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  • Unreported Judgment

Onza Industries Pty Ltd v Tingalpa Tyre & Mechanical Pty Ltd

 

[2021] QSC 1

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Onza Industries Pty Ltd v Tingalpa Tyre & Mechanical Pty Ltd [2021] QSC 1

PARTIES:

ONZA INDUSTRIES PTY LTD AS TRUSTEE FOR THE PLATH FAMILY DISCRETIONARY TRUST

(Plaintiff)

v

TINGALPA TYRE & MECHANICAL PTY LTD

(Defendant)

FILE NO/S:

BS No 10492 of 2016

DIVISION:

Trial Division

PROCEEDING:

Trial

DELIVERED ON:

6 January 2021

DELIVERED AT:

Brisbane

HEARING DATE:

30 November and 1 December 2020

JUDGE:

Bowskill J

ORDERS:

The solicitor for the plaintiff is directed to provide a form of draft order, reflecting the proposed declarations and orders referred to in paragraphs [116], [117]and [118] of the reasons for judgment delivered today.

I will hear from the parties as to costs of the proceeding.

CATCHWORDS:

EQUITY – TRUSTS AND TRUSTEES – VESTING ORDERS – VESTING ORDERS, CONVEYANCES AND TRANSFERS – VESTING ORDERS – where the defendant was formerly the trustee of a trust, but was removed and replaced by the plaintiff as trustee – where there is a dispute as to the capacity in which the defendant purchased certain real property located in New South Wales prior to its removal as trustee, namely, as trustee of the trust or in its personal capacity – where the defendant and its now sole director have refused to deliver up the certificate of title to enable the legal title to the property to be transferred to the plaintiff as the new trustee – whether a vesting order should be made under the Trustee Act 1925 (NSW)

EQUITY – TRUSTS AND TRUSTEES – APPOINTMENT, REMOVAL AND ESTATE OF TRUSTEES – APPOINTMENT OF NEW TRUSTEES – UNDER POWER – where the appointor of the trust exercised his power under the trust deed to remove the defendant as trustee, and appoint the plaintiff in its place – where the plaintiff was not incorporated until the day after the resolution was made – whether the appointment of the plaintiff as trustee was valid and effective

EQUITY – TRUSTS AND TRUSTEES – POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES – INDEMNITY, LIEN AND REIMBURSEMENT – whether the defendant had a liability to reimburse Ira Plath for money he contributed to the purchase of the subject property, both at the time of the initial purchase and subsequently to discharge the mortgage over the property, as well as for renovation works undertaken to the property

Trustee Act 1925 (NSW), ss 71 and 78

COUNSEL:

D Lang, sol, for the plaintiff

I Plath, director, appeared with leave for the defendant

SOLICITORS:

Lewis & McNamara for the plaintiff/applicant

Introduction

  1. [1]
    The dispute the subject of this proceeding is essentially one between two brothers, Mr Ondra Plath, who is the director of the plaintiff, and Mr Ira Plath, who is the director of the defendant, about ownership of a property located at Lot 2 Abercairney Terrace, Aberdeen in New South Wales (the property).[1]
  2. [2]
    The plaintiff’s case is that the defendant, in its then capacity as trustee of the Plath Family Discretionary Trust (the Trust), purchased the property in August 2006.  In December 2014, Ondra, the appointor of the Trust, removed the defendant as trustee and appointed the plaintiff as trustee in its place.  Since that change, the defendant has failed to do what is required to facilitate the change of trustee on the title to the property in the New South Wales real property register (in particular, deliver up the certificate of title).  In addition, it is said the defendant, by its now sole director Ira, has acted in breach of its duties as trustee by dealing with the property in a manner inconsistent with the plaintiff’s legal title (including changing the locks and advertising the property for sale or rent with Ira’s contact phone number).
  3. [3]
    By its amended claim, the plaintiff seeks a declaration, pursuant to s 71 of the Trustee Act 1925 (NSW),[2] that the property be vested in the plaintiff; consequential orders requiring the defendant to do what is necessary to cause the property to be transferred to the plaintiff, including delivering the certificate of title; and further or in the alternative, equitable damages for the defendant’s breach of trust, including loss alleged to have been suffered by the defendant failing to rent the property and an account of the rental which should have been received by the plaintiff since it became trustee.
  4. [4]
    The defendant denies the plaintiff is entitled to the relief which it seeks.  The defendant’s case is that it purchased the property in its own capacity, not its capacity as trustee of the Trust.  It is alleged that occurred in circumstances where Ira had intended to purchase the property for himself, and had paid a deposit for that purpose, but was unable to obtain finance to complete the purchase.  Ira approached Ondra to assist, because he did not want to lose the deposit he had paid.  Ira says he put to Ondra a “proposal”, which Ondra agreed to, under which Ondra would arrange for the defendant to obtain a loan to cover the purchase price (secured by a mortgage over Ondra’s home and the property); Ira would fund the deposit, legal costs and stamp duty associated with the purchase; Ira would undertake works and renovations on the property; the property would be leased to third party/ies; rent received for the property would be applied to pay outgoings and repay the loan; once the loan was paid out, the property would be sold; from the sale proceeds the defendant would repay Ira the money he had contributed, including for the purchase costs and building work, plus 5%; and any balance would then be split 50/50 between Ira and Ondra.    On the basis of this proposal, the defendant contends that it holds the property on constructive trust for Ira and Ondra.
  5. [5]
    Alternatively, if it is found the property was purchased by the defendant as trustee, the defendant disputes the validity of the change of trustee, and alleges wrongdoing on the part of Ondra as appointor by purporting to change the trustee.  Further, even if the change of trustee was effective, the defendant alleges the property vested in the new trustee subject to the “proposal”, and claims a lien over the property, as the outgoing trustee, for the liability the defendant says it has to repay Ira for the money he contributed to the purchase of the property, the value of work Ira says he carried out on the property and money paid by Ira to pay out the loan.
  6. [6]
    There is no counterclaim by the defendant; and no claim by (or against) Ira in his personal capacity, as Ira is not a party to the proceeding.

Evidence and findings

  1. [7]
    CreditThe true factual circumstances of the case are hard to determine.   Neither Ira nor Ondra, the central witnesses, impressed as entirely credible or reliable.   The dispute is clearly acrimonious.  This is unfortunate, as it appears from the evidence that this was once a close and loving family, willing to do a lot for each other.   That is no longer the case.  There has been a dispute between Ira and some of his siblings, at least Ondra and their sisters Cheyenne and Alexis, since the death of their parents in 2010 and 2011, over the parents’ estate.   The relevant events occurred many years ago, beginning in 2000 but also significantly in 2006.
  2. [8]
    By order made on 28 September 2020, the evidence in chief was by affidavit.  The plaintiff is legally represented; the defendant is not, and appeared by its director, Ira.  Neither party took any objections to the other side’s affidavits, although the affidavits on both sides included inadmissible material.  Whilst there are a number of matters which did not seem to be controversial; there are other respects in which there are stark conflicts in the evidence.  As there was limited cross-examination of any of the witnesses, this did not really assist in resolving the conflicts. 
  3. [9]
    It was apparent from the evidence that there was some (perhaps a lot of) misunderstanding – on both sides – about the legal implications of various things that were done, and a tendency to have become entrenched in a factually and legally misconceived view of the circumstances.  Although I cannot rule out that any particular witness may have been deliberately untruthful, I have not determined the case on that assumption.  I proceed on the basis that assessing credibility is a complex task, and even an honest witness, who is telling the truth as they see it, may be recalling events as they would wish them to have been, rather than as they were.  As White AJA said in ACN 070 037 599 Pty Ltd v Larvik Pty Ltd [2008] QCA 416 at [6],[3] “[w]hen considering conflicting accounts of events that occurred well in the past [in that case eight years ago]… it is as well to recall the observation of Lord Pearce that with every day that passes the memory becomes fainter and the imagination becomes more active.  Even though the witnesses may be honest, the probabilities must be carefully weighed and, in the process, contemporary documents and incontrovertible facts play an important part”.[4]    I have assessed the evidence with these matters in mind, and where I have not accepted the evidence of a witness it is on the basis of this assessment, rather than a finding of dishonesty.
  4. [10]
    I have found it useful to begin the task of resolving the issues by focussing on the contemporaneous documentary evidence, particularly that which is independent of the parties, and to analyse the evidence of the witnesses by reference to that in determining where the probabilities lie.
  5. [11]
    Background facts.  Ondra is a qualified mechanic.  Between about 1995 and 2000 he worked for a business in Tingalpa known as Ace Tyres.  In about 1999 Ace Tyres went into liquidation. 
  6. [12]
    Ondra says at this time he established his own business, called Tingalpa Tyre & Mechanical, which he operated from the premises Ace Tyres had previously occupied.    This business was to be operated as a partnership, with Ondra and his wife, Anita, each having a 50% interest in the business.  An ASIC business name search supports what Ondra says.  The business name “Tingalpa Tyre & Mechanical” was registered on 10 February 2000, recording the “holder type” as partnership, in the names Ondra Plath and Anita Plath.[5]
  7. [13]
    The registration of the business name did not last long – it was cancelled on 3 March 2000.  The business was then operated by the newly incorporated company, Tingalpa Tyre & Mechanical Pty Ltd (which I will refer to as TTM or the defendant).   Ondra says that was done on the basis of an accountant’s advice, “because the GST was coming in”,[6] and as an “asset protection measure”.[7]
  8. [14]
    TTM was incorporated on 21 February 2000.  The directors of TTM, from its incorporation, were Ira and Ondra.  The secretary at that time was Anita. 
  9. [15]
    In his affidavit, Ondra says that at this time, he was the sole shareholder.  Documents forming part of exhibit 1 (on the USB), contradict this, and show that from February 2000 Ondra held one share and (what is said to be) Ira’s company, International Blend Pty Ltd, held one share.[8]
  10. [16]
    Ondra worked for TTM as a mechanic.  Ira also worked for TTM at this time.  Ira is not a mechanic, but did other work for the business.
  11. [17]
    Ondra says that in about June 2000 he suspected Anita was using company funds to pay credit card debts without his knowledge.  He says he caused Anita to be removed as the company secretary, and Ira was appointed as secretary in her place.  There was also a change in the shareholding at this time.  Ondra says he did this on the advice of his father who suggested he change the shareholding in TTM “to protect the business in the event of divorce”.  Ondra says he arranged for an additional 99 ordinary shares to be issued in TTM in June 2000, which were allocated to Ira’s company, International Blend Pty Ltd. 
  12. [18]
    There is a notification of share issue in evidence,[9] referring to the issue of 98 shares, dated 19 June 2000.[10]
  13. [19]
    The company extract shows International Blend Pty Ltd formerly held 99 shares; and that Ira currently holds those 99 shares.  There are no dates shown for those changes.  The document number adjacent to the reference to Ira as the holder of the 99 shares (7EAU83251) appears to have been processed on 17 March 2020.[11]  
  14. [20]
    There was no explanation in any witness’ evidence for the discrepancy between 98 shares issued in June 2000, and International Blend Pty Ltd later holding 99 shares.  However, there is in evidence an “application for shares” by International Blend Pty Ltd, dated 21 February 2000, which seeks the allotment of 1 share to that company,[12] and a memorandum of resolutions dated 21 February 2000[13] recording allotment of one share to International Blend Pty Ltd, and the transfer of one share (from the previous shareholder) to Ondra.  This explains how, following the allotment of 98 shares in June 2000, International Blend held 99 shares. 
  15. [21]
    Although there is an anomaly in Ondra’s evidence as to when International Blend Pty Ltd first acquired shares in TTM, on the basis of the document in exhibit 1 at p 35, I otherwise accept the evidence of Ondra about the timing of the issue of the large number of shares to Ira’s company.
  16. [22]
    There was also no explanation in the evidence about when Ira acquired the shares from International Blend Pty Ltd.  It may be reasonable to infer this occurred in March 2000, but as it was not addressed at the trial I do not make a specific finding.
  17. [23]
    Ondra says he issued the additional shares to Ira’s company “on the understanding that TTM remained ‘my company’ and the change in shareholding was an asset protection measure only” and “I continued to operate TTM as ‘my company’ as I had done before the change in shareholding”.
  18. [24]
    As against this, Ira says that in about 2000 his father approached him to start a tyre and mechanical business, which would employ Ondra,[14] and that Ira and his father subsequently arranged for the establishment of a company to carry on that business, TTM.
  19. [25]
    On the balance of probabilities, and having regard to the documentary evidence, I do not accept Ira’s evidence in this respect, as it is inconsistent with the evidence of the registration of the business name (with Ondra and Anita being equal partners) and the history of the company just discussed.   I find that the business was established by Ondra and his wife; with the wife’s role being diminished in the first six months.
  20. [26]
    The evidence of Darryl Home, who was the owner of the Tingalpa premises where Ace Tyres had operated its business and then where TTM operated its business, which is relied upon by Ira, does not support a different conclusion to that which I have found, based on the objective documents.
  21. [27]
    It is not disputed that Ira loaned $37,500 to Ondra to help him set up the business.  It is also clear that Ira was involved in TTM – as a director from the outset; as an employee working for the business; as secretary of the company from June 2000 and, indirectly, through the shareholding of International Blend Pty Ltd.
  22. [28]
    Ondra and Ira’s sisters, Cheyenne and Alexis, also worked for the business – Cheyenne was the bookkeeper for the business from January 2001 and Alexis worked for the business in a range of capacities, but largely administrative, from early 2002.
  23. [29]
    Ira worked for TTM from the beginning of its operations until March 2001, at which time Ira left and returned to Childers to assist their parents by refurbishing and operating their commercial fishing vessel, which he continued to do until about December 2005.   
  24. [30]
    Ira ceased being a director on 8 March 2001, leaving Ondra as the sole director of the company until August 2010.[15]
  25. [31]
    Ondra says that by the time Ira left in March 2001 he had repaid Ira the $37,500 which Ira had loaned to him to start up the business.  Ondra also says he paid Ira an additional $43,000 as a “bonus” for assisting him to set up the business.  Ira denies both these things, but also says he has never made a demand for repayment of the money he loaned to Ondra.  There is no documentary evidence to assist in resolving this factual dispute. 
  26. [32]
    It is not essential to make a finding about whether or not this money was repaid, and I find myself in real doubt as to where the truth lies.   Taken literally, the evidence is of a loan from Ira to Ondra, personally (as opposed to a loan to the company).  I have reviewed the financial statements for TTM which are in evidence and, although I cannot see a reference to a loan for $37,500, they do evidence a loan of a smaller amount from Ira (and of much higher amounts from Ondra) to the company. 
  27. [33]
    The financial statements for the company, TTM, record loans from Ondra and Ira as a non-current liability in each year from June 2000 to June 2006, as follows:
    1. (a)
      $89,273 from Ondra and $13,370 from Ira in 2000;[16]
    2. (b)
      $81,603 from Ondra (on the basis of additional capital introduced, less drawings taken) and an unchanged $13,370 from Ira in 2001;[17]
    3. (c)
      $82,147 from Ondra (on the basis of minimal additional contributions and drawings) and $23,077 (on the basis of $12,864 capital introduced and just over $3,000 in drawings) from Ira in 2002, as well as $5,000 contributed by Cheyenne in this year;[18]
    4. (d)
      $81,549 from Ondra (essentially unchanged), a reduction to $9,982 for Ira (on the basis of repayment of capital of $10,200 and drawings of $2,894) and a reduction to nil for Cheyenne in 2003[19] (although the balance sheet for 2004 still shows as a long term liability the loan from Cheyenne);[20]
    5. (e)
      $65,709 from Ondra (reduced as a result of $15,841 drawings) and $14,984 for Ira (increased by additional capital introduced of $5,000) in 2004;[21]
    6. (f)
      $59,559 from Ondra (reduced by drawings), $9,984 from Ira (reduced by drawings) and $2,000 from Cheyenne in 2005 (the loan of $5,000 appearing back in the records for this year, less $3,000 drawings);[22]
    7. (g)
      although the financial records for the 2006 year do not set out a breakdown of non- current liabilities (of $67,258.73),[23] the balance sheet records as a long term liability the loan from Ira of $9,983.88;[24] and
    8. (h)
      by 2007, the non-current liabilities have been reduced to $51,920 (again, no breakdown appears).[25] I infer from the financial statement for 2008 that the loan from Ira had been almost fully paid by this time (because the liability to Ira is recorded as $770 for both 2007 and 2008).[26]
  28. [34]
    In the latter years, a loan from Alexis (Lexi) is also recorded.
  29. [35]
    I am conscious, in what I have set out in paragraph [33] above, that this is my reading of documents which are in evidence, but which neither party, nor any witness, referred to.[27]  Nevertheless, it seems to me that these records are consistent with the finding I have made above, accepting the evidence of Ondra about him setting up the business – having regard to the substantially greater financial contribution Ondra is recorded as having made.  However, it is apparent that Ira also contributed financially to the company, and in turn took drawings from the company, and that this involvement was not limited to the time before March 2001.   The involvement of their sisters, Cheyenne and Alexis, confirms what I said at the outset – that in this early stage, this was a close family, working together in various enterprises.  No mention was made by Ondra in his evidence of loans Ira made to the company.
  30. [36]
    As I have said, I remain unsure of where the truth lies about the $37,500 (let alone the “bonus” Ondra says he paid Ira).  I am not actually persuaded to accept the evidence of Ondra on this point; nor am I actually persuaded by Ira’s evidence either.[28]
  31. [37]
    What I am persuaded of is that TTM was not Ira’s company, as he put it.  But I accept that he had some involvement in it, as part of the family, including providing and taking money from the business.
  32. [38]
    Purchase of the property in 2006.  As already noted, Ira was away from the business from March 2001 to the end of 2005, working on the fishing vessel.  In January 2006, Ira moved to Scone in New South Wales, for work.  He says in February 2006 he decided to start an earthmoving business with his long term friend, Paul.  For this purpose, they decided to buy some equipment and a shed located at 2 Abercairney Tce, Aberdeen, which is the property.  Their plan was that Ira would pay the deposit for the equipment and the property, and Paul would secure a loan for the rest.  He says they entered into a contract to purchase the property in March 2006, and Ira paid a deposit of $18,000. 
  33. [39]
    Paul was not able to secure finance to complete the purchase.  Ira also tried to obtain a loan, but could not.  So he called Ondra.
  34. [40]
    There is some dispute about whether Ira only spoke to Ondra on the phone (as Ira says), or called him and came to see him in Brisbane (as Ondra says), and about whether Ira said the deposit was $18,000 (as Ira says) or $50,000 (as Ondra says). 
  35. [41]
    Alexis gave evidence of recalling Ira arriving at the office of TTM later in 2006 “very agitated”.  She recalls hearing a very loud conversation between Ondra and Ira, in which Ira explained he needed Ondra to buy a shed that Ira had put a deposit down on in Aberdeen and if Ondra did not put up the money quickly, Ira said he would lose his deposit of $50,000.
  36. [42]
    On disputed matters I find it difficult to determine whether to prefer the evidence of Ira or Ondra, in the absence of independent documentary or other evidence, as I find myself sceptical about the reliability of both of them in the circumstances of this case.  I did not form that view about Alexis, whose evidence I am prepared to accept.[29]
  37. [43]
    There is no particular consequence which flows, or adverse inference to be drawn (against Ira), from the evidence of Ira making reference to a deposit of $50,000, rather than $18,000.  It is uncontroversial that what Ira had in fact paid was $18,000.  Having regard to Ondra’s affidavit at [31] and [32] it is possible there was a miscommunication, at the time Ira contacted Ondra, in terms of what was required to be paid to acquire the property and the business, as opposed to the property only.
  38. [44]
    Ondra says that, at the time, TTM was doing well financially and he had been considering buying premises to operate the business from, rather than continuing to lease premises.  He says he had obtained pre-approval from Suncorp for a loan for this purpose.  I accept his evidence in this regard. 
  39. [45]
    Ondra also says that, because Ira had helped him financially when he set up the business, he “felt that it was the right thing to do to assist him by purchasing the Aberdeen property so that Ira could get his deposit back” (Ondra’s affidavit at [35]).  I also accept his evidence in this regard.  The picture painted, more broadly, of this family, at least prior to 2010, is that they were close and involved and helped one another out in a variety of ways, including financially.
  40. [46]
    Ondra says that he made enquiries with the bank about applying his pre-approved finance towards the purchase of the Aberdeen property, as he “determined that the shed in Aberdeen would be a good investment” for the benefit of his children.  Ondra says Ira at all times knew that the purchase of the property was to be an investment for the benefit of Ondra’s children.
