Zheng v Zhang [2020] NSWSC 904 | Case summary

Supreme Court of NSW|2020-07-15|Before: Ward CJ

EX TEMPORE Judgment

HER HONOUR: This is an application by notice of motion filed on 1 April 2020 by the plaintiff, Ms Guiling Zheng, seeking that the matter proceed to a trial for assessment of damages, and in relation to other relief sought by the plaintiff pursuant to r 30.1 of the Uniform Civil Procedure Rules 2005 (NSW).
That application follows the entry by the Court of default judgment in favour of the plaintiff on 24 March 2020 in the following terms: YONGSHENG ZHANG, First Defendant is liable to the plaintiff, GUILING ZHEN, First Plaintiff for damages and costs. Damages to be assessed.
The proceedings were commenced by statement of claim filed on 25 November 2019. The defendant did not file a defence to the statement of claim (and does not appear to have taken any active step in the proceedings).
There was no appearance by the defendant at the hearing of this application, nor was there any appearance by or for the defendant at the time this motion was set down was set down for hearing. I have already noted that no defence was filed by the defendant. It appears that the defendant was at one stage represented by a solicitor, but a notice of ceasing to act was filed by that solicitor on 24 March 2020. I am satisfied that the defendant was on notice of the listing of the matter for hearing today and that it is appropriate in the circumstances that the matter be heard in the defendant's absence (see the affidavit affirmed 8 July 2020 by the plaintiff's solicitor, Mr Wenhao Cai; and the affidavit of service sworn 3 December 2019, by a licensed process server, Mr Martin Folkes). (I considered it appropriate in those circumstances to proceed to hear the application in the absence of the defendant and did so pursuant to r 18.7 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR).)

Background

The background to the matter is that the plaintiff and the defendant were married on 15 June 2000. They divorced on 5 September 2013, but continued to live together, after they divorced, until around April 2019 (see Ms Zheng's affidavit affirmed 1 June 2020 at [5]-[6]).
By the time they divorced the couple owned a number of properties and had contracted to purchase three more properties "off the plan" (see Ms Zheng's affidavit affirmed 1 June 2020 at [7]). Those properties included a property in Castle Hill (the Castle Hill Property).
The proceedings commenced in this Court by Ms Zheng concerned the alleged failure of the defendant to comply with an agreement that the parties had made in relation to the proceeds of sale of the Castle Hill Property. The agreement in question (a copy of which is annexure A to Ms Zheng's 1 June 2020 affidavit) is an agreement made in writing (in Mandarin) on 4 March 2017, the English translation of which is headed "Property Distribution Agreement" (the Property Distribution Agreement).
The relevant clause of the Property Distribution Agreement is cl II, which provides that: II. Regarding the property located at 7 Nottingham Ave Castle Hill NSW 2154 in Sydney, Australia: Although the name of the property is under Party A [Mr Zhang]'s name, Party A and Party B [Ms Zheng] agreed that the ownership and the right to use will be given to Party B. Party A will assist Party B with its potential matters in the future such as sale, leasing, using, refinancing. Party B will be responsible for repaying the mortgage in the future, and the rental income of the property will belong to Party B.
Following entry into the Property Distribution Agreement, the defendant continued to be the legal owner of the Castle Hill Property (see Ms Zheng's affidavit affirmed 1 June 2020 at [9]).
Ms Zheng has deposed that, by late March 2019 the parties' relationship had begun to deteriorate and that Castle Hill Property was vacant; and that on 1 April 2019 the parties reached an agreement: to sell the Castle Hill Property and that all funds in the mortgage offset account would be paid to the plaintiff and the remaining equity in the property would be paid to the plaintiff following settlement (see Ms Zheng's affidavit affirmed 1 June 2020 at [10]).
Between 2 and 4 April 2019, the defendant transferred the sums in the mortgage offset account to the plaintiff (see Ms Zheng's affidavit affirmed 1 June 2020 at [11]).
On 30 June 2019, contracts for sale of the Castle Hill Property were exchanged for a sale price of $1.6 million. A deposit of $160,000 was paid, and the real estate agent (by letter dated 16 July 2019) has confirmed that the real estate agent held the deposit (from which was deducted an amount upon settlement of $24,335 (including GST) for the real estate agent's fees).
Settlement of the sale took place on 12 August 2019. On settlement, the sum of $200,193.21 was paid to the defendant out of the balance of the purchase price, and the sum of $135,665 was payable to the defendant out of the balance of the deposit held by the real estate agent (see Annexure C to Ms Zheng's affidavit affirmed 1 June 2020).
On 31 October 2019, the defendant paid the sum of $20,000 to the plaintiff and on 4 November 2019 the defendant paid a further $30,000 to the plaintiff (see Ms Zheng's affidavit affirmed 1 June 2020 at [18], [20]). However, the defendant has failed to pay the residual amount of the settlement moneys, namely $285,858.21, to the plaintiff.

Plaintiff's submissions

It is submitted by the plaintiff that the Property Distribution Agreement created a trust over the Castle Hill Property in her favour, notwithstanding that the word "trust" was not used in the Property Distribution Agreement itself. This submission is made on the basis that although the property is in the defendant's name, cl II of the Property Distribution Agreement provides that "ownership and the right to use" the property "will be given" to the plaintiff. It is noted that, under that clause, the defendant was to assist the plaintiff with the future sale of the property and its "leasing, using (sic) and refinancing", and that the defendant "will be responsible for repaying the mortgage in the future", whereas the rental income of the property was to "belong" to the plaintiff.
The plaintiff relies upon the statement of Spigelman CJ in Mario Salvo v New Tel Limited [2005] NSWCA 281 at [33] (quoted in George v Webb [2011] NSWSC 1608 at [204]) that: [33] It is well established that an intention to create an express trust can be inferred from the full range of relevant circumstances, including the nature of the transaction and the construction of the words used. and to Re Australian Elizabethan Theatre Trust; Lord v Commonwealth Bank of Australia [1991] FCA 344; (1991) 30 FCR 491 per Gummow J, then sitting in the Federal Court, at 502-503 (as quoted at [205] in George v Webb).
The plaintiff claims the sum of $335,858.21 as payable to the plaintiff by the defendant from the proceeds of the sale of the Castle Hill Property.
It is submitted that the residual settlement moneys are moneys that represent the proceeds of sale of the Castle Hill Property (that property being held in trust for the plaintiff) and therefore that the moneys are trust proceeds; and that the defendant's failure to pay the residual settlement moneys to the plaintiff was in breach of the defendant's duties as trustee of those moneys following the sale of the Castle Hill Property (and in breach of the Property Distribution Agreement).
The plaintiff now seeks declarations that the defendant held the Castle Hill Property on trust for the plaintiff from 4 March 2017 to 12 August 2019, and that from 12 August 2019 the defendant held the residual proceeds of sale of the Castle Hill Property on trust for the plaintiff; an order for the payment of the residual settlement moneys to her, either as an order for the transfer of trust property to her in specie, or as damages for breach of contract, or equitable compensation for breach of trust; an order for interest to be paid on the residual proceeds of sale (pursuant to s 100 of the Civil Procedure Act 2005 (NSW)); and an order that the defendant pay her costs.

Determination

I am satisfied that it can be inferred from cl II of the Property Distribution Agreement that it was the intention of the parties that, from 4 March 2017, the defendant was to hold the Castle Hill Property on trust for the plaintiff.
I note that the payment of moneys, to which I have referred above, out of the settlement moneys on 31 October 2019 and 4 November 2019 provides post-contractual support for the finding that there was an agreement for the payment of the proceeds of sale to the plaintiff as she alleges.
I am satisfied that the defendant has failed to pay the residual settlement moneys to the plaintiff and that this constitutes both a breach of trust and a breach of the Property Distribution Agreement.
I am satisfied that the entitlement of the plaintiff to damages and costs arises pursuant to the default judgment entered on 24 March 2020 in the plaintiff's favour, that the amount of damages has been established, and that the relief sought should be granted.

Orders

Accordingly, I make the following orders: 1. Declare that the defendant held the property located at 7 Nottingham Avenue, Castle Hill, New South Wales, folio identifier Lot 45 in Deposited Plan 244895, to which I will refer as the Castle Hill Property, on trust for the plaintiff from 4 March 2017 to 12 August 2019. 2. Declare that from 4 August 2019 the defendant held the residual proceeds of sale of the Castle Hill Property in the sum of $285,858.21 on trust for the plaintiff. 3. Order that the defendant pay the sum of $285,858.21 to the plaintiff, as the transfer of trust property in specie and by way of damages for breach of contract and equitable compensation for breach of trust. 4. Order that the defendant to pay interest up to judgment under s 100 of the Civil Procedure Act 2005 (NSW) on the sum of $285,858.21 calculated from 12 August 2019 to 15 July 2020 in the amount of $13,088.50. 5. Order that the defendant pay the plaintiff's costs of these proceedings.

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Zheng v Zhang

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