Raams v Ainsley-Squires

An Arrangement to Buy the Werrington Downs Property - 2013 to 2023

The Relationship Between Mr Raams and Ms Ainsley-Squires

1. Mr Raams and Ms Ainsley-Squires commenced a close personal relationship in about November 2010. They lived close to one another in the neighbouring Western Sydney suburbs of Werrington Downs and Kingswood. Ms Ainsley-Squires owned her property in Meadowview Way, Werrington Downs ("the Meadowview Way property") which she shared with her mother, who was assisting her to pay off her mortgage to the ANZ Banking Group Ltd ("ANZ"). Mr Raams was renting in Kingswood.
2. The couple had differing perspectives on their relationship. Mr Raams appeared less committed to the long-term than Ms Ainsley-Squires. Neither of them had a strong interest in marriage. Mr Raams had been married and had three adult children. He had separated from his wife in 2009. When he and Ms Ainsley-Squires commenced their relationship, he was already enmeshed in divorce proceedings, which concluded in 2011. Mr Raams and Ms Ainsley-Squires never lived together. It suited Ms Ainsley-Squires to live at her own place with her mother.
3. The pair also had very different work lives. Mr Raams was principally employed on a casual basis, performing fly in-fly out contracting work in the Alice Springs region. Whilst Mr Raams was away for work Ms Ainsley-Squires would give him domestic assistance, caring for his dog, feeding his fish, and keeping an eye on his rented property in Kingswood. In contrast, Ms Ainsley-Squires had regular full-time employment as a retail manager in Sydney.
4. In about February 2012, about 15 months into their relationship, Mr Raams' explained to Ms Ainsley-Squires he was having trouble finding a place to rent. He explained to her that he found being single, working casually away from Sydney, and having pets were impediments to finding rental accommodation. In response, Ms Ainsley-Squires suggested that he might think about buying a property rather than renting, so he would not have to deal with a landlord.
5. Ms Ainsley-Squires offered to help find a property for him. Although he now denies it, she did much of the leg work visiting real estate agents to find a property for him. He was working most weekends outside Sydney. So, she found out what he wanted and looked for properties that might suit him. He told her that he wanted a house with a pool and a large garage. Not all real estate agents were online in this era. So, she took photographs and made notes for him, so she could show him what she had found from her travels to real estate agencies. She mostly inspected houses on the weekend. Occasionally she had to interrupt her shifts to inspect properties, and later she had to make up the time she had spent away from work. She gave a significant time commitment through this work and Mr Raams was grateful for it.
6. Ms Ainsley-Squires made enquiries of a friend, Donna Mollen, about how Mr Raams could obtain finance to acquire a property. Ms Mollen suggested that a mortgage broker, Mr Jeremy Claessen, might be able to assist by assessing Mr Raams' borrowing capacity.
7. They met Mr Claessen together on 29 October 2012. The parties contest what was said between them at the meeting with Mr Claessen and what Mr Claessen said but there are common elements. Both sides accept that Mr Claessen told them that Mr Raams would be unable to obtain a home loan on his own as he had insufficient assets. Mr Raams' contracting work paid well but after his divorce he had little property of his own. Ms Ainsley-Squires was keen to do what she could to assist Mr Raams acquire a home, as she wanted to support their relationship. The Court accepts that she said to Mr Raams and Mr Claessen: "We are hoping to get Richard [Mr Raams] a home and then purchase an investment property together. We have no intention of getting married and living together. That is currently out of the question, but we are in it for the long haul."
8. Mr Raams denied Ms Ainsley-Squires had spoken about them being in a relationship, "for the long haul". But the Court accepts that was said: it was Ms Ainsley-Squires' perspective on the relationship. It is probable that Mr Raams either did not take in what she was saying on this subject, or he ignored it.
9. Mr Claessen suggested a way forward. The Court accepts Ms Ainsley-Squires' account of what Mr Claessen advised. Mr Claessen said the following to them: "You could use Alexandra's property at the Meadowview Way as security to obtain a home loan for Richard but, [Ms Ainsley-Squires], you would need to refinance your mortgage to do so. If that occurs, Richard, you will put Alexandra on the title for 20% interest as a tenant-in-common. Alexandra, as you will be on the title deed there would never be any questions about you receiving your 20%".
10. The concluding words of Mr Claessen's advice make clear he was communicating that Ms Ainsley-Squires would have 20% of the Werrington Downs property both legally and beneficially. That is the only sensible way to interpret the statement "there would never be any questions about you receiving your 20%". The Court accepts that Mr Claessen explained this in several ways to the pair. He conveyed the essential idea that Ms Ainsley-Squires would obtain 20% of the property legally and beneficially.
11. Apart from the Court's preference for Ms Ainsley-Squires' evidence, Mr Claessen is objectively likely to have said something to this effect. Mr Claessen did not give evidence. Ms Ainsley-Squires was entering upon a substantial financial entanglement with Mr Raams putting at risk her own home and linking it to Mr Raam's reliability in discharging his mortgage obligations.
12. Throughout her oral evidence Ms Ainsley-Squires made clear she expected some degree of security as consideration for the risk she would be undertaking by offering her Meadowview Way property as collateral for Mr Raams' liabilities. Mr Claessen expressed 20% as being the minimum amount the ANZ would require for her to have an interest in the Werrington Downs property as a co-borrower. ANZ policy on this subject appeared aimed at avoiding a loan structure in which Ms Ainsley-Squires would in substance be a third-party mortgagor, a structure that would be much less stable for ANZ.
13. Mr Raams and Ms Ainsley-Squires discussed Mr Claessen's advice. Their accounts of their discussion differ. The Court accepts Ms Ainsley-Squires' version of that discussion, in which she initially characterised herself as a guarantor - that being her initial understanding: "Mr Raams: For me to be able to purchase a property, we will need you use [the Werrington Downs property] as security. Ms Ainsley-Squires: Yes, that's the only way but I need to protect my interests if we're using my property as security. Mr Raams: As [Mr Claessen] advised, I'll put you on as a proprietor on title of the property with a 20% interest. Ms Ainsley-Squires: That sounds fair. I want to help you get your own property, so you no longer need to worry. You'll need to be solely responsible for paying the mortgage ref and rates of your own property and make they're (sic) paid on time. I would be a guarantor so I can't afford my credit rating to be affected if you don't make the payments on time. Mr Raams: Of course, don't worry, I'll pay for all the outgoings including the mortgage repayments on any property I purchase. You have your own property to worry about. It would be good to find a property that has a pool and large garage. Ms Ainsley-Squires: Don't worry, I'll help you find a property you like."
14. The parties only saw the broker together once. Mr Claessen's notes of that 29 October 2012 meeting cover several subjects to which these reasons will return. But on the question of whether Ms Ainsley-Squires would have beneficial ownership of the Werrington Downs property, his notes support her version. Under the heading "Land Transfer" Mr Claessen wrote the following: "Land Transfer ANZ requires the minimum ownership split as follows: Alexandra: 20% ownership Richard: 80% ownership 20% was the minimum benefit for Alexandra. The applicants were recommended by me, to seek legal and financial advice, but decided against it. It was discussed between the two parties to the loan that Richard would take responsibility for the loan splits secured by the property to be purchase, while Alexandra continued to pay for the mortgage in her name only, secured by her Meadowview Way property. However, I advised them both that they were financially responsible for the loan splits secured by the property to be purchased. This was understood by both applicants".
15. Mr Claessen's notes make clear that ANZ was insisting on an ownership split of 20% to Ms Ainsley-Squires on the basis that "20% was the minimum benefit for Alexandra" [Emphasis added].
16. Mr Claessen gave the couple some advice about their relative responsibilities under the loan that he was structuring for them. He recorded that advice in his notes as follows: "It was discussed between the parties to the loan that Richard would take responsibility for the loan splits secured by the property to be purchased, while Alexandra continued to pay for the mortgage in her name only, secured by her [owner occupied] property however I advise them both that they were equally responsible for the loan splits secured by the property to be purchased. This was understood by both applicants."
17. It might be thought that this would be the point - where mutual obligations were being discussed - at which Mr Claessen might perhaps mention in his notes any discussion that had taken place about an arrangement by which Ms Ainsley-Squires held on trust her 20% of the Werrington Downs property for Mr Raams. But there is no mention of it, which offers further support for Ms Ainsley-Squire's case that no such discussion took place.
18. These findings contrast with Mr Raams' account of the conversation. He puts the substance of the agreement about Ms Ainsley-Squires' place on the title on the Werrington Downs property as being a mere "formality". Mr Raams agrees Mr Claessen conveyed to them the ANZ's requirement that Ms Ainsley-Squires needed to be a joint borrower with him on the loan and that she would need to be on the title to the property the ANZ's purposes. But he differs from Ms Ainsley-Squires' version by giving the following account in which he says that he insisted upon full ownership of the property: "Mr Claessen: The banks are not going to go with a loan where Alexandra is the guarantor. They are going to need her to be a joint borrower on the loan, and they are going to need her to be registered on the property as a co-owner. Mr Raams: But it will be my property - it has nothing to do with Alexandra, she is just helping me get the loan. Mr Claessen: Sure, but that is how the banks will require it. Ms Ainsley-Squires: Ok, so if I go on the loan and the property, Richard can get his loan? Mr Claessen: Correct, but you will be jointly liable for the loan."
19. The Court does not accept that this conversation occurred. Apart from the Court's preference for Ms Ainsley-Squires' evidence, this exchange is implausible. It is difficult to accept that Mr Raams would have said, "it has nothing to do with Alexandra, she is just helping me get the loan" and Mr Claessen simply said, "Sure, but that is how the banks will require it". To anyone in the broker's position, it would have been clear that Ms Ainsley-Squires' property was at risk should Mr Raams default on his payments. It would be surprising if any broker acquiesced in the statement, "it has nothing to do with Alexandra", given the advice he had already given the pair in the same session. Or if this was said, Mr Claessen who appears as a thorough note-taker, would be likely to have noted their arrangement. Nothing of it appears in Mr Claessen's notes. It is equally implausible that Ms Ainsley-Squires would have merely acquiesced in this statement.
20. Mr Raams gave a similar structure to the conversation with Mr Claessen as had Ms Ainsley-Squires. He said that after the broker advised the couple of the ANZ's requirements, they had a separate conversation between themselves to the following effect: "Ms Ainsley-Squires: Ok. Richard - if that is how it has to work, I'm happy to do it. Of course, you have to pay all of the loan. Mr Raams: Definitely, of course I won't ask you to pay anything. It is still going to be my property and my loan even though you have to go on the documents. And I am still getting the extra funds to give you to put towards those dental works that you want to get done as a thanks for helping me. Ms Ainsley-Squires: Ok. Mr Raams: Alright - let's proceed."
21. Part of this conversation can be accepted. An agreement was made that Mr Raams was to pay all the loan for the Werrington Downs property. But part of what Mr Raams attributes here to Ms Ainsley-Squires does not reflect the way she presented in Court. Ms Ainsley-Squires was not a financial ingénue. Whilst she is not financially sophisticated, she is careful with money, financial risk and taking on monetary liabilities. She impressed the Court as cautious about keeping secure her own Meadowview Way home in which she and her mother lived. It is impossible to accept that someone as careful as she is would simply acquiescence with an "okay", to the proposition Mr Raams attributed to himself, "it is still going to be my property and my loan even though you have to go on the documents." If at that moment he had clearly communicated to her that he was to be the beneficial owner of the whole Werrington Downs property, that would have given her pause for thought. Ms Ainsley-Squires was aware that she would be vulnerable to financial loss if Mr Raams' earnings became uncertain and is not the kind of person who would have accepted an open-ended risk of such loss once she understood it.
22. And she soon came to understand the nature of that risk. Ms Ainsley-Squires gives an account that part of the conversation with the broker was a revelation to her. She had thought that before meeting with Mr Claessen that she would be able to guarantee Mr Raams' payments on his mortgage but that her own property would not otherwise be at risk if he defaulted. The Court accepts that Mr Claessen explained to her that the risks she faced were greater. She understood for the first time from Mr Claessen that that if Mr Raams defaulted then her own property could be sold to meet any shortfall to the ANZ Bank on his loan account. Once she became aware of this risk, she fully appreciated her vulnerability. So probably did Mr Claessen. His notes indicate that he recommended that the applicants seek legal and financial advice. But they decided against it.
23. Ms Ainsley-Squires could give a reasonable account of her logic for going into the transaction, on the basis that she owned 20% of the Werrington Downs property. Mr Raams had suffered a heart attack by this time. Ms Ainsley-Squires attributed this in part to the stress of going through his divorce, but also to what she called his "poor lifestyle choices". She was concerned that he may suddenly become unwell again and not be able to continue his employment. She had observed his fly-in-fly-out work was intermittent. When the work was available his income was good, but it could be patchy. She knew that, especially with the risk of adverse market conditions, the Werrington Downs property may be needed to satisfy deficiencies arising from default on his loan account. To her the 20% of Werrington Downs property represented a buffer against such contingencies.
24. The Court doubts one aspect of Ms Ainsley-Squires' account of the meeting she and Mr Raams had with Mr Claessen. She says, at least in her oral evidence, that Mr Raams and she met Mr Claessen before they had found the Werrington Downs property for Mr Raams. But the broker's notes of the meeting on 29 October 2012 appear to confirm the opposite: the couple had given Mr Claessan the address of the Werrington Downs property and told him that Mr Raams was going to purchase it. Moreover, it makes sense that they would only approach the broker when they had a definite purchase in prospect and could calculate an overall loan to valuation ratio and work out what loans could be advanced on each account on the basis that both properties were to be offered as security. It is however possible that when Mr Claessen wrote up the notes after the 29 October 2012 meeting that he inserted the Werrington Downs property even though that information had not been available at the time.
25. But the parties strongly debated in evidence the timing and content of their discussion on another subject, which requires closer analysis: whether Ms Ainsley-Squires agreed that dental procedures that she desired would be paid for out of the loan proceeds as the full consideration she would receive for putting up her house as security.

