Togias v State of New South Wales

This is the Court’s second judgment in the post-appeal applications in these proceedings. The Court gave its first judgment concerning this post-appeal phase of the proceedings on 20 June 2023: Togias v State of New South Wales [2023] NSWSC 665. This judgment should be read with that first post-appeal judgment (referred to in these reasons as “the June 2023 judgment”) and assumes a reading of that judgment, which (at [13] – [17]) gives a summary of the overall course of these proceedings. Persons, matters, and events are referred to in both judgments in the same way.

In the first judgment the Court considered the remaining issues in the proceedings. These were a set-off issue and a possession issue. The Court decided the possession issue but deferred determination of the set-off issue to allow the parties to put supplementary submissions. The parties put supplementary written submissions and spoke to them on 17 October 2023.

The parties’ legal representation was substantially the same as what it had been at the time of the first judgment. Mr N Kabilafkas instructed by Fox & Standiland, solicitors, appeared for Ms Togias. Mr T Hale SC, instructed by Proactive Legal, appeared for the NSWTAG.

Much of the argument on the set off issue turns on the construction of the Court of Appeal’s declaration (3) and order (4) in its judgment of 23 May 2022, which provided as follows:

The parties were focused in argument on the set off issue upon what was meant in the wording of declaration 3(b) by “her payment of rates, charges and mortgage instalments” and by “a notional occupation fee”. They were also concerned with the question of what “further or consequential orders” could be made on the remitter to the Equity division. In the Court’s view when the reasons for decision of the Court of Appeal are read in full the meaning of declaration 3(b) and order 4 can be readily discerned.

The parties’ principal positions and overarching arguments on the set off issue may be shortly stated.

NSWTAG accepts that declaration 3(b) of the Court of Appeal’s orders recognises that the Glenwood property is charged for the benefit of Ms Togias to secure the outgoings that she has met in respect of the Glenwood property that are more than her proportionate 25% interest in that property. But NSWTAG advances evidence of the market rental value of the Glenwood property during the period of Ms Togias’s occupation since January 2010, through a valuer, Ms Lynette Savage. Then, NSWTAG submits that the notional market rental payable by Ms Togias for her occupation of the Glenwood property since January 2010, discounted by a factor of 25%, to subtract from it her proportionate interest in the property, should be offset against the value of any charge over the property that would otherwise benefit her by reason of her payment of rates, charges, and mortgage instalments since 29 January 2010.

NSWTAG submits that when this notional rental calculation is undertaken the market rent payable by Ms Togias is so substantial that it fully offsets the amount of any charge over the Glenwood property that would otherwise arise for her benefit. NSWTAG submits that as a result it is not necessary for the Court to attempt to calculate the amount of the charge, thereby reducing the need for any further accounting or a referral of these proceedings out to a Court expert for calculation of the quantum of the charge of Ms Togias.

Based upon the evidence that NSWTAG has adduced, it calculates a nil value for the charge in the following way. For the purposes the calculation, NSWTAG accepts the plaintiff’s evidence that she may be credited the sum of $394,020 for the payment of mortgage instalments to the mortgagee of the Glenwood property (although in a later argument, as will be seen NSWTAG seek to reduce this figure). These payments can then be reduced by 25% to reflect her payment for her own proportion of these outgoings, meaning that she has paid $295,515 on account of the other 75% interests in the Glenwood property that she does not own.

NSWTAG then calculates a “notional occupation fee” by reducing the market rental figure of $425,000 by 25% to $318,750, which NSWTAG says represents “the notional occupation fee” for the balance of the 75% of the Glenwood property which she has occupied but in which she does not have an equitable interest. NSWTAG submits that when the maximum amount that the plaintiff can claim, a charge of $295,515, is offset against the notional occupation fee that she must pay of $318,750, she is left with a deficit which he owes to NSWTAG of $23,235. Thus, NSWTAG submits there is no point in referring this matter out to a referee or court expert to do any calculation of the amount of her charge over the Glenwood property, because at best it will be nil.

