Vlahos Pty Ltd v Vlahos [2017] VSCA 166

Court of Appeal (Vic)|2017-06-29|Before: Mr P, Kyrou JA, Tate JA

Vlahos v Vlahos Pty Ltd [2016] VCC 1250 (Judge Cosgrave)

TRUSTS - Presumption of resulting trust - Principles - Beneficiary contributed to purchase price of property acquired in name of trustee of a trust established by beneficiary's father - Presumption not rebutted - Leave to appeal granted - Appeal dismissed.

CONTRACT - Oral agreement for transfer of interest in land - Statute of Frauds not satisfied - Principles relating to part performance - Sufficient acts of part performance established.

1 I have had the benefit of reading, in draft form, the reasons of Kyrou JA. I agree, for the reasons his Honour gives, that leave to appeal should be granted but that the appeal should be dismissed.

2 This is an application for leave to appeal against a declaration made by a judge of the County Court that the respondent ('James') holds an interest in a property at 50 Puckle Street, Moonee Ponds ('Property') which is registered in the name of the first applicant ('Trustee'), and an order requiring the Trustee to transfer that interest to James.[1]

3 The second applicant ('Andrew') is the younger brother of James. They are both directors of the Trustee, which is the trustee for a family discretionary trust known as the S Vlahos Family Trust ('Trust'). James is a solicitor.

4 The proceeding arose out of the acquisition by the Trustee of the Property in July 1990 for $590,000. The Property is a two storey building and comprises a retail area on the ground floor, a residential area on the first floor and two car park spaces at the rear of the building. James contributed $110,000 towards the purchase price of the Property and paid the stamp duty of $31,600 for the transaction. His total contribution of $141,600 represented 22.57[2] per cent of the total cost of the transaction, namely, $621,600 ('acquisition cost').

5 In December 2011, Andrew and James signed a minute of meeting of the Trustee which was expressed to have taken place on 8 December 2011 ('Minute').[3]

The Minute set out a number of resolutions, including a resolution providing for an in specie distribution of the first floor of the Property to James ('in specie distribution'). The Minute stated as follows:

The directors resolved that the [Property] which is owned by the company in its capacity as trustee of the [Trust] should be subdivided to separate the ground floor retail area from the residential area upstairs.

The directors also resolved that once the subdivision is complete, the upstairs residential area is to be transferred to [James] or an entity that he nominates in specie by the [Trust].

Graham Joe ... has already advised that a valuation should be undertaken to provide a separate value for [the] upstairs and downstairs areas of the [Property] on the basis that the subdivision is approved. From an accounting perspective, he has advised that the valuation of the upstairs area will be recorded as the 'disposal price' in the Trust's financial accounts and tax return. As there will not be an actual payment of monies by [James] or his nominee, this amount needs to be debited to the beneficiaries' loan accounts.

It was resolved by the directors that this would be divided equally between the loan accounts of [James] and Andrew ... in the accounts of the Trust.

The cost of organising the subdivision and transfer, and any tax liability incurred by the [Trust] will also be paid for by the Trust.

6 The judge found that James's financial contribution of 22.57 per cent of the acquisition cost of the Property gave rise to a resulting trust in his favour. He also found that James could enforce the resolution in the Minute for the in specie distribution because, by compromising and settling his claim against the Property arising from his financial contribution, he had given valuable consideration. The judge rejected James's alternative argument that he and the Trustee had made an enforceable contract for the transfer of the first floor of the Property to him. The judge did so on the basis that the alleged contract involved a transfer of land which was neither evidenced in writing as required by the Statute of Frauds[4] nor supported by sufficient acts of part performance.

7 After the judge published his reasons, James elected to take the benefit of the resulting trust rather than enforce the in specie distribution.

8 The Trustee and Andrew ('applicants') have applied for leave to appeal. They rely on eight grounds which seek to impugn the judge's findings concerning the resulting trust (Grounds 1-4) and the enforceability of the in specie distribution (Grounds 5-8). Grounds 1-4 rely on arguments that were not advanced at trial.

9 James has filed a notice of contention by which he seeks to impugn the judge's finding in relation to part performance. In his oral submissions, James informed the Court that he no longer relied on his written submissions in opposition to Grounds 5-8.

10 It was common ground that, if Grounds 1-4 were not made out, the applicants could not succeed on appeal.

11 For the reasons that follow, I have concluded as follows:

(a) the applicants should not be permitted to pursue arguments in respect of Grounds 1-4 that were not raised at trial;

(b) even if those arguments were permitted, Grounds 1-4 would not be made out;

12 The Trustee was incorporated on 20 January 1981. Its first directors and shareholders were the parents of Andrew and James, Stefhanos Vlahos ('Stefhanos') and Niki Vlahos ('Niki'). Stefhanos had invested in a number of residential properties.

13 The Trust was established on 11 February 1981 pursuant to a trust deed dated on or about that date ('Trust Deed'). Under the Trust Deed, the 'Specified Person' was Stefhanos and the 'Primary Beneficiaries' were the Specified Person and 'the spouse of the Specified Person, any child ... of the Specified Person, any spouse ... of any ... such child ... , any relative of the Specified Person and of the spouse of the Specified Person'. Thus, the class of beneficiaries of the Trust was wide and included Stefhanos, Andrew, James and their sister Ourania.

14 Stefhanos was the appointor and guardian under the Trust Deed. Pursuant to cl 12(1)(b) of the Trust Deed, the appointor had the power to remove the Trustee. Clause 17 empowered the Trustee, with the consent of the guardian, to distribute the whole or a part of any asset of the Trust in specie to a beneficiary.

15 Around June 1990, James and Stefhanos discussed the acquisition of a property by the Trust. At that time, James was 30 years old, married and practising as a solicitor in his own firm. He wanted to purchase a commercial property rather than a residential property. Stefhanos said that he was interested and asked whether James was prepared to contribute to the purchase price. James agreed to contribute over $100,000.

16 On 5 July 1990, James negotiated the purchase of the Property, and executed a contract to purchase it for $590,000. The contract described the purchaser as James or his nominee.

17 On 9 July 1990, James nominated the Trustee as the purchaser of the Property.

18 On 25 July 1990, James and his wife were appointed as directors of the Trustee.

19 On 13 August 1990, a transfer of land was executed transferring the Property from the vendor to the Trustee. Despite James's contribution of 22.57 per cent of the acquisition cost of the Property, the Trustee became the sole registered proprietor of the Property on 22 October 1990. At all relevant times, both floors of the Property have been tenanted.

20 On 4 December 1992, James's wife ceased to be a director of the Trustee.

21 On 29 April 2003, Stefhanos died. On that date, Niki became the appointor of the Trust. On 19 May 2004, James became the appointor.

22 On 28 June 2008, Andrew was appointed as a director of the Trustee.

23 Prior to April 2010, the Trustee's accountant was Peter Grapsas. In July 2010, he was replaced by Graham Joe.

25 Andrew became aware of James's claim of a contribution to the purchase price of the Property a few months before Niki's death.

26 On 28 March 2011, Andrew was appointed as sole secretary of the Trustee.

27 In late November or early December 2011, Andrew and James orally agreed: that the Property be subdivided into an upstairs residential lot and a downstairs retail lot; and that James take the subdivided upstairs residential lot in place of the interest he claimed in the Property ('2011 oral agreement').

28 On approximately 13 December 2011, Mr Joe drafted the Minute set out at [5] above in response to a request from James that Mr Joe prepare minutes to implement the 2011 oral agreement. The request was contained in an email dated 6 December 2011 from James to Mr Joe which releva[5]tly stated:5

I've had discussions will brother Andrew in relation to resolving some internal issues that have arisen since the date of a mother.

Effectively we have both agreed that will be upstairs residents and 50 Puckle Street should be subdivided from the ground floor shop area and that upstairs area be transferred to me or my nominee, if family trust allows, wants new titles issue.

I have already engaged surveyor and am hopeful that lease by Christmas the draft of the survey planned will be my possession with a view of lodging with council early in the New Year.

To this end would be grateful if either you or one of the staff could prepare minutes of meeting evidencing and confirming this agreement commencing 1 January 2012.

Please note that the rental for this residence shall from 1 January 2012 be directed to me or my nominee and not to Vlahos P/L.

The intention obviously is that once the plan subdivision is approved by council of Vlahos family trust shall transfer the upstairs portion of this property in specie will to myself or my nominee.

Contact me should you have any queries or need clarification on any of the above points.

29 At around this time, James and Andrew signed the Minute without having a physical meeting.

30 Also at around this time, James and Andrew arranged for the Trustee to obtain a valuation of the Property for subdivision purposes, and authorised a surveyor to prepare subdivision documents. The valuation was provided to the Trustee on 16 January 2012. The Property was valued at $2,100,000, with $1,800,000 apportioned to the ground floor and $315,000 apportioned to the first floor. The subdivision documents were subsequently prepared and lodged with the local council, which approved the subdivision on 27 August 2012. Andrew wrote out cheques to pay the valuer and the local council's fees for the subdivision. The cheques were signed by James. Andrew did not see the subdivision documents until after the subdivision was approved.

31 As a result of the subdivision, the upstairs residential lot became known as 33 Puckle Lane and separate municipal and water rates and other expenses became payable in relation to it. From January 2012, pursuant to an agreement between Andrew and James, James began to receive the rent from the upstairs residential lot and to pay the rates and other outgoings for that lot.

32 On 26 May 2015, James sent to Andrew a copy of the plan of subdivision for the Property and a transfer of land for the transfer of the subdivided upstairs unit from the Trustee to James. Andrew did not sign the transfer as he had changed his mind about the subdivision.

33 On 21 October 2015, James commenced a proceeding in the County Court against the Trustee and Andrew claiming an equitable interest in the Property on the following alternative bases:

(a) a resulting trust arising from his financial contribution to the purchase of the Property;

(b) the 2011 oral agreement, which was said to be a specifically enforceable contract;

34 At trial, it was common ground that, if the judge found that James had contributed 22.57 per cent of the acquisition cost of the Property, a presumption of resulting trust would apply which the applicants would need to rebut. The applicants conducted their case - including their cross-examination of James - on the basis that his contribution constituted a loan and therefore the presumption was rebutted. They relied principally on the characterisation of the contribution in the books of the Trustee as a loan. The applicants did not positively submit, or put to James in cross-examination, that his contribution constituted a gift.

35 In his opening address at trial, the applicants' counsel stated:

The dispute as to fact principally concerns the resulting trust, the claim that there was a contribution to the purchase price in 1990. The position of the [Trustee] is that if there was such a contribution in the proper form with an intention for it to be part of the purchase price, then we don't quibble with the legal consequence my learned friend proposes. If in fact 22.14 or whatever the ... per cent of the purchase price was contributed to by one party and that was intended to be a contribution to the purchase price, then the consequences will flow.

...

The next step is that the [Trustee] says it is not adequate simply that money was provided, and since there is no quibble that the money was provided - the quibble is whether the amount can be proved with the requisite precision - whether it was provided as a contribution to the purchase price or by way of some other capacity. It could be a gift to the [Trust], it could be a loan. In fact, we're inclined to think it was a loan because the accounts recorded a loan of some $140,000. There were queries in the email correspondence by [James] about what happened to the loan account for the purchase in the accounts and the loan accounts have been there since at least 2010 showing that amount. There is no documentation about how the amount was treated prior to 2010.[6]

36 James gave the following evidence in chief that is relevant to the issue of whether the presumption of resulting trust was rebutted.

Could you tell us about the purchase of the [Property] in 1990?---My father invested relatively [heavily] in residential property. I had a different idea. I [preferred] commercial property and I was keen on the family moving into purchasing commercial property and I was suggesting to dad that this would be a good way of building the family's assets.

What did he say?---He was interested, but he was also keen to know how he'd fund a purchase of this sort and he asked me whether I was prepared to contribute and I agreed that I would.

Did you discuss how much you would contribute?---I don't recall exactly whether I discussed the actual amount that I contributed, but I had funds in term deposits and I was practising at the time, so I indicated to him that I could contribute something in excess of $100,000.

...

It's being put by the [Trustee] that your contribution to the purchase of the [Property] should have been properly documented. Could you explain to His Honour why it hasn't been?---It was a family arrangement, Your Honour. My father and I had discussed the purchase of the [Property], we discussed how it was going to be funded, we discussed what I was going to contribute. We just don't submit things to writing. Everything is done on trust.[7]

37 James gave the following evidence in cross-examination that is relevant to the issue of whether the presumption of resulting trust was rebutted:

So you understand that if you're a director of a trustee company, you have obligations. You're a lawyer, I don't need to - - -?---I do understand ... My father was the trust. It was his trust.

So it was what he wanted to do with the [Property] is what would prevail, if you met?---It was his trust. He was in charge.

...

[Did you do what your] father told [you] during the period that he was alive ...?---Always.

Would that be because you agreed with what it was that he was doing because you were a director?---No, that's because he was my father.

So notwithstanding legal obligations imposed upon you, you would do what your father said, even if you disagreed?---Absolutely.

So would you know if the accounts from 2000 of the trust showed the trust owing you an amount of $140,000 by way of loan or not?---No, I had no input into what went into those tax returns. I never saw them. I never signed them.

If the company made distributions of rental income relating to the [Property] and your father chose to disregard your interest in calculating how those distributions were met, you didn't do anything about that either?---Distributions to whom?

I think in that era it was to your parents, fifty-fifty?---It was his trust. It was his trust account. He was in charge.

He was in charge, yes, but it's a trust, isn't it?---It's a family.

Yes, it's a family trust?---But it's a family, beyond that.

Yes?---It was a family.

Yes. And it's a family trust designed for the benefit of the family?---You don't seem to understand what I'm trying to say but I agree with you, yes.

I guess what I'm going to is that the way that it was conducted was to benefit, as you saw it, the family?---Everyone was working towards the benefit of the family, that's right.

But your father was in charge?---Totally.

...

And if those trust accounts included a loan account to you showing that the [Trust] owed you $140,000, you would accept that that's what the [Trust] owed you?---If that's what those documents said, that's what those documents said.

Yes. I take it you are not an expert accountant? --- Certainly not.

If that $140,000 was recorded as a loan owing to you in 2010, for example, and that amount was the only amount you had given to the [Trust], would you accept that the [Trust] owed you money for the money you had put in for the [Property]?---There is no reason why it should be put down as a loan because it was never a loan.

...

I think you described the original arrangement whereby you put in the money of $140,000 as a family arrangement?---Yes.

I just wanted to explore a little what you meant by that. It was done for the benefit of the whole of the family?---It was done for the advancement of the family.

You weren't paying too much regard to the particular legal form of the arrangement?---Absolutely not.

It was assumed that everybody would benefit in due course?---As everybody who was working within my father's business and working without salary or wages, et cetera, were doing for many, many years.

And that could arise through salary, it could arise through - because you get paid something - it could arise through trust distributions, or something?---Sorry, go back a step.

You were going to obtain a benefit because - everyone in the family will benefit, was the proposition?---The whole idea was to advance the family by buying different types of property, rather than having residential property.

When you say 'advance the family', you mean increase the overall wealth?---Increase the overall asset wealth of the family.

And specific family members would benefit by taking distributions or income through whatever mechanism the investment had been made?---Not at the time. But my father was in control of this trust. No-one got a physical distribution, if I understand your question.

No, my question was very simple. You say everybody is meant to benefit, the family is meant to benefit?---In the long run, yes.

How?---In the long run.

When?---At some point in time we were all going to be getting distributions from the trust.

So you accept - the proposition is this: that a particular form of investment vehicle has been chosen, a family trust in respect of this particular property. Do you agree with that proposition?---Yes.

What I'm asking you is that over the years it was assumed by you in this family arrangement that the relevant family members would benefit because a distribution would be made through this particular legal structure in due course?---The assets would increase in value.

And they would derive income?---And they would derive income annually.

And that would be distributed to, when your parents were [alive], to whomever they chose. Is that right?---To themselves.

Well, to whoever they - they weren't the only - - -?---Well, yes. They dictated that.

Yes. Now, the [Trustee] borrowed the money to buy the [Property]?---Yes.

Did you contribute to the repayments of that mortgage?---No, the repayments were made by the rent and by my father's earnings in his business. I did not contribute to the repayments.

Your father's business wasn't conducted in the Vlahos Family Trust?---No, he lodged independent tax returns, but he himself had no independent and separate bank account or savings account. Everything went into Vlahos Pty Ltd, all his income.

So the income was directed to the company?---Everything went in there.

Were there other trusts?---Only one trust. [8]

38 In their final written submissions, the applicants submitted as follows:

It is submitted that ... the Court should conclude that any intention ... for the [Trustee] to hold an interest in the [Property] on trust for [James] is rebutted. It is plain that the only amount that [James] gave [the Trustee] was treated by it as a loan to it. Having chosen the legal form of the investment vehicle for investing his funds into the [Property], and having chosen to defer to his father's wishes in respect of the characterisation of his investment as a loan, [James] ought not be entitled to call on equity to characterise what he decided to do. Moreover, Stefhanos died in 2003. Whatever the position of domination he may have had over [James], it did not exist from the 2004 year onwards. Yet [James] continued to allow a company of which he was a director to maintain accounts that are inconsistent with his claim. The Court should find that those accounts were correct.

39 In the trial of the proceeding in the County Court, the parties filed an agreed statement of issues. Those issues, as refined during the trial, and the judge's findings on them, may be summarised as follows:

(a) Whether James contributed $141,600 towards the acquisition cost of the Property. The judge found that James had done so.[9] That finding is not being challenged by the applicants.

(b) Whether, as a result of such a contribution, James became the owner in equity of an aliquot and undivided interest in 22.57 per cent of the Property. The judge found that James had acquired such an equitable interest on the basis of a resulting trust.[10] That finding is being challenged by the applicants.

(c) Whether, in consequence, James is entitled to a transfer from the Trustee of a 22.57 per cent interest as tenant in common of the Property. The judge found that James is entitled to hold his 22.57 per cent interest in the Property as tenant in common with the Trustee and to a transfer of that interest.[11] That finding is being challenged by the applicants.

(d) Whether James is barred from claiming equitable relief by the doctrine of laches. The judge found that James is not so barred.[12] That finding is not being challenged by the applicants.

(e) Whether there was, in or about 2011, an agreement ('alleged agreement') between James and the Trustee:

(i) to subdivide the Property into an upstairs residential unit plus a car park space and a downstairs retail unit plus a car park space; and

(ii) for the Trustee to transfer the subdivided upstairs unit and a car park space to James in discharge of his alleged interest of 22.57 per cent in the Property.

The judge found: that in about 2011, James and Andrew agreed to subdivide the Property; that pursuant to the agreement, James was to receive the upstairs residential area and the Trustee was to retain the downstairs retail area; that the consideration from James was the settlement of his claimed interest in the Property; and that the agreement made no reference to car park spaces.[13] These findings are not being challenged by the applicants.

(f) Whether there has been part performance of the alleged agreement. The judge found, first, that the agreement between James and Andrew (on behalf of the Trustee) did not satisfy the Statute of Frauds[14] and, secondly, that the agreement was not made out by part performance.[15] Only the second finding is being challenged by James.

(g) Whether the Trustee's resolution for the in specie distribution recorded in the Minute was made pursuant to the alleged agreement, and was effective to:

(ii) distribute in specie the upstairs residential unit of the Property plus a car park space to James pursuant to the Trust Deed.

The judge found, first, that the resolution was insufficient to implement the agreement,[16] and, secondly, that the resolution was effective to distribute in specie the upstairs part of the Property to James (but not the car park space).[17] Only the second finding is being challenged by the applicants.

(h) Whether James is entitled to specific performance of the alleged agreement, or alternatively the Trustee's resolution for the in specie distribution. The judge found that James was entitled to 'specific performance' of the resolution.[18] This finding is being challenged by the applicants.

(i) Whether James is entitled to damages or equitable compensation for breach of the alleged agreement, or breach of duty or trust by the Trustee's refusal to transfer the upstairs unit to James. The judge found that, as James had received the rental for the upstairs unit from around 2012, he had not suffered any loss for which the Trustee was liable.[19] This finding is not being challenged by James.

(j) Whether James is entitled to an order that the Trustee pay him 22.57 per cent of the net rental of the whole of the Property for the period of six years prior to the commencement of the proceeding in October 2015, or alternatively annual rent from the upstairs residential unit after the date of the Minute, or alternatively damages or compensation in respect of any unpaid net rental. The judge found that James should not receive any payment in addition to the rental he received for the upstairs unit since around 2012.[20] This finding is not being challenged by James.

40 The judge's reasons for finding that a resulting trust arose in favour of James and that this was not rebutted were as follows:

Having found that James contributed the money, the next point is whether James did so as a loan or as an equity contribution. [The Trustee] sought to cast doubt upon the nature of the funds contributed by James by referring to some of the accounts of the [Trust] for the years 2004 - 2009 in which [the Trustee] was said to owe James about $140,000. James agreed that the moneys which he contributed to the purchase price and payment of the stamp duty in connection with the [Property] were the only moneys of substance which he ever paid in relation to the [Trust].

[The Trustee] argued that because James was a director of the [Trustee] and the financial accounts and tax returns showed the $140,000 as a loan, the court should conclude that any contribution by James was in fact a loan and not a contribution which could give rise to any equitable interest in the [Property].

I reject [the Trustee's] submissions. First, the accounts were until 2010 prepared by Grapsas. The brothers agreed that the work done by Grapsas was deficient and the financial statements he produced were not readily understood and accepted as accurate.

Secondly, when Joe took over the accounts from Grapsas, he inherited the pre-existing problems. Joe confirmed that there were, in effect, aspects of the accounts which were incomprehensible. He sought clarification from the brothers regarding the most significant matters as they arose.

Thirdly, I accept that James had no involvement in the production of the accounts. Nor did he have knowledge of the details. Even if, as James conceded, on their face the accounts suggested that the money which he advanced was a loan to [the Trustee], James said that the characterisation was wrong, and did not accurately reflect the arrangement made between himself and his parents.

While one might be critical of James regarding the performance of his duties as the director of a company, I nonetheless accept his evidence as to his state of knowledge and the basis on which he provided the monies for the purchase of the [Property]. Whether or not he complied with his obligations under the corporations legislation, or other common law or equitable obligations as a director in respect of the accounts, is a separate issue. But, for present purposes, I do not consider it relevant and do not accept that the state of the financial statements means that I should reject his evidence.

...

There are situations in which equity will infer a presumption of advancement - that is, there are relationships such as between spouses or a parent and a child where equity infers that the benefit conferred has been provided by way of advancement with the result that the prima facie position is that the equitable interest is presumed to follow the legal estate.

Such a presumption would not apply here. The court could not properly infer that James intended to benefit the [Trust] by contributing to the purchase of the [Property] while simultaneously surrendering any claim he might otherwise have arising from that contribution.

I am satisfied that, by reason of a resulting trust, James is entitled in equity to a 22.57% share of the [Property], and holds his interest as tenant in common with [the Trustee].[21]

41 As a result of his finding that the Minute did not record the 2011 oral agreement in writing in a manner that satisfied the Statute of Frauds,[22] the judge went on to consider whether the 2011 oral agreement could be enforced on the basis of the doctrine of part performance. In particular, the judge considered the requirement that the acts relied upon as part performance 'must be unequivocally, and in their own nature, referable to some such agreement as that alleged'.[23] The judge's reasons for concluding that the requirements of the doctrine of part performance had not been satisfied were as follows:

James relies upon the following as acts of part performance:

(a) the Board resolution of [the Trustee] dated 8 December 2011;

(b) the valuation of the [Property] in 2012;

(c) the preparation and lodgement of the plan of subdivision in 2012;

(d) James receiving the nett rental from the upstairs part of the [Property] and paying the outgoings associated with that part of the [Property].

Each of these acts occurred after the formation of the alleged contract and not before. Apart from the making of the Board resolution of [the Trustee], the other acts relied upon as part performance of the oral agreement were all required or permitted under the contract alleged.

...

In this case, [the Trustee] has an argument that the acts were not unequivocal because, if there were a distribution of trust property in accordance with the terms of the [Trustee's] minutes of meeting, then the actions of valuing the [Property], preparing the plan of subdivision, and then James receiving the rent from the trust property, would likely follow. That being so, the quality of the possession granted to James is ambiguous and not sufficiently unequivocal. The fact that the [Minute] made no reference to the agreement giving rise to the subdivision of the [Property] serves to underline the equivocal nature of the acts of part performance relied upon.

In the circumstances, I find that the acts of part performance relied upon are too equivocal to establish part performance of the agreement.[24]

42 The judge then went on to consider whether the Trustee's resolution for the in specie distribution to James of the upstairs area of the Property plus a car park space was effective. He found in favour of James on this issue for the following reasons:

The final basis upon which James relies to validate his claim is the in specie distribution of trust property. Clause 17 of the trust deed [for the Trust] authorises and empowers [the Trustee] to distribute assets of the [Trust] in specie to beneficiaries.

[The Trustee] argued that because:

(a) [the Trustee] had the power to distribute trust property in specie;

(b) the [Minute] was expressed only as a power of appointment and made no reference to the agreement between the brothers, or the resolution of James's claim to part of the [Property]

James was therefore a volunteer who gave no consideration for the property distributed, and, until he received a signed transfer of land in registrable form, [the Trustee] could change its mind. [The Trustee] contended that a court of equity would not effect an imperfect gift to a volunteer.

The logic of [the Trustee's] position might be correct if viewed in isolation but it is not clear to me that the mere failure to refer to the brothers' agreement in the [Minute] necessarily means that the court should ignore it. I consider this approach to be wholly unrealistic and at odds with the proven facts. As previously found, the evidence discloses that the only reason the [Minute] came into being was to give effect to the agreement made by the brothers to satisfy James's claim against the [Property]. In my view, it is artificial in those circumstances to pretend that the [Minute] can be sensibly considered while ignoring the context which caused its creation. As part of the agreement, James gave consideration by compromising and settling his claim against the [Property].

Because I consider that [the Trustee] has adopted an approach to the issue which is too simplistic because it ignores uncontested facts, I reject the submission that James is a volunteer and that this case is 'on all fours' with the deed of gift in Corin v Patton. As a result of the Board resolution by [the Trustee], the [Property] is to be subdivided and the upstairs residential area is to be transferred to James or an entity which he nominates. Because the terms of the resolution did not expressly address the matter and the agreement made between the brothers similarly did not address the matter, the distribution in favour of James does not include a car parking space.

...

By virtue of the reasons already given, James is entitled to an order from the court requiring [the Trustee] to complete the subdivision.[25]

43 In his reasons, the judge indicated that James would need to make an election in relation to the relief that he sought. This was because he could not 'insist upon the transfer [of] the upstairs residential section of the [Property] and also claim a 22.57% interest in the [Property]'.[26]

44 A further hearing took place to enable the parties to make final submissions on the orders to be made.[27] In the course of that further hearing, James elected to claim a 22.57 per cent interest in the Property.

45 On 9 November 2016, the judge made the following order:

The Court declares that the [Trustee] holds its interest in the [Property] ... on trust for itself and [James] as tenants in common with [James] having 9 equal undivided 40th parts or shares ('[James's interest']) and the [Trustee] the remaining 31 equal undivided 40th parts or shares.
The [Trustee] as soon as practicable transfer [James's] interest in the [Property] to [James].
As soon as it is practicable for him to do so, [James] serve upon the [Trustee] in a form ready for execution, any documents he requires the [Trustee] to execute in order to transfer [James's] interest in the [Property] to [James], and in order to have [James's] interest in the [Property] registered on title pursuant to the Transfer of Land Act 1958 (Vic).
Andrew ... execute all such documents provided to him by [James] and deliver them to [James's] solicitors within 21 days of service of them upon him and in default thereof, the Registrar of the Court be authorised to execute them on behalf of the [Trustee] and [Andrew].
There be liberty to apply in relation to the preceding paragraphs of this order.
Andrew ... pay [James's] costs of the proceeding including reserved costs and the costs of the [Trustee's] application to re-open its case, such costs to be taxed on a standard basis in default of agreement.
Andrew ... pay the [Trustee's] costs of the proceeding including reserved costs and the costs of the [Trustee's] application to re-open its case, such costs to be taxed on an indemnity basis in default of agreement.

46 As stated at [8] above, the applicants rely on eight grounds of appeal. Grounds 1-4 deal with the judge's finding that the presumption of resulting trust had not been rebutted while Grounds 5-8 deal with the judge's finding that the resolution in the Minute was an enforceable distribution in specie of the upstairs area of the Property. As stated at [9] above, James's notice of contention seeks to impugn the judge's finding that there had been insufficient acts of part performance to entitle James to equitable relief in connection with the 2011 oral agreement.

47 The issues concerning the presumption of resulting trust, the enforceability of the resolution in the Minute and the sufficiency of the acts of part performance will be discussed separately below. The grounds of appeal and the grounds in the notice of contention will be set out when the issue to which they relate is discussed.

In finding that [James] held a 22.57% equitable interest in the [Property] pursuant to a presumed resulting trust in consequence of [James's] contribution of that proportion of the total purchase price plus stamp duty, the learned Trial Judge erred by failing [to] consider whether the presumption was displaced on the facts and in the circumstances at the time the [Property] was acquired; viz. that the [Trustee] was acting in its capacity as the trustee of the [Trust] and that [James] was an object of the [Trust] and, with his wife, about to become a director of the board of the [Trustee].
The learned Trial Judge erred by not finding that the presumption was displaced on the facts and in the circumstances, and hence by not finding that the [Trustee] acquired the legal estate in the [Property] as its registered proprietor only in its capacity as the trustee of the [Trust] to hold solely as trustee of the [Trust].
The learned Trial Judge should have found on the facts and in the circumstances that the presumption of resulting trust in favour of [James] was displaced, and hence that the [Trustee] held the legal estate in the [Property] solely in its capacity as the trustee of the [Trust].
The learned Trial Judge misdirected himself as to the application of the presumption in finding that the 'court could not properly infer that [James] intended to benefit the [Trust] by contributing to the purchase price of the [Property] while simultaneously surrendering any claim he might otherwise have arising from that contribution': Reasons, [55].

Principles relating to raising a new argument on appeal

49 There is a fundamental principle that a point not taken at first instance cannot be taken on appeal if evidence could have been given at the first instance trial which by any possibility could have prevented the point from succeeding.[28] Exceptional circumstances will be required in order for a party to introduce an issue for the first time on appeal. Even where the new point sought to be raised is a point not capable of being affected by further evidence, such as an argument as to the construction of a statute or document, the court may not permit it to be relied upon.[29]

50 In Coulton v Holcombe,[30] Gibbs CJ and Wilson, Brennan and Dawson JJ stated that '[i]t is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial.'[31] They quoted with approval the following statement from Metwally v University of Wollongong:[32]

It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so.[33]

51 Gibbs CJ and Wilson, Brennan and Dawson JJ then referred to the underlying reasons for the above principle. The reasons were: the finality of litigation; the difficulty of inducing an appeal court to consider new facts; the undesirability of encouraging tactical decisions to keep an issue in reserve for an appeal rather than presenting it at first instance; and the need to avoid injustice to a party having to meet new factual or legal issues for the first time on appeal.[34]

52 The legal principles that are relevant to a 'purchase money resulting trust' of the type found by the judge may be summarised as follows.

53 Where A purchases property in the name of B, or in the name of A and B, and B does not financially contribute to the purchase price, there is a presumption that A is beneficially entitled to the interest in the property held by B.[35]

54 Where two or more parties make equal financial contributions to the purchase price, but the property is conveyed into the name of one party only, there is a presumption that the parties take a beneficial interest in the property as tenants in common in equal shares.[36]

55 Where two or more parties make unequal financial contributions to the purchase price, but the property is conveyed into the name of only one of them, or in all their names, there is a presumption that the parties take a beneficial interest in the property as tenants in common in shares that are proportionate to their respective financial contributions to the purchase price.[37]

56 Payment of stamp duty and registration fees can be treated as a financial contribution to the purchase price for this purpose.[38]

57 The onus of establishing the payment(s) giving rise to a presumption of resulting trust lies on the party who is asserting the existence of the trust.[39]

58 When a presumption of resulting trust arises, it performs a similar function to the civil onus of proof by requiring the person against whom the presumption applies to adduce evidence, or to point to other evidence in the case, that rebuts the presumption.[40]

59 Where the party claiming the benefit of the presumption of resulting trust contributed the entire purchase price, the presumption can be rebutted by evidence that the party had a contrary intention at the time the contribution was made, such as evidence of a gift or a loan.[41]

60 Where two or more parties financially contribute to the purchase price and the legal title does not reflect their respective contributions, the presumption of resulting trust can be rebutted by evidence that, at the time the contributions were made, the parties had a common intention that the beneficial interests are to be the same as the legal interests.[42] Ordinarily, whether a common intention existed at that time is not to be determined by reference to the subjective, uncommunicated intentions of the parties. Rather, it is to be inferred by reference to the parties' words and conduct and the prevailing context at that time, including the relationship that then existed between the parties.[43] Evidence of subsequent statements or conduct, as distinct from those which are contemporaneous with the relevant transaction, will only be admissible as admissions against interest.[44]

61 The strength of any presumption of resulting trust will vary from case to case, as will the weight of evidence required to rebut the presumption.[45]

62 In some circumstances, a countervailing presumption of advancement will operate. That presumption arises in favour of the person in whose name the property is purchased, where the relationship between that person and the purchaser or contributor is such that the latter has a 'natural obligation to provide'[46] for the former, such as in a case of a father and child.[47] It will be presumed in such a case that the purchaser or contributor intended to give the other a beneficial interest unless the presumption is rebutted.[48]

63 If a presumption of resulting trust arises and the relationship between the parties does not give rise to a presumption of advancement, the former presumption will give rise to a trust unless there is evidence that the person who financially contributed to the purchase price had a contrary intention at the time the contribution was made.[49]

64 It was common ground in the present case that the presumption of advancement did not apply.

65 The applicants submitted that they had conducted their case at trial on the basis that, if the presumption of resulting trust applied, it was rebutted. Accordingly, so it was said, James was on notice that the nature of any common intention between him and his father (as the controlling mind of the Trustee) at the time that the Property was purchased was a key issue at trial. They contended that the fact that they focused on whether James's contribution was a loan did not confine the factual enquiry that was relevant at trial. Thus, so they argued, any shortcomings in James's evidence relating to common intention at the time the Property was purchased reflected forensic decisions made by him and did not amount to such prejudice as would preclude them from pursuing an argument on appeal that the presumption was rebutted otherwise than by a common intention that he make a loan.

66 The applicants conceded that they did not contend at trial that James's contribution was an express gift. Nevertheless, they submitted that on the totality of the evidence before the judge, he should have inferred that the common intention of James and his father was that the amount paid by James would be a voluntary contribution to the purchase price ('common intention to make a voluntary contribution' argument).

67 The applicants contended that the presumption of resulting trust is 'readily rebutted by comparatively slight evidence'[50] and that, in the present case, there was sufficient evidence to enable the judge to infer the existence of a common intention to make a voluntary contribution and to conclude, on the basis of that common intention, that the presumption had been rebutted.

68 The applicants relied on the following evidence in support of a common intention to make a voluntary contribution: James nominated the Trustee to be the purchaser of the legal estate in the Property; James was a beneficiary under the Trust; James and his wife were about to be appointed as directors of the Trustee; and there was no compelling reason to put the Property in the name of the Trustee to hold partly as trustee for James and partly on the terms of the Trust. The applicants emphasised that, as the Trustee was the trustee of a subsisting express discretionary family trust of which James was a beneficiary, it was objectively improbable that there was a common intention that the Trustee would become trustee of a resulting trust which was to coexist with the express trust in respect of the Property.

69 The applicants contended that rebuttal of a presumption of resulting trust at the time of the contribution in the present case would not necessarily have resulted in any economic diminution of James's interest, as he was a beneficiary of the Trust and was about to be appointed as a director of the Trustee. It followed, so it was said, that the judge misdirected himself in finding that he could not properly infer that James intended to benefit the Trust by contributing to the purchase price of the Property while simultaneously surrendering any claim he might otherwise have from that contribution.[51]

70 The applicants relied on the fact that, although James gave evidence that he agreed with his father that he would contribute to the purchase price of the Property, he gave no evidence of the intended character of the contribution. They submitted that this was significant because in Calverley v Green,[52] Gibbs CJ stated that, in order for the presumption of resulting trust to apply, 'the money must have been provided by the purchaser in his character as such - not, eg, as a loan'.[53]

71 The applicants contended that James and his father clearly intended that the legal title in the Property would vest in the Trustee. According to the applicants, as there was no evidence of a common intention that James's contribution would entitle him to an equitable interest in the Property, the presumption of resulting trust was rebutted. Thus, so it was said, the only trust to which the Trustee was subject in respect of the Property was the express discretionary trust under the Trust Deed.

72 James submitted that the applicants should not be permitted to advance the 'common intention to make a voluntary contribution' argument before this Court, as it was not raised at trial. Furthermore, so it was said, this new argument was in direct conflict with the principal argument the applicants pursued at trial, namely, that James's contribution was a loan. In this regard, James referred to the applicants' opening address, the evidence given by him during cross-examination and the applicants' final written submissions.[54]

73 James contended that a loan, which involved the creation of a debt, was self-evidently not a voluntary contribution. He further contended that, as the applicants conceded that they did not advance the case at trial that his contribution was an express gift, they should not be permitted to rely on an argument that there was a common intention that he make a voluntary contribution because such a contribution is, in substance, a gift.

74 James submitted that, if the applicants are permitted to advance the 'common intention to make a voluntary contribution' argument on appeal, he would be prejudiced because, had that argument been made at trial, he would have adduced evidence against it. According to James, that evidence would have included:

(a) Evidence of his personal circumstances, including his family situation and finances, with a view to demonstrating that he did not intend to give up $141,600 of his personal wealth to benefit the wide range of beneficiaries of the Trust.

(b) Evidence about the circumstances in which he and his wife came to be appointed directors of the Trustee with a view to demonstrating that there was no connection between the appointments and his contribution to the purchase price of the Property.

(c) Evidence about the financial position of James' parents and of the Trust in 1990, and about James's expectation as to what would be ultimately distributed to him from the Trust.

75 James contended that, even if the applicants were permitted to advance the 'common intention to make a voluntary contribution' argument on appeal, that argument must fail because there is insufficient evidence of such a common intention. He argued that he was the only person who gave evidence on what he and his father said and did at the time the Property was purchased and that no part of his evidence was challenged in cross-examination. According to James, that evidence included evidence that:

(a) Stefhanos had 'invested relatively [heavily] in residential property', that James '[preferred] commercial property', that Stefhanos 'was interested, but he was also keen to know how he'd fund a purchase of this sort and he asked [James] whether [he] was prepared to contribute and [he] agreed that [he] would', and that it was agreed that James 'could contribute something in excess of $100,000';[55]

(b) James identified the Property as being suitable, handled the purchase negotiations, organised for the payment of the deposit, signed the contract of sale as purchaser and acted as the purchaser's solicitor;

(d) the remainder of the purchase price was funded from '[a] combination of ANZ Bank loan and Vlahos Pty Ltd savings';[56] and

(e) James had denied that his contribution was a loan.[57]

76 James submitted that, in accordance with the principles summarised at [53]-[63] above, this evidence meant that a resulting trust must be implied in his favour in proportion to the contribution he made to the purchase price of the Property. He contended that, in context, his references to his 'contribution' plainly meant an equity contribution.

77 According to James, statements to the effect that the presumption of resulting trust may be readily rebutted by comparatively slight evidence are incorrect, as are contrary generalisations that the presumption is not lightly rebutted.[58]

78 James submitted that neither the fact that the Trustee was the trustee of the Trust of which he was a beneficiary, nor the fact that he and his wife were about to be appointed as directors of the Trustee, defeated the presumption of a resulting trust. According to James, there were five reasons for this:

(a) There were many other potential beneficiaries of the Trust and there was no guarantee that any distribution would be made to him or his family to reflect the financial contribution made by him to the purchase of the Property. It would be remarkable if a recently married 30 year old man would have intended to gift a substantial sum of money to a discretionary trust in those circumstances.

(b) Even if he and his wife were about to be appointed as directors of the Trustee, that would not enable him to control the Trust. Stefhanos remained the appointor, and thus had the power to remove the Trustee, until 2003.[59] James did not become the appointor until 2004, many years after the purchase of the Property.

(c) The evidence did not establish that he and his wife were about to be appointed as directors at the time of the purchase of the Property. Notwithstanding the proximity of the date of the contract of sale (5 July 1990) and the date of the appointments (25 July 1990), the evidence did not establish any connection between those events. In particular, the evidence did not establish that he and Stefhanos agreed that he and his wife would be appointed in order to protect their interests arising from a 'gift' of $141,600 to the Trust.

(d) Whatever the legal position concerning potential benefits available to him from the Trust, he gave evidence that, during his father's lifetime, distributions of income were made only to Stefhanos and Niki. He also gave evidence that he perceived the Trust to be under his father's control. That evidence made it unlikely that he would have freely gifted his own money to the Trust merely because he was a beneficiary.

(e) It was never put to him in cross-examination that he intended a gift of the sum of $141,600 because he was a beneficiary of the Trust and would have some degree of control arising from his and his wife's appointment as directors of the Trustee. The objective facts relied on are so weak and inconclusive as to have made it essential that they be put to him at trial so he could have responded to them.

79 James submitted that, at best, the applicants' supposed evidence that the contribution was made to a family trust raises an idle possibility that he intended a gift to the Trust, and that it falls well short of any evidence of a common intention to make a voluntary contribution. As such, so it was said, the presumption of resulting trust must determine the outcome.

80 I accept James's submission that the applicants should not be permitted to advance on appeal the 'common intention to make a voluntary contribution' argument. This is because that argument is inconsistent with the case the applicants conducted at trial which was based on the existence of a loan. More importantly, their failure to advance that argument at trial would cause prejudice to James on appeal, as he was deprived of the opportunity of adducing evidence at trial to seek to refute that argument.

81 However, it is not necessary for me to elaborate further on this issue. This is because I am firmly of the opinion that the judge correctly concluded that the presumption of resulting trust had not been rebutted.

82 It was common ground at trial that, if it was established that James had contributed $141,600 to the acquisition cost of the Property, a presumption of resulting trust would arise and the onus would be on the applicants to rebut the presumption. It follows that, if, on the totality of the evidence, no inference could be drawn about the common intention of James and his father at the time the Property was purchased, the presumption would not be displaced and would govern the outcome of the proceeding.

83 Before considering the evidence upon which the applicants relied to rebut the presumption, I will deal with their submission that the presumption is 'readily rebutted by comparatively slight evidence'.[60] I reject that submission. Although in Pettitt v Pettitt[61] Lord Upjohn stated that proposition in relation to the presumption of resulting trust and the presumption of advancement,[62] the proposition has not been adopted in Australia. In Calverley, Mason and Brennan JJ said that the strength of the presumption of resulting trust varies from case to case.[63] In the same case, Deane J expressed the view that the proposition that a presumption of resulting trust should not give way to slight circumstances can no longer properly be accepted as an unqualified rule.[64] He repeated this view in Muschinski v Dodds.[65] However, Deane J did not adopt Lord Upjohn's proposition in either case. In our opinion, the correct principle is that set out at [61] above.

84 The evidence upon which the applicants relied in support of the 'common intention to make a voluntary contribution' argument is largely speculative and could not, either individually or in combination, found an inference that such a common intention existed at the time the Property was purchased.

85 The first item of evidence upon which the applicants relied was the fact that James nominated the Trustee to be the owner of the legal estate in the Property. This evidence does not assist the applicants. This is because the fact that James contributed part of the purchase price, when combined with the fact that the Trustee became the sole legal owner of the Property, gave rise to a presumption of resulting trust. As such, neither of those facts can provide a basis for rebutting the presumption.

86 The second item of evidence upon which the applicants relied was the relationship between James and the Trust. That evidence also does not assist the applicants. This is because the fact that James was a beneficiary of the Trust says nothing about why he agreed with his father to contribute 22.57 per cent[66] of the acquisition cost of the Property. The following circumstances render it much more likely that the common intention of James and his father was that James would acquire an equitable interest in the Property commensurate with his contribution rather than that his contribution be treated as 'voluntary':

(a) At the time the Property was purchased, James was 30 years old, married and practising as a solicitor in his own firm.[67]

(b) As appointor, Stefhanos had the capacity to control the Trust[68] and therefore James had no way of ensuring that his contribution would confer upon him a benefit over and above the benefit to any other person falling within the wide class of beneficiaries[69] under the Trust.

(c) In the light of the matters set out at (a) and (b) above, it is highly improbable that James would give away a large sum of money for the benefit of his extended family - with only the potential for an indirect benefit to his own family through distributions from the Trust - rather than retaining or investing the money for the direct benefit of his own family.

(d) The evidence that James gave about 'advancement of the family' ** - ** which is set out at [37] above - on its face amounts to no more than evidence that he made a financial contribution to enable the Trust to acquire a valuable commercial property and thus assist in wealth generation for his extended family through the Trust. The applicants would need to go further and establish that this amounted to an admission that James and his father intended that James would not acquire a beneficial interest in the Property commensurate with his contribution and that any benefit to James would be exclusively through potential distributions from the Trust. But James's intention to benefit his extended family is entirely consistent with an intention that the extended family's benefit would be commensurate with the Trust's contribution to the purchase price and that he would be entitled to an equitable interest commensurate with his respective contribution.

(e) In any event, as James's evidence, which is set out at [37] above, is about his subjective intentions rather than about what he and his father said and did at the time the Property was purchased, it was probably i[70]dmissible.70 Furthermore, insofar as the evidence did not concern contemporaneous statements or conduct, it was inadmissible because it did not amount to an admission again[71] interest.71

87 The third item of evidence upon which the applicants relied was the fact that on 25 July 1990, 20 days after James signed the contract for the purchase of the Property on 5 July 1990, he and his wife were appointed as directors of the Trustee. This fact also does not support the 'common intention to make a voluntary contribution' argument, as there was no evidence that there was any connection between the two events. If James had agreed to contribute to the purchase price of the Property on the basis that he and his wife would be able to control distributions from the Trust in their capacity as directors, he would have needed to do more than arrange those directorships before agreeing to make his contribution. He did not ensure that he and his wife were able to control the board of directors of the Trustee. Nor did he replace his father as appointor of the Trust. James and his wife simply became two of four directors of the Trustee 20 days after the contract for the purchase of the Property was signed and James became appointor 24 years later.[72] These facts offer little support to the applicants' characterisation of the transaction.

88 The fourth item of evidence upon which the applicants relied is not evidence at all but rather a process of inferential reasoning based on the first three items of evidence. Further, the inferential reasoning is essentially negative in that it postulates that there is no compelling reason for James to put the Property in the name of the Trustee to hold partly as trustee for him and partly on the terms of the Trust. I reject that reasoning. For the reasons I have already given, the circumstances that existed at the time the Property was purchased are capable of giving rise to an inference that James and his father had a common intention that James's contribution would benefit his extended family - by enabling the Trust to acquire a valuable commercial property - and would also benefit James by enabling him to acquire a beneficial interest to the extent of his contribution.

89 In any event, it was not for James to establish any inference. Rather, it was for the applicants to establish that the inference that they contended for - that James and his father had a common intention that James would make a voluntary contribution to the purchase price of the Property - was the more probable inference which arises from the established facts.[73] This they failed to do. For the reasons set out at [86] above, in the circumstances that prevailed at the time the Property was purchased, it was highly improbable that James would agree to cede control of a substantial amount of money for the benefit of his extended family as beneficiaries under the Trust rather than acquire a beneficial interest in the Property to the extent of his contribution to its purchase price.

90 As stated at [70] above, the applicants relied on a statement by Gibbs CJ [74] Calverley74 that, in order for a presumption of resulting trust to apply, 'the money must have been provided by the purchaser in his character as such - not, eg, as a loan'. To the extent that the applicants sought to contend that this statement meant that James had an onus of adducing evidence about the character in which he made his contribution before a presumption of resulting trust could arise, that contention must be rejected. It is well established that, in a case such as the present, a presumption arises from the mere fact that two parties made financial contributions to the purchase price of a property and the legal title to the property was put in the name of only one of them. Evidence that the character of the contribution made by the party which did not acquire the legal title was a loan or a gift goes to rebuttal of the presumption rather than to whether the presumption arose in the first place. I do not believe that Gibbs CJ's statement was intended to depart from this orthodox doctrine.

91 For the above reasons, Grounds 1-4 are not made out.

92 As I have concluded that the judge correctly found that the presumption of resulting trust had not been rebutted and that James was entitled to an equitable interest in the Property, it is not necessary for me to consider the notice of contention. However, as the parties made detailed submissions on the issue of part performance, I will consider it briefly.

93 The notice of contention is in the following terms:

The respondent respectfully contends that the learned Trial Judge erred in finding:

(a) that the agreement made in or about late 2011 between [James] and the applicants to subdivide the [Property] and transfer the upstairs unit and one car parking space to [James] was not sufficiently part performed so as to be specifically enforceable; and

(b) 'that the acts of part performance relied upon are too equivocal to establish part performance of the agreement',

in the circumstances where:

(c) the acts done could not have been referable to any agreement other than the one alleged, and

(d) nothing further remained to be done to complete performance of the agreement other than the signing and lodgement of the transfer of land form in relation to the plan of subdivision.[75]

Relevant statutory provisions and legal principles

94 Section 126(1) of the Instruments Act 1958 provides as follows:

(1) An action must not be brought to charge a person ... upon a contract for the sale or other disposition of an interest in land unless the agreement on which the action is brought, or a memorandum or note of the agreement, is in writing signed by the person to be charged or by a person lawfully authorised in writing by that person to sign such an agreement, memorandum or note.

95 Section 53 of the Property Law Act 1958 relevantly provides as follows:

53 Instruments required to be in writing

(1) Subject to the provisions hereinafter contained with respect to the creation of interest in land by parol -

(a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law;

...

(2) This section shall not affect the creation or operation of resulting, implied or constructive trusts.

96 The legislative requirements set out above are modern day derivatives of the Statute of Frauds. Equity has always guarded against allowing the Statute of Frauds to be used as an instrument of fraud.[76] Accordingly, where a contract does not comply with the requirements of the Statute of Frauds, but a party has altered his or her position in reliance on the contract, the equitable doctrine of part performance operates to prevent another party from improperly invoking those requirements in order to circumvent the real agreement between the parties.[77]

97 In Regent v Millett,[78] Gibbs J (with whom the other members of the High Court agreed) described the principle upon which the doctrine of part performance rests as follows:

[W]hen one of two contracting parties has been induced, or allowed by the other, to alter his position on the faith of the contract, as for instance by taking possession of land, and expending money in building or other like acts, there it would be a fraud in the other party to set up the legal invalidity of the contract on the faith of which he induced, or allowed, the person contracting with him to act, and expend his money.[79]

98 Gibbs J set out the test for part performance in the following terms:

[T]he test suggested by the Earl of Selborne LC in [Maddison v Alderson], that the acts relied upon as part performance 'must be unequivocally, and in their own nature, referable to some such agreement as that alleged', has been consistently accepted as a correct statement of the law. It is enough that the acts are unequivocally and in their own nature referable to some contract of the general nature of that alleged (see McBride v Sandland).[80]

99 The above test has been followed in Australia.[81]

100 There have been various statements of a more liberal approach to the applicable test in English law[82] but any reconsideration of the approach in Australia is a matter for the High Court.[83] More recently in Laserbem Pty Ltd v Gainsville Investments Pty Ltd,[84] Kaye J summarised the requirements as follows:

(a) The act relied on must be unequivocally and its own nature referable to 'some such agreement as that alleged';

(b) By 'some such agreement as that alleged' is meant some contract of the general nature alleged;

(c) The act or acts of part performance must be those of the plaintiff who is a party to the agreement;

(d) There must be a completed agreement between the parties;

(e) The act or acts must be done under and pursuant to the terms of the agreement.[85]

101 As the reference to 'some such agreement as that alleged' means some contract of the general nature or general class alleged, it is not necessary for the acts of part performance to point to the very contract alleged or to disclose the specific terms of that contract.[86] Acts of part performance will not be sufficient if they are equally referable to an arrangement other than a contract of the general nature alleged.

102 Ordinarily, the payment of money is not an unequivocal act and cannot by itself be an act of part performance.[87] By contrast, the giving and taking of possession of property may of itself be a sufficient act of part performance. In Regent v Millett, Gibbs J described the change of possession of land as 'the act of part performance par excellence'[88] and on the facts of that case, the giving and taking of possession by itself was held to be sufficient part performance of the contract. However, this may not be the case where possession could be equally referable to some arrangement other than the contract alleged.[89]

103 In order to satisfy the requirement that the acts of part performance must be done under and pursuant to the terms of the contract, it is not necessary that the acts should have been done in compliance with an obligation in the contract.[90] Thus, the giving and taking of possession of land will amount to part performance notwithstanding that under the contract the purchaser was entitled rather than bound to take possession.[91]

104 In Thwaites v Ryan,[92] Fullagar J said the following about the order in which evidence about part performance should be considered:

[I]t is wrong first to postulate the contract pleaded and then to ask if the alleged acts were a part performance of it, or of a contract of its general nature ... One must first seek to find such a performance as must imply a contract, and then proceed to ascertain the general nature of such contract as the performance implies, and then to compare that result, if one gets to it, with the general nature of the contract pleaded.[93]

105 James submitted that the judge's finding that the 2011 oral agreement was not enforceable because it was not sufficiently part performed was wrong, and that if the appeal is allowed, this Court should find that that agreement was part performed and is specifically enforceable by an order that the Trustee sign a transfer in accordance with the plan of subdivision.

106 According to James, part performance is made out in this case whether a strict or more liberal approach to the relevant test is applied. James submitted that even on the strict approach, the giving and taking of possession of land is usually treated as a sufficient act of part performance.[94]

107 James submitted that the acts of part performance upon which he relied at trial[95] could not sensibly be referrable to any agreement other than an agreement to subdivide the Property in terms of the plan of subdivision that was lodged and approved and to transfer both ownership and possession of the subdivided upstairs residential lot to him.

108 James also submitted that the language of the Minute and the email instruction to Mr Joe[96] implied the existence of a contract rather than merely a trust distribution. In the case of the Minute, this was said to be because the references to 'disposal price' and the equal debiting of James's and Andrew's loan accounts implied that only James was receiving a benefit because of the existence of a contract. In the case of the email, this was said to be because it refers to what had been 'agreed' and to 'this agreement commencing 1 January 2012'.

109 James contended that the judge was unduly dismissive of the fact of possession of the upstairs residential lot being granted to him by his receipt of the rental, and payment of the outgoings, attributable to that lot.

110 The applicants submitted that the judge was clearly correct in concluding that the matters upon which James relied were not unequivocally and in their own nature referable to some contract of the general nature of that alleged or to any contract at all. According to the applicants, in the context of the administration of a family discretionary trust, the acts relied upon point, at most, to a decision by the Trustee to make a distribution to James under the terms of the Trust. In particular, so it was said, the collection of rent in respect of the upstairs residential lot by James is not indicative of a sale rather than a voluntary transfer, nor does it amount to a taking of possession. The applicants submitted that even if it did amount to a taking of possession, that would not unequivocally indicate a contract as opposed to an advancement.

111 In relation to the Minute, the applicants submitted that there were a number of reasons why it does not constitute an act of part performance, including that: it is not an act of James but is an internal record of a decision taken by the Trustee through its board; it is not an act which is required or authorised by the 2011 oral agreement, it is an act done in consequence of that contract; and it was unsuccessfully relied upon by James as a sufficient note or memorandum of the unwritten contract within s 126(1) of the Instruments Act 1958. The applicants submitted that James cannot 'pull himself up by his boot straps' by relying on the Minute as an act of part performance.

112 The applicants further submitted that even if one views the Minute as an act of part performance, it points to an arrangement different from that embodied in the 2011 oral agreement because it does not contemplate the release of any claim by James. According to the applicants, the consideration referred to in the Minute does not accord with that required by the 2011 oral agreement.

113 In relation to the email instruction to Mr Joe, the applicants submitted that James ought not now be permitted to contend that the judge erred by failing to take account of an act that was never relied upon at trial. Notwithstanding that observation, the applicants submitted that the email instruction is manifestly not an act of part performance because it is not an act by James in execution of the 2011 oral agreement and even if it were regarded as an act of part performance, it does not unequivocally indicate entry into any contract.

114 The applicants also submitted that James's acts in procuring the valuation and subdivision of the Property did not qualify as acts of part performance because they were performed by him in his capacity as a director of the Trustee rather than in his capacity as a party to the 2011 oral agreement.

115 In my opinion, the judge erred in finding that there had not been sufficient acts of part performance of the 2011 oral agreement.

116 As stated in Thwaites v Ryan,[97] in determining whether a contract has been sufficiently part performed, the first question is whether the acts of part performance upon which the party is seeking to rely are unequivocally referable to a contact. It is only if that question is answered in the affirmative that one considers the second question, namely, what is the general nature of that contract and then the third question, namely, whether the contract relied upon is of that general nature.

117 In the present case, the main focus was on the first question because the judge decided that the acts of part performance upon which James relied were equally consistent with a decision by the Trustee to make an in specie distribution to James of the first floor of the Property.

118 It is well established that, in assessing the adequacy of acts of part performance, those acts must be considered as a whole in the context of the circumstances that prevailed at the time they were performed. In my opinion, the prevailing circumstances that can be considered as part of the context include the nature of the property in dispute, the personal and financial relationship between the parties, and their recent dealings.[98]

119 In the present case, the prevailing circumstances that formed part of the context against which the acts of part performance are to be assessed include the following:

(a) The Property was purchased in 1990 and the legal title was registered in the name of the Trustee.[99]

(b) James contributed 22.57 per cent of the acquisition cost of the Property.[100]

(c) The Property comprised a retail area on the ground floor, a residential area on the first floor and two car park spaces at the rear of the building.[101]

(d) Until his death in April 2003, Stefhanos was the appointor of the Trust and effectively controlled it.[102] From the time the Trust was established in 1981 until Stefhanos's death in April 2003, distributions from the Trust were made only to Stefhanos and Niki and between his death and Niki's death in November 2010, distributions were made only to Niki.[103]

(e) In early 2011, Andrew became aware that James claimed an equitable interest in the Property based on his financial contribution to the purchase price.[104]

(f) From 21 November 2010, James and Andrew were the only directors of the Trustee.[105]

(g) In recent years, the Trustee adapted a 'pattern' of distributing the income of the Trust annually to James's family and Andrew's family equally.[106]

(h) There was evidence that the relationship between James and Andrew had been strained since their mother passed away on 21 November 2010.[107]

120 Having regard to the above circumstances, the question arises whether the following acts of part performance are referable to a contract or to some other arrangement such as an in specie distribution by the Trust:

(a) James's email dated 6 December 2011 to Mr Joe;[108]

(b) the in specie resolution in the Minute dated 8 December 2011;[109]

(d) the plan of subdivision which was commissioned by the Trustee in December 2011 and approved by the Council on 27 August 2012;[111] and

(e) the receipt by James of the rent from the upstairs part of the Property and the payment by him of the outgoings for that part from around January 2012.[112]

121 It is not necessary for me to decide whether the Minute and email are capable of constituting acts of part performance of the 2011 oral agreement. This is because, in my opinion, the combined force of the other acts of part performance, considered in the context of the circumstances set out at [119] above, makes it highly improbable that those acts were undertaken pursuant to anything other than a contract between James and the Trustee. There is simply no logical reason why, in the context of those circumstances, Andrew would acquiesce in the Trustee making an in specie distribution to James of a substantial part of t[113]Property.113 On the other hand, those circumstances give rise to a compelling inference that the acts of part performance are referable to an agreement which involved the creation of rights and obligations on the part of James and the Trustee.

122 It follows that the acts of part performance are unequivocally referable to a contract between James and the Trustee. That conclusion gives rise to the second question, namely, what is the general nature of that contract? In my opinion, it can be inferred from the acts of part performance that the general nature of the contract between James and the Trustee was that the Property would be subdivided into an upstairs residential lot and a downstairs retail lot and that the subdivided upstairs residential lot would be transferred to James by the Trustee. It is true that the acts of part performance do not disclose the precise consideration flowing from James to the Trustee under the putative contract. However, it can be inferred in general terms that the consideration would be that James would give up any claim on the Property based on his contribution to the purchase price.[114]

123 The final question is whether the 2011 oral agreement is of the general nature as the putative contract to which the acts of part performance are referable. As the essential features of the 2011 oral agreement set out at [27] above mirror those of the putative contract, the third question must be answered in the affirmative.

124 I reject the applicants' submission that reliance cannot be placed on the valuation and subdivision as acts of part performance because they were performed by the Trustee rather than by James. Those acts qualify as acts of part performance because they were procured by James through the Trustee with Andrew's cooperation as James's co-director of the Trustee.

125 I also reject the applicants' submission that the acts of part performance upon which James relied were not required by the terms of the 2011 oral agreement but were simply undertaken after that agreement was made. As the essence of the agreement was that James would become the legal owner of the upstairs residential lot, that outcome could not be achieved without a subdivision. Further, as the Property was registered in the name of the Trustee, the agreement could not be given effect without the Trustee resolving to authorise the taking of steps that were integral to the transaction and necessary to ensure the maintenance of proper records by the Trustee. While James's acts of possession of the upstairs residential lot - the receipt of rent and the payment of outgoings - were not required by the 2011 oral agreement, they were contemplated and authorised by it.

At a glance

Court

Decision date

Before

Source

Judgment (307 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (17)