring the case within O 53;
(e)The jurisdiction should be exercised with great care;
(f)Where an issue does emerge, the judge has discretion whether simply to dismiss the proceeding, to determine the issue or cause the issue to be subsequently tried. This includes giving directions as to the further conduct of the proceeding or ordering the proceeding to continue as if begun by writ pursuant to Rule 4.07 of the Rules; and
(g)Where the Court gives judgment for possession under Order 53, it may grant a stay of execution.
The power to give summary judgment for possession is similar in nature to the power to give summary final judgment under Rule 22.02 of the Rules. That power should be exercised with great care and should never be exercised unless it is clear that there is no question to be tried. The need for exceptional caution in exercising the power is the subject of numerous observations of courts in this country.[62]
[62]Ibid [41]-[42].
The issues which arise on this occasion are first, whether the Faalogos are parties to whom Order 53 applies, and secondly, whether this Court should, in all the circumstances, exercise its discretion to compel the Faalogos to surrender possession of the Hampton Park property, noting that the plaintiffs, as registered proprietors, have the prima facie right to possession of the Hampton Park property.
Counsel for the plaintiffs submitted that, as the registered proprietors of the Hampton Park property, the plaintiffs are entitled to possession. If the Faalogos do not have any interest in the property, they have no right to remain in possession. They have remained in the property without paying rent since June 2018.
Counsel for the Faalogos submitted that the preconditions for the operation of Order 53 have not been met. The Faalogos did not enter into occupation as licensees: they were the registered proprietors of the Hampton Park property, and remained in occupation following the transfer to the plaintiffs. Further, the Order 53 procedure is only appropriate in circumstances where there is no reasonable doubt as to the plaintiffs’ claim for possession.
I was not directed to any authority which supports the proposition that a person who entered into possession lawfully (that is, by reason of being the registered proprietors, or as a lawful tenant) but whose right to possession has been lawfully terminated by reason of them ceasing to be the registered proprietor, is not amenable to a judgment under Order 53. It would seem to me to defeat the purpose of Order 53 if its operation was restricted to those who occupy or take possession of land without the consent of the registered proprietor or any other party entitled to possession, and those who lawfully entered into occupation, but no longer lawfully occupy the relevant property, are excluded from the operation of Order 53.
Indeed, the recent authorities concerning applications under Order 53 largely concern situations where the occupier has been lawfully in possession prior to the consent of the registered proprietor or the mortgagee having been impliedly or expressly withdrawn.[63]
[63]See, for example, Lu v Yu [2019] VSC 499 per Derham AsJ; In the matter of the Will of Dorothea Agnes Baird [2019] VSC 59 per Keogh J; Alderuccio v Alderuccio [2019] VSC 404.
On one view, the Faalogos do not fall within the terms of r 53.01, on the basis that they did not enter into occupation of the Hampton park property as licensees: one or both of them was entitled to possession as the registered proprietors. However, the terms of r 53.01 encompass a situation where a licensee remains in occupation without the registered proprietor’s consent or that of any predecessor in title. Here, the predecessors in title are the Faalogos. But it seems to me to be artificial to suggest that, in circumstances where the current registered proprietors of the land do not consent to the ongoing occupation of the land by the Faalogos, the Faalogos can rely upon their own implied ‘consent’ to preclude the operation of order 53. As noted by Derham AsJ in Tajon Pty Ltd v Arvanitis:[64]
[64][2017] VSC 130.
Is a claim by a mortgagee against a third party in occupation of mortgaged land within the terms and intent of r 53.01(1)? The language of the rule is unusual:
(a)first, because it uses the language of ‘occupation’ of land rather than possession;
(b)secondly, because its first limb uses language that presupposes the person with the entitlement to possession, who could be the registered proprietor of the fee simple estate, or a person with a lesser estate in the land such as a lessee or mortgagee, claims against a person who entered into occupation without the plaintiff’s licence or consent or that of any predecessor in title of the plaintiff. That is a person who was a trespasser from the outset of his or her occupation; and
(c)thirdly, because the second limb of the rule presupposes that the person in occupation was originally a licensee and ‘remained in occupation without the plaintiff’s licence or consent or that of any predecessor in title of the plaintiff.’ The words of the second limb do not require that it was the plaintiff or its predecessor in title who licenced the occupier, just that they remain in occupation without that consent. In other words, it is wide enough to include the situation where a mortgagor licenses individuals to occupy land, the mortgagor loses, (by its default under the mortgage), the entitlement to possession, and the mortgagee seeks to recover possession in order to sell the land and recover its secured debt.
The language of the rule reflects the conceptual framework of property in Anglo-Australian law, in that there is no absolute ownership of land and ‘[a]ll titles to land are ultimately based on possession in the sense that the title of the man [sic] seised prevails against all who can show no better right to seisin.’ As the learned authors of Australian Property Law observe:
In disputes concerning land the question to be decided as between the plaintiff and the defendant was which party had the better right to seisin. The courts were unconcerned as to whether the plaintiff or the defendant had a right enforceable against the whole world, the concept of relativity of title rather than absolute ownership was firmly established in English law from very early times and has remained one of the cornerstones of Anglo-Australian real property law.
In this case, it is the mortgagee who has the better right to possession as against the mortgagor and any person claiming under it. At best, the mortgagor licensed the defendants and the other occupiers of the Property to occupy it, and they remain in occupation without the plaintiff’s licence or consent, and without the licence or consent of any predecessor in title of the plaintiff, being in this case a person who precedes the plaintiff as mortgagee. Put another way, to be entitled to remain in occupation, the defendants and other occupiers must be able to claim that they remain in occupation with the licence or consent of the plaintiff or its predecessor in title, and they do not do so.
Accordingly, notwithstanding the fact that the Faalogos entered into possession lawfully at the outset, once the transfer to the plaintiffs was registered, the plaintiffs had a better right to possession. It is arguable that, upon the transfer of the property, and prior to their receipt of the letter from the plaintiffs’ solicitors dated 14 September 2018, the Faalogos occupied the property pursuant to an implied licence,[65] which was expressly revoked by the plaintiffs on that date.
[65]In their letter dated 5 November 2018, the former solicitors for the plaintiffs referred to an oral agreement by which the Faalogos were permitted to continue to occupy the Hampton Park property. However, it was not contended by either party that the Faalogos occupied the property as tenants of the plaintiffs.
However, the current case seems to me to be inappropriate for summary disposition under order 53 of the Rules. There is clearly a factual dispute between the parties which is not amenable to speedy resolution. The circumstances in which the transfer of the Hampton Park property took place are sufficiently curious so as to enable a view to be formed that there is a real question to be tried that the transfer was tainted by fraud, and that fraud may well be able to be sheeted home to the plaintiffs. In particular, the fact that both the plaintiffs and the Faalogos were represented by the same conveyancer indicates that any knowledge of the conveyancer regarding any fraud perpetrated upon the Faalogos may well be imputed to the plaintiffs. Only time will tell.
For that reason, I propose to adjourn the further hearing of the application for possession to a date to be fixed not before 4 March 2020. That will provide the Faalogos sufficient time to bring any proceeding and seek any interim relief with respect to their allegations of fraud. If, for example, they are successful in obtaining injunctive relief against the plaintiffs, making an order for possession would detract from any relief granted. However, if they do not take any steps to assert their rights in the meantime, an application for possession by the plaintiffs will no doubt be looked upon more favourably.
I will hear further submissions from counsel with respect to the form of orders to give effect to these reasons, the question of costs, and the questions of whether any conditions should be imposed upon the granting of a stay and/or the adjournment of the application pursuant to Order 53.
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