Supreme Court of WA|1999-07-30|Before: Mr P, Wallwork J, Owen J

Oates v Blackburne & Anor [1999] WASC 112 (30 July 1999)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : OATES -v- BLACKBURNE & ANOR [1999] WASC 112

Contracts - Parties - Whether payment by one party amounted to a loan - Turns on facts

Equity - Equitable estates and interests - Claim for constructive trust over property of one party accruing by expenditure towards the property - Common intention of parties - Whether expenditure made in reliance of a promise to sell a 50 per cent interest in the property - Whether actual intention inferred by conduct - Whether improvements increased value of property

Contracts - Remedies - Quantum meruit - Whether alternative to claim in equity

Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137

Gissing v Gissing [1970] UKHL 3; [1971] AC 886

Hibberson v George (1989) 12 Fam LR 725

Higgins v Wingfield [1987] VicRp 59; [1987] VR 689

Hook v Holland [1984] WAR 16

Kais v Turvey (1994) 11 WAR 357

Renton v Youngman, unreported; SCt of WA (Wallwork J); Library No 950342; 17 July 1995

Robinson v Robinson [1961] WAR 56

Thwaites v Ryan [1984] VicRp 7; [1984] VR 65

1 OWEN J: This is an application by the plaintiff against the defendants for the removal of a caveat lodged by the first defendant over a property registered in the plaintiff's name. The plaintiff also seeks to recover the sum of $6000 from the first defendant as moneys advanced by way of loan. There is also a counterclaim by the first defendant for a declaration that the first defendant has an equitable interest in the plaintiff's property in proportion to the expenditure claimed to have been expended by the first defendant on the property.

2 The second defendant did not appear at the hearing. He filed a notice indicating that he was prepared to abide the decision of the court. In these reasons I will refer to the first defendant simply as ("the defendant") except to the extent where it is necessary to distinguish between the two parties.

3 This action arises from failed personal relationship between the plaintiff and the first defendant. At the time of the hearing the personal animosity between the parties was barely concealed. As a result it was at times difficult to ascertain an accurate account of the factual background. The plaintiff and the defendant met in June 1992 when they both attended a primary school reunion held in Perth. At the time the reunion was held the defendant was living in Sydney. Following this meeting a romantic relationship developed between the parties and within days of meeting they had discussed marriage at some time in the future. The relationship continued throughout 1992 with the parties meeting on a number of occasions in both Sydney and Perth.

4 At the time the relationship between the plaintiff and the defendant commenced the plaintiff was living with his then wife on a 10-acre property at Gnangara, a semi-rural location on the outskirts of the metropolitan area ("the property"). The plaintiff's marriage was in trouble and a separation was imminent. It was decided that the defendant would move to Perth and in the months following their decision to marry a number of discussions took place between the parties as to whether they would make the property their matrimonial home. The defendant expressed a preference to live closer to the city while the plaintiff told her that he enjoyed the peaceful surroundings of the property and would prefer to remain there. It seems that the parties' discussions as to their future living arrangement revolved around two options. The first option was that the plaintiff could sell the property and the parties would then purchase jointly a new place closer to the city. The other option was that the parties would stay at the property but that the plaintiff would give up his city office and work from home. The idea of the plaintiff working from home appealed to the defendant as she was concerned about the isolation of the property and was not keen to remain at home alone each day.

5 Throughout the course of these discussions (between June - September 1992) the defendant told the plaintiff that if they were to stay at the property she would need certain renovations to be done to the property to accommodate both herself and her 6-year old daughter. Further, the defendant said that should they decide to make the property their matrimonial home, she would want the plaintiff to sell her a half-interest in the property. The defendant pointed out to the plaintiff that she had in her previous relationships always been a working partner and financial contributor and would not feel the right to live in his house unless she had bought into it. The plaintiff was not enthusiastic about the defendant's proposal and told her that there was no need for her to buy half an interest in the property. He went on to say that in any event it was too soon to decide, particularly in view of the fact that they were both still married and had not made a final decision as to where they would live.

6 Towards October it was tentatively agreed that they would reside together with the defendant's daughter at the property. The defendant decided that in order to avoid disruption to her daughter's schooling she would not relocate to Perth on a permanent basis until the end of the year. The defendant again expressed to the plaintiff her need for certain renovations to be made to the property. The plaintiff told the defendant that he did not feel these were necessary and that the changes she required seemed to him excessive. However the defendant continued to press him on the matter and eventually he gave her permission to talk with some builders on an exploratory basis regarding the changes she required. This she did.

7 On or around 1 October 1992, prior to the defendant returning to Sydney, matters between the parties came to a head. The defendant told the plaintiff that she had secured an arrangement with a builder for certain renovations to be done at a budget cost of approximately $25,000. The plaintiff became very angry at this and told the defendant that he felt the cost and the changes were ridiculous. He said that he was not prepared to spend any more money on the property as he had already spent enough money on it . The plaintiff had recently acquired his former wife's share of the property at a cost of some $145,000 as part of a divorce settlement. The defendant told the plaintiff that she was prepared to pay for the renovations and that this amount could be deducted from the eventual purchase price she would pay for her 50 per cent interest in the property. At this point the plaintiff told her he would not sell her an interest in the house as it was too early in the relationship to do so. However according to the plaintiff he did tell the defendant that he was prepared to reconsider her proposition in June 1993. The plaintiff then told the defendant that if she was prepared to pay for the renovations she could go ahead and do them. A somewhat vigorous argument then occurred between the parties lasting over an hour. The worst of the argument dissipated. After this the defendant returned to Sydney to finalise her affairs and organise the move.

8 On 3 November 1992, while the defendant was still in Sydney, the plaintiff signed a contract with a builder for a number of specific renovations. This contract was signed by the plaintiff in his capacity as owner of the property. However nearly all of the negotiating and planning with the builder had been conducted by the defendant. On 13 November 1992 while the defendant was still in Sydney, the plaintiff on the defendant's request, paid the first instalment of $5000 to the builder. The defendant returned to Perth on or around 19 November 1992 and stayed approximately 10 days. While she was in Perth she paid the second instalment of $5000 to the builder. In addition to this she paid the plaintiff $5000 to reimburse him for the money he paid to the builder on 13 November 1992. When the final payment of $6000 became due on 22 or 23 December the defendant told the plaintiff that she did not have the money to pay the builder. She asked the plaintiff if he could pay the builder. This he did.

9 Up and until 25 December 1992 relations between the parties were good. However on 26 December another significant argument occurred when the defendant refused to accompany the plaintiff on a vacation in the south of the State that they had previously planned. The defendant told the plaintiff that she needed to stay to supervise the final stages of the renovations and make sure everything was ready for her daughter's arrival on 11 January 1993. It seems from this point the relationship (at least from the plaintiff's point of view) deteriorated steadily.

10 The parties continued to reside together for a number of weeks. However in February 1993 the defendant told the plaintiff that she was going to leave. At the request of the plaintiff she agreed to stay at the property until April 1993. In April the defendant secured a rental property in Wanneroo and moved there with her daughter. After cohabitation ceased the plaintiff and the defendant continued their association on a sporadic basis. During this time the defendant made a number of requests to the plaintiff to repay her the money she had spent on the renovations. The plaintiff's initial response to this request was to tell the defendant that he did not feel he owed her this money as it had been her decision to have and pay for the renovations in the first place.

11 In October 1993 the parties attempted to reconcile their relationship. During a visit to the Esplanade Hotel the defendant told the plaintiff that if there was to be any prospect of their relationship continuing the plaintiff would have to repay the money. After this and throughout 1994 there was a number of infrequent meetings between the parties. In around April 1994 the plaintiff gave to the defendant a cheque for $5000. Contact between the two parties ceased until a chance meeting at Rottnest in February 1995. Having received what she described as an unfriendly and hostile reception the defendant realised the plaintiff had no intention of repaying to her the rest of the money she had spent on the property. The defendant then took action and placed a caveat over the plaintiff's property asserting an equitable interest in that property.

12 Paragraph 1 of the plaintiff's statement of claim asserts that the plaintiff is the registered proprietor of the property. Paragraph 2 goes on to state that the defendant has registered a caveat no F825849 against the title to the property. The plaintiff by par 3 seeks the removal of the caveat on the basis that it does not assert an interest capable of giving rise to a right to lodge a caveat under the terms of the Transfer of Land Act or any other interest in law or equity. In addition to the removal of the caveat the plaintiff in par 4 seeks to recover $6000 being money payable by the defendant to the plaintiff for money lent to the defendant on 22 or 23 December 1992.

