Supreme Court New South Wales Medium Neutral Citation: DUIC v DUIC [2011] NSWSC 371 Hearing dates: Wednesday 16 March 2011; Thursday 17 March 2011 Decision date: 17 March 2011 Jurisdiction: Common Law Before: Hall J Decision: The operation of Caveat number AF911491 is extended until the determination of the substantive proceedings. Order the respondent (Emil Duic) to pay the applicant's (Josip Duic) costs. Catchwords: CAVEAT - whether existing caveat should be extended or a further caveat should be lodged - whether caveator's claim has "substance" - whether serious question arises and where balance of convenience lies - interest in land in the nature of improvements and monies spent thereon and payment of all rates - purported agreement that land would be given to the applicant for payment and improvements - no formal lease or lease-type payments - whether caveat defective in form - whether property held on constructive trust - no evidence of detriment to the respondent Legislation Cited: Real Property Act 1900 Cases Cited: Australian Building & Technical Solutions Pty Limited v Boumelhem [2009] NSWSC 460 Baumgartner v Baumgartner (1987) 164 CLR 137 Business Acquisitions Aust Pty Limited v Renshall [2006] NSWSC 1238 Circuit Finance Pty Limited v Crown Gleeson Securities Pty Limited (2005) NSW Conv R 56-143 Dowdle v Inverell Shire Council (1998) 9 BPR 17,349 Eng Mee Young v Letchumanan [1980] AC 331 Grant v Edwards [1986] Ch 638 Green v Green (1989) 17 NSWLR 343 Hanson Construction Materials v Vimwise Civil Engineering [2005] NSWSC 880 Shepherd v Doolan [2005] NSWSC 42 West v Mead [2003] NSWSC 161 Category: Interlocutory applications Parties: Josip DUIC v Emil DUIC Representation: Counsel: P: D Raphael D: R Gration Solicitors: P: Penhall & Co D: Sage Solicitors File Number(s): 2011/64779 Judgment 1HIS HONOUR: The plaintiff, Josip Duic, commenced proceedings against the defendant, his son, by way of statement of claim on 28 February 2011. 2The plaintiff claimed an order for possession of the property as 2A Mellor Street, West Ryde. 3In the statement of claim, the property is described as having a mixed residential and business use and that the plaintiff ordinarily resides in the residence comprising part of the building erected on the land. 4The defendant was conducting a radiator repair business on the business part of the property (paragraph 2 of the statement of claim). 5The statement of claim records the fact that the defendant, who is the applicant on a notice of motion filed on 16 March 2011, asserted payments having been made to the plaintiff in the amount of $360 per week since 1996. The plaintiff denies that assertion. 6It was said on behalf of the plaintiff that there was no written or oral lease in respect of the property and that in early 2011, the plaintiff informed the defendant that he would sell the property to finance his entry to a retirement village. 7The notice of motion filed on 16 March 2011 came before me on 17 March 2011 in the Duty Judge list. In paragraph 3, an order was sought pursuant to s.74K(2) of the Real Property Act 1900 that the operation of Caveat number AF911491 lodged in respect of the West Ryde property be extended until further order of the Court. 8Alternative relief is claimed pursuant to s.74O of the Real Property Act for leave to the plaintiff to lodge a further Caveat in respect of the land. 9In support of the notice of motion, the applicant relied upon his own affidavit affirmed on 16 March 2011. The affidavit was read in support of the relief claimed. In addition, the following documents were tendered in support of the application:- (1) Exhibit A - a proposed defence to the primary proceedings number 2011/64779. (2) Exhibit B - a copy of the Caveat AF911491. (3) Exhibit C - a copy of the notice to caveator of proposed lapsing of the Caveat together with a copy of a letter dated 24 February 2011 enclosing a copy of the notice to caveator. 10The power of the Court to extend the operation of a caveat is governed by the provisions of s.74F of the Real Property Act . One essential condition, even on an interlocutory basis for an order extending the operation of a caveat, is that the Court is satisfied that the caveator's claim on the Caveat has or may have substance: s.74K(2). 11The Court, on an application under s.74K, proceeds upon well-established principles. In particular, the Court regards the caveator as being in an analogous position to an applicant for an interlocutory injunction. Accordingly, the onus is upon the caveator to establish two matters. First, the caveator's claim to an interest in the land must raise a serious question to be tried. In this respect, it has been said that the onus is not a difficult one to discharge insofar as "it is not a very demanding test" : Dowdle v Inverell Shire Council (1998) 9 BPR 17,349 at 17,350. 12Secondly, if there is a serious question to be tried, the Court then decides where the "balance of convenience lies" : Eng Mee Young v Letchumanan [1980] AC 331 at 337 to 338. 