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[2024] VSC 618
General information, not legal advice.
Supreme Court of Victoria
2024-10-10
Hetyey AsJ
Original judgment source is linked above.
CORPORATIONS - Winding up - Corporations Act 2001 (Cth) - Company in liquidation registered proprietor of large semi-rural property - Adult children of deceased former director claim beneficial ownership of property - Shareholder of company and step-mother of children disputes claim - Whether property held by company on resulting trust and/or pursuant to declaration of trust - Section 90-15 (Schedule 2, Insolvency Practice Schedule (Corporations)) - Application by liquidator for directions from Court as to beneficial ownership of property.
TRUSTS - Resulting trust - Principles - Purchase of property in 1987 where limited contemporaneous documentation - Adult son and daughter allege payment of purchase price of property acquired in name of company owned and controlled by father and step-mother - Whether presumption of resulting trust - Whether presumption rebutted - Meaning and calculation of 'purchase price'.
TRUSTS - Express trust - Requirements - Written declaration of trust - Whether properly executed by company - Where recital to declaration inaccurate - Whether trust valid and enforceable - Whether clear intention to create a trust - Whether trust a sham - Party alleging existence of sham also a necessary participant.
EQUITY - Purported gift of beneficial interest in property held under alleged trust - Whether donor has done all that is necessary to achieve assignment of equitable property.
EVIDENCE - Whether s 272(1) of Duties Act 2000 (Vic) ('Duties Act') precludes admissibility of written declaration of trust if insufficiently stamped - Instrument predates current legislation - Applicability of s 20 of predecessor Stamps Act 1958 (Vic) - Direction under s 272(2)(a) of Duties Act to admit into evidence later declarations confirming gift of beneficial interests under trust.
1 This proceeding concerns the ownership of a large semi-rural property located at 1665 Mount Cottrell Road, Mount Cottrell, Victoria ('property').[1] The registered proprietor of the property is Richflow Pty Ltd (in liq) ('Richflow' or 'company'). The first plaintiff, the liquidator of the company ('liquidator'), seeks directions from the Court regarding the beneficial ownership of the property. The critical question is whether the property is beneficially owned by the company (and ultimately its shareholders, including the sixth defendant) or whether it is held by the company on trust for the third and/or fifth defendants. However, the matter is far from straightforward. Key events occurred more than 35 years ago and the company was deregistered for approximately 20 years. Important documents cannot be located, people have passed away or become incapacitated, and the memories of witnesses have faded over time.
2 For the reasons that follow, I have determined the property was partly held by Richflow on resulting trust as to 27.5% on behalf of the fifth defendant (Julie Dardovski) who paid a portion of its purchase price.[2] However, the entirety of the property is now held by Richflow on trust for the third defendant (Feim Dardovski) in accordance with a declaration of trust executed by the company on 31 January 1995 and pursuant to later declarations of confirmation made by the trust beneficiaries (including the fifth defendant) in July 2010 gifting their beneficial interests in the property to the third defendant.
3 The dramatis personae in this matter are as follows:
(from 9 November 1988 to 31 May 1996 and from 2 August 2017 to 5 March 2018)
Former secretary of Richflow (from 9 November 1988 to 31 May 1996)
Shareholder of Richflow (500 of 1000 ordinary shares)
Naim's first wife, biological mother to Nazif, Nevrus, Feim, Sehiha and Julie
Second generation - Naim's children and their spouses
Julie Dardovski (also known as Julie Dardovska and formally known as Julie Bunjaku)
Former director of Richflow (from 3 February 1995 to 31 May 1996)
Litigation guardian of, and holder of enduring power of attorney for, Feim
Third generation - grandchildren, cousins and their spouses
Shareholder of Richflow (500 of 1000 ordinary shares)
Former director of Richflow (from 17 April 2019 to 24 January 2020)
Former director of Chelmaness Pty Ltd, the development company which sold the property to Richflow
Lawyer who formerly acted for Feim, Julie, Naim, Jelena and Richflow
4 For ease of reference, and without any intended disrespect, I will refer to the members of the Dardovski family mentioned above by their first names.
5 It is necessary to set out a number of matters by way of background.
6 Naim, Feride and their children immigrated to Australia in 1965 and settled in Melbourne. However, Feride died tragically that same year. Naim and Jelena married in 1976 or 1977 (there is conflicting evidence as to precisely when).
7 On 10 June 1987, Naim received two letters from Paul Markopoulos & Company, Barristers and Solicitors ('Paul Markopoulos & Company'), concerning the purchase of a property, comprising approximately 40.49 hectares, described as 'Rock Bank' and 'Lot 3 Mount Cottrell Road' ('June 1987 solicitor's correspondence'). The correspondence suggests the relevant contract was entered into on 7 June 1987 and was a 'terms [c]ontract' for a total purchase price of $140,000, although the instalments are not specified. Unfortunately, there is no contract of sale concerning the property ('contract of sale') in evidence before the Court. However, for reasons which I will explain more fully, I am satisfied the June 1987 solicitor's correspondence relates to the property in question.
8 More than a year later, on 25 October 1988, Richflow was incorporated. Naim and Jelena were appointed its directors on 9 November 1988.
9 At some point (the precise date is a matter of contention) between late 1988 to around 1990, Feim and Fezije permanently moved to the property.
10 On 2 February 1989, Richflow granted a mortgage to RMBL Investments Pty Ltd ('RMBL') over the property for consideration of $80,000. The mortgage was registered on 9 March 1989. On 17 February 1989, a certificate of transfer of land was executed by the vendor of the property, Chelmaness Pty Ltd ('Chelmaness'), transferring the property to Richflow for $140,000. The company became the registered proprietor of the property on 9 March 1989. The company granted a further mortgage over the property on 7 June 1990 to Hathson Investment Company Pty Ltd ('Hathson Investment') for the consideration of $875,000.
11 At some stage between 1994 to 1996 (again, there is some dispute as to the precise date), Jelena moved to the property and commenced residing there.
12 On 31 January 1995, a document styled 'Declaration of Trust' was purportedly executed by Richflow, declaring it held the property on trust for Nazif, Nevrus, Feim, Sehiha and Julie ('declaration of trust'). This is a contentious document which has been the subject of considerable evidence and submissions by the parties. On 24 October 1995, Wilson Potter Nicholson solicitors sent a letter to Naim and Jelena referencing their previous instructions and enclosing a 'Form of Gift' under which Nazif, Nevrus, Feim, Sehiha and Julie might gift to each other the interest they purportedly held in the property ('form(s) of gift'). Julie has given evidence that she signed the form of gift and, together with Feim, procured signatures from the other siblings to the form of gift documents by which they gifted their putative interests in the property to Feim. However, the signed copies of the form of gift documents before the Court are undated and do not appear to have been duly executed by the respective grantor, donee and witnesses.[3]
13 As noted in the table above, on 31 May 1996, Naim, Jelena and Julie ceased acting as directors of the company. Then, on 1 October 1996, Naim and Jelena were declared bankrupt following the filing of a creditor's petition by the Australian Taxation Office. They each submitted a statement of affairs to their trustee in bankruptcy dated 20 December 1996 in materially identical terms.
14 The company was deregistered on 24 June 1997 for failing to pay Australian Securities and Investments Commission ('ASIC') annual review fees. Naim passed away shortly thereafter on 16 July 1997.
15 At a point in time between 2000 and 2004 (there is conflicting evidence as to the precise date), Jelena permanently moved out of the property.
16 Between 14 and 16 July 2010, each of Nazif, Nevrus, Feim, Sehiha and Julie purportedly made a declaration gifting their respective interests in the property to Feim ('declaration(s) of confirmation'). The declarations of confirmation referenced earlier documents supposedly executed in October 1995 which were 'intended to evidence' the declarant's decision to gift their interest in the property to Feim. I take this to be a reference to the form of gift documents discussed above.
17 Around April 2011, Feim suffered a massive heart attack which resulted in him experiencing serious cognitive and functional problems. Consequently, his wife Fezije was appointed as his attorney pursuant to an enduring power of attorney dated 24 June 2011.
18 On 16 June 2016, Western Water compulsorily acquired part of the property and the compensatory sum of $225,000 was paid to ASIC on the basis the company itself was deregistered. A few weeks later, on 5 July 2016, Julie lodged a caveat over the property on the grounds of an implied, resulting or constructive trust. Feim and Fezije also later registered caveats on the property on 26 February 2018 and 1 March 2019, respectively, although these were on the grounds of adverse possession by exclusive occupation.
19 On 19 June 2017, Jelena filed an application in this Court seeking the reinstatement of Richflow. Orders were made by the Court on 28 July 2017 reinstating the registration of the company. Jelena was then reappointed as director of the company on 2 August 2017. She executed an ASIC 'refund authority' on 11 August 2017 to be paid the $225,000 in compensation for the earlier compulsory acquisition. Skender Besimi was appointed as a director of the company on 5 October 2017 and, on 5 March 2018, Jelena ceased being a director.
20 On 3 August 2018, the State Revenue Office ('SRO') issued a letter to the company demanding payment of $60,409.35 in respect of outstanding land tax and interest. The letter warned that failure to make payment could result in winding up proceedings. On 1 August 2019, the Commissioner of State Revenue filed an application in this Court to have the company wound up in insolvency on the basis it had failed to comply with a statutory demand. At a hearing on 4 September 2019, I wound the company up and appointed David Mutton as liquidator.
21 On 17 September 2019, lawyers purporting to act on behalf of Richflow (after its liquidation) sent a letter to the occupiers of the property demanding they vacate it immediately. On 2 October 2019, Jelena completed and signed a Report on Company Activities and Property dated 2 October 2019 ('Jelena's ROCAP' or 'ROCAP') purportedly as director of the company, although Skender was in fact the director at that time. In the ROCAP, Jelena stated the company owned the property and placed its value at $10 million. Around the same time the liquidator procured a 'kerbside appraisal' on the property which disclosed the property had an estimated realisable value of between $3 million to $3.3 million. On 17 October 2019, the liquidators of Richflow caused a formal notice to vacate the property to be issued to its occupiers. The occupiers were afforded the opportunity to put forward reasonable grounds of dispute within 15 business days. In response, Feim (by his attorney Fezije) executed a document titled 'Direction by Beneficiary to Trustee', addressed to the liquidator and dated 30 March 2021, which referenced the declaration of trust and declaration of gift and sought the transfer of the property into his name ('beneficiary direction').
22 On 3 July 2020, Richflow lodged a caveat over the property as its registered proprietor 'being entitled to possession of the certificate of title...and to prevent improper dealings'.
23 On 27 May 2021, around the time of the commencement of this proceeding, the company purported to pass a resolution signed by Jelena and Skender as members acknowledging Skender's resignation as director of Richflow and Jelena's re-appointment as a director. However, the change is not reflected in the most recent historical company extract before the Court and the company remains under the control of the liquidator.
24 The proceeding had a long and convoluted history before eventually going to trial. The plaintiffs filed their originating process on 28 May 2021 seeking, among other things, directions from the Court under ss 90-15 and 90-20 of the Insolvency Practice Schedule (Corporations) ('IPS') (which is Sch 2 to the Corporations Act 2001 (Cth) ('Act')) and the inherent jurisdiction of the Court concerning the ownership of the property (the company's sole asset). In particular, the liquidator seeks a direction as to whether he is justified in treating the property as being wholly held on trust by Richflow for the benefit of Feim, Julie, Nick, Nevrus and Sehiha. Ancillary orders and directions are also sought regarding the realisation of the property and the distribution of the proceeds of sale, the appointment of the liquidator as receiver and manager over any trust property and for the payment of the liquidator's remuneration and costs. The hearing of those issues has been deferred until after the Court determines who is the beneficial owner of the property.
25 At the first return of the originating process on 25 June 2021, the Court made orders adding Jelena as a defendant to the proceeding and requiring the defendants to file and serve affidavit material on the question of any alleged contribution to the purchase price of the property. The matter was also referred to judicial mediation.
26 However, at a mention on 22 July 2021, the Court was informed that Nevrus had passed away. The Court later invited a representative of Nevrus' deceased estate to participate in the judicial mediation, despite no appearance having been filed. Nick appeared at the mention with the assistance of his son, Ethan Pierce, who was granted leave by the Court to act as a McKenzie friend to assist Nick in preparing any affidavit material. The Court also received and noted correspondence on behalf of Sehiha confirming she did not intend to file any evidence or otherwise participate in the proceeding, including the judicial mediation.
27 At a directions hearing on 3 September 2021, the Court made a pro bono referral for Nick to obtain legal assistance from the Victorian Bar Pro Bono Scheme in respect of the judicial mediation ordered by the Court.
28 On 1 March 2022, the Court ordered by consent that pursuant to r 9.06(c) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('Rules'), Jonathon Colbran be substituted for David Mutton as the first liquidator plaintiff in the proceeding. This followed Mr Mutton's resignation as liquidator of all companies to which he was appointed liquidator (including Richflow) and an application pursuant to s 473A of the Act to enable the change of liquidators.[4]
29 Following an unsuccessful judicial mediation on 29 November 2021, the matter returned for directions on 16 December 2021. The Court made an order that any defendant claiming any interest, or making a submission regarding any interest in the property file and serve on other parties, points of claim specifying the grounds on which the claim is made. As a natural contradictor to any such claim, Jelena was ordered to file and serve points of defence. The matter was fixed for trial to commence on 19 July 2022.
30 By points of claim dated 28 February 2022, Feim and Julie make a claim on the property. They allege Richflow holds the property on a resulting trust for them by reason of their alleged payment of the property's purchase price. Further, or in the alternative, they allege Richflow holds the property in favour of Nick, Nevrus, Feim, Sehiha and Julie by reason of the declaration of trust. Feim also contends Nick, Nevrus, Sehiha and Julie later gifted their interest in the property to him in accordance with the declarations of confirmation. In the event either of the trust claims failed, Feim also made a claim for adverse possession of the property by reason of his alleged continuous, sole and exclusive occupation of it since 1997 or, alternatively, 2004. However, the adverse possession claim was ultimately abandoned during the trial.
31 In points of claim and defence dated 15 March 2022, Jelena denies the allegations made by Feim and Julie and seeks a declaration that Richflow is the beneficial owner of the property and is entitled to its possession. On this analysis, Jelena and her fellow shareholder Skender would be entitled to any surplus following realisation of the property by the plaintiffs and the payment of the liquidator's remuneration and costs.
32 When the matter came back for pre-trial directions on 29 April 2022, it was dealt with on the papers by consent. Among other things, the Court made orders excusing Nick, Nevrus and Sehiha from the proceeding as they had elected not to file any points of claim or make any submissions regarding an interest in the property pursuant to the 16 December 2021 orders. By further order, Nick, Nevrus and Sehiha were therefore not permitted to file any points of claim document, affidavit, submission, or other document in the proceeding claiming any interest in the property without the Court's leave. Timetabling orders were then made to prepare the matter for trial as between the remaining parties.
33 On 17 May 2022, the Court granted Jelena's former solicitors, TBA Law, leave to cease acting for her pursuant to r 20.03(3) of the Rules. Following the granting of that leave, the matter was listed for mention on 24 May 2022 to ensure compliance with the pre-trial timetable. However, the Court was informed at that mention, and at a subsequent mention on 14 June 2022, that Jelena had not formally retained new solicitors and required additional time to do so. In light of this, it was appropriate to vacate the existing trial dates, and relist the trial for late October 2022. Consequential orders were made at the hearing extending the time for the relevant pre-trial steps. However, there were continued delays in Jelena obtaining legal representation.
34 At a mention on 31 August 2022, the Court was informed that Jelena had been unable to raise sufficient funds to engage lawyers and would, accordingly, be unrepresented at trial. Counsel for the liquidator, Mr Kohn, suggested the liquidator may consider funding the representation of Jelena as a contradictor or ask the Court to make a pro bono referral to enable her to perform such a role. The Court then vacated the trial of the matter for a second time and relisted it to commence on 14 February 2023, on a three-day estimate.
35 At a further mention of the matter on 30 September 2022, Jelena appeared with the assistance of Mr Stephen Thorp, a consultant. Mr Thorp indicated finance had been secured by Jelena and she would shortly be in a position to retain solicitors formally. On the basis of that assurance, a new pre-trial timetable was set and the February 2023 trial dates confirmed. Jelena then retained Tisher Liner FC Law to act on her behalf and a notice of solicitor commencing to act was filed with the Court on 6 December 2022.
36 However, on 21 December 2022, the Court received an email from Nicholsons Lawyers and Consultants, the solicitors on the record for Feim and Julie, indicating the firm was expecting to receive instructions to cease acting based on an alleged conflict of interest. Given the pending February 2023 trial dates, leave to cease acting was required under r 20.03(3)(b) of the Rules. The Court was subsequently provided with an affidavit by Mr Anthony Forbes-Nicholson dated 22 December 2022 in support of an application for leave to cease acting. In his affidavit, Mr Forbes-Nicholson deposed to having previously acted for Jelena, Naim, Richflow, and other members of the Dardovski family, including in respect of matters relevant to the proceeding. The next day, the Court received email correspondence from Tisher Liner FC Law alleging a clear conflict of interest arose in circumstances where Mr Forbes-Nicholson continued to act for Feim and Julie in the proceeding against the interests of Jelena. In the circumstances, the Court considered it appropriate that Nicholsons Lawyers and Consultants be granted leave to cease acting and listed the matter for urgent mention on 23 January 2023, given the pending trial. On 16 January 2023, Jem Lawyers filed a notice of change of solicitor for Feim and Julie. Accordingly, on 23 January 2023, the Court made orders extending the time for compliance with certain remaining pre-trial steps.
37 However, difficulties with the parties' legal representation continued. Twelve days before the commencement of the trial in mid-February 2023, Tisher Liner FC Law sought leave to cease acting for Jelena under r 20.03(3)(b) of the Rules. On the basis the solicitor-client relationship was no longer viable, the Court granted leave for Tisher Liner FC Law to cease acting for Jelena on 3 February 2023.
38 Pursuant to the Court's orders of 23 January 2023, the parties attended a second judicial mediation on 7 February 2023, which was unsuccessful. Jelena attended the mediation unrepresented, but was assisted by Mr Thorp. The matter was then brought back for mention on 10 February 2023 at the request of the plaintiffs' solicitors. Jelena appeared with the assistance of Mr Thorp who informed the Court that Jelena was again seeking new solicitors to act for her at the trial of the proceeding. Jelena ultimately engaged DSA Law as new solicitors on 20 February 2023. Given the timing of this engagement and the complexity of the proceeding, it was regrettably necessary to vacate the trial for the third time and relist it for 22, 23 and 24 May 2023. Consequential orders were made by consent on 9 March 2023, extending the time for the completion of various pre-trial steps.
39 By affidavits sworn by Fezije on 7 February and 16 March 2023, Fezije applied under ord 80 of the Rules to be appointed as Feim's litigation guardian. No other party raised any formal objection to the application. On the available evidence, I was satisfied Feim lacked the capacity to manage his affairs, including instructing his lawyers in the proceeding. I was otherwise satisfied the appointment of Fezije as Feim's litigation guardian was appropriate. In particular:
(a) a recent medical report prepared by Feim's general practitioner, Dr Jude Gurusinghe, confirmed that following his 2011 heart attack, Feim suffered from an acquired brain injury, which 'result[s] in diffuse cognitive impairments with prominent reductions in attention and memory'. His prognosis was described as 'poor' on the basis that his cognitive capacity will not improve;
(b) the appointment formalised an arrangement already in place in accordance with the power of attorney given to Fezije on 24 June 2011;
(c) Fezije has no interest in the proceeding adverse to Feim; and
(d) the appointment was otherwise appropriate given the complexity of the issues involved in the proceeding and the identity, number and interests of the other parties.
40 Accordingly, I made orders on 2 May 2023 for the appointment of Fezije as litigation guardian. Due to his condition, Feim was unable to give evidence at trial.
41 By orders dated 11 June 2021 and supplementary orders dated 22 May 2023 (to reflect the claims brought by Feim and Julie), Connock J referred the proceeding to an Associate Justice for hearing and determination pursuant to r 77.05 of the Rules and, if required, also under r 16.1(3) of the Supreme Court (Corporations) Rules 2013 (Vic) (then in force).
42 Following a final pre-trial mention of the matter on 17 May 2023, the matter proceeded to trial. The trial was heard over four days, with parties giving opening submissions and evidence on 22, 23 and 24 May 2023, and closing submissions on 14 August 2023. On 6 June 2023, following the parties' evidence and before closing submissions, the matter was again referred to judicial mediation (with the consent of the parties); but the mediation was unsuccessful.
43 Over the course of the trial, the following five witnesses were called to give oral evidence and were cross-examined by counsel: Julie; Fezije; Mr Anthony Forbes-Nicholson; Mr Livio Cellante; and Jelena. Before each witness was called, objections to aspects of their affidavit evidence were dealt with. Prior to the commencement of the trial, the parties were required to produce a joint table of objections to evidence and the Court made provisional rulings on those objections. The parties were then invited to make short submissions concerning the objections and the provisional rulings at the trial. The court book, which contained all of the affidavits upon which the parties relied, was subsequently updated so as to strike out any part of the affidavit evidence ruled inadmissible by the Court, and the updated versions of the affidavits were subsequently adopted by the witnesses.[5]
44 Although Nick and Sehiha both filed affidavits in the proceeding,[6] their affidavits were not relied upon by any party. Further, neither Nick, Sehiha, nor the deceased estate of Nevrus made any claim in the proceeding. The liquidator did not give any oral evidence and the plaintiffs rely upon the affidavit of David Mutton dated 28 May 2021 and the affidavit of Jonathon Colbran dated 15 February 2022. No expert witnesses were called, including on the authenticity of any critical document before the Court.
45 Feim and Julie rely on the following material in the proceeding:
(a) the affidavits of Julie Dardovski sworn 25 August 2021, 10 February 2023 and 4 May 2023 ('Julie's first affidavit', 'Julie's second affidavit' and 'Julie's third affidavit', respectively);
(b) the affidavits of Fezije Dardovski sworn 27 August 2021, 7 February 2023, 16 March 2023, and 4 May 2023 ('Fezije's first affidavit', 'Fezije's second affidavit', 'Fezije's supplementary affidavit' and 'Fezije's third affidavit' respectively);
(c) the affidavit of David Mutton affirmed 27 May 2021 ('Mutton affidavit');
(d) the affidavit of Livio Cellante sworn 29 November 2022 ('Cellante affidavit');
(e) the affidavits of Anthony Peter Forbes-Nicholson sworn 15 December 2022 and 3 February 2023 ('first Nicholson affidavit' and 'second Nicholson affidavit', respectively);
(f) the affidavits of Thanh Nguyen affirmed 7 February 2023 and 19 May 2023; and
(g) outlines of submissions dated 18 May 2023, 21 May 2023 and 13 June 2023.
46 Jelena relies on her affidavits sworn on 23 August 2021 and 11 April 2023 ('first Jelena affidavit' and 'second Jelena affidavit', respectively), together with outlines of submissions dated 18 May 2023 and 13 June 2023.
47 The liquidator places reliance on the Mutton affidavit and the affidavit of Jonathon Colbran affirmed on 14 February 2022, along with outlines of submissions dated 18 May 2023 and 13 June 2023.
48 Pursuant to the Court's orders, the parties also jointly prepared a statement of agreed facts and a neutrally worded chronology.
49 The proceeding raises a number of complex and interrelated questions for determination. Following the hearing of the parties' evidence, Feim abandoned his claim for adverse possession over the property. Additionally, as earlier noted, there are a number of ancillary issues which are deferred for consideration and determination at a later time. The following primary questions now fall for consideration:
(a) does Richflow hold the whole or part of the property on resulting trust for Feim and Julie by reason of their alleged payment of the property's purchase price?;
(b) in answering (a), is the declaration of trust made on 31 January 1995 relevant?;
(c) if yes to (a), is that interest held by Feim and Julie equally or in accordance with their respective contributions?;
(d) in 1995, was there a declaration of trust by Richflow concerning the property in favour of the children of Naim Dardovski (being Nick, Nevrus, Feim, Sehiha, and Julie) by reason of the declaration of trust document?;
(e) question (d) above subsumes the following subsidiary questions:
(i) is the declaration of trust admissible?;
(ii) was the declaration of trust properly executed by the company and is it a valid and enforceable document?;
(iii) for the purpose of (e)(ii), did Naim and Jelena affix their signature to the document?;
(iv) for the purpose of (e)(ii), does it matter whether or not some or all of the named beneficiaries contributed some or all of the purchase money for the property?;
(v) for the purpose of (e)(ii), was there a clear intention to create a trust?
(vi) was the declaration of trust a sham and, if so, what is the legal consequence?; and
(f) if yes to (d), in 2010 did all or any of Naim's children referred to above gift any of the interest they had in the property to Feim?
50 The following questions are to be resolved following this judgment:
(a) is Richflow entitled, as against any person to whom the property is conveyed, to:
(i) a contribution for payments made or which must be made by Richflow in respect of the property?;
(ii) a charge or lien over the property to secure the obligations referred to in (i)?;
(b) is the liquidator entitled to a lien over the property for his remuneration and costs?; and
(c) should the property be transferred to Feim or sold by the liquidator?
(1) The Court may make such orders as it thinks fit in relation to the external administration of a company.
(3) Without limiting subsection (1), those orders may include any one or more of the following:
(a) an order determining any question arising in the external administration of the company...
52 Section 90-20 of the IPS specifies who may apply for an order under s 90-15. Those persons relevantly include an officer of the company. It follows that the liquidator has standing under s 90-20.
53 Section 90-15 is broad in its scope and contemplates not only the exercise of judicial discretion, but also the determination of substantive rights.[7] In GDK Projects Pty Ltd, in the matter of Umberto Pty Ltd (in liq) v Umberto Pty Ltd (in liq),[8] Farrell J remarked that the power in s 90-15(1) is, 'in its terms, unconstrained'.[9]
54 In discussing the scope of the court's jurisdiction to give directions under the now repealed analogues of ss 447D(1) and 479 of the Act, Goldberg J observed in Re Ansett Australia Ltd[10] that:
...[T]he prevailing principle adopted by the courts, when asked by liquidators and administrators to give directions, is to refrain from doing so where the direction sought relates to the making and implementation of a business or commercial decision, either committed specifically to the liquidator or administrator or well within his or her discretion, in circumstances where there is no particular legal issue raised for consideration or attack on the propriety or reasonableness of the decision in respect of which the directions are sought. There must be something more than the making of a business or commercial decision before a court will give directions in relation to, or approving of, the decision. It may be a legal issue of substance or procedure, it may be an issue of power, propriety or reasonableness, but some issue of this nature is required to be raised.[11]
55 Having regard to the issues for determination in this case, there are clearly legal questions of substance which arise and in respect of which the liquidator requires guidance. I consider that the Court's jurisdiction under s 90-15 to make the relevant directions is engaged. Alternatively, the Court has power to do so in accordance with its inherent jurisdiction. No party contends otherwise.
56 In determining the issues arising in this case, the Court is confronted with competing testimony from witnesses concerning their recollection of events occurring many years ago.
57 As Leeming JA observed in Gautam v Health Care Complaints Commission,[12] '[u]sually, the resolution of an issue involving the credibility of witnesses will require reference to, and analysis of, any evidence independent of the parties which is apt to cast light on the probabilities of the situation'.[13] In a similar vein, in 3 Apples Childcare Centre Pty Ltd v MMC Pacific International Pty Ltd,[14] M Osborne J said:[15]
The...appropriate course in evaluating competing evidence is 'to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence', and make 'inferences drawn from the documentary evidence and known or probable facts'.
58 I note in this regard that there is no direct objective evidence concerning a number of aspects of the property's acquisition, including the date of the contract of sale and its terms, and whether certain payments were made. In Siegwerk Australia Pty Ltd (in liquidation) v Nuplex Industries (Aust) Pty Ltd,[16] a case concerning questions of causation and breach of contract, Beach J explained the proper approach to be taken in making inferential findings in a circumstantial case:[17]
It is not sufficient that the circumstances give rise to conflicting inferences of an equal degree of probability or plausibility or that the choice between them can only be made by conjecture (Coastwide Fabrication & Erection Pty Ltd v Honeysett [2009] NSWCA 134 at [60] per McDougall J, Ipp and Young JJA agreeing). I accept though that the process of inference may involve an intuitive element that is not susceptible to detailed support or explanation (at [64] per McDougall J).
There is a distinction between inference and conjecture even if the reasoning process occurs on a continuum in which there is no bright line division (Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262 at 275 [84] to [88] per Spigelman CJ). A conjecture, even though plausible, is no more than a guess, whereas an inference is a deduction from the evidence. If the deduction is reasonable, the inference may rise to legal proof (Jones v Great Western Railway Co (1930) 144 LT 194 at 202). But there must be objective facts from which the inference could be drawn, otherwise what is left is mere speculation or conjecture (Caswell v Powell Duffryn Associated Collieries Ltd [1940] AC 152 at 169 and 170 per Lord Wright).
Generally, the proper inference to be drawn on the balance of probabilities depends upon a practical and reasonable assessment of the evidence as a whole (BGC Residential Pty Ltd v Fairwater Pty Ltd [2012] WASCA 268 at [51] and [54] per Pullin JA).
59 I intend to apply the above principles in scrutinising the competing testimony of the witnesses in the case and drawing any necessary inferences from the available evidence.
60 I will address questions of credibility of witnesses and conflicts of evidence progressively in my analysis of the issues below. However, by way of overview, it is appropriate to record my impressions about the creditworthiness of the witnesses.
61 Julie initially gave evidence at trial in a straightforward and businesslike manner. Whilst some of Julie's evidence was supported by objective documentary evidence (for example, in relation to the terms of the contract of sale and the payment of the first instalment under it), her evidence regarding other matters was not (for example, in relation to the source of funds to make the second instalment on the purchase price). There were also aspects of her evidence that were unsatisfactory. For example, her evidence regarding the payment of a deposit on the purchase of the property was inconsistent and confusing. She initially maintained Feim had sourced the funds for the deposit from Sehiha but then changed her evidence to conform with her prior evidence given in a Federal Court public examination that she and Feim had jointly borrowed the money from their sister. Her evidence regarding the source of funds for the second deposit was also at odds with prior evidence given in the public examination.
62 Julie conceded she has a poor memory at times but said there were things she remembers very well. That is partly understandable because a number of events the subject of the proceeding occurred more than 35 years ago. Given her evidence was at times unreliable, I have approached Julie's evidence cautiously, weighing it against objective contemporaneous documents and other oral and affidavit evidence. On the question of the payment of the first instalment of the deposit for the purchase of the property, Julie's evidence was given in a forthright manner and appeared truthful. More importantly, it was independently corroborated by contemporaneous documentation. Although her evidence regarding the first instalment was ostensibly at variance with her evidence given in the Federal Court public examination, her explanation for that inconsistency was plausible and her oral testimony about that issue was internally consistent with her affidavit evidence given in the proceeding.
63 While I found that Fezije's evidence was truthful to a degree, it could not be wholly relied upon. Her credibility was particularly brought into question when giving evidence in support of the ultimately abandoned adverse possession claim as she omitted to disclose the salient fact that Feim had been in prison for a number of years during which time he was also said to have resided at the property. She also gave contradictory and unsatisfactory evidence about payment of expenses by her and Feim in respect of the property. In the case of the payments, some of her evidence was uncorroborated by the documentation upon which she relied. It may be that Fezije's evidence about the extent of payments by Feim and Fezije in respect of the property was overstated or inflated. In determining certain contested issues, such as the circumstances and source of the payment of the deposit and second and third instalments on the purchase of the property, it was necessary to scrutinise closely Fezije's evidence in light of the documentary record and the objective surrounding material.
64 I found Jelena to be a wholly unreliable witness. I would not believe any disputed assertion by Jelena unless it was independently corroborated by objective documentary evidence. By way of example, she gave the following unsatisfactory evidence:
(a) Jelena initially insisted the property was purchased by Richflow in February 1989, but belatedly conceded under cross-examination that the property was in fact purchased in June 1987. She volunteered her memory was fallible because of her age. I find her memory of events around this time to be unreliable;
(b) Jelena's initial evidence that she and Naim arranged for the construction of a three-bedroom house on the property in 1989 was either a significant embellishment on her part or a major defect in her memory. She ultimately conceded she could not remember whether she and Naim had commenced the construction of a three-bedroom house in 1989 and then suggested she and Naim had paid to extend an existing dwelling on the property for the use of Feim and Fezije;
(c) her evidence that the purchase of the property was partly funded by a cash payment of $60,000 from profits of the Builders Arms Hotel was implausible and unsupported by any documentary evidence;
(d) she was adamant in her affidavit evidence that she had never signed the declaration of trust as a director of Richflow. She also emphatically denied signing the document when examined under oath during public examinations conducted in September 2020 in the Federal Court of Australia in relation to the affairs of the company. In her first affidavit filed in this proceeding she deposed to first seeing the declaration of trust during the public examination process. Somewhat inconsistently, in her second affidavit she said she first saw the declaration of trust in 2021. However, at trial, she gave supplementary oral evidence conceding that while the signature appeared to be hers, she did not recognise the declaration of trust and had not seen it before the commencement of the Court proceeding, or the trial itself (it was unclear which). Eventually, Jelena conceded under cross-examination that she had in fact signed the declaration of trust at the time of its execution in January 1995. However, she then gave entirely new evidence that she was told to sign the declaration by her husband and to not ask any questions. Her evidence on the topic was inconsistent and unreliable. No explanation was offered for why she had changed her evidence so materially; and
(e) she similarly denied in her affidavits having previously seen a letter sent to the Department of Social Security in June 1995 concerning an application by Naim and Jelena for an age pension and which attached a copy of the declaration of trust. However, she ultimately accepted under cross-examination that she had in fact seen the letter in 1995.
65 Mr Cellante was a disinterested witness who gave clear, direct and credible evidence concerning the nature of contracts entered into by the vendor company at the time of the purchase of the property. I consider him to be a witness of truth.
66 At trial, Mr Forbes-Nicholson presented as a witness of truth and answered questions in a direct manner. Whilst a significant part of his evidence was informed by his interpretation of contemporaneous documents and his usual practice as a solicitor, I have no reason to doubt the veracity of his evidence. When he could not recall specific matters, he did not hesitate in saying so. I do not consider that his history in acting for members of the Dardovski family, including most recently for Feim and Julie, in any way coloured his evidence. Nor was that put to him in cross-examination.
67 I turn now to the legal principles and evidence concerning the resulting trust claim brought by Feim and Julie.
68 A 'purchase money resulting trust' may arise in circumstances where a legal estate in property held in the name of another is taken to 'result' to the person who advances all or part of the purchase money for the property.[18] This occurs because the law presumes a person who purchases property in the name of another does not intend to gift the beneficial interest in that property to the other person.[19]
Where A purchases property in the name of B, or in the name of A and B, and B does not financially contribute to the purchase price, there is a presumption that A is beneficially entitled to the interest in the property held by B.
Where two or more parties make equal financial contributions to the purchase price, but the property is conveyed into the name of one party only, there is a presumption that the parties take a beneficial interest in the property as tenants in common in equal shares.
Where two or more parties make unequal financial contributions to the purchase price, but the property is conveyed into the name of only one of them, or in all their names, there is a presumption that the parties take a beneficial interest in the property as tenants in common in shares that are proportionate to their respective financial contributions to the purchase price.
Payment of stamp duty and registration fees can be treated as a financial contribution to the purchase price for this purpose.
The onus of establishing the payment(s) giving rise to a presumption of resulting trust lies on the party who is asserting the existence of the trust.
When a presumption of resulting trust arises, it performs a similar function to the civil onus of proof by requiring the person against whom the presumption applies to adduce evidence, or to point to other evidence in the case, that rebuts the presumption.
Where the party claiming the benefit of the presumption of resulting trust contributed the entire purchase price, the presumption can be rebutted by evidence that the party had a contrary intention at the time the contribution was made, such as evidence of a gift or a loan.
Where two or more parties financially contribute to the purchase price and the legal title does not reflect their respective contributions, the presumption of resulting trust can be rebutted by evidence that, at the time the contributions were made, the parties had a common intention that the beneficial interests are to be the same as the legal interests. Ordinarily, whether a common intention existed at that time is not to be determined by reference to the subjective, uncommunicated intentions of the parties. Rather, it is to be inferred by reference to the parties' words and conduct and the prevailing context at that time, including the relationship that then existed between the parties. Evidence of subsequent statements or conduct, as distinct from those which are contemporaneous with the relevant transaction, will only be admissible as admissions against interest.
The strength of any presumption of resulting trust will vary from case to case, as will the weight of evidence required to rebut the presumption.
In some circumstances, a countervailing presumption of advancement will operate. That presumption arises in favour of the person in whose name the property is purchased, where the relationship between that person and the purchaser or contributor is such that the latter has a 'natural obligation to provide' for the former, such as in a case of a father and child. It will be presumed in such a case that the purchaser or contributor intended to give the other a beneficial interest unless the presumption is rebutted.
If a presumption of resulting trust arises and the relationship between the parties does not give rise to a presumption of advancement, the former presumption will give rise to a trust unless there is evidence that the person who financially contributed to the purchase price had a contrary intention at the time the contribution was made.
The presumption [of a resulting trust] can be rebutted by evidence from which it may be inferred that there was no intention on the part of the person providing the purchase money to have an interest in land (or other property) held on trust for him or her. The presumption cannot prevail over the actual intention of the party paying the purchase price as established by the overall evidence, and where more than one person pays the purchase price, as here, regard is necessarily had to evidence of each of their intentions.
71 Their Honours further explained that 'the question of intention is entirely one of fact, and concerns the intention manifested by the person or persons who contributed funds towards the purchase of the property.'[26]
72 Justice Gageler (as his Honour then was) held in a similar vein:[27]
The presumption of a resulting trust is a presumption of fact, functionally akin to a civil onus of proof. The presumption will yield to an actual intention to the contrary found on the balance of probabilities as an inference drawn from the totality of the evidence. The weight to be given to the fact of a contribution having been made to the purchase price in drawing an inference as to actual intention will vary according to the totality of the circumstances of the case.
73 Importantly, only evidence of actual intention before, at, or immediately after, the acquisition of the property is probative as to whether the presumption has been rebutted.[28]
75 The question arises (as it does here) as to what constitutes a contribution to the purchase price in establishing the presumption of a resulting trust. The answer is as follows.
77 Secondly, instalment payments under a mortgage do not constitute a contribution towards the purchase price, but instead go towards securing the release of the charge created over the property purchased.[33] That said, taking out a loan (such as by way of mortgage) to fund the purchase price may constitute a direct contribution to the purchase price.[34] Similarly, paying down an existing mortgage secured against the property acquired may be taken into account as a direct contribution.[35]
78 Thirdly, authority suggests that capital costs of acquisition in the nature of stamp duty and registration fees will count as contributions to the purchase price, because those costs are necessarily incurred in the acquisition of the property.[36] Put differently, it is not possible to acquire the legal interest in a property without paying such fees. However, the position appears to be different in respect of legal fees and bank fees. As Kyrou J (as his Honour then was) cogently explained in Sivritas v Sivritas ('Sivritas'):[37]
...only costs necessarily incurred prior to and as a condition of obtaining registration of the interest which is to be held on trust should be included in the purchase price. On this basis, stamp duty and registration fees would be included but legal fees and bank fees would not be.[38] Although legal fees and bank fees are normally incurred in the purchase of property, they are not always incurred, and where they are incurred, their amounts may vary significantly depending on the purchaser's circumstances and, more importantly, they may be incurred as debts that are paid after the registration of the interest which is to be held on trust.
[emphasis added]
79 In the later Court of Appeal judgment in Vlahos v Vlahos, his Honour considered that payment of stamp duty and registration fees can be treated as a financial contribution to the purchase price (citing his earlier analysis in Sivritas), but made no mention of legal and bank fees.[39] Whilst Kyrou J's comments in Sivritas are strictly obiter,[40] I respectfully agree with his Honour's analysis. It is apparent that legal and bank fees are not directly incurred in acquiring a property because payment of such fees is not a condition of obtaining registration of the property in the name of the purchaser. However, even assuming legal and bank fees may be taken into account in quantifying a purchase price on the basis that it is the cost to the purchaser rather than the benefit to the vendor that is important,[41] an absence of evidence of those fees would not affect the calculation of the purchase price.[42]
80 Lastly, money subsequently expended on the maintenance or improvement of the property will not constitute part of the purchase price or alter the beneficial interests of contributors under a resulting trust already in existence.[43]
81 As regards the purchase of the property, Feim and Julie essentially contend that:
(a) the contract of sale of the property (which has not been located) provided that the property would be purchased for $140,000, with a deposit of $20,000 and the balance in three instalments of $40,000, with possession to be taken immediately;
(b) Feim borrowed $20,000 to pay the deposit of $14,000 and meet legal costs;
(c) Julie paid the first instalment of $40,000 on or about 7 December 1987 from a loan obtained by her. She later repaid that loan following the sale of a property located at 50 Fehon St, Yarraville, Victoria ('Fehon Street');
(d) Julie also paid the second instalment of $40,000 by taking out a second loan;
(e) Feim paid the final instalment of $40,000 on or about 30 November 1988 from the proceeds of the sale of a property located at 36 Leslie Street, St Albans which was owned by him and Fezije ('Leslie Street'); and
(f) because Julie and Feim paid the entire purchase price, Richflow took the property as bare trustee for them by way of resulting trust. This follows in the absence of consideration from Richflow or some contrary intention expressed by Julie and Feim.
82 At trial, Julie adopted her affidavits as her evidence in chief but also gave supplementary oral evidence about the layout and features of the property. Her evidence in relation to the alleged resulting trust is as follows.
83 Julie deposes in her first affidavit that in or around 1985, she and her husband Naser purchased a mixed business located at 73 Anderson Street, Yarraville ('Yarraville business'). The vendors of the business, Mr Gorgi Stojcevski and Ms Marija Stojcevski, also originally owned two properties in Fehon Street, Yarraville. Also in 1985, Naim purchase the freehold and business in the Builders Arms Hotel located in Gertrude Street, Fitzroy.
84 On 26 May 1987, Naser died suddenly. Julie made arrangements to have staff operate the Yarraville business while she commenced full-time work at the Builders Arms Hotel. In her third affidavit, Julie gave evidence that she worked at the Builders Arms Hotel with Feim every day during 1987 until mid to late 1988. However, she says she was not paid for her work and was informed by Feim and Nevrus that they were not paid either. When she discussed this with her father, he said there was not enough money and too much debt to allow for payment for her services. Julie then reached an agreement with the original vendors to sell them back the Yarraville business in return for title to Fehon Street. There was a contract executed on 15 December 1987 for the sale of the business (referred to in the contract as 'Bunjakus Foods') and its stock ('Yarraville business sale contract') for an amount which Julie says corresponded to the value of Fehon Street. The settlement of the Yarraville business sale contract was to occur on 7 January 1988. Julie says Fehon Street was transferred to her as part of the transaction and the transfer was registered (later) in 1988.[44]
85 Before Naser's death, he and Julie were interested in purchasing a farm property and had been looking at various locations. In accordance with tradition and her family values, she mentioned this to Naim who resisted the idea. In 1987, when their financial situation permitted it, she, Naser and her brother Feim became more serious about the idea of finding a farm property to purchase. Julie and Feim inspected a number of properties around Mount Cotterell, including the property in question. She considered that the property had a good slope and view of a lake. The property was otherwise an empty block, littered with rocks and weeds and had fencing in poor condition. It was around the time she inspected the property that Naser suddenly passed away. Julie considered purchasing the property to be a good way to honour his memory.
86 Prior to executing the contract, Julie informed Naim of the intended purchase. Naim apparently became angry he had not been involved in the process. To appease Naim, it was suggested he could be named as purchaser with the right of nomination but the property could be used by the whole family. Whilst the contract of sale cannot be located, having regard to the June 1987 solicitor's correspondence, Julie considers that the contract of sale was dated 7 June 1987 and involved a settlement period of 18 months, with three payments of $40,000 to be made at regular intervals. Possession was to be taken at the time the contract was signed.
87 Julie's evidence was that Feim arranged to borrow around $20,000 for the deposit of $14,000 and related legal costs. She says she knows Feim borrowed the money because he told her he had done so. She also deposes she paid the first two instalments under the contract of sale.
88 In her third affidavit, Julie recounts her father telling her and Feim that he expected them to make the instalment payments on the property. He also specifically reminded her to make the first instalment. To make the first instalment, which she believes fell due on 7 December 1987, she borrowed $40,000 through the Burns Philp Trustee Company ('Burns Philp') as facilitated by Paul Markopoulos & Company. She located loan documentation which records that on 7 December 1987 she arranged to borrow a '$50,000 adjustable advance' and received loan proceeds of $40,000 on that date ('Burns Philp loan documentation'). She says the loan from Burns Philp was then discharged in July 1988 following the settlement of the sale of her property at Fehon Street, which is confirmed by a settlement statement.
89 Julie's evidence was that she derived the funds to make the second instalment by taking out an unsecured loan of $40,000 from an organisation called Custom Credit. However, she has been unable to locate any document in relation to that loan and does not recall how she or Feim repaid it.
90 Julie recalls it was Feim who paid the final instalment in December 1988 by selling Leslie Street. She recalls that following this final payment, settlement of the property occurred in December 1988, or shortly afterwards, although the title to the property was not transferred until March 1989. She believes this occurred because her father had wished to defer the payment of stamp duty. Julie says that in the period between signing the contract for the property and its settlement, there were active efforts by herself, Feim and Fezije to engage a builder to construct a 110m² home for use by them and the extended family. Julie understood Feim would live with his family on the property. However, immediately prior to arranging for a building permit, Julie and her brother discovered that Naim had taken out a mortgage over the property. She and Feim were upset with their father. Naim considered he had the right to use the property as he saw fit as the family decision-maker. In any case, Naim informed them that he had obtained legal advice and had consequently put the property into a trust structure with Richflow as the trustee to keep the property safe from any risks that may arise from the Builders Arms Hotel.
91 Although the initial plans to build a large house on the property did not come to fruition, Julie gave evidence in her first affidavit and at trial that following the purchase of the property, Feim erected a tin shed on the property, which he used to operate a mechanical repair business. Feim also acquired a small timber bungalow in 1988 and moved it onto the property. The bungalow was improved so Feim and his family could move to the property after the sale of Leslie Street. Julie gave evidence that Feim and Fezije have lived in the renovated bungalow since 1988. In addition, Feim also improved the fencing, removed rocks, planted trees, and constructed a driveway. Various cars, car parts and building materials were stored by Feim in a large garage at the front of the property. Julie explained that an eight-car garage is located next to the bungalow. She also said that in 1996, she, Feim and her other siblings pooled their resources to purchase another dwelling, which was relocated to the property and used by their father and Jelena. Ten years later, Julie's niece and her husband transported a cottage to the property.
92 She deposes that her father purchased the Rifle Club Hotel in Williamstown in 1990 and the sale settled on about 6 September 1990, with a loan provided by Hathson Investment. Mortgages were taken out over the titles to: the property; 61 William Street, St Albans ('William Street') (where Naim and Jelena lived); a property owned by Nevrus; and the Builders Arms Hotel to secure the loan. Naim and Jelena moved into the Rifle Club Hotel after it was purchased. Nazif (Nick) and Nevrus were then brought in to be partners in the ownership of the hotel.
93 Under cross-examination, Julie confirmed she lived at the property in 1990 and again in 1996. Although she has not lived there since 1996, she visits Feim and Fezije regularly. When the property was acquired, it was Julie's intention that it could be used by all family members, including her father and Jelena. That remained her intention, until the onset of this litigation.
94 Reference was made in cross-examination to Naim's last will and testament made on 18 January 1989 ('Naim's will'). In his will, Naim made the following statement:
I DIRECT that my other children JULIE DARDOVSKI (BUNJAKU), NEVRUS DARDOVSKI, and SENIHA DARDOVSKA (SALIEVSKA), their spouses and their issue shall have no share or entitlement under the Will in my estate whatsoever AND for that purpose I say that JULIE DARDOVSKA (BUNJAKU) was married at the age of sixteen and has since then lived a separate life from myself and has not been involved in any business or other financial activity with the family and has not assisted in the building of any of my assets which I bequeath by this Will but she is financially independent (and refused to be involved in the Family business of Hotel and Farm activities).
95 Julie maintained the statements about her in Naim's will were false.
96 Julie was taken by Jelena's counsel to the June 1987 solicitor's correspondence in connection with the purchase of the property. The first letter comprising the correspondence is addressed to Naim and refers to a conference with the solicitor Paul Markopoulos on 9 June 1987. Julie accepted that despite the fact that she and Feim claim to have wholly paid for the purchase of the property, neither she nor Feim attended the conference referred to in the letter and were not the recipients of any correspondence from the solicitor. She did not insist on her name being placed on the contract of sale and was content for the property to be placed into her father's name as he was the head of the family. She recalls having first sighted the contract of sale three or four days after she had gone to see the property when the contract was delivered to her father's house by a real estate agent. Her evidence as to the terms of the contract was based on her recollection of having seen it at that time. She was also familiar with the terms from a prior discussion with the agent when she had inspected the property. She confirmed under cross-examination that the contract required a 10% deposit and instalments every six months 'around the $40,000 mark'.[45]
97 However, when cross-examined about the deposit for the purchase of the property, Julie's evidence became inconsistent and confusing. Julie initially said that Feim had borrowed $20,000 from Sehiha, $14,000 of which was used as the deposit. She was then taken to the following transcript excerpt of her evidence given during public examinations conducted in September 2020 in the Federal Court of Australia concerning the affairs of the company ('Federal Court public examination'):[46]
And did you make the deposit payment? - I - privilege. I made the deposit payment.
How much was it? - The - we - privilege. We borrowed $20,000. That was part of the deposit we paid to [Cellante].
98 Jelena's counsel then asked her to reconcile this with the evidence she gave at trial:[47]
So there, you're saying that you made the payment of the deposit whereas you've just given evidence that your brother made the payment?---No. My brother and me would have done that together.
...
So there you say, '[w]e borrowed' whereas in your [first] affidavit at paragraph 16, you said that Feim borrowed. So who was it? Did Feim borrow $20,000 or did you and Feim borrow $20,000 together?---Me and Feim borrowed $20,000. My brother went to my sister's to pick it up.
99 Julie was also cross-examined in relation to the first instalment payment towards the purchase of the property. She gave evidence that she utilised the services of Mr Markopoulos, the family lawyer, to procure a $40,000 loan for her to pay the first instalment. She was taken to the Burns Philp loan documentation which shows a loan advance of $50,000, $40,000 of which was described as 'loan proceeds'. The enclosed loan schedule also records a number of payments made to third parties, namely $2,393.30 in respect of a 'Stantcher Settlement' and $800 as a payment to Maria Dedovkaj'. Julie openly admitted she could not recall the purpose of those payments. She also accepted the Burns Philp loan documentation does not refer to the property itself and that she had produced no documentation to establish that the $40,000 was actually applied towards the purchase of the property. However, Julie was adamant that the only loan she took out in 1987 was for the purchase of the property and she repaid it following the sale of her property at Fehon Street. When Julie was asked where she obtained the Burns Philp loan documentation, after some consideration, she suggested she located it in 'the shed', which I take to be the shed on the property.
100 Jelena's counsel pointed out a number of further inconsistencies between Julie's evidence in this proceeding and her earlier evidence in the Federal Court public examination. In the public examination, she stated that the first instalment made by her was in the vicinity of $50,000, whereas her evidence in this proceeding was that the first instalment (and each of the two subsequent instalments) was $40,000. Julie explained that when she gave her evidence in the Federal Court she genuinely thought the first instalment was around the $50,000 mark. Counsel directed Julie to prior evidence given by her in the Federal Court public examination where she said she had raised the money to purchase the property by selling a business called 'Bunyarples Foods' in Yarraville. When it was suggested this was inconsistent with her evidence given in this proceeding (namely, that she borrowed money from Burns Philp to make the first instalment), she gave the following evidence under cross-examination:[48]
[Counsel reading from transcript of Federal Court public examination] [']Now, can you tell me, how did you have the funds, on your evidence, to purchase the property? Where did they come from?' And your answer was, 'I sold a business.' Now, that's not your evidence in this proceeding, is it?---No, that's exactly my evidence. I sold my shop for the house. I borrowed on the house...
Your evidence in this case is that you borrowed money from [Burns Philp] for the first instalment, and for the second instalment you borrowed money from Custom Credit? ---Correct.
That's your evidence, isn't it?---Yes, but that's the same thing. I had a business that I gave for in return for Fehon Street. I borrowed on Fehon Street, and I paid the instalment on the farm.
...
You didn't use the proceeds of sale of the business to pay the two instalments you just mentioned, did you?---The business was in exchange for a fully-paid property. To me it's the same thing.
...
So when you were asked and given the opportunity to say where you got the funds from to purchase the property, you didn't mention either the [Burns Philp] loan [or] the Custom Credit loan?---I probably didn't think of it at the time. But I did supply them with my contract of sale for the shop.
101 Whilst Julie insisted she obtained the second instalment of $40,000 from Custom Credit, she accepted she had no documentation in relation to that purported loan. She believed that both the first and second instalments for the property were remitted via Mr Markopoulos to the vendor. However, her evidence about the source of the second instalment was also inconsistent with prior evidence she had given in the Federal Court public examination. There, Julie gave evidence that Feim paid the last two instalments of $40,000 each. When asked about this prior evidence, Julie explained her evidence reflected her memory on the earlier occasion but she accepted it was not correct and maintained that she was probably confused. Whilst she insisted she was responsible for the first two instalments and that her brother made the final instalment, she agreed she made no mention in the public examination of obtaining a loan from Custom Credit to pay the second instalment. She explained that her changing recollection arose as a result of conversations she had with Fezije following the public examination, which refreshed her memory. She conceded she has a poor memory at times but there are things that she remembers very well.
102 When pressed on her evidence about the repayment of the loan from Custom Credit, her evidence was also confusing:[49]
So are you saying there that you can't even remember whether you paid Custom Credit back or whether your brother did?---It wouldn't have mattered whether I paid or my brother would have paid it back.
The question is, are you saying you cannot remember whether you made the repayment back to Custom Credit or your brother did?---We would have both done it.
Do you recall that?---Yes, I do. We always pooled our money together.
103 Julie strongly disagreed with the proposition that she had not made any contribution to the purchase price of the property. When asked about Jelena's account of how the property was purchased and used (Jelena's evidence is discussed further below), she rejected that evidence and said Jelena 'just makes up the story as she goes'. She also 'totally disagree[ed]' with Jelena's evidence that in or about 1989, Naim and Jelena commenced construction of a three-bedroom house in the north-west corner of the property with a view to living there.
104 Julie explained she first became aware the property had been purchased in Richflow's name in 1989. However, she accepted she never made any attempt to become a shareholder of the company despite her claim to have contributed to the purchase of the property. When she was asked whether she had ever paid any rates on the property, she suggested it was possible she had done so, although she accepted she could not provide any documentary evidence to substantiate such payments.
105 Fezije adopted her four affidavits as her evidence in chief. Her evidence largely accords with the evidence given by Julie in relation to the process of locating, paying for and improving the property. However, she does not recall whether she was made aware of all of the details of the purchase at the time and she only recently sighted the June 1987 solicitor's correspondence concerning the property. In her first affidavit, Fezije deposes that Feim paid the final instalment of $40,000 on or about 30 November 1988. She says the funds used to pay the third instalment were sourced from the sale of Leslie Street. She and Feim purchased Leslie Street in 1980 under a terms contract for $31,000 and lodged a caveat on 5 March 1981 in respect of their interest. They sold Leslie Street in the second half of 1988 for $84,000, the settlement of which occurred on 30 November 1988. After payment of a sum of $26,456.19 to the original vendor under the terms contract and payment of fees, the sale of Leslie Street by Feim and Fezije yielded $53,055.16 in available funds. Fezije says the money was handed over by their solicitor to Naim and Feim. Fezije produced solicitor's correspondence from Paul Markopoulos & Company dated November 1988, together with a settlement statement confirming those matters. She understands that a large part of the proceeds of sale were used to pay the third instalment under the contract to the property because Feim told her that at the time. After the sale of Leslie Street settled, Feim and Fezije moved to the property permanently and have lived there ever since. When they obtained vacant possession in July 1987, they set about improving the property and its amenities. They initially put an old caravan on the property to provide shelter and later purchased a disused two-bedroom timber bungalow which Feim arranged to move to the property from a nearby farm in 1988, before extending it by adding rooms and a balcony. Feim also arranged for water and power to be connected to the property. Fezije deposes that Feim operated a car repair business from the property and used the large shed for this purpose.
106 Fezije says she did not understand Naim to have contributed to the property. She does recall that both Feim and Julie were upset with their father when they discovered he purchased the farm using a company or a trust and then borrowed money against it. Fezije says that in the early stages, Naim was interested in what was going on at the property and would visit and keep company with Feim and her while they worked on the property - although because he was unwell, he tended to remain in an old caravan and later, the timber bungalow.
107 Under cross-examination by Jelena's counsel, Fezije admitted she failed to disclose to the Court that her husband Feim had in fact been convicted of aggravated burglary and armed robbery,[50] and imprisoned for approximately three and a half years from 1999 or 2000.[51] This contradicted her prior evidence that she and Feim had resided at the property permanently and continuously since 1988 (which was evidence primarily given in support of the now abandoned adverse possession claim).
108 Fezije was asked about her evidence concerning the third instalment payment on the property. She confirmed her husband told her he had applied the proceeds of the sale of Leslie Street to the purchase of the property. Fezije accepted she did not have any documents that actually showed Feim had paid money in respect of the purchase of the property. Fezije said she knew Feim borrowed $20,000 from Sehiha which he used to pay the deposit on the property. Her husband told her he had done this and she therefore believed him. She operated on the understanding that the owners of the property were Julie and Feim, until she saw the relevant paperwork. When asked to give a precise figure of the contributions made by her husband towards the purchase of the property, she said Feim paid the deposit of $14,000, together with the third instalment in the amount of $40,000, whereas Julie had paid the first two instalments.
109 Fezije rejected evidence given by Jelena that the $140,000 purchase price of the property was paid in 1989 using a loan of $80,000 obtained by Richflow from RMBL and $60,000 in profits from the Builders Arms Hotel. She also did not agree with Jelena's evidence that Jelena and Naim had constructed a three-bedroom house in the north-west corner of the property in 1989 at their own expense. She explained the bungalow was in fact acquired by Feim at this time and then extended. She also denied Jelena's assertion that Jelena and Naim paid a deposit for Leslie Street for Feim and Fezije, and that Feim and Fezije took out a mortgage to finance the balance of that purchase.
110 Mr Cellante is a land developer and former director of Chelmaness, the land development and trading company that sold the property in question. In his affidavit, Mr Cellante states he does not hold any documents or records concerning Chelmaness, which went into receivership on 24 January 1991. As a director of Chelmaness he was primarily responsible for the acquisition of land and the development and marketing of such land for sale. He recalls the property as being one of approximately 60 allotments that formed part of a large holding of 3700 acres. However, he has no recollection of any purchaser by the name of Richflow or Dardovski. He recalls that during the late 1980s, Chelmaness offered purchasers of land a number of different types of contracts of sale which typically included:
(a) a cash contract with the balance payable after 30, 60 or 90 days;
(b) a terms contract paid in monthly repayments with the balance payable up to 10 years; or
(c) an interest-free contract under which the purchasers paid a deposit and then paid the balance by way of instalments every six months for 18 months.
111 He recalls the third option was often selected by purchasers who were not using a lender. He also believes the typical deposit paid by customers at that time was 10% of the purchase price. Mr Cellante opines that a sale of the property for $140,000 entered into about 7 June 1987 would have provided for a deposit of $14,000 to be paid upon signing the contract, with instalments paid every six months in the amount of $42,000 and a settlement by December 1988. He also believes that it would have been unlikely a contract of sale for the property would have provided for a deposit to be paid in June 1987, with the balance to be paid upon settlement in December 1988 as a lump sum.
112 Under cross-examination, Mr Cellante gave clear and direct evidence. He confirmed he could not specifically recall the sale of the property in question and which category of contract would have applied. He said that although category (c) above was common, he could not say with certainty that the contract with Richflow adopted those terms. In the event the contract fell within this category on a purchase price of $140,000, the contract would have required a $14,000 deposit with three instalments of $42,000. He accepted the instalments would not have been $40,000, otherwise the contract price would have been less. Further, he conceded it was possible Chelmaness may have negotiated a tailored contract which did not fit neatly within categories (a), (b) or (c), although he believed it was unlikely that Chelmaness would have taken a deposit on signing the contract with the balance due much later, because the developer wanted to see instalments along the way to ensure the contract would perform. Whilst he could not say for certain, he considered it was also unlikely under a tailor-made contract for the first two instalments to be less than the final instalment.
113 It is Jelena's position that the property is legally and beneficially owned by the company. She denies the property is held on trust for Feim and Julie. In her evidence in chief, Jelena adopted her first and second affidavits as being true and correct. Her evidence pertinent to Feim and Julie's resulting trust claim is set out below.
114 Jelena deposes that in about February 1989, she and Naim decided that Richflow should purchase the property. She says the decision for the company to purchase the property was based on advice received from a financial adviser. The purchase price was $140,000 and was funded by the following:
(a) a mortgage loan of $80,000 from RMBL taken out on 2 February 1989; and
(b) the balance of $60,000 plus stamp duty and other expenses from the profits of the Builders Arms Hotel, which she and Naim owned at the time.
115 She says the company became the registered proprietor of the property on 9 March 1989. At that time, she and Naim lived at William Street and worked at the Builders Arms Hotel. In or about July 1990, she and Naim borrowed $895,000 from Hathson Investment to purchase the Rifle Club Hotel, and used both the property and William Street as security.
116 Jelena says that in 1989 she and Naim purchased a caravan and parked it on the property to stay on weekends. She claims that in or about 1989, she and Naim commenced construction of a three-bedroom house in the north-west corner of the property with a view to living there. Construction of the three-bedroom house was completed in about 1990 at a cost of $76,000. She says she and Naim made various other improvements to the property at their own cost including erecting a fence, planting over 40 fruit trees and building a driveway.
117 Jelena deposes that in 1988, she and Naim paid the deposit for Leslie Street for Feim and Fezije, and that Feim and Fezije took out a mortgage to finance the balance of that purchase. However, in or about 1990, Feim and Fezije were unable to pay the mortgage instalments on Leslie Street and were forced to sell their home. She and Naim then allowed Feim and Fezije to move into the three-bedroom house on the property because they had nowhere else to live. They were permitted to live on the property rent-free on the basis they would attend to regular maintenance and pay all utility bills; however, Jelena asserts they did not pay any such bills. Another person who resides at the property is John Willis, a long-term tenant at the Rifle Club Hotel and whom Jelena permitted to live on a building at the property in exchange for maintenance services.
118 Under cross-examination, Jelena was asked about her evidence that she and Naim had decided to purchase the property in about February 1989. As the transfer of land was signed on 17 February 1989, it was suggested to Jelena that this would mean there had been a settlement period of no more than 17 days. She maintained that was correct.
119 She was repeatedly asked about the accuracy of her evidence that the property was purchased in February 1989, notwithstanding the June 1987 solicitor's correspondence which records a contract date of 7 June 1987. After some prevarication, she conceded her evidence was incorrect in that regard:[52]
Do you agree after reading this letter that the land was sold to ... Naim in June 1987, not February 1989?---Maybe I forgot, you know. I forgot because I'm too old, you know, to think three years what was before.
But so you agree it was June 1987?---Yeah.
120 Given the correct date of purchase, it was then suggested by counsel for Feim and Julie that there was no evidence Naim or Richflow paid for the property at that time. Jelena made reference to bills which had been paid and 'some paper which we put that for that land [sic]'. When it was squarely put to her that neither Naim nor Richflow paid for the property, she said that was not correct.
121 Jelena was asked whether Naim owed Nevrus $100,000 around the time of the purchase of the property. Initially she denied Naim owed this amount to his son. She was then shown a letter dated 11 April 1989 prepared by Mr Paul Markopoulos, solicitor, which suggested otherwise ('April 1989 letter'). The letter is a written and signed acknowledgement by Nevrus that he had received the sums of $10,000 and $50,000 and that upon payment of $40,000 by 13 April 1989, there would be no further monies owing to him by Naim. On the basis of this letter, Jelena accepted Naim borrowed $100,000 from Nevrus and repaid that amount. It was then put to her whether the $80,000 borrowed from RMBL was used by Naim to partially repay the loan from Nevrus, instead of being applied to the purchase of the property. She denied it had been used in this way but conceded that she did not know how Naim was able to repay Nevrus.
122 When asked about the amount of $60,000 allegedly paid towards the purchase of the property from profits of the Builders Arms Hotel, Jelena gave remarkable evidence that the business held $60,000 in cash which was provided to Chelmaness as a cash payment.[53] She suggested she and Naim had 'money on the side all the time with a running business' but accepted she had not produced any evidence to show the Builders Arms Hotel was profitable at that time or that $60,000 was available to apply towards the purchase of the property.
123 Jelena was significantly challenged under cross-examination on her evidence that she and Naim paid $76,000 in 1989 for the construction of a three-bedroom house in the north-west corner of the property. Jelena initially appeared to be confused about her own evidence:[54]
Now, where did that $76,000 come from?---[Jelena reading out para [14] of her first affidavit] 'In about 1989 Naim and I commenced construction of a three-bedroom house in the northwest corner of the farm.' That's not true.
Sorry, this is what you've, this is your affidavit?---We buy for, three bedrooms, that was house two bedroom.
124 She then said she was no longer sure about her evidence in this regard before ultimately conceding she could not remember whether she and Naim had commenced the construction of a three-bedroom house in 1989.[55]
125 Counsel for Feim and Julie further suggested that given:
(a) Richflow had borrowed $80,000 from RMBL on 2 February 1989, at an interest rate of between 14.25 and 16.25 per cent payable quarterly, final repayment of which was due on 11 July 1991 (although not actually repaid until October 1996);
(b) Richflow borrowed a further amount of $875,000 in mid-1990 from Hathson Investment, at an interest rate of between 17.05 and 21.05 per cent payable monthly, final repayment of which was due on 7 June 1993; and
(c) Naim had borrowed $100,000 from Nevrus,
it would not have been feasible for Naim, Jelena and/or Richflow to pay for the construction of a three-bedroom dwelling on the property at that time. However, Jelena insisted that despite these significant debts, she and Naim had sourced $75,000 from the sale of the Builders Arms Hotel which she used 'to extend the house proper for [her] stepson'. She appeared to suggest the $75,000 was in fact used to extend an existing dwelling on the property for Feim and Fezije's use. This marks a departure from her previous evidence that she and Naim paid for the construction of a new three-bedroom house on the property, initially for their own use. In any event, I understood Jelena's own affidavit evidence to be that the Builders Arms Hotel freehold was sold in 1993[56] and the business was sold by her trustee in bankruptcy in 1996.[57] It follows that $75,000 could not have been sourced in this way to pay for building work supposedly undertaken in 1989.
126 In view of the above matters, I cannot accept Jelena's account of her and Naim arranging for the construction of a three-bedroom house on the property in 1989, or at any time. I consider that her initial evidence on this topic constitutes either a significant embellishment on her part or a major defect in her memory. Instead, I prefer the evidence given by each of Julie and Fezije that it was in fact Feim and Fezije who moved a two-bedroom timber bungalow to the property in 1988 and subsequently extended it. Their evidence on that topic was unimpeached under cross-examination.
Whether property held on resulting trust for Feim and Julie?
127 In determining whether Richflow holds the whole or part of the property on resulting trust for Feim and/or Julie by reason of their alleged payment of the purchase price, it is important to first ascertain on the evidence when the contract to purchase the property was entered into and its terms, including the amounts of any instalments.
128 Whilst no party has produced a copy of the contract of sale for the property, the weight of evidence suggests the property was purchased on 7 June 1987. In this regard, I accept both Julie's evidence that the contract of sale was entered into on that date and Fezije's corroborating evidence that she recalls the purchase occurring in June 1987. Importantly, the testimony of Julie and Fezije is supported by the only available contemporaneous evidence concerning the date of the contract, being the June 1987 solicitor's correspondence. One of the letters comprising the June 1987 solicitor's correspondence refers to a contract date of 7 June 1987 in respect of the purchase of property at 'Rock Bank' and the other letter concerns the purchase of property at 'Lot 3 Mount Cottrell Road'. Mr Cellante gave uncontradicted evidence that Lot 3, Mount Cottrell Road, Rockbank is now known as 1665 Mount Cottrell Road, Mount Cottrell, which is the subject property. Further, a caveat was lodged over the property on 16 July 1987. This may be a purchaser's caveat, which was contemplated in the June 1987 solicitor's correspondence. There is also no evidence before the Court to suggest Naim or Richflow acquired any other property in Rockbank or Mount Cottrell. I therefore consider that the June 1987 solicitor's correspondence relates to the property in question.
129 Although Jelena initially gave evidence that in February 1989 she and Naim determined Richflow should purchase the property, and insisted the sale of the property had occurred at that time, under cross-examination, Jelena belatedly accepted the property was in fact purchased in June 1987. She volunteered that because of her age, her memory was fallible in this regard.
Terms of contract of sale including number of payments
130 As to the terms of the contract of sale, the June 1987 solicitor's correspondence confirms the purchase price was $140,000, payable in instalments, although there is no reference to the number, amount or timing of those instalment payments. Whilst there is no direct documentary evidence of payment towards the purchase price by any person to the vendor, it is safe to infer the purchase price was actually paid because the property was ultimately transferred from Chelmaness to Richflow in March 1989, as evidenced by the certificate of title. Because Richflow did not exist at the time of entry into the contract of sale but the title was nevertheless transferred into its name as registered proprietor, it is reasonable to infer the contract of sale contained a nomination clause permitting the named purchaser (who was most probably Naim) to nominate an alternative purchaser prior to the date of settlement.
131 It will be recalled Julie's evidence was that the contract required a 10% deposit and three interval payments every six months of $40,000 (according to her affidavit evidence) or 'around the $40,000 mark' (as stated in her cross-examination). Her understanding of the terms was informed by her discussion with the real estate agent and her memory of the contract itself, having sighted it.
132 Julie's evidence about the terms of the contract is largely supported by the frank and persuasive evidence of Mr Cellante, a former director of Chelmaness and a disinterested witness. Mr Cellante was clear he could not recall the specific transaction in question, however, he explained Chelmaness typically offered terms contracts requiring payments every six months with a deposit of 10% and the contracts entered into commonly reflected those terms. Although Mr Cellante accepted in cross-examination that Chelmaness from time to time entered into bespoke contracts, he considered it unlikely the vendor would have entered into a contract in June 1987 which entailed a deposit and a lump sum payment at settlement in December 1988. He was also of the view that it was unlikely the first two instalments would be less than the final instalment. No serious challenge was made to Mr Cellante's evidence and I have no reason to doubt its truthfulness. Further, because the contract of sale was dated 7 June 1987 and the settlement of the contract occurred in December 1988 or early 1989 (when the certificate of transfer was signed by the vendor and Richflow was put on the title as the registered proprietor) it seems more probable than not that the contract of sale fell within the third category described by Mr Cellante, namely: an interest-free contract under which the purchasers paid a deposit and the balance payable by instalments every six months for 18 months.
133 Whilst Mr Cellante gave evidence that if the contract of sale provided for a 10% deposit, there would have been three instalments of $42,000 rather than $40,000, I do not consider this to materially undermine Julie's evidence of three instalments of $40,000 or 'around the $40,000 mark'. Given her evidence concerns a transaction which occurred approximately 36 years prior, I do not regard the distinction between instalments of $40,000 or $42,000 to be especially significant. Nor do I accept the submission of Jelena's counsel that Julie's evidence is directly contradicted by Mr Cellante's evidence in this regard. Their evidence is broadly consistent.
134 By contrast, neither the June 1987 solicitor's correspondence nor the evidence of Mr Cellante support Jelena's evidence of the timing of and payment under the contract of sale. In fact, Jelena gave no evidence of any payment being made towards the purchase of the property in 1987, including in respect of a deposit or any instalments. Her initial evidence about a payment or payments being made in 1989 also made no mention of a deposit. Instead, her evidence was that the purchase price was paid in full by way of a mortgage of $80,000 on 2 February 1989 and the balance of $60,000 plus stamp duty and other expenses from profits of the Builders Arms Hotel on an unspecified date. However, in ascertaining the likely terms of the contract of sale, I am unpersuaded by Jelena's evidence. I consider her memory of events around this time to be unreliable. In particular, she ultimately conceded under cross-examination that the property was purchased in June 1987 and not February 1989 (as stated in her earlier evidence). Significantly, she also gave unsatisfactory and potentially untruthful evidence that she and Naim constructed a three-bedroom house on the property in 1989, from which she later appeared to resile.
135 Having regard to the available evidence, I find that the contract of sale was entered into on 7 June 1987 and that its terms entailed:
(a) a total purchase price of $140,000;
(b) payment of a 10% deposit of $14,000 at or shortly after the execution of the contract of sale on 7 June 1987;
(c) possession to be taken immediately;
(d) payment of three instalments to be made every six months in the sum of $42,000; and
(e) the named purchaser having the right to nominate an alternative purchaser prior to the date of settlement.
136 I turn then to consider the relative strength of Julie's and Fezije's evidence concerning the payments of the deposit and three instalments under the contract of sale. Because I have some reservations about the reliability of their evidence, I intend to carefully weigh it against the available contemporaneous documents and other oral and affidavit evidence, including that given by Jelena. As already explained, the onus of establishing the payments giving rise to a presumption of resulting trust lies on the parties asserting the existence of that trust - in this case Feim and Julie. I accept that Richflow, as the legal owner of the property, is not required to establish that it paid for the property. I also accept that Jelena, as a shareholder of the company, does not bear the onus in establishing proof of payment. Nevertheless, her evidence is relevant given her role as a contradictor to the claims brought by Feim and Julie and because she seeks a declaration that the company is the beneficial owner of the property and does not hold it on trust.
137 As I have already observed, Julie's evidence regarding the $14,000 deposit for the purchase of the property was inconsistent and confusing. She initially maintained Feim had sourced the deposit by way of a $20,000 loan from Sehiha. Only when confronted with her prior inconsistent evidence given at the Federal Court public examination that Feim and herself had jointly borrowed the money for the deposit from Sehiha did Julie suggest that was the case.
138 By contrast, Fezije's evidence regarding the deposit was that Feim told her he borrowed $20,000 from Sehiha and used it to pay the deposit. Her evidence was that Feim was responsible for the deposit and that it counted towards his contribution to the purchase of the property. In other words, there is a conflict between Fezije's evidence and Julie's evidence that she was jointly responsible for the payment of the deposit. I do not accept the submission made by Feim and Julie that this was consistent with the tenor of Julie's evidence that she did not distinguish between herself and her brother in terms of the purchase.
139 There is no documentation to establish the actual payment of the deposit by Feim, or by Julie and Feim, to Chelmaness, including the means by which it was remitted. Further, because no party relied on Sehiha's affidavit, there is no additional evidence as to the source of the $14,000 deposit. Although Jelena's counsel suggested I should draw an adverse inference that Sehiha's evidence would not have assisted Feim and Julie's case,[58] in my view, it is not necessary or appropriate to do so. Whilst Sehiha's evidence may have conceivably shed light on the matter, the Court was informed at trial by senior counsel for Feim and Julie that Sehiha had positively declined to attend to give evidence.[59] Jelena's counsel also confirmed he did not intend to call Sehiha. In any event, it is not apparent that Feim and Julie could reasonably be expected to have called Sehiha. She was named as a defendant in her own right. It is entirely possible that Sehiha's unwillingness to give evidence may relate to her decision to not make any claim in respect of the property or to otherwise participate in the proceeding.
140 Although Jelena gave no evidence about the payment of a deposit by anyone at the time, I find Julie and Fezije's evidence regarding the deposit to be contradictory and unsatisfactory. I am therefore unpersuaded there is sufficient credible evidence to establish the payment of the deposit by Feim or by Feim and Julie jointly.
141 Julie's evidence was that on or about 7 December 1987, she paid the first instalment of $40,000 from a loan obtained by her from Burns Philp which she repaid from the proceeds of sale of Fehon Street in about July 1998. Although her earlier evidence given in the Federal Court public examination was that the amount of the first instalment was around $50,000, I accept that at the time she gave that evidence she may have genuinely believed that to be the case. Moreover, it is entirely possible that her memory has since been refreshed by the Burns Philp loan documentation, which she said she located at the property and apparently produced for the first time in this proceeding, in addition to the conversations she has had with Fezije since the public examination process.
142 Whilst Julie also said in the Federal Court that she contributed to the purchase of the property by selling the 'Bunyarples Foods' business and made no mention of a loan from Burns Philp, her explanation for this apparent inconsistency was that she sold the Yarraville business and received Fehon Street in return, which she then used as security to obtain the loan from Burns Philp. She was adamant as to the correctness of this explanation and did not waver when challenged. She appeared to genuinely regard the sale of her business, the acquisition of Fehon Street, and the use of Fehon Street as security for a loan for the first instalment on the property to constitute a single transaction, or a series of related transactions. Further, her later explanation aligns in important respects with her earlier unchallenged affidavit evidence that she sold the Yarraville business to Mr and Ms Stojcevski on 15 December 1987, the settlement of which was to occur on 7 January 1988, and that she received title to Fehon Street in return. The Yarraville business contract of sale confirms she sold the Yarraville business (referred to in the document as 'Bunjakus Foods') to Mr and Ms Stojcevski on that date and with that settlement timeframe. It would appear the reference to Bunyarples Foods in the Federal Court public examination was likely a reference to Bunjakus Foods. A settlement statement accompanying the Burns Philp loan documentation also includes reference to the transfer of title of Fehon Street from 'Stojcevski' to Julie immediately prior to the settlement of Julie's subsequent sale of Fehon Street in 1988 and the repayment of the Burns Philp loan with the sale proceeds. In other words, the objective evidence lends support to Julie's evidence that she sold the Yarraville business in exchange for Fehon Street, which was in turn used to secure a loan from Burns Philp. Although I have misgivings about other aspects of Julie's evidence more generally, it would appear her evidence in the Federal Court public examination was simply an abridged and incomplete account of a more detailed transaction or series of transactions. I accept her explanation for the inconsistency.
143 As an aside, I note the parties included in the court book a handwritten file memorandum prepared by a solicitor within Nicholsons Lawyers and Consultants which appears to record a conference with Julie on 10 July 2010. On its face, the file memorandum suggests the conference concerned the purchase of the property (there described as 'Rock Bank'). As best as I can decipher it, the handwritten file memorandum relevantly includes the following:
December '87 - $50,000 JD borrowed -
Paid $40,000 to [indecipherable]
May '88 extended loan
July '88 Repaid loan by selling Fehon St.
144 Neither Julie nor Mr Forbes-Nicholson gave evidence about the file memorandum or its provenance in their affidavits. Nor were they asked about the document in their oral evidence in chief or under cross-examination. No party made any submissions about the document. It may be that it was a document discovered by Julie. Whilst I do not treat the representations in the file memorandum as evidence that proves Julie made the first instalment on the property by way of loan and later repaid the loan by selling Fehon Street, I simply observe that it ostensibly records instructions given by Julie to a solicitor more than a decade prior to the commencement of this proceeding. Further, those instructions appear to be consistent with the evidence Julie has given in the proceeding.
145 It is important then to consider Julie's evidence about the first instalment in light of the contemporaneous written record and other available evidence.
146 First, Julie's evidence as to the timing of the first instalment accords with the terms of the contract of sale which, as I have found, required three instalments, payable at six month intervals. Further, her evidence that each instalment, including the first instalment, was $40,000 or 'around the $40,000 mark' broadly corresponds to, and is not materially different from, an instalment amount of $42,000 under the terms of the contract of sale. Given the effluxion of time, the discrepancy in her evidence is understandable.
147 Secondly, although the Burns Philp loan documentation records a number of smaller payments made to third parties (the details of which Julie could not recall), it is clear from the loan schedule that these amounts are distinct from and in addition to the $40,000 loan proceeds. Further, Julie was clear in her evidence under cross-examination that the only loan she took out in 1987 was for the purchase of the property and that the loan was repaid by her following the sale of her property at Fehon Street. I accept her evidence in that regard. I also accept her evidence that the loan from Burns Philp was discharged in July 1988 following the settlement of the sale of Fehon Street, which is confirmed by a settlement statement included as part of the Burns Philp loan documentation.
148 Thirdly, although there is no reference in the Burns Philp loan documentation to the advance being for the purchase of the property, the documentation does not refer to any alternative purpose for the loan. The $40,000 loan proceeds are simply unattributed. Critically, the loan advance made by Burns Philp on 7 December 1987 corresponds with the due date for the first instalment under the contract of sale. Further, because Fehon Street is ostensibly recorded as the security for the loan, I do not consider it was necessary or important for the Burns Philp loan documentation to have separately recorded the loan proceeds as being applied towards the property in question. Whilst Jelena is correct in her submission that Julie has not adduced any documentary evidence proving actual payment of the first instalment on the property, the contents of the Burns Philp loan documentation and the circumstances concerning the amount and timing of the first instalment give rise to the reasonable inference that the funds for the first instalment were sourced by way of a loan from Burns Philp and secured against Fehon Street. In other words, the Burns Philp loan documentation supports Julie's evidence about the first instalment. It is the only documentation proximate in timing to the payment of the first instalment.
149 Lastly, Jelena advanced no competing specific evidence about the source, amount and timing of the payment of the first instalment. Notably, the company itself was not incorporated until 25 October 1988 - more than 10 months after the first instalment fell due. The $80,000 loan from RMBL to the company was not made until 2 February 1989. Although Jelena gave evidence that the purchase of the property was partly funded by the cash payment of $60,000 from profits of the Builders Arms Hotel, I do not accept that evidence for the following reasons:
(a) Jelena did not adduce any documentary evidence to support this claim. In particular, there was no documentation concerning the profitability of the Builders Arms Hotel at that time or any receipt showing payment of $60,000 in cash to the vendor;
(b) Julie gave uncontroverted evidence that the Builders Arms Hotel did not pay her, Feim and Nevrus for their work and that Naim told her the business had insufficient funds and too much debt to do so;
(c) I have already found Jelena's memory of events around this time to be highly unreliable. In the case of her evidence about the three-bedroom house allegedly built in 1989, Jelena showed she was either capable of embellishing facts to suit her case, or that she had a major defect in her memory. In the absence of supporting documentation, I do not give her evidence about the profits from the Builders Arms Hotel any real weight; and
(d) in any event, I consider it is highly unlikely the business would have held $60,000 in cash at that time. It also seems implausible that the sum was provided to Chelmaness in cash. I take judicial notice of the fact that, accounting for inflation, $60,000 in 1987 would be worth more than twice that amount in today's terms.[60]
150 Having regard to the above matters, I find the proper inference to be drawn on the balance of probabilities is that the $40,000 sourced by Julie from Burns Philps was paid by her on or about 7 December 1987 towards the acquisition of the property. As I stated, the evidence suggests the first instalment was actually $42,000; not $40,000. In the absence of any compelling evidence that Julie paid an additional $2,000 towards the full first instalment amount of $42,000, I will treat her contribution as being $40,000 only.
151 By contrast, I find there is insufficient evidence to establish Julie paid the second instalment on the purchase of the property. Whilst Julie insisted she obtained $40,000 for the second instalment from Custom Credit, there is no documentation before the Court in relation to that purported loan. Julie's own evidence in relation to the second instalment was also inconsistent with prior evidence she gave in the Federal Court public examination where she made no mention of sourcing funds from Custom Credit and instead said Feim had paid the second instalment. She conceded under cross-examination that her evidence given at the Federal Court was incorrect and that she had a poor memory at times, although her memory had been refreshed following discussions with Fezije. She was also unable to clearly explain how and by whom the alleged Custom Credit loan was repaid. I therefore consider Julie's evidence regarding her alleged payment of the second instalment to be unreliable and unpersuasive.
152 As regards the third and final instalment for the purchase of the property, the position is less clear-cut. As previously discussed, Julie and Fezije gave evidence that Feim paid the final instalment of $40,000 on or about 30 November 1988 from the proceeds of sale of Leslie Street. She deposed to there being $53,055.16 in available funds after payment of $26,456.19 to the original vendor of Leslie Street and payment of fees. There is documentation from Paul Markopoulos & Company dated November 1988 to substantiate the settlement of sale and an accompanying counter-signed and handwritten note suggests the surplus funds were given to Feim and Fezije at settlement. A title search for Leslie Street also confirms it had been owned by Feim and Fezije and there was no mortgage registered on the title between 1980 and early 1990 (which was after the sale). I am satisfied on the evidence that Feim had at least sufficient funds to make the final instalment payment for the property. I am also satisfied Fezije's evidence about the timing of the third instalment conforms with the terms of the contract of sale, which required three instalments payable at six monthly intervals, the last of which would have fallen due in early December 1988. Whilst the funds from Leslie Street were available at that time, I also accept the submission from Jelena's counsel that there is no direct evidence the sale proceeds from Leslie Street were actually used to make payment of the third instalment on the property.
153 At the same time, there is documentary evidence that on 2 February 1989, just over three months after Richflow's incorporation, RMBL loaned the company $80,000, secured by mortgage over the property. The mortgage in favour of RMBL was then recorded on the title to the property following Richflow's registration as proprietor on 9 March 1989. Jelena gave evidence that an $80,000 loan made on 2 February 1989 from RMBL to Richflow was applied towards the purchase price of the property. However, the April 1989 letter evidences Naim's loan obligation to Nevrus in the amount of $100,000 around this time. The letter records that $60,000 of that amount had already been paid to Nevrus, with a further $40,000 to be paid by 13 April 1989. Jelena accepted under cross-examination that Naim owed these amounts to his son. Although she initially denied the RMBL funds were used to pay Nevrus, she eventually stated she did not know how her husband had dealt with his son in relation to the loan. Whilst I cannot discount the possibility that some or all of the $80,000 from RMBL was paid to Nevrus by Naim, the features and surrounding circumstances of the loan also admit of the possibility those monies were partly used to make the third instalment payment on the property. The loan postdates the incorporation of Richflow and was made to Richflow as borrower and secured against the property. Whilst the loan from RMBL was made on 2 February 1989, two months later than the due date for the third instalment in early December 1988, it was made prior to the execution of the certificate of transfer of land on 17 February 1989 by Chelmaness to Richflow and the recording of the company as registered proprietor on title on 9 March 1989.
154 As already mentioned, I have reservations about the credibility of both Jelena and Fezije as witnesses. I have already discussed the difficulties with Jelena's evidence at some length. In the case of Fezije, when initially giving evidence in support of her adverse possession claim, she omitted to disclose the significant fact that Feim had been in prison for a number of years during which he was said to have resided at the property. She also gave contradictory evidence about payments made by her and Feim in respect of the property that were unsupported by the documentation upon which she relied.
155 When Feim's claim in respect of the third instalment is then assessed in light of the contemporaneous records, it is apparent the documentary evidence is finely balanced and there are competing inferences available as to the source and application of funds necessary to make the third instalment, namely: the proceeds of sale of Leslie Street or the RMBL loan. In my view, the circumstances give rise to conflicting inferences of an equal degree of probability or plausibility. To elect between them would involve impermissible conjecture.
156 In the result, I find that Feim, through his litigation guardian Fezije, has not met the onus of proof in demonstrating he paid $40,000 towards the third and final instalment payment for the acquisition of the property. Accordingly, no presumption of a resulting trust can arise in respect of any such alleged contribution.
Intention at time of payment and other matters
157 It follows there is sufficient evidence to support the conclusion that Julie made a contribution to the purchase price by paying $40,000 towards the first instalment and that the presumption of resulting trust therefore arises. As made clear in the authorities, the presumption of resulting trust can be displaced by evidence that the parties contributing to the purchase price had a common intention that the beneficial interests were to be the same as the legal interests.[61] The question of intention is assessed by reference to the parties' words and conduct and the prevailing context around the time of the payment, including the relationship that then existed between the parties.[62]
158 Julie has given clear evidence that in 1987 she sought to purchase a property with her late husband Naser and her brother Feim. She physically inspected the property with Feim. Following Naser's sudden death in May 1987, Julie resolved to purchase the property to honour his memory. She says that when Naim became upset due to not being consulted about the purchase, it was agreed he or his nominee would be named as purchaser but the property could otherwise be used by the wider family. She also deposed that Naim reminded her to make the first instalment payment on the property. None of this evidence was challenged to any significant degree under cross-examination. I have also found on the balance of probabilities that Julie made the first instalment payment on 7 December 1987. To make this instalment, she took out a loan from Burns Philp, secured against her property at Fehon Street, and committed to paying down that liability. All of this evidence supports the inference that at the time of the acquisition of the property on 7 June 1987, and when Julie made payment of the first instalment on 7 December 1987, Julie intended to take an interest in the property.
159 Conversely, neither the company nor Jelena adduced any compelling evidence concerning the common intention of the relevant parties at the time of the purchase and the payment of the first instalment. Richflow was, of course, not incorporated until 25 October 1988 - more than 16 months after the contract of sale was entered into and 10 months after the first instalment fell due.
160 However, I do not accept Jelena's submission that a resulting trust cannot arise because Richflow was not yet in existence at the time of the execution of the contract of sale and Julie's payment towards the first instalment. As the case law shows, where two or more parties make unequal financial contributions to the purchase price, but the property is conveyed into the name of only one of them, or in all their names, there is a presumption that the parties take a beneficial interest in the property as tenants in common, in shares proportionate to their respective contributions.[63] In other words, the resulting trust is presumed to exist at the time of the conveyance or vesting of the legal title to the property. Here, Richflow became the nominated purchaser for the property prior to the transfer of legal title to it on 17 February 1989 and its registration on title on 9 March 1989. Whether the resulting trust was in existence at the time of the entry into the contract of sale or the making of the first instalment is beside the point.
161 I also do not accept Jelena's submission that Naim's will dated 18 January 1989 is probative in ascertaining the intention of the relevant parties. It post-dates by more than a year the signing of the contract of sale and the payment towards the first instalment by Julie. In any event, Naim's statement in his will that Julie had not been involved in any business or other financial activity with the family is contradicted by Julie's uncontroverted evidence that she worked at the Builders Arms Hotel during 1987 and 1988 and that her father reminded her to make the first instalment payment on the property. Whilst Jelena submits it is unlikely Feim and Julie would have allowed Naim to be the listed purchaser of the property if they were providing the purchase monies, given I have found that only Julie made a partial contribution towards the purchase of the property, the fact that her father was likely listed as the purchaser is not decisive. It is also consistent with Julie's evidence that it was done to appease Naim, the family patriarch, after he became angry about her and Feim's intended purchase. For similar, reasons, I do not consider it determinative that the June 1987 solicitor's correspondence was only addressed to Naim or that Julie did not apparently attend any conference with the solicitor regarding the purchase. She inspected the property prior to its purchase and raised the capital necessary to make the first instalment.
162 As already noted, Julie was a director of Richflow for the period between 3 February 1995 and 31 May 1996. In her closing submissions, Jelena also made passing reference to the company's annual return dated 23 February 1995 in which Julie declared that the company was not a trustee. Jelena submits that this evidence is an admission against interest by Julie in relation to her resulting trust claim. I disagree with that analysis. The declaration was made well after Julie made her contribution to the purchase of the property and does not go to the intentions of the parties either at the time of execution of the contract of sale or when the first instalment was made. Given the question of intention is assessed around the time of the payment, I am not persuaded by the liquidator's submission that it is appropriate to look to other post-purchase statements or conduct said to be inconsistent with the company holding part of the property on trust for Julie, such as the declarations of confirmation and the beneficiary direction. These documents fall within much later time periods and the beneficiary direction was only issued a couple of months prior to the commencement of this proceeding.
163 The same can be said for the declaration of trust itself which is dated well after the acquisition of the property. If the acquisition of the property had been closer in time to the declaration of trust, and had there been a uniformity of interests between the named beneficiaries under the declaration of trust and those persons now claiming the existence of a resulting trust (Feim and Julie), the declaration of trust might have been relevant in the sense of confirming the force of the legal presumption of a resulting trust.[64] But that is not the position here.
164 Similarly, Julie's failure to provide documentary evidence of paying water and council rates on the property at any time does not seem relevant to the question of intention at the time of the purchase of the property and the payment of the first instalment. I will, however, consider the question of post-purchase conduct in the context of the declaration of trust claim.
165 It follows there is insufficient evidence to support the making of any inferences that at the time of the transaction(s):
(a) Julie did not intend to take any interest in the property; or
(b) there was a common intention (as between Julie, Naim, Jelena and/or Richflow) that Julie would not take an interest in the property.
166 In closing submissions, the liquidator suggested that if the Court finds Richflow holds only part of the property on resulting trust for Julie and/or Feim (which I have so found), it will be difficult to calculate the individual parts or percentages held on trust because:
(a) there is no evidence of the additional transaction costs (such as stamp duty and legal costs) associated with of the purchase of the property;
(b) there is no evidence as to who paid those expenses; and
(c) it is not possible to calculate the total purchase price.
167 I do not agree with that submission. The June 1987 solicitor's correspondence in fact specifically refers to stamp duty payable on the transaction in the amount of $4,900 and a registration fee of $324 payable to the Registrar of Titles. Consistent with my earlier review of the authorities, both of these sums comprise capital costs associated with the acquisition of the property and were payable as a condition of registration of the property. Accordingly, they can be included in calculating the total purchase price for the property. I accept, however, there is no direct evidence of who paid those amounts and neither Feim nor Julie claim to have done so.
168 By contrast, legal and bank fees are not directly incurred in acquiring a property because the payment of such fees is not a condition of obtaining the registration of the property in the name of the purchaser. I do not accept it is necessary to have evidence of such fees in calculating the purchase price.
169 Lastly, I do not accept Jelena's submission that any resulting trust fails because of the operation of s 53(1)(b) of the Property Law Act 1958 (Vic) ('Property Law Act') which states that 'a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will'. As is made clear by s 53(2) of the statute, the provision does not affect 'the creation or operation of resulting, implied or constructive trusts'.
170 I have found on the balance of probabilities that Julie paid $40,000 towards the first instalment on the acquisition of the property, which cost $140,000 plus $4,900 stamp duty on the purchase, plus a registration fee of $324 - making a total purchase price of $145,224. However, there is insufficient credible evidence to establish that Julie or Feim paid either the deposit, the second instalment, or the third instalment on the purchase. Despite an absence of clear documentary evidence, it may therefore be inferred that the balance of the purchase price was sourced by Naim and/or Richflow itself as the registered proprietor. Therefore, at the time of settlement of the acquisition, Julie took a 27.5% beneficial interest in the property ($40,000 of the total purchase price of $145,224) as tenant in common with Richflow as to 72.5%. Having found that Julie contributed to the purchase price of the property, there is a presumption that her proportionate interest in the property was held on resulting trust by the company in her favour at the time of the conveyance. Further, the evidence taken as a whole does not establish a contrary intention so as to displace that presumption.
Legal principles concerning declaration of trust claim
171 I now turn to consider the alternative (or parallel) claim that the property is held on express trust for Feim. This claim relies upon the declaration of trust, the form of gift and the declarations of confirmation.
172 The onus of establishing a trust lies on the person(s) alleging it.[65] To constitute an express trust, three certainties are required, namely:
(a) certainty of intention to create a trust;
(b) certainty of the subject matter of the trust; and
(c) certainty as to the object of the trust.[66]
173 Further, pursuant to s 53(1)(b) of the Property Law Act, a declaration of trust of land must be manifested and proved by writing.
174 As regards the first certainty, equity will only enforce a trust to the extent the intention to create it is clear.[67] Broadly, the Court must consider whether, in the relevant circumstances of the case, and on the true construction of what was said and written, a sufficient intention to create a trust has been manifested.[68] The language or conduct of the parties may demonstrate a sufficiently clear intention to create such a trust.[69] No formal or technical words are necessary and any expression of intention will suffice.[70] Further, the conclusion that the requisite intention existed may be inferred from the available evidence.[71] In particular, the Court may infer an intention having regard to the nature of the transaction and the whole of the circumstances surrounding the relationship between the parties.[72]
175 Consistent with the maxim that equity looks to the substance and not the form, the question of whether a person intended to create a trust is one of substance and will ultimately turn on the facts of the case. In Hyhonie Holdings Pty Ltd v Leroy ('Hyhonie Holdings'),[73] the issue in dispute was whether a parcel of shares in a company formed part of a bankrupt estate or whether the shares were in fact held on trust. The salient facts of the case were as follows. The plaintiff, Hyhonie Holdings Pty Ltd ('Hyhonie'), was incorporated on 1 August 1996 and Mr Robert Yazbek became the sole shareholder and director of Hyhonie. On 26 August 1996, the Robert Yazbek Family Trust ('Family Trust') was established and Hyhonie became its corporate trustee. Another company, Aldora Holdings Pty Ltd ('Aldora') was incorporated on 20 February 1997 and allotted 1000 shares to Mr Yazbek and five shares to his father, both of whom became the company's directors. By a written declaration of trust dated 14 March 1997, Mr Yazbek stated the monies he used to acquire the shares in Aldora were provided by the Family Trust. He then declared he held the benefit of the shares in Aldora for and on behalf of the Family Trust. Notably, the declaration of trust was not stamped until February 2001. Then, on 11 June 2002, Mr Yazbek was declared bankrupt. The defendant was appointed trustee of Mr Yazbek's bankrupt's estate.
176 In considering the matter, Young CJ in Eq cited with approval a number of important legal propositions, which I gratefully adopt:
(a) while a person can create a fully effective trust merely by declaring themselves as trustee, the express declaration must be intended to be final and binding on the settlor;[74]
(b) a fully constituted and declared trust may be enforced even though the plaintiff is a volunteer;[75]
(c) however, difficult questions of fact may arise where a person, despite the declaration of trust, continues to retain or exercise personal dominion over the alleged trust property;[76]
(d) equity will only enforce a trust to the extent the intention to create a trust is clear, and while words alone may be sufficient, where those words are at odds with a donor's actions, proof may be lacking;[77]
(e) it is possible to create a trust by declaration without any communication to any person;[78]
(f) however, the fact of little or no communication may be a relevant factor in assessing whether any trust exists at all.[79] The absence of communication raises a strong inference against an intention to make an irrevocable declaration of trust and silence may suggest that the donor intended to reserve the right to adhere to or abandon the declaration as it served his or her advantage.[80]
177 Mr Yazbek's trustee in bankruptcy argued that: the evidence demonstrated there was no intention to create any trust; any intention to create the trust was not carried through to execution; the transaction was effectively abandoned; and/or the transaction was a sham. A number of factors weighed against the existence of the trust, namely: all company returns for Aldora from 1997 listed Mr Yazbek as the beneficial owner of the shares; Aldora held 50% of the shares in a joint-venture vehicle with a business partner, however, the business partner gave evidence he had never heard of the alleged trust; the Family Trust did not have sufficient money at the relevant time to pay for the shares in Aldora; aside from the late discovered declaration of trust, there was no record of the alleged trust in the books of the Family Trust; there was no evidence to show that the declaration of trust had been communicated to its intended beneficiaries; and there was no evidence of the circumstances in which the declaration of trust was supposedly executed.
178 Following his review of the whole of the circumstances of the case, Young CJ in Eq held that the trust purportedly declared on 14 March 1997 never came into existence or was incompletely constituted.[81] Of particular significance was the fact the plaintiff did not lead any evidence concerning who drafted the declaration of trust or the surrounding circumstances at the time.[82] The failure by the plaintiff to cast light on the totality of material circumstances counted heavily against it in discharging its onus of proof.[83] Nor was there any evidence of any request by the plaintiff to acquire the shares purportedly held on trust.[84] Further, following the preparation of the declaration of trust, nothing further happened for a number of years to give any indication of the existence of a trust.[85] Aside from the declaration of trust itself, there was no other document to indicate the transaction was ever carried into effect; instead, the business records of all relevant entities prepared on the instructions of Mr Yazbek suggested the contrary.[86] A failed attempt to transfer the relevant shares to Mr Yazbek's daughter immediately prior to his bankruptcy also supported the conclusion there was no trust over the shares.[87] Significantly, in his statement of affairs, Mr Yazbek did not characterise the shares in Aldora as being held on trust and instead stated they were held by him personally and transferred to his daughter for nominal value.[88] His Honour concluded the most plausible explanation of the course of events to be that at no time prior to Mr Yazbek's bankruptcy was there any intention to treat the declaration trust as being effective.[89]
179 Separate and distinct from the question of whether there exists the necessary intention to create a trust, is the question of whether the trust is itself a 'sham'. A 'sham' refers to 'steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences.'[90] A document or transaction is a sham where it purports to be one thing, but is in fact something different.[91] In Sharrment Pty Ltd v official Trustee in Bankruptcy,[92] Lockhart J described a sham in these terms: [93]
A "sham" is therefore, for the purposes of Australian law, something that is intended to be mistaken for something else or that is not really what it purports to be. It is a spurious imitation, a counterfeit, a disguise or a false front. It is not genuine or true, but something made in imitation of something else or made to appear to be something which it is not. It is something which is false or deceptive.
...
[A] purported disposal of property, and by analogy a purported creation of a debt, may be a sham where donor and donee (or lender and debtor) do not intend to give effect to the transaction, it being agreed between them that there will be no change in the legal and beneficial ownership of the property.
180 The sham doctrine is a relatively rare example of the law ascribing legal meaning to a document by reference to a subjective intention. There is an important difference between the requirement for there to be certainty of intention to create a trust and the sham doctrine. The certainty of intention principle generally requires the identification of a clear objective intention to create a trust, whereas the sham doctrine calls for a positive finding that the parties subjectively did not intend to create a trust.[94]
...where it is legally warranted, sham analysis affords the court a ground for ignoring, instead of merely construing, the primary documentary material in determining the rights and obligations of the parties.
...
Although, therefore, courts will ordinarily give legal effect to documents according to their language, sham analysis is an exception to that conventional approach. That is why it requires exceptional circumstances to enliven a conclusion that documents and acts amount to a sham, with the legal results that such a conclusion justifies.
The key to a finding of a sham is the demonstration, by evidence or available inference, of a disparity between the transaction evidenced in the documentation (and related conduct of the parties) and the reality disclosed elsewhere in the evidence. Where, for example, the evidence shows a discordance between the parties' legal rights or obligations as described in the documents and the actual intentions which those parties are shown to have had as to their legal rights and obligations, a conclusion of sham will be warranted.
The test as to the parties' intentions is subjective. In essence, the parties must have intended to create rights and obligations different from those described in their documents. Such documents must have been intended to mislead third parties in respect of such rights and obligations.
When a court is considering a suggestion of sham that has a reasonably arguable evidential foundation, the court will not be confined to examining the propounded documentation alone. It may examine (and draw inferences from) other evidence, including the parties' explanations (if any) as to their dealings, and evidence describing their subsequent conduct.
To justify a conclusion that documents constitute a sham, the requisite intention to mislead must be a common intention of the parties. An exception may exist where the acts and documents reflect a transaction divisible into separate parts, such that a transaction is a sham as to part only of the transaction.
182 It has been said there is a 'strong and natural presumption against holding a provision or a document a sham.'[97] As Gleeson CJ, Gummow and Crennan JJ confirmed in Raftland, a necessary element of a sham is 'an objective of deliberate deception of third parties',[98] the presence of which 'indicates fraud' and which 'suggests the need for caution in adoption of the description "sham"'.[99] The requirement to find an intention to deceive means it is appropriate to apply the Briginshaw v Briginshaw[100] standard of proof.[101] Often there is little, if any, direct evidence of a sham and the court is asked to draw inferences from the circumstances surrounding the relevant events. To conclude there is a sham on the basis of inference is 'a strong finding and one which cannot be made if another inference is at least equally open.'[102] Further, the onus of establishing that a document is a sham rests with the party making that assertion.[103]
183 The sham doctrine extends to trusts in circumstances where steps are taken to bring about a legally effective trust, but it is intended that the true transaction be something different.[104] In Lewis v Condon,[105] the New South Wales Court of Appeal considered a situation in which a trustee in bankruptcy became the registered proprietor of property which had previously been registered in the name of the bankrupt. At first instance, the bankrupt's daughter sought a declaration that the property was held in trust for her and other beneficiaries pursuant to a deed of trust. The trust was a discretionary trust in respect of which a company, Appinville Pty Ltd ('Appinville'), had been appointed trustee and borrowed money to acquire real property. The director of Appinville and the settlor of the relevant trust gave evidence that the trust was a device to help the bankrupt and to give the appearance that the property was held in trust and was not an asset to which the bankrupt was beneficially entitled. Justice Leeming, with whom the other members of the Court of Appeal agreed, upheld the findings of the trial judge that: (a) the trust deed was not a sham and, (b) having regard to the need for caution in concluding the transaction was in fact fraudulent, it could not be determined that the parties to the trust deed did not intend for it to have apparent or any legal consequence.[106] Further, the Court of Appeal confirmed a sham transaction to be one where it was intended that the true transaction be different from that which would ordinarily be attributed to the transaction on the face of the document(s).[107]
184 Importantly, Leeming JA explained that a transaction will not be a sham merely because it was entered into with an improper motive.[108] His Honour relevantly stated:
The proposition that not every transaction entered into for a legally improper motive is a sham must also be correct in principle. There is a clear distinction between a settlement of property in favour of (say) a spouse intended to operate in its terms, but made with the intent of defrauding creditors, and a sham declaration of trust in favour of a spouse never intended to give rise to the ordinary incidents of a trust. Both are entered into for an improper purpose, but the legal meaning of the former accords with the language of the declaration (although it is apt to be set aside pursuant to statute), while the legal meaning of the latter is that there is no trust at all. The limited notion of what constitutes a sham does not swallow up the large class of other transactions entered into for a purpose regarded as improper by the law.
In short, every case of shamming intent involves a finding of intentional deception as to the effect of a document, but not every case of improper purpose is a sham.[109]
185 His Honour considered the evidence demonstrated the bankrupt wanted to establish a trust so that it would appear in family law litigation she did not have legal title to the relevant property; however, she subsequently wished to become the legal owner of the property in order to avoid land tax.[110] His Honour observed it was not apparent on the evidence whether, and to what extent, there was in fact a deception of the Family Court, the bankrupt's spouse, or of the revenue.[111] However, as a matter of law, an intent to deceive, even if deception actually occurred, would not result in the conclusion that the trust was a sham.[112]
Admissibility of declaration of trust, declarations of confirmation and beneficiary direction
186 Having set out the relevant principles concerning the declaration of trust claim brought by Feim and Julie, it is necessary to consider the admissibility of the declaration of trust itself and other documents relevant to the declaration of trust claim. Prior to the commencement of the trial, Jelena objected to the admissibility of the declaration of trust, the declarations of confirmation and the beneficiary direction on the basis there was no evidence of stamp duty having been paid on those instruments pursuant to which the beneficial ownership of real property was sought to be transferred. Feim and Julie provided detailed written submissions dated 21 May 2023 in response to those objections and the question of admissibility. However, because Jelena was not in a position to respond to those submissions at the opening of the trial, I provisionally admitted the documents into evidence, pending further submissions from the parties and on the basis that I would ultimately make a ruling as to their admissibility in these reasons for decision. At the conclusion of the trial, counsel for Jelena sought, and was granted, additional time to file supplementary written submissions in support of the objections taken and orders were made accordingly. In the event, Jelena elected not to file any supplementary submissions on the point.[113]
187 Section 272 of the Duties Act 2000 (Vic) ('Duties Act') relevantly states:
(1) An instrument that effects a dutiable transaction or is chargeable with duty under this Act is not available for use in law or equity for any purpose and may not be presented in evidence in a court or tribunal exercising civil jurisdiction unless -
(a) it is duly stamped; or
(b) it is stamped by the Commissioner or in a manner approved by the Commissioner.
(2) A court or tribunal may admit in evidence an instrument that effects a dutiable transaction, or is chargeable with duty in accordance with the provisions of this Act, and that does not comply with subsection (1) -
(a) if the instrument is after its admission transmitted to the Commissioner in accordance with arrangements approved by the court or tribunal; or
(b) if (where the person who produces the instrument is not the person liable to pay the duty) the name and address of the person so liable is forwarded, together with the instrument, to the Commissioner in accordance with arrangements approved by the court or tribunal.
188 Section 7(1)(b)(i) of the Duties Act relevantly provides that duty is chargeable on a 'declaration of trust' relating to 'dutiable property', the specification of which forms part of the declaration of trust or part of the transaction constituted by the declaration of trust. Section 7(4), in turn, defines a 'declaration of trust' to mean:
[a]ny declaration (other than by a will or testamentary instrument) that any identified property vested or to be vested in the person making the declaration is or is to be held in trust for the person or persons, or the purpose or purposes, mentioned in the declaration although the beneficial owner of the property, or the person entitled to appoint the property, may not have joined in or assented to the declaration...
189 Section 10(1) defines 'dutiable property' to include an estate in fee simple. Additionally, pursuant to s 7(1)(b)(iv) of the legislation, duty is also chargeable on any other transaction that results in a 'change in beneficial ownership of dutiable property', which is defined by s 7(4) to include a change in 'equitable interests in dutiable property'.
190 The Duties Act came into operation on 1 July 2001.[114] I accept the submission by Feim and Julie that the Duties Act does not purport to apply retrospectively. Subject to certain limited exceptions found in Sch 2 in the case of transitional arrangements (which exceptions do not apply here), the legislation expressly applies to instruments first executed on or after 1 July 2001.[115]
191 The predecessor legislation to the Duties Act was the Stamps Act 1958 (Vic) ('Stamps Act'). The Stamps Act operated in respect of dutiable instruments until its repeal on 1 July 2001[116] (which was also the commencement day of the Duties Act). Section 20 of the Stamps Act essentially prohibited the use, pleading or receipt into evidence of any unstamped dutiable instruments in civil proceedings. At the time of the 16 September 1993 Reprint (which applied as at 31 January 1995 - the date of the declaration of trust), s 17 of the Stamps Act imposed duties on specified instruments as set out in Sch 3 of the legislation, which relevantly included instruments of settlement, and deeds of any kind. Section 29 of the Stamps Act contained a regime to regularise an unstamped dutiable instrument and its receipt into evidence. The provision relevantly stated:
(1) Upon the production of an instrument chargeable with any duty as evidence in any court of civil judicature in any part of Victoria or before any person or body having by law or consent of parties authority to hear receive and examine evidence, any person may call the attention of the judge or person or body (as the case may be) to any omission or insufficiency of the stamp thereon.
(2) If the instrument is one (other than a bill of exchange or promissory note) which may legally be stamped after the execution thereof, it may on payment to the appropriate officer of the amount of the unpaid duty and the penalty payable by law on stamping the same as aforesaid and of a further sum of $2 be received in evidence, saving all just exceptions on other grounds.
192 It is apparent there is nothing in the transitional provisions of the Duties Act which purports to extend the operation of ss 20 or 29 of the Stamps Act.[117]
193 I turn then to the instruments in issue. As regards the declaration of trust, which was executed on 31 January 1995, I observe that the document is, on its face, stamped. The stamp is marked 'Victoria Stamp Duty' in the amount of $10, dated 31 January 1995 by hand and initialled. Mr Forbes-Nicholson gave unchallenged evidence (referred to further below) that he wrote the date on the stamp duty stamp affixed to the declaration of trust and initialled it. At trial, counsel for Jelena conceded the document was stamped for a nominal amount but submitted there was a question as to whether it had been properly and sufficiently stamped. He suggested that if the declaration merely reflected an existing trust, the $10 stamp duty paid may well have been sufficient. However, if there was an underlying change of beneficial ownership from the date of acquisition of the property to the execution of the declaration of trust, then the duty may be inadequate. It was said that much would depend on the Court's findings. This is somewhat unhelpful. On the one hand, Jelena is contesting the admissibility of the declaration of trust; on the other, she is suggesting that its admissibility depends on the Court's construction of the document at trial (which assumes it is received into evidence). Ultimately, the onus is on Jelena, as the party making the technical evidentiary objection, to demonstrate that the instrument is insufficiently stamped.[118] I do not consider that she has done so. I will admit it into evidence accordingly.
194 That said, even if the duty purportedly paid on the instrument was insufficient, there is no barrier to receiving the declaration of trust into evidence. Feim and Julie submit, and I accept, that:
(a) the process in s 272 of the Duties Act does not apply to the declaration of trust because it is a transaction which occurred prior to the commencement of the legislation;
(b) section 272 only covers instruments that attract duty and which are executed after the 1 July 2001 commencement;
(c) the evidentiary prohibitions in s 20 of the Stamps Act, which may otherwise have applied to the declaration of trust, have been repealed and do not have ongoing effect; and
(d) accordingly, there is no statutory prohibition on the receipt into evidence of the declaration of trust. The declaration of trust appears to fall into a statutory lacuna in relation to certain instruments executed during the operation of the Stamps Act, but sought to be adduced into evidence after the enactment of the Duties Act.
195 However, if I am wrong and s 272 of the Duties Act applies, I note that by letter dated 19 May 2023 (which is exhibited to the affidavit of Thanh Nguyen affirmed 19 May 2023) ('19 May correspondence'), the lawyers acting for Feim and Julie transmitted the stamped declaration of trust to the Commissioner of State Revenue ('Commissioner'). In the circumstances, I will make a direction that, to the extent necessary, the declaration of trust be admitted into evidence in accordance with s 272(2)(a) of the Duties Act on the basis it has been transmitted to the Commissioner. Plainly, the declaration of trust is a document highly relevant to the real issues in dispute in the proceeding. Following the delivery of these reasons, the Commissioner will be in a position to assess whether duty remains unpaid on the instrument and, if so, who is liable to pay that duty. A similar course was adopted in this Court by M Osborne J in Re The Thoroughbred Consultants Pty Ltd[119] and by Cohen J in the Family Court in Roda v Roda.[120]
196 The 19 May correspondence makes clear that the declarations of confirmation, which were purportedly executed between 14 and 16 July 2010, were not submitted to the Commissioner for assessment and stamping. It may be there is duty payable on the declarations, along with penalties for late payment. However, the declarations of confirmation are not invalid or void for lack of stamping and are capable of being stamped to make them retroactively efficacious,[121] even after judgment.[122] They are also documents highly relevant to the real issues in dispute. It is therefore appropriate to make a direction pursuant to s 272(2)(a) of the Duties Act that the declarations of confirmation be admitted into evidence. Following the publication of these reasons, the Commissioner can assess whether duty remains unpaid on the declarations of confirmation, and by whom. I approve that arrangement for the purpose of s 272(2)(a) accordingly.
197 Lastly, although no stamp duty was apparently paid on the beneficiary direction, it is unclear that any stamp duty is in fact payable. Certainly, Jelena has not clearly explained why duty is payable. In the circumstances, I will admit the beneficiary direction into evidence pursuant to s 272(2)(a) of the Duties Act, and further direct that following the publication of these reasons, Feim and Julie refer the beneficiary direction to the Commissioner for assessment of duty, if any.
198 Having determined the admissibility of the declaration of trust, the declarations of confirmation and the beneficiary direction, I will now set out the evidence given by the parties concerning the declaration of trust claim.
Content of declaration of trust and declarations of confirmation
199 As already noted, the declaration of trust bears the date 31 January 1995 and purports to be made by Richflow. The full text of the declaration of trust is set out in Annexure A to this judgment. In the first part of its recitals, the declaration sets out details of the purchase of the property by Richflow, including the date of registration of title to it on 9 March 1989. Another of the recitals to the declaration of trust provides as follows:
PROVISION OF PURCHASE MONEY:
AND WHEREAS the whole of the purchase money was provided by NAZIF DARDOVSKI, NEVRUS DARDOVSKI, FEIM DARDOVSKI, SEHIHA SALIEVSKI and JULIE DARDOVSKI and the land [being the property in question] was transferred to RICHFLOW PTY. LTD. merely as the trustees for the said NAZIF DARDOVSKI, NEVRUS DARDOVSKI, FEIM DARDOVSKI, SEHIHA SALIEVSKI and JULIE DARDOVSKI as joint tenants as the said RICHFLOW PTY. LTD. do hereby acknowledge.
DECLARATION:
NOW THIS DEED WITNESSETH that the said RICHFLOW PTY. LTD. hereby declares that it holds the said lands in trust for the said NAZIF DARDOVSKI, NEVRUS DARDOVSKI, FEIM DARDOVSKI, SEHIHA SALIEVSKI and JULIE DARDOVSKI in fee simple and hereby agree that it will at the request and cost of the said NAZIF DARDOVSKI, NEVRUS DARDOVSKI, FEIM DARDOVSKI, SEHIHA SALIEVSKI and JULIE DARDOVSKI make such applications and execute and do all such instruments acts and things as may be necessary for the purpose of procuring the said lands to be transferred to the said NAZIF DARDOVSKI, NEVRUS DARDOVSKI, FEIM DARDOVSKI, SEHIHA SALIEVSKI and JULIE DARDOVSKI as joint tenants or otherwise dealt with at such times and in such manner as the said NAZIF DARDOVSKI, NEVRUS DARDOVSKI, FEIM DARDOVSKI, SEHIHA SALIEVSKI and JULIE DARDOVSKI shall direct or appoint.
201 Under the declaration of trust, the company appears to be both the settlor of the trust and the trustee. The common seal of Richflow appears to be affixed to the declaration of trust and is purportedly done so in accordance with its Memorandum and Articles of Association (which are not in evidence). The instrument is apparently witnessed and signed by two persons who are identified as the company's director and secretary, respectively.
202 The declarations of confirmation, which are all in the same form, were ostensibly signed and executed by each of Nazif (Nick), Nevrus, Feim, Sehiha and Julie on various days between 14 and 16 July 2010 as deeds. The recitals reference the declaration of trust and the form of gift documents. The declarations of each document relevantly state:
203 As previously set out, Julie gave evidence that prior to the settlement of the sale of the property in December 1988, it was discovered Naim had taken out a mortgage over the property and that she and Feim were upset with their father. Naim apparently considered he had the right to use the property as he saw fit as the family decision-maker. However, Naim informed them that as a result of obtaining legal advice, he put the property into a trust structure with Richflow as the trustee to keep the property safe from any risks that may arise from the Builders Arms Hotel.[123] Julie says she understood her father was referring to a family trust structure, with which she is familiar. According to Julie, the Rifle Club was purchased in 1990 and the sale settled on about 6 September 1990, with a loan provided by Hathson Investment. However, the Rifle Club Hotel business was not successful and money became a significant problem. Naim sold the Builders Arms Hotel freehold in 1993 to try to reduce debt and because he was not well enough to operate two hotels. Julie was asked by Naim, Jelena and Nazif (Nick) to assist with the operation of the Rifle Club Hotel in 1994 with a view to it eventually being sold. Earlier that same year, Naim had his leg amputated due to his ongoing medical problems and was not coping well. Julie says in about February 1994 she became aware that her father and Jelena were in financial difficulties. She and her brothers, Feim and Nazif (Nick), then took over the operation of the Rifle Club Hotel and her father and Jelena gave Julie authority to arrange for its sale. Naim and Jelena then moved back to William Street in March 1994. The sale of the Rifle Club Hotel ultimately occurred on 11 October 1994, with the settlement taking place on 20 January 1995. The solicitor Mr Forbes-Nicholson assisted with the sale.
204 Julie says that around this time, Naim, Jelena and Nazif (Nick) were assessed for personal tax obligations arising from the operation of the Rifle Club Hotel. Despite the sale of the Rifle Club Hotel, they were not expected to be in a position to pay their debts and were facing possible bankruptcy. Julie was aware of those matters because she assisted her father in relation to the operation of the Rifle Club Hotel. She says Naim and Jelena were both aware the only asset of the company was the property and they sought to protect it in light of the contributions made by her and Feim to its purchase. She also says her father acknowledged he needed to ensure that funds from which he had originally benefited, upon the death of the children's mother, were passed on to his children. He also wished to ensure that the property was safe from his impending bankruptcy particularly as Julie and Feim had paid for it. Julie deposes that her father and Jelena consulted Mr Forbes-Nicholson to address these issues. She has a recollection of being present at a conference with Mr Forbes-Nicholson and assisting in translating information for her father into Albanian. She was able to provide some documentation and other information about the property. At Naim's request, Mr Forbes-Nicholson then prepared the declaration of trust which recognised all five siblings as owners of the property. She says the declaration of trust was executed by Naim and Jelena as directors of Richflow on 31 January 1995. Julie was not particularly happy about the form of the declaration of trust because she considered it should have recognised only herself and Feim as the beneficiaries.
205 Julie states that on 3 February 1995, she became a director of Richflow so that she 'could oversee the remaining issues concerning the company without bothering [her] father unnecessarily'.
206 Following the sale of the Rifle Club Hotel, Julie assisted Naim and Jelena in applying for and obtaining a pension. As part of that process, the question of ownership of the property arose. Julie understands that a letter was sent by Mr Forbes-Nicholson's firm on 1 June 1995 to the Department of Social Security on behalf of Naim and Jelena ('June 1995 Social Security letter'). The letter relevantly states:
We enclose a copy of the information you requested in your earlier letter as follows.
1. Copy of [declaration of trust].
Our instructions indicate that the property was purchased using funds obtained initially by the sale of the family home which was owned by all the children following the death of their mother. Those funds were permitted to be used by Naim Dardovski for the purpose of providing security to him for business ventures. Now that those ventures are at an end the children have called for and Naim Dardovski has acknowledged that through Richflow Pty. Ltd. he holds this property for the children.
207 Julie deposes that she and her siblings were aware of the declaration of trust and felt that the persons who ought to have been recognised as the owners of the property were herself and Feim because they had contributed the most towards its acquisition and improvement and the family's various enterprises.
208 With her father's agreement, Julie approached Mr Forbes-Nicholson to 're-arrange the interests' created by the declaration of trust. By letter dated 24 October 1995 and addressed to Naim and Jelena, Mr Forbes-Nicholson provided the form of gift documents by which each of the siblings could direct their interest in the property to another family member ('October 1995 solicitor's correspondence'). According to Julie, the form of gift documents were signed by her and each of her brothers and her sister. The apparent intention was to pass complete ownership of the property to Feim. The document makes reference to the declaration of trust in its recital. In its operative part, the 'Grantor' conveys to the 'Donee' all of the estate and interest that the Grantor had in the property in consideration of their natural love and affection. After the forms were apparently signed they were kept by Julie or held by Feim. However, the versions produced by Julie are not properly executed.
209 Naim, Jelena and Nazif (Nick) were all bankrupted in 1996. Naim and Jelena sold William Street shortly before this occurred and most of the proceeds of sale were applied towards loans owing to RMBL and Hathson Investment which had arisen in relation to the Rifle Club Hotel.
210 As already noted, Julie said that in 1996, she, Feim and her other siblings pooled their resources to purchase a dwelling which was relocated to the property for the use of Naim and Jelena. In addition, she confirmed that with Feim's agreement, a former resident of the Rifle Club Hotel, Mr John Willis, was offered the opportunity to live at the property by Julie on the understanding he would assist with work required on the property. Initially, Mr Willis lived in the house with Feim and Fezije. Later, Feim and Mr Willis constructed a small bungalow for Mr Willis to use and he has resided on the property ever since. After her father died on 15 July 1997, Jelena continued to live at the property, until about 2004 when she left suddenly and without warning. Julie later discovered that Jelena had departed Australia to live with her sister overseas. When her sister died, Jelena returned to Australia and moved into public housing accommodation.
211 Julie recalls that in early 2010, Feim made her aware that Western Water was interested in acquiring part of the property. Around the same time, she and Feim became aware of potential zoning changes impacting the development potential of the property. They were also approached by a developer potentially interested in acquiring the property. As a consequence, Julie approached Mr Forbes-Nicholson to discuss the process of sale of the property. Julie believes she provided Mr Forbes-Nicholson with the signed forms of gift but was advised they were inadequate as they were incomplete. Julie and Feim confirmed the siblings considered that Feim should be the owner of the property. Mr Forbes-Nicholson then prepared the declarations of confirmation which were provided in early July 2010. Julie says she arranged for Sehiha and Nazif (Nick) to sign the document. She also recalls taking the declaration to Nevrus to sign at his home in the presence of Nevrus' wife who also witnessed it. She then gave all the signed declarations of confirmation to Mr Forbes-Nicholson in mid-July 2010. While she and Feim asked Mr Forbes-Nicholson to prepare sale documentation for the property, the sale process was ultimately not pursued because of the costs associated with changing the ownership of the property, as Richflow had been deregistered by that time and the title could not be located.
212 In 2017, Julie became aware that Jelena had taken steps to reinstate Richflow, presumably as a result of the actions taken by Western Water to acquire a portion of the property. On 5 October 2017, Nick's son Skender became a director of the company. Julie said she spoke at length with Skender about his role in the company and he informed her that he 'saw an opportunity to claim ownership of [the property] and benefit from any acquisition money along with obtaining control of the property'. Skender apparently informed her that he had made arrangements with Jelena, with whom he was then living, to engage someone to put together a claim. He also entered into some form of agreement with the SRO in relation to land tax owed by the company. Skender also informed Julie that his friend Southern Brooks claimed he could fund the company and, in return, receive some benefit from the claim of ownership of the property. However, in the end, Southern Brooks did not have the money to contribute. Southern Brooks became a director of the company on 17 April 2019 but ceased being a director on 24 January 2020, not long after which the company was wound up.
213 Julie says that Skender has had ongoing difficulties with drug abuse and problems with police which caused his relationship with his father Nick to break down and led to him living with Jelena. However, she understands that more recently Skender reformed himself and reconciled with his father, with the result that his father broke his connection with Julie's and Feim's families.
214 Julie says that from the time Feim established a home at the property until the end of 1994, she lived there for short periods and subsequently visited the property on numerous occasions to see her brother and his family. Although she did not have any dealings with Jelena from 2004, in or around 2016 she discovered that Jelena was suffering from a heart condition and visited her. Jelena did not speak about the property or state that she believed she had any interest in it.
215 Julie was cross-examined about the declaration of trust. She accepted that by stating the whole of the purchase money had been provided by each of the five siblings, the declaration's recital was not true. She said only she and Feim had contributed money towards the purchase price of the property and that the other siblings did not contribute. She accepted the declaration of trust contained false information in this regard and that it was prepared for the purpose of protecting the property in the event that her father and Jelena became bankrupt.[124] She stated that she had asked for the property to be transferred to herself and Feim 'quite a few years ago', although she could not recall whether she had included that evidence in her affidavits. When asked about her role in assisting Naim and Jelena in applying for a pension, she explained she would have taken both of them to Centrelink. Julie said she assumed the declaration of trust was used by her father and Jelena as part of the process of obtaining a pension. However she disagreed that the declaration of trust was in fact prepared for the purpose of allowing them to obtain the pension. When pressed, she accepted that the June 1995 Social Security letter was incorrect insofar as it stated the property was purchased using funds obtained initially by the sale of the family home, which was owned by all of the children following the death of their mother. Julie maintained the property was purchased by Feim and herself.
216 Julie confirmed the form of gift document was prepared by Mr Forbes-Nicholson at the request of Naim and Jelena, although she approached Mr Forbes-Nicholson with her father's permission. The intention behind the document was that four of the siblings would transfer their interest to Feim. This was despite the wording of the form of gift which permitted each of Nazif, Nevrus, Feim, Julie and Sehiha to gift their interest in the property to each other.
217 She was then taken to the declarations of confirmation made in 2010 by which she had confirmed she had made a gift of her interest in the property to Feim. She stated she had signed the document. Counsel for Jelena then directed Julie to the caveat she lodged against the property on 5 July 2016 on the grounds of an implied, resulting or constructive trust:[125]
How could you claim an interest in the property, when you acknowledge that you've gifted all of it to your brother Feim?---I had bought it with Feim, and I have paid for it with Feim. I put a caveat because I wasn't talking to them at the time. I put the caveat there to protect my interests.
What I'm asking you is that given that you'd signed a declaration of confirmation in 2010, if that was a valid document, you would have no interest in the property in 2016?---I will always have an interest in that property 'cause I bought it and paid for it.
Yes?---It doesn't matter who I give it to.
Are you saying that the document called declaration of confirmation that you signed on 15 July 2010 should be given no legal effect?---No, I'm not saying that.
But what effect do you say that document should have then?---I gave it to Feim.
218 Jelena's counsel also directed Julie to evidence she had given in the public examination where she maintained she had an interest in the property notwithstanding the declarations of confirmation by which she had purportedly gifted her interest to Feim. She further stated in the earlier public examination:[126]
...The documents were done for a different purpose. Whether it's my name or Feim's name, it doesn't matter. It still belongs to me.
What purpose was this document prepared for? - Privilege. The documents were prepared for - we were trying to move it from Richflow into our own names.
Right. And did you make any application for that to happen? - Privilege. We commenced some sort of work with our legal team, but we were unable to continue it due - due to the cost.
219 When asked by Jelena's counsel at the trial to confirm the purpose of the declarations of confirmation, Julie said it was '[t]o give it to Feim'.[127] Despite her understanding of the purpose of the declarations of confirmation, Julie maintained she still had an interest in the property and regarded herself as an owner of the property.[128]
220 Julie rejected Jelena's affidavit evidence that until Naim's death in July 1997, Naim and Jelena paid all utility bills, rates, charges and maintenance expenses for the property. Instead, she maintained that whilst her father and Jelena lived on the property from 1996 onwards, Feim paid for all utilities, rates and other expenses.
221 As previously noted, for a period between 3 February 1985 and 31 May 1996, Julie was a director of the company. The liquidator's counsel called Julie's attention to Richflow's 1994 annual return signed by her as director on 23 February 1995 and declared to be complete and correct at the date of signing. Question 13 of that declaration asked whether the company acted as a trustee. A cross was placed next to the word 'no'. Julie said that she would not have filled out the declaration herself but accepted she had signed it. She maintained that despite the statement in the annual return that the company did not act as a trustee, it in fact always held the property in trust.
222 Fezije gave the following evidence relevant to the declaration of trust claim. In about 1994, she understood from discussions with Feim and Julie that the Rifle Club Hotel was in financial difficulties and would need to be sold to meet borrowings and that Naim and Jelena would need to sell William Street to meet debts. She deposed to knowing Naim and Jelena were facing bankruptcy. She recalls a conversation in her lounge room at the property around that time in which Naim, Feim, Jelena and herself were all present. Naim told Feim that he (presumably Feim) and Nazif needed to take over the Rifle Club Hotel, because Naim was in financial trouble and 'was going to lose everything'. Feim apparently got very angry and Jelena said nothing. Fezije was anxious about the implications for the property but, in a later conversation at her house at the property, she was assured by Feim and Naim that the property was in a trust and would not be affected by any bankruptcy.
223 After Naim and Jelena sold their house in William Street around 1994, Naim remained in poor health and had limited mobility because his leg had been amputated. It was then determined that he and Jelena would move to the property. The family pooled their funds to obtain a second timber house for use by Naim and Jelena. After Naim passed away in July 1997, Jelena continued to live in the house until about 2004 when she left to live overseas with her sister. When she returned to Australia, she did not resume living at the property. The house that had been relocated to the property for the use of Naim and Jelena was later made available to Feim and Fezije's daughter Brooke and her family. A third house was brought onto the property by Fezije's eldest daughter and her husband in about 2006, however, after her daughter's marriage ended, her husband continued to reside there alone. Fezije's stepson Selim ultimately purchased the third house in 2015 and took up its occupation, although the house is currently vacant. In addition, Feim built a two-bedroom bungalow for John Willis, who has lived on the property since about 1994 at the invitation of Feim and Julie, and in exchange for assistance with the property.
224 Fezije says that she and Feim paid the rates and other holding costs associated with the property. By the time Naim and Jelena moved onto the property in 1996, they had no money and soon went bankrupt. Despite difficulty in doing so, Fezije and Feim continued to make payments towards outgoings. Fezije placed reliance upon a number of bank statements purporting to show payment towards water bills and council rates from 2006 to 2018. She says that in around 2018 they were prevented from making regular payments towards rates because the council had determined the rates should be paid by Richflow instead.
225 Fezije says that in 2010, Feim and Julie explored the possibility of selling the property to a developer as a result of zoning changes but difficulties were encountered because the property was held in trust by Richflow which was deregistered and the title to the property was missing. After Feim suffered his massive heart attack in 2011 and was rendered incapacitated, Feim and Fezije used their pension payments to meet the costs of holding the property. When Western Water later compulsorily acquired part of the property in mid-2015, the question of ownership was discussed with ASIC which was apparently prepared to recognise that Feim and Fezije had been in adverse possession of the property for around 27 years. However, before Feim and Fezije could formally make an adverse possession claim, they became aware Jelena had taken steps to reinstate Richflow to claim the property and remove them from it. She therefore instructed her solicitor to lodge caveats on behalf of herself and Feim for adverse possession in February 2018 and March 2019.
226 By way of cross-examination, Jelena's counsel asked Fezije whether she was aware of the declaration of trust and responded that she had heard of it. When she was given an opportunity to review the document, Fezije commented that it had been a while since she had seen it. She elaborated that her husband showed her the document at their house on the property, but she could not recall precisely when. She accepted that insofar as the recital to the declaration of trust stated the purchase money for the property was provided by all the siblings, it was untrue. Fezije confirmed she had sighted the declarations of confirmation in or around 2010 or 2011 when her husband provided them to her to hold. She agreed the property was never transferred into the name of her husband but said she and Feim could not afford to take steps to enforce the declaration of trust and declarations of confirmation at the time.
227 Fezije accepted the caveat lodged over the property by Feim was for adverse possession and not in respect of any trust, although she had thought the caveat 'include[d] everything'. Reference was also made to Fezije's evidence given in the Federal Court public examination in September 2020 where she said that although the relevant caveat claimed an interest in the property on the ground of adverse possession, the property was subject to a trust because her husband contributed to its purchase.
228 Although Fezije contended Feim and Julie are the owners of the property, under further cross-examination by Jelena's counsel she accepted they did not pay any land tax in respect of the property. She did not realise land tax was payable given the property was her and Feim's place of residence. She explained she previously attended to the payment of City of Melton council rates until Richflow changed the payment details with the council around 2018. However, when counsel for the liquidator took her to a City of Melton rates notice dated 8 June 2017, Fezije accepted that any change must have occurred earlier. Fezije also contended the water authority, Western Water, was taking money out of her account in respect of the property. Counsel for the liquidator also asked Fezije questions about a schedule prepared on her behalf and exhibited to her third affidavit which recorded payments ostensibly made by her and Feim from their bank account in respect of council rates and water bills for the property. She accepted the schedule did not record any entries from 1989 to 2006. Further, under cross-examination from the liquidator's counsel, she conceded the table referred to certain payments where no bills or tax invoices had been produced corresponding to those payments.[129]
229 I cannot discount the real possibility that Fezije's evidence about the extent of payments by her and Feim in respect of the property has been overstated or inflated.
230 In his affidavit evidence, Mr Forbes-Nicholson deposes that he came to know Naim, Jelena, Nazif, Nevrus and Julie whilst he was in the employ of Prus & Markopoulos & Company, from mid-1982 to mid-1985. His involvement with the Dardovski family then recommenced in around 1987 or 1988 when, as a sole practitioner, he was asked by Paul Markopoulos & Company to assist with a charge of culpable driving brought against Nevrus. In 1990, he acted for Naim regarding a 'hotel related issue', and then acted for Julie following the death of Naser.
231 Mr Forbes-Nicholson says that in 1994, he was instructed to act for Richflow concerning the sale of the Rifle Club Hotel and, 'leading up to' 1995, he received instructions to act for Nazif and Jelena regarding tax-related issues. In 1995, he also defended a proceeding brought against Richflow by Tooheys Brewing Pty Ltd.
232 Mr Forbes-Nicholson gave evidence that in the course of acting for Richflow, Naim and Jelena, he prepared the declaration of trust. Mr Forbes-Nicholson says he has very little recollection of the circumstances leading to the preparation and execution of the instrument. However, he is able to say that:
(a) the declaration of trust would have been executed on 31 January 1995 as it bears that date of execution which is printed as part of the document. This would only have been done if the signatories of the instrument were present to sign it at his office on that date. It was his usual practice as a solicitor to have the signatories to documents with pre-entered execution dates present in his office on the relevant date to sign such documents;
(b) he wrote the 31 January 1995 date on the stamp duty stamp which is affixed to the declaration and initialled the stamp;
(c) he has been in possession of the declaration of trust since it was executed and continues to hold it;
(d) the declaration of trust would have been prepared on the instructions of the directors of Richflow, being Naim and Jelena;
(e) similarly, the content of the declaration of trust would have been derived from instructions received from Naim and Jelena either at, or shortly prior to, the date of its execution. He says the declaration of trust would have been prepared on the instructions of the company's directors because it was his usual practice as a solicitor to obtain instructions from all the directors (or at least a majority of directors) when asked to prepare a document that would bind a company;
(f) any file material relating to the circumstances leading to the creation of the declaration of trust has been destroyed and only the instrument remains; and
(g) at the time, he did not have any particular knowledge of the circumstances in which the property described in the document came to be purchased, other than the instructions he was given leading up to the drafting of the declaration. He did not act for Feim, Julie, Naim, Jelena or the company at the time the property was purchased.
233 Mr Forbes-Nicholson confirms he prepared and signed the June 1995 Social Security letter in accordance with instructions provided by Naim and/or Jelena. He also confirms sending the October 1995 solicitor's correspondence, enclosing the form of gift. The letter was drafted and signed by him based on instructions provided by Naim and/or Jelena. With respect to both pieces of correspondence, he says that as a solicitor, he would not prepare any document on behalf of a client without instructions from the client.
234 Following service of a subpoena on the Official Trustee in Bankruptcy, in October 2022 Mr Forbes-Nicholson obtained copies of statements of affairs lodged by Naim and Jelena with the Insolvency and Trustee Service of Australia dated 20 December 1996. Whilst he can identify that he wrote the information contained in each of those documents, he has no specific recollection of assisting Naim or Jelena in relation to their preparation. However, the information contained in the statements of affairs would have been based on information provided to him by each of Naim or Jelena at the time the forms were completed. Again, he confirms that he would not prepare a document on behalf of a client without receiving instructions from the client.
235 He deposes that Feim instructed him on or about 30 June 2010 to assist with the potential sale of the property. He recalls being provided with the form of gift documents and accompanying letter at that time. Mr Forbes-Nicholson says he had concerns about the execution of the form of gift documents and indicated to Feim that the forms of gift needed to be confirmed by the beneficiaries of the declaration of trust. To that end, he provided Feim with unsigned declarations of confirmation. He says that the declaration of confirmation signed by Julie on 15 July 2010 was witnessed by him. The other deeds of confirmation were brought to his office in their executed form and stored in his firm's deeds register. Mr Forbes-Nicholson recalls that Feim ultimately elected not to proceed with having the property transferred into his name due to the potential expense involved and because Richflow was deregistered at the time.
236 At trial, Mr Forbes-Nicholson gave supplementary oral evidence about an aspect of Jelena's bankruptcy statement of affairs dated 20 December 1996 ('statement of affairs'). One of the questions in the statement of affairs (question 40) is whether Jelena, her spouse or any member of her family had an interest in a trust, or had transferred any assets to a trust. The answer is ticked 'Yes' and the property is identified as being an asset held by the trust. The name of the trust is stated to be 'None' and the name of the trustee is identified as 'College House Logical Solution Pty Ltd' ('College House'), with the address of Level 4, 552 Lonsdale Street, Melbourne. Mr Forbes-Nicholson confirmed that College House was a company set up by himself and two of his law firm partners, to hold property at the relevant Lonsdale Street address. When asked why the name College House appears in the statement of affairs, Mr Forbes-Nicholson said he believed he would have advised Naim and Jelena it was appropriate to change the trustee of the property from Richflow to another trustee and that he and his partners were prepared to allow College House to be temporarily used for that purpose.
Mr Forbes-Nicholson's evidence under cross-examination
237 Jelena's counsel tested Mr Forbes-Nicholson's evidence about the reference to College House in the statement of affairs. Whilst he did not have a clear memory about the reference to College House, he said his recollection about that matter was that 'something had been agreed upon to that effect'. Mr Forbes-Nicholson was then asked about the circumstances surrounding the preparation and execution of the declaration of trust. Mr Forbes-Nicholson stated he did not retain any file notes concerning the preparation of the declaration of trust and that any such material was likely to have been destroyed in the early 2000s. He was unable to confirm whether he received any documentation, such as receipts for payments of contributions towards the property's purchase price, before preparing the document, including its recitals. Although he could not specifically recall Julie attending a meeting with him in late 1994 and providing such documentation, he said it was certainly possible. He said that whether he prepared the declaration in accordance with supporting documents would depend on the nature and contents of the documents and the specific instructions he was given.[130] He was pressed on this aspect of his evidence: [131]
If you'd been provided instructions by Julie that only she and Feim had provided the purchase monies and if she provided receipts to that effect, would you still have prepared a deed saying that all five of them had provided the purchase money?---I think the question - the way you put it doesn't accord necessarily with what would follow because if a client produces a document and says, 'I provided all this money but I wish you to do a deed that reflects that it's been provided by the entire family' for some reason, then that may be the appropriate thing to write. It depends on what I was instructed to do.
238 Whilst Mr Forbes-Nicholson could not independently recall what precise instructions he received at the time of the preparation of the declaration of trust, he emphasised that any instructions would have come from the directors of Richflow - Naim and Jelena.[132] At the time he prepared the declaration of trust, Mr Forbes-Nicholson said he was aware both Naim and Jelena were having financial difficulties. He was then asked whether the purpose of preparing the declaration was to ensure that the property was protected from creditors, and he replied that its purpose was to 'recognise the existence of a trust so that the asset wasn't taken in the course of ...either potential bankruptcy or actual bankruptcy.' He was asked to clarify whether the trust reflected in the declaration of trust was created in 1995 or was a recording of a trust that had been in existence since the property was acquired. He responded that the declaration of trust 'was a recording of a set of facts...given to [him] by the directors of Richflow as to the...true ownership of the property in 1995'.[133] When asked to clarify whether the property was not held on trust prior to 1995, he stated that he had no way of knowing one way or another.
239 It was then put to Mr Forbes-Nicholson that he used the declaration of trust for the purpose of enabling Naim and Jelena to obtain the age pension. He emphatically stated this was incorrect and that it was 'some subsequent time' after the document had been prepared that he was asked to provide it to the Department of Social Security. He was then asked about the veracity of the statement in the June 1995 Social Security letter, that 'the property was purchased using funds obtained initially by the sale of the family home, which was owned by all of the children following the death of their mother' and he confirmed it reflected his instructions. He asserted the information contained in the June 1995 Social Security letter would have been based on instructions received from Naim and/or Jelena; however, he did not have any independent recollection of those instructions.
240 When asked about the form of gift document and the accompanying the October 1995 solicitor's correspondence, he confirmed he had been instructed to prepare a form of gift under which each of the five children may give to each other the interest they held in the property. However, he did not know whether he was given any instructions that the property was to be gifted to any particular child of Naim. He accepted that the form of gift and accompanying letter did not suggest that any particular child would be the donee of the other siblings' interests in the property.
241 Mr Forbes-Nicholson was asked about the caveat lodged by his firm on behalf of Feim on 26 February 2018 on the grounds of adverse possession by exclusive occupation. He said that whilst he was aware of the existence of the declaration of the trust when preparing the caveat, it was not referred to because the claim for adverse possession had been 'heavily in contemplation for a number of years' and 'the cost was likely to be far lower than the potential need to prove a claim in trust.'
242 The nature and substance of Jelena's evidence concerning the declaration of trust evolved significantly over the course of the proceeding.
243 In her first affidavit, Jelena gives evidence about a number of matters proximate in time to the apparent execution of the declaration of trust. She says she lived at the property for much of the time from about 1994 onwards. However, she has not lived at the property since about 2000 and has not been to the property since 2007 when her relationship with Feim and Fezije broke down. Jelena deposes that after she and Naim became bankrupt in October 1996, RMBL sold William Street as mortgagee and her trustee in bankruptcy sold the Builders Arms and the Rifle Club Hotels, the proceeds of which were sufficient to pay creditors. She says her trustee made no claim over the property or her shares in Richflow. Jelena says that in October 1996, she and Naim purchased a transportable house for approximately $10,000, which was moved onto the property and used as their place of residence. This occurred following the sale of William Street and because Feim and Fezije were occupying the three-bedroom house on the property at that time.
244 Jelena says that until Naim's death in July 1997, she and Naim paid the utility bills, maintenance, rates and charges on the property. Following his death, Jelena says she alone paid them. However, Jelena has not been able to locate any documents confirming her financial contribution to the acquisition and maintenance of the property and the payment of mortgage instalments, utility bills, rates and other charges.
245 In her first affidavit, Jelena deposes that she first became aware of the declaration of trust in the course of the public examination on 15 September 2020. Despite the wording of the declaration of trust, she maintains that none of Naim's children contributed any money towards the purchase of the property or made any financial contribution to its upkeep, including payment of rates and charges. She also gives the following definitive evidence about the execution of the declaration of trust: [134]
The Purported Declaration is said to have been signed by a director of the Company. I was a director as at 31 January 1995, as were Naim and Julie. The signature of the person described as a witness to the affixing of the seal of the Company is not mine. I do not believe the signature [is] that of Naim. He would have told me if he had signed such a document.
246 I note, as an aside, that an historical company extract for Richflow reveals that Julie was in fact appointed a director of the company from 3 February 1995 (i.e. after the apparent execution of the declaration of trust) until 31 May 1996.
247 I also note that Jelena's evidence in this regard reflects evidence given under oath by her in the public examination on 15 September 2020, where she stated that she had never signed the declaration of trust and asserted that someone else had put her signature on the document. She also denied that she and Naim signed the declaration in her points of claim and defence filed in this proceeding on 15 March 2022.
248 In her second affidavit, Jelena further deposes that whilst Mr Forbes-Nicholson was her and Naim's solicitor, Mr Forbes-Nicholson would usually consult with and advise her husband and then produce documents for them both to sign. She says she was not usually present when advice was given to Naim but was often requested by Naim to sign whatever documents were necessary to give effect to whatever Naim and Mr Forbes-Nicholson had sought to achieve. On the rare occasion she questioned the nature or content of the documents she was requested to sign, her enquiries were dismissed and she was instructed by Naim to 'just sign'.
249 Jelena says she was shown and made aware of the declaration of trust in 2021 (i.e. not in September 2020 as set out in her first affidavit). She says she has never sighted the original declaration of trust and understands that Mr Forbes-Nicholson's office has failed to produce the original document despite requests from the liquidator and her former solicitors. I interpose that the liquidator says in his affidavit of 15 February 2022 (filed more than a year before Jelena gave this evidence) that a senior manager of his office in fact attended at the offices of Feim and Julie's solicitors on 18 January 2022 and physically inspected the declaration of trust, the October 1995 solicitor's correspondence enclosing the form of gift, and the declaration of confirmation.
250 In her second affidavit, Jelena gives the following evidence about the declaration of trust in her capacity as a director of Richflow: [135]
... I never instructed, or consented to Julie instructing, Mr [Forbes-] Nicholson to draft any of the [d]eclaration of [t]rust, [form of gift] or [d]eclaration of [c]onfirmation documents...I emphatically state as a director of Richflow, that Richflow never intended to hold the [property] on Trust for my stepchildren or anyone else. I also state emphatically that at no time before his death did Naim ever indicate to me that he had transferred, or had agreed to transfer, his or my interest in the [property] to his children or to any other person.
251 She asserts she would not knowingly have consented to the creation of the declaration of trust, and willingly agreed to give away 'her interest' in the property (presumably referring to her shareholding in Richflow), as it would mean she would be left with nothing. She says that at no time did she ever agree to transfer 'her interest' in the property to anyone.
252 At trial, Jelena gave the following supplementary oral evidence in chief concerning the declaration of trust: [136]
Ms Dardovski, in relation to the signatures that appear on that page, in your affidavit, you said the signature was not yours. Do you maintain that or do you wish to vary that evidence?---It look like mine but ah the, the documents, I can't recognise documents.
Yes?---I didn't see that before the, the court come, you know, and I saw that. Yes. And you said, 'I do not believe the signature that of Naim,' - - -?---Yeah, I don't believe that signature, you know, is mine but - and even the paper, I never see before that.
253 In her first affidavit, Jelena denies having given any instructions to Mr Forbes-Nicholson to prepare the form of gift as suggested by the October 1995 solicitor's correspondence. She says she is confident Naim did not give any such instructions either. She says she was shown the October 1995 solicitor's correspondence in August 2021. She also says in her second affidavit that until she saw Julie's first affidavit and its exhibits, she had never seen the declarations of confirmation and did not recognise them. She also observes the address ascribed to Nevrus in the declaration of confirmation was incorrect and the signing by Nazif is erroneous because from 4 October 2002, he exclusively went by the name 'Nick Besemi'.
254 As regards the June 1995 Social Security letter, Jelena says she was not consulted by Mr Forbes-Nicholson's firm in relation to its preparation. She says the letter inaccurately states the family home was owned by Naim's children and that the property was held on trust for the children. Whilst she says she was unaware of the letter until she read Julie's first affidavit, she says it appears the letter, and the declaration of trust, were prepared by Naim and Mr Forbes-Nicholson in order to obtain the age pension.
255 Jelena confirms that in or about October 1996, she, Naim and Nazif (Nick), were declared bankrupt. Shortly prior to their bankruptcies, Mr Forbes-Nicholson guided them through the bankruptcy process. She says she had little involvement in or understanding of the bankruptcy process as all the necessary paperwork was completed by Mr Forbes-Nicholson in consultation with Naim. She was apparently not included in their discussions. However, she recalls attending at Mr Forbes-Nicholson's office on request by him and Naim to sign various documents. She said she was not permitted by Naim to read the documents or to question their contents before she signed them. Jelena says she was simply told where to sign and did as she was instructed. She deposes to having no independent recollection of her statement of affairs. She believes it may have been one of the documents presented to her for signing without explanation or prior opportunity to read and understand it.
256 When taken to the statement of affairs under cross-examination, Jelena confirmed that by signing the statement, she declared that the particulars set out in the statement were true and correct. In setting out her assets in the statement of affairs, Jelena assigned no value to her shares in Richflow and otherwise identified the company as having nil value. The following exchange occurred between Jelena and senior counsel for Feim and Julie:[137]
...I suggest that you put a value on nil, because Richflow didn't actually even own - it wasn't the real owner of the [property]?---I don't know why we put, we thought - they ask us questions, did you work, that farm is working and you get the money, that's why maybe I put that as nil, zero.
But if Richflow owned the property by itself, then you would've put a lot, a big value on those shares, wouldn't you?---Of course I will put.
257 In the statement of affairs, Jelena also stated she was a director of Richflow. She accepted under cross-examination this meant she controlled the activities of the company. She was directed to a part of the statement which asked about the nature of the company's activity (at question 39). Jelena agreed that the answer given in the statement was 'Trustee'. Counsel for Feim and Julie then asked Jelena whether Richflow was a trustee company, to which she answered yes.
258 As already noted, the statement of affairs also asked (at question 40) whether Jelena, her spouse or any member of her family had an interest in a trust, or had transferred any assets to a trust. The answer ticked was 'Yes' but the name of the trust was not given. The property was identified as being an asset held by the trust with a (then current) market value of $160,000. The principal activity of the trust was described as '[h]older of property for children' and the names of the beneficiaries of the trust were identified as '[t]he children of Naim Dardovski'. She gave the following evidence when asked about these matters:[138]
You said that [the trust was the holder of property for Naim's children] because it's true, isn't it?---I no understand this. I can't understand this.
Mrs Dardovski, you signed this document, and you agreed you had to tell the truth in the document?---Yes. I - I signed it, and I'm - I'm telling the truth.
...
And it's true, isn't it, that Richflow was a holder of a property for the children. That's what it says?---Yeah, I don't know. For the children? I can't recall. That just, you know, that they put that for the children. I can't recall that.
259 Jelena was also asked about the reference in the statement of affairs to College House as being the name of the trustee entity. She was unable to say whether she and Naim were considering removing Richflow as the trustee and appointing a new trustee.
260 Jelena admitted under cross-examination that the alleged purchase of the transportable house allegedly for $10,000 in October 1996 occurred without the knowledge of her trustee in bankruptcy. When it was suggested that she had not disclosed this in her statement of affairs (dated 20 December 1996), she offered the following evidence by way of explanation:[139]
I tell the truth, but nobody believe, because all what I have documents, I will know everything what was done with the debt, farm, and everything, but like this? I can't do. I can't remember. I'm a - I'm old woman. I can't remember all.
261 Notwithstanding her previous evidence that she and Naim had paid all utility bills, maintenance, rates and charges on the property until Naim's death in 1997, and then paid those expenses herself after Naim's death, she conceded under cross-examination that following her bankruptcy in December 1996, she did not pay for these expenses because she could not afford to do so on the pension.
262 She was taken to the June 1995 Social Security letter, and the statement contained in the letter that Richflow held the property for Naim's children. When asked if this was true, she said '[n]ot in [her] knowledge'. Whilst she said she did not agree with the content of letter, she accepted she read it in 1995 but did not do anything about it. Jelena confirmed the Builders Arms Hotel was sold in 1993[140] and the Rifle Club Hotel in the following year because there were too many debts. She agreed that because of those financial difficulties, she and Naim sought advice from Mr Forbes-Nicholson, although she said it was her husband who predominantly dealt with him. When asked whether Mr Forbes-Nicholson gave advice that one way of protecting the property was to create a trust in favour of Naim's children, Jelena said she was not present when her husband consulted with Mr Forbes-Nicholson.[141]
263 She was then asked about the execution of the declaration of trust itself and gave the following evidence:[142]
On 31 January you...attended Mr Nicholson's office to sign the declaration of trust?---Yeah, he, he tell me my husband come and we are going to sign it, but we go to sign, I don't know what I signed. He said, 'Just sign it and don't, don't ask questions.'
Look, you were company secretary of Richflow and you know the importance of reading documents, correct?---Yes, correct.
Yes. And you were also a director of Richflow?---Yes. If they let you to sign it. You know, if they let you to read the paper. But my husband was like that, very hard man. And the kids know, he never let me read what I am signing, he just tell and I swear to god and to bible, he told me to sign it and not to ask questions. That, my life was with him.
264 Whilst Jelena denied Mr Forbes-Nicholson prepared the declaration of trust document on the instructions of the directors of Richflow, she accepted the declaration of trust had affixed to it Richflow's company seal and was also signed by her husband, although he 'never mentioned the children for the trust of the property'. Notwithstanding her previous evidence to the contrary, Jelena then confirmed she had signed the declaration of trust herself:[143]
And you signed this in front of Mr Nicholson?---Yeah.
Yes, all right?---I signed.
Thank you?---That's my signature.
265 Although Jelena initially gave evidence that she had not seen the October 1995 solicitor's correspondence enclosing the form of gift (which made reference to the earlier declaration of trust) until 2021, under cross-examination she indicated she could not recall whether she had seen the correspondence and form of gift, when they were ostensibly sent to her and Naim at William Street at the relevant time. Jelena confirmed that following the company's reinstatement on 28 July 2017, she recovered $225,000 held by ASIC in compensation for the compulsory acquisition of a part of the property. She said she kept the money because she thought it belonged to her and her late husband.
Whether declaration of trust in favour of children of Naim (and ultimately Feim)?
266 In determining this aspect of the case, it is necessary to consider whether the declaration of trust was properly executed and is otherwise a valid and enforceable document. That question, in turn, gives rise to a number of related issues which I will address.
Was declaration of trust properly executed by Richflow and signed by Naim and Jelena?
267 In my view, there is sufficient evidence to indicate the declaration of trust was properly executed by Richflow and signed by its responsible officers.
268 It is apparent that the declaration of trust has affixed to it Richflow's common seal (purportedly in accordance with its Memorandum and Articles of Association) and is witnessed by two persons who have signed it, being the director and secretary of the company. As at the date of the declaration of trust on 31 January 1995, both Naim and Jelena were the directors of the company and Jelena was its secretary. Further, as I have found, stamp duty has been paid on the declaration of trust and Mr Forbes-Nicholson gave unchallenged evidence that he wrote the date on the duty stamp affixed to the declaration of trust and initialled it.
269 There is then the matter of Jelena's evidence concerning the execution of the declaration of trust. In summary, Jelena variously gave the following evidence on that topic:
(a) she was adamant in the public examination and in her affidavits filed in this proceeding that she never signed the declaration of trust as a director of Richflow and she did not believe that Naim signed it;
(b) in her first affidavit, she deposed to first seeing the declaration of trust during the public examination process in September 2020, but in her second affidavit, said she first saw the document in 2021;
(c) at trial, she gave supplementary oral evidence equivocating on whether the signature on the document was hers. She stated she did not recognise the declaration of trust and had not seen it prior to the commencement of the proceeding, or the trial itself (it was unclear which);
(d) she ultimately conceded under cross-examination that the declaration of trust had affixed to it the company's seal and that she and Naim signed the document in the presence of Mr Forbes-Nicholson; and
(e) she stated under cross-examination that she was told by Naim to sign the declaration of trust and to not ask questions.
270 Having resiled from the position she had maintained since the public examination in September 2020 (that she had not signed the declaration of trust), Jelena gave a new account of what she said occurred (that she was instructed by Naim to sign the document without question). Although Jelena made reference in her affidavit material to being requested by Naim to sign whatever documents were necessary to give effect to whatever he and Mr Forbes-Nicholson had sought to achieve, Jelena specifically did not say this occurred in the case of the declaration of trust. Instead, she definitively said she had not signed the document. For a person to deny signing a document is materially different to saying they were told to sign it. The reason for Jelena's change of narrative was simply not explained and her evidence lacks credibility. In any event, Jelena did not make any claim to set aside the declaration of trust on the basis of duress, coercion or some other vitiating circumstances which might impugn its enforceability. Her argument that the declaration of trust was a sham, is a matter to which I will return shortly.
271 While Mr Forbes-Nicholson openly admitted he has little recollection of the circumstances leading to the preparation and execution of the declaration of trust, he gave clear and unequivocal evidence that he prepared and dated the document and initialled the stamp duty stamp. He also gave evidence that, based on his usual practice as a solicitor, he would have prepared the documents in accordance with instructions from the company's directors and only dated the document if its signatories were in attendance on the date set out in the document. I have no reason to doubt that evidence.
272 Finally, the declaration of trust, on its face, complies with s 53(1)(b) of the Property Law Act because 'it is manifested and proved by some writing signed by some person who is able to declare such trust'. The document bears the company's common seal, and Naim and Jelena signed it in their respective capacities as director and secretary of the company as witnesses to the use of the seal. It is therefore prima facie enforceable for the purpose of the legislation.
273 The liquidator submits equity will not uphold a trust where there is no intention to execute it. He further asserts that subsequent dealings with alleged trust property may evidence an intention to hold the property not on trust, but by some other means, for example: where a settlor declares themselves as trustee but continues to deal with the trust property as if they remained its beneficial owner.[144] The liquidator submits the Court should consider whether there is an absence of such an intention in the present case and particularly draws the Court's attention to the decision in Hyhonie Holdings, which is said to involve analogous facts. Many of the matters raised by the liquidator on this issue were also raised by both the liquidator and Jelena in connection with the question of whether the declaration of trust is a sham. Some of those matters are more relevant to the sham question. As I have already pointed out, the principle of certainty of intention to create a trust and the sham doctrine are distinct concepts. The former requires the identification of a clear objective intention to create a trust, whereas the latter necessitates a positive finding that the parties involved had a subjective intention not to create a trust.
274 Having regard to the available evidence, on a proper construction of what was said and written, I find there was a clear intention to create a trust and for the trust to have legal effect. Further, there is sufficient evidence to conclude the transaction constituted by the declaration of trust was actually carried into effect. I have arrived at those conclusions for the reasons below.
275 First, the relevant circumstances suggest that at or around the time of the execution of the declaration of trust, Richflow, as both the settlor and trustee of the trust, conducted itself in such a way as to evince an intention to create a trust.
276 By way of example, Julie gave evidence that she recalls being present with Naim and Jelena at a conference with Mr Forbes-Nicholson in around 1994 to obtain advice about the protection of the property in view of Naim and Jelena's potential bankruptcy. She also said that at Naim's request, Mr Forbes-Nicholson subsequently prepared the declaration of trust which was executed by Naim and Jelena as directors of Richflow on 31 January 1995. Notably, Julie was not cross-examined in relation to this aspect of her evidence. At the same time, Jelena gave evidence under cross-examination that she was not present at any conference concerning the creation of a trust to protect the property. Even if she did not attend a conference, it does not follow that no conference took place. The fact that Mr Forbes-Nicholson no longer retains file notes pertaining to the conference is unsurprising given it occurred around 30 years ago.
277 Although Mr Forbes-Nicholson deposed to having little recollection of the circumstances surrounding the preparation and execution of the declaration of trust, he confirmed he had done so in the course of acting for Richflow, Naim and Jelena. He also gave evidence under cross-examination of being aware that Naim and Jelena were experiencing financial difficulties at the time. He stated the purpose of the declaration of trust was to 'recognise the existence of a trust so that the asset wasn't taken in the course of ...either potential bankruptcy or actual bankruptcy'.
278 While Jelena's evidence in chief was that she did not instruct Mr Forbes-Nicholson to prepare the declaration of trust or intend for Richflow to hold the property on trust for her stepchildren, and would not knowingly have consented to the creation of the declaration of trust, this must all be considered in light of her later evidence under cross-examination that she and her husband in fact signed the document as officers of Richflow in the presence of the company's solicitor. Naim and Jelena were the controlling minds of Richflow and the company acted through its responsible officers. Further, it is the intention of the company, as settlor and trustee, that is most relevant here.
279 Secondly, the fact that one of the recitals to the declaration of trust is untrue does not render the declaration invalid or mean there was no intention to create a trust. It will be recalled that the relevant recital states 'the whole of the purchase money was provided by [Nazif (Nick), Nevrus, Feim, Sehiha and Julie]'. Whilst Feim and Julie contend that they contributed money towards the purchase price, I have determined there is only sufficient evidence to support a positive finding that Julie did so. There was plausible evidence that Feim made payment of the final instalment on the purchase of the property, but there was another competing inference available on the evidence as to the source of funds for the final payment. Accordingly, Feim did not meet the evidentiary standard of proof to succeed on his resulting trust claim. Nor is there any evidence that any of the remaining three siblings contributed to the purchase of the property. It follows that the recital to the deed is at least partly true.
280 In any event, I accept the submission by Feim and Julie that the recitals to a deed do not constitute an operative part of the deed and mistakes or misdescriptions in recitals do not provide a ground to set it aside.[145] Moreover, where parties have agreed to enter into a transaction on a counterfactual basis, there is no occasion for rectification or rescission and there is nothing necessarily improper about parties determining as between themselves to be bound on that basis.[146]
281 Additionally, parties to a deed are estopped from denying the truth of a recital when an action is brought to enforce rights arising out of the deed.[147] However, because the case was not argued on the basis of estoppel by deed, and the Court does not have the benefit of submissions from the parties on the point, I only note the principle in passing.
282 Mr Forbes-Nicholson, who was cross-examined at some length about the declaration of trust and the relevant recital, could not recall what documentation he had been provided with or precisely what he had been told in respect of the actual contributions referred to in the declaration of trust. Instead, he maintained the document was prepared to reflect his instructions. It is reasonable to infer the contents of the recital reflect the instructions Mr Forbes-Nicholson received. Moreover, because Richflow's responsible officers were prepared to sign and witness the execution of the declaration, it is reasonable to proceed on the basis that the company determined to be bound by what the declaration said.
283 Furthermore, I accept the submission made by Feim and Julie that even if none of the named beneficiaries of the declaration of trust provided consideration or had a pre-existing beneficial interest, the declaration of trust would nevertheless amount to a gift of the beneficial interest. A fully constituted and declared trust may still be enforced even by a volunteer.[148]
284 Thirdly, while the liquidator asserts there is no evidence as to whether the other siblings were aware of the declaration of trust, there is evidence to suggest otherwise. Here, Julie deposes she and her siblings were aware of the declaration of trust but felt that the persons who ought to have been recognised as the owners of the property were herself and Feim because of their prior contributions towards its acquisition and improvement, alongside the family's various enterprises. Julie's evidence that her siblings knew of the existence of the declaration of trust was not challenged under cross-examination. I am inclined to accept that evidence.
285 Fourthly, the declaration of trust is expressly referred to in the June 1995 Social Security letter which related to an application by Naim and Jelena for the age pension. Mr Forbes-Nicholson confirmed the letter would have been sent to the Department of Social Security on the instructions of either or both of Naim or Jelena. While Jelena denied in her affidavits having previously seen the June 1995 Social Security letter, or being consulted in relation to its preparation, she ultimately accepted under cross-examination that she had in fact seen the letter in 1995. Further, although she said under cross-examination that she disagreed with the contents of the letter, she conceded she did not do anything about it after seeing it. It follows that Naim and Jelena, who witnessed the execution of the declaration of trust by Richflow in their capacity as officers of the company, explicitly and intentionally relied upon its existence in dealing with an Australian Government department approximately four months after the underlying trust was created.
286 The declaration of trust is also expressly referred to in the October 1995 solicitor's correspondence enclosing the form of gift which was sent to Naim and Jelena at William Street. Jelena's evidence under cross-examination was that she could not recall seeing the correspondence at the time it was sent. Given Jelena's difficulty with her memory at this time, I consider in all likelihood that she and Naim did receive the correspondence and would have seen the reference to the declaration of trust. However, there is no evidence they did anything about it, including making inquiries of Mr Forbes-Nicholson.
287 Jelena and Naim also signed statements of affairs in connection with their bankruptcies on 20 December 1996 (almost two years after the execution of the declaration of trust), and again referred to and placed reliance upon the declaration of trust. The answers and declarations contained in their statements of affairs are materially the same. Relevantly, they each declared as true that:
(a) they each had total 'Assets / Property' worth $4,500;
(b) they each had shares in Richflow worth 'Nil';
(c) they did not own the property (listed as their then current residential address);
(d) they were each a director of Richflow;
(e) the nature of Richflow's activity was 'Trustee'; and
(f) they each had, or a member of their family had, an interest in a trust, or they had transferred assets to a trust in the previous five years. The principal activity of the trust was 'Holder of a property for children'. The names of the beneficiaries were identified as the 'children of Naim Dardovski'. The property was listed as the asset of the trust, with a market value of $160,000.
288 The above matters are consistent with Richflow and its officers intending the company to hold the property beneficially as trustee for Naim's children. Further, when asked about the reference in Jelena's statement of affairs to College House, Mr Forbes-Nicholson considered there must have been a conversation at the time concerning the possible change of Richflow as trustee, and the substitution of College House. Although the rationale is not clear, it may be that the discussion about a change of trustee reflected a concern that the company would itself become insolvent following the personal bankruptcies of Naim and Jelena. Whatever the reason, this evidence suggests the company was, at the relevant time, genuinely considered to hold the property on trust.
289 When cross-examined about the statement of affairs, Jelena agreed that, as a director of Richflow, she controlled its activities and that Richflow was a trustee company. She accepted that if the company owned the property itself, she would have put a 'big value on [Richflow's] shares'. Instead no value was ascribed to her shares in the company. When asked about the reference in her statement of affairs to Richflow holding the property on trust for Naim's children, she first asserted that she did not understand, then that she did not recall, and then that her husband told her to sign whatever paper he gave her. Her evidence was vague and inconsistent. I prefer the evidence of Mr Forbes-Nicholson that he would not have prepared a statement of affairs without receiving proper instructions from her as his client.
290 While Jelena states in the ROCAP that the company does not own the property on trust, I do not place any great weight on this document. It is entirely at odds with what she said in her earlier statement of affairs and her concessions under cross-examination about that statement of affairs. Despite Jelena having signed the ROCAP on 2 October 2019 purportedly as director of Richflow, she was not in fact the director of Richflow at that time or when the company was wound up. Jelena resigned as director on 5 March 2018 and Skender was the sole director from that time. However, according to the liquidator, Skender never provided his own ROCAP to the liquidator. Further, Jelena's ROCAP was prepared at a point of time after she obtained orders reinstating the registration of Richflow, more than 20 years since the company was deregistered. The reinstatement of Richflow enabled recovery of the $225,000 held by ASIC in compensation for the partial compulsory acquisition of the property. Although Jelena asserts in her points of claim and defence that the company received the compensation which was then applied to expenses of the company, that is not borne out by the evidence. Instead of paying the company's creditors, which included the State Revenue Office (in respect of land tax) and Slater + Gordon lawyers (for work undertaken in recovering the compulsory acquisition compensation), Jelena gave evidence under cross-examination that she retained the money herself because she believed it was hers.
291 It is fair to say that Jelena has changed her position over the decades in relation to the ownership of the property whenever it has suited her. She was content to assert the property was held on trust when dealing with the Department of Social Security and her trustee in bankruptcy, but has adopted a distinctly different position when dealing with ASIC and the liquidator.
292 Fifthly, despite the liquidator's submission to the contrary, the facts in this case are distinguishable from those in Hyhonie Holdings. In particular, in stark contrast to the position in Hyhonie Holdings:
(a) Feim and Julie led evidence, including from Richflow's then solicitor, Mr Forbes-Nicholson, concerning the drafting of the declaration of trust and surrounding circumstances;
(b) there is credible evidence before the Court as to the source of some of the funds used to pay for the acquisition of the property held by the company as trustee;
(c) aside from the declaration of trust itself, there are contemporaneous documents provided to third parties which tend to indicate the transaction was carried into effect and relied upon, namely: the June 1995 Social Security letter; the October 1995 solicitor's correspondence; and the statements of affairs signed by Naim and Jelena in December 1996;
(d) the statements of affairs signed by Naim and Jelena characterised the property as being held on trust by the company, whereas in Hyhonie Holdings the bankrupt's statement of affairs stated that the relevant shares were held by him personally and transferred to his daughter for nominal value;
(e) there was no failed attempt to transfer the property from Richflow to another person or entity prior to Naim's and Jelena's bankruptcies. The potential change of trustee to College House would not have altered the underlying beneficial ownership of the property; and
(f) the declaration of trust was stamped at the time of its execution and not years after the event.
293 Sixthly, while the liquidator submits there are no records of the declaration of trust in the company's books and records, at the same time, he also deposes to receiving no books and records of the company from Skender and only minimal books and records from Jelena and the company's previous lawyers, Davis Lawyers. The few records provided did not include any financial statements, journals, ledgers or any source documents. However, Richflow's annual returns for 1990 and 1991, which were signed by Jelena as director, state that the company held assets of around $437,500 and $437,362 respectively and had equivalent liabilities. Annual returns for 1992 and 1993 signed by Jelena suggest the company had total assets of around $582,000 and equivalent liabilities. The annual return for 1994 also states the company had total assets of around $582,000 and equivalent liabilities and that it did not act as trustee. The 1994 annual return was signed by Julie on 23 February 1995, during her limited time as director. Although the document stated the company did not act as trustee, it is important to note that the return pertained to the financial year ending 30 June 1994, which predated the execution of the declaration of trust. While there is a distinct absence of books and records of the company, there are no books and records of the company which positively show it as holding the property on trust from the financial year ending 30 June 1995 - being the financial year in which the declaration of trust was executed. But equally, no books and records from this period show the converse. The position is essentially neutral.
294 Seventhly, although there is an argument that Naim treated the property as the company's by using it as security for loans, Julie gave evidence that both she and Feim were very angry with their father when they discovered this and confronted him about it. Julie was not cross-examined on this evidence and I am prepared to accept it. It is noteworthy that Naim's use of the property as security for finance occurred well before the execution of the declaration of trust.
295 Eighthly, the evidence about Naim's dealing with the property is also counterbalanced by evidence of conduct by Feim and Julie (as named beneficiaries under the declaration of trust) which is consistent with them believing the property was held on trust for their benefit. That evidence includes the following matters:
(a) Feim and Fezije resided continuously at the property since its purchase and after the execution of the declaration of trust (aside from the period of Feim's incarceration);
(b) under cross-examination, Julie confirmed she lived at the property in 1990 and again in 1996;
(c) Feim and Fezije invested time and money into improving the property. For example, in 1988, Feim arranged for the installation of a two-bedroom bungalow on the property in which his family lived. He also organised the construction of the large shed on the property, which he used to conduct his mechanical repair business, and undertook other improvements on and maintenance of the property;
(d) by contrast, Naim and Jelena did not move to the property until some point between 1994 and 1996. Julie says that around this time, a second house was located and transferred to the property by her and her brothers, at a cost of $12,000, for use by Naim and Jelena. I reject the competing evidence given by Jelena that she and Naim were responsible for purchasing the house for $10,000, and moving it onto the property for their use. Neither Jelena nor Naim disclosed this in their statements of affairs. Yet, when cross-examined on this issue, Jelena complained about a lack of documentation and said she could not 'remember all';
(e) following Naim's death, Jelena left the property between 2000 and 2004. Thereafter, Feim and Fezije made the second house available to their daughter Brooke and her family to live in. In addition, Fezije and Julie gave credible evidence that Feim built a two-bedroom bungalow for Mr Willis, who has lived on the property since about 1994 at the invitation of Feim and Julie and provides labour as payment in-kind; and
(f) while Fezije's evidence about her and Feim paying council rates and utilities for the property may well have been overstated or inflated, there is plausible evidence that she and Feim had historically paid council rates and water rates from 2006 until a time no later than mid-2017. At the same time, Jelena conceded under cross-examination that following her bankruptcy in December 1996, she did not pay for utility bills, maintenance, rates and charges because she could not afford to do so on the pension.
296 Lastly, I note that, aside from Julie, the named beneficiaries of the declaration of trust did not lodge caveats to protect their beneficial interest in the property. I do not consider this to be decisive, particularly in light of all of the other factors suggesting a clear intention to create and carry out the declaration of trust. Further, when Mr Forbes-Nicholson was asked about the caveat lodged by his firm on behalf of Feim on 26 February 2018 on the grounds of adverse possession by exclusive occupation, he said the declaration of the trust was not referred to because the claim for adverse possession had been 'heavily in contemplation for a number of years' and 'the cost was likely to be far lower than the potential need to prove a claim in trust.'
297 Jelena contends the declaration of trust is a sham and should not be given effect by the Court. However, because there was a clear intention to create a trust by the execution of the declaration of trust and to carry it out, it follows that there is no sham. In addressing some of Jelena's specific submissions, I will further explain why the sham trust argument must fail.
298 First, Jelena submits the recital to the declaration of trust is false because it erroneously states that the whole of the purchase money was provided by all of Naim's children. Further, the recital is said to be false irrespective of whether the Court finds none of Naim's children contributed to the purchase price, or that only Julie and/or Feim did so.
299 However, the mere reference to false or inaccurate facts in a document by way of background or recitals does not render the document a sham. To find a sham, it is necessary to identify a disparity between the transaction evidenced in the document and the reality disclosed elsewhere in the evidence. The parties must have intended to create rights and obligations different from those described in their documents. I have already found the relevant parties intended for the declaration of trust to have legal effect and to be carried out. There is no evidence the declaration of trust is something different from that which it appears to be on its face. Jelena has only identified a disparity of fact in a recital to the document and not a disparity of intention. She has not identified with any precision what is said to be the true transaction.
300 Further, I accept Feim and Julie's submission that it is immaterial the contributors of the purchase price of the property were not all of Naim's children. The only material fact that emerges from the declaration of trust is that Richflow did not hold the property beneficially. I am satisfied on the evidence the recital reflects the instructions (and any documentation) Richflow's lawyer, Mr Forbes-Nicholson, was provided and that Naim and Jelena, who witnessed the company's execution of the document as Richflow's director and secretary, respectively, can be taken to have agreed to its content.
301 In any event, there is sufficient evidence to find that Julie contributed to the purchase price and at least plausible (but ultimately insufficient) evidence that Feim made payment of the final instalment of the purchase price. The recital to the deed is therefore at least partly true. Further, as earlier stated, the recitals to a deed are not its operative parts and errors in the recitals do not provide a ground to set the deed aside. Nor is there anything necessarily improper about parties determining as between themselves to be bound on a counterfactual basis.
302 Next, Jelena contends the declaration of trust was created for Naim and Jelena to receive an age pension and to protect the property from their pending bankruptcy. She submits the timing of the declaration of trust supports the conclusion the document is a sham. She says that despite the company becoming the registered proprietor of the property on 17 February 1989, the declaration of trust was not executed until 31 January 1995. She argues it was only in the face of Jelena and Naim's looming bankruptcy that the declaration of trust was prepared.
303 Feim and Julie submit, and I accept, that there is nothing inherently impermissible about documenting an existing beneficial ownership of property, including where there is the prospect of a future insolvency event. I have already found there was a pre-existing resulting trust in favour of Julie by virtue of her payment towards the acquisition of the property. Mr Forbes-Nicholson also gave evidence under cross-examination that the declaration of trust was a 'recording of a set of facts...given to [him] by the directors of Richflow as to the...true ownership of the property in 1995.'
304 Further, as is apparent, the June 1995 Social Security letter was sent approximately four months after the declaration of trust was executed. On the face of the correspondence, the declaration of trust and accompanying information appears to have been provided pursuant to a request from the Department of Social Security. I accept Mr Forbes-Nicholson's evidence to the effect that the preparation of the declaration of trust and the application for the age pension were not connected. The fact that the declaration of trust was used to assist Naim and Jelena in obtaining the age pension does not mean that it was prepared for that purpose.
305 However, even assuming: (a) there was no pre-existing trust; (b) there is no evidence of any contribution to the purchase of the property by any of Naim's children; and (c) the intention of the declaration of trust was to place the property beyond the reach of Naim and Jelena's creditors, and/or to obtain an age pension for Naim and Jelena in circumstances where they may have otherwise been ineligible, it does not necessarily mean the declaration of trust is a sham. As Leeming JA observed in Lewis v Condon, a transaction will not be a sham merely because it was entered into with an improper motive.[149] To adapt an example given by his Honour, there is an important difference between a trust set up and intended to operate in its terms, but made with the intent of defrauding creditors, and a sham declaration of trust in favour of beneficiaries never intended to give rise to the ordinary incidents of a trust.[150] Here, I have found the relevant parties intended to create and give actual legal effect to the declaration of trust. It was a real transaction. Any improper motivation or purpose would not then render the transaction a sham.
306 Regardless, there are specific legislative provisions which operate to protect creditors and other persons prejudiced by transactions conducted for improper purposes. In particular, s 172(1) of the Property Law Act essentially provides that an alienation of property made with intent to defraud creditors may be voidable on the application of any person prejudiced. Additionally, s 121 of the Bankruptcy Act 1966 (Cth) essentially renders void a transfer of property by a person who later becomes bankrupt in circumstances where the property would have become part of the bankrupt's estate and where the main purpose in making the transfer was to prevent the property from becoming divisible among creditors, or to hinder or delay making the property so available. However, there is no evidence that any person, including a trustee in bankruptcy, sought to invoke any of these provisions or otherwise took any action in respect of the declaration of trust.
307 Lastly, Jelena submits the declaration of trust was intended to mislead the trustee in bankruptcy and the Department of Social Security into believing the property was beneficially owned by all of the children of Naim Dardovski as they had contributed the whole of the purchase price.
308 As the authorities show, the requisite intention to mislead or deceive third parties must be a common intention of the parties. During closing submissions, Jelena's counsel submitted that the only party to the declaration of trust was the company (presumably in its position as both settlor and trustee).[151] Further, it was suggested that the company's intention 'must be created by its directors' and the Court can 'infer such an intention from the circumstances given that both of the directors were imminently facing bankruptcy and...took steps to put [the] property out of the reach of creditors by putting it into the trust.' However, counsel conceded that, at the relevant time, there was no suggestion the company itself was on the brink of insolvency. Following an exchange with the bench, counsel clarified his submission to be that the company had, through its directors, acted with the intention of seeking to protect its directors in the event of their personal bankruptcy.
309 However, there is no direct evidence of any such intention of the directors. Nor is there direct evidence of an intention of the company to mislead the Department of Social Security to assist its directors in obtaining age pensions. Jelena conceded under cross-examination she was not present when her husband consulted with Mr Forbes-Nicholson about the preparation of the declaration of trust. Further, while Jelena says that it appears the June 1995 Social Security letter and the declaration of trust were prepared by Naim and Mr Forbes-Nicholson to obtain the age pension, she does not go so far as to say she knows that to be the actual purpose of the declaration. Whilst I accept there is some general evidence of Naim and Jelena's financial position at the time, including their financial difficulties associated with the hotel businesses and related personal tax liabilities, to conclude there is a sham on the basis of inference is a strong finding which should be made cautiously having regard to its seriousness. I am not satisfied it is appropriate to make that finding on the basis of inference in this case.
310 But even if there was sufficient evidence to permit the inference that Richflow intended to mislead or deceive Naim and Jelena's trustee in bankruptcy and/or the Department of Social Security, there is no evidence of anyone actually being misled or deceived.[152] This was conceded by Jelena's counsel in closing submissions.[153] No creditor, third party or organisation claims to be prejudiced by the declaration of trust.
311 For completeness, I note Jelena also argued the company has never taken any steps to transfer the property to Feim and Julie. I do not consider this is especially relevant to the question of a sham. It does not demonstrate an intention to deceive anyone. In any event, Feim executed the beneficiary direction on 30 March 2021 calling for the transfer of the property into his name. Plainly, the liquidator has not acted on that direction pending the outcome of this proceeding.
312 Finally, Feim and Julie submit that, if the necessary intention to deceive and the other requirements for a sham are present, Jelena should not be permitted to take advantage of her own wrong.[154] A classic explanation of the maxim that no person should take advantage of their own wrong was set out by Bramwell B in Hooper v Lane:[155]
...it means that no one shall gain a right by his own wrong; and not that if he has a right, he shall lose it, or the power of exercising it, by a wrong done in connection with it.[156]
313 A helpful example of the maxim's application given by Giles JA in Ruthol Pty Ltd v Tricon[157] is that 'a party in breach of contract may be precluded from relying on a contractual entitlement arising from the breach, but will not be precluded from relying on a contractual entitlement which does not arise from the breach'.[158]
314 There is some force to Feim and Julie's submission. If the declaration of trust was a sham, as a director of Richflow, Jelena would necessarily have been party to, or otherwise participated in the sham. It is also likely she would have benefited from the sham by obtaining the age pension and defeating her creditors. If the Court were to accede to her argument that the declaration of trust is a sham, she would be gaining a benefit as a shareholder of the company by obtaining a declaration that the company is the beneficial owner of the property and entitled to its possession (as she seeks in her points of claim and defence). It is noteworthy that in none of the cases referred to by the parties was the person who claimed the existence of a sham also party to or involved in the sham. Had I found the existence of a sham (to be clear, I have not), I would be disinclined to grant Jelena the relief she seeks because she would be taking advantage of her own wrong as a perpetrator of, or participant in, the sham.
Effect of deregistration of Richflow on declaration of trust
315 As already explained, Richflow was deregistered for the period 24 June 1997 to 28 July 2017 - a period of more than 20 years. By force of s 601AD(1) of the Act, the company ceased to exist on its deregistration. However, I accept Feim and Julie's submission that the company's deregistration did not lead to the destruction of the trust. A trust will not fail for want of a trustee.[159]
316 Pursuant to s 601AD(1A) of the Act, because the property was held on trust by Richflow immediately prior to its deregistration, the property vested in the Commonwealth. In accordance with s 601AH(5) of the legislation, upon the reinstatement of Richflow's registration, the property revested in it, again as trustee.
Interaction between resulting trust and declaration of trust
317 In her written opening submissions, Jelena says the resulting trust claim and the declaration of trust claim are inconsistent with each other. She says that if a resulting trust existed, then the declaration of trust could not have been validly declared as the property would have been already held on trust for Feim and Julie (however, as I have found, there was only a resulting trust in Julie's favour).
318 While Feim and Julie initially made the resulting trust claim their primary claim and advanced the declaration of trust claim in the alternative, they modified their stance in closing submissions. Senior counsel explained that to the extent there was any doubt about whether the full purchase price of the property was paid by Feim and Julie, it would not matter because Feim would be entitled to the entire beneficial ownership of the property by virtue of the declaration of trust and declaration of confirmation. However, if the resulting trust claim failed in its entirety, the declaration of trust claim would still be effective. In this way, the resulting trust claim and the declaration of trust claim operate in tandem.
319 Feim and Julie also submit that 'if...there was no or only a partial resulting trust in favour of Julie [and/or] Feim, then, and only to the extent that there was no resulting trust, could Richflow deal with a beneficial interest in the [p]roperty by declaring a trust over it.' I consider this analysis to be correct. The subject of the declaration of trust did not include Julie's pre-existing beneficial interest in the property held on resulting trust by the company. Further, because all five of Naim's children were named as beneficiaries under the declaration of trust, it was not the case that the declaration of trust simply acknowledged a resulting trust which already existed. It had its own legal consequences.
320 Further, in the event I am wrong about the existence of the resulting trust in favour of Julie, Richflow would nevertheless have held the whole of the beneficial ownership of the property on trust for Nazif (Nick), Nevrus, Feim, Sehiha and Julie pursuant to the declaration of trust. As explained further below, the beneficial ownership of the property was then later changed by operation of the declarations of confirmation.
Effect of forms of gift and declarations of confirmation
321 Having confirmed the validity of the declaration of trust, it is then necessary to consider whether each of Julie, Nick, Nevrus and Sehiha gifted their beneficial interest in the property to Feim by a later instrument, specifically the declarations of trust.
Legal principles concerning voluntary assignment of equitable interests
322 As the liquidator rightly identifies, so long as the relevant rules of equity are satisfied, there is no conceptual difficulty with the gifting of a beneficial interest in property held on trust.
323 In Corin v Patton,[160] Mason CJ and McHugh J explained the test for the recognition in equity of the voluntary assignment (or gift) of legal property, including interests in Torrens land:
Accordingly, we conclude it is desirable to state that the principle is that, if an intending donor of property has done everything which it necessary for him to have done to effect a transfer of legal title, then equity will recognize the gift. So long as the donee has been equipped to achieve the transfer of legal ownership, the gift is complete in equity. "Necessary" used in this sense means necessary to effect a transfer. From the viewpoint of the intending donor, the question is whether what he has done is sufficient to enable the legal transfer to be effected without further action on his part.[161]
324 Justice Deane came to a similar conclusion in that case about the stage at which a gift of real property will be complete and effective in equity:
That test is a twofold one. It is whether the donor has done all that is necessary to place the vesting of the legal title within the control of the donee and beyond the recall or intervention of the donor. Once that stage is reached and the gift is complete and effective in equity, the equitable interest in the land vests in the donee and, that being so, the donor is bound in conscience to hold the property as trustee for the donee pending the vesting of the legal title.[162]
325 Although this case raises a question of the purported voluntary assignment (or gift) of equitable property, being existing beneficial interests under a trust, the above test may be applied by way of analogy. However, what is 'necessary' to achieve the assignment of equitable property will differ to what is necessary when assigning legal property. It is important to consider the intention of the donor concerning how and when their gift is to be effected and it is necessary to identify the form of dealing used to achieve the assignment to assess whether the assignment is effective.[163] Justice Dixon explained the position in Comptroller of Stamps (Vic) v Howard-Smith:[164]
A voluntary disposition of an equitable interest may take one of at least three forms. It may consist of an expression or indication of intention on the part of the donor that he shall hold the equitable interest vested in him upon trust for the persons intended to benefit. In that case he retains the title to the equitable interest, but constitutes himself trustee thereof, and, by his declaration, imposes upon himself an obligation to hold it for the benefit of others, namely the donees.
In the second place, the disposition may consist of a sufficient expression of an immediate intention to make over to the persons intended to benefit the equitable interest vested in the donor, or some less interest carved out of it. In that case communication to the trustee or person in whom the legal title to the property is vested is not required in order effectually to assign the equitable property. Notice to the trustee may be important to bind him to respect the assignment and in order to preserve priorities. But it is not a condition precedent to the operation of the expression of intention as an assignment. Nor does it appear necessary that the intention to pass the equitable property shall be communicated to the assignee. What is necessary is that there shall be an expression of intention then and there to set over the equitable interest, and, perhaps, it should be communicated to someone who does not receive the communication under confidence or in the capacity only of an agent for the donor.
In the third place, the intending donor for whom property is held upon trust may give to his trustee a direction requiring him thenceforth to hold the property upon trust for the intended donee.
...Accordingly, a voluntary disposition of an equitable interest may be effected by the communication to the trustee of a direction, intended to be binding on him, thenceforward to hold the trust property upon trust for the donee. But it must be a direction, and not a mere authority revocable until acted upon.[165]
326 There is also the requirement of writing. Section 53(1)(c) of the Property Law Act states that 'a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorized in writing or by will'. In the case of a direct assignment of an equitable interest, aside from the requirement that it be expressed in writing, no other formalities are necessary to make an immediate disposition.[166]
327 Although equity will not perfect an imperfect gift or aid a volunteer, at the same time, it will 'not strive officiously to defeat a gift'.[167] After all, equity looks to the intent rather than the form.
328 Julie's evidence was that, with her father's consent, she approached Mr Forbes-Nicholson to 're-arrange the interests' created by the declaration of trust. Mr Forbes-Nicholson confirmed he was instructed to prepare the form of gift, the purpose of which was to enable Naim's children to gift to each other the interest that they held in the property. After Mr Forbes-Nicholson provided the forms of gift to Naim and Jelena, Julie says they were signed by her and each of her brothers and her sister.
329 Feim and Julie accept the forms of gift were not properly completed and executed by the relevant persons. It is not contended they were legally effective. However, the forms of gift were incorporated by reference into the declarations of confirmation.
330 It is Julie's evidence that after consulting Mr Forbes-Nicholson in 2010, he prepared the declarations of confirmation to be executed by each of Julie, Nick, Nevrus and Sehiha to confirm that Feim was the owner of the property. The operative part of each of the declarations of confirmation states that the relevant form of gift signed in 1995 was 'intended to evidence [the donor's] decision to gift whatever interest [they] had in the [p]roperty to ... Feim...'. Further, each declaration is said to be provided for 'the purposes of confirming the gift [they] made in October, 1995 and to confirm that [donor has] no interest in the [p]roperty.'
331 Julie says she arranged for Sehiha and Nazif (Nick) to sign the document. She also recalls taking the document to Nevrus to sign at his home in the presence of Nevrus' wife who also witnessed it. She then gave all the signed declarations of confirmation to Mr Forbes-Nicholson in mid July 2010. Sehiha's declaration bears the date of 14 July 2010; Julie's and Nick's declarations are dated 15 July 2010; and Nevrus' declaration is dated 16 July 2010. Julie's evidence in this regard was not the subject of any challenge under cross examination.
332 There is no evidence on behalf of Nevrus (who passed away in 2019) to contradict that he signed his copy of the declaration of confirmation. However, both Nick and Sehiha filed affidavits in the proceeding which, among other things, address the declarations of confirmation.[168]
333 Importantly, although tendered as part of the court book, the affidavits of Nick and Sehiha were not read into evidence. No party ultimately relied on the affidavits of Nick or Sehiha or sought to cross-examine them. In the case of Sehiha, the Court was informed she declined to attend to give evidence.[169] Feim and Julie specifically objected to Nick's affidavit being relied upon without the opportunity to cross-examine him.[170] Neither Nick, Sehiha, nor the deceased estate of Nevrus made any claim in the proceeding. Further, on 29 April 2022, the Court made orders excusing those parties from the proceeding as they had elected not to file any points of claim or make any submissions regarding any interest in the property pursuant to the Court's orders of 16 December 2021. I therefore consider that the affidavits of Nick and Sehiha are not in evidence and I am not required to consider their contents.
334 Insofar as Jelena's evidence about Nick's use of his name is concerned, Jelena does not explain the basis for that evidence. For example, she does not say she had witnessed particular occasions where Nick had signed with the name Nick Besimi or 'Nick Besemi'. In any event, I consider it is unlikely Jelena is able to speak from her own knowledge of the practice of her step-son in signing documents. Julie's evidence that Nick, Nevrus and Sehiha signed the declarations of confirmation was unimpeached under cross-examination and I am inclined to accept it.
335 I find then that the declarations of confirmation were signed by each of Julie, Nazif, Nevrus and Sehiha on the respective dates recorded on those instruments. Regardless of whether the declarations of confirmation were intended to confirm an earlier gift of a beneficial interest by the forms of gift, or were only effective when the declarations of confirmation were purportedly signed in 2010, I accept Feim and Julie's submission that the declarations of confirmation evidence a disposition of equitable interests in the property, signed by the holders of those interests, in compliance with s 53(1)(c) of the Property Law Act.
336 In my view, the declarations of confirmation constitute a sufficient expression by each of Julie, Nick, Nevrus and Sehiha of an immediate intention to 'make over' or gift to Feim their respective equitable interests in the property referred to in the declaration of trust. Communication to a trustee (noting that the property had then vested in the Commonwealth) of the dispositions by Julie, Nick, Nevrus and Sehiha was not a requirement for the effective assignment of their equitable property to Feim. While not a condition precedent for an effective disposition, there is also sufficient evidence that the declarations of confirmation came to the attention of Feim, as donee. The declarations were also communicated and delivered to Mr Forbes-Nicholson who gave evidence that he retained them in his firm's deed register. As donors of equitable property, Julie, Nick, Nevrus and Sehiha did everything necessary to effect a transfer of their equitable interests. Equity will therefore recognise their gifts to Feim.
337 I accept Feim and Julie's contention that each of the declarations of confirmation operated as a deed poll in favour of Feim, who is sufficiently identified as the beneficiary of the gifts, and is able to be enforced by him.[171] As a deed poll, once executed and delivered, each of the declarations of confirmation were irrevocable as they did not expressly reserve a power of revocation.[172]
338 In the specific case of Julie, I consider the declaration of confirmation had the effect of her gifting to Feim 'whatever interest [she had] in the [p]roperty [emphasis added]', including the 27.5 per cent beneficial interest already held by Richflow on resulting trust for her. Further, by confirming her gift to Feim, she definitively stated she has 'no interest in the property'. In other words, she abandoned any interest she had in the property, in favour of Feim.
339 As pointed out by the liquidator, Julie has given confusing evidence about her status as beneficial owner of the property. That evidence can be summarised as follows:
(a) in the public examination, she said she had an interest in the property notwithstanding the declaration of confirmation;
(b) when asked under cross-examination about the caveat she lodged against the property on 5 July 2016 on the grounds of an implied, resulting or constructive trust, she maintained that '[she] will always have an interest in [the] property [because she] bought it and paid for it' and that it didn't matter who she gave that interest to; and
(c) she said under cross-examination that the purpose of the declarations of confirmation, was '[t]o give it to Feim', but nevertheless maintained she still had an interest in the property and regarded herself as an owner of the property.
340 Despite the conflicting evidence about Julie's understanding of, and intention concerning, the declaration of confirmation, it has always been her case in her points of claim and legal submissions that the effect of the declaration of confirmation was to confirm that she intended any interest she had in the property to be gifted to her brother Feim and that she relinquished any such interest in his favour. As I have found, the subject of the trust created by the declaration of trust did not include Julie's pre-existing beneficial interest in the property held on resulting trust by the company. Julie fully and irrevocably disposed of her beneficial interest in the property, including her beneficial interest held on resulting trust by the company (until its deregistration), when she executed the declaration of confirmation on 15 July 2010, as witnessed by Mr Forbes-Nicholson. She is bound by its operation.
341 In light of the above matters, Richflow now holds the entire property on trust for Feim. Feim's beneficial interest in the property arises pursuant to: (a) the declaration of trust, which is a valid and enforceable instrument and not a sham; and (b) the later declarations of confirmation, by which Feim's siblings (including Julie) irrevocably gifted their respective beneficial interests in the property to him.
342 In view of the above reasons, the answers to the primary questions in this case are as follows:
Question (a) - does Richflow hold the whole or part of the property on resulting trust for Feim and Julie by reason of their alleged payment of the property's purchase price?
Answer: Richflow held 27.5 per cent of the property on resulting trust for Julie. However, Julie gifted her beneficial interest to Feim pursuant to a later declaration of confirmation in July 2010.
(b) - in answering (a), is the declaration of trust made on 31 January 1995 relevant?
Answer: No.
(c) - if yes to (a), is that interest held by Feim and Julie equally or in accordance with their respective contributions?;
Answer: Julie's 27.5 per cent interest represented a contribution by her of $40,000 (paid on or about 7 December 1987) to the total purchase price of the property of $145,224 (inclusive of stamp duty and registration fees). There is insufficient evidence that Feim contributed to the purchase of the property.
Question (d) - in 1995, was there a declaration of trust by Richflow concerning the property in favour of the children of Naim Dardovski (being Nick, Nevrus, Feim, Sehiha, and Julie) by reason of the declaration of trust document?
Answer: Yes. However, the trust was established subject to Julie's pre-existing interest held by Richflow on resulting trust. Even if the Court is wrong in finding a resulting trust in favour of Julie, Richflow held the entire property beneficially for each of Nick, Nevrus, Feim, Sehiha and Julie in accordance with the declaration of trust.
(e) question (d) above subsumes the following subsidiary questions:
(i) is the declaration of trust admissible?
Answer: Yes.
(ii) was the declaration of trust properly executed by the company and is it a valid and enforceable document?
Answer: Yes.
(iii) for the purpose of (e)(ii), did Naim and Jelena affix their signature to the document?
Answer: Yes.
(iv) for the purpose of (e)(ii), does it matter whether or not some or all of the named beneficiaries contributed some or all of the purchase money for the property?
Answer: No.
(v) for the purpose of (e)(ii), was there a clear intention to create a trust?
Answer: Yes.
(vi) was the declaration of trust a sham and, if so, what is the legal consequence?
Answer: No, there was no sham.
Question (f) - if yes to (d), in 2010 did all or any of Naim's children referred to above gift any of the interest they had in the property to Feim?
Answer: Yes. Pursuant to the declarations of confirmation, each of Julie, Nick, Nevrus and Sehiha irrevocably gifted their interest in the property to Feim. In the case of Julie, this included her pre-existing interest held under resulting trust by Richflow.
343 I will ask the parties to confer on the preparation of orders to give effect to these reasons and to propose a timetable for the resolution of the deferred questions. In the event the parties cannot agree on a form of order within 14 days of the publication of these reasons, the matter will be listed for further hearing.
DAVID MARK MUTTON in his capacity as liquidator of RICHFLOW PTY LTD (IN LIQUIDATION)
FEIM DARDOVSKI by his litigation guardian FEZIJE DARDOVSKI
[1] The property is more specifically described in Certificate of Title Volume 9512 Folio 367.
[2] I have found Julie Dardovski contributed $40,000 towards a total purchase price of $145,224 ($140,000 contract price plus stamp duty and registration costs).
[3] These signed form of gifts were not included in the court book but can be found at exhibit 'JD-12' to the affidavit of Julie Dardovski sworn 25 August 2021.
[4] See Re ACN 167 984 045 Pty Ltd (in liq) [2021] VSC 652 (Gardiner AsJ).
[5] A supplementary court book was also provided during the course of the trial containing a limited number of historical documents.
[6] Nick's affidavit was sworn 14 August 2021 and Sehiha's affidavit was affirmed 16 September 2021.
[7] See Re Polat Enterprises Pty Ltd (in liq) [2020] VSC 485 [31] (Hetyey AsJ). See also Michael Murray and Jason Harris, Keay's Insolvency: Personal and Corporate Law and Practice (Lawbook, 11th ed, 2022) [10.335].
[11] Ibid, 451 [65]. See also Re MF Global Australia Ltd (in liq) [2012] NSWSC 994, [7] (Black J).
[13] Ibid, [25] (Leeming JA). See also Amorosi v Robinson [2024] VSC 466 [58] (Moore J) ('Amorosi v Robinson').
[14] [2023] VSC 21 (M Osborne J). See also Amorosi v Robinson, [58].
[15] Ibid, [144] (citations omitted).
[16] [2016] FCA 158 (Beach J) ('Siegwerk v Nuplex').
[18] Bosanac v Federal Commissioner of Taxation [2022] HCA 34; (2022) 405 ALR 424, [12] (Kiefel CJ and Gleeson J) ('Bosanac'), citing Dyer v Dyer (1788) 2 Cox 92, 93.
[19] DKL v LYK [2019] SASC 100, [230] (Doyle J).
[20] (2017) 16 ASTLR 360 ('Vlahos v Vlahos').
[21] Ibid, 377-9 [53]-[63] (Kyrou JA; Tate JA agreeing at 364 [1]; McLeish JA agreeing at 393 [134]) (citations omitted).
[22] [2020] VSCA 336 ('Zekry v Zekry').
[23] Ibid, [85] (Tate, Kyrou and Niall JJA).
[25] Ibid, 51 [13] (Kiefel CJ and Gleeson J) (citation omitted).
[26] Ibid, 56 [32] (Kiefel CJ and Gleeson J).
[28] Charles Marshall Pty Ltd v Grimsley [1956] HCA 28; (1956) 95 CLR 353, 364-366 (Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ) ('Grimsley'); Calverley v Green [1984] HCA 81; (1984) 155 CLR 242, 251-2 (Gibbs CJ); 262 (Mason and Brennan JJ) ('Calverley'); Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583, 589- 590 (Gibbs CJ) ('Muschinski'); Zekry v Zekry, [85] (Tate, Kyrou and Niall JJA). See also G E Dal Pont, Equity and Trusts in Australia (Lawbook, 8th ed, 2023) [26.100] ('Equity and Trusts in Australia').
[29] Calverley, 262-3 (Mason and Brennan JJ). See also Equity and Trusts in Australia, [26.100].
[30] Calverley, 262-3 (Mason and Brennan JJ); Shepherd v Doolan & Ors [2005] NSWSC 42, [23] (White J) ('Shepherd v Doolan'); Sivritas v Sivritas [2008] VSC 580; (2008) 23 VR 349, 373 [127] (Kyrou J) ('Sivritas').
[32] Calverley, 257 (Mason and Brennan JJ).
[33] Calverley, 257-8 (Mason and Brennan JJ); Sivritas, 372 [125]; Zekry v Zekry [85] (Tate, Kyrou and Niall JJA).
[34] Calverley, 251-2 (Gibbs CJ), 257-8 (Mason and Brennan JJ), 267-8 (Deane J); Silvester v Sands [2004] WASC 266, [43] (EM Heenan J) ('Silvester v Sands'); Sivritas, 372 [125].
[35] Bloch v Bloch [1981] HCA 56; (1981) 180 CLR 390, 402 (Brennan J); Calverley, 263 (Mason and Brennan JJ).
[36] See Currie v Hamilton [1984] 1 NSWLR 687, 691 (McLelland J) ('Currie v Hamilton'); Atilgan v Atilgan [1999] NSWSC 324, [111] (Austin J); Ryan v Dries [2002] NSWCA 3, [25], [52]-[53] (Hodgson JA) ('Ryan v Dries'); Black Uhlans Inc v New South Wales Crime Commission [2002] NSWSC 1060, [144] (Campbell J); Silvester v Sands, [40]-[41]; Martech Energy Systems Pty Ltd (in liq) v Bell [2005] VSC 198, [8] (Hollingworth J); Dinsdale v Arthur [2006] NSWSC 809, [11] (Brereton J); Brennan v Duncan [2006] NSWSC 674, [9] (White J). Cf Little v Little (1988) 15 NSWLR 43, 44-46 (Bryson J).
[37] [2008] VSC 580; (2008) 23 VR 349, 372-3 [126] (Kyrou J).
[38] Citing Calverley, 257 (Mason and Brennan JJ).
[39] Vlahos v Vlahos, [56] (Kyrou JA).
[40] His Honour did not need to reach a concluded view on the matter because he ultimately found the existence of a constructive trust rather than a resulting trust in that case.
[41] See Currie v Hamilton, 691; Ryan v Dries, [52]-[53] (Hodgson JA).
[42] See Fan v Han [2016] NSWSC 1488, [76] (White J).
[43] Sivritas, 373 [127] citing Currie v Hamilton, 693; Shepherd v Doolan, [23] (White J).
[44] This is borne out by a settlement statement accompanying the Burns Philip loan documentation which includes reference to the transfer of title from 'Stojcevski' to Julie immediately prior to the settlement of the later sale of Fehon Street by Julie in 1988 and the repayment of the Burns Philip loan.
[45] Transcript of Proceedings, Re Richflow Pty Ltd (in liq) (Supreme Court of Victoria, S ECI 2021 01796, Hetyey AsJ, 22-24 May 2023 and 14 August 2023), 148 ('transcript of proceedings' or 'transcript').
[46] Court book of Proceedings, Re Richflow Pty Ltd (in liq) (Supreme Court of Victoria, S ECI 2021 01796), 1160 ('court book').
[50] See the Court of Appeal decision in R v Dardovski [1999] VSCA 81 which concerned an unsuccessful appeal by Feim against his sentence.
[58] Presumably referring to the rule in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, 320 (Windeyer J).
[60] By way of example, according to the Reserve Bank of Australia Inflation Calculator, $60,000 in 1987 would be worth $173,731.83 in 2023 at an average annual inflation rate of 3%: https://www.rba.gov.au/calculator/annualDecimal.html.
[61] Vlahos v Vlahos, 378 [60] (Kyrou JA; Tate JA agreeing at 364 [1]; McLeish JA agreeing at 393 [134]).
[62] Ibid. See also Zekry v Zekry [85] (Tate, Kyrou and Niall JJA); Grimsley, 364-366 (Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ); Calverley, 251 (Gibbs CJ), 262 (Mason and Brennan JJ); Muschinski, 589- 590 (Gibbs CJ), 612-61 (Deane J)
[63] Vlahos v Vlahos, 377 [55] (Kyrou JA; Tate JA agreeing at 364 [1]; McLeish JA agreeing at 393 [134]).
[64] See Benidorm Pty Ltd v Chief Commissioner of State Revenue [2020] NSWSC 471, [272] (Ward CJ in Eq).
[65] Hyhonie Holdings Pty Ltd v Leroy [2003] NSWSC 624, [34] (Young CJ in Eq) ('Hyhonie Holdings').
[66] See Knight v Knight [1840] EngR 862; (1840) 3 Beav 148, 172-3 (Lord Langdale MR); Kauter v Hilton [1953] HCA 95; (1953) 90 CLR 86, 97 (Dixon CJ, Williams and Fullagar JJ); Pascoe v Boensch [2008] FCAFC 147; (2008) 250 ALR 24, 29 [20] (Finn, Dowsett and Edmonds JJ); Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62, 71 [7] (French CJ); Vanta Pty Ltd v Mantovani [2023] VSCA 53, [96] (Kyrou JA and Sifris JJA and J Forrest AJA).
[67] See Hyhonie Holdings, [41] quoting Arthur v Public Trustee (1988) 90 FLR 203, 209 (Asche CJ) ('Arthur v Public Trustee').
[68] See John Heydon and Mark Leeming, Jacobs' Law of Trusts in Australia (LexisNexis Butterworths, 8th ed, 2016) [5-02] ('Jacobs' Law of Trusts') citing Re Kayford Ltd (in liq) [1975] 1 All ER 604, 607; Tito Waddell (No 2) [1977] Ch 106; and Walsh Bay Developments Pty Ltd v Federal Commissioner of Taxation (1995) 130 ALR 415, 422. See also Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588, 605 (Gaudron, McHugh, Gummow and Hayne JJ).
[69] Jacobs' Law of Trusts, [5-02].
[70] Accident Compensation Tribunal v Federal Commissioner of Taxation (1993) 178 CLR 145, 165-6 (Mason CJ, Deane, Toohey and Gaudron JJ).
[71] See Jacobs' Law of Trusts, [5-02].
[72] Jacobs' Law of Trusts, [5-02] and the authorities cited there, including Inland Revenue Commissioners v Raphael [1935] AC 96, 142-3 and Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44; (1988) 165 CLR 107, 121 (Mason CJ and Wilson J).
[75] Ibid, citing Collinson v Pattrick [1838] EngR 357; (1838) 2 Keen 123; Sheslow v Kostin [1997] BC9702183 (Young J).
[76] Hyhonie Holdings, [36], citing Hughes v Stubbs [1842] EngR 877; (1842) 66 ER 1119, 1120 (Wigram VC) ('Hughes v Stubbs').
[77] Hyhonie Holdings, [41], quoting Arthur v Public Trustee, 209.
[78] Hyhonie Holdings, [42], citing Middleton v Pollock [1876] UKLawRpCh 9; (1876) 2 Ch D 104; Rose v Rose (1986) 7 NSWLR 679, 686.
[80] Ibid, [43], quoting In re Cozens [1913] UKLawRpCh 67; [1913] 2 Ch 478, 486 (Neville J).
[81] Hyhonie Holdings, [58]-[59], [87]. Upheld on appeal in Hyhonie Holdings Pty Ltd v Leroy [2004] NSWCA 72.
[90] Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471, [46] (Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ). See also Snook v London & West Riding Investments Ltd, [1967] 2 QB 786, 802 (Diplock LJ).
[91] See WT Ramsay v Inland Revenue Commissioners [1981] UKHL 1; [1982] AC 300, 323 (Lord Wilberforce).
[92] [1988] FCA 179; (1988) 18 FCR 449 (Lockhart J) ('Sharrment').
[94] See Matthew Conaglen, 'Sham Trusts' (2008) 67(1) Cambridge Law Journal 176, 184.
[95] [2008] HCA 21; (2008) 238 CLR 516 ('Raftland').
[96] Ibid, 561-2 [142]-[148] (Kirby J) (citations omitted).
[97] National Westminster Bank plc v Jones [2001] 1 BCLC 98, [59] (Neuberger J) ('National Westminster Bank'); Lewis v Condon [2013] NSWCA 204; (2013) 85 NSWLR 99, 112-13 [63] (Leeming JA; McColl JA and Sackville AJA agreeing) ('Lewis v Condon').
[98] Raftland, 531-2 [35] (Gleeson CJ, Gummow and Crennan JJ).
[99] Ibid, 532 [36] (Gleeson CJ, Gummow and Crennan JJ).
[100] ([1938] HCA 34; 1938) 60 CLR 336, 361-2 (Dixon J). In particular, serious allegations should be accepted more cautiously, and on the basis of 'reasonable satisfaction' having regard to: the seriousness of the allegations made; the inherent unlikelihood of an occurrence of a given description, and the gravity of the consequences flowing from a particular finding.
[101] Lewis v Condon, 112 [59] (Leeming JA; McColl JA and Sackville AJA agreeing).
[103] Mikeover Ltd v Brady [1989] EWCA Civ 1; [1989] 3 All ER 618, 626 (Slade LJ); National Westminster Bank, [68].
[104] Lewis v Condon, 112 [59] (Leeming JA; McColl JA and Sackville AJA agreeing).
[106] Ibid, 111 [54] (Leeming JA; McColl JA and Sackville AJA agreeing).
[107] Ibid, 112 [59] (Leeming JA; McColl JA and Sackville AJA agreeing).
[108] Ibid, 114 [68] (Leeming JA; McColl JA and Sackville AJA agreeing) and the numerous authorities cited there, including Sharrment, 455. See also Jacob's Law of Trusts [5-04].
[109] Lewis v Condon, 114 [69]-[70] (Leeming JA; McColl JA and Sackville AJA agreeing).
[110] Ibid, 114 [71] (Leeming JA; McColl JA and Sackville AJA agreeing).
[113] See email to the Court from Jelena's lawyers dated 28 August 2024.
[114] See s 2 and sch 2 of the Duties Act 2000 (Vic) ('Duties Act').
[115] See cl 4 of sch 2 of the Duties Act.
[116] See s 284 of the Duties Act as originally enacted (Act No 79/2000).
[117] See s 286 and sch 2 of the Duties Act.
[118] Home v Walsh [1978] VR 668, 694 (Anderson J) ('Home v Walsh'), citing Re Tucker [1887] VicLawRp 75; (1887) 13 VLR 551, 552 (Webb J).
[119] [2021] VSC 627, [33]-[35] (M Osborne J).
[120] [2011] FamCA 77, [21] (Cohen J).
[121] See Home v Walsh, 693, applying Re Waterhouse's Policy [1937] 1 Ch 415; Electricity Meter Mfg Co Ltd v Manufacturers' Products Pty Ltd [1930] NSWStRp 57; (1930) 30 SR (NSW) 422, 428 (Street CJ); Westpac Banking Corporation v Mousellis (1985) 37 NTR 1, 6 (Nader J) ('Westpac v Mousellis').
[122] Westpac v Mousellis, 6-7, citing Burton v Kirkby [1816] EngR 766; (1816) 7 Taunt 174.
[123] There is no documentary evidence before the Court of the existence of an express trust in late 1988.
[140] I understood Jelena to be referring to the sale of the freehold for the Builders Arms Hotel.
[144] See Hughes v Stubbs, 1120; Arthur v Public Trustee, 209-10; Hyhonie Holdings, [35]-[36].
[145] Davey v Herbst, Herbst and Bray (No. 2) [2012] ACTCA 19, [91] (Refshauge J) ('Davey v Herbst'), citing Bath and Montague's Case [1685] EngR 4120; (1693) 22 ER 963, 991. In Davey v Herbst, the recitals to the deed in question inaptly referred to an assignment of the burden of a debt where the contract giving rise to the debt was likely novated. See also Data Transfer Services Pty Ltd v White [2023] NSWCA 16, [37]-[38] (Ward P, Leeming JA and Griffiths AJA) ('Data Transfer').
[146] Data Transfer, [37]-[39] (Ward P, Leeming JA and Griffiths AJA).
[147] Carpenter v Buller [1841] EngR 552; (1841) 8 M&W 209, 212-13 (Parke B); Re Patrick Corp Ltd and Companies Act [1981] 2 NSWLR 328, 332E-333B (Needham J). See also John Heydon, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (LexisNexis Butterworths, 5th ed, 2015) 90-1.
[149] Lewis v Condon, 114 [68] (Leeming JA; McColl JA and Sackville AJA agreeing) and the numerous authorities cited there, including Sharrment, 455. See also Jacob's Law of Trusts [5-04].
[150] Lewis v Condon, 114 [69]-[70] (Leeming JA; McColl JA and Sackville AJA agreeing).
[152] As was the case in Lewis v Condon, 114 [71] (Leeming JA; McColl JA and Sackville AJA agreeing).
[154] Citing the New South Wales Court of Appeal in Ruthol Pty Ltd v Tricon (Aust) Pty Ltd (2005) 12 BPR 23, 923 [19]-[23] and the authorities referred to there.
[158] Ibid, [22] (Giles JA; Santow JA and Hunt AJA agreeing).
[159] See Jacobs' Law of Trusts, [1-05].
[161] Ibid, 559 (Mason CJ and McHugh J).
[163] Michael Evans, Bradley Jones and Theresa Power, Equity and Trusts (LexisNexis Butterworths, 4th ed, 2016) [7.4].
[166] Norman v Federal Commissioner of Taxation [1963] HCA 21; (1963) 109 CLR 9, 30 (Windeyer J).
[167] T Choithram International SA v Pagarani [2000] UKPC 46; [2001] 1 WLR 1, 11 (Lord Browne-Wilkinson).
[168] Nick's affidavit was sworn 14 August 2021 and Sehiha's affidavit was affirmed 16 September 2021.
[171] Nicholas Seddon, Seddon on Deeds (The Federation Press, 2ed, 2022) [1.7], [6.10] citing Netglory Pty Ltd v Caratti [2013] WASC 364, [79] (Edelman J, citing Jones v Bartlett [2000] HCA 56; (2000) 205 CLR 166, [141] (Gummow and Hayne JJ); Tipperary Developments Pty Ltd v Western Australia [2009] WASCA 126; (2009) 38 WAR 488, [253] (McLure JA); Re A & K Holdings Pty Ltd [1964] VicRp 36; [1964] VR 257).
[172] Burns Philip Hardware Pty Ltd v Howard Chia Pty Ltd (1986) 8 NSWLR 621, 639-640 (Young J); Smeaton Grange Holdings Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1594, [50]-[51], [56]-[57] (White J).
Plaintiffs
NAZIF DARDOVSKI & ORS
(2000) 49 NSWLR 262
(2022) 405 ALR 424
(1956) 95 CLR 353
(1984) 155 CLR 242
(1985) 160 CLR 583
(2008) 23 VR 349
(1981) 180 CLR 390
(1988) 15 NSWLR 43
(1959) 101 CLR 298
(1953) 90 CLR 86
(2008) 250 ALR 24
(2015) 255 CLR 62
(1988) 90 FLR 203
(1995) 130 ALR 415
(2000) 202 CLR 588
(1993) 178 CLR 145
(1988) 165 CLR 107
(1986) 7 NSWLR 679
(2004) 218 CLR 471
(1988) 18 FCR 449
(2008) 238 CLR 516
(2013) 85 NSWLR 99
(1990) 169 CLR 540
(1936) 54 CLR 614
(1963) 109 CLR 9
(2000) 205 CLR 166
(2009) 38 WAR 488
(1986) 8 NSWLR 621