Irvine v Scaysbrook [2005] NSWSC 565 | Case summary

Me: That's okay." 17 There were then subsequent discussions between Mr Irvine and his mother in July 2002 after he and Mrs Irvine had located a property at Walloon which interested them. Mr Irvine says that in the subsequent discussions it was agreed that an offer would be made for the property of $129,000 and that there was discussion about Mr and Mrs Scaysbrook borrowing up to $140,000, which would be more than would be needed to purchase the property even on 100 per cent finance. He says that in a conversation with his mother in early July 2002 he said that he would not pay the extra repayments on the extra money which she and Mr Scaysbrook borrowed above the purchase price of the property, and that that was agreed. 18 He says that at no stage prior to the purchase of the Walloon property did he discuss its purchase or the arrangements for ownership with Mr Scaysbrook. 19 Mrs Scaysbrook denies these conversations. She says that Mr Irvine asked her if she and her husband could use the proceeds of sale of their investment property to buy an investment house in Queensland in which Mr and Mrs Irvine could live and where they would not be liable to be "thrown out on five minutes' notice". 20 She says that she was told that the Irvines were currently paying $210 per week in rent and that under the arrangement which she discussed with Mr Irvine they were prepared to rent the property to the Irvines. The rent the Irvines would pay would be no more than the rent they were currently paying, and would be permanently capped at the rent that they were currently paying. 21 She agrees that in the course of the discussions with Mr Irvine, Mr Irvine said that the proposed arrangements would provide a tax benefit for Mr Scaysbrook. 22 Mr Scaysbrook says that he had discussions with Mr Irvine in relation to the purchase of the property. He says that he told Mr Irvine that "your mother has told you that if we were to purchase a property for you to live in, then we would not charge you any more rent than what you are paying now." He says that Mr Irvine told him that they were then paying $850 per month in rent. 23 Later he says that there was a further discussion between him and Mr Irvine, in which he told Mr Irvine that he had arranged for insurance and that with regard to rates and any items of maintenance which might be necessary, that he should let Mr Scaysbrook know about any expenses which the Irvines incurred and they would be reimbursed. 24 He also says that on about 21 August 2002, which was the date when the purchase of the Walloon property was settled, he told Mr Irvine that rent payments would not commence until 10 September and that the Irvines did not have to worry about a rental bond. 25 The resolution of the conflict in this evidence does not depend solely, or even primarily, upon an assessment of the reliability of each of the witnesses based on their demeanour in the witness box or matters of that kind. There is, in my view, a number of inherent inconsistencies and implausibilities in Mr Irvine's version of events which, subject to a consideration of the rest of the evidence, make it improbable. 26 The first of these is that the reason Mr Irvine gives for the property being purchased in the name of the Scaysbrooks is so that it would provide a tax benefit to Mr Scaysbrook. I have not been able to understand how, on the plaintiffs' case, the proposed arrangements would provide a tax advantage to either of the defendants. 27 It is true that the defendants could claim a tax deduction in respect of interest which they paid on a loan for an investment property, and if those payments exceeded the rent which they were to receive for it there would be a net tax deduction to be offset against their other income. If they paid for repairs to the property they could deduct the cost of those repairs. But they would only be entitled to such deductions if the property was an investment property which they owned. 28 Counsel for the plaintiffs was unable to suggest a proper way in which the Scaysbrooks could derive a tax advantage from the purchase of the property if it were beneficially owned by the plaintiffs. There is no reason in the evidence which would justify a finding that the defendants intended to attempt a fraud on the revenue, and hence no reason for thinking that they did not intend to become the owners of the property. 29 The next curious feature of Mr Irvine's version of his conversation with his mother is that, according to him, his mother agreed that she would make a will leaving the house to him and Mrs Irvine. If, as Mr Irvine claimed, the plaintiffs owned the house, it would not be Mrs Scaysbrook's property to dispose of by will. His explanation was that his mother could leave the property by will because "her name was on the ownership". However, the fact that ownership is in her and her husband's name provides no explanation as to how she could leave the property by will unless she did in truth own it or a share in it. 30 The next curious feature of Mr Irvine's version of events is that, according to him, he did not discuss the arrangements with Mr Scaysbrook. All the relevant discussions, at the time of acquisition of the property, were with his mother. 