Nagi v Hussein
[2020] VSC 401
•30 June 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY & PROBATE LIST
S CI 2018 02094
| MOHAMMED FEZ NAGI | Plaintiff |
| v | |
| ABDULLA NAGI HUSSEIN | Defendant |
---
JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 30 June 2020 |
CASE MAY BE CITED AS: | Nagi v Hussein |
MEDIUM NEUTRAL CITATION: | [2020] VSC 401 |
---
ISSUE ESTOPPEL — Where Administrative Appeals Tribunal found the existence of a constructive trust — Whether this Court bound by that decision — AAT decisions cannot give rise to issue estoppel — Midland Metals Overseas Limited v Comptroller-General of Customs (1991) 30 FCR 87 — Lilienthal v Minister of Immigration and Multicultural Affairs [2001] FCA 2 — Administration of the Territory of Papua and New Guinea v Daera Guba (1973) 130 CLR 353.
COMMON INTENTION CONSTRUCTIVE TRUST — Whether sufficient evidence to support existence of common intention — Plaintiff failed to discharge burden of proof — Allen v Snyder [1977] 2 NSWLR 685 — Hohol v Hohol [1981] VR 221 — Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc [2018] VSC 413.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J McCoy | DSA Lawyers |
| For the Defendant | No appearance | No appearance |
HER HONOUR:
Introduction
By originating motion filed 4 June 2018, the plaintiff, Mr Mohammed Fez Nagi, seeks an order pursuant to s 51(2) of the Trustee Act 1958 that the legal and beneficial interest in the property at 30 Murphy Grove, Preston (‘the property’) be vested in him.[1]
[1]The property is that described in certificate of title volume 04124 folio 608.
The defendant, Mr Abdulla Nagi Hussein, is the plaintiff’s father and the registered proprietor of the property.
On 10 July 2018, the plaintiff made an ex parte application for substituted service pursuant to r 6.10 of the Supreme Court (General Civil Procedure) Rules 2015. On 25 July 2018, orders were made for substituted service on the defendant. Pursuant to that order, the defendant is taken to have been served on 14 August 2018. On 4 September 2018, the plaintiff filed an affidavit of a paralegal from the plaintiff’s solicitors, who deposed that substituted service had been effected.
Pursuant to the 25 July 2018 order, the defendant was required to file and serve an appearance by 4.00pm on 24 August 2018. The defendant did not do so.
The Court is satisfied that the defendant is on notice and aware of this proceeding.
Evidence
The plaintiff relied on the following affidavits:
(a) affidavits of the plaintiff sworn 1 June 2018 and 29 May 2019;
(b) affidavit of the plaintiff’s sister, Lina Khaldie (‘Lina’) sworn 24 October 2018; and
(c) affidavit of the plaintiff’s brother, Ahmad Nagi (‘Ahmad’) sworn 24 October 2018.
The plaintiff was the registered proprietor of the property from 7 December 2002 until 17 February 2006. On or around 17 February 2006, he transferred the property to the defendant. The plaintiff claims that the defendant was to hold it on trust for the him.
The property was mortgaged to the National Australia Bank Limited (‘NAB’). The plaintiff deposed that the reason the property was transferred to the defendant was to avoid an order for possession of the property obtained by the NAB. A historical title search of the property, exhibited to the plaintiff’s affidavit sworn 1 June 2018, shows that a NAB mortgage was registered on 7 December 2002 and was discharged on 17 February 2006.
The plaintiff deposed that, at the time of the transfer, he was suffering from a gambling addiction and, as a result, he had not kept up with the mortgage repayments to the NAB. In or around February 2006, he asked the defendant to accept transfer of the property and also take out a loan secured against it in order to avoid a mortgagee sale by the NAB. The plaintiff was unable to acquire new finance owing to his poor credit rating. The plaintiff agreed to make the mortgage repayments and continue to pay the other household expenses, along with his brother. The defendant agreed to the arrangement.
In or around February 2006, the parties met with a solicitor, Mr Anthony Bucca, in his Carlton office, where it was agreed that the property would be transferred to the defendant to avoid the mortgagee sale, and that the defendant would hold the property on trust for the plaintiff.
The defendant took out a loan for $200,000 with the Australia and New Zealand Banking Group Limited (‘ANZ’) and repaid the NAB mortgage. The historical title search shows that on 17 February 2006 the property was transferred to the defendant and a mortgage held by ANZ was registered on the title of the property.
