NEW SOUTH WALES SUPREME COURT
CITATION:
Ciaglia v Ciaglia [2010] NSWSC 341
This decision has been amended. Please see the end of the judgment for a list of the
amendments.
JURISDICTION:
Equity
FILE NUMBER(S):
2008/282290
HEARING DATE(S):
21-23 October 2009 and 20 November 2009
JUDGMENT DATE:
28 April 2010
PARTIES:
Plaintiff: Robert Andrew Ciaglia
Defendant: Pamela Josephine Ciaglia
JUDGMENT OF:
White J
LOWER COURT JURISDICTION:
Not Applicable
LOWER COURT FILE NUMBER(S):
Not Applicable
LOWER COURT JUDICIAL OFFICER:
Not Applicable
COUNSEL:
Plaintiff: T J Morahan
Defendant: D R Stack
SOLICITORS:
Plaintiff: Bryden's Law Office
Defendant: Norton Rose (Deacons)
CATCHWORDS:
EQUITY – plaintiff transferred interest in land to deceased for sum described as
consideration for transfer – true agreement was a loan and mortgage - whether
plaintiff entitled to equity of redemption on repayment of loan – whether executrix
held land on constructive trust for plaintiff
EQUITY – plaintiff’s claim under constructive trust not barred by Limitation Act 1969,
s 14, s 42 or s 27 – defence of laches not made out –purpose of transaction to
frustrate enforcement of maintenance orders by family court – insufficient nexus with
equity sued for – defence of unclean hands not made out
REAL PROPERTY – EQUITY – which of s 23C or s 54A of Conveyancing Act 1919
relevant to enforcement of constructive trust under executed agreement –principle
that reliance on s 23C and s 54A to deny true nature of transaction is to use the
statute as an instrument of fraud – oral evidence admissible to establish true nature
of transaction –principle applicable to mortgages – whether reliance on defence as
note or memorandum of agreement permitted for s 54A – sufficient acts of part
performance by plaintiff – whether repayments of principal and payment of interest
can be relied on as acts of part performance – proving acts of part performance by
admissions of acts
REAL PROPERTY – EQUITY – whether personal equity exception to indefeasibility
applies – deceased held land subject to constructive trust for plaintiff – executrix
personally bound by same trust as deceased’s legal representative and under
Probate and Administration Act, s 45 – executrix lodged notice of transmission
claiming entitlement as beneficiary under will – fraud not pleaded - registration of title
in executrix does not defeat enforcement of constructive trust
LEGISLATION CITED:
Probate and Administration Act 1898
Real Property Act 1900 (NSW)
Limitation Act 1969 (NSW)
Conveyancing Act 1919 (NSW)
Statute of Frauds
Bankruptcy Act 1966 (Cth)
CATEGORY:
Principal judgment
CASES CITED:
G and C Kreglinger v New Patagonian Meat and Cold Storage Co Ltd [1914] AC 25
Abigail v Lapin [1934] AC 491
Currey (Registrar of Titles) v The Federal Building Society (1929) 42 CLR 421
Venables v Foyle (1660) 1 Ch Cas 2; 22 ER 664
Richardson v Syms (1740) 1 Barn C 90
Cholmondeley v Clinton (1820) 2 Jac & W 1; 37 ER 527
Pearce v Morris (1869) LR 8 Eq 217
Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492
Lindsay Petroleum Co v Hurd (1873-74) LR 5 PC 221
Dewhirst v Edwards [1983] 1 NSWLR 34
Baloglow v Konstantinidis & Ors [2001] NSWCA 451; (2001) 11 BPR 20,721
Khoury v Khouri [2006] NSWCA 184; (2006) 66 NSWLR 241
Maddison v Alderson (1883) 8 App Cas 467
Lincoln v Wright (1859) 4 De G & J 16; 45 ER 6
Edge v Worthington (1786) 1 Cox 211; 29 ER 1133
Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98; Barton v Bank of NSW (1890) LR 15
App Cas 379
Haigh v Kaye (1872) LR 7 Ch App 469
Re Duke of Marlborough; Davis v Whitehead [1894] 2 Ch 133
Rochefoucauld v Boustead [1897] 1 Ch 196
Cadd v Cadd (1909) 9 CLR 171
Bannister v Bannister [1948] 2 All ER 133
Dalton v Christofis [1978] WAR 42
Last v Rosenfeld [1972] 2 NSWLR 923
Theodore v Mistford Pty Ltd (2005) 221 CLR 612
Wratten v Hunter [1978] 2 NSWLR 367
Bahr v Nicolay (No. 2) (1988) 164 CLR 604
Dudgeon v Chie (1954) 55 SR (NSW) 450
Fletcher v Burns (1997) 12 BPR 22,937
Walters v Morgan (1792) 2 Cox 369; 30 ER 169 Cooth v Jackson (1801) 6 Ves Jun
12; 31 ER 913
Blagden v Bradbear (1806) 12 Ves Jun 466 at 471; 33 ER 176
Regent v Millett (1976) 133 CLR 679
Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387
Cooney v Burns (1922) 30 CLR 216
Theodore v Mistford Pty Ltd (2005) 221 CLR 612
Millett v Regent [1975] 1 NSWLR 62
Ex parte Whitbread (1812) 19 Ves Jun 209; 34 ER 496
Ex parte Whitbread and Arnick Holdings Limited v Australian Bank Ltd (Supreme
Court of NSW, Bryson J, 4 December 1987, unreported)
Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32
Frazer v Walker [1967] 1 AC 569
Boyd v Mayor Etc, of Wellington [1924] NZLR 1174
Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537
LHK Nominees Pty Ltd v Kenworthy [2002] WASCA 291; (2002) 26 WAR 517
Barnes v Addy (1874) LR 9 Ch App 244
Super 1000 Pty Ltd v Pacific General Securities Pty Ltd [2008] NSWSC 1222; (2008)
221 FLR 427
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89
Sistrom v Urh (1992) 40 FCR 550
Phillip Morris Incorporated v Adam P Brown Male Fashions Proprietary Ltd (1981)
148 CLR 457
Wickstead v Browne [1992] NSWCA 272; (1992) 30 NSWLR 1
Maio v Sacco [2009] NSWSC 413
TEXTS CITED:
RW Turner, The Equity of Redemption (1931) Cambridge University Press
Tyler, Young and Croft, Fisher & Lightwood’s Law of Mortgage, 2nd Australian
edition (2005) LexisNexis Butterworths
W Clark (ed), Fisher and Lightwood’s Law of Mortgage, 12th ed (2006) LexisNexis
Butterworths
R P Meagher, J D Heydon & M J Leeming, Meagher, Gummow & Lehane’s Equity
Doctrines & Remedies, 4th ed LexisNexis Butterworths
Williams, The Statute of Frauds Section IV (1932) Cambridge University Press
Sugden, A Concise and Practical Treatise of the Law of Vendors and Purchasers of
Estates, 14th ed (1862) H. Sweet
Greig & Davis, The Law of Contract (1987) LawBook Co
H McGregor, McGregor on Damages, 17th ed (2003) Sweet & Maxwell
Fry, A Treatise on the Specific Performance of Contracts
DECISION:
Direct counsel for the plaintiff to bring in short minutes of order in accordance with
reasons.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
WHITE J
Wednesday, 28 April 2010
2008/282290
Robert Andrew Ciaglia v Pamela Josephine Ciaglia
JUDGMENT
1
HIS HONOUR: The defendant is the registered proprietor of land in Goodchap Road, Chatswood
(“the Chatswood property”). The principal question in these proceedings is whether she holds a onehalf share of the land on trust for the plaintiff.
Background
2
The defendant is the widow of the plaintiff’s brother, Pasquale Ciaglia, who died on 15 November
2002. From about 1970 to 1991 the plaintiff and Pasquale Ciaglia were the registered proprietors as
joint tenants of the Chatswood property. The property was used as a boarding house. From about 1982
the boarding house business was operated by a company called Lajido Pty Ltd (“Lajido”) of which the
two brothers were the sole directors and shareholders. From the late 1980s the plaintiff was engaged in
family law proceedings with his then wife. He deposes that in early 1991 he came to an oral agreement
with his brother, Pasquale, that he would transfer his half-share of the Chatswood property to Pasquale
and Pasquale would raise a mortgage of around $195,000 on the property and lend that amount to him.
He deposed that a conversation took place between them to the effect that he said to Pasquale “I‘ll
transfer the property to you as security on the loan ... in case anything should happen to either of us”
and Pasquale said “OK ... Well if anything happens to me your half will always be yours, subject to you
repaying the $195,000 with interest.”
3
Although counsel for the defendant submitted that the plaintiff’s evidence should not be accepted, there
is no real dispute on the pleadings about the nature of the arrangement. The defendant admits that:
“5(a)
The Plaintiff and Pasquale Ciaglia made an oral agreement with regard to the
Chatswood Property in or about 1991 (the Loan Agreement);
(b)
It was a term of the Loan Agreement that Pasquale Ciaglia would raise
approximately $190,000 by way of mortgage over the Chatswood Property and
would use those moneys to acquire the Plaintiff‘s half share in the Chatswood
Property;
...
6(a)
It was a term of the Loan Agreement that the Plaintiff would repay the principal of
the loan and interest to Pasquale Ciaglia; and
(b)
The interest payable would be that which the National Australia Bank charged on the
monies which Pasquale Ciaglia borrowed;
...
10
4
... it was a term of the Agreement that upon payment by the Plaintiff to Pasquale
Ciaglia of the outstanding loan monies, Pasquale Ciaglia would transfer back to the
Plaintiff his half share in the Chatswood Property ...”
The defendant pleads that there was an understanding between the plaintiff and his brother that upon
repayment by the plaintiff of the moneys owing on the loan Pasquale Ciaglia would transfer to the
plaintiff a one-half interest in the property, but pleads that this understanding was:
“on the basis that two other properties would also be shared equally between the Defendant
and Pasquale Ciaglia (and after their deaths by their respective children) being:
5
(a)
the block of apartments owned by the Plaintiff‘s mother located at Crows Nest (‗the
Crows Nest property‘); and
(b)
the house built by the Plaintiff in Italy (‗the Italy Property‘).”
There was no evidence that the admitted agreement between the parties was subject to a term or
understanding that it was conditional upon either the Crows Nest property or the Italy property being
“shared equally” between the defendant and Pasquale Ciaglia, and after their deaths, their respective
children. It is not clear what that allegation was intended to convey, given that the Crows Nest
property was not owned by either the plaintiff or his brother. It was not suggested to the plaintiff in
cross-examination that the agreement was subject to any such condition. The defendant did not give
evidence.
