Sckaff v Sckaff

Case •

[2024] NSWCA 207

•

19 August 2024

Court of Appeal


Supreme Court


New South Wales

Medium Neutral Citation: Sckaff v Sckaff [2024] NSWCA 207
Hearing dates: 7 June 2024
Date of orders: 19 August 2024
Decision date: 19 August 2024
Before: Leeming JA at [1];
Mitchelmore JA at [2];
Stern JA at [179]
Decision:

(1)   Appeal allowed.

(2)   Set aside orders 1 to 9 inclusive made on 15 December 2023 and in lieu thereof, order that:

1.   Within 90 days, the defendants pay equitable compensation to the plaintiffs, being the sum of $250,000, with that sum to be secured by an equitable charge over the property at [No 6] (“the Property”);

2.   The second further amended statement of claim is otherwise dismissed.

(3) Order pursuant to s 74MA of the Real Property Act 1900 (NSW) that the caveat having registered number … lodged by the first respondent over the Property be withdrawn or removed within 28 days of today.

(4)   Direct the parties to supply agreed short minutes of order in relation to the balance of the relief sought by the appellants within 14 days of today, or, in lieu of agreement:

(a)   direct each party to file and serve the orders for which they contend, including as to costs, together with submissions not exceeding 5 pages within 14 days of today, and

(b)   direct each party to file and serve submissions in reply within 7 days thereafter.

Catchwords:

ESTOPPEL — proprietary estoppel — standing by — where appellants registered proprietors — where appellants allowed respondents to occupy property long term for no rent — whether first appellant paid for property — whether first appellant asserted ownership of property to respondents — proprietary estoppel not made out

APPEALS — review of findings of primary fact — whether primary judge erred by failing to make findings of fact — where evidence lost to passage of time — where multiple conflicting witnesses — error in finding on basis not put to parties or supported by evidence — evidence sufficient to support finding — findings made pursuant to s 75A of the Supreme Court Act 1970 (NSW)

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 56

Residential Tenancies Act 1970 (NSW), s 13

Supreme Court Act 1970 (NSW), s 75A

Uniform Civil Procedure Rules 2005 (NSW), r 51.53(1)

Cases Cited:

Blatch v Archer (1774) 1 Cowp 63; 98 ER 969

Clancy & Anor v Salienta Pty Ltd & Ors [2000] NSWCA 248; (2000) 11 BPR 20,425

Cook's Construction Pty Ltd v Brown & Anor [2004] NSWCA 105; (2004) 49 ACSR 62

Currie v Hamilton [1984] 1 NSWLR 687

Curtis v Curtis [2024] NSWCA 136

Delaforce v Simpson-Cook (2010) 78 NSWLR 483; [2010] NSWCA 84

Donnelly v Kempsey Local Aboriginal Land Council [2021] NSWSC 1699

Evans v Evans [2011] NSWCA 92

Fensom & Anor v Cootamundra Racecourse Reserve Trust & Ors [2000] NSWSC 1072

Foundas v Aramztzis [2020] NSWCA 47

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22

Lee v Lee (2019) 266 CLR 129; [2019] HCA 28

Mitchell v Cullingral Pty Ltd [2012] NSWCA 389

PC Developments Pty Ltd v Revell (1991) 22 NSWLR 615

Q (a pseudonym) v E Co (a pseudonym) [2020] NSWCA 220; (2020) 383 ALR 469

Revell v PC Developments Pty Ltd (1990) NSW ConvR 55-527

Rixon v Horseshoe Pastoral Co Pty Ltd [2017] NSWSC 1293

Saltalamacchia v Zamagias [2024] NSWCA 184

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

Watson v Foxman (1995) 49 NSWLR 315

West v Mead [2003] NSWSC 161; (2003) 13 BPR 24,431

Zhang v Metcalf; Metcalf v Zhang [2020] NSWCA 228

Category:Principal judgment
Parties: Richard Sckaff (First Appellant)
Nada Sckaff (Second Appellant)
George Sckaff (First Respondent)
Anne Thompson (Second Respondent)
Representation:

Counsel:
J Lazarus SC / D Knoll AM (Appellants)
C Wood SC / N Obrart (Respondents

Solicitors:
Joseph G Capogreco & Associates (Appellants)
AJB Stevens Lawyers (respondents)
File Number(s): 2023/459951
Publication restriction: Nil
 Decision under appeal 
Court or tribunal:
Supreme Court
Jurisdiction:
Equity
Citation:

Sckaff v Sckaff [2023] NSWSC 1582

Date of Decision:
15 December 2023
Before:
Robb J
File Number(s):
2018/54674

HEADNOTE

[This headnote is not to be read as part of the judgment]

The appellants, Richard Sckaff and his wife, Nada Sckaff, are the registered proprietors of a residential property located in Dulwich Hill, Sydney (the Property). The respondents, George Sckaff has lived in the Property since around 1990, and Anne has lived in the Property since around 2001. The respondents paid utilities but never paid rent and treated the Property as their family home, raising two children there. In December 2014, Richard served an eviction notice on the respondents and, in May 2017, he commenced proceedings in the NSW Civil and Administrative Tribunal for an order terminating their tenancy.

In February 2018, the respondents brought proceedings in the Equity Division seeking a declaration that the appellants held the Property on trust together with orders requiring the transfer of the Property to them. The appellants contended that the brothers’ parents, Fahad and Souad Sckaff, provided the funds for the purchase of the Property but placed the Property in Richard’s name to hold on trust for George. The respondents further contended that George believed that the Property was purchased for him, and Richard did nothing to disabuse him of this belief. The appellants contended that Richard purchased the Property with his own funds and allowed the respondents to live there. Further, Richard corrected George’s assumption that he (George) owned the Property whenever George asserted so in Richard’s presence.

The primary judge was not prepared to accept the evidence of one side in preference to the other and did not make findings as to the circumstances in which the Property was acquired. However, his Honour was satisfied that Fahad and Souad told George that they had caused the Property to be bought for him and put in Richard’s name. His Honour was also satisfied that Richard was aware of this and did nothing to disabuse George of this belief. His Honour ultimately found that the appellants held the Property on trust for the respondents on the basis that Richard acquiesced in George’s assumption that he owned the Property.

By their appeal, the appellants challenged the primary judge’s approach to the issue of who purchased the Property (grounds 1-4), his Honour’s conclusion that Richard acquiesced in George’s belief that George was the true owner of the Property (grounds 5-8) and his Honour’s further conclusion that proprietary estoppel was made out (grounds 9-11).

The Court held (Mitchelmore JA, Leeming JA and Stern JA agreeing), allowing the appeal:

  1. The primary judge effectively reversed the onus of proof, and erred in declining to make a finding as to who paid for the Property. Contrary to the view of the primary judge, the proportion of savings needed for the appellants to fund the purchase of the Property was not “extraordinary” given his personal circumstances over the relevant period: at [63], [75]. The primary judge had also relied on his own calculations of interest payments that were not put to Richard or the experts, which was procedurally unfair: at [67]. The evidence before the primary judge supported a finding that Richard paid the purchase price of the Property: at [72].

    Watson v Foxman (1995) 49 NSWLR 315; Fox v Percy (2003) 214 CLR 118; [2003] HCA 22; Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 considered.

  2. The Court found that there were conversations between Richard and George in which Richard had disabused George of his assertion that he was the owner of the Property: [147]. His Honour erred in not making findings about those conversations and yet also concluding that Richard had not done enough to disabuse George of his belief as to his ownership. In light of the finding that Richard purchased the Property, Richard only needed to assert his ownership of the Property when that was challenged; and when George contended that he (and not Richard) owned the Property, Richard corrected him: at [142], [145]-[147].

    Mitchell v Cullingral Pty Ltd [2012] NSWCA 389 considered; Curtis v Curtis [2024] NSWCA 136 cited.

  3. Richard did not acquiesce in George’s belief that he owned the Property, and his conduct was not unjust or unconscionable in a manner that equity would intervene to protect by way of a constructive trust. The primary judge erred in reaching the contrary conclusion: at [158].

    Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Q (a pseudonym) v E Co (a pseudonym) [2020] NSWCA 220 considered; Rixon v Horseshoe Pastoral Co Pty Ltd [2017] NSWSC 1293; Evans v Evans [2011] NSWCA 92 cited.

  4. Following from the appellants’ concession that the respondents should be compensated for the improvements to the Property effected by the respondents, the Court ordered compensation in a sum equal to the increase in the capital of the value of the Property by reason of the improvements: at [164], [172].

    Fensom & Anor v Cootamundra Racecourse Reserve Trust & Ors [2000] NSWSC 1072; Donnelly v Kempsey Local Aboriginal Land Council [2021] NSWSC 1699; West v Mead [2003] NSWSC 161; (2003) 13 BPR 24,431; Clancy & Anor v Salienta Pty Ltd & Ors [2000] NSWCA 248; (2000) 11 BPR 20,425; Revell v PC Developments Pty Ltd (1990) NSW ConvR 55-527; PC Developments Pty Ltd v Revell (1991) 22 NSWLR 615 considered.

JUDGMENT

  1. LEEMING JA: I agree with Mitchelmore JA.

  2. MITCHELMORE JA: This appeal concerns the beneficial ownership of a residential property located in Dulwich Hill, Sydney (the Property). The appellants, Richard Sckaff and his wife, Nada Sckaff, are the registered proprietors. The first respondent, George Sckaff, is Richard’s brother, and the second respondent, Anne Thompson, is George’s wife. Without intending any disrespect, I will refer to the parties by their first names.

  3. George has lived in the Property since around 1990, and Anne has lived there since around January 2001. Although George and Anne have not paid rent at any stage of their occupation, they have treated the Property as their family home and have raised their two children there. George has paid for at least the utilities since the early to mid 1990s; and George and Anne have carried out three separate renovations of the Property, in 2001, 2008 and 2013.

  4. In December 2014, Richard served an eviction notice on George and Anne, and in May 2017 he commenced proceedings in the NSW Civil and Administrative Tribunal (Tribunal) for an order terminating their residential tenancy. In February 2018, George and Anne commenced proceedings in the Equity Division, seeking a declaration that Richard and Nada held the Property on trust for them together with orders requiring the transfer of the Property to them on an unencumbered basis. On 23 February 2018, the Tribunal made an order, on the application of George and Anne, transferring the Tribunal proceedings to the Supreme Court, to be heard as a cross-claim.

  5. The circumstances surrounding the purchase of the Property were central to George’s claims (for convenience I will refer below to the respondents’ arguments by reference to George alone, and to the appellants’ arguments by reference to Richard). George contended that his parents, Fahad and Souad Sckaff, provided the funds for the purchase of the Property, intending that the Property belong to George. However, they put the Property in Richard’s name with a view to Richard holding it on trust for George. George further contended that even if his parents did not in fact purchase the Property for his benefit, he held that belief, and at no stage did Richard tell him otherwise before he served the eviction notice.

  6. Richard, on the other hand, denied that his parents purchased the Property for George. He contended that he purchased the Property with his own funds and allowed George to live there, rent-free, until the pressure of his financial circumstances made that impossible (although George has continued to live in the Property throughout the course of these proceedings). Richard also claimed that whenever George asserted in his presence that the Property was his (George’s) property, Richard corrected that assertion.

  7. The primary judge recognised that “[i]n principle, the resolution of the dispute should begin with a determination of the circumstances in which No 6 [being the Property] was acquired in the name of Richard” (at [5]). Ultimately, however, his Honour did not make findings as to those circumstances, taking the view that he was unable to do so. The issue of who purchased the Property, and his Honour’s approach to that issue, was the subject of grounds 1 to 4 of the notice of appeal. For the reasons which follow, I consider that his Honour’s approach to this issue was erroneous and that his Honour should have made a finding as to who purchased the Property. The evidence did not support a finding on the balance of probabilities that Fahad and Souad purchased the Property. Rather, it supported a finding on the civil standard that Richard had done so.

  8. Ultimately, the primary judge found that Richard and Nada held the Property on trust on the basis that Richard had acquiesced in an assumption that George formed, that he (George) owned the Property. On the appeal, Richard challenged the primary judge’s conclusion that he acquiesced in George’s belief that he (George) was the true owner of the Property and did not take any steps to correct that belief (grounds 5-8), and his Honour’s further conclusion that proprietary estoppel was made out (grounds 9-11). The primary judge’s reasoning in relation to the source of funds for the Property impacted on these aspects of the reasoning, in a manner that requires appellate intervention. The appeal should be allowed.

  9. George submitted that in the event that the appeal were allowed, the matter should be remitted for a retrial. Richard opposed that course. A retrial may not be ordered unless it appears to the Court that some substantial wrong or miscarriage has been occasioned: Uniform Civil Procedure Rules 2005 (NSW), r 51.53(1). As Payne and Kirk JJA recently observed in Saltalamacchia v Zamagias [2024] NSWCA 184 at [3], the rule recognises that a new trial “increases costs, delays resolution and cuts across the aim of finality.” Bearing in mind the overriding purpose in s 56 of the Civil Procedure Act 2005 (NSW), the Court will ordinarily, if error is made out, determine the point itself rather than remit to the court below, and to that end s 75A of the Supreme Court Act 1970 (NSW) empowers it to make findings of fact. As the following reasons disclose, I consider that the evidence in the court below is sufficient to make the necessary findings of fact to resolve the matter without remitting it for retrial.

George’s claims against Richard

  1. It was common ground, and the primary judge found, that the Property was purchased on 5 February 1988 for $110,000 and that Richard became the registered proprietor: at [230]. In order to succeed in his claims, George needed to displace the prima facie position that the beneficial ownership of the Property was commensurate with the legal title: Currie v Hamilton [1984] 1 NSWLR 687 at 690 (McLelland J), cited with approval in Foundas v Aramztzis [2020] NSWCA 47 at [47]; and Zhang v Metcalf; Metcalf v Zhang [2020] NSWCA 228 at [47].

  2. In his further amended statement of claim, George alleged that Richard held the Property on trust for him or for him and Anne jointly. In the alternative, George sought an order that Richard give restitution in respect of George’s contributions to the Property and a charge over the Property to secure the value of those contributions. George did not seek, by way of further alternative relief, a right to long-term occupancy of the Property.

