Anthony Magafas & Anor v Peter Carantinos & Ors

Supreme Court of NSW|2010-04-30|Before: Einstein J, Macready J

CITATION : Anthony Magafas & Anor v Peter Carantinos & Ors [2010] NSWSC 370

DECISION : Cross-claim dismissed. Parties are to bring in short minutes of order.

CATCHWORDS : Trusts and trustees - Constitution and classification of trusts generally - Classification of trusts in general - Implied trusts - Resulting trusts - Where intention presumed - When arising - Joint purchase of land - Whether cross-claimant shown on evidence to have contributed to the purchase price of the property in question such that a proportion of the proceeds of sale were held on resulting trust for her - Following trust property - Identification of property - Whether possible to trace trust money paid into an overdrawn bank account - Procedure - Judgments and orders - Effect of judgments - In general - Whether cross-claimant's claim inconsistent with earlier declaration of Court

Baker v Official Trustee in Bankruptcy [1995] FCA 565 Bishopsgate Investment Ltd (in liq) v Homan[1995] Ch 211; [1995] 1 All ER 347 Black Uhlans Inc v New South Wales Crime Commission & Ors [2002] NSWSC 1060 Carantinos v Magafas [2008] NSWCA 304 Calverley v Green (1984) 155 CLR 242 Diplock; In re; Diplock v Wintle [1948] Ch 465; [1948] 2 All ER 318 CASES CITED : Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22, (2007) 230 CLR 89 Global Finance Group Pty Ltd (in liq); Re (2002) 26 WAR 385; [2002] WASC 63 Hallett's Estate re Knatchbull v Hallett (1879) 13 Ch D 696 James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62, Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072 Viscariello v Bernsteen Pty Ltd (in liq) [2004] SASC 266 Williams (as liquidator of Scholz Motor Group Pty. Limited) v Peters [2009] QCA 180; 72 ACSR 365

TEXTS CITED : GA Weaver and CR Craigie, "The Law relating to banker and customer in Australia", 3rd ed, Law Book Company, Sydney, 2003 Jacobs Law of Trusts in Australia, 7th Edn, 2006,

Anthony Magafas (First Plaintff) Pac-Com Pty Limited (Second Plaintiff) Peter Carantinos (First Defendant) PARTIES : Fotini Carantinos (Second Defendant) Artesian Pty Limited (Third Defendant) Athena Touriki (Fourth Defendant) Gregory Fav (Fifth Defendant)

COUNSEL : Mr T Alexis SC, Mr S Golledge (Plaintiff) Mr Kelly SC (Second Defendant)

SOLICITORS : Rockliffs Solicitors and IP Lawyers (Plaintiff)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2006/00256511 Anthony Magafas & Anor v Peter Carantinos & Others JUDGMENT The state of these proceedings 1 Following the first instance judgment [2007] NSWSC 416 and the judgment of the Court of Appeal [2008] NSWCA 304 and the taking of accounts before Associate Justice Macready on 11 November 2009, the second defendant was given leave to file a cross claim. 2 The cross claim in its final amended form, pleads as follows:

i. A declaration that the cross claimant was at all material times up to the date of sale on 16 November 1999 beneficially entitled to her one-half share as registered proprietor as tenant in common in equal shares with the first defendant in the property situate at and known as No. 43 Riverside Crescent, Dulwich Hill ("No. 43").

ii. A declaration that the cross claimant was at all material times beneficially entitled to: a. one-half of the $80,000 included in the $296,000 deposit that was forfeited in relation to the failed sale of the properties situate at and known as 39-43 Riverside Crescent, Dulwich prior to 16 November 1999; and b. one-half of the sum of $176,000 left over after the sale of No. 43 on or about 16 November 1999 after repayment of the mortgage debt then secured by that property to the National Australia Bank.

iii. A declaration that the cross claimant contributed $45,540 or the $128,000 … or such further or other sum as the Court may determine ("the cross claimant's contribution") to the purchase price of the interest of the partnership which this Honourable Court has found to have existed between the first plaintiff and the first defendant ("the partnership") in the property situate and known as 60-82 Princes Highway, St Peters ("the Hoechst site").

iv. A declaration that at all material times the partnership held its interest in the Hoechst site and the proceeds of sale of the Hoechst site …("the trust property"), subject to a resulting trust in favour of the cross claimant in the proportion which the cross claimant's contribution bears to the contribution of the partnership to the purchase price of the partnership's share in the Hoechst site, being the proportion which the sum of $45,540… bears to one half of the purchase price of $2,310,000 plus stamp duty of $60,000, being a total of $2,370,000, namely a proportion of $45,540 to $1,139,460 or such further or other sums as the Court may determine.

v. A declaration that the trust property is now represented by the fund of approximately $2,248,532.48 held by Stephen John Rockliff as trustee for the first and second cross defendants on deposit with Westpac Private Bank in accounts numbered 62-5577, 62-5585 and 62-5593 together with all accrued interest thereon ("the fund on deposit").

vi. A declaration that the cross claimant is entitled to a beneficial interest in the fund on deposit of no less than $89,865 or such further or other sum as the Court may determine… together with a proportionate share of all accrued interest thereon ("the cross claimant's share of the fund on deposit").

vii. An order that the first cross defendant, or alternatively, the second defendant, … account to the cross claimant for the cross claimant's share of the fund on deposit by payment of the said sum of $89,865 or such further or other sum as the Court may determine out of the fund on deposit.

viii. In the alternative, an order for the taking of accounts to determine the amount of the claimant's share of the fund on deposit.

3 During the present hearing the second defendant conceded that the amount of her claim is now approximately $90,000, it having previously been articulated in the sum of $256, 000. 4 It has to be said that both parties through their respective counsel, had to traverse a dense set of factual material covering a number of properties in circumstances in which they sought to pray in aid numerous banking and other documents. And at the same time the second defendant had determined not to call the first defendant. As a reading of the original first instance reasons makes plain, the first defendant had been found to be a completely unreliable witness and it is now apparent that he clearly lied to the second defendant in relation to the veracity of the plaintiff's claims: see the second defendant's affidavit of 3 December 2009 [at 24]. The cross-examination of the second defendant 5 Under cross-examination the second defendant on a number of occasions gave evidence amounting to basing her claim upon a belief or understanding with respect to the use of 'her' money by her husband, which, I accept lacks documentary support or, in some instances, is inconsistent with the documentary evidence. The finding is that the second defendant was content at the time to leave the relevant arrangements with respect to the acquisition and sale of the properties and the financing of those transactions to her husband and that her understanding has been derived in large measure from him. She of course bears the onus of proof. Notably the second defendant has not made any claim against her husband with respect to the use of 'her' monies, by lodging a claim in his bankruptcy: T 19.40.

6 For reasons which follow the second defendant's claim fails at a factual level. The material payments relied upon by the second defendant 7 The second defendant relied upon two payments in relation to the acquisition of the St Peter's Property by Artesian Pty Ltd, that are alleged to have been 'sourced' from money that she was beneficially entitled to from the sale of 43 Riverside Crescent.

i. The first is a portion of the deposit of $296,000 that was received by her and her husband into the National Australia Bank mortgage account on 7 May, 1999 from the sale of 39, 41 and 43 Riverside Crescent, said to be one half of the $80,000 attributable to the sale of 43. At [4] of the supplementary submissions, the second defendant asserts that 'her' $40,000 funded part of the deposit of $115,500 for the purchase of the St Peter's property ie $40,/$296, 000 x $115, 500 = $15, 540;

