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[2012] WASC 19
Supreme Court of WA
2012-01-25
Edelman J
Original judgment source is linked above.
1 On 15 April 1994, a sale of land in Anstey Road, Forrestdale was completed. The purchasers were the plaintiffs (joint tenants of a half share) as tenants in common with the defendants (joint tenants of the other half share).
2 In this judgment I refer to the parties by their first names. I mean no disrespect by this; it is simply for clarity and to avoid confusion. The defendants, Troy and Stephannie, are the son and daughterinlaw of the plaintiffs, Bruce and Carol. Troy and Stephannie have twins, Harly and Tayla.
3 Most of the purchase price for the Anstey Road property was contributed by Bruce and Carol. However, Bruce and Carol agreed that they would live at Anstey Road with Troy and Stephannie and Harly and Tayla. It was agreed that Troy and Stephannie would make all the mortgage repayments, including payments for a loan which was to be used to build a rear residence on the property where Bruce and Carol would live.
4 In May 2006, Troy and Stephannie separated. This claim was subsequently brought by Bruce and Carol. Their case was primarily that Troy and Stephannie held their title to the Anstey Road property on resulting trust for Bruce and Carol in proportion to the contributions made by Bruce and Carol.
5 Both counsel placed substantial reliance on presumptions in their arguments concerning the resulting trust. This requires some navigation of the procellous waters of the language of 'presumptions' involved with resulting trusts. Once the presumptions are explained, the ultimate resolution of this issue turns upon uncomplicated factual matters, some of which were not in dispute.
6 I conclude that Stephannie has proved that the objective circumstances establish that the half share in the title to the Anstey Road property was transferred to Stephannie and Troy for their own benefit. They did not hold their interest on trust for Bruce and Carol and the 'presumption of resulting trust' has been rebutted.
7 But the trial was not to be so simple. At the start of the trial, counsel for Stephannie amended her pleading to introduce counterclaims based upon mistake, failure of consideration, undue influence, and unconscionable conduct. The evidence led on Stephannie's behalf did not support any of these claims. The claim based on mistake was later abandoned.
8 It is necessary to deal at the outset of these reasons with a submission made in closing by counsel for Stephannie. The submission was that the court should ignore any deficiencies in evidence led on her behalf. Counsel for Stephannie said that changes to the plaintiffs' case meant that 'I didn't know the case that I had to answer' (ts 261). This ignorance was said by counsel to be 'a very good reason to allow me to make one or two assumptions that just fill in the gaps that the evidence leaves' (ts 262 263).
9 There is no basis in law for a court to fill evidentiary gaps which arise due to deficiencies in evidence which could have been led by counsel for Stephannie.
10 Nor is there any basis in fact for the submission that the plaintiffs' conduct of their case was such that Stephannie's legal representatives could not reasonably have understood the case put against her. It is necessary to explain the context in which this submission was made to show why this is so.
11 In their writ, the plaintiffs made a simple claim that they held their interest in a property in proportion to the contributions which they and the defendants had made to the property.
12 On 18 February 2008 the plaintiffs filed their statement of claim in these proceedings. With one exception, their statement of claim remained unamended throughout these proceedings.
13 The statement of claim provided details of the contributions by the plaintiffs. In par 19 of the statement of claim, although not in the writ or the prayer for relief, the trust was described as a 'constructive trust'.
14 On 15 July 2009 Stephannie's substantive defence was filed. Stephannie pleaded numerous contributions that she had made to the property. Stephannie also pleaded that the plaintiffs were 'in loco parentis', and that a 'presumption of advancement' arose: defence par 24.
15 The case had all the hallmarks of a simple case concerning a resulting trust. For the plaintiffs it was a case based upon an assertion of a resulting trust arising from the plaintiffs' contributions. Stephannie had defended the claim on that basis by pleading a 'presumption of advancement' due to the familial relations between the plaintiffs and her and she had relied upon her contributions to the property.
16 On 29 September 2011 the plaintiffs filed a written opening outline. Although the words 'resulting trust' were not used, the case was squarely put on the basis that 'the equitable presumption is that they hold the legal estate in trust for themselves as tenants in common in shares proportionate to their contributions unless their contributions are equal'. The plaintiffs relied upon a leading decision on resulting trusts, Calverley v Green [1984] HCA 81; (1984) 155 CLR 242.
17 The same day, counsel for Stephannie filed submissions containing an opening outline. Counsel made submissions denying that a common intention constructive trust had arisen. Submissions were also made denying that a resulting trust had arisen. The submissions recognised that both types of trust pleaded required the presence of a common intention: pars 6, 15, 20, 27.
18 On the morning of the trial counsel for Stephannie filed written submissions saying that if the plaintiffs sought to amend their pleadings to plead a resulting trust then Stephannie 'will submit that any such trust (if any arose, which is denied) was undermined by one or more of the vitiating factors mentioned in Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 [115]. The relevant factors in this case are: estoppel; undue influence and unconscionable dealing': par 15 supplementary submissions. In the history of the action, this was the first time that any of these claims had been mentioned.
19 At the start of the trial, on 3 October 2011, counsel for the plaintiffs applied to amend the plaintiffs' pleading. He was given leave to amend to strike out the adjective 'constructive' which qualified the reference to trust in par 19 of the statement of claim (ts 8 9). This removed any doubt that the plaintiffs' case was based on an assertion of a resulting trust. During opening, counsel also accepted that there was nothing pleaded which could justify the alternative relief of 'equitable compensation' which had been sought in the prayer for relief (ts 27).
20 Counsel for Stephannie then made an opening statement. He explained that he intended to rely upon unpleaded allegations of undue influence, unconscionable conduct and estoppel. He claimed that he had not realised that the trust pleaded was a resulting trust, although he said that he 'thought something must be amiss because I couldn't see an element of unconscionability that would support the imposition of a remedial trust in the nature of a constructive trust' (ts 21). He did not explain why the defence had pleaded matters such as a 'presumption of advancement' which was an apparent response to a resulting trust. Nor did he explain why the alleged change by the plaintiffs from a plea of a common intention constructive trust to a resulting trust required a wholly new counterclaim based on undue influence, unconscionable conduct or estoppel.
21 Counsel for Stephannie also sought leave to rely on all these unpleaded allegations without amending Stephannie's defence. I declined to allow this course. The trial adjourned at lunch on the first day to allow counsel further time to consider these new amendments.
22 On the second day, 4 October 2011, counsel for Stephannie filed an amended pleading. No objection was taken to this course and leave was granted for the amendment, with costs consequences reserved. The amended pleading introduced a new counterclaim and contribution and indemnity notice. Estoppel was not included. New pleas of undue influence and unconscionable conduct were accompanied by pleas of failure of consideration and mistake.
23 After filing the amended pleading, counsel for Stephannie then sought an adjournment of the trial on the basis that he could not 'be satisfied that the evidence that is before the court is adequate to prove each and every of the additional allegations made in the amended pleadings' (ts 53). The application for an adjournment was not opposed. The trial was briefly adjourned.
24 On the third day, 5 October 2011, the court reconvened following communication from counsel. Counsel for Stephannie said that he was ready to proceed, subject to the possibility that he may apply to recall the plaintiff's only lay witness if the case were adjourned partheard and if something new arose as a result of further instructions that he received (ts 57).
25 The trial proceeded. The evidence concluded on the fourth day, 6 October 2011. The parties agreed to file written closing submissions with brief oral closing submissions on 24 November 2011.
26 In oral closing submissions, counsel for Stephannie applied to make a further amendment to Stephannie's pleading. He said that he needed to amend his pleading because he had not addressed all the elements of a mistake which can make a contract voidable (ts 227). The amendment sought was to include allegations that the plaintiffs knew of Stephannie's mistake, or alternatively induced that mistake. It became apparent that there was no evidentiary foundation for the amendment. Counsel for Stephannie abandoned the amendment and the claim for mistake (ts 258 259).
27 There is no legal foundation for the submission that a lack of clarity in a plaintiffs' case provides a reason for the court to 'fill in the gaps that the evidence leaves'. This brief summary of the manner in which the trial was conducted also shows that, in any event, the factual basis for the submission is misconceived. Stephannie had every reasonable opportunity to present her case. Four points should be emphasised.
28 First, it was apparent on the face of the writ and the pleading that the plaintiffs' case was based on a trust arising from contributions made by the plaintiffs. The only possible contrary indication was a single paragraph, par 19 of the statement of claim, which described the trust as 'constructive'.
29 Secondly, Stephannie had defended the matter on the basis that a resulting trust had been pleaded against her. She had pleaded her contributions; she had pleaded a relationship between the parties akin to parentchild and had sought to raise a 'presumption of advancement'.
30 Thirdly, even if the plaintiffs had changed their legal case from one based upon a common intention constructive trust to one based upon a presumedintention resulting trust, the pleaded facts were entirely unchanged and the trust alleged was still one based upon intention. The amendment provided no basis for the submission by counsel for Stephannie that because an allegedly different trust was asserted (as a matter of law) new counterclaims needed to be pleaded for undue influence, mistake (which was later abandoned), failure of consideration, and unconscionable conduct.
31 Fourthly, some of the evidence in relation to which Stephannie sought to fill evidentiary gaps in her case was expert evidence concerning the quantification of the value of the property. Counsel for Stephannie had sought an adjournment, and one had been granted. When the trial recommenced, there was no suggestion by Stephannie's counsel that he needed a further adjournment to prepare cross-examination of the valuer called by the plaintiffs.
32 The primary evidence in this case was given by Bruce and Stephannie. Stephannie called evidence from a friend, Ms Annette Gallagher. Expert evidence was called by Bruce from Mr Ross Lambert, a valuer. My findings of fact below derive from that evidence and the exhibits as well as an agreed statement of facts provided by the parties prior to trial.
33 The first and second plaintiffs in this trial were Mr Bruce Anderson and Ms Carolyn Anderson.
34 Bruce and Carolyn have three children. One of their children is Troy Anderson. Although Troy was the second defendant in these proceedings, he took no part and agreed to abide by the decision of the court.
35 On 16 November 1991, Troy married Stephannie McPherson. Stephannie is the first defendant.
36 Troy and Stephannie have twin children, Harly and Tayla.
37 From 13 March 1978, Bruce and Carolyn were the owners and registered proprietors of a property at 77 Tamar Street, Palmyra (the Tamar Street property). The Tamar Street property was contained in certificate of title vol 1428, folio 405.
38 On 14 December 1992, Bruce and Carolyn contracted to buy property at 25 Baal Street, Palmyra (the Baal Street property).
39 On 2 February 1993, title to the Baal Street property was transferred to Bruce and Carolyn as joint tenants. The property was registered as certificate of title vol 1163, folio 835 on that date.
40 The purchase price of the Baal Street property was $107,000.
41 Payment of the purchase price for the Baal Street property was funded by a loan from the ANZ Bank. The Baal Street ANZ bank loan was $110,000. It was made jointly to Bruce, Carolyn, Troy and Stephannie. Monthly repayments were approximately $1,062.
42 The Baal Street ANZ bank loan was secured by mortgages over both Baal Street and Tamar Street.
43 There was dispute at trial concerning who made the repayments to ANZ. Bruce said that he and Carol paid $200 each month and that the balance was paid by Troy and Stephannie (ts 79).
44 Bruce said that Carol would come home having collected some of the cash for the payment from Troy and Stephannie, together with the bank payment book. He said that he gave the balance to Carol to make up the total. He said that the money was given by him in cash to Carol usually to be paid by Carol to the teller at the ANZ bank across the road from where Carol worked (ts 70, 80).
45 Carol did not give evidence, and although Stephannie disputed the manner in which these payments were made to the bank, she later accepted in re-examination that Carol did make some (at least) of the payments in to the bank (ts 214).
46 It is not necessary to determine how often the money was paid to the bank, and when it was paid by Carol or by Stephannie. This is because I am satisfied that whatever the manner in which the payments were made to the bank, Bruce's evidence is accurate concerning the contributions made to the payments. Bruce's evidence was that he and Carol contributed a total of $200 per month to the mortgage repayments, and the remainder was paid by Troy and Stephannie.
47 From about 2 February 1993 until about 15 April 1994, Troy and Stephannie lived at the Baal Street property. Bruce took a month off work to renovate the Baal Street property; painting, pruning, gardening, fencing, and building a cupboard (ts 86). He was assisted by Troy on weekends, although not much was paid for by Troy (ts 87).
48 A significant issue at trial was whether the title to the Baal Street property was held by Bruce and Carolyn on trust for a 50% interest for Troy and Stephannie. Counsel for Stephannie submitted that this trust was of the legal title to Baal Street held by Bruce and Carol.
49 It was common ground that Bruce told Stephannie that she and Troy would not be on the title for Baal Street (ts 205). Bruce's evidence on this matter, which I accept, was unequivocal. He said that he told Troy and Stephannie:
If we go ahead and purchase the property at 25 Baal Street, would you and Steph like the first opportunity to move in it as tenants and we will spend some money improving it and then when Carol and I were setting ourselves up for retirement, eventually you will have to buy your own house and we will sell that? (ts 77)
Bruce also said that Troy and Stephannie's contribution to the mortgage was to be a form of rent (ts 76).
50 In contrast, Stephannie's evidence was that Bruce had told her that the reason why she was not on the title was because he and Carol were using Tamar Street as collateral but that Stephannie and Troy 'will ... be in on the mortgage' (ts 212) and that 'because you will be on the mortgage papers that will be sufficient' (Stephannie's witness statement par 15, exhibit C).
51 On this issue I prefer the evidence of Bruce. I have referred below to his evidence of this Baal Street arrangement as the Baal Street Agreement.
52 Bruce's recollection was clearer, and his evidence was more convincing on this issue. I also consider that he and Carol would have put Troy and Stephannie's names on the certificate of title if they had intended that Troy and Stephannie should have an interest in the property other than as tenants.
53 Finally, although events which postdate the purchase of the Baal Street property cannot be evidence of any manifest intention to create a trust at the time of purchase, they can be used to show that no subsequent trust was declared. One relevant piece of evidence is that Bruce and Carolyn paid the capital gains tax on the capital gain in value of the Baal Street property following its sale. They both paid capital gains of $8,304 (exhibits 18 19).
54 Stephannie also referred to a statement made by Bruce to her and Troy, at the later time of the purchase of the Anstey Road property, that '[y]ou will have to sell Baal Street and we will have to sell Tamar Street' (Stephannie's witness statement par 4(bb)). I do not accept that the statement by Bruce was made in precisely these terms or in terms which would reasonably have suggested that Troy and Stephannie had an interest, other than as tenants, in the Baal Street property. In any event, this statement would not be sufficient to be a declaration of a trust over Baal Street property where, as I have found, none had previously existed.
55 On 22 December 1993, Bruce, Carolyn, Troy and Stephannie submitted an offer to purchase a property at 44 Anstey Road, Forrestdale (the Anstey Road property). The Anstey Road property is contained in certificate of title vol 64, folio 39A. The offer was accepted.
56 The Anstey Road property had a front house with three bedrooms and one bathroom. A selfcontained 'granny flat' was also part of the front house. The granny flat had a bedroom, lounge, kitchen, and separate front and rear doors. Apart from the front house, there was also a transportable house on the Anstey Road property.
57 On 5 January 1994, the ANZ Bank approved a loan facility to a maximum of $40,000 for the purchase of the Anstey Road property (the ANZ Anstey Road loan).
58 Settlement and registration of the Anstey Road purchase occurred on 15 April 1994. Title to the Anstey Road property was held by Bruce and Carol (as joint tenants of one half share) as tenants in common with Troy and Stephannie (as joint tenants of the other half share).
59 Bruce, Carol, Troy and Stephannie, and Troy and Stephannie's twin children Harly and Tayla, all moved in to the Anstey Road property. Bruce and Carol initially lived in the granny flat. The intention was to build a separate rear house on the Anstey Road property in which Bruce and Carol would live.
60 Bruce, Carol, Troy and Stephannie were jointly and severally liable to the ANZ Bank in relation to the ANZ Anstey Road loan.
61 The purchase price paid for the Anstey Road property, including duty and fees, was $223,455.45. That purchase price was paid by:
(a) the $40,000 ANZ Anstey Road loan secured by mortgage of the Anstey Road property;
(b) $24,751.03 from the proceeds of sale of the Baal Street property; and
(c) $158,704.42 which was the proceeds of sale of the Tamar Street property.
62 On about 31 July 1995, the ANZ Bank approved an increase to the ANZ Anstey Road loan. Repayments were $493.63 a fortnight (exhibit 12). The purpose of that increase was for the construction of the rear house at Anstey Road where it was intended Bruce and Carol would live.
63 The Anstey Road loan facility was increased to a maximum of $120,000. This meant that up to $80,000 was available for the construction of the Anstey Road rear house.
64 Bruce, Carolyn, Troy and Stephannie remained jointly and severally liable to the ANZ Bank for repayments of amounts drawn from the $120,000 loan facility.
65 Around early 1996, the Anstey Road rear house was completed. Bruce and Carolyn had been living in a 'granny flat' attached to the front house. Following the completion of the rear house Bruce and Carolyn moved into that new house.
66 Improvements to the Anstey Road property were carried out by Bruce, Carolyn, Troy and Stephannie. The extent and nature of those improvements were disputed but it is clear that the majority of the improvements were carried out by Bruce and Troy.
67 The improvements also included the construction of aviaries for Bruce's hobby of breeding exotic parrots which occurred at the Anstey Road property (ts 91 92).
68 For reasons which I explain in more detail below, the extent and nature of the improvements to the Anstey Road property are irrelevant to Bruce and Carol's claim for a resulting trust. The existence of that trust, and the beneficial interest to which the parties are entitled under that trust, must be determined at the time of the purchase of Anstey Road or so immediately afterwards as to constitute part of the transaction. Subsequent improvements are not relevant to this determination.
69 At some time between 22 December 1993 and 24 January 1994, Bruce, Carolyn, Troy and Stephannie entered into an agreement (the Anstey Road Agreement). It is common ground that the following were terms of the Anstey Road Agreement.
(a) Bruce and Carolyn would build a second dwelling house at the rear of the Anstey Road property (the Anstey Road rear house).
(b) The cost of constructing the Anstey Road rear house would be paid by way of a building loan secured by mortgage against the Anstey Road property.
(c) $40,000 of the purchase price of the Anstey Road property would be paid by a loan from the ANZ Bank secured by a mortgage against the Anstey Road property.
(d) Troy and Stephannie would live in the existing house on the Anstey Road property.
(e) Bruce and Carolyn would live in a 'granny flat' which was annexed to the existing house on the Anstey Road property. When construction of the Anstey Road rear house was completed, Bruce and Carolyn would move from the existing granny flat to the new Anstey Road rear house.
(f) The cost of rates and services for the Anstey Road property would be shared equally between Bruce, Carolyn, Troy and Stephannie.
(g) Troy and Stephannie would make all principal and interest repayments for the building loan for construction of the Anstey Road rear house, and for the $40,000 loan which partly financed the purchase of the Anstey Road property.
70 The plaintiffs said that it had also been agreed in the Anstey Road Agreement that Bruce and Carol would pay $200 per month to assist Troy and Stephannie towards the repayments for the period until the rear house was completed.
71 It had been anticipated that the ANZ Anstey Road loan would be increased for the construction of the rear house. The plaintiffs pleaded that the agreement was that this contribution was to assist Troy and Stephannie towards the ANZ Anstey Road loan: statement of claim par 8.3.2. However, Stephannie pleaded that the agreement was that the contribution was to be towards living expenses: defence, par 11A(a)(ii).
72 I prefer the evidence of Bruce on this matter. His recollection of the details of the agreement on this point was more precise than that of Stephannie who, as I explain below, was concerned mainly with the fact that she would be a part owner of a property for the first time.
73 Bruce's evidence, which I accept, was that he and Carol agreed to be responsible for $200 of the monthly mortgage repayments until completion of the rear house: Bruce's witness statement par 78 (exhibit A).
74 This contribution period was from 15 April 1994 until early 1996. The $200 monthly mortgage repayments were, therefore, Bruce and Carol's contribution to the monthly repayment.
75 There was evidence concerning the amount of monthly repayments. Copies (but not the originals which were apparently available) of the deposit book stubs were tendered (exhibit 22). Those copies showed repayments of $550 each fortnight from 27 April 1994. No objection was taken to the admissibility of the copies of these statements.
76 I am satisfied that at the relevant times the repayments made were approximately $1,062 a month (ts 195 196) and that this was the approximate repayment amount (and rate) which was expected by the parties (including for repayment of the loan for the rear building work) at the time of the Anstey Road Agreement.
77 Although the bank initially required repayment only of $354 per month, I accept Stephannie's evidence that the repayments were made fortnightly, and were in the amount of $500 a fortnight. The same payments continued after the bank increased the loan for the building of the rear house and required repayment of $493.63 a fortnight (exhibit 12).
78 There was also dispute concerning whether the $200 monthly payments by Bruce and Carol were actually made, as well as the manner in which the total payment was made to the bank on each occasion. The handwriting on many of the Anstey Road payment stubs was identified by Bruce as Carol's (ts 68 70).
79 Stephannie said that all the payments for the Anstey Road property were made by funds provided from her and Troy (ts 208). On this issue I prefer the evidence of Bruce that he contributed $200 each month to the mortgage repayments. It is consistent with his agreement to do so in the Anstey Road Agreement. I do not consider that Bruce would have promised to make these payments as part of the Anstey Road Agreement and then failed to do so.
80 Around May 2006, Troy and Stephannie separated. Troy moved out of the main house on the Anstey Road property. He has not returned to the main house.
81 Stephannie remained living at Anstey Road with Bruce and Carol. Some time in 2006, Stephannie's relationship with Bruce and Carol also deteriorated (ts 209 210).
82 Around 27 July 2006, Stephannie drew $70,388.06 from the ANZ Anstey Road loan (exhibit 13). This increased the debit balance of the Anstey Road loan to $144,132.44.
83 In par 23 of the statement of agreed facts provided before trial it was an agreed fact that none of the $70,388.06 was paid to, or for the benefit of, Bruce or Carol.
84 There are also currently amounts owing by Stephannie in relation to Shire rates and Water Corporation charges.
85 As at 28 September 2011, a debit balance of $132,143.35 existed in respect of the ANZ Anstey Road loan.
86 The principal relief claimed by the plaintiffs was a declaration that Troy and Stephannie held their title to the Anstey Road property on resulting trust for Bruce and Carol. The plaintiffs also sought a declaration that Troy and Stephannie were liable to the ANZ Bank for the outstanding loan balance on that account and that Troy and Stephannie indemnify Bruce and Carol in relation to the ANZ Bank loan.
87 The plaintiffs relied upon the 'presumption' of resulting trust. Stephannie relied upon a presumption of advancement. The plaintiffs pleaded that the presumption of advancement did not arise; and they pointed to a lack of any assumption by them to provide for, or support, Stephannie.
88 An important preliminary question is why a resulting trust arises. The answer to that question in this case dictates the facts which must be proved by a defendant to rebut the 'presumption of resulting trust'.
89 The Supreme Court of Canada has recently observed that 'there is not much one can say about resulting trusts without a well-grounded fear of contradiction. There is debate about how they should be classified and how they arise, let alone about many of the finer points': Kerr v Baranow [2011] SCC 10; [2011] 1 SCR 269 [16] (Cromwell J for the court).
90 The view of Professor Chambers in Resulting Trusts (2007) 4, following the late Professor Birks, is that the label 'resulting trust', from the Latin resalire, invokes a metaphor of rights 'jumping back' to the settlor: see also J D Heydon and M J Leeming Jacobs' Law of Trusts (7th ed, 2006) 234 [1201].
91 The metaphor of jumping back is misleading. For instance, where a legal right of ownership of land is transferred and a resulting trust arises, a new equitable interest is created in favour of the settlor. The absolute owner in fee simple who transfers title did not previously hold both legal and equitable estates. He held only a legal estate; no equitable estate existed prior to the transfer which could 'jump back': DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1982] HCA 14; (1982) 149 CLR 431, 463 (Aickin J); Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) [2005] HCA 20; (2005) 220 CLR 592, 606 [30] (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ); Peldan v Anderson [2006] HCA 48; (2006) 227 CLR 471, 485 [37] (Gummow ACJ, Kirby, Hayne, Callinan & Crennan JJ).
92 An alternative view which does not invoke this metaphor suggests that 'resulting' ought merely to be understood as 'resulting' from the circumstances of the case: Black Uhlans Inc v New South Wales Crime Commission [2002] NSWSC 1060 [131] (Campbell J, as his Honour was then).
93 If 'resulting' is understood as arising from the circumstances of the case then there is little difference, as a matter of labelling, between 'resulting' and 'constructive'. Quoting from Professor Scott, a joint judgment in the High Court of Australia has said that for a constructive trust, a court 'construes the circumstances in the sense that it explains or interprets them': Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101, 111 [2] (Gleeson CJ, McHugh, Gummow & Callinan JJ).
94 Indeed, the historically close association between resulting and constructive trusts meant that they were originally used interchangeably, particularly by Lord Nottingham LC. For instance, in Grey v Grey (1677) 2 Swan 594, 598; [1677] EngR 86; (1677) 36 ER 742, 743, Lord Nottingham LC spoke interchangeably of a use by implication (now, resulting trust) and a constructive trust; see also M McNair 'Coke v Fountaine (1676)' in C Mitchell and P Mitchell (eds) Landmark Cases in Equity (forthcoming) ch 2. Historical separation may have occurred with the epexegetical interpretation of the word 'construction' in the expression in the Statute of Frauds 1677 'by the implication or construction of law': W Holdsworth, A History of English Law (1924) VI, 643.
95 Therefore, whether the label 'resulting trust' is concerned with a trust which 'jumps back' or 'results from the circumstances of the case', the label does not assist in understanding why the trust arises. However, two matters are well established for resulting trusts inter vivos (amongst the living). First, the resulting trust is a trust in favour of the settlor himself or herself. Secondly, resulting trusts are not monocausal. In other words, resulting trusts arise for a number of different reasons.
96 For centuries, the most common instance in which resulting trusts have arisen has been where the settlor's objectively manifested intention is that the rights which the settlor transferred to another, or purchased in the name of another, should be held on trust for the settlor. If this intention is proved by evidence the trust is usually described as an express trust. But where the intention is proved by presumption the trust is described as a resulting or implied trust.
97 In this sense, resulting trusts have been described as 'intent enforcing' like express trusts: Black Uhlans Inc v New South Wales Crime Commission [133] (Campbell J). Campbell J's decision was described by Young CJ in Eq as 'the latest authoritative discussion' in Salvo v New Tel Limited [2005] NSWCA 281 [92].
98 The intention to be discerned in a resulting trust is an objective, manifest intention; it is not an unexpressed subjective intention: Calverley v Green (261) (Mason & Brennan JJ), (270) (Deane J); Byrnes v Kendle (286 287) [105] [106] (Heydon & Crennan JJ); Re Vandervell's Trusts (No 2) [1974] Ch 269, 294 (Megarry J).
99 But resulting trusts also arise for reasons other than (presumed) manifestations of intention to create a trust. There are numerous examples where a resulting trust has been imposed by law even despite clear and manifest evidence that the settlor did not intend that the rights be held on trust for him or her. Sometimes these resulting trusts which are imposed by law are described as 'automatic' resulting trusts.
100 A well recognised example of a resulting trust which is imposed by law is where an attempt to create an express trust fails: see the discussion in Knudsen v Kara Kar Holdings Pty Ltd [2000] NSWSC 715 [49] (Austin J); and Yard v Yardoo Pty Ltd [2006] VSC 109 [298] (Cummins J), discussion not considered on appeal in either Yard v Yardoo Pty Ltd [2007] VSCA 35 or Kara Kar Holdings Pty Ltd v Knudsen [2001] NSWCA 276. See also J D Heydon and M J Leeming Jacobs' Law of Trusts (7th ed, 2006) 236 [1205].
101 Another example of a resulting trust imposed by law is where a transfer of legal title occurs 'about which the transferor was entirely unaware': Robb Evans of Robb Evans & Associates v European Bank Limited [2004] NSWCA 82; (2004) 61 NSWLR 75, 99 100 [111] [113] (Spigelman CJ).
102 In these cases of resulting trusts imposed by law, the justification for the trust sometimes proceeds on the flawed basis (see [91] above) that the transferor held both a legal and equitable interest and divested only the legal interest: W Swadling 'Explaining Resulting Trusts' (2008) 124 LQR 72, 99 100 discussing Vandervell v Inland Revenue Commission [1966] UKHL 3; [1967] 2 AC 291, 313 (Lord Upjohn), 329 (Lord Wilberforce).
103 A better explanation for the imposition of a resulting trust in these cases focuses upon the lack of intention, usually by the immediate transferor, to benefit the recipient: Robb Evans of Robb Evans & Associates v European Bank Limited (99 100) [111] [113] (Spigelman CJ) citing R Chambers Resulting Trusts (1997); Air Jamaica Ltd v Charlton [1999] UKPC 20; [1999] 1 WLR 1399, 1412 (Lord Millett). These resulting trusts are imposed as a legal response to prevent the recipient having the use and enjoyment of rights for his or her own benefit where that use and enjoyment was not intended.
104 In this case it is not necessary to consider the imposition of this type of resulting trust which is imposed by law, or its boundaries or scope. Counsel for the plaintiffs clarified that their case was brought solely on the basis of a resulting trust which arises as a result of a presumption of objectively manifested intention: closing submissions pars 2 3; (ts 244).
105 The focus of the claim for a resulting trust in this case is therefore only upon the presumed or manifested intention of Bruce and Carol in their purchase of the Anstey Road property.
106 In the class of 'intent enforcing' resulting trust cases, judgments almost invariably refer to a 'presumption of resulting trust'. I have generally followed this approach. But the reference to a 'presumption of resulting trust' is shorthand for a presumption of a declaration of trust; the rebuttable presumption is of the fact of a manifest declaration. The presumption is not of the legal institution of the trust itself (which is the conclusion of law): W Swadling 'Explaining Resulting Trusts' (2008) 124 LQR 72, 79. Nor is there a presumption of the existence of the trust property conveyed, a matter which is essential to the trust, and which is proved by evidence.
107 In Cook v Fountain (1676) 3 Swan 585, 591; (1676) 36 ER 984, 987, the Lord Chancellor, Lord Nottingham, giving the opinion of himself and two Chief Justices, said of the presumption of a declaration of trust:
[E]xpress trusts are declared either by word or writing; and these declarations appear either by direct and manifest proof, or violent and necessary presumption. These last are commonly called presumptive trusts; and that is, when the Court, upon consideration of all circumstances presumes there was a declaration, either by word or writing, though the plain and direct proof thereof be not extant.
108 The presumption of a declaration of trust applied not merely to voluntary conveyances of title, or purchases in the name of another, but also in cases where the legal title was held in a proportion different from the contribution to the price: Lake v Gibson [1667] EngR 103; (1729) 1 Eq Ca Abr 291; (1729) 21 ER 1052; Lake v Craddock [1732] EngR 132; (1732) 3 P Wms 158; (1732) 24 ER 1011.
109 In Dyer v Dyer [1788] EWHC J8; (1788) 2 Cox Eq Cas 92, 93; [1788] EWHC J8; (1788) 30 ER 42, 43, Eyre CB said that the rule that the 'trust of a legal estate ... results to the man who advances the purchasemoney' developed by strict analogy from the rule which applied to the predecessor of the trust, the use. That rule was that where a feoffment was made without consideration, the use would result to the feoffor. The rule was extended to advances of part of the consideration by Sir Thomas Plumer in Wray v Steele [1814] EngR 300; (1814) 2 Ves & B 388; (1814) 35 ER 366.
110 The feoffment to uses, and later the trust, was extremely common from the fifteenth until the seventeenth centuries for a number of reasons. Lord Hardwicke LC explained two of the reasons for the popularity of the use or trust. These were to avoid wardship, and to avoid escheat and forfeiture to the Crown particularly during the Wars of the Roses: see Lloyd v Spillet [1740] EngR 88; (1740) 2 Atk 148, 150; [1740] EngR 88; (1740) 26 ER 493, 494 and the essay (as Sanders on Uses and Trusts was then) commended by Atkyns in his report, F Sanders An essay on the nature and laws of uses and trusts (1791) 109 110, 127 134.
