Dencio v Dencio in her capacity as Administrator of the Estate of the late Brian Gordon Dencio, Deceased
[2020] ACTSC 250
•18 September 2020
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Dencio v Dencio in her capacity as Administrator of the Estate of the late Brian Gordon Dencio, Deceased |
Citation: | [2020] ACTSC 250 |
Hearing Dates: | 20-21 July 2020 |
DecisionDate: | 18 September 2020 |
Before: | Burns J |
Decision: | See [107]–[109] |
Catchwords: | EQUITY – TRUSTS – whether express or constructive trust – where property registered in mother’s and son’s names through family deed arrangement – whether words and conduct establishes express or constructive trust – whether common intention regarding respective beneficial interests in property at time one-half share in property conveyed to son – whether mother acted to own detriment based upon that common intention |
Legislation Cited: | Administration and Probate Act 1929 (ACT) |
Cases Cited: | Allen v Snyder [1977] 2 NSWLR 685 |
Texts Cited: | G E Dal Pont, Equity and Trusts in Australia (Thomas Reuters, 7th ed, 2019) J D Heydon and M J Leeming, Cases and Materials on Equity and Trusts (LexisNexis Butterworths, 8th ed, 2011) |
Parties: | Christine Margaret Dencio (Plaintiff) Danielle Kristy Dencio in her capacity as Administrator of the Estate of the late Brian Gordon Dencio, deceased (Defendant) |
Representation: | Counsel Dr D Hassall with J Harris (Plaintiff) G Blank with T Morton (Defendant) |
| Solicitors O’Connor Harris & Co (Plaintiff) Farrar Gesini Dunn (Defendant) | |
File Number: | SC 309 of 2019 |
BURNS J:
Background
The plaintiff is the mother of Brian Dencio (deceased) and Colin Dencio. The defendant is the daughter of Brian Dencio and is sued in her capacity as Administrator of the Estate of the late Brian Dencio. Brian Dencio died intestate in March 2012. At the time of his death, he held a legal interest in a property at Kaleen in the ACT (the property). This was the property in which the plaintiff lived, and where she resided with her husband Keith Dencio from August 1977 until Keith Dencio’s death in May 1996. Upon the death of Keith Dencio, the plaintiff became the sole owner of the property. The property was subject to a mortgage securing a loan of about $60,000 and the plaintiff could not afford to service the loan and pay for her day-to-day living expenses.
In 1997, the plaintiff conveyed a one-half interest in the property to Brian Dencio, who was then registered on the Certificate of Title with the plaintiff as tenants in common in equal shares. Prior to this occurring, the plaintiff and Brian Dencio entered into a
Deed of Family Arrangement (the Deed) whereby the plaintiff agreed to relinquish a one-half share in the property to Brian Dencio. At or about the same time, it was agreed that Brian Dencio would take over a watchmaker’s business that had previously been conducted by his father, Keith Dencio (the business).
It is accepted by the parties that when Brian Dencio died intestate the defendant, as his daughter, became entitled to inherit the whole of her father’s estate by virtue of the provisions of the Administration and Probate Act 1929 (ACT). In the present proceeding, the plaintiff claims that the defendant is not entitled to take an interest in the property because Brian Dencio held his interest in trust for the plaintiff.
The pleadings
This proceeding was commenced on 1 August 2019 and came to be heard based on an Amended Statement of Claim dated 15 November 2019. The causes of action pleaded by the plaintiff are summarised as follows:
(a)a claim that as at the date of his death, Brian Dencio held all of his equitable interest as a registered tenant in common of the property as trustee upon an express trust in favour of the plaintiff as beneficiary;
(b)in the alternative, as at the date of Brian Dencio’s death, by reason of the words and conduct of Brian Dencio and the plaintiff, Brian Dencio held all of his equitable interest as a registered tenant in common in the property as a trustee upon a constructive trust in favour of the plaintiff as beneficiary, it being unconscionable for Brian Dencio to retain any equitable interest in his registered title as tenant in common of the property; and
(c)
a claim that the plaintiff and the defendant have been benefited and enriched by the discharge of mortgage security on the property and it would be unconscionable for them as the present registered title holders to retain such benefit and enrichment, without providing equitable compensation to
Colin Dencio.
The pleaded particulars regarding the claim based upon an express trust are:
(a)in or about May 1997, Brian Dencio said to the plaintiff, referring to the property, words to the effect of: “[t]his house will always be yours Mum, I am only putting my name on the title to protect it for you. I don’t want it and I will never claim it”;
(b)on various occasions after the plaintiff and Brian Dencio entered into the Deed on or about 12 May 1997, Brian Dencio said to the plaintiff, referring to the property, words to the effect of: “I hold our house on trust for Mum” and “I am only on title to enable Mum to stay in her house” and “I’m Mum’s trustee so she can stay in the house”;
(c)the plaintiff not disagreeing with these statements;
(d)the plaintiff’s conduct in:
(i) entering into the Deed of Family Arrangement;
(ii) permitting Brian Dencio to reside at the property; and
(e)Brian Dencio’s conduct in:
(i) entering into the Deed of Family Arrangement;
(ii) accepting residency at the property;
(iii) accepting the benefit of payments by the plaintiff of expenses for electricity, rates, water and insurances of and concerning the property.
The pleaded particulars regarding the claim based upon a constructive trust are:
(a)the statements made by Brian Dencio as set out at paragraph [5](a) and (b) above;
(b)
in or about May 1997, title to the property was registered in the name of
Brian Dencio and the plaintiff as tenants in common in equal shares;
(c)in or about May 1997, an amount of $60,000.00 owing to Arkway Pty Limited (Arkway) secured by a mortgage over the property was paid out and the mortgage discharged;
(d)in about May 1997, a mortgage in favour of National Australia Bank (NAB) was registered over the property in the names of the plaintiff and Brian Dencio as mortgagors and securing a loan of about $60,000.00;
(e)after the execution of the Deed:
(i) neither the plaintiff nor Colin Dencio made any claim on the business;
(ii) Colin Dencio made no claim on the property;
(iii) Brian Dencio conducted the business;
(iv) Brian Dencio made the payments on the NAB loan;
(v) Brian Dencio lived with the plaintiff at the property;
(vi) the plaintiff paid the electricity, rates, water and insurances of and concerning the property; and
(vii) Brian Dencio made no claim to any interest, legal or beneficial, in the property.
(f)in or about 2002, the plaintiff and Brian Dencio obtained an additional $50,000.00 loan from NAB secured by a mortgage on the property given by both the plaintiff and Brian Dencio;
(g)from the additional $50,000.00 loan, Brian Dencio:
(i) paid off the debts and acquitted the obligations of the business;
(ii) closed down the business;
(iii) relocated himself interstate to paid private sector employment as an employee.
(h)Brian Dencio thereafter continued to make payments due under the loans from the NAB;
(i)the plaintiff’s conduct in forgoing all intestacy entitlement to the business without consideration;
(j)Brian Dencio making payments paying out of the loan to Arkway Pty Ltd and in repayment of the loans from NAB;
(k)the plaintiff allowing and enabling the debts constituted by the loans from NAB to be secured by mortgage over the property to NAB; and
(l)the plaintiff suffering a detriment, being that the plaintiff forwent the security of past regular payments of the loan from NAB, which payments secured the property for the plaintiff’s residence of the property, for the risk of ongoing payments, which risk eventuated when Brian Dencio became ill and ceased making the payments.
Regarding the “unjust enrichment” claim, the plaintiff pleaded that it would be unconscionable for the defendant to retain her title to the property on the grounds:
(a)that Colin Dencio had made no claim on the business or on the property after the plaintiff and Brian Dencio had executed the Deed;
(b)that in or about May 2012, Colin Dencio said to the plaintiff, after the death of Brian Dencio, words to the effect of: “[d]on’t worry about the house Mum, I will pay the Bank loan exactly the same as Brian did”;
(c)from about May 2012, Colin Dencio made payments by instalments of about $50,000.00 towards the NAB loans;
(d)in or about February 2017, Colin Dencio paid a lump sum of about $50,000.00 to NAB paying out the loans and resulting in the discharge of the mortgage held by NAB; and
(e)at or about the time that the loans from NAB were paid off, Colin Dencio said to the plaintiff words to the effect of: “I don’t want you to put part of the house in my name. The funds that I have paid are a gift to you. You should go and get the home into your sole name”.
In the defence filed by the defendant, she denied that Brian Dencio had held his half share in the property in trust for the plaintiff. She raised three other matters that should be noted. First, she pleaded that the plaintiff’s claim based on an express trust must fail because there was no evidence of the trust in writing as required by
s 201 of the Civil Law (Property) Act 2006 (ACT) (the Civil Law (Property) Act). Secondly, and in answer to the whole claim, the defendant pleaded that she is the registered proprietor of a one-half share of the property as tenant in common with the plaintiff and that no allegation of fraud or other exception has been pleaded by the plaintiff to defeat the indefeasibility of title conferred on her by such registration. Thirdly, the plaintiff pleaded that the plaintiff is barred from obtaining a remedy by her own laches.
The relief sought by the plaintiff is:
(a)a declaration that, as at his death, Brian Dencio held all his registered title to the tenancy in common of the property as trustee upon an express trust in favour of the plaintiff as beneficiary to the extent of 100 per cent of the equitable interest therein;
(b)in the alternative, a declaration that as at his death, Brian Dencio held all of his registered title to the tenancy in common of the property as trustee upon a constructive trust in favour of the plaintiff as beneficiary to the extent of 100 per cent of the equitable interest therein;
(c)an order that the defendant do all things necessary to transfer registered title to the said tenancy in common, currently registered in the defendant’s name, to the plaintiff so that the plaintiff becomes the sole registered proprietor of the property;
(d)an order that, in the event Colin Dencio or his successor or successors in title requires it of the plaintiff in writing, the plaintiff shall provide equitable compensation to Colin Dencio within six months of such request in writing;
(e)in the alternative to relief under the express or constructive trusts pleaded, the plaintiff seeks:
(i) a declaration that the registered tenancy in common of the property held by Brian Dencio as at his death was subject to a resulting trust in favour of Brian Dencio to the extent of 50 per cent of equitable interest in his said tenancy in common;
(ii) a declaration that 25 per cent of the equitable interest in the property vests in the defendant as administrator of the estate of Brian Dencio;
(iii) an order that the plaintiff and the defendant do all things necessary to cause title to the property to be registered in the names of the plaintiff and the defendant as registered proprietors as tenants in common in the following shares: 75 per cent share to the plaintiff and 25 per cent share to the defendant;
(iv) an order that such equitable compensation shall be paid or made to Colin Dencio by the defendant as is assessed by this Court as payable or to be made to him as equitable compensation for the benefit and enrichment conferred on the defendant; and
(f)an order that the plaintiff’s costs of and incidental to these proceedings be paid from the estate of the deceased, Brian Dencio.
The evidence
The plaintiff relied on three affidavits prepared for the purpose of this proceeding:
· an affidavit sworn by the plaintiff herself on 31 May 2019;
· an affidavit affirmed by her son, Colin Dencio on 1 August 2019; and
· an affidavit affirmed by James William Pike on 24 July 2019.
The evidence of the plaintiff
The plaintiff was born in England in 1936 and emigrated to Australia in 1949. At the time of the hearing she was 84 years old. The plaintiff married Keith George Dencio on 28 January 1956. There were three children born of that marriage:
· Keith Ian Dencio (born 1956);
· Colin Gilbert Dencio (born 1957); and
· Brian Gordon Dencio (born 1960).
The plaintiff’s husband was a watchmaker who worked in various New South Wales country towns before they came to Canberra in 1960. The plaintiff worked part-time while the children were young, but worked full-time as a shop assistant from about 1974 until 1996. By the time that she went to work as a shop assistant, her husband owned and ran a small watchmaker’s store in Civic, ACT.
In 1977 the plaintiff and her husband purchased the property which was a
three-bedroom home in Kaleen in the ACT. In her affidavit, the plaintiff said that for reasons connected with their home loan application but not completely known to her, the house was purchased in her husband’s name only. The purchase price was about $45,000.00, of which about $40,000.00 was borrowed from the Civic Cooperative Building Society.
From August 1977 onwards, the plaintiff contributed her weekly wage towards household expenses and payment of the mortgage. In January 1994, the plaintiff received approximately $70,000.00 in compensation for injuries sustained in a motor vehicle accident in 1985. She paid approximately $50,000.00 of that sum to discharge the mortgage on the house.
In 1994 the plaintiff’s husband was ill. He established a loan account with a private finance company called Arkway to give himself a line of credit to draw on to enable him to keep his business going and to employ staff while he was ill. Over the next two years, approximately $60,000.00 of debt (including unpaid interest) accrued on this line of credit. This was secured by a mortgage over the property in favour of Arkway. In May 1996 the plaintiff’s husband died intestate. At that time, the plaintiff was unemployed and the watchmaker’s business was barely profitable.
Brian Dencio had previously trained as a watchmaker and worked with his father, but he was working in the construction industry at the date of his father’s death. He undertook to return to the watchmaking business in order to keep it going.
The plaintiff described her position in May 1996 as follows:
(a)she was entitled to the majority of her deceased husband’s estate including the house;
(b)she was not working and had no realistic prospect of re-joining the workforce in order to earn a good wage;
(c)the property was worth approximately $120,000.00, with $60,000.00 owing to Arkway and secured by way of mortgage over the property; and
(d)she was not qualified to run the watchmaking business and was unable to meet its ongoing expenses such as rent and wages, but her son Brian Dencio had the capacity to earn a “bare wage” from the business.
The plaintiff and Brian Dencio went to see the ACT Public Trustee in order to discuss the problem. They wanted to retain the property and the watchmaking business if possible. The ACT Public Trustee became the Administrator of the plaintiff’s husband’s estate on 10 January 1997. Officers at the ACT Public Trustee advised the plaintiff to enter the Deed pursuant to which she transferred the watchmaker’s business to
Brian Dencio for no charge together with one-half share of the property, in return for which
Brian Dencio agreed to pay the mortgage and support her to continue living in the house.
The plaintiff and Brian Dencio executed the Deed on 12 May 1997 and at that time the property was transferred into the names of the plaintiff and Brian Dencio as tenants in common in equal shares, and Brian Dencio refinanced the loan from Arkway by taking a loan from the NAB secured by a mortgage over the property and both the plaintiff and Brian Dencio signed the mortgage documents. In her affidavit the plaintiff said that “at that time” Brian Dencio said to her: “[t]his house will always be yours Mum, I am only putting my name on the title to protect it for you. I don’t want it and I will never claim it”. The plaintiff said that on several occasions over the next few weeks, as they discussed the situation with the plaintiff’s other sons and other members of her family, Brian Dencio said: “I’m only on the title to enable Mum to stay in her house”, “I hold our house on trust for Mum”, and “I’m Mum’s trustee so she can stay in the house”.
The financial arrangements between the plaintiff and Brian Dencio after May 1997 were:
(a)the plaintiff had no claim on the watchmaking business;
(b)Brian Dencio lived with her in a shared household;
(c)the plaintiff paid all the household expenses from her pension including food, electricity and household rates and insurance; and
(d)Brian Dencio paid the monthly instalments on the mortgage.
In about 2002, Brian Dencio received a job offer as a watchmaker in Melbourne.
Brian Dencio said to the plaintiff: “The business here is doing no good. I am getting heavier into debt all the time. There is too much competition in Canberra. I will close the business down here and pay off all the debts. I can then go to Melbourne and earn a decent wage”. The plaintiff stated that she agreed with this proposition. At the time Brian Dencio left for Melbourne, he borrowed another $50,000.00 secured by a mortgage on the property in order to pay off the debts and close the watchmaking business in Civic. He also used some of the funds to re-establish himself in Melbourne. He did all those things with the plaintiff’s full knowledge and consent.
After Brian Dencio moved to Melbourne, he continued to pay the mortgage over the property. Unfortunately, Brian Dencio became ill in Melbourne with kidney failure and then he contracted heart disease in about 2009. He was required to undergo dialysis daily and to attend hospital from time to time. In February 2012, Brian Dencio returned to Canberra to live with the plaintiff so that she could help to look after him during his illness. On 7 March 2012 the plaintiff found Brian Dencio deceased in his bedroom. Brian Dencio died intestate.
After Brian Dencio’s death, the plaintiff continued to live in the house. The secured bank loan over the property had returned to a figure of about $95,000.00. The plaintiff could not afford to pay the bank loan payments and to support herself. Her other son,
Colin Dencio, said to her: “[d]on’t worry about the house Mum; I will pay the bank loan exactly the same as Brian did”. The plaintiff accepted that offer and from about May 2012 Colin Dencio made all the payments on the bank loan.
The plaintiff stated in her affidavit that “about that time” she consulted her present solicitor and engaged in correspondence with the NAB. In late 2012, the position was:
a) amounts owing on Brian Dencio’s credit cards with the NAB were paid off under an insurance scheme associated with the cards;
b) NAB accepted ongoing payment of the loans by Colin Dencio until the ownership of the house and a refinance could be “regularised”; and
c) the plaintiff had investigated the possibility of entering into a further Deed of Family Arrangement with Colin Dencio and also applying for Letters of Administration of Brian Dencio’s estate in order to put that proposal into effect.
By late 2012, the plaintiff’s health was failing and she was feeling very ill. She had been diagnosed with a defective heart. During 2013, she did nothing about Brian Dencio’s estate or the property. She had heart problems, chronic high blood pressure and several resultant severe health crises. She was informed by her doctor that she had nearly died. In 2014 she was dizzy, confused and barely able to look after herself. She was confused about what to do about Brian Dencio’s estate and did nothing about it. On 18 July 2018, she had a pacemaker inserted into her heart. After a period of a few months’ recovery, she has enjoyed relatively good health.
Colin Dencio continued to pay the mortgage loan from mid-2012 until early 2017. He paid approximately $1,080.00 per month during that period. The plaintiff continued to live in the house and pay all the outgoings on the property. In February 2017
Colin Dencio, with the agreement of the plaintiff, paid approximately $49,000.00 to the NAB to pay out the mortgage. The plaintiff stated that this reminded her that she needed to get the property ownership issues sorted out. At the time that he paid the $49,000.00 to the NAB, Colin Dencio said to the plaintiff: “I don’t want you to put part of the house in my name or anything like that. The funds that I have paid are a gift to you. You should go and get the home into your sole name”.
In “about 2018”, the plaintiff instructed her solicitor to apply to the ACT Supreme Court for an order recognising that she was entitled to ownership of the house. As a result of her instructions, her solicitor made contact with the defendant. On 29 June 2018, the plaintiff’s solicitor sent an email to the defendant asking her to contact him. After a telephone conversation with the defendant, the plaintiff’s solicitor sent a further email to the defendant on 2 July 2018 attaching a draft application to the ACT Supreme Court and a draft affidavit in support. The draft application sought a declaration, inter-alia, that the late Brian Dencio held his interest in the house on trust for the benefit of the plaintiff. The respondent to the draft application was expressed to be the
ACT Public Trustee and Guardian. The draft application makes no reference to the defendant. The draft affidavit in support was a document in the plaintiff’s name in similar form to the affidavit which she swore on 31 May 2019.
On 11 July 2018, the plaintiff’s solicitor received a reply to his email of 29 June 2018 from solicitors engaged by the defendant. In their letter of 11 July 2018, the defendant’s solicitors advised that they were instructed to seek a grant of Letters of Administration on the basis of intestacy. Regarding the draft application prepared by the plaintiff’s solicitors, the defendant’s solicitors said:
We have considered your client’s draft originating application and affidavit.
The draft affidavit you have provided is not sufficient for us to form a final view about your client’s claim. We are instructed to request that you provide further and better particulars in relation to your client’s alleged equitable interest in the deceased’s half of the Kaleen Property.
On 18 July 2018, the plaintiff’s solicitor wrote to the defendant’s solicitor, in which they stated:
With respect, it would seem unlikely that you will find any assets other than the house in Kaleen of which the beneficial ownership will be contested.
Unless circumstances should force her into such a position it is not Mrs Dencio’s intention to engage in a dispute with your client. We would be happy to discuss the issues with you in some depth and provide any other information that you may need to settle any questions which arise. The central issue which will arise however, will be the beneficial ownership of our client’s house in Kaleen.
It may be appropriate for you to take no further action until we have a joint opportunity to resolve any uncertainties in the present situation.
The defendant’s solicitors responded by letter dated 31 July 2018, stating:
We confirm that we are instructed to continue to seek a grant of letters of administration on the basis of intestacy
…
Our client intends to sign her application for letters of administration soon. This is a necessary step given that without the grant our client is not in a position to participate in the resolution of your client’s claim.
We will provide you with a copy of the grant when it issues.
The plaintiff’s solicitors responded to this letter on 7 August 2018, stating:
This brings me to the point of any application for letters of administration. The manner in which Mrs Dencio has chosen to proceed, with the full knowledge of your client, was to seek a declaration about the ownership of the house at…Kaleen. This puts the only matter likely to be an issue between the parties fairly and honestly before the Court for resolution.
With great respect, applying for letters of administration is somewhat of a costs-generating sideshow. I wish to place it on record now, that if the only prospective asset of the estate is the house share and if that falls to Mrs Dencio, then any attempt to seek costs from the assets of the estate will be nugatory (sic). For that reason alone, you ought to consider bringing some form of “case stated” before the Court in order to curtail the parties’ costs.
On or about 20 August 2018 the plaintiff’s solicitor was informed by the defendant’s solicitor that Letters of Administration in the estate of Brian Dencio were issued to the defendant on 10 August 2018 by this Court. By email dated 9 November 2018, the defendant’s solicitor advised the plaintiff’s solicitor that they had been able to locate and have the Certificate of Title to the property released to the defendant and that they had immediately registered a transmission application such that the Certificate of Title recorded the plaintiff and the defendant as tenants in common in equal shares.
In her affidavit, the plaintiff deposed that Brian Dencio had married Elizabeth Annette Anastasiou in 1989. The defendant in the current proceeding was born in 1990.
Brian Dencio and Ms Anastasiou separated in November 1992 and were divorced in February 1994. The relationship between Brian Dencio and Ms Anastasiou became increasingly acrimonious, and Brian Dencio had decreasing contact with the defendant. The plaintiff stated that Brian Dencio did not see the defendant in the last 10 years of his life. The plaintiff deposed to statements made by Brian Dencio to the effect that he would have to get used to the fact that the defendant was completely out of his life.
The evidence of Colin Dencio
Colin Dencio stated that the death of his father in 1996 left his mother in very poor financial circumstances. She had no job, no real capacity to re-join the workforce, no income and an unexpectedly large debt secured by mortgage over the house. Shortly after his father’s death, Colin Dencio discussed the plaintiff’s financial situation with her and his brother, Brian Dencio. He was left with the clear impression that the plaintiff could not afford to stay in the house no matter what she did because she would not be able to earn enough income to pay her mortgage and her living expenses. Brian Dencio said that he and the plaintiff were going to see the ACT Public Trustee “to see if something can be worked out to save the house for Mum”. Brian Dencio stated that he was willing to help and to move back home with his mother to give her an income from his board.
About one week later, Colin Dencio had a further conversation with his brother,
Brian Dencio, in which Brian Dencio said:
The Public trustee bloke says that I can go onto the title of the house with Mum and in that way, she can get a proper bank loan to cover the mortgage because my earning capacity will then be taken into account for the mortgage calculations.
Mum is going to give me Dad’s watchmakers business because it is not worth much and she can’t afford to employ me or anybody else and pay the wages. I think I might be able to build it back up and make a living out of it.
I am going onto the title of the house solely for Mum, to help her pay it off, I don’t want the house and I will never claim it. I will be Mum’s trustee and I will help her with the payments.
Colin Dencio said that during this conversation Brian Dencio was explaining things carefully so that he, Colin Dencio, would understand the situation and give Brian Dencio his approval as a brother. Colin Dencio said to Brian Dencio: “I agree with all of that and I think that you are doing a really good thing for Mum. You know I can’t afford to do much at this moment because I am pretty stretched for cash myself but I will help out when I can”.
A few months later, Colin Dencio had dinner at the house with the plaintiff and
Brian Dencio. Brian Dencio said to them: “I now hold half of this house on trust for Mum. It is the only way that Mum could stay in the house and that is why I have done it. I will never claim that this house is mine because it is Mum’s house”.
Colin Dencio stated that the watchmaker’s business run by Brian Dencio did not do well. On a couple of occasions over the next few years, Brian Dencio said to him things such as: “[t]he business is no good. I am going out backwards. I just can’t make it work and earn a decent wage. Its (sic) slave labour in the watch repair business”.
Colin Dencio was therefore not surprised when Brian Dencio told him sometime around 2002 that he intended to close the business and move to Melbourne to get a watchmaker’s job in a bigger business. At the time Brian Dencio moved to Melbourne he said to Colin Dencio: “I am going to have to borrow some money. I have got to pay off my debts in order to close the business and I will need some money to establish myself in Melbourne. I have discussed it with Mum. The only way I can do it is to use Mum’s house as security for the loan. Mum agrees. Do you think it will be OK? I will pay the money back, don’t worry about that. Mum will never lose the house. It is hers not mine”. Colin Dencio replied: “[y]ou have always done the right thing Brian and it will be OK. I hope you have better luck in Melbourne and I will back you up if there is a problem”.
To the best of Colin Dencio’s knowledge, Brian Dencio continued making the property mortgage payments while he was in Melbourne. Brian Dencio returned from Melbourne in 2012 in a very sick state and died shortly afterwards. At the time that Brian Dencio returned to Canberra, he said to Colin Dencio: “I’ve been really crook and I am now on disability benefits. I can’t afford to keep paying Mum’s house. Can you take over the payments now because I can’t afford them?” At about this time, Brian Dencio also said to Colin Dencio: “I want to transfer Mum’s house to you and get off the title. I don’t know that I will ever be able to work again. If we can’t to (sic) that cheaply, then I need to make a will so that the house goes to you in that way and you can take over from me”.
Colin Dencio took over payment of the mortgage repayments. When Brian Dencio died, Colin Dencio discovered that the bank loan secured by the mortgage was about $98,000.00 in debit. He started to make the monthly payments from his own resources immediately. Between 2012 and 2017, he repaid approximately $64,818.00 off the bank loan. In 2017 Colin Dencio made a payment of about $51,561.00 to pay off the bank loan and discharge the mortgage.
Colin Dencio stated that he regarded the payments he made from 2012 onwards as gifts to his mother to help her remain in the property.
Colin Dencio was not required for cross-examination.
The evidence of James William Pike
Mr Pike was a very close friend of Brian Dencio. A short time after Brian Dencio’s father (Keith Dencio) died, Brian Dencio said to Mr Pike: “Dad’s death has left Mum in a terrible state for money. There was a big mortgage on the house and Mum can’t afford to pay it. She will get kicked out of the house unless something can be done. I am going to pay the mortgage for her because she doesn’t deserve to lose her house like that”. A short time after that conversation, Brian Dencio said to Mr Pike: “I’ve had to become a part owner of the house with Mum so we could get a joint bank loan and keep the house. I will live there with Mum and pay off the house instead of paying board. I don’t want the house. If we ever get it paid off it will go back to Mum”. At another time,
Brian Dencio said to Mr Pike: “I’m the trustee for Mum’s house. It’s really her house but I have to be an owner for the bank loan. I don’t want the house. It was the only way we could arrange to do it”.
Mr Pike was not required for cross-examination.
Was there an express trust?
As noted above, at [5], the plaintiff relies upon the words and deeds of Brian Dencio as establishing his intention to create an express trust over his half share in the property in favour of the plaintiff as beneficiary. It is acknowledged that in order to create an express trust, three certainties must exist: certainty of intention, certainty of subject matter (trust property) and certainty of object (beneficiary or purpose). The focus in the present proceeding is on the first of these requirements, certainty of intention. There is no doubt that if the plaintiff establishes this requirement, the other two requirements are clearly established.
In some texts and previous authorities there has been disagreement about how certainty of intention may be established, and in particular whether it is open to a putative settlor to dispute by oral evidence their intention formally recorded in writing to hold nominated property on trust for a third party. The suggestion that evidence of the subjective intention of the putative settlor may be led in order to counter the contents of a formal written document can be traced back to the High Court decision in
The Commissioner of Stamp Duties (Queensland) v Jolliffe(1920) 28 CLR 178 (Jolliffe). In that case the respondent Mr Jolliffe opened a bank account in the name of and as trustee for his wife. In doing so, he completed a written declaration that he was acting as the bona fide trustee of his wife. He made a number of deposits into that account. Upon the death of his wife, and before obtaining Letter of Administration to her estate, Mr Jolliffe withdrew the money and appropriated it to his own use. The appellant, the Commissioner of Stamp Duties, claimed duty on the sum as part of the deceased estate.
At first instance, based on evidence given by Mr Jolliffe, it was held that Mr Jolliffe had no intention of creating a trust in favour of his wife. It was accepted that the creation of the bank account in the name of his wife was a sham transaction by Mr Jolliffe directed towards avoiding a legislative cap on the amount of deposits in the name of a single depositor which could attract interest. As Issacs J in the High Court observed (in dissent in the outcome), it is reasonably clear that Mr Jolliffe was attempting to perpetrate a fraud.
The matter came before the High Court on a limited grant of special leave, which excluded any challenge to the finding made by the primary judge that Mr Jolliffe had not, in acting as he did, intended to benefit his wife. The majority of the High Court (Knox CJ, Gavan and Duffy JJ) considered this finding by the primary judge, which was not before them as part of the appeal, to be an “insuperable obstacle” to the appellant’s case on appeal, saying, at 181:
[W]e know of no authority, and none was cited, which would justify us in deciding that by using any form of words a trust can be created contrary to the real intention of the person alleged to have created it. In our opinion the law is accurately stated in Lewin on Trusts, 11th ed., at p. 85: “It is obviously essential to the creation of a trust, that there should be the intention of creating a trust, and therefore if upon a consideration of all the circumstances the Court is of opinion that the settlor did not mean to create a trust, the Court will not impute a trust where none in fact was contemplated.
(Emphasis in original).
Whether the decision in Jolliffe would have been the same if the restriction on the grant of leave had not existed is debatable. In Byrnes v Kendle [2011] HCA 26; 243 CLR 253 (Byrnes v Kendle), French CJ stated at [14] and [15] that the decision of the majority in Jolliffe turns upon the finding of fact made by the trial judge made in a particular statutory context and that it should not be taken as authority for the general proposition that where there has been an explicit written declaration of trust, unaffected by vitiating factors (such as fraud, undue influence, duress, the non est factum principle or the intention to create a sham trust), evidence is admissible to contradict the intention manifested by the declaration to create a trust.
The present case is not one regarding an explicit, written declaration of trust. It concerns oral statements made by Brian Dencio in the context of internal family arrangements designed to ensure that his mother, the plaintiff, was able to continue to reside in the matrimonial home. In such a case it is incumbent on the court to examine all relevant, surrounding circumstances in order to determine whether it was
Brian Dencio’s intention that he hold his half share of the property in trust for the plaintiff: Kautner v Hilton (1953) 90 CLR 86 at 100; Byrnes v Kendle at [54] per Gummow and Haynes JJ.
As a starting point, it is important to acknowledge that there is no magic in the use of the word “trust”: Kinloch v The Secretary of State for India in Council (1882) 7 App Cas 619 at 630 per Lord O’Hagan. In Tito v Waddell (No 2) [1977] 1 Ch 106, Megarry VC said, at 211:
[T]he word is in common use in the English language, and whatever may be the position in this court, it must be recognised that the word is often used in a sense different from that of an equitable obligation enforceable as such by the courts…
Meaning no disrespect to Brian Dencio, he was not a lawyer or, as far as the evidence reveals, tutored in the law; he was an honourable man attempting to support his mother in her old age. This Court must look to all of the surrounding circumstances to determine whether he intended by his statements and actions to hold his share in the property on behalf of the plaintiff as the beneficial owner.
In May 1996 the property was worth approximately $120,000.00 with $60,000.00 owing to Arkway and secured by a mortgage over the property. Prior to the refinancing of the property, the plaintiff and Brian Dencio executed the Deed on 12 May 1997 in the following form (omitting formal parts):
WHEREAS:
1.KEITH GEORGE DENCIO late of [redacted] in the said Territory (“the deceased”) died on the 25th May 1996.
2.The deceased died intestate.
3.The deceased was the sole owner of property known as [redacted] Kaleen in the said Territory.
4.Pursuant to the laws of intestacy CHRISTINE MARGARET DENCIO the second named party is entitled to take a transfer of property known as [redacted] Kaleen in the said Territory
NOW THIS DEED WITNESSETH:
1.By way of family agreement and in consideration of the mutual agreements hereby made, the terms of the Deed shall take effect in substitution for the provisions the laws of intestacy.
2.CHRISTINE MARGARET DENCIO relinquishes any entitlement to a one half share of the property known as [redacted] Kaleen in the said Territory in favour of BRIAN GORDON DENCIO of [redacted] Kaleen in the said Territory.
Shortly after the Deed was executed, the $60,000.00 owing to Arkway (which was owed by the plaintiff only) was paid out and the mortgage to Arkway was discharged. This was achieved by the plaintiff and Brian Dencio borrowing sufficient monies from the NAB, which debt was in turn secured by a mortgage to the NAB. The plaintiff and
Brian Dencio were, of course, jointly and severally liable for the debt to the NAB. What this establishes is that this is not a case where one party has paid the entire
“purchase price” for a property. The plaintiff brought to the transaction approximately $60,000.00 in equity in the property, and Brian Dencio effectively contributed the same by agreeing to meet the repayment of the NAB loan, which the plaintiff could not afford to pay.
It is true that Brian Dencio also obtained the watchmaking business previously conducted by his father, but the evidence establishes that this was of little value. The business was apparently run at a loss by Brian Dencio’s father, and by 2002 Brian Dencio concluded that the business simply was not profitable. It does not appear that any attempt was made to sell the business in 2002, and on the plaintiff’s evidence part of the $50,000.00 borrowed in 2002 was to pay off the business’s debts.
In her affidavit, the plaintiff referred to Brian Dencio borrowing $50,000.00 in 2002 secured by a mortgage over the property. The money appears to have been either a redraw on the existing loan account from the NAB or a new loan from the same bank. It was secured by a mortgage over the property. The loan paid out the debts of the watchmaking business and allowed Brian Dencio to move to Melbourne to obtain stable employment. Brian Dencio conducted the watchmaking business to gain income which, inter alia, allowed him to service the original loan from the NAB. His relocation to Melbourne was calculated to enable him to earn an income sufficient to continue to meet the mortgage payments. The sum of $50,000.00 borrowed in 2002 cannot therefore be viewed as an amount borrowed solely for the benefit of Brian Dencio.
The statement made by Brian Dencio to the plaintiff in 1997, that “[t]his house will always be yours Mum, I am only putting my name on the title to protect it for you. I don’t want it and will never claim it” is equivocal. It may refer to an intention on the part of Brian Dencio to take a half interest in the property to enable his mother to remain in the property. The last part of the statement may be seen as an assurance that he would not try to remove the plaintiff from the house. The statement subsequently made by Brian Dencio (see [19] above) that “I’m only on the title to enable Mum to stay in her house” is likewise equivocal. The statement by Brian Dencio that “I’m Mum’s trustee so she can stay in the house” may be demonstrative of an intention on the part of
Brian Dencio at the time he took the half share in the property to take it on trust for the plaintiff, but it is not conclusive. Much depends on the intention of Brian Dencio as demonstrated by all the surrounding circumstances, and not just on the language that he used.
Similarly, the statements made by Brian Dencio to Colin Dencio, as set out at [35] and [38] above, are equivocal. The same may be said of the statements made by
Brian Dencio to Mr Pike, as set out at [43] above.
Of considerable significance in ascertaining the intention of Brian Dencio with regard to his interest in the property is the statement he made to Colin Dencio in 2012, as set out at [39] above. The evidence of Colin Dencio that Brian Dencio suggested transferring his half interest in the property to Colin Dencio or leaving it to him in his will is inconsistent with an understanding on the part of Brian Dencio that he was not the beneficial owner of the one-half share and that the plaintiff was.
In addition, it is significant that there is no mention in the Deed that Brian Dencio was taking the one-half share in the property as trustee for the plaintiff. Indeed, the terms of the Deed are not consistent with this assertion. As the suggestion is that the creation of the express trust occurred at the time of the transfer of the half share in the property to Brian Dencio, the failure of the parties to mention anything in the Deed about Brian Dencio taking the half share as trustee for the plaintiff is telling as to the then intention of the plaintiff and Brian Dencio.
I am not satisfied that Brian Dencio intended in making the statements that he did, and in acting as he did, to create an express trust in which he held his half share of the property in trust for the plaintiff.
In any event, even if I am wrong in the above analysis, the plaintiff’s claim for relief must fail by reason of the provisions of s 201 of the Civil Law (Property) Act. This section provides:
201 Instruments required to be in writing
(1) An interest in land cannot be created or disposed of by a person except—
(a) by writing signed by the person or by the person’s agent properly authorised in writing; or
(b) by the person’s will; or
(c) by operation of law.
…
(2) A declaration of trust by a person in relation to an interest in land must be—
(a) in writing signed by the person; or
(b) made by the person’s will.
(3) A disposition by a person of an equitable interest or trust existing at the time of the disposition must be—
(a) in writing signed by the person or by the person’s agent properly authorised in writing; or
(b) made by the person’s will.
(4) This section—
(a) does not affect the creation or operation of a resulting, implied or constructive trust; and
(b) is subject to section 202 (Creation of interests in land by word of mouth).
The term “interest”, in relation to land, is defined in Part I of the Dictionary to the Legislation Act 2001 (ACT) as:
(a) a legal or equitable estate in the land; or
(b) a right, