New South Wales Supreme Court CITATION : Keremelevski v Keremelevski [2008] NSWSC 1290 HEARING DATE(S) : 29 & 30 September, 1 & 3 October and 18 & 27 November 2008 JUDGMENT DATE : 4 December 2008 JURISDICTION : Equity JUDGMENT OF : Hamilton J DECISION : Claim for declaration of constructive trust or resulting trust or relief under Contracts Review Act 1980 dismissed. CATCHWORDS : EQUITY [102] - Trusts and trustees - Constitution and classification of trusts generally - Classification of trusts in general - Implied trusts - Constructive trusts - Independent of intention - General principles – Whether transfer of real estate procured by overreaching conduct – Son made signatory on aged parents' bank account and given power of attorney – Whether authority given by parents for him to use funds for his own benefit. LEGISLATION CITED : Contracts Review Act 1980 CATEGORY : Principal judgment Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 CASES CITED : Calverley v Green (1984) 155 CLR 242 Irvine v Irvine [2008] NSWSC 592 TEXTS CITED : Michael Evans, Equity and Trusts (2003) at 16.10 Fana Keremelevski (P) PARTIES : Zivko Keremelevski (D1) William Keremelevski (D2) Sonja Keremelevski (D3) FILE NUMBER(S) : SC 3909/07 COUNSEL : A J Tibbey (P) G P McNally (Ds) SOLICITORS : John J Kells (P) Colin Daley Quinn (Ds) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J THURSDAY, 4 DECEMBER 2008 3909/07 FANA KEREMELEVSKI v ZIVKO KEREMELEVSKI & ORS JUDGMENT 1 HIS HONOUR: There are two subject matters of these proceedings. The first is a house property being Lot A in DP 447585 and known as 86 Union Street, Erskineville ("the house property"). The second is moneys in certain bank accounts ("the bank accounts"). Both the house property and the bank accounts belonged to the plaintiff Fana Keremelevski ("the plaintiff") and her husband, Atanas Keremelevski ("Atanas"). In 2005, the house property was transferred by the plaintiff and Atanas to their grandson, William Keremelvski ("William") and his wife, Sonja Keremelevski ("Sonja"). The proceeds of the bank accounts were taken by the plaintiff's son, Zivko Keremelvski ("Zivko"), who is William's father, and used partly for the benefit of the plaintiff and Atanas and partly for Zivko's own benefit. The plaintiff claims that the house property is held on a constructive or resulting trust for her and that she should have an account of the moneys in the bank accounts. FACTUAL FRAMEWORK 2 The facts under this heading are undisputed or easily found, except where it is indicated that there is a substantial dispute. 3 The plaintiff was born in June 1914 and is now aged 94 years. The plaintiff and Atanas came to Australia from Macedonia in 1966. They were accompanied by the youngest of their four sons. The other three sons, Zivko, Simon Keremelevski ("Simon") and Boris Keremelevski ("Boris"), had come to Australia earlier. Zivko and his wife, Todorka Keremelevski ("Todorka") moved from Macedonia to Australia in 1962. 4 The house property was purchased in the name of Zivko and Todorka in 1965. The purchase was effected with the benefit of finance from George Nicholls in the sum of $3,500, secured by a mortgage. 5 Upon the arrival of the plaintiff and family in Australia in 1966, the members of the extended family lived in the house property and the adjoining house at 84 Union Street, Erskineville. The plaintiff and Atanas (collectively "the parents") lived principally in the house property until August 2005. 6 The Nicholls mortgage was fully repaid by 1971 or thereabouts and discharged at that time. There is substantial dispute as to how the mortgage was paid off. After the parents arrived in Australia, the evidence suggests that all members of the extended family pooled their financial resources. Money derived from boarders taken in by the family was added to the pool. The plaintiff claims that the mortgage was substantially paid off from the pool (from which the plaintiff also kept house) by Atanas attending personally on Mr Nicholls. Zivko claims that he and Todorka made all payments under the mortgage. Mr Nicholls' evidence appears to favour Zivko's claim, but it does not really matter, since no claim was made (as it could not be) of a resulting trust arising from these payments: Calverley v Green (1984) 155 CLR 242 at 251, 257 – 258, 267 –268. 7 In 1970, Zivko and Todorka moved to Miranda. The parents continued to live in the house property. In 1979 the house property was transferred out of the names of Zivko and Todorka into the names of the parents as joint tenants "absolutely" and they thereafter held it as absolute owners in their own right. It was at the time of the transfer unencumbered. No consideration was paid. Zivko paid the stamp duty and all expenses associated with the transfer. 8 Up to 2004 the parents had a close relationship with their son, Boris, who visited them regularly and rendered them assistance as they grew older. In 2004, the parents and Boris had a falling out and Boris ceased to visit them. 9 In October 2004, the parents wished to close certain bank accounts because their sons Boris and Simon were signatories and the parents no longer trusted them. On 29 October 2004 Dr Patricia Walton certified that the parents were suffering from hypertension, general debility and frailty and were housebound and unable to get to a bank. On 1 November 2004, those bank accounts were closed and a new account was opened in the joint names of the parents. Zivko was made a signatory on that account. 10 In early 2005, at Atanas' request, William arranged for a Macedonian speaking solicitor, Sasho Petrovski, to visit the parents. On 24 March 2005, Mr Petrovski had a meeting with the parents at the house property ("the first meeting"). At that meeting the parents executed a power of attorney in favour of Zivko. 11 On 1 April 2005, Mr Petrovski had a second meeting with the parents at the house property ("the second meeting") to which he took a transfer of the house property to William and Sonja ("the transfer"). The transfer was signed by the parents at the second meeting. The transfer bears the date 31 March 2005 and was expressed to be for a consideration of $1.00. It was duly registered. It is the transfer that gives rise to the first claim in these proceedings. 12 At the first meeting the parents, Zivko, Todorka and William were present, together with Mr Petrovski and Marika Lajmanovski, a family friend, who witnessed the power of attorney. At the second meeting the parents, Zivko, Todorka, William and Sonja were present, together with Mr Petrovski. Ms Lajmanovski was not present at the second meeting. 13 On 14 April 2005 Dr Patricia Walton certified that the parents "are both of sound mind and are capable of understanding & signing legal documents". 14 On 30 May 2005, a loan of $416,000.00 was raised by William and Sonja from Perpetual Trustees Australia Ltd secured by a registered mortgage that subsists on the title to the house property. 15 In August 2005, the parents left the house property and moved in with Zivko and Todorka or with William and Sonja who lived next door to Zivko and Todorka at Miranda. Thereafter, Zivko and family looked after the parents at Miranda. 16 On 6 December 2005 there was a report from the Aged Care Agency at Sutherland Hospital based on a conversation with William that the home care of the parents was adequate at that time and there was no intention of placing them in an aged care facility. 17 In June 2006, the plaintiff was hospitalised for four weeks and was then discharged into a nursing home. There was an assessment of the plaintiff by the Department of Health and Ageing on 3 July 2006 to the effect that she was in need of nursing home care. She has not subsequently been permitted to return to the house property. The plaintiff was very upset at being in the nursing home and abused Zivko, saying "you dumped me". 18 Boris then recommenced visiting the plaintiff in the nursing home. On 19 July 2007 Atanas died. On 24 July 2007, the plaintiff commenced these proceedings. CREDIT OF WITNESSES The plaintiff 19 The plaintiff was a witness of virtually no credibility. The defendants submitted, correctly in my view, that the plaintiff's "testimony was overwhelmed by an obsession of an assertion that she had been tricked by Zivko." This was manifested in the witness box by a garrulous insistence on repeating her conviction to this effect. It was extremely difficult to get her to attend to particular questions asked of her, rather than her simply repeating what she wanted to say. I do not propose to catalogue fully the unsatisfactory aspects of her evidence. She initially swore that she believed that she was signing a will at one of the meetings, although this assertion was later abandoned. Furthermore, she initially claimed that Mr Petrovski, when addressing the parents, had done so in English and not in Macedonian, contrary to the evidence of all other witnesses of the meetings with Mr Petrovski, although she later resiled, at least in part, from that, also. My conclusion is that she is a witness whose evidence can only be accepted when it is corroborated by documentary evidence or the evidence of a credible witness. Zivko, Todorka, William and Sonja 20 Because of their interest in the outcome and the emotional content of the proceedings, I have taken the view that their evidence must be approached with some caution. However, none of them was discredited in any overall fashion and, although approached with care, their evidence on any particular matter must be assessed as a possible version of the facts along with other evidence bearing on the particular subject matter. Ms Lajmanovski and Mr Petrovski 21 They were both independent and apparently dispassionate witnesses, who appeared to be trying to give the Court their best recollection of events in the past. Their evidence does not coincide in all respects as to what occurred at the first meeting, at which they were both present. However, in my view, they both have a substantial degree of credibility. 