Szeto v Situ

[2016] NSWSC 646

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Szeto v Situ [2016] NSWSC 646
Hearing dates:	3 and 4 June and 9 October 2015
Date of orders:	24 May 2016
Decision date:	24 May 2016
Jurisdiction:	Equity
Before:	Lindsay J
Decision:	(1) Declare that the plaintiff has no right, title or interest in land at Carlton bought in the name of her brother, the defendant.  (2) Consequential orders.
Catchwords:	EQUITY – General principles – Equitable estates and interests - Nature of equitable interests and ownership – Beneficial ownership – Property purchased in the name of defendant alone – Defendant paid whole of purchase price and mortgage, not plaintiff - Plaintiff has no right or interest in property   REAL PROPERTY – General principles – Ownership – Beneficial ownership
Legislation Cited:	-
Cases Cited:	Calverley v Green (1984) 155 CLR 242 Jones v Dunkel (1959) 101 CLR 298 Muschinski v Dodds (1986) 160 CLR 583
Texts Cited:	-
Category:	Principal judgment
Parties:	Plaintiff/cross defendant: Livy Szeto Defendant/cross claimant: Liming Situ
Representation:	Counsel: Plaintiff/cross defendant: A Norrie Defendant/cross claimant: P Cutler   Solicitors: Plaintiff/cross defendant: Advance Lawyers Group Defendant/cross claimant: Equiton
File Number(s):	2014/00285214

Judgment

INTRODUCTION

1. In these proceedings the Court is called upon to determine a dispute between siblings (a sister/plaintiff and a brother/defendant) about beneficial ownership of a residential property (at Carlton, in Sydney) purchased, in the name of one of them (the defendant) alone, with the benefit of a Bank loan (from Adelaide Bank Ltd) which was made on the application of both of them.

2. The parties are in dispute, substantially, about: (a) the terms of an agreement, made between them, about beneficial entitlements to the property; and (b) the source of funds applied to purchase of the property, and in repayment of a mortgage registered on the title to the property, in favour of the Bank, consequentially upon the purchase.

3. The property the subject of contention was purchased (for $260,000) by a contract, dated 18 September 1997, settled on 21 November 1997.

THE PLAINTIFF’S CASE

4. The plaintiff’s case, essentially, is that the purchase of the property was preceded by an oral agreement between her and her brother: that the property would be purchased in the defendant’s name only; that he would hold the property for both of them in equal shares; and that both would contribute to the purchase, and repayment of the Adelaide Bank mortgage.

5. The plaintiff contends that this agreement was carried into execution, and that the defendant is acting unconscionably in his refusal to recognise that she has a beneficial entitlement to a one half share in the property.

6. She asserts that entitlement on two bases. Her primary case, relying upon Muschinski v Dodds (1986) 160 CLR 583 at 612-620, is that she is entitled to the benefit of a “common intention trust” based upon the agreement she alleges. Her alternative case, relying upon Calverley v Green (1984) 155 CLR 242 at 246-247, is that she is entitled to the benefit of a resulting trust commensurate with her actual contributions to acquisition of the property, on her case very close to 50%.

7. The plaintiff explains her acquiescence in the purchase of the property in the name of the defendant alone as the product of a desire, on her part, to conceal her interest in the property from her estranged husband.

THE DEFENDANT’S CASE

8. The defendant’s case, essentially, is that purchase of the property was preceded by an oral agreement between his sister and himself: that the property would be purchased in his name only, and for his use and benefit absolutely; that the plaintiff’s involvement would be limited to helping him to get a loan; that he alone would be responsible for payment of the purchase price, all expenses associated with the purchase and all loan repayments; and that the plaintiff would have no right, title or interest in the property.

9. The defendant contends that this agreement was carried into execution, and that he is perfectly entitled to deny the plaintiff’s claim to a beneficial interest in the property.

10. He asserts that he has, in fact, paid for the property in all material respects, without any monetary contribution from his sister. He acknowledges that his sister did make a contribution to purchase of the property merely by agreeing to be named as a borrower from the Adelaide Bank; but, in effect, he says that that contribution is and was at all material times subordinated to her agreement that the property would be his alone, and to his payment, in fact, of the whole of the purchase price and all mortgage repayments. He does not, in terms, characterise the plaintiff as a mere guarantor, vis-a-vis the Bank; but, on his case, that characterisation is not wholly inapt.

