Yardley v Favell Gordon (Aust) Pty Ltd
[2005] WASC 212
YARDLEY -v- FAVELL GORDON (AUST) PTY LTD & ANOR [2005] WASC 212
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2005] WASC 212 | |
| Case No: | CIV:1673/2005 | 9 AUGUST 2005 | |
| Coram: | MASTER NEWNES | 23/09/05 | |
| 21 | Judgment Part: | 1 of 1 | |
| Result: | Leave to lodge second caveat | ||
| B | |||
| PDF Version |
| Parties: | VALERIE PATRICIA YARDLEY FAVELL GORDON (AUST) PTY LTD THE REGISTRAR OF TITLES |
Catchwords: | Real property Application to lodge second caveat Relevant principles Claim of constructive trust arising out of de facto relationship Property registered in name of company Whether plaintiff has caveatable interest Turns on own facts |
Legislation: | Transfer of Land Act 1893 (WA) s 138B, s 138C, s 138D |
Case References: | ANZ Executors & Trustee Company Ltd v Qintex Australia Ltd [1991] 2 Qd R 360 Baumgartner v Baumgartner (1987) 164 CLR 137 Commonwealth v Verwayen (1990) 170 CLR 394 Custom Credit Corporation Limited v Ravi Nominees Pty Ltd (1992) 8 WAR 42 Field v Gaborit [2002] QSC 466 Gilford Motor Co Ltd v Horne [1933] Ch 935 Giumelli v Giumelli (1999) 196 CLR 101 ICT Pty Ltd and Buquebus International Ltd v Sea Containers Ltd (1995) 39 NSWLR 640 Jones v Lipman [1962] 1 All ER 442 Landlush Pty Ltd v Rutherford [2002] QSC 219 Muschinski v Dodds (1985) 160 CLR 583 Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd & Anor [2004] WASC 30 Yukong Line Ltd of Korea v Rendsburg Investments Corp of Liberia (No 2) [1998] 4 All ER 82 Beckford v Wade (1805) 17 Ves 87 Clark v Sinclair High Trading Limited, unreported; High Court of New Zealand, Auckland, M No 873/90; 23 July 1990 Ex parte Lisciandro v Official Trustee in Bankruptcy (1995) ATPR 41436 Gregg v Tasmanian Trustees Ltd (1997) 143 ALR 328 Howell v Union Bank of Australia (Ltd) (1888) 6 NZLR 567 Jandric v Jandric [1999] WASC 22 Kelly & Craig v Bentinck (1902) 22 NZLR 235 Lindsay Petroleum Co v Hurd, Farewell & Kemp (1874) LR 5 PC 221 Merbank Corporation Ltd (In liq) v Price (1978) 1 NZLCPR 24 Metcalf v Skyline Holdings Ltd (1982) 1 NZCPR 480 Sargent v ASL Developments Ltd; Turnbull v ASL Developments Ltd (1974) 131 CLR 634 Sullivan v Sullivan [2005] NSWSC 10 Troncone v Aliperti (1994) 6 BPR 13,291 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Wilkin v Scardina [2003] WASC 144 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
FAVELL GORDON (AUST) PTY LTD
First Defendant
THE REGISTRAR OF TITLES
Second Defendant
Catchwords:
Real property - Application to lodge second caveat - Relevant principles - Claim of constructive trust arising out of de facto relationship - Property registered in name of company - Whether plaintiff has caveatable interest - Turns on own facts
Legislation:
Transfer of Land Act 1893 (WA) s 138B, s 138C, s 138D
(Page 2)
Result:
Leave to lodge second caveat
Category: B
Representation:
Counsel:
Plaintiff : Mr M F Rynne
First Defendant : Ms B C Longfield-Turner
Second Defendant : No appearance
Solicitors:
Plaintiff : Morgan Alteruthemeyer
First Defendant : Cahill Billington
Second Defendant : No appearance
Case(s) referred to in judgment(s):
ANZ Executors & Trustee Company Ltd v Qintex Australia Ltd [1991] 2 Qd R 360
Baumgartner v Baumgartner (1987) 164 CLR 137
Commonwealth v Verwayen (1990) 170 CLR 394
Custom Credit Corporation Limited v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Field v Gaborit [2002] QSC 466
Gilford Motor Co Ltd v Horne [1933] Ch 935
Giumelli v Giumelli (1999) 196 CLR 101
ICT Pty Ltd and Buquebus International Ltd v Sea Containers Ltd (1995) 39 NSWLR 640
Jones v Lipman [1962] 1 All ER 442
Landlush Pty Ltd v Rutherford [2002] QSC 219
Muschinski v Dodds (1985) 160 CLR 583
Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd & Anor [2004] WASC 30
Yukong Line Ltd of Korea v Rendsburg Investments Corp of Liberia (No 2) [1998] 4 All ER 82
(Page 3)
Case(s) also cited:
Beckford v Wade (1805) 17 Ves 87
Clark v Sinclair High Trading Limited, unreported; High Court of New Zealand, Auckland, M No 873/90; 23 July 1990
Ex parte Lisciandro v Official Trustee in Bankruptcy (1995) ATPR 41436
Gregg v Tasmanian Trustees Ltd (1997) 143 ALR 328
Howell v Union Bank of Australia (Ltd) (1888) 6 NZLR 567
Jandric v Jandric [1999] WASC 22
Kelly & Craig v Bentinck (1902) 22 NZLR 235
Lindsay Petroleum Co v Hurd, Farewell & Kemp (1874) LR 5 PC 221
Merbank Corporation Ltd (In liq) v Price (1978) 1 NZLCPR 24
Metcalf v Skyline Holdings Ltd (1982) 1 NZCPR 480
Sargent v ASL Developments Ltd; Turnbull v ASL Developments Ltd (1974) 131 CLR 634
Sullivan v Sullivan [2005] NSWSC 10
Troncone v Aliperti (1994) 6 BPR 13,291
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Wilkin v Scardina [2003] WASC 144
(Page 4)
1 MASTER NEWNES: This is an application by the plaintiff under s 138D of the Transfer of Land Act 1893 (WA) to lodge a second caveat against the title to land owned by the first defendant, the first caveat having lapsed following a notice issued by the second defendant under s 138B of the Act. I will turn to the circumstances in which the first caveat lapsed shortly, but for the present it is sufficient to say that, the plaintiff having obtained ex parte an order under s 138C extending the operation of the caveat, did not serve the order on the second defendant within the prescribed time and the caveat automatically lapsed pursuant to s 138B(2).
