Lee v Li

[2022] NSWSC 1336

Supreme Court

New South Wales

Medium Neutral Citation:

Lee v Li [2022] NSWSC 1336

Hearing dates:

12 – 15 September 2022

Decision date:

30 September 2022

Jurisdiction:

Equity

Before:

Peden J

Decision:

(1) The parties are to confer and provide agreed short minutes of order reflecting this judgment and appropriate costs orders to my Associate within 7 days of the publication of this judgment.

(2) Should the parties not be able to agree, the parties are to provide their competing short minutes together with submissions of no more than 2 pages and any necessary evidence, within 10 days of the publication of this judgment.

Catchwords:

EQUITY — Trusts and trustees — Constructive trusts — Common intention — Where two sisters claimed various beneficial and legal interests in four properties — Whether loan or trust in respect of one property — Whether there was an agreement that plaintiff sister would remain the sole beneficial owner of one property — Whether sisters’ original intention to purchase one property as equal co-owners was changed to tenants in common with interests of 99% and 1% by agreement

BANKING AND FINANCE — Banks — Bank accounts — Joint accounts — Whether property purchased using funds from joint account entitled each account holder to co-ownership — No joint account found

Legislation Cited:

Evidence Act 1995 (NSW) s 128

Cases Cited:

Austin v Keele (1987) 10 NSWLR 283

Baumgartner v Baumgartner (1987) 164 CLR 137

Bijkerk Investments Pty Ltd v Bikic [2020] NSWSC 1336

Carruthers v Manning [2001] NSWSC 1130

Green v Green (1989) 17 CLR 343

Jemmark Pty Ltd v 10 Egan Street Pty Ltd [2022] NSWSC 865

Jones v Maynard [1951] Ch 572

Muschinski v Dodds (1985) 160 CLR 583

Re Bishop (dec’d); National Provincial Bank Ltd v Bishop [1965] 1 All ER 249

Shepherd v Doolan [2005] NSWSC 4

Wang Chunfeng v Law Society of New South Wales [2022] NSWSC 986

Watson v Foxman (1995) 49 NSWLR 315

West v Mead [2003] NSWSC 161

Zhang v Zhang [2022] NSWSC 924

Texts Cited:

J McGhee and S Elliott, Snell’s Equity (34th ed, 2019, Sweet & Maxwell)

Category:

Principal judgment

Parties:

Jenny Lee (Plaintiff and Cross-Defendant)
Cheryl Shu Yan Li (Defendant and Cross-Claimant)

Representation:

Counsel:
B Goodyear (Plaintiff and Cross-Claimant)
T Cleary (Defendant and Cross-Claimant)

Solicitors:
Yingke Law Firm (Plaintiff and Cross-Claimant)
Prime Lawyers (Defendant and Cross-Claimant)

File Number(s):

2019/85958

Publication restriction:

Nil

Judgment

1. This case is about two sisters’ dispute about the beneficial interests in four properties in Sydney, New South Wales.

2. The plaintiff, Jenny Lee, has brought these proceedings against her youngest sister, Cheryl Li, claiming the registered title of two properties did not reflect the true beneficial ownership agreed by them. Cheryl has cross-claimed against Jenny, claiming that the registered title of two other properties does not reflect the true beneficial interest agreed by them. The properties are referred to as Arncliffe, Arthur Street, Belmore Street and Mooltan Avenue.

3. Given the homophonous quality of the sisters’ surnames and the approach taken at the trial, I will refer to them by first name, without intending any disrespect.

4. The sisters’ positions in relation to each of the four properties are set out below in the chronological order of purchase:

Sisters’ claims in relation to properties

Arncliffe

5. Arncliffe was purchased in 2013 with Cheryl as the sole registered proprietor. Jenny claimed it was owned 10% by Cheryl and 90% by Jenny based on their agreement and cash contributions to the purchase price.

6. Cheryl claimed the title was correct, and Jenny only provided Cheryl with a loan for the 90% of the purchase price.

7. In 2015, the property was sold and the proceeds placed into a “joint account” and then used to purchase the fourth property in the dispute, Mooltan Avenue.

Arthur Street

8. Arthur Street was purchased in 2014 with Cheryl and Jenny as joint tenants with equal proportions.

9. Jenny’s case was that the property is 100% beneficially owned by her and Cheryl’s name was placed on title only so that Jenny could borrow more money by using Arncliffe as security.

10. Cheryl’s case was that the title is correct.

Belmore Street

11. Belmore Street was purchased in 2015 with Jenny and Cheryl registered as tenants in common, Jenny holding 99/100ths and Cheryl holding 1/100ths. Jenny’s case was that the title is correct.

12. Cheryl’s case was that the parties agreed it was to be owned 50-50 and Jenny did not have authority to reduce her ownership to 1%. It has been sold and the proceeds of sale are being held pending the outcome of this litigation.

Mooltan Avenue

13. Mooltan Avenue was purchased in 2015 with Jenny as the sole proprietor. Jenny’s case was the title is correct;

14. Cheryl’s case, as raised by her cross-claim, was that the property is owned 50-50 because Jenny used joint funds to purchase the property.

15. I did not understand there to be any dispute as to the applicable legal principles. However, there was a very substantial factual dispute as to the conversations concerning the purchase of the properties and their ownership.

16. The case was complicated by the fact that the sisters used various joint bank accounts, being loan accounts and offset accounts and refinanced the mortgage loans from time to time. In addition, it appears the sisters had personal accounts and credit card accounts. There was no comprehensive or expert analysis of all the movement of money between the accounts or an agreed position in relation to the source and purpose of funds paid in and out of the joint accounts. It was accepted that Jenny used the offset accounts for personal use; she had her salary deposited into those accounts and used the funds to pay personal expenses including for example at supermarkets and to pay off credit cards. It was also agreed that from time to time, Cheryl used the offset accounts to transfer money in and sometimes take some out.

17. Jenny’s case was that all of the money in the joint account was hers, except for any sum Cheryl actually deposited and had not withdrawn, including for example her 10% interest in the Arncliffe proceeds of sale. Cheryl’s case was she was jointly entitled to the funds in the accounts.

18. I have resolved the dispute primarily on the basis of the credibility of the sisters considered together with the very little documentary evidence and the inherent probability of each sister’s argument. This is how the submissions were also framed with each sister arguing that they were credible, and the other sister was not, and that the rest of the evidence only supported her case.

Arncliffe

19. In 1996, Jenny migrated from China to Australia. She is the eldest of three siblings. In 2004, Cheryl followed. In about 2006, their parents Mr Yuanxu Li (the Father) and Mrs Yongxiu Gan (the Mother) joined them in Australia.

20. In mid-2010, Cheryl purchased the two-bedroom Arncliffe unit off the plan for $495,000, paying the 10% deposit from her own money.

21. Towards the end of 2012, the settlement of Arncliffe was approaching, and Cheryl needed to arrange finance to pay the remaining 90% of the purchase price or lose her deposit.

22. It is not in dispute that Jenny subsequently provided the 90% purchase price and third-party expenses in the sum of $446,602.39. The dispute is whether this was a loan to Cheryl or an investment by Jenny. The determination of that aspect of the dispute impacts the analysis of whether the joint bank accounts should be considered truly joint, or whether the parties had agreed that they were predominantly Jenny’s. The determination of the nature of the accounts impacts the analysis of the ownership of the other properties.

Loan or investment?

23. Cheryl’s case was that Jenny was happy to provide Cheryl with an unsecured short-term loan for an unspecified period for the almost $450,000 because they were sisters in a close relationship (that had not yet broken down) and it was a reciprocation for Cheryl’s 1999 loan to Jenny of about $30,000 to assist Jenny with her mortgage for a property.

