Makaritis v Makaritis

Claims for determination

1. Bill instituted these proceedings in late July 2020. Shortly before doing so, he lodged a caveat over the property claiming an "Estate In Fee Simple" supported by a "Beneficial Interest In Trust".
2. Bill alleged that Luke had taken advantage of him by persuading him to transfer the property to HPH. Initially, Bill resisted giving up possession of the property, and this resulted in interlocutory proceedings in the Applications List, which, coincidentally, came before me. In April 2022, I refused Bill's application to stay HPH's claim for possession (see Makaritis v Makaritis [2022] NSWSC 468).
3. The essential reason for that decision was the balance of convenience: Bill was not in a position to discharge the mortgage on the property or to cover the costs of servicing it. I did, however, permit Bill to keep the caveat on the property so as to prevent HPH from selling or further encumbering it.
4. It is accepted on Bill's behalf that, even if he were to succeed in his allegations, rescission of the transfer would not be possible. Bill is not in a position to return the $338,000 he received from HPH for the transfer, let alone to find the additional amount which has been borrowed and would be required to discharge the mortgage: see Alati v Kruger (1955) 94 CLR 216 at 223-4 per Dixon CJ, Webb, Kitto and Taylor JJ. Rather, Bill's claim is for a proprietary interest by way of a constructive trust over the equity in the property (that is, the value of the property after the mortgage has been discharged). Bill seeks orders for the sale of the property to give effect to this claim.
5. Bill's constructive trust claim has been advanced from several bases. These have included relief based on a proprietary estoppel; an unconscionable transaction; and a failed joint endeavour. At the final hearing, the principal case put by counsel for Bill was for a failed joint endeavour constructive trust of the type recognised in Muschinski v Dodds (1985) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137.
6. Bill also makes alternative monetary claims against Luke personally. Bill alleges that, in making the arrangements for the transfer, Luke was acting in his professional capacity as a solicitor. Bill claims damages for negligent misrepresentation or misleading or deceptive conduct. There is also a claim for equitable compensation.

Chronology of key facts

1. Bill bought the property (which was, at that time, vacant land) in 1991 for $50,000. The purchase was financed by a $45,000 loan from ANZ Bank, which was secured by a mortgage over the property. Bill later built a four-bedroom house which served as the family home during his marriage to Sally, and then during his relationship with Candice.
2. In around May or June 2016, Bill and Candice separated. In August of that year, Bill commenced proceedings in the Federal Circuit Court ("FCC") against Candice seeking parenting and property division orders. For the purposes of those proceedings, a joint valuation report was prepared for the Maryland property. The report placed a value on the property, as at the valuation date of 18 July 2018, of $470,000.
3. Following the dissolution of his relationship with Candice (who had custody of Sienna), the house was larger than Bill needed for himself. From the beginning of the FCC proceedings, however, Bill had hoped to keep the property in the family for his benefit and for the benefit of his children. The making of the FCC orders created a new impetus for action if this was to be achieved.
4. On 21 February 2019, the FCC made property division orders between Bill and Candice. The orders provided for the Maryland property to be sold. The proceeds of sale were then to be used to discharge ANZ's mortgage loan on the property (which stood, at the time, at around $42,000) and to pay the sale costs, as well as any rates and utilities adjustments. As ordered by the FCC, the balance was to be used to pay Candice $62,000, and the remaining proceeds were to be split between her and Bill equally.
5. Bill proposed paying Candice a settlement sum to avoid the sale. Through her solicitors, Candice agreed to a sum of $265,000 (based on the $470,000 valuation of the property) to cover her entitlement under the FCC orders. There was no specific deadline for this to occur, but it was suggested that Bill "should act promptly".
6. Bill recognised that he would probably need financial help to raise the money needed to pay out Candice. He raised this with his nephew, Peter Phillips ("Peter"), and with Luke. Although the circumstances in which this happened are disputed, by late February 2019 it had been agreed that any help would come from Luke, and Peter would not be involved financially. Bill continued, however, to consult Peter.
7. Soon after the FCC orders were made, Luke indicated to Peter his proposal for the property to be bought in the name of Mr Yousuf Tanweer, who was Luke's partner at the time. Apparently, this was because Luke was planning to buy another property in Glebe and wanted to take advantage of the first home buyer concession on that property rather than the Maryland one. But the property in Glebe proved to be too expensive and the idea did not go any further.
8. On 18 March, Bill obtained a quote from Backyard Grannys (a business specialising in the construction of granny flats), for a three bedroom and one bathroom granny flat. It was estimated that this would cost around $113,000. Around this time, Bill arranged for an appraisal of the property to see how much rental income it could generate.
9. On the same day, Bill approached Mr Dinesh Jayasuriya, a branch manager at ANZ, about obtaining finance. Mr Jayasuriya suggested structuring the loan as a loan to a corporate trustee. But Mr Jayasuriya considered that Bill did not have sufficient borrowing capacity to obtain all the required funds by himself; Luke needed to be involved and therefore also needed to make an application.
10. Because of Luke's involvement, it was necessary to look at his finances. Luke had liabilities in the form of a personal loan and credit card debt. Mr Jayasuriya suggested that if those personal debts were to be consolidated into the loan, then Luke and Bill could jointly borrow $298,000. Bill could borrow a further $177,000 on his own.
11. On 19 March Luke sent Mr Jayasuriya a loan application completed by Bill, as well as a loan application completed by himself and Bill as co-borrowers. But further complications arose because of the uncertainty about where both Bill and Luke were going to live. Their cost of accommodation needed to be factored into the loan assessment.
12. Also on 19 March, Luke had approached Mr John Carey, a lending specialist at Pepper Group Limited (known as "Pepper Money"), to refinance the property and fund the construction of a granny flat. At this stage, Mr Carey gave an early indication that the loan could be approved, subject to a credit assessment. But serviceability of the loan was complicated by Luke's personal debts. According to Luke, Mr Carey proposed for them to be consolidated into the loan.
13. The indication from Mr Carey appears to have prompted Luke to incorporate HPH on 22 March. On the following day, he submitted a formal loan application to Pepper Money in the name of HPH as borrower, with Bill and himself as guarantors. The application was for a principal and interest ("P&I") loan of $471,000 to HPH with a loan term of 30 years. On 26 March, Luke abandoned his loan application with ANZ.
14. On 26 March, Luke arranged for the execution of a deed of settlement for the Makaritis Family Trust. The trust deed was executed by Peter as settlor, HPH as trustee, and Luke as appointor. Bill was not a party to it.
15. Bill and Luke were named as "primary beneficiaries" in the trust deed. Also named as primary beneficiaries were "any legitimately recognised heirs, successors and descendants' ex sanguinis [sic]" of both Bill and Luke. The Trustee was given a wide discretionary power to appoint the income of the Trust to the named beneficiaries. The Trustee was also given the power, with the written consent of the Appointor, by resolution or deed, to remove beneficiaries. The Appointor had the power to appoint or remove the Trustee.
16. At the time, Luke was working with Navado Lawyers and Solicitors ("Navado") as an employed solicitor. For reasons which were not explained in the evidence, he decided to give up that employment and work instead as a casual legal writer with a company called "Wordwallah". There is some dispute about when Luke stopped working at Navado, but he was working at Wordwallah from early April onwards.
17. On 2 April, Pepper Money conditionally approved Bill and Luke's loan application. The loan amount was $464,000 for a term of 30 years with monthly P&I repayments of $2,000 and an interest rate of 4.52 per cent per annum. Pepper Money's conditional approval prompted Luke to pay the stamp duty for the trust deed on 4 April.
18. One of the conditions imposed by Pepper Money was for Bill to be appointed as a director of HPH. Luke tried to persuade Pepper Money to drop this requirement, but the request was refused. Having failed to reach agreement with Pepper Money, on 8 April, Luke withdrew the loan application. Instead, Luke asked Mr Daniel Patch, a mortgage broker, to try to put together a loan from St George Bank ("SGB").
19. For reasons which are not explained in the evidence, the SGB loan application process took almost two months. By late May, approval had not been granted but was expected by Luke to occur by 31 May. On 24 May, Bill and HPH retained a law firm trading under the name Think Conveyancing ("TC") to undertake the legal work on the transfer of the property. Ms Caroline Tsau was the primary contact.
20. On 29 May, Luke instructed CBRE Residential Valuations Pty Limited ("CBRE") to prepare a valuation report of the property for the purposes of calculating stamp duty. CBRE completed the valuation and sent a report to Luke on 4 June which valued the property at $600,000. A duties statement issued on 5 June by Revenue NSW assessed the duty as $22,000.
21. Approval from SGB was not, however, obtained by 31 May as Luke had hoped. Meanwhile, Candice, through her solicitors, was putting pressure on Bill to pay the settlement sum or to put the property up for sale.
22. On 4 June, Luke emailed Mr Patch putting him on notice that settlement needed to occur the next day and that the funds from SGB were required to avoid the sale falling through. This did not happen. Instead, SGB asked for the consideration for the transfer of the property to be $333,000. On 5 June, the FCC made an order appointing trustees for the sale of the property but stayed the order until noon on 26 June on the basis that if Bill paid Candice the settlement sum (now $267,000) the order would be discharged.
23. According to Luke, Bill consented to the transfer consideration being reduced. But, on 7 June, the SGB loan application fell through. At the last minute, Mr Patch asked for Luke's pay-slips to verify his earnings and learned that Luke was no longer employed by Navado. Although Luke expected to work full-time hours at Wordwallah, he was a casual employee. Mr Patch advised that SGB would not proceed with the loan because the Bank's lending criteria required a minimum of three months' employment for a casual employee.
24. According to Luke, Mr Patch suggested that, despite the unavailability of finance from SGB, it might be possible to obtain a business loan for HPH, but this would only be for a short term and would carry a higher interest rate. The decision was made to pursue this, in the hope of paying out Candice and refinancing the property in due course. Luke changed tack and sought to borrow a lesser amount and find funding at a later point to build the granny flat.
25. According to Luke, he emailed Mr Jayasuriya proposing a loan with ANZ at Bill's request. But even if ANZ's lending criteria could be satisfied, that loan could not be settled in time. Having failed to secure financing from ANZ, Luke (and HPH) then made two further loan applications to "second-tier lenders". These also produced no result.
26. Candice, through her solicitors, continued to pressure Bill. At the last minute, on 19 June, Luke received from Mr Jonathan Valentino of Catalyst Advisers, a mortgage brokerage firm, a loan offer from Prime Capital Securities Pty Limited ("Prime Capital"). The loan amount was $400,000 for a term of 12 months (with a minimum term of 6 months) with an interest rate of 8.55% per annum. Later that evening, the loan approval document was signed by Luke on behalf of HPH as borrower and by Luke as guarantor.
27. The transfer of the property proceeded to settlement on 21 June. The property was transferred to HPH, and a mortgage was placed over the property by Prime Capital. The consideration recorded on the transfer document and PEXA settlement statement was $490,000.
28. On settlement, Prime Capital credited HPH with the $400,000 lent together with a prior deposit of $2,000. Prime Capital and its solicitors retained a total of $24,000 for borrowing and legal fees (and the first month's interest). Prime Capital made third party payments totalling $15,000, apparently for the broker's fee and mortgage insurance. Following deduction of stamp duty and other fees, $42,000 was paid to ANZ to discharge Bill's existing mortgage, and Bill received $296,000 which he used to pay Candice the $267,000 settlement sum on 25 June. There was, thus, $29,000 left over in Bill's hands.
29. On 22 June, Luke emailed Bill requiring him to find alternative accommodation and to move out as soon as possible. I discuss this email in more detail below at [73]. There appears to have been no written reply from Bill to this email. In any case, Bill did not move out. Instead Bill made payments to HPH to help cover the borrowing costs with Prime Capital.
30. At the start of July, Luke reapproached Mr Carey to refinance the property with Pepper Money for the purpose of building the granny flat. On 17 July, HPH received conditional approval from Pepper Money for a refinancing of the property with Luke as the guarantor. The loan amount was $525,000 for a term of 30 years, with an interest rate of 4.41% per annum.
31. On 23 July, Mr Carey emailed Luke noting that $417,000 would be needed to pay out the Prime Capital loan. He also noted that the construction cost for the granny flat would be $136,000. At Luke's request, Bill transferred $30,000 to HPH to cover the shortfall.
32. A written loan agreement was prepared by Pepper Money on 25 July. The mortgage over the property by Pepper Money was executed on 22 August.
33. Bill made a number of additional payments on top of the $30,000 toward the renovating of the property and servicing the loan. These payments were made between June 2019 and January 2020. Some payments were made directly to HPH to cover borrowing costs, and others were made to suppliers for renovation costs. According to HPH's financial statements, HPH was indebted to Bill in the sum of $47,000 as at 30 June 2020. But the evidence before me suggests that the total amount paid by Bill may be as high as $56,000.
34. The construction of the granny flat required a development approval from the local council. In late January 2020, Backyard Grannys submitted a proposed design for approval by Bill and Luke. In mid-February, Luke began advertising the bedrooms in the house (other than the one occupied by Bill) for rental.
35. But, by late February, the relationship between Bill (who was being advised by Peter) and Luke had begun to deteriorate. Bill and Peter became suspicious of Luke's motives. On 11 March, following a conversation with Luke which I discuss in more detail below at [96], Bill sent a text to Luke threatening to report him to the Law Society unless he handed over control of HPH. Luke responded with a notice purporting to terminate Bill's tenancy under the Residential Tenancies Act 2010.
36. Five days later, Luke, on behalf of HPH, sent Bill a second notice to deliver vacant possession. According to Luke, Bill had been interfering with his attempts to let the other bedrooms in the house.
37. Bill remained living in the house, despite the eviction notices he had received from HPH. By early April, Luke had let three of the bedrooms out. The parties remained at loggerheads.
38. In April, the development application for the granny flat was approved by the Newcastle City Council. Luke, on behalf of HPH, then went ahead with the construction of the granny flat in accordance with the agreement with Backyard Grannys. Construction was completed in January 2021.
39. Meanwhile, on 10 June, Luke, on behalf of HPH, commenced proceedings against Bill in NCAT, seeking possession of the property. Bill lodged a caveat over the property on 26 June, and then commenced proceedings in this Court against Luke and HPH by Statement of Claim on 29 July.

Witnesses

1. At the hearing, Bill and Peter gave evidence in Bill's case and were cross-examined. Luke was the only witness to give evidence in the defence case; he, too, was cross-examined.
2. The credit of all the witnesses was challenged. I consider these challenges later, and then give my conclusions on the factual issues about the dealings between the parties. Before doing that, I summarise the documentary evidence, and the witnesses' testimony, on those dealings.

Documentary evidence

1. Proposal to buy property in Mr Tanweer's name: The first documentary evidence to which it is necessary to refer is a text message from Luke to Peter dated 24 February 2019. This was three days after the FCC orders had been made. Luke wrote: … I've been thinking about what you said about buying the house. I'm leaning towards doing it. Still subject to what happens with Glebe - but if I can do both I will. I have certain conditions though that must be met. One of them being a contract will be formed as a Deed that the house will be bought in the name of Joseph (in his legal name of Yousuf Tanweer - because Candice has never known him as that), but the deed will specify Yousuf only holds the property as trustee for William Makaritis and Luke Makaritis and me [sic] and dad jointly will be responsible for the mortgage repayments not Joseph. Dad and I will secure the mortgage with our joint incomes (my wage and his pension) the Deed will specify that equitable ownership of the property is acknowledged to be 50% William Makaritis and 50% Luke Makaritis but for the purposes of decision making as to what happens with the property (re: renovations etc.) the voting power for decisions will be 49% Dad, 49% me and 2% Joseph as trustee. It just makes things operate so that a clear majority decision can be followed.
2. Mr Tanweer would buy the property as he was: eligible for the first home buyers grant of $10,000 plus no stamp duty. I [Luke] also am eligible BUT I want to use that on Glebe since the stamp duty will be much higher on that property. I believe this can work out well; but I suspect I may need your help convincing dad. It being in Joe's name and him having 2% decision making rights may put him off. But I think this will work out in the best interests of all of us.
3. Luke then proposed that the deed would: specify that Joseph MUST sell the property to the Makaritis Family trust at the time specified by a vote of the property decision makers. In other words - whenever we're financial enough when dad and I vote that he must sell to our family trust he must do it. That way everyone is protected. Dad is coming here on Wednesday evening. Sometime after Wednesday [27 February] if you're around Rockdale pop in and we can discuss putting all of this into concrete action. Dad and I must jointly approach potential mortgagees ASAP.
4. ANZ loan application: On 18 March, following the initial approach from Bill (see [23] above), Mr Jayasuriya emailed Bill and Luke. Bill would have to borrow jointly with Luke to supplement his own loan application. Mr Jayasuriya proposed: We merge the current loan for 42k [this refers to the existing ANZ mortgage over the property] and 215k extra Bill can borrow on his own - 215k might change depending on how much potential rental income can be verified for the house Maryland property, then borrow the rest up to 265k - could be around 50k - in joint names. We will have to convince an assessor that Luke will get a benefit out of being a co-borrower on the smaller loan - this will be difficult - I am going to state that it forms part of your inheritance ultimately and that you want to prevent it from been sold now. If you can think of anything else to justify it please send to me. However the assessor might say it is not acceptable as Luke is becoming liable for a benefit that he might not get as it's up to Bill to decide who gets what/ how much in his estate and that Luke you are paying for something that might not eventuate and not fair to you If you are happy for me to proceed with the application, please inform me so I can send an application to you Luke
5. On 19 March, Mr Jayasuriya emailed Bill and Luke and proposed structuring the loan with a trust and corporate trustee: If you set up a Trust - as long as the Trust has powers to borrow funds, etc - , with a company as corporate trustee, we should be able to consider the Directors income and borrow funds
6. On 20 March, Mr Jayasuriya emailed Luke and asked whether Bill would be moving in with Luke while the property was rented out. Luke replied to Mr Jayasuriya from Bill's email account: No, dad moving in with me was the previous idea. The current idea is that the trust (through dad and I as joint trustees) raise a mortgage to buy the property at Maryland, we then build a 3 bedroom granny flat and live here at Maryland in the granny flat renting the house out for $500pw.
7. Pepper Money loan application: Meanwhile, on 21 March at 5.01 pm, Luke emailed Mr Carey with a proposal for the loan with Pepper Money after apparently discussing the matter with Bill. He wrote: I've spoken to dad about the various options (he is cc'ed into this email) and he has decided that the way we should proceed is as follows: He understands the Lender will require that it be shown my name is attached to the property in some capacity showing legal interest. He prefers that we borrow enough now to cover stamp duty also so that we can set up a company in which both dad and I are co-directors and shareholders. After speaking to dad, he does not want to go down any other path. He prefers we have a company as legal owner for taxation reasons - so that any rental income earned from the property will be tax payable by the company and will not affect either his or my own existing taxation arrangements. … Can you please therefore process the loan application on the basis of the primary lender [sic; borrower] being Hellenic Property Holdings Pty Ltd with William Makaritis and Luke William Makaritis as guarantors. …
8. On 2 April, Pepper Money conditionally approved Bill and Luke's loan application. One of the conditions of the loan was that Bill be appointed as a director of HPH. The next day, Luke emailed Mr Carey, attaching the letter signed by him and Bill. The letter outlined Bill and Luke's "exit strategy" which included: William Makaritis is presently aged 58 years. He is in receipt of the disability support pension at the time of applying for this loan and his declared income as per this loan application is therefore not expected to decrease since he is already a pensioner. In addition to Luke's salary and William's pension, one of the several reasons for this loan is to build a granny flat in the property's backyard so that we can take advantage of rental income to assist with drawing [sic; paying] down the mortgage a lot quicker. …
9. The letter then addressed the "problematic" directorship requirement: As explained on the phone at the time of making the application, the whole purpose of establishing a company to act as corporate trustee who holds the property in legal title as trustee for the Makaritis Family Trust was so that we can have a legal structure that makes absolutely clear the beneficial and equitable interest in the property vests in William Makaritis and Luke Makaritis, with the company being the legal entity to hold it in legal title. The reasons behind this are several, firstly it is a way to safeguard the property in a way that does not require succession laws to come into play in the event that one of the interested parties on the trust deed passes away. Everything can continue unaltered with the appointment of a new Director(s) of the Trustee company that can be taken care of in the will of the deceased. Secondly, with a company holding legal title, the rental income expected to be gained from the property which will assist with the exit strategy outlined above will not in any way affect the present disability support pension of Bill Makaritis. This is the deliberate reason Luke Makaritis was listed as sole director of the trustee company. Should we comply with the request presently made by Pepper Home Loans, we submit that this will in fact only serve to complicate matters further for Bill Makaritis with respect to his income from Centrelink, causing a review of his pension that may result in a lessening of it which would be a disadvantage not only to Bill Makaritis but also to Pepper Home Loans as far as the serviceability of the mortgage repayments are concerned. With a trustee company with Luke Makaritis as sole director holding the property very clearly as trustee for the benefit of those named in the Trust Deed, we have a legal entity and legal structure whereby it is undeniable that beneficial and equitable interest vests in both Bill and Luke regardless of who the directors of the Trustee company may be. By keeping Luke as sole director of the trustee company, with the way the trust deed is written, this in no way compromises Bill as having a legally established and enforceable interest in the property but it avoids the unfortunate side step of his being a director of the corporate trustee from causing a review and possible lessening of his Centrelink pension income.
10. Communications about incorporation of HPH and establishment of Trust: On 26 March, the deed for the Makaritis Family Trust was executed by Peter as settlor and Luke (for HPH as Trustee). That day, Luke sent an email to Bill attaching an ASIC extract of HPH and a signed copy of the trust deed.
11. Although Luke was the sole director of HPH, its postal address was given as that of the Maryland property. As a result, Bill received letters confirming the Tax File Number and the Australian Business Register details for HPH. On 3 April, an email was sent to Luke from Bill's account attaching scanned versions of a letter, as well as documents from Backyard Grannys.
