Gibbons v Pozzan

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
GIBBONS v POZZAN
[2012] SASCFC 131
Judgment of The Full Court
(The Honourable Justice Gray, The Honourable Justice Sulan and The Honourable Justice David)
5 December 2012
EVIDENCE - WITNESSES - IN GENERAL
EVIDENCE - BURDEN OF PROOF, PRESUMPTIONS, AND WEIGHT AND SUFFICIENCY OF EVIDENCE - GENERALLY - CREDIBILITY AND WEIGHT
MORTGAGES - MORTGAGEE'S REMEDIES - GENERALLY
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH JUDGE'S FINDINGS OF FACT - FUNCTIONS OF APPELLATE COURT - WHERE FINDINGS BASED ON CREDIBILITY OF WITNESSES
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PAYMENT INTO COURT, AND OFFERS TO SETTLE OR CONSENT TO JUDGMENT
MORTGAGES - PRIORITY OF SECURITIES - SUBSEQUENT LEGAL AND PRIOR EQUITABLE INTEREST
Appeal from the decision of a Master of the Supreme Court - proceedings involved a contest of priority between two claimants to monies paid into Court from the enforced sale of two properties - whether the second intervener and appellant holds an equitable interest in and therefore has a claim to the monies paid into Court - whether the master made an error of fact in reaching his findings in relation to Mrs Gibbons' credibility and reliability.
Held per Gray J (Sulan and David JJ concurring): Appeal allowed - the Master made a significant error of fact - this error played a pivotal role in his rejection of the evidence of the appellant - orders of the Master including orders as to costs set aside - matter remitted for rehearing.
Real Property Act 1886 (SA) Pt 17; Trustee Act 1936 (SA) s 47, referred to.
Byrnes v Kendle (2011) 243 CLR 253; Orr v Ford (1989) 167 CLR 316, considered.

GIBBONS v POZZAN
[2012] SASCFC 131
FULL COURT: Gray, Sulan and David JJ
GRAY J.

This is an appeal from a decision of a Master of the Supreme Court.
The proceedings involved a contest of priority between two claimants to the monies paid into Court following the enforced sale of two properties.
Introduction
An intervener and appellant, Suzan Gibbons, together with her husband, Kirk Gibbons, were the registered joint owners of a property at Cape Jervis. The property was subject to a mortgage in favour of the Commonwealth Bank of Australia. Mr and Mrs Gibbons built their home on the property and over time made improvements to the property. They lived with their children on the property.
In 1992, Mr Gibbons suffered serious injuries in a motor vehicle accident which, together with the consequences of a subsequent accident, incapacitated him and prevented him from being employed for many years. As a consequence, the Gibbons were in financial difficulty and, at relevant times, were in default of their repayment obligations to the Commonwealth Bank.
In or about mid-September 2005, the Commonwealth Bank obtained an order under Part 17 of the Real Property Act 1886 (SA) for possession of the Cape Jervis property. Notwithstanding the obtaining of the order, the Gibbons remained in possession.
The Gibbons made an arrangement with their accounting advisor, Anthony Smith, who was also their friend, to enable the Gibbons family to continue to reside in the Cape Jervis property. The arrangement involved Mr Smith purchasing the property from the Commonwealth Bank in the exercise of its powers as mortgagee for $126,000.00. This apparently cleared the debt then owing to the Commonwealth Bank. To enable this transaction to settle, the property was mortgaged at the time of settlement to Citibank Limited to secure a loan for $50,000.00. The Gibbons arranged from an undisclosed source for the balance of $76,000.00 to be made available to Mr Smith. As a consequence, Mr Smith was able to complete the purchase from the Commonwealth Bank without resort to his own resources. Mr Smith, however, remained liable to Citibank in respect of the loan of $50,000.00.
It was agreed between the Gibbons and Mr Smith that the Gibbons would meet all outgoings on the property including the repayments to Citibank. It was further agreed that the Gibbons would remain in occupation at the Cape Jervis property free of rent.
It was agreed between the Gibbons and Mr Smith that Mr Smith would retransfer the property to the Gibbons at their direction on the basis that he would be reimbursed for any financial outlay that he had incurred in purchasing and holding the property. It was never the intention of the Gibbons and Mr Smith that Mr Smith would retain the property.
On 26 July 1996, the mortgage to Citibank was discharged and the property was then mortgaged to several private lenders to secure a loan of $80,000.00. The evidence established that the Gibbons arranged the refinancing. The amount of the loan together with accrued interest was paid out to Citibank and the balance of the $80,000.00 was apparently paid to the Gibbons.
By 1998, Mr Gibbons received a substantial damages award. It would appear that in early 1998, Mr Gibbons requested Mr Smith to retransfer the Cape Jervis property. On 24 April 1998, pursuant to his arrangement with the Gibbons, Mr Smith retransferred the Cape Jervis property. The consideration was expressed to be $124,000.00. At the time of transfer, the mortgage to private lenders was discharged. For reasons that are unexplained, Mr Smith retransferred the property to Mr Gibbons alone. At the time of the retransfer, the land was mortgaged by Mr Gibbons to Westpac Banking Corporation. Subsequently this mortgage was discharged. However, in 1999 and 2003, other mortgages were given by Mr Gibbons to Westpac Banking Corporation over the Cape Jervis property and other properties.
In August 2003, Mr Gibbons mortgaged a property registered in his name at Wirrina to Westpac Banking Corporation. A number of other properties were the subject of the mortgage. However, the Cape Jervis property was not mortgaged as part of these transactions.
On 12 October 2004, a second mortgage was registered over the Wirrina property in favour of Dorian Pozzan, the first intervener and respondent.
From 2005 until 2007, Mr Gibbons and Mr Pozzan were involved in litigation over disputes in respect of other matters. The proceedings ultimately lead to a substantial money judgment in favour of Mr Pozzan against Mr Gibbons.