24. While I accept that the sisters were close until about 2017 and that an unsecured and undocumented loan between family members on good terms is not necessarily implausible, I do not accept Cheryl provided Jenny with such a loan for the reasons below.

25. First, Cheryl had no documentary evidence to demonstrate that a “loan” was ever agreed with Jenny nor money advanced to her, but I accept that Jenny did not have any documentary evidence to demonstrate the arrangement was an investment.

26. Secondly, there was also no evidence that any other witness considered the arrangement was a loan. The Mother did not agree with the proposition put to her that Cheryl had lent Jenny money, for example, the Mother said:

Q. You’re aware that Cheryl lent Jenny around 150,000 Chinese yuan, didn’t she?

A. INTERPRETER: No. No, she did not have money because she had a mortgage that she needed to pay herself.

It was not suggested to the Mother that her evidence was untrue.

27. Thirdly, Jenny was not challenged in cross-examination about her evidence that:

1. She never received any loan as Cheryl asserted;

2. The whole of the purchase of the property in 1999 was funded by a loan of about $100,000 and $9,000 from savings.

28. Fourthly, Cheryl’s own evidence of the alleged loan was unpersuasive. She said:

Q. You don’t have any evidence of this, do you, Ms Li?

A. That’s common sense.

Q. You don’t have any evidence of this, do you, Ms Li?

A. I can get the evidence, or the expired(?) evidence from the bank. The lending manager.

Q. You don’t have any evidence of this, do you, Ms Li?

A. For what?

Q. Ms Li, you’re in a difficult position, aren’t you, because the documents tell a different story from yours, don’t they?

A. No, I don’t worry about that thing.

29. Even if I am wrong, and Cheryl did loan Jenny the money, I do not consider a loan of $30,000 in 1999 would provide a motivation to Jenny to provide Cheryl with a loan of a sum of about fifteen times that amount in 2012.

30. In any event, I do not accept that Jenny loaned Cheryl 90% of the purchase price for the following reasons.

31. First, there was no evidence that Cheryl could otherwise complete the purchase if her sister did not support her. At that time her parents were not able to financially assist Cheryl.

32. Cheryl had insufficient funds for the purchase in Australia, but apparently owned a property in Shenzhen, China (Shenzhen Property). Her taxation return for FY2011-2012 revealed a gross income of only $1,311. The following year she received Centrelink AUSTUDY payments of just over $7,000 to assist her studying full-time for a masters degree.

33. In cross-examination she said “yes and no” in answer to a suggestion that she never earned any “substantial” money from part-time jobs. There was no documentary evidence to support exactly what income she received or the source of that income. I accept Jenny’s submission that there was no such evidence because Cheryl did not earn any substantial income that would enable her to purchase the property or obtain a loan or make mortgage payments.

34. I accept that Jenny was asked by Cheryl and her parents to assist Cheryl to complete the purchase, so she did not lose her deposit.

35. Secondly, in late 2012 Jenny’s situation was that her relationship with her then husband was precarious and in September 2012 the couple divorced. Jenny’s extended family, being herself and Cheryl and their parents had been living in the marital home along with Jenny’s ex-husband. It appears that Jenny (and possibly her husband) had also been supporting the family in terms of living expenses. However, with the end of the marriage that living arrangement ceased to be viable. Jenny’s evidence, which I accept, was that she managed to negotiate with her then husband that the family could remain in the home for a short time, but I accept that Jenny was looking to find an alternative property she could purchase to house the family.

36. In her affidavit, Jenny described the money provided to Cheryl for Arncliffe as “almost” her entire “life savings”. That would plainly impact on her ability to purchase another large family home. I consider it unlikely that Jenny would have been prepared to provide control of that sum of money to Cheryl in the circumstances.

37. Thirdly, at the time Jenny agreed to assist her sister, there was evidence that the Arncliffe property had already increased in value between purchase and completion by about $30,000. That would have provided a motivation to Jenny to invest in the property, knowing that her money would provide a positive return in the short term.

38. I accept that even though the sisters originally discussed selling Arncliffe quickly, the reason why it was not sold immediately after purchase was because Cheryl wanted to take advantage of the First Home Buyer Grant, which she understood (and told Jenny) required her to keep the property for at least 6 months after settlement. That also provided a reason as to why Jenny’s name was not added to the title, despite her contribution of the majority of the purchase price. While Jenny conceded she did not ask her solicitor about putting her name on title, I accept that she had little time between being asked to assist and the settlement, and she trusted her sister to adhere to their arrangement without the protection of being on title.

39. Fourthly, I do not accept Cheryl’s submission that the Father and Mother’s evidence supported the construction that Jenny had loaned Cheryl the money. Cheryl relied on the following evidence by the Father in cross-examination:

Q. … So in around 2012 - so moving forward a bit - you were aware that Jenny helped Cheryl with the purchase of a property at Arncliffe, aren’t you?

A. INTERPRETER: Yeah, I think that is correct.

…

Q. Yes, that’s right. Jenny loaned Cheryl money so that Cheryl could complete the purchase of that property, didn’t she?

A. INTERPRETER: Yes.

Q. Cheryl had to repay Jenny that money loaned to her as quickly as possible, 5 didn’t she?

A. INTERPRETER: Yes.

40. I am not convinced that the Father necessarily understood the legal differences between a “loan” and an “investment” by Jenny. For example, his affidavit evidence was that Jenny had said “I do not want to lend you money. … I will pay 90% and the costs. When the property is sold I will get 90% of the sales price. But we will need to sell it as soon as possible.”. He was not cross-examined on his recollection of that conversation, and I do not consider a bald acceptance of the legal characterisation of a “loan” in answer to a leading question particularly persuasive, noting that he is also very elderly.

41. I also am not satisfied that the Mother’s evidence supported Cheryl. She did agree with the question that Jenny “gave Cheryl the money but wanted Cheryl to sell the property quickly so she could have her money back, didn’t she?” However, I do not consider that assists the determination of the legal effect of the conversations the sisters had which I must consider in determining their legal effect. The Mother’s evidence in cross-examination was very clear that Jenny did not loan the money to Cheryl, and she was not challenged that her evidence was untrue:

Q. So Jenny loaned Cheryl the money so that she could buy the airport property, didn’t she?

A. INTERPRETER: It was not a loan because at that time Jenny just - just got divorced and she did not have money to - to lend to Cheryl. Otherwise she did not - she would not have the money to buy a property for herself.

Q. So she gave Cheryl the money but wanted Cheryl to sell the property quickly so she could have her money back, didn’t she?

A. INTERPRETER: Correct.

Q. And you were present when they talked about giving this money, weren’t you?

A. INTERPRETER: Jenny did not want to lend the money or give money to Cheryl, but Cheryl told us she paid a deposit of $49,000 so when the property was finished and she needed to pay the balance, otherwise she would lose her deposit, so we talked to Jenny many times and we convinced her to put her money in to help Cheryl to purchase the property. Otherwise, Cheryl would lose her deposit.

Q. And Cheryl knew that she had to repay Jenny, didn’t she?

A. INTERPRETER: Yes.

Q. Because it was a loan, wasn’t it?

A. INTERPRETER: No, it - no, it - it - it was not a loan, I just told Jenny to help her younger sister out. I told her, “You help her, otherwise she will lose her initial deposit and also the first home buyer grant”, which is about $7,000.

Q. So, so far as you understand it, Jenny gave money to Cheryl but expected that same money to be paid back to her as quickly as possible. Is that correct?

A. INTERPRETER: So Cheryl purchased the property two years prior, it’s an off the plan property, and she paid a deposit and she needed to pay the full balance when the - the property was built.

42. There was no cross-examination of the Mother that the conversations she deposed to in her affidavit were untrue. That evidence was that Cheryl said to Jenny that “It is also your investment. We will share the profit after selling the property”. I accept that evidence.

