Szeto v Situ

Judgment

1. BATHURST CJ: In these proceedings Ms Livy Szeto (the appellant) claimed a 50% interest in a residential property in Carlton, Sydney (the Carlton property), of which Mr Liming Situ (the respondent) was the registered proprietor. The Carlton property was purchased in September 1997. The purchase price was $260,000. A deposit of $26,000 was paid and the balance of purchase monies was funded in part from a loan from the Bank of Adelaide Ltd, in the sum of $208,000 leaving a balance payable of $27,209.11 (the shortfall). The source of the funds to pay the shortfall is a critical issue in this appeal.
2. The appellant's case in the Court below was that prior to the purchase of the Carlton property she and the respondent, her brother, agreed it would be registered in the respondent's name but that she and the respondent would have an equal interest in the property. The appellant alleged in her case below that she paid both the deposit and the shortfall, whilst the defendant paid the stamp duty on the purchase in the sum of $7,594. She claimed, and this was not in dispute, that she and the respondent were jointly liable on the loan.
3. In relation to the loan agreement the appellant's evidence was that from the date of settlement to November 2005, she paid $112,000 towards repayment of the loan. She somewhat confusingly elaborated on this by saying that the rental from the Carlton property (which was wholly let out between October 1998 and November 2005) went towards repaying the home loan and other bills relevant to the property, whilst she made up any shortfall from her own funds.
4. The appellant gave evidence that the reason the property was placed into the name of the respondent was because she wished to conceal the purchase from her estranged husband.
5. The respondent denied all these allegations. He claimed that the arrangement between him and the appellant was that the appellant's involvement would be limited to helping him get a loan by signing the loan contract and that he was responsible for the payment of the purchase price, all expenses associated with the purchase and all loan repayments and that the appellant would have no interest in the property. The respondent asserted he made all payments due in respect of the property including loan repayments.
6. The appellant's case was based on what the primary judge described as a "common intention trust" based on the agreement alleged by her, or the benefit of a resulting trust arising from her contribution to the acquisition of the property.
7. The primary judge accepted the evidence of the respondent, holding that the appellant had no entitlement to an interest in the property. Accordingly, he dismissed her claim. The appellant has appealed from that decision.

The primary judgment

1. The primary judge referred to the difficulties involved in determining the case as a result of the absence of corroborative primary records, including records of the solicitor who acted on the purchase of the property, internal records of the bank that might have been expected to cast light on the circumstances in which the bank loan was granted or tax records. He described the appellant and respondent's family as living within "the embrace of the cash economy".
2. The primary judge further stated that unravelling the available records was complicated by the death of the parties' father who managed the Carlton property. He stated his task was further complicated by what he described as all witnesses' rudimentary grasp of the English language.
3. The primary judge noted that the appellant came to Australia in 1988, the respondent in 1989, his wife in March 1998 and the parents of the parties in May 1998. He noted that on the parents' arrival the parties' father played a dominant role in the parties' financial affairs. He accepted that following the purchase of the Carlton property, the respondent and his wife lived in it until they were ordered by the respondent's father to vacate it. He stated the property was in effect run as a boarding house between October 1998 and November 2005.
4. The primary judge stated that because of the unsatisfactory nature of the evidence on both sides of the record, a determination of the issues depended in large measure on matters of credit. He described the appellant as a voluble, excitable, relatively unsophisticated witness, who was prone to exaggeration. He stated her evidence was characterised by inconsistencies, both as to the nature of her claim and in respect of the payments she said she made towards the Carlton property. In that context he referred to the different interests claimed by her in various caveats she lodged over the property. He stated the respondent was calmer, more rational and less argumentative. He described the respondent's wife as an "intelligent, prim, precise witness". He stated he preferred the evidence of the respondent and his wife over that of the appellant, based both on the demeanour of the witnesses and an appraisal of the surrounding circumstances.
5. The first matter on which he relied was that the property was purchased wholly in the name of the respondent, accepting it was purchased as the prospective matrimonial home.
6. The second matter referred to by the primary judge was the joint purchase by the appellant and the respondent of a property at Turrella some months after the purchase of the Carlton property. He said that this did not appear to be affected by the appellant's estrangement from her husband.
7. His Honour considered the fact that the respondent and his wife moved out of the Carlton property at the request of his father did not constitute an admission. His Honour accepted the respondent's evidence that he had no practical alternative and that he made regular payments to the father to cover mortgage repayments whilst he and his wife pressed to be paid rent.
8. The primary judge described the appellant's evidence as bare assertions absent any corroborative detail. He said that her evidence concerning contribution was based on an implicit assertion that she was entitled to the rent from the Carlton property for her own benefit. He said the fact that she may have applied rental income to the payment of the mortgage debt provided no firm foundation for a finding that she personally made payments indicative of an ownership interest.
9. The primary judge also rejected the submission that a letter of 25 May 2007 written by the respondent's solicitors to the appellant could be construed as an admission. That letter so far as relevant provided as follows: "2. We are instructed that: (a) Since 1992 the following properties were purchased: Date Address Registered Name 18/09/92 6/34 Yerrick Street Livy Szetu Lakemba 21/11/97 43 Henry Street Liming Situ Carlton 07/05/98 30B Hannam Street Livy Szeto & Liming Situ in equal shares Turrella 29/08/03 52 Dowling Street Livy Szeto Arncliffe

(b) The properties were registered in either of your names except for Turrella property for the convenience of obtaining bank loans. (c) All the properties should belong to you and your brother in equal shares. You are holding your brother's share in Lakemba and Arncliffe properties in trust for him. Likewise, your brother is holding your share in trust in the Carlton property. (d) Your brother has been paying the expenses in respect of all the properties. (e) You have not accounted to your brother for the rental received in respect of the properties. (f) You have not accounted to your brother for any excess funds you received from the refinance of the properties. (g) Our client believes that you have refinanced the loans on the properties solely for your benefit and to his detriment."

1. The primary judge held the letter did not constitute an admission by the respondent, concluding that it appeared to advance a settlement proposal. In that context he placed particular reliance on the word "should" in par 2(c). His Honour did not deal with the sentence "Likewise, your brother is holding your share in trust in the Carlton property". Further he accepted the respondent's evidence that he did not instruct his solicitors to make admissions as to the ownership of the property.
2. In the circumstances the primary judge dismissed the appellant's claim.

The appeal

1. The Notice of Appeal and the written submissions initially challenged all the factual findings made by the primary judge. However the appeal ultimately focused on only two issues. First, a matter said not to be taken into account by the primary judge, namely, that it was demonstrated by bank records that the appellant had contributed the shortfall and second, that his Honour erred in not treating the letter from the respondent's solicitors to the appellant to which I have referred above, as an admission. It is convenient to deal first with the evidence which it was submitted the primary judge failed to consider.
2. In submitting that there was evidence which showed the source of the shortfall was a bank account of the appellant, counsel for the appellant first pointed to the appellant's evidence that she paid the $27,209.11 by drawing a bank cheque in the sum of $20,000 from an account she had with the St George Bank and an amount of $8,484.65 from another account in her name with the National Australia Bank. She produced bank records verifying these payments. The amount withdrawn was just over $1,000 more than what was required to meet the shortfall and the withdrawal of $8,484.65 left precisely $1,000 in the National Australia Bank account. Counsel for the appellant submitted this was not considered by the primary judge.
3. Senior counsel for the respondent noted that an appeal from the other adverse findings made against the appellant had been abandoned particularly her evidence of the other contributions which she made. He said the primary judge accepted that the respondent paid the shortfall.
4. He submitted the appellant's submission may have had some force if there were complete and accurate bank records supporting each transaction and no suggestion of cash payments being used. He pointed in particular to the evidence of the appellant in her affidavit of 10 April 2015 when in relation to the payment of stamp duty she stated she took $7,594 out of a fan box at the premises at which she and her brother were residing which had $20,000 in it.
5. Senior counsel for the respondent pointed to the fact that the respondent's bank account records showed that a cheque for $26,000 was drawn on the respondent's bank account on 19 September 1997 which was said to be the 10% deposit and $7,594 on 24 October which was the stamp duty payable. He submitted that this showed the appellant's evidence that she paid those amounts was demonstrably false. He submitted the most that had been established was that there was one piece of evidence which supported the appellant's case which was not sufficient to overturn the judge's finding based on the assessment of the credibility of the parties. He pointed out that the case was conducted on the basis that the appellant was entitled to a 50% interest in the property and even if the appellant paid the shortfall, that did not establish her case.
6. He further submitted that the total amount withdrawn from the appellant's bank accounts, namely $28,484.65 was not the precise amount required to settle the transaction which he said cast further doubt on the application of those funds.

Consideration

1. As was pointed out in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22, within the constraints marked out by the nature of the appellate process, the appellate court is required to conduct a real review of the trial and of the judge's reasons whilst observing the "natural limitation" that exists in proceeding on the record which include the disadvantage an appellate court has compared to the trial judge in the assessment of a witness' credibility: Fox v Percy supra at [23]-[25].
2. That disadvantage particularly arises in a case such as the present where the judge based his conclusion, to a significant extent, on the credibility of the principal witnesses. However, if a conclusion based on credit is shown by uncontroversial facts or uncontested testimony to be erroneous, the appellate court is obliged to intervene: Fox v Percy supra at [28]. One instance where this may occur is where contemporaneous and apparently reliable documentary evidence is contrary to the credibility based finding of the trial judge: State Rail Authority of NSW v Earthline Constructions Pty Ltd (in liq) (1999) 73 ALJR 306; [1999] HCA 3 at [62]-[63], [93].
3. In the present case the primary judge proceeded on the basis that there was an absence of corroborative primary records (primary judgment at [13]). In particular he stated the appellant's evidence consisted of bare assertions and there was an absence of evidence corroborative of her assertion that she had contributed money to the purchase of the property: at [47].
4. In reaching that conclusion, the primary judge did not deal with the appellant's evidence of payment of the shortfall by drawing $20,000 from a bank account on the day before settlement and $8,484.65 cash from another account which monies she said she gave to the respondent. (Affidavit of appellant of 22 September 2014 par [11] and Annexures E and I.) Nor did he have regard to the records verifying these payments. It should be noted that the $20,000 came from funds that had been deposited in the St George bank account between 11 September 1997 and the date of settlement of the transaction and the $8,484.65 primarily as a result of a cash deposit made on 12 September 1997, the deposits thus being made at the time the purchase was in contemplation.
5. The respondent by contrast claimed that he paid the shortfall by taking cash partly taken from his home and partly from a "bank account" and used the cash to purchase a bank cheque for the amount of $27,209 to pay the shortfall. The bank account was unidentified but the bank statement of the respondent's Commonwealth Bank account which showed withdrawals of amounts to pay the deposit and stamp duty, did not disclose the purchase of a bank cheque or any withdrawal of significance at or about the time of the settlement of the transaction. In cross-examination the respondent said he could not find any corroborating evidence to support his claim but denied he received the funds for the shortfall from the appellant. He claimed in re-examination he did not pay any money into his sister's St George Bank account.
6. The reasons of the primary judge did not address this evidence. This evidence went directly to a central issue in the trial: the financial contributions made by the appellant to the purchase price of the property. Its importance was heightened by the fact that it was based on contemporaneous banking records, and was not contradicted by any documentary evidence from the respondent. Thus, putting to one side the testimonial evidence of the respondent (which lacked specificity), the withdrawals from the appellant's accounts seem to be the only identified source of funds to pay the shortfall. Accordingly, the evidence of those withdrawals was evidence to which the primary judge was required to have regard in determining questions of primary fact as well as the appellant's credit.
7. It is true, as senior counsel for the respondent pointed out, that there are other matters which could justify the adverse credit finding made against the appellant, particularly her evidence regarding the payment of the deposit and stamp duty. It is also true, as his Honour stated, that there was evidence that cash was commonly used by the appellant and the respondent in their dealings and that the total amount withdrawn by the appellant was not the precise amount required for the shortfall. It is also possible that had the primary judge considered the evidence to which I have referred, he may nonetheless have reached a conclusion that he was not satisfied the appellant paid the shortfall. Nonetheless, the appellant was entitled to have the evidence taken into account. The primary judge, in my respectful opinion, was in error in failing to do so.
8. In these circumstances, the orders of the primary judge should be set aside. Because the ultimate determination of the proceedings will depend on the evaluation of the evidence of the parties, taking the evidence to which I have referred to above into account, it is not possible for this Court to reach a conclusion as to whether the appellant is entitled to any relief and what if any should be granted. Regrettable as it is, the only order which can be made is an order for a new trial.
9. In these circumstances it is not appropriate to deal with the letter of 25 May 2007 to which I have referred at [16]. It will be necessary for the judge hearing the retrial to evaluate it along with all the other evidence brought in those proceedings.

Conclusion

1. I would make the following orders: 1. Appeal allowed. 2. Set aside the orders made by the primary judge. 3. Order a retrial of the proceedings before a judge nominated by the Chief Judge of the Equity Division. 4. Order the respondent pay the appellant's costs of the appeal and have a certificate under the Suitors' Fund Act 1951 (NSW) if eligible. 5. Costs of the proceedings in the Court below abide the outcome of any new trial.
2. MACFARLAN JA: I agree with Bathurst CJ.
3. LEEMING JA: I agree with Bathurst CJ.

Amendments 16 June 2017 - [28] 5th line change '2007' to '1997' 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: 16 June 2017