At the time of the property transfer, the plaintiff deposed that he lived in the property with his brother, Ahmad, and Ahmad’s family. Ahmad moved into the property in or around 2004, and has been paying rent each month to the plaintiff, who put this towards the mortgage repayments. The plaintiff claims the defendant has never lived at the property.
The plaintiff claims he made all the payments on the ANZ mortgage. He also claims that he has lived at the property with his family since 2006, has paid water rates, council rates and undertaken all the maintenance at the property.
In November 2016, the plaintiff and defendant had an argument and a ‘falling out’ with each other. Around this time, the plaintiff asked the defendant to transfer the property back into his name as he was concerned that the defendant would redraw on the ANZ mortgage. The defendant told the plaintiff that he did not have to do so. Since this time, the parties have not spoken directly to each other.
On 24 November 2016, the plaintiff lodged a caveat over the property claiming a freehold interest on the grounds of an implied, resulting or constructive trust.
On 24 March 2017, the plaintiff’s solicitors sent the defendant a formal letter requesting that the defendant transfer the property to the plaintiff. It does not appear that the plaintiff received a response to the formal letter.
Lina deposed that she no longer speaks to the defendant after an argument regarding the property in or around October 2016. Ahmad deposed to having verbal confrontations with the defendant regarding this proceeding on or around 20 July 2018 and on 7 October 2018.
Procedural history
At a directions hearing on 12 October 2018, the Court made orders for the plaintiff to file written submissions.
On 26 October 2018, the plaintiff filed written submissions, addressing the merits of his claims and the effect of the defendant’s failure to appear in the proceeding given that he was apparently illiterate.
On 19 December 2018, the Court raised the following concerns with the plaintiff’s application:
(a) the plaintiff relied on a decision of the Administrative Appeals Tribunal (‘AAT’) to support his claim of issue estoppel but did not provide any direct evidence of his claim that the property is held on constructive trust for him by the defendant; and
(b) a current certificate of title of the property which to that stage had not been provided to the Court.
On 29 May 2019, the plaintiff filed a further affidavit.
On 6 September 2019, the plaintiff provided further written submissions addressing the issues raised in his affidavit of 29 May 2019.
AAT decision — issue estoppel
The plaintiff submitted the defendant is estopped from claiming the beneficial ownership of the property, owing to a previous decision of the AAT.[2]
AAT decision
[2]Hussein v Chief Executive Centrelink (Administrative Appeals Tribunal, Member A Grant, 4 October 2017).
The defendant received payments of a disability support pension from the Department of Human Services (‘Centrelink'). On 10 October 2016, an officer of Centrelink determined the defendant was the beneficial owner of the property, which he had not declared as one of his assets or interests to Centrelink.[3] As a result, Centrelink claimed the defendant had been overpaid in the amount of $189,703.02.[4] This decision was reviewed internally, at the defendant’s request, and it was found that the decision was correct.[5] The defendant then appealed this decision to the AAT.
[3]Ibid [2].
[4]Ibid [1].
[5]Ibid [2].
The defendant submitted before the AAT that he was holding the property on trust for his son.[6] This was the sole issue determined by the Member.[7] The Member found that the defendant had no beneficial interest in the property, and was holding it on trust for the plaintiff.[8]
[6]Ibid [7].
[7]Ibid [11].
[8]Ibid [33].
The AAT decision traverses substantially the same ground as the facts alleged by the plaintiff in this proceeding. The plaintiff initially attempted to use the factual findings in the AAT decision as the basis of his claim in this proceeding.
Issue estoppel
The plaintiff relied on the oft-quoted passage of Dixon J’s judgment in Blair v Curran to frame his submissions on issue estoppel:
A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies.[9]
[9](1939) 62 CLR 464, 531.
In that judgment, his Honour went on to say:
The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion… In matters of fact issue estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established.[10]
[10]Ibid 531–2.
Issue estoppel is a complex area of law, and there is judicial disagreement whether it is a rule of evidence or a rule of law.[11] The test to determine whether issue estoppel applies in a subsequent proceeding has three elements:
[11]See Commonwealth of Australia v Sciacca (1988) 17 FCR 476, 480 (‘Sciacca’) for a comprehensive list of references for both propositions.
(a) That the same question has been decided;
(b) That the judicial decision which is said to create the estoppel was final; and
(c) That the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.[12]
[12]Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853, 935 (Lord Guest), cited by the Full Court in Kuligowski v Metrobus (2004) 220 CLR 363, 373 [21].
The first element is not in issue.
