Sadri v Samian (No 3)
[2010] VSC 251
•10 June 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 6652 of 2006
| SEPIDEH SADRI | Plaintiff |
| v | |
| ALI REZA SAMIAN | Defendant |
---
JUDGE: | HANSEN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 8, 14 and 17 December 2009 | |
DATE OF JUDGMENT: | 10 June 2010 | |
CASE MAY BE CITED AS: | Sadri v Samian (No 3) | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 251 | |
---
ADMINISTRATION AND PROBATE – Whether estate solvent – Executor ordered to adduce further evidence on two properties – Valuation evidence – Expert evidence as to Iranian law – Sufficiency of evidence – Net position of estate – Executor failed to ascertain estate’s liability to deceased’s children by reason of deceased’s breach of a trust for their benefit – Executor paid other unsecured creditors in full disregarding estate’s liability to children – Executor failed to get in proceeds of Iranian land – Executor alleged land subject to equitable charge to secure deceased’s debt to her father – Whether transaction created equitable charge – Whether executor acted properly in permitting father to sell land and keep proceeds of sale – Extent of executor’s personal liability.
EVIDENCE – Best evidence rule – Defendant sought to rely on copy documents relating to Iranian land – Authenticity disputed – No explanation for failure to produce originals – Documents inadmissible.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Perkins | David Perkins |
| The Defendant appeared in person |
HIS HONOUR:
Introduction
This is the third judgment I have delivered in the proceeding and should be read in conjunction with my two earlier judgments[1]. Those judgments set out the history of the proceeding. To understand the present position in the litigation it is necessary to refer to that history in further detail.
[1][2009] VSC 99 and [2009] VSC 354.
History of the proceeding
The plaintiff and her two brothers are the beneficiaries of a trust created by their late mother, Mona Samian (“the deceased”) who died on 2 June 2004. The defendant is the brother of the deceased and the executor of her estate. The proceeding came on for trial on 30 June 2008. The hearing occupied two days, in which the defendant gave evidence while the plaintiff called no evidence, her counsel being content to run the case on the basis of admissions in the pleadings. I gave judgment on 26 March 2009 (“the first judgment”[2]) upholding the plaintiff’s claim (which was not disputed by the defendant) that the deceased was, both prior to and at the time of her death, in breach of a trust she had created in favour of her children. I did not then make a general order for accounts and inquiries as the plaintiff sought, as such orders seemed to me to be unwarranted by the evidence and unjustifiable in terms of cost. Rather, in circumstances where a question was raised as to whether the estate was solvent, and the answer to that question seemed to depend on the value of two assets which were, or arguably were, part of the estate, namely a unit at Southbank (“the Southbank unit”) and land in Iran (“the Iranian land”), I considered that further evidence was required as to those two assets.
[2][2009] VSC 99.
On 26 March 2009 I made orders adjourning the further hearing of the proceeding to 5 June 2009 for the purpose of the Court receiving evidence as to:
(a)The market value of the Southbank unit and the amount owing thereon, including the contract of purchase by the deceased and any financing documents, at the date of death and six months thereafter; and
(b)The deceased’s ownership of the Iranian land, including documents pertaining to its sale, the receipt and disposition of the proceeds of sale, and the law of Iran relating thereto.
The evidence at the hearing was to be on affidavit with a right of cross-examination, and I gave directions for the filing of affidavits.
Affidavits were filed pursuant to my orders, and the second judgment describes the contents of those affidavits[3]. For present purposes, it is necessary to refer in further detail as to what was deposed in relation to the Iranian land.
[3][2009] VSC 354 at [14]-[36].
In his affidavit sworn 24 April 2009, the defendant deposed that in approximately February 1999 the deceased agreed to transfer the land to her father (“Mr Khansari”) in full satisfaction of her debt to him of $15,800 and provided him with a power of attorney No. 21845 dated 24 February 1999 (which I will call the 1999 power of attorney) to enable him to sell the land. The defendant deposed further that the power of attorney was confirmed by the Iranian Embassy on 2 March 1999 and approved by the Department of Foreign Affairs on 18 April 1999. I interpolate that this position is, in substance, the same as that contained in the defendant’s defence (referred to at [84] of the first judgment) which pleaded that in approximately April 1999 the deceased agreed to transfer the land to her father in full satisfaction of her debt to him of $15,800 and provided him the 1999 power of attorney to enable him to sell the land. Notwithstanding the reference in the pleading to the 1999 power of attorney as the basis on which Mr Khansari sold the land, the defendant did not exhibit it to his affidavit. Indeed, the defendant has never provided an original or copy of the 1999 power of attorney.
Rather, the defendant exhibited[4] a copy document in Persian which purports to be a power of attorney dated 20 May 2004, together with an English translation made by Dr Hosain Riazi in 2006. It is convenient to call this the 2004 power of attorney. A photocopied stamp, signature and handwritten date of 20.05.04, apparently of the defendant’s former solicitor, Sousan Oboodi (“Ms Oboodi”), appear on the Persian document. At the top of the translation, the words “Original Document: A Faxed Copy of Power of Attorney” appear. When Dr Riazi appeared in court as interpreter[5], counsel for the plaintiff asked him whether he had seen the original 2004 power of attorney. He said that he saw a faxed copy but not the original. As to the content of the 2004 power of attorney, after setting out the names of the parties, it provides as follows:
[4]AS-13.
[5]On 14 December 2009.
“Subject of the Case:
Sale of a parcel of land number 1/16670 subdivision 1 from Main number 6023 situated in Takestan and with an area of approximately 230 square metres.
I, Fatemeh Samieian Khansari give this power of attorney following my earlier one dated 24 February 1999 as confirmed by the Embassy of the Islamic Republic of Iran in Canberra and as registered by the Department of Foreign Affairs through the letter 1375 dated 2 March 1999. Hereby, I am confirming the earlier power of attorney and give this power of attorney again to appoint my father Mr Haj Mostafa Samieian Khansari as my attorney with full authority including the appointment of other agents to sell the above mentioned land in any way that he sees fit to anyone and make this transfer final. His signature is regarded as mine for any document in all government and local councils and notaries of public and any other agency dealing with the transfer of the said land and will have equal legal weight. The attorney can transfer all the authority given to him through a power of attorney to a third person to act as his agent. This power of attorney is valid for ever.
Scope of Authority:
Mr Haj Mostafa Samieian Khansari my attorney has unlimited authority and he is legally able to transfer his right in this power of attorney to a third person giving that person the same authority. That agent has the full authority to sell (the land) and act as specified in this power of attorney and the one I have issued earlier, with the power to transfer the power to yet another agent to act on behalf of the attorney. This authority is for an unlimited period with legal validity for ever.
Signature of the Client: [Signed] Date: 20 May 2004
Translator’s Remark: This power of attorney bears two stamps; one is by the Iranian Embassy in Canberra certifying (confirming) the signature of Fatemeh Samieian given registration number 06750 and dated 25 May 2004 and appears on the top right hand side of the document and signed by Mojtaba Vali, the First Secretary of the Embassy; the other one is by Sousan Oboodi and appears at the bottom of the page who signed without commenting.”
Next, the defendant deposed that at the time of the deceased’s death, the title of the land was still in her name. I interpolate that this was consistent with the evidence he gave in 2008. He deposed that she “had instructed me that since she had transferred the subject parcel of land to her father in replacement of her debts back in February 1999, she did not include that in her Will dated 4 May 2004”. He exhibited[6] a document in Persian, accompanied by an English translation, which he described as “a copy of Will and Affidavit dated 20 May 2004”. A photocopied stamp, signature and handwritten date of 20.05.04, apparently of the defendant’s former solicitor, Sousan Oboodi (“Ms Oboodi”), appear on the Persian document. Although the document is not a will at all, and was never admitted to probate, it is convenient to refer to it as “the Iranian will”. After setting out formal details, the Iranian will stated that:
“According to the power of attorney 21845 dated 18/04/1999, I had given my father the right to sell on my behalf, a parcel of land with an area of 230 square metres, situated in a suburb of Takestan, in Ghazvin Province in Iran. I duly confirm, certify and declare that my father Mostafa Samieian gave me AUD $15,800.00 that was spent on the repair of my residential building and expenses that I had for the treatment of my illness. Therefore, I owe him this amount of money legally and morally and accordingly, through this I ask that my father keeps the above-mentioned land in lieu of his loan to me. Should there be a surplus, I ask that the money be spent for the pilgrimage to Mecca for me. I would like to add that originally, my father made the title of this land under my name as a reward for my academic achievements when I was a student in Iran. So he is deservedly entitled to act as my agent with full authority to keep the proceeds of sale of this land in lieu of part of his loan to me and my debts to him. My spouse and children have no right of objection or claim.”
[6]AS-14.
Next, the defendant deposed that after the deceased’s death, acting as trustee of the estate he instructed Mr Khansari to act:
“as per the deceased’s Will [clearly a reference to the Iranian will] and sell the land in Iran as he [Mr Khansari] had had no chance prior to this to act upon [the deceased’s] wish and power of attorney. Upon seeking advice on the Iranian law, I asked my father to make enquiries as to the value of the land.”
He exhibited[7] “two appraisals from two different organisations”. The first appraisal was a copy of a handwritten document in the Persian language, accompanied by an English translation, purporting to be a certificate from the Imam Hassan Mojtaba Mosque Board of Trustee and Charity Clinic, city of Takestan, Endowment Department, dated 11 September 2007. This document, which I will call “the mosque certificate”, purported to certify that the deceased owned land with an area of 218m2 “located at the back of Social Security Hospital in the City of Takestan” and that the approximate market price of the land in 2003 and 2004 was between 500,000 and 550,000 Rials[8] per square metre. The translation included a “verification” whereby the manager of “Eskan Real Estate Agency” in the city of Takestan purported to certify the mosque’s appraisal. It is to be noted that the mosque certificate was a copy document, and no original was produced. The second appraisal was also a copy of a handwritten document in the Persian language, accompanied by an English translation, purporting to be a certificate from the Endowment & Charity Affairs Dept. city of Takestan, dated 6 September 2007. This document, which I will call “the second mosque certificate”, purported to certify that the deceased owned land[9] “next to Social Security Hospital in the City of Takestan” and that the approximate market price of the land in 2003 and 2004 varied from 500,000 to 520,000 Rials per square metre. The translation included a “verification” whereby the manager of “Real Estate Agency” in the city of Takestan purported to certify the above appraisal. Again, it is to be noted that the second mosque certificate was a copy document, and no original was produced.
[7]AS-15.
[8]The official currency of Iran is the Rial, however prices are often quoted in Toomans. There are 10 Rials to one Tooman. At the relevant time, there were approximately 7000 rials to the Australian dollar.
[9]The area of the land was not specified.
