Monday, 23 June 2014

Take care with caveats- Family Court

In Homer's classic tale of the wanderings after Troy, the Odyssey, one of the challenges facing Odysseus was to escape the Sirens. These three singing maidens would sing to seafarers, calling them to their deaths when the seafarers, hearing their beautiful voices, would steer their ships to certain doom on the rocks. Odysseus, wisest of them all, plugged all his sailor's ears and had himself tied to the mast of the ship. He gave strict orders that when he called out to follow the Sirens, his men must ignore him. When the time came, and the Sirens sang out, Odysseus and his men, alone of all the sailors, sailed safely past.

If only this approach had been taken by the wife in a recent case before the Family Court. In the case, called Auricchio and Auricchio, the wife started court proceedings seeking 90% of the property owned by the parties. The husband filed his documents in response, saying that there was little point in the wife seeking certain restraining orders, or injunctions, against property to be sold, because the property had already been sold. The same day as the husband filed his documents, the wife lodged her caveat.

A caveat (which is from Latin and means "beware" or "warning") is a very powerful document. it prevents the registration of any dealings on land with the consent of the person who lodged the caveat. In effect you may be unable to sell, lease or mortgage property. This puts the caveator in a very strong position.

To lodge a caveat you must show that you have a caveatable interest- a specific interest in that land. If you don't then as part of the accountability for lodging such a document, the court can remove the caveat. You can also be liable for interest, costs and damages. Hence- be very, very careful indeed in lodging a caveat without justification.

When the matter finally came before the court, the wife said that she needed more time before the caveat argument could be put, as she needed more disclosure from the husband and his companies. She said the disclosure had been late and deficient.

Justice Forrest, in considering whether or not the caveat should remain, said that there was a three part the test that the caveator had to establish:

  • "(i) there is a serious question to be tried which involves showing “a sufficient likelihood of success to justify in the circumstances the preservation of the status quo”; and
  • (ii) it is fairly arguable that the caveator has a caveatable interest in the land, and, if so 
  • (iii) the balance of convenience favours the retention of the caveat on the title.”
His Honour stated:

  1. The adjournment of the application for the removal of the caveat was not made on the basis of the fact that the wife had only been given notice of it on Monday 7 April, two days before the hearing. It was made on the basis that the husband’s disclosure pursuant to Kent J’s orders had been late and deficient, and that the wife thus needed more time to consider the disclosed documents. Mr Looney QC submitted that proper consideration of the disclosed material would better place the wife to be able to present her case as to the balance of convenience favouring the retention of the caveat.
  2. Mr North SC made the submission in response that if the wife’s evidence did not disclose an arguable case for the determination of a caveatable interest in the subject property, there was no point to the adjournment that was being sought to more carefully consider the preparation of her case in respect to the balance of convenience argument. I respectfully considered that submission to have merit and considered that if I was not satisfied by the wife’s evidence that she had an arguable case to establish the interest in the land that she claimed in the caveat that there was no point in granting the adjournment just so matters relevant to the balance of convenience could be further considered.
  3. I set out in paragraph 18 of these reasons the interest claimed by the wife in the caveat she lodged and the grounds of the claim that she set out in the same caveat. She asserts she owns “an estate in fee simple as beneficial owner” on the basis of an “implied, resulting or constructive trust”. Although the Court was informed that there was a current intention to file in the proceedings in this Court an Amended Application seeking to establish the interest the wife claimed, that had not been done by the time of the hearing, which was just under three weeks from the lodgement of the caveat. Of course, a caveator has 3 months from the lodgement of the caveat to take such a step before the caveat lapses or only 14 days from the date of being served with a notice requiring her to do so by the caveatee.[5] The caveatee (the Second Respondent) had not served such notice at the time of the hearing and the wife had not yet “asserted” her interest, in the sense of taking a formal step in the proceedings in this Court to establish her interest as claimed.
  4. Nevertheless, the onus to satisfy the Court that she had an arguable case for an equitable or beneficial interest in the C Street property was on her and it may have been easier for her to meet that onus had a formal step been taken such as the filing of an Amended Application with an attached pleaded case in the form of a Statement of Claim. That had not happened and the wife was in the position of having to try to meet the onus on the evidence that was before the Court....\
To be able to establish that she had a caveatable interest, the wife asserted that her interest in that land arose by virtue of an implied, resulting or a constructive trust. Unfortunately, the wife had no evidence before the court to say so. His Honour stated of Mr North SC who represented the husband:

  1. He submitted, correctly, I was satisfied, that she did not depose to any bases asserting a caveatable interest such as claimed by her. He also submitted, again correctly, I was satisfied, that no trust was deposed to of the nature asserted by the wife in the caveat. The submission went on to assert:
... the Wife offers no evidence to support the existence of a trust, a breach of trust, or some other foundation for the remedy of constructive trust, for instance some unconscionable dealing.
  1. Again I respectfully accepted that submission. ...
  1. "With respect, the highest I could put the position advanced by Mr Looney QC for the wife on the evidence is that there is an inference available to be drawn by the Court that the wife, therefore, somehow contributed $48,000 into the cost of purchasing the Q Street development site or the cost of constructing the units on that site. Without actually having deposed to the assertion or without actually submitting it was the case, I understand the wife’s case is likely to be that she therefore somehow acquired an equitable interest in the Q Street development that on the sale of all of the units in that property must be traceable, through the use of the $530,000 from the sale proceeds of those units in the purchase of the C Street site for around $1,500,000, into an interest in that property.
  2. As Mr North SC submitted, correctly, I was satisfied, there was simply no evidence from the wife, who carried the onus of persuading the Court, that the $48,000 was somehow transferred by her to the Second Respondent other than as a loan and actually applied in the Suburb R development in some way. The Court was simply being asked to draw inferences to this effect from the evidence and Mr Looney QC himself even submitted that the wife could not fully “articulate all of the events that give rise to such a trust”.
  3. As Mr North SC ultimately pointed out, even putting the wife’s case at its highest, with all inferences being drawn in her favour, the value of any equitable interest that she might potentially establish she had in the Q Street development that cost approximately $2,700,000 alone just to construct would have to be minimal. Tracing that through the $530,000 of the total $4,119,000 sale proceeds from Q Street that were put into the approximate $1,500,000 total purchase price of the C Street property would, if it somehow could be demonstrated to have given rise to an equitable interest, be an interest of even more minimal value.
  4. In all of these circumstances, I was just not satisfied by the wife that there was a serious question to be tried and that she had demonstrated “a sufficient likelihood of success to justify in the circumstances the preservation of the status quo”. I was not persuaded that the wife had a “fairly arguable” caveatable interest in the C Street property.
  5. Accordingly, I determined not only that the adjournment sought by the wife should not be granted but also that the caveat should be ordered to be removed without even going on to hear any further argument as to the balance of convenience."
In ordering the removal of the caveat, Justice Forrest reserved the costs of the husband. 

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