Butler v Walker Fletcher
[2015] SADC 146
•28 October 2015
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
BUTLER v WALKER FLETCHER
[2015] SADC 146
Judgment of His Honour Judge Chivell
28 October 2015
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS - CONTRACT IMPLIED FROM CONDUCT OF PARTIES
Defendant inherited a half-share in a house property. Plaintiff advanced the money to buy the other half-share and to renovate and subdivide the property and for other purposes. Whether that money was a loan or a gift - surrounding circumstances examined.
Held: The advance was not a gift. There was an agreement between the parties to enter into a ‘joint venture’ on a 50-50 basis to purchase, renovate, subdivide and sell the property.
Judgment for the plaintiff in the sum of $91,194.90.
Hawkins v Clayton (1988) 164 CLR 539; Byrne v Australian Airlines Ltd (1995) 185 CLR 410; Briginshaw v Briginshaw (1938) 60 CLR 336, considered.
BUTLER v WALKER FLETCHER
[2015] SADC 146
Mr Butler and Ms Walker Fletcher were old friends. They had been neighbours for about 20 years.
Mr Butler is a motor mechanic. He had worked on Ms Walker Fletcher’s cars over the years. He is also a skilled handyman-builder.
Ms Walker Fletcher had a career in the banking industry. She became unemployed due to poor health. She is skilled in finance and bookkeeping.
In about 2007, Ms Walker Fletcher moved to Queensland. She purchased a block of land in a development called ‘Varsity Lakes’, on the Gold Coast. She contracted with a builder to build a house for her.
In late 2008, around the time of the ‘Global Financial Crisis’, Ms Walker Fletcher learned that her investments, worth about $600,000.00, had failed.
It would seem that the relationship between Mr Butler and Ms Walker Fletcher had become close by then. Mr Butler travelled to Queensland twice to see Ms Walker Fletcher. They spoke almost nightly on the telephone.
The Initial Advances
There is no dispute that in late 2008 Mr Butler advanced $128,640.00, in two payments of $50,000.00 and $78,640.00, to Ms Walker Fletcher so that she could meet her obligations to the builder in Queensland. There is a dispute as to the nature of these payments. Mr Butler asserts that they were loans, which Ms Walker Fletcher promised to repay with interest at 8%. Ms Walker Fletcher said that the money was a gift, motivated by love and affection. Her evidence was:
(H)e said 'I will give you the money' and I asked him 'Is it a loan? Is it a gift?', and he said 'No, it is a gift' and I said 'Well, does that entail interest or any other entailments?', and he said 'No, it definitely does not'. Once again, 'I love you so much, it does not entail any loan repayments or any interest'.[1]
[1] T 178.
There is no longer any point to this dispute, however. On 6 December 2012, Ms Walker Fletcher paid $469,569.86 to Mr Butler. That amount included the $128,640.00 just mentioned. Ms Walker Fletcher made that clear in written documents and in evidence.[2]
[2] Exhibit P1.12 and T 179.
The only outstanding issue is the question of interest. Mr Butler gave evidence that they specifically agreed that Ms Walker Fletcher would pay interest at 8%.[3] Ms Walker Fletcher denied that, as I have already observed. The plaintiff’s accountant, Mr Cutillo, has included $9,685.00 on his spreadsheet for interest.[4] Ms Walker Fletcher included that sum in her note dated 19 May 2011.[5] She attributed the sum to ‘loan’. The amount is very close to 8% of the principal sum from the date the plaintiff advanced the money to the date Mr Butler settled on the sale of his house and paid out his mortgage. As the cross-examination of Ms Walker Fletcher demonstrated,[6] this amount could not be the sum of instalments on the defendant’s mortgage in Queensland, as she asserted in her second note dated 25 January 2013.[7]
[3] T 49.
[4] Exhibit P2.
[5] Exhibit P1.12.
[6] T 255.
[7] Exhibit P1.12 – I will discuss the contents of these notes later in these reasons.
Mr Butler drew down the mortgage on his Grange property to make the money available. He was paying 8% interest on it. I reject Ms Walker Fletcher’s evidence that the advances were gifts. I accept Mr Butler’s evidence that the money constituted a loan, repayable with interest at 8%, for reasons I will elaborate upon later. I assess that interest at $9,685.00.
