Faulks v Chief Commissioner of State Revenue

2. that a solicitor had acted for father and daughter on the purchase, and

3. that the purchase moneys had been provided by the solicitor from a trust account in the name of Ms Faulks and her father. Applicant's case 7 Ms Faulks submitted that she held her legal interest in the property on resulting trust for her father, because he provided the purchase moneys, and did not intend her to take a beneficial interest. He caused her name to be on the title, she said, merely so that she could obtain an Owner/Builder permit to enable him to build a house on the vacant block of land and live in it.

Respondent's case 8 The Chief Commissioner made the following submissions in reply: 1) At least part of the purchase price was paid by Ms Faulks, because a solicitor acting for both purchasers paid the entire purchase price from a trust account in the name of both purchasers.

2. The Tribunal would not be satisfied that the moneys in the trust account were provided entirely by Mr Faulks.

3. Even if it were so satisfied, the presumption of advancement applies as between father and daughter, so that Mr Faulks is presumed to have intended his daughter to take the legal and beneficial interest in her share of the land as joint tenant. Ms Faulks had not discharged the onus of rebutting the presumption, because (for a number of reasons) the evidence of Mr Faulks as to his intentions on purchase was unreliable, and ought be rejected.

4. A constructive trust ought not be imposed in favour of Mr Faulks, because he received the entire proceeds of sale of the home, and therefore needs no remedy to obtain recoupment of his expenditure on it, including payments made by him in discharge of obligations under any mortgage.

Issue for determination 9 The parties agreed that the ultimate issue for determination was whether Ms Faulks held her interest as registered proprietor on resulting trust for her father. As the Tribunal has found that a resulting trust arose, it has been unnecessary to consider whether a constructive trust ought be imposed, or whether there is power to do so.

10 If Ms Faulks did hold her interest as joint tenant on resulting trust, she had not previously held a relevant interest in residential property, and was entitled to the grant. If she held her interest absolutely, the Chief Commissioner's decision was correct.

11 Whether a resulting trust arose turns on the determination of two issues of fact: 1) Whether Mr Faulks supplied the whole of the purchase price.

2. If he did, whether he intended his daughter to take the legal and beneficial interest in her share of the property as joint tenant.

Evidence of Ms Faulks 12 Ms Faulks said that she was born on 12 January 1978. She turned eighteen years of age on 12 January 1996. She had left school the previous year.

13 She identified her signature on an application for an Owner/Builder permit in respect of the Eagle Vale property dated 23 June 1996. She did not recall signing the document, but recalled having been asked to sign it by her father. He had explained to her that he wanted to build on the vacant block, but was not eligible for a permit because he had already held one or more such permits. She signed as she was asked. She did not read the document.

14 So far as she could recall, there was no other conversation with her father concerning the property.

15 As at the date of the application, she was eighteen years of age. She had left school the previous year.

16 There was handwriting on the application. It was not hers. She could not recall whether it had been filled in when she signed the document. On the evidence, the Tribunal cannot be satisfied that it was filled in when she signed the document, or that, if it was, she read it. The handwriting affirmed, among other things, that she intended to reside at the Eagle Vale address, and that she had not in the last five years been granted a permit.

17 She said that her father lived at the Eagle Vale property after it was built, until he sold it in 1998 or 1999. She and her siblings resided there with their father every second or third weekend, sleeping there on the Saturday and Sunday nights. She resided on all other occasions with her mother and siblings. Her parents were divorced.

18 She said that, when she signed the application, it was not her intention to reside at the Eagle Vale property. She admitted that the statement in the document to the contrary was false. As the Tribunal is not satisfied that the document had been completed when she signed it, or that she read it, that is not an admission of dishonesty on her part. In any event, viewed objectively, the Tribunal is satisfied on other evidence (considered below) that at the time of the application the access arrangements described above had been in place for some time. It is highly likely that Ms Faulks was intending to continue the arrangement, as in fact she did. In all likelihood, she did intend to reside at Eagle Vale, but did not intend that it be her principal place of residence, as she lived for most of the time with her mother. On the evidence, despite her admission, the statement in the application form that she intended to reside at the Eagle Vale property was true.

19 A document evidencing the trust account for the solicitor who acted for the purchasers of the Eagle Vale property was in evidence. On 13 May 1996, an amount of $6,200 was transferred into the trust account from an account with the Illawarra Credit Union. This amount was disbursed the next day. It is likely that this was paid by way of deposit. On 20 June 1996, another amount of $51,613.25 was transferred into the account from the National Australia Bank, and disbursed the same day. In all likelihood, this was the balance paid on settlement.

20 The transfer was in evidence. It was dated 21 June 1996, stamped on 25 June and registered on 27 June 1996. It was signed on behalf of the transferees by their solicitor.

21 Ms Faulks said that, until purchasing the North Parramatta property, the only bank accounts she had ever held were with the Commonwealth Bank. She knew nothing about the bank account with the Illawarra Credit Union. She denied ever entering into a loan agreement with the National Australia Bank. On her evidence, she never held an account with it. Her tax return for the 1996 financial year disclosed a taxable income of $10,793.

22 She said that the solicitor who acted for her on the purchase was her father's solicitor. She did not retain him directly. She accepted that the reference on the solicitor's trust account to Mr and Mrs R and K Faulks must have been a reference (albeit an inaccurate one) to her father and her respectively.

23 She was shown a mortgage over the land to the National Australia Bank dated 29 July 1996. It was expressed to secure a loan to Kwality Ceiling Insulation Pty Limited. She admitted that it bore her signature. She could not recall signing it. She was not a shareholder of the borrower. There was no evidence as to what relation, if any, that company bore to either Ms Faulks or her father.

24 She was shown a mortgage over the land to the National Australia Bank dated 18 October 1996. It was expressed to secure a loan to her and her father. She admitted that it bore her signature. She could not recall signing it.

25 It is unlikely that either mortgage secured a loan for the purchase of the Eagle Vale property, as any loan funds must have been advanced, if at all, on or before the transfer was stamped on 25 June 1996, well before either mortgage was signed. The fact that Ms Faulks could not recall signing them demonstrates that she signed documents which she cannot now recall.

26 A number of declarations by Ms Faulks, her father, her mother, and Ms Faulks' accountant, Mr Charlton, were in evidence. Ms Faulks denied contributing to the repayment of any loan in respect of the property, or deriving any financial gain or benefiting 'in any manner whatsoever financially' on its sale. She admitted to benefiting in the limited sense that she stayed there with her father every second or third weekend. In respect of the Eagle Vale property, Mr Charlton declared that Ms Faulks 'did not receive any part of the proceeds from its sale'. This evidence was unchallenged.

27 The Tribunal had the opportunity to observe Ms Faulks give evidence, and to observe her under skilful cross-examination. She gave her evidence in a forthright manner. Her evidence was internally consistent, and not so improbable as to raise doubts as to its veracity. Her credit was not challenged. Her inability to recall signing the two mortgages which were probably unconnected with the purchase of the property does not incline the Tribunal to doubt her veracity, or her reliability as to the matters which she recalled.

28 On the other hand, in her application for the First Home Owner Grant, Ms Faulks affirmed that she had 'never owned a residential property, either jointly, separately or with some other person before 1 July 2000 in any state or territory of Australia'. Even allowing for the argument that she did not hold a beneficial interest in the Eagle Vale property, that affirmation, at best, displayed a lack of candour. Nevertheless, in the absence of any significant challenge to her credit, the Tribunal is satisfied that her evidence is true, and makes findings in accordance with it.

Evidence of Mr Faulks 29 Mr Faulks gave evidence that he and Ms Faulks' mother had divorced in about 1994. He had suffered a substantial diminution in assets due to the divorce, and attempted to recoup his finances by building and selling two duplexes. He was a plumber by trade, but had sufficient skill and knowledge to build houses with an Owner/Builder permit. He wanted to build and sell another home, and decided to purchase the land at Eagle Vale for that purpose. He was told he was not entitled to an Owner/Builder permit, because he had had two permits previously, so he asked his daughter to sign an application for a permit in her name, so that he could build the property using her permit.