111 It is easy to see why this presumption of a declaration of trust arose in historic circumstances where the only facts proved were that title to land had been voluntarily conveyed from one person to another, or purchased in the name of another whose contribution to the purchase price did not correspond with his or her legal interest.
112 The obvious inference historically from those facts was that a trust had been declared since 'almost all the lands in England were conveyed to Uses' to evade 'the hardships of the feudal tenures ... [and] to secure estates from forfeitures for high treason': W Cruise An Essay on Uses (1795) 30; see also T Plucknett and J Barton St German's Doctor and Student (1523; ed 1974) page 222, ch 22, 'Howe uses of lande began and by what law and the cause why so moche lande is put in use'.
113 With almost all land conveyed to uses and in circumstances in which it was not usual to include words of trust on the conveyance, common experience suggested that a trust had been declared when there was a voluntary conveyance of land to another, or a purchase in the name of another whose contribution did not correspond with his or her legal interest: W Swadling 'Explaining Resulting Trusts' (2008) 124 LQR 72, 80.
114 It is more difficult today to justify why a declaration of trust should be presumed where land is voluntarily conveyed or where contributions to a joint title are not equal. The New South Wales Court of Appeal has remarked that it 'seems rather ridiculous that troubles in England at the end of the Middle Ages should be the basis, in the late twentieth century, for making findings of fact': Dullow v Dullow (1985) 3 NSWLR 531, 535 (Hope JA, Kirby P & McHugh JA agreeing). And in Calverley v Green (264), Murphy J said that the presumption should be discarded.
115 However anachronistic the presumption may be, Australian courts have said that it is a wellentrenched landmark in the law of property which cannot be disregarded by judicial decision: Calverley v Green (266) (Deane J); Brown v Brown (1993) 31 NSWLR 582, 588 (Gleeson CJ); see also Charles Marshall Pty Ltd v Grimsley [1956] HCA 28; (1956) 95 CLR 353, 364 (Dixon CJ, McTiernan, Williams, Fullagar & Taylor JJ) '[t]he law applicable to cases of this nature can ... no longer be the subject of argument'. Further, '[m]any disputes have been resolved and transactions effected on [the] foundation' of the presumption: Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538, 548 (Deane & Gummow JJ), see also 602 (McHugh J) 'the better course is to leave reform ... to the legislature' (Nelson v Nelson [1995]).
116 As developed from these historical origins, the presumption of a declaration of trust which is relevant to this case means that 'a resulting trust arises in favour of the purchaser, or in favour of two purchasers in the proportions in which they contributed the purchase money ... subject to the exception created by the presumption of advancement': Calverley v Green (247) (Gibbs CJ), see also (258) (Mason & Brennan JJ), (269) (Deane J).
117 The total cost of purchase of the Anstey Road property was $223,455.45, including duty and fees. The stamp duty, fees and expenses of purchase are included in the purchase price for the purpose of considering the presumption of resulting trust: Ryan v Dries [2002] NSWCA 3 [52] [53] (Hodgson JA).
118 I have set out above at [61] the sources of finance for the purchase of the Anstey Road property. $183,455.45 of the $223,455.45 cost of the purchase was provided by Bruce and Carol from the sale of their Baal Street and Tamar Street properties (see my discussion of the Baal Street property above at [38] [54]). The remaining $40,000 was provided by a loan to which Bruce, Carol, Troy and Stephannie were all jointly and severally liable, although Troy and Stephannie made all the repayments on that loan, except $200 of the $1,062 a month during the construction of the rear house.
119 In Calverley v Green, Mr Calverley paid $9,250 towards the purchase of land. Ms Green and Mr Calverley jointly borrowed the remainder of the purchase price, $18,000, although repayments were made by Mr Calverley. The land was transferred to them as joint tenants. A majority of the High Court held that it was presumed that a trust had been declared in proportions representing a $9,250 contribution by Mr Calverley and equal contributions as to the balance.
120 In Calverley v Green, the majority emphasised that the trust, and the proportionate beneficial interests, must be determined at the time of purchase, or 'so immediately after it as to constitute a part of the transaction': Calverley v Green (262) (Mason & Brennan JJ), see also (252) (Gibbs CJ), (269) (Deane J). This point is well established: Charles Marshall Pty Ltd v Grimsley (365) (Dixon CJ, McTiernan, Williams, Fullagar & Taylor JJ).
121 At the time of purchase, Stephannie's proportionate contribution, jointly with Troy, to the purchase price of the Anstey Road property was $20,000 of $223,455.45, or approximately 9%. However, she and Troy also took responsibility for repayment of the whole ANZ Anstey Road loan, with small initial contributions from Bruce and Carol.
122 One manner in which Stephannie sought to dispel the presumption of resulting trust was by relying upon a 'presumption of advancement'. Stephannie's argument requires a significant step to be taken in expanding the presumption of advancement. It should not be taken in this case. In order to explain why this is so it is necessary to set out the meaning of the presumption of advancement, the nature of the 'presumption', and the relationships to which it applies.
123 One difficulty with the language of 'presumption of advancement' is that it is not limited to advancement. Another difficulty, which I address below, is that it is not a presumption.
124 The word 'advancement' has been described as a legal expression which had 'a limited range of meaning, since it was thought to convey the idea of some step in life of permanent significance': Pilkington v Inland Revenue Commissioners [1964] AC 612, 634 (Viscount Radcliffe, giving examples of an apprenticeship, the purchase of a commission in the army or an interest in business).
125 Historically, the primary basis asserted for the presumption of advancement in circumstances such as a purchase by a person in the name of another was that the purchaser was 'under a species of natural obligation to provide for the nominee': Murless v Franklin (1818) 1 Swan 13, 17; [1818] EngR 128; (1818) 36 ER 278, 280 (Lord Eldon). A distinction was drawn between a father-child relationship to which the presumption of advancement applied and a motherchild relationship to which it did not, because there was 'no obligation according to the rules of equity - on a mother to provide for her child': Bennet v Bennet (1879) 10 Ch D 474, 478 (Sir George Jessel MR).
126 A distinction was also drawn between a son who had been married and provided for (advanced) and a son who was 'unprovided for': Elliot v Elliot [1677] EngR 91; (1677) 2 Cas in Ch 231, 232; [1677] EngR 91; (1677) 22 ER 922, 923 (Lord Nottingham LC). But this distinction disappeared in the late 18th Century after Dyer v Dyer, albeit against the strong views of Sir Edward Sugden, the later Lord St Leonards: J Glister 'The presumption of advancement' in C Mitchell (ed) Constructive and Resulting Trusts (2010) 289, 299.
127 In Wirth v Wirth [1956] HCA 71; (1956) 98 CLR 228, 237, Dixon CJ argued that the presumption of advancement had moved to a different foundation. The Chief Justice said that in the course of growth of the presumption it 'obtained a foundation or justification in the greater prima facie probability of a beneficial interest being intended'. That view was endorsed by Gibbs CJ in Calverley v Green (249).
128 But this modern rationale proposed by Dixon CJ has not yet been accepted. In Nelson v Nelson [1995], Deane and Gummow JJ referred to the historical foundation of the presumption as the obligation to provide, but did not reject this historical foundation, saying only that the appeal should be approached on the basis that the presumption of advancement also extended to the relationship of mother and child (548 549). Dawson J thought that the presumption of advancement should apply to the relationship of mother and child whether its basis was moral obligation or the probability rationale of Dixon CJ (576). And Toohey J considered the probability rationale of Dixon CJ to 'have a question begging aspect' as evidenced by the fact that Gibbs CJ was the only judge in Calverley v Green to extend the presumption of advancement to a de facto relationship (586).
129 The state of the law, then, is that the presumption of advancement does not necessarily require either a relationship where advancement might be expected or one where a moral duty to provide was recognised in equity.
130 The presumption of advancement applies even between a parent and his or her adult children. For instance, in Nelson v Nelson[1995] the two children of Mrs Nelson who asserted a presumption of advancement were aged 33 and 37 at the time of the transaction (542). In this sense it might be better described as a 'presumption of gift': Nelson v Nelson [1995] (548) (Deane & Gummow JJ).
131 On the other hand, despite the suggestions of Dixon CJ, the presumption of advancement also does not extend to every relationship where the ties of love and affection might give rise to a probability, or expectation based upon common experience, that a gift was intended.
132 At this stage of development of the law in relation to the 'presumption of advancement', all that can be said is that it provides for a list of relationships where the presumption of resulting trust does not apply.
133 In Wirth v Wirth (237) Dixon CJ quoted from Sir William Page Wood VC to the effect that the presumption of advancement was 'to preclude a resulting trust from arising for the purchaser'.
134 In this sense, the presumption of advancement is not a presumption at all. It is simply a description of facts where the presumption of resulting trust (or, more accurately, the presumption of a declaration of trust) does not arise.
135 On the other hand, there have been suggestions in some cases, and by some judges, that the presumption of advancement is a genuine presumption of a manifest intention to make a gift. These suggestions presuppose a confused evidentiary process where the presumption of advancement would need to be rebutted by the transferor, which would then reinstate a presumption of a declaration of trust in favour of the transferor, which the recipient would then need to rebut. This was the view of Maitland and Holdsworth: see F W Maitland Equity: A Course of Lectures (1910) 79 80, also (1936, 2nd ed) 77 80; William Holdsworth, A History of English Law (1924) VI, 644. See also the discussion of some of the authorities to this effect in J Glister 'Is there a presumption of advancement?' (2011) 33 Sydney Law Rev 39.
136 The dominant Australian approach, however, is that of Dixon CJ: the 'presumption of advancement' is not a presumption but is simply a circumstance in which the 'presumption of resulting trust' does not arise. Thus, in Martin v Martin [1959] HCA 62; (1959) 110 CLR 297, the High Court (Dixon CJ, McTiernan, Fullagar & Windeyer JJ) explained that the presumption of resulting trust did not apply where a husband purchased land in the name of his wife: 'as she was his wife the fact that he found the purchase money for the land raised no presumption in his favour of a resulting trust as it would or might have done had she been a stranger' (303). The court explained that the presumption 'is called a presumption of advancement but it is rather the absence of any reason for assuming that a trust arose' (303).
137 Various of the judgments in Calverley v Green also reiterate this point: (247) (Gibbs CJ), (256) (Mason & Brennan JJ). The judgments of Deane J and Murphy J are the most explicit. Murphy J said that '[t]he presumption of advancement, supposed to be an exception to the presumption of resulting trust, has always been a misuse of the term presumption, and is unnecessary' (265). Deane J said this:
[T]he 'presumption of advancement', is not, if viewed in isolation, strictly a presumption at all. It is simply that there are certain relationships in which equity infers that ... there is an 'absence of any reason for assuming [presuming] that a trust arose (267).
138 The question for resolution in this case, therefore, is whether the 'presumption of advancement' applies. If so, this would then have the effect that there is no presumption of a declaration of trust.
139 In Wirth v Wirth (237 238), Dixon CJ explained, quoting from the Vice Chancellor, Sir William Page Wood VC (as Lord Hatheley was then) in Soar v Foster [1858] EngR 247; (1858) 4 K & J 152, 160 161; [1858] EngR 247; (1858) 70 ER 64, 67:
[The presumption of advancement] is applicable where the purchase was made in the name of a legitimate or illegitimate child, or in the name of a grandchild whose father is dead, or in the name of the wife of the purchaser. In all these cases the rule is definite and clear, that the purchase is prima facie to be taken as a provision or advancement for the person in whose name the purchase has been made.
140 I accept that the presumption of advancement now also applies in the case of a gift from mother to daughter. This is a recent development. In Bennet v Bennet, Sir George Jessel MR had held that there was no presumption of advancement from a mother to a daughter because equity recognised only an obligation on the father to provide for a child, not the mother. In Scott & Hansen v Pauly [1917] HCA 60; (1917) 24 CLR 274, 282, Isaacs J said that this point had not been 'judicially doubted'.
141 But there can be no basis today to distinguish between the relationship between a father and a child and the relationship between a mother and a child. This was accepted by the New South Wales Court of Appeal in Nelson v Nelson (1994) 33 NSWLR 740 (Nelson v Nelson (1994)). In the High Court, all judges approved this conclusion or assumed it to be correct: Nelson v Nelson [1995] (548 549) (Deane & Gummow JJ), (574) (Dawson J), (586) (Toohey J), (601) (McHugh J).
142 Troy is the son of Bruce and Carol. Like Carol, Troy also did not give evidence. In relation to Troy a presumption of advancement would apply to the contribution by Bruce and Carol to Troy's legal title.
143 But the same is not true for Stephannie. Stephannie is not the child of Bruce and Carol. She is their daughterinlaw. This is not a recognised relationship for the purposes of the presumption of advancement: Z v Z [2005] FamCA 996; (2005) 34 Fam L R 296, 320 [145] (Coleman & Boland JJ); Yoshino v Niddrie [2003] NSWSC 57 [45] (Young CJ in Eq).
144 Stephannie asserted that her relationship with Bruce and Carol was one where they were in loco parentis. It has long been recognised that the 'presumption of advancement' can been extended beyond a situation of parent and child to instances where the relationship is akin to parent and child because one person acts in loco parentis (in place of a parent) to the other: Napier v Public Trustee (WA) (1980) 32 ALR 153, 158 (Aickin J, Stephen, Mason & Murphy JJ concurring).
145 In Beecher v Major (1865) 2 Drew & Sm 431, 435; (1865) 62 ER 684, 686, the Vice Chancellor, Sir Richard Kindersley, held that for a relationship in loco parentis to be established the case must be regarded as one of 'an adopted child'. This may state the matter too highly. The question is whether in all the circumstances the relationship between Stephannie and her parentsinlaw Bruce and Carol, was of such a similar nature to that of an ordinary parent-child relationship that it could be treated in the same manner as a parentchild relationship for the purpose of the presumption of advancement.
146 Stephannie's argument that Bruce and Carol were in a relationship with her in which they were akin to her parents is not supported by the facts.
147 Bruce explained that the relationship between Stephannie and Carol was 'a normal motherinlaw, daughterinlaw relationship'. He said that Stephannie was treated in the 'correct' manner (ts 128). I accept this evidence.
148 Ms Gallagher, a friend of Stephannie's, said in her witness statement that she would 'often see Stephannie and Bruce joking and laughing together' (par 16). She also said that Carol and Stephannie never fought or upset each other in any way when Ms Gallagher was around and that whenever she came around she would see Stephannie and Carol cooking, organising and entertaining guests (pars 9, 14).
149 Although Bruce did not accept that Stephannie and Carol worked together to entertain guests, or that he had jokes and laughed with Stephannie (ts 128), I find that Bruce and Carol were warm and welcoming to Stephannie and that at the time of purchase of the Anstey Road property the relationship between Stephannie and her parentsinlaw was close.
150 I also accept Stephanie's evidence that Bruce and Carol often gave her gifts, hosted her engagement party, and made her feel very welcome: Stephannie's witness statement pars 31 34. There was also no suggestion of any apprehension about them all moving in together to live at the same property.
151 But the relationship between Stephannie and her parents in law, although close and warm, was not a parentchild relationship. Bruce and Carol were, and are, generous, warm and welcoming people. Ms Gallagher's evidence was that their kindness extended beyond Stephannie to other friends (ts 218 219). As she was their daughterinlaw, Stephannie was treated with even greater kindness and warmth. But even though Stephannie was partly estranged from her mother and father, Bruce and Carol did not take the place of her parents.
152 Stephannie also relied upon Bruce having 'given her away' at her wedding to Troy (ts 128) as evidence of their relationship being akin to parent and child. But in counsel's submissions he omitted to refer to all of the evidence of Bruce on this matter. Bruce said that he had not immediately agreed to walk Stephannie down the aisle. He asked why her father was not doing it. He asked why her brothers were not doing it. He only agreed when she explained that she did not want them to do it and that her father would not be at the wedding (it turned out that he was present) (ts 131).
