Supreme Court of SA|2002-07-16|Before: Besanko J

For the reasons I have given I am not prepared to find on the balance of probabilities that there was an agreement, understanding or common intention between, or on the part of, Mr and Mrs Jimenez that the property would be held on trust for Ramon. As I have said I think the conversations were more general than that. It was understood that the property would not be given to Mr Jimenez's parents. Mr and Mrs Jimenez would retain control of the property ultimately for Ramon's benefit. The precise mechanism whereby this was to be achieved was not the subject of any agreement, understanding or common intention. The second conversation took place in this context.

It seems to me that these findings are fatal to the argument that there is a trust in favour of Ramon. Ramon has failed to establish a clear intention to create a trust in his favour.[6]

In case I am wrong in making these findings of fact, I now go on to consider the second and third issues referred to above. In other words, I now consider the matter on the assumption (contrary to my findings) that there was an agreement, understanding or common intention between, or on the part of, Mr Jimenez and Mrs Jimenez that there would be a trust in favour of Ramon.

I do not think that the conversations (accepting that they were in the terms deposed to by Mrs Jimenez) gave rise to a trust obligation in favour of Ramon.

First, I note that Mrs Jimenez said that the first conversation she had with Mr Jimenez took place in late 1987. At that time the Contract Note for the purchase of the property had not been signed. Neither Mr Jimenez nor Mrs Jimenez had an interest in the property and there was no property over which a trust could be declared at that stage.[7] Even if the first conversation took place after the Contract Note was signed and even if Mr Jimenez had an equitable interest in the property by reason of his rights under the contract,[8] Mrs Jimenez had no interest in the property until the purchase monies were provided. It may be inferred from the Declaration of Trust that by that time Mr Jimenez had changed his mind about who was to be the beneficiary.

Secondly, it was envisaged by Mrs Jimenez that documents would be prepared. The execution of the documents would establish or constitute the trust.

As I have said, it may be inferred that after the conversations Mr Jimenez changed his mind. In my opinion he was free to do so. The first conversation between Mr and Mrs Jimenez gave rise to an understanding between husband and wife, not an enforceable contract. The fact that Mr Jimenez put in place an arrangement contrary to that which was the subject of the understanding may effect the efficacy of what was put in place. However, absent an enforceable contract (and for that matter proceedings to enforce a contract) the understanding remains just that. It was not an existing declaration of trust.

The second conversation can be given no greater legal effect than the first.

"29. (1) Subject to the provisions hereinafter contained 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 his 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 his 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 his agent thereunto lawfully authorised in writing or by will.

(2) This section shall not affect the creation or operation of resulting, implied, or constructive trusts."

The provisions of the Act dealing with the creation of interests in land by parol are not relevant.

Section 29(1)(a) and (c) differ from s 29(1)(b) in that they require the creation or disposition of the interest to be in writing, whereas s 29(1)(b) requires the declaration to be manifested and proved by some writing. Writing sufficient to satisfy the terms of s 29(1)(b) may be created well after the declaration of trust and may be an affidavit.[9]

A matter debated in the authorities is whether both s 29(1)(a) and 1(b) apply to a declaration of trust in land or whether a declaration of trust is governed solely by s 29(1)(b). I agree, for the reasons given by Lee J in Secretary, Department of Social Security v James,[10] that the equivalent of s 29(1)(a) does not apply to declarations of trust in land.[11] Before me the plaintiff proceeded on the basis that there is only one relevant subsection on the facts of this case and that is s 29(1)(b).

The person able to declare the trust is the beneficial owner of the property.[12] However, it appears that a writing signed by the alleged trustee is also sufficient to satisfy the requirements of the subsection.[13]

Ramon put two arguments in response to the plaintiff's submission that the alleged trust was unenforceable by reason of non compliance with the provisions of s 29(1)(b).

First, he submitted that paragraph 16 of Mrs Jimenez's affidavit sworn on 27 August 1997 is sufficient to satisfy the requirements of s 29(1)(b). In my opinion this argument fails for a number of reasons. It has long been established that the writing required by the section must show not only that there is a trust, but also what the trust is. In Smith v Matthews[14] Turner LJ said,

"I take it therefore, that when this Court is called upon to establish or act upon a trust of lands by declaration or creation, it must not only be manifested and proved by writing, signed by the party by law enabled to declare the trust, that there is a trust, but it must also be manifested and proved by writing, signed as required what that trust is."