30 On his understanding, to be eligible for the permit, Ms Faulks had to be a registered proprietor.

31 He said that the only reason he arranged for his daughter's name to be on the title was to facilitate her obtaining the permit, and thereby to advance himself by building on the land. It would have defeated his purpose, he said, to have given half the house to her. Moreover, it would have advantaged her substantially over and above her three siblings.

32 On many occasions before approaching her to sign the application, he told her that he wanted to build another home, that he couldn't get an Owner/Builder permit, and that if her name was on the title, she could apply for one, and he could build the home. He also said to her words to the effect:

'You don't own half the house. You're not receiving any benefit. You're helping me.' 33 Mr Faulks admitted that he did not understand the nature of a resulting trust, but said he had been aware that there were different kinds of interest in property.

34 He asked his solicitor to act on the purchase. He gave instructions that both names were to be registered on title. He could not recall any specific occasion on which Ms Faulks attended the solicitor's office, but thought she must have done, to sign documents. In the absence of any evidence that she did so, the Tribunal is not satisfied that Ms Faulks ever attended the solicitor in person, or gave him instructions. Her signature did not even appear on the transfer.

35 Mr Faulks said that he provided all the funds for the purchase of the Eagle Vale property. He denied borrowing any of them, from the National Australia Bank or otherwise. He said that he essentially used the profits from the sale of two duplexes, previously developed and sold by him, to purchase the land. He said the funds transferred from the Illawarra Credit Union were from his account. He said that he had no account with the National Australia Bank, so far as he could recall. He could not explain the transfer from that bank into his solicitor's trust account. He explained that he was a person who often 'robs Peter to pay Paul'.

36 The source of the funds transferred by the National Australia Bank is unexplained. On the evidence, there is no other likely source apart from Mr Faulks himself. It need not have been a loan, or an account in his name. It might, for instance, have been a transfer by direction from a debtor. Mr Faulks' evidence does not assist the Tribunal to determine how the transfer came about. However, in the absence of any evidence of another source, the most likely source was Mr Faulks, possibly by way of a payment from a third party at his direction.

37 Mr Faulks' evidence was the subject of challenge. It was submitted that, by procuring his daughter's signature on the Owner/Builder Permit application, he sought successfully to subvert the provisions of the relevant home building legislation, and obtain for himself a permit to which he was not entitled. It was also submitted that his evidence as to his conversations with his daughter were self-serving, in that they were designed to advance the interests of a family member, and inconsistent with Ms Faulks' evidence, who could recall no conversations other than those she mentioned.

38 Even assuming, without deciding, that in procuring the signature of his daughter on the application for an Owner/Builder Permit, Mr Faulks attempted successfully to avoid the requirements or intent of the home building legislation, that circumstance alone does not convince the Tribunal to reject the evidence of Mr Faulks as being untrue.

39 The Tribunal had an opportunity to observe him giving evidence in chief, and under skilful cross-examination. He gave his evidence in a forthright manner. Except as detailed below, it was consistent with his daughter's evidence, internally consistent and not so improbable as to cast doubt on its veracity. He made an admission against interest - namely, that he had not been truthful when writing on the application that Ms Faulks intended to reside at the Eagle Vale property.

40 However, when asked by the Tribunal whether he intended that she should reside there with him on access visits, he answered in the affirmative, observing that that was already the family practice at the time of purchase. As there was no representation on the application that Ms Faulks was to occupy the Eagle Vale property as her principal place of residence, and it is highly likely that she and her father intended to continue the existing access arrangements, the Tribunal is not satisfied that the application was false in this respect. Mr Faulks' admission, though against interest, was probably inaccurate. To that extent, he demonstrated a certain candour. The Tribunal finds him to be a witness of truth, and his recollection reliable, except in one respect more fully described below.

