Lottwo Pty Ltd (in Liquidation) v Tudo - [2012] SASC 172

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master: Civil)
LOTTWO PTY LTD (IN LIQUIDATION) v TUDO & ORS
[2012] SASC 172
Judgment of The Honourable Justice White
27 September 2012
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PARTIES - JOINDER OF PARTIES
EQUITY - TRUSTS AND TRUSTEES - IMPLIED TRUSTS - RESULTING TRUSTS - WHEN ARISING - JOINT PURCHASE OF LAND
Purchasers, including the appellant, defaulted on loans used to purchase several properties - bank exercised mortgagee's powers of sale - surplus remained after borrowers' liabilities discharged - surplus paid into Court in actions relating to the different properties - three persons applied to a Master to be joined as plaintiffs to the action relating to appellant's property - Master granted the application - appeal against that order for joinder.
Whether each of the persons has an arguable claim in a proprietary interest in the money in Court - whether an arguable case of a resulting trust - whether sufficient pleading or evidence that these three persons provided their monies as purchaser.
Held: appeal dismissed with respect to the respondent Tudo, appeal allowed with respect to the joinder of the other two persons - Tudo has an arguable case that he has a proprietary interest in the money, the other persons did not plead or establish such an arguable case.
Supreme Court Civil Rules 2006 (SA) r 74, r 98, r 99; Real Property Act 1886 (SA) s 223LB; Strata Titles Act 1988 (SA); Community Titles Act 1996 (SA), referred to.
Calverley v Green (1984) 155 CLR 242; Muschinski v Dodds (1985) 160 CLR 583; Nelson v Nelson (1995) 184 CLR 538, considered.

LOTTWO PTY LTD (IN LIQUIDATION) v TUDO & ORS
[2012] SASC 172
Appeal from a Master

WHITE J. This is an appeal against an order by a Master that three persons be joined as plaintiffs to this action. Those persons are Biay Ing Ong, Maxwell Tudo and Rose Ong. They have been referred to in the proceedings as Moses, Tudo and Rose and, without intending any disrespect, I will do likewise.
Background
The proceedings at first instance arise out of the purchase in 2006 of seven parcels of land in or near to Gouger Street, Adelaide. Two parcels (Properties 1 and 2) were purchased by Gouger Centre Pty Ltd (Gouger Centre); one parcel (Property 3) by Gouger Centre and Pua Hor Ong; one parcel (Property 4) by Gouger Centre and Shek Kwan Lee; one parcel (Property 5) by Magnificant Pty Ltd; one parcel (Property 6) by the present appellant Lottwo Pty Ltd (Lottwo); and one parcel (Property 7) by The Wine Kingdom Pty Ltd. Each of these companies is now in liquidation. The purchasers (collectively, the Gouger Central Companies) borrowed $7.5m from St George Bank, now part of the Westpac Banking Corporation (Westpac). The borrowings were secured by mortgages over the seven parcels of land (collectively, “the Land”) and by directors’ guarantees.
The Gouger Central Companies defaulted in making repayment and, eventually, Westpac exercised the mortgagee’s powers of sale. Settlement of the sales was effected on 24 December 2009. As I understand it, each of the properties was sold to the one purchaser under the one contract. The overall purchase price was apportioned pro rata between the seven properties by reference to their respective areas.
After discharge of the borrowers’ liability to Westpac and payment of associated expenses, a surplus remained. Westpac paid the surplus into Court. It did so in six separate actions, being Actions numbered 188-193 of 2010 respectively. Action 188 of 2010 relates to the payments in respect of Properties 1 and 2. The remaining actions relate to the respective payments concerning Properties 3-7 inclusive. The surplus sum was apportioned pro rata between the seven properties according to their respective areas.
The present appeal concerns Action 192 of 2010 being the amount of the surplus ($193,979.07) relating to Property 6 previously owned by Lottwo.