22 In Mr Petrovski's case, it is true that he did not retain any contemporaneous notes of the meetings. He displayed some initial resistance to giving evidence. It must be observed that he had a professional interest in making it appear that he had behaved appropriately as a solicitor in the circumstances of the case. Despite these reservations, I was impressed by the manner in which he gave his evidence. He was firm about matters that he said that he recalled. He was prepared to make concessions quite readily when appropriate, eg, that he had not told the parents that they might be evicted from the house property after the transfer. The advice he says that he gave the parents, whilst not extensive, appeared to me to be clear and reasonable. It also appeared to me, on the probabilities, to be advice that a responsible solicitor was likely to have given in the circumstances. Whilst his evidence on any particular matter must be closely examined together with all the other evidence bearing on it, I regard him generally as a witness of considerable credibility. Certainly, where his evidence conflicts with the plaintiff's, on the balance of probabilities I am likely to accept his evidence in preference to hers. THE PLAINTIFF'S CONTENTIONS CONCERNING THE HOUSE PROPERTY 23 It is contended on behalf of the plaintiff that the Court should find that the house property is held on trust for the plaintiff because execution of the transfer was procured by overreaching conduct on the part of the defendants. The conduct was unconscionable due to a variety of factors: (a) the parents were elderly at the time of the transaction; (b) they did not speak English well enough to understand the transaction; (c) they had no independent legal advice; (d) they were not sophisticated in terms of property transactions; (e) they were not in good health; and (f) they were not highly educated. 24 The plaintiff submits that these factors placed the parents in a situation of serious disadvantage and special disability in protecting their interests, such that it was unconscientious "to procure or accept the weaker party's assent to the impugned transaction in the circumstances." The current registered proprietors should not, in good conscience, retain any benefit of the transfer of the house property. In the circumstances, a remedial constructive trust should be imposed on the house property. 25 The highest that the defendants could reasonably put the case against the present existence of a trust would be to suggest that there was an intention on the part of the parents to leave the house property to William and Sonja only upon the death of the last surviving parent. 26 That possibility had been the subject of discussion between the parents and Zivko, but always upon the basis that the parents would continue to own the house property and to be cared for there until their deaths. There was never any agreement or common intention that the house property would pass out of the parents' ownership and control before their deaths. 27 If (contrary to the plaintiff's case) the Court were to find that the parents freely and voluntarily transferred the house property to William and Sonja, the plaintiff submits that the Court should find (at the very least) that the transfer was effected pursuant to an agreement or a common intention to the effect that the parents would each be entitled to reside in the house property until the times of their respective deaths, on terms that they would be cared for by the defendants. That is, the Court should find that the house property was transferred to William and Sonja subject to a constructive trust in favour of the parents arising from such agreement or common intention. 28 The plaintiff alternatively contends that a resulting trust arose when the purpose for which or intention with which the transfer was effected failed. The authorities cited by Ms Tibbey, of counsel for the plaintiff, included Michael Evans, Equity and Trusts (2003) at 16.10 and Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567. The plaintiff further contends that she is entitled to have the transfer set aside under the provisions of the Contracts Review Act 1980 ("the CRA"). In this regard, Ms Tibbey draws attention to the decision of Barrett J in Irvine v Irvine [2008] NSWSC 592. THE DEFENDANTS' CONTENTIONS CONCERNING THE HOUSE PROPERTY 29 The defendants contend that the plaintiff's claim to a constructive trust over the house property appears to be based upon an allegation of unconscionable conduct. The unconscionable conduct alleged seems to relate to the fact that the plaintiff received no independent legal advice in relation to the transfer. Initially, it was suggested that she executed the transfer in the mistaken belief that she was signing a will. 30 In view of the dispute with Boris, the parents foresaw that to leave the house property to Zivko by will would mean a dispute over the will. Accordingly, they sought to transfer the house property back to Zivko and Todorka, who had originally transferred