Luff v Lyons

These proceedings concern a dispute between a brother and sister regarding a deed of family arrangement. Under that deed, the mother agreed to leave a legacy to the son on her death. The sister promised to pay any shortfall to the brother. That promise was secured by a charge over certain land known as “Miglen” and “Kagens” received by the sister, and the brother was permitted to lodge a caveat over that land to secure the performance of the sister’s obligation.

In the event she wished to sell the land, she had the right to have the caveat withdrawn on the provision of alternate security.

The sister wants to sell the land and wants the caveat removed. The brother says it should remain as sufficient alternate security has not been provided.

The proceedings were heard on 8 December 2025. Mr A d’Arville appeared for the plaintiff and Ms F McNeil appeared for the defendant.

For the reasons set out below, I have determined that the plaintiff’s claim succeeds and the defendant’s fails – the caveat should remain. I will hear the parties on the appropriate orders and as to costs.

Mr Kevin Luff (Kevin or the Deceased) passed away in October 2003. His widow (Connie) was appointed as sole executrix of his estate.

Connie and Kevin relevantly had two children. The plaintiff (Stephen) and the defendant (Karen).

In using first names in these reasons, I mean no disrespect or over familiarity.

Stephen subsequently commenced family provision proceedings against Kevin’s estate.

Those proceedings were ultimately settled. A Deed of Family Arrangement (Deed) was entered into between Connie, Stephen and Karen dated 12 September 2008. The Deed provides, in effect, for an intergenerational succession plan.

Under the terms of the Deed:

Clauses 8 to 11 of the Deed provide:

Clauses 14 and 15 provide:

Stephen lodged a caveat on the titles of Miglen and Kagens in 2014.

Karen now desires to sell Miglen and Kagens and has sought Stephen’s consent to the withdrawal of his caveat.

Karen’s solicitor first wrote to Stephen in July 2024 regarding possible options regarding Miglen and Kagens. No response was received.

Karen subsequently obtained valuations of Bonnie Doon, Miglen and Kagens which were sent to Stephen on 22 November 2024. The valuation valued Bonnie Doon as at 11 October 2024 (216.5 hectares) at $3 million. The Miglen and Kagens valuation as at the same date (326.05 hectares) was $5,300,000.

On 10 July 2025, Karen’s solicitor wrote to Stephen. The letter stated that Karen had confirmed that she intended to move towards a sale of Miglen and Kagens. The letter sought Stephen’s consent to the removal of the caveat and attached a withdrawal of caveat form for him to sign. The letter attached the earlier valuations obtained in October 2024 and stated that the combined value of Kagens, Miglen and Bonnie Doon (approximately 542 hectares or 1339 acres) in accordance with the valuation is $8,300,000, or $6,199 per acre.

The letter went on to state:

On 31 July 2025 Stephen responded saying he was away travelling and had forwarded the 10 July 2025 email to his solicitor and was awaiting his instructions.

On 1 September 2025, Karen’s solicitor sent a copy of the 10 July 2025 email to Stephen’s solicitor, asking him to respond. No response was received.

On 18 September 2025 a lapsing notice was served on Stephen.

On 2 October 2025, solicitors for Stephen wrote to Karen’s solicitor attaching a summons and indicating an intention to approach the Duty Judge seeking an extension of the caveat.

The summons was filed on 2 October 2025 and on 3 October 2025 the Duty Judge made orders extending the caveat until further order.

To complete the pleadings, a cross-summons was filed on 14 November 2025 by Karen seeking, inter alia, a declaration that Karen is entitled to deal with Miglen and Kagens and an order that Stephen withdraw the caveat. Alternatively, Karen seeks orders pursuant to s 74MA of the Real Property Act 1900 (NSW) (RPA) for the caveat to be removed.

The parties continued to correspond through their solicitors after the commencement of the proceedings.

On 30 October 2025, the solicitors for Karen wrote to Stephen’s solicitors. The letter stated that it was for Stephen to advise pursuant to the terms of the Deed what the security might be and that to date, this had not occurred.

