recognize a constructive trust in her favour to that extent. Muschinski v Dodds [1993] SASC 4291 | Case summary

JUDGE1 PERRY J The plaintiff claims that a property situated at 5 George Street, Norwood, which was transferred into the sole name of the defendant as registered proprietor of an estate in fee simple in February 1981, is burdened by a constructive trust in her favour pursuant to which she is entitled to one half of its present value, after giving credit to the defendant for the whole of the purchase price, which he paid, namely, $45,500. For the purposes of the proceedings that value has been agreed at $205,000. Specifically, she claims an equitable interest to the extent of one half of the balance after allowing for the sum of $45,500, that is, one half of $159,500, or $79,750. 2. The parties met in 1979. At that time, the plaintiff was a divorced lady who lived with her three children then aged 12, 10 and 9 years at a house of which she was the sole owner, situated at 9 Edith Place, North Adelaide. 3. The defendant is a divorced man who at the time the parties met lived alone at 12 Figtree Court, North Adelaide, where he was the sole owner of a townhouse. 4. In about mid-1980 the parties commenced a relationship. At about that time the defendant paid for the plaintiff to accompany him on a holiday to Fiji. While there, the parties decided to cohabit in a de facto relationship. 5. The defendant owned several other house properties apart from the premises at Figtree Court. The parties agreed, however, that neither the house at Edith Place, or at Figtree Court or the defendant's other properties suited the needs of the household which they wished to set up together, with the plaintiff's three children. Accordingly, when they returned from Fiji they began looking at houses, mainly in the inner suburbs of Adelaide. Their preference was for an old house which they could renovate. The plaintiff had formal qualifications in architectural design, and the defendant, who was a qualified engineer, had previous experience in building construction and alteration. Both parties had had previous experience at renovating houses. 6. They did not intend to commence cohabiting until a suitable house property had been found, although they visited each other and kept company regularly in the meantime. 7. On 26 January 1981, the parties inspected the subject property at George Street, Norwood. The property was a late Victorian bluestone villa which had been divided into three flats. The partitioning and other extensions to the original structure had been poorly executed. The property was generally in a poor state of repair, and was littered with accumulated rubbish. 8. Despite the condition of the property, the parties considered that it had potential for their purposes. 9. On the same day, the defendant made a written offer to purchase the property for $45,500. In the written offer, which he alone signed, the purchaser was described as "Richard Beresford and/or nominee". The form of contract provided for a cash settlement within fourteen days. 10. The words "Richard Beresford and/or nominee" were written onto the contract in the presence of both parties and the land agent representing the vendor. I accept the evidence of the defendant that the words "and/or nominee" were inserted by him because he was unsure at the time whether or not the property would be transferred into his name or that of a company through which he conducted his engineering business. He owned other properties in the name of that company. 11. When the plaintiff saw that her name was not written into the contract, the plaintiff said something, the precise terms of which are the subject of conflicting evidence given by the parties. I find that the effect of what the plaintiff said was that she wanted her "name on the title". 12. When confronted by the plaintiff's assertion that she wanted her name included, I am satisfied that the defendant responded by saying that the words "and/or nominee" would cover the situation, and that they could discuss the matter after they had left the land agent. In particular, I accept the defendant's evidence that he said something to the effect, "Well, 'the nominees' (sic) will cover that if we can come to some agreement about how you are going to pay for it". 13. When they left the agent, they immediately went to the defendant's house at Figtree Court where a further discussion took place. 14. Before coming to that discussion, I should say that before that day, the parties had had discussions as to the terms upon which they proposed to live together. 15. I am satisfied that in those discussions the defendant was cautious about committing himself to marriage. He had had two previous marriages which had failed, and he was reluctant to contemplate marriage with the plaintiff unless or until they had lived together for a time, and were sure of their intentions. I find also that during the course of the discussions before 26 January 1981, the plaintiff had indicated that she would be prepared to pay her share of the purchase price of a property once it was found, and that to do so she was prepared to sell Edith Place. The Edith Place property was unencumbered. 16. I find that there was a more specific discussion along the same lines when the parties came back to Figtree Court after leaving the agent. I accept the defendant's evidence that the gist of the discussion was as appears in the following passage of his evidence: "I think it was agreed that we would live together for a trial period and then discuss, again, how I would include Claire's name on the title; probably by her selling Edith Place. We both agreed that we would keep our houses in North Adelaide as a fall back position in case things blew up very early in the piece, and Claire could go back to Edith Place and would have lost nothing, and I would have acquired another investment property and gone back to North Adelaide, which I probably would have done early, or I would live at Norwood and let my place - go on letting my place at North Adelaide." 17. I reject the plaintiff's evidence insofar as it is inconsistent with that account, and in particular when she asserted that if after a trial period they decided "that our relationship would work out", that the defendant would then transfer the house into joint names without any contribution from the plaintiff. 