Gabor v Public Trustee of New South Wales
[2007] VSC 410
•26 October 2007
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 9909 of 2004
| RENEE GABOR | Plaintiff |
| v | |
| PUBLIC TRUSTEE OF NEW SOUTH WALES | Defendant |
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JUDGE: | Mandie J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 11 October 2007 | |
DATE OF JUDGMENT: | 26 October 2007 | |
CASE MAY BE CITED AS: | Gabor v Public Trustee of New South Wales | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 410 | |
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TRUSTS – whether plaintiff entitled to interest in land by way of constructive trust or otherwise – counterclaim for possession and arrears of rent
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | In person | |
| For the Defendant | Mr M Dean | Rennick & Gaynor |
HIS HONOUR:
Introduction
The plaintiff is in possession of the land situate at and known as 12 Bradfield Lane, Kensington in the State of Victoria (“the Land”) [1] and has resided in the dwelling thereon since April 1994. It was in 1994 or thereabouts that the dwelling was constructed. The defendant is, and has been since August 1996, the registered proprietor of the Land and holds the same on trust for one Malcolm McCallum (“Mr McCallum”).
[1]Certificate of Title Vol 144 Fol 553.
By her amended statement of claim (“ASC”) filed 28 August 2007, the plaintiff seeks a declaration that Mr McCallum, and the defendant as his trustee, holds his interest in the Land “on a constructive trust for the plaintiff to the extent of the difference of the purchase price and the value of the Land as at August 1996 as a proportion to the current value of the Land.” The plaintiff also seeks an order that an account and inquiries be taken and made as to the value of the Land as at August 6, 1996.
Factual Issues
The issues raised by the pleadings and the facts as I find them are as follows.
It is common ground that:
· The plaintiff is and at all relevant times has been in possession of the Land;
· The defendant has been the registered proprietor of the Land, on trust for Mr McCallum, since August 1996;
· Mr McCallum is and at all relevant times have been a person whose estate (or part of whose estate) is subject to an Order of the Supreme Court of New South Wales pursuant to the Damages (Infants and Persons of Unsound Mind) Act 1929 (NSW).
The plaintiff alleges that in 1993 she formed a relationship with one Geoff Kitchin (“Mr Kitchin”) and that on 14 May 1994 Mr Kitchin purchased the Land from the Urban Land Authority for the sum of $87,300. The plaintiff alleges that Mr Kitchin gave a mortgage over the Land to Citibank Limited to secure the sum of $67,300 advanced by Citibank for the purchase of the Land and that she paid the deposit of $8,730 and that Mr Kitchin made the repayments under the mortgage “as he owed $12,000 to the plaintiff at the time.” The plaintiff’s evidence supporting these allegations was not disputed, except perhaps as to Mr Kitchin’s alleged debt of $12,000. I am satisfied that the plaintiff lent the sum of $12,000 to Mr Kitchin in or prior to November 1993. The plaintiff testified[2] that she lent Mr Kitchin this amount on condition that he purchase the Land and use the monies for the initial mortgage repayments.
[2]The plaintiff gave viva voce evidence during the course of which she also verified the truth of her ASC and the truth of the matters outlined by her in her opening address to the Court.
The evidence did not make clear the role of the entities that were involved in the sale of the Land to Mr Kitchin. I am satisfied that in November 1993 the plaintiff paid the sum of $1000 as a holding deposit to an entity that I will call “Belvedere” by cheque drawn on her account with Challenge Bank Ltd (“the Challenge bank account”) and that in April 1994 she paid the balance of the deposit to a company that I will call “Kent Bros”[3], namely the sum of $7730 also by cheque drawn on the Challenge bank account.
[3]Apparently this entity was a company carrying on business as contract builders.
I am satisfied that the plaintiff probably made another payment to Mr Kitchin but it does not appear that the proceeds of this payment were used at settlement of the purchase of the Land - the evidence indicates that the plaintiff drew a cheque for $7000 on her Challenge bank account in January 1994 which she says was deposited into Mr Kitchin’s bank account.
