Whittington v Lilleyman - [2016] WASC 173

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: WHITTINGTON -v- LILLEYMAN [2016] WASC 173

CORAM: MARTINO J

HEARD: 9 JUNE 2016

DELIVERED : 9 JUNE 2016

FILE NO/S: CIV 1894 of 2016

MATTER :Section 138C of the Transfer of Land Act 1893 (WA)

BETWEEN: SHANNON DAVID WHITTINGTON
Plaintiff
AND
GARY RANDELL LILLEYMAN
First Defendant
REGISTRAR OF TITLES
Second Defendant

Catchwords:

Real property - Application to extend operation of caveat

Legislation:

Transfer of Land Act 1893 (WA), s 138C

Result:

Caveat extended

Category: B

Representation:

Counsel:

Plaintiff:     Mr M S Crawford
First Defendant             :     In person
Second Defendant         :     No appearance

Solicitors:

Plaintiff:     Arns & Associates
First Defendant             :     In person
Second Defendant         :     No appearance

Case(s) referred to in judgment(s):

Bashford v Bashford [2008] WASC 138
Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Jandric v Jandric [1999] WASC 22
Porter v McDonald [1984] WAR 271

MARTINO J: The plaintiff applies pursuant to s 138C of the Transfer of Land Act 1893 (WA) (the TLA) for an order extending a caveat over land owned by the first defendant. The first defendant acts in person. He has entered an appearance and filed an affidavit in opposition to the application. The second defendant, the Registrar of Titles, has followed the usual practice of sending a letter to the plaintiff and the court stating that she proposes to take no part in the action and to abide by any orders made by the court.
Although this is the first return of the plaintiff's application it is appropriate for me to determine the application today due to the small amount in dispute and because I consider that the appropriate resolution of the application is clear.
The following facts appear from the affidavits filed by the plaintiff and the first defendant.
On 2 March 2000 the first defendant transferred the land over which the caveat has been lodged to the plaintiff. A dispute arose between the first defendant and the plaintiff as to who was the beneficial owner of that land.
That dispute was resolved and on 24 December 2014 the plaintiff and the first defendant entered into a deed of settlement by which the plaintiff agreed to transfer the land to the first defendant.
Clause 3.1 of the deed provided that in the event that capital gains tax (CGT) was payable by the plaintiff to the Australian Taxation Office (the ATO) and the plaintiff provided to the first defendant a letter (on approved letterhead) from the ATO that evidenced that CGT was payable by him in respect of the property, the first defendant agreed to contribute $23,925 to the CGT payable.
Clause 3.2 provided that to secure the first defendant's obligation to the plaintiff in cl 3.1, the first defendant charged his interest in the land and the first defendant consented to the plaintiff registering a caveat over the land.
Clause 3.3 provided that the plaintiff would remove the caveat on the earlier of the ATO assessing that no CGT was payable or the first defendant paying the amount set out in cl 3.1.
The land was transferred to the first defendant and the plaintiff lodged a caveat on the land. In that caveat the plaintiff claims an estate or interest as equitable chargee pursuant to the deed.
On 14 April 2016 the ATO issued a notice of assessment to the plaintiff assessing that for the year ended 30 June 2015 the plaintiff's taxable income was $91,241, that the tax on that taxable income was $21,706.17 and that $20,160.95 was payable by the plaintiff to the ATO. The notice of assessment states that the plaintiff's taxable income includes $59,814 capital gains.
On 10 May 2016 the plaintiff sent an email to the first defendant requesting that the defendant pay him $20,000 pursuant to the deed. The first defendant has requested that the plaintiff provide him with the ATO documentation that supports this claim. The plaintiff has provided the first defendant with a copy of the notice of assessment and some correspondence and papers from his accountant. His solicitors have demanded that the first defendant pay the sum of $20,160.95.
The first defendant acknowledges that money is payable by him to the plaintiff under cl 3.1 of the deed however he disputes that the sum payable is the sum claimed by the plaintiff. The first defendant has paid a total of $10,080.45 to the plaintiff. He says that he has paid the full amount payable to the plaintiff under cl 3.1 of the deed.
Section 138C(2) of the TLA provides:
On the hearing of an application under subsection (1), the Supreme Court ‑
(a)if satisfied that the caveator's claim has or may have substance ‑
(i)may make an order extending the operation of the caveat for such period as is specified in the order;
(ii)may make an order extending the operation of the caveat until the further order of the court; or
(iii)may make such other orders as it thinks fit concerning the caveat or the land in respect of which the caveat was lodged;
(b)if not satisfied that the caveator's claim has or may have substance, shall dismiss the application; and
(c)may make such ancillary orders in relation to the application as it thinks fit.
