Equuscorp Pty Ltd v Jimenez
[2002] SASC 225
•16 July 2002
EQUUSCORP PTY LTD v MANUEL JIMENEZ & ORS
[2002] SASC 225
Civil
BESANKO J
Introduction
The plaintiff is a finance company. It was formerly known as Equus Financial Services Limited.
Mr Manuel Jimenez is the first defendant. He met the second defendant, Mrs Elma Maria Jimenez, in 1975. They were married on 5 June 1976. Mr Jimenez had no assets of substance at the time of the marriage. There is one child of the marriage, Mr Ramon Jimenez, the fourth defendant, who was born on 2 February 1979. I will refer to the fourth defendant as Ramon.
Mrs Jimenez was born on 13 October 1949. Her father migrated to Australia in 1938 and her mother in 1947. Mrs Jimenez has two brothers. She trained and obtained qualifications as a teacher.
Mrs Jimenez’s father conducted a business involving property development in rural areas in Victoria. The business was very successful. He contributed approximately $42,000 towards the purchase of Mr and Mrs Jimenez’s first home at 8 Vine Court, Doncaster, in the State of Victoria. Thereafter he gave Mr and Mrs Jimenez the sum of $250,000 in about 1976 and the sum of $600,000 at some time between 1978 and 1981. Mr and Mrs Jimenez used these funds in a business involving property development in rural areas in Victoria. This business was also very successful. Between 1976 and 1986 the business involved the purchase of broadacre land, the subdivision of that land and the sale by instalments of the allotments created thereby. In 1986 the business expanded to include investment in the commercial property market.
Mr Jimenez was the principal operator and manager of the business. Mrs Jimenez gave evidence which I accept that she was not involved in the day to day operation of the business and that she had little knowledge of the workings of the business. The business was conducted through various companies. Mrs Jimenez was a director and probably a shareholder of some of those companies.
Mr and Mrs Jimenez lived in the house at 8 Vine Court, Doncaster, until they sold the property in 1989 for the sum of approximately $420,000. They then purchased a house in Howard Street, Kew in the State of Victoria for the sum of approximately $1.7 million.
Ultimately, the business conducted by Mr Jimenez and Mrs Jimenez failed. Although the precise details were not made clear by the evidence, it seems that in 1993 Mr and Mrs Jimenez each entered into an arrangement with their respective creditors under Part X of the Bankruptcy Act 1966 (Cth). Mrs Jimenez was made bankrupt on her own petition on 31 August 1995. She was discharged from bankruptcy on 31 August 1998.
The marriage between Mr and Mrs Jimenez also failed, and they separated in April 1995.
Mrs Petra Jimenez is the third defendant. I will refer to her as Petra. She is Mr Jimenez’s mother. She is the registered proprietor of a residential property at 541 Torrens Road, Woodville, in the State of South Australia (Certificate of Title Register Book Volume 5175 Folio 137). This property is the subject of the dispute in the present case. I will refer to it as the “property”.
Mr Jimenez’s father, Mr Manuel Jimenez senior, was also a registered proprietor of the property. He died on 10 January 1996, and since that date Petra has been the sole registered proprietor of the property.
The Registrar-General is the fifth defendant.
On 2 January 1988 Mr Jimenez signed a Contract Note for the purchase of the property. The vendor was a Mr Peter Kolokouris. The purchaser named in the contract was “Mr Jimenez and/or nominee”. The consideration for the purchase of the property was the sum of $83,500 and the settlement date was 31 March 1988. The contract was unconditional.
Some time prior to 20 February 1988 Mr Jimenez nominated his mother and father (Petra and Mr Jimenez senior) as purchasers under the contract. No evidence as to the form of the nomination was put before the court. The fact that there was a nomination to this effect was admitted in the respective pleadings of Mrs Jimenez and Ramon. Clearly there was a nomination because Mr Jimenez senior and Petra signed the Memorandum of Transfer and became the registered proprietors of the property. In addition there is a statement in the Declaration of Trust referred to below to the effect that Mr Jimenez had made a nomination in favour of his parents.
On 20 February 1988 Mr Jimenez senior and Petra signed a document called a Declaration of Trust (“Declaration of Trust”). The Declaration of Trust refers to the contract for the purchase of the property. It refers to the fact that Mr Jimenez had nominated Manuel Jimenez (his father) and Petra Jimenez “to take his place as purchasers of the said land and improvements”.
The Declaration of Trust contains an acknowledgment that Mr and Mrs Jimenez have provided the monies for the purchase of the property. Mr Jimenez senior and Petra declare that they hold the property on trust for Mr and Mrs Jimenez and that they will transfer the property to Mr and Mrs Jimenez on request.
The Declaration of Trust was put before me by consent. Although Mrs Jimenez and Ramon put various arguments as to the effect of the Declaration of Trust, they did not suggest that it had not been signed by Mr Jimenez senior and Petra on or about 20 February 1988.
In fact the property was not put into the names of Mr Jimenez senior and Petra until sometime after 20 February 1988. A Memorandum of Transfer dated 8 March 1988 records the transfer of the property from Mr Kolokouris to Mr Jimenez senior and Petra and it seems that settlement of the sale of the property took place in May 1988.
The purchase monies for the property were provided by Mr and Mrs Jimenez. This is common ground between the parties although there is no evidence as to the precise source of the funds.
On these facts alone Mr Jimenez senior and Petra were the registered proprietors and legal owners of the property and Mr and Mrs Jimenez were the beneficial owners either by reason of the Declaration of Trust, or, if for some reason this was ineffective, by reason of a resulting trust. The provision of the purchase monies by Mr and Mrs Jimenez gives rise to a presumption of a resulting trust in their favour.[1]
[1] Dyer v Dyer (1788) 2 Cox 92 at 93; 30 ER 42 at 43; Napier v Public Trustee (WA) (1980) 32 ALR 153 at 158
In 1990 Mr and Mrs Jimenez conducted their business through various companies. Four companies were Amestar Nominees Pty Ltd (“Amestar”), Chelmantau Pty Ltd (“Chelmantau”), Chelserjay Pty Ltd (“Chelserjay”) and Saterjay Pty Ltd (“Saterjay”). On 10 August 1990 each of those companies entered into a Discount Facility Deed with the plaintiff. It is not necessary to go into the details of the financing arrangements created under the Deeds. Each Deed is, in material respects, in identical terms and Mr and Mrs Jimenez are guarantors under each Deed in respect of the liabilities of the relevant company.
Each Deed includes a clause as follows:
“17.19In the event of any default by the Guarantor hereunder the Guarantor hereby charges in favour of the Assignor all real and personal property in which it has any interest whether as registered proprietor, owner in fee simple, mortgagee, lessee, tenant, mortgagor, chargee, or otherwise and whether or not such interest is encumbered to the intent that the charge given by the Guarantor in favour of the Assignor shall vest in the Assignor as chargee the maximum interest which the Guarantor is able so to charge or the interest of the Guarantor in such land whichever be the greater.”
On the application of the plaintiff, a single Judge of this court on 22 May 2001 made an order on the hearing of a preliminary point in the following terms:[2]
“The words ‘Assignor’ in clause 17.19 of the subject Deeds be construed as ‘the Company’ as defined in the Deeds.”
[2] Equuscorp Pty Ltd v Jimenez & Ors [2001] SASC 165
Each Deed refers to the plaintiff as the Company. Each of Amestar Nominees, Chelmantau, Chelserjay and Saterjay defaulted in its obligations under the Deed, and Mr and Mrs Jimenez defaulted in their obligations under the guarantee in each Deed.
As I have said, Mrs Jimenez was made bankrupt on her own petition on 31 August 1995. She was discharged from bankruptcy three years later.
The plaintiff lodged a Proof of Debt in Mrs Jimenez’s bankruptcy for the sum of $100,000 said to be the debt due by Mrs Jimenez to the plaintiff ($982,303.87) minus the estimated value of the security ($882,303.87). The Proof of Debt was completed by a manager of the plaintiff on 25 June 1998.
From time to time various caveats have been lodged over the property under Part 16 of the Real Property Act 1886.
Mrs Jimenez lodged a caveat dated 8 September 1995 claiming the following interest in the property -
“The Caveator claiming to be beneficially entitled to an estate and interest in fee simple jointly with Manuel Jimenez, the younger, in and by virtue of a certain Declaration of Trust bearing date the 20th February 1988 whereunder the abovenamed Caveatees declared that they were holding the above land on trust for the said Caveator and Manuel Jimenez, the younger.”
This caveat has been removed.
The plaintiff lodged a caveat dated 23 December 1997 claiming the following interest in the property.
“The Caveator claiming an estate as equitable chargee pursuant to a deed dated 10/8/90 made between Manuel Jimenez (the younger) and Elma Maria Jimenez as chargors and the caveator as chargee and whereas pursuant to a Declaration of Trust dated 20/2/88 the caveatee holds the said land as trustee for the said Manuel Jimenez (the younger) and Elma Maria Jimenez.”
This caveat has not been removed.
Ramon lodged a caveat dated 29 December 1997 claiming an interest in the property. The caveat provides,
“The Caveator claiming to be beneficially entitled to an estate and interest in fee simple as equitable proprietor in the whole of the land (hereinafter referred to as “the said land”) on the following grounds.
1.The said Land was purchased using monies provided by
amongst others, the Caveator’s mother Elma Maria Jimenez and father Manuel Jimenez.2.
It was intended that the said Land would be held on trust for the Caveator as the son of the said Elma Maria Jimenez and instructions were provided to legal advisers to prepare the appropriate trust declaring that the said Land was held in trust for the Caveator.3.At the time of purchase of the said Land the Caveator was a minor.
4.
It was only after July 1995 that the said Elma Maria Jimenez became aware that the said Land had been transferred to Manuel Jimenez and Petra Jimenez, rather than to the said Elma Maria Jimenez to be held in trust for the Caveator.2.The said land was held on express trust for the Caveator. Verbal instructions were provided by Manuel Jimenez on his own account and on behalf of Elma Maria Jimenez in or about January 1988 and on subsequent instructions to a lawyer to prepare an appropriate form of declaration recording that the said Land was and would continue to be held on trust for the Caveator. The lawyer had acknowledged receipt of those instructions. The Caveator does not have a copy of the trust instrument and cannot determine whether it was prepared.”
It appears that the amendments to the caveat as shown above came about as a result of certain requisitions by the Registrar-General.
This caveat has not been removed.
The trustee for the bankrupt estate of Mrs Jimenez, Mr T A Jonas, lodged a caveat over the property in 1997. This caveat has been removed. The caveat itself was not put in evidence.
The Issues at Trial
The plaintiff issued a Summons and Statement of Claim in May 2000 claiming various declarations and orders against each of the defendants. The relief claimed in the Statement of Claim as it was immediately before trial was as follows:
“AS AGAINST THE FOURTH AND FIFTH DEFENDANTS
A. An order that the caveat be removed from the register of titles.
AS AGAINST THE FIRST AND SECOND DEFENDANTS
B. DELETED.
C.A declaration that the Plaintiff is entitled by virtue of the charge to an equitable charge upon the estate and interest which Jimenez and Elma Jimenez have in the land for securing to the Plaintiff the principal sum of $980,341.50 and interest on that sum.
D.A declaration that the sum due and payable by Jimenez and Elma Jimenez to the Plaintiff pursuant to the guarantee as at 7 December, 1999 is $980,341.50.
E.An Order that Jimenez and Elma Jimenez pay the Plaintiff the aforesaid sum within 14 days or such other period as the Court deems appropriate.
AS AGAINST THE FIRST, SECOND AND FOURTH DEFENDANTS
F.Further or alternatively, a declaration that the interest of the Plaintiff as chargee of the land has priority over the interest of Ramon Jimenez.
AS AGAINST THE FIRST, SECOND AND THIRD DEFENDANTS
G.In the event of default by Jimenez and Elma Jimenez to make the payment ordered, Orders that:
(a)the Plaintiff have possession of the land;
(b) the Plaintiff be at liberty to sell the land and pay the proceeds into Court, such proceeds to be applied in accordance with the provisions of section 50 of the Law of Property Act 1936 (SA) or section 135 Real Property Act 1886 (SA) as if the Plaintiff were a mortgagee selling pursuant to section 44 of the Law of Property Act 1936 (SA) or 133 of the Real Property Act 1886 (SA) respectively.
H.A declaration that the Plaintiff shall in respect of the aforementioned sale have all the powers of sale and the same capacity to transfer the estate and interest in land which a mortgagee has under section 43 of the Law of Property Act 1936 (SA) or 133 of the Real Property Act 1886 (SA).
I.A declaration that the Plaintiff is permitted to bid for the land at the aforementioned sale.
J.Interest.
K.Costs.
L.Such further or other relief as the Court deems fit.”
At the commencement of the hearing before me on 8 April 2002 the plaintiff’s counsel announced that the plaintiff had settled with Mr Jimenez and with Petra. I was told that a deed of settlement had been executed and that Mr Jimenez would consent to a declaration in the following terms:
“That the plaintiff has an equitable charge upon the estate and interest of the first and second defendants and each of them, in the land comprised in Certificate of Title Register Book Volume 5175 Folio 137 securing to the plaintiff the sum of $882,303.”
No other orders were sought against Mr Jimenez.
No orders were sought by the plaintiff against Petra other than leave to discontinue. The plaintiff’s counsel said that Petra had executed a registered mortgage over the property in favour of the plaintiff, and accordingly the plaintiff did not seek orders for possession or sale.
Mr Jimenez, who appeared in person, and counsel for Petra said that they consented to orders in the above terms. On the basis that they consented to the only orders sought against them, Mr Jimenez and counsel for Petra sought and were given leave to withdraw from the trial. I did not make orders against them at that stage because it is convenient that if orders are to be made, they all be made at the same time.
Counsel for the Registrar-General was also given leave to withdraw from the trial on the basis that she indicated that the Registrar-General will abide by any orders of the court.
The trial proceeded against Mrs Jimenez and Ramon who were represented by the same counsel and firm of solicitors.
The issues changed during the course of the trial and it is necessary to say something about how this occurred.
By her pleadings Mrs Jimenez raised a number of matters in response to the plaintiff’s claim. The first matter is raised in paragraph 2 of her Defence. That paragraph contains Mrs Jimenez’s response to the plaintiff’s plea of the Declaration of Trust and the allegation that by reason of that Declaration of Trust the property was held on trust for Mr and Mrs Jimenez. At the beginning of the trial paragraph 2 of Mrs Jimenez’s Defence read,
“2.In relation to paragraph 4 of the Statement of Claim the second defendant admits the allegations made therein but further states that a trust was created by oral agreement between the first defendant and the second defendant in about January 1988 which trust was for the ultimate benefit of her son the fourth defendant Ramon Jimenez and that instructions would be given for this to be documented by a solicitor by the second defendant’s former husband, being the first defendant Manuel Jimenez.”
