Reitano v Reitano

The Facts 10In March 1985, the plaintiff was living at the Alexandria property with his mother and grandmother. On one day in March 1985, his mother informed him that she and her mother were leaving the property to live with the plaintiff's father who resided at Arcadia in northwestern Sydney. The defendant said on that occasion words to the effect that "The house is now yours. It is now your responsibility to pay the bills. I cannot afford to do so." There was, in my opinion, nothing contractual about that statement and throughout the rest of 1985 and into early 1986, the defendant made brief periodic returns to the Alexandria property. 11The situation changed however. On one occasion when the defendant returned, she informed the plaintiff that a three bedroom apartment in the same building in which certain relatives resided had become available for sale in Spain. The plaintiff questioned why the defendant might want to acquire such property. There were several more conversations in relation to the topic of the acquisition by the plaintiff of the apartment in Spain. It was situated in the Mediterranean port city of Alicante. As the conversations progressed, the defendant told the plaintiff the purchase price of the apartment. He volunteered that he could buy the unit but he was not interested in doing so. He added that he did not understand that his mother had the means to buy it. She replied that she and her husband could take out a mortgage over the Arcadia property and that if he contributed the outstanding one-third of the purchase price, the property could be acquired. She said all three names could be on the title deed. 12In February 1986, the plaintiff reluctantly agreed to this proposal. He made clear that he had no intention of travelling to Spain and no desire, for his part, of acquiring an interest in any property in Spain, other than to help his mother. Nonetheless, he obtained a personal loan from the Commonwealth Bank of Australia and made the whole of the proceeds available towards the purchase price. The contract for the purchase of the Spanish apartment was signed by the plaintiff and his parents in the Sydney office of the Spanish Consul General during February. 13On 14 March 1986, shortly after the documentation for the purchase of the apartment in Spain was executed, the plaintiff's parents both made new wills and gave powers of attorney to the plaintiff. They engaged solicitors for that purpose. The wills both provided that the plaintiff would be the sole executor and beneficiary of the estates of each of them. The power of attorney given by the defendant provided, among other things, for the plaintiff to have the power to do all things necessary in relation to any land belonging to the defendant, including the disposition of any such land. 14Immediately after signing the power of attorney in the presence of a solicitor, the defendant asked the plaintiff to come with her into the dining room in the home, where she said words to the effect: As your father and I will be living in Spain for the rest of our lives, I want to transfer the house in Alexandria to you and in return you will not receive any rent or any other benefits from the unit in Alicante. 15The plaintiff's response was to the effect: I am happy to accept that arrangement but there is no need to rush the transfer of the house to me. The power of attorney will allow me to transfer it at any time and it will suffice for now. 16Later in 1986, the Arcadia property was placed on the market for sale and in October 1987 it was sold. The defendant then said to the plaintiff that she was now leaving Australia with her mother and husband to live in Spain. She has never returned. The mother died in 1988 and the husband died in 2000. 17Since February 1986, the plaintiff has paid all expenses of ownership and all costs of repairs and improvement in relation to the Alexandria property. And he duly paid all instalments under his personal loan from the Commonwealth Bank until it was discharged. At some time subsequent to the plaintiff's return to Spain, and in circumstances which the evidence did not disclose with any clarity, she and her husband bought certain other property in Spain. 18The situation has remained unchanged since February 1986. Until these proceedings, there has been no attempt by the defendant to qualify or contradict the statements made by her to her son in March 1986. To the contrary, in 2006 the plaintiff and the defendant had a conversation in which the defendant said words to the effect: "Can you sell the property at Alexandria to help me out?" To this the plaintiff responded: "That is out of the question. I will never contemplate it."

The Agreement 19Having regard to those facts, I have concluded that in March 1986 the plaintiff and the defendant either made an oral agreement relating to the Alexandria property or the defendant made a declaration of trust of her interest in it. The consideration given by the plaintiff was the money paid by him to enable his mother to acquire an apartment in Alicante in Spain in the same building as her relatives together with his agreement to forego any interest in or benefits from the property. The Alicante apartment was the home where she wanted to spend her remaining years. 20Not only did the plaintiff facilitate the acquisition of this property but he effectively renounced any interest in it. For practical purposes, he agreed to be no more than a nominal owner of a one-third share in the Alicante property. He agreed to borrow the money to assist his mother and father, but especially his mother. Except in the formal sense that his name appeared on the registered title, he had no interest in the Alicante property. He was not born in Spain, had no friends there and no desire to travel there. 21From the defendant's perspective, the effect of the agreement made in March 1986 was that she no longer had any interest in or financial responsibility for the Alexandria property. She had no use for the property and was relieved of the burdens of ownership. She was motivated in part by the natural love and affection which she had for her son and in part by the gratitude she felt for being able to purchase, with her son's assistance, the home of her choice in Spain, where she wished to establish herself for the rest of her life. She made it clear that she did not intend to return to Australia. 22Had it not been for the plaintiff's statement that there was "no need to rush the transfer of the house to me" and his perception, rightly or wrongly, that there were potential taxation benefits to him in not having his name on the title to the Alexandria property, the defendant would have transferred the property to the plaintiff before she left Australia. The effect of the words spoken in the particular circumstances, was that the defendant agreed in effect to transfer the property at a future date when the plaintiff called for it. 23As a matter of legal analysis, the same facts give rise to an agreement to transfer ownership and an agreement to create a bare trust pending transfer: Khoury v Khouri [2006] NSWCA 184 at [40]. In both cases, subsequent conduct is admissible to prove the existence of the agreement: Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61 at [25] (Heydon JA); Kriketos v Livschitz [2009] NSWCA 96 at [5] (Allsop P) and [109] (McColl JA). In this case, there have been 25 years of uninterrupted sole possession, unfettered responsibility and independent control. 24The conversation that occurred in 2006 is a powerful indicator of the agreement. It constitutes an acknowledgment, an admission and an instance of subsequent conduct that tends to prove the agreement's existence. The defendant's request that the plaintiff sell the property was a recognition of his ownership. His response that he would never contemplate it was telling. Equally telling was the absence of contradiction by the defendant then or at any later time - until she commenced these proceedings a few months ago. The whole of the subsequent behaviour of the parties is conformable with the probability of the agreement for which the plaintiff contends.

Declaration of Trust 25Another analysis that is open on the facts that I have found, is that by her words and actions in March 1986 the defendant created a trust and constituted herself as trustee of the property. The question is whether there is language or conduct which shows a sufficiently clear intention to create a trust. No formal or technical words are required. Any apt expression of intention will be sufficient. In order to infer the relevant intention, the court may look to the nature of the transaction and the whole of the circumstances attending the relationship between the parties. Subsequent conduct can be just as much an indicator of the coming into existence of a trust as it may be of the existence of an agreement. The conversation between the plaintiff and the defendant in 2006 is probative of the existence of a bare trust, just as it is probative of the existence of an agreement. 26The overall question is whether in the circumstances of the case, and on the true construction of what was said or written, a sufficient intention to create a trust has been manifested. It is not necessary that the creator of the trust should know that the particular relationship intended to be created is in law a trust. A trust will be created whether or not the creator is precisely aware of so doing, provided that, in substance, the creator intends that his or her actions should have the legal effect of creating the relationship which is known in law as the trust. If the language and conduct is such that an intention to create such a legal effect is manifested, then a trust will be created whether or not the words trust or trustee are used. 27The objective nature of the question was emphasised in Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253, where Heydon and Crennan JJ said at [114]: The intention referred to is an intention to be extracted from the words used, not a subjective intention which may have existed but which cannot be extracted from those words. This is as true of unilateral declarations of alleged trusts as it is of bilateral covenants to create an alleged trust. It is as true of alleged trusts which are not wholly in writing as it is of alleged trusts which are wholly in writing. In relation to alleged trusts which are not wholly in writing, the need to draw inferences from circumstances in construing the terms of conversations may in practice widen the extent of the inquiry, but it does not alter its nature.

Part Performance 28Notwithstanding the formalities of writing required by Sections 54A and 23C of the Conveyancing Act, if there are sufficient acts of part performance, the effect will be to defeat the reliance on the statute. The principle of part performance is clear. The classic statement is that of Gibbs J in Regent v Millett [1976] HCA 40; (1976) 133 CLR 679 at 683: The acts relied upon as part performance must be unequivocally and in their own nature referable to some such agreement as that alleged... it is enough that the acts are unequivocally and in their own nature referable to some contract of the general nature of that alleged. 29The application of that test should, logically, be approached in the manner explained in Lighting By Design (Aust) Pty Ltd v Cannington Nominees Pty Ltd [2008] WASCA 23 at [75] - [78] and [156]. 30I am satisfied that there have been sufficient acts of part performance. By itself, I do not regard the execution of the power of attorney as a sufficient act of part performance. It was obviously considered to be a convenient means of facilitating the maintenance and management of the property by the plaintiff. Taken in isolation, it is not capable of being unequivocally referable to some such agreement as that alleged. Nor is the payment by the plaintiff of his contribution towards the purchase price of the Alicante property sufficient by itself. But taken as a whole, the conduct of the plaintiff and the defendant, including the payment by the plaintiff towards the Alicante property and his possession and sole occupation of the Alexandria property over a period of 25 years, together with his expenditure on repairs and improvements and the payment of rates, taxes and other incidences of ownership, constitutes sufficient part performance. 31A change of possession has been described as "the act of the part performance par excellence": Regent v Millett at 683. The nature and quality of the plaintiff's occupation changed after the making of the agreement in March 1986. From that point he became solely responsible for the property, with no legal or practical recourse to his mother. The defendant gave up any control and the plaintiff was given sole possession and total responsibility. He became entitled, for the first time, to deal with the property as he wished. He could share it, cease to occupy it, lease it or improve it, all at his own expense and at his own discretion. 32The transfer of possession and control to the plaintiff from March 1986 was either pursuant to his agreement with the defendant or pursuant to the trust which she created. It was done on the faith of the agreement or the trust and by force of it: Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 at 432. I have reached the same state of satisfaction in relation to the evidence in this case as Glass JA explained in the Court of Appeal in Millett v Regent (1975) 1 NSWLR 62 at 72-3: In my opinion, the weight of evidence favouring the plaintiffs' submission is such that I would myself hold that the acts of part performance, viewed in the context of the family dealings, were such as to admit of no reasonable explanation except that of an agreement that upon the fulfilment of certain conditions the plaintiffs should become owners of the property as a matter of right and not of favour. 33The defendant gave no evidence of any conversations from which it might have been inferred that the plaintiff's possession was pursuant to an arrangement or agreement different from one of the general nature alleged. She merely insisted, as I have explained, on outright denials and the subsistence of her (subjective) intention to return. In my view, her subjective intention, for what it is worth, was that her son should have the ownership of the property to deal with as he wished. She held that intention in 1986 and she manifested that intention in 2006. She has now changed her mind. 34I should not allow the requirements for writing in Sections 54A and 23C of the Conveyancing Act to be used as instruments of fraud. I am justified in doing so because of the acts of part performance to which I have referred. The cogency and singularity of the evidence in this case is of a different order to that which existed in Khoury v Khouri. And in that case, although the claim failed, Bryson J emphasised the significance of conduct such as that which has occurred in this case. He referred to: ...acts of ownership such as taking possession, paying rates or paying for the upkeep or improvement of the property, or receipt of rent or profits, or any other act at all. Acts of part performance have been almost universally closely related to possession and use or tenure of the land itself, such as where a purchaser is put into possession by the vendor, or allowed to take possession by the vendor, or where the purchaser carries on improvements. They have not necessarily been acts which the contract required to be done. Acts on the land can much more readily be seen as unequivocally referable to the contract than payments of money.

Other Matters 35The submissions for the defendant directed attention to several other features of the evidence, none of which I regard as persuasive. One matter that emerged tangentially in cross-examination, but without exploration or any testing, was that the defendant may have left some clothes in the Alexandria property. Another was her assertion that she suffered some reduction in her Australian pension because the relevant department was aware or became aware that she was the registered proprietor of the Alexandria property. 36I do not regard either of these matters as having sufficient weight to detract from the weight of evidence that I have already explained. I do not think anything turns on the clothes. Their possible presence in the Alexandria property, is too nebulous a consideration. If the defendant is correct, they were abandoned a quarter of a century. As far as the pension is concerned, I do not regard this evidence as reliable or probative. There was no evidence of what the defendant may or may not have said in response to the position supposedly taken by the relevant department and no documentary support for her contention in circumstances where one might have expected the existence of documents to corroborate her assertion. Having regard to my views as to the defendant's credibility, I attach no significance to this evidence. 37The defendant's counsel also adverted to the likelihood that the value of the Alexandria property was greater than the value of the apartment at Alicante or the defendant's one third share of it. There was no evidence about this but I am prepared to assume it is correct. However I do not think it matters. The defendant received from the plaintiff the opportunity of establishing herself in Spain and the ability to spend the rest of her life there. The value to her of the agreement is not to be measured only by reference to the comparative monetary values of each property. If this were an important matter, the defendant had an opportunity to lead evidence on the topic addressing the extent of the disparity. She did not do so. I do not think that any inference based upon the comparative values of the properties should affect my conclusion.

Intention to Enter into Legal Relations 38The defendant also contended that looked at objectively, there was no intention to enter into legal relations. I have reached the opposite conclusion. There is, of course, no necessary presumption against such an intention, even within the family context: Tadrous v Tadrous [2010] NSWSC 1388 at [5]; Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95. In this case the subject matter, the circumstances, including the benefit to the defendant, the finality of her decision to leave Australia, the absence of any intention by her to return to Australia and her desire to confer a benefit on her son, all point to the seriousness of the defendant's intention, let alone that of the plaintiff. She consulted solicitors and had a will and power of attorney prepared. Her conversation with the plaintiff occurred in the context of and immediately following her dealing with the solicitors. Her statement to her son in the dining room in March 1986 was, I am satisfied, considered. So was the plaintiff's response. The result was, in my view, that she committed herself deliberately and legally to holding the property for her son and renouncing any interest in it. The probability that she intended to enter into legal relations is only amplified when one has regard to her silence on the matter over the next 25 years and the conversation with her son in 2006.

Costs 39Finally I should say something about costs. The defendant has been well represented but facts win cases and the facts that I have found do not permit me to find in the defendant's favour. However, in the exercise of my discretion, I do not propose to order the defendant to pay the plaintiff's costs. I do so because this is a family dispute. A costs order may have the effect of prolonging the dispute and may cause hardship to the defendant. There may even be difficulties of enforcement. It seems appropriate and fair that each party should pay his and her own costs, especially as I propose to act on the basis that any final orders I make be conditional on the plaintiff undertaking to the court that he take steps to transfer to his mother his legal interest in the Alicante property and any further interest in that property to which he may be entitled through the estate of his father. During the hearing, senior counsel for the plaintiff indicated his acceptance of such a condition on the relief which I would otherwise propose to make.

Orders 40In the result, the appropriate orders are broadly as follows: (a) The defendant should execute all such documents and do all such things as may be necessary to transfer to the plaintiff her right title and interest in the Alexandria property. (b) In the event of her failure to do so within 42 days of the making of these orders, a Registrar of the Court should be authorised to complete and execute all necessary documents on her behalf. (c) These orders are conditional on the plaintiff undertaking to the court that he shall himself do all such things and execute all such documents as may be necessary to ensure that he transfers to the defendant his interest in the property at Alicante in Spain, including any interest in that property to which he may be entitled through the estate of his father. 41I will leave it to the parties to agree on the precise form of orders to reflect these reasons and the draft orders which I have proposed. If there is any need to consider the form of undertaking from the plaintiff to which senior counsel for the plaintiff acquiesced in the course of addresses, then I will deal with that at any time convenient to the parties on a Friday morning in the Expedition List. Subject to that, once the parties have agreed on the precise form of orders, they should deliver them to my associate. The exhibits may be returned. oOo DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 September 2012