Swettenham v Wild [2005] QCA 264

SUPREME COURT OF QUEENSLAND

CITATION: Swettenham v Wild [2005] QCA 264

PARTIES: LEONARD THOMAS GEORGE SWETTENHAM (plaintiff/appellant) v ROSE-MARIE BEVERLEY WILD (defendant/respondent)

FILE NO/S: Appeal No 11135 of 2004 / SC No 6780 of 2003

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeal

ORIGINATING COURT: Supreme Court at Brisbane

DELIVERED ON: 29 July 2005

DELIVERED AT: Brisbane

HEARING DATE: 1 June 2005

JUDGES: McMurdo P, Williams JA and Atkinson J / Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDERS: 1. **Appeal allowed.**2. **Set aside the orders made at first instance.**3. **Declaration that Rose-Marie Beverley Wild holds her legal ownership of Lot 413 on RP 223343, County of Ward, Parish of Gilston, on trust to pay Leonard Thomas George Swettenham $213,760.**4. **Liberty to apply within 14 days for any further orders necessary to give effect to these reasons.**5. The respondent pay the appellant’s costs of and incidental to the trial and the appeal.

CATCHWORDS: EQUITY – TRUSTS AND TRUSTEES – CONSTITUTION AND CLASSIFICATION OF TRUSTS GENERALLY – IMPLIED TRUSTS – CONSTRUCTIVE TRUSTS - INDEPENDENT OF INTENTION – PARTICULAR CASES – where joint venture the purchase of a house subject to the right of the appellant to reside in a family environment / EQUITY – TRUSTS AND TRUSTEES – CONSTITUTION AND CLASSIFICATION OF TRUSTS GENERALLY – IMPLIED TRUSTS – RESULTING TRUSTS – WHERE INTENTION PRESUMED – REBUTTAL OF IMPLICATION – PRESUMPTION OF ADVANCEMENT – REBUTTAL OF PRESUMPTION OF ADVANCEMENT – parent/child relationship – where circumstances of relationship may be used to rebut the presumption – common intention of parties dependent on a continuing state of affairs or joint endeavour – where the joint endeavour failed / Allen v Snyder [1977] 2 NSWLR 685, cited / Baumgartner v Baumgartner (1987) 164 CLR 137, followed / Bennett v Horgan (unreported, Supreme Court of New South Wales, Bryson J, No 4056 of 1991, 3 June 1994), referred to / Calverley v Green (1984) 155 CLR 242, cited / Lawrence v Branch [2002] WASCA 292, cited Muschinski v Dodds (1985) 160 CLR 583, followed / Nelson v Nelson (1995) 184 CLR 538, cited / Turner v Dunne [1996] QCA 272; Appeal No 196 of 1995, 20 August 1996, followed / Willets v Marks & Skram Investment Pty Ltd [1994] QCA 006; Appeal No 115 of 1993, 14 February 1994, cited

COUNSEL: K F Boulton, for the appellant / D A Savage SC for the respondent

SOLICITORS: Hunter Solicitors for the appellant / Holding Redlich acting as Town Agents for McMillan Criminal Law for the respondent

1. McMURDO P: I agree with Atkinson J that the appeal should be allowed for the reasons she gives and with the orders she proposes.

2. WILLIAMS JA: The relevant facts are fully set out in the reasons for judgment of Atkinson J and it is not necessary for me to repeat them. I agree with her Honour's analysis of the issues raised on the hearing of the appeal, but it is desirable that I add some brief reasons of my own because this Court is departing from the decision at first instance.

3. The appellant's basic desire after the death of his wife was that he live in a granny flat attached to a house in which his daughter, the respondent, resided so that she would be able to provide him with some care in his advancing years. He achieved that aim by purchasing the property in question at Nerang, initially in his own name. At that stage the parties agreed upon the financial arrangements referred to by Atkinson J in her reasons, but the respondent, and her husband, did not meet their obligations. Nevertheless, at that stage the overall arrangement worked satisfactorily; although he slept in the granny flat the appellant spent a lot of time essentially as one of the respondent's family. Throughout that period it remained his intention that ultimately the respondent should succeed to the ownership of the house; his will so provided.

4. Against the background of his intention ultimately to benefit the respondent, and partly with a view to encouraging the respondent and her husband to assume more of the financial obligations, in late 2002 it was agreed that the appellant would transfer the property to the respondent. But the clear intention of all the parties was that the pre-existing arrangement between the parties would continue, the only change would be with respect to the ownership of the property.

5. Very shortly after that transfer was completed on 17 January 2003 there was a serious falling out between the appellant and the respondent. The evidence would suggest that it was unreasonable conduct on the part of the respondent which precipitated that, but the legal issues can be resolved without the necessity of attributing blame for the breakdown of the relationship.

6. It became impossible for the appellant to continue residing in the granny flat and he ultimately purchased a unit in a retirement village and moved there to live. He had to borrow a significant sum of money in order to do so.

7. In the proceeding the appellant claimed a declaration that he held an equitable interest in the Nerang property. At first instance it was held that his interest in the property was limited to an entitlement to equitable compensation represented by the cost of his residing in similar accommodation for the rest of his life. In consequence the respondent was ordered to pay $45,000.00 by way of equitable compensation.

"In circumstances where the parties neither foresaw nor attempted to provide for the double contingency of the premature collapse of both their personal relationship and their commercial venture, it is simply not to the point to say that the parties had framed that overall arrangement without attaching any condition or providing any safeguard specifically to meet the occurrence of that double contingency. As has been seen, the relevant principle operates upon legal entitlement. It is the assertion by Mr. Dodds of his legal entitlement in the unforeseen circumstances which arose on the collapse of their relationship and planned venture which lies at the heart of the characterisation of his conduct as unconscionable. Indeed, it is the very absence of any provision for legal defeasance or other specific and effective legal device to meet the particular circumstances which gives rise to the need to call in aid the principle of equity applicable to preclude the unconscionable assertion of legal rights in the particular class of case."

10. That approach was affirmed by all the members of the High Court in Baumgartner v Baumgartner (1987) 164 CLR 137. In their joint judgment Mason CJ, Wilson and Deane JJ based their decision on the proposition that after the relationship had failed in circumstances where the property had been financed in part through the pooled funds of the parties, the man's assertion of entitlement to the exclusion of any interest in the woman was unconscionable conduct which attracted the intervention of equity and the imposition of a constructive trust. Toohey J reasoned that the constructive trust could in the circumstances be based either on unconscionable conduct or on the principle of unjust enrichment.

11. In the present case the conduct of the respondent in asserting an entitlement to the full legal and beneficial ownership of the home to the exclusion of any interest in the appellant is clearly caught by the reasoning in Muschinski v Dodds and Baumgartner v Baumgartner. Her conduct is clearly unconscionable and in the circumstances equity would intervene and impose a constructive trust. I am also of the view, although it is not necessary in the circumstances to elaborate on the reasoning, that the same conclusion could be reached by relying on the concept of unjust enrichment as it has been developed in a number of recent cases.

12. Here the appellant contributed virtually all of the purchase price of the house in question and that was done against the background of an agreed joint endeavour intended to mutually benefit the parties; the respondent was to get the benefit of ownership of the house and the appellant was to get the benefit of a home in which to reside in a family atmosphere and receive comfort and care from the respondent. The formal arrangement between the parties did not make provision for what would happen if that joint endeavour failed.

13. In the circumstances of this case the constructive trust which the Court imposes should be based on the contributions to the acquisition of the property made by each of the parties.

14. In the circumstances I agree that the declaration formulated by Atkinson J gives proper recognition to those considerations.

15. I agree with the orders proposed by Atkinson J.

16. ATKINSON J: Leonard Swettenham is an elderly widower who was born in October 1923. He and his wife had three children, two sons, Alan and Barry, and a daughter, Rose-Marie, who is the respondent to this appeal. Mr Swettenham’s wife died in 1999 after an illness of some duration and Mr Swettenham was then left alone in a large house at Williamstown in Victoria.

17. Before his wife’s death, Mr Swettenham had formed the intention to move to Queensland where his daughter lived. In 1998 his daughter married and he told her of his intention to move to Queensland when Mrs Swettenham died. He told Rose-Marie, who lived in rented accommodation, that he would like to buy a house in Queensland for her which had a granny flat that he could live in and she could look after him.

“…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 or specially provided that that other party should so enjoy it … 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.”⁹

37. It may in such circumstances be inequitable to leave the legal and beneficial interests to fall where they lay at the end of the relationship.¹⁰

“Both common law and equity recognize that, where money or other property is paid or applied on the basis of some consensual joint relationship or endeavour which fails without attributable blame, it will often be inappropriate simply to draw a line leaving assets and liabilities to be owned and borne according to where they may prima facie lie, as a matter of law, at the time of the failure.”

38. Mason J agreed with the statement of principle by Deane J with regard to constructive trusts and their application in such a case.¹¹

“The failure of the projected development of the land, including its subdivision and the sale of part of the land, through no fault of the parties, provides a firm basis for declaring that the parties hold their respective interests in the property as tenants in common on a constructive trust, after payment of any debts incurred in the improvement of the property, to repay to each his or her respective contributions and as to the residue for them both in equal shares. The circumstances of the case, viewed in the light of the common intention that Mr. Dodds was to take an immediate and unconditional interest in the property, did not make it inequitable that he should retain that interest, notwithstanding the failure of the projected development. But it would be inequitable for him to retain his interest without crediting to Mrs. Muschinski the contributions which she made to the acquisition and improvement of the property. Although Mrs. Muschinski. intended that he should take an immediate and unconditional half interest, that intention was accompanied by an expectation, shared by Mr. Dodds. that the projected development would take place for their mutual benefit and that Mr. Dodds would be making substantial contributions to it. I agree with Deane J that the general principle underlying the proportionate repayment of capital contributions to joint venturers on the failure of a joint venture is wide enough to support this aspect of the constructive trust.”

39. The reasoning of Mason and Deane JJ was followed by the High Court in Baumgartner v Baumgartner¹² particularly at 148 where Mason, Wilson and Deane JJ, after referring to a passage from the judgment of Deane J in Muschinski v Dodds¹³ held:

“His Honour pointed out that the constructive trust serves as a remedy which equity imposes regardless of actual or presumed agreement or intention ‘to preclude the retention of assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle’. 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.”

40. That principle has been applied in this Court¹⁴ in Turner v Dunne¹⁵ where Pincus JA observed¹⁶ that:

“It is clear from the principal judgment in Baumgartner that a trust may be imposed ‘regardless of actual or presumed agreement or intention’.”

McPherson JA agreed:¹⁷

“Recent decisions of the High Court have established that, when an enduring joint relationship between a man and a woman¹⁸ comes to an end, their respective rights in and to property do not, or do not necessarily, fall to be determined according to strict legal entitlement. Ownership at law may be qualified by the equitable remedy of a constructive trust, which may be imposed ‘regardless of actual or presumed agreement or intention’ on the part of those concerned. See Baumgartner v Baumgartner (1987) 164 CLR 137 at 148 (Mason CJ, Wilson and Deane JJ).”¹⁹

41. The imposition of a constructive trust is not confined to the breakdown in relationship between de facto couples. A constructive trust was imposed in Bennett v Horgan²⁰ in a case very similar on its facts to this. As Bryson J observed in that case:

“It is a sadly recurring judicial experience to see that family relationships do deteriorate and become intolerable, and that the persons involved did not foresee that this might happen.”

As his Honour also, observed if the parties had foreseen that their relationship would change so that the shared accommodation arrangement would become intolerable, the arrangement to share occupancy would not have been made at all.

42. In this case, Mr Swettenham intended that Ms Wild would take the legal title to the property. However in return he was to retain not only a right to reside in the granny flat but also receive the support and comfort of living in a family environment with his daughter and her family as he aged. That was the joint endeavour between them and not, as the learned trial judge held, the conferral by Ms Wild on Mr Swettenham of the right to reside in the granny flat for the rest of his life. That joint endeavour between the parties was to be for their mutual benefit but failed through no attributable fault of either party. Mr Swettenham contributed a large proportion of the purchase price. In these circumstances it would be unconscionable for Ms Wild to retain the beneficial interest in the whole of the property subject only to Mr Swettenham’s right to reside in the granny flat.

43. In determining what constitutes unconscionability, one is not left “at large to indulge random notions of what is fair and just as a matter of abstract morality”.²¹ In this case, as in Muschinski v Dodds, the conduct which has an unconscionable character is the respondent’s conduct in seeking to assert and retain the benefit of a legal interest in the property without making any allowance for the fact that the appellant contributed a disproportionate amount of the cost of its purchase,²² where, as here, no arrangement had been made between the parties as to what should happen in the unforeseen circumstances of the collapse of the relationship. There is a need to call in aid the principle of equity applicable to preclude the unconscionable assertion of legal rights in this class of case, just as in Muschinski v Dodds it was held that “equity requires that the rights and obligations of the parties be adjusted to compensate for the disproportion between their contributions to the purchase and improvement of the … property.”²³

44. It follows that a constructive trust should be imposed so that, irrespective of their intentions, the parties should be proportionately repaid their respective contributions to the property acquired during the relationship.

45. Prima facie, Mr Swettenham is entitled in these circumstances to the proportionate share of the property relative to his capital contribution to the property. Such an order would have given Mr Swettenham his proportionate share of the increase in the value of the property. It had increased in value from $235,000.00 when it was purchased in 2000 to $390,000.00 at the time of trial. However, what Mr Swettenham sought on appeal was merely repayment of his original contribution together with a modest rate of interest from the time of the break down of the relationship giving a total sum of $213,760.00. To this, he is undoubtedly entitled.

Orders

1. Appeal allowed.

2. Set aside the orders made at first instance.

3. Declaration that Rose-Marie Beverley Wild holds her legal ownership of Lot 413 on RP 223343, County of Ward, Parish of Gilston, on trust to pay Leonard Thomas George Swettenham $213,760

4. Liberty to apply within 14 days for any further orders necessary to give effect to these reasons.

5. The respondent pay the appellant’s costs of and incidental to the trial and the appeal.

Footnotes

1. (1985) 160 CLR 583. ↩

2. Allen v Snyder [1977] 2 NSWLR 685 at 692, 699. ↩

3. (supra) at 611. ↩

4. Calverley v Green (1984) 155 CLR 242 at 268-269. ↩

5. Calverley v Green (supra) at 267. ↩

6. Nelson v Nelson (1995) 184 CLR 538 at 547 per Deane and Gummow JJ. ↩

7. Nelson v Nelson (supra) at 547. ↩

8. (supra) at 620. ↩

9. See also Willets v Marks & Skram Investment Pty Ltd [1994] QCA 006; Appeal No 115 of 1993, 14 February 1994 at 10-13. ↩

10. Muschinski v Dodds (supra) at 618. ↩

11. (supra) at 599. ↩

12. (1987) 164 CLR 137 ↩

13. (supra) at 614. ↩