Ms Walker Fletcher Acquires an Interest in the Torrensville Property
In March 2009, Ms Walker Fletcher returned to Adelaide. Her aunt was gravely ill. Ms Walker Fletcher spent time with her until she died on 12 July 2009.
Ms Walker Fletcher received from her aunt’s estate a half-share of a property at 4 Fairfax Terrace, Torrensville. The other half was left to the aunt’s sister. The property was worth $540,000.00. Ms Walker Fletcher also received $39,000.00 in cash.
The Parties Become Domestic Partners
In early September 2009, Mr Butler sold his house in Grange and moved into the Torrensville property with Ms Walker Fletcher. They became full domestic partners. They decided to purchase the other half-share of the property, sell the rear portion of the land and renovate the house. Ms Walker Fletcher always intended to return to Queensland. Having regard to the state of the relationship at that stage, it is reasonable to assume that Mr Butler would go too, although that was not clearly stated.
It was agreed that Mr Butler would perform the renovation work on the house. He was already employed full-time as a motor mechanic. He also had a ‘backyard’ business as a motor mechanic. He worked on the house in his spare time.
It was Ms Walker Fletcher’s role to act as bookkeeper and to pay the various accounts. Her only income was the disability pension. It was agreed that Mr Butler would pay the renovation costs. Her evidence was that Mr Butler told her ‘he would be happy to give me the money for the house and the renovations as a gift as he was very much in love with me.’[8] Mr Butler denied that the money was a gift. He said he advanced it as part of an agreement with Ms Walker Fletcher to share the renovation costs.[9]
[8] T 170.
[9] T 62.
For that purpose, an account was set up in Mr Butler’s name with the Suncorp Bank in Queensland. Ms Walker Fletcher knew the password. She would pay the accounts with her Visa card, and then reimburse herself by transferring money from Mr Butler’s account. The records show that a great deal more money was transferred to Ms Walker Fletcher’s account than was justified by the renovation expenses.
Purchase of Remaining Half-Share in Torrensville
The purchase of the remaining half-share of the Torrensville property was settled on 26 February 2010. Mr Butler paid $283,064.18, comprising $270,000 plus stamp duty, registration fees and the like.[10]
[10] See settlement statement dated 17/2/10, Exhibit P1.10.
Mr Butler thought that he was purchasing a half-interest in the property.[11] Ms Walker Fletcher was less sure. Her evidence about this was confusing and self-contradictory. The following passage in her cross-examination demonstrates this point:
[11] T 64-6.
Q. In relation to the house at Torrensville, after your aunt died, you and Mr Butler talked about buying the house together.
A. Yes.
Q. And I suggest that the effect of your discussion was that you would own it equally.
A. He said he would give me the money to buy the other half of the house.
Q. But I understood you to put to Mr Butler, and correct me if I am wrong - I thought you said to Mr Butler 'We talked about you buying into the house'.
A. Yes.
Q. And the effect of the arrangement, as I understood it, was that you would own the house equally.
A. I guess we did own it equally but it was in my name. Dave didn't want to put it in his name. He said 'Just leave it'.
Q. That's not quite what happened though, is it.
A. Yes, it is exactly what happened. That's exactly what he told me.
…
Q. I suggest that the reason the house was entirely in your name was because - I made a note - you put to Mr Butler as follows: 'And I explained to you that because it was going through Public Trustee, it would have to go into my name and later, when we worked out what we were going to do, we would transfer it into both names'. Is that a summary fair.
A. Yes, but Dave told me not to do it. He said 'Don't worry about it'.
Q. No, but when it was initially acquired, I suggest the understanding was it would be in both names.
A. No, it wasn't. It was always an understanding that it was just going to be in my name.
Q. But that after the land was transferred just in your name, you explained to Mr Butler that it had to go into your name because of something Public Trustee said to you.
