These proceedings are concerned with the ownership of four properties that are the subject of dispute between the parties to the proceedings. On 20 November 2017, I published my reasons for determining beneficial ownership of one of the properties (the 2017 Reasons). [1] In my reasons for judgment of 3 October 2019 (the 2019 Reasons), [2] I dealt with ownership of the other three properties. In these reasons, I shall use terms as defined in the 2019 Reasons.
The 2017 Reasons were concerned with the Carlton Property. In the course of the hearing that led to the 2017 Reasons, it became apparent that there were also disputes between the Sister and the Brother as to beneficial ownership of the other three of the Properties, the Lakemba Property, the Turrella Property and the Arncliffe Property. It also became apparent that there was a substantial dispute as to accounting between the two siblings in relation to the income and outgoings in relation to all four of the Properties. On 24 October 2018, an order was made by consent that the determination of ownership of each of the Lakemba Property, the Turrella Property and the Arncliffe Property, based on contributions to the purchase price, be dealt with as a separate and preliminary issue pursuant to r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW). Once that determination as to beneficial ownership has been made, it will be necessary for accounts to be taken.
Accordingly, after a further hearing, the 2019 Reasons were concerned with the Lakemba Property, the Turrella Property and the Arncliffe Property. However, in the course of addresses that led to the 2019 Reasons, the Sister sought to renew the tender of certain parts of material the tender of which had been withdrawn at the beginning of the hearing (the Additional Material). The Additional Material related to the respective contributions by the parties to the Arncliffe Property, the Sister contending that the Brother made no contribution to the Arncliffe Property, other than signing loan documentation. The Brother contended that to admit the Additional Material would be prejudicial to him because he had not had the opportunity to assert his joint entitlement to certain funds and to challenge the Sister's entitlement to those funds. The funds in question came from the parties' father in circumstances to which I shall refer below. I indicated to the parties that I would rule on the admissibility of the additional material after receipt of written submissions.
In the 2019 Reasons, I indicated my final conclusions as to beneficial ownership of the Lakemba Property and the Turrella Property. I concluded that the Additional Material should be admitted, to the extent that it demonstrated, if at all, that contributions were, or were not, made by either of the parties to outgoings in respect of the Arncliffe Property following its purchase, and that the Brother should be afforded the opportunity of adducing any further evidence on which he wished to rely in answer to the Additional Material and I gave directions accordingly. Nevertheless, I indicated a provisional conclusion in relation to the Arncliffe Property, namely, that the intent of the Brother and Sister was that it would be owned by the Sister beneficially and that there was no intention that the Brother would have any beneficial interest in the Arncliffe Property. To the extent that the Brother incurred personal liability, he would be indemnified by the Sister.
The parties have now filed further evidence and I have received further written submissions. The parties are content for the question of ownership of the Arncliffe Property to be determined finally on the papers without any further oral argument.
The Brother, in effect, relies on the presumption of a resulting trust arising as a consequence of his asserted contribution to the purchase price for the Arncliffe Property. It is not in dispute that, where two people contribute to the purchase price for a property, there is a presumption that the property is held by the purchaser on trust for the contributors as tenants-in-common in the proportions in which they have contributed to the purchase price. [3] The parties also accept that the presumption of a resulting trust can be rebutted if there is evidence that the party in whose favour the presumption would arise had no intention to acquire a beneficial interest. The presumption may be rebutted by, for example, evidence of subsequent payments by the parties, from which interferences can be drawn as to the intentions of the parties at the time of purchase.
The Brother says that, by signing mortgage documents to secure loans in respect of the purchase price for the Arncliffe Property, he incurred increased personal liability without any corresponding gain. He asserts that, having regard to the history of his relationship with the Sister, it is unlikely that he would do so as "an unsolicited act of kindness". He contends that, having regard to his increased liability in respect of his indebtedness in respect of the Joint Loan, his role in the purchase of the Arncliffe Property went beyond that of a mere surety or guarantor intended to be indemnified by the Sister. Rather, he says, he made a contribution to the purchase price for the Arncliffe Property.
The Brother contends that the following matters that post-date the acquisition of the Arncliffe Property give rise to an inference that the parties intended that he would have an ownership interest in the Arncliffe Property:
Between 2003 and 2006, the Brother deposited $35,380 into the Sister's "offset account" and that amount was disbursed in the repayment of various loans that were current at that time. As a result, the Brother says, he paid $15,683 over and above his liability on the loan secured on the Turrella Property. He asserts that that excess was applied towards the repayment of the loans secured on the Arncliffe Property;
Funds in which the Brother claims an interest by way of inheritance were applied in discharge of the Joint Loan secured on the Arncliffe Property;
Certain expenses in relation to the Arncliffe Property, which have not been specified, were paid by the Brother when he was requested to do so.
In at least two of the Sister's tax returns, she stated that she had only a 50% interest in the Arncliffe Property and it is by no means clear whether that that was a mistake or an oversight;
The Brother's assertion of an interest in the Arncliffe Property was the subject of a claim in correspondence from his lawyers as early as May 2007.
In the course of opening at the hearing in relation to the Carlton Property, Mr Evatt QC, who appeared for the Sister, referred to the Lakemba, Arncliffe and Turrella properties as properties in which each of the Brother and Sister had a half interest. [4]
[2]
Contribution to Offset Account
In his affidavit of 6 May 2020, which was not the subject of objection or cross examination, the Brother asserted that, between August 2003 and around January 2006, he paid sums totalling $35,380 to an "offset account" with St George Bank in the name of the Sister, which the Brother characterised as a "pooling account". Funds deposited to the account were disbursed in repayment of the loans secured on the Turrella Property and on the Arncliffe Property. The Sister asserts that deposits made by her to the pooling account represented rent collected from tenants of the Arncliffe Property. The Brother asserts that, during the period 2003 to 2006, his liability in respect of the relevant loans was $19,697.50, being 50% of $39,395, and that, since he contributed $35,380, which was applied by towards the loans secured on the Arncliffe Property, he contributed $15,683 in excess of his share, being $35,380 less the sum of $19,697.
In his affidavit evidence, the Brother asserted that the Sister and their father were in control of his finances. He said that the arrangements were that he would provide money to either the Sister or their father who "would make the payment on the relevant loans". The Brother said that he did not control where the money was applied. He annexed to his affidavit a spread sheet prepared with the assistance of his wife that summarised "the flow of money through the various accounts" for the period from August 2003 to January 2006.
The Brother says in his affidavit that, in early January 2006, his father said words to the following effect:
"The rental is enough to cover the loan repayments. In case it is not enough then we can use the money from the grandmother's estate to pay for it. You are not required to pay any further."
The Brother says that, relying upon what his father said and his belief that he was a part owner of the Arncliffe Property and entitled to a share of the rent, he ceased to make any further payments.
[3]
Contribution to Outgoings
In his affidavit of 15 February 2019, the Brother asserted that, following settlement, he paid sums of money in 2004 and 2014 to either the Sister or his father for council and water rates in respect of the Arncliffe Property. He was not challenged on the affidavit, in which he said as follows:
"I only pay when my father or [the Sister] asked me to pay. If they do not ask me then I can only assume that they have enough money to cover the bills."
The amounts in question are shown in a document annexed to the affidavit described simply as "the Payment Schedule". The provenance of that document is not explained.
[4]
Repayment of Loans
The Brother says in his affidavit evidence that the Joint Loan in respect of the purchase price for the Arncliffe Property was fully repaid in February 2014 and that there were two payments of $175,000 and $69,446 on 2 January 2014 and 13 February 2014 respectively. The Brother asserts in his affidavit of 29 October 2019 that the deposit of $175,000 was part of his inheritance from their father and that the application of that sum to extinguish the Joint Loan was discussed with the Sister. The question of inheritance was first raised by the Brother in his affidavit of 28 April 2019 in response to the Sister's affidavit of 22 March 2019.
The Sister's evidence is that the money claimed by the Brother to be an inheritance from their father was a gift from her father at the end of 2010, before his death. She denies that there was any inheritance from their father. In her affidavit of 3 December 2018, the Sister referred to a transfer of money that she said she held overseas. In her affidavit of 26 May 2020, she referred to the transfer of money in December 2013.
In her affidavit of 26 May 2020, the Sister reiterated that the Joint Loan in respect of the Arncliffe Property was repaid from rentals received in respect of the Arncliffe Property and also from funds that she held overseas. Statements in respect of a St George bank account in the name of the Sister showed receipt of the following amounts from overseas:
19 December 2013 - $41,983;
20 December 2013 - $25,932;
20 December 2013 - $54,783;
23 December 2013 - $53,783.
The Brother confirmed that the payment of $41,983 was remitted by his father's "student" whom his father "entrusted to manage the property and bank account in China since 1998". The Sister withdrew the sum of $176,000 on 2 January 2014 and on the same day, the sum of $175,000 was credited to the Joint Loan. On 12 February 2014, the Sister re-drew the sum of $69,446.41 on the Sister's Loan and transferred that sum to the credit of the Joint Loan so as to repay the whole of the Joint Loan, thereby extinguishing the Brother's liability in respect of that loan.
The parties' father died in June 2011 and their mother died in May 2012. Neither made a will, neither had assets in Australia and no application has been made for letters of administration in respect of either of their estates. The Brother also annexed to his affidavit a copy of an article entitled "Inheritance in China: Key Issues" that his solicitor found on the website of a firm of Chinese lawyers. There was no objection to that document. The document suggests that the persons entitled on death under the law of China would be the spouse, if no spouse, the children, and if no spouse and no children, the parents.
In his affidavit of 29 October 2019, the Brother said that his parents did not have any assets in Australia but had a property in Guangzhou, China. On the assumption that the document in question represents the law of China, it would follow that the Brother and the Sister would be entitled to share equally in the estate of their mother, which would have included the estate of their father.
The Brother asserted that in December 2013 the Sister asked him and his wife to discuss some money that she had received. He asserts that the Sister said words to the following effect:
"I have received the parents' age pension and rental money into my account. I propose to pay off our Arncliffe Property home loan with this money. Do you agree? Any surplus should be paid into Turrella account."
The Brother said that he and his wife agreed with that proposal.
In her affidavit of 26 May 2020, which was not the subject of cross-examination, the Sister said that the Joint Loan was fully discharged on 13 February 2014. She said that, at that time, she had repaid $483,578.30 towards the Joint Loan. In her affidavit she said that, in about October 2010, her father intended to give his money to her because she looked after him and her mother for 13 years while they were both in Australia. She said that her father "arranged everything for me to get his money" and that, in January or February, she received from her father, into her "HSBC account", the equivalent of $222,872.92 in Chinese currency. She annexed a copy of a bank statement showing when she received the money, which was before the death of her father. She says in her affidavit that she had no instructions from her father when he was alive to give any money to the Brother. She asserts that the Brother had an estranged relationship with their parents from about 2000 because the Brother's wife "disrespected our father". The Sister said that she could not bring all of the money that she received from her father to Australia at once because of China's restriction on "moving the currency across the border". She said that, in December 2013, "she moved [her] father's money from Guangzhou to Australia through four friends because of restrictions on foreign currency in China".
The Sister said that, in January 2014, she paid the sum of $175,000 into the credit of the Joint Loan and in February 2014 transferred the sum of $69,446.41 from the "offset account" to pay off the balance of the Joint Loan of $300,000 on 13 February 2014. The Sister asserted in her affidavit that the Brother did not show any interest in the Arncliffe Property or have anything to do with contributing to the repayment of any loan and did not once require information about the cost of the Arncliffe Property.
The Brother contends that the application, towards the repayment of borrowings for the purchase of the Arncliffe Property, of funds from the estates of their deceased parents, to which they would be jointly entitled constitutes an admission by the Sister of the Brother's entitlement to a share in the Arncliffe Property. Thus, he says, the payment was under the control of the Sister and she elected to repay the joint liability in preference to the liability that she owned personally. However, in the circumstances, I consider that it is more likely than not that the funds were given to the Sister by their father and were not part of an inheritance from the parents of the Brother and the Sister.
In any event, the Sister invites the Court to draw a different inference from the fact that she applied funds in repayment of the Joint Loan. She asserts that, if she had intended that the Joint Loan was to be a contribution by the Brother to the purchase price for the Arncliffe Property, so as to give rise to a resulting trust, it would not have been logical for her to pay off the Joint Loan first. Rather, she would have paid off the Sister's Loan where she alone was liable. The amount secured in respect of that loan is still some $120,000.
An agreement at the time of joint purchase of a property that one party will be responsible for repayments of the loan made to purchase the property may give rise to an inference that that person has an exclusive interest in the property. [5] There is no evidence that the Sister at any time asked the Brother to make any payment towards the loans secured on the Arncliffe Property. In addition, from 2005, the Brother ceased making payments in respect of the joint loan of $230,000 secured on the Turrella Property. That loan is still owing, the present outstanding balance being $148,000. The Brother made no payments in respect of the Joint Loan of $300,000 borrowed to finance the purchase of the Arncliffe Property. He contends that there was no need to do so because the income from the Arncliffe Property was sufficient to cover outgoings, including interest on the loans.
The Sister disputes the assertion by the Brother that he contributed to repayments of the loan and to outgoings in respect of the Arncliffe Property. The purchase price for the Arncliffe Property was $525,000. The total cost with stamp duty and fees was $551,000. The Sister paid the whole of the deposit and some other costs from her own funds in the sum of $27,185.44. She received a cheque for the sum of $182,814.36 on settlement of the purchase to cover contingencies, renovations and working capital in respect of the project involved in operating the Arncliffe Property.
The Sister accepts that the Turrella Property was purchased for $265,000, the total cost being $275,742 with stamp duty and fees. The Sister borrowed $80,000 on security of the Lakemba Property and the parties jointly borrowed $195,000 on the security of the Turrella Property. Both loans were made by St George Bank. The legal title to the Turrella Property was held by the Brother and the Sister as tenants-in-common in equal shares. At the time of acquisition, the Sister was responsible for half of the loan of $195,000, which had been reduced to approximately $166,800 at the time of refinancing. The Sister was responsible for the whole of the $80,000 loan which had been reduced to approximately $62,100 at the time of refinancing. However, I have found, in the 2019 Reasons, that the parties had agreed that the property would be owned jointly and contributed jointly to the repayment of both loans. Accordingly, the presumption of the resulting trust was rebutted. The fact of equal ownership was confirmed when the two original loans were refinanced into a single joint loan of $230,000 in August 2003.
There is no evidence that the Brother ever received a statement in respect of the loans secured by mortgage of the Arncliffe Property or made any payment towards those loans. Rather, he did no more than sign the mortgage in respect of the Turrella Property as security for the Joint Loan and has never had any involvement in the activities of being a landlord in respect of the Arncliffe Property, such as finding tenants or paying or contributing directly towards outgoings.
There is a dispute as to what funds were paid by the Brother into the "pooling" account. The Sister accepts that the Brother made some payments into that account. The Sister asserts that, even if some of the Brother's money was applied towards repayment of the loan secured on the Arncliffe Property, which she denies, that of itself does not create any ownership interest in the Arncliffe Property.
The Brother also relies on the fact that the bank statements demonstrate that from August 2003 to January 2006 he paid over $35,000 into the Sister's account and that funds from that account were used to repay various loans secured both on the Turrella Property and the Arncliffe Property. That amount, he says, exceeds his liability in respect of the Turrella Property giving rise to the inference that the Brother's funds were being used to service the loans secured on the Arncliffe Property.
In all of the circumstances, I am not persuaded that the objective material demonstrates that the Brother, by incurring a liability in respect of loans that were applied towards the purchase price of the Arncliffe Property, was intended to acquire a proprietary interest in the Arncliffe Property. On the other hand, to the extent that any of his funds have been applied in the discharge of any of the debts incurred for the purpose of purchasing the Arncliffe Property, he is entitled to be indemnified by the Sister. That is a matter to be dealt with on the taking of accounts.
[5]
Endnotes
See Szeto v Situ [2017] NSWSC 1554.
See Szeto v Situ (No 2) [2019] NSWSC 1312.
Calverley v Green (1984) 155 CLR 242 at 246-247 (Gibbs CJ); [1984] HCA 81.
See 2019 Reasons at [35].
See Currie v Hamilton [1984] 1 NSWLR 687 at 691.
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: 29 October 2020