Josipovic v Lezaich [2013] NSWSC 713

Supreme Court New South Wales

Medium Neutral Citation: Josipovic v Lezaich [2013] NSWSC 713 Hearing dates: 30 May 2013 Decision date: 31 May 2013 Jurisdiction: Equity Division Before: Lindsay J Decision: Short Minutes of Orders to be brought in providing, inter alia, for (1) a declaration that, subject to a charge in favour of the defendant, the defendant holds his legal interest in land on trust for the plaintiff; and (2) orders for sale of the land as soon as may be practicable Catchwords: Equity - Trusts and trustees - Implied trusts - When arising - Purchase in another name - Plaintiff is entitled to presumption of resulting trust upon paying for subject property - Work undertaken by defendant subsequent to acquisition of property gives rise to equitable estoppel operating in his favour - Whether defendant's occupation of property cancels his equitable interest - Whether defendant is entitled to defence of laches. Legislation Cited: Conveyancing Act 1919 NSW, s 66G Cases Cited: Calverley v Green (1984) 155 CLR 242 at 265-267 Muschinski v Dodds (1985) 160 CLR 583 at 598-599, 612 and 624 Giumelli v Giumelli (1999) 196 CLR 101; Delaforce v Simpson-Cook (2010) 78 NSWLR 483 at 488 [21] and 492 [55]- - 494 [69] Forgeard v Shanahan (1994) 35 NSWLR 206 at 222 B-C and 223A-E. Orr v Ford (1989) 167 CLR 316 at 330 and 340-342 . Category: Principal judgment Parties: Branka Josipovic (Plaintiff) Rajko Lezaich (Defendant) Representation: DJ Barnett (Plaintiff) M Boyd, Solicitor (Defendant) MJO Legal (Plaintiff) Prichard Lawyers (Defendant) File Number(s): 2012/00083914

Judgment 1The parties to these proceedings are the registered proprietors of land (being lot 125 in deposited plan 264329), at Lawrence (or Gurranang) in the state of New South Wales, as tenants in common in equal shares. 2They acquired legal title to the property by purchase via a contract made on 9 February 1998 and completed on 28 May 1998. The purchase price was $28,000. 3At the time of purchase, a residence erected on the property was in a poor state of repair. A letter dated 5 December 1997 addressed to the selling agent by Copmanhurst Shire Council listed 15 deficiencies in the building - described as "a shed" - required to be rectified if the building were to be fit for human habitation. It counselled against any attempt to upgrade the shed to comply with current building standards for a dwelling because, it said, to do so would be "unlikely to be cost effective". 4The parties were undaunted by that warning. Since their acquisition of the property, the "shed" has been the subject of substantial renovation work. They evidently regarded it as habitable from the outset. One or both of them have lived there, on and off, since its acquisition. 5The parties are in dispute as to the beneficial ownership of the property. 6The plaintiff claims relief designed to establish that, subject to any allowance to be made in favour of the defendant for renovation work undertaken by him on the residence, she is beneficially entitled to the whole of the property. She contends that he holds his one half share in the legal title to the property on trust for her. 7Upon an assumption that the court may find that the defendant himself has a beneficial entitlement in the property, the plaintiff also claims an order (under s 66G of the Conveyancing Act 1919 NSW) for the appointment of trustees for sale or such other orders as may facilitate an early sale of the property. 8The defendant presently resides at the property alone. He has done so for several years, since the parties fell out. The plaintiff says, but the defendant denies, that she suffered physical abuse at his hands. She says she has stayed away from the property since that time because she is fearful for her safety. He denies, not only her allegation of abuse, but also any suggestion that she has been excluded from the property. 9Both parties deny that there has ever been a romantic or any similar form of personal relationship between them. I accept that. The defendant is a generation older than the plaintiff. He was a good friend of her stepfather. She turned to him for protection against violence directed towards her by her brother. 10Both parties gave evidence before me. Both swore affidavits. Both were cross examined. Theirs was the only oral evidence adduced. Other evidence was relatively formal. 11Neither party is a sophisticated person. Both appear to have lived a hard life. 12On the whole, I prefer the evidence of the plaintiff. She gave evidence without any lack of candour. So far as the parties' evidence was corroborated by records, hers was the subject of greater corroboration. I do not accept as credible a cornerstone of the defendants' case: his evidence (not entirely consistent) that he paid $14,000 or thereabouts to the plaintiff, in cash, at the time of purchasing the property, as a contribution towards their joint acquisition of the property. 