11. He claims that significance attaches to his selection of the Carlton property, in anticipation of marriage, as a prospective matrimonial home. He would have the Court accept that as a substantial justification for purchase of the property in his name alone, and for his payment of the whole of the purchase price and all mortgage repayments.

UNUSUAL FEATURES OF THE CASE

12. A resolution of the parties’ dispute by the Court is bedevilled by several unusual features of the case.

13. First, there is an absence of corroborative, primary records, including records of the solicitor who acted on the purchase of the property; internal records of the Bank that might have been expected to cast light on the circumstances in which the Bank mortgage was granted; and tax returns of any description.

14. Secondly, allowance must be made for the unreliability of whatever records are available, a substantial number of which are incapable of verification or are reconstructions based upon efforts of the parties or others acting in their interests. No precise accounting for money-flows has been proferred by either party. The family appears to have lived within the embrace of the cash economy.

15. Thirdly, unravelling such records as are available is complicated by the death of the parties’ father, who managed the Carlton property (and family finances generally) for much of the time following its purchase.

16. Fourthly, verification of accounting records is frustrated by the Byzantine methodology adopted by the family, under the father’s dominance, in managing family finances rendering any attempt to trace money-flows within the family speculative. Transfers between accounts were commonplace.

17. Fifthly, language difficulties confront the case at every turn because, within the domestic sphere, all communications were conducted by the principal players in Chinese and, in presentation of their evidence, all witnesses exhibited only a rudimentary grasp of the English language, the language in which the proceedings were conducted.

18. Sixthly, although the parties’ dispute in the present proceedings has focused on the Carlton property, that property is but one of four properties acquired by the siblings in Sydney, in one or both of their names, on terms the subject of ongoing disagreements, and the parties’ dealings with the Carlton property appear all the more opaque because of difficulties associated with disentangling broader property transactions not the subject of precise delineation. Those transactions involved, at least, the purchase of a property at Turrella, in the joint names of the plaintiff and the defendant in May 1998.

FAMILY CONTEXT, A CULTURAL IMPERATIVE AND RELATIONSHIP TENSIONS

19. The plaintiff, the defendant, their parents and the defendant’s wife (“Lisa”), whose inter-personal relationships lie at the heart of these proceedings, were all born in China and came to live in Australia only after spending their formative years in China.

20. The plaintiff, the defendant and their parents came to Australia steeped in a Chinese cultural tradition that subjected even adult children to a respect for their elders that, within this family at least, translated into a dominant position for the father. That much is common ground in these proceedings. Both sides of the record acknowledge it.

21. The plaintiff came to Australia in 1988. The defendant came in 1989. Lisa came in March 1998, shortly before the older couple.

22. They, the parents of the plaintiff and defendant, came to Australia in May 1998. The mother remains of this world but, critically, not the father. Between his arrival in Australia and his death in 2011, he managed family affairs, as a dominant personality, in a manner to which both his children (the plaintiff and the defendant) appear to have submitted, however reluctantly in the case of the defendant.

23. The parents’ arrival in Australia is one factor that appears, fundamentally, to have affected the course of dealings between the plaintiff and her brother. Their father ordered the defendant and his wife to vacate the Carlton property. The father thereafter managed arrangements for letting out rooms in the property, the collection of rents from the property and funds from his children, the payment of expenses and repayment of the mortgage. The property was, in effect, run as a boarding house between October 1998 and November 2005 or thereabouts

24. Another factor may have been a breakdown in the plaintiff’s marriage, upon which she relies as an explanation for the state of the title of the Carlton property.

25. A third factor was, undoubtedly, friction between the defendant’s wife, Lisa, and his family. Seeking to avoid a fractious household comprising the plaintiff, the defendant, their parents and Lisa (all living in the Carlton property), the defendant and Lisa moved out of the Carlton property in about July 1998, when ordered to do so by the defendant’s father. With her husband, Lisa nevertheless persisted, with little initial success, in demanding that he be given an accounting for rents collected on the Carlton property. Ongoing resentment of Lisa, on the part of the plaintiff, was manifest in the way the plaintiff gave evidence at the final hearing.