13 The defendant in her amended defence and counterclaim denies the allegations contained in par 3 of the statement of claim. The defendant claims in par 5 of her defence that in or about October 1992 the plaintiff and the defendant orally agreed that:

"(i) in contemplation of marriage the first defendant would acquire a 50% share in the property in the future;

(ii) the first defendant would acquire a 50% share in the property upon payment to the plaintiff of one-half of the value of the property as had been agreed between the plaintiff and his former wife;

(iii) the first defendant would renovate the property as particularised at her cost. (Particulars then followed) "

14 In par 7 the defendant claims that at all material times she made the contribution to the cost of the renovations in contemplation of marriage to the plaintiff and in the belief that she would acquire an interest in the property in the future. Further she says that she made these payments in reliance on the plaintiff's promises that he intended to marry her, reside at the property and that she would upon payment of an agreed amount be able to purchase a 50 per cent share in the property. In par 13 the defendant claims that by reason of the above promises made by the plaintiff and the fact that the renovations have increased the value of the property it is unconscionable for the plaintiff to retain the benefit of her expenditure. Consequently the defendant seeks a declaration the she has an equitable interest in the property in proportion to the expenditure incurred by her for the said renovations. Alternatively the defendant claims compensation in lieu of the interest in the property to the amount of $6000 as quantum meruit.

15 In my opinion there are primarily two issues which arise from the pleadings and need to be determined in this matter. The first being whether the payment of $6000 by the plaintiff to the builder on 22 or 23 December 1993 constituted a loan from the plaintiff to the defendant. The second issue is whether the circumstances give rise to the defendant's claim in equity. The critical question is whether it can be said that the payments made by the defendant were made in reliance of a common intention existing between the parties that the defendant would acquire a 50 per cent share in the property at some stage in the future. If this were to be established it may give rise to a constructive trust over the property. This second issue encompasses the defendant's claim that it would be unconscionable for the plaintiff to retain the benefit of what she says is the increased value of the property due to her contributions.

The Plaintiff's claim based on a loan to the Defendant

16 The plaintiff in par 4 of the statement of claim claims that the defendant is indebted to the plaintiff to the sum of $6000 being money lent to the defendant on 22 or 23 of December 1992. There was a progress payment due to the builder. The plaintiff says that in December the defendant asked him to pay, by way of a loan, that sum to the builder on her behalf. The defendant denies this and says that while she asked the plaintiff to pay the builder the sum of $6000 there was never any agreement that this payment constituted a loan by the plaintiff to the defendant.

17 In my view it is clear from par 5(iii) of the defendant's amended defence and from the oral evidence given at trial that the parties had agreed that the defendant would be responsible for the payment of the renovations to the property. I am aware that the defendant claims that the agreement to expend monies on the property was in the belief that she would acquire at a later stage an interest in the property. However the plaintiff's claim for money owed must be determined in relation to what was, at the time the payment was made, the actual understanding between the parties as to where responsibility for the payment lay. At this stage I will put to one side the issue whether the parties had agreed that the defendant would acquire an interest in the property and whether it is unconscionable for the plaintiff to enforce the loan (issues which I will address in relation to the defendant's counterclaim in equity). On that basis it seems to me the question whether the payment of the $6000 constituted a loan must be resolved on the factual circumstances surrounding the payment and the intention of the parties at the time the payment was made.

18 The plaintiff's evidence-in-chief was that in early October 1992 the defendant told him that she had secured an arrangement with a builder to do certain renovations to the house at a budget cost of about $25,000. His evidence was that he thought this was ridiculous. He said, (at p15 of the transcript) that at this point he resolved to tell the defendant he had decided that he would not sell her part of the house. Further he says he told her that he was not prepared to spend one more dollar on the house by way of renovations. He then goes on to say:

"...you would say that within 5 seconds of me making that statement, which is clear, concise and unequivocal, that I would not sell her half the house and that I would not spend another dollar on this property, she came back and said that she would spend her money to do the job. I said to her, 'If you are prepared to spend your money to do these jobs, then you have my permission to go ahead and do that'."

19 The plaintiff gave two separate reasons for refusing to pay for the renovations. The first was because he had only recently spent a large amount of money buying out his former wife's interest in the property and did not wish to spend any more money on the property. Secondly he said that he felt there was nothing wrong with the house as it was and that the renovations proposed by the defendant were unnecessary. The plaintiff said that once he told the defendant he did not intend to pay for any renovations he had little if any involvement in the planning of the renovations. He could not recall attending any meetings with the builder except when he was required to sign the contract as owner of the property. His evidence was that it was the defendant's project and he had little to do with it.

20 In relation to the series of payments made for the renovations the plaintiff said that on 13 November 1992 he paid the first instalment of $5000 to the builder. His evidence was that he did this because at the time the payment was due the defendant was still in Sydney. He said the defendant had asked him to pay the builder for her and had said that she would pay him back when she returned to Perth. She did this on or around 19 November 1992. In addition to reimbursing the plaintiff the $5000 paid to the builder the defendant also paid to the builder the second instalment of a sum of $5000. In relation to the final payment, the subject of the plaintiff's claim in this action, the plaintiff says that on 22 or 23 December the defendant came to him and said that she did not have the money to make the final payments to the builder as all her cash was tied up. He says that she asked if he would lend her the money and told him that she would pay him back. He said he had no reason not to trust her to pay him back and agreed to lend her the money by paying the $6000 to the builder. This was done by way of two separate cheques, one cheque dated 23 December for $4000 and the other dated 24 December for $3425. The sum of these cheques is $7425 which incorporates the $6000 loan to the defendant and an amount of $1425 for the repair of a septic tank. The plaintiff acknowledges that he was responsible for the repairs to the septic tank.

21 The defendant in her examination-in-chief stated that as a direct result of the plaintiff's undertaking to live at the property and work from home and her belief that she would acquire an interest in the property in the future she proceeded to go ahead with, and subsequently pay for, the renovations (p 89 of the transcript). Her evidence in relation to the payment for the renovations was that on 23 November 1992 she paid $5000 to the builder as part payment and that on the same day she paid the plaintiff $5000 to reimburse him for the progress payment he had made on 13 November 1992 at her request. She goes on to say that in late December she found herself unable to make the final payment to the builder as one of her businesses had taken up her cash reserves. She asked the plaintiff if he would pay it and he did so without complaint.

22 The defendant argues that at no time then or since, other than in these proceedings, has the plaintiff ever claimed she owed him the money or requested that she repay the amount of the progress payment to him. Nor, she argues, when he became aware at a later time that she had received funds did he ever ask her for the money. She says, (at p 91 of the transcript), that she assumed that both parties believed the cost would be accounted for in the eventual purchase price she would pay for her interest in the property and that this would mean that she would simply pay him more when she acquired that interest. On one view of it there is an internal difficulty within the position contended for by the defendant. By admitting that the cost would be set off in relation to the eventual purchase price she would pay she appears to acknowledge the fact that a debt on her behalf had been incurred. In any event in my view it cannot be inferred that the fact that the plaintiff did not ask the defendant to repay the money means that the payment did not constitute a loan at the time when the progress payment was made. The plaintiff's evidence was that he did not feel it necessary to ask the defendant for the money as he assumed she would repay him when she was ready and able to do so.

23 Looked at objectively, in my view at the time the plaintiff made the payment to the builder, the payment was made by the plaintiff on the basis that it constituted a loan from him to the defendant. He was making a payment for renovations which she desired to be made to the property and for which the parties had from the outset agreed would be her responsibility. It was clear from the evidence that these were changes the defendant required not the plaintiff. The plaintiff had from the beginning refused to spend any further money on the changes because they were in his view unnecessary. I accept that he had made this clear to the defendant It was also clear that the plaintiff had taken a very minimal role in organising the renovations and he had not sought to have much input into the changes that were to be made. The fact that the plaintiff was the owner of the property and was the party living at the property at the time would obviously require him to have some involvement in the work. However it cannot be inferred from this that it had become "his project" in any relevant sense. Further, while the defendant claimed that her decision to pay for the renovations was in reliance on her being able to purchase an interest in the property she accepted in both her evidence-in-chief and in par 5(iii) of her amended defence and counterclaim that she had agreed to undertake and pay for the renovations. The defendant must be held to these admissions.

24 This, then, is the position. There are admissions made by the defendant in the pleadings. The evidence given by both parties was that at the time the renovations were done it was understood that the defendant was responsible for the payment. There is also evidence that the defendant had already taken responsibility for and paid a significant portion of the total cost of the renovations. In my view, and I find, that at the time the payment was made both parties intended that the payment by the plaintiff was to be made by way of a loan to the defendant. This was regardless of whether that money would be repaid either directly or indirectly on her eventual purchase of the property.

25 Another important factor in reaching this conclusion is the fact that the defendant had on a previous occasion asked the plaintiff to make a payment to the builder on her behalf and had subsequently reimbursed him for this payment. This supports the conclusion that she had from the outset assumed responsibility for the cost of the renovations and was prepared at the time to cover all the expenses. In the light of this earlier conduct by the defendant it seems reasonable that when requested a second time to make such a payment the plaintiff would have understood it to be on the same terms as on the previous occasion. The fact that the defendant, on asking the plaintiff to make the payment, did not specifically refer to the payment as a loan or mention her intention to pay him back is relevant and I have considered it. However, when the circumstances are viewed in their entirety, I believe the payment amounted to a loan.

26 The defendant was, upon the payment of $6000 by the plaintiff to the builder, indebted to the plaintiff for that amount.

27 The defendant in her amended defence and counterclaim seeks equitable relief. The cause of action against the plaintiff said to give rise to this relief is based on a constructive trust. The relief pleaded is in the form of a declaration that she holds an equitable interest in the property in proportion to the expenditure incurred by her for the renovations less the amount of $5000 which was paid to her by the plaintiff. Alternatively she seeks equitable compensation in lieu of the interest in the property. The plaintiff makes a further alternative claim for $6000 as a quantum meruit. As ancillary relief, the defendant claims the sum of $6000 in satisfaction of the plaintiff's indebtedness to the defendant or alternatively the defendant seeks damages.

28 In short the defendant seeks to recover an amount of money equal to the payments she made towards the total cost of the renovations. In par 6 of the amended defence and counter claim the defendant says that in or about December 1992 the renovations were completed at a cost of $17,000. Of that sum, $11,000 of which was paid by the defendant. However her claim is reduced by the sum of $5000 which was paid by the plaintiff to the defendant in July 1994. As a result the defendant's overall claim is that her equitable interest in the property extended to protect repayment of the sum of $6000. At the hearing the defendant sought to broaden the ambit of her claim to include other amounts she claimed were expended by her throughout the time she had spent with the plaintiff. Leave was sought to amend her defence and counterclaim. The additional matters which the defendant sought to raise were all known at the time when the pleadings were drawn. At that time the defendant was legally represented, although she appeared in person at trial. I took the view that if I were to allow the amendment the trial would have to be adjourned and that the defendant would have to pay the costs thrown away. This is because there would be new material that the plaintiff would have to investigate and meet. I explained this to the defendant (transcript pp 39 to 44). The defendant decided not to pursue the proposed amendment.

29 The defendant claims that she made the contributions to the cost of the renovations in reliance on the plaintiff's promise that they would marry and that she would acquire a 50 per cent interest in the property. She claims in par 5(iii) of her amended defence that her decision to undertake and pay for the renovations was based on an oral agreement between the plaintiff and the defendant that they would marry at some time in the future, make the property their matrimonial home and that she would purchase a 50 per cent share in the property in June 1993. Given this common intention arising from the oral agreement and the plaintiff's failure to keep these promises, the defendant submits that it is unconscionable for the plaintiff to retain the benefit of her expenditure which was made in reliance of those promises.

30 In my view the success of the defendant's claim in equity depends on whether the circumstances in this case are capable of giving rise to a constructive trust based on the common intention of the parties. It is clear from the authorities that a constructive trust may be imposed on the grounds of a common intention between the parties. In Green v Green (1989) 17 NSWLR 343 Gleeson CJ, after considering the authorities, referred to the two matters that must be demonstrated when a party seeks to establish a constructive trust based on actual intention, namely:

"First, that there was a common intention that both should have a beneficial interest, and secondly, that the claimant acted to his or her detriment on the basis of that common intention".

31 This common intention may be expressed in an oral agreement, or it may be inferred from the conduct of the parties: Allen v Snyder [1977] 2 NSWLR 685 at 690. It is the actual intention of the parties that is enforced. Actual intention is to be inferred as a matter of fact. It does not depend on an imputed intention which the parties never had, but would have had, if they had applied their mind to it: Stowe v Stowe, unreported; FCt of WA; Library No 950246; 22 May 1995 at 8.

32 Further, a constructive trust will not be imposed as a remedy for the purpose of satisfying some general idiosyncratic notions of fairness and justice. The courts will only impose a constructive trust where it can be shown that such a remedy is based on an established equitable principle: Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 per Deane J at 615. Put simply, a constructive trust is an intervention founded on principle rather than on a general and non-specific notion of what is fair: Stowe v Stowe (supra) at 16. In the circumstances of this case, I think the defendant would need to establish that at the time she made the payments for the renovations there was a common intention between the parties that the defendant would purchase, at some time in the future, a 50 per cent share in the property and that it was because of, and in reliance on, this intention that she made the payments.

33 I have already referred to par 5(iii) of the defendant's amended defence and counterclaim in which she pleads to the specific undertaking she says existed between the parties. According to the defendant the undertaking was that the parties had orally agreed that in contemplation of marriage the defendant would acquire a 50 per cent share in the property at some time in the future. However, at the hearing the defendant conceded that there was no actual specific agreement between them to this effect but the plaintiff led her to believe, by his conduct, that she would be able (at some time in the future) to acquire an interest in the property.

34 The defendant's evidence was that the possibility of her purchasing a 50 per cent share in the property was only discussed at two periods in their relationship. The first was during telephone conversations that occurred on a number of nights in July or August 1992. The defendant said that the idea arose in the context of their discussions on where they intended to live when she arrived to stay on a permanent basis. She said that she told the plaintiff at some point in these discussions that if they lived at the property she would want to acquire a half-share in it so she would feel that it was her home and not the home of his previous wife. The defendant recalled being surprised and upset at his negative reaction. She thought he would be pleased that she would want to make an equal financial contribution. The defendant then said that the plaintiff told her it was too soon to decide and there was no need for her to buy an interest. He then pointed out to her that they were both still married, had not yet decided where to live and that the defendant still had her funds tied up in her Sydney property ( p 85 of the transcript). The defendant said that over the next few nights they had several long and emotional conversations on the subject. She said the plaintiff told her that he would need time to think about it. The defendant said she agreed as this was only one of the options available to them. Her evidence was that she was not at this stage concerned about the issue but that she was disappointed and perplexed by his attitude.

35 According to the defendant the next time the subject of her purchasing an interest was raised was in early October 1992. She had travelled to Sydney to Perth to be with the plaintiff. Her evidence was that towards the end of her stay they again discussed the idea of renovations and whether they should live at the property. The defendant said (at p 87 of the transcript) that it became apparent to her that the plaintiff was not enthusiastic about renovating. However she says that rather than saying he didn't want the changes she suggested, he said that he had spent too much money on the house and didn't want to spend any more. The defendant then said that she began to tell the plaintiff that his worries did not make sense as she was offering to buy into the property and that this would reimburse him all the funds he had spent on purchasing his former wife's share. She also told him that she was prepared to pay for the renovations and they could account for the cost in the payment she would make to the plaintiff for her interest in the property. The defendant said that the plaintiff told her that he had only just bought out his wife and did not want to lose half of it again. Following this the defendant's evidence was that they went to bed with the matter unresolved, both angry and upset.

36 It is in light of the defendant's evidence above that her account of what occurred between the parties the next morning must be viewed for the purpose of inferring whether a common intention was shared by the parties. At p 87 - p 88 she says:

"I woke up the next morning and went to the family room...I realised that although Ken was and had been loving, supportive.....[in relation to the defendant's move to Perth].all the actual acts of love had been mine. For the first time I had doubts about...the wisdom of me moving to WA...Ken came into the room and found me crying and distressed...He told me that it would be alright. He just had a problem. He would get over it. -in my mind that issue had been put to bed. I never raised buying an interest again. My understanding after that conversation was that Ken needed time to overcome the emotional difficulty he had with paying a large sum of money to his wife for her interest in the house but that after that I would purchase a half interest in the Gnangara house if we made it our home. This was reinforced by the fact that me contributing half towards any other property closer to town was taken for granted and never an issue but even at that time, no decision had been made by Ken."

37 The defendant then went on to refute the plaintiff's evidence that he had told her he would make a decision in June 1993. She says that if the plaintiff had specifically reserved the right to deny her a proprietary interest in the house until June 1993 she would never have agreed to put in her time, effort and funds into the property. She said she felt protected in the belief that she would eventually become a part owner.

38 In cross-examination the defendant said that the basis for her claim that there was a common intention that she would acquire an interest in the property came about from the conversation between the parties the morning after the discussions relating to the renovations. She told counsel in cross-examination that she believed the common intention came during the conversation in which the plaintiff assured her he would in time overcome the emotional problem he had with paying out his wife and it would be "all right". The defendant also said that the plaintiff decided to work from home and that he willingly assisted with the renovations. These things, she submitted, supported her claim of common intention.

39 The defendant said, and I accept, that her request that the plaintiff work from home was critical (at least from her point of view) to the development of their relationship. It was, I think, crucial to her claim that a common intention existed. She says that it was not until the plaintiff communicated to her in a telephone conversation late in October his decision that they would live at the property and he would work from home that she decided to proceed with the renovations. This may be so . However, in my view the plaintiff's decision to work from home and the fact that he assisted with the renovations are not sufficient basis from which to infer that a common intention existed between them that the plaintiff would sell her a 50 per cent interest in the house. This is because the common intention giving rise to her claim in constructive trust is based on a common intention that she would acquire a 50 per cent interest in the property. The option of the plaintiff working from home appeared to be raised as a means to relieve the sense of isolation the defendant would encounter if they were to continue to live at the property while the plaintiff spent long periods at work at another location. I can very well see how the defendant would regard this is a significant issue in terms of their relationship. But I do not think it bears any relevance to the decision whether she would be able to purchase an interest in the property.

40 I have searched for evidence of a specific common intention agreement, or for material from which an inference could be drawn in relation to the defendant acquiring an interest. The evidence which the defendant says supports the contention is found in the conversation in early October. There is nothing to indicate that the matter was discussed further after this point or that the plaintiff's decision to allow her to acquire an interest went hand in hand with his decision to work from home. Despite what the defendant may have believed, I think these two issues were independent. The option of living at the property, working from home, renovating or selling and buying closer to the city were all options discussed by the parties as was the option of the defendant buying into the property. In my view, and I find, the decision to sell the defendant an interest was, from the plaintiff's point of view, a separate issue and something he needed time to consider. By the time the relationship ended the plaintiff still had not made a decision.

41 From the outset the plaintiff did not deny that at the time the decision to undertake the renovations was made the parties contemplated that they would marry when they were free to do so. This undertaking was never in dispute. However the plaintiff denied that there was any agreement that he would sell the defendant an interest in the property. His evidence was that the matter was discussed and that on these occasions he had indicated to the defendant that he did not share her enthusiasm for the idea. This view accords with the evidence of the defendant. However the plaintiff then said that during the October discussions he told the defendant that he would be prepared to review the matter in June 1993. This the defendant denies. However I think the defendant does accept that after this conversation the parties had not reached an agreement and the matter was left (as she described it) unresolved. I think at this point (the evening of that conversation), I must conclude that there was no common intention between the parties.

42 In the light of the findings the success of the defendant's claim depends entirely on whether a common intention can be inferred from the plaintiff's conduct the following morning. Her evidence was that the morning after the initial conversation she was distressed and in tears. She said that the plaintiff came over to her and told her it would be all right and that he just needed time to get over his emotional problems which arose from buying out his wife's share in the house. The plaintiff's evidence was to much the same effect. In assessing the conduct of the plaintiff for the purpose of determining whether there was any common intention the conduct of the plaintiff must be based on actual intention, inferred as a matter of fact not an implied intention which the parties never had: Muschinski v Dodds. In my view there was nothing in the plaintiff's conduct from which an actual intention on his part to sell the defendant an interest in the property at some time in the future could be inferred. From the outset the plaintiff had indicated a clear disinterest in the proposition that he should permit the defendant to acquire an interest in the property. In my opinion on the evidence before me the plaintiff's position did not change following the conversation the next morning. I do not believe there was anything in his conduct the next morning which would justify a finding that he had altered his position. I think it can be inferred from his conduct that he wished to comfort and console the defendant by telling her he needed time to overcome his emotional problems. In other words, there was no outright rejection of the plaintiff's request but it falls far short of amounting to conduct amounting to a representation or promise that he would at some point in the future sell her an interest in the property. The fact that the defendant made an assumption or drew a conclusion from which the plaintiff said and did is not, of itself sufficient to impute to the plaintiff a similar intention when such an intention was not in fact shared by him. In this case there was no meeting of the minds on the issue. The cause of action has not been made out.

43 Given that the facts do not sustain a common intention between the parties a constructive trust does not arise in the circumstance of the case. There is in this case no established equitable principle on which the defendant can rely. The plaintiff's conduct did not induce the defendant's subjective belief that the payments for the renovations were made in contemplation of her purchasing an interest in the property. Therefore the plaintiff cannot be made to account for the money paid over by the defendant despite the fact that he may retain some benefit from those improvements.

44 Finally I wish to say something in relation to the improvements to the property. There was no cause of action in unjust enrichment pleaded. As a result it is difficult to see how the defendant's claim that the plaintiff has been unjustly enriched by her contributions actually not arise for determination. However, I will make some comments on the merits of the contention that a financial benefit has accrued to the plaintiff by way of the defendant's expenditure. I have come to the conclusion that the improvements added no overall value to the property. This finding is based on the plaintiff's expert evidence provided by Mr Gerald Browne.

45 The defendant relied on a valuation given by Mr Brian Miles. He proffered the opinion that the improvements would have increased the value of the property by $17,000. However the approach taken by Miles in his valuation tended to focus on isolating each particular improvement that was made and assessing the value of each improvement in terms of the benefit each change would make to the use and enjoyment of the property. His evidence did not focus on the effect of the improvements on the overall market value of the house. While both the valuations of Miles and Brown agreed on the overall market value of the property, Miles' valuation differed in that it attributed $17,000 of the market value to the improvements.

46 In my opinion in determining whether the plaintiff must account for the expenditure it is necessary to see if the expenditure has had the effect of increasing the actual overall market value of the property. In other words if the plaintiff decided to sell the property would it be worth $17,000 (or some other amount) more than if he had sold it in its pre-renovation state? The evidence and valuation of the plaintiff's witness Brown specifically focussed on the issue of whether there had been any real increase value in the overall market value of the property. He stated that people desiring to purchase properties of the sort in question (in semi rural localities) were inclined to set themselves a bench mark price. His evidence was that in the locality where the property was situated there was a ceiling value and in his opinion the property even in its original form probably exceeded that value. The commercial effect of this meant that no matter what additional money was spent on the property unless it was very carefully spent would add marginal value only. He said this was the whole basis of his thinking in valuing the property and for this reason he did not believe there was any point in looking at the improvements individually. Even so he did, in his valuation, deal with the individual improvements and his opinion was that the changes did not add to the value of the property. I also note that as the issue was whether the plaintiff had retained a benefit from the improvements. Accordingly, the relevant factor is the present market value of the property. On this point the plaintiff's valuation by Brown was completed in April 1998 while that of Miles was completed in June 1995.

47 I accept the defendant's submission that the effect of some of the changes may have improved the overall scheme, layout and charm of the property by providing additional comforts to those using the property. However, I do not think it overcomes the problem of valuation, which is the central issue in deciding whether the plaintiff had retained a benefit in terms of added financial benefit. Accordingly, even if the question of unjust enrichment had arisen squarely on the pleadings, I would have preferred the evidence of the plaintiff over that of the defendant. In my view no benefit accrued to the plaintiff in the relevant sense.

48 The defendant also puts her claim for recovery of the sum of $6000 on a quantum meruit basis. Quantum meruit is essentially a common law principle, rather than one that arises in equity , although it is difficult to divorce equitable considerations entirely from the equation. In Monks v Poynice Pty Ltd (1987) 8 NSWLR 622, Young J identified, at 663 - 664, four situations in which quantum meruit can arise. First, where there is a request, express or implied for the performance of the service. Secondly, where the party benefited, accepted or acquiesced in the provision of the service under circumstances where it must have known that the service was not being rendered gratuitously. Thirdly, where the service is necessary for the protection of property. Finally, where the service conferred incontrovertible benefit on the defendant and it would be unconscionable for the defendant to keep the benefit of the service without paying a reasonable sum for it.

49 I will assume, for the purposes of argument, that quantum meruit can apply where the claimant is not the person who provided the service but who arranged for a third party to do so and who undertook responsibility to pay the third parties. I do not think the first category applies in this case. There was no request, express or implied by the plaintiff for the works to be carried out. He simply acquiesced in the defendant's proposals in relation to the renovations. Nor does the case fit within the second category. On the defendant's own evidence she was responsible for paying the builder, although she did expect that an accounting would take place if and when his acquisition of an interest in the property was finalised. The third category simply does not apply. The final category adds little, of anything, to the defendant's claim for equitable relief.

50 Accordingly, I find that there is no basis for recovery by the defendant of the amount of $6000 on a quantum meruit.

51 I have found that the plaintiff has not been guilty of unconscionable conduct. I can see no other basis on which the defendant would be entitled to equitable compensation.

52 For the sale of completeness, I should refer to one piece of evidence that might be seen as having relevance to the defendant's claim generally. In July 1994 the plaintiff paid the defendant $5000. The plaintiff explained the payment in this way:

"I did it because of - once again, I was frustrated. We were trying to resurrect this relationship. She put it to me that the relationship had absolutely no chance unless I paid her the money, to which I responded 'Kim, I do not owe you this money. I will always believe that I do not owe you this money. However, if it helps this relationship, I will pay you some money.' Whereupon I paid her $5000."

53 I accept this evidence of the plaintiff. I do not think the payment of the $5000 indicates that the plaintiff had acknowledged a responsibility to reimburse the defendant for the costs of the renovation.

54 I have considerable sympathy for the position in which the defendant found herself. I have no doubt that the parties had a genuine and deep mutual affection and believed they had the chance of a lasting relationship. Against that background the defendant severed her ties in Sydney and came to Perth with her daughter. It was a natural aspiration for her to seek additional security by making a commitment to the property. On the other hand I do not believe that the plaintiff acted unconscionably in the way that he dealt with the plaintiff in relation to the property. I do not think that at any time he formed an intention to sell an interest in the property to the defendant. Nor do I think that he "led her on" or did anything reprehensible on which a finding of unconscionable conduct could be made.

55 I think the plaintiff is entitled to an order that the caveat be removed and that the defendant repay the sum of $6000. I do not think the defendant is entitled to the relief claimed in the counterclaim. I will hear the parties as to the form of the order which should be made.

(1989) 12 Fam LR 725

Oates v Blackburne & Anor [1999] WASC 112

At a glance

Court

Decision date

Before

Catchwords

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Judgment (80 paragraphs)

Oates v Blackburne & Anor [1999] WASC 112 (30 July 1999)

Parties

Cases Cited (6)