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[2014] NSWSC 1462
Supreme Court of NSW
2014-10-22
McDougall J
Original judgment source is linked above.
Judgment (ex tempore - revised 22 October 2014) 1HIS HONOUR: The plaintiff is the proprietor of a property at Nerrigundah, in the hinterland of the far south coast of New South Wales. Further, up until it was sold, the plaintiff and the defendant were proprietors as joint tenants of a property at Narooma.
The disputes 2The property at Narooma has been sold. There is a balance, awaiting division between the parties, of $236,853.63. The parties are at odds as to who is entitled to that sum. 3Further, as to the plaintiff's Nerrigundah property, the defendant asserts an interest by way of constructive trust (modified, in the course of submissions, to a claim for an equitable charge).
Claim on the Nerrigundah property 4The claim in relation to the Nerrigundah property - that is to say, the second of the two claims that I have identified - can be disposed of relatively simply. The case advanced for the defendant in submissions was that he had contributed, substantially if not entirely, to the erection of a residence on the Nerrigundah property to be occupied by himself, the plaintiff and their children (including children from other relationships). 5The property had been owned by the plaintiff and a former partner of hers and, I think, her parents as well. At some stage, when the relationship between the plaintiff and her former partner broke down, the parents took over the property. They transferred the property to the plaintiff in August 1992. 6The relationship between the plaintiff and the defendant commenced in 1982. They lived together at the Nerrigundah property: initially in some sort of temporary shelter. They built the residence to which I have referred. There is a dispute as to who contributed what, both by way of money, and by way of labour and materials. The evidence (which is lamentably deficient) is that if the defendant's labour, which he estimates amounted to some 2500 hours over a three and a half year period, were valued at the rate he then charged people as a home handyman, his contribution might amount to some tens of thousands of dollars. However, the total imprecision in the evidence, and the lack of any documentary or other extrinsic support, makes it impossible to reach a conclusion. 7The real difficulty with this aspect of the case - which is raised by the defendant's cross-claim - is that it is neither pleaded nor proved that such work as the defendant did upon the Nerrigundah property was done by him on the basis of an expectation, engendered by the plaintiff or acquiesced in by her when she became aware of it, that he would obtain some equitable interest in the property in exchange for the work that he did. 8Further, on the defendant's evidence, about three years after he and the plaintiff started to live on the Nerrigundah property, he assured the plaintiff and her parents that he would not make a claim on the property. That happened in 1985, when the plaintiff's parents paid out the plaintiff's former partner and he vacated the property. 9Although there is no breakdown of what work was done and when it was done, it is I think clear on the evidence that at least the bulk of the work done was done after that relatively clear and straightforward assurance was given to the plaintiff and her parents. 10That assurance to my mind is quite inconsistent with any case that the work done by the defendant was done on the basis of any expectation of the kind to which I have referred. 11To my mind, the obvious explanation of the work is that the plaintiff and the defendant realised that they needed a roof over their heads, and set about constructing one. That, of itself, does not give rise to any claim for a constructive trust, or indeed a lesser interest in the nature of an equitable charge.
Dispute as to the Narooma property 12I return to the dispute in relation to the Narooma property. 13The evidence in relation to that dispute is also somewhat scanty. However, it would appear that children who were living with the plaintiff and the defendant attended school at or near Narooma. The travel was difficult for them and disruptive for the family. The plaintiff and the defendant agreed to see if they could buy a property in Narooma where the children could stay, at least during the week. In due course, in June 1993, they exchanged contracts for the sale of the property in question. The sale was settled in August 1993. 14The defendant says that after the house was bought - in context (from his affidavit) in August 1993 - the plaintiff said to him: "Narooma is your house because you've done all this work at Nerrigundah and you don't own anything. You deserve to own something of your own." 15The plaintiff did not swear an affidavit in reply denying that conversation. However, it was put to her in cross-examination that she had said such words. She denied it. To complicate matters a little further, it was not put to the defendant in cross-examination that no such words had been said. 16In any event, as I think Ms Gatland of counsel, who appeared for the defendant, accepted in the course of submissions, that asserted evidence of intention in relation to Narooma occurred only after the property had been acquired in joint names, as joint tenants. Accordingly, it does not seem to me to be capable of showing that, when the parties agreed to acquire the property, they had any common intention that, although the legal title might be in both their names, in equity it would be the property of the defendant only. 17There is some other evidence that seems to me to tell against the existence of any common intention of the kind asserted by the defendant. 18I refer specifically to the way in which the purchase price was provided. The price was $72,500. There was a 10% deposit, $7,250. The Commonwealth Bank of Australia provided $58,000 on mortgage. That meant that there was a shortfall between the amount of the deposit and the amount of the mortgage advanced. The uncontroverted, and corroborated, evidence of the plaintiff is that she provided the shortfall between the mortgage and the amount required on settlement. 19I have said that it is corroborated. There is a receipt showing a payment made by her, well after contracts had been exchanged but only a week before settlement, in an amount that would cover both the shortfall and disbursements. 20Evidence as to payment of the deposit is entirely lacking. Presumably, somehow, the parties scraped it together between them. 21If the defendant's case were to be accepted - that is to say, if it were to be accepted that the plaintiff had said words of the kind attributed to her - a necessary consequence would be that the plaintiff intended to make a gift to the defendant of the amount, in excess of $8,200, contributed by her towards the settlement of the purchase. If anything is clear in this case it is that the parties' resources at the time (and indeed, I would think, at all relevant times) were scanty, if not straitened. I find it really difficult to accept that someone in the financial position of the plaintiff (as I infer it was) back in 1993 would have been prepared to make a gift of what was, to her and the defendant, a very substantial sum of money at that time. On the contrary, I think that the payment was made because the plaintiff thought that she would have a beneficial interest in the property. 22The defendant moved into the Narooma property and occupied it, off and on, over the ensuing years. For many of those years, the property was tenanted and the defendant received the rents. For others of those years, the children of the relationship (by which I mean not only the children born to the plaintiff and the defendant but also their children from their earlier relationships) lived there, either with the defendant or by themselves. 23So far as the evidence goes, it was only during 1993, 1994, 1995, 2000 and 2001 that the property was not occupied (in whole or in part) by the children of the relationship or tenanted. 24On the evidence, the relationship between the plaintiff and the defendant deteriorated in 1994 and broke down in 1995. However, for the earlier of the groups of years to which I have referred, there is no suggestion that the plaintiff sought to live in the Narooma property. It was never a property occupied by the plaintiff and the defendant as their joint dwelling house. On the contrary, the plaintiff continued to reside at Nerrigundah whilst the defendant resided at Narooma. 25The position is slightly different for the years 2000 and 2001, because of course by then the relationship had broken down. There is, however, no evidence that the defendant had sought to exclude the plaintiff from the Narooma property. On the contrary, I infer, the plaintiff had simply continued to live in her own property at Nerrigundah. 26Against that background, the question is whether the net proceeds of sale should be divided in accordance with the legal interests, making adjustments for rents and outgoings, or whether some other order should be made in respect of them. 27The defendant asserted an equitable interest in the whole of the property, arising from what he said was the agreement between him and the plaintiff relating to its acquisition. For the reasons I have given, there is no basis for concluding that the property was acquired on the common expectation that, although it was in joint names as a matter of convenience (including, so the defendant says, to facilitate the obtaining of a bank loan), nonetheless the parties intended that the sole beneficial interest would be the defendant's. 28Thus, I think, the starting point is indeed that the net proceeds of sale should be divided in accordance with the legal interests, subject only to the making of proper allowances. 29The parties accept that a schedule prepared by Ms Gatland sets out with substantial if not complete accuracy the history of income and expenditure. For the years the property was rented (1997 to 1999 and 2008 to 2014), the total rents received were approximately $67,716. I say "approximately" because some of the rents have been estimated. 30For the years when the property was rented, expenses for cleaning and gardening, insurance, repairs and maintenance and water usage totalled some $13,422. If those expenses are to be deducted from rent, the net rent received would be of the order of $54,294. 31Some challenge was made to some of those expenses, on the basis that they were not referable to the joint ownership. I do not agree. Plainly enough, they were expenses incurred in the gaining of the assessable income - the rent. Just as those expenses should be allowed (and have been allowed) for taxation purposes, they should be allowed between co-owners where the question is what is the net amount of the rent to be divided between them. 32The total of rates paid (again involving a degree of approximation because not all the records are available) over the period of ownership was $33,579. The total of mortgage loan repayments made by the defendant over the same time was $120,690. 33To my mind, it is appropriate that the net rent (which was entirely received by the defendant) should be apportioned between the plaintiff and the defendant equally. 34It is also appropriate that rates and mortgage repayments should be apportioned equally. If nothing else, they represent the defendant's sole discharge of liabilities owed by him and the plaintiff jointly, on which basis he has an equity of contribution from the plaintiff. That is supported by the reasoning of Meagher JA in Forgeard v Shanahan (1994) 35 NSWLR 206 at, in particular, 225. 35Thus, the adjustments to be made should include that one half of the rent received by the defendant should be allowed in favour of the plaintiff and added to her notional one half share in the proceeds of sale. There should be deducted from the notional result one half of the amount of the mortgage payments ($60,345) and one half of the amount of the rate payments ($16,789.50). If my arithmetic is correct, the result of that process is a net amount of $68,439.30. 36However, that is not the only adjustment claimed. The plaintiff sought an allowance for an occupation fee referable to the times when the defendant was residing in the property. As I have said, it appears to be the case that it was only for five years (1993 to 1995, and 2000 and 2001) that the defendant resided in the property without one or more of the children of the relationship (in the sense stated earlier) living there with him, either full time or part time, also. I do not see why, when the defendant was living there with the children of the relationship, equity as between the parties would require any allowance to be made for an occupation fee. 37Of course, to the extent that the property was rented out, no question of occupation fee arises, as the income and expenditure are to be allocated between the parties, on the logic of what I have said, in equal shares. 38For the five years in question, the question is really whether the defendant has ousted the plaintiff, either actually or notionally, from the property. 39The starting point, in terms of principle, seems to me to be the analysis of Meagher JA in Forgeard at 221 to 224. His Honour there set out some 16 propositions which, in his view, stated, perhaps at a level of some generality, the way in which the question of apportionment between co-owners should be dealt with and, in particular (from proposition 8 onwards) the way in which a claim for an occupation fee should be treated. 40Although Meagher JA suggested that an occupation fee was chargeable only where there has been some physical ouster or where there is a claim for improvements, it seems to be relatively clear, from more recent cases, that an allowance may be made for an occupation fee where there has been no physical ouster but, rather, what in Callow v Rupchev (2009) 14 BPR 27,533 at [30], the Court referred to as "constructive ouster". Their Honours there said, and other cases confirm, that an occupation fee may be allowed where there has been no actual ouster, by violence or under a threat of violence, but where a domestic relationship has broken down so that the departure of one of the parties to that relationship from the property hitherto occupied by them jointly can be seen to be justified or reasonable. 41It is not necessary to explore in detail the extension arising out of the cases dealing with breakdowns in domestic relationships. Brereton J looked at many of the cases (up until the date of His Honour's judgment) in McKay v McKay [2008] NSWSC 177. Ball J considered the cases some four years later, in Payne v Rowe (2012) 16 BPR 30, 869. 42However, what the Court should be careful to avoid is creating a situation where in effect one co-owner, by refusing to take up occupation of the property, foists occupation on the other co-owner so as to seek to make him or her liable for an occupation fee. Compare Hodgson JA in Ryan v Dries (2002) 10 BPR 19,497 at [75]. 43This is not a case where the Narooma property is or ever was the property occupied by the parties jointly as their residence during the subsistence of their relationship. On the contrary, although it was acquired during the subsistence of their relationship, it appears to have been occupied substantially by the defendant alone. As I have noted, even after the Narooma property was acquired, the plaintiff continued to reside at Nerrigundah. 44Of course, from time to time, one of the parties went to the other party's house and stayed there for a time. However, on the evidence, this did not happen in such a way as to amount to a change of residence, or the adoption by the moving party of the house of the other as a new residence. 45Thus, whilst acknowledging the point made in Callow and in other cases, the facts in this case seem to me to be significantly distinguishable. 46In reality, I think, the parties never intended that the Narooma property would be their joint residence. In reality, the reason why the plaintiff did not seek to live there was that she wanted to live, and continued to live, at the Nerrigundah property. There is nothing in the evidence to suggest that she was excluded, or dissuaded, from residing in the property, at any time until the relationship broke down. 47In those circumstances, I do not think that there has been shown in equity any basis for the imposition of an occupation fee for any part of the period when the defendant alone occupied the Narooma property. 48In the result, I do not think that the provisional outcome to which I referred earlier should be disturbed. The result is thus that, out of the net proceeds of sale presently held from the Narooma property, the plaintiff should be declared to be entitled to $68,439.30 and the defendant entitled to $168,414.30, in each case subject to the correction of arithmetical errors. Accrued interest should be paid out in the same proportion. 49The claims for relief should otherwise be dismissed. 50The parties are to bring in short minutes of order to give effect to these reasons. I will hear counsel as to when that may be done and as to costs.
Costs 51Were it not for the matter to which I am about to refer, my instinctive reaction (which may or may not have matured into an order) was that, bearing in mind the relative degrees of success and failure, substantial justice as to costs could be done if, leaving undisturbed any existing orders as to costs, there were no order as to costs. 52However, the defendant relies on an offer of compromise, said to have been made under UCPR r 20.26, which proposed that he would pay the plaintiff $70,398.28 (giving details of the calculation); that upon payment he would have judgment; and that there be no order as to costs. 53It seems to me that the offer accorded with r 20.26 as it now stands. Subrule (3) authorises an offer that proposes a judgment in favour of the defendant with no order as to costs (UCPR r 20.26(3)(a)(i)). That is exactly what the offer of compromise in this case did, together with an offer of a sum which, after interest is taken into account, exceeds by about $2,000 the benefit that the plaintiff will receive from the orders that I have said should be made. 54In those circumstances, the consequences seem to me to follow from UCPR r 42.15 unless some basis is shown why the Court should order otherwise. Those consequences are (see subr 2) that the plaintiff should have her costs up until the day following the date of making of the offer, and the defendant should have his costs on the indemnity basis thereafter, with the rider that no existing costs order should be disturbed. 55Ms Gatland confirmed that, notwithstanding my earlier tentative view, her client was prepared to accept the burden (UCPR r 42.15(2)(a)) together with the benefit (r 42.15(2)(b)). 56I see no reason for ordering otherwise. The offer constituted a recognition by the defendant that the plaintiff was entitled to succeed in principle in asserting her interest to the Narooma property and in defending his claim to an interest in the Nerrigundah property. Thus, the offer involved a recognition that the plaintiff's claim was at least in part justified. That suggests that the r 42.15(2)(a) position should not be disturbed. 57As to the remaining issue - indemnity costs - it was submitted that there was no real element of compromise. I do not agree. The basis on which the offer was made was spelled out. To the extent that it matters, the logic of the offer follows substantially what I have said in the reasons just given. 58Accordingly I make the following costs orders:
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: 24 October 2014
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