Can a gift of land during the donor's lifetime defeat a claim against his or her estate after death?

In the case of Daunt v Daunt [2013] VSC 706, the plaintiff and the defendant were twin brothers and sons of the deceased.

While he was alive, the deceased and his wife (the twins' mother) gifted real property to one son as a joint tenant with the deceased, by executing a transfer in the appropriate form. The consideration for the transfer was described as “I desire to make a gift”. 

Upon the death of the father, the title vested solely in that son by survivorship.  This meant that the property did not form part of the deceased’s estate, and could not be subject to a Part IV claim.  The surviving proprietor lived at the Wandong property at the time of the proceeding. 

The plaintiff made a claim against the estate in the Supreme Court of Victoria alleging (amongst other things) that the defendant had unduly influenced their father.

Associate Justice Daly found that the brother lacked standing to make a claim.  This was due to the fact that the plaintiff was merely a disappointed beneficiary under his living mother’s estate.  Consequently, the only person who could make such a claim was their mother. 

The Court of Appeal (Redlich, Santamaria and Kyrou JJA) dismissed the disappointed brother's appeal (see Daunt v Daunt [2015] VSCA 58). 

Daly As J went on further, however, to make comments as to how she would have decided the case had the plaintiff in fact had standing. 

Her Honour concluded that there was no undue influence in this case as the transfer had been a voluntary gift where the transferor had fully understood the consequences of the transfer.

The case came about because the plaintiff lodged a caveat over the title to a property at Junction Road, Heathcote Junction (“Wandong property”). 

The defendant (as surviving registered proprietor) applied to remove the caveat on the basis that the plaintiff did not have the interest in the Wandong property that he claimed. The plaintiff issued the proceedings to justify the caveat.  

At paragraph 40, Her Honour noted that the question of the standing of an actual or potential claimant under Part IV of the Administration and Probate Act 1958 (Vic) has been the matter of some debate, and that debate had yet to be resolved. 

 In Mataska v Browne [2013] VSC 62, McMillan J approved of the view adopted by the Full Court of the Supreme Court of Queensland in Hogarth v Johnson (1987) 2 Qd R 383. While McMillan J stated [at paragraph 53] that: 

A contingent Part IV interest, without more, is insufficient to support standing. 

she found in an application by a child of the deceased to remove the executor of the deceased’s estate in circumstances where the executor was the sole beneficiary of the deceased’s estate, but also the recipient of a gift of the bulk of the assets of the deceased shortly prior to her death, a potential claimant under Part IV of the Act had sufficient standing to make the application for the removal of the executor, and the appointment of another executor for the purpose of investigating the circumstances in which the gift was made.

Daly As J also noted at paragraph 45 that:

... regardless of the standing of the plaintiff, now is the opportune time to determine, on the basis of the evidence before the Court, whether the Transfer of Land ought to be set aside on the basis that the Transfer of Land was procured by the defendant’s breach of fiduciary duty, exertion of undue influence, or unconscionable conduct. The plaintiff and the defendant have filed and served extensive written evidence ...

Continuing on with that analysis, she found at paragraph 47  that there was no factual basis for alleging that the defendant breached his fiduciary duty as power of attorney for his parents by procuring the Transfer of Land: the Transfer of Land predated the defendant’s appointment as an attorney for each of his parents. She also noted that there is no overarching doctrine at law that an adult child otherwise owes a fiduciary duty to his or her parents. 

In her analysis of whether the defendant procured the Transfer of Land by exerting undue influence, Daly As J adopted the principles articulated in Christodoulou v Christodoulou [2009] VSC 583 at [70], where Kaye J stated as follows:

