Campana v Censori (No 2)
[2023] VSC 557
•15 September 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2019 03564
| TONY CAMPANA | Plaintiff |
| v | |
| ELENIA CENSORI | Defendant |
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JUDGE: | McDonald J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 14 September 2023 |
DATE OF JUDGMENT: | 15 September 2023 |
CASE MAY BE CITED AS: | Campana v Censori (No 2) |
MEDIUM NEUTRAL CITATION: | [2023] VSC 557 |
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TRUSTS – Declaration that defendant holds property on trust for plaintiff – Loan account in favour of defendant secured by registered mortgage over trust property – Whether defendant should be ordered to take all necessary steps to discharge mortgage – Order requiring defendant to take all necessary steps to discharge mortgage appropriate to give effect to declaration that defendant holds property on trust for plaintiff – Transfer of Land Act 1958 s 77.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | G Parncutt | Kiatos & Co |
| For the Defendant | B Carew | Velos Lawyers |
HIS HONOUR:
On 25 August 2023 the Court delivered judgment upholding the plaintiff’s claim for a declaration that the defendant holds 160 Union Street, Brunswick (‘160 Union Street’) on trust for his benefit. The Court also held that the defendant is liable to account to the plaintiff for rental income received from 160 Union Street. The defendant’s counterclaim was dismissed. The parties were directed to file written submissions on the costs of the proceeding and the form of order to give effect to the Court’s judgment. On 14 September 2023 the Court heard oral submissions from the parties directed to these issues.
The parties are in agreement as to the form of declaration to give effect to the Court’s finding that the defendant holds 160 Union Street on trust for the benefit of the plaintiff. The parties are also in agreement that the defendant should pay the plaintiff’s costs of the claim and counterclaim on a standard basis to be taxed in default of agreement. The parties also agree that the defendant is liable to pay the plaintiff the sum of $153,370.24 together with interest of $28,726.80 in respect of rental income received by the defendant.
The principal issue in dispute is whether, as contended by the plaintiff, the defendant should be ordered to take all steps necessary to discharge a mortgage over 160 Union Street in favour of the Commonwealth Bank of Australia (‘CBA Mortgage’). The CBA Mortgage secured the defendant’s Investment Home Loan Account. The Court has concluded that the plaintiff cleared the debit balance of this account on 6 March 2014.[1] As at 14 June 2023 the account had a debit balance of $180,958.75.[2] The plaintiff seeks an order which would require the defendant to clear this debit balance.
[1]Campana v Censori [2023] VSC 502, [141], [148].
[2]CB2106, Investment Home Loan Account Balance.
The defendant’s written submissions resist any order requiring her to clear the debit balance of the Investment Home Loan Account and to discharge the CBA Mortgage. The defendant opposes this order on the following basis. First, that the plaintiff’s pleaded claim and prayer for relief does not seek any relief in respect of the Investment Home Loan Account. Second, that there has been no finding that the Investment Home Loan Account is trust property. Third, in circumstances where the plaintiff did not contend at trial that the defendant was liable to account for the debit balance in the Investment Home Loan Account, the plaintiff would suffer procedural and substantive prejudice if ordered to clear the debit balance in the account.
The defendant has been the trustee of the plaintiff’s beneficial interest in 160 Union Street since 31 May 2005. The defendant has a duty to account to the plaintiff for all unauthorised profit made from the property since 31 May 2005.[3]
[3]Byrnes v Kendle (2011) 243 CLR 253, 270 [42]; Giumelli v Giumelli (1999) 196 CLR 101, 122 [4].
As at 14 June 2023 the investment home loan account had a debit balance of $180,958.75. On 5 June 2023 the defendant withdrew $135,000 from the account. Mr Carew, who appeared for the defendant, acknowledged that these funds were withdrawn to pay the defendant’s legal costs of the present proceeding. In addition, it is common ground that on 28 June 2017 the defendant commenced withdrawing sums totalling $88,000 from the account for personal expenditure. Together with the $135,000 withdrawn on 5 June 2023, the defendant has withdrawn $223,000 for personal expenses which were not authorised by the plaintiff. The defendant is liable to account for this unauthorised expenditure by clearing the debit balance on the account in order to facilitate the discharge of the CBA Mortgage. Contrary to Mr Carew’s submission, the question for determination is not whether the Investment Home Loan Account is trust property. Rather, the question is whether the debit balance reflects unauthorised profit made by the defendant from the property since 31 May 2005. This question must be answered in the affirmative.
Although no specific relief was sought by the plaintiff in respect of the Investment Home Loan Account, an order requiring the defendant to take all necessary steps to discharge the CBA Mortgage is a necessary consequential order to give effect to the Court’s declaration that the defendant holds the property on trust for the plaintiff.[4] Absent an order requiring the defendant to discharge the CBA Mortgage, any transfer of the plaintiff’s legal interest in the property would be subject to the mortgage. If the defendant defaults in making repayments of the debit balance of the Investment Home Loan Account, the CBA’s power of sale under s 77 of the Transfer of Land Act 1958 will be enlivened. Absent an order requiring the defendant to discharge the CBA Mortgage there is a possibility that 160 Union Street would be sold by CBA. If the defendant fails to make repayments on the loan, in order to avoid CBA having a right of sale, Mr Campana would have to service the debit balance of the account. That debit balance includes $135,000 borrowed by the defendant to resist the plaintiff’s claims which have been upheld in the present proceeding. Such an outcome would be completely inconsistent with the Court’s conclusion that the plaintiff is the sole owner of the beneficial interest in 160 Union Street to the exclusion of the defendant.
[4]Re Estate Buxton; Knoll v Buxton [2023] NSWSC 819, [68], [130].
During the hearing on 14 September 2023 Mr Carew resiled from his written submission that an order requiring the defendant to discharge the CBA Mortgage would involve procedural unfairness. He did so in response to an indication from the Court that if the defendant maintained the contention that she would suffer procedural unfairness the Court would entertain an application to reopen the hearing to allow the defendant to lead further evidence and make further submissions addressing whether an order should be made requiring the defendant to discharge the CBA Mortgage. After taking instructions, Mr Carew informed the Court that he did not seek to reopen the hearing and did not oppose an order requiring the defendant to discharge the CBA Mortgage on the grounds of denial of procedural fairness.
In order to give effect to the Court’s declaration that the defendant holds 160 Union Street on trust for the plaintiff it is necessary and appropriate to order the defendant to forthwith take all necessary steps to discharge the CBA Mortgage.
The Court will make the following orders:
1. The Court declares that the defendant holds the property situated at 160 Union Street, Brunswick, Certificate of Title Volume 10858 Folio 706 on trust for the plaintiff.
2. The defendant is to forthwith take all necessary steps to discharge mortgage AE457379P in favour of the Commonwealth Bank of Australia.
3. The defendant is to forthwith execute and lodge all requisite property instruments and settlement documents (as prepared and provided to her by the plaintiff) for a PEXA property exchange transaction to effect settlement and transfer of 160 Union Street, Brunswick, Certificate of Title Volume 10858 Folio 706.
4. The defendant pay the plaintiff the sum of $153,370.24 together with interest of $28,726.80.
5. The defendant pay the plaintiff’s costs of the claim and counterclaim on a standard basis to be taxed in default of agreement.
6. The defendant’s counterclaim is dismissed.
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