Dispute over ownership of properties and trust arrangement in New South Wales Supreme Court
Davis & Peterson [2023] FedCFamC1A 13 (17 February 2023)
The case involves a dispute over the ownership of two properties between four parties. The appellants argued that the properties were held on trust by the first and second respondents, but the court held that the appellants had failed to prove their case and that the first and second respondents were the legal and beneficial owners of the properties.
Facts:
The case involves a dispute between four parties over the ownership of two properties. The appellants were the legal and beneficial owners of the properties until they found themselves in financial difficulties in 2006. In January 2007, they refinanced a loan over the properties with a financier, which they subsequently failed to repay, leading to the financier commencing proceedings in the Supreme Court of New South Wales for possession of the properties. The appellants then entered into an agreement with the first and second respondents to transfer the properties to them so that they could borrow funds to pay out the appellants' loan.
The first and second respondents obtained a loan from the Commonwealth Bank of Australia and the properties were transferred to them. The appellants continued to use the properties as they had before the transfer, receiving the rent and paying the mortgage instalments on the loan, as well as all other expenses in relation to the properties. The first and second respondents made no loan payments nor met any of the outgoings on the properties. The first respondent subsequently filed for financial adjustment against the second respondent, and the appellants were joined as parties. The appellants argued that the properties were held by the first and second respondents on either a bare trust, a common intention constructive trust, or a remedial constructive trust for the appellants. However, the primary judge concluded that the appellants had failed to prove that the properties were held on trust by the first and second respondents.
The judge found the first appellant to be an unreliable witness and the second respondent's evidence to be not credible unless supported objectively. The judge also found the evidence of other witnesses to be tainted or contaminated, leading him to conclude that the appellants had not discharged the onus of proof to establish that the properties were held on trust. The appellants appealed against the primary judge's decision, but the Court of Appeal dismissed the appeal. The Court held that the primary judge had correctly applied the legal principles in determining whether the properties were held on trust, and that his findings of fact were supported by the evidence.
The Court also noted that the appellants had not challenged the primary judge's findings that the transfer of the properties was not a sham, and that the appellants had continued to use the properties as they had before the transfer. The Court concluded that the appellants had not established any basis for setting aside the transfer of the properties, and that the first and second respondents were the legal and beneficial owners of the properties.
Issue:
The issue in this case is a dispute over the ownership of two properties involving four parties. The appellants argue that the first and second respondents hold the properties on trust for them, while the respondents maintain that they are the legal and beneficial owners of the properties.
Applicable law:
Federal Circuit and Family Court of Australia Act 2021 (Cth) can - provides that this Court may in its discretion receive further evidence.
Analysis:
In this case, the appellants argued that the trial presented a binary outcome. They believed that either the properties were held on trust for the appellants by the first and second respondents, or the first and second respondents had purchased the properties for valuable consideration. The appellants argued that there were incontrovertible facts that led to only one outcome, namely that the first and second respondents held the properties on trust for the appellants. The appellants further argued that the primary judge was in error in finding otherwise and that the incontrovertible facts were sufficient to discharge the onus of proof.
The appellants acknowledged that the primary judge accurately stated the relevant legal principles. They argued that an express trust requires an intention on the part of the relevant parties to create a trust, and that no special words are necessary to create a trust. They also acknowledged that a common intention constructive trust would be recognized where the common intention of the parties demonstrates that it was intended that the appellants would have a beneficial interest in the properties and have acted to their detriment in reliance upon such intention. The establishment of a common intention is a question of fact that may arise from express agreement or will be inferred from conduct. If established, it would be unconscionable for the other parties to deny the common intention.
Overall, the appellants argued that the incontrovertible facts led to only one outcome, that the first and second respondents held the properties on trust for the appellants, and that the primary judge was in error in finding otherwise.
Conclusion:
The appeal was allowed and the second respondent's request to present additional evidence was denied. Several orders made on August 31, 2022, were discharged. The court declared that two properties located at 1 and 2 N Street, D Town, and identified by certain folio numbers, were held in trust by the second and third respondents for the appellants as joint tenants. The first, second, and third respondents were ordered to transfer the properties to the appellants after the latter paid any transfer costs and obtained a mortgage discharge. The first and third respondents were also ordered to pay the appellants' appeal costs within 42 days, with the first respondent responsible for 25% and the third respondent responsible for 75%.
Case: Davis & Peterson [2023] FedCFamC1A 13
Judgment of: TREE, CHRISTIE & SCHONELL JJ
Counsels:
Counsel for the Appellants: Mr Cook SC with Mr Ng
Solicitor for the Appellants: McEvoy Legal
Counsel for the First Respondent: Mr Mathews
Solicitor for the First Respondent: Williamson & Learmouth
The Second Respondent: Litigant in Person
Counsel for the Third Respondent: Mr Marshall SC with Mr Eardley and Ms Blake
Solicitor for the Third Respondent: Mercantile Legal Pty Ltd