The writing must clearly set out the beneficiaries, the trust property and the nature of the trust. Paragraph 16 of the affidavit identifies the beneficiary and the trust property. It does not identify the nature of the trust, and in particular (as pleaded by both Mrs Jimenez and Ramon) it does not contain a statement that Mr Jimenez senior and Petra were to occupy the property for the term of their respective lives and thereafter the property was to pass to Ramon absolutely. Furthermore the affidavit is signed by Mrs Jimenez. It is not signed by Mr Jimenez. Both Mr and Mrs Jimenez are the persons able to declare the trust within s 29(1) (b). In my opinion the signature of only one of the persons able to declare the trust is not sufficient to satisfy the requirements of s 29 (1)(b).

Secondly, Ramon submitted that to allow the plaintiff to rely on the provisions of the LPA would be to allow the statutory provisions to be used as an instrument of fraud. It is true that equity will not permit the statutory provisions to be used as an instrument of fraud, and that the Court will admit oral evidence in cases of fraud. It is said that the principle does not apply in the case of an owner of land who declares himself a trustee by oral statement not for value.[15] The principle does apply in the case of a person to whom land is conveyed as a trustee, and who knows it was so conveyed and yet who denies the trust and claims the land as his own.

In Rochefoucauld v Boustead[16] Lindley LJ speaking for the Court of Appeal said,

"It is further established by a series of cases, the propriety of which cannot now be questioned, that 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."

In Bannister v Bannister [17] Scott LJ speaking for the Court of Appeal said,

"It is, we think, clearly a mistake to suppose that the equitable principle on which a constructive trust is raised against a person who insists on the absolute character of a conveyance to himself for the purpose of defeating a beneficial interest, which, according to the true bargain, was to belong to another, is confined to cases in which the conveyance itself was fraudulently obtained. The fraud which brings the principle into play arises as soon as the absolute character of the conveyance is set up for the purpose of defeating the beneficial interest, and that is the fraud to cover which the Statute of Frauds or the corresponding provisions of the Law of Property Act, 1925, cannot be called in aid in cases in which no written evidence of the real bargain is available."

In Bloch v Bloch[18] Brennan J described the principle in these terms,

" The defendant set up s. 7 of the Statute of Frauds 1677, but the plea was rejected because his Honour thought that the trust affecting the land was not an express trust. Following Lord Diplock's classification - a resulting, implied or constructive trust, it being unnecessary to distinguish between them - the trust in the present case was held to fall outside the net of s. 7 and within the saving provisions of s. 8 of the Statute of Frauds 1677. And so the plea failed, as it was bound to do. The principle is that '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' (per Lindley L.J. in Rochefoucauld v Boustead, [1897] 1 Ch. 196, at p. 206). Whatever be the classification of the trust which binds the person entrusted with the legal title to property, his repudiation of the terms upon which he was entrusted with that property "is a fraudulent use of another's confidence, and the Statute is not intended to cover fraud" (per Isaacs J. in Cadd v Cadd [1909] ArgusLawRp 104; (1909), 9 C.L.R. 171, at p. 187; and see Lincoln v Wright [1859] EngR 406; (1859), 4 De G. & J. 16, at pp. 22, 23; [1859] EngR 406; 45 E.R. 6, at 9). Scott L.J. said in Bannister v Bannister, [1948] 2 All E.R. 133, at p. 136:

'The fraud which brings the principle into play arises as soon as the absolute character of the conveyance is set up for the purpose of defeating the beneficial interest, and that is the fraud to cover which the Statute of Frauds ... cannot be called in aid in cases in which no written evdence (sic) of the real bargain is available.'"

I think the trust which is enforced in the circumstances in which the Court applies the principle that the statute may not be used as an instrument of fraud is an express trust rather than a constructive trust.[19] What is proved by the party permitted to put forward oral evidence is an express trust.

The circumstances of this case are somewhat unusual. The alleged trustee, Petra, did not appear before me and argue that she was entitled to hold the property free of any trust. In practical terms, the contest is between a person claiming a security interest over the alleged beneficial interest of the person able to declare the trust, and a person claiming that a declaration of trust was made in his favour.

For the reasons which follow I do not think the principle that equity will not allow the statute to be used as an instrument of fraud applies in the circumstances of this case.

First, on the evidence before me I would not be prepared to find that there was any fraud on the part of Mr Jimenez senior and Petra in connection with the transfer of the property to them. It may be that in general terms they considered that the property would ultimately belong, or go, to Ramon, but it cannot be inferred from that fact that they executed the Declaration of Trust knowing that it did not reflect the true position.

Nor does Petra seek to set up the absolute character of the transfer so as to defeat the beneficial interest. No one has suggested that Petra holds the beneficial interest in the property. Both the plaintiff and Ramon assert that Petra holds the property on trust. That much is agreed.