The basic principles relating to the concept of undue influence are uncontroversial. In equity, a transaction, whereby a donor transfers property to a donee (or recipient), is voidable, if it is shown to be the result of undue influence exercised by the recipient over the mind of the donor. There are two categories of cases of undue influence. The first category of cases arises where it has been positively proven that the transaction in question was produced by actual influence exercised by the recipient over the donor. ... The second category of case is where there has been shown to be an antecedent relationship between the donor and the donee, which is such as to raise a presumption that the donee has relevant influence over the donor. In such a case, the court will set aside a voluntary gift, unless it is proven by the donee that the gift was a spontaneous act of the donor in exercise of an independent and informed will. In this category of case, the law has recognised particular relationships which automatically raise a presumption of influence, including the relationship of doctor and patient, solicitor and client, guardian and ward, and parent and child (where the gift is by the child to the parent). However, the classes of relationships, in which the presumption arises, are not fixed and inflexible. In essence, where there is found to be an antecedent relationship between the parties, which gives the recipient of the gift “authority or influence over the donor from the absence of which it is proper that he [or she] should be protected”, the law will presume that any gift by the donor to the donee was the result of undue influence exercised by the latter.

In this case, the plaintiff alleged that the Transfer of Land was procured by the reason of actual undue influence on the part of the defendant. However, Her Honour concluded that the case fell squarely in the second category of cases: that is, by reason of the facts and circumstances of the relationship between the defendant and his parents, there was an antecedent relationship between the defendant and his parents such as to raise a presumption of undue influence which must be rebutted by the defendant in order to avoid the gift to him effected by the Transfer of Land being set aside.

The antecedent relationship did not arise merely by the defendant being the adult child of Mrs Daunt and Mr Daunt senior. However, it was apparent to Her Honour that, at least in the period after the Black Saturday fires and his parents’ movement into institutional care, his parents had become increasingly dependent upon the defendant’s day to day assistance.

At the time that the Transfer of Land was executed, the parents were becoming increasingly anxious about the potential impact of their ongoing ownership of the Wandong property upon their financial security. It had become clear to them that neither the plaintiff nor the parties' sister were either willing or able to provide them with material and/or practical assistance, despite the defendant’s entreaties in his letters to them, and indeed, their lack of assistance was a major source of disgruntlement to Mrs Daunt in particular. 

Her Honour then noted (at paragraph 55) that the finding that there was sufficient evidence to raise the presumption of undue inference was not intended as a criticism of the defendant or his conduct and motivations in assisting his parents. It was simply a recognition of their potential vulnerability to manipulation of them by him, such that it was necessary for him to demonstrate that the Transfer of Land was executed by his parents freely and willingly. 

Daly As J concluded that the onus rested with the defendant to establish that the execution of the Transfer of Land was “a spontaneous act in exercise of an independent and informed will” on the part of Mrs Daunt. 

At paragraph 57 Her Honour concluded that the defendant had discharged that onus. It was apparent from the evidence of Mrs Daunt that she voluntarily gifted her share of the Wandong property to the defendant, with a full understanding of the consequences of the transaction, and a rational basis for embarking upon the transaction. There was, accordingly, no basis for setting aside the transaction on the basis of any undue influence exercised by the defendant. 

Similarly, Her Honour was unable to find any basis for setting aside the Transfer of Land on the grounds of unconscionable conduct on the part of the defendant. 

Her Honour then noted that in order to establish unconscionable conduct on the part of the defendant, the onus was on the plaintiff who had to establish that:

(a) his parents, and in particular, Mrs Daunt, were under a relevant special disability or disadvantage, which seriously affected their (her) ability to make a judgment as to their (her) own best interests; and

(b) the defendant knew, or ought to have known of that special disability and/or disadvantage, and that special disability or disadvantage affected his parents’, and in particular, his mother’s ability to make an appropriate judgment as to whether the transaction was in their (her) best interests.

At paragraph 61, Daly As J found that the plaintiff’s claim with respect to unconscionable conduct fell at the first hurdle: that is, Mrs Daunt was under no special disadvantage when she made the gift of her share of the Wandong property to the defendant. 

Her Honour went on to conclude that the question of whether Mr Daunt senior was under a special disadvantage or disability was peripheral to the real issue in the proceeding, as Mr Daunt senior suffered no material financial disadvantage by reason of the execution of the Transfer of Land. 

