Ly v Ly

ex tempore Judgment 1Miss Kim Soy Ly ("Miss Ly"), the plaintiff, and Mr Kim Tap Ly ("Mr Ly"), the defendant, are sister and brother. They purchased a property in Canley Heights ("the Property") for $295,000 as tenants in common in November 2006, with Miss Ly having a 70 per cent share and Mr Ly having a 30 per cent share interest in the Property. 2The Bank of Adelaide loaned Miss Ly and Mr Ly $284,949.69 for the purchase and they agreed to repay the loan with interest and to grant a mortgage. Miss Ly paid an amount of $14,750 toward the purchase price and the cost of the purchase and a first home owner's grant of $7000 was applied to the cost of purchase as well. 3Miss Ly claims that since the purchase Mr Ly has only ever paid $10,850 towards the loan repayment and other expenses. It was at the time of purchase envisaged by the parties that they would live in the house together with their mother. 4Miss Ly claims that the defendant holds his 30 per cent interest as constructive trustee for her by virtue of her having carried the burden of the loan repayment and other expenses and Mr Ly's refusal to meet his share and she commenced proceedings by statement of claim filed on 16 August 2011. 5A defence was filed by Mr Ly on 31 October 2011 but the defendant did not comply with orders made by consent on 11 October 2011 for the filing of evidence by him. Even though the time for him to file his evidence was extended, he did not avail himself of that indulgence. 6On 14 February 2012, Miss Ly filed a notice of motion seeking orders that the defence be struck out and summary judgment entered against the defendant. 7On 9 March 2012, the matter came before Ball J in the duty list. Miss Ly was then represented by counsel but Mr Ly appeared for himself. His Honour was advised that there had, on a prior occasion, been some settlement discussions and that the parties were not far apart and his Honour stood the matter down in the list, after indicating that the matter was not one suitable to be heard in the duty list, and that the parties should seek to resolve their differences. 8When the matter was called again, Mr Ly did not appear. Justice Ball then ordered that pars 2, 3 and 10 of the defence be struck out and directed the matter be listed before the Registrar for the allocation of a date of the hearing of the balance of the notice of motion. His Honour indicated that if the matter was undefended, the plaintiff would still need to prove her case. He ordered the defendant to pay the plaintiff's costs of the hearing on 15 March 2012 and 3 April 2012. His Honour directed that copies of the orders made be served on Mr Ly. 9Today Miss Ly has appeared without legal representation, as has Mr Ly. 10Having regard to the contents of the statement of claim and the defence as it stands after the striking out of pars 2 and 3, the following matters seem to be accepted: (1)firstly, that the Property was purchased for $295,000 in the 70/30 percentage shares to which I have referred; (2)secondly, that the Bank of Adelaide provided the substantial proportion of the funds; (3)thirdly, that Mr Ly has paid only $10,850 towards the mortgage and that Miss Ly has paid all other mortgage payments due and water and council rates and electricity costs; and (4)further, that Miss Ly has sought a 30 per cent contribution from Mr Ly for those amounts to which he is obliged to contribute and he has not done so, other than the $10,850 to which I have already referred. 11In relation to an amount of $18,000, Mr Ly in his defence as filed asserted that there had been an agreement for him to pay monies of up to $18,000 by mid-2008 in connection with "hui games" conducted by his mother. "Hui" is a lending and borrowing scheme of Chinese origin which is popular among Vietnamese people. That aspect of the defence was struck out and, although today Mr Ly continued to maintain that there had been such an agreement, it was denied by Miss Ly and there is no evidence before me of that agreement, or it having been fulfilled by Mr Ly. 12Miss Ly's evidence is contained in two affidavits, the first, 27 October 2011 and the second, an affidavit of 13 February 2012. 13Miss Ly has, in her affidavit, calculated the amounts which were due from Mr Ly as at October 2011 (see par 25). Miss Ly accepts that the claim for water rates, which is $947 or 30 per cent of that, should not be included because it is accepted that Mr Ly left the Property by March 2010. 14On the evidence, as at February 2012, the amount owing to the Adelaide Bank under its mortgage was $257,849. There is evidence that as at October 2011 the Property was valued at $365,000. 15Further, on the calculations put forward by Miss Ly (see par 26 of her affidavit sworn 14 November 2011), Mr Ly's share of payments, rates and charges in relation to the Property was $40,925.31 as at 31 October 2011, excluding interest on unpaid amounts. 16Since the date of that affidavit in October last year, Miss Ly has continued to make mortgage payments and has paid council rates and insurance for the Property as those obligations have arisen and Mr Ly has made no further contribution to those. According to the affidavit of Miss Ly, Mr Ly decided to move out of the Property with his new wife and child. Mr Ly indicated that he disputed that he willingly left the Property but there is no dispute that he did in fact leave the Property and that, from that point, that he took the position that he did not need to make any further payments in relation to the Property. 17There is evidence from Miss Ly that Mr Ly in 2010 told her that he was willing to transfer his interest in the Property to her provided she pay him an unspecified amount (see pars 35 - 38 of her affidavit of 14 November 2011) and later, it seems to be agreed, when Mr Ly asked for $18,000. 18Mr Ly has refused to make any repayments for the loan or payments, such as the rates and insurance for the Property, and accordingly, in my view, it is appropriate that Miss Ly should not be left carrying the burden of the debt to the bank and these other expenses, with the consequence that there should be an adjustment of the interests of Mr Ly and Miss Ly in the Property. 19In my view, in the absence of express agreement, a co-owner of a property cannot leave the whole burden of repaying the loan obtained to purchase the property and other ongoing necessary expenses such as council rates and insurance to the other co-owner without eroding his beneficial interest in the property. As the High Court held in Muschinski v Dodds (1985) 160 CLR 583: "[v]iewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle." An application of this principle where a co-owner discharged the mortgage is found in The State of Western Australia v Bowman (Supreme Court of Western Australia, Sanderson M, 11 November 1997, unreported, BC9706022). 20I did not understand Mr Ly to dispute that his interest in the Property had been eroded but rather to dispute Miss Ly's contention that all of his interest had been eroded. There has been an indication from Mr Ly that he would now be prepared to accept an obligation to transfer his interest in the Property to his sister for a payment of $8000. That is on the basis that he not be required to pay any of the costs of these proceedings. 21I think the first step is to calculate the net equity of Miss Ly and Mr Ly in the Property. This is achieved by deducting from the $365,000 valuation the amount owing to the bank. This leaves a figure, on my calculations, of $107,150. This would mean that Mr Ly's equity in the Property at 30 per cent would be worth $33,145. 22Next, the amount due from the defendant needs to be calculated. Miss Ly has paid the following amounts: (1) $120,982 for loan repayments from December 2006 to 31 October 2011; (2) $4375.56 for loan repayments from November 2011 to 31 January 2012; (3) $5834.08 for loan repayments from February 2012 to 31 May 2012; (4) $5136.65 for council rates from January 2007 to 31 December 2011; (5) $1925.89 for insurance from November 2007 to 25 November 2011; (6) approximately $6714.26 for electricity and water from 2006/2007 to March 2010; and (7) approximately $1490 for council and insurance from the end of 2011 to May 2012; producing a total of $146,458.44. 23The required contribution from Mr Ly is $43,937.53 and he has paid $10,850. This calculation does not take into account the fact that the contributions were due at the time that Miss Ly paid the whole amount of each repayment or liability and that interest should be paid by Mr Ly on his unpaid portion. 24It is clear that subject to one matter Mr Ly owes his sister more than his equity in the Property. On the evidence presented by Miss Ly, she has made endeavours to obtain a payment of monies from Mr Ly, but the problem is that any agreement, on her part, or willingness on her part to accept that a payment of $8000 to Mr Ly for the transfer of his interest, has been saddled with the further problem of costs, which she has sought from Mr Ly. 25The one qualification to what I have said earlier relates to the fact that Mr Ly moved out in March 2010 and has not had the benefit of residing in the Property since then. There is authority for the proposition that when a co-owner vacates the property voluntarily, no allowance should be made (see Luke v Luke (1936) 36 SR (NSW) 310 and Ryan v Dries [2002] NSWCA 3), but even if the departure of Mr Ly was not forced, given the fact that he had by then married and had a child, it was appropriate and beneficial to Miss Ly that he find alternative accommodation and it seemed to me that some allowance should be made for the fact that he has not had the benefit of the Property since March 2010 and Miss Ly accepted that the amount which I suggested as appropriate, namely $8000, was not inappropriate. 26I raised with the parties a method of considering Mr Ly's departure from the Property by examining the notional rent that he would have paid if he had stayed in the Property from 2010 until today. The parties were in agreement that the house overall would attract a rental of between $420 and $430 a week and, if one uses one-third of that notional rental for one year one arrives at a figure of about $7000. 27Mr Ly has been out of the Property for two years but as the circumstances of his departure would not warrant reimbursement for the entire period (and the calculation of $33,087 does not include interest over the four years), and the figure of $8000 was actually the figure that the defendant was prepared to accept and the plaintiff was willing to pay (apart from reimbursement for costs), $8000 is, I think, an appropriate figure to allow. A tabulation of the costs Miss Ly has incurred is contained in MFI 1, a total of $22,345 of which she has paid to her former solicitors $10,742.70. Included in those costs are the filing and hearing fees in this Court ($926 and $1850 respectively) and transcript fees of $194.70. 28Accordingly, in my view, it is appropriate to make a declaration as sought by Miss Ly and an order requiring Mr Ly to transfer to the plaintiff his 30 per cent interest in the Property, but to do so on the basis that he receive an amount of $8000 from Miss Ly. The $8000, however, should be paid by way of an offset for costs, as I shall explain. 29Miss Ly has, undoubtedly, incurred significant amount of costs in bringing these proceedings. Essentially, she was forced to bring these proceedings because Mr Ly did not pay his requisite share of the mortgage repayments and other payments. Miss Ly has already received an order in relation to the costs of the notice of motion. 30In view of the conclusion which I have reached, Miss Ly has had a significant amount of success in the proceedings but not a total success. In my view, it is appropriate that she receive an order for costs of 80 per cent of her costs in the proceedings as assessed. 31Miss Ly has incurred costs of $22,345. If the claim was reduced by 20 per cent and an assessment recovery on the 80 per cent were assessed to be 70 per cent, she would be entitled to $12,513.20. Miss Ly has already paid $10,742 and considering that almost $3000 was for disbursements about which there can be no dispute (and the costs associated with the motion would not be reduced to 80 per cent), it is apparent that she will recover well in excess of $8000 from Mr Ly. Mr Ly has indicated that he has no money to pay any amount sought from him. 32It is in my view therefore appropriate to treat the $8000 which Miss Ly is required to pay to Mr Ly as offset by $8000 worth of costs to which she is entitled from Mr Ly, with the consequence that she is not required to pay any further amount to Mr Ly for the transfer to her of Mr Ly's 30 per cent interest in the Property. 33Accordingly, I propose to direct Mr Ly to execute the documents that the plaintiff seeks be executed; namely, a memorandum of transfer in the form of a document (Exhibit H), and a document described as Adelaide Bank's Mortgage Discharge Authority (Exhibit J). Copies of those documents, to be signed by Mr Ly, are to be provided to him.