During the course of the trial I gave Mrs Jimenez leave to amend paragraph 2. The amended paragraph 2 reads,
“2.1In relation to paragraph 4 of the Statement of Claim the second defendant admits that the declaration in writing dated 20 February 1988 was entered into in the terms described but states that it did not record the true intention of the second defendant insofar as the creation of a trust in respect of the land was concerned.
2.2The second defendant states that a trust was created by oral agreement between the first defendant and the second defendant in about January 1988 which trust was for the ultimate benefit of her son the fourth defendant Ramon Jimenez and that instructions would be given for this to be documented by a solicitor by the second defendant’s former husband, being the first defendant Manuel Jimenez. The oral agreement was that the third defendant and her husband would, as legal owners, hold the land on trust for the fourth defendant. A declaration of this trust was made by the second defendant in an affidavit sworn by her on 27 August 1997.
PARTICULARS OF TRUST
2.2.1The first defendant’s parents Manuel Jimenez Senior and the third defendant were to occupy the land for the term of their respective lives; and
2.2.2thereafter the land was to pass to the fourth defendant absolutely.”
The second matter raised by Mrs Jimenez in her Defence is an allegation that for various reasons she is not bound by the Discount Facility Deeds. Mrs Jimenez admits that she signed the Deeds but she denies that she is bound by the Deeds. She alleges that her husband exercised undue influence over her. She alleges that she did not receive independent advice. She alleges that she was ignorant of the provisions of the Deeds.
On the second day of the trial the plaintiff issued an application for leave to amend the Statement of Claim to plead what it said was the legal effect of Mrs Jimenez’s bankruptcy and in particular, to plead that the effect of the bankruptcy was that on any view Mrs Jimenez has no interest in the property at the present time. If the plaintiff had a valid security interest over the property then that was unaffected by her bankruptcy (s 58(5) Bankruptcy Act 1966 (Cth)). On the other hand, if the Discount Facility Deeds are not valid and enforceable against Mrs Jimenez, nevertheless she would have no interest in the property after her bankruptcy. Her interest in the property would have vested in the trustee of her bankrupt estate (s 58 (1) of the Bankruptcy Act 1966 (Cth)). It does not re-vest in her after her discharge from bankruptcy.[3]
[3] Daemar v Industrial Commission of New South Wales and Anor [No 2] (1990) 22 NSWLR 178
In addition to amending to raise these matters the plaintiff sought leave to amend its claim for relief as follows:
“AS AGAINST THE FOURTH AND FIFTH DEFENDANTS
A. An order that the caveat be removed from the register of titles.
AS AGAINST THE FIRST DEFENDANT
AA.A declaration that the plaintiff has an equitable charge upon the estate and interest of the first and second defendants and each of them in the land comprised in Certificate of Title Register Book Volume 5175 Folio 137 securing to the plaintiff the sum of $882,303.
AS AGAINST THE SECOND DEFENDANT
AB.A declaration that the plaintiff has an equitable charge upon the estate and interest of the first and second defendants and each of them in the land comprised in Certificate of Title Register Book Volume 5175 Folio 137 securing to the plaintiff the sum of $882,303; or
AC.In the alternative to AB, a declaration that the second defendant has no beneficial estate or interest in the land comprised in Certificate of Title Register Book Volume 5175 Folio 137.
AS AGAINST THE FIRST AND SECOND DEFENDANTS
B.DELETED.
C.DELETED.
D.DELETED.
E.DELETED.
AS AGAINST THE FIRST, SECOND AND FOURTH DEFENDANTS
F.DELETED.
AS AGAINST THE FIRST, SECOND AND THIRD DEFENDANTS
G.DELETED.
H.DELETED.
I.DELETED.
J.DELETED.
K.Costs.
L.Such further or other relief as the Court deems fit.”
I mention at this point that I did raise with the plaintiff’s counsel the question whether Mr Jonas should be made a party to the proceedings. The plaintiff’s counsel submitted that that was not necessary, and, in view of the fact that ultimately the only order the plaintiff sought against Mrs Jimenez is that set out in paragraph AC above, I think the plaintiff’s counsel is right.
In addition to the application to amend the plaintiff also sought immediate relief in terms of the declaration set out in paragraph AC above. I gave the plaintiff leave to amend in the terms sought. I gave Mrs Jimenez leave to amend her Defence to respond to the plaintiff’s new allegations. I held over the application for immediate relief until after Mrs Jimenez had filed and served an amended Defence. An amended Defence was filed and served. At the time this was done Mrs Jimenez’s counsel indicated that she did not oppose a declaration in terms of paragraph AC above. I did not make the declaration at the time, again for the reason that I think it is convenient to make all the orders at the same time.
The plaintiff has indicated that it does not seek any other orders against Mrs Jimenez.
In the above circumstances it is not necessary for me to consider whether Mrs Jimenez is bound by the Discount Facility Deeds. If it is shown that Ramon holds the beneficial estate or interest in the property then his interest is unaffected by the Discount Facility Deeds or Mrs Jimenez’s bankruptcy (s 116 (2) (a) of the Bankruptcy Act 1966 (Cth)). If, on the other hand, Ramon’s claim that he is entitled to a beneficial estate or interest in the property fails, then Mrs Jimenez has no beneficial estate or interest in the property either because she is bound by the Discount Facility Deeds and the rights of the plaintiff are unaffected by her bankruptcy, or if she is not bound by the Discount Facility Deeds, the beneficial estate or interest she had in the property passed to the trustee of her bankrupt estate upon her bankruptcy. As may be seen, the plaintiff no longer seeks against Mrs Jimenez an order for the payment of a sum of money.
The third matter raised by Mrs Jimenez in her Defence concerns the amount claimed against her ($980,341.50) before the plaintiff’s most recent amendment to the Statement of Claim. Mrs Jimenez pleads that in her bankruptcy the plaintiff lodged a Proof of Debt in the sum of $100,000.00. As the plaintiff no longer seeks an order for the payment of a sum of money by Mrs Jimenez and as the amount claimed in relation to the plaintiff’s security has been reduced to $882,303, this point need be noticed no further.
The principal matter raised by Ramon in his Defence is also set out in paragraph 2 and is in response to the plaintiff’s plea concerning the effect of the Declaration of Trust. At the start of the trial paragraph 2 of his Defence read,
“2.In relation to paragraph 4 of the Statement of Claim the Fourth Defendant admits the allegations made therein but further states that an additional trust in respect of the land was created by oral agreement between the First Defendant and the Second Defendant in about January 1988 which additional trust was for the ultimate benefit of the Fourth Defendant and that instructions would be given for this to be documented by a solicitor by the First Defendant. The existence of the additional trust was subsequently manifested in writing by Affidavit of the Second Defendant sworn on August 27, 1997 and filed in Federal Court Proceeding No VG 7459 of 1997.”
During the course of the trial I gave Ramon leave to amend paragraph 2 of his Defence. The amended paragraph 2 reads,
“2.1In relation to paragraph 4 of the Statement of Claim the Fourth Defendant admits that the declaration in writing dated 25 February 1988 was entered into in the terms described but states that the document did not record the true intention of the Second Defendant insofar as the creation of a trust in respect of the land was concerned.
2.2The Fourth Defendant states that a trust was created by oral agreement between the First Defendant and the Second Defendant in or about January 1988 which trust was for the ultimate benefit of the Fourth Defendant and that instructions would be given for this trust to be documented by a solicitor to be instructed by the First Defendant. The oral agreement was that the Third Defendant and her husband would, as legal owners, hold the land on trust for the Fourth Defendant.
PARTICULARS
2.2.1 The existence of the trust was subsequently manifested in writing by an affidavit of the Second Defendant sworn on 27 August 1997 and filed in the Federal Court of Australia in proceeding number VG7459 of 1997. Paragraph 16 of the Affidavit stated as follows:
‘16In relation to the caveat placed by me over the property at Woodville in the state of South Australia, I state that the property was purchased for my former husband’s parents with monies then belonging to both of us and it was agreed at the time of purchase that a Declaration of Trust would be executed by them in favour of Ramon. Subsequent to the breakdown of my marriage to the firstnamed respondent (Manuel Jimenez) I located a document being a Declaration of Trust apparently signed by my former husband’s parents in favour of the firstnamed respondent (Manuel Jimenez) and myself. Whilst the grounds for the caveat is described as an alleged declaration of trust in my favour, I have at all times maintained that the declaration of trust was in favour of my son Ramon Jimenez. I therefore do not agree with paragraph 16 of Juan Martinez Affidavit that any right, title or interest which I may have and which I deny having vests with the Trustee.’
The Fourth Defendant will refer at trial to the full terms of the Affidavit.
2.2.2 The terms of the trust provided that:
2.2.2.1The First Defendant’s parents Manuel Jimenez Senior and the Third Defendant were to occupy the land for the term of their respective lives; and
2.2.2.2thereafter the property would pass to the Fourth Defendant absolutely.”
In the result by the end of the trial the plaintiff sought only three orders, leaving aside orders as to costs and other consequential matters. The order sought against Mr Jimenez (paragraph AA) is not opposed. The order sought against Mrs Jimenez (paragraph AC) is not opposed. The only contested order is that which is sought against Ramon, namely, that the caveat he has lodged be removed from the register of titles. It is important to note that this position was only reached as a result of developments that occurred during the course of the trial, and that as a result I did hear evidence on issues such as those relating to the allegation by Mrs Jimenez that she is not bound by the provisions of the Discount Facility Deeds. I mention this evidence in my summary of the evidence both for the sake of completeness and because of its possible relevance to issues of credit.
I should also mention the fact that during the course of the trial Ramon made an application to amend his Defence to add a counterclaim seeking a declaration and orders to the effect that there is a trust over the property in his favour. I directed that notice of the application be given to Mr Jimenez and Petra who, as I have said, had previously been given leave to withdraw from the trial. After that had been done, the plaintiff, Mr Jimenez and Petra each indicated that they opposed the application. Petra’s counsel indicated that he would be applying for an adjournment of the trial should the application be granted. I did not hear detailed submissions from all the parties because part way through the argument Ramon’s counsel withdrew the application to amend to add a counterclaim.
The Evidence called by the Plaintiff
The plaintiff called one witness, Mr Nicola Russo. He is the managing director of the plaintiff. He was a straightforward and reliable witness and I accept his evidence.
Mr Russo described Amestar, Chelmantau, Chelserjay and Saterjay as the four main companies in the group of companies which carried out the business conducted by Mr and Mrs Jimenez. This group of companies was known as the Aussieland Group.
Mr Russo said that the negotiations which preceded the execution of the Deeds were conducted by Mr Russo and an account manager for the plaintiff and by Mr Jimenez and a Mr Glen Mendez for Amestar, Chelmantau, Chelserjay and Saterjay.
Clause 16.11 in each of the four Deeds makes a statement in writing by an authorised officer of the plaintiff as to the amount due and owing by a guarantor, prima facie evidence of that fact and of all other matters stated in the statement in writing. Mr Russo is an authorised officer of the plaintiff and he produced various certificates proving Mrs Jimenez’s indebtedness to the plaintiff. Mrs Jimenez did not dispute the amounts said to have fallen due under the Deeds.
Mr Russo said that the plaintiff’s proof of debt in the sum of $100,000 was admitted by the trustee of the bankrupt estate of Mrs Jimenez.
In cross-examination Mr Russo agreed that in 1990 there were negotiations between the plaintiff and Saterjay involving a different transaction to those transactions embodied in the Discount Facility Deeds. In the course of the negotiations those acting on behalf of Saterjay provided financial information to the plaintiff including an asset and liability statement of Mr and Mrs Jimenez. That asset and liability statement became exhibit D2. Whilst it shows the residential property at Kew as an asset of Mr and Mrs Jimenez, it makes no reference to the property. Ramon relies on this document as an acknowledgment by Mr Jimenez that he (Mr Jimenez) did not hold a beneficial estate or interest in the property.
Mr Russo conceded that the plaintiff had no contact with Mrs Jimenez either before the Deeds were executed or indeed at any time before the defaults under the Deeds occurred.
The Evidence called by Mrs Jimenez and Ramon
Mrs Jimenez and Ramon gave evidence and they called two witnesses, a Mr Alphonso Herminio Perez and a Mr Xavier Perez.
Although I accept a good deal of what Mrs Jimenez said, her evidence was unsatisfactory in some respects. At times she seemed very defensive. At other times she gave me the impression of a witness who had convinced herself of matters she believed were favourable to her case. For reasons I will state after summarising her evidence, there are aspects of her evidence which I do not accept.
Mrs Jimenez gave evidence that she knew very little about the way the business operated, or the companies involved, or the assets and liabilities of those companies. Mr Jimenez did not involve her in the day to day operation of the business. He expected her to sign documents relating to the business without enquiry. He did not welcome the attempts she made to learn about the business. In general terms I accept her evidence on these matters.
Mrs Jimenez said that she did not have any conversations or communications with the plaintiff before signing the Deeds or thereafter until her bankruptcy. I accept her evidence on this matter. It is consistent with the evidence of Mr Russo.
Mrs Jimenez said Mr Jimenez’s parents lived in South Australia in what she described as a government assisted apartment or flat.
Mrs Jimenez said that towards the end of 1987 she and her husband discussed the purchase of a house for his parents. Mr Jimenez told her that in order to get the benefit of some form of government concession the property would have to be put into the names of his parents.
Mrs Jimenez said that she was concerned about purchasing a property in the names of her husband’s parents because of the possibility that her husband’s parents would leave the property to their other grandchildren (ie other than Ramon). Mrs Jimenez said,
“but I agreed only if he were to secure the house for Ramon on their – to secure the house for Ramon, and I also said that they would have a life tenancy of the home”
Mrs Jimenez said her husband promised her that he would call his solicitor and arrange for papers to be prepared whereby the house would be held in trust for Ramon.
Mrs Jimenez said that sometime later she had a conversation with her husband wherein,
“I asked him if he had effected the documents we discussed, the trust that we discussed, and he said that it had been done”
Mrs Jimenez said that she was “absolutely shocked” when for the first time in 1995 she saw the Declaration of Trust. She said that it did not represent what she had agreed with her husband.
Mrs Jimenez said she lodged the caveat that she did in September 1995 on the advice of her solicitor, Mr Ian Kennedy of Wisewoulds in Victoria, who told her to do it in that way because at the time Ramon was a minor.
Mrs Jimenez said that her husband said after the purchase of the property that his parents were living in the house until they died. Mrs Jimenez said that Mr Jimenez said on many occasions and in the presence of other people including his parents,
“The house was going to be held in trust for Ramon; that it was Ramon’s house and he often referred to the fact that he was so young and owned a house”.
Mrs Jimenez said that on many occasions her husband’s parents referred to the property as Ramon’s house or home.
On 27 August 1997 Mrs Jimenez swore an affidavit in proceedings commenced by the trustee of the bankrupt estates of Mr and Mrs Jimenez (Action No V9 7459 of 1997). The affidavit contains the following paragraph,
“16.In relation to the caveat placed by me over the property at Woodville in the state of South Australia, I state that the property was purchased for my former husband’s parents with monies then belonging to both of us and it was agreed at the time of purchase that a Declaration of Trust would be executed by them in favour of Ramon. Subsequent to the breakdown of my marriage to the firstnamed respondent I located a document being a Declaration of Trust apparently signed by my former husband’s parents in favour of the firstnamed respondent and myself. Whilst the grounds for the caveat is described as an alleged declaration of trust in my favour, I have at all times maintained that the declaration of trust was in favour of my son Ramon Jimenez. I therefore do not agree with paragraph 16 of Juan Martinez Affidavit that any right, title or interest which I may have and which I deny having vests with the Trustee.”
She said in evidence that the statements in this paragraph are true and correct.
In cross-examination, Mrs Jimenez was asked whether in 1988 she had signed a Deed which named her as a party. The other parties were her husband, Jimenez Holdings Property No 9 Pty Ltd and Challenge Bank Limited (“the Challenge Bank Deed”). She denied that a signature on the Deed was in fact her signature. A solicitor had given a certificate to the effect that she had signed the Challenge Bank Deed in his presence. She denied this fact. The Challenge Bank Deed was admitted in evidence and became exhibit P8.
Counsel for Mrs Jimenez indicated at this point that he sought to adduce evidence from a handwriting expert, a Mr Don Gangell, to the effect that the signature on the Challenge Bank Deed was not the signature of Mrs Jimenez. It was said that his evidence would support her evidence that it was not her signature.
Counsel for the plaintiff submitted that Mrs Jimenez should not be permitted to adduce evidence from Mr Gangell. He said that he would be submitting that Mrs Jimenez should not be believed and that one of the grounds he would put forward in support of the submission was her evidence relating to whether she had signed the Challenge Bank Deed. He submitted that Mrs Jimenez should not be permitted to adduce the evidence because she had not complied with the provisions of Rule 38 of the Supreme Court Rules 1987 which require a party to deliver a copy of every expert report within a certain time after discovery.
I delivered a ruling to the effect that Mrs Jimenez could adduce expert evidence from Mr Gangell. The plaintiff’s counsel attacked Mrs Jimenez’s credit by reference to what appears to be her signature on the Challenge Bank Deed and the certificate of the solicitor to the effect that Mrs Jimenez had signed the Challenge Bank Deed in his presence. The evidence of Mr Gangell is admissible for the purpose of attempting to rehabilitate the credibility of Mrs Jimenez[4]. The issue arose in somewhat unusual circumstances and I did not think that either party was at fault. In those circumstances I considered it appropriate to allow the evidence to be adduced despite the provisions of Rule 38.
[4] R v C (1993) 60 SASR 467 per King CJ at 473
Mr Gangell’s report was received in evidence. No application was made to cross-examine him. No evidence was called to contradict his report. On the evidence presented to me, I find on the balance of probabilities that Mrs Jimenez did not sign the Challenge Bank Deed.
In view of the issues left for decision the critical part of Mrs Jimenez’s evidence is that which deals with the two conversations she said she had with her husband sometime in late 1987, early 1988.
There are a number of reasons why I do not accept her evidence about these conversations. First, if her evidence is accepted that it was clearly agreed between Mr and Mrs Jimenez that a trust would be created in favour of Ramon, then it would seem that for no apparent reason Mr Jimenez went ahead and arranged for a different transaction to be implemented and then deceived Mrs Jimenez as to the nature of the transaction which he had put in place. Mrs Jimenez said that the marriage was a happy one in 1986 and in mid 1990 and there is no reason to think that it was not a happy one at the time of the conversations. There is no apparent reason why Mr Jimenez would implement a different transaction and then deceive Mrs Jimenez, particularly when it is borne in mind that the transaction he implemented went no further than reflecting the respective contributions to the purchase monies.
Secondly, I did not find convincing her explanation of the caveat she lodged in September. It was not explained why the fact that Ramon was a minor at the time affected the caveat which was lodged. Even if I accept this part of the explanation at face value, it was never made clear why the caveat makes reference to the Declaration of Trust and makes no reference to a trust in favour of Ramon. In other words, Mrs Jimenez relied on the Declaration of Trust in the caveat, in contrast to her present position where she asserts that it does not record her true intention.
Thirdly, I did not think that some of her evidence on general matters was satisfactory. I would not put as much weight on this point as the first two, but nevertheless I was not convinced that she knew so little about a number of matters which were put to her in cross-examination. The following are examples of topics put to her where I found her evidence unconvincing:
1. Whether representatives of the plaintiff attended meetings of creditors in her bankruptcy (T.154).
2. That she did not know in November and December 1998 that she could get legal advice about the plaintiff’s claim (T.158).
3. That she had heard of the name Kevington Pty Ltd but knew nothing about it, and that she may have heard the name Asturiana Pty Ltd (T.174).
4. Her evidence about why she took proceedings in relation to the Navarro Family Trust was not particularly satisfactory (T.253).
5. Her explanation as to why she did not take proceedings to protect Ramon’s interest in the property was not particularly convincing (T. 255-257).
It was the cumulative effect of her evidence on these topics that led me to the conclusion that some of her evidence on general matters was unsatisfactory.
In the result I think Mrs Jimenez’s account of the conversations she had with her husband was reconstruction on her part. The reconstruction may well have been a subconscious process.
I accept that Mrs Jimenez had a conversation with Mr Jimenez about the purchase of a property for his parents to live in. There was some benefit, in terms of the obtaining of a concession, in placing the property in the names of Mr Jimenez’s parents. Neither Mr Jimenez nor Mrs Jimenez intended that Mr Jimenez’s parents be given the beneficial interest in the property. Mrs Jimenez wanted to avoid a situation whereby Mr Jimenez’s parents could dispose of the property to their other grandchildren (or children). Mr Jimenez may have had the same concern, or he may have simply not wanted to give the property to his parents. The notion of retaining control of the property for Ramon’s benefit or so that it might be given to Ramon may have been a way of “selling” the whole idea to his parents. In other words, without that explanation Mr Jimenez may have been embarrassed by the fact that as a wealthy son he was not prepared to give a relatively modest home to his parents. Whatever Mr Jimenez was thinking, I am not prepared to find on the balance of probabilities that there was an agreement, understanding or common intention between, or on the part of, Mr and Mrs Jimenez that the property would be held on trust for Ramon. I think the conversation was likely to have been more general than that. I think it was understood by Mr and Mrs Jimenez that the property would not be given to Mr Jimenez’s parents. Mr and Mrs Jimenez would retain control of the property ultimately for Ramon’s benefit. The precise mechanism whereby this was to be achieved was not the subject of any agreement, understanding or common understanding.
The second conversation between Mr and Mrs Jimenez took place in this context. In other words, that a mechanism had been put in place to prevent the property going to Mr Jimenez senior and Petra absolutely.
In reaching these conclusions I have taken into account the matters urged upon me by counsel for Mrs Jimenez and Ramon. In particular, counsel referred to the statements made by Mr Jimenez and his parents after the transfer of the property to the effect that the property belonged or would belong to Ramon. Counsel for the plaintiff did not object to the admission in evidence of the various statements and it would seem that in so far as they are admissions against interest they are admissible.[5] In my opinion the statements do not establish an existing trust in favour of Ramon. As far as the statements by Mr Jimenez are concerned, they are equally consistent with the more general understanding by Mr Jimenez that ultimately the property would belong to Ramon. The same may be said of the statements of Mr Jimenez’s parents. In the absence of evidence that they did not understand the Declaration of Trust, I think I should assume that they were expressing an understanding not inconsistent with the Declaration of Trust (ie a general understanding that ultimately the property would go to Ramon rather than that there was an existing trust in favour of Ramon.) Counsel for Mrs Jimenez and Ramon also referred to the fact that the property is not part of the asset and liability statement of Mr and Mrs Jimenez (exhibit D2). To a point this is evidence in their favour but, to my mind, it is not strong enough to change the conclusions I have reached. There might be a number of reasons why the property does not appear on the asset and liability statement of Mr and Mrs Jimenez.
[5] Shephard v Cartwright [1955] AC 431; Calverley v Green (1984) 155 CLR 242 at 262
Ramon said in evidence that in the middle to latter part of 1988 when he was nine years old, his father said to him,
“AWords to the effect that it was a property that had been purchased for his parents and that it would be my house, after they weren’t living there.”
Each year thereafter when Mr Jimenez and Ramon came to Adelaide to attend the Grand Prix they stayed at the property and Mr Jimenez made similar comments. On other occasions in Melbourne Mr Jimenez referred to his parents as tenants or mere tenants and he said that the property would ultimately be Ramon’s property. I note that Ramon agreed that Mr Jimenez also referred to himself as a caretaker of the business he ran and,
“that everything he was doing was, you know, one day to benefit me”
Ramon said he found the Declaration of Trust in 1995 and showed it to his mother who seemed surprised by its terms.
The thrust of Ramon’s evidence was the statements made by his father about the ownership or proposed ownership of the property. Whilst I accept his evidence in general terms, I bear in mind that Ramon was a young boy at the time many of the conversations occurred and that he did not have a recollection of the precise terms of the conversations. The statements made by his father are not inconsistent with the more general intention to benefit Ramon and with the findings which I have made.
Mr Alphonso Herminio Perez gave evidence through a Spanish interpreter. This caused confusion at times as he appeared to have a reasonable understanding of English and therefore of the questions asked by counsel. Even taking this into account I did not think that he was a particularly satisfactory witness. He did not seem to me to give his evidence in an impartial way. He seemed anxious to give evidence which would favour Mrs Jimenez and Ramon.
Mr Alphonso Perez said that he began a friendship with Mr Jimenez in 1988. He and Mr Jimenez came from Melbourne to Adelaide to attend the Grand Prix in late 1988. They stayed with Mr Jimenez’s parents at the property. He said that Mr Jimenez referred to the property as a house they had bought for his son, Ramon.
Mr Alphonso Perez said that the day after he arrived in Adelaide he went to the markets with Mr Jimenez senior and Petra. Petra allegedly said,
“AI didn’t have a discussion with her, we just talked, we talked about a lot of things, and one of the things she was saying is my grandchild that I have, the house, that he will leave me. I have a grandchild, this grandchild is going to leave me this house – I already live in this house.
Q ‘Leave’ or ‘live’, we’re getting lost in the translation there.
AIt’s ‘The house where I live, this is my grandchild’s house, and he lends me the house to live there, to stay there. My grandchild leaves me the house – he allows me to live in the house. He is my grandchild; I love my grandchild’. In Spanish it is different, you know when we’re talking Spanish, that doesn’t – it’s different than English. It’s more sentimental, it is more European. One is more, more hit there. When she speak to me, you know, she saying ‘My grandson, my grandson, he lend me the house’, whatever, I know that, but – I know she have the grandson, he is beautiful child because he and my son, they have been together in the holidays. I know the family very, very well. I know it’s their grandchild.
QPerhaps, in light of that mixture of Spanish and English, I’ll ask you this; have you told his Honour all that which Mrs Jimenez put to you at the market on that day about the ownership of the house.
AYes, she told me of course they never – they have a poor life here in Australia, with small kids and they have to work very hard and all this, and they live in commission houses, and after they – her grandson has let him there, because Manuel is buying with Elma ‘I let him live there’, you know. She told me in that way. She want – she feel herself to tell me that, like she want to tell me that at the time.’
Mr Alphonso Perez also said that on one evening there was a conversation between Mr Jimenez senior and Mr Jimenez. He gave the following evidence about the conversation,
“A… The father said ‘I don’t want to stay in this house any more. This house is not mine. I don’t want to pay’; they were having a discussion about paying the rates, and the father was saying he didn’t want to pay them, it wasn’t his house.
QWho was involved in this discussion.
AThe father and junior.
QSorry.
ASo they were having this discussion, the father was saying he didn’t want to pay the rates because it wasn’t his house.
QWhat, if anything, was said by Manuel Jr when that was said by Manuel Sr.
AIt was more than a discussion, it was really like shouting and all that was left was for them to punch each other. The father was very upset and was saying, or yelling ‘I don’t want to live here. This is not my house, I don’t want to live here’. What I was very surprised to see is someone like him, this is the father, of his calibre, who had arrived at a situation like that.
QHow did the evening finish after that row that you’ve just described to his Honour.
AThe father ended up crying. The son said he was going to throw his father out onto the streets, and the father said ‘Yes, I don’t want to live here any more. I don’t want to be here, I don’t want to live here’.”
Mr Alphonso Perez’s friendship with Mr Jimenez ended in 1998 after a dispute over a business transaction. The transaction was the subject of court proceedings. He has remained friends with Mrs Jimenez and Ramon.
I am not prepared to place much weight on what Petra is alleged to have said at the markets. First, I did not think Mr Alphonso Perez was a particularly satisfactory witness. Secondly, it is difficult to make complete sense of the evidence about what Petra said. Thirdly, in the absence of any evidence that Petra misunderstood the Declaration of Trust, I think I should assume that she was expressing an understanding not inconsistent with the Declaration of Trust.
As to what was said by Mr Jimenez to Mr Alphonso Perez, I do not think that it is inconsistent with a more general intention to benefit Ramon and with the findings which I have made. Furthermore, it seems to me that the conversation between Mr Jimenez senior and Mr Jimenez about the rates is consistent with Mr Jimenez retaining control of the property.
Mr Xavier Perez said that he met Mr Jimenez in mid 1989. He came to Adelaide with Mr Jimenez in 1989 to attend the Grand Prix. During the stay Mr Jimenez said to him,
“He said words to the effect that ‘Elma and I have bought this house for our parents’ – for his parents, but ultimately it was meant to be Ramon’s.”
On other occasions Mr Jimenez said that the property was “his parents’, but eventually it would be his son’s.”
I accept Mr Xavier Perez’s evidence. Again, the statements said to have been made by Mr Jimenez are not inconsistent with a more general intention to benefit Ramon and with the findings which I have made.
In considering whether a trust in favour of Ramon was created in late 1987 or early 1988, three issues must be addressed viz,
1.Did conversations take place between Mr and Mrs Jimenez in late 1987 and early 1988 in the terms deposed to by Mrs Jimenez?
2.Assuming the answer to the first question is yes, were those conversations sufficient to give rise to a trust obligation in favour of Ramon?
3.Assuming the answer to the first two questions is yes, is the trust in favour of Ramon enforceable in light of the provisions of s 29(1) of the Law of Property Act 1936 (“LPA”)?
The Conversations between Mr and Mrs Jimenez
For the reasons I have given I am not prepared to find on the balance of probabilities that there was an agreement, understanding or common intention between, or on the part of, Mr and Mrs Jimenez that the property would be held on trust for Ramon. As I have said I think the conversations were more general than that. It was understood that the property would not be given to Mr Jimenez’s parents. Mr and Mrs Jimenez would retain control of the property ultimately for Ramon’s benefit. The precise mechanism whereby this was to be achieved was not the subject of any agreement, understanding or common intention. The second conversation took place in this context.
It seems to me that these findings are fatal to the argument that there is a trust in favour of Ramon. Ramon has failed to establish a clear intention to create a trust in his favour.[6]
[6] In Re Cozens; Green v Brisley [1913] 2 Ch 478; Commissioner of Stamp Duties (Qld) v Jolliffe (1920) 28 CLR 178; Tito v Waddell (No 2) (1977) Ch 106 per Megarry V-C at 111; Bloch v Bloch (1981) 55 ALJR 701
In case I am wrong in making these findings of fact, I now go on to consider the second and third issues referred to above. In other words, I now consider the matter on the assumption (contrary to my findings) that there was an agreement, understanding or common intention between, or on the part of, Mr Jimenez and Mrs Jimenez that there would be a trust in favour of Ramon.
A Trust Obligation in Favour of Ramon
I do not think that the conversations (accepting that they were in the terms deposed to by Mrs Jimenez) gave rise to a trust obligation in favour of Ramon.
First, I note that Mrs Jimenez said that the first conversation she had with Mr Jimenez took place in late 1987. At that time the Contract Note for the purchase of the property had not been signed. Neither Mr Jimenez nor Mrs Jimenez had an interest in the property and there was no property over which a trust could be declared at that stage.[7] Even if the first conversation took place after the Contract Note was signed and even if Mr Jimenez had an equitable interest in the property by reason of his rights under the contract,[8] Mrs Jimenez had no interest in the property until the purchase monies were provided. It may be inferred from the Declaration of Trust that by that time Mr Jimenez had changed his mind about who was to be the beneficiary.
[7] Permanent Trustee Co v Scales (1930) 30 NSWSR 391
[8] Lysaght v Edwards (1876) 2 Ch D. 499; Walsh v Lonsdale (1882) 21 Ch D 9; As to the effect of the nomination see Harry v Fidelity Nominees Pty Ltd (1985) 41 SASR 458
Secondly, it was envisaged by Mrs Jimenez that documents would be prepared. The execution of the documents would establish or constitute the trust.
As I have said, it may be inferred that after the conversations Mr Jimenez changed his mind. In my opinion he was free to do so. The first conversation between Mr and Mrs Jimenez gave rise to an understanding between husband and wife, not an enforceable contract. The fact that Mr Jimenez put in place an arrangement contrary to that which was the subject of the understanding may effect the efficacy of what was put in place. However, absent an enforceable contract (and for that matter proceedings to enforce a contract) the understanding remains just that. It was not an existing declaration of trust.
The second conversation can be given no greater legal effect than the first.
Section 29 of the LPA
Section 29 of the LPA provides:
“29. (1) Subject to the provisions hereinafter contained with respect to the creation of interests 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 authorised in writing, or by will, or by operation of law;
(b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will;
(c) a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will.
(2) This section shall not affect the creation or operation of resulting, implied, or constructive trusts.”
The provisions of the Act dealing with the creation of interests in land by parol are not relevant.
Section 29(1)(a) and (c) differ from s 29(1)(b) in that they require the creation or disposition of the interest to be in writing, whereas s 29(1)(b) requires the declaration to be manifested and proved by some writing. Writing sufficient to satisfy the terms of s 29(1)(b) may be created well after the declaration of trust and may be an affidavit.[9]
[9] Smith v Matthews (1861) 3 De G. F. & J. 138; 45 ER 831; Barkwork v Young (1856) 26 LJ Ch 153;
A matter debated in the authorities is whether both s 29(1)(a) and 1(b) apply to a declaration of trust in land or whether a declaration of trust is governed solely by s 29(1)(b). I agree, for the reasons given by Lee J in Secretary,Department of Social Security v James,[10] that the equivalent of s 29(1)(a) does not apply to declarations of trust in land.[11] Before me the plaintiff proceeded on the basis that there is only one relevant subsection on the facts of this case and that is s 29(1)(b).
[10] (1990) 95 ALR 615
[11] Di Pietro v Official Trustee (1995) 59 FCR 470; Hagan v Waterhouse (1992) 34 NSWLR 308, See also Adamson v Hayes (1973) 130 CLR 276
The person able to declare the trust is the beneficial owner of the property.[12] However, it appears that a writing signed by the alleged trustee is also sufficient to satisfy the requirements of the subsection.[13]
[12] Tierney v Wood (1854) 19 BEAV. 330; 52 ER 377 at 379-380; Kronheim v Johnson (1877) 7 Ch D.60 per Fry J at 66
[13] Mountain v Styak [1922] NZLR 131; Principles of the Law of Trusts Ford and Lee 3rd Ed. para [6070]
Ramon put two arguments in response to the plaintiff’s submission that the alleged trust was unenforceable by reason of non compliance with the provisions of s 29(1)(b).
First, he submitted that paragraph 16 of Mrs Jimenez’s affidavit sworn on 27 August 1997 is sufficient to satisfy the requirements of s 29(1)(b). In my opinion this argument fails for a number of reasons. It has long been established that the writing required by the section must show not only that there is a trust, but also what the trust is. In Smith v Matthews[14] Turner LJ said,
“I take it therefore, that when this Court is called upon to establish or act upon a trust of lands by declaration or creation, it must not only be manifested and proved by writing, signed by the party by law enabled to declare the trust, that there is a trust, but it must also be manifested and proved by writing, signed as required what that trust is.”
[14] Smith v Matthews (1861) 3 De G. F. & J. 138; 45 ER 831
The writing must clearly set out the beneficiaries, the trust property and the nature of the trust. Paragraph 16 of the affidavit identifies the beneficiary and the trust property. It does not identify the nature of the trust, and in particular (as pleaded by both Mrs Jimenez and Ramon) it does not contain a statement that Mr Jimenez senior and Petra were to occupy the property for the term of their respective lives and thereafter the property was to pass to Ramon absolutely. Furthermore the affidavit is signed by Mrs Jimenez. It is not signed by Mr Jimenez. Both Mr and Mrs Jimenez are the persons able to declare the trust within s 29(1) (b). In my opinion the signature of only one of the persons able to declare the trust is not sufficient to satisfy the requirements of s 29 (1)(b).
Secondly, Ramon submitted that to allow the plaintiff to rely on the provisions of the LPA would be to allow the statutory provisions to be used as an instrument of fraud. It is true that equity will not permit the statutory provisions to be used as an instrument of fraud, and that the Court will admit oral evidence in cases of fraud. It is said that the principle does not apply in the case of an owner of land who declares himself a trustee by oral statement not for value.[15] The principle does apply in the case of a person to whom land is conveyed as a trustee, and who knows it was so conveyed and yet who denies the trust and claims the land as his own.
[15] Jacobs Law of Trusts in Australia 6th ed. Para [708]
In Rochefoucauld v Boustead[16] Lindley LJ speaking for the Court of Appeal said,
“It is further established by a series of cases, the propriety of which cannot now be questioned, that the Statute of Frauds does not prevent the proof of a fraud; and that it is a fraud on the part of a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land himself. Consequently, notwithstanding the statute, it is competent for a person claiming land conveyed to another to prove by parol evidence that it was so conveyed upon trust for the claimant, and that the grantee, knowing the facts, is denying the trust and relying upon the form of conveyance and the statute, in order to keep the land himself.”
[16] [1897] 1 Ch. 196
In Bannister v Bannister[17] Scott LJ speaking for the Court of Appeal said,
“It is, we think, clearly a mistake to suppose that the equitable principle on which a constructive trust is raised against a person who insists on the absolute character of a conveyance to himself for the purpose of defeating a beneficial interest, which, according to the true bargain, was to belong to another, is confined to cases in which the conveyance itself was fraudulently obtained. The fraud which brings the principle into play arises as soon as the absolute character of the conveyance is set up for the purpose of defeating the beneficial interest, and that is the fraud to cover which the Statute of Frauds or the corresponding provisions of the Law of Property Act, 1925, cannot be called in aid in cases in which no written evidence of the real bargain is available.”
[17] [1948] 2 All ER 133
In Bloch v Bloch[18] Brennan J described the principle in these terms,
“ The defendant set up s. 7 of the Statute of Frauds 1677, but the plea was rejected because his Honour thought that the trust affecting the land was not an express trust. Following Lord Diplock’s classification – a resulting, implied or constructive trust, it being unnecessary to distinguish between them – the trust in the present case was held to fall outside the net of s. 7 and within the saving provisions of s. 8 of the Statute of Frauds 1677. And so the plea failed, as it was bound to do. The principle is that ‘the Statute of Frauds does not prevent the proof of a fraud; and that it is a fraud on the part of a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land himself’ (per Lindley L.J. in Rochefoucauld v Boustead, [1897] 1 Ch. 196, at p. 206). Whatever be the classification of the trust which binds the person entrusted with the legal title to property, his repudiation of the terms upon which he was entrusted with that property “is a fraudulent use of another’s confidence, and the Statute is not intended to cover fraud” (per Isaacs J. in Cadd v Cadd (1909), 9 C.L.R. 171, at p. 187; and see Lincoln v Wright (1859), 4 De G. & J. 16, at pp. 22, 23; 45 E.R. 6, at 9). Scott L.J. said in Bannister v Bannister, [1948] 2 All E.R. 133, at p. 136:
‘The fraud which brings the principle into play arises as soon as the absolute character of the conveyance is set up for the purpose of defeating the beneficial interest, and that is the fraud to cover which the Statute of Frauds … cannot be called in aid in cases in which no written evdence (sic) of the real bargain is available.’”
[18] (1981) 55 ALJR 701 at 706
I think the trust which is enforced in the circumstances in which the Court applies the principle that the statute may not be used as an instrument of fraud is an express trust rather than a constructive trust.[19] What is proved by the party permitted to put forward oral evidence is an express trust.
[19] Di Pietro v Official Trustee (1995) 59 FCR 470 per Sackville J at 482
The circumstances of this case are somewhat unusual. The alleged trustee, Petra, did not appear before me and argue that she was entitled to hold the property free of any trust. In practical terms, the contest is between a person claiming a security interest over the alleged beneficial interest of the person able to declare the trust, and a person claiming that a declaration of trust was made in his favour.
For the reasons which follow I do not think the principle that equity will not allow the statute to be used as an instrument of fraud applies in the circumstances of this case.
First, on the evidence before me I would not be prepared to find that there was any fraud on the part of Mr Jimenez senior and Petra in connection with the transfer of the property to them. It may be that in general terms they considered that the property would ultimately belong, or go, to Ramon, but it cannot be inferred from that fact that they executed the Declaration of Trust knowing that it did not reflect the true position.
Nor does Petra seek to set up the absolute character of the transfer so as to defeat the beneficial interest. No one has suggested that Petra holds the beneficial interest in the property. Both the plaintiff and Ramon assert that Petra holds the property on trust. That much is agreed.
Even if it is Mr Jimenez’s conduct which is the relevant conduct, I do not think the principle applies. It is a case of one person able to declare a trust not carrying out the common understanding with the other person able to declare the trust and instead putting in place an arrangement whereby both of them had a beneficial interest in the property commensurate with the purchase monies each of them provided. To my mind that is not fraud in the relevant sense.
Secondly, I do not think the principle operates unless fraud will result from the application of the statutory provisions. That will not happen in this case. After the transfer Mr Jimenez senior and Petra held the property on trust for Mr and Mrs Jimenez either by reason of the Declaration of Trust, or if this is ineffective, by reason of a resulting trust. In my opinion, the principle that equity will not allow the statutory provisions to be used as an instrument of fraud does not apply to enable a third party volunteer to enforce a trust in the absence of writing in circumstances where there is clearly a resulting trust in favour of the person able to declare the trust. None of the cases seem to go that far and to hold that the principle could be applied in such circumstances would go a long way towards emasculating the operation of the statutory provisions. I realise that there are some difficulties of analysis in cases where written evidence comes into existence after a trust has been created orally but in my opinion they are not sufficient to alter the conclusion I have reached.[20]
[20] Principles of the Law of Trusts Ford & Lee 3rd Ed paras [6090] – [6100]
For these reasons, I conclude that even assuming there was a trust created orally in favour of Ramon that trust was unenforceable by reason of the provisions of s 29(1) of the LPA.
Conclusions
In the circumstances I am prepared to make the declarations to which particular defendants have consented (ie paragraphs AA (excluding the reference to the second defendant) and AC). As I have reached the conclusion that there was and is no enforceable trust in favour of Ramon, I am prepared to make an order that the caveat lodged by Ramon be removed.
I will hear the parties as to the formal orders to be made and any other matters including costs.
JUDGMENT CITATIONS
LISTED IN ORDER OF APPEARANCE IN JUDGMENT
1.Dyer v Dyer (1788) 2 Cox 92 at 93; 30 ER 42 at 43; Napier v Public Trustee (WA) (1980) 32 ALR 153 at 158
2.Equuscorp Pty Ltd v Jimenez & Ors [2001] SASC 165
3.Daemar v Industrial Commission of New South Wales and Anor [No 2] (1990) 22 NSWLR 178
4.R v C (1993) 60 SASR 467 per King CJ at 473
5.Shephard v Cartwright [1955] AC 431; Calverley v Green (1984) 155 CLR 242 at 262
6.In Re Cozens; Green v Brisley [1913] 2 Ch 478; Commissioner of Stamp Duties (Qld) v Jolliffe (1920) 28 CLR 178; Tito v Waddell (No 2) (1977) Ch 106 per Megarry V-C at 111; Bloch v Bloch (1981) 55 ALJR 701
7.Permanent Trustee Co v Scales (1930) 30 NSWSR 391
8.Lysaght v Edwards (1876) 2 Ch D. 499; Walsh v Lonsdale (1882) 21 Ch D 9; As to the effect of the nomination see Harry v Fidelity Nominees Pty Ltd (1985) 41 SASR 458
9.Smith v Matthews (1861) 3 De G. F. & J. 138; 45 ER 831; Barkwork v Young (1856) 26 LJ Ch 153;
10.(1990) 95 ALR 615
11.Di Pietro v Official Trustee (1995) 59 FCR 470; Hagan v Waterhouse (1992) 34 NSWLR 308, See also Adamson v Hayes (1973) 130 CLR 276
12.Tierney v Wood (1854) 19 BEAV. 330; 52 ER 377 at 379-380; Kronheim v Johnson (1877) 7 Ch D.60 per Fry J at 66
13.Mountain v Styak [1922] NZLR 131; Principles of the Law of Trusts Ford and Lee 3rd Ed. para [6070]
14.Smith v Matthews (1861) 3 De G. F. & J. 138; 45 ER 831
15.Jacobs Law of Trusts in Australia 6th ed. Para [708]
16.[1897] 1 Ch. 196
17.[1948] 2 All ER 133
18.(1981) 55 ALJR 701 at 706
19.Di Pietro v Official Trustee (1995) 59 FCR 470 per Sackville J at 482
20.Principles of the Law of Trusts Ford & Lee 3rd Ed paras [6090] – [6100]
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