Williams v Williams & Anor
[2007] VSC 564
•19 December 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
PRACTICE COURT
No. 5203 of 2007
| NEIL AUSTIN WILLIAMS | Plaintiff |
| v | |
| KAYE MARGARET WILLIAMS & ANOR | Defendants |
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JUDGE: | BYRNE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 December 2007 | |
DATE OF JUDGMENT: | 19 December 2007 | |
CASE MAY BE CITED AS: | Williams and Williams | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 564 | |
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Sale of land – caveat – caveators assert purchase subject to subsisting trust in favour of caveators – vendor held land as bare trustee for caveators – suggested that vendor as trustee had no right to sell – purchaser had no notice of this – whether purchaser guilty of fraud.
Transfer of Land Act 1958 s. 42(1)
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Dr J Glover | A.I.F. Lucas & Co. |
| For the First Defendant | No appearance | |
| For the Second Defendant | Mr G Burns | Oakleys White |
HIS HONOUR:
David John Pilkington, the second‑named defendant, is the registered proprietor of three parcels of land at Sandy Point being Lots 1, 2 and 3 on plan of subdivision 341695G. Lot 1 is a large farming property of 105 hectares. Lots 2 and 3 are adjoining residential lots. They are respectively the land described in Certificate of Title Volume 10563 Folios 355, 356 and 357 (I shall refer to these parcels as "the subject land").
On 29 January 2007 caveat AE864332W was lodged by Andrew Neil Williams, Stuart Mark Williams, Matthew Austin Williams and Alistair David Williams, asserting that they had an equitable estate in fee simple in the subject land. The grounds of claim are that, "The registered proprietor acquired the land subject to a subsisting trust dated 8th May 1987 in favour of the Caveators".
This proceeding was commenced on 19 March 2007 by the plaintiff, Neil Austin Williams, pursuant to the Transfer of Land Act s.89A(3) to substantiate the caveators' claim. On 21 November 2007 Master Evans acceded to an application made on behalf of Mr Pilkington that the proceeding against him be dismissed. The plaintiff appeals against the Master's order.
The circumstances are a little complicated. The plaintiff was married in 1975 to the first‑named defendant Kay Margaret Williams now Kay Margaret Ferrari. The four caveators are the children of the marriage and are all of full age. Andrew was born in May 1978, Stuart in August 1979, Matthew in January 1985 and Alistair in May 1987. Mr Williams and his wife on 13 February 1986 became registered as joint proprietors of the subject land which was then the land described in Certificate of Title 9636 Folio 393.
Mr Williams says that in May 1987 he and his wife agreed the subject land be transferred to his wife's name alone on the basis that she held it on trust for the children. She says that, "The transfer was to preserve the property and another property for our sons". The agreement was oral.
For present purposes I proceed on the basis contended for by Mr Williams. The Certificate of Title shows that Mrs Ferrari was registered as sole proprietor on 3 July 1987. In the transfer which is dated 8 May 1987 the consideration is said to be "natural love and affection".
About a year later Mrs Ferrari executed a deed of declaration of trust dated 1 March 1988. This is a discretionary trust in fairly conventional form which identifies the children as primary beneficiaries and as income beneficiaries. In the recital the deed refers to the establishment of the trust for the children in May 1987 and further says that the deed is entered into to record and confirm the terms and conditions of that trust.
In September 1988 Mr Williams became bankrupt. His statement of affairs discloses a deficiency of $33,000. On 8 September 1989 his trustee in bankruptcy lodged a caveat on the title to the subject land asserting that the 1987 transfer to Mrs Ferrari was void pursuant to s.120 or s.121 of the Bankruptcy Act. In 1992 there were marital difficulties between Mr Williams and his wife and Family Court proceedings were commenced by her seeking custody of the children and settlement of property.
In the meantime Mrs Ferrari was being pressed by the Bank of Melbourne as mortgagee of the subject land and she put the subject land to sale by private contract. On 25 February 1993 the subject land was sold to Mr Pilkington and his brother Thomas Overton Pilkington for $357,610 plus $4,000 for stock yards. The settlement date is shown as 19 April 1993. It was said, and not challenged, that this was an arms length sale for a proper price. At the time of the sale the title to the subject land was encumbered and these encumbrances were disclosed to the purchasers in the s.32 statement. The encumbrances were the following:
1.Registered mortgage to RESI Statewide Building Society (Bank of Melbourne).