153 A presumption of advancement does not apply in relation to Stephannie.
154 Since no 'presumption of advancement' applies in this case, the question is whether the 'presumption of resulting trust' has been rebutted.
155 The presumption of resulting trust can be rebutted by evidence which shows that the intention of Bruce and Carol at the time of the purchase of the Anstey Road property was that Troy and Stephannie would be entitled to the use and enjoyment of their legal title for their own benefit: Calverley v Green (251) (Gibbs CJ), (269) (Deane J).
156 The references to 'intention' in the paragraph above, and generally in this judgment, are references to objective, or manifest, intention. As I have explained at [98], the intention is not a subjective, uncommunicated intention but it 'is to be inferred from what the parties do or say': Calverley v Green (261) (Mason & Brennan JJ), (270) (Deane J).
157 There are six reasons why the presumption of resulting trust has been rebutted in this case. Most of these reasons, on their own, would be sufficient to show that Bruce and Carol intended that Troy and Stephannie should enjoy the full benefit of their legal title to Anstey Road and to rebut the presumption that Troy and Stephannie held their legal title to the Anstey Road property on resulting trust for Bruce and Carol in proportion to the latter's contribution. In combination, these six reasons mean that the conclusion that no resulting trust was intended is irresistible.
158 First, the certificate of title to the Anstey Road property recorded that title to the property was held by Bruce and Carol (as joint tenants of one half share) as tenants in common with Troy and Stephannie (as joint tenants of one half share): exhibit 25.
159 The agreement to include, and the inclusion of, Troy and Stephannie on the certificate of title contrasts with the manner in which title to the property at Baal Street was held.
160 In relation to the Baal Street property, the full beneficial title was held by Bruce and Carol in circumstances in which Bruce and Carol intended, and explained to Troy and Stephannie, that Troy and Stephannie would be their tenants. Important family decisions were always discussed and made jointly (ts 73). Bruce's omission of Troy and Stephannie from the certificate of title to Baal Street was an intentional choice in which he had explained to them that they would only be tenants and that the transactions in relation to Baal Street were not Troy and Stephannie's transactions because their names were not on the certificate of title (ts 82). In these circumstances, the inclusion of Troy and Stephannie on the certificate of title for the Anstey Road property is strong evidence of an objective intention that Troy and Stephannie should enjoy the benefit of those rights.
161 In closing it was properly conceded by counsel for the plaintiffs that the plaintiffs' intent in relation to the Baal Street property (which counsel described as an intent to hold it as an 'investment') was 'entirely different' from the intent in respect of the Anstey Road property (ts 252). This concession was appropriate. I do not accept that anything was said to Troy or Stephannie by either Bruce or Carol which could reasonably have suggested to them that the arrangement at the Anstey Road property, where all parties were to live together and where all would be on the title, was to be the same as that at the Baal Street property or that payments towards the mortgage by Troy and Stephannie were to be a form of rent (compare ts 84). Such a statement would have been contrary to the tenor of all the other conversations discussed in the paragraphs below; it would have been recalled by Stephannie, and her reaction to the purchase would not have been as ecstatic; and it would be contrary to the circumstances described at [173] [185] below.
162 Secondly, there is Bruce's evidence concerning the circumstances in which the shares in the Anstey Road property had been agreed in the offer and acceptance in December 1993. This evidence also supports the rebuttal of the presumption of resulting trust.
163 Bruce gave evidence that the purchase occurred on the advice of his real estate agent, Mr John Johnson. Bruce said that this matter had been discussed by him with Mr Johnson in the presence of Carol, Troy and Stephannie. Mr Johnson had asked Bruce whether all the proceeds from the sale of Baal Street and Tamar Street would be used for the purchase of Anstey Road. Bruce answered 'yes'. Bruce had held a real estate agent's sales person's licence, although he had never acted as an agent (ts 88). In the presence of the others, he accepted the advice of Mr Johnson that the 'best way' to structure the purchase 'and for [the] long term' was as a purchase by Bruce, Carol, Troy and Stephannie as tenants in common in equal shares (ts 106).
164 The offer and acceptance document included Bruce, Carol, Troy and Stephannie as tenants in common in equal shares (exhibit 9, special condition 6). At settlement this was varied so that Bruce and Carol held as joint tenants as to one half share and Troy and Stephannie as joint tenants as to the other half share (exhibit 25).
165 Thirdly, I accept Stephannie's evidence that prior to signing the contract for purchase of Anstey Road, she and Troy had discussed this with Bruce and Carol and the effect of their discussion was reasonably construed by her as meaning that they were all together purchasing the Anstey Road property (ts 194).
166 This conclusion is supported by a number of matters. In his witness statement Bruce referred to conversations including statements by Troy that 'we are interested in buying it [Anstey Road] as you have said' (par 71). Stephannie also gave evidence that discussions occurred when the parties were looking for a property where they would all live together (after an offer on a property by Troy and Stephannie had fallen though). In those discussions, Stephannie had told Bruce and Carol that she and Troy could not afford properties that they liked, and Bruce and Carol had responded to Stephannie to the effect that '[w]e want to help you and this is how we can help you': Stephannie's witness statement pars 4i, 4w.
167 Although Stephannie did not pay any further attention to the detail of the purchase and did not get 'bogged down in the details of the discussions' (ts 199) I accept that the importance of this conversation to her meant that she would have recalled it and its context. Bruce also accepted that he spoke words to this effect although he said that what he had meant was that the 'help' was 'to have a permanent place of residence because the property they were living in wasn't really suitable' (ts 85). I do not accept that, in the context of the discussions, the precise words which were used could reasonably have been understood by Stephannie other than as a suggestion that the ownership of a property would be shared.
168 Stephannie's evidence of these conversations, and their context, is also consistent with Bruce's evidence that when Stephannie heard that the offer for Anstey Road had been accepted Stephannie was ecstatic; Stephannie even offered to Bruce that she would drive all night to Meekatharra so that Bruce could sign the offer and acceptance document (ts 84). I do not consider that Stephannie would have had such a strong reaction simply to the prospect of moving to a larger property where she could run horses but where her title would be held for the benefit of Bruce and Carol (ie on trust). Stephannie's reaction demonstrates that the broad effect of the discussions and conversations which she had with Bruce had conveyed the impression, which I find was reasonably held, that she and Troy would have an interest in the Anstey Road property for their own benefit.
169 Stephannie's reasonable belief that her title to the Anstey Road property would be held for her own benefit is also consistent with the conversation the previous year concerning the Baal Street property. As I have explained above at [49], Bruce had told Stephannie and Troy that they would be tenants in Baal Street but that his expectation was that eventually Baal Street would be sold so that (1) Bruce and Carol could set themselves up for retirement, and (2) Stephannie and Troy could buy their own house. The purchase of Anstey Road, and the inclusion of all names on the registered title, achieved both of these goals.
170 At one point in his evidence, Bruce suggested that the reason why Troy and Stephannie's names were put on the certificate of title to Anstey Road was that it was hard for them to get a credit rating and that the title would assist them to purchase their own home later (ts 85). In his witness statement, Bruce said that he told Troy and Stephannie that the ANZ bank manager had suggested that 'we should put all four names down for the income on the loan' (par 77).
171 Although Bruce may have subjectively considered this to be the case, the communications to Troy or Stephannie would not reasonably have conveyed the impression that their names were being put on the title only to service income on the loan or only to assist with their credit rating. I find that the effect of the discussions led Stephannie, as it would have led a reasonable person in her position, to understand that she would be entitled to the benefit of the legal title which was in her name.
172 Bruce also gave evidence that when Baal Street was sold he and Carol discussed buying a new property for their retirement. However, he accepted that this discussion was only between him and Carol (ts 81). He said that he was 'not really in the habit of discussing my finances with the children on a general basis' (ts 81). I find that nothing was said by Bruce or Carol to Troy and Stephannie which could reasonably have led Troy or Stephannie to contradict the reasonable impression created that Troy and Stephannie would hold their legal rights for their own benefit.
173 Fourthly, even though I have concluded that no 'presumption of advancement' arises in this case, the relationship that Bruce and Carol had with Troy and Stephannie is nevertheless a significant circumstance in considering whether the presumption of resulting trust has been rebutted.
174 In Calverley v Green (270), Deane J emphasised that 'evidence of the actual relationship between the parties' may mean that the 'presumption of resulting trust' may not be of any practical importance. See also Nelson v Nelson [1995] (549) (Deane & Gummow JJ).
175 In particular, the relationship between Troy and Bruce and Carol was a circumstance which meant that a trust unlikely to have been intended. Troy had a close relationship with his parents. Bruce and Troy jointly renovated Baal Street. Bruce and Carol were going to be living together at Anstey Road with their children, Troy and Stephannie, and their grandchildren, Harly and Tayla. This was a circumstance which made it unlikely that Bruce and Carol could reasonably be taken to have intended that Troy and Stephannie should hold their title to Anstey Road on trust for Bruce and Carol.
176 Further, there was no suggestion at any stage in this trial that Bruce and Carol had any different intention concerning the purchase of Anstey Road in relation to Troy from their intention in relation to Stephannie. No evidence existed to support any different intention. The intention of Bruce and Carol should be considered as a single intention, and it should be considered in relation to Troy and Stephannie together. And as I have explained above at [142], if this claim concerned only Troy, the presumption of resulting trust would not apply because of his relationship as the son of Bruce and Carol.
177 Fifthly, the entry by the parties into the Anstey Road Agreement is another circumstance which rebuts the presumption that Troy and Stephannie's legal rights to the Anstey Road property were held on resulting trust in proportion to Bruce and Carol's contribution.
178 I have explained above at [120] that any resulting trust, and the proportionate beneficial interests under that trust, must be determined at the time of purchase, or so immediately thereafter as to constitute a part of the transaction. The Anstey Road Agreement was made within approximately a month after the offer and acceptance on 22 December 1993, but several months before settlement of the purchase. The subject matter of the Anstey Road Agreement is also intimately connected with the purchase. The Anstey Road Agreement is a relevant circumstance in ascertaining the intention of Bruce and Carol as to the manner in which the legal title to the Anstey Road property should be held.
179 In the Anstey Road Agreement, Stephannie, Troy, Bruce and Carol agreed to share responsibilities relating to the Anstey Road property. The agreement dealt with the living arrangements on the Anstey Road property; the shared payment for the cost of rates and services; and the repayment of the ANZ loan by Troy and Stephannie with contributions by Bruce and Carol only until the rear building was completed.
180 The manner in which the agreement carefully divided all the responsibilities concerning the Anstey Road property is much more consistent with an intention that Troy and Stephannie should hold their title to Anstey Road for their own benefit than it is with an intention that they should hold the title for the benefit of Bruce and Carol.
181 Sixthly, in the Anstey Road Agreement the parties agreed that Troy and Stephannie would be responsible for the repayment of the ANZ bank loan with the exception of $200 per month during the building of the rear house. This obligation for Troy and Stephannie existed even though the loan had been extended to all of Bruce, Carol, Troy and Stephannie.
182 This is another matter which contrasts with the arrangements in relation to the Baal Street property. In the Anstey Road Agreement, Troy and Stephannie had promised to repay all the principal and interest for the joint ANZ loan for the Anstey Road purchase, with the exception of a $200 monthly contribution from Bruce and Carol only until the building of the rear house was completed (which occurred in early 1996).
183 In contrast, at the Baal Street property, Bruce and Carol's contributions had been ongoing. Further, in the Anstey Road Agreement, Troy and Stephannie also promised to be responsible for the repayments of the building loan for the building of the rear house on Anstey Road in which Bruce and Carol would live.
184 Troy and Stephannie had contributed far less than Bruce and Carol to the purchase price of the Anstey Road property, the bulk of which had been provided from the sale of Bruce and Carol's property at Tamar Street. But a reasonable person considering this matter would be likely to conclude that the mortgage liability which Troy and Stephannie promised to discharge, including for the building loan, was, in part, their contribution to Anstey Road.
185 Although the contribution of Troy and Stephannie was not equal in quantum to the generous contribution of Bruce and Carol, the Anstey Road property was purchased as a family venture. There had been no discussion of the arrangement being a tenancy as had occurred at Baal Street. At Anstey Road, it was agreed that the family would live together; they would share the responsibilities of life; they would engage in their hobbies such as Bruce's breeding of exotic parrots and Stephannie's horse riding; Bruce and Carol would interact on the same property with their grandchildren; they would all 'chip in' for purchases from the shops (Stephannie's witness statement par 4hh); and the mortgage liability would mainly be paid by Troy and Stephannie until after the rear house was completed, when it would be exclusively paid by Troy and Stephannie.
186 As I have explained above at [19], further relief of equitable compensation or damages (prayer for relief 1.3) was properly abandoned by the plaintiffs at trial. No cause of action was pleaded to support equitable compensation or damages.
187 However, the plaintiffs also sought 'a declaration that the Defendants are liable to the ANZ for the balance outstanding [of the ANZ account concerning the loan for the purchase of the Anstey Road property and the building of the rear house on the Anstey Road property] and [to] indemnify the Plaintiffs against any claim howsoever arising out of or in relation to that account' (prayer for relief 1.2).
188 The basis of the grant of a declaration is under s 25(6) of the Supreme Court Act 1935 (WA) which, following s 50 of the Chancery Procedure Acts of 1850 and 1852, 13 16 Vict c35, c86, provided that the court could grant 'binding declarations of right' without consequential relief.
189 The remedy of declaration is concerned with asserted 'legal rights', or the absence of them: Gouriet v Union of Post Office Workers [1977] UKHL 5; [1978] AC 435, 501 (Lord Diplock); Taylor v O'Beirne [2010] QCA 188 [24] (Chesterman JA). The notion of legal rights includes all types of legal relations: claim rights, powers, privileges and immunities.
190 The extent of a declaration to be granted should be coextensive with the rights and obligations agreed by the parties in relation to the ANZ loan account. The plaintiffs' prayer for relief is not entirely coextensive with those rights and obligations.
191 As I have concluded above, in the Anstey Road Agreement a promise was made by Troy and Stephannie that they would make all principal and interest repayments for the loan which partly financed the purchase of the Anstey Road property and which was increased, as the parties to the Anstey Road Agreement had contemplated, for construction of the Anstey Road rear house.
192 The obligation of Troy and Stephannie to pay the mortgage was qualified by the promise by Bruce and Carol to contribute $200 per month until the construction of the rear house was completed. However, I have found that this contribution was made by Bruce and Carol. The construction of the rear house was completed in early 1996.
193 It was agreed in the statement of agreed facts that around 27 July 2006, Stephannie drew $70,388.06 from the ANZ Anstey Road loan which increased the debit balance of the Anstey Road loan to $144,132.44. It was also agreed that none of the $70,388.06 was paid to, or for the benefit of, Bruce or Carol. As at 28 September 2011, a debit balance of $132,143.35 existed in respect of the ANZ Anstey Road loan.
194 Since the parties had agreed that Troy and Stephannie should bear the responsibility for payment of the ANZ loan, the conduct of Stephannie in drawing down the loan for reasons other than for the benefit of Bruce and Carol, extends that agreement to the further drawings of that loan.
195 There was no evidence, or submissions, concerning the manner in which any responsibility for the further drawings should be divided between Troy and Stephannie. This may be a matter for the family law proceedings which are currently in progress.
196 A declaration should be made to the effect that the first and second defendants (Troy and Stephannie) owe a duty to the plaintiffs to repay the ANZ the balance outstanding of the ANZ account. I will hear from the parties concerning the precise formulation of this declaratory order, which should refer to the bank details of the ANZ account.