43. Fifthly, where there is inconsistency, I prefer the evidence of Jenny and Mr Tao over Cheryl’s evidence.

Cheryl

44. Cheryl was an unimpressive witness. She was argumentative and often asked for simple questions to be repeated to her or took a long time to answer, which appeared to be taking time to formulate answers that might assist her. Similarly, she searched through the court book when she had not been directed to look at any particular page. She was prone to emotional outbursts, such as referring to her sister as “ugly face”, and in relation to a fight with Jenny she volunteered “she started it”. At times, she was also prone to overstatement such as when she suggested she had worked full-time “24/7” before qualifying that to “12/7. 14, 16, 18/7. Apart from sleeping”.

45. Cheryl denied that she had spoken to Jenny about the prospect of selling her property in China to assist in the purchase of the Belmore Street property prior to signing the contract (discussed below). She initially maintained this denial in cross-examination. Upon being taken to her own affidavit which stated that she had spoken to Jenny prior to the contract about the possibility, she said that she “had a bad memory” before stating “Sorry. I withdraw that” and qualifying that admission: “I had a bad memory occasionally”.

46. I accept that some of the conversations in this case date back to 2012 and, as counsel for Jenny put it, “there are curiosities to both sides [evidence].” The passage of time afflicts all memories and that is a feature of the human experience: see eg Watson v Foxman (1995) 49 NSWLR 315 at 318-319 (McLelland CJ in Eq).

47. However, only Cheryl expressly admitted to having a “bad memory”. When she later frankly admitted that she could not remember her daily routine 10 years ago, that concession was in relation to an issue that had no material bearing on the case. From these examples, it seems to me that Cheryl was willing to admit to gaps in memory on issues which have no bearing on the outcome of the case whereas her rapid qualification in respect of other matters demonstrated a willingness to express herself in a way which would maximise her prospects in the case.

48. On many occasions she rejected a proposition in cross-examination where that proposition was taken from her own affidavits; it appeared she was intent on rejecting any proposition put by Jenny’s counsel without attempting to provide honest answers. A few examples suffice.

49. In her affidavit, she said that she did not have full-time employment in Australia between 2010 and November 2015. That was consistent with her tax returns that disclosed declared income of $1,311 in 2012, $8,055 in 2013 (including $7172 Austudy allowance), $2,458 in 2014, $355 in 2015, $1,734 in 2016 and $695 in 2017. However, in cross-examination she first rejected the suggestion that she did not have full-time employment during those years, and then said she could not remember. On another occasion, Cheryl said she had a full-time job in 2013. When she was taken back to her affidavit, she qualified her position:

Q. We’re now moving to 2013. Ms Li, in 2013 you still didn’t have a full-time job in Australia. Correct?

A. 2013. No, I had a full-time job in Hammond & Li Pty Limited, also called Ashfield - sorry, Aussie Home Loans Ashfield.

Q. Do you agree or disagree with this statement?

A. Which statement?

Q. In 2013, you did not have a full-time job in Australia?

A. No, I didn’t agree. I don’t agree.

Q. Can you please go to court book page 808. At the top of the page, you should see a paragraph 26. Do you see that?

A. (No verbal reply)

Q. Can you please read out loud, not the first sentence, but the second 15 sentence.

A. The second sentence?

Q. Yes, the one beginning, “I admit that I did not have a full-time job.”

A. “in Australia between 2010 and November 2012. 2015.”

Q. Yes, so I’ll ask my question again. In 2013, you still didn’t have a full-time job in Australia. Correct?

A. No, I worked full-time in Aussie Home Loans Ashfield, but I couldn’t recall whether it’s 2013 or 2014.

Q. So, you just had a punt when you made your affidavit and wrote that sentence, did you? Just had a guess?

A. I may have made a mistake.

Q. Well, I suggest that you didn’t make a mistake and you told the truth in that particular sentence, and now you’re realising how bad it looks--

A. No.

Q. --because I keep going back to it time and time again?

A. No, I don’t agree. We are human beings and we make mistakes.

Q. So, your evidence now is that you did have a full-time job in Australia in 2013?

A. Or 2014. You just said it’s around 10 years ago.

Q. Yes, but you seem to be able to precisely remember the words spoken to you by your sister?

A. Yes.

Q. That’s convenient, isn’t it, Ms Li?

A. No.

50. Although Cheryl suggested she had full-time employment in China between June 2011 to October 2011, there was no evidence of how much she earned from that work or whether it was declared in her tax return.

51. Counsel for Cheryl submitted that it was incumbent on the plaintiff to inquire into Cheryl’s absence of income, and Cheryl’s tax records merely indicated she did not declare much income, but it could not be concluded that she did not have substantial income. Having regard to the evidence, I am not persuaded that Cheryl had a substantial income. Although Cheryl owned a property in China, there was nothing in evidence to indicate that the property was generating rental income and if it was she did not declare it in her tax return.

52. When Cheryl was challenged about the fact that she had not included any evidence about her part-time job earnings at all:

Q. You agree there’s no such evidence?

A. I haven’t provided the evidence.

…

Q. The reason you hadn’t put forth any such evidence of substantial income is because there isn’t any evidence. Correct?

A. No, it’s not correct

53. Similarly in relation to savings:

Q. If you did have evidence of these so-called savings that you had at the time, that would have been helpful to your case, wouldn’t it?

A. Probably.

Q. And the reason you haven’t put forth any such evidence is because there isn’t any such evidence, is there?

A. No, that’s not the reason.

Q. Well, the reason there isn’t any such evidence, I’m suggesting to you, is because there were no savings, were there?

A. I don’t agree.

54. In her affidavit, she admitted that Jenny “mostly managed those properties” and accepted in cross-examination that she was referring to Arthur Street. An exchange then followed in cross-examination where she retreated from her use of the word “mostly”:

Q. --you’re telling me it’s wrong, isn’t it? I suggest to you that what you said in your affidavit was in fact correct, and Jenny did mostly manage those properties. Do you accept that?

A. No, I don’t accept.

Q. You don’t accept the truth of your own evidence in your affidavit?

A. I made an error about “mostly”.

Q. I suggest to you that Jenny did mostly manage Arthur Street, because she was the real owner of it. Correct?

A. No, it’s not correct.

55. In relation to Mooltan Avenue, Cheryl also denied she was in financial hardship in 2017 despite using those very words in her affidavit and stating her “financial situation is not that good”. Again, her subsequent qualification was that she was in financial hardship “to some extent” and “in terms of the mortgage”. On 24 November 2017, Cheryl sent a message to Jenny asking if she could borrow money and providing a screenshot which indicated that Cheryl’s loan of $1.7 million on a North Ryde property (which is not in issue in these proceedings) was overdue.

Tommy Tao

56. I also have regard to the evidence of Mr Zhiyong (Tommy) Tao, Cheryl’s ex-partner or boyfriend. Mr Tao gave evidence about conversations he had with Cheryl concerning the properties, which is supportive of Jenny’s case and suggests Cheryl was untruthful. In relation to Arncliffe, it was not suggested to Mr Tao that his evidence was untrue in saying that:

1. Cheryl told him that “my sister paid most of the money”, and when it was sold “most of the profits belong to my sister. … my money has been saved in my sister’s offset account”.

2. Cheryl told him she was on title for Arthur Street merely to “protect [Jenny’s] assets”.

57. While Mr Tao accepted bluntly in cross-examination that his relationship with Cheryl did not end on good terms and he now does not like Cheryl, he did not agree that he wanted Cheryl to lose this case against her sister. He said, “It’s up to the Court to make a justice [sic] judgment”. I do not consider it likely that Mr Tao would be prepared to lie on oath to assist Jenny to ensure that Cheryl lost the case. Mr Tao has no financial or other interest in the outcome of this case.

