This judgment concerns two interlocutory applications by way of notice of motion that were before the Court on 27 April. During the course of the hearing I indicated to counsel for the parties how I thought the applications should be resolved. At my request, counsel subsequently prepared short minutes of order reflecting my conclusions. They were unable to agree, resulting in a short further hearing. This judgment sets out the reasons for the orders which I now make.
Both applications were made by the defendant and each challenged the viability, or adequacy, of the plaintiff's pleaded case. In the first notice of motion, which was filed on 18 November last year, the defendant sought an order for the provision of certain specified "particulars" of the plaintiff's prayers for relief and pleaded allegations. In the second notice of motion, filed on 29 March this year, the defendant sought to have the Court summarily dismiss the plaintiff's claim, or alternatively to make a self-executing order striking out the statement of claim if the particulars sought in the first notice of motion were not provided.
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Background and procedural history
The proceedings concern two properties in western Sydney which were originally owned by, and remain registered in the name of, Wayan Arya Subakti. Mr Subakti is the former de facto husband of the plaintiff in these proceedings, Nicolitsa Togias. The properties were acquired and registered in the name of Mr Subakti during their relationship. One of the properties, at Glenwood, functioned as the family home. The other property, at Seven Hills, appears to have been acquired as an investment and was rented out.
Mr Subakti and Ms Togias have two daughters. The older one was born in January 2001. The younger one followed in May 2005. In the meantime, in July 2003, Mr Subakti had acquired the Glenwood property. He acquired the Seven Hills property in May 2008.
In January 2010 Mr Subakti was arrested on drug charges. He was later sentenced to six years' imprisonment. According to Ms Togias, Mr Subakti's arrest resulted in the irretrievable breakdown of their relationship.
In January 2014 Mr Subakti was released on parole and returned to live at the Glenwood house. According to Ms Togias, although they lived under the same roof, she remained separated from him.
Following Mr Subakti's arrest in 2010, the New South Wales Crime Commission brought proceedings for forfeiture of his property under the Criminal Assets Recovery Act 1980 (NSW). In May 2014, consent orders were made between the Commission and Mr Subakti forfeiting his interest in specified assets on the ground that he had, over the prescribed period before the Commission's application for the order, been engaged in serious criminal activity: see s 22(2).
The May 2014 forfeiture order covered the Glenwood property and the Seven Hills property. But pursuant to leave granted in the consent orders, Mr Subakti then applied for an order excluding those properties from the forfeiture order, on the ground that they had not been fraudulently or illegally acquired: see s 25(2). That application came before Hall J. His Honour rejected it in October 2016: New South Wales Crime Commission v Subakti [2016] NSWSC 1421.
Under the Criminal Assets Recovery Act 1980 (NSW), when property is forfeited it is registered in the name of the NSW Trustee and Guardian ("the Trustee"), who arranges for its sale and accounts for the proceeds to the Treasury: s 23(1)-(2). But Ms Togias has asserted an interest in the properties which she contends was not affected by the forfeiture order against Mr Subakti. As a result, the Trustee has not proceeded with the realisation of the properties and they remain registered in Mr Subakti's name.
In 2016 Ms Togias commenced proceedings against the Commission over the properties. The proceedings came before RA Hulme J who delivered judgment in November 2019: Togias v NSW Crime Commission [2019] NSWSC 1556. His Honour observed that it was open to Ms Togias to make a proprietary claim against the properties, but that any such claim would have to be made separately, perhaps by way of proceedings in this Division. His Honour dismissed an alternative claim for provision on the basis of hardship: see s 24.
Meanwhile, in March 2017, Mr Subakti was reincarcerated as a result of fresh drug offences. Ms Togias continued, and continues, to live at the Glenwood property with their two daughters.
The present proceedings were begun by Ms Togias, evidently in response to RA Hulme J's suggestion, in June last year. The Trustee is the second defendant. The State of New South Wales is the first defendant. It has entered a submitting appearance.
In the proceedings, Ms Togias claims to be entitled by way of constructive trust to a share of the Glenwood and Seven Hills properties. The alleged trust is of a type sometimes referred to as a "common interest" constructive trust.
The principle upon which the court acts in declaring such a trust was authoritatively stated by the High Court in Baumgartner v Baumgartner (1987) 164 CLR 137 at 147-148. The High Court in that case approved the following statement by Deane J in the earlier decision of Muschinski v Dodds (1985) 160 CLR 583 (at 620, citations omitted):
… the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do.
In the present case, the "joint relationship or endeavour" is said to have been the domestic relationship between Mr Subakti and Ms Togias, which is said to have extended both to the acquisition of the Glenwood property as a family home and to the acquisition of the Seven Hills property as an investment for the future financial benefit of the family.
The purchase of the properties was allegedly funded, at least in part, with income derived from a business called "Bioform Nutrition" operated by Mr Subakti and Ms Togias. Ms Togias alleges that she worked in the business without receiving wages, so that the income derived from the business could be applied to paying for the properties. In this way, it is said, she contributed to the acquisition of the properties in Deane J's sense. She also alleges that since Mr Subakti's incarceration in 2010, she has been solely responsible for meeting the mortgage repayments over the Glenwood property (the Seven Hills mortgage repayments have been covered by rental payments received from the tenant).
The Trustee accepts that, should Ms Togias establish an entitlement to a share in the properties by way of common intention constructive trust, that entitlement would not be defeated by the forfeiture order. The Trustee however does not admit that Ms Togias has any such entitlement.
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Pleading applications
The Trustee's challenge to Ms Togias' pleaded case starts with the decision of Hall J on Mr Subakti's claim to have the properties excluded from the forfeiture order. Part of the argument for Mr Subakti in those proceedings, supported by evidence from Ms Togias herself, was that the acquisition of the properties had been funded by legitimate profits from the Bioform business. His Honour did not accept that this had been established by the evidence: see at [165]-[171].
Counsel for the Trustee accepted that the judgment of Hall J did not give rise to a res judicata or issue estoppel for the purpose of these proceedings. Although she participated as a witness, Ms Togias was not a party to the proceedings before Hall J. But counsel did submit that, in the light of the adverse findings by his Honour, there was an obligation on Ms Togias in these proceedings to spell out in her statement of claim in the present case full details of how she could prove her claim.
The Trustee's application was to require Ms Togias to provide detailed particulars of her allegations about contributions being made to the acquisition of the property in lieu of wages in the business. The particulars were to specify, for each payment towards the purchase of the properties, the amount of the payment attributable to wages foregone by Ms Togias, or wages foregone by Mr Subakti, or income otherwise received by the business. The exercise was to be done separately for the Glenwood and Seven Hills properties. The payments to be so particularised were to include not only the initial purchases but each subsequent loan repayment.
In Muschinski v Dodds the orders made by the High Court to reflect the common interest constructive trust which was found were (see at 623-625):
1. a declaration that the parties held their respective legal interests in the properties in question upon trust to repay to each of them their respective contributions, and as to the residue, for them both in equal shares;
2. an order remitting the proceedings to this Court to determine the quantum of the respective contributions.
Under a trust of this type, the parties' financial interests in the property are not finally quantified until the property is sold, the contributions made by each party are determined, and the surplus is then divided equally between them. But that quantification exercise is distinct from, and subsequent to, the declaration of the constructive trust. It can be carried out by way of an account or enquiry, or even, perhaps, by a trustee appointed to effect the sale.
It follows that in the present case, Ms Togias' entitlement or otherwise to an interest by way of common intention constructive trust depends upon the facts leading up to the acquisition of the two properties. If she had any such entitlement, the Court can make a declaration to that effect and the quantum of her entitlement can be determined in due course. If she fails to establish her entitlement, her claim will be dismissed.
Properly analysed, Ms Togias' cause of action in these proceedings is her claim to be entitled to a common interest constructive trust which, in the events which have happened, require the properties the subject of the trust to be sold and distributed in accordance with the Muschinski v Dodds formula (or, perhaps, some variant of that formula based on the particular nature of the "common endeavour" between Ms Togias and Mr Subakti). The material facts for the purposes of this claim are whether the parties were engaged in a joint endeavour as alleged, and whether the acquisition of the properties fell within the scope of that joint endeavour.
This means that the contributions in fact made by Ms Togias are relevant only to the subsequent stage of quantifying her ultimate interest in the property. As I will discuss in more detail below, it is not even clear that that quantification will be done by this Court.
In my view the particulars sought by the Trustee were not (or at least were not at this stage of the proceedings) necessary for the conduct of the Trustee's defence. That was because they did not go to facts which were material to establishing Ms Togias' cause of action.
For these reasons, I considered that the application for particulars by the trustee was misconceived. But the application, and consequential debate, did expose some further issues about Ms Togias' pleading and the conduct of her claim.
The first issue concerned the prayers for relief in the statement of claim. The following relief was sought concerning the Glenwood property (declarations in the same form were sought for the Seven Hills property):
1. A declaration that the interest in the real property described as [XX], Glenwood ("the Glenwood property") is solely beneficially owned by the plaintiff, or alternatively, which was in part forfeited to and vested in the defendant, was subject to the beneficial interest of the plaintiff in the said property as tenant-in-common in equal shares to be determined by the Court.
2. Further or in the alternative, a declaration that the plaintiff has a beneficial interest in the Glenwood property (or additional beneficial interest), consistent with her payments and contributions, including in respect of the capital appreciation of the Glenwood property.
These prayers for relief are unsatisfactory in so far as they suggest that, in a case of common intention constructive trust, the court itself fixes the financial entitlements of the parties. The true position is, as I have explained, that the court determines whether or not the plaintiff has an entitlement according to a particular formula.
The proper prayers for relief would have been for a declaration of the type made in Muschinski v Dodds, coupled with consequential orders in the nature of an account or enquiry to determine the quantum of the parties' contributions to be repaid out of the proceeds of sale of the properties. When I put this to counsel for Ms Togias at the hearing, he readily accepted that the statement of claim should be amended accordingly.
Furthermore, now that it is clear that the quantification process is a distinct and subsequent step, it will be necessary to determine when, and how, that will be done (if Ms Togias' claim succeeds). It would be open to the Court at trial just to settle the terms of the account or enquiry, and to leave the quantum to be worked out by that process at a later stage. Such an assessment can of course be carried out by the Court, but in many cases it is better made the subject of an order for reference out. In this regard equitable procedures for quantification are different from the assessment of damages at common law, which typically takes place at the hearing unless an order for separate determination is made.
Counsel for Ms Togias stated that in cases of this sort the Court usually determines questions of quantum at the same time as questions of entitlement. I am not sure whether any such practice does, or should, exist. At all events, counsel accepted that the issue needed to be considered. One particular advantage of dealing with quantum at a later stage in this case is that it would facilitate the early determination of the entitlement issue, in particular by way of expedition (see below).
There is also the question of the sale of the properties, which Ms Togias appears to this point to have been resisting. It is clear that they would have increased in value. Mr Subakti's forfeited share will, if nothing else, include one half of the equity remaining after the contributions are repaid. Counsel for Ms Togias accepted that, for this reason alone, on no view would she be entitled to complete ownership of both of the properties.
The Muschinski v Dodds formula presupposes that it is one of the terms of the common interest constructive trust that upon breakdown of the joint endeavour one or other of the parties can require the sale of the property in question. In principle, therefore, Ms Togias cannot insist on continuing to live in the properties while the trial takes place and (if she is successful) the parties' respective entitlements are ultimately quantified. If she is entitled to a share by way of common intention constructive trust, she must necessarily accept the entitlement of the Trustee as co-beneficiary to have the properties sold.
There was, however, a complication in the present case. Counsel for Ms Togias accepted that there was no reason why the Seven Hills property should not be sold immediately. But counsel contended that the circumstances should be construed as having given rise to a single common intention constructive trust covering both properties (rather than two trusts, one covering each property). Counsel contended that in that event there was a reasonable possibility that the quantification exercise would leave Ms Togias with a sufficient overall share to allow her to retain the Glenwood property in its entirety.
It was not possible at the hearing on 27 April to explore the strength of this contention. What the debate pointed up was that the Trustee was prima facie entitled as registered proprietor to sell the properties and this was resisted by Ms Togias. In principle, therefore, she was in the position of a plaintiff seeking an interlocutory injunction to preserve property pending the determination of her claim to it.
If Ms Togias had a sufficiently substantial case that she will ultimately end up with the Glenwood property, she might be entitled to an injunction against it being sold. But that would usually require, at a minimum, for her to give some sort of undertaking to pay any damages the Trustee may suffer if the sale is delayed. Such damages would usually take the form of an occupation fee. When I made this point, it was accepted in principle by counsel for Ms Togias.
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Orders
For these reasons, I considered that the Trustee's notices of motion should be dismissed, but that there needed to be directions to allow appropriate amendments to be made to Ms Togias' statement of claim; to decide whether any entitlement she may have is to be quantified at the trial or later; to set an interlocutory regime for the sale of the properties (subject, in the case of the Glenwood property, to the deferral of the sale on Ms Togias establishing sufficient grounds to do so); and to allow for the making of an application for expedition.
Although the Trustee's notices of motion were to be dismissed, the Trustee had not been wholly unsuccessful. I considered that the appropriate order was for the costs of the application to be Ms Togias' costs in the proceedings.
Following the adjournment on 27 April, the parties tried to agree a set of orders to give effect to the conclusions I had reached. The reason for the short further hearing today was that the parties could not fully agree the terms of the interlocutory regime. The sticking point was how Ms Togias' undertakings should be expressed. Following further debate, I fixed the terms of the undertakings in a form which the parties accepted.
The orders to be made include two undertakings. One is to pay interest on the proceeds of the Seven Hills properties to the extent that Ms Togias' claim to those monies does not succeed. The other is to pay an occupation fee on the Glenwood property to the extent that Ms Togias' claim to that property does not succeed.
As to the second undertaking, counsel for Ms Togias emphasised that she had been paying the loan repayments on the property for some years and would presumably continue to do so. Counsel suggested that the Trustee had actually benefited, and would continue to benefit, from Ms Togias' occupation, as a result of the property increasing in value, and that it would be unfair to require payment of an occupation fee on top of the loan repayments.
Counsel's point may be valid, but whether it is or not cannot be determined at this stage of the litigation. To do so will ultimately require evidence of what repayments have been made, what increase in value there may have been, and what a proper occupation fee would be having regard to market rental rates, over the period of Ms Togias' occupation of the property.
The undertaking as it has been framed leaves the quantum of the occupation fee (if any) and the period over which it is to be paid to be determined by the Court in due course if the issue arises. Similarly, the quantum of interest payments (if any) to be made on the monies derived from the Seven Hills property will be determined in due course. No doubt that will take account of the interest in fact earned in the meantime.
The Court now makes the following orders:
1. (a) The Plaintiff to file a further amended statement of claim by 4:00pm on 26 May 2021.
(b) The Second Defendant to file a defence to the further amended statement of claim within 14 days of being served with the further amended statement of claim.
1. The Court notes the agreement of the Plaintiff, without admissions and subject to her right to maintain her claim made in these proceedings that the Plaintiff holds an interest in each of the said properties, that the Second Defendant is to be registered as the proprietor of -
1. the land contained in Folio Identifier 118/861300 being Lot 118 in Deposited Plan 861300 and known as [XX] Rothwell Circuit, Glenwood, New South Wales 2147 ("Glenwood property"), and
2. the land contained in Folio Identifier 26/SP80568 being Lot 26 in Strata Plan 80568 and known as [XX] Powers Road, Seven Hills, New South Wales 2768 ("Seven Hills property"),
pursuant to the Consent Order made by this Court and entered on 5 May 2014 in proceedings 2010/41388 between the NSW Crime Commission and Wayan Arya Subakti whereby the interest in property of Wayan Arya Subakti in the Glenwood property and the Seven Hills property was forfeited to, and vested in, the Crown.
1. The Court notes the agreement of the Plaintiff and the Second Defendant that -
1. the Second Defendant may proceed to sell the land contained in Folio Identifier 26/SP80568 being Lot 26 in Strata Plan 80568 and known as [XX] Powers Road, Seven Hills, New South Wales 2768;
2. the net proceeds of sale of that property are to be retained by the Second Defendant pending further order of the Court in an interest-bearing bank account;
3. the Plaintiff undertakes, to the extent that her claim to those monies proves unsuccessful, to pay interest on such part of those monies for such period and at such rate as the Court may determine.
1. The Court orders that, upon the Plaintiff undertaking, to the extent that her claim to the land contained in Folio Identifier 118/861300 being Lot 118 in Deposited Plan 861300 and known as [XX] Rothwell Circuit Glenwood New South Wales 2147 proves unsuccessful, to pay to the Second Defendant such occupation fee for that land over such period and at such rate as the Court may determine, the Second Defendant not sell, encumber or otherwise deal with the land until further order of the Court.
2. The Court grants an extension of time to the Second Defendant to file and serve within 14 days a statement of cross-claim seeking -
1. an order for possession of the land contained in Folio Identifier 118/861300 being Lot 118 in Deposited Plan 861300 and known as [XX] Rothwell Circuit, Glenwood, New South Wales 2147, and
2. mesne profits with respect to the occupation by the Plaintiff of that property.
1. The two Notices of Motion respectively filed by the Second Defendant on 20 November 2020 and 29 March 2021 be dismissed.
2. The Plaintiff's costs of the two Notices of Motion respectively filed by the Second Defendant on 20 November 2020 and 29 March 2021 be the Plaintiff's costs in the cause.
3. The Court notes the intention of the Plaintiff to file a notice of motion and affidavit in support seeking expedition.
4. The proceedings be stood over to be listed before the Expedition List Judge on 4 June 2021.
5. Liberty to apply to Parker J on 2 days' notice.
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Decision last updated: 21 May 2021