197 I turn now to consider the counterclaims raised by Stephannie in her Further Amended Defence, Counterclaim, Contribution and Indemnity Notice as amended on 3 October 2011 (Defence and Counterclaim). These are not entirely easy to understand. There are several aspects of relief sought in addition to interest and costs (see par 37 of the Defence and Counterclaim):
(1) 'a declaration that the Baal Street agreement is vitiated by mistake, undue influence and/or total failure of consideration and was void ab initio';
(2) 'a declaration that the Anstey Road agreement is vitiated by mistake, undue influence and/or total failure of consideration and was void ab initio';
(3) 'a declaration that from on or about 2 February 1993, the Plaintiffs held the whole of the beneficial estate in the Baal Street property upon a resulting trust for the Defendants jointly';
(4) 'restitution of such portion of the Defendants' payment of the monies borrowed to finance the purchase of Baal Street and the Anstey Road expenses which:
(ii) exceeds such proportion of the total of such repayments and expenses as the Defendants' beneficial share in each property bears to the Plaintiffs'; or
(5) 'alternatively, equitable damages for the first defendant's loss of the benefit and use of the monies applied towards payment of the home loan borrowed to purchase Baal Street and the Anstey Road expenses'.
198 The Anstey Road expenses are pleaded as 'particulars of enrichment at the expense of the Defendants' in par 32 of the Defence and Counterclaim: 'the Plaintiffs derived a benefit from the Defendants' payment of the Purchase Loan, the Building Loan and the rates and taxes with respect to the Anstey Road property'.
199 In essence, Stephannie's counterclaims were for restitution of her half share of the mortgage repayments which she and Troy made for the Baal Street and Anstey Road properties, as well as restitution of her half share of the rates and taxes which she and Troy paid at the Anstey Road property.
200 These claims were pleaded in a lengthy par 32 of the Defence and Counterclaim (no par 31 existed). That paragraph asserted counterclaims seeking restitution of these payments based upon mistake, undue influence, failure of consideration and 'unconscionable dealings'.
201 There are four reasons why each of the 'counterclaims', or aspects of them, must fail. In this section I set out those four reasons relating to the counterclaims generally. In the sections which follow I then explain why particular elements of each of the individual counterclaims were also not established.
202 The first reason why the counterclaims must fail is because they were only contingent claims. Although each was expressed as a counterclaim, the opening words to par 32 expressed each claim as contingent upon a finding that a resulting trust arose in favour of the plaintiffs. I have found that no resulting trust arises.
203 The second reason why the counterclaims must fail is because of the presence of contractual agreements concerning the Baal Street property and the Anstey Road property. It was accepted by counsel for Stephannie that restitution of her share of the mortgage repayments, and rates and taxes at Baal Street and Anstey Road required the Baal Street Agreement and the Anstey Road Agreement to be rescinded.
204 For the reasons expressed below, no mistake, undue influence, or 'unconscionable dealing' occurred prior to the making of either agreement which could permit the rescission of either agreement. Rescission of the agreements are necessary conditions for restitution of any money paid by Stephannie. These conditions are not satisfied.
205 The position in relation to failure of consideration is more complex because rescission of an agreement is not necessary for a claim for restitution for failure of consideration. However, the claim for failure of consideration cannot be inconsistent with any express or implied term of an agreement. Stephannie's claim for failure of consideration cannot succeed for this reason.
206 Even if some vitiating factor had been proved by Stephannie which might have entitled her to rescind the contracts, a further difficulty may have arisen. This is how the contracts could be rescinded against Bruce and Carol despite the existence of rights of a third party to the contract, Troy, who did not give evidence and whose contractual rights dated back to 1993, almost two decades ago: see discussion in O'Sullivan, Elliott and Zakrzewski The Law of Rescission (2007) 480 481 [20.31] [20.33]. No submissions were made on this point and it is not necessary to address it.
207 Another reason why the counterclaims must fail is because counsel for Stephannie did not lead sufficient evidence in support of the quantum of any claim for restitution. This was acknowledged by counsel who sought to make several assumptions to 'fill the gap' left by the evidence. For the reasons I have explained above at [8] [31] this submission has no legal or factual foundation. I have set out below a number of those evidentiary gaps.
208 Even if each of the contracts could have been rescinded, Stephannie's claim for restitution would require the court to calculate the portion of the mortgage payments as well as the rates and taxes which had been paid by Stephannie, and the portion which had been paid by Troy. There was no evidence, either concerning portions paid before or those paid after their separation.
209 Another problem is that rescission and restitution would not simply require the court to calculate the amount of mortgage repayments she and Troy had made for the Baal Street and Anstey Road properties and their and their payments of rates and taxes for the Anstey Road property. Rescission of the transaction by Stephannie would also require her to give counterrestitution of the benefits which she obtained from Bruce and Carol.
210 In other words, if the contingency upon which the counterclaims had been based had been established (ie if a resulting trust of Anstey Road existed), and if rescission and restitution of Stephannie's mortgage payments and rates and taxes were available, then Stephannie would be required to make counter-restitution to Bruce and Carol of the benefits she received of free accommodation in a property in which she had no legal interest (the Baal Street property) and one in which she had only a 9% legal interest jointly with Troy.
211 However, Stephannie led no evidence on the notional value of the rental accommodation which she had received at Baal Street or Anstey Road. Some evidence on this matter was led by the valuer, Mr Lambert, called on behalf of Bruce and Carol who provided a 'preliminary advice' in a 'short time frame' concerning the notional rental values for the front house on the Anstey Road property where Troy and Stephannie lived (exhibit 20B).
212 Although this was the only way in which Stephannie's claim for rescission and restitution of the Anstey Road mortgage repayments might have been established, counsel for Stephannie objected to various parts of this report (ts 144).
213 One objection was that the report had relied upon an amount for agistment potential of the property in the rental assessment, but that this amount was based upon information provided by another agent. As I explained in ruling on this objection, no weight can be placed on that assessment of agistment value; it is effectively an assumption in the report without any justification. This creates real difficulty for Stephannie's valuation exercise because the agistment value is a substantial part of the assessment of current rental value, which is then discounted back to achieve historical values. It cannot simply be severed from the exercise.
214 A further difficulty is that the assessment of a notional rent for the Anstey Road property was conducted on the basis of the front house on the property, and facilities, in their current state, before being discounted for historic values. But no allowance was made for the fact that the many improvements to the property were made over time.
215 These difficulties, combined with the absence of any historical notional rent assessment for the Baal Street property would have made rescission and restitution of the benefits sought by Stephannie impossible.
216 Even further evidential difficulties occur with Stephannie's claim for 'equitable damages' which were said to arise from the unconscionable dealing.
217 Substantial evidence was led at trial concerning the current valuation of the Anstey Road property. The valuation was conducted by an expert valuer, Mr Ross Lambert. The date of valuation was 1 September 2011 (exhibit 20).
218 Some evidence was also led concerning improvements made to the Anstey Road property by Bruce, and improvements made by Troy and Stephannie. Some of these improvements were very substantial. For instance Stephannie said that she and Troy made improvements to the Anstey Road property which included a full dressage arena with lights and reticulation and stables. In her pleaded defence these were alleged to have a value of $50,000.
219 For reasons I have explained above at [120], it is well established that the subsequent evidence of current value of the Anstey Road property, and the evidence of the improvements after purchase, is irrelevant to the question of whether there should be a 'presumption of resulting trust', or whether the presumption has been rebutted.
220 The evidence concerning the valuation of the Anstey Road property was also relied upon in support of Stephannie's claim for 'equitable damages' for unconscionable dealing. Stephannie produced an elaborate schedule in closing submissions (Schedule B) which purported to establish the losses she had suffered. The schedule assumed the following:
(1) Stephannie had contributed half of the mortgage payments each month at Baal Street and Anstey Road. I have addressed above why this assumption was not supported by any evidence [208].
(2) Stephannie contributed $600 per month to the mortgage expenses at Anstey Road and Baal Street. I have explained above why this assumption is false. It assumes that Bruce and Carol made no contribution to the mortgage expenses.
(3) Stephannie would have been in a position to save that $600 per month if she had not paid it towards mortgage expenses. No evidence supported this assumption.
(4) Stephannie would have chosen to buy a property instead of renting and the time at which she would have purchased could be pinpointed by an examination of the changing value of the Anstey Road property. Again, no evidence was led from Stephannie on this matter, which might have required expert evidence.
Like the claim for restitution, the claim for 'equitable damages' lacked an evidentiary foundation.
221 In closing submissions, Stephannie also produced a schedule (Schedule A) in support of relief which went beyond the pleaded restitution of the mortgage payments and Anstey Road rates and taxes paid by Stephannie. Schedule A went beyond the pleaded relief and sought disgorgement from the plaintiffs of 'capital growth of the property'.
222 Once again, there are serious evidentiary gaps in the facts concerning the proportion of capital growth which could be attributed to the property and the improvements made by the respective parties. Further, the unpleaded schedule seeking disgorgement is based upon a legal misapprehension.
223 Again, on the basis that a resulting trust had been established (contrary to these reasons) the submission was that Bruce and Carol should give up a proportion of the capital growth in the property because that would represent 'the benefit obtained at [Troy and Stephannie's expense]' (Schedule A).
224 This submission in closing is contrary to the pleaded case that Stephannie should be entitled to restitution of the mortgage payments and rates and taxes that she had paid. No leave was sought for this significant change in pleading.
225 Even apart from the other legal and factual problems with the counterclaims, the measure of restitution for the pleaded unjust enrichment in par 32 would have been limited to the pleaded relief. It would not have included the capital growth in the Anstey Road property because that is not a benefit which was transferred from Stephannie to Bruce and Carol.
226 A personal claim for restitutionary relief does not require a defendant to account for and disgorge profits made, irrespective of source (such as a proportion of capital growth in the property). Instead, the personal award of restitution 'operates to restore to the plaintiff what has been transferred from the plaintiff to the defendant': Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd [1994] HCA 61; (1994) 182 CLR 51, 75 (Mason CJ); Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516, 529 [26] (Gleeson CJ, Gaudron & Hayne JJ). Hence, an account and disgorgement of a defendant's profits is not a restitutionary remedy. Unlike a restitutionary remedy, the profits need not be transferred from the plaintiff in the taking of an account. In the words of the Supreme Court of Canada, a personal award of restitution for unjust enrichment 'is concerned with giving back to someone [the equivalent value of] something that has been taken from them': The Citadel General Assurance Company v Lloyds Bank Canada [1997] 3 SCR 805 [30] (La Forest, Gonthier, Cory, McLachlin, Iacobucci and Major JJ). See also Sempra Metals Ltd v Her Majesty's Commissioners of Inland Revenue [2007] UKHL 34; [2008] 1 AC 561, 605 606 [116] [117] (Lord Nicholls). Capital growth in the Anstey Road property was not value which was transferred from Stephannie to Bruce and Carol.
227 This counterclaim was abandoned by Stephannie in closing submissions in the course of abandoning proposed amendments to this counterclaim. Counsel for Stephannie explained that he had 'decided to withdraw that particular cause of action' (ts 258) and that he no longer pressed any claim based upon mistake (ts 259).
228 The counterclaim for mistake was properly withdrawn. It was a plea of unilateral mistake by Stephannie in the making of the Baal Street Agreement and the Anstey Road Agreement. Stephannie said that she was mistaken in her belief that she and Troy would jointly take the benefit of the whole of the proceeds from the sale of Baal Street as consideration for the mortgage repayments that she and Troy made (Defence and Counterclaim, par 32 particulars of mistake).
229 The basis for this counterclaim involved two erroneous understandings of the law. First, the pleaded unilateral mistake does not have the effect that either agreement is void. The objective theory of contract, which is 'in command of the field' means that the contract 'continues to be binding, unless and until it is avoided in accordance with equitable principles which take as their foundation a contract valid at common law but transform it so that it becomes voidable': Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422, 429 (Mason ACJ, Murphy & Deane JJ); Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, 179 180 [41] (Gleeson CJ, Gummow, Hayne, Callinan & Heydon JJ).
230 Secondly, the unilateral mistake would not permit rescission of either agreement in circumstances in which there was no evidence (and no pleading) to suggest that Bruce and Carol 'contributed to or knew of the mistake' or had engaged in any form of 'fraud, misrepresentation or sharp practice': Torrance v Bolton (1872) LR 8 Ch App 118, 124; Tranchita v Retravision (WA) Pty Ltd [2001] WASCA 265 [45] (Owen J); Taylor v Johnson.
231 While either agreement remains valid, the pleaded claim for unjust enrichment based upon mistake must fail. To award restitution for a unilateral mistake of this nature, despite the existence of a valid agreement, would undermine the objective theory of contract and would subvert the contractual agreement.
232 When restitution is sought for a 'failure of consideration', the word 'consideration' is used in a different sense from its modern contractual meaning. It 'embraces payment for a purpose which has failed as, for example, where a condition has not been fulfilled, or a contemplated state of affairs has disappeared': Roxborough v Rothmans of Pall Mall Australia Ltd (525) [16] (Gleeson CJ, Gaudron & Hayne JJ); see also (557) [104] (Gummow J).
233 A claim for restitution of unjust enrichment can arise in the absence of a contract, if a benefit is conferred on a condition or basis which fails: Roxborough v Rothmans of Pall Mall Australia Ltd (525) [16] (Gleeson CJ, Gaudron & Hayne JJ), (555 556) [102] [103] (Gummow J); Martin v Andrews [1856] EngR 944; (1856) 7 El & Bl 1, 4; [1856] EngR 944; (1856) 119 ER 1148, 1149 (Lord Campbell CJ).
234 But where the claim for failure of consideration arises in a contractual context, the claim does not rescind a contract ab initio (from the beginning). Instead, the success of the claim for restitution generally depends upon the failure of the conditional nature of the payment, as discerned from the terms of the contract: Roxborough v Rothmans of Pall Mall Australia Ltd (538 539) [58], [60] (Gummow J).
235 For this reason the doctrine of failure of consideration has been described as failure of 'condition'. Understood in this way, it signals a focus upon the conditional nature, or basis, upon which a payment is made or the benefit transferred: Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1942] UKHL 4; [1943] AC 32, 65 (Lord Wright); F WilmotSmith 'Replacing risktaking reasoning' (2011) 127 LQR 610, 618 619; C Mitchell, P Mitchell and S Watterson (eds) Goff and Jones The Law of Unjust Enrichment (8th ed, 2011) 363 [1201].
236 In cases involving bilateral (or exchange) transactions, such as this case, the assessment of the condition or basis for a payment is objective; the focus is upon failure of an (objectively) manifested condition or basis: Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd [2005] NSWCA 83; (2005) 63 NSWLR 203, 252 [239] [240] (Mason P). The High Court of Australia did not consider this issue on appeal: Campbells Cash & Carry Pty Ltd v Fostif Ltd [2006] HCA 41; (2006) 229 CLR 386, 417 [39] (Gummow, Hayne & Crennan JJ).
237 The counterclaim for failure of consideration was based upon a pleading that Stephannie made repayments of the Baal Street and Anstey Road property mortgages with the expectation that she would, respectively, receive the benefit of the proceeds from the sale of the Baal Street property, and 'have and retain a joint beneficial interest in one half' of the Anstey Road property (par 32).
238 Apart from the general reasons explained above, the first reason why this counterclaim fails is because neither of those conditions or bases failed. As I have explained, the objective basis of the Baal Street Agreement was not that Stephannie would receive the benefit of the proceeds of its sale. Instead, the objective basis was that Stephannie would be a tenant. Nor did the objective basis for the Anstey Road Agreement fail. That basis was that the parties would enter a joint family enterprise and have shared ownership of the Anstey Road property. That basis did not fail.
239 In any event, Stephannie's submission was based on the flawed premise that a payment made on a subjective condition or basis which is contrary to the terms of a contract could permit restitution. The premise is flawed because no cause of action for restitution of unjust enrichment can exist where the action is inconsistent with the express or implied terms of a contract; to allow that remedy despite the terms of the contract would 'redistribute risks for which provision has been made' by the contract: Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635, 655 [47] (Gleeson CJ), 663 [79] (Gummow, Hayne, Crennan & Kiefel JJ); Perum Building & Construction Pty Ltd v Tallenford Pty Ltd [2007] WASCA 245.
240 It has been observed that undue influence 'is a muchused phrase, but its precise nature remains a matter for dispute. Some authorities tend to treat the doctrine as being concerned with "excessively impaired consent", but others treat it as involving the improper abuse or exploitation of those whose consent has been impaired': Sexton v Titiro Trustee Company Ltd [2008] NZHC 715 [56] (Heath J).