In determining the question as to whether the transaction was fair and reasonable in all of the circumstances, Daly As J concluded, having regard to all of the circumstances, the transfer by Mrs Daunt of her interest in the Wandong property to the defendant was fair and reasonable. 

It was apparent from the evidence that Mr Daunt senior and Mrs Daunt were keen to find some mechanism for maintaining Mrs Daunt’s access to the Wandong property while maximising their ability to receive financial assistance from the Commonwealth Government, and it appeared that objective had been achieved by reason of the Transfer of Land. 

Conclusion

These findings support the use of lifetime (inter vivos) gifts as an effective estate planning tool in some circumstances. 

It will most likely be necessary, for it to be effective, to have a medical report confirming that the gift maker is of sound mind, as well as to document the reasons for the gift. 

It would also be useful to have the gift receiver not involved in the transaction. Instead, the gift should be documented by an independent lawyer, who is acquainted with the gift giver, or who at least meets with the giver and satisfies themselves about the circumstances of the gift, and the fact that the gift giver is not being unduly influenced by the donee. 

WG Stark 

Hayden Starke Chambers

How does the Supreme Court determine whether modification of a restrictive covenant would substantially injure those entitled to the benefit of the covenant?

1.     In Foudoulis v O’Donnell [2020] VSC 248, the Supreme Court (Mukhtar As J) considered the approach to be taken by the Court in assessing whether a proposal to modify a restrictive covenant would substantially injure the persons entitled to the benefit of the covenant.

 

2.     The plaintiff was the registered proprietor of a block of land in Wilson Boulevard, Reservoir, Victoria. The land in question (along with many others subdivided at the same time, in the early 1920’s) was burdened with a single dwelling covenant, meaning that each property in the neighbourhood could only have one dwelling on it. Eventually around 3000 lots had the benefit of that covenant.

 

3.     As property lawyers will understand, the burden and the benefit of the covenant runs with the land so that the covenant remains equally enforceable in property law by and against successors in title. The plaintiff was bound by the covenant.

 

4.     The plaintiff proposed to retain the existing dwelling on his property and to construct two new semi-detached, 2-storey dwellings behind the existing house in the current back yard, and 3 new garages.

 

5.     The proposal would not be the first instance in the area of multi dwellings on a single Lot. But it would be the first instance of its kind: two double storey dwellings constructed behind a single dwelling on an ‘ordinary’ house block.

 

6.     The proposed development would obviously contravene the covenant. To overcome the restriction, the plaintiff applied to the Supreme Court under s 84(1) of the Property Law Act to have the covenant modified so that it reads ‘not more than three dwelling houses shall be erected’.

 

7.     Associate Justice Mukhtar noted (at paragraph 12 of the judgment):

An application for covenant modification is a lawsuit. The onus of proof is on an applicant to make out on the evidence a statutory ground for modification of a covenant.

 

8.     The plaintiff’s case was that the proposed of the Covenant would not

substantially injure the persons entitled to its benefit, having regard to the

expert evidence of the benefits originally intended to be conferred and in fact conferred by the Covenant and the benefits that will remain if the Court grants this application.

 

9.     In effect, the plaintiff’s case was that modifying the covenant to allow three dwellings on the plaintiff’s land would not substantially injure the beneficiaries of the covenant because the modification would be just another example of multi dwellings on land or an alteration of housing density that has already occurred in the neighbourhood, and therefore there would be no harm in allowing the modification as sought here.

 

10.  The main objectors prepared an extensive, meticulous and dispassionate research paper all based on proper sources in support of their objection which responded directly to the facts and the opinion in the expert’s expert report. They methodically engaged with his report on the facts concerning the re-subdivisions and developments within the neighbourhood ― street by street and Lot by Lot ― to contend that on a refined analysis the changes that have occurred have not been of a degree to make for a conclusion that the predominant single dwelling character of the neighbourhood had been eroded.

