Harvey v Harvey

Supreme Court of NSW|2024-05-21|Before: Peden J

ex tempore JUDGMENT (revised)

The children of the late Edward Harvey and the late Heather Harvey are in dispute. I refer to each of the family members involved by their first names, meaning no disrespect.
Heather died on 25 December 2013 intestate, and her whole estate passed to Edward pursuant to s 112 Succession Act 2006 (NSW). Edward died on 29 August 2019 intestate.
The youngest of the three children, David, is the administrator of Edward's estate. Mark is the oldest child and the defendant. The parties' other sibling, Lara, is not a party to the proceedings, nor a witness for either of her brothers. David is estranged from his siblings.
David alleges that, because his late parents sold their home and used a large portion of the sale proceeds to build a dwelling for themselves on Mark's property at New Lambton, New South Wales, he can establish that his late father and Mark had a common intention that Edward would hold an interest in Mark's property, likely as to 50%. David asserts that Edward's interest in Mark's property ought to be declared and, thereafter, it will be distributed to the three children equally from the intestate estate.
Whether there was such a common intention is the sole issue in these proceedings, because Mark denies such a common intention. Mark asserts that, while obtaining a proprietary interest in his land was one idea that he and his father discussed, his father did not pursue it. Instead, Mark asserts his father was content to construct his dwelling and then live there mortgage and rent free and with physical and emotional support from Mark and his wife for the final ten years of his life.
For completeness, I note that David abandoned any claim based on a resulting trust. Further, while in his statement of claim David sought orders against Mark for alleged misappropriation of Edward's chattels, including cash, in his defence, Mark offered those chattels for David's collection. Some of the serious allegations David made against Mark, including alleged stealing from his father's bank account after his death, were demonstrated to be wrong or withdrawn. In any event, David does not seek relief in these proceedings in relation to any of Edward's personal property.

Further background

By 1998, Heather had early Alzheimer's disease, and she retired from working as a teacher's secretary. In 2003, Edward retired as a school teacher.
In 2001, Mark purchased his property at New Lambton (Number 29) with a mortgage to enable him to purchase and renovate.
Until December 2002, Edward and Heather lived in a property at Thornton. They sold that property and purchased vacant land nearby. On that land, they constructed a new dwelling, in which they then lived until 2007. By July 2004, they had discharged their mortgage over their property.
On 6 August 2004, Edward and Heather borrowed $73,000 from Homeside Lending, secured by a first registered mortgage over their property. That money was provided to Mark for the purchase of a tutoring franchise, either in Mark's name alone or in both Mark and Edward's names. The franchise was not successful, and Mark's unchallenged evidence was that later, the original owners bought back the franchise for the purchase price. Mark promised his parents he would make loan repayments from the franchise profits. However, there were insufficient profits generated and few or no repayments were made on the loan before 2007.
On 21 September 2005, after issuing earlier letters outlining defaults on the loan's repayments in the sum of a few thousand dollars, the bank instructed its lawyers to initiate court proceedings to instigate a mortgagee sale of Edward and Heather's home. While complaining about the bank's conduct and that of the vendor of the tutoring franchise, a bank record dated 8 May 2006 states that Edward "decided to put his property on the market" and pay the arrears.
On 17 April 2007, Edward and Heather sold their property for $375,000, and from those proceeds they repaid the secured loan in the sum of $76,429.57.
Before that sale, Edward and Heather had started applications to build a dwelling on Mark's property, which, once built, came to be known as "Number 29A". Council consent was not provided until May 2008, and construction commenced in the months after that. Mark accepted that he and his father had discussed his parents building on his land "for many years" before his parents sold their home in 2007, and at least by October 2006. His unchallenged evidence, which I accept, was: My father wanted to live in New Lambton. That's what he wanted. He wanted to live in New Lambton because mum was stricken with Alzheimer's and the notion of having a house at the back of my place helped with the supervision of somebody who was quite ill. That's why he wanted to move to New Lambton."
On 3 April 2009, the construction certificate for Number 29A was issued.
In about May 2009, at Mark's suggestion, Edward and Mark attended a Newcastle University legal service to obtain advice about Mark's property and Edward's dwelling on it. Mark's evidence given in cross-examination was: I proposed to [Edward] that we talk to [the legal service] about what it would entail for [Edward] to have a half share of the property.
Mark's evidence was also that having his father on title would assist his financial situation, which was dire at the time.
The legal service provided Edward and Mark with a blank approved transfer form. They jointly filled it in, referencing Mark's transfer to Edward of a 50% interest in Mark's property as tenants in common. The witness signature block is empty. No stamp duty was ever paid, and the transfer was never registered.
By mid-2009, according to Mark's unchallenged evidence, Edward and Heather moved into their completed dwelling on Mark's land. About a year later, Heather's health had deteriorated, and she moved into a nursing home and died in 2013.
As noted above, Edward passed away intestate in 2019. Shortly after his father's death, David found in his father's papers the signed transfer. Following extensive further investigations, David commenced these proceedings.
To date, David has incurred approximately $280,000 in legal costs. The only valuable asset in Edward's estate would be a share in Mark's property, if the arrangement alleged by David is found. There is no valuation evidence of Mark's property, however, a submission was made that a half share in Mark's property may be worth approximately $300,000. Without the property forming part of Edward's estate, and based on David's assessment of the estate as administrator, the estate would be worth about $81,000.

Common intention constructive trust principles

Questions have been raised as to whether the common intention constructive trust has been, or should be, subsumed within the law of proprietary estoppel: see Bijkerk Investments Pty Ltd v Bikic [2020] NSWSC 1336 at [111]-[119] (Leeming JA).
However, Leeming JA expressed no concluded view on this question and determined the matter before the Court on the basis of a common intention constructive trust, because there was no debate before him about the most appropriate legal analysis. As there has been no such debate before me, I will do the same. This approach appears to be common among trial judges: see eg Behman v Behman [2015] NSWSC 1787 at [32]-[33] (Rein J); Clayton v Clayton [2023] NSWSC 399 at [534]-[543] (Meek J); Jemmark Pty Ltd v 10 Egan Street Pty Ltd [2022] NSWSC 865 at [69] (Parker J).
For a common intention constructive trust to arise, it must be established that: 1. the parties agreed, or had a common intention, that the plaintiff would have a beneficial interest in property legally owned by the defendant; 2. the plaintiff relied to their detriment on the agreement or common intention as to ownership; and 3. it would be unconscientious for the owner to deny the plaintiff's beneficial interest: Bassett v Cameron [2021] NSWSC 207 (Bassett v Cameron) at [563] (Ward CJ in Eq); Shepherd v Doolan [2005] NSWSC 42 (Shepherd v Doolan) at [34]-[42] (White J), cited with approval in Galati v Deans & Ors [2023] NSWCA 13 (Galati v Deans) at [54] (White JA).
In Bassett v Cameron at [564]-[565], Ward CJ in Eq (as the President then was) set out a number of more specific principles concerning the common intention constructive trust: cited with approval in Galati v Deans at [148] (Basten JA). In brief (citations omitted): 1. The parties need not have a common intention that they will hold specific shares of the property; a common intention that the plaintiff have a beneficial interest or "some form of a proprietary interest" is sufficient. 2. If a common intention of the parties is made out, then the less stringent test identified by Gleeson CJ in Green v Green (1989) 17 NSWLR 343 at 357 applies, according to which: [O]nce it has been shown that there was a common intention that the claimant should have an interest in the house, any act done by her to her detriment relating to the joint lives of the parties is, in my judgment, sufficient detriment to qualify. The acts do not have to be inherently referable to the house … The holding out to the claimant that she had a beneficial interest in the house is an act of such a nature as to be part of the inducement to her to do the acts relied on. Accordingly, in the absence of evidence to the contrary, the right inference is that the claimant acted in reliance on such holding out and the burden lies on the legal owner to show that she did not do so. 1. A common intention constructive trust can arise after the acquisition of the relevant property, if there is evidence to establish that the common intention formed at some later time.
Additional principles governing common intention constructive trusts are set out by White J (as his Honour then was) in Shepherd v Doolan at [37]-[42]: cited with approval in Galati v Deans at [54] (White JA). In brief (citations omitted): 1. In ascertaining common intention, the Court is concerned with the parties' actual and not presumed intention; common intention is, in turn, a question of evidence, not law. 2. The requisite intention may be established by the existence of an agreement between the parties, express statements of the parties, or by inferences from the parties' conduct. 3. The requisite intention cannot be inferred from joint occupation, shared household duties, the bringing up of children, repairs, renovations, maintenance, decoration or improvement, or the provision of furniture. 4. The requisite intention may be inferred from financial contributions made by the plaintiff to the acquisition of the property, whether direct or indirect. 5. The requisite intention may be inferred from declarations made by the parties before, or at the time of, or shortly after the relevant events, and subsequent declarations are only admissible against interest. 6. The claimant must show that they acted to their detriment in a way referable to the parties' common intention. However, conduct which is insufficient to establish a common intention may be sufficient to establish detriment. 7. The requisite intention and the act of detrimental reliance may be inferred from the same evidence. 8. The quantum of interest is whatever the parties' agreed or commonly intended. If this cannot be established, the maxim that equity is equality applies. However, the maxim should be departed from where the parties have made disproportionate contributions, including non-financial contributions, towards acquisition of the property.

Did Edward and Mark have a common intention as alleged?

On 28 April 2023, the Court made an order at the request of Mark for the matter to proceed by way of pleadings, for "crystallisation" of the issues.
In his statement of claim, filed on 29 May 2023, David pleads that the alleged common intention of his late father and Mark was either that: 1. Mark's land would be subdivided, to provide Edward with the land on which his dwelling stood; or 2. Mark and Edward would own Mark's land as tenants in common, with a 50% share each.
The case based on a subdivision was abandoned. Instead, the case was run solely on the basis of a common intention, by way of agreement or arrangement, that Edward would own 50% of Mark's property, or some other unidentified portion of Mark's property.
David accepts that there are no statements in writing by Edward about his intention. Further, there is no suggestion that Edward lacked capacity when he was making financial and property decisions.
In his statement of claim, David particularises the facts said to give rise to the inference of the alleged common intention. Of those particularised facts, the following are not in dispute: 1. Edward provided all the funds to build his home on Mark's land. 2. Edward's development application stated that he would be the "owner" of the proposed development. 3. Edward paid some of the water rates associated with Mark's land, and for the electricity and gas he used. 4. In about May 2009, Edward and Mark signed a transfer of 50% of Mark's land to Edward. At no time was that transfer witnessed, nor lodged with the requisite stamp duty. 5. On 28 October 2009, Edward had a draft will prepared, which bequeathed his estate to his three children equally. It did not refer to any portion of Mark's property. The will was never executed.
Other particulars in the statement of claim were abandoned, but no further particulars were provided by David to Mark at any time before or during the hearing. Mark has taken issue with David expanding his case beyond the particulars, by alleging that further facts support the alleged inference of an intention that Edward would obtain a proprietary interest in Mark's property. The facts relied upon are that Edward advanced various sums of money to Mark, in particular between 2004 and 2008. David's explanation for the failure to provide further particulars of these advances to Mark was that subpoenaed documents were not obtained until a few weeks before the hearing. However, no explanation has been provided as to why particulars were not provided after the subpoena material was obtained and why further particulars were not provided in circumstances where David had filed extensive evidence in 2022 before his pleading, which identified some of these advances.
I do not consider that the matters now raised by David solely go to issues of credit, and instead, consider they are matters of substantive fact which ought to have been notified to Mark before the trial. I do not accept that it is incumbent on a defendant to go into detailed evidence on every unpleaded matter that is raised by a plaintiff. In the circumstances, I do not consider that the evidence sought to be advanced by David is relevant and admissible and the correlative submissions therefore ought to be ignored.
However, on the assumption that that conclusion is incorrect, and the material ought to be considered, I deal with it below in the context of the other matters, upon which David relies.
David's whole case is based on an inference which he seeks the Court to draw in relation to the common intention. Commenting on the use of inferences to meet the civil standard of proof, the learned author of Cross on Evidence (14th Aust ed, 2023, Lexis Nexis) has observed (at [9055], citations omitted): "Where there is no direct evidence of a fact it is not possible to obtain entire satisfaction as to the true state of affairs." But the standard of proof can be met by drawing "reasonable and definite" inferences from circumstances. Where satisfaction of the civil standard of proof depends on inference, there must be something more than mere conjecture, guesswork or surmise. That is, there must be more than "conflicting inferences of equal degrees of probability so that the choice between them is a mere matter of conjecture". If there is, the test is as follows: "The difference between the criminal standard of proof in its application to circumstantial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence, while in the latter you need only circumstances raising a more probable inference in favour of what is alleged.
First, David submits it ought to be inferred that Edward and Heather would not have been compelled to sell their property to repay the mortgage, except for Mark failing to repay the loan for the tutoring franchise. Therefore, it is said it ought to be inferred that Edward considered Mark was indebted to him, and Mark also held that view. I do not accept that submission.
The broader submission was that Edward had provided Mark with significant financial support from 2004, being: 1. Approximately $76,000 paid by Edward and Heather to pay out the $73,000 tutoring franchise loan. 2. About $54,000 towards Mark's mortgage in various amounts. 3. About $42,000 for legal expenses incurred because of Mark's workplace dispute.
The evidence around the $73,000 loan and the reasons why Edward and Heather assisted Mark were not developed in detail by David.