Consideration 41 Aspects of the law of resulting trusts were authoritatively stated for Australia by the High Court in Charles Marshall Pty Limited v Grimsley [1956] 95 CLR 365. In that case, a father had caused a company to allot shares to the Plaintiffs, who were his daughters, for which he had provided the entire consideration. In upholding the decision of the Full Court of the Victorian Supreme Court that the Plaintiffs were beneficially entitled to the shares, the High Court said in its joint judgment [at 363-364]:

'We are in the presence of the familiar problem that arises whenever a person purchases and pays for property, real or personal, whatever its description may be, the legal title to which is transferred by his direction into the name of another person. If that person is a stranger, the presumption of a resulting trust arises and he holds the property on trust for the purchaser. But if the purchaser is the father of or a person in loco parentis to the legal owner, the presumption arises from the relationship of the parties that the father intended to purchase the property to advance his child and to make the child not only the legal but also the beneficial owner of the property. These presumptions were described as landmarks in the law by Eyre C.B. as far back as 1788 in the leading case of Dyer v Dyer (1). In Sidmouth v Sidmouth (2), decided in 1840, Lord Langdale M.R. said: "The law applicable to cases of this nature is subject to so little doubt that it has not been questioned in the argument of this case. Where property is purchased by a parent in the name of his child, the purchase is prima facie to be deemed an advancement; the resulting or implied trust which arises in favour of the person who pays the purchase-money, and takes a conveyance or transfer in the name of a stranger, does not arise in the case of a purchase by a parent in the name of a child; but still the relation of parent and child is only evidence of the intention of the parent to advance the child, and that evidence may be rebutted by other evidence, manifesting an intention that the child shall take as a trustee; and in this case, as in most others of the like kind, the only question is, whether there is such other evidence. That contemporaneous acts and even contemporaneous declarations of the parent may amount to such evidence, has often been decided. Subsequent acts and declarations of the parent are not evidence to support the trust, although subsequent acts and declarations of the child may be so; but, generally speaking, we are to look at what was said and done at the time" (3).'

42 The High Court quoted with approval the following passage from the speech of Viscount Simonds in Shephard v Cartwright (1955) AC 431 [at page 445]:

'My Lords, I do not distinguish between the purchase of shares and the acquisition of shares upon allotment, and I think that the law is clear that on the one hand where a man purchases shares and they are registered in the name of a stranger there is a resulting trust in favour of the purchaser; on the other hand, if they are registered in the name of a child or one to whom the purchaser then stood in loco parentis , there is no such resulting trust but a presumption of advancement. Equally it is clear that the presumption may be rebutted but should not, as Lord Eldon said, give way to slight circumstances: Finch v Finch [(1808) 15 Ves Jun 43 [33 ER 671]].' 43 The High Court continued [at 365]:

'On the same page his Lordship referred to the evidence by which the presumption can be rebutted. He cited a passage from Snell's Equity 24 th edition (1954), p 153: "The acts and declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration … But subsequent declarations are admissible as evidence only against the party who made them, and not in his favour." ' 44 Of Viscount Simonds' formulation, the New South Wales Court of Appeal observed in Damberg v Damberg & ors [2001] NSWCA 87 [at 45]: 'Viscount Simonds' formulation is generally taken implicitly to exclude not only subsequent declarations which are not admissions, but subsequent conduct: see Snell's Equity (30th ed, 2000) para 9-16; Lewin on Trusts (17th ed, 2000) para 9-36; Underhill and Hayton, Law Relating to Trusts and Trustees (15th ed, 1995) p 329; Ford and Lee, Principles of the Law of Trusts (3rd ed), [21130] and [21160] and Jacobs' Law of Trusts in Australia (6th ed, 1997) [1213]. The principles are old: eg Sidmouth v Sidmouth (1840) 2 Beav 448 at 455; 48 ER 1254 at 1257 per Lord Langdale MR. They stem from an age when party-witnesses were disqualified on grounds of interest. Read by itself, Viscount Simonds' formulation might suggest that testimony by the husband in his own favour was inadmissible, as being a subsequent declaration. However, Viscount Simonds' formulation does not exclude testimonial evidence of intention. The reference to "declarations" is a reference to out of court declarations. In truth the propositions enunciated by Viscount Simmonds are not peculiar to this field, nor are they an exhaustive statement: they merely summarise parts of the common law rules relating to res gestae evidence and admissions. "[Q]uestions … as to the relevancy and admissibility of evidence … can best be considered … by reference to the principles and authorities to be found in a textbook on evidence. There are no special rules relating to cases of this kind; such cases merely illustrate general evidentiary principles": Davies v The National Trustees Executors and Agency Co of Australasia Ltd [1912] VLR 397 at 402 per Cussen J. In general a person whose intention at an earlier time is in issue may give evidence of it, and the position is the same here, even though the weight of the evidence, coming as it does from an interested witness, must be scrutinised with care: Devoy v Devoy (1857) 3 Sim & Giff 403 at 406; 65 ER 713 at 714 per Stuart V-C; Dumper v Dumper (1862) 3 Giff 583 at 590; 66 ER 540 at 543 per Stuart V-C; Davies v The National Trustees Executors and Agency Co of Australasia Ltd [1912] VLR 397 at 403; Drever v Drever [1936] ALR 446; and Martin v Martin (1959) 110 CLR 297 at 304 per Dixon CJ, McTiernan, Fullagar and Windeyer JJ. It follows from the proposition that the rules for admissibility of evidence tendered to rebut the presumption are simply those of the general law that any modifications effected by the Evidence Act 1995 (Cth) are applicable.'