The Dental Work - The Sole Agreed Consideration?

1. The parties had conversations about part of the advance from ANZ being used to fund dental work that Ms Ainsley-Squires wished to have done. They agree that such conversations took place, but they strongly disagree about both the content and their timing. Ms Ainsley-Squires' dental work took place shortly after settlement of the loan, commencing in March 2013 and concluding in June 2013.
2. Mr Raams contends that he and Ms Ms Ainsley-Squires reached a concluded agreement that the sole benefit that Ms Ms Ainsley-Squires agreed to receive for committing her Meadowview Way house as security was that approximately $12,000 of a loan advance would be made available to her for that purpose. He says that this arrangement had been discussed before they approached the broker and that explains the statements that he claimed he made to her at the meeting with the broker, "and I am still getting the extra funds to give you to put towards those dental works that you want to get done as a thanks for helping me."
3. Ms Ainsley-Squires' account is very different. She denies that funding her dental work from the loan proceeds was the sole substantial benefit she agreed to receive from the transaction. Her affidavit evidence first refers to this subject arising between the couple at about the time that the property transaction settled, about 30 January 2013. She says that Mr Raams gifted her $12,000 from the surplus mortgage funds. In her affidavit narrative of events Mr Raams spontaneously gifted her the $12,000 in words to the following effect: "I'm gifting you $12,000 to show my gratitude for organising an appointment with Jeremy for me, house hunting for me as I was unable to take time off from work to do so on my own and also for meeting with the conveyancer and organising payment of fees on my behalf. I appreciate what you did for me. If it wasn't for you, I wouldn't have the property."
4. Ms Ainsley-Squires distanced herself from the idea that this subject could have been discussed before the finance was organised and before the transaction proceeded and emphasised that it was a spontaneous gift on Mr Raams.
5. Neither of the parties' accounts is accurate on this subject. Ms Ainsley-Squires is wrong, as she ultimately substantially conceded in cross-examination, that the subject of her dental work was discussed before the transaction proceeded. She glossed over these earlier discussions, probably because she wanted to distance herself as much as possible from Mr Raams' case that she had bargained for this benefit before the transaction. But this did not impair her overall credibility.
6. The documentary evidence and the likely course of events supports Mr Raams' case that this subject was discussed before the transaction. Neither the assessment of the credibility of the parties nor the documents support the idea that either party believed that the cost of the dental work is all Ms Ainsley-Squires bargained for as the price of committing her Meadowview Way property to the transaction.
7. It is very unlikely that this subject just happened to arise at the time of settlement of the transaction. Mr Raams' evidence that for some time prior to October 2012, Ms Ainsley-Squires had shared with him her desire to have this work done. She was keen for it to be completed but it was expensive. The dental evidence shows that the total procedures ultimately cost a little under $20,000. Ms Ainsley-Squires was disappointed she could not readily afford to pay for this work. It was on her mind, and it is likely that she did mention it to Mr Raams.
8. The documentary evidence, which is discussed in more detail below, also shows that an advance of $12,000 had been set aside for Ms Ainsley-Squires from the very earliest structuring of the loan application to ANZ.
9. Moreover, Ms Ainsley-Squires did not need Mr Raams or the transaction involving the Werrington Downs property to fund her dental work. She had two other sources of funds to have the work done. She usually received annual bonuses of between $6,000 and $10,000. The Court accepts she could have saved the funds she needed from this source over 2 to 3 years. And she had already paid down her mortgage on her own property and could raise some of the $20,000 she needed by refinancing on her own with ANZ, without entering any joint transaction with Mr Raams. Ms Ainsley-Squires approached her finances rationally. She was unlikely to put her property at risk for a lengthy period to secure funds which she could have saved in less than three years.
10. Finally, as will be seen later, the text message exchanges between the couple are not wholly consistent with Mr Raams' contention that funding the dental work was the sole benefit Ms Ainsley-Squires agreed to accept.

