Sellers v Siemianowski [2008] NSWSC 538

New South Wales Supreme Court

CITATION : Sellers v Siemianowski [2008] NSWSC 538

HEARING DATE(S) : 22/05/08

JUDGMENT DATE : 4 June 2008

JURISDICTION : Equity Division

JUDGMENT OF : Barrett J

DECISION : Declarations and orders recognising full beneficial ownership of plaintiff son

CATCHWORDS : EQUITY - resulting trust - presumption of advancement - where son becomes sole purchaser of house and father pays deposit and stamp duty - where contract later novated to include father as co-purchaser - where both take title as joint tenants - son claims full beneficial ownership - father claims undivided interest in equity

LEGISLATION CITED : -

CATEGORY : Principal judgment

Big River Timbers Pty Ltd v Stewart (1998) 9 BPR 16,599 CASES CITED : Calverley v Green [1984] HCA 81; (1984) 155 CLR 242 Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538

PARTIES : Paul Charles Sellers - Plaintiff Michael Siemianowski - Defendant

FILE NUMBER(S) : SC 4477/07

COUNSEL : Mr J P Redmond - Plaintiff Mr J Sleight - Defendant

SOLICITORS : Thomas & Company - Plaintiff Clinch Neville Long Letherbarrow - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BARRETT J

WEDNESDAY 4 JUNE 2008

4477/07 PAUL CHARLES SELLERS v MICHAEL SIEMIANOWSKI JUDGMENT 1 The plaintiff is the son of the defendant. They are together the registered proprietors as joint tenants of a house at Randwick. The plaintiff claims that he alone is entitled to the property in equity. The defendant claims that the property is owned in equity as to 13.56% by himself and as to 86.44% by the plaintiff. 2 It is common ground that, when the property was purchased in 2001, the defendant paid the deposit of $59,500 at or shortly before exchange of contracts and paid stamp duty of $22,269 shortly thereafter. After taking account of stamp duty, legal expenses, adjustments on settlement and the purchase price of $595,000, the total outlaid to purchase the property was $619,497.33. It is common ground that the balance over and above the $81,769 paid by the defendant for deposit and stamp duty (being $537,728.33) was paid solely by the plaintiff from his own moneys. 3 The $81,769 paid by the defendant represents 13.56% of the total of $619,497.33. The $537,728.33 paid by the plaintiff represents 86.44% of that total. 4 The plaintiff was, at the time of the purchase, aged 26. He had become engaged to be married a few months earlier. He and his fiancée wished to buy a home and had looked at a number of houses in the Randwick locality. The defendant had also looked at houses there. The plaintiff, his fiancée and the defendant sometimes inspected houses together. 5 The plaintiff was, at the time, entitled to a significant sum from the estate of his late grandfather which was being administered in Pennsylvania. He did not know exactly how much was coming to him or when the money would be received. He was aware he was entitled to about US$270,000 but did not know how much that would yield in Australian currency. 6 It is the plaintiff's evidence that the defendant suggested that a loan be sought from Westpac to cover any balance needed for the purchase beyond the money coming from the grandfather's estate. 7 The plaintiff says that it was only when he first spoke to Mr King, solicitor, that he became aware of the need to pay a 10% deposit on exchange of contracts and to pay stamp duty soon after exchange. The defendant says it was he who discovered this from the solicitor. In the end, it does not matter who obtained the information. The two sums had to be paid promptly and it is common ground that the defendant paid them. 8 There is a conflict in the evidence of the parties as to the reason why they both took title. The matter is, to my mind, satisfactorily explained by the contemporary documents. A letter from the solicitor, Mr King, to the vendors' solicitors dated 21 April 2001 reads as follows: "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." 9 Contracts were exchange on 19 April 2001 on the basis that the plaintiff alone was the purchaser. The counterpart contract introduced into evidence is signed by the plaintiff alone and names him as sole purchaser. It may be inferred that, upon exchange, a contract was formed between the vendors and the plaintiff alone as purchaser and that the defendant was, with the vendors' concurrence, added as a co-purchaser some days later in accordance with the request conveyed by Mr King's letter of 21 April 2001. There was, at that point, a novation. 10 The reference in Mr King's letter to "my client's incoming mortgagee" is a reference to Westpac. This is made clear by a letter dated 28 April 2001 from Mr King addressed to both the plaintiff and the defendant. Mr King there said: "I note that you are obtaining mortgage finance with the Westpac Bank to assist with the purchase of the property." 11 This, coupled with the statement in Mr King's earlier letter that the incoming mortgagee "requires" the defendant "to be noted as a registered proprietor following settlement" shows that it was a requirement of Westpac that caused what had been a concluded contract under which the plaintiff alone was purchaser to be novated so as to become a contract under which both the plaintiff and the defendant were purchasers. The reason why Westpac took that attitude is probably unimportant but it does seem likely that, as the plaintiff testified, Westpac had said that his income was insufficient to qualify him for a home loan and that "both incomes" – his and the defendant's – "would be sufficient to support a loan for $535,000". 12 The defendant's case is that it was intended from the outset that the parties would be co-purchasers and co-owners. I reject that proposition. Mr King's letter of 21 April 2001 and the contract as exchanged are inconsistent with it. 13 I also reject the proposition postulated by the defendant's evidence that the reason he and the plaintiff visited Westpac before exchange of contracts was, as he put it in cross-examination, "to find out how much Paul's inheritance would translate to … and to ascertain that I had sufficient money in my account to cover any deficiency at the beginning", with discussion about a loan having "come up only briefly". The defendant's version is inconsistent with Mr King's letters referring to Westpac as the incoming mortgage lender – added to which, the bank officer concerned (Mr Connell) was apparently the branch manager and it is scarcely conceivable that one would see the manager to ascertain, first, how much a United States dollar sum would yield in Australian currency and, second, the balance in the defendant's account. These must have been very simple inquiries not warranting an appointment with the manager. A housing loan, by contrast, is something that one might well expect to be raised at that level. 14 Both parties gave evidence that Mr King discussed with them the difference between holding as tenants in common and holding as joint tenants. Both also gave evidence that, after the explanation, the defendant expressed a preference for joint tenancy and that the plaintiff agreed – although, on his account, with some discussion about what would happen to his future wife if he and his father held as joint tenants. 15 By the time for completion came, the funds expected by the plaintiff from the United States had arrived. They were used to satisfy the settlement moneys. No loan was obtained from Westpac. 16 The essential facts are therefore as follows: 1. By the exchange of contracts on 19 April 2001, the plaintiff alone became the purchaser. 2. By a novation of the contract made after 21 April 2001, the defendant was added as a second purchaser. 3. The addition of the defendant as a purchaser was to satisfy a requirement of Westpac in connection with a loan arranged as a contingency measure in case the settlement moneys could not be met out of the funds coming to the plaintiff from the United States. 4. The plaintiff and the defendant took title on completion as joint tenants. 5. The defendant paid from his own funds the 10% deposit on or shortly before exchange of contracts and the stamp duty on the contract shortly after exchange – a total of $81,769. 6. The plaintiff paid from his own funds all moneys due on completion – a sum of $537,728.33. 7. The plaintiff is the only son of the defendant. 17 This is accordingly a case in which potentially conflicting presumptions of equity arise for consideration. 18 The first – said by Deane J and Gummow J in Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538 at CLR 547 to be "perhaps not strictly a presumption at all" – is that a benefit provided for a son by his father at the cost of the father is provided by way of advancement, that is, that the father intended to confer benefaction on the son. 19 The second presumption is that a trust arises in favour of the person who contributes the whole of the purchase price when the property is conveyed into the joint names of that person and another: Calverley v Green [1984] HCA 81; (1984) 155 CLR 242 at CLR 255. 20 The third presumption is that, where property is held in joint names but the joint tenants have not contributed equally to the cost of acquisition, the beneficial interests are held between the parties on trust in proportion to their contributions: Calverley v Green (above) at CLR 247. 21 Each presumption reflects an a priori position with respect to the parties' intentions. In other words, equity takes the view that, unless the contrary is proved, the intentions should be taken to be those reflected by the presumption. Proof of actual contrary intention will displace any of the presumptions. 22 Before the applicability and operation of the presumptions are considered, it is appropriate to note the nature and significance of the co-ownership of persons who hold as joint tenants, as explained by Young J in Big River Timbers Pty Ltd v Stewart (1998) 9 BPR 16,599. Under that form of ownership, each proprietor has a right shared with the other for the whole property, but no individual has a right to any share in it. A joint tenant who wishes to convey his or her "interest" to another of the joint tenants has, strictly speaking, nothing to convey as the other is already seised of the whole. Release of the right of survivorship was the proper way of "conveying" the "interest" of one joint tenant to another. I mention these matters to dispel any thought that, in the present case, the plaintiff and the defendant each has some separate and distinct interest in the property. 23 I come now to matters of intention. It is clear that, when contracts were exchanged on 19 April 2001, it was the plaintiff's intention that he be the sole owner. This is borne out by his being the sole purchaser under the contract. The defendant's intention may be taken to have been the same – otherwise, he would have insisted on being named in the contract as a co-purchaser before exchange. 24 It is also clear that, a few days later, the plaintiff and the defendant formed a common intention that they should together take title as joint tenants. But this latter intention arose only because it represented a means by which loan finance could be raised from Westpac, if required, with the defendant, as it were, allowing his name to be added to the plaintiff's existing contract to facilitate the financing of the transaction that had already been undertaken by the plaintiff in his own name alone. 25 The defendant argues that a letter dated 27 April 2001 written by the plaintiff to the trustee of the deceased estate in Pennsylvania shows a contemporary intention of the plaintiff that the plaintiff and the defendant should together own the property. The letter reads in part as follows: "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?" 26 The defendant has given evidence that he regarded the property as an investment. But this is not borne out by the surrounding circumstances. He knew that the plaintiff and his fiancée had become engaged in early 2001. He accepts that the plaintiff, the plaintiff's fiancée, the fiancée's mother and the plaintiff's mother (from whom the defendant was divorced more than 20 years earlier) all inspected the property in addition to himself. He acknowledges that the fact that all those persons liked the property was a factor in the decision to buy. That is not consistent with a situation in which a father and son are simply making an investment or going into a business venture together. It is consistent with a family decision in which the plaintiff and his fiancée, with the advice and guidance of their parents, were buying a home. Why the defendant's long divorced wife would take an interest in his investments is something that he did not attempt to explain. 27 There is the added point that, after completion, the plaintiff and his fiancée (later wife) occupied the property and made it their home. The defendant visited from time to time and helped with improvements and renovations. He stayed there for a short period of recuperation after being released from hospital. It was never suggested that the plaintiff and his wife should pay rent to the defendant or otherwise recognise financially the defendant's investment. Nor was it suggested that the plaintiff and the defendant should let the property so as to obtain a return on investment. 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. 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. 30 In these circumstances, equity takes the view that the defendant, as the plaintiff's father, intended to provide a benefit to his son by paying the deposit and stamp duty. For reasons I have given, that view is not displaced by evidence to the contrary. Equity will therefore also take the view that the plaintiff provided the whole of the property's acquisition cost. He provided it in part from his own funds and in part by means of the benefaction conferred on him by his father. Again, that view is not displaced by evidence to the contrary. 31 In the result, therefore, the case is one in which the plaintiff provided the whole of the purchase moneys so that the property conveyed to the plaintiff and the defendant jointly is, by operation of the second of the presumptions identified above, held upon trust for the plaintiff alone. 32 There will therefore be declarations and an order in terms of paragraphs 2, 3 and 4 of the summons. The defendant's cross claim will be dismissed. There will also be an order that the defendant pay the plaintiff's costs of the proceedings. **********