On 9 June 2010, the Court ordered that Kimberlina Pty Ltd be the plaintiff in the action and have the carriage of the proceedings. Wu You Yang Pty Ltd, Jiang Ling Huang Pty Ltd and Lottwo were designated as defendants. On 7 November 2011, a Master ordered, by consent, that $150,000 of the amount standing in Court to the credit of this action be paid out to Kimberlina Pty Ltd in settlement of its claims arising under an equitable mortgage. The claims of Wu You Yang Pty Ltd and Yiang Ling Huang Pty Ltd have also been compromised and neither they nor Kimberlina took any part in the appeal. No party suggested that their presence was necessary in order that there be a proper hearing and determination of the appeal.
The Master’s decision giving rise to the present appeal concerned an interlocutory application filed on 23 November 2011 by Moses, Tudo, Rose and two others. As at 23 November, none of these persons was a party to this action nor, as I understand it, to any of the other actions. The five claimants sought orders to the following effect:
(1)the disjoinder of Kimberlina Pty Ltd as plaintiff and of Wu You Yang Pty Ltd and Yiang Ling Huang Pty Ltd as defendants;
(2)the consolidation of the six actions;
(3) their joinder as plaintiffs to Action 192 of 2010;
(4)the joinder of the remaining Gouger Central Companies as defendants;
as well as orders relating to the filing of pleadings.
The Master did not hear and determine the claims for each of these orders. Instead, at the request of the parties, he heard and determined only the application by the five claimants to be joined as plaintiffs in Action 192 of 2010, albeit in the context of the foreshadowed application for consolidation of this action with the other five actions.
The Master granted the application of Moses, Tudo and Rose but dismissed those of the fourth and fifth claimants. No appeal has been brought in respect of that dismissal and it is not necessary to mention further the claims of the fourth and fifth claimants.
Lottwo now appeals against the order for joinder of Moses, Tudo and Rose. Its notice of appeal is irregular in that it also named the other Gouger Central Companies as appellants. They are not yet parties to the action and have no standing to appeal. However, for present purposes nothing turns on their inclusion as appellants.
Rule 74
Rule 74(1) provides (relevantly):
The Court may, on application or on its own initiative, order that a person who is not a party to the action be joined as a party if satisfied that—
(a)the person has an interest in the subject matter of the action or in a question of law or fact involved in the action; or
…
(d)the person should be joined as a party to ensure that all matters in dispute in the action are determined; or
(e)the person should be joined as a party in order to enable determination of a related dispute and thus avoid multiplicity of proceedings.
Subparagraphs (1)(a) and (e) are particularly pertinent in the present case.
The Claims of Proprietary Interest
Each of Moses, Tudo and Rose claim a proprietary interest in the monies paid into Court. Each claims that such an interest exists because of a resulting trust in their favour arising from their provision of some of the funds used in the purchase of the Land. Tudo also claims an equitable interest in the form of a purchaser’s lien.
The evidence which Moses, Tudo and Rose relied upon in support of their applications was contained in affidavits sworn by their solicitor, Mr Patel. These affidavits were, of necessity, made on the basis of information and belief. Mr Patel exhibited a draft statement of claim which, he said, set out the basis of the respective claims.
The draft statement of claim appears to have been prepared on the assumption that the Court would make the respective orders for joinder and disjoinder sought by the claimants and also the claim for consolidation. This being so, it is surprising that the claimants requested the Master to hear and determine their application for joinder as plaintiffs without determining at the same time the remaining aspects of their application.
The draft statement of claim indicates that the aggregate purchase price paid on 4 July 2006 for the Land was $11,456,540. Of that amount $7,500,000 was borrowed from St George Bank.
Moses alleges that he had paid, in three instalments of $200,000, a total of $600,000 into the trust account of Bail and Robazza, the conveyancers acting for the purchasers in the transaction. The draft statement of claim contains the following two pleas pertinent to the joinder of Moses:
[14]The amount paid into the trust account by Moses was subsequently used as part of the purchase price used by the Defendants for the purchase of the Land.
[15]In the premises, the Defendants each held their interest in the Land on a resulting trust in favour of Moses, being an equitable interest in favour of Moses equal to 5.24 per cent ($600,000/$11,456,540) of the total value of the Land.
