Bertei v Feher

[1999] WASC 40

BERTEI -v- FEHER [1999] WASC 40

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[1999] WASC 40
Published:	27/05/1999
Case No:	CIV:1583/1998	Heard:	28-30 APRIL 1999
Coram:	HEENAN J	Delivered:	27/05/99
No of pages:	10	Judgment Part:	1 of 1
Result:	Parties hold the more valuable of the properties in trust for the plaintiff as to a one-fifteenth share only and for the defendant as to a fourteen-fifteenths share and the other property in trust for the benefit of the plaintiff alone subject to a charge in favour of the defendant for a sum equivalent to the total of his payments in reduction of principal secured by the mortgage.
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Parties:	KATHLEEN BERTEI REINHARD FEHER
Catchwords:	Trusts Constructive trust Beneficial interest De facto relationship Engaged to marry Two residential properties Purchase price provided by man Tenants in common in equal shares Separation Intention of parties
Legislation:	Nil
Case References:	Baumgartner v Baumgartner (1987) 164 CLR 13 Kais v Turvey (1994) 11 WAR 357 Baars v Brendstrup (1986) DFC 95-029 Bennett v Tairua, unreported; FCt SCt of WA; Library No 920135; 16 March 1992 Calverley v Green (1984) 155 CLR 242 Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Fradd v Blythman; unreported; SCt of WA (Steytler J); Library No 970181; 24 April 1997 Gissing v Gissing [1971] AC 886 Legione v Hateley (1983) 152 CLR 406 Marcucci v Burns (1985) DFC 95-003 Muschinski v Dodds (1985) 160 CLR 583 Needham v WA Trustee Co Pty Ltd, unreported; FCt SCt of WA; Library No 2404; 8 September 1978 Tracy v Bifield (1998) 23 Fam LR 260 Wirth v Wirth (1956) 98 CLR 228

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA CITATION : BERTEI -v- FEHER [1999] WASC 40 CORAM : HEENAN J HEARD : 28-30 APRIL 1999 DELIVERED : 27 MAY 1999 FILE NO/S : CIV 1583 of 1998 BETWEEN : KATHLEEN BERTEI

Plaintiff

AND

REINHARD FEHER
Defendant

Catchwords:

Trusts - Constructive trust - Beneficial interest - De facto relationship - Engaged to marry - Two residential properties - Purchase price provided by man - Tenants in common in equal shares - Separation - Intention of parties

Legislation:

Nil

Result:

Parties hold the more valuable of the properties in trust for the plaintiff as to a one-fifteenth share only and for the defendant as to a fourteen-fifteenths share and the other property in trust for the benefit of the plaintiff alone subject to a charge in favour of the defendant for a sum equivalent to the total of his payments in reduction of principal secured by the mortgage.

(Page 2)

Representation:

Counsel:

Plaintiff : Mr J G Hanly
Defendant : Mr P R Eaton

Solicitors:

Plaintiff : Hotchkin Hanly
Defendant : Marks Healy Sands

Case(s) referred to in judgment(s):

Baumgartner v Baumgartner (1987) 164 CLR 13
Kais v Turvey (1994) 11 WAR 357

Case(s) also cited:

Baars v Brendstrup (1986) DFC 95-029
Bennett v Tairua, unreported; FCt SCt of WA; Library No 920135; 16 March 1992
Calverley v Green (1984) 155 CLR 242
Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Fradd v Blythman; unreported; SCt of WA (Steytler J); Library No 970181; 24 April 1997
Gissing v Gissing [1971] AC 886
Legione v Hateley (1983) 152 CLR 406
Marcucci v Burns (1985) DFC 95-003
Muschinski v Dodds (1985) 160 CLR 583
Needham v WA Trustee Co Pty Ltd, unreported; FCt SCt of WA; Library No 2404; 8 September 1978
Tracy v Bifield (1998) 23 Fam LR 260
Wirth v Wirth (1956) 98 CLR 228

(Page 3)

1 HEENAN J: The parties are registered as tenants in common in equal shares of two residential properties. By writ issued on 3 June 1998 the plaintiff, Kathleen Bertei, claims a declaration that they are joint legal and beneficial owners of both properties. The defendant, Reinhard Feher, counterclaims a declaration that the parties hold their respective legal interests in trust for his benefit alone. Consequential orders also are sought.