2 The plaintiff's claim to a caveatable interest in the land arises out of a de facto relationship which the plaintiff and a David Favell entered into in Victoria in March 1988. The relationship came to an end in early 2000. During the relationship the plaintiff and Mr Favell were in regular employment, the plaintiff mostly in clerical or receptionist duties, and Mr Favell as a CAD design engineer providing his services through the first defendant.
3 In November 1988 the plaintiff and Mr Favell moved to Perth to reside. The plaintiff says it was their intention eventually to purchase a house in Perth. Mr Favell says it was not. In any event, they lived in rented accommodation, together with the plaintiff's youngest son, from their arrival in Perth until Mr Favell purchased, in his own name, a property in Barrisdale Road, Ardross (the "Ardross property"), in April 1991. The property was purchased for $169,977.
4 The plaintiff says she inspected and purchased the Ardross property with Mr Favell and it was purchased as their home. The plaintiff says as far as she was concerned, it was purchased for them both. The plaintiff says that she "was unaware of how the money to purchase Ardross property was acquired and relied upon Mr Favell to attend to this." The plaintiff says she "was aware that we needed a mortgage to purchase Ardross and it was for that reason I was content to apply all of my income to our joint living expenses so that [Mr Favell's] money was to be free to apply to the mortgage."
5 The plaintiff says during the time they lived their together in the Ardross property she maintained the house in good working order and arranged for tradespeople to carry out any necessary work on it. She says she spent at least 20 hours each week working in the gardens.
(Page 5)
6 Mr Favell, on the other hand, says all negotiations in respect of the purchase of the property were done by him. He denies the plaintiff's allegation that the property was purchased for them both and treated as their joint home. According to Mr Favell, whilst he intended for the plaintiff and her son to live in the Ardross property with him, there was a mutual understanding that he would always be the sole owner of it and would pay all expenses in relation to it. He says that understanding arose at the time he purchased the property through general discussions with the plaintiff. It was reinforced during the course of the relationship as the property was always referred to as being owned by him and as being his financial responsibility.
7 It was not in dispute that the plaintiff did not contribute to the purchase price of the Ardross property. Mr Favell had funds of some $29,000 from the sale of a property that he had owned in Queensland, and the balance of some $140,000 was borrowed from his father. Mr Favell says he intended to repay the loan in due course from the sale of another property he owned in Queensland.
8 According to Mr Favell, a mortgage was registered over the Ardross property some four months after it was purchased, not in relation to the purchase money, but to support a guarantee to the ANZ Bank which Mr Favell had given in connection with a business loan to a company with which he was associated. In 1993 Mr Favell provided his father with a mortgage over the property to secure the funds that his father had lent to him. Mr Favell said that he made monthly repayments to his father in respect of the loan. That loan was subsequently repaid with funds borrowed by Mr Favell from a lending institution, which took a mortgage over the property.
9 Mr Favell also says that he alone paid for maintenance, repairs, and renovations to the property, as well as rates, insurance and all other expenses.
10 It was common ground that the plaintiff and Mr Favell did not hold joint bank accounts until about 1997 or 1998. The plaintiff says, however, that at all times during their relationship the arrangement was that she would pay for day-to-day living expenses such as groceries, leaving Mr Favell's income free to pay other living expenses and "available to pursue our joint wishes". The plaintiff says she had no experience in business matters so during the relationship she left such matters to Mr Favell.