it to them. 31 The defendants submit that the parents knew full well what they were doing. They requested a Macedonian speaking solicitor to explain the transaction to them. 32 There is no doubt that the plaintiff came to have an expectation that the defendants would look after her in her own home until her death. There is no doubt that they promised to look after her. But there was not on the evidence any promise that that care would be in her own home until death. The defendants did in fact look after the parents when they could no longer be cared for in their own home by taking them to live at Miranda. However, when the plaintiff's condition required nursing home care, she came to resent the fact that she was placed in a nursing home. This led her to assert that she had been "tricked" into transferring the house property, when in fact she had intended the house property to be transferred by way of gift. 33 The remedy of constructive trust has no role to play in these proceedings. There is no breach of fiduciary duty, undue influence or fraud alleged. There was no "special disability" known to the defendants that operated in this case to give rise to a finding of unconscionable conduct on the part of the defendants. Equally, there is no resulting trust and no entitlement to relief under the CRA. FACTS RELATING TO THE TRANSFER OF THE HOUSE PROPERTY 34 Early in 2005 Atanas was in hospital with a broken arm. William deposed that his grandfather asked William and Zivko to contact a solicitor so that he could "make a Will to leave the house, to you." William told his grandfather that he would find a Macedonian speaking solicitor to come and see his grandfather once he returned home. In the Macedonian telephone book, William located a Macedonian speaking solicitor, Mr Petrovski. William telephoned Mr Petrovski and sent him emails dated 21 and 23 February and 17 and 23 March 2005. In the first of those emails he gave tentative instructions as to the contents of the wills to be made by the parents and in that of 23 February he added that they wished to give power of attorney to Zivko. 35 On 24 March 2005 the first meeting with Mr Petrovski took place at the house property. Mr Petrovski deposed that he always regarded the parents as his clients and never regarded himself as acting for William. He took a power of attorney to the meeting with him; he spoke to the parents in Macedonian; he asked questions to satisfy himself as to their capacity; he explained the power of attorney to them; and he ascertained that they had understood the explanation. He then had the power of attorney signed by them and witnessed by Ms Lajmanovski. 36 After that he deposed that the following conversation took place: "Whilst I was present at 86 Union Street on that day, I also raised the issue of the Wills of Fana and Atanas. There was a discussion in words to the following effect. I said: 'I understand you also want to make some Wills where you will leave everything to each other and after you both die, your son Zivko is to get the property here'. Fana said: 'We want to give the property back to Zivko. Zivko bought the property for us to live in and it is only fair it goes back to him. We don't want the others to get a part of it. They are money hungry and only after our property. Zivko is looking after us very well. The others don't come and visit. They only seem to be interested in the house and that is all they are after. We don't want trouble over our Wills. Can we transfer the property to him now?' I said: 'If you leave it to Zivko in your Will that can be challenged by your other children. As you are the owner of the property, you can transfer it now and that would give more certainty although nothing is ever 100% certain'. Fana or Atanas said: 'How can you do this?' I said: 'It can be done very simply by signing a Transfer. It is not a difficult procedure. That would transfer the property to Zivko now'. Both Fana and Atans said: 'That's what we want'. I said: 'You understand that if you go this way you will be transferring the property now and you won't be the owners of it after that'. Fana said: 'Yes, we are not worried. Zivko bought the property. He should get it back. Zivko will look after us until we die'. I also recall Zivko saying that at some stage after this at the meeting words to the following effect: 'I would rather the property go straight to my son Bill'. I said: 'Let me know what you want to do'. " 37 Zivko also deposed that it was at that meeting that he told Mr Petrovski that instead of the house property being transferred to his name he would like it to be transferred to William and Sonja. Whether that was said at that meeting or not, certainly William sent a further email to Mr Petrovski on 29 March 2005 to the effect that his parents and grandparents had "decided to transfer this property into both my and my wife [sic] names" and asked Mr Petrovski to proceed accordingly as a matter of urgency. 