13The onus is on the caveator to show that, on the balance of convenience, it would be better to maintain the status quo until the trial of the action, by leaving the Caveat in place so as to prevent disposal of the land. 14I have had the benefit of written submissions both from Mr R Gration, counsel for the applicant, and Mr D Raphael, counsel for the respondent. Those submissions were supplemented by oral submissions on behalf of each party. 15Without doing injustice, I hope, to the very detailed and helpful submissions by Mr Raphael, there are two matters raised in opposition to an order extending the operation of the Caveat. 16First, that the Caveat was defective in that it did not disclose the nature of the estate or interest as the basis the Caveat. 17Second, that the applicant had not established an enforceable estate or interest in land to sustain the Caveat: s.74F of the Real Property Act . 18In the submissions for the applicant, it was emphasised that the applicant does not have to establish a real prospect of success or even to establish that it is more probable than not at trial that he will establish the interest claimed. 19The nature of the estate or interest in land relied upon was said to arise on the evidence from both labour and money expended in respect of improvements to the property over a period of 29 years since 1982, together with the payment of all rates and other outgoings on it upon the basis of the plaintiff/respondent's alleged assurance given on a number of occasions after 1982 that, in effect, the land would be the defendant/applicant's and that he, the plaintiff/respondent would not sell the property. 20Further reliance is placed upon alleged representations made by the plaintiff/respondent to the effect that "the property would one day belong to the applicant" . Reliance was placed upon a number of authorities including those in respect of a "common intention" constructive trust said to arise on the basis of an estoppel by encouragement. Reliance was also placed upon the principles of proprietary estoppel. 21The relevant authorities were referred to in submissions and were conveniently collected and referred to in the judgment of Ward J in Australian Building & Technical Solutions Pty Limited v Boumelhem [2009] NSWSC 460. 22On the question of balance of convenience, it was submitted that the circumstances of the case indicated that that balance favoured the extension of the operation of the Caveat and that, in the circumstances of the present matter, the balance substantially favoured the applicant. Reliance was placed, inter alia, upon the applicant's evidence that his business would be substantially damaged if sold, he having established a clientele in the relevant area. It was also contended that there was no evidence which would indicate hardship or detriment to the respondent in the event that the operation of the caveat was extended. 23The order sought was that the Caveat be extended until the determination of the substantive proceedings (2011/64779). The applicant's submissions 24It was acknowledged in the submissions for the applicant that it was necessary that he establish that it is "reasonably arguable" that he has an interest in the land. 25It was submitted that the basis for the applicant's claim is that there was a joint endeavour between himself and his father in about 1982 in relation to the establishment and carrying on of a radiator repair business. In that respect it was claimed that the respondent ceased contributing to the joint venture in about 1987, but continued to draw income from the business, was provided with a car and a boat and had certain living and travelling expenses provided for. 26The applicant, it was further contended, contributed his labour and money and made various improvements to the property over the 29 years in question. These have been referred to earlier in this judgment. 27It was contended that the applicant acted to his detriment in building up the radiator business over the years and in making improvements to the property. 28As to the relevant test to be applied, reference was made to the dicta of Gleeson CJ in Green v Green (1989) 17 NSWLR 343 at 357 and to the judgment of White J in Shepherd v Doolan [2005] NSWSC 42 and Ward J in Boumelhem (supra) at [115]. The test was said to be based upon the following observation of Sir Nicholas Browne-Wilkinson VC in Grant v Edwards [1986] Ch 638 at 657:- "Once it has been shown that there was a common intention that the claimant should have an interest in the house, any act done by her to her detriment relating to the joint lives of the parties is, in my judgment, sufficient detriment to qualify. The acts do not have to be inherently referable to the house ... The holding out to the claimant that she had a beneficial interest in the house is an act of such a nature as to be part of the inducement to her to do the acts relied upon. Accordingly, in the absence of evidence to the contrary, the right inference is that the claimant acted in reliance on such holding out and the burden lies on the legal owner to show that she did not do so ..." 29It was argued on behalf of the applicant in the present proceedings that the Court would impose "a constructive trust which best gives effect to the intention of the parties" : Boumelhem (supra) at [116]. 