Kagelaris v Kagelaris

[2017] NSWSC 307

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Kagelaris v Kagelaris [2017] NSWSC 307

Hearing dates:

14 – 15 December 2016

Decision date:

31 March 2017

Jurisdiction:

Equity

Before:

Robb J

Decision:

Parties to confer and bring in short minutes of orders to implement the terms of this judgment.

Catchwords:

SUCCESSION – Administration of estate – Assets – Other cases – Whether asset in estate was held on constructive trust for beneficiary.

 

SUCCESSION – Administration of estate – Whether executor derelict in his duties under the grant of probate.

  CONVEYANCING – Sales by court order or direction – Whether court should make an order appointing a trustee for sale – Where property held by tenants in common – Where an order appointing a trustee for sale would be more expensive than other suggested options.

Legislation Cited:

Conveyancing Act 1919 (NSW) s 66G

Cases Cited:

Czapp v Cassar [2015] VSC 111
Monty Financial Services v Delmo [1995] 1 VR 65
Muschinski v Dodds (1986) 160 CLR 583; [1985] HCA 78
Watson v Foxman (1995) 49 NSWLR 315

Category:

Principal judgment

Parties:

John Elefterios Kagelaris (plaintiff)
Peter Elefterios Kagelaris (defendant)

Representation:

Counsel: J Hassett, solicitor (plaintiff)
J Van Aalsi (defendant)

  Solicitors: Hassett Lee & Co Lawyers (plaintiff)   
John Hertz Associates (defendant)

File Number(s):

2016/83657

Publication restriction:

None

Judgment

Background

1. The plaintiff in these proceedings, John Elefterios Kagelaris, and the defendant, Peter Elefterios Kagelaris, are brothers.

2. Their parents were named Agatha Kagelaris and Elefterios Kagelaris.

3. Without intending any disrespect, for convenience I will refer to the parties and their parents by their first names.

4. Elefterios died on 25 April 2015 and Agatha died on 4 June 2015.

5. Elefterios and Agatha both made their last wills on 26 June 1985. The wills were in materially the same terms. Each left his or her residuary estate, after payment of debts and testamentary expenses, to the other, provided the other survived the testator by more than 30 days. In default of survival of the other, each left their residuary estate to John and Peter in equal shares as tenants in common.

6. As Elefterios died before Agatha, his residuary estate passed to her, and upon her death shortly thereafter, Agatha’s residuary estate passed equally to John and Peter.

7. At the date of Agatha’s death, the only substantial asset in her residuary estate was the property known as 22 Tudor Street, Surry Hills, in this State. The Tudor Street property had been purchased by Elefterios and Agatha on 17 May 1963. It was the family home until about May 1975, when Elefterios and Agatha purchased 3/171 President Avenue, Monterey, in this State, and the family moved to that property. The Tudor Street property was leased to tenants until about mid-1990. At that time it became the residence of Peter, who carried out some renovations of the property. There is a dispute between the parties concerning the basis upon which Elefterios and Agatha agreed that Peter could use the Tudor Street property as his sole residence. There is also a dispute about the nature, extent and cost of the renovations undertaken by Peter. Peter has used the Tudor Street property as his residence from 1990 to date.

8. The primary issue in these proceedings is whether, from the time of her death, Peter and John, as Agatha’s executors, have held the title to the Tudor Street property on a constructive trust for Peter.

9. On 29 May 1984, Peter and John became registered proprietors of the property at 45 Arthur Street, Carlton, in this State, as tenants in common.

10. There was a dispute between the parties concerning the circumstances in which they became owners of the Arthur Street property, and the arrangements by which the original costs of acquisition were paid. It was Peter’s case that he found the property, he had saved the money necessary to pay the deposit and the cost of acquisition, and told his parents that he would buy the property alone. The parents, particularly Agatha, responded by insisting that the property be bought in the name of both brothers. Peter’s evidence was that he bowed to his parents’ wishes, and further he loaned John $13,000 to pay John’s share of the deposit and expenses of purchase. In his evidence, John denied that the purchase of the Arthur Street property occurred in this manner. John said that the decision to purchase the property was a joint one from the outset. There was a family discussion at which Peter said that he had saved up about $12,000. The family agreed that a mortgage of $60,000 should be taken out to cover half of the purchase price of $120,000. The balance was paid as to $6000 by Peter, $6000 by John (of which $5000 was borrowed from Peter), and the parents contributed $48,000.

11. Although there was an evidentiary contest at the hearing as to which of these versions was correct, I am not able to resolve the dispute with any confidence, and in my view the resolution of that dispute is not necessary for the purpose of deciding the real questions is at issue in these proceedings.

12. The simple fact is that the Arthur Street property is owned by the parties in equal shares as tenants in common.

13. On 20 March 1986, Elefterios and Agatha transferred the title to the President Avenue property to Peter and John in equal shares as tenants in common, as a gift.

14. Consequently, of the three properties, the Tudor Street property remained part of the residuary estate of Agatha at the time of her death, and the President Avenue and Arthur Street properties were owned by Peter and John.

15. Relief is sought in these proceedings concerning the President Avenue and Arthur Street properties, as the parties disagree as to the appropriate arrangements for conducting the sale of those properties.