26. The plaintiff maintains that she and her father managed the Carlton property. In my assessment, to the extent she was involved in the process, she acted at the direction, and under the influence, of the father. The period during which the father controlled family finances, vis-a vis the Carlton property, extended from about July 1998 (when the defendant and his wife moved out) until about November 2005, when they moved back in. Throughout that time the plaintiff lived with her parents, initially at the Carlton property; but, from a time shortly after the defendant and Lisa moved out, in another property (at Turrella) owned by the plaintiff and the defendant in their joint names.

QUESTIONS OF CREDIT

27. Because of the unsatisfactory character of much of the evidence adduced in the proceedings, on both sides of the record, a determination of the parties’ dispute depends in large measure upon questions of credit.

28. The plaintiff presented as a voluble, excitable, relatively unsophisticated witness, even allowing for cultural differences and translation problems. She was prone to exaggeration. Her evidence was characterised by inconsistencies, both as to the nature of her claim and as to payments she made towards the Carlton property.

29. Counsel for the defendant attached particular significance to different formulations of the plaintiff’s claim to an interest in the Carlton property in successive caveats she lodged against the title. It is not necessary to recount the tortuous procedural steps which attended her lodgement of successive caveats. The fact is, three different forms of caveat were lodged in succession.

30. In a caveat (numbered AC31499) dated 16 December 2005, she claimed an equitable interest as “a co-mortgagor and sole contributor to the loan repayments”. In a caveat (numbered AD325903) dated 8 August 2007, she claimed an equitable interest as “a co-mortgagor and contributor to the loan repayments”. In a caveat (numbered AD800696) dated 28 February 2008, she claimed an interest pursuant to an agreement with the defendant that she would own half the property, conditional upon her making mortgage repayments and paying outgoings from property, which she claims to have done until the defendant moved into the property “in December 2005”.

31. With the leave of the Court a fourth caveat (numbered AI949059) was lodged against the title to the property on 20 October 2014 pending the determination of these proceedings. At the time the Court granted that leave (on 8 October 2014) the defendant gave to the Court (without admissions) an interlocutory undertaking not to deal with the property.

32. The defendant presented himself as a much calmer, more rational, less argumentative person than his sister.

33. Counsel for the plaintiff placed substantial reliance on what might be described (in disregard of cultural imperatives) as an admission, on the part of the defendant, that the Carlton property is not his alone, implicit in his submission to a paternal demand that he leave the property.

34. Substantial reliance was also placed upon a letter dated 25 May 2007 written by a former solicitor of the defendant in which, purporting to summarise arrangements for ownership of the four properties acquired by the plaintiff and/or the defendant since their arrival in Australia, the following statement was made to the plaintiff:

“All of the properties should belong to you and your brother in equal shares. You are holding your brother’s share in [properties at] Lakemba and Arncliffe in trust for him. Likewise, your brother is holding your share in trust in the Carlton property.”

35. The defendant disclaimed this letter as one written without his knowledge or instructions in circumstances in which the solicitor spoke no Chinese, he spoke no English of any consequence and he had communicated with the solicitor only through a Chinese-speaking friend of his wife. Counsel for the plaintiff met that explanation with a submission, based on Jones v Dunkel (1959) 101 CLR 298, noting the absence of any evidence from the solicitor or the intermediary.

36. The defendant’s wife, Lisa, presented as an intelligent, prim, precise witness, not given to the excitability inherent in the plaintiff’s presentation of evidence.

37. Conscious of criticism levelled at each of the plaintiff, the defendant and Lisa (the only witnesses in the case), and conscious of a need to make allowances for cultural differences and translation difficulties, I prefer the evidence of the defendant and Lisa over that of the plaintiff. That preference is based upon both the demeanour of the witnesses and an appraisal of surrounding circumstances.

38. That the Carlton property was purchased in the name of the defendant alone (when it might readily have been purchased in joint names, if so agreed) is worthy of at least some weight in itself. Especially is this so in the context of two factors. First, there is the defendant’s evidence that he identified the property, in anticipation of marriage, as a prospective matrimonial home and, consistently with that evidence, his ultimate return to the property, and continuing occupation of it, as his matrimonial home. Secondly, within six months of the purchase of the Carlton property, the plaintiff and the defendant purchased the Turrella property in their joint names. The plaintiff’s estrangement from her husband appears not to have operated as an impediment to this.

