Ball v Smith

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

5946/2007 TRACY-LEE BALL v BRAYDON DAVID SMITH JUDGMENT 1 HIS HONOUR: This is an application by the plaintiff for a declaration in respect of the ownership of a property at Kestrel Place, Ingleburn held by her late mother Brenda Mavis Smith who died on 16 June 2006. An alternative application is made under s 7 of the Family Provision Act in respect of the estate of the deceased. The plaintiff and defendant are the only children of the deceased and her late husband, Charles Henry Smith, who died on 5 May 2006. Family History 2 At some time prior to 1979 the family decided to migrate to Australia from New Zealand. The deceased and her children arrived in February 1979 in advance of the arrival of her husband. In March 1979 the deceased purchased a town house at Clifford Crescent, Ingleburn. 3 The deceased's husband joined his family in Australia in 1982 and by that year the plaintiff had completed her education and she obtained employment with the Commonwealth Bank.

4 In March 1984 the deceased and her husband sold the Clifford Crescent Ingleburn property and used the proceeds to in part to fund a purchase of the property at Kestrel Place Ingleburn for $90,000. Contracts on that purchase were exchanged on 19 April 1984. 5 The deceased and her husband provided $55,000 of the purchase price and a loan was taken out with the Commonwealth Bank for $35,000. For reasons which I will return to later the purchase was in the name of the deceased, her husband and her son, the defendant, as joint tenants. 6 The mortgage with the Commonwealth Bank was one which made each of the borrowers jointly and severally liable under the mortgage. No contribution to the purchase price or subsequent mortgage repayments were made by the defendant.

7 In June 1984 both the deceased and her husband made a will in which they provided that their estate would pass to their survivor and in default the wills contained a provision that their interest in the home was to be transferred to the defendant and the residue of their estate to the plaintiff. 8 After completion of the transaction the parents made re-payments on the mortgage from their pensions and in August 1985 they made a lump sum payment of $10,000 off the loan.

9 In 1984 the defendant purchased a house at Boeing Crescent Raby with his then girlfriend.

10 In October 1986 when the loan had been substantially reduced the deceased and her husband made an application to have the defendant's name removed from the loan. The bank charged $210 in fees to the parents for this request.

11 In due course in 1987 the loan was discharged and the deceased and her husband obtained a discharge of mortgage and a return of the certificate of title. The discharge of mortgage was registered on 2 December 1987. 12 In 1988 the defendant and his then partner with whom he bought his property at Raby separated. 13 On 11 July 1990 both the deceased and her husband made their last wills and in the event that each did not survive the other before probate was granted their estates were left upon trust for the plaintiff and the defendant as tenants in common in equal shares. The defendant was not to receive his share until he attained the age of 35 years because of what was described as his alcohol drinking problem. 14 The plaintiff who is married has two daughters, Melissa born in February 1992 is now aged 16 and Laura born in July 1996 now aged 12. 15 As I have mentioned the deceased's husband died on 5 May 2006 and deceased died on 16 June 2006.

16 The summons was filed on 11 December 2007 and to the extent that there is an application under the Family Provision Act 1982 the summons is within time. Ownership of Kestrel Place, Ingleburn 17 In the event that this claim is successful it will mean that the property at Kestrel Place was held completely by the deceased at the date of her death and in that event half will pass to the plaintiff and half to the defendant. If this result is achieved the plaintiff does not intend to proceed with her application under s 7 of the Family Provision Act 1982 as she will be satisfied with the half of the property. Accordingly, it is appropriate to deal with this claim first. 18 It will be recalled that the property was purchased in the names of the three purchasers and the son, the defendant, did not provide a contribution to the purchase money. The general rule is that it is presumed that a resulting trust arises in favour of several purchasers in the proportions in which they contributed to the purchase money for the purchase of property. This is subject to the exception created by the presumption of advancement: see Calverley v Green (1984) 155 CLR 242 at 247.

