Peter A Clarke

In Bernstein v Georgakakis & Anor Beach J analysed an application for removal of a caveat placed in August 2005 over property owned by a sole proprietor but arising out of an agreement between her husband and someone he was in business with.   It is a useful judgment in both restating principles but in dealing with equitable interests in this (unusual) fact situation.

His Honour sets out the principles at [5] & [6] regarding the principles applicable in removing caveats under section 90(3) of the TLA, namely:

• it is broadly analogous to determination of interlocutoryinjunctions – the power is discretionary;
• the caveator has the onus of establishing there is a serious question to be tried that he has an interest in the land; and
  
• the balance of convenience favours maintenance of the caveat until trial;

The evidence

The agreement, reproduced at [7], in this case is exhibit A as an example of what to avoid when seeking to make a claim for an equitable right over property. The agreement seemed to relate to an agreement between the Plaintiff/sole proprietor’s husband and a putative business partner regarding purchase of shares in a pet food business.  His Honour forensically analysed the many deficiencies in the agreement, at [17] – [26].  The first observation made was that it consisted of 5 recitals and no operative clauses. The problems included the agreement:

• requiring the husband to pay $3 million for 15% share in a company that had not been established at the time of the agreement;
• referring to the parties a creditor and debtor respectively.  Hardly consistent with an investment;
• in one part limiting the interest to $3 million, at another recital registering the interest for not less than $3million.

Unusually in such applications the deponents were cross examined and his Honour found that that sole proprietor never knew of this agreement.  In examining the enforceability of the agreement his Honour noted that no demand for money by the business partner was made from August 2005 until 2007, that the husband had no interest in any corporate entity which might be the vehicle for the pet food busines and there was no evidence of a company conducting a pet food business.  The court found it relevant that notwithstanding a “clause” providing for the execution of an unregistered mortgage within 7 days of 8 August 2005 in favour of the business partner nothing had been done.  In such circumstances that constitutes evidence that it was not a caveatable interest (see [29]).

This application was made with the backdrop of Family Court litigation between the sole proprietor/wife and husband.  In that context it was relevant to consider the possible outcome of the litigation and the disposition of the property between the husband and wife.  The court found it likely that the wife wold remain the sole proprietor of the property.

While effectively His Honour found in favour of the plaintiff on the serious question issue he also found the balance of convenience also favoured her.  The husband and his business partner were engaged litigation which was moving at a “lamentably leisurable pace”, a factor which may prejudice timely resolution of the Family Court proceedings.  His Honour, at [44] found that the husband’s lawyers are seeking to dleay the trial of the Family Court proceedings on the basis of the claims made by the business partner.

Issues

Applications for removal of caveats are a regular feature in the Practice Court.  It is important to carefully analyse the underlying factual basis for the equitable claims. Those that rely on vague agreements, notoriously involving family members, can be susceptible to challenge.