Moses acknowledges in [16] of the draft statement of claim the later receipt by him of the sum of $300,000 (apparently by way of part repayment) and acknowledges that he must give credit in his claim for that amount.
Tudo alleges that he executed an agreement with Gouger Centre on 4 July 2006 to purchase an area described as “Shop 9” in Property 2 for the sum of $830,000. As required by that contract, he had paid a deposit of $200,000: comprised of $140,000 paid on 4 July 2006 and $60,000 paid on 31 August 2006. The contract authorised Gouger Centre to use the deposit in part-payment of the purchase price of Property 2. Tudo claims that these payments gave rise to a resulting trust in his favour over the whole of the Land or, alternatively, a purchaser’s lien for the aggregate amount of $200,000.
Rose alleges that on 4 July 2006 she had paid a total of $530,000 into the trust account of Bail and Robazza, and that those monies were used to complete the purchase of the Land. Accordingly, Rose too alleges a resulting trust in her favour equal to a pro rata share of the total purchase price.
The Master’s Decision
The Master considered that each of Moses, Tudo and Rose had established an arguable case of a resulting trust with the effect that their applications to be joined as plaintiffs to the proceedings should be granted. His reasons appear in the following passages:
[30]… [T]here is at least prima facie evidence that Moses, Tudo and Rose paid substantial monies to the conveyancers involved in the property transaction and that those monies were used as part of the purchase price of those properties. There is no evidence before the Court to explain any arrangements between those three potential claimants and the companies and persons involved in actually purchasing the properties. The claimants rely on the presumption of a resulting trust, it being demonstrated that they have paid substantial monies towards the purchase price.
[31]In my view those three claimants have an arguable case of a resulting trust. This is so notwithstanding that there may be considerable argument as to the extent of the trust and whether it exists at all. That will be a matter for pleading and trial. It is convenient that they should be joined as plaintiffs to this action. …
The Master was not concerned by the absence of any plea or foreshadowed plea that Moses, Tudo or Rose had paid the money upon which they relied as purchasers of the Land. He considered the material indicating that their monies had been used to meet the purchase price was “sufficient to give them an arguable case of a resulting trust and therefore a proprietary interest in the funds held in the Suitors Fund” (at [40]).
In relation to Tudo’s alternative claim of a purchaser’s lien, the Master held:
[35]… [I]t is arguable that Tudo has a claim for a purchaser’s lien in respect of at least [Property 2]. As such that is another reason why permission should be given for Tudo to be joined as a plaintiff in these proceedings.
A Resulting Trust: Relevant Principles
The principles relating to resulting trusts in the present context are well settled. The authors of Jacobs’ Law of Trusts in Australia state the principle as follows:
A resulting trust will be presumed where, on a purchase, the legal title to real or personal property is vested in someone other than the person who is proved (by parol or other evidence) to have provided the purchase money. Thus, where A purchases land from X and directs X to make the transfer to B, which X does, there is a presumption of a resulting trust in favour of A except … where A is the husband or parent of, or stands in loco parentis to B.[1]
(Citations omitted)
[1] JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (7th ed, 2006) at 240.
However, this principle does not apply if the party advancing the money has not done so as purchaser. This requirement appears in the following passage in the reasons of Gibbs CJ in Calverley v Green:[2]
Where a person purchases property in the name of another, or in the name of himself and another jointly, the question whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser. However, in such a case, unless there is such a relationship between the purchaser and the other person as gives rise to a presumption of advancement, i.e., a presumption that the purchaser intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take beneficially. In the absence of evidence to rebut that presumption, there arises a resulting trust in favour of the purchaser. Similarly, if the purchase money is provided by two or more persons jointly, and the property is put into the name of one only, there is, in the absence of any such relationship, presumed to be a resulting trust in favour of the other or others. For the presumption to apply the money must have been provided by the purchaser in his character as such – not e.g., as a loan. [3]
(Emphasis added)
Similarly, the authors of Jacobs’ Law of Trusts in Australia say:
These principles will not apply if A lends or gives money to B and B uses the money to buy property from X, or if A lends or gives money to B and at the direction of B pays it to X; B is not an implied trustee of the land for A because A has not acted as a purchaser. Unless A can show an express trust of the land by B in favour of A, the relationship between A and B will be limited to donor and donee or lender and borrower.[4]
(Citation omitted) (Emphasis added)
[2] (1984) 155 CLR 242.
