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[2022] NSWSC 1785

Brose v Slade

Two caveats in issue. One caveat extended. Leave granted to file a fresh caveat in relation to other caveat. Secured undertaking as to damages required.

Catchwords

LAND LAW — Caveats — Extension of operation of caveat — Balance of convenience — Serious question to be tried — Undertaking as to damages LAND LAW — Caveats — Formal requirements — Requirement to specify particulars of estate or interest claimed — Where dropdown boxes on PEXA system do not permit interest to be described accurately — Whether description due to requirements of PEXA system a failure to comply with legislation which can be disregarded — Recommendation that PEXA system be changed to provide options which better describe trust claims — Real Property Act, 1900 (NSW), s 74L

Cases cited

  • Australian Security Estates Pty Ltd v Bluecrest Holdings Pty Ltd (1999) 9 BPR 17, 533;[1999] NSWSC 524
  • Bale v Kimberley Development Pty Ltd[2022] NSWSC 820
  • COMSERV (NO 210) PTY LTD v Robert Ristevski[2022] NSWSC 821

Legislation cited

  • Real Property Act, 1900 (NSW)
  • Real Property Regulation 2019 (NSW)
  • NSW Conveyancing Rules

Judgment

Summary

  1. [1]

    This judgment resolves an application brought under s 74K of the Real Property Act 1900 (NSW) (the Act) to extend two caveats (the Caveats). The Caveats have been lodged in the course of a farming family’s intergenerational succession planning dispute. Without disrespect, I shall refer to the parties by their given names.

  2. [2]

    The first plaintiff (Kellie) and the second plaintiff (Garreth) are married. They are, respectively, the daughter and son-in-law of the first defendant (Bruce) and the second defendant (Donna). The third defendant (IJAAMOTT) is a company controlled by Bruce and Donna, and is the trustee of their self-managed superannuation fund.

  3. [3]

    The present dispute concerns five blocks of land (the Land) which formed part of a farming enterprise originally operated by Bruce and Donna in a partnership known as the Slade Pastoral Co (the Partnership) near West Wyalong. Bruce is the registered proprietor of three of those blocks: “Ostenleigh”, “Ozone Park” and “The Reserve” (the Slade Land). They are subject to a caveat lodged by Kellie and Garreth (the Slade Land Caveat). IJAAMOTT is the registered proprietor of the other two blocks: “Gilgowrie” and “Misery”. They are also subject to a caveat lodged by Kellie and Gareth (the IJAAMOTT Caveat). The Caveats are in almost identical terms.

  4. [4]

    The plaintiffs claim that the defendants hold the Land on constructive trust for them. The primary, but not exclusive, basis for that claim is a Deed of Family Arrangement, and the representations made in it, between the four natural parties made on 13 June 2019 (the DOFA). As part of the purported implementation of the DOFA, Kellie and Garreth were later admitted into the Partnership. Putting it neutrally for present purposes, the DOFA contemplates that by 1 July 2026 Bruce and Donna will have retired and Kellie and Garreth will have become owners of the Land and related farming enterprise as the only partners in the Partnership.

  5. [5]

    Relations between the parties have broken down. Bruce transferred Gilgowrie and Misery to IJAAMOTT as trustee of Bruce and Donna’s self-managed superannuation fund. The parties agree that the Partnership is at an end, but differ as to the legal basis for that result.

  6. [6]

    Bruce and IJAAMOTT have respectively entered into contracts for sale of the Land for a combined price of just over $10.1 million. Those contracts are due to complete on 2 February 2023. Bruce and IJAAMOTT have issued lapsing notices in respect of the Caveats.

  7. [7]

    These proceedings were commenced by Statement of Claim filed on 6 October 2022. The plaintiffs seek the extension of the Caveats by notice of motion filed on 7 November 2022 (the Motion) and which I heard in the Duty List on the last Wednesday of term. As a result of matters which arose during the course of argument, I granted leave to the parties to file and serve additional affidavits and submissions on some limited issues over the following two days, all of which I have also taken into account. That included evidence, which the Court accepts, that caveats by a third party over some of the Land relate to cropping rights which are expected to be lapsed by consent because the crops have been harvested.

  8. [8]

    For the reasons which follow, the Slade Land Caveat will be extended. While the IJAAMOTT Caveat will not be extended, leave will be granted to the plaintiffs to file a fresh caveat over the blocks held by IJAAMOTT asserting a Barnes v Addy claim against that company in relation to those blocks.

  9. [9]

    Mr J Mack of Counsel appeared for the plaintiffs. Mr B F Katekar of Senior Counsel appeared with Mr S Hoare of Counsel for the defendants.

The evidence on the Motion

  1. [10]

    The plaintiffs relied on three affidavits from their solicitor, Mr M Jones, which attached relevant documents and correspondence. Mr Katekar SC criticised the plaintiffs’ case for want of direct evidence from the plaintiffs. In response, Mr Mack also relied on the allegations made in the statement of claim, which had been verified by Kerrie. To the extent the plaintiffs had to prove any matters for the purposes of their application, the Court finds they were sufficiently proven through Mr Jones’ affidavits (including annexures) and the verified statement of claim.

  2. [11]

    The defendants relied on an affidavit affirmed by Bruce and an affidavit sworn by their solicitor, Mr I A Meagher. I have also had regard to the defendants’ defence, which has been verified by Bruce.

  3. [12]

    No deponent was required for cross-examination.

The Facts

  1. [13]

    As might be expected in a case of this kind, it is clear from the material before the Court that the parties have different recollections of the various relevant conversations between them. Those differences are not something the Court can or should attempt to resolve on this application. I have determined this application by reference to the essential facts which appear from the objective and otherwise uncontroversial evidence, in particular the DOFA. It was by reference to that material that the parties advanced their respective cases.

  2. [14]

    On 1 July 2007, Bruce and Donna entered into a formal written partnership agreement to operate a farming enterprise as members of the Partnership under the name “Slade Pastoral Co”.

  3. [15]

    The blocks the subject of the Slade Land Caveat are Ostenleigh, Ozone Park and Reserve. Bruce had purchased Ostenleigh and Ozone Park in 1978. Reserve was purchased in 2011.

  4. [16]

    The properties the subject of the IJAAMOTT Caveat are Gilgowrie and Misery. These were bequeathed to Bruce and Donna by a neighbour who died in 2017.

  5. [17]

    In 2013, Kellie and Garreth were living in Townsville. In factual circumstances which are disputed between the parties as to what may have induced them to do so, they moved from Townsville and, in 2014, Garreth commenced working for the Partnership as an employee.

  6. [18]

    On 6 and 7 October 2015, with the assistance of “Proagtive”, a firm describing itself as “Succession Planning Specialists”, a family meeting took place attended by the members of the Slade family together with Garreth and the husband of Donna and Bruce’s other daughter, Tegan. This led to what was described as a “family in-principle agreement” of 22 points which included a plan to enable Bruce and Donna to live independently in West Wyalong in their retirement in approximately 10 years (2025), by which time the farming blocks were to have been transferred to Kellie to be farmed by her and Garreth. The transfer to Kellie alone was recorded as being at Garreth’s suggestion. The “agreement” was silent on what (if any) consideration would be paid by Kellie for the blocks.

  7. [19]

    On 10 November 2018, Kellie wrote a letter to her parents which included:

  8. [20]

    On 18 December 2018, Bruce, Donna, Kellie and Garreth attended a meeting with Ms Jenny Officer, an accountant. The notes of that meeting (the Notes), headed “Notes – Succession Planning Meeting 18 December 2018”, describe its purpose as being “to develop a succession plan for the future and to provide clarity”. The Notes record a proposed plan which involved Bruce and Donna’s entire interest in the Partnership being transferred in tranches between 2018 to 2026 to Garreth and Kelly, commencing with them having a 25% interest by 1 July 2019.

  9. [21]

    On 13 June 2019, Bruce, Donna, Garreth and Kellie entered into the DOFA which had been prepared by a firm of solicitors in West Wyalong. The DOFA comprises three recitals and three operative clauses. Attached to the DOFA were the Notes. The DOFA provided (emphases added):

  10. [22]

    The DOFA (including its annexure) was silent on what the “fair terms” were on which Kellie and Garreth would acquire the Land, including for what consideration, if any, over and above the income generated by the operation of the Partnership.

  11. [23]

    Purportedly in accordance with the DOFA, by a partnership deed made on 1 July 2019 between Bruce, Donna, Garreth and Kellie, Garreth and Kellie were formally admitted as members of the Partnership, with their interests being:

  12. [24]

    Clause 10 of that partnership deed provided:

  13. [25]

    Despite having admitted the plaintiffs to the Partnership, Bruce’s affidavit evidence was that “From 1 July 2019, and then throughout the 2020 and 2021 years, my working relationship with Garreth was poor. I found him to be rude and disrespectful to me and Donna”. That description is contested.

  14. [26]

    On 26 November 2019, Bruce transferred Gilgowrie and Misery to IJAAMOTT in its capacity as trustee of Bruce and Donna’s self-managed superannuation fund. IJAAMOTT leased those blocks back to Bruce and Donna as joint tenants. Although the plaintiffs do not appear to have objected to these transfers at the time, the timeline set out in Annexure “A” to the DOFA did refer to “Misery” being part of the Partnership assets as at 1 July 2026 and one-third of Gilgowrie being part of the Partnership assets, with the time for the transfer of that one-third interest “tbc”, which I have assumed means “to be confirmed”. On Bruce’s evidence, he had told Kellie and Garreth at the meeting on 18 December 2018 (see paragraph [20] above) that he intended to transfer Gilgowrie and Misery, together with another block, into their (Bruce and Donna’s) self-managed superannuation fund.

