Siemianowski v Sellers [2009] NSWCA 245

New South Wales Court of Appeal

CITATION: Siemianowski v Sellers [2009] NSWCA 245

HEARING DATE(S): 3 August 2009

JUDGMENT DATE: 3 August 2009

JUDGMENT OF: Hodgson JA at [1], [52], [56]; Ipp JA at [54]; Handley AJA at [55]

EX TEMPORE JUDGMENT DATE: 3 August 2009

DECISION: 1. Appeal dismissed with costs. 2. No order made altering the usual basis for assessment of costs.

CATCHWORDS: EQUITY – Resulting trust – Presumption of advancement – Contract for purchase of property in son's name – Father pays deposit and stamp duty – Agreement that transfer be to father and son as joint tenants – Whether father intended to make gifts – Whether father's interest held on trust for son.

CATEGORY: Principal judgment

PARTIES: Michael SIEMIANOWSKI (appellant) Paul Charles SELLERS (respondent)

FILE NUMBER(S): CA 40276/08

COUNSEL: J SLEIGHT (appellant) D J RUSSELL, SC/ J V GOOLEY (respondent)

SOLICITORS: Clinch Long Letherbarrow Pty Ltd (appellant) Thomas and Company (respondent)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 4477/07

LOWER COURT JUDICIAL OFFICER: Barrett J

LOWER COURT DATE OF DECISION: 4 June 2008

LOWER COURT MEDIUM NEUTRAL CITATION: Sellers v Siemianowski [2008] NSWSC 538

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40276/08 SC 4477/07

HODGSON JA IPP JA HANDLEY AJA

3 AUGUST 2009 Michael SIEMIANOWSKI v Paul Charles SELLERS Judgment 1 HODGSON JA: The appellant, who I will call "the father", is the father of the respondent, who I will call "the son". 2 In 2001, they became registered proprietors as joint tenants of the property 3 King Street, Randwick. The son brought proceedings in the Equity Division seeking a declaration that he was the sole beneficial owner of the property, and an order that the father transfer his interest in the property to him. The father put on a cross-claim seeking orders for the sale of the property and division of the proceeds. 3 On 4 June 2008, Barrett J made the orders sought by the son, dismissed the father's cross-claim, and ordered the father to pay the son's costs of the proceedings. 4 The father appeals from those orders. For reasons I will give, in my opinion this appeal should be dismissed. 5 I will start with an account of facts that are either not in dispute or clearly established. 6 In early 2001, at a time when the son was living with the father, the son became engaged to Nicole Mackie. 7 Between about February and April 2001, the son and the father inspected a substantial number of houses in the Eastern Suburbs of Sydney. 8 On 11 April 2001, the son and the father, together with Nicole and perhaps others, inspected the property 3 King Street, Randwick. They were told the asking price was $595,000, and they obtained a copy of the contract. 9 The son and perhaps also the father took the contract to the office of Philip King, solicitor, and handed it to a secretary, and an instruction to act sheet was filled out. There is in evidence a document that appears to be the document produced on that occasion (Combined Book 156) showing the instructions as received from the son alone. The father said he filled out a document on this occasion, but no such document has been produced by him or is in documents produced on subpoena by the solicitor. 10 The son, at the time, was entitled to a significant sum of money from the estate of his late grandfather, which was being administered in Pennsylvania. He did not know how much this would yield in Australian currency, but understood it would yield between $500,000 and $600,000. 11 A few days later, the son and the father went to the Westpac Bank at Randwick and they saw the branch manager, Paul Connell. There is some dispute as to how the discussion proceeded on that occasion. 12 Contracts for the purchase of the property for $595,000 were prepared by the solicitor, showing the son as the sole purchaser. The son alone signed the counterpart that was to go to the vendor. The father provided the deposit of $59,500, and a cheque for that amount was given to the agent on 19 April 2001. Contracts were exchanged later that day. 13 On 20 April, the son and the father both attended Mr King's office, and it was agreed that the property was to be purchased by the son and the father as joint tenants. 14 On 21 April 2001 Mr King wrote to the vendor's solicitors a letter in the following terms: RE: SIEMIANOWSKI FROM COUSINS PROPERTY: 3 KING STREET RANDWICK

I refer to previous communications and advise that I have been instructed that my client's incoming mortgagee requires Michael. Siemianowski to be noted as a registered proprietor following settlement.

While noting the provisions of Clause 4.3, I would be grateful if you could advise as to whether the contract can be amended, by amending the identity of the purchaser to "Paul Siemianowski and Michael Siemianowski" as joint tenants.

I look to hearing from you. 15 On 27 April 2001 the vendor's solicitors replied as follows: Cousins sale to Seimanowoski 3 King Street, Randwick

We refer to your letter dated 21 April 2001. Our client does not object to executing a transfer in favour of Paul Siemanowski and Michael Siemanowski as joint tenants as you have requested.

We note the exemption under the Duties Act for transfers not in conformity but to related persons may apply. 16 The copy of the contract held by Mr King, on the front page, has written in after the son's names the words "and Michael Siemianowski" (which is the father's name) and a tick in the box for joint tenants. However no such alteration was made to the copy of the contract held by the vendor's solicitors. 17 On 27 April 2001, the son wrote to the trustee of the grandfather's estate in Pennsylvania. This letter included the following passages: To fill you in on latest developments at this end, Dad and I have decided to purchase the house I told you about. Dad paid the initial (10%) deposit on the property, $59,500 AUD. Our solicitor advises that we must pay an additional stamp duty fee soon, of approximately $20,000 AUD. Dad is positioned to do this.

…

We have fewer than six weeks to arrange full settlement to our best interests, so we're advised to proceed expeditiously. All the evidence Dad and I have gathered indicates that we gain huge benefits by avoiding costly bank loan arrangements. The electronic transfer of $10,000 USF to cover my UNSW fees worked quickly. Could we access the same method with a $250,000 USD withdrawal? 18 On 28 April, Mr King wrote to the father and the son inter alia requesting a cheque for the stamp duty of $22,269. This letter also noted "You are obtaining mortgage finance with the Westpac Bank to assist with the purchase of the property." The father then provided money for the payment of the stamp duty, and it was paid shortly thereafter. 19 Funds arrived from the United States of America in May, and it was not necessary to borrow any money from Westpac to complete the purchase. 20 The purchase of the property was completed on 5 June 2001 by a transfer to the son and the father as joint tenants. The balance of $535,495.91 was paid on settlement by the son with the funds received from the United States of America. It appears also that about $22,000 for legal costs and disbursements was paid by the son. 21 Thereafter the son, and subsequently his wife also, occupied the property as their home. 22 In his reasons for judgment, the primary judge noted a contention of the father that it was intended from the outset that the parties would be co-purchasers and co-owners; and he rejected that proposition as being inconsistent with Mr King's letter of 21 April and the contract as exchanged. 23 The primary judge also rejected a proposition, proposed by the father's evidence, that the reason he and the son visited the Westpac branch was to ascertain how much the son's inheritance would translate to in Australian dollars, and that the discussion about a loan came up only briefly; and he held that the addition of the father as a purchaser was to satisfy a requirement of Westpac in connection with its proposed loan. 24 The primary judge found it was clear that, when contracts were exchanged, it was the son's intention that he be the sole owner, and that the father's intention may be taken to have been the same. The primary judge did not accept the father's evidence that he regarded the property as an investment. 25 The primary judge summarised his assessment of the transaction as follows: [28] The true characterisation of events is that both plaintiff and defendant knew and intended that the property was to be the home of the plaintiff and his new wife; that the plaintiff alone became the purchaser upon exchange of contracts; that the defendant assisted his son by paying the deposit under and the stamp duty attracted by that contract; that there was uncertainty as to the amount coming to the plaintiff from the United States and the timing of its receipt; that steps were taken to obtain a bank loan in case bridging funds should be needed; that the defendant was added as a purchaser by way of novation only to ensure the availability of the loan; and that neither party intended that the defendant, having provided the funds for the deposit and stamp duty, should gain any beneficial interest in the property by being added as a purchaser. 26 The primary judge also held that the presumption of advancement applied in relation to the payment of the deposit and the stamp duty, and that this was not displaced by evidence to the contrary. 27 The father relies on the following grounds of appeal: 1. His Honour erred in holding that the equitable "presumption of advancement" applied to the payment by the appellant of the deposit of $59,500 and stamp duty of $22,269 ("the funds") in relation to the purchase of 3 King Street, Randwick NSW being the whole of the land contained in certificate of title folio identifier 4/1/902 where his did not find nor did the evidence permit the finding that relationship between the appellant and the respondent was not one where " it is more probable than not that a beneficial interest was intended to be conferred " (per Gibb CJ Calverley v Green (1994) 155 CLR 251 at 250). .

2. His Honour erred in holding that the equitable "presumption of advancement" applied to the payment of the funds where there was evidence to the contrary sufficient to displace any such "presumption" namely; (a) the novation of the contract for the purchase of the property so that the appellant and the respondent were to purchase as joint tenants.

(b) the expressed intention of the respondent in a letter dated 27 April 2001 where the respondent states " [the appellant] and I have decided to purchase [the land] ".

(c) the transfer of the property into the joint names of the appellant and respondent after the reason alleged by the respondent to justify the purchase as joint tenants (being to assist in the obtaining bridging finance) no longer existed.

3. His Honour erred at law in holding that any equitable "presumption of advancement" could operate where the appellant was a registered joint tenant so as to result in trust where appellant held his entire interest in the property on trust for the respondent. If such a "presumption" did arise then his Honour ought to have found that no resulting trust arose and the parties equitable interest followed the legal estate and was at home with the legal title (per Deane J Calverley v Green at page 267).

4. Absent any finding of fact that the funds were a gift from the appellant to the respondent, his Honour erred in failing to find that the appellant and respondent were equitable tenants in common of the land in shares proportionate to their respective contributions to the purchase price being 13.56% and 86.44% respectively. 28 In the submissions, the contentions have been divided into submissions as to facts and submissions as to the possible effect of presumptions. 29 In relation to facts, Mr Sleight for the father in his written submissions first challenged the primary judge's finding that the addition of the father as purchaser was to satisfy a requirement of Westpac in connection with its proposed loan. He made the following particular submissions: (1) that the alleged conversation giving rise to any such requirement occurred prior to exchange, so if this was relevant it could and would have been accommodated in the original contract; (2) that the son had agreed in cross examination that he had not been told by the bank officer to put the father's name on the contract; (3) that Mr King's letter of 21 April did not refer to Westpac as the incoming mortgage lender; (4) that it was not improbable that the meeting with the bank manager without an appointment was primarily to discuss the transfer of funds from the USA and the exchange rate; (5) that the need for the father's participation could have been satisfied by making him a guarantor; (6) that it was more probable that the placing of the father's name on the title was to protect the father's interests after Mr King discovered that the father was making a financial contribution to the purchase; and (7) that this was supported by the son's letter of 27 April 2001 asserting "Dad and I have decided to buy a property." 30 In oral submissions, Mr Sleight expanded particularly on the sixth of those submissions, referring to par [20] of the son's affidavit dated 11 September 2007, in which the son recounts the conversation with the solicitor on 20 April, including saying that the solicitor said that the father should be placed on the title "because of his financial involvement", and in which the solicitor is recorded as saying that if it was a tenancy in common it would be on the basis that the father would get a ten per cent interest. 31 Mr Sleight submitted that the primary judge should have found that the son's letter of 27 April expressed the intention of both parties at all material times, and should have found that the father did not intend to make gifts to the son. He submitted that this was confirmed by the consideration that the son was an adult and not a dependant, and the further consideration that if the father's intention had been to confer a benefit on the son, the property would not have been put in the names of both of them as joint tenants. 32 In my opinion, these submissions have to be assessed having regard to the whole of the evidence given by the parties as to the circumstances surrounding the transaction, some of which was not dealt with in detail by the primary judge. 33 In his affidavit of 5 October 2007 dealing with what happened following inspection of the property on 11 April 2001 the father said this: 16. Following the inspection I had a conversation with Paul on the footpath out the front of the property. I said: Do you like the place? He said: "Yes." I then turned to Sheena and Sue and said words to the following effect: I said: "do you both like the property?" They said: "Yes." I then turned to Paul and said words to the following effect: I said: "Let's you and I do this together. We should use the solicitor across the street from us because he is convenient and also near the agent." He said: I think that's a good idea."

17. Nicole, Sheena and Sue then left the property and Paul and I went to the agent's office. There we obtained a copy of the Contract.

18. We took the contract to the office of Philip King, Solicitor. We saw a secretary at Philip King's office and had a conversation to the following effect: I said: "We are interested in buying a property in King Street."

We handed over the contract we had and I filled out a sheet with our details.

19. On or about mid April 2001 I called Philip King's office in the presence of Paul and had a conversation to the following effect: I said: "The agent tells us that there is another interested party in the property. We don't want to miss out. My son has money in a trust fund in the US and it may take some time to access it, but we really do want to get in before the competition does." He said: "You'll need a 10% deposit when the contracts are exchanged however you won't need the balance of the purchase moneys until such time as the settlement is completed."

I said: "That's fine' have enough money in my bank account to cover the deposit."

20. Immediately following the conversation in the previous paragraph, I had a conversation with Paul to the following effect: I said: "This is urgent we need to do it quickly. I have enough money in my savings account to pay the 10% deposit and any other costs. We don't want to lose it." He said: "OK."

21. On or about late April 2001, I paid the deposit in the sum of $59,500.00 from my personal bank account.

22. On or about late April 2001, Paul and I attended Phillip King's office to discuss the contract and we had a conversation to the fallowing effect: Mr King said: "You need to decide on the tenancy for the property. You can be joint tenants or tenants in common. If you are joint tenants, when one of you dies the property automatically passes to the other joint tenant. In the case of tenants in Common, each of you have your own share in the property. Joint Tenants would be more appropriate in your situation as on death the property would pass to whoever survived with less red tape." I said: "That sounds right for us."

Paul said: "Yes." 34 This was in reply to the son's affidavit referred to earlier in which the son gave a different account of events. In par [14] of the son's affidavit, the son had said that on 12 April the father had said words to the effect that "I will give you the deposit and the stamp duty to secure the property for you". The son had also given an account of what happened shortly after the meeting with Mr O'Connell at Westpac on 16 or 17 April as follows: 18. On or shortly after the day on which my father and I saw Paul O'Connell, I went to see Philip King and he explained to me the contract for the purchase of the Property. That contract showed me as the sole purchaser of the Property. The appointment took something in the vicinity of half an hour to one hour and my recollection is that my father came to the appointment with me. At that time, I said to Philip King words to the effect: "I have approached Westpac to discuss the possibility of obtaining a loan to cover the balance of the purchase price if the money from the US arrives late or to cover any shortfall if that money proves to be insufficient." 35 The father's affidavit in reply did not deny or otherwise answer this paragraph, and did not give any account of how it was that contracts were exchanged showing the son alone as purchaser. In his evidence, the father portrayed himself as taking the initiative as a purchaser of the property and in dealings with the solicitor's office; and in my opinion this picture is inconsistent with the fact that the solicitor drew up contracts for the purchase by the son alone and that the son alone signed the contract. 36 There is no suggestion whatsoever that the son surreptitiously went behind the father's back in doing this; and in any event it is highly implausible that the father, in providing money for the deposit, was unaware that contracts were being exchanged for purchase by the son alone. 37 In those circumstances, in my opinion it was reasonable for the primary judge to reject the father's contention that it was intended from the outset that the parties would be co-purchasers and co-owners, and thus implicitly to reject the father's evidence in the quoted paragraphs to the extent that it suggested this. 38 In my opinion also, it was reasonable for the primary judge to take at face value and as reliable the assertion by the solicitor in his letter of 21 April that the "incoming mortgagee" required the father "to be noted as a registered proprietor", and to regard that as carrying more weight than the son's recollection of a conversation that had occurred six years earlier. The possible need for a loan from Westpac was raised at the meeting with the bank manager. Whether or not Mr King ascertained this from the son and/or the father and/or from some contact the solicitor may have had with Westpac, it is in my opinion a reasonable inference that Mr King did ascertain this requirement of Westpac at around the time of exchange of contracts or shortly thereafter. The exchange went ahead quickly in any event, because another potential purchaser was showing an interest in the property. 39 In my opinion those considerations, that is the circumstance of exchange of contracts in the name of the son alone and the assertion in the solicitor's letter of 21 April, substantially meet and outweigh the considerations put by Mr Sleight. In particular, in my opinion his contentions are insufficient to suggest that Mr King was being other than accurate in his letter of 21 April, and they do not give any reasonable explanation of why the contracts were for the purchase by the son alone. 40 The primary judge's finding that the inclusion of the father was because of the requirement of Westpac was thus in my opinion justified and it takes away much, if not all of the weight that the subsequent inclusion of the father as a purchaser may otherwise have had in suggesting that the intention of the parties was that he have an interest in the property. The reference in the son's letter to "Dad and I" having decided to purchase was reasonably assessed by the primary judge in par [29] of his judgment as follows: [29] The plaintiff's references in the letter to the trustee in Pennsylvania to "Dad and I" having decided to purchase was no more than a reflection of the natural and unremarkable reality that a young man, inexperienced in property matters, was receiving and relying on the advice and support of his father in undertaking such a significant transaction.

In addition the comment may be made that the letter may have been intended to reassure the trustee that this was a responsible decision undertaken with the approval of the father. 41 In my opinion, the correct construction of the primary judge's judgment is that the judge did make a positive finding that it was the intention of the parties that the purchase be for the benefit of the son alone, and that accordingly the monies provided by the father were paid as gifts. If, as I believe, that is the correct interpretation of the judgment, in my opinion such a finding is not shown to be erroneous. 42 On that basis, it is not strictly necessary to consider the question of presumptions, which provides an alternative basis for the judge's decision. However I will do so briefly. 43 Mr Sleight submitted that the presumption of advancement by a father to a child applied where property was purchased by the father's money in the name of the child, so as to defeat the resulting trust that would otherwise arise. However, he submitted, where property is purchased by the father's money or partly by the father's money in the joint names of the father and the child, the presumption of advancement could only apply in relation to the child's joint interest. It could not apply so as to take away the father's joint interest. 44 Here, he submitted, the property had been purchased in the joint names of the father and the son. The presumption of resulting trust had the effect that, because the son had paid about eighty-seven per cent of the amount outlaid to purchase the property, in equity the father had only a thirteen per cent interest as tenant in common. However, since he had a legal interest as a fifty per cent joint tenant, the presumption of advancement could not operate so as to deprive him of the thirteen per cent. 45 In my opinion, this submission overlooks the circumstances in which the money was actually advanced. The father advanced the deposit of $59,500 to enable exchange of contracts in which the son was the purchaser. The legal interest under the contract and the equitable interest in land then obtained would, unless the payment by the father give rise to a resulting trust, be interests obtained by the son alone. 46 In my opinion, unless an actual intention to that effect was established, there would not be a resulting trust arising at that time because the presumption of advancement would apply; so that whatever interests concerning the land were obtained by reason of the exchange and the payment of the deposit would be interests obtained by the son alone, again unless an intention to the contrary was shown. 47 In my opinion, that position was not altered by the subsequent change to purchase as joint tenants. By that change, property to which the son was solely entitled was procured to be put in the father's name, without consideration at that stage and in circumstances where there would be presumption of resulting trust. 48 I note that the primary judge said there was a novation at the point when the father with the vendor's concurrence was added as a co purchaser. I am not sure that this is so. I am inclined to think that there was no novation, but rather the father's actual interest arose when there was a transfer by direction on settlement. It was only the making of a transfer to the father and son as joint tenants that was consented to by the vendor in the solicitor's letter of 27 April, and there was no re execution of the contracts, or even any alteration of the copy held by the vendor's solicitor. 49 In any event, when the father provided the money for the stamp duty, this was in relation to a contract, the whole beneficial interest in which was at that time with the son, so again in my opinion the presumption of advancement would apply. I think this would so a fortiori if, as I believe to be the preferable view, there was no effective novation prior to completion on 5 June 2001. 50 For those reasons, I think that the alternative basis for the judge's holding, relying on presumptions, is also valid. 51 For those reasons, in my opinion the appeal should be dismissed with costs. 52 HODGSON JA: Mr Russell has applied on behalf of the son for an order that the costs of the appeal should be assessed on an indemnity basis. He relies on a letter from the son's solicitors dated 19 December 2008, advising that the son was prepared to settle the matter on the basis that appeal be dismissed and that each party pay his own costs of the appeal. 53 In my opinion this does not justify an order for indemnity costs. The concession offered is a very slight one, and in my opinion it cannot be said to have been unreasonable for the respondent not to have accepted that offer. Accordingly, no order will be made altering the usual basis for assessment of costs. 54 IPP JA: I agree. 55 HANDLEY AJA: I also agree. 56 HODGSON JA: So the order of the court is appeal dismissed with costs. **********

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