3909/07 FANA KEREMELEVSKI v ZIVKO KEREMELEVSKI & ORS
JUDGMENT
1 HIS HONOUR: There are two subject matters of these proceedings. The first is a house property being Lot A in DP 447585 and known as 86 Union Street, Erskineville ("the house property"). The second is moneys in certain bank accounts ("the bank accounts"). Both the house property and the bank accounts belonged to the plaintiff Fana Keremelevski ("the plaintiff") and her husband, Atanas Keremelevski ("Atanas"). In 2005, the house property was transferred by the plaintiff and Atanas to their grandson, William Keremelvski ("William") and his wife, Sonja Keremelevski ("Sonja"). The proceeds of the bank accounts were taken by the plaintiff's son, Zivko Keremelvski ("Zivko"), who is William's father, and used partly for the benefit of the plaintiff and Atanas and partly for Zivko's own benefit. The plaintiff claims that the house property is held on a constructive or resulting trust for her and that she should have an account of the moneys in the bank accounts.
FACTUAL FRAMEWORK
2 The facts under this heading are undisputed or easily found, except where it is indicated that there is a substantial dispute.
3 The plaintiff was born in June 1914 and is now aged 94 years. The plaintiff and Atanas came to Australia from Macedonia in 1966. They were accompanied by the youngest of their four sons. The other three sons, Zivko, Simon Keremelevski ("Simon") and Boris Keremelevski ("Boris"), had come to Australia earlier. Zivko and his wife, Todorka Keremelevski ("Todorka") moved from Macedonia to Australia in 1962.
4 The house property was purchased in the name of Zivko and Todorka in 1965. The purchase was effected with the benefit of finance from George Nicholls in the sum of $3,500, secured by a mortgage.
5 Upon the arrival of the plaintiff and family in Australia in 1966, the members of the extended family lived in the house property and the adjoining house at 84 Union Street, Erskineville. The plaintiff and Atanas (collectively "the parents") lived principally in the house property until August 2005.
6 The Nicholls mortgage was fully repaid by 1971 or thereabouts and discharged at that time. There is substantial dispute as to how the mortgage was paid off. After the parents arrived in Australia, the evidence suggests that all members of the extended family pooled their financial resources. Money derived from boarders taken in by the family was added to the pool. The plaintiff claims that the mortgage was substantially paid off from the pool (from which the plaintiff also kept house) by Atanas attending personally on Mr Nicholls. Zivko claims that he and Todorka made all payments under the mortgage. Mr Nicholls' evidence appears to favour Zivko's claim, but it does not really matter, since no claim was made (as it could not be) of a resulting trust arising from these payments: Calverley v Green (1984) 155 CLR 242 at 251, 257 - 258, 267 -268.
7 In 1970, Zivko and Todorka moved to Miranda. The parents continued to live in the house property. In 1979 the house property was transferred out of the names of Zivko and Todorka into the names of the parents as joint tenants "absolutely" and they thereafter held it as absolute owners in their own right. It was at the time of the transfer unencumbered. No consideration was paid. Zivko paid the stamp duty and all expenses associated with the transfer.
8 Up to 2004 the parents had a close relationship with their son, Boris, who visited them regularly and rendered them assistance as they grew older. In 2004, the parents and Boris had a falling out and Boris ceased to visit them.
9 In October 2004, the parents wished to close certain bank accounts because their sons Boris and Simon were signatories and the parents no longer trusted them. On 29 October 2004 Dr Patricia Walton certified that the parents were suffering from hypertension, general debility and frailty and were housebound and unable to get to a bank. On 1 November 2004, those bank accounts were closed and a new account was opened in the joint names of the parents. Zivko was made a signatory on that account.
10 In early 2005, at Atanas' request, William arranged for a Macedonian speaking solicitor, Sasho Petrovski, to visit the parents. On 24 March 2005, Mr Petrovski had a meeting with the parents at the house property ("the first meeting"). At that meeting the parents executed a power of attorney in favour of Zivko.
11 On 1 April 2005, Mr Petrovski had a second meeting with the parents at the house property ("the second meeting") to which he took a transfer of the house property to William and Sonja ("the transfer"). The transfer was signed by the parents at the second meeting. The transfer bears the date 31 March 2005 and was expressed to be for a consideration of $1.00. It was duly registered. It is the transfer that gives rise to the first claim in these proceedings.
12 At the first meeting the parents, Zivko, Todorka and William were present, together with Mr Petrovski and Marika Lajmanovski, a family friend, who witnessed the power of attorney. At the second meeting the parents, Zivko, Todorka, William and Sonja were present, together with Mr Petrovski. Ms Lajmanovski was not present at the second meeting.
13 On 14 April 2005 Dr Patricia Walton certified that the parents "are both of sound mind and are capable of understanding & signing legal documents".
14 On 30 May 2005, a loan of $416,000.00 was raised by William and Sonja from Perpetual Trustees Australia Ltd secured by a registered mortgage that subsists on the title to the house property.
15 In August 2005, the parents left the house property and moved in with Zivko and Todorka or with William and Sonja who lived next door to Zivko and Todorka at Miranda. Thereafter, Zivko and family looked after the parents at Miranda.
16 On 6 December 2005 there was a report from the Aged Care Agency at Sutherland Hospital based on a conversation with William that the home care of the parents was adequate at that time and there was no intention of placing them in an aged care facility.
17 In June 2006, the plaintiff was hospitalised for four weeks and was then discharged into a nursing home. There was an assessment of the plaintiff by the Department of Health and Ageing on 3 July 2006 to the effect that she was in need of nursing home care. She has not subsequently been permitted to return to the house property. The plaintiff was very upset at being in the nursing home and abused Zivko, saying "you dumped me".
18 Boris then recommenced visiting the plaintiff in the nursing home. On 19 July 2007 Atanas died. On 24 July 2007, the plaintiff commenced these proceedings.
CREDIT OF WITNESSES
The plaintiff
19 The plaintiff was a witness of virtually no credibility. The defendants submitted, correctly in my view, that the plaintiff's "testimony was overwhelmed by an obsession of an assertion that she had been tricked by Zivko." This was manifested in the witness box by a garrulous insistence on repeating her conviction to this effect. It was extremely difficult to get her to attend to particular questions asked of her, rather than her simply repeating what she wanted to say. I do not propose to catalogue fully the unsatisfactory aspects of her evidence. She initially swore that she believed that she was signing a will at one of the meetings, although this assertion was later abandoned. Furthermore, she initially claimed that Mr Petrovski, when addressing the parents, had done so in English and not in Macedonian, contrary to the evidence of all other witnesses of the meetings with Mr Petrovski, although she later resiled, at least in part, from that, also. My conclusion is that she is a witness whose evidence can only be accepted when it is corroborated by documentary evidence or the evidence of a credible witness.
Zivko, Todorka, William and Sonja
20 Because of their interest in the outcome and the emotional content of the proceedings, I have taken the view that their evidence must be approached with some caution. However, none of them was discredited in any overall fashion and, although approached with care, their evidence on any particular matter must be assessed as a possible version of the facts along with other evidence bearing on the particular subject matter.
Ms Lajmanovski and Mr Petrovski
21 They were both independent and apparently dispassionate witnesses, who appeared to be trying to give the Court their best recollection of events in the past. Their evidence does not coincide in all respects as to what occurred at the first meeting, at which they were both present. However, in my view, they both have a substantial degree of credibility.
22 In Mr Petrovski's case, it is true that he did not retain any contemporaneous notes of the meetings. He displayed some initial resistance to giving evidence. It must be observed that he had a professional interest in making it appear that he had behaved appropriately as a solicitor in the circumstances of the case. Despite these reservations, I was impressed by the manner in which he gave his evidence. He was firm about matters that he said that he recalled. He was prepared to make concessions quite readily when appropriate, eg, that he had not told the parents that they might be evicted from the house property after the transfer. The advice he says that he gave the parents, whilst not extensive, appeared to me to be clear and reasonable. It also appeared to me, on the probabilities, to be advice that a responsible solicitor was likely to have given in the circumstances. Whilst his evidence on any particular matter must be closely examined together with all the other evidence bearing on it, I regard him generally as a witness of considerable credibility. Certainly, where his evidence conflicts with the plaintiff's, on the balance of probabilities I am likely to accept his evidence in preference to hers.
THE PLAINTIFF'S CONTENTIONS CONCERNING THE HOUSE PROPERTY
23 It is contended on behalf of the plaintiff that the Court should find that the house property is held on trust for the plaintiff because execution of the transfer was procured by overreaching conduct on the part of the defendants. The conduct was unconscionable due to a variety of factors:
(a) the parents were elderly at the time of the transaction;
(b) they did not speak English well enough to understand the transaction;
(c) they had no independent legal advice;
(d) they were not sophisticated in terms of property transactions;
(e) they were not in good health; and
(f) they were not highly educated.
