Navigating legal battles when co-ownership goes undocumented
May 08, 2024All legal dealings, especially when they are between friends and family members, should be documented - which will be helpful if a dispute ever arises (or even, as in this case, one of the parties dies and the family needs to understand the nature of the dealing). The Supreme Court of New South Wales has just considered a situation where there was little, if any, written evidence of the actual arrangement between the co-owners of the property.
Odelli v Gabrielle [2024] NSWSC 468 (26 April 2024)
This dispute relates to the co-ownership of a property at Belmore in Sydney, which was originally purchased by Chakib (Carlo) Gabrielle ("Carlo") (the defendant) and Stephen Odelli (the plaintiff's son) as tenants-in-common in equal shares (that is, they each hold a 50% interest in the property's title) back in 2003. It was secured by a loan from National Australia Bank.
Following Stephen's untimely death in 2008, Stephen's interest was inherited by his parents (in accordance with the laws of intestacy, because Stephen died without a Will), however they never changed the title into their names. His father died in 2019, leaving his mother as the sole heir to Stephen's share of the property.
Carlo claimed that Stephen/Stephen's parents had nothing to do with the property. Rather, Carlo was the person who managed the tenancy.
In 2021, Stephen's mother arranged for Stephen's half-share to be transmitted to her. In 2023, she commenced these proceedings seeking an appointment of a trustee for sale of the property pursuant to section 66G of the Conveyancing Act 1919 (NSW). In response, Carlo cross-claimed, seeking a declaration that Stephen's share was held his share on trust for him, and sought an order that the share be transferred to him.
In early 2024, Stephen's mother sought to amend her claim to seek a declaration that the property belonged in equity to her as to 57%, on the basis that Stephen provided approximately 57% of the purchase price of the property. The Court rejected this following arguments between the parties about issues of delay.
A claim of trust
Carlo argued that Stephen had acquired his share for Carlo as either:
- an express trust;
- a common intention constructive trust; or
- a constructive trust based on "unconscientious" use of the legal title.
Relevant facts
The Court noted the following facts in its consideration:
- Carlo was solely responsible for the negotiations to purchase the property;
- It was Carlo's bank manager who suggested that Carlo buy the property in joint names "as this would assist [Carlo] in obtaining further loans in the future". It was then that Carlo approached Stephen.
- Stephen's passbook for his bank account showed 2 withdrawal entries with the descriptions "Carlo House" and "House Vince" - Stephen's mother suggested that the amounts withdrawn represented 20% of the purchase price, with the balance being funded by National Australia Bank.
- In 2010, Carlo disclosed as part of his bankruptcy that he owed an amount equal to half the amount then owed to NAB for a "joint loan".
- Carlo had sent an email to Stephen's mother's lawyer referring to Carlo's contribution (financial or otherwise) toward the property
- Carlo had a history of litigation - including his bankruptcy, a dispute with his mother's deceased estate, and a dispute with the local Council about leasing part of his home as a secondary dwelling. He also claimed in various periods that he was getting his "life and finances in order".
Difficulties for both parties
Unfortunately, there was hardly any written documentation in support of either position - rather, both sides relied heavily on their individual recollections of conversations quite a number of years back. Many witnesses faltered when being cross-examined about conversations mentioned in their written statements (that is, their affidavits). There were further complications arising from Stephen's mother's language difficulties, with her daughter admitting that she assisted her mother with her affidavit, acting as an interpreter between her mother and the lawyer.
There were inconsistencies in Carlo's evidence - his version of events was not supported by any written evidence. Also, his own statement of affairs, and later correspondence, was contrary to the version of events he sought to rely on in the Court proceedings. As noted by the Court -
"Carlo's version of events describes a series of transactions which were highly favourable to him. It involved Stephen taking on significant risk, while Carlo was to receive all the gain, if any, from the purchase. I remind myself of the need for caution in dealing with self-serving evidence which cannot now be contradicted because the other party to the alleged conversations has died."
The Court was critical of the delay on the part of Stephen's family in pursuing the recovery of Stephen's share of the property. Nevertheless, the Court was not satisfied that Carlo's story was correct, and therefore found that he hadn't established that Stephen held his legal share in the property on trust, for Carlo, and agreed to appoint a trustee for the property to be sold. Nevertheless, the Court allowed Carlo to make submissions to the trustee regarding any allowances to be adjusted in his favour for improvements to the property.
Lessons to be learned
- If you are purchasing a property with another person, ensure that it is documented. If, as Carlo suggested, one person is purchasing as trustee for another, document it. Ensure there is a clear understanding as to what interest each person has in the property.
- If you have a conversation with someone about a legal issue, document what was discussed - ideally in a written form of correspondence such as a letter or email to the other person, to outline your understanding of the conversation, which will then give them an opportunity to respond with their own understanding of the discussions if they do not agree with your recollection.
- Upon someone's death, deal with the estate assets in a timely fashion, so that issues like this are dealt with sooner rather than later.
Contact the Shire Legal team if you have any questions.
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