Bakewell v Bakewell

[2013] NSWSC 446

Supreme Court

New South Wales

Medium Neutral Citation:	Bakewell v Bakewell [2013] NSWSC 446
Hearing dates:	26 April 2013
Decision date:	01 May 2013
Jurisdiction:	Equity Division
Before:	Sackar J
Decision:	The remaining sum of $47,000 be divided equally between the plaintiffs
Catchwords:	EQUITY - constructive trusts
Cases Cited:	Baumgartner v Baumgartner (1987) 164 CLR 137 Byrnes v Byrnes [2012] NSWSC 1600 Muschinski v Dodds (1985) 160 CLR 583
Category:	Principal judgment
Parties:	Sharon Bakewell - first plaintiff Susan Bakewell - second plaintiff Kerrie Bakewell - defendant
Representation:	Counsel: Plaintiffs self-represented M Langenheim - defendant Solicitors: No solicitors
File Number(s):	2012/330105

Judgment

Background

1. These proceedings concern a dispute between three sisters about the distribution of the proceeds arising from the sale of a property at 13 Springwood Street, Blackwall, New South Wales (the Property). The defendant, Ms Kerrie Bakewell, was the registered proprietor of the Property. At the time the Property was acquired, the Bakewell family was living in a property at Woy Woy. In order to acquire the Blackwall Property, a loan of about $143,000 was taken out in Kerrie's name from Residential Housing Corporation Pty Ltd, secured against the title of the Blackwall Property. However, shortly thereafter, the Woy Woy property was sold and the proceeds were used to pay off all but $1,000 of the loan. The Blackwall Property, at the time it was sold in late 2012, had registered against its title a mortgage in favour of Community First Credit Union Limited.

1. The plaintiffs claim there was an agreement between themselves, the defendant and their parents (namely Barry Bakewell and Lorraine Morris) that the Property would be registered in the name of the defendant but would in equity be owned equally by the sisters in the family (there were initially four sisters, however one of the sisters, Cheryl Bakewell, died on 19 December 2007).

1. The plaintiffs allege that after the death of their father, Barry Bakewell, on 12 August 2003, the defendant, without telling the plaintiffs, drew on the loan which was secured against the Property and used the funds thereby obtained for her own purposes.

1. The second plaintiff is the attorney under power of the defendant (by a general power of attorney dated 15 August 2012), and in that capacity caused the Property to be sold for apparently $342,000, with contracts exchanged on 9 October 2012. The sale was said to be necessitated due to the non-payment of the loan from Community First Credit Union Limited. The settlement date of the sale appears to have been on or soon after 20 November 2012, and net proceeds appear to have been about $142,000. The net proceeds were placed in a trust account of Cleary Finlay Solicitors, who acted on the sale of the Property. The parties do not dispute that the amount owing to Community First Credit Union Limited pursuant to the mortgage registered on the title of the Property, plus the costs and expenses of the sale of the Property, should be first paid from the proceeds of sale before distribution of the proceeds. This has been done.

1. However, the plaintiffs argued that the defendant has no remaining share in the Property because the amount used to discharge the mortgage to Community First Credit Union Limited was allegedly about $176,713.45, which they say is far in excess of the defendant's agreed share in the Property.

1. The matter was initially listed before Stevenson J on 19 November 2012, the day before the settlement of the sale. His Honour granted an ex parte injunction, which was due to expire on 5pm on 22 November 2012, restraining the defendant from dealing with the net proceeds, and standing the matter over to 10am on 22 November 2012 before the Duty Judge in Equity.

1. On 22 November 2012, Gzell J, the Duty Judge in Equity, ordered an extension of the injunction granted by Stevenson J until 5:00pm on 29 November 2012. On 29 November 2012, Gzell J further extended the injunction until 13 December 2012. On 7 December 2012 a mediation was scheduled to take place before Registrar Musgrave, but was terminated due to the defendant's non-attendance.

1. The matter came before Hallen J on 13 December 2012. In the presence of the plaintiffs, the defendant was contacted by telephone and the parties were able to agree that from the net proceeds held by Cleary Finlay Solicitors, each of the plaintiffs would receive $40,000 and the defendant would receive $15,000. The balance of $47,000 remained and, as I understand, remains the subject of dispute between the parties. Hallen J ordered the defendant to put forward any claim she wished to make on the balance of the proceeds by 4:00pm on 31 January 2013, and that if no claim was made, the sum of $47,000 would be divided equally between the two plaintiffs.

1. The issue before me is how the sum of $47,000 should be divided between the three parties to these proceedings. It is important to note that the plaintiffs assert that as a result of the family arrangements, there was a constructive trust under which the Property would be divided equally between the sisters.

Relevant principles

1. In Muschinski v Dodds (1985) 160 CLR 583, a de facto couple contributed unequal amounts to purchase land but were registered as proprietors of the land as tenants in common in equal shares. The relationship broke down. The partner who had contributed the larger share had previously shown a clear intention to give the other partner a half-interest in the property. Deane J concluded that a constructive trust should be imposed, and said (at 620):

[I]n 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...

1. Deane J drew on commercial cases involving equitable principles applied to the distribution of assets upon the dissolution of a partnership. Gibbs CJ and Mason J both agreed with the relief proposed by Deane J and that the relevant property be held by the parties upon constructive trust and repayment of each of their respective contributions. Gibbs CJ decided in favour of a constructive trust on the basis of a common obligation to pay the relevant debt based on notions of quasi-contract. Mason J on the other hand was of the view that a constructive trust was warranted on the basis that the arrangement between the parties was akin to a joint venture, the failure of which required the relevant declaration that the parties hold their respective interests in the property as tenants in common on a constructive trust after the payment of any debts incurred in the improvement of the property, to repay to each his or her respective contributions and to reside for them both in equal shares.

1. Muschinski v Dodds involved direct financial contributions made to property held in the names of both parties in equal shares as tenants in common. In Baumgartner v Baumgartner (1987) 164 CLR 137 a de facto couple pooled their income to meet household expenses and to make mortgage repayments on a property, which was purchased in the man's name alone. When he later asserted full beneficial ownership of that property, the majority (Mason CJ, Wilson and Deane JJ) approved Deane J's statement of principle in Muschinski v Dodds and concluded there was a constructive trust, and said (at 148) that this was:

the general equitable principle which restores to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them.

1. As to what constitutes a "contribution", Deane J in Muschinski v Dodds said (at 622):

any assessment of what would and would not constitute unconscionable conduct would obviously be greatly influenced by the special considerations applicable to a case where a husband and wife or persons living in a "de facto" situation contribute, financially and in a variety of other ways, over a lengthy period to the establishment of a joint home. In the forefront of those special considerations there commonly lies a need to take account of a practical equation between direct contributions in money or labour and indirect contributions in other forms such as support, homemaking and family care.

1. At the end of the hearing before me, Sharon, one of the plaintiffs, brought to my attention a recent decision of this court, Byrnes v Byrnes [2012] NSWSC 1600, which she said was authority for the proposition that it was possible for a constructive trust to be formed by a verbal agreement. I think that proposition is non-controversial.

Defendant's claim in respect of the sum of $47,000

1. The material provided to the court by way of evidence is very little, insufficient, and almost entirely objectionable. However, all of the parties in these proceedings have been and are self-represented. Bearing this in mind, I have reviewed the material before the court (including material which was provided to the court on previous occasions) relevant to determining whether there was any agreement between the sisters and their parents, under which the sisters would receive an equal share in the Property.

1. In her affidavit dated 10 February 2013, Sharon Bakewell said there was a "verbal agreement" that the Property "would be divided between the four daughters". Similarly, in her affidavit dated 11 February 2013, Susan Bakewell alleges there was an agreement "that the property is to be divided amongst the daughters of Lorraine and Barry Bakewell". In an affidavit dated 2 October 2012, Lynette Mavis Shanks (a first cousin of Lorraine Bakewell) said that in conversations which took place during her visits to the Property, Lorraine said to her "that when she [Lorraine] and her husband [Barry] died the [Property] would be a home shared by all of them". Another of Lorraine Bakewell's first cousins, Richard Daniel Shanks, also said in an affidavit dated 5 October 2012 that "during my visits to the home of Lorraine and her husband...over the years it was mentioned in conversation that the [Property] would be shared equally between their four daughters". In an affidavit dated 10 February 2013, Larni Ryan, the daughter of Cheryl Bakewell (the deceased sister), said she was present during conversations where it was said that "the house was to be sold and divided by the four daughters".

1. In relation to the mortgage on the Property's title, the plaintiffs generally assert that the loan monies secured by it were largely used for Kerrie's personal purposes and to satisfy what the plaintiffs say was a drug and alcohol addiction of the defendant.

1. In her affidavit dated 10 February 2013, Sharon said "the draw down facility Kerrie used for her own purposes" and the loan "was spent on her extravagant lifestyle and addictions. I found marijuana in her belongings and I seen her consume large amounts of vodka". Sharon also disputes the defendant's allegation regarding the payment of household expenses, and says that every member of the family paid rent which was used to meet insurance, food, repairs and maintenance expenses and electricity, water and Council rates.

1. Susan makes allegations to the same effect. She says that household expenses were paid by contributions from all family members, and that their father, Barry Bakewell, paid all Council rates and paid for kitchen and bathroom renovations. She denies that any payment by Kerrie was provided for the kitchen renovations, and she says that Kerrie's "actions of accessing the funds from the mortgage" was an "[abuse of] her power in relation to having access to the funds". Susan also describes the defendant has having enjoyed "an extravagant lifestyle".

1. However, the plaintiffs appear to accept that about $10,000 of the loan money was in fact used to assist Susan to purchase a home, and that a further $5,000 was used for a family holiday. This appears to be the basis on which the plaintiffs, at the hearing before Hallen J, consented to the payment of $15,000 to Kerrie from the net proceeds of the Property. Susan also says that although she consented to Hallen J's award to Kerrie of $15,000, this "compensates her for more than her 'alleged' costs".

1. Larni Ryan, the daughter of Cheryl Bakewell (the deceased sister) lived at the Property for a number of years, and prepared two affidavits for these proceedings. In her affidavit dated 28 January 2013, she alleges that her grandmother (i.e. the parties' mother) "fronted the costs of the electricity bills, broken household appliances and general necessities", and that despite the household's financial difficulties, Kerrie lived a relatively luxurious lifestyle, having "beautiful clothes, jewellery and the best electrical equipment". In her second affidavit, dated 10 February 2013, Larni again asserts that the parties' mother met the general household expenses and that Kerri lived luxuriously.

1. The only material provided by the defendant appears to be an affidavit dated 25 January 2013, filed on 31 January 2013. In that affidavit, the defendant concedes that although the Property was registered in her name, it was agreed it would be divided among the sisters. I am satisfied that the evidence establishes the existence of an understanding that the Property, though registered in the name of the defendant, would ultimately be divided between the sisters.

1. However, the defendant asserts in her affidavit that she used the funds obtained from the mortgage to finance certain renovations to the kitchen, make all or the majority of the mortgage repayments, pay the insurance bills, water rates, land rates, and various repair and maintenance expenses in respect of the Property, and support her parents and other family members. She asserts she is therefore entitled to the entirety of the remaining $47,000 to satisfy her one-third share of $40,000 and to compensate her for money which she says the plaintiffs borrowed or stole from her bank account. The defendant also asserts that the mortgage against the Property was known to the first plaintiff and was used for the benefit of the family generally.

1. At the hearing before me, Sharon appeared on behalf of herself and her sister, Susan, who was unable to be present in person. Susan was however available via telephone and both she and her sister were cross-examined. Kerrie was present and was represented by counsel and was cross-examined by her sister Sharon. I note in passing that no witnesses, including the parties, were given any notice of cross-examination. However, as already observed, Sharon was present in court, Susan was present by telephone, and Kerrie was present in court and represented. Therefore the evidence of Larni Ryan, Lynette Mavis Shanks and Richard Daniel Shanks is unchallenged. During the hearing, the parties appeared to accept that Kerrie made a payment of $10,000 to Susan to assist her to purchase a home, and an earlier payment of $20,000 for materials related to renovations to the Property (there was said to first be a withdrawal of $50,000 but then refund of $30,000 into the loan account). As will become apparent, this appears to be corroborated by bank statements produced by Sharon during the hearing.

1. During her cross-examination of Kerrie, Sharon produced a bundle of bank statements covering the period 1 January 1999 to 31 December 2003, 1 January 2006 to 6 March 2008, 1 July 2009 to 31 December 2009 and 1 July 2010 to 6 July 2010. There are obviously intervals of time not covered by the bank statements, however for the periods which are covered, the bank statements recorded the transactions on the mortgage account the subject of the dispute between the parties. The initial financier of the loan appears to have been Residential Housing Corporation, until about early July 2010 when the loan was refinanced with Community First Credit Union Limited.

1. The bank statements record that on 24 April 2001 there was a withdrawal of $50,000, and on 26 June 2001 there was a repayment of $30,000 into the loan account. These two transactions are the first transactions of any real significance in the account, leaving an outstanding balance of just over $20,000. As I have said, the parties did not appear to object that this sum of $20,000 was used for renovations. I should observe however that Kerrie's evidence was that the $20,000 was spent by her father on materials for the removal of asbestos from the house and the construction of a new kitchen. Whilst this does not appear to be disputed, Kerrie has not produced any contemporaneous materials substantiating that expenditure by her father.

1. The outstanding balance slowly decreased to about $19,000 by 28 May 2003, at which time there was a withdrawal of $2,000. In her oral evidence, Kerrie said this was for the purchase of a washing machine and dryer, however no documentary support was provided. The outstanding balance remained close to $21,000 until at least 29 December 2003. The father had died on 12 August 2003. By 1 January 2006 the outstanding balance increased to just over $50,000. The bank statements in the intervening period are missing, and there was, in my view, no plausible explanation for the increase in the amount owing.

1. The next major transactions were withdrawals of $12,500 on 14 December 2006, $12,000 on 9 July 2007, and $7,000 on 6 March 2008. These transactions brought the outstanding balance to about $76,000. In oral evidence, Kerrie said these withdrawals were probably used to pay for her credit card debts, which she says were incurred to meet grocery and other general expenses for the members of the household.

1. During the period from 6 March 2008 to 1 July 2009 (for which there are no bank statements) the outstanding balance increased to just over $89,000. Again, in my view, no plausible explanation was provided for the increase. On 14 September 2009 there was a withdrawal of $10,000, which was said, and I accept, to be a payment to Susan to assist her to purchase a home, bringing the outstanding balance on the loan account to about $100,000.

1. It appears that on 5 July 2010 (by which time the loan balance was about $103,500), Kerrie refinanced the loan and the account with Community First Credit Union Limited. In cross-examination, Kerri indicated that she changed the mortgage lender because she was unsatisfied with the service and irresponsiveness of Residential Housing Corporation, and that after the change she had more control over the account.

1. Following the refinancing, no statements from Community First Credit Union Limited have been provided, but it is clear, from a letter to Kerrie from Clearly Finlay Solicitors dated 23 November 2012, that the outstanding amount had increased to about $176,713.45 by 22 November 2012 (being the settlement date for the sale of the Property). Again, in my view, no plausible explanation was provided for this increase of about $70,000.

Discussion and conclusion

1. I am satisfied on the material before me that the defendant took out a loan, in her name, secured by a mortgage over the Property. The little contemporaneous material which is available supports only this finding. There is a mortgage document which names the defendant as the mortgagor and Community First Credit Union Limited as the mortgagee. There is a loan document which indicates that the defendant received or had access to a loan in her name of around $136,000.

1. The principal point of contention appears to be the use to which the loan monies were put. In Vetter v Lake Macquarie City Council (2001) 202 CLR 439 at [36] the High Court expressed its agreement with the principle, stated as long ago as 1774 (Blatch v Archer (1774) 1 Cowp 63 at 65), that "all evidence is to be weighed according to the proof which it is in the power of one side to have produced and the power of the other to have contradicted." Here, the defendant should not only articulate, but prove by admissible evidence, that she spent the money in the manner she asserts.

1. It must be readily apparent that if a person is coming to court to assert that certain monies were expended in a particular way, they should at least be able to tell the court in some detail exactly how the monies were expended, when they were expended, the names of the recipients of the various expenditures, and they should be able to provide to the court some documentation such as receipts, cheque butts, bank statements, quotations received from tradespersons for the alleged renovations, or at least an explanation of the steps taken to obtain such documentation. None of this is before me.

1. I do not, and cannot on the evidence, accept the defendant's assertion that she merely acted as a vehicle to obtain a loan to meet household expenses, though I do accept that she may well have made some contribution to household expenses from time to time, along with other members of the household. The defendant is unable to account for very large sums of money, and could provide no more than very limited and general explanations about how the loan was spent. Her inability to recall or provide detail about the use to which loan withdrawals were put may perhaps be explained by what she described as her "self-medication" with alcohol from time to time. I found Sharon and Susan (though she communicated via telephone) to be truthful and candid, and their admissions (or non-objection) in respect of the sums of $10,000 and $20,000 was consistent with contemporaneous material (namely the bank statements). However, I have reservations accepting Kerrie's evidence.

1. In her filed material, the defendant simply lists in broad terms various expenditures and purposes to which she says the loan was put, without any reference to contemporaneous material. In the absence of evidence of the nature I have described, I cannot attach any weight to her sweeping assertions. As I have said, there is documentation showing that the loan was in the name of the defendant. There is simply no evidence which enables me to find with any degree of comfort that the defendant, after clearly obtaining a loan in her own name, used it for the benefit of her family.

1. As shown from the chronology of the bank statements, there is a significant amount of money withdrawn, well in excess of $100,000, for the use of which Kerrie cannot provide an adequate or plausible explanation. In my view, the defendant has already received an amount far in excess of her share of the Property by way of discharge of the mortgage to Community First Credit Union Limited. The most compelling inference on the probabilities is that she has used a significant amount of money for her own purposes.

1. In the circumstances, I order that by the expiration of 28 days from 1 May 2013 there be distributed out of the fund held by Cleary Finlay Solicitors the remaining balance held by them to the plaintiffs equally.

1. The plaintiffs were unrepresented. Only one attended the hearing and travelled from Brisbane. She may have incurred a cost in doing so. The defendant appeared by counsel who appeared pro bono and she travelled from Tasmania also I assume incurring some costs. In all of the circumstances I think the appropriate order on the question of costs is that each party bear their own costs such as they may be in relation to the proceedings.

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Decision last updated: 01 May 2013