Talevski & Anor v Talevski & Anor

[2007] NSWSC 945

CITATION:	Talevski & Anor v Talevski & Anor [2007] NSWSC 945
HEARING DATE(S):	20 - 22 August 2007
JURISDICTION:	Equity Division
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	22 August 2007
DECISION:	Plaintiff may elect to insist on conveyance subject to plaintiff offering to do equity, or to recoup contributions secured by equitable charge.
CATCHWORDS:	EQUITY – Equitable estoppel – rights arising out of informal family arrangements – remedies – equitable charge – where defendant denies assumption that plaintiff would be registered proprietor – whether plaintiff entitled to recoup contribution rather than enforce equity to be registered.
CASES CITED:	Chalmers v Pardoe [1963] 3 All ER 552 Corin v Patton (1990) 190 CLR 540 Giumelli v Giumelli (1999) 196 CLR 101 Morris v Morris [1982] 1 NSWLR 61 Muschinski v Dodds (1985) 160 CLR 583 Ogilvie v Ryan [1976] 2 NSWLR 504
PARTIES:	Jovan Talevski (first plaintiff) Luba Talevski (second plaintiff) Peter Talevski (first defendant) Iskra Talevski (second defendant)
FILE NUMBER(S):	SC 6396/05
COUNSEL:	Mr K W Andrews (plaintiffs) Mr M W Hadley (defendants)
SOLICITORS:	McGrath, Dicembre & Co (plaintiffs) Shaw McDonald Solicitors (defndants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Wednesday, 22 August 2007

6396/05 Jovan Talevski & Anor v Peter Talevski & Anor

JUDGMENT (ex tempore)

1 HIS HONOUR: Before the events in and about 1994 that give rise to this litigation, the plaintiffs Jovan Talevski and his wife Luba Talevski, who had migrated to Australia from Macedonia in the former Yugoslavia in 1970, were the registered proprietors of 3 Barrier Place, Illawong which they had purchased in 1998, subject to two mortgages to the National Australia Bank, which had originally secured advances totalling $50,000 to them and their son, the first defendant, Peter Talevski, who, with his wife, the second defendant, Iskra Talevski, lived with his parents in Barrier Place. Peter and Iskra – and I shall refer to the parties for the sake of convenience and without intending the slightest disrespect, by their first names – were themselves the registered proprietors of the property at 26 McPherson Place, Illawong, which they had acquired on 30 November 1992 for a price of $235,000, subjected to a mortgage initially securing advances to them of the same amount – that is, the whole purchase price of $235,000. They commenced construction of a house on McPherson Place in about April 1993, which is the date of the development approval, and that house was still in the course of erection, although largely complete, by November 1994. According to the documentary record, on 21 December 1994, Jovan and Luba completed the sale of Barrier Place to third parties for a price of $375,000; Peter and Iskra as vendors and Jovan and Luba as purchasers exchanged contracts for the sale and purchase of McPherson Place between them for $360,000; and Peter and Iskra delivered to the solicitor who acted for all parties on that transaction, one Dobrinka Zlatevska, an executed transfer of McPherson Place to Jovan and Luba for registration, which transfer acknowledged receipt of the consideration of $360,000. Thereafter, Jovan and Luba moved into McPherson Place where for some time they occupied the garage; later, when the house was completed, they were joined by Peter and Iskra who lived with them in McPherson Place until early 2004. All assumed, incorrectly, that the transfer of McPherson Place to Jovan and Luba had been registered; in fact, it had not been registered due to the non-production by the mortgagee of McPherson Place, the National Australia Bank, of the Certificate of Title, which was required to enable the transfer to be registered. Peter discovered in 2002 that the title had not been transferred, and took some steps with the solicitor, Ms Zlatevska, to endeavour to procure its registration, without success. Jovan discovered that the transfer had not been registered in late 2003; he believed that Peter had deceived him, and the relationship broke down. In early 2004, Peter and Iskra formed an intention not to transfer title to Jovan and Luba, and in or about April 2004, Jovan and Luba left McPherson Place.

2 Jovan and Luba bring these proceedings to compel a transfer to them of McPherson Place, asserting that they are beneficially entitled, pursuant to a completed Contract for Sale of that property to them. Peter and Iskra resist the claim, contending that Jovan and Luba were mere volunteers, and that equity will not perfect an incomplete gift. I accept that if Jovan and Luba were volunteers their claim must fail, because Peter and Iskra did not do all things necessary on their part to complete a gift of the property – in particular, they did not procure their mortgagee, the National Australia Bank, to produce the Certificate of Title to permit registration. In this respect, the case would be indistinguishable from Corin v Patton (1990) 190 CLR 540, which establishes that in practically identical circumstances a donor is not to be taken to have done all things necessary on his or her part to make a gift.

3 Accordingly it will only be if Jovan and Luba gave consideration for the transfer of McPherson Place to them, or acted to their detriment in reliance upon an assumption that the property would be conveyed to them, that they will be entitled to relief. Although to some extent there was evidence of reliant conduct in the form of minor works said to have been performed, by Jovan in particular, in completing the building works, it is fair to say that, on reliance as well as consideration, the real question was whether the $360,000 consideration referred to in the Contract for Sale of McPherson Place was paid. Accordingly, the real questions which require resolution are:

· first, what was the basis of the 1994 transaction between the parties;

· secondly, was consideration given by Jovan and Luba for the transfer of McPherson Place, and in particular, was the $360,000 paid; and

· thirdly, if so, what are the legal consequences.

What was the basis of the December 1994 transaction?

4 The evidence of the understanding and arrangements that culminated in the December 1994 transaction is surprisingly slight, and leaves room if not need for inference. However, much of the basis of that transaction is ultimately uncontroversial, either because the parties agree, or because it can be seen from what subsequently in fact happened, the events that subsequently transpire often being the best evidence of what the parties understood or anticipated would transpire.

5 The background is that Jovan and Luba were dissatisfied with the accommodation arrangements in Barrier Place in which they and Peter and Iskra were then living. They decided that they could build more acceptable accommodation on the McPherson Place property that Peter and Iskra had recently purchased. In April 1993, they placed Barrier Place on the market, as evidenced by a selling agent authority of that date. The overall intent of the parties appears to have been to combine the resources provided by Barrier Place on the one hand and McPherson Place on the other to produce appropriate accommodation at McPherson Place for all four of them. Because of the delay which occurred in the sale of Barrier Place from when it was first listed in April 1993 until it was ultimately sold in late 1994, Peter and Iskra bore the initial burden of funding the building works at McPherson Place. In addition, it was perceived that the sale of Jovan and Luba’s home would jeopardise their entitlement to a pension unless the proceeds were accounted for, presumably since otherwise it would appear that they had transferred assets calculated to reduce their means, or had an undisclosed fund in place of their previous primary place of residence. One obvious way of accounting for the proceeds – which Jovan says was one of the underlying considerations, and Peter accepted in the course of his evidence was also adverted to at or about that time – was that if McPherson Place was held in the name of Jovan and Luba, that would account for the proceeds of sale of Barrier Place to the satisfaction of the Department of Social Security.

6 The understanding or arrangements between the parties made during the period early 1993 to late November 1994 involved five elements. The first was that Peter and Iskra would transfer title to McPherson Place to Jovan and Luba. No one disputes that this was an element of the understanding between them and indeed, a transfer was duly executed and delivered to Ms Zlatevska for registration, and all assumed it had been registered until the contrary came to light in 2002. I should record at this point that I do not accept that Peter was aware earlier than 2002 that the transfer had not been registered. That documents came to his notice indicating that McPherson Place continued to provide security for further borrowings by him is not inconsistent with that position; as he said, the mortgage was already in place, before the 1994 transfer, and he assumed that that the references to the property being security for his further borrowings was to the existing mortgage continuing to provide that security. I also accept that although rates notices and some utilities bills issued in the name of Peter and Iskra, no one paid much attention to the particular name in which an account was held.

7 The second element of the 1993/94 understanding was that Peter and Iskra would be entitled to reside in McPherson Place indefinitely, together with Jovan and Luba. This reflected the existing arrangements in Barrier Place, where they all resided together. The underlying intent seems to have been to provide more acceptable accommodation for all of them in place of Barrier Place. After December 1994, or at least some time in 1995 when McPherson Place was sufficiently completed, all four did, in fact, reside in McPherson Place until the relationship broke down in 2004 when Jovan and Luba left.