(Page 6)
11 Mr Favell, however, says that the arrangement was that the first defendant would pay bills such as power, telephone, newspapers, and hardware, Mr Favell would pay the majority of household expenses such as entertainment, gardening consumables, equipment, pool chemicals and tools, and that he and the plaintiff would both contribute to the purchase of groceries. He says the plaintiff used the majority of her income to pay for her needs and those of her children, and she rarely paid for household expenses other than food and personal items. Mr Favell says he also paid for a motor vehicle used by the plaintiff.
12 Mr Favell says that in April 1998 he opened a joint bank account with the plaintiff into which their salaries were paid for joint expenses such as groceries, petrol, pharmacy, veterinary fees and entertainment. Otherwise the financial arrangement continued unchanged. According to Mr Favell, from the time the joint account was opened until the end of the relationship he contributed $75,658.44, or some 80% of the total contributions to the joint account, and the plaintiff contributed the balance, a sum of $18,960.64.
13 Mr Favell says that he renovated parts of the property and also paid for substantial renovations. He says that while the plaintiff did some gardening, it was nowhere near the 20 hours per week she claims and they shared the gardening equally. Mr Favell says that apart from some gardening, the plaintiff did not contribute to the maintenance and upkeep of the property.
14 The plaintiff says that in early 2000, on the breakdown of the relationship, she discussed with Mr Favell how the property would be dealt with. In her affidavit of 10 June 2005, the plaintiff says it was agreed the Ardross property would be sold and, rather than the plaintiff receiving a share of the proceeds, Mr Favell promised to arrange for the purchase of a unit for her to own outright at Hepburn Way, Booragoon. The plaintiff says Mr Favell promised that he would attend to the payment of rates and taxes in respect of Hepburn Way, which was purchased in March 2000.
15 In her affidavit of 11 July 2005, the plaintiff appears to put the matter a little differently. There the plaintiff says that, following the breakdown of their relationship, she told Mr Favell that she considered she was entitled to at least half of the value of the Ardross property because of her contributions to it. Mr Favell then told her that he had purchased the Hepburn Way property for her and had paid $150,000 for it. It was to be her property. The plaintiff says that she agreed to take Hepburn Way and
(Page 7)
- not to make any further claim upon Mr Favell. The plaintiff says that she was not aware that Mr Favell had purchased the Hepburn Way property until they were discussing what they should do following the breakdown of their relationship.
16 The plaintiff says that she agreed to prepare the Ardross property for rental as Mr Favell was to be away at the time and says she dealt with the managing agent until the property was sold. The plaintiff says she then left the Ardross property and moved into Hepburn Way. According to the plaintiff, she has since expended money on maintaining and improving the Hepburn Way property and has attended to its maintenance and upkeep.
17 Mr Favell, on the other hand, says the Hepburn Way property was purchased, after consultation with his accountants, as an investment vehicle primarily for the Favell Gordon Superannuation Fund (the "FGSF"). He says that, on behalf of the first defendant, which he operated, he chose the property to be purchased and attended to all of the things necessary to conclude the transaction. The plaintiff did not have any involvement in the purchase of the property and did not know it had been purchased until the sale had been concluded. Mr Favell says that he was intending to move to Singapore on 23 March 2000 to work and wished to invest the funds of FGSF while he was away. He expected to be away for a minimum of three years.
18 Mr Favell says that in February 2000 the accountants arranged for the formation of a property trust called the Favell Gordon Property Trust (the "Trust"), with FGSF owning one-third of the units and Mr Favell owning two-thirds of the units. The first defendantis the trustee of the Trust. The Hepburn Way property was purchased by the first defendant as trustee of the Trust. Mr Favell says that he borrowed $130,000 from a lending institution to purchase his units in the Trust and, in January 2002, he borrowed money from his father to repay part of that debt. According to Mr Favell, his personal contributions to FGSF were used by FGSF to purchase units in the Trust and it currently holds 46.13 per cent of the units.
19 According to Mr Favell, the plaintiff also made contributions to the FGSF and, on 16 June 2002, an amount of $11,141.30 in her name in that fund was transferred to an AMP fund.
20 Mr Favell disputes the plaintiff's contribution to the letting of the Ardross property and says that the plaintiff's only contribution was to make appointments with the relevant tradespeople in his absence so the
(Page 8)
- work could be carried out. Mr Favell says that he arranged and paid for the work carried out. The Ardross property was sold on 27 June 2002 for the sum of $330,975.37. After payment of some debts, Mr Favell ultimately received a net amount of $271,767.
21 Mr Favell denies that the plaintiff ever told him that she considered she was entitled to at least half of the Ardross property and says neither he nor the first defendant ever promised the plaintiff any share in the Ardross property or the Hepburn Way property, or promised to give the Hepburn Way property to the plaintiff. Mr Favell says that upon the breakdown of the relationship there was no specific discussion about a property settlement, but the plaintiff retained her motor vehicle, which had been paid for by the first defendant, and almost all of their household possessions and furniture, including antiques, which had an insured value of $43,000.
