Martech Energy Systems v Bell [2005] VSC 198
In the Commercial and Equity Division of the Supreme Court of Victoria, Hollingworth J held that, where a factory was bought in a company officer's name with the company paying most of the purchase moneys, an unrebutted presumption of resulting trust arose for both in the shares they contributed, and proposed a declaration over the net sale proceeds accordingly, although neither side had argued for that result [3], [11], [91], [92], [93].
What the court decided
The factory was bought in 1994 for $265,000 and registered in the name of Mrs Bell, then the company secretary and a shareholder of Martech [1]. Martech paid the entire contract price and most of the settlement moneys [2]. Mrs Bell paid stamp duty of $13,264, registration costs of $801 and legal fees of $980 [56]. The property was sold in 2003 for $600,000 [3]. The liquidator said that Martech was entitled to the net proceeds of $300,731.07 under a resulting trust, while Mrs Bell claimed all of them [3].
Her Honour stated that where two or more persons provide the purchase price and the property is put in the name of one only, there is, absent a presumption of advancement, a presumption of resulting trust for the contributors in the shares in which they provided it [6]. The money must be provided in the capacity of purchaser and not, for example, by way of loan [7]. Both parties proceeded on the basis that the purchase price included incidental costs such as stamp duty and legal costs [8]. The plaintiffs argued that Martech had contributed the entire purchase price [9]. They argued alternatively that, if the trust was not rebutted, Martech would have to make restitution to Mrs Bell of her contribution to avoid unjust enrichment [9]. Mrs Bell claimed that she had completely rebutted the presumption [10]. Her Honour held that, notwithstanding the way each side argued, this was not an "all or nothing" case [11].
It was common ground that intention was assessed at the purchase, by acts and declarations before, at or so immediately after it as to form part of the transaction [14]. Rejecting the plaintiffs' submission that only Martech's intention was relevant, her Honour considered both parties' intentions, because Mrs Bell had contributed some of the purchase moneys [15]. The court looks to what a reasonable person would draw from the words or conduct, not the purchaser's subjective intention [16]. It was also common ground that later acts and declarations are admissible only against the party who made them, not in their favour [17]. Her Honour added that those principles do not prevent a party in whose favour the presumption falls from relying on later acts or declarations to impeach a witness's credit [18].
Her Honour was not persuaded that Martech had agreed to lend Mrs Bell the deposit [44]. Nor was she satisfied that there was any agreement that Martech would lend Mrs Bell the entire purchase price [46]. Her Honour said Martech's company charge need not show that it intended to own the property, as that inference assumed the directors observed their fiduciary duties [53]. The interim accounts, existing at the purchase, were admissible in support of Martech's claim [70]. Later accounts recording the factory as Martech's asset were not sufficiently contemporaneous to be admissible in support of its case [70]. Rent entries in the 1995 and 1996 financial years were not explained sufficiently to rebut the presumption [71]. Alleged discussions in 2002 and 2003 were not admissible or probative on Martech's intention in early 1994 [88].
Her Honour found that Mrs Bell contributed $15,045 of the purchase moneys and that Martech paid the remaining $268,123.95 [89]. She was not satisfied that Martech paid the balance as a lender to Mrs Bell [90]. Applying Calverley v Green, her Honour found a presumption of resulting trust in favour of Mrs Bell and Martech in the shares in which each provided the purchase moneys, which Mrs Bell had not rebutted as to Martech [91]. Her Honour proposed to declare that the $300,731.07 was held on a resulting trust for the parties in proportion to their contributions to total purchase moneys of $283,168.95 [93]. She would hear the parties on the form of orders and costs [94].
Why it matters
The court may apply a proportionate resulting trust where the evidence supports one, even though neither party argued for that result [11], [92]. On the common ground in this case, later acts and declarations could be used against the party who made them but not in its favour, so a contributor claiming the whole interest needs evidence of intention at or about the time of purchase [14], [17]. This first instance decision applies settled principles, and much turned on the evidence failing to establish the alleged loans.
Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.