Mutual Will, Caveatable Interest & an Appeal

In Thynne v Sheringham [2023] NSWCA 181 Harry Thynne ( the applicant) sought leave to appeal from an interlocutory judgment requiring that a caveat he lodged over the title to a real property (Darling Point property) be withdrawn.

The applicant claimed that an agreement between his father (the testator) and his stepmother Victoria Sherlngham (the respondent) that she would leave the Darling Point property or the remaining proceeds of its sale, at her death, to the applicant and his half-brother Patrick in equal shares gave rise to a constructive trust in his favour.

The applicant lodged the caveat on the title of the Darling Point property to prevent anyone, including the respondent from registering any dealings on it.

In discussing the agreement the Court of Appeal held that the following features of the agreement are significant:

1. the intention was not that the family home be preserved and passed on to the testator’s two sons in equal shares, but rather that it, or any other property bought to replace it, or the proceeds of sale of any such property be passed on in equal shares.
2. that which was to be passed on in equal shares was identified as the property or proceeds of sale of “at the time of (the respondent’s) death”. The identification of an obligation as arising at the date of the wife’s death is at least suggestive of the absence of any interest in the ultimate beneficiaries in the property in the meantime.
3. the testator expected that his wife may need to use the proceeds of the sale or rental of the Darling Point property for her maintenance and upkeep, and for that of their son Patrick, and the maintenance of the two properties which he owned. The Court held that the testator recognised the possibility that the value of the Darling Point property might be exhausted in its commitment to those purposes.

The Court of Appeal upheld the findings of the primary judge that based on the agreement the applicant did not have a caveatable interest in the Darling Point property The applicant could have a basis for relief for a breach of fiduciary duty if the respondent disposed of the property in breach of the agreement, however the agreement did not prevent the respondent from mortgaging the Darling Point property.

The applicant accepted that the terms of the caveat as lodged did not reflect the terms of the agreement, but maintained his claim that he had an equitable interest in the property sufficient to support a caveat in appropriate terms.

The testator’s will provided that the respondent can deal with the Darling Point property or its proceeds, and use them for

• her maintenance,
• the maintenance and education of Patrick (the testator and respondent’s son),

• maintaining the Darling point property and the Farm,

the value of the trust cannot be established until the respondent dies.

A floating obligation exists on the Darling Point property that will crystallise into a trust on the respondent’s death. Therefore as the applicant is not the beneficiary of a trust he does not have a caveatable interest on the Darling Point property.

The applicant argued that he may not know in advance of actions being taken by the respondent that would undermine or defeat her obligations, hence his desire to maintain his caveat on the Darling Point property. That fact illustrates that

“in human affairs, even in legal affairs, perfection, and the complete effectuation of intention are sometimes not possible”

Barns v Barns [2003] HCA 9 at [152] per Callinan J

and does not metamorphose his potential equitable claim into a proprietary interest.

On this analysis, the applicant does not presently have a caveatable interest in the Darling Point property and the primary judge did not err in so concluding.

The applicant could not establish a breach of trust creating a caveatable interest in the Darling Point property, before the respondent’s death. The court of appeal did not determine whether upon full argument a different view may emerge. At the interlocutory stage, the judge’s observations were entirely plausible and that, if a caveat was available, the balance of convenience supported its lapsing.