30Alternatively, it was argued that, without any attributable blame on the part of the applicant, the respondent threatened to terminate prematurely the parties' joint endeavour in having served the Notice to Quit on the applicant and threatening to sue on the property. 31It was said, in the circumstances, that it would be unconscionable for the benefit of the monetary and non-monetary contributions to be retained by the respondent. Accordingly, it was contended that, consistent with relevant principle, the required factors had been established in the current proceedings as to warrant the imposition of a constructive trust. 32On behalf of the applicant, Mr Gration acknowledged that the applicant bore the onus of showing that, on the balance of convenience, it would be better to maintain the status quo until the substantive trial of the applicant's claim, by leaving the Caveat in place. 33It was contended that courts are often prepared to hold that the balance of convenience favour the maintaining of the Caveat, even though this may temporarily sterilise the registered proprietor's plans for the land. 34It was argued that once it had been established that there was a serious question to be tried, the balance of convenience is likely to favour retention of the Caveat. It would only be in "unusual" or "exceptional" circumstances that the balance of convenience would favour removal of the Caveat. 35It was contended that the balance of convenience substantially favoured the applicant. In this respect, the evidence was said to indicate that, if the Caveat were not extended and the applicant had to vacate the property, then it would substantially damage his business, especially so if the property was sold. 36Balanced against this was a desire only by the respondent to sell the property but no evidence that he had taken any steps towards doing so or that he had a buyer ready to purchase the property. It was claimed that there was no evidence that preserving the status quo would cause any detriment to the respondent. Accordingly, it was submitted that the Caveat should be extended until determination of the proceedings in the substantive proceedings. Respondent's submissions (1) The issue of constructive trust 37Mr Raphael of counsel in his detailed and helpful submissions, contended that there is no "joint agreement" with respect to dealing with the property. He argued that it is plain that the expenditure made by the applicant is wholly consonant with that of a tenant. 38Mr Raphael also submitted that a number of aspects of the suggested joint agreement were not clear (paragraph 3 of Respondent's Outline of Submissions ). 39The essence of the applicant's case was, Mr Raphael submitted, essentially based upon the payment of money. That, of itself, does not give rise to an estate or interest in land. (2) The form of the Caveat 40In Schedule 1 to the Caveat, the nature of the estate or interest was described as an "Equitable Interest" . In that Schedule, the facts relied upon were said to be set out in the attached document, Annexure A. 41Annexure A set out the facts under the headings:- (1) Contributions (2) Improvements (3) Maintenance 42In paragraph 1(a), it is stated:- "(a) Emil Duic, the caveator, has paid his father, Josip Duic, the registered proprietor, a sum of $360 since 1996 upon reliance of his father's promise that the property would be left to him. See Proprietary Estoppel by encouragement in Delaforce v Simpson-Cook [2010] NSWCA 84." 43Annexure A then set out a number of matters said to have been, inter alia, improvements to the property effected by the applicant, contributions to council rates, water rates, insurance and maintenance of the property including landscaping, cementing of the driveway and provision of a parking area as well as a security brick fence around the premises. 44Mr Raphael submitted that such matters, on analysis, were simply consistent with occupation arrangements such as would be found in a conventional rental or licence arrangement. The obligations upon the occupier in such circumstances would usually be to maintain the premises. It was contended that there were no substantial improvements disclosed in Annexure A and that substantial improvements would be necessary in order to establish a constructive trust. 45In support of the contention that the Caveat was bad in form, Mr Raphael submitted that the phrase "an equitable interest" was insufficient to describe the estate or interest claimed. The submission was reinforced by dicta in a number of cases including that of Campbell J in Hanson Construction Materials v Vimwise Civil Engineering [2005] NSWSC 880, Brereton J in Circuit Finance Pty Limited v Crown Gleeson Securities Pty Limited (2005) NSW Conv R 56-143 and of Barrett J in Business Acquisitions Aust Pty Limited v Renshall [2006] NSWSC 1238. 46I have had regard to the observations made in each of those cases when considering the question raised in respect of the Caveat in issue in these proceedings. I have also borne in mind the provisions of s.74L of the Real Property Act . 47If the estate or interest was simply described as "equitable" , then the Caveat would, in my opinion, be bad in form. However, I consider that the nature and the basis of the interest was established by virtue of the disclosure of certain matters in Annexure A to the Caveat. 48The applicant stated in paragraph 1(a) of that document that he had paid his father, the respondent, an amount of money (stipulated as $360 per week - his affidavit suggests that that was meant to indicate that amount on a weekly basis) since 1996:- "... upon reliance of his father's promise that the property would be left to him." 49That is followed by a contention based upon proprietary estopped "by encouragement" . That, in my opinion, is sufficient to disclose the nature and the interest of the estate in land based upon or derived from an alleged promise. 50It was submitted for the respondent that the Caveat failed to describe the nature and scope of the "agreement" and the subject matter of it. However, as brief as the facts stated in relation to "contributions" in Annexure A may be, the essential fact asserted is that the equitable estate or interest is said to have been based upon and derived by reason of an arrangement between the applicant and the respondent, part of which was a promise having been made by the respondent and relied upon by the applicant to provide an amount of money on an ongoing basis since 1996, the promise being that the performance of the applicant's financial obligation would create or confer an entitlement upon the applicant to the property. Conclusions 51The facts disclosed in Annexure A are, as it were, incorporated by reference in Schedule 1 of the Caveat. In my opinion, they provide sufficient particulars of factual matters to amount to compliance with the obligation under the Real Property Regulation 2003 (Schedule 3) to specify particulars of "... the nature of the estate or interest in land claimed by the caveator" and "the facts on which the claim was found ..." . 52I am, accordingly, satisfied that the Caveat does adequately describe the nature and scope of the agreement and the subject matter of the agreement. 53Whether or not the applicant can make out at trial a requisite state or interest in land (be it under a constructive trust or otherwise) there is, in my opinion, sufficient material to satisfy the first prerequisite for an order extending the Caveat, namely, the existence of a serious question to be tried. 54The primary relief claimed is a constructive trust. The evidence in support was relied upon, as I would understand it, alternatively on the "pooling" principles based on the High Court's decision in Baumgartner v Baumgartner (1987) 164 CLR 137 or, alternatively, a "common intention" constructive trust upon the basis of an estoppel by encouragement. 55In order to establish a constructive trust, there are a number of matters to be established. These were addressed by Campbell J (as his Honour then was) in West v Mead [2003] NSWSC 161. It is, of course, not necessary for the applicant to prove on an application for an extension of the operation of a caveat, each and all of those matters as would be required at a final hearing. 56The evidence relied upon by the applicant, however, is relied upon as establishing a serious question to be tried concerning those matters including:- (1) Whether there was a "joint endeavour" between the applicant and his father pursuant to which monetary and non-monetary contributions were made. (2) The characterisation of the relationship in relation to the property, in particular, the issue of "common benefit" in relation to expenditure on the property and otherwise. (3) The circumstances in which the joint endeavour terminated. The Statement of Claim sets out particulars in which possession of the property was sought (paragraphs 5, 6, 7, 8 and 9). (4) The facts relied upon to support the issue of unconscionability: West v Mead (supra) at [62]. 57In addition, the applicant relies upon the facts pleaded and referred to in his affidavit as the basis for relief on proprietary estoppel principles. Although certain of the evidence in the applicant's affidavit relied upon is not in admissible form, that is, in a form required for the purposes of a final hearing, the evidence, in my opinion, is sufficient to establish a serious question to be tried as to the estoppel pleaded. 58As Mr Gration observed in his submissions in reply, the matters raised by Mr Raphael may be decided at a final hearing but do not provide a basis for a refusal of the extensions to the Caveat sought. 59I am also satisfied on the evidence that the balance of convenience favours the making of the order sought in the summons. 60In relation to costs, Mr Raphael opposed an order for costs being made in favour of the applicant. In particular, he emphasised the fact that the application was brought on at short notice and, accordingly, there was a very real question concerning costs. 61I have, however, concluded that, the plaintiff having been successful in establishing the basis for the order sought, there is no conduct by him or his legal advisors which would offset the usual rule that costs follow the event. 62Accordingly, I make an order that the respondent pay the applicant's costs on the ordinary basis, as agreed or assessed. 63I confirm that on 17 March 2011, I made orders in accordance with the notice of motion filed on 16 March 2011. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 May 2011