  3. George sought a constructive trust on three bases: first, a trust arising from a common intention or joint endeavour, second, estoppel by representation, and, finally, estoppel by convention. Fundamental to each of these bases was his allegation that in or about 1988, Fahad and Souad purchased the Property and registered it in Richard’s name (FASOC [1]). Specifically, George alleged that his father, Fahad, paid $60,000 up front, and his parents paid the balance by way of a loan from the Commonwealth Bank of Australia (CBA), secured by a mortgage over the Property (FASOC [3]).

  4. The parties to the alleged common intention or joint endeavour were George, his parents and Richard. George alleged that the common intention or joint endeavour, at the time of purchase of the Property and at all times thereafter, was to the effect that the Property would be his property, but put in Richard’s name (FASOC [4], [5]). In accordance with this common intention or joint endeavour, his parents paid off the mortgage, giving Richard money for this purpose (FASOC [7]). George further alleged that in reliance on the common intention or joint endeavour, he moved into the Property and continued to reside there (FASOC [6], [10]), paying the rates, taxes and utilities (FASOC [11]) and making various improvements in 2001, 2008 and 2013 at a cost in excess of $300,000 (FASOC [13]). George next alleged that Richard’s transfer of the Property to himself and Nada, in about January 2014, was a departure from the common intention and a failure of the joint endeavour (FASOC [15]-[16]), as was the demand, in December 2014, that George vacate the premises (FASOC [17]-[17A]).

  5. George alleged, further or alternatively, that on or about the date of purchase of the Property or, alternatively, when he moved in, he adopted an assumption that he beneficially owned the Property (FASOC [18B]). Although he does not expressly plead the source of the assumption, reading the pleading as a whole the source can only have been what George earlier alleged about the circumstances surrounding the purchase of the Property. George next alleged that Richard “knew of [and] acquiesced in and induced the Assumption” by agreeing to George (and later Anne) moving in, making improvements and treating the Property as his own “for all purposes and in all respects” (FASOC [18C]). Relying on the assumption, George moved in and made the improvements, to his detriment (FAOSC [18D]-[18E]), and it would be unconscionable for Richard to deny that George was the beneficial owner (FASOC [18F]).

  6. George finally alleged, further or alternatively, that in or about 1988 or 1989, upon his moving into the Property, he and Richard adopted a “mutual assumption” that George beneficially owned it. Again, the source of the mutual assumption was not pleaded. George alleged that he relied on the assumption to his detriment by moving into the Property, making improvements and treating it as his own, such that it would be unconscionable for Richard to deny the mutual assumption (FASOC [18H]-[18L]).

  7. Separately, in relation to the improvements, George alleged that Richard both acquiesced in his undertaking of the improvements and had knowledge that they were undertaken by George in the belief that he owned the Property (at [20]-[21]). George claimed that the Property should either be held on a constructive trust in respect of the improvements, or that Richard should give restitution to George in respect of the contribution to the Property by payment of the outgoings and improvements (at [24]). The amount of restitution was pleaded as constituting “reimbursement of the cost to Plaintiffs of the Improvements being the sum of $535,315.08 as at September 2018 plus interest”, together with compensation for the project management and labour (which was not quantified) (at [25]).

  8. In his amended defence, Richard denied that his parents purchased the Property. He pleaded that he (Richard) purchased the Property, paying the deposit and the balance by way of a loan from CBA which was secured by a mortgage over the Property and which he paid off (AD [1], [3]). Richard denied the asserted common intention or joint endeavour (AD [4]), and denied that George moved into the Property in reliance upon it. Richard pleaded that he offered to permit George to live in the Property until he (Richard) married and moved in, and later agreed that George could remain there (AD [6]). Richard denied that his parents paid the mortgage, repeating that he made all mortgage repayments and discharged the original mortgage in 1992 (AD [7]-[8]). He also denied that George paid the utilities or made the improvements in reliance on a common intention or joint endeavour, alleging that George paid the utilities following a conversation between the two of them in 1994, in which they agreed that George could continue living in the Property on that condition, while Richard paid all insurance and land tax (AD [11]). George disputed Richard’s payment of the insurance for the Property but he did not dispute that Richard paid land tax.

  1. Richard admitted that George made improvements to the Property but denied that George did so in reliance on the pleaded common intention or joint endeavour (AD [12]-[13]). Richard also admitted the transfer of the Property in January 2014 to him and Nada jointly, and that he sent the eviction notice in December 2014, but he denied that either constituted a departure from, or failure of, any common intention or joint endeavour (AD [15]-[17A]).

  2. Richard did not admit the existence of the assumption that George alleged, further pleading that he did not know about it and did not acquiesce to it. Richard further pleaded that no act or omission on his part caused George to treat the Property as one for which he was entitled to be the registered proprietor (AD [18A]-[18F]). Richard denied the alleged estoppel by convention on a similar basis (AD [18H]-[18L]).

  3. In relation to George’s claim for restitution in relation to the improvements, ultimately Richard did not dispute before the primary judge that George would be entitled to equitable compensation in that regard: at [43]. One of the alternative sets of orders that Richard sought on the appeal, in the event that the primary judge’s orders were set aside, included an order that he and Nada pay such compensation.

The purchase of the Property (grounds 1 to 4)

Introductory remarks

  1. Richard was 24 years old when the Property was purchased, and George was 20 years old. They both gave evidence of having made searches for documents that would assist their respective cases, with limited success. The primary judge acknowledged that the many disputes between them, about whether conversations occurred long in the past and the content of those conversations, exemplified the difficulties that McLelland CJ in Eq explained in Watson v Foxman (1995) 49 NSWLR 315 at 318: at [215].

  2. His Honour observed that “the parties conducted their cases on the assumption and in the hope that the Court would accept the credibility of one side’s evidence to the exclusion of the other, so that, on a ‘winner-takes-all’ basis, the Court would accept the case propounded by one side and reject the case propounded by the other”: at [219]. His Honour described that aspiration as having failed, as his Honour was “not prepared to accept unequivocally the evidence of either George or Richard on issues that are in dispute between them”: at [220]. His Honour also found “no basis to accept the evidence of one in preference to the other, particularly when the subject matter is significant conversations between them”: at [220].

  3. In his submissions on the appeal, George emphasised the need to recognise the advantages enjoyed by the primary judge, and so much may be accepted consistently with Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 (“Fox v Percy”) and Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 at [55]. George submitted in this regard that although Richard relied heavily on his affidavit evidence in the appeal, the primary judge had not found his evidence persuasive and was satisfied that Richard had sought to downplay the level of his knowledge on certain matters: at [206]-[211]. In oral submissions, Senior Counsel for George cautioned the Court against accepting Richard’s attempt to rehabilitate his credit and emphasised the positive credit findings that the primary judge had made about third party witnesses, to whose evidence I will come.

  4. In a rehearing pursuant to s 75A of the Supreme Court Act, it is necessary for this court to conduct a real review of the trial and the judge’s reasons whilst observing “the ‘natural limitations’ that exist in the case of any appellate court proceeding wholly or substantially on the record”: Fox v Percy at [23]. Those limitations include the disadvantage that an appellate court has compared to the trial judge in assessing a witness’ credibility. Nevertheless, as the Court recognised at [24], “mistakes, including serious mistakes, can occur at trial in the comprehension, recollection and evaluation of evidence”. What the Court said at [25] bears repeating in the present context:

“Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge's reasons. Appellate courts are not excused from the task of ‘weighing conflicting evidence and drawing [their] own inferences and conclusions, though [they] should always bear in mind that [they have] neither seen nor heard the witnesses, and should make due allowance in this respect’. In Warren v Coombes [(1979) 142 CLR 531 at 551; [1979] HCA 9], the majority of this Court reiterated the rule that:

‘[I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it.’

