Memduh Cihan and Mehmet Cihan trading as trustees of the Cihan Family Trust ABN 43 973 762 406 v Cihan Family Pty Limited [2023] NSWSC 1289
Hearing dates:
13 October 2023
Date of orders:
30 October 2023
Decision date:
30 October 2023
Jurisdiction:
Equity
Before:
McGrath J
Decision:
See [148]
Catchwords:
EQUITY — Real Property Act 1900 (NSW) – exceptions to indefeasibility of title — fraud and unconscionable conduct — transfer of 27.38% interest in real property from family trust to self-managed superannuation fund (Transfer) by a father at the direction of his adult son with the overwhelming benefit of the Transfer flowing away from the father to adult son and his family — in circumstances where the father is unable to read or understand the English language and was reliant on adult son as to the prudence of the Transfer — application of principles outlined in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 — lack of specificity as to precise act of adult son which would satisfy finding of fraud — HELD — fraud not established — special disability of the father established — no appearance on behalf of the defendant to rebut equitable presumption of invalidity — HELD — plaintiff has established unconscionable conduct — Transfer set aside
CIVIL PROCEDURE — pleadings — fraud – requirement for specific pleadings and particulars — HELD — plaintiff’s fraud claim rejected as not pleaded or particularised or otherwise included too late to afford defendant procedural fairness
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Memduh Cihan and Mehmet Cihan trading v Cihan Family Pty Limited [2023] NSWSC 1289
Case
[2023] NSWSC 1289
Decision Date
CaseChat Overview and Summary
In this case, Memduh Cihan and Mehmet Cihan, trading as Memduh Cihan and Mehmet Cihan, filed an action against Cihan Family Pty Limited, a company that held title to certain real property. The dispute centred around the transfer of a 27.38% interest in the real property from a family trust to a self-managed superannuation fund, an act orchestrated by the father of the plaintiffs. The plaintiffs argued that this transfer, which occurred at the behest of the adult son, was executed under circumstances that constituted unconscionable conduct and potentially fraud, given the father's special disability — his inability to read or understand English and his reliance on his son for guidance.
The court was tasked with determining whether the transfer constituted fraud under the Real Property Act 1900 (NSW) and whether the plaintiffs had established unconscionable conduct. Fraud required a specific act to be identified, which the plaintiffs failed to do with sufficient clarity. Consequently, the court rejected the fraud claim. However, the court found that the plaintiffs had successfully established the special disability of the father, which created an equitable presumption of invalidity regarding the transfer. The defendant did not appear to rebut this presumption.
The court's reasoning led to the conclusion that the transfer was indeed unconscionable, as the father, due to his special disability, was at a significant disadvantage in understanding the implications of the transfer. The plaintiffs had effectively demonstrated that the transfer was to the overwhelming benefit of the adult son and his family, and away from the father. The court set aside the transfer of the 27.38% interest in the real property back to the family trust. Given the rejection of the fraud claim, the court did not proceed to address the additional issue of the procedural fairness in relation to the fraud allegations.