A. Yes, and he knew that and he was fine with that.
HIS HONOUR
Q. Why did you offer to put it in joint names then.
A. Because later on down the track I said to him 'Do you want to change it over to joint names?', and he said 'No'.
Q. Why would you offer that if you didn't consider that he had a half-interest in the house.
A. I don't know. I haven't really thought about it. I never really thought about it, to be honest.
Q. That is what Mr Riggall is putting to you. If you stop yelling and listen more carefully to the question, you might help yourself.
A. Sorry.
XXN
Q. It's not a natural process, I understand. These are the words that I understood you used to Mr Butler and this is what I was focussing on 'And I explained to you that because it was going through the Public Trustee, it would have to go into my name, and later, when we worked out what we were going to do, we would transfer it into both names'.
A. Yeah, we worked out that we were going to most probably sell it because the relationship had gone up the creek and I said to him 'Do you want to put it in both names?', and he said 'No, I'm happy to leave it in your name'.
Q. But I suggest to you that when you talked about Mr Butler buying into the house, the arrangement was that you would both own the house equally.
A. Yes and no, I suppose.
Q. But because of something Public Trustee said to you, it wasn't possible to put the house into both names, is that right.
A. Yes, that's right.
Q. And you explained that to Mr Butler.
A. Yes.
Q. And then you talked about transferring it into Mr Butler's name as well.
A. No, I didn't talk about transferring it. I just asked him later on, when the relationship had gone up the creek, whether he wanted it transferred into both names because -
HIS HONOUR
Q. Isn't that talking about it.
A. Sorry?
Q. Isn't that talking about it.
A. Yes, it's talking about it because we knew we were going to sell it.
Q. You just said 'We didn't talk about it'.
A. No.
Q. And in the next sentence you say you did discuss it.
A. Sorry, I must have misunderstood, but, yes, I did ask him that question, yes.
XXN
Q. But Mr Butler said 'That's going to cost money to do that, so let's not waste money', is that right.
A. Yes, and he was also happy to leave it in my name.
Q. Because it was understood between the two of you that you both owned the house equally.
A. Yes.
Q. And I suggest to you that the arrangement was, from the outset, that you both owned the house equally because Mr Butler had put in an equal amount of money to your value.
A. I guess so, if you want to look at it that way, but – I guess so.
Q. Because you went off and got valuations, didn't you.
A. I got a valuation for my aunty's one but my cousins went and got one for their purpose and then the Public Trustee decided what valuation it was.
Q. So, in other words, after the process of valuing the house, Mr Butler provided an amount equal to half that value.
A. Yes.
Q. And from that point on you owned the house equally.
A. I guess so.
Q. And you understood that from the out set [sic], that it was both your house.
A. Well, yes and no, because Dave told me that it was my family home, so therefore it didn't matter if it stayed in my name and he gave me the money. He didn't lend it to me. He gave it to me as a gift.[12]
[12] T 242-46.
I do not accept Ms Walker Fletcher’s evidence that any of the money advanced by Mr Butler to her, or his purchase of the remaining half-share of the Torrensville property, were gifts. I agree with Mr Riggall’s submission that her belief about this is an ex post facto reconstruction. Her evidence is contradicted by:
·the fact that she has repaid most of the money;
·Mr Butler’s evidence, which I do accept;
·Ms Walker Fletcher’s own documents. These include:
-a note in her handwriting dated 19 May 2011 in which she listed the following (part of Exhibit P1.12):
- ‘House 270,000P’ (a reference to the remaining half-share of the Torrensville property);
-‘Loan from Dave 50,000 + 78640 = 128,640P’ (a reference to the payments in late 2008) (my underlining);
-‘Costs House expense 50,941.13’;
-‘Loan 9,685.00’ (my underlining).
The total of these sums was $459,266.00. I agree with Mr Riggall’s submission that this note was a contemporaneous acknowledgment of Ms Walker Fletcher’s indebtedness to Mr Butler;
-a note dated 25 January 2013 (also part of Exhibit P1.12), also in Ms Walker Fletcher’s handwriting and verified by affidavit, as follows:
House Costs etc.
House Fairfax Tce Torrensville - $270,000
Loan from Dave- $50,000 + $78,640 = $128,640
Expenses for Torrensville house repairs - $ 50,941
My House Loan $ 12,820
25/8/10 $2,270
23/9/10 $2,270
22/10/10 $2,270
25/11/10 $2,270
6/12/10 $2,270
28/2/11 $ 735
22/3/11 $ 735
______
Total - $12,820
______
Total of all
$462,401
_________
Paid Dave extra amount
of $11,169
over what I owed him.
