Sarkis & Ors v Deputy Commissioner of Taxation [2005] VSCA 67

Sarkis & Ors v Deputy Commissioner of Taxation [2005] VSCA 67 - VSCA 2005 case summary — Zoe

[11]

The appellants did not dispute those allegations, and they elected not to call any evidence. But they submitted that they had no case to answer.

5 Originally, the no case submission was based upon a contention that the gift being oral was rendered ineffective by s.53 of the Property Law Act 1958. But in the end that contention was not pressed, presumably because of s.53(2) of the Act.

6 The appellants also argued that the Deputy Commissioner's claim for declaration was in aid of her attempts to execute on the judgments for $5,334,244.79 and $5,326,645.36 respectively, and was for that reason contrary to s.3(5) of the Supreme Court Act 1958.[1] The judge rejected that argument. It was not in doubt that the Deputy Commissioner was seeking the declaration in aid of execution. One of her officers deposed that it was so, and he identified three execution options which the Deputy Commissioner had under consideration.[2] But the judge held that a declaration of the kind sought was not an enforcement of the judgment within the meaning of s.3(5). His Honour considered that the section is directed to the particular procedures for enforcement that are referred to in the Rules - of which warrants of execution are an example - and to make clear that what is set out in the Rules constitutes a code in relation to procedures of that kind. It does not prevent other steps using other kinds of procedures, either as a preliminary to enforcement or in aid of enforcement by procedures of the kind prescribed by the rules. Alternatively, his Honour said, if the declaration which was sought were an enforcement of the judgment within the meaning of s.3(5), it was a procedure for which the Rules provided and so it complied with s.3(5).

7 The appellant's third argument in support of the no case submission was that the declaration sought was directed to a hypothetical issue, in as much as a final decision about the assets to be subjected to execution would or at least could be for a trustee in bankruptcy or the Sheriff or a receiver, depending upon the mode of enforcement that may be selected. And the appellants referred in support of that submission to what was said by this Court on the topic of hypothetical issues in Ansett Ground Staff Superannuation Fund Proprietary Limited v Ansett Australia Limited and Ors[3]. But the judge also rejected that contention.

8 The judge noted the caution expressed in Ansett about the determination of issues that may ultimately need to be considered by a different court, but his Honour said that the critical question in this case was whether an issue estoppel would arise following a decision on the merits, and whether the issue estoppel could be relied upon so as to prevent the appellants re-litigating the question. The judge accepted that questions as to the existence of a beneficial interest in a property might ordinarily be determined in the context of execution proceedings, whether in bankruptcy or under warrant of execution or upon the appointment of a receiver, and he took into account that Fadi and Claudette Sarkis did not wish to seek the aid of equity to complete the gift of the property and were not in the proceeding claiming an interest in the property. But his Honour concluded that those features of the matter, although complications, did not mean that the declaration would be directed to a hypothetical issue. He reasoned that the declaration sought was directed to the determination of a legal controversy and not to answering abstract or hypothetical questions, because: (a) the Deputy Commissioner had deposed that she intended to execute the judgment if successful, using one of the three identified methods of execution; and (b) in the event of any of those methods of execution being employed, the parties to this proceeding and their privies would be precluded by issue estoppel from re-litigating the question of whether Fadi and Claudette Sarkis were the beneficial owners of the property.

9 The appellants' final argument in support of the no case submission was that even if the Deputy Commissioner had standing to seek declaratory relief, the facts did not establish that Fadi and Claudette Sarkis were entitled in equity to the property or, if they had an equity in the property, it was limited to the amounts which they had expended in improving the property. The judge also rejected that argument. As his Honour put it:

[32]

Here the Deputy Commissioner's case was a circumstantial case, and so the inferences which were capable of being drawn from the facts that were proved by the direct evidence were just as much part of the evidence as those facts themselves.[11]

14 In Naxakis v Western General Hospital[12], Kirby, J. criticised the Protean test as by the words "ought" and "reasonably" introducing unnecessary complications and tending to invite the exercise of a non-existent evaluative function. Callinan, J.[13] said that the preferable test was that articulated by Jordan, C.J. in De Gioia v Darling Island Stevedoring & Lighterage Co Ltd[14], and that henceforth it should be applied. But their Honours were there speaking in the context of trial by jury - both judges emphasised that they were not dealing with the case of trial by judge alone - and the position is different where the trial is before judge alone. As Windeyer, J. observed in Jones v Dunkel[15], where the trial is of the latter kind the proposition "no case to answer" may obviously mean far more than: "is there evidence on which a jury could find for the plaintiff?". It may mean: "would you the judge on the evidence given, find for the plaintiff?" In such a case, the judge must decide whether he or she could find for the defendant on the evidence so far led. And as Tadgell, J. reasoned in Protean[16], it would be quite unrealistic to expect him or her to do so without being able to consider all questions which bear on the sufficiency of the evidence and without power to draw or to decline to draw all inferences from the evidence given on which the respondent party might seek to rely.

15 In this case the facts in issue were whether Fayez and Greta Sarkis had created in the minds of Fadi and Claudette Sarkis an assumption as to the ownership of the property and whether Fadi and Claudette Sarkis had acted as if they were owners, and remained in possession and spent money in improving the property on the basis of that assumption. Apart from the direct evidence on those issues, the appellants' communications and state of mind in dealing with property were properly to be inferred from the nature of their dealings and the circumstances in which they occurred.[17]

16 The appellants contended that even if all that were so, the judge in this case went beyond drawing inferences based upon direct evidence and decided the no-case application on the basis of an adverse inference derived from the appellants' decision not to adduce any evidence. I do not think that is so. I see nothing in the reasons for judgment which suggests that his Honour drew any inference of that kind. There is no mention of it and the overall thrust of the reasons on the no case submission is that it was the contents of the documents put in evidence and the appellants' answers to interrogatories upon which his Honour based his conclusion.[18] It is also unlikely that his Honour would have based his decision on the no-case application on an inference of that kind. Young, C.J. stated in Protean[19] that it is not to be done, and that pronouncement is ordinarily followed as a matter of course. Given the very considerable experience of the judge it is improbable that he would have done otherwise.

17 As an aside, however, I question why a judge when deciding a no case submission[20] should not be permitted to draw such inferences as might ordinarily be drawn from a party's decision not to adduce evidence upon an issue. After all, by making a no case submission, and electing as a condition of making that submission not to call evidence, a defendant in effect asks the judge to decide whether the judge could find for the plaintiff on the evidence thus far led and assuming that the defendant will not give evidence. As is demonstrated in the judgment of Windeyer, J. in Jones v Dunkel[21], albeit in a slightly different context, a jury faced with the same task would be entitled to draw an adverse inference from the silence of the defendant notwithstanding that the decision not to give evidence arose from an earlier and unsuccessful no case submission of which the jury knew nothing.[22]

18 Finally, on this aspect of the matter, the appellants contended that whatever adverse inferences might be drawn against them, the judge was in error in failing to have regard to the letter of 23 December 1999 and the inferences favourable to them to which they say it gave rise. I shall refer to the letter in greater detail below and it will be convenient to deal then with the inferences to which it gives rise. But I may say now that I do not accept that the judge failed to have regard to the letter or to consider its effect in the context of all the other evidence. While it is not mentioned specifically in the reasons for judgment, I think it plain that it is included in the judge's collective reference in the reasons to the documents which informed his decision. As his Honour put it (after referring to his findings of fact):

[42]

21 In this case the Deputy Commissioner had a real interest in establishing that Fadi and Claudette Sarkis were beneficially entitled to the property. She wished to ensure that in the event of execution proceedings the Sarkis's could not contend that the property was immune from execution. It is not to the point that the question might just as well have been determined in subsequent proceedings or even that that is the way in which it would usually be done. A plaintiff is not necessarily to be refused declaratory relief just because another form of relief is available,[27] and here a declaration was a more satisfactory remedy because it enabled the Deputy Commissioner to ascertain in advance of execution proceedings whether the property would be available for execution. Practically speaking, it would have been a waste of time and resources to insist that execution proceedings be instituted in order to determine whether the property was available for execution.[28]

Supreme Court Act 1958, s.3(5)

22 I am also of the opinion that the Deputy Commissioner was not prevented by s.3(5) of the Supreme Court Act from seeking a declaration in aid of execution of the judgment. Like the judge I read the section as being directed to forms of execution of a kind for which the Rules provide: for example, because Order 74 provides for warrants of seizure and sale, s.3(5) prohibits the issue of a writ of fi fa or venditioni exponis[29]. A declaration of right is not a form of execution of the kind for which the rules provide, or indeed any other kind of execution. It is "an affirmation, by the authorized societal agent of the state... of the legal consequences attending a proved or admitted state of facts. It is a conclusive adjudication that a legal relation does or does not exist."[30]

Hypothetical issues

23 I agree with the judge too that the question of whether Fadi and Claudette Sarkis were beneficially entitled to the property was not hypothetical and consequently that the observations made in Ansett[31] about hypothetical issues do not apply in this case. Those observations were directed to cases like Bass v Permanent Trustee Co Ltd Co Ltd[32] in which facts are not known, and hence in which a declaration if made could be no more than an advisory opinion, or in which even if the facts are known the declaration will not settle the dispute. As Ormiston, J.A. explained in Ansett:

[46]

26 Contrary also to the appellants' contentions, it was no bar to the declaration in this case that Fadi and Claudette Sarkis had not sought the aid of equity before the institution of the proceeding. In the way in which the Deputy Commissioner put her case below, the constructive trust was said to have arisen out of the facts that Fayez and Greta Sarkis had been induced by Fadi and Claudette Sarkis to assume that ownership of the property had been or would be transferred to them and that they had expended more than $215,000 in rebuilding the property in reliance upon that assumption. Upon that analysis, Fadi and Claudette Sarkis became entitled in equity to have the property transferred to them once they had spent the money - it required no assertion of entitlement to achieve that result[38] - and, until and unless the position altered, it was competent for the Deputy Commissioner to seek a declaration that Fadi and Claudette Sarkis were so entitled. It may be that their equity stood to be defeated upon registration of a transfer to a third party, or by a purchaser otherwise taking for value and without notice, or even by Fadi and Claudette Sarkis choosing to release Fayez and Greta Sarkis from their equitable obligations. But it was not suggested that such an event had occurred and no doubt such a disposition if undertaken would be subjected to scrutiny for the purposes of s.172 of the Property Law Act 1958.

The adequacy of the reasons

27 The appellants next contended that the judge had erred in failing to provide "full and proper reasons for his decision on the substantive issue, of fact and law" and reference was made to paragraphs 25 to 27 of his Honour's reasons for judgment. It was submitted that what was there said was deficient in failing to set out any findings as to whether and how Fayez and Greta Sarkis induced Fadi and Claudette Sarkis to assume that they were the owners of the property and as to whether and why it was on the basis of that assumption that Fadi and Claudette Sarkis had remained in occupation and spent substantial amounts of money in re-building the property. I set out paragraph 25 earlier in these reasons. Paragraphs 26 and 27 were as follows:

[50]

As the facts were found to be, each of those factors was present in this case.

Constructive trust

30 That leaves to be considered the appellants' contention that there was no evidence or insufficient evidence to support the judge's conclusion as to the existence of a constructive trust and the further alternative contention that the evidence mandated a positive holding that there was no constructive trust.

31 As to the first of those points the appellants submitted that it was not enough for the Deputy Commissioner to show that Fayez and Greta Sarkis may have allowed Fadi and Claudette Sarkis to live in the property indefinitely. They contended that the question was instead whether Fayez and Greta Sarkis' conduct had been such that in all the circumstances they were bound in conscience to transfer title and the entire beneficial ownership of the property to Fadi and Claudette Sarkis. Consequently, they submitted, it was critical to the Deputy Commissioner's case for the Deputy Commissioner to establish that Fayez and Greta Sarkis had encouraged or induced Fadi and Claudette Sarkis to spend money on improving the property. According to the appellants, the documentary case presented by the Deputy Commissioner fell well short of the mark. In particular, the appellants submitted, there was no direct evidence as to whether Fayez and Greta Sarkis had encouraged or induced Fadi and Claudette Sarkis to spend money on improving the property; it was not open to the judge to draw any inference on the point which was adverse to the appellants; and if it were open to draw any inference about the matter, it should go no higher than that Fayez and Greta Sarkis had acquiesced in Fadi and Claudette Sarkis spending money on improving the property. In the appellants' submission, that would be no different in point of principle to a landlord acquiescing in expenditure by a tenant on the fit-out of leased premises.

32 I reject those submissions. As has been seen the judge approached the case on the basis that the question was whether Fayez and Greta Sarkis' conduct had been such that in all the circumstances they were bound in conscience to transfer title and the entire beneficial ownership of the property to Fadi and Claudette Sarkis, and in my opinion there was evidence on the basis of which his Honour was entitled to conclude that the question should be answered affirmatively. As I observed earlier in these reasons, the direct evidence was enough in itself to establish that the gift had been made in 1987; and that Fadi and Claudette Sarkis had thereafter remained in occupation of the property paying all rates and taxes and other outgoings on the property; and that they had borrowed $50,000 on the security of the property for the purpose of rebuilding the home with the consent of Fayez and Greta Sarkis; and that they had spent at least $215,000 rebuilding the home on the property with the knowledge and approval of Fayez and Greta Sarkis; and that the gift had not been revoked either before the moneys were spent or at all. For the reasons already given, I am also of the opinion that it was open to the judge to draw inferences from those facts adverse to the appellants. I consider that his Honour was entitled to infer, as I would infer, that Fayez and Greta Sarkis induced Fadi and Claudette Sarkis to assume that they were the owners of the property, and that it was on the basis of that assumption that Fadi and Claudette Sarkis remained in occupation and spent substantial amounts of money in re-building the property. In point of principle such a situation goes far beyond that of a landlord acquiescing in expenditure by a tenant on the fit-out of leased premises.

33 The letter of 23 December 1999 from Fayez and Greta Sarkis to Centrelink Compliance was in terms as follows:

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34 According to the appellants it showed that Fayez and Greta Sarkis had expressly forborne from transferring title to the property to Fadi and Claudette Sarkis and that they had done so in order to protect Fadi and Claudette Sarkis from the claims of Fadi's gambling creditors. In turn that was said to imply that Fayez and Greta Sarkis had never intended to transfer the property to Fadi and Claudette Sarkis, or even to create in Fadi and Claudette Sarkis any interest in the property, and that they had never encouraged Fadi and Claudette Sarkis to believe that they did have such an intention. Another possibility was the creation of something in the nature of a protective trust, although the technicalities involved in that sort of arrangement[42] make it an unlikely possibility.

35 I am not persuaded. In my opinion the words "the house is totally his" point strongly to a recognition that the beneficial ownership lay in Fadi, and impliedly also with Claudette, both before and at the time at which the letter was written,[43] and the reference to a "security" may be taken as meaning no more than keeping the fact of Fadi and Claudette Sarkis' beneficial ownership secret from creditors. The likelihood of that construction is enhanced by the other documents that were in evidence before the judge. Among other things they showed that Fayez Sarkis had a "New Start Allowance Claim" on 9 November 1999 in which he declared that the only real property which he owned was a house other than the property and that his total asset value was only $86,000; and that applications for insurance and insurance policies had been made and issued in the names of Fadi and Claudette Sarkis as owner of the property; that leases of the property had been entered into by Fadi and Claudette Sarkis as owner of the property; and that Fadi and Claudette Sarkis otherwise paid all rates taxes and outgoings on the property; and that Fadi and Claudette Sarkis borrowed moneys on the security of the property; and the large amount of money which Fadi and Claudette Sarkis spent on improving the property. How probable is it that a man and woman would in the early 1990's outlay more than $215,000 on a property situate in West Brunswick in which they believed that they had no more interest than a right of indefinite occupation?

36 Like the judge, I would infer from the letter of 23 December 1999 taken with the other documents and conduct which I have mentioned that Fayez and Greta Sarkis induced Fadi and Claudette Sarkis to assume that they were the owners of the property, and that it was on the basis of that assumption that Fadi and Claudette Sarkis remained in occupation and spent substantial amounts of money in re-building the property. And like the judge too, I would be aided in drawing that inference by the fact that the appellants decided not to give evidence upon critical matters of which they alone had personal knowledge. Whatever might have been the position on the no-case submission, I am in no doubt that the rule in Jones v. Dunkel was applicable at the end of the case. Consistently with it, I would infer that whatever evidence the appellants might have given on matters of which they alone had personal knowledge, would not have assisted their case.[44]

Partial interest issue

37 Finally, it was put on behalf of the appellants that if any constructive trust were properly to be imposed, the judge had erred by failing to limit the scope of the trust to the $215,000 expended by Fadi and Claudette Sarkis in rebuilding the property. Again I do not agree. The submission is in large part based on what was said by the High Court in Giumelli v Giumelli[45]. As was there made plain, however, where a plaintiff has acted to his or her detriment in reliance upon the conduct of the defendant and consequently upon the basis of an assumed state of affairs, such that it would be unconscionable for the defendant to depart from the assumed state of affairs, the prima facie operation of the doctrine of equitable estoppel is to preclude the defendant's departure from the assumed state of affairs. It is only where relief framed on the basis of that assumed state of affairs would be inequitably harsh or would otherwise exceed what could be justified by the requirements of conscientious conduct that some lesser form of relief should be awarded. Such may be described as the minimum equity needed to avoid the relevant detriment or as moulding relief in order to do equity depending upon the circumstances, but often the only way to prevent the promisee suffering detriment is to enforce the assumed state of affairs.[46]

38 Taking the facts of this case as found, there is nothing to suggest that the prima facie operation of the doctrine would result in relief that would be inequitably harsh or would otherwise exceed what could be justified by the requirements of conscientious conduct. As the evidence stands it appears to me that it was well open to the judge to conclude that the minimum equity was to enforce the assumption that Fadi and Claudette Sarkis were the owners of the property. Other things being equal it cannot be supposed that the detriment which they have suffered as a result of building their home on the property and treating it as their own for almost twenty years could be alleviated by payment of no more than the amount which they spent at least twelve years ago in the process of rebuilding.

39 In Giumelli v Giumelli[47] the High Court had regard to the position of third parties with an interest in the subject property or at least who would likely be affected by a change in ownership of the property. The circumstances included an attendant partnership action, the fact that other members of the family had spent money on the property and the continued residence on the property of a member of the family who was party to the partnership action although not the action before the court. The court concluded that the result pointed inexorably to relief expressed not in terms of acquisition of title to land but in a money sum. In this case it was not suggested that there were any factors of that kind, and there was certainly no evidence of them before the judge.

Conclusion

40 I would dismiss the appeal.

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