Elizabeth Havas v Laurence Wiggins [1996] ACTSC 114 (7 November 1996)

SUPREME COURT OF THE ACT

ELIZABETH HAVAS v. LAURENCE WIGGINS
No. SC342 of 1995
Number of pages - 11
Trust

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
HOGAN A/J

CATCHWORDS

Trust - constructive trust - unmarried persons pooling incomes - property purchased in joint names - property purchased in man's name - dispute about shares in which properties held - terms of constructive trusts.

De Facto Relationships Act 1984 (NSW), s15(1)(b)(i), Part 3
Family Law Act 1975, s86

Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137
Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583
Allen v Snyder (1977) 2 NSWLR 685

HEARING

CANBERRA, 8-10 October 1996
7:11:1996

Counsel for the Plaintiff: Mr I F Byrne

Instructing solicitors: Snedden Hall and Gallop

Counsel for the Defendant: Mr J Lloyd

Instructing solicitors: Henry Davis York
by their Canberra agents
Elrington Boardman Allport

ORDER

THE COURT DECLARES THAT:

1. The plaintiff and the defendant hold the Long Beach property
as joint tenants in trust for the plaintiff and the defendant as
tenants in common in equal shares.

2. The defendant holds his right title and interest in the
Willoughby property upon trust as to $7,700.00 for himself, as
to $31,222.00 for the plaintiff, and as to the residue upon
trust for the plaintiff and the defendant as tenants in common
in equal shares.

DECISION

HOGAN A/J This suit concerns the beneficial ownership, as between the plaintiff and the defendant, of two pieces of real estate situated in New South Wales. Since the relief sought is equitable, and operates in personam, no issue was raised about the jurisdiction of this Court to entertain it.

2. The parties lived together for a time as husband and wife, although not married, and the parcels of land were acquired during that relationship. It is common ground between the parties that the provisions of Part 3 of the De Facto Relationships Act 1984 (NSW) have no application, because the parties were not resident in New South Wales for a substantial period of their de facto relationship as required by s15(1)(b)(i) of that Act.

3. The claim for relief is founded entirely upon the equitable principles expounded by the High Court in Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137 and Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583, and by the NSW Court of Appeal in Allen v Snyder (1977) 2 NSWLR 685.

4. The plaintiff was born in Sydney in 1944, and the defendant in 1948.

5. In 1972 the plaintiff married George Havas and there was one child of that marriage, Lisa Havas, born on 23 September 1974. That marriage was dissolved by decree made on 19 August 1983.

6. The defendant married Judith Wiggins on 6 December 1969. There were two children of that marriage, Rebecca Wiggins, born on 20 July 1972 and Claire Wiggins, born on 28 November 1974. That marriage was dissolved, also in 1983.

7. The plaintiff was a pharmacist, the defendant a public servant. They had met not long before 1980 and began to live together in May 1982. That relationship was to continue until about February 1992.

8. It should be said at the outset that both the plaintiff and the defendant experienced difficulty in remembering some matters of detail in giving their evidence. That is quite understandable in the light of the long period of time since the events took place. The nature of the relationship was such that the keeping of detailed records about their joint financial affairs would not have seemed necessary, or even appropriate. However, it seemed clear to me that they both tried, to the best of their ability, to give frank and accurate evidence in the witness box, and their credit, in that sense, was not really attacked by either counsel, despite the sometimes puzzling gaps in their recollection.

9. The parties began to live together in premises at 44 Chauvel Circle, Chapman in the Australian Capital Territory, of which the plaintiff was joint tenant with her husband.

10. By a deed dated 7 August 1984, made pursuant to s86 of the Family Law Act 1975, Mr Havas covenanted to transfer to the plaintiff his interest in that property. She agreed to pay to him $7,000.00. They were to have joint custody of Lisa and Mr Havas covenanted to pay for her educational, medical and dental expenses until she was 18 and to contribute to the cost of tertiary education and other school related activities on an equitable basis.

11. Lisa lived in the home with the plaintiff and the defendant over the course of the relationship and was accepted by the defendant as part of the household.

12. The defendant and his wife had been joint tenants of property at 9 Cussen Street, Higgins. They also entered into a s86 Deed, dated 22 November 1983. The defendant covenanted to transfer to his wife his interest in that property and she agreed to pay him $16,000.00. A Honda car valued at $5,000.00 went to the wife and a Toyota van valued at $2,000.00 to the husband. Joint custody of the children was agreed, with the wife to have their care and control and the defendant to have reasonable access. The children visited the plaintiff and the defendant about every second weekend and at times during school holidays. Their father undertook to contribute to their maintenance by paying their school fees at Canberra Grammar School and by covering them for health insurance until they reached the age of 18.

13. The provisions of both those Deeds were substantially carried into effect. Mr Wiggins received a few hundred dollars less than the $16,000.00 referred to and purchased with it a Mazda car and some video equipment. The plaintiff traded in her previous car and thereafter the Mazda was substantially used by her while the defendant continued to use his Toyota van.

14. The parties at first did not operate a joint bank account. The plaintiff was working as a pharmacist and later as a consultant and teacher of Bridge. The defendant worked as a public servant until 1992, when he became a director of Wiggins Price and Associates, an economic consultancy firm. The plaintiff was usually paid in cash. The defendant's salary was paid into a bank account, but he was not able to recall which account, and had not preserved any records relating to it. His records of an account with Westpac Bank between some time in 1982 and 22 November 1985 are in evidence (Exhibits C and D), but there are no entries in it relating to salary deposits. The opening credit balance in those records was $180.63, and the account fluctuated between credit and debit balances, ending with a credit of $118.54.

15. There was also in evidence (Exhibit F) some records of an account that he had jointly with his former wife at the CBA Bank, beginning at 5 May 1981 and ending in 9 November 1982. That also fluctuated, opening with a credit of $78.02 and finishing with $180.65. In that account also there were no regular deposits of salary.

16. There were also in evidence (Exhibits B, 3 and 4) partial records of investment accounts in the name of the plaintiff with the Civic Permanent Building Society between about May 1982 and May 1990.

17. On 22 November 1985 the parties opened a joint account with the Civic Permanent Building Society, which became Civic Advance Bank and later Advance Bank Australia. The defendant's net salary, which at the beginning of 1986 was $748.96 a fortnight, was regularly paid into it, as is evidenced by Exhibit A.

18. It is consistent with such records as are in evidence, and with the oral evidence, that both parties contributed towards the ordinary household expenses, in no particular proportion so far as could be ascertained.

19. At the beginning of the relationship, the plaintiff had a number of investments, the capital value of which was of the order of $40,000.00.

20. Even after the relationship began, the defendant remained responsible for mortgage repayments in respect of the home that he owned jointly with his former wife, until the provisions of the Family Law settlement were fully put into effect. They totalled about $3,168.00.

21. In about August 1984 the parties arranged to buy a property, with its contents, at Long Beach near Bateman's Bay, from the defendant's parents. The price was $40,000.00, which was to be paid in instalments. Of that sum, $35,000.00 was for the real estate, $5,000.00 for the personalty. It is not disputed that the first payment, of $7,000.00, was paid by the plaintiff from her own monies.

22. A document signed by the vendors and dated September 1984 (Exhibit 9) acknowledged payment at that date of $20,000.00 in part payment, the balance of $20,000.00 on call. The document evidences payment of the balance as follows,

22 March 1986 $5,000.00
16 July 1986 $5,000.00
16 June 1988 $5,000.00
5 October 1989 $2,500.00
25 December 1989 $2,500.00

It is common ground that of the initial $20,000.00, $7,000.00 was provided by the plaintiff.

23. The defendant stated in his evidence that at about the same time as the plaintiff provided $7,000.00, he contributed $13,000.00.

24. The plaintiff denied that he had paid anything at that time.

25. Counsel could not point to any entries in any of the bank records that would help to resolve this conflict of recollections.

26. The plaintiff gave no evidence about where that balance of $13,000.00 came from. She did not claim to have paid it herself. Her recollection of the whole transaction was scanty. She thought, for example, that the price was $30,000.00, not the undoubted $40,000.00.

27. The defendant had no direct recollection of the form in which the $13,000.00 was paid, but expected that it would have been by cheque. He could give no details about the account on which the cheque had been drawn, as he had not kept the records. The records that do exist do not point to his having any substantial savings at that time.

28. I think it is probable that at that time he did have a bank account, into which his salary would have been paid. None of the accounts of which records are in evidence show deposits of his salary at the relevant time.

29. On balance, I am prepared to accept his evidence that he did pay that $13,000.00.

30. It is common ground that during 1986 extensions and renovations were carried out to the property at Long Beach, which cost about $15,000.00, which also came from the plaintiff's own resources.

31. During the relationship, the other expenses associated with ownership of the property came out of the joint account. After it ended, the defendant expended about $10,000.00 on expenses connected with it.

32. The purpose of buying that property was that the parties and their children might enjoy the use of it as a holiday home at the beach and also as a long term investment.

33. The property was purchased in their joint names.

34. In July 1985, the parties decided to purchase another residential property at Willoughby as an investment.

35. The defendant claimed that he paid an initial deposit of $7,700.00 for the purchase of that property. The plaintiff disputed that evidence. She claimed that she paid it. The plaintiff certainly paid from her own funds a further sum of $31,322.64 for the balance of the funds initially invested in the property, and was able to point to a record of the withdrawal of that amount from her account. She was not able to point to any record of the payment by her of the $7,700.00. Her conclusion that she had paid it was based on her impression that, at the time, the defendant's bank balance was negligible.

36. Again, the defendant had no contemporaneous record of that payment. The balance in the accounts of which he did have records was small. Nevertheless, it was not such a large sum that he might not have had it in some other account. On the balance of probabilities, I am persuaded that he did contribute that sum from his own moneys.

37. The property was let to tenants, and the rent paid a substantial part of the mortgage payments, approximately $55,888.00 in all. The balance of mortgage repayments and expenses came out of the joint account which was opened in November 1985. There is still a small amount owing, secured by mortgage.

38. The property was purchased in the name of the defendant. When the purchase was made, the expenses exceeded the income, and the defendant's income was greater than the plaintiff's, so that it was preferable for taxation purposes that the property be in his name. The defendant freely agreed in evidence that the purpose of acquiring the property was that it be a joint investment.

39. After the separation, the defendant excluded the plaintiff from the use of the Long Beach property. There is no evidence that he claimed to be solely entitled to the Willoughby property. However, the case was conducted on the basis, agreed to by both counsel, that the only issue that the Court would be asked to determine is the nature and extent of the constructive trust to be created.

40. The plaintiff, in her Statement of Claim, sought declarations that both properties were held in trust for the parties as tenants in common, 80% to the plaintiff and 20% to the defendant.

41. The Defence filed simply opposed the making of the orders sought by the plaintiff. However, counsel for the defendant conducted the case on the basis that declarations should be made, but that the proportions should be more of the order of 42% to the plaintiff and 58% to the defendant.

42. Neither counsel submitted that there was any evidence of an express intention by the parties at the time of acquiring the properties that they should be held in any particular shares.

43. Counsel for the defendant based his submissions on an analysis of the net contributions made by each party, not to the individual properties as such, but to the financial resources of the parties over the whole of the relationship, taking into account facts such as that his income was greater than hers, and items such as sales of shares, the proceeds of a personal injury claim and dealings with motor cars used by one or other of them.

44. I am not persuaded that this is a correct approach.

45. First, there was no evidence that it was the common intention of the parties that any property that they might acquire should be held on trust in shares calculated in such a manner.

46. In fact, neither counsel argued the case on the basis of a particular intention, express or implied. Nor was either party asked to give any evidence about it. I think that if the case had been presented in that way, there would probably have been a finding that there was a common intention to acquire both properties for the benefit of both parties jointly with no evidence of any intention that the shares should be other than in equal shares.

47. As in Muschinski v Dodds (supra), especially per Deane J at 611, there was no express or implied agreement, arrangement or understanding between the parties that they should hold their legal interests in the two properties upon trust for themselves in shares corresponding to their respective contributions.

48. Nor was there any express or implied contract between them to the effect that, if they were to separate, they would hold the properties or either of them either upon trust to repay their respective contributions, and then for themselves equally, or upon trust for themselves in shares according to their respective contributions. There is, in the circumstances of this case, also no occasion for recourse to the presumption of the law of equity that would give rise to a resulting trust.

49. There was no allegation in the pleading, and no evidence was called, of any particular conduct of the defendant that could be said to be unconscionable.

50. Nevertheless, the case was conducted by both counsel on the basis that the circumstances were such as to call for the imposition by the Court of the remedy of a constructive trust, which arises or is created regardless of the actual intentions of the parties,

... to preclude the retention or assertion of beneficial
ownership of property to the extent that such retention or
assertion would be contrary to equitable principle. (Per Deane J
in Muschinski v Dodds at 614)

51. The equitable principle applied to the particular facts of that case was expressed by Deane J at 620 as follows,

.. 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 or 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. Attwood v Maude ((1868)
LR 3 Ch App at pp 374-375), and per Jessel MR, Lyon v Tweddell
((1881) 17 Ch D 529 at p 531).

52. In Baumgartner (supra), at 148, Mason CJ, Wilson and Deane JJ cited that passage with approval, and commented,

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.

53. On the particular facts in that case, there had been a collapse of a commercial venture and the failure of a personal relationship combining to lead to a particular situation. The terms of the trust imposed were that out of the net proceeds, each party should receive her or his respective contribution, and the residue was to be held in equal shares.

54. In Baumgartner, the appellant had asserted that property which had been financed in part through pooled funds was his sole property. After holding that such an assertion amounted to unconscionable conduct which attracted the intervention of equity and the imposition of a constructive trust, the Court then turned to the determination of the terms of that constructive trust. The relevant property had been acquired and developed as a home for the parties, and had, at least indirectly, been largely financed from the pool of the earnings of the parties. The Court considered that equality of beneficial ownership was a starting point. As the majority held, at 149-150,

Equity favours equality and, in circumstances where the parties
have lived together for years and have pooled their resources
and their efforts to create a joint home, there is much to be
said for the view that they should share the beneficial
ownership equally as tenants in common, subject to adjustment to
avoid any injustice which would result if account were not taken
of the disparity between the worth of their individual
contributions either financially or in kind. The question which
has caused us particular difficulty is whether any such
adjustment is necessary in the circumstances of the present case
to avoid any injustice which would otherwise result by reason of
disparity between individual financial contributions. The
conclusion to which we have come is that some such adjustment is
necessary.

55. In dealing with the particular facts, they commented, at 150,

The court should, where possible, strive to give effect to the
notion of practical equality, rather than pursue complicated
factual inquiries which will result in relatively insignificant
differences in contributions and consequential beneficial
interest. We do not think, however, that the difference in the
present case can be regarded as relatively insignificant. Nor
has it been suggested that the difference in the amount of the
financial contributions was offset by the greater worth of the
respondent's contribution in other areas.

56. I do not think that it follows from either of those authorities that I should adopt the approach suggested by counsel for the defendant. It does not follow, as a matter of law, that because the defendant's income was substantially greater than that of the plaintiff, and that it went into the joint account while the properties were being paid for, that there is a necessity to avoid injustice by taking that particular disparity into account in the way suggested by counsel.

57. As counsel for the plaintiff pointed out, such considerations might be critical in applications under the New South Wales legislation, or in applications for property settlement under the Family Law Act.

58. Although it is true that over the period of the relationship the defendant's earnings from salary were a little more than twice those of the plaintiff, and went into the joint account from August 1985 till the relationship ended, the plaintiff brought substantial financial assets to the relationship, whilst the defendant had little capital at that time. Earnings from, and occasional sales of those assets were, to some extent, also pooled, although I have not attempted to quantify the sums involved. But even if it is apparent that the defendant, over the whole of the time of the relationship, brought into the total funds utilised by the parties 58% of those funds, I do not think that the result is that all or any of the substantial assets of the parties should be divided in the proportion of 58% to 42%. I think that each of the two pieces of real estate should be looked at separately.

59. Neither of the properties in issue in this case were acquired for use as the home in which the parties were to live during their relationship.

60. The Long Beach property was acquired for use as a holiday home, and as a long term investment. The initial cost, of $40,000.00, included a price of about $5,000.00 for personal property, which is not sought to be made the subject of any trust. The total cost of the real estate has been made up as follows,

Initial cost $35,000.00
Renovations $15,000.00
Expenses since separation $10,000.00
$60,000.00

61. The funds contributed by the parties included the cost of the personal property. The part of the total that came from their pooled funds was $20,000.00, which was paid between August 1984 and December 1989, a period roughly equal to half the time covered by their relationship.

62. The amounts contributed by each were as follows,

Plaintiff Defendant
Initial deposit $7,000.00
Balance of initial payment $13,000.00
Paid from joint account $10,000.00 $10,000.00
Renovations $15,000.00
Expenses after separation $10,000.00
$32,000.00 $33,000.00

63. In those circumstances, I do not think that there is a need for any adjustment in order to avoid injustice to the defendant by reason of disparity between the financial contribution made by him over the whole of the relationship. I think that practical equality is called for with respect to that property.

64. I declare that the plaintiff and the defendant hold the Long Beach property as joint tenants in trust for the plaintiff and the defendant as tenants in common in equal shares.

65. The Willoughby property was expressly acquired as a joint commercial venture. It was purchased in July 1985. It has not yet been completely paid for. The only figures relating to it that are in evidence are that the defendant paid $7,700.00 towards the deposit and the plaintiff paid $31,322.00. Net rentals amounted to $55,888.00. Other expenses, which are not quantified, came out of the joint account. In recent times, the rent has been sufficient to cover the expenses and reduce the mortgage debt, but there is no evidence about that length of time or the extent of the reduction.

66. As in Muschinski v Dodds, the relationship between the parties was not merely a commercial one. It was a mixture of the commercial and the personal. With respect to the Willoughby property in this case, however, there were no considerations applicable such as would or might arise where the parties spent many years contributing to the establishment of a joint home in the subject premises. Its acquisition was much more in the nature of a commercial venture, although neither party gave any thought to defining what should happen if the personal relationship ended before the commercial venture came to fruition, as it did. Although some of the money spent on the property must have come from the joint account, there is no evidence of the amount, or even that it was a substantial amount. Apart from the initial deposits, I infer that the bulk of the funds expended in reduction of the mortgage came from the rent of the premises. I see no reason for departing from the approach which would attribute to each party her or his individual contribution specifically to the purchase, with the balance to be shared equally.

67. I declare that the defendant holds his right title and interest in the Willoughby property upon trust as to $7,700.00 for himself, as to $31,222.00 for the plaintiff, and as to the residue upon trust for the plaintiff and the defendant as tenants in common in equal shares.

68. I grant liberty to apply in respect of consequential relief.

69. I will hear submissions from counsel about costs.