ii. The second is one half of the $60,000 that was derived from the proceeds of sale of 43, namely the sum of $30,000 [supplementary submissions at [6], that is alleged to have been used to fund the stamp duty for the purchase of the St Peter's property. 8 It is thus now alleged that the second defendant's total financial contribution to the St Peters property is $45,540 (supplementary submissions at [7]). Portion of the $296,000 deposit 9 I accept that to determine whether the second defendant had any beneficial interest in the proceeds of sale of 43 Riverside Crescent, it is necessary to step through the sale of 440 Marrickville Road and the purchase of 43. Hence in order for the second defendant to make good the proposition that she contributed part of the deposit to the St Peter's acquisition, she needs to demonstrate a beneficial interest in 43 Riverside Crescent so that she is then able to contend that she had a beneficial interest in the proceeds of sale of that property. 10 The plaintiff's contention is that there is no beneficial interest whatsoever such that when one seeks to trace the deposit from the sale of that property, the documentary evidence establishes that the beneficial interest simply does not continue to exist such that the claim in relation to that portion of the deposit is not made out. 11 It is apparent from the contract for sale in 'FC1' at 41, that 440 was sold for $450,000 on 2 May 1996. It was completed on 29 October, 1996: see the Solicitors letter dated 8 November, 1996 at page 39. On completion, the agent was to account for the deposit of $45,000 and $404,402.03 went into the first and second defendant's account with the NAB. 12 As to the deposit, a copy of this letter at page 78 indicates by the handwritten notes that a cheque went to 'Communicado' for $37,533.72 after the agent's commission of $7,466.28. The deposit slip for the deposit of this cheque is at page 80 and the bank statement for the 'Communicado Publishing' bank account confirms the deposit on 8 November 1996. Thus, the balance of the released deposit on the sale of 440 went to the first defendant. In cross examination, the second defendant confirmed that she had nothing to do with the operation of that account, that the first defendant was the only signatory, that he did not concern her with the day to day operation of the account and that the first defendant did not need her approval or authority to operate the account as he liked: T 21.19/30; see also T 27.32. Further, her evidence at T 29.1/27 makes plain that she was content to leave the use of the balance of the deposit to her husband and did 'nothing' to indicate to him that she was not content to allow him to deal with that sum as he liked. There is no evidence to show how the first defendant expensed this amount in the course of his business after 8 November 1996. The second defendant has not produced as part of her exhibit, the next bank statement for the period up to and including 3 December 1996. 13 The bank statement at page 94 records the deposit of $404,212.03 into the first defendant's 'Flexiplus mortgage' account on 30 October, 1996; the deposit retired debt, leaving a credit balance in that account of $133,812.28. [This was accepted at T 30.29] Importantly, on 1 November, 1996 the sum of $120,000 was withdrawn from that account, leaving a credit balance of $11,291.06. A further sum of $10,000 was withdrawn on 20 November, 1996 (page 95) and a further sum of $16,599.60 was withdrawn on 2 December, 1996. Those withdrawals sent the account back into overdraft and the creation of a fresh debt to the bank. The last withdrawal has the words "deposit 43 Riverside" crossed through, with the marginal note "Purchase Shares …" The second defendant confirmed in cross examination that she and her husband did trade in shares at this time. 14 Ex 'P3' demonstrates that the $120,000 and the $10,000 drawn from the mortgage account on 1 and 20 November, 1996 was used for 'improvements' to the family home at 4 View Street, Tempe. The second defendant confirmed that work occurred with respect to the conversion of a garage to a self-contained flat shortly after the home was purchased, which according to the Transfer (Ex 'P2') was in August, 1996. The second defendant was unable to satisfactorily explain this expenditure, when confronted with her accountant's fax. [T 32.42 - 'I have no idea, sorry' - see also T 34.30 and T 38.50]. 15 The second defendant asserted an 'understanding' that the sum of $100,000 deposited into her husband's housing loan with Westpac on 8 November 1996 ('FC1' at 82) was sourced from the $120,000 withdrawn from the NAB mortgage account (page 94) on 1 November 1996: [36.23/37.] But there is no evidence to establish the correctness of this understanding: [see particularly her evidence at T 38.11/19] [At T 38.37 it was accepted that she 'had nothing to demonstrate to his Honour that the bank cheque referred to in handwriting on the bank statement at page 94 was in fact received in two separate cheques.'] Further the effect of that deposit was to reduce the first defendant's liability to Westpac under the housing loan to ($25,343.30) and thus, has nothing to do with the purchase of 43. [At 48.42 the second defendant would not accept that the effect of the deposit of $100,000 was to retire debt - she persisted as follows: 'No my understanding is that the proceeds were deposited, were used to purchase 43, so there's a connection there.'] 16 It follows that there is nothing to establish that any of these withdrawals from the 'Flexiplus mortgage' account had anything to do with the purchase of 43. The contract for the purchase of 43 was exchanged on 3 December 1996: see page 83. Indeed, it is clear from the evidence in relation to the purchase of 43, that the deposit was not sourced from this account and the balance of the purchase price was entirely financed by the NAB and Westpac. 17 The deposit of $24,500 for the purchase of 43 was paid by the first defendant from a cheque drawn on the 'Communicado' account: see page 84. Ex 'P4' demonstrates that the sum of $18,000 was deposited into that bank account that day from one of the Magafas companies. As noted, there is no bank statement for this day in evidence. 18 The fax at page 77 indicates that $190,000 was to be borrowed from the NAB. On completion on 24 January 1997, the balance due after adjustments was $220,975.30: see the settlement statement at page 76 and the letter from Konstan, Solicitors at page 88 indicating that the balance was paid by a mortgage advance from the NAB of $190,000 and a bank cheque of $30,975.30. The loan from NAB is confirmed on the 'Flexiplus mortgage' bank statement at page 87; as to the payment of the balance, it is clear that the first defendant borrowed this from Westpac - the bank cheque slip is at page 85 and the bank statement for the first defendant's housing loan facility at page 86 shows the drawdown (including the bank fee) on 23 January 1996. 19 Contrary to her asserted understanding, the second defendant's own documents demonstrate that she made no financial contribution to the purchase of 43. As Hodgson JA observed in [2008] NSWCA 304 at [79]: "Her half share of the NAB debt would not give rise to a beneficial interest, in my opinion, if Mr Carantinos had indemnified her against liability to NAB; and the circumstances as the Court knows them are such that this may have happened; either expressly or impliedly. It does not appear that Mrs Carantinos made any payment in reduction of her share of this debt and the whole of the debt was repaid out of the sale proceeds." 20 It follows, that the second defendant has failed to establish that she had any beneficial interest in 43 and thus, had no such interest in the proceeds of sale. 21 Artesian exchanged contracts for the purchase of St Peters for $2.310M on 28 April 1999: see page 205. At page 206 is the cheque drawn by the first defendant for the 5% deposit on his 'Communicado' account dated 1 May 1999. 22 The contract for the sale of 43 was exchanged on 6 May 1999: see the Konstan letter at page 5, which confirms the release of the deposit on exchange. The $80,000 deposit attributable to 43, formed part of the cheque for $296,000 to Pac Com; the balance of the deposit of $216,000 was attributable to the contract for the sale of 39 and 41, also exchanged that day. 23 The bank statement for the 'Flexiplus mortgage' account at page 129 shows the deposit of the $296,000 into this account: see the primary judgment of the Court at [94]. [At T 52.19/45] The second defendant could not explain how it was that 'deposits relating to properties in respect of which you make no claim ended up being utilised to reduce your mortgage debt to the NAB.'] 24 Even if the second defendant had some entitlement to half of the $80,000 deposit for the sale of 43, she had no right to extinguish her indebtedness to the NAB with the balance. The fact remains, however, that the released deposit for all three properties was used to retire Carantinos debt to NAB in this facility: as to the implications of this on the second defendant's claim, see Williams (as liquidator of Scholz Motor Group Pty. Limited) v Peters [2009] QCA 180; 72 ACSR 365 at [5], per McMurdo P. and at [31] to [37], per Muir JA. 25 In Williams Muir JA at 31-37 made the following observations :

[31] It is unnecessary to decide whether a trust in respect of the monies paid by Daimler came into existence in consequence of the operation of the Act or by reference to the principles relating to the constitution of trusts of whatever nature. That is because the payment of the monies by Daimler into the company's overdraft account had the consequence that, if a trust had existed, any consequent proprietary claim against the company was lost, leaving the respondent with a personal claim for breach of trust. That claim did not entitle the respondent to any priority over any other unsecured creditors in the winding up.

[32] An overdraft account is a current account which the customer is permitted to have in debit up to an amount agreed with the bank. The debit balance of a current account is referred to as "an overdraft" [GA Weaver and CR Craigie, "The Law relating to banker and customer in Australia", 3 rd ed, Law Book Company, Sydney, 2003, at [3.820]].

[33] In Bishopsgate Investment Ltd (in liq) v Homan [1995] Ch 211; [1995] 1 All ER 347 it was held by the Court of Appeal that equitable tracing could not extend to tracing through an overdrawn bank account, as payment into the account fund ceased to exist. In the course of his reasons, Dillon LJ, quoted the following passage from the judgment of the Privy Council in Re Goldcorp Exchange Ltd at AC 104-5; All ER 827 :

Their Lordships should, however, say that they find it difficult to understand how the judgment of the Board in Space Investments Ltd v Canadian Imperial Bank of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072, on which the claimants leaned heavily in argument, would enable them to overcome the difficulty that the moneys said to be impressed with the trust were paid into an overdrawn account and thereupon ceased to exist: see, for example, Re Diplock [1948] Ch 465. The observations of the Board in the Space Investments case were concerned with a mixed, not a non-existent, fund. [34] Dillon LJ, after noting that the interpretation of observations of Lord Templeman in the Space Investments case [1986] 3 All ER 75 had been rejected by the Privy Council said: … Instead the decision of the Court of Appeal in Re Diplock; Diplock v Wintle [1948] Ch 465; [1948] 2 All ER 318 is endorsed. There it was said, at p 521; All ER 346: The equitable remedies presuppose the continued existence of the money either as a separate fund or as part of a mixed fund or as latent in property acquired by means of such a fund. If, on the facts of any individual case, such continued existence is not established, equity is as helpless as the common law itself. [35] In his concurring reasons, Leggett LJ was of the opinion that the Space Investments case was " … authority for no wider proposition than that, where a bank trustee wrongly deposits money with itself, the trustee can trace into all the bank's credit balances." His Lordship observed after referring to Re Goldcorp Exchange Ltd , "I do not accept that it is possible to trace through an overdrawn bank account …". Henry LJ agreed with the reasons of both the other judges.

[36] McLure J in Re Global Finance Group Pty Ltd (in liq) (2002) 26 WAR 385; [2002] WASC 63 at [129] was of the opinion that, "The overwhelming balance of authority is to the effect that a proprietary claim to the traceable product will fail if trust money is paid into an overdrawn account." Her Honour said: [135] The rationale for the rule which prevents equitable tracing into an overdrawn bank account is that the property being traced must continue to exist in some form up to the time of, and through to, the traceable product. An overdrawn bank account is a debt owing by the trustee to the bank. The effect of a payment into an overdrawn account is to reduce or cancel the trustee's indebtedness to the bank. Tracing is a factual process and a trust fund or part of it which is dissipated cannot be traced. The extinguishment or reduction of the trustee's indebtedness is regarded in effect as the disappearance of the property. [37] Her Honour's conclusions and the reasons for them are consistent with the approach taken by the Full Court of the Federal Court in Baker v Official Trustee in Bankruptcy [1995] FCA 565 and the Full Court of the Supreme Court of South Australia in Viscariello v Bernsteen Pty Ltd (in liq) [2004] SASC 266 . The approach is also consistent with the conclusion in James Roscoe (Bolton) Ltd v Winder [1915] 1 Ch 62, approved of in Bishopsgate Investment Management Ltd (in liq) v Homan, that tracing was possible "only to such an amount of the balance ultimately standing to the credit of the trustee as did not exceed the lowest balance of the account during the intervening period." 26 McMordo P agreed with the reasons given by Muir JA for concluding that the primary judge erred in finding that the company held either of the payments of $165,000 in its overdraft account on trust for Mr Peters. As his honour observed :

As the company's overdraft account was in debit when the payments of $165,000 were made into that account they were subsumed into the debit account and ceased to exist as money, regardless of whether the company held any of that amount on trust for Mr Peters. 27 The deposit left a credit balance of only $30,767.63. At T 53.15/40 the second defendant argued that the $150,000 drawn by her husband from the mortgage account was not a re-draw on the mortgage facility, but 'the redraw on the deposit.' Her characterisation of the transaction is clearly wrong. At T 54.5 she persisted with the idea that the forfeited deposits from 39, 41 and 43 Riverside Crescent was 'actually used to purchase a - to go towards the Hoechst purchase.' 28 On 14 May, 1999 the sum of $150,000 was withdrawn/re-drawn from the mortgage facility and paid to the first defendant. Save for the credit balance of $30,767.63, the balance of the re-draw was borrowed from the NAB. If the second defendant had an interest to ½ of that sum, the first defendant either took that sum or she loaned it to him, as the $150,000 was deposited into the first defendant's 'Communicado' account with Westpac: see the bank statement at page 201. The deposit cheque for $115,500 at page 206 was drawn on this account cf: the findings in the primary judgment at [108], 'pointing to the acquisition by the Pac Com joint venture/partnership of an interest in the Artesian property.' 29 It follows on this evidence that the second defendant made no financial contribution to the deposit for the St Peters property. 30 The sale of 43 was completed on 18 November 1999: see the settlement statements at pages 21 and 22. After adjustments, the balance due on settlement was $396,778.85. The letter from NAB at page 26 shows that the balance was utilised to retire debt, save for 'bank cheques made out to Peter Carantinos' totalling $80,000. [The second defendant accepted this at T 55.15/40 and T 56.19.] The details of the bank cheques are referred to on the authority at page 27. 31 Further, it is appropriate to recall of the findings in the primary judgment at [102 vi. and vii.] that the proceeds of sale of 39 and 41 were used to not only discharge the mortgage over 43, but also over the first and second defendant's family home. Examining the second defendant's case The claimed entitlement of the second defendant to a one half share of 43 Riverside Crescent, Dulwich Hill 32 The substance of this claim may be discerned from the following matters forming part of the address by the second defendant's counsel, Mr Kelly SC:

i. Mrs Carantinos had a beneficial interest in her one half share of 43 Riverside Crescent as tenant in common in equal shares with her husband because, apart from the mortgage to the NAB, the $245,000 purchase price of 43 was contributed as to the deposit of $24,500 from the deposit on the sale of 440 Marrickville Road (Items 2 and 4 in the Schedule to the second defendant's submissions); $31,981.30 from the P Carantinos home loan account (Item 9), which sourced those funds in the sale proceeds of $404,212.03 from 440 Marrickville Road via the deposit of $100,000 from those proceeds into the P Carantinos home loan account on 8 November 1996 (Items 1 and 3).

ii. The fact that Mrs Carantinos was the registered proprietor of a one half share as tenant in common in equal shares with her husband provides a strong prima facie case that she was the beneficial owner of that share because equity follows the law. Absent some claim that she held her legal estate subject to a personal equity in favour of another party, she had an indefeasible title to her share of that property by operation of s 42 of the Real Property Act 1900.

iii. There was no claim by the plaintiffs that Mrs Carantinos held her estate or interest in her one half share pursuant to a resulting trust for either of them, either on the basis that they had provided any part of the purchase price or that she had provided none. Nor is any such assertion made in answer to Mrs Carantinos' Cross Claim. Nor was anything put to Mrs Carantinos in cross-examination that would justify a finding in that regard.

iv. At first instance, it was alleged that Mrs Carantinos was a volunteer but that proposition is defeated by the fact that she entered into a personal covenant to repay the mortgage debt on the property. For that reason alone, she was not a volunteer, as the High Court held in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22, (2007) 230 CLR 89, 166 para [188].

v. Moreover, the purchase price of 43 was provided by way of $190,000 from the National Australia Bank (FC1-88), $30,975.30 drawn on Mr Carantinos' Westpac home loan account (not his Communicado account into which Magafas money had been paid from time to time) (Item 9 - FC1 81, 82, 85 & 86); and the deposit of $24,500 was paid out of the deposit of $37,333.72 from the sale of 440 Marrickville Road, which was paid into the Communicado account on 7 November 1996, from which the $24,500 deposit was paid out on 5 December 1999 (Items 2 & 3: FC1 - 78, 79, 80, 83 & 84).

vi. The fact that $190,000 was provided by way of mortgage goes to the credit of the mortgagor when assessing the personal equities. In Black Uhlans Inc v New South Wales Crime Commission & Ors [2002] NSWSC 1060 at [142] Campbell J said, "if part of the purchase price is provided by being borrowed on mortgage, the presumption of resulting trust is applied by treating the monies raised on mortgage as a contribution by the person who is liable to repay that money: Calverley v Green at 251 per Gibbs CJ, 257-258 per Mason and Brennan JJ, 267-268 per Deane J."

vii. Similarly, the $30,975.30 does not assist the plaintiffs. There is no suggestion that any Magafas money went into Mr Carantinos' Westpac home loan account - the evidence is that it went into the Communicado account. Indeed, in Carantinos v Magafas [2008] NSWCA 304 at [77] Hodgson JA said, "The contributions to the $245,000 purchase price of No. 43, in addition to the NAB loan, appear to have been the $24,500 deposit and a balance of about $30,000. As mentioned earlier, it appears there was no evidence as to the source of the $24,500 deposit; although the accounting that has been ordered may disclose that this was in fact derived directly or indirectly from payments made by Mr Magafas in November and December 1995 and in December 1996. As mentioned earlier, it appears that the balance of about $30,000 was provided by Mr Carantinos " (underlining added).

viii. We now know the deposit of $24,500 came out of the $37,533.72 release of deposit of $45,000 minus agent's commission after settlement of the sale of 440 Marrickville Road: Item 2: FC1 - 78, 79 & 80; that is, from a fund in which Mrs Carantinos had a one half interest by reason of the fact that she was a tenant in common in equal shares with her husband of 44O Marrickville Road.

ix. It is not to the point that $18,000 was deposited into the Communicado account pursuant to one of the fraudulent invoices on 3 December 1999. The Communicado account was in credit of $20,917.83 on 8 November 1996; when the $37,533.72 was deposited, it went into credit of $58,451.55 (FC1-79); when the only additional deposit to the account between 8 November 1996 and 5 December 1996 when the $24,500 went out was the deposit of $18,000 on 3 December 1996; as at that date, the credit balance was $41,107.26; the $18,000 took the balance up to $59,107.26. There is no basis on which it may be said that the $18,000 funded the $24,500 payment of the deposit; the $37,533.72 already had that amount covered.

x. At its highest, there was a mixed fund in the Communicado account on 5 December 1996 when the deposit was drawn. The $18,000 was deposited as part of the fraudulent scheme. There was no suggestion to Mrs Carantinos in cross-examination that she was aware of or played any part in the scheme. In that circumstance, the "first in, first out" rule in Clayton's Case applies. Moreover, to the extent that the Communicado account held funds which belonged to Mrs Carantinos, namely, her half share of the $37,533.72 balance of the deposit from the sale of 440 Marrickville Road and an $18,000 fraudulent invoice payment as at 5 December 1996, the rule in Hallett's Estate re Knatchbull v Hallett (1879) 13 Ch D 696 (wherever an act can be done rightfully, a fiduciary is not allowed to say as against the person entitled to the property, that he has done it wrongfully) applies: see also Re Diplock; Diplock re Wintle [1948] Ch 465 & Jacobs Law of Trusts in Australia, 7 th Edn, 2006, [2706]. It would be an odd result in equity if a payment by Mr Magafas of $18,000 for the purpose of effectuating his fraudulent scheme were to be given priority over the half share of $37,533.72 to which Mrs Carantinos was beneficially entitled when she was innocent of any participation in the scheme and was acting on the basis that she and her husband had agreed to buy No. 43 half each using the profit from Marrickville Road and their overdraft on their home in View Street (affidavit 3 December 2009, para 16). The stamp duty payment issue 33 As the plaintiff has contended this matter may be disposed of shortly. 34 The matters of significance may be outlined as follows: 35 From the proceeds of sale of 43, the NAB was directed to draw three bank cheques to Peter Carantinos: see 'FC1' at 26 and 27. One of the bank cheques was for $60,000. The second defendant asserts that this was banked into the 'Communicado Publishing' account with Westpac on 19 November 1999, the day after the completion of the sale of 43 (see the bank statement in 'FC1' at 210) and funded the cheque drawn on that account for the stamp duty of $60,000 referred to at 211B and in the bank statement (29 November) at 211. The second defendant's evidence was that she neither collected any of the bank cheques drawn in favour of her husband, nor dealt with any of those cheques: [T 59.30/37. She has not called any evidence from the person who did: T 60.12].

36 There is thus no evidence to establish that the bank cheque in favour of Peter Carantinos for $60,000 was in fact banked into his account on 19 November, 1999: [see the second defendant's evidence at T 58.40 to T 59.21].

37 In any event, the evidence at the trial that was accepted by the Court was that the $60,000 for the stamp duty on the purchase of the St Peters property came from the second plaintiff, Pac Com Pty. Limited: see the primary judgment [2007] NSWSC 416 at [108], [113] and especially at [186], with respect to the handwritten note on the reverse side of the cheque butt. [If there is any serious doubt about the purport of this note, Ex 'P4' demonstrates that the sum of $100,000 was withdrawn from the deposit Pac Com had with AGC on 29 November, 1999; this is the $100,000 deposited into the 'Communicado' account referred to in 'FC1' at 211 - note the entry on the bank statement for 29 November, 1999 'DEPOSIT AGC INV SER.']

38 When confronted with the first defendant's evidence on this subject at the trial, the second defendant in cross examination was not prepared to concede that her understanding with respect to the $60,000 was wrong, but it clearly is and is contrary to her husband's contemporaneous note: [T 60.35/50].

39 Further, it is noted that the deposit of $60,000 into the 'Communicado Publishing' account with Westpac on 19 November 1999, had the effect of reducing the running debit balance of that account to zero and left a credit of $34,911.46. There were further payments from the account and a further deposit of $100,000 on the day the stamp duty cheque was paid. 40 Hodgson JA appears to have considered at [81] that the second defendant may have an entitlement to 'the $128,000' if she had a beneficial half interest in 43; but that assumed that there was '$176,000 left over after repayment of NAB.' $400,000 less $223,528.85 = $176,471.15 and this is what his Honour was referring to. The letter at page 26 was not before his Honour and seen for the first time in 'FC1'. It is to be recalled that the finding in the primary judgment at [102 viii] was to the effect that the evidence before the Court did not disclose where the proceeds of sale of 43 went. The letter from NAB demonstrates that in fact nothing was left over and $80,000 was paid to the first defendant.

41 The second defendant has failed to establish that she made any financial contribution to the purchase of the St Peters property by Artesian Pty. Limited, let alone anything to demonstrate the intention of the provider of the money: cf Black Uhlans Incorporated v New South Wales Crime Commission [2002] NSWSC 1060 at [136] and [138]. It is noted that she has not called her husband to give evidence (note the evidence as to his availability at T 33.10/29), nor any of his bookkeepers whose fingerprints are on some of the documents evidencing the transactions contained in 'FC1': [see T26.17 and T 58.2 re Betsy Kriticos and T 27.9 re: Elly Carantinos]. The natural inference is that nether of their evidence would not have assisted the second defendant. 42 The second defendant's claim also fails for the following additional reasons: i. The declaration sought in the amended Cross Claim at [3], is inconsistent with the declared interest of the partnership in the St Peters property, being held by Pac Com, via its shareholding in Artesian Pty. Limited: see Declaration 5 of the Court's declarations and orders made on 30 August, 2007, unaffected by the Orders of the Court of Appeal.

ii. The second defendant's claim for the declaration in [4], that the partnership held its interest in St Peters, subject to a resulting trust in favour of the cross claimant in the proportion which the cross claimant's contribution bears to the contribution of the partnership to the purchase price of the partnership's share in St Peters, is precisely that which was sought to be raised and rejected by the Court in [2007] NSWSC 965 at [8] and [9]. The Court could not make th at declaration, as it would be inconsistent with Declaration 5 (not to mention the way in which the First and second defendants jointly argued the issue at the trial, ie. the shares in Artesian were beneficially owned by the first defendant and subject to nothing). As Campbell JA said at [147], the rights of the parties that have been decided cannot be overturned or varied as a consequence of further consideration of the matter. The written submissions from the second defendant dated 22 August, 2007 (Kelly SC and Bowen of Counsel - marked on the leave application as Ex A2) at [7(a)] makes it plain that the amendment to proposed declaration 5 that was rejected by the Court in [2007] NSWSC 965 at [8] and [9] expressly sought to have the shares in Artesian held on trust for Pac Com and the second defendant in such proportions s may be ascertained upon the taking of accounts. The material facts relied upon to support that amendment are the same as those relied upon now. Short minutes of order 43 The parties are directed to bring in short minutes of order on which occasion costs may be argued. *********************

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At a glance

Court

Decision date

Before

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Judgment (45 paragraphs)

Parties

Cases Cited (12)