24 The plaintiff submits that these factors placed the parents in a situation of serious disadvantage and special disability in protecting their interests, such that it was unconscientious "to procure or accept the weaker party's assent to the impugned transaction in the circumstances." The current registered proprietors should not, in good conscience, retain any benefit of the transfer of the house property. In the circumstances, a remedial constructive trust should be imposed on the house property.
25 The highest that the defendants could reasonably put the case against the present existence of a trust would be to suggest that there was an intention on the part of the parents to leave the house property to William and Sonja only upon the death of the last surviving parent.
26 That possibility had been the subject of discussion between the parents and Zivko, but always upon the basis that the parents would continue to own the house property and to be cared for there until their deaths. There was never any agreement or common intention that the house property would pass out of the parents' ownership and control before their deaths.
27 If (contrary to the plaintiff's case) the Court were to find that the parents freely and voluntarily transferred the house property to William and Sonja, the plaintiff submits that the Court should find (at the very least) that the transfer was effected pursuant to an agreement or a common intention to the effect that the parents would each be entitled to reside in the house property until the times of their respective deaths, on terms that they would be cared for by the defendants. That is, the Court should find that the house property was transferred to William and Sonja subject to a constructive trust in favour of the parents arising from such agreement or common intention.
28 The plaintiff alternatively contends that a resulting trust arose when the purpose for which or intention with which the transfer was effected failed. The authorities cited by Ms Tibbey, of counsel for the plaintiff, included Michael Evans, Equity and Trusts (2003) at 16.10 and Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567. The plaintiff further contends that she is entitled to have the transfer set aside under the provisions of the Contracts Review Act 1980 ("the CRA"). In this regard, Ms Tibbey draws attention to the decision of Barrett J in Irvine v Irvine [2008] NSWSC 592.
THE DEFENDANTS' CONTENTIONS CONCERNING THE HOUSE PROPERTY
29 The defendants contend that the plaintiff's claim to a constructive trust over the house property appears to be based upon an allegation of unconscionable conduct. The unconscionable conduct alleged seems to relate to the fact that the plaintiff received no independent legal advice in relation to the transfer. Initially, it was suggested that she executed the transfer in the mistaken belief that she was signing a will.
30 In view of the dispute with Boris, the parents foresaw that to leave the house property to Zivko by will would mean a dispute over the will. Accordingly, they sought to transfer the house property back to Zivko and Todorka, who had originally transferred it to them.
31 The defendants submit that the parents knew full well what they were doing. They requested a Macedonian speaking solicitor to explain the transaction to them.
32 There is no doubt that the plaintiff came to have an expectation that the defendants would look after her in her own home until her death. There is no doubt that they promised to look after her. But there was not on the evidence any promise that that care would be in her own home until death. The defendants did in fact look after the parents when they could no longer be cared for in their own home by taking them to live at Miranda. However, when the plaintiff's condition required nursing home care, she came to resent the fact that she was placed in a nursing home. This led her to assert that she had been "tricked" into transferring the house property, when in fact she had intended the house property to be transferred by way of gift.
33 The remedy of constructive trust has no role to play in these proceedings. There is no breach of fiduciary duty, undue influence or fraud alleged. There was no "special disability" known to the defendants that operated in this case to give rise to a finding of unconscionable conduct on the part of the defendants. Equally, there is no resulting trust and no entitlement to relief under the CRA.
FACTS RELATING TO THE TRANSFER OF THE HOUSE PROPERTY
34 Early in 2005 Atanas was in hospital with a broken arm. William deposed that his grandfather asked William and Zivko to contact a solicitor so that he could "make a Will to leave the house, to you." William told his grandfather that he would find a Macedonian speaking solicitor to come and see his grandfather once he returned home. In the Macedonian telephone book, William located a Macedonian speaking solicitor, Mr Petrovski. William telephoned Mr Petrovski and sent him emails dated 21 and 23 February and 17 and 23 March 2005. In the first of those emails he gave tentative instructions as to the contents of the wills to be made by the parents and in that of 23 February he added that they wished to give power of attorney to Zivko.
35 On 24 March 2005 the first meeting with Mr Petrovski took place at the house property. Mr Petrovski deposed that he always regarded the parents as his clients and never regarded himself as acting for William. He took a power of attorney to the meeting with him; he spoke to the parents in Macedonian; he asked questions to satisfy himself as to their capacity; he explained the power of attorney to them; and he ascertained that they had understood the explanation. He then had the power of attorney signed by them and witnessed by Ms Lajmanovski.
36 After that he deposed that the following conversation took place:
"Whilst I was present at 86 Union Street on that day, I also raised the issue of the Wills of Fana and Atanas. There was a discussion in words to the following effect. I said: