Supreme Court New South Wales Medium Neutral Citation: Ignjatovic v Goreski [2017] NSWSC 1677 Hearing dates: 15, 16 and 17 November 2017 Date of orders: 17 November 2017 Decision date: 17 November 2017 Jurisdiction: Equity Before: Lindsay J Decision: Declaration as to beneficial entitlements to land, together with orders for sale of the land and distribution of proceeds of sale. Catchwords: EQUITY – Joint venture – Breakdown in relationship – Property held on trust – Directions for sale of property and distribution of sale proceeds Legislation Cited: Civil Procedure Act 2005 NSW Cases Cited: Muschinski v Dodds (1985) 160 CLR 583 Texts Cited: - Category: Principal judgment Parties: Plaintiff: Sveti Ignjatovic First Defendant: Nikolce Goreski Second Defendant: Elicia Ignjatovic Third Defendant: Jessica Ignjatovic Representation: Counsel: Plaintiff: PM Lane 1st and 2nd Defendants: CM Lee 3rd Defendant: No appearance Solicitors: Plaintiff: SBA Lawyers 1st and 2nd Defendants: Fulcrum Legal 3rd Defendant: No appearance File Number(s): 2016/00052689 Judgment – EX TEMPORE 1. These proceedings concern competing claims to beneficial ownership of residential land at Austinmer in the State of New South Wales ("the property"). 2. The principal competing claimants are the plaintiff and the first defendant. The plaintiff is the father of the second and third defendants, his daughters. The first defendant is the fiancé of the second defendant. The third defendant has taken no part in the proceeding, and the second defendant's participation in them has been directed towards support of the first defendant's case. 3. Until February 2015, or thereabouts, the property was registered in the name of the plaintiff, subject to a mortgage. In late 2014 or early 2015, the property was "sold" to the first defendant for $650,000, an amount ostensibly borrowed by the first defendant on security of the property and applied in payment of pressing debts of the plaintiff. 4. The "sale" was proposed by the plaintiff as a means of allowing him, in effect, to refinance his mortgage, using the preparedness of the first defendant to lend his name to the mortgage (an interest-only mortgage) as mortgagor. 5. The second defendant acted as a go-between between the plaintiff and the first defendant in discussions leading to the arrangement between the plaintiff and the first defendant being made. 6. The nature and terms of the (wholly oral) arrangement made between the plaintiff, the first defendant and the second defendant for the "sale" to proceed are disputed. 7. It is common ground: 1. the plaintiff would pay instalments due under the new mortgage (sometimes, nominally, described as "rent") and would indemnify the first defendant against liability under the mortgage; 2. the plaintiff would pay outgoings on the property (essentially rates, insurance, and any land tax payable by the first defendant) and indemnify the first defendant against liability for such debts; 3. whilst ever the plaintiff complied with (a) and (b), he would be entitled to reside at the property. 1. What is not common ground is: 1. for what term or duration the arrangement would run; and 2. what, if any, benefits would flow to the first defendant for his support of the plaintiff. 1. The plaintiff says that the arrangement was that he could reside at the property for the rest of his life and that, contingent upon being able to reside there for that period, beneficial ownership of the property would pass on his death to his daughters, the second and third defendants. 2. The first and second defendants say that the arrangement was only ever to be temporary one and, even then, subject to the plaintiff having an option to repurchase the property from the first defendant. 3. Putting their case at its highest, they contend that the plaintiff was only ever a tenant at will. However, when pressed, that is not the case for which they ultimately contend. 4. Neither the second defendant nor the third defendant claims a beneficial entitlement to the property, in remainder, based on the case presented by the plaintiff. 5. The conversations between the plaintiff, the first defendant and the second defendant (on behalf of the first defendant) leading to the arrangement between the plaintiff and the first defendant, and leading to transfer of the property, were imprecise as to both the term of the arrangement and any benefit to the first defendant . 6. Objectively, the arrangement was determinable on reasonable notice, which, by the institution of these proceedings, can be taken to have been given on one side or the other, or both. 7. As to the benefit, if any, to the first defendant: the picture is obscured by the plaintiff's provision to the mortgage broker who arranged the new mortgage of a "letter of gift" dated 8 October 2014, which, in terms, recorded that the plaintiff gifted to the first defendant $250,000 in equity in the property. 8. That document is not determinative of the rights of the parties inter se. It was created for the purpose of ensuring that the incoming mortgagee would not be concerned about there being a sale at an undervalue. Nevertheless, it might be thought to indicate that the plaintiff was conscious of some need for gratitude to the first defendant for the first defendant's assistance. 9. The arrangement between the parties was not contractual in character. There was no intention to create legal relations between the plaintiff and the first defendant, the parties to the land transfer. The arrangement was an informal one between family members: the plaintiff as father of the second defendant and as prospective father-in-law of the first defendant; the first defendant acting at the request of the second defendant, his fiancée. 10. The relationship between the parties - essentially the plaintiff and the first defendant but of necessity embracing the second defendant - has broken down. The plaintiff has paid mortgage instalments due, but there has been discord and possibly misunderstanding between the parties about payments of rates. The first defendant complains that he is out of pocket having paid expenses on the property, as does the second defendant. 11. The first and second defendants want to be free of any obligations the first defendant has under the mortgage, and free of the arrangement which they understood to be no more than temporary. 12. In my opinion, the principles governing a determination of these proceedings are those found in Muschinski v Dodds (1985) 160 CLR 583. There was, in effect, a joint venture between the parties, a joint venture which has failed. 13. The relationship between the parties, upon which the arrangement was based, is no longer compatible with continuation of the arrangement. 14. The first defendant would be content for the plaintiff to buy back the property, relieving him of any ongoing obligations referable to the property. In the absence of any offer by the plaintiff to buy back the property, the first defendant wants to sell the property so as to be free of it. 15. The property cannot be sold by the first defendant, in good conscience, without acknowledgement of the plaintiff's beneficial interest in the property. On the other hand, the plaintiff cannot take the benefit of a sale of the property without at least allowing for expenses incurred by the first and second defendants on the property. 16. The evidence of the first defendant is that he has been put to an expense totalling $31,296 by his involvement with the property, comprising $9,363 referrable to rates; $18,843 referrable to land tax; and $3,120 referable to insurance. The plaintiff concedes that, if an allowance is to be made for the first defendant upon an adjustment of the parties' rights, an additional $20,000 should be allowed to the first defendant for his pains and trouble in lending his name to the new mortgage arrangement and for bearing the risk of exposure to the mortgagee. 17. It is agreed between the parties that the second defendant has incurred expenses assessed at $15,000. 18. The appropriate course, in the absence of any agreement between the parties, is for the Court to make orders for the property to be sold and for the proceeds of sale to be applied as follows: 1. first, in repayment of any loan secured against the property, and to obtain a discharge of any mortgage or security relating to such a loan. 2. secondly, to satisfy the costs and expenses of sale of the property, including real estate commission, conveyancing fees and (if any) capital gains tax payable upon the sale. 3. thirdly, to pay the sum of $51,296 to the first defendant. 4. fourthly, to pay the sum of $15,000 to the second defendant. 5. fifthly, to pay the costs of these proceedings, of all parties, assessed on the ordinary basis. 6. sixthly, to pay the balance to the plaintiff. 1. If the parties are able to agree upon an alternative method for sale of the property, they can do so or apply to the Court for the Court's orders to be varied so as to accommodate their agreement. 2. The plaintiff presently has a caveat (dealing number AK482196J) entered against the title to the property. At some point, that will need to be withdrawn, but the timing of its withdrawal may best, in the first instance, be left to the parties. 3. A sticking point between the parties is evidently that the plaintiff has sought to remain in possession of the property, on terms consistent with a continuation of the family arrangement, for 12 months. 4. In my opinion, that is far in excess of what is reasonable. In my opinion, subject to any further orders that might be made by the Court, it would be appropriate to allow him until mid-February next year to vacate the property. 5. If the major interest in the property is the plaintiff's, prima facie the plaintiff's solicitor should have carriage of the conveyancing aspects of the sale. 6. Neither side of the record objects to that structure of the business of sale, remembering that the first defendant (as registered proprietor) must participate in the process. 7. Provided the defendants get their money, including whatever may be necessary for their costs, in practical terms the plaintiff should have carriage of the sale. 8. It is agreed between the parties that the costs of these proceedings should be borne by the property, upon its sale; such costs to be assessed on the ordinary basis. 9. [Having allowed the parties an opportunity to be heard as to the form of orders proposed to be made,] I make the following orders: 1. DECLARE that the first defendant holds on trust for the plaintiff, subject to charges in favour of himself and the second defendant, the property contained in Folio identifier A/340192 ("the property"). 2. DECLARE that the charges over the property to which the first and second defendants are entitled comprise as at the date of these orders being made: 1. a sum of $51,296.00 in favour of the first defendant. 2. a sum of $15,000.00 in favour of the second defendant. 1. ORDER that the plaintiff pay those sums to the first and second defendants respectively. 2. ORDER that, if not paid on or before 15 December 2017, interest accrue on those sums, from that date, at the rate prescribed by the Civil Procedure Act 2005 NSW, section 101. 3. ORDER, subject to further order, that the property be sold by public auction, reserving to all parties liberty to bid at any auction. 4. ORDER that the proceeds of sale of the property be applied as follows: 1. first, in repayment of any loans secured against the property and to obtain a discharge of any mortgage or security relating to any such loan. 2. secondly, in satisfaction of the costs and expenses of sale, including real estate agent's commission, conveyancing fees and (if any) capital gains tax. 3. thirdly, in payment to the first defendant of the sum of $51,296.00 plus accrued interest, if any. 4. fourthly, in payment of the sum of $15,000.00 to the second defendant, plus accrued interest, if any. 5. fifthly, in payment of the costs of these proceedings. 6. sixthly, in payment of the balance to the plaintiff. 1. ORDER that the costs of all parties to the proceedings, assessed on the ordinary basis, be paid out of the proceeds of the sale of the property. 2. ORDER, subject to further order, that Caveat AK482196J be withdrawn on or before settlement of any sale of the property pursuant to these Orders. 3. ORDER that the plaintiff deliver up vacant possession of the property to the first defendant (for the purpose of giving effect to a sale of the property pursuant to these Orders) no later than 15 February 2018 or such, if any, other date as may be agreed between the plaintiff and the first defendant in writing. 4. ORDER, subject to further order, that the solicitor for the plaintiff (Stephen Blanks of SBA Lawyers) have carriage of conveyancing work to be done in order to effect a sale of the property pursuant to these Orders. 5. NOTE that the plaintiff, by his counsel, gives to the Court an undertaking that, pending completion of a sale of the property pursuant to these orders, he will pay or bear all liability for mortgage payments and outgoings referable to the property. 6. RESERVE to all parties liberty to apply for orders consequential upon, or in the working out of, these Orders, including an application for orders governing the terms upon which the property is to be sold. 7. ORDER that exhibits and subpoenaed material may be returned forthwith: any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined. 8. ORDER that these Orders be entered forthwith. ********** Amendments 14 December 2017 - Paragraphs 28 and 35(8) amended by substitution of the reference AK482196J for the caveat reference AJ844457. 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. Decision last updated: 14 December 2017