2.The trustee in bankruptcy's caveat lodged on 8 September 1989 to which I have referred.
3.Caveat S191821Y which appears to be dated 14 October 1992 lodged on behalf of Mr Williams claiming that Mrs Ferrari held the land, the subject land "for herself and the caveator by virtue of an implied or constructed trust pursuant to s. 53(2) of the Property Land Act".
4.Caveat S261766P lodged on 10 December 1992 on behalf of the Victorian Legal Aid claiming an interest under a charge given by Mrs Ferrari, presumably for her legal costs.
5.Caveat S301038R lodged on 8 January 1993. This caveat is a handwritten document lodged by Mr Williams in person. The caveators are two of his four sons, Andrew, who was then 14 years, and Stuart, then 15 years. The document appears to have been signed by these infant caveators. They assert an equitable interest in the subject 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". It was not suggested that there is such a deed bearing that date. I take it to be a reference to the discretionary trust deed dated 1 March 1988.
These encumbrances were of course known to the purchasers. Their solicitors required their removal prior to settlement and the solicitors for Mrs Ferrari agreed to do so.
It seems that there was some difficulty in obtaining the withdrawal of Mr Williams' caveat and the children's caveat. On 22 February 1993 Mrs Ferrari applied to the Family Court for orders requiring her husband to effect their withdrawal. On 11 March 1993 a degree of agreement appears to have been reached between the spouses. On that day a solicitor was appointed to be next friend of the two infant caveators for the purposes of their responding to the application to remove the children's caveat.
On the following day consent orders were made resolving custody and access issues and ordering that Mr Williams leave the home. It seems too that the issue as to his caveat was resolved, for a notice of withdrawal of caveat was signed on his behalf on 15 April 1993.
The solicitor representing the infant caveators, who was shown as being present in the Family Court on that occasion, also signed a withdrawal of caveat dated 15 April 1993. I should add that on 22 March 1993 the Family Court, on the application of Mrs Ferrari, there being no appearance for Mr Williams, ordered that her application with respect to the children's caveats be withdrawn.
Settlement of the sale to the Pilkingtons took place on 20 April 1993 and they entered into possession. The disbursement statement shows that of the balance of the price about $72,000 went to the trustee of Mr Williams' bankruptcy estate and $256,687 went to the Bank of Melbourne. Of the balance $5,000 is showing as going to Mrs Ferrari and $12,000 for her solicitor, presumably for fees.
The ensuing 14 years witnessed continuing disputation between Mr Williams and his wife notwithstanding that their divorce took place in November 1994. Mr Williams has in various ways made complaint about the sale of the subject land. The discretionary trust too has seen changes as the disputations between the former spouses continued. The trustee was changed from time to time until on 6 April 1998 Mr Williams himself became trustee. He remains its trustee and brings this proceeding in that capacity.
The subject land too saw changes as the Pilkingtons farmed on it and, they say, made improvements to it. They say that they also expended substantial sums by way of interest paid on the amount borrowed for the purchase. The subject land has been sub‑divided into three lots as described above and in 1999 Mr Pilkington took a transfer of his brother's half interest as part of a family financial rearrangement.
Mr Pilkington says that no claim upon him or the property by Mr Williams or the trust or his sons was made until earlier this year.
On 29 January 2007 the caveat which is the subject of this proceeding was lodged. I have already described this caveat and the grounds of its claim. The caveators are the four sons who are the primary beneficiaries under the discretionary trust. The description of the claimed equitable interest is a little unusual and I quote it again, "The registered proprietor acquired the land subject to a subsisting trust dated 8th May 1987 in favour of the Caveators".
Pursuant to s.89A(3), if the claim of the caveator is not substantiated to the satisfaction of the court, the court may make such orders as it thinks fit with respect to the caveat.
