Turnbull v Gorgievski [2000] NSWSC 365

New South Wales Supreme Court

CITATION : Turnbull v Gorgievski [2000] NSWSC 365 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 2513/98 HEARING DATE(S) : 5 August 1999; 25 February; 16 and 31 March 2000 JUDGMENT DATE : 8 May 2000

Stephen Turnbull (P) PARTIES : Dobra Gorgievski (D1) Ristana Gorgievski (D2) JUDGMENT OF : Hamilton J

COUNSEL : D R Sibtain (P) Miss R Winfield (D1 & 2) SOLICITORS : Williams (P) Delwyn A Bishop (D1 & 2) CATCHWORDS : BANKRUPTCY [209] - Fraudulent disposition of property - Conveyancing Act 1919 s 37A - Proof of intent to defraud. LEGISLATION CITED : Conveyancing Act 1919 s 37A Brown v Brown (1993) 31 NSWLR 582 Calverley v Green (1984) 155 CLR 242 Cannane v J Cannane Pty Limited (In Liquidation) (1998) 192 CLR 557 CASES CITED : Muschinski v Dodds (1985) 160 CLR 583 Napier v Public Trustee (WA) (1980) 55 ALJR 1 Nelson v Nelson (1994) 33 NSWLR 740 Jacobs on Trusts (6th ed 1997) [1210] - [1215] DECISION : Plaintiff's claim to set aside transfer of interest in house property fails.