38 On 31 March 2005 Mr Petrovski attended the second meeting at the house property. He again spoke in Macedonian throughout the meeting. He deposed that: "I had a conversation with Fana and Atanas in words to the following effect: 'I am now here to talk to you about the transfer of your property to Bill and Sonja. I have prepared a Transfer and I want to make sure that you understand what you are proposing to do. What you want to do is to give this property, your home, to William and Sonja now. You are not being paid for the property. You are giving it to them as a gift. If you sign this document which is a Transfer, you won't be the owners of the property any more. Do you understand this?' Both Atanas and Fana said: 'Yes'. I said: 'So you want to give your house, here, to Bill and Sonja and you understand they are not paying for it and it won't be your house anymore. Is that what you want to do?' They both said: 'Yes'. I formed the view that both Fana and Atanas understood the legal effect of the Transfer. I then said words to the following effect: 'If that is what you want to do, then you then have to sign this Transfer'. I then watched them sign the document. I then witnessed their signatures." 39 There is one piece of evidence given by a credible witness that is at odds with the bulk of the evidence concerning these meetings. Ms Lajmanovski stated that Atanas said at the first meeting that "the house belongs to all four children and the cash money is to be given to the grandchildren." Despite my generally favourable view of her credit, I do not accept her evidence that that was said at the first meeting. Her evidence is that that sentiment had been expressed to her by the parents on many past occasions. I take it that those occasions were before the parents' falling out with Boris. I think it most unlikely in view of the other evidence available and the circumstances surrounding the first meeting that that was said in her presence on that occasion, rather than on an earlier occasion. I do not accept her evidence in this regard. 40 The plaintiff deposed that the solicitor spoke entirely in English; that the parents thought they were signing a will and did not understand what was being done. The high point of her evidence concerning the promise that was made to them was that at one meeting (it is not clear which), before they signed: "… Zivko, Todorka and their son William said words to us to the following effect: 'We will look after you in your own home until your death. You will not want for anything. All your needs will be provided.'" 41 That is the only version of the making of the alleged promise that includes the words "in our own home". There is no doubt that an intention was expressed by or on behalf of Zivko, Todorka, William and Sonja to care for the parents until they died. Whilst not recording words to this effect, Mr Petrovski acknowledged in cross examination that his belief was that the parents envisioned that they would remain in the house (no duration stated). CONCLUSIONS RELATING TO THE TRANSFER OF THE HOUSE PROPERTY 42 On all the evidence I accept that what occurred at the meetings was substantially as stated by Mr Petrovski and that he gave advice and received instructions as deposed to by him. 43 I do not accept that a promise was made in terms that Zivko, Todorka, William and Sonja would look after the parents in their home until their deaths. It was certainly contemplated that the parents would continue in occupation of the house property after the transfer, as they did. And there was a general promise that the parents would be looked after until their deaths. 44 I turn now to the bases on which it was contended that the transaction was unconscionable as set out in [23] above, namely: (a) the parents were elderly at the time of the transaction; (b) they did not speak English well enough to understand the transaction; (c) they had no independent legal advice; (d) they were not sophisticated in terms of property transactions; (e) they were not in good health; and (f) they were not highly educated. 45 It is apparent that the parents were elderly at the time of the transaction and that they were not highly educated. They were not highly sophisticated, but were not totally ignorant, in relation to property transactions. While they were old and frail, there is no reason to doubt their mental acuity at the time. As to the allegations that they did not speak English well enough to understand the transaction and had no independent legal advice, I find that the discussions with Mr Petrovski concerning the transaction were conducted in Macedonian and the parents did have advice in that language from a solicitor acting only for them. 46 The probabilities arising from the facts surrounding the transaction support the conclusion that the parents fully intended at the time to make a gift of the house property to Zivko and Todorka and then, in accordance with Zivko and Todorka's wishes, to William and Sonja instead. There had been a complete breach of relations with Boris. Zivko and Todorka had assumed the role of primary carers. It was Zivko and Todorka who had transferred the house property to them in 1979 without payment of consideration. 