22 Mr Favell says that upon his separation from the plaintiff, he, on behalf of the first defendant, invited the plaintiff and her son to live in the Hepburn Way property rent-free and free of costs (except for personal consumption) until it was sold. Mr Favell says he told the plaintiff that the first defendant, as trustee of the Trust, had purchased the property and, although no dates were set, that he intended to sell the property upon his return from Singapore. Mr Favell says the discussion took place at about the time of the purchase of the Hepburn Way property. Mr Favell says the plaintiff accepted the invitation and moved into the Hepburn Way property.
23 According to Mr Favell, the plaintiff was also aware that the property was owned by the first defendant from correspondence received by her. He says correspondence in relation to the purchase was sent to the Ardross property while the plaintiff was still residing there. Subsequently, all rates and land tax notices were sent to the Hepburn Way property addressed to the first defendant. The plaintiff passed those on for payment. Mr Favell also says that while he was in Singapore, the plaintiff, on behalf of the first defendant, signed a notice of resolution under the Strata Titles Act for the property and completed a form in July 2000 in which she inserted, as the name of the owner, the first defendant.
24 Mr Favell says that if he had intended that the property would belong to the plaintiff it would have been registered in her name as there would have been no advantage to him in not doing so and, moreover, if it had been registered in the plaintiff's name certain costs and expenses would have been avoided.
(Page 9)
25 When the plaintiff says she first became aware that the Hepburn Way property was registered in the name of the first defendant is not entirely clear from the plaintiff's affidavits. In her affidavit of 10 June 2005, the plaintiff says that at the time she moved to the Hepburn Way property she did not know that the property was registered in the name of the first defendant. It seems, on her evidence, she first became aware of that fact in about March 2000 when a real estate agent delivered what apparently was the duplicate certificate of title to her. The document was retrieved some time later by Mr Favell, following his return from Singapore, although it is nowhere stated when he returned. The plaintiff says that when Mr Favell collected it she asked him why she was not on the title and he told her it was for tax purposes. That is denied by Mr Favell, who says the matter was never raised by the plaintiff.
26 According to Mr Favell, the first defendant has outlaid an amount of at least $9,000 in improvements and repairs to the Hepburn Way property and has paid rates, land tax, insurance levies and annual service charges, in a total amount of some $9,400. He says that on some occasions the plaintiff paid invoices and was then reimbursed for them by the first defendant. The plaintiff did not contribute at all to the purchase price, renovation or ongoing costs of the property and has forwarded, and continues to forward, all rates and taxes notices for payment by the first defendant.
27 Mr Favell says that he wishes to sell the Hepburn Way property so as either to repay an amount of $111,000 owing to his father from the loan to purchase units in the Trust or to pay other debts, and because he does not have the financial capacity to maintain the property. He says the first defendant no longer has any income because he is now a permanent employee, not a contractor providing his services through the first defendant. The first defendant, as trustee, wishes to sell the property and has wished to do so since 1 November 2004. It wishes to do so because rates, taxes and maintenance charges continue to accrue, and no income has been received from the property.
28 Mr Favell also says he has been advised by the accountants for FGSF that FGSF has been accruing expenses in relation to the Trust which has created difficulties in relation to the operation of the FGSF. In addition, to comply with the relevant legislation the Hepburn Way property, as an asset of the Trust, is required to be earning income. Mr Favell says over 80 per cent of his superannuation savings are in the FGSF which holds units in the Trust.
(Page 10)
29 The plaintiff, on the other hand, says that she has little by way of savings and is unable to purchase another property.
30 As I have mentioned, following issue by the second defendant of a notice under s 138B of the Act on 20 May 2005, the plaintiff applied to extend the operation of the caveat, which was due to lapse at midnight on 10 June 2005. The plaintiff applied ex parte on 10 June 2005 for an order extending the caveat. At approximately 4.40 pm, after an urgent hearing, McKechnie J ordered that the operation of the caveat be extended until midnight on 17 June 2005. Due to the late hour, the plaintiff's solicitors were unable to have the order extracted and served at the Department of Land Administration by midnight on 10 June 2005, with the result that the caveat lapsed. This application has now been brought for leave to file a second caveat.
31 It was submitted on behalf of the plaintiff that a constructive trust arose in respect of the Ardross property, charging that property with the respective contributions of the plaintiff and Mr Favell to that property. Mr Favell was, at all material times, an agent of the first defendant, which was simply his alter ego. The first defendant therefore had knowledge of, and was bound by, Mr Favell's promise concerning Hepburn Way.
32 In relation to the constructive trust, the plaintiff referred to Baumgartner v Baumgartner (1987) 164 CLR 137, although acknowledging that in this case there was no joint pooling of funds from the commencement of the relationship. It was submitted, however, that it was clear from the financial arrangements between the plaintiff and Mr Favell that their earnings were to be utilised in such a way that the Ardross property was acquired for their mutual benefit. It was submitted that it was therefore arguable that at the time the de facto relationship ended in early 2000 the plaintiff had an equitable interest in the Ardross property.