6
On 16 April 1991 the plaintiff executed a memorandum of transfer in registrable form of his interest in
the Chatswood property to his brother. The transfer stated that it was made in consideration of the
payment of $195,000. Pasquale Ciaglia became the sole registered proprietor of the property. The
transfer was made pursuant to the loan agreement. The plaintiff contends that by 1993 he had repaid
the whole of the loan and interest. The date by which the loan was repaid is disputed by the defendant,
but there is no dispute on the pleadings that the loan was repaid prior to Pasquale Ciaglia’s death in
2002. In para 15 of his statement of claim the plaintiff pleaded:
“15.
After the repayment by the Plaintiff of all monies outstanding in relation to the loan
agreement, Pasquale Ciaglia failed or neglected to transfer to the Plaintiff a half
share interest in the property.”
In response to this paragraph the defendant pleaded:
"As to paragraph 15 of the Statement of Claim, the Defendant admits that after repayment of
all monies outstanding in relation to the Loan Agreement Pasquale Ciaglia did not transfer to
the Plaintiff a half share interest in the Chatswood Property but says further that:
7
(a)
at no time did the Plaintiff request that Pasquale Ciaglia transfer to the Plaintiff a
half share interest in the Chatswood Property; and
(b)
in or about 1999 or 2000 Pasquale Ciaglia offered to transfer the half share interest
in the Chatswood Property to the Plaintiff and the Plaintiff refused this offer for the
reason that matters with his former wife in the Family Court had not been resolved
and he did not wish to have any property in his name.”
The defendant pleads that the reason she refused to transfer the half share in the Chatswood property to
the plaintiff was that the plaintiff refused to acknowledge the entitlement of the defendant’s children to
a share in both the Crows Nest property and the Italy property. She did not aver that the reason she
refused to transfer the half share in the Chatswood property to the plaintiff was that the loan had not
been repaid. There was no evidence that any proposal was put to the plaintiff that the plaintiff
acknowledge an entitlement of the defendant’s children to a share in the Crows Nest property or the
Italy property or of his refusing to do so, and no such matter was put to the plaintiff in crossexamination.
8
In about January 2003, not long after Pasquale Ciaglia’s death, the plaintiff spoke to the defendant and
said words to the effect that he wanted her to transfer his half of the property back into his name. She
said “How do I know that the Chatswood property is half yours?”. He replied “You know very well that
half of it is mine and I want you to transfer my one half back to me.”
9
Some time after 18 February 2003 the defendant handed the plaintiff a document and told him that
“I‘ve done this addendum so that it forms part of my Will. I‘ve fixed everything up for you.” The
document she gave to the plaintiff was signed by her and was described as an addendum to her last will
and testament. It was directed to a Mr Ralph Selwyn, the family solicitor. The defendant wrote:
“I being of sound mind wish to state that two properties, they being [...] Ridge Street Ettalong
and [...] Goodchap Road, Chatswood, are shared properties and half ownership is to revert
back to my brother-in-law Umberto known as [Robert] Ciaglia ... There are monies owed by
myself and my late husband Pasquale Ciaglia to Robert, of which we are in the process of
working out ...”
10
By this document the defendant acknowledged that the Chatswood property was a “shared property”
with the plaintiff and that half ownership of that property was to revert back to him.
Her
acknowledgement that she and Pasquale Ciaglia owed money to the plaintiff is inconsistent with the
plaintiff’s not having repaid the loan.
11
Probate of Pasquale Ciaglia’s estate was granted to the defendant on 28 May 2003. By a transmission
application dated 16 December 2003 the defendant applied to be registered as proprietor of the estate or
interest of the late Pasquale Ciaglia in the land as beneficiary of his will. She had notice of the
plaintiff’s claim to be entitled to a half share of the property. The property was vested in her on her
obtaining the grant of probate pursuant to s 44 of the Probate and Administration Act 1898. The
vesting of the property in her as executor was subject to any trust or equity affecting the same (Probate
and Administration Act, s 45).
12
The admitted contract is an agreement for a loan and the grant of a common law mortgage
notwithstanding that the property in question is land held under the provisions of the Real Property Act
1900. In G and C Kreglinger v New Patagonian Meat and Cold Storage Co Ltd [1914] AC 25, Lord
Parker of Waddington said (at 47):
“My Lords, a legal mortgage has generally taken the form of a conveyance with a proviso for
reconveyance on the payment of money by a specified date. But a conveyance in this form is
by no means necessarily a mortgage. In order to determine whether it is or is not a mortgage,
equity has always looked to the real intention of the parties, to be gathered not only from the
terms of the particular instrument but from all the circumstances of the transaction, and has
always admitted parol evidence in cases where the real intention was in doubt. Only if
according to the real intention of the parties the property was to be held as a pledge or
security for the payment of money, and as such to be restored to the mortgagor when the
money was paid, was the conveyance considered to be a mortgage.”
13
A mortgage of Torrens title land can be effected by registering an instrument of transfer of the legal
title from the mortgagor, and at the same time, entering into a separate agreement that confirms the
intention that the transfer was by way of security only: Abigail v Lapin [1934] AC 491 at 501; Currey
(Registrar of Titles) v The Federal Building Society (1929) 42 CLR 421.
14
On the defendant’s admission, the transfer by the plaintiff to his brother of his half interest in the
property was not intended to be an absolute conveyance and the money paid on the transfer was not
paid as the price for a transfer on sale but as a loan to be repaid and on terms that the property was to
be restored to the plaintiff when the loan was repaid. The real intention of the parties was that the
plaintiff’s half-interest in the land was to be held by Pasquale Ciaglia as security for the repayment of
the advance with interest. In the case of a common law mortgage, where the mortgagee acquires the
legal title to the property, upon the whole of the mortgage debt being repaid and the mortgagor
becoming entitled to a reconveyance, the mortgagee holds the property on a constructive trust for the
mortgagor (Venables v Foyle (1660) 1 Ch Cas 2; 22 ER 664; Richardson v Syms (1740) 1 Barn C 90;
Cholmondeley v Clinton (1820) 2 Jac & W 1; 37 ER 527; RW Turner, The Equity of Redemption
(1931) Cambridge University Press at 167; Pearce v Morris (1869) LR 8 Eq 217; Tyler, Young and
Croft, Fisher & Lightwood‘s Law of Mortgage, 2nd Australian edition (2005) LexisNexis Butterworths
at [32.54]).
15
Notwithstanding the defendant’s admission, Mr Stack of counsel, who appeared for the defendant
submitted that the evidence of repayment adduced by the plaintiff, did not show that the loan had been
repaid. He submitted that I should determine whether the loan had been repaid based on that evidence
and should find that it had not, notwithstanding the defendant’s admission that it had been repaid. He
referred to Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492 at 520-522.
16
The plaintiff deposed that the loan repayments were made partly from lump sum repayments which he
made from Italy to his mother’s account, and partly by payments from Lajido to Pasquale Ciaglia’s
loan account with the National Australia Bank which he obtained for the purposes of the mortgage
raised on the Chatswood property. The plaintiff said that the payments from Lajido represented his
half share of net income of Lajido to which he was entitled.
17
The plaintiff paid $117,050.77 into his mother’s account between 23 April 1991 and 9 February 1993.
Pasquale Ciaglia’s loan account with the National Australia Bank was credited with 28 payments of
$3,327 from Lajido between May 1991 and September 1993 ($93,156) and six payments in lump sums
ranging between $15,000 and $40,000 made between 26 April 1991 and 19 February 1993 totalling
$144,000. The latter payments were made from Mrs Maria Ciaglia’s bank account.
18
In a number of cases the payments were prima facie made pursuant to a loan agreement between Mrs
Maria Ciaglia and Pasquale. There is no evidence that any repayment by Pasquale to his mother was
made or sought.
19
The result of these payments to Pasquale Ciaglia’s account with the National Australia Bank for the
loan he took was that the account was in credit. That is, Pasquale Ciaglia’s loan from the National
Australia Bank was repaid by August 1993.
20
Damberg v Damberg demonstrates that a court is not bound to act on the parties’ admissions. But a
fundamental purpose of pleadings is to define the issues so as to confine the matters on which evidence
need be led. In Damberg v Damberg Heydon JA observed (at [160]) that courts will act on admissions
of or about matters of fact where there is no reason to doubt their correctness, but are reluctant to do so
if there is such doubt. Where a matter of fact is admitted on the pleadings, it is not a reason to doubt
the correctness of the admission that attenuated evidence is given on that matter, which, but for the
admission, would be insufficient to prove the fact. Were it otherwise pleadings would not only fail in
their purpose, but could be the source of injustice. If a party who admits a fact is later able to say that
the court should not act on the admission because the opposite party’s evidence about the fact does not
amount to proof on the balance of probabilities, the efficacy of pleadings is much diminished. The
opposite party would have to prepare his or her case as if no such admission were made. That is not
the law. I do not doubt the correctness of the admission because of the insufficiency of the objective
corroboration of the plaintiff’s evidence, considered without the admission, to prove the fact if it had
been in issue. Other evidence might well have been called, for example from Mrs Maria Ciaglia, to
explain the payments made through her account. As appears below, I consider that the indirect means
of repayment were probably adopted due to the parties’ desire to conceal the true nature of the
transaction from the plaintiff’s former wife.
21
During the hearing the defendant sought leave to withdraw the admission. I refused that application.
There was no evidence that the admission was made by mistake. I had regard to the defendant’s
admission in her document of 18 February 2003 (at [9] above) that she and her husband were indebted
to the plaintiff, which I regard as inconsistent with the plaintiff’s not having repaid the admitted loan
and interest.
22
Nothing turns on the question as to whether the loan was repaid in 1993 as deposed to by the plaintiff,
or at some time before Pasquale’s death as admitted by the defendant. In the absence of other evidence
as to how the loan was repaid, and having regard to the defendant’s admission, I accept that it was
repaid by August 1993.
23
On the admissions of the defendant, she holds the land on a constructive trust for the plaintiff as to a
one-half share subject to her defences of:
24
a)
the Limitation Act 1969;
b)
laches;
c)
unclean hands;
d)
s 23C and s 54A of the Conveyancing Act 1919; and
e)
indefeasibility under s 42 of the Real Property Act.
The plaintiff did not contend that the property was beneficially owned by him and his brother as joint
tenants so that he became entitled to his brother’s share on his brother’s death. The plaintiff claims to
be entitled to a half-share of the land as tenant-in-common with the defendant.
Limitation Act 1969 (NSW)
25
The defendant contends that the plaintiff’s claim is barred by s 14(1)(a), s 42(1) or s 27(2) of the
Limitation Act.
26
Section 14(1)(a) provides:
―14 General
(1)
An action on any of the following causes of action is not maintainable if brought
after the expiration of a limitation period of six years running from the date on which
the cause of action first accrues to the plaintiff or to a person through whom the
plaintiff claims:
(a)
a cause of action founded on contract (including quasi contract) not being a
cause of action founded on a deed,
...”
27
I accept that the plaintiff is seeking to found his cause of action on the contract made with his brother
in April 1991 that on repayment of the loan with interest, the half-interest in the property would be
transferred back to the plaintiff. As the plaintiff says that the loan was repaid by 1993, and as it is
common ground that the loan was repaid by at least 1999, and as these proceedings were not
commenced until 2008, the claim is clearly statute barred if s 14(1)(a) applies. However, the relief that
the plaintiff claims on the contract is in the nature of a claim for specific performance of the obligation
to transfer back the property. Section 23 of the Limitation Act provides that s 14 does not apply, except
so far as it might be applied by analogy, to a cause of action for specific performance of a contract or
for other equitable relief. It was not submitted that equity would apply s 14 by analogy. The relevant
analogy is not with s 14, but with s 27.
28
Section 42(1) of the Limitation Act provides:
“42 Action for principal, possession or foreclosure
(1)
An action on a cause of action:
(a)
to recover principal money secured by mortgage,
(b)
to recover possession of mortgaged property from a mortgagor, or
(c)
to foreclose the equity of redemption of mortgaged property,
is not maintainable by a mortgagee under the mortgage if brought after the
expiration of a limitation period of twelve years running from the date on which the
cause of action first accrues to the plaintiff or to a person through whom the plaintiff
claims.”
29
The plaintiff’s action is not an action on any of the causes of action referred to in s 42(1)(a), (b) or (c).
The plaintiff’s claim is to recover possession of mortgaged property from the mortgagee, not from the
mortgagor.
30
Section 27(2) of the Limitation Act provides:
“27 General
...
(2)
Subject to subsection (3) an action on a cause of action to recover land is not
maintainable by a person other than the Crown if brought after the expiration of a
limitation period of twelve years running from the date on which the cause of action
first accrues to the plaintiff or to a person through whom the plaintiff claims.”
31
The plaintiff’s action is to recover an estate or interest in land. By s 38(1) the time of accrual of the
cause of action is postponed for so long as the land was not in adverse possession. There is no
evidence that whilst Pasquale Ciaglia was alive he held the land in possession adverse to the plaintiff.
It was not until January 2003 at the earliest, when the defendant queried the plaintiff’s right to a retransfer of the land, that it could be contended that the defendant’s possession of the land was adverse
to the plaintiff. Given that the defendant was in any view entitled to possession of the land as a legal
owner even if she held a half interest on trust for the plaintiff who was an equitable co-owner, and
given that there is no evidence of the defendant having sought to exclude the plaintiff from possession
of the land, I doubt that the cause of action commenced to run even in January or February 2003. The
plaintiff carried out repairs and improvements to the land in 2003 which the defendant did not oppose.
32
In any event, the defendant’s memorandum in which she acknowledged that the Chatswood property
was a shared property, half ownership of which was to revert back to the plaintiff, was a confirmation
of the plaintiff’s right or title such that no limitation period running before 18 February 2003 would
count in the reckoning of a limitation period.
33
For these reasons I reject the defence based on the Limitation Act.
Laches
34
The defendant submits that the plaintiff should be disentitled from equitable relief because of his delay
in commencing proceedings. She points out that on the plaintiff’s case he was entitled to a transfer
back of his half interest in the land in 1993. Yet the plaintiff did not bring proceedings to seek to
enforce his claim until 2006. The proceedings brought in 2006 were dismissed in 2008 by Windeyer J
by reason of difficulties with the pleadings. These proceedings were commenced in December 2008.
The 2006 proceedings were dismissed on the basis that the defendant would not take any point in
relation to the late commencement of the new proceedings which would not have been available in
relation to the 2006 proceedings.
35
Between 1991 and 2002 the plaintiff was resident in Italy. He said he had no reason to commence
proceedings whilst his brother was alive because there was never any dispute between them in relation
to the land. I accept that evidence.
36
Two matters relevant to the defence of laches are the length of the delay and the nature of the acts done
by the defendant during the period of delay which are material to the justice of allowing or depriving
the plaintiff of an equitable remedy (Lindsay Petroleum Co v Hurd (1873-74) LR 5 PC 221 at 239240). There is no evidence that the deceased was in any way prejudiced by the delay. This is not a
case in which relevant evidence may have been lost over the period of delay, because there is no
material difference between the claim propounded by the plaintiff and the agreement admitted by the
defendant. There is no evidence that Pasquale Ciaglia suffered any prejudice by reason of the plaintiff
not calling for a transfer of the land before Pasquale Ciaglia’s death. The plaintiff requested that the
defendant transfer the land to him in early 2003. Her initial response was to provide the plaintiff with a
document which indicated it was her intention to do so. There is no evidence that she suffered any
prejudice by reason of the delay between 2003 and 2006 or 2008 in the plaintiff’s seeking to enforce
his rights against her. I reject the defence of laches.
Unclean hands
37
On 15 August 1990 Cohen J of the Family Court of Australia made various orders against the plaintiff
at the suit of his former wife. His Honour declared that the plaintiff’s former wife had no right, title or
interest in the Chatswood property. The plaintiff was ordered to pay child and spousal maintenance of
$400 per week. In an affidavit sworn in the Family Court on 3 August 2005 the plaintiff admitted that
he made maintenance payments only for a short period following the orders and ceased making those
payments in 1991. On 26 May 2004 the Child Support Agency wrote to the plaintiff stating that
maintenance payments (including adjustments and penalties) totalling $232,512.73 were overdue.
38
In August 2005 the plaintiff applied for an order discharging the orders made in August 1990 for the
payment of child and spousal maintenance and discharging the arrears. In support of that application
he filed an affidavit in which he described his agreement with his brother for the transfer of his interest
in the Chatswood property to his brother in quite different terms. He deposed that he sold his half
interest in the Chatswood property to his brother. He said that he took about $150,000 to Italy
intending to invest the money in Italy, but the return on the investment was minimal and over the
following two years he sent the remainder of the funds back to Australia to be deposited into an
account in his mother’s name. He did not disclose that the moneys were paid by his brother to him as a
loan. He did not say that he had repaid the loan. He did not say that he and his brother had agreed that
upon repayment of the loan his half-interest in the property was to be transferred back to him. He
deposed that when he returned to Australia in 2002 when Pasquale Ciaglia was terminally ill, he
ascertained that his brother had used the funds that he had sent back to Australia to pay off the loan that
Pasquale Ciaglia had taken out to purchase his half interest in the property. He deposed that he then
ascertained that all of the funds which he had deposited to his mother’s account had been used.
39
In August 2005, in connection with that application, the plaintiff filed a financial statement in which he
stated that he did not own or have any percentage share in any real estate.
40
The plaintiff had lodged a caveat on the Chatswood property in April 2005 claiming a half interest as
tenant-in-common. This came to the attention of his former wife. She filed an affidavit in the Family
Court proceedings which referred to this claim. Following the service of her affidavit, the plaintiff
filed a further affidavit in the Family Court sworn on 21 September 2006 in which he deposed to
having filed proceedings in this court on 31 July 2006 seeking declarations to the effect that he is
entitled to a half share of the property.
41
The defendant pleads that the plaintiff’s purpose in entering into the loan agreement with his brother in
1991 was to frustrate the ability of his former wife to secure payment of the maintenance orders made
on 15 August 1990 in the Family Court. She alleges that for this reason the plaintiff does not come to
the court with clean hands. She also alleges that by swearing the affidavits in the Family Court referred
to above, the plaintiff did not come to court with clean hands.
42
The plaintiff denied that the reason he transferred his interest in the property to his brother in 1991 was
to make it difficult for his wife to recover the maintenance payments. He said that some of the loan
advance of $195,000 was used to pay for his legal expenses. Some was invested, and he and his
mother used the interest on the investment in living in Italy. He said that he and his mother had no
money to take overseas.
43
Mr Stack, for the defendant, submitted that there was no commercial purpose in the loan, as the loan
left the plaintiff with about $150,000 which could have been applied immediately for repayment.
There is nothing in the pattern of payments made by the plaintiff to his mother’s account or the
drawings from Lajido that necessarily contradicts the explanation of why the funds were borrowed and
applied.
44
It is curious that the parties to the loan agreement structured the loan as a transfer of the plaintiff’s half
interest in the property to his brother with a promise for retransfer on payment of the loan. That
arrangement involved the payment of stamp duty on the transfer as well as on the mortgage from
Pasquale Ciaglia to the National Australia Bank. There would be further stamp duty payable on the
retransfer after the loan was paid off. It would have been simpler and cheaper for both brothers to have
borrowed the money on mortgage from the National Australia Bank and to have agreed between
themselves that the plaintiff should have the money and would be responsible for repaying the loan.
The fact that they did not document the transaction in that way could support the inference that I am
asked to draw that the purpose of the transaction was to leave the plaintiff without any evident assets in
Australia to meet his obligations under the orders of the Family Court.
45
The fact that the plaintiff made no direct repayments to his brother, but directed payments from Lajido
and channelled repayments through his mother’s account, coupled with the fact that the loan and
mortgage was documented as an apparent sale, supports the defendant’s argument that the transaction
was entered into to defeat his former wife’s ability to enforce the orders for maintenance.
46
I do not accept the plaintiff’s explanation for failing to disclose the true nature of his agreement with
his brother in his affidavits filed in the Family Court in 2005. The plaintiff’s explanation for the
omission was that although he believed he had a half interest in the Chatswood property, his claim to
that interest had not been established and was denied by the defendant. That does not explain why he
failed to disclose his claim to the half interest, nor does it explain his evidence to the Family Court that
he sold his interest in the property to his brother without disclosing that the payment made by his
brother to him was a loan which he had repaid and without disclosing his brother’s agreement to
retransfer the property to him. His failure to disclose the true arrangement further supports the
inference that that arrangement had, as at least one of its purposes, the purpose of creating the
appearance that the plaintiff had no assets within the jurisdiction against which the maintenance orders
could be enforced. I conclude that was one of the purposes of the transaction.
47
Whilst these matters adversely affect the plaintiff’s credit, they do not warrant the refusal of equitable
relief. There is no reason the defendant should be the beneficiary of the plaintiff’s improper conduct.
At one point Mr Stack for the defendant submitted that the plaintiff had accurately described the nature
of the arrangement in his affidavit filed in the Family Court on 3 August 2005. That submission is
inconsistent with the defence. The defendant pleads that the filing of the affidavit justifies the refusal
of equitable relief on the grounds of unclean hands, which is only explicable on the basis that the
defendant contends the affidavit to be untruthful.
48
To make out a defence of unclean hands the plaintiff’s wrongful conduct must have an “immediate and
necessary relation to the equity sued for” (Dewhirst v Edwards [1983] 1 NSWLR 34 at 51). The filing
of affidavits in the Family Court in 2005 which did not disclose the true nature of the transaction does
not have a sufficient nexus with the plaintiff’s claim to enforce against the defendant, who was the
executrix of Pasquale Ciaglia’s estate, the agreement he had with his brother. I accept that a purpose of
the agreement between the plaintiff and his brother was to remove the appearance of the plaintiff
having assets within the jurisdiction. That conduct also does not have a direct relation to the equity
sued for. On either basis, it is not equitable to give effect to the defence of unclean hands with the
result that the plaintiff’s former wife would have no prospect of belatedly obtaining payments she is
owed out of the plaintiff’s interest in the land in question. There is no reason the defendant should be
the beneficiary of conduct directed at depriving the plaintiff’s former wife of the benefit of the orders
she obtained.
49
Further, before commencing these proceedings, the plaintiff had filed an affidavit in the Family Court
stating that he was seeking a declaration to the effect that he was entitled to a half share of the property.
That the plaintiff made that disclosure after his former wife filed an affidavit referring to the caveat
lodged by the plaintiff does not alter the fact that the plaintiff has, albeit belatedly, made disclosure.
Sections 23C and 54A of the Conveyancing Act
50
Sections 23C, 23E(d) and 54A(1) and (2) provide:
“23C Instruments required to be in writing
(1)
Subject to the provisions of this Act with respect to the creation of interests in land by
parol:
(a)
no interest in land can be created or disposed of except by writing signed by
the person creating or conveying the same, or by the person‘s agent
thereunto lawfully authorised in writing, or by will, or by operation of law,
(b)
a declaration of trust respecting any land or any interest therein must be
manifested and proved by some writing signed by some person who is able
to declare such trust or by the person‘s will,
(c)
(2)
a disposition of an equitable interest or trust subsisting at the time of the
disposition, must be in writing signed by the person disposing of the same or
by the person‘s will, or by the person‘s agent thereunto lawfully authorised
in writing.
This section does not affect the creation or operation of resulting, implied, or
constructive trusts.
...
23E Savings in regard to secs 23B, 23C, 23D
Nothing in section 23B, 23C, or 23D shall:
...
(d)
affect the operation of the law relating to part performance.
...
54A Contracts for sale etc of land to be in writing
51
(1)
No action or proceedings may be brought upon any contract for the sale or
other disposition of land or any interest in land, unless the agreement upon
which such action or proceedings is brought, or some memorandum or note
thereof, is in writing, and signed by the party to be charged or by some
other person thereunto lawfully authorised by the party to be charged.
(2)
This section applies to contracts whether made before or after the
commencement of the Conveyancing (Amendment) Act 1930 and does not
affect the law relating to part performance, or sales by the court.‖
There is a threshold question of which of s 23C and s 54A is potentially engaged, or whether both are
engaged. In Baloglow v Konstantinidis & Ors [2001] NSWCA 451; (2001) 11 BPR 20,721 Giles JA,
with whom Mason P agreed, held that s 54A applies at the stage of there being an executory agreement
to dispose of an interest in land, whereas s 23C arises at the stage of performance of an agreement or
where there is a creation or disposal of property without a prior agreement. His Honour said (at [162]):
“[Section 54A] arises at the stage of agreement to create or dispose of an interest in land. It
has its own requirement of writing, less stringent than the requirement in s23C in that a note
or memorandum of the agreement is sufficient and the signing agent need not be authorised in
writing. [Section 23C] arises at the stage of performance of an agreement or where there is no
prior agreement, and in keeping with the importance attached to property rights has a more
stringent requirement of writing in that the creative or dispositive instrument itself must be in
writing and the signing agent must be authorised in writing. S54A excepts the operation of the
law relating to part performance, material to an executory agreement, s23C excepts the
operation of the law relating to trusts, material to property rights. S23C is in a Part of the
Conveyancing Act dealing with property and a Division of that Part dealing with assurances,
and otherwise concentrates on property rights, see s23C(1)(b) dealing with declarations of
trust and s23C(1)(c) dealing with disposition of subsisting equitable interests. There is no
encouragement in its language to make it apply to executory agreements under which
property rights are to be created or disposed of when the agreement is performed.‖
It was held that s 23C does not apply where the only basis for asserting that property rights were
created or disposed of was because equity would decree specific performance of an executory
agreement. Giles JA also said that where the question was whether there had been an assurance of
property because the agreement to dispose of property had been performed, s 23C, and not s 54A, was
the relevant section. His Honour said (at [190]):
“... When property rights are involved, s23C applies at the time of assurance. It may be that
property rights arise without an assurance, because the purchaser pays the purchase price
and the vendor holds the property as bare trustee for the purchaser. In that situation there will
be no requirement of writing because s23C(2) will have effect.”
52
On this analysis, only s 23C would be engaged in the present case.
53
On the admitted facts, the plaintiff has performed his obligations under the agreement by granting the
mortgage. For the reasons below, equity prevents the transferee from denying the true character of an
apparently absolute conveyance as a mortgage if it would be a fraud to insist on the absolute
conveyance. The deceased became the registered proprietor of the plaintiff’s half interest in the land
and advanced the loan to the plaintiff. The agreement is therefore executed; it does not require the
execution of an instrument or the doing of an act to put the parties in the position contemplated by the
agreement as mortgagee/mortgagor and lender/borrower.
54
The plaintiff has repaid the loan. Accordingly, all that remains is for equity to enforce the parties’
property rights under the conveyance by recognising a constructive trust in the plaintiff’s favour that
arose upon the loan repayment (see cases cited at paragraph [14]). The application of s 23C(1)(a) to the
enforcement of the constructive trust is excluded by s 23C(2) (see Baloglow v Konstantinidis at [158]
and [162]). For this reason, s 23C(1)(a) does not preclude the court from recognising that the interest
created in Pasquale Ciaglia was an interest as mortgagee only, preserving to the plaintiff an equity of
redemption, and thus enforcing the defendant’s obligation to reconvey.
55
The issue in Baloglow v Konstantinidis was whether s 23C applied to an agreement which was wholly
executory, where the only basis for contending that interests in property were created or disposed of
was through the agreement being amenable to an order for specific performance. Only s 23C was
relied on because there was a memorandum signed by the agent of the party to be charged, although the
agent was not authorised in writing. The ratio of the decision is that s 23C does not apply in such
circumstances. The reasoning that s 23C, and not s 54A, applied where the interest created or disposed
of arose out of the performance of the agreement was said to be part of an harmonious relationship
between the sections. But it was not essential for the decision. That part of the reasoning in Baloglow
v Konstantinidis is difficult to reconcile with earlier cases concerning s 4 of the Statute of Frauds (the
equivalent of s 54A) and in any event is inconsistent with the later Court of Appeal decision in Khoury
v Khouri [2006] NSWCA 184; (2006) 66 NSWLR 241.
56
So far as earlier cases are concerned, in the seminal case of Maddison v Alderson (1883) 8 App Cas
467, the plaintiff had fully performed the agreement the jury found had been made that the deceased
would leave the plaintiff a life interest in certain lands if she continued to serve him as housekeeper
without wages. Yet the plaintiff failed under s 4 of the Statute of Frauds because there was no
memorandum of the agreement signed by the deceased and the acts of performance were not
unequivocally in their own nature referable to some such agreement as was alleged. Lord Selborne
said (at 478-479) that:
“... it may be taken as now settled that part payment of purchase-money is not enough; and
judges of high authority have said the same even of payment in full: Clinan v. Cooke; Hughes
v. Morris; Britain v. Rossiter. Some of the reasons which have been given for that conclusion
are not satisfactory; the best explanation of it seems to be, that the payment of money is an
equivocal act, not (in itself), until the connection is established by parol testimony, indicative
of a contract concerning land. I am not aware of any case in which the whole purchase-money
has been paid without delivery of possession, nor is such a case at all likely to happen. All the
authorities shew that the acts relied upon as part performance must be unequivocally, and in
their own nature, referable to some such agreement as that alleged: Cooth v. Jackson; Frame
v. Dawson; Morphett v. Jones.” (citations omitted)
57
None of the authorities cited for the proposition that payment of the purchase price in full was not a
sufficient act of part performance supported the proposition, but this reasoning is inconsistent with s 4
of the Statute of Frauds being inapplicable if payment were made in full so that the land was held on a
constructive trust for the purchaser.
58
In Lincoln v Wright (1859) 4 De G & J 16; 45 ER 6 (discussed below in the context of equity’s not
permitting the statute to be used as an instrument of fraud) it was agreed that an apparently absolute
conveyance should be no more than security for payment of a debt. The agreement was at least partly
executed. The mortgagor’s claim to enforce the oral promise for redemption was upheld by KnightBruce LJ on the grounds of part performance.
59
In Khoury v Khouri the primary judge found that the parties made an oral agreement that B (Bechara)
would pay $30,000 to P (Peter) and pay P’s instalments under a bank loan in exchange for P’s promise
to hold his half share in certain land for the benefit of, that is, on trust for B (at [26]-[28]). The primary
judge found that the agreement had been performed by a complex arrangement involving other parties.
Later the primary judge described the agreement as one by which B promised to declare a trust in
favour of A, but Bryson JA, who gave the leading judgment, rejected that description and said that on
the primary findings there was a declaration of trust with immediate effect (at [40]).
60
Bryson JA (with whom Handley JA agreed) said (at [54] and [57]):
“[54]
Upon the present facts, it is my opinion that both ss 54A and 23C(1)(a) operate to
prevent enforcement of the agreement as found unless enforcement is available under
the doctrine of part performance.
...
[57]
... [counsel contended] that as Bechara performed his obligations under the
agreement and paid the consideration Peter held his share in the property on a
constructive trust for Bechara. It was then contended that if Peter held his share in
the property as a constructive trustee for Bechara there was no room for the
operation of s 23C(1) having regard to s 23C(2). I will not examine this argument
further; it could well be right but would not overcome s 54A ...”
61
Thus it was held that s 54A applied to an agreement to declare immediately a trust of land, and that was
so notwithstanding that the agreement had been performed and a constructive trust arose if the
agreement was enforceable. The Court of Appeal held that payment of money could not be relied on as
part performance to take the case outside s 54A and in any event the complex arrangements involving
payments to third parties were not acts unequivocally referable to some such agreement as was alleged.
It did not reverse the primary judge’s finding that the agreement had been performed.
62
This analysis is only consistent with s 54A applying not only to executory but also to executed
agreements.
It is the ratio of Khoury v Khouri.
Accordingly, notwithstanding Baloglow v
Konstantinidis, I conclude that s 54A is also potentially applicable. That is not to say that s 23C(1)(a)
is not also engaged. The defendant pleads that s 23C(1)(a) precludes the plaintiff’s asserting that the
transfer of the land to Pasquale was by way of mortgage and that he is entitled to redeem the mortgage.
Once it is recognised that the transfer to Pasquale was not absolute but by way of mortgage, there is no
difficulty in concluding that s 23C(1) does not apply because the plaintiff is seeking to enforce a
constructive trust. Prima facie s 23C(1)(a) means that in the absence of writing the plaintiff cannot
establish that the transfer was by way of mortgage and he has an equity of redemption. For the reasons
below this would be to use s 23C(1)(a) as an instrument of fraud, which the defendant is not allowed to
do.
63
The authorities also establish that independently of the doctrine of part performance, s 54A cannot be
used as an instrument of fraud. Hence s 54A also does not preclude the recognition and enforcement of
the plaintiff’s equity of redemption. I also consider that the plaintiff can rely on the doctrine of part
performance.
Fraud on the Statute
64
The plaintiff did not specifically plead that the defendant was not entitled to rely upon either s 23C or s
54A of the Conveyancing Act because to do so would be to use those sections as an instrument of
fraud. However, he pleaded the facts which give rise to that contention and during the hearing it was
plainly identified as an issue arising on the pleadings and the evidence.
65
The following cases illustrate that equity will not permit a party to rely upon s 23C of the
Conveyancing Act to resist proof that an apparently absolute conveyance was intended to be by way of
security only and to deny a mortgagor’s right to redeem and obtain a retransfer of the mortgaged
property. To do otherwise constitutes a fraud on the statute. If the issue arises under s 54A, as I think it
does, the same wider principle applies that a party cannot use the Statute as an instrument of fraud to
deny an agreement for the grant of a mortgage.
66
The leading analogous case is the decision of the Court of Appeal in Chancery (Knight-Bruce and
Turner LJJ) in Lincoln v Wright. There, a mortgagee made it known that he proposed to exercise his
power of sale and sell the mortgaged property for £220 unless a higher offer could be obtained. The
mortgaged property consisted of land and buildings and a policy of insurance on the mortgagor’s life.
The plaintiff (mortgagor) agreed with Wright that Wright would buy the mortgaged property from the
mortgagee on the mortgagor’s behalf for £230 and have a lien on it for that sum, but that the mortgagor
would pay five percent interest and the premiums on the policy. The mortgagor and Wright agreed that
the mortgagor would continue to occupy the house and land and that rents of other buildings would be
applied in reducing the principal. Wright duly purchased the mortgaged property. The mortgagor
remained in possession of the house and land without paying rent. Wright received rents from other
buildings. The mortgagor paid the premiums on the policy as they became due. The agreement
between the mortgagor and Wright was oral. It was not evidenced by any note or memorandum.
Knight-Bruce LJ held that the plaintiff’s continuing in possession of the property amounted to part
performance of the oral agreement although his Lordship added that “though I have mentioned part
performance alone as a ground for excluding the operation of the Statute of Frauds, I am not sure that
its operation is not also otherwise excluded in this case” (at 8-9). Turner LJ said (at 9):
“Without reference to the question of part performance, on which I do not think it necessary to
give any opinion, I think that the parol evidence is admissible and is decisive upon the case.
The principle of the Court is, that the Statute of Frauds was not made to cover fraud. If the
real agreement in this case was that as between the Plaintiff and Wright the transaction
should be a mortgage transaction, it is in the eye of this Court a fraud to insist on the
conveyance as being absolute, and parol evidence must be admissible to prove the fraud.
Assuming the agreement proved, the principle of the old cases as to mortgages – to which I
referred in the course of the argument – seems to me to be directly applicable. Here is an
absolute conveyance, when it was agreed there should be a mortgage; and the conveyance is
insisted upon in fraud of the agreement.”
67
The “old cases as to mortgages” to which Turner LJ referred may have included England v Codrington
(1758) 1 Eden 169; 28 ER 649. In that case the proviso for redemption was fraudulently omitted by the
drawer of the conveyance which, on its face, was absolute. There was no note or memorandum signed
by the mortgagee or his agent evidencing the true nature of the transaction, but the mortgagee by his
answer admitted that the agreement was not for the sale of the estate but the estate was redeemable in
certain circumstances (which the mortgagee contended had not occurred). The court recognised and
enforced the true transaction (that the conveyance was by way of security) notwithstanding the absence
of writing.
68
In Edge v Worthington (1786) 1 Cox 211; 29 ER 1133, Kenyon MR admitted parol evidence to prove
the “actual agreement”, being an agreement for the grant of a mortgage, and made a decree for
foreclosure. Thus it is stated in W Clark (ed), Fisher and Lightwood‘s Law of Mortgage, 12th ed
(2006) LexisNexis Butterworths at [1.12] that:
“The courts will, however, give effect to an intention to create a security, if proved, and will
also take care that a borrower shall not suffer from the omission by fraud, mistake, or
accident, of the usual requisites of a mortgage. An instrument which purports to be an
absolute conveyance may, therefore, be construed as a mortgage where, according to the true
intention of the parties, it was intended to be regarded as a mortgage. This will be done
where there is parol evidence of the non-execution, erasure, or omission by mistake or fraud
of an intended defeasance or proviso for redemption, or if a separate defeasance or
agreement for a right of redemption has been made by the mortgagee or his duly authorised
agent, either in writing or orally ...” (emphasis added)
(See to the same effect Fisher and Lightwood’s Law of Mortgage 2nd Australian Edition at [1.20].)
69
Cases of the highest authority establish that oral evidence is admissible to establish the true nature of
the transaction, and that if the true nature of the transaction is one of mortgage, the equity of
redemption can be enforced (Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98; Barton v Bank of NSW
(1890) LR 15 App Cas 379). The reason, I take it, that the Statute of Frauds does not stand in the way
is that it would be to use the Statute as an instrument of fraud to deny enforcement of the true
transaction.
70
The judgment of Turner LJ in Lincoln v Wright has frequently been applied to allow a transferor who
purports to part with his or her property under an absolute conveyance to establish that the true
intention of the parties was that the conveyance should not be absolute, but that the transferee had
orally agreed to reconvey the property in certain events. In Haigh v Kaye (1872) LR 7 Ch App 469 the
plaintiff conveyed his estate to the defendant by deed which was expressed to be an absolute
conveyance for consideration of the purchase price. The defendant admitted that the purchase price
had not been paid and it was found that on the defendant’s admissions that he acquired the property as
trustee for the plaintiff. The trust so found appears to be an express, not a resulting or constructive,
trust. It was held, applying the judgment of Turner LJ in Lincoln v Wright, that the Statute of Frauds
could not be relied upon to deny the trust.
71
In Re Duke of Marlborough; Davis v Whitehead [1894] 2 Ch 133, the Duchess of Marlborough
transferred her leasehold estate to the Duke by deed, expressed to be an absolute assignment made for
natural love and affection, in order that the Duke could use the property as security for a loan to be
raised by him on mortgage. The Duke and Duchess both intended that he would reconvey the property
to her, and that she was beneficially entitled to the property subject to the mortgage. Stirling J,
applying the judgment of Turner LJ in Lincoln v Wright and also Haigh v Kaye, held that the Duchess
was entitled to the equity of redemption in the leasehold house and that she was entitled to a
reconveyance of the leasehold estate subject to the mortgage.
72
In Rochefoucauld v Boustead [1897] 1 Ch 196 the plaintiff was the owner of lands subject to a
mortgage. The mortgagees exercised their power of sale and the defendant purchased the land. The
plaintiff successfully contended that the defendant purchased the land as trustee for her subject to a
charge in the defendant’s favour in respect of sums advanced by him to purchase the estates and to
work them. The Court of Appeal held (at 206) that:
“Consequently, notwithstanding the [Statute of Frauds], it is competent for a person claiming
land conveyed to another to prove by parol evidence that it was so conveyed upon trust for the
claimant, and that the grantee, knowing the facts, is denying the trust and relying upon the
form of conveyance and the statute, in order to keep the land himself.”
73
The Court of Appeal cited Lincoln v Wright and Re Duke of Marlborough; Davis v Whitehead in
support of that principle.
74
In Cadd v Cadd (1909) 9 CLR 171 at 187 Isaacs J said:
“The respondent‘s evidence as to the trust is entirely oral, but that in itself presents no
difficulty. The repudiation by any person of the terms upon which he has been entrusted with
the legal title to property is a fraudulent use of another‘s confidence and the Statute is not
intended to cover fraud: In Re Duke of Marlborough; Davis v Whitehead; Rochefoucauld v
Boustead.”
75
In Bannister v Bannister [1948] 2 All ER 133 the defendant sold her cottages to the plaintiff on terms
which included an oral agreement for the grant of a life tenancy in one of the cottages. The Court of
Appeal held that to permit the plaintiff to rely upon the absolute character of conveyance to defeat the
oral reservation of a life tenancy would be to use the Statute of Frauds as an instrument of fraud. In
Dalton v Christofis [1978] WAR 42, Smith J held that the Statute of Frauds could not be relied on to
smother proof of an agreement to hold land on an express trust.
76
In Last v Rosenfeld [1972] 2 NSWLR 923, the parties were joint owners of property. The parties
executed and completed a contract for the defendants to purchase the plaintiffs’ half-share of the
property. There was a prior oral agreement that the defendants would resell that half-interest to the
plaintiffs if the defendants did not live in the property themselves within one year. After the purchase
contract was completed, the defendants did not live in the property within the year but then sought to
deny the oral agreement. Hope J held that the principle that the Court would not allow the Statute of
Frauds to be used as an instrument of fraud applied to s 54A of the Conveyancing Act and precluded
the defendants’ reliance upon that section. In the course of a wide ranging review of authority, his
Honour observed (at 927-928):
“No sooner had the Statute of Frauds been enacted in 1677 than the courts set about relieving
persons of its effect in cases where it was thought that the legislation could not have been
intended to apply. In general terms, it was said that the courts would not allow the Statute of
Frauds to be made an instrument of fraud, and that it did not prevent the proof of the fraud.
No doubt, as was said by Selborne L.C. in Maddison v. Alderson in relation to one of the
principles that was developed in this way, namely, the doctrine of part performance, this
summary way of stating the principle, however true it may be when properly understood, is
not an adequate explanation, either of the precise grounds, or of the established limits, of the
relevant doctrine. The general approach indicated by this summary statement did, however,
spread into a number of fields where a statute requires writing, some of which it will be
necessary to look at for the purposes of the present case. The fields in which this general
approach was adopted include, as well as the doctrine of part performance, the rule that parol
evidence is admissible to show that an absolute conveyance was in truth by way of security
only, the principle that oral evidence can establish that a person has taken a transfer of
property as trustee or agent for another, the doctrine whereby equity gave relief upon a
breach by the survivor of two persons of a contract they had made to make mutual wills, and
the principle whereby equity will compel beneficiaries who have agreed to accept their
interests under the will upon communicated trusts to perform those trusts. ...”
77
His Honour also observed that mortgage cases were within this principle, that is, the Statute of Frauds
cannot be used to prevent a person who has transferred his or her property, apparently by way of
absolute conveyance, from establishing that the true transaction was by way of mortgage and that he or
she was entitled to redeem, that is, to take a reconveyance upon repayment of the loan. His Honour
said (at 931-932):
“Another class of case where what I have described as the general approach is adopted is that
where land has been conveyed by what on its face is an absolute conveyance, but where the
transaction was intended to be defeasible. The mortgage cases are included in this class. In
the seventeenth century and for some time thereafter it would seem that a mortgage was
commonly effected by an absolute conveyance to the mortgagee, who also executed a separate
deed of defeasance. This deed would operate according to its terms at law, and if the
condition which it contained as to repayment was not duly performed, the legal right of the
mortgagor to recover the property would go. In equity, of course, the mortgagor would still
be entitled to redeem until he was foreclosed or otherwise lost this right, but by virtue of an
equitable right and not by virtue of any legal or contractual right. ... ... there are a great many
decisions in which a court of equity has admitted oral evidence to establish that an apparently
absolute conveyance was in truth a mortgage. In most of these cases it was not material to
order the execution of a deed of defeasance or to rectify the absolute conveyance; the time for
the exercise of the legal right to redeem was gone and the only question was whether the
mortgagor had an equitable right to redeem. The maxim ‗Once a mortgage always a
mortgage‘ was developed in relation to this situation, but it seems to me that this is really
merely an expression of the general principle as to fraud in its application to mortgages. ...
The rule that oral evidence can be adduced to show that an apparently absolute transaction is
in truth a mortgage is well established and has been affirmed by the Privy Council: Barton v.
Bank of New South Wales.”
78
His Honour then dealt with Lincoln v Wright.
79
These observations, coupled with his Honour’s applying the wider principle that the Statute of Frauds
cannot be used as an instrument of fraud in the context of s 54A, indicate that the principle applies to
both s 23C and s 54A. This is consistent with Lincoln v Wright. The learned authors of Meagher,
Gummow & Lehane‘s Equity Doctrines & Remedies, 4th ed LexisNexis Butterworths at [12-125] treat
Lincoln v Wright as a case on s 7 of the Statute of Frauds, that is as a case on the predecessor to s
23C(1) requiring all declarations or creations of trust of land to be in writing. There is nothing in the
decision in Lincoln v Wright which so confines it. As observed earlier, at least Knight-Bruce LJ
considered the issues under the doctrine of part performance. Moreover, if, as Khoury v Khouri
indicates, both ss 23C and 54A apply, there is no reason to confine the principles discussed above to
cases under s 23C. In any event, Last v Rosenfeld clearly establishes that the principles are not so
confined.
80
Last v Rosenfeld was referred to with approval by the High Court in Theodore v Mistford Pty Ltd
(2005) 221 CLR 612 at [31], although not on this point.
81
In Wratten v Hunter [1978] 2 NSWLR 367, Needham J also held that the principle in Rochefoucauld v
Boustead applies “where land is conveyed to a person as a mortgagee by absolute conveyance, and he
subsequently seeks to rely upon the absolute conveyance so as to deny the equity of redemption of the
mortgagor” (at 369).
82
This line of authority developed independently of the doctrine of part performance. The doctrine of
part performance is itself an illustration of the wider principle that courts will not permit the Statute of
Frauds to be used as an instrument of fraud. In Williams, The Statute of Frauds Section IV (1932)
Cambridge University Press, at 222-223, the learned author opined that the principle that a party will
not be allowed to make the Statute an engine of fraud was restricted in its operation to two classes of
case, namely:
83
“(i)
Cases where one party has partly or wholly performed his side of the contract, and
the other thereupon, designing to secure the benefit of such performance without
performing in return the obligations which the contract imposes on him, sets up a
plea of non-compliance with the Statute; and
(ii)
Cases where such a plea is set up by one who has by fraud prevented the execution of
a sufficient writing.”
Mr Stack for the defendant submitted that if the agreement could not be enforced in accordance with
the doctrine of part performance then the wider principles in relation to a party not being allowed to
rely upon the Statute of Frauds as an engine of fraud would not be of assistance. However as I have
indicated the doctrine of part performance is but an example of the wider principle. It is also clear from
Lincoln v Wright and Last v Rosenfeld that the two principles are discrete. Accordingly the limitations
and prescriptions in the doctrine of part performance have no part to play where the wider principle can
be invoked. It is also clear that, contrary to Mr Stack’s submission that the wider principle should be
confined to the cases of express trusts, the wider principle is not so confined.
84
Mr Stack submitted also that the wider principle is inconsistent with the terms of ss 23C and 54A.
However, the wider principle is of long standing. The current provisions were enacted without material
modification in the light of that well-established doctrine. As Brennan J said in Bahr v Nicolay (No. 2)
(1988) 164 CLR 604 at 656, there is no reason the doctrine should be doubted. The limits of the
doctrine are unclear. But cases on mortgages, such as the present case, fall within it.
85
For these reasons neither s 23C(1)(a) nor s 54A precludes the plaintiff’s establishing that the true
arrangement was a mortgage and not an absolute sale, notwithstanding the absence of writing.
However in case I am wrong in concluding that the doctrine of “fraud on the statute” is applicable to s
54A, I will also deal with the issue of part performance.
Part performance
86
An agreement to mortgage or charge land is within s 54A (Khoury v Khouri at [5] and cases there
cited). There is no note or memorandum of the agreement signed by the deceased or his agent. There
is a note or memorandum of the agreement signed by the person to be charged, that is, the defendant.
She has verified her defence which admits all of the terms of the agreement. The decisions of the Full
Court in Dudgeon v Chie (1954) 55 SR (NSW) 450 and the Court of Appeal in Fletcher v Burns (1997)
12 BPR 22,937 and the earlier decisions in Walters v Morgan (1792) 2 Cox 369; 30 ER 169; Cooth v
Jackson (1801) 6 Ves Jun 12 at 39; 31 ER 913 at 927; and Blagden v Bradbear (1806) 12 Ves Jun 466
at 471; 33 ER 176 at 178 preclude reliance upon the defence, and the defendant’s affidavit verifying
the defence, as constituting a sufficient note or memorandum. (See also Sugden, A Concise and
Practical Treatise of the Law of Vendors and Purchasers of Estates, 14th ed (1862) H. Sweet at 149
and Williams, The Statute of Frauds Section IV at 276-277.) This result has been strongly criticised
(Greig & Davis, The Law of Contract (1987) LawBook Co at 696) but the authorities are binding upon
me. The plaintiff did not seek to rely upon the defence, or the affidavit verifying the defence, as a
sufficient note or memorandum.
87
As to part performance of contracts for the sale of land, it is necessary and sufficient for the plaintiff to
establish acts on his part that are “unequivocally and in their own nature referable to some contract of
the general nature of that alleged” (Regent v Millett (1976) 133 CLR 679 at 683; Waltons Stores
(Interstate) Limited v Maher (1988) 164 CLR 387 at 432; Khoury v Khouri at [86], [90]). Cases on
contracts for the sale or lease of land apply by analogy to the enforcement of agreements creating
securities, but the nature of the acts which suffice as acts of part performance differ, because the
subject matter of the latter class of agreements is not the ownership or possession of land, but the debt
to be repaid and the security to be taken (Cooney v Burns (1922) 30 CLR 216 at 241-242; Theodore v
Mistford Pty Ltd (2005) 221 CLR 612 at 623 [28]).
88
The plaintiff’s acts of performance of the agreement were his signing of the transfer, his receipt of
$195,000 described as the purchase price, his repayment of the principal of $195,000 and payment of
interest.
89
The plaintiff also did work on the property between February and November 2003. That work
involved repairing the roof, laying a new driveway, excavating foundations for retaining walls and
preparing the formwork and pouring the concrete for the walls, replacement of rotten and badly
weathered timbers and painting, refitting banisters, installing a new outdoor veranda light, repairing
leaks on the veranda and relaying the veranda floor, replacing the power board, rewiring, removing
overgrown trees, renovating a bathroom, installing new drainage, demolishing a rear fence and
installing a new fence and retaining wall, other work to a roof, and purchasing and installing a new
skylight, and blocking holes to make roof areas unaccessible to possums and pigeons. Some of the
work was done by the plaintiff personally; some was done by tradesmen whom he engaged. The
plaintiff was not engaged to do the work as a tradesman and was not paid. The plaintiff relied on this
work as further acts of part performance of the agreement to mortgage his interest in the property. It is
an interesting feature of the doctrine of part performance that improvements made by a purchaser to a
property after taking possession with the knowledge of the vendor are regarded as acts of part
performance (Regent v Millett at 682), although they are not acts done in performance of the contract,
but rather in reliance on it. This demonstrates the close relationship of the doctrine to principles of
estoppel (Cooney v Burns at 241).
90
The defendant denied that repayments of the loan could be acts of part performance. Counsel for the
plaintiff relied upon Khoury v Khouri where Bryson JA said (at [90] and [92]) that payments of money
are “unavailable” as acts of part performance and that such payments are “excluded”.
