Ozaltay v Atilla

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

TRUSTS, EQUITY & PROBATE LIST

S CI 2013 03714

BOURHAN OZALTAY and SAFAK OZALTAY	Plaintiffs
v
SELEN ATILLA	First Defendant
-and-
SIBEL COFFEY (also known as Sibel Mustafa)	Second Defendant

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JUDGE:	McMillan J
WHERE HELD:	Melbourne
DATE OF HEARING:	12, 13, 14 December 2016, 31 January, 1 February 2017
DATE OF JUDGMENT:	1 November 2017
CASE MAY BE CITED AS:	Ozaltay & Anor v Atilla & Anor
MEDIUM NEUTRAL CITATION:	[2017] VSC 664

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TRUSTS — Where plaintiffs claimed repayment of loan from defendants — Where loan claim abandoned and plaintiffs alleged constructive trust against defendants — Where at trial plaintiffs sought to claim in the alternative a resulting trust — Claim dismissed — No point of principle.

LOAN — Where plaintiffs claim repayment of loan to defendant —Defendant alleges a gift or payment for services — Where plaintiffs claim dismissed — No point of principle.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr D W Laidlaw CSC	Bowlen Dunstan & Associates
For the First Defendant	Mr N P Jones	Portfolio Law
For the Second Defendant	In person	Adams Maguire Sier

HER HONOUR:

Introduction
The plaintiffs’ constructive trust claim

This proceeding primarily concerns the ownership of a property known as 20 Woolnough Drive, Mill Park, in the State of Victoria (’20 Woolnough Drive’ or ‘the property’), registered in the names of the defendants, who are the plaintiffs’ adult children. The plaintiffs live in the property. They seek that the defendants transfer the property to them on the basis of a common intention constructive trust. At trial, they made an oral application to add a new alternative claim alleging a resulting trust in their favour.

The second defendant gave evidence in support of the plaintiffs’ claim. She did not resist the constructive trust claim or the transfer of her share of the property to the plaintiffs. The first plaintiff, Mr Ozaltay, disclosed for the first time in his oral evidence that the second defendant had signed a transfer of land. It is dated 23 July 2014 with the expressed consideration being ‘entitled in equity’. The transfer had not been discovered by the plaintiffs or the second defendant prior to the commencement of the trial and has not been lodged with the Land Titles Office.

The first defendant opposed the plaintiffs’ claims made against her and denied that her interest in 20 Woolnough Drive should be transferred to the plaintiffs.

The Cyprus payment

The plaintiffs made a second claim against the first defendant seeking payment of the sum of £10 000. The plaintiffs contend, and the first defendant denies, they loaned £10 000 to the first defendant in May 2011 when they were in Cyprus, which loan was repayable on demand by them (‘the Cyprus payment’).

Conclusions on the two claims

The determination of the two claims is that both claims are dismissed.

Procedural history of the property claim
Plaintiffs’ initial claim

Prior to the commencement of the proceeding, the plaintiffs sought payment of the sum of $451 104 from the first defendant said to be owing pursuant to a deed dated 23 September 2002 (‘the 2002 loan agreement’), otherwise they would commence proceedings for recovery of the debt. They also indicated that they would be prepared to accept a transfer of the property in full and final settlement.

In 2013, this proceeding was issued seeking payment for an amount of $295 000 for the loan plus interest and costs pursuant to the 2002 loan agreement, alleging that:

In performance of the deed, the plaintiffs advanced the principal sum by providing the [sic] all of the funds to complete the purchase of [20 Woolnough Drive].
PARTICULARS
The land was purchased by the defendants for the price of $295,000 together with duties, expenses and adjustments and settled on 2^nd October 2002.

The plaintiffs alleged that in breach of the 2002 loan agreement, the defendants defaulted in repayment of the loan and claimed $295 000 plus interest of $159 138.36 and continuing at the rate of $40.41 per day, and also sought a declaration that the plaintiffs were entitled to an equitable charge over the estate and the interest of the first defendant in 20 Woolnough Drive.

First defendant’s defence

The first defendant denies all of the claims made against her. She does not admit that she signed the 2002 loan agreement. She also says that no moneys were advanced to her by the plaintiffs pursuant to the 2002 loan agreement. Alternatively, she says that if she did sign the 2002 loan agreement, her signature was procured by the knowingly false and untrue representations made by the plaintiffs regarding the 2002 loan agreement and upon which she relied.

Plaintiffs’ first amended statement of claim

On 10 July 2014, the plaintiffs amended their claim to add an alternative claim for a common intention constructive trust over 20 Woolnough Drive on the basis that in or about June 1998, the common intention of the parties was that:

(a)The plaintiff’s [sic] would transfer all their title and interest in Pandora Avenue to the defendants, (“the Transfer”);
(b)The defendants would upon registration of the Transfer, hold all of their title and interest in Pandora Avenue for the benefit of the plaintiffs;
(c)The plaintiffs would continue to have the exclusive right to occupy Pandora Avenue;
(d)The defendants would transfer all of their title and interest in Pandora Avenue back to the plaintiffs upon request of the plaintiffs.

PARTICULARS
The Common Intention of the parties arose out of oral discussions between them occurring at Pandora Avenue shortly prior the Transfer [of 11 Pandora Avenue]. The substance of the discussion was to the effect that, as the plaintiffs were concerned as to the risks of certain litigation they were at that time parties to, they wished the defendants to hold the legal title to Pandora Avenue on their behalf until such time as the plaintiffs sought its return. The defendants agreed to this proposal. The parties agreed that, pending the re-transfer of legal title, the plaintiffs would continue to reside in Pandora Avenue as their home.

The plaintiffs claimed the following relief:

a.A declaration that the first defendant’s interest as a registered proprietor in the whole of the land described in Certificate of Title volume 10180, folio 562 situate at 20 Woolnough Drive, Mill Park in the State of Victoria, is held on trust for the plaintiffs, or is held or is held on trust for the plaintiffs and the defendants in such proportions as this Honourable Court shall find;
b.An order requiring the first defendant to transfer the first defendant’s interest as a registered proprietor in the whole of the land described in Certificate of Title volume 10180, folio 562 situate at 20 Woolnough Drive, Mill Park in the State of Victoria, to the plaintiffs;

c. Alternatively, equitable compensation.

Plaintiffs’ claims and proposed amendments at trial

At trial, the plaintiffs ‘elected’ not to proceed with their debt claim arising pursuant to the 2002 loan agreement. By oral application, they sought to amend their claim again by including an additional and alternative claim for a resulting trust in their favour.

Witnesses at trial

Each of the plaintiffs gave evidence at the trial. The second defendant and her husband, Mr David Coffey, and Mr John Collard, a solicitor from Collards Lawyers, also gave evidence for the plaintiffs.

The first defendant gave evidence, as did her husband, Mr Hassan Atilla.

Factual background

In about 1972, the plaintiffs migrated to Australia from Cyprus. In 1973, Mr Ozaltay started working at Westpac Bank and worked there for around 22 years, primarily as a loans officer.

In 1990, Mr and Mrs Ozaltay built a family home on property they had purchased at 11 Pandora Avenue, Thomastown (‘Pandora Avenue’).

In early 1995, Mr Ozaltay resigned from Westpac Bank. He received a superannuation payment of over $200 000. Using that payment, he purchased a video rental business in Sydney Road, Coburg (‘the video rental premises’) for $88 000 and paid $40 000 off the mortgage secured by Pandora Avenue, which amount he either lent or gave to his son, Mr Ali Ozaltay. Mr Atilla said he helped Mr Ozaltay with the video rental business without being paid on the basis that Mr Ozaltay told him ‘this is not work relationship. You just help me out. I'll help you out with a lot.’

Purchase of a hot bread shop business

Mr Ozaltay said that in around 1996 or 1997, a business known as the Lalor Hub Hot Bread and Cake Shop (‘the bread shop business’) was purchased. The evidence he gave differed as to his share in this business. He said he contributed to the purchase price by borrowing $185 000 from Westpac Bank, using Pandora Avenue as security. He also said he contributed $110 000 to buy a half share of the business with the remainder of the purchase price of approximately $90 000 being paid by a Mr and Mrs Osman. The contemporaneous business name extract for the business shows that a business name ‘Lalor Hub Hot Bread and Cake Shop’ was registered in November 1997 and was initially purchased as an equal partnership between Mr and Mrs Ozaltay, Mr Ali Ozaltay and his wife, Oya, and Mr Ali Osman and his wife, Mrs Pembe Osman.

Mr Ozaltay said that Mr Ali Ozaltay ran the bread shop business for a year. Mr Atilla said that in 1997 Mr Ozaltay and Mr Ali Ozaltay started asking him to help in the bread shop business and he did so from mid-1997. Mr Ozaltay said that after about a year of Mr Ali Ozaltay running the business, his half share was sold to the other owners for $140 000. Mr Ozaltay also said that he purchased a block of land for $20 000 as a gift to Mr Ali Ozaltay.

In August 1996, Mr Aytekin Tatlica and his wife, Mrs Serpil Tatlica, purchased the Osmans’ share of the bread shop business. Mr and Mrs Tatlica were friends of the Ozaltays and Mrs Ozaltay said they decided to purchase a share in the bread shop business because Mr Tatlica’s work was closing down and he was looking for alternative work. She said after purchasing a share of the business, Mr Tatlica decided that he did not want to work and regretted buying into it.

The Tatlicas’ County Court proceeding against the Ozaltays

In February 1997, Mr and Mrs Tatlica issued a proceeding in the County Court of Victoria against, inter alia, Mr and Mrs Ozaltay and Mr Ali Ozaltay claiming repayment of the amount paid for their share of the bread shop business (‘the County Court proceeding’). The County Court proceeding was brought against Mr Ozaltay under another name—‘Burhan Mustafa’—that was used by him. Mr Ozaltay described the County Court proceeding as a dispute over the Tatlicas’ decision to discontinue purchasing a share of the business and that they failed to pay him for their share of the business. The judgment in the County Court proceeding was in evidence and Mr Ozaltay’s summation of it is in stark contrast to the judgment.[1]
[1]Tatlica v Mustafa (Unreported, County Court of Victoria, Judge Dyett, 16 June 1998).

The first defendant was not sure of the exact sequence of ownership of the bread shop business other than she thought that Mr Ali Ozaltay originally owned it jointly with a Mr Osman. At some stage after Mr Osman left the business, Mr and Mrs Tatlica became involved and this resulted in the problems that went to court but she was not aware of the details of the dispute.

Fire destroys the video rental premises

On 14 June 1997, a fire at the video rental premises effectively destroyed the business. Mr Ozaltay claimed that he received $116 000 from his insurer after the fire and noted that ‘[i]t was unfortunately a low amount because I didn’t add the other store that I picked up’. This was the first and only mention of another ‘store’ during the trial. No records for the receipt of the insurance funds were in evidence. The amount of $116 000 is contradicted by a letter in evidence that stated Mr Ozaltay’s insurer intended to pay him $100 000 for the fire claim. After the fire in the video rental premises, Mr Ozaltay said he ran the bread shop business. He also said that at some stage after the fire, Mr Ali Ozaltay was having difficulty running the bread shop business and various unpaid creditors started visiting and calling the Ozaltays ‘looking for money’. Sometime in late 1997, Mr Ali Ozaltay moved into Pandora Avenue and ‘people were coming, knocking my door, threatening, asking for money’ and Mr Ozaltay became ‘fed up’ with this.

Discussions to transfer the bread shop business to Mr Atilla

In early 1998, Mr Ali Ozaltay and Mr Ozaltay approached Mr Atilla offering to sell part of the bread shop business for $90 000 to him. Mr Atilla refused the offer as he understood the business was struggling financially at the time. He did, however, become more involved in working at the bread shop. Later on, Mr Ozaltay made him another offer to purchase a half share in the bread shop business for $30 000 and Mr Atilla agreed to this. Mr Ali Ozaltay told Mr Atilla that he wanted money to walk away from the bread shop business. Mr Atilla recalled that he paid the money for the business to Mr Ali Ozaltay at Pandora Avenue in cash in a plastic bag. Mr Atilla said he funded the purchase with his savings from when he worked in Cyprus and his savings with the first defendant, including money received on their marriage. After this, Mr Ozaltay gave Mr Atilla some documents to sign and told him the documents would be taken to a solicitor. Mr Atilla described Mr Ozaltay’s evidence that the payment and purchase of the bread shop business never took place as ‘lies’. Mr Atilla signed what he was told was an agreement to purchase half of the business. He did not have a copy of it and has been unable to locate it upon enquiries with the solicitors, Collards. He believed his purchase was done in early 1998 before the commencement of the trial of the County Court proceeding on 21 May 1998. The first defendant’s evidence accords with Mr Atilla’s evidence in this respect.