19 To the extent that part of the purchase price has been provided by mortgage funds and under the mortgage each party incurs a joint and several liability that part of the purchase price is deemed to be as contributed by the parties in equal shares: Crew v Sheldon (Supreme Court of New South Wales, Bryson J, 22 September 1995 unreported) at pp1-2. 20 In dealing with the presumption of advancement Gibbs J in Calverley v Green at 251 had the following to say: "However, both the presumption of advancement, and the presumption of a resulting trust, may be rebutted by evidence of the actual intention of the purchaser at the time of the purchase: see Charles Marshall Pty. Ltd. v. Grimsley (1956) 95 C.L.R. 353 at pp. 364 -365. Where one person alone has provided the purchase money it is her or his intention alone that has to be ascertained. In the present case however both purchasers contributed the purchase money. The amount of $18,000 borrowed under the mortgage was provided equally by the parties, for it was lent to them jointly, on terms which made them jointly and severally liable for its repayment, and, having thus been borrowed, was applied by them in part payment of the purchase price. Where there are two purchasers, who have contributed unequal proportions, but have taken the purchase in their joint names, the intentions of both are material. Even if the parties had no common intention, the intentions of each may be proved, for the purpose of proving or negating that one intended to make a gift to the other." 21 The principal claim is that because of a number of factors which I will discuss the intention was that the property was to be held only by the parents and that the presumption of advancement is rebutted. An alternative position was put regarding contributions resulting from the position of the three owners being joint debtors to the bank. The plaintiff bases this upon the fact that the parents repaid the debt and there was no contribution by the defendant. 22 The prima facie position is that where one of the co-owners pays such a debt in full that party is entitled to require the other co-owner to contribute a rateable amount. In this regard the parties' rights arise from the equitable doctrine of contribution not from the law of property: Calverley v Green at 263; Muschinski v Dodds (1985) 160 CLR 583, 596 - 598 per Gibbs C.J.; Forgeard v Shanahan (1994) 35 NSWLR 206, 224 F per Meagher JA. 23 I turn to whether the presumption of advancement has been rebutted in the present case. 24 According to the plaintiff's submissions there were five factors which suggested that the presumption of the advancement was rebutted. The submissions on this aspect are as follows: "Firstly, the conversations of the parents which refers to the intentions of the parties at the time of the purchase of the property: "There is a complication with the Commonwealth Bank making a loan to your father and I as we are too old as pensioners, our income does not quite meet the Bank's guidelines for us to repay the loan before we are of retiring age. Kay Edwards from the Commonwealth Bank has suggested Braydon go on the Contract with your dad and I and that will fix the problem". And later in pa 20 "When we bought the house we used our savings and the money we got from the sale of Clifford Street and a loan of $35,000 to pay from it. Braydon has not put any of his money in." Secondly within two weeks of purchase of the property the parents instructed Marsdens solicitors to prepare wills in which each of the parents respectively gave their estate (in the event that they did not survive the other by 30 days) to their executors to hold on trust: "To transfer all my right title and interest in my home to my son Braydon David Smith." and "Transfer the residue of my estate to my daughter Tracey-Lee Smith." The fact that the parents thought they had an interest in the property of which to dispose is inconsistent with the joint tenancy in which the title to the property was held. It is consistent with a notion that the Defendant held his interest in trust for the parents: See for example Hale v Hale [2004] NSWSC 266 at [41]. Thirdly, during the course of the loan as abovementioned the parents took the positive step to have the Defendant's name removed from the loan account. This was a formalizing of the fact that the parents regarded the property as their own. Fourthly, the Plaintiff gives evidence that the parents in speaking about the property indicated that it was their home. She gives an example of in or about 1988/1989 after the Defendant had stopped over at the house Brenda made a statement speaking about Braydon to the effect: "I will not have his drunken, pub-going ways. He is treating the place like it was his own personal hotel." Brenda asked the Defendant to move out and he did so. Fifthly, the failure of the defendant to give evidence. The court can assume from the unexplained failure of the Defendant to attend and give evidence, that his evidence would not assist his defence of the case." 25 The time when these events occurred raises the question as to whether one can determine intention from subsequent declarations and conduct. Kaye J provided a useful summary of the law in Wilkins v Wilkins [2007] VSC 100 at [16] to [22]: 16 There is some disagreement in the authorities as to whether the donor, or his or her representatives, is entitled to rely on subsequent acts and conduct of the donor as positive evidence in support of the existence of the resulting trust. There are a number of authorities which expressly state that such evidence is inadmissible. In Sidmouth v Sidmouth (1840) 2 Beav 447 at 454; 48 ER 1254 at 1257 Lord Langdale MR, in a case involving the acquisition of property by a parent in the name of a child, stated: "Where property is purchased by a parent in the name of his child, the purchase is prima facie to be deemed an advancement ... [T]he relation of parent and child is only evidence of the intention of the parent to advance the child, and that evidence may be rebutted by other evidence, manifesting an intention that the child shall take as a trustee; and in this case as in most others of the like kind, the only question is, whether there is such other evidence. That cotemporaneous acts and even cotemporaneous declarations of the parent may amount to such evidence, has often been decided. Subsequent acts and declarations of the parent are not evidence to support the trust, although subsequent acts and declarations of the child may be so; but, generally speaking, we are looking at what was said and done at the time." 17 Similarly, in Shephard v Cartwright [1955] AC 431 at 446 Viscount Simonds, referring to the presumption of advancement which arises in the case of an acquisition in the name of a child, considered that the principles of law were "well settled" and correctly stated in a number of texts, including the following passage from Snell's Equity : 24th ed p.153 "The acts and declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration. ... But subsequent declarations are admissible as evidence only against the party who made them, and not in his favour." 