Della-Franca's Caveat, Re [1991] QSC 190 [1993] 1 Qd R 382

IN THE SUPREME COURT OF QUEENSLAND CATCHWORDS: o.s. No. 618 of 1991 IN THE MATTER of "The Real Property Acts 1861-1963" - and - IN THE MATTER of an Application by Trepas Pty. Ltd. as trustee for Th~ Pascoe Family Trust for the removal of a caveat JUDGMENT - G.N. WILLIAMS J. Delivered the day of July, 1991 Real Property - contract of sale entered into by trustees for sale appointed under s. 38 of Property Law Act - caveat lodged by one co-owner before request lodged pursuant to s. 46 of Real Property Act 1877 - s. 90 Trusts Act considered - caveat removed on ground no caveatable interest - afters. 38 order co-owner only has interest in distribution of proceeds of sale. Counsel: Solicitors: D.R. Cooper for applicant M. Amerina for respondent Stubbs Barbeler Grant town agents for Barbeler & Cooke for applicant Neil O'Sullivan & Rowell town agents for John Fisicaro & Co for respondent Hearing date: 28th June, 1991 -- 1 of 13 -- IN THE SUPREME COURT OF QUEENSLAND O.S. No. 618 of 1991 IN THE MATTER of "The RealProperty Act 1861-1963" - and - IN THE MATTER of anApplication by Trepas Pty. Ltd. as trustee for The Pascoe Family Trust for the removal of a caveat JUDGMENT - G.N. WILLIAMS J. Delivered the S-.~ day of July, 1991 The purchaser of land from statutory trustees for sale appointed pursuant to s. 38 of the Property Law Act 1974 seeks an order · for the removal of a caveat lodged by one of the original registered proprietors of the land and which is preventing completion of the sale. The relevant facts can be shortly stated. Prior to 28th March, 1991 John Michael Della-Franca, Peter Ashley Della-Franca and the respondent Michael Lewis Della-Franca were registered proprietors as tenants in common ..of vacant land described as Lot 1 on Registered Plan No. 680.40 County of Ward Parish of Boyd, being the land contained in Certificate of Title Vol. 2598 Folio 68. On that date a Judge of this Court, on the application of John Michael Della-Franca, made an order pursuant to s. 38 of the Property Law Act appointing trustees for sale of that land and vesting it in the trustees. The two persons appointed trustees were solicitors of this Court. The relevant terms of the Order are -- 2 of 13 -- 2 as follows: "I do order that Michael Morrison Quinn and DamianJohn Scattini be appointed trustees of the property I do further order that the said land be vested in the trustees to be held by the trustees on thestatutory trust for sale defined in Division 2 Part 5 of the Property Law Act 1974-1976 as hereinafter altered. I do further order that the statute trust for sale be altered by providing that the land be held upon trust . (a) (b) to sell the same by public reserve price unless suchagreed between the parties private treaty on such termsthey shall think fit; to stand possessed of . sale upon trust: auction without a reserve price be in writing or byand conditions as . the proceeds of (i) to discharge the mortgages (ii) to pay all costs and expenses in respect of the carrying out of their obligations as trustees and of sale ... (v) to pay to themselves,reasonable remuneration the trustees, ( vi) subject to any Order which may be made before 6th June, 1991, to pay one third of the balance then remaining to the solicitors foi Michael Lewis Della-Franca and the balance of the solicitors for theapplicant provided that such payment shall not be made before 6th June, 1991. I do further order that each of the parties be at liberty to purchase the land upon the same terms as members of the public." By contract in writing bearing date 10th April, 1991 the trustees agreed to sell the subject land to the applicant for $95,000. On 26th April, 1991 the respondent.lodged a caveat -- 3 of 13 -- 3 under the hand of his solicitor forbidding "the registration of any instrument affecting the said land or estate or interest therein until this caveat is by me withdrawn." The respondent claimed an "estate in fee simple as registered proprietor" in the subject land. The grounds of claim set out in the caveat were as follows: "Breach by the Trustees of their Statutory Trust for sale created by order of the Honourable Mr. Justice Mackenzie on the 28th day of March, 1991." Then on 7th May, 1991 the trustees lodged a Form 14 Request with the Registrar seeking to have particulars of the order of 28th March, 1991 recorded in the register. The Registrar has not complied with that request because of the existence of the caveat. The applicant has now sought to have the caveat removed. The competing arguments can again be shortly stated. The applicant contends that after the making of · the order appointing statutory trustees for sale the respondent no longer had a caveatable interest in the land. Alternatively, the appellant if the respondent has a