The first defendant said that at some stage thereafter, Mr Ozaltay said that he was going to set up a trust company called Izel Enterprises Pty Ltd (‘Izel Enterprises’) and he suggested to her that she be a director of the company. Mr Atilla also said that Mr Ozaltay told him that he was planning to set up a family company to own the bread shop business. Mr Ozaltay said that Izel Enterprises took over the bread shop business in about 2000. He also said that he ‘prepared’ the company on 3 April 1995 and told the first defendant she could be a director of the company and ‘if anything comes up, you can run the company and share whatever income will come’.

After the purchase of a share of the bread shop business, Mr Atilla began working six nights a week, if not seven, baking the bread and working from approximately 10pm to 6am. He continued to do so until the business was sold in 2001. Both the first defendant and the plaintiffs also worked in the business, with the first defendant mainly working on weekends and Mr and Mrs Ozaltay working during the day. Mr Ozaltay controlled the money, made the purchases, placed the orders and looked after the accounting side. The second defendant occasionally helped as well. Mr Ozaltay agreed that the first defendant did not receive a wage for her work in the bread shop business.

Mr Ozaltay denied that he had approached the first defendant and Mr Atilla with his son and offered to sell them the son’s share in the bread shop business for $90 000. He also denied that shortly thereafter he and Mr Ali Ozaltay made a further offer to them to sell the share for $30 000. Mr Ozaltay denied that he reached an agreement with Mr Atilla to the effect that Mr Atilla would own half the business for the amount of $30 000 to be paid to Mr Ozaltay. He also denied that from that time onwards Mr Atilla worked in the shop full-time, usually six days a week. Rather, Mr Ozaltay said that Mr Atilla was not working so continuously.

Mr Ozaltay did agree, however, that on 1 May 1998 he transferred the bread shop business to Mr Atilla, that Mr Atilla became the registered owner of the bread shop business and that the lease for the premises was in Mr Atilla’s name.

Mrs Ozaltay said she worked in the bread shop from 1998 to 2001. She agreed that Mr Atilla also worked there in that period. She did not receive payment for working there as the business was not making any money although she said Mr Ozaltay was paid. She said that she and Mr Ozaltay supported the bread shop business from their savings and earnings from the video shop. This was done because Pandora Avenue was security for the bank loan for the purchase of the business. Mrs Ozaltay denied that an agreement was reached in 1998 with Mr Atilla and the first defendant that they would become half owners of the hot bread shop business. Nonetheless, she agreed that Mr Atilla’s name was ‘included as the owner’ of the bread shop business from 1 May 1998 in an attempt to stop Mr Ali Ozaltay from taking money from the business as he and Mr Atilla did not get along. Mrs Ozaltay also denied that Mr Atilla paid anything to be included as an owner of the business.

Mr Ozaltay was unable to provide any idea of how much money the bread shop business earned each week. In cross-examination, Mr Ozaltay denied that when discussing the purchase of a share in the bread shop business by the first defendant and Mr Atilla, Mr Ozaltay said he ‘would open up a family trust and that she and her husband would have half interest in the trust and you and your wife would have the other half’; that there was a contract of sale of the business that was signed giving Mr Atilla an interest in the business; that Mr Atilla worked at the bread shop business; that Mr Ali Ozaltay taught him how to work in the bakery and that the first defendant worked at the bread shop business most weekends and sometimes during the week.

The documentary evidence in respect of Izel Enterprises establishes that the company was the trustee of a family discretionary trust, being Izel Family Trust, the beneficiaries being certain members of the Ozaltay family.

Mrs Ozaltay was aware that on 17 November 1998, Izel Enterprises was a trustee of the Izel Family Trust. Mr and Mrs Ozaltay denied that Mr Atilla was a beneficiary of the trust, despite contrary evidence in the tax documents for the trust. According to Mr Ozaltay, the beneficiaries of the trust were the defendants and his grandson.

The second defendant had little knowledge of the ownership of the bread shop business. She believed that in about 1998 her parents purchased it for Mr Ali Ozaltay and, at some point, that changed and her parents began working in the shop at least six days a week. The second defendant knew nothing about the Izel Family Trust and to her knowledge she did not receive any money from it. She was taken to entries in the trust statements for the Izel Family Trust that set out distributions made to her but denied receiving those distributions and, to her knowledge, did not declare them in her tax returns.

Discussions to transfer Pandora Avenue

Mr Ozaltay said that in about April 1998, he spoke with the defendants, both of whom he said knew he was receiving threats, and asked them whether he could transfer Pandora Avenue into their names. At this time, both defendants and Mr Atilla lived at Pandora Avenue. The second defendant was still a student at secondary school.

Mr Ozaltay said the discussions between the plaintiffs and defendants took place at Pandora Avenue. He recalled the discussions occurring approximately one month before the transfer of Pandora Avenue, placing those discussions in late May 1998. A letter from Collards stating that the firm had instructions on 31 March 1998 to act in respect of the sale and purchase of Pandora Avenue contradicts that timeline. Mr Ozaltay also said that he believed the discussions commenced around April 1998 as they occurred about the same time that he saw his accountant regarding the change of ownership of the bread shop business to Izel Enterprises. He also said that the conversations occurred a few times before the transfer was made in June 1998.

Mr Ozaltay’s description of the discussions with the defendants was that he asked them whether they would be prepared to accept the transfer of Pandora Avenue into their names on the understanding that the plaintiffs would be pay all loan repayments and could stay there as long as they wanted. Mr Ozaltay believed the defendants were happy with this arrangement and they agreed to it. Mr Ozaltay said he agreed that on the transfer of Pandora Avenue, it was to be owned entirely by the defendants whilst he and Mrs Ozaltay would live there ‘as owners of the house’ and ‘meet all the obligations’, such as loan repayments, rates and insurance. When asked if he was giving Pandora Avenue to the defendants, Mr Ozaltay responded, ‘it was transferred to them, yes, but on the understanding that if and when we will need our house back we will get it back’. In later evidence, Mr Ozaltay also said that he discussed the transfer with the defendants, ‘on the understanding that we have to clear out a loan to the other side because the bank sent us … a letter to vacate the premises, and then I went to sell the property where I paid $40 000 to reduce the loan. And thereafter I decided to change. I got fed up with people come [sic] to my door, and … sold the property’.

Mr Ozaltay’s evidence was that this understanding arose from the discussions with his daughters. In that respect, Mr Ozaltay said:

The girls said that they are prepared to sign and accept that what we have talked, and no problem with that. We proceeded with the transfer, and according to the solicitors. If they didn't understand, they wouldn't have proceeded with that. And it's not the first time that that happened. The second time, the girls and us did sign the documents in front of Mr Collard in his office.

In cross-examination, Mr Ozaltay denied that the conversation that took place was in fact to the effect that:

I'm going to give you the house and it's better that you have it than they come and take it. Do you agree that you said that?---I did not say such a thing. When I had to talk, I was talking to both (indistinct) not [the first defendant] only.
And you also said, "We will always live here together"?---We were living together.
And she said that you said that to her in the lounge room in Pandora Avenue. Do you disagree that conversation took place?---Well, I considered that when we lived together for sure, they never saved any money to buy a house so they could not afford to pay rent so why should they go out and waste their money, stay over there.
She will say that a few weeks later you said to her that you had to sell the house and that she and [the second defendant] should buy it?---Not in that moment, no.
And she'll say that you said, ‘I need the money and it's a good start for you in life," do you agree you said that?---I don't agree that.
And that she said that you would give them part of the house as a gift?---Never.

That they would borrow 160,000 and the rest of it would be a gift?---No.
She said that you arranged for a finance broker called Terry?---Yes.
And that he arranged for the loan through ING?---That's correct.
That he came to visit [the first defendant] and you and [the second defendant] at the Pandora Avenue house?---That's correct.
She said that at about this time she knew you had a disagreement with the Tatlicas, that she did not know that you were involved in the court case, would you agree with that?---The court case if it's on, she had the knowledge, yes.
So she'll say that she didn't know there's a court case until the actual hearing started, do you agree with that?---I don't agree with that. She knew the whole story.
She says that after you lost the County Court case messages were being left on the answering machine by irate persons including a Morris Milder, do you recall that?---I didn't have any message bank.
And she said people were coming to the door demanding money, do you recall that?---No.
She said that you wouldn’t answer the door and that you asked her to answer the door. Do you agree with that?---I would never do that. Where I am, I am responsible and I open the door. I don't let my girls open the door.

Mrs Ozaltay said that she and her husband discussed the ownership of Pandora Avenue and decided ‘to sell the house to the girls, transfer it to the girls’. They spoke to the girls about this decision a number of times and ‘the girls said that they wanted us to have the house transferred into their names and that they will return the house or re-transfer it onto our names whenever it was appropriate in the future.’ Her evidence was that it was the girls who initiated this conversation and as Mr Ozaltay ‘had a lot of issues at the time’ they decided ‘it was better to go this way’.

The first defendant said that the discussion about the transfer of Pandora Avenue took place in the context of her parents’ legal dispute with Mr and Mrs Tatlica. One day in early 1998, Mr Ozaltay was sitting in the family room and said to her that he would rather give Pandora Avenue to her and the second defendant than Mr and Mrs Tatlica. Later, Mr Ozaltay approached her and said he needed money, that he wanted to sell Pandora Avenue and suggested that she and the second defendant buy it. The first defendant told her father that she was concerned about obtaining a loan. He told her that he would give part of Pandora Avenue as a gift and that ‘Terry would fix it up’. Terry was a broker at Westpac Bank and a friend of Mr Ozaltay’s from his time working at Westpac Bank. The first defendant said there were then a number of discussions with Mrs Ozaltay and the second defendant. Mrs Ozaltay dismissed the first defendant’s account of these conversations as a lie.

The first defendant also asked the second defendant if she were willing to purchase Pandora Avenue with her, and she agreed. The first defendant also discussed the purchase with Mr Atilla. Mr Ozaltay told the first defendant it would be ‘a good beginning for us in life’ and, although the consideration would be $200 000, he did not need the full amount, only about $160 000. This was because he only needed to pay out the Westpac mortgage of $150 000 on Pandora Avenue and allow an amount for stamp duty and the rest would be given to the defendants.

The first defendant denied any discussion to the effect alleged in the pleadings as to a common intention. Mr Atilla was aware that Pandora Avenue was transferred to the defendants. He was not directly involved in discussions regarding the transfer but he overheard discussions about it. He recalled Mr Ozaltay saying ‘he would rather give the property to his daughters instead of giving anything to the Tatlicas’. He said this was a statement made generally to the room and occurred before the transfer of Pandora Avenue to the defendants. He discussed this with the first defendant who told him that:

… her dad was gonna give the property, he has the intention of giving the property to them, and then he changed his mind and he started saying he needs money and he is gonna sell the property. And eventually, my knowledge that I know, he sold the property to them.

Mr Atilla understood that the consideration for the sale was to be $200 000 and was aware that the first defendant had agreed to sign a mortgage as part of the transfer of Pandora Avenue. He was happy with this, especially in light of the fact that it was made clear to him that Mr Ozaltay was giving part of the property to his daughters.

The second defendant said her parents approached her and the first defendant about transferring Pandora Avenue into their names. The substance of the discussion was a request for the defendants to accept a transfer of Pandora Avenue ‘on the condition that we gave it back to them when they wanted it back’. Her understanding was not that she was being given Pandora Avenue and she observed in giving evidence ‘[i]t was always their home’. She conceded that she was still at school at the time and had little understanding of what was occurring. She understood that Mr Ali Ozaltay had numerous debts and that people were constantly coming to their house demanding money. She had little knowledge of the County Court proceeding. She was not aware that her parents lost the County Court proceeding, though apparently became aware of this at some stage in 1998, and was not aware that her parents had been ordered to pay money as a result of the County Court proceeding.