At the outset a number of things must be said about this caveat. First, the acquisition referred to is not that of Mr Pilkington, it is that of himself and his brother. His brother too it would seem would be fixed with the asserted equities if there be any. Second, if the Pilkingtons or Mr Pilkington acquired the land the subject of the asserted trust, this gives no equitable interest in the subject land to the caveators. They are among the objects of a discretionary trust. The case presented on behalf of Mr Williams seeks to avoid this by contending that the trust is that created by the oral agreement between Mr Williams and his wife on 8 May 1987. This trust is not a discretionary trust but a bare trust in favour of the four sons. Third, although the proceeding is brought by Mr Williams in his capacity as trustee of the trust, the caveat is lodged on behalf of the suggested beneficiaries. This may cause difficulties, as will be seen.
The contention put on behalf of Mr Williams is, first, that he on behalf of his children can enforce a claim in personam against Mr Pilkington to the effect that he, Pilkington, holds the subject land on trust for the children. In the alternative it is contended that the title of Mr Pilkington was effected by fraud within the meaning of s. 42(1).
Before I turn to these contentions I remind myself that the defendant here seeks summary judgment. This is relief which is sparingly granted and then only in cases which are plainly hopeless. If there is a contest of fact I should assume that the plaintiff will prevail and if there is a contest as to the law, I should refuse relief unless I am satisfied that the plaintiff's contentions would not be improved by fuller argument.
The first question is as to the trust upon which Mrs Ferrari held the subject land at the time of the sale in 1993. The contention offered on behalf of the plaintiff is that the deed of declaration of trust executed by her on 1 March 1988 was of no effect, except perhaps for the evidentiary value to be had from one of the two recitals but not the other recital. The part of the recital which is relied upon is the following:
“On the 8th day of May 1987 the trustee, Mrs Ferrari, in that capacity and as declarant hereunder received by transfer of land certain property”… [and there the property is described]… “and in respect of which the terms and conditions upon which the trustee and declarant accepted and received the same were that the same would be immediately and thereafter held for and on behalf of the then existing and any future children of the marriage of the trustee and her husband Neil Williams”.
The part of the recital which this contention would ignore asserted that the terms of the discretionary trusts were the terms of the 8 May 1987 trust.
Accepting as I must for present purposes that the May 1987 agreement created a bare trust in favour of the four existing minor children, it would follow that the deed must be read as an ineffectual attempt by the trustee to vary the terms of the trust.
In paragraph 13 of the statement of claim it is alleged that the sale to the Pilkingtons was in wrongful and wilful breach of the May 1988 trust.
These breaches are particularised, first, as being that the vendor sold the subject land other than in a trustee capacity and, second, by failing to account for the $357,610 received. There is no substance in these allegations on any view of the evidence and they were not relied upon in oral argument. There is no legal requirement that the vendor who sells as a trustee should so describe herself in the contract. It is not suggested in the affidavits that any account of the proceedings of sale was sought or refused. The bulk of these proceedings were paid to the mortgagee and to Mr Williams' own creditors. It is not alleged that the proceeds were misapplied by the trustee.
What was said before me was that, as trustee of a bare trust, Mrs Ferrari had no power of sale so that the sale of the subject land to the Pilkingtons was a breach of trust. In fact, the sale was effected under the shadow of a mortgagee's notice of intention to re‑enter and take possession served on 30 November 1992 and under threat of ejectment and a mortgagee's sale by the bank. It is very likely that the sale by the trustee in these circumstances could be seen as an attempt to preserve as far as possible the trust fund for the benefit of the beneficiaries.
Be that as it may, the case against Mr Pilkington is that he holds the subject land as constructive trustee for the four children. It is at this point that the plaintiff's case becomes very muddy. It is not submitted that the Pilkingtons purchased the subject land on terms which bound them to the trust as was the case in Bahr v. Nicolay No.2,[1] although such an allegation appears to have been made in paragraph 17 of the statement of claim. What was put was that the Pilkingtons, having notice of the caveat lodged on behalf of two of the four children, had sufficient knowledge of the trustee's breaches as to fix them as purchasers, with the terms of the trust.