31 While it is understandable that the discussions would be with his mother if the events occurred as Mr Irvine deposed to, I nonetheless find it surprising that he would not also discuss those arrangements with his stepfather. 32 He recognised that his stepfather's name would go on the title. He had, according to his evidence, sought from his mother a written acknowledgment of the arrangement. No written acknowledgment was obtained. The arrangement, if it was to be of benefit to his stepfather, would involve his stepfather being prepared to claim tax deductions on an investment property which he did not own. In those circumstances, it is, I think, inherently implausible that such an arrangement would be made without at least discussing it with Mr Scaysbrook. 33 Before turning to the claimed items of expenditure, I will deal briefly with the acquisition of the property. It was selected by Mr and Mrs Irvine in early July 2002 and was then being offered for sale at $132,000. The offer of $129,000 was accepted by the vendor. A contract for sale was sent by Mr Irvine by facsimile to the defendants for their signatures. They signed the contract on 9 July 2002 and the sale was completed, according to Mr Scaysbrook, on 21 August 2002, and, according to the statement of claim, on 15 August 2002. Nothing turns on the precise date. 34 Mr Irvine estimated that the cost of purchase would be $133,000, comprising principally, the purchase price of $129,000 and stamp duty of $3,870. The defendants submit that the cost of purchase was $135,154. That includes stamp duty on the loan taken out by the Scaysbrooks, credit fees and charges, and adjustments on settlement. 35 The defendants borrowed $140,000 from the National Australia Bank to complete the purchase. All of the acquisition costs were thus financed by borrowings and there was some extra money left over between $4,000 and $7,000 - although I think closer to $4,000 than $7,000 - for the defendants' other purposes. There were some discrepancies in the evidence as to whether the balance was to be used for renovations at the defendants' house at Weston, about which there was conflicting evidence, but that is an irrelevant issue in this case. 36 The mortgage payments were $940 per month. The plaintiffs moved into the property on completion in August 2002 and from either September or October 2002 they made monthly payments into the defendants' account with the National Australia Bank of $850. Those payments were made by electronic transfer from 12 October 2002 until 13 April 2004. 37 In addition, the plaintiffs say that there was a cash deposit of $850 to the defendants' account in September 2002. There is no precise corroboration of that payment, although there was evidence that not long before the payment was said to have been made, there were cash withdrawals from the Irvines' accounts and cash deposits to the Scaysbrooks' accounts which were consistent with a deposit of at least that amount being made. I accept the plaintiffs' evidence that a deposit of $850 was made in September 2002. From October 2002 the payment was sent by electronic transfer via the internet, and Mr Irvine entered the words "home payment" in the payment description field of the electronic form. 38 I will return to the proper characterisation of those payments shortly, but as well as relying upon those payments the plaintiffs pointed to the following matters as being corroborative evidence of their version of events as acts from which the court should infer that the parties had an actual common intention that the plaintiffs had a beneficial interest in the property and as acts of claimed detrimental reliance. 39 Those matters were additionally the payment of rates from November 2002 to February 2004, the reimbursement of insurance payments, the purchase of fittings and fixtures, and the carrying out of repairs and improvements to the property through repairing a fence, repainting, laying turf, other landscaping and gardening work, installing new flooring, and installing air-conditioning. 40 Coming back to the monthly payments of $850, the plaintiffs deny that those payments had the character of rent. Mr Irvine says that he was told by a finance broker, Mr Green, to whom he had introduced the defendants, that the monthly mortgage payments on a loan of $133,000 would be $850. There was no corroboration of that evidence and, as a matter of arithmetic, it does not make much sense unless one assumes either a different rate of interest or a different repayment term on the balance of the loan. There is no apparent reason to do so. If the monthly repayment for a loan for $140,000 was $940, then the repayment attributable to 95% of that loan, being the proportion $133,000 bears to $140,000, would be $893 per month. 41 On the other hand, Mr Scaysbrook says that Mr Irvine had said to him that his, Mr Irvine's, rent, was $850 per month. In fact, it was not. The rent, as he told his mother, was $210 per week, or $910 per month. In short, the figure of $850 is neither the amount of rent which the plaintiffs were then paying, nor the proportion of the monthly mortgage payment which the defendants had to make which was referable to the amount borrowed to acquire the property, even if the acquisition costs were put as low as $133,000. 42 I think the better view of the evidence is that the payments are properly characterised as rent, and the fact that the rent was less than the rent which the plaintiffs were then paying was a benefit which they were to derive from the arrangement. That benefit had even greater value because Mrs Scaysbrook had agreed that the rent would always be capped at no more than the rent the Irvines had previously been paying. 43 As I previously indicated, a principal reason for considering the payments to be properly in the nature of rent is that that is consistent with the notion that there would be tax advantages to the defendants in the transaction. 44 The plaintiffs relied on Mr Irvine's description of the payment as "home payments". It was suggested that this was an inapposite way of describing a payment of rent. However, the expression is equivocal. It could refer either to the occupation or to the purchase of a home. As Mr Irvine gave no evidence about his intentions in so describing the payments, I do not infer from that language that he intended to indicate that the payments were not rent. 45 The plaintiffs moved out of the Walloon property in mid-March 2004. Initially they stayed with the defendants at Weston, but they moved out of that property on 6 May 2004 into rented premises at Paxton. The last payment of $850 was made on 2 April 2004. The defendants suggested that the fact that the payments stopped, indicated that the plaintiffs did not really consider that they were liable to pay the mortgage instalments on the property. However, whilst that is a prima facie inference which could be drawn, I think it is rebutted by the circumstance that after the plaintiffs moved out of the Weston property they did not have the money to pay, and also from the fact that by that date the defendants had refused to acknowledge that they had any interest in the property. Accordingly, I do not place any weight on the circumstance that the monthly payments stopped in April 2004. 46 It is significant that there was no evidence that the amount of $850 per month was above a proper market rental for the Walloon property. There was somewhat confusing evidence given orally by Mr Scaysbrook that the rent currently being received for the property is $800 per month, less managing agent's commission. He also said that the rent currently being paid was $200 per week which, on my arithmetic, would equate to $867 per month. However that may be, the evidence does not show that at the time the plaintiffs were in occupation of the property, the amount they were paying was above a reasonable market value for the rental accommodation in that property. 47 I turn next to the payment of rates. There the position is tolerably clear. Until the plaintiffs vacated the property at Walloon, the rate notices were sent to Walloon. The plaintiffs paid the rate notices from 14 November 2002 to 19 February 2004. They paid a total sum of $1,762.75. Mrs Scaysbrook contended that the plaintiffs were reimbursed for the rates they paid by deposits which she made into Mr Irvine's account. There is no question that from time to time she did make the deposits into Mr Irvine's account. She did so at least from July 2002 to December 2003, in amounts which varied from $50 to $300. 48 The deposits made bear no obvious relationship to the amounts for rates which the plaintiffs paid, nor to the time at which the rates were due. If the arrangement had been that the defendants should bear the burden of rates, then it would have been far simpler for the rates notices simply to have been addressed to the defendants at Weston, rather than for there to have been an ad hoc arrangement whereby payments were made in "bits and pieces", as Mrs Scaysbrook put it. 49 The plaintiffs said that the payments were not for reimbursement for rates at all, but for other matters such as the purchase of birthday or Christmas presents for Mrs Scaysbrook's grandchildren, or for payment of veterinary and other fees in respect of certain show dogs which she and Mr Irvine jointly own, or to compensate Mrs Irvine for the cost of Christmas cards which Mrs Irvine produced. There were contests about all of the details of this. It is unnecessary to resolve those details. I am not satisfied that the plaintiffs were reimbursed for the rates which they paid. 50 On the other hand, there were numerous exchanges of money of relatively small amounts - of a few hundred dollars or less - between both sides of the family. The rates themselves, were in amounts of about $275 and, at most, $365 per quarter. Such monetary transactions of relatively small amounts are entirely explicable as ordinary family dealings where no party gives consideration as to whether what is being paid is a gift, or a loan, or a reimbursement, or a payment made in the expectation of owning or acquiring an interest in property. Money was exchanged relatively freely between both sides of the family for a wide range of purposes without thought of any such accounting. 51 I do not infer that because the plaintiffs paid the rates on the property in which they were living the parties intended that they should be the owners of that property, or have a beneficial interest in it. 52 I should also add that there was no evidence that the monthly payment of $850 plus rates would result in the plaintiffs paying more than would be a fair market rental for the property. 53 I turn then to the question of insurance. The plaintiffs pleaded that the parties had a common intention that they would pay all of the liabilities associated with the purchase of the property, including insurance. It is common ground that the insurance was paid by the defendants. The defendants paid $229.40 in August 2002; $266.62 on 8 August 2003; and $280.91 on 2 August 2004. 54 In their affidavits in reply, although not in chief, the plaintiffs said that they reimbursed the defendants for the 2002 and 2003 payments. Mr Irvine said that he paid his mother $230 in cash to reimburse her for the first insurance premium, when his family came down to Weston for the spring fair in November 2002. The plaintiffs say that Mrs Irvine paid Mrs Scaysbrook $290 in cash when they were staying at Weston over the weekend of 9 and 10 August 2003, and that they told Mrs Scaysbrook that the money was to reimburse her for the insurance premiums. This is denied by Mrs Scaysbrook. 55 It was clearly established that the plaintiffs were not at Weston at the times they claimed to have handed over the cash payments. I accept Mrs Scaysbrook's denials and I find that the insurance premiums were not reimbursed. 56 I turn then to the question of the fittings and fixtures installed by the plaintiffs and the work done by them on the property. The first such work was the installing of new flooring in the kitchen, hallway and dining room in August 2003. This work involved the taking up of the carpet and the laying of a vinyl covering. The cost was $1,850. 57 Mrs Scaysbrook says that she paid Mrs Irvine $2,000 in cash when she visited the property in November 2003 to reimburse her for this cost. This is a claim which Mrs Irvine denies. 58 Mrs Irvine says that on 4 August 2003 she told Mrs Scaysbrook that she had organised and paid for the flooring. There is an invoice of that date showing payment for the supply and laying of flooring. I think it is clear that the work was done before Mrs Scaysbrook was advised of it. 59 According to Mrs Irvine, Mrs Scaysbrook asked her during the course of that telephone call to have the invoice changed to the defendants' names so that "Phil can claim it on tax". Mrs Scaysbrook denies this conversation and said that she reimbursed Mrs Irvine in cash on the basis of a receipt. 60 The relevance of this work is what inferences one should draw from regarding the parties' intentions as to the ownership of the property. If the conversation occurred as Mrs Irvine deposed, it would, in my view, have reinforced in Mrs Irvine's mind that the defendants considered themselves the owners of the property. Otherwise, there would be no basis upon which Mr Scaysbrook could claim the expenditure on his tax. 61 I do not impute either to her or to the defendants an intention of making or contemplating the making of false claims for deduction of expenditure. Accordingly, I find it unnecessary to decide whether the sum of $2,000 was paid in November 2003 and, if so, whether it was a reimbursement. Whether it was or it was not, the installing of the new floor and the circumstances of the conversations between the parties do not suggest that the plaintiffs regarded themselves, or were regarded by the defendants, as the owners of the property. 62 The air-conditioning was installed in January 2004 at a cost of $1,054. It is not disputed that this work was done and it is not suggested that any reimbursement was made for it. At the time the work was done, the plaintiffs were occupying the property and could have expected to live there indefinitely, for as long as they wished. It was a benefit to them, as occupiers of the property - at least as much as, if not more than, a benefit for the owner of the property - for the air-conditioning to be installed. It was installed without prior reference to the defendants and it is not a basis on which I infer an intention that the plaintiffs have actual ownership of the property. 63 The same observations are true of the painting work which cost $719, the installation of a new fence and the concrete paving. 64 In relation to claims of a constructive trust where claims have been made in the context of a marital or de facto relationship, and where one party has claimed a beneficial interest in property arising from expenditure or work done on the property, it has been held that a common actual intention that the parties have an interest in the property owned by another will not be inferred merely from, inter alia, the doing of repairs, decoration and renovations, and even improvements, at least improvements which are not of a substantial kind. The question is one of fact in each case, but see generally Pettitt v Pettitt [1970] AC 777 at 804 and 826. 65 This is not a matrimonial case, but it is a case where there is a family relationship between the parties. I think it is generally true to say that the work which the plaintiffs did is referable to their occupation of the property and does not indicate an intention that the plaintiffs have an interest by way of ownership in it. That conclusion can more readily be drawn given that there was a family relationship between the parties, so that I should not assume that everything that was done was done for the purpose, or with the expectation, of monetary gain. 66 The last item of substance which I need consider is an expenditure on a real estate agent's advertising fee of $405 in 2004. It was claimed by the defendants that this sum was reimbursed by payments made for the benefit of the plaintiffs in transporting Mr Irvine's motorcycle to Weston and in storage, claims which were vigorously contested. There was clearly no direct reimbursement of this expense. However, I do not infer from the fact that that expense was incurred that the plaintiffs considered that they had an interest in the property or the defendants assumed that they had such an interest. 67 Putting these considerations together, and considering also the way in which each of the witnesses gave evidence in the witness box and the points of credit which were made in respect of each of them, to which it is not necessary to refer in any detail, I can safely prefer the denial by the second defendant of the conversations to which Mr Irvine deposed, on the basis of which, the plaintiffs' claim was made. 68 The plaintiffs also relied on alleged admissions made by the defendants orally in 2004, and on a letter written by the first plaintiff and sent, it seems, by mistake to Mrs Scaysbrook dated 28 January 2004. According to Mr Irvine, in January 2004 he sought confirmation from his mother that "the house is still ours, isn't it", and received that confirmation. That evidence was denied by Mrs Scaysbrook, and I accept her denial. The letter of 28 January 2004 contained what was said to be a formal request from the Irvines for "a contract from you both to transfer the current loan for the premises at 72 Farrell Drive, Walloon...to Rodney and Julie Irvine". 69 After setting out what was contended to be the purchase price of the loan and the mortgage instalments, the letter stated: "I appreciate what was done for us in the beginning and this was to help us both. In light of recent events I must ask that we end our agreement and we transfer this loan to our name." 70 The letter did not articulate what it said was "our agreement". Whilst the letter is consistent with the case which the plaintiffs put, it is also consistent with the existing arrangement being a rental arrangement and with Mr Irvine wishing to take over the loan and become, I assume, in some unspecified way thereafter, entitled to equity in the house. 71 Whether that is so or not, Mr Irvine's, or the plaintiffs', assertions in 2004 of an agreement, even if it is of the kind which the plaintiffs assert, cannot itself be relied on as evidence of such an intention as to the ownership of property. It would be available to rebut an allegation of recent invention, but even if it can be read as an assertion of the case which the plaintiffs put, it cannot provide independent evidence of the true arrangements. 72 Evidence from which conclusions can be drawn as to the intention of the parties included declarations of the parties before or at the time of the transaction, or so close in time after the transaction as to constitute a part of it. But subsequent declarations of intention are only admissible against interest. (See Charles Marshall Pty Limited v Grimsley (1956) 95 CLR 353 at 365; Calverley v Green (1984) 155 CLR 242 at 262 and 269; and Bryson v Bryant (1992) 29 NSWLR 188 at 215). Nor are there any implied admissions against the defendants for the way they dealt with the letter following its receipt. Mrs Scaysbrook telephoned Mrs Irvine to ask what the letter was about and was told that it had been sent by mistake. There was therefore no occasion for the defendants to respond to it. 73 I turn then to the particular bases upon which the plaintiffs put their claim. For the reasons I have given I consider there was no express declaration of trust. I have rejected the evidence of Mr Irvine which was the basis upon which that claim was put. It is unnecessary to consider the difficulties which arise from the fact that on any view Mr Scaysbrook did not declare a trust. 74 As to the first claim upon which the constructive trust case was put, I find there was no common intention that the plaintiffs be the beneficial owners of the property or have a proprietary interest in it. Further, even if that had been established, I do not consider that the actions relied upon as reliance by the plaintiffs on such common intention are shown to be referable to the intention which they allege. 75 To qualify as acts of detrimental reliance the conduct in question must be such that the plaintiffs could not reasonably have been expected to have embarked upon it unless they would have an interest in the property. (See Grant v Edwards [1986] Ch 648). I do not consider that that is made out. 76 As to the claim based on estoppel, having regard to the inherent inconsistencies in Mr Irvine's account of events, I am not satisfied that the plaintiffs have made good their proposition that they assumed that they were owners of the property. However, even if they did make that assumption, the defendants did not play such a part in the adoption of or the persistence in the assumption that it would be unjust for the defendants to depart from it; nor, I should say, would the plaintiffs be put in a position of significant disadvantage if a departure from the assumption were permitted. 77 So far as the actions which I have already considered are concerned, for the most part they involve comparatively small amounts of money. More appositely, as I have said, it is not shown that the plaintiffs did not get a fair return for what they did through their occupation of the property. 78 The other ground of disadvantage which the plaintiffs pleaded was that they lost an opportunity to purchase an alternative property. However, I do not consider that the evidence establishes that they were in a position to do so. It is true that there is evidence that they had obtained pre-approved home finance of $190,000, but there is no evidence as to what security margin a lender would have required, and therefore what amount of money the plaintiffs would have needed themselves to make up the gap to purchase a property. 79 Mr Irvine did not, in his affidavit evidence, seek to prove the allegation that the plaintiffs could have purchased an alternative property and would have done so but for their arrangement with the defendants. 80 He adduced evidence in the form of a letter from his solicitors to the defendants of 19 July 2004 which stated - and I have no doubt it stated this on instructions: "At this time Rodney and Julie were living in Queensland and were desirous of acquiring a home as they were living in rented premises. However, having regard to Rodney and Julie's finances, they did not have sufficient funds for a deposit and would have had difficulty in obtaining finance." 81 It is true that Mr Irvine was not cross-examined on that document, but as he produced it in his own evidence, I do not think it was incumbent upon counsel for the defendants to do so. Accordingly, I consider that none of the elements required for the plaintiffs' estoppel case is made good. 82 Finally, as to the claim for a constructive trust based on the principles of Baumgartner v Baumgartner, it is sufficient to say that I do not consider that that case has any relevance to the present facts. This was not a joint endeavour in any relevant sense. There was no pooling of assets or resources and there was no question of there being a premature determination of the parties' joint relationship - see the illuminating discussion of Baumgartner v Baumgartner by Campbell J in West v Mead [2003] NSWSC 161 at [52-64]. 83 That leaves the question of an equitable charge. In Morris v Morris, to which counsel referred, McLelland J as his Honour then was, held that the plaintiff, who had spent some $28,000 on extensions to his son's house and thereafter left the property after their personal relations broke down, was entitled to an equitable charge to secure the recoupment of the moneys which he advanced because it would be unconscionable and inequitable for the owners of the property to retain the benefit of the plaintiff's expenditure of his money on the property free of any obligation of recoupment. 84 There the money was spent, as his Honour found, in the expectation induced or encouraged by the defendants that he would be able to live indefinitely on the property as a member of the family. There was a prior arrangement between the parties of a somewhat loose kind under which it was agreed that the plaintiff would spend the proceeds of sale from a unit which he owned in that way. 85 The circumstances are obviously very different from the present case. In my view, there are two principal reasons why the plaintiffs have not demonstrated an expenditure of money in relation to the property which the defendants have an obligation to repay and which should be secured by an equitable charge. 86 The first is that in the case of the repairs and improvements, the work was done without the prior knowledge of the defendants and was work of a kind which could be expected to be of benefit to the plaintiffs themselves as occupiers of the property. 87 Secondly, the plaintiffs had the benefit of living in the property from August 2002 to March of 2004 and they have not shown that the money which they paid, including the additional expenditure which they made, was out of proportion to the value of the accommodation to them. 88 When that is placed in the context of the family relationship where there were numerous monetary transactions of relatively small amounts, I do not consider that the plaintiffs are entitled to any equitable relief in respect of the property and the expenditures which they made. 89 I do not know what would be the jurisdiction to order an equitable charge to secure some form of equitable damages or compensation for loss of an opportunity to make a capital gain on another property, but assuming there is such jurisdiction, for the reasons I have already given, I do not consider that such a claim has been made out. For these reasons, I order that the proceedings be dismissed.

Irvine v Scaysbrook

At a glance

Court

Decision date

Before

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Judgment (15 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (9)

Cited By (2)