Khouri v Khoury

[2004] NSWSC 770

CITATION:	Khouri v Khoury [2004] NSWSC 770
HEARING DATE(S):	18/05/04, 19/05/04, 20/05/04, 21/06/04, 22/06/04 Reserved 23/07/04 after written submissions received
JUDGMENT DATE:	26 August 2004
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
DECISION:	Declaration that second defendant holds undivided half interest in property on trust for plaintiff
CATCHWORDS:	CONTRACTS - whether oral contract exists - terms of such contract - whether contract to hold interest in property upon trust or to transfer such interest - Statute of Frauds - whether sufficient acts of part performance
LEGISLATION CITED:	Conveyancing Act 1919, ss.23C, 54A Evidence Act 1995, s.63 Statute of Frauds
CASES CITED:	Australian and New Zealand Banking Group Ltd v Widin (1990) 102 ALR 289 Baloglow v Konstantinidis & Ors (2001) 11 BPR 20,721 Barclay v Messenger (1874) 30 LT 351 Brittain v Rossiter (1879) 11 QBD 123 Clinan v Cooke (1802) 1 Sch & Lef 40; [1775-1802] All ER Rep 16 Eads v Williams (1854) 4 De G M & G 674, 43 ER 671 Fletcher v Burns, NSWCA, unreported, 19 March 1997 Francis v Francis [1952] VLR 321 Gunter v Halsey (1729) Amb 586; 27 ER 381 Hughes v Morris (1852) 2 De G M & G 349; 42 ER 907 ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue (2003) 53 ATR 527 J C Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282 Jones v Peters [1948] VLR 331 Lamshed v Lamshed (1963) 109 CLR 440 Lehmann v McArthur (1868) LR 3 Ch 496 Maddison v Alderson (1883) 8 App Cas 467 McBride v Sandland (1918) 25 CLR 69 Millet v Regent [1975] 1 NSWLR 62 Miller & Aldworth Ltd v Sharp [1899] 1 Ch 622 Regent v Millett (1976) 133 CLR 679 at 683 Steadman v Steadman [1976] AC 536 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Wu Koon Tai v Wu Yau Loi [1997] AC 179
PARTIES :	Bechara Khouri - Plaintiff Marina Khoury - First Defendant Peter Basil Khoury - Second Defendant
FILE NUMBER(S):	SC 4534/02
COUNSEL:	Mr A J L Ogborne - Plaintiff Mr R E Steele - Defendant
SOLICITORS:	Di Lizio & Associates - Plaintiff Michie, Shehadie & Co - Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

THURSDAY, 26 AUGUST 2004

4534/02 – BECHARA KHOURI v MARINA KHOURY & ANOR

JUDGMENT

Introduction

1 The parties to this proceeding are two brothers and a sister. They are three of seven siblings. The eldest sibling is Father Elias Khouri, a priest of the Antiochian Orthodox Church based at the church at Punchbowl. The youngest two are Marina Khoury and Peter Khoury. They are the defendants. The middle sibling (fourth out of seven) is Bechara Khouri. He is the plaintiff. The next in order of birth after him is Victoria Nasr. The five brothers and sisters I have mentioned gave evidence, as did Moses Khouri (known as “Moussa”), the 15 year old son of Father Elias Khouri. Without intending any disrespect and simply to avoid the confusion that can arise where several persons share the same family name, I shall refer to the family members by their first names.

2 The dispute between Bechara as plaintiff and Marina and Peter as defendants concerns a house property at 93 Johnston Road, Bass Hill. The registered proprietors of the property are Marina and Peter as tenants in common in equal shares. They purchased the property by a contract made on 23 September 1988. Completion took place on 9 November 1988. The purchase price was $175,000. The parents of the seven siblings, together with Marina and Peter, took up residence in the property after its purchase. The parents continued to live there until they moved to alternative accommodation in 1996.

3 Marina and Peter say their parents contributed $24,000 to the purchase price of the Johnston Road property. Bechara asserts that their contribution was $30,000. It was acknowledged by Mr Ogborne of counsel, who appeared for Bechara, that there would be a presumption of advancement in respect of the contribution and that no claim had been raised by either parent on the basis of any resulting trust.

4 By his further amended statement of claim, Bechara seeks specific performance of an agreement between himself and Peter under which Bechara claims to be entitled to be registered as proprietor of an undivided one half share in the Johnston Road property. The basis for this claim is an oral agreement between Peter and Bechara to the effect that Peter would sell his interest in the property to Bechara in consideration of Bechara’s paying $30,000 to Peter and undertaking to him to meet Peter’s share of repayments on a mortgage loan obtained by Marina and Peter to purchase the property.

5 Bechara seeks to characterise the agreement in two alternative ways. First, he says that Peter agreed that, upon the nominated consideration being given, the legal estate would remain in Peter’s name but be held in trust for Bechara: in short, an agreement to create a trust. Alternatively, Bechara says that Peter promised to transfer the legal estate in the property to Bechara for value, with the transfer to be deferred until requested by Bechara. For convenience I will refer to these alternatives as the “trust agreement” and the “land transfer agreement”.

6 Bechara’s case is that, although the agreement was not in writing, it is nonetheless enforceable. If the trust agreement view is accepted, it is argued that s.23C and s.54A of the Conveyancing Act 1919 (the modern embodiment of provisions of the Statute of Frauds) do not apply and specific performance of the agreement is available despite the absence of writing. If, however, the Statute of Frauds provisions do apply (which was conceded if the land transfer agreement characterisation is correct), Bechara contends that there have been sufficient acts of part performance to make the oral agreement enforceable.

7 Bechara says that, pursuant to the agreement with Peter, he paid to Peter the initial $30,000 and that he later paid about $70,000 to Bishop Gibran Rimlawi, bishop of the Antiochian Orthodox Diocese of Australia, which moneys he says were applied by the bishop in paying Peter’s remaining portion of the loan payments in respect of the property.

8 The bishop died in January 1999. His role should be put into context. The family to which the parties belong are adherents of the Antiochian Orthodox Church. The bishop was the leader of the church in Australia. He was also, it appears, on terms of personal friendship with the members of the family. Elias, as a priest of the church, worked closely with the bishop. Aspects of the evidence show that the bishop habitually provided financial assistance to members of the church community he considered to be in need of it.

9 In resolving the substance of these proceedings, three questions must be addressed. The first is whether there was an agreement between Peter and Bechara as alleged by Bechara, and if so what the proper construction of that agreement is. If such an agreement is found to exist, the second question is whether the Statute of Frauds applies. If it does, the third question arises, namely, whether Bechara performed sufficient acts of part performance to forestall the operation of the Statute of Frauds provisions.

The alleged agreement between Peter and Bechara

10 As I have already said, Bechara contends that he and Peter made an agreement in 1992 under which he paid Peter $30,000 and promised to meet Peter’s share of repayments on the home loan in exchange for Peter’s promise to transfer his one half share of the property or alternatively hold that share on trust for him. This was an oral agreement. There are no bank records available to show that Bechara paid Peter the $30,000 as Bechara alleges. It is Bechara’s evidence that he had this money available after the sale of a unit he owned at Lakemba. Peter denies that such an agreement was made. It is his evidence that he made an agreement with Marina – not Bechara – that he would give his share in the property to her in exchange for her meeting the remainder of his repayments under the loan. Marina says that she and Peter made this agreement and denies any knowledge of an agreement between Peter and Bechara. However Bechara was able to point to a number of aspects of the evidence that, in a cumulative fashion, support the existence of the agreement he asserts and contradict the existence of the agreement for which Peter and Marina contend.

11 The first piece of evidence is a document signed by Bishop Rimlawi. The document purports to be the bishop’s will but does not satisfy the formal requirements for a will. I shall nevertheless refer to it as the bishop’s “will”. The text of the document shows that it was prepared without professional assistance. I am satisfied that the bishop himself composed it.

12 Mr Bruce Rowan, who was named by the bishop to be executor, deposed that the bishop gave him the document in an envelope in early 1992 and was instructed not to open it “unless something happens to me”. In the last two pages of the document, the bishop appears to have undertaken the task of documenting his assets as at 28 March 1992. In particular the following items are significant:

“DETAILS AND INSTRUCTIONS TO my Executor and Trustee BRUCE ROWAN to help him execute my will and last Testament with a clear conscience and equity and distributie [sic] the following sums after having settled them:
…
k).- With Marina H. Khoury the sum of Twenty thousand dollars ($20,000-) to be paid at her convenience, and if needs be to be forfeited, as the Trustee Executor will determine. No Charges.
l).- Half of the house on 93 Johnston, Bass Hill, where live the family of the priest Fr, Elais Khoury, the owner of the other half is Bechara Khoury. This house is still in the name of Marina and Peter her brother, but there is a certificate from her testifying that I paid her the price of half the property, and kept it in her name so we can save the exchange of Title. Marina and Bechara and Bruce Rowa [sic] know the truth of the matter.”

13 This is the only contemporaneous document throwing any light on agreements involving Bechara, Peter and Marina. Mr Rowan was a bank manager. The document was handed to him shortly before he left the Dulwich Hill branch of the Commonwealth Bank in 1992. Item (l) is consistent with the agreement as alleged by Bechara and inconsistent with the agreement alleged by Peter and Marina. How the bishop came to understand that Bechara had an interest in the property is not revealed. Nevertheless the contemporary nature of the document and the fact that it is consistent with Bechara’s assertions lend weight to his case.

14 The second piece of evidence is from Elias who deposes to a conversation between himself and the bishop in 1994. He gave evidence of a conversation as follows:

“Khoury: ‘What has happened with the house?’
Gibran: ‘Bechara and I had to buy the house from Peter and Marina to keep a roof over your parents and to maintain the peace.’ “

15 This conversation was admitted to evidence on a limited basis. As to the bishop’s actions, it was admitted under s.63 of the Evidence Act as to the truth of the matters. The remainder, however, was only admitted as to the fact of the words being spoken. The assertion that Bechara had bought part of the house cannot be evidence of the truth of that action but only of the fact that the bishop said he had.

16 It was Elias’ evidence that he had distanced himself from the other family members. I accept that this is so and that he has no reason to prefer any of his siblings. I accept that this conversation with the bishop took place as he deposes – noting as I do the limited evidentiary purposes for which it can be used.

17 Third, there were a number of alleged admissions made by Peter and Marina that Bechara had a half share in the property. Rodrique Nini, a nephew of the parties, deposes that while he was living at the Johnston Road property he had offered to pay Marina money for board or rent. She had replied that this was unnecessary as he was living in Bechara’s half of the house. He says that he similarly approached Peter, saying that he was feeling bad that he was not paying rent. Peter replied that it was nothing to worry about because he was living in Bechara’s half and if he (Bechara) did not want rent then not to worry. Mr Nini conceded during cross-examination that Bechara was his sponsor for immigration purposes, but considering his close family connection with all three parties I do not see this would have any bearing on his credibility. I accept his evidence.

18 Helen Khouri, Bechara’s wife, gave evidence. She deposed that Peter had said to her after he had moved out of the Johnston Road property:

“Peter: I’m so happy Bechara helped me out.”

Bechara says that this statement is effectively an admission by Peter that he had sold his share to Bechara. There was no suggestion that Peter had been helped out by Bechara in any other way. Helen also recounted a conversation she witnessed between Peter and Marina. She deposed that the following exchange took place in 1995:

“Marina: ‘Do you know what your Aunty Martha has said to some people? She said: “Bechara has put money into the house but has left it in Peter and Marina’s names. He should put it into his name. You never know what could happen, they could turn on him.” How dare she say that – we are not that sort of people. We would never do that to our brother.’
Peter: ‘She always interferes in other people’s business.’”

19 These two pieces of evidence are somewhat equivocal but do go some way towards strengthening Bechara’s case. It is reasonable to infer that implicit in what was said in each case is an acceptance (in one case by Peter and in the other by Marina) of the existence of the agreement between Bechara and Peter.

20 The defendants said that Helen Khoury wished the property to be passed to her son and that this was a sufficient motive to make her wish to support her husband’s claim. She agreed in cross-examination that she wanted her son to have a share in the property, but I nevertheless regard her as a credible witness and accordingly accept that Peter and Marina said these words.

21 The other witness who gave evidence of an admission that I accept is Jamal Houssami, the manager of the Auburn branch of the Arab Bank from mid 1996 to 1999. Her evidence was that in late 1996 or early 1997 Peter and Marina attended the Bank in order to complete documents for a loan. It is common ground between the parties that Marina and her husband were the borrowers from the Arab Bank and that Peter was merely a guarantor. Ms Houssami says that, during that meeting, the following conversation occurred in her presence:

“Marina: ‘Why are you late?’
Peter : ‘I don’t know why I’m even here. It’s a waste of time. I’ve got nothing to do with this house any more. I’m only helping Bechara. I’m getting nothing out of this.’
Marina: ‘Look, it’s still in your name so you have to sign.’”

22 Peter and Marina say that Peter was not at the Arab Bank for the meeting. They say that he signed the document at home. During cross-examination, Ms Houssami was firm in her evidence that Peter attended the meeting. She said that it was her practice to meet guarantors face to face even though the Bank itself had no such policy. She also conceded that while she was at the Bank she would have processed about 700 loan applications. The defendants say that this, coupled with the fact that the events took place seven or eight years before Ms Houssami swore her affidavit, makes it highly unlikely that she would remember a specific meeting, let alone the conversation that took place. There is some cogency to this submission, but Ms Houssami withstood cross-examination and there is no reason to regard her as other than a credible witness. I accept her recollection. In particular, I accept that a responsible bank officer would wish to have face to face contact with a guarantor.

23 There were other alleged admissions asserted by Victoria Nasr (a sister of the parties), John Alam (a business associate of Bechara) and Nabil Sawalha (an employee of Bechara) which, for different reasons, are of limited value. Ms Nasr’s evidence was inconsistent and at times implausible. On several occasions she stated that she recalled events in 1991 “like yesterday”, but was quite unable to give any details. Mr Alam admitted that he was a close friend and business partner of Bechara’s and, after listening to him in the witness box, I have some reservations about his evidence. Mr Sawalha’s evidence was that Peter admitted to him that Bechara owned half of the house. This allegedly occurred while Peter and Mr Sawalha were working together at an Ali Baba restaurant owned by Bechara. Mr Sawalha conceded in cross-examination that he only worked with Peter once a month and that their relationship wasn’t particularly close. In that context, I doubt that Peter would have discussed such a private matter regarding family affairs with him. While I do not reject the evidence of Ms Nasr, Mr Alam and Mr Sawalha, its probative value is not great.

24 Finally, there is evidence about the payment of $30,000 that Bechara says he made to Peter. There is no direct evidence that this amount was paid. However, there is evidence that Peter used $30,000 to purchase a property at Glenfield shortly after the time when Bechara says he handed over the money. The settlement statement for Peter’s purchase of the Glenfield property shows that the deposit and other expenses totalled just over $30,000. Peter’s solicitor’s file notes show a series of calculations that appear to tally the costs involved in the purchase. In cross-examination, Peter conceded that the document was the result of an exercise he undertook with his solicitor to determine how much was needed to purchase the Glenfield property. Peter also conceded that he had asked his solicitor specifically whether the purchase could be achieved with $30,000 – that being the amount he was willing to invest in the venture. It is clear that Peter embarked upon the Glenfield purchase with $30,000 of his own funds to invest and that this occurred soon after Bechara says he paid $30,000 to Peter.

25 In contrast to this, there is little evidence to support the defendants’ case that Peter and Marina made an oral agreement in 1992. After being asked to read the relevant passages of the affidavit deposing to the conversations relevant to the alleged agreement and then to close the affidavit, neither Peter nor Marina was able in cross-examination to give details of the conversations embodying the alleged agreement. More telling is the fact that the affidavits sworn by Peter and Marina are almost identical in content and form on this subject. Both insisted in cross-examination that they had not simply adopted a version that had been prepared by their solicitor. They were at odds as to whether they had spoken about the issue prior to swearing their affidavits. Peter maintained that they had not spoken while Marina indicated that she had discussed the matter with Peter. These factors tell strongly against the version of events propounded by Peter and Marina.

26 Taken as a whole, the evidence warrants findings on the balance of probabilities in favour of Bechara. I find that Peter did make an oral agreement with Bechara. As stated previously, Bechara asserts two alternate agreements that are open on the facts – a trust agreement and a land transfer agreement. However, there is no mention in the evidence of any transfer, whether immediate or deferred. On balance, the most likely version is that Bechara and Peter had an agreement that Bechara “owned” a one-half share in the Johnston Road property despite Peter’s name being on the register, there being no promise to transfer the legal estate. I therefore find the agreement made between Peter and Bechara in 1992 to be to the following effect: Bechara to pay Peter $30,000 initially and pay Peter’s share of instalments under the Commonwealth Bank loan (under which Peter and Marina were borrowers) in exchange for Peter’s promise to hold his one half share in the Johnston Road property for the benefit of (that is, on trust for) Bechara.

Performance of the agreement

27 Before dealing with the Statue of Frauds and part performance issues, it is convenient to address the evidence concerning Bechara’s performance of the trust agreement. There were two obligations here. The first was that Bechara pay to Peter $30,000 and the second was to meet Peter’s instalments under the bank loan. With respect to the $30,000 there is, as I have said, no documentary evidence that it was paid to Peter. However, the alleged agreement would only have come into existence if Bechara had actually paid the money to Peter since the payment was required at the outset. For reasons already stated, I am satisfied that Bechara paid Peter the $30,000 consistent with the agreement.

28 In relation to the loan repayments the facts are more complicated. Bechara says that in 1992 a separate agreement was struck between Bishop Rimlawi and Marina by which Marina assigned her share in the property to the bishop in return for the bishop paying her $70,000 and undertaking to honour Marina’s obligations under the loan. Marina was in financial difficulties at the time. No transfer was executed. Bechara says that from this time onwards the bishop took over the responsibility of making all loan repayments to the Commonwealth Bank.

29 Bechara deposed that after this occurred he had the following conversation with the bishop:

“Gibran: ‘Marina and I have made an arrangement so that I will take over her share of the house at Johnston Road and also be responsible for the loan over the house. I will look after the bank. What I suggest is that we work out an amount which represents your share and you can just pay that amount to me.’
Bechara: ‘What amount do you think is proper?’
Gibran: ‘I suggest seventy thousand dollars.’
Bechara: ‘All right. I will start paying that in instalments to you.’ “

30 For this reason, Bechara paid monies direct to the bishop instead of to Marina or the Commonwealth Bank in order to honour his agreement with Peter. Bechara does not say that he made any payments in relation to his agreement with Peter directly to the Commonwealth Bank or to Marina. Accordingly, if Bechara cannot show that the bishop and Marina had an agreement along the lines set out above then this aspect of the claimed part performance is not made out.

31 Marina agrees that there was an arrangement between herself and the bishop in 1992, but she denies that it involved her assigning her share in the property to the bishop. She conceded in cross-examination that she signed a document prepared by the bishop in relation to the transaction but does not know what it said. No such document is in evidence but there is reference in item (l) of the bishop’s will to “a certificate form her testifying that I paid her the price of half the property and kept it in her name so we can save on the exchange of Title”. On Marina’s evidence, the agreement was for a loan of $70,000 from the bishop to Marina, to be repaid by her at her convenience. She alleges that the bishop never took responsibility for the loan and that no payments were ever made to her by Bechara referable to Peter’s share of the loan.

The 1992 agreement between Marina and Bishop Rimlawi

32 In relation to this alleged agreement between the bishop and Marina the bishop’s will is again a central piece of evidence. In item (l) set out at paragraph [12] above, the bishop stated that he owned a half share in the property. He could only have acquired that from Marina. Furthermore, the will refers at item (k) to a loan of $20,000 to Marina. This shows that the bishop was careful to distinguish between loans and property interests. It also shows the unlikelihood of any loan of $70,000 having been made to Marina. It is conceivable that a loan was made by the bishop to Marina after the will was written but this does not fit with Marina’s timing of the alleged agreement; nor does it explain the statement at item (l) that the bishop is the owner of a one half interest in the property.

33 Elias’s evidence referred to at paragraph [14] above is also relevant here. As noted in paragraph [15], the statement by the bishop, if accepted, is evidence of the fact of the bishop’s actions. For the reasons already given I accept that the bishop said these words thus lending support to the conclusion that he acquired a share of the property from Marina.

34 Of assistance to Marina’s version of her agreement with the bishop are documents that were created when Marina obtained the loan from the Arab Bank. It is common ground that Marina and her husband made this borrowing and that the proceeds were paid in part to the Commonwealth Bank (to satisfy its loan) and in part to the bishop. Bechara says that this refinancing was part of a transaction in which Marina repurchased her share of the property from the bishop. A letter from Marina’s solicitors following the refinancing relevantly reads as follows:

“We confirm that in accordance with your instructions that your refinance with the Arab Bank was finalised on the date hereof. For your records we hereby enclose copies of the following:
1. Signed mortgage (we confirm that you were provided with a copy of Memorandum of Mortgage No E125742D for your records by the writer);
2. Standard Terms and conditions of your loan approval;
3. Memorandum of Professional Costs and Disbursements for the banks solicitors (noting that the same has been paid);
4. Our Memorandum of Costs and Disbursements (noting that the same has been paid);
5. Settlement Sheet; and
6. Cheque made payable to ‘Michael Shehadie’ in the sum of $72,536.44 representing the balance of your loan monies in accordance with your direction.
We confirm on settlement that you paid out your Commonwealth Bank loan in relation to the above property in the sum of $56,544.56.”

35 Item 6. of this letter is of relevance. Mr Shehadie is a solicitor. He acted for the bishop and the Antiochian Orthodox Church. Mr Shehadie gave evidence that he received a cheque in the amount of $72,536.44 in September 1996 and that this was paid into his trust account for the benefit of the bishop’s relief fund. The description of the sum of $72,536.44 in Marina’s solicitors’ letter as “your loan monies” is important. It characterises Marina’s dealing with the bishop as a loan rather than the sale of her half share in the property. Bechara says, however, that characterisation of the payment as a loan is incorrect. He accepts that Marina now has an undivided half share in the property, just as she did after the 1988 purchase. His case is, however, that item (l) of the bishop’s will shows that he purchased the one-half share from Marina and refers to a “certificate from her testifying that I paid her the price of half the property”. The subsequent payment by Marina to Mr Shehadie for the benefit of the bishop’s relief fund is therefore said by Bechara to entail re-purchase by Marina of the interest she had sold to the bishop.

36 My inclination is to accept Bechara’s account. Marina, on her own admission, did not know what she signed when the bishop helped her out by providing $70,000. Nor, on her admission, did Marina concern herself with the precise nature of the transaction that yielded the $70,000 she needed. The bishop’s will, on the other hand, is specific in characterising the transaction as a purchase by him from her.

37 An important factor is the fact that Marina did not characterise the 1992 transaction as a loan in her 16 October 2002 affidavit. The only reference to a loan from the bishop was to a loan in 1995. During cross-examination, it was put to her that she had not mentioned any 1992 loan, even though in her affidavit she was responding directly to part of Bechara’s affidavit where he referred to the 1992 dealing in which he says the bishop acquired a share in the property. Marina conceded that a 1992 loan was important to her case, and insisted that she had mentioned the 1992 loan to her solicitors before swearing her affidavit. She said it must have been an oversight by her and her solicitors that it did not appear in its final form. I do not find this explanation plausible. I do not accept that Marina mentioned any 1992 loan to her solicitor when preparing her 16 October 2002 affidavit.

38 On the balance of probabilities, I find that the bishop and Marina did enter into an agreement in 1992 under which it was intended that the bishop acquire Marina’s interest in the property in exchange for $70,000 and the bishop’s promise to meet all of Marina’s responsibilities under the Commonwealth Bank loan.

Did Bechara pay the bishop his portion of the loan repayments?

39 I have found that an agreement was made between Peter and Bechara as alleged by Bechara and that the bishop at relevant times was responsible for repayments of Marina’s share of the Commonwealth Bank loan. I now turn to the question whether Bechara paid to the bishop $70,000 as he alleges and whether that money was applied to the loan.

40 There is no documentary evidence that deals with the transfer of these funds. Bechara deposed:

“In 1992, Marina went to Lebanon. At about the time that she left, Bishop Gibran Rimlawi and I had a conversation to the following effect:
Rimlawi: ‘Marina and I have made an arrangement so that I will take over her share of the house at Johnston Road and also be responsible for the loan over the house. I will look after the bank. What I suggest is that we work out an amount which represents your share and you just pay that amount to me.’
Bechara: ‘What amount do you think is proper?’
Rimlawi: ‘I suggest seventy thousand dollars.’
Bechara: ‘All right. I will start paying that in instalments to you.’
Over the next few years, I paid an amount of about $70,000 to Bishop Ramlawi, as we had agreed.”

41 In cross-examination Bechara said that the amount was repaid in full by June or July 1992, rather than over a few years as suggested by his affidavit. This inconsistency weakens Bechara’s case. The defendants also submitted that it was not realistic for an experienced businessperson like Bechara to have paid the whole $70,000 over a few months and not have any documentary evidence to support it.

42 Counsel for Bechara pointed to the rate of reduction in the principal on the Commonwealth Bank loan during the period that Bechara says he paid the bishop and compared that to the rate of reduction in principle of Marina and her husband’s subsequent Arab Bank loan. It was conceded that this was a rough guide but the starting principal was similar for each loan. Marina had conceded in cross-examination that her salary was greater while she was repaying the Arab Bank loan and it was not contested that the interest rates were higher for the earlier Commonwealth Bank loan. This comparison showed a reduction in the principle of the Commonwealth Bank loan from $118,000 to $56,000 between 1992 and 1996 – a rate of $14,000 per annum. This was compared to a reduction in principal of the Arab Bank loan from $130,000 to $107,500 between 1996 and 2002 – a rate of $3,600 per annum.

43 It was argued that there was no possible explanation for this marked difference in rates other than someone other than Marina was making the repayments on the Commonwealth Bank loan. The evidence shows that Marina did not have the funds required to make such large repayments in the relevant period. That inference may be reasonable, but it does not necessarily follow that Bechara was making those payments. A deposit slip was found among the bishop’s belongings that was referable to the loan, but that may have been repayments the bishop made for his share of the loan.

44 However this is not the end of the matter. The Commonwealth Bank loan was repaid in 1996. The outstanding balance was paid out of loan monies acquired by Marina and her husband from the Arab Bank. Peter was not a party to this subsequent loan transaction with the Arab Bank, other than as a guarantor. Peter did not make any Commonwealth Bank loan repayments after he left the property in 1992. He had, as between himself and Bechara, been relieved of liability for the Commonwealth Bank loan repayments by his agreement with Bechara. Bechara’s promise (to protect Peter against loan obligations) had been fulfilled. While it is not absolutely certain that Bechara actually made these repayments, that is the most logical conclusion. If it were otherwise, why would Marina repay the balance of the Commonwealth Bank loan out of moneys borrowed from the Arab Bank by herself and her husband? The strong inference is that Bechara made payments to the bishop who then applied them in reducing the Commonwealth Bank loan.

45 I accept that Bechara paid to the bishop $70,000 and thereby discharged all of his obligations under the 1992 trust agreement with Peter.

The Statute of Frauds does not apply

46 The next question to be considered is whether the equitable interest created by a contract to declare a trust is an interest to which the Statute of Frauds applies. I had occasion to consider this issue in ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue (2003) 53 ATR 527. I there came to the view that such an interest was not unenforceable for lack of writing.

47 The relevant Statute of Frauds provisions now in force in New South Wales are s.23C and s.54A of the Conveyancing Act 1919. The interplay of these sections was explained by Giles JA in Baloglow v Konstantinidis & Ors (2001) 11 BPR 20,721 at [162] as follows:

“If this analysis be correct, it permits a harmonious relationship between s 54A of the Conveyancing Act and s 23C. The former arises at the stage of agreement to create or dispose of an interest in land. It has its own requirement of writing, less stringent than the requirement in s 23C in that a note or memorandum of the agreement is sufficient and the signing agent need not be authorised in writing. The latter arises at the stage of performance of an agreement or where there is no prior agreement, and in keeping with the importance attached to property rights has a more stringent requirement of writing in that the creative or dispositive instrument itself must be in writing and the signing agent must be authorised in writing. Section 54A excepts the operation of the law relating to part performance, material to an executory agreement, while s 23C excepts the operation of the law relating to trusts, material to property rights. Section 23C is in a Part of the Conveyancing Act dealing with property and a Division of that Part dealing with assurances, and otherwise concentrates on property rights, see s 23C(1)(b) dealing with declarations of trust and 23C(1)(c) dealing with disposition of subsisting equitable interests. There is no encouragement in its language to make it apply to executory agreements under which property rights are to be created or disposed of when the agreement is performed.”

48 On this view, s.23C only applies to the immediate act of creating or disposing of an interest in land (s.23C(1)(a)), declaring a trust respecting any land or interest therein (s.23C(1)(b)) or disposition of an equitable interest or trust subsisting at the time of disposition (s.23C(1)(c)). Any antecedent act or agreement is not governed by the section. As noted by Giles JA at [191], “s.23C does not apply at all – whether as to creation or as to disposal of an interest – if there is no more than an agreement to assure the property in the future.”

49 This is the case here. The agreement which Bechara wishes to enforce is an agreement under which Peter promised to declare a trust in his favour. It is not the declaration of a trust he wants to enforce but the antecedent agreement that obliges him to make that declaration.

50 The next step then is to consider the application of s.54A to the agreement. As I observed in ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue at [317] – [322], a contract for the declaration of a trust does not fall within the ambit of the section. Section 54A only deals with contracts “for the sale or other disposition of land or any interest in land”. The creation of a trust clearly does not involve the sale of land, nor does it dispose of land or an interest in land. A declaration of a trust creates an interest in land, and therefore is beyond the operation of s.54A. It is not clear what policy is furthered by the exclusion of contracts to declare a trust from the operation of s.54A. However, the wording of the section is plainly different to s.23C, which expressly includes declarations of trusts. Effect must be given to this drafting. Consequently the agreement between Peter and Bechara does not attract the Statute of Frauds limitations as to the need for writing and is thus specific performance is available as a remedy.

Part Performance

51 If I am wrong about the application of the Statute of Frauds, Bechara can only enforce the agreement under the doctrine of part performance which I now proceed to consider.

52 On the findings I have made, the acts on which Bechara can rely as constituting part performance of his agreement with Peter are the payment of $30,000 in 1992 and the subsequent payment of $70,000 to the bishop for application in reduction of the Commonwealth Bank loan. The orthodox formulation of the doctrine of part performance in Australia is as noted by Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 432:

“In order that acts may be relied on as part performance of an unwritten contract, they must be done under the terms and by the force of that contract and they must be unequivocally and in their nature referable to some contract of the general nature of that alleged.”

53 This view is supported by numerous High Court decisions: see, for example, Regent v Millett (1976) 133 CLR 679 at 683; J C Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282 per Dixon J at 297; McBride v Sandland (1918) 25 CLR 69 at 78-79. The position is somewhat different in England. In Steadman v Steadman [1976] AC 536 Lord Reid said at 415:

“I am aware that it has often been said that the acts relied upon must necessarily or unequivocally indicate the existence of a contract. It may well be that we should consider whether any prudent reasonable man would have done those acts if there had not been a contract but many people are neither prudent nor reasonable and they might often spend money or prejudice their position not in reliance on a contract but in the optimistic expectation that a contract would follow. So if there were a rule that acts relied on as part performance must of their own nature unequivocally show that there was a contract, it would be only in the rarest case that all other possible explanations could be excluded.
In my view, unless the law is to be divorced from reason and principle, the rule must be that you take the whole circumstance, leaving aside the evidence about the oral contract, to see whether it is proved that the acts relied on were done in reliance on a contract: that will be proved if it is shown to be more probable than not.”

54 The High Court has yet to deal with this decision. As has been noted by the Court of Appeal (Fletcher v Burns (NSWCA, unreported, 19 March 1997 per Handley JA at 6) and the Full Court of the Federal Court (Australian and New Zealand Banking Group Ltd v Widin (1990) 102 ALR 289 per Hill J at 304), until it does so the position remains as summarised by Brennan J above.

55 The question then is whether the $30,000 and $70,000 payments by Bechara were acts: (a) done under the terms and by the force of the alleged contract; and (b) unequivocally referable to a contract of the general nature of the alleged contract. It is clear that a term of the agreement, as described at paragraph [23] above, obliges Bechara to pay Peter the $30,000. Further the $70,000 paid by Bechara to the bishop was applied so as to relieve Peter of any liability for repayments under the loan. This was also envisaged by the contract. Requirement (a) is thus satisfied.

56 The issue of controversy is whether these payments are unequivocally referable to a contract of the general nature as that alleged. The approach to be taken in making such an inquiry was summarised by Smith J in Francis v Francis [1952] VLR 321 at 340:

“…it is necessary to exclude from consideration the evidence of the alleged parol agreement between the parties and to look at the act relied upon in the light of the surrounding circumstances as revealed by the rest of the evidence: see McBride v Sandland (1918), 25 C.L.R. 69, at pp. 77-8; Cooney v Burns (1922), 30 C.L.R. 216, at pp. 222, 224; Maddison v Alderson (supra), at pp. 479, 483-4; Dale v Hamilton (1846), 5 Hare 369, at p. 381; Broughton v Snook , [1938] Ch. 505, at pp. 514-5. The act cannot amount to sufficient part performance unless, when so considered, it points plainly, and not merely in an equivocal fashion, to the existence of an agreement between the parties falling within the general class to which the agreement alleged belongs.”

57 The payment of moneys in isolation, even the entire purchase price, has not been considered a sufficient act of part performance. The key cases supporting this proposition are said to be Clinan v Cooke (1802) 1 Sch & Lef 40; [1775-1802] All ER Rep 16, Hughes v Morris (1852) 2 De G M & G 349; 42 ER 907, Brittain v Rossiter (1879) 11 QBD 123 and Maddison v Alderson (1883) 8 App Cas 467. The reasoning in Clinan v Cooke is revealed in the following extract, at 41:

“… but the great reason, as I think, why part payment does not take such agreement out of the statute is, that the statute has said (a) that in another case, viz. , with respect to goods, it shall operate as part-performance. And the Courts have therefore considered this as excluding agreements for lands, because it is to be inferred, that when the legislature said it should bind in that case of goods, and were silent as to the case of lands, they meant that it should not bind in the case of lands.”

This approach does not appear to hold good in New South Wales today. There is no similar provision in the Conveyancing Act 1919 regarding “goods”, with the result that the contradistinction is not available. This comment also applies to Brittain v Rossiter , as a case dealing with whether part performance was available in relation to the sale of goods as well as the sale of land.

58 The decision in Hughes v Morris is also of limited contemporary value, given the lack of expressed reasoning and the aspect of the statute as in force in England to which reference has been made. At 910 Knight Bruce LJ said:

“The case appears to me to stand upon much the same footing as a parol contract for the sale of land without part performance. A parol contract for the sale of land, though all the money be paid, without part performance (for the payment of the money is no part performance) cannot be carried into effect if the person sued chooses to avail himself of the defect.”

No further explanation is given as to why payment is not part performance.

59 In Maddison v Alderson, the Earl of Selborne LC addressed the deficiencies of these previous decisions and provided a more reasoned explanation. At 478 he said (referring to the judgment of Lord Hardwicke in Gunter v Halsey (1729) Amb 586; 27 ER 381):

“On that point later authorities have overruled Lord Hardwicke’s opinion; and it may be taken as now settled that part payment of purchase-money is not enough; and judges of high authority have said the same even of payment in full: Clinan v Cooke ; Hughes v Morris ; Brittain v Rossiter . Some of the reasons which have been given for that conclusion are not satisfactory; the best explanation of it seems to be, that the payment of money is an equivocal act, not (in itself), until the connection is established by parol testimony, indicative of a contract concerning land.” [footnotes omitted]

60 The essentially equivocal nature of payment is the reason why it cannot, viewed in isolation, bespeak part performance. This is reflected in the reasoning of Herring CJ in Jones v Peters [1948] VLR 331. Money can pass between two parties – even at arm’s length – for a variety of reasons, not necessarily referable to any sale of land. It may be a gift, a loan or for some other transaction. The payment of money is a characteristic of contracts dealing with a wide variety of subjects. It does not, of itself, point to a particular class of contract, as is necessary for the doctrine of part performance.

61 However the payment need not be analysed in isolation. The context in which it is made must be considered, disregarding the oral testimony supporting the contract alleged. Smith J said as much in Francis v Francis (above) at [43] above. As noted by Spry in Equitable Remedies (4th edition) at 274:

“But certainly it is established that the making of a payment of money may be sufficient if it is rendered unequivocal by other acts or circumstances. So it has been seen that simply to remain in possession of land after the expiration of a tenancy is equivocal, since it is consistent with a mere holding over without any further contract; but if in addition a payment of money at a new rate is made, or an additional obligation is assumed, it may become possible, if it is otherwise appropriate, to rely on the doctrine of part performance. Hence it is a question of fact in each case where a payment of money has been made whether or not it is sufficiently unequivocal.” [footnotes omitted]

62 Furthermore the circumstances must be analysed to determine whether any reasonable explanation, other than that alleged, can be attributable to the acts relied on for part performance. Any other such explanation must be founded in the evidence: Millet v Regent [1975] 1 NSWLR 62 at 72-73 per Glass JA.

63 What are the circumstances in which the payments of $30,000 to Peter and $70,000 to the bishop were made? There are two important facts. First, Peter left the Johnston Road property after the payment of $30,000 had been made. Second, Peter also ceased to make repayments on the Commonwealth Bank loan at this time. This context gives the payments the particular character of part performance. Peter’s giving up possession of the property and discontinuing payments on the loan makes the payment of $30,000 unequivocally referable to an agreement pursuant to which Peter undertook to sell his interest in the property to Bechara. This is a contract of the general nature alleged by Bechara, as described at paragraph [26] above.

64 Peter’s giving up possession is central to the part performance claim. In Wu Koon Tai v Wu Yau Loi [1997] AC 179, the payment of the purchase price and the entering of possession were seen as sufficient acts of part performance. The giving and taking of possession was also seen as significant in Regent v Millet (at 683). In a slightly different context, in Miller & Aldworth Ltd v Sharp [1899] 1 Ch 622 it was held that the taking of possession was unequivocally referable to an alleged lease agreement between the parties. Admittedly in this case Bechara has not entered possession, but in context of the close family dealing between the siblings this is not inconsistent with his claim.

65 In light of all of the circumstances, I am satisfied that the doctrine of part performance applies in this case to prevent Peter from relying on the Statute of Frauds. Bechara is entitled to specific performance of the agreement.

Laches

66 The defendants point to Bechara’s delay in pressing his claim to an interest in the Johnston road property. A defence of laches will succeed if it can be shown that Bechara’s delay has been excessive in all the material circumstances, in the sense that a reasonably assiduous person would have proceeded with substantially greater speed or diligence (Eads v Williams (1854) 4 De G M & G 674, 43 ER 671; Lehmann v McArthur (1868) LR 3 Ch 496; Barclay v Messenger (1874) 30 LT 351; Lamshed v Lamshed (1963) 109 CLR 440).

67 In the present case, Bechara’s interest in the property arose in 1992 from the agreement with Peter. It was not until some ten years later, in August 2002, that Bechara asserted that interest by lodging a caveat on the property. However this action was taken soon after Marina had indicated that she intended to act inconsistently with his interest and sell the Johnston Road property without accounting for a proportion of the proceeds to him. In the context of these dealings between family members, I do not consider that a reasonable person would have pursued the matter any earlier. The defence of laches does not arise.

Orders

68 Bechara is entitled to a declaration that Peter holds his interest in the land identified in folio identifier 8/230379 and known as 93 Johnston Road, Bass Hill on trust for Bechara. Consequential relief may also be warranted. I direct that the parties file, by delivery to my Associate, within 21 days short minutes of orders appropriate to give effect to these reasons.

69 As to costs, there is no reason why costs should not follow the event. I shall expect the short minutes to contain a costs order accordingly, unless either party gives notice of a desire to be heard on costs.

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Last Modified: 08/27/2004