Discussions regarding the transfer of Pandora Avenue and the loan agreement

Mr Ozaltay then saw his solicitor, Mr Collard, about the transfer of Pandora Avenue. Mr Collard prepared the contracts and he suggested that the defendants have a different solicitor represent them. Mr and Mrs Ozaltay said the defendants were then represented on the transaction by a solicitor, Mr Frank Costanzo. Mr Ozaltay also said that Mr Collard acted for both the defendants and he and his wife in respect of the transfer of Pandora Avenue. No documents were produced to establish that Mr Costanzo acted for the defendants on the transfer of Pandora Avenue. Mr Ozaltay then said that Mr Collard suggested that a loan be prepared as ‘at least it protects all interest in future in case anything happens.’ Mr Ozaltay said ‘I trust my daughters, there is no need for a loan to be prepared’. This was his explanation for why he received a letter from Collards on 30 April 1998 indicating that the transfer was no longer going ahead. Mr Ozaltay later changed his mind about the loan agreement. In cross-examination, he said Mr Collard had prepared the loan document even though Mr Ozaltay did not tell him that he was lending any money to his daughters. He said that the same thing occurred regarding the 1999 loan agreement and the 2002 loan agreement.

The following exchange occurred regarding the instructions that Mr Ozaltay did, or did not, give Mr Collard:

When the Pandora Avenue property was … transferred from you to your daughters in 1998, that was prepared by Mr Collard, wasn't it, the transfer?---Yes.
And that's the transfer that called the consideration was $200 000?---Yes.
Did you tell Mr Collard that your daughters were going to pay you $200 000?---No.
Where did he get that figure from?---That was the variation done by the council and they took that variation.
But did you tell him that they were going to pay you $200 000?

---The contract of sale was $200 000, yes. That's what it has prepared and a solicitor was acting for the girls.
Did you tell Mr Collard that the property was to be held on trust by your daughters for you?---Yes.
When did you tell him that?---From the beginning and he's the one who gave all - - -
Before 11 Pandora Avenue was transferred?---No, after transferring, before it was under our names.
Sorry?---11 Pandora Avenue, we (indistinct) that property over there. It was under our names. Only when the property would have been transferred on to [the defendants], then we talk with Mr Collard.
When did you tell Mr Collard that the property was to be held on trust for you and your - - -?---On each occasion that we attended his offices.
Is that before or after the transfer was signed?---After. Well, it has been signed but the story of our conversation was going on all the time.

Mr Ozaltay said that Mr Collard put in a figure of $70 000 as the loan amount. Mr Ozaltay agreed to this amount, as it was very close to the amount of the cost of transferring Pandora Avenue, such as stamp duty, to the defendants. In later evidence, Mr Ozaltay expanded upon his instructions to Mr Collard explaining that his instructions were that Pandora Avenue was to be transferred to his daughters ‘and that if and when we require we will get it back for $200 000 and I will pay all the instalments’. In response to these instructions, Mr Ozaltay said that Mr Collard recommended that the defendants have a separate solicitor and that he would only act for the plaintiffs and he then prepared the contract of sale and the loan document.

Mr Ozaltay gave evidence that ‘each time that we were supposed to sign a document or so on I was asked to stay outside and the solicitor there talking to them and that we proceeded with the transfer’. Mr Ozaltay said that the defendants then signed the loan agreement in front of their solicitor and he and Mrs Ozaltay then signed the loan agreement in front of Mr Collard. The situation was explained thus:

Mr Ozaltay, whose idea was the loan agreement? Did you instruct Mr Collard to produce a loan agreement?---No.
Or was that his idea?---Mr Collard suggested, "Because one of them is married, just to protect your interest, this—if anything comes up, you can put caveat on the property and stop the transaction." So we prepared a loan agreement, and that was discussed with the girls. They were happy. And as I have said, they have a chat with Frank Costanzo, with the loan agreement with the other transfer documents, everything. They did a transaction in Mr Costanzo's place, and I paid all the legal costs.

Mr Ozaltay said the 1998 loan agreement was signed by him in front of Mr Collard as a witness to his signature. Initially he said his wife and daughters were with him when he signed the agreement, and then said that the defendants were not present and they signed the agreement separately and he was not present when they signed the loan agreement.

Mr Ozaltay denied that the 1998 loan was a fictitious loan and said that the $70 000 expressed to be the loaned sum was comprised of various sums, stamp duty and other expenses, as follows:

It's not a loan?---Your Honour, I sold a property for $200,000. They borrowed and paid Hiyla $60 000 to Westpac Bank, where their loan was paid to Westpac and this loan agreement, the purchase price of the house was 200. 160 paid to the other party. What happened to the $40 000? And they won. What happened to two solicitor fees, stamp duty, transfer and so on. That's why it is $70 000 thereabouts.
So, is it your—are you saying now that when you transferred the property to your daughters for $200 000 that they owed you $70 000 because of the $40 000 which is the 200 less the 160 000 and some other amounts for stamp duty and the like. Is that what you're saying?---That's the amount, around that figure. I didn't work it out.
So, you're saying, as a result of the transfer that was signed to transferring the property from yourself and your wife to your two daughters, that they owed you and your wife $70 000?---Yes. That's very close to the amount that they owed. It's not—$20 000 is a shortfall. Stamp duty, (indistinct).
You didn't actually pay them 70 000, did you?---No.
No?---Why should I pay $70 000 to them?

The following evidence was then given:

So did you regard that this $70 000 was an amount that you could ask your daughters to pay back to you?---No, that $70 000 actually went that the property will be hold on trust for us if and when I do require it, and I—as I have said before, I was (indistinct) the obligation of paying the loan and everything.
Well if you weren't—so are you saying that your daughters had no, as far as you're aware, they weren't ever required to pay back the 70 000 to you and your wife?---If I do request it, yes. If not, no.
So it was up to you. You could request that they pay you $70 000?---They could maybe pay me more, depending how much they would owe me. What difference does it make?
And why would they owe you money?---Well, if I pay on behalf of yourself, wouldn't you be owing me some money?
HER HONOUR: No, answer the question, not with a question, but answer the question. Repeat the question, Mr Jones.
MR JONES: Yes. Why would they owe you money?---Because there is a shortfall of $40 000 and there is stamp duty and other expenses there.
So you're saying that because you transferred the property to them, and they only paid 160 000, that they owed you 40 000 on the property. Is that what you are saying?---Yes.

When questioned further about the loan arrangement and its relationship to the alleged common intention trust, Mr Ozaltay appeared to agree that the arrangement was in fact that either the defendants could repay the $70 000 or re-transfer the property. Later in cross-examination, Mr Ozaltay again appeared to agree that, following the transfer of Pandora Avenue, approximately $150 000 from an ING account in the name of his two daughters was paid directly to the Westpac Account which he agreed was ‘my debt’. He then gave the following evidence:

And that money that was owed to Westpac and secured by a mortgage on 11 Pandora Avenue was owed by you and your wife?---That's correct.
And that was repaid by the ING account in the name of your two daughters?---My two daughters borrowed the money and gave it on my request to the bank to pay the loan, and in return they got the house.
So in return for paying your Westpac loan you say they got the house?---That's correct.
The ING loan was repaid, I put it to you, mostly from payments from a Westpac Bank account also in the name of your two daughters. Would you agree with that?---Yes.
And that the moneys in the Westpac Bank account in the name of your two daughters which was used to pay the ING loan account, also in their name, came from the bakery. Would you agree with that?---Came from where?
The moneys in the Westpac Bank account came from the bakery?

---From that account, yes.

Mrs Ozaltay said that she went to Collards with Mr Ozaltay and the defendants. The instructions given to Mr Collard were ‘that we wanted to have the ownership of [Pandora Avenue] transferred onto the girls like a sale and also to have a loan agreement contract prepared to that effect and that it will in the future be transferred back to us.’ When taken to the transfer of land in respect of Pandora Avenue, Mrs Ozaltay denied that the consideration of $200 000 recorded on the transfer was in fact received and said that they, in fact, gave the defendants some money.

Mrs Ozaltay said the 1998 loan agreement was prepared by Collards and all four parties signed it at Collards. In cross-examination, it was put to Mrs Ozaltay that the 1998 loan agreement stated that $70 000 had been lent to the defendants. Her response was, ‘if it says that that's what's happened at the time, yes’. When asked if this amount had in fact been paid, she said she could not remember. When asked about her understanding of the 1998 loan agreement, the following exchange occurred:

So is it the case you were asked to sign this by your husband and that's what you did?---Well, that would have been secured against the house. I mean passed over, you know, whole house to the girls, I mean it makes sense that, you know, $70 000 is not a big deal and it would have been secured against the house.
So are you saying that this 70 000 was some sort of security arrangement that you had because you had transferred the house to your daughters?---Yes.
So was it your understanding of this document that you could ask your daughters to pay you back $70 000?---No. We were—the understanding was that we were never going to ask for any money. The only thing we were going to request was the return of the property, the house.
Then why sign this document if you weren't going to ask for the money?---Well, no, that was to prevent claims made against the house if in case the daughters separated from their husbands, because [the first defendant] came to a point of separation on three different occasions and she used to come over crying.
So how did that protect you? That means you got $70 000, is that what you're saying?---I don't know. Sorry, I don't understand. I'm not going to—I can't answer, I don't understand, sorry.

Later Mrs Ozaltay said that she believed she made a mistake in her earlier testimony regarding the circumstances in which the 1998 loan agreement was signed and said that she and Mr Ozaltay signed at Collards and she thought the defendants signed at Costanzo’s. Mrs Ozaltay refuted the contention of the first defendant that when she signed the documents at Collards, she did not realise she was signing a loan agreement and believed the documents related to the transfer saying the first defendant ‘knew all along’ what she was signing.

The second defendant did not recall precisely when the signing of the documents for the transfer of Pandora Avenue and the 1998 loan agreement occurred. Notwithstanding this, she said at some stage Mr Ozaltay told her and the first defendant to see another lawyer and she went to a lawyer’s office in Lalor, which she believed was not Collards. It was unclear which document the second defendant is referring to but she said:

How did you get there on that day?---My sister and I went there together. I can't remember who drove. She may have driven.
Did you have an opportunity on that day to read the document?---Probably. I don't think I would've signed something or I would have read it definitely but I can't recall what it was exactly. I don't know.

In cross-examination, the second defendant agreed that it was possible that she may have gone to Costanzo’s in 1999, rather than in 1998. She also said that ‘I don’t actually recall much about signing the 1998 document…I don’t recall actually signing it. I don’t know where I was when I signed it.’

In cross-examination, the second defendant said that although the consideration listed in the transfer of Pandora Avenue was $200 000 she was never asked to pay this amount. She denied that the $40 000 difference between the sum borrowed and the consideration listed in the transfer of $200 000 was said by Mr Ozaltay to be a gift. The second defendant was unable to explain why the consideration was said to be $200 000 but agreed that it was possibly to make it look as though such an exchange had occurred. The second defendant agreed that her parents never lent $70 000 to her and the first defendant, as indicated by the 1998 loan agreement.

Mr Collard could not recall his involvement in the events and transactions of 1998 and, to his knowledge, he had not seen the transfer document before the trial. At one stage he said he might have been overseas at the time of this transaction. He said that he was aware that in 1998 his firm received instructions regarding a loan agreement but could not recall giving advice in relation to it or the circumstances surrounding it. He recalled that it was ‘a loan agreement with a charge over the property’. He did not know how the figure of $70 000 as a loan was arrived at in the loan agreement.

By letter dated 30 April 1998, Collards wrote to the plaintiffs and defendants advising that a loan agreement had been prepared and was ready for execution and requested that an appointment be made at Collards to discuss and execute the loan agreement. The letter implies that the instructions to prepare the loan agreement were received on behalf of both the plaintiffs and the defendants. Mr Collard recognised the signature of the witness to the defendants’ signatures on the 1998 loan agreement as a solicitor at his firm. He did not recognise the signature of the witness to the plaintiffs’ signatures and presumed it was an employee from his office. His evidence is contrary to that of Mr Ozaltay who said that Mr Collard witnessed his signature in the document.

Transfer of Pandora Avenue and execution of the loan agreement

The broker, Terry, came to Pandora Avenue to organise the loan to pay out the Westpac Bank. The defendants, their parents, and Mr Atilla were all present. Terry gave the defendants a number of documents to sign in order to apply for the loan. The defendants then obtained a loan of $160 000 from ING Mercantile Mutual Bank Ltd (‘ING’).