 

11.  The central contention is that whatever the changes to date, the Court should uphold the utility and purpose of a single dwelling covenant and not let the changes in the neighbourhood go any further lest the predominantly single dwelling character of their neighbourhood does become spoiled or ruined by more of these applications, which they apprehend is bound to happen. This is known as the ‘thin end of the wedge’ or precedential effect of a modification, a phenomenon which legal authorities accept as being ‘substantial injury’ for the purposes of s 84(1)(c) especially in neighbourhoods with a cohesive network of single dwelling covenants.

 

12.  The plaintiff contended that there have been many instances (involving at least 40 lots) of resubdivisions of a single Lot into 2 or more Lots, and instances of multi-unit developments (some two storey) on single Lots in Wilson Boulevard. That meant, he contended, that the benefit of lower density living had been eroded to the degree that the presence of two dwellings at the back of the plaintiff’s land did not truly inflict substantial injury.

 

13.  At paragraph 45 of the judgment, Mukhtar AS J found:

I do not accept that the neighbourhood has experienced change since 1922 to an extent that has eroded the benefits of a single dwelling covenant. The plaintiff has not discharged his onus of showing that the proposed modification will not cause substantial injury to the beneficiaries. Therefore the application will be refused.

 

14.  His honour summarised his findings in the nine paragraphs that followed.

 

15.  One of the objectors’ main contentions was that a re-subdivision of a large piece of land into two or more housing Lots of at least 500m2 and each of which is restricted to a single dwelling, does not therefore make for a change to the character of the neighbourhood or an erosion of the benefits of the covenant burdening the plaintiff’s land.

 

16.  His Honour noted that in Stanhill (2005) 12 VR 224, Morris J had concluded in an application to vary (at paragraph 17):

 

… it is sufficient [in an application under section 84(1)(c)] to show that the proposed discharge or modification will not cause harm to the persons entitled to the benefit of the restriction which could be regarded as being of real significance or importance. This will require a judgment call in the particular circumstances being considered; it does not admit of some universal answer based upon the attitude of the beneficiary, the original purpose of the covenant or any other similar factor.

 

17.  His Honour then noted that more recent authorities in the Supreme Court had not adopted or endorsed the approach of Stanhill and prefer to apply the ‘longstanding principles’ about s 84 that preceded it.

 

18.  Mukhtar AS J chose not to enter into debate about that point of law. Instead, he found at paragraph 92:

In this case, I think the submission is academic because I take the view that the plans and elevations as put forward by the plaintiff in evidence from which to judge the application show substantial change to the build form and density of the plaintiff’s land, and, there will be no relief to the mass of the proposed build form when seen from the gardens of beneficiaries. In my view that will constitute substantial injury.

 

Conclusion

19.  The objectors did a substantial amount of work to analyse the expert evidence and show that, in fact, the character of the neighbourhood in the area of the application was still vastly a single dwelling neighbourhood, and that any variation to the single dwelling covenant as proposed would cause substantial injury.

 

WG Stark

Hayden Starke Chambers 

When will I be able to appeal successfully from the dismissal of application to remove caveat under section 90(3) of the Transfer of Land Act?

1.     The Court of Appeal (Beach, Kyrou and Kaye JJA), considered whether the Trial Judge erred in dismissing an application to remove a caveat under section 90(3) of the TL Act (see Chan and anor v Liu and anor [2020] VSCA 28).

 

2.     The appeal did not of itself make any alteration to the existing law relating to the removal of caveats. In particular, the Court of Appeal approved of and followed the decision in Piroshenko v Grojsman (2010) 27 VR 489.

 

3.     In Chan, the substance of the dispute related to whether the respondent purchaser had failed to settle the purchase on time, or whether an extension of time to settle had been granted.

 

4.     Interestingly, the purchaser had actually withdrawn its original caveat, in response to a demand by the vendor. It then lodged a subsequent to caveat (ostensibly in breach of section 91(4) of the TL Act). For reasons that are not clear from the Court of Appeal’s judgement, the trial judge did not consider that s 91(4) of the TL Act had the effect of prohibiting the respondent from lodging the [subsequent] caveat.