Those
statements must be understood in the context of the case where the contract was one of sale and
purchase and the only acts of part performance relied upon were the payment of money. In Maddison v
Alderson at 476 in a passage quoted by Bryson JA (at [77]), Lord Selborne LC posited a case of part
performance where the vendor would be charged on the equities such that the contract could be
enforced. The case supposed was as follows:
“Let the case be supposed of a parol contract to sell land, completely performed on both sides,
as to everything except conveyance; the whole purchase-money paid; the purchaser put into
possession; expenditure by him (say in costly buildings) upon the property; leases granted by
him to tenants.” (my emphasis)
91
This does not suggest that payments of money are excluded from consideration of whether the contract
has been partly performed, as distinct from being insufficient. Similarly in a passage in cited in Khoury
v Khouri at [82], Knox CJ said in Cooney v Burns (at 222-223):
“It is settled that payment of part of the purchase-money is not of itself and apart from other
circumstances — eg, delivery of possession — a sufficient act of part performance to take a
case out of the statute.” (my emphasis)
92
The payment of money in effecting improvements made with the knowledge of the other contracting
party may be an act of part performance.
93
In Millett v Regent [1975] 1 NSWLR 62, the Court of Appeal found that the acts of the plaintiffs in
entering into and retaining possession, payment off of the owner’s mortgage instalments and making
repairs and renovations to the premises all qualified for consideration as acts of part performance. In
the High Court, Gibbs J, with whom Stephen, Mason, Jacobs and Murphy JJ agreed said (at 683):
“In the present case the giving and taking of possession by itself was sufficient part
performance of the contract and it is therefore unnecessary to consider whether the other acts
relied upon would also, either alone or together, amount to part performance.”
94
The High Court did not disapprove of the reasoning of the Court of Appeal insofar as the Court of
Appeal treated the payment off of the owner’s mortgage instalments as being relevant acts of part
performance.
95
The cases on vendor and purchaser apply only by analogy to an oral contract of loan and mortgage. In
Ex parte Whitbread (1812) 19 Ves Jun 209; 34 ER 496 Lord Eldon observed that in a mortgage by
deposit of title deeds, the fact that an advance of money is made by the person with whom the deeds are
deposited is sufficient to connect the actions so as to conclude that the acts were done in performance
of an agreement to lend on security. His Lordship said (at 212):
“a person, with whom [title] deeds were deposited, having advanced nothing, could not be the
person who was to have an interest in the estate; and where there has been a dealing with the
estate by a third person, who had made an advance, by connecting that dealing with the only
advance, by that person, the deposit has been held a security for him”.
In my view it is open to consider the repayments of principal and payment of interest as acts of part
performance of the agreement for loan and mortgage, even if the payments would not by themselves be
sufficient.
96
If one had regard only to the payments made by Lajido and Mrs Ciaglia to Pasquale, without the
defendant’s admission that the loan was repaid, and the plaintiff’s explanation that those payments
were in repayment of the loan, it could not be said that the payments of their own nature referred
unequivocally to some such agreement as that alleged. The payments were not made by the plaintiff to
Pasquale. However, in my view the defendant’s admission that the loan was repaid can be used to
prove that act of part performance. The defence cannot be relied on as a note or memorandum of the
agreement, but there is no reason it cannot be relied on to prove acts of part performance. The
requirement that acts of part performance must of their own nature refer unequivocally to some such
agreement as is alleged cannot exclude all evidence or admissions to explain the acts. In a typical case
of a contract for sale of land, the act of the purchaser of going into possession is treated as an act of part
performance. But by itself, and without colour from the surrounding circumstances, such an act cannot
be unequivocally referable to an agreement for sale, as distinct from a licence to occupy the property.
97
Support for this approach can be found in the decision of the Court of Appeal in Millett v Regent,
where Glass JA (at 71-72), in discussing the degree of proof required for part performance, chose to:
“… measure the sufficiency of the evidence by asking whether the acts of part performance
admit of any other reasonable explanation, except that the defendants agreed to transfer to the
plaintiffs an interest in the premises.”
His Honour concluded (at 72-73) that:
“... the acts of part performance, viewed in the context of the family dealings, were such as to
admit of no reasonable explanation except that of an agreement that upon the fulfilment of
certain conditions the plaintiffs should become owners of the property as a matter of right and
not of favour.”
98
This suggests that regard can be had to surrounding circumstances to establish, objectively, whether
acts of part performance can be proven. That must be so because it would otherwise be impossible to
say that any acts are unequivocally and in their own nature referable to a contract of the nature alleged.
Hutley JA recognised this in stating (at 65) that:
“If ‗unequivocal‘ [in the requirement for part performance referred to above] is given its
ordinary meaning, it is hard to see how any acts of part performance would suffice, as any set
of acts can have multiple references to ingenious minds. ‗Unequivocal‘ is used in a special
sense …”
99
The High Court did not express disapproval of these statements.
100
In my view, in determining whether there were sufficient acts of part performance, I can have regard
not only to the fact that Pasquale was paid moneys by Lajido and Mrs Maria Ciaglia, but to the
evidence and admissions that those payments were repayments of the plaintiff’s loan with interest.
101
Cases such as Ex parte Whitbread and Arnick Holdings Limited v Australian Bank Ltd (Supreme Court
of NSW, Bryson J, 4 December 1987, unreported) point to the essential ambiguity in saying that the
deposit or delivery of title deeds is a sufficient act of part performance of an agreement to give security.
Lord Eldon observed that it is possible to infer that the purpose of the deposit was to give an interest in
the title deeds themselves rather than creating the security. Bryson J noted that the act of delivering title
deeds “could well be referable to a wish to furnish information about their contents, or to a wish to
have them kept in safe custody.” However the plaintiff’s execution of the transfer in registrable form as
an act of part performance of an agreement to grant security does not invoke the ambiguities identified
by Lord Eldon and Bryson J.
102
In my view the execution by the plaintiff of the transfer of his land coupled with his repayment of the
moneys paid to him on the taking of the transfer with interest are acts which are unequivocally
referable to an agreement for the grant of a mortgage. I think that is further established by the further
acts of part performance by the plaintiff in carrying out repairs and renovations to the property with the
knowledge of the defendant.
103
A complicating factor is that Lajido was apparently the tenant of the property, although the evidence
about that was thin. But there was no evidence that the work carried out by the plaintiff was done by
him on behalf of Lajido. It was not suggested to the plaintiff in cross-examination, nor was there any
evidence, that the directors of Lajido considered or approved of the doing of the work. Lajido did not
pay for it. The expenses were paid by their being drawn from an account of the plaintiff’s mother on
which the plaintiff was authorised to draw. The plaintiff’s mother considered that the plaintiff was
liable to repay her. In my view these acts were the acts of an owner of the property, not acts done on
behalf of the tenant, and they were unequivocally referable to an agreement by which the plaintiff was
entitled to an interest as beneficial owner of the property.
104
Accordingly if it were necessary for the plaintiff to establish part performance, he has done so.
Indefeasibility: Real Property Act s 42
105
Section 42 of the Real Property Act relevantly provides:
“42 Estate of registered proprietor paramount
(1)
Notwithstanding the existence in any other person of any estate or interest which but
for this Act might be held to be paramount or to have priority, the registered
proprietor for the time being of any estate or interest in land recorded in a folio of
the Register shall, except in case of fraud, hold the same, subject to such other
estates and interests and such entries, if any, as are recorded in that folio, but
absolutely free from all other estates and interests that are not so recorded except:
...”
106
No relevant exception is stated in the section.
107
The defendant became registered as the proprietor of the property pursuant to a transmission
application she signed dated 16 December 2003. Section 93 of the Real Property Act relevantly
provides:
“93 Transmission on death of proprietor
(1)
Upon the death of a registered proprietor, the executor, administrator or other
person claiming consequent upon the death, will or intestacy of that deceased
proprietor, or otherwise, to be entitled to be registered as proprietor may apply in
the approved form to the Registrar-General to be registered as proprietor of all or
part of the estate or interest of that deceased proprietor.
(2)
An application under subsection (1) shall be:
(a)
(b)
(3)
108
supported by such evidence as the Registrar-General may require, and
accompanied by the consent of the executor or administrator of the
deceased proprietor where the applicant claims otherwise than as executor,
administrator or trustee unless the Registrar-General thinks fit to dispense
with that consent.
The Registrar-General, on being satisfied that an applicant under subsection (1) is
entitled to the estate or interest claimed in the application, shall record the applicant
in the Register as proprietor of that estate or interest.”
The transmission application stated that the defendant applied to be registered as proprietor of the
estate or interest of Pasquale Ciaglia in the land as beneficiary of his will. At the time she lodged the
transmission application the defendant knew of the plaintiff’s claim to a half-interest in the property
and had acknowledged that interest. The estate was not fully administered. The defendant as executrix
held the estate of which the deceased was a registered proprietor subject to any trust or equity affecting
the property (Probate and Administration Act, s 45). The trust on which she held the property arose
from a contract made by the deceased which was specifically enforceable against her (Fry, A Treatise
on the Specific Performance of Contracts at [211]).
109
No argument was advanced for the defendant to justify the lodgement of the transmission application in
which she claimed the property as beneficiary under the will when, as executrix, she was bound by the
agreement made by the deceased which she admitted.
110
No reply was filed by the plaintiff asserting that the defendant was not entitled to the benefit of s 42 of
the Real Property Act because registration was obtained by fraud. In his opening submissions counsel
for the plaintiff, Mr Morahan, relied upon the “personal equity” exception to indefeasibility. He
submitted that “a personal equity is simply a person‘s ability to apply to a court of equity for relief”
relying upon Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32 at 45 (per
Mahoney JA). However, in the passage relied upon by Mr Morahan, Mahoney JA said that whilst in
some senses every equity or equitable interest may be regarded as a personal claim, that is not the sense
relevant to the “personal equity” exception to indefeasibility.
111
Mr Morahan also submitted that the defendant had the same personal equitable obligation as Pasquale
Ciaglia had when he was alive, namely, to either continue to hold a half-share of the property on trust
for the plaintiff or, on demand, transfer the half-share of the property back to the plaintiff.
112
In Frazer v Walker [1967] 1 AC 569, Lord Wilberforce, in giving the advice of the Privy Council said
(at 585):
“... their lordships have accepted the general principle, that registration under the Land
Transfer Act, 1952, confers on a registered proprietor a title to the interest in respect of which
he is registered which is (under s 62 and s 63) immune from adverse claims, other than those
specifically excepted. In doing so they wish to make clear that this principle in no way denies
the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in
law or in equity, for such relief as a court acting in personam may grant. That this is so has
frequently, and rightly, been recognised in the courts of New Zealand and of Australia: see,
for example, Boyd v Mayor, Etc., of Wellington [[1924] NZLR 1174 at 1223 per Adams J]
and Tataurangi Tairuakena v Mua Carr [[1927] NZLR 688 at 702 per Skerrett CJ].
Their lordships refer to these cases by way of illustration only without intending to limit or
define the various situations in which actions of a personal character against registered
proprietors may be admitted.”
113
As Mr Stack submitted, it is only those “personal equities” which are consistent with the terms and
policy of the Real Property Act which are exceptions to the principle of indefeasibility. It is consistent
with the policy and terms of the Act to enforce a personal equity arising from a contract entered into or
binding on the registered proprietor (Boyd v Mayor Etc, of Wellington [1924] NZLR 1174 at 1223).
Such a personal equity is enforceable whether it arises before or after the registered proprietor obtained
registration (Bahr v Nicolay (No. 2) at 613, 638; Logue v Shoalhaven Shire Council [1979] 1 NSWLR
537 at 563).
114
Nor can an express trustee rely upon s 42 or its equivalent to deny the claim of a beneficiary of the trust
merely by becoming registered as proprietor of the land. To the contrary, in the usual course it would
be the duty of the trustee to become registered so as to acquire the legal title to the land. But that
would not defeat the interests of beneficiaries. The trustee is subject to personal fiduciary obligations
owed to the beneficiaries.
115
Mr Stack relied on LHK Nominees Pty Ltd v Kenworthy [2002] WASCA 291; (2002) 26 WAR 517.
There the Full Court of the Supreme Court of Western Australia held that the in personam exception to
indefeasibility does not extend to a claim to enforce a constructive trust against the registered
proprietor based on the first limb of Barnes v Addy (1874) LR 9 Ch App 244 at 251-252. For the
reasons I gave in Super 1000 Pty Ltd v Pacific General Securities Pty Ltd [2008] NSWSC 1222; (2008)
221 FLR 427 at [213]-[234] I respectfully consider that the majority judgments in that case conflate the
principles relating to a beneficiary’s tracing of his or her property, and the circumstances in which a
recipient of trust property will be liable to personal as well as proprietary remedies as a constructive
trustee under the first limb of Barnes v Addy. Nonetheless, in Super 1000 Pty Ltd v Pacific General
Securities Pty Ltd, I applied LHK Nominees Pty Ltd v Kenworthy because of the approval given to that
decision by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007)
230 CLR 89. Mr Stack submitted that as the personal exception to indefeasibility does not apply to a
constructive trustee under the first limb of Barnes v Addy, nor does it apply to the defendant. I
understood Mr Stack, and at one point Mr Morahan, to submit that if the defendant was liable as trustee
she was liable under the first limb of Barnes v Addy as having acquired trust property with notice of the
trust by which Pasquale was bound.
116
But the defendant is not in that position. She is not a third party who took trust property from a trustee.
On acceptance of her appointment as executrix she became personally bound by force of statute by the
same trust of the property as bound Pasquale Ciaglia. He held the half-interest in the property on a
constructive trust for the plaintiff. She became bound by that trust directly through s 45 of the Probate
and Administration Act. Her liability as trustee is direct. It is not a liability as an accessary. I see no
reason that her obligation as trustee should be discharged because, in breach of trust, she lodged a
transmission application claiming to be entitled to the whole of the property as beneficiary under
Pasquale Ciaglia’s will. As the estate was not fully administered and she had notice of the plaintiff’s
interest, she ought to have lodged her application as executrix of the will, not as beneficiary. Had she
done so she would have had exactly the same estate as registered proprietor as she does presently. The
Real Property Act does not permit the registration of a person as trustee or executor. It would not be
incumbent upon any purchaser from the defendant to inquire as to the capacity in which she applied to
become registered.
117
In Sistrom v Urh (1992) 40 FCR 550 a bankrupt and his wife were registered as joint tenants of Torrens
Title land. Under s 58 of the Bankruptcy Act 1966 (Cth), the bankruptcy of the husband effected a
severance in equity of that joint tenancy. After the bankrupt’s death his wife, without fraud, lodged a
Memorandum of Notice of Death and became the sole registered proprietor of the land as the survivor.
The Full Court of the Federal Court held that a trust arose upon the husband’s bankruptcy such that
although the legal title was held on a joint tenancy the joint tenants held the property on trust for the
trustee in bankruptcy and the wife as tenants-in-common. That trust was enforceable against the wife
after she became registered as the sole proprietor. This was an example of the “personal equity”
exception to indefeasibility relating to the enforcement of express or implied trusts. In the same way,
in the present case, registration does not defeat the plaintiff’s claim.
118
In summary, the defendant is personally bound by the contract by which Pasquale Ciaglia was bound to
reconvey the half-interest in the land to the plaintiff. After the repayment of the loan and interest
Pasquale Ciaglia held the half-interest in the property on a constructive trust for the plaintiff. The
defendant as Pasquale Ciaglia’s executrix was bound by the same trust. Her obligation to perform the
contract and her obligation as trustee are enforceable against her personally and are not affected by s
42.
Procedural fairness
119
The defendant and her legal representatives might consider that the grounds on which I have decided
this case and the authorities on which I have relied were not articulated or referred to by the plaintiff’s
lawyers. The plaintiff pleaded (inadequately) a case of estoppel which was not pressed and with which
I have not dealt. In opening submissions his counsel alleged a case of constructive trust based on the
defendant’s being a volunteer who took a devise of the property under Pasquale’s will with knowledge
of a trust. He submitted that there was imposed on the defendant a personal equitable obligation to
hold the half share interest on trust for the plaintiff, because the defendant took the property knowing
of and subject to the trust. No case was expressly put that the defendant as executrix was bound by the
same trust as bound Pasquale Ciaglia. The plaintiff did not plead that it would be a fraud on the statute
for the defendant to be able to rely on s 23C and s 54A. Part performance was raised by an amendment
I allowed during the hearing. To put it kindly, the plaintiff’s submissions on s 23C and s 54A of the
Conveyancing Act, and on indefeasibility, were abbreviated.
120
However, the relevant facts were pleaded, except the fact that the defendant was appointed as the
deceased’s executrix and obtained a grant of probate. That fact was common ground. Over the
defendant’s objections I gave the plaintiff leave to amend to plead the defendant’s appointment as
executrix and the grant of probate. It was not necessary, although it would have been desirable, that the
plaintiff articulate in his pleading that the defendant as executrix was bound by the same trust as bound
Pasquale Ciaglia. As a matter of pleading it was sufficient that the plaintiff allege the facts relied on
and the relief claimed, without articulating the cause of action (Phillip Morris Incorporated v Adam P
Brown Male Fashions Proprietary Ltd (1981) 148 CLR 457 at 473; Wickstead v Browne [1992]
NSWCA 272; (1992) 30 NSWLR 1 at 15-16).
121
During the course of the hearing I identified what I considered to be the real issues. The issue that the
defendant was bound by the same trust as bound Pasquale Ciaglia was clearly identified. After
allowing the amendment referred to above I adjourned the proceedings so that the plaintiff could be
further cross-examined, the defendant could give evidence if she wished, and both parties could make
further submissions. I invited further submissions on the issues arising under s 23C and s 54A of the
Conveyancing Act, the relevance of the line of authority of which Re Duke of Marlborough; Davis v
Whitehead is an example, and the personal equity exception to indefeasibility. Counsel for the plaintiff
confessed some embarrassment that his submissions did not address all the matters they should have. I
was later advised that the defendant did not wish to adduce evidence, or further cross-examine the
plaintiff. I was provided with no further submissions from either party, apparently as a result of an
agreement reached between the parties that, with a view to saving costs, neither would provide further
submissions if the other did not do so.
122
Accordingly my reasons on the issues arising under s 23C and s 54A of the Conveyancing Act and s 42
of the Real Property Act have been prepared without the assistance of submissions I might have
expected. If there are authorities or arguments I have overlooked it is not because the parties have not
had the opportunity to put relevant matters to me. The defendant has had the opportunity to address the
issues I articulated during the hearing. The task of a judge is to do right to the parties in accordance
with the issues raised, the evidence, and what he or she understands to be the law. I do not consider
that I was relieved of that task by the limited nature of the submissions advanced for the plaintiff when
I had indicated to the defendant’s legal representatives what I perceived to be the relevant questions,
had given the defendant the opportunity to address those questions, and when neither party wished to
provide further assistance.
Conclusion
123
For these reasons it should be declared that the defendant holds the Chatswood property on trust for the
plaintiff as to a one-half share. In his statement of claim the plaintiff also sought orders that:
(a)
The defendant transfer to him a one-half share interest in the property free of all
encumbrances;
(b)
a declaration that he is entitled to a one-half share of all mesne profits from the property ;
(c)
an inquiry as to the amount of such profits;
(d)
an order that the defendant pay to the plaintiff a half-share of the moneys expended by the
plaintiff in improvements on the property;
(e)
124
interest.
The claim to a half-share of moneys spent in making improvements to the property was not pressed in
these proceedings. Mr Morahan accepted that the claim of a co-owner of property to contribution for
expenditure on improvements only arose on an equitable accounting in a partition suit or an application
for the appointment of trustees for the sale, or a similar event which terminated the co-ownership of the
land (Maio v Sacco [2009] NSWSC 413 at [5] and [9] and cases there cited).
125
Mesne profits are damages for trespass (H McGregor, McGregor on Damages, 17th ed (2003) Sweet &
Maxwell at [34-039]). The defendant was not liable to pay mesne profits as she was a joint owner of
the land and entitled to possession. Nor did she receive any mesne profits on an account ordered
against a trespasser. The plaintiff did not seek an account of profits. In any event, there was no
evidence that the plaintiff had received any “profits” from the property. The property was occupied by
Lajido. There was no evidence that Lajido paid rent to the defendant. As the plaintiff was a director of
Lajido it could be expected that he would adduce such evidence had any rent been paid.
126
As well as a declaration as to his beneficial ownership, the plaintiff is entitled to an order for the
defendant to transfer a half-interest in the land to him so that the land is held equally by them as
tenants-in-common. There was no evidence that the defendant had encumbered the property. If there
are any issues in relation to an order for the transfer of the property I will deal with those issues when
short minutes are brought in.
127
I will then also deal with questions of costs.
128
I direct counsel for the plaintiff to bring in short minutes of order in accordance with these reasons.
The short minutes should include an order that the orders to be made and a copy of these reasons be
provided to the solicitors for the plaintiff’s former wife.
******
AMENDMENTS:
29/04/2010 - Addition of further hearing date to cover sheet - Paragraph(s) 0
LAST UPDATED:
29 April 2010