LUKE v CHAMBERLAIN

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4979 of 1998 EVA MARGRIT LUKE v JOHN EDWARD CHAMBERLAIN AND ANOR

JUDGMENT 1 MASTER: This is an application which is brought by the plaintiff in respect of the expenditure by her of a sum of some $37,000 for improvements on the property owned by the defendants. The plaintiff seeks the imposition by the court of a constructive trust or, alternatively, a charge to secure the amount of her expenditure and interest following upon the breakdown of the relationship between the plaintiff and the defendants. 2 There are many matters of agreement between the parties in this case and the dispute is within a somewhat small compass. I will deal with the general history of the matter before turning to the particular disputed areas. 3 In late 1979 the plaintiff and her family which included her son, Michael and a daughter, Melinda were living at 15 Dolphin Crescent, Wale Beach. At that time the defendants moved into the next door home 13 Dolphin Crescent and the parties met some time in 1980. By Christmas 1981 the plaintiff and her children had become friendly with the defendants. The first defendant, Mr Chamberlain, is a quadriplegic who is normally confined to a wheelchair although he is able to drive a car. His wife, Mrs Chamberlain, has an occupation as a physiotherapist and during the period from 1988 to 1997 she was employed at Manly Hospital. 4 In 1988 there was a breakdown in the plaintiff's marriage which led to proceedings for dissolution and property settlement. As a result of that property settlement the matrimonial home in which plaintiff had resided at 15 Dolphin Crescent was sold. She received a sum from the sale for her part of the property settlement. However, this necessitated her having to leave the property and following discussions between her and the defendants she moved into reside with the defendants. 5 At that stage the defendants' home was a one storey home and the plaintiff and her two children occupied one bedroom. A division was placed in the room. The plaintiff and her daughter slept in one part and the plaintiff's son in the other. Thereafter the plaintiff paid her family's share of the food, household supplies and other household accounts such as utilities. She did not pay any rent and this subject was not discussed between the parties. The offer no doubt arose because of the close friendship between the plaintiff her children and the defendants. At the time of moving in the plaintiff's daughter, Melinda, was aged 11 years and her son, Michael, 9 years of age. 6 After moving to 15 Dolphin Crescent and while she was living in the home the plaintiff herself worked part-time as a shop assistant and an office worker. This left her at home for a substantial period time and she used to provide assistance to the first defendant on a daily basis. That assistance did not include getting him in and out of bed, bathing and dressing him as his wife provided that part of his care. However, she rendered other assistance during the day including running errands and assisting where he needed assistance because of disability. 7 In 1992 there were a number of conversations between the plaintiff and the defendant concerning extensions to the home the detail of which I shall return shortly. However the upshot of the discussions was that the first defendant or the defendants engaged a builder to make some alterations to the house. This involved adding a second storey which comprised two bedrooms. There was also a staircase built from the second floor down to the ground floor. The cost of these alterations, including the fees, was $37,000 and this amount was paid by the plaintiff. After the renovations the plaintiff continued to live in the room downstairs while her two children occupied the separate bedrooms upstairs. Thereafter the relationship between the parties continued as before and the parties seem to be agreed that the relationship was a close friendship which was of mutual benefit to them all. The defendants enjoyed the company of the plaintiff's children and those children received assistance and encouragement from the defendants in a number of ways. 8 By the end of 1995 or early 1996 Melinda had completed her teenage years and had moved out to set up her own home. 9 In May 1997 the plaintiff and the defendants along with the first defendant's mother went on a two week holiday to Jindabyne. They had the use of a friend's house outside Jindabyne and the plan was to spend a week or two fishing in the area. On one occasion during the holiday an unfortunate argument occurred when the parties were all returning to the house at Jindabyne after what was described in evidence as an unsuccessful day's fishing. As a result of the argument the first defendant stopped the car and ordered the plaintiff out and proceeded to drive off and leave her on the road. He came back about half an hour later and picked her up and the parties returned to the house. There was clearly great upset caused to the plaintiff. I will deal with some of the detail of the differences concerning this matter later but suffice it to say that although the parties did not return home immediately the rest of the holiday was spoilt and on return to Whale Beach the plaintiff some days later moved from the home with her son Michael. 10 The plaintiff has not returned to the house and the parties are agreed that in the circumstances of the breakdown in the relationship between the parties it would now be inappropriate for her to return. 11 In May 1998 a letter was sent by the plaintiff's solicitor in which she made a claim for repayment for her expenditure on the extension. That claim was denied. 12 These proceedings were commenced on 11 December 1998. 13 The defendants still own the property at Whale Beach and there is agreement the parties that the present value of the increase in the value of the property brought about by the improvements paid for by the plaintiff amount to $42,500. 14 I return to the conversation in 1992 which led to the renovations. It will be appreciated that the plaintiff's children at this stage were aged 15 years and 13 years and were obviously growing up. Precisely who initiated the discussions is a matter of difference although the first defendant conceded that he had said on at least two occasions to the plaintiff, "You can't keep living like this all three of you in one room". The plaintiff says that in response to that she said that she had some money and asked to use it in putting on two bedrooms. The first defendant concedes that from the end of 1989 on more than one occasion she said, "I'd like to put an extension on this house". It seems to me common ground that during the discussions one or other of the defendants commented in respect of the proposal for the extension that they could not afford it and if that if the plaintiff moved out, or if the children moved out, it would be of no use. The plaintiff indicated that if the children moved out she would still stay and she would never leave. There certainly was no thought on the defendants' part that there might be a breakdown in what was then a happy and harmonious relationship. 15 The plaintiff gave evidence of a conversation after she had paid for the renovation when she says the defendants said they would borrow the money and pay her back. She says that she responded, "That's not necessary but if you sell the house when I leave pay me back then." The defendants suggested that there was never any agreement in that regard. 16 Given that the plaintiff does not base her case upon an agreement it is not necessary to resolve this question. 17 I turn to the circumstances in which the relationship concluded. I have already recounted the circumstances in which the plaintiff was asked to get out of the car. She was some miles out in the countryside, was left by the roadside, was picked up half an hour later and taken back to Jindabyne. Clearly she was very upset by the incident and the second defendant agrees that that was so. When they got home to Jindabyne the first defendant sought to apologise for what he regrets that he did and said on that occasion. Given the evidence of the second defendant it seems clear that at the discussions back at the house the first defendant said to the plaintiff, "If you don't like the way things are you have a choice, you can always change your address when we get home". There was some suggestion that the holiday might terminate then and there but it continued and the parties came back at the conclusion of the planned period. 18 Ten days later the plaintiff and her son moved out, she no doubt needing time to organise new accommodation. There were a few notes between the plaintiff and the second defendant which certainly indicated that the plaintiff did not want to have any further contact with the first defendant although she expressed gratitude for matters in the past.

The Law 19 The principles upon which the plaintiff seeks relief by way of a charge relate in part to the circumstances in which the Court may impose a constructive trust. In Muschinski v Dodds (1985) 160 CLR 583 His Honour Mr Justice Dean stated the principle in the passage between pages 612 to 620. Of importance is the following which occurs at page 618:- Nor has it been suggested that there was a true partnership or contractual joint venture between the parties. The case has been approached and argued on the basis that they were not partners and that the overall arrangement between them, while consensual, was a non-contractual one. That does not mean, however, that particular rules applicable to regulate the rights and duties of the parties to a failed partnership or contractual joint venture might not be relevant in the search for some more general or analogous principle applicable in the circumstances of the collapse of the consensual commercial venture and personal relationship in the present case. Both common law and equity recognise that, where money or other property is paid or applied on the basis of some consensual joint relationship or endeavour which fails without attributable blame, it will often be inappropriate simply to draw a line leaving assets and liabilities to be owned and borne according to where they may prima facie lie, as a matter of law, at the time of the failure. Where there are express or implied contractual provisions specially dealing with the consequences of failure of the joint relationship or endeavour, they will ordinarily apply in law and equity to regulate the rights and duties of the parties between themselves and the prima facie legal position will accordingly prevail. Where, however, there are no applicable contractual provisions or the only applicable provisions were not framed to meet the contingency of premature failure of the enterprise or relationship, other rules or principles will commonly be called into play. If, in the last-mentioned case, the relevant relationship is merely contractual and the contract has been frustrated without fault on either side, the present tendency of the common law is that contributions made should be refunded at least if there has been a complete failure of consideration in performance…… The prima facie rules respectively entitling a fixed term partner to a proportionate refund of his or her premium and a contractual joint venturer to a proportionate repayment of his or her capital contribution on the premature dissolution of the partnership or collapse of the joint venture are properly to be seen as instances of a more general principle of equity. That more general principle of equity can also be readily related to the general equitable notions which find expression in the common law count for money had and received (cf. Moses v. Macferlan 101 (1760) 2 Burr. 1005, at p. 1012 [97 E.R. 676, at pp. 680-681].; J. & S. Holdings Pty. Ltd. v. N.R.M.A. Insurance Ltd. 102 (1982) 61 FLR 108, at p. 120.) and to the rationale of the particular rule of contract law to which reference has been made: cf. Fibrosa 103 [1943] A.C., at p. 61ff, esp. at p. 72.. Like most of the traditional doctrines of equity, it operates upon legal entitlement to prevent a person from asserting or exercising a legal right in circumstances where the particular assertion or exercise of it would constitute unconscionable conduct: cf. Story, Commentaries on Equity Jurisprudence, 12th ed. (1877: Perry ed.), vol. 2, par. 1316; Legione v. Hateley 104 (1983) 152 C.L.R., at p. 444.. The circumstances giving rise to the operation of the principle were broadly identified by Lord Cairns L.C., speaking for the Court of Appeal in Chancery, in Atwood v. Maude 105 (1868) L.R. 3 Ch. App., at p. 375.: where "the case is one in which, using the words of Lord Cottenham in Hirst v. Tolson 106 (1850) 2 Mac. & G. 134 [42 E.R. 521., a payment has been made by anticipation of something afterwards to be enjoyed [and] where ... circumstances arise so that future enjoyment is denied". Those circumstances can be more precisely defined by saying that the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do: cf. Atwood v. Maude 107 (1868) L.R. 3 Ch. App., at pp. 374-375., and per Jessel M.R., Lyon v. Tweddell 108 (1881) 17 Ch. D. 529, at p. 531. 20 This passage was accepted in Baumgartner v Baumgartner (1987) 164 CLR 137 at 147-8. 21 It is apparent that the present proceedings require a determination of whether there was a joint endeavour the sub-stratum of which was removed without attributable blame and whether the benefit of the money contributed by the plaintiff on the basis and for the purpose of the endeavour would otherwise by enjoyed by the defendants in circumstances in which it was not specifically intended or specially provided that the defendants should so enjoy it. As was said by His Honour Mr Justice Bryson in Bennett v Horgan (3 June 1994):- "Prima facie the plaintiff's entitlement is to a proportionate repayment of their capital contribution on the premature collapse of the venture, but the true remedy is such order as would prevent the defendants from retaining the benefit of the property to the extent that it would unconscionable for them to retain it." 22 The principles for devising an appropriate adjustment were considered by McLelland J as he then was in Morris v Morris (1982) 1 NSWLR 61 a case which is universally applied in this jurisdiction. In that case His Honour, being then bound by Allen v Snyder (1977) 2 NSWLR 685 held that there was no express or implied trust but went on to hold that there was a proprietary estoppel in favour of the plaintiff which should be satisfied by an equitable charge over the property to secure his investment which he spent in the expectation, induced or encouraged by the defendants that he would be able to live there indefinitely as a member of that family. It was a typical example of what Professor Cope in "Constructive Trusts" 1992 describes as the "expectation principle" at p 643-662. Those principles are also applicable in this case.

Consideration of the Principles 23 It seems clear that there was a joint endeavour that the parties would make the extension in the manner in which it was done with payments made in the manner in which they were for the purposes of allowing the plaintiff and her children to reside there indefinitely. I am also satisfied that that expectation that the plaintiff and her children could live there indefinitely has been defeated by the unfortunate events which were not contemplated when the improvements were carried out. The fact that the joint endeavour could no longer proceed is clear and no one party can be blamed in the sense used in the cases for this occurrence. 24 The critical matter in the present case is the question of what is the appropriate remedy which will prevent the defendants from obtaining the benefits of the property to the extent that it would be unconscionable to retain them. The defendants' case on this aspect points to the fact that the plaintiff and her children had the benefit of occupation from 1982 until June 1997 of the property including the alterations. There is evidence before me of the rental value of a two bedroom house for the period 1 November 1988 to 31 August 1992 of $26,000 and that for a four bedroom house from 1 September 1992 to 1 June 1997 was $47,500. The cross claim is of course made by the defendants for this sum and there clearly has never been any agreement for the payment of rental. It is suggested that these figures be taken into account in order to indicate that no appropriate adjustment is necessary. 25 Against this the following should be noted:-

1. The defendants have the benefit of the improvements to the extent that they add to the value of the house. That increase in value is $42,500.

2. There is some detriment as a result of the alterations but this is of minor significance. 3. The joint venture was a consensual one which has already provided an advantage to the defendants. There were the family arrangements and the assistance to the first defendant. To deny those advantages would be contrary what the parties then intentions were both for the period the house was occupied and the period which they intended that it should be occupied, namely, indefinitely. 26 In these circumstances I do not see that it is appropriate now to regard the matter as one which could be measured by allocating a rental value to the plaintiff's occupation of the property. To do so would be to only look at one side of the equation. The other side of the equation is not susceptible to such precise measurement. 27 In the circumstances I am satisfied that the appropriate remedy is that there be an equitable charge in favour of the plaintiff for the sum of $37,000 together with interest from when a demand was made. The sum including interest is $41,409.07. Accordingly, the parties can bring in short minutes to reflect the necessary orders.

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