18 In Charles Marshall Pty Ltd v Grimsley , the High Court quoted and adopted as correct the passages from Sidmouth v Sidmouth and Shephard v Cartwright which I have quoted above. In their joint judgment, Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ stated: "The plaintiffs are the daughters of the donor and the initial presumption is that he intended to give the shares to them or, in other words, to make them the absolute beneficial as well as the legal owners of the shares. The plaintiffs start with this advantage. The presumption can be rebutted or qualified by evidence which manifests an intention to the contrary. Apart from admissions, the only evidence that is relevant and admissible comprises the acts and declarations of the parties before or at the time of the purchase ... or so immediately thereafter as to constitute a part of the transaction. ... Subsequent statements or acts by the donor could only be evidence not for but against him so far as they were admissions that the plaintiffs were the beneficial owners of the shares. Subsequent statements or acts by the plaintiffs could only be evidence not for but against them so far as they were admissions that the shares were allotted to them as trustees for their father" at 365-6; see also Calverley v Green at 261-2 (per Mason and Brennan JJ) 19 Finally, in Damberg v Damberg [2001] NSWCA 87 at [45] the New South Wales Court of Appeal considered itself bound by the views of the High Court in Charles Marshall and the House of Lords in Shephard v Cartwright in considering that subsequent conduct of the donor, in developing properties placed by him in the names of his children, was inadmissible. Heydon JA (as his Honour then was), with whose judgments Spigelman CJ and Sheller JA concurred, referred to Shephard v Cartwright and Charles Marshall Pty Ltd v Grimsley and noted that: "Viscount Simonds' formulation is generally taken implicitly to exclude not only subsequent declarations which are not admissions, but subsequent conduct. ... The principles are old ... They stem from an age where party witnesses were disqualified on grounds of interest" at [45] . 20 Heydon JA thus concluded at [45] that the evidence of the husband, in developing the properties and working on them after they had been placed in the names of his children, should have been excluded. His Honour stated: "The husband relied on his conduct in developing the properties and working on them even after they were in the names of the children. Use of the evidence about that conduct for that business offends the principles laid down in Shephard v Cartwright (1955) AC 431 at 445-6 so far as they survive the Evidence Act 1995 (Cth): the conduct was not an admission, was not part of the transaction, and was self-serving. ... However the evidence was admitted. ... The children had no complaint about this. The evidence in question is far from conclusive, but it offers some support for the trial judge's conclusion." 21 On the other hand there is some authority which supports the proposition that subsequent acts and conduct of the donor may be admitted in evidence in support of the proposition that the property acquired by the donor in the name of the donee is subject to a resulting trust. In Davies v The National Trustees Executors and Agency Co of Australasia Limited [1912] VLR 397 at 403-4 Cussen J stated: "It was said that evidence of declarations of the husband or father (the donor) tending to negative the presumptive advancement must be confined to declarations before or at the time of the transaction being investigated. I agree with this if such evidence is tendered directly to prove his mental condition at that time -- that is, to prove the intention which accompanied his act. But I can conceive circumstances in which such a declaration might be proved to rebut evidence given by the other side, or as a basis for direct admission, or that indirect form of admission which may, in certain circumstances, be implied from silence. It was also suggested that evidence of subsequent acts or conduct of the husband or father (as distinct from oral declarations or statements) if tending to negative the presumption could not be admissible. I think this is not correct. Such acts or conduct may be confirmatory of an expression of intention proved aliunde. I respectfully agree with what was said by Lopes LJ in Re Grove [1888] 40 CD 216: `I have always understood the law to be that in order to determine a person's intention at a given time you may regard not only conduct and acts before and at the time, but also conduct and acts after the time, assigning to such conduct and acts their relative and proper weight and cogency.' Notwithstanding this statement I should exclude subsequent oral declarations of the husband or father, and I should also exclude subsequent acts which, from want of continuity or otherwise, must in substance be regarded as merely equivalent to oral declarations if the tendency was to negative the presumption of advancement and such subsequent declarations or acts were tendered merely as direct proof of the prior intention. My view on this point makes admissible evidence tending to show that the husband or father dealt with the property as his own, particularly if he so dealt with it continuously from the time of the transaction being investigated. The admission of such evidence is merely an illustration of a general principle as to such confirmatory matter being admissible. Its weight in some circumstances would be very great, in others very small." In the present case it is not necessary to resolve the difference in the authorities. It was the plaintiff who sought to adduce evidence as to the conduct of his parents, and in particular his mother, in relation to Killingworth after it was acquired by them and placed in the names of the plaintiff and his brother Neil. The plaintiff sought to prove that he and Neil, and not his parents, had been responsible for payment of rates and other outgoings in relation to the property, and for tending and developing the property. In those circumstances evidence adduced by the defendant as to the conduct of William and Norma Wilkins, after the acquisition of Killingworth, was clearly admissible in rebuttal. In any event, to the extent that it was relied on affirmatively by the defendant, it was adduced without objection on behalf of the plaintiff.

