Daftar v Al-Khamisy [2013] NSWSC 34

Supreme Court New South Wales

Medium Neutral Citation: Daftar v Al-Khamisy [2013] NSWSC 34 Hearing dates: 23/01/2013 Decision date: 23 January 2013 Jurisdiction: Equity Division Before: McDougall J Decision: Application, for extension of caveat or freezing order, dismissed. Catchwords: PRACTICE AND PROCEDURE - judgments and orders - freezing order - whether arguable case - REAL PROPERTY - caveats - application for extension - whether equitable invest identified Legislation Cited: Real Property Act 1900 (NSW) Cases Cited: Muschinski v Dodds (1985) 160 CLR 583 Category: Procedural and other rulings Parties: Khalid Daftar (Plaintiff) Kiraas Sabah Ati Al-Khamisy (Defendant) Representation: Counsel: FFF Salama (Plaintiff) JAN Hogan-Doran (Defendant) Solicitors: Stojanovic Solicitors (Plaintiff) Consolidated Lawyers Pty Ltd (Defendant) File Number(s): 2013/16730

Judgment (EX TEMPORE REVISED - 23 jANUARY 2013) 1HIS HONOUR: The plaintiff filed a summons seeking an order extending the operation of a caveat lodged by him against the title to land owned by the defendant. On the return of the summons today, the plaintiff amended to seek, in the alternative, an order restraining the defendant from selling, further encumbering or otherwise dealing with the property in question. 2The caveat states the estate or interest claimed as: "... an equitable interest in the land as beneficiary of a constructive trust." 3That interest is said to arise from: "... the fact that the caveator provided a sum of $170,000 for the acquisition of the land." 4The plaintiff's evidence, which is essentially non-contentious, is that on 31 January 2011 he lent the defendant $120,000, which the defendant said he needed to help buy a house. The defendant agreed to repay the money in eights months' time. 5Further, according to the plaintiff, he had a further conversation with the defendant in late May 2011. The defendant said he needed some more money for the house: $50,000. The plaintiff agreed to lend that sum. The defendant asked for it to be paid by bank cheque in the name of the vendor, a company known as MS Paul Pty Ltd. 6The plaintiff procured and gave to the defendant a bank cheque thus drawn. 7Stepping aside from the loans for a moment, it is proved that the vendor of the property in question to the plaintiff was indeed a company known as MS Paul Pty Ltd. 8On those facts, the plaintiff asserts that he has an equitable interest in the land. However, there is no evidence that the purchase was made as a result of some joint enterprise, or on the basis of an agreement or understanding that the plaintiff would obtain, in exchange for the payments, some interest in the land. 9For the purposes of this application, I am prepared to accept that each of the advances was made to enable the defendant to buy the land in question. That is I think reasonably plain in the case of the second instalment - the bank cheque made out in the name of the vendor. And on the plaintiff's evidence, which for present purposes I accept, it is equally clear in respect of the first instalment. 10There were other dealings between the plaintiff and the defendant relating to the sale and purchase of the business. The defendant appears to acknowledge that the purchase price was $100,000. 11There are questions as to whether the total amount advanced by the plaintiff to the defendant ($270,000, including the price of the business) has been repaid. There are also related issues as to the ownership of gold bullion (both parties are jewellers). For present purposes, I proceed on the basis that there is a serious question to be tried as to whether any amount is indeed owing to the plaintiff. 12However, in relation to the caveat, the question, in terms of s 74K of the Real Property Act 1900 (NSW), is whether the Court can be satisfied that the plaintiff's claim has or may have substance. That question has been addressed traditionally by considering whether there is a serious question to be tried. 13If a serious question to be tried is made out then the Court moves to consider the balance of convenience. It has been observed, and I proceed on the basis, that the question of serious question to be tried and the question of balance of convenience are interrelated. Thus, whether or not there is a serious question to be tried is something to be assessed having regard to, among other things, the consequences of the grant or refusal of interlocutory relief. 14In the present case, and jumping to the second of those points: there is no evidence of any risk that the defendant will in some way divest himself of, or dissipate, his assets. On the other hand, there is no evidence that the defendant has any immediate plans to deal with the property, which plans might be impeded by the presence of a caveat. 15However, before getting to those matters, it is necessary to return to the caveat and the interest claimed. 16Mr Salama of counsel, for the plaintiff, conceded that the caveat "is probably borderline in respect to the interest characterised and particularised". When asked to indicate on which side of the border the caveat lay, Mr Salama replied, in the frank manner that one would expect of him, "Probably the worst off side". 17I mention those matters not by way of humour but because it seems to me to be clear that the facts do not establish an equitable interest in the nature of a constructive trust. The starting point is, I think, that an agreement to lend money does not of itself give the lender any interest in land even where the money is used to buy land (and even if it be known that this was the purpose for which the money was sought). 18The circumstances in which a Court will find the existence of a constructive trust are not closed. That is made plain by the decision of the High Court of Australia in Muschinski v Dodds (1985) 160 CLR 583. See, in particular, the judgment of Deane J at 616-617. 19In some cases, a constructive trust may be imposed for remedial purposes (for example, in the case of misapplication of moneys held on trust, or misapplied in breach of fiduciary duty). In other circumstances, it may be imposed as a consequence of, or to give effect to, some obligation of law (for example, where a property is transferred under a contract which is set aside in equity). And there are many other categories of fact which may give rise to a constructive trust. 20In some cases, the advance of money to a party to enable that party to acquire real estate may give rise to a form of resulting trust. But there must be facts which show that the intention or understanding of the parties were that they would jointly contribute to the purchase price, so as to give rise to an inference of a resulting trust in favour of the lender. 21In my view, the relevant principles are stated with sufficient accuracy in Jacobs' Law of Trusts (7th edition, 2006) at [1210]. The authors state that the principles relating to "purchase trusts" will not apply simply because one party lends or gives money to another which money is used to buy property from a third party. Nor will they apply simply where the money is lent but, at the direction of the borrower, paid to the vendor. The authors conclude that it is necessary to show an express trust of the land, created by the borrower in favour of the lender, if their relationship is to go beyond that of borrower and lender. 22Applying those principles to the present case, the facts go nowhere near showing an agreement or understanding of the necessary kind. 23Thus, not only is the caveat irremediably bad in form (because the interest disclosed is not capable of supporting a constructive trust), the underlying facts do not disclose any other caveatable interest. 24In my view, it follows that the application to extend the caveat must fail. 25I turn to the alternative claim for what is in substance a freezing order. As I have said, there is no evidence that the defendant proposes to dispose of or further encumber the land, or otherwise to dissipate his assets. There is no evidence that the defendant is taking any step with the intention of, or that might have the effect of, frustrating any judgment that the plaintiff may recover against him in the District Court proceedings. 26Mr Salama pointed to two matters. One was the absence of any undertaking proffered by the defendant. However, as Mr Hogan-Doran of counsel, for the defendant, observed, the amendment to claim relief in the nature of a freezing order had only been foreshadowed and made today. There is no evidence (apart from the form of the amendment) of any request for an undertaking. In those circumstance, the absence of an undertaking seems to me to carry very little weight indeed. 27The second matter to which Mr Salama pointed was the form of the defendant's evidence. The affidavit came not from the defendant (so that leave to cross-examine him on it might have been sought, and perhaps even granted), it came instead, on information and belief, from his solicitor. 28Again, however, that seems to me to be of little significance. The affidavit was prepared in response to the application for an extension of the caveat. The facts that it stated were relatively non-controversial (indeed, they appear, if anything, to have assisted proof of the matters on which the plaintiff relied to support his claim that there was a caveatable interest). The only other issue to which the affidavit went was to the further prayer for relief, that the proceedings in the District Court be brought up into this Court and heard together with the present proceedings. 29In those circumstances, I do not regard those matters, considered individually or together, as offering any basis for an inference that the defendant might take the steps to which I have referred with the intention of frustrating any judgment in his favour. 30It follows that the application for interlocutory relief, both in terms of the caveat and in terms of prayer 4A of the summons, should be dismissed, and I so order. 31I will hear the parties on costs and on the future (if any) of these proceedings. (Counsel addressed) 32The plaintiff wishes to discontinue. He accepts that he must pay the costs of the proceeding if he does so. In circumstances where there is no visible difference between those costs and the costs of the application, it is appropriate to grant the plaintiff leave to discontinue. I do so, and I direct that the notice of discontinuance be filed and served within seven days. 33I order the plaintiff to pay the defendant's costs of the proceedings.