 

5.     The trial judge found that on the facts, there was a serious issue to be tried as to whether the purchaser had a caveatable interest in the property, and that the balance of convenience favoured the retention of the caveat.

 

6.     The power of the court, under section 90(3) of the TL Act, to remove a caveat is discretionary. Accordingly, in order to succeed on the application for leave to appeal, the applicants had to establish material error by the judge in the exercise of that discretion.

 

7.     Counsel for the applicant raised grounds that were not relied on at the hearing before the trial judge.

 

8.     The Court of Appeal noted (at paragraph 47) that:

Ordinarily, a party may not be permitted to raise a point, or rely on an argument on appeal, that was not put before the court that determined the matter at first instance.

 

9.     However, at paragraph 49, they noted:

That principle has been applied with less stringency in cases in which the decision, that is the subject of appeal, was by way of summary or interlocutory judgment.

 

10.  The Justices of Appeal then noted (at paragraph 50):

In the present case, the decision, concerning the removal of the caveat, had the potential effect of substantially affecting the rights of the respective parties. If the judge had ordered that the caveat be removed, such a decision would, in a practical sense, have rendered nugatory any right of the respondent to insist on specific performance of the contract of sale. Alternatively, the decision by the judge, not to order removal of the caveat, has had the practical effect that the applicants are, and will remain, in default of the contract to re-sell the property until the trial of this proceeding. In that way, the decision of the primary judge had the potential to substantially adversely affect the rights of the applicants under that contract.

 

11.  In determining whether to allow further arguments to be put to the Court of Appeal, which were not put to the trial judge, they decided:

… bearing in mind the substantive effect of the decision made by the judge on the rights of the applicants, and the circumstance that, if the points made … had been contended before the judge no further evidence would have been adduced, we consider that it is appropriate to permit counsel for the applicants to rely on those propositions.

 

12.  The Court of Appeal agreed that the primary submission, made by the applicants, was that, by his conduct the respondent elected not to rely on his rights to specific performance of the contract of sale, but, rather, to confine those rights to a claim for damages for the alleged repudiation of the contract by the applicants.

 

13.  In reply, Counsel for the respondent submitted that the Court of Appeal should not determine whether the respondent's conduct constituted an election by him between inconsistent competing rights under the contract. Counsel contended that the Court should do no more than acknowledge that the question, whether there was an election (or estoppel) affecting the rights of the respondent, under the contract of sale, is an arguable issue, but that proposition did not preclude or affect the conclusion that the respondent had established that there was a serious issue to be tried that he had a caveatable interest in the property.

 

14.  In the circumstances, the Court of Appeal did not consider it appropriate or necessary to determine conclusively whether, on the evidence, there was a binding election by the respondent which would preclude him from seeking specific performance of the contract of sale. However, they noted that they were well satisfied that there were strong grounds for concluding that such an election was made by the respondent as contended for on behalf of the applicants.

 

15.  The Court of Appeal agreed that there was a serious issue to be tried as to whether he had a caveatable interest in the property. However, based upon the assessment referred to in the previous paragraph, the Court of Appeal concluded that the balance of convenience in the case clearly favoured the removal of the caveat. They noted that the applicants had entered into a contract to sell the property to a third party after purporting to rescind the contract with the respondent, and after the respondent had previously withdrawn his caveat.  

 

16.  It was the matters that were not argued before the trial judge, but were argued before the Court of Appeal, that tipped the balance of convenience in favour of the removal of the caveat.

 

Conclusion

17.  The appeal in this proceeding succeeded on the basis of arguments that were not raised before the trial judge. That in itself makes this appeal, and its success, unusual.

 

18.  Apart from that, the appeal itself does not raise any new issues of law.  

WG Stark 

Hayden Starke Chambers

When will a hand-written licence to occupy premises in a contract of sale of real estate be enforceable?

1.     In CAG Company P/L v Cheruku and anor [2020] VCC 13, the County Court (Marks J) considered the interpretation of a handwritten clause in a contract of sale of real estate allowing the purchaser to take possession of the property being sold 5 and 1/2 months before settlement.

