Djmal v Cemal - [2015] NSWSC 1125

Supreme Court

New South Wales

Medium Neutral Citation: Djmal v Cemal & Ors [2015] NSWSC 1125
Hearing dates: 6 August 2015
Decision date: 06 August 2015
Jurisdiction: Equity Division
Before: White J
Decision:
Refer to para [32] of judgment.

Catchwords:
EQUITABLE REMEDIES – resulting trust – presumption of advancement – constructive trust – failure of joint endeavour – plaintiff purchased property for her son – property transferred to son and his wife – purchase made for the purpose of the son’s building a house on the land for the plaintiff and her daughter to live in – son did not build any house – relations within the family broke down – held that the presumption of advancement was rebutted as the intention to advance was conditional on the property’s being used to build a house for the plaintiff and her daughter, so that the property was held on trust upon failure of the condition, and alternatively a Baumgartner v Baumgartner constructive trust arose upon failure of the parties’ joint endeavour
EQUITABLE REMEDIES – resulting trust – Quistclose trust – plaintiff paid money into a newly opened bank account held by her son and his wife – money was to be used by the son to build a house for the plaintiff – son and his wife made unauthorised withdrawals of most of the money prior to a freezing order being made – held that the money was paid under a common intention Quistclose trust, that the bank account was held on a resulting trust for the plaintiff when the purpose of the payment failed, and that the son and his wife are liable to restore the trust funds
Legislation Cited: Civil Procedure Act 2005 (NSW)
Cases Cited: Currie v Hamilton [1984] 1 NSWLR 687
Muschinski v Dodds (1985) 160 CLR 583
Baumgartner v Baumgartner (1987) 164 CLR 137
Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567
Australasian Conference Limited v Mainline Constructions Pty Limited (in liq) 141 CLR 335
Re MF Global Australia Ltd (No 2) (in liq) [2012] NSWSC 994; (2012) 267 FLR 27
Category: Principal judgment
Parties: Nursel Djmal (Plaintiff)
Ozay Cemal (1st Defendant)
Bernadine Mau Elizabeth Haare (2nd Defendant)
National Australia Bank Limited (3rd Defendant)
Representation:
Counsel:
M Fozzard (Plaintiff)
Solicitors:
AI Legal (Plaintiff)