39. No admission can fairly be attributed to the defendant in his compliance with a paternal demand that he and Lisa vacate the Carlton property, leaving it free (after the plaintiff and her parents had also moved out) to be let out for rental income, the collection and application of which was managed by the father as part of a larger assumption by the father of management of the finances of the family. Both the plaintiff and the defendant acknowledge a cultural imperative in according paramountcy to their father within the family. The defendant submitted to this regime on the basis that, according to cultural tradition, he had no practical alternative; but, in making regular payments to the father to cover mortgage payments, he and Lisa also regularly pressed to be paid rental proceeds or, at least, to have them accounted for. In about November 2005 they moved back in.

40. The property had been let out, by the parties’ father (with assistance from the plaintiff) on the account of the defendant as an integral part of management of the family financials, not to the exclusion of the defendant’s interests.

41. Although the letter dated 25 May 2007 written by the defendant’s solicitor to the plaintiff could be construed as an admission, read in context it is not. The key to understanding this is the word “should”. The solicitor appears to have sought to advance a settlement proposal (“all of the properties should belong to you and your brother”) by attributing to each party an existing status as a trustee notwithstanding that, as manifested in the course of these proceedings, neither party accepts that status. The plaintiff sought the benefit of an “admission” that the defendant holds a one half share of the Carlton property on trust for her, without accepting that she holds a one half share in the Lakemba and Arncliffe properties in trust for him. The solicitor’s use of the present tense, indicative mood served a normative proposal (embodied in the word “should”) never accepted by either sibling.

42. I accept that the defendant never instructed his solicitor to make an admission that a one half share of the Carlton property is held by him on trust for the plaintiff. In giving his evidence, the defendant adhered to his version of his agreement with his sister, and to his insistence that that agreement had been carried into execution, as a means by which he acquired a family home for himself and his wife.

43. Lisa was not in Australia (or married to the defendant) at the time the Carlton property was purchased. She married the defendant in 1998, on a date not disclosed by the evidence. Nevertheless, her evidence corroborated that of the defendant insofar as she confirmed: that the defendant made regular payments to his father to cover mortgage payments on the Carlton property; that they both regularly demanded of the father that he account to the defendant for rental receipts in respect of the Carlton property; and that, upon their return to the Carlton property as their matrimonial home in 2005, the defendant resumed responsibility for mortgage repayments, without any contributions or interference from the plaintiff or the father.

44. I accept that the defendant and Lisa are witnesses of truth, not given to exaggeration.

45. On the other hand, I am not confident that evidence of the plaintiff can be accepted as reliable.

46. Leaving aside the form of her caveats, in the presentation of her oral evidence she did maintain consistency in asserting the existence of an agreement for the Carlton property to be held by the siblings in equal shares. However, her evidence consisted principally of bare assertions rather than corroborative detail.

47. Leaving aside the absence of evidence corroborative of her assertion that she had contributed money towards payment of the purchase price for the property, her evidence of substantial contributions towards payment of the mortgage debt was predicated on an implicit assertion (which I do not accept) that she was entitled, to the exclusion of the defendant, to retain for her own benefit rental income derived from letting out the Carlton property between 1998 and 2005. The fact that she may have, in consultation with her father, applied rental income to the payment of the mortgage debt provides no firm foundation for a finding that she, personally, made payments indicative of an ownership interest in the Carlton property. The property was let out on the account of the defendant.

35. Despite submissions of the plaintiff to the contrary, I do not hold against the credit, or credibility, of the defendant the absence of any court action instituted by him for recovery of money from the plaintiff or their father. Although he has resisted the plaintiff’s persistent claims to a beneficial interest in the Carlton property, he has manifested a predisposition against conflict with family. His departure from the Carlton property in 1998, and his surrender of financial management of the property until his return to it in 2005, are both reflective of this predisposition, in part a form of deference to family and, in part, a desire to avoid litigation and attendant expenses. Although he has met the plaintiff’s statement of claim (seeking a declaration of an entitlement to a beneficial half share in the Carlton property) with a cross-claim that includes a claim to rental income from the property unaccounted for by the plaintiff, the cross claim is essentially defensive in character, a response to the plaintiff’s claim rather than an independent action.

DETERMINATION

49. I find that the agreement made between the plaintiff and the defendant, as a preliminary to purchase of the Carlton property in the name of the defendant, was an agreement in the terms for which the defendant contends.

50. I do not accept that the plaintiff and the defendant ever made an agreement that the Carlton property would be held by the defendant on trust for himself and the plaintiff, in equal or other shares.

51. Nor do I accept that the plaintiff applied any of her own personal funds to acquisition of the Carlton property or mortgage, or other, payments relating to the property. Although the plaintiff did contribute to the purchase of the property by allowing herself to be named as a borrower from the Bank, and in thus exposing herself to liability to the Bank, this was done on the express basis that, as between the siblings, the plaintiff would bear no part of the economic burden of the property and have no interest in it.

52. I accept that the defendant paid, or funded, the whole of the purchase price, and expenses of the purchase, of the property, and paid or funded all payments due under the mortgage.

53. The plaintiff made no repayments on the mortgage loan between settlement of the purchase (in November 1997) and the time the property commenced to operate as a boarding house (in or about October 1998).

54. During the period between October 1998 and November 2005 or thereabouts (during which the property was run as a boarding house) records apparently maintained by the parties’ father record total rent receipts of the order of, at least, $103,062, possibly as high as $116,925. At least some of this appears to have been applied towards the mortgage and, I infer, the payment of other expenses relating to the property. During the same period, the defendant made regular payments to his father/the plaintiff, ostensibly for the purpose of paying off the mortgage over the Carlton property.

55. After the defendant and his wife reoccupied the property, in about November 2005, he made loan repayments on the property without any contribution from the plaintiff. That is common ground.

56. The defendant contends that he paid, or funded, the whole of the purchase price, associated acquisition costs and mortgage repayments relating to the Carlton property (as well as meeting his share of joint obligations relating to acquisition of the Turrella property in the names of the plaintiff and himself). I accept that he did so.

57. I do not accept that the plaintiff applied her own funds in or towards the acquisition or maintenance of the Carlton property. Nor do I accept that she was entitled to any part of the rental income from operation of the property as a boarding house, under the control of the parties’ father, albeit with assistance from the plaintiff, on the account of the defendant.

58. The property was purchased in the name of the defendant on the agreed basis that it would be owned by him alone and, as between the plaintiff and himself, he would be responsible for the costs of its acquisition, as he has been.

59. On these findings, there is nothing unconscionable in the defendant refusing to acknowledge that the plaintiff has a beneficial interest in the Carlton property. Beneficial ownership of the property resides with the defendant as registered proprietor.

60. In the absence of a full accounting between the plaintiff and the defendant, it is not necessary or appropriate to grant to the defendant, on his cross claim, relief beyond confirmation that the plaintiff has no right, title or interest in the Carlton property. I do not exclude the possibility that the parties’ father (with acquiescence of his family) may have applied some rental receipts from the Carlton property for the benefit of the plaintiff personally, for the benefit of both the plaintiff and the defendant jointly, or for the broader family collectively. Be that as it may, the question litigated in these proceedings has been confined to a determination of the beneficial ownership of the Carlton property.

ORDERS

61. Accordingly, subject to allowing the parties an opportunity to be heard as to the form of orders to be made, I propose to make orders to the following effect:

1. DECLARE that the plaintiff has no right, title or interest in the Carlton property (the land contained in Folio Identifier 26/7/3252).

2. ORDER that the caveat of the plaintiff presently on the title to the property (caveat number AI949059) be withdrawn forthwith.

3. ORDER that the plaintiff’s statement of claim, and the defendant’s statement of cross-claim, otherwise be dismissed.

62. Prima facie, the costs of the proceedings should follow the event.

63. Dismissal of the statement of claim carries with it a release of the defendant from the undertaking he gave to the Court on 8 October 2014 (without admissions of any kind) not to charge, transfer or part possession with or otherwise deal with the Carlton property without the prior written consent of the plaintiff or the leave of the Court.

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Amendments

26 May 2016 - Paragraph 31 amended by substitution of the number AI949059 for the number AI972466.

Paragraph 55 amended by the substitution of the words "made loan repayments" for the words "paid off the rest of the loan"

25 May 2016 - Order 2 amended by substitution of the number AI949059 for the number AI972466.

Decision last updated: 26 May 2016