High Court of Australia|1981-10-16|Before: Gibbs CJ

Bloch v Bloch [1981] HCA 56; (1981) 180 CLR 390 (16 October 1981)

BLOCH v BLOCH AND ANOTHER [1981] HCA 56; (1981) 180 CLR 390

GIBBS CJ(1), MURPHY(2), AICKIN(3), WILSON(4) AND BRENNAN(5) JJ

Practice - Interest on judgment - Claim for declaration of entitlement to share of proceeds of sale of land - Whether proceeding for recovery of money - Adjournment - Appeal from refusal - Common Law Practice Act 1867 (Q.), s. 72.

GIBBS CJ I have had the advantage of reading the reasons for judgment prepared by my brother Wilson and am in complete agreement with them. I would accordingly dismiss the appeal.

MURPHY J I agree with Wilson J. The appeal should be dismissed.

AICKIN J In this matter I have had the advantage of reading the reasons for judgment prepared by my brother Wilson with which I am in full agreement. I would therefore dismiss this appeal.

WILSON J This is an appeal as of right from a decision of the Full

2. Court of Me Supreme Court of Queensland. The respondents are the parents of the appellant. They sued for a declaration that they were entitled to a one-third share of the net proceeds of the sale, on 9 July 1976, of some flats situated in Gresham Street East Brisbane. At first instance, W. B. Campbell J upheld the claim, and made the declaration and consequential orders sought. His Honour also allowed interest, pursuant to s. 72 of the Common Law Practice Act 1867 (Q.) ("the Act"), from the date of the statement of claim to the date of judgment. His decision was affirmed by the Full Court.

3. The trial of the action proceeded in the absence of the appellant. At that time he resided with his wife in West Germany, but by reason of his employment with a company engaged in oil exploration he spent lengthy periods on an oil rig in the North Sea. The nature and location of the appellant's employment had already delayed the trial for a considerable time. The statement of claim was filed in November 1976, and in February 1978 the solicitors for the respondents forwarded a certificate of readiness to the solicitors for the appellant for completion. That certificate was not completed until the middle of 1978, and then only on the understanding that the trial would not proceed until the appellant came to Australia during 1979. In due course the matter was set down for trial in May 1979. This fixture was not convenient to the appellant, and on the application of his solicitors supported by information received from his wife that he would be returning to Australia in July, the trial was adjourned until the middle of that month. Towards the end of June a further application on behalf of the appellant for an adjournment of the trial until November 1979 was refused. The application was renewed at the commencement of the trial and again refused, the learned vial judge being of the opinion that the appellant had not made reasonable efforts to attend the trial. The appellant was represented by counsel, and letters from him addressed to his solicitors outlining his version of the arrangements with his parents were received in evidence pursuant to s. 92 of the Evidence Act 1977 (Q.).

4. W. B. Campbell J accepted as truthful the evidence of the male respondent, finding it to be supported by oral testimony from other witnesses and by the documentary evidence. Understandably in the circumstances, the appellant is unable to mount a strong criticism of the primary facts as found by the learned judge. It is convenient to take those facts from his Honour's judgment:

"In June 1966 the plaintiffs purchased a house in Ferguson Road for the sum of $5,600 with their own moneys aided by a loan of $3,200 from the defendant. This house was purchased as a home for the plaintiffs; the defendant did not see it until several months after it was purchased. The male plaintiff agreed to pay the defendant interest at the rate of 7 per cent per annum on the loan and told the latter that he would put the property in the defendant's name 'so he is secure so I cannot sell it'. The interest was in fact paid to the defendant. The male plaintiff made certain improvements to the house which was subsequently 'traded in', at a value of $7,000, as part payment for the purchase in 1968 of the flats at Gresham Street.

In 1968, prior to the Ferguson Road home being sold and before the defendant left for New Guinea, he and his father agreed that they would buy some flats in order to get a better financial return. The arrangement, as put in rather imprecise language by the male plaintiff, was that 'whatever we put in, that is what we will receive in the proceeds from the flats - we will separate it correctly'. As a result, the male plaintiff found and purchased the block of flats at Gresham Street for $24,000, the purchase money being provided by the Ferguson Road home $7,000), $2,800 cash by the male plaintiff, $2,700 cash by the defendant and a mortgage of $11,500 in favour of the Bank of New South Wales. The loan of $3,200 for the purchase of the Ferguson Road property had not been repaid to the defendant, so that the plaintiffs' contribution was the balance on the value of the Ferguson Road home, namely, $3,800 plus $2,800, being $7,600. This was approximately one-third of the purchase price.

The flats were purchased in the defendant's name because, as the father said: 'I wanted him secure so I could not cheat him and sell the flats.' After the son's return from New Guinea it was agreed between him and his father that when the flats were sold two-thirds of the proceeds would be the defendant's share and one-third the share of the plaintiffs. The mortgage debt was fully satisfied by June 1970, having been paid with moneys from the rental of the flats and moneys sent from New Guinea by the defendant.

I do not think that there is any need for me to discuss at length the purchase, in April 1971, of the duplex at Miami Beach and the financial dealings between the father and son which took place in subsequent years. The parents lived in one of the flats at Gresham Street and also used one of the units at Miami, and I am satisfied that the defendant's financial interests in the properties were fully and properly taken care of by his father. The latter took his share of profits from the rents of the Gresham Street flats and, although all the rent moneys were deposited in the defendant's bank account, he properly accounted at all times for the income and expenditure to the defendant. The documentary evidence as contained in the bank books and bank statements supports this, as does Ex. 15. 1 accept that the male plaintiff sent regular accounts to the defendant. The defendant sold the Miami property in 1975 and, after he had returned to Australia in 1976, he told his father that he had 'taken over' the flats and the father would have to pay rent, to which the latter agreed. Prior to that time the father had been the caretaker of the flats and had collected the rent payments. The defendant sold the Gresham Street flats in July 1976 and has failed to account to his father and mother for the latter's one-third share of the net proceeds of sale. I am satisfied that, although the female plaintiff took no active part in the financial arrangements, all the material agreements made between the father and the son were made by the former on behalf of himself and his wife. The evidence of Mrs. Bloch supports this view, and I rind that the son was at all material times aware of the fact that the financial contribution made by the father towards the purchase of the Gresham Street property was to be treated as one made by his father and his mother. In these reasons, when I speak of the male plaintif's share and interest I treat it as being a share or interest to which he and his wife were jointly entitled."

5. It should be observed that there appears to be a mathematical error in his Honour's computation of the plaintiffs' contribution to the purchase of the flats. He refers to the items of $3,800 and $2,800 as amounting to $7,600. It is, I think, common ground that the total of $7,600 is correct, and that the learned trial judge has omitted to refer to another payment of $1,000 which the evidence shows to have been contributed by the plaintiffs.

6. Counsel for the appellant advances three submissions in support of the appeal: first, that the refusal to grant a further adjournment occasioned his client serious injustice and should be reviewed; secondly, that the trust which was found to exist was an express trust not evidenced by writing and was therefore "utterly void and of none effect" by reason of s. 7 of the Statute of Frauds 1677 (see now, Property Law Act 1974 (Q.), s. 11); thirdly, that there was no power to award interest because the proceedings were not "for the recovery of money (including proceedings for debt, damages or the value of goods)" within the meaning of that passage in s. 72 of the Act.

7. The decision whether to grant or refuse an adjournment lies in the discretion of the trial judge, and it is indeed seldom that an appellate court will feel justified in reviewing such a decision. In Maxwell v. Keun (16), Atkin LJ stated the rule in terms which have won general acceptance:

"I quite agree the Court of Appeal ought to he very slow indeed to interfere with the discretion of the learned judge on such a question as an adjournment of a trial, and it very seldom does do so; but, on the other hand, if it appears that the result of the order made below is to defeat the rights of the parties altogether, and to do what which the Court of Appeal is satisfied would be an injustice to one or other of the parties,

8. In the Full Court, Douglas J in whose judgment Andrews and Connolly JJ concurred, reviewed the circumstances briefly and concluded that the attitude of W. B. Campbell J was well justified. In my respectful opinion, that conclusion was correct. Counsel for the appellant was unable to give a firm assurance that his client would be in Australia at any particular time; indeed, he conceded to the learned trial judge that it was possible that he would never return. No attempt was made to have his evidence taken on commission. Mr. and Mrs. Bloch, senior, were then sixty-nine and seventy-three years of age respectively, and justice to them required that the proceedings be not unduly delayed. This ground of appeal must fail.

9. It is then argued for the appellant that the facts as found by W. B. Campbell J established an express trust which fails for want of writing. Reliance is placed on the conversation between the appellant and his father with respect to the purchase of some flats as an investment. The conversation took place before the former left Australia to work in New Guinea. It was to the effect that, in the words of the father, "whatever we put in, that is what we will receive in the proceeds from the flats - we will separate it correctly". This conversation must be seen in its context. It was directed entirely to the future, there being no particular property in contemplation, and no discussion as to the person or persons by whom the conveyance would be taken. It was some months after the appellant had left the country that his father found and purchased the flats in Gresham Street. It was the father's decision to put the property in the son's name because "I wanted him secure so I could not cheat him and sell the flats". While it is true that no particular form is necessary for the creation of an express trust, the intention of the settlor to create a trust must be explicit. In every case it is a question of fact for the court to determine whether an intention to create a trust is sufficiently evinced (18).

10. The learned trial judge concluded his consideration of the nature of the trust which he found to exist with these words:

"In the circumstances I do not think the parties gave any consideration to the legal effect of the arrangement to acquire the flats. Being father and son and having a good relationship

(17) cf. also, Hayes v. Hayes (No. 1), (1934) QSR 219; Myers v. Myers, (1969) WAR 19; Walker v. Walker, (1967) 1 WLR 327; (1967) 1 All ER 412.

(18) See, e.g., Underhill's Law Relating to Trusts and Trustees, 13th ed. (1979), pp. 29-32; Jacobs' Law of Trusts in Australia, 4th ed. (1977), p. 54.

with each other, the father was anxious to help the son obtain a better return on the surplus money which the latter was earning by way of salary, and the son was keen that his father and mother have a home in which to reside and to live there so as to enable them to take care of the son's investment. In such a situation they went ahead with their financial dealings in an atmosphere of mutual confidence and trust. ... The father and son did not expressly envisage, it seems to me, that the son held the property on a trust which could be said to be a declared or an express trust."

11. His Honour decided that the circumstances were such as to give rise to a resulting trust. He had already found the presumption of advancement to be rebutted, and no criticism is offered of that finding.

12. With respect, I do not think that his Honour's reasoning can be faulted in any way. The circumstances surrounding the acquisition of the flats do not yield with sufficient certainty the expression of an intention to create a trust. On the other hand, the facts present a classic illustration of the creation of a resulting trust. The property was conveyed into the name of the son, with the father having contributed part of the purchase price in circumstances which rebutted the presumption that the contribution was intended to advance or benefit the son. The contribution was not a gift. It was not a loan. The inference then arises that the father intended the son to hold the property in trust for him in a proportion corresponding to the proportion of the purchase price which was contributed by him (19).

13. In support of the argument that the arrangement touching the flats constituted an express trust which was unenforceable for want of writing, counsel for the appellant relies on the father's evidence of a later agreement with the son after his return from New Guinea to the effect that when the flats were sold the proceeds would be divided in the proportion of two-thirds to the son and one-third to the father. It was in reliance upon this evidence that the learned trial judge determined that the proportion of the net proceeds of the sale of the property which was the subject of the resulting trust was onethird. Counsel also argues that even if the trial judge's finding of a resulting trust be accepted, the law requires that the trust be declared in terms which reflect the actual proportionate contribution made by the donor to the purchase price. He asserts that on the evidence the father contributed $7,600 towards a total

(19) Underhill, p 267; Allen v. Snyder, (1977) 2 NSWLR 685, at p 698, per Samuels JA

purchase price of $24,000, a proportion of 19/60ths, not one-third. However, there is evidence that some of the rents received from the property were applied in reduction of the principal and interest owing under the mortgage. It is reasonable, therefore, to suppose that some accretion, incapable of precise computation, to the father's initial contribution to the purchase price is to be derived from the application of the rents in this way, bearing in mind that he was entitled to a one-third interest in the property. Given a resulting trust, it was for the trial judge to determine on the evidence the precise extent of the beneficial interest thereby created. In the course of cross-examination of the male respondent by counsel for the appellant, the following passage occurred:

"You mentioned that, later on, you agreed it was to be one-third and two-thirds? ... That is correct.

And that was - what - a number of months after you had bought these Gresham Street flats? ... It was after the finalization, after we paid off the Gresham flats and I knew how much money I had in and I knew how much money he put in and that is how we separated it.

Up to that time there had never been any discussion about the one-third, two-thirds? ... No, we couldn't.

And this was about two years after the flats were put in Werner's name? ... That is right twenty months."

14. In my opinion, it was open to the trial judge to accept this evidence as establishing a consensus between the father and the son in relation to the question of fact which he had to determine, namely, the respective contributions which the parties made towards the purchase of the flats. It supports the declaration which his Honour made. It does not itself establish the trust; that was constituted when the property was acquired.

15. The third submission for the appellant attacks the award of interest pursuant to s. 72 of the Act. Counsel argues that the action is one for a declaration and hence does not fall within the description of proceedings for the recovery of money. I think this contention must fail. The claim is for a declaration that the plaintiffs are entitled to a one-third share of the "proceeds of sale" of the property, and, inter alia, for "further or other relief". The writ was issued on 5 July 1976, the sale of the property was finalized on 9 July 1976, and on that day, by arrangement between the parties, the sum of $20,000 being part of the proceeds of sale was paid into court. In addition to making a declaration of the one-third entitlement of the respondents his Honour also ordered that the judgment be satisfied by payment out of the moneys in court. In my opinion, the proceedings clearly come within the description of proceedings in respect of a cause of action for the recovery of money (20).

BRENNAN J The appellant, Werner Bloch, is the son of the respondents Erich Bloch and Elizabeth Bloch. In October 1968, Werner Bloch became the sole registered proprietor of an estate in fee simple in land situated at Gresham Street, East Brisbane, subject to a bill of mortgage. A block of flats stood on the land. The purchase price was $24,000. The respondents contributed $6,600 towards the purchase price, $11,500 was advanced upon the security of the bill of mortgage given by the appellant to the Bank of New South Wales and the balance, $5,900, was contributed by the appellant from his own resources. In June 1969, the respondents contributed a further $1,000 as part of a payment of $3,000 made in reduction of the mortgage debt. The appellant, who was then in highly remunerative employment in New Guinea, sent sums of money to his father in Brisbane, and these sums together with the rents derived from letting the flats were sufficient to pay off the balance of the mortgage debt by June 1970.

2. When the appellant returned from New Guinea, after the mortgage debt had been discharged, it was agreed between him and his father that when the flats were sold two-thirds of the proceeds would be the appellant's share, one-third the respondents' share. By the time of that agreement, of course, the respondents had contributed $1,000 and their share of the rents towards discharging the mortgage debt. The learned trial judge (W. B. Campbell J) found that the payments made by the respondents were not intended as a gift to the appellant, and that the evidence rebutted the presumption of advancement.

3. In June 1976, the appellant entered into an agreement for the sale of the land for the price of $52,000. He failed to meet the father's request that he account to the parents for their share of the proceeds. A caveat was lodged by the respondents but it was withdrawn, the sale was completed, and $20,000 was paid into court to abide the outcome of the present litigation. The respondents commenced the action in July 1976 claiming a declaration that they were entitled to a one-third share of the proceeds of sale.

4. Before the land was bought in 1968, an oral arrangement was made between father and son which the father described in evidence: "whatever we put in, that is what we will receive in the

(20) cf. In Shoppe Pty. Ltd. v. Smith (1976), 6 ATR 242, at pp 247-248,

proceeds from the flats - we will separate it correctly. "His Honour found: "This is a case where the male plaintiff provided money for the purchase of We Has on the clear understanding between him and his son that each of them was to share in the property in proportion to the contribution made by each?'

5. However, it was found that the arrangements and contributions made by the father were made on behalf of himself and his wife, and the son knew that that was so. There was no express declaration of trust made by the son. His Honour further found:

"The parties could not be said to have expressed an intention, by conduct or words, that the property at Gresham Street was to be held by the son in trust as to a certain share for his parents; one-third of the purchase money was provided by the plaintiffs, not by way of gift to the son, but on the understanding that each would share in the proceeds (by way of rental and sale) in proportion to the extent of his or their own contribution to the purchase price."

6. His Honour also said that the "father and son did not expressly envisage ... that the son held the property on a trust which could be said to be a declared or an express trust. In my view the circumstances are such as to give rise to a resulting trust". The judgment declared that the respondents were entitled to one-third of net proceeds of the sale of the land with interest on that sum at 7 per cent per annum from the date of the statement of claim until judgment. The son appealed to the Full Court but the appeal failed.

7. There is a question whether the parents' interest was founded on the arrangement made between father and son before the land was bought, or upon the contribution of $6,600 made by the parents towards the purchase price, or upon that contribution and the additional sum contributed towards the discharge of the mortgage debt, or upon the agreement made after the son returned from New Guinea relating to the division of We proceeds of sale, or upon some other foundation. The extent of the parents' beneficial interest is dependent upon the answer given. It is clear that there was no jurisdiction to order distribution of the proceeds of the sale of the land in accordance with some broad notion of justice but in disregard of the parties' proprietary rights (21).

8. In the circumstances narrated in his Honour's judgment the foundation upon which the parents' beneficial interest rested was not of great moment. The judgment contained a wrong calculation of the parents' initial contribution, which was found to be $7,600 or

(21) Wirth v. Wirth [1956] HCA 71; (1956), 98 CLR 228, at p 232; Hepworth v. Hepworth (1963), 110 CLR 309, at p 318.

"approximately one-third of the purchase price". On that assumption, the respondents were entitled to a one-third interest from the time when the land was purchased, whether that interest was said to rest on the understanding found by his Honour or upon the contributions first made by the parents towards the purchase price. The subsequent contribution was not considered in ascertaining what the parents' interest was. His Honour concluded:

"The son was the person who became in law the trustee - it was he, the owner in law of the land, who by his conduct led his father and mother to believe that they would take a share in the profits from the flat, and the son by accepting the father's money and allowing him to take a share in the profits, brought about a situation where the law will presume that he held the property as trustee for himself and his parents. He cannot now be allowed to deny that lie is obliged to account to his parents for one-third of the net proceeds of the sale."

9. This conclusion appears to be based upon a passage, cited in the judgment, from the speech of Lord Diplock in Gissing v. Gissing (22):

"A resulting, implied or constructive trust - and it is unnecessary for present purposes to distinguish between these three classes of trust - is created by a transaction between the trustee and the cestui que trust in connection with the acquisition by the trustee of a legal estate in land, whenever the trustee has so conducted himself that it would be inequitable to allow him to deny to the cestui que trust a beneficial interest in the land acquired. And he will be held so to have conducted himself if by his words or conduct he has induced the cestui que trust to act to his own detriment in the reasonable belief that by so acting he was acquiring a beneficial interest in the land."

10. This is not a case where the beneficiaries' intention as to the beneficial interests to be held by the parties was not shared by the trustee, and it is not necessary to consider whether the beneficiaries' belief that they were acquiring a beneficial interest was induced by the trustee's conduct. His Honour's finding that there was a common understanding that the property was to be shared in proportion to the contributions made establishes an actual intention common to the parties that the beneficial interests should be in the same proportion as the moneys contributed. In my view, the facts of the present case do not require consideration of the proposition expressed in the last sentence in the passage cited from Lord Diplock's judgment. And as the common intention of the parties was that the parents' beneficial interest should be in the same

(22) [1970] UKHL 3; (1971) AC 886, at p. 905.

proportion as the moneys they contributed, it is not necessary to consider what would have been the effect of their intention if they had intended that their respective interests should be in different proportions from the proportions of their contributions (23).

11. However, it is necessary to ascertain whether it was the intention of the parties that their respective interests should be in accordance with the contributions made when the land was purchased or in accordance with the contributions made by them to the purchase of the land and the discharge of the mortgage debt upon it. His Honour's findings are of no assistance on this point, for they are affected by the error earlier mentioned. In the circumstances of this case the utilization of the rentals and the making of cash contributions by all parties tend to show that the asset which they sought to acquire was not merely the mortgaged land but the unencumbered land. They contributed what they could afford to acquire the unencumbered title and it is more likely than not that they intended the whole of their respective contributions to furnish the measure of their respective interests in that asset. Lord Diplock, in Gissing v. Gissing (24), in reference to the intention of spouses who contribute to the purchase of the matrimonial home, said:

"The conduct of the spouses in relation to the payment of the mortgage instalments may be no less relevant to their common intention as to the beneficial interests in a matrimonial home acquired in this way than their conduct in relation to the payment of the cash deposit."

12. The inference to be drawn from the facts of the present case is that the parties intended their respective beneficial interests to be proportionate to the contributions made to acquire the land and to free it of encumbrance. The agreement by the son that the parents should have one-third of the proceeds of the land is both supportive of this inference and the best evidence of the proportion of the contributions made by the parties and of their respective beneficial interests in the asset.

13. The defendant set up s. 7 of the Statute of Frauds 1677, but the plea was rejected because his Honour thought that the trust affecting the land was not an express trust. Following Lord Diplock's classification - a resulting, implied or constructive trust, it being unnecessary to distinguish between them - the trust in the present case was held to fall outside the net of s. 7 and within the saving provisions of s. 8 of the Statute of Frauds 1677. And so the plea

(23) See Allen v. Snyder, (1977) 2 NSWLR 685, at p 692.

failed, as it was bound to do. The principle is that "the Statute of Frauds does not prevent the proof of a fraud; and that it is a fraud on the part of a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land himself" (25). Whatever be the classification of the trust which binds the person entrusted with the legal title to property, his repudiation of the terms upon which he was entrusted with that property "is a fraudulent use of another's confidence, and the Statute is not intended to cover fraud" (26). Scott LJ said in Bannister v. Bannister (27):

"The fraud which brings the principle into play arises as soon as the absolute character of the conveyance is set up for the purpose of defeating the beneficial interest, and that is the fraud to cover which the Statute of Frauds ... cannot be called in aid in cases in which no written evidence of the real bargain is available."

(25) Rochefoucauld v. Boustead, (1897) 1 Ch 196, at p 206, per Lindley J.

(26) Cadd v. Cadd [1909] HCA 59; (1909), 9 CLR, 171, at p 187, per Isaacs J; and see Lincoln v. Wright (1859), 4 De G and J 16, at pp 22, 23 (45 ER 6, at p 9).

14. Accordingly, the appeal upon the merits fails. I agree, for the reasons given by my brother Wilson, that the grounds as to the refusal of an adjournment and the allowing of interest should not be upheld. The appeal should be dismissed with costs.

16. Solicitors for the appellant, Bell, Bell and Fradgley.

17. Solicitors for the respondents, Spranklin and Co.

Common Law Practice Act 1867

Bloch v Bloch [1981] HCA 56;

At a glance

Court

Decision date

Before

Source

Judgment (69 paragraphs)

Bloch v Bloch [1981] HCA 56; (1981) 180 CLR 390 (16 October 1981)

Parties

Legislation Cited (2)

Cases Cited (2)