  15. [27]

    In 2019 and 2021 two other blocks were transferred (one only in part) to the plaintiffs, purportedly pursuant to the DOFA.

  16. [28]

    In July 2021, Bruce and Donna moved to West Wyalong.

  17. [29]

    On 3 May 2022, the plaintiffs’ solicitor wrote to the defendants’ solicitor, including:

  18. [30]

    On 10 May 2022, the defendants’ solicitor responded, including:

  19. [31]

    On 17 June 2022, the plaintiffs’ solicitor wrote to the defendants’ solicitor, including:

  20. [32]

    On 8 July 2022, the plaintiffs’ solicitors wrote to the defendants’ solicitors, including:

  21. [33]

    It does not appear that the Dissolution Notice was ever signed.

  22. [34]

    On 29 July 2022, a clearance sale occurred at Ostenleigh which raised approximately $2 million that was paid into the Partnership account.

  23. [35]

    On 14 September 2022, the Caveats were registered. They are in almost identical terms, with the only difference being in the last bullet point of each attachment:

  24. [36]

    On 15 September 2022, the plaintiffs’ solicitors wrote to the defendants’ solicitors, including:

  25. [37]

    On 16 September 2022, the defendants’ solicitors replied, including:

  26. [38]

    On 30 September 2022, the defendants’ solicitors wrote to the plaintiffs’ solicitors, including:

  27. [39]

    On 4 October 2022, the plaintiffs’ solicitors replied, including:

  28. [40]

    On 5 October 2022, the defendants’ solicitors replied, including:

  29. [41]

    By a statement of claim filed on 6 October 2022, the plaintiffs commenced these proceedings. The statement of claim is divided into two parts. The first is described as “relief relating to an interest in the land” and the second as “relief relating to the Partnership”.

  30. [42]

    Identical relief is sought in relation to each block of land, so it only necessary to set out one paragraph by way of example:

  31. [43]

    On 7 October 2022, the plaintiffs’ solicitors wrote to the defendants’ solicitors, including:

  32. [44]

    On 10 October 2022, the defendants’ solicitors wrote to the plaintiffs’ solicitors, including:

  33. [45]

    On 20 October 2022, lapsing notices were served in relation to each of the Caveats.

  34. [46]

    On 24 October 2022, Bruce entered into a contract to sell Ostenleigh, Ozone Park and Reserve, and IJAAMOTT entered into a contract to sell Gilgowrie and Misery. Both contracts provide for settlement to occur on 2 February 2023. The combined price payable under the two contracts is slightly more than $10.1 million.

  35. [47]

    On 28 October 2022, the plaintiffs’ solicitors wrote the defendants’ solicitors, including:

  36. [48]

    On 2 November 2022, the defendants’ solicitors wrote to the plaintiffs’ solicitors, including:

  37. [49]

    Some of the points made in the letter extracted in the preceding paragraph were explained in Bruce’s affidavit:

  38. [50]

    On 3 November 2022, the plaintiffs’ solicitors replied, including:

  39. [51]

    On 7 November 2022, the defendants filed the Motion seeking the extension of the operation of the Caveats.

  40. [52]

    On 8 November 2022, consent directions were made by the Court for the filing of a defence and for evidence in support of the Motion. The Caveats were extended until 13 December 2022. At the conclusion of the hearing before me, the parties agreed that the Court should extend the Caveats until further order pending delivery of these reasons. That order was made.

The Statement of Claim

  1. [53]

    Insofar as the Land is concerned, I have set out an example of the relief sought in paragraph [42] above.

  2. [54]

    The Statement of Claim pleads representations said to have been made by Bruce and Donna commencing in 2013. However, because the parties’ course of conduct appears to have culminated in the DOFA, it is sufficient for present purposes to set out those parts of the Statement of Claim most immediately relevant to the DOFA:

  3. [55]

    The Statement of Claim includes a discrete pleading in relation to IJAAMOTT:

  4. [56]

    The defendants’ defence is a substantial pleading which not only puts the plaintiffs’ allegations in issue but makes numerous positive averments in addition to denials and non-admissions. Mr Mack, with respect correctly, accepted that the pleading in relation to IJAAMOTT was a less than textbook example of an attempt to plead a Barnes v Addy claim of knowing assistance in breach of trust or fiduciary duty against IJAAMOTT. He accepted that was the only type of proprietary claim available against IJAAMOTT. The defendants appear to have understood it as such, given that the defence specifically pleads to the particulars in paragraph 43 of the statement of claim, an irregular course under the rules of pleading in this Court but necessitated because the particulars are really material facts which should have been pleaded as such.

The Legal Principles

  1. [57]

    There was no dispute about the applicable legal principles.

