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

1 I agree with the reasons for judgment prepared by Nettle, J.A., that the appeal should be dismissed.

2 Having had the advantage of reading the reasons for judgment prepared by Nettle, J.A., I agree with his Honour that the appeal should be dismissed, for the reasons given.

3 This is an appeal from a judgment following trial in the Common Law Division, given on 15 September 2003. The judge held that the Deputy Commissioner of Taxation ("the Deputy Commissioner") had standing to seek a declaration that the first and second appellants (Fadi and Claudette Sarkis) were beneficially entitled to land registered in the names of the third and fourth appellants (Fayez and Greta Sarkis), and his Honour declared that Fadi and Claudette Sarkis were so beneficially entitled.

The decision below

4 The history of the matter may be stated briefly. On 28 September 2001 the Deputy Commissioner obtained judgment against Fadi Sarkis in the sum of $5,326,645.36 and against Claudette Sarkis in the sum of $5,334,244.79. The judgment debts remain outstanding. On 16 November 2001 the Deputy Commissioner instituted a fresh proceeding seeking a declaration that Fadi and Claudette Sarkis were the beneficial owners of a residential property situate at 79 Grantham Street Brunswick, of which the registered proprietors are Fayez and Greta Sarkis. The matter then came on for trial before the judge on 3 September 2003 and continued on 4 and 5 September 2003. At the trial the Deputy Commissioner tendered a number of documents in support of the following allegations:

1. Fayez and Greta Sarkis had given the property to Fadi and Claudette Sarkis in October 1987 (by way of oral gift);

2. For all relevant purposes Fadi and Claudette Sarkis and their family had remained in occupation of the property paying all rates and taxes and other outgoings on the property;

3. In late 1993, Fadi and Claudette had borrowed $50,000 on the security of the property for the purpose of rebuilding the house on the property and they had done so with the consent of Fayez and Greta Sarkis;

4. Thereafter, Fadi and Claudette Sarkis had in fact spent at least $215,000 in rebuilding the house on the property with the knowledge and approval of Fayez and Greta Sarkis; and

5. The oral gift of the property was not revoked before Fadi and Claudette spent those moneys in rebuilding the house.

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:

"24. A number of categories of cases have emerged in this area of law. In Giumelli v Giumelli, the passage relied upon by counsel for the defendants appears in the discussion of the category of cases identified by the Privy Counsel in Plimmer v Mayor, etc, of Wellingto__n where it was said that the 'Court must look at the circumstances in each case to decide in what way the equity can be satisfied'. Plimmer was not a case of an incomplete gift. It concerned a situation where the holder of a revocable licence had made improvements at the request of the proprietor. The High Court in Giumelli also identified Baumgartner as another category of case that turned on

'the general equitable principle which restores to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstance is in which it was not intended that the other party should enjoy them'.

Baumgartner also was not a case of an incomplete gift. That latter category was referred to in Giumelli as one where the relief

'was found in an assumption as to the future acquisition of ownership of property which had been induced by representations upon which there had been detrimental reliance by the plaintiff.'

'This is a well recognised variety of estoppel as understood in equity and may found relief which requires the taking of active steps by the defendant.'

25. In my view, the present case on the above facts, is clearly in the third category [scil. where relief is found in an assumption as to the future acquisition of ownership of property which had been induced by representations upon which there had been detrimental reliance by the plaintiff] and the first and second defendants would be regarded in equity as the beneficial owners of the property and entitled to orders compelling the third and fourth defendants to transfer legal ownership to them. The third and fourth defendants may properly be said to hold the property on a constructive trust in favour of the first and second defendants, a trust being one that is proprietary in nature."[4]

Grounds of appeal

10 The grounds of appeal are in substance that:

a) The judge erred in the determination of the no case submission, by drawing inferences adverse to the appellants.

b) The judge erred in holding that the Deputy Commissioner had standing to obtain the declaratory relief which was sought, because the Deputy Commissioner did not have a sufficient interest in the subject matter of the proceeding or alternatively because her claim was precluded by s.3(5) of the Supreme Court Act.

c) The declaratory relief which was sought related to a hypothetical question and ought therefore to have been refused .

d) The judge erred in failing to provided full and proper reasons for his decision on the substantive issue of fact and law of the beneficial ownership of the property.

e) The judge erred in holding or finding that Fadi and Claudette Sarkis held the land as constructive trustees for Fayez and Greta Sarkis.

f) The judge erred in holding that the third and fourth respondents were beneficially entitled to the whole of the property when the minimum equity was no more than an interest commensurate with the amounts of money which the third and fourth appellants had spent on the property.

The no case submission

11 Before this court the appellants submitted that the judge erred in deciding the no case submission by drawing inferences adverse to the appellants about matters on which there was no direct evidence. They contended that the burden of proof was on the Deputy Commissioner to establish that Fayez and Greta Sarkis encouraged and induced Fadi and Claudette Sarkis to assume that the property would be theirs, and that Fadi and Claudette Sarkis spent money in redeveloping the property on the basis of that assumption, and that the appellants were not under any obligation to adduce evidence about those matters. According to the appellants, the Deputy Commissioner's documentary case was inadequate to discharge the burden of proof and such direct evidence as there was (including in particular a letter of 23 December 1999 from the third and fourth appellants to Centrelink Compliance) tended to contradict the existence of a constructive trust. It followed in the appellants' contention that the judge should have dismissed the claim.

12 I do not accept the contention. In my opinion there was a substantial amount of evidence in support of the Deputy Commissioner's case, especially in the answers to interrogatories sworn by Fadi and Claudette Sarkis and in the documents identified in the answers, and I do not accept that the judge was prohibited from drawing inferences adverse to the appellants on the basis of that evidence. In the answers to interrogatories it was deposed among other things that:

• "The [property] was given to [Fadi and Claudette Sarkis] as a gift by [Fayez and Greta Sarkis] in October 1987"[5];

• After the gift of the property in 1987, Fadi and Claudette Sarkis had had sole occupation of the property paying all rates and taxes and other outgoings on the property and had insured the property in their own names as owners[6];

• In late 1993 Fadi and Claudette Sarkis 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[7];

• Fadi and Claudette Sarkis had spent at least $215,000 rebuilding the home on the property with the knowledge and approval of Fayez and Greta Sarkis,[8]

In the documents identified in the answers to interrogatories it appeared that Fadi and Claudette Sarkis had sought and obtained insurance cover in their own names as owners of the property and at one stage let the property in their own name as owners.

13 So far as inferences are concerned, it is not in doubt that the burden of proof was on the Deputy Commissioner and that the appellants were not obliged to adduce evidence. They were entitled to put the Deputy Commissioner to proof and to submit that she had failed to make out her case. It may also be that upon the no case submission the judge was prevented from drawing inferences adverse to the appellants arising out of the appellants' decision not to call evidence. But it does not follow that the judge was precluded from drawing inferences adverse to the appellants based on the documentary evidence. According to the no case test formulated in Protean, the judge had to decide whether there was evidence that ought reasonably to satisfy him as the tribunal of fact that the facts sought to be proved were established.[9] And as Menzies, J. stated in Jones v Dunkel[10]:

"... 'Inferences from actual facts that are proved are just as much part of the evidence as those facts themselves. In a civil cause `you need only circumstances raising a more probable inference in favour of what is alleged ... where direct proof is not available it is enough if the circumstances appearing in evidence give rise to a reasonable and definite inference; they must do more than give rise to conflicting inferences of equal degree of probability so that the choice between them is mere matter of conjecture: see per Lord Robson, Richard Evans & Co. Ltd. v. Astley. ... All that is necessary is that according to the course of common experience the more probable inference from the circumstances that sufficiently appear by evidence or admission, left unexplained, should be that the injury arose from the defendant's negligence. By more probable is meant no more than that upon a balance of probabilities such an inference might reasonably be considered to have some greater degree of likelihood.'"

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):

"I do not propose to go in detail through the evidence relied upon by the plaintiff. An examination of the documents aided by the defendants' answers to interrogatories clearly justifies those findings."

The letter of 23 December 1999 was the subject of a number of the defendants' answers to interrogatories.

19 Any remaining doubt as to whether the letter was included in "the documents" and "defendants' answers to interrogatories" is excluded by reference to the trial transcript. It may be seen there that the Deputy Commissioner put forward the letter of 23 December 1999 as one of the documents which was central to her case and there was considerable discussion as to its meaning and significance in the course of final addresses. The following exchange, from page 198 of the transcript, serves as a useful example:

[Counsel for the defendants]: "...The plaintiff's case at its highest, stands on ...the 23 December 1999 letter, but that is a letter of the third and fourth defendants. It gives rise as to what their understanding of the circumstances were, but---"

[His Honour]: "It is in evidence against all defendants, isn't it?"

[Counsel for the defendants]: "Yes, it is. It is in evidence against all defendants, and true, my friend would invite your Honour to draw the inference against the first and second defendants for not giving evidence to rebut what is contained in that letter which would flow against them, namely the statement, that of Mr and Mrs Sarkis senior in 1999 about 'the house is totally his' in the context of a letter to Centrelink, so while it says that the house is totally his [Mr Sarkis junior], it still doesn't elevate it as to the precise nature of the estate from which your Honour can then ascertain whether or not there was an expectation---"

[His Honour]: "But if the parents assert [in the letter] that some 12 years earlier they had given a house to their son and the evidence is the son and his wife moved in there and they've been living there ever since, isn't an inference open on the evidence that the son and the daughter had an expectation that it had been given to them, and then you face a Jones v Dunkel problem, don't you?"

[Counsel for the defendants]: "Yes, but the plaintiff still needs to show what it was that was in fact given to them. The evidence falls short. It doesn't nail the defendant[s] by saying precisely, or proving precisely what it was that was given. Could be one of two or three different possibilities".

Standing

20 Turning then to the question of standing, I agree with the judge for the reasons that he gave that the Deputy Commissioner did have standing to seek the sort of declaratory relief that was awarded. I take the law on the subject to be as stated by Gibbs, J. in Forster v Jododex Aust. Pty Ltd[23]. The jurisdiction of a judge of the Supreme Court to make a declaration is a very wide one and, where it is a question of defining the rights of two parties, the power to make a declaration is limited only by discretion. The rules summarized by Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd[24] should in general be satisfied. The question must be a real and not a theoretical question and the person raising it must have a real interest to raise it, and the plaintiff must be able to secure a proper contradictor (which is to say someone presently existing who has a true interest to oppose the declaration sought). Beyond that, however, it is neither possible nor desirable to fetter the discretion by laying down rules as to the manner of its exercise. It is doubtful that more principle is involved than that the power to grant a declaration should be exercised with a proper sense of responsibility and a full realisation that judicial pronouncements ought not to be in issue unless there are circumstances that call for their making.[25] These points were reiterated by majority of the High Court in Ainsworth v Criminal Justice Commission[26]:

"It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which '[i]t is neither possible nor desirable to fetter ... by laying down rules as to the manner of its exercise.' However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. The person seeking relief must have 'a real interest' and relief will not be granted if the question 'is purely hypothetical', if relief is 'claimed in relation to circumstances that [have] not occurred and might never happen' or if 'the Court's declaration will produce no foreseeable consequences for the parties".

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:

"The vice in asking the present questions is rather that the answers to them would be advisory. As was said in Bass, 'one crucial difference between an advisory opinion and a declaratory judgment is the fact that an advisory opinion is not based on a concrete situation and does not amount to a binding decision raising res judicata between parties'. Moreover, as pointed out in the same paragraph, one critical test is whether the declaration will settle the dispute finally. That certainly will not occur here; indeed the facts as found by the learned judge may no longer be the appropriate basis for the asking of any question whether now or in the future, because of the coming into existence after her judgment of the special funding and solvency certificate. The real objection, however, is that, at least since the deed of company arrangement came into effect, the answers given to the questions posed and answered by para 14 will not settle the real dispute finally. That dispute is, as it must now be, whether it is appropriate for the deed to be terminated or for it to be amended so as to delete the provisions which deny the right of the appellant in relation to the 'top up' claims. That dispute is being heard in another court but, as I have already said, any form of declaratory relief as to para14 in this Court will not even resolve any factual issue in that court, but will only be a step in a chain of legal reasoning which may lead to the appellant gaining the relief it desires there."[33]

24 That was not so here. Here the facts were known or at least capable of being ascertained, and once ascertained, as they were, the declaration was capable of finally determining the dispute as to whether Fadi and Claudette Sarkis were beneficially entitled to the property[34]. It does not render an issue hypothetical that its determination is dependent upon findings of fact to be made in the proceeding. To the contrary, an issue is more likely to be hypothetical when its determination is not dependent upon the facts as found or otherwise established in the proceeding.[35]

25 It makes no difference either that the final decision as to whether to execute against the property might come to rest with a trustee in bankruptcy or a receiver, or that for some reason the Deputy Commissioner might later change her mind about wishing to execute against the property. None of those possibilities makes the question of beneficial entitlement hypothetical in the relevant sense or detracts from the conclusion that the declaration was capable of finally determining the dispute as between the Deputy Commissioner and the appellants as to the beneficial ownership of the property. So much is demonstrated by the decision in Oil Basins Ltd v The Commonwealth[36], in which a prospective taxpayer sued the Commissioner (in advance of assessment and when it was not known whether the Commissioner would issue an assessment) for a declaration that the plaintiff was not liable to be assessed to tax. In rejecting a contention that the declaration sought would be hypothetical, Dawson, J. said:

"The question raised by the plaintiff is neither abstract nor hypothetical and the answer to that question will clearly produce consequences for the parties. In those circumstances I would, for my own part, doubt whether the failure on the part of the Commissioner to indicate whether or not he disputes the plaintiff's claim could preclude the plaintiff from seeking against him the relief which it does. The most that could be urged is that there is no proper contradictor, but I doubt whether that is so when the Commissioner's participation in the action is likely to force him to abandon his present stand of neutrality. Even if he were to maintain that stand, I doubt whether that would prevent him from being a proper contradictor. He clearly has a true interest in the plaintiff's claim and, if he were to choose not to oppose it and to abide by any order which the Court might make, that might perhaps amount to no more than the performance of his role as a contradictor in a particular manner."[37]

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:

"26. For the foregoing reasons the no case submission of the defendants fails. I turn then to the question whether the plaintiff has made out its case.

27. I have referred above to the facts which are established if the evidence taken at its highest from the plaintiff's point of view is considered. As it happens, I am also satisfied that those are the facts that should be found in any event. I do not propose to go in detail through the evidence relied upon by the plaintiff. An examination of the documents, aided by the defendants' answers to interrogatories, clearly justifies those findings. If there were any doubt, that evidence should be more readily accepted and relevant inferences more readily drawn because of the failure of the defendants to give evidence and the lack of evidence before me to explain that absence. I note that defence counsel suggested that the third defendant was currently overseas in Lebanon and too ill to travel. No evidence was placed before me, however, to substantiate those instructions."

28 In my opinion the criticism of paragraphs 25 to 27 is misplaced. It is only if those paragraphs are read alone and out of context that they may cause some doubt. But if the reasons are read as a whole, as they should be, I do not think that there can be any room for doubt. Paragraphs 25 to 27 are evidently based on the findings of fact set out in paragraph 19. In turn they are based on the evidence identified in paragraph 27. And in turn it is necessarily implicit in the conclusion expressed at paragraph 24 that his Honour was satisfied that Fadi and Claudette Sarkis had made an assumption as to the future acquisition or ownership of the property, which had been induced by representations of the Fayez and Greta Sarkis, and that they had relied upon that assumption to their detriment. As it appears to me, there is no other way of construing his Honour's statement at paragraph 25 that "the present case on the above facts, is clearly in the third category."

29 If, however, there were some doubt as to the terms in which his Honour expressed his conclusion, I should be in no doubt as to the rectitude of the substance of his Honour's conclusion. It depended solely upon unchallenged documentary evidence, and the inferences to be drawn from it and from the absence of the appellants from the witness box, and upon the principles articulated in Dillwyn v Llewlyn[39] and explained in Olsson v Dyson[40]. His Honour described those as the third category of cases, and as appears in the analysis of the subject which is undertaken in Meagher Gummow & Lehane[41], the third category of cases is characterised by the following factors:

"...(a) an expectation or belief by A as to the property of B, for example, that...B has given or will give A an interest in it whether full ownership...[as in Dillwyn v Llewlyn]...or a licence to stay permanently or for a period on the land...[ as in Plimmer v Mayor of Wellington]; (b) knowledge by B of this expectation or belief of A; (c) activity of A in reliance upon his expectation or belief [as by] expenditure upon the property... ; (d) the interest or expectation of A must be one which B could lawfully satisfy (for example, statute does not prohibit transfer of title...); (e) encouragement by B of the activities of A under (c) or at least knowledge of those activities with failure to assert his title to his property when they are adverse to it... 'so that he dishonestly remained wilfully passive'...and therefore it is fraudulent for him to rely on his legal rights to defeat the expectation encouraged by his conduct or lack of it....; and (f) knowledge by B of his property rights as under his enjoyment, control and disposition..."

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:

"After talking to my son Sam on the phone today you asked me to write to you in reference to 79 Grantham Street West Brunswick.

1st. Me and my wife Greta Sarkis own one property and that is at 1 Howson Street West Brunswick which is currently rented out. I am currently staying with my son Sam Sarkis at 31 Vincent Street Coburg who he owns with his wife Samiha Sarkis. I do not own that property either.

The 79 Grantham Street [W]est Brunswick was give to my son Fadi Sarkis and his wife Claudette Sarkis as a gift by me and my wife Greta back in October 1987 (12 Years ago). The condition of the house was in a very poor condition, since then my son Fadi has rebuilt a new home.

I have not changed ownership on the title due to the fact my son is a heavy gambler. He has been paying all bills, rates and Utilities associated with house since he took over in 1987.

I do not collect any money or gifts from him or anyone else on that property. The house is totally his. I am just securing his family with a roof over their heads (He has 3 Children) or otherwise there's a possibility he could loose the house from gambling.

My son Fadi is well known to Crown Casino and other gambling venues and he has a bad gambling habit and that's why the house is still in me and my wife's ownership name. (as a security) it is just too risky to change ownership. We are more concern about his wife and children who will be the losers.

The Information give to you is totally true and honest and that I am prepared to be sworn on it."

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.

[1] "(5) A judgment in any proceeding must be enforced in accordance with Chapter I of the Rules of the Supreme Court and not otherwise."

[2] Namely: having Fadi and Claudette Sarkis declared bankrupt and a trustee in bankruptcy appointed (who would be bound by the declaration); obtaining a warrant for the seizure and sale of the property under Order 69 of the Rules of Court; and obtaining an order for the appointment of a receiver of the property, pursuant to Order 74 of the Rules of Court.

[3] [2003] VSCA 117; (2003) 176 F.L.R. 393 at 400-402[14]-[16] and 403-406[21]-[30], per Ormiston, J.A.

[4] Citations omitted.

[5] See interrogatory 8 (which refers to the letter of 23 December 1999) and the answer thereto.

[6] See interrogatories 11 , 17 and 18 and the answers thereto.

[7] See interrogatories 9, 10, 14 and 15, and the answers thereto.

[8] See interrogatory 15 and the answer thereto.

[9] Protean (Holdings) v American Home Assurance Co [1985] VicRp 18; [1985] V.R. 187 at 240.

[10] [1959] HCA 8; (1959) 101 C.L.R. 298 at 309-310.

[11] Richard Evans & Co Ltd v Astley [1911] A.C. 674 at 687, per Lord Robson; Jones v Dunkel (1959) 101 C.L.R. at 310, per Menzies, J; R v Bilick (1984) 36 S.A.S.R. 321; 11 A.Crim.R. 452; Festa v The Queen [2001] HCA 72; (2001) 208 C.L.R. 593 at 595[5].

[12] [1999] HCA 22; (1999) 197 C.L.R. 269 at 298 [82] et seq.

[13] (1999) 197 C.L.R. at 309 and following.

[14] (1941) 42 S.R. (NSW) 1 at 5.

[15] [1959] HCA 8; (1959) 101 C.L.R. 298 at 330 -331.

[16] [1985] VicRp 18; [1985] V.R. 187 at 239.

[17] Pascoe v Federal Commissioner of Taxation (1956) 30 A.L.J.R. 402; Jacob v Federal Commissioner of Taxation (1971) 45 ALJR 568 cf_. Gauci v Federal Commissioner of Taxation_ [1975] HCA 54; (1975) 135 C.L.R. 81 at 87.

[18] See in particular paragraph [27] of the Reasons for judgment.

[19] [1985] VicRp 18; [1985] V.R. 187 at 215.

[20] In a case of trial before judge alone.

[21] [1959] HCA 8; (1959) 101 C.L.R. 298 at 330-331.

[22] But see Swain v. Waverley Municipal Council [2005] H.C.A. 4 at [37] - [39], [154] - [155] and [237].

[23] [1972] HCA 61; (1972) 127 C.L.R. 421 at 435.

[24] [1921] 2 A.C. 438 at 448.

[25] Forster v Jododex Aust. Pty Ltd, (1972) 127 CLR at 438; Ibeneweka Egbuna [1964] 1 W.L.R. 219 at 225, per Lord Radcliffe.

[26] [1992] HCA 10; (1992) 175 C.L.R. 564 at 581-2.

[27] Forster v Jododex Aust Pty Ltd (1972) 127 CLR at 438.

[28] See and compare Sunrise Auto Ltd v Deputy Commissioner of Taxation (1995) 61 F.C.R. 446 at 471, per Beaumont and Beazley, JJ.

[29] Marriner v Smorgon [1989] VicRp 47; [1989] V.R. 485 at 508, per Ormiston, J.

[30] Borchard, Declaratory Judgments (1934) at 6-7, which is cited in Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 C.L.R. 334 at 355.

[31] [2003] VSCA 117; (2003) 176 F.L.R. 393.

[32] [1999] HCA 9; (1999) 198 C.L.R. 334.

[33] [2003] VSCA 117; (2003) 176 F.L.R. 393 at 400-402[14]-[16] and 403-406[21]-[30].

[34] cf. Young v Federal Commissioner of Taxation [2000] ATC 4133 at 4140.

[35] Bass v Permanent Trustee Co Ltd [1999] HCA 9; (1999) 198 C.L.R. 334 at 335[45]-[47].

[36] [1993] HCA 60; (1993) 178 C.L.R. 643.

[37] ibid, at 649.

[38] Muschinski v Dodds [1985] HCA 78; (1986) 160 C.L.R. 583 at 613 -614, per Deane, J.

[39] [1862] EngR 908; (1862) 4 De G.F. & J. 517, 45 E.R. 1285.

[40] (1969) 120 C.L.R. 365.

[41] Equity, Doctrines and Remedies, 4th.Ed. at [17-105].

[42] Trustee Act 1958, s.33.

[43] The Perpetual Executors & Trustees Association of Australia Ltd. v Wright [1917] HCA 27; (1917) 23 C.L.R. 185 at 192, per Barton, A.C.J.

[44] O'Donnell v. Reichard [1975] VicRp 89; [1975] V.R. 916 at 921 per Gillard, J. See also Earle v. Castlemaine District Community Hospital [1974] VicRp 86; [1974] V.R. 722 at 734-5 per Lush, J.; Payne v. Parker [1976] 1 N.S.W.L.R. 191 at 201-2 per Glass, J.A.; Romanos v. Pentagold Investments Pty. Ltd. [2003] HCA 58; (2003) 77 A.L.J.R. 1882 at [49].

[45] [1999] HCA 10; (1999) 196 C.L.R. 101 at 123.

[46] ibid. at 123 -125, per Gleeson, C.J. and McHugh, Gummow and Callinan, JJ.

[47] (1999) 196 C.L.R. at 123.