By letter dated 6 May 1998 to the plaintiffs and defendants, Collards confirmed instructions given on 5 May 1998 that the proposed transfer of Pandora Avenue to the defendants was not proceeding. Despite this letter, on 1 June 1998, Mr and Mrs Ozaltay signed a transfer of Pandora Avenue to the defendants with the consideration of $200 000 recorded in the transfer of land. On 2 June 1998, settlement of the transfer of Pandora Avenue to the defendants took place. On the same date, the defendants executed a loan agreement for $160 000 between ING as lender and the defendants as borrowers and a mortgage between ING as mortgagee and the defendants as mortgagors. Stamp duty of $8200 was paid on the transfer on 4 June 1998. From the loan of $160 000, an amount of $150 000 was paid into the Ozaltays’ Westpac account to pay out their Westpac loan and enable the defendants’ purchase of Pandora Avenue. The ING mortgage account statement on 2 June 1998 shows $150 324.50 paid to their parent’s Westpac account and the balance of the loan used to pay stamp duty on the transfer to them.

The second defendant recalled going to a bank with the first defendant and opening a bank account ‘for the mortgage’. She did not operate the account, saying that Mr Ozaltay operated the mortgage account. She had no involvement in making payments towards the mortgage but said her father did, that no one else was involved and her father paid the ING mortgage repayments. In cross-examination, however, the second defendant recalled having meetings with a finance broker called Terry to arrange for the loan with ING. The second defendant did not think it strange that if she held Pandora Avenue for her parents that she was required to borrow $160 000, saying that was the arrangement back then and she never had a problem with that.

After the transfer of Pandora Avenue, a loan agreement dated 15 June 1998 was executed between the plaintiffs as lenders and the defendants as borrowers whereby the plaintiffs purported to lend the sum of $70 000 to the defendants (‘the 1998 loan agreement’). In the 1998 loan agreement, Mr Ozaltay’s name was recorded as ‘Burhan Mustafa’. The 1998 loan agreement did not require instalment payments or charge interest on the loan, it simply required repayment of the full amount on demand. The loan of $70 000 was said to be secured by a mortgage over Pandora Avenue. It was uncontested that the plaintiffs never in fact lent the sum of $70 000 to the defendants, despite the 1998 loan agreement stating that, ‘the lender hereby lends to the Borrower and the Borrower hereby borrows from the Lender the sum referred to in the Schedule hereto as the loan’. It was also uncontested that ING, as first mortgagee, was not informed of the 1998 loan agreement and a mortgage in respect of that loan was not registered on the Certificate of Title to Pandora Avenue.

Outcome of the County Court proceeding

On 21 May 1998, the trial of the County Court proceeding commenced before his Honour Judge Dyett. The trial ran for 14 days to 12 June 1998. Prior to the commencement of the trial, Mr Ozaltay transferred the bread shop business to Mr Atilla. On 2 June 1998, the transfer of Pandora Avenue from Mr and Mrs Ozaltay to the defendants took place. The 1998 loan agreement was executed on 15 June, one day before judgment was delivered in the County Court proceeding.

In the judgment delivered on 16 June 1998, Judge Dyett concluded that both Mr Ozaltay and Mr Ali Ozaltay made misrepresentations by silence to Mr and Mrs Tatlica, which they relied upon to their detriment. His Honour found that Mr Ozaltay had ‘an astute understanding of business and figures’; that he ‘took a much keener intense interest in the profits or otherwise of this business than he was prepared to admit in the witness box’ and Mr Ozaltay, with Mr Ali Ozaltay, made ‘a clear misrepresentation by silence’ to Mr and Mrs Tatlica.[2]
[2]Tatlica v Mustafa (Unreported, County Court of Victoria, Judge Dyett, 16 June 1998) 21–2.

Orders were made for rescission of the agreement entered into by the Tatlicas to purchase a one third share of the bread shop business and restitution to the Tatlicas of the purchase price paid by them, less their earnings from the bread shop business. Judgment was entered against Mr and Mrs Ozaltay for the amount of $88 221 plus interest of $14 774 and costs.[3]
[3]Ibid 24–5.

There was no dispute that Mr and Mrs Ozaltay have never paid the judgment amount to the Tatlicas, who subsequently went bankrupt on 21 March 2000.

Mr Ozaltay specifically denied that his decision to transfer Pandora Avenue to the defendants had anything to do with the County Court proceeding. He said the only reason for his decision to transfer Pandora Avenue out of his name and Mrs Ozaltay’s name was as a result of people threatening him over the debts of Mr Ali Ozaltay. This evidence is contrary to the pleading in the statement of claim that the plaintiffs were concerned as to the risks of the County Court proceeding as the reason for the transfer of Pandora Avenue out of their names. Mr Ozaltay continually denied that the statement of claim said this, but subsequently said ‘at that time I had so many problems that I can’t give you an exact answer’. He later stated that the main reason he transferred Pandora Avenue to the defendants was to do with his son’s creditors, although he knew that he himself did not owe them money. He paid the creditors and cleared the debts for $20 500 after the sale of the bread shop. He was asked about his son’s creditors during the hearing, including the following:

Mr Ozaltay, you would have known back then in 1998 that your son's creditors couldn't take action against your property could they?---That's correct, they couldn't, but I was not aware to what extent they can demand. I am not a legal representative, I am just a ordinary person who has been working in this country to the age of 67.

However, Mr Ozaltay’s position then changed again:

And it goes on to say in the particulars that you did that because you were concerned about the risk of certain litigation that you were in at the time?---It could be the case, yes. I can't remember exactly but it could be the case, yes.
So that could be the reason you did it?---Not the whole reason.
Some of the reason?---Some of the reasons.

In cross-examination, Mr Ozaltay was unwilling to admit that the judgment required the Tatlicas to be repaid the amount paid for their share of the bread shop business. When Mr Ozaltay was questioned as to why he did not pay the judgment debt:

Are you saying you were advised not to pay?---Advised us to wait, not to take an action against it and see what the outcome of it, and after that we never heard anything from Mr Tatlica. Is ten years now.
So you could have, instead of transferring the property to your daughters, you could have sold the property, repaid your Westpac mortgage and you could have paid the balance to the Tatlicas couldn't you?---Which you do not in a few days' time.
But you didn't do that did you?---No.
Instead what you did was you transferred it to your daughters?

---But I took the action on the basis that I was advised by my legal representatives.
On your version of this case, it's said that the properties at 11 Pandora Avenue, 26 Woolnough Drive and 20 Woolnough Drive were always held on trust for you. That's your case isn't it?---That's correct.
So you could have at any time asked for those properties to be sold and you could have repaid Mr and Mrs Tatlica, couldn't you?---But I was not asked by my barrister to pay that money. I was told wait til we get more information and that's it.
You were ordered by a judge of the County Court to pay that money weren't you?---If I did come to that stage I would have sold and paid, yes.
You were ordered by a judge of the County Court to pay that money weren't you?---No, not the judge.
Judge Dyett was a judge of the County Court?---You're complicating this story.
Judge Dyett, after hearing the trial for 14 days, ordered you to pay the money to the Tatlicas didn't he?---That's correct.
And you didn't comply with that order did you?---No.
I put it to you that you deliberately did not comply with that order?---No.
Because you said yesterday that you had money in a super fund and money from the insurance. You didn't use that to pay the Tatlicas did you?---I had money but I did not have so much money and I had other obligations to carry out especially around the hot bread shop.

Mrs Ozaltay was aware of the County Court proceeding but denied that she was concerned about losing the case. She denied that the transfer of Pandora Avenue occurred because of concerns about the County Court proceeding. She also denied that so much could be taken from the statement of claim and that the decision was made to transfer Pandora Avenue before the County Court proceeding. When taken through the chronology of the proceeding, the transfer and 1998 loan agreement, she again denied any relationship between the two events, asserting that ‘[i]t could be a coincidence, it's not planned.’ Mrs Ozaltay was unable to explain how transferring Pandora Avenue would solve the problem of people coming to the house seeking money and she could not answer why she did not simply move elsewhere to resolve the problem.

When asked why the judgment debt was not paid, Mrs Ozaltay responded:

We were also going to launch a court case against the Tatlicas but our solicitors, lawyers advised us that the Tatlicas had gone bankrupt.
You and your husband decided not to pay money to the Tatlicas pursuant to that court order didn't you?---Nobody asked us for any money.
I put it to you that you and your husband deliberately decided not to pay any moneys under that order made by Judge Dyett of the County Court?---Nobody sought money from us.
I put it to you what you did is you tried to hide your assets so that the Tatlicas would not be able to get any money from you?---No, no.

Mrs Ozaltay also referred to the Tatlicas wanting to put a caveat over Pandora Avenue, ‘but they lost the case’. Mrs Ozaltay did not recall that after the County Court proceeding concluded, messages were being left by solicitors seeking payment of their legal fees and barrister fees. She denied that creditors were ‘knocking at the door of Pandora Avenue’ as ‘we didn't owe anyone any money’.

The sale of Pandora Avenue and purchase of 26 Woolnough Drive

The first defendant said she decided to sell Pandora Avenue because it wasn’t ‘safe’ to live there anymore under the shadow of constant threats and intimidation. She recalled a message being left on the answering machine from a lawyer, a Mr Morris Milder, who was owed a lot of money by her parents. Eggs were thrown at the house and many people would knock at the door. Her father would tell her to answer it and tell whoever was knocking that he was not there. The first defendant said everyone agreed to the sale and that she and the second defendant decided to invest their money by purchasing 26 Woolnough Drive.

Both Mr and Mrs Ozaltay disagreed with the first defendant. Mr Ozaltay said he decided to sell Pandora Avenue because he got ‘fed up with people come to my door’.[4] He discussed this with his wife, the defendants and Mr Atilla. It was agreed to contact an estate agent and sell Pandora Avenue. Mrs Ozaltay said that it was she and Mr Ozaltay who decided to sell Pandora Avenue and the claims of the first defendant ‘that she wanted to have the house sold, the Pandora Avenue, because she didn't like the environment there with all the phone calls and the people throwing eggs and demanding money and the like’ were lies. The decision was made because they ‘had lost peace of mind’ and were having ‘issues’ with their son’s problems which made them uncomfortable, as well as receiving ‘bills and debts’. The second defendant said she was not involved in her parent’s decision to sell Pandora Avenue and it was also not the decision of the first defendant.
[4]The same explanation was offered in respect of the transfer of Pandora Avenue to the defendants. Clearly, the transfer did not resolve the problems.

Mr Ozaltay and Mrs Ozaltay agreed that it was Mr Ozaltay who was involved in selling Pandora Avenue. He decided on the listing price, instructed Mr Collard as the solicitor for the transfer of the Pandora Avenue and paid the costs incurred in effecting the sale. Mrs Ozaltay said that she also found the property at 26 Woolnough Drive and that Mr Ozaltay conducted the negotiations with the agent, agreed the purchase price and paid the deposit.

When asked about any discussions that took place when deciding to sell Pandora Avenue and purchase 26 Woolnough Drive, Mrs Ozaltay responded that she had discussions with her husband and indicated these discussions were only between herself and Mr Ozaltay because they owned the property, they made the decisions and ‘the girls just signed’. Mrs Ozaltay said the girls always accepted their decisions and they were happy with the arrangements to sell Pandora Avenue and purchase 26 Woolnough Drive. Mr Ozaltay said that he and his wife were still prepared to put 26 Woolnough Drive in the names of the girls and he told Mr Collard this.

It was put to Mrs Ozaltay that the first defendant would say that Mr and Mrs Ozaltay were overseas at the time and that she appointed an agent to sell Pandora Avenue. Mrs Ozaltay disagreed, and answered:

No, we weren't overseas but we negotiated with and engaged an agent before we went abroad.
So you appointed an agent to sell the house and then you went overseas, is that what you say?---We spoke to an agency but, I mean her father may have spoken to her and given instructions to follow the sale of the house but in the end the house belonged to us, it was our house.

