|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
Supreme Court of Victoria |
![[AustLII]](173.1.gif)
Supreme Court of VictoriaLast Updated: 9 May 2014
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
PRACTICE COURT
|
LEONIE SNELLING
|
Second Defendant
|
|
VICTORIAN REGISTRAR OF TITLES
|
Third Defendant
|
---
|
JUDGE:
|
||
|
WHERE HELD:
|
Melbourne
|
|
|
DATE OF HEARING:
|
||
|
DATE OF JUDGMENT:
|
||
|
CASE MAY BE CITED AS:
|
||
---
REAL PROPERTY – Caveat – Application to remove – Whether agreement to secure parents’ loans to son created caveatable interest – Later bankruptcy of son – Whether consideration – Whether consideration past – Whether forbearance to sue – Whether agreement a deed – Bankruptcy Act 1966 (Cth) s 120; Transfer of Land Act 1958 (Vic) s 90(3), Property Law Act 1958 (Vic) s 73, 73A.
---
|
APPEARANCES:
|
Counsel
|
Solicitors
|
|
For the Plaintiff
|
Harris Carlson
|
|
|
For the First and Second Defendants
|
Vadarlis & Associates
|
1 The plaintiff, Mr Stirling Horne, as trustee for the bankrupt estate of David Snelling, applies under s 90(3) of the Transfer of Land Act 1958 (Vic) to remove a caveat lodged over the interest of David Snelling in land in Certificate of Title Volume 08983 Folio 146 at Surf Beach, Victoria.
2 David Snelling lodged a debtor’s petition under the Bankruptcy Act 1966 (Cth) on 4 July 2009. He was discharged from bankruptcy in July 2012.
3 The first and second defendants are the parents of David Snelling. The third defendant, the Registrar of Titles, did not participate in the proceeding.
4 The onus lies on the caveators to establish that there is a serious question to be tried that they have the estate or interest which they claim in the Surf Beach land and, having done so, to establish that the balance of convenience favours the maintenance of the caveat until trial.[1]
5 The caveators, being the first two defendants Fred and Leonie Snelling, allege that the caveat was lodged pursuant to an agreement of 20 October 2008 with their son, David Snelling. That agreement related to moneys that they advanced to him pursuant to the agreement between December 2007 and September 2008, and totals $100,590.24.
6 The caveat was lodged over the Surf Beach property on 27 October 2008 and claimed an estate in fee simple in the land to the extent of the interest of David Frederick Snelling. The grounds of claim for the caveat were:
Pursuant to an Agreement in writing dated 20 October 2008 between the Caveators and David Frederick Snelling.
7 The Agreement, which is entitled a Deed of Agreement, contained recitals that:
(a) FSLA (Fred Snelling and Leonie Snelling) have advanced funds to DFS (David Snelling)(“the advances”) at the request of David Snelling.(b) Fred Snelling and Leonie Snelling seek security for the advances from David Snelling.
(c) The parties wish to record in writing what was agreed at the time of the advances.
8 The Deed of Agreement in its operative clauses states:
9 The plaintiff contends that there was no temporal nexus between the alleged advances and the Deed of Agreement and that they were not part of the one, single transaction. The Deed of Agreement purported to ‘hereby charge’, but it was based on past consideration. A caveatable interest needs to be recorded in writing.[2] At the time the alleged advances were made, there was no written agreement. The arguments to support the caveat had only arisen at a late point.
10 Mr Horne, the trustee, made an affidavit in support of the application. He stated that he considered that the caveat was void as against him pursuant to s 120(1) of the Bankruptcy Act. The grant of an encumbrance over property of the bankrupt is a “transfer” of property of the bankrupt under s 120 of the Act. He expressed the view that the charging of the property took place within the five year period before the commencement of the bankruptcy and that any consideration for the charge of the property was past consideration.
11 Leonie Snelling made an affidavit in which she stated that the property at Surf Beach had been left to her by her mother as to one-third undivided share, to her son David as to one-third undivided share, and to her other son Michael as to one-third undivided share. The property is used by the family as a holiday house.
12 In late 2007, David told his parents that he needed $100,000 to put into a business so that he and his partner could grow it. He promised to pay them interest on the loan. Leonie Snelling and her husband were reluctant to advance the money. She told David that they would need some security and she suggested taking security over his share in the Surf Beach property, as she knew that that property was unencumbered. He agreed to this suggestion.
13 Leonie Snelling said that David’s request presented a difficult decision for her and her husband. She and her husband eventually agreed to lend David the sum of $100,000 in two lump sums, on condition that he would give a security supported by a caveat over his share of the property, and also pay them interest at the same rate as they were receiving from term deposits in a bank, namely 4%. David agreed to these terms. There was no time stipulated for repayment of the loan. He only made one interest repayment of $500 on 13 February 2008.