  2. [58]

    The plaintiffs relied on what was said by Young J (as his Honour then was) in Australian Security Estates Pty Ltd v Bluecrest Holdings Pty Ltd (1999) 9 BPR 17, 533; [1999] NSWSC 524:

  3. [59]

    The defendants drew attention to what was said by Williams J in COMSERV (NO 210) PTY LTD v Robert Ristevski [2022] NSWSC 821 (COMSERV): [57]-[65]

  4. [60]

    I respectfully apply and adopt both of those summaries of principle to the present case.

The plaintiffs’ submissions

  1. [61]

    Before turning to summarise the plaintiffs’ submissions, it should first be noted that, with one exception, Mr Mack expressly eschewed any reliance for the purposes of the present application on the DOFA as a source of contractual rights in the Land, including as the source of an implied term that the defendants could not deal with the Land so as to defeat the plaintiffs’ rights under the DOFA or as giving rise to a right to specific performance. He made it clear that the extension application was based on the fundamental proposition that there was substance in the plaintiffs’ claim to the remedial institution of the constructive trust based on a common intention with the result that his clients were entitled to a transfer in fee simple of the Land.

  2. [62]

    The one exception was his submission that the plaintiffs’ alleged contractual causes of action which were pleaded in relation to obtaining a conveyance of the Land (as opposed to damages) were relevant as a matter of discretion and (to the extent it was juridically different) on the balance of convenience. This was because those causes of action would be lost to the plaintiffs if the proposed sales were permitted to proceed.

  3. [63]

    As to the form of the Caveats (including what I refer to below as “the PEXA issue”), the plaintiffs’ submissions may be summarised as:

    1. (1)

      The description of the “estate or interest claimed” as “Estate in Fee Simple/By Virtue of: Beneficial Interest in Trust/Details Supporting the Claim: See Attachment” is sufficient for the purposes of s 74F of the Act because the reference in s 74K(2) to the Court being satisfied the claim “may have substance” is sufficiently broad to capture the nature of the estate that the plaintiffs seek to have transferred to them following a final hearing.

    2. (2)

      If that is not correct, then because the relevant drop down box on the PEXA system only offers “estate in fee simple”, s 74L of the Act applies.

  4. [64]

    As to a serious question to be tried, the plaintiffs’ submissions may be summarised as:

    1. (1)

      The plaintiffs have a good, arguable case for a common intention constructive trust which would be given effect by an order transferring the Land to them. Issue has been joined by the defence and there has been no suggestion of summary dismissal or strike out. The pleadings amply demonstrate that there is a serious question to be tried between the parties.

    2. (2)

      The DOFA is clear evidence of the representations which form the foundation of the plaintiffs’ constructive trust claim. Any argument about the meaning and effect of those parts of the DOFA which have been emphasised in the extract in paragraph [21] above is a matter for trial and demonstrates a serious question to be tried. This includes the plaintiffs’ contention that the transfer of the Land was intended to occur against the background of the continued operation of the Partnership, as opposed to the Land being the subject of a sale with some additional consideration to be provided by the plaintiffs.

    3. (3)

      In relation to the IJAMOTT Caveat, the last bullet point (see paragraph [21] above) of the attachment is sufficient to raise the substance of the Barnes v Addy claim manifested at paragraph 43 of the statement of claim. Insofar as it was suggested that there should have been a restriction to one-third of Gilgowrie, the Act requires a description of the estate claimed, being one in fee simple albeit as a tenancy in common.

  5. [65]

    As to the balance of convenience and the undertaking proffered supporting the extension of the Caveats, the plaintiffs’ submissions may be summarised as:

    1. (1)

      If the Land is sold, the plaintiffs will be confined to claims for compensation or damages. They will not be able to advance their equitable and contractual claims (the latter relying on the DOFA) against the Land.

    2. (2)

      Insofar as both parties may have equities in the Land, permitting the sale of the Land would restrict the Court’s ability to fashion a remedy that reflected those interests.

    3. (3)

      Claims for compensation or damages are not an adequate remedy in circumstances where the plaintiffs’ primary relief is the vindication of their interest in the Property.

    4. (4)

      The plaintiffs relied on the matters set out in the letter extracted in paragraph [47] above.

    5. (5)

      The plaintiffs were prepared to give the secured undertaking calculated as set out in the letter extracted in paragraph [50] above.

    6. (6)

      In reply to the defendants’ submissions set out in [68] below:

The defendants’ submissions

  1. [66]

    As to the form of the Caveats, the defendants’ submissions may be summarised as being that the claim to an estate in fee simple was plainly wrong and was a matter of substance and not form which fell outside the scope of s 74L of the Act.

  2. [67]

    As to a serious question be tried, the defendants’ submissions may be summarised as:

    1. (1)

      The claim to an estate in fee simple was plainly wrong because a constructive trust does not confer an estate in fee simple. This is fatal to the validity of the Caveats.

    2. (2)

      Assuming the correctness of the plaintiffs’ contention set out in paragraph [63(1)] above (so that what I refer to below as the “PEXA issue” is irrelevant):

    3. (3)

      The facts set out in the statement of claim did not disclose a present entitlement in the plaintiffs to have the Land transferred to them.