Mr Atilla explained that Pandora Avenue was sold for the following reason:

First thing first, they were involved in a hearing and after that hearing—that was a lengthy hearing and it was stressful for the whole family because during the hearing we were living in the same house, in the 11 Pandora Avenue. And what happened after that, ah, people start to throw eggs to the house. And this happened two occasions. I know it very well because it was—it was sad to watch that because I was a smoker at the time, used to go out to smoke, watching that all damage and it was embarrassing and disgusting.
Secondly, this was—of course Selen knew about that, and this happened twice to my knowledge. And, secondly, people leaving messages. I heard the message, it was upstairs and the message all type message bank, and it was playing itself after and after again. I don't know, I didn't touch it. As soon as Selen was home, told Selen what is this? Some person calling himself Morris Milder calling Bourhan Mustafa as a liar and continuing—continuing asking moneys from him. Apart from him, ah, closing down the shop at the closing time at the shop another person came which I ask father-in-law who is this person? It was a skinny, tall, well-dressed person with a suitcase holding, his name was Jonathan Otis. And I remember exactly what happened because it was unusual and awkward.

What happened was he was—he let the person in and they were talking. I was doing the packing up. We were about to close the shop. They were talking, I wasn't following, I wasn't hearing things. But at one stage what Mr Mustafa did, he looked up, opened his hands and he said, "When God gives me money, I'll give you money." That person, the standing person, just kept (indistinct), his head dropped down, he wait at least a minute, silent. I look at my father-in-law and he—sorry, he did kind of this gesture to me and he started working too, pushing the drinks in the fridge, to the front because we're stocking (indistinct). And that guy standed there quite silently and eventually by himself walk out. I ask him, "Who is this guy? What's happening." He said, "You don't get involved. He's my old lawyer, Jonathan Otis.”

In cross-examination, Mr Atilla said that Mr and Mrs Ozaltay followed the decision of the first defendant to sell Pandora Avenue because they were just as disturbed as she was by what was occurring at Pandora Avenue.

The first defendant inspected 26 Woolnough Drive and decided to buy it. She did not live there as she and Mr Atilla lived at their house in Aster Court. The second defendant disputed this saying it was her parents’ decision to purchase 26 Woolnough Drive.

The second defendant recalled signing another transfer of land and entering into another loan agreement when 20 Woolnough Drive was purchased. She recalled a discussion with her parents to the effect that the loan was a precaution if they asked for the house to be transferred to them, the precaution described as ‘I don’t know, future husbands and stuff’.

On 9 March 1999, Frank Costanzo & Associates, solicitors, wrote to the defendants regarding the purchase of 26 Woolnough Drive as follows:

We refer to the above matter and in particular to the draft Loan Agreement prepared on your behalf between yourselves and your parents.

We confirm your advices of today’s date that you will not be proceeding with the Loan Agreement and your parents also do not wish to proceed with the Agreement.

We confirm our previous advices to you that the Mortgagee should be notified of any unregistered loan agreement or mortgage in accordance with the First Mortgagee’s loan conditions.

We confirm that you have understood the above advices given to you but have made the decision not to proceed with the Loan Agreement.

The second defendant did not recall deciding not to proceed with the 1999 loan agreement, as indicated in the letter from Costanzos, nor why that may have been the case. Notwithstanding the letter from Constanzos, the purchase of 26 Woolnough Drive settled on 11 March 1999, simultaneously with the settlement of the sale of Pandora Avenue at $200 000.

The 1999 loan agreement

On 28 July 1999, the 1999 loan agreement was entered into between the plaintiffs as lenders and the defendants as borrowers. This agreement was prepared by Collards. The terms of the agreement are the same as for the 1998 loan agreement; namely, the loan is expressed to be for $70 000, the full sum is payable on demand, no instalments or interest are provided for and the loan is said to be secured by a mortgage over 26 Woolnough Drive.

As with the 1998 loan agreement, it is not in dispute that, in spite of the terms of the agreement to the contrary, the sum was never advanced nor was there any intention to do so.

Mr Ozaltay said Mr Collard was instructed to prepare the 1999 loan agreement. He said a loan agreement was signed but there was no exchange of money. Before execution of the document, Mrs Ozaltay said that Mr Collard gave them the following advice:

… he recommended that we prepare, have this document prepared in our—it would be in our interested to do and that it would secure and the agreement and understanding with the girls was that we would have this transferred onto their names and that whenever we felt appropriate, that we could have it re-transferred onto our names.

Mr Collard apparently talked to the defendants regarding the 1999 loan agreement. The loan agreement was prepared to protect the house for the plaintiffs. All parties signed the agreement on one occasion in front of Mr Collard. Mr Ozaltay denied that this loan agreement was ‘wrong’ as no money had been paid pursuant to it, but explained that it was ‘the continuation of the previous loan’.

Mr Collard recalled the firm’s involvement in the production of the 1999 loan agreement. He received instructions from Mr and Mrs Ozaltay to prepare the 1999 loan agreement to the effect stated, and was told a loan agreement was required for a family transfer. Mr Collard’s evidence was that ‘[t]hey knew what they wanted’. He witnessed the signing of the 1999 loan agreement by all four parties. Mr Collard believed he was instructed that $70 000 had been lent by the plaintiffs to the defendants. He said that the following occurred:

And I did say to my—Mr and Mrs Mum and Dad that there would be—once you transfer a property, they become the legal owners subject to the mortgage. And it was at that stage that the two daughters told me, "Mum and Dad, you don't have to worry, whenever you want it back, we'll give it back to you."
On what day, perhaps by reference to this loan agreement, did that conversation occur?---28 July 1999.
And where did that conversation occur?---In my office.
And who was present at the time those words were spoken?---Just the four parties, the four parties and myself.
The $70 000 that appears in this and the earlier agreement, do you have any knowledge of how that figure was arrived?---No.

Mr Collard recalled that he was told that the property was being held for the parents by the daughters, although he could not recall precisely when he was told this, however he knew that he was told this in the context of the 1999 loan agreement. Mr Collard believes he was told by Mr and Mrs Ozaltay that the defendants would be holding the property for them. He initiated discussions with them about how the loan agreement sat with that concept, but ‘they didn’t tell me the reason why they wanted it. So I stayed out a little bit at that stage’.Mr Collard also believed that he was instructed that the $70 000 referred to in the 1999 loan agreement had been lent by the plaintiffs to the defendants. However, by the time of a later loan agreement in 2002, Mr Collard understood the loan to be ‘because of the debt’.

Around the time of the 1999 loan agreement, Mr Collard recalled that ‘everybody was in full agreement and the daughters definitely stated that they would hold it in trusts and return it to Mum and Dad in one piece’. He specifically recalled that both daughters stated this. However, in cross-examination, he became unsure about whether he was told the property was held on trust by the daughters in 1999 or at the time of the 2002 loan agreement. His evidence was that he clearly recalled being told this at the time of signing. When he observed that the 2002 loan agreement was not signed before him, he became more certain that the conversation occurred in 1999. He did not keep a note of this conversation.He was not told that the loan agreements were related to the property held on trust. When questioned further about this in cross-examination, the following exchange occurred:

Well, it doesn't really matter why it's happening. If you're told that the property's being held on trust and you know that there's no trustee, wouldn't you as a prudent (indistinct) advise the parties that they should enter into a trust deed?---I heard the daughter say that they would hold it in trust for Mum and Dad, they didn't use the word trust but they—"You can have it back whenever you want it Mum, it's your property."
They didn't use the word ‘trust’, did they?---No, they didn't use the word ‘trust’.
So, you can have it back whenever you want it. That's what you're saying they said?---Yes.
And if they transfer the property back, was it your understanding the loan would also be repayable?---If they transfer the property?
Or didn't you know anything about that?---I always understood that the land was always to be repaid.
Whether or not the daughters retain the property?---Well, I think I mentioned somewhere along the line, I said that at some stage I had a conversation, I thought, with Mum and Dad to the effect that, if the property was sold at a higher price, that Mum and Dad could only get the loan money back.
And the rest would go to the daughters?---Correct.
And you told Mr and Mrs Mustafa did you?---I believe I did.

In cross-examination, Mr Collard denied that when the first defendant came to his office and was asked to sign the 1999 loan agreement she refused to sign it after reading it. He denied that he told the first defendant ‘it was for her benefit to sign it because her parents had gifted her part of the house and, if she divorced, her husband would not get the gifted share from her parents’.

When Mrs Ozaltay was asked about the 1999 loan agreement, she indicated that she and her husband made all the decisions about the family’s properties and that the defendants ‘just signed’ and ‘always accepted our decisions, always’. When asked if she said anything to the defendants about the 1999 loan agreement, Mrs Ozaltay simply responded: ‘Yeah we had a loan agreement prepared because each time we bought or sold a house and it happened three times, a loan agreement would be prepared, a contract.’

In cross-examination, Mrs Ozaltay was unable to explain the nature of the arrangement or the terms of the 1999 loan agreement:

That's security for the amount of $70 000 isn't it?---Yes.
So according to this if the property went up in value it doesn't matter how much it went up by you can only get $70 000 back. Do you agree with that?---Like I said many times, we weren't seeking money, we were seeking the house's return and that was the understanding all along with them.
Your evidence is you entered into this document as security. I'm putting to you that all it gives you the right for is security of $70 000 irrespective of what the value of the house is?---I don't understand those things.
Let's say the house increases in value to half a million dollars, all you've got the right to ask for under this agreement is $70 000?---I don't understand those figures.
If you say that you owned all the property and your daughters held it on your behalf you should get all the property, not just $70 000?---Sorry, I can't understand when I don't understand what's—I can't answer you if I can't understand the matter.
But is it true to say that at the time these loan agreements have been entered into that I've taken you to that you didn't really understand what the arrangement was between yourself and your husband and your two daughters?---I did know. We spoke to the girls and it was a loan agreement between us and the girls and it was set out and we signed it but we weren't seeking cash money from them. All we were seeking was the return of our house.

The second defendant agreed that her parents never lent her and the first defendant $70 000 as indicated by the 1999 loan agreement.

The second defendant was adamant that she was told that the loan agreement was a ‘precaution’ and ‘if [the plaintiffs] asked for the property back it was something that would protect them’ in the first defendant’s presence.

Sale of the bread shop business

In or around October 2001, Mr Ozaltay sold the bread shop business for approximately $180 000. By this time, the bread shop business was in the name of Izel Enterprises, however, Mr Ozaltay’s evidence was given on the basis that he sold it. He said he used the proceeds of sale to pay $100 000 off the mortgage to ING. He also bought a car for $39 000 registered in the name of the first defendant but used by the whole family. He said the remainder was spent on family holidays to Queensland in 2001 and 2002.

The first defendant and Mr Atilla said that the bread shop business was sold for $180,000. Mr Atilla said the sale proceeds were used to pay down the ING mortgage and fund a holiday. Mr Ozaltay told him he would attend to the accounting fees and taxes arising from the sale. Mr Atilla recalled that he and the first defendant received $10 000 from Mr Ozaltay out of the proceeds of the sale of the bread shop business.

The first defendant had spoken to Mr Ozaltay about selling the bread shop business as she wanted to begin her teaching career and Mr Atilla wanted to stop working nights. She wanted to pay off the home loan and then split the balance remaining equally and the second defendant agreed to this. The first defendant said the sale proceeds of the bread shop business were used to pay $100 000 off the ING mortgage and Mr Ozaltay said he would deal with taxes. They then decided to go on a family holiday for two weeks and the second defendant and her husband joined them for a few days, all paid for from the sale proceeds. She confirmed that after Mr Ozaltay finished the calculations for the payment of taxes from the sale proceeds, he gave her and Mr Atilla $10 000.

Sale of 26 Woolnough Drive and purchase of 20 Woolnough Drive

After the sale of the bread shop business, Mt Atilla studied for a diploma of education. He struggled with the course and wanted to return to live in Cyprus where he could work as an architect. He and the first defendant decided to sell their home in Aster Court and 26 Woolnough Drive and relocate to Cyprus. He said that the Ozaltays were happy with this and they were also planning to return to live in Cyprus.

While 26 Woolnough Drive sold quickly, Aster Court did not sell at all. Mr Atilla then received information that employment prospects in Cyprus were not good. These factors led Mr Atilla and the first defendant to abandon their plans to relocate to Cyprus.

Mr and Mrs Ozaltay were overseas when 26 Woolnough Drive was sold. When they returned and found that the property had been sold and that the first defendant and Mr Atilla were no longer moving to Cyprus, they were very upset and ‘all hell break out’, but later reconciled. The first defendant then felt guilty and asked the second defendant if she wanted to continue the investment and purchase a property as an investment for their parents to live in. The first defendant found 20 Woolnough Drive and the second defendant inspected it as well. They decided to purchase it. The ‘contract note’ lists the purchaser as Bourhan Ozaltay. According to the first defendant, this is because she was working and had asked her father to put in the offer to purchase the property. Her parents continue to live at 20 Woolnough Drive. As with Pandora Avenue and 26 Woolnough Drive, they do not pay any rent to her or the second defendant for living in 20 Woolnough Drive.