14 Her husband, Fred, withdrew $100,000 from his superannuation account on 6 December 2007. On 19 December 2007, he gave $50,000 to David. Over the Christmas period, David asked for more money and his parents agreed to lend him a further $45,000, on the same terms and conditions as the first advance. This further sum was paid on 3 January 2008.
15 Some time after that second advance, Leonie Snelling received a letter from a firm of solicitors advising that their client, a financier, had lodged a caveat over the Surf Beach property to secure a loan to David. She had been unaware of this loan. She spoke with David about it and he told her that he had borrowed $28,000 from a financier, sometime in 2007.
16 Fred and Leonie Snelling advanced further sums to David as follows:
(a) $3,488.24 on 17 April 2008;
(b) $1,152.00 on 10 September 2008; and
(c) $5,950.00 on 24 September 2008.
17 Leonie Snelling swears that in October 2008 she and Fred asked David to repay the loan, which totalled $105,590.24 before interest and without taking into account the one repayment of interest that he had made.
18 David told them that he could not repay any money. She said that in that event she and Fred wanted a caveat lodged over David’s share of the Surf Beach property to protect the loan, as that had been their agreement when the loan was made. They also agreed on 31 December 2010 as the date for repayment of the loan.
19 Their discussion about the repayment of the loan led to the signing of the agreement dated 20 October 2008.
20 Mrs Snelling also gave details in her affidavit of the money that she and Fred had spent on the property.
21 David Snelling made an affidavit stating that, subject to minor corrections, his mother’s affidavit was accurate.
22 The first and second defendants argued that the removal of a caveat pursuant to the summary procedure in s 90(3) of the Transfer of Land Act is not appropriate if there are disputed matters of fact that require the trial of the proceeding in order to be determined.[3]
23 They relied on the evidence in Leonie Snelling’s affidavit that she and her husband would not have advanced the $100,590.24 unless David had given them the security. They contended that it was at least arguable that the transaction by which they made the advances took place between the giving of the moneys and the execution of the Deed. On that basis they argued that the consideration was not past consideration.
24 They also argued that there was consideration given for the Deed other than monetary consideration, by reason of Fred and Leonie Snelling’s forbearance in extending the time for repayment of the loan. They further argued that consideration was given by the Deed itself.
25 Section 120 of the Bankruptcy Act 1966 (Cth) provides:
Transfers that are void against trustee(1) A transfer of property by a person who later becomes bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor’s bankruptcy if:
(a) the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and
(b) the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property.
Note: For the application of this section where consideration is given to a third party rather than the transferor, see section 121A.
Exemptions
...
What is not consideration
(5) For the purposes of subsections (1) and (4), the following have no value as consideration:
(a) the fact that the transferee is related to the transferor;
(b) if the transferee is the spouse or de facto partner of the transferor—the transferee making a deed in favour of the transferor;
(c) the transferee’s promise to marry, or to become the de facto partner of, the transferor;
(d) the transferee’s love or affection for the transferor;
(e) if the transferee is the spouse, or a former spouse, of the transferor—the transferee granting the transferor a right to live at the transferred property, unless the grant relates to a transfer or settlement of property, or an agreement, under the Family Law Act 1975;
(f) if the transferee is a former de facto partner of the transferor—the transferee granting the transferor a right to live at the transferred property, unless the grant relates to a transfer or settlement of property, or an agreement, under the Family Law Act 1975;
Protection of successors in title
(6) This section does not affect the rights of a person who acquired property from the transferee in good faith and by giving consideration that was at least as valuable as the market value of the property.
Meaning of transfer of property and market value
(7) For the purposes of this section:
(a) transfer of property includes a payment of money; and
(b) a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person; and
(c) the market value of property transferred is its market value at the time of the transfer.
26 The plaintiff relied considerably on a decision of the Federal Magistrates Court in Official Trustee in Bankruptcy v Dunwoody.[4] That case bears some similarities with the present case, but there are also differences. It was a decision after a trial of an action under s 120 of the Bankruptcy Act 1966 (Cth). In effect, the Federal Magistrate decided on the facts that there had been no sufficiently definite agreement about the provision of security before the money was advanced. The Federal Magistrate found:
However the evidence clearly supports the finding that if security could not be provided, the loan would still be made.[5]
27 The Federal Magistrate further stated:
Given this contradictory evidence in the respondent’s case I am not satisfied that any promise was made that identified security over those two lots prior to the making of the advance or indeed before the 18 March 1998 at the very earliest. Despite the release being obtained from QDIC the mortgage was not signed until 8 April 1998.[6]
28 The Federal Magistrate stated that things were left “in a very loose manner”.[7]
29 In Mateo v The Official Trustee In Bankruptcy,[8] Tamberlin J, in an application dealing with the signing and making of consent orders filed in the Family Court of Australia, stated:
This submission depends on the selection of the Memorandum of Transfer as the only operative transfer within the meaning of s 120 in isolation from the other elements in the transaction, namely the signing of the Consent Orders and the making of the Consent Orders.In my view, this is an artificial and unsupported approach to the interpretation of the meaning and expression “transfer” in s 120. The authorities indicate that one must look at the overall transaction which has been implemented rather than to simply isolate one individual component of the transaction as in itself comprising the transfer: see Silvera v Savic.
In my view, the “transfer” in this matter consisted of the whole transaction ranging from the signing of the Consent Orders on 18 April 2000 through to completion of the transfer of the interest on or about 10 August 2000. There is no basis on which to isolate the making of the Consent Orders from the “transfer” which took place and rely only on the formal instrument of transfer. Effectively, the transfer of the equitable interest to the applicant occurred when the orders were made on 22 June 2000. [9]
30 In my opinion, the caveators have established a serious question to be tried whether the making of the Deed of Agreement in October 2008, and the charge or encumbrance created by it, that are said to be a transfer of property under s 120 of the Bankruptcy Act, were part of the one transaction that commenced with the first advance and culminated in the signing of the Agreement. The delay in formalising an agreement in a transaction between parents and a child may be explicable by their relationship. I consider that it is arguable that the consideration for the Agreement was not past consideration. The caveators have established a serious question to be tried that they have the estate or interest that they claim in the Surf Beach land.
31 I also consider that the Snellings’ argument that consideration for the Agreement was provided by their forbearance to sue establishes a second serious question to be tried that they have the estate or interest that they claim in the Surf Beach land. In Re Hyams; Official Receiver v Hyams,[10] which is referred to in Official Trustee in Bankruptcy v Dunwoody,[11] Gibbs J stated:
It is clear that the mere existence of an antecedent debt is not consideration for the giving of a security in respect of that debt; ‘in order to have consideration for a further security there must be an agreement, express or implied, to give time or some further consideration, or else there must be an actual forbearance which ex post facto may become the consideration to support the deed’: Wigan v English and Scottish Law Life Assurance Association. In considering whether an agreement to forbear can be implied, or whether the creditor has in fact forborne from taking action on the strength of the security, it is an important matter that the creditor has requested the giving of the security. If the creditor has requested the security, the inference is that if he had not obtained it he would have taken action which he forbears to take on the strength of the security: Glegg v Bromley. Similarly, the fact that a security was given at the request and demand of the creditor was held in Re Dundas; Moss v Dundas, to support an implication of an agreement to forbear. In the present case, as I have held, the respondent in no way sought the mortgage. However, even where there has been no request or demand by the creditor, it may be inferred from the circumstances of the case that he did in fact forbear from action on the strength of the security.
32 I consider that the Agreement, by providing a date for the repayment of the money advanced and the interest payable thereon, can arguably be regarded as constituting a forbearance to sue. Prior to the making of that Agreement, the loan would have been repayable on demand. In turn, that forbearance arguably provided consideration for the Agreement.
33 I do not accept that the first and second defendants’ third argument, that consideration was unnecessary because the Agreement was executed as a Deed, gives rise to a serious question to be tried. Even though it was described as a Deed, the document did not purport to be executed as a deed.[12]
34 The parties made limited submissions concerning the balance of convenience. If the caveat is removed, presumably, the plaintiff can sell David Snelling’s interest in the property and that would significantly affect the first and second defendants’ use of the property as a family holiday home. There is no evidence that the Snellings have sold or propose to sell the property. I consider that the balance of convenience supports the maintenance of the caveat until the trial of the proceeding.
35 For the above reasons, I refuse the plaintiff’s application for the removal of the caveat.
36 I will hear the parties as to the appropriate form of orders.
[1] Piroshenko v Grojsman (2010) 27 VR 489 [7] (Warren CJ).
[2] Property Law Act 1958 (Vic), s 53.
[3] McMahon v McMahon [1979] VicRp 23; [1979] VR 239, 245.
[5] Ibid [81].
[6] Ibid [85].
[7] Ibid [86].
[9] Ibid [22]–[24].
[10] (1971) 19 FLR 232, 254-255.
[11] Supra [76].
[12] See s 73 and 73A of the Property Law Act 1958, cf P .Butt, Land Law, (6th ed) 740-741.
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/vic/VSC/2014/173.html