Supreme Court New South Wales Medium Neutral Citation: Naumovski v Naumovski [2015] NSWSC 2 Hearing dates: 14 January 2015 Decision date: 14 January 2015 Jurisdiction: Equity Division Before: Black J Decision: Orders made in accordance with short minutes of order initialled and placed in the file. Defendant to pay the costs of and incidental to the hearing, as agreed or as assessed. Catchwords: REAL PROPERTY – Torrens title – caveats – application to extend operation of caveat – whether established a seriously arguable case giving rise to proprietary interest in property – whether balance of convenience favours extension of caveat. Legislation Cited: - Real Property Act 1900 (NSW) ss 74J, 74K - Residential Tenancies Act 2010 (NSW) Cases Cited: - Delaforce v Simpson-Cook [2010] NSWCA 84; (2010) 78 NSWLR 483 Category: Procedural and other rulings Parties: Alison Marie Naumovski (Plaintiff) Mite Naumovski (Defendant) Representation: Counsel: S Chapple (Plaintiff) Solicitors: Legal Aid Commission of NSW (Plaintiff) File Number(s): 2015/10981 Judgment – ex tempore 1. By Summons filed on 13 January 2015, the plaintiff, Mrs Alison Naumovski, sought short service of an application to extend the operation of a caveat and an order that that caveat be extended until further order of the Court. The application for extension of the caveat was made in connection with substantive relief sought in the Summons, including an order that the Defendant transfer to the Plaintiff a particular property situated at Argenton, New South Wales, to Mrs Naumovski or, alternatively, a declaration that the Defendant held the property on trust for Mrs Naumovski. 2. The application to extend the caveat, and the claims for a transfer of the property or a declaration of trust as substantive relief, were supported by an affidavit of Mrs Naumovski dated 7 January 2015. Mrs Naumovski referred to various conversations involving her father-in-law, the Defendant, Mr Mite Naumovski, in respect of the Argenton property. Those conversations include, on Mrs Naumovski's account, representations that, when the late Mr Boris Naumovski and Mrs Naumovski were married, the Defendant would give them the Argenton house or at least would leave it to them in their will. Mrs Naumovski also refers to comments to the same effect made at their wedding, and to a statement later made, in 2007, by which the Defendant invited Mrs Naumovski and her late husband to renovate the house and make it bigger. Mrs Naumovski also refers to work which was undertaken on the house, including the replacement of internal walls and ceilings in the majority of the house, rewiring of the house, replacement of the plumbing, renewal of the kitchen, installation of a new solar hot water system and air conditioning, the repair of the roof and other work. Mrs Naumovski's evidence is that she would not have moved back to the house and the work would not have been carried out if she did not believe the house was to be given to Mrs Naumovski and her late husband by the Defendant. 3. It appears that Mr Boris Naumovski died in December 2012 and Mrs Naumovski gives evidence of a further statement by the Defendant that "the house is yours" at the funeral, and of reference to that matter in conversations concerning the Defendant's will. Mrs Naumovski's evidence is that the Defendant's wife has now engaged new solicitors to act for the Defendant, who it appears is in a nursing home and who may have limited capacity. 4. On 28 November 2014, the Defendant's solicitors advised Mrs Naumovski that the owner of the property, which must refer to the Defendant, had instructed the firm to complete the necessary legal work on the sale of the property and that, when the property was sold, she would be provided with a 30 day notice to vacate the property in accordance with the Residential Tenancies Act 2010 (NSW), unless she was able to negotiate a fresh tenancy with any successful buyer. By letter dated 3 December 2014, Legal Aid New South Wales, who were acting for Mrs Naumovski, drew attention to her claim for an interest in the property as beneficiary under a constructive trust arising by proprietary estoppel, and referred to several of the matters which are addressed in Mrs Naumovski's affidavit to which I have referred above. By a further letter dated 5 January 2015, a firm of real estate agents gave fourteen days' written notice to Mrs Naumovski of the commencement of buyer inspections in respect of the sale of the property. 5. Mrs Naumovski lodged a caveat over the property, which claimed the interest of a beneficiary under a constructive trust arising by reason of a proprietary estoppel, and identified the relevant facts as being that: "The registered proprietor promised to the caveator that he would transfer title to the property to her. The caveator relied on that promise to her detriment by making improvements to the land, maintaining the land, and paying rates." 1. A lapsing notice is in evidence by which the Registrar-General gave notice that the registered proprietor had made application for preparation of a notice under s 74J of the Real Property Act 1900 (NSW), and that the caveat would lapse upon the expiration of 21 days after the date of service of the notice upon Mrs Naumovski. I have been informed, and will proceed in this application on the basis that, the lapsing notice was served on 24 December 2014 and that the caveat would accordingly lapse today unless extended. 2. On 13 January 2015, I made orders for short service of the application, to be effected upon the Defendant. By affidavit dated 13 January 2015, Mrs Naumovski's solicitor, Mr McClintock, gives evidence of instructions to a process server to serve the Summons, Orders and affidavit in accordance with my orders upon the Defendant, and also upon the law firm acting for him. An email from the process server in turn confirms service upon Mr Naumovski, and upon that law firm, although it records that an employee of that firm indicated that the principal of that firm was away until 19 January 2015 and she had no authority to accept service. A letter was in turn sent by a secretary with that firm to the Court, indicating that that solicitor was presently away and that she had informed the process server that she had no authority to accept the relevant documents, and suggesting that it was "severely harmful to Mr Naumovski this man left these documents". 3. I should pause here to make one observation which seems to me to be of wider application. In this case, a lapsing notice was served on 24 December 2014. The consequence of service of that lapsing notice was that, if Mrs Naumovski sought to extend the operation of the caveat, she would be required to make application to the Court to do so within 21 days. It seems to me that there is little merit in an argument that, on the one hand, a party may serve a lapsing notice on 24 December and, on the other hand, is disadvantaged when proceedings to extend the caveat are served within the statutory time period in which they may be brought, because the solicitor acting for that party is away during the period in which an application could be brought before the Court. It seems to me preferable that, if a party takes the course of serving a lapsing notice immediately before Christmas, which is not necessarily a desirable one, then it should make arrangements so that its solicitor (or another solicitor in his or her absence), is available to respond to any application to extend the caveat, if the party upon whom the lapsing notice is served takes the steps which the law permits to extend that caveat. 4. In the present case, Mr Chapple, who appears for Mrs Naumovski, adopts the prudent and sensible course that she does not seek to proceed with the application today, other than to the extent necessary to extend the caveat so the matter may be relisted before the Duty Judge next week. I say that course is prudent and sensible because, in taking that course, Mrs Naumovski ensures that the Defendant will in fact be given an opportunity to appear, at a time that he can be represented by the solicitor who is presently away or Counsel instructed by him, and that course is an appropriate one where there may be questions as to the Defendant's capacity. Having said that, it must be recognised that that course has itself imposed additional costs upon Mrs Naumovski, or at least upon Legal Aid New South Wales, who appear today in circumstances that there is no party present to oppose the application, and who will now been required to develop the argument for an extension of the caveat before the Court twice rather than once. 5. Turning now to the substance of the application, the order which is now sought is that, upon Mrs Naumovski giving the usual undertaking as to damages, the caveat be extended until 5pm on 21 January 2015, and the matter be listed before the Equity Duty Judge on that date. Section 74K of the Real Property Act provides that, on the hearing of an application for an order extending the operation of a caveat under that section, the Court may, if satisfied that the caveator's claim has or may have substance, make an order extending the operation of the caveat for such period as is specified in the order or until the further order of the Court, or may make such order as it thinks fit, but, if the Court is not so satisfied, it shall dismiss the application. In order to extend a caveat, the Court must be satisfied that there is an arguable case that the caveator's claim to an interest in the property raises a seriously arguable case for final relief to justify maintenance of the caveat and that the balance of convenience favours extending the caveat, at least for the specified period. 6. I am satisfied that Mrs Naumovski's evidence is sufficient to establish an arguable case for a proprietary interest in the property, arising by way of equitable or proprietary estoppel. In order to establish such an estoppel, Mrs Naumovski would be required to establish that the Defendant had played such a part in the adoption by her or her late husband of an assumption, which formed the basis of their action or inaction, and that they would suffer substantial detriment if the assumption was not adhered to, that it would be unconscientious for the Defendant to deny that assumption; Delaforce v Simpson-Cook [2010] NSWCA 84; (2010) 78 NSWLR 483 at [21]. In this case, the evidence as to representations made by the Defendant seems to me to be sufficient to establish an arguable case that he had played a part in the adoption of the assumptions which Mrs Naumovski says she and her late husband had made, and that there is also an arguable case that she would suffer detriment from now being required to vacate a house on which, on her evidence, she and her late husband had undertaken substantial work, at least without compensation for the value of that work. This seems to me to be sufficient to provide an arguable case for an equitable proprietary interest, arising by way of constructive trust, which in turn would support the caveat upon the relevant property. I am conscious, of course, that the Court has not had the benefit of hearing from the Defendant in respect of this application, and, of course, it is possible that the Duty Judge, in hearing a further application to extend the caveat for more than the short time in issue before me, may reach different views from those which I have expressed on the basis of the evidence then before him or her. 7. So far as the balance of convenience is concerned, it seems to me clear that the balance of convenience favours the extension of the caveat for the short time that is sought. If the caveat were not extended, then Mrs Naumovski would be deprived of the protection which it affords her against a sale of the property which may otherwise defeat any equitable rights which she has. On the other hand, the short extension which is sought, to allow a hearing before the Duty Judge at which the Defendant may be represented, seems to me to involve little detriment to him. For these reasons, I am satisfied that the balance of convenience supports the order that is sought. Accordingly, I make orders in accordance with the short minutes of order initialled by me and placed in the file. 8. Mrs Naumovski also seeks an order that the costs of today be paid by the Defendant. I am satisfied that such an order should be made. As I noted above, this application arises from circumstances that a lapsing notice was served immediately before Christmas, necessitating an application to the Court during the January vacation, but the Defendant cannot be represented at that application, because his solicitor is away from his office. In these circumstances, it seems to me that the costs of the hearing today have been wasted, because it was necessary to address today the substantive merits of the application, in order to extend the caveat for the short period, and may be necessary to again address that matter before the Duty Judge next week, when the Defendant is represented, so as to extend the caveat for a further period, if the Duty Judge is satisfied that the basis for such an extension is established. In that result, two hearings have been necessary to deal with a matter which, had the Defendant's solicitor been available to address an application which was a potential consequence of service of a lapsing notice immediately prior to Christmas, could have been dealt with at one hearing. I am satisfied that this is a proper basis in which to order that the costs of today, which have been wasted by these matters, should be paid by the Defendant. 9. Accordingly, I make the further order that the costs of and incidental to the hearing before me today, as agreed or as assessed, be paid by the Defendant. 10. These orders may be entered forthwith. ********** 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: 20 January 2015