The Loan Application and Structure

1. There was much contention between the parties about the structure of the loan advances they negotiated and how the advance relevant to Ms Ainsley-Squires fitted into that structure. The starting point for analysis of the parties' competing contentions are the loan documents and the notes of the mortgage broker that they consulted, Mr Claessen.
2. As indicated above Mr Claessen, the broker, Ms Ainsley-Squires and Mr Raams used to secure funding from the ANZ first saw them on 29 October 2012. He gave them detailed advice as to ANZ's available financial products and what security ANZ would accept. He made detailed notes of his interactions with the pair, notes which appear to have been written up in the form of a summary close to but after they lodged their loan applications with ANZ. Some knowledge of the funding structure of the ANZ's advances assists in assessing the parties' competing accounts of events.
3. In Mr Claessen's introduction to his chronological notes, he appears to treat the Werrington Downs property as jointly beneficially held. He explains that he arranged a preapproved loan application, "to assist [Mr Raams] and [Ms Ainsley-Squires] in the purchase of their property" [Emphasis added]. This appears to be a backward-looking judgment, as the parties had not yet found the Werrington Downs property when they first approached him on 29 October.
4. When they first approached Mr Claessen, Ms Ainsley-Squires was looking to refinance her existing ING loan which she had taken out in 2006 for $329,000. By October 2012, she owed ING bank $294,058. Her Meadowview Way property was valued at $411,000. Independently of Mr Raams desire to purchase a property, Ms Ainsley-Squires was interested in refinancing with ANZ to obtain a better interest rate that she had with ING. Mr Claessen appears to have pointed out to her that she was likely to get loan approval from ANZ for a loan of up to $304,000. It appears that for a single borrower on a single owner-occupied property ANZ was prepared to accept a loan to valuation ratio of 75%. ANZ had an offering of a slightly cheaper interest rate of 5.9% compared with the 5.97% per annum she was paying to ING. As her Meadowview Way property was valued at $411,000, borrowing to $304,000 were possible whilst satisfying a loan to valuation ratio of 73.97%. It was not difficult for Mr Claessen to arrange this, and the loan was formally approved the following day, on 30 October 2012.
5. ANZ paid out ING on 23 November 2012. The numbers at settlement were slightly different to those planned by Mr Claessen. On the refinance Ms Ainsley-Squires received $8,438.41. Thus, even before she went into the joint arrangement with Mr Raams, she already had this amount available to commit towards her dental work, which she expected to total $20,000. She needed another $12,000. As will be seen, the valuation of her Meadowview Way property and the purchase price of the Werrington Downs property allowed this additional $12,000 (indeed a little more) to be borrowed by the couple.
6. Mr Claessen constructed a joint application to the ANZ of two loans: the first advance to Mr Raams (loan 1); and the second advance to Ms Ainsley-Squires (loan 2). Mr Raams' loan (loan 1) was for a base loan amount of $363,200 with loan mortgage insurance of $13,970.08 making a total $377,170.08. Ms Ainsley-Squires' new loan (loan 2) was for a base loan amount of $12,000 with loan mortgage insurance of $438.63, making a total of $12,438.63. The aggregate lending of loan 1 and loan 2 was $389,608.71 ($377,170.08 plus $12,438.63).
7. But an interest-rate discount was available from ANZ for Mr Raams and Ms Ainsley-Squires, if they aggregated her existing loan on her Meadowview Way property with the new loans, they were seeking - loan 1 and loan 2 - and offered both their properties as security. The aggregated borrowings would be $693,608.71 (being $304,000 plus $377,170.08 plus $12,438.63).
8. Mr Claessen calculated a loan to valuation ratio of the aggregated borrowings by aggregating the value of the Meadowview Way property at $411,000 with the proposed purchase price of the Werrington Downs property at $360,000 making a total of $771,000. On aggregated borrowings such as this ANZ appeared to permit a loan to valuation ratio of 90%. The aggregated loan proposal to ANZ came within that ratio at 89.96% ($693,608.71 divided by $771,000).
9. Mr Claessen submitted the preapproval application to the ANZ for this aggregated loan on 23 November 2012. The two loans applied for were sometimes referred to as "split one" (loan 1) and "split two" (loan 2). Both loans were for variable rates of interest and required principal and interest repayments.
10. At the time of the first submission to ANZ in November 2012, the loan amount on loan 1 was a little higher than $360,000, because the purchase price of the Werrington Downs property had not yet been settled at that figure. Contracts were only exchanged on 5 December 2012. The loan application is instructive about the relative financial position of Ms Ainsley-Squires and Mr Raams. The application shows that she had total assets of $556,000 (most of which were comprised in the Meadowview Way property) and she had uncommitted monthly income of $632.03. In contrast Mr Raams had total assets of only $103,000 but uncommitted monthly income of $4,319.33. As Mr Burchett, counsel for Mr Raams submitted: he was asset poor but cash rich and she was asset rich but cash poor.
11. Approval came through from the ANZ on 29 November 2012. Mr Claessen submitted formal property details to the ANZ on 4 December 2012. Contracts were exchanged for the purchase of the Werrington Downs property for $360,000 on 5 December 2012. And ANZ provided formal loan approval to this essential structure on 7 December 2012. Both loans had the benefit of an interest-rate discount of 0.96% as part of a financial product called a "ANZ Breakfree Package". Ms Ainsley-Squires nominated her own bank account to be the account from which the annual package fee of $400 would be paid for the combined Breakfree ANZ facility, including the discounted interest rate. This was an incidental benefit that Mr Raams received from entering an arrangement combining his borrowings for the Werrington Downs property with Ms Ainsley-Squires' ANZ facility relating to the Meadowview Way property. Ms Ainsley-Squires continued to pay this fee herself, which later became a source of friction between them.
12. The purpose of loan 1 was described in the ANZ approval as "purchase owner occupied property" and the security for the loan was described as "already held by ANZ and to be retained by it as security for this loan". The first was a registered mortgage over Meadowview Way said to be "given by" Ms Ainsley-Squires and a registered mortgage over the Werrington Downs property said to be "given by" Ms Ainsley-Squires and Mr Raams.
13. The purpose of loan 2 was described in the ANZ approval as "for personal purposes". The security for the loan was recorded in the same manner as for loan 1.
14. Although it was contested, the Court accepts that Mr Raams funded part of the purchase price of the Werrington Downs property with an advance by his mother apparently in anticipation of his future inheritance from her. The deposit on exchange of contracts was raised by Ms Ainsley-Squires paying a fee of $421 to purchase a deposit bond. Her credit card details are recorded in the deposit bond purchase form. Mr Raams did not appear to have ready cash available to do that himself.
15. When the acquisition of the Werrington Downs property settled the total loan 1 and loan 2 borrowings at a 90% loan to valuation ratio left a surplus available for distribution of $13,728.85. This meant that Ms Ainsley-Squires received the additional $12,000 that she wanted from loan 2 and Mr Raams received an additional $1,728.85. The final position these parties and the surplus of funds available to them is conveniently set out in the table below. Aide Memoire - Calculations Description Amount Funds Available ANZ Loan 1 $362,768.20 ANZ Loan 2 $12,000 Total from ANZ Loans $374,768.20 Contribution from mother $13,000 Total Available $387,768.20

Funds Required Purchase Price $360,000 Stamp Duty $11,690 Conveyancing $1,700 Total Required $373,390

Surplus Funds Total Surplus $14,378.20 Amount to [Ms Ainsley-Squires] $12,000 Amount to [Mr Raams] $1,728.85 Remaining Surplus $649.35

1. But within three years the deteriorating relationship between the couple meant that their financial arrangements would be unsustainable in the long term.

Assessing Mr Raams' Case

1. Mr Raams argues that it is implausible that he would have agreed to have shared the benefit of the purchase as to 20% with Ms Ainsley-Squires when: (1) they both approached the mortgage broker to solve the central problem, "how is [Mr Raams] going to get his house"; and (2) they agreed that Mr Raams would undertake the whole burden of the mortgage payments.
2. But this submission looks at their agreement too narrowly. The question "how is [Mr Raams] going to get his house" was answered by Ms Ainsley-Squires offering her house as security to enable his borrowing. The fact to be faced is that Mr Raams could not acquire the Werrington Downs property without Ms Ainsley-Squires' security assistance.
3. And the agreement was not necessarily unfair to Mr Raams. Although he was bearing all the outgoings and paying down her $12,000 on loan 2, Mr Raams was receiving agreed exclusive occupation of the Werrington Downs property. He always had rights under Conveyancing Act 1919, s 66G, to force a sale of the Werrington Downs property whenever he chose, which would in turn have given him leverage to buy out her interest whenever he could afford to do so by offering other security. In the early years after 2012, when property values had not risen very much and minimal equity was held in the Werrington Downs property, he could probably have acquired her interest inexpensively. He always had that potential option. But whilst he left the title the way it was to satisfy the ANZ, Ms Ainsley-Squires would always take 20% of the accretions to the capital value of the property after subtraction of the mortgage liability. But by saving, planning, and deploying good financial management he could have arranged alternative security to that Ms Ainsley-Squires had provided. Yes, he was responsible for paying the whole mortgage in the short term. But he always had the legal option of buying out her 20% of the property.
4. Mr Raams also points out that Ms Ainsley-Squires was initially prepared to guarantee Mr Raams' obligation to the ANZ without stipulating for an interest in the Werrington Downs property and that it was only because of the ANZ's insistence that she became a co-borrower. He argues that if she was prepared to become a guarantor of his obligations without insisting an interest in the property, there is no logical reason why she would have insisted upon an interest when becoming co-borrower.
5. But this argument oversimplifies Ms Ainsley-Squires' change from willing guarantor to co-borrower. This bank-driven change was accompanied by her broker-sourced sudden realisation that, even as a guarantor she would be liable to lose her property, if Mr Raams defaulted. Fully informed by the broker about the risks, she was an unlikely guarantor. The agreement was not inherently unbalanced as Mr Raams submits. Ms Ainsley-Squires wanted security for the long-term possibility of his default. He wanted a property he could not otherwise acquire. Her holding a 20% interest in the property is not an outcome that "beggars belief", as Mr Burchett submits on behalf of Mr Raams.
6. It was difficult to fathom Mr Raams' understanding of Ms Ainsley-Squires' position on the title deeds, holding 20% of the property. Mr Raams professed a degree of naïveté about what the certificate of title to the Werrington Downs property would look like when he acquired it. He said he was not sure of "the paperwork side of it" because as he explained "I was working six days a week". But he seemed incurious about what the title to the Werrington Downs property would look like and whether it would record Ms Ainsley-Squires as legally entitled to 20% of the property.
7. His evidence that he paid the issue little attention can be accepted. He was dismissive of the legal paperwork, seeing Ms Ainsley-Squires 20% on the title deeds being "any kind of piece of paper". He seemed convinced in his own mind that she would not try and claim the 20% because "she was, as far as I'm concerned, paid the agreement" by receiving her money for her dental work and he thought "then anything on the paper would be just as it was on the paper" and "there was no action to come". He saw what he saw as his contribution to the dental work in the sum of $20,000 as his assurance that she would not come back for more. He explained "I guess the 20K cash was assurance that she wasn't going to bring it to this."
8. But if that was what he believed, he never sought to clarify that belief either with the broker or with Ms Ainsley-Squires; and his belief was based upon a view that he had provided her with $20,000 for her dental work rather than $12,000, a belief that Ms Ainsley-Squires is hardly likely to have shared. Both these matters provide obstacles accepting his case that he retained a beneficial interest in the whole of the Werrington Downs property.
9. The first obstacle arises from a contradiction within Mr Raams' case. On the one hand he was firmly of the view that his relationship with Ms Ainsley-Squires was casual and that she could walk away any time. On the other hand, he surprisingly made no verifiable efforts to ensure that if she did walk away that she could not claim the 20% interest in the property which the certificate of title recorded. Asked why he did not get something put in writing with Ms Ainsley-Squires to ensure that the 20% was "only a formality" and that she was limited to the $20,000 that he claimed he had given her, he replied: "The whole situation became quite, in my eyes, fairly simple and cut and dry with the broker explaining things - how it had to be done - and everything seemed to work. And there was no reason for me to question them or feel doubt or insecure, so I let them just make it happen. And I was - obviously, kept my eyes closed and too busy"
10. This answer is the best explanation of what happened. Mr Raams took the advice of the broker and accepted the additional security being offered by Ms Ainsley-Squires and "let them just make it happen". And making "it happen" in this context meant Ms Ainsley-Squires taking a 20% legal interest in the property with no specific arrangements for her to hold that 20% legal interest for him beneficially.
11. When asked why if he "might need to prove someday that the 20% was only a formality" and was not the "real story" he said: "Well, obviously I didn't rea[d] it properly, that I assumed once I had the equity in the home that - that her being there was irrelevant once I had the equity, despite the relationship or the friendship, whatever that may have been."
12. This too was a frank confession of his outlook: he saw her presence on the title as "irrelevant", or a formality. But that is not something he ever sought clearly to discuss with her, or the broker, or to put in writing with her. As for the broker, discussing it with him was unlikely because that would have put him in the uncomfortable position of potentially misrepresenting the beneficial ownership position to ANZ. And as for Ms Ainsley-Squires, because the Court accepts her version of these conversations, she was entitled to leave the Meadowview Way property in their mutual arrangement and to pay the annual ANZ package fee, on the basis that he was not retaining the beneficial interest in her 20% of the Werrington Downs property.
13. The second obstacle to Mr Raams' success is that the centrepiece of his contention that he retained the beneficial interest in her 20% is based upon a wrong conviction that the price at which he agreed with her to retain that beneficial interest was by giving her $20,000 for her dental work.
14. But the evidence does not support the conclusion that he gave her $20,000 for her dental work and he is mistaken about this very fundamental aspect of their arrangement. As the analysis of the loan arrangements above shows, Ms Ainsley-Squires received $12,000 at settlement of the acquisition of the Werrington Downs property, not $20,000. The conveyancer that the pair engaged, Ms Valerie Dries, recorded this undoubted fact in correspondence to ANZ dated 15 January 2013 that on settlement Ms Ainsley-Squires would receive a bank cheque for $12,000 and Mr Raams for $1,728.85.
15. Mr Raams' attempts to explain how we could have been mistaken about such a fundamental part of what he said was the core agreement with Ms Ainsley-Squires, was one of the least satisfactory parts of his oral testimony. At first, he denied the suggestion that Ms Ainsley-Squires only received $12,000. But when confronted with the 15 January 2013 letter from Ms Dries, he seemed to accept that "based on this evidence, yes," she may only have only received $12,000. He then sought to say that the $13,000 that his mother had given him contributed towards the rest of the $20,000 that Ms Ainsley-Squires received. But the $13,000 was applied directly to the purchase, either to the vendor or for stamp duty and was not given to Ms Ainsley-Squires.
16. Another explanation he gave for this discrepancy was to say that he must have paid her from his "cash funds". But he could not recall where he might have sourced such cash. And it is surprising that he would have that amount of cash available for that purpose, when he was not able to pay the $400 fee for the deposit bond. When it was directly put to Mr Raams by counsel that he did not have $8,000 to pay Ms Ainsley-Squires on top of the $12,000 bank cheque, his only answer was "I can't say yes or no. I don't know". There was indeed no plausible explanation for how he could have been the source of the other $8,000. It is more likely that this sum came from Ms Ainsley-Squires' own financial resources, including for example from the refinancing of her ING mortgage.
17. As a footnote it should be observed that Mr Raams' own pleaded case recognised that the correct amount of assistance that had been given to Ms Ainsley-Squires was $12,000, not $20,000. But the problem for Mr Raams is that despite the accuracy of the pleading, his own recollection was widely at odds with the real benefit to Ms Ainsley-Squires. In final submissions Mr Burchett sought to contend that the $20,000 was $12,000 plus interest over 11 years. But this does not well accord with Mr Raams' own expressed recollection of the agreement he says he made.

The Relationship Cools - 2014 to 2015

1. The relationship between Mr Raams and Ms Ainsley-Squires declined in 2014 and ended in late 2015. Their exchanges about many subjects including this loan became infrequent over time. From late 2015 they avoided one another.
2. Since the date of settlement Ms Ainsley-Squires had been paying an annual ANZ loan package fee of $395. In about March 2014, Ms Ainsley-Squires asked Mr Raams to pay "at least half of the bank's annual fee," she reminded him that he had promised her to meet, "all the expenses on the property". Mr Raams responded with a terse expletive. Ms Ainsley-Squires continued to pay the annual fee.
3. In February 2015 Ms Ainsley-Squires found out that Mr Raams was attempting to date other women. She decided that she wanted to terminate the relationship. The Court accepts her version of a conversation that occurred between the couple when she moved to end the relationship at that time, a conversation to the following effect: "Ms Ainsley-Squires: You can either buy me out or sell the house and give me my 20%. Mr Raams: I'll cancel the house insurance and burn down the house. The bank will come after you for payment."
4. Deterred by this aggressive behaviour Ms Ainsley-Squires did not respond and decided not to put a formal end to the relationship at that point. But the conversation is important for Ms Ainsley-Squires claiming her 20% and not receiving a repudiation of the claim straight away from Mr Raams.
5. Relations between the pair had plummeted by about November 2015. The following final conversation took place between them. Ms Ainsley-Squires: Just give me my 20% so we can have a clean break and go our separate ways. Mr Raams: You'll come home one day and find your Mum and cats dead. Ms Ainsley-Squires: I'll report you to the police. Mr Raams: I would make sure your life is a living hell. Don't forget my son, daughter and son-in-law are police officers and I'll fuck you up."
6. Once again Ms Ainsley-Squires is claiming her 20% without receiving a denial from Mr Raams that she held such an interest.
7. Following this conversation, Ms Ainsley-Squires stayed away from Mr Raams. Although they both lived in the Werrington Downs area and had chance meetings. One of these occurred in 2018. Ms Ainsley-Squires encountered Mr Raams at their local supermarket. After initial pleasantries, Mr Raams said to her: "I want to sell the house as it needs lots of repairs, and I found asbestos that I don't want to deal with. You'll need to sign over your 20% to me."
8. Once again this was an acknowledgement on Mr Raams part that she had 20% of the property and he was seeking to persuade her of the desirability of giving it up consensually. Ms Ainsley-Squires calculated that as Mr Raams was continuing to pay the mortgage and she was not being pursued by the ANZ, she could just wait.
9. About three years later the pair had further contact. On 24 March 2021, Mr Raams came to Ms Ainsley-Squires' Meadowview Way house and knocked on the door. She did not answer. He left a note asking her to call him. She found his conduct intrusive and the following day she sent him a text message to the following effect: "I don't want to see you or talk to you. Don't come to my house. Whatever it is text me. If you want to refinance and get me off the loan, then I will sign the paperwork, but only if you organise with a solicitor that if you sell the house or die, that I get 20% as per the original plan. I want a clause drawn up that that deal remains and that you can't change it, and I want a copy of it before going to ANZ. I'm not interested in your sob story. I have been unemployed for a year and am up to my eyes in debt. I am now thinking about what's best for me. My days of caring about you and doing things to make your life better are over."
10. Shortly afterwards, Mr Raams responded with the following text message that for the first time asserted that he had not agreed to her having 20% of the property: "I recall the agreement was for 20k not 20%. I too have been unemployed since covid started and due to poor advice, self-funded for six months, and now like you in heavy debt. If you're willing to remove yourself from the house for me to refinance and do the urgent repairs needed to put it on the market then I can give you your 20k once sold. As for an agreement, you seem to forget who paid the 20k already for all your dental work!"
11. On 27 March 2021, Mr Raams initiated further text messages. He had moved house. He had retained three real estate market appraisals with a view to selling the Warrigal Glenn property. He then returned to the subject of the distribution of the proceeds of sale, which gave some insight into his then thinking about the agreement that he thought had been made. "…I've had 3 appraisals done and all are within 25k of each other with 600k for a quick sale or I spend a few k to push for 650k. Unfortunately, due to living day by day off a credit card it will be a quick sale. As it stands your total profit after all expenses such as - outstanding mortgage, real estate fees, legal fees and dental fees. Your estimated clear profits should be between $30,000 and $35,000. Are you satisfied for me to have a legal binding document written up for you to receive 20% less dental?..."
12. Mr Raams seemed prepared in this text message to adopt Ms Ainsley-Squires claimed 20% as a basis for negotiations between the pair. Mr Raams could not explain why in this text message he would offer her 20% of the proceeds of sale, increasing the offer from $20,000, if that was not the agreement. To this he simply answered, "I don't know". The better explanation is that he recognised that this was probably what had been agreed and he was trying to at least give credit against that liability for the money he thought had been paid to her for her dental work.
13. But Ms Ainsley-Squires replied asserting that the dental work was a gift and that in addition she had paid annual loan package fees for eight years amounting to approximately $3000.

The Sale of the Werrington Downs Property - from mid-2022 to the present date

1. In 2021, Ms Ainsley-Squires began receiving correspondence from ANZ notifying her that the ANZ mortgage on the Werrington Downs property was in arrears. She was copied into ANZ correspondence to Mr Raams confirming his applications for loan extensions and hardship assistance from the ANZ. This correspondence realised the risk she had foreseen when she first went into this arrangement with Mr Raams.
2. Solicitors' correspondence commenced at about the same time, with the parties taking the positions that each took in the proceedings. It is not necessary to detail this correspondence in these reasons. Mr Raams ceased making payments to the ANZ from about 7 April 2022.
3. Mr Raams' contracting work came to an end in mid-2022 when he suffered another heart attack. He has not worked since then. He recognised that he was no longer able to service the mortgage to the ANZ. He decided to sell the Werrington Downs property and to move away from Sydney. His deteriorating health burdened him with increased and continuing medical expenses. Since mid-2022 his only income has been from unemployment benefits, leading to him trying to take advantage of ANZ's financial hardship policies.
4. In July 2022 Ms Ainsley-Squires received a default notice from ANZ noting that she was in arrears and that the entire mortgage may become due and payable together with the cost of a mortgagee sale.
5. The legal representatives of both parties began in mid-2022 to negotiate a way through the sale of the Werrington Downs property and the retention of some of the proceeds of sale pending the outcome of these proceedings. It is not necessary to detail this unnecessarily fractious correspondence. But it may have saved the parties some costs in a matter in which the amount at stake is not great if the parties had managed this dispute more cooperatively during this period. The Courts are constantly emphasising the need for cooperation between practitioners to serve the objectives of Civil Procedure Act 2005, ss 56-60.
6. Eventually the Werrington Downs property was sold in early 2023 giving net proceeds of approximately $450,000 after payment out of ANZ. About $175,000 of the net proceeds of sale were released to Mr Raams and the balance of approximately $275,000 was kept in the plaintiff's solicitor's trust account pending the outcome of these proceedings.

Analysis of the Claim for Relief

1. The factual substratum of Mr Raams' claims for relief is absent and his claim therefore fails. Mr Raams pleads that an agreement was made between himself and Ms Ainsley-Squires that she would take a 20% share of the legal title to the Werrington Downs property "solely for the purpose of satisfying the minimum title requirement [of ANZ]" as advised by the broker, to obtain approval of a joint home loan. He further pleads that it was agreed that her refinance of the ING home loan, the drawdown of loan 1 and loan 2 and Mr Raams making all payments to ANZ on loan 1 was in part performance of their agreement. He pleads that the fundamental agreement between the parties was merely one of guarantor on her part, and as between Mr Raams and Ms Ainsley-Squires the agreement was that she would hold legal title of the property on trust for him.
2. Mr Raams' primary claim is put several ways: as a claim in specific performance, as a claim in equitable estoppel and a claim upon a common intention constructive trust. But all these claims depend upon Mr Raams establishing that Ms Ainsley-Squires' position on the title was agreed to be nominal. But the Court accepts her account of the transaction, which is not consistent with her holding her 20% of the property on trust for him.
3. In the alternative, Mr Raams made a claim for unjust enrichment. He says that he has made all payments of principal and interest on loan 1 discharged loan 2 and paid all rates, outgoings, and maintenance costs in relation to the Werrington Downs property, so she cannot take the benefit of 20% of the Werrington Downs property without accounting for his payments in respect of her interest.
4. But this alternative claim also fails. The liability for these outgoings was covered by the agreement made between the parties. The agreement was that Mr Raams would be responsible to maintain loan repayments and other expenses associated with the mortgage on the Werrington Downs property and indeed for loan 2. In return it was agreed that he would have exclusive use and occupation of that property, which implies that she would not be able to maintain any claim for an occupation fee on the basis that he had excluded her from the property. But she would nevertheless have a 20% interest in the Werrington Downs property as she was leaving the Meadowview Way property at risk as collateral security, for his benefit. There is no room for a claim for unjust enrichment here. Their arrangement is fully accounted for by their agreement.
5. Ms Ainsley-Squires has cross claimed to recover the 20% of the net proceeds of sale of the Werrington Downs property to which she is entitled. Her cross claim also seeks damages because Mr Raams failed to comply with his obligations to service the loan secured against the property and to pay council rates associated with the property. These various defaults on the part of Mr Raams are established. It is not clear to the Court, whether agreement has been reached between the parties about the exact quantum of funds that will be distributed to Ms Ainsley-Squires upon a successful outcome. If agreement has been reached no further consideration of this subject is necessary.
6. But if agreement has not been reached there will need to be a further accounting between the parties in this respect. Ms Ainsley-Squires says that increased charges accrued on the mortgage in the sum of $23,370.17 from 7 April 2022 up to the time of settlement of the sale of the Werrington Downs property on 11 July 2023, during a period of rising interest rates. She says that some additional costs and charges were occasioned by his default on the mortgage and his later delay in agreeing upon an orderly sale.
7. Ms Ainsley-Squires should not have to bear the financial consequences of Mr Raams' default. Their agreement obliged him to bear all mortgage and other outgoings on the Werrington Downs property and he is in breach of that obligation.
8. But many costs and charges accruing on the Werrington Downs property would have been incurred anyway. It can be assumed, for example, that Mr Raams' poor health would have led him in about mid-2022 to sell the property and that this would have taken several months to organise even without a default on his part. Therefore, the effect of increased interest rates in 2022 and 2023 may perhaps have to be borne to an extent by both parties in calculating the net proceeds. But Ms Ainsley-Squires has a persuasive argument that specific interest and other charges which are solely referable to Mr Raams' default should not be borne by her 20% share of the net proceeds of sale. This discussion is all subject to agreements as may have been made between the parties about such issues.
9. Ms Ainsley-Squires' cross claim raised alternative claims, in restitution and an application of the presumption of advancement, if she was unsuccessful in establishing an entitlement to 20% of the net proceeds of sale of the Werrington Downs property. But it has not become necessary to consider these alternative claims.

Conclusions and Orders

1. The Court indicated during final submissions that because the amount in issue in the proceedings was low that this was an appropriate case for the making of an order fixing a specified gross sum instead of assessed costs under Civil Procedure Act s 98(4)(c). The useful procedure provided for under Civil Procedure Act s 98(4)(c) can be deployed where a full cost assessment would be vexatious or aggravating. The case law on the procedure emphasises the adaptability of s 98(4)(c) to new circumstances: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 (Giles JA) at [21]-[22]; Hamod v New South Wales [2011] NSWCA 375 at [819]; Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2014] NSWCA 99 at [28].
2. The s 98(4)(c) procedure is apt for the present circumstances. Here the costs of a contested cost assessment could in a pessimistic scenario amount to as much as 20% to 25% of the amount that was ultimately found to be in issue. In the course of final submissions, the Court indicated to the parties that directly after judgment had been delivered they should be ready to present to the Court a bundle of memoranda of fees from counsel and solicitors so that the Court could fix a specified gross sum under Civil Procedure Act s 98(4)(c) in favour of the successful party. The Court will appoint a short hearing for the making of a s 98(4)(c) order before the end of this week.
3. For these reasons the Court makes the following orders and directions: 1. Order that the plaintiff/cross-defendant pay 20% of the net proceeds of sale of the Werrington Downs property [as defined in the summons] to the defendant/cross claimant, subject to any adjustments that might be necessary between the parties to account for the plaintiff'/cross-defendant's defaults upon his obligations to meet all expenses and outgoings in relation to the said property; 2. Direct the parties to arrange with my Associate the listing of these proceedings to deal with any consequential issues, including the calculation of the amount to be paid to the defendant, which listing shall occur at the same time as costs are dealt with pursuant to order (4) below; 3. Subject to order (4), order that the plaintiff pay the defendant's costs of the proceedings on the ordinary basis; 4. Direct the parties to exchange evidence (in the form of bundles of memoranda of fees and cost agreements and any Calderbank letters) and any necessary short written submissions with a view to the matter being relisted for no more than one hour to determine any remaining issues of costs, including whether costs should be paid on the indemnity basis and the quantum of any specified gross sum ordered instead of assessed costs pursuant to Civil Procedure Act 2005 s 98(4)(c); 5. Grant liberty to apply DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 October 2023