The power of the court to make an order extending the operation of a caveat arises only if the court is satisfied that the caveator's claim 'has or may have substance'.
On an application for an extension, the onus is on the caveator to demonstrate that there is a serious question to be tried as to whether a caveatable interest exists: Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, 50; Jandric v Jandric [1999] WASC 22 [5]; Bashford v Bashford [2008] WASC 138 [47].
It is not appropriate to attempt to resolve conflicts of evidence on affidavit on the hearing of an application to extend the operation of a caveat: Porter v McDonald [1984] WAR 271, 276; Bashford v Bashford [48]. The caveat will be extended unless the claim to an estate or interest in the land appears to be without foundation: Porter v McDonald (276); Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (48); Bashford v Bashford [49].
The balance of convenience is a factor to be considered in an application to extend the operation of a caveat. However, interlocutory removal of a caveat will be unusual where an arguable case as to the existence of a caveatable interest has been demonstrated. That is because the purpose of a caveat is the protection of a proprietary interest. Removal of the caveat will, in many cases, have the effect of destroying the benefit of the proprietary interest claimed in the caveat: Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (50); Bashford v Bashford [50].
Whether the plaintiff is entitled to the full amount that he claims will turn upon evidence. The ATO assessment notice does not necessarily resolve the issue. The plaintiff says that the CGT payable is $20,160.95 and points to the ATO assessment notice and the taxation estimate prepared by his accountant at page 40 of his affidavit. However those documents show that the plaintiff's total taxable income for the year ended 30 June 2015 was $91,241. That taxable income included $59,814 capital gains. The tax payable on the taxable income was $21,706.17. In addition the plaintiff was assessed as having a liability for the Medicare levy of $1,824.82. The amount due to the ATO was reduced by $31 for franking tax credit offsets and $3,339 for PAYG instalments he paid, leaving a balance due of $20,160.95.
At the hearing today counsel for the plaintiff handed up a further taxation estimate prepared by the plaintiff's accountant which showed that if not for the CGT the plaintiff would have received a tax refund of $673. This does not resolve the issue but it does show that it may be that the CGT liability was more than the amount that has been paid to the plaintiff by the first defendant.
The plaintiff is seeking a letter from the ATO. Counsel for the plaintiff does not know how long it will take to receive such a letter, but says that two months is a reasonable estimate.
It is not necessary or desirable that I resolve the issue in dispute on the affidavits. However I am satisfied that there is a serious question to be tried as to whether the plaintiff continues to hold a caveatable interest in the land after the payment that the first defendant has made. The ATO has not assessed that no CGT was payable. It is not yet clear that the first defendant has paid the full amount of CGT.
I have considered whether, in view of the small amount remaining in dispute, the balance of convenience lies against extending the caveat. I have decided that it does not. The plaintiff has an arguable case that he is owed monies secured by the equitable charge created by the deed. If I were not to extend the caveat then he will lose his proprietary interest in the land to secure the monies that are arguably due to him by the first defendant.
The amount in dispute is $10,080.45. I encourage the parties to endeavour to resolve this dispute. If it is not resolved the costs and losses that may flow will be out of proportion to the amount in dispute. If the parties cannot resolve the dispute it will be necessary for it to be resolved by an action in the Magistrates Court.
As to the costs of today I consider that they should be in the cause in the action to be commenced. Whether the first defendant is indebted to the plaintiff is yet to be determined.
I make the following orders:
Upon undertaking of the plaintiff that he will pay to any party restrained or affected by the restraints imposed by caveat number M924271 such compensation as the court may in its discretion consider on the circumstances to be just, such compensation to be assessed by the court or in accordance with such directions as the court may make and to be paid in such manner as the court may direct:
1.The operation of caveat number M924271 lodged against the first defendant's land at Lot 478 on Plan 2683 and being the whole of the land comprised in certificate of title volume 1207 folio 777 is extended until further order.
2.It is a condition subsequent to the continuation of order 1 that by 9 August 2016 the plaintiff commence proceedings in the Magistrates Court claiming the balance of the monies that he claims are due to him by the first defendant under cl 3.1 of the deed of settlement between the plaintiff and the defendant made on 24 December 2014.
3.The costs of today's hearing be in the cause in the action to be commenced in the Magistrates Court.
4. There be liberty to apply for variation of these orders.