12. SGB loan application: Around the time Luke was negotiating with Pepper Money, he also approached Mr Patch to broker a loan with SGB. Luke completed a Client Preliminary Assessment form on 5 April with himself and HPH as applicants. Under the question "What are you wanting to do?", Luke wrote: Purchasing the old family home cheaply from my dad (approx for 80% of its market value), build a granny flat in the large backyard for dad and I to live in, and rent out the main residence for additional income.
13. Under the question "Any specific goals or objectives for this loan?", Luke wrote: Purchase home from my dad for $470,000. From those sale proceeds, once received dad has agreed to fund the building of a granny flat for him to live in rent free for life and to add value to the property purchased.
14. On 23 May, Luke emailed Bill a statutory declaration to sign, which appears to have been at the request of SGB, which I discuss further below in Luke's evidence at [114]-[115]. Bill signed that statutory declaration on 24 May which said: … 2. I have agreed to sell the property to a company registered as Hellenic Property Holdings Pty Ltd (ACN: 632 448 241), the sole director and shareholder of which is Luke William Makaritis. 3. The agreed consideration for the sale of the property to the abovenamed company is $470,000. It is my understanding that the mortgage the company has applied for is $490,000 and that the extra $20,000 beyond the consideration price to be used to cover the stamp duty payable. 4. Of the $470,000 the company will obtain in finance, I have agreed to gift the following amounts to Luke William Makaritis for the below stated purposes: 4.1 The approximate amount of $22,230 to pay out a car loan to Nissan Financial Services; 4.2 The approximate amount of $3,800 to pay out a personal loan to Society One; 4.3 The approximate amount of $136,320 to pay for the construction of a granny flat at the property. … 9. With the expenses at 4.1 - 4.3 having been fulfilled, I acknowledge that the fulfilment of those expenses plus the discharge of my existing ANZ mortgage and the sum of $265,650 to be received by me satisfy full consideration of the sale of the property and that I have no personal interest or claim on the property thereafter.
15. Following the failure of the loan to settle by 5 June (see above at [36]), SGB asked for the consideration price for the property to be further lowered to $333,000. Bill signed a statutory declaration on 6 June: … 2. I have agreed to sell the property to a company registered as Hellenic Property Holdings Ply Ltd (ACN: 632 448 241), the sole director and shareholder of which is Luke William Makaritis 3. The agreed consideration price for the sale of the property to the abovenamed company was originally at $470,000. 4. However, in light of my own changed circumstances, and the fact I will now no longer be assisting my son with the construction of a granny flat, I have agreed instead to lower the consideration amount. 5. The agreed consideration for the sale of this property will now be $333,000. 6. Of the $333,000 agreed consideration, approximately $43,000 will need to go to the ANZ bank to discharge the mortgage which is presently secured on the property. The balance of the consideration price is to be payable directly to me. 7. I have made this decision with my own free will and without external influence, I agree that for the full and frank consideration of $333,000 divided as per paragraph (6) above, I no longer have any claim on the property.
16. Second ANZ loan application: On 7 June, Luke emailed Mr Jayasuriya and submitted a proposal to ANZ for a $388,000 loan (with a $333,000 consideration price) which would need to be finalised by 19 to 20 June at the latest. He wrote: … I recently commissioned a fresh valuation of the house for stamp duty purposes. That valuation through CBRE, a copy of which is attached to this email, value the house at $600,000. We have decided the sole priority now is to pay out dad's ex-partner to save the house, and any talk of a granny flat (as before) can be put on hold for a later stage. What we now propose is the following. That the house be sold to the Family Trust (as discussed before)- and for this purpose the trust is established and ready - stamp duty paid on it and it is ready to go. The Trustee is a company named Hellenic Property Holdings Pty Ltd (It is a non-trading company, solely a holding company that acts as trustee for the Trust). I am the sole director and shareholder of the trustee company and as such, it is solely my wage and financial information that is relevant. …
17. Luke then explained that the property would be rented out for the purposes of the loan application. The "idea" was for Bill to live with Luke in Sydney while the property was rented out at $500 per week.
18. Luke asks Bill to move out: The day after settlement (22 June), Luke sent a lengthy email to Bill. First, he suggested that Bill take immediate steps to pay Candice the settlement sum. He then wrote that Bill would need to find alternative accommodation so the property could be rented out to service the mortgage: … I know this will come as a shock to you, but you were aware before settlement that if I purchased the house that I would be relying on rental income to fund the mortgage repayments. It's a very large house, you're on a pension, I know you might have expected leniency from me because I'm your son but the market rental value of the house is much more than you can afford to pay me. So by this email I'm giving you formal written notice that I require you to find alternate accommodation and move out as soon as possible. Although I agreed to let you stay post settlement, on a temporary basis; to give you time to sort out alternate arrangements, I need you to understand this time is not infinite. Time is a finite resource. Therefore, I am giving you 8 weeks notice to find alternate accommodation and to move all of your belongings out and clean up and get rid of any junk you don't want from the house. I believe 8 weeks is more than generous in the circumstances. Don't delay this - start finding a place of your own soon. I know you won't be happy with this decision but please understand that I can't afford to let you live there at cheap subsidised rent at my expense. I now have a mortgage to pay on top of my other financial commitments. Please be understanding of this and move out as soon as possible - but definitely before 8 weeks from today's date. …
19. Luke gives Bill notice to quit: On 16 March 2020, Luke emailed Bill a notice to deliver vacant possession of the property by 15 June 2020. Also attached to the email was a letter which addressed various topics. The first was the "Ownership Status" of the property: 4. It is a fact known to you that the registered owner with legal title of the property is Hellenic Property Holdings Pty Ltd in its capacity as Trustee for the Makaritis Family Trust as defined in Deed of Settlement establishing the Makaritis Family Trust dated 26 March 2019. 5. The Trust Deed was stamped by Revenue NSW as duty paid on 4 April 2019 and on that same date a scanned copy of the Trust Deed was provided by email to both you and the Settlor, Mr Phillips. 6. The Trust Deed was executed, signed, sealed and delivered and had stamp duty paid on it well in advance of the June 2019 conveyance of the property by you transferring legal ownership from William Makaritis to Hellenic Property Holdings Pty Ltd. 7. I note you made allegations that Luke Makaritis had somehow deceived you into the conveyance but in circumstances where all of the documents were transparently laid out before you this cannot be said to be true when the documents record the accuracy of everything transparently at a time before you agreed to the sale of the premises. 8. While you evidently fail to comprehend the above and still seem to be under the mistaken impression that you own the premises and are in charge of managing it, the legal documents show your status is that of a beneficiary of a discretionary trust and not a Trustee or manager who in any way controls ownership.
20. Luke then addressed the rental payments that Bill owed to HPH as well as the money he contributed toward the property in the form of renovation costs and mortgage repayments: 22. The agreement in place between us since the sale is that while you performed certain works on the house in readiness for it to be rented out you would stay in place at the property. For reasons explained above this is now untenable. 23. While there was never an agreed fixed-term for your stay, nor a fixed price; the agreement was that to the extent there are no rents amounting to the costs of the mortgage repayments and other bills related to the household and the property that you would cover those amounts payable. 24. The trust acknowledges contributions of $45,000 in cash deposits made to it by you and other sundry expenses (such as the kitchen makeover) that were paid by you. At the same time, it must be put on the record that without notice to the Trustee you unilaterally went to the Wallsend Branch on the Westpac Bank and withdrew $6,000 in cash from the Trust bank account. As such, the contribution by you currently sits at $39,000 plus other capital works expenses paid for from your pocket (like the kitchen for example). When the Trust is in a financial position any monies owed to you will be repaid less any monies you owe to the trust. 25. As such, according to the terms of the agreement, monies you owe to the trust in this manner will be calculated at the time you depart from the premises and will be calculated at the total costs for the premises for each month for each month there was no rental income. A partial amount will be added for bills incurred above and beyond paying rental income from the date paying tenants moved into the premises. 26. At the end of your residential tenure in the premises therefore, the amount of expenses owed as per paragraph 25 above will be subtracted from contributions sum derived as per paragraph 24 above and the balance will be an outstanding amount the Trust owes to you.

Bill's and Peter's evidence

1. In his affidavits of 9 May 2022 and 20 September 2022, Bill gave evidence of his dealings with Luke leading up to the transfer in June 2019. The thrust of Bill's version of events was that Luke used his position as a solicitor and as his son to gain Bill's trust and to swindle him out of the property. Bill presented himself as having had little knowledge of the lending negotiations or the way in which the transaction was structured through HPH. Bill's evidence was supplemented by the evidence of Peter.
2. According to Bill, after the FCC made orders on 21 February to sell the property, he knew he needed to pay Candice around $265,000 to keep the property. He first approached Peter for help as they had a good relationship. Apparently, Peter was willing to be the guarantor on Bill's loan, but did not want to "cause a rift" in Bill's and Luke's relationship. According to Peter, Luke was "insistent" on helping Bill and he did not want to come in between them.
3. Sometime before 18 March, Bill said that he had a joint phone call with Luke and Peter about the property where Luke offered to help. According to Bill, Luke justified taking over from Peter due to his expertise as a solicitor: Bill: Peter has agreed to help me with the loan as a guarantor. I should be able to finalise the court money with Candice shortly. Luke: No, Peter. I will help dad. Peter: OK. You guys work it out. … Luke: Why didn't you come to me first? I am your son and a solicitor. Bill: Peter has been helping me through the court proceeding and is happy to continue to help me. Luke: I am a solicitor. I know how the system works. I can do things that Peter can't. Why would you go to him instead of me, your own son? Bill: Do you reckon you can help me? Luke: Yes. Trust me. I will do a better job. Bill: OK.
4. Bill mentioned to Luke that he wanted a lawyer suggested by Peter to set up the Trust. According to Bill, Luke said that he himself would set up the family trust for Bill as he was a "lawyer and [Bill's] son". Bill instructed Luke that he wanted the house to be put into a family trust which he would control, and with his children as beneficiaries. He wanted to be able to live at the property rent-free for the rest of his life. Luke agreed to facilitating this arrangement.
5. This account is supported, but only in part, by the evidence of Peter. According to Peter, on 11 March, he, Bill, and Luke had the following conversation: Bill: I'm going to get some assistance from Peter for getting the finances Luke: Dad, I will help you, don't worry about it Peter Peter: No worries, it looks like you guys can work it out. Let me know if you need me for anything
6. According to Bill, when he and Luke began approaching lenders in early March, he told Luke that he wanted to save the house by borrowing money to pay out Candice. They would use part of the loan amount to build a granny flat for Bill to live in for the rest of his life, and would rent out the rooms in the house to pay off the loan.
7. According to Bill, around the time he and Luke approached ANZ and Pepper Money, Luke suggested the idea of incorporating HPH which would be the trustee of the trust and owner of the property. This was because if Bill had another relationship, they would not be able to make any claims against the house as Bill would not be listed as the registered proprietor.
8. According to Bill, after HPH was incorporated on 22 March (see above at [27]), he became aware that he was not a director or shareholder. Bill asked Luke why this was the case. Luke said that if Bill were a director or shareholder of HPH this would affect his pension. Bill believed what Luke said as he was a lawyer. Luke repeated this advice in early April after Pepper Money imposed the condition that Bill be made as a director of HPH if the loan was to proceed. Luke told him: A condition for the loan from Pepper is that you become a director of Hellenic Property Holdings. Being a director or shareholder of a company that earns an income will have an adverse effect on your pension. You should not become a director because this will affect your pension. The company must act in the interests of the beneficiaries. The family trust really owns the company. The company is a front.
9. Bill stated that, a week afterwards, he asked Luke about the Makaritis Family Trust deed and why he was not named as the Trustee. They then had a conversation as follows: Luke: We can't get a loan with the trust in the format you wanted. We must structure the transaction with Hellenic Property Holdings as trustee to get the loan from the bank. Once the granny flat is completed and everything is finished, I will put you back as trustee. You have nothing to worry about. Bill: I should see a lawyer to get independent advice and help me understand what is going on. Luke: I am a lawyer and your son. Why pay for a lawyer? You can trust me.
10. In cross-examination, Bill alleged that, on 26 March, Luke asked him to sign a deed of settlement for the Makaritis Family Trust which named him, and not HPH, as trustee. Luke sent Bill an email on 26 March attaching the executed version of the trust deed. That document named HPH as the Trustee of the Trust (see above at [28]). Bill denied ever receiving this email but later accepted it could have been in his inbox. Bill also denied receiving the email from Luke on 2 April attaching the loan approval letter from Pepper Money which identified HPH as Trustee (see above at [31]).
11. An issue arose about the letters recording TFN and ABN details which Bill received by post and which were attached to an email from Bill to Luke on 3 April. In his evidence, Bill maintained that Luke withheld these details from him. In cross-examination, Bill said he sent the documents from Backyard Grannys but did not send the Tax File Number or ABN details for HPH. He explained that Luke must have sent the documents himself as he had access to Bill's email account. Although the TFN and ABN letters were sent to the property, he said he left them "on the bar" where they were collected by Luke. He denied that he had access to the ABN for HPH.
12. Bill's evidence also addressed the statutory declarations he made in support of the SGB loan application, and which stated that he would have no interest in the property after receiving the transfer price. Bill stated that, when Luke asked him to sign the first statutory declaration on 24 May, Luke said that it was "for loan purposes only". Bill wanted to get independent legal advice about the declaration, but Luke said that Bill should trust him as a lawyer and his son. The money spent on lawyers could instead be put towards renovations.
13. According to Bill, he asked Luke why he needed to sign the second statutory declaration on 6 June (see above at [70]). Luke said that this was because the 24 May statutory declaration was "not satisfactory". Again, Bill said that he "trusted Luke" and signed the declaration. According to Peter, he had a conversation with Bill on 6 June after the statutory declaration was signed. Peter told Bill that he should not have signed the statutory declaration. Bill then said: I was reluctant to sign it but Luke kept telling me that it is a requirement to secure the loan. The lender will not provide funding unless I sign it according to Luke. Luke told me not to worry about it. He said, "Dad, don't worry about it. It's just for the lender to secure the loan.
14. Bill stated that, after the FCC made orders on 5 June appointing trustees for sale of the property (see above at [36]), he approached Peter to assist in arranging a loan which Peter agreed to do. But when he told Luke this, Luke asked for "more time" to organise a loan and said "Don't let Peter organise the loan".
15. On 19 June, Luke received a loan approval from Prime Capital (see above at [40]). Bill was cross-examined about his pleadings and his allegation that he did not know about the terms of the loan with Prime Capital, including the loan amount. He repeated the allegations made in his pleadings but accepted that he in fact knew that Prime Capital was lending $400,000.
16. On the day of settlement (21 June), Bill said that he was at Luke's apartment in Rockdale. That afternoon, Luke told Bill that Dentons, the solicitors for Prime Capital, were asking for a further $5,000 or settlement would not occur. Bill said: Bill: This is ridiculous. I am not paying any more fees. This doesn't sound right. I am going to ring Caroline [Ms Tsau] and cancel the transaction. I don't care if we have to sell the house. Luke: No you won't.
17. According to Bill, Luke "snatched" his mobile phone and ran onto the balcony. Luke then held onto Bill's phone until later that afternoon.
18. According to Bill, he did not receive Luke's email of 22 June asking him to vacate the property (see above at [73]). He only became aware of it when it was annexed to an affidavit served by Luke in the NCAT proceedings in 2020.
19. In July, Bill said that Luke told him about refinancing the Prime Capital loan with a lender "which charged a lower interest rate for a longer-term loan". The refinancing was for the purpose of funding the construction of the granny flat. But there was a $30,000 shortfall (see above at [45]). According to Bill, on 23 July, he and Luke had the following conversation: Luke: We have a problem. I am trying to refinance with Peppers. There is a shortfall of $30,000 for the granny flat. If you want to borrow money for the granny flat, you must transfer $30,000 to Hellenic's bank account. If you can't pay the shortfall of $30,000, we can still refinance away from Prime Capital, but you can't borrow money to build the granny flat, and there won't be a granny flat for you to live in. Bill: If I provide $30,000, will the refinance be approved for the granny flat? Luke: Yes. Bill: I will transfer the money in two lots of $15,000 as that is my daily transfer limit.
20. According to Peter, on 29 July, Bill expressed his "displeasure with the family trust Luke made". Bill said that he had asked Luke for the loan documents, but Luke was "avoiding the subject".
21. In late February to early March 2020, Bill wanted to inspect the Makaritis Family Trust deed to prepare his will. He asked Luke to give him the ABN details for the Trust. In the evening of 11 March, Bill had a phone conversation with Luke where he pressed Luke to provide him with the Trust's ABN: Bill: I am phoning to ask you again for the ABN for the Makaritis Family Trust so that I can prepare my will for the kids' percentages. Luke: Why do you need the ABN? Bill: You told me the Makaritis Family Trust is a discretionary trust and I need to do a will to state the kids' percentage split. I need the ABN for the solicitor to identify the Makaritis Family Trust. Luke: No you don't. You own nothing. What's the point of a will? Don't rile me up. Or I will sell the house and run off with the lot.
22. At this point, Bill said his state of mind was that "Luke may have stolen the Property" from him. Bill then called Peter "in a panic" and they had the following conversation: Bill: I tried to get Luke to explain the trust structure and he refused. I asked him about the ABN and told him I want to see a solicitor to set up my will. He told me that I don't own the house and it's owned by the trust. He said there's no point in me getting a will because I don't own the house. When I asked for the ABN Luke just said not to 'rile me up, otherwise I will sell the house and run off with the lot'. Peter: Send Luke an SMS asking him to relinquish his directorship of the company and shares otherwise (you) will be sending a letter to the NSW Law Society regarding his actions.
23. That day, Peter looked at the Makaritis Trust Deed and told Bill that Luke had "changed [the] document". He did not recall the deed he executed being twenty-five pages long. He alleged that Luke added some "additional documents" to the trust deed. Peter repeated these allegations in cross-examination. He said the trust deed he executed was about five or six pages, while the stamped trust deed was twenty-five pages long.
24. On Peter's advice, Bill sent Luke the following SMS message in the evening of 11 March: Interesting conversation we just had Luke. Tell you what, you have 30 mins to call me back otherwise I will be requesting your resignation as director and forfeiture of the shares in the company. If you refuse I will be submitting a lengthy letter to the NSW Law Society. You have 30 mins. After receiving the message, Luke emailed Bill attaching a termination notice "pursuant to section 85 of the Residential Tenancies Act 2010".
25. Despite HPH's notice to terminate Bill's periodic tenancy and the breakdown in Bill's and Luke's relationship, Bill continued to live at the property (see above at [51]).

Luke's evidence

1. In his affidavits of 29 July 2022 and 25 October 2022, Luke gives evidence about his recollection of the arrangement and his dealings with Bill and Peter. The thrust of his version of events was that the arrangement was ultimately driven by Bill, who understood the nature of the transaction. Bill understood he would have to relinquish ownership of the property and could not be involved with HPH as that would affect his pension. Bill also understood that HPH could assert its rights against him and evict him from the property.
2. Luke explained that, in early September 2018, before any FCC orders were made, he contemplated setting up a trust structure "for future investment purposes". In cross-examination, Luke accepted that, around this time, it was contemplated that a trust would be created for the purpose of owning the property.
3. According to Luke, Bill approached him on 21 February 2019, the day the FCC orders were made, for help to keep the property "within the family at all costs". He wanted to find a loan to pay Candice the settlement amount. On the same day, Luke had a phone conversation with Bill and Peter where they discussed the options that would allow Bill to keep the property. During the conversation, Peter suggested that Luke should buy the property from Bill. Luke was reluctant to do this, as his friend had offered to sell him an apartment in Glebe: Bill: Peter, what am I going to do if I can't raise enough money on my own? Will you buy the house, and I can make the mortgage repayments and buy it back from you later? Or can you go guarantor? Peter: I can't Bill, I've got enough financial problems of my own … Luke: I don't really want to buy the Maryland house. I want to buy a house of my own. A friend of mine owns an apartment in Glebe, he's offered to sell it to me before he lists it so he can save on advertising and estate agent commission. I don't want to let the Glebe opportunity go. Bill: Come on Luke, you heard what I said to Peter. I'll make all the mortgage repayments. Luke: It's not that simple. If I buy Maryland before Glebe, that means the first home buyer's grant and stamp duty exemption I'm eligible for will be wasted on the Maryland property. Glebe is worth a lot more so it's better to apply it there. It doesn't really matter who pays the mortgage as far as the bank is concerned. If it's in my name, it's my liability. That will prevent me from being able to get another mortgage for a second property. Unless maybe it is owned by another entity like a company or a trust. Peter: What about the company/trust option you mentioned? If you buy the place at Glebe for yourself maybe you can consider a company or trust to purchase Maryland? Luke: It's a possibility, but we have to look into it with financial institutions to see what works first. I'm considering establishing a Trust anyway to hold other investments. I have ambitions to eventually set up my own law firm, which would be ultimately held by a Trust. That way profits could eventually be shared amongst beneficiaries to share the tax burden. An investment property that's rented out could work the same. Collect rents and after the mortgage is paid off and there's profits income can be distributed to beneficiaries. Peter: Yeah exactly, that sounds ideal, why don't you do that Bill. Look at setting up a Trust with Luke and pay the mortgage down faster, you'll be back on your feet in no time. Luke: The whole idea of the Trust and paying down the mortgage faster is premised on the idea that the property is rented. Dad would need to move out for the plan to work. Anyway I said I would consider it, but no guarantees. Like I said. Glebe is my first priority.
4. According to Luke, it was Bill who first approached Mr Jayasuriya at the Newcastle West ANZ branch on 18 March. He did not attend the meeting as he was in Sydney that day. The next day, Luke had a phone conversation with Bill about Mr Jayasuriya's email (see [59] above): Bill: Did you see the email from Danish? [sic] Luke: Yes, so what happened? Bill: I can't borrow enough on my own, so my first option is gone. My second option was to keep the house in my name and use you as co borrower. There was a slight possibility that if we did it as two separate loans: one in my name alone, and the bridging loan covering the gap for you and me together, but Danish [sic] said that the assessor might not accept it unless we have a good reason for why you want to attach your name to the loan when you don't own the house. Luke: Okay, so what now then? Bill: I spoke to Danish [sic] again today and told him about the Trust idea with both of us as trustees in the company. He doesn't know much about lending to trusts so he's going to speak to Rod Green and get back to me.
5. Luke said that, at around the time the ANZ and Pepper Money loan applications were made, he had conversations with Bill about the tow of them living at the property. In cross-examination, Luke acknowledged that there was no discussion between him and Bill about Bill having to pay rent to continue living at the property. There was, instead, an understanding that Bill would be able to live at the property in a granny flat once it was constructed, and Bill would continue to have a "beneficial and equitable interest" in the property. It was put to Luke that there was no change in that understanding by mid-May which was the time he was dealing with Mr Patch. Luke said a change occurred around late May or early June after SGB required Bill to sign the 24 May statutory declaration saying he would gift Luke $136,000 to build the granny flat and relinquishing any "personal interest or claim on the property" (see above at [69]).
6. According to Luke, he first approached Mr Carey on 19 March over the phone; Bill was also "tapped" into the teleconference. Luke asked Mr Carey about getting a loan through a trust structure where the ownership of the property would be transferred into the name of a corporate trustee. The loan amount would be enough for the construction of a granny flat to maximise rental income. According to Luke, during these negotiations with Pepper Money, Bill did not say anything or represent that this proposal was unacceptable. According to Luke, Bill was aware that the only way Luke could be involved was for him to "have some kind of 'legal' interest" in the property.
7. According to Luke, it was Bill who raised the question about whether the loan would affect his pension entitlement. This happened on the evening of 21 March, when Bill called Luke and they had the following conversation: Bill: I've just realised something we haven't considered all along. How will this affect my pension? Luke: I really don't know exactly, but I know Centrelink take into consideration all income streams including companies and trusts. You're going to have to look into that. The next day they spoke again and Bill said: I can't be involved in the Trust in any official capacity, if I am a Trustee with 50% control of a trust then Centrelink deem Trust income and assets as mine for the purposes of the pension means test. When you set it up leave me out of it. I will be a beneficiary only. That way the only income that Centrelink assess is any amount distributed to me as a beneficiary which won't be much if anything anyway. I can't risk losing my pension.
8. According to Luke, on 22 March, either immediately before or after the registration of HPH, Luke told Bill that he would have to move out of the property until enough rental income was generated to get the mortgage "under control". Then, Bill would be able to resume living at the property in a granny flat. Their conversation continued: Luke: Since you've decided not to take any active role within the Trustee Company, you realise that I will be in control of the Trust, don't you? I need to be very clear on this, because I will not participate in a Trust structure where the whole thing is a sham and a mere façade for you still controlling the house at Maryland. Bill: Yes. I understand Luke. Luke: If the Trust owns it, it belongs to the Trust and it's in the Trustee Company's discretion how to deal with the property. I know that long-term you wanted to live in the house, but you realise that until the Trust starts generating profit you'll probably have to move out for a while to maximise rental income. Then when we get the mortgage under control we can perhaps consider the possibility of you moving in to the granny flat. Bill: I understand getting the mortgage under control but can't I stay here anyway? Luke: How are the Trust's expenses ever going to get under control if you never leave? The only way I see that scenario working is if you rent from the Trust, that way the Trust gets to meet its expenses. If you are genuinely paying rent to the Trust, you may even be entitled to rent assistance from Centrelink. Bill: Yes, that's true. I'll think about it. Dennis [Bill's friend, Dennis Zambelis] said I could stay with him if necessary. I might just move in there until the Trust is finally secure. Luke: In the long term, since I control the Trust, I may use this same trust to own shares in my future law firm. Bill: Don't you want to keep it separate from me and Adam and Sienna? I'm selling the house to the Trust to keep it in the family and generate income for the good of the whole family, I just don't want you to cut Sienna and Adam and me out. Luke: I won't cut anyone out. If it makes you feel any better, I'll write it in the Trust Deed that you and me are default beneficiaries and if we die, any offspring from either of us becomes default beneficiaries. That way it covers Adam and Sienna, and their children and the next generations also. Bill: Okay, send me the paperwork when you establish the Trust, and I want the original papers not a photocopy. I want Peter involved too.
9. From 22 to 25 March, Luke amended a draft discretionary trust deed he had saved in September 2018 (see above at [102]). The final executed trust deed "had substantially the same structure" as the precedent, except for amendments that reflected the "factual circumstances surrounding [its] creation as discussed with Bill".
10. After receiving conditional approval from Pepper Money on 2 April, Luke and Bill sent a letter to Pepper Money on 3 April which made various legal propositions about the purpose of the Makaritis Family Trust structure (see above at [63]-[64]). For example, it asserted that, with HPH as the Trustee of the Makaritis Family Trust, there would be a "legal entity and legal structure whereby it is undeniable that beneficial and equitable interest vests in both Bill and Luke" (see above at [64]). In cross-examination, Luke said that he believed that statement to be true at the time, but no longer believed it to be legally correct. He said that he had received legal advice after the commencement of the proceedings that led him to change his views.
11. In his affidavit evidence, Luke said that he read the 3 April letter "verbatim" to Bill before it was sent to Mr Carey. But in cross-examination, Luke said he could not recall whether he told Bill that being appointed as a director of HPH, as required by Pepper Money, would affect his Centrelink entitlements. He also could not recall whether he had provided the letter (dated 3 April) written to Pepper Money addressing the directorship requirement to Bill, and could not remember whether he explained its contents to Bill.
12. Luke said that he first approached Mr Patch to broker a SGB loan on 5 April 2019. The $470,000 consideration figure that was used for the SGB application was taken from the joint valuation report from the FCC proceedings.
13. Around this time, he had the following conversation with Bill about Bill's role in any loan transaction: Luke: Since you don't want to be a director of the Trustee Company you realise you cannot be involved in future finance applications or the same thing that happened with Pepper will happen again [this was a reference to Pepper Money's requirement for Bill to be appointed as a director of HPH: see above at [63]-[64]]. Bill: Yes, absolutely, keep my name out of future applications. As far as they're concerned, you're the buyer and I'm the seller, end of story.
14. Luke was cross-examined about his proposal to Mr Patch in the Client Preliminary Assessment. He acknowledged that, at that time, he and Bill again agreed that they would live in a granny flat on the property while the rest of the property was rented out. At the time of this application, Luke said that he had not suggested to Bill that he would need to pay rent to live at the property (although he said there were other times where he did suggest this: see below at [120]). Nor did he suggest that Bill would need to move out of the property if the property did not generate enough rental income to cover interest payments.
15. Luke explained his recollection of the background to Bill making the 24 May statutory declaration. SGB wanted Bill to acknowledge that part of the loan would be used to pay off Luke's personal debts, and to allow SGB to withhold some of the funds for the granny flat. According to Luke, with some reluctance, Bill agreed to sign the statutory declaration. Luke was cross-examined about the 24 May statutory declaration. Luke could not positively deny that he had told Bill that there was "nothing to worry about" in signing the statutory declaration, as he had no clear recollection.
16. On 7 June, Luke called Bill and told him that the SGB loan application would not go ahead, as Luke did not meet SGB's lending criteria for a casual employee (see above at [37]). According to Luke, Bill asked him to pursue the business loan options. Bill also suggested contacting Mr Jayasuriya to secure a loan.
17. According to Luke, after the ANZ loan had fallen through, Bill wanted to go ahead with the last-minute offer from Prime Capital. But Luke was reluctant because of the high interest rate for the loan. Around 10.50 pm on 19 June, Bill called Luke, urging him to proceed with the loan. Again, Luke reminded Bill that he would need to contribute to the property so that it could be rented out to pay off the mortgage: Bill: We've only got a week left, sign it. We have no choice really. Luke: You've seen the exorbitant interest rate and other charges? Bill: Like I said, if we want the Trust to buy it, we have no choice. Luke: As director of the Trustee Company, you realise I need to ensure we meet regular repayments on this loan until it's refinanced to a better deal. You know I can't really afford that kind of money right now. Especially at 8.5% interest. We might just be rushing a decision to buy the house only for it to default and be lost again. The house cannot be rented out in its current state. No one will rent that out until the renovations are done. You realise if we go through with this it will be necessary for you to assist with payments for Trust expenses for as long as you live there and the place cannot be rented out. right? Bill: Yes, I understand, I'll cover it. I'll have to. Luke: It won't be for ever, the sooner you're able to loan the Trust funds to replace the carpet and fix the kitchen, we'll be able to rent the place out. When it's making profit, the Trust will be in a better position to become self-sufficient. Then the money you loaned can start to be paid back. Bill: It's not about the money Luke, I don't care about that. I just want to save the house for the family. That way all of us benefit.
18. Luke was cross-examined about his email of 22 June in which he asked Bill to move out (see above at [73]) and about other times where he claimed to have told Bill about HPH's right to evict Bill from the property. Luke said that he had had conversations with Bill sometime on 21 February, and between 6 and 21 June 2019 to the effect that once HPH became registered proprietor of the property, it could evict Bill from the property. But he could not recall the conversations between 6 and 21 June, other than that there was "no protest or controversy" from Bill.
19. At the time of the settlement, Luke said that it was not his intention to profit from Bill while he lived at the property with HPH's consent. According to Luke, he wanted to: … see Bill make enough payments that would see the Trust break even from all its expenses for as long as he remained in the Property. My contemporaneous thoughts were to ensure that Bill would pay all outgoing expenses for the Property as long as he stayed there. I intended this arrangement to occur only until the place was ready to be rented out to full paying tenants for profit.
20. As the director of HPH, Luke wanted to "establish a deal" with Bill so that the Trust "at least broke even and did not fall into debt". He feared that if the rooms in the property were not being rented out during the renovation, HPH would not be able to meet its expenses. He caused HPH to put in place the periodic tenancy agreement with Bill prior to settlement to prevent default of the mortgage. Luke did not want to "exploit" Bill. Instead, he wanted to protect Bill and the other beneficiaries under the Trust from the risk of losing the property.
21. According to Luke, Bill was happy to make contributions to the Trust and was helpful with "assisting on practical matters around the Maryland Property". He was pleased to be working well with Bill and they had "no major problems". Luke thought that Bill understood the "greater good" was the need to "establish the Trust with financial security rather than remaining where [Bill] wants to be rent free".
22. According to Luke, on 1 July, Luke approached Mr Carey to refinance the Prime Capital loan with Pepper Money which would also fund the construction of the granny flat. On 17 July, Luke received conditional loan approval for HPH as the borrower and him as guarantor (see above at [44]). To avoid "complications with the loan", such as the previous directorship requirement by Pepper Money (see above at [32]), Luke deliberately did not include Bill in his email correspondence with Mr Carey.
23. On 23 July, Mr Carey told Luke that there would be a $30,000 shortfall once the Prime Capital loan was paid out and the price for the construction of the granny flat was factored into the loan. Luke asked Bill to cover the shortfall, which Bill agreed to do (see above at [45]): Luke: Pepper require the Trust to supply proof it can cover the $30,000 shortfall between the finance figure and the construction of the granny flat. They want to see that money in the Trust's account. You know the Trust doesn't have it. Would you be willing to loan it to the Trust now and be repaid when the Trust makes profit? Or should I just refinance for now and not build the granny flat? Bill: More money again? This Trust is turning into a money pit. I'm not just giving $30,000 over like that. Luke: That's fine, I'll tell them to forget about it. Bill: Are you sure that if I paid this money into the Trust account that it will go through? We're not going to get messed around again like last time? Luke: Look, here's the letter of conditional approval. I have it in writing already and none of the conditions are difficult like last time, so I don't see any problems, but we don't have to proceed with the granny flat now. Bill: Okay, I'll do it. I can only pay $15,000 at a time, so I'll do $15,000 today and $15,000 tomorrow.
24. In the Christmas and New Year period, Luke noticed that Bill had not made any direct financial contributions to the Trust's bank accounts since transferring the $30,000 in July. On 2 January 2020, Luke asked Bill to put more money into the Trust's account: Luke: Dad when the Trust took over ownership you knew that for as long as the place wasn't rented out and you remained here that I needed you to contribute to the property expenses. You haven't put anything in since July. The next mortgage repayment comes out on 5 January, can you put enough money into the Trust's account to cover it please? Bill: You're always asking for money! I gave you $30,000 for the Trust already. Isn't that enough? Luke: You knew that money had a specific purpose - the shortfall for the granny flat construction. That money is gone since just before the refinance occurred in early September. Bill: What do you mean gone? Luke: It was paid to Galilee Solicitors' [Pepper Money's solicitors] trust account to cover the shortfall between the loan amount and the refinance plus the granny flat build. Since Pepper are withholding the money for the granny flat to be drawn down slowly, the shortfall money was taken by Pepper at settlement of the refinance on 5 September 2019. Bill: Well I can't afford to keep paying, I'm running out of money. Luke: Well you'll have to move out so the Trust can have a tenant who can afford to pay. Bill: This is my home, I'm not going anywhere. I built this house while you were just a kid. Luke: It's not about the past dad, it's about the present. Either there's enough money in the account on 5 January 2020 or the Trust has its first default. Bill: Well money is tight for me too you know. Can't you at least pay half. Luke: No promises, I'll see what I can do. But you're the one living there, while there's no rental income you're it. You need to keep contributing so the Trust's expenses are met. Bill then transferred money to Luke on 2 and 3 January to service the mortgage repayments.
25. Around this time, Bill and Luke had several "constructive conversations" about the property. With the renovation work underway, Bill proposed renting the property out to tenants in the belief that the rental income would assist in paying off the mortgage. Luke and Bill then had a conversation about finding Bill alternate accommodation: Luke: It's great to see things coming together here. With the kitchen done, carpets soon to go in and a good clean up. What a difference it's making. It's amazing. Bill: It sure is, but Luke we need to get tenants in here soon, once the money I've put in runs out we're in trouble. Luke: I agree, and I'm glad you've mentioned that because I want to be in a position to start advertising soon. So, we need to organise that clean up we've been talking about. We need to clear out the garage so you can put the furniture you want to keep in there. Then when the junk is gone, we can get tenants in. But this all begs the question of what you're going to do, have you decided yet? Bill: Yes, I've been thinking about that. And I know we need tenants in, and I don't really want to be here with them if I can help it. I prefer to have my own space. It's just a question of money. Luke: What about if I put your name on the list for a housing commission? The waiting list here is not as bad as it is in Sydney. Bill: Yes, I agree, can you help me with the application please? Get the forms for me and put the paperwork together to submit it. Luke: Sure, no problem.
26. On 24 January, Bill told Luke that he was going to make a further deposit into the Trust account: I'm going to make another deposit just over $15,000 to the Trust account. I'll put the money there in advance so there's enough for the Trust's expenses to keep it going for a while until we get the renovations done and tenants in.
27. But the goodwill between Bill and Luke did not last. Their relationship began to break down in mid-February when Luke advertised the property for rent and prospective tenants visited the property. Luke observed "Bill's attitude start to change".
28. According to Luke, at around this time, Bill asked Luke about the "business administration of the Trust, such as its ABN". They had a conversation to the following effect: Bill: You've deceived me haven't you. There is no Trust is there? Luke: What are you talking about? You've seen the papers, why would I pay $510 stamp duty for a fake document? Bill: I don't know, you tell me. If it's real then where's the ABN Luke? Why can't I find any record of the ABN online? Luke: Because the Trust isn't trading as a business. It operates a rental property. Landlords don't need ABNs if collecting rent is their only income. It's only necessary if you run a trading business. Bill: Don't give me that rubbish, do you think I'm stupid? Luke: Not necessarily, I just think that you don't know what you're talking about on this issue. Bill: Okay, well if I don't know what I'm talking about, let's see what Peter says then.
29. Bill then called Peter and put him on loudspeaker: Bill: Peter, isn't it the case that a Trust can't exist without an ABN? Peter: Not only trusts, any non-personal entity can't be legally recognised unless they have an ABN. Luke: I don't really think that's right Peter. The ABN is only relevant if trading as a business. The Trust isn't trading, it just owns the house and other investments at this stage. Peter: No, I'm pretty sure about this. The Trust isn't a person, so how can such an entity be recognised as legally existing if it has no registration number anywhere? That's what the ABN does, the registration of a Trust's ABN gives it legal recognition as an existing entity. … Bill: See Luke, I told you. Peter knows what he's talking about. So I'll ask you again: why can't we find an ABN for the Trust? Luke: Well, it's funny you say that, because I'm looking now and I can't find an ABN for the Trust either. But I know for certain the Trust exists though because I have a letter from the ATO with a tax file number on it. Peter: That can't possibly be true, with no ABN the Trust doesn't exist so how can it have a tax file number.
30. According to Luke, on 11 March he ceased contact with Bill. The first tenant had moved in on 7 March. Luke decided to remove Bill from the property to prevent any financial losses for the Trust. He sent Bill his first termination notice that day (see above at [49]).
31. On 15 March, Luke had arranged for another prospective tenant to inspect the property. That day, when Luke visited the property with the prospective tenant, Bill was "extremely angry", and called Luke a "fraudster", a "failure", and "pathetic". Bill also blocked access to parts of the house during the inspection.

Witness credit

1. Bill: Bill presented poorly as a witness. In cross-examination, his answers frequently failed to address the questions he was asked, and this continued despite repeated explanations and warnings. On more than one occasion he broke off into a tirade against Luke. He seemed more interested in saying what he wanted to say than in recollecting what he could remember in answer to the questions he was asked.
2. Bill denied receiving emails which are recorded as having been sent to him, and went so far as to suggest that Luke had removed them from his email account. There was no evidence to support this, and his counsel, very properly, declined to support it in final submissions. I am satisfied that Bill's denials were untrue, and that, in fact, he received and read the emails addressed to him which are in evidence.
3. The documentary evidence contradicts Bill's testimony at various points. In cross-examination, Bill agreed with counsel for the defendants that some of his evidence was false, and that he knew it was false. Although the cross-examination was perfectly fair, the ease with which Bill made those concessions left me in some doubt about whether he truly intended to say that he had consciously lied in giving the evidence in question. Perhaps what Bill meant is that he had said things which were actually false, and he would have appreciated their falsity if he had reflected on them. But even on this strained and charitable interpretation, Bill's concessions say very little for his reliability.
4. I was left with the impression that, at best, Bill has succumbed to a "conspiracy theory" about the transaction. He has convinced himself that Luke set out to cheat him and has completely lost any objectivity. I approach his evidence with great caution.
5. Peter: Peter presented as a better witness than Bill. But he, too, seems to have decided that Luke was trying to cheat Bill and has placed the worst possible interpretation on Luke's actions. For example, he alleged that Luke had altered the terms of the trust deed (see above at [98]). I think he too lacks objectivity.
6. Luke: Luke's manner in giving evidence was far better than that of his father. Broadly, I accept his version of events. But there were some areas where, when pressed in cross-examination, he did not support what he had said in his affidavit. He conceded some aspects were incorrect and in others he said that he could not now recall (see above at [110], [111], [118]).
7. Although Luke pointed out that some time had passed since he had sworn his original affidavit, I did not find this to be a very convincing explanation for his failure to come up to proof. There must be a suspicion that the affidavit involved reconstruction rather than recollection. For this reason, I have treated the self-serving parts of the affidavit with some reservations and relied instead on the testimony Luke actually gave at the hearing.
8. Counsel for Bill invited me to go further. Counsel submitted that Luke's evidence that he did not attend the meeting with Mr Jayasuriya in Newcastle on 18 March was false. Counsel also referred to some other statements by Luke in the loan applications which counsel submitted were falsehoods. In particular, counsel submitted that Luke represented to Pepper Money that, at the time of the March and April applications he was in full-time employment with Navado when he was not, or, at least, his employment was about to end. Counsel also submitted that Luke never intended to live with his father at the Maryland property as he told both Pepper Money and SGB.
9. These points, counsel accepted, went purely to credit. On the conclusions I have reached, I do not find it necessary to deal with them.

Factual conclusions

1. From March 2020 onwards (above at [120]), Luke's position has been that, following the transfer on 21 June 2019, Bill was no more than a short-term tenant of the Maryland property (and a discretionary beneficiary under the Trust, which was, however, controlled by Luke, through HPH). There was no wider agreement between the parties. But there are difficulties in reconciling this with Luke's earlier conduct, as revealed by the evidence.
2. Luke's text message to Peter of 24 February 2019 (above at [56]-[58]) shows that, from the outset, Luke saw the Trust as a vehicle for both himself and Bill. Luke also told Pepper Money, on 3 April, that the company was to hold the "legal title" to the Property and the "legal and beneficial interest" was to "vest" in the two of them. Furthermore, the SGB loan assessment prepared by Luke on 5 April stated, quite explicitly, that the plan was for Bill to be able to live in the granny flat once the renovation was completed, rent-free, "for life" (above at [68]).
3. Luke's affidavit version of the conversation between himself and Bill on 22 March (above at [108]) presented the parties' plan as being predicated on a clear understanding that the Trust would be a real trust, not a sham, and that it would be controlled by Luke through HPH. I would not accept that Luke in fact used language inconsistent with Bill having the "legal and beneficial interest" which Luke told Pepper Money about. Furthermore, Luke is recorded as saying that Bill might have to move out "for a while" after settlement to "get the mortgage under control", and Bill is recorded as saying that he might move out and stay with his friend, Mr Zambelis, "until the Trust is financially secure". Luke's own language in the affidavit thus acknowledged, implicitly, an understanding that the objective was for Bill to be able to live rent-free at the property for life.
4. In his evidence (above at [83]), Bill described HPH as a "front". I doubt that Luke would have put it so crudely. But I am satisfied that, in substance, the understanding between the parties was that HPH would hold the property for the benefit of Luke and Bill in accordance with their plan to redevelop it.
5. In these circumstances, the statutory declarations of 24 May and 6 June (above at [69]-[70]), in so far as they stated that there was a gift to Luke of the surplus value in the property and that Bill disclaimed any interest therein, did not properly reflect the parties' actual intentions. It is clear from Luke's own evidence (see above at [115]) that Luke was aware of the inconsistency but took the view that they were his father's statutory declarations not his. On my view of Bill as a witness, he would have had no hesitation whatsoever in making a false representation in a statutory declaration for the purpose of procuring the loan which he wanted.
6. It is true that the inability to borrow the full amount, and the resort to Prime Capital, caused a change of plan. The parties contemplated that it meant that Bill might not be able to live in the property after settlement. But this did not affect the objective, which remained, when possible, for Bill to live at the property rent-free, supported by rental income from the main house.
7. I have already referred to Luke's version of his conversation with Bill on 22 March, in which the parties referred to the possibility of a temporary period during which Bill would not be able to live at the property after settlement. I think Luke's version of his conversation with Bill on the evening of 19 June (above at [117]) contains a similar implication. Luke recorded himself as saying that "we" (that is, himself and Bill) were meeting the loan repayments, and were at risk of defaulting and the house "being lost again". If "we" were to go through with the transfer, it would be "necessary" for Bill to cover the costs so long as he lived there, but this would not "be for ever" and would only be until the Trust became "self-sufficient" from rental income.
8. In Luke's version, he did not expressly link "self-sufficiency" to Bill living at the property rent-free. On his version, he only referred to repayment of Bill's loan. But that, on its own, does not explain why, having transferred the property at an under-value, it was "necessary" for Bill to underwrite the ongoing loan expenses. The obvious explanation is that the parties were continuing to operate on the basis that the property was to be set up so that, eventually, Bill would be able to live there rent-free. Interim financial support from Bill was "necessary" to allow the longer-term plan to be carried out.
9. Read in its context, the email which Luke wrote to Bill on 22 June asking him to leave the property (above at [73]) is quite consistent with this analysis. The email shows that, at the time, Luke thought his father would have to move out, presumably to allow for rental income from his room. But the letter did not deny the ongoing objective of ensuring that Bill would be able to live at the property. In fact, the perceived problem was solved by Bill covering the borrowing costs, and the email was never acted on.
10. Similar observations may be made of Luke's version of the discussions between himself and Bill after settlement, in which Bill agreed, at Luke's request, to provide further funds for the construction of the granny flat and to cover ongoing lending costs (above at [123]-[126]). The payments only make sense from Bill's point of view in the context of an ongoing plan between the parties for the property to be renovated so that Bill could live there. I reject the suggestion that they were just loans made by Bill to help Luke out.
11. But I do not accept Bill's allegation (see above at [97]) that the transfer of the Maryland property to HPH was the result of a scheme of Luke's, all along, to enrich himself. I am satisfied that the origin of the transaction was Bill's wish to "save" the property from being sold.
12. The fact that Luke took some preliminary steps toward setting up a trust before the FCC orders were made in February 2019 (see above at [109]) only shows that Bill's plan, at least in a preliminary form, pre-dated those orders. The important point is that it was only because Bill was unable to borrow enough money himself to pay Candice out, and to fund the renovation as well, that it became necessary to tap into Luke's borrowing power. I am not satisfied that Peter could have funded the transaction or that Luke pushed him aside as Bill and Peter claimed (see above at [78]).
13. Nor do I accept that, once Luke had been enlisted by his father to help, he used the incorporation of HPH and the establishment of the trust as a way of spiriting control of the property away to himself. The structure was originally suggested by Mr Jayasuriya of ANZ (see above at [60]). It was a way of presenting the plan in a form which would allow for ANZ's lending requirements to be satisfied. No one thereafter seems to have suggested that there was any practical alternative if the finance that Bill wanted was to be obtained, and counsel for Bill made no such suggestion in his submissions.
14. I am not sure that Luke's account of how the possible problem with Bill's pension came to be discovered is accurate. But whether it was Bill or Luke who identified the problem, I accept that it was the reason that Bill chose not to become a director of HPH. Similarly, while I do not accept in terms every self-justificatory passage about the loan negotiations in Luke's affidavit, I do accept that he undertook those negotiations at his father's request because that was what Bill wanted.
15. In particular, I do not accept that Luke somehow forced Bill to complete the transfer at the end. When the SGB loan fell through, the Prime Capital loan was the only apparent option. Luke was not responsible for this situation. Bill was well aware that the interest rate under the Prime Capital loan was high and that he was transferring the property to HPH at an undervalue (see above at [90]). He could have pulled out and let the property go. I do not believe his story (see above at [92]) that Luke took his phone away from him at the critical moment.
16. Nor do I accept that the parties agreed that Luke in some way undertook to act for Bill in a professional capacity as he claims (see above at [79], [83], [84]). No doubt the parties both thought that Luke would draw on his experience as a solicitor in negotiating with lenders and in giving instructions to the conveyancer. But the only professional relationship was with the conveyancer, and I am not satisfied that Bill ever thought otherwise.
17. It is true that Luke seems to have regarded HPH as a vehicle for building his own wealth in future: in particular, Luke's ownership of the solicitor's practice which Luke hoped to establish was to be included in the Trust. But this does not mean he intended to appropriate his father's share in the Maryland property to himself. I think that Luke probably did believe that once the renovation had been carried out the property would make sufficient money to cover the borrowing costs and allow his father to live there rent-free. This would have enabled both parties' interests to be accommodated.

Proprietary claim against Maryland property

1. It is convenient to deal with Bill's claim to a constructive trust over the Maryland property in the following order: 1. failed joint endeavour; 2. proprietary estoppel; and 3. unconscionable dealing.

Failed joint endeavour

1. The principle upon which Bill's claim was based was stated by Deane J in Muschinski v Dodds (1985) 160 CLR 583 at 620 in a form which was approved by the High Court in Baumgartner v Baumgartner (1987) 164 CLR 137 at 148: the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do:
2. Counsel for Bill contended that the facts of this case fall within the principle stated by Deane J. Counsel identified the joint endeavour as the refinancing of the Maryland property, followed by the renovation of the property, including the construction of the granny flat, which would enable the property to be rented out and allow Bill to reside in the granny flat rent-free for as long as he wished.
3. Counsel for the defendants acknowledged that the Maryland property was transferred to HPH at an undervalue, but contended that it was an arm's length transaction which was not intended to impose any ongoing obligation on Luke. Counsel characterised the arrangement as "loose talk" which involved Bill putting in some money to help Luke. In effect, to the extent that the property was transferred at an undervalue, the equity was a gift to HPH.
4. I have already explained why I do not accept the defendant's submission on a factual level. In my finding, at the time of the transfer, there was indeed an understanding between Bill and Luke (on behalf of HPH) that funds would be raised sufficient to pay out Candice and the existing debt on the property, with a view to redeveloping it and Bill living there rent-free in the future. The existence of this understanding was, in my finding, the reason why Bill was prepared to make the transfer at an undervalue in the first place.
5. Counsel for the defendants submitted that on no view had the parties clearly agreed on the terms of the joint endeavour. Counsel pointed out the uncertainty as to whether Bill would in fact be able to live at the property. In fact no one appears seriously to have considered whether the proposal would work financially.
6. In my view, these submissions do not avail HPH. Obviously, for there to be a joint endeavour, there needs to be some sort of understanding between the parties. But the scope of that understanding can change from time to time: see Australian Building & Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460 at [51] per Ward J (as her Honour then was). Nor does the understanding have to have the sort of precision required for a contract. If it did, the contract would cover the field and there would be no need for the failed joint endeavour doctrine; the whole point of the doctrine is that it covers a situation which the parties have not addressed, namely the failure of the endeavour which would leave one party with an unexpected windfall: see the authorities discussed in Woods v McKinlay (No 2) [2021] NSWSC 1510 at [244]-[260].
7. It is true that the parties contemplated the possibility of Bill having to contribute funds, and, in that sense, there was no understanding that Bill would have an absolute and unqualified entitlement to live at the property rent-free. But the idea of living at the property was the ultimate objective. The fact that some delay might take place in achieving that outcome, or indeed that the venture might not prove feasible at all, did not mean that it was not a "joint endeavour" for relevant purposes.
8. Apart from the existence of a joint endeavour, the other ingredients of the doctrine are that the property was acquired pursuant to the endeavour, and the endeavour has failed "without attributable fault" on either side. There can be no dispute that the property in the present case was acquired pursuant to the endeavour that I have found existed.
9. Counsel for the defendants submitted that the breakdown in the relationship in March 2020 resulted from suspicions which had been formed by Bill and Peter which were unreasonable, and also that Bill had behaved unreasonably in his dealings with the other tenants and had interfered with the Trust's ability to earn money. But I do not think that it is necessary to go into the rights and wrongs of what happened.
10. In my view, Bill's and Peter's suspicions were wholly unfounded, but the fact was that the trust between the parties was lost and that made the continuation of the joint endeavour untenable. There are few, if any cases in which relief has been refused because the breakdown in the relationship was the fault of the plaintiff. As Young CJ in Eq said in Henderson v Miles (No 2) [2005] NSWSC 867 at [18], in deciding whether there has been "attributable blame" in the context a domestic relationship, the Court is not concerned with which of the parties bears moral responsibility for the breakdown in the relationship.
11. The reason for this is not hard to see. The doctrine operates in a restitutive way. It restores to the plaintiff contributions which the plaintiff has made to property owned or controlled by the opposing party. Once the relationship has in fact broken down, it is hard to justify allowing the opposing party to retain such a windfall, no matter how badly the plaintiff may have behaved, unless that behaviour in some way makes the recovery of the plaintiff's contribution unconscionable: see Austin v Hornby [2011] NSWSC 1059 at [169]-[173] per Ward J; see also Knox v Knox (Supreme Court of New South Wales, Young J, 16 December 1994) 10. That was not suggested here.
12. It is sometimes said that a fourth ingredient is necessary, namely unconscionability of retention of the benefits. In Woods v McKinlay (No 2) at [256]-[261], I questioned whether this is so. In any event, if some further analysis of unconscionability is required, there is no doubt that the Maryland property was transferred at a significant under-value. The relatively short period of occupation which Bill obtained was hardly commensurate, and, in any event, allowance can be made for it.
13. For these reasons, I consider that the claim for a constructive trust based on the failed joint endeavour is sustained.
14. In the ordinary course, the grant of relief under this doctrine would involve the declaration of a constructive trust for sale of the property, with the proceeds to be applied so as to discharge any borrowings, and then out of the balance to refund the parties' respective contributions, with the remainder being split equally: see Woods v McKinlay (No 2) at [262]. Where one party has been in occupation of the property, it may be appropriate to charge that party with a market rental for the period of occupation.
15. Counsel for Bill, in final submissions, began by inviting me to declare a constructive trust in the form of a charge for the contributions made by Bill, and nominating a specific figure. Limiting the relief in that way would make it unnecessary to determine HPH's contribution (which, in the present case, would obviously require some sort of accounting process).
16. But I was left in some uncertainty about the quantum of Bill's contribution. On the face of it, the contribution would not include amounts which are already acknowledged as debts. And the balance sheet debt figure does not accord precisely with the amount claimed. Some reconciliation, therefore, appears necessary. Furthermore, counsel for the defendants indicated that a rental deduction would be sought for the period of Bill's occupation.
17. It may be that, if Bill continues to limit his claim to recovery of his contributions, these details can be worked out relatively easily. But if an account is required, its terms will need to be determined. It will also be necessary to work out the details of the order for sale of the property. I will leave it to the parties to consider these questions further.

Proprietary estoppel

1. In final submissions, counsel for Bill made it clear that the claim was for what is described as a proprietary estoppel by encouragement, namely detriment suffered in reliance on the promise of a proprietary interest in the property which is not granted.
2. Usually, such an estoppel involves an existing owner of property making a promise, in return for which the plaintiff makes a contribution to the property. The present case does not have that element. Furthermore, I have already made the point about the fact that this case involved an objective that Bill should live in the property rent-free. But it was recognised that this might have to be deferred and there was a possibility, albeit remote, that it might never happen. There was no promise to Bill of an interest in the relevant sense.
3. The usual remedy for a proprietary estoppel is the fulfilment of the promised expectation. But counsel for Bill did not pursue this. Instead, all that was sought was a constructive trust for the return of Bill's "contributions".
4. In cases involving family property dealings, there may well be potential for overlap between proprietary estoppel and failed joint endeavour doctrines: see, for example, the recent observations by Robb J in Saitannis v Katsolos [2022] NSWSC 1468 at [106]-[111]. As his Honour stated, the doctrinal basis for the grant of relief should not affect the outcome. Given the way in which counsel presented Bill's case, it would not do so here. Be that as it may, in my view, the present case is one which fits more naturally into the mould of a failed joint endeavour than of a proprietary estoppel.

Unconscionable transaction

1. Initially, a claim for undue influence was pleaded. That claim was abandoned in final submissions. Counsel, however, maintained a claim that the transaction was an improvident one which involved Luke (through HPH) exploiting Bill.
2. Again, the only relief sought was a constructive trust covering Bill's "contributions" to the property. Whether this claim was sustained or not, therefore, makes no difference. But in my view the claim is not justified by the evidence.
3. In retrospect, it is clear that the transaction was an unsound one from Bill's point of view. But the risks involved in the transaction were, in my view, clear to Bill from the outset. I reject Bill's claims that he was misled by Luke, or misunderstood the nature of the transaction involved. Bill knew very well that the property was being transferred to HPH as Trustee. He probably had no clear idea of the discretionary nature of the Trust, but he knew that Luke would control it. It was not suggested that he had any expectation that he would necessarily benefit as beneficiary.
4. In any view, even if the transaction was improvident from Bill's point of view, he was the moving force behind it. I am not satisfied that there was any exploitation of Bill by Luke.
5. Despite Luke's qualifications as a solicitor, he appears to have had little understanding of the way in which a discretionary trust works. That may be something for which he could be criticised on a professional level, but this was not a case of him ensnaring his father in legal concepts that he understood and he knew his father did not. Rather, I think it was a case of both of them blundering into a structure which was not suitable for their plan (in fact, considering Bill's desire in maintaining his pension, it may be that no properly functioning legal structure would have been suitable).
6. The fact is that, after the transfer took place, Luke continued to carry out the agreement which had been reached. It was only when the relationship broke down, because of the unreasonable suspicions which were developed by Bill and Peter, that Luke changed his position and began to assert an absolute ownership in the property. I have found that he was wrong to do so, but I am not satisfied that it was his plan all along. Again, the case is best analysed as an application of the failed joint endeavour doctrine.

Personal claims against Luke

1. In final submissions, counsel for Bill maintained a personal claim for damages at law, or compensation in equity, against Luke personally. The claims all proceeded on the basis that Luke had been acting for Bill in a professional capacity. They were claims for: 1. damages in tort for professional negligence; 2. damages under the Australian Consumer Law for misleading and deceptive conduct in trade and commerce; and 3. compensation in equity for breach of fiduciary duty.
2. In propounding these claims, counsel began by referring to Luke's conduct in the drafting of the trust deed. This presented a problem because it is far from clear that Bill could be regarded as a client in relation to the drafting of the trust deed. The settlor was Mr Phillips and the Trustee was HPH. Bill was in no way a party.
3. I suggested, and counsel appeared to accept, that the real complaint was not so much about the drafting of the trust deed, but upon the later transfer of the property to HPH as Trustee under the deed. This tended to point up the difficulty in the case because, by then, TC was acting for Bill on the transaction. There were also difficulties with assessing the damages from the transaction. I was asked to infer that, but for Luke's allegedly wrongful conduct, the transaction would not have gone ahead, and Bill would have recovered the value he put into the property, but there was little or no evidentiary basis for such inferences. In any event, as I have found that Bill has a proprietary entitlement to recover his contributions, it is difficult to see what loss has been sustained.
4. But, in any view, it is unnecessary to consider these claims further. On my findings, there never was any professional relationship between Bill and Luke. The personal claims against Luke fail.

Conclusions and orders

1. I have concluded that: 1. Bill's claim for the imposition of a constructive trust over the Maryland property on the basis of a failed joint endeavour succeeds; 2. the other bases for equitable relief claimed over the Maryland property fail; 3. the personal claims by Bill against Luke also fail.
2. Bill thus succeeds in his claim against HPH for a proprietary interest in the Maryland property. I will leave it to the parties in the first instance to see whether they can agree on a figure for Bill's entitlement, or a mechanism to determine what that figure is, and the form of the order for sale. The claims against Luke personally should be dismissed.
3. I will adjourn the proceedings for a short time to allow the parties to agree, if possible, a minute of order specifying the final relief necessary to give effect to this judgment. The minute of order should also, if possible, deal with the costs of the proceedings. If agreement cannot be reached I will hear further argument.
4. The orders of the Court are: 1. Adjourn the proceedings to 2.00 pm on 14 December 2022 or such other time as may be arranged with my Associate. 2. Direct that the parties confer on the form of orders to be made to give effect to this judgment and to deal with costs, and, no later than 24 hours before the adjourned hearing, submit proposed orders for this purpose.

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