26 Plainly the second event, the making of the wills, is so connected that such conduct can be regarded as part of the transaction. The third and fourth items of conduct I do not think can be regarded as part of the material to which the Court can have regard. 27 The defendants submitted that the presumption of advancement was not rebutted for the following reasons: "a. The defendant was asked to be a party to the purchase of the property. The Plaintiff was not. b. The defendant does not appear to have been asked to contribute to the property's purchase nor to its mortgage repayment. c. The parents must have known that Braydon was a part-owner of the property. This was not the mother's first property. d. There is no evidence that there was any arrangement with Braydon such that his placement on the title was upon trust for the parents. e. Braydon was subject to obligations under the mortgage, like his parents were. Such behaviour was consistent with Braydon being given a part ownership of the title, to the exclusion of the Plaintiff, which share was unconditional and permanent. f. 1 week after the purchase settled, the parents made mutual wills which included the clause (see para 4) wherein (should the father not survive her by 30 days) the defendant was to receive the property to the exclusion of the plaintiff. This is consistent with an intention by the parents to ensure the defendant retained - to the exclusion of the plaintiff - the entirety of the property. 28 The first point has no probative value so far as concerns the intention to benefit Braydon. The second point does not show any intention on the parents' behalf that the property was intended as a gift for Braydon and is consistent with the argument by the plaintiff that the parents did not wish to convey a beneficial interest to the defendant. His name on the title was simply to facilitate the loan approval and nothing more. The third point merely recognises this knowledge of the parents. The fourth point is true but that absence has to be seen in the light of the other evidence. The fifth point adds nothing and the last point to which the defendants refer merely shows that the parents believed they had the devisable interest which is inconsistent with an intention that beneficial title had passed to Braydon with the legal title. 29 In the result having regard to the first two matters referred to by the plaintiff I am satisfied that the presumption of advancement is rebutted. However, in the event that some other decision is accepted on appeal I will deal with the other aspects of the matter. 30 The first is to look at the matter on the basis of contributions to the purchase price. 31 There was a joint and several liability under the mortgage. Thus the parents contributed to the purchase price of the property the sum of $55,000 and two thirds of the mortgage sum of $35,000 namely $23,334 making the parents interest in the property the sum of $78,334 out of $90,000 or approximately 87%.

32 To the extent that Braden has a 13% ownership he was liable for that amount under the mortgage. He did not contribute any of the mortgage payments and accordingly under the equitable doctrine of contribution is liable to contribute to the parents' estate that amount.

33 The payments made by the parents on the 5 pages of the loan account in the plaintiff's affidavit total approximately $43,384.86. 34 By way of illustration a payment by the parents of $100 towards the mortgage liability would bring with it an entitlement to recover contribution from the Defendant of $13 and a charge over his interest in the property to secure repayment of that contribution: See for example Crew v Sheldon. at p2.

35 The parents are entitled to contribution for the 13% of the $43,384.86 sum which they paid. That amounts to $5,640.03 plus interest since at least December 1987 when the loan was discharged. 36 This means that for the purposes of the plaintiff's Family Provision Act application the deceased held 87 percent of the property and the defendant 13 percent and that the defendant owed the estate $5,640.03 plus interest since at least December 1987 when the loan was discharged. Plaintiff's alternative claim under the Family Provision Act 37 The plaintiff is an eligible person. In applications under the Family Provision Act the High Court in Singer v Berghouse (1994) 181 CLR 201 has set out the two-stage approach that a Court must take. At page 209 it said the following: "The first question is, was the provision (if any) made for the applicant 'inadequate for (his or her) proper maintenance, education and advancement in life'? The difference between 'adequate' and 'proper' and the interrelationship which exists between 'adequate provision' and 'proper maintenance' etc were explained in Bosch v Perpetual Trustee Co Limited . The determination of the first stage in the two-stage process calls for an assessment of whether the provision (if any) made was inadequate or what, in all the circumstances, was the proper level of maintenance etc appropriate for the applicant having regard, amongst other things, to the applicant's financial position, the size and nature of the deceased's estate, the totality of the relationship between the applicant and the deceased, and the relationship between the deceased and other persons who have legitimate claims upon his or her bounty. The determination of the second stage, should it arise, involves similar considerations. Indeed, in the first stage of the process, the court may need to arrive at an assessment of what is the proper level of maintenance and what is adequate provision, in which event, if it becomes necessary to embark upon the second stage of the process, that assessment will largely determine the order which should be made in favour of the applicant. In saying that, we are mindful that there may be some circumstances in which a court could refuse to make an order notwithstanding that the applicant is found to have been left without adequate provision for proper maintenance. Take, for example, a case like Ellis v Leeder where there were no assets from which an order could reasonably be made and making an order could disturb the testator's arrangements to pay creditors." Assets in the Estate 38 The value of the Ingleburn property is given in the affidavit of the plaintiff dated 24 June 2008 as being $320,000. 87% is $278,400. The other assets in the estate were:

Motor vehicle $4,000 ANZ Account $54,324.00 Furniture $10,000 Jewellery $2,000 UK Bank Account £ 19,000 ($44,000 approx) Debt due by the defendant with interest approx. $10,000 39 There are funeral expenses of $5,453. 40 The net value of the deceased's estate is thus approximately $397,271.

41 The plaintiff is 44 years of age, married with two daughters born in February 1992 and 1996. The family currently lives with her husband's parents in rented accommodation. They have recently bought a block of land at Douglas Park in New South Wales with the plaintiff having a 30% interest, her husband a 30% interest and his parents having a 40% interest. A 30% interest based on the purchase price is $145,000. The plaintiff and her husband own a vehicle worth $12,000 and their furniture is estimated at $20,000. They have superannuation of $25,000, personal effects and a minimum amount in the bank. The plaintiff and her husband owe $230,000 to the bank in respect of the purchase of the land. 42 It is proposed (and indeed building work has commenced on the land) that the plaintiff's husband who is a builder will build a house which is expected to cost some $300,000 which will accommodate their family as well as her husband's parents. At the end of that exercise the loan on the land for the plaintiff and her husband will be $400,000. 43 The husband's parents have contributed their share of the funds in cash. 44 It is necessary to consider the situation in life of others having a claim on the bounty of the deceased. The only other person in this case is the plaintiff's brother, Braydon Smith, the defendant. 45 The defendant did not place before the court any information as to his financial circumstances or his relationship with the deceased. In these circumstances the court can assume that he does not wish the court to consider his financial circumstances for the purpose of considering the plaintiff's application. 46 The plaintiff is entering a time in her life when she will have very substantial debts and a young family to bring up and educate. In these circumstances a sum equal to one half of the value of the deceased's land which is the most significant asset in the estate would be an appropriate sum for her to receive. 47 In the alternative consideration of the case the property would have passed to the defendant as he was the surviving joint tenant. The failure of the deceased to sever the joint tenancy which then existed between her and the defendant is a prescribed transaction under the Family Provision Act. The relevant prescribed transaction, which is alleged under s 23(b) (iii) of the Act, is the failure of the deceased to sever the joint tenancy. By the combined effect of s 22(1)(a)(i), s 22(4)(b) and s 22(5) there will be a prescribed transaction if the deceased omits to sever the joint tenancy immediately before death and full valuable consideration in money or money's worth is not given for the omission of the deceased to do that act (s 22(1)(b)).

48 In Wade v Harding (1987) 11 NSWLR 551 Mr Justice Young, as he then was, concluded on the facts of that case "what was forgone in not severing the joint tenancy was received by continuing to be a joint tenant." This conclusion appears to be because he formed the view that immediately before death the deceased had an equal chance with the joint tenant of benefiting by the jus accrescendi.

49 In Cameron v Hills (Supreme Court of New South Wales, 26 October 1989 Needham J, unreported) described that approach in these terms: "With great respect to his Honour, I find it difficult to see how a joint tenant, about to die immediately, can be said to have an equal chance of surviving the other joint tenant. The Court must look at the position the moment before death. Whatever may have been the facts in that case justifying the conclusion, there are no such facts in this case. Immediately before the death of this deceased there was no rational prospect of his surviving the defendant. Accordingly, in my opinion, no valuable consideration in money or money's worth was given for the omission of the deceased to sever the joint tenancy."

50 The approach of Needham J has now been followed in the Court of Appeal, see Cetojevic & Anor v Cetojevic [2007] NSWCA 33.

51 Provided that a deceased has suffered some injury, had a medical problem or set in train some sequence of events as a result of which death ensues then, like his Honour Justice Needham, I would normally conclude that there was no rational prospect of the deceased surviving his co-tenant. In the present case the deceased was the surviving parent of the defendant. In these circumstances I would conclude that no valuable consideration was given and thus there is a prescribed transaction.

52 Section 27 of the Family Provision Act provides: "(1) On an application in relation to a deceased person, the Court shall not make an order designating property as notional estate of the deceased person unless it has considered: (a) the importance of not interfering with reasonable expectations in relation to property; (b) the substantial justice and merits involved in making or refusing to make the order; and (c) any other matter which it considers relevant in the circumstances. (2) In determining what property should be designated as notional estate of a deceased person, the Court shall have regard to: (a) the value and nature of property the subject of any relevant prescribed transaction or distribution from the estate of the deceased person; (b) where, in relation to any such prescribed transaction, consideration was given, the value and nature of the consideration; (c) any changes over the time which has elapsed since any such prescribed transaction was entered into, any such distribution was made or any such consideration was given in the value of property of the same nature as the property the subject of the prescribed transaction, the distribution or the consideration, as the case may be; (d) whether property of the same nature as the property the subject of any such prescribed transaction, any such distribution or any such consideration could, during the time which has elapsed since the prescribed transaction was entered into, the distribution was made or the consideration was given, as the case may be, have been applied so as to produce income; and (e) any other matter which it considers relevant in the circumstances." 53 In this case there are no matters which the Court is required to consider under s 27 which would lead me to consider that I should not designate the property as notional estate. In these circumstances were it not for the fact that the plaintiff's principal claim succeeded, I would have declared the property to be notional estate and made appropriate orders for provision in favour of the plaintiff. Orders 54 I direct the parties to bring in short minutes. **********

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.