As this Court there said, that approach was ‘not only sound in law, but beneficial in ... operation’.”

(Footnotes omitted.)

  1. In the present case, the primary judge did not go so far as to find that George or Richard was not a credible witness. Rather, his Honour was not satisfied that he could “properly rely upon the uncorroborated evidence of either Richard or George as to the events that occurred before the purchase of No 6, and the circumstances in which No 6 was acquired, and the source of funds for the payment of the purchase price”: at [212]. The evidence on which George and Richard respectively relied by way of corroboration of their claims was thus significant and remains so in considering the grounds of appeal.

  2. The primary judge commenced his analysis with Richard’s account of the purchase of the Property. However, ground 1 of Richard’s notice of appeal contended that the primary judge reversed the onus. In light of that contention, it is appropriate to commence the analysis of grounds 1 to 4 with the account of the purchase on which George’s case rested. Before doing so, I will set out some uncontentious matters about the Sckaff family.

The Sckaff family

  1. Fahad and Souad migrated from Lebanon to Australia, where they met, married and started a family. Fahad worked in a factory until he was retrenched in the 1980s (the precise timing was in dispute), while Souad worked in the home. In addition to Richard and George, Fahad and Souad had two daughters, Mary being the eldest child and Adele the youngest: at [9].

  2. The family lived in Dulwich Hill, at No 12 in the same street as the Property (the family home). According to Richard, his parents paid off the mortgage on the family home in the early 1970s: at [10]. Fahad died in February 1996: at [58]. Souad remained in the family home until 2007, when she moved into a nursing home: at [11]. Souad died in October 2013: at [239].

  3. In 1974, Richard commenced working at Hurlstone Park Newsagency, initially as a paperboy and, from 1977, as a paperboy and shop assistant. In 1981, at the age of 17, he commenced as a bank clerk at CBA, while also maintaining his job at the newsagency. In 1986, while still working at CBA, Richard commenced employment as a delivery driver with John Fairfax Publications (Fairfax), holding that position until 1996. By the time Richard ceased employment with Fairfax, he had established his own newspaper delivery business, which traded through R and N Sckaff Enterprises Holdings (Aust) Pty Ltd. In 1998, Richard ceased his employment with CBA, by which time he had been promoted through various positions. After that time, the newspaper delivery business was Richard’s sole source of income.

  4. Richard and George’s older sister, Mary, gave evidence in the proceedings that Souad encouraged her children to save. Like Richard, Mary started working on a full time basis at the age of 17. According to Mary, she and Richard would give Souad their wages each week, from which Souad would give them an allowance to spend and bank the rest. Both Mary and Richard lived in the family home until they respectively married, in 1987 (Mary) and 1991 (Richard).

George’s evidence regarding the purchase of the Property

  1. At the time of purchase of the Property, George was unemployed. George gave evidence that his father told him that he and Souad were buying the Property for him, using a redundancy payout of $60,000 that he (Fahad) had received. Souad insisted that the Property be put in Richard’s name because she was worried that George was going to “gamble it away”. By George’s own admission, Richard was the more responsible of the two brothers at that time: Richard had a job (two jobs, in fact) and could obtain a loan, and although Richard also gambled, George described himself as “definitely the bigger gambler”.

  2. George recalled a further conversation with his father about the Property in similar terms, when his mother and Richard were also present (which Richard denied). According to George, Fahad said that he and Souad were helping George with the Property, just as they had helped Richard to buy a house in Campsie and had given Mary $30,000 as a wedding gift. George recalled his mother saying something to a similar effect at around the time the Property was purchased, as well as subsequently.

  3. On George’s evidence, then, his parents bought the Property for him, and they did so because they had done the same for Richard. In support of this contention, and that this was what his parents had told him, George called three witnesses: Claude Cacitti, Michael Geoghegan and Nasser Zahr.

Evidence of Mr Cacitti

  1. Mr Cacitti came to give evidence as a result of having seen a segment on A Current Affair in 2017 “about the feud between George and his brother Richard”. He gave evidence that around 1979, he was George’s primary school teacher and, in that capacity, he had visited Souad at the family home about six times, on her invitation, as she wished to discuss her children. Mr Cacitti stated in his affidavit:

“19. We discussed our respective traditions and when discussing the Lebanese traditions, she said to me words to the following effect:

‘It is the parent's responsibility to look after kids and make sacrifices. If George doesn't get a good job, he will have a house and something to start a family with.’

20. On several occasions, Mrs Sckaff mentioned that it was her intention to provide her sons with a house so that they would have a good start in life. I have always remembered her words on this matter as I found it a very generous thing to do which reflected the caring and supportive nature of George's parents as well as recognising the sacrifices that they endured to make such a gift possible

21. The fact that she was trying to provide as much as she could for her children resonated with me because I came from an Italian background and I wasn't the brightest child in primary school. I am aware that in certain parts of Italy, parents have the same values.

22. She would often say words to the following effect: -

‘I want to make sure my kids are provided for in life. Adele would get money because her husband's family would provide her with a home. I will buy George and Richard each a home so that they are prepared.’”

  1. The primary judge described Mr Cacitti as “an entirely independent and credible witness”, and was prepared to give weight to his evidence notwithstanding “the inherent likelihood of dissipation of recollection over the decades”: at [90]. However, at its highest, Mr Cacitti’s evidence was of conversations in which Souad expressed a future intention to purchase houses for her sons, taking place at a time when Richard was 15 years old and George was 11 years old.

Evidence of Mr Geoghegan

  1. Mr Geoghegan’s evidence was more proximate to the property purchases in issue. He grew up on the same street as the Sckaffs and had known George and Richard since they were children, frequently playing football and cricket with George during the 1960s and 1970s and, between 1973 and 1979, often working with Richard as a paperboy. Mr Geoghegan’s evidence included the following in relation to the Campsie house:

“19. In approximately 1983, Richard told me words to the following effect:

‘Mum and dad bought me a house at [Campsie].’

20. At about the same time, George told me words to the following effect:

‘Mum and dad bought Richard a house at [Campsie].’”

  1. In relation to the Property, Mr Geoghegan gave this evidence:

“24. In 1988, Souad Sckaff (‘Souad’) told me words to the following effect:

‘We bought Richard a house and we bought Georgie this one too. It is a Lebanese custom to buy your sons a house.’

25. When Souad said ‘we bought this one too,’ she gestured by pointing to [the Property].

…

31. I have always assumed that [the Property] belonged to George because of conversations with George and his mother about the house.

32. Around that time, George told me words to the following effect:

‘Because Richard works at the Commonwealth Bank, we put [the Property] in his name. That way we can get a better interest rate.’”

  1. The primary judge described Mr Geoghegan as a “reasonably careful and satisfactory witness”, to whose recollection he was satisfied was justified in giving some weight: at [82]. However, his Honour recognised that Mr Geoghegan’s credibility was “necessarily diminished by his recollection that both Souad and Richard told him that Fahad and Souad had bought Richard a house, as well as George” (at [83]), for reasons to which I will come shortly.

Evidence of Nasser Zahr

  1. Mr Zahr frankly admitted that he had been close friends with George since 1980 and that they remained friends. He gave evidence that he knew Souad well and spoke to her mostly in Arabic, and gave evidence of the following two conversations with her in around 1988, before George moved into the Property:

“[18] I recall in around 1988, George invited our whole football team to come to his house at [the Property] to watch the grand final…

…

[21] While I was at the house getting ready to watch the grand final, Souad, came in and we had a conversation. She said to me words to the following effect:-

‘Fahad (George’s dad) and I have purchased this house for George but we put it under Richard’s name because Richard is working with the Commonwealth Bank and has settled down. George is not ready to settle down and accept responsibilities and has only just finished school. George is only interested in having fun like most young men his age.’

[22] Not long after that conversation and before George moved into [the Property], I remember visiting George at [the Property]. I had another conversation with Souad, his mother, when she said words to the following effect:-

‘This is George’s house and it’s my wish that one day George will settle down in the house and marry and have children and look after his affairs and stop going out and partying.’”

  1. The primary judge accepted that Mr Zahr “had a real recollection of the substance of the statements made to him by Souad, notwithstanding the passing of the decades since the conversations took place”: at [78].

George’s allegation that his parents purchased the Campsie house for Richard

  1. Contrary to what Fahad and Souad led George to believe (on his evidence) about their purchase of the Campsie house for Richard, Mary and Richard gave evidence that they jointly purchased a property in Campsie in 1983, to which their parents made no financial contribution. Mary’s evidence, which was not seriously challenged, was that she and Richard paid the deposit (which as best as she could recall was $9,500) and obtained a loan for the balance. She and Richard then jointly made all of the loan repayments (the mortgage was discharged in June 1986).

  2. Richard’s evidence was consistent with Mary’s in terms of the payment of the deposit on the Campsie house and the loan repayments. Richard also gave evidence that the Campsie house was leased between 1983 and 1990 to a single tenant, who would bring the rent to the family home and leave it with his mother, for Richard (who still lived in that home). Between 1990 and 1992, the Campsie house was rented to a couple from whom Richard generally collected the rent directly.

  3. The primary judge ultimately found at [227]:

“… I have concluded that the evidence is not sufficient to support a positive finding by the Court, on the balance of probabilities, that Fahad and Souad applied a Lebanese custom whereby they used their own funds to buy homes for both of their sons. It would not be warranted for the Court to make such a finding in the face of the evidence given by Richard and Mary as to the manner in which No 42 was originally purchased by them. In particular, Mary's evidence on the subject was not sufficiently challenged in her cross-examination.”

  1. The circumstances surrounding the purchase of the Campsie house were contrary to George’s case and supported the credibility and reliability of Richard’s evidence regarding his property purchases. The evidence, from Mary in particular, that Fahad and Souad did not buy the Campsie house for Richard necessarily diminished the weight of the evidence of Mr Cacitti and Mr Geoghegan on whom George relied to corroborate his evidence that his parents had purchased a home for both of their sons. Mary gave evidence doubting that her father would have told George that he and Souad bought the Campsie house for Richard, when Fahad knew they did not contribute financially to its purchase.

  2. Specifically in relation to Mr Geoghegan’s evidence, the primary judge stated at [83]:

“While there is no positive reason to disbelieve Mr Geoghan’s [sic] evidence on this subject, which was broadly consistent with the evidence given by some other witnesses, it is inconsistent with the evidence on the subject given by Richard and Mary, and the Court has had to decide the issues in this case on the basis that there is no objective evidence to support a finding that Fahad and Souad paid for houses for George and Richard.”

  1. Not only was there no objective evidence to support a finding that Fahad and Souad bought a house for Richard, Mary’s evidence, which his Honour accepted, was that they had not done so.

  2. I note that there was also no substance in George’s assertion that their parents had given Mary $30,000 as a wedding gift and on account of her share of the Campsie house, for Richard. Mary denied that her parents ever gave her this amount of money, as a wedding gift or at all. When she was asked about this in cross-examination, Mary’s evidence was that the only gift she received from her parents for her wedding was a bedroom suite. Richard and Nada both gave evidence that they received a bedroom suite from Richard’s parents, with Nada describing the giving of such a gift as a custom in the Lebanese community.

George’s allegation that his parents paid the purchase price for the Property

  1. As I have noted above, George’s evidence was that his parents told him that they purchased the Property using the $60,000 redundancy payout that Fahad said he had received, and a loan which was in Richard’s name but which, according to Fahad, he and Souad also paid off. Although George gave evidence, and maintained in cross-examination, that his parents paid $60,000 by way of a deposit, the primary judge found, consistently with Richard’s evidence, that the amount of the upfront payment was $50,000, with the balance of $60,000 the subject of a loan from CBA: at [190].

  2. Richard and Mary disputed George’s evidence about Fahad’s receipt of a redundancy payout, both as to the amount and its timing. Mary recalled a conversation with her mother shortly after Fahad lost his job (at a factory in Ashfield, not Alexandria as George recalled), in which Souad said that Fahad had only received $2,000 and she was worried about how they were going to manage. Mary said that $60,000 would have been a “huge” amount of money for her parents and she was confident that her father would have told the whole family if he had been given such a large sum (the clear implication being that she was not told).

  1. Richard recalled that in May or June 1981, he had a conversation with Souad in which she told him that the factory where Fahad worked was closing at the end of the year and she was worried about how they were going to manage. Richard also recalled his father returning from the work Christmas party and giving his mother an envelope containing his wages and four weeks’ holiday pay. Richard gave evidence that on or about January 1982, he took his parents to the Department of Social Security and completed unemployment forms for his father, providing the Department with copies of his parents’ bank books. His recollection was that at that time, there was around $15,000 in their account.

  2. In cross-examination, George said that he had no reason to dispute that Richard had taken Fahad to the Department of Social Security after he stopped working at the factory, or that his parents had only $15,000 in the bank at that time. Ultimately, the primary judge thought it was “probable that George's definite recollection of the date of the retrenchment and the amount received by Fahad was not reliable (given, in particular, that it seems that George did not recall the correct name of the suburb in which Fahad had been employed)”: at [229]. Without that finding in George’s favour, on his case his parents needed to have available at least $50,000 in the first half of 1988 for the upfront payment on the Property (having paid Mary (also on George’s evidence) $30,000 in 1986), along with funds to pay down the $60,000 loan by 1994.

  3. In so far as George gave evidence of his parents telling him that they were putting the rent money from the Campsie house towards the loan repayments, that was Richard’s money, as the owner of that property. George also gave evidence in cross-examination that his parents “had a lot of cash in the house” and they were not going to have everything in the bank. His evidence in that regard was not supported by Richard or, more significantly, by Mary, who in one of her affidavits described their parents as “poor” in the 1980s. In cross-examination, Mary accepted that her parents saved their money, that Souad saved cash, and that she would have cash around the house. Mary was not asked about the amount of cash her mother had around the house, or its source.

  4. There was evidence that Souad owned a number of parcels of land in Lebanon, three of which she sold in 1994. The primary judge said of these properties that “[t]he implication in the evidence is that the properties in Lebanon had value, but there is no evidence at all as to that value, or whether Souad received income from the properties”: at [229]. Specifically, his Honour did not accept George’s contention “that the mortgage over No 6 to the CBA was repaid by Souad from the proceeds of sale of her Lebanese properties”: at [231]. His Honour further found at [231]:

“The evidence does not exclude the possibility that Souad had funds that enabled her to contribute to the repayment of the mortgage from year to year, but there is no evidence that would support a positive finding to that effect.”

Although couched in terms of an inability to make positive findings, the absence of positive findings meant, necessarily, that the primary judge did not accept George’s assertion that his parents had paid the purchase price for the Property.

  1. I note that his Honour referred to what he described as “intriguing” evidence from Richard about what his mother did with the three remaining properties that she held in Lebanon (transferring one to Richard’s daughter, one to Richard, and one to another family member). The primary judge described this evidence as suggesting no reason why Souad would have acted in that manner, “unless she thought that George had already adequately been provided for”: at [232]. That speculation formed no part of George’s case, and it was not put to Richard.

Richard’s allegations regarding the purchase of the Property

  1. As I noted above, Richard denied George’s allegations that his parents paid for the Property. He gave evidence that he paid the deposit for the Property out of his own funds and borrowed the balance from CBA, utilising a staff housing loan. By contrast with George’s case, there was contemporaneous documentary evidence that supported his claims regarding his repayment of the loan.

  2. Richard gave evidence that loan repayments were automatically deducted from his CBA wages, and were described on his pay advices as “SHL”. Richard was able to locate a pay advice for the fortnight ending 27 May 1993, which listed a number of deductions including an amount described as “SHL”. On the basis of the amount of the deduction in the pay advice ($65.56), the primary judge calculated that the SHL deductions would total about $1,700 per year (assuming no change in the amount of the deduction): at [50]. In my view, there could be no serious question that the automatic deductions constituted payments, by Richard, towards the purchase price of the Property.

  3. In addition to those fortnightly deductions, Richard gave evidence that between 1988 and 1994 he made extra payments to reduce the balance of the loan. Richard tendered copies of deposit slip butts “to the extent available”. His Honour included a table of the deposit slip butts at [51] of the reasons. The respective amounts on the 45 deposit slips that were in evidence ranged from $150 (for 26 of the slips) up to, on one occasion, $6,000. On his Honour’s calculation, the total was $50,400: at [52].

  4. On their face, the deposit slips evidenced payments that Richard made into the loan account. In oral submissions on the appeal, Senior Counsel for Richard drew attention to one of the deposit slips in the amount of $5,000, which was dated 20 November 1991 and was annotated with the description “wedding money”. The date and description were consistent with the evidence of Nada and Richard that they married in late October 1991, following which they embarked on a three-week honeymoon.

The errors in the primary judge’s reasoning

  1. The primary judge accepted that “all repayments were apparently made through accounts in Richard’s name”: at [189]. Nonetheless, his Honour was “not prepared to accept that Richard was able to save the proportion of his income for the whole of the period from 1975 to 1994 that would have been necessary to enable him to make the initial payment for the purchase of No 6, and to repay the mortgage over No 6, from his own resources”: at [188].

  2. The manner in which the primary judge reached that conclusion, and how his Honour then used it, was the subject of grounds 1 to 4 of the notice of appeal. By ground 1, Richard contended that the primary judge effectively reversed the onus of proof on this issue, focusing on what Richard was or was not able to prove at the expense of assessing what the evidence did or did not establish on George’s case, as the plaintiff. By grounds 2 and 3, Richard took issue with his Honour’s finding that Richard did not prove that he had the capacity to fund, and had funded, the purchase of the Property, complaining specifically about an exercise that his Honour carried out involving interest on the loan for the Property. By ground 4, Richard contended that the primary judge erred in failing to hold that he (Richard) was the beneficial owner of the Property.

  3. In order to evaluate the alleged errors, it is necessary to refer briefly to the expert evidence that was led in the case. In response to evidence that Richard gave about how he was able to fund the purchase of the Property, George obtained a report from an accountant, Mariano Rossetto. Mr Rossetto was instructed to assume (against George’s case) that Richard’s evidence about funding the purchase was accurate, and to give an opinion as to whether Richard would have been able to make the necessary payments at the times they needed to be made, from his own resources. Richard retained a responsive accountant, Fiona Bateman.

  4. Ultimately, as the primary judge observed at [173], both parties accepted that the result of the expert accounting evidence was inconclusive. Despite that being the position of the parties, his Honour considered that an aspect of the experts’ conclusions was significant, namely, “a comparison between the total income of Richard (plus that of Nada after their marriage in 1991), total living expenses, the property payments that Richard claimed he made, the balances at end of financial year and, importantly, the proportion of Richard’s income that represented savings”: at [174]. His Honour found that the proportion of Richard’s earnings that he would have been required to save in order to make the payments he claimed to have made, both for the Property and other purchases (namely, two properties in Brisbane, purchased in 1991 and 1992 respectively (see [170])), was “extraordinary”: at [175].

  5. Senior Counsel for George accepted that this court was in as good a position as the primary judge to draw inferences about whether it was likely or unlikely that a borrower would spend between 60% and 80% of income on discharging indebtedness. Particularly having regard to Richard’s circumstances, the primary judge’s finding that the proportion of savings was “extraordinary” was not warranted. The period during which Richard put the highest proportions of savings towards loan repayments was when he was still living at home with his parents. I have referred above to Mary’s evidence that her mother put a strong emphasis on saving, which was encapsulated in her cross-examination as follows:

“Well, my mother, she was the boss. She was like the Queen Elizabeth, the late Queen Elizabeth, but the monarch – matriador, sorry. She empowered us to save and one day she wanted us to have a better life than my mother and – themself, my mother and father, so we have something for ourself, like, save up for a home or lifestyle – better lifestyle, that’s what I’m saying.”

  1. In addition to his scepticism of Richard’s capacity to save the proportion of his and Nada’s incomes that would have been necessary, the primary judge relied upon a matter that, in his opinion, neither of the experts had been instructed to make any assumptions about. That matter was the interest that Richard was required to pay on his CBA staff home loan: at [177]. His Honour undertook a series of calculations “to compare the exercises carried out by the parties’ experts if, unlike their calculations, it was assumed that Richard’s outstanding mortgage debt on No 6 accumulated interest at the rate of 10% per annum”: at [180]. His Honour adopted that rate of interest on the basis that Richard’s expert, Ms Bateman, had adopted 8% per annum as an appropriate interest rate to assume that Richard had earned on his deposited savings: at [178].

  2. Starting with the debt of $60,000 in 1988, his Honour calculated interest at 10% to give the total at the end of the year. His Honour then allowed for the fortnightly deductions “that are assumed to have been made from Richard’s salary”, and for the additional payments for which there was evidence in the form of the deposit slips, to give the amount of the debt in the next year: at [180]. His Honour observed the following of his result at [181]:

“The result of this exercise has been to demonstrate that, if allowance is made for the assumption that the mortgage debt on No 6 accrued interest at the rate of 10% per annum, even if Richard’s income is assumed to have been sufficient to make all the regular and one-off payments that he claimed to have made, there would have remained an unpaid amount of about $27,500 at the date the mortgage was repaid. That amount cannot, of course, be any more than an approximation based upon the effect of the evidence and the assumptions that are made.”

  1. The primary judge acknowledged that the approach was necessarily, “imprecise because it does not allow for the effect of interest accruing and payments being made throughout the year”: at [180]. His Honour also acknowledged that as this issue only occurred to him after the hearing, “the conclusions have not been supported by actual evidence, and they have not been tested by cross-examination of Richard, and do not have the benefit of the responses of the expert witnesses”: at [185]. Nonetheless, and notwithstanding that his Honour accepted that he could not reliably act upon the precise result obtained (at [186]), his Honour relied upon the broad outcome of this analysis, stating at [187]:

“The result is, if the Court accepts the most favourable set of calculations from the expert evidence for Richard, and then assumes that he would have been required to pay interest on the mortgage debt at a slightly higher rate than he was paid on his own savings, the Court is driven to conclude that Richard would have been unable to fund the purchase of No 6 from his own resources by a substantial margin.”

(Emphasis added.)

  1. In his written submissions on the appeal, George sought to characterise this exercise as not a basis for his Honour’s decision-making but, rather, “an additional safeguard in the context of the evidence that was available to him”. The emphasis his Honour gave the exercise, and the conclusion to which it drove him, tells against that submission. As Richard submitted, in circumstances where no question about the interest payable on the loan was put to him during his evidence, and where the experts were not asked about interest and how that would ordinarily be dealt with, his Honour’s reliance on this exercise in a manner that was adverse to Richard was productive of unfairness.

  2. Additionally, the approach his Honour adopted assumed, wrongly, that such deposit slips as Richard had tendered constituted all of the additional payments that were made. The latter assumption was contrary to Richard’s evidence that he had produced the deposit slips to the extent they were available, which was unsurprising given the passage of time, and was not challenged. The passage of time undermined George’s reliance in this context on Blatch v Archer (1774) 1 Cowp 63; 98 ER 969. As Hodgson JA observed in Cook's Construction Pty Ltd v Brown & Anor [2004] NSWCA 105; (2004) 49 ACSR 62 at [42]:

“… where a party has to prove something and prima facie has available evidence that would directly deal with the question, a court will be very hesitant in drawing an inference in that party's favour from indirect and second-hand evidence, when the party doesn't call the direct evidence that prima facie it could have called, at least unless some explanation is given, or the circumstances themselves provide an explanation…”

(Emphasis added.)

  1. Further, George’s related submission that there was no objective evidence as to the payment of the purchase price before his Honour was not correct, at least in light of the pay advice that Richard was able to locate, if not also the deposit slips.

  2. More fundamentally, the primary judge’s conclusion regarding Richard’s capacity to pay, necessarily impacted by the exercise his Honour undertook without notice to either party, erroneously distracted his Honour from the correct question on this aspect of George’s case. The manner in which his Honour relied on the conclusion can be seen from [189] and [230] of his Honour’s reasons. First, in [189] his Honour stated:

“That conclusion does not, of course, assist the Court in making a finding about the source of funds that would have been necessary to make up any shortfall in funds that was actually required to pay for No 6 over the period 1988 to 1994. In reality, the evidence ultimately leaves the Court in the position where it does not accept that Richard has proved that he paid the entire price for No 6 from his own resources, and the Court considers on the evidence that it is more likely than not that he would not have been able to repay the whole of the price from his own resources. While the evidence does establish that Richard was the purchaser and mortgagor for No 6, and all repayments were apparently made through accounts in Richard’s name, the source of the funds necessary to purchase the property remains unproved. That leaves open the possibility that Richard received funds from his parents to pay for No 6, in whole or in part, without providing any positive proof that he did so.”

  1. His Honour expressed a similar conclusion in [230], where his Honour stated:

“No 6 was purchased on 5 February 1988 for the price of $110,000 and Richard became the registered proprietor, and the mortgagor of the property in favour of the CBA for a mortgage of $60,000. The mortgage was repaid through an account at the CBA in Richard’s name. I have not found it possible to make any positive finding on the balance of probabilities as to the ultimate source of the funds that were used to pay the balance of the purchase price and to repay the amount of the mortgage. It is possible that some or all of those funds were from Richard’s savings, but it is also possible that some or all of those funds were contributed by Fahad and Souad. As I have explained above, Richard’s attempt to prove to the Court that he had the funds to purchase No 6 from his own resources failed, but it remains possible that Richard paid for the property, or at least a substantial portion of the price, from his own resources.”

(Emphasis added.)

  1. His Honour well appreciated, and indeed stated expressly, that the Court “must require a high level of satisfaction to be established before it will make an order that disturbs the proprietary rights of the registered proprietor of land”: at [248]. In answer to George’s case that his parents bought the Property for him, as they had bought the Campsie house for Richard, the evidence established that Richard and Mary, between them, purchased the Campsie house, and that their parents made no financial contribution. Without a finding that Fahad received a $60,000 redundancy payout, there was no evidence to support that Fahad and Souad had $50,000 available to put towards the purchase of the Property; or that they contributed (or had the capacity to contribute) to the repayment of the loan. Meanwhile the objective evidence showed loan funds being deducted from Richard’s salary, and Richard making additional payments into his loan account. His Honour accepted what the records reflected, namely that the mortgage was repaid through a CBA account in Richard’s name. So much was at least clear from the pay advice.

  2. The only alternative source of those payments on which George relied was his parents, yet his Honour was not prepared to accept that Fahad or Souad made, or could have made, any of those payments. That his Honour was not prepared so to accept reflected the dearth of evidence to support that Fahad or Souad had the means available to fund the purchase of the Property. The evidence thus did not support the basis on which George’s case rested.

  3. Nonetheless, his Honour left open the conclusion as to who had paid for the Property on the basis of what Richard had been unable to prove. In doing so, his Honour erred. George sought to submit that the primary judge did not so err, because the evidence gave rise to a practical onus that fell on Richard and that he had failed to discharge. His Honour addressed the question of onus at [249]. It is apparent from that paragraph that the practical onus to which his Honour referred arose not in relation to payment of the purchase price, but from what his Honour considered to be the forensic effect of all of the evidence. If Richard in fact purchased the Property, that evidence would bear a different complexion.

  4. I would uphold ground 1 of the notice of appeal. I would also uphold grounds 2 and 3 of the notice of appeal. I accept Richard’s submission that in finding that he had not proved that he purchased the Property, his Honour erred in proceeding on the basis that the proportion of savings was “extraordinary”, having regard to Richard’s personal circumstances. Further, in relying on his own interest calculation exercise, his Honour’s conclusion that Richard did not have capacity to pay for the Property involved an unfair process. It also rested on the erroneous premise that the deposit slips in evidence constituted all of the additional payments Richard had made.

For my part I do not think that there is such a general rule. It may be that in some circumstances enhancement in value is appropriate whereas in other cases compensation for the cost of improvements might accord with the interests of justice. In a case where a purchaser had been on the land for many years (such as in Stern) and had effected improvements gradually over those years there may well be a strong case for basing compensation upon the enhancement of value. But where, as in the present case, a very short period of time is involved I find it hard to see why a defaulting purchaser should receive more than an amount sufficient to recompense him for his outlays. Nor do I understand why it is the defaulting party, rather than the innocent ones who in the present case had invested their capital in the land, who should derive the whole of the value of the benefit to the land flowing from the improvements.

On the other hand, if the costs of the works carried out on the land had been greater than the enhancement of value there would be no justification, in my view, for requiring that the innocent party pay that greater cost. To require him to do that would be to subject him to loss. …”

  1. The contributions that George made to the Property took the form of three sets of renovations. The first lot of renovations occurred in 2001 and the last in 2013, while the most significant renovation was undertaken in 2008. Living in the Property rent-free at all times, George and Anne have had the benefit of each of those renovations for a significant period. Accepting, consistently with Richard’s concession, that compensation was required to be paid to George, having regard to the circumstances I consider that the appropriate compensation is the capital value that the renovations added to the Property, rather than the cost of the renovations.

  2. Richard proposed that the second amended statement of claim should be dismissed in its entirety. However, George made a claim for the value of the improvements, and Richard has conceded that claim. An order should be made to reflect that outcome.

Other relief

  1. I have referred above at [4] above to the Tribunal proceedings that Richard commenced before George commenced the Equity Division proceedings, and which were transferred to the Supreme Court to be heard as a cross-claim. The relief that Richard sought in that case included the orders that he now seeks in orders 5, 6 and 7. However, Richard sought that relief by reference to a residential tenancy agreement that he alleged existed as between himself and George. Thus, the relief in the amended cross-claim included:

"1.   Declarations that:

a.   there is a residential tenancy agreement in place in respect of the property at [the Property] between [Richard] as landlord and [George] as tenant (‘the Residential Tenancy Agreement’); and

b.   [Richard] is entitled to an order terminating the Residential Tenancy Agreement; and/or

c.   [Richard and Nada] are entitled to possession of the Property.

2.   …

3.   An order that the proceedings be remitted to [the Tribunal] to make orders:

a. terminating the Residential Tenancy Agreement pursuant to section 94 of the Residential Tenancies Act 2010 (NSW);

b. granting vacant possession of the Property to [Richard and Nada] pursuant to s 94 of the Residential Tenancies Act 2010 (NSW); and

c.   that [George and Anne] ensure that the Property is in good order and condition when they vacate.

4.    In the alternative, either:

a. an order that the proceedings be remitted to [the Tribunal] for determination as to whether to (i) determine whether to terminate the Residential Tenancy Agreement pursuant to section 94 of the Residential Tenancies Act 2010 (NSW), (ii) make an order to grant vacant possession of the Property to [Richard and Nada] pursuant to s 94 of the Residential Tenancies Act 2010 (NSW) and (iii) make an order that [George and Anne] ensure that the Property is in good order and condition when they vacate; or

b.   an order that within 28 days [George and Anne] give to [Richard and Nada] vacant possession of the Property in good order and condition.”

  1. The issues to which this relief gave rise were canvassed as between the primary judge and counsel for Richard, in the context of Richard’s counsel tendering the Tribunal’s reasons for transferring the matter to the Supreme Court:

“HIS HONOUR: If the plaintiff’s claim fails completely, it follows that the defendant is the registered proprietor with an entitlement of possession.

KNOLL: Yes. And the question then is upon a reading, your Honour would have to determine if it was a residential tenancy. If your Honour finds that it is not a residential tenancy, there’s no barrier to the Court making an order.

HIS HONOUR: Yes.

KNOLL: If your Honour finds that it was a residential tenancy, a contingent question arises as to whether the Court can make the order. And it’s on that question that there are competing authorities.”

  1. In his closing written submissions before the primary judge, Richard submitted, in summary, that if George did not beneficially own the Property, Richard was entitled to an order for possession. He submitted that if there was an enforceable oral agreement between Richard and George as to the latter’s occupation of the Property subject to paying the utilities (as pleaded in the cross-claim), it was an oral residential tenancy agreement within the meaning of s 13 of the Residential Tenancies Act 1970 (NSW). If there was such an agreement, Richard submitted that George was, by the transfer of the Tribunal proceedings to the Supreme Court, effectively estopped from asserting that the Supreme Court was not an appropriate forum for the determination of the claims. If, on the other hand, there was not a legally binding agreement but an intra-family agreement, the Court could make an order for possession without remitting the proceedings to the Tribunal. Accordingly, he submitted that the Court should make the following orders:

“239. The Court should

239.1   declare that [Richard and Nada] are entitled to possession of the property at [the Property].

239.2 order pursuant to section 74MA of the Real Property Act 1900 (NSW) that the caveat having registered number … lodged by [George] on the title for the Property be withdrawn or removed within 28 days [or such other date as the Court may determine];

239.3   order that within 90 days [or such other date that the Court may determine] [George and Anne] give to [Richard and Nada] vacant possession of the Property in good order and condition; and

239.4   order that Richard and Nada pay equitable compensation to George and Anne in the sum of $250,000 [or such other reasonable sum as the Court may determine in respect of the capital improvements effected by George and Anne].”

  1. As his Honour upheld George’s claim for a constructive trust, his Honour dismissed the cross-claim without needing to consider the merits of it or what relief should be granted in respect of it. By his proposed orders on the appeal, Richard did not seek to disturb his Honour’s dismissal of the cross-claim, and yet at the same time sought relief that he had sought on that claim. It is difficult to reconcile those two positions, to which no written or oral submissions were directed in this court. That Richard advanced no submissions is perhaps understandable given that George does not appear to have made any submissions on the cross-claim before the primary judge, or in relation to the orders that Richard proposed at the conclusion of his written submissions (both his opening and closing submissions proposed a similar set of orders), including in his written reply. However, the issues are not without some complexity, one possibility being that they should be remitted.

  2. The parties should have an opportunity to consider these reasons and, if unable to resolve the way forward as between themselves, be heard as to the balance of the relief sought, including the question of costs. I have proposed a timetable for written submissions to address the remaining issues, including as to whether the Court can determine those issues on the papers. Accordingly, I propose the following orders:

  1. Appeal allowed.

  2. Set aside orders 1 to 9 inclusive made on 15 December 2023 and in lieu thereof, order that:

1.   Within 90 days, the defendants pay equitable compensation to the plaintiffs, being the sum of $250,000, with that sum to be secured by an equitable charge over the property at [No 6] (“the Property”);

2.   The second further amended statement of claim is otherwise dismissed.

  1. Order pursuant to s 74MA of the Real Property Act 1900 (NSW) that the caveat having registered number … lodged by the first respondent over the Property be withdrawn or removed within 28 days of today.

  2. Direct the parties to supply agreed short minutes of order in relation to the balance of the relief sought by the appellants within 14 days of today, or, in lieu of agreement:

  1. direct each party to file and serve the orders for which they contend, including as to costs, together with submissions not exceeding 5 pages within 14 days of today, and

  2. direct each party to file and serve submissions in reply within 7 days thereafter.

  1. STERN JA: I agree with the orders proposed by Mitchelmore JA and with her Honour’s reasons for proposing those orders.

**********

Decision last updated: 19 August 2024

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Cases Citing This Decision

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Sckaff v Sckaff (No 2) [2024] NSWCA 225
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Fox v Percy [2003] HCA 22
Lee v Lee [2019] HCA 28
Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810