Tamas v Silver Beach Resort

[2000] NSWSC 574

CITATION:

Tamas v Silver Beach Resort [2000] NSWSC 574

CURRENT JURISDICTION:

Equity Division

FILE NUMBER(S):

SC 5540/93

HEARING DATE(S):

29 May 2000

JUDGMENT DATE:

27 June 2000

PARTIES :

Stephen Tamas
(Plaintiff/First Cross Defendant)

M C Donnelly
(Second Cross Defendant)
v
Silver Beach Resort Pty Ltd
(First Defendant/Third Cross Claimant)

New South Wales Police
(Second Defendant)

Reginald E. Nixon
(Third Defendant/First Cross Claimant)

Robyn H. Nixon
(Fourth Defendant)

R. E. Nixon Pty Ltd
(Second Cross Claimant)

JUDGMENT OF:

Davies AJ

COUNSEL :	P/1XD: No Appearance 2XD: No Appearance 1,3,4D/1,2,3XC: Mr G Colyer
SOLICITORS:	P/1XD: In person 2XD: Ferrier Hodgson 1,3,4D/1,2,3XC: McCabes
CATCHWORDS:	Trust - whether resulting, constructive or implied trust - whether property purchased in the name of another - whether shareholder was a gratuitous transferee - whether misleading conduct - whether breach of fiduciary duty
CASES CITED:	Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Napier v Public Trustee (WA) (1980) 32 ALR 153 Calverley v Green (1984) 155 CLR 242 Warman International Ltd v Dwyer (1995) 182 CLR 544
DECISION:	Amended cross-claim dismissed. See paragraphs 23, 24, 25 and 26.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

DAVIES AJ

27 JUNE 2000

5540/93 - Stephen TAMAS v SILVER BEACH RESORT PTY LTD & ORS
JUDGMENT

1    HIS HONOUR: In these proceedings, the principal claim brought by Stephen Tamas, that of malicious prosecution, has been dismissed. It was conceded by Mr G Colyer of counsel, who appeared for Mr R E Nixon, the third defendant/first cross-claimant, Mrs R H Nixon, the fourth defendant, R E Nixon Pty Ltd ("REN"), the second cross-claimant, and Silver Beach Resort Pty Limited ("Silver Beach"), the first defendant/third cross-claimant, that, as the applicant, Stephen Tamas, is a bankrupt, the cross-claim by Silver Beach which seeks monetary orders should be dismissed and so also should the cross-claim by Mr Nixon and REN insofar as they seek orders of a monetary nature. The hearing thus proceeded on the cross-claims brought by Mr Nixon and REN insofar as they sought a declaration that Mr Tamas holds his twenty-five shares in Silver Beach, one-quarter of the issued shares of that company, on trust for REN or for Mr Nixon and REN in proportion to the moneys contributed by them. Mr Tamas did not appear at the hearing, his interests having passed to his trustee in bankruptcy, Mr M C Donnelly. By consent, Mr Donnelly was joined as a party to the proceedings, but he took no part in the hearing.

2    Many of the facts of the case have not been adequately established by the material with which I have been provided. However, as I am of the view that the cross-claim must be dismissed, I proceed upon the assumptions which appear to be inherent in Mr Colyer's address. Some of those facts are that Silver Beach Resort Pty Ltd ("Silver Beach") is the same company as "Silver Beach Tourist Park Pty Ltd" and that, at the time of the transaction which I shall mention, it had two issued shares and they were held by Mr and Mrs McLean.

3    Silver Beach was the owner of a caravan park known as "Silver Beach Tourist Park" ("the Park") at Kurnell. In 1991, Mr Tamas became interested in acquiring the shares in Silver Beach. Mr Tamas first offered to acquire the shares for $1,950,000, made up of $950,000 in money and the transfer of two properties which Mr Tamas owned and which he valued at $1,000,000. That offer was rejected. Mr Tamas made a subsequent offer of $1,100,000 in money and the transfer of the two properties for a value of $850,000.

4    In March 1991, Mr Ross McLean, a son of the vendors, informed Mr Tamas that Mr and Mrs McLean would accept the price of $1,950,000 and would be prepared to attribute $650,000 of the sale price to the two properties. That offer thus required $1,300,000 in money.

5    In the meantime, Mr Tamas had interested Mr and Mrs Nixon in the purchase. Discussions between them resulted in an agreement in principle that they would join in the venture, that REN would lend $1,300,000 to Silver Beach and that additional funds of $800,000 would be provided, as to $400,000 by Mr Nixon and as to $400,000 in property owned by Mr Tamas. It was agreed that Mr Tamas would hold one-half of the shares in Silver Beach and that Mr Nixon would hold the other one-half.

6    I now return to the negotiations with Mr and Mrs McLean. Because the sums due to mortgagees on Mr Tamas' two properties amounted to $615,000, Mr Tamas had little equity in them. He found also that he did not have other funds which would enable him to contribute to the acquisition. Mr Tamas then put another proposition to the vendors. The evidence of Mr Ross McLean is that Mr Tamas said words to the effect:

"For this deal to proceed I want the sale price of Kurnell to be shown as $2,180,000.00 as is recorded in the valuation. Your offer of $650,000.00 for my properties should be increased to $880,000.00 leaving the same cash change over to yourselves of $1,300,000.00".

7    After consideration, Mr and Mrs McLean accepted the proposal. Mr McLean wrote the following letter to Mr Tamas:

"Please find below the figures re the sale of shares in the above company, due to re-valuation of the exchange properties.
Sale Price $2,180,000 (excluding property at 284 Prince Charles Parade Kurnell, which is optional and open to negotiations).
made up as follows;


Cash at settlement $1,300,000

Alexandria & Wisemans
Ferry properties with clear
title at settlement 880,000
$2,180,000 "

8    Mr Tamas informed Mr Nixon that the value of his properties had fallen and that the Park had been valued at $2,180,000. He proposed that, of the $2,180,000, he would contribute $200,000 in property, Mr Nixon would contribute $600,000, and REN would loan $1,380,000 to Silver Beach. Mr Nixon agreed to that proposal. It was agreed that Mr Tamas would hold one-quarter of the shares in Silver Beach and that Mr Nixon would hold three-quarters thereof. The arrangement that REN's contribution to the purchase price would be debited to Silver Beach as a loan is difficult to understand. It is unnecessary to discuss this point.

9    That was how the settlement of the purchase proceeded. A letter from solicitors acting for Mr Tamas and for Mr Nixon in the transaction shows that, after adjustments, the balance payable was $2,182,466.80. This amount was satisfied by the transfer of one of Mr Tamas' properties at a value of $380,970, the transfer of the second property at a value of $496,498.87 and by moneys payable to Mr and Mrs McLean of $1,304,997.93. Mr Nixon and REN provided funds of $1,969,000. Of this sum, a total of $615,000 was paid to mortgagees of the properties owned by Mr Tamas. After listing the various sums which had been paid, the solicitors recorded in a letter to Mr Nixon that he or his nominee had effectively loaned $621,292.97 to Mr Tamas, most of which had been applied towards the purchase of the shares. However, no other evidence discloses such a loan. Of the two shares acquired, one was transferred to Mr Tamas and the other to Mr Nixon. That was in April 1991. Subsequently, in November 1993, a further twenty-four shares were allotted to Mr Tamas and seventy-four shares to Mr Nixon.

10    The material before the Court shows that, in the negotiations for the purchase of the shares, Mr Tamas engaged in conduct that, so far as Mr Nixon and REN were concerned, was misleading and deceptive. Without informing Mr Nixon and REN of the true facts, Mr Tamas arranged the terms of the purchase in such a way that it would appear that he contributed a value of more than $200,000 to the acquisition of the shares.

11    I am prepared to accept the submission by counsel that Mr Tamas breached fiduciary duties so far as Mr Nixon, REN and Silver Beach were concerned, for he negotiated the purchase of the shares, a venture in which he and those persons were involved. In Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 at 96-97, Mason J described a fiduciary relationship in these terms:

"The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (cf. Phipps v Boardman [1967] 2 AC 46, at p 127), viz, trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions 'for', 'on behalf of', and 'in the interests of' signify that the fiduciary acts in a 'representative' character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal."