File Number(s): 2015/65437

Judgment

HIS HONOUR: This is a sad case of a breakdown in family relations and exploitation of a mother's goodwill.
The plaintiff is a lady of Turkish background who speaks no English. She is a widow with four children. The defendants are the plaintiff's second son and his wife. The defendants were earlier represented in these proceedings but have chosen not to defend the plaintiff's claims. Nonetheless they have not consented to appropriate orders. They have not attempted to defend their conduct.
In 2014 the plaintiff was the owner of a house in Auburn. She and her husband had bought the property in 1978 as joint tenants. She became the sole owner after her husband's death.
In 2014 the first defendant (the plaintiff’s son) proposed to the plaintiff that she should sell the Auburn property and use the proceeds to buy a vacant block of land on which he would build a house where she, her daughter and the first defendant and his wife could live. The plaintiff acceded to that proposal.
On 4 July 2014 the plaintiff exchanged contracts for the sale of the Auburn property. At about the same time the first defendant and his wife, the second defendant, exchanged contracts to buy land on Putty Road, Putty.
Both contracts were completed on or about 9 September 2014. The defendants’ purchase of the Putty land was wholly funded by the plaintiff from the moneys she received on the sale of her Auburn property. The plaintiff also funded the costs of purchase, such as stamp duty.
Following the completion of both the sale and the purchase, the plaintiff had additional funds remaining from the sale of the Auburn property.
On 30 September 2014 the first defendant accompanied the plaintiff when she deposited $308,000 into a joint account in the names of the first and second defendants. That account with the National Australia Bank had been opened by the defendants just a few days before 30 September with a nominal credit of $0.10. I infer that this account was especially opened by the defendants for the receipt of the moneys from the plaintiff that, in accordance with their agreement, was to be used for the purpose of building a house or houses on the Putty land.
On only one occasion after the plaintiff's deposit of $380,000 into the account in the defendant's name was any money deposited to that account by the defendants. That occurred on 11 February 2015 when there was a $250.00 credit to the account by way of internet transfer. On the same day there was a cash withdrawal of the same amount.
The moneys in the account were thus kept separate and not mixed by the defendants with their other moneys. The one exception relating to the $250 deposit and withdrawal on the same day shows that the defendants considered that the moneys in the account were to be kept separate from their other moneys.
The moneys were to be applied for the purposes of the agreement between the parties for the construction of a house on the Putty land in which the plaintiff and her daughter could live, along with the first defendant and his wife.
After the settlement of the sale and purchase, the plaintiff and her daughter moved into a property that the first defendant and his wife were renting. After a couple of months, the plaintiff asked the first defendant to show her the plans for the house that she was paying for and said that otherwise she would like her money back. The first defendant promised to get the plans and show them to her. He did not ever do so.
Disagreements arose between the plaintiff's daughter and the second defendant and also between the plaintiff and the second defendant.
It was originally agreed that on the expiry of the defendants’ lease all parties would live in their own caravans on the vacant Putty land. But due to these disagreements it was made clear to the plaintiff that she was not welcome to be on that land or to have a caravan on it. She and her daughter had to find other accommodation. After this breakdown in family relations, the plaintiff asked the first defendant to return her money but she did not receive a reply.
The plaintiff commenced these proceedings on 3 March 2015. She sought a declaration that the Putty land is held on trust for her absolutely and for an order that the land be transferred to her. She also sought a declaration that the defendants hold the amount of $308,000 that she had deposited to the National Australia Bank account in their names and any interest accrued thereon on trust for her.
The National Australia Bank was joined as a third defendant to the proceedings. No substantive relief is sought against it save for an order that it transfer the balance of the moneys in the account to the plaintiff. It does not oppose that order and has taken no part in the proceedings.
In the course of the proceedings, and as a result of the service of a notice to produce on the National Australia Bank, the plaintiff's solicitor has obtained a copy of the bank statement for the account in the first and second defendants' names into which the plaintiff deposited $308,000. The bank statement shows that between 6 October 2014 and 3 March 2015 the defendants withdrew approximately $173,000 from the account in 14 separate transactions.
On 5 and 6 March 2015, that is to say shortly after they were served with the summons and supporting affidavit, the defendants withdrew $35,000.
On 6 March 2015 interlocutory orders were made by consent restraining the defendants from diminishing the funds in the National Australia Bank account or from dealing with the Putty land.
As at 6 March 2015, the credit balance of the account was $102,648.94. Interest of $2,648.84 had been earned on the account up to that date.
The plaintiff now seeks a declaration that the Putty land is held on trust for her and an order requiring the defendants to transfer that land to her. She also seeks a declaration that the moneys held in the account are held on trust for her and she claims equitable compensation for the unauthorised transfers totalling $280,000 from the account.
Alternatively, if it is not found that the moneys in the account were held on trust for the plaintiff, she seeks judgment on a common law count for money had and received for the $308,000 paid to the defendants.
I turn first to the question of the plaintiff's beneficial interest in the Putty Road land. As a result of some further evidence that has been adduced, I am now satisfied that the plaintiff did meet all of the costs of acquisition of the Putty Road land.
The first and second defendants are the registered proprietors of that land which is unencumbered. The initial presumption is that the beneficial ownership of that land is in accordance with the legal title. However, because the plaintiff provided the purchase price and the costs of acquisition, unless the parties’ relationship gives rise to a presumption of advancement, the parties’ presumed intention is that the beneficial ownership should be held in the proportions in which they contributed to the acquisition, in this case 100 per cent to the plaintiff.
The relationship between the parties, or, at least between the plaintiff and the first defendant, does give rise to a presumption of advancement. But it can be rebutted by evidence. The evidence establishes that the plaintiff did not unconditionally intend to advance her son and daughter-in-law. Her intention to advance them was conditional on the property acquired in their names being used for the construction of a house or houses in which she and her daughter could live, and on their being allowed to do so. That condition was not satisfied. Hence the plaintiff's intention to advance her son and daughter-in-law is not operative and the presumption of advancement is rebutted (cf Currie v Hamilton [1984] 1 NSWLR 687 at 690). The presumption of resulting trust remains un-rebutted.
If this analysis be wrong, then I accept the submission of counsel for the plaintiff that a constructive trust would nonetheless arise on the basis explained in Muschinski v Dodds (1985) 160 CLR 583 at 620 and Baumgartner v Baumgartner (1987) 164 CLR 137 at 148.
Here the plaintiff and the defendants, having embarked on a joint relationship or endeavour, to which the plaintiff had contributed money for the acquisition of the Putty land for the purposes of that joint endeavour, in circumstances where it was not intended that the defendants would enjoy the land if the joint endeavour failed, and the joint endeavour having failed without attributable blame to the plaintiff, equity will not permit the defendants to retain the benefit of the property, to the extent it would be unconscionable for them to do so. It would be so unconscionable for them to retain the benefit of the property in this case. In either way the question is approached, the defendants hold the property on trust for the plaintiff.
Turning to the money claim, the plaintiff elected to maintain her claim that the $308,000 deposited to the National Australia Bank account in the defendants’ name was money held on trust for her. She advanced that money to the defendants with the parties having a mutual intention, I infer, that the moneys should not become part of the defendants’ assets, but should be used exclusively for the specific purpose of constructing a house on the Putty land. That purpose having failed, the defendants hold the money on resulting trust for the plaintiff.
I think it clear that it was not the parties’ intention that the money should become part of the defendants’ assets. Although there was no evidence as to anything said between the parties about that matter, the circumstances in which the account was set up and the fact that the defendants did keep the money separate from their other moneys, indicates that that was the parties’ mutual intention.
In those circumstances, I accept that the moneys were held by the defendants on trust for the plaintiff (see Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 at 580; Australasian Conference Limited v Mainline Constructions Pty Limited (in liq) 141 CLR 335 at 353; and in Re MF Global Australia Ltd (No 2) (in liq) [2012] NSWSC 994; (2012) 267 FLR 27 at [224]-[237]). It is no objection to the existence of a trust relationship that the plaintiff would have an alternative cause of action at common law. The relations of trust and debt need not be mutually exclusive.
The transfers by the defendants of $208,000 between 6 October 2014 and 6 March 2015 were payments made by them in breach of trust which they are liable to restore. As the beneficiary of the trust of the moneys, the plaintiff is entitled to the credit balance presently standing in the account and interest that has been accrued on the account. The defendants are liable to pay equitable compensation in the amount of $208,000 together with interest. It is convenient to calculate interest for the purposes of s 100 of the Civil Procedure Act 2005 (NSW) from an approximate midpoint of the period over which withdrawals were wrongly made. I will calculate interest from 1 January 2015. That interest, calculated at the rates prescribed for the purposes of s 100 of the Civil Procedure Act from 1 January 2015 to today, totals $7,969.53. For these reasons and subject to any submissions that counsel might have to make as to the precise form of the orders to be made I propose to make the following orders.

[His Honour stated proposed orders and counsel addressed.]

I make the following orders:

1. Declare that the first and second defendants hold the property at [xxx] Putty Road, Putty NSW 2330 being the land in folio identifier [xxx] on trust for the plaintiff absolutely.

2. Order that within 7 days of their being given notice of these orders, the first and second defendants execute a transfer in registrable form of the said land to the plaintiff and deliver such duly executed transfer to the plaintiff or her solicitor.

3. Order that if the defendants do not comply with order 2, a registrar may execute a memorandum of transfer in registrable form for the purpose of effecting the transfer of the said land from the first and second defendants to the plaintiff.

4. Declare that the plaintiff is entitled to the chose in action constituted by the credit balance, including all accrued interest, in the account held in the names of the first and second defendants with the third defendant being account known as BSB Number [AAA] and account number [BBB].

5. Order that the third defendant pay to the plaintiff, or as she might direct, all moneys standing to the credit of the said account.

6. Judgment for the plaintiff against the first and second defendants in the sum of $215,969.53 inclusive of pre-judgment interest.

7. Order that the first and second defendants pay the plaintiff's costs.

8. Give liberty to the plaintiff to apply for the purposes of enforcement of these orders.

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Decision last updated: 12 August 2015

Medium Neutral Citation:	Djmal v Cemal & Ors [2015] NSWSC 1125
Hearing dates:	6 August 2015
Decision date:	06 August 2015
Jurisdiction:	Equity Division
Before:	White J
Decision:	Refer to para [32] of judgment.
Catchwords:	EQUITABLE REMEDIES – resulting trust – presumption of advancement – constructive trust – failure of joint endeavour – plaintiff purchased property for her son – property transferred to son and his wife – purchase made for the purpose of the son’s building a house on the land for the plaintiff and her daughter to live in – son did not build any house – relations within the family broke down – held that the presumption of advancement was rebutted as the intention to advance was conditional on the property’s being used to build a house for the plaintiff and her daughter, so that the property was held on trust upon failure of the condition, and alternatively a Baumgartner v Baumgartner constructive trust arose upon failure of the parties’ joint endeavour EQUITABLE REMEDIES – resulting trust – Quistclose trust – plaintiff paid money into a newly opened bank account held by her son and his wife – money was to be used by the son to build a house for the plaintiff – son and his wife made unauthorised withdrawals of most of the money prior to a freezing order being made – held that the money was paid under a common intention Quistclose trust, that the bank account was held on a resulting trust for the plaintiff when the purpose of the payment failed, and that the son and his wife are liable to restore the trust funds
Legislation Cited:	Civil Procedure Act 2005 (NSW)
Cases Cited:	Currie v Hamilton [1984] 1 NSWLR 687 Muschinski v Dodds (1985) 160 CLR 583 Baumgartner v Baumgartner (1987) 164 CLR 137 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 Australasian Conference Limited v Mainline Constructions Pty Limited (in liq) 141 CLR 335 Re MF Global Australia Ltd (No 2) (in liq) [2012] NSWSC 994; (2012) 267 FLR 27
Category:	Principal judgment
Parties:	Nursel Djmal (Plaintiff) Ozay Cemal (1st Defendant) Bernadine Mau Elizabeth Haare (2nd Defendant) National Australia Bank Limited (3rd Defendant)
Representation:	Counsel: M Fozzard (Plaintiff) Solicitors: AI Legal (Plaintiff)
File Number(s):	2015/65437