58. Counsel for Cheryl submitted that Mr Tao was not a credible witness because he denied reading Cheryl’s affidavits even though his affidavit referred to his ability to access Gmail in China. It was suggested to him that this was only inserted in the affidavit after Mr Tao read Cheryl’s affidavit and her statement that she could not access Gmail. It was put to Mr Tao that he was therefore lying about not reading Cheryl’s affidavit. I reject that suggestion and accept his evidence. There are other reasons why Mr Tao may have covered that topic in his affidavit, for example, if he had been asked to give evidence on that topic by lawyers.

Jenny

59. Jenny was a more credible witness than Cheryl. Cheryl’s counsel submitted she was not a witness of truth for five reasons.

60. First, that she did not want to agree to the use of the word “loan” where she considered the correct term was a “refinance” or a “loan split”. I do not consider this made her evidence generally unreliable and instead consider it demonstrated she was attempting to be as precise as possible, for example, because the refinance documentation used the description “loan split”.

61. Secondly, it was said that Jenny failed to demonstrate her nett contributions to the properties which showed she had “taken a clear position that everything was hers”. I do not consider her taking that position means her evidence was not truthful. Instead, I consider that the challenges to her affidavit evidence about the sums she had contributed did not go anywhere. Her evidence was that she had provided a complete list of amounts that had been spent on the properties and whether they could be classified as “personal” or “investment” amounts. She willingly conceded that different calculations could be carried out to show different things, including the amount of rent that could have been obtained for properties, in which she and her family lived for a time.

62. Thirdly, when Jenny was cross-examined about her 2015/2016 tax return, she accepted that she had declared rent from one property but allocated it to the property in which she and the family were living. Her explanation was that she considered that her allocation was appropriate because she considered the property in which they were living was “an investment”. She further stated that she was not a tax accountant and that had she allocated it correctly she would have paid less tax because the deductions would have been greater. This was clearly not best practice, but I do not consider she was being intentionally dishonest, or her tax return declaration means that her evidence about her agreements with her sister were false.

63. I note that neither sister appears to have paid capital gains tax in relation to the properties that have been sold and Cheryl never declared in her tax returns foreign income she stated she had received. The evidence of both sisters in relation to tax liabilities was given during the proceedings under the protection of Evidence Act 1995 (NSW) s 128.

64. Fourthly, counsel for Cheryl put to Jenny that she “struck a deal with Tommy” that she would give evidence in support of his separate litigation against Cheryl, in exchange for him giving favourable evidence to her case here. The basis for this suggestion was text messages between the sisters in which Jenny indicated to Cheryl that if she did not “give back” Arthur Street then she would “go and help Tao”. The text messages were not admitted into evidence, but there was cross-examination and submissions made about them.

65. I do not accept Cheryl’s submission that these messages indicated the use of “strong armed tactics” and that Jenny was prepared to give untruthful evidence to help Mr Tao win his legal case against Cheryl. I accept Jenny’s evidence that the “help” took the form of providing information to Mr Tao on his request such as transaction details:

that’s something I can help him with identify because his account I think was very messy and Cheryl was withhold [sic] some information from him. I’m the only one can give him a very clear idea of how the money coming in, how the money was went out.

66. I accept that because the beginning of the sisters’ dispute coincided with the end of Cheryl and Mr Tao’s relationship, Cheryl may have felt Mr Tao would work against her, however, on 5 January 2018 in a WeChat conversation between Jenny and Cheryl, Jenny expressly sought to keep Mr Tao out of their dispute:

Jenny: Am aware you have money on account, repay me the money first

Cheryl: Please do not be incited by Tao

Cheryl: He fears the most that you aid me

Jenny: Do not talk nonsense

Jenny: And you borrowed more than 3000 in cash from Dad, go and withdraw money to repay Dad now! You have gone over the line!

Cheryl: Your attitude towards me now is exactly what Tao is after … sigh!

Jenny: Nonsense! This is between you and me, and do not get him involved!

67. Finally, Cheryl submitted that two documents supported her case and not Jenny’s. I do not accept Cheryl’s submission that by an email Jenny sent on 11 December 2012 in relation to sums paid at settlement, Jenny was making an “admission” that Cheryl was the true “owner” of Arncliffe. That email reads:

Please find below the following amount details for your property.

Instead, I consider Jenny was simply providing Cheryl with the information about the amounts expended on Arncliffe at settlement. In an email Jenny sent Cheryl on 4 March 2013 Jenny asked Cheryl to “contact Jimmy regarding selling your apartment”. I do not consider this assists Cheryl as I consider it was obvious that Cheryl, as the registered proprietor, would need to be involved in the sale of the property. However, the email also suggests that Jenny had already made investigations with “Jimmy”, which is consistent with her being actively involved as if an owner.

Findings

68. I therefore accept Jenny’s evidence that before the settlement of Arncliffe she had a conversation with Cheryl in which Cheryl accepted that if Jenny assisted with 90% of the purchase price, then she would be entitled to “profit” as a 90% owner, and that Cheryl said words to the effect “you invest more so you will have more profit”.

69. I also note that Cheryl volunteered that Jenny “on purpose” paid the mortgagee and other third parties directly rather than giving Cheryl the money to on-pay. I consider that the “purpose”, of which Cheryl appeared to be aware, was that Jenny wanted to demonstrate that she was contributing the 90% purchase price as co-owner, rather than loaning that money to Cheryl.

70. I therefore do not accept that Jenny agreed to an unsecured, undocumented interest-free loan with no deadline for repayment, where Cheryl would obtain all the benefits of Jenny’s money, which she could not otherwise use for example to purchase a family home. Instead, Jenny and Cheryl agreed that Jenny would invest in Arncliffe and be entitled to a 90% interest in that property.

71. That conclusion is also consistent with the parties’ conduct after settlement. Jenny was primarily responsible for managing the tenants at Arncliffe. Further, when the property was being sold there is documentary evidence that favours Jenny’s position:

1. When the agency documentation was prepared Cheryl was listed as the vendor as she was on title, but Jenny was listed as a contact, which would have been unnecessary if she had merely loaned Cheryl the funds.

2. In early 2015, Jenny sent Cheryl a text message in which she stated that she had decided to sell Arncliffe. Cheryl did not respond refuting Jenny’s entitlement to make such a decision, which might have been expected if the property was Cheryl’s. Cheryl’s submission was that this message can be explained as Jenny not being prepared to permit the property to be held any longer without the repayment of her loan. However, it is unclear how Jenny was entitled to make such a demand if she was merely a lender of money without a repayment date. Instead, I consider it supports Jenny’s case.

72. Jenny asserted that the Court ought to find that Cheryl held Jenny’s 90% interest in Arncliffe on trust by reason of a common intention constructive trust. Jenny relied on Einstein J’s decision in Carruthers v Manning [2001] NSWSC 1130 at [121]-[124] for the principles of a common intention constructive trust. In Shepherd v Doolan [2005] NSWSC 42, White J (as his Honour then was) explained the principles:

30 The ultimate basis for the imposition of a constructive trust is that it would be unconscionable for the holder of the legal title to the property to assert that he holds it free of any beneficial interest in the claimant. However, although “unconscionability” is the underlying basis upon which equity will intervene, it is not itself a sufficient description of the principles upon which equity does so. Equitable rights do not arise merely because the Court considers it fair in all the proven circumstances that the legal owner of property should hold it, or a portion of it, for the benefit of another. (Muschinski v Dodds (1985) 160 CLR 583 at 615-616).

31 One class of case where equity will intervene to prevent the unconscientious denial by the legal owner of another party’s rights, is where the parties agreed, or it was their common intention, that the claimant should have an interest in the property owned by the other, and the claimant acted to his or her detriment on the basis of that agreement or common intention. (e.g Grant v Edwards [1986] Ch 638; Green v Green (1989) 17 NSWLR 343; Maharaj v Chand [1986] AC 898 at 907).

32 Another class of case where equity will intervene is to “…[restore] to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them.” (Baumgartner v Baumgartner (1987) 164 CLR 137 at 148). …

…

34 Where a constructive trust is imposed, based upon the parties’ common intention as to the ownership of property upon which the claimant has acted to his or her detriment, the inquiry is as to the actual intention of the parties. The law does not impute a presumed intention to the parties based upon what the Court considers fair and reasonable persons in the position of the parties would have intended had they turned their minds to the issue. (Pettitt v Pettitt [1970] AC 777 at 804, 810, 816-817; Gissing v Gissing [1971] AC 886 at 900, 902, 905-909; Allen v Snyder [1977] 2 NSWLR 685 at 690, 698, 701).

…

37 The intention may be established in various ways. There may be an agreement between the parties as to how the property should be held. There may be express statements as to their intention. Their intention may be inferred from their conduct. The question of what acts demonstrate an agreement or common intention referable to the beneficial enjoyment of the property is one of evidence, not law. (Allen v Snyder at 691; Green v Green at 355). A common intention that a party have a beneficial interest in a property owned by another will not be inferred merely from their joint occupation of property, nor the carrying out of household duties, nor the bringing up of children on the property, nor the doing of repairs, renovations, maintenance, decoration or improvement, nor the provision of furniture. (Pettitt v Pettitt [1970] AC 777 at 805-6, 811, 818, 826; Gissing v Gissing [1971] AC 886 at 900, 910; Burns v Burns [1984] Ch 317 at 326, 328, 342).

38 The intention may be inferred from financial contributions, direct or indirect, to the acquisition of property, including the paying off of mortgages, or the payment of expenses which free up funds for that purpose. (Burns v Burns at 328–329; Gissing v Gissing at 900, 902-3, 906-907; Grant v Edwards at 647, 648-9, 653-4, 655; Green v Green at 355). This is a wider enquiry than whether a contribution was made to the purchase money such as to give rise to a presumption of a resulting trust. Whilst both enquiries address the inferences to be drawn as to the parties’ actual intentions, a contribution to the purchase price creates a presumption of beneficial ownership in the proportion which the amount contributed bears to the price. For a “common intention” constructive trust, a contribution, direct or indirect, to the costs of acquisition of the property is a matter from which an intention that the claimant have a beneficial interest in the property might be inferred. There is a difference between a fact from which an inference can be drawn, and a fact from which a rebuttable presumption arises. The significance of the difference will depend upon the strength of the presumption. In the case of the “common intention” constructive trust, there is no presumption that the beneficial interest is in proportion with the contribution to the purchase price.

39 Other evidence from which conclusions may be drawn about the intentions of the parties include declarations of the parties before or at the time of the transaction or so close in time after the transaction as to constitute a part of it. Subsequent declarations of intention are only admissible against interest. (Calverley v Green (1984) 155 CLR 242 at 262 and 269; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 365; Bryson v Bryant (1992) 29 NSWLR 188 at 215).

40 The plaintiff must also show that she acted to her detriment in a way referable to the agreement or intention that she have an interest in the property. (Austin v Keele (1987) 10 NSWLR 283 at 291;Grant v Edwards at 648; Carruthers v Manning [2001] NSWSC 1130 at [124]). Conduct which is insufficient to establish a common intention as to the ownership of the property may be sufficient to constitute relevant actions to the plaintiff’s detriment to establish a trust if the common intention is established otherwise. Conduct may be both the evidence from which an intention that the plaintiff have a beneficial interest can be inferred and the act of detrimental reliance. (Green v Green at 355; Grant v Edwards at 647, 652, 655). In Grant v Edwards Nourse LJ said (at 648) that to qualify as acting on the common intention, the conduct must be such that the plaintiff could not reasonably have been expected to embark upon it unless she were to have an interest in the property. In Green v Green (at 357) Gleeson CJ, with whom Priestley JA agreed, approved a less stringent test taken from the judgment of Sir Nicholas Browne-Wilkinson VC in Grant v Edwards (at 657) that:

“... once it has been shown that there was a common intention that the claimant should have an interest in the house, any act done by her to her detriment relating to the joint lives of the parties is, in my judgment, sufficient detriment to qualify. The acts do not have to be inherently referable to the house. … The holding out to the claimant that she had a beneficial interest in the house is an act of such a nature as to be part of the inducement to her to do the acts relied on. Accordingly in the absence of evidence to the contrary, the right inference is that the claimant acted in reliance on such holding out and the burden lies on the legal owner to show that she did not do so...”

41 The quantum of the claimant’s beneficial interest will be that which the parties agreed upon or intended, if that can be established. …

73. In Austin v Keele (1987) 10 NSWLR 283 at 291 Lord Oliver had explained the elements, including what is sufficient for “detriment”:

A trust does not come into being merely from a gratuitous intention to transfer or create a beneficial interest. There has first of all to be the additional ingredient of an intention or at least an expectation that the cestui que trust will act in a particular way, normally, though not necessarily exclusively, by making some contribution towards the cost of acquisition of the property in which the interest is intended to subsist. Moreover, Lord Diplock’s formulation of the principle in Gissing v Gissing involves the further essential element that the trustee has so conducted himself that it will be inequitable to allow him to deny to the cestui que trust the beneficial interest which it is proved that he was intended to have. There has to be some conduct detrimental to the cestui que trust, even if only in the sense of an irrevocable change of legal position, which is referable to the common intention proved and undertaken on the footing of the grant of the beneficial interest claimed. Classically this takes the form of some contribution towards the purchase of the property, a feature which is entirely absent in the instant case. In fact there was not, from first to last, any evidence that Austin ever contributed a cent towards the cost of the properties.

74. More recently, Parker J noted in Jemmark Pty Ltd v 10 Egan Street Pty Ltd [2022] NSWSC 865 at [69]:

In Bijkerk Investments Pty Ltd v Bikic [2020] NSWSC 1336 at [111]-[119] Leeming JA, sitting at first instance, observed that there were few actual examples of a common intention constructive trust being recognised in Australia. His Honour referred to academic suggestions that a common intention constructive trust is not a separate institution in Australian law, but rather, where it applies, part of the doctrine of proprietary estoppel. His Honour also suggested that the practical need to recognise such an institution might have been removed by the development of the joint endeavour constructive trust in Muschinski v Dodds (1985) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137…

75. Cheryl’s opening submissions referred to Leeming JA’s comments in Bijkerk and stated:

…while [a common intention constructive trust] exists, it would appear that the more appropriate focus in Australia is on the type of relief identified in Muschinski v Dodds… as expanded and confirmed in Baumgartner v Baumgartner …

76. However, Leeming JA expressed no concluded view and proceeded to determine the matter before the Court on the basis of a common intention constructive trust, because there was no debate before him about the most appropriate legal analysis. As there was no such debate before me, I will do the same. However, I also briefly consider Jenny’s alternative resulting trust claim, as her counsel submitted it may be the “stronger claim”.

77. Here, I consider that the parties had a common intention about the percentages of beneficial ownership of Arncliffe founded on an actual oral agreement between the parties. That agreement can further be inferred from significant financial contributions made by Jenny to the purchase of the property and the other evidence.

78. In the circumstances, I do not need to consider whether Cheryl and Jenny’s agreement was “ambulatory” such that their understanding about the existence of the beneficial interest evolved over time: see J McGhee and S Elliott, Snell’s Equity (34^th ed, 2019, Sweet & Maxwell) at 24-054; Green v Green (1989) 17 CLR 343 at 354-355, Gleeson CJ (with whom Priestley JA agreed).

79. In turn, Jenny acted to her detriment on the basis of that common intention by agreeing to provide the funds necessary for completion; there was an “irrevocable change of position” in contributing her “life savings” to Arncliffe.

80. Having regard then to Jenny’s contributions, it would be unconscionable for Cheryl to deny Jenny’s beneficial interest in the Arncliffe property.

Conclusion

81. It follows that Cheryl held Jenny’s interest in Arncliffe on trust and such a trust arose before the time of the Arncliffe property’s sale. It further follows that when Arncliffe was sold the sisters were entitled to that proportion of the proceeds representing their respective investments.

82. Having found that Cheryl held the property on trust for Jenny, I do not need to consider the suggestion by Cheryl that the better way to consider the evidence is that Cheryl:

1. held Arncliffe on a joint endeavour constructive trust, such that the remedy ought to take into account their various contributions: Baumgartner v Baumgartner (1987) 164 CLR 137; Muschinski v Dodds (1985) 160 CLR 583; West v Mead [2003] NSWSC 161 at [52]-[64] (Campbell J); or

2. should be declared to hold the properties subject to a charge in his favour securing repayment of her contributions on the basis that it would be unconscionable for her to retain the benefit of those contributions free of any obligation of recoupment: Morris v Morris (1982) 1 NSWLR 61.

83. In any event, should a resulting trust or joint endeavour constructive trust analysis be employed in relation to Arncliffe, the same practical conclusion would be reached in these circumstances because Jenny contributed 90% of the purchase price. There was no suggestion that Cheryl provided non-financial contributions of any kind that ought to be considered.

Arthur Street

84. On 5 February 2013, the National Australia Bank sent Cheryl and Jenny a “pre-approval certificate” for a loan in the sum of $760,000 for the purchase of a property at Dundas Valley. However, the bank required a valuation of the property, the front page of the sale contract and proof of Jenny’s payslips and savings of $200,000 and Cheryl’s Centrelink payments and savings of $80,000. There was no evidence as to what property was at Dundas Valley, nor that the sisters ever provided the bank with the required documentation. That loan was never taken out.

85. Nevertheless, Cheryl submitted that the pre-approval demonstrated that the sisters had an intention to purchase a property together and from that it should be inferred that they purchased Arthur Street together. However, I do not consider that the pre-approval, without more, is sufficient to demonstrate a joint intention to purchase Arthur Street, which was a different property. Cheryl did not provide any evidence about the alleged conversations that the sisters had in order to agree to the joint purchase of Dundas Valley or the terms of that agreement.

86. It is not contested that on 6 April 2013, Jenny attended an auction of Arthur Street, and was the successful bidder with $749,000. Jenny’s evidence was that she called a colleague and, as a result of that phone call, understood that in order to raise the finance necessary to pay for Arthur Street, she would need to:

1. Use Arncliffe as security for a bank loan; and

2. Register Cheryl as a co-owner of Arthur Street because she was the registered owner of Arncliffe.

Jenny candidly admitted that she simply trusted the advice of this colleague, even though not she was not a mortgage broker or a representative of a lender. She did not investigate whether she could have obtained a loan for herself for Arthur Street without involving Cheryl.

87. Jenny and Cheryl had a discussion at the auction site before Jenny paid the 10% deposit of $74,900 from her personal chequebook. Cheryl’s evidence was that Jenny introduced Cheryl to the agent and said inter alia:

We are going to buy this house together.

…

It’s well within our borrowing limit by NAB and we could afford to buy it. Now we are bound together by this house. We do everything 50:50. You will have to sell the Arncliffe and pay out the money owed to me. All right?

88. In contrast, Jenny’s evidence was:

Since I contributed $446,124 to purchase the Arncliffe Property, I don’t have enough cash now to purchase Arthur Street Property outright. I need to get a bigger loan. Ms Fang Liu is suggesting put the Arncliffe Property as additional equity. I am entitled to 90% ownership of the Arncliffe Property. Do you agree to use the Arncliffe Property to secure my home loan to the Arthur Street Property?...

But I have to make it clear that you are not to have real ownership of the Arthur Street Property, and I do not need you to make any financial contribution to its purchase. I will pay the purchase price and other acquisition costs by myself. I will be solely responsible for the payment of all expenses and mortgage payments in relation to the Arthur Street Property. I will be the sole beneficial owner of the Arthur Street Property and this arrangement does not in any way entitle you to any ownership or financial benefit over this property. Your name will be removed from the title to the Arthur Street Property once I have the borrowing capacity to refinance the mortgage into my sole name.

89. The reasons I reject Cheryl’s contention that she was entitled to be treated as a joint owner, and specifically as a tenant in common, are as follows.

90. First, I prefer Jenny’s evidence to Cheryl’s as a matter of credit.

91. Secondly, I consider that the sisters were aware that Jenny was entitled to 90% of Arncliffe and therefore she was effectively using her equity in that property to facilitate the purchase of Arthur Street.

92. Thirdly, I do not accept that Jenny was prepared to fund all the costs of Arthur Street and be responsible to ensure the mortgage repayments were made, in circumstances where Cheryl was not contributing anything other than the fact she was the registered proprietor of Arncliffe, which she had only achieved because of Jenny’s 90% contribution.

93. Fourthly, I do not accept Cheryl’s submission that by Jenny asking Cheryl to sign a document with a builder of a granny flat for Arthur Street as “one of the owners” she was making an admission that Cheryl had beneficial ownership. Jenny’s explanation of the email was that she meant that Cheryl was an owner “on the paper, on the title only” and it was unnecessary to specify that in the email because both Jenny and Cheryl were aware of those circumstances. The same words are also consistent with Jenny’s account, because they presuppose an owner other than Cheryl, such as herself.

94. Fifthly, Cheryl’s evidence was that Jenny had paid the $74,900 deposit out of her personal chequebook. Cheryl accepted in cross-examination that this was contrary to her evidence that the sisters would do everything in equal shares and the figures would be adjusted upon settlement to be closer to equal shares. There was nothing in evidence to suggest Cheryl thereafter sought to return to or comply with the 50-50 agreement.

95. In relation to Arthur Street, I accept Jenny’s submission that the agreement was:

1. Cheryl would become a joint purchaser of Arthur Street with Jenny so that finance could be obtained using Arncliffe as security;

2. Jenny would pay the deposit of $79,400 as well as the remainder of the purchase price and acquisition costs;

3. Jenny would be responsible for the payment of the mortgage and any outgoings;

4. Jenny would be the sole beneficial owner of Arthur Street; and

5. Cheryl’s name would be removed from the title once Jenny had the requisite borrowing capacity to refinance Arthur Street into her sole name without relying on Arncliffe.

96. I find that there was a common intention that gave rise to a trust relationship:

1. The parties agreed that Cheryl would hold her interest in Arthur Street on trust for Jenny;

2. Jenny acted to her detriment in including Cheryl on the title and accepting sole responsibility for arranging the completion of Arthur Street and mortgage repayments;

3. It would be unconscionable for Cheryl to deny Jenny’s interest in Cheryl’s legal interest, as Cheryl knew the true agreed position.

Joint accounts

97. In terms of financing Arthur Street, the parties behaved in accordance with Jenny’s version of the agreement:

1. The parties were listed as co-purchasers on the sale contract, and Arthur Street was registered in their names as joint tenants.

2. After the Arthur Street auction, joint bank accounts were set up to finance the settlement with the National Australia Bank (NAB). But the loan sum was not $760,000, which had been pre-approved for Dundas Valley. Instead:

1. $598,408 was borrowed and secured against Arthur Street, and

2. $393,395 was borrowed and secured against Arncliffe.

98. On 21 May 2013, part of that borrowed money was used for the settlement of Arthur Street and the remaining money was placed in an offset account, from which both mortgages were paid. Arthur Street was leased and the rent was paid into the same offset account. In October 2013, a further offset joint account was opened, but this time linked to the home loan for Arncliffe.

99. A further debate exists because both sisters were named on the NAB offset accounts, but Jenny’s position was that the accounts were effectively her accounts, but that Cheryl used them when she either had some cash that she did not need, or she wanted to move money through an account. For example, Jenny’s evidence, which I accept, is that Cheryl said to her in about August 2013:

I have some money in my bank account, it doesn’t earn much interest. I will transfer it to our NAB Offset Account so it can help you to reduce the interest on the mortgage. I will take the money out when I need it.

100. I therefore do not accept Cheryl’s counsel’s submission that Cheryl’s deposits into the offset accounts, of what appears to be about $60,000, are “critical” evidence of her being a beneficial joint owner of any property or the accounts. Instead, what Cheryl was doing was similar to the parents depositing $300,000 into the offset account to assist in reducing the interest payable.

101. Further in 2015 and 2016, Cheryl transferred over $1 million through the account to purchase real estate with Mr Tao. Money was also moved through the bank account of Ms Suqun He, the parties’ sister-in-law. Ms He’s affidavit evidence was that she allowed Jenny to use her Australian bank account to move money between accounts. She was not required for cross-examination.

102. I accept that the joint bank accounts were agreed to be used by the sisters in the following ways.

103. First, it was undisputed that Jenny used them as personal accounts, into which her salary was paid and from which she paid for personal and property expenses. Cheryl’s evidence was that she was happy for Jenny to use the accounts this way.

104. Secondly, in relation to Cheryl, Jenny’s position about Cheryl’s entitlement to use the funds was:

Q: You would never have agreed that Cheryl could draw money out of the joint accounts to purchase a property in her own name, would you?

A: No. She can never do that.

…

Q. The agreement that you reached with Cheryl was that neither of you could just go and withdraw money from the joint accounts to buy properties in your sole names.

A. There's not such agreement. I always know that I can do anything with the account, any - in - with the money in the account, I can do anything with it. I'm free.

105. Cheryl’s counsel relied on this to demonstrate that the funds were joint. However, I consider Jenny’s evidence, which I prefer, was consistent with her position that the funds were predominantly her own; Cheryl was only entitled to withdraw any funds she had actually deposited into the accounts.

106. Therefore, I do not accept that the joint bank accounts were ever intended to provide a legal entitlement to both sisters to use the joint funds as joint owners. The general rule that a joint account entitles each account holder to the money held in the accounts yields to the intentions of the account holders: West v Mead [2003] NSWSC 161 at [72] (Campbell J); Re Bishop (dec’d); National Provincial Bank Ltd v Bishop [1965] 1 All ER 249 at 461-462 (Stamp J).

107. This conclusion impacts on Cheryl’s arguments as to her entitlement to an interest in Belmore Street and Mooltan Avenue as discussed below.

Belmore Street

108. It is not in dispute that in early 2014, Jenny and Cheryl discussed the idea of purchasing a property, as true co-owners. While Cheryl did not have any real income or employment, she owned the Shenzhen Property and Jenny’s evidence was that Cheryl agreed to sell it and put the proceeds towards a joint purchase. Cheryl’s evidence was that before the signing for Belmore Street she said to Jenny that her sale of the Shenzhen Property was a “worst case scenario”, even though in cross-examination she tried to suggest that conversation occurred after signing (as noted above). She did not explain what the “worst case scenario” would be. Cheryl eventually accepted she had raised the idea of selling her Shenzhen Property before signing the Belmore contract. I prefer Jenny’s evidence over Cheryl’s concerning the use of the Shenzhen Property.

109. On 15 March 2014, the parties proceeded with their plan to buy a property together and were named as co-purchasers on a contract to buy Belmore Street for $720,000. This property was another off-the-plan residential purchase, and it would not settle for another year and a half. The 10% deposit for Belmore Street was paid from a joint offset account in two stages, with $5,000 paid on 14 March 2014 and $67,000 paid on 4 April 2014.

110. Cheryl asserted that, at least because the deposit came from the joint account, she is a joint owner. However, for the reasons outline above I do not consider Cheryl was entitled to the joint account funds as she asserted.

Mooltan Avenue

111. In April 2014, before Belmore Street had settled, Jenny and Cheryl discussed buying a second property together, but this time a commercial property. Again, Jenny’s case was that Cheryl offered to use the sale proceeds of her Shenzhen Property towards the purchase, which I accept.

112. On 30 April 2014, Jenny and Cheryl were named as co-purchasers on a contract to buy Mooltan Avenue for $849,000. This commercial property was bought off-the-plan and would not settle for a number of years. The deposit of $84,900 was paid from the joint offset accounts in two stages, with $5,000 already having been paid on 14 April 2014 and the balance of $79,900 was subsequently paid out of the joint offset account.

113. On 17 March 2015, Jenny opened a new joint account with the Australia and New Zealand Banking Group (ANZ) ahead of a refinancing of the various home loans, moving them from NAB to ANZ. The money necessary for settlement of Mooltan Avenue was paid out of a newly created joint ANZ account and Cheryl claimed that because the funds were from a “joint” account she is entitled to joint ownership of the property.

114. Consistent with the above, I accept Jenny’s evidence that at the time this account was opened Cheryl was only signing the documentation to assist Jenny. This is also consistent with the fact that around this time, Cheryl appeared to treat the account as Jenny’s as she asked Jenny to transfer money through that account to Cheryl and Mr Tao for their property purchases, rather than Cheryl doing it herself.

115. The refinancing with ANZ did not change the agreed position between the sisters. The joint account funds used for Mooltan Avenue were primarily Jenny’s and she is therefore the sole beneficial owner of that property.

111. The ANZ loan sum of $936,000 was drawn down and used to pay off the home loans with NAB. In the process, the mortgage over Arncliffe was completely paid out, and Cheryl applied to NAB to release the title deed of Arncliffe.

Sale of Arncliffe

117. On 16 June 2015, Cheryl, who remained the sole owner registered on title of Arncliffe, signed a contract to sell it for $677,000.

118. On 14 July 2015, with the settlement of the Belmore Street purchase approaching, Jenny and Cheryl signed a loan offer from Westpac to fund the purchase. In the loan application, while Cheryl was listed as a “second person” or borrower, all of the $936,000 liability was allocated to Jenny. While Jenny completed that form it was something that Cheryl also needed to sign and it can be assumed she agreed with its contents. This tells against Cheryl believing she had any interest in the borrowings or any real liability.

119. On 28 July 2015, Arncliffe settled, and the proceeds were placed in the ANZ offset account.

120. Cheryl asserted that by the proceeds of the Arncliffe sale being paid into the joint offset account: “I have paid out the balance of the private lending from Jenny”. However, the payment into the joint account is also consistent with Jenny having invested in Arncliffe and the joint account really being Jenny’s account. There was no evidence that Cheryl documented her alleged “repayment” of a loan or ever told Jenny she considered she had repaid a loan.

121. Further, as I have found that the sisters had agreed that the joint accounts were Jenny’s accounts and Cheryl would merely use them from time to time, the deposit of the proceeds of sale into joint accounts is consistent with both sisters placing their individual sale proceeds into that account for their own personal purposes to be withdrawn or used as they individually wished. I do not accept that Cheryl automatically obtained a beneficial interest in any property purchased with the funds from the joint accounts.

Cheryl withdrew from Belmore Street purchase

122. Jenny’s evidence was that Cheryl told her as settlement was approaching in 2015 that she no longer wanted to be involved in the Belmore Street property, because she did not want to sell her Shenzhen Property. Cheryl denied that she ever promised to provide any input into the Belmore Street property but that nevertheless the agreement was that they would own the property 50-50 by using the “joint” bank loans in place. As noted above I consider Cheryl offered to use her Shenzhen Property and her refusal to follow through with that was contrary to the sisters’ agreement.

123. Jenny’s evidence was that because Cheryl was no longer going to be involved in the purchase, Jenny sought to remove Cheryl’s name from title before settlement, but that because Cheryl was overseas, her solicitor did not consider it possible to achieve because Cheryl could not electronically sign the documents. While Jenny was cross-examined about the timing of events and the likely possibility that Cheryl could have signed documents in China and posted them to Australia before settlement, I accept Jenny’s explanation, namely that such a solution was not canvassed at the time, and instead the solicitor suggested reducing Cheryl’s interest to 1% with Jenny holding 99%. She accepted her solicitor’s recommendation. While not explained in the evidence, it may well have been the cheapest solution.

124. On 4 September 2015, two weeks before settlement, the solicitor sent both Cheryl and Jenny an email outlining the change in legal ownership proportions. It was sent to Cheryl at her Gmail account. Cheryl was adamant that before settlement she was unaware that her legal interest in Belmore Street was being changed from 50% to 1%.

125. Cheryl gave the reason that she could not access her Gmail account while she was in China in September 2015 and she continued to believe she was entitled to 50% ownership. I consider Cheryl’s evidence on this point untrue for the following reasons:

1. Mr Tao’s evidence was inconsistent with Cheryl’s. He said that he had no issues with Gmail in China and that in fact Cheryl checked his Gmail for him in China. I prefer his evidence.

2. Cheryl stated in cross-examination that Gmail was “blocked” from use in China since 2006. This was a proposition put by Cheryl’s barrister to Mr Tao in cross-examination, which he rejected. Cheryl’s barrister submitted that the proposition put was incorrect and Cheryl ought not be tainted by adopting the mistaken proposition that was put to Mr Tao. However, instead I accept Jenny’s counsel’s submission that it speaks against Cheryl’s honesty as a witness, that she simply adopted a proposition put by her barrister to another witness which was rejected, rather than giving evidence of what she knew to be true.

3. There was evidence that Cheryl sent emails from Gmail while she was in China at around the same time. When presented with that evidence in cross-examination Cheryl attempted to change her position to say “There was time that you can use and there was time that you cannot use”. This exchange provides an example of Cheryl’s tendency to take a fall-back position when confronted with contradictory material, rather than making responsive concessions.

126. However, even if Cheryl could not have read the solicitor’s email while in China, she subsequently returned to Australia four days before settlement. When reminded of that fact and her evidence that she checked her email as soon as she landed in Australia, she changed her evidence from never having received the email in time, to in fact having seen the emails upon her return, but not reading them until at least a year later:

Q. --And now you're saying there are only some accounts that you’ll check when on the tarmac?

A. No, no, no, no. I'm the type of person. I will check my email. I didn’t read them. I saw those new emails coming in, I hadn’t got opportunity to read them through. I was so much engaged in a lot of stuff, all happen at the same time. I've got my own properties to settle, my own home loan to figure out. And my new email, my new emails account, which is a joint email I had with Tommy, and for work, and also for personal life.

127. Jenny’s evidence was that she also called Cheryl to explain the change in legal title, which was denied by Cheryl, but I accept Jenny’s evidence on that issue also. There would have been no reason for Jenny to hide that fact from Cheryl at the time as they were on good terms at the time. Cheryl described the relationship as “very good” and between 2010 and November 2015, Cheryl and Jenny were living together.

128. I find that Cheryl knew of the change to her interest in Belmore Street before settlement at the very least because she would have read the email upon her return to Australia. I consider it more likely she was content with retaining 1% in circumstances where she was not complying with her promise to provide funds from her Shenzhen Property and was not otherwise contributing any of her personal funds.

129. Even if I am wrong and she was unaware of the change before settlement, there is no doubt she was aware by 2016. In the second half of 2016 Jenny and Cheryl exchanged WeChat messages in which Jenny stated, “Don’t forget you only have 1% in [Belmore Street].” Cheryl did not object, and instead engaged with her sister in working out what 1% of the rent for Belmore Street would be for the purposes of her tax return. Further, in 2019 when Jenny demanded Cheryl transfer her 1% across to her, Cheryl did not complain that there was no agreement to that effect and instead demanded a sum of approximately $15,000 from Jenny based on Cheryl’s calculations of her entitlement to rent across the various properties. Cheryl’s conduct is consistent with her knowing and accepting Jenny’s position.

130. Another matter telling against Cheryl’s credibility on these matters is that she claimed that she found out about the change to 99/1 split in title in 2016 when she received a land tax notice for 99% of the property, which indicated she had 99% ownership of Belmore Street. She said she subsequently paid land tax for 99% of the property but was “not so sure” whether she continued paying the land tax. She attributed these events to a “mistake by land tax assessment”. There was no evidence to that effect in her affidavits, nor was there any land tax assessment notice in evidence. Cheryl stated that she paid the 99% land tax without complaint to either the land tax authority or Jenny. I do not accept such unlikely evidence.

131. I do not accept Cheryl’s submission that the reason why Jenny changed Cheryl’s ownership percentage was solely because Jenny would receive a better tax benefit from losses if she owned a larger proportion “on paper”. While that may or may not have been a positive result of the change, I do not accept that Jenny was prepared to fund all of the necessary shortfalls in Belmore Street in circumstances and agree that Cheryl would own 50% of the property, where Cheryl was not contributing any funds and was busy overseas or working “24/7 for Tommy” for no money.

132. On 18 September 2015, the purchase of Belmore Street settled, with Jenny using funds from the Westpac account, in relation to which Cheryl remained a signatory because of her 1% registered interest in the property. As outlined above I consider the joint bank accounts were effectively Jenny’s. Therefore, had Cheryl wanted to become a true co-owner of the property then it was incumbent upon her to contribute 50% of the deposit and the purchase price. She did neither. I do not accept Cheryl’s submission that Jenny held any part of Belmore Street on trust for Cheryl because of the use of the joint accounts for the purchase of that property.

133. Upon settlement, Jenny and her family moved into Belmore Street to live, and Jenny was responsible for the interest payments on the mortgage, but admittedly used rent from Arthur Street to assist. This is also consistent with the sisters’ intentions that Jenny was the sole beneficial owner of Belmore Street and Arthur Street.

134. In late 2017, Jenny had been told by her bank that she had sufficient borrowing capacity to remove Arthur Street as security for the loan. She asked Cheryl at a family Christmas gathering to transfer her 50% legal interest in Arthur Street into Jenny’s name. Cheryl refused. This led to the sisters falling out and Cheryl’s accusation that Jenny “started it”, and ultimately this litigation.

Conclusion

135. For the reasons outlined above I find that Jenny has made out her case and Cheryl has failed on her cross-claim.

136. However, as Jenny conceded, Cheryl remains entitled to, inter alia:

1. 10% of the nett proceeds of sale of Arncliffe;

2. Any money she has deposited and left in the “joint bank accounts”;

3. 1% of the Belmore Street sale proceeds.

Orders

137. I will accede to the parties’ request that they be given time to consider this judgment and provide me with their proposed final orders.

138. Therefore, I make the following orders:

1. The parties are to confer and provide agreed short minutes of order reflecting this judgment and appropriate costs orders to my Associate within 7 days of the publication of this judgment.

2. Should the parties not be able to agree, the parties are to provide their competing short minutes together with submissions of no more than 2 pages and any necessary evidence, within 10 days of the publication of this judgment.

**********

Decision last updated: 30 September 2022