    4. (4)

      Whatever equitable interest the plaintiffs may have, it was contingent on the satisfaction of a number of preconditions, including acquisition of the Land “on fair terms” which had not been specified or, since the dispute arose, offered.

    5. (5)

      The IJAAMOTT Caveat disclosed no claim against that company. It was not a party to the DOFA. The particulars to the IJAAMOTT Caveat did not apply to that company, which on the plaintiffs’ own case did not have any common intention with the plaintiffs. The claim made against IJAAMOTT in the statement of claim was not the claim made in the IJAAMOTT Caveat, because in terms paragraph 43 of the statement of claim (see paragraph [55] above) was a claim that the defendants had breached the DOFA. Nor could a Barnes v Addy claim be discerned from the last bullet point in the attachment to the IJAAMOTT Caveat. Furthermore, on any view the plaintiffs were only ever to have an entitlement to one-third of Gilgowrie.

    6. (6)

      As appears from paragraph 30 of the defence, the DOFA “was an aspirational document only, unenforceable, and even at its highest does not create any legal obligation for Bruce and Donna to transfer valuable assets to Kellie and Garreth, for no consideration, when they each had ceased working” for the Partnership. Whatever the plaintiffs’ entitlements were, they were premised upon the continuation of the Partnership. Clause 2 of the DOFA recognised that “circumstances may change”, such a change now having eventuated with the breakdown of the relationship between the parties and the mutual position that the Partnership was at an end. The most that the plaintiffs can claim is a 50% interest in the Land in the winding up of the Partnership. The Partnership having come to an end, so too had any enforceable expectation as to the still future transfers referred to in the DOFA, because it was funds produced from the operation of Partnership that would allow those transfer to occur.

    7. (7)

      The language of the DOFA emphasised in paragraph [21] above was too vague to give rise to a right that equity would enforce by requiring transfer of the Land to the plaintiffs.

  3. [68]

    As to the balance of convenience, the defendants’ submissions may be summarised as being that the balance of convenience did not favour extension of the Caveats because:

    1. (1)

      The plaintiffs’ claim was weak.

    2. (2)

      The proffered $500,000 security for the undertaking as to damages, assuming it could be provided, was inadequate because it barely covered the interest that would be lost on the sale proceeds.

    3. (3)

      The defendants appeared to have minimal savings and to be, substantively, unemployed.

    4. (4)

      The defendants had a purchaser for the Land for just over $10.1 million. The evidence of the selling agent was that it was “very unlikely” that a comparable price would be achieved on re-marketing, which could take “a long time”, possibly one or two years, and that the defendants could expect to receive “at least 10% less, possibly more” than the current sale price. Those views were based on the effect of recent severe flooding, rising interest rates and the low demand for other properties in the area. What was said to be a comparable in quality, but smaller, block had received no interest from buyers over a recent six week period. The damage to the defendants could be up to $3 million (interest on 4 years delay including litigation and re-marketing of $2 million, and a $1 million lower sale price), with the flooding inhibiting the capacity of the defendants to mitigate their loss by leasing out the Land in the meantime.

    5. (5)

      Even if the Court was satisfied that the plaintiffs had sufficient assets to meet the undertaking, if the Caveats were extended the defendants would be left with the “Hobson’s choice” of bearing those substantial losses or pursuing their daughter and son-in-law for a sum which might ruin them and exacerbate the family enmity.

    6. (6)

      There was no suggestion the defendants would dissipate the sale proceeds and Bruce and Donna’s offer to set aside $5 million from those proceeds pending the outcome of the proceedings gave the plaintiffs more than adequate protection. This was especially the case because if the plaintiffs obtained any final relief, it was more likely to be for compensation rather than orders against the Land.

Consideration – the Slade Land Caveat – form

  1. [69]

    This issue arises by reason of the decision of Williams J in COMSERV. The circumstances and reasoning appear from these paragraphs of her Honour’s decision:

  2. [70]

    While I am not bound by her Honour’s decision, there is much to be said for the proposition that in the interests of consistent guidance to the profession on issues as commonly encountered as caveats, a judge of this Division should not lightly depart from a decision of another judge exercising the same jurisdiction. However, in the present case it is not necessary for me to express a view on the correctness of COMSERV because, in my respectful opinion, it is distinguishable from the case at bar for at least these reasons:

    1. (1)

      Her Honour proceeded on a concession by counsel. Mr Mack makes no such concession.

    2. (2)

      As a matter of fact, the attachment to the Slade Land Caveat is much more extensive than the explanation of the interest claimed in COMMSERV.

    3. (3)

      Her Honour did not have the advantage of the evidence before me as to the limited options available on the PEXA online system in relation to caveats.

  3. [71]

    In my respectful opinion, there is no difficulty with the description of the interest claimed in the Slade Land Caveat for two reasons.