  41. [47]
    A discretionary trust was established on 1 July 2006, called the Plath Family Discretionary Trust, for the purpose of purchasing the property.  An accountant, Robert Ward, assisted Ondra with the establishment of the trust in 2006.  He gave evidence of a recollection that the reason for Ondra setting up a trust in 2006 was because Ondra was purchasing property and, reflecting a consistent theme in relation to Ondra’s financial affairs, that the purpose was to provide protection in the event of a breakdown of Ondra’s marriage.   Mr Ward says that Ondra was nominated as appointor of the trust on his advice that this would provide him with control of the trust, and that “Ondra’s existing company”, TTM, was appointed trustee of the trust.  Mr Ward dealt only with Ondra in relation to this, not Ira.   At this stage, Ondra was the sole director of TTM.
  42. [48]
    Ira gives evidence, in his affidavit (at [31]), of Ondra contacting him in early 2006 “asking if he could set up a Family Trust for his children’s education costs”.  On the basis of Ondra’s evidence, which is supported by the evidence of the accountant, Mr Ward, as to how the Trust came to be established, I reject Ira’s evidence in this regard.  I accept the Trust was established in the circumstances, and for the purpose, explained by Ondra in his evidence.
  43. [49]
    Solicitors were engaged to do what was necessary to rescind the contract Ira and Paul had entered into, and enter into a new contract for TTM, in its capacity as trustee of the Trust, to purchase the property, without losing the deposit Ira had paid.[30]  
  44. [50]
    Subsequently, the first contract was rescinded,[31] the deposit of $18,000 paid by Ira was released and applied to the new contract to purchase the property which was entered into on 29 August 2006.[32]  The contract records the purchaser as “Tingalpa Tyre & Mechanical Pty Limited atf The Plath Family Discretionary Trust”.  The price is recorded as $180,000, with a deposit of $18,000.  
  45. [51]
    The balance of $162,000 was funded by the loan from Suncorp.  The loan repayments were made out of the business investment bank account, in the name of “The Plath Family Discretionary Trust”, to the loan account in the name of TTM (see exhibit 1, USB, “bank statements”). 
  46. [52]
    The funds to pay the loan came from rental income received for the property.  Ondra’s evidence is that the property was consistently tenanted from when it was purchased and returned a rental income of between $16,000 to $18,000 per year (Ondra’s affidavit at [60]), which is roughly $1,500 per month.[33]  The financial statements for the Trust are largely consistent with this, recording rental of the following amounts received for the financial years ending June 2007 ($4,727), 2008 ($19,272), 2009 ($15,909), 2010 ($16,363), 2011 ($2,272.73), 2012 ($16,067), 2013 ($17,125) and 2014 ($19,210).[34]
  47. [53]
    Rent payments were deposited directly into the Trust’s bank account.  The monthly loan repayments appear to have been $1,650.  As there were also other expenses associated with the property (including rates and insurance), I accept the evidence of Ondra that the mortgage repayments were made with rental income and funds provided by TTM, on the basis of an inference that rental income alone would not have covered the loan repayments.
  48. [54]
    There were various steps involved in arranging for the refund and repayment of stamp duty, payment of penalty interest in relation to delays in settling the purchase, and legal costs incurred associated with the rescission of the first contract and entry into the second contract.  Some of these amounts were paid by Ira (for example, the penalty interest[35] and legal fees to Halletts for work done on the first contract for Ira) and some were paid by TTM (legal fees and stamp duty on the second contract).  
  49. [55]
    Ondra gives evidence that there was payment of money to Ira (he thinks $23,500), in settlement of a complaint against the solicitor who had acted for Ira and Paul in respect of their handling of the first contract, as a result of which he says Ira was not left out of pocket with respect to any payments made pursuant to the first contract or the second contract.[36]   In the absence of some objective evidence about this, I am not persuaded by Ondra’s evidence in this respect.  But even if Ira did receive such a payment, it remains the fact that the property was acquired with funds including the $18,000 paid by Ira – that is, the ultimate purchaser of the property did not have to outlay $180,000, only $162,000, because $18,000 had already been paid, by Ira.
  50. [56]
    In what capacity did the defendant purchase the property?  I am satisfied that the property was purchased by the defendant, TTM, in its capacity as trustee of the Plath Family Discretionary Trust.  This is clear from the following:
    1. (a)
      the evidence about the establishment of the Trust, in July 2006, for the purpose of acquiring the property, which I accept;
    2. (b)
      the description of the purchaser on the contract;
    3. (c)
      the letter from the solicitor dated 4 August 2006, to Ondra, recording his instructions “to rescind the current contract and at the same time exchange and settle the contract to your Trust as purchaser”;[37]
    4. (d)
      the letter from the solicitor dated 31 August 2006, which states, among other things that “[t]he Title Deed when issued will only show the registered proprietor as Tingalpa Tyre & Mechanical Pty Limited, as in NSW the Trustee, and not the Trust, is shown on the Title Deed.  However, it is clear on the contract that Tingalpa Tyre & Mechanical Pty Limited holds that land in its capacity only as Trustee of ‘The Plath Family Discretionary Trust’, in accordance with your instructions”;[38]
    5. (e)
      the identification of Tingalpa Tyre & Mechanical Pty Ltd as trustee for the Plath Family Discretionary Trust as the borrower, on the loan contract, which also states the purpose of the loan as being “to assist with the purchase of a commercial property situated at Lot 2, Abercairney Terrace, Aberdeen NSW”;[39]
    6. (f)
      the payment of rent in respect of the property into the Trust’s bank account, from which loan repayments were made; and
    7. (g)
      the inference which I draw from the evidence of Ondra, Mr Ward and the financial statements for the Trust, that the only property owned by the Trust was the property in New South Wales.
  51. [57]
    The defendant’s contention that the property was purchased by it in its own capacity, and not as trustee, is, I find, on the basis of its director, Ira’s misunderstanding about the legal nature of companies and trusts, including failing to appreciate that the company, TTM, could wear “two hats”, effectively – one as a company in its own capacity (as the operator of the tyre and mechanical business) and another as the corporate trustee of the Trust.
  52. [58]
    The only factual basis seemingly put forward on behalf of the defendant for its contention was that the certificate of title was in TTM’s name, without reference to the trust.[40]  But, as the solicitor’s letter of 31 August 2006 explained, that is because of legislation in New South Wales, s 82 of the Real Property Act 1900 (NSW), which expressly provides that no notice of trusts is to be recorded in the Register.
  53. [59]
    Again, I record that the evidence of Darryl Home, relied on by Ira, does not support a contrary conclusion.  Mr Home’s affidavit also reflects the same misconception that Ira holds, as to how and by which entity the property was acquired – as demonstrated by the final paragraph in which he describes as “atrocious” how “Ondra & his Sisters are now trying to take a property from Ira that he has paid for himself & as I understand no financial help from Ondra whatsoever”.
  54. [60]
    Did Ondra and Ira have an agreement in terms of the “proposal” pleaded in [4(e)] of the amended defence?  Ira says in his affidavit that in the course of his conversation with Ondra [at the time of contacting him when Ira was unable to secure finance to complete the purchase of the property] he said words to the effect that he would like Ondra to make enquires with Suncorp about the possibility of TTM securing a loan to finance the remainder of the purchase price.  Ira then says:

“28. Onza [Ondra] later advised me that he had made enquiries with Suncorp, and it had indicated that it would only lend money to TTM, Ondra also had a Mortgage with Suncorp on his Home, Suncorp for whatever reason, Ondra couldn’t explain, Suncorp coupled the Mortgages together, I think for Equity reasons.  At the end of the day Ondra & Anita paid their Home Mortgage & TTM and I looked after the Aberdeen property Mortgage, with all the Rent Roll repaying the loan.

  1. On the basis of the matters in paragraph 28 above, I proposed to Onza that TTM should purchase the property on the following basis:
  1. (a)
    I would fund the deposit, legal costs and stamp duty (“funds”);
  1. (b)
    TTM would borrow funds from Suncorp sufficient to complete the purchase of the property (“loan”);
  1. (c)
    Ondra would provide to Suncorp the company figures from TTM;
  1. (d)
    I would undertake certain works and renovations to cause the property to be more valuable to rent and to increase its overall value (“works”)
  1. (e)
    all rent would be applied to pay any outgoings for the property, and the balance would be applied to reduce the loan;
  1. (f)
    that sometime after the loan was paid out the property would be sold;
  1. (g)
    when the property was sold, TTM would repay me the funds and any expenses associated with the works plus an additional 5%; and
  1. (h)
    that any balance remaining from the sale of the property after I was paid the amounts in paragraph (g) above would be split evenly between Ondra and me.  (“the proposal”)
  1. After I explained to Ondra what happened with Paul Kurtz & his financial failings & that my Tax had not been done for 2 years so I could not apply for finance.  What I said to Ondra is what I explained in paragraph 29, now if Ondra didn’t agree with what I offered he would have declined to approach the bank for finance.” [underlining added]
  1. [61]
    The question is whether I am persuaded Ira put any such “proposal” to Ondra, or that Ondra agreed with it.   Ondra denies that he reached any such agreement with Ira.
  2. [62]
    Ira’s evidence in cross-examination was that this proposal was put to Ondra in a phone call, which lasted about 6 or 7 minutes.  His evidence in cross-examination, consistent with what appears in [30] of the affidavit, was that he assumed Ondra accepted his proposal, because Ondra went to the bank, saying “if he didn’t agree to it, he wouldn’t have gone and got the loan”.[41] When I asked him to clarify what he was saying, Ira said that Ondra told him, with his voice, “that’s a good idea”.[42]    Having regard to what appears in Ira’s affidavit, and Ira’s initial answers to the questions put to him in cross-examination, I do not accept Ira’s subsequent evidence of Ondra saying something expressly.
  3. [63]
    But in any event, I am not actually persuaded that a proposal, in the terms pleaded in [4] of the amended defence, was put by Ira to Ondra.
  4. [64]
    I have already mentioned the evidence, which I accept, that Ondra already had pre-approval for a loan to be used to purchase premises for TTM’s business.  I accept that Ondra decided that he would take steps to purchase the property as an investment, to help Ira avoid losing the deposit he had paid.  Ondra’s evidence is that he arranged finance for the purchase of the property with Suncorp in the name of the Trust, providing a mortgage over his home (which he owned with Anita) as security for the loan, as well as both Ondra and Anita providing personal guarantees (Ondra’s affidavit at [46]).[43] Ondra’s evidence in this regard is supported by the documentary evidence.  The loan from Suncorp was also secured by a mortgage given by TTM as trustee over the property itself.
  5. [65]
    Ondra and his wife were taking on a considerable amount of the risk associated with the loan obtained to purchase the property (providing a mortgage over their home and personal guarantees as security).  That is consistent with Ondra’s evidence of the purchase of the property being an investment for the benefit of his children.
  6. [66]
    Ira is convinced the loan was obtained using TTM’s “figures”, because, he says, Ondra could not afford the loan himself.  There is no evidence to support that.  The loan to purchase the property was secured by a mortgage over Ondra and Anita’s house, a mortgage over the property, and personal guarantees from both Ondra and Anita.   There was no additional security provided by TTM.  The more rational inference to draw is that, in addition to that security, the loan was supported by evidence of the potential rental income for the property (which is how the loan was to be serviced), as opposed to the profit of the tyre and mechanical business operated by TTM.    But whether or not the financial position of TTM was relied upon in obtaining the loan to purchase the property makes no difference to the determination of the issues in this case.
  7. [67]
    The picture painted by Ira in his affidavit does not reflect what I find was the reality at the time.   Ira refers to TTM as “my company”, but he had very little to do with the business in a practical sense after March 2001, and was not a director of the company at this time.  I do not accept that Ira would have said to Ondra that he would like him to make enquiries with Suncorp about the possibility of TTM securing a loan.  Rather, I find he contacted Ondra in an agitated state, worried about losing his deposit, and asking Ondra to help him out (however that may be done).  I also do not accept that Ondra would have asked Ira if he could set up a family trust for his children’s education costs, as opposed to acting on the advice of the accountant, Mr Ward, as to the most appropriate structure within which to purchase the property as an investment, having determined that he would take steps to buy the property, to help his brother out.  Ira’s contention, in [35] of his affidavit, that “I purchased the Aberdeen Property for myself with the help of my Company TTM income figures to secure the Loan” does not in any way accord with the objective facts as I have found them.
  8. [68]
    There is no other evidence to support the defendant’s contention about the “proposal”.   The defendant bears the onus of proving the existence of an agreement based on the proposal, and I am not actually persuaded, on the evidence of Ira, that a conversation as he describes took place between Ira and Ondra, or that any agreement in the terms alleged in [4(e)] of the amended defence was reached.[44]
  9. [69]
    I am inclined to think there was some arrangement between Ondra and Ira in relation to the property, which I will discuss further below.  But on the evidence before the court I am not persuaded it was in terms of the “proposal” contended by the defendant.
  10. [70]
    I therefore reject the defendant’s claim that the defendant holds the property on constructive trust for Ira and Ondra.
  11. [71]
    Management and renovation of the property after it was purchased.   Ondra’s evidence is that from 2006, when the property was purchased, until 2010, when his marriage broke down, Ira had limited dealings with the property, although Ondra acknowledges that because Ira was in the region, he assisted with minor property management tasks.  Ondra says he managed all of the Trust affairs associated with the property, with the assistance of Cheyenne, who attended to the bookkeeping for the Trust.[45]
  12. [72]
    Ondra’s evidence is also that, at the time the property was purchased, fit-out works were required to be completed to add liveable quarters to the shed and have these works certified by the Council.  He says that when he visited Aberdeen in November 2006, these works were complete.  He also says he “was of the belief” that the works were substantially complete before settlement, but gives no basis for that belief.[46]
  13. [73]
    In contrast, Ira says that significant work was required to be undertaken.   He says that the previous owner had erected the shed and put a couple of windows in and put the roller doors on, but outlines in his affidavit at [36]-[43] a range of additional renovation work that he says he did.  He sets out at [47], in addition to other items, amounts of money that he says “myself & TTM” invested in the property for this work, which appear to total $70,006.
  14. [74]
    Ira contends that he sent the invoices or receipts for the work done on the property to Cheyenne once a month, so that TTM could claim the GST on them.  Cheyenne says no such invoices or receipts were provided, until later on.   She says that she asked Ondra and Ira for invoices, so that the records of the Trust could be properly prepared.  She says she raised this with Ondra again “in 2009/10”, in the context of collating paperwork to assist in Ondra’s “lengthy separation and property settlement dispute with his wife Anita”.  Ondra told her to get something in writing from Ira.  Cheyenne says she did eventually receive a bundle of “receipts” from Ira.   Based on what was provided to her at this time, Cheyenne “prepared back-dated invoices for the work to November 2008 so that it could be included in the 2009 tax return”.  This was done hastily, according to Cheyenne, “to reduce the profits” (of the Trust). 
  15. [75]
    Cheyenne annexes a document to her affidavit which she says is a summary of the receipts provided by Ira, and what appears to be two “back-dated” invoices.  The summary of receipts totals $9,183.92 (including GST).[47]  One of the invoices, purporting to be issued by Ira’s company, International Blend Pty Ltd, to TTM as trustee for the Trust, is for “repairs & upgrading of existing building, toilets, shower, office, kitchen and mezzanine flooring”, in an amount of $35,583.92 (including GST).  The other invoice, again purporting to be issued by International Blend Pty Ltd, is for the deposit, stamp duty, cost of a certificate and legal fees (associated with the first contract), in the amount of $26,794 (again, including GST).[48]   Those amounts add up to just over $71,500.   It is not disputed that these amounts were not paid to Ira (or International Blend Pty Ltd).[49]
  16. [76]
    As far as I can tell (again, in circumstances where no reference was made to these documents in the evidence or submissions), the invoice for $35,583.92 was included as a current liability in the 2009 financial statements for the Trust for “trade creditors”.[50]  In the financial statements for the Trust for 2010, the figure for trade creditors has increased to $62,377.92.[51]  The difference between those two figures is, curiously, $26,739.92 – remarkably close to the amount of the other backdated invoice.  The figure for trade creditors remains about the same for the 2011, 2012, 2013 and 2014 years (2014 being the last of the financial statements for the trust on the USB).[52]
  17. [77]
    Cheyenne is Ondra’s twin sister and very much on his side of the fence in this dispute.  Her affidavit includes material purporting to corroborate aspects of Ondra’s evidence, but about which she has no first-hand knowledge.[53]  I have disregarded these aspects of her affidavit evidence.  On disputed matters, I am also sceptical about the reliability of Cheyenne’s evidence in some respects, as I did not form the view that she was independent or objective.  The evidence just referred to, about backdating invoices, to reduce the profit in the Trust, reflects steps taken, again, to protect assets from Ondra’s wife – this time, in the context of the actual divorce.   
  18. [78]
    As proof of the work he says was undertaken, Ira relies on “tax invoices” he has prepared.  But these tax invoices were prepared, and are dated, in November 2016.[54]  The invoices were prepared by Ira, he says, in response to a request in the context of this proceeding for evidence of what work was done.  He says these documents represent his “best recollection”.[55]  But he also said “[i]n the paperwork, my sister put down – she tallied everything up and it come into seventy thousand dollars and six - $70,006. These here add up to that total”[56] – as though he had, in creating these “invoices” in 2016, sought to match up to the amount Cheyenne had purportedly claimed as expenses of the Trust, in the context of hastily trying to “reduce the profits” of the Trust, in the context of Ondra’s divorce and property settlement.  As already noted, the figures for building work set out in [47] of Ira’s affidavit, on my calculation, add up to $70,006.
  19. [79]
    I do not accept the 2016 invoices as reliable evidence of work done or expenses incurred by TTM or Ira in relation to the property – prepared as they are on the basis of Ira’s purported recollection, 10 years after the event(s), without the benefit of any other documents (none being disclosed in the proceeding), and seemingly in an attempt to match the figure arrived at by Cheyenne.
  20. [80]
    There is no assistance to be gained from Council records, as it seems that apart from an approval in 2005 (that is, prior to the purchase) for “demolish existing shed and erection of new garage/storage/workshop”,[57] no other approval was given, and there was no certification of building works prior to a request made by Ira in February 2020.[58]
  21. [81]
    I am prepared to find on the balance of probabilities that Ira did carry out some renovation work on the property, after it was purchased by TTM as trustee for the Trust,[59] and that more work was required than Ondra suggests.  Whether that was done only in 2006, or in subsequent years, does not matter for present purposes.   The conduct of both Ondra and Cheyenne, on the one hand, and Ira, on the other, in relation to dealing with this matter both in the context of the financial records, and this proceeding, is dubious, to say the least. I am not persuaded that the figures attributed for work done by Ira are reliable, not least because he has conveniently made sure they add to up the figure arrived at by Cheyenne.  But nor am I persuaded to the view that the amounts claimed as expenses associated with the property by the Trust, on the basis of Cheyenne’s evidence, are reliable. 
  22. [82]
    In so far as the defendant bears the onus, in this proceeding, of proving that it has a liability to reimburse Ira for work done on the property, for a particular amount, it has not done so.   But it is the case that the Trust has included, as part of its official financial statements, an amount which is referrable to the “invoice” for “repairs and upgrading of existing building, toilets, shower, office, kitchen and mezzanine flooring”.  On that basis, it may be reasonable to conclude that TTM, as trustee of the trust, prior to December 2014, had a liability to reimburse Ira for work he did in relation to the property, in the sum of about $35,000.[60]
  23. [83]
    Paying out the loan.  By 2010, Ondra’s marriage had broken down and in 2010 to 2011 he was involved in finalising the property settlement with Anita.  Ondra says that due to the pressure of the dealings with Anita, he made arrangements for Ira to be re-appointed as a director of TTM, to assist Ondra.  Ira was reappointed as a director on 31 August 2010, and Ondra was removed as a director on this date.  Ondra continued as the appointor of the Trust.
  24. [84]
    Ondra says that as part of the finalisation of the property settlement, he had to reduce the debt on the property so that the personal guarantees given by himself and Anita could be released.   Ondra says he had a discussion with his father and Ira, about how he could arrange for the loan to be reduced.  Ondra says “my father proposed and it was agreed that Ira would pay out the mortgage as he owed a substantial sum of money to me from family loans that I had provided to him” (Ondra’s affidavit at [76]).
  25. [85]
    As to that, Ondra makes reference in his affidavit to money he contributed to assist Ira to purchase a fishing boat called “On Strike” in 2009, a tractor to haul the boat, and a shed to be built on a property at Turkey Beach (Ondra’s affidavit at [77]-[86]).  Ondra also exhibits pieces of paper he says are “IOUs”, from Ira, evidencing money borrowed by Ira from a safe in which Ondra kept cash in their parents’ house (Ondra’s affidavit at [92], [94-[95][61]).  
  26. [86]
    The pieces of paper are almost illegible.  Without more I would not be prepared to infer they have the meaning or effect Ondra contends.  As for the fishing boat, Ira disputes Ondra’s evidence about this, and says he paid the $50,000 for the boat.[62]
  27. [87]
    It is uncontroversial that, on 14 July 2011, Ira paid $87,312.52 towards paying out the loan.   Another $20,000 was required to fully pay out the loan.  Cheyenne’s evidence is that she arranged for $20,000 to be paid into TTM’s bank account, which was in turn used to pay out the loan.  The bank statement (exhibit 1, USB, doc 11) clearly shows Cheyenne contributed $10,000.  The source of the other $10,000 is not clear from the bank statement.  However, I accept Cheyenne’s evidence in this regard as it is supported by the financial statement for the Trust for the year ended 30 June 2012, which records, as a current liability, a loan from Cheyenne of $20,000.[63]
  28. [88]
    Those records also show, as a current liability, a loan from Ira of $109,417.03.   This coincides with the extinguishment of the liability for the bank loan which previously appeared in the financial statements for the Trust.  It may be observed that this figure is not too far from the combination of the $18,000 and the $87,312, which represents Ira’s contribution to the cost of acquiring unencumbered title to the property.  Although there was no evidence about what makes up this figure.
  29. [89]
    Ondra’s contention in this proceeding is that the $87,000 paid by Ira represented (part of) the money Ira owed Ondra for what he called “family loans” (for example, for the fishing boat and the IOUs).  On the basis of the evidence, and having regard to my observations about credit at the outset, I am not persuaded of that to the requisite standard, in the absence of any objective supporting material.   The recording in the financial statements for the Trust of a loan from Ira of an amount in excess of what he contributed to pay out the loan is also inconsistent with Ondra’s evidence, in this proceeding, that the money paid by Ira to pay out the loan on the property represented repayment of “family loans” owed by Ira.
  30. [90]
    I therefore find that Ira also contributed $87,312 towards the acquisition of the property by the Trust.
  31. [91]
    What was the arrangement between Ondra and Ira in relation to the property?  As I mentioned above, I do accept that there was some arrangement between Ondra and Ira in relation to the property, although I do not accept it was in terms of the pleaded “proposal”.  
  32. [92]
    As to what the arrangement was, the evidence supports the following findings.
  33. [93]
    Ira was included within the scope of discretionary beneficiaries under the Trust, and was allocated distributions from time to time.[64]  So it is not the case that the investment, within the structure of the Trust, was solely for the benefit of Ondra’s immediate family, in the sense of his wife and children.  There plainly was intended to be some potential benefit to other members of Ondra’s family, including his siblings.
  34. [94]
    Whilst the property was acquired by TTM, in its capacity as Trustee, that was done with the benefit of $18,000 contributed to the purchase price by Ira at the time of purchase, and a further contribution of $87,312 at the time the mortgage was discharged, giving the Trust unencumbered title to the property.   As discussed above, I do not accept that this was done by way of repayment of debts Ira owed to Ondra.  Rather, I find that it was consistent with what this family did – helping one another out, at times financially, in a fairly fluid way in so far as the company and Trust arrangements were concerned.  It is reasonable to infer that, given the amount of money he paid, there was an agreement that money would be repaid to Ira, given that the Trust has the benefit of ownership of the property, unencumbered.  On the evidence, Ira has contributed $105,312 towards that ($18,000 plus $87,312).  The evidence does not permit a finding as to the circumstances in which repayment of this money to Ira would occur (for example, repayment at a particular time, or only on sale of the property).
  35. [95]
    Lastly, it is clear there was some agreement for Ira to carry out renovation work on the property, even though the evidence does not permit a finding as to precisely what this work was.  Again, it is reasonable to infer there was an agreement that Ira would be paid or reimbursed for this work.
  36. [96]
    On the evidence before the Court, it is reasonable to conclude that, prior to December 2014, the trustee of the Trust had a liability to reimburse Ira for the contributions he made to the cost of acquiring the property ($105,312) and for the contributions he made for the renovations to the property (say, in the amount of $35,000).
  37. [97]
    As far as other amounts purportedly claimed by the defendant are concerned, the figures in Ira’s affidavit at [47] are, I find, misleading.  For example, he includes $4,794 for stamp duty.  But it is apparent that was the stamp duty on the first contract (see Ira’s affidavit at [34]), which was refunded.  The fees payable to Halletts were retained from the refund, and the balance of about $1,800 was paid to Ira.[65]  The certificate fee also related to the first contract, as did the penalties for late settlement.  None of those expenses can properly be said to be incurred in execution of the Trust – because they relate to the failed first contract Ira and Paul entered into.
  38. [98]
    Removal and appointment of a new trustee.  The siblings’ father passed away in June 2011.  Six months later the relationship began to deteriorate, due to arguments over the parents’ estate.  Ondra was reappointed as a director of TTM on 21 April 2012, although by this time the business operated by TTM had come to an end. 
  39. [99]
    By late 2014, Ondra says that the deterioration in the relationship prompted him to obtain advice in relation to TTM being the trustee of the Trust, given that Ira was still a director of TTM.  He received advice, from Mr Ward, that as the appointor of the Trust, he could remove TTM as trustee and appoint a new trustee.
  40. [100]
    On 4 December 2014 Ondra, as appointor, resolved to:

“remove Tingalpa Tyre & Mechanical P/L as Trustee of the Plath Discretionary Trust as of this date 4/12/2014 and appoint Onza Industries Pty Ltd as the new Trustee of the Plath Discretionary Trust.[66]

  1. [101]
    Onza Industries Pty Ltd was incorporated on 5 December 2014.[67]
  2. [102]
    The defendant contends the appointment of the new trustee was ineffective because:  firstly, the plaintiff was not incorporated at the time of the resolution; and, secondly, of the effect of the pleaded proposal.  I reject the second argument, on the basis of my finding that the proposal was not made, and did not result in any agreement on those terms.
  3. [103]
    As to the first argument, I am satisfied the removal of TTM as trustee, and appointment of Onza Industries Pty Ltd as trustee in its place, was effective.  The power to appoint a new trustee and the power to remove a trustee vest in the appointor, under clause 8 of the trust deed.[68]  Ondra as the appointor therefore had the power to remove TTM and appoint a new trustee.  The fact that Onza Industries Pty Ltd was not incorporated until the following day does not lead to the conclusion that the resolution was ineffective.  In my view, the rational analysis is that the resolution was passed on 4 December 2014, clearly evidencing the appointor’s intention.   The outgoing trustee (TTM) would cease to be the trustee immediately upon the appointment of the new trustee taking effect – namely, upon its incorporation.  The outgoing trustee (TTM) would therefore remain as the legal owner of the Trust property, until the incoming trustee came into existence, the following day.  From 5 December 2014, the appointment of the new trustee was effective and, by operation of clause 8(d) of the trust deed, the Trust Fund vested at that time in the new trustee.
  4. [104]
    Events since December 2014.   The defendant, and Ira, were made aware of the change of trustee in July 2015.[69]  Since that time the defendant, or Ira personally (it is not entirely clear) has asserted that it/he is the rightful owner of the property.  Ira instructed solicitors to assert his claim in that regard.[70]  He has refused to deliver up the certificate of title, which is required in order to effect the change of legal ownership in New South Wales. 
  5. [105]
    In August 2015, Ondra was removed as a director of TTM, it seems without his knowledge.  I infer this was effected by Ira.  In the context of this proceeding, which was commenced in 2016, the defendant has asserted that it is the owner of the property.  Ira has been the sole director of TTM since August 2015.
  6. [106]
    Interaction between Ira and the tenant in possession of the property in mid-2015 led to the tenant vacating the property.  Ira changed the locks on the property, and placed signs with his mobile phone number on them, advertising the property for lease, and effectively took over control of the management of the property.   Ira has retained the rental money received for the property since that time.[71] 
  7. [107]
    Ira says in his affidavit that he took control of the rental income from August 2016.  However, I accept the evidence of Ondra that Ira in fact took control and receipt of the rental income from August 2015, as this is supported by the bank statements forming part of exhibit 1 (USB).[72]  It appears, however, that Ira has also paid the expenses associated with the property (rates, mowing etc) since that time.[73] 
  8. [108]
    The evidence of how much rental has been received since August 2015 is vague and unsatisfactory.[74]  
  9. [109]
    The question is how to deal with this in the context of this proceeding.
  10. [110]
    The plaintiff pleads that despite demand the defendant has failed to deliver to the plaintiff the certificate of title, and has failed to facilitate the change of trustee on the title to the property in the real property Register of New South Wales.  That is established.  Ira said in his evidence he has refused to provide the certificate of title until he is “paid out for all the work and all the money that I tipped into the shed”.[75]
  11. [111]
    The plaintiff then pleads that, as a trustee of the Trust, the defendant owed a fiduciary duty to the Trust to act in its best interests; not act in conflict with the Trust; and not deal with the Trust property for personal benefit.  It is pleaded that in breach of those duties the defendant has failed to deliver the certificate of title, refused to facilitate the change of trustee on the land title, changed locks on the property, advertised the property for sale or rent with Ira’s phone number and made statements to real estate agents appointed by the plaintiff to the effect that they had no authority to manage the property.  The plaintiff pleads that the defendant’s breach of duty has caused the plaintiff loss and damage, including the loss of rent from July 2015. That is the basis for the claim for equitable damages, including an account.
  12. [112]
    All of that conduct occurred after the change of trustee.  Some (or most) of that conduct was by Ira, not the defendant.  Accordingly, it seems to me the plaintiff’s claim in this regard is misconceived, both in so far as it is based on a breach of the defendant’s duty as trustee of the Trust and in so far as there is no claim against Ira personally.
  13. [113]
    In so far as the property is concerned, it may be right to conclude that since December 2014, the defendant, as the former trustee, has held the property on a constructive trust.  The defendant has, on the evidence, failed to take the necessary steps to transfer the legal title to the property to the plaintiff, as the new trustee.  The orders sought in this proceeding vesting the property in the plaintiff as the new trustee are an appropriate form of relief as against the defendant in that regard.
  14. [114]
    But in so far as the plaintiff seeks to recover equitable damages (for the lost rental), and an order for an account, on the evidence the rent has been received by Ira, not the defendant.  There is no claim in this proceeding by the plaintiff against Ira; just as there is no (counter) claim in this proceeding by Ira.

Conclusion and orders

  1. [115]
    On the basis of the findings I have made above, the following declarations and orders will be made.
  2. [116]
    First, there will be a vesting order made under ss 71 and 78 of the Trustee Act 1925 (NSW), vesting the property located at Lot 2, Abercairney Terrace, Aberdeen, New South Wales, described as Lot 2 Section 2 in DP758003 – Folio 2/2/58003 (the property) in the plaintiff, Onza Industries Pty Ltd as trustee for The Plath Family Discretionary Trust.
  3. [117]
    Second, there will be consequential orders made, requiring the defendant, and its director Ira Plath, to execute all such documents and do all things necessary to give effect to the vesting order, including delivering the certificate of title to the solicitor for the plaintiff within fourteen days.   I am satisfied it is appropriate to make an order in these terms, binding Ira, even though he is not a party to the proceedings, because of the central role he has played in the events which have transpired since mid-2015, and as the sole director of the defendant.
  4. [118]
    Third, I am satisfied it is also appropriate to make a declaration that the plaintiff, as trustee of the Trust, holds the property subject to a lien securing the defendant’s equitable right of indemnity for expenses reasonably incurred while it was the trustee (that is, the funds Ira contributed to the acquisition of the property and the amount I have found may be appropriate to be paid for the renovation work carried out on the property).[76]  The lien, as an equitable security, arises by operation of law.
  5. [119]
    As to that last matter, in a practical sense, there will need to be some accounting between the plaintiff, the defendant and Ira, in terms of what is owed to Ira, for his contribution to the acquisition and renovation of the property, and what is owed by Ira, for the rental income received (less expenses).  But that is beyond the scope of this proceeding, having regard to the pleadings and the parties. 
  6. [120]
    I direct the solicitor for the plaintiff to prepare a draft order, reflecting the declaration and orders in paragraphs [116], [117] and [118] for my consideration.
  7. [121]
    I will hear from the parties as to the costs of the proceeding.

 

Footnotes

[1]  For ease of reference, the brothers will be referred to in these reasons as Ondra and Ira.

[2]  Relying on s 4 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW) and s 9 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Qld).

[3]  Referring to Onassis and Calogeropoulos v Vergottis [1968] 2 Lloyd’s Rep 403 at 431.

[4]  See also Fox v Percy (2003) 214 CLR 118 at [31] and Camden v McKenzie [2008] 1 Qd R 39 at [34]

[5]  Exhibit 1 (resolution bundle), at p 18.

[6]  T 1-18.

[7]  Affidavit of Ondra Plath (exhibit 2) at [7]-[8].

[8]  Exhibit 1 (USB), docs 90 and 95.

[9]  Exhibit 1, at p 35.

[10]  Exhibit 1 (USB), doc 103.

[11]  Exhibit 1, at pp 23 and 24.

[12]  Exhibit 1 (USB), doc 90.

[13]  Exhibit 1 (USB), doc 95.

[14]  Although Ira refers to his brother as “Onza” in his affidavit, he confirmed in his evidence that this is a reference to Ondra.

[15]  Exhibit 1, at p 22.

[16]  Exhibit 1, USB, doc 225.

[17]  Exhibit 1, USB, doc 226.

[18]  Exhibit 1, USB, doc 228.

[19]  Exhibit 1, USB, doc 231.

[20]  Exhibit 1, USB, doc 236.

[21]  Exhibit 1, USB, doc 233; but cf the balance sheet (doc 236) which does not seem to match up with the financial statement.

[22]  Exhibit 1, USB, doc 239.

[23]  Exhibit 1, USB, doc 244.

[24]  Exhibit 1, USB, doc 245.

[25]  Exhibit 1, USB, doc 248.

[26]  Exhibit 1, USB, doc 257.

[27]  No reference was made to the documents tendered as part of exhibit 1 on the USB, until a question asked by me of the solicitor for the plaintiff during the closing submissions.  Although the plaintiff did not seek to rely on the documents, the plaintiff’s solicitor referred to some of the documents (the records of distributions from the Trust), at my request.  I informed both parties that I would look at the financial statements for the company and the Trust, but did not otherwise propose to consider the documents on the USB, in circumstances where neither party referred to them in the evidence or submissions.  But this is an unsatisfactory way to conduct a trial, tendering large numbers of documents to which no reference is made, and leaving it to the judge to work out the meaning and effect of them, if any.

[28]  For completeness, I record that the evidence in Cheyenne’s affidavit about this, at [13], is inadmissible hearsay.

[29]  T 1-67.

[30]  Exhibit 1, at pp 63-68 (letters from Halletts Solicitors dated 4 August 2006 and 31 August 2006).

[31]  Exhibit 1, at p 79 (deed of rescission).

[32]  Exhibit 1, at p 82 (contract).

[33]  Some copies of commercial leases appear in exhibit 1, at pp 130-141.

[34]  Exhibit 1 (USB), docs 249, 258, 268, 276, 286, 293, 302 and 311.

[35]  T 1-22.

[36]  Affidavit of Ondra Plath, at [50]-[51].

[37]  Exhibit 1, at p 63.

[38]  Exhibit 1, at p 67.

[39]  Exhibit 1, at pp 108 and 111.

[40]  Affidavit of Ira Plath, at [33]; a copy of the Certificate of Title appears in exhibit 1, at p 129.

[41]  T 1-77 to 1-78.

[42]  T 1-78.

[43]  See also exhibit 1, at p 94 (details of security).

[44]  See John Holland Pty Limited v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451 at [94]; Briginshaw v Briginshaw (1938) 60 CLR 336 at 361; Brown v New South Wales Trustee and Guardian [2012] NSWCA 431 at [52].

[45]  Ondra’s affidavit at [62]-[63]; Cheyenne’s affidavit at [39].

[46]  Ondra’s affidavit at [64]-[66].

[47]  Exhibit 1, at p 259.

[48]  Exhibit 1, at pp 260 and 261.

[49]  T 2-28.

[50]  Exhibit 1 (USB), doc 268.  The figure is $35,638.92, which is very close to the amount of the invoice, $35,583.92 (exhibit 1, at p 260).  The difference is likely to be, I find, a typographical error.

[51]  Exhibit 1 (USB), doc 276.

[52]  Exhibit 1 (USB), docs 286, 293, 302 and 311.

[53]  See, for example, at T 1-59.

[54]  See exhibit 1 at pp 296, 297, 298, 299, 300 and 301.

[55]  T 1-84.

[56]  T 1-85 to 1-86.

[57]  Exhibit 1, at p 142.

[58]  Exhibit 1, at p 148.

[59]  In a general sense at least this is supported by the evidence of Wayne Cox, relied upon by Ira.

[60]  See paragraph [76] above.  I do not include the amount of $26,739.92 in this, because I infer this relates to the second backdated invoice, which is for the deposit and other moneys, not for renovation works.

[61]  I regard [93] of Ondra’s affidavit as inadmissible.

[62]  See also exhibits 3 (bank statement for Ira’s bank account, showing transfer of $50,000 on 8 October 2009, which he says was for the boat) and 4 (certificate of registration of the vessel in Ira’s name).

[63]  Exhibit 1, USB, doc 293.

[64]  See, for example, exhibit 1 (USB), docs 286, 293, 302, 311.

[65]  See exhibit 1, p 126 (letter from Halletts dated 9 January 2007).

[66]  See the minutes, exhibit 1, at p 163.

[67]  Exhibit 1, at p 159.

[68]  Exhibit 1, at p 43.

[69]  Exhibit 1 at p 167; T 1-91.

[70]  Exhibit 1, at pp 165-166.

[71]  T 1-89.

[72]  For example, doc 77 shows a deposit of rent from Eco Earthworks on 3 August 2015 into the Onza Industries Pty Ltd as trustee for the Trust account; but from the following bank statements (docs 78 onwards), there are no deposits consistent with rent.

[73]  See, for example, the bank statements, in the name of I Plath, in exhibit 1, at pp 218-231.

[74]  For example, at T 1-89 to 1-90.

[75]  T 1-89.

[76] Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367; see also Re Dalewon Pty Ltd (in liquidation) (2010) 79 ACSR 530; [2010] QSC 311 at [7]-[8].

Close

Editorial Notes

  • Published Case Name:

    Onza Industries Pty Ltd v Tingalpa Tyre & Mechanical Pty Ltd

  • Shortened Case Name:

    Onza Industries Pty Ltd v Tingalpa Tyre & Mechanical Pty Ltd

  • MNC:

    [2021] QSC 1

  • Court:

    QSC

  • Judge(s):

    Bowskill J

  • Date:

    06 Jan 2021

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.
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