[3] Ibid at 246.
[4] JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (7th ed, 2006) at 241.
Lottwo emphasises the requirement for the monies to have been provided by the advancing party with the intention that it should be a purchaser. It made no concession that an arguable case for the existence of the other requirements for a resulting trust had been shown but submitted that the draft statement of claim contained no plea as to the intention of Moses, Tudo or Rose. It also referred to some evidence concerning the monies provided by Moses which is seemingly inconsistent with the allegation that the monies were provided by him with the intention that he should be a purchaser.
Accordingly, Lottwo submits that the Master erred by concluding that the proposed pleadings and evidence that Moses, Tudo and Rose had provided monies used to meet the purchase price was sufficient to give them an arguable case of a resulting trust and therefore a proprietary interest in the funds held by the Court.
In my opinion, this submission has considerable force in relation to Moses and Rose. It is appropriate to consider the claim of Tudo separately.
The Claim of Moses and Rose
In the draft statement of claim said to set out the basis of the respective claims, Moses and Rose allege only their respective advances of money, and that their money was used in the purchase of the Land. They allege, in effect, that their provision of monies used to make up the purchase price of the Land is sufficient to give rise to the resulting trust on which they rely for their proprietary interest.
Given the well‑settled nature of the principles relating to the resulting trust which they assert, the absence of any plea by Moses or Rose as to their intention at the time they provided the monies is stark. They are well placed to make such a plea as their state of mind at the time is a matter which is particularly, if not peculiarly, within their knowledge. In these circumstances, it is reasonable to suppose that an intention to advance the monies as purchaser, if that had been the case, would be pleaded. That is especially so in the context of pleading rules which require parties to plead the material facts relating to their claim together with such facts as will give fair notice of their case at trial.[5]
[5] Supreme Court Civil Rules 2006, rr 98(2) and 99(1).
The affidavits of Mr Patel upon which Moses and Rose rely do not make good these omissions in the draft statement of claim. In his affidavit of 1 August 2011, after making an assertion that his clients had paid monies which were used to meet the purchase price of the Land and providing some evidence of their payment, Mr Patel deposed merely:
[9]In the circumstances, and by reason of the discussions held and documentation created from time to time between my clients and the directors of the various companies, I consider that my clients had an equitable interest in respect of the Land, which would entitle them to part of the proceeds of sale paid into Court.
Nor did Mr Patel’s next two affidavits address the purpose of the payments made by Moses and Rose.
There is also some material which is inconsistent with the monies having been advanced by Moses in the character of a purchaser. On 9 April 2009 Moses lodged a caveat with the Registrar-General on the title to Property 2. He claimed an interest in the land as follows:
The Caveator claiming an estate and interest as Chargee in the whole of the estate and interest of the Caveatee in the land above described, having advanced the sum of two hundred thousand dollars ($200,000.00) to the Caveatee on the 29^th day of June 2006 to assist the Caveatee to purchase the said land and wherein the Caveatee agreed to charge the said land in favour of the Caveator.
(Emphasis added)
Thus, in the caveat, Moses appeared to be asserting an interest as a secured lender, rather than that of purchaser.
On 22 April 2009, Tudo also lodged a caveat with the Registrar‑General relating to Property 2. Tudo’s caveat, apart from referring to the two separate advances of $140,000 and $60,000, was in identical terms to that of Moses.
It is pertinent for present purposes that, although Moses was in April 2009 asserting a proprietary interest in Property 2, and relying, in part, on the same advance of monies as is relied on presently, he did not assert that the monies had been advanced by him as purchaser. On the contrary, he claimed then that the monies had been advanced to assist Gouger Centre to purchase the land.
By a letter dated 28 September 2011, Patel & Co informed the solicitors for the liquidator of the Gouger Central Companies that the interests claimed by Moses and Tudo in their respective caveats were incorrect. Whether that is so is not something which can be determined on the present appeal. However, in my opinion, the nature of the interest asserted in Moses’ caveat makes more stark the absence of any plea in the draft statement of claim that the monies were advanced by him as purchaser.

I note in addition that the liquidator of the Gouger Central Companies, by correspondence dated 5 August and 19 September 2011, requested the solicitors for Moses, Tudo and Rose to set out in as much detail as possible the background to their respective claims to an interest in the funds paid into Court. Patel & Co responded on 28 September 2011.
Patel & Co said that Moses had paid the sum of $400,000, of which $200,000 had later been repaid. He went on to say that it had been agreed that “the remaining loan of $200,000” should be converted into deposits on contracts said to have been executed by Moses in June 2008 for the purchase of Lots 8 and 9 (apparently part of the Land). In the present context the solicitor’s reference to “the remaining loan” is significant. Further, the draft statement of claim makes no reference to an agreement in June 2008 of the kind to which Patel & Co had referred. The discrepancy between the nature of the interest asserted in the letter of 28 September and the requirements for a resulting trust also serves to highlight the absence of any plea as to the character of the monies advanced in June and July 2006.
The letter from Patel & Co of 28 September 2011 made no reference to the interest asserted by Rose.
The pleaded return to Moses of some $300,000 also appears significant in the present context. That return may not be inconsistent with him having advanced the monies originally as purchaser but it does, at the least, seem to require some explanation. Monies paid with the intention that they be part of the purchase price contributed by a purchaser are not usually returned. The absence of any explanation contributes, in my opinion, to the significance to be attached to the absence of any plea that Moses had advanced his monies as a purchaser.
Counsel for Moses, Tudo and Rose referred to the presumption that, when two or more persons advance the purchase price of property in different shares, the person to whom the legal title is transferred holds the property on a resulting trust in favour of those who provided the purchase price in the shares in which they provided it. That presumption performs much the same function as the civil onus of proof.[6]
[6] Muschinski v Dodds (1985) 160 CLR 583 at 612; Nelson v Nelson (1995) 184 CLR 538 at 547.
I do not consider this to be a persuasive consideration for present purposes. It is to be remembered that Moses and Rose sought to be joined to the present proceedings. It was incumbent upon them to set out a proper basis upon which the Court may act under r 74. That is particularly so given the relatively modest amount now standing to the credit of this action. These circumstances, together with the well‑settled principles concerning the existence of a resulting trust in the present context, made it appropriate for them both to assert and to provide at least some evidence that they had advanced the monies relied upon as purchasers (if that is their contention).
Counsel for Moses, Tudo and Rose also submitted that the requirement that the monies be advanced by the payer in the capacity of purchaser really operates in a negative way against the operation of the presumption of a resulting trust. In Chambers’ Resulting Trusts, the author states:
It is often said that a resulting trust will not arise in favour of a contributor to the purchase price unless he or she made the contribution “in the character of a purchaser”. This does not mean that the contributor must have intended to purchase the property in question. … The expression really means that the presumption of resulting trust will not apply if the contribution was intended to be a gift, loan or payment for some other purpose.[7]
(Citations omitted)
[7] Robert Chambers, Resulting Trusts (1977) at 27.
It is not necessary presently to consider the appropriateness of this characterisation. Whether it be appropriate or otherwise does not, in my opinion, bear upon the adequacy of the case for joinder put forward by Moses and Rose.
I consider, with respect, that in the case of the applications by Moses and Rose the Master has erred. They did not establish an arguable case of a resulting trust so as to warrant the order for joinder which he made. The matters about which the Master acknowledged that there may be “considerable argument” should not, in my opinion, be left for pleading and trial if Moses and Rose are not prepared to plead positively the character of their advances and to provide the Court with at least some evidence indicating that the pleaded character is reasonably arguable.