As to the second element, the plaintiff submitted that the AAT makes decisions that are final in nature, and therefore its decisions can create issue estoppel. The plaintiff cited Administration of the Territory of Papua and New Guinea v Daera Guba (‘Daera Guba’)[13] and Cross on Evidence[14] to support this proposition.
[13](1973) 130 CLR 353, 453 (Gibbs J) (‘Daera Guba’).
[14]LexisNexis Australia, Cross on Evidence (online at September 2018) [5030].
Daera Guba concerned a tri-partite dispute between two separate clans and the Administration of Papua New Guinea over an area of land in Port Moresby. The Administration contended that the dispute over who owned the land had been definitively determined by the decision of a special Land Board in 1954.[15] The doctrine of estoppel was taken to extend to the decision of the Land Board, which was empowered to make a final determination of ownership of parcels of land.[16] The plaintiff relied solely on Gibbs J’s analysis of this point, to support his contention that the AAT decision gives rise to issue estoppel in the present case.
[15]Daera Guba (n 13) 369 (Barwick CJ).
[16]Daera Guba, (n 13) 403–4 (Barwick CJ); 452–9 (Gibbs J, Stephen J agreeing).
Contrary to the plaintiff’s submissions, Daera Guba has not been interpreted by Australian courts to support the proposition that decisions of the AAT give rise to issue estoppel.[17] Daera Guba is regarded as applying to cause of action estoppel only.[18] Indeed, in Daera Guba, Gibbs J notes that issue estoppel is not applicable to the dispute.[19]
[17]Midland Metals Overseas Ltd v Comptroller-General of Customs (1991) 30 FCR 87, 98 (Hill J) (‘Midland Metals’); Lilienthal v Migration Agents Registration Authority [2001] FCA 2, [22] (Katz J) (‘Lilienthal’).
[18]Midland Metals (n 17) 98 (Hill J); Minister for Immigration, Local Government and Ethnic Affairs v Gugerli (1992) 36 FCR 68, 78 (Davies J) (‘Gugerli’).
[19]Daera Guba (n 13) 453 (Gibbs J).
More generally, the authorities favour the view that AAT decisions and findings cannot give rise to issue estoppel.[20] In one of the oft-quoted decisions on this topic, Midland Metals Overseas v Comptroller General of Customs (‘Midland Metals’),[21] Hill J noted a range of reasons for this, including:
(a) The AAT is an administrative body, which acts in an administrative capacity;
(b) The rules of evidence do not apply to proceedings before the AAT.[22]
[20]See Gugerli (n 18); Langley v Repatriation Commission (1993) 43 FCR 194, 202 (Lockheart and Beazley JJ); Lilienthal (n 17); Midland Metals (n 17) 96 (Hill J); Sciacca (n 11) 480. Cf Re the Hospital Benefit Fund of Western Australia Inc and Department of Health, Housing and Community Services (1992) 16 AAR 158, [20]. See also Dennis Pearce, Administrative Appeals Tribunal (LexisNexis Butterworths, 4th ed, 2015) 327–8.
[21]Midland Metals (n 17).
[22]Ibid 96–7 (Hill J).
Following Midland Metals, there will be no issue estoppel regardless whether the tribunal remits a decision to a decision maker or substitutes its decision for that of the original decision maker, as in both cases the final decision rests with the decision maker, not the tribunal.[23] In the latter situation, Hill J concluded that the tribunal substitutes its decision for that of a decision maker in a merely administrative capacity.[24]
[23]Ibid 97.
[24]Ibid.
In Morris v Riverwild Management Pty Ltd,[25] Weinberg J made a number of observations regarding the uncertainty surrounding issue estoppel as it applies to administrative tribunals, although the case in question concerned the Victorian Civil and Administrative Tribunal. His Honour found:
Arguably, [there is] a disconformity between the availability of issue estoppel in relation to AAT proceedings, at the federal level, and VCAT proceedings, at the State level. At some point, that apparent disconformity may have to be addressed by the High Court.[26]
[25][2011] 38 VR 103.
[26]Ibid 122 (Weinberg J).
For present purposes, it is sufficient to say that the weight of recent authority suggests that issue estoppel cannot arise out of the AAT decision. Accordingly, it is necessary to consider whether the defendant is holding the property on constructive trust for the plaintiff.
Is the defendant holding the property on constructive trust for the plaintiff?
Plaintiff’s submissions
The plaintiff submitted that the property is held for his benefit by way of a common intention constructive trust.
Citing Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc (‘Imam Ali Islamic Centre’),[27] it was submitted that the Court will construe a common intention constructive trust where:
[27][2018] VSC 413, [402] (McMillan J) (‘Imam Ali Islamic Centre’).