33 In relation to the plaintiff's claim of a constructive trust in respect of the Hepburn Way property, it was submitted that while the first defendant was not a party to the arrangements between the plaintiff and Mr Favell, at law a principal is imputed with knowledge gained by an agent in the course of the agent's duties on behalf of the principal. In the present circumstances, the first defendant had knowledge of, and was therefore bound by, the arrangement entered into by Mr Favell in respect of the Hepburn Way property. Moreover, it was clear that the company was simply the alter ego of Mr Favell and therefore bound by his actions.
(Page 11)
34 Alternatively, the plaintiff contended that the first defendant, through Mr Favell, encouraged the plaintiff to assume that she would be the owner of the Hepburn Way property and is now estopped from resiling from that. In reliance upon Mr Favell's conduct, the plaintiff had agreed to surrender her equitable interest in the Ardross property. It would be unconscionable if the first defendant obtained possession of the Hepburn Way property in circumstances where Mr Favell had been enriched by retaining the whole of the proceeds of the Ardross property.
35 The first defendant accepted that where parties in a de facto relationship have pooled their income to meet the expenses of the relationship in relation to real property, a constructive trust will arise according to the respective contribution of each party. It was submitted that in the present case, however, the arrangement between Mr Favell and the plaintiff was not one where earnings were pooled to meet the expenses of the relationship and there was indeed no pooling of funds at all for the first ten years. The parties did not open a joint account until April 1998 and that was in operation for less than two years before the relationship ceased and was not used for purposes connected with the acquisition or improvement of the Ardross property.
36 Counsel for the first defendant said that the plaintiff had not contributed to the purchase price of the Ardross property, or in respect of any of the properties owned by Mr Favell or the first defendant from which the funds were obtained to purchase the Ardross property. The purchase of the Ardross property was funded solely by Mr Favell from his own funds, obtained by him prior to the commencement of the relationship with the plaintiff, and the loans which were obtained to enable the property to be purchased were repaid solely by him. It was submitted that on the evidence, almost all of the utilities were paid by the first defendant and ongoing maintenance and renovations of the property were paid solely by Mr Favell and the first defendant. There was no joint endeavour between Mr Favell and the plaintiff.
37 Counsel for the first defendant argued that even if it were accepted that the alleged payments for living expenses could give rise to a constructive trust, the plaintiff had not established that she had met those expenses and the evidence on behalf of the first defendant in that respect should be preferred. Prior to April 1998 all of their living expenses, except for the cost of groceries (which was shared) and the plaintiff's personal expenses, were met by Mr Favell and from 30 April 1998 to the end of the relationship Mr Favell paid 80 per cent of their joint living expenses.
(Page 12)
38 It was contended that, in any event, any claim asserted by the plaintiff would only establish a constructive trust in respect of the Ardross property and that is irrelevant to the question of whether a constructive trust arises in respect to the Hepburn Way property.
39 In relation to the estoppel claim, it was submitted that neither Mr Favell nor the first defendant was in a position to make a gift of the property to the plaintiff because the property was purchased by the first defendant as trustee for the Trust. It was further submitted that it was plain from the evidence that the plaintiff at all times knew the first defendant owned the property and nothing the first defendant did encouraged the plaintiff to assume that she would be entitled to the Hepburn Way property. It would not be unconscionable for the first defendant to retain the property.
40 It was also submitted by the first defendant that it was not necessary for the Court to impose a constructive trust because other appropriate equitable remedies short of a trust were available. In that respect, the first defendant noted that the net amount received from the sale of the Ardross property was $271,767, to which the maximum entitlement of the plaintiff, if she were successful in establishing an interest in it, would be an amount of $135,883.50. The plaintiff would be entitled to equitable compensation of that amount if her claim was successful and it was unnecessary to impose the constructive trust sought.
41 It was also contended that the balance of convenience was against the grant of leave to lodge another caveat. In the first place, there had been delay in making the present application and indeed, delay in making the first application, which was not made until the eleventh hour on the last possible day. In addition, despite knowing that from at least May 2000 the first defendant was the owner of the property, the plaintiff did not lodge a caveat until February 2005, nearly five years later. Moreover, nearly six months have now elapsed since the initial caveat was lodged and the plaintiff has not commenced any substantive proceedings against the first defendant in respect of the issues relied upon in support of the alleged caveatable interest.
42 It was submitted that the plaintiff had failed to commence such proceedings despite knowing from at least May 2000 that the first defendant was the owner of the property and despite the first defendant having given notice to the plaintiff in November 2004 of its intention to sell the property. The position is now that the first defendant no longer has any income, there are issues with the legality of the units owned by
(Page 13)
- the FGSF, and the first defendant is continuing to incur liabilities in respect of the property.
43 The principles to be applied on an application to lodge a fresh caveat are similar to those applicable to an application to remove a caveat, namely whether there is a serious question to be tried and whether the balance of convenience favours maintaining the status quo. The applicant must also provide a satisfactory explanation as to why the earlier caveat lapsed and for any delay in making the application for leave. See Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd & Anor [2004] WASC 30; Landlush Pty Ltd v Rutherford [2002] QSC 219; Field v Gaborit [2002] QSC 466.
44 The onus lies on the applicant to demonstrate that there is a serious question to be tried as to whether a valid caveatable interest exists: see Custom Credit Corporation Limited v Ravi Nominees Pty Ltd (1992) 8 WAR 42.
45 It is now well established that when an enduring joint relationship between a man and a woman comes to an end, their respective rights in and to property do not, or do not necessarily, fall to be determined according to their strict legal entitlements. Ownership at law may be qualified by the equitable remedy of a constructive trust, which may be imposed regardless of actual or presumed agreement or intention on the part of those concerned.
46 In Muschinski v Dodds (1985) 160 CLR 583, Mason and Deane JJ recognised that the court could impose a constructive trust consequent upon the failure of a joint venture between the parties because it was unconscionable for one to assert their legal entitlement without recognising the considerable financial input from the other. A constructive trust may therefore arise when the common intention of the parties was based on the expected continuation of the relationship between them and the relationship fails without attributable fault. Deane J (at 620) described the relevant principle as follows:
" … where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it … equity will not permit that
(Page 14)
- other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do."
47 Although in that case it was unnecessary to examine the worth of indirect contributions, Deane J (at 622) went on to say:
" … any assessment of what would and would not constitute unconscionable conduct would obviously be greatly influenced by the special considerations applicable to a case where a husband and wife or persons living in a 'de facto situation' contribute, financially and in a variety of other ways, over a lengthy period to the establishment of a joint home. In the forefront of those special considerations there commonly lies a need to take account of a practical equation between direct contributions in money or labour and indirect contributions in other forms such as support, homemaking and family care."
48 The approach of Mason and Deane JJ in Muschinski v Dodds was affirmed by all the members of the High Court in Baumgartner v Baumgartner (1987) 164 CLR 137. In their joint judgment, Mason CJ, Wilson and Deane JJ based their decision on the proposition that after the relationship had failed in circumstances where the property had been financed in part through the pooled funds of the parties, the man's assertion of entitlement to the exclusion of any interest in the woman was unconscionable conduct which attracted the intervention of equity and the imposition of a constructive trust. Their Honours referred (at 148) to a passage from the judgment of Deane J in Muschinski v Dodds and said:
"His Honour pointed out that the constructive trust serves as a remedy which equity imposes regardless of actual or presumed agreement or intention 'to preclude the retention of assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle'. In rejecting the notion that a constructive trust will be imposed in accordance with idiosyncratic notions of what is just and fair his Honour acknowledged that general notions of fairness and justice are relevant to the traditional concept of unconscionable conduct, this being a concept which underlies fundamental equitable concepts and doctrines, including the constructive trust"
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49 Toohey J considered that the constructive trust could in the circumstances be based either on unconscionable conduct or on the principle of unjust enrichment.
50 The nature of the contributions that will attract the intervention of equity was considered by the Full Court of this Court in Lloyd v Tedesco (2002) 25 WAR 360. Murray J (with whom Hasluck J agreed) said (at 364):
" … it seems to me that there is no doubt that the remedy of a constructive trust may be employed in various circumstances establishing unconscionability. In a case such as this where a joint relationship or endeavour of a particular kind is relied upon, if there is found to have been a 'pooling' of resources, at least in the sense of a mutual commitment of resources, both financial and otherwise, directed towards the acquisition of or otherwise related to an asset, the Court will be more inclined to hold it to be unconscionable for one party to retain the entirety of the legal and beneficial ownership of that asset. The pooling of resources of which the courts have spoken has not been confined to financial resources. The courts do not draw artificial distinctions between the situation of a plaintiff who makes a direct financial contribution to an asset, one who makes a financial contribution which enables his or her partner to expend more of that person's money upon the asset, or one who contributes time and effort directed towards an asset rather than simply towards the maintenance of the relationship itself."
51 In the present case, the plaintiff says that the Ardross property was purchased for them both as their joint home and, although she did not contribute directly to the purchase price, the mortgage expenses or the improvements to the property, her income was used for other domestic purposes so as to leave more of Mr Favell's income free to meet those costs. The plaintiff says that it is beside the point that they did not have a joint bank account until 1998. Their funds were pooled, in effect, by the arrangement by which they shared their living expenses.
52 Mr Favell, on the other hand, says it was always the common understanding that he was the sole owner of the property and, consistent with that, he alone provided the purchase price, met the mortgage repayments and paid for repairs, improvements and utility charges. There was never any intention that the plaintiff's financial contributions were to
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- contribute to their material well-being or to acquire an interest in the Ardross property.
53 Those matters, however, cannot be resolved on affidavit evidence on an application of this sort. Nor is it possible to determine whether there was any discussion between the plaintiff and Mr Favell when their de facto relationship came to an end as to the plaintiff's entitlements in respect of the Ardross property and, in particular, whether Mr Favell offered to the plaintiff, and the plaintiff accepted, the Hepburn Road property in full settlement of her claim to an interest in the Ardross property. Those are matters of fact that can only be resolved at a trial. For present purposes it is sufficient to say that if the plaintiff's evidence were accepted at trial, it is arguable that the plaintiff was entitled to equitable relief in respect of the Ardross property based upon her contributions to the household income.