45 As the Tribunal is satisfied, on the mere balance of probabilities, that the entirety of the purchase price for the land at Eagle Vale was provided by Mr Faulks, the presumption of advancement applies. Mr Faulks is presumed to have intended his daughter to take the beneficial, as well as the legal, interest in her share as joint tenant.

46 That presumption may be rebutted. Ms Faulks bears the onus of doing so.

47 Mr Faulks gave evidence of contemporaneous declarations made by him to his daughter, repeated on a number of occasions. In part, they explained the reason why he wanted her to sign the application for an Owner/Builder permit. The remainder were those quoted above, indicating that she would not own the house. If his evidence of his declarations is accepted as accurate, they would indicate an intention on his part not to part with the beneficial interest in any share of the property.

48 Evidence of his contemporaneous declarations is admissible. The task of the Tribunal is to determine whether that evidence is reliable. As he is an interested witness, his evidence must be 'scrutinised with care': Damberg (supra). There is additional reason to scrutinise his evidence carefully as, in one of the declarations before the Tribunal, he said of Ms Faulks and the Eagle Vale property: 'She didn't live there either. She was still at school.'

49 Both statements were inaccurate. If they were not intentionally misleading, they were at best made without checking the facts, or giving the matter proper consideration.

50 No evidence was given of any contemporaneous notes taken of Mr Faulks' declarations at the time he procured his daughter's signature on the application. There was no evidence that, between 1996 and the date of the hearing some fourteen years later, Mr Faulks had ever had occasion to recall those declarations.

51 Ms Faulks gave evidence consistent with her father's assertion that he explained to her the purpose of signing the application. However, she did not recall his statements as to her ownership of the house, or lack of ownership. So far as she could recall, there were no conversations other than those of which she gave evidence.

52 In those circumstances, the Tribunal is satisfied that Mr Faulks asked his daughter to sign the application, and explained to her the reason for it. It cannot be satisfied that he said words to the effect:

'You don't own half the house. You're not receiving any benefit. You're helping me.' 53 It is satisfied that Mr Faulks now believes that he said those words, but it cannot be satisfied that his recollection is accurate. Whether he had the intention evidenced by the words is a different matter. The existence of that intention is corroborated by two telling factors:

1. In the absence of evidence of a commensurate benefit to his other children, or of any other compelling reason, it seems highly unlikely that Mr Faulks would wish to advance the interest of one daughter so significantly over those of her siblings, by giving her a joint tenancy in his home, with the right of survivorship which flows from it. The Tribunal is not satisfied that the mere making of the application for a permit was the kind of consideration likely to have inspired him to do so.

2. Ms Faulks received no part of the proceeds of sale of the Eagle Vale property. That would be remarkable if she considered herself, or was considered by her father to be, the beneficial owner of her share in the joint tenancy. 54 These two circumstances are compelling evidence that neither Mr Faulks nor his daughter, either at the time of the purchase or on sale of the property, considered Ms Faulks to be a beneficial owner. They tend to corroborate, in a striking way, the existence of an intention on the part of Mr Faulks as settlor that his daughter should not receive a beneficial interest in the Eagle Vale property.