Next, the defendant exhibited[10] “a copy of Legal advice given by the Iranian lawyer … Mr Davoud Rahmani.” The document is in the Persian language and appears to be undated. It is accompanied by an English translation dated 23 April 2009. Despite the absence of a date in the advice, it is clear that the defendant was claiming that he relied on the advice at the time of the sale. I so conclude because he deposed that “upon seeking advice on the Iranian law”, he asked Mr Khansari to make enquiries as to the value of the land, and clearly the enquiries as to value were alleged to have occurred before the sale. It is not necessary to set out the contents of the advice, save to note that it quotes from several articles of the Civil Code of Iran and concludes by stating that “After the death of the testator the executor is regarded as full [sic] authorized representative of the testator and must act in accordance with the will, which have been intention and goal and objective of the testator”. In short, the advice is couched in the most general terms and does not make any reference to the specific circumstances of the present case, nor does it advise that it was lawful to sell the land. The defendant sought to summarise the contents of the advice in his affidavit, stating in effect that he as executor must act in accordance with the deceased’s will. Read in context, the defendant was clearly referring here to the Iranian will rather than the will admitted to probate.
[10]AS-16.
Next, the defendant deposed that the land was sold on 27 June 2004 for 105,000,000 Iranian Rials, which converted to approximately AUD$15,000 at the time[11]. He exhibited[12] a copy of the contract of sale of the Iranian land in the Persian language with no English translation accompanying it. He then deposed that “after consideration of expenses to Iran by the Deceased’s father, the proceeds of the sale of the land have been used towards the repayment of some of her debts owed to her father and the Pilgrimage in early 2005 for and on behalf of the Deceased and in accordance with her Will dated 20 May 2004 [the Iranian will]”.
[11]At an exchange rate of 7000 Rials to the Australian dollar.
[12]AS-18.
The defendant also filed an administration account dated 24 April 2009. Part A of the account listed total receipts and disbursements of $300,000, set out as follows:
“Number of Items Date
Particulars
$.c.
$.c.
1
2
24 March 2005
27 June 2004
Southbank Unit (Eureka Tower)
Iranian Land (Not part of the estate)
285000.00
15000.00
Total: 300000.00 Disbursements
Peter Kay
Mostafa Samieian[13] Khansari
285000.00
15000.00TOTALS: 300000.00 300000.00 Balance: 0.00 0.00” [13]The name is spelt this way in some documents.
Part B of the account stated that the Southbank unit was “disbursed to Peter Kay … in accordance with the Codicil of the Will”, and the Iranian land was “disbursed to [Mr Khansari] in accordance with the Deceased’s Power of Attorneys and the Will Dated back in 24th February 1999 and 20th May 2004”. Part E of the account stated that “The residue sum of $19,948.10 held in Trust by Costanzo Lawyers”.
In her affidavit affirmed on 18 May 2004, the plaintiff complained that she had repeatedly asked the defendant to provide the original of the 1999 power of attorney and that he had failed to do so. She disputed the allegation that the deceased owed money to Mr Khansari. She also disputed the authenticity of the Iranian will, and alleged that the only valid will was the one dated 4 May 2004 and admitted to probate. She alleged more generally that “all documents provided by the defendant or his father on this issue are forged and of no legal value”. She disputed the authenticity of the legal advice allegedly received from Rahmani, and asserted that “what the defendant has provided or said on this matter are mere afterthoughts”. Finally, she alleged that the land was worth in excess of $250,000.
The defendant’s affidavit in response to the plaintiff raised further matters in relation to the Iranian land.
First, he denied the plaintiff’s allegations as to the authenticity (or lack thereof) of documents. He deposed that “I always treated the Land as a debt repayment of the deceased to her father as referred to in paragraph 11 of her Will, dated 4 May 2004[14] and the Power of Attorney, Statutory Declaration[15] and the Will”. The defendant also deposed that “as the executor I have acted to achieve the ultimate outcome that would have been to sell and convert the subject land to money and assure that the deceased’s wish was achieved”. Read in context, the reference here to the deceased’s wish is a reference to the wish expressed in the Iranian will.
[14]That paragraph (of the will admitted to probate) states the deceased’s wish that the beneficiary of her superannuation fund, Soroor Bolooni, pay $40,000 owing to Mr Khansari.
[15]The reference to a Statutory Declaration is unclear, however the defendant used the word interchangeably with the words “affidavit” and “will” at the hearing on 29 June (at transcript 87) and I infer that the reference in his affidavit to Statutory Declaration was a reference to the Iranian will.
Secondly, he denied the plaintiff’s assertions as to the value of the land, and in doing so exhibited (a) a copy of the contract of sale for the land, this time accompanied by an English translation[16], and (b) a document he described as “a true copy of the valuation and appraisal certificates”[17]. This latter exhibit, which comprised a Persian copy document and an English translation thereof, can be conveniently referred to as “the appraisal”. As far as the Persian document is concerned, the appraisal appears to be identical to the second mosque certificate referred to above. The English translations of these documents were done by different translators, hence the wording is somewhat different, but the substance including the asserted value of the land is the same in each.
[16]FS-7.
[17]FS-18.
Thirdly, the defendant alleged that the deceased “approached her father for financial support on many occasions, being small amounts for grocery shopping or larger [amounts] to pay credit card bills, in which we did not see the need to keep records”. He exhibited[18] a copy of a deposit slip for a deposit allegedly made to the deceased’s bank account at the Bank of Melbourne by the defendant on 16 July 2003 on behalf of Mr Khansari. Although the defendant did not mention any specific amount of money in his affidavit, the deposit slip states $44,000 (in handwriting) and contains the handwritten words “Loan from Alan Sam to Mona and Peter Kay”.
[18]FS-14.
By email to the defendant dated 26 June 2009, counsel for the plaintiff objected to many of the paragraphs in the affidavits filed by the defendant. As to the Iranian land, the email stated:
“The plaintiff will contend that you have not provided these documents [the documents required by the 26 March orders], or any basis for the proposition that there was any valuation at all, or that any valuation on which you proceeded was honest, reasonable or open. The plaintiff will contend that it is patent that you entered into arrangements with your father which have not been disclosed, or have not been disclosed in a way which permits scrutiny.
The plaintiff will contend that you have provided no evidence or alternatively that you have provided no admissible evidence of the market value of the Iranian land. You have provided no details of the Iranian land which would identify it and hence permit the plaintiff to obtain evidence relating directly to that land or concerning it. The plaintiff will contend that it is plain that you could have provided this evidence, and that your failure to do so is deliberate.”
The email stated further that the plaintiff objected to the whole of paragraphs 10 to 14 of the defendant’s affidavit of 24 April. I interpolate that those were the paragraphs by which the defendant had sought to put into evidence the Iranian will, the two mosque certificates and the legal advice of Rahmani. The email also required the defendant to produce at the next hearing “all of the documents” referred to in the defendant’s affidavit of documents sworn 7 March 2007[19]. The email listed particular document numbers sought, the only one presently relevant being document “1” which was described in the affidavit of documents as “Document in Iranian” without more.
[19]Which was exhibit FS-5 to the defendant’s affidavit in response to the plaintiff, sworn 10 June 2009.
As to the defendant’s affidavit in response to the plaintiff, the email objected to a large number of paragraphs including (a) the paragraph relating to the land value in which the defendant referred to the contract of sale and the appraisal, and (b) the paragraph which referred to the bank deposit of $44,000.
There was a hearing on 29 June 2009 at which the defendant cross-examined the plaintiff and her father (“Mr Sadri”) on their affidavits and a wide range of other matters. At that hearing, counsel for the plaintiff reiterated the position taken in his email, namely that the defendant had not provided admissible evidence as to the value of the Southbank unit, nor as to the steps taken in relation to the Iranian land, that there was no identification of the Iranian land such as would enable the plaintiff to call independent valuation evidence, no evidence as to Iranian law in relation to the land and the power of attorney, and no evidence given by Mr Khansari, who had sold the land. Counsel chose not to cross-examine the defendant, effectively on the basis that because the defendant had not advanced the case by admissible evidence beyond the stage reached in the first judgment, there was nothing on which to cross-examine. He reiterated his submission that the appropriate relief in the circumstances was an order for the taking of accounts so as to clarify the position of the estate.
The defendant submitted that:
“… my father was instructed by myself to return to Iran and sell that property as per the affidavit or the will of the deceased, which was in a statutory declaration or affidavit by the deceased, referring to a power of attorney dated back in 1999 giving the land to her father and as to why and in relation to the debts that she had had to her father, namely $44,000 which I have attached in my affidavits …”.
He asserted that the deceased intended Mr Khansari to sell the Iranian land to repay her debts, and that she had given him the 1999 and 2004 powers of attorney for that purpose, which was why the land was not mentioned in her will. I interpolate that this is incorrect, for while the will did not specifically mention the Iranian land it had a residue clause. The defendant referred to the valuations of the land and said “it was sold on that and the advice I was given from a solicitor saying that it has been her wish”.
Counsel for the plaintiff renewed his call for originals of the documents referred to above. The defendant said that he did not have the originals, as they were taken to sell the parcel of land, but he had obtained certified true copies from the solicitors and the notary public.
I reserved my decision and gave the second judgment on 28 August 2009. I concluded that the defendant had not provided admissible evidence as to the market value of the Southbank unit, and had not provided a satisfactory account of his dealings with the Iranian land nor had he provided admissible evidence as to the law of Iran in relation thereto. The effect of this lack of evidence was that there was no basis on which I could conclude that the power of attorney remained in force after the deceased’s death so as to permit Mr Khansari to sell the Iranian land. I also noted that in circumstances where the plaintiff disputed the authenticity of the documents provided by the defendant in relation to the sale of the Iranian land, the defendant had not called evidence from Mr Khansari as to the circumstances in which the sale occurred or as to any other matter which might establish that it was proper not to include the land as an asset of the estate. I observed that while the defendant sought to rely on the Iranian will as justifying the sale, that was not the will admitted to probate. I noted that the defendant had been given an opportunity to adduce evidence that might establish that the Iranian land was not an asset of the estate, but that he had failed to do so, and in the absence of such evidence, I was left with the same concern I had expressed in the first judgment, namely that as the land was still owned by the deceased when she died it should have been included as an asset of the estate. I also noted that as the defendant had provided no admissible evidence as to the value of the land, and had not accounted for the proceeds of sale, the Court and the beneficiaries under the deceased’s will remained uninformed as to the value of the Iranian land. I concluded that the absence of proper evidence as to the value of the Iranian land and the Southbank unit meant that the overall value of the estate could not be determined, hence the question of the solvency or otherwise of the estate could not be resolved, and it was not possible to determine the extent to which the defendant was in a position to remedy the deceased’s breach of trust to her children.
