Ayshan v Abualadas

Claims for determination

1. The proceedings were commenced by Linda in May last year. Originally, Linda was named as the sole plaintiff, Tareq as the first defendant and Emaan as the second defendant. Linda's statement of claim was filed last August. Tareq cross‑claimed, naming Linda and Emaan as cross-defendants.
2. After the trial was allocated to me for hearing, I held several pre‑trial directions hearings. I was not sure that the parties' pleaded claims for relief were sustainable in their then form. I made it clear to the parties that the case would be decided on the pleadings and gave them an opportunity to amend.
3. During the directions hearings, questions arose about Emaan's position. She is self-represented. Initially, she filed a submitting appearance. But shortly before the hearing, she applied for leave to withdraw the submitting appearance and to appear in the proceedings as an active defendant. I granted leave and she filed defences to Linda's claim and Tareq's cross‑claim, as well as affidavit evidence.
4. In opening, counsel for Linda put her case in two ways. One was that the arrangements between the parties in 2008 amounted to an enforceable contract which obliged Tareq to cooperate in the partition of the subdivided lots, the loans, and the mortgage in the way Linda had earlier suggested. Effectively, this was a claim for specific performance of the alleged contract.
5. The other way in which the claim was put relied on trust. The alleged trust was articulated on several disparate bases. At various points, counsel referred to express and resulting trusts, and to a constructive trust based on proprietary estoppel or on common intention.
6. Despite the uncertainty of its doctrinal basis, one thing about the trust claim remained clear. I asked counsel whether the facts would sustain a constructive trust based on a failed joint endeavour on the principle stated in Muschinski v Dodds (1985) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137. But he emphatically declined to adopt any such contention. That may be because a claim formulated in such a way would not have justified Linda's continuing occupation of the property pending trial and determination of the proceedings: see Makaritis v Makaritis [2022] NSWSC 468 at [41]-[42]. But whether that is so or not, counsel remained firm. He accepted that if he could not establish Linda's claim on one of the bases articulated, it would have to be dismissed.
7. Tareq's statement of cross-claim initially did not rely on a failed joint endeavour constructive trust either. But the statement of claim was amended shortly before the hearing to contend for such a trust (and no other relief).
8. For this purpose, Imad was joined as an additional cross-defendant. In the course of closing submissions, at the request of counsel for Linda, I joined Imad as an additional plaintiff. For convenience, when referring to the parties to the proceedings, I will refer only to Linda unless specific reference to Imad is required.
9. The principal claim presented for Linda was the contract claim. That remained the case until late in the parties' oral closing submissions when the claim was abandoned.
10. Abandonment of the claim was the correct, if belated, course. It was unsustainable.
11. The arrangement between the parties was a family one which plainly was not intended to create legal relations. Not coincidentally, even on Linda's version of events, there was no agreement at the time the contract was allegedly entered into (late 2008) on the form of the duplex which was to be built, how the land was to be subdivided, and which couple was to have which half.
12. Furthermore, the alleged contract was an entirely oral one and was therefore caught by the Statute of Frauds. It seemed unlikely that any acts of part performance could have been identified which would have been "unequivocally, and in their own nature, referable" to a contract of the kind alleged. [1]
13. To cap it off, Linda's affidavit evidence was in conclusory form which did not purport to give even the gist of the conversations in question as she recollected them. It was plainly inadmissible and was, in due course, rejected when counsel sought to read it as part of the evidence.
14. At the same time as abandoning the contract claim, counsel for Linda also abandoned the resulting trust claim. Counsel did not develop the idea of a constructive trust based on proprietary estoppel, at least as a basis for final relief.
15. This left constructive trust based on common intention as the sole basis for Linda's claim. The claims before the Court thus boil down to a choice between a failed joint endeavour constructive trust and a common intention constructive trust.

Chronology of key facts

1. The initial impetus for the arrangement appears to have come from Imad and Tareq in 2008. Imad was (and still is) a plumber. Tareq was (and still is) a welder. Tareq had recently obtained fly-in-fly-out work which had greatly increased his income and he was looking to use that increased income to improve his family's financial position.
2. The property was purchased at auction on 18 October 2008. Imad attended the auction and bought the property for $585,000. He paid a deposit of 10% and later signed the contract as the sole purchaser. Imad, Linda, Emaan and Tareq however agreed among themselves for Imad's contract to be rescinded and replaced with a contract under which the purchasers were Linda, Emaan and Tareq. The contract contained space for the parties to indicate, in the case of co-ownership, whether the ownership should be other than equal, but this was not completed. The result was that Linda, Emaan and Tareq, at law, purchased the property as tenants in common each holding a one third share.
3. It is common ground that the reason for Tareq's inclusion as a purchaser was that it was a requirement of the CBA. Originally, Emaan and Linda had wished to be joint borrowers and joint purchasers. But the Bank required Tareq to act as guarantor, presumably because his income was essential for loan servicing purposes. As a result, the Bank required Tareq to be on the title.
4. The settlement took place on 5 December 2008. A total of $412,000 was borrowed from the CBA, the remaining amount (after the deposit paid by Imad) was paid by Linda. This included the stamp duty and legal fees on the purchase.
5. The finance from the CBA was documented as two separate loans. I will refer to them as loan A and loan B. Loan A was for $296,000, loan B was for $116,000. In each case the borrowers were Emaan and Linda with Tareq as the guarantor.
6. There appears to be no dispute that, as between the parties, loan A was the Abualadases' contribution to the purchase. It represented, effectively, 50% of the total acquisition cost, which, including stamp duty and legal fees, was $594,000.
7. Similarly, as between the parties, loan B was part of the Ayshans' contribution. It effectively represented the difference between the amounts paid by Imad (the deposit) and Linda (the stamp duty, legals and other amounts) prior to settlement, and the amount payable on settlement.
8. Following the purchase, the property was rented out while the parties made arrangements to undertake the development. There is no evidence about how the rent, the outgoings and the financing costs were accounted for between the parties, or for tax purposes.
9. Development consent was obtained from the local council in August 2009. By this stage the parties had obtained approval from the NAB to finance the construction of the duplex building and to refinance the CBA loans as well. For this purpose, three separate NAB loans were created. I will refer to these loans as loans 1, 2 and 3.
10. Loan 1 was for $288,000. Statements for this loan account were addressed to Emaan. It represented a refinance of loan A.
11. Loan 2 was for $114,000. The statements were addressed to Linda. This loan was a refinance of the Ayshans' loan B from the CBA.
12. Loan 3 was for $398,000 and covered the construction costs for the development. The statements were addressed to Linda, but it seems that the parties agreed that this loan was effectively to be shared between them.
13. The NAB borrowings were increased in March 2011. The increase was to fund landscaping and tiling works and the construction of a swimming pool for each side of the duplex. The additional amounts borrowed by the Abualadases and the Ayshans were almost the same. In one case the amount was $22,000 and in the other, $23,000.
14. The construction works were completed later in 2011. The two sides of the duplex are almost, but not quite, identical. Number 40 is slightly bigger: it is 407.6 square metres, whereas 40A is 405.1 square metres. There is a slight encroachment on to number 40A from a neighbouring property. There are some slight differences in the external detailing of the building between number 40 and number 40A and number 40 also has slightly higher ceiling heights.
15. The parties shared the cost of construction equally by making equal contributions to the repayments under loan 3. After construction, both couples and their families moved in. As already indicated, the Ayshans occupied number 40 and the Abualadases occupied number 40A. They continued to make separate repayments on loans 1 and 2 and to meet the repayments on loan 3 equally. Common costs associated with ownership of the property, such as rates, were shared equally between them. Otherwise, they paid for their own household services and expenses.
16. The situation continued for more than five years until 2017 when the property was subdivided into two separate lots. Nevertheless, when this was done, both of the subdivided lots were retained in the same ownership as the original block had been. That is, they were registered to Linda, Tareq and Emaan as tenants-in-common in equal one-third shares.
17. The explanation given for this by Linda in her affidavit, which was not disputed, was that they had considered partitioning the ownership of the two lots between the Ayshans and the Abualadases but were advised that this would incur significant duty. According to Linda they lacked the funds, "at that time", to pay the duty.
18. The subdivision did not make any change of substance to the loan and security arrangements with NAB which were effectively left as they had been. NAB retained a single mortgage registered over both of the lots. That mortgage secured the parties' liabilities for the three loans which continued to operate as before. Rates and other costs associated with the ownership of the two titles were now separate and thereafter those expenses were paid by the Ayshans and the Abualadases separately. They continued to share the payments on loan 3 (the construction loan) equally. In 2018 or 2019 the Abualadases paid off "their" share of loan 3 and thereafter the Ayshans assumed sole responsibility for servicing the remaining balance.