8 The third element was that Jovan and Luba would leave their assets to Peter, at least after the death of the survivor of them, Peter being their eldest son. Peter gave evidence that he understood such arrangements to be traditional. Jovan agreed [T13] that leaving the property to Peter was an element of the transaction, at least so long as they continued to live together. Although there is not a total correlation of Jovan’s understanding and Peter’s understanding in this respect, I think the best evidence to resolve it is that Jovan and Luba in fact made Wills, on 9 May 1995, leaving their estates to each other, but in the event the other predeceased him or her, to Peter absolutely. I conclude that the mutual understanding of the parties was that the entirety of each parent’s estate was to be left to Peter if the other parent predeceased him or her.

9 The fourth element, which is perhaps the least clear, is that the mortgage securing Peter’s borrowings on McPherson Place would not be discharged, but that Peter would be responsible for the mortgage. The direct evidence on the topic is given by Peter in re-examination [T95-96] where, albeit in answer to rather leading questions, he said that at the time he formed the intention to transfer McPherson Place to his parents, the property was still subject to the mortgage that he and Iskra had previously given when they acquired it, and that they were not in a financial position to pay it out, and believed that the property could be transferred into their parents’ name with the mortgage still in place and that that is what would happen [T96.7-18]:

Q. So did you believe that the property could be put in your parents’ name with a mortgage still there?
A. Solicitor didn’t say anything otherwise; she was told all the information, she just said, don’t worry about it, it will be taken care of and we had dealings after that with her. She never once mentioned it that there was a problem there in anything.
Q. So did you believe that the property would come into your parents’ name and the mortgage remaining and you responsible for the mortgage?
A. Yes.

10 The transfer dated 21 December 1994, signed by Peter and Iskra as transferors and Ms Zlatevska as solicitor for the transferees, is expressed to be subject not only to the encumbrances in the Deposited Plan 718714, but also to E995777, which was the mortgage to the National Australia Bank. That is evidence in an inter partes document supportive of this fourth element of the understanding. It is consistent with what in fact happened, in that no attempt was made to procure a discharge of the mortgage in December 1994, and when Ms Zlatevska wrote to the bank to procure production of the Certificate of Title in 1995, it was not to obtain a payout figure for a proposed discharge, but simply to permit registration of a transfer subject to the mortgage. There is no contrary evidence.

11 However, it would be too much to infer there was any common understanding that Peter would be entitled to borrow more against the property, the only evidence on that topic being Peter’s [T96.20-23]:

Q. Did you believe that you might be able to borrow more money against that property?
A. Well, after it was developed, you could, I suppose, yeah.

12 That does not convey an understanding between the parties, but only a unilateral belief in Peter’s mind that if the value of the property was increased by improvements, there might be sufficient equity to permit further borrowings.

13 The fifth element, and the most controversial one, is that the proceeds of sale of Barrier Place would be made available to Peter and Iskra, inter alia to service their debt including, but not limited to, that associated with building the house on McPherson Place. The solicitor Ms Zlatevska, in re-examination, when asked whether she had any memory in relation to the instructions she was given regarding payment of the consideration of the sale of McPherson Place said [T34.4-8]:

A. The – as I understood it, the house needed to be finished and that was why Mr and Mrs Talevski Senior sold their property to assist with the completion of the house and I think that Peter was – for his business ventures, that was how I understood it.

14 Peter gave this evidence [T81.30-39]:

Q. Do you recall any discussion in the period leading up to December 1994 about what was going to happen with the proceeds of sale of Barrier Place?
A. My understanding was that proceeds of it, at least some of the proceeds, should come, should be put back at least in the overdraft because most of the money for the constructions came from the overdraft. That was my understanding. We did not discuss any figures or any amounts or how it was going to be disbursed. It was understood that there will be some help forthcoming.