55 Even if the circumstances on sale were inadmissible to prove an intention as at the date of purchase, the Tribunal is not bound by the rules of evidence, and is entitled to have regard to them. In doing so, it has regard to the observations of Evatt J in his dissenting judgment in The King v War Pensions Entitlement Appeal Tribunal; ex parte Bott [1933] 50 CLR 228 at 256: 'Some stress has been laid by the present respondents upon the provision that the Tribunal is not, in the hearing of appeals, "bound by any rules of evidence." Neither it is. But this does not mean that all rules of evidence may be ignored as of no account. After all, they represent the attempt made, through many generations, to evolve a method of inquiry best calculated to prevent error and elicit truth. No tribunal can, without grave danger of injustice, set them on one side and resort to methods of inquiry which necessarily advantage one party and necessarily disadvantage the opposing party. In other words, although rules of evidence, as such, do not bind, every attempt must be made to administer "substantial justice." '

56 In Re Pochi and Minister for Immigration and Ethnic Affairs (1979) 26 ALR 247, Brennan P, sitting as President of the Administrative Appeals Tribunal (Cth), quoted this passage with approval, and observed [at 256]: 'That does not mean, of course, that the rules of evidence which have been excluded expressly by the statute creep back through a domestic procedural rule. Facts can be fairly found without demanding adherence to the rules of evidence. Diplock LJ in R v Deputy Industrial Injuries Commissioner; Ex parte Moore [1965] 1 QB 456 at 488 said: "These technical rules of evidence, however, form no part of the rules of natural justice. The requirement that a person exercising quasi-judicial functions must base his decision on evidence means no more than it must be based upon material which tends logically to show the existence or non-existence of facts relevant to the issue to be determined, or to show the likelihood or unlikelihood of the occurrence of some future event the occurrence of which would be relevant. It means that he must not spin a coin or consult an astrologer, but he may take into account any material which, as a matter of reason, has some probative value in the sense mentioned above. If it is capable of having any probative value, the weight to be attached to it is a matter for the person to whom Parliament has entrusted the responsibility of deciding the issue." '

57 As the Federal Court observed in Minister for Immigration and Ethnic Affairs v Pochi (1980) 31 ALR 666 [at 690]: 'Implicit in Diplock LJ's conclusion [in Moore ] and in that well-established principle [that a decision of a statutory tribunal must ordinarily be based on evidence which is reasonably capable of sustaining it] are both the requirement that findings of material fact of a statutory tribunal must ordinarily be based on logically probative material and the requirement that the actual decision of such a tribunal must, when relevant questions of fact are in issue, ordinarily be based upon such findings of material fact and not on mere suspicion or speculation.'

58 The Tribunal has had regard to these principles when considering the evidence that Ms Faulks received no part of the sale proceeds of the Eagle Vale property, and drawing the inferences from it that it has. In the absence of any evidence that the views of either father or daughter had changed since purchase, it is likely that Mr Faulks' views as to the basis on which his daughter held her share were the same at the date of purchase as they were at the date of sale.

Issues of fact 59 For the reasons given, the Tribunal is satisfied, on the balance of probabilities: 1) that Mr Faulks provided the entire purchase price for the Eagle Vale property, and

2. that when he did so, he had no intention of transferring a beneficial interest to Ms Faulks, but rather intended to retain the entire beneficial interest, giving Ms Faulks a bare legal interest in the property as joint tenant. Trust funds 60 It remains to consider the argument that the purchase price was provided by a solicitor from funds held by him as trustee for father and daughter. If, as the Tribunal has found, all funds in that account were provided by Mr Faulks, with the intention that they be used to acquire for his daughter a legal, but not the beneficial, interest in a joint tenancy, it is likely that he had the same intent with regard to any interest she acquired in the funds standing to the credit of the trust account. It follows that her interest in the trust funds was also held on resulting trust for her father, and that any interest she acquired by virtue of their disbursement was held by her on the same trust.

1. that Ms Faulks' interest in the property was held on resulting trust for her father;

2. that she did not, prior to 1 July 2000, hold 'a relevant interest in residential property in New South Wales', and

3. that she was not disentitled to the First Home Owner Grant by reason of any such interest. Orders 62 Pursuant to section 29 of the First Home Owner Grant Act 2000, the Chief Commissioner's decision of 14 May 2010 is reversed and varied, so as to decide that the First Home Owner Grant is payable to Ms Faulks.

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