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[2025] NSWSC 760
General information, not legal advice.
Supreme Court of NSW
2025-07-17
Ball JA
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Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Khoury v Khoury [2025] NSWSC 760
Hearing dates: 7 to 10 July 2025
Date of orders: 17 July 2025
Decision date: 17 July 2025
Jurisdiction: Equity - Real Property List
Before: Ball JA
Decision: See [57]-[58]
Catchwords: EQUITY – trusts and trustees – common intention constructive trusts – informal agreement between two brothers to build duplex development – where one brother owns underlying land – each brother to occupy respective property on completion of duplex development – loan for construction costs taken out jointly and secured over the property – designers and tradespersons engaged jointly by brothers – construction completed – subdivision undertaken – where brother registered on both titles dies intestate and prior to transferring title to one lot to other brother – title to both lots transferred to deceased’s widow following transmission application – whether lot occupied by living brother held on trust for him pursuant to agreement with deceased brother – whether detriment established for purposes of common intention constructive trust – detriment established – common intention constructive trust established
Legislation Cited: Trustee Act 1925 (NSW)
Cases Cited: Galati v Deans [2023] NSWCA 13
Grant v Edwards [1986] Ch 638; 2 All ER 426
Green v Green (1989) 17 NSWLR 343
Marchese v Marchese [2021] WASC 385
Secretary, Department of Social Services v Hulett [2025] FCA 23
Category: Principal judgment
Parties: Jason Khoury (Plaintiff)
Karisa Lee Khoury (Defendant)
Representation: Counsel:
N Kulkarni (Plaintiff)
AL Connolly (Defendant)
Solicitors:
Lane and O’Rourke (Plaintiff)
Muscat Law (Defendant)
File Number(s): 2024/279596
Publication restriction: None
The plaintiff, Mr Jason Khoury (Jason), and his late brother, Mr Tony Khoury (Tony), were very close. They had worked together originally in the family fruit shop business in Sans Souci, NSW with their father and another brother, Mr John Khoury (John). In 2005, Tony, Jason and John through a family company, GY Khoury & Sons Pty Ltd, purchased another fruit shop business at Westfield Mount Druitt, NSW which operated successfully until 2022, when it was forced to close as a result of the COVID-19 pandemic. Subsequently, Jason and Tony bought a fruit shop in Sutherland, NSW through Fresh N Full Pty Ltd, a company they had incorporated in November 2022. They operated that fruit shop together until Tony’s unexpected death on 26 December 2023 at the age of 43.
In 2013, Jason and Tony built duplex houses on land in Holt Road, Taren Point (the Property) that Tony had acquired in June 2002 for $457,000 using funds he had borrowed from Westpac Banking Corporation (Westpac). The costs of building the duplex houses were also financed by a loan from Westpac which was secured over the Property.
On completion of the building work, Tony and his family moved into the house known as 162A Holt Road and Jason and his family moved into the house known as 162 Holt Road. Jason was principally responsible for making the mortgage repayments on the construction loan from Westpac, although he says, and I accept, that Tony reimbursed him in cash for part of the payments he made. Tony also retained responsibility for repaying the loan he originally obtained from Westpac to finance the purchase price of the Property.
Starting in about 2016, relations between the two families deteriorated severely, although Tony and Jason remained on cordial terms.
In June 2020, Tony obtained a subdivision of the Property corresponding to the two houses located on it with the intention that the loan from Westpac would be refinanced enabling Tony to sell 162A Holt Road. However, for reasons that will be explained, that did not happen before he died.
Tony died intestate. His wife, Mrs Karisa Khoury (Karisa), the defendant, was granted Letters of Administration of Tony’s estate. On 19 April 2024, she applied for transmission of 162 and 162A Holt Road into her name as administrator.
On 30 July 2024, Jason commenced these proceedings claiming:
A declaration that Karisa holds 162 Holt Road on trust for him;
An order pursuant to s 71 of the Trustee Act 1925 (NSW) that 162 Holt Road be vested in him subject to the mortgage in favour of Westpac;
Ancillary or alternative relief.
Although Karisa denies it, her initial position appears to have been that Jason had no interest in 162 Holt Road, and indeed, as I will explain, it is not entirely clear that she has abandoned that position entirely. However, at the hearing, if not before, she mostly accepted that Jason was entitled to 162 Holt Road, but only after he discharged the mortgage over 162A Holt Road and paid any stamp duty and capital gains tax on the transfer, which Jason is not in a position to do. She resists the relief claimed by Jason principally on that basis.
As I have said, Tony bought the Property in June 2002 for $457,000 plus legal costs and stamp duty (estimated to be $18,000). He borrowed most of the purchase price from Westpac, which was secured by a mortgage over the Property. Located on the Property was a somewhat dilapidated house and granny flat, which Tony rented out. At the time, both Tony and his family and Jason and his family were living in rented accommodation.
Tony, Jason and John had at various times considered buying an investment property and developing it through their family company. However, nothing came of those proposals.
According to Jason, in early to mid‑2009, Tony suggested that they build a duplex on the Property together, which would give them each a new house. After discussing the proposal with his wife, Mary, Jason agreed.
Karisa disputes this evidence. She says that based on discussions she had with Tony at the time, what Tony originally proposed was that he, Jason and John would develop the Property as an investment and that it was only later that a decision was made to develop the Property to provide a family home for each of Tony and Jason.
Little turns on the resolution of this dispute, but to the extent that it is relevant, I prefer Jason’s evidence on the point.
It is apparent that shortly after the conversation between Tony and Jason, they jointly retained Nagy Khoury of Nagy Khoury Design Pty Ltd to prepare an appropriate design and to apply for the necessary approvals, which is what happened. John, who gave evidence, denies that he was ever involved. In December 2009, Jason gave notice terminating his existing residential lease following which he and his family moved in with his parents. He would only have done that if he anticipated moving into a new home in the foreseeable future. It is plain that the Property was developed to provide family homes for both families and it is not easy to understand what on Karisa’s version of events brought about the change to develop the Property for that purpose rather than as an investment for Tony, Jason and John.
The only objective evidence that supports Karisa’s account of events is an email sent by Mr Matthew Farrell of Westpac dated 22 July 2009 setting out the documents “required to support your home development proposal”. The email refers to income tax returns, group certificates and related information for each of Jason, Tony and John. However, without knowing how the email came to be sent, little can be inferred from it. At the time the email was sent it was clear that it was Tony and Jason who had retained Nagy Khoury. Westpac dealt with the three brothers in connection with their fruit shop business. It is plausible that when Mr Farrell sent his email he misunderstood the precise details of what was proposed.
There were delays in obtaining development consent from Sutherland Shire Council. A conditional development approval was finally obtained on 15 June 2011. There were further delays in obtaining a construction certificate (which was not issued until 1 August 2013). It appears that one reason for the delay was that Tony and Jason were having difficulty obtaining financing from Westpac because they were unable to demonstrate that their incomes were sufficient to support a loan. They were not in a position to do so until they could produce their tax returns for 2012. It is Jason’s evidence, which I accept, that he and Tony shared all the costs of the design and approval process equally. Most of those costs were paid in cash.
“(a) Tony and Jason would proceed together with the project ’50-50’ on the basis of equal contributions and each ending up with a new home to reside in;
(b) Jason would obtain a loan to ‘pay for the land’ that would allow us to pay off the remainder of Tony’s loan originally taken out to buy the land. Tony and Jason would then jointly borrow a construction loan that they would share equally.”
“(a) Tony and Jason originally wanted to borrow more for construction but the bank would only lend a maximum of $730,000 due to their income levels at the time.
(b) Tony and Jason could only get the $730,000 loan by both being on the construction loan with Tony’s property as security for that loan.
(c) Jason would be solely responsible for paying the construction loan.
(d) Tony would continue to be solely responsible for his existing Westpac loan secured against the Taren Point property.
(e) Tony and Jason were going to build with Arrage because they were cheaper and that the build quality would probably not be as good.
(f) When the project was finished we would live in one duplex and Jason would live in the other duplex.
(g) Jason would need to refinance the construction loan into his sole name and pay stamp duty for his duplex.
(h) Tony was contributing the land, Jason was responsible for the construction loan and ”everything has to be equal”.
(i) Tony and Jason would not know final construction costs, any additional contributions required for the project and how they would pay those additional costs until the duplexes had been completed.
(j) Sometime in the future Tony and Jason would need to sit down and work out if their contributions to the project had been equal and take steps to equalise their contributions if they had not been equal.
(k) Tony would only transfer ownership of the duplex to Jason when the construction loan was refinanced and contributions were equalised.”
Again, I prefer Jason’s account of what occurred. It is common ground that what was agreed was that the two brothers would share the costs of the project equally. Given how close the two brothers were at the time, it does not strike me as implausible that Tony was willing to value his contribution of the Property at cost. On that basis, it made sense for Tony to agree to be responsible for $100,000 of the construction loan.
One difficulty with Karisa’s account of what occurred is that it appears to assume that the brothers agreed to value Tony’s contribution of the Property at about $700,000. The first proposal (which Karisa says did not proceed because Tony was unable to borrow the money from Westpac) involved Tony taking responsibility for the original Westpac loan and for the two brothers to take equal responsibility for the construction loan. At the time, the amount owed in respect of the original loan was $410,000, or $360,000 after allowing for an amount held in an offset account. The proposal would only involve equality if it was assumed that Tony’s contribution of the Property was to be valued at twice that amount – that is, at $820,000 or perhaps $720,000. Similarly, the second proposal, which Karisa says was agreed, involved Tony contributing $700,000. But there was no evidence that any attempt was made to obtain a valuation of the Property at the time or that that was a matter discussed between Tony and Jason.
John gives evidence that he had a number of conversations with Tony and Jason in which both told him that they were building a duplex together at Taren Point, that they were obtaining a loan in their joint names to fund the cost; that Jason would be responsible for $600,000 of the loan and Tony would be responsible for $100,000; that each would get a new home and that eventually Tony would transfer Jason’s residence into Jason’s name.
More significantly, in March 2019 Tony and Jason approached Capitaleyes Finance Pty Ltd, a financial services firm operating in Dulwich Hill about refinancing the construction loan so that Tony could sell 162A Holt Road. The principal of Capitaleyes is Mr Charbel Fahd. He gave evidence that he and his late wife, Georgia, met with Tony and Jason on 12 March 2019 to discuss the refinancing. According to Mr Fahd, Tony and Jason told him (he cannot recall who said what) that:
“a. Tony had purchased a house at Taren Point;
b. Tony and Jason agreed to knock down the existing house at Taren Point and rebuild on the land;
c. Jason had borrowed the money needed for the build (but that Tony was responsible for $100,000.00 of the loan amount);
d. The outcome would be they would own one residence each;
e. The whole of the land at Taren Point was contained on one title;
f. The whole of the land at Taren Point was still in Tony’s sole name; and
g. The purpose of the proposed refinance was to enable Jason’s residence to be transferred into his name and for the loan could be separated [sic] in accordance with Tony and Jason’s respective shares of the loan, as agreed between them.”
Mrs Fahd prepared a file note of the meeting, which is consistent with Mr Fahd’s evidence, although the file note states “Jason and came [sic] in to ask for a refinance their joined loans and see if they could have a separate loan each.”
Karisa takes issue with Mr Fahd’s evidence that Tony was present at the meeting. She says that Tony could not have attended because 12 March 2019 was a Tuesday and Tony would have been at work. She also points to the fact that Jason signed a Credit Guide (setting out the terms on which Capitaleyes was to be retained) and a Privacy Disclosure Statement and Consent at the meeting whereas Tony only signed them later electronically after they had been sent to him by Mrs Fahd by email.
I am satisfied that Tony was present at the meeting. Mr Fahd said in cross‑examination that he was certain that he was. Mr Fahd struck me as a careful witness, who would readily have conceded that he could have been mistaken if there was any doubt in his mind about whether Tony was present. Although Mrs Fahd’s file note is not entirely clear, it does suggest that Tony was present when it says that “Jason and” came in to ask about refinancing their “joined” loans. It is plausible that Tony would have taken time off work to attend the meeting, and it seems likely that he would have been keen to do so because he was keen for the refinancing to proceed. Jason gave evidence in cross-examination that Tony did not sign the documents at the meeting because he was more careful than Jason and wanted a chance to read them. That evidence is consistent with evidence given by Karisa that Tony was very careful about financial matters. The email attaching the documents for Tony’s electronic signature assumed that Tony would know what the documents were for. The likely explanation for that was that he had been asked to sign them at the meeting. Tony did sign them about ten minutes after receiving them.
Taking these matters together, I am satisfied that Tony and Jason did agree that Tony would be responsible for $100,000 of the construction loan.
On the question of reconciling contributions and refinancing, Jason gave this evidence in cross-examination:
“Q. Part of your arrangement by this time in mid-2013 was that your contributions to the project would be equal?
A. Yes.
Q. That you would reconcile the contributions that you made along the way at the end to make sure that they were equal?
A. Yes.
Q. It was also part of the arrangement that you'd formed by the middle of 2013 that you would refinance your share of the borrowings into your own name?
A. Not at 2013.
Q. But that was the agreement?
A. The agreement was we get the loan, we build it together, and we worry about it later, how we're going to split it.”
That evidence strikes me as plausible and I accept it. As I have said, the brothers were very close at the time. They trusted one another completely. There was no reason for them to address what was to happen in the future immediately. Similarly, contrary to what Karisa says, I doubt that the question of stamp duty occurred to either Tony or Jason at the time.
On the other hand, Jason accepted in cross-examination that the agreement was that 162 Holt Road would not be transferred to him until the construction loan was refinanced:
“Q. You wouldn't be able to have the title of your house transferred into your name until you were able to refinance your share of the loan.
A. You have to subdivide first, then get the refinance in. You can't get refinance without subdivision.
Q. You wouldn't be able to have your house, once subdivided, transferred into your name until you were able to refinance the loan in your name.
A. Yeah.
Q. That was always the plan.
A. The plan was, yeah. Yeah.”
On 16 June 2013, Tony and Jason entered into a building contract with Arrage Group Pty Ltd for a contract price of $600,000. Certain costs were not covered by the building contract such as, for example, the cost of demolishing the old house on the Property and joinery work. Those costs were shared equally between Tony and Jason. In some cases, such as rendering, the work was undertaken by relatives without charge.
Construction of the houses was completed in mid-2014. Tony and his family moved into 162A Holt Road and Jason and his family moved into 162 Holt Road. The balance of the construction loan, amounting to $99,087.35 was drawn down on 25 June 2014 and paid into an offset account in the name of Tony and Jason. Jason took responsibility for making repayments on the loan. He says that Tony reimbursed him for Tony’s share of the loan in cash, initially in the amount of $300 per month and later in the amount of $500 per month. Karisa says that she was unaware of those payments. However, they were consistent with the agreement between Tony and Jason, and I accept Jason’s evidence that they were made.
On 1 September 2015, the original construction loan was divided into two loans consisting of the original loan, which was reduced to $230,000 and continued to be at a variable interest rate, and a second loan for $500,000 which was at a fixed rate for a period of five years, when it would convert to a variable rate. Both loans were interest only for a period of five years (until 1 August 2020), when they would convert to principal and interest loans.
The amount of $99,087.35 that was paid into the offset account was used in various ways. Some of it was used to pay other expenses associated with the building work. Some of it was used to pay the deposit on the fruit shop in Sutherland, some was paid to Jason, and the balance was used to make interest payments on the construction loan. Jason was cross-examined extensively on the payments to him and on the payments of interest. The effect of his evidence was that Tony had access to the accounts and was aware of the payments and that to the extent necessary the brothers made cash payments between themselves to balance their contributions in accordance with the agreement that they had reached.
