Rupchev v Callow

CATCHWORDS : Co-owners - contribution mortgage and acquisition expenses - occupation fee

LEGISLATION CITED : Property (Relationships) Act 1984

Chieco v Evans (unreported) Equity Division, 5 June 1990 Dennis v McDonald [1982] Fam 63 CASES CITED : Forgeard v Shanahan (1994) 35 NSWLR 206 McFarland v Byron [2005] NSWSC 1038 Muschinski v Dodds (1984-1985) 160 CLR 583

Svjatoslav Rupchev (Plaintiff) PARTIES : Beverley Callow (1st Defendant) Vladimir Rupchev (2nd Defendant)

COUNSEL : R E Quickenden (1st Defendant) R I Bellamy (2nd Defendant)

SOLICITORS : Nash Allen Williams & Wotton (1st Defendant) Plowman Legal (2nd Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION POSSESSION LIST

BELL J: Introduction 1 Vladimir Rupchev and Beverly Callow were living together in a de facto relationship in April 1998 when they jointly purchased a property at 21 Redgrave Road, Normanhurst (the property). The purchase was funded by a loan advance of $252,500 made by the St George Bank. Mr Rupchev's father, Svjatoslav Rupchev, guaranteed their obligations under the loan agreement and the St George Bank took a mortgage over property owned by him. Mr Rupchev and Ms Callow granted a mortgage over the property to Svjatoslav Rupchev. 2 The relationship between Mr Rupchev and Ms Callow came to an end not long after they acquired the property. Ms Callow moved out of the property leaving Mr Rupchev in occupation of it and responsible for making the mortgage repayments. For a time Mr Rupchev maintained the loan account in advance of the scheduled repayments. However, by January 2004 he was in financial difficulties and the loan account was about to fall into arrears. Svjatoslav Rupchev took over and continued to make the loan repayments in order to protect his security. 3 On 18 June 2004 Svjatoslav Rupchev commenced proceedings against his son and Ms Callow seeking to enforce his security over the property. The proceedings were resolved by consent orders which were made on 29 May 2006, by which Svjatoslav Rupchev obtained a money judgment and an order for possession of the property. The orders contemplated the exercise of the power of sale under the mortgage and provided that the balance of the proceeds of the sale were to be invested by Svjatoslav Rupchev's solicitors in trust for the parties until further order. 4 The orders made on 29 May 2006 disposed of the proceedings, save for the second cross-claim, which had been filed on 8 December 2005 by Mr Rupchev against Ms Callow. By this claim Mr Rupchev sought orders including the imposition of a constructive trust on Ms Callow's interest and/ or a declaration that Ms Callow held the whole of her interest on trust for Mr Rupchev.

5 On 29 May 2006 Mr Bellamy, who appeared on Mr Rupchev's behalf, informed the court that Mr Rupchev did not press his claim that Ms Callow held her interest in the property on trust for him. Mr Rupchev confined his claim to contribution by Ms Callow in relation to certain payments made by him in connection with the property.

6 It appears that the property was sold on 8 November 2006 and that the balance of the proceeds of sale, amounting to $172,141.49, is being held pending the disposal of these proceedings.

7 The second cross-claim was amended by leave granted on 1 August 2007. By his amended cross-claim Mr Rupchev seeks declarations that Ms Callow is liable to contribute an amount equal to a one half share of expenses incurred in the acquisition of the property and repayments of the loan standing in their joint names with the St George Bank. He seeks an order that after deduction of the contributions, the proceeds of sale be distributed rateably between the two of them. The facts 8 Mr Rupchev and Ms Callow commenced living together in September/October 1992. Initially they resided in premises in Foucart Street, Rozelle, which were owned by Mr Rupchev. In 1995 the Rozelle property was sold and they moved into rented premises in Castle Cove.

9 Following the sale of the Rozelle property Mr Rupchev and Ms Callow discussed the possibility of jointly buying a home. In 1996 they had a conversation in which Mr Rupchev said that he would save to pay the deposit, stamp duty and legal expenses if Ms Callow paid for the food and household bills (paragraph 10 of the affidavit of Ms Callow, sworn 31 August 2007). In the period between this conversation and settlement of the purchase of the property each contributed to the rent of the premises in which they were living and each contributed to the payment of their household expenses. 10 In early 1998 Mr Rupchev and Ms Callow approached the Advance Bank to obtain a loan to purchase the property. 11 On 6 March 1998 Mr Rupchev and Ms Callow were advised by the Advance Bank of the approval of their application for a loan in the sum of 252,500.00. The Bank took a guarantee from RUP Constructions Pty Ltd. RUP Constructions was a family company with Mr Rupchev and his parents as its directors. 12 On the day of settlement of the purchase of the property there was a further discussion between Ms Callow and Mr Rupchev in which Mr Rupchev said that he would take care of the mortgage repayments. At around this time Ms Callow said to him, "I'll pay our household expenses and you pay the loan" (paragraph 31 of the affidavit of Ms Callow, sworn 23 March 2005). Between 20 April and 11 July 1998, when they both lived in the property, Ms Callow was responsible for payment of most of their household expenses. Mr Rupchev paid the loan repayments. He does not claim contribution in respect of the loan repayments made in this period.

13 Between 27 March and 7 June 1998 Mr Rupchev made, or caused RUP Constructions to make, a number of payments in respect of fees and duties connected with the purchase of the property as detailed in paragraphs 4, 5, 8, 10, 11 and 12 of his affidavit, which was sworn on 31 July 2007. In total these payments amounted to $10,900.00. 14 Settlement of the purchase of the property took place on 20 April 1998. On 21 April 1998 Mr Rupchev signed an authority authorising the St George Bank (as the Advance Bank had by that date become known) to debit the RUP Constructions account weekly with the amount of the loan repayments due under the loan agreement. All the loan repayments which are the subject of the present claim were debited to the RUP Constructions' account and recorded in the company's ledger account in a Vladimir Rupchev loan account.

15 RUP Constructions was wound up commencing on 25 September 2002, prior to which date the books of the company were delivered to the liquidator. 16 Weekly repayments to the loan account with the St George bank in the names of Mr Rupchev and Ms Callow resumed on 26 January 2004 and were made by Svjatoslav Rupchev. No claim is made in respect of loan repayments from this date and following.

17 The property was in a poor condition at the time Mr Rupchev and Ms Callow acquired it. The exterior fibro was not painted, the guttering was old and rusted and the exterior steps were cracked. A builder's prop held up the kitchen ceiling. Both the kitchen and the bathroom were in a poor state of repair. Mr Rupchev carried out renovations to the property over the years. No claim is made in relation to the cost of the renovations. 18 Between September 2004 and April 2006 Mr Rupchev was living and working in Queensland. Between January and August 2005 the property was let and Mr Rupchev received the sum of $9,600 in rent. The tenants were a couple who owned a lot in Redgrave Avenue and who wished to live near at hand while their property was developed. The property was vacant for the balance of the time that Mr Rupchev was living in Queensland. He had completed the renovations to it by September 2004 and it was in a fit state to be let from this time on. Mr Rupchev acknowledges that he must account to Ms Callow for her interest in the rent that he received for the eight months that the property was tenanted.

19 The relationship between Mr Rupchev and Ms Callow was a tempestuous one. Relevant to the issues to be determined by the present claim is Ms Callow's assertion that Mr Rupchev was violent towards her and that she was in fear of him. In her affidavit, which was sworn on 23 March 2005, Ms Callow asserted that Mr Rupchev had punched several holes in the wall of the residence that they had rented. She stated that she had stayed with him because he had been very good to her daughter. She gave an account of an incident that occurred after they moved into the property in which Mr Rupchev had become angry with her and put his hands around her throat. She said that her daughter witnessed this incident and that seeing her daughter so closely involved with this violence had been a major factor in her decision to leave Mr Rupchev. I will refer to this as the bedroom incident. 20 In a further affidavit, which was sworn on 31 August 2007, Ms Callow said that after the move to Normanhurst relations between them had completely deteriorated. By way of example, she referred to an incident in which she had come home and found Mr Rupchev installing down lights in the ceiling. She complained that he had not consulted her and that they were not particularly nice lights. Mr Rupchev nonetheless installed the lights. She referred to one further incident which occurred towards the end of June 1998: they were arguing and Mr Rupchev interrupted her before she had completed what she wanted to say. 21 Mr Rupchev said that by June 1998 he and Ms Callow were having frequent fights and that a subject of difficulty was Ms Callow's unbased suspicion that he had been sexually unfaithful to her. He described her as unreasonable and given to sobbing and screaming at him. He said that he had become frustrated at her behaviour and he acknowledged the bedroom incident. He said that he had put his hands on her collarbone on either side of her neck saying, "get some sense into you girl". He pushed her onto the bed and left the room. Ms Callow's daughter was standing in the doorway at the time of this incident and he had not been aware of her presence. Mr Rupchev said that the following day he and Ms Callow discussed the fact that the child had seen their argument and both agreed to make their disagreements less volatile. He denied that he had punched holes in the walls of any premises in which they had lived. He said there had been an incident when they were renting premises in Willoughby in which he had punched a hole in a door.

22 Ms Callow said in oral evidence that there had always been "a degree of violence" in her relationship with Mr Rupchev (T 57). She qualified this by explaining that she had not realised that the relationship was a violent one at the time; this was an insight that she had gained in the course of therapy over a number of years. In a similar vein Ms Callow said that she had always been afraid of Mr Rupchev but that she had not been aware of it at the time. She was asked if she had ever been concerned for her safety to which she replied that she had been "very disempowered" (T 57.32). She described Mr Rupchev's behaviour as "controlling" and the relationship as emotionally abusive. In the latter respect she complained of his neglect of her. 23 Mr Rupchev and Ms Callow have different perceptions of the reasons for the breakdown of their relationship. To the extent that there was a conflict between their accounts of relevant events I preferred the evidence of Mr Rupchev. Mr Rupchev impressed as a frank and accurate historian. Ms Callow was a somewhat defensive and, at times, argumentative witness; "I think you're trying to put words into my mouth" (T 47); "I think that's a very unfair question" (T 59); "I don't know what you are trying to make me say" (T 60). She was unwilling to acknowledge the relatively poor condition of the property in the face of cogent evidence to the contrary.

24 The date of the bedroom incident was not established. It occurred not long before 11 July when Ms Callow left the property. At the time she moved out of the property Mr Rupchev believed that it was still possible that they could sort things out. 25 Within eight weeks of leaving the property Ms Callow returned to discuss matters with Mr Rupchev. They had a conversation to this effect: Ms Callow: "I can't service the loan, so you keep the house, and you pay the mortgage." Mr Rupchev: "That's fine, I agree to that".

The discussion appears to have been amicable. Mr Rupchev had a clear recollection, which I accept, that Ms Callow was sitting on his knees during the course of it.

26 There was a further discussion concerning the property in which Ms Callow said that she would like to "get off the loan" because it was affecting her pension (paragraph 60 of Mr Rupchev's affidavit, sworn 26 May 2006). At the time Mr Rupchev understood that the transfer of Ms Callow's interest in the property to him would require the payment of substantial stamp duty. Neither was in a position to pay any duty. The conversation concluded with Mr Rupchev saying, "well we will just have to leave it the way it is. When we get some money we will get it changed". 27 On 30 July 2003 Ms Callow sought to obtain a valuation of the property at the request of a solicitor, whom she had retained to finalise her financial arrangements with Mr Rupchev. Mr Rupchev refused access to the house in order to carry out the valuation. Ms Callow changed the locks to the premises in order to obtain the valuation. 28 Around two years after the separation Ms Callow drove past the property and noticed that work was being carried out on the premises. She made inquiries of the Hornsby Council and came to learn that Mr Rupchev had signed a building application on her behalf, stating, "signing on behalf of wife". 29 Mr Rupchev admitted that he had falsely asserted in the application to the Council that he was signing on Ms Callow's behalf. He acknowledged that he had refused access to the premises for the purpose of the valuation. The submissions 30 Mr Rupchev claims that he and Ms Callow were subject to a common obligation to repay the St George Bank and that he has discharged more than his share of that obligation and he calls upon her for contribution: Muschinski v Dodds (1984-1985) 160 CLR 583 per Gibbs CJ at 596-597. 31 Mr Quickenden, who appeared on Ms Callow's behalf, submitted that there was no evidence that Mr Rupchev had paid any repayments under the loan agreement or that he had paid the stamp duty and certain other of the acquisition costs. In Mr Quickenden's submission a third party, RUP Constructions, had assumed responsibility for these payments and the principles respecting contribution between co-debtors did not extend to requiring contribution in such a case.

32 Mr Rupchev's evidence was that RUP Constructions made the loan repayments on his behalf. As I have noted, RUP Constructions' ledger account records the sums debited to it's St George Bank account by way of repayment of the loan in a loan account in Mr Rupchev's name. Mr Rupchev was indebted to RUP Constructions in respect of the payments debited to its account and which were applied at his direction in repayment of the loan. It is not correct to say that the repayments were made by a third party.

33 Ms Callow and Mr Rupchev were jointly responsible under the terms of the loan agreement to repay the loan advance. Ms Callow made no repayments. Ms Callow and Mr Rupchev acquired the property jointly upon the understanding that Mr Rupchev would be responsible for the acquisition expenses and for servicing the loan and that Ms Callow would assume responsibility for their living expenses. No claim is made for the repayments in the period between April and July 1998, when they jointly occupied the premises and Ms Callow paid for household expenses. Thereafter, Ms Callow left the premises and ceased paying household expenses and Mr Rupchev continued to make the loan repayments up to January 2004. I consider that he is entitled to contribution from Ms Callow subject to consideration of her claim to an occupation fee and/or to withhold the declaratory relief that is sought in the exercise of discretion. 34 In Forgeard v Shanahan (1994) 35 NSWLR 206 Meagher JA (with whose judgment Mahoney JA agreed) considered the circumstances in which a co-owner will be entitled to claim an occupation fee. His Honour summarised the position, noting that where one co-owner is in occupation and the other not, but in which there has been no ouster or exclusion by the former of the latter, the law treats the latter simply as someone who has chosen not to exercise his legal right to occupy the land (at 221.G). 35 In Chieco v Evans (unreported) Equity Division, 5 June 1990, Young J (as he then was) discussed what constitutes ouster. His Honour said this: It is often put that what is necessary for an ouster is an act of a co-tenant which amounts to a trespass. However, sometimes that proposition is turned upside-down and it is said that a sufficient act of ouster will be considered a trespass, Jacobs v Seward (1872) LR 5 HL 464, Ferguson v Miller [1978] 1 NZLR 819. It is not necessary to show some act of violence or direct force, a course of conduct which operates to deny the co-owner's title will suffice. This conduct will not be held to exist from more isolated acts even deliberate acts such as placing a lock on a gate without providing the co-owner with a key (Jacobs v Seward) or even keeping the profits of the land.

36 There is an issue concerning the scope of what amounts to ouster in cases involving the breakdown of a domestic relationship. In Dennis v McDonald [1982] Fam 63 Purchas J found that the plaintiff/wife had left the family home as the result of violence or threatened violence by the defendant/husband. His Lordship considered that it would be unreasonable to expect her to exercise her rights as a tenant in common to occupy the jointly owned home as she had done before the breakdown in the relationship. In Chieco Young J doubted that such an approach should be accepted as part of Australian law. In Biviano v Natoli (1998) 43 NSWLR 695 at 702 Beazley JA (with whom Stein JA agreed) expressed a contrary view (at 702.F), albeit it was not necessary for decision in that case. 37 Mr Quickenden submitted that Ms Callow left the property because she was in fear of Mr Rupchev and that in the circumstances, which included the bedroom incident, it would be unreasonable to expect that she would return and resume joint occupation of the premises. In his submission Ms Callow had established that she was ousted and thereafter excluded from occupation of the property. 38 I do not find that Ms Callow left the property, and remained away from it, because she was in fear of Mr Rupchev. Such an assertion was not one which found support in her oral evidence. In this respect I refer to the matters touched on in paragraph [22] above. Ms Callow gave as her reason for not returning to the property that she had placed her daughter in school and she did not wish to see her schooling disrupted again (T 54). 39 There are a number of facts and circumstances which are against a finding that Ms Callow left the property and/or remained away from it because she was in fear of Mr Rupchev. These include the absence of any complaint by Ms Callow to the police or to any other person of violence by Mr Rupchev or that she was in fear of him. Mr Rupchev's version of the bedroom incident, which I accept, suggests that it was an unpleasant and distressing event. However, it did not cause Ms Callow to leave the property. Her conduct was not consistent with the suggestion that she was in fear of Mr Rupchev; she returned to the property and discussed arrangements for the house within weeks of their separation. She allowed Mr Rupchev to baby-sit her daughter after they had separated and permitted the child to go away on holidays with him. Ms Callow's evidence was eloquent of her realisation that her relationship with Mr Rupchev was unfulfilling but not that she was in fear of him.

40 Mr Quickenden submitted that Mr Rupchev's conduct in (i) carrying out renovations to the property without consulting Ms Callow by means of falsely claiming that she had signed the building application; (ii) refusing to give access to the valuer retained by Ms Callow; and (iii) pleading that she held her interest in the property on trust for him and maintaining that claim until 29 May 2006, involved a denial of Ms Callow's title such as amount to an ouster and entitle her to an occupation fee. He relied on Biviano in this respect. In that case the appellant/wife filed a defence in the proceedings by which she denied the respondent/husband's interest in the jointly owned property. The wife persisted in her denial of the husband's title up until the commencement of the hearing of the appeal. Beazley JA considered that the denial of the husband's interest amounted to an express denial of his rights as co-tenant and constituted ouster. Her Honour considered that the appellant wife was liable to pay an occupation fee from the date she filed her defence (at 703.D).

41 Mr Bellamy acknowledged that Mr Rupchev had treated the property as if it were his own. In his submission this was the product of Ms Callow's conduct in saying to him "I can't service the loan, so you keep the house, and you pay the mortgage". The property had been acquired a matter of months earlier and was in a poor condition. Ms Callow did not have the means to contribute to the mortgage repayments or to the costs of renovation. A sale of the property within months of its acquisition may have involved loss. In Mr Bellamy's submission, her decision to draw a line under her financial liability might have been thought a prudent one at the time. 42 Mr Quickenden submitted that Ms Callow's statement (extracted above) evidenced no more than her acquiescence in an arrangement by which Mr Rupchev was to meet the mortgage repayments in return for his occupation of the jointly owned home. I do not consider that this is the way the conversation was understood by Mr Rupchev or Ms Callow. If the tenor of the discussion was as Mr Quickenden contended, it is noteworthy that it was not referred to in Ms Callow's affidavits. In evidence Ms Callow did not assert that she intended at the time to convey no more than that Mr Rupchev should be responsible for the mortgage repayments while he was in occupation. The account that she gave for making the statement was that she had been vulnerable at the time and had wished to keep the peace (T 53.34-35). I accept that following the discussion Mr Rupchev understood that the property was his.

43 I do not consider that undertaking renovations to the property without obtaining Ms Callow's consent (and the false assertion made in the building application) and the later denial of access to the valuer can be characterised as a course of conduct operating to deny Ms Callow's title: Chieco at [35] above. 44 Mr Bellamy submitted that the circumstance that in the period December 2005 to May 2006 Mr Rupchev's claim included the assertion that Ms Callow held her interest in the property on trust for him (or that a constructive trust should be imposed on her interest for him) did not constitute a denial of her title such as to amount to an ouster. This is because Ms Callow had not sought to assert her entitlement as a co-owner to occupation of the property. She left the property within a short period after it was acquired as the result of the breakdown in her relationship with Mr Rupchev. She moved to the Central Coast and enrolled her child in a school there and had not evinced any desire to resume occupation of the property. I accept that is so. In these circumstances I am not persuaded that the pleading and maintenance of the claims for the imposition of a constructive trust and/or declaration of trust provides a basis for finding of a denial of Ms Callow's title amounting to ouster.

45 Mr Quickenden submitted that Ms Callow had received no benefit arising from her interest in the property from 11 July 1998. Following the breakdown of her relationship with Mr Rupchev she had been the one to leave their jointly owned home with the associated need to find alternative rented accommodation. In his submission the Court should withhold the declaratory relief that Mr Rupchev seeks, taking into account discretionary considerations of the kind considered in McFarland v Byron [2005] NSWSC 1038. That was a case involving a claim for the adjustment of interests of the parties in property pursuant to s 20(1) of the Property (Relationships) Act 1984. Neither Mr Rupchev nor Ms Callow brought an application seeking an adjustment of interests with respect to property under this legislation. I do not consider that it is open to take into account the broader discretionary considerations which Mr Quickenden advanced. No conduct of Mr Rupchev is relied upon as disentitling him to contribution on general equitable principles: see Meagher, Gummow & Lehane's Equity Doctrines & Remedies (Sydney: Lexis Nexis Butterworths, 4th ed, 2002) at [10-130]. 46 I consider that Mr Rupchev has made good his claim to contribution with respect to one half of the mortgage payments made by him from August 1998 until January 2004 subject to bringing into account the $9,600.00 in rent received by him. 47 This leaves consideration of Mr Rupchev's claim for contribution in relation to the acquisition expenses. The unchallenged evidence was that Mr Rupchev and Ms Callow agreed in 1996 that she would pay their household expenses and that Mr Rupchev would save money in order to pay the stamp duty and other expenses associated with their joint purchase of a property.

48 Mr Rupchev gave an account of his and Mr Callow's respective financial contributions to the payment of rent and household expenses in the period from 1996 until the purchase of the property; paragraphs [11] to [19] of his affidavit, sworn 26 May 2006. He was not challenged in these respects. Prior to moving into the property Mr Rupchev paid at least half the rent. Each contributed to their joint household expenses. From the time of moving into the property until their separation Ms Callow paid most of the household expenses (paragraph [32] of Ms Callow's affidavit, sworn 23 March 2005). The conduct of the parties is consistent with the submission made on Mr Rupchev's behalf that their agreement was that he would pay the costs of acquiring the property and servicing the loan repayments and that Ms Callow would pay their household expenses. In the event, their separation within three months of the purchase resulted in Ms Callow not fulfilling her agreement to pay their household expenses. In these circumstances I consider that Mr Rupchev has made out his entitlement to contribution in relation to the acquisition expenses. 49 I am satisfied that Mr Rupchev has established his entitlement to contribution from Ms Callow of amounts equivalent to a one half share of (i) the expenses incurred by him and her in the acquisition of the property and (ii) repayments of the loan standing in their joint names with the St George Bank, made by him in the period from 25 August 1998 up to and including 19 January 2004. The matter was argued on the basis that Mr Rupchev's entitlement to contribution in respect of the mortgage repayments was as to one half of the amount expended by him in repayments for the period to which I have referred, being the sum of $111,206.11 and not the lesser sum pleaded in paragraph 2(a) of his amended second cross-claim. The evidence of the payments made by Mr Rupchev is that contained in annexure "I" to his affidavit, sworn 31 July 2007. I propose to make orders consistently with the evidence and the way in which the matter was argued. 50 An order was made reserving costs on 2 August 2006. Mr Rupchev's claim included interest. No submissions were directed to this claim. The proceedings may be re-listed for submissions on both interest and costs. ORDERS

1. Declare that the cross-defendant is liable to contribute an amount equivalent to a one half share of expenses incurred by the cross-defendant and the cross-claimant in the acquisition of the property situated at 21 Redgrave Road, Normanhurst (the property) paid by the cross-claimant, such contribution being in the sum of $5,450.00;

2. Declare that the cross-defendant is liable to contribute an amount equivalent to a one half share of repayments of the loan standing in the name of the cross-defendant and the cross-claimant with the St George Bank, made by the cross-claimant, such contribution being in the amount of $55,603.05;

3. Direct the parties to bring in short minutes with respect to the manner in which the balance of the proceeds of sale are to be distributed. In the absence of agreement the proceedings are to be re-listed by arrangement with my Associate on three days' notice.

4. The proceedings may be re-listed by arrangement with my Associate on three days' notice for submissions on costs and interest.

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