In reply, Ms Togias contends that a notional rent should not be set-off against her charge over the property. Her argument assumes that neither the Court of Appeal nor Sackar J have already decided against her that a notional rent must be offset against her charge.

This generated the first sub-issue between the parties on the set off question: namely whether it was open for Ms Togias to contend upon the proper construction of the orders of the Court of Appeal that a notional rent should not be set off against her charge. On this sub-issue, Ms Togias put the following in her written submissions:

In other words, Ms Togias submitted that the Court of Appeal did not find that an occupation fee must be paid but only concluded that on remitter the Equity court might find that an occupation fee should be paid but might not need to be paid, depending on the circumstances.

But the NSWTAG took a contrary position, arguing that the Court of Appeal’s decision required the market rent of the Glenwood property for Ms Togias’ occupation to be offset against Ms Togias’ charge.

Before examining NSWTAG’s argument it is useful to examine the relevant part of the decision of the Court of Appeal that explains the rationale for the set-off. In the Court of Appeal, in the reasons for decision of Mitchelmore JA, which were agreed in by Basten AJA and Griffiths AJA, her Honour addressed the issue of the rental value of the Glenwood property under the heading “Relief” as follows.

NSWTAG further submits that the way the set off question was formulated by this Court on the remitter (see the June 2023 judgement at [8]) is not consistent with what was intended by the Court of Appeal in declaration 3(b) and in the above passages. NSWTAG further submits that to ascertain the meaning and intent of declaration 3(b) it is necessary to consider declaration 3(b) in the context of the judgments of Sackar J and the Court of Appeal.

The NSWTAG’s submission is correct that on this remitter this Court’s original formulation of the set-off question (in the June 2023 judgment at [8]) does not capture all the issues that have now been debated between the parties about the set-off issue. It is now convenient to abandon that previous formulation of the question and deal with the issues actually raised by the parties as a series of sub-issues.

The first sub-issues is: what did the Court of Appeal decide? The NSWTAG submits the Court of Appeal decided that “a notional occupation fee” must be set off against Ms Togias’ charge. The NSWTAG submits that the Court of Appeal’s declaration 3(b) is founded upon principles which underpin the grant of relief imposing a constructive trust to prevent unconscionable conduct. The NSWTAG submits that as a condition of imposing the equitable charge to ensure appropriate fairness in the formulation of the remedy of an equitable charge the Court required Ms Togias to pay for her occupation of the Glenwood property through “a notional occupation fee”. The NSWTAG submitted that declaration 3(b) is not based upon doctrines of legal or equitable co-ownership and that doctrines of ouster are therefore irrelevant to determining whether occupation fee is payable and to be offset against Ms Togias’ equitable charge. In short, the NSWTAG emphasises that the “notional occupation fee” is a condition of moulding the grant of relief in the form of an equitable charge.

Ms Togias’s contrasting contention is that the Court of Appeal left open the possibility that doctrines of ouster between equitable co-owners may be brought into play because the Court of Appeal did not determine that “a notional occupation fee” must be paid but rather that it may need to be paid to mould a suitably balanced equitable charge but equally it may not need to be paid.

Upon analysis of the Court of Appeal’s reasons Ms Togias’ argument is more persuasive on this issue. Mitchelmore JA is the only one of the three judges who discussed the terms upon which the equitable charge remedy would be imposed. Basten AJA made observations about the availability of the remedy of a remedial constructive trust and the basis for valuing the entitlement of Ms Togias but he did not separately deal with the terms of the equitable charge. Griffiths AJA agreed with the reasons of Mitchelmore JA and the additional reasons of Basten AJA. Therefore, the answer to this question must look to analysis of the reasons of Mitchelmore JA. The relevant parts of her Honour’s judgment are set out earlier in these reasons. The sentence in her Honour’s reasoning which is key to the resolution of this issue is the following sentence in [113]:

Her Honour did not find that there must be a set off with respect to the respondent’s occupation of the Glenwood property with her children. Rather, her Honour used language which clearly conveyed that she was leaving open the question of whether there would or would not be a set off with respect to Ms Togias’ occupation of the Glenwood property.