15 The overdraft to which he referred was the overdraft of his company PJT Engineering Pty Limited. Later, he gave a further intimation to the same effect [T95.47-51]:

Q. And you had some belief about what would happen to that mortgage if the property were transferred and put into your parents’ name?
A. Well, we had discussions that some of the money might come should come –

16 His counsel then stopped the answer on the basis that counsel thought it unresponsive.

17 For the defendants, it was argued that a conclusion that this was an element of the understanding in 1994 was contra-indicated by the inability of the plaintiffs to plead with precision or particularise how the $360,000 was applied, and that it was inconsistent with their pleadings, which suggested that the proceeds of sale of Barrier Place were to be applied to the building of a house on McPherson Place when, in fact, Barrier Place had not been sold and the proceeds were not available until after the McPherson Place house was substantially completed.

18 As to the first of those arguments – that the plaintiffs were unable to specify with particularity what had happened to the $360,000 – I do not think that it has any force. The plaintiffs’ position is, and has always been, that they left the transaction, or at least its details, to Peter and to some extent the solicitor; that they were not present when it was completed; and that they do not know what happened to the $360,000 beyond the circumstance that they have not received it. That being their case, I do not see how it is weakened or impugned by the circumstance that they are unable to specify where the money went.

19 As to the second argument, based on a supposed inconsistency in the sequence of the sale of Barrier Place and the building of a house on McPherson Place, its force is significantly reduced when the dates are more closely examined. As I have said, Peter and Iskra acquired McPherson Place in a purchase that was completed on 30 November 1992. The development approval for the house is dated 15 April 1993, and significant works could not have commenced before that date. The Sales Inspection Report for the listing for sale of Barrier Place is dated 17 April 1993. In fact, there is a very substantial concurrence in timing between the commencement of building works on McPherson Place and the decision to sell Barrier Place. That is entirely consistent with an intention throughout 1993 and 1994 that the proceeds of Barrier Place be ultimately used to fund the building of the house on McPherson Place, although some funding would need to be provided in the interim by Peter and Iskra, which could be reimbursed out of the proceeds of Barrier Place when it became available. That analysis is entirely consistent with Peter’s own evidence [T81], to which I have referred [see [14] above].

Was consideration given, and in particular was the $360,000 paid?

20 The evidence on this topic begins with the contract for sale, dated 21 December 1994, of McPherson Place, expressed to be for a price of $360,000 and stamped with duty on that amount. The contract is signed by Peter and Iskra as vendors.

21 The next, and a very important, aspect of the evidence, is the transfer, also dated 21 December 1994, duly stamped, and signed by Peter and Iskra as transferors and Ms Zlatevska as solicitor for the transferee by which the transferors acknowledge receipt of the consideration of $360,000. The defendants’ case was that despite the acknowledgment in the transfer, other evidence should persuade me that in fact no consideration was paid.

22 At the outset, I do not think that the acknowledgment of receipt of consideration in the transfer should lightly be put aside. One fundamental purpose of documents of record, such as conveyances and transfers, is to create a formal record for the future of important aspects of transactions in order to minimise scope for later disputation, and particularly with the passage of time, a court should not easily be persuaded to disregard as inaccurate such formal matters of record.

23 Jovan says that he does not know what happened to the $360,000, and that Peter handled the detail of the transaction. That this would be so was entirely consistent with Peter having dealt, on behalf of his parents, with bankers and solicitors in the past. It is also consistent with the execution of the transfer, by Peter and Iskra personally but by the solicitor Ms Zlatevska on behalf of Jovan and Luba. Of course it is quite commonplace for the solicitor for the transferee to sign on behalf of the transferee, but the fact that in this case, where she was acting for all parties, the transfer was signed by the transferors in her presence, but by her on behalf of the transferee, is some indication of at least one occasion on which she was dealing with Peter and Iskra alone and in the absence of Jovan and Luba.

24 Peter also says that he does not know what happened on settlement, or with the $360,000. However, in the course of his evidence, what were initially absolute denials that any part of $360,000 had been applied for his and Iskra’s benefit became somewhat more equivocal. After the passage, to which I have already referred, in which he indicated an understanding that at least some of the proceeds should be put back into the overdraft, because most of the money for the construction came from the overdraft, he gave this evidence [T81.45-48]:

Q. And do you have any reason to doubt that that happened?
A. I am not quite sure what happened. But this particular statements are missing.

Q. But that may have happened?
A. Could have, yes.

Q. So are you saying that you could have received the benefit of some of the $360,000 in that way?
A. Yes, there is a possibility. Without the records I can’t say a hundred per cent.

25 The documentary evidence, and in particular bank statements of accounts operated by Peter and Iskra, and Peter’s company PJT Engineering, far from excluding the possibility that they received the benefit of the $360,000, to my mind confirm that there is a distinct possibility that they did so. The McPherson Place home loan stood at $211,000 in October 1994. At that time that was being serviced by fortnightly periodic payments of $1,500 and the amount of interest being charged to the account was very approximately $1,500 per month. From some time in early 1995, the loan was serviced by fortnightly periodic payments of only $1,000. In the earlier period, the fortnightly payments of $1,500 would have produced reductions in the mortgage balance of about $18,000 per annum. After the fortnightly repayments were reduced to $1,000, the annual reduction would have decreased to about $6,000. By May 1996, however, the balance had been reduced to $26,000, when it was discharged by a refinance. Peter now says that this reduction was achieved by large lump sum payments from his company’s income, but there was no hint of a substantial capital reduction in his affidavit evidence, which rather suggested that he was struggling to service the mortgage by periodic payments and was unable to pay it down, whereas had he received $360,000 from the December 1994 transaction, he would have repaid the home loan. Given the progressive increase in the company’s overdraft from mid 1994 until 1996 and thereafter, and given that that increase took place despite a number of significant capital injections to reduce it – including from further borrowings by bank bills of $150,000 in early 1996 – this seems somewhat improbable. Its improbability is increased by Peter’s own description of the prevailing circumstances. In the course of giving evidence of the income his company received from construction works which it was conducting in the mid 1990s and from consultancy work which he undertook, and when asked to explain how this apparently sizable income was to be reconciled with the fact that the overdraft continued to grow, he said [T92.35-50]:

A. Well, once I – the overdraft was very high. Construction – most the construction costs I couldn’t borrow any money as such on what the Bank Manager was suggesting that the best way to handle this was to go via the overdraft and once after the construction of – during the construction of McPherson Place once the overdraft went high it just – it couldn’t lower it down, I was busy repaying other these other debts that I had and in

Q. What other debts?
A. Well, I owed a number of contractors money for tiling and in related other activities to finish off McPherson Place. I didn’t quite finish McPherson – in ‘95, I didn’t do the landscaping until late ‘97, the front courtyard, which was quite a substantial sum of money that went in that as well so

26 The picture that this paints is quite inconsistent with Peter having available funds approaching $200,000 to pay any capital reductions of his home loan between late 1994 and May 1996.

27 I have already recorded that when Peter and Iskra purchased McPherson Place, they borrowed from the National Australia Bank 100 percent of the purchase price of $235,000. It is prima facie very unlikely that a bank would lend 100 percent of the purchase price in the absence of some collateral security. It appears that the bank regarded one of the existing mortgages on Barrier Place – which secured advances not only to Jovan and Luba, but also advances to Jovan, Luba and Peter – as that collateral. Indeed, the loan approval letter for the McPherson Place home loan refers to one of the existing mortgages on Barrier Place as being the security. In that context, it is likely that the bank would have sought a reduction of the amount secured on McPherson Place, upon the sale of the property that provided the collateral security for that borrowing. This is all the more likely in the context that there were indications that Peter and his company were under some financial stress at that point. On the other hand, there is admittedly also evidence that McPherson Place had increased in value by late 1994 to $360,000, which reduces the probability that the bank would have insisted upon a reduction. Nonetheless, there remains at least a possibility that the sale of Barrier Place was an occasion for a reduction being required.

28 There were also two capital payments totalling $90,000, made in reduction of the company’s overdraft, on 27 September and 13 November 1995, which are described in the bank statements as “prepayments”, and which, it might be inferred, were the early repayment of a term deposit. The defendants were granted leave to re-open to tender further evidence, which shows that those funds were probably transferred from an account of a client – who also happened to be Peter’s brother-in-law and Jovan and Luba’s son-in-law – in payment of a job that Peter was performing for him. Nonetheless, the circumstance that those amounts were applied in late 1995 to achieve substantial reductions in the company’s overdraft would make it curious if other funds from business income were applied, not to reduction of the overdraft (which there appears to have been a need to achieve, to remain within limits), but to reduction of the home loan, which was in order.

29 Moreover, Peter and Iskra received into their joint account 65-805-7153 on 23 December 1994 the sum of $41,000, and on 28 December 1994 a further sum of $26,000. 23 December 1994 was two days following completion of the transaction. It was also the date on which the amount of $13,418.53 required to discharge the original $50,000 loan secured by mortgage on Barrier Place were deposited into that loan account, and I would infer those funds came from the proceeds of the sale of Barrier Place, as is the discharge of the mortgage that had secured it was necessarily handed over on settlement, and was registered immediately prior to the transfer of Barrier Place. It is striking that a sum of $41,000 was paid into Peter and Iskra’s personal joint account – not the company account, so that it is not readily explainable as company income – on the same day. Moreover, 28 December 1994 would be about the time that one would have expected the deposit held by the agent on the sale of Barrier Place to have been released by the agent and received, and $26,000 corresponds with the amount approximately one would expect to see remaining after a 10 percent deposit had been reduced by agent’s commission on the sale.

30 I readily accept that none of the matters to which I have referred about the bank accounts are affirmatively probative of receipt by Peter and Iskra of $360,000 or any other amount, and that the possibilities to which I have referred involve elements of speculation. I do not rely on these matters to conclude that $360,000 was paid, but they do show that there is no force at all in any contention that the bank records and other documents produced in the defendants’ case negative, are inconsistent with, or tell against receipt by the defendants of the $360,000.

31 It was submitted for the defendants that a further reason for concluding that $360,000 was not paid was that the raison d’etre of the transaction was a gift from Peter and Iskra to Jovan and Luba. I do not accept this, as will be apparent from my analysis of the elements of the understanding and arrangements between them. Moreover, such a raison d’etre is not consistent with Peter’s own acceptance that it was anticipated that at least some of the proceeds of the transaction would come to him in reduction of the overdraft and to repay construction costs. Nor is it consistent with the overall intent of the parties of combining the resources of both properties to provide a more suitable home for all of them on one.

32 It was also submitted on behalf of the defendants that the transaction concerning McPherson Place was documented in the way it was, and involved an acknowledgment of receipt of consideration in the way in which it did, solely for stamp duty purposes. Again, I am unable to accept this. If it were solely for stamp duty purposes, the Contract for Sale was completely unnecessary. If it were solely for stamp duty purposes, no reference to a consideration of $360,000 in the transfer was required; the transfer could have referred to a consideration of $1, but would of course had been stamped with duty on the true value as established by valuation. There is initially some apparent force in the view that if the true arrangement were that the proceeds of sale of Barrier Place were made available to Peter and Iskra, there was no need to obtain a valuation because the consideration would be fixed by the proceeds of Barrier Place, but the answer to that is that it would in any event have been necessary to obtain a valuation, because the Stamp Commissioner would not accept a transfer between related parties without independent evidence of value. The fact that such evidence of value was necessary does not mean that the sole purpose of putting a value in the transfer was to satisfy the Commissioner.

33 Accordingly, I do not think that any of the matters to which reference has been made provides reason to disbelieve the acknowledgment of receipt of consideration in the transfer document, or to conclude that the consideration that the transfer says was received, was not received. On the probabilities I find that the $360,000 was, upon completion, applied for the benefit of Peter and Iskra.

What are the legal consequences?

34 Jovan and Luba are the purchasers under a completed Contract for Sale of McPherson Place, the consideration having been paid. Prima facie they are beneficially entitled to McPherson Place, and entitled to be registered as proprietors. However, this prima facie position is complicated in the present case in two different ways.

35 The first is that the transfer has not been registered, and cannot be registered unless and until the mortgagee consents. Jovan and Luba could not compel the mortgagee to consent. Peter and Iskra were obliged to use their best endeavours to procure the mortgagee’s consent, and to indemnify Jovan and Luba in respect of the mortgage, but given the fourth element of the original understanding to which I have referred, they were not obliged to procure its discharge other than in accordance with its terms. The position is further complicated by the circumstance that Peter has now refinanced McPherson Place, the original mortgage to the National Australia Bank having been discharged and replaced by a mortgage to the Commonwealth Bank.

