CATCHWORDS
LAND TITLES UNDER THE TORRENS SYSTEM - cross vested jurisdiction - caveats against dealings - withdrawal of caveat by summary motion - purchase money resulting trust as a caveatable interest -burden of proof - onus of caveator.
TRUSTS - classification of trusts - purchase money resulting trust - not a mere equity - extent of contribution to purchase price.
TRUSTS - claim that property held on trust - use of property to defend proceedings - injunction to restrain.
Blackburn v Y V Properties Pty Ltd [1980] VR 290, noted
Calverly v Green (1984) 155 CLR 242, considered
Carl-Zeiss-Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276, noted
Galvasteel Pty Ltd v Monterey Building Pty Ltd (1974) 10 SASR 176, considered
George v Biztole Corporation Pty Ltd, Victorian Supreme Court, unreported, 8 March 1995, (No 6940 of 1994), applied
In re Caveat No 773; ex parte Hodgson (1873) 3 QSCR 158, considered
Napier v Public Trustee (Western Australia) (1980) 32 ALR 153, considered
Re Oil Tool Sales Pty Ltd; Classified Pre-Mix Concrete Pty Ltd [1966] QWN 11, considered
Re Pile's Caveats [1981] QNR 81 at 83, considered
Swanston Mortgage Pty Ltd v Trepace Investments Pty Ltd [1994] 1 VR 672, discussed
Queensland Estates Pty Ltd v Ownership Land Development Pty Ltd (No 3) [1971] QdR 260, considered
KRALFLY PTY LIMITED v DEAN McVEIGH
No VG 703 of 1995
FINN J
MELBOURNE
8 SEPTEMBER 1995
IN THE FEDERAL COURT OF AUSTRALIA)
)
VICTORIA DISTRICT REGISTRY ) No. VG 703 of 1995
)
GENERAL DIVISION )
BETWEEN: KRALFLY PTY LIMITED
Applicant
AND: DEAN McVEIGH
Respondent
COURT: FINN J
PLACE: MELBOURNE
DATE: 8 SEPTEMBER 1995
MINUTES OF ORDER
THE COURT ORDERS THAT:
(1) Dean McVeigh remove forthwith the caveat numbered T402205D registered on Certificate of Title Volume 8769 Folio 698.
(2) The order made by The Honourable Mr Justice Beach in this proceeding on 31 July 1995 that:
"Until further order in this proceeding or in Federal Court Proceeding No. VG 441 of 1994 the Plaintiff by its officers, servants and/or agents be restrained from pledging the land described in Certificate of Title Volume 8769 Folio 698 situated at and known as Lot 5, Queenscliff Road, Moolap, Victoria, as security for any amount in excess of $1 million."
be varied by substituting the words "$1.2 million" for "$1 million".
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA)
)
VICTORIA DISTRICT REGISTRY ) No. VG 703 of 1995
)
GENERAL DIVISION )
BETWEEN: KRALFLY PTY LIMITED
Applicant
AND: DEAN McVEIGH
Respondent
COURT: FINN J
PLACE: MELBOURNE
DATE: 8 SEPTEMBER 1995
REASONS FOR JUDGMENT
I have before me an originating motion and
a summons which were filed in the Supreme Court of Victoria on 20 July
1995. By order of Beach J of that Court
those proceedings were, pursuant to the Jurisdiction
of Courts (Cross Vesting) Act 1987 (Vic), s5(1)(b), transferred to the
Federal Court of Australia. The
plaintiff in the proceedings, Kralfly Pty Limited ("Kralfly") is the
registered proprietor of land described in Certificate of Title Volume 8769
folio 698 ("the land"). The
first defendant (the "trustee") is the trustee in bankruptcy of the
estate of Roman Solczaniuk (the "bankrupt") and is registered as the
caveator of three separate caveats (T433929P, T433928S and
T402205D) on that Certificate of Title.
The second defendant has not appeared in the matter.
The present summons seeks the removal of all three caveats. When the matter came on before me, the trustee sought only to resist removal of the third of those mentioned, that is that numbered T402205D, he apparently having previously indicated that he will withdraw the other two.