 

2.     The plaintiff agreed to sell its Coburg North property to the defendants in February 2019, for $1.37 million, with settlement to take place some seven months later, on 1 September 2019. The contract of sale included a handwritten clause, which was added by the plaintiff’s real estate agent and initialled by the defendants when they signed the contract of sale on 9 February 2019.

 

3.     The precise wording of the hand-written clause was:

The Vendor allows the purchaser to take possession of the property

under lease LICENCE agreement on the March 20th March [sic] 2019 at $700 per week until Settlement.

 

4.     Settlement eventually occurred on 2 September 2019 and the defendants moved in. They did not take possession before settlement.

 

5.     The dispute (the value of which was $16,500) was over whether the defendants were obliged to pay the licence fee or not.

 

6.     The plaintiff vendor submitted that the clause was ambiguous. It said that it could mean that the $700 per week payment it sets out was mandatory (payable regardless of whether the defendants took possession before settlement) – or that it was permissive (only payable if the defendants took possession before settlement).

 

7.     The plaintiff then argued that where a clause is ambiguous and there is a constructional choice as to how it is interpreted, that ambiguity may be resolved by considering pre-contractual negotiations in order to establish the parties’ objective intentions. Finally, the plaintiff submitted that the pre-contractual negotiations established that the parties’ objective intentions were that payment was mandatory. The fact the defendants did not take possession is irrelevant: the fee provided for by the clause was payable in any event as a fee for the opportunity to take possession.

 

8.     The defendants, on the other hand, argued the handwritten clause was not ambiguous. It permitted the defendants to enter the property under a licence agreement but it did not compel them to do so, nor did it create a liability to pay if they had not entered the property before settlement.

 

9.     The lawyers for the vendor must have realised that there was a problem with the clause as drafted by the estate agent, and after the contract of sale was signed proceeded on the basis that the defendants were required to sign a further agreement, described as a ‘Licence Agreement’ which included extensive terms not provided for in the contract of sale.

 

10.  At paragraph 31, of the judgment Her Honour noted:

… the plaintiff did not offer the defendants possession of the property on or from 20 March 2019 based on the handwritten clause. On the contrary, they issued proceedings seeking to force the defendants to sign the Licence Agreement.

 

11.  It was not until trial that the plaintiff claimed that $16,500 was due to it as a debt because of the handwritten clause.

 

12.  This allowed the judge to conclude that the parties had not reached agreement. She found (at paragraphs 34 to 35):

 

… it is for the plaintiff to show, on the balance of probabilities, that it

has established the precondition to the debt claim it now pursues.

 

35 It has not. On its construction of the handwritten clause, in order to succeed on its claim it needs to establish that after the contract of sale was executed it offered the defendants possession based on that clause. It needs to show it was ready, willing and able to offer possession – without requiring as a further condition of possession that the defendants agree to further conditions not contemplated in the contract of sale. It did not show that.

 

13.  Her honour went on to explain the meaning of the hand written clause. She noted at paragraph 36 that the clause was “unambiguous". The word allows is clearly permissive.

 

14.  Following on from that construction, Judge Marks concluded (at paragraph 38, emphasis added):

The proper construction of the clause is that the plaintiff is giving the defendants the opportunity to take possession of the property under licence from 20 March 2019, at the cost of $700 per week until settlement if they take possession.

 

Conclusion

15.  With all due respect to real estate agents in Victoria, they should be leaving the drafting of unusual terms in Contracts for the Sale of real Estate to lawyers.

 

16.  The ambiguity in the licence clause shows that it is imperative that the drafting of such a clause is clear, as well as concise.

 

17.  The vendor’s lawyers clearly recognised that the hand written clause was inadequate, which led to their attempt to renegotiate the clause and its effect by drafting a more detailed licence agreement. Unfortunately, the evidence showed that no agreement could be reached about the terms of the proposed licence agreement, and so it seems that the vendor ‘jumped the gun’ in seeking to enforce the licence agreement, leading to unnecessary (and ultimately unsuccessful) litigation.

WG Stark

Hayden Starke Chambers

When is it appropriate to seek summary possession under order 53 of the Victorian Supreme or County Court Rules?

Summary procedure for possession under order 53

1.     In March 2020, the Court of Appeal (Maxwell P, Tate and Forrest JJA), looked at whether the summary procedure for possession of land under order 53 was appropriate in the case of a dispute between a brother and sister (see Chan and Lin v Chan [2020] VSCA 40).

 

2.     Maxwell P and Forrest JA agreed with the detailed reasons for decision written by Tate JA.

 

Background

3.     The dispute was between a brother and sister over the ownership of land in Victoria. Ching Ha Chan (‘Carol’) was the registered proprietor of 2 units in Plenty Road, Bundoora. Carol paid the deposit on each unit using money given to her from her parents. Carol and her brother, Ching Lung Chan (‘Michael’), lived in Unit 2 while Carol rented out a number of other bedrooms in Unit 2 and all of the bedrooms in Unit 1. Carol used the rental income to service the mortgage repayments. When Michael married Ying Lin (‘Lisa’) he moved to Unit 1 with his wife and eventually collected the rent from the other tenants in Unit 1 for himself. Michael claims that the money their parents gave to Carol was to purchase Unit 2 for herself and to hold Unit 1 on trust for him. Since late 2017, Michael had been in dispute with Carol about the ownership of unit 1. However, it was not in dispute that Michael and Lisa moved into Unit 1 with Carol’s consent.

 

4.     Carol brought summary possession proceedings for possession under order 53 in the County Court on 30 July 2018 to evict Michael and Lisa. She denied that she held Unit 1 on trust for Michael.

 

5.     A County Court judge made orders under Order 53 of the County Court Civil Procedure Rules 2018 in favour of Carol for the summary recovery of land.

 

6.     In the County Court, Michael and Lisa had claimed that they had an interest in unit one, ostensibly on the basis of a resulting, constructive or implied trust (although not in those terms, as they were not represented by counsel at the hearing).

 

7.     Counsel for Carol had submitted that nothing that Michael and Lisa raised had displaced the presumption of indefeasibility of title under the Transfer of Land Act, 1958. Justice of Appeal Tate found (at paragraph 38) that:

… counsel was wrong to submit that nothing had emerged either from Michael’s and Lisa’s affidavit, or Lisa’s oral submissions, to support an arguable case for the recognition of an equitable interest that might

attract an exception to indefeasibility (See, for example, Mathieson Nominees Pty Ltd v Aero Developments Pty Ltd [2016] VSC 131, [128] – [130]).

 

8.     Michael and Lisa applied for leave to appeal from the orders of the County Court. The primary basis for the appeal was that the dispute was not an appropriate case for the summary procedure under order 53, and

in the circumstances there were disputed facts and legal

contentions in respect of their equitable interest in Unit 1 that warrant a trial.

 

9.     The Honourable Justice of Appeal Tate granted leave to appeal and allowed the appeal.

 

10.  As a part of her reasoning, Tate JA examined the history, purpose, and scope of Order 53 (commencing at paragraph 46 of her reasons).

 

11.  Among other points of interest, Tate JA concluded that the summary procedure does not apply to a tenant, including a tenant holding over after the determination of the tenancy (in paragraph 8).

 

12.  Tate JA quoted from a decision by Derham As J (In Framlingham Aboriginal

Trust v McGuiness [2014] VSC 241, which was upheld on appeal in Framlingham Aboriginal Trust v McGuiness [2014] VSC 354 (Ginnane J). Associate Justice Derham summarised the principles that govern the application of Order 53 as follows:

(a)   It is intended to enable a speedy resolution in favour of the proprietor of land of a dispute whereby trespassers are keeping the proprietor out;

(b)  It is intended to apply only in clear cases where there is no question to try;

(c)   The existence of a factual dispute does not deny the applicability of Order 53 where it is possible to resolve the dispute readily and fairly;

(d)  While an order for possession may be made notwithstanding that there is a factual dispute between the parties, such an order will only be appropriate if the Court is able to satisfy itself as to the material facts that bring the case within Order 53;

(e)   The jurisdiction should be exercised with great care;

(f)    Where an issue does emerge, the judge has discretion whether simply to dismiss the proceeding, to determine the issue or cause the issue to be subsequently tried. This includes giving directions as to the further conduct of the proceeding or ordering the proceeding to continue as if begun by writ pursuant to Rule 4.07 of the Rules; and

(g)   Where the Court gives judgment for possession under Order 53, it may grant a stay of execution.