16. As I have noted, Agatha appointed Peter and John as her executors under her will.

17. After Agatha’s death, disputes arose between the parties concerning the administration of the estate. There is a suggestion that Peter’s original position was that he should be given sole ownership of the Tudor Street property, as his long-term residence, and in return, John should receive sole ownership of the Arthur Street property, which had also been his residence for a long time. That suggestion gave rise to a dispute concerning the respective values of the two properties.

18. John apparently took the view that Peter was not willing to carry out his duties as Agatha’s executor, and to obtain a grant of probate of her will, and commenced proceedings for a grant of probate to him alone.

19. There was correspondence between the solicitors for the parties concerning whether or not Peter would renounce probate, but it is not necessary to consider that correspondence in detail.

20. On 12 October 2015, Peter’s solicitors filed a caveat in the Probate Registry to prevent a grant of probate of Agatha’s estate without prior notice to Peter.

21. On 22 February 2016, Lindsay J made an order granting probate in common form to Peter and John in respect of Agatha’s estate.

22. His Honour also ordered that any dispute between the parties concerning the title to the Tudor Street property be determined by proceedings to be commenced in the Equity Division. This judgment relates to those proceedings.

Orders sought by John

23. On 17 March 2016, John filed a summons in which he sought the following relief:

1   An order that the grant of Probate of the Will of Agatha Kagelaris (“the Deceased”) made on 22 February 2016 to the Plaintiff and the Defendant be revoked.

2   An order that a fresh grant of Probate in common form of the Will of the Deceased be made to the Plaintiff.

3   Further and alternatively, an order that the Defendant vacate the property at 22 Tudor Street, Surry Hills in the State of New South Wales (“the property”) within 30 days.

4   An order that one of the following real estate firms be appointed forthwith to market the property by public auction:

a   First National Estate Agents; or

b   Bresic Whitney Estate Agents; or

c   Richards Elliott Estate Agents, or

d   Belle Property Real Estate Agents.

5   An order that property be sold accordingly with the proceeds paid to the Plaintiff and the Defendant in equal shares.   

24. As I understand it, John sought orders 1 and 2 on the ground that Peter was derelict in his duty as executor under the grant of probate made by Lindsay J because he had resisted the sale of the Tudor Street property, and tried to obtain an outcome whereby he acquired sole title to the property, or alternatively, that Peter acquired the Tudor Street property and John acquired the Arthur Street property. John relied upon Monty Financial Services v Delmo [1995] 1 VR 65 and Czapp v Cassar [2015] VSC 111 to support a submission that Peter had demonstrated by his conduct that he was unfit to remain as an executor of Agatha’s will.

25. This aspect of John’s claim calls for a very simple determination. While it is true that Peter has not cooperated with John in administering Agatha’s estate in the manner required by John, that is because there is a genuine dispute between them as to the title to the only significant asset in the estate, being the Tudor Street property. There is no evidence capable of supporting a claim that Peter was otherwise delinquent in a manner that would cause the court to disturb the order made by Lindsay J on 22 February 2016.

26. Furthermore, no utility would be served by revoking the grant of probate made by Lindsay J and making a fresh grant to John alone. It is plain that there is a genuine contest between the parties concerning title to the Tudor Street property, and if the court were to make a grant of probate to John alone, it would inexorably follow that he had a conflict of interest. In practical terms, the outcome of these proceedings will determine the issue of title to the Tudor Street property, and if that property remains part of Agatha’s estate, it will be necessary for the court to make orders concerning the sale of the property and the distribution of the proceeds of sale. The consequence will be that all matters of significance in the administration of Agatha’s estate will be implemented pursuant to orders of the court. There should remain nothing of substance that is required to be done by the executors. There is therefore no point in the court disturbing the existing arrangements concerning the grant of probate, which would only create a conflict of interest in the manner that I have described.

27. This is clearly a case where John’s claim for orders 1 and 2 in his summons should be dismissed.

28. Orders 3 to 5 in the summons are sought on the implicit basis that the Tudor Street property is an asset of the estate, and should be sold and the proceeds equally divided between Peter and John. John has not actually sought a declaration to that effect.

29. John has sought orders 4 and 5 because he takes the stand that it would be an unwarranted waste of money for the court to appoint trustees for sale in the conventional way, as to do so will subject the estate to the need to pay the professional fees of the trustees. If it is determined that the Tudor Street property is part of Agatha’s estate, the parties, as executors, could of course sell the property of their own motion, provided they were able to cooperate to the extent necessary to achieve that result.

30. It should be recorded that during the course of the hearing John acknowledged that the Tudor Street property had been Peter’s home since 1990. John’s primary position was that, as he was entitled to half of the beneficial interest in the property, he was entitled in the present Sydney property market to have the value of the property determined by putting the property to the market. He should not have to be satisfied by a value placed upon the property by some professional valuer, and it was inappropriate for the court to determine the value by resolving a dispute as to the value by expert valuers called by the parties. John was prepared, however, to entertain the court making a special order in relation to the process for the sale of the Tudor Street property, which would have an effect such as, after the value was determined by a marketing process that yielded the highest purchase price that would be offered by a third party purchaser, Peter would have a last right of refusal to better that price. I will return to this issue below.

Orders sought by Peter

31. On 5 May 2016, Peter filed a cross summons in which he sought the following relief.

1   Declaration that the deceased Agatha Kagelaris as at the date of her death continued to hold the property known as 22 Tudor Street, Surry Hills being the whole of the land comprised in folio identifier 1/737543 (“the Surry Hills Property”) upon a constructive trust for the cross-claimant.

2   Order that the cross-defendant do and cause to be done all things reasonably necessary for the plaintiff [an error for cross-claimant] to be recorded as the registered proprietor of the Surry Hills Property.

3 Order pursuant to s 66G(1) of the Conveyancing Act 1919 that Alexander Zuur and Con Katralis be appointed trustees for sale of the following properties which are held in co-ownership by the cross-claimant and cross-defendant as tenants in common in equal shares:

a)   45 Arthur Street, Carlton being the whole of the land comprised in folio identifier 41/F/5409

b)   Unit 3, 171 President Avenue, Brighton-Le-Sands being the strata title homu (sic) unit comprised in the folio identifier 3/SP5188.

32. The claim for relief in orders 1 and 2 is the primary subject matter of these proceedings.

33. Order 3 has been sought to achieve a sale of the two properties owned equally by the parties as tenants in common in the conventional way. John does not oppose the properties being sold, but submits that the parties should not have to incur the trustees’ fees, and that some more simple arrangement should be made for the sale of the properties in the manner sought by John in respect of the Tudor Street property in order 4 of the summons.

Issues that do not require determination

34. It will be convenient at this point to refer to three issues that were sought to be raised by evidence that was included in the affidavits and the court book, but which do not in fact arise in relation to the determination of the real dispute between the parties.

35. The court book originally contained competing valuations of the Tudor Street property. As I have observed, it was John’s position that these valuations were irrelevant. During the hearing, Peter accepted that the court should not receive the valuations. The valuations were not ultimately tendered in evidence, except for the valuation obtained by John for the purpose of giving a value to the Tudor Street property as at mid-1990.

36. There was evidence in Peter’s primary affidavit that Peter guaranteed a loan by the National Australia Bank to John that was obtained by John to finance a matrimonial settlement with his wife at the time of their divorce, and that the loan was secured by a mortgage over the Arthur Street property. The existence of that guarantee and mortgage may give Peter various rights against John, but they are not matters raised in these proceedings. The evidence relating to those matters was accordingly rejected.

37. Finally, there was substantial evidence in Peter’s affidavits and the court book in its original form concerning a loan made by Mr Paul Sengos to John and security granted for that loan. It may be that some or all of John’s share in the properties may have to be paid to Mr Sengos to repay the loan, but that is also not a matter raised in these proceedings. Accordingly, the relevant evidence was rejected, or not accepted as an exhibit in the proceedings.

Issue for determination

38. The only material substantive issue that arises is whether Peter and John as the executors of Agatha’s estate hold the title to the Tudor Street property on a constructive trust for Peter.

39. Peter’s submissions made it clear that his case is that the constructive trust arose upon the death of Agatha on the ground that she had not provided in her will for the title to the Tudor Street property to be left to Peter alone, which was contrary to representations that Agatha made to Peter in about April 1984, and in mid-1990, on the faith of which Peter carried out renovations of the property to the value of $198,916, in the belief that he would receive sole title to the property on his parents’ death.

40. Peter based his claim on the following statement of principle by Deane J in Muschinski v Dodds (1986) 160 CLR 583; [1985] HCA 78 at 613-615, to which he took the court in submissions:

…Like express and implied trusts, the constructive trust developed as a remedial relationship superimposed upon common law rights by order of the Chancery Court. It differs from those other forms of trust, however, in that it arises regardless of intention. For that reason, it was not as well suited to development as a conveyancing device or as an instrument of property law. Indeed, whereas the rationale of the institutions of express and implied trust is now usually identified by reference to intention, the rationale of the constructive trust must still be found essentially in its remedial function which it has predominantly retained (cf Waters, op cit, pp 37–39). The constructive trust shares, however, some of the institutionalized features of express and implied trust. It demands the staple ingredients of those trusts: subject matter, trustee, beneficiary (or, conceivably, purpose), and personal obligation attaching to the property (cf Sir Frederick Jordan: Chapters on Equity in New South Wales, 6th ed (1947: Stephen), pp 17–18). When established or imposed, it is a relationship governed by a coherent body of traditional and statute law. Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle.