36 Where there is an equitable entitlement to a transfer of property arising by expenditure in reliance upon an assumption that the property would be conveyed, the prima facie remedy is to compel a transfer of the property. However, where, for reasons of title or the lack of a requisite consent, such a transfer cannot take place, an alternative remedy of imposing a charge for the expenditure is often appropriate. Thus, in Chalmers v Pardoe [1963] 3 All ER 552 Sir Terence Donovan, speaking for the Privy Council, constituted by himself, Lord Evershed and Lord Hodson, said (at 555):

There can be no doubt on the authorities that where an owner of land has invited or expressly encouraged another to expend money on part of his land on the faith of an assurance or promise that that part of the land will be made over to the person so expending his money a court of equity will prima facie require the owner by appropriate conveyance to fulfil his obligation; and when, for example for reasons for title, no such conveyance can effectively be made, a court of equity may declare that the person who has expended the money is entitled to an equitable charge or lien for the amount so expended. That was in fact the orders made in the Unity Joint Stock Mutual Banking case [(1858) 25 Beav 72, 27 LJCh 585] though it appeared in that case that the land-owner had never actually engaged or promised to make over the appropriate land.

37 See also, for example, Morris v Morris [1982] 1 NSWLR 61, 64; Giumelli v Giumelli (1999) 196 CLR 101, 119 [31]. Given the difficulties presented, not only by the need for the mortgagee’s consent in the first place, but the circumstance that the property has been refinanced with another mortgagee, that remedy of an equitable charge for the plaintiffs’ expenditure, rather than a transfer of the property, is available in this case.

38 The second complication is that the basis upon which Jovan and Luba obtained their entitlement to become registered as proprietors was one that involved them allowing Peter and Iskra to reside indefinitely with them in McPherson Place, and leaving their estates (or at least the survivor of them) to Peter. In those circumstances it would be unconscionable for Jovan and Luba to take title but to deny Peter and Iskra the rights of residence and inheritance that formed elements of the underlying transaction [see, for example, Ogilvie v Ryan [1976] 2 NSWLR 504]. In those circumstances, Jovan and Luba would be obliged in equity, as a condition of obtaining the equitable relief they seek, to do equity by offering to permit Peter and Iskra to continue to reside with them in McPherson Place, and to undertake to leave their estates to Peter. Jovan and Luba have indicated, through their counsel, that they are prepared to proffer undertakings to do so as a condition of obtaining a transfer of the property; however, in the light of the breakdown of the relationship between the parties, they prefer an alternative remedy, which would provide a clean break between the parties by way of separating the interests of the parties, rather than a transfer with those conditions attached to it.

39 Jovan and Luba have not acted contrary to their obligations under the original 1994 understanding: they have not excluded Peter and Iskra from McPherson Place, and – despite an assertion to the contrary in Jovan’s affidavit evidence – they have not revoked the Wills that they made in 1995 leaving the estate of the survivor to Peter. Although it is true that at the time of the breakdown of the relationship in early 2004, Jovan expressed severe displeasure with Peter, he did not say anything to the effect that he would no longer honour his obligations under the 1994 arrangements or revoke his Will.

40 On the other hand, Peter and Iskra have repudiated their obligations under the 1994 arrangements. As I have said, and in their favour, I do not accept that they were aware before 2002 that the transfer of title had not taken place. I accept that they did not receive the misaddressed correspondence from Ms Zlatevska in which production of the Certificate of Title was sought, and that until 2002 they assumed that a transfer had taken place. I also accept that they did not exclude Jovan and Luba from McPherson Place, but rather that Jovan and Luba left of their own volition when the relationship broke down. But what is crucial is that, in early 2004, Peter and Iskra formed the intention not to perform their obligations under the 1994 arrangements by completing the transfer, and instead maintained they were not obliged to do so. While they did that in the belief, which I accept they by that time held, that they were not obliged to do so, objectively their position was inconsistent with their obligations as I have found them to be, and amounted to a repudiation of their equitable obligations.

41 In this context I use the term “repudiation” in a rather less technical sense than in the law of contract; when dealing with the dictates of good conscience one need not be excessively troubled by the technicalities of the law of contract. In this case, the defendants manifested an intention no longer to be bound by the equitable obligations that arose from the 1994 transaction. It is established that where a joint venture breaks down without attributable fault, the parties are entitled to a return of their contributions [Muschinski v Dodds (1985) 160 CLR 583]. Where there is attributable fault – as there is here, where it is the defendants who have repudiated – justice requires that the innocent party’s rights be no less, but it does not require that their rights be enlarged by permitting them to take title free of the obligations which were attached to it in the first place. In my view, by analogy with the law of contract, the plaintiffs in effect may elect between two remedies. The first of those remedies is to insist on performance of the obligations originally undertaken, namely, to have a transfer of the property, subject to the mortgage but with an indemnity in respect of the mortgage, and conditioned on permitting Peter and Iskra a right of residence and on undertaking not to revoke the 1995 Wills or alternatively to make further Wills to the same effect. The alternative remedy, which is the equitable equivalent of acceptance of repudiation of a contract, is to recoup their contributions pursuant to an equitable charge on the property.

42 In this case, upon the findings of fact I have made, upon the probabilities Jovan and Luba contributed $360,000. On this basis too, they would be entitled to a return of that $360,000 charged on the McPherson Place property. As they have had the benefit of occupation of the property until they vacated in or about April 2004, it is appropriate that that benefit be recognised by not allowing interest so long as they enjoyed that benefit. The practical break down of the relationship was when Jovan and Luba departed in April 2004, and since that time, they have not enjoyed the benefit of their contribution, whereas Peter and Iskra have been in a position to enjoy it to their exclusion. That is sufficient justification for an award of interest from April 2004.

Conclusion

43 To sum up then:

44 First, the December 1994 transaction had as its essential elements:

· that Peter and Iskra would transfer title to McPherson Place to Jovan and Luba;

· that Peter and Iskra would be entitled to reside in McPherson Place with Jovan and Luba indefinitely;

· that Jovan and Luba or their survivor would leave their estates to Peter;

· that the transfer would be subject to the existing mortgage to the National Australia Bank, which would remain on title, but Peter would be responsible for servicing it in accordance with its terms;

· that the proceeds of the transaction would be made available to Peter and Iskra, inter alia to reduce the company overdraft, to repay or reimburse funds that had been used to construct the home on McPherson Place, or to fund completion of that home.

45 Secondly, the consideration for the sale of McPherson Place of $360,000 was paid to or applied for the benefit of Peter and Iskra.

46 Thirdly, the consequences are that Jovan and Luba, as purchasers under a completed Contract for Sale were entitled to be registered proprietors of McPherson Place, but subject to the consent of the mortgagee, Peter and Iskra being liable to indemnify them in respect of that mortgage. However, it would be unconscionable for Jovan and Luba to assert their rights to title without honouring those aspects of the understanding which benefit Peter and Iskra, namely, the right of residence and the right to inherit.

47 Fourthly, the breakdown of the relationship is ultimately attributable to repudiatory conduct on the party of Peter and Iskra, who formed the intention not to transfer title. While this is no reason to deprive Jovan and Luba of their equitable rights under the 1994 arrangements while they remain prepared to do equity, they are in any event entitled to the alternative relief of a charge to recoup their contributions on two bases: first, that the requirement for consent, not only of the original mortgage but now, following the refinance, of a new mortgagee, pose such obstacles to a transfer of title as warrant the imposition of a charge instead; and secondly, because upon repudiation by Peter and Iskra, Jovan and Luba are entitled to elect, if they wish, to recoup their contributions upon failure of the venture rather than to insist on performance of the original obligations.

48 Finally, because Jovan and Luba have had the benefit of occupation of the property, and thus of their contribution, until April 2004, interest should not commence to run until that date. Interest on $360,000, at the rates prescribed from time to time for interest on unpaid judgment debts by the Rules of Court from 1 April 2004 to date, amounts to $112,180, producing a total of $472,180.

49 Accordingly, I make the following orders:

(1) Give judgment that the defendants pay the plaintiffs $472,180.

(2) Declare that the amount of the judgment is charged upon the defendants’ property situate at and known as 26 McPherson Place, Illawong in the State of New South Wales, being the land comprised in folio identifier 24/718714.

(3) Reserve liberty to the plaintiffs to apply for further orders and directions to implement the charge.

(4) Order that the defendants pay the plaintiffs’ costs, to be assessed on the indemnity basis from 15 August 2007 and otherwise on the ordinary basis.

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