[1](1988) 164 CLR 604.
It is true that the solicitors for the Pilkingtons were aware of the children’s caveat and of its terms. They were aware, too, of Mr Williams' own caveat. I proceed on the basis that the Pilkingtons themselves are fixed with their solicitor's knowledge of these matters. They knew then that Mr Williams contended that he held a half interest in equity and that Andrew and Stuart contended that their mother held the subject land in trust for them pursuant to a deed of declaration of trust, a deed which is now not said to be effective.
I turn now to the breaches of trust of which the purchasers are said to have been aware at the time of acquisition. The first breach pleaded is that the vendor sold otherwise than as trustee. They knew from the caveats that she sold as trustee, for one or other or both of the trusts were asserted in the caveats. They could not have been aware of her failure to account for the proceeds for this had not yet occurred.
Turning to the breach asserted from the Bar table, it was said that, having failed to inquire as to the nature of the children's trust, the purchasers should be fixed with knowledge of that trust, that it was a bare trust with no power of sale and that the sale was in breach of that trust. It will be recalled that the caveats were discharged at the time of settlement as the solicitors for the Pilkingtons required.
These contentions have only to be set out in order to see that they are entirely without substance. A purchaser is not ordinarily required to make inquiry 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. It was not suggested that the Pilkingtons had any particular knowledge of the domestic difficulties which beset the vendor and her husband. I am at a loss to see how the first contention of the plaintiff could possibly succeed.
The second is that of fraud. Counsel for Mr Williams sought to soften this allegation by speaking of equitable fraud or fraud as this expression is used in s.42. His written outline was not at all so coy. It is put that Mr Pilkington, and presumably his brother as well, deliberately used the indefeasibility provisions of the Transfer of Land Act to defeat the children's claims.
Let me say immediately that such an allegation is not warranted on any version of the affidavits. Mr Pilkington said that he and his brother purchased the subject land from a selling agent; they had no dealings with the vendor or her family. They had no reason to believe, if indeed it was the case, that the vendor was selling in breach of trust or that the interests of her children or any of them were prejudiced by the transaction.
The evidence does not provide any basis for the allegation of fraud. There is here no moral turpitude shown in the Pilkingtons. There is no substance in the plaintiff's alternative contention.
I should record too that the plaintiff has offered no explanation for his long delay in lodging the caveat after his withdrawal of his earlier caveat. The trust has received a benefit from the application of nearly all of the proceedings of sale in payments of the debts which encumbered the trust property. In the circumstances, I inquired of counsel for Mr Williams as trustee whether his client proposed to recompense the second defendant as a condition to obtaining the relief sought. The response was that no such proposal was made.
The consequence of this, if the claim were to be successful, would be that the trust would receive the subject land or its value as well as the price paid for it. It is unlikely that equity would countenance such a result.
It seems to me the sooner this unwarranted claim against Mr Pilkington is laid to rest the better for all concerned. The court should not be troubled by specious claims of this nature. In my mind the Master was entirely correct in making the order he did. The claim of the caveats has not been substantiated.
The question then arises as to what orders should be made in the circumstances. Obviously enough, the appeal should be dismissed and the orders of the Master should stand. Section 89(a)(vii) empowers me to make orders with respect to the caveat. This raises the difficulty that I foreshadowed earlier, because the party before the court is not the caveator. It seems therefore that I would have some difficulty in ordering its withdrawal, notwithstanding the apparent necessity that that be done. I might order that the plaintiff cause the caveat to be withdrawn. I will hear counsel as to what might be the appropriate order as to the disposition of the caveat and as to cost.
Having heard what was said by counsel the orders I will make are that the appeal be dismissed and that the proceeding against the second defendant be dismissed. The order of the Master that the plaintiff pay the second defendant's costs of the proceeding from the date of its commencement to 10 August 2007 on a party and party basis and thereafter on a solicitor and client basis is confirmed. I will further order that the costs of the appeal of the second defendant be paid by the plaintiff and these costs too be on a solicitor and client basis.
With respect to the disposition of the caveat, I will direct that the plaintiff within 7 days cause to be lodged a withdrawal of the caveat.
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