The solicitors for Stephen responded later that day. That letter asserted that Karen’s interpretation of clause 15 of the Deed (as set out in their letter of 30 October) was nonsensical. The letter asserted that Karen has not provided “other security”, and that none of the options proposed by Karen amount to any form of security. It was then asserted that on any interpretation of the Deed, Karen therefore presently has no right to have the caveat withdrawn and had no right to issue the lapsing notice.

Later on 30 October 2025, Karen’s solicitor’s responded by email to the letter from Stephen’s solicitors. The email relevantly stated:

No response to that email was immediately received and on 6 November 2025 Karen’s solicitors wrote again to Stephen’s solicitors. The letter relevantly stated:

Stephen’s solicitors responded by letter dated 13 November 2025. It is convenient to set the letter out in full (emphasising some important passages):

The parties were at odds as to how the Deed operates. In my view, the proper construction of the Deed is tolerably clear.

I have set out above the relevant provisions.

Relevantly, on Connie’s death, Stephen has the right to receive a legacy (my emphasis) “in a sum equal to a Registered Valuer’s Valuation at the date of her death (if no agreed value is reached) of the average value per acre of the combined properties Kagens, Miglen and Bonnie Doon multiplied by 134” (the Legacy).

By clause 8 of the Deed, Connie promises to leave the Legacy to Stephen in her Will.

By clause 11 of the Deed, Karen promises to pay Stephen any shortfall in the Legacy. As security for that obligation, Karen agreed to charge Miglen and Kagens. Stephen was able to protect his rights to the Legacy by caveat on the title to Miglen and Kagens.

It is against this background that clause 15 falls to be construed. Under clause 15, if Karen desires to sell Miglen and Kagens she has a right to have the caveat removed provided, in effect, she offers sufficient security in place of the charge and caveat over Miglen and Kagens. The sufficiency of the security is determined by what in Stephen’s reasonable view is of sufficient value to protect the benefit derived by Stephen pursuant to paragraph 8 of the Deed.

The benefit derived by Stephen pursuant to paragraph 8 of the Deed is the Legacy. Counsel for Karen contended that the reference to “pursuant to paragraph 8 hereof” in clause 15 was only intended to pick up Stephen’s rights as a beneficiary under a Will which are no more than a right to have the estate properly administered. I do not accept these submissions.

Construed in context, the benefit being referred to in clause 15 of the Deed is the Legacy, secured by a charge which is supported by a caveat. This is also in the context of the security being for a future obligation namely one that arises on Connie’s death.

There was some debate before me as to how it is to be determined whether Stephen’s view is a reasonable one. Counsel for Karen relied upon what was said by Hodgson CJ in Eq in EFG Australia Limited v Kennedy [1999] NSWSC 922 (EFG) at [57]:

These observations were made in the context of an employment agreement. They have, however, been applied more broadly: see, for example, Doust v Riveaux Holdings Pty Ltd [2024] NSWSC 1434 at [5] per Hammerschlag CJ in Eq.

Both parties also placed some reliance on what was said by Goodman J in Qantas Airways Limited v Australian and International Pilots Association (No 2) [2024] FCA 756 at [105]-[108]:

Having regard to the position adopted by Karen in the present case, it is not necessary, in my view, to reach any ultimate conclusion on this point. In the present context, however, I incline to the view that the matters referred to by Goodman J at [107] are likely to be of most relevance. In any event, as is apparent below, Stephen’s position would satisfy the test propounded in EFG.

Against these observations as to the proper construction of the obligations under the Deed, I turn now to consider the circumstances of the present case.

In considering whether clause 15 has been complied with by Karen, as she contends, it is important to keep firmly in mind that the benefit which Stephen currently enjoys is the right to receive the Legacy on Connie’s death. It is that benefit that Karen agrees to satisfy in the event of any shortfall, that is protected by a charge over Miglen and Kagens and supports the caveat. Alternate security which is to be put in place in the event of Miglen and Kagens being sold must be of sufficient value to protect the future right to the Legacy.