The plaintiff tendered a list of payments that stated, inter alia, that she drew a cheque dated 27 April 1994 for $7000 on a bank account of hers with the Commonwealth Bank and that the cheque was payable to Belvedere, although no Commonwealth Bank statement was produced. The plaintiff’s list suggested that this payment went towards the purchase of the Land. Further, on 17 May 1994 the plaintiff drew a cheque on the Challenge bank account payable to Kent Bros in the sum of $7134.17. Although the plaintiff’s evidence was not entirely clear, she did testify that she had paid a total of $14,134.17 to “the builders” in addition to the deposit. I am satisfied that the plaintiff probably paid a total sum of $22,864.17 (including the deposit), as her list suggests, towards Mr Kitchin’s purchase of the Land.
A settlement statement from T J Mulvany & Co, solicitors, dated 27 May 1994 and addressed to Mr Kitchin shows that the purchase price of the Land was $87,300, that the deposit was $8730, that Citibank advanced $64,597.60 and that the balance of $14,134.17 was paid by “you” (ie Mr Kitchin) at settlement. Handwriting on the settlement statement indicates that the plaintiff paid the deposit and the sum of $14,134.17 at settlement together with a further sum of $836 for the solicitors’ costs. However the handwriting was not identified and the evidentiary effect of the statement is limited to what the settlement statement itself shows. Nevertheless I am satisfied, as I have said, by the plaintiff’s own evidence, that she probably contributed the sum of $22,364.17 towards Mr Kitchin’s purchase of the Land.
The plaintiff then alleges that on 25 May 1994 Mr Kitchin became the registered proprietor of the Land “[w]hich is registered in my name but which I hold as constructive trust[sic] for the said Renee Gabor absolutely”.[4] This allegation was not admitted by the defendant although it was not in issue that Mr Kitchin became the registered proprietor of the Land. The pleaded allegation, on its face, appears to be a quotation from some document or other acknowledgement that must have been written by Mr Kitchin. The plaintiff testified that she remained in the property “by virtue of a declaration of trust” from Mr Kitchin. However, no such document was produced although the plaintiff referred to some written material that she had lost. Of course it may well have been the case, in any event, that, as a result of the payments that the plaintiff made, directly or indirectly, towards Mr Kitchin’s purchase of the Land, the plaintiff had good claims in equity as against Mr Kitchin to an interest in the Land by way of trust, constructive or otherwise.
[4]ASC, para 8.
The plaintiff next alleges[5] that in or about May 1994 the relationship between her and Mr Kitchin ceased but that Mr Kitchin started making mortgage repayments at $491.48 per calendar month. This allegation was not admitted by the defendant but, although not perhaps strictly proved, was not really disputed at the hearing.
[5]ASC, para 9.
The plaintiff alleges that in August 1994 she formed a relationship with Mr McCallum. She provides particulars[6] that, between August 1994 and July 1996, Mr McCallum visited her fortnightly and that each visit lasted 3-7 days.[7] The defendant admitted that in or about August 1994 the plaintiff met and became friendly with Mr McCallum but otherwise did not admit this allegation. However the substance of the allegation was proved save perhaps that, according to Mr McCallum, the visits were monthly rather than fortnightly, but this is of no significance.
[6]Other particulars were provided by the plaintiff but they are irrelevant to her case.
[7]ASC, para 10.
The plaintiff alleges that in or about April 1995 she lodged a caveat over the Land claiming an interest therein. This allegation was not admitted but at the hearing was accepted by the defendant.
The plaintiff alleges that in or about March 1996, Mr Kitchin ceased making repayments under the mortgage and that in or about May 1996 Citibank obtained possession of the Land[8]. The defendant did not admit these allegations but at the hearing accepted that Mr Kitchin had ceased making his repayments and that Citibank was, at the very least, pressing to enforce its mortgage as a result.
[8]ASC, para 12.
By letter to the plaintiff dated 1 May 1996 from Phillip Bing & Associates, who were then acting as her solicitors, certain telephone advice to the plaintiff in relation to Mr Kitchin and Citibank was confirmed. The solicitors confirmed that they had advised the plaintiff of the following:
·Citibank’s solicitors had indicated that it was most unlikely that Citibank would allow her to remain in the property by paying arrears and future loan instalments.
·The only realistic way for her to remain in the property was either to buy the property from Citibank (as mortgagee in possession) or to procure a transfer of the property from Mr Kitchin.
·It was preferable for the property to be transferred rather than incur the expenses of a mortgagee sale.
·She had told them that she had a friend, Mr McCallum, who might be prepared to purchase the property for the amount required to discharge the mortgage loan to Citibank, and that, obviously, Mr Kitchin would have to agree to this and execute a transfer.
·“We note that you have equity in the property. If Mr McCallum purchases the property for an amount less than the true value of the property, you will effectively lose your equity in the property. Accordingly, we strongly recommend that at the same time as the transfer is put in place, an agreement be prepared whereby Mr McCallum acknowledges that he holds the property as to part on trust for you. As part of this agreement, the terms under which you are to occupy the property should be set out.”
·“We note your comments that you are prepared to “give up” your interest in the property. We simply repeat the contents of the previous paragraph.”
The plaintiff’s then solicitors wrote again to her by letter dated 29 May 1996. The letter stated inter alia:
“…We confirm that if the proposed sale proceeds, you will have no further claims at all against Mr Kitchin.
We confirm our very real concerns about the proposed sale of the property to Mr McCallum. As his affairs are apparently being looked after by the Public Trustee, we have doubts about whether or not he can validly enter into a contract of sale…
You have instructed us that the name of the purchaser on the contract with...Kitchin is to be ”Renee Gabor and/or nominee”…
We also confirm our strong recommendation that you enter into a written agreement with Mr McCallum (if he is in fact legally capable of entering into such agreement) to ensure that you are able to remain in the property. We also recommend that such agreement also acknowledge your interest in the property…”
The plaintiff wrote to Mr McCallum by letter dated 30 May 1996, enclosing a copy of the lastmentioned letter from her solicitors. In that letter the plaintiff stated:
“As earlier indicated to you, I am not holding any interest or equity in the property and may I repeat that I am not getting a cent richer from all these and you are of course not getting a cent poorer from these transactions”.
In a central allegation, the plaintiff pleads,[9] after a sub-heading “The Agreement”, that in or about June 1996 Mr McCallum offered[10] to purchase the Land for an amount equal to discharge the liability of Mr Kitchin to Citibank, to permit the plaintiff to remain in it and to permit the plaintiff to acquire ownership of the Land by paying Mr McCallum $40 per week until the purchase price was repaid in full on condition that Mr Kitchin transferred the Land to the plaintiff or nominee and the plaintiff withdrew her caveat. The defendant denied this allegation. Moreover the defendant contended that no such agreement had been made between the plaintiff and Mr McCallum[11]. Evidence was given by the plaintiff that there was such an agreement and by Mr McCallum that there was not. Mr McCallum not only denied making such an agreement but he denied having discussions along those lines and he further denied that he had any knowledge that the plaintiff “had put any money in the property”. Although, as I have said, the plaintiff testified that there was such an offer or agreement by Mr McCallum, it was apparent from her evidence that he had told her at an early stage, in all probability before the purchase of the Land by the defendant, that, in substance, what was to happen was up to the Public Trustee and not up to him. In the end, in cross examination, the plaintiff said in relation to this alleged agreement that “nothing was concluded”.
[9]ASC, para 13.
[10]I note that the plea is that Mr McCallum “offered” to do the matters alleged. There is no express allegation of an agreement.
[11]Defence para 8.