  4. [72]

    First, as a matter of fact and law it is exactly the interest which the plaintiffs claim in this case. They claim a transfer of the fee simple in the Slade Land by reason of the constructive trust they assert.

  5. [73]

    Second, it is the entire Slade Land Caveat which must be read. When that is done, including the attachment setting out the claim details, it is clear what interest the plaintiffs claim and on what basis.

  6. [74]

    However, if those two reasons are wrong, then in the alternative I accept Mr Mack’s alternative submission that that any statutory non-compliance with the description of the interest claimed is one which the Court can disregard under s 74L because of what I shall refer to, without disrespect, as the “PEXA issue”. PEXA is the now ubiquitous acronym in conveyancing matters for Property Exchange Australia, which at the moment is the only Electronic Lodgment Network (ELN) for the purposes of the Act and its rules.

  7. [75]

    The plaintiffs’ solicitor, Mr M Jones, gave this unchallenged evidence (emphasis added):

  8. [76]

    The Pexa issue, as I refer to it, is what I have emphasised in the preceding extract, which was that the Mr Jones had no alternative but to use the PEXA system, and that system gave Mr Jones no alternative other than to claim an “Estate in Fee Simple” and then use the claim category “Beneficial Interest in Trust”. In my respectful opinion, this appears to be an example of the technological tail waving the legal dog.

  9. [77]

    Mr Mack’s alternative submission was (I here reproduce his written submission with minor amendments):

    1. (1)

      For the purposes of s 74L of the Act there is “legal proceeding” and a question has arisen as to the “validity of a caveat lodged under a provision of this Part”;

    2. (2)

      The question is whether the Caveats are invalid because they do not comply with s 74F and/or cl 7 of the Real Property Regulation 2019 (NSW) and or schedule 2 of the Real Property Regulation 2019 (NSW);

    3. (3)

      The potential invalidity is that there are insufficient particulars relating to the estate or interest to which the plaintiffs claim to be entitled;

    4. (4)

      The Caveats describe the estate or interest claimed as an “Estate In Fee Simple” by virtue of: “Beneficial Interest in Trust”;

    5. (5)

      Whereas the plaintiffs were required to describe the estate or interest as the “estate it is entitled to” by virtue of: “their status as the beneficiary of a common intention constructive trust”. Other more “valid” formulations are also conceivable such as “interest as a beneficiary” by virtue of: “a claimed common intention constructive trust”;

    6. (6)

      However, a valid description was not in reality possible because the “conveyancing rules” (see s 12E of the Act and also s 74L of the Act which picks up the definition of “conveyancing rules”) required that a caveat be lodged through an ELN (see rule 8.8 of the Conveyancing Rules made under s 12E of the Act);

    7. (7)

      The only ELN available to the plaintiffs’ solicitor was PEXA;

    8. (8)

      The PEXA system restricted the possible descriptions of the estate or interest claimed;

    9. (9)

      None of the possible descriptions included a “valid” description;

    10. (10)

      In those circumstances, s 74L operates to cure the invalidity because the system of conveyance mandated by the “conveyancing rules” has produced a conveyancing system which does not operate in a manner that enables a caveator to comply with the requirements of cl 7 of the Real Property Regulation 2019 (NSW) and / or schedule 2 of the Real Property Regulation 2019; and

    11. (11)

      Using the language of s 74L, the plaintiffs were not able to “comply strictly” with the “conveyancing rules” and therefore the “court shall disregard” the “failure” to “comply strictly” with the “conveyancing rules”.”

  10. [78]

    I accept that submission but with what is, in my view, the necessary final step. That is that the failure to comply was “with respect to the form of the caveat” for the purposes of s 74L precisely because the form of the Caveats (which created the non-compliance) was dictated by the PEXA system.

  11. [79]

    It may be accepted that, in terms, an estate in fee simple does not arise by a beneficial interest in a trust. The Duty List sees many claims every week relating to caveats where resulting or constructive trusts are asserted by reason of joint endeavours or common intention. They are often, but not always, advanced in the fraught circumstances of the breakdown of personal relationships. Those circumstances themselves often give rise to an approach to litigation in which every point will be taken.

  12. [80]

    There is a public interest, including in maintaining the accuracy and utility of the Torrens register, that where a party has a legitimate caveatable interest, they be able to record it clearly and legally correctly in a caveat so as to minimise the scope for confusion and argument. Where there is such scope, it will often lead to unnecessary, time consuming and expensive applications to the Court. There is a public interest in such applications being avoided where possible. Parties should not be left in doubt as to whether they have solved any potential misdescription or non-compliance by the detail they have provided of the claim (which as Mr Jones’ evidence demonstrates is limited to an arguably inadequate 300 text characters unless other steps are taken).

