The fact which must be proven in the case of a purchase money resulting trust is that one party paid the purchase price for property and another party was given legal title. The recitals in the deed do not preclude evidence of the actual transaction. Hernandez, Texas, 155 Tex. 249, 285 S.W.2d 184 (1956). Professor Scott in his. The Constructive TrustA constructive trust is formed by operation of law. It is considered an equitable remedy so as to prevent unjust enrichment, which is when the law imposes an obligation upon one party to hold specific property for another. The person so obligated becomes a constructive trustee towards the person to whom he owes performance of the obligation. Although the application of. Trust of land (if two or more people own land, must hold in trust, Law of Property Act 1925 s 36 will impose a trust whether you want it or not. Debate about whether resulting trusts arise by operation of law (Chambers) or because someone wanted to create a trust (Swadling – intention).

Purchase Money Resulting Trusts Only Apply To Real Property Without
Purchase Money Resulting Trusts Only Apply To Real Property

SMAV Nominees Pty Ltd v Bakal Enterprises Pty Ltd [2020] VSC 203 (24 April 2020), Derham AsJ

Comment.This case is interesting for the following reasons –

1.It considers the circumstances in which hearsay is admissible on an application to remove a caveat under the Transfer of Land Act s. 90(3). See also Blog 11.

2.Derham AsJ considers whether the caveator has to show, as to the existence of its asserted legal or equitable rights in the land, on the one hand a prima facie case or on the other hand a serious question to be tried. His Honour states that the first is the correct test (as previously stated in Blog 1) and indeed states (at [64]) that the first test requires a higher standard than the second, citing the decision of Warren CJ in Piroshenko v Grojsman [2010] VSC 240; (2010) 27 VR 489. It is, however, difficult to find any case in which a court holds that a caveator met one and not the other test (in this case Derham AsJ finds that caveator failed both), and indeed in Concrete Mining Structures Pty Ltd v Cellcrete Australia Pty Ltd [2015] FCA 888 at [33] (not a caveat case) Edelman J stated that the difference between the two tests is one of language not of substance.

3.Although his Honour simply ordered that the caveator pay the plaintiff’s costs of the application he reserved liberty to apply in relation to his proposed orders. It was ominous that he also found that the caveat had been used as a bargaining chip as this may foreshadow indemnity costs – see Blog 35 and previous Blogs on costs.

The facts were –

·In October and November 2017 the plaintiff’s sole director Mavroudis loaned Sabawi a total of $200,000.

·In April 2018 Mavroudis was introduced to 294 Pound Road Hampton Park (“the property”) by Sabawi, whom he believed to be a licensed real estate agent. On 13 April he signed a “Letter of Offer Expression of Interest” and paid a holding deposit of $10,000 to one of the vendors at the direction of Sabawi.

·On or about 17 April 2018 Sabawi asked Mavroudis for his bank account details so that he could repay the loan of $200,000. Mavroudis did this. Sabawi subsequently advised Mavroudis that he had repaid the $200,000 to his account. Mavroudis received the $200,000 into his account on 18 April 2018, recorded in his bank statement as “Inward Telegraphic Transfer 180490”.

·On 7 July 2018 Sabawi presented the contract of sale to Mavroudis for signing with the purchaser named as “294 Pound Road Pty Ltd” and the vendor’s estate agent named as a particular company formed by the two of them other than for the purpose of selling real estate. Mavroudis signed only after insisting that the document be altered to show the plaintiff as purchaser and the sale as being by private treaty. The plaintiff became registered proprietor.

·On 23 August 2019, the solicitors for the plaintiff and Mavroudis received a letter of demand from the then solicitors for the first defendant (“Bakal Enterprises”) demanding repayment of $200,000. Among other things the letter alleged that, following discussion with an unnamed mutual friend, Bakal Enterprises had paid $200,000 into Mavroudis’s account on 18 April 2018 as a contribution towards a development on the property, which had fallen over. Shortly before this letter Mavroudis received a telephone call to similar effect from, he gathered, Bakal, who was Bakal Enterprises’ sole director.

·On 27 August 2019 the plaintiff’s solicitors responded, stating that Mavroudis’ first knowledge of these allegations was in this telephone call and refuting them. On 16 September 2019 the then solicitors for Bakal Enterprises responded confirming that the mutual friend was Sabawi, enclosing a receipt so as to corroborate the statement that Bakal Enterprises and not Sabawi had made the $200,000 payment, and demanding its repayment.

Purchase Money Resulting Trusts Only Apply To Real Property Without

·The plaintiff heard nothing further until receiving notice that Bakal Enterprises through its new solicitors Madgwicks had caveated on 10 February 2020 claiming a freehold interest in the property on the basis of a resulting implied or constructive trust.

·The plaintiff’s solicitors demanded removal of the caveat and stated that the $200,000 had been repayment of a loan by Sabawi. On 27 and 28 February Madgwicks and the plaintiff’s solicitors communicated, in the course of which:

·Madgwicks stated that Sabawi denied the loan, maintaining that the caveator had an interest in the land arising from the contribution of $200,000 towards its purchase;

·the plaintiff’s solicitors provided documentary evidence of the $200,000 loan to Sabawi, foreshadowed caveat removal proceedings, reiterated Mavroudis’ previous account of the facts, and stated that: the plaintiff had purchased the property with its own funds and financial assistance from Mavroudis’s father; a planning permit for a subdivision of the property was imminent; the plaintiff had a very interested buyer once it could sell with plans and permits but that this was impeded by the caveat.

·On or about 5 March Bakal and Sabawi conferred with Madgwicks. On 12 March Madgwicks wrote to the plaintiff’s solicitors stating, after reiterating its instructions about the $200,000 payment, that Sabawi had instructed it that Mavroudis inappropriately altered the name of the purchaser in the contract of sale from 294 Pound Road Pty Ltd (to be incorporated between Mavroudis and Sabawi) to the plaintiff’s name and “[we] are informed by Mr Sabawi that this change was made under false pretences and without adequate payment to Mr Sabawi, who was instrumental in facilitating the sale in the first place …. Mr Sabawi is currently attending to swearing a statutory declaration confirming the above…”.

The plaintiff applied under s. 90(3) of the Transfer of Land Act for removal of the caveat. Before the caveator filed any evidence Madgwicks offered in return for withdrawal of the caveat that $300,000 be held in trust pending determination of the dispute.

The material before the court included –

·an affidavit by the caveator’s solicitor which stated that a statutory declaration was being prepared by Sabawi;

·an affidavit by Bakal. This affidavit exhibited a statutory declaration, inferred by his Honour to have been prepared by Madgwicks, said to have been made by Sabawi, containing Sabawi’s evidence including disputing Mavroudis’ account of the facts. Bakal asserted that Sabawi had not sworn an affidavit because of the social distancing measures required in the COVID-19 pandemic. The statutory declaration