Even if it is Mr Jimenez's conduct which is the relevant conduct, I do not think the principle applies. It is a case of one person able to declare a trust not carrying out the common understanding with the other person able to declare the trust and instead putting in place an arrangement whereby both of them had a beneficial interest in the property commensurate with the purchase monies each of them provided. To my mind that is not fraud in the relevant sense.

Secondly, I do not think the principle operates unless fraud will result from the application of the statutory provisions. That will not happen in this case. After the transfer Mr Jimenez senior and Petra held the property on trust for Mr and Mrs Jimenez either by reason of the Declaration of Trust, or if this is ineffective, by reason of a resulting trust. In my opinion, the principle that equity will not allow the statutory provisions to be used as an instrument of fraud does not apply to enable a third party volunteer to enforce a trust in the absence of writing in circumstances where there is clearly a resulting trust in favour of the person able to declare the trust. None of the cases seem to go that far and to hold that the principle could be applied in such circumstances would go a long way towards emasculating the operation of the statutory provisions. I realise that there are some difficulties of analysis in cases where written evidence comes into existence after a trust has been created orally but in my opinion they are not sufficient to alter the conclusion I have reached.[20]

For these reasons, I conclude that even assuming there was a trust created orally in favour of Ramon that trust was unenforceable by reason of the provisions of s 29(1) of the LPA.

In the circumstances I am prepared to make the declarations to which particular defendants have consented (ie paragraphs AA (excluding the reference to the second defendant) and AC). As I have reached the conclusion that there was and is no enforceable trust in favour of Ramon, I am prepared to make an order that the caveat lodged by Ramon be removed.

I will hear the parties as to the formal orders to be made and any other matters including costs.

Dyer v Dyer (1788) 2 Cox 92 at 93; [1788] EWHC J8; 30 ER 42 at 43; Napier v Public Trustee (WA) (1980) 32 ALR 153 at 158

Equuscorp Pty Ltd v Jimenez & Ors [2001] SASC 165

Daemar v Industrial Commission of New South Wales and Anor [No 2] (1990) 22 NSWLR 178

R v C [1993] SASC 4095; (1993) 60 SASR 467 per King CJ at 473

Shephard v Cartwright [1954] UKHL 2; [1955] AC 431; Calverley v Green [1984] HCA 81; (1984) 155 CLR 242 at 262

In Re Cozens; Green v Brisley [1913] 2 Ch 478; Commissioner of Stamp Duties (Qld) v Jolliffe [1920] HCA 45; (1920) 28 CLR 178; Tito v Waddell (No 2) (1977) Ch 106 per Megarry V-C at 111; Bloch v Bloch [1981] HCA 56; (1981) 55 ALJR 701

Permanent Trustee Co v Scales [1930] NSWStRp 51; (1930) 30 NSWSR 391

Lysaght v Edwards (1876) 2 Ch D. 499; Walsh v Lonsdale (1882) 21 Ch D 9; As to the effect of the nomination see Harry v Fidelity Nominees Pty Ltd (1985) 41 SASR 458

Di Pietro v Official Trustee (1995) 59 FCR 470; Hagan v Waterhouse (1992) 34 NSWLR 308, See also Adamson v Hayes [1973] HCA 6; (1973) 130 CLR 276

Tierney v Wood [1854] EngR 646; (1854) 19 BEAV. 330; 52 ER 377 at 379-380; Kronheim v Johnson (1877) 7 Ch D.60 per Fry J at 66

Mountain v Styak [1921] NZGazLawRp 168; [1922] NZLR 131; Principles of the Law of Trusts Ford and Lee 3rd Ed. para [6070]

Jacobs Law of Trusts in Australia 6th ed. Para [708]

Di Pietro v Official Trustee (1995) 59 FCR 470 per Sackville J at 482

Principles of the Law of Trusts Ford & Lee 3rd Ed paras [6090] - [6100]

[1] Dyer v Dyer (1788) 2 Cox 92 at 93; [1788] EWHC J8; 30 ER 42 at 43; Napier v Public Trustee (WA) (1980) 32 ALR 153 at 158

[2] Equuscorp Pty Ltd v Jimenez & Ors [2001] SASC 165

[3] Daemar v Industrial Commission of New South Wales and Anor [No 2] (1990) 22 NSWLR 178

[4] R v C [1993] SASC 4095; (1993) 60 SASR 467 per King CJ at 473

[5] Shephard v Cartwright [1954] UKHL 2; [1955] AC 431; Calverley v Green [1984] HCA 81; (1984) 155 CLR 242 at 262