Accordingly, I would allow the appeal insofar as it concerns the joinder of Moses and Rose.
The Claim of Tudo
The claim of Tudo stands differently. He did provide evidence, in the form of an executed contract, of the purpose of his payments of $140,000 and $60,000. As previously noted, Tudo entered into a contract with Gouger Centre on 4 July 2006 by which he agreed to buy the area marked “Shop 9” on a development plan annexed to the contract relating to Property 2. Under this contract he was required to pay a deposit of $140,000 on execution and $60,000 on 31 August 2006. Tudo provided evidence that the sums of $140,000 and $60,000 had been paid into the trust account of Bail and Robazza on 4 July 2006 and 31 August 2006 respectively. As previously noted, the contract permitted Gouger Centre to use the deposit in the settlement on Property 2.[8]
[8] Schedule 2, which contains this authority, refers to “Shop 1”. It was not suggested, however, that anything turns on this discrepancy.
Tudo pleads that both the sum of $140,000 and the later sum of $60,000 were applied to the purchase of all of the parcels of land and not just the land of which Shop 9 formed part. He contends that, in this way, he did contribute monies to the purchase of the Land and that he did so in the capacity of purchaser of at least part of the land. Tudo contends that, in these circumstances, he has either a purchaser’s lien to the extent of $200,000 or, alternatively, that there came into existence a resulting trust by which the owners of the Land held their respective interests subject to a trust in his favour to the extent of his contribution of $200,000.
Lottwo contended first that s 223LB of the Real Property Act 1886 (SA) precluded Tudo having any interest in the Land. By s 223LB(1) the sale of land is prohibited unless the land which is the subject of the sale constitutes the whole of an allotment or a number of allotments. However, subs (5) provides that s 223LB does not affect the validity of a contract to sell an interest in land if, amongst other things, a division of land under the Strata Titles Act 1988 (SA) or by community plan under the Community Titles Act 1996 (SA) is contemplated by the parties to the contract. Although Tudo does not plead that such a division was contemplated in the present case, it seems implicit in the arrangement that this was so. Accordingly, it is at least arguable that the contract between Gouger Centre and Tudo did not offend s 223LB. Even if it did, it is at least reasonably arguable that the character in which Tudo made the payments of $140,000 and $60,000 would not be affected.
It is true that Tudo, like Moses and Rose, does not make an express plea in the draft statement of claim that the deposit was paid by him as purchaser of Property 2, let alone of the whole land. Nevertheless, both the proposed pleading and the evidence of the contract between Gouger Centre and Tudo indicate a reasonably arguable case that the payment was made (at least in some respects) in the capacity of purchaser of part of Property 2. That being so, Lottwo has not demonstrated any error in the Master’s reasons insofar as it concerns Tudo.
There is one seemingly unsatisfactory feature of the Master’s decision concerning Tudo. The effect of his decision is that Tudo has been joined as a plaintiff to Action 192 of 2010 which presently concerns only the surplus funds from the sale of Property 6. Tudo does not claim that he paid the deposit in respect of this property. He should instead have sought to be joined as plaintiff to Action 189 of 2010 which concerns the surplus funds from Property 2.
However, the argument before the Master took place in the context of a foreshadowed claim for consolidation of the six actions. In addition, counsel for Tudo on appeal informed the Court that Tudo had not yet acted on the grant of permission to be joined as plaintiff in this action and may instead seek to be joined as plaintiff in Action 189 of 2010.
In those circumstances, I consider it inappropriate for the appeal concerning Tudo to be allowed on the basis of this unsatisfactory feature. Instead, the matter should be remitted to the Master for him to address the remaining aspects of the interlocutory application of 23 November 2011 insofar as it concerns Tudo.
Summary
For the reasons given above, I allow Lottwo’s appeal insofar as it concerns Biay Ing Ong and Rose Ong. The Master’s orders of 28 February and 19 July 2012 that these two claimants be joined as plaintiffs are set aside. However, the appeal, insofar as it concerns the joinder of Maxwell Tudo, is dismissed. I will hear from the parties as to costs.