2 The parties met in April 1987, when each was about 40 years old. Mrs Bertei, a schoolteacher, had been married previously and she had a nine year old daughter and a seven year old son. The marriage had been dissolved in March 1984. Her former husband contributed to the maintenance of the children and she was supporting herself by working as a research nurse at Hollywood Repatriation Hospital. Mr Feher, a mechanical engineer working at the Alcoa Refinery in Kwinana, was a bachelor with no dependants. Within six months of their meeting he proposed marriage to Mrs Bertei. Because she was writing her thesis for a master's degree in Medical Science and had other commitments and because, in her words, "there was some talk about my children going to my ex-husband", Mrs Bertei chose to defer marriage at that stage. Instead the parties became engaged to marry at a date to be set. They looked for a wedding gown together and she looked for an engagement ring. In June 1988, after she had found a ring which she liked, he bought it for her. Within the next few months they announced their engagement to friends and family. But they did not set a date for the wedding and they never married.

3 From the time they met the parties kept company to the exclusion of all others. Mr Feher soon began staying overnight, several times during the week and sometimes at weekends, in the duplex unit at 1A Crown Court, Carine where Mrs Bertei resided with her children. Occasionally she stayed overnight with him in the house in Teague Street, Victoria Park where he resided alone. She prepared meals for him and entertained his relatives at her house from time to time. He made no direct financial contribution towards the maintenance of her household but he took her and her children away on holidays and gave her substantial financial assistance. For example, in 1988 he lent her $7000 to carry out renovations to her house and accepted only $1000 of what she gave him by way of repayment, saying that she needed the money more than he. In the same year he appointed her as a director of the company which he used when providing engineering services on contract. She received director's fees until she resigned the directorship almost eight years later.

(Page 4)

4 For more than two years the relationship continued in that way. In March 1990, because of shortage of work in Perth, Mr Feher obtained employment at Nhulunbuy in the Northern Territory. He remained in that employment until June 1993, keeping in touch with Mrs Bertei by telephone while he was away and spending time with her in Perth while on leave. In or about April 1991 he suggested to her that, because neither of them would feel comfortable living in the home of the other, she should look for a house in which they and her children could live together, one which would cost no more than $330,000. He said that the arrangement would relieve them from maintaining two households. Being aware that her financial position prevented her from making any contribution to the price, he said that he would sell his house and provide the finance for the new property, leaving her to retain her unit for her own future financial security. At her request he agreed that both of their names would appear on the title.

5 Within the next couple of months Mrs Bertei found a house at 1 Tarata Court, Duncraig which met their requirements. It had four bedrooms – one for the parties, one for each of the two children and a spare bedroom for visitors – as well as a swimming pool, a large garden and other features which she liked. On or about 3 June 1991 the real estate agent acting for the owner completed a form setting out an offer by the parties to purchase the property for $320,000 as joint tenants. A facsimile was sent to Mr Feher in the Northern Territory for his signature. Having discussed with Mrs Bertei the difference between joint tenancy and tenancy in common (noting, in particular, that in the event of the death of one joint tenant the share of the deceased would pass to the other and not to the estate of the deceased) he informed the agent that they were to be tenants in common. On 1 August 1991 they were registered as proprietors of the Duncraig property as tenants in common in equal shares.

6 In order to meet the purchase price Mr Feher had obtained a bridging loan of $137,000 from the Commonwealth Bank by way of a discount bill facility and a loan of $70,000 from the same bank, the smaller loan being secured by way of mortgage registered on the title. He paid the balance of the price and acquisition expenses from his savings. On 10 October 1991, after it had been on the market for six weeks, he sold his house in Victoria Park for $132,000 and applied that amount, together with a further $5000 from his savings, to pay out the bridging loan. By the end of October in the following year, he had repaid the smaller loan and had the mortgage discharged. Mrs Bertei had made no contribution in actual cash to the purchase of the property or to the reduction of either loan, but it is

(Page 5)

common ground that she had joined with Mr Feher in executing the registered mortgage and it seems that she had executed also an unregistered mortgage to secure the bridging loan.

7 Before the end of August 1991 and after the interior of the house had been painted – at a cost of $2300 to Mr Feher – Mrs Bertei and her children took up residence at the Duncraig property. As well as moving their belongings from her unit at 1A Crown Court, she arranged for the removal of Mr Feher's belongings from his house in Victoria Park. She let her unit and applied the rental towards reduction of the mortgage which she had granted when purchasing it in 1984.

8 For most of the time while Mr Feher was in the Northern Territory Mrs Bertei worked full-time. She finished her thesis before moving to the Duncraig property and was employed thereafter mainly as a relief teacher but also doing pathology work for Western Diagnostic Services. She applied her income towards maintaining herself and her children and paying their school fees. She also paid for some landscaping and gardening of the Duncraig property and purchased chemicals for the swimming pool, as well as linen and other items for the household. From the time when he went to the Northern Territory Mr Feher gave her the use of his company's car, the company meeting the cost of its maintenance and licence fees. Also he arranged for her to have access to his "streamline" bank account from which she drew money to pay tradesmen for fixing taps, showers, etc, as well as other expenses for the household at Duncraig. At the end of 1992 he took Mrs Bertei and her children to England, where they stayed for 10 days. Then, after he had returned to Australia to resume work in the Northern Territory, she and the children spent three weeks in Europe. He had paid their air fares and made a substantial contribution to the cost of their holiday in Europe.

9 When Mr Feher left the Northern Territory in June 1993 he commenced employment with Clough Engineering at a site near Perth and took up permanent residence with Mrs Bertei and her children in the house at Duncraig. From that time onwards he made regular payments to her for housekeeping. At first he paid her $300 per week and, because his employer provided him with a car, he left his company's car with her. In or about July 1994, when he left Clough Engineering and took over another consultancy, he purchased a car for himself. Then, because he was paying for a second car and had other expenses, he reduced the housekeeping to $250 per week. Meanwhile, early in 1994 Mrs Bertei had commenced a two year university course to qualify as a general nurse.

(Page 6)

10 In the early part of the year 1995 Mrs Bertei became aware that the unit at 1B Crown Court was for sale. Because it adjoined her own unit and appeared to be a good investment, which would provide further security for her future, she suggested to Mr Feher that they buy it. In April 1995 they purchased the unit for $135,000, having borrowed $137,500 from BankWest to meet the price and other acquisition expenses. The unit was transferred into their names as tenants in common in equal shares, the loan being secured by a mortgage over the property, and the unit was let to tenants. The parties had agreed that the rent would be applied towards the instalments payable under the mortgage and that, for the time being, Mr Feher would meet the balance of the instalments from his own funds. They had agreed also that Mrs Bertei would take over responsibility for the mortgage when she could afford to do so and that the unit then would be transferred into her name as sole proprietor, Mr Feher (in her words) "being paid back in some way for the amount of money which he had paid on the property". Pursuant to that agreement Mr Feher has paid an average of about $850 per month to meet the balance of the instalments due under the mortgage.

11 Having completed her university course, in 1996 Mrs Bertei obtained employment which, she believed, provided her with sufficient income to take over financial responsibility for the property at 1B Crown Court. That belief was supported when, in mid-1997, a representative of BankWest indicated that the bank would be prepared to accept her as sole mortgagor. However, it seems that Mr Feher was reluctant to change the arrangement, and it has continued until the present time.

12 Meanwhile, the relationship between the parties began to sour. In November 1996 Mr Feher had sought advice on his own. In January 1998, after the failure of a mediation arranged by their respective solicitors, the parties separated – although they remained under the same roof until Mr Feher left on 6 November 1998. Mrs Bertei still is residing in the house at Duncraig, with her son. Her daughter, a trainee teacher, is residing in the country.

13 At the trial there was some difference between the parties as to the discussions which took place prior to the purchase of the Duncraig property. In evidence, Mrs Bertei spoke of telling Mr Feher that in the break-up of her marriage she had ended up with only 40 per cent of the proceeds and that she would never again willingly go into a property arrangement with anyone unless her name was "half on the title deeds" of that property. She was not cross-examined as to that aspect of her evidence and, when her counsel put it to Mr Feher in cross-examination,

(Page 7)

he said that he did not recall her saying that at all. His version was that he had intended to purchase the Duncraig property in his name alone and that he agreed to include her name on the title because she expressed concern that otherwise "she would have no say in the running of the house" and that he did it "as a gesture of good faith on both parties, that we were going to go into a long-term commitment". I am satisfied that Mrs Bertei truthfully expressed to the Court her reason for requesting that her name be included on the title and that Mr Feher likewise truthfully expressed his reason for agreeing to that request, but I am far from satisfied that either stated that reason to the other before the property was purchased.

14 Mr Feher went on to testify that, having suggested that they should be registered as tenants in common, he did not have any particular distribution of shares in mind, although hers "would just have been a very nominal figure, a very nominal share". I find that, after acceding to Mrs Bertei's wish to have her name on the title, Mr Feher did not give any consideration to the distribution of shares – at least not until he saw on the transfer that they were to be registered as proprietors as tenants in common "in equal shares". Nevertheless, despite his later complaint that the settlement agents had incorrectly assumed that there was to be an equal distribution of shares and his protestation under cross-examination that he "never considered it a gift in any shape or form at any time", I find that when he signed the transfer he understood and accepted that he was giving Mrs Bertei title to half of the Duncraig property.

15 When a man pays the purchase price for a property which is transferred into the name of his wife or intended wife there is a presumption of advancement or, in other words, a presumption that the transaction was a gift (Kais v Turvey(1994) 11 WAR 357 at 360 per Malcolm CJ). I infer that when both have contributed to the purchase price there is a presumption of gift to the extent that the contribution of the man is greater than that of the woman. However, the presumption will not apply if reliance upon it would amount to unconscionable conduct. Equity then will intervene to impose a constructive trust (Baumgartner v Baumgartner (1987) 164 CLR 137). As Malcolm CJ observed in Kais v Turvey at 361, a gift in contemplation of marriage is to be regarded as a gift upon condition that it shall be returned in the event that the contemplated marriage does not take place. At 362 his Honour went on to say:

"In my opinion, it probably does not matter whether this case is regarded as one of a conditional gift which has failed or as one of constructive trust. Indeed, on the basis of modern analysis,

(Page 8)

the obligation to return a gift following the failure of a condition may well be regarded as simply an example of the imposition of a constructive trust on the ground that retention of the benefit of a gift made in contemplation of marriage would be unconscionable, when the marriage does not occur because one party does not wish to go on with it, or the engagement to marry is called off by mutual consent."

In relation to the Duncraig property the fundamental issue is whether the conduct of Mrs Bertei in asserting her claim to an equal beneficial interest is unconscionable. For the reasons mentioned by Ipp J in Kais v Turvey at 365 resolution of that issue depends largely upon whether the gift by Mr Feher was made in contemplation of marriage.

16 The evidence shows that before the end of 1987 the parties were committed to marry each other. The engagement became "formal" or "official" upon the acceptance of the ring by Mrs Bertei and their announcement of the event to family and friends. As Mrs Bertei said in evidence, she intended to marry Mr Feher: it was, as she agreed in cross-examination, "just a question of time". Their engagement to marry endured, it seems, at least until well after they purchased the Duncraig property and, on the evidence, it came to an end without either attributing blame to the other. It is common ground that the Duncraig property was to be the family home of the parties and that when they married it was to be their matrimonial home. I find that Mr Feher was acting in the contemplation of their marriage when he purchased that property and when he repaid the money which he had borrowed for the balance of the purchase price.

17 On behalf of Mrs Bertei it is said that she was encouraged by Mr Feher, or not discouraged by him, to believe that her interest in the property was not only legal but also beneficial. It is said that she acted on that belief to her detriment in that she left her own home to look after him and the Duncraig household and ended up in the Supreme Court, when otherwise she might well have bought her own property and very likely profited from its appreciation in value. In my opinion, the evidence falls far short of showing that Mrs Bertei acted to her detriment. To the contrary, I believe that she acted to her advantage. The services which she provided were much the same as those which she would have provided had she continued to live in her unit at 1A Crown Court. In addition, she had the benefit of using that unit as an investment property and she received other substantial financial benefits from Mr Feher.

(Page 9)

18 In the circumstances, I find that it would be unconscionable for Mrs Bertei now to retain the full benefit of her legal interest in the Duncraig property. In my opinion Mr Feher is entitled to equitable relief in the form of a constructive trust. I would declare that the parties hold the property in trust for each of them in proportion to their respective contributions to its acquisition, improvement and conservation.

19 The contribution which Mr Feher made to the acquisition of the Duncraig property was overwhelmingly greater than that made by Mrs Bertei. As we have seen he provided about $113,000 from his own funds towards the purchase price of $320,000, met all of the other acquisition expenses and paid off the loans for the balance of the purchase price. Mrs Bertei's sole contribution to its acquisition was her joining in executing the mortgages, registered and unregistered, which secured the loans. In doing so, she put herself at risk of being called upon to pay all or part of the moneys lent but, bearing in mind that the bridging loan was secured by the Victoria Park property (which was otherwise unencumbered) and that the smaller loan was secured by the Duncraig property itself, the chance that the risk would become a reality always was extremely remote. As we have seen, the larger loan was repaid within three months and the smaller within fifteen months.

20 Apart from the evidence showing that Mr Feher paid for the painting of the interior of the house and that Mrs Bertei paid for landscaping the property, there is little information available as to what was done by the parties towards its improvement.

21 As to conservation of the property, it is true that Mrs Bertei resided there and did all of the cooking, cleaning and other household chores from August 1991 until the present time and, at least until Mr Feher returned from the Northern Territory in June 1993, she did all of the gardening, the cleaning and the maintenance of the swimming pool and looked after the exterior as well as the interior of the house. While Mr Feher resided there she provided his meals, did his washing, ironing and so on. In my opinion, however, such activities do not qualify as a relevant contribution. Even if they did, they were outweighed by the fees which she received following her appointment as a director of his company, by the provision which he made for expenses to be paid from his "streamline" account, by his provision of the motor car and the housekeeping allowance and by his payment, between 1993 and 1998, of the bulk of the municipal and water rates and the bills for telephone, water consumption, gas, building insurance and electricity – such rates and bills amounting to a total of more than $23,000.

(Page 10)

22 Counsel agree that the Duncraig property now is worth between $380,000 and $400,000. Without even attempting precise mathematical calculation I assess the value of the contribution which Mrs Bertei has made to the acquisition, improvement and maintenance of the property as being about $25,000. I calculate her share as one-fifteenth and the share of Mr Feher as fourteen-fifteenths.

23 Different considerations apply in relation to 1B Crown Court. It is common ground that when the unit was purchased the parties intended it be an investment, providing additional future security for Mrs Bertei. The title was to be transferred into her name alone when she could afford to meet the instalments due under the mortgage and she was to reimburse Mr Feher for what he had spent on the property. The parties never intended that he should retain any beneficial interest in it. In those circumstances, in my opinion, no question of unconscionability arises and there is no basis for making a declaration either that the parties are the joint legal and beneficial owners, as is claimed in the reply, or that they hold their respective legal interests in trust for the benefit of Mr Feher alone, as is sought in the counterclaim.

24 As the parties intended that Mrs Bertei be the sole beneficial owner of 1B Crown Court I am inclined to make a declaration in those terms and to order that the property stand charged in favour of Mr Feher for a sum equivalent to the total of what he has paid in reduction of the principal secured by the mortgage registered over it. That sum, I assume, is only a proportion of the monthly payments which he has made, and the evidence before the Court does not enable me to calculate it. That being so, and as counsel should have the opportunity of obtaining instructions as to the suitability of the proposed declaration and order, I shall make these reasons available to counsel before delivering them formally. The parties, I hope, will agree upon that sum and will agree also upon a minute of declarations and orders consequent upon the findings which I have made. Otherwise, I shall hear further submissions from counsel.