In the third caveat the caveator claims -
"An estate in fee simple in the land as Trustee in Bankruptcy of the estate of Roman Solczaniuk."
As a result of an amendment made pursuant to the orders of Beach J on 31 July 1995, the grounds of the claim now read: -
"As Trustee of the Bankrupt Estate of Roman Solczaniuk being the beneficiary of a Resulting Trust."
The extent of the prohibition imposed by the caveat is absolute. The caveat, in other words, claims that the trustee is entitled to be registered as the sole proprietor of the entire estate in fee simple as a consequence of a resulting trust in his favour.
The resulting trust claim is itself the subject of an application made in this Court on 29 November by the trustee against Kralfly and ten other respondents including the bankrupt and his wife. That application seeks a declaration that the land and all the assets of the business conducted on it, including goodwill, are held on trust by Kralfly for the bankrupt (hence the trustee).
The Statement of Claim, insofar as it bears on the present proceedings, alleges the following.
First the bankrupt's brother, wife and one of the respondent companies (or their nominee) agreed to purchase the land and the contract was signed on or about 29 June 1989 (para 20). Kralfly was subsequently nominated as purchaser (para 23).
Secondly, the contract provided for the payment of $24,000.00 as a deposit. The balance of the purchase price was to be paid in three instalments due on specified dates, in the amounts of $96,000,000, $60,000 and then such balance as was owing under the contract (para 21).
Thirdly, it is alleged that the deposit moneys were provided by the bankrupt and, to that extent, Kralfly holds the property on trust for the trustee (para 31).
Fourthly, it is alleged that the first instalment of the balance of the purchase price of $96,188.19 was paid under the contract and that this money was provided by the bankrupt (paras 32 and 33).
Fifthly, the second instalment of $42,217.50 was paid and it was alleged to have been provided either by the bankrupt or by Kralfly (para 35).
Sixthly, the final instalment of $79,210.20 was paid but it is noted in the Particulars that -
"Until the completion of discovery and inspection of documents in this proceeding the plaintiff is unable to give particulars of this payment. Those particulars will be provided before trial."
Seventhly, it is claimed that the property in its entirety is held by Kralfly on trust for the trustee.
It is appropriate to note in passing that a golf course is now being operated on the land. A valuation made of the golf course and associated facilities in August 1994 put its value at $4.48 million.
A Schedule to the Statement of Claim contains details of the disposition of the
proceeds of property sales, of transfers of money and of the opening and use of
a bank account in the bankrupt's wife's name.
It was relied upon in the Statement of Claim to particularise the
allegations that the first two of the payments I have noted (ie the deposit and
the first instalment) were made from the bankrupt's money. That Schedule does not demonstrate explicitly
that money of the bankrupt was used as alleged in relation to those two
payments. It does show that in the period of about six months prior to
the contract the bankrupt
received variously sums of $43,500.00, $25,578, $99,120.63 and $30,000. These in aggregate amount in rounded figures
to $198,199.00. I would note that the
total purchase price paid was $240,615.00.
The difference between the two is in the order of $42,417.00. The significance of this figure I will
explain below.
The affidavit of the trustee filed in these proceedings relies on Schedule A to assert (1) that it is more probable than not that the money used to pay the deposit was the bankrupt's; and (2) that the money used to pay the first instalment may have come from the bankrupt. In common with the Statement of Claim, the trustee does not assert that Schedule A itself can be used to support the inference that the second and third instalments may have come from the money of the bankrupt.
The type of resulting trust relied upon in these proceedings is what is commonly known as a "purchase money resulting trust": see generally Ford and Lee, Principles of the Law of Trusts, 2nd ed, para 2112. The leading modern Australian authorities on this species of resulting trust are the decisions of the High Court of Australia in Calverley v Green (1984) 155 CLR 242 and Napier v Public Trustee (Western Australia) (1980) 32 ALR 153. For present purposes it is sufficient to refer to observations of Gibbs C J in the first mentioned of these at pp 246-247:
Where a person purchases property in the name of another, or in the name of himself and another jointly, the question whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser. However, in such a case, unless there is such a relationship between the purchaser and the other person as gives rise to a presumption of advancement, i.e., a presumption that the purchaser intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take beneficially. In the absence of evidence to rebut that presumption, there arises a resulting trust in favour of the purchaser. Similarly, if the purchase money is provided by two or more persons jointly, and the property is put into the name of one only, there is, in the absence of any such relationship, presumed to be a resulting trust in favour of the other or others. For the presumption to apply the money must have been provided by the purchaser in his character as such - not, e.g., as a loan. Consistently with these principles it has been held that if two persons have contributed the purchase money in unequal shares, and the property is purchased in their joint names, there is, again in the absence of a relationship that gives rise to a presumption of advancement, a presumption that the property is held by the purchasers in trust for themselves as tenants in common in the proportions in which they contributed the purchase money.
It is well accepted law that, if a person is to invoke the presumption of resulting trust in his or her own favour so as to claim the entire beneficial ownership of property purchased in another's name, that person must be able to show that he or she provided the entire purchase price of the property. If only a proportion of the price was provided then, as Gibbs C J noted, only a proportionate interest can be claimed in reliance of the presumption. Herein, as I will indicate, is the trustee's difficulty in resisting the present summons.
In summary proceedings for the removal of a caveat the following propositions seem now well accepted:
(1) It is not appropriate for the court to make what is in effect a summary adjucication of the matters in issue between the parties in the main proceedings between them: see Re Oil Tool Sales Pty Ltd; Classified Pre-Mix Concrete Pty Ltd [1966] QWN 11; Galvasteel Pty Ltd v Monterey Building Pty Ltd (1974) 10 SASR 176.
(2) A court will not order a caveat to be removed on a summary application if it is not satisfied that the caveator will not be able to make out a case for relief: Queensland Estates Pty Ltd v Co-Ownership Land Development Pty Ltd (No 3) [1971] Qd R 260; Galvasteel Pty Ltd v Monterey Building Pty Ltd, above esp at 182-183.
(3) The onus probandi is upon those who seek to withdraw [i.e. to remove] a caveat, but this onus must not be confused with the burden of proving a title. If a caveator's title is displaced, the person who takes out the summons must succeed. There must be a colourable title shown by the caveator (i.e. a fairly arguable title) such a title as the Court or a judge will not undertake to dispose of summarily: In re Caveat No 773; Ex p Hodgson (1873) 3 QSCR 158 at 159 per Cockle C J; see also Re Pile's Caveats [1981] Qd R 81 at 83.
In relation to the regularity of the caveat itself, it is common ground between the parties here that a caveator acting under the Transfer of Land Act 1958, (Vic) s89(1) must use the "appropriate approved form" for a caveat. That form requires the caveator to "specify the estate or interest claimed": see George v Biztole Corporation Pty Ltd, an unreported decision of Smith J of the Supreme Court of Victoria, 8 March 1995.
The caveat in issue in these proceedings is regular upon its face, in that it specifies the estate or interest claimed. That is an estate in fee simple in the entire land. When, however, one proceeds beyond the form of the caveat to the substance of the claim on which the caveat is based the matter becomes problematic. It is submitted by the trustee that the Statement of Claim and facts now supporting it provide such sufficient foundation for the "caveator's title" (to use the language of Cockle C J in ex p Hodgson at 159), as to justify a refusal to remove the caveat in summary proceedings. The claim as I have noted is for a purchase price resulting trust which claims the entire beneficial ownership on the premise that the whole of the purchase price has been provided by the bankrupt.
The plaintiff, in contrast, submits that the estate claimed in the caveat is, simply, not supported by the case made by the trustee to date. The submission had, as I understood it, two bases. The first was that, on the material before the court, it could not be said that there was factual material which could justify a conclusion that "a single penny" of the bankrupt's money was used in effecting the purchase of the land. For reasons which I will give below it is unnecessary for me to detail the factual material before this Court on which the plaintiff relies in making this part of its submission.
The second basis of the submission was that a claim for a purchase price resulting trust, at least when based on such material as is now before the Court, did not give rise to an equitable interest at all but only to a "mere equity" as that term is used in the case law on caveats: see Swanston Mortgage Pty Ltd v Trepace Investments Pty Ltd [1994] 1 VR 672. As developed, however, this submission seemed to amount to little more than a reformulation of the first: for a resulting trust to arise there needs to be proof of the payment of the purchase price and, without material in this proceeding suggesting that such was the case, the trustee's case at this stage amounted only to the assertion of an equity to relief involving land: cf Re Pile's Caveat [1981] Qd R 81.
If, and there were suggestions of this, the
burden of the submission was that a claim to an interest in land on the basis
of a purchase price resulting trust gave rise in any event only to a mere
equity, I could not accede to it. Such a
submission would necessitate the conclusion that, until a plaintiff had made out to the satisfaction of a court
the matters giving rise to
the presumption, that person could claim no existing interest in the property. Apart from further blurring the distinctionbetween resulting and constructive trusts (cf Muschinski v Dodds (1985)
160 CLR 583), this would seem to be wholly at variance with the premise upon
which decisions such as Calverley v Green,
Napier v Public Trustee (Western
Australia) and, I would note, Blackburn
v Y V Properties Pty Ltd [1980] VR 290 are founded. However, given the conclusion I have arrived
at, it is not necessary to enlarge upon this.
The essence of the matter before me is whether the trustee has demonstrated a sufficient "equitable right" (cf Galvasteel Pty Ltd v Monterey Building Pty Ltd (1974) 10 SASR 176) as would entitle him to maintain his caveat. I put the matter in this way because, notwithstanding the onus the plaintiff carries in the summons, there is a real question at this stage as to whether there is sufficient material before this Court which, if accepted, could sustain the "caveator's title". The short answer to that must be no.
There simply is not evidence (contested or
otherwise) before this court which could provide the conclusion that the
bankrupt's money may have made up the entirety of the purchase price of the
land. Even if I were to draw the inference
most favourable to the trustee, that is that all of the bankrupt's money
referred to in Schedule A was in fact used in the property's purchase - this at
best would sustain only about a five sixths interest in the property. As I earlier noted, while the purchase price
was roughly $240,600.00, the total Schedule A money received was only
$198,200.00. In argument before me it
was conceded by counsel for the trustee that, on the assumption that the second
of these
sums was used in its entirety in the purchase, it was not known whether the
balance of the purchase price would be found to be attributable in any way to
the bankrupt.
It was suggested at one stage in argument that the purchase price may have been made up of the bankrupt's money and of borrowings. If borrowings were made - and it was admitted there was no clear evidence of this -then, irrespective of who repaid the loan, the identity of the borrower would be a vital matter, as Calverley v Green illustrates.
Equally, it was suggested that companies in whose affairs the bankrupt was involved may have provided the money. The basis on which this may have occurred - gift or loan to the bankrupt, or direct contribution by a company to the purchase price - was not specified. But how, if at all, it may have occurred again is vital to the resulting trust claim.
In the upshot, the submission of the
trustee was that, while it was not known how the remaining money was provided,
the court should not at this stage arrive at a conclusion that the trustee is
not able to prove his claim in its entirety.
It was suggested that I was entitled to take into consideration (a) the
marked lack of cooperation the bankrupt demonstrated during his examination
when asked about his own expenditures, (b)the role he has played as a moving
force in the golf course project, and (c) his possible access to funds in the hands of other companies, for
the purpose of concluding that the trustee may be able to
unearth evidence sufficient eventually to sustain the resulting trust claim in
its entirety.
It is not my role here to speculate on whether or not the claim of the trustee will be made out. Rather it is to determine whether the material before me could, if accepted, sustain the interest claimed in the caveat. Even adopting the most favourable possible view of how the bankrupt's money was used - and it is at this stage particularly favourable - there remains the hiatus of over $42,000 in the purchase price to which I have referred.
In this state of affairs I can only conclude that while the caveat claims the entire beneficial ownership of the property, the trustee can presently do no more than point to material which could result in a proportional interest being found in his favour. In this the specification in the caveat is not reasonably accurate. For this reason it should be removed from the register: cf George v Biztole Corporation Pty Ltd, above. I should emphasise in saying this that I have taken a particularly generous view of the quantum of the purchase price which, on the evidence before me, at the moment, may be able to be inferred to have been provided by the bankrupt. I would note that neither the Statement of Claim nor the trustee's affidavit in these proceedings attributes the second and third instalments of purchase money to money of the bankrupt referred to in Schedule A to the Statement of Claim.