There is, however, a more limited sense in which there is some superficial plausibility in the notions of “institution” and “remedy” as competing characterizations of the constructive trust. If “institution” is understood as connoting a relationship which arises and exists under the law independently of any order of a court, and “remedy” is defined as referring to the actual establishment of a relationship by such an order, the catchwords of “institution” and “remedy” do serve the function of highlighting a conceptual problem that persists about the true nature of a constructive trust. Even in this more limited sense, however, any perceived dichotomy between the two notions tend to prove ephemeral upon closer examination. Equity acts consistently and in accordance with principle. The old maxim that equity regards as done that which ought to be done is as applicable to enforce equitable obligations as it is to create them and, notwithstanding that the constructive trust is remedial in both origin and nature, there does not need to have been a curial declaration or order before equity will recognize the prior existence of a constructive trust (cf Scott: The Law of Trusts, 3rd ed (1967) vol V, para 462.4). Where an equity court would retrospectively impose a constructive trust by way of equitable remedy, its availability as such a remedy provides the basis for, and governs the content of, its existence inter partes independently of any formal order declaring or enforcing it. In this more limited sense, the constructive trust is also properly seen as both “remedy” and “institution”. Indeed, for the student of equity, there can be no true dichotomy between the two notions.

The acknowledgment of the institutional character of the constructive trust does not involve a denial of its continued flexibility as a remedy (cf Wirth v Wirth (98 CLR) at p 238. The institutional character of the trust has never completely obliterated its remedial origins even in the case of the more traditional forms of express and implied trust. This is a fortiori in the case of constructive trust where, as has been mentioned, the remedial character remains predominant in that the trust itself either represents, or reflects the availability of, equitable relief in the particular circumstances. Indeed, in this country at least, the constructive trust has not outgrown its formative stages as an equitable remedy and should still be seen as constituting an in personam remedy attaching to property which may be moulded and adjusted to give effect to the application and inter-play of equitable principles in the circumstances of the particular case. In particular, where competing common law or equitable claims are or may be involved, a declaration of constructive trust by way of remedy can properly be so framed that the consequences of its imposition are operative only from the date of judgment or formal court order or from some other specified date. The fact that the constructive trust remains predominantly remedial does not, however, mean that it represents a medium for the indulgence of idiosyncratic notions of fairness and justice. As an equitable remedy, it is available only when warranted by established equitable principles or by the legitimate processes of legal reasoning, by analogy, induction and deduction, from the starting point of a proper understanding of the conceptual foundation of such principles (cf, generally, Sir Frank Kitto's foreword to the 1st ed (1975) of Meagher, Gummow and Lehane: Equity, Doctrines and Remedies, at pp v-vii of the 2nd ed (1984), and see also, eg Re Diplock [1948] Ch 465 at 481–2; Pettitt v Pettitt [1970] AC 777 at 793, 801, 809, 825; Cowcher v Cowcher [1922] 1 WLR 425 at 430; [1972] 1 All ER 943 at 948; Jacobs’ Law of Trusts in Australia, 4th ed (1977: Meagher and Gummow), paras 1301–2, 1325–9; Allen v Snyder [1977] 2 NSWLR 685 at 689, 702ff; Oakley, op cit, pp 1–10; Pettit, op cit, pp 4–6). Viewed as a remedy, the function of the constructive trust is not to render superfluous, but to reflect and enforce, the principles of the law of equity.

41. Peter did not claim an entitlement to beneficial ownership of the Tudor Street property from the time that the alleged representations were made by his parents, as those representations did not demonstrate an intention that Peter would have that beneficial interest from the time they were made. The representations relied upon took the form that Peter would ultimately enjoy the ownership of the property, by inference from the time of his parents’ death by the medium of their wills.

42. Although Peter’s case depended upon his having paid a substantial amount in renovating the property, Peter did not make a case that the bare payment of that money entitled him to some equitable interest in the property, if he did not establish that the representations upon which he relied had been made by his parents.

43. The crucial issue is, therefore, whether Peter has established on the evidence that his parents made to him the representations upon which his claim that the executors hold the Tudor Street property on a constructive trust solely for him depends. It is to that issue that I will now turn.

Consideration of the evidence

44. Peter gave evidence in his 1 June 2016 affidavit of two conversations with his parents upon which he has based his claim that he is entitled to the benefit of a constructive trust of the Tudor Street property.

45. The first alleged conversation occurred in about April 1984, after Peter had made a decision to buy the Arthur Street property. The second took place in about mid-1990, after the tenants of the Tudor Street property had decided to move out.

46. Peter’s evidence in par 55 of his primary affidavit, that he “had no reason to believe that my parents would not have honoured the representation to me in 1984 that Tudor Street would be my property”, makes it clear that Peter relies upon both of the alleged conversations.

47. Peter’s evidence concerning the 1984 conversation was in the following terms:

25   In about April 1984 I had a conversation with my parents and John when we were in the Apartment after I return from one of my rosters overseas. I said “I am interested in a house for sale in Carlton which I want to buy” (sic) Sometime shortly after that conversation I that (sic) I took my parents with me to inspect the house at 45 Arthur Street, Carlton.

26   I said to my mother “the sellers want $124,000 I have enough money saved to pay the deposit and the expenses I am going ahead with the purchase” she said “what about your brother” I said “what about him” she said “aren’t (sic) going to buy it with John” I told my mother “John would not have enough money and he could not afford to contribute to the mortgage payments” he said “your father and I have worked very hard for you and John why would you not include your brother”.

27   My mother said to me “you know you are going to get Tudor Street, it is going to be yours, and you should buy the new house with John to keep it in the family”. [Evidence rejected] My mother also said “I want John to also have the responsibility of the mortgage with you”.

48. Peter then gave evidence of taking steps to buy the Arthur Street property jointly with John. For that purpose, according to Peter, he made a loan of $13,000 to John to assist John to meet his share of the deposit plus transaction costs. The Arthur Street property was transferred to Peter and John on 29 May 1984.

49. If Agatha made the statement attributed to her by Peter, it did not by its terms have the effect of promising Peter an immediate entitlement to the Tudor Street property. His entitlement was to arise at some unspecified time in the future, which might reasonably be implied to be by devise on the death of the parents.

50. Peter did not provide any evidence that would objectively explain why Agatha, in the presence of Elefterios, would have made the spontaneous statement attributed to her in par 27 of Peter’s affidavit. There is nothing in the evidence that could explain why the parents would have formed an intention in April 1984 to leave the Tudor Street property solely to Peter.

51. In fact, the express insistence by Agatha that Peter and John buy the Arthur Street property jointly, with the implicit agreement of Elefterios, is quite inconsistent with the parents having any intention other than to treat their two sons equally.

52. The statement attributed to Agatha in par 27 is in my view, in any event, ambiguous in its context, as it is not clear that the words “you” and “yours” were intended to mean Peter to the exclusion of John. If the context is put aside, it may be accepted that the natural meaning of the words “you” and “yours” would be to refer to Peter, but given the family context, and in particular the fact that Agatha was addressing a proposal that Peter buy a property alone, when Agatha evidently had a strong view that her sons should both purchase the property together, the words “you” and “yours” are at least strongly capable of referring to both brothers.

53. The will in respect of which probate has been granted to the brothers was made by Agatha on 26 June 1985. Elefterios made a will on the same date in materially identical terms. As noted above, by cl 4(b) of her will, Agatha, having survived Elefterios, left her residuary estate to both of her sons in equal shares as tenants in common.

54. At the date of the wills, Agatha and Elefterios owned the President Avenue apartment (which they did not transfer to their sons until 20 March 1986), as well as the Tudor Street property. Although the wills were made little more than one year after the April 1984 conversation deposed to by Peter, neither parent included a term whereby they left the Tudor Street property solely to Peter.

55. Peter has not offered any explanation of why his parents would have prepared their wills in terms that left the whole of their residuary estate to their two sons equally, if they remembered at the time they made their wills that little more than one year earlier they had effectively promised to leave the Tudor Street property to Peter alone.

56. The terms of the two wills are strong evidence that Agatha and Elefterios did not understand that any statement that either of them had made to Peter conveyed their intention to leave the Tudor Street property solely to Peter.

57. There is no suggestion in the evidence that Peter became aware of the terms of the wills until after his parents’ deaths. However, there is also no evidence that Peter ever sought any confirmation by his parents that they had left the Tudor Street property to him alone in their wills.

58. The second conversation upon which Peter relied was recorded by Peter in the following terms:

35   Sometime during in or about mid 1990 I was at Arthur Street having dinner with my parents and John. My father said “the tenants at Tudor Street are about to move out, and it is going to be difficult for us the (sic) rent it because of the run down condition of the house I am worried that the council will condemn it. I want to sell it and have a holiday and invest the money elsewhere.” My mother said “no, there will be no selling of the house we have worked too hard to keep it, I am not allowing it to be sold” I said “I can renovate the house; I would love to live in it because it was always my dream. I can do it in my time off I can put in a new bathroom and kitchen and an attic room. I helped the builders put in the swimming pool and the kitchen in Arthur Street, so I know you know what you can expect from me in undertaking renovation work”.

36   My father said “I am not spending any more money on that place” I said “I am prepared to pay for it and live there and I have will (sic) a room for you [to] come an (sic) stay with me over weekends, you can catch up with your Greek friends in the area and the church” my mother said “so you should spend your money on it because it is going to be yours” I said “great it’s done” John then said “I do not want to live in that dog box, any way I will be able to have my friends over here when mum and dad are spending weekends with you in Tudor Street”.

59. The following considerations cast doubt on Peter’s claim that his parents made a representation to him that he could spend money on the renovation of the Tudor Street property because they would leave it to him alone upon their deaths.

60. A preliminary concern is that Elefterios’ statement that he wanted to sell the Tudor Street property is inconsistent with Elefterios having any recollection in mid-1990 that Agatha had said to Peter in his presence in April 1984 that the Tudor Street property would be left solely to Peter.

61. If par 35 of Peter’s affidavit is considered carefully in isolation, it is consistent with Peter simply agreeing to do a certain amount of renovation of the Tudor Street property in order to obviate the desire of his father to sell the property, in circumstances where the property could then be retained in the family, and Peter would be given the opportunity indefinitely to live in the property.

62. Paragraph 35 cannot, of course, properly be read without par 36, but the way the latter runs on from the former tends to suggest that Peter made the offer to partially renovate the property so that he could live in it and it could be retained for the benefit of the family.

63. Agatha is then alleged to have said: “so you should spend your money on it because it is going to be yours”, but in my view that statement is also subject to the ambiguity that I have discussed above in relation to the earlier statement. The use by Agatha of the word “yours” is capable of being intended to refer to both of her sons, given that, although Peter would be the one who was spending the money on the renovation, he would also be the one who enjoyed the fruits of the expenditure. It is implicit in the discussion that Peter would be able to live in the Tudor Street property indefinitely without the payment of rent. I use the word “indefinitely” to mean a long time, consistent with the life expectancy of the parents, but not necessarily to continue after their deaths.

64. Significant light is thrown by John’s response to the discussion as recorded by Peter on the true effect of the discussion. If whatever words Agatha used had objectively conveyed to John that his parents were agreeing to leave the Tudor Street property solely to Peter in return for his agreement to pay the costs of a significant but partial renovation of the property, it is highly probable that John would have complained. There is no suggestion in the evidence that the family members contemplated that the cost of the renovation would be equivalent to the market price for the property. Given the closeness of the family and the natural expectation of John that he would be treated equally with his brother, it is improbable that John would have acquiesced without complaint in substantial special treatment being given to Peter.

65. Not only did John not complain, but his only response was that he did not want to live in the property, and it is implied that he was happy to continue to live in the Arthur Street property with his parents, as he could entertain his friends when his parents visited Peter at the Tudor Street property. This response strongly suggests that the objective tenor of the conversation was that it was concerned with an agreement within the family as to how the family members would live at the properties that were owned. John stated that he did not want to live in that “dog box”. The better view of the objective meaning of the conversation, assuming that it happened in the terms deposed to by Peter, was that for the foreseeable future Peter would get to live in the Tudor Street property alone, while John would reside with the parents. To the extent that Peter had to pay more than John, because of the cost of the renovation, he would be compensated by being allowed to live alone at the property in which he had always dreamed of living.

66. Peter claimed in his affidavit that he expected that his parents would have made provision for him in their wills that would have secured for him the right to use, occupy and enjoy the Tudor Street property for the rest of his life as owner. Further, he said that he would not have undertaken any of the renovations, had he been advised in 1990 that his mother’s will left the property equally to Peter and John. He said that he had no reason to believe that his parents would not have honoured the 1984 (or, I infer, the 1990) representation. He acknowledged that he did not take any steps to become registered owner of the property.

67. While it would be too extreme a response to this evidence to rule out the possibility that, in a close-knit family, a person in Peter’s position might reasonably take it for granted that his parents would honour representations made to him, and might also avoid seeking proof during his parents’ lifetimes that they would do so, in order to avoid causing offence, I am satisfied in the present case that Peter’s failure to take any steps to confirm that he would become the sole owner of the Tudor Street property casts considerable doubt on whether the parents made the representations that Peter claims they made.

68. It appears to me from Peter’s evidence that the statements upon which he relies were equivocal in their context and were made spontaneously as part of family discussions. They were not made in any formal way, and it would only be natural to expect a person in Peter’s position, over the 31 years between April 1984 and the death of his parents in mid-2015, to seek some objective assurance or confirmation that he would receive the title to the Tudor Street property, particularly as his parents approached the end of their lives.

69. It is of significance, as John has submitted, that there is no objective corroboration at all of Peter’s evidence concerning the representations he claims his parents made over the whole of the 31 year period.

70. In his affidavit sworn on 17 June 2006, in response to Peter’s primary affidavit, John denied or disputed much of the evidence given by Peter. He denied that Agatha had ever said to Peter in John’s presence that Peter would get the Tudor Street property to the exclusion of John. John acknowledged that he did not hear every conversation that Peter had with his parents, but he said that he heard his mother say many times, from his childhood right through to the time when Agatha went into a nursing home in 2012, words to the effect: “We are leaving our estate to each other and then to you both equally”. John said that his mother never deviated from this concept.

71. John said that Peter did not claim an entitlement to receive sole ownership of the Tudor Street property after the death of their parents until after Lindsay J, on 7 December 2015 in John’s probate application, directed Peter to file an affidavit. That affidavit was filed on 19 February 2016. John said that he learned for the first time that the Tudor Street property was “intended for him” when he read the affidavit.

72. In his affidavit in reply to John’s affidavit, Peter claimed at par 15 that John’s allegation that he did not learn about Peter’s claim until he read the 19 February 2016 affidavit “is false”. Peter did not explain how he claimed John learned of his claim to sole ownership of the Tudor Street property before he read the affidavit.

73. Peter’s 19 February 2016 affidavit was tendered by John at the hearing. At par 7, Peter said:

It was always my parents intention that I continue to reside in the property after their deaths and that the Plaintiff reside in the property situated at 45 Arthur Street, Carlton which I jointly own with the Plaintiff as tenants in common in equal shares…

74. That is not a statement that the parents represented that they would leave the title to the Tudor Street property solely to Peter in their wills, with the result that Peter and John would continue to own the Arthur Street property equally. It is a statement of the parents’ intention concerning the residences of their sons, being that Peter would continue to reside in the Tudor Street property and John would continue to reside in the Arthur Street property.

75. Peter also said in par 11 of the 19 February 2016 affidavit:

I do not want to sell or allow the Surry Hills property to be sold. I wish to continue to live in the property and purchase the Plaintiff’s half share of the property…

76. That statement is consistent with Peter having a belief at the time that John was entitled to a half interest in the Tudor Street property, as Peter expressed an intention to want to buy that half interest.

77. Peter accepted in cross-examination at T 56.20-57.4 that, shortly after the deaths of his parents, he and John obtained their parents’ wills and visited the family solicitor, Mr Steven Ktenas, for a reading of the wills. He accepted that when cl 4(b) of Agatha’s will was read out, he did not complain that the will was inconsistent with the representations that his mother had made to him, which Peter now seeks to prove. Peter explained this omission on the basis that he was trying to absorb the terms of the will, and was not given an opportunity to complain, although he was “disappointed”.

78. The caveat that Peter’s solicitor lodged in the Probate Registry on 12 October 2015 described Peter’s interest in Agatha’s estate as: “Joint Executor and beneficiary as to one half share of the estate as tenant in common”.

79. That claim is inconsistent with Peter’s present claim that he was in effect entitled to sole ownership of the only substantial asset in the estate.

76. It must be allowed as a possibility that Peter did not immediately claim an entitlement to sole beneficial ownership of the Tudor Street property because he was upset and affected by his parents’ deaths, and he did not realise the legal significance of the representations that he now claims his parents made to him until shortly before he filed his cross summons. However, it is clear that Peter was cross-examined on the basis that his present claim was a late invention. Positive evidence was not lead in Peter’s case to acknowledge and explain Peter’s conduct, in the period immediately after his parents’ deaths, that was inconsistent with his then having a belief that he was entitled to sole beneficial ownership of the Tudor Street property. Peter did not lead reply evidence, for example, from his solicitor, to explain that Peter had simply not appreciated the legal effect of the evidence that he gave in the proceedings, and that he gave instructions to his solicitor concerning the terms of the alleged representations much earlier than his actual conduct would suggest.

77. In these circumstances, Peter’s conduct after the deaths of his parents provides telling evidence against the conclusion that Peter understood that his parents had represented that they would leave the Tudor Street property solely to Peter in their wills.

78. The following extract from the cross-examination of Peter at T 49.1-41.21, in relation to whether on many occasions over the years Agatha made statements to Peter to the effect that her estate would be left equally to the two sons, is telling:

Q. No, but the concept, half each, was that discussed?

A. Yeah, what was discussed with my parents was that they were building an empire for themselves and they wanted us to build on top of that empire and for us to keep everything for the future generations of the Kagelaris family, not to go selling parts off for other reasons.

Q. So that much was discussed?

A. Yes.

Q. But inherent in that discussion was it not implicit that the estate was being left to you and your brother, whatever it was? Was that not discussed?

A. No, because at the time my mother was saying, “My will - my will, I’ll do whatever I want with it and I give it to whoever I want.” I remember one time we had an argument where she said she’d give it to her family in Greece, so it was her choice what she wrote in that will.

Q. So you did discuss the will with her at some--

A. No, not in depth but she just said a couple - one day we were arguing about something and she said, “Look, I can leave the will to anybody. I can even leave it to your cousins in Greece.”

83. The first part of this cross-examination strongly suggests that Peter accepted that the overarching intent of his parents was to acquire properties within the family that would be retained by the family for generations. That is consistent with an intention that Peter and John were to jointly own all of the properties that the parents were responsible for acquiring.

84. Further, Peter’s contradiction of the suggestion that it was implicit in his mother’s comments that she intended to leave her property equally to her two sons, by saying that she had said on occasions that the property was hers and that she could leave it to anybody, including relatives in Greece, is inconsistent with Agatha having an understanding at the time that she was obliged to leave the Tudor Street property to Peter.

85. This is an occasion where it is well to have regard to the oft-quoted words of McClelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-319:

Where in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously describe as "misleading") within the meaning of s52 of the Trade Practices Act (or s42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the Court (1) what the alleged conduct was, and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the Court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions of self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.

Each element of the cause of action must be proved to the reasonable satisfaction of the Court, which means that the Court "must feel an actual persuasion of its occurrence or existence". Such satisfaction is "not ... attained or established independently of the nature and consequence of the fact or facts to be proved" including the "seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding" (Helton v Allen 63 CLR 691 at 712).

Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a cause of action based on s52 of the Trade Practices Act (or s42 of the Fair Trading Act), in the absence of some reliable contemporaneous record or other satisfactory corroboration. That is the position in the present case. There is no contemporaneous document in evidence which supports the making of any such promise or representation as is relied on and no other satisfactory corroboration… I have the clear impression that Mr Foxman's memory of conversations in 1990 between himself and Mr Cross is not sufficiently clear to enable him to actually recall any of the critical words said to have been used by Mr Cross in the conversation deposed to in para8 of his affidavit. I believe that his account of that conversation is predominantly a reconstruction made some years after the event.

Conclusion

86. In all of the circumstances considered above I am not satisfied that Peter has established that his parents made the representations to him upon which he relies in this case, to the objective effect that if he paid for renovations of the Tudor Street property he could live in the property rent free and it would be left solely to him in his parents’ wills.

87. On the contrary, I am satisfied that, if Peter’s parents ever made representations to him about the consequences of Peter paying for renovations of the property, it was in the objective context of the parents expressing the intention that all of the properties that they acquired were to continue to be owned equally by their two sons. On the parents’ continuing assumption that all members of the family would remain close and act in each other’s interests, the parents offered an indefinite arrangement, in the sense that I have described above, that each of their sons could live in one of the properties. I do not accept that any representations that were made were made in a context that could reasonably be taken to be a legally binding representation or promise. Any statements that were made by the parents were made about 31 and 25 years respectively before their deaths. At that time the parents’ life expectancy was substantial and indefinite. In my view, if any statements were made by the parents on the subject matter claimed by Peter, they objectively contemplated a long term permissive occupancy by Peter of the Tudor Street property (which is exactly what he received), and they could not reasonably be interpreted as impinging on the parents’ ownership of the property, and entitlement to leave it in their wills as they saw fit. In fact, the parents’ intention was always to leave the property to their two sons equally, which is what they in fact did in their wills.

88. I accordingly find that Peter’s claim for the relief in orders 1 and 2 of his cross summons fails.

Finding on renovation

89. It is not strictly necessary in these circumstances for me to make findings concerning the contest in the evidence as to the amount that Peter in fact paid for the renovations that he carried out of the Tudor Street property.

90. Peter claimed that the amount that he paid was $198,916. John’s response was to assert that the amount paid was no more than about $30,000. John tendered evidence from an independent valuer that the Tudor Street property’s market value was about $185,000 in 1990. Peter did not object to the tender of this evidence, and it was not contested. John’s submission was that it was ridiculous to suggest that the limited renovations that Peter carried out in the period including and shortly after 1990 could have cost an amount more than the market value of the property.

91. It then transpired in cross-examination that Peter was not actually saying that he had spent the whole $198,916 at the time of the initial renovation. He claimed at T 41.15 that he had initially spent in the range of $90,000-$100,000. He claimed to have carried out a number of renovations over the whole of the period, and the figure he gave related to all of the renovations.

92. Although Peter claimed to have invoices to support the expenditure of some $170,000, he did not tender any invoices to support his claim in his evidence.

93. There was a dispute between the parties concerning the extent to which the Tudor Street property was dilapidated as at mid-1990. There is no reliable way for the court to resolve that dispute, which essentially arose out of competing descriptions given by Peter and John.

94. Peter tendered Council approved plans for the initial renovation, as well as a number of photographs showing the state of the property during the course of the initial renovation.

95. All that can be concluded is that, in my view, Peter did carry out a substantial renovation that was in part structural, but also substantially improved the general appearance and state of repair of the property.

96. The evidence does not allow the court to estimate the costs incurred by Peter over the whole period in renovating the property from time to time. The cost was probably substantial, although the evidence does not corroborate the amount asserted by Peter.

97. It may put the issue into some perspective to note that, even if Peter did pay an amount in the order of $200,000, if the property is owned equally by each brother, $100,000 of that money was for Peter’s benefit. Peter was not required to pay rent to his parents. As the parents were pensioners, whatever rates were paid by Peter, if any, they were in reduced amounts. Peter has enjoyed sole residence of the property since about 1990, a period of about 25 years (allowing one year for the renovation of the property, for the sake of the calculation). A payment of $100,000 over that period would represent a weekly rent of about $80, or $160, if the calculation is undertaken in respect of the whole $200,000.

98. This calculation is not germane to any finding that I make in the resolution of this dispute, but it serves to indicate that Peter has not in reality been oppressed by whatever informal arrangement he may have come to with his parents concerning his occupation of the Tudor Street property.

Orders

99. Peter is strictly entitled to the orders that he has sought under s 66G of the Conveyancing Act in respect of the Arthur Street and President Avenue properties. The parties have been unable to cooperate to date, and realistically the result of this judgment is likely to exacerbate the personal dispute between them. In the circumstances the court could not reasonably deny to Peter orders that will ensure that the properties are sold by independent trustees, simply in order to reduce the fees that the parties will be required to bear. If the court does not make an order for sale by trustees, it is likely to have to exercise a continuing role in supervising the sales, which is not a satisfactory outcome.

100. In my view, a similar order should be made in relation to the Tudor Street property as, although the parties as executors have power to sell the property, the substantive position is that they are equal beneficial owners of the property, and in practical terms the same position applies as in respect of the other two properties.

101. It remains the case, however, that the parties will save in fees if they are able to cooperate in agreeing to orders that will provide a practical and effective way to sell the properties, without the formal appointment of trustees for sale. Furthermore, as I have noted above, John has expressed a preparedness to consider a regime that would give each brother some right of last refusal in relation to the property that has been their residence for many years.

102. In the circumstances, I will ask the parties to confer and bring in short minutes of the orders to implement the terms of this judgment. If they cannot agree to an alternative regime that is satisfactory to the court, the short minutes of order should provide for conventional s 66G orders in respect of the three properties.

103. I will hear the parties as to costs, but note that both parties essentially failed in their claims. There has been no real dispute by John concerning the making of s 66G orders, notwithstanding that he has strongly urged that a practical alternative would be better because of the saving in fees.

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Amendments

31 March 2017 - Correction in par 5 to date 26 June 1985

Decision last updated: 31 March 2017