Declaration 3(b) should be read in the context of these reasons. Given what is said in paragraph [113] of her Honour’s judgment the formulation of her Honour’s declaration in 3(b) to include the words “less a notional occupation fee” should be taken as leaving open the question of whether that occupation fee will be a market rent or a fee based upon an implied licence or a fee that is so nominal that it qualifies as “notional” and is possibly even nil. Such an interpretation would be consistent with paragraph [113] in her Honour’s reasons. In other words, her Honour was leaving to the trial judge in the Equity Division on remitter to decide questions such as whether a notional occupation fee would be paid or not.

Two further observations should be made here. Nothing in her Honour’s reasons can be taken as suggesting that “a notional occupational fee” must be measured by the market rent for the Glenwood property, as distinct for example for a fee for a non-exclusive license to occupy the Glenwood property. Her Honour merely refers to “a set off with respect to the respondent’s occupation of the Glenwood property” and “a notional occupation fee”. Her Honour’s language does not refer to “market rent” and leaves what is the appropriate measure of the fee, if any, to the Equity Division. NSWTAG’s contentions that a market rent must be the appropriate measure of the occupation fee and that an occupation fee must be charged as the result of her Honour’s reasons, are not correct.

This leads to the second sub-issue.

The next sub-issue is whether doctrines of ouster are relevant to the fixing of “a notional occupation fee” with respect to the balance of the interests in the Glenwood property. The parties expressed strong disagreement about this issue in their respective submissions. Ms Togias contended that she was an equitable co-tenant who had not taken positive steps to oust either Mr Subakti or the NSWTAG from the Glenwood property and therefore the NSWTAG could not seek an occupation fee from her.

The NSWTAG argued a contrary position as a matter of law. Quite apart from whether there had been an ouster in fact, the NSWTAG argued that a merely equitable co-tenant, such as Ms Togias, could not take advantage of the doctrine available to a legal co-tenant – that an occupation fee was not chargeable to a co-tenant unless that co-tenant had ousted the other co-tenant. Ms Togias countered by contending that (a) not only was the position the same between legal and equitable co-tenant’s, but (b) she had not ousted either Mr Subatki or the NSWTAG and a nil occupation fee was appropriate here.

On this issue the arguments advanced by Ms Togias are the more persuasive for the following reasons.

In Forgeard v Shanahan (1994) 35 NSWLR 206 (Forgeard) Meagher JA with whose reasons Mahoney JA (as His Honour then was) agreed, decisively stated the applicable law contrary to the contentions of the NSWTAG. In Forgeard (at 223A-D) Meagher JA stated the principle in question as follows:

Based upon doctrines going as far back as Pascoe v Swan (1859) 27 Beav 508; 54 ER 201 Meagher JA here clearly accepted here that an equitable co-tenant in occupation will be charged with an occupation fee if there has been an exclusion of the other co-tenant, but will not be charged an occupation fee if there is no exclusion.

The case of Biviano v Natoli [1998] 43 NSWLR 695 (at 700D-G) applied this reasoning in Forgeard and considered whether or not there had been ouster of an equitable co-tenant.

Finally, Tobias AJA came to the same conclusion in another case in 2013. Tobias AJA applied these principles in The Owners of Strata Plan 50276 v Thoo [2013] NSWCA 270 at [143] – [145] as follows:

This authority (especially at [144]) puts beyond question that a co-tenant in Ms Togias’ position should not be charged an occupation fee if she has not ousted her equitable co-tenant. This is a matter quite distinct from the issue decided on the 2023 judgment that the NSW TAG as the legal owner of the property may obtain an order for possession against her. That matter has been decided against her in the Court’s June 2023 judgment. It is important to distinguish the NSWTAG’s position is legal owner from its coordinate position as a co-tenant with the NSWTAG in equity.

This leads to the third sub issue.

The third sub issue is the question of how the Court will approach this issue in practice when tasked with settling “a notional occupation fee” in accordance with the Court of Appeal’s declaration 3(b). Several matters will guide the parties’ preparation of this part of the case. The first matter is that Mitchelmore JA (at [113]) recorded in the last sentence of that paragraph that on 21 May 2021 the Court had made an order restraining the NSWTAG from disposing of the Glenwood property “upon an undertaking from the respondent, to the extent that her claim failed, to pay an occupation fee to be determined by the Court”. When the Court intervened on 21 May 2021 to restrain the NSWTAG from disposing of the Glenwood property, the Court changed the ground rules for Ms Togias claiming an occupation fee. From that date onwards she undertook that “to the extent her claim failed” she would pay an occupation fee to be determined by the Court. From that time forward, it is not open to Ms Togias to argue that as an equitable co-tenant she is not liable to pay an occupation fee because she has not ousted her co-tenant. She has given a positive undertaking to the Court to pay an occupation fee as the price for delaying sale of the Glenwood property. In the present contest in the Equity Division she will be required to pay an occupation fee from 21 May 2021, come what may.

This leads to 2 related questions.

But the next two related question are: (a) how should the occupation fee after 21 May 2021 be calculated and similarly (b) how should any occupation fee for which Ms Togias is found liable between 29 January 2010 and 21 May 2021 be calculated. This whole period is relevant because the NSWTAG may be able to establish, when the evidence is analysed that there was a period in which Ms Togias ousted her co-tenant.

In the Court’s view for any period that Ms Togias is to be required to pay an occupation fee, the fee should be measured by the true legal position in which she found herself as was found in the June 2023 judgement: she was a licensee at will with non-exclusive occupation of the property. And, for some periods of her occupation, she has actually shared occupation of the Glenwood property with Mr Subatki but not as part of the same household. Her security of tenure was improved when she gave the undertaking on 21 May 2021, but prior to that it was no more than was stated here.

The existing evidence as to the market rental of the property is not a true measure of the market value of the legal tenure Ms Togias held in the Glenwood property. It may be expected that the occupation fee she should be charged, especially before 21 May 2021 will be less than a market rent. And in this respect the observations Beazley JA in Biviano (at 307E-304E) that an appropriate occupation fee to be claimed by an ousted co-tenant would not necessarily be the full rental value of the property in question, come into focus. The expert evidence that has been prepared will need to be adjusted to accommodate this conclusion. The parties will also need to agree upon periods of time when Ms Togias was in the Glenwood property on her own and the periods of time when Mr Subatki was in occupation.

But in one important respect the NSWTAG submissions are correct. Although the Court has found that Ms Togias can claim that she is not liable for an occupation fee between 29 January 2010 and 21 May 2021 (because she has not ousted her equitable co-tenant), equally it is open to NSWTAG to answer that argument by emphasising, as it does, the present situation is slightly different from mere equitable co-tenants and that the Court of Appeal is formulating equitable relief by way of a charge on a condition that an occupation fee may – but not must – be paid. Notwithstanding that Ms Togias can set up her position as an equitable co-tenant NSWTAG can still argue that particular circumstances established here mean that to prevent a disproportionate grant of relief that some level of occupation fee should nevertheless be charged. These will be matters for final submissions upon the evidence.

NSW TAG’s submissions raised three other matters that should be addressed.

The first of these subsidiary issues is the NSW TAG’s submission that from 9 June 2021 the date on which the NSW TAG filed its Cross-Claim applying for an order for possession that the plaintiff has been a trespasser. This can be rejected on two grounds. First, it is inconsistent with the Court’s reasoning in the June 2023 judgment at [36]-[42]. Secondly, it is not consistent with the undertaking that was given by Ms Togias on 21 May 2021.

The second subsidiary issue relates to the mortgage instalments claimed by the plaintiff. The NSW TAG submits that when the Court is seeking to determine what are “her payments”, which taken together will establish the quantum of the charge within declaration 3(b), that Ms Togias cannot rely upon payments that were made from various funds that were legally or beneficially owned or controlled by Mr Subakti. NSWTAG submits that using funds from various accounts of Mr Subakti and his businesses – which may have come from the legal sources – are not payments by Ms Togias for the purposes of declaration 3(b).

This argument has a simple answer. It is inconsistent with the Court of Appeal’s reasoning that expressly rejected such an argument. Mitchelmore JA said about this same issue at [108] and [109] the following:

In formulating the relief in declaration 3(b), Mitchelmore JA had here put to one side all questions of the legitimacy of Mr Subatki’s income. There was no issue that Ms Togias did not know of her de facto partner’s illegal activities when she used she could legitimately regarded as joint funds from their relationship that she was entitled to apply for the joint endeavour in which they were involved. Her use of these funds did not deprive her of an equitable interest in the Glenwood property and it would now be an abuse of process to permit these matters now be raised again on this remitter to the Equity Division.

The last subsidiary issue is a claim that the NSWTAG makes for an accounting from Mr Togias in respect of the rental income she received from the Seven Hills property, in which the Court of Appeal – unlike Sackar J – found she had no interest. The NSWTAG submits that a duty “arose’ in Ms Togias to account to the NSWTAG for the rental income of the Seven Hills property due to the forfeiture of that property to the Crown, once the Court of Appeal found that Ms Togias did not have any interest in that property.

No such claim arises from the Court of Appeal’s findings for several reasons. First, it does not arise on the pleadings. The NSW TAG filed a Cross-Claim in the proceedings. It made no claim in that Cross-Claim for an account in respect of rental income from the Seven Hills property in the event that the NSWTAG was successful. No claim made for such rental income in the NSWTAG’s motion of 13 February 2023 or the NSWTAG’s motion of 4 July 2023. The issue is obliquely referred to in paragraph 7 of the NSWTAG’s Amended Defence in relation to the acquisition of the Seven Hills property but that does not entitle the NSWTAG now to bring a claim upon that subject. Nor did NSWTAG raise the issue in the Court of Appeal in a manner that is evident from the Court of Appeal’s judgment.

Finally, this issue does not come within the apparent scope of Order 4 of the Court of Appeal’s orders remitting the matter to the Equity Division “for any further or consequential orders”. Mitchelmore JA gave examples (at [116]) of the consequential orders that her Honour had in mind, and they were matters in relation to the vacation and sale of the Glenwood property and the costs of the proceedings. A broad ranging accounting in relation to the Seven Hills property which had never previously been claimed on the pleadings could hardly qualify as a “consequential order”.

In summary, once the Court determines basic factual issues such as when the Glenwood property was occupied and has evidence before it that is relevant to the claim for an occupation fee, the matter can either be determined by the Court or referred out to an expert. The Court will make directions for the parties to identify a suitable a court expert to determine an appropriate occupation fee for the Glenwood property in accordance with these reasons. But if the parties agree for the Court to determine this matter, they can ask for this direction to be vacated. The Court deciding the matter is probably likely to be more cost-effective.

The Court notes there is something of a trend in these proceedings for matters that have been decided to be reargued. The Court requests the parties to be mindful of what has now been decided and move on with determining the balance of the issues to bring the matter to a final resolution. The remaining issues are not extensive.

In addition to the NSWTAG’s primary motion of 13 February 2023 seeking possession and sale of the Glenwood property the NSWTAG filed a supplementary motion on 4 July 2023, shortly after the June 2023 judgment. The NSW TAG 4 July 2023 motion sought various amendments to the June 2023 judgment. These amendments in substance sought to change the Court’s conclusions - that Ms Togias was a mere licensee of NSWTAG, that she did not occupy the Glenwood property as an exclusive licensee, and that at all times since the NSWTAG became registered as proprietor of the property that the plaintiff occupied the property as a trespasser or in the alternative without any licence or permission of NSW TAG.

This motion must be dismissed. It is in substance an appeal from the June 2023 judgment. It seeks to change the result of the judgment. That can only be done on appeal and not by motion before the trial judge. The NSWTAG seeks for that motion to be dealt with. For these reasons the Court will dismiss the 4 July motion as incompetent.

The parties have had mixed success upon the present application although Ms Togias has had the greater success. It may be appropriate for each party to bear her and its own costs of the application. But the Court will reserve costs for the present and hear any applications in due course.

For these reasons the Court makes the following orders and conclusions which are designed to bring the remaining issues to a head: