FEDERAL COURT OF AUSTRALIA
Sheikholeslami v Tolcher [2011] FCA 1050
Citation: Sheikholeslami v Tolcher [2011] FCA 1050 Parties: GITA SHEIKHOLESLAMI v RAYMOND TOLCHER AS TRUSTEE OF THE BANKRUPT ESTATE OF ROYA SHEIKHOLESLAMI File number(s): NSD 1164 of 2010 Judge: YATES J Date of judgment: 9 September 2011 Catchwords: BANKRUPTCY AND INSOLVENCY – whether certain real property part of bankrupt’s divisible property – whether bankrupt held property on trust for another at the commencement of her bankruptcy
TRUSTS AND TRUSTEES – whether an express trust exists – informal family arrangement between siblings in respect of the ownership of real property
EQUITY – defence of unclean hands – whether applicant should be denied equitable relief in circumstances where notice under s 26A of the Foreign Acquisitions and Takeovers Act required but not given
Legislation: Federal Court of Australia Act 1976 (Cth) s 23
Foreign Acquisitions and Takeovers Act 1975 (Cth) ss 26A(2)(a), 38Cases cited: Calverley v Green (1984) 155 CLR 242
Charles Marshall Proprietary Limited v Grimsley (1956) 95 CLR 353
Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18
Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271
Ikeuchi v Liu (2001) 160 FLR 94
Menezes v Salmon [2009] NSWSC 2
Nelson v Nelson (1995) 184 CLR 538
Sheikholeslami v University of New South Wales (No 3) [2008] FMCA 35
Shephard v Cartwright [1955] AC 431
The Commissioner of Stamp Duties v Jolliffe (1920) 28 CLR 178
The Registrar of the Accident Compensation Tribunal v Commissioner of Taxation of the Commonwealth of Australia (1993) 178 CLR 145
Trident General Insurance Co Limited v McNiece Bros Proprietary Limited (1988) 165 CLR 107
Walker v Corboy (1990) 19 NSWLR 382Date of hearing: 21 - 23 March 2011, 5 May 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 190 Counsel for the Applicant: Mr M Condon Counsel for the Respondent: Mr S Golledge Solicitor for the Respondent: Turnbull Hill Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1164 of 2010
BETWEEN: GITA SHEIKHOLESLAMI
ApplicantAND: RAYMOND TOLCHER AS TRUSTEE OF THE BANKRUPT ESTATE OF ROYA SHEIKHOLESLAMI
Respondent
JUDGE:
YATES J
DATE OF ORDER:
9 SEPTEMBER 2011
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The proceeding stand over to a date to be fixed for the hearing of any argument on the form of orders to be made and the question of costs.
2.The parties exchange a draft of the orders each proposes (including as to costs), and provide a copy to my Associate, by 30 September 2011.
Note: Settlement and entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1164 of 2010
BETWEEN: GITA SHEIKHOLESLAMI
ApplicantAND: RAYMOND TOLCHER AS TRUSTEE OF THE BANKRUPT ESTATE OF ROYA SHEIKHOLESLAMI
Respondent
JUDGE:
YATES…
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Details
- Case
- [2011] FCA 1050
- Decision Date
CaseChat Overview and Summary
In the case of Sheikholeslami v Tolcher, the primary issue before the court was whether the bankrupt held certain real property on trust for the applicant prior to the commencement of her bankruptcy. This case involved a dispute between two sisters, one of whom was declared bankrupt, regarding the ownership of a property in Sydney. The applicant, who was not the registered owner of the property, claimed that the bankrupt held the property on trust for her benefit. The court had to determine if an express trust existed between the sisters and if the applicant was entitled to any relief despite the defence of unclean hands raised by the respondent.
The central legal issues the court had to decide were whether the bankrupt held the property on trust for the applicant and if the applicant's claim should be denied due to the defence of unclean hands. The court had to consider the nature of the transaction between the sisters, the circumstances surrounding the purchase of the property, and the intentions of the parties at the time of the transaction. Additionally, the court examined if the applicant's actions in seeking to establish her beneficial entitlement involved circumventing the statutory regime governing foreign ownership of land in Australia and if she intended to mislead the bank to secure a loan.
The court found that the bankrupt and the applicant had indeed intended that the bankrupt would hold the property on trust for the applicant. The court rejected the defence of unclean hands, concluding that there was no evidence to suggest that the applicant and the bankrupt intended to mislead the bank or that the bank was misled in any material way. The court emphasised that the evidence did not support the notion that the applicant had acted inequitably in seeking to establish her beneficial entitlement to the property.
The court ordered that the proceeding stand over for a later date to hear arguments on the form of orders and the question of costs. The parties were required to exchange drafts of the orders they proposed, including those relating to costs, and submit copies to the court by a specified date.
The central legal issues the court had to decide were whether the bankrupt held the property on trust for the applicant and if the applicant's claim should be denied due to the defence of unclean hands. The court had to consider the nature of the transaction between the sisters, the circumstances surrounding the purchase of the property, and the intentions of the parties at the time of the transaction. Additionally, the court examined if the applicant's actions in seeking to establish her beneficial entitlement involved circumventing the statutory regime governing foreign ownership of land in Australia and if she intended to mislead the bank to secure a loan.
The court found that the bankrupt and the applicant had indeed intended that the bankrupt would hold the property on trust for the applicant. The court rejected the defence of unclean hands, concluding that there was no evidence to suggest that the applicant and the bankrupt intended to mislead the bank or that the bank was misled in any material way. The court emphasised that the evidence did not support the notion that the applicant had acted inequitably in seeking to establish her beneficial entitlement to the property.
The court ordered that the proceeding stand over for a later date to hear arguments on the form of orders and the question of costs. The parties were required to exchange drafts of the orders they proposed, including those relating to costs, and submit copies to the court by a specified date.
Orders
Orders of the court
1. The proceeding stand over to a date to be fixed for the hearing of any argument on the form of orders to be made and the question of costs.
2. The parties exchange a draft of the orders each proposes (including as to costs), and provide a copy to my Associate, by 30 September 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
The starting point is the applicant’s case as advanced by the affidavits.The applicant’s affidavit evidence The applicant said that in “mid/late 1996” (but, by the sequence in her affidavit, before 5 November 1996) she travelled to Sydney for a holiday and to visit the bankrupt, who had “recently relocated from Canada to Australia”. During that trip the applicant said she had a conversation with the bankrupt, in which:(a)the bankrupt said she was “paying a huge rent” and had “practically no money left … to do anything”;(b)the applicant suggested that she could purchase a home unit and rent it to the bankrupt under arrangements whereby the rent could be paid “flexibly”, thereby assisting the bankrupt who was “settling in a new country”; and (c)the applicant and the bankrupt agreed to look at “some places” to obtain an idea of market prices. The applicant and bankrupt, during this trip, then looked at “a couple of places” for sale and gained an idea of the prevailing market prices. The applicant said she then had a conversation with the bankrupt in which she specified her requirements in relation to her intended purchase. Those requirements were that:1.the property had to be a home unit of one or two bedrooms;2.the home unit had to be well-built and in good condition;3.the home unit had to be in “the downtown area in the Sydney CBD” and “not in the area you [the bankrupt] are living now”; and 4.the applicant could pay about $130,000 towards the purchase price, with the balance of the purchase price being funded by a bank mortgage. Notably, the affidavit does not identify the area in which the bankrupt was then living or the total purchase price which, according to the applicant, she was prepared to pay for such a unit. The applicant said that she instructed the bankrupt “to check and liaise with the banks for the mortgage”. The applicant said that she left the task of contacting banks and estate agents with the bankrupt, and returned to Canada. The next event recorded by the applicant in her affidavit was that, on 5 November 1996, she was informed by the bankrupt that she (the applicant) could not become a registered owner of a home unit in Australia or obtain a mortgage. This advice was said to have been communicated by a letter from the bankrupt sent as a facsimile transmission. The document in evidence, said to be “a copy of the facsimile”, is in the following form:5 November 1996Gita,I tried phoning you several times but Rita said you were in meetings.Just wanted to let you know that I was told by both the real estate agent and by the bank that you cannot be the owner of a property here in addition to the fact that you have no income in Australia and as such it is very unlikely for the bank to approve a mortgage under your name. However, they told me that if it is ok with you I could have the unit in my name and get the mortgage in my name as I have employment here and live here. I can then make the mortgage payment on a monthly basis which will be deducted from my pay check.I told them that you trust me and are buying this in fact to help me and it should be ok with you but anyhow think about it and if that is ok with you we can do it that way.So please think about it and we can talk over the phone and decide what to do.Roya[also signed “Roya”]
Decision
Reasons for decision
In Walker v Corboy (1990) 19 NSWLR 382 Meagher JA, when considering the imputation of intention to create a trust, referred (at 397) to the necessity “to look at the nature of the transaction, the particular provisions of the agreement of the parties, and the whole of the circumstances attending the relationships between the parties”. In that case, his Honour identified a “general reluctance of the courts to extend the law of trusts into ordinary commercial transactions”: see at 398. However, the present case is plainly not of that character. It is a case where the alleged trust is an emanation of “private family dealings where some imprecision of thought and expression might perhaps be expected”: Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 at 277.CONCLUSIONS ON FINDINGS My findings of fact, considered in light of the principles to which I have briefly referred, lead me to conclude that, upon the purchase of the Kent Street property by the bankrupt, and at the time of her registration as proprietor of that property, the bankrupt and the applicant intended that the bankrupt would hold the property for the benefit of the applicant, pursuant to the arrangement I have found existed between them. These findings plainly support the existence of an express trust in respect of the Kent Street property. Accordingly, I find that, prior to the commencement of her bankruptcy, the bankrupt held the Kent Street property on trust for the applicant as beneficial owner. This finding makes it unnecessary for me to consider the alternative cases advanced by the applicant. It becomes necessary, however, for me to consider the defence of unclean hands that has been advanced by the respondent. THE DEFENCE OF UNCLEAN HANDS The applicant claims declaratory relief (with respect to her beneficial ownership of the Kent Street property), a mandatory injunction that the respondent transfer the Kent Street property to her, and an order that accounts be taken of the amounts due to her for moneys paid as rent in respect of the property. The respondent submitted that the applicant should be denied all relief because, in seeking to establish her beneficial entitlement to the Kent Street property, the applicant is forced to prove a mutual intention between herself and the bankrupt:(a)to avoid or circumvent the statutory regime which governs the regulation of foreign ownership of land in Australia (being in particular s 26A of the FATA); and(b)to mislead the Bank with a view to inducing it to make a loan to the bankrupt so as to facilitate the purchase of the Kent Street property when, had the true position been made known to the Bank, it is unlikely that any such loan would have been provided. I am able to deal with the second of those matters in short measure. In my view a defence of unclean hands, on that basis, cannot be sustained in light of the findings of fact I have made: see [140]. The evidence does not show that the applicant and the bankrupt had a mutual intention to mislead the Bank as the respondent has argued, or that the Bank was misled in any material way in relation to its consideration of whether finance should be granted to the bankrupt for the purchase of the Kent Street property. Moreover, there is no evidence about what the Bank would or might have done with respect to advancing loan funds had it regarded itself as having been misled in some material particular.
Ratio Decidendi
Legal Principle Established
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