  13. [81]

    In my respectful view, the frequency of claims such as the present in relation to caveats relying on constructive or resulting trusts (I have seen four in my last fortnight as Duty Judge) warrants the PEXA system offering as the estate or interest claimed “beneficial estate or interest” (or similar) and with several claim categories to follow “by virtue of” to describe each of the possible types of trust. Because this judgment seems to me to raise a systemic issue, I will have my Associate refer it to the Minister for Customer Service and Digital Government (as the Minister responsible for the Act), the Registrar-General and PEXA for their consideration.

Consideration – the Slade Land Caveat – serious question to be tried

  1. [82]

    The Court accepts Mr Mack’s submissions that there is a serious question to be tried as to whether the defendants hold the Slade Land upon a common intention constructive trust which would be enforced by the Slade Land being transferred in fee simple to the plaintiffs. That is the claim made in the Slade Land Caveat (including the attachment) and the Court accordingly finds that claim has or may have substance for the purposes of s 74K of the Act. I do not accept Mr Katekar SC’s submission that primarily, but not exclusively, because of the emphasised matters to which he has drawn attention in the DOFA (see paragraph [21] above), the plaintiffs’ claim is weak. However, it is unnecessary and potentially misleading at this early stage of the proceedings to offer any further characterisation of the plaintiffs’ prospects beyond the statutory language of s 74K.

  2. [83]

    Quite apart from what may have been said between the parties, and notwithstanding the parts of the DOFA emphasised in paragraph [21] above and relied upon by Mr Katekar SC for the contrary conclusion, the Court accepts that it is seriously arguable that the DOFA evidences the common intention of the parties as to how the Slade Land would be held by the defendants to enable its acquisition by the plaintiffs. The nature and sufficiency of the plaintiffs’ detriment alleged to have been suffered in reliance on that common intention is a matter for trial, as is the question of whether the defendants have unconscientiously sought to depart from that intention, including by asserting an entitlement to transfer the Slade Land to a party other than the plaintiffs. Such unconscientiousness can be remedied by the imposition of a constructive trust as the stepping stone to an order that the Slade Land be conveyed to the plaintiffs as beneficiaries of the trust (assuming the whole of the Land has been found to be subject to the trust). Such relief is available, for example, in relation to unconscientious dealings (see, for example, Bale v Kimberley Development Pty Ltd [2022] NSWSC 820 per Ward P at [670] and [676(2)]) and it is clearly arguable that it is available to give effect to a common intention in an appropriate case.

  3. [84]

    In reaching this conclusion, I have not overlooked this evidence given by the plaintiffs’ solicitor:

  4. [85]

    That evidence fortifies my view, which I expressed to Mr Mack in the course of argument, that this was almost certainly a case (given the terms of the DOFA) where to obtain the relief they sought, the plaintiffs will have to do equity towards the defendants. However, what that might be can only be determined at the end of the hearing. For present purposes it is sufficient that I observe that the fact that the plaintiffs may have to do equity does not detract from the Court’s conclusion that their claim to a transfer of the Slade Land in fee simple has or may have substance.

Consideration – the Slade Land Caveat – balance of convenience

  1. [86]

    The primary reason why the Court accepts the submission that the balance of convenience favours the extension of the Slade Land Caveat is that if it is not extended, this would have the certain consequence of summarily terminating the plaintiffs’ proprietary claim to the Slade Land, being a claim which the Court has found has or may have substance. The secondary reasons are the matters set out in subparagraphs 6.3(a), (c), (d) and (e) of the letter extracted in paragraph [47] above.

  2. [87]

    When compared to the certain summary termination of the plaintiffs’ proprietary claim, how detrimental the extension of the Slade Land Caveat would be for the defendants is, on the evidence, far less certain, for reasons which I will next set out.

  3. [88]

    There is no evidence from the current purchaser (even by solicitor’s correspondence, for example) as to what may happen to the contract for sale. Nor, for understandable reasons, does Bruce say anything on that topic. His evidence, set out in paragraph [49] above, assumes and is fearful of the loss of the present sale, but there is no evidence before the Court that enables the likelihood of that assumption proving true to be assessed. In my respectful view, in the absence of evidence, for the Court to conclude that the sale at the current price will be lost forever would be speculation. There is obviously a chance it may be lost, but how great that chance is cannot be assessed. It has certainly been my experience both at the bar and on the bench that an inability to complete a contract for the sale of land pending third party legal proceedings does not always lead to termination of the contract.

  4. [89]

    Nevertheless, the view to which I have come would be the same even if the evidence were that the current sale will be lost forever and the deposit returned. This is because the evidence is too general and speculative to enable the Court to make any conclusion about any future sale price and how long any sale might take to achieve. To describe the evidence as such is not a criticism of the parties, who have sought to provide the best evidence they can in urgent circumstances. Furthermore, assuming no deleterious effect from the floods, the only relevant, objective fact currently available to the Court – that the present sale was achieved within three months – suggests that fear of a long delay if the blocks have to be put back on the market may be unrealistic.