(a) there is an actual or inferred common intention of the parties as to their beneficial interest in a property;
(b) there has been detrimental reliance on that common intention by the claimant; and
(c) it would be an equitable fraud on the claimant to deny his or her interest in the property.
The plaintiff submitted that, at the time of transfer of the property, there was a common intention between the parties that the defendant would hold the property on constructive trust for the plaintiff, while the plaintiff retained full beneficial title. This was done because the plaintiff was not himself able to refinance to avoid a mortgagee sale. The defendant also took out a mortgage with the ANZ to satisfy repayment of the NAB mortgage but, on agreement between the parties, it was the plaintiff who made the repayments to service the ANZ mortgage.
The plaintiff submitted that there was an ‘actual intention’ as to this arrangement. Alternatively, he submitted that this common intention could be inferred from the conduct of the parties, namely, that the plaintiff paid all outgoings on the ANZ mortgage and for maintenance of the property, while the title was held in the defendant’s name. The defendant was described by the plaintiff as a ‘stranger’ to the property.
The plaintiff submitted that he relied on the parties’ common intention by continuing to pay for all expenses associated with the property, and that such reliance will be to his detriment should the defendant be permitted to deny the plaintiff his beneficial interest. Accordingly, it would be unconscionable for the defendant to depart from the common intention, and equity should intervene to recognise the plaintiff’s beneficial interest in the form of a constructive trust.
Constructive trusts
The Court will construe a common intention constructive trust where:
(a) there is an actual or inferred common intention of the parties as to their beneficial interest in a property;
(b) there has been detrimental reliance on that common intention by the claimant; and
(c) it would be an equitable fraud on the claimant to deny his or her interest in the property.[28]
[28]Ibid. See also Sobey v Sobey [2014] VSC 373, [44] (Almond J); Hohol v Hohol (1981) VR 221, 225 (O’Bryan J).
The party asserting a beneficial interest against the legal owner bears the onus of proving such a trust.[29] Before making an order for the plaintiff, the Court must be satisfied on the balance of probabilities that the plaintiff’s case is made out on the evidence.
[29]Imam Ali Islamic Centre (n 27).
The common intention between the parties requires that the claimant should have been intended to have some form of beneficial interest in the property.[30] Intention can be established through the parties’ express statements and conduct, such as financial contributions to acquiring property, payment of mortgages and comments regarding ownership of property.[31] The intention will usually form at the commencement of the purchase of property or transfer of it,[32] but can also arise after the acquisition of property.[33] The inquiry is one of fact; the Court is concerned with determining the actual intentions of the parties rather than imposing what might be considered fair.[34]
[30]Shepherd v Doolan [2005] NSWSC 42, [36] (White J); Hohol v Hohol (n 28) 225–6.
[31]Shepherd v Doolan (n 30) [37]–[39]; Rasmussen v Rasmussen (1995) 1 VR 613, 615 (Coldrey J); Allen v Snyder [1977] 2 NSWLR 685, 698 (Samuels JA); Green v Green (1989) 17 NSWLR 343, 353, 355 (Gleeson CJ, Priestley JA agreeing).
[32]Hohol v Hohol (n 28).
[33]Rasmussen v Rasmussen (n 31) 616.
[34]Hohol v Hohol (n 28) 226; Shepherd v Doolan (n 30) [34], [37]; Rasmussen (n 31).
A court’s determination of what constitutes detriment can be very broad.[35] The relevant detriment can be financial contributions made to a property, giving up former living conditions or other options for accommodation, or being paid little for work undertaken on a property.[36]
[35]Shepherd v Doolan (n 30) [40].
[36]Hohol v Hohol (n 28) 227 (O’Bryan J); Rasmussen v Rasmussen (n 31) 628 (Coldrey J).
The final element of the test is that it would be a fraud on the claimant if their interest were denied.[37] This has also been treated as a requirement of unconscionability,[38] and has invited parallels with the law of proprietary estoppel.[39]
Consideration
[37]Hohol v Hohol (n 28) 225.
[38]Rassmussen v Rasmussen (n 31) 628.
[39]GE Dal Pont, Equity and Trusts in Australia (Thomson Reuters, 7th ed, 2019) [38.225]–[38.230].
Much of the relevant evidence supporting the plaintiff’s claim of a common intention constructive trust comes from his own affidavits.