Mr Atilla had little involvement with the purchase of 20 Woolnough Drive. In cross-examination, he denied that the Ozaltays were involved in the sale of 26 Woolnough Drive. He said they were not in Australia and the first defendant did all the work. However, Mr Atilla did say the plaintiffs may have been involved in ways that he did not witness or know about. A letter from the selling agent, Stockdale & Leggo, addressed to the second defendant and her husband was put to Mr Atilla. He did not recall having seen the letter before. When taken to other documents, such as the contract note and buyer’s price declaration, both of which referred to Bourhan Ozaltay, Mr Atilla observed that he ‘didn’t witness everything’ and could not comment on the documents.

In cross-examination, Mr Atilla denied that Mrs Ozaltay was ‘very interested’ in the selection of the new home. Rather, Mr Atilla said his limited observation was that the Ozaltays did not particularly care about it.

On 3 May 2002, in a letter addressed to the plaintiffs, Collards wrote to the defendants anticipating receiving instructions for the sale of 26 Woolnough Drive. These instructions were presumably received as Collards wrote a further letter to the defendants, again addressed to the plaintiffs, on 17 May 2002 enclosing an account for the preparation of section 32 statements for the sale of 26 Woolnough Drive.

On 30 May 2002, the defendants signed a contract note for the sale of 26 Woolnough Drive for the sum of $308 500.

Mr Ozaltay said he and his wife decided to sell 26 Woolnough Drive and use the sale proceeds to return to live in Cyprus and that he dealt with the agent. The sale authority for 26 Woolnough Drive was entered into by the defendants with Stockdale & Leggo at a time when Mr Ozaltay was in Cyprus. Mr Ozaltay said he told the defendants he wanted to clear $300 000 on the sale of 26 Woolnough Drive and spoke about this with them on the telephone from Cyprus. Mrs Ozaltay said she and Mr Ozaltay were entirely responsible for negotiating the sale and giving instructions regarding the sale price of 26 Woolnough Drive.

The second defendant said her parents decided to sell 26 Woolnough Drive and she believed that they were considering moving to Cyprus at that stage. She was not aware that anyone else in her family was considering moving to Cyprus at that time. She was not involved in the sale of 26 Woolnough Drive and it was her father who appointed the agent and negotiated the sale price. She also said her parents were overseas at the time of sale and she does not recall being involved in any legal formalities regarding the sale of the house.

Mr Ozaltay then decided he could no longer live in Cyprus and he returned to Australia. Mrs Ozaltay said she and her husband were also the ones who found and negotiated the price for 20 Woolnough Drive, with neither defendant involved in finding the property. The plaintiffs simply informed the defendants of their decision to buy 20 Woolnough Drive and that this would require the preparation of new sale agreement documents.

On 26 July 2002, Mr Ozaltay signed a ‘Buyer’s Price Declaration’ and made an offer to purchase 20 Woolnough Drive for the sum of $295 000. The terms of the offer were the payment of a deposit of $29 500 by 12 August 2002, $500 of which was said to have already been paid. The purchaser was expressed to be Bourhan Ozaltay and/or his nominee. Mr Ozaltay conducted the negotiations for the purchase of 20 Woolnough Drive.

On 5 August 2002, Collards wrote to the defendants at the first defendant’s address at Aster Court indicating that they had received instructions from them regarding the purchase of 20 Woolnough Drive.

On 12 August 2002, the balance of the deposit appears to have been received by Chesterton Real Estate Agents recording that the sum was received from ‘Ozaltay’. The deposit of $29 500 was paid from the proceeds of the sale of 26 Woolnough Drive and 20 Woolnough Drive was registered in the name of the defendants. This was explained by Mr Ozaltay as follows:

In terms of the arrangements between you and your daughters, were there any discussions about whose home 20 Woolnough Drive would be?---No, as I have said, it is—it has been always over there into their names with the understanding that if and when I want the house, I can have it back.

In cross-examination, it was put to Mrs Ozaltay that if 20 Woolnough Drive was held on trust for her and her husband by the defendants, then the property could have been put in the names of Mr and Mrs Ozaltay. She responded:

We formed the pattern, I guess, a precedent where we trusted the girls and it was just normal practice to continue to do it in the same way.
So you put it in, on your evidence, even though you owned the property at 20 Woolnough Street, you put it in your daughter’s name because you had a pattern, is that what you say?---Yes.

The 2002 loan agreement

Mr Collard recalled the firm’s involvement in the production of the 2002 loan agreement. He received instructions to prepare the 2002 loan agreement from Mr and Mrs Ozaltay. The instructions he received were to prepare a loan with a charge over 20 Woolnough Drive, which he ultimately did. He believed he was instructed that the parents had in fact lent the sum of $295 000 to the defendants. He was not told of the purpose of the loan and he did not question the plaintiffs about the instructions as their ‘instructions were quite plain’. He assumed that he received these instructions a week or two before the 2002 loan agreement was signed. He did not recall the defendants being present during discussions about the 2002 loan agreement and believed they would not have been present when he received instructions regarding it.He was not present when the document was signed.

On 23 September 2002, the 2002 loan agreement was prepared by Collards and signed by the plaintiffs as lenders and the defendants as borrowers.Mrs Ozaltay could not remember any advice given by Mr Collard regarding the 2002 loan agreement. However, she did recall that it was signed at their house, with all parties, as well as the husbands of the defendants, present. She also recalled that they asked a man who was at their house building a pergola to be a witness. Mr Ozaltay gave evidence consistently with his wife’s recollection in this regard.

The terms of the 2002 loan agreement were for a loan of $295 000 repayable on 21 September 2012 with provision for the payment of interest and secured by a ‘[c]harge over 20 Woolnough Drive, Mill Park and if called upon to Execute and Register a first mortgage over 20 Woolnough Drive’.

The trial was made more complicated and took longer than necessary because of the volume of irrelevant evidence. In many respects and as often occurs in bitter family disputes, a trial is used as a vehicle to vent emotions. In this proceeding, the plaintiffs displayed a virulent attitude towards the first defendant for not adhering to their wishes and were keen to disparage her and Mr Atilla throughout the evidence. On a number of occasions, the plaintiffs made angry verbal attacks against the first defendant and it became necessary to warn them about their conduct, in particular, Mrs Ozaltay.

Credibility of the plaintiffs
The plaintiffs’ abandonment of the debt claim under the 2002 loan agreement

The plaintiffs’ principal claim when the proceeding was commenced was a claim for a debt pursuant to the 2002 loan agreement. This was their only claim against the first defendant until the plaintiffs added the alternative claim of a common intention constructive trust in 2014. The first defendant had always raised serious issues as to her execution of the 2002 loan agreement. The evidence of the plaintiffs and the second defendant was that the signatures on the 2002 loan agreement were witnessed by Mr Rizzo Kudrow. When the proceeding was fixed for trial he was not on the list of witnesses to be called by the plaintiffs and the plaintiffs did not mention that they intended to abandon the debt claim. At the commencement of the trial, the plaintiffs said they ‘elect not to proceed on the claim in debt arising out of the [2002] loan agreement’. Although the plaintiffs characterised their position as an ‘election’ by them, in fact, they were abandoning the debt claim.

The effect of the abandonment of the debt claim means there will be consequent costs thrown away on the part of the first defendant. It also means that the third party notice seeking contribution against the second defendant will fall away.

The abandonment of the debt claim also affects the credibility of the plaintiffs and the second defendant in a number of ways, particularly given that if the Court determined that the 2002 loan agreement was valid and binding as pleaded, there would be no basis for any trust, whether constructive or resulting, to be imposed and no basis for orders being made requiring the transfer of the first defendant’s interest in 20 Woolnough Drive.

The plaintiffs’ pleading as to their concerns of the risks of litigation at the time of the Pandora Avenue transfer

In their common intention constructive trust claim, the plaintiffs plead that the transfer of Pandora Avenue was because they ‘were concerned as to the risks of certain litigation they were at that time parties to’, by which they mean the County Court proceeding. At trial, they disavowed the County Court proceeding as being the basis for the alleged common intention constructive trust. Instead, their evidence centred on the problems concerning their son, Mr Ali Ozaltay, and his creditors. At the same time, the plaintiffs accepted that his creditors could not claim payment from them. The plaintiffs did not call Mr Ali Ozaltay to give evidence in this proceeding. Despite their evidence of events concerning their son around the time of the transfer of Pandora Avenue, at trial the plaintiffs’ evidence was that this proceeding arose as a result of their son seeking funds from them again and they needed collateral to use as security to borrow those funds to assist him. This reasoning is implausible when their unpleaded case at trial rested on attempting to remove their assets to avoid their son’s constant claims for money and his creditors. The plaintiffs gave no explanation for their son not giving evidence at the trial. In those circumstances, it is more probable than not that his evidence would not have assisted them.[7]

The plaintiffs’ failure to seek relief against the second defendant

[7]Jones v Dunkel (1959) 101 CLR 298; O'Donnell v Reichard [1975] VR 916.

The plaintiffs have never sought relief against the second defendant, including in relation to the 2002 loan agreement. The effect of the plaintiffs’ abandonment of the debt claim under the 2002 loan agreement in respect of the second defendant has already been addressed. In addition, the second defendant has not in fact transferred her legal interest in 20 Woolnough Drive to the plaintiffs, despite her assertions and those of the plaintiffs that she is prepared to do so. These factors are relevant to the credibility of the second defendant and plaintiffs’ version of events regarding their intention at the time of the transfers of each property.

Credibility of the witnesses
Mr Ozaltay

Mr Ozaltay’s evidence relied primarily on his own recollection of events. This is despite the fact that on many topics documentary evidence could have easily been obtained by him. His evidence was often evasive, unresponsive, contradictory or made up by him in the moment. Some of it flew in the face of what documentary evidence was produced. Overall, there can be no hesitation in concluding that he was willing to give evidence that he believed would support his case or iron out its deficiencies, whether or not this accorded with the truth. Generally, he was an unreliable and untruthful witness who lacked any credibility. No weight can be placed on his evidence, except where it is against his interest or is supported by reliable documentary evidence.

Several examples, which are by no means exhaustive, serve to support this finding:

(a) he was asked the simple question of whether or not the statement in the loan agreement that the specified sum in the agreement had been loaned was wrong, as no money had every been loaned. Mr Ozaltay claimed that he could not understand the basic loan agreements he entered into with the defendants, despite having been a loans officer at Westpac for a number of years;

(b) his assertion that the County Court proceeding arose from the failure of Mr and Mrs Tatlica to pay the agreed purchase price for an interest in the bread shop business;

(c) his unwillingness to admit that the result of the County Court proceeding went against him, with an order for him to pay the judgment debt;

(d) his very unsatisfactory explanation as to why he did not pay the judgment debt, in particular, his claim that he did not do so because, amongst other things, Mr Tatlica was bankrupt. Documentary evidence establishes that Mr Tatlica became bankrupt two years after judgment in the County Court proceeding. He was bankrupted on 21 March 2000 and discharged by law on 22 March 2003;

(e) his assertion that it was Mr Collard who instigated the loan agreement arrangements and suggested the figure of $70 000. For a solicitor to suggest such an arrangement to protect what is now said to be a trust arrangement, and suggest a figure that coincidentally aligns with his client’s alleged understanding of the costs incurred by him in the transfer is not believable;

(f) his refusal to acknowledge that the first defendant and Mr Atilla had any financial interest in the bread shop business, despite documentation to the contrary;

(g) despite instructing his solicitors in May 2013 and his solicitors sending a letter of demand to the first defendant’s solicitors for the payment of the debt alleged by him as arising from the 2002 loan agreement, he claimed that he never called in the alleged debt;

(h) allowing the letter of demand in which the debt was called upon to be sent, despite readily agreeing that in fact no money had ever been advanced to the first defendant;

(i) refuting the admission made in his statement of claim that the transfer of Pandora Avenue occurred to avoid the potential adverse consequences of the County Court proceeding without providing an adequate explanation as to how such an admission came to be in the statement of claim without his instructions; and

(j) his unsatisfactory explanation for his change in surname and change in the spelling of his first name after judgment in the County Court proceeding. His explanation that he coincidentally determined to implement these changes in the same period of time that he was facing legal action in the County Court, a significant judgment debt and disgruntled creditors—apparently because of either a cultural or legal change as to naming conventions that occurred in Cyprus 20 years prior to the County Court proceeding—is simply not credible.

