Paul Anthony Hartigan v David Widdup [1992] ACTSC 25 (23 March 1992)

SUPREME COURT OF THE ACT

PAUL ANTHONY HARTIGAN v. DAVID WIDDUP
S.C. No. 631 of 1991
Trust - Pleading

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Master A. Hogan(1)

CATCHWORDS

Trust - Constructive Trust - Unconscionable Conduct - Homosexual Couple - House Owned by One - Contributions by Other to Upkeep and Maintenance of House - Sharing Household Expenses - Owner of House thereby enabled to reduce Mortgage - Recognition by Owner of Other's Contribution - Estoppel - Whether Constructive Trust Capable of Arising.

Pleading - Strike Out Application - Constructive Trust - Whether Claim Clearly Untenable.

Allen v Snyder 1977 2 NSWLR 685

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

Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387

Jacob's Law of Trusts in Australia 5th Ed. para 1310

HEARING

CANBERRA
23:3:1992

ORDER

The application made in paragraphs 6 and 7 of the Notice of Motion dated 1 November 1991 be dismissed.

By consent the applications in paragraphs 1 to 5 inclusive of that Notice of Motion be stood over until the hearing of the suit.

The plaintiff pay the defendant's costs of and incidental to this application.

The amendments to the counterclaim sought by the defendant as set out in the document handed up at the hearing of the application be allowed. That document has been initialled by me and is with the papers.

The defendant pay the costs of and occasioned by that amendment.

That the action be listed before me for directions on 27 March 1991, and that Counsel be prepared to make submissions on that date about the steps necessary to prepare the action for hearing, and a timetable for taking those steps.

DECISION

In the Notice of Motion before me, dated 1 November 1991, seven separate orders were sought. By agreement between Counsel the first five were stood over to be determined on the hearing of the action. That leaves two, the first of which was that the defendant's counterclaim be struck out in its entirety on several grounds, and the second that various parts of it be struck out for a number of reasons.

2. The Writ was issued on 9 September 1991. It was accompanied by a Statement of Claim, the allegations in which may be summarised as follows:
1. The plaintiff was the registered proprietor of land ("the

cottage") at Narrabundah.
2. On 1 August 1991 the defendant entered a caveat on the title to
the cottage, claiming an equitable interest in it.
3. The grounds put forward in the document supporting the caveat
to found the claimed equitable interest were that the defendant
lived with the plaintiff for 17 years and contributed to the
maintenance and improvements of the property on an equal basis,
enabling the plaintiff to pay off the mortgage on the cottage.

3. The situation was complicated by a proposal of the plaintiff to mortgage the cottage in order to finance the purchase of a home unit, but I do not think that those details affect this present application. The respective positions of the parties were effectively preserved by an order made by the Chief Justice on 13 September 1991.

4. The relevant relief sought in the Writ was:

1. An order that the defendant show cause why the caveat should
not be removed;
2. A declaration that the caveat was bad in form; and
3. A declaration that the defendant had no caveatable interest in
the land.

5. The Defence entered on 16 October 1991 in effect admitted the facts alleged by the plaintiff, but set up a counterclaim.

6. An application to amend the counterclaim was made at the hearing, but it is appropriate to defer consideration of that amendment pending a decision on the question whether, even if it were made, the counterclaim alleges facts that would found the relief sought in it.

7. The allegations made in the counterclaim are:

1. In 1975 the defendant, at the plaintiff's request, began
cohabiting (sic) with the plaintiff at the cottage.
2. Between 1975 and March 1991 the plaintiff and the defendant
cohabited at the cottage and other places.
3. During cohabitation the parties lived together in a permanent
de-facto homosexual relationship.
4. During the periods of cohabitation the defendant contributed to
the improvement, maintenance and upkeep of the cottage.
5. The defendant contributed money to the household and for the
living costs of the parties, thereby relieving the plaintiff of
financial expenses and facilitating the payment of mortgage and
other expenses relating to the cottage.
6. The defendant made additional contributions to the household
and the relationship, particulars of which were set out, but
mainly consisting of housekeeping activities.
7. The plaintiff recognised the contribution of the defendant, and
expressed an intention that the defendant should share in the
cottage by offering to transfer to the defendant half of the
title of the cottage and by stating that he intended leaving
the defendant an interest in the property in his will.
8. The defendant in making the contributions set out above acted
to his detriment and in the belief that the plaintiff would
give him an interest in the cottage.
9. It would thereby be unconscionable for the plaintiff to retain
the whole of the proceeds of the sale of the cottage to the
exclusion of the defendant.
10. The plaintiff is estopped from denying that the defendant
is entitled to an equitable share of the proceeds of sale.

8. The relief sought in the counterclaim was:

a declaration that the net proceeds of sale of the cottage,
less an adjustment for the net equity of the plaintiff in the
property as at 1975, are held on trust for the plaintiff and
the defendant in equal shares;
an order that the plaintiff pay to the defendant his
entitlement from the proceeds of sale;
an injunction;
costs;
and interest.

9. The first attack that was made upon the counter claim as a pleading was that it did not identify with certainty the property that would be subject to any trust that might arise.

10. I think that the order made by the Chief Justice sufficiently identifies, in accordance with the pleadings, an asset upon which a constructive trust could operate. In any event I do not think that it is necessary in all cases where it is sought to raise a constructive trust that there be at the time of the Court's order specific and identifiable property upon which it may operate. As is noted in Jacob's Law of Trusts in Australia 5th Ed. para 1310:

"Finally, in some instances the term "constructive trust" is used
in respect of persons whose liability is purely personal and not
proprietary in character. An example is the defendant who
instigates, or participates with the requisite degree of knowledge,
in the loss occasioned by a breach by trustees of an express trust;
he has long been treated as personally liable as a constructive
trustee for the loss of the trust estate, although he has received
no trust property and made no profit for himself to which a trust
might attach."

11. I do not accept that submission.

12. The next attack that I would deal with is that of illegality. Let it be accepted that the allegation in the counterclaim that the parties lived together in a homosexual relationship involved of necessity an allegation that the parties were parties to acts that, at the beginning of the relationship at least, were offences against the criminal law at that time.

13. The defendant does not allege a contract. There is no suggestion here of seeking to enforce a promise made upon a sexually immoral consideration or for a sexually immoral purpose. Also, if there be a constructive trust, it does not arise from the initial intentions of the parties, but it is imposed by the law in order to remedy conduct of the plaintiff said to be unconscionable, in that after the relationship ceased he seeks to keep for himself beneficial title to the whole of the property and any proceeds of its sale.

14. In Allen v Snyder (1977) 2 NSWLR 685 at 693 Glass J.A. said:

"But when it is called a constructive trust, it should not be
forgotten that the courts are giving effect to an arrangement
based upon the actual intentions of the parties, not a
rearrangement in accordance with considerations of justice,
independent of their intentions and founded upon their
respective behaviour in relation to the matrimonial home."

15. That view of the foundation of the doctrine was rejected by the High Court in Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137, where at 147, Mason C.J., Wilson J. and Deane J. held that:

"the foundation for the imposition of a constructive trust in
situations of the kind mentioned is that a refusal to recognise
the existence of the equitable interest amounts to
unconscionable conduct and the trust is imposed as a remedy to
circumvent that unconscionable conduct."

16. Nevertheless, I respectfully agree with the comment of Glass J.A. in Allen v Snyder at 689, where he said:

"It will be seen that the law does not countenance, in this respect,
different rules for the married and unmarried. Nor should it be
overlooked that the rules, however they come to be formulated, ought
to apply indifferently to all property relationships arising out of
cohabitation in a home legally owned by one member of the household,
whether that cohabitation be heterosexual, homosexual, dual or
multiple in nature.
The velocity of social change affecting, not only the
financial balance in the relationship of husband and wife, but
also producing new forms of association outside marriage has,
indeed, produced a flurry of litigious activity. New
situations have, it appears, produced some new legal rules. It
is inevitable that judge made law will alter to meet the
changing conditions of society. That is the way it has always
evolved. But it is essential that new rules should be related
to fundamental doctrine."

17. I do not think that the force of that comment is lessened in any way by the decision in Baumgartner.

18. I therefore reject the submission that the counterclaim must fail for illegality, or because to enforce the claim that it makes is contrary to public policy.

19. It was clear from the submissions of Counsel for the defendant that the two bases on which the counterclaim is founded are a constructive trust arising from the principles set out in Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137, and an equitable estoppel founded upon the principles dealt with in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1987) 164 CLR 387.

20. In Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 the parties, who had lived together for three years, decided to buy a property on which to erect a dwelling. The woman provided $20,000 from the sale of her house and the man was to contribute $9,000, partly from loans. She in fact contributed $25,000 and he $2,500 (in round figures) The house was not erected. The Court declared that the parties held their respective legal interests upon trust to repay to each his or her contribution and as to the residue for them both in equal shares.

21. In discussing that case in Baumgartner Mason C.J., Wilson J., and Deane J., said (at 148) that the result was reached by applying the general equitable principle which restores to a party contributions which he or she had made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them. Equity will not permit the other party to retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do. Equity imposes the constructive trust as a remedy, regardless of actual or presumed intention, in order to prevent the retention of property to the extent that such retention would be contrary to equitable principle.

22. This present case could be distinguished from Baumgartner and Muschinski on a number of significant factual bases.

23. In Baumgartner the parties entered into a defacto relationship. They actually pooled their incomes thereafter, creating a common fund out of which the purchase of the property was financed.

24. In this counterclaim it is not alleged that the cottage was acquired in the context and for the purpose of the relationship between the parties.

25. As I understand the case, though it is not expressed in the pleading, the plaintiff owned the cottage, subject to a mortgage, before the relationship began.

26. There is not alleged any pooling of income. What is alleged is that the defendant contributed to the improvement, maintenance and upkeep of the cottage, and by moneys that he contributed to the household expenses and living costs of them both, made it easier for the plaintiff to pay the mortgage and other expenses.

27. These may be thought to be important distinctions. There may well be others as important. They are not, however, to my mind sufficiently material as to force the conclusion that the defendant's counterclaim is doomed to fail.

28. It is necessary when dealing with equitable principle, such as that in the area of unconscionable conduct, not to place too great a reliance on the exact words used by Judges in their formulation of the principles, nor to embark upon fine and detailed distinctions. Further detail, additional to what is set out in the pleading, may appear in the evidence, lending weight to the allegation of unconscionability.

29. Yet it is also important not to lose sight of the purpose of pleadings, in defining the issues to be tried and informing the opponent of the case to be met.

30. I think that the limits of the law relating to such a doctrine as the constructive trust as applied to domestic situations are appropriate to be laid down by Judges after full argument on the whole of the evidence, rather than being fixed by a Master in interlocutory proceedings relating to pleadings.

31. Insofar as the plaintiff complains that the counterclaim does not sufficiently inform him of the case he has to meet, these proceedings have drawn from Counsel for the defendant a clear statement of the legal basis alleged for the counterclaim. Any factual deficiencies may be dealt with by appropriate requests for particulars.

32. Similarly, in so far as the counterclaim depends upon estoppel, in reliance on Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, that doctrine is so bound up with notions of unconscionable conduct that it is not appropriate to decide, on a point of pleading, that the counterclaim is doomed to failure.

33. In that case Brennan J. sets out six elements that must be proved in order to found an equitable estoppel. It would, in my view, be consistent with the views of the other members of the Court that a pleading which alleged each of those six elements as a separate material fact would be sufficient to found the remedy. I do not, however, think that the decision of the whole Court requires that unless a pleading does set out those six elements separately it is so defective that it must be struck out. Again, in the circumstances of this case I think that it will be most efficiently and cheaply prepared for hearing if appropriate requests for particulars are answered.

34. The alternative submission by the plaintiff, sought in Order 7 of the Notice of Motion, was that certain parts of the counterclaim be struck out.

35. I think that it may well be material, and that it does not embarrass the fair trial of the action, for the counterclaim to include the following allegations:

(a) that the defendant began cohabitation at the
plaintiff's request;
(b) that the parties were living in a permanent de facto
homosexual relationship;
(c) that the defendant contributed to maintenance and
upkeep;
(d) that the defendant maintained the garden;
(e) that the defendant engaged in the conduct set out in
paragraphs 8(c) (d) and (e), 9 and 10 of the counterclaim;
(f) the intention referred to in paragraph 11.

36. The matter complained of in paragraph 12 is dealt with by the amendments proposed to the counterclaim by the defendant.

37. So far as any of those allegations may be said to be vague or imprecise, again I think that an appropriate request for particulars would suffice to define and delineate the real issues.

38. I therefore dismiss the application made in paragraphs 6 and 7 of the Notice of Motion dated 1 November 1991.

39. By consent I stand over the applications in paragraphs 1 to 5 inclusive of that Notice of Motion until the hearing of the suit.

40. I order the plaintiff to pay the defendant's costs of and incidental to this application.

41. I allow the amendments to the counterclaim sought by the defendant as set out in the document handed up at the hearing of the application, which document has been initialled by me and is with the papers.

42. I order the defendant to pay the costs of and occasioned by that amendment.

43. I direct that the action be listed before me for directions on 27 March 1991, and that Counsel be prepared to make submissions on that date about the steps necessary to prepare the action for hearing, and a timetable for taking those steps. I would comment that, in the view that I have at present about the case, I would need to be persuaded that discovery should be had other than restricted to financial records, or that interrogatories are necessary at all. Many of the basic facts do not seem to be seriously in issue, and at first sight the case appears to be one where the giving of the evidence in chief by affidavit would seem to be appropriate.