An order for the removal of the caveats does not, however, end this matter. The summons filed on 28 July 1995 which, inter alia, sought the cross-vesting of this matter into this Court, also sought an interlocutory injunction restraining the Plaintiff by its officers, servants and/or agents from pledging the land as security for any amount in excess of $1 million. An injunction to that effect was granted by Beach J on 31 July 1995. That order was to be operative both in the proceeding initiated in the Supreme Court of Victoria and in Proceeding VG 441 in this Court.
In the latter proceeding Kralfly filed a motion in this Court on 18 August 1995 seeking the variation of the order of Beach J by substituting the words "$1.2 million" for "$1 million".
Three reasons are advanced for the particular variation sought. The first is that the injunction as it stands is unable to be complied with in that at the time it was made Kralfly was already indebted to the National Bank of Australia in the sum of $1,020,000. The mistaken belief at the time was that the debt to the bank was only $900,000. The second is that the applicant needs access to further funding to meet the operating expenses of its business. The third is that funding is required to finance its defence of the Federal Court proceeding.
The trustee for his part, while prepared to accept a variation of the injunction both to reflect the true debt to the bank and to allow for further operating costs of the business, opposes any use of the funds raised against the security of the land, to finance legal costs. His submission shortly, is that because, as is claimed, the land belongs beneficially to him as trustee in bankruptcy, any use of it to finance the defence of the proceedings he is bringing against the company will result in the dissipation of trust property.
I have already held in the caveat proceedings that even on the view most favourable to the trustee, his claim as it presently stands would not lead to a resulting trust in his favour embracing the entire beneficial interest in the land. This is not to say that at the trial he may not be able to make out his claim [in full]. Neither is it to say that the trustee will in fact be successful at all. I should add that I have not been addressed at all on such other grounds for relief as are advanced with the Statement of Claim.
There is a serious question to be tried between the trustee and Kralfly. It is the case that there are other respondents who have a clear interest in Kralfly's successful defence of the proceedings. It has been submitted that these parties should fund the proceedings somewhat on the analogy of a security for costs order against those standing behind an insolvent company.
If the trustee's particular claim was a manifestly strong one, there may well have been reason to accede to his submission. As the matter stands before me at the moment it cannot be said that at least his resulting trust claim will in all likelihood succeed. In these circumstances it should, in my view, be open to the company to defend the proceedings against it and from its own funds. If, to the knowledge of the directors, there is in fact no genuine defence to the claim, yet corporate funds are applied to that purpose, then it may be that in other proceedings recourse may be able to be had against those who have so participated in the misuse of trust property: cf Carl-Zeiss- Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276. There has been no suggestion that the defence to the trustee's claim is not a genuine one.
In these circumstances I would vary the injunction in the manner sought in the motion.
My orders then are that -
(1) Dean McVeigh remove forthwith the caveat numbered T402205D registered on Certificate of Title Volume 8769 Folio 698.
(2) The order made by The Honourable Mr Justice Beach in this proceeding on 31 July 1995 that:
"Until further order in this proceeding or in Federal Court Proceeding No. VG 441 of 1994 the Plaintiff by its officers, servants and/or agents be restrained from pledging the land described in Certificate of Title Volume 8769 Folio 698 situated at and known as Lot 5, Queenscliff Road, Moolap, Victoria, as security for any amount in excess of $1 million."
be varied by substituting the words "$1.2 million" for "$1 million".
I certify that this and the preceding 15 pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.
Associate
Dated: 8 September 1995
Counsel for the applicant : G Bigmore QC and P Fary
Solicitors for the applicant: J M Smith & Emmerton
Counsel for the respondent : Dr P Buchanen QC and R J McInnes
Solicitors for the respondent : Coltmans
Date of hearing : 6 September 1995
Date of judgment : 8 September 1995
