GRUNDY -v- CASSAR [2010] WASC 409 (23 December 2010)

GRUNDY -v- CASSAR [2010] WASC 409 (23 December 2010) - WASC 2010 case summary — Zoe

[45]

19 I should note at this point that my preference for the recollections of the plaintiff, where I have indicated that preference, is without regard to matters that counsel for the plaintiff submitted went very much to the credit of the first defendant. Those matters were four. One was the failure of the first defendant to have her defence amended until the time of a previous trial in this action, when for some time previously she must have been aware that the denial in that defence that she had executed, in October 2004, a transfer of the property the subject matter of these proceedings was unwarranted. The second matter was that an earlier version of her witness statement (exhibit 11) had had an allegation in it as to an amount remaining due to her from the sale in 1996 of the business in which that property was used, which she admitted had no basis. The third matter was that there was, in former pleading of hers, an allegation that certain money of hers had been stolen by the plaintiff. This allegation had been removed from the pleading because, as she accepted, there was nothing in the allegation. The fourth matter was that she had not described in answer to cross-examination on an agreement she alleged the parties made in May 2004 that, as she had said in her witness statement representing her examination-in-chief, she had promised to transfer the property into the parties' joint names in consideration of the plaintiff continuing to pay her share of the payments on the mortgage on the property. I accept that the first, second and third - although not in my view the fourth, where it seems to me the first defendant's recollection failed her, and there is an undoubted conflict on the evidence of the parties that I need to address below - of these give rise to some concern with respect to the credibility of the first defendant. However, in my view, where these were matters arising out of dealings between the parties of some complexity, and where, as was common ground, the plaintiff had been responsible for keeping the relevant records, I am unable to draw from those first three matters the conclusion that I should doubt the first defendant's credibility as counsel for the plaintiff would have me doubt it. That is, I am unable to conclude the first defendant was someone who was prepared to tell untruths to support her case. Indeed on how she presented to me in the giving of her evidence I concluded she sought to tell the truth as she understood it to be. However, I also concluded, as I will indicate, that in some significant matters of detail in her evidence it could not be relied upon.

[88]

54 It was common ground that the plaintiff and the first defendant agreed by some time in 2002, after the first defendant and her partner had moved into the dwelling house on the Depot Property, that the plaintiff and the first defendant would share equally the burden of the payments on the loan in respect of the Depot Property and each would pay the 'outgoings' in respect of the property she lived in, the plaintiff in respect of the Fewster Street property and the first defendant in respect of the Depot Property. There was evidence from the plaintiff that she and the first defendant had agreed at about the time the first defendant and her partner moved into the dwelling house to share equally all of the 'expenses' of the Depot Property, including payments on the loan in respect of the Depot Property, except for 'outgoings' in the nature of 'rates and taxes', which the first defendant would bear, while the plaintiff would bear the 'outgoings' on the Fewster Street property. There was no challenge to this evidence, and it appears to be consistent with the evidence of the first defendant that at the time she moved into the dwelling house on the Depot Property the plaintiff agreed with her to pay one-half of the payments in respect of the loan in respect of the Depot Property, and one-half of the 'outgoings', which I consider to be a reference to the cost of the initial improvements I previously referred to. I consider the plaintiff's evidence also derives support from the way in which it accounts for the use of the proceeds of the lease to the purchaser from the Adsheads as well as for the parties' arrangements with respect to the initial improvements and for their respective living arrangements. There is also evidence from the plaintiff and from the first defendant that from the end of the lease to the purchaser from the Adsheads each paid one-half of the payments on the loan in respect of the Depot Property, while the evidence from the first defendant is that she paid 'all outgoings' on the Depot Property from March 2002. I have previously referred to the use of the proceeds of the lease to the purchaser to pay the instalments on the loan in respect of the Depot Property and to the payments by both parties in respect of certain improvements on the Depot Property.

[146]

As the Depot Property was partnership property and the transport business partnership was dissolved, either by reason of the oral agreement in or about 1996, that the transport business be sold and the proceeds split but the Depot Property retained by the plaintiff and the first defendant, or by reason of the first defendant's refusal to execute fresh mortgage documentation for the Depot Property and to complete the transaction to transfer the title to the Depot Property into the parties' joint names and the issue of the present proceedings; and the first defendant holds the Depot Property in trust for the parties as tenants in common in equal shares or alternatively as joint tenants: I call this the partnership claim; or
As it was the common intention of the plaintiff and the first defendant that the Depot Property be owned for the benefit of each of them equally, by reason of the events pleaded by the plaintiff as having occurred since 1990 when the plaintiff and the first defendant commenced conducting the roadhouse business and the transport business both in partnership up to the time of the conversation in April 2005 above; and the first defendant holds 'the plaintiff's one-half beneficial interest in the Property on an implied alternatively a constructive trust for the plaintiff': I call this the common intention claim; or
As it would be 'unconscionable' for the first defendant to retain the Property without the plaintiff having a beneficial one-half interest in the Property, either by reason of the events pleaded by the plaintiff as having occurred since 1990 when the plaintiff and the first defendant commenced conducting the roadhouse business and the transport business both in partnership up to the time of the conversation in April 2005 above, or by reason of the fact that the parties' joint ownership or endeavour and their respective contributions were directed to the acquisition and maintenance of the Property as their joint asset; and the plaintiff has a beneficial one-half share in the Property, which interest the first defendant holds on a constructive trust for the plaintiff: I call this the unconscionability claim; or
As the first defendant would be unjustly enriched at the expense of the plaintiff if the first defendant were 'to retain the plaintiff's beneficial one-half share in the Property' by reason of the events pleaded by the plaintiff as having occurred since 1990 when the plaintiff and the first defendant commenced conducting the roadhouse business and the transport business both in partnership up to the time of the conversation in April 2005, and the plaintiff has a beneficial one-half share in the Property, which interest the first defendant holds on a constructive trust for the plaintiff: I call this the unjust enrichment claim; or
As the plaintiff assumed that the first defendant accepted that the plaintiff had the same interest in the Property as the first defendant did, the plaintiff relied upon 'that assumption or expectation' and by so doing the plaintiff has and will suffer detriment if the assumption or expectation is not fulfilled, such assumption or expectation being either by reason of the events pleaded by the plaintiff as having occurred since 1990 when the plaintiff and the first defendant commenced conducting the roadhouse business and the transport business (both in partnership) up to the time of the conversation in April 2005 or by reason of the first defendant's representations in the pleaded oral agreement in or about late 1994 or early 1995 that the partnership in the transport business would purchase the Property, in circumstances where the first defendant induced the plaintiff to adopt such assumption or expectation; and the first defendant knew the plaintiff would and intended the plaintiff to act in reliance on such assumption or expectation; and the first defendant has failed to avoid the detriment by fulfilling the assumption or expectation; and it would be unconscionable for the first defendant to depart from such assumption or expectation: I call this the estoppel claim.

[147]

107 The first defendant on her re-amended defence and counterclaim admits that she 'holds the equitable interest of the plaintiff in [the Depot Property]' commensurate with the extent of the plaintiff's financial contributions to the Depot Property relative to the first defendant's contributions to the Depot Property, as the Depot Property 'as valued at 25 October 2005' at $250,000, on a constructive trust for the plaintiff. This admission was on the basis, which is not clear on that pleading but which emerged clearly in the written supplementary submissions for the first defendant by which her case at the trial was opened, that the first defendant had acquired the Depot Property for the benefit of the transport business partnership and to be held in trust for herself and for the plaintiff in equal shares, as it was their common intention, which was given effect to until August 2004, that their contributions to the acquisition and improvement of the Depot Property would be equal. However, the plaintiff had, in 'late August 2004', 'resiled' from or repudiated the agreement of May 2004 contended for by the first defendant, an agreement which reflected that common intention and as I understood the submissions replaced or supplanted all previous agreements between the parties. By the first defendant's acceptance of that repudiation, the agreement had been rescinded, with the effect that the plaintiff's interest in the property had to be measured as at the date of that acceptance without regard to any common intention as to equality of contributions, but rather by reference to the contributions the plaintiff had made to the Depot Property up to that date, relative to the contribution the first defendant had made up to that date. In effect, as I understood the submission, the plaintiff's interest, expressed as a sum of money was an equitable interest in that amount on the Depot Property. This would appear to be an assertion that the plaintiff's interest is an equitable interest in the nature of a charge. See for such an equitable charge Morris v Morris [1982] 1 NSWLR 61, 64 (McLelland J), referred to in Willis v The State of Western Australia [No 3] [2010] WASCA 56 [55] (Buss JA, McLure P & Owen JA concurring).

[152]

Specific performance of the agreement 'pleaded in paragraph 15A' with the plaintiff to be 'at liberty to apply upon notice to the [first] defendant for further directions as to the implementation of this Order': the reference to the agreement 'pleaded in paragraph 15A' is to the agreement I earlier found, made at about the time of the sale of the Fewster Property (on the plaintiff's evidence in chief) or May 2004, subsequent to that sale but before its settlement (on the first defendant's evidence in chief), that the Depot Property would be transferred into their joint names, for the purpose of which I also found that the parties agreed to set aside $6,000 from the proceeds of the sale;
'Alternatively' a declaration that 'the partnership between the plaintiff and the [first] defendant pursuant to which the Property was purchased is dissolved';
A declaration that the first defendant holds the Property in trust for the plaintiff and the first defendant as tenants in common in equal shares alternatively as joint tenants;
'Alternatively' a declaration that:
- The plaintiff has an equitable interest to the extent of one undivided half share of the Property;
- The first defendant holds that interest on constructive trust for the plaintiff;
An order that the Property and any improvements be sold by public auction as stipulated;
An order that the net proceeds of sale after the payment of what is due to the encumbrancer or encumbrancers and proper costs, charges and expenses of the sale be paid into a trust account of the solicitors of the plaintiff to the credit of this action, to be disbursed by agreement of the parties or to abide further order, with liberty to apply;
'Alternatively' equitable compensation, by reference, it seems, to:
- A market value for the Property of $700,000;
- A reasonable rental value of the Property for the period 1 January 2005 to 30 April 2007 at $2,000 per month, namely, $56,000 in total;
- The plaintiff's interest in the Property as one-half of its market value and one-half of its rental value, less one-half of the mortgage payments, outgoings and maintenance payments for the period August 2004 to date;
- It being equitable there be a set-off of the plaintiff's share of the rental value against her share of the mortgage payments, the outgoings and the maintenance payments; and
Interest on such equitable compensation as may be ordered from the date on which such compensation became due or alternatively the date of the judgment, whichever is the earlier, calculated pursuant to Supreme Court Act 1935 (WA) s 32.

[198]

It is therefore necessary to examine the principles which apply to claims for an account or an allowance in respect of improvements, mortgage repayments, repairs and other like expenditure on property as between beneficial co-owners. These have been examined extensively in Ryan v Dries (supra) and in Oxley v Hiscock [2004] EWHC 2473; [2004] 3 All ER 703 CA although it may be that the current English approach gives greater recognition to non-pecuniary contributions than has been accepted in this country.

In an instance where the beneficial ownership of a property is shared between two people, either husband or wife, co-habitees or others, and one leaves, with the remaining co-owner continuing or taking over mortgage repayments and the responsibility for repairs and improvements, there can be an account taken in equity between those parties. For the paying party to recover an allowance for any appreciation in the value of the capital asset because of these outgoings it is necessary to prove that the expenditure has, in fact, produced an ascertainable increase in the capital value as, for example, in the case of a renovation which has enhanced the market value of a house or, in relation to the repayments of a mortgage where the repayments have effected an ascertainable reduction in the principal previously owing under the mortgage. In the absence of proof of an increase in capital value so caused, no recovery because of unrelated appreciation in value will be possible and the parties are left to hold the property, or share the proceeds of any sale, on the basis of their established beneficial interests, usually, but not always, arising from the extent of their contributions towards the costs of its acquisition. Such a claim, where it exists, will only be available in certain designated proceedings which, include a partition suit or a claim for a compulsory sale or in other proceedings which involve a termination of the proprietary interests of the co-owners whether those interests be legal or beneficial.

Then there is the category of payments which do not directly enhance the capital value of the asset such as for the interest component under a mortgage or other outgoings necessary for the preservation of the property such as repairs, minor improvements and the payments of rates, taxes and other expenses deriving directly from ownership. Often there will be a situation where one of the co-beneficial owners vacates the premises and leaves the other in occupation who, staying on, through choice or necessity continues to meet the mortgage repayments, rates, taxes and other like expenditure. In that situation a remaining co-owner or co-beneficial owner may be entitled to recover a contribution, proportionate to the departed co-owner's beneficial interest in the property, to the mortgage repayments, rates, taxes and like expenditure but, in such cases, the person claiming a contribution or an account will be chargeable with an occupation rent in respect of the period in which he or she continued to enjoy sole possession of the premises - In Re Pavlou (a Bankrupt) (supra) at 1049 - 1050. In some cases a court may simply set-off the payment of expenditure by the continuing occupant against the occupation rent as a matter of convenience but a strict accounting can be demanded by the parties - In Re Gorman (a Bankrupt) [1990] 1 WLR 616 at 626. In this regard, Hodgson JA said in Ryan v Dries (supra) at [61]:

[220]

Accordingly, in the absence of an agreement between those contributing towards the purchase price that Miss Sands should hold the entire legal and beneficial interest in the property, the established rule is that the beneficial interest should be held by the contributors in proportion to their contributions to the purchase price - Calverly v Green (supra); Muschinski v Dodds ... and Baumgartner v Baumgartner (supra) unless the facts warrant a conclusion that, in the case of the plaintiff or the defendant's mother, their contributions entitled them to no more than an equitable charge over the property to secure eventual repayment to them of their contributions, perhaps with interest - Baumgartner v Baumgartner (supra), Bloch v Bloch [1981] HCA 56; (1981) 180 CLR 390 and Napier v Public Trustee (WA) (1980) 55 ALJR 1. It is the measure of the parties' contributions to the purchase or acquisition cost of the property which usually determines their proportionate beneficial share - Calverly v Green (supra). This leaves the question of the significance of subsequent contributions to repayment of a mortgage loan in controversy because the primary rule is that these will not alter the extent of the proportionate beneficial interests determined by contributions to the purchase price. However, there are exceptions to this approach which will later require consideration - see per Gaudron J in Baumgartner v Baumgartner (supra) at 156.

There is some difference in authority over whether contributions to the purchase price are confined to the payments made by the parties only to the price paid to the vendor so excluding fees, disbursements and other incidental costs of completing the transaction such as stamp duty. In a resulting trust case between de facto couples, McClelland J treated the trust as extending to the value of all acquisition costs including the purchase price, incidental costs, fees and disbursements - Currie v Hamilton [1984] 1 NSWLR 687 at 691 but that decision was doubted and a contrary approach was taken by Bryson J in Little v Little (1988) 15 NSWLR 43 at 45 - 46 where his Honour said:

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GRUNDY -v- CASSAR [2010] WASC 409 (23 December 2010)

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