241 The latter view is prevalent in authorities which describe undue influence as involving 'a connotation of impropriety': Royal Bank of Scotland Plc v Etridge (No 2) [2001] UKHL 44; [2002] 2 AC 773, 800 [32] (Lord Nicholls); compare Hammond v Osborn [2002] EWCA Civ 885 [32] (Sir Martin Nourse).
242 On the other hand, Australian authorities have generally focused upon the 'impairment of the judgment of the weaker party ... [as] the critical element' in a claim for undue influence: Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457, 478 [75] (Gaudron, Gummow & Kirby JJ quoting from Sir Anthony Mason); see also Christodoulou v Christodoulou [2009] VSC 583 [74] (Kaye J); Commercial Bank of Australia Ltd v Amadio [1983] HCA 14; (1983) 151 CLR 447, 474 (Deane J).
243 Historically, it has not been necessary for a court to make any finding about the behaviour or conduct of a defendant as a precondition to an award of restitution of a benefit transferred by undue influence. The source from which the influence arises might be a third party, or it might simply be the result of a relationship of dominance to which the plaintiff is subject, independently of any positive action by the defendant.
244 In Bridgeman v Green [1757] EngR 92; (1757) Wilm 58, 65; [1757] EngR 92; (1757) 97 ER 22, 25, the Lord Commissioner (as the Chief Justice was then) said: 'Let the hand receiving it be ever so chaste, yet if it comes through a corrupt polluted channel, the obligation of restitution will follow it'. And in one of the most commonly cited authorities on undue influence, Allcard v Skinner (1887) 36 Ch D 145, Lindley LJ found that undue influence was present even though everything that Miss Allcard did was 'referable to her own willing submission to the vows she took and to the rules which she approved, and to her own enthusiastic devotion to the life and work of the sisterhood' (184).
245 It may be that an element of wrongful conduct by a defendant is necessary in a case where remedies are sought for undue influence other than the mere reversal of a transaction. For instance, if compensation for losses is available for undue influence there may be a requirement that the defendant's conduct involves an 'abuse of trust': Mahoney v Purnell [1996] 3 All ER 61, 90 91 (May J); discussed by J D Heydon 'Equitable compensation for undue influence' (1997) 113 LQR 8. There is little authority on this issue.
246 One matter is clear. However the requirements of undue influence are formulated, and whether or not the label 'undue influence' conceals two different doctrines, a core element of undue influence requires a relationship of sufficient influence. This was absent in this case.
247 The party seeking to set aside a transaction for undue influence must prove (by evidence or by presumption) a relationship going beyond mere confidence and influence. It must be a relationship involving dominion and ascendancy by one person over the will of the other, and correlative dependence by the other: Brown v The NSW Trustee & Guardian [2011] NSWSC 1203 [46] (Brereton J); Goldie v Getley [No 3] [2011] WASC 132 [140] (Simmonds J); Union Fidelity Trustee Co of Australia Ltd v Gibson [1971] VicRp 69; [1971] VR 573, 575 579 (Gillard J); Johnson v Buttress [1936] HCA 41; (1936) 56 CLR 113, 119 (Latham CJ).
248 In cases where a person seeks to prove by evidence the existence of undue influence, the required dominance has been described as a position 'in which it could fairly be said that the plaintiff's mind was in effect a mere channel through which the will of the defendant operated': Tufton v Sperni [1952] 2 TLR 516, 530 (Jenkins LJ), 532 (Morris LJ); Bank of Credit & Commerce International SA v Aboody [1990] 1 QB 923, 969 (Slade, Balcombe & Woolf LJJ).
249 In seeking to prove the existence of a sufficient degree of influence Stephannie did not rely upon the benefit of a presumption deriving from her status as daughterinlaw. Even a parent/child relationship does not necessarily raise a presumption of ascendancy in the instance of an emancipated adult: see especially Tillett v Varnell Holdings Pty Ltd [2009] NSWSC 1040 [80] (Brereton J). But even if it were available, for the reasons below it would have been rebutted. Stephannie's argument was simply that a relationship of undue influence existed between her and her fatherinlaw, Bruce, by his dominance and ascendancy which had caused her entry into the Baal Street Agreement and the Anstey Road Agreement.
250 There is simply no factual foundation for Stephannie's argument that her relationship with Bruce was one in which he exerted dominance and ascendancy over her will and in which she was, correspondingly, dependent upon him.
251 None of the matters of alleged 'dominance' submitted by Stephannie in her summary of evidence establish an ascendancy over her will. Some of these related to decisions by Bruce and Carol in relation to the Baal Street property which were made without discussion with Troy and Stephannie. Others related to trust placed in Bruce by Stephannie. None of these matters can establish a relationship of dominion and ascendancy necessary for proof of undue influence.
252 As I have explained above, at the time of the Baal Street Agreement and the Anstey Road Agreement, Stephannie enjoyed a warm and close relationship with Bruce and Carol. But she still made her own decisions. There was no evidence that Bruce had ascendancy over Stephannie's will. Until the move to Anstey Road she lived separately with Troy and the children; the decisions they made to enter the Anstey Road Agreement; to purchase Anstey Road with Bruce and Carol; and to live with them and Harly and Tayla there, were the product of the unconstrained free will of her and Troy.
253 The counterclaim based on undue influence should be rejected.
254 Counsel for Stephannie relied upon the label 'unconscionable' and formulated the claim for unconscionable dealing in a manner which, at times, came close to a submission seeking the exercise of an idiosyncratic judicial discretion to unwind the two contracts. Stephannie's evidence included vituperative allegations against Bruce and Carol which postdated the Baal Street Agreement and Anstey Road Agreement in an attempt to establish unconscionable dealing and undue influence. The label 'unconscionable dealing' might be thought to give such a submission beguiling attraction. Such an approach is not correct.
255 As Spigelman CJ said in AttorneyGeneral of New South Wales v World Best Holdings Limited [2005] NSWCA 261; (2005) 63 NSWLR 557 [122], some people, 'including legal practitioners, whose primary experience is the representation of the interests of particular parties, could well be seen as likely to approach the task of determining unconscionability by a principle of what is "fair" or "just" in all of the circumstances of the case'. However, it has been emphasised that there is a strong objection to equating the concept to what is unreasonable and unfair. The object of the doctrine is not to protect people from the consequences of their own mistakes: Micarone v Perpetual Trustees Australia Ltd [1999] SASC 265; (1999) 75 SASR 1, 127 128 [648] (Debelle & Wicks JJ quoting from Sir Anthony Mason).
256 For this reason, the label 'unconscionability' ought to be used with great care. It has been explained that 'the statement that enforcement of the transaction would be "unconscionable" is to characterise the result rather than to identify the reasoning that leads to the application of that description': Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395, 409 [34] (Gaudron, McHugh, Gummow & Hayne JJ). Further, the broad use of terms like unconscionable and unconscientious 'may have masked rather than illuminated the underlying principles at stake': Australian Competition & Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51, 73 [43] (Gummow & Hayne JJ quoting from McGhee QC, the current editor of Snell's Equity). See also Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315, 325 326 [23] [26] (Gleeson CJ, McHugh, Gummow, Hayne & Heydon JJ).
257 Without vigilance to ensure that conclusory references to 'unconscionability' are delineated then, as Professor Getzler presciently, and colourfully, observed, the term could be appropriated as a 'roving commission enabling an imperial judiciary to redistribute benefits and burdens between transacting individuals by decree': J Getzler 'Unconscionable Conduct and Unjust Enrichment as Grounds for Judicial Intervention' [1990] MonashULawRw 15; (1990) 16(2) Monash University Law Review 283, 322.
258 A delineated description of the equitable doctrine of 'unconscionable dealing' was given by Kitto J in Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362, 415:
It applies whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands.
259 If a person seeking relief for 'unconscionable dealing' establishes the elements of (1) special disadvantage or special weakness and (2) a taking advantage of that special weakness then the onus shifts to the other party to show that the transaction was, nevertheless, fair just and reasonable: Commercial Bank of Australia Ltd v Amadio (474) (Deane J); Johnson v Smith [2010] NSWCA 306 [5] (Allsop P).
260 The nature of element (1), a special weakness, requires the party asserting it to prove that the effect was that he or she was 'unable to judge for [himself or herself]' or 'unable to make a worthwhile judgment as to what is in [his or her] best interest': Blomley v Ryan (392) (McTiernan J); Commercial Bank of Australia Ltd v Amadio (461) (Mason J); Australian Competition & Consumer Commission v CG Berbatis Holdings Pty Ltd (64) [12] (Gleeson CJ), (74) [46], (77) [55] (Gummow & Hayne JJ).
261 The consequence, and importance, of element (2) above is that, unlike undue influence, the doctrine of 'unconscionable dealing' focuses 'more on the unconscientious conduct of the defendant': Bridgewater v Leahy (478) [75] (Gaudron, Gummow & Kirby JJ quoting from Sir Anthony Mason).
262 As to the first requirement of 'unconscionable dealing', I do not consider that Stephannie was unable to make a worthwhile judgment as to her best interests when entering into the Baal Street and Anstey Road Agreements. As a witness she impressed me as capable and intelligent. Although she said that she did not pay attention to the finer details of the transactions, she was aware of the nature of the transaction. In relation to the Anstey Road property, she was satisfied that it was in her best interests to enter an arrangement where the effect was that she would obtain a legal interest in the property for her own benefit.
263 As the opening paragraph of Stephannie's witness statement reveals, Stephannie is currently a social worker with the Department of Corrective Services. She has a degree in Social Work from Curtin University, from which she graduated in 2004: Stephannie's witness statement par 43. She gave her evidence in a clear, intelligent manner. It is plain from all the circumstances surrounding the transaction that she was capable of making a judgment about her best interests in relation to the Anstey Road Agreement and Baal Street Agreement.
264 Counsel for Stephannie relied upon a number of matters concerning Stephannie's background and her relatively inferior bargaining position to Bruce. He referred, for example, to Stephannie's 'family history of abandonment and social isolation, which placed her in a position of relative disability, in relation to the Anderson family, which was a strong and cohesive family unit with good communal ties': see Stephannie's summary of evidence.
265 None of these factors establishes that Stephannie was incapable of making a judgment about her best interests at the time. It is clear that a person could be ill, or poor, or even 'affected by delusions' but still be perfectly capable of making a judgment as to his or her own best interests: Tillett v Varnell Holdings Pty Ltd [49] [54] (Brereton J). Nor will a person even in a greatly inferior bargaining position necessarily lack capacity to make a judgment about that person's own best interests: Australian Competition & Consumer Commission v CG Berbatis Holdings Pty Ltd (77) [56] (Gummow & Hayne JJ).
267 Nor is the second requirement of unconscionable dealing satisfied. This element of 'taking advantage of the special weakness' requires that Bruce and Carol were aware, or ought reasonably to have been aware, of some special disadvantage under which Stephannie laboured: Brown v The NSW Trustee & Guardian [36] (Brereton J). Even if Stephannie had been labouring under some special disadvantage, there is no evidence that Bruce or Carol were aware of it, or could reasonably have been aware of it. The relationship between the parties at the time of the Baal Street Agreement and the Anstey Road Agreement was warm and friendly. The parties trusted and cared for each other. There is no evidence of any awareness, or basis for an awareness, by Bruce of any special disadvantage suffered by Stephannie, which could prevent her from making a judgment about her own best interests.
268 In the context of statutory proscriptions against 'unconscionable conduct', which in part find their 'origin in the general law, equity' the New South Wales Court of Appeal has said that ' the conduct must demonstrate a high level of moral obloquy on the part of the person said to have acted unconscionably': Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 [289], [291] (Allsop P); see also Attorney General of New South Wales v World Best Holdings Ltd (583) [121] (Spigelman CJ). Neither Bruce nor Carol acted with any degree of moral obloquy.
269 The counterclaim based on unconscionable conduct should be rejected.
270 In addition to the counterclaims, Stephannie claimed equitable contribution and indemnity for the amount by which the plaintiffs' liability to the ANZ Bank under the Purchase Loan and the Building Loan has been discharged by Stephannie, plus interest and costs.
271 No submissions were made by counsel for Stephannie in relation to this claim. It is directly inconsistent with the terms of the Anstey Road Agreement that Troy and Stephannie would make the payments for the Purchase Loan and the Building Loan.
272 This claim for contribution and indemnity must be rejected.
273 Until shortly before this trial began the issues were confined. The case concerned whether Stephannie held her rights to the Anstey Road property on resulting trust for Bruce and Carol, and whether a declaration sought by the plaintiffs concerning the ANZ Anstey Road loan should be made.
274 The declaration sought corresponded largely with admitted rights that the plaintiffs had under the Anstey Road Agreement. I will hear from the parties as to the terms in which the declaration should be made consistently with these reasons.
275 The parties disagreed about the operation of a 'presumption of resulting trust' and a 'presumption of advancement' which necessitated consideration of those concepts in these reasons. Although there is a presumption that a (resulting) trust was declared, ultimately the presumption of resulting trust is rebutted on the facts for a number of different reasons. Each of those reasons establishes that there was no manifested intention by Bruce and Carol that Stephannie should hold her legal interest in the Anstey Road property on trust. The intention was that she should hold the interest which she and Troy jointly had in the Anstey Road property for their own benefit.
276 However, the trial was extended by counterclaims for mistake (abandoned in closing reply), failure of consideration, undue influence and unconscionable dealing. None of these claims was established on the evidence. And for several reasons of law each of these claims fails.
277 In closing submissions, both counsel sought to defer consideration, until after judgment, of the plaintiffs' prayer for relief seeking an order for sale of the Anstey Road property under s 126 of the Property Law Act 1969 (WA): see eg Miller v Dudman [2002] WASC 99. I will hear from counsel in relation to that relief sought and the appropriate orders to give effect to, and consequential upon, these reasons.
CITATION : ANDERSON -v- McPHERSON [No 2] [2012] WASC 19 (S)
HEARD : 3-6 OCTOBER & 24 NOVEMBER 2011 & 2 MARCH 2012
Orders consequent upon reasons for judgment - Equitable compensation sought - No cause of action pleaded in support of equitable compensation - No submissions in opening or closing in support of equitable compensation - No legal basis for the award of equitable compensation - 'Minimum equity' principle as derived from the law of estoppel is not a stand-alone ground for equitable compensation - 'Minimum equity' principle is probably not part of Australian law - Award of equitable compensation inconsistent with reasons given and with findings of fact
[These supplementary reasons were delivered orally. This written version has been formatted and edited for typographical and grammatical errors.]
1 On 25 January 2012, I delivered my reasons for decision in this matter: Anderson v McPherson [No 2] [2012] WASC 19. The issue concerning an order for sale of the Anstey Road property under s 126 of the Property Law Act 1969 (WA) had been deferred until after judgment. The making of orders was adjourned, in particular to allow the plaintiffs the opportunity to make any submissions on this point as well as submissions concerning equitable compensation.
2 At the hearing before me this morning the appropriate orders for sale were common ground. Those orders are:
3 As for the issue of equitable compensation, that issue arose because at the time judgment was handed down, counsel for the plaintiffs submitted that my reasons for decision supported the award to the plaintiffs of equitable compensation. Although equitable compensation had been pleaded, counsel for the plaintiffs accepted in opening that there was nothing in the pleading to support such a claim. No submissions concerning equitable compensation were made by counsel for the plaintiffs either in opening or in closing. It was not identified as an issue in the agreed statement of facts and issues.
4 At the handing down of my decision, when the issue of the basis upon which equitable compensation was raised, I asked counsel of the basis on which it might be awarded. Counsel for the plaintiff said: '[i]n the time available I have not been able to identify properly the cause of action' (ts 273). For the reasons which follow, no basis was identified at the hearing before me today either. And the claim for equitable compensation should be refused for four reasons.
5 There were also issues raised this morning concerning the appropriate form of the declaration concerning the liability of the defendants in relation to the ANZ loan; declarations were also sought concerning claims for liability relating to rates and charges falling within a general prayer for relief in the statement of claim; and orders were sought as to costs.
6 The plaintiffs' claim for equitable compensation should be refused for four reasons.
(1) Nothing is pleaded which could support an award of equitable compensation.
(2) The facts upon which the plaintiffs' submissions rely for equitable compensation are not an entirely accurate description of my findings of fact.
(3) There is no legal basis for an award of equitable compensation.
(4) An award of equitable compensation would be inconsistent with my rejection of a resulting trust and my findings concerning the Anstey Road Agreement.
7 In my reasons for decision I explained why the only trust sought by the plaintiffs in this case was a resulting trust. In opening submissions counsel for the plaintiffs, in response to a question from me concerning the nature of the trust which was claimed, emphasised that the resulting trust was the only basis upon which the claim for a trust was brought (ts 9; Monday 3 October 2011). The following exchange then occurred:
EDELMAN J: ... one matter which I neglected to mention to you in opening is I understand you also have a claim for equitable compensation. Is that right, or this is the - - -
COUNSEL: I certainly pleaded a claim for equitable compensation. I think the answer is that it can only go to the improvements which on the other relief we're seeking is not a matter that's going to bite as an alternative I think, I think is the proper answer.
EDELMAN J: Yes. Certainly after trial you can - or in closing you can indicate - - -
COUNSEL: Yes, the form of relief.
EDELMAN J: - - - the basis upon which any claim for equitable compensation could be sought.
COUNSEL: Yes.
EDELMAN J: It doesn't seem to me that there is anything - - -
COUNSEL: No, I know. I accept that.
EDELMAN J: - - - pleaded that could give rise to that.
COUNSEL: I do accept that, your Honour, and I must say I had just overlooked it in going back on the basis that I couldn't see how I was going to go to it so at the moment I think that means we both agree it seems unlikely it's going to be a relevant issue.
8 In an agreed statement of facts and issues filed on 10 October 2001 shortly prior to trial, ten issues were identified. None of those concerned a claim for equitable compensation by the plaintiffs.
9 No application was made by the plaintiffs to amend their pleading to bring any cause of action which might entitle them to equitable compensation. Nor was there any mention of any claim by the plaintiffs for equitable compensation, other than the exchange I have described, in any written or oral opening submissions at trial either by counsel for the plaintiffs or counsel for the first defendant. Nor was there any mention of a claim by the plaintiffs for equitable compensation in any written or oral closing submissions at trial either by counsel for the plaintiffs or counsel for the first defendant.
10 After my publication of reasons equitable compensation has now been sought.
11 There may be cases where equitable compensation might be awarded as a remedy in place of a trust which would otherwise be available. Speaking of a constructive trust, the High Court said in Bathurst City Council v PWC Properties Pty Ltd [1998] HCA 59; (1998) 195 CLR 566, 585 [42] that
before the court imposes a constructive trust as a remedy, it should first decide whether, having regard to the issues in the litigation, there are other means available to quell the controversy. An equitable remedy which falls short of the imposition of a trust may assist in avoiding a result whereby the plaintiff gains a beneficial proprietary interest which gives an unfair priority over other equally deserving creditors of the defendant. (emphasis added)
12 This is not a case where, applying this obiter dicta, considerations such as a defendant's insolvency or third party rights might require equitable compensation to be considered as an alternative to a beneficial proprietary interest which would otherwise be recognised. The reason is because the plaintiffs' case for a trust was based solely on an assertion of a resulting trust (ts 59). And that case failed because the plaintiffs' assertion of a presumption of resulting trust was rebutted. Hence, even if equitable compensation might, in cases of insolvency or third party rights, need to be considered as an alternative to the recognition of an existing beneficial interest under a resulting trust as well as a constructive trust (a matter upon which I express no opinion) this was not a possibility in this case because the plaintiffs never had the beneficial proprietary interest claimed.
13 There are, of course, numerous other instances in which equitable compensation might be an available remedy for breach of an equitable obligation: Young, Croft and Smith On Equity (2009) 1115 [16.1150], 1117 [16.1190]. Some examples include claims for breach of confidence, knowing assistance in a breach of trust or fiduciary duty, unconscionable dealing, or estoppel. None of those claims was pleaded by the plaintiffs. None was ever raised before me. The first defendant's case may have been run very differently if any of those had been pleaded.
14 Counsel for the plaintiffs submitted in writing (par 27) that equitable compensation should be awarded based upon my findings that:
(a) 'the contributions of the [p]laintiffs were in the order of 91% of the purchase price' (citing [121] of my reasons);
(b) the contributions of the plaintiffs were 'not a gift' (citing [153] of my reasons); and
(c) 'the objective intention [of the plaintiffs] was to set themselves up for retirement' (citing [169] of my reasons).
15 Considerable emphasis was placed in oral submissions upon the latter of these factors. These submissions concerning my findings of fact are not wholly accurate.
16 As to (a), at [121] of my reasons I did find that the contributions by the defendants to the purchase price was 9% (and 91% to the plaintiffs). However, in the very next sentence of that paragraph I explained that the defendants 'also took responsibility for repayment of the whole ANZ Anstey Road loan, with small initial contributions from Bruce and Carol.' As I explained (at [184]) this was a further part of Troy and Stephannie's contribution to the Anstey Road property. Although this is not a matter which would have been relevant to the quantification of any interest under a resulting trust it had the effect, as intended, of nearly doubling their contribution (see also my findings at [179] concerning other promised contributions from Troy and Stephannie).
17 In Calverley v Green [1984] HCA 81; (1984) 155 CLR 242 the High Court held that mortgage payments made by Mr Calverley were not relevant to the calculation of the proportions by which the property was to be held on resulting trust. However, each of the judgments emphasised that in an equitable accounting the mortgage contributions may be relevant. If monetary relief were to be awarded reflecting an interest of the plaintiffs of 91% in the property then it may be that the defendants would be entitled, on an equitable accounting, to the proportion of the mortgage payments which they made which exceeded 9% of the property and possibly other contributions to expenses. Several of the judgments in the High Court recognised, or suggested, this possibility: see Calverley v Green (252 253) (Gibbs CJ), (263) (Mason & Brennan JJ), (in a passage with which Deane J agreed at (271)).
18 In other words, unlike the determination of an interest under a resulting trust, in quantifying equitable monetary relief it may be necessary to consider the overall contributions of the parties to the whole of the Anstey Road venture. Those overall contributions were not simply a case of a 91% contribution by Bruce and Carol and 9% by Troy and Stephannie. The contribution of Troy and Stephannie, once their accepted liability for the loan is included, was nearly double that amount and possibly more when other contributions are included.
19 As to (b), it is incorrect to describe my conclusion at [153] as being that the contributions of the plaintiffs were 'not a gift'. At [153] I said that '[a] presumption of advancement does not apply in relation to Stephannie' (emphasis added). I spent some time in my reasons explaining the operation of these 'presumptions'. This was necessary because presumptions featured heavily in the case before me and there is some confusion as to the operation of the presumptions in relation to resulting trusts. I will not repeat my reasons save to emphasise that:
(1) a presumption is a standardised inference which allows a secondary fact to be proved without evidence; and
(2) the 'presumption of advancement' is simply a legal rule which dictates when the presumption of resulting trust does not apply.
20 Quite simply, my reasons were that a 'presumption of advancement' did not apply. In other words, the plaintiffs could have the benefit of a presumption of resulting trust although that presumption could still be, and was, rebutted by evidence. The rejection of a presumption of advancement is emphatically not, as asserted by counsel for the plaintiffs, a finding that the plaintiffs' contributions were not a gift.
21 At [132], I explained why the meaning of a 'presumption of advancement' concerns a 'list of relationships where the presumption of resulting trust does not apply'. The relationship of parentinlaw and daughterinlaw is not a relationship where the presumption of resulting trust is automatically excluded.
22 However, as I explained, the presumption of resulting trust (ie the presumption of declaration of trust for the plaintiffs) can plainly be rebutted by proof of positive facts inconsistent with any objective intention to create a trust. At [154] [185] of my reasons for decision I set out six reasons why the presumption of resulting trust was rebutted in this case. As I explained, each of those reasons would probably suffice, on its own, to rebut the presumption of resulting trust. Each of those six reasons showed a positive, objective intention by the plaintiffs that the defendants should enjoy the benefit of the rights transferred.
23 My finding was that the objective intention of Bruce and Carol was 'that Troy and Stephannie should enjoy the benefit of [their] rights [on the title]' or that they should be entitled to the use and enjoyment of their rights for their own benefit: [160]; see also [157], [168], [169], [171] [172], [180]. I rejected the evidence of Bruce (ts 84) to the contrary (see [161]).
24 I did not conclude, nor was it suggested, nor could it have been suggested, that Troy and Stephannie's rights were somehow conditional upon payment of some sum of money to Bruce and Carol, other than the amounts agreed in the Anstey Road Agreement.
25 In my reasons I preferred to describe Bruce and Carol's objective intention as being that Troy and Stephannie should enjoy the benefit of their legal rights, rather than using the label 'partial gift' or 'gift'. One reason why it is awkward to use the label 'gift' (or, more properly, 'partial gift') to describe the rights acquired by Troy and Stephannie is because their legal title to the Anstey Road property was transferred for full value by the vendor, not by the plaintiffs.
26 However, with this caveat, there is no difference between a description of the intention of Bruce and Carol that their son and daughterinlaw have the benefit of the registered legal rights to the Anstey Road property and a description that the intention of Bruce and Carol was that a gift was intended of any excess contribution by Bruce and Carol towards their son and daughterinlaw obtaining the half interest in the Anstey Road property.
27 As to (c), it is inaccurate to describe my conclusion from the conversation referred to at [49] as only that 'the objective intention [of the plaintiffs] was to set themselves up for retirement' (citing [169] of my reasons). In oral submissions counsel for the plaintiffs accepted that this description only referred to half of the relevant conversation.
28 At [169] of my reasons I referred to this conversation which Bruce had had with Stephannie and Troy a year before the purchase of the Anstey Road Property. The conversation (see [49] and [169]) involved Bruce saying: 'when Carol and I were setting ourselves up for retirement, eventually you will have to buy your own house and we will sell [the Baal Street property]'.
29 The second half of the conversation is important. It suggested that Troy and Stephannie would buy their own house on the sale of the Baal Street property. As I found in my reasons for decision at [169], the joint purchase of the Anstey Road Property a year later achieved that goal. There was no suggestion, a year later when the Anstey Road property was purchased, that the interest of Troy and Stephannie would be conditional upon their payment to Bruce and Carol of approximately $183,000. As I will discuss in a moment, my finding at [180] was that the Anstey Road Agreement (the existence of which was an agreed fact at trial) 'carefully divided all the responsibilities concerning the Anstey Road property'.
30 As to the first half of the conversation, counsel for the plaintiffs submitted that the meaning of the words spoken was that when the Baal Street property was eventually sold, the proceeds would be used in a way by Bruce and Carol so that they were financially no worse off. In other words, the effect of the submission was that these words would reasonably have been understood by Troy and Stephannie, and would have the legal effect, to require them to reimburse Bruce and Carol for the extent to which Bruce and Carol were financially worse off as a result of the Anstey Road purchase. There are several problems with this submission.
31 First, the submission was made today for the first time. It was not the subject of any pleading, nor was it one of the issues which the parties raised in the statement of agreed issues at the start of the trial.
32 Second, this construction is inconsistent with the first half of the conversation which did not suggest that Troy and Stephannie's ownership of their own home would be conditional upon ensuring that Bruce and Carol were not financially worse off.
33 Thirdly, the proposed construction is a purely financial view of 'retirement' which is not consistent with my findings concerning the domestic or family arrangement and the expectations at the time of purchase of the Anstey Road property. At [185] of my reasons I said this:
Although the contribution of Troy and Stephannie was not equal in quantum to the generous contribution of Bruce and Carol, the Anstey Road property was purchased as a family venture. There had been no discussion of the arrangement being a tenancy as had occurred at Baal Street. At Anstey Road, it was agreed that the family would live together; they would share the responsibilities of life; they would engage in their hobbies such as Bruce's breeding of exotic parrots and Stephannie's horse riding; Bruce and Carol would interact on the same property with their grandchildren; they would all 'chip in' for purchases from the shops (Stephannie's witness statement par 4hh); and the mortgage liability would mainly be paid by Troy and Stephannie until after the rear house was completed, when it would be exclusively paid by Troy and Stephannie.
34 As I explained, at the Anstey Road property Bruce also built aviaries for his hobby of raising exotic parrots. Separate accommodation for Bruce and Carol was built. Bruce and Carol had found a property in which to live with their son, Troy, and daughterinlaw, Stephannie, as well as their grandchildren. It was also a property which was expected by Bruce to appreciate significantly in value (see ts 83), a substantial appreciation which did occur. And, as I also explained, at Anstey Road the arrangement was that Bruce and Carol would not pay any of the mortgage expenses. Their outgoings would be minimal.
35 Fourthly, as I explained in my reasons the conversation upon which counsel for the plaintiffs relies occurred a year before the purchase of Anstey Road when the defendants were living in Baal Street. As I explained at [172], when the Baal Street property was sold a year later, Bruce and Carol's discussions concerning buying a new property for their retirement were only between themselves.
36 Counsel for the plaintiffs submitted that the rejection of proprietary relief (on the basis of a resulting trust) does not conclude the matter because 'the relevant enquiry is to determine "what was the minimum equity to do justice to the plaintiff", or the "minimum equity principle"'.
37 Counsel for the plaintiffs relied upon the following cases: Crabb v Arun District Council [1976] Ch 179, 193 194 (Scarman LJ); Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 (without a page reference but citing Mason CJ & Wilson J); Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394 (without a page reference but citing Brennan J); Cardile v LED Builders Pty Ltd [1999] HCA 18; (1999) 198 CLR 380 [124] (Kirby J); Jackson v Sterling Industries Ltd [1987] HCA 23; (1987) 162 CLR 612, 625 (Deane J); Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101, 124 [46] (citing Kirby J although the reasons at the page cited are those of Gleeson CJ, McHugh, Gummow & Callinan JJ); Sullivan v Sullivan [2006] NSWCA 312 [23] (citing Handley, Hodgson & McColl JJA although the pinpoint reference is only to Handley JA).
38 None of these cases supports the award of equitable compensation in the absence of an identified cause of action.
39 In Crabb (193), Scarman LJ explained that the question of the 'extent of the equity' (or minimum equity) was preceded by a question of 'is there an equity established?'. The 'equity' or cause of action in that case was an estoppel.
40 In Waltons Stores (404), Mason CJ and Wilson J quoted from Scarman LJ's reference to a 'minimum equity' and explained that the decision was 'consistent with the principle of proprietary estoppel'. Again, the cause of action in that case was based on estoppel.
41 In Commonwealth v Verwayen (428 429), Brennan J also quoted from Scarman LJ's reference to a 'minimum equity', describing it as a 'remedy'. That reference immediately followed the statement that 'equitable estoppel yields a remedy in order to prevent unconscionable conduct on the part of the party who, having made a promise to another who acts on it to his detriment, seeks to resile from the promise'.
42 The passage of Kirby J cited in Cardile v LED Builders Pty Ltd concerned confining relief to the minimum equity consequent upon a proved cause of action for an asset preservation order.
43 In Giumelli v Giumelli, the passage in the plurality reasons, [46], cited by counsel for the plaintiffs, referred to Brennan J's decision in Waltons Stores, and the minimum equity needed to avoid the relevant detriment in that estoppel case. Giumelli v Giumelli was also a case where the cause of action was based on estoppel.
44 In Sullivan v Sullivan [23], Handley JA referred to the minimum equity principle, citing the estoppel cases including Crabb, Verwayen, and Giumelli v Giumelli. His Honour's comments were also directed at relief based upon the proof of a claim for estoppel.
45 It is, therefore, impossible to discern from references in these cases, or in any case of which I am aware, to a 'minimum equity' principle giving a right to equitable compensation in the absence of an identified cause of action. This is unsurprising. The points made in my reasons at [255] [257] about generalised references to 'unconscionability', and the authorities described, apply equally to claims for compensation based upon assertions of a 'minimum equity to do justice'.
46 Since most of the authorities relied upon by counsel for the plaintiff concerned a cause of action based upon estoppel, it is necessary to reiterate that no estoppel was ever pleaded in this case. No evidence was led, nor any crossexamination conducted, of an unambiguous encouragement or representation made by the defendants, or an assumed state of affairs, for the purposes of a claim to estoppel. In turn, the first defendant did not lead any evidence, or crossexamine, concerning whether any such representation or state of affairs was acted upon by the plaintiffs or whether it was reasonable to depart from any assumed state of affairs. Nor was any evidence led by the plaintiffs, or cross-examination conducted, concerning the extent of any detriment which would be sustained by departure from any representation or assumption. Nor was any evidence led for the purposes of an estoppel concerning
the conscionability (or not) of resiling from [any] encouragement or representation previously made, including the nature and character of the detriment, how it can be cured, its proportionality to the terms and character of the encouragement or representation and the conformity with good conscience of keeping a party to any relevant representation or promise made, even if not contractual in character.
See Delaforce v SimpsonCook [2010] NSWCA 84 [3] (Allsop P with whom Giles JA agreed) and Tadrous v Tadrous [2012] NSWCA 16 [48] (Meagher JA, with whom Young JA & Handley AJA agreed).
47 There is a further difficulty with the plaintiffs' submission that it is necessary to enquire as to the minimum equity to do justice to the plaintiffs. This further difficulty is that there is real doubt whether a minimum equity principle exists in Australia even if a cause of action is established.
48 In Sullivan v Sullivan [23], Handley JA referred to the approach taken in the plurality decision in Giumelli v Giumelli which permitted the remedy for an estoppel to be a money sum representing the value of the promised land as the prima facie relief, displaced only if this relief for an estoppel would be 'inequitably harsh': see especially Giumelli v Giumelli (123) [42]. His Honour said of the operation of the minimum equity principle in relation to estoppel that
[t]he minimum equity principle was applied in Verwayen ... by Mason CJ (441) and Brennan J (429, 430), but since Giumelli it is probably not the law in this country'.
Hodgson JA (with whom McColl JA agreed) agreed with Handley JA on this point [94].
49 In later cases, including in this jurisdiction, it has been reiterated that there is no principle in estoppel cases requiring a court to enquire into a 'minimum equity' because generally an estopped party can only avoid detriment created by resiling from the assumption or expectation that they had engendered by making good that assumption or expectation: see, for example, Como v Helmers [2011] WASC 179 [77] (Corboy J); Clifton v Chinnery [2011] WASC 294 [48], [55], [69] (Kenneth Martin J).
50 At [157], I rejected the plaintiffs' claim for a resulting trust for six reasons most of which would have been sufficient, on their own, to show that the plaintiffs objectively intended that the defendants should enjoy the benefit of their one half joint interest in the Anstey Road property. Later, in relation to a counterclaim, I said at [238] that the objective basis of the Anstey Road agreement was that 'the parties would enter a joint family enterprise and have shared ownership of the Anstey Road property'. See also [185].
51 As I explained at [180], the Anstey Road Agreement (the existence of which was an agreed fact at trial) 'carefully divided all the responsibilities concerning the Anstey Road property'. There was no evidence, nor was there any submission, at any stage of the trial that the Anstey Road Agreement should contain an implied term that the defendants make payment to the plaintiffs of $183,455.45. No such condition can be implied into the Anstey Road agreement.
52 Nor was there any evidence, or any submission, which could have established any objective intention that the defendants' joint interest in the Anstey Road property should be subject to such a condition of payment. Such a condition would, as counsel for the second defendant submitted in written submissions, be inconsistent with the Anstey Road Agreement.
53 Any award of equitable compensation requiring the defendants to make that payment to the plaintiffs, on the basis of some unidentified cause of action, and premised upon a 'minimum equity to do justice', would therefore be inconsistent with my findings concerning the objective agreed contract between the parties.
54 In my reasons I explained at [190] that the extent of a declaration to be granted should be coextensive with the rights and obligations agreed by the parties in relation to the ANZ loan account. The duty which the defendants undertook in the Anstey Road Agreement was for repayment of the ANZ loan (see my reasons at [69(g)], [118] and [196]) which, from the perspective of the ANZ bank, was the subject of joint and several liability of all of the plaintiffs and the defendants.
55 Counsel for the plaintiffs initially submitted that the appropriate order was as follows:
Save only in respect of any rights that the Australian and New Zealand Banking Group Limited (ANZ) has as against the Plaintiffs, the Defendants are liable, jointly and severally, to the ANZ and to the Plaintiffs, for the balance outstanding on ANZ loan account with BSB 016780 and account number 255121867 and the defendants indemnify the Plaintiffs against any claim, howsoever arising out of or in relation to that account. (emphasis added)
This declaration is appropriate, save for the words I have emphasised in italics. The terms of this 'howsoever arising' indemnity are not coextensive with the agreed rights and obligations of the parties in relation to the ANZ loan account. During the hearing this morning this was accepted by counsel for the plaintiff. There was no dispute about the remainder of the order.
56 Counsel for the plaintiffs sought orders, encompassed in a general pleading in the statement of claim for other appropriate orders, that:
(a) In the Anstey Road Agreement, it was agreed that the cost of rates and services for the Anstey Road property would be shared equally between Bruce, Carolyn, Troy and Stephannie: [69(f)]; and
(b) There are currently amounts owing by Stephannie in relation to Shire rates and Water Corporation charges: [84].
58 Exhibit 14 at trial was a statement of rates due from the City of Armadale which suggested that payments of rates had not been made by Stephannie. The first defendant who, for avoidance of confusion, I have referred to as Stephannie, has now sworn an affidavit saying, amongst other things, that:
(1) she has potential concerns about adjustment to the rates by the plaintiffs on account of water drunk by horses rather than a flat 25% amount of the total excluding interest;
(2) she opposes any claim for interest on the rates on the basis that the plaintiffs have prevented her from making timely payment of the rates.
59 In circumstances in which there may be controversy concerning matters such as interest on any liability of Stephannie's, or adjustment to Stephannie's liability, but these issues were not raised at trial (either in evidence or cross-examination), the orders which should be made concerning rates and water charges which are due and payable by Stephannie should declare only her obligation, as found in my reasons, to pay 25% of these charges. Her counsel accepted that the appropriate orders are as follows:
61 I will hear now further submissions from counsel as to costs.
CITATION : ANDERSON -v- McPHERSON [No 2] [2012] WASC 19 (S2)
HEARD : 3-6 OCTOBER & 24 NOVEMBER 2011 & 2 MARCH 2012
Costs - Order 24A offer of compromise - Whether offer by plaintiffs more favourable to first defendant than orders made - Method of valuing offer - Similar offer of compromise made by first defendant - Turns on own facts
Property Law Act 1969 (WA), s 126
Uniform Civil Procedure Rules 2005 (NSW), r 42.15A
1 EDELMAN J: This issue concerning the appropriate orders as to costs was deferred pending my decision on the other orders. Submissions as to costs orders were made at the conclusion of my oral reasons for decision on the other orders. The submissions ran past the end of the day and counsel were content that these reasons and my proposed costs orders would be provided by email, with liberty to apply in relation to the costs orders if any further matters arose from these reasons.
2 The plaintiffs sought various orders in their prayer for relief. These included an order for sale of the Anstey Road Property, a declaration concerning rights relating to the ANZ Anstey Road account, equitable compensation, and a declaration of resulting trust.
3 The issue concerning an order for sale of the Anstey Road Property under s 126 of the Property Law Act 1969 (WA) was deferred until after the giving of my reasons. There were also agreed facts that rates and charges were owing to the Armadale Council and the Water Corporation by the first defendant. Counsel for the plaintiffs said, at the end of trial that 'we hope not to trouble your Honour with [those issues]' (ts 264). The issue concerning the rights relating to the ANZ Anstey Road account was generally the subject of agreed facts at trial.
4 Apart from the first defendant's counterclaims, contribution and indemnity notice (as to which she accepts that she must pay the plaintiffs' costs) almost all of the evidence at trial, and almost all of the pleadings and the submissions of both counsel in opening and closing, were directed to whether the plaintiff was entitled to a declaration of resulting trust. That declaration was not made. The declaration of resulting trust was the essence of the plaintiffs' case because a resulting trust, and any beneficial interest of the parties under that trust, would dictate the parties' respective shares in the Anstey Road Property under an order for sale. The ordinary course in a case such as this would therefore be that the plaintiffs would pay the costs of the first defendant of the claim, to be taxed if not agreed.
5 Counsel for the plaintiffs pointed to my reasons that apart from the issue of the operation of presumptions the ultimate resolution of the resulting trust issue turned upon uncomplicated factual matters, some of which were not in dispute [5]. He submitted that the trial had been complicated and extended by issues raised by the first defendant in the counterclaim and contribution and indemnity notice. That may be so, but those additional costs will be borne by the first defendant, since the costs of the counterclaim and contribution and indemnity notice are to be paid by the first defendant.
6 Counsel for the plaintiffs then referred me to an offer of settlement made by the plaintiffs to the first defendant under O 24A of the Rules of the Supreme Court 1971 (WA). The offer was made on 20 June 2008. It is an unfortunate mark of this litigation that an extremely similar offer was made by the first defendant to the plaintiffs on 29 March 2011, differing only in the requirement that the first defendant be released from payment of rates and taxes she owes in relation to the Anstey Road Property. Both offers were rejected.
7 Counsel for the plaintiffs sought party and party costs of the claim based upon the 20 June 2008 offer. His submission was that the orders made were less favourable to the first defendant than this offer and the plaintiffs were therefore entitled to their party and party costs of the claim for the period before and after the offer: see O 24A r 10 Rules of the Supreme Court.
8 Order 24A r 10 of the Rules of the Supreme Court is incomplete in one significant respect. It only contemplates costs orders in circumstances of an offer by a plaintiff or defendant where 'the plaintiff obtains judgment on the claim': see O 24A r 10(4),(5). It provides no direct guidance for how to resolve a situation where the defendant obtains judgment on the claim but the offer made by the plaintiff might have been more favourable to the defendant than the judgment obtained by the defendant. This gap has been noticed by judges in other jurisdictions, whose comments led to reform of the rules in New South Wales and in the Federal Court: see the discussion in G Dal Pont The Law of Costs (2nd ed, 2009), 374 375, [13.16]; Federal Court Rules 1979 O 23 r 11(6) (with effect from 1 August 2008) see now Federal Court Rules 2011 r 25.14; and Uniform Civil Procedure Rules 2005 (NSW) r 42.15A.
9 Counsel for the plaintiff submitted that the approach in O 24A r 10(4) ought to be applied by analogy in the general exercise of my costs discretion. Counsel for the first defendant did not suggest that this approach was incorrect. I proceed on this basis, although there may be doubt whether an analogical approach is always appropriate in a case of a statutory omission. In other words, it is unclear whether, in the absence of provision in the rules, the common law should generally allow costs for the period both before and after an offer to a plaintiff where a defendant obtains judgment which is less favourable than the offer. However, in circumstances in which the plaintiff did obtain some orders sought (albeit not orders which were the subject of any substantial contest) I proceed on the basis that the question is whether the plaintiffs' offer was more favourable than the judgment obtained by the first defendant.
10 The plaintiffs' offer on 20 June 2008 was as follows:
(2) a release of the first defendant from liability under the ANZ Anstey Road loan (with an outstanding balance of $141,297.10 as at 12 May 2008); and
(3) the interests of the defendants in the Anstey Road Property be transferred to the plaintiffs.
11 It is extremely difficult to assess whether this offer, at this date, was more favourable to the first defendant than the orders which I have made. This is because the effect of my orders is that the first defendant will recover 25% of the value of the property (less selling costs). But there is no evidence before me concerning the value of the Anstey Road Property (in (3) above) as at 12 May 2008.
12 Both counsel submitted that I should consider, as a rough and ready approximation, a comparison between the $1 million value of the Anstey Road Property, as at 23 September 2011, based on the valuers' report from Mr Lambert, and the balance of the ANZ Anstey Road loan at about that date. This approach is very rough because it values the 20 June 2008 offer at a date several years later, ie 23 September 2011. At that date, the offer in force was an offer from the first defendant.
13 However, even proceeding on this basis as submitted by counsel for the plaintiffs, the plaintiffs' offer is less favourable to the first defendant than the judgment which the first defendant obtained.
14 At 28 September 2011, the balance of the ANZ Anstey Road loan was $132,243.35. The first defendant's liability under the ANZ Anstey Road loan was joint and several with the plaintiffs and the second defendant. But the first and second defendants had undertaken to the plaintiffs that they would make the repayments for that loan: see my reasons at [69(g)].
15 Although part of the increase in the loan was due to a draw down by the first defendant, the extent to which that draw down should be apportioned between the first and second defendant is a matter for the Family Court proceedings. There is insufficient evidence for me to make any apportionment.
16 The result is that the plaintiffs had a right to proceed to recoup any of their $132,243.35 joint liability against the first or second defendant under the Anstey Road Agreement. The proposed release of the first defendant from that liability in the plaintiffs' O 24A offer was not a release of the second defendant. At best, from the plaintiffs' perspective, the release of the first defendant at 28 September 2011 should be valued at $66,121.68. The plaintiffs' claim against the second defendant was not released. The same value of the debt applies to the first defendant. Even if the Anstey Road Agreement could be construed as creating a joint liability of the first and second defendant to the plaintiffs, the first defendant could have sought equitable contribution from the second defendant if the whole of the debt were enforced against her, or joined the second defendant (who was not released) to any enforcement action.
17 Therefore, even if it be assumed that the plaintiffs' offer of 20 June 2008 had been in force as at 28 September 2011, and even assuming that I were to ignore the fact that the offer in force at that date was from the first defendant and not from the plaintiffs, a rough valuation of the plaintiffs' offer would be $236,121.68 (comprised of $170,000 cash offer plus $66,121.68). This is less than the amount which both counsel assumed to be the value of the judgment to the first defendant (ie $250,000, being a quarter of Mr Lambert's valuation) even with some reduction for selling costs (the extent of such a reduction was, again, not the subject of any evidence before me).
18 The appropriate costs disposition of the claim is that the plaintiffs should pay the first defendant's costs.
19 There remains for consideration the issue of the costs of the hearing on 2 March 2012 which concerned all the appropriate orders consequent upon my judgment. The primary focus of the submissions, written and oral, concerned those orders focussed upon an award of equitable compensation, in the amount of $180,000. There was little dispute concerning the other orders. The plaintiffs were unsuccessful in these orders sought for equitable compensation: see Anderson v McPherson [No 2] [2012] WASC 19 (S). After the delivery of my supplementary reasons, further submissions were made by both counsel in relation to the costs of the plaintiffs' action, including the costs of the 2 March 2012 hearing (ts 330 331). As to these orders, for the reasons I have given in this judgment the first defendant has also been successful in her submissions that the plaintiffs should pay the first defendant's costs of the action. There was no dispute that the first defendant should pay the plaintiffs' costs of the counterclaims and contribution and indemnity notice.
20 It is, therefore, appropriate that the plaintiffs should pay the costs of the first defendant in relation to the 2 March 2012 hearing.
(1984) 155 CLR 242
(2011) 243 CLR 253
(1982) 149 CLR 431
(2005) 220 CLR 592
(2006) 227 CLR 471
(1999) 196 CLR 101
(2004) 61 NSWLR 75
(1985) 3 NSWLR 531
(1993) 31 NSWLR 582
(1956) 95 CLR 353
(1995) 184 CLR 538
(1956) 98 CLR 228
(1959) 110 CLR 297
(1917) 24 CLR 274
(1994) 33 NSWLR 740
(2005) 34 Fam L R 296
(1980) 32 ALR 153
(1994) 182 CLR 51
(2001) 208 CLR 516
(1983) 151 CLR 422
(2004) 219 CLR 165
(2005) 63 NSWLR 203
(2006) 229 CLR 386
(2008) 232 CLR 635
(1998) 194 CLR 457
(1983) 151 CLR 447
(1936) 56 CLR 113
(2005) 63 NSWLR 557
(1999) 75 SASR 1
(1998) 194 CLR 395
(2003) 214 CLR 51
(2003) 217 CLR 315
(1956) 99 CLR 362
(1998) 195 CLR 566
(1988) 164 CLR 387
(1990) 170 CLR 394
(1999) 198 CLR 380
(1987) 162 CLR 612