Hamed v Elddin

[2016] NSWCA 9

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:	Hamed v Elddin [2016] NSWCA 9
Hearing dates:	2 February 2016
Decision date:	12 February 2016
Before:	Meagher JA; Gleeson JA; Sackville AJA
Decision:	1. Dismiss the summons seeking leave to appeal. 2. Order that the applicant pay the respondent’s costs of the application (and concurrent hearing). 3. Direct that the applicant provide, within fourteen days, a copy of this judgment to Mark Damien Charles Roufeil and Andrew John Scott, as the trustees in bankruptcy for Mr Mohamed Hamed.
Catchwords:	REAL PROPERTY – whether applicant has equitable interest in premises – whether applicant contributed to the purchase price of premises – whether presumption of resulting trust in favour of applicant – no evidence applicant contributed in own right to purchase price – no evidence that contributions were provided by applicant in character of purchaser – application for leave to appeal denied
Legislation Cited:	Bankruptcy Act 1966 (Cth), ss 58(1)(b), 60(1)(b), 60(3)(b) Civil Procedure Act 2005 (NSW), s 56(1), (2) Supreme Court Act 1970 (NSW), ss 63, 101(2)(r)
Cases Cited:	Calverley v Green [1984] HCA 81; 155 CLR 242 John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; 241 CLR 1 Oertel v Crocker [1947] HCA 40; 75 CLR 261
Category:	Principal judgment
Parties:	Rina Hamed (Applicant) Moustafa Elddin (Respondent)
Representation:	Counsel: Mr P Lange (Applicant) Mr CP O’Neill (Respondent)   Solicitors: Farah Lawyers (Applicant) Thurlow Fisher Lawyers (Respondent)
File Number(s):	2015/188668
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Common Law Citation: [2015] NSWSC 654 Date of Decision: 29 May 2015 Before: Button J File Number(s): 2014/175205

Judgment

1. THE COURT: This is an application for leave to appeal from a decision of a judge of the Common Law Division (Button J). [1] The primary Judge made a declaration that the respondent (Mr Elddin), the plaintiff in the proceedings, was entitled to exclusive possession of residential premises located at South Granville (Premises). His Honour granted Mr Elddin leave to issue a writ of possession in respect of the Premises.

   1. Elddin v Hamed (No 2) [2015] NSWSC 654 (Primary Judgment).

2. The defendants to the proceedings instituted by Mr Elddin were the present applicant (Mrs Hamed) and her husband, Mr Hamed. Mr and Mrs Hamed were in possession of the Premises, both when the proceedings were commenced and when the Primary Judgment was delivered. However, following an unsuccessful stay application,[2] the Hameds vacated the Premises. They did so before Mrs Hamed’s application for leave to appeal was heard by this Court.

   2. Elddin v Hamed (No 3) [2015] NSWSC 1145.

3. At all material times, Mr Hamed has been an undischarged bankrupt. Despite being the first defendant in the Common Law proceedings, Mr Hamed is not a party to Mrs Hamed’s application for leave to appeal from the decision of the primary Judge. Mr Hamed’s trustees in bankruptcy have not been joined to the proceedings at any stage.

4. The parties to the present application appear to have assumed that the applicant requires leave to appeal from the decision of the primary Judge. The basis for this assumption is not entirely clear. It may be that the view was taken that the judgment or order did not involve a matter in issue amounting to the value of $100,000 or more, in which case leave is necessary. [3] If this was the view taken, it may not have been correct. [4] Be that as it may, the parties proceeded on the basis that leave to appeal is required and no notice of appeal (as distinct from a draft notice of appeal) has been filed.

   3. Supreme Court Act 1970 (NSW), s 101(2)(r).

   4. See Oertel v Crocker [1947] HCA 40; 75 CLR 261 at 266 (Latham CJ).

5. The application for leave to appeal was to be heard concurrently with the appeal itself. In view of some rather obvious obstacles in the applicant’s path, the Court asked the parties to address the question of leave at the outset. The argument also canvassed the merits of the appeal. At the conclusion of argument, the Court reserved its decision.

6. These are the Court’s reasons for refusing leave to appeal.

The Primary Judgment

7. The primary Judge summarised Mr Elddin’s case as follows: [5]

“Mr Elddin … is the registered proprietor of [the Premises]. His position in a nutshell is that he borrowed money through … [Mr and Mrs Hamed] to buy the [Premises] from the trustees in bankruptcy of [Mr Hamed]. He borrowed that money in order to make up the shortfall in the difference between the purchase price and the amount of money that a bank was prepared to lend him towards the purchase; in other words, to provide the deposit. That loan was in the sum of $96,600, and its provision required, it seems, payment of a fee of $10,000. Separately, the position of [Mr Elddin] revealed at the hearing was that he also owed [Mr and Mrs Hamed] $67,000 ….

[Mr Elddin says that he] permitted [Mr and Mrs Hamed] to remain in the [Premises] for a time after settlement, and it was agreed that [they] would pay rent of $550 per week and some outgoings. Eventually, he asked [Mr and Mrs Hamed] to leave but they did not do so. Things soured, and for quite some time he has had neither possession of the property nor rent for it. His position is that he is ready, willing and able to pay back all of the loans outstanding to [Mr and Mrs Hamed].”

5. Primary Judgment at [2]-[3].

8. The sum of $67,000 referred to by the primary Judge arose out of a side arrangement between Mr Elddin (the purchaser from the trustees) and Mr Hamed. The purchase price paid by Mr Elddin to the trustees for the Premises was $483,000. The primary Judge found that the nature of the side arrangement was not entirely clear, but that Mr Elddin had agreed with Mr Hamed that the total purchase price should be $550,000. Accordingly, his Honour found that Mr Elddin owed Mr Hamed $67,000, which sum had not been paid. [6] Although his Honour did not say so, the debt due to Mr Hamed has vested in his trustees in bankruptcy. [7]

   6. Primary Judgment at [45].

   7. Bankruptcy Act 1966 (Cth), s 58(1)(b).

9. His Honour said that the Hameds’ case stood in stark contrast to that of Mr Elddin:[8]

“They assert that there was an agreement whereby they would become co-owners of the [Premises] with [Mr Elddin]. For that reason, they provided him with the $96,000, not as a loan, but rather as part of the purchase funds. Thereafter, the weekly payments of $550 were repayments of the mortgage as co-owners, not rent as tenants. The contention of counsel for [Mr and Mrs Hamed] was that, by way of a constructive or resulting trust, [they] are not only entitled to an equitable interest in the land, but also have a right to possession that excludes any such right vested in [Mr Elddin] as registered proprietor.”

8. Primary Judgment at [4].

10. The primary Judge observed that no party had raised the question of whether Mr Hamed was entitled, as an undischarged bankrupt, to engage in litigation without the consent of his trustees in bankruptcy. For this reason, his Honour did not address that question. [9] It seems that the parties also did not draw his Honour’s attention to the possibility that Mr Hamed’s trustees in bankruptcy might be necessary parties to the proceedings.

    9. Primary Judgment at [6].

11. The primary Judge noted that it was difficult to make firm findings of fact because of the conflicting evidence given by witnesses and the paucity of documentation. A number of the key transactions were said to have involved large unrecorded cash payments. Moreover, some witnesses, including Mr Elddin and Mr Hamed, had not been “entirely candid” in their evidence. [10]

    10. Primary Judgment at [5], [71]ff.

12. His Honour’s key conclusions can be summarised as follows:

• His Honour was satisfied on the balance of probabilities that prior to Mr Elddin purchasing the Premises from the trustees, he received substantial sums of cash from Mr and Mrs Hamed. However, his Honour considered it difficult to go beyond that bare finding of fact. [11]

  11. Primary Judgment at [80].

• Before Mr and Mrs Hamed could rely upon the presumption of a resulting trust in their favour, they had to establish the necessary factual pre-condition on the balance of probabilities. In the circumstances of the present case, the pre-condition was that they had contributed monies to the purchase price of the Premises. [12]

• His Honour was not satisfied that the Hameds contributed to the purchase price (as distinct, for example, from lending money to Mr Elddin). Nor was his Honour satisfied that there had been a firm agreement between Mr Elddin and Mr Hamed (as the Hameds claimed) to develop the Premises as a joint venture. Accordingly, the Hameds were unable to establish the existence of a resulting or other trust that would have enabled them to acquire an equitable interest in the Premises. [13]

• His Honour was satisfied that there had been an agreement between Mr Elddin and the Hameds that the latter would pay rent in respect of the Premises for the time they remained in possession. [14]

• Despite the agreement, no order could be made against Mr Hamed in respect of arrears of rent because of his status as an undischarged bankrupt. [15]

The Question of Parties

12. Primary Judgment at [82]-[83].

13. Primary Judgment at [84]-[86].

14. Primary Judgment at [89].

15. Primary Judgment at [90]-[91].

The Common Law Proceedings

13. Part of Mr Elddin’s pleaded case against the Hameds was that they were liable to him for arrears of rent. Since Mr Hamed was an undischarged bankrupt, Mr Elddin was not entitled to pursue the claim for arrears of rent against him, except with the leave of the Court. [16] While pursuit of the claim against Mr Hamed was a procedural irregularity, it did not require the trustees to be joined to the proceedings.

    16. Bankruptcy Act 1966 (Cth), s 58(3)(b).

14. The position as to joinder changed when the Hameds filed an amended defence, which pleaded that they were in possession of the Premises not as tenants, but as owners. The amended defence is not easy to follow and the Hameds’ evidence was somewhat confusing. But the substance of their case at trial was that they had obtained monies from third parties, presumably by way of loan, and had used those funds to contribute to the purchase price paid by Mr Elddin to the trustees. On this basis, so they argued, they acquired an equitable interest in the Premises. At no stage did they attempt to quantify their interest or to define it with precision.

15. If, as the Hameds claimed, Mr Hamed acquired an equitable interest in the Premises by reason of his dealings with Mr Elddin (none of which was disclosed to the trustees), that interest vested in Mr Hamed’s trustees as the after-acquired property of a bankrupt. [17] For that reason, the trustees had a direct interest in the claims advanced by the Hameds. It is true that the Hameds put forward their claims by way of defence to Mr Elddin’s claim to possession of the Premises. Nonetheless, it would have been an appropriate exercise of the Court’s powers to require the Hameds to formulate their case with precision by way of cross-claim. [18] At that point, the need to join the trustees as parties to the Common Law Proceedings presumably would have become apparent.

    17. Bankruptcy Act 1966 (Cth), s 58(1)(b)

    18. Civil Procedure Act 2005 (NSW), s 56(1), (2); Supreme Court Act 1970 (NSW), s 63.

The Application for Leave to Appeal

16. Mr Lange, who appeared for Mrs Hamed on her application for leave to appeal, submitted that it was not necessary to join the trustees to that application. He contended that Mrs Hamed need only show that she had made some separate contribution to the purchase price in order to successfully defend Mr Elddin’s claim for possession. Any such contribution would entitle Mrs Hamed to an equitable interest in the Premises as tenant in common (albeit holding an indeterminate share). This would be sufficient, so Mr Lange argued, to enable her to remain in (or resume) possession of the Premises and to defeat Mr Elddin’s case against her.

17. This way of putting the case departed in fundamental respects from the case advance by the Hameds at the trial. Putting that difficulty to one side, it can be seen that the case now advanced by Mrs Hamed is adverse to the interests of the trustees. She now says that she alone contributed some or all of the funds that were provided to Mr Elddin. This claim is contrary to the case run on her behalf at trial, namely that she and Mr Hamed jointly contributed to the funds provided to Mr Elddin. The claim now made by Mrs Hamed is contrary to the interests of the trustees who, if joined, may have wished to contend that Mr Hamed contributed to funds provided to Mr Elddin.

18. In short, Mrs Hamed is asserting, albeit by way of defence rather than cross-claim, that she has a proprietary interest in the Premises to the exclusion of Mr Hamed and his trustees in bankruptcy. [19] In these circumstances it would seem that the trustees should have been joined as parties to the application for leave to appeal so that they had the opportunity, if so advised, to advance their claim to an interest in the Premises. If this is correct, the application for leave to appeal is not properly constituted as to parties.

    19. John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; 241 CLR 1 at [132]-[133] per curiam.

A Fatal Obstacle

19. Independently of the question of parties, as was pointed out in oral argument on the leave application, Mrs Hamed’s case faces an insuperable difficulty. The case presented by the Hameds to the primary Judge was that both had contributed to the purchase price paid to the trustees and thus both had acquired an equitable interest in the Premises. The argument advanced on the leave application was that Mrs Hamed made some (unspecified) contribution in her own right.

20. Mr Lange conceded that this case could not be maintained unless there was evidence before the primary Judge that Mrs Hamed had contributed to the purchase price of the Premises in her own right, independently of any contributions made by Mr Hamed. Not surprisingly, given the way in which the Hameds had put their case in the Common Law Proceedings, Mr Lange was not able to point to any such evidence. Mrs Hamed did not say in her evidence that she had provided funds to Mr Elddin independently of monies provided by or through the agency of Mr Hamed. Indeed Mrs Hamed readily accepted that she was not employed and had no income of her own. Mr Lange rather faintly suggested that a rather vague passage in an affidavit sworn by Mrs Hamed supported the claim now sought to be made, but that submission is unsustainable. There was simply no evidence before the primary Judge to support a contention that Mrs Hamed made contributions in her own right to the purchase price of the Premises.

21. Even if there was evidence before the primary Judge that Mrs Hamed had independently contributed to the purchase price, that would not necessarily mean that the primary Judge had erred in failing to make a finding to that effect. But the absence of any such evidence is fatal to the success of the application for leave to appeal.

A Further Issue

22. Mr Lange submitted that the primary Judge fell into error by failing to apply the presumption of a resulting trust in favour of Mrs Hamed. For the reasons already given, it is not necessary to address the argument. It is appropriate to record, however, that the submission cannot be accepted.

23. Mr Lange contended that the finding by the primary Judge that Mr Elddin received substantial amounts of cash from the Hameds was sufficient to attract the presumption of a resulting trust. As Gibbs CJ said in Calverley v Green [20] (and as the primary Judge pointed out[21] ), “[f]or the presumption to apply the money must have been provided by the purchaser in his character as such – not, e.g., as a loan”. The party relying on the presumption must establish that factual precondition.

    20. [1984] HCA 81; 155 CLR 242 at 246.

    21. Primary Judgment at [82].

24. The mere fact that Mrs Hamed provided money to Mr Elddin (if it was a fact) would not of itself establish that she had provided funds in her capacity as a purchaser. Depending on the circumstances in a particular case, an inference to that effect might be drawn. But here the evidence, at best, was inconclusive. For that reason, the primary Judge was not satisfied on the balance of probabilities that the Hameds (much less Mrs Hamed) made any contribution to the purchase price paid for the Premises. Thus the Hameds had not satisfied the factual precondition required to invoke the presumption of a resulting trust.

Orders

25. Mrs Hamed’s summons seeking leave to appeal should be dismissed. She should pay Mr Elddin’s costs of the application for leave to appeal (including the costs of the appeal to be heard concurrently).

26. It is appropriate to direct that the solicitors for Mrs Hamed provide within fourteen days a copy of this judgment to Mr Hamed’s trustees in bankruptcy.

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Endnotes

Decision last updated: 12 February 2016