Arrow Custodians Pty Ltd v Pine Forests of Australia Pty Ltd

Supreme Court of NSW|2018-10-26|Before: Adamson J

Introduction

By amended notice of motion filed on 5 October 2018, Dominic Ziino (the applicant) seeks orders and declarations that the balance of funds which were paid into court by Westpac Banking Corporation (Westpac), together with interest, be paid to him.
Westpac paid the funds into court in 2004 after it had sold a property, as mortgagee, of which the applicant and his co-owner, Julie Young were registered proprietors as joint tenants.
In order to address the question whether the applicant is entitled to the relief sought it is necessary to summarise the evidence, all of which is uncontroverted.

The applicant's submissions

Mr Charles, the applicant's solicitor who appeared on his behalf, contended that the balance of the funds ought be paid to him on the following two alternate bases: 1. Ms Young ought be presumed to be dead and the applicant is entitled to the funds as the sole surviving joint tenant; and 2. the applicant is, on equitable principles, entitled to the whole of the funds as Ms Young made no contribution to the purchase of the property.

General principles

The general principles are well established and can be shortly stated.
A joint tenancy can be terminated in any one of three ways: 1. death of one joint tenant (which results in the other owning the whole by survivorship); 2. alienation by one joint tenant of his or her share (which destroys the unity of time) and converts the joint tenancy into a tenancy in common; 3. mutual agreement between the parties; or 4. an order of a court granting equitable relief.
A joint tenancy cannot be terminated by a unilateral declaration of intention: Corin v Patton (1990) 169 CLR 540; [1990] HCA 12. Of the four ways set out above, only (1) and (4) were suggested to be relevant. In these circumstances it is not necessary to consider, in the context of (3), whether severance ought be inferred, as sometimes occurs when parties to a marriage which has ended have come to an agreement to sell the matrimonial home but one dies before the sale is effected: Public Trustee v Pfeiffle [1991] 1 VR 19 at 23-28 per Kaye J; and texts summarised by Ward J in Scott v Scott [2009] NSWSC 567 at [64]-[69].
As to (1), the applicant submitted that it should be presumed that Ms Young is dead on the basis of the presumption in Axon v Axon (1937) 59 CLR 395; [1937] HCA 80 that once seven years have passed and a person has not been seen by the persons who would be expected to be contacted by that person (the propositus) the court can presume that the propositus is dead although not that he or she died at any particular time. This presumption operates even in cases where the propositus was a person who had deliberately cut him- or herself off from friends or was avoiding arrest: Ross v NRMA Life (1993) 7 ANZ Ins Cas 61-170.
As to (4), the applicant submitted that, as Ms Young had made no contribution to the property, he was entitled, in equity, to all of the proceeds which had been paid into court and that the court ought grant equitable relief accordingly.
Because I consider, for the reasons given below, that the applicant is entitled to equitable relief which will result in his being entitled to the whole of the funds, it is not necessary for me to consider whether the presumption of death arises.
When considering who owns property, equity has always had regard to intention and contribution. Thus, where two people contribute equally to the purchase of a property which is in the name of one of them, the property will be held by the legal owner on trust for the persons who paid the purchase price in equal shares as tenants in common: Calverley v Green (1984) 155 CLR 242 at 258-259; [1984] HCA 81 (Mason and Brennan JJ). Similarly, when two people buy a property as joint tenants, but one contributes more than the other, the equitable presumption is that they hold the legal estate on trust for themselves as tenants in common in shares proportionate to their contributions: Calverley v Green at 246-247 (Gibbs CJ); 258-259 (Mason and Brennan JJ); 266-267 (Deane J).
The basic equitable presumption is that joint tenants hold the legal estate on trust in proportion to their contributions. This presumption may be displaced by the presumption of advancement or by presumed or actual intention. Thus, a married couple in a lifelong relationship might be presumed to intend that the property be enjoyed together during their joint lives and by the survivor on the death of the other: Calverley v Green at 259.
Under s 58(3) of the Real Property Act 1900 (NSW), the applicant and Ms Young, as registered proprietors, became entitled to the surplus proceeds subject to any adjustment for their respective equitable interests: Bofinger v Kingsway Group Ltd (2009) 239 CLR 269; [2009] HCA 44 at [34]-[35]; Residential Housing Corporation v Esber (2011) 80 NSWLR 69; [2011] NSWCA 25 at [139]-[144]. When property held jointly is sold to a third party by a mortgagee or trustee, the mortgagee holds the proceeds of sale upon such trust as may be required to give effect to the rights of the co-owners: Arrow Custodians Pty Ltd v Pine Forests of Australia Pty Ltd [2008] NSWSC 839.

The present case

In the present case, there is, in my view, no operative presumption of advancement. Although the applicant and Ms Young were in an intimate relationship, they were not married. Their plan to buy real property together was motivated by practical concerns about the relative cost of a mortgage as opposed to the cost of rent.
The relevant equitable presumption is, accordingly, the presumption that joint tenants hold the legal estate on trust in proportion to their contributions. The applicant has established, by uncontroverted and largely incontrovertible evidence, that Ms Young made no contribution to the property. Following the sale of the property, Westpac held the proceeds on trust, in accordance with the equitable principles referred to above, and the funds in court are to be paid out in accordance with that constructive trust. The order for payment out made by Button J did not sever the joint tenancy at law. It neither created, nor recognised, any equitable interest in the funds.
In these circumstances, the applicant is entitled, in equity, to the whole of the funds paid into court. An order for payment out of the balance of the funds ought be made, together with declaratory relief to give effect to the equitable presumption.

The appropriate relief

It is desirable that a declaration be made to reflect the position in equity that the parties' respective legal interests in the funds are subject to a constructive trust in favour of the applicant solely, having regard to his contribution to the purchase of the property. This was the mechanism adopted in Muschinski v Dodds (1985) 160 CLR 583 at 623-624; [1985] HCA 78 (Deane J).

Orders

For the reasons set out above I make the following orders: 1. Declare that Dominic Ziino (the applicant) was the sole contributor to the purchase of the property known as 6/32-41 Graham Road, Narwee (the Property) which he purchased with Julie Young (the co-owner) as joint tenants. 2. Declare that, until the sale of the Property, the applicant and the co-owner held their respective legal interests as joint tenants in the Property on trust for the applicant solely. 3. Declare that, upon the sale of the Property on 4 June 2004, Westpac Banking Corporation (Westpac) held the balance of the proceeds of sale on trust for the applicant solely. 4. Order, pursuant to Uniform Civil Procedure Rules 2005 (NSW), rr 41.3 and 41.8, that the balance of the proceeds of the sale of the Property, which were paid into Court by Westpac, together with any interest accrued on such monies, be paid to the applicant for his sole benefit and use.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 October 2018

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