19. As already noted, the marriage between Emaan and Tareq broke up in February 2021. The breakup was bitter. In evidence were an interim apprehended violence order ("AVO") obtained by Emaan and an AVO obtained by Linda, both against Tareq. The terms of those AVOs required Tareq to stay away from both number 40 and number 40A. I was told by the parties that Tareq has been charged with a breach of the interim AVO obtained by Emaan and that the hearing of this matter will take place in the next month or so.
20. Following the break-up, Emaan and Linda decided that they wanted to finalise the partition. In late May or early June 2021, on their instructions, a solicitor, Ms Danielle Fasi, prepared a deed, styled "Deed of Partition", for this purpose. Tareq however did not sign it.
21. So far as the evidence goes, no further action to advance the proposal was taken for more than a year. Then Linda retained Mr Craig Lockhart, of Fox & Staniland, to act for her. In late November 2022 Mr Lockhart sent a formal letter on Linda's behalf to Tareq (and Emaan).
22. In his letter, Mr Lockhart stated that he had instructions from Linda to "proceed with the correction of the ownership shares" of number 40 and number 40A. Mr Lockhart seems to have thought that he had found a way around the problem with duty which had been perceived by the parties in 2017. He explained: Pursuant to s 55 of the Duties Act 1997 we should be able to stamp for nominal duty a correcting transfer that results in the ownership being as to 50% to yourselves and 50% to Linda based on a "resulting trust". The "resulting trust" arises because the title incorrectly records the ownership 2/3 and 1/3 whereas the purchase monies were provided by Linda as to $296,000 and in the same amount by the two of you. In this situation the two of you as the apparent purchasers (i.e. the ones on title) of the 1/6 share that should be in Linda's name, hold it on trust for Linda. Once the ownership has become 50/50 the partitioning can proceed.
23. Mr Lockhart invited Tareq and Emaan to co-operate in signing the necessary documents and providing the necessary supporting evidence to allow the documents to be stamped (presumably, meaning stamped with nominal duty). Otherwise, Linda could commence proceedings in this Court for declaration and enforcement of the "resulting trust". Mr Lockhart foreshadowed an application for indemnity costs (which he described as payment of "every last cent" of costs incurred on solicitors, counsel and any other consultants) should such proceedings be necessary.
24. Mr Lockhart stated that he had reviewed "various correspondence and financial records" and it seemed "very clear" to him that Linda would succeed if proceedings were brought.
25. Finally, Mr Lockhart raised another point about tax: There is another matter you ought take into consideration in deciding to support the rectification [of] the situation and that is capital gains tax. Assuming the "resulting trust" procedure has been completed, you will each own half of one property for which you can claim principal place of residence and a half of the other property which is not used as your principal place of residence. That other half will be liable for capital gains tax because the principal place of residence exemption will not apply to that other half. It is the writer's view that there is an agreement between the parties to partition the property at the time the duplex were constructed. We can make that the effective date of the agreement for the partition to be that date. That would then confirm each couple owns half the property they live in and have an equitable interest in the other half of that property, which will result in the whole of the property being eligible for the principal place of residence exemption.
26. Emaan agreed to co-operate, but Tareq hedged. In January last year, Mr Lockhart followed up with a letter to Tareq enclosing documents for him to sign. Mr Lockhart noted that it was open to Tareq to obtain his own legal advice. The documents included a deed styled "partition agreement" and a statutory declaration for duty purposes. The statutory declaration included the following statements: An error occurred in the conveyancing and the title has been recorded in our three names as tenants in common in equal shares. The lawyers who acted in the conveyancing on our behalf did not raise with us what shares we would have in the property and how the shares would be held. This error only became apparent when we were reviewing the title in preparation to partition the property with Emaan and I to take one of the dual occupancies and Linda to take the other as our respective shares in the property. I wish to correct this error so Emaan and I own one half of the properties and Linda owns the other half and then we will proceed with the partition.
27. The evidence now before me makes it difficult to justify the requests made by Mr Lockhart in his correspondence or the opinions he expressed. Whether or not it is correct to characterise what happened with the title in 2008 as a mistake, there was clearly no relevant mistake from 2017 onwards. The parties had made a deliberate decision to maintain an ownership structure of one-third each. They had done so as the result of a perception that this was the most favourable approach to follow so far as duty was concerned. As I have already mentioned, at the trial, counsel for Linda abandoned any contention of a resulting trust, [2] and there was never, at any stage, any pleaded claim for the imposition of a trust based on some form of mistake.

Witnesses

1. There was affidavit evidence from all four protagonists. Counsel for Tareq took a sensibly economical approach. He did not cross-examine Linda or Imad. Counsel for Linda cross-examined Tareq. Emaan did not cross-examine any witnesses. She was herself briefly cross-examined by counsel for Tareq (only).
2. In the end, there was little, if any, dispute about the objective facts. Some issues were joined between the parties in their affidavits but, on the approach I take, it is not necessary to resolve any of those evidentiary disagreements.

Failed joint endeavour constructive trust

1. The elements of a failed joint endeavour constructive trust can be summarised in the following way (NSW Trustee and Guardian v Togias (2022) 110 NSWLR 86 at [62]): (1) the formation of a joint endeavour between the parties; (2) the acquisition of property pursuant to that joint endeavour; and (3) the premature termination of the joint endeavour, leaving one party with a legal interest which that party was not intended to enjoy beneficially in those circumstances.
2. The first and second elements are not in dispute. It is common ground that the parties purchased the property in 2008 under an arrangement that they would undertake a duplex development on it.
3. The argument by counsel for Linda focused on the third element. Counsel argued that it was not satisfied. Counsel submitted that the development, and with it, the joint endeavour, ended long ago. In counsel's submission that was when the parties (at least on Linda's case) agreed that the Ayshans would have number 40, and the Abualadases number 40A.
4. Tareq asserted in his affidavit that the occupation arrangement was only ever temporary. He claimed that both parties had occupied the property with the intention to sell as soon as the period of time had expired during which they were required to live there for the purposes of the duty exemption which they had obtained. Tareq also claimed that number 40 was a better property than number 40A and that he only ever moved into 40A on sufferance because Emaan insisted on it.
5. Counsel for Linda submitted that I should reject this evidence. In support of this submission, counsel invited me to find that Tareq was not a witness of credit and that I should not accept his evidence on any contentious matter (both Linda and Imad had given contrary versions of events in their affidavits).
6. The fact that Linda and Imad were not cross-examined could potentially have created a problem if it were necessary to resolve this conflict in the evidence but I do not think it is necessary to do so.
7. Even if the parties agreed when they occupied the duplex in 2011 to divide the property between them for the future, this agreement had never been carried into effect. Indeed in 2017 the parties consciously chose not to do so. Of course, it is clear that the parties, as between themselves, did not intend that Linda, Tareq and Emaan were to continue to own the two lots as tenants in common in equal one-third shares forever. Implicitly it was understood that there was to be a separation between the Ayshans and the Abualadases, but actually effecting that separation remained unfinished business.
8. For these reasons, I reject counsel's submission. It is however only fair to Mr Abualadas to add that my decision on this question should in no way be taken as sanctioning the submissions by counsel for Linda about Mr Abualadas's credit. In these proceedings, it is not necessary to make any finding on that matter and I do not do so.
9. Counsel for Linda also took the point that it has sometimes been said to be a requirement of a failed joint endeavour constructive trust that the failure of the joint endeavour and the breakdown of the relationship between the parties should have happened "without attributable fault." As I understood counsel's argument, Tareq, through the conduct which was the subject of the AVO proceedings, was said to be to blame for the breakdown in the present case.
10. The requirement of attributable fault must be understood in its context. It is not enough to say that one of the parties may be mainly, or even wholly, responsible for the breakdown of personal relations between them. The consequence of refusal of relief on the basis of "attributable fault" would be to deprive the party at fault of the proprietary entitlements which he or she would otherwise have. It seems to me therefore that, if relief is to be refused on this basis, it can only be if the fault in some way impeaches that party's entitlement to pursue the relevant proprietary interest in the property.
11. On that basis, conduct of the type alleged against Tareq in the AVO proceedings, even if established, would be unlikely to deprive him of an entitlement to an interest in the Roselands property reflecting his contribution to the joint endeavour. In any event, the making of the AVO orders (one of which, so far as the evidence before me is concerned, was only an interim order) is not evidence that the allegations made against Tareq in the AVO proceedings are true: Evidence Act 1995, s 91.
12. Counsel for Linda also submitted that the remedy of appointing a trustee for sale was inappropriate in the circumstances. Counsel pointed out that the parties had carefully divided the costs of the purchase and the development between them, and decried the cost which would result if some sort of account were now ordered. Counsel also submitted that it would result in unnecessary hardship for the Ayshans to have to vacate number 40 for the purposes of sale and then to be required to buy it back on the market.
13. Similar submissions were made by Emaan. She told me that she is still living at number 40A with the children and wished to be able to do so until her divorce proceedings came on for hearing, which, as I understood, is likely to be sometime next year. Emaan submitted that in due course, the division of property between herself and Tareq would be the subject of orders in those proceedings and the Court should allow that process to take its course.
14. I do not accept these submissions. No doubt it is convenient for the Ayshans (and for Emaan) for the status quo to continue. But this simply ignores the interest of Tareq, who was a full participant in the venture. Indeed, on the evidence, he appears to have played a critical role in obtaining the finance which underpinned the venture in the first place. On the face of it, he has an interest in the properties no less than that of Emaan, yet under the current arrangements, he has been unable, because of the AVO orders, to live there. Nor can he derive any rent from the properties when they are occupied by his estranged wife and his sister-in-law's family.
15. In specific answer to the point raised by Emaan about the divorce proceedings, it may be accepted that, in due course, the matrimonial property will be divided between her and Tareq. But the court which undertakes that adjustment will take those proprietary rights, so far as the Roselands properties are concerned, as they are found by this Court. I do not see how the possibility of an adjustment in the future would justify this Court in failing to declare what those legal rights are and to act on that declaration by granting the appropriate relief. Certainly, the evidence falls far short of demonstrating that, as a result of dealings between Emaan and Tareq, he will receive nothing from the eventual proceeds of sale of the properties in question.
16. The answer to the argument from counsel for Linda about the wastefulness of having to determine the parties' contributions is that, in a proper case, this can be done summarily if there is any dispute about it. In any event, during closing submissions, counsel for Tareq obtained instructions and indicated that the entire proceeds, after paying off the loans, could be divided equally between the couples without the need to calculate their respective contributions, except for adjustments to reflect the their unequal responsibilities for the NAB loans.
17. The grant of relief by way of constructive trust in the case of a failed joint endeavour is restitutionary, in the sense that the Court aims to return to the parties their contributions to the endeavour and a just share of the profit, if there is any. The court takes this step, effectively as a last resort, if, the venture having failed, there is no other alternative available.
18. Thus, there can be no question of recognising such a constructive trust if the endeavour can be completed in a way which respects the parties' intentions. If the joint endeavour has been undertaken pursuant to an enforceable contract, then the court will grant relief under that contract. Similarly, if relief is available by way of proprietary estoppel, then there would usually be no room for a failed joint endeavour constructive trust. The same may be so if a common intention constructive trust is available. I therefore turn to that question.

Common intention constructive trust

1. The relief originally claimed in Linda's statement of claim was: A declaration that each of [Tareq and Emaan] hold their interests in [number 40], on trust for [Linda]. A declaration that [Linda] holds her interest in [number 40A], on trust for [Tareq and Emaan] in equal shares. An order that [Tareq and Emaan] do all things necessary to transfer their interests in [number 40] to [Linda]. An order that [Linda] do all things necessary to transfer her interest in [number 40A] to [Tareq and Emaan] as tenants in common in equal shares.
2. Counsel for Linda relied on the statement of principle by White J (as his Honour then was) in Shepherd v Doolan [2005] NSWSC 42, at [31] (citations omitted): One class of case where equity will intervene to prevent the unconscientious denial by the legal owner of another party's rights, is where the parties agreed, or it was their common intention, that the claimant should have an interest in the property owned by the other, and the claimant acted to his or her detriment on the basis of that agreement or common intention. …
3. The present arrangement does not in my view satisfy this test, at least to the extent of supporting the relief claimed on Linda's behalf. That relief is premised on a common intention that Linda was intended to have number 40, including the subdivided lot on which it stands. But even on Linda's (inadmissible) evidence, no such agreement was made in 2008 before the land was purchased.
4. In Shepherd v Doolan, White J dealt with the possibility of some alteration to the terms of a common intention constructive trust based on the parties' subsequent dealings, at [44]-[45] (citations omitted): Unlike the presumption of a resulting trust, there is no reason that the beneficial interest cannot change over time. … However, if there are to be changes to the proprietary interests of the parties after the property was acquired, the changes must occur according to the same principles as those upon which a constructive trust may arise for the first time. …
5. Counsel for Linda did not propound a case of the type recognised by his Honour, namely some reformulation of an earlier common intention constructive trust so as to make it specific to number 40. In particular, counsel did not identify any detriment associated with the subsequent subdivision in 2017. It is difficult to see how there could have been any which would justify the alteration of the parties' then interests so as to create the specific right in number 40 for which counsel contended.
6. There is a further difficulty, which is illustrated by the prayers for relief advanced as a consequence of the common intention constructive trust claim. The making of the declarations sought would not be enough. They would leave the mortgage to be dealt with and, in turn, that would require some adjustment of the parties' rights under the loans.
7. In particular, it would not be enough, from Linda's point of view, simply to impose a constructive trust in her favour over lot 40. She would also need to partition the mortgage and the loans. While she is clearly willing to give up her share of the title to number 40A, she also needs to have her obligations to the bank with respect to that property discharged. For that purpose, she requires Tareq to enter into fresh arrangements with NAB to "partition" the debt and secure the Abualadases' share of the debt on number 40A.
8. A trustee who mortgages the trust property in his or her own interest, and without the consent of the beneficiary, can be required by the beneficiary to deliver up the trust property in its original (i.e. unencumbered) form. For that purpose, an order such as that sought against Tareq in the present proceedings, namely that he take all steps necessary to transfer the encumbered property, obliges the trustee to discharge the mortgage either by refinancing it on his or her own property or paying it off.
9. But a trustee who has mortgaged property in the course of carrying out the terms of the trust is in a much different position. Such a trustee will have the benefit of an indemnity against the trust property for any liabilities which he or she has entered into as trustee, including any authorised mortgage. The Court will not force the trustee to pay out of his or her own pocket to discharge the mortgage, on the basis that the trustee will ultimately be entitled to recoupment.
10. This means that, in the case of an authorised mortgage, the beneficiary has only two options. One is to require the trustee to sell the property and discharge the encumbrance out of the proceeds. The other is for the beneficiary to pay out the mortgage himself or herself.
11. Counsel for Linda sought to meet this problem by watering down the order obliging Tareq to transfer unencumbered his share of lot 40 to her. Counsel suggested that it might be sufficient for the Court merely to make a declaration of entitlement and couple it with an order requiring Tareq to execute a transfer, leaving it to the parties to negotiate suitable arrangements with the NAB in due course. It was also suggested that rather than recognising a trust for sale the appropriate course was to give Tareq some lesser security in the form of an equitable charge.
12. I do not accept these submissions. On the evidence before me, ordering Tareq to execute a transfer which could not be used against him unless suitable arrangements were made with the bank would be an exercise in futility. Nor do I think an equitable charge would be an answer to the problem. The usual remedy for enforcement of an equitable charge would be an order for judicial sale and it is difficult to see how, if I granted such a charge, there could be any opposition to an immediate application for an order for sale to give effect to it. Simply to make the bare declaration sought by counsel for Linda would, I think, sooner or later result in the sale of both properties anyway.
13. All of this only reinforces the conclusion that I have already reached, namely that the joint endeavour was never completed, and the only just way to resolve the dispute is to return the parties' contributions and divide the profit from the venture between them.

Conclusions and orders

1. For these reasons I have concluded that: 1. Linda's claim for the recognition of a common intention constructive trust fails; and 2. Tareq's cross-claim for recognition of a failed joint endeavour constructive trust succeeds.
2. I will hear the parties on the form of order and costs. (The parties made submissions on the form of orders to be made, and on costs)
3. So far as the form of orders is concerned, the parties agree that the conclusions that I have reached should be reflected by making a declaration imposing a constructive trust for sale over the Roselands properties in the hands of Linda, Tareq and Emaan, coupled with an immediate order replacing them with an independent trustee (Mr Blair Pleash) to carry out the sale and divide the proceeds. Some difficulties however arise in the formulation of the declaration.
4. One is that the argument has tended to focus on the position of the respective couples as against each other and has not fully explored how each couple's half share should be held as between that couple. Accordingly, at this point, the declaration will only determine the entitlements to the proceeds of sale of each couple against the other couple and the question of entitlements inter se will be reserved for further consideration.
5. The second difficulty is with the way in which the proceeds of sale are to be divided. As already noted, counsel for Tareq was prepared to dispense with any formal calculation of the parties' contributions and to proceed on the basis that the two couples would receive equal shares of the proceeds, subject to deducting the loan liabilities for which they had agreed to be responsible. It remains necessary to convert that concession into formal language. Counsel for Linda also wishes to consider whether some other adjustments may be appropriate.
6. Accordingly, I will not make orders today but will adjourn the proceedings for a short time to allow the parties to agree, if possible, on the final form of the declaration including adjustments. If that cannot be agreed, I will hear further argument.
7. I have referred to the correspondence which raised questions of capital gains tax that might arise from the sale of the properties the subject of the proceedings. This will be a matter which the trustee will need to consider in due course. Tax returns will have to be lodged to cover any income derived from the properties after the trustee's appointment and before sale. But, if there is a capital gain from the sale which is taxable, that too will need to be included in the return for the relevant year.
8. I will specifically reserve the question of directions on this issue so that it is not forgotten, but it does not need to be dealt with now.
9. As to costs, the starting point is that costs follow the event. In the present case, there are two events, one for Linda's claim as plaintiff and the other for Tareq's cross‑claim. Because the parties to the claim and the cross-claim are not the same, it is necessary to determine which event should carry the general costs. [3] It seems to me that such costs should be carried by Linda's claim, which brought the dispute before the Court and was pursued to the end. I do not understand any party to dissent from that view.
10. Accordingly, there will be an order for costs against Linda (and, from his joinder on 23 May, Imad) in favour of Tareq on the claim against him, which will include the general costs of the proceedings. There will also be an order in favour of Tareq for the costs solely referable to his cross-claim against Linda and Emaan as cross-defendants (and, from his joinder on 22 May, Imad as an additional cross-defendant).
11. Counsel for Linda argued however that costs on the cross-claim against Linda and Emaan should be limited to the period 22 May onwards. This was because it was only on that date that the amendment was made propounding the successful claim based on a failed joint endeavour. Before that date, the pleaded claim was based on partnership.
12. I think this point is well taken. The partnership claim was untenable, as counsel for Tareq very properly conceded when the difficulty was brought to his attention at the trial. Accordingly, the cross-claim costs will be limited, as against all cross-defendants, to the period from 22 May onwards.
13. For his part, counsel for Tareq sought to have the orders made in his client's favour on an indemnity basis from 19 April onwards. The basis for this submission was a settlement offer put forward in a Calderbank letter. The letter proposed the listing of the two properties for sale within three months with a split of the proceeds of 50% in favour of Linda, 25% in favour of Tareq and 25% in favour of Emaan (I should say that indemnity costs were sought against Emaan on the basis that the letter was sent to her as well, but it was accepted that the costs would only run from the time that she became actively involved in the proceedings).
14. The offer was an informal one and this means that a presumption in favour of indemnity costs does not arise merely from obtaining a result more favourable than that set out in it. Tareq must demonstrate that rejection of the offer was unreasonable.
15. Given the way in which the proceedings have been conducted, it seems unlikely that the difference between costs assessed on the ordinary basis and costs assessed on an indemnity basis for the last few weeks would be significant. More importantly, it has not, in my view, been demonstrated that rejection of the offer was unreasonable. The fact is that, at the time the letter was sent, both parties had adopted legal analyses as the bases for their claims that were ultimately unsustainable. A further complication is that the offer involved an equal split between Tareq and Emaan when that is something which has been reserved for further consideration.
16. In all the circumstances, I decline to order indemnity costs.
17. The proceedings will be adjourned for a short period of time to allow the parties to consider the form of the declaration and any other orders which may be required for the discharge, by the independent trustee, of his duties. When the orders are brought in, they should provide for costs of the proceedings to be disposed of in the way in which I have indicated.

31 May 2024: (The parties made further submissions on the form of orders, but, in the course of argument, issues requiring further consideration were identified. The Court decided to defer making orders and give the parties an opportunity to address those issues and to redraft their proposed final orders.)

1. The orders of the Court on 31 May 2024 were: 1. By 5pm on 10 June 2024, the first defendant is to serve and send to the Associate to Parker J any revised short minutes setting out the orders sought and short written submissions in support of those orders. 2. By 5pm on 17 June 2024, the plaintiff and second defendant are to serve and send to the Associate to Parker J any revised short minutes setting out the orders sought and short written submissions in support of the orders sought.

Endnotes

1. Pipikos v Trayans (2018) 265 CLR 522.
2. As was pointed out to counsel, the parties had not, before completing the purchase, agreed on a particular form of subdivision, or who was to get which of the subdivided lots. A purchase money resulting trust might have given Linda a half share and Tareq and Emaan one quarter shares in equity (although this would have left Imad's contribution out of account), but those equitable shares would have been shares of the property as a whole. Such a trust would not have justified partitioning the two subdivided lots between the parties, as Linda was seeking.
3. Johnston v Allen (No 2) [2024] NSWSC 476, [47], [49].

Amendments 08 July 2024 - [41] correction to year. 08 July 2024 - [] DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 July 2024