(my underlining)
By the time of this note, Ms Walker Fletcher had, on 6 December 2012, paid Mr Butler $469,569.86 from the proceeds of sale of the Torrensville property, on her own figures an excess of $7,168.86, not $11,169.00 as she claimed.
Ms Walker Fletcher claimed that the use of the word ‘loan’ in both documents was a ‘mistake’, and that she was distressed by Mr Butler’s behaviour at the time she made the notes.[13] I do not accept that. She had been engaged in fairly complex bookkeeping and payment of accounts incurred during the renovation throughout the period of work.[14] By the time of the second note, she was safely back in Queensland.
[13] T 195.
[14] See Exhibit D1.8.
Ms Walker Fletcher seemed oblivious to the illogicality of her position. While insisting that Mr Butler made these very substantial gifts to her, she also alleged that from only about two months after they commenced cohabiting in September 2009, Mr Butler was abusive and unpleasant towards her.[15] She now asserts that she made the repayment ‘out of the goodness of my heart’.[16]
[15] T 156-7.
[16] T 10 - further submissions 27.10.15.
I am satisfied on the evidence that, at the time Mr Butler paid $283,064.18 for the remaining half-share of the Torrensville property, there was an agreement between him and Ms Walker Fletcher that they had entered into a ‘joint venture’, on a 50-50 basis, to purchase, renovate, subdivide and, as it transpired later, sell the Torrensville property. To the extent that the agreement between Mr Butler and Ms Walker Fletcher was not explicit, it would be appropriate to imply such a term from the proved circumstances, because to do so is necessary for the reasonable or effective operation of the agreement.
I conclude that it was a term of the agreement between Mr Butler and Ms Walker Fletcher that they would contribute equally to the project and would share the profits equally.
In Hawkins v Clayton[17] Deane J said:
The most that can be said consistently with the need for some degree of flexibility is that, in a case where it is apparent that the parties have not attempted to spell out the full terms of their contract, a court should imply a term by reference to the imputed intention of the parties if, but only if, it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case.
(see also Byrne v Australian Airlines Ltd[18])
[17] (1988) 164 CLR 539 at 573.
[18] (1995) 185 CLR 410 at 422.
Sale of Torrensville Property
The rear portion of the Torrensville property was sold on 17January 2011 for $270,000.00. The balance of the settlement money, $240,263.45, was paid into Ms Walker Fletcher’s account in Queensland.
There is another dispute about this. Mr Butler considered that he was entitled to half of those proceeds. He said he asked for his half but Ms Walker Fletcher refused to pay him. As they were still in a relationship, he took it no further. Ms Walker Fletcher, on the other hand, insisted that Mr Butler gifted his half to her, so that she could reduce her indebtedness on the Queensland property. She said in evidence:
I talked to Dave about subdividing the large block and he told me straight out ‘This has been in your family for 101 years, when you sell the land at the back of the house I want you to put all the money on your Queensland mortgage or you will lose your house and I don’t want that to happen as you’ve been through hell to keep it. I don’t want any of that money, it belongs to you’.[19]
[19] T 171.
Having regard to my earlier finding, I reject Ms Walker Fletcher’s evidence that the money from the sale was a gift. In my view, Mr Butler acquiesced in Ms Walker Fletcher using the money to reduce her indebtedness on the Queensland property, but he did not abandon his claim to a half-share.
In June 2012, Ms Walker Fletcher returned to Queensland. The Torrensville property had been on the market since January of that year. It was sold in November 2012. The net proceeds were $473,565.86. This was paid into Ms Walker Fletcher’s account. She was the sole registered proprietor.
Defendant’s Payment
On 6 December 2012, Ms Walker Fletcher paid almost the entire proceeds from the sale of the Torrensville property, $469,569.86, to Mr Butler. She said that she does not believe that she owed Mr Butler any money, since the money he advanced to her was a gift. Notwithstanding that, she decided to repay to him the entire amount he had outlaid.[20] As I have already noted, she considered that she actually paid him $11,169.00 more than he outlaid.[21] Her note reads: ‘Paid Dave extra amount of $11,169 over what I owed him’. This clearly represents her belief at the time she made the note. I reject her evidence to the contrary.
[20] T 196-7.
[21] Exhibit P1.12.
Mr Butler claims that Ms Walker Fletcher owes him more than she has calculated. As I have already observed, his claim is encapsulated in the spreadsheet prepared by his accountant, Mr Cutillo.[22] Expressed somewhat differently, the figures are:
[22] Part of Exhibit P2.
Payment to Queensland builder 128,640.00 Interest on that 9,685.00 Payment for remaining half-share of Torrensville property 270,000.00 Total amount transferred from Mr Butler’s accounts to Ms Walker Fletcher’s accounts, including renovation, subdivision, sale costs and living expenses, and mortgage payments on her Queensland property 198,334.83
Half-share of profit from sale of Torrensville property 45,154.93 Less amount repaid re mortgage payments on her Queensland property - 20,031.00 Less refund from sale of Torrensville property - 469,569.86 - 489,600.86 651,814.76 Total $ outstanding 162,213.90
The parties agree that the outstanding amount should be reduced by $25,000.00, being Mr Butler’s share of the household expenses during the relevant period. The agreement was noted as follows:
‘The parties agree for the purposes of this action that the total shared expenses are $50,000, consisting of food, utilities, electricity, water, gas, rates, insurance, and that the defendant is therefore entitled to a credit for $25,000 in respect of money taken from the plaintiff’s account for his share of those household expenses’.[23]
[23] T 166.
Ms Walker Fletcher set out her version of how the money was expended.[24] Some of those items are included in the $25,000.00 agreed expenditure (Items 1‑6, 8, 17-19, 21, 23, 33). Others were paid for by Mr Butler personally, so should not be included (Items 7, 31).
[24] Exhibit P1.13.
Ms Walker Fletcher argued that further money was spent on Mr Butler’s backyard car repair business. She has identified payments of $6,670.42 and $3,878.02 for car parts[25] and estimated another $10,000 under the same heading.[26] Mr Butler kept no records of these expenses, or of his earnings from his work on cars. He cannot complain that Ms Walker Fletcher is unable to provide further proof of these items. I will allow a total figure of $20,548.44 under the heading of Mr Butler’s backyard repair business.
[25] See Exhibit P1.7.
[26] See Exhibit P1.13, items 34, 35, 36.
Mr Riggall argued that there is a strong inference that part of the excess went on renovating Ms Walker Fletcher’s Queensland property. This was denied. Ms Walker Fletcher said that her daughter helped to pay for that (this was confirmed by Kelly Hoffmann’s evidence). Ms Walker Fletcher also used her own money from her aunt’s estate.[27]
[27] T 233, 234, 237.
To find that Ms Walker Fletcher converted Mr Butler’s money to her own use without his knowledge is a very serious allegation. I would only make such a finding on clear evidence, and that has not been produced in this case (see Briginshaw v Briginshaw[28]). In the absence of such evidence, I accept Ms Walker Fletcher’s evidence as to how this money was spent.[29]
[28] (1938) 60 CLR 336.
[29] See discussion with counsel at T 292-295.
Finally, there is no doubt that $50,941.13 was spent by Ms Walker Fletcher on the Torrensville renovations.
I invited further submissions from the parties about this matter. These were heard on 27 October 2015. Mr Riggall acknowledged on behalf of his client that half of this sum should be deducted from the outstanding amount, representing Mr Butler’s share of the renovation expenses.[30] Ms Walker Fletcher does not acknowledge that there is any outstanding amount, since she continues to maintain that all payments by Mr Butler were gifts.[31]
[30] T 9 - further submissions 27.10.15.
[31] T 10 - further submissions 27.10.15.
I deduct a further $25,470.56 from the outstanding amount in relation to the renovation costs.
The amount outstanding is therefore ($162,213.90 - $25,000.00 - $20,548.44 - $25,470.56), or $91,194.90. There will be judgment for the plaintiff in that amount.
I will hear the parties as to any consequential orders.
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