Chen v Liu [2017] NSWSC 1767

Supreme Court New South Wales

Medium Neutral Citation: Chen v Liu [2017] NSWSC 1767 Hearing dates: 16, 17 November 2017; Submissions 24 November 2017 Date of orders: 18 December 2017 Decision date: 18 December 2017 Jurisdiction: Equity Before: Emmett AJA Decision: Direct the plaintiff to bring in short minutes of orders to give effect to the conclusions reached in the reasons of 18 December 2017. Catchwords: EQUITY — Trusts and trustees — Resulting trusts — Purchase money trusts Legislation Cited: Conveyancing Act 1919 (NSW), s 66G Family Law Act 1975 (Cth) Real Property Act 1900 (NSW) Cases Cited: Calverley v Green (1984) 155 CLR 242; [1984] HCA 81 Category: Principal judgment Parties: Rong Chen (Plaintiff) Yue Liu (Defendant) Representation: Counsel: Ms E Cohen (Plaintiff) Mr C D Wood (Defendant)

Solicitors: Ren Zhou Lawyers (Plaintiff) Juris Cor Legal (Defendant) File Number(s): 2016/257549

Judgment 1. These proceedings have had a somewhat chequered background. The plaintiff and the defendant are registered under the Real Property Act 1900 (NSW) as the proprietors as joint tenants of the fee simple in a lot in a strata plan relating to a building situated at Zetland (the Apartment). The plaintiff commenced proceedings seeking an order under s 66G of the Conveyancing Act 1919 (NSW) for the appointment of trustees for the sale of the Apartment. He also sought an order that the defendant give possession of the Apartment to the trustees and that the defendant pay him mesne profits. In addition, he sought an account in relation to the payment of outgoings in respect of the Apartment. 2. The defendant opposed the appointment of trustees for sale. She also sought an order that the proceedings be transferred to the Family Court of Australia, as she alleged that she and the plaintiff were engaged in a de facto relationship, as a consequence of which the Family Court would have jurisdiction to make orders in relation to the Apartment. On 8 August 2014, Darke J ordered that the proceedings be transferred to the Family Court. However, on 23 August 2016, Loughnan J of the Family Court found that the relationship between the parties was not one to which the Family Law Act 1975 (Cth) applied and held that the Family Court lacked jurisdiction to deal with the proceedings. Loughnan J therefore transferred the proceedings back to the Supreme Court. 3. On 16 December 2016, the defendant agreed to the sale of the Apartment without the need for the appointment of trustees for sale. Orders for the sale were then made by consent. The proceeds of sale, after repayment of a loan from Westpac Banking Corporation (Westpac), which was secured by a mortgage over the Apartment, have been paid into a controlled monies account held by the solicitor who acted on the sale of the Apartment. These proceedings are now concerned with entitlement to those proceeds. 4. Several issues were raised in the proceedings. First, there was a dispute as to whether or not the Apartment was held by the plaintiff and the defendant on trust in the proportions in which they contributed to the purchase price. The price paid for the Apartment was $794,000. Stamp duty of $31,220 and legal fees of $1,005 were also incurred. Thus, it appears that the total cost of the Apartment was $826,225. That total cost was funded as to $326,225 by the plaintiff and as to the balance by way of the loan from Westpac in the sum of $500,000. The loan was made to the plaintiff and the defendant jointly. Thus, in effect, the plaintiff contributed $576,225 and the defendant contributed $250,000. It is now common ground that the Apartment was held by the plaintiff and the defendant on trust for the plaintiff and the defendant as tenants in common in the proportions in which they respectively contributed to that total cost, namely, 69.87% and 30.13%. 5. Secondly, there was a dispute as to the entitlement of the defendant to contribution from the plaintiff in respect of interest payments on the loan from Westpac and as to whether the defendant was liable for an occupation fee. The interest payable in respect of the loan by Westpac has been paid by the defendant and the defendant was in occupation of the Apartment until December 2016. However, as a result of compromises reached between the plaintiff and the defendant, partly in the course of oral argument, that dispute has been resolved. 6. The Apartment was sold and the proceeds of sale, after the payment of commission and legal costs, amounted to $1,050,450. The loan of $500,000 made by Westpac was repaid from the proceeds. Apart from the question of the costs of the proceedings, the remaining question in issue between the parties is the proportions in which the net proceeds of sale should be distributed to the plaintiff and the defendant. That is to say, the issue is how the trust bears on the respective entitlements of the plaintiff and defendant to the net proceeds. 7. As I have said, it is now common ground that the plaintiff contributed 69.87% of the total purchase price and the defendant contributed 30.13% of the total purchase price. That determined their respective interests in the Apartment. The fact that the contribution by the defendant was by means of the joint loan from Westpac and part of the contribution by the plaintiff was by means of the joint loan from Westpac does not alter the conclusion that the Apartment was held in those proportions. The liability of each to Westpac has been discharged. The total proceeds of the sale of the Apartment belonged to the plaintiff and the defendant in the proportions in which they owned the Apartment. Thus, 69.87% of the proceeds belonged to the plaintiff and 30.13% of the proceeds belonged to the defendant. Each had a liability to Westpac of $250,000. The defendant discharged her liability from her share of the proceeds and the plaintiff discharged his liability from his share of the proceeds. 8. The defendant accepts that the extent of the beneficial interests of the parties that arose by reason of the resulting trust must be determined at the time when the Apartment was purchased and the trust created. [1] She also accepts that the entitlements under the resulting trust would not be affected by later contributions, or want of contributions, to the repayment of the loan. [2] Thus, she accepts that, had the loan by Westpac not been secured by a mortgage on the Apartment, the position would have been as contended for by the plaintiff. She accepts further that, had the loan to Westpac been repaid prior to the sale of the Apartment, the result would have been as contended for by the plaintiff. 9. However, she contends, nevertheless, that the discharge of the loan from Westpac should be treated as an expense of the sale because, she says, the entitlement of the parties is to the "equity" in the Apartment. She asserts, in effect, that the property that was the subject of the resulting trust was the "equity" in the Apartment. If that contention were to be accepted, the consequence would be that the plaintiff would be entitled to the whole of the "equity", because the defendant did not contribute any funds of her own to the purchase of the Apartment. The contention cannot be correct, and it is difficult to follow the reasoning advanced on behalf of the defendant. 10. Once it is accepted that the Apartment was held on trust in the proportions in which the plaintiff and the defendant respectively contributed to the purchase price, namely, the proportions 69.87% to 30.13%, that is the end of the matter. The plaintiff and the defendant acquired the fee simple in respect of the Apartment. They acquired that fee simple for a total outlay, including stamp duty and costs, of $826,225. It was the proportions in which they contributed to that total cost that determined the proportions in which they beneficially held the fee simple. That was determined at the point of purchase. It was not affected by the way in which their joint liability to Westpac was discharged. There was no agreement after the purchase to alter the equitable interests acquired when the Apartment was purchased. Payments made in relation to the loan from Westpac, whether equally or otherwise, made no alteration to the respective interests that they acquired on completion of the sale, although it may be relevant on an equitable accounting between the parties. [3] 11. The sale price of the Apartment was $1,070,000. The balance after legal costs of $3,835.18 and commission and advertising of $21,050 was $1,050,450. Of that sum, the shares would be as follows: Plaintiff 69.87% $733,949 Defendant 30.13% $316,501 1. The plaintiff and the defendant were jointly liable to Westpac for the amount payable to Westpac of $501,167.56. Therefore, each was liable to pay to Westpac the sum of $250,583. Thus, the entitlement of the parties would appear to be as follows: Plaintiff's share $733,949 Less $250,583 Balance $483,366 Defendant's share $316,501 Less $250,583 Balance $65,918 1. That leaves the question of costs. Unfortunately, this issue is now a major one in the proceedings. 2. In the ordinary course, it may be appropriate for costs of an application for an order under s 66G of the Conveyancing Act to be paid out of the proceeds of sale. However, as I have indicated, these proceedings have had a somewhat chequered history, having been transferred to the Family Court and then transferred back to this Court. 3. The proceedings have been on foot since February 2014. The defendant opposed the appointment of trustees for sale up to December 2016. The appointment of trustees for sale was opposed by the defendant on the basis of her contention that the matter should be dealt with by the Family Court. The transfer to the Family Court was opposed by the plaintiff. In the result, that opposition would appear to have been justified. Further, the opposition to a s 66G order was misconceived. 4. The plaintiff has incurred costs that, in the result, have been thrown away. Even after the sale of the Apartment, the defendant disputed the plaintiff's contention that the Apartment was held on trust for the parties in proportion to their respective contributions to the outlay made to acquire it. 5. The defendant contends that, notwithstanding that history, the costs of the proceedings in this Court should be borne equally by the parties on the basis that the resulting trust did "not exist until declared". That proposition appears to be misconceived. The resulting trust arose by reason of the respective contributions made by the parties to the outlay made in order to acquire the Apartment. The Apartment vested in the plaintiff and the defendant, in equity, in the proportions in which they contributed to its price. In the result, it has not been necessary for the Court to make a declaration to that effect because the parties have agreed that they held the Apartment in the relevant proportions. 6. On the other hand, as I have indicated, while the parties have resolved some disputes, the defendant has nevertheless persisted in her stance as to entitlement to the net proceeds of sale. Overall, the plaintiff has been substantially successful in the proceedings. That is to say, apart from the need for him to seek the assistance of the Court in effecting a sale of the Apartment, he has been successful in establishing his entitlement to the majority of the net proceeds of sale. In the circumstances, I consider that the appropriate order is for the defendant to pay 80% of the plaintiff's costs of the proceedings and that the amount of those costs should be paid out of the defendant's share of the net proceeds of sale. There is no reason why the plaintiff's costs should not include those costs incurred in resisting the defendant's application to transfer the proceedings to the Family Court and the plaintiff's costs in resisting the relief sought by the defendant in the Family Court. 7. The figures set out above are not entirely certain. I propose to direct the plaintiff to bring in short minutes to give effect to the conclusions that I have expressed above.