18. It is not without significance that following the failure of his second marriage in 1975, the defendant was obliged to make a property settlement in favour of his second wife which he regarded as unreasonable, having regard to what he perceived to be the lack of any contribution to the property (which was the Figtree Court property) by her. This explains his evidence as to the stand taken by him with respect to the subject property, when he said: "I didn't want to get sunk with another joint property and then the relationship fall through in a short period." 19. I am satisfied, though, that there was a discussion between the parties as to Mr Beresford making a will in the plaintiff's favour. In particular, I accept the defendant's evidence that as an alternative to the plaintiff purchasing a full share of the property, after they had been living for a reasonable time together, he agreed to make a will leaving her a life interest in the property. However, I doubt his evidence that his willingness to do so was because he "anticipated we would have a long term relationship". I suspect that he made that offer to placate the plaintiff. I am not sure how genuine he was about it. 20. At all events, on that somewhat shaky foundation, the transaction moved ahead. The defendant's offer made on 26 January 1981 was accepted by the vendor, and settlement was effected about a fortnight later. 21. On settlement, the defendant advanced the whole of the purchase price of $45,500. 22. The parties did not move into the property until August 1981. Between the date of settlement and the time when they moved in, a considerable amount of work was done on the property. Indeed, the plaintiff says that following the signing of the contract, and before settlement, she spent much of her time clearing the property of rubbish. 23. After settlement, the partitions were demolished, various archways restored, some walls, particularly to the rear of the property, demolished and rebuilt, and a room separate from the house and adjacent to a corrugated iron walled shed against the back fence of the property was renovated and turned into what was described as a studio for the plaintiff. 24. There was much painting and redecoration following the more major building work. 25. As I have said, the parties moved into occupation and cohabited in the premises from August 1981. Eleven years later, namely, in September 1992, the plaintiff and her children left the property and the defendant. They have not cohabited since. 26. The plaintiff's evidence was that with respect to the period from the signing of the contract down to the date upon which they moved into occupation, she spent almost every day, including weekends, at the property. During that period, the defendant was still engaged in his engineering business, and his contribution to the work on the property was mainly confined to weekends. 27. At some stage, just when it was is not clear, the defendant retired from active work as an engineer, although he retained a position as director of his company. The evidence suggests that during the time they lived in the house, the parties were more or less continually working on it, but the most active period must have been before they moved in. 28. The plaintiff gave much evidence detailing physical work which she carried out during the course of the renovations, and as to time spent visiting antique shops and other suppliers of materials which were incorporated into the work, and furniture and other contents. The defendant, on the other hand, made light of the plaintiff's contribution, and maintained that he had put in most of the physical work involved (his evidence was that he did 95 per cent of the physical work), and all of the money needed for tradesmen and materials, and that while the plaintiff would talk about doing things, she rarely got down to doing much. 29. After carefully considering their evidence, I have reached the view that there is more truth in what the defendant says than in the assertions of the plaintiff. On the other hand, clearly, in the wake of their failed relationship, there is still much bitterness between the parties which caused them to adopt during the course of the case, extreme positions. In the result, the defendant's denial of any substantial contribution by the plaintiff is overstated to a degree, although I have no doubt that in terms of both physical work and financial contributions, almost all of what was put into the property came from him. 30. It would serve no useful purpose to go through the evidence of the plaintiff in respect of each of the various items of work which she maintains that she was responsible for, and for various payments she says that she made. It is sufficient to say that with the reservation which I have indicated, I have preferred the evidence of the defendant where it conflicts with that of the plaintiff as to the nature and extent of the work, and for that matter, as to their respective financial contributions. 31. The plaintiff also gave evidence of contributing design concepts, including the preparation of sketches offering ideas as to how the work both inside and outside the house might be executed. She certainly made a contribution towards matters of design and layout, but in my opinion this was far more basic and inconsequential than she was prepared to concede. The plans upon which council approval was obtained, and the technical drawings upon the basis of which demolition and construction proceeded, were all done by the defendant. 32. The plaintiff sold her Edith Place property for $85,000 in August 1985. 33. As to contributions in terms of money, in her Statement of Claim, the plaintiff asserts that from the date of settlement until sale of the Edith Place property, she "expended moneys in the approximate amount of $13,000 aside from her contribution in terms of labour" (para 25); that between August 1981 and August 1985 she expended approximately $18,000 "on furniture and household effects for the George Street property" (para 31); and that she spent $16,000 from the proceeds of sale of her house property at Edith Place "towards the purchase of further furniture and effects, and towards effecting further improvements on the George Street property" (para 33). 34. Expenditure on furniture and household effects is irrelevant to the issues in the case. I was given to understand that a division of chattels has already taken place between the parties. The claim for equitable relief pursued in the proceedings turns on contributions alleged to have been made in terms of physical labour and money spent towards the fabric of the house itself. 35. While it is true that the parties shared the cost of ordinary household expenses, the defendant paid or reimbursed to the plaintiff all of the rates and taxes, fuel and the like outgoings and gave her a regular amount each week towards the cost of food. The plaintiff must, nonetheless, be treated as having made some contribution to their living expenses, but it is impossible on the evidence to say how much or in what proportion. The situation in that respect is complicated by her need to look after her children, albeit with some support from her former husband, and social security. The property was owned freehold, and there were no mortgage repayments. In those circumstances, the only basis upon which an equitable interest could be regarded as arising is by reference to the plaintiff's contribution, either in money or labour, to the physical improvement of the house. Mr Richards for the plaintiff more or less conceded this during the course of his closing address. 36. The plaintiff applied $48,000 of the proceeds of sale of her Edith Place property towards the purchase in June 1986, with the defendant, of a property situated on Hindmarsh Island. The defendant had by then sold his property at North Adelaide for over $100,000, and had sufficient money to buy the Hindmarsh Island property which was purchased for a little more than $95,000. I accept the defendant's evidence that he discussed with the plaintiff whether she wanted to put her money into the Norwood property or take up a half share in the Hindmarsh Island property, and that she indicated that she would prefer to put it into Hindmarsh Island. 37. The Hindmarsh Island property was duly purchased by them jointly in that fashion, and transferred into their names as joint tenants. On 24 May 1985 the parties signed an "Agreement" as to the basis upon which they owned, and agreed to maintain, the Hindmarsh island property. That agreement provides basically for an equal financial contribution by each of them. 38. The plaintiff gave evidence as to her application of the balance of the proceeds of sale of the Edith Place property. Putting that evidence against other evidence from the defendant as to his knowledge of various payments made by her, I am not satisfied that any substantial amount was put into the Norwood property following sale of Edith Place. The plaintiff gave evidence that she bought a car costing $10,000 and put another $12,000 in trust accounts on behalf of her three children. She may have repaid a loan due to Satisfac of the order of $10,000 - $12,000, but the evidence as to that is not conclusive. 39. In assessing the credit to be given to the plaintiff's assertions which find expression in the Statement of Claim, and in particular the paragraphs to which I have referred in which the various alleged financial contributions are indicated, it is necessary to have regard also to the other sources of income available to the plaintiff. 40. It does not appear that the plaintiff had any regular employment before early 1988 when she commenced full-time employment with the Housing Trust. She ceased work with the Housing Trust in March 1991. She gave evidence that during the time she was there she earned an annual salary of the order of $25,000 gross. 41. In 1983, she commenced a course of study which lasted for some three years and which led to her obtaining a Bachelor of Arts in interior design. She obtained this degree before commencing with the Housing Trust. On either side of the period she was employed by the Housing Trust, I am satisfied that she had some casual and intermittent work as a consultant in architectural design, and in school teaching. But there is very little satisfactory evidence which could lead to a finding that she earned much in her other work apart from the Housing Trust. 42. She also received some maintenance for her children which at one stage was of the order of $15 per child per week. 43. Until its sale, she received $100 per week, which later rose to about $130 per week with respect to her renting out of the Edith Place property. 44. Be that as it may, the evidence of financial contributions to the improvements effected at the George Street property was both fragmentary and unconvincing. Although the plaintiff prepared a detailed list of certain alleged contributions which she had made, accompanied by some accounts and receipts, many of the items in that list relate simply to contents and also to expenses such as rates and taxes, and fuel and other accounts. As to the financial contributions which were said to have been made respectively by the parties, I prefer the evidence of the defendant. 45. The plaintiff was candid enough to admit during the course of her evidence that she never "bothered about finances" and that her "financial affairs are chaotic". 46. The defendant produced a long schedule of items of material and labour contributed by tradesmen between 19 February 1981 and 16 December 1992, totalling $26,255.10. Some of those items were disputed by the plaintiff, but most of them were not, and she conceded that those which were not were paid for by the defendant as detailed in the schedule. 47. The defendant's evidence was that even when the plaintiff did pay for a few items, he made a point of reimbursing her because he was wary of her becoming financially involved in the house during the course of its renovation for fear of complications if they should separate. 48. I should say, in case it might be thought that I have overlooked the matter, that at one stage before the Edith Place property had been sold, the plaintiff said to the defendant words to the effect (to quote the evidence of the defendant) "how about drawing up a document that would ... put my name on the title if we don't get married". In response, the defendant drew up a document, which he showed to her, and which provided, inter alia, for payment by her of a fair price, and for an option in favour of the defendant to repurchase the half share if they later separate. I accept the defendant's evidence that when she read the document, the plaintiff tore it up. 49. In view of the unsatisfactory nature of the plaintiff's evidence generally and the absence of any reliable records indicating how much money she expended on the property, it is very difficult to assess what figure, if any, should be allowed for both the physical contributions and financial payments made by her. Certainly there has been no proof that anything like the amounts pleaded was expended. 50. In all the circumstances, I would assess the financial value of the contributions made by the plaintiff, either in terms of labour and time, and also allowing for whatever payments of money she made for or towards items which were incorporated in the renovations, at $7,500. 51. Having found that the plaintiff has made a contribution to the subject property which in money terms should be valued at the amount of $7,500, the only remaining question in the case if whether the circumstances of that contribution provide a proper basis for a finding that the defendant holds the property in trust to the extent of that contribution. 52. On the findings which I have made, it could not be concluded that there was an agreement between the parties that the plaintiff's contribution would be recognised in any way. There was no common intention to create a trust with respect to the land. I am satisfied on the evidence that it was the defendant's intention throughout that he would only transfer to the plaintiff an interest in the Norwood property if she paid for it. I have specifically rejected the plaintiff's evidence that there was an understanding between them that if their relationship survived a test period the defendant would accord to her, for no further consideration, a joint interest in the property. That view of the matter, however, does not conclude the question whether the plaintiff is entitled to relief by way of constructive trust. 53. The circumstances in which a constructive trust will be found to exist where there have been contributions to a home in which the parties have cohabited has, over the years, been the subject of conflicting decisions in the United Kingdom and in Australia. However, certain principles now seem clearly to have been established by the High Court, in particular in the cases of Muschinski v Dodds [1985] HCA 78; (1986) 160 CLR 583, and Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137. 54. In Muschinski, Deane J (with whom Mason J agreed) observed (160 CLR at 615) that a constructive trust does not represent "a medium for the indulgence of idiosyncratic notions of fairness and justice". It is only to be made available according to established equitable principles. He said further (616): "The mere fact that it would be unjust or unfair in a situation of discord for the owner of a legal estate to assert his ownership against another provides, of itself, no mandate for a judicial declaration that the ownership in whole or in part lies, in equity, in that other....." 55. However, after making those observations, His Honour went on to consider the situation where there is a failure of a joint venture or joint relationship and a question arises as to the recognition to be given to contributions of capital by the persons involved. He said (620): "... the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended to specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do: cf. Atwood v Maude (1868) LR 3 Ch App at 374-375, and per Jessel MR, Lyon v Tweddell (1881) 17 Ch D 529 at 531." 56. That passage was specifically approved in the joint judgment of Mason CJ, Wilson and Deane JJ in Baumgartner (164 CLR at 148) where Their Honours add the comment: "In rejecting the notion that a constructive trust will be imposed in accordance with idiosyncratic notions of what is just and fair his Honour acknowledged that general notions of fairness and justice are relevant to the traditional concept of unconscionable conduct, this being a concept which underlies fundamental equitable concepts and doctrines, including the constructive trust." 57. True it is that an agreement to transfer a joint interest at some time in the future, if the plaintiff paid for it, might be thought to preclude the creation of a constructive trust arising by reason of contributions made to the property before any such transfer. But I have no doubt that if their relationship had not failed, and the plaintiff had wished to purchase a half share of the subject property, the defendant would not only have carried into effect their understanding that he would do so, but that he would have been prepared to give some credit for the time and money which the plaintiff had put into the property. His attitude in the witness box in the context of adversarial proceedings following the breakup of their relationship cannot be regarded as a reliable indication of what his attitude might have been in that situation. 58. Given my view as to what his attitude would have been in those circumstances, it would seem to me that a proper foundation has been established by the evidence for the recognition in equity of a constructive trust to the extent of what I have found to be the plaintiff's contribution. This is so, given that the relationship between the parties has now broken down, and the opportunity for the plaintiff to purchase a half share in accordance with the undertaking which existed when they cohabited, has been lost. 59. The plaintiff is entitled to a declaration that the defendant holds his interest in the Norwood property on trust for the plaintiff to the extent of $7,500. Just how that interest is to be protected and enforced, and whether or not there should be a decree in equity that the plaintiff be entitled to a charge on the property to that amount, I will raise with counsel upon delivery of judgment. 60. I will also hear counsel as to the question of costs.

recognize a constructive trust in her favour to that extent. Muschinski v Dodds

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CLAIRE BOOTH v. RICHARD DE LA POER BERESFORD No. SCGRG92/1372 Judgment No. 4291 Number of pages - 10 Equity - constructive trust (1993) 61 SASR 475 [1993] SASC 4291 (29 November 1993)

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