This is also in the context of where Connie is still very much alive. Although she is 92 years old, Karen’s solicitor’s letter dated 6 November 2025 stated that she is in good health, lives independently, and that it was Karen’s hope that Connie lives for another five, hopefully more years. The letter from Stephen’s solicitor asserted a life expectancy of at least another eight years.

According to the written submissions advanced by Karen prior to the hearing, the security relied upon as satisfying clause 15 was said to be the cash payment to Stephen on the terms proposed in paragraph 1 of the email from Karen’s solicitors to Stephen’s solicitors dated 30 October 2025. I have extracted that offer above. It is to be remembered that the effect of the offer is to satisfy the Legacy now by payment to Stephen, once Miglen and Kagens have been sold, of an amount calculated in accordance with the Deed – the average value per acre of the three properties multiplied by 134. Although not expressly stated, it appears that the value is to be determined by reference to the October 2024 valuations obtained by Karen. The payment is to be made in return for Stephen executing a deed confirming that the terms of clause 8 of the 2008 Deed will not be complied with and that Stephen will accept the payment in satisfaction of clause 8.

The principal difficulty with this position, in my view, is that on no view could this be said to be offering security for the benefit of the Legacy. It is seeking to make Stephen accept the Legacy now based on October 2024 valuations rather than at the date of Connie’s death, whenever that may be. As Karen’s counsel conceded, it effectively assumes that Connie passes away now.

In simple terms, the offer is seeking to impose on Stephen a new obligation instead of what he is entitled to under the terms of the Deed.

It was perfectly reasonable for Stephen to reject this offer as he did in the letter from his solicitors to Karen’s solicitors dated 13 November 2025.

A number of submissions were made by counsel for Karen seeking to criticise the position set out by Stephen in the letter from his solicitors dated 13 November 2025. It was said that this position was an unreasonable one, and I infer that clause 15 had therefore been satisfied by Karen. In my view, it has not.

In my view, it is not necessary for the Court to parse too heavily over the matters asserted by Stephen’s solicitor in the letter dated 13 November 2025 beyond the rejection of the offer made by Karen on the basis that it does not reflect the obligations under the Deed.

If the offer made by Karen does not offer any form of security to Stephen but rather seeks to force him to accept a new obligation now, any statements made by Stephen in his solicitor’s letter cannot be availed of by Karen as demonstrating some unreasonable view. The starting point is whether an offer of other security has been made by Karen. It has not. The focus is on what Karen has offered, not Stephen.

In any event, I record that I do not regard any of the statements made by Stephen’s solicitor in the 13 November 2025 letter as to what may happen to the value of the properties between now and Connie’s passing, as demonstrating anything unreasonable on his part. He is really saying no more than the obvious, namely that property values may go up between now and when Connie passes.

This obvious point is, in any event, made by Mr McLeod the valuer who prepared the valuations in October 2024. His two valuation reports state the obvious that the valuations are current as at the date of valuation only. Further, he stated:

In terms of what was said by Hodgson CJ in Eq in EFG, Stephen’s view was a reasonable one as well as reasonably based on the available material. It was based on a construction of the obligations under the Deed. It was not said that this view was not honestly held. As set out above, in my view it is the correct construction of the Deed.

After the conclusion of oral submissions, counsel for Karen indicated that she also relied upon the other option set out in the letter dated 10 July 2025. I have extracted in full that option above. The offer was for Karen to deposit a sum, on settlement of the sale of Miglen and Kagens, equivalent to 134 acres of the three properties. The three properties would then be revalued on Connie’s death and Stephen would then receive the Legacy of the sum equal to the 134 acres at that time.

As pointed out by counsel for Stephen, there are still a number of difficulties with this option. Most fundamentally, it fails to directly appreciate that the Legacy is a future obligation and property values may change between now and when that obligation falls due. The security offered by Karen must have regard to this possibility. The offer made by Karen does not. The offer simply implicitly asserts that the value ascertained now is sufficient security for the future obligation. To contend that Stephen’s rejection of that offer was not reasonable, Karen would be required to prove that Stephen was acting unreasonably in not accepting this security. In effect, Karen would be required to prove that there would be no real possibility of the properties rising in value between now and when Connie passes. There was no attempt to prove this.

Further, the offer does not indicate where the monies would be invested. Are they to be invested securely? The offer also does not offer any security, by way of a charge for example, in a manner similar to the charge over the property provided for in the Deed. Absent a charge, Stephen could potentially be at risk to a claim over the monies by creditors of Karen.

For completeness, I also record that I reject the contention by counsel for Karen that by failing to respond to the offer made on 10 July 2025, Stephen was acting unreasonably such that Karen was entitled to serve the lapsing notice on 18 September 2025. The contention appeared to be that the effect of Stephen not responding was that the caveat should be removed with no security in place of it.

I do not accept these contentions. The delay between 10 July 2025 and 18 September 2025, whilst no doubt frustrating to Karen was not, in my view, unreasonable. The properties were not being marketed at this time, and have still not been marketed. Furthermore, there is nothing in the Deed which suggests to a reasonable person, in my view, that the parties intended that if there was such delay, Stephen would forfeit his right to any alternative security. Consistent with the approach adopted in the authorities, including those referred to by Goodman J in Qantas, the more orthodox approach would be that the Court, in assessing whether any view of Stephen’s was reasonable, would consider the fact that he had not provided reasons for that view.

The question should thus be considered at the present time and not, in my view, simply at the time that the lapsing notice was given.

For these reasons, I reject Karen’s contention that pursuant to clause 15 of the Will, she is entitled to have the caveat removed. In my view, she has not yet offered sufficient security to enliven her right to have the caveat removed. Such security would need to take into account, at the least, the fact that the Legacy is a future obligation and may not arise until some years in the future.

Karen also mounted an alternative argument seeking withdrawal of the caveat pursuant to s 74MA of the RPA.

An aspect of Karen’s argument in this regard contended that clause 15 had been satisfied by her and accordingly the Court should order the caveat be removed pursuant to s 74MA. As set out above, I have rejected Karen’s contention that she has complied with clause 15.

Counsel for Karen also referred to the discretion that the Court possesses under s 74MA to order that a caveat be removed. Reference was made to the authorities that approach the exercise of discretion in a manner akin to an interlocutory injunction, asking whether there is a serious question to be tried as to whether a caveatable interest exists and, if so, considering the balance of convenience.

The present case is, in my view, quite different to the usual case of the extension of a caveat under s 74MA. Ordinarily, such cases are dealt with on an urgent basis where the caveat is said to support a disputed interest in land and the question for the Court is whether the caveat remains on title whilst the proceedings to determine the underlying disputed question proceed, or whether the caveat is removed.

In the present case, I have determined above the underlying question.

The occasion for the Court to balance the competing interests between the parties arguably does not arise.

In any event, if the balancing exercise was to be engaged in, the price for Karen obtaining an order that the caveat be removed would ordinarily be the provision of adequate security to Stephen, coupled with an undertaking as to damages from Karen. As set out above, no adequate security has been offered. Further, no undertaking as to damages has been given.

It was also suggested that the existence of the caveat was preventing a sale of Miglen and Kagens. This was only a suggestion. There is no evidence that the properties have even been marketed. I do not accept that, as a universal proposition, the existence of a caveat on title prevents a sale of property. The obligation to provide title free from encumbrances arises on completion.

For these reasons, I see no basis on which the Court should exercise its discretion under s 74MA to order the removal of the caveat.

For the reasons set out above, Stephen’s case succeeds and Karen’s fails.

It seems to me that the relief that should be granted is as set out in the summons extending the caveat until further order, with the cross-summons being dismissed. I will however, give the parties an opportunity to seek to agree orders.

It also seems to me that costs should follow the event and Karen should pay Stephen’s costs of the proceedings. I will, however give the parties a short opportunity to agree on costs, failing which I will direct submissions to be filed and I will determine the remaining issues on the papers.

The Court orders that: