Cocks v Cocks
[2020] VCC 103
•21 February 2020
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-19-01435
| PAUL COCKS | Plaintiff |
| v | |
| ROBERT COCKS | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 28-30 January, 13 February 2020 | |
DATE OF JUDGMENT: | 21 February 2020 | |
CASE MAY BE CITED AS: | Cocks v Cocks | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 103 | |
REASONS FOR JUDGMENT
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Subject: Constructive or resulting trust.
Catchwords: Father purchasing residential allotment and allowing adult son into possession of garage as residence in consideration of fortnightly payment – whether son a tenant or beneficiary of a trust.
Legislation Cited: Transfer of Land Act 1958; Income Tax Assessment Act 1997; Residential Tenancies Act 1997.
Cases Cited:Inwards v Baker [1965] 2 QB 29; Baumgartner v Baumgartner (1987) 164 CLR 137; Giumelli v Giumelli (1999) 196 CLR 101; Muschinski v Dodds (1985) 160 CLR 583; Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669; McMahon v McMahon [1979] VR 239; Carkeek v Tate-Jones [1971] VR 691 and Vedejs v Public Trustee [1985] VR 569; McDonald v Dunscomb [2018] VSC 283; Hohol v Hohol [1981] VR 221; Cooke v Cooke [1987] VR 625; Calverley v Green (1984) 155 CLR 242.
Judgment: 1. Proceeding dismissed. 2. Costs reserved.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P. W. Lithgow | Law on Lydiard |
| For the Defendant | Mr J. Rizzi | Harwood Andrews |
HIS HONOUR:
Background
1 This proceeding concerns title to and beneficial ownership of a residential allotment, and buildings erected upon it, at 7 Mitchell Drive, Cardigan Village, being the land comprised in Certificate of Title Volume 9281 Folio 464. The plaintiff is Mr Paul Robert Cocks (to whom I shall refer as “Paul”), who is the son of the defendant, Mr Robert David Cocks (to whom I shall refer as “Robert”).
2 The family history is somewhat complex. In the 1980s, Robert was living in a de facto relationship with a Ms Christine Keirl, who gave birth to Paul in 1982. (Transcript (“T”) 152). According to Robert, Ms Keirl was “very fiery”. (Ibid Line (“L”) 30) They had a second son, David, in 1987. (T305, L17-18) Robert and Ms Keirl split up sometime around 1990 or 1991. (T153, L19-21) Whilst there were access arrangements in favour of Robert after the split, the sons resided with their mother for the balance of their childhood and had little contact with their father. (T153, L24-28) Paul came to reside with Robert and his new partner, Margaret, whom he married on 5 February 1995 while they were living together in Cobram. (T154) The family then moved to Stanhope, where Robert and his wife ran a hotel business. One of Paul’s teachers, according to Robert, put him in touch with his mother. He left and returned to reside with her. (T155)
3 In 2000, with Paul aged 18, he and his father had a discussion about real estate. Robert told Paul that there were a number of cheap houses available in the Ballarat area which could be purchased for as little as $40,000. This led to Paul purchasing a property at 31 Heales Street, Mount Pleasant, on 21 March 2001. (T156) The price was $40,000 or $42,000 (T63, L14-15) This entailed Paul borrowing some $24,000. He also received a First Home Owner Grant and drew on a $16,000 compensation payment. (Ibid L17-22) Robert apparently would have favoured Paul’s purchasing a property “closer to the highway”. (T64, L7-9) Robert assisted Paul to renovate part of the property. (Ibid, L26-28) Paul sold this property for $88,000. (Exhibit 8) Paul spent the profit on this transaction on a number of motor vehicles. (T65, L15-21) Around this time, Paul worked for Robert’s brother-in-law, Mick Armstrong, in a truck repair business. According to Robert, Paul was “helping to pull trucks apart”. (T159, L19-28)
4 At one stage, Paul resided in a caravan park in Williamstown. According to Robert, it was “a bit expensive”. (Ibid, L9-11) At that time, Robert and Margaret, his wife, moved to the Melbourne suburb of Gowanbrae and Paul lived with them for a while. (Ibid, L13-14) Robert and his wife lived for about a year, or perhaps slightly more, at Gowanbrae. (T160, L31-T161, L2) At that stage, Robert and his wife had capital of approximately $117,000. Robert suggested that he and Margaret might purchase cheap houses in the Ballarat area for about $40,000:
“put a deposit on some, and they were all rented out and they were paying about $100 – ah, $120 a week for the rent, and I said it’d be a good investment, then you could pull one off, do it up and sell it and go on to the next sort of thing.” (T164, L10-15)
5 His wife, Margaret, was not interested. (Ibid, L16) Instead they purchased a motel at 428 Black Forest Road, Macedon. (T161, L3-6) Paul came to live with Robert and his wife at that motel in around 2002. While he was working for a company called “Parker Trading” in 2005, he got “hit in the chest with a semi-truck tyre” when he was working as a forklift driver/storeman. (T23, L1-3) Paul continued in this employment until 2009, when he was retrenched “because I … couldn’t physically meet the required capabilities of [my] pre-injury duties at the job.” (Ibid, L5-8) He received no damages award under the WorkCover system, but suffered a further injury in a motor vehicle accident. Paul has been on a Disability Support Pension since 2010. (Ibid, L9-14)
6 Paul lent his father $10,000, according to his account, as part of the deposit payable for the purchase of the motel in 2007. (Ibid, L27-30) Robert says that this money was used “to help with cash flow” – viz as working capital. According to Robert, he paid Paul back $5,000 in cash and repaid the balance by a contra arrangement against the rental which Paul was paying for the room he occupied at the motel. (T161, L21-25) Paul denies this. He said that he paid $120 or $140 per week cash for his occupancy of the motel room. (T66, L15‑24) Paul said that his father, Robert, and stepmother, Margaret, led him to believe that if he saved money, he would not be charged “but I still got charged”. (Ibid, L25-31) As to the other $5,000, it was paid not in cash but in listed securities as part of an “E-Trade” arrangement. (T67, L4-8) Paul then moved to what he described as “a little bed-sitter” which was located opposite the cemetery in Woodend. (T67, L30-31) Paul remained in this “bed-sitter” for a year or a year and a half. This seems to have been around 2006. (T68, L30-31) Next, Paul boarded with a friend and his wife or partner in Kyneton on Edgecombe Road. He stayed there until he was retrenched in 2009, perhaps for a year. (T69, L2-17)
7 Next, Paul took up residence at the Creswick Caravan Park. In 2010, he was enrolled at the Ballarat TAFE, studying Conservation and Land Management. He paid $140 a week for his accommodation. (Ibid, L20-31, Exhibit 6) At Creswick, Paul resided in an onsite caravan with electricity connected but requiring the use of a communal shower and toilet block. (T70, L21-29) Robert was concerned about the standard of the accommodation, though Paul found it cramped but otherwise satisfactory. Paul had to evacuate the caravan park for “a couple of days till the water receded” when there was a flood scare. His own caravan was not flooded however. He lived in the caravan park for about nine months. (T70, L30-T71, L9)
8 At that stage, according to Paul, his father, Robert, told him that he was buying a property at Cardigan Village, a residential development near Ballarat “and that if I paid it off … it would be mine”. (T26, L5-7) According to Paul, “Dad asked me if I could pay the repayments and that by doing so the property was going to be mine and I could do as I wanted on there.” (Ibid, L25‑27) The property was at 7 Mitchell Drive in Cardigan Village and was vacant land save for a metal garage and a dilapidated tin plywood shed. (Ibid, L9‑14) According to Robert, he spoke to Paul as they stood in front of the caravan park at Creswick, telling him “I only have a little bit of money, we could look for a cheap house in Ballarat.” The prices had gone up, but there were a couple around. However, Paul was not interested in most of them and would have preferred a 5 acre block or something on the edge of town, but they were too dear. Robert said:
“Well, you know, there was a couple of places … with a garage on which you camp in maybe and um, I could afford the deposit on those. So we looked at a few and he wasn’t interested in most of them. When we looked at the one at Cardigan Village, he seemed to like that and so I put down a deposit on it, and arranged finance through the ANZ in my name … .” (T164, L18-30)
9 On 22 July 2010, the owner of No 7, Mr Neil Rook, and Robert signed an informal typescript contract to sell No 7 to Robert for $67,000, with an initial deposit of $5,000 and settlement fixed for 1 October 2010. Robert denied having any conversation with Paul, promising or representing to him that if he, Paul, met the mortgage payments, the property would be his. (T168, L8-13)
10 In cross-examination, Robert agreed that he bought Mitchell Drive “for Paul”. (T261, L17) In-chief, he said his motivations for buying were as follows:
“because Mark [scil Margaret, his wife] and I weren’t getting along very well, um, if anything happened there, I would have liked somewhere to fall back on to at least stay for a while, and um, it also gives – gave Paul somewhere, and if David ever needed anywhere, maybe we could do something there, um, but at the time, David said he wouldn’t – didn’t want to live in Cardigan Village, because it was too far from his work. Um, he had a unit. He was quite happy there, um, so it would have been basically Paul and I would have been staying there, it was still available to David if he did need it.” (T168, L14-25)
11 Robert and Margaret were divorced by order of the Federal Circuit Court of Australia with effect 26 August 2013. (Court Book (“CB”) 714‑5) In 2012, Margaret had informed Robert that she wanted him to exit the motel business, which he agreed to do. On the basis of valuing the business at $240,000, he demanded $120,000 as the price for his departure. He was met with the contention that an overdraft of $20,000 required his “payout” to be cut to $110,000. According to Robert, the true level of the overdraft was $8,000. Ultimately, he left with a payout of $100,000. (T175, L15-T176, L14)
12 On 25 October 2010, Robert arranged with a local electrician known only as “Len” to install a power supply to the garage or shed on No 7. (T173-4, Exhibit 9) Paul said he installed a pot-bellied stove to provide heating. (T27, L19-22) The shed was approximately 24 feet long by 12 feet wide and located at the rear of the allotment. (T165, L28-30) Robert said that he spoke to Paul:
“and he was ah, going to pay rent, and I said to him um, if you do – how much rent assistance would you get? And he said he didn’t know, he wasn’t sure or something along these lines. And I said, look, if you can go down to Centrelink and ask um, and we can work the rent out on that. And he subsequently got back to me that it was $120 was the minimum.” (T166, L21‑28)
13 According to Robert, he required Paul to pay rent “because I didn’t think I could afford the repayment.” (T167, L16-17) According to Robert:
“Well Paul came back and told me that um, $120 was the amount, um, and I said well if you pay that um, I’ll take care of the rates and the power and any water bills.” (T167, L31-T168, L3)
14 Paul said:
“I already started paying at the end of 2010 and it was sort of set and forget. It automatically got deducted out of my bank account and transferred over to the ANZ I think it was.” (T27, L24-27)
15 Statements covering the transactions in the relevant account are to be found at CB 731 and following.
16 The account is styled “Access Advantage Cheque Statement”. The account party is identified as Robert and the account was commenced with an initial deposit of $200 made on 20 December 2010. (CB 731) On 22 December 2010, a transfer of $800 from Paul is recorded and thereafter fortnightly transfers of $240 appear. At the same time, fortnightly deductions of $165.70 by way of repayment appear to have been made. The repayment amount on the mortgage varied from time to time. For instance, as at the period September to November 2013, the payment amount was $150. (CB 175)
17 Between 2010 and 2012, Robert considered a number of options as to structures which might be erected on No 7. According to Paul:
“In between 2010 and 2012 I think it was Dad used to send me emails of kit homes, shipping container homes. We used to watch a TV show Grand Designs and it come up there was all different alternative building methods and yeah, we discussed it.” (T28, L11-15)
18 One attractive option considered was to move an old house from its site in St Arnaud but, according to Paul, “We worked out it was too big to fit on the block across the width.” (Ibid, L30-31) The St Arnaud house would have cost $40,000. (T29, L25-26) Paul continued to reside in the shed. (T31, L7-8)
19 During that time, he said:
“I have set up garden beds like vegie beds. Dad and I built a couple of sheds which one turned into a storage shed and my bathroom. I dug a gutter around the outside of my lived in shed so that it wouldn’t keep flooding.” (Ibid, L10-14)
20 He continued:
“The bathroom shed was originally, as far as I can remember it was on the farm when I was six. Dad give it to my uncle Stuart [sic] and he had it on his place for years until he upgraded the shed for a caravan and we moved that.” (Ibid, L23-27)
21 He said:
“It wasn’t lined. It was the hot water unit was behind it. My toilet was screwed to the wall and I had a shower over a bath and that was a third of the size and the other two thirds was storage.” (T32, L3‑6)
22 The appliances were eventually plumbed to the sewer after resort to a home-made septic tank and a misconceived plumbing connection to an easement drain which turned out to be for stormwater only. (Ibid, L8-11) Paul and Robert made a driveway. (T32, L18‑22) A proposal to erect a workshop or woodworking shop was rejected by the municipal council on the basis that it was not appurtenant to a dwelling house which was a requirement for land zoned residential. (T32, L23-T33, L4)
23 Eventually, Robert obtained a permit to erect a house as owner/builder. Work began with a contractor engaged with a bobcat to clear the site and make the necessary “cut”. Then Robert hired a post hole digger, at which stage Paul was required to render assistance. (T33, L23-T34, L2) Whilst it seems Robert intended to do all or most of the work himself, according to Paul, following the post hole stage, he was fully engaged in the construction thereafter. (T34, L4-9) Robert conceded that having hired the stump hole digger, he got about halfway through the job and could not get the post hole digger out of the hole. (T189, L8-13)
24 Paul’s account has him working long hours for months and years in the construction of Robert’s house. According to Robert, however, Paul devoted only 70 to 80 hours to the entire project. (T230, L15-17) Ms Stefanie Amelia Loat, Paul’s partner, said that during the construction period she visited the site every second weekend, her principal residence being in Frankston. She said that Paul was engaged throughout in the construction of the roof portion of the house, which took approximately six months. (T144, L7-10)
25 Robert conceded that he could have designed and built a three-bedroom house at No 7, but he “didn’t want one”. (T296, L14-15) Robert said that when he and Paul could not agree on a design, Paul told Robert he could not live in the same house with him. (T257, L2-5) Following completion, he departed from the original plan by first installing a mezzanine floor and ceiling in his bedroom and later covering in the back veranda facing south. He said on that south side “In the winter the rain pelts in.” (Ibid, L25-28)
26 These additional areas were occupied by his son, David, who had previously resided in a unit in Buninyong which the owners wished to sell with vacant possession. (Ibid, L29-31) David lived there for two years, paying rent or board for six months, but this requirement was remitted later to enable him to build up some money toward the deposit on his own unit. He continued to pay for internet services and some food. (T317-8) Earlier plans which had been proposed by Paul entailed two bedrooms and two bathrooms, but these proposals did not proceed. According to his brother, David, this was because Paul objected to yielding part of the ground on which the shed stood. (T316, L25-T317, L4) Paul did not distinctly admit this allegation.
27 During construction, according to Paul, while plastering was being done inside one bedroom of the house, he told Robert “I’ve had enough, I want my life back.” (T43, L4-7) To induce Paul to continue working on the job, his father promised him what was described as a “postie bike” – that is, a small motorcycle such as postmen use on their delivery rounds. In the event, Robert said he was unable to obtain one and offered Paul $600 in lieu, which Paul refused. Ultimately, Paul’s uncle – that is, Robert’s brother – was able to obtain a motor scooter, which Paul accepted. (T43, L13-31) Shortly after, the house was completed and Robert had taken up residence, according to Paul, he asked Paul to give an assurance that Robert would not be “placed in a home” and asked him “to move out or threatened to kick [him] out”. (T45, L7-17) Paul refused to leave. (Ibid, L21-22) Then Robert issued an ultimatum, telling Paul “I need to clean up my area and I have two months.” (Ibid, L27-28) Nevertheless, according to Paul, even if he had done this, Robert would give no assurance that he would not sell the house. (T46, L18‑19) This led Paul to take action.
28 A Ms Kylie McArdle of Ballarat Conveyancing lodged Caveat No AQ933023Y, claiming an interest in No 7 on behalf of Paul as “chargee”. This claim was said to be based on an agreement with the registered proprietor – viz, Robert – made “01/10/2010”. (Exhibit 5) Paul says he “put a caveat on the property so that I wouldn’t get short changed, or what I believed short changed.” (T46, L22-24) Presumably, as a result of notice provided to them by the Registrar of Titles, Robert became aware of the lodgement of the caveat. Paul says he was “absolutely fuming about it”. (T48, L12) Robert told Paul “it was his property to do [with] as he wanted.” (Ibid, L19-20)
29 Paul then received a notice issued by the Registrar of Titles pursuant to s89A of the Transfer of Land Act 1958, on the application of Robert threatening to “lapse” the caveat unless Paul took legal action to substantiate the claim made in the caveat within a limited period of time. As Paul understood the notice:
“There was two options that I could either lodge something with VCAT or lodge it in it was either the Magistrate or Supreme Court, but that was my understanding so that’s why to save costs I put it with VCAT.” (T49, L8-14)
30 Paul lodged an online application with the Victorian Civil and Administrative Tribunal in its Residential Tenancies List. The document was styled “General Application” and, under the heading “What orders are you wanting VCAT to make?” the application stated “General dispute 452”, which presumably refers to s452 of the Residential Tenancies Act 1997. Under the heading “Details about the claim”, the application stated “Claim to keep the caveat in place on 7 Mitchell Drive, Cardigan Village, Victoria, 3352”. Under the heading “Rented premises”, the application referred to a house at 7 Mitchell Drive, Cardigan Village, Victoria. (CB 619-622)
31 As to the circumstances of lodgement, Paul said:
“I lodged it at two o’clock in the morning. I was having one hour a night sleep. I was stressing about this really badly and it was – yeah, it was due I think January the 4th and everyone else had closed down and no one could give me advice.” (T49, L23-27)
32 As it turns out, as Paul conceded, this application was made in the wrong venue. It should have been made in court. (Ibid, L13-14) The Registrar of Titles advised Robert’s solicitors that the caveat was removed by letter 22 July 2019. (CB 623)
33 While Paul and Robert were building the house, according to Paul “We talked about building a wooden boat together or I guess you could say prosperity to both use and pass along like grandkids.” (T55, L24-27) What was envisaged was “a little dory like a dinghy”. (Ibid, L28-29) Ultimately, this did not happen but Robert acquired a metal boat, what Paul described as a “tinny”, from the Ballarat Yachting Club, which he was eventually able to purchase for a modest price. (T55, L28-T56, L2) This boat had a 30 horsepower motor and a steering wheel. (T56, L17-19) Paul accepted this purchase in place of the proposed wooden boat, but when Paul and Robert went to VicRoads, Robert registered the transfer of the boat into his name where it “sat … for 13 months”. The transfer into Paul’s name only took effect after he lodged the caveat. (T56, L21-29) The price paid was $1,000. (Ibid, L30)
34 On 22 March 2019, Paul lodged a “building complaint form” with the City of Ballarat relative to buildings at 7 Mitchell Drive. He identified all the various items of work which had been carried out without building or planning permission, including the covering in of the veranda and the construction of the “mezzanine”. He also complained about “no permit for living in shed”, and “the shed bathroom”. The complaint form had a handwritten annexure of two detailed pages. (Exhibit 2) This led to an inspection by the city’s building inspector, who provided a report dated 23 April 2019 identifying “illegal works”, substantially in accordance with the matters identified in Paul’s complaint. This led council to issue a building notice requiring the removal and demolition of those illegal works. (Exhibit A) The demolition of the various illegal structures, including the “sleep-out” and the veranda, as well as the bathroom constructed adjacent to the original shed/garage. Paul did not refer to his role in procuring the demolition order in his evidence-in-chief. He did, however, say that he ceased living at Cardigan Village because he lost his “bathroom”. (T54, L11-14)
35 In cross-examination, when asked about his motivation in making the complaint, he said “If he’d done it with a permit properly there wouldn’t have been an issue. If I had a bedroom like I was promised there wouldn’t have been an issue.” (T116, L16-18) He agreed that the demolition as a result of his complaint rendered it impossible for him to continue living at Cardigan Village. (T116, L8-9)
This proceeding
Plaintiff’s claim
36 Solicitors acting for Paul commenced this proceeding. In the Statement of Claim dated 29 March 2019, it was alleged that Robert, being the registered proprietor of 7 Mitchell Drive, agreed with Paul in or about December 2010, or alternatively represented to him, that if Paul “contributed to paying the mortgage payments in respect of the property, the property would belong to [Paul].”
37 It was said that pursuant to the agreement or in reliance on the representation, Paul had made mortgage payments since December 2010 and provided his labour, contributing $6,000 worth of materials in the period 2012 to 2013 and had “resided in and maintained and improved the property since 2010”. Therefore, it was said that Paul had an interest in No 7 pursuant to the agreement or “pursuant to a constructive, resulting or implied trust.”
38 Paul sought a declaration that he had an interest in the property “to the extent deemed appropriate” by the Court, a declaration that he be “entitled to record his interest”, costs, further and other relief.
Defendant’s defence
39 Through his solicitors, Robert admitted to being the registered proprietor of No 7, but denied the allegations as to an agreement or representation, saying the allegations were “vague, embarrassing and lacking in particulars”. Robert admitted making representations that he would allow Paul “to reside on the property for the payment of rental”, and that he intended ownership of the property to pass to Paul and David “only after the death” of Robert, pursuant to his will. Any agreement between Robert and Paul was said to be “a tenancy agreement”. Robert denied making any representation or agreement that Paul would “obtain any ownership interest in the property” prior to Robert’s death.
40 Admitting that Paul had lived at No 7, Robert said the only payments made to him were “on account of rental”. He admitted that Paul had contributed labour, but denied contribution of materials, and said the “limited labour” was provided in consideration for a “boat and motorised scooter”.
Plaintiff’s contentions
41 Mr Lithgow, on behalf of the plaintiff, said a finding should be made that Robert told Paul that if he paid the mortgage payments for the property at 7 Mitchell Drive, Cardigan Village, the property would belong to him. Mr Lithgow said that Paul’s evidence was consistent and supported by later statements made by Robert and heard by Paul’s partner, Ms Loat.
42 He said that Robert’s account was less credible when it was considered that Paul did not start receiving Centrelink rental support “until either April 2011 (at the earliest) or mid-2012.”
43 He said that for the first few years the account into which Paul made his payments was “largely reserved for payment of the mortgage and it was only much later that [Robert] treated [Paul’s] payments as more broadly accruing to his benefit.”
44 According to Mr Lithgow, there was a pattern of conduct by Robert in making promises, but honouring them only in part or in very modified form. He referred to:
“(a)the repayment of the $10,000 loan;
(b)proposing a multi-bedroom dwelling on the property, but only constructing a single-bedroom dwelling;
(c)the postie bike/scooter; and
(d)the wooden boat/tin dinghy.”
He said this was consistent with Robert’s reinterpreting the arrangements which he had made in 2010 so as to downgrade Paul’s status to that of renter. Mr Lithgow said that Robert failed to declare the receipt of the payments said to be rent as income in 2011 and 2012 tax returns, and failed to lodge any returns after 2013.
45 According to Mr Lithgow, Paul’s admitted receipt of Centrelink rental support payments was appropriate if:
“(a)the approach to Centrelink was as a result of [Robert’s] repeated assertion that [Paul] should seek advice as to whether he was entitled to rental support; and
(b)[Paul] revealed the circumstances that he was paying for the right to occupy but was not on title.”
He said the Centrelink officer could well, in those circumstances, advise that “with the broad operation of the pension entitlement regime he was entitled to receive rental support payments.”
46 Mr Lithgow said that based on the statements made by Robert to Paul in late 2010, there was either:
“(a)an agreement; or
(b)a representation which was relied on by [Paul].”
He conceded that in the absence of writing, an agreement would be unenforceable.
47 Mr Lithgow said that where a person contributes to the purchase or improvement of a property and such contribution was made in reliance upon an agreement or representation, and in circumstances where the legal title does not recognise such contribution, a constructive or resulting trust arises to recognise that contribution. He referred to Inwards v Baker [1965] 2 QB 29; Baumgartner v Baumgartner (1987) 164 CLR 137; Giumelli v Giumelli (1999) 196 CLR 101; Muschinski v Dodds (1985) 160 CLR 583; Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669; McMahon v McMahon [1979] VR 239.
48 Mr Lithgow said that Paul was entitled “to a declaration that [Robert] holds the property subject to a resulting or constructive trust in proportion to each party’s contribution to the purchase price and improvements.” He referred to Carkeek v Tate-Jones [1971] VR 691 and Vedejs v Public Trustee [1985] VR 569.
49 Mr Lithgow contended that Paul should be found to own between 50 and 80 per cent of the interest in the property. One scenario which he suggested was a valuation of the property at $105,000, being the total of the purchase price for the land at $67,000 and the $38,000 cost of building, as against the $53,000 mortgage. Mr Lithgow said that such scenario assumed “roughly equal labour input and ignores the monetary contribution of [Paul].” A second scenario set Paul’s interest at 80 per cent, leaving the building cost out of the equation on the basis that the mortgage loan of $53,000 represented 80 per cent of the purchase price of the land. This approach was based on the view that both Paul and Robert contributed to labour and materials for the house, hence its exclusion from the equation. In the circumstances, Mr Lithgow contended for an allocation to his client of 50 to 65 per cent of the value of the real estate.
Defendant’s contentions
50 Mr Rizzi, counsel for Robert, contended that Paul should not be entitled to a finding of ownership in the Cardigan Village property.
51 Mr Rizzi drew attention first to what he said was the “varying evidence” given by Paul as to the discussions between him and his father when Cardigan Village was being purchased. In contrast, he said, Robert’s evidence was “relatively consistent”. Mr Rizzi said the “central issue” in the case was how the fortnightly payments made by Paul to Robert should be characterised, whether as rent or as mortgage payments. The $240 fortnightly payment was “not referable”, according to Mr Rizzi, to the mortgage payment of $165.07. (CB 673) Robert said that this figure was dictated by being the minimum amount of rent which would create an entitlement to rental assistance from Centrelink.
52 Mr Rizzi referred to the ANZ loan account, which was produced after the close of evidence. This demonstrated credits and debits to the loan account made by Robert without reference to Paul; for instance, a credit to the loan account on 17 October 2012 of $45,000 and a redraw by way of debit on 10 December of that year in the amount of $18,000, a debit of $7,500 on 8 July 2019 by way of redraw, and a further debit of $10,000 on 13 January this year. Likewise, he said, Robert treated the cheque account into which the $240 payments were made as his own money. Robert, said Mr Rizzi, had disclosed the receipt of rental from his son, Paul, to Centrelink in August 2012, submitting a profit and loss statement relative to this rental enterprise. (CB 651) Robert paid the mortgage and not Paul. (Exhibit 12) It was common ground that Paul was charged rent while he resided in a room at the motel at Macedon run by Robert and his then wife. This was consistent with Robert having let Cardigan Village to Paul as a tenant afterwards.
53 Mr Rizzi referred to documentation from Centrelink produced by Paul in response to a notice to produce after the close of evidence. This documentation showed rental assistance being granted as early as 13 August 2010. Mr Rizzi submitted that I should “infer from this case that Paul applied for rent assistance sometime before 13 August 2010.” There was no rental assistance, according to these documents, for Paul between 30 November 2010 and 7 April 2011. It resumed on 20 April 2011 in the modest sum of $36.53 and was thereafter set at $102.30. Paul’s evidence that he began receiving rent assistance in June or July 2012 therefore must be incorrect. (T51, L27-28) Mr Rizzi said that Paul must have been paying rent to achieve rent assistance, which was inconsistent with his being regarded as having made the mortgage payments.
54 When Robert commencing building with statutory approval a one-bedroomed house, according to Mr Rizzi, this was a clear indication that the house was not being built as some sort of joint venture. Robert imposed rules in the manner that a landlord would, directing that Paul could keep only one dog (T81, L21-23), though Paul complained that this direction was given only after he already had more than one. (T81, L21-23)
55 Mr Rizzi said Robert asserted ownership of the house by directing Paul to leave within a few weeks of his moving into the one-bedroomed house. Mr Rizzi said Paul should be regarded as conceding that his relationship with his father was one of landlord and tenant by making an application to the Residential Tenancies List of the Victorian Civil and Administrative Tribunal and describing his father as the landlord or lessee in that document.
56 According to Mr Rizzi, Paul’s actions in making a complaint to the City of Ballarat and leading to the demolition of many structures on the property was “inconsistent with Paul having a beneficial interest in the property, as a true owner would not want to see part of his own property demolished.” Mr Rizzi said that Paul was unforthcoming on the subject of his complaint to the City of Ballarat and this adversely reflected upon his credit as a witness.
57 According to Mr Rizzi, a finding that the relationship was one of landlord and tenant meant that Paul’s case would fail. If it were found that representations had been made to Paul along the lines alleged, Mr Rizzi made the following points. First, it would be wrong to treat Paul as having paid the entire mortgage debt which had a 30 year term. The calculations made by Mr Lithgow, he said, failed to take this matter into consideration, nor did they allow for the fact that each payment would have to be regarded as including a portion of interest and not to that extent in reduction of the principal sum.
58 If it were contended (despite not being pleaded) that Paul was beneficiary of a common interest constructive trust, no such finding should be made. He referred to McDonald v Dunscomb [2018] VSC 283 [181]-[184] per McMillan J. He referred to Muschinski v Dodds (1985) 160 CLR 583, 614 per Deane J. Mr Rizzi said that there was no joint relationship or joint endeavour proven. He said there might have been a common plan to build a property to accommodate the father, Robert, and his two sons, but this was plainly abandoned when Robert began building a one-bedroomed house.
59 Moreover, he said, Paul had not pleaded or established a material disadvantage which, according to Mr Rizzi, was “a necessary requirement for a common intention to construct a trust”.
60 Mr Rizzi said that whatever the truth was about the measure of assistance rendered by Paul to Robert, this could be regarded as simply a matter of assistance from one family member to another. In any event, Paul was not suffering a detriment in the sense of relinquishing a career or the opportunity to engage in a profitable enterprise. He was at all material times living on a Disability Support Pension with a limited entitlement to engage in paid employment. Merely disappointed expectation is not a detriment of the type required to establish a constructive trust – Hohol v Hohol [1981] VR 221; Cooke v Cooke [1987] VR 625.
61 Mr Rizzi said Robert should not be regarded as having acted unconscionably. He provided his son “with a safe and stable place to live in for several years” charging rent. Paul could have moved elsewhere.
62 There could be no finding of a resulting trust, said Mr Rizzi. He referred to Calverley v Green (1984) 155 CLR 242. According to the High Court’s analysis, the making of mortgage repayments does not constitute a contribution to the purchase price of a property. If there was an allegation of proprietary estoppel, Mr Rizzi said “There is no evidence that Paul relied on any promise made by Robert and there was no evidence of any detriment suffered by Paul in reliance on any promise.” As to the overall equity of the dispute, Mr Rizzi said that his client had walked out of the business and personal relationship with his former wife, Margaret, with $100,000. The Cardigan Village property is his only significant asset and is the result of partial expenditure of his capital. It would be inequitable, said Mr Rizzi, to deprive Robert of the full equity in the Cardigan Village property.
Conclusion
63 The principal contention on behalf of the plaintiff, Paul, was that his father, Robert, made a representation to him, or a promise, that if Paul contributed to paying the mortgage payments in respect of the property, the property would belong to Paul. The evidence does not make out this contention.
64 As to what was said or not said, this is a simple issue of clash of evidence. Neither Paul nor Robert was substantially discredited as a reliable witness, nor was either of them shown to be so self-evidently reliable that his account could be accepted without question. The clash must be resolved by reference to the inherent probabilities and the surrounding events which have been established by unchallenged evidence. The payments which Paul made do not equate with the mortgage payments, either exactly or by some fixed relationship, such as the addition of some kind of levy or surcharge. As Mr Rizzi correctly observed by reference to the loan account documents produced after the close of the principal hearing, the mortgage payments varied over time. There was no attempt at any stage indicated by the evidence of an attempt by Paul or Robert to harmonise the amounts paid by Paul with the regular mortgage outgoing.
65 The payments made by Paul were not remitted by him to the mortgage loan account, as one would expect if the arrangement were that he was undertaking responsibility for the mortgage payment. Rather, his payments went into a cheque account held by the bank in the name of “Robert”. A person accepting responsibility for mortgage payments would be expected to establish a direct line of communication with the relevant bank as mortgage lender. Statutory and contractual principles of privacy would have precluded Paul from doing this unilaterally. He would have required Robert’s cooperation to be able to obtain information direct from the bank as mortgage lender on this account. Whether this result could have been achieved only by the use of Robert as an intermediary or directly by Paul simply by Robert giving the bank approval to release the information, was not explored. What is significant, is that Paul made no attempt by any means to establish a line of communication to the bank as lender under the relevant loan. Consequently, the loan balance on the mortgage account has fluctuated independently of the payments that Paul has or has not made. Robert has exercised an apparent right of “redraw”, including, it would seem, to finance his defence of this proceeding.
66 Paul’s action in bringing an application in the Victorian Civil and Administrative Tribunal’s Residential Tenancies List, categorising himself as “tenant” and his father as “landlord” [30 above], constitutes an admission of his being a tenant, rather than an equitable freehold owner of the Cardigan Village property. Likewise, in his dealings with Centrelink relative to the age pension, Robert characterised his relationship with Paul as being one of landlord and tenant (CB 651).
67 Mr Lithgow, in closing submissions, was critical of Robert’s conduct of his tax affairs, drawing attention to his failure to lodge tax returns after 2013 and his treatment of payments received from Paul in the returns that were lodged. I must treat these criticisms with caution. First, it was not established in the course of the cross-examination, though no doubt it could be if I undertook my own research, what the non-taxable threshold was and whether that non-taxable threshold related to assessible income or a taxable income. Robert did not concede that he had failed to meet his obligations under the Income Tax Assessment Act 1997 and it is has not been established, for the reasons explained, that he did. Even if he did, regrettably a failure of punctilious observance of obligations under the Income Tax Assessment Act seems to be so widespread in the community that it would be unwise to treat establishment of a failure to comply with the tax law as equivalent to the comprehensive destruction of a witness’s credit.
68 Finally, there is the issue of rental assistance from Centrelink. Mr Rizzi, on behalf of Robert, treated this as evidence supportive of his case, that Paul was a tenant and not a beneficiary of a trust giving him an interest in the freehold. Paul’s account was that he obtained the rental assistance only because he had been badgered by his father. The documentation ultimately produced showed that the rental assistance began in August 2010. There was a four-month gap from the end of November 2010 until April 2012, and it then continued on the key question as to Paul’s statement. This further evidence is ultimately equivocal on the major point. If Paul were Robert’s tenant it would be in no way inconsistent with that, for Robert, as his father, to “badger” his son into obtaining rent assistance. Mr Lithgow, correctly I think, said that the documentary evidence was difficult to square with Robert’s account of the rental’s having been fixed by reference to what, following enquiry from Centrelink, was the minimum rental which would attract the rental assistance.
69 All in all, the arrangement between Robert and Paul looks very similar to what Robert had proposed to his then wife, Margaret, before they bought the motel in Macedon viz buy a property, putting down the deposit and perhaps something more towards the purchase price, then install a tenant, using the rent to pay off the outstanding purchase price (see [4] above). Mr Lithgow, on behalf of the Paul, cross-examined Robert vigorously, suggesting to him, in effect, that he had treated his son, Paul, in a miserly and ungenerous manner. There is a human tradition going back thousands of years whereby a father was expected to give his son a “portion” to set him up in life (Luke, chapter 15, verse 12).
70 Whatever the moral or cultural obligations of parents in that respect as far as the law is concerned, whilst a father is responsible under the principles of family law for providing for the care and maintenance of a son until he attains 18 and he may be responsible to make provision for him in his will whilst the are both adults, there would seem to be no other legal responsibility or liability of the father to the son beyond what the father owes to any other citizen. Moreover, as Mr Rizzi pointed out, events have left Robert now an old-age pensioner with only very meagre capital, consisting of one very modest residence.
71 Both counsel agreed that a finding that Paul was a tenant would necessarily resolve the proceeding against the plaintiff. Accordingly, it would seem unnecessary to say anything as to the further contentions put on behalf of Paul. I do, however, make the following additional observations. Even in the absence of a finding that the relationship was one of landlord and tenant, a finding of resulting trust could not be sustained. The basis for such a finding would have to be that Paul had contributed the whole or part of the purchase price of Cardigan Village. The High Court, in Calverley v Green (1984) 155 CLR 242, determined that making repayments on a mortgage loan, where the loan moneys had been used to complete the purchase, was not to be treated as contribution of the whole or part of the purchase price of a piece of real estate and could, therefore, not be the basis for a finding of resulting trust.
72 Further, insofar as there was a contention of a constructive trust arising following the failure of a joint arrangement in accordance with the principles of Baumgartner v Baumgartner (1987) 164 CLR 137, it was not clear what the failed arrangement or venture might have been. Insofar as reliance was placed on Paul devoting his labour to the building of the house at Cardigan Village, principally, it would seem, on the roof structure, it had become clear by the time that construction commenced that this was to be a one-bedroom house. The format was dictated by the approval plans on the basis of which permits are issued. Paul, therefore, can have had no expectation that this house would constitute his home, apart, altogether, from any statements which he might have made as alleged by Robert that he, Paul, did not wish to reside in the same house as his father. The same considerations also would have tended against success on a claim based on proprietary estoppel.
Disposition
73 The proceeding should be dismissed. I have heard no argument on the question of costs and so I will reserve them.
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