On 28 August 2009 I made orders adjourning the proceeding to 4 November 2009 for the purpose of the Court receiving evidence as to:
(a)The market value of the Southbank unit and the amount owing thereon, including the contract of purchase by the deceased and any financing documents, at the date of death and six months thereafter; and
(b)The deceased’s ownership of the Iranian land, including documents pertaining to its sale, the receipt and disposition of the proceeds of sale, the deceased’s alleged power of attorney to her father (including its validity following her death), and the law of Iran relating thereto. (emphasis added)
I made directions for the filing of affidavits including statements of experts under O 44. It is to be noted that apart from the italicised words above, the subject matter in respect of which evidence was to be filed was the same as that specified in the orders of 26 March 2009. That is to say, the defendant was effectively given a second chance to adduce the admissible evidence that he failed to provide on the first occasion. Accordingly, I emphasised to the parties, and particularly to the defendant, that I required evidence that was admissible. I noted in the second judgment that the extra cost, expense and delay in the case was the result of the defendant’s failure to produce the required evidence in admissible form, and that I would deal with the costs thus wasted in due course.
Material filed by the defendant following orders of 28 August 2009
In response to the orders of 28 August 2009, the defendant provided the following material.
First, there was a valuation report prepared by Charter Keck Cramer, dated 12 October 2009, which concluded that the value of the Southbank unit was $285,000 at 2 June 2004 and 2 December 2004. The report was not attached to an affidavit or in the form of an O 44 report.
Secondly, on 16 October 2009 the defendant filed an affidavit sworn by Mr Khansari on 9 October 2009. Mr Khansari deposed (in para 3) that the deceased was the registered owner of a piece of “agricultural land” in a suburb of Takestan, in Ghazvin province in Iran. He exhibited as MS-1 the same mosque certificate that the defendant had exhibited to his affidavit. Mr Khansari deposed that, based on the figures in the mosque certificate, the value of the land was between AUD$14,533 and AUD$15,986. These figures were based on an exchange rate of 7500 Rials to the Australian dollar.
Next, Mr Khansari deposed (at para 4) that on 18 April 1999 the deceased gave him a power of attorney and asked him to sell the land in Iran “so that she can repay her debt to me”. At that time, she owed him approximately $8,000. He deposed (at para 5) that between August 2003 and May 2004 the deceased was very sick and asked him for further loans to repair her house in Bulleen and to pay medical expenses. He deposed (at para 6) that on or about 20 May 2004 the deceased swore an affidavit before her solicitor, Ms Oboodi, “in which she expressly acknowledged that she owed me the sum of $15,800 and she asked me to take over the Land in Iran, in satisfaction of her debt to me. She also stated that I could keep the proceeds of sale of the Land in Iran in lieu of part of my loan to her and her debts to me”. I interpolate that this document, described by Mr Khansari as an “affidavit”, is a copy document written in the Persian language and, accompanied by an English translation, was exhibit MS-2 to Mr Khansari’s affidavit. The document, which I will call “the deceased’s affidavit”, stated as follows:
“According to the power of attorney 21845 dated 18/04/1999, my father has the right to sell on my behalf, a parcel of land with an area of 230 square metres, situated in a suburb of Takestan in Ghazvin province in Iran. I duly confirm certify and declare that my father Mostafa Samieian gave me AUD $15,800.00 that was spent on the repair of my residential building and expenses that I had for the treatment of my illness. Therefore, I owe him this amount of money legally and morally and accordingly, through this I ask that my father takes the above mentioned piece of land in lieu of his loan to me. Should there be any surplus, I wish that the money be spent for my pilgrimage to Mecca. I would like to add that originally my father made the title of this land under my name as a reward for my academic achievements when I was a student in Iran. So he is deservedly entitled to act as my agent with full authority to keep the proceeds of sale of this piece of land in lieu of part of his loan to me and my debts to him. My spouse and children have no right of objection or claim to this arrangement.”
A photocopied stamp, signature and handwritten date of 20.05.04, apparently of Ms Oboodi, appear on the Persian document. A further photocopied stamp and signature of Ms Oboodi and a photocopied stamp stating “Certified True Copy” appear on the Persian document. The original has not been provided. As to the content of the deceased’s affidavit, it is to be noted that it is almost identical to the Iranian will set out at [7] above.
Next, Mr Khansari deposed (at paras 7 to 10) that between 20 May and 12 June 2004 he called Iran and spoke to two real estate agents (Rahmani Real Estate Agents and Shabani Real Estate Agents) in Takestan “in order to obtain the highest market price for the Land in Iran”. On about 25 June 2004 Shabani found a purchaser for the land who agreed to pay 10,000,500 Toomans, which was equivalent to AUD$14,268 at the then prevailing exchange rate of 700 Toomans[20] to the Australian dollar. Mr Khansari went to Iran on about 25 June, and on 27 June signed a contract of sale with the purchaser to sell the land for 10,000,500 Toomans. A copy of the contract of sale, accompanied by an English translation, was exhibit MS-3 to his affidavit. I note that this is the same copy contract exhibited to the defendant’s affidavit of 10 June. On 27 June 2004 he received a deposit of 4,000,000 Toomans. He later received the balance of purchase price, being 6,000,500 Toomans, and conveyed the land to the purchaser. I interpolate that the correct figure for the price in the contract of sale is 10,500,000 (rather than 10,000,500) Toomans, which was confirmed during Mr Khansari’s oral evidence. That is the same figure (105 million Rials) as that stated in the defendant’s affidavit. At the exchange rate of 700 Tooman to the Australian dollar, used by both the defendant and Mr Khansari, the price stated in the contract was equivalent to AUD$15,000.
[20]7000 Rials.
Next, Mr Khansari deposed (at para 11) that the proceeds of sale were insufficient to repay the deceased’s entire outstanding debt to him of $15,800. Finally, he deposed (at para 12) that he was advised[21] by his solicitor in Australia, Francis Lim, and verily believed that:
[21]He did not specify in the affidavit when he received that advice.
(a)By reason of Exhibit MS-1, he (Khansari) had a beneficial interest in the Iranian land, or alternatively had an equitable mortgage.
(b)Further and in the alternative, he had a lien over the Iranian land because he had possession of the title to the land.
(c) By reason of his equitable mortgage and lien, he was a secured creditor of the deceased’s estate.
(d) Therefore, he was entitled to keep and retain the entire proceeds of sale amounting to $14,628[22].
When Mr Khansari was called to give evidence, it became clear that the reference to MS-1 in para 12(a) of his affidavit should have been a reference to MS-2. That is to say, the beneficial interest (alternatively equitable mortgage) in the Iranian land asserted by Mr Khansari was not based on the mosque certificate, but rather was based on the deceased’s affidavit.
[22]This figure is erroneous, being based on the incorrect figure of 10,000,500 Toomans. Assuming the sale price was 10,500,000 Toomans, the correct figure is AUD$15,000.
Thirdly, on 27 November 2009 the defendant filed an affidavit sworn in Tehran on 22 November 2009 by Dr H Amirshahi, who purported to be an expert in Iranian law. Relevantly, he deposed that the defendant asked him three legal questions, which he answered as follows:
(a)Is a Power of Attorney given by a person to another still valid under Iranian law after her death?
The conclusion is the power of attorney is invalid after the death of either the client or the attorney.
(b)Is a contract made by a deceased still valid after her death?
A contract made by a deceased is still valid after her death.
(c)If someone confesses as having a debt to someone else, would the debtor be responsible for such debt after his or her death? If so, against whom the claim must be made to retrieve the debt?
If someone confesses as having a debt, after his or her death, such debt remains in force. The creditor can claim against the heirs (or the estate of the deceased) and courts, after the declaration of such debt is confirmed and authenticated, can order the payment being made from the estate of the deceased.
Plaintiff’s letter of objections to defendant’s material
By letter emailed to the defendant on 25 November 2009, counsel for the plaintiff objected to the affidavits of Mr Khansari and Dr Amirshahi, and the valuation report on the Southbank unit.
As to the affidavit of Mr Khansari, the letter stated that “the plaintiff requires that the original [NOT copies] of each of the exhibits, and of each document referred to in [Mr Khansari’s] affidavit, be produced at the Court”. Among many specific objections, the letter objected to (a) MS-1 (the mosque certificate), on the basis that it was hearsay and that “the purported verification appears to be the opinions of two others, does not appear in the original produced. The document is not, and does not purport to be, authentic”; (b) the statement in para 5 as to the deceased requesting further loans as “this is too vague and unspecific, and the plaintiff should have proper notice of the deponent’s claims”; and (c) the whole of paras 6 to 12 inclusive, and the whole of exhibits MS-2 (the deceased’s affidavit) and MS-3 (the contract of sale). As to para 12, the letter stated that “the plaintiff requires an affidavit from Francis Lim which sets out the basis on which any advice was given, and states what the advice was.”
As to the affidavit of Dr Amirshahi, the letter requested that the deponent be made available for cross-examination. The letter also complained that the affidavit did not set out the questions “in the form you [may have] asked them”. It added that “the questions … are surprisingly narrow in scope given the issues in this case. Are you asserting that Iranian law governs the contract [if there was one] … ? Are you, or your father, asserting that there is a notion of confession of debt which arises under Iranian law which has a relevance to this case? If you are, please inform us what you are saying about that notion here, and what possible relevance Iranian law might have to its resolution.” The letter also complained that Dr Amirshahi’s affidavit had not been sworn properly. In response to this latter point, on 7 December 2009 the defendant forwarded to the Court a copy[23] of a further affidavit sworn by Dr Amirshahi on 4 December 2009 which was identical to the earlier affidavit except that its swearing was witnessed by a different person.
[23]The original was ultimately filed on 14 December 2009.
The letter also stated that “Given that you have informed the Court previously that you instructed your father to go to Iran and sell the property there, would you explain on what basis it was that you did so.”
As to the valuation report on the Southbank unit, the letter made a number of complaints including that the questions to the expert were not set out properly, that there was no letter of instructions, and that the sources of information in the report were unclear. The letter alleged that the report did not comply with O 44 and stated “If you maintain that it does fall within Order 44, you will need to have the relevant witness at court [on the next hearing date] to be cross-examined”.
The hearing on 8 December 2009
Following a brief mention on 4 November[24], the proceeding next came before me on 8 December 2009. On that day, Francis Lim announced that he appeared for the defendant. After discussion in which counsel for the plaintiff expressed concern as to Lim purporting to act for the defendant in circumstances where he had also acted for Mr Khansari, who claimed to be a creditor of the estate and who had dealt with land that was an asset of the deceased, Lim withdrew his announced appearance for the defendant. Lim remained sitting at the Bar table, and appeared by leave for Mr Khansari who was to be cross-examined that day. Counsel reiterated that he required an affidavit from Lim as to the legal advice he had given concerning the Iranian land. To that end, counsel submitted that Mr Khansari had, by para 12, waived privilege in relation to the advice from Lim. I did not make any ruling at this stage, but merely pointed out that Mr Khansari’s evidence in his affidavit as to his belief on matters of law was simply inadmissible.
[24]The case was adjourned that day to 27 November to allow the defendant further time to file an affidavit on Iranian law. On 26 November the case was adjourned to 8 December on the Court’s own motion.
Next, Mr Khansari was called and gave evidence through an interpreter. Mr Khansari described himself as a retired teacher.
Counsel cross-examined Mr Khansari, who said as follows. He last worked 20 years ago in Tehran, where he taught sports and literature. He has spoken some English for decades, and manages on a day to day basis but with some issues.
He accepted that the mosque certificate in MS-1 was a copy document. Counsel renewed his call for the original of the mosque certificate and the originals of all other exhibits to Mr Khansari’s affidavit. Mr Khansari said that the original was not exhibited, as “I thought there is no need of doing so”. He denied that the mosque certificate was in his handwriting. The real estate agent wrote, signed and sealed the document. The land described in the certificate was the deceased’s land. The real estate agent was “quite familiar with that whole suburbs in that area”. When counsel pointed out that the real estate agent had not been called to give evidence, Mr Khansari said “if he wasn’t in a position he wouldn’t have signed that document in front of me now”. He agreed that the mosque certificate was not signed by the Mosque Board of Trustee and Charity Clinic.
As to the circumstances in which he travelled to Iran to sell the land, Mr Khansari said that “my son [the defendant] permitted me to do this selling, to go and sell this property, land”. He first discussed with the defendant going and selling the land in Iran about May 2004, before his daughter died. On about 20 May 2004, he told the defendant that his daughter owed him money and the defendant said ‘go, sell it and get your money, whatever she owes you’. Mr Khansari had the 1999 power of attorney, and it was about 20 May 2004 that his daughter permitted him to get the money he had lent her, as to which she swore her affidavit, “made some sort of oath and swearing, and after that, after 20 May, after I got her permission, I did that”. Mr Khansari arranged to have the “affidavit” sworn by his daughter, in the sense that he told Ms Oboodi that his daughter was in hospital and needed to swear, to take an oath. He asked Ms Oboodi to come to the hospital. I note that, initially, Mr Khansari said that his daughter was dead when he made the arrangement with the defendant to go to Iran to sell the land. Later, however, he agreed with counsel’s suggestion that “when you decided between and your son that the land in Iran would be sold, that was before your daughter died”.
Mr Khansari said that after he received the power of attorney[25] from his daughter, he contacted two real estate agents and told them that he was interested in selling the land if they had a purchaser. He initially said that “within 12 May and 20 June when I arrived in touch with the agent a few times, and then I was informed that there is someone interested in the land”. He first contacted Haji Shabani of Shabani Real Estate on 20 May 2004. On about 12 June he was told there was someone who wanted to buy the land for 10,000,500 Tomans, which was equivalent to $14,300AUD, and he thought it was a good offer and decided to go to Iran. He made the travel booking at that time. He said he left Australia for Iran on 25 June and was away about a month. I interpolate that I found in my first judgment that Mr Khansari returned to Australia on 15 August, hence I conclude that he was in Iran for about seven weeks.
[25]I understood this to be a reference to the deceased’s affidavit, as the witness was referring here to 2004 and not 1999. It may be that he was referring to the 2004 power of attorney, however having not mentioned the 2004 power of attorney in his affidavit, and having referred specifically to the deceased swearing her affidavit in 2004, I consider that he was referring to the latter document.
As to proof of the sale, Mr Khansari said that he has documents that relate to the engagement of the real estate agent. He referred to the contract of sale and said that the agent gave that document to him. I interpolate that the contract refers to Mr Khansari as the vendor “legally representing Ms Fatemeh Samian Khansari based on authority document number 2/845[26] dated on 18-04-1999”. Mr Khansari said that the authority document was the 1999 power of attorney. The contract describes the land as “certificate of title 10484 folio 37 located in Takestan … Lot 16670 on plan of subdivision 6023 of residential land of district Ghazvin with 218 square meter area”.
[26]This may read 21845.
Counsel called for production of a copy of the certificate of title and the original of the 1999 power of attorney.
As to the certificate of title, Mr Khansari said “When you sell the land, you are not in a position to possess the title any more”. He said that it is the norm in Iran not to obtain a copy of the title, “when you finish the selling of the property or a land, all the document belongs to the purchaser and you don’t need to have it any more”. As to why he did not make a copy, he said that when the land is no longer in your possession “you don’t need to keep any document”.
As to the 1999 power of attorney, Mr Khansari said that the original is “with the Notary Public Office in Iran where you do the registration for selling the land.” The number 2/845 or 21845 was given by the Iranian Embassy in Australia, where it was sent before being returned to him and then sent to the Notary Public Office. Mr Khansari suggested that a copy was in the defendant’s papers, and then added “Even if the lawyer or my son can’t find it, I can make a request to the Iranian embassy so they can send one to you”. Such a request had not been made previously as “there wasn’t any need”.
As to whether he went to a lawyer in Iran about selling the land, he said “there wasn’t a need to have a lawyer, there is no need.” He also agreed with counsel’s suggestion that he had never looked at advice from any lawyer in Iran concerning the position of a power of attorney after the death of the donor. I interpolate that I understood counsel’s question as referring to whether any advice was received at about the time he sold the land, rather than at some later time. He said that there was no need to tell anyone in Iran that his daughter had died when he was selling the land.
Mr Khansari said that he had seen the affidavit of Dr H Amirshahi, the Iranian law expert, filed by the defendant. As to that, Mr Khansari volunteered his own opinion as to what the Iranian expert deposed, namely that according to Iranian civil law, article number 10, “if someone is dead and you have the power of attorney, according to that power of attorney, if there is any contract between two, you can finalise it”. Counsel referred him to para 9(a) of the affidavit – which states that “the power of attorney is invalid after the death of either the client or the attorney” – and asked him when he first became aware that that was the case. Mr Khansari said that when he went to sell the land, a lawyer in Iran called Rahmani told him that “if that person who appoints you as a power of attorney is dead, then this power of attorney is not valid”. He said to the lawyer, “I have got a power of attorney. Can I sell this land?”, and the lawyer replied “No, this power of attorney is not valid. But because you have affidavit, you can do that. The affidavit. That is valid”. This was clearly a reference to the deceased’s affidavit. As to the advice received in Iran, Mr Khansari did not tell the defendant about it at the time as “there was no need to”. And he did not discuss with the defendant whether the advice was correct, as he had nothing to do with that. He first told the defendant “about a month ago” and he (the defendant) was surprised. He also said that he has not discussed with any member of his family the effect of his daughter’s death on his right to sell the land in Iran.
He only discussed the advice [of Rahmani] with Francis Lim, and that was “about two months ago”. The circumstances in which that occurred were that Mr Khansari told the defendant that he needed a lawyer and the defendant referred him to Lim. The defendant accompanied him to see Lim and acted as interpreter during the conference with Lim. Lim took instructions from Mr Khansari - which included telling Lim that the lawyer in Iran had told him that after the death of the deceased the power of attorney was invalid – and Lim prepared an affidavit which Mr Khansari swore. As to why his affidavit did not refer to the advice received in Iran about the invalidity of the power of attorney, he said “I wasn’t asked”. Mr Khansari said that everyone knows that the power of attorney was invalid, “but they went according to affidavit of my daughter”.
The hearing on 14 December 2009
The hearing resumed on 14 December 2009, with Mr Khansari giving further evidence in cross-examination as follows.
As to the deceased’s affidavit, he accepted that the document was written in his hand-writing. He said that was because his daughter was in hospital, had a shaking hand and could not write herself, and she dictated to him and he wrote as she wished, and that Ms Oboodi witnessed the document. He provided the original of the deceased’s affidavit to the real estate agent in Iran when he sold the land. Counsel suggested that after the deceased’s death, the affidavit was of no validity in Iran, to which Mr Khansari replied that “if there is a promise made by a person, that promise, after the death of that person, is still valid”. He said that that was his understanding of Iranian law, which understanding came from reading books and his own research, and “no one told me”. Counsel then suggested that “similarly, nobody had to tell you that a power of attorney is invalid, or inoperative, after the death of the person who gave it”, to which he replied “I noticed when I had already sold the land”. Counsel then suggested that he knew before he sold the land, to which he replied “If I knew I would not have sold”. Counsel then suggested that “you were told by a lawyer, weren’t you, that it wasn’t right for you to sell the land”, to which he replied “Yes, he told me, but it was at the time that I had already sold it”. The advice was several days after the sale, and was received in Tehran. He had gone to see a lawyer about a personal matter and, during that discussion asked the lawyer about the entitlement to sell the land.
Counsel then called for originals of the powers of attorney. Mr Khansari said that he took the original of the 1999 power of attorney with him to Iran in 2004 and provided it to the real estate agent, Shabani. I interpolate that this answer was different from his earlier evidence that he provided the original to the Notary Public Office. When counsel asked where the original of the 2004 power of attorney was, Mr Khansari said that in order to sell the land the real estate agent required the original. It then became apparent that Mr Khansari was referring to the 1999 power of attorney. In short, he gave a non-responsive answer as to the whereabouts of the 2004 power of attorney. No original was produced and its absence was not explained.
As to the sale of the Iranian land, the highest offer was 10,500,000 Toomans which, he said, was equivalent to about AUD$14,000. He “tried to sell it at the highest possible price so that when I get what I was owed, to have something remaining for the grandchildren”. As to counsel’s suggestion that the sale price did not justify the trip to Iran to sell the land, he said “I took some of the proceeds for the cost of travel, and I was left with some money”. He deducted his travel expenses from that money “and the rest I brought with me”. He exchanged the money into Australian dollars at a Bazaar in Tehran but did not ask for or get a receipt, “because it wasn’t a huge amount of money”. As to his travel expenses, he had booked and paid for his return flight in Australia. It cost about $2000. He did not pay for hotels, as he was staying with his brother, but as the deceased’s land was situated in an outer suburb of Takestan, which is another city, he said that “I spent a lot of money for travelling”. Initially, when asked by counsel where the balance of sale proceeds was, he said that he had spent it “for the living expenses of my grandchildren, my children, my wife, my family”. Later, he said that the defendant had told him that he could sell the land, get the proceeds “and have your expenses and what remains you can give to the grandchildren”. When counsel suggested that Mr Khansari had not given the money to the grandchildren, he replied “the money, any time that they want, they can have it. It is with me … in the bank”. He said that he had his bank book available, but refused to show it to counsel as it was private. Discussion then ensued and he said that he brought $7000 with him to Australia which he spent on family expenses and the grandchildren. He had deposited the sale proceeds (but not the whole $7000) into the account after returning from Iran “and progressively I took out and spent”. He added “of course, my daughter owes me more than this, and I thought I forego with the debt and donate the money to my grandchildren”.
As to conversations he had with the defendant about selling the land, he agreed with the statement in the defendant’s affidavit that the defendant instructed Mr Khansari to act in accordance with the deceased’s will[27]. Mr Khansari added “Yes, he told me to act in accordance with this, and I did, according to the sworn statement”. When counsel referred to the difference between the will and the sworn statement (the deceased’s affidavit), Mr Khansari said “Both texts require the same thing”. He denied that the instruction to act as per the deceased’s will was given after the deceased’s death.
[27]As I noted above, this was clearly a reference to the Iranian will.
As to the lack of precision in the description of the land in the mosque certificate, he said that the land was originally agricultural land and that the “streets do not have names yet. It is a village type area that is becoming a town”. He denied counsel’s suggestion that he had described the land as agricultural land “so as to justify the unrealistically low price that you claim you sold this land for”. I interpolate that the contract of sale refers to the land as “residential land”.
The hearing on 17 December 2009
On 17 December, the cross-examination of Mr Khansari continued. In relation to the proceeds of sale of the Iranian land, he said that there was no excess money, “she still owes me. And I have forgiven her my remainder of the loan”. As to why he did not transfer the proceeds of sale to Australia by bank transfer, “there was no need for it after I spent for the expenses”. Counsel then asked “Are you saying that your expenses exhausted the entire balance of the proceeds of the sale?” to which the witness replied “yes”. Counsel then put to Mr Khansari that he never had a valuation of the Iranian land done, as distinct from receiving offers on it, as to which the witness said that he asked local real estate agents what the land was worth although he did not receive anything in writing from them.
In re-examination, Mr Khansari said that after he sold the land, he became aware that the power of attorney was not valid. As to his evidence that he had received advice from a lawyer [in Iran] to whom he had asked questions, Mr Khansari said that he and his brother went to a lawyer after the sale of the land “and my brother had some questions and I accompanied him as well”. Mr Khansari also said that he told the defendant that he was going to go and sell the land, and that he did not ask for [the defendant’s] permission “because it related to me”. He decided to sell the land in Iran “when my daughter gave me the sworn statement”.
Next, Sam Nathan, the author of the valuation report on the Southbank unit, was called to give evidence. This occurred in the context of counsel having reiterated at the end of the hearing on 14 December that he wished to cross-examine the author of the report on the basis that the report took account of other buildings which were “completely irrelevant”. Counsel had also stated on 14 December that the plaintiff did not propose to call any evidence in relation to the value of the Southbank unit:
“…because we don’t know what it is that’s being said. I understand that this present valuation might be treated by your Honour as at least evidence, but we are not really satisfied that it should be, your Honour, that is our position.”[28]
The defendant thus called Nathan on 17 December, who produced his report[29]. I permitted the defendant to attach to the report an email which was effectively his letter of instructions. Nathan was cross-examined by counsel, and I refer to that below.
[28]Transcript 127.
[29]Exhibit 7.
Following Nathan’s evidence, the parties made oral submissions.
Submissions
Plaintiff
Counsel first reiterated that he maintained his objections to the affidavits identified in the letter of 25 November.
As to the Southbank unit, counsel submitted that the defendant had not provided adequate valuation evidence. First, the defendant had kept the Court in the dark as to the circumstances in which Peter Kay received the unit. Kay should have been called to give evidence as he would have been in a position to clarify the circumstances of the transaction. Secondly, as to Nathan’s valuation report, while counsel conceded that Nathan was properly qualified as an expert witness and did not seek to attack his credit, he submitted that the valuation figure of $285,000 should not be accepted, in essence because neither the report nor Nathan in his oral evidence provided any rational or persuasive basis for the figure. In developing this submission, counsel conceded that some of the sales in the report’s list of comparable sales were indeed comparable sales. He also accepted that the figures in the report were not “made up”, and “if he [Nathan] has mentioned a figure that he would have a basis for it in that sense”. Counsel nevertheless submitted that viewing the report and the evidence overall, there was no adequate explanation as to how all the sales in the list were comparable and how the figure of $285,000 was reached, thus the report was not persuasive.
As to the Iranian land, counsel submitted that there was no admissible evidence as to its value or as to the price for which it was sold. The material in Mr Khansari’s affidavit as to value was merely the opinion of others who were not experts. The evidence as to the sale price was not persuasive and, even if accepted, did not purport to be evidence of the land’s value. Counsel submitted more generally that in the circumstances of the case, where there was a need for an explanation as to what had occurred, Mr Khansari’s evidence was inadequate and unpersuasive. His evidence as to the existence of the deceased’s debt to him was so unspecific that it could not be relied on. And even if the debt existed, it made no sense that Mr Khansari would go to Iran to sign a contract to sell the land for a price which barely, if at all, covered the debt. Further, Mr Khansari had been advised by a lawyer that the power of attorney was inoperative after the death of the deceased, hence there was never any basis to suppose that the Iranian land was not part of the estate.
Defendant
As to the Southbank unit, the defendant reiterated his submission that he had acted properly in giving the unit to Kay in accordance with the codicil. He submitted that he had considered whether it was reasonable to resist Kay’s claim against the estate, and in this regard he thought about the option of selling the unit prior to settling the purchase, however that was not feasible as there were a huge number of units for sale at that time, and some were selling for less than they had cost off the plan. In short, in the circumstances which included: (a) that the settlement date for the sale of the unit had been extended several times and the vendor’s solicitors were pressing for completion; (b) that the estate did not have the money to settle the sale and was not in a position to borrow for that purpose; (c) the need to settle Kay’s claim in order to obtain the removal of the caveat from the Bulleen home in order to sell that property and thus pay out the mortgage which was a liability of the estate; and (d) the fact that the codicil provided for Kay to have the unit, the defendant considered that the best option was to give the unit to Kay.
As to the Iranian land, the defendant submitted that the mosque certificate was sufficient evidence of value, as it was common land valuation practice in Iran to seek such a certificate from a mosque and have it certified by a real estate agent. Further, Mr Khansari had done his best to sell the property at the best price he could get, as “he would not want to rip himself off, after all it was his debt that he was recovering”. And while the plaintiff had asserted that the property was worth “billions of dollars”, she had led no valuation evidence and Mr Sadri had also failed to do so despite having been to Iran recently.
As to the reason why Mr Khansari sold the land, the defendant submitted that the deceased did not refer to the land in her will[30] or codicil:
“… due to the affidavit and the power of attorney that she had already given to her father. Not only that, but also by giving the title of that land to her father in lieu of her debt to her father. The land in Iran, your Honour, had for that reason nothing to do with the will. There was no mention of it in the will. As far as I am concerned, anything that is mentioned in the will as an executor, and as I was given advice, I needed to act upon, and act as per said in the probate. The land in Iran was not one of them. It was a deal, it was a contract, verbal, written in the form of an affidavit, between the father and the daughter, by the way of lien over the property having held or being in possession of the title of that land with the father, he had the rights to go and sell that land and nothing to do with me, your Honour. And for me to question it and bring it into the will, well, if Mona Samian wanted that to come into the will, she would have mentioned it in her will.”[31]
[30]Which I understood to be the will admitted to probate.
[31]Transcript 223.
The defendant referred to Durham Bros v Robertson[32], which he described as being a case “about the equitable charge, Your Honour. The applicable law. It is talking about the right of the lien over the property due to a person having held or been in possession of the title of that land, and so that gave them the right to have lien over the property and an equitable charge over the property”. He also relied on Porter v Bonarrigo[33] as authority for the proposition that an equitable charge can arise on the basis of a person holding or being in possession of the title for the land.
[32][1898] 1 QB 765
[33][2009] VSC 500.
The defendant did not develop his submission as to the relevance of the above cases to the present facts. Nevertheless, it was clear enough that his submission was that Mr Khansari was entitled to sell the land and retain the proceeds, and the defendant did not have to account for the proceeds of sale in the administration of the estate, because Mr Khansari had an equitable charge or lien over the land to secure repayment of his daughter’s debt. The alleged basis of the equitable charge and/or lien was the agreement between the deceased and Mr Khansari whereby she had given him the powers of attorney, and the affidavit authorising him to sell the land and keep the proceeds, and the further fact that Mr Khansari was in possession of the title.
Plaintiff’s reply
Counsel submitted that the evidence did not establish that Mr Khansari had an equitable charge over the Iranian land. On the material presented, it was not open to draw an inference that there may have been a property right created according either to the law of Victoria or Iran. In any event, the deceased was in breach of trust to her children and “for it to be suggested that the rescuer, namely her father, by lending her some money can somehow cut across the fundamental obligations of the trustee is a nonsense. And she can’t encumber further what is already notionally owed to the trust”.
Decision
It is convenient to begin with the Southbank unit, as that is a discrete issue which can be dealt with independently of the evidence of Mr Khansari.
The Southbank unit
I accept Nathan’s valuation figure of $285,000. In doing so, I do not overlook the matters raised by counsel. I also note that Nathan was not able to inspect the unit. As against that, Nathan’s company was involved in the development of the Eureka Tower complex, and the company has worked closely with marketing agents with respect to historical sales evidence. Further, Nathan was generally familiar with the units in the building in question, and the valuation was done on the basis that the unit was of a standard design within the complex. As to the valuation rationale, after listing comparative sales the report stated that “having regard to the evidence available, and after appropriate adjustments for size, quality, location and other attributes, we have addressed the market value of the subject property ‘as if complete’ at the retrospective relevant dates as follows [then followed the two figures of $285,000 at each date]”. In cross-examination Nathan conceded that the report itself did not expose the reasoning process by which he compared the other sales to the subject unit to arrive at the above figure. However, he said that his company had files containing notes about the positive and negative attributes of particular properties sold. To this end, Nathan produced pages from his file containing photographs, descriptions and sales histories of more than 30 units in the Southbank area, some of them with hand-written annotations as to how they compared with the subject property[34]. Nathan also provided a handwritten list[35] of seven properties, with notes comparing their attributes with the subject property. The notes are brief and conclusionary, nevertheless they indicate that Nathan addressed his mind to the types of matters (including size, aspect, car parking, etc) relevant to the value of the subject property. I am satisfied that the report arrived at an informed opinion as to the valuation, and that the level of detail and analysis underlying the figure of $285,000 was appropriate in the circumstances.
[34]Exhibit AA.
[35]Exhibit BB.
As to the steps taken by the defendant in relation to the Southbank unit, I said in the second judgment that it was possible that, in all the circumstances, he acted reasonably in allowing Kay to take over the liability of completing the purchase of the unit, however that I could not determine that matter on the evidence then before me.
Having now had the benefit of the valuation evidence and further explanation from the defendant as to why he did what he did, I consider that he acted reasonably in allowing Kay to take over the liability of completing the purchase of the unit. I so conclude for the following reasons.
The deceased had paid the deposit on the unit, which gave her (and hence the estate on her death) an equitable interest in the unit as purchaser under an uncompleted contract of sale. The estate’s equitable interest was, in principle, amenable to be applied to pay the debts and liabilities of the estate. But settlement was due and the estate was without funds, and the financial capacity to borrow the required funds, to complete the purchase. Further, in circumstances where the value of the unit was no more than the contract price, the defendant could not find somebody prepared to purchase the estate’s rights under the contract for the Southbank unit at an increased price. There was also Kay’s claim against the estate, which had the potential to develop into litigation and thus further diminish the estate. And of course the estate’s ability to sell the Bulleen property and thus discharge the mortgage was tied up by Kay’s caveats. I note also that the defendant relied on the fact that the codicil provided that Kay was to have the unit. In my view, this last matter could not have justified the unit being passed to Kay while the estate’s liabilities to the deceased’s children went unpaid. In all the circumstances, however, I consider that it was properly open to the defendant to effectively give up the estate’s interest in the Southbank unit in exchange for relieving the estate of the liability to settle the purchase of the unit, settling the dispute with Kay and thus avoiding potential litigation, and enabling the sale of the Bulleen property. In this regard, I accept that the defendant acted in good faith and in the best interests of the estate.
The Iranian land
Before dealing specifically with the defendant’s latest round of material on the Iranian land, it is necessary to examine in some detail the various stages of the proceeding in terms of the material provided by the defendant on this issue.
The defendant’s initial position, as described in the first judgment, was the plea in the defence that in approximately April 1999 the deceased agreed to transfer the land to Mr Khansari in full satisfaction of her debt to him of $15,800 and that she provided him the 1999 power of attorney to enable him to sell the land. Further, the defendant asserted in cross-examination that he had provided all relevant documents to Ms Oboodi and that she had advised that it was not appropriate to refer to the land in the inventory. He led no other evidence to support the position in the defence, the alleged 1999 power of attorney was not in evidence, and Ms Oboodi was not called to explain what occurred. In short, the defendant led no cogent evidence to support the plea in the defence.
That led to my orders of 26 March 2009 and the affidavits filed by the defendant in response thereto. The effect of those affidavits was that the defendant reiterated his reliance on the matters pleaded in the defence as the basis for having dealt with the land in the way that he did. He then raised new material as follows. First, the 2004 power of attorney dated 20 May 2004; secondly, the Iranian will, also dated 20 May 2004; thirdly, the undated legal advice of Rahmani; fourthly, the two mosque certificates, the appraisal, and the contract of sale, all led to establish the value of the land; and fifthly, the copy of the deposit slip in support of the defendant’s assertion that he deposited $44,000 into the deceased’s account as a loan to her from Mr Khansari. The difficulty with all of these new materials, however, was that they were inadmissible as hearsay in circumstances where the people with first hand knowledge of the alleged events and transactions were not called to give evidence.
More fundamentally, the defendant did not produce originals of any of these documents, notwithstanding the fact that the defendant was on notice that the plaintiff disputed the authenticity of “all documents provided by the defendant or his father” on the issue of the Iranian land, and the fact that the plaintiff specifically requested production of the original of the 1999 power of attorney. Nor did the defendant provide any cogent explanation for his failure to provide originals. And Ms Oboodi, the person who purportedly witnessed the deceased sign the 2004 power of attorney and the Iranian will and who was presumably in the best position to explain what occurred, was not called to give evidence. Nor did the defendant offer any explanation as to why she was not called. It followed that the defendant’s material was unsatisfactory, hence my orders on 28 August and my emphasising to the defendant the importance of providing admissible evidence.
It is in that context that the defendant provided the latest round of material. I have described in detail the material in the affidavits and the oral evidence of Mr Khansari and I do not repeat it here. I merely note the following. The documents exhibited to Mr Khansari’s affidavit and referred to in his oral evidence were substantially the same documents previously provided by the defendant. That is, Mr Khansari referred to and relied on the two powers of attorney and the mosque certificate. He introduced for the first time the deceased’s affidavit, but as I have pointed out, it is almost identical to the Iranian will previously provided by the defendant. Mr Khansari also sought to rely on Lim’s legal advice as justifying his sale of the land, however it became clear in cross-examination that the advice was received long after the sale, and hence was not something that he or the defendant relied on at the time of the sale. Finally, it is to be noted that neither the defendant nor Mr Khansari produced originals of any of these documents.
As I have mentioned, counsel for the plaintiff did not accept the authenticity of any of the documents relating to the sale of the Iranian land. The objection was taken early and has been maintained throughout. It is thus necessary to rule on the admissibility of the documents sought to be relied on by the defendant.
The relevant law was stated in Commissioner for Railways (NSW) v Young[36] where Dixon CJ quoted[37] the following passage from Lord Coleridge CJ in R v Francis[38]:
“Where the question is as to the effect of a written instrument, the instrument itself is primary evidence of its contents, and until it is produced, or the non-production is excused, no secondary evidence can be received”.
Dixon CJ referred[39] to “the distinction between physical things bearing written inscriptions and documents the written contents of which amount to what may be called an instrument or writing which, because of the significance of what it expresses, has some legal or evidentiary operation or effect material to the case.”
[36](1961) 106 CLR 535.
[37]At 544-545.
[38](1874) LR 2 CCR 128 at 133.
[39]At 546-547.
In Godfrey v Woolworths (WA) Pty Ltd[40], Miller J summarised the ‘best evidence’ rule as follows:
“A succinct statement of the ‘best evidence’ rule is contained in Cross on Evidence (5th Aust Ed) at para 39005:
‘A party relying on the words used in a document for any purpose other than that of identifying it must, as a general rule, adduce primary evidence of its contents.’
The rule has come under attack in recent times. In R v Governor of Pentonville Prison; Ex parte Osman (1990) 90 Cr App R 281, Lloyd LJ (at 308-9) said that the Court would
‘... be more than happy to say goodbye to the best evidence rule. We accept that it served an important purpose in the days of parchment and quill pens. But since the invention of carbon paper, and still more, the photocopier and the tele-facsimile machine, that purpose has largely gone. Where there is an allegation of forgery the Court will obviously attach little, if any, weight to anything other than the original; so also if a copy produced in court is illegible. But to maintain a general exclusionary rule for these limited purposes is, in our view, hardly justifiable."
Lloyd LJ cited Kajala v Noble (1982) 75 Cr App R 149 where Ackner LJ said (152):
‘The old rule, that a party must produce the best evidence that the nature of the case will allow, and that any less good evidence is to be excluded, has gone by the board long ago. The only remaining instance of it is that, if an original document is available in one's hands, one must produce it; that one cannot give secondary evidence by producing a copy’.” [Emphasis added]
[40](1998) 103 A Crim R 336 at 342 per Miller J.
In the present case, whether the plaintiff’s objection be described as an allegation of forgery, the fact is that the plaintiff does not accept the authenticity of the documents. Further, Mr Khansari has admitted that the deceased’s affidavit is in his handwriting. Of course it does not follow from that that the document is a forgery, nevertheless the circumstances are such that the original document should be produced, or its non-production adequately explained. That has not happened. The defendant has not established by evidence that the originals cannot be found after due search, or that production of the originals is, for practical purposes, impossible, such as might permit him to call secondary evidence to prove the contents of the documents. In any event, apart from Mr Khansari, the defendant has not sought to call evidence, say from Ms Oboodi or any other person with personal knowledge of relevant events/transactions, to explain the documents. As to the 2004 power of attorney, the Iranian will, and the deceased’s affidavit, those three documents were apparently executed before Ms Oboodi on 20 May 2004, and the latter two documents are almost identical, yet there was no explanation as to why both came into existence, and what the difference was, if any, between them. A further curious feature of the case was the fact that the defendant exhibited the Iranian will (but not the deceased’s affidavit, even though it must have been in existence at the time), and then after the second judgment the deceased’s affidavit was produced by Mr Khansari but without any explanation linking it to the Iranian will. It was as though the defendant was obfuscating, and trying to keep one card up his sleeve to be produced at the critical time. In short, the defendant has provided no cogent evidence to justify the non-production of the originals of both powers of attorney, the Iranian will, the deceased’s affidavit, the two mosque certificates, the appraisal, and the contract of sale. These documents are all important to the case. In particular, the powers of attorney and the deceased’s affidavit are critical, as it was those documents that the defendant ultimately relied on as the basis for dealing with (or permitting Mr Khansari to deal with) the land as he did. In the circumstances of this litigation, non-production of the originals of highly contentious documents cannot be excused, and it follows that the photocopy documents provided are inadmissible.
That is not the end of the matter, however, as there was oral evidence (independent of the inadmissible documents) addressing some of the matters in my orders. Further, lest I be wrong in my conclusion as to inadmissibility, it is convenient to deal fully with the documents on the assumption that they were in evidence. On that footing, I now consider Mr Khansari’s evidence.
Observations on Mr Khansari as a witness
Mr Khansari gave evidence through two different interpreters over the three days on which he was cross-examined. Notwithstanding the presence of the interpreter, he sometimes answered in English, and often seemed to understand counsel’s questions before they were interpreted. He impressed me as having a reasonable command of the English language, but in the stressful circumstances of being cross-examined he preferred the comfort of speaking his native language. He also had his own lawyer, Lim, present on the first day of cross-examination. Counsel for the plaintiff questioned Mr Khansari exhaustively on matters pertaining to the Iranian land and also on a wide range of matters relevant to credit only. As to the questions going to credit only, in most instances Mr Khansari denied the matters put, and as there was no independent evidence to support counsel’s allegations, and no inherent lack of credibility in the witness’s denials, counsel properly conceded in oral submissions that he was “stuck with” Mr Khansari’s denials and that his credit was not thereby affected. Accordingly, I have not set out the detail of questioning on those matters, some of which were of a personal nature, which ultimately led nowhere.
There was, however, one matter not directly relevant to the issues before me which nevertheless needs to be mentioned. That is the matter of a case commenced by Mr Khansari against Mr Sadri in a court in Iran in 1999. Mr Khansari initially denied counsel’s suggestion that he had commenced an action against Mr Sadri in 1999. After counsel showed him a copy of the claim made in the Iranian courts[41], and suggested that his previous denial was false, Mr Khansari said that he meant that he had not commenced an action in Australia “because this person is Iranian and you didn’t ask me exactly whether – whereabouts, where exactly … if you had asked me whether Iran or in Australia, did you take any legal action against him, I would have said yes”. I consider this explanation was contrived. Mr Khansari is evidently an intelligent man, and I do not accept that he thought counsel’s question referred only to proceedings in Australia. Rather, his answer reflected a desire to exclude reference to his case against Mr Sadri in Iran. As to that, Mr Khansari accepted in evidence that in the Iranian action he is claiming damages of US$450,000 from Mr Sadri on the basis that Mr Sadri deceived his daughter (the deceased) before marrying her “and that caused dishonour in my family”. Mr Khansari alleges that Mr Sadri falsely claimed that he was an engineer. Mr Khansari said that while Mr Sadri had a building degree from Manchester University, he was not a civil engineer, and that he also deceived the deceased by claiming that he had a house and a car when he did not, and that he was in Australia and had a “very quite huge building company” but “it was a lie”. Of course, the action in Iran is irrelevant to the issues before me, and I express no view on its merits whatsoever. I merely note the existence of an underlying bitterness engendered (or aggravated) by that dispute, which seems to be adding fuel to the fire in the present proceeding. The claims in Iran (which remain pending) demonstrate the degree of bitterness and distrust between Mr Sadri and Mr Khansari, which has otherwise been manifest in the proceeding and which I would infer has filtered down through the respective camps. For present purposes, the more important point to note is that Mr Khansari’s attempt to avoid the question about the Iranian proceeding was one of several instances where he sought to avoid answering counsel’s questions on the basis that he considered them irrelevant to the issues in dispute. That is, he sought to set the limits as to what counsel could ask about. He did this for several reasons. One reason was to exclude evidence on matters he considered personal to himself. Another was a wariness that an answer might trip him up and expose his son to liability. This resulted in Mr Khansari being somewhat emotional and argumentative.
[41]Exhibit Y.
The real question is whether Mr Khansari had an equitable interest in the land that permitted him to sell the land and retain the proceeds of sale as he did. The starting point is the proposition that to create an equitable charge, no particular form of words is required[44]. In Cradock v Scottish Provident Institution[45], Romer J said:
“To constitute a charge in equity by deed or writing it is not necessary that any general words of charge should be used. It is sufficient if the court can fairly gather from the instrument an intention by the parties that the property therein referred to should constitute a security.”
[44]See generally the discussion in Young, Croft, Smith, On Equity, Lawbook Co, 2009 at [9.180] to [9.190].
[45](1893) 69 LT 380 at 382.
In the case of debtor and creditor, the question is whether, viewing objectively the relevant transaction, the parties intended to create a charge in the creditor’s favour over the debtor’s property to secure repayment of the debt. In National Provincial and Union Bank of England v Charnley[46] Atkin LJ said that:
“… where in a transaction for value both parties evince an intention that property, existing or future, shall be made available as security for the payment of a debt, and that the creditor shall have a present right to have it made available, there is a charge.”
[46][1924] 1 KB 431 at 449-450 (CA).
In Avco Financial Services v White[47], Gillard J cited with approval the above quote from Cradock and held that an equitable charge was created by the loan agreement before him which contained the following words[48]:
“As for the security for the payment of the loan and interest I agree … to charge (as beneficial owner) all freehold and leasehold interest in the land which I may now have or during the currency of the loan may acquire …”.
[47][1977] VR 561.
[48]At 564.
The present case is quite different from Avco. The deceased’s affidavit refers back to and supplements the 1999 power of attorney, by which Mr Khansari “has the right to sell on my behalf” the land. The affidavit also acknowledged that the deceased owed $15,800 to Mr Khansari, and “asks” that Mr Khansari take the land “in lieu of his loan to me” and that “should there be any surplus, I wish that the money be spent for my pilgrimage to Mecca”. The affidavit further stated that Mr Khansari was “entitled to act as my agent with full authority to keep the proceeds of sale of this piece of land in lieu of part of his loan to me and my debts to him.” On analysis, the affidavit does no more than authorise Mr Khansari to sell the land and, if he sells it, to retain the proceeds of sale to satisfy the debt. The deceased’s affidavit can thus be understood as a document subordinate to and clarifying the operation of the power of attorney, rather than itself creating an equitable charge over the land in favour of Mr Khansari.
The defendant’s alternative submission was that Mr Khansari had a charge based on his possession of the title to the Iranian land. The fundamental difficulty with this submission is the lack of precision in the evidence as to how Mr Khansari came into possession of the title to the Iranian land. In his affidavit, the defendant deposed that the deceased “had transferred the subject parcel of land to her father in replacement of her debts back in February 1999”. In that sense, the defendant seems to equate the giving of the 1999 power of attorney with the transfer of the land. In oral submissions on 17 December, he referred to the deceased ”giving the title of that land to her father in lieu of her debt to her father” and to Mr Khansari “being in possession of the title of that land”. Mr Khansari’s evidence was that he had possession of the title to the land in Iran, but no longer did. The certificate of title was not in evidence, and it was unclear when Mr Khansari came to possess it. Did that occur at the time of providing the 1999 power of attorney, or at the time of providing the documents executed on 20 May 2004, or at some time in between, or at some other time and in circumstances not explained? It is to be noted that there was evidence that Mr Khansari originally owned the land himself and at some stage put it in the deceased’s name. In those circumstances, it may be that Mr Khansari always retained the certificate of title, even though he had put the title in the deceased’s name. But I do not know and cannot and do not speculate about these matters. I merely note that in view of the lack of evidence as to the circumstances in which and when Mr Khansari came into possession of the certificate of title, I cannot infer from that possession that the parties intended to create an equitable mortgage or charge.
As to the defendant’s reference to a lien, it was unclear from the defendant’s submission how the alleged lien differed, if at all, from the alleged equitable charge. And while there is debate as to the precise juridical boundaries between an equitable charge and an equitable lien, in Hewett v Court[49] Deane J observed that:
“An equitable lien is a right against property which arises automatically by implication of equity to secure the discharge of an actual or potential indebtedness. Though called a lien, it is, in truth, a form of equitable charge over the subject property …”. [emphasis added]
[49](1983) 149 CLR 639 at 663.
For the reasons I have given in relation to the equitable charge, there is nothing in the facts of the present case which could found an equitable lien over the Iranian land in favour of Mr Khansari.
Finally, I reject the plaintiff’s submission that, assuming the Iranian land was subject to an equitable charge, charging the land to Mr Khansari was a further encumbering of what was already notionally owed to the children as victims of the breach of trust. That is because the children never had a proprietary interest in the Iranian land, as opposed to the Mooroolbark and Bulleen properties that were subject to the trust.
For the reasons given above, I am not satisfied on the balance of probabilities that Mr Khansari had any interest in the Iranian land. It follows that Mr Khansari had no legal entitlement to sell the land and retain the proceeds.
Further, I do not accept that the defendant and/or Mr Khansari acted as they did on the basis of legal advice. In this regard, I referred in my first judgment to the defendant’s evidence that he advised the estate’s then solicitor, Ms Oboodi, that the Iranian land was in the deceased’s name and that (for reasons the defendant did not know), Ms Oboodi considered that it was not appropriate to refer to the land in the inventory. I did not then make any finding as to whether I accepted the defendant’s evidence on the issue. As events have unfolded, however, and having further reflected on the matter, I do not accept the defendant’s evidence. First, it seems curious that a competent solicitor would have so advised, without more. While the defendant is not a lawyer, he is evidently an intelligent man, and if Ms Oboodi had given the advice claimed, I consider that he would have been alert to the reasons for the advice and would have sought to rely on those reasons as justifying the way he dealt with the Iranian land. That is to say, if he had been advised that it was unnecessary to include the land in the estate because, for example, the land had already been gifted to Mr Khansari, or was the subject of an equitable charge in Mr Khansari’s favour, one would expect the defendant to have given evidence that he was so advised, or to have called evidence from Ms Oboodi to explain what occurred. That is especially so in light of the two sets of orders requiring the defendant to adduce evidence as to the deceased’s ownership of the Iranian land. Those orders clearly encompassed evidence that the defendant might have sought to call to establish that the land could properly be dealt with outside the estate. The defendant’s silence as to this matter leads me to the conclusion that Ms Oboodi did not advise him that the land did not need to be included in the estate. And leaving aside any advice received from Lim long after the sale was completed, there was no evidence that the defendant or Mr Khansari relied on any other legal advice as the basis for their dealings with the Iranian land.
I note further that, as I mentioned in my first judgment[50], the defendant and Mr Khansari moved quickly in dealing with the Iranian land. The land was sold within weeks of the deceased’s death, notwithstanding the defendant’s awareness of the trust (to which I refer below) and the fact that liabilities needed to be ascertained and dealt with. Acting properly, the defendant would have been aware of the possibility of a claim by one or more of the children for compensation for breach of trust or under Part IV of the Administration and Probate Act 1958, as to which the Act allowed the children six months, or such further time as the Court might allow, in which to commence an application for further provision out of the estate[51], and the defendant would bear personal responsibility if he distributed before then[52]. In other words, it was important that the defendant properly investigate the matter of the breach of trust, do what he could to obtain compensation for the children for the breach, and clarify the extent of the other debts and liabilities, prior to distributing the estate. But rather than carefully reflecting on the matter in light of the position after the death of the deceased, the defendant simply permitted Mr Khansari to carry out his (Mr Khansari’s) plan, made before the deceased died, to sell the land to recoup his debt. That this is what occurred is clear from the evidence that Mr Khansari began the process of contacting estate agents in Iran before the deceased died. The deceased’s death did not affect Mr Khansari’s preconceived plan to sell the land and retain the proceeds. Viewing the evidence overall, I consider that despite having had the opportunity to do so, the defendant has provided no cogent evidence to establish that either he or Mr Khansari ever had a proper basis for treating the Iranian land as an asset which could be dealt with as though it did not form part of the estate.
[50]At [101].
[51]Section 99.
[52]Section 99A.
As executor, the defendant was required to get in the assets and ascertain the debts and liabilities of the estate. These liabilities included compensation to the children resulting from the deceased’s breach of trust, and the debt of $15,800 to Mr Khansari. Even assuming that the defendant genuinely believed that he was acting properly in allowing Mr Khansari to dell the land and retain the proceeds, his belief was mistaken. The combined effect of ss 36 and 37 of the Administration and Probate Act 1958 was that in circumstances where the land was not subject to a charge in favour of Mr Khansari, the land was an asset of the estate for payment of debts and liabilities (s 37), and those debts and liabilities were to be paid rateably and proportionably to creditors without preference (s 36). In effect, by acquiescing in Mr Khansari’s sale of the land and retention of the sale proceeds, the defendant failed to get in the proceeds of sale and wrongfully elevated his father to the position of a secured creditor, at the expense of the estate’s unsecured creditors. As I explain below, it appears that all the unsecured creditors were paid in full, except the deceased’s children.
As to the defendant’s knowledge of the estate’s liability to the children, I find that shortly after the deceased’s death, and before the Iranian land was sold, the defendant became aware, or at least became aware of facts that put him on notice, that the deceased had breached the trust to her children. This finding flows from the conclusion in my first judgment[53] that Mr Sadri advised the defendant of the trust. This occurred in circumstances where, within two or three weeks of the deceased’s death, Mr Sadri and the defendant discussed the caveat dated 7 June 2004 on the Bulleen property (which caveat mentioned the trust), and that discussion included reference to the Deed of Trust and the nature of the trust for the children. In my first judgment I also referred[54] to a letter dated 21 December 2004 from Mr Sadri’s solicitors to the defendant which mentioned the Deed of Trust and its terms, the deceased’s subsequent dealings with the Mooroolbark and Bulleen properties, and the possibility of proceedings being brought in the future in respect of the breaches of trust. The defendant’s evidence was that he received that letter and referred it to his then solicitors, Costanzo Lawyers, “without knowing or understanding any of the contents or reading it”. As I observed in my first judgment, the letter was so clear that it spoke for itself. I do not accept that the defendant did not read the letter and did not understand that a trust was being asserted. And as stated in my first judgment, I accepted that the defendant received advice from Costanzo Lawyers on the 21 December letter, however I did not accept the defendant’s evidence that the advice was that the trust could be ignored as it died with the deceased[55]. In short, I am satisfied that shortly after the deceased’s death and before the sale of the Iranian land, the defendant knew, or was on notice, that the estate had a liability (or potential liability) to the children in respect of the deceased’s breach of trust. Further, at a time no later than 11 February 2005 (which was before the settlement of the sale of the Bulleen property and the subsequent payment of creditors), the defendant sought advice from Costanzo Lawyers on the above letter which unambiguously stated that the estate was liable to compensate the deceased’s children in respect of the breach of trust. It follows that the defendant (a) permitted Mr Khansari to sell the Iranian land and keep the proceeds; and (b) paid out the estate’s other creditors when he knew, or was on notice, that the estate was liable to compensate the children for the breach of trust.
[53]At [48]-[49].
[54]At [20].
[55]At [58].
As to the extent of the liability for the breach of trust, I accept the defendant’s evidence (referred to at [74] of my first judgment) that he had not calculated the entitlements of the children if the trust had not been breached. I also note that counsel for the plaintiff said (see [78] of my first judgment) that it was difficult to know the precise measure of the breach, as at death, in dollar terms. Indeed, for that reason counsel submitted in July 2008 that an inquiry was appropriate to ascertain the monetary value of the breach of trust.
It is difficult to ascertain the precise dollar amount of the deceased’s breach of trust because, as I noted in my first judgment, there was a lack of precision in the evidence relating to financial records and mortgages and the link between the deceased’s sale of the Mooroolbark property and her purchase of the Bulleen property. Nevertheless, given the history of the proceeding, the amount of obfuscation and the fact that there is some evidence on the matter, albeit not perfect, but on the basis of which I was able to make findings in the first judgment, in my view it is not appropriate to order an inquiry as to the monetary value of the breach of trust. That would lead to further obfuscation and delay. Rather, I am of the view that the value of the breach can be properly ascertained on the evidence and findings.
The starting point is that by the Deed of Trust executed in early 1999, the deceased held one half of the Mooroolbark property for herself absolutely and one half of the property on trust for her three children. The deceased was not permitted to encumber the children’s half-share “beyond the level of the then existing mortgage”. As the property was then valued at around $220,000, and was subject to a registered mortgage with an amount owing not exceeding $80,000, the children’s half-share effectively had a value of about $110,000 encumbered as to $40,000[56], which was 36% of the value of the half-share[57]. As I concluded in the first judgment, the prohibition on the deceased encumbering the children’s half-share “beyond the level of the then existing mortgage” is to be interpreted as meaning that the deceased could only encumber the children’s half-share up to 36% of its value. It is to be noted that the deceased was at liberty to sell the Mooroolbark property for the purpose of purchasing a substitute property, such substitute property to be held on the same trust as the Mooroolbark property. In this context, if the new property was worth more, or increased in value, she could encumber the property to a greater extent in dollar terms, although in percentage terms she could never encumber the children’s half-share by more than 36% of its value.
[56]Assuming in the defendant and the deceased’s favour that it was encumbered to the full extent of the mortgage.
[57]36% is a rounded figure, taken from the fraction 4/11, which produces 36.36 recurring. In the calculations below I have used the fraction rather than the rounded figure.
As events happened, the deceased sold the Mooroolbark property for $255,000 in late 2001 and used the proceeds of sale to discharge the Westpac mortgage over that property[58] and for her own purposes. At about this time[59], she purchased the Bulleen property for $308,000, subject to a mortgage to Permanent Trustee Company Ltd to secure advances of $292,000. The defendant denied that the sale proceeds of the Mooroolbark property were used to purchase the Bulleen property. But as I concluded in my first judgment[60], the Bulleen property was clearly a substitute for the Mooroolbark property, hence the terms of trust had the effect that the Bulleen property was held on the same trust. It follows that the deceased held the Bulleen property on the same terms as the Mooroolbark property. That is, she held a one half-share on trust for the three children, and that share was not to be encumbered in excess of 36% of its value. By contract of sale dated 24 November 2004, the Bulleen property was sold for $442,000. The sale was apparently settled on 18 February 2005, and after settlement the mortgage was discharged by payment of $371,234.85. As between the deceased and her children, it can be seen that the deceased’s half-share (assuming a value of $221,000, being half the sale price) was fully encumbered and the children’s half-share would have borne a further $150,000 or so of this mortgage amount. According to the terms of the trust, the deceased was only permitted to encumber the children’s half-share to a maximum of 36%, which translates to $80,364. As I said in the first judgment, the deceased was clearly in breach of trust. If the trust had not been breached, and the 36% limit had been respected, the children’s notional equity in their half-share of the Bulleen property would have been $140,636.
[58]The mortgage had secured advances of up to $178,000 and/or $216,000.
[59]The transfer was dated 24 October 2001 and registered on 1 November 2001.
[60]See [75]-[76].
It is thus seen that the amount of the liability was significant, both in absolute terms and also relative to the other debts and liabilities of the estate. And while the defendant did not know the amount at the time, he should have appreciated the fact that the estate had a potentially large liability and thus sought to ascertain the precise extent of it. It may have been a difficult task, and one that required appropriate professional advice, yet it was his duty to ascertain the extent of the liabilities. If he had done so, it would have become apparent after discharge of the mortgage on the Bulleen property and payment of the secured creditor (the mortgagee), that the remaining assets of the estate were insufficient to pay in full the unsecured creditors, which included the deceased’s children. That is so because, after selling the Bulleen property and paying out the mortgage and the sale costs, the defendant paid out debts and liabilities of the estate in the order of $46,000, leaving $19,948.10 left over in the Costanzo Lawyers trust account[61]. In other words, assuming that the defendant had not yet paid out the unsecured creditors, the estate would have had an amount of almost $66,000 with which to pay the unsecured creditors. On account of the estate’s liability of $140,636 to the deceased’s children alone, let alone the other unsecured creditors, there was a shortfall in the estate’s assets. Accordingly, it was imperative that the defendant get in and realise all the assets he could, ascertain the net value thereof and then calculate the rate at which the unsecured creditors would be paid. The corollary of the defendant getting in the Iranian land, of course, was that Mr Khansari would not have sold it. He would, and should, have been a further unsecured creditor to be paid rateably.
[61]See [24] of the first judgment.
If that had occurred, the amount of $66,000 in the estate referred to above would have been increased by the amount of $15,000 that should have been brought into the estate as the proceeds of sale of the Iranian land. That would produce a figure of about $81,000, however that would be offset by an allowance of a reasonable sum for the defendant’s personal expenses incurred in administering the estate (stated to be $3,841.42[62]), and any proper expenses incurred in selling the Iranian land.
[62]See Exhibit K.
As to the sale expenses in relation to the Iranian land, I note that there was no evidence that the expenses incurred by Mr Khansari in travelling to Iran (the amount of which was not established in any event) were properly incurred. Moreover, there was no evidence that it was necessary for Mr Khansari to travel to Iran to sell the land, and no evidence that the defendant or Mr Khansari investigated a cheaper way of selling the land. In my view, and in the absence of evidence to the contrary, I am not satisfied that it was necessary for Mr Khansari to travel to Iran to sell the land. It may have been a difficult and tedious process to arrange a sale from Australia, but in view of the size of the estate and the fact that creditors were not going to be paid in full, it was imperative that the estate not incur unnecessary cost in selling the Iranian land. Doing the best that I can in the circumstances, and as a matter of fairness between the parties, I would allow the defendant $2000 for sale expenses.
Conclusion
The result is that on the figures postulated, the estate would have had an amount of about $75,000[63] with which to pay the unsecured creditors. But as I have said, the liabilities to the unsecured creditors far exceeded that amount. As I have indicated above, the liability to the children alone was about $140,000. Mr Khansari was owed $15,800. And the other creditors were owed about $46,000. Thus, total liabilities were about $202,000. With only $75,000, the estate would not have been able to pay any of the unsecured creditors in full. On the figures referred to above, the estate could have only paid the liabilities of each unsecured creditor at the rate of about 37 cents in the dollar. Unfortunately, the defendant breached his duty as executor in that he failed to calculate a rate of payment and pay the creditors accordingly. Rather, he paid most of the creditors in full (including the preference given to Mr Khansari’s debt) whilst the children were not paid at all.
[63]Derived from the figure of $81,000 referred to above minus $4000 for the defendant’s personal expenses and $2000 as an allowance for the sale costs of the Iranian land.
The ultimate question is the extent of the defendant’s personal liability to the plaintiff in respect of his breaches of duty as executor. The plaintiff was entitled to be paid 37 cents in the dollar in respect of the approximately $47,000[64] owing to her on account of the breach of trust. This being so, if the estate had been administered properly, she would have received $17,400. As a result of the way the estate was administered, the plaintiff has not been paid that amount. It follows that the defendant as executor is liable to pay the plaintiff $17,400. The plaintiff is also entitled to interest on that amount as from the time at which she should have been paid, which I consider was one year after the deceased’s death. In my view, and subject to hearing the parties, a reasonable rate at which to allow interest would be 6 percent per annum as from 2 June 2005.
[64]Being one third of $140,000.
I note that there is an amount of $19,948.10 in the estate, which has been held in the trust account of Costanzo Lawyers since November 2005, and has not been earning interest. As executor, it may be presumed that the defendant will exhaust those funds to pay the plaintiff her $17,400 plus interest. To the extent that there is any shortfall between the money in the estate and the plaintiff’s entitlement, the defendant is personally liable to the plaintiff to pay the difference. I will make orders in these terms.
I will hear the parties as to interest and costs.
1
3
0