Mrs Ozaltay

Much of the evidence of Mrs Ozaltay concerning events and situations appeared to be based upon what she had been told by Mr Ozaltay. Notwithstanding this, she was very willing to give evidence about matters she accepted she knew nothing about. Examples to support this conclusion are:

(a) while protesting that Mr Ozaltay dealt with the financial side of things, she also denied that a financial agreement was entered into between Mr Ozaltay and Mr Atilla;

(b) when it was put to Mrs Ozaltay that at the time this proceeding was first issued the plaintiffs’ only claim was for $295 000, she responded, ‘I don't deal with the money side of things’. When asked how a case could be issued seeking judgment on a loan of $295 000 if such a loan was never made, Mrs Ozaltay responded:

That was because of the value of the house. It was based on the value of the house. That's what I've been saying all along. We've made it look like we sold the house, that money was exchanged, but the money was never exchanged at all. All outgoings and instalments were paid by us.

(c) Mrs Ozaltay could not remember when she changed her name to ‘Ozaltay’.[8] She agreed that the relevant law was passed in Cyprus in 1974. The following exchange occurred:

You see, when you signed the first loan agreement in June 1998 your surname there was Mustafa, wasn't it?---Yes.
Then when you signed the second loan agreement in July 1999 your surname was Ozaltay?---Yes, that's when the [sic] got the family surname.
But your evidence was that the law changed in 1974?---When we lived in Cyprus the law hadn't passed. The law was passed after the war but we used to live in Australia so we chose to adopt the name later.
I put it to you that the change of name occurred after you lost the court case against the Tatlicas, didn't it?---It's got nothing to do with it.

[8]T326.

These examples demonstrate her inventiveness in giving evidence. This factor, together with her virulent animosity and anger towards the first defendant that burst from her from time to time during her evidence, supports the conclusion that little weight can be placed on her evidence unless it is either against her interest or is supported by reliable contemporaneous documentary evidence.

The second defendant

The second defendant generally attempted to give truthful evidence. In contrast to her parents, she was willing to admit being unable to recall fully or understand various events and transactions that had occurred over the years. At the time of the transfer of Pandora Avenue, she was a school student and readily conceded that she had little understanding of the events at that time. When she was taken to documents, she willingly accepted that her recollection was faulty.

However, she did display a willingness to give categorical and emphatic answers on topics upon which she had little or no knowledge. For example, despite having little recollection regarding the ING mortgage and how it was repaid, she was prepared to state vigorously that Mr Ozaltay was the only one who contributed to the repayments and was otherwise involved in the mortgage. Similarly, despite giving evidence that she had little or no role in the subsequent property transaction, she confidently asserted that neither did the first defendant.

Her involvement in a restaurant operated by her brother, Mr Ali Ozaltay, was raised in cross-examination. It was put to her that in taking deposits for the bookings for functions, she put some of the money into her own bank account as she was not being paid enough by her brother. She denied that this occurred, or that her brother sued her in respect of that money. She gave evidence that her brother lodged a caveat over her property and a proceeding was commenced in the Supreme Court where the caveat was ultimately removed. She said she was ‘heartbroken’ that the first defendant had supported her brother at that time in spite of the difficulties he had created for her. It was put to her that as she was the only sibling still in communication with her parents, she was likely to be the only child to benefit from her parents. Her response was that she did not care and did not want any of her parents’ money.

In giving her evidence she had a clear animosity towards the first defendant and she was clearly aligned with the plaintiffs. In those circumstances, her evidence should be treated with some caution.

Mr Coffey

Very little weight can be placed on Mr Coffey’s evidence as it was mostly irrelevant and mostly given as a result of what he had been told by the second defendant. Importantly, he was unable to give evidence as to the critical events in 1998 and 1999 as he had little or no memory of those events.

Mr Collard

Mr Collard had little understanding of the rationale behind the documents and transactions that he was instructed to prepare in 1998 and 1999 by the plaintiffs. His evidence was that he simply acted upon instructions that were ‘plain’ with little analysis of those instructions. Although his evidence was that he told Mr and Mrs Ozaltay that the defendants should be separately represented on the 1998 translations, it is clear that his firm acted on behalf of all of them. Given the nature of the 1998 transaction, the age of the defendants, the circumstances within which it occurred and the overbearing nature of the plaintiffs, there is a clear conflict of interest on the part of Collards. There is also a conflict in advising all of them when attempting to persuade the first defendant to sign the relevant documents in 2013.

Initially, he gave evidence concerning the 1998 transaction but later said that he could not remember those events in 1998 and may even have been overseas at the time. His evidence was of little assistance in understanding the intended nature of the transactions and his recollection of statements said to have been made by the defendants to the effect that they understood that they held the relevant property on trust for their parents occurred at the earliest in 1999, if they occurred at all.

The first defendant

The first defendant presented as a generally reliable witness. For the most part, her recollection of the events at the heart of this proceeding is clearly preferable to the incoherent alternative offered by the plaintiffs.

However, the first defendant was selective in her memory at times and occasionally engaged in the emotional rhetoric that was a feature of her parents’ evidence. This tended to reduce her persuasiveness as a witness, such that the Court was left in a difficult position when trying to resolve competing accounts.

Mr Atilla

Despite his limited English, Mr Atilla’s evidence was marked by a coherence otherwise rare in this proceeding. Whereas each of the other witnesses appeared evasive, speculative or even dishonest at various stages, Mr Atilla gave direct answers to all of the questions he was asked. He openly acknowledged that he could not give evidence about certain matters because we was not privy to them. In respect of the matters of which he did have knowledge, his answers were honest and truthful. Overall, he impressed as a reliable witness.

Consideration
Was the transfer of Pandora Avenue voluntary or for consideration?

In order to make good their various trust claims, the plaintiffs must establish that the transfer of Pandora Avenue was ‘voluntary’, that is, for no consideration. Neither the documentary nor the oral evidence establishes this to be the case.

At the time of the transfer of Pandora Avenue, Mr and Mrs Ozaltay were divesting themselves of their assets for the sole purpose of avoiding any adverse orders made against them in the County Court proceeding. The chronology of events concerning the transfer of Pandora Avenue and the plaintiffs’ pleaded case compels this conclusion. This was also the reason for the bread shop business being transferred to Mr Atilla for a payment of $30 000. Despite reviewing their pleadings well before trial, the plaintiffs did not seek to amend their pleading as to the reasons for the transfer of Pandora Avenue at any time.

The alternative reasons proffered by them in their oral evidence concerning their son being the reason for the transfer of Pandora Avenue—which were not pleaded—are implausible and unbelievable. Mr Ozaltay’s evidence that he decided to sell Pandora Avenue because he was fed up with people coming to his door is contradictory as the change of ownership of Pandora Avenue did not solve those problems.

The arrangement that was entered into was that Pandora Avenue would be transferred to the defendants, in exchange for which the defendants would obtain a mortgage that would be used to discharge the plaintiffs’ existing mortgage with Westpac. To this end, the defendants obtained a mortgage with ING Bank with the assistance of Mr Ozaltay’s loan brokerage contact, ‘Terry’. The statement for the ING mortgage account records that on 2 June 1998 the sum of $150 324.50 (being most of the borrowed amount) was paid into a Westpac bank account. The oral evidence of both the first defendant and Mr Ozaltay on this point is in rare agreement; that is, this sum was paid into the plaintiffs’ mortgage account, thereby discharging the plaintiffs’ mortgage with Westpac. Otherwise, further fees were deducted by the bank for stamp duty and the like making a figure of around $160 000 utilised for the transaction.

The second plaintiff and second defendant, on their own accounts, had little or no involvement with this aspect of the transactions making any evidence given by them to the contrary implausible.

As the consideration just identified does not fully constitute the amount of $200 000 recorded on the transfer, the question remains as to whether this means that the difference of $40 000 between those two amounts needs to be accounted for either as a gift, a proportionate trust interest, a loan or otherwise. As stated, the true reasons for the transaction was for the plaintiffs to divest themselves of their assets to avoid the looming and potentially substantial judgment brought against them in the County Court proceeding. In such a scenario, it would be highly improbable that they were concerned with ensuring they received the full value of Pandora Avenue, notwithstanding their oral evidence to the contrary. If this conclusion is incorrect, I am satisfied on the evidence that the remainder was a gift by them to the defendants.

The plaintiffs’ contentions that they made the repayments on the ING mortgage does not change this conclusion. At best, the plaintiffs’ evidence as to payment of the mortgage was confused and entirely unsatisfactory. On the one hand, it was said that the mortgage repayments were made from the takings of the bread shop business, topped up with ‘savings’ where necessary. On the other hand, when it was put to Mr Ozaltay that the mortgage was paid from the takings of the bread shop business, he dismissed this idea as ‘nonsense’. Simultaneously, Mrs Ozaltay declared that the bread shop business was losing money and had to be propped up by the seemingly unending insurance payment as a result of the fire at the video rental premises or their savings, about which no evidence was ever given by them.

Although counsel for the plaintiffs queried the ability of the bread shop business to support the payment of two mortgages in his cross-examination of Mr Atilla, the reality is there is no evidence of how much the bread shop business was making at any relevant time. Mr Ozaltay was the person entirely responsible for the finances of the bread shop business for three years yet he was unable to provide even an estimate of how much the bread shop business earned over that time. The evidence has no real utility as it is entirely without context or documentary support.

Despite the myriad variations proffered, the general consensus between the parties appeared to be that the takings from the bread shop business were deposited in cash into the Westpac account to cover the mortgage repayments. However, as observed by counsel for the first defendant, the plaintiffs appear to assume that this means that all of those funds are to be put to the credit of the plaintiffs. Given the evidence of the ownership and operation of the bread shop business, some of which is supported by contemporaneous documentary evidence, this cannot be so.

Accordingly, I am satisfied on the evidence that the transfer of Pandora Avenue from the plaintiffs to the defendants was supported by valuable consideration with the result that the plaintiffs’ claim fails at this first hurdle. This conclusion is relevant to the plaintiffs’ claim for a common intention constructive trust. In the event I am wrong regarding the payment of consideration for the transfer of Pandora Avenue, it is appropriate to consider the relevant factors required to establish a common intention constructive trust.

Common intention constructive trust

A common intention trust is based on actual intention, which is either expressly stated or is to be inferred from the conduct of the parties. The elements of a common intention trust are uncontroversial and may be summarised in three steps:

(a) the first is whether the parties formed a common intention as to the ownership of the beneficial interest in the relevant property, in this case, Pandora Avenue;

(b) the second is whether the parties claiming a beneficial interest in the property have acted to their detriment; and

(c) the third is whether it would be a fraud on claimants for the other party to assert that the claimants had no beneficial interest in the property.[9]

Did the parties form a common intention regarding Pandora Avenue?

[9]Sobey v Sobey [2014] VSC 373 (14 August 2014) [44] (Almond J), citing Hohol v Hohol [1981] VR 221, 225 (O’Bryan J).

Given the volume of evidence, it is worthwhile addressing the common intention alleged by the plaintiffs. It is unnecessary for the determination of the trust claims to reach a final conclusion on each occurrence that is said to demonstrate the alleged intention. What is necessary to decide the claims relied on by the plaintiffs is to reach a conclusion as to whether the facts of the case support a finding that that intention exists.

For their common intention trust claim, the plaintiffs plead that the parties formed a common intention that arose out of oral discussions shortly before the transfer of Pandora Avenue in June 1998.

The only common factors between the parties regarding the transfer of Pandora Avenue was universal confusion and inconsistency. The accounts of the plaintiffs and the second defendant of the conversations that were said to give rise to the alleged common intention differed in material and substantial respects. The plaintiffs’ evidence of the conversations that occurred simply does not go so far as their pleaded case. There was no conversation in the oral evidence, or in conjunction with other contemporaneous conversations, that contained each of the elements constituting the alleged common intention.

I accept the first defendant’s submission that the plaintiffs’ evidence as to the alleged oral discussions was inconsistent as between themselves and as compared to their pleaded case. The first defendant gave two examples to illustrate the point: the first being that Mrs Ozaltay’s evidence was that the defendants initiated the conversations regarding the transfer while Mr Ozaltay’s evidence was that he initiated those conversations and the second being that the plaintiffs’ evidence essentially denies their pleaded case that the transfer was to avoid the potential adverse consequences of the County Court proceeding.