caveatable objects to the form of the caveat. interest, On the other hand the responde.nt contends that he is still in law the registered proprietor and that he is entitled to prevent the completion of a sale entered into by the trustees in circumstances which would constitute a breach of trust. Counsel for the applicant objected to much of the material contained in the affidavit of the respondent which was relied upon in support of the contention that the sale was in breach of trust. The objection was largely based on the -- 4 of 13 -- 4 ground that the evidence was not admissible against the applicant; it was not in a position to respond to it and the trustees were not a party to this application. I do not find it necessary to rule finally on the objection. I am inclined to the view that in these proceedings in which the respondent is called upon to show cause why the caveat should not be removed, he is entitled to point to facts which, if proved in an action, would entitle him to an order preventing the sale from proceeding. All I can • do in this proceeding, in the absence of the trustees, is to assume that the respondent could establish in an action that the trustees acted, in entering into the contract, in breach of their obligations as trustees, because they failed to obtain a proper market price, failed to advertise or hold an auction, sold with undue haste, sold to a company introduced by a co-owner antagonistic to the respondent, and refused to allow the respondent to purchase even at a higher price. The essential question, in my view, is whether or not after the making of the order appointing statutory trustees the respondent had some legal or equitable interest in the land which would support the caveat. If he did it would be appropriate, in my view, on the material contained in the respondent's affidavit, to allow the caveat to stand until the question of breach of trust was determined in appropriate proceedings. Section 37(2) of the Property Law Act provides that when "property" is ordered to be held upon the "statutory trust for sale" it shall be held "upon trust to sell the same and to -- 5 of 13 -- 5 stand possessed of the net proceeds of sale, after payment of costs and expenses, ... and other outgoings upon such trust, and subject to such powers and provisions as may be requisite for giving effect to the rights of the co-owners." That trust is to be contrasted with the "statutory trust for partition" which is also defined therein. "Property" by definition includes land under the Real Property Act ( see s. 4 ( 1 ) ) and "co-ownership" refers, inter alia, to the holding of real property as tenants in common (s. 33). Against that backgrounds. 38 relevantly provides: "(1) Where any property is held in co- ownership the Court may, on the application of any one or more of the co-owners, and notwithstanding the provisions of any other Act, appoint trustees of the property and vest the same in such trustees, . to be held by them on the statutory trust for sale ... (3) (a) where the - entirety of the property is vested at law in co-owners the Court may appoint ... two or more individuals.to be trustees of the property on either of such statutory trusts. ( b) on such appointment the property shall, subject to the provisions of s. 90 of theTrusts Act 1973, vest in the trustees. (6) In relation to the sale ... of property held in co-ownership, the Court may alter such statutory trusts, and the trusts so altered shall be deemed to be the statutory trust in relation to that property. (7) Where property becomes statutory trust for sale - subject to such ( b) in any case land shall be deemed to be converted upon the appointment of trustees for sale unless the Court otherwise -- 6 of 13 -- 6 directs." In order to ascertain the effect of the vesting order one must turn to s. 90 of the Trusts Act 1973 which relevantly provides: " ( 1) Subject to the provisions of any other Act, a vesting order vests the property to which it relates in the persons named in the order astrustees without any conveyance, transfer or assignment. (3) Where, by reason of the provisions of any other Act or for the protection of any trust propertyto which the order relates, it is requisite that the order should be notified to or registered or recorded by the Registrar or other person having the duty or function ofregistering or recording the order, thetrustees shall - (a) produce the order to the Registrar or such other person; and (b) do such other act or acts as may properly be required by the Registrar or such other person, for the purpose of effecting the notification, registration or recording of that order." · By definition (s. 5) the "Registrar" is the Registrar of Titles. In my view it is appropriate to pause here and analyse. the legal position on the basis of those statutory provisions alone applying. Once the property is subject to the order the land is deemed to be converted; that is really a statutory recognition of the position under the general law. The equitable doctrine of conversion is fully discussed in Lecture 18 of Maitland' s Equity and the application of that doctrine to the factual circumstances under consideration here is discussed in Megarry and Wade, The Law of Real Property -- 7 of 13 -- 7 (3rd ed.) at 293 and 379. Reference could also be made to the judgments of Parker J. in In Re Walker; Mackintosh-Walker v. Walker (1908) 2 Ch. 705 and Upjohn J. in Stevens v. Hutchinson (1953) Ch. 299. In the latter case at 306 it was observed that "an interest in the proceeds of sale is not aptly described as an equitable interest in land". Megarry and Wade specifically state at 379 that "the rights of the beneficiaries under a trust for sale of land are treated forthwith as rights in personalty." The allusion in s. 90 of the Trusts Act is clearly to s. 46 of the Real Property Act 1877-1988, which provides: "Whenever the Supreme Court shall make any order that any land under the provisions of this Act ... shall vest in any person for all the estate in the registered proprietor of such land the Registrar of· Titles shall on production to him of the order and a request in the prescribed form record particulars thereof in the register and do all things necessary to give full effect to the order." In my view the use of the word "record" is of significance. The section does not contemplate the registration of an · instrument in accordance with s. 43 of the 1861 Act. Section 46 of the 1877 Act can be read with s. 90 ( 1 ) of the Trusts.Act so that the property vests "without any conveyance, transfer or assignment." It seems clear from the judgments of all of the members of the Full Court in Wilde and Harris v. Byrne (1987) 2 Qd.R. 822 that the trustees are entitled to have particulars of the order recorded on the register notwithstanding, for example, failure to produce all the relevant certificates of title to the land. (See per Macrossan J. at 831 and per McPherson J. at 835.) Section 46 -- 8 of 13 -- 8 obliges the Registrar to do all things necessary to give full effect to the order, but the section does not, in my view, prevent or delay the order from having full effect as a vesting order until the particulars thereof are recorded. Finally I have to consider whether or not s. 83 of the 1861 Act has any relevance; it provides: "(1) Where the Supreme Court •.. makes an order in respect of any trust affecting land under the provisions of this Act, the Registrar ofTitles, upon receipt of a request in the prescribed form together with an office copy of that order, shall record particulars of theorder in the register. (2) Until particulars of an order are, pursuant to sub-section (1), recorded in the register, theorder shall not under this Act be effective totransfer or otherwise vest the in any sale,transfer or other dealing under the order shall not to that extent be valid or effectual." Prima facie that section would not, in my view, apply to an order made under s. 38 of the Property Law Act. Such an order is not "an order in respect of any trust"; rather it is an order creating a trust. That appears to have been the view of Macrossan J. in Wilde and Harris v. Byrne at 830; he there said of s. 83 that "it seems to be phrased more as though it refers to orders affecting a pre-existing trust". In that case the Court was concerned with an appeal from an order designed to facilitate the task of the statutory trustees for sale appointed pursuant to an earlier order. Thus on the facts of that case it was possible to speak of the later order being "an order in respect of any trust", and McPherson J. does appear to have considered the later order in that light. But McPherson J. also appears to have considered, albeit obiter, that the original vesting order could have been -- 9 of 13 -- 9 recorded either pursuant to s. 46 of the 1877 Act ors. 83 of the 1861 Act: "The question will not arise until, at th.e earliest, particulars of the vesting order are recorded pursuant to s. 83 or s. 46." ( at 838). Because he dissented on an issue of principle it was not necessary for Kelly S.P.J. to considers. 83 at all. Thus there is no ratio as to the operation of s. 83 to be found in Wilde and Harris v. Byrne which is binding on me. As I have already said I prefer the construction which Macrossan J. favoured. Ifs. 83 applied to vesting orders made by the court when creating a trust there would be no need at all for s. 46 of the later Act. It is significant in my opinion (and this appears to have been the view also of Macrossan J.) that s. 46 refers specifically to vesting orders, whereas s. 83 applies generally to all orders made in respect of a trust, some only of which may incidentally provide for vesting. In those circumstances the specific provision should be given full effect. The present case is distinguishable from the situation confronting Ryan J. in Re McKean's Caveat (1988) 1 Qd.R. 524. There a caveat was lodged by the registered proprietor to prevent the registration of a transfer pursuant to a completed contract of sale resulting from the exercise by a registered mortgagee of the power of sale conferred by the mortgage. His Honour held that the caveator retained. an interest in the land as registered proprietor. In those circumstances the registered proprietor was not divested of all his interest in the land until the transfer was registered; until that time he had at least an equitable interest therein capable of -- 10 of 13 -- 10 supporting a caveat. The distinguishing feature in this case is the divesting effect of the order appointing trustees for sale and the conversion thereby of the interests of the co-owners into mere interests in the proceeds of sale. In my views. 38 of the Property Law Act, s. 90 of the Trusts Act, and s. 46 of the Real Property Act 1877 mesh together to constitute virtually a code dealing with the creation and implementation of a statutory trust for sale of land under the Real Property Acts. On the making of the order appointing statutory trustees for sale, the interest of each co-owner is converted into an interest in the proceeds of the sale. Upon the making of that order the legal and beneficial interest in the land vests in the trustees and they have an immediate right, which cannot be challenged by any co-owner, to have particulars of the order recorded on the register. Though the names of the co-owners would remain on the title for some time after the order was made they have no right to assert against the trustees (or anyone claiming under them) any claim to the land derived from that fact. The trustees should, as soon as possible after the order appointing them is made, make the appropriat~ request pursuant to s. 46. I need not consider what might be the consequence of a dealing with the land, by one or more of the persons shown on the title as registered proprietor, prior to the recording thereon of particulars of the order. To complete the conveyance of the subject land it would ordinarily be necessary for the trustees to become the registered proprietors shown on the certificate of title. That may create some problems as is demonstrated by -- 11 of 13 -- 1 1 Wilde and Harris v. Byrne, but that is not to the point here. On the facts of this case the caveat was lodged prior to the request pursuant to s. 46. But that does not, in my view, improve in any way the respondent's position. For the reasons I have given he had, and has, no right to prevent recording of the appropriate particulars pursuant to s. 46. Nor does he have any estate or interest in the land which could support the caveat. Since the making of the order appointing trustees for sale there is no longer vested in him an "estate in fee simple as registered proprietor". Since 28th March, 1991 the respondent only has an interest in the proceeds of the sale by the statutory trustees and that does not constitute either a legal or an equitable interest in the land such as would support a caveat. Even if the contract of sale was set aside on the ground that the trustees and the applicant were guilty of fraud (cf. Latec Investments Ltd. v. Hotel Terrigal Pty. Ltd. (1965) 113 C.L.R. 265) the respondent would still be without any legal or equitable interest in the- land; he would only have an interest in the proceeds of the trust for sale. ~aving reached that conclusion it is not necessary for me to give further consideration to the form of the caveat in fact lodged. The removal of the caveat does not prejudice the right of the respondent to bring an action against the trustees alleging that the sale to the applicant was made in such circumstances as constituted a breach of trust. If that was established then there would be various remedies available to -- 12 of 13 -- 12 him. One of the reasons for the Court taking ca~e as to the identity of trustees appointed on an application under s. 38 is that they should be people of substance capable of meeting the consequences of any conduct in breach of their trust. If action was commenced against the trustees the court may well have power, particularly as the trustees are court appointed, to make interlocutory orders preventing completion of the sale to the applicant, but such considerations are not relevant to the question whether or not the respondent has a caveatable interest in the land. In all of the circumstances the caveat should be removed and the respondent should pay the applicant's costs of and incidental to the application to be taxed. -- 13 of 13 --