The plaintiff then alleges[12] that in the belief that she could acquire full ownership of the Land by paying Mr McCallum $40 per week, she relinquished all her rights and interest in the Land, lodged a withdrawal of the Caveat and procured Mr Kitchin to transfer the Land to her or nominee pursuant to a Deed of Trust[13]. The defendant denied this allegation[14]. I accept that, in order to facilitate the defendant’s purchase of the Land, the plaintiff withdrew a caveat that she had earlier lodged.
[12]ASC, para 14.
[13]However there was no evidence of any such Deed of Trust being executed.
[14]Defence para 9.
The plaintiff alleges[15] that “[a]cquiescing to the Agreement, in or about June 1996” Mr McCallum instructed the defendant to advance him an amount “equal” to discharge the liability of Mr Kitchin to Citibank or “[s]ettle whatever it costs”. The plaintiff further alleges[16] that “it was an Agreement that never was meant to be made in good faith by [Mr McCallum] – an Agreement he would vehemently deny having made: a) it was not in writing; b) his affairs are being looked after by the Public Trustee of NSW – these facts he would seize to exploit and take advantage of.” The defendant denies these allegations. However it is not in issue that in order to purchase the Land, Mr McCallum procured the defendant to make available the necessary funds from monies held in trust for him by the defendant and to purchase the Land in its name on trust for him.
[15]ASC, para 15.
[16]ASC, para 16.
In or about June 1996 the defendant engaged Thomas J Pound, an expert valuer, to value the Land. Mr Pound inspected the Land and carried out other necessary investigations as to comparable sales and the like and assessed the fair market value of the Land at $82,500. I accept his uncontradicted evidence[17].
[17]The plaintiff said in her ASC that she would provide particulars of the value of the Land in 1996 but she did not do so and the only evidence called as to the value of the land was that of Mr Pound.
The plaintiff further alleges[18] that on 19 July 1996 the defendant purchased the Land for $80,000 but that, at the date of purchase, the value of the Land had increased from $87,300 to a value in excess of that sum. The defendant admits purchasing the Land for $80,000 on 21 July 1996 but otherwise denies the allegations and says the Land was valued at $82,500.
[18]ASC, paras 17 and 18.
The plaintiff then alleges that Mr McCallum was benefited by the plaintiff by the difference between the amount the defendant paid for the Land and the amount that would have had to be paid if the Land had been purchased from an arm’s length vendor and that the said benefit was conferred by her and received by Mr McCallum under a mistake by her that the Agreement alleged by her was enforceable and that the plaintiff remained in occupation of the Land pursuant to an agreement between her and Mr McCallum. The defendant denies all of these allegations other than that the plaintiff remained in occupation of the Land.
The defendant retained Marston & Cook Pty Ltd (“Marston”), estate agents, as managing agents. Prior to the completion of the defendant’s purchase of the Land, Marston wrote to the plaintiff by letter dated 18 July 1996 in relation to a proposed tenancy agreement between the defendant and the plaintiff. The letter was signed by Stephen Richardson , Property Manager. The letter stated inter alia:
“ Listed below is what we require on or before the settlement date:
1. Tenancy Application to be completed…
2. Rental $499.99 per calendar month paid monthly in advance.
3. Lease to commence as from the date the property settles.
4. Security Deposit $499.00.”
In cross-examination, the plaintiff agreed that she had had a telephone conversation with Mr Richardson prior to receipt of the above letter in the course of which the tenancy arrangements had been discussed. The plaintiff testified that she did not tell Mr Richardson that she had an agreement with Mr McCallum to buy the Land at $40 per week because “it was something very personal”.
A Residential Tenancy Agreement[19] dated 21 July 1996 was completed and signed between the defendant and the plaintiff, in a standard form under the Residential Tenancies Act 1980, for a term of 12 months at a calendar monthly rate of $499.
[19]The existence of this agreement is pleaded by the plaintiff in para 22 of the ASC.
The plaintiff alleges that a Warrant of Possession “prematurely” terminated the tenancy agreement “in a matter of months”.[20] The defendant pleads in answer[21] that the plaintiff was a tenant of the Land until 6 September 2007 but had not paid rent to the defendant since 21 January 2005 and was currently indebted to the defendant in the sum of $17,766 for arrears of rental. The plaintiff admitted that she had paid rent from 21 July 1996 until 20 January 2005, a period in excess of eight years, and that the rent was initially $499 per month and subsequently increased to $564 per month.
[20]ASC, para 23.
[21]Defence para 17.
On or about 5 July 2001 the plaintiff lodged a caveat claiming an equitable estate in fee simple in the Land “whereby the registered proprietor holds his interest in the said Land as trustee for himself and for the caveator by virtue of a constructive trust”. By letter to the plaintiff dated 7 October 2003 from State Trustees Ltd (written on behalf of the defendant), State Trustees informed the plaintiff that it had been asked by the defendant to assist in the sale of the Land and noted that the plaintiff had lodged a caveat dated 4 July 2001. the letter went on to ask the plaintiff to advise “your interest in the property, to what extent, circumstances thereof and whether you would oppose the sale?” The plaintiff did not reply to this letter.
By letter to the plaintiff dated 13 October 2003, the defendant asked the plaintiff to explain in writing how she claimed to have an equitable interest in the Land when the defendant purchased it for full value without any encumbrance. The plaintiff did not reply to this letter.
The plaintiff pleads[22] that the relationship between the plaintiff and Mr McCallum ceased in or about August 1996 and this was confirmed by the evidence.
[22]ASC, para 24.
It is unnecessary to refer further to the allegations in the ASC save that, in para 28, the plaintiff pleads:
“By reason of the matters aforesaid, Malcolm McCallum (and the Public Trustee of NSW as Trustee for Malcolm McCallum) holds his interest in the Land on a constructive trust for the Plaintiff to the extent of the difference between the purchase price and the value of the Land as at August 1996 as a proportion to the current value of the Land.”
The defendant denies the existence of the trust alleged by the plaintiff or of any trust. The defendant further alleges that the plaintiff knew that Mr McCallum did not have or was unlikely to have capacity to enter into any agreement with her. The defendant further says that the plaintiff has waived any claim and/or is estopped from making any claim with respect to an interest in the Land.
This proceeding was commenced by writ filed 30 December 2004. At that time the plaintiff was represented by solicitors. The writ had a general endorsement stating that the plaintiff claimed a declaration that the defendant held the land on trust for the plaintiff pursuant to an express or constructive trust. There must have been a considerable delay in the service of the Writ as the defendant did not enter an appearance until 19 October 2005. On 15 December 2005 the Master ordered the plaintiff to file and serve a statement of claim by 22 December 2005. It was in her statement of claim filed on 22 December 2005 that the plaintiff first alleged the agreement with Mr McCallum as to purchase of the Land. By letter dated “23 December” the plaintiff stated to Mr McCallum, inter alia, “I am willing to buy the house off you but please don’t involve lawyers”. The plaintiff testified that this letter was sent immediately after she had asked the solicitors to cease acting for her, so the letter must have been written on 23 December 2005 because in January 2006 the solicitors ceased acting for the plaintiff.
The defendant now counterclaims, on the basis of non payment of rental since 20 January 2005 and a Notice to Vacate served on the plaintiff on 22 August 2007 expiring on 6 September 2007, for possession of the Land and the sum of $17,776 for arrears of rental.
Reasons
I am not satisfied that Mr McCallum made the alleged offer to the plaintiff as alleged by her[23]. I found the plaintiff to be an unimpressive witness. In any event, I am satisfied that, even if an offer along those lines was made or discussed between them, the plaintiff was probably aware prior to the defendant’s purchase of the Land and her withdrawal of caveat that no agreement had been concluded and that her only interest in the Land was to be held as a tenant of the defendant.
[23]ASC, para 13.
The plaintiff’s case does not depend on establishing a concluded or enforceable agreement with Mr McCallum. She accepts that there was none. Her case is (and is so pleaded) that she withdrew her caveat and permitted the defendant to purchase the Land in the mistaken belief that she had an equitable interest in the Land as a result of Mr McCallum’s alleged offer or agreement to sell the Land to her and that Mr McCallum took advantage of her in that regard.[24] However, I am not satisfied that she had any such belief. Even if she did, I am not satisfied that Mr McCallum (or the defendant) were aware of it or had any suspicion of it, so as to support the suggestion that they were seeking to take advantage of her. On the contrary, I find that the plaintiff’s continuing belief was probably as earlier stated by her in the letter to Mr McCallum dated 30 May 1996 and that, moreover, she probably induced him to procure the defendant’s purchase of the Land by such statement, namely, that she was not holding any interest or equity in the property. In addition, her conduct in entering a residential tenancy agreement with the defendant tends to detract from the credibility of her case in this regard. I conclude that the plaintiff’s claim, as pleaded, fails.
[24]ASC, para 15.
Further, the plaintiff’s pleaded claim depends upon establishing that the defendant purchased the Land for less than its true value. Mr Pound’s evidence which, as I have said, I accept, was that the Land was worth $82,500, so that at best the defendant achieved a purchase at an undervalue of $2,500. If the plaintiff’s case was otherwise made out, this might translate into a proportionate interest of some present value to the plaintiff, albeit limited, but having regard to my earlier conclusion, it is unnecessary to make the calculation.
In argument, the plaintiff submitted, as I understood her, that she had a right to an equitable interest in the Land, as against the defendant, by virtue of her position as a “tenant in possession of the land” within the meaning of s.42(2)(e) of the Transfer of Land Act 1958. That was not a case pleaded by her nor one that the defendant came to trial to meet. However, as I have found, the plaintiff had no equitable interest in the Land, by way of a constructive trust or otherwise, in the way pleaded[25] by her, and thus no equitable interest that could be statutorily protected by her position as a tenant in possession. It was not clear to me whether the plaintiff was also seeking to submit that she had a prior equitable interest in the Land by virtue of her contributions to the purchase thereof by Mr Kitchin that remained protected by her position as tenant in possession. If so, I consider that she is estopped from so contending because Mr McCallum procured the purchase of the Land by the defendant on the faith of her statement to him that she was not holding any interest or equity in the property and further because the defendant paid the purchase money and took a transfer of the Land on the faith of her entry into the residential tenancy agreement.
[25]i.e. an equitable interest derived from her reliance on Mr McCallum’s offer to sell her the Land.
Counterclaim
The facts alleged in the defendant’s counterclaim are proved.
On 26 September 2007 the defendant commenced a proceeding in the Victorian Civil and Administrative Tribunal (“VCAT”) claiming possession of the Land and arrears of rental.[26] The VCAT proceeding was adjourned having regard to this Supreme Court proceeding.
[26]See exhibit 12 – See too s.322 and s.213A of the Residential Tenancies Act 1997.
Sections 446 and 447 of the Residential Tenancies Act 1997 (“the Act”) set out the jurisdiction of VCAT and the monetary limits thereof but, as s.448 of the Act makes clear, the jurisdiction of VCAT in that regard, once an application is made to it, is not exclusive of the jurisdiction of the Supreme Court (although it is exclusive of other courts and persons acting judicially). In addition, the counterclaim in this proceeding was filed some weeks before the VCAT application was filed. Section 448(3) of the Act provides that VCAT must not determine an issue in an application if a civil proceeding in respect of the issue was instituted before a court before the application to VCAT was instituted. As a result, not only does the Supreme Court have jurisdiction to determine the counterclaim but VCAT is not able to determine the application before it on the same issues.
Accordingly judgment will be given on the counterclaim in favour of the defendant.
Orders
There will be judgment for the defendant on the plaintiff’s claim and judgment for the defendant on its counterclaim for possession of the Land and for arrears of rent in the sum of $17,776.
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