54 That, of course, is not the end of the matter for the purposes of this application. The plaintiff contends that she is now entitled to equitable relief in relation to the Hepburn Way property, having, on her case, agreed to give up her entitlements in respect of the Ardross property in exchange for title to the Hepburn Way property.
55 It is quite clear that the Hepburn Way property is not owned, and has never been owned, by Mr Favell, but by the first defendant. At the time the alleged promise was made to the plaintiff it was owned, or was in the process of being acquired, by the first defendant. The plaintiff has argued first, that Mr Favell, in making the promise to the plaintiff that the Hepburn Way property would be hers, was acting as the agent of the first defendant, so that his knowledge or conduct was that of the first defendant. The plaintiff also contended that the first defendant was simply the alter ego of Mr Favell.
56 The plaintiff has put in evidence a recent extract from the ASIC database in relation to the first defendant. That showed that Mr Favell is one of two directors, the other being his father. There are 100 issued shares, of which Mr Favell holds 30, his wife (whom he married in 2002) holds 10 and his father holds 60. To what extent the position with respect to the control or shareholding of the company may have been different at the time the Hepburn Way property was purchased is not evident from the extract. In his affidavit, Mr Favell says, however, that he "operated the first defendant".
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57 I should also mention that Mr Favell says the plaintiff was a director of the first defendant until 14 August 2002 and a shareholder until 23 August 2002, when she sold her shares. The records of the ASIC which are in evidence do not, however, refer to the plaintiff ever being a director or shareholder of the company.
58 Mr Favell's evidence that the Hepburn Way property was purchased and is held by the first defendant, not in its own right, but as trustee for the Trust is not, in my view, necessarily inconsistent with the plaintiff's contention that the first defendant, in its own right and in its capacity as trustee of the Trust, is simply the alter ego of Mr Favell.
59 In his affidavit in opposition to this application, for instance, Mr Favell does not always draw a distinction between his own affairs and interests and those of the first defendant or the Trust. Thus, according to Mr Favell he intended to sell the property on his return from Singapore. As to the current position, he says that "I wish to sell the Property and either repay the loan to my father and/or retire debts. I currently have a mortgage and two loans which require payment. I do not have the financial capacity to continue to maintain the Property … The sale of the property will alleviate current financial pressures." The loan from Mr Favell's father is elsewhere identified as a loan made to Mr Favell personally to enable him to purchase units in the Trust.
60 The Trust is a unit trust, the beneficiaries of which are Mr Favell and FGSF. While there is no evidence as to the terms of the FGSF, or the assets it holds beyond the units in the Trust, it appears that Mr Favell is at least a contributory, if not the sole contributory, to the FGSF. Mr Favell does not suggest that there are or have been any others, apart from the plaintiff whose contributions were transferred to another fund in June 2002.
61 On the material before me it is, in my view, arguable that the first defendant is a creature of Mr Favell and under his effective control, such that it is for all practical purposes his alter ego, and that he is effectively the sole beneficiary of the Trust. It is therefore arguable that the Hepburn Way property is and has always been within the effective control of Mr Favell and is effectively his property.
62 Those are issues that, once again, cannot be determined on this application. But if ultimately that were established by the plaintiff, and if it were also found that the plaintiff had relinquished a claim to an interest in the Ardross property upon the alleged promise by Mr Favell, I do not
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- consider that the interposition of the first defendant as the registered proprietor of the Hepburn Way property would necessarily be an impediment to the grant of the equitable relief sought by the plaintiff. It is clear that the Court will not permit colourable evasion of legally binding promises. The grounds upon which the Court will grant relief in such circumstances have been variously described, but that it will grant relief in an appropriate case is not in doubt, including requiring a person who controls a company to cause "his" company to do something he undertook to do: see, for instance, Gilford Motor Co Ltd v Horne [1933] Ch 935; Jones v Lipman [1962] 1 All ER 442; ANZ Executors & Trustee Company Ltd v Qintex Australia Ltd [1991] 2 Qd R 360 at 363; ICT Pty Ltd and Buquebus International Ltd v Sea Containers Ltd (1995) 39 NSWLR 640 at 656 – 657; Yukong Line Ltd of Korea v Rendsburg Investments Corp of Liberia (No 2) [1998] 4 All ER 82.
63 I am satisfied that there is a serious question to be tried that the plaintiff has a caveatable interest in the Hepburn Way property.
64 It is therefore necessary to turn to the question of whether the balance of convenience favours leave being granted.
65 Counsel for the first defendant submitted that even if the plaintiff were ultimately to make out a case for equitable relief there are appropriate remedies available short of the constructive trust sought by the plaintiff.
66 The decision of the High Court in Giumelli v Giumelli (1999) 196 CLR 101, is authority for the proposition that if an equitable remedy is to be provided, it will be tailored to the circumstances of the case. The majority of the Court said (at 113) that:
"… the Court must look at the circumstances in each case to decide in what way the equity can be satisfied. Before a constructive trust is imposed, the Court should first decide whether, having regard to the issues in the litigation, there is an appropriate equitable remedy which falls short of the imposition of a trust."