The state of the evidence is unsatisfactory. However, on balance, I accept the explanation given by Jason. It was consistent with the relationship between the two brothers that their financial affairs were conducted informally. It was also consistent with the way that they operated their businesses that their financial affairs were conducted largely in cash. It is not surprising in those circumstances that there are no records showing the payment of money between them. As Jason points out, Tony had access to the bank records. Karisa gave evidence that Tony was careful with money and it is to be expected that he would look at the account records from time to time. It is also to be expected that if he had had any concerns with any of the payments from the bank account, he would have raised them with Jason. There is no suggestion that he ever did. Jason says and I accept that he and Tony were in the habit of keeping track of their respective drawings from the business to make sure that they were equal and that that practice continued in relation to the duplex project. Even following the breakdown in the relationship between the two families, Tony was happy to buy a new business with Jason, and he must have known that the deposit for that business was being paid for from the offset account, which supports the view that he was aware of payments from the account and agreed to them. I accept that the relationship between Tony and Jason was such that Jason would not take more than his entitlement. It follows that it is unnecessary to analyse the payments to and from the offset account before Tony’s death. It is more likely than not that at the time of Tony’s death neither owed the other money by reference to the arrangements they had reached.
“A common intention constructive trust arises where the parties have agreed, or it was their common intention, that a claimant should have an interest in property owned by the other and the claimant has acted to his or her detriment on the basis of that agreement or common intention …”
It appears to be common ground that Tony and Jason agreed that Jason should have a half interest in the Property corresponding to 162 Holt Road, although Tony would not transfer that interest until the Property was subdivided and the construction loan was refinanced so that the $630,000 for which Jason was responsible was secured against 162 Holt Road only. There is a question when the relevant agreement or common intention was reached. In my opinion, it was reached when Tony and Jason accepted the loan offer from Westpac and signed the building contract – that is, on 16 June 2013. By that stage, the terms on which Tony was to hold an interest in the Property for Jason had been agreed. It is true that in mid-2009, Tony and Jason had agreed to develop the Property jointly and, on the findings I have made, each contributed to the preliminary costs of doing so. However, it was not until the loan was approved and agreement was reached on the proportion of the loan for which each would be responsible that each became committed to that proposal so that it could be said that they had reached an agreement concerning it.
In her defence and in final submissions, Karisa contends that Jason did not act to his detriment in reliance on the agreement because, as a result of the agreement, he and his family have lived in 162 Holt Road rent free, and if they had not been able to do so, they would have had to have rented accommodation for an amount that would have been substantially greater than the interest payments Jason has made on the construction loan.
There are two problems with that submission. First, it misunderstands the requirement of detriment for the purposes of the principle. Detriment in this context is not to be assessed by undertaking some counterfactual comparison between the position the claimant is in with the position he or she would have been in but for the agreement or common intention. Rather, the question is whether the party claiming an equitable interest has taken some step – most often the expenditure of money or the provision of some service – on the basis of the agreement or common intention. That requirement is not a demanding one. As Sir Nicolas Browne-Wilkinson VC explained in Grant v Edwards [1986] Ch 638 at 657:
“In many cases of the present sort, it is impossible to say whether or not the claimant would have done the acts relied on as a detriment even if she thought she had no interest in the house. Setting up house together, having a baby, making payments to general housekeeping expenses (not strictly necessary to enable the mortgage to be paid) may all be referable to the mutual love and affection of the parties and not specifically referable to the claimant’s belief that she had an interest in the house. As at present advised, once it has been shown that there was a common intention that the claimant should have an interest in the house, any act done by her to her detriment relating to the joint lives of the parties is, in my judgment, sufficient detriment to qualify.”
See also Green v Green (1989) 17 NSWLR 343 at 357 (Gleeson CJ, with whom Priestley JA agreed); Secretary, Department of Social Services v Hulett [2025] FCA 23 at [58] (Derrington J).
Plainly, Jason suffered a detriment in this sense. Pursuant to his arrangement with Tony, Jason took on liability for the construction loan, made repayments on that loan, and expended time and money engaging tradespersons and designers in relation to the development of 162 Holt Road.
Secondly, even if Karisa correctly states the requirement of detriment, her submission overlooks the fact that if she is right, Jason has no interest in the Property but continues to be liable for the whole of the construction loan.
Three things follow from what has been said so far. The first is that a common intention constructive trust came into existence on 16 June 2013. In principle, Jason is entitled to a declaration to that effect. It is unnecessary to consider the other bases on which he seeks relief. It was not suggested that either of them provided a more favourable remedy. Secondly, consistently with the agreement that was reached, Jason is not entitled to have 162 Holt Road transferred to him until he has discharged his share of the construction loan. Thirdly, if a declaration is made that Karisa holds 162 Holt Road on trust for Jason, it is appropriate to impose a lien over that property in favour of Tony’s estate to secure the estate’s obligation to pay that part of the construction loan for which Jason is responsible in the event that it is required to do so. It would be inequitable for Jason to have the beneficial interest in 162 Holt Road, but for Tony’s estate to remain liable for that part of the construction loan that was intended to be secured over 162 Holt Road only without that obligation being secured over that property: cf Marchese v Marchese [2021] WASC 385.
It is common ground that capital gains tax is payable on the disposition of a half interest in the Property to Jason, which on the findings I have made occurred on 16 June 2013. It is also common ground that on the disposition of 162A Holt Road, capital gains tax will be payable in respect of an increase in the value of the property in the period before it became Tony’s principal place of residence. Lastly, stamp duty is payable on the transfer of an interest in the Property to Jason. There is a question which if any of those liabilities should be treated as a cost of the project to develop the Property to provide residences for each of Tony and Jason, with the result that they are costs that should be shared equally between them.
I have concluded that each of those liabilities is a cost of the project.
So far as capital gains tax on the sale of 162A Holt Road is concerned, it is true that Tony would always have been liable for the capital gains tax payable in respect of the increase in the value of the Property during the time that it was rented out. However, as I have pointed out, for the purposes of determining the brothers’ relative contributions, it was agreed that the Property would be valued at cost. It would be inequitable in those circumstances for Jason not to be responsible for half the capital gains tax.
So far as capital gains tax on the disposition of an interest in the Property (now 162 Holt Road) to Jason, that is also a liability that falls on Tony’s estate. However, Karisa’s position appears to be that Jason should indemnify the estate for that amount. In my opinion, the disposition of that interest to Jason was part of the arrangements by which each brother would make equal contributions to the costs of each of them obtaining his own home. In those circumstances, the liability for capital gains tax was part of the costs of the project. Consistently with the agreement between Tony and Jason, it should be shared equally.
In my opinion, the same is also true of the stamp duty payable on the transfer of an interest in the Property at the time a trust came into existence as a consequence of the brothers’ agreement. That Jason would obtain his own house was an essential part of the agreement which gave rise to both the trust and the liability to stamp duty. Seen in that way, it was a cost of the project and was therefore a cost that they agreed to share equally.
Consistently with the agreement reached between Tony and Jason, the estate is liable to repay so much of the $100,000 as remains outstanding and to continue to pay interest on that amount until it is repaid. For the purpose of calculating that amount, it is appropriate to assume that any repayment of principal has reduced the amounts owed by Tony’s estate and Jason in proportion to the amount that their original share of the loan bore to the total amount of the loan. Since Jason is also liable for those amounts, it would be appropriate for that liability to be secured by a lien over 162A Holt Road. It would be inequitable for Tony’s estate to have the benefit of such a lien in relation to the amount primarily payable by Jason but for Jason not to have the benefit of a similar lien in relation to amounts primarily payable by the estate.
The parties should bring in short minutes of order to give effect to these reasons for judgment and any agreement they might reach in relation to costs within 3 weeks of the date of this judgment.
If agreement cannot be reached on the form of orders and costs within that time, then within a further 7 days the parties should provide my Associate with proposed short minutes of order setting out the orders they seek and a short outline of written submissions not exceeding 10 pages in support of those short minutes of order. Within a further 7 days after that, the parties should provide my Associate with a short outline of submissions in reply not exceeding 5 pages, with the intention that any outstanding issues be determined on the papers.
**********
Khoury
Khoury [2025] NSWSC 760
(1989) 17 NSWLR 343
Karisa takes issue with this evidence pointing to an email dated 19 August 2013 that Tony sent to himself listing various expenses that were apparently incurred in relation to the project (such as fees charged by Nagy Khoury and various engineering fees) and to a receipt issued to Tony by Sutherland Shire Council for a payment of $16,603.24. But even assuming that those documents establish that Tony paid those amounts, they do not establish that Jason did not reimburse him for his share. It is natural that the Council would issue the receipt in Tony’s name, since he owned the land. As I have said, Tony and Jason were very close. They earned the same income, a substantial amount of it in cash, from the fruit shop. It is not plausible that having agreed to share expenses equally, they would not have done so.
In early 2013, Jason and Tony retained Ms Glenice Ware of Glenice Ware Interior Design to provide advice in relation the interior design of the two houses. She had originally been retained to provide design services in relation to the fruit shop at Mount Druitt. Ms Ware’s evidence, which I accept, is that she dealt mainly with Tony and Karisa in relation to 162A Holt Road and Jason and Mary in relation to 162 Holt Road. At the end of her work, Ms Ware issued a single invoice to Jason and Tony, which was paid electronically.
Jason and Tony also retained Buildingscope Pty Ltd to provide a quote for the building work, which it did on 5 February 2013. The quote was for an amount of $700,000.
In late January 2013, Ray White Sylvania Waters provided Karisa with an appraisal of the two properties when built suggesting that the value of each was between $900,000 and $1,000,000. Ray White Sylvania Waters also provided an estimate of the rental that could be obtained for each property of $850 to $900 per week. It is likely that these estimates were obtained to support the application for a loan from Westpac.
In early 2013, Jason and Tony applied to Westpac to obtain a loan to fund the construction costs.
On 1 June 2013, Westpac provided a loan offer addressed to Tony and Jason. The offer was for an amount of $730,000. The loan was for a term of 30 years. It was an interest only loan at a variable rate for the first year after which it became a principal and interest loan. Tony and Jason signed an acceptance of the loan offer on 1 June 2013.
It is Jason’s evidence that on receipt of the loan offer he and Tony had a discussion at which it was agreed that of the $730,000, Jason would accept liability for an amount of $630,000 and Tony would accept liability for the remaining $100,000; that of the $630,000, Jason would use $30,000 towards paying off an outstanding loan on a motor vehicle and the remaining $600,000 was to be applied towards construction costs; and that on that basis Jason would be contributing $600,000 towards the project and Tony would be contributing approximately $575,000 consisting of his contribution of the land and $100,000 for the loan. Jason says that at one point during the discussion Tony said “I spent the $475K so I’ll take on the $100K. You take the $600K. You’re my brother – we do everything half-half”.
Karisa disputes that evidence. According to her, Tony had told her in late 2012 or early 2013 that:
As I have said, relations between the two families started to deteriorate in 2016. The reasons are unimportant for present purposes. The disputes had become very bitter by 2019, and it was in that context that Tony started to take steps to sell 162A Holt Road. There is some evidence that Tony was becoming frustrated with the fact that Jason had not taken steps to refinance the construction loan. However, that frustration arose from the current circumstances. It cannot be inferred that Tony had expected Jason to refinance the loan as soon as possible after the building work was complete. It is against that background that Tony and Jason went to see Mr Fahd. Mr Fahd advised them that there was no possibility of refinancing the loan until the Property was subdivided. That took some time and did not occur until 5 June 2020. By that stage the COVID-19 pandemic had started, which affected the profitability of the Mt Druitt shop and Tony’s and Jason’s income. It was apparent that Jason did not have the income to support a loan of $630,000 on his own. Moreover, Tony and Jason became aware that Tony would be liable for capital gains tax on the sale of his property. Those issues were not addressed before Tony’s death.