Ha v Xu and Hou

[2007] NSWLC 25

Local Court of New South Wales

CITATION:	Ha v Xu and Hou [2007] NSWLC 25
JURISDICTION:	Civil
PARTIES:	Plaintiff: Paul Kay Mui Ha First Defendant: Xuan Fang (Wendy) Xu Second Defendant: Xuhua Hou
FILE NUMBER:	3581/07
PLACE OF HEARING:	Downing Centre Local Court
DATE OF DECISION:	07/13/2007
MAGISTRATE:	Magsitrate B A Lulham
CATCHWORDS:	Jurisdiction - whether property bought on trust - whether on pleadings matters are proceedings in which title to land is in question
LEGISLATION CITED:	Local Courts Act ss65(1), 65(7), 67(e)
CASES CITED:	Hunyh v Swanson (1999) NSWSC 72 Toll v Alphapharm (2004) 219 CLR 164. Smith v Patterson (1934) 51 WN (NSW) 137 Khoury & Anor v Khouri (2006) 66 NSWLR 241
REPRESENTATION:	Mr P Cullen (Counsel for Plaintiff) Equiton Solicitors & Notary (Solicitors for Plaintiff) Mr Monahan (Counsel for Defendant) Shijing Lawyers (Solicitors for Defendant)
ORDERS:	The defendants are to file their Defences by 3 August 2007. The hearing of the Motion is adjourned part heard to 9 August 2007, or to some other suitable date, at 9.30

Reasons for Decision

1    The defendants Wendy Xu and Mr Hou applied to the court seeking that the plaintiff’s claim be stayed until the claim was removed to the Supreme Court of New South Wales or until further order of the court.

2 The plaintiff’s original Statement of Claim sought declarations as to the basis upon which land was owned. They were orders outside the jurisdiction of this court. An Amended Statement of Claim was filed. The defendants claim that the orders which the plaintiff now seeks under the Fair Trading Act 1987 require the court to make a finding as to the existence of a declaration of trust and therefore the title to land is in question. The defendants contend this court does not have jurisdiction to hear such matters.

BACKGROUND TO THE APPLICATION

3    The application is made at a very early stage of the proceedings and I have to rely on the plaintiff’s Statement of Claim to obtain an understanding of what is alleged to have occurred.

4    The plaintiff alleged that he agreed to advance to Wendy Xu a sum of money to enable her to purchase a unit at Hurstville. Wendy Xu was to repay the loan within a reasonable time and to pay interest at a bank rate. The plaintiff and Wendy Xu identified and agreed to purchase a unit 10/1 Empress Street, Hurstville for $261,000. The plaintiff agreed to advance $52,200 towards the purchase.

5    The Statement of Claim pleaded that the plaintiff and Wendy Xu agreed to vary the loan agreement to provide that Wendy Xu’s son Mr Hou, the second defendant, would become the purchaser of the unit on behalf of Wendy Xu. The plaintiff pleaded that he agreed to advance the same sum of money to the first and second defendants jointly, to enable the unit to be purchased in Mr Hou’s name on behalf of Wendy Xu. Alternatively the plaintiff pleaded that he had agreed to loan the same sum of money to Mr Hou on the same terms and conditions, on the basis that he would hold the unit in trust for Wendy Xu. The plaintiff alleged that one reason for Mr Hou to purchase the unit in his name was to enable him to make a claim under the First Home Buyers Scheme.

6    The plaintiff alleged that pursuant to the agreements he advanced at the direction of Wendy Xu the sum of $46,656.29, either to Wendy Xu and Mr Hou, or alternatively to Mr Hou only. The plaintiff alleged that neither Wendy Xu nor Wendy Xu and Mr Hou had paid any amount back to him on account of the loan or interest.

7    The plaintiff alleged that Wendy Xu had subsequently agreed to pay $30,000 over two years, but Mr Hou denied being party to any loan agreement with the plaintiff.

8    Mr Monahan conceded that the defendants now agree that this court has jurisdiction to hear the claim pleaded by the plaintiff against the first and second defendants, and alternatively against the second defendant, based on the loan agreement.

9 Mr Monahan submitted that this court does not have jurisdiction to hear the plaintiff’s separate claim under s68 of the Fair Trading Act 1987 because the determination of that claim would require the court to make a declaration as to whether the property was purchased by Mr Hou in his name as Trustee for his mother Wendy Xu or on his own behalf.

10 I propose to set out the pleading under s68 based on the alleged misleading or deceptive conduct:

“Misleading or Deceptive Conduct


50. At all material times, the second defendant (Mr Hou) was acting in trade or commerce.


51. At all material times, the second defendant was aware that the plaintiff was providing finance for the purchase of the relevant residential unit for the purposes of the assisting the first defendant (Wendy Xu) to obtain the beneficial ownership of it.


52. At no time did the second defendant inform the plaintiff that he was intending to become the registered owner of the relevant residential unit on any basis other than as trustee for the first defendant.


53. The plaintiff had a reasonable expectation that he would have been informed if the second defendant intended to hold the relevant residential unit on any basis other than as trustee for the first defendant, the second defendant’s conduct was misleading or deceptive within the meaning of under section 42 of the Fair Trading Act 1987 (NSW).


54. The plaintiff relied upon the second defendant’s conduct by


a. entering into the amended agreement or the first alternative agreement or the second alternative agreement: and
b. performing his actions as pleaded in paragraph 33.


55. To the extent that the second defendant claims to hold the relevant residential unit on any basis other than as trustee for the first defendant, the plaintiff will suffer loss or injury.


56. The plaintiff claims damages under section 68 of the Fair Trading Act 1987 (NSW).


57. The plaintiff claims the following amounts:


Loan principal $46,656.29
Loan interest $1,546.00
TOTAL $48,202.29


The jurisdiction of the Local Court

11 S 65 of the Local Courts Act 1982 sets out the jurisdiction of the Local Court. S 65(1) provides as follows:

S 65(1)


1. Subject to this part a court sitting in its General Division has jurisdiction to hear and determine;


(a) proceedings on any money claim … is less than or equal to the jurisdictional limit of the court when sitting in that Division.

12    The jurisdictional limit is $60,000. ‘Money claim’ is defined in s 4 to mean;

A claim for recovery of any debt, demand or damage, whether liquidated or unliquidated.

13 S 65(7) provides as follows;

S 65(7)


In this section a reference to proceedings extends to an action referred to in s 68 of the Fair Trading Act 1987.

14    A note to that section provides as follows;

The effect of sub-section 7 is to confer jurisdiction on a court in respect of proceedings for damages referred to in s 68 of the Fair Trading Act 1987. That jurisdiction is similar to the jurisdiction conferred on a court by s 86 of the Trade Practices Act of the Commonwealth and in respect of proceedings for damages referred to in s 82 of that Act.

15 The jurisdiction granted to this court by s 65(7) for actions referred to in s 68 of the Fair Trading Act would include a claim for damages for misleading or deceptive conduct within the meaning of s 42 of the Fair Trading Act 1987 (NSW). It follows that ordinarily this court would have jurisdiction to hear such a claim.

16 However s 67 of the Local Courts Act sets out matters for which the court does not have jurisdiction. S 67(e) provides;

Proceedings in which the title to land is in question other than proceedings on a claim in respect of which the question of a title to land is merely incidental.

17 S 67(2) provides as follows;

The judgment of a court in proceedings in which the title to land has been in question, as referred to in sub-section 1(e) is not admissible as evidence if the title to the land in any other proceedings in that or any other court, whether or not a court.

18    The particulars of the misleading or deceptive conduct alleged against Mr Hou is that he knew that the plaintiff was providing finance to assist the first defendant Wendy Xu, and was doing so on the basis that the second defendant Mr Hou would hold the title as trustee for Wendy Xu. The further allegation of the misleading or deceptive conduct was that if the second defendant claimed to hold the relevant unit on any basis other than as trustee for Wendy Xu, then the plaintiff will suffer loss or injury.

19    The practical difficulty in the court deciding jurisdiction at this stage is that the defendants have not filed their Defence. If the second defendant Mr Hou files a Defence claiming to hold the unit on a basis other than as trustee for the first defendant, then the plaintiff will be required to prove the agreement for the second defendant to purchase as trustee for the first defendant. Mr Cullen for the plaintiff in paragraph 7 of his written submissions sought to rely on the decision of His Honour James J in the Supreme Court in Hunyh v Swanson (1999) NSWSC 72. That decision may have assisted the plaintiff in relation to any challenge to the first count against both defendants on the agreement for loan. It does not assist the plaintiff in relation to the claim under the Fair Trading Act. As I have already found, the court has jurisdiction under s 65 to ordinarily hear such a claim, but the problem in this matter is presented by the exclusion of jurisdiction under s 67(1)(e) in proceedings in which title to land is in question.

20    In my view this court when determining the basis upon which the land was acquired, would do so in the same manner as it is required to do when determining all contract matters, no doubt taking into account the principles set out, for example in Toll v Alphapharm (2004) 219 CLR 164. If this court was to find that the second defendant Xuhua Hou did acquire the land as trustee for the first defendant Wendy Xu, then such finding would not be admissible as evidence of the title to the land in any proceedings in any other court (s67(2) of the Local Courts Act). The decision of Smith v Patterson (1934) 51 WN (NSW) 137 is authority for the proposition that a bona fide dispute as to whether a freehold is a clear fee simple or is subject to a lease, is a question directly involving the title to land and therefore the District Court has no jurisdiction to determine that question. That decision would appear to support the defendants’ argument (although the case was not relied upon or referred to in submissions).

21    In Smith v Patterson there had been lengthy negotiations between Smith the intending lessee and Patterson the owner regarding the lease of a rural area of land. The intending lessee entered possession and pastured cattle on the land before a formal lease had been signed. When that action came to the notice of the defendant owner, he drove the cattle to the nearest town claiming that no lease had been finalised between he and the plaintiff. The plaintiff lessee then brought an action against the defendant owner for trespass to land and trespass to cattle.

22    The District Court Act 1912 provided, inter alia, that a District Court shall have jurisdiction in an action in which the title to land of greater value than 200 pounds ‘incidentally comes into question’. His Honour Judge Neil DCJ found that a bona fide dispute as to whether a freehold was clear fee simple or was subject to a lease, was a question directly involving the title to the land and therefore the District Court did not have jurisdiction to determine such a question where the value of the land exceeds 200 pounds.

23    When hearing oral submissions in this matter I was inclined to the view that the court would have jurisdiction because the court would not have to make a declaration as to the existence of a trust, and would determine the likely factual dispute between the plaintiff and the two defendants on the evidence in the usual way. Although a very old case, the decision in Smith v Patterson supports the defendant’s case. I have also considered the decision in Khoury & Anor v Khouri (2006) 66 NSWLR 241. In that matter the New South Wales Court of Appeal considered whether an oral agreement for the declaration of a trust over an interest in land, was a disposition of the land within the meaning of s 54A of the Conveyancing Act and therefore not enforceable unless it is in writing. The court also considered whether s 23C of the Act applied to the interest in land requiring that the interest be manifested and proved by some writing signed by the person disposing of the interest. As well, the court looked at the interaction between s 23C and s 54A. The court held that an agreement for the declaration of a trust was a dispossession of land and therefore not enforceable unless it is in writing. It would appear to me that a magistrate hearing the plaintiff’s claim under s 68 would not necessarily have to go into matters agitated in Khoury in detail. The case however would certainly appear to strongly support the proposition that proceedings where a court is required to determine whether the title to land is held in trust or not, are proceedings in which the title to land is in question, and in question in a way which is not merely incidental.

24    I am however still satisfied that the question of the jurisdiction of this court to hear the matter cannot be finally determined until the first and second defendants have filed their verified Defences. I am satisfied that they should be required to file their Defences. The filing of the Defences would be without prejudice to their jurisdictional objection.

25    I would propose to make the following orders:

1. The defendants are to file their Defences by 3 August 2007.


2. The hearing of the Motion is adjourned part heard to 9 August 2007, or to some other suitable date, at 9.30.

26    I shall hear from the parties in relation to the proposed orders.

B.A. LULHAM