47 The parents continued to reside in the house property until Atanas had a fall, which indicated that it was unsafe for them to remain there by themselves. It was at their request that Ms Lajmanovski took them to Miranda, where they appeared happy and were looked after. They did not complain at that time of their absence from the house property. 48 I find that Zivko, Todorka, William and Sonja substantially carried out their promise to care for the parents. It was only when the need for a high degree of nursing care arose that the parents were placed in a nursing home. It was after this that the plaintiff developed the view that she had been tricked or dumped by Zivko. To any extent that she was not attended to thereafter, it was by reason of her rejection of Zivko and his family. 49 I hold that the transfer constituted a valid transaction of gift by the parents of the house property to William and Sonja and that no constructive trust arose on the basis of unconscionable conduct. 50 The plaintiff's case on the basis of a resulting trust fails for the same reasons. It is based upon the failure of an expressed or agreed purpose for the transfer. I am far from certain that the authority cited on behalf of the plaintiff, as referred to in [28] above, establishes this principle. But, in any event, I have found that there was no purpose or intention that failed. 51 Equally, a claim based on the CRA fails. There was no taking advantage of a position of weakness on the parents' part and no lack of independent advice. Although there are some similarities to the facts of Irvine v Irvine (see [28] above), there are many differences. These have been catalogued by Mr McNally, of Senior Counsel for the defendants, and I shall not repeat them. However, a major difference is that the legal advice obtained by the parents in this case was obtained at their instance, was adequate and was understood by them. 52 No reason is shown on any basis for the transfer to be set aside. THE CLAIM RELATING TO THE BANK ACCOUNTS 53 The plaintiff contends that Zivko used the powers conferred on him concerning the bank accounts to remove the moneys from the accounts and use them substantially for his own purposes without authorisation. The plaintiff claims that there should be a declaration that the moneys when removed from the accounts by Zivko were held in trust for the parents and that an account should be taken or an inquiry had as to the use of the moneys. 54 The defendants' contention is that the moneys in the bank accounts were given by the parents to Zivko. 55 Zivko's evidence was that at the end of March or in early April 2005 the moneys were used, as to $19,340 in payment of the stamp duty on the transfer. The evidence, which I accept, is that Atanas went with Zivko and Zivko's son Steven Keremelevski ("Steven") to the bank when a cheque was obtained for that purpose. Steven corroborated this evidence. It does not seem unlikely that the stamp duty should be provided from the parents' moneys, bearing in mind that Zivko paid the stamp duty when the house property was transferred from Zivko and Todorka to the parents. 56 At about that time the parents together indicated to Zivko that they wished to give the balance of the moneys in the bank accounts to Zivko, saying "You have supported us financially over the years and lent us money". Steven deposed that the parents said to him on many occasions: "Our family has dumped us because we did not give them the house. We want to give all our money to your father because he gave us help all his life and gave us the house to live in." 57 I find no reason to disbelieve Steven. He was cross examined only briefly and not on this evidence. 58 Subsequently, Zivko used some of these moneys for the parents' benefit, as in effecting improvements to the house property and buying new furniture for them after they moved to Miranda. Zivko and his family also clearly incurred expense in caring for the parents at Miranda. But Zivko does not suggest that the whole of the moneys from the bank accounts were expended on the parents. In so far as he took the moneys as his own, he relies upon the gift that he says was made to him of the moneys. 59 I accept Zivko's evidence, corroborated as it was in some regards by Steven's evidence. The plaintiff's case concerning the moneys being taken without authorisation depends upon her own evidence. Her evidence I do not accept. 60 I find that a gift of the moneys was made to Zivko as he deposed. I reject the plaintiff's claims for the declaration of a trust and the taking of an account concerning the moneys in the bank accounts. RESULT 61 The result of the above is that the plaintiff's claims must be dismissed. It seems difficult for the plaintiff to resist an order for the costs of the proceedings, but I shall, of course, hear any submission to the contrary. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.