 

13.  Derham As J concluded with the following summary:

The power to give summary judgment for possession is similar in nature to the power to give summary final judgment under Rule 22.02 of the Rules. That power should be exercised with great care and should never be exercised unless it is clear that there is no question to be tried. The need for exceptional caution in exercising the power is the subject of numerous observations of courts in this country.

 

14.  Justice of Appeal Tate then analysed a number of other cases which held that the procedure under order 53 was not appropriate to deal with a factual dispute.

 

15.  In summary, she noted as follows:

The purpose of proceedings for the summary recovery of land is to protect against trespassers, that is, those who enter land without lawful authority or those who remain in occupation when the licence or consent to that occupation has been withdrawn. The procedure is only appropriate in a clear case, although it may be available where there is a minor factual dispute providing the dispute can be readily and fairly resolved by the judge.

 

The dispute between Carol, and Michael and Lisa, as to whether Unit 1 was held on trust by Carol for Michael, is not minor. The issue was not resolved by the judge, nor could it be without a trial. The judge, quite properly, determined not to hear the application until the parties had been given an opportunity to adduce evidence by affidavit. The evidence filed established a relevant contest of fact between the parties that could not be fairly and readily resolved summarily.

 

16.  After her analysis of the history, purpose, and scope of Order 53, Tate JA then noted that the two issues raised by the grounds of appeal relate to the status of Michael and Lisa as tenants at will or licensees and whether Carol holds Unit 1 on trust for Michael.

 

17.  The Honourable Justice of Appeal Tate then noted “When a person is given an uncertain interest in premises, the law may presume a tenancy at will” (paragraph73).

 

18.  At paragraph 76, Tate JA noted:

Michael and Lisa entered into occupation of Unit 1 lawfully. They

were permitted to occupy Unit 1 rent-free. There is no evidence to suggest that the occupation was for any defined term. There was no relevant lease. Their interest in Unit 1 is uncertain. If they had exclusive possession of Unit 1 by reason of an express or implied agreement with Carol, the law would likely presume a tenancy at will. While the position of a tenant at will has been described as somewhere between a lessee and a licensee, it is accepted that tenants at will are not licensees, licensees not being entitled to exclusive possession.

 

19.  As a result, Tate JA concluded that having never been nor become licensees, Michael and Lisa would fall outside the scope of Order 53.

 

20.  On the hearing of the appeal, both parties attempted to rely on new evidence. This evidence tended to establish that there may have been a constructive trust arrangement in place. The Court of Appeal rejected the attempt to introduce new evidence.

 

21.  Tate JA also outlined some of the (disputed) evidence from the hearing in the County Court and concluded (at paragraph 87):

While the evidence may seem somewhat scant to found a constructive trust based on principles of proprietary estoppel, in my view it is sufficient to indicate that the matter ought to have been directed to proceed by way of trial. … This was especially so given that Michael and Lisa were self-represented below and the identification of a relevant equitable interest is a complex matter.

 

22.  Finally at paragraph 91, the Honourable Justice Tate concluded:

I cannot confidently conclude that a constructive trust could not be found against Carol at a trial hearing of this proceeding. In those circumstances, the summary procedure under Order 53 is neither available nor appropriate.

 

Conclusion

23.  This case provides a useful summary of the law as it relates to the summary procedure for possession of land, as provided by order 53, as well as a thorough analysis of the circumstances in which the procedure will and will not be available.

WG Stark

Hayden Starke Chambers