  5. [90]

    In this regard I have given careful attention to the hearsay evidence of the current selling agent, Mr McLaren, in conversation with the defendants’ solicitor:

  6. [91]

    As I read that evidence, it is heavily influenced by a view as to the effect of the flood damage. However, both common sense and some of the evidence (see paragraph [65(6)(d) and (e)] above) suggests that there will be no ongoing damage. As for the balance of Mr McLaren’s statement, to his credit he qualifies it by “who knows”. With that qualification, and the speculative tone of the entire extract, it is no criticism of Mr McLaren that the Court concludes that his statement is of insufficient weight to influence the balance of convenience in favour of the defendants.

  7. [92]

    Furthermore, as a matter of discretion, I have taken into account that Bruce took a calculated risk in entering into the contract for sale of the Slade Land with knowledge of the plaintiffs’ claim and these proceedings having been commenced. I do not regard the alleged doubts entertained about the plaintiffs’ undertaking at the time set out in the correspondence extracted in paragraphs [37] to [44] above as sufficient to negative this consideration.

  8. [93]

    Also highly relevant to the balance of convenience is the question of the undertaking as to damages. This is clearly a case where the undertaking should be required. By reference to the evidence set out in paragraph [65(6)(a) and (b)] above, the Court is satisfied an undertaking from the plaintiffs would be valuable. Furthermore, it is appropriate that, as proferred by the plaintiffs, it be secured over the Brose Property to the amount of $500,000 before 2 February 2023 (which is not to be understood as a limit on the amount recoverable pursuant to the undertaking as to damages). That amount of security is acceptable in the first instance for the reasons set out in the correspondence extracted in paragraph [50] above. The Court will also require an undertaking that the plaintiffs will not deal with or further encumber the Brose Property without the consent of the defendants (not to be unreasonably withheld) or further order of the Court.

  9. [94]

    By way of summary, the Court will exercise its discretion under s 74K by confirming the current order extending the Slade Land Caveat until further order, and grant leave for the plaintiffs to file a fresh caveat in relation to the land held by IJAAMOTT (as to which see paragraphs [95] to [97] below) upon the plaintiffs:

Consideration – the IJAAMOTT Caveat

  1. [95]

    Even allowing for the conclusion I have reached in paragraphs [69] to [81] above, I accept Mr Katekar SC’s submission that the claim in the IJAAMOTT Caveat does not have substance for the reasons set out in paragraph [67(5)] above, including as to the lack of efficacy in the last bullet point in the attachment to that caveat to make out a Barnes v Addy claim against IJAAMOTT. By reason of that conclusion, I am bound by s74K to dismiss the Motion in relation to the IJAAMOTT Caveat, but I will do so on terms designed to preserve the status quo until a fresh caveat is filed in accordance with the next paragraph.

  2. [96]

    During the course of argument, the possibility was raised that the Court might conclude that the Slade Land Caveat, but not the IJAAMOTT Caveat, would be extended if Mr Katekar SC’s submissions were accepted. Mr Mack submitted that given the dispute is about all of the Land, that result would almost certainly excite an application by the plaintiffs under s 74O of the Act for leave to file a fresh caveat in lieu of the IJAAMOTT Caveat. It is consistent with the overriding purpose, not least given the time of the year, that I should pre-empt that course by indicating that I will grant leave under s 74O for a fresh caveat to be filed making the Barnes v Addy claim and specifying only a one-third interest in Glengowrie.

  3. [97]

    The Court is satisfied that such a claim, having as its first step the alleged common intention constructive trust over the Land, has or may have substance. The balance of convenience considerations which I have set out in relation to the Slade Land Caveat apply equally in favour of permitting the fresh caveat to be filed over the blocks held by IJAAMOTT subject to the undertakings set out in paragraph [94] above. Whether the plaintiffs may wish to clarify the pleading of this claim by amending the statement of claim is a matter for another day.

Conclusion

  1. [98]

    Because the adequacy of the security to be given for the undertaking as to damages at least in part is affected by the possibility of the Land being leased pending the conclusion of this litigation, I commend to the parties’ consideration by way of suggestion only that the most logical outcome in both their interests (both to mitigate potential loss and limit liability on the undertaking) is for an agreement to be reached that it is the plaintiffs who should be permitted work the Land in the meantime. Any profits of that work could be held to be disbursed in accordance with the outcome of the proceedings depending upon who is determined to be entitled to the Land.

  2. [99]

    I will discuss with the parties the orders I propose to make to give effect to these reasons. Unless absolutely necessary, any issues which might arise about the implementation of these orders should not be taken to the Vacation Judge, but should be raised for my determination at the directions hearing I propose to fix before me on 31 January 2023 (still being a date before the contracts for sale of the Land are due to settle). While my preliminary view is that the costs of the Motion should follow the event, being success on the part of the plaintiffs, I will also stand over any argument as to costs to the directions hearing. Apart from anything else that may be required on that date, I will then list the matter for mention before the Expedition Judge on 3 February 2023.

Unofficial copy. Source: NSW Caselaw. Refer to the official version for authoritative text.