Williams v Williams & Anor
[2008] VSCA 108
•13 June 2008
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No. 3714 of 2008
| NEIL AUSTIN WILLIAMS | |
| Appellant | |
| v. | |
| KAY MARGARET WILLIAMS | Respondents |
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JUDGES: | BUCHANAN JA and OSBORN AJA |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 13 June 2008 |
DATE OF JUDGMENT: | 13 June 2008 |
MEDIUM NEUTRAL CITATION: | [2008] VSCA 108 |
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Rural property – Torrens system – Sale of land – Purchaser entitled to rely on withdrawal of caveat.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Dr JS Glover | A I F Lucas & Co |
| For the Second Respondent | Mr GJ Burns | Oakleys White |
BUCHANAN JA:
In 1975, the appellant married the first-named respondent. Four children were born of the marriage. On 13 February 1986, the appellant and the first-named respondent were registered as proprietors of a farm at Sandy Point. On 3 July of 1987, the first-named respondent was registered as sole proprietor of the land. The appellant says that was done pursuant to an agreement with his wife that she would hold the land on trust for their children. In 1988, the first-named respondent executed a declaration of trust in the form of a discretionary trust, naming the children as primary and income beneficiaries.
In September 1988, the appellant was bankrupted. His trustee in bankruptcy lodged a caveat on the title, claiming the transfer to the first-named respondent was void pursuant to the provisions of the Bankruptcy Act. In 1992, the marriage between the appellant and the first-named respondent became strained. Family Court proceedings were instituted by the first-named respondent.
On 25 February 1993, the land was sold by the first-named respondent to the second-named respondent and his brother, as a result of pressure applied by a bank which held a mortgage over the land. It was common ground that the sale was at arm's length and for a proper price. At the time of sale, in addition to the mortgage, the title to the land was encumbered by four caveats as follows:
(1)A caveat lodged by the trustee in bankruptcy on 8 September 1989.
(2)A caveat lodged on behalf of the appellant, claiming that the first-named respondent held the land 'for herself and the caveator by virtue of an implied or constructive trust'.
(3)A caveat lodged on behalf of Victoria Legal Aid, claiming an interest under a charge given by the first-named respondent.
(4)A caveat lodged by the appellant in January 1993, naming as caveators two of his four children, asserting an equitable interest in the land 'pursuant to a deed of declaration of trust dated 2 June 1988 whereby the registered proprietor holds her interest in the land on trust for the caveators'.
The last-mentioned caveat was set out in a statement pursuant to s 32 of the Sale of Land Act 1962, which was given to the purchasers.
The caveats were all withdrawn and the title to the land was transferred to the second-named respondent and his brother. The bulk of the purchase moneys was disbursed to the mortgagee and the appellant's trustee in bankruptcy. Only some $7,000 remained. In 1999, the second respondent's brother transferred his interest in the land to the second-named respondent pursuant to a family arrangement.
On 29 January 2007, the four children of the appellant lodged a caveat on the title to the land, claiming an interest in fee simple on the ground that 'the registered proprietor acquired the land subject to a subsisting trust dated 8 May 1987 in favour of the caveators'. The trust was apparently the oral trust created by the agreement between the appellant and the first-named respondent that the land be transferred to the first-named respondent to be held on trust for the couple's children.
The Registrar of Titles gave the appellant notice pursuant to s 89A(3) of the Transfer of Land Act 1958, requiring that the caveat be withdrawn or proceedings be commenced to substantiate the appellant's claim. On 19 March 2007, the appellant instituted proceedings against the respondents, claiming against the second respondent specific performance of the agreement between the appellant and the first-named respondent I have described, a declaration that the second-named respondent held the land as trustee for the children, and ancillary relief.
In an amended statement of claim, the appellant alleged the oral agreement with his wife, that the first-named respondent retired as trustee and after a succession of appointments the appellant was appointed trustee, that the appellant lodged the 1993 caveat, that the land was sold to the second-named respondent and his brother, and that the title was transferred to the second-named respondent alone. The appellant alleged that by virtue of the caveat, the second-named respondent acquired the land subject to and with notice of the interests of the children under the trust, and that the second-named respondent denied these interests 'fraudulently'. The fraud was said to be constituted by deliberately denying the rights of the children when the second-named respondent, knowing of the trust, registered the title in his name for the purpose of destroying the interests of the children.
A master of the court dismissed the action against the second-named respondent. An appeal to a judge in the Trial Division was dismissed. It appears that the judge exercised the summary power of dismissal conferred by rule 23.03. His Honour dealt with a contention that, having failed to enquire as to the nature of the trust for the children, the purchasers were fixed with knowledge of the trust, that it was a bare trust with no power of sale, and that the sale was in breach of the trust. His Honour rejected that contention, holding that the purchaser is not ordinarily required to make enquiry beyond the assertions in the caveats and the fact of their discharge. At the time of settlement the title was clear and the purchasers were entitled to conclude that the rights, if any, asserted in the caveats had been accommodated. The judge also rejected the allegation of fraud, saying that the evidence provided no basis for the allegation.
