Leeson v Reichstein [2009] ACTSC 157 (4 December 2009)

Last Updated: 8 December 2009

ROBERT JOHN LEESON v HOLLY GAY REICHSTEIN

[2009] ACTSC 157 (4 December 2009)

EQUITY – trusts – de facto relationship – parties contributing equally to purchase price of house – title registered in name of one party only – implied or resulting trust in favour of other party

INTEREST – interest before judgment – circumstances in which interest awarded at rate less than the prescribed default rate

Domestic Relationships Act 1994

Court Procedures Rules 2006 rr 35, 1616, 6700, 6701

Family Law Act 1975 (Cth) s 90B

Catanzariti v Romano [2009] ACTSC 38

Abbhall Pty Ltd v Canberra Land Developments Pty Ltd [2009] ACTSC 120

Allen v Snyder [1977] 2 NSWLR 685

Calverley v Green [1984] HCA 81; (1984) 155 CLR 242

Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583

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

Gascoigne v Gascoigne (1918) 1 KB 223

Perpetual Executors and Trustees Association of Australia Ltd v Wright [1917] HCA 27; (1917) 23 CLR 185

Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538

Armstrong v Sheppard & Short Ltd [1959] 2 QB 384

Carmody v Delehunt (1984) 1 NSWLR 667

Delehunt v Carmody [1986] HCA 67

Atkinson v Festic (1990) DFC 95-089

No. SC 15 of 2006

Judge: Master Harper

Supreme Court of the ACT

Date: 4 December 2009

IN THE SUPREME COURT OF THE )

) No. SC 15 of 2006

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: ROBERT JOHN LEESON

Plaintiff

AND: HOLLY GAY REICHSTEIN

Defendant

ORDER

Judge: Master Harper

Date: 4 December 2009

Place: Canberra

THE COURT ORDERS THAT:

Judgment be entered for the plaintiff against the defendant in the sum of $95,104.12.

1. This action arises out of a failed domestic relationship between the plaintiff and the defendant. It is common ground that, whilst the relationship included a period of cohabitation, that period was not long enough to entitle either party to relief under the Domestic Relationships Act 1994.

2. When they met, both the plaintiff and the defendant had previously been married and had children of school age.

3. In September 2001, the defendant bought a house in Kirkwood Crescent, Gordon, a southern suburb of Canberra. The plaintiff’s case is that he contributed money to the purchase price and that the defendant held the title to the house on either a constructive trust or a resulting trust for herself and him in proportion to their contributions.

4. In January 2003 the defendant sold the house, and bought another house in Woodfull Loop, Gordon.

5. Although the parties were no longer living together, their personal relationship continued until October or November 2003. The defendant has since remarried and lives in the Woodfull Loop house with her new husband, who has put money into extensions to that house. In October 2004 the plaintiff lodged a caveat over the title to the house, which remains in the defendant’s name.

6. The plaintiff seeks a declaration that the defendant holds the Woodfull Loop property on either a constructive or a resulting trust for herself and him, and in the alternative, judgment against the defendant for a money amount notionally secured against the house.

7. The defendant denies that the plaintiff has any equitable interest in the house or that she owes him any money. By way of counterclaim she seeks declaratory relief, and unpaid wages.

The pleadings

8. The action was commenced in January 2006. The plaintiff asserted that he and the defendant had commenced their personal relationship in about March 2000. He also asserted initially that they had lived together from September 2001 to January 2003, though he later agreed that he had made a mistake about this and the statement of claim was amended during the trial to reflect the cohabitation as having come to an end a year earlier.

9. The plaintiff asserted that on 14 September 2001 he and the defendant had jointly purchased the Kirkwood Crescent property, with each contributing some money from their own resources, and the balance being raised by bank loan for which they were jointly responsible. He said that the purchase price had been $370,000.00 with his contribution being $81,000.00 and that of the defendant being $80,000.00. $225,000.00 had been provided by loan from Bendigo Bank. He said that the title for the property had been registered solely in the defendant’s name, but that the parties had agreed prior to purchase that they would be equal joint owners of the property. He asserted that he had made mortgage repayments from his own funds from September 2001. He had made a further one or two mortgage repayments after he moved out of the house.

10. In January 2003, he said, the defendant sold the Kirkwood Crescent property for $470,000.00 without consulting him or informing him of her intention to do so. In February 2003 she paid him $50,000.00 “in part repayment of the plaintiff’s contribution and capital gain in the first Gordon property”.

11. The statement of claim then asserted that the parties agreed to jointly purchase the Woodfull Loop property for $330,000.00. This property was also registered in the defendant’s name only. In about November 2003 the relationship between the parties broke down irretrievably. Despite requests the defendant had failed to pay any further money to the plaintiff or to transfer any proprietary right to him or acknowledge that he had any equitable right in the Woodfull Loop property.

12. A defence was filed in March 2006. The defendant asserted that their relationship had not begun until about April 2001. She denied that the purchase of the Kirkwood Crescent property had been a joint purchase. She said that the plaintiff’s contribution to the purchase had been about $73,000.00 and not $81,000.00. She went on to say that the parties had agreed that he was to have no interest at law or in equity in the property. She said that the defendant was fully aware of her plans to sell the Kirkwood Crescent property in January 2003 and to buy another house. She said that he had agreed to accept $50,000.00 in full satisfaction of any claim he had in relation to the first house. She denied that there was any agreement that he was to have any interest in the Woodfull Loop house. She said that the relationship between the parties had ended in about October rather than November 2003.

13. There was then a counterclaim. She asserted that in April 2003 the plaintiff paid for a second-hand car and gave it to her: she accepted the gift on condition that he would accept payment of $21,000.00 which she was borrowing through Tonto Home Loans. In May 2003 she attempted to pay the $21,000.00 to him. He initially refused to accept payment but eventually agreed to accept it on the basis that the payment was in full satisfaction of any funds he had provided to her towards the purchase of the Kirkwood Crescent property.

14. The defendant then said that in about May 2001 the parties had entered an agreement whereby the plaintiff would employ the defendant in his business, Tablelands Explosives Pty Ltd at a wage of $400.00 per fortnight. She worked for the business from May 2001 until July 2003 but received no payment. She claimed wages of $23,200.00. (It is difficult to see how this could be said to give rise to a claim against the plaintiff personally rather than the company, but the plaintiff did not take any point about this)

15. The defendant in the counterclaim went on to say that she had made loan repayments in respect of the mortgage over the Kirkwood Crescent property from February 2002 to January 2003 of $17,758.00. She said that she had made loan repayments in relation to the Woodfull Loop property from January 2003 and that the plaintiff had not made any such payments.

16. In a defence to the counterclaim, the plaintiff agreed that he had lent the plaintiff $21,000.00 in May 2003 to buy a car but denied that the repayment of this amount had anything to do with the Kirkwood Crescent purchase.

17. He agreed that he had employed the defendant to work for his business but said that she had worked for only one month, from 7 June 2002 to 5 July 2002, for which he had paid her $1000.00.

18. In March 2008, well into the hearing, the defence was amended to include an assertion that any trust which might be held to have arisen in relation to either the Kirkwood Crescent property or the Woodfull Loop property was unenforceable because the plaintiff had entered the arrangement for an improper or unlawful purpose, namely to defeat a potential property claim against him in the Family Court of Australia and to defeat potential creditors.

19. In June 2008, also during the hearing, the defendant abandoned the portion of the counterclaim which asserted that the plaintiff had accepted repayment of the $21,000.00 car loan in full satisfaction of any claim relating to funds he had provided towards the purchase of the Kirkwood Crescent property. The defendant in a further amended defence at that time changed the date for the commencement of cohabitation from September to October 2001, and added an assertion that the plaintiff and the defendant had agreed that the defendant would repay the money contributed to the purchase of the property by working in the plaintiff’s business.

The direction for affidavit evidence

20. On 16 November 2006 the then Deputy Registrar made directions by consent, which included a timetable for the filing of affidavit evidence by both parties. It is not clear that there was any real consideration given as to whether this was the appropriate course, either by the parties or by the Court. Since the Court Procedures Rules 2006 came into force on 1 July 2006, the general rule has been that evidence at the trial of a proceeding started by originating claim is to be given orally in open court: r 6700(1). Evidence in a proceeding started by originating application is to be given by affidavit: r 6700(2). The distinction between the two forms of originating process appears from r 35. An originating application is appropriate where the only or main issue is an issue of law, and a substantial dispute of fact is unlikely. Where there is a significant dispute on the facts, it is appropriate to commence proceedings by originating claim, with evidence being given orally. The present action was commenced in January 2006 and was properly commenced under the Supreme Court Rules then in force by originating application. By the time the action came before the Deputy Registrar for directions, the new rules had come into force. Practitioners and Court officials were not yet familiar with them. I accept that this is probably the reason that little thought seems to have been given to the direction about affidavit evidence.

21. R 6701 permits an exception to the general rule: the parties may agree that the evidence is to be given by affidavit. The agreement must be made before the proceeding is set down for trial, and the parties must tell the Court about it. It does not appear in the present case that such an agreement was arrived at, or that the Court was told about it. Even where such an agreement is made, the Court may order that the evidence be given orally.

22. It has been apparent from the earliest stages of the present action that there would be a substantial dispute between the parties as to questions of fact. The plaintiff’s claim is pleaded by a statement of claim. The defendant has delivered a defence and counterclaim.

23. In Catanzariti v Romano [2009] ACTSC 38, notwithstanding that the parties had proceeded, as in the present case, on the assumption that evidence-in-chief would be by affidavit, I ordered that the proceeding continue as if started by originating claim and the evidence at the trial be given orally in open court. As I said when making that order, adducing the evidence-in-chief of witnesses by affidavit in a case in which the facts are disputed deprives the Court of the opportunity to observe the witnesses giving their evidence without the assistance of leading questions, and without the help of a solicitor to put their evidence into words. More recently I said in Abbhall Pty Ltd v Canberra Land Developments Pty Ltd [2009] ACTSC 120 that oral evidence-in-chief will always be more satisfactory for the Court where there are issues as to credibility and as to reliability of memory.

24. In the present case, far from saving time, it seems to me with the benefit of hindsight that the case could have been listed for hearing much earlier, and heard over a much shorter period, if the evidence had been given orally. The solicitors for the parties signed a certificate of readiness in June 2007, by which time affidavits of the parties and five other witnesses had been filed and served, estimating that the hearing would take two days. The hearing was fixed, on the basis of that estimate, for Monday 19 November 2007. The hearing occupied the whole of that week (five sitting days) and had to be adjourned to 25 March 2008 to be completed. The two days fixed in that week proved inadequate, and the hearing went over to 16 June for a further three days then to 10 July 2008 for its final two days. In all, what should have been a relatively simple dispute between two individuals over an amount which now turns out to be about $100,000.00 has occupied twelve sitting days spread over some eight months, generating nearly a thousand pages of transcript and a similar volume of exhibits. An accurate estimate of the length of a hearing, so that the whole hearing can take place on consecutive days, is highly desirable for the Court, the profession and the parties and greatly increases the Court’s prospects of preparing reasons for judgment within a reasonable timeframe. This is a case which would have benefited from the rigour of a docket case-management system as in use in the Federal Court of Australia.

The affidavit evidence

25. The plaintiff’s first affidavit was filed and served on 10 October 2006. He swore that he had contributed to the purchase price of the Kirkwood Crescent property the sum of $81,000.00 “directly from my family law settlement proceedings”. He deposed that he and the defendant jointly borrowed $225,000.00 towards the purchase from the Bendigo Bank, and this is borne out by the loan agreement. I am satisfied that although the loan was secured by mortgage over the Kirkwood Crescent property, which was registered in the defendant’s name alone, by virtue of the loan agreement the plaintiff was jointly and severally liable to the bank for repayment of the loan. The plaintiff swore that the defendant had contributed $80,000.00. He said that the only reason he and the defendant had registered the property in her name alone was that he had continuing reservations about having any property registered in his name because of the family law proceedings with his ex-wife.

26. He deposed that he and his sons had moved into the Kirkwood Crescent property, as did the defendant and her sons, on settlement in September 2001. He deposed that during this period he hired the defendant as a bookkeeper for his business, Tablelands Explosives, working ten hours a week. He said that she worked in that capacity for about a month, from 7 June 2002 to 5 July 2002, and he paid her $200.00 per week (this was consistent with the assertion he had made in his defence to the defendant’s counterclaim, filed in April 2006). In support of the assertion, he annexed what he swore was a true copy of a page from his wages book and weekly time and pay sheet for the defendant. The page annexed records the employer as Tablelands Explosives and the employee as Holly Friend of 25 Kirkwood Crescent, with the period she worked as the period from the week ending 7 June 2002 to the week ending 5 July 2002. He said that she was not a trained bookkeeper and had been unable to carry out the work competently. After a month he had had to employ somebody else to do the work.

27. The plaintiff deposed that his relationship with the defendant was a volatile one, and that despite their efforts their families had trouble living in the same house. The defendant’s behaviour towards him was inconsistent, sometimes being sweet and loving and at other times being moody and unreasonable. He deposed that in about January 2003 the defendant asked him and his sons to leave the property. They moved out, initially boarding with a friend and a few weeks later renting accommodation elsewhere in the same suburb. He said that the defendant refused to let him take any furniture with him, notwithstanding that he had purchased most of the furniture in the Kirkwood Crescent property. As a result he had to buy “new furnishings and whitegoods”. This had cost him $15,000.00 to $20,000.00. Because he needed to incur this expenditure and to pay rent, he had been unable to continue making mortgage repayments in relation to the Kirkwood Crescent property, and had made only or two payments after he moved out.

28. He then deposed that on about 6 January 2003, that is during the month he said he and his boys moved out, the defendant sold the Kirkwood Crescent property for $470,000.00. On about 20 February 2003 the defendant paid him $50,000.00 by deposit into his bank account. During January or February 2003, in the course of a conversation, the defendant said words to the effect “Why don’t you invest the remainder of your money in another property I purchased? This would be a house for our retirement. It will be for both of us.” The plaintiff had agreed to this.

29. The plaintiff further deposed that the defendant told him that on about 6 January 2003 she bought the Woodfull Loop property for $330,00.00. This house was also registered in her name only. From time to time he and the defendant had conversations about the Woodfull Loop property to the effect that when they retired, they would be able to sell it and “have a nice life in retirement”.

30. The plaintiff deposed that on about 2 May 2003 he withdrew $30,000.00 and lent it to the defendant so that she could buy a car. She made it clear that she would repay the money, and he made it clear that he expected to be repaid. On about 10 May 2003 the defendant repaid the loan.

31. The plaintiff went on to say that at about the end of 2003 or the beginning of 2004 he asked the defendant to pay him $31,000.00 “representing the balance of the moneys I had initially contributed to the Kirkwood Crescent property that she had not paid me back after its sale.” The defendant refused to pay him the amount. She had on occasions admitted that she owed him the money. At one time she proposed in an undated letter to have the plaintiff’s mother to live in the house and to look after her, as an alternative to paying back the money. In the same letter she said that she “would list your boys in my will in relation to your money in this house.”

32. In January 2007 the defendant swore an affidavit which I accept was intended to set out her evidence-in-chief. She said that she had commenced a relationship with the plaintiff in late April 2001 and that they had lived together from late October or early November 2001 until January 2002. The relationship had ended on 30 October 2003.

33. She said that the background to the purchase of the Kirkwood Crescent property was that the plaintiff was in the middle of a property dispute with his former wife and was being forced to sell the former matrimonial home and also an investment property. The plaintiff offered, if the defendant would agree to buy a larger house in Gordon to house both families, to become a joint mortgagor to enable her to borrow enough money to make the purchase. Her income alone was insufficient. The plaintiff persuaded her to buy a larger house. She sold her house at Conder, with the sale being completed on 14 September 2001 and the purchase of the Kirkwood Crescent property settling on the same day. The purchase price for Kirkwood Crescent was $370,000.00. She and plaintiff jointly borrowed $225,000.00 from Bendigo Bank. She contributed the net proceeds of the sale of her house, $80,719.62.

34. The trustee of the plaintiff’s superannuation fund had, a few weeks earlier, agreed to pay an amount to the plaintiff, being satisfied that he was suffering financial hardship. An amount of some $108,000.00 was paid to the plaintiff, out of which he paid about $28,000.00 to the solicitors acting in his family law proceedings, leaving $80,000.00 available towards the purchase. This was paid into a bank account in the defendant’s name. Late in August she drew a cheque on the account for $37,000.00 to pay the 10% deposit on exchange of contracts for the Kirkwood Crescent purchase. Two weeks before settlement she drew a further cheque for $12,165.00 on the account to pay stamp duty. A week before settlement she drew a cheque on the same account for $23,638.32 towards the balance of the settlement. The total of those three cheques, $72,803.32, represented the contribution made by the plaintiff towards the purchase price. The rest of his $80,000.00 was spent by the two of them on a trip to Bali in November 2001, and on household expenses including furniture and sheets and towels.

35. The defendant said that she proposed that the purchase of the property should be in both names but the plaintiff refused. She recalled a conversation at about the time of settlement at the office of the solicitor acting on the purchase, in which the plaintiff had said, “As far as I’m concerned the house is Holly’s and the business is mine”. The solicitor had suggested drawing up a deed confirming that the plaintiff had some equity in the property. The defendant agreed to the suggestion but the plaintiff refused, saying, “No way. I do not want my name legally attached to this house in any way, shape or form, as far as I am concerned the house is Holly’s.”

36. The defendant said that on the same day, she had asked the plaintiff “why he did not want his name on the house.” He had said, “The house is your security and the business is mine.” She protested that she could not afford to repay him. He said, “You can work for me, running the office and we will come to an agreement on how much and that way you can pay me back.” She agreed to this proposal. The plaintiff had repeated these remarks on many subsequent occasions.

37. The defendant said that she moved into the Kirkwood Crescent on settlement, with her three sons. The plaintiff and his sons did not “officially” move in until mid-October or early November 2001. The couple went to Bali for twelve days in the middle of November.

38. The defendant said that there had been an arrangement that the plaintiff would pay the mortgage payments, while she would pay for household expenses such as gas, electricity, rates, telephone and food. The plaintiff had made two repayments after he had moved out in January 2002, but from March 2002 the defendant had made all mortgage payments.

39. In relation to her work for the plaintiff’s business, the defendant said that in about May 2001 she began to help with office work, but without remuneration. After they moved in together, she started to work for him officially, on a part-time basis, running the office for the business from home, in her words “in order to pay off my debt to him for his contribution to my house.” The agreement was that she would be paid $200.00 a week, and would attend to banking, mail, sending and receiving facsimiles, collecting debts, and some dealings with suppliers and with the accountant for the company. She said that she never asked for payment because she regarded the work as in repayment for the contribution the plaintiff had made towards the purchase of the house. The plaintiff changed the account name on the plaintiff’s mobile telephone to his company, and the company paid the telephone account until about December 2003. The plaintiff issued the defendant with a company petrol charge card in June 2002, but this arrangement lasted only a month because the plaintiff’s ex-wife objected to it.

40. The defendant then deposed that she had a handwritten and signed document from the plaintiff dated 14 July 2002 stating that she had worked for him for a period of two years at a rate of $400.00 per fortnight. She said that the two year period incorporated her casual work for the plaintiff dating back to May 2001. She annexed a copy of the document, which is on the letterhead of Tablelands Explosives Pty Ltd and reads:

Holly Friend has been employed on a part-time basis with Tablelands Explosives for a period of two years. Holly takes care of day to day office duties, business activity statements and payments. As a part-time employee Holly receives a fortnightly salary of $400.00

Robert J Leeson

Manager

Tablelands Explosives

14 July 2002.

The defendant did not in her affidavit go into any further detail about how this document came into existence. A careful reading of her affidavit makes it clear that she was not asserting that the contents of the document were true, though she did not deny their truth in terms. This document assumes some significance in the action and I shall return to it.

41. The defendant then asserted that after the plaintiff moved out, she decided to sell the Kirkwood Crescent property in order to repay him “the remaining debt of $50,000.00 which we calculated still owing from the house (taking into account the $20,000.00 worth of the work I did for him and his business)”. She repaid the plaintiff $50,000.00 by cheque in February 2003. She said that as far as she was concerned, as of that date, she had repaid the debt in full. She denied any conversation to the effect that the plaintiff would have any interest in the Woodfull Loop property, and any conversation about a joint retirement. She said that she had obtained finance for the purchase of the Woodfull Loop property through Tonto Home Loans well before the purchase. The plaintiff had been aware of the purchase and he and a friend, Sue Proudman, had helped her to move into the Woodfull Loop property.

42. The defendant gave a somewhat more extensive version of the events surrounding the purchase of the car in April 2003. She said that she told the plaintiff in that month that she had applied for a further loan of $30,000.00 from her mortgagee to buy a new car. The plaintiff went with her to a car dealer where she found a car she liked. She left a deposit of $500.00 and agreed to pay the balance when the loan was approved. There were some alterations to be made to the car which were to take about two weeks. On 14 April 2003 the dealer rang to say that the car was ready to collect the following day. As it happened, 15 April is the defendant’s birthday. Coincidentally it is also the plaintiff’s birthday. There had been some delay with the loan approval. The plaintiff said that he would pay for the car. The defendant accepted gratefully, and said that she would pay him back when the finance came through. She said that he replied with words to the effect “we will worry about that later”. When she arrived at the dealer’s the next day, she was shown a car with a body skirt. She said that this was not what she had ordered. The plaintiff, who was with her, said, “Happy birthday”, and gave her a bank cheque for $21,000.00 in favour of the dealer. This left an amount of $40.00 which the defendant paid in cash. The plaintiff made it clear when he paid for the car that it was a birthday present for the defendant.

43. On 9 May 2003 the lender approved the defendant’s loan. She wrote a cheque out to the plaintiff for $21,000.00 and offered it to him. He told her that the car was a birthday present and that he would not accept any repayment from her. She said, “No, you have to accept it. I don’t want you to say I still owe you money.” The plaintiff said that he would not accept the cheque and that the car had been a gift. After some further discussion the defendant eventually said, “Look, why don’t you accept the cheque as a full and final settlement of any debt you said that I owed you. You can use the money towards a down payment on the block of land at Colinton which you are purchasing.”

44. The defendant said that the plaintiff had ended their relationship on 30 October 2003. She had met her present husband, Ian Reichstein, on 5 December 2003.

45. She denied that the plaintiff had ever asked her for repayment of $31,000.00 at any time prior to the lodgement of his caveat on the title to the Woodfull Loop property in October 2004. She said that during 2004 the plaintiff maintained contact with her, generally by text message to her mobile telephone. On 14 February 2004, St Valentine’s Day, he had sent her a box of red roses and had inserted an anonymous message in the Canberra Times. A short time after this he asked her to meet him and she did so. He tried to hand her a letter which included a proposal of marriage but she refused both the proposal and the letter. The messages and calls continued. The defendant said that she had to be forthright in telling the plaintiff to leave her alone.

46. The defendant annexed to her affidavit a copy of a letter from Higgins Solicitors, who had acted on the purchase, dated 20 June 2002. The letter informed her that the plaintiff had consulted the firm the previous day about his financial contribution to the Kirkwood Crescent property. The plaintiff had instructed the solicitors that he had contributed about $81,000.00 to the purchase price and informed them that the defendant had recently said that she did not accept that he had any interest in the property. They said that they would not be able to act for either party in the event of a dispute, and said that the plaintiff hoped that the matter could be resolved without litigation. The defendant said that this was the context in which she had written the letter to the plaintiff annexed to his affidavit and referred to in paragraph [31] above.

47. Ms Proudman swore an affidavit in January 2007, prepared by the solicitors for the plaintiff. She had been a longstanding friend of the defendant but had evidently fallen out with her by the time she swore her affidavit. She said that she had met the defendant and her then husband through a mutual friend about fifteen years earlier. She was the godmother of the defendant’s youngest son, born in 1995. She recalled the defendant meeting the plaintiff. She remembered the defendant talking about the plaintiff’s strong financial position. She recalled, I am satisfied mistakenly, that the plaintiff and his sons had moved into the defendant’s house at Conder in late 2001. She remembered them moving to the larger house in Kirkwood Crescent, and was aware that the title was to be in the defendant’s name only. Ms Proudman understood that this was related to the plaintiff’s Family Court proceedings. She remember the sale of the Kirkwood Crescent house and the purchase of the Woodfull Loop property in 2003. She had helped the plaintiff and the defendant with the defendant’s move into her new house.

48. Ms Proudman’s evidence was generally supportive of the plaintiff’s case. She swore that the defendant had told her that she had no intention of sharing any profit from the Kirkwood Crescent sale with the plaintiff although he had contributed to the purchase price. She had told her at one point that she intended to include the plaintiff’s boys in her will as a compromise and a show of good faith.

49. In late 2003 the defendant told Ms Proudman that she had met another man, who I infer was Mr Reichstein. Ms Proudman said that she told the defendant that she should do the decent thing and decide between the two men. She should not string the plaintiff along. She said that the defendant said in reply, “No, stuff him. I’m going to use him for his money. Bob spent a night with someone else while we were separated. He’s going to pay for hurting me. I’m going to take whatever is on offer.”

50. Ms Proudman swore to a further conversation in April 2004, the last time she had seen the defendant. She had urged the defendant to do the right thing and pay the plaintiff the money she owed him, or at least to change her will and leave something to his sons. The defendant had said, “No way, he can go to hell. I don’t care if it’s his money. I’m keeping the money now and I’ll never pay it back.”

51. Both the plaintiff and the defendant put on affidavits in reply. The plaintiff deposed that during cohabitation he had paid all household expenses from his earnings, giving the money to the defendant. At one point in this affidavit the plaintiff said that the defendant had commenced working for his business in about June 2001. She had been unable to cope with the work and they agreed after about a month that this would come to an end. He paid her $200.00 per week for the period she worked for the business. Later in the same affidavit he said, “Except for the one month period between June and July 2002, Holly never worked for Tablelands Explosives undertaking bookkeeping work.” The inconsistency as to the year in the affidavit was explored during oral evidence.

52. In the affidavit, he acknowledged writing the statement that the defendant had been employed by his business for two years, and acknowledged that this had been untrue. He said that he had written the letter at the defendant’s request as a personal favour, because she did not have proof of income and could not obtain finance. He disagreed that there had ever been any conversation between them about paying $50,000.00 in full satisfaction of his contribution. He acknowledged that the $50,000.00 had been paid but said that at that time they had discussed the fact that there was a further amount of $31,000.00 outstanding, which the plaintiff “agreed to invest into the new property at Woodfull Loop.”

53. As to the purchase of the car, he denied ever saying that the car was a birthday present to the defendant. He said that he always made it clear that his birthday present to her was a spoiler kit which he arranged for the dealer to add to the car. He specifically denied any conversation at the time of repayment of the $21,000.00 to the effect that the payment was in settlement of the earlier claim.

54. In her second affidavit, the defendant said that she was still living at the Woodfull Loop property with her three children and her new husband. They had added extensions to the house in 2005. Her husband had sold his previous house and put the proceeds, $217,500.00, towards reduction of the mortgage over the house. I infer that he had also made himself jointly liable for the whole of the bank loan secured by mortgage over the property. The defendant and her husband had executed a financial agreement under s 90B of the Family Law Act 1975 (Cth) to reflect these arrangements.

The hearing

55. At the commencement of the hearing counsel for the plaintiff sought leave to amend the statement of claim so as to alter the date when cohabitation between the parties ceased from January 2003 to January 2002, on the basis that the plaintiff accepted that his recollection had been wrong about this. Counsel further sought leave to amend the defence to the counterclaim in which it had been pleaded that the plaintiff had employed the defendant from 7 June 2002 to 5 July 2002. He sought to amend this to the same dates in 2001, and again attributed the mistake to the plaintiff’s memory.

The plaintiff’s oral evidence

56. The plaintiff gave oral evidence, at the commencement of which he corrected his previous affidavit evidence about these dates. He said that he and the defendant had ceased cohabiting in January 2002, having lived together for five months, and that she had worked for him in 2001, not 2002.

57. The plaintiff agreed that the contract for the purchase of the Kirkwood Crescent property had originally been prepared in the names of himself and the defendant as purchasers. A copy of the conveyancing file of the solicitors who acted on the purchase is in evidence, and it is clear that this is so. Indeed, the contract was originally prepared in their names as joint tenants. It was amended to delete the plaintiff’s name prior to exchange. The plaintiff agreed that this happened on his instructions. There had been two reasons, the first being his concern about the family law proceedings, and the second being that his company Tablelands Explosives Pty Ltd was at the time in financial difficulties. He had given personal guarantees in respect of company indebtedness, and he believed that if his name was not on the title, the property would not be available to creditors.

58. Counsel for the defendant cross-examined the plaintiff at some length in an attempt to have him admit that the reason he did not want the house in his name was that he did not want to have any property or interest in the home. The plaintiff’s answers were to the effect that he did not want to have any interest in such a way that it might result in a sale of the house.

59. The plaintiff was also asked whether, in paying the cheque for his superannuation money into an account in the defendant’s name, he had been attempting to conceal this asset from the Family Court. He denied this, but had to admit that on 29 August 2001 he had signed a statement of financial circumstances for the purpose of his Family Court proceedings, listing his assets, and that the assets did not include the amount in the bank account (which I infer at that date would have been about $74,000.00). His explanation for this was quite unsatisfactory, for example seeking to rely on the fact that the contents of the financial statement had not been completed in his handwriting. There is no question that he signed the statement on the date it bears in the presence of the solicitor acting for him in the Family Court proceedings.

60. The plaintiff agreed that he had signed a further financial statement for the Family Court in June 2004 in which the following words appear:

I applied $81,000.00 to the purchase of real property with Holly Friend. I received $50,000.00 from her in 2003 to pay out my interest and I have invested this in Tablelands Explosives and I have purchased real estate in Bumbalong.

61. His explanation was that the use of the words “to pay out my interest” had been an oversight. He agreed that he had not listed any residual equitable interest in the Woodfull Loop house in his listed assets in the document. He said that this had been an error, something he had overlooked, and a serious oversight. He denied any suggestion that he had completed the form in the way he had in order to obtain any advantage at the expense of his ex-wife in the Family Court proceedings.

62. He gave inconsistent answers in cross-examination about conversations with the defendant at the time of the sale of the Kirkwood Crescent property and the purchase of the Woodfull Loop house. At one point he said that the defendant had asked him whether she could keep the $31,000.00 because there was a shortfall for the Woodfull Loop purchase. A few questions later he said, “At that point in time no monetary figure was put on it. We both agreed that the house at 64 Woodfull Loop would become a retirement house for both of us, so monetary values weren’t put on it . . . if I had to look at it then it would have been half the profit plus the $31,000.00 I put in. Monetary values weren’t placed on it then.”

63. The plaintiff was asked in cross-examination whether he had at one stage said or written to the defendant that the house belonged to her. He conceded that he had done so. It was put to him that this had been in June 2002, and he thought that this sounded about right. He identified an envelope on which had earlier been written “Happy birthday Stumpy”. “Stumpy” was apparently a nickname used by the defendant for the plaintiff. These words were in the defendant’s handwriting. I infer that the envelope had earlier contained a birthday card from the defendant to the plaintiff, probably for his birthday in April 2002. These words had been lined through. On a blank area on the face of the envelope, the following words had been written: “Holly Friend 25 Kirkwood Cres Gordon ACT 2906 this house now belongs to you xx”. The plaintiff agreed that these words were in his handwriting. Also on the envelope the words had been written “Delivered on 2nd June 2002”. That handwriting has not been identified. The plaintiff agreed that he had delivered the note to the defendant.

64. Oddly, he was asked nothing else about the envelope or the incident. Neither party referred to it in the affidavits. The document was apparently produced by the defendant on discovery, but she did not mention it in her evidence at all.

65. There is really insufficient information about the envelope and the incident for me to place particular significance on it. The fact that the defendant did not make anything of it in her evidence would suggest that she did not see it as of any particular significance at the time she received it or when she was giving her solicitors instructions about her defence or instructions for the preparation of her principal affidavit. The writing on the envelope does not alter my findings of fact about the intentions of the parties at the time of exchange of contracts for the purchase of the Kirkwood Crescent property.

66. The plaintiff conceded that in late 2003 and early 2004 he had asked the defendant for $31,000.00 and that he would have been prepared to accept that amount in full satisfaction of his claim. He said that this had been basically because he wanted to stay on good terms with the defendant.

67. The plaintiff was next cross-examined about his affidavit evidence that the defendant had worked for his business in June-July 2002. He had given oral evidence, at the commencement of his evidence-in-chief, that this had been a mistake and that the period of employment was in 2001. He was asked how she had been paid. He did not recall whether it had been in cash or by cheque but he remembered seeing a cheque stub with “Bob/Holly wages” on it and an amount he could not reconcile, which he thought had been $268.16.

68. He was then asked about the timesheet, a copy of which he had annexed to his affidavit, to which I have previously referred at [26]. He said that he had “obviously” put the wrong date in. He was asked when he had prepared the document. He said that it would have been in 2001. He confirmed that it was in his handwriting. His attention was drawn to the fact that in June-July 2001 the defendant had still been living at her Conder address, and that this was prior to the Kirkwood Crescent purchase. It was put to him that the document could not have been prepared in June or July 2001. He agreed that it might not have been and that he might be confused about that. He said that he had lost a lot of documentation in a fire at his brother’s house in Banks in September 2002. Most of the Tablelands Explosives records had been destroyed in the fire, although some had survived in a bookcase and others in a safe. He had had to reconstruct some of the business records for his accountant. He suggested that the figures may have been mixed up in that process.

69. Counsel for the defendant then asked him how he could be sure that it was June-July 2001 when he employed the defendant. His answer was that it could not have been 2002 because they were no longer living together, and it could not have been 2000 because they had only just met. Accordingly it must have been 2001. He then had to concede that he had not been living with the defendant in June or July 2001, or in June or July 2002, first saying that he was not sure and would have to look at the dates again but subsequently agreeing with the proposition. He agreed that the “week ending” column of the document annexed to his affidavit had been completed with five dates all being in 2002 (7.6.02, 14.6.02, 21.6.02, 28.6.02 and 5.7.02). When this was put to him he said that he had “obviously” made a mistake. He was asked again when he had prepared the document. He was not sure. He had lost a lot of documents in the fire and might have reconstructed it for his accountant’s records. He agreed that he had not said anything about reconstructing it in his affidavit. Rather he had said “Annexed hereto and marked with the letter C is a true copy of my wages book and weekly time and pay sheets for Holly.”

70. He was then shown another photocopy of a page from a wage book, completed with the same heading but with the “week ending” column completed with the dates 10.5.02, 17.5.02, 24.5.02 and 31.5.02. He was asked how this document had come into existence. He had no recollection of it although he agreed that it was in his handwriting. It was apparent that the copy had been produced during the process of discovery. Counsel for the defendant asked the plaintiff where the original was. He said that he had not been able to track it down and was not sure where it was. It might be with his solicitors.

71. The plaintiff was asked why the page with the May dates showed an employment commencement date of 6 May 2002 and a termination date of 5 July 2002, a period of two months. He said that he had probably written it out in advance.

72. He also said that such pages were given to employees in the field. It was a fairly dirty atmosphere working with explosives. He gave the impression that the sheets were filled out in the field and their details entered into a clean wage book later. Counsel called for the clean wages book. It was put to the plaintiff that he must have had the original document in October 2006 when he swore his affidavit. He agreed with this and said that he would look for the book overnight.

73. The next morning counsel for the plaintiff produced a number of Zions 500 Time Pay and Wages Books. He said that he was not able to produce the originals of the documents on which the plaintiff had been cross-examined. They could not be located.

74. The plaintiff said that his practice had been to tear pages out of a blank wages book for employees in the field to complete. These figures would be entered into a clean wages book at his office, either by himself or an office employee. They would be checked by the external accountant at the end of each quarter.

75. None of the wages books produced related to years prior to 2004. The plaintiff said that before late 2003 he had engaged temporary labour and had probably paid cash. He changed this a little later, to say that there had been wage records for two employees in 2000-2001, and that group certificates had been issued for those employees. Those records had been lost in the fire.

76. The plaintiff was shown a wages book, commencing with a double page for one employee, described as a driller, starting with the week ending 13 June 2004. The next page related to a second employee, a shotfirer’s assistant, with the commencing date being 24 February 2004. The pages were not numbered. Four double pages had been completed, and the rest of the book was apparently blank. On closer examination, it became apparent that at the end of the book, the last two double pages had been completed with the handwriting on which the plaintiff had been cross-examined. The plaintiff was asked how this came to be. He answered a series of questions to the effect that he could not be certain, was not sure, and did not recall. He said that he was being accused of failing a memory test. He was asked whether it was possible that he might have written those pages only about twelve months earlier, when swearing his affidavit in October 2006. He conceded that this was possible, but thought that he might have recreated the documents for his accountant’s records. He could not explain why he might have needed to do so. He was asked whether he had reconstructed the document from some other written record. His answer was that he had recreated it from memory at some stage.

77. The plaintiff was shown a cheque butt on an account with the National Australia Bank in the name of Tablelands Explosives Pty Ltd, bearing the date 31 August 2001, in an amount of $286.62 and showing the payee as “Wages (July) Bob and Holly”. He agreed that the cheque butt was in handwriting but was unable to give any satisfactory explanation of it.

78. It seems to me likely that the double page at the end of the book was probably started first, and that the plaintiff at some point decided not to take it to completion, but to go to the previous double page and complete it for the shorter period from 3 June 2002 to 5 July 2002. One reason for this conclusion is that the “Week ending” column was not completed for the first double page, nor were any amounts written in. For the second double page, the sheets appear complete, and for each of the five weeks, on the right-hand sheet of the double page a column is completed showing ten hours at $20 per week, an amount of $200 for each week.

79. It seems to me an irresistible conclusion that the sheets relating to the defendant in the wages book were completed by the plaintiff at some time before he swore, and for the purposes of, his affidavit of 10 October 2006, to support his assertion in the affidavit that he had employed the defendant in his business during the period set out. I am satisfied that the document was not a document contemporaneous with any such period of employment and that it was prepared years afterwards. Whilst I am satisfied that the plaintiff fabricated this piece of evidence to support his case, I cannot go so far as to conclude that the paragraph in his affidavit about employing the defendant was deliberately untruthful. It is possible that the plaintiff genuinely believed the contents of paragraph 12 of his affidavit to be true, but that he thought it would help his case to bring into existence an apparently contemporaneous record to support his recollection. He did so in a careless and ham-fisted manner and has been caught out. The fact that did so casts considerable doubt on his reliability as a witness and his credibility generally. The fact that in doing so he chose a period which he later had to agree must have been incorrect also casts considerable doubt on the reliability of his memory, if indeed he was doing his best to remember something which had actually happened.

The defendant’s oral evidence

80. The defendant gave evidence that she believed that she and the plaintiff were purchasing the Kirkwood Crescent house together, until a conversation at the office of Higgins Solicitors with Mr Coombes when they attended to sign the contract, shortly before exchange. It was common ground that the date of exchange was 31 August 2001, with settlement on 14 September 2001.

81. The defendant said that she had done some work for the plaintiff’s business early in their relationship, but that it had been on an irregular basis. There had never been any discussion about her being paid for the work, and she did not receive any payment.

82. She said that when the plaintiff said that he did not want to have his name on the title to the Kirkwood Crescent house, she became concerned about how she would pay him back the money he was putting into the house. They agreed that she would pay off her debt by working in or running his business.

83. The defendant took the opportunity in chief to change evidence contained in a paragraph of her affidavit. The affidavit evidence is quoted in [43]. She said that her evidence about what she had said to the plaintiff on repayment of the $21,000.00 loan for her car had not included the words “why don’t you accept the cheque as a full and final settlement of any debt you said that I owed you”. In her oral evidence, the defendant said the words she had used at the time were, “Look, why don’t you accept the cheque because I do not want to be in any debt to you and have you say I owe you any money ever.”

84. The defendant was asked in cross-examination about her bank accounts at the time of purchase of the Kirkwood Crescent property. She agreed that she had been receiving income by way of commission on sales from Ideals Clothing. She was also receiving payments through the Child Support Agency from her former husband, and Centrelink payments. She conceded that she had worked cleaning houses for cash, earning about $45.00 a week on average and that she had not declared this income in her tax returns or in the information she provided to Centrelink.

85. The defendant had made an application dated 4 April 2003 through a mortgage broker, Oz Approved Home Loans Pty Ltd, to a lender, Tonto Home Loans, in April 2003. She showed her income as an annual salary of $65,000.00. She subsequently lodged a tax return declaring a taxable income for 2002-2003 of $12,000.00. When confronted with the documentation, the defendant agreed that the representation in the loan application form was false. She agreed that she had not told Centrelink that her salary for that year was $65,000.00, and conceded that she had received Centrelink benefits during the financial year in question of almost $10,000.00. She said that she had inserted the salary on the form on the advice of the mortgage broker.

86. The defendant agreed with the proposition that her wish and her understanding initially had been that the purchase of the Kirkwood Crescent house was to be a joint purchase. This changed because the plaintiff changed his mind prior to signing of contracts. After settlement, by agreement between the plaintiff and the defendant, the solicitors who acted on the purchase sent each of them an account for half of their costs and disbursements, and they paid half each. Counsel for the plaintiff put to the defendant that the arrangement was that it was to be fifty-fifty, up to the time when the plaintiff decided that he wanted the property put into the defendant’s name. The defendant said that this was correct, until the plaintiff “changed his mind and decided he no longer wanted to be – have equity in that home. That he no longer wanted to be on the title of that home, that it was my home.”

87. Regrettably it became necessary to adjourn the hearing for some four months, leaving the defendant subject to the constraints of cross-examination for that period. When the cross-examination resumed, she was asked again to confirm that her taxable income disclosed in her 2002-03 tax return was about $12,000.00, whereas she had completed the Tonto loan application documents in April 2003 stating that her salary was $65,000.00. She was asked whether she recalled that she had admitted, earlier in her cross-examination, to increasing her salary on the advice of her loans officer, so that she could extend the loan on her house. Her response was “I recall telling you that my tax documents didn’t include my family allowance or my child support because . . . they were both tax exempt and they were further income that I had.” Counsel asked whether she denied saying earlier that she was admitting to increasing her salary on the advice of her loans officer. She answered, “No, I don’t deny that, sir, I did beef it up a little bit.” She identified the loans officer as Ms Janelle Woodham. She was asked whether she was suggesting that Ms Woodham had induced her to tell an untruth to the lender and to overstate her income. Her response was that they had come to that agreement between them. It was a joint idea. The defendant said that it had been a “low document” loan and that she had not had to prove any income. She was asked whether, in completing the form, Ms Woodham had asked her questions and whether she had answered those questions truthfully and accurately. She answered, “Well, I would answer them but, as I said, I was applying for a housing loan so I may have beefed up my income in order to get that housing loan.” It was put to her that she had said something that was not true. She said, “Maybe, yes.” She was then asked whether she had told lies to the lender. She said, “I wouldn’t go that far . . . as to telling lies. I was applying for a home loan . . . I may have beefed it up a bit, yes.” The defendant agreed that when Ms Woodham had completed the form, she gave it to her to read and sign. Counsel asked whether this had been to satisfy herself that the answers were true and correct. She answered, “To satisfy that that’s what we agreed we would write down, yes.”

88. The defendant was then shown an earlier loan application form, dated 15 August 2002. She had stated her salary in that document as $7,083.00 per month, the equivalent of $85,000.00 a year. When this was put to her, the defendant said, “Yes, that was really beefed up, wasn’t it?” Counsel put to her that it had been a lie. Her response was that she had not written it, although she then agreed that she had read the document and signed it. She said, “... I understood that I was beefing up my income in order to get the housing loan, therefore I signed it, yes.” She said that in the course of her discussion with Ms Woodham, they had decided that she had to be seen to be earning a certain amount, to justify a loan of $150,000.00. She agreed that her aim had been to get her income up as high as she could. She said that she had told Ms Woodham about her income from Ideals Clothing, child support, family allowance and the sole parent pension. She also told Ms Woodham that she did three or four cash cleaning jobs a fortnight. The defendant agreed that she had not disclosed in any of her loan application forms any income from Mr Leeson’s business, although she said that Ms Woodham had been well aware of it.

89. Asked about a third application, which apparently resulted in the lender approving a loan for the purchase of the Woodfull Loop property, she answered questions as follows:

Q. You were telling the lender when you applied for this loan of $150,000.00 for Woodfull Loop that you had an income of $85,000.00 per annum? . . .

A. That we agreed that we would put the income of around about that, yes.

Q. And so you’re suggesting again that Ms Woodham for the third time was practising a deceit on the lender? . . .

A. I’m not saying she’s practising in deceit. We are going for a low document loan. You can put anything down. You do not have to prove it, and this is what she said to me.

90. Counsel put to the defendant that the document handwritten and signed by Mr Leeson in July 2002 (set out at [40]) had been false. Counsel put to her that the document could not have been correct because she had not been employed by the plaintiff’s business for a period of two years by 14 July 2002. She agreed with this but protested that she had not written the letter. Nor had she given it to Ms Woodham. The plaintiff had done so. The defendant agreed that she had been content for Ms Woodham to rely on the letter and pass it on to the lender.

Oral evidence of the mortgage broker

91. Ms Janelle Woodham gave evidence that her dealings with the defendant had been by telephone, and, on at least two occasions, at the Kirkwood Crescent house. She had a vague recollection of a man being present at the house on one of the occasions. She identified the plaintiff in Court as vaguely familiar to her.

92. She said that she took the defendant through the loan application form. She asked questions of the defendant, and completed the form in her own handwriting. She recalled the statement of employment signed by the plaintiff but could not remember precisely when she was given it or in what circumstances. Ms Woodham denied that she had ever suggested to the defendant or to any other client that they should exaggerate income figures in a loan application.

93. Ms Woodham gave evidence that in completing a loan application form, it was acceptable practice to increase income by way of government payments to the gross rather than the net-of-tax figure. Her understanding was that the lender when processing the application would adjust these gross figures, using a computer program. Ms Woodham said that she had worked with Oz Approved Home Loans until early 2003. She had been remunerated by way of commission only.

Analysis of the evidence

94. The plaintiff was, in relation to many aspects of his evidence, an unreliable witness. He had a poor memory for dates and periods of time. He had been prepared to make a false statement in a certificate as to employment to assist the defendant in obtaining a home loan. He falsely certified that she had been employed by his business for two years when she patently had not. He did so in circumstances where he was well aware that his false statement would be used to induce a lender to approve a loan to the defendant.

95. I should say that the plaintiff does not seem to have had anything personally to gain by making the false statement to the lender. I am reasonably satisfied that he did so purely to assist the defendant in obtaining her loan. But his willingness to do so reflects poorly on his integrity, and indirectly on his credibility generally.

96. It is submitted by counsel for the defendant that I should also take into account, detrimentally to the plaintiff’s credit and character, his attempt to protect his assets from his former wife and from his creditors. It may be recalled that he arranged to pay his superannuation money into a bank account in the defendant’s name, as well as subsequently instructing his solicitors to remove his name from the contract for the purchase of the Kirkwood Crescent house prior to exchange. Counsel for the defendant also submitted that the plaintiff’s motivation in doing so should be seen as coming to the Court with unclean hands, disentitling him to equitable relief.

97. I am less concerned about this aspect of the plaintiff’s conduct. It is clear that his former wife and her solicitors were well aware of the superannuation payout and indeed its precise amount. Insofar as the plaintiff’s behaviour in this regard was motivated by an intent to keep his assets out of the reach of the Family Court, the attempt was poorly thought through and was doomed to failure.

98. As to business creditors, the evidence is that the business was operated by a company controlled by the plaintiff, but that he had given personal guarantees in respect of some debts. There is no suggestion that any such guarantee has ever been called upon, or that the plaintiff was unable to pay his debts at the time of the purchase.

99. Much more serious for the plaintiff’s credibility is his fabrication of wage records to support his case. I am satisfied on the balance of probabilities that he created a false documentary record, swore a false affidavit annexing it, and gave oral evidence on oath which he knew to be false. He was not prepared to admit his misconduct even when caught out. I have no choice but to find, based upon the plaintiff’s behaviour in that regard, that he is a man who is prepared to give false evidence when he thinks it will suit his case.

100. This conclusion is reinforced by my observation of the plaintiff when giving his oral evidence, and his prevarication when faced with difficult questions. I cannot have any confidence about his evidence where it conflicts with other evidence or is not independently corroborated.

101. Regrettably, this is not a case where I find myself able to say that I prefer the evidence of the defendant where it conflicts with that of the plaintiff. The defendant too has proved to be willing to sign a document containing representations she knew to be false, with the intention of gaining a financial benefit. She displayed little or no embarrassment when forced to admit to the false representations she had made. She gave the impression that she believed that it was acceptable to make false representations to financial institutions in such circumstances. She attempted to blame the mortgage originator, or at least to paint Ms Woodham as jointly responsible for the misrepresentation. Whilst it must be acknowledged that Ms Woodham stood to gain from a loan being approved, and whilst I was left in some doubt about some of her evidence, I am not satisfied that she was the instigator of the making of the misrepresentations. I suspect that Ms Woodham took the view that the defendant had sufficient equity in her property to minimise any risk to the lender if some of the representations were exaggerated, but I am not able to make any more adverse finding about Ms Woodham, her evidence or her conduct. The defendant, on the other hand, prevaricated on a number of occasions when questioned about the representations and the loan application documents.

102. I am left with the uncomfortable feeling that the defendant’s evidence cannot be relied upon where it is helpful to her case unless independently corroborated

Factual findings

103. Whilst there is some difference of recollection about when the plaintiff and the defendant met, it is common ground that by the end of April 2001 they had commenced a relationship. The plaintiff was going through a divorce. The defendant owned a small house at Conder where she lived with her three sons. The plaintiff had access to money from a superannuation fund. They decided to buy a larger house together, and to move into it. The defendant sold her house, and put the net proceeds towards the purchase. The plaintiff contributed the net proceeds of his superannuation money. They jointly borrowed $225,000.00 from the Bendigo Bank, to be secured by registered first mortgage over the house they were buying (the Kirkwood Crescent property). The purchase price was $370,000.00.

104. The solicitors for the vendors of this property prepared a contract for sale, showing as purchasers the plaintiff and the defendant as joint tenants. I think that the nature of the tenancy was probably an assumption on their part: after the contract was received by Higgins, they wrote to the plaintiff and the defendant a long letter which included a brief summary of the difference between a joint tenancy and a tenancy in common. I am not satisfied that a point was ever reached where either the plaintiff or the defendant made a conscious decision between the two kinds of tenancy.

105. Before exchange, the plaintiff decided that the house should be purchased in the defendant’s name alone. The plaintiff’s name was removed from the contract prior to exchange, and the purchase proceeded to completion.

106. The plaintiff remained a joint borrower from the Bendigo Bank, jointly and severally liable for the loan. It seems to me highly unlikely that the Bendigo Bank would have been prepared to lend $225,000.00 to the defendant if the plaintiff had not been a joint borrower.

107. I am satisfied that at the time of exchange of contracts and settlement of the Kirkwood Crescent purchase, all was positive in the relationship between the plaintiff and the defendant. Only after settlement did difficulties emerge.

108. I am satisfied that the amounts contributed by the plaintiff and the defendant to the purchase were broadly equal, and that it was their intention at those times to purchase the property as equal owners, even though the title was to be in the defendant’s name alone. Attempts were made during preparation and during the course of the hearing on both sides to calculate precisely how much each party contributed to the purchase. It is enough for me to say that if the amounts were different, the difference was not significant and it was not the intention of the parties to purchase in other than equal shares.

109. Completion of the purchase took place on 14 September 2001. The plaintiff moved in. The plaintiff has two sons from his previous marriage. Difficulties emerged within the household after a time. The plaintiff and the defendant went to Bali on a holiday in November 2001. The holiday was not an unqualified success, at least from the defendant’s perspective. She realised that they had different interests. She thought that the plaintiff drank too much.

110. In January 2002 the plaintiff moved out of the house. The relationship between the plaintiff and the defendant continued. The plaintiff had paid mortgage repayments to the Bendigo Bank while they had been living together. After he moved out, he made another two payments but then stopped paying, and the defendant made payments from then on.

111. During the second half of 2002 the defendant decided to sell the Kirkwood Crescent house and buy a smaller house. She sold the Kirkwood Crescent house for $470,000.00, and bought the Woodfull Loop house for $330,000.00.

112. In February 2003 the defendant paid the plaintiff $50,000.00.

113. In April 2003 the plaintiff lent the defendant $21,000.00 to buy a car, which she paid him back within a month. At his own expense, he had some modifications made to the car as a present for her.

114. Late in 2003 the relationship came to an end. Soon afterwards the defendant met her present husband. They became engaged in mid-2004 and were married in 2005.

115. The plaintiff made no direct contribution to the purchase of the Woodfull Loop property. He was not a party to any loan agreement in relationship to it.

116. In October 2004 the plaintiff lodged a caveat over the title to the Woodfull Loop property. The caveat was prepared by the solicitors who had acted for the plaintiff and the defendant on the purchase of the Kirkwood Crescent property. I accept that the solicitors did not advert any conflict of duty to the parties in doing so. The caveat describes the nature of the caveator’s estate or interest in the land in the following terms: “The caveator has an equitable interest having contributed $31,000.00 to the purchase price.”

117. It seems to me that this figure was arrived at from the plaintiff’s recollection that he had contributed $81,000.00 to the purchase price of the Kirkwood Crescent house, after the sale of which the defendant had paid him $50,000.00.

118. I am unable to make any finding of fact to the effect that the defendant was ever employed in the plaintiff’s business at a wage or salary. I accept that she carried out tasks for the business at different times. I reject the defendant’s evidence that there was any agreement that she could work off any debt to the plaintiff at $200.00 per week.

119. I reject the plaintiff’s evidence that there was any agreement or arrangement between the parties to the effect that he had any interest in the Woodfull Loop property or that it was to be a house they could live in in their retirement together, or sell to provide for their retirement. The plaintiff’s evidence about that seems to me to have been, from the most generous perspective, wishful thinking on his part, which he later decided to use to support his claim of an interest in the house.

120. I think it likely that after the defendant purchased the Woodfull Loop property and paid the plaintiff $50,000.00, she had some conversation with him in which she acknowledged that he was entitled to more than $50,000.00 out of the sale of the Kirkwood Crescent house, but that she could not pay him any more money at the time because all of her funds were by then tied up in the Woodfull Loop house. I do not accept the plaintiff’s evidence that, as part of any such conversation, the defendant acknowledged that the plaintiff had any interest, legal, equitable or otherwise, in the Woodfull Loop house. But I do accept that she felt some obligation to pay him more money, recognising that he had contributed more than $50,000.00 to the Kirkwood Crescent purchase.

121. In this regard, I think it quite likely that the defendant thought about making a will or changing her existing will to make some provision for the plaintiff’s sons, in recognition of this. There is no suggestion that she ever did so.

122. It should be recognised that with the sale of the Kirkwood Crescent property, and the discharge of the mortgage to the Bendigo Bank, the plaintiff’s joint and several liability for the borrowings over that house came to an end, and that he did not assume any such liability in relation to the Woodfull Loop property.

123. In summary, then, I am satisfied that it was the intention of both parties, at the time of the Kirkwood Crescent purchase, that the plaintiff would have a half interest in that property. I am not satisfied that it was ever the intention of the parties, or either of them, that at the time of purchase of the Woodfull Loop property, the plaintiff was to have any interest in it.

Legal implications from the findings of fact

124. The plaintiff’s case is that upon settlement the defendant became the legal proprietor of the Kirkwood Crescent house, but held it on either a constructive trust or a resulting trust for herself and him, either in equal shares or in proportion to their contributions.

125. The general principle of law is that where someone other than the owner of a parcel of land has provided part of the purchase price, there will be an implied trust or resulting trust created in favour of the contributor: Allen v Snyder [1977] 2 NSWLR 685. Where two people advance the purchase price in different shares, there is a presumption that the legal owner holds the property on resulting trust for those who provided the purchase price in the shares in which they provided it: Calverley v Green [1984] HCA 81; (1984) 155 CLR 242. The question of whether such a trust has arisen is to be determined at the time of acquisition of the land: Calverley at 252. Where the persons are married, a presumption of advancement in favour of the wife may arise, but this has no application in the case of de facto relationships. (No such presumption was argued to apply in the present case).

126. Where the facts do not support the creation of an implied or resulting trust, the Court may impose a constructive trust on the legal owner if it would be a fraud against the contributor for the legal owner to assert beneficial ownership. A constructive trust will be imposed by the Court regardless of any intention of the parties, in order to satisfy the demands of equity and good conscience. If there is an implied or resulting trust, there is no constructive trust: Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583; Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137.

127. In the present case, as I have said, I am satisfied on the facts that the parties intended to purchase the Kirkwood Crescent property in equal shares, and that their contributions were in any event so close to equal as to make any differential insignificant. In the circumstances, following registration of the transfer of title to the defendant, she held the property on an implied or resulting trust as to half for herself and half for the plaintiff.

128. If I am wrong about this, I am satisfied that it would be unconscionable to permit the defendant to deny the plaintiff his half-interest in the property, and that if it were necessary to do so the Court would impose a constructive trust upon her in the same terms

129. Counsel for the defendant argues that the plaintiff has disentitled himself from equitable relief because of his motivation in placing the property in the defendant’s name. Counsel draws my attention to Gascoigne v Gascoigne (1918) 1 KB 223. The facts in that case were that a husband had acquired property in his wife’s name, and with her connivance, because he was in debt and had borrowed from moneylenders. His intention was to protect the property from his creditors. The parties separated and the husband subsequently sought a declaration that the wife held the property on trust for him. Because they were married, the presumption of advancement applied but was rebuttable. The Court (Lawrence and Lush JJ) held that he could not set up his own fraudulent design as rebutting the presumption of advancement. Hence the wife was entitled to retain the property notwithstanding that she had been a party to the fraud.

130. Gascoigne can be readily distinguished, if it is still good law in Australia. The plaintiff and defendant in the present action were not married. There was no presumption of advancement.

131. In any event, the High Court of Australia held as long ago as 1917 that the fact that the purpose with which a man has put property into his wife’s name as a trustee for him is to defraud his creditors does not prevent him from afterwards recovering that property from her, provided that the illegal purpose has in no respect been carried into effect: Perpetual Executors and Trustees Association of Australia Ltd v Wright [1917] HCA 27; (1917) 23 CLR 185. More recently the High Court confirmed in Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538 that a mother who had paid the purchase price for a house but arranged for the title to be in the names of her adult son and daughter, with a view to obtaining a Defence Service Home subsidy on another house in the future (and did so) was not disentitled to equitable relief in the form of a declaration that she held the beneficial interest in the house. The relief was made conditional on her repaying the statutory subsidy.

132. In the present case, I accept that the plaintiff’s motivation in having the legal title to the Kirkwood Crescent house in the defendant’s name alone was to protect the house from sale at the instigation of future creditors, whether his former wife or creditors of his business. It is clear that whatever he thought, the plan had no prospect of success in relation to his previous wife. As to business creditors, although he had given personal guarantees on behalf of his company, there is no evidence that any guarantee was ever called upon. I am not satisfied that the conduct of the plaintiff in relation to the purchase being made in the defendant’s name alone involves any illegality or failure to approach the Court with clean hands such as might disentitle him to equitable relief.

133. I have given some thought to whether the plaintiff’s fabrication of documentary evidence should disqualify him from obtaining equitable relief. It has been held that specific performance may be refused if a plaintiff is shown to have materially misled the Court or to have abused its process or attempted to do so: Armstrong v Sheppard & Short Ltd [1959] 2 QB 384. Whether the plaintiff’s behaviour has been sufficiently improper to justify a refusal of relief is an issue within the Court’s discretion. The conscious making of an untrue statement to the Court on a material issue is a matter tending against the grant of specific performance. Whether or not these considerations apply to a claim for breach of trust, I am not satisfied in the present circumstances that the plaintiff’s behaviour, unacceptable as it was, was sufficiently central to the issues in the case or sufficiently grave to warrant the Court refusing him relief.

134. Where an unmarried couple have contributed approximately equally to the purchase of a home, although the title has been registered in the name of one of them only, the likely imputed intention will be that they intended the beneficial ownership to be held as tenants in common in equal shares: see for example Carmody v Delehunt (1984) 1 NSWLR 667, affirmed on appeal by the High Court ([1986] HCA 67).

135. The Kirkwood Crescent property was sold, the sale being completed on 6 January 2003. The sale price was $470,000.00. The Bendigo Bank was paid $222,091.11. After deduction of agent’s commission, legal costs and other adjustments, the net amount received by the defendant on settlement of the sale was $234,463.15.

136. The defendant paid the plaintiff $50,000.00. Almost all of the balance must have gone towards the purchase of the Woodfull Loop property, either towards the purchase price direct, or to cover stamp duty, legal costs and other expenses.

137. Counsel for the plaintiff submits that, in round terms, after taking account of the mortgage loan borrowed by the defendant from Tonto Home Loans, $150,000.00, the plaintiff and the defendant should be taken to have contributed the balance of the purchase price of the Woodfull Loop house roughly in the proportions 65% by the defendant and 35% by the plaintiff, and that the plaintiff should be seen as having a 35% interest in the property by virtue of the equitable principle of tracing.

138. Alternatively, counsel for the plaintiff submits that the plaintiff should be seen as having contributed to the Woodfull Loop purchase an amount of $67,231.57, which the defendant should be taken as holding on his behalf as a constructive trustee, and he should be seen as having a charge against the Woodfull Loop house in respect of that amount plus interest since he contributed it.

139. It does seem to me that the plaintiff, on sale of the Kirkwood Crescent property, was entitled to half the net proceeds, that is to say $117,231.57, so that after payment of $50,000.00 to him by the defendant, he remained entitled to a further $67,231.57.

140. However, I am not satisfied that the plaintiff should be regarded as having any beneficial interest in the Woodfull Loop property. Nor am I satisfied that he ought to be permitted to trace that amount into the Woodfull Loop asset.

141. There are a number of factors which militate against tracing on the facts of the present case. The first is that the plaintiff stood by and accepted the conduct of the defendant in proceeding immediately with the Woodfull Loop property. I am satisfied that he knew about the sale and purchase in advance. It is not surprising that he accepted that her behaviour was reasonable. Before he and she commenced to live together, she had lived with her three boys in a much smaller house. It was entirely reasonable, after he and his sons had moved out, that the large house should be sold and that she should move back into a smaller one.

142. Indeed, the plaintiff gained a notional benefit when she did so. Although she had been paying the mortgage payments, he had been jointly liable to do so and was at risk of becoming liable for the balance in the event of any default.

143. Another reason is that the Woodfull Loop property has been improved using funds contributed by the defendant’s present husband, and that he has become a joint borrower from the present mortgagee over the property. Although he effected these changes to his position knowing about the plaintiff’s claim, it would in my view be unfair to him to permit tracing of the amount claimed by the plaintiff into the new property.

144. It was submitted by counsel for the defendant that any equitable interest the plaintiff might be found to have had in the Kirkwood Crescent property should be reduced to take account of the fact that after about March 2002, the defendant paid all of the mortgage repayments and the plaintiff did not pay anything. We are speaking here of a period of about eight months before completion of the sale of the house. The other side of that coin is that the defendant lived with her sons in the house during that period. It is suggested on behalf of the plaintiff that if she is to be seen as having gained any benefit at the plaintiff’s expense from paying the mortgage repayments, she should have to bring to account something in the nature of the notional rent for the house.

145. An argument of this kind was raised in Atkinson v Festic (1990) DFC 95-089, a decision of Ipp J in the Supreme Court of Western Australia. His Honour was satisfied in that case that one of the parties had had the possession of the property without having to share it with the other, but that he had during that period made mortgage payments in respect of the property. On the facts of that case, the mortgage payments exceeded the rental value by a relatively insignificant sum. In such circumstances, his Honour took the view that equity should not intervene.

146. In the present case, the same observations would seem to apply. I am not satisfied that either party should be required to give credit to the other in respect of the period from March 2002 until January 2003 when the defendant occupied the Kirkwood Crescent property and paid the mortgage repayments.

Conclusion

147. The effect of these findings is that the defendant became obliged to account to the plaintiff, from 6 January 2003, for his half share in the proceeds of sale of the Kirkwood Crescent property, $117,231.57. She paid him $50,000.00 reasonably promptly but has not paid him the balance. The plaintiff should have judgment against the defendant for $67,231.57, plus interest.

148. R 1616 of the Court Procedures Rules 2006 deals with interest up to judgment. The rule empowers the Court, in a proceeding for the recovery of money, to order that interest be included on the amount at which judgment be given at the rate it considers appropriate, for all or any part of the period beginning on the day the cause of action arose and ending on the day before the day judgment is entered. In the alternative, the Court may order that a lump sum be included in the amount for which judgment is given instead of interest. The Court may set the rate of interest at the rate prescribed in schedule 2 to the Rules. For the purposes of the present action, the prescribed rate is 9% per annum.

149. The purpose of an award of interest is to do justice between the parties. Notionally, in a case like this, the plaintiff has been kept out of his money, and the defendant has had the use of it, since January 2003. The task of the Court is to fix a rate which is fair to both parties having regard to all relevant circumstances, which will vary from case to case. The prescribed rate is a default rate, and the Court can be expected to apply it in, for example, actions for damages for personal injury where there is no contractual or commercial relationship between the parties. In most of those cases the defendant will be insured or sufficiently financially robust to be in a position to afford not to insure.

150. The prescribed rate is fixed with some recognition of interest rates available to lenders in the market place, and interest rates offered to borrowers, which are known to vary considerably depending on the financial position of the borrower and any security that the borrower is able to put forward. It is common knowledge that in reality the range between the interest which might be available to a small depositor from a bank and the interest which is demanded by a bank of an unsecured credit-card holder is extremely wide. The rate prescribed under the Rules is probably somewhere in the middle of the range.

151. In the present case, both parties are individuals with no significant influence in the financial marketplace. In the absence of specific evidence from either side, I am of the view that to allow interest at the prescribed rate would operate somewhat harshly upon the defendant and would provide the plaintiff with, to an extent, an undeserved benefit. Doing the best I can, I propose to allow interest at 6% per annum from 6 January 2003 to the date of judgment.

152. There will be judgment for the plaintiff for $67,231.57 plus interest of $27,872.55, a total of $95,104.12.

153. I shall provide the parties with an opportunity to be heard in relation to costs.

I certify that the preceding one-hundred and fifty-three (153) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Master.

Associate:

Date: 4 December 2009

Counsel for the plaintiff: Mr RP Clynes

Solicitors for the plaintiff: Meyer Vandenberg

Counsel for the defendant: Mr PA Walker

Solicitors for the defendant: Elrington Boardman Allport

Date of hearing: 19, 20, 21, 22, 23 November 2007, 25, 26

March, 16, 19, 20 June, 10, 11 July 2008

Date of judgment: 4 December 2009