67 In that case, the High Court held that the imposition of a constructive trust went beyond what was required for conscientious conduct by the respondents and concluded that it was a case for the fixing of a money sum to represent the equitable claim of the appellant to the land in question.
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68 Similarly, it is established that the appropriate remedy when an estoppel is established is the minimum remedy which would cure the injustice resulting from the defendant having resiled from the position which it had led the plaintiff to believe it was taking: Commonwealth v Verwayen (1990) 170 CLR 394; Giumelli v Giumelli (supra).
69 It was submitted on behalf of the first defendant that in the current circumstances equitable compensation in respect of any interest the plaintiff may be found to have had in the Ardross property would be an appropriate remedy. Refusal of leave to lodge a second caveat would not therefore leave the plaintiff without an adequate remedy.
70 I do not consider that the question of the appropriate relief can properly be determined on this application. That is a matter that can only be considered when all of the relevant circumstances are known. Moreover, even if ultimately the Court were to determine that a remedy short of a constructive trust was appropriate that would not necessarily be to deny the plaintiff any right in respect of the Hepburn Way property. In that connection, in Giumelli v Giumelli (supra), for instance, while the High Court found that equitable compensation was an adequate remedy, it granted the appellant a charge over the property of the respondents in respect of that compensation.
71 It was further submitted on behalf of the first defendant that there has been undue delay by the plaintiff in seeking to enforce the right she claims.
72 On the evidence, the plaintiff became aware that the title to the Hepburn Way property was in the name of the first defendant at some time in 2000. Notice was given to the plaintiff that the first defendant intended to sell the Hepburn Way property, on the first defendant's case, in November 2004 and, on the plaintiff's case, on 28 January 2005. According to an affidavit of the plaintiff's solicitor, he was instructed by the plaintiff on 1 February 2005 and the first caveat was lodged on 17 February 2005.
73 It does not seem to me that that establishes undue delay on the plaintiff's part. The plaintiff claims that when she asked Mr Favell why the Hepburn Way property was not registered in her name Mr Favell told her it was for tax reasons. It is not clear when that conversation is alleged to have occurred. It is also not clear, on the plaintiff's case, that the plaintiff should necessarily have deduced from fact the property was not registered in her name that Mr Favell did not intend that she should have
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- the benefit of it. When the plaintiff says she was informed that Mr Favell intended to sell the property she instructed solicitors immediately.
74 It is the case that following service of the 21-day notice under s 138B, the plaintiff's application to extend the operation of the first caveat was not brought until the day the caveat was due to lapse. The plaintiff's solicitor says that was due to the unavailability of counsel and the absence interstate of the plaintiff. It is not, however, clear why other counsel could not have been briefed or why, in an age of various means of electronic communication, the absence of the plaintiff in Melbourne occasioned such delay. When an application is brought so late it is rather to invite disaster and it is therefore not altogether surprising that it turned out not to be possible to effect service of the order of the Court in time to maintain the first caveat.
75 I do not, however, regard those matters as weighing significantly in the balance. But they do form part of the background to a matter that, in my view, does, namely that as at the date of the hearing of this application, some six months after the plaintiff says she became aware that the right she claims was disputed and that the first defendant said it needed to sell the property, the plaintiff had still not undertaken proceedings finally to determine that right.
76 The purpose of a caveat in circumstances such as the present is to restrain the registered proprietor from dealing with the land in a way which will defeat or derogate from the incidents attaching to the proprietary interest claimed by the caveator until the respective rights of the parties have been determined: Custom Credit Corporation Limited v Ravi Nominees Pty Ltd (supra) at 50. The caveat is not an end in itself, but a means to an end. Where, therefore, a person seeks to restrain a registered proprietor in that way it is incumbent upon that person to proceed with reasonable expedition to have the right they claim determined.
77 The first defendant says it is without income and wishes to sell the property to be relieved of the ongoing expense involved in its maintenance and to repay its debts, and to overcome any difficulties of compliance with the law relating to superannuation funds. The nature of the latter difficulties were not explained in the first defendant's affidavit or in argument, and are not entirely clear from the letter from the first defendant's accountant which is exhibited to Mr Favell's affidavit. Nor is it evident that the need to pay the debts referred to has assumed a real
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- degree of urgency or that the continuing expense is imposing a burden that cannot be met.
78 On balance, I do not consider that such delay on the first defendant's part is sufficient cause to refuse leave to file a second caveat. It would, however, be incumbent upon the plaintiff to pursue with reasonable dispatch proceedings to determine the rights she claims in respect of the property. If the circumstances of the first defendant now or at some future time require those proceedings to be dealt with more quickly than the ordinary list will permit, it is always open to the first defendant to apply to have the proceedings admitted to the expedited list.
79 In the circumstances, I would grant leave to the plaintiff to lodge a second caveat. I would require the plaintiff, as a condition of such leave, to provide an undertaking as to damages in the usual form.
80 I will hear the parties on the form of orders and on costs.
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