SACKVILLE AJA: In these proceedings a father seeks orders against his daughter. The dispute arises out of a contribution made by the father (Plaintiff) towards the purchase by the daughter (Defendant) in her own name of a unit located at West Esplanade Manly (Property). The purchase price for the Property was $562,500. Settlement occurred on 18 January 2011.
The Plaintiff says that he contributed $200,000 towards the purchase price and renovation of the Property by way of an investment, on the agreed basis that he would acquire a one third beneficial interest in the Property. The Defendant denies this claim. She says that the Plaintiff's contribution was a gift made in order to enable her to enter the property market for the first time.
The dispute came to a head when the Defendant entered into a contract for the sale of the Property to a third party at a price of $1,137,000. By this stage the relationship between the Plaintiff and the Defendant had broken down.
The Plaintiff learned of the sale of the Property by accident. On 6 September 2017, he caused a caveat to be lodged over the title to the Property. [1] The caveat claimed "[a]n equitable interest in land arising out of an agreement between the Registered Proprietor and the Caveator". The facts by virtue of which the interest arose were described in the caveat as follows:
"The Caveator advanced the Registered Proprietor an amount of $200,000.00 for the purchase of the [P]roperty … on the agreement that in consideration for the advance the Caveator would acquire a one third interest in the [P]roperty. The Registered Proprietor holds that one third interest on trust for the Caveator."
On 11 October 2017 the Plaintiff filed a summons in the Equity Division seeking by way of interlocutory relief an order pursuant to s 74K of the Real Property Act 1900 (NSW) extending the operation of the caveat. The summons sought the following final relief:
"1. A declaration that the Plaintiff and Defendant entered an oral Agreement ('Agreement') on or about December 2010 to the effect that the Defendant use $200,000 advanced by the Plaintiff to the Defendant to purchase the Property in return for the Plaintiff receiving a 1/3 interest in the Property.
2. In the alternative to Order 1, a declaration that by reason of the Plaintiff's advance of the $200,000 used by the Plaintiff to purchase the Property, the [Defendant] holds the Property and/or the proceeds of sale of the Property as to one-third share on trust for the Plaintiff.
3. An order that the Defendant pay from the proceeds of sale of the Property, or otherwise if such proceeds are insufficient, to the Plaintiff an amount equal to one-third of the value of the Property.
4. That there be an account in relation to the rent which was payable by the Defendant to the Plaintiff in relation to the Property.
5. An order that the Defendant pay from the proceeds of sale of the Property, or otherwise if such proceeds are insufficient, to the Plaintiff and amount equal to the amount determined upon the accounting ordered in order 4 above.
As will be seen, the Plaintiff's final submissions proposed modifications to the relief sought in the summons. [2]
The matter came before Darke J on 16 October 2017. His Honour delivered an ex tempore judgment in which he ordered that the caveat be extended until 30 October 2017 and made consequential directions.
On 27 October 2017, Darke J made orders that upon settlement of the contract for the sale of the Property, the Plaintiff deliver to the Defendant a duly executed withdrawal of caveat in exchange for a bank cheque in the sum of $379,000 (being one third of the sale price). His Honour also ordered that the cheque be paid into a controlled moneys account, where the funds were to remain pending determination of the proceedings or further order of the Court.
The critical factual issue in the proceedings is whether the parties agreed that the Plaintiff would provide $200,000 by way of an investment, as he alleges, or whether he contributed that sum as a gift to the Defendant, as she claims. Of course the Plaintiff bears the burden of establishing his case on the balance of probabilities. [3] Since the Plaintiff and Defendant gave starkly contrasting versions of their dealings, it is necessary to assess the credibility of their evidence. That task has to be undertaken having regard to the documentary evidence insofar as it sheds light on the nature of the relevant transactions.
The hearing took place on 3 and 4 April 2018. Dr Peden, who appeared with Ms Mee for the Plaintiff, read two affidavits affirmed by the Plaintiff, the first dated 11 October 2017 and the second dated 15 March 2018. Dr Peden also read affidavits sworn or affirmed by Ms Ewins, a bookkeeper in the business conducted by the Plaintiff; Mr Turner, the "bookkeeping consultant" for the Plaintiff between 2007 and 2014; and Ms Tan, formerly a Local Business Banker at the Warringah Mall Branch of Westpac Banking Corporation Ltd (Westpac). The Plaintiff was cross-examined but none of the other three deponents was required for cross-examination.
Ms Power, who appeared for the Defendant, read two affidavits affirmed by the Defendant, the first dated 2 February 2018 and the second dated 3 April 2018. Ms Power also read affidavits made by Mr Guiffrida, the real estate agent who dealt with the Defendant when she purchased the Property; Ms Dunphy, the Defendant's mother; and Mr Russell, the Defendant's partner in 2010 and (as from 2013) her husband. The Defendant, Ms Dunphy and Mr Russell were cross-examined, but Mr Guiffrida was not required for cross-examination.
At the conclusion of the hearing the evidence had been completed. Dr Peden handed up closing written submissions and supplemented them by brief oral submissions. Ms Power made brief oral submissions in reply.
I gave the parties the opportunity to make further written submissions after the hearing concluded. This included an opportunity for Ms Power to comment on certain documents that the Plaintiff produced to the Court during the hearing. The Defendant filed her closing written submissions on 22 April 2018. The Plaintiff filed his further written submissions in reply on 1 May 2018.
[3]
Background
Except where otherwise indicated, the following account records matters that either never were or are not now in dispute.
In about 2000, the Plaintiff and the Defendant's mother, Ms Dunphy, were divorced. It appears that the divorce was acrimonious. For some years after the divorce, the Plaintiff and the Defendant had a distant relationship. However, from about 2008, when the Defendant finished her tertiary studies, they slowly re-established their relationship.
In 2010, the Plaintiff was the principal of a strata management business conducted by Fresh Strata Pty Ltd (Fresh Strata) under the name "Strata Choice Northern Beaches". At that time, the Plaintiff held both issued shares in Fresh Strata. The Plaintiff also held one of the two issued shares in a company then known as Gateway Ventures Australia Pty Ltd (Gateway) and was its sole director. Gateway later changed its name to Secure Trade Pty Ltd.
In about July 2010, the Defendant commenced employment with Fresh Strata. Her precise title and status was disputed but she performed duties as a strata manager. By this time the Defendant had expressed interest in entering the property market and to that end had inspected numerous properties. Around this time the Defendant asked her mother to act as a guarantor so that she (the Defendant) could obtain a loan. Her mother declined as she did not wish to put her own house at risk.
In July and August 2010, the Plaintiff disposed of two commercial units that were held in the name of Gateway. During this period he lived in a unit at Freshwater that he rented from his sister who had assisted him financially and in other ways after his divorce. The Plaintiff apparently had accumulated arrears of rent and, although he had paid off some of the amount due, he still owed money to his sister. Later in the year the Plaintiff purchased the Freshwater unit from his sister at a price less than market value.
On 7 October 2010, the Defendant sent an email to her mother concerning a property she intended to inspect. The email asked whether Ms Dunphy would be interested in investing the sum of $58,000 by providing the 10 per cent deposit required by the vendor. Somewhat optimistically, the Defendant suggested that she might borrow the balance required to pay the purchase price of $580,000. Ms Dunphy replied on 11 October 2010 that she was "still digesting the idea".
In late November 2010, the Defendant inspected the Property, which had been advertised for sale. On about 29 November 2010, she made an offer of $550,000 to purchase the Property. That offer was not accepted but on 30 November 2010 the Defendant made a second offer of $562,500 which was accepted. At about that time the Defendant provided a cheque for $1,400 to the agent as a holding deposit. The cheque was drawn on Gateway's account and signed by the Plaintiff. The agent confirmed in a letter to the Defendant that an Advice of Sale had been forwarded to her conveyancer.
Events then moved quickly. On the same day, 30 November 2010, the Defendant exchanged contracts with the vendor for the purchase of the Property for the agreed price of $562,500. On that date, the Defendant provided to the agent a cheque, again drawn on the account of Gateway and signed by the Plaintiff, for the balance of the deposit, namely $54,850. Both the cheques drawn by Gateway were debited to its account with Westpac on 1 December 2010.
Following the exchange of contracts the Plaintiff wrote on Gateway letterhead to Ms Tan, then a Local Business Banker at Westpac's Warringah branch. The letter, dated 30 November 2010, was as follows:
"Thank you for your help so far in negotiating a loan for Michelle and I. The exchange of contracts has been finalized …
I have paid the deposit of $56,250 from Gateway Ventures Australia Pty Ltd. …
As discussed this morning, I will borrow up to $150,000, secured by a first mortgage over my soon to settle unit at … Foam Street Freshwater, in order to assist Michelle with the purchase of the property. She is to borrow $448,000 secured by a first mortgage over the Manly unit. I will be a guarantor for Michelle's loan.
Michelle and I will contact you in the next day or two in order to organize the necessary paperwork."
On 15 December 2010, the Plaintiff created a document entitled "Partnership Agreement" which he drafted himself. The parties to the Partnership Agreement were identified as the Plaintiff and the Defendant. The draft document included the following terms:
"[The parties] HEREBY MUTUALLY AGREE that the parties shall become partners in the business of owning and leasing the property known as … West Esplanade, Manly upon the terms and conditions set out in this agreement.
1. The partnership shall commence on the eighteenth day of January two thousand and eleven and shall continue until determined as provided.
2. The partnership shall be carried on at … West Esplanade, Manly …
3. The bankers for the partnership shall be Westpac Banking Corporation Ltd …
4. The capital of the partnership shall be in the sum of six hundred thousand dollars ($600,000) comprising of four hundred thousand dollars ($400,000) contributed by [the Defendant] and two hundred thousand dollars ($200,000) contributed by [the Plaintiff].
5. Where additional capital is required it will be contributed in the ratio of two-thirds from [the Defendant] and one-third from [the Plaintiff] …
6. The net profits, as established by using the accounting standards adopted from time to time by the Australian Institute of Chartered Accountants, shall be divided between the partners with two-thirds going to [the Defendant] and one-third going to [the Plaintiff].
7. In return for contributing their labour, without charge for the renovation of the property at … West Esplanade, Manly, [the Defendant] and Chance Russell may reside at the property until 18 July 2011 without any charge for rent.
…
10. On the tenth day of each quarter during the continuance of the partnership, an account shall be taken as at the last day of the previous quarter, of all the capital, assets and liabilities for the time being of the partnership and a balance sheet and profit and loss account, using the accounting standards adopted by the Australian Institute of Chartered Accountants, shall be prepared and a copy furnished to each partner.
…
15. The partnership shall terminate on 18 January 2016 unless by mutual agreement the partnership has terminated at an earlier date or by mutual agreement is to be extended to a future date. Upon termination the assets of the partnership shall be sold and the partnership debts discharged before distributing the remaining capital in the same shares as was originally contributed at the commencement of the partnership."
In December 2010, the Plaintiff applied to Westpac for a loan of $150,000 to be secured by a mortgage over his Freshwater unit. The application was not in evidence but the Bank's credit memorandum was. This recorded that the Plaintiff was the "Borrowing Entity" and that the purpose of the loan was "Personal Investment". The loan was to be for a term of 30 years and was to be interest only for the first 10 years. The credit memorandum said nothing about the form of personal investment the Plaintiff contemplated.
In December 2010 the Defendant also submitted a loan application to Westpac. She sought a loan of $400,000 which was said to be for the purpose of purchasing an established dwelling. The application, which oddly enough was undated, stated that the Plaintiff was a first home buyer. The Plaintiff was said to have assets of $44,550, mostly comprising a motor vehicle and personal effects. Her net monthly income was said to be a salary of $3,863 and what was described as "Rental Income Property being purchased" of $1,646.
Stamp duty of $14,076.25 in respect of the contract of sale was paid by bank cheque on 17 December 2010. The Defendant acknowledged that the Plaintiff paid for the stamp duty "out of one of his business accounts". However she claimed that she reimbursed the Plaintiff for this amount over the following years, in part by foregoing bonuses due to her from Fresh Strata. The Plaintiff did not deny that the Defendant repaid the amount of stamp duty.
On 10 January 2011, the Plaintiff sent an email to a Mr Walker, with a copy to Mr Turner. The email was as follows:
"I have just bought my sister's unit that I live in. It cost gross $525K plus $17K stamp duty. The net will be $345K as my sister has made a gift to me of $145K on the basis that I will receive nothing from her estate when she dies, which I hope will not be for many years to come. The payment to her is coming from Gateway Ventures which I would classify as being in part repayment of the $165K that I advanced from my divorce settlement and a loan for the balance.
I have also bought a unit in Manly in partnership with my daughter. I have drawn up a partnership agreement which is to be executed before settlement next week. Michelle is paying $400K and the unit is in her name. I'm paying $200K which will come from a loan from Westpac which will partly pay for the unit and partly pay for a strata portfolio that I am looking to purchase soon. Michelle is to live there rent free for the first six months while she and her boyfriend renovate the unit. After six months she will have qualified for exemption from CGT and she will either stay on and pay rent or otherwise move out and it will be tenanted and the income put into a partnership bank account. We will be maintaining a complete set of accounts and bank account for the partnership.
Please confirm that I have taken all steps necessary to avoid the payments on my account being treated as income in my hands."
On 17 January 2011, at 1.46 pm, the Defendant emailed Ms Dunphy asking her to review the draft Partnership Agreement attached to the email. Ms Dunphy replied that afternoon commenting that "this [meaning the two thirds-one third division] is really unclear and totally unworkable if you disagree". Ms Dunphy also said that the document was "convoluted [and] vaguely adopted from some other diverse document". She suggested that a "more applicable & workable" document could be drafted.
Settlement of the purchase of the Property took place on 18 January 2011. On that date a joint account was opened with Westpac in the names of the Plaintiff and the Defendant. The sum of $150,000 was deposited to the credit account by the Plaintiff. In his affidavit the Plaintiff said that he borrowed this sum from Westpac. As this evidence was not challenged, I accept that the Plaintiff personally paid the sum of $150,000 into the joint bank account.
The settlement statement prepared by the conveyancer acting on behalf of the Defendant shows that after adjustments a payment of $507,627.98 was made to the vendor. In addition, the Defendant provided cheques totalling $709.60 for rates and paid $1,200 in professional costs. The Westpac statement for the joint account shows that $109,668.98 was withdrawn for the purposes of the settlement. The balance required for settlement came from Westpac's loan of $400,000 to the Defendant.
A further sum of $541 was withdrawn from the joint bank account on 20 January 2010 to pay the stamp duty on a mortgage. It is not clear whether the duty was payable in respect of the loan to the Plaintiff or the loan to the Defendant.
Following settlement of the purchase, the Defendant was registered as the sole proprietor of the Property, subject to a mortgage to Westpac to secure the loan of $400,000.
On 3 February 2011, the Plaintiff gave instructions to Ms McLean of McLean & Associates, solicitors, to review the draft Partnership Deed he had prepared. A copy of an undated letter in the solicitors' file suggests that Ms McLean reviewed the draft and identified some matters that she wished to clarify with the Plaintiff. It is not clear whether the letter was actually sent to the Plaintiff, but the file contains the draft of a deed of loan evidently prepared by Ms McLean as an alternative to the proposed partnership deed.
On 6 June 2011, Ms McLean wrote to the Plaintiff confirming his "instructions… not to proceed with the preparation of a Partnership Agreement as there is no longer any necessity to do so".
In the first six months or so following settlement of the purchase, Mr Russell carried out renovations on the Property. For this purpose he purchased materials from various outlets and performed much of the labour himself. Mr Russell kept receipts for the items purchased and also kept a record of his contributions in the form of labour. He provided these records to the Defendant. Notwithstanding evidence from Mr Russell that the expenses for renovations did not come out of a joint account, the statements for the joint account show that in addition to numerous cash withdrawals payments were made from the account to outlets such as hardware stores and suppliers of building materials.
On 8 June 2011, the joint account was closed, a final payment of $37.50 on that day to a hardware store reducing the balance in the account to nil. Apart from the initial payment of $150,000 into the account by the Plaintiff, small amounts were credited to the account from time to time. Those amounted in total to about $1,350. The evidence did not address the source of these small deposits.
On 6 September 2011, Fresh Strata's agent lodged a form with the Australian Securities and Investments Commission. This recorded the issue of eight ordinary shares in the company, including the issue of one ordinary share to the Defendant. The Plaintiff at this point held the remaining nine ordinary shares issued by the company.
On 11 June 2012 a spreadsheet was created the author of which, according to a screenshot, was the Defendant. A reproduction of the document appears below:
The document was sent by the Defendant to the Plaintiff as an attachment to an email dated 15 October 2012.
On 6 February 2014, the Defendant sent an email to Westpac as follows:
"I want to repay [the Plaintiff] for his share of my unit that he lent me. I know its [sic] valued currently at $680K. Can I get an extra $225K to give back to him? If not what is the maximum I can give back to him?
Brian is selling his unit and would like the money to invest in another property."
On 29 March 2015, at a time when the Plaintiff and the Defendant were on good terms, the Plaintiff sent an email advising the Defendant that she should accept that it was not the right time to buy property. The email included the following sentence:
"I think it is wise to sit tight, maybe move to a house when your second one arrives and rent out your unit at that time until you have more equity in your unit and don't have to borrow so much."
According to a screenshot, the Defendant created another spreadsheet on 29 September 2015. The columns in the spreadsheet included one headed "Dad rent" which stated as follows:
"rent due since sept 2014 (we were paid up till this date)
$800 per month
$4800 for 2014
$9600 for 2015
Total due to BD $14,400"
The document set out strata levies and rates for 2014 and 2015, with a note indicating that the Defendant was owed $3,612 in respect of those items. The document also attributed a value of $4,000 for "Chance [Russell] work on [the Plaintiff's] unit" and recorded amounts to be offset against the rent due to the Plaintiff. The amounts to be offset included the cost of certain repairs to the Property and sums apparently representing what were said to be the Defendant's share of profits from the activities of Secure Trade between 2013 and 2015.
In late November or early December 2015, the Defendant and Mr Russell moved out of the Property. On 4 December 2015, the Defendant entered into a residential tenancy agreement with two parties. The tenancy was for a term of one year at a rental of $780 per week.
On 27 August 2016, the Defendant emailed the Plaintiff as follows:
"This is the spreadsheet we went through for the Rent differences and secure trade stuff awhile [sic] back. We need to sort out 2016 year now secure trade has been charged."
The spreadsheet attached was the one prepared on 29 September 2015.
In early March 2017, the Plaintiff and Defendant exchanged acrimonious correspondence relating to their respective interests in Fresh Strata. On 10 March 2017, the Defendant resigned as a director of Fresh Strata and Secure Trade.
At about the same time the Defendant refinanced the Property, paying out the Westpac loan through a new loan from the ANZ Bank.
In June 2017 the Defendant decided to sell the Property and to that end engaged an estate agent. On 1 September 2017, the Defendant and a buyer exchanged contracts for the sale of the Property at a price of $1,137,000.
As has been noted, the Plaintiff lodged a caveat over the title to the Property on 6 September 2017 and filed the Equity Division summons on 11 October 2017.
At the date of the hearing the Plaintiff had not paid off any part of the principal advanced to him by Westpac.
[4]
Competing versions
The Plaintiff and the Defendant gave very different versions of the events leading to the Plaintiff making a contribution from borrowed funds to the purchase of the Property.
[5]
Plaintiff's version
The Plaintiff's version was given in his first affidavit of 11 October 2017. On the Plaintiff's account the Defendant approached him in mid-2010 and said that she and Mr Russell were looking to purchase a unit but could not afford to do so on their own. She asked the Plaintiff whether he would be interested in putting in some money and joining Mr Russell and her. The following conversation then took place:
"[Plaintiff]: 'Yes, that's a possibility as an investment. I'll need to see if I can get money from the bank though.'
[Defendant]: 'We will pay you rent when we move in. Say one third of what the market rent would be.'
[Plaintiff]: 'That sounds good because that can go towards the interest.'"
At around the same time, the Defendant told the Plaintiff:
"[Defendant]: 'If we buy it in my name I will get the first home owners $15,000.00 grant.'"
The Plaintiff subsequently contacted Ms Tan at Westpac to inquire about obtaining funds and was told that he could borrow about $200,000, although not necessarily all in his own name (as distinct from Gateway).
In about early November 2010 the Plaintiff inspected the Property with the Defendant and Mr Russell. He then had a conversation with the Plaintiff as follows:
"[Defendant]: 'Chance and I have worked out that we would need about $600,000 to purchase the property and renovate it. If we offer $558,000.00, pay stamp duty and then get Chance to do the renovations we should be able to do it all for $600,000.00.'
[Plaintiff]: 'Yeah, that sounds good. I'll be able to put in $200,000 for a one third share.'"
The Defendant told the Plaintiff about the progress of negotiations. She informed him on 30 November 2010 that her offer of $562,500 had been accepted. According to the Plaintiff, he had drawn a cheque for a holding deposit of $1,400 on about 25 November 2010. He drew a further cheque for the balance of the deposit shortly before 1 December 2010. He provided the funds for the deposit through Gateway, using the proceeds of sale from one of the commercial units at Freshwater.
The Plaintiff and the Defendant agreed that a joint account should be opened with Westpac. The Plaintiff would pay the $150,000 into the joint account and the funds could be used to pay the balance of the purchase price and to meet the cost of the renovations.
The joint account was duly opened. The sum of $109,668.98 was withdrawn from the account to enable settlement of the purchase to take place. The remaining funds in the account were available to be used and were used by the Defendant and Mr Russell for the renovations.
The Plaintiff accepted in his evidence that after the purchase was completed he did not ask the Defendant to pay rent. Indeed he agreed that he made no demand for rent between 2011 and 2016. Even when the relationship between the parties deteriorated he did not demand rent, but merely an "accounting". The Plaintiff's explanation was that he could service the loan without recourse to any rent and he was prepared to wait until the Property was sold for an accounting of what was due.
[6]
Defendant's version
The Defendant's account was given in her affidavit affirmed on 2 February 2018. On her account, the Plaintiff said on several occasions in the second half of 2010 that he was thinking of giving her shares in Fresh Strata because so much of the success of the business had been due to her. During this period the Plaintiff expressed regret that he had not given more help to the Defendant and her two brothers due to the acrimonious breakdown of the marriage between the Plaintiff and Ms Dunphy.
According to the Defendant, the Plaintiff urged her to consider buying a property. In about mid-2010 she began to consider entering the property market in the Northern Beaches area of Sydney. The Defendant spoke Ms Dunphy about guaranteeing a home loan but her mother declined.
In about October 2010, the Plaintiff told the Defendant that he proposed to give her 10 per cent of the business. The gift would enable the remaining 90 per cent of the business to be divided equally among his three children on his death. In the same conversation the Plaintiff said he wanted to give the Defendant $200,000 towards the purchase of her first property. The Defendant thanked him profusely for such a kind offer.
In November 2010, the Defendant approached the Plaintiff at his Dee Why office and had the following conversation:
"[Defendant]: Dad, I would like to buy a place to live in. I want to live close to Manly, but I don't have much of a deposit, although financially I have the ability to pay a loan. I did approach Mum, but she doesn't have the money available.
[Plaintiff]: I would like you to get into the property market. I don't want you to be renting anymore. I understand what you mean, it is hard to enter the property market, so I'd like to help you. I don't have any money personally but I could approach Westpac who manage the business accounts and see if they would consider giving me a business loan as the business is growing, which I could give to you to purchase a property.
[Defendant]: Dad, thank you! That is so generous of you. Are you sure?
[Plaintiff]: Yes, I am sure. I want to help you get into the property market and giving you some money would be the best way to help you buy a property. However, I do have a condition that Chance [Russell, my then-boyfriend] is not put on the title with you as you really haven't been together that long. If you broke up I would be essentially giving Chance half of my gift to you as he could get half of the property. The property has to be in your name. This is my gift to you, and only you.
[Defendant]: Yes, that is fine, I understand. It is a gift solely to me, I'm sure Chance will understand. Thank you again Dad, that is so generous of you.
[Plaintiff]: You're welcome. I'm glad I'm now in a financial position where I can help you."
On the Defendant's account, at no stage thereafter did the Plaintiff suggest that he would own a share of any property that the Defendant purchased in her name.
Shortly after this conversation, the Defendant accompanied the Plaintiff to a meeting with Ms Tan during which the Plaintiff's proposal to borrow funds was discussed. In the Defendant's presence, the Plaintiff told Ms Tan that he wished to borrow money to help the Defendant buy a unit. Because the Defendant was impressed by Ms Tan's efficiency she decided to apply for her own loan through Westpac.
The Defendant told her mother about the Plaintiff's offer of assistance. Ms Dunphy asked the Defendant whether the Plaintiff had requested her to sign any documents. She replied that his only request was that any property she bought should be in her own name because it was not a good idea for Mr Russell's name to be on the title.
After the vendor of the Property accepted the offer of $562,500, the Defendant telephoned the Plaintiff and had the following conversation:
"[Defendant]: Dad, they accepted my offer!
[Plaintiff]: That is great news! When do they want to exchange?
[Defendant]: Right away, I think! Can you access the funds for the deposit quickly?
[Plaintiff]: Yes I think I have some spare money in an account, I will write you the cheque to give to LJ Hooker. Find out what name they would like on the cheque.
[Defendant]: Oh cool, thank you thank you thank you!"
The Plaintiff ascertained from the agent how the deposit was to be paid and had this conversation:
"[Defendant]: Hi Dad, I have to give them two cheques, one for the holding deposit of $1,400, then one for the balance of the deposit. They say it should be made out of LJ Hooker. Are you able to pay this out of the money you're giving me?
[Plaintiff]: Yes, that's fine. I can draw those cheques out of the company account, and that will be part of the $200,000.00 I'm giving you.
[Defendant]: Thank you so much! I'm so excited!"
[7]
Plaintiff's evidence
The Plaintiff has a law degree and qualifications in accountancy. He has never held a practising certificate but for many years conducted an insolvency practice. In addition, he conducted the strata management business that the Defendant joined in 2010. He is not unfamiliar with court hearings and procedures.
Having regard to the Plaintiff's experience it is perhaps not surprising that for the most part he gave evidence in a clear and straightforward manner. His answers were generally concise and to the point. He did not waver from his claim that he provided moneys for the purchase of the Property as an investment and that he never told the Defendant that he was making a gift.
Nevertheless, the manner in which the Plaintiff adduced documentary evidence in support of his case raised some questions. In his second affidavit the Plaintiff stated that he had undertaken a search of his records and had located a copy of the draft Partnership Agreement he had prepared in December 2010. [4] The Plaintiff had not mentioned the draft Partnership Agreement in his first affidavit but in the second affidavit he asserted that the draft reflected the terms of the agreement he had reached with the Defendant. The Plaintiff's second affidavit also annexed other documents that he claimed to have located. These included the 2012 spreadsheet said to have been prepared by the Defendant. [5] The Plaintiff had annexed the 2015 spreadsheet to his first affidavit but not the 2012 spreadsheet.
The wording of the Plaintiff's second affidavit suggests that he personally conducted the searches of records which discovered significant documents not referred to in his first affidavit. In fact, as the Plaintiff's cross-examination revealed, he had commissioned an information technology expert to recover documents from back-up tapes maintained by Fresh Strata which saved data stored on the computers used by the Plaintiff and the Defendant. The expert was apparently asked to undertake this task after the Defendant had prepared and served her first affidavit. The Plaintiff participated in the process by going through the recovered documents in order to isolate documents he considered relevant to the proceedings, and taking screenshots of the properties of those documents.
One consequence of this belated revelation was that I required production to the Defendant's representatives of a hard drive on which the retrieved documents were stored. I considered this to be necessary as a matter of fairness to ensure that the Defendant's representatives had an opportunity to determine whether other recovered documents were relevant to the proceedings.
The curious manner in which the documentary evidence was presented in the Plaintiff's second affidavit also caused me to consider whether he intended the affidavit to create a false impression as to how the documents came to be identified. Although the Plaintiff denied in his evidence that the wording of the second affidavit created a false impression, I do not accept this assessment since the language used in the affidavit clearly conveys the impression that the Plaintiff personally made the inquiries that identified the documents annexed to the affidavit. However, having regard to the totality of the Plaintiff's evidence and the evidence which authenticated the documents, I am satisfied that the Plaintiff did not intend to mislead or deceive by the wording of his affidavit.
Certain other aspects of the Plaintiff's evidence invited close scrutiny. For example, the Plaintiff insisted that the gift of a 10 per cent share in the business to his daughter was "directly related to her employment [and] was not to do with her relationship with [him]". Yet his own account indicated that family considerations played some part in the decision. The Plaintiff's evidence on this point and his characterisation of the Defendant as merely a "trainee" early in her employment seems to have been influenced by the animosity between them.
It also seemed odd that the Plaintiff, when he affirmed his first affidavit, had presumably forgotten that he had prepared the draft Partnership Agreement despite its obvious significance for his case. In his oral evidence the Plaintiff claimed that he had shown the (recently located) draft to the Defendant prior to settlement but was rather vague as to the circumstances in which this occurred. Nor did the Plaintiff provide a particularly clear explanation as to why he did not persist with his efforts to record the arrangement, beyond stating that he trusted his daughter.
The Plaintiff's cross-examination included questions hinting that the draft Partnership Agreement may not have been created at the time and in the circumstances claimed by the Plaintiff. Although the proposition was not directly put to the Plaintiff, at the conclusion of his cross-examination I had some doubts as to whether the draft Partnership Agreement had been created and shown to the Defendant prior to settlement of the purchase of the Property.
Evidence given later clarified the position. The emails of 17 January 2011 [6] were tendered during the cross-examination of Ms Dunphy (the Defendant's mother). Ms Dunphy, whom I regard as having given her evidence honestly, initially said that she had not seen the draft Partnership Agreement until two days before the hearing commenced. But when shown the emails of 17 January 2011 she accepted that she had simply forgotten that the Plaintiff had forwarded the draft to her and sought her advice. It is also clear from the file of the solicitor (Ms McLean) that the Plaintiff instructed the firm in February 2011 to review the draft Partnership Agreement.
This evidence dissipated the doubts I felt as to precisely when the draft Partnership Agreement had been created and as to whether, as the Plaintiff claimed, the document had been provided to the Defendant prior to settlement of the purchase. The evidence clearly establishes that the Plaintiff provided a copy of the draft Partnership Agreement to the Defendant before settlement took place and that she had an opportunity to consider it.
The Plaintiff's account of the conversations between the Defendant and himself is corroborated by a substantial body of documentary or unchallenged evidence:
The terms of the draft Partnership Agreement support the Plaintiff's claim that he contributed $200,000 towards the purchase and renovation of the Property in return for an interest in the Property. The draft undoubtedly incorporated some terms that had not been discussed with the Defendant, including provisions structuring the arrangement as a partnership. Nonetheless the terms of the draft reflect the substance of the matters discussed between the Plaintiff and the Defendant and are plainly inconsistent with the Defendant's contention that the Plaintiff simply gave her the sum of $200,000. [7] It is true that the Defendant did not sign the draft presented to her, but as is pointed out later, [8] it is her response to the draft that is significant for present purposes.
The Plaintiff's email of 10 January 2011 to Mr Walker, copied to Mr Turner, set out the basis of what was described as the "partnership agreement" with the Defendant. [9] The email predated settlement of the purchase and is consistent with the Plaintiff's claim that he was investing $200,000 in the Property being purchased in the Defendant's name.
The fact that the Plaintiff sought advice from his solicitor concerning the draft Partnership Agreement also confirms his contention that his contribution was intended to be an investment.
The Westpac Credit Memorandum annexed to Ms Tan's affidavit indicates that the loan to the Plaintiff was for personal investment and that he would derive income from the investment property. In addition, Ms Tan gave uncontested evidence that if the Plaintiff had told her that the loan was to enable him to make a gift to the Defendant she would have recorded that information as it was relevant to the credit risk.
The Plaintiff's contribution to the purchase price was financed mainly by the loan from Westpac. I do not think it likely that the Plaintiff would have borrowed $150,000 in his own name in order to make a gift to the Defendant given that his financial position, if not precarious was not robust.
The contents of the spreadsheets (to which I refer later [10] ) prepared by or with the participation of the Defendant, reflect the substance of the arrangement alleged by the Plaintiff.
Ms Power, who appeared for the Defendant, submitted that these matters were outweighed by the Plaintiff's letter of 30 November 2010 to Ms Tan. [11] Ms Power contended that the reference in the letter to the Plaintiff "assist[ing] Michelle with the purchase" indicates that the Plaintiff's contribution was intended to be a gift rather than an investment. This letter was written following an earlier discussion between the Plaintiff and Ms Tan. Her unchallenged evidence was that she always understood that the loan to the Plaintiff was for the purpose of him investing in the Property to be purchased by the Defendant. The terms of the letter, if read in isolation, are ambiguous but are not inconsistent with the Plaintiff's account. When understood in the context of the evidence as a whole, the letter does not undermine or detract from the credibility of the Plaintiff's evidence.
My assessment is that the Plaintiff's evidence on the critical matters in dispute was truthful and largely accurate.
[8]
Defendant's evidence
The Defendant was born in 1984 and was 33 years of age when she gave evidence. She has a degree in commerce and has studied business law.
The Defendant's evidence was unconvincing in some respects and at times implausible. My strong impression was that she was extremely resentful of what she regarded as the unjust failure by the Plaintiff to recognise her worth as a contributor to the strata management business. Whether this caused the Defendant to falsify parts of her evidence or merely to reconstruct her account to fit the narrative she had come to believe need not be resolved. The point is that her evidence on some important issues was not credible.
The Defendant was reluctant to acknowledge matters that she perceived might be harmful to her case. An example is that the Defendant initially denied asking her mother to invest with her in a property, as distinct from asking her mother to act as guarantor for a loan. When shown the email of 7 October 2010 [12] the Defendant ultimately agreed that she had made a request to her mother to invest in a property that she (the Defendant) thought she might buy.
In assessing whether the Defendant's initial denial was truthful it is significant that the Defendant, by her own account, was anxious in late 2010 to enter the property market and knew that she had insufficient resources to do so without financial assistance. As she observed in her evidence, she "put forward lots of scenarios" to enable her to enter the market. It would be very surprising indeed if the Defendant had overlooked an obvious "scenario" to achieve her objective - that is, asking her mother to invest in the purchase of a suitable property. I find it difficult to accept that the Defendant did not recall before being shown the email that she had made precisely such a request to Ms Dunphy.
The Defendant denied having seen the draft Partnership Agreement prior to reading the Plaintiff's second affidavit. When shown the email in which she sought advice from Ms Dunphy, the Defendant accepted that she had seen the draft. Having regard to the Plaintiff's lapse of memory on the same issue I accept that it is plausible that the Defendant did not recall, until shown the email, that she had seen the draft Partnership Agreement in January 2011. What is significant, however, is that the Defendant made no comment to Ms Dunphy at the time expressing surprise or concern that the Plaintiff had apparently changed his mind about making an unconditional gift. Yet on the Defendant's account, the Plaintiff had resiled from his intention to make a gift of $200,000 and instead prepared the draft Partnership Agreement asserting a one third beneficial interest in the Property.
I do not regard it as credible that if the Plaintiff had changed his mind a day or two before settlement about making a gift of $200,000 the Defendant would have made no complaint to her mother. The Defendant's explanation was that the document was "sprung on" her and that is why she declined to sign the draft Partnership Agreement. But that does not explain why her response to receiving the draft Partnership Agreement was simply to ask her mother to review the document. Her response suggests that she was well aware shortly before settlement of the purchase that the Plaintiff intended to contribute funds as an investment and not as a gift to her.
The most unsatisfactory features of the Defendant's evidence were her attempts to explain away the 2012 and 2015 spreadsheets [13] and her email of 6 February 2014 to Westpac. [14] The Defendant clearly appreciated that each of these documents appeared to be inconsistent with her case. Her efforts to dissociate herself from the spreadsheets and to deny responsibility for the admission in the email that she had to repay the Plaintiff "for his share of [the] unit" were not plausible.
The 2012 spreadsheet, on its face, recorded calculations of amounts owing by the Defendant to the Plaintiff. The monthly amounts of $800 "owed to Dad" were not explicitly designated as rent, but the same monthly figure was identified as "Dad rent" in the 2015 spreadsheet. The obvious inference is that the figure of $800 per month was selected by the author of the spreadsheet as equivalent to one third of the rental value of the Property (as the Plaintiff testified). The 2012 spreadsheet also recorded expenses in respect of the Property that were to be offset against the "Money owed to Dad". The total deductions were said to have been "Divided by 3 … for [the Plaintiff's] third". It is difficult to see what these calculations could refer to other than that the rent due to the Plaintiff was to be offset by one third of the expenses incurred by the Defendant in respect of the Property. At the very least the 2012 spreadsheet is an acknowledgement by the Defendant that the Plaintiff had a beneficial interest in the Property.
The Defendant asserted that the 2012 spreadsheet had been altered from a document she prepared for a car loan. This assertion made little or no sense. Its plausibility was not assisted by the absence of any suggestion to the Plaintiff in his cross-examination that he was responsible for creating the document. Moreover, there was documentary evidence that the Defendant had created the 2012 spreadsheet on her computer on 11 June 2012.
The Defendant accepted that she had created the 2015 spreadsheet together with the Plaintiff and that she had inserted the figures for expenses. She gave various explanations for the contents of the documents. These included her claim that this was the first time the Plaintiff had raised the question of rent and that he made her insert the figures for "Dad rent"; that the document was prepared quickly and on the basis of rough estimates (notwithstanding that some of the figures recorded the precise expenses the defendant had incurred); and that in any event the figures in the document were wrong. Bearing in mind that on the Defendant's evidence she and the Plaintiff had a good relationship at this time, I reject the Defendant's explanation that the Plaintiff in some way forced her to include the references to rent.
It may well be that the discussions that led to the 2015 spreadsheet being prepared was one of the very few times the parties addressed the question of rent following the purchase of the Property. On his own admission, the Plaintiff made no demands for rent until 2016 at the earliest - his evidence was that even then he merely asked for an "accounting". The principal significance of the 2015 spreadsheet, like its earlier counterpart, is that it effectively constitutes an admission by the Defendant that the Plaintiff's contribution to the acquisition and renovation of the Property entitled him to a beneficial interest in the Property.
The Defendant's email of 6 February 2014 contains a clear admission that she owed the Plaintiff $225,000 for his share of the Property. She acknowledged that the figure represented about one third of the valuation of the Property at the time. I do not accept the Defendant's explanation that she wrote the email because she was under the complete control of her father. At the time, as has been noted, she enjoyed a good relationship with the Plaintiff. The email accurately reflected the Defendant's understanding that the Plaintiff had acquired a one third beneficial share in the Property and was entitled to a one third share of the proceeds of any sale.
[9]
Findings
For these reasons I accept the Plaintiff's account of the conversations with the Defendant that led to the Plaintiff paying the deposit on the Property and the sum of $150,000 into the joint account. The discussions were to the effect that:
the Plaintiff would contribute $200,000 towards the purchase of the Property, including the cost of renovations to be undertaken by Mr Russell;
this contribution was to be by way of an investment on the part of the Plaintiff;
the contribution would amount to approximately one third of the total cost of the Property including the renovations; and
the Defendant would be the sole registered proprietor of the Property to enable her to claim a first home owner's grant, but the Plaintiff would have a one third share in the Property in return for his contribution.
However, as I shall explain, I do not think that the parties reached an understanding prior to settlement of the purchase that the Defendant would pay rent to the Plaintiff while she and Mr Russell occupied the Property.
[10]
Plaintiff's submissions
As has been noted, the proceedings were commenced by the filing of a summons. No order was made for the matter to continue by way of pleadings. Therefore neither the Defendant nor the Court has had the benefit of a statement of claim that identifies the material facts on which the Plaintiff relies and sets out the doctrinal basis for the relief claimed in the summons.
Matters were not carried a great deal further by the Plaintiff's opening written submissions. These identified the "real issue" between the parties as whether the parties intended that the Plaintiff's provision of $200,000 to the Defendant was "a gift or an investment in the [P]roperty". The written submissions seemed to assume that if the Plaintiff's evidence was accepted it had to follow that he would be entitled to the relief claimed in the summons. Since the Plaintiff's opening submissions did not address the principles supporting his claim for relief, it is perhaps not surprising that the Defendant's opening written submissions concentrated on the factual dispute between the parties rather than on the applicable legal or equitable principles.
The Plaintiff's final written submissions addressed both the factual issues in dispute and the principles that should be applied if his evidence is accepted. On this basis, the Plaintiff submitted that the parties' conduct gave rise to an "informal agreement" or "implied contract". Although the agreement was not in writing, it was said to be supported by acts of part performance. According to Dr Peden, the conduct of the parties manifested an agreement that incorporated the principal terms of the draft Partnership Agreement that had been prepared by the Plaintiff and given by him to the Defendant prior to settlement of the purchase. The agreement therefore included the following terms:
(i) the Plaintiff would contribute $200,000 and the Defendant $400,000 to the acquisition and improvement of the Property;
(ii) the parties would open an account with Westpac and contribute to other expenses in the ratio of one third (the Plaintiff) and two thirds (the Defendant);
(iii) the Defendant and Mr Russell would renovate the Property and in return live there rent free until June 2011;
(iv) upon sale of the Property the proceeds, after payment of debts, would be distributed in the original shares.
The acts of part performance were said to be:
(i) the payment of $200,000 by the Plaintiff and $400,000 by the Defendant;
(ii) the preparation of the draft Partnership Agreement;
(iii) the opening of the joint account with Westpac;
(iv) the actions by the Defendant and Mr Russell in occupying and renovating the Property; and
(v) the creation of the spreadsheets to account for rent and expenses.
The Plaintiff submitted, in the alternative, that the Plaintiff's contribution of $200,000 to the acquisition and renovation of the Property justified the Court recognising or imposing a resulting or constructive trust in favour of the Plaintiff.
Dr Peden contended that it was open to the Court to impose a constructive trust to prevent the Defendant's unconscionable reliance on her legal title to preclude the Plaintiff's claim. Such a trust would be imposed, so it was argued, even where the dealings between the parties did not create an enforceable contract, provided that they manifested a common intention that the Plaintiff should have a beneficial interest in the Property.
Dr Peden further submitted that the Plaintiff could invoke the principle that a party who contributes a portion of the purchase price of a property acquired in the name of another, is ordinarily entitled to a beneficial interest in the property in proportion to his or her contribution. Dr Peden recognised that the presumption of advancement may apply where a parent contributes to the acquisition of a property by a child. However, in this case the presumption was rebutted because the evidence clearly established that the Plaintiff did not intend to make a gift of his contribution.
The Plaintiff submitted that the following orders, which differ in some respects from those sought in the summons, should be made:
"[i] Declaration that the parties entered into an agreement in relation to the Property, whereby the Defendant agreed to hold 1/3 of the Property on trust for the Plaintiff. Or in the alternative a declaration that the Defendant holds 1/3 of the Property on trust by way of a resulting or constructive trust for the benefit of the Plaintiff.
[ii] Order that the $379,000 held in the trust account as ordered by Darke J on 27 October 2017 be paid to the Plaintiff.
[iii] Order that the Defendant pay the Plaintiff interest on the $379,000 at the Supreme Court rate from the date of settlement to the date of payment.
[iv] Order that the Defendant pay the Plaintiff 1/3 of the net rent received from renting out the Property from 2015 to settlement of the Property in the sum of …"
The changes in the orders sought by the Plaintiff were due in part to the sale of the Property after the proceedings commenced. However, two points should be noted about proposed Order [iv]. First, it seeks payment of the net rent received (presumably by the Defendant) from the date the Property was let in 2015. It is not clear why the Plaintiff apparently abandoned his claim for an account of rent due from the date the Property was acquired. Secondly, the proposed Order does not quantify the amount sought from the rental received by the Defendant.
[11]
Defendant's submissions
The Defendant's closing submissions addressed the factual issues dealt with earlier in this judgment. The submissions also addressed the position should the Plaintiff's evidence be preferred over that of the Defendant (as I have found).
The Defendant submitted that even if the Plaintiff's account is accepted, no finding should be made that the parties had reached a concluded and enforceable agreement. Ms Power pointed out that, although the Defendant may have received the draft Partnership Agreement, she never signed it. Moreover, the draft did not reflect what had actually occurred. For example, the parties had never discussed forming a partnership and the parties had not reached any agreement as to the quantum of rent payable by the Defendant or how it was to be paid. The Plaintiff had never demanded payment of rent, nor had the Defendant paid any rent, while the Defendant had paid all expenses connected with the Property (except for the cost of renovations met from the joint account). At most, so it was argued, the parties engaged in pre-contractual discussions or negotiations. This conclusion was supported by the solicitor's file which showed that the Plaintiff was contemplating more than one legal structure for his "investment", including a loan rather than a partnership. The fact that the Plaintiff ultimately decided not to proceed with formal documentation showed that no final agreement had been reached. Thus the Plaintiff had not established that an express trust had been created.
The Defendant contended that even if the parties had reached a final agreement there were no acts of part performance that would overcome the need for an instrument in writing signed by the Defendant. The draft Partnership Agreement was prepared only by the Plaintiff and had not been signed or acknowledged by the Defendant. The joint Westpac account was opened at the Plaintiff's initiative and was not referable to an agreement of the kind alleged by the Plaintiff. The fact that the Plaintiff lived on the Property and paid expenses was consistent with her claim to sole ownership of the Property.
The Defendant submitted that it was not open to the Court to find that a constructive trust arose because there "was no common intention between the parties" to create a trust. However, this submission appears to rest on the contention that the Plaintiff's contribution to the acquisition and renovation of the Property was a gift rather than an investment. That factual contention has been rejected. It is not entirely clear that the Defendant resisted the recognition of a constructive trust if her evidence was not accepted. I shall assume that she did intend to resist that conclusion.
Finally the Defendant disputed that it was open to the Court to impose a resulting trust in favour of the Plaintiff by reason of his contributions to the acquisition and improvement of the Property. However, the basis of this submission also appears to be that the Plaintiff's contributions should be characterised as a gift rather than an investment. The submissions provided no reasons why a resulting trust should not be imposed if (as I have found) the Plaintiff's contributions were intended to be an investment. The only specific contention advanced was to the effect that the Plaintiff's contributions did not include the stamp duty of $14,076.25 and conveyancing costs of $1,200.
[12]
Reasoning
As the Plaintiff submitted, the first question that should be considered is whether the dealings between the parties had the effect of creating an express trust in favour of the Plaintiff. Only if the Plaintiff's contention that such a trust created is rejected it is necessary to consider whether his contribution to the acquisition and improvement of the Property justify the imputation or presumption of a resulting trust in favour of the Plaintiff. This was the approach taken by Ward CJ in Eq in Amit Laundry Pty Ltd v Jain (Amit Laundry). [15]
[13]
A concluded agreement?
The Plaintiff's first argument is that the implied contract between the parties created an express trust in his favour incorporating the terms identified in the draft Partnership Agreement. An enforceable contract can be concluded not only by express agreement between the parties but by a course of conduct that manifests an intention to enter into a final and concluded agreement. [16] However the authorities also establish that the character and circumstances of the contract must indicate unambiguously that the parties intended to contract. [17]
In the present case, on the Plaintiff's account, there were two conversations in which he and the Defendant discussed whether he would contribute to the acquisition of the Property. The first conversation can fairly be characterised as preliminary, in the sense that the parties discussed the "possibility" of the Plaintiff investing. In that conversation the Defendant proposed paying rent at about one third of the market rent, although a precise figure was not identified.
In the crucial second conversation the Plaintiff responded to the Defendant's assessment that the Property could be acquired and renovated at a total cost of $600,000 by indicating that he would be able to contribute $200,000. It was on the basis of this conversation that the Plaintiff paid the deposit (through Gateway), borrowed $150,000 from Westpac and (with the Defendant's agreement) paid the borrowed funds into the joint account. Nothing was said in the second conversation, however, about any rental payments to be made by the Defendant. The Plaintiff later prepared the draft Partnership Agreement which for the first time introduced the concept of a partnership to the arrangement (he also referred to a partnership in the email of 10 January 2011 copied to Mr Turner) [18] . The introduction of this concept, not discussed between the parties, suggests that the informal arrangement between them had not reached the stage of a final and concluded agreement.
This conclusion is reinforced by the disconformity between the terms of the draft Partnership Agreement and the conversations that preceded it. The draft included a provision (cl 7) stating that in return for Mr Russell's labour in carrying out the renovations, he and the Defendant could reside at the Property rent free until 18 July 2011. There is, however, no direct evidence that any such arrangement had been discussed with the Defendant (although it was also referred to in the Plaintiff's email of 10 January 2011). Furthermore the draft Partnership Agreement did not include an express term requiring the Defendant to pay rent to the Plaintiff, even though this had been referred to in the first conversation.
In these circumstances, if it was necessary to decide whether the parties had entered into a final and binding contractual arrangement, I would conclude that they had not. There were matters, particularly in relation to the payment of rent, that had not been finalised and at the time the Plaintiff made his contributions he contemplated that any arrangement should be formalised by the execution of a written agreement incorporating the terms agreed between the parties.
[14]
Express trust?
The rejection of the Plaintiff's first submission does not, however, mean that his claim based on the creation of an express trust must fail. As French CJ pointed out in Korda v Australian Executor Trustees (SA) Ltd (Korda) [19] , the three requirements for the creation of an express trust are certainty of intention to create the trust, certainty of subject matter and certainty of object (in the sense that the beneficiary can be ascertained with certainty). The issue in the present case is whether the requisite intention is established.
In Korda, French CJ explained that whether an express trust exists must always be answered by reference to intention. [20] His Honour continued as follows: [21]
"An express trust cannot be created unless the person or persons creating it can be taken to have intended to do so. Absent … an explicit declaration of such an intention, the court must determine whether intention is to be imputed. It does so by reference to the language of the documents or oral dealings having regard to the nature of the transactions and the circumstances attending the relationship between the parties." (Citations omitted.)
The relevant intention is that manifested by the words and actions of the parties, not their subjective intentions. [22] It is necessary in order for the court to find that an express trust has been created, that the intention of the putative trustee be sufficiently clear. [23] But even if the language employed by the parties is inexplicit, the court may infer an intention to create a trust from other language used by them, the nature of the transaction and the circumstances attending the relationship. [24]
In Amit Laundry, [25] Ward CJ in Eq quoted the observations of Elliott J in Nguyen v Phan (No 2) [26] as a useful summary of the position:
"In order to find an express trust was created, it is not necessary for the plaintiffs to prove the parties specifically and formally turned their minds to the fact that a trust was being created; no special or technical language needs to be used; it is sufficient if the intention to create a trust may be ascertained from what the parties actually agreed or said. The intention is imputed when manifest in what is expressly agreed or declared. That intention must be clear from the language used, as objectively understood in the relevant circumstances of the case, including the relationship of the parties. More than once, Gummow J has observed that the precision that might be expected in arms-length commercial transactions is not to be expected in private family dealings. (Footnotes omitted.)
In the present case, neither party during their conversations or otherwise adverted to the question of whether the Plaintiff's "investment" in the Property should create a trust in his favour. The concept of a trust was never mentioned between them and was not even referred to in the draft Partnership Agreement prepared by the Plaintiff. Nonetheless, the communications between the parties and their subsequent actions, objectively assessed, establish that both the Plaintiff and the Defendant intended the Plaintiff to obtain a beneficial interest in the Property notwithstanding the Defendant's registration as the sole proprietor.
The Plaintiff communicated to the Defendant that he was prepared to contribute $200,000 to the purchase and renovation of the Property as an investment. He also communicated that his contribution would be on the basis that he would acquire a "one third share" in the Property. It was agreed between the parties that the Defendant alone would be registered as the proprietor, but that was because (as they discussed) she wished to claim the first home owner's grant.
The Defendant acknowledged to the Plaintiff and accepted that his contributions would be on the basis discussed between them. As the Defendant's email to Westpac of 6 February 2014 confirms, the mutual understanding of the parties, derived from their discussions prior to settlement of the purchase, was that the Plaintiff would have a beneficial interest in the Property entitling him to a share of the increase in value if and when the Property was sold. Their intention was not that the Plaintiff would lend money to the Defendant and be repaid the principal sum (with or without interest) in due course. Their mutual intention could be implemented only by the creation of a trust.
On the faith of the discussions between the parties, the Plaintiff paid the deposit of $56,250, borrowed $150,000 from Westpac and paid the borrowed funds into the joint account. As the parties expressly contemplated, the funds were used to pay the balance of the purchase price and to finance the renovations carried out by Mr Russell.
Although the arrangement was not formalised, the conversations between the parties and their actions show that they intended that:
(i) the Plaintiff would contribute $200,000 to the acquisition and renovation of the Property;
(ii) the Property would be acquired in the Defendant's name; and
(iii) the Defendant would hold the legal title in trust as to a one third beneficial interest for the Plaintiff.
I do not consider that the parties intended that the Defendant would be obliged to pay "rent" to the Plaintiff while she occupied the Property. Although the payment of rent was referred to in the first (preliminary) conversation, the issue was not revisited in the second conversation. At no stage prior to the creation of the 2012 spreadsheet was any figure attributed to "rent". Nor did the Plaintiff seek payment of any rent. The first reference to the Defendant not being required to pay rent while renovations were carried out appears to have been in the draft Partnership Agreement prepared by the Plaintiff. But that document did not incorporate a term requiring the Defendant to pay or account for rent. Nor does there seem to have been any discussion prior to settlement as to the Plaintiff contributing to outgoings, although this was raised as an issue in the 2012 and 2015 spreadsheets.
There is no doubt that the question of rent was discussed in the context of the 2012 and 2015 spreadsheets. But those discussions occurred long after settlement of the purchase. While the Plaintiff, on the basis of the initial conversation in 2010 with the Defendant may have had in mind that an unquantified amount for rent would be payable, I am not satisfied that the dealings between the parties gave rise to a common intention that the Defendant should pay rent to the Plaintiff while she remained in occupation of the Property.
In my view, the conversations and circumstances to which I have referred made the parties' intentions sufficiently explicit for the creation of a trust. The case is very different, for example, from Bloch v Bloch, [27] where parents contributed funds to the acquisition of a property in their son's name. In that case, at the time the relevant conversation took place no particular property was in contemplation and there were no discussions as to who should become the registered proprietor when a property was ultimately purchased. The parents bought a property some months later when the son was out of the country and decided without reference to him to put the property in his name. [28] In the present case, among other differences the critical conversation took place when the Property had been located and both parties agreed that the Property should be purchased in the Defendant's name to allow her to obtain the first home owner's grant.
Two further points should be noted. First, the Plaintiff's contribution turned out to be slightly more than the sum of $200,000 referred to in the discussions between the parties. Neither party suggested that anything turns on the additional amount contributed. Secondly, the Plaintiff paid the deposit on the purchase from Gateway's account rather than from his own. The case was conducted on the basis that the amounts paid from Gateway's account are to be regarded as contributions by the Plaintiff personally to the acquisition and renovation of the Project. The Defendant made no submission to the contrary.
[15]
Absence of writing
The Defendant's written submissions relied on ss 23C(1) and 54A of the Conveyancing Act 1919 (NSW) (Conveyancing Act) as a defence to the Plaintiff's claim insofar as it was founded on the parties having reached a final and concluded agreement. It is not clear whether Ms Power also relied on s 23C of the Conveyancing Act if a finding was made that, even though the parties did not enter into an enforceable agreement, an inference should be drawn that they intended to create a trust in the Plaintiff's favour. I proceed on the assumption that she did intend to rely on s 23C.
Section 23C provides as follows:
"Instruments required to be in writing
(1) Subject to the provisions of this Act with respect to the creation of interests in land by parol:
(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person's agent thereunto lawfully authorised in writing, or by will, or by operation of law,
(b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person's will,
(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same or by the person's will, or by the person's agent thereunto lawfully authorised in writing.
(2) This section does not affect the creation or operation of resulting, implied, or constructive trusts."
As Hope J pointed out in Last v Rosenfeld, [29] no sooner had the Statute of Frauds (the predecessor of s 23C of the Conveyancing Act) been enacted in 1677 than the courts set about ameliorating its effect in circumstances where it was thought that the legislation could not be intended to apply. The principle was stated in the leading case of Rochefoucauld v Boustead [30] as follows:
"the Statute of Frauds does not prevent the proof of a fraud; and that it is a fraud on the part of a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land himself. Consequently, notwithstanding the statute, it is competent for a person claiming land conveyed to another to prove by parol evidence that it was so conveyed upon trust for the claimant, and that the grantee, knowing the facts, is denying the trust and relying upon the form of conveyance and the statute, in order to keep the land himself."
The repudiation by the person bound by the trust of the terms on which he or she was entrusted with legal title is regarded as the fraudulent use of another's confidence which the Statute of Frauds is not intended to cover. [31] There are many circumstances in which this principle can be applied, including circumstances of the kind involved in the present case. [32]
The Defendant acquired title to the Property using funds provided by the Plaintiff. She also did so having agreed that the Plaintiff would have a one third beneficial share in the Property in return for his contributions. The Defendant denied the Plaintiff's entitlement to a share in the Property knowing of the facts and relied on her legal title to the exclusion of the Plaintiff's interest. She therefore cannot invoke s 23C(1) of the Conveyancing Act to defeat the Plaintiff's claim to an equitable interest in the Property.
[16]
Resulting trust
In view of the conclusion I have reached it is not necessary to address the Plaintiff's alternative argument that he is entitled to rely on the principles relating to resulting trusts. If it was necessary to do so, I would find, in the language of Wilson J in Bloch v Bloch, [33] that "the facts present a classic illustration of the creation of a resulting trust".
It is sufficient for present purposes to quote the helpful summary of principles stated by Ward CJ in Eq in Amit Laundry: [34]
"[161] The relevant presumption was formulated (at 266-267) in Calverley [v Green [35] ] by Deane J in the following terms (see also Gibbs CJ at 246-247 and Mason and Brennan JJ at 258):
… where two or more persons advance the purchase price of property in different shares, it is presumed that the person or persons to whom the legal title is transferred holds or hold the property upon resulting trust in favour of those who provided the purchase price in the shares in which they provided it.
…
[163] The presumption of a resulting trust is … a presumption as to a declaration of trust, premised on a presumed intention to create an equitable (beneficial) interest in the acquired property in someone other than, or in addition to, the person in whom legal title is vested. Once the primary fact giving rise to the presumption is established (for example, that one or more persons has or have provided part or all of the purchase price but the legal title has been vested in another), the burden falls on the party disputing the existence of a resulting trust … to rebut the presumed fact on the balance of probabilities … Where that party fails to rebut the presumption, the court 'upon consideration of all circumstances presumes there was a declaration [of trust] though the plain and direct proof thereof be not extant' …
[164] So understood, the presumption of resulting trust is thus the 'starting point of a factual enquiry' about the intention of the party (or parties) who provided the funds for the purchase in question … the presumption operating 'to place the burden of proof [on the party disputing the trust], if there be a paucity of evidence bearing upon such a relevant matter as the intention of the party who provided the funds for the purchase' …" (Most citations omitted.)
In this case, the Plaintiff contributed one third of the purchase price of the Property, including the cost of the renovations contemplated at the time the purchase was settled. The presumption is therefore that the parties intended that the Defendant should hold the legal title on trust for the Plaintiff in proportion to the Plaintiff's contribution - that is, in trust as to a one third beneficial interest in the Property. The evidence which I have accepted establishes that the parties specifically contemplated that the Plaintiff would acquire a one third beneficial interest in the Property.
Where a parent contributes funds to the purchase of a property in the name of a child, the child may be able to rely on the presumption of advancement to rebut the inference that the parties intended a trust to arise. Whatever the doctrinal basis of the presumption, [36] the Defendant cannot invoke it in the present case. On the findings that have been made, the Plaintiff's intention was not to benefit the Defendant but to obtain a beneficial interest in the Property proportionate to his contribution.
[17]
Orders
The parties should have leave to file written submissions as to the form of orders. The following orders should be made:
Declare that the Defendant holds the proceeds of sale of the Property referred to in the Summons on trust for the Plaintiff as to a one third share.
Order that the Defendant pay from the proceeds of sale of the Property the sum of $379,000, being one third of the proceeds of sale.
Direct that the moneys held in the controlled moneys account referred to in the orders made by Darke J on 27 October 2017 be paid to the Plaintiff or at his direction.
Order that the Defendant pay the Plaintiff's costs of the proceedings.
Note that Orders 1-4 are subject to Orders 6-8.
Direct that any written submissions proposing amendments to Orders 1-4 be filed and served within 14 days.
Direct that if one party files written submissions within 14 days, the other party should file a reply within a further seven days.
If no written submissions are received within 14 days, Orders 1-4 will become final at the expiration of 14 days.
[18]
Endnotes
The caveat was given the dealing number AM 702816J.
See at [100] below.
Evidence Act 1995 (NSW), s 140(1).
See at [22] above.
See at [37] above.
See at [27] above.
See at [22] above.
See at [84] below.
See at [26] above.
See at [87] below.
See at [21] above.
See at [18] above.
See at [88]-[89] below.
See at [91] below.
[2017] NSWSC 1495 at [141] ff.
CSR Ltd v Adecco (Australia) Pty Ltd [2017] NSWCA 121 at [88]-[92] (McColl JA, Macfarlan and Simpson JJA agreeing).
Laidlaw v Hillier Hewitt Esley Pty Ltd [2009] NSWCA 44 at [5] (Macfarlan JA, Beazley JA agreeing, Handley AJA also agreeing with the analysis but dissenting in the result), citing Brogden v Metropolitan Railway Co (1877) 2 App Cas 666.
See at [26] above.
(2015) 255 CLR 62; [2015] HCA 6 at [7].
Korda at [3], citing Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia (1991) 30 FCR 491 at 502 (Gummow J).
Korda at [3].
Byrnes v Kendle (2011) 243 CLR 253 at [65] (Gummow and Hayne JJ), at [110] (Heydon and Crennan JJ).
Bloch v Bloch (1981) 180 CLR 390; [1981] HCA 56 at 396 (Wilson J, Gibbs CJ, Murphy and Aicken JJ agreeing).
Byrnes v Kendle at [112] citing Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (In Liq) (2000) 202 CLR 588; [2000] HCA 25, at [34] (Gaudron, McHugh, Gummow and Hayne JJ).
Amit Laundry at [147].
[2015] VSC 634 at [237].
(1981) 180 CLR 390; [1981] HCA 56.
Bloch v Bloch at 395-6.
[1972] 2 NSWLR 923 at 927.
[1895] 1 Ch 196 at 206.
Bloch v Bloch at 403 (Brennan J), citing Cadd v Cadd (1909) 9 CLR 171; [1909] HCA 59 at 187 (Isaacs J).
Cf Bloch v Bloch at 403. Many of the cases concern s 54A of the Conveyancing Act but the same principles apply to attempts to use s 23C as an instrument of fraud: Ciaglia v Ciaglia (2010) 269 ALR 175; [2010] NSWSC 341 at [79] (White J).
Bloch v Bloch at 397.
Amit Laundry at [161]; [163]-[164].
(1984) 155 CLR 242; [1984] HCA 89.
Amit Laundry at [230]-[231].
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Decision last updated: 24 May 2018