The appellant has appealed to this Court against the trial judge's decision. On 10 June 2008, the President determined, pursuant to s 11(1A) of the Supreme Court Act 1986, that the appeal be heard by two Judges of Appeal. Accordingly, we have heard the appeal.
It was submitted on behalf of the appellant that the first-named respondent breached the terms of the trust for the children by selling the land to the second-named respondent and his brother. The purchasers took with knowledge of the children's interest, for they were given notice of the caveat. The Pilkingtons were guilty of fraud within the meaning of s 42 of the Transfer of Land Act 1958 because they did not investigate the children's claim and deliberately invoked the registration provisions of the Act to deny the children's claim. It was also submitted that the second-named respondent had reasonable grounds to suspect that the first-named respondent was acting fraudulently. Those grounds were not identified.
In my opinion, the foregoing argument breaks down at several points. Ordinarily, a trustee does not commit a breach of trust by selling trust property. Presumably that is why counsel for the appellant, in alleging breach of trust, coupled the sale with the allegation that the second-named respondent failed to account for the proceeds of sale. I doubt that she did. The proceeds in the main were paid to the mortgagee and the appellant's trustee in bankruptcy. In any event, any failure to account took place after settlement, and it is not alleged that the second-named respondent or his brother knew or ought to have suspected any failure to account. There was no evidence that the Pilkingtons deliberately used the registration provisions of the Transfer of Land Act to defeat the claim of the children. Nor was there any evidence that the second-named respondent had reasonable grounds to suspect that the first-named respondent was acting fraudulently. Indeed, it is difficult to discern fraud in responding reasonably to demands by a mortgagee whose loan has not been repaid.
Even if the appellant could overcome the difficulties that I have referred to, he must fail at the final hurdle represented by the withdrawal of the caveat claiming the equitable interest for the children. The caveat was withdrawn by a solicitor appointed by an order of the Family Court 'to be next friend of Andrew Neil Williams and Stuart Mark Williams for the purpose of the infants responding to application of the applicant for an order that the caveat lodged by the said children be removed by direction of this Honourable Court'. It was submitted that the solicitor acted wrongfully in executing a withdrawal of caveat without authority from the court. I doubt that the order did require the solicitor to obtain the imprimatur of the Family Court before withdrawing the caveat. For the sake of argument, however, I am prepared to assume that the withdrawal was in breach of the court's order.
The difficulty that the appellant cannot overcome is that the second-named respondent had no notice of any facts which might be said to have put him on enquiry. The appellant relied upon the decision in Barry v Heider[1]. In that case, a purchaser, Schmidt, tricked the vendor, Barry, into signing an instrument of transfer for an understated price. The same solicitor acted for both Barry and Schmidt. A caveat was lodged by the solicitor on Barry's behalf, notifying a lien by which Barry claimed the full price. Schmidt used the signed transfer to get a mortgage advance from a lender, one Gale. Gale searched the title and learned of the caveat. Gale was also aware that the solicitor acted for both parties and that the solicitor withdrew Barry's caveat in order to facilitate the transaction. Griffith CJ, with whom Barton J agreed, said that a stranger preparing to enter into a transaction respecting land might reasonably infer that a solicitor by whom a caveat was lodged had authority to withdraw it. He continued:
Gale, however, was not a mere stranger coming on the scene for the first time. He knew on 4 December that Peterson was acting as solicitor for Schmidt, the proposed borrower. The letter withdrawing the caveat was equivalent to an acknowledgment by Peterson as agent for Barry that the latter's lien for unpaid purchase money was satisfied. The case is, therefore, as if the person proposing to advance money on equitable mortgage were told by the solicitor for the proposed borrower, purporting also to act as solicitor for a prior equitable mortgagee, that the prior equitable mortgage had been satisfied.
That is not this case. The appellant is unable to point to any circumstances known to the second-named respondent which is comparable to the circumstances which put Gale on notice. In my opinion, the second-named respondent and his brother acted entirely properly in relying upon the withdrawal of the caveat. They were not bound to go behind the solicitor's act and were entitled to assume that she acted properly.
[1](1914) 19 CLR 197.
The second-named respondent contended that the appeal is incompetent, that the decision of the judge was interlocutory and leave to appeal pursuant to s 17A(4)(b) of the Supreme Court Act 1986 has not been granted. In my opinion, the decision below was final. The order made in the Trial Division finally determined the rights of the parties having regard to the legal, rather than the practical, effect of
the order.[2] The order dismissing the proceeding was based upon the existence of a good defence on the merits. His Honour apparently exercised the jurisdiction conferred upon him by rule 23.03, for he said that the claim was not established, not that the statement of claim failed to disclose a cause of action, or was scandalous, frivolous, vexatious or an abuse of the process of the court.
[2]See Hall v Nominal Defendant (1966) 117 CLR 423.
For the reasons I have stated, I would dismiss the appeal.
OSBORN AJA:
I agree and I would also dismiss the appeal.
BUCHANAN JA:
The order of the Court is that the appeal is dismissed with costs.
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