13At least initially, the defendant gave his oral evidence in a halting manner that reflected on the reliability of his affidavits, independently of any question of honesty. Although, for a time, I contemplated the possibility that he lacked the mental capacity required to give evidence - he denied his authorship of affidavits and dawdled in answering questions - ultimately I formed the view that he did have the requisite capacity. His answers were responsive to questions, and generally consistent with the case for which he contends. Nevertheless, his performance as a witness was not persuasive. 14Given the quality of the evidence adduced, on both sides of the record, the task of the court is to reconstruct the facts - doing the best that can be done with imperfect materials - for the purpose of resolving the questions for determination. 15The substance of the evidence of the plaintiff (which I accept) is to the following effect: (a) the plaintiff paid the whole of the purchase price for the property, from her own resources, with no monetary contribution from the defendant. (b) the property was purchased in the joint names of the parties, at the suggestion of the defendant, in circumstances in which (misguidedly) the plaintiff believed that, if the property were to be purchased in joint names, the defendant's name would appear first on the title and, by placement of her name after his, her ownership of the property would be obscured from the view of her abusive brother. (c) there was no discussion between the plaintiff and the defendant, before completion of the purchase, about the defendant having or acquiring a beneficial entitlement in the property. (d) after completion of the purchase she promised him that, if he undertook renovation work to the residence on the property, he would be recompensed for that work on her sale of the property (if not sooner) and he could himself reside at the property. (e)the plaintiff has paid substantially all the expenses involved in maintenance and improvement of the property, including council rates. 16On the whole of the evidence I find, further, that, after acquisition of the property: (a) the plaintiff encouraged the defendant to believe that his recompense for work done on the property would take the form of a personal share (not necessarily 50 percent) in beneficial ownership of the property; (b) that encouragement in large measure took the form of acquiescence by the plaintiff in his proposals for improvement of the property, or other work undertaken by him, and acquiescence in his occupation of the property as his principal place of residence; (c) the defendant undertook work on the property in reliance upon his belief (encouraged by the plaintiff) that he thereby acquired a personal stake in beneficial ownership of the property; (d) if the plaintiff were now to sell, or force a sale of, the property without recognition of an entitlement in the defendant to a share of the property, or a share of the proceeds of its sale, the defendant would suffer substantial detriment, having made the property his home. 17Having paid the whole of the purchase price for the property, without any intention that the defendant would acquire a beneficial interest in the property, the plaintiff is entitled to a finding that (subject to any qualification arising from subsequent events) the defendant holds his legal title to a one half share of the property on trust for the plaintiff. She is entitled to the benefit of the presumption of a resulting trust: Calverley v Green (1984) 155 CLR 242 at 265-267. That presumption has not been rebutted. I do not accept the defendant's contention that it was the parties' common intention that they would acquire the property as co owners in equity as well as at law: cf, Calverley v Green at 155 CLR 251; Muschinski v Dodds (1985) 160 CLR 583 at 598-599, 612 and 624. 18On the other hand, events subsequent to the parties' acquisition of the property give rise to an equitable estoppel (operating in favour of the defendant, against the plaintiff) because, on the findings I have made, it would be unconscionable for the plaintiff to deny the defendant a share of the property consequent upon the work undertaken by him: Giumelli v Giumelli (1999) 196 CLR 101; Delaforce v Simpson-Cook (2010) 78 NSWLR 483 at 488 [21] and 492 [55]- 494 [69]. 19The plaintiff acknowledges that, in seeking the aid of equity against the defendant, she must herself do equity by him. That requires that some allowance be made in favour of the defendant. 20A determination of what that allowance should be is not an easy task, as both parties have acknowledged. 21Substantial difficulty in this department stems, inter alia, from an inter partes agreement in the conduct of proceedings that both sides would refrain from the expense of obtaining expert evidence. Accordingly, there is no evidence before the court as to the value of the property (apart from its purchase price in distant days); the value of improvements or other work undertaken on the property; or the value of any form of occupation fee that might be sought or otherwise be required to be taken into account. 22Contrary to a submission made on behalf of the plaintiff, I do not accept that the defendant's occupation of the property for several years can properly be taken as having cancelled out any entitlement the defendant might otherwise have to an "ownership interest" in the property or proceeds of sale of the property. 23I accept that, even if the parties were fully co owners of the property, had the defendant excluded the plaintiff from occupation of the property, he would be liable to make an allowance in her favour arising from the fact of that exclusion: Forgeard v Shanahan (1994) 35 NSWLR 206 at 222 B-C and 223A-E. The evidence does not, however, rise quite high enough to ground a finding that the plaintiff was in fact excluded from the property. 24In any event, I am not prepared to embrace the plaintiff's proposition that she has fully discharged the dictates of conscience by allowing the defendant to remain in occupation to date. That has, in part, satisfied the requirements of conscience that constrain her; but it has also fed the defendant's reliance upon a belief in his residence at the property by entitlement. 25I do not accept, as the defendant would have it, that the plaintiff's delay in the enforcement of her rights, via these proceedings, entitles him to a discretionary defence of laches. He has not so altered his position by reason of any delay on her part as to circumscribe her equitable entitlement to relief; provided, of course, she does right by him: Orr v Ford (1989) 167 CLR 316 at 330 and 340-342 . 26With the benefit of submissions on both sides of the record, and with a measure of acquiescence arising from the dialectic of debate between Bench and Bar, I find that the plaintiff's obligations to the defendant will be fully discharged by an allowance in his favour of an amount equivalent to a one quarter share of the proceeds of sale of the property, in circumstances in which orders should be made to facilitate a sale (with vacant possession), as soon as may be practicable. 27I will allow the parties an opportunity to bring in short minutes of order to give effect to these reasons. 28Prima facie, there should be orders to the following effect: (1) a declaration that, subject to a charge in favour of the defendant as provided for in these orders, the defendant holds his legal interest in the property on trust for the plaintiff. (2) orders providing for a sale of the property, with vacant possession, as soon as may be practicable (either by appointment of trustees for sale under s 66G of the Conveyancing Act or by orders for a judicial sale, whether referable to s 103 of the Act or otherwise). (3) a declaration that, upon sale of the property, the defendant is entitled to a one quarter share of the net proceeds of the sale, after allowing for the costs of sale (and, pursuant to orders to be made in the exercise of the power of the court under s 98 of the Civil Procedure Act, 2005 NSW, the costs of these proceedings). (4) a declaration that, pending sale of the property, the defendant's entitlement to a share of such proceeds stands as an equitable charge on the property 29Subject to two qualifications, the costs of the proceedings should be paid out of the proceeds of sale, before distribution of those proceeds (75 percent to the plaintiff, 25 percent to the defendant). 30Subject to those two qualifications, the property should bear the costs of the proceedings. 31The two qualifications are these. First, the defendant should pay, or allow in favour of the plaintiff, the costs thrown away by adjournment of the hearing listed for 25 February 2013. Secondly, the defendant should pay, or allow in favour of the plaintiff, the costs of and incidental to appearances on 9 July 2012. 32The costs to be paid, or allowed in favour of the plaintiff, by the defendant, in each of these two instances should be assessed on the indemnity basis. Otherwise, all costs should be assessed on the ordinary basis.

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