Generally, I accept that Mark's affidavit evidence, and his evidence in cross-examination on unpleaded facts, was not always accurate. However, Mark conceded appropriately in cross-examination where there were errors and also explained that his lawyers had prepared his affidavit evidence, as is often the case. I do not accept the submission that Mark had "deliberately concealed" facts from the Court in relation to the unpleaded matters.
Mark accepted that he had agreed with his parents to make repayments on the $73,000 loan, but he was unaware that the loan was secured by a mortgage over his parents' property. Mark was also not aware that his parents were compelled to sell their property, as opposed to wanting to sell to move closer to Newcastle and secure family support for Heather. I do not accept that, because Mark was a witness to his parents' signatures on the loan, he understood the legal implications for his parents at the time.
While Edward had decided to sell his property, as recorded in the bank document referenced above, it is not in dispute that he also wanted to move closer to Newcastle. I do not accept that it can be concluded that Edward would not have sold, even if Mark had made repayments towards the loan. I do not accept it must be concluded that Mark forced his parents to sell through his actions.
Further, I do not accept that Edward and Heather's agreement to borrow money against their home gives rise to a common intention on Edward and Mark's part that Edward would later obtain a proprietary interest in Mark's property. As noted, Mark's unchallenged evidence was that the franchise was repurchased by the former franchisee for the purchase price of $73,000.
David submits that all of the advances detailed below, which were not documented as gifts, tell against Edward wanting to further prefer Mark with the improvement on his land, and instead point to the alleged common intention. I note that there is no evidence that Edward's construction of the second dwelling on Mark's land has led to an improvement on Mark's land. While that might ordinarily be the case, there is no evidence to demonstrate that. Mark accepted that the original intention was that he would repay the $73,000 business loan from the business proceeds, and that he was provided other advances from Edward. However, his evidence was that his father was "helping out" by providing advances generally.
I do not consider the evidence surrounding these various advances, even if admissible, assists David in the way he alleges. There was no evidence, for example, as to the exact assistance Edward had provided to his other children. I note that David accepted in cross-examination that his father had provided him with financial assistance when he was unemployed and when his business failed. I consider Edward's conduct is consistent with a father assisting his children, as and when he could, and, as and when they needed.
In relation to all of these advances to Mark, there are no documents created by Edward explaining his intentions as to whether they were gifts or whether he was expecting anything in return. It appears that Edward was a good record keeper and did from time to time include descriptions in his bank statements for some transfers, including a transfer to Mark for "bills". The fact that Edward did not make any record of all of the advances as loans tells against him expecting repayment of those sums. There is no evidence at all of Edward demanding repayment from any of his children for sums advanced.
I also do not accept that, because Edward appears to have benefitted Mark during his lifetime, it ought to be inferred that he intended to ensure that he had legal title to part of Mark's property, so as to bequeath it to his three children.
David may feel he has been treated unfairly by his father. However, it is impossible to know with certainty Edward's motivations for advances of money to any of his children and his decision not to document his arrangement with Mark or any advances or to complete a will.
Therefore, I do not accept that Edward's provision of money to Mark demonstrates that Edward's intention was that he would be "repaid" by Mark by way of a proprietary interest in Mark's property.
Secondly, David submits that, because Edward and Heather had used most of their property sale proceeds to construct the new dwelling on Mark's land, an inference ought to be drawn of an intention to obtain a proprietary interest in Mark's property.
I am not asked to find that the parents had insufficient money to purchase elsewhere and were compelled to build on Mark's property as the only possibility for their future accommodation.
However, oddly, in his evidence and through cross-examination, David sought to advance that Edward spent the largest possible sum on construction costs, rather than relying on the actual payments made by his father to the builder evidenced in the bank records or the builder's quote. After the parents had sold their house and paid their mortgage, they had close to $300,000. I accept that approximately two thirds of the parents' proceeds of sale were spent on the construction of their dwelling on Mark's property, but the evidence goes no further on other alternatives open to the parents, had they decided not to build. Alone, I consider this matter neutral.
Thirdly, David's submissions similarly include that a common intention was formed before Edward and Heather sold their previous property. However, the only clear evidence of any agreement at that time, was that Mark agreed that Edward and Heather could build on his land. That agreement does not prove that Mark and his parents had a common intention about title to Mark's property.
Other than the transfer, which I consider below, there is no evidence that Edward was induced to build on Mark's land because of any express promise of a proprietary interest, or that he would have preferred to use the property sale proceeds to live elsewhere, save for an arrangement or agreement with Mark.
Fifthly, David places great reliance on the signed transfer prepared in 2009. There is no dispute that Edward obtained legal advice about the legal process to obtain an interest in Mark's property. He was provided by a legal service with a transfer document. Edward had also bought and sold various properties and could be taken to have understood that stamp duty was payable for any land transfer. Mr Keizer, for David, submitted that the stamp duty would have been payable by Edward.
However, Edward did not complete the necessary legal steps for a transfer and there is no evidence that he made any attempt to satisfy them, including the payment of stamp duty or registration of the transfer. I also consider it significant that Edward sought independent legal advice, without Mark, about a will, which makes no reference to any proprietary interest in Mark's land. Having known where he could access legal advice, there is no evidence that Edward ever sought further legal advice to complete a transfer, or to document his advances to Mark, or record their arrangement, or finally complete a will.
In circumstances where Edward kept records and was careful with his money, had he had a particular intention it would have been expected that he would have documented it in some way. I also consider that, had he wanted any arrangement to be legally complete, he would have satisfied the legal requirements.
I do not accept David's evidence that the family agreed that Lara and her husband would pay the stamp duty on a transfer in relation to Mark's property. Neither Lara nor her husband were called to give evidence. David said he was "estranged" from them. There is no evidence that Edward attempted to obtain funds for the stamp duty, including, for example, seeking David's assistance to do so.
I accept Mark's unchallenged evidence that he never had another discussion with his father about the transfer after 2009.
David's evidence with respect to the transfer was largely speculative and unhelpful. David found the transfer document after his father's death. He assumed it was signed in 2009, because he found a receipt for a valuation of Mark's property dated 2009. David accepted he was "guessing" about when the transfer was created; I do not accept he had any knowledge of it around the time it was created, or before his father's death. I do not accept that Edward ever discussed the transfer document with David.
David also assumed that the amount stated on the transfer could be explained by reference to his father's other financial papers, asserting that $135,000 was equivalent to advances Edward had made to Mark. I do not accept David's assumption is correct. Edward's financial records and notations do not support that conclusion, neither do any of the other documents.
The only real evidence offered in support of David's understanding of the signed transfer and the alleged common intention was an alleged conversation David had with his father in about 2009, when David asserts that he urged his father to "get on title". In response, Edward allegedly said "I'm waiting on Mark. He said he'd do the transfer. Lara and Rod have agreed to pay the stamp duty". However, had that conversation occurred, and had David been the person agitating for his father to be protected on title, it appears odd that David gives no explanation as to why he did not assist his father to achieve his goal, and why he never had a single conversation with his father about the subject matter for the remaining ten years of his life. No other witness gives any evidence that Edward discussed any proprietary interest in Mark's land.

Conclusion

For the reasons identified, I do not accept that David has demonstrated, on the balance of probabilities, that a common intention existed between his late father and his brother, as he alleges.
Instead, I consider that there were other reasons why Edward built on Mark's property, without requiring a proprietary interest in that land. I accept that there were benefits to Edward and Heather, including living mortgage-free for life and having support from Mark, in a location close to the convenience of Newcastle and, in particular, health care.
The only inference that can comfortably be drawn is that Edward made a conscious decision, for whatever reasons, not to agitate for any transfer or other documented arrangement concerning Number 29A and, further, decided not to execute a will, including a will referencing Number 29A. It is not therefore necessary to consider any other matters raised by the parties as to detriment and unconscionability.
Therefore, the Court makes the following orders: 1. Statement of claim dismissed. 2. Plaintiff to pay the Defendant's costs as agreed or assessed. 3. Parties have liberty to apply to make an application for an alternative costs order within seven days of today's date, setting out the application and any evidence and submissions upon which they rely. 4. The responding party is to provide evidence and submissions opposing any alternative costs order within seven days of receiving the first application. 5. The Court will consider any such alternative costs order on the papers, if appropriate.

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 May 2024

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