On 20 September 2007, Mrs Gibbons lodged a caveat over the Cape Jervis property claiming that she was the holder of an equitable interest in the property. In October 2010, Westpac Banking Corporation, exercising its powers as mortgagee, sold the Cape Jervis property for $500,000.00. Westpac Banking Corporation appropriated the whole of the net purchase price against the monies owed to it by Mr Gibbons. In December 2010, Westpac Banking Corporation, exercising its powers as mortgagee, sold the Wirrina property for $216,000.00. From that sum Westpac Banking Corporation deducted the balance of the monies owing by Mr Gibbons. On 23 February 2011, Westpac Banking Corporation paid the balance of $128,114.00 into the suitors’ fund of this Court pursuant to section 47 of the Trustee Act 1936 (SA).
On 6 July 2011, Mr Gibbons was declared bankrupt. His trustee made no claim to any interest in the monies paid into Court by Westpac Banking Corporation.
Both Mr Pozzan and Mrs Gibbons intervened in the within proceeding, each making application for the monies in Court to be paid to them. Both applied for summary orders. The Master directed that they file points of claim and defence setting out their respective alleged entitlements to the monies in Court. It was agreed that the Master would first determine the following issues:
1.1.Whether the second intervener had any interest in the Cape Jervis Property at the date it was last sold by Westpac Banking Corporation, and the nature and extent of that interest.
1.2.If the answer to the first question is ‘Yes’, whether the second intervener has an interest in the funds paid into the Supreme Court suitors fund by Westpac Banking Corporation.
1.3.If the answer to the second question is ‘Yes’ whether:
1.3.1That interest has priority over Mr Pozzan’s claim; or
1.3.2Whether there is to be a rateable distribution as between Mr Pozzan and Mrs Gibbons.
1.4.Is Mr Pozzan’s claim for costs which he asserts are secured by his mortgage over the Wirrina Property confined to the amounts payable pursuant to the orders made in Supreme Court of South Australia in Action Nos. 668 of 2005 and 649 of 2005?
1.5.If the answer to the fourth question is no, the proper construction of clause 30 of Mr Pozzan’s mortgage, and in particular:
1.5.1.What costs are secured by the mortgage?
1.5.2What is the basis on which those costs are calculated, namely:
1.5.2.1.Actual costs incurred by Mr Pozzan (i.e. indemnity costs, except to the extent unreasonably incurred)?
1.5.2.2.Reasonable costs, and if so, how are they to be calculated?
1.5.2.2.1.On a time costing basis?
1.5.2.2.2.On the Supreme Court scale?
1.5.2.2.3.On any other basis?
1.5.2.3.Costs as actually taxed by the Court.
1.5.3.Does the mortgage secure an entitlement to interest on any costs owing by Mr Gibbons to Mr Pozzan? If so, when is interest calculated from?
1.6.Is Mr Pozzan limited to recovery of costs that have already been taxed prior to these proceedings being instituted?
The Master concluded that Mrs Gibbons had no interest in the Cape Jervis property at the time it was last sold by Westpac Banking Corporation. As a consequence, the Master determined the first issue in favour of Mr Pozzan. The Master considered that it was not necessary to make findings or resolve any of the remaining issues. As a result, this Court does not have the relevant findings as to the Master’s conclusions on the remaining questions.
On the appeal, Mrs Gibbons challenged the conclusion of the Master that she had no interest in the Cape Jervis property and contended that this Court should find that it had been established that she had an interest of the Cape Jervis property at the date that it was last sold by Westpac Banking Corporation. It was further contended that this Court should then resolve the questions arising in respect of the equitable doctrines of subrogation and marshalling.
The Trial Findings
Credibility and Reliability
The Master made adverse findings concerning the credibility and reliability of Mr and Mrs Gibbons and Mr Smith. In particular the Master concluded:
The only witnesses whose evidence was challenged, and who were cross-examined, were [Mr Gibbons], [Mrs Gibbons] and [Mr Smith]. None of them were able to give detailed evidence of the transactions in issue. [Mrs Gibbons] did not produce any documents about relevant transactions, other than those which had been obtained from public registries. While she established that the solicitors acting in the transfer from the Commonwealth Bank to [Mr Smith] in 1995, and those acting in the transfer from [Mr Smith] to [Mr Gibbons] in 1998, no longer had any papers for those transactions, she has not shown that the Commonwealth Bank, Westpac, Citibank or the like could not have provided relevant evidence about some of the transactions.
[Mr Gibbons] was an unimpressive and unreliable witness. He was argumentative and obviously antagonistic to [Mr Pozzan]. Much of his evidence was no more than speculation and conjecture. In an effort to distance himself from what was contained in the affidavit of [Mr Smith] initially he said he had not read that affidavit, but was ultimately forced to concede that he had read it, because he had stated in his own affidavit that he agreed with its contents. Little weight can be placed on his evidence.
[Mr Smith] had only a vague and incomplete recollection about relevant events. His evidence was not criticised by counsel for [Mr Pozzan] in his final address. I accept his evidence insofar as it was positive assertions about matters which he said he could remember.
[Mrs Gibbons] was an unsatisfactory witness. She had very little recollection of relevant events. Little weight can be placed on her evidence, but where there is any conflict between her evidence and that of [Mr Gibbons], I prefer her evidence.
On the appeal, it became evident that the Master had made a significant error of fact – one that played a pivotal role in his rejection of the evidence of Mrs Gibbons. The Master concluded that, contrary to her evidence, Mrs Gibbons knew at the time at which Mr Smith transferred the Cape Jervis property to Mr Gibbons that she was no longer registered on the title as a joint owner of that property. The Master accepted the submission put on behalf of Mr Pozzan that even if Mrs Gibbons had some equitable interest in the Cape Jervis property at the time Mr Smith transferred the property to Mr Gibbons, Mrs Gibbons was aware it was being transferred to Mr Gibbons alone. The Master further accepted the submission that Mrs Gibbons acquiesced in the transfer to Mr Gibbons alone. The Master specifically rejected Mrs Gibbons’ denials to the contrary.
In reaching the above conclusions the Master reasoned:
Although [Mrs Gibbons] had a poor memory of relevant events, she was not unintelligent. She witnessed [Mr Gibbons’] signature to his mortgage of the Cape Jervis property to Westpac, which occurred when he received the transfer of it from [Mr Smith]. While the face of the mortgage document does not make it clear that the mortgage was over the Cape Jervis property, the temporal coincidence of the execution of this mortgage and the transfer of the Cape Jervis property back from [Mr Smith] should have alerted her that [Mr Gibbons] was dealing in the Cape Jervis property for his own business purposes. By this time he was heavily engaged in property transactions which were being financed through Westpac. [Mrs Gibbons] was not directly involved in these transactions, although she may well have been a beneficiary in various trusts which would have profited from the transactions. The evidence is equivocal about the extents to which [Mr Gibbons] financed his transfer of the Cape Jervis property from [Mr Smith] on the one hand out of his damages award and on the other hand from his borrowings from Westpac. While I accept the evidence of [Mr Smith] that the figure of $142,000 shown on the transfer from himself to [Mr Gibbons] was not paid, and was only stated for ad valorem stamp duty purposes, nevertheless [Mr Gibbons] had to raise a substantial sum of money to pay out the private lenders’ mortgage, particularly as it was apparently then in arrears. It also seems that he already used at least part of his damages monies for other property investments. Thus, the transfer of the Cape Jervis property into the name of [Mr Gibbons] alone cannot be justified on the grounds that the whole of the monies paid for it came out of [Mr Gibbons’] damages money. It is implausible that both [Mr Gibbons] and [Mr Smith] would have transferred the property to [Mr Gibbons] alone unless [Mrs Gibbons] knew of, and concurred in, such a course.
[Mrs Gibbons] gave no plausible explanation about how and when she first learnt that the title to the Cape Jervis property was only in the name of [Mr Gibbons]. She did not say when she first learnt of it. She said that someone must have told her, but she could not remember who it was. She apparently knew of it by the time she was dealing with a lawyer in relation to the death of her mother, which occurred in 2005, and that lawyer advised her to lodge the caveat. If [Mr Smith] and [Mr Gibbons] had acted against her interests, it might have been expected that she would have at least given some notice to them of her potential claim against them. The inference which is most consistent with the evidence, as I have found it to be, is that she knew from the time at which [Mr Smith] transferred the Cape Jervis property to [Mr Gibbons] that she was no longer registered on the title as a joint owner of that property.
A primary difficulty with the Master’s reasoning is his critical assertion that Mrs Gibbons witnessed Mr Gibbons’ signature to the mortgage of the Cape Jervis property to Westpac Banking Corporation at the time of the retransfer from Mr Smith. The Master considered that the temporal coincidence of the execution of the mortgage and the retransfer would or should have alerted Mrs Gibbons that Mr Gibbons was dealing in the Cape Jervis property for his own business purposes.
An examination of the relevant documents reveals that Mrs Gibbons did not witness Mr Gibbons’ signature to the mortgage of the Cape Jervis property as described by the Master. There was in fact no temporal coincidence. Mrs Gibbons had witnessed her husband’s signature on a different document but this had occurred a considerable time later. The Master misunderstood the sequence of events. Counsel for Mr Pozzan accepted that this error had occurred.
It follows that the Master proceeded under a material misapprehension of fact when making findings as to credibility and reliability. In these circumstances the Master’s findings as to credibility and reliability of Mrs Gibbons cannot stand. The factual findings that follow from his adverse view of Mrs Gibbons’ credibility and reliability are also affected.
The Master’s conclusion that Mrs Gibbons acquiesced in the transfer of the property to her husband is also flawed. In Byrnes v Kendle,[1] the members of the High Court discussed the concepts of acquiescence and consent. For present purposes, it is sufficient to refer to the observations of French CJ and those of Heydon and Crennan JJ. French CJ observed:[2]
[1] Byrnes v Kendle (2011) 243 CLR 253.
[2] Byrnes v Kendle (2011) 243 CLR 253, [25]-[27].
… The two concepts [concurrence and acquiescence] are not congruent. Consent, of course, may be expressed in a number of ways some of which may overlap with conduct constituting acquiescence. As Handley JA said in Spellson v George:
“Consent may take various forms. These include active encouragement or inducement, participation with or without direct financial benefit, and express consent. Consent may also be inferred from silence and lack of activity with knowledge. However consent means something more than a state of mind. The trustee must know of the consent prior to the breach.”
Handley JA quoted a number of authorities for the proposition that consent to a breach of trust operates as an estoppel and observed: “If this defence does operate by way of estoppel it would require proof of inducement and reliance thereon by the trustee.” Young A-JA, in the same case, distinguished between concurrence in a breach and acquiescence after breach. His Honour also referred to the distinctions to be drawn between consent and other concepts, including the distinction between consent and “a situation where a person knows of the facts, hopes that the proposed course will take place but does nothing to assist it”. Hope A-JA, who agreed with Young A-JA, said it was necessary, in determining whether a defence of consent to a breach of trust was made out, to consider all the circumstances with a view to determining whether it was fair and equitable to allow the plaintiff to sue the defendants for the breaches of trust.
…
Acquiescence as a defence to a claim for equitable relief is used in at least two different senses:
• A person who is aware that an act is about to be done to his or her prejudice takes no step to object to it.
• A person being aware of a violation of his or her rights which has occurred fails to take timely proceedings to obtain equitable relief. This is acquiescence after the event which founds the defence of laches.
[Footnotes omitted.]

Heydon and Crennan JJ adopted the approach identified by Deane J in Orr v Ford.[3] Their Honours relevantly observed:[4]
[3] Orr v Ford (1989) 167 CLR 316.
[4] Byrnes v Kendle (2011) 243 CLR 253, [133]-[139].
In Orr v Ford Deane J set out various meanings of “acquiescence”. It is convenient to consider the circumstances of this case in the light of his analysis.
Deane J said:
“Strictly used, acquiescence indicates the contemporaneous and informed (knowing) acceptance or standing by which is treated by equity as “assent” (ie consent) to what would otherwise be an infringement of rights ...”
…
Deane J then said that the word “acquiescence” is commonly used also to refer “to a representation by silence of a type which may found an estoppel by conduct”. The respondent did not attempt to establish the ingredients of an estoppel by silence.
Deane J further said that “acquiescence” is commonly used to refer to “acceptance of a past wrongful act in circumstances which give rise to an active waiver of rights or a release of liability”. The conditions for “active waiver” were not established. Nor were the conditions for a “release of liability”. Lord Westbury LC described those conditions thus in Farrant v Blanchford:
“Where a breach of trust has been committed, from which a trustee alleges that he has been released, it is incumbent on him to shew that such release was given by the cestui que trust deliberately and advisedly, with full knowledge of all the circumstances, and of his own rights and claims against the trustee; for it is impossible to allow a trustee who has incurred personal liability to deal with his cestui que trust for his own discharge upon any other ground than the obligation of giving the fullest information, and of shewing that the cestui que trust was well acquainted with his own legal rights and claims, and gave the release freely and without pressure or undue influence of any description.”
The evidence does not establish that the second appellant was acting deliberately and advisedly or with knowledge of her own rights and claims against the respondent.
Deane J then said that “acquiescence” is commonly used to refer to “an election to abandon or not enforce rights”. The evidence does not support election.
Deane J then referred to two usages of the word “acquiescence” which he found unhelpful:
“First, it is sometimes used as an indefinite overlapping component of a catchall phrase also incorporating “laches” or “gross laches” and/or “delay” ... Secondly, acquiescence is used as a true alternative to “laches” to divide the field between inaction in the face of “the assertion of adverse rights” (acquiescence) and inaction “in prosecuting rights” (laches).”
He then gave a third meaning:
“Thirdly, and more commonly, acquiescence is used, in a context where laches is used to indicate either mere delay or delay with knowledge, to refer to conduct by a person, with knowledge of the acts of another person, which encourages that other person reasonably to believe that his acts are accepted (if past) or not opposed (if contemporaneous).”
There is no evidence of that encouragement, and the respondent did not give evidence that he had that belief.
Finally, Deane J said that the expression “gross laches” referred to
“circumstances where inaction or standing by (with knowledge) by a plaintiff over a substantial period of time assumes an aggravated character in that it will, if the plaintiff is granted the relief which he seeks, give rise to serious and unfair prejudice to the defendant or a third party.”
The grant of relief to the plaintiff appellants here will cause no prejudice to third parties and no prejudice (beyond the justice of the case) to the respondent.
[Footnotes omitted.]
The Master, on the topic of acquiescence, reached the following conclusion:
In addition, I accept the submission for [Mr Pozzan] that even if [Mrs Gibbons] had some equitable interest in the Cape Jervis property at the time [Mr Pozzan] transferred it to [Mr Gibbons], [Mrs Gibbons] was aware that it was being transferred to [Mr Gibbons] alone and she acquiesced in this. I do not accept her denials on the topic.
As noted above, this conclusion is flawed. It is premised on the finding that Mrs Gibbons was aware that the transfer was to Mr Gibbons alone. As noted above, this finding cannot be sustained as it relied on the Master’s misapprehension that Mrs Gibbons had witnessed her husband’s execution to the mortgage of the Cape Jervis property to Westpac Banking Corporation.
Another important finding of the Master affected by his adverse views about the reliability and credibility of Mrs Gibbons concerned the arrangement that had been struck with Mr Smith. The Master concluded in respect of that arrangement as follows:
I accept that [Mr Smith] negotiated his purchase of the Cape Jervis property from the Commonwealth Bank pursuant to a loose oral arrangement which he had made with [Mr and Mrs Gibbons] that he would purchase that property in his own name and would re-transfer it to [Mr Gibbons] and [Mrs Gibbons] at their direction or request and upon him being reimbursed for his financial outlay in purchasing and holding it. The arrangement included that [Mr Gibbons] and [Mrs Gibbons] would continue to live in the property without paying any rent, but would pay the outgoings on it and what was payable on the mortgage to Citibank. [Mr Smith] received no financial benefit for entering into this arrangement and did it as a favour for [Mr Gibbons] and [Mr Smith][5] as his friends.
[Mr Smith] paid $126,000 for this property. He raised $50,000 on his mortgage of it to Citibank and $76,000 plus the expenses of purchasing it from some other source. That $76,000 and the expenses of purchase did not come from [Mr Smith’s] own resources. There is no credible evidence about where they did come from. There was some speculation by [Mr Gibbons] and [Mrs Gibbons] that they might have come from the mother of [Mrs Gibbons], but this was no more than speculation. Even if they had come from [Mrs Gibbons’] mother, there was no evidence as to whether it was a loan from the mother, a gift to [Mrs Gibbons], or paid on some other basis. [Mrs Gibbons] has not proved that she was beneficially entitled to this $76,000. Whether some other person might have acquired an equitable interest in the Cape Jervis property by such a contribution to the purchase of it by [Mr Smith] is unknown.
Even more mysterious was the discharge of the Citibank mortgage and the granting of a new mortgage by [Mr Smith] for $80,000 over the Cape Jervis property. I do not accept the evidence of [Mr Gibbons] that [Mrs Gibbons] had paid all of the mortgage instalments while the land was in the name of [Mr Smith] out of her own resources. She did not say this in her evidence. I accept the evidence of [Mr Smith] that [Mr Gibbons] and [Mrs Gibbons] did not make all of the payments which were due under both the Citibank mortgage and the private lenders mortgage. Whether the additional $30,000, which was raised by the private lenders’ mortgage, was needed to discharge the accumulated arrears on the Citibank mortgage is unknown. Likewise, it is unknown how much had to be paid on the transfer of the property from [Mr Smith] to [Mr Gibbons] to discharge the private lenders’ mortgage. I accept the evidence of [Mr Smith] that this private lenders’ mortgage was instigated and arranged by [Mr Gibbons] and/or [Mrs Gibbons]. It is likely that at least some of this additional $30,000 was used by [Mr Gibbons] and/or [Mrs Gibbons] for their own purposes. [Mrs Gibbons] has not proved that such an appropriation of the $30,000 or some part of it was not a reimbursement to her for her alleged beneficial interest in the Cape Jervis property.
[5] This is to be understood as a reference to Mrs Gibbons.
Mr and Mrs Gibbons were unable to recall who provided the $76,000.00. They had a recollection that it had possibly come from Mrs Gibbons’ mother. Mr Smith gave unchallenged evidence that he did not provide the $76,000.00. To my mind, the Master’s conclusion that it had not been proved by Mrs Gibbons that she was beneficially entitled to the $76,000.00 is not to the point. Those monies were apparently provided by Mrs Gibbons to Mr Smith to enable Mr Smith to settle on the sale of the Cape Jervis property from the Commonwealth Bank.
There was no suggestion that any third party had made any claim in respect of the $76,000.00 over the past 17 years. The inference may readily be drawn that the $76,000.00 was provided by Mrs Gibbons through some family arrangement or from some other friendly source.
Mrs Gibbons gave evidence of the establishment of the family home at Cape Jervis and of her extensive work about that property. She gave unchallenged evidence of her support of her husband and her attempts to maintain the Cape Jervis property as the family home. On Mrs Gibbons’ case, Mr Smith, the family’s accountant and a friend, agreed to take the property from the Commonwealth Bank and to later, at the request of the Gibbons, retransfer the property to them. The agreement was conditioned on Mr Smith not being out of pocket. However, he was to receive no consideration for his involvement. The Gibbons arranged for the purchase monies to be used by Mr Smith. They did this by providing the $76,000.00 and through the Citibank mortgage. Although Mr Smith carried obligations as mortgagor, it was the Gibbons who were responsible for the payment of interest and the repayment of the debt. The Gibbons arranged for the refinancing of the property through private lenders and through that process they arranged for the clearing of the Citibank debt. Mr Smith held the legal title of the property but the beneficial interest was held by Mr and Mrs Gibbons. Mr Smith acted in the manner of an agent for undisclosed principals.
It follows on the case of Mrs Gibbons that on the retransfer of the property to Mr Gibbons, the property was impressed with a trust in respect of a one-half interest in the property in favour of Mrs Gibbons. She had not relinquished her interest in the property. She had not acquiesced in the transfer of the property to her husband alone. Mr Gibbons, on the retransfer, held a one-half interest of the property on trust to Mrs Gibbons.
The Master’s conclusion that Mrs Gibbons had no equity in the property is flawed and should be set aside.
On Mrs Gibbons’ case, she had an equitable interest in the Cape Jervis property. However, this interest was not the subject of any title notation until the lodging of a caveat in respect of that equitable interest on 20 September 2007. By this time, Mr Pozzan’s interest as second mortgagee had been registered. Whether Mrs Gibbons is entitled to any relief, if she establishes that she had an equitable interest, will depend on a number of considerations, none of which were the subject of findings or conclusions on the part of the Master. The resolution of these issues require further findings of fact.
For a time, having regard to the modest sum paid into Court, I attempted to ascertain whether it would be appropriate for this Court to resolve the entire proceeding. However, as questions of credibility and reliability arise, regrettably it is not possible for this Court to resolve the proceeding. During the appeal, counsel did invite the Court to proceed to finally resolve the matter, notwithstanding the concerns as to credibility and reliability. However, in subsequent written submissions counsel for Mr Pozzan expressly withdrew this submission. As this Court has not observed the witnesses it is not possible to resolve a number of critical questions. It is to be observed that the misunderstanding of fact by the Master and the rejection of Mrs Gibbons’ evidence has a consequential effect on the Master’s rejection of Mr Gibbons’ evidence. A robust approach is not appropriate.
In these circumstances, it is appropriate that the proceeding be remitted to a differently constituted Court for rehearing.
Conclusion
I would allow the appeal, set aside the orders of the Master, including orders as to costs, and remit the proceeding for rehearing.
SULAN J: I agree with Gray J and the orders that he proposes.
DAVID J: I would allow the appeal. I agree with the reasons of Gray J.

[2012] SASCFC 131

5 December 2012

Key Legal Topics

Areas of Law

Evidence

Property Law

Civil Procedure

Legal Concepts

Appeal

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