Further, the documentary evidence comprising the transfer and loan documentation is totally inconsistent with a common intention constructive trust. These documents show that the plaintiffs have treated the defendants as the owners of these properties for the purposes of giving themselves the right to take either a mortgage or charge and they also show the plaintiffs’ written acknowledgment of the defendants’ ownership of the property. In particular, the transfer of land dated 1 June 1998 expresses $200 000 as the consideration for the transfer to the defendants, with no reference to trustees or the property being held on trust; the ING loan documents were in the names of the defendants and the 1998 loan agreement and the 1999 loan agreement gave the right to mortgage the subject property at the relevant time of the transfer and the 2002 loan agreement gave the right to a charge.

Notably, both of the defendants were quite young at the relevant time, with the second defendant still at school. As previously noted, she conceded that she did not know much about the arrangements at the time. The first defendant was older but not so much older that she had any relevant experience in buying and selling land or with trusts. It was evident during the trial that Mr and Mrs Ozaltay expected the defendants to comply with their demands. Furthermore, Mrs Ozaltay’s evidence, and to a lesser extent, Mr Ozaltay’s evidence, was that the defendants were expected to agree to the decisions made by them. The decisions appeared to, at least on certain occasions, have been made by Mr and Mrs Ozaltay in discussions not involving the defendants and they expected the defendants to abide their decision. This is consistent with the evidence that the defendants were not given independent legal advice in respect of the 1998 transactions. All of these matters raise serious doubt as to the common intention and understanding alleged by the plaintiffs in their pleading.

In my view, the evidence fails to establish the common intention alleged by the plaintiffs.

In closing submissions, the plaintiffs submitted that the trust created upon the transfer of Pandora Avenue continued with the subsequent two property dispositions and acquisitions of 26 Woolnough Drive and 20 Woolnough Drive. It was submitted that these subsequent transactions were agreed variations of the original trust ‘intention’ or ‘agreement’ and that the trust remained by analogy with ‘tracing’. The plaintiffs did not rely on any authority to support this submission.

The conclusion that the evidence fails to establish the common intention alleged by the plaintiffs makes it unnecessary to consider whether such a common intention and consequent trust could be varied and maintained throughout the following years and transactions in the manner alleged by the plaintiffs.

Have the plaintiffs acted to their detriment?

Though not strictly necessary in view of the finding in relation to the common intention of the parties, for completeness, the issue of the plaintiffs’ claim of detriment should also be addressed. The plaintiffs contend that the funds for the purchase of the three properties came from them. There is no documentary evidence to support their claims, merely confusing and inconsistent oral evidence already set out. It remains unclear what funds they had at the relevant time and the documentary evidence does support that funds were paid into either the Westpac account or the ING account to repay the mortgage, yet generally the source of those funds was the subject of vague and unsubstantiated oral evidence.

The plaintiffs also incorrectly allege that all payments said by them to be made from the bread shop business into either the Westpac account or the ING account were payments that went solely to their credit. An example is contained in the particulars to paragraph 10 of their statement of claim where it is asserted that the payment of $100 000 into the ING account, which it is agreed came from the sale of the bread shop business, was to the credit of the plaintiffs only. The documentary evidence was that at the time of that payment the bread shop business was owned by Izel Enterprises, which was at least half owned by the defendants. There was no explanation by the plaintiffs of their reasons for claiming that they should derive all credit for the payment.

There was also no documentary support for Mr Ozaltay’s evidence that the takings from the bread shop business were used to pay the mortgage repayments into the Westpac bank account, and when the takings were insufficient he used his own money to make the repayments. As stated earlier, the state of the plaintiffs’ finances and resources remained a mystery, with no credible evidence provided to support his oral evidence on these points.

The plaintiffs have also not taken into consideration that they received substantial consideration for Pandora Avenue that meant they could discharge their mortgage to Westpac. Other benefits received by them were being able to live, rent free, for a significant period of time in the three properties since 1998 and they remain living in 20 Woolnough Drive. The plaintiffs also have the benefit of the defendants assuming the liability for repayments under the ING mortgage and they have avoided paying the judgment debt to Mr and Mrs Tatlica. Had they not transferred Pandora Avenue to the defendants, as was their scheme, either Mr and Mrs Tatlica or their trustee in bankruptcy would have sold Pandora Avenue.

Accordingly, I am satisfied that the plaintiffs have not suffered or acted to their detriment in the circumstances.

Would it be a fraud on the plaintiffs for the first defendant to assert that the plaintiffs had no beneficial interest in Pandora Avenue?

In view of the finding that the transfer of Pandora Avenue from the plaintiffs to the defendants was supported by valuable consideration and the findings in respect of the first two elements of the common intention constructive trust, it is unnecessary to consider this issue any further.

Plaintiffs’ oral application to amend their claim to plead a resulting trust in the alternative

The plaintiffs’ oral application at the commencement of the trial seeking to include an alternative claim of a resulting trust in their favour was a bold application in the circumstances. It was unusual in that the trial date had been fixed on an earlier occasion but had been unable to start due to availability of counsel for personal reasons. The proceeding was then refixed for trial and yet no mention was made of this proposed amendment at that time.

No formal application by summons was made to amend the pleadings and no proper reason was given by the plaintiffs for seeking to add this proposed alternative claim at such a late stage of the proceeding. The defendant objected to the proposed amendment on the basis that it was too late and was not sufficiently pleaded.

Because I have determined that the transfer of Pandora Avenue was made for consideration, it is unnecessary to consider this proposed amendment at all as a resulting trust could not arise in view of that finding.

The Cyprus payment

The plaintiffs’ claim filed in July 2013 alleged an oral agreement between the plaintiffs and the first defendant whereby, on or about 10 May 2011, whilst in Cyprus, the plaintiffs agreed to lend the first defendant £10 000 to be repaid on demand. They allege that on 13 May 2011 they lent this sum to the first defendant. The plaintiffs claim the first defendant is indebted to the plaintiffs in the amount in Australian dollars equal to the sum of £10 000, which sum was demanded by the issue and service of this proceeding.

The first defendant denies the Cyprus payment was a loan. She says the payment of £10 000 was made pursuant to an agreement whereby she would assist the plaintiffs to sell a property in Cyprus in exchange for one third of the sale proceeds. Although the property was sold for greater than £30 000 pounds, she accepted £10 000 as a genuine compromise of the agreement with the plaintiffs. Alternatively, the first defendant says the sum of £10 000 was a gift to her from the plaintiffs.

Mr Ozaltay’s evidence

Mr Ozaltay was in Cyprus in May 2011, as were the first defendant and Mr Atilla. Mr Ozaltay wanted to sell land that he owned in Cyprus for £38 000. The purchaser knew Mr Attilla’s family and, through the family, got in touch with Mr Ozaltay to purchase the property. Mr Ozaltay agreed to sell the property on the condition that he received the purchase price in cash. Mr Atilla took Mr Ozaltay to meet the selling agent, and after some irrelevant difficulties, the purchase price in cash was received by Mr Ozaltay. Mr Ozaltay denied that there were any arrangements regarding money with the first defendant or Mr Atilla prior to the sale. A week after the sale, the first defendant approached Mr Ozaltay and said that her mother-in-law had given her a sum of money and she requested £10 000 from him to pay off a housing loan. He agreed to do this, but said to her ‘on the understanding that if and when I want that money I get my money’.

Mr Ozaltay asked for the money back after there were problems between his children. He said at first the first defendant agreed to pay the money back, but later on she refused to do so, saying the money was a gift to her.

The first defendant’s evidence

Several years ago, after Mr Atilla’s father had died and his mother was unwell, the first defendant and Mr Atilla decided to take a two week holiday and visit Mr Atilla’s mother in Cyprus. Shortly after their arrival in Cyprus, Mr Ozaltay began calling the first defendant, asking for help from her and Mr Atilla in selling his property in Cyprus. At first, the first defendant refused but Mr Ozaltay kept insisting that they help him. Eventually, he promised the first defendant one third of the sale price if they helped him with the sale of the property. On this basis, the first defendant and Mr Atilla then agreed to do so. Mr Atilla, in particular, spent a considerable amount of time showing the property to prospective purchasers and negotiating a sale. The first defendant estimated that about half of their time in Cyprus was occupied with selling Mr Ozaltay’s property. The property was ultimately sold for £40 000.

After the sale, Mr and Mrs Ozaltay came to Cyprus. According to the first defendant, Mrs Ozaltay—who did not give evidence on the Cyprus payment—then said to her: ‘I know we promised you a third, but is £10 000 OK?’ The first defendant agreed to this. Mr Ozaltay then transferred the sum of £10 000 to the first defendant.

In cross-examination, it was put to the first defendant that there is a custom in Cyprus whereby parents will share with their children a portion of the proceeds of sale of properties sold in Cyprus. The first defendant agrees there is such a custom, but denied that that was what occurred between her and her father.

Mr Atilla’s evidence

Mr Atilla recalled that while he and the first defendant were on holidays in Cyprus, Mrs Ozaltay offered to give them ‘a lot of money’ if they assisted them in selling a property in Cyprus. Mr Atilla was not given an exact figure but the first defendant told him it would be one third of the sale price. Mr Atilla used his contacts to find some interested potential buyers. He made numerous telephone calls, followed those calls up, kept Mr and Mrs Ozaltay updated on what he was doing and conducted negotiations with potential buyers. Eventually, he made an oral agreement with a purchaser to sell the property for £40 000. Mr and Mrs Ozaltay then travelled to Cyprus for the settlement of the sale of the property. Mr Atilla was still busily involved in the sale after Mr and Mrs Ozaltay came to Cyprus by driving them when they were in Cyprus, taking them to government offices and banks. He estimated that he spent about a week and half assisting Mr and Mrs Ozaltay with the sale.

Mr Atilla did not recall a conversation in which the first defendant asked Mr Ozaltay for £10 000 to pay off her housing loan during this time. He agreed that a custom exists in Cyprus that where a parent sells property in Cyprus, they give a share of the proceeds to their children, however, he denied that he and the first defendant had an expectation that they would receive any money upon the sale of the property beyond what had been promised to them for their assistance.

Consideration of the Cyprus payment

The plaintiffs bear the onus of establishing that the Cyprus payment was a loan to the first defendant repayable on demand. The only documentary evidence regarding the Cyprus payment to the first defendant was a copy of an electronic transfer entirely in the Turkish language. For someone not familiar with that language, it is difficult to understand without a translation, but it shows a transfer of £10 000 between Mr Ozaltay on the one side and the first defendant and Mr Atilla on the other. Reading between the Turkish words, one might conclude that the funds appear to come from an account held with a Turkish bank named Iktisatbank and then go to an account held with the Commonwealth Bank of Australia. This suggests that Mr Ozaltay was the transferor and the first defendant and her husband were the transferees of those funds.

The oral evidence as to the nature of the Cyprus payment is conflicting. Mr Ozaltay failed to provide any explanation for an alleged loan. The only term alleged in respect of the loan was that it was repayable on demand. Demand was not made until two years after the Cyprus payment was made when the plaintiffs had issued their proceeding in respect of the 2002 loan agreement; that is, after the plaintiffs had fallen out with the first defendant.

Mrs Ozaltay’s failure to give any evidence regarding the Cyprus payment is significant given the first defendant’s evidence that Mrs Ozaltay said ‘I know we promised you a third, but is £10,000 OK?’

The evidence of the first defendant and Mr Atilla provides a rational explanation for the Cyprus payment, namely, as payment for services that Mr Atilla provided to Mr and Mrs Ozaltay in respect of the sale of the land. Considering the timing of the demand for repayment and the evidence objectively, I am satisfied that the Cyprus payment was not a loan repayable on demand.

Accordingly, the plaintiffs have failed to establish their claim against the first defendant that the Cyprus payment was a loan to the first defendant repayable on demand.

Conclusion

The plaintiffs’ claims against the first defendant are dismissed. The parties are to send in orders dismissing the claims and any other ancillary orders for the efficient resolution of the proceeding, including costs. If the parties are unable to agree on the costs of the proceeding, written submissions may be filed by them on or before 17 November 2017.

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[2017] VSC 664

1 November 2017