12    However, as Mr Tamas is a bankrupt, no order of a monetary nature is sought. The sole issue is whether Mr Tamas holds his twenty-five shares in Silver Beach on trust for Mr Nixon or for REN and Mr Nixon. The evidence as to how the transaction was implemented is sparse for the early accounts and records of Silver Beach are not in evidence. I mentioned this fact during the hearing but the lack of accounts was not remedied. The only accounts and records which have been tendered are the 1999 accounts of Silver Beach. These accounts show that Silver Beach has issued one-hundred ordinary shares of $1 each and thus has a paid up capital of $100. Whether the share capital was paid to Silver Beach and, if so, by whom is not disclosed. In the absence of any evidence, I assume that the subscription sums were paid by the shareholders or is still due by them.

13    The 1999 accounts show that, as at 30 June 1999, $232,853.67 was owed by Silver Beach to REN, being the net balance of a loan account, and that there was accrued interest on the moneys due to REN since 1993 of $1,605,554.05. The 1999 accounts do not disclose any moneys due to Mr Nixon or Mr Tamas. Presumably, their contributions were reflected in the shares of which they each became the registered holders.

14    It may be noted that the facts do not show that Mr Tamas made a profit of $200,000 or more by his misleading and deceptive conduct. The increased value given to his property was counteracted by the increase in the purchase price of Silver Beach. The position is not so much that a profit was made but that Mr Tamas failed to negotiate a purchase at the lowest possible price.

15    The principal case presented by Mr Colyer was based upon the principle of a resulting trust. Aickin J, with whom Gibbs ACJ, Mason, Murphy and Wilson JJ agreed, said in Napier v Public Trustee (WA) (1980) 32 ALR 153 at 158:

"The law with respect to resulting trusts is not in doubt. Where property is transferred by one person into the name of another without consideration, and where a purchaser pays the vendor and directs him to transfer the property into the name of another person without consideration passing from that person, there is a presumption that the transferee holds the property upon trust for the transferor or the purchaser as the case may be. This proposition is subject to the exception that in the case of transfers to a wife or a child (including someone with respect to whom the transferor or purchaser stands in loco parentis ) there is a presumption of advancement so that the beneficial as well as the legal interest will pass. Each of the presumptions may be rebutted by evidence."

In Calverley v Green (1984) 155 CLR 242, Gibbs CJ said at 246-247:

"Where a person purchases property in the name of another, or in the name of himself and another jointly, the question of whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser. However, in such a case, unless there is such a relationship between the purchaser and the other person as gives rise to a presumption of advancement, ie, a presumption that the purchaser intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take beneficially. In the absence of evidence to rebut that presumption, there arises a resulting trust in favour of the purchaser. Similarly, if the purchase money is provided by two or more persons jointly, and the property is put into the name of one only, there is, in the absence of any such relationship, presumed to be a resulting trust in favour of the other or others. For the presumption to apply the money must have been provided by the purchaser in his character as such - not, eg, as a loan. Consistently with these principles it has been held that if two persons have contributed the purchase money in unequal shares, and the property is purchased in their joint names, there is, again in the absence of a relationship that gives rise to a presumption of advancement, a presumption that the property is held by the purchasers in trust for themselves as tenants in common in the proportions in which they contributed the purchase money: Robinson v Preston (1858) 4 K & J 505, at p 510, 70 ER 211, at p 213; Ingram v Ingram [1941] VLR 95 and Crisp v Mullings [1976] EG 730 (a decision of the English Court of Appeal)."

16    Mr Colyer submitted that Mr Tamas was "a gratuitous transferee". He submitted:

"If Mr Tamas' properties were, in reality, only worth $650,000 to the vendor, and not the $877,468.87 recorded in the letter from Blackshaw Lindsay Bugden, then Mr Tamas did not, as he has subsequently claimed, contribute any sum towards the purchase price of the shares."

17    Mr Colyer submitted that the twenty-five shares were held on trust for Mr Nixon or for Mr Nixon and REN, for they had provided the moneys for the purchase.

18    However, twenty-four of Mr Tamas' shares were not transferred by Mr and Mrs McLean, they were issued by Silver Beach two years after the transaction had occurred. There is no evidence of facts which would give rise to a resulting trust in respect of those shares. Nor, indeed, do the facts which have been proved show that Mr Tamas was a purely gratuitous transferee. On any view of the facts, Mr Tamas contributed valuable properties towards the purchase of the shares. The properties were transferred at values agreed with by Mr and Mrs McLean. Mr Tamas' equity was small, but it was not insignificant. Moreover, the agreement as to the proportion of the shares to be held in Silver Beach would not have reflected merely monetary contributions. Both Mr Tamas and Mr Nixon were to be involved in the running of the Park.

19    It should also be noted that the moneys contributed by REN were always to be and were in fact treated as a loan to Silver Beach. Much of the purported loan has been repaid. The moneys contributed by Mr Nixon went not directly to Mr and Mrs McLean but to pay off the liabilities on Mr Tamas' properties. These are not facts which give rise to a resulting trust.

20    Mr Colyer submitted, by way of alternative argument, that the Court should declare a remedial trust in favour of Mr Nixon. Mr Colyer relied upon the categories of fiduciary relationship enunciated by Gibbs CJ in Hospital Products Ltd v United States Surgical Corporation at 68 and upon the discussion of appropriate remedies by Mason CJ, Brennan, Deane, Dawson and Gaudron JJ in Warman International Ltd v Dwyer (1995) 182 CLR 544 at 559-560, in particular the statement that:

"It is necessary to keep steadily in mind the cardinal principles of equity that the remedy must be fashioned to fit the nature of the case and the particular facts."

21    However, I see no element in the facts of the present case on which a finding of resulting, constructive or implied trust should be based. Mr Tamas received twenty-five shares in the capital of Silver Beach because that was the arrangement between himself and Mr Nixon. It was the interest which Mr Tamas was to have in the caravan park venture. Mr Tamas agreed to provide his properties, which he did, and Mr Nixon and REN agreed to provide the funds which they did. Notwithstanding that there was misleading and deceptive conduct on the part of Mr Tamas, the venture proceeded in the manner agreed. There was no failure of consideration or like circumstance to impose upon Mr Tamas a trust for others in respect of his shareholding in Silver Beach. There is no occasion for tracing trust moneys into a specific asset. The moneys contributed by Mr Nixon and REN were expended by the solicitors precisely as intended.

22    Mr Colyer submitted that:

"One of Mr Tamas' obligations as a fiduciary was to complete the purchase in accordance with the prior arrangement between himself and Mr Nixon."

But Mr Tamas did not have any such obligation. He was not acting as an agent for Mr Nixon and REN alone. He proposed a venture in which he was to have an interest. The proposal first contemplated could not go ahead, because of Mr Tamas' lack of funds. Mr Tamas then negotiated different terms. His fault lay in his deception of Mr Nixon. For this, he would be liable to pay damages, if any were suffered, or perhaps to account for profits, if there were any. But no such monetary order is sought.

23    In these circumstances, I am satisfied that the amended cross-claim by the first cross-claimant, the second cross-claimant and the third cross-claimant, so far as it seeks relief in respect of the shares registered in Mr Tamas' name on the books of Silver Beach, must be dismissed. It follows that, as other aspects of the amended cross-claim are not pursued, the amended cross-claim should be dismissed. I make no order as to costs.

24    There still remains aspects of the application instituted by Mr Tamas which have not been dismissed. As those aspects have not been pursued, it should be ordered that the remaining aspects of the claim be dismissed with costs.

25    The final matter is that, on 6 September 1996, Hodgson J made an interlocutory order that all the proceeds of sale of the principal asset of Silver Beach be placed in an account of the solicitors for the parties and that any receipts consequent on the vendor finance in that sale also be placed in that account as they were received and that the money remain in that account until further order. As the claim and the cross-claim have been dismissed, it is appropriate that the funds be released. I order that the funds in account number 063832648 with St George Bank Limited be released to the solicitors T S McCabe and D Austin on their undertaking that those funds will be paid forthwith to Silver Beach Resort Pty Limited.

26    The exhibits may be returned.

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Last Modified: 09/26/2000