In respect of the common intention of the parties, the plaintiff deposed that the defendant and he had a conversation about the transfer in or around February 2006. The plaintiff further deposed that he had a similar conversation during a meeting at Mr Bucca’s office, during which Mr Bucca explained that the defendant would hold the property as trustee in order to secure a new loan and avoid a mortgagee sale. The plaintiff deposed that Mr Bucca prepared the relevant documents for the transfer of land. The plaintiff deposed that the defendant did not pay anything for the transfer of the property, despite the transfer of land stating the consideration as ‘$395,000’. The plaintiff acknowledged that the defendant took out the ANZ mortgage on the property, however he deposed that he has made all payments on this mortgage.
The only evidence of these events is what is deposed to in the plaintiff’s affidavits of 29 May 2019 and 1 June 2018. The documentary evidence provided to support these claims consists of two exhibits. The first, exhibit MFN-4 to the plaintiff’s 29 May 2018 affidavit, is a copy of a transfer of land of the property to the defendant dated 10 February 2006. The second, exhibit MFN-1 to the plaintiff’s 1 June 2018 affidavit, is a historical title search for the property, which shows that on 17 February 2006 the NAB mortgage was discharged, the property was transferred to the defendant and the ANZ mortgage was lodged.
This evidence supports the plaintiff’s claims in relation to the two mortgages, and the fact that the property was transferred to the defendant on 17 February 2006.
However, there were no other documents provided to the Court that could illustrate a common intention between the parties as to the beneficial ownership of the property. For example, there were no documents from Mr Bucca relating to the transfer of land. It may be that these documents were subject to privilege, as Mr Bucca appears to have been the defendant’s solicitor. However, no effort by the plaintiff seems to have been made to retrieve such documents. In a case such as this, any file notes that Mr Bucca may have made when discussing a transfer of land between the parties could be critical in determining that a common intention existed between them that the plaintiff would retain the whole beneficial interest in the property.
The plaintiff claims that, following the transfer of the property to the defendant on 17 February 2006, he paid for all of the utility bills, rates, maintenance and mortgage repayments for the property. However, he did not exhibit a single receipt, invoice, bank statement or other evidence of payment for any of these expenses over the relevant period of time. As such, the plaintiff’s affidavits of 1 June 2018 and 29 May 2019 are primarily bare statements of fact. If the plaintiff’s account of the facts is taken to be true, it is implausible that he was unable to obtain at least some of these documents to corroborate his statements.
The transfer of land between the plaintiff and defendant, which was one of the two relevant exhibits, lists the consideration provided for transfer of the property as $395,000. The transfer of land lists two parcels of land with separate volume and folio numbers, but relief is sought only in relation to one of these. The Court was not addressed on this issue.
Further, there were no documents from the ANZ concerning the mortgage or the loan to the defendant. In the ordinary course, the ANZ would require reasons for the transfer and details of the defendant’s financial circumstances so that it could ascertain whether the loan would be viable. For example, the amount claimed by Centrelink for the overpayment of the disability support pension to the defendant suggests that at the time of the transfer the defendant was a pensioner.
Despite the figure given for consideration, the plaintiff deposed that no consideration was provided by the defendant. He has provided no documentary evidence to the Court on this point. For example, none of the plaintiff’s bank statements from the relevant year have been provided. The exhibit, as it stands, weighs against the plaintiff’s case.
In her affidavit, Lina deposed that, on or around 15 June 2018, her mother gave her a rates notice for the property for $10,578.50, which was payable on 22 June 2018. Lina deposed that her mother told her that the defendant wanted the plaintiff to pay the rates notice. To the extent that statement is intended to prove that the defendant wanted the plaintiff to pay the rates notice, it is inadmissible as hearsay under s 59(1) of the Evidence Act 2008. Lina deposed that she took a photo of the rates notice and sent it to her brother to pay, but no such photo is exhibited by her.
Ahmed’s affidavit contained statements of belief that his parents were working together to prevent the plaintiff from obtaining the title to the property. He also deposed to a conversation with his mother, the contents of which are inadmissible as hearsay under s 59(1) of the Evidence Act 2008.
Although the AAT decision was provided to the Court as evidence going to arguments regarding issue estoppel, it does not bear on the question of whether a common intention constructive trust has arisen. If it did, issues of admissibility of the decision would arise and the plaintiff has not addressed these issues in his submissions.
Conclusion
On the evidence before the Court, the plaintiff has failed to prove, on the balance of probabilities, any of the three elements necessary for a finding that the defendant holds the property on constructive trust for the plaintiff.
In the circumstances, the plaintiff will be provided with a further opportunity to file any other evidence and written submissions within 28 days. Otherwise, the proceeding will be dismissed.
---
3
8
0