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

HAMILTON J MONDAY, 8 MAY 2000

2513/98 STEPHEN TURNBULL v DOBRA GORGIEVSKI & ANOR

JUDGMENT His Honour: 1 These are proceedings brought by Stephen Turnbull for an order setting aside pursuant to s 37A of the Conveyancing Act 1919 ("the CA") a transfer of real property as being made with the intention of defauding creditors. The property concerned is a house property known as 10 Megan Avenue, Bankstown ("the property"). The transfer sought to be set aside is a transfer by the first defendant, Dobra Gorgievski ("the son"), and the second defendant, Ristana Gorgievska ("the mother"), as joint tenants, to the mother alone. The consideration is expressed to be $1. The transfer is dated 16 October 1995 and was registered 676184L. The plaintiff is a judgment creditor of the son. 2 The sequence of events relating to the acquisition and transfer of the property and also to the circumstances in which the plaintiff became a creditor of the son is as follows. On 11 January 1988 the plaintiff commenced employment with the Royal Prince Alfred Hospital as a theatre orderly. On 18 January 1988 the son, the mother and Rade Gorgievski, who was the son's father and mother's husband ("the father"), became registered as proprietors as joint tenants of the property. On 22 December 1988 the plaintiff, also an employee of the Royal Prince Alfred Hospital, alleges that there was an incident at work in which the son punched him in the face, breaking his spectacles and driving glass into his right eye, so that it had subsequently to be surgically removed. As a result of this incident, the son was charged with criminal offences. On 24 October 1990 he was acquitted by a jury in the Sydney District Court on a charge of maliciously inflicting grievous bodily harm on the plaintiff, but convicted of an assault upon him occasioning actual bodily harm. He was subsequently sentenced by Gibson DCJ to 300 hours community service, which sentence he served. On 20 March 1991 the father died. On 22 May 1991 the plaintiff was awarded $40,000 by the Victims' Compensation Tribunal in respect of the injury inflicted on him. On 25 October 1994 he commenced civil proceedings in the District Court at Sydney ("the District Court action") against the son for the assault, and the statement of claim in those proceedings was served on 9 November 1994. On 30 November 1994 the son filed a defence in the District Court action. On 9 May 1995 there is a letter from MacMahon Drake Balding, solicitors, to the effect that they had "been instructed to act in the Transfer by Dobra Georgievski [sic] of his interest in" the property. (The letter was to valuers to request a valuation for stamp duty purposes.) In October or November 1995 there were lodged with the Registrar General, first, a notice of death seeking to have the mother and the son registered as the sole proprietors as joint tenants of the property by reason of the father's death, and, secondly, the transfer. Both instruments were registered on 9 November 1995. On 5 December 1997 judgment for the plaintiff on liability was entered by consent in the District Court action and the matter went to hearing for assessment of damages on 29 July 1998. The proceedings having been referred to arbitration, an arbitrator made the assessment of damages. His award was handed down on 18 August 1998. The award in favour of the plaintiff was in the sum of $181,451 together with costs. Judgment was entered accordingly for the plaintiff in the District Court on 18 September 1998. Save in one respect, there was no dispute on the evidence as to the above facts. The son, who admitted in his sworn defence in the District Court action punching the plaintiff in the face, when asked in this Court whether he had hit the plaintiff, denied that he had hit him, although conceding that he had pushed him. 3 The gravamen of the plaintiff's case is that it will be inferred from the sequence of events above that the intention with which the property was transferred by the son to the mother was to remove it from the reach of the judgment which it was anticipated the plaintiff might obtain in the District Court action. The intention to defraud creditors may, where appropriate, be inferred from the circumstances in which the transfer took place: Cannane v J Cannane Pty Limited (In Liquidation) (1998) 192 CLR 557 per Brennan CJ and McHugh J at 566 - 7; Gaudron J at 572; Kirby J at 591 - 2. 4 The case for the mother and the son before me was as follows. The property was purchased for $175,000. There was no clear evidence as to the amount paid for stamp duty and costs, although obviously there would have been expenses of this sort. Of the purchase price, $140,000 was provided by the mother and the father out of their own funds. The balance of $35,000 was raised from the Commonwealth Bank ("the Bank") on the security of a mortgage under which father, mother and son were the borrowers. That loan, together with interest, was subsequently paid off by the father and the mother out of their own funds. The son paid nothing. The defendants' case as to how the son came to be on the title of the property and he, therefore, before the father's death, the owner of a one third, and, upon the registration of the notice of death, the owner of a one half share in the legal estate in the property is as follows. The parents owned outright a house at Newtown ("the Newtown house"). Late in 1987 they desired to sell the Newtown house and buy the property. To purchase the property for $175,000 it would be necessary for them to borrow some $35,000. At the time the mother was not employed. It was necessary from the point of view of the Bank, from which the money was to be borrowed, for the borrowers to include two wage earners. The father therefore asked the son to become a party to the mortgage and to the borrowing and to go upon the title, but on the basis that the parents would repay the whole of the borrowing; that he would not have to pay any part of it; and that his name would be removed from the title if they so requested after the mortgage was paid out. 5 If a purchaser pays a vendor and directs the transfer of the property into the name of another person without consideration passing from that person there is a presumption that that person holds the property upon trust for the purchaser: Napier v Public Trustee (WA) (1980) 55 ALJR 1 per Aickin J at 2. If two or more persons contribute the purchase moneys of property in unequal shares and this property is purchased in joint names, in the absence of a relationship which gives rise to a presumption of advancement, there is a presumption that the purchasers hold it in trust for themselves as tenants in common in the proportions in which they contributed the purchase money: Calverley v Green (1984) 155 CLR 242 at 245 - 7, 266 - 7. There is a presumption of advancement when the purchase money is provided by a parent and the title is taken by a child, Calverley at 267, even an adult child: Brown v Brown (1993) 31 NSWLR 582; Nelson v Nelson (1994) 33 NSWLR 740. All the above presumptions are rebuttable by evidence: Calverley at 267; Muschinski v Dodds (1985) 160 CLR 583 at 589 - 9, 613 - 4, 624. As to the foregoing, see generally Jacobs on Trusts (6th ed, 1997) [1210] - [1215]. Thus, in this case, the son would take his interest beneficially unless the evidence established that it was not the intention of the parties to the transaction that he should do so. And, although he provided some $12,000 of the purchase money by engaging in the borrowing under the mortgage (Calverley at 251), he would not take a beneficial interest even to that extent if it were intended that he should not do so, ie, it is established that it was intended that the parents should repay the loan (particularly if it be proved that they did in fact do so). 6 The son's evidence that went to this question of intention was as follows. In his first affidavit he deposed as follows: "8 I am aware of the arrangements my parents made in respect of the purchase because my father said to me: 'We've got the money from the sale of the house in Newtown and some money in the account but we've got to borrow some money' or words to that effect. 'We need to borrow $35,000 to buy the house and pay the expenses. Your mum is not working and the bank won't lend me the $35,000. If you put your name on the loan, the bank will lend me the $35,000' or words to that effect. He said further: 'Just put your name on it and don't worry about the money. I'll be repaying it' or words to that effect. He said: 'Just as long as they give us the $35,000, don't worry, I'll repay it.' 9 I did not have any conversations with my mother at that time. My father said to me: 'Don't tell her the lot, just tell her we got a small amount of money from the bank.'"