[6] In Re Cozens; Green v Brisley [1913] 2 Ch 478; Commissioner of Stamp Duties (Qld) v Jolliffe [1920] HCA 45; (1920) 28 CLR 178; Tito v Waddell (No 2) (1977) Ch 106 per Megarry V-C at 111; Bloch v Bloch [1981] HCA 56; (1981) 55 ALJR 701

[7] Permanent Trustee Co v Scales [1930] NSWStRp 51; (1930) 30 NSWSR 391

[8] Lysaght v Edwards (1876) 2 Ch D. 499; Walsh v Lonsdale (1882) 21 Ch D 9; As to the effect of the nomination see Harry v Fidelity Nominees Pty Ltd (1985) 41 SASR 458

[11] Di Pietro v Official Trustee (1995) 59 FCR 470; Hagan v Waterhouse (1992) 34 NSWLR 308, See also Adamson v Hayes [1973] HCA 6; (1973) 130 CLR 276

[12] Tierney v Wood [1854] EngR 646; (1854) 19 BEAV. 330; 52 ER 377 at 379-380; Kronheim v Johnson (1877) 7 Ch D.60 per Fry J at 66

[13] Mountain v Styak [1921] NZGazLawRp 168; [1922] NZLR 131; Principles of the Law of Trusts Ford and Lee 3rd Ed. para [6070]

[15] Jacobs Law of Trusts in Australia 6th ed. Para [708]

[19] Di Pietro v Official Trustee (1995) 59 FCR 470 per Sackville J at 482

[20] Principles of the Law of Trusts Ford & Lee 3rd Ed paras [6090] - [6100]

Law of Property Act 1936(SA)

Real Property Act 1886(SA)

Supreme Court Rules 1987

Law of Property Act 1936(SA)

Supreme Court Rules 1987

Real Property Act 1886(SA)

EQUUSCORP PTY LTD v MANUEL JIMENEZ & ORS No. SCCIV-00-474 [2002] SASC 225 (16 July 2002)

Bankruptcy Act 1966 (Cth) Part X;

Real Property Act 1886 ;

Law of Property Act 1936 s29;

Supreme Court Rules 1987 r38;

Texts ;

Ford & Lee, Principles of the Law of Trusts 3rd Edition;

Jacobs, Law of Trusts in Australia 6th Edition, referred to.

Equuscorp Pty Ltd v Jimenez & Ors [2001] SASC 165 ;

Secretary, Department of Social Security v James [1990] FCA 150; (1990) 95 ALR 615;

Smith v Matthews [1861] EngR 426; (1861) 3 De G. F. & J. 138; 45 ER 831;

Rochefoucauld v Boustead [1897] 1 Ch 196;

Bannister v Bannister (1948) 2 All ER 133;

Bloch v Bloch [1981] HCA 56; (1981) 55 ALJR 701, discussed.

Dyer v Dyer (1788) 2 Cox 92; [1788] EWHC J8; 30 ER 42;

Napier v Public Trustee (WA) (1980) 32 ALR 153;

Shephard v Cartwright [1954] UKHL 2; [1955] AC 431;

Calverley v Green [1984] HCA 81; (1984) 155 CLR 242;

In Re Cozens; Green v Brisley [1913] 2 Ch 478;

Commissioner of Stamp Duties (Qld) v Jolliffe [1920] HCA 45; (1920) 28 CLR 178;

Tito v Waddell (No 2) (1977) Ch 106;

Bloch v Bloch [1981] HCA 56; (1981) 55 ALJR 701;

Permanent Trustee Co v Scales (1930) 30 NSWLR 391;

Lysaght v Edwards (1876) 2 Ch D 499;

Walsh v Lonsdale (1882) 21 Ch D 9;

Harry v Fidelity Nominees Pty Ltd (1985) 41 SASR 458;

Barkwork v Young (1856) 26 LJ Ch 153;

Di Pietro v Official Trustee (1995) 59 FCR 40;

Hagan v Waterhouse (1992) 43 NSWLR 308;

Adamson v Hayes [1973] HCA 6; (1973) 130 CLR 276;

Tierney v Wood [1854] EngR 646; (1854) 19 BEAV. 330; 52 ER 377;

Kronheim v Johnson (1877) 7 Ch D 60;

Mountain v Styak [1921] NZGazLawRp 168; [1922] NZLR 131;

R v C [1993] SASC 4095; (1993) 60 SASR 467;

Daemar v Industrial Commission of New South Wales and Anor [No 2] (1990) 22 NSWLR 178, considered.

EQUUSCORP PTY LTD v MANUEL JIMENEZ & ORS No. SCCIV-00-474 [2002] SASC 225

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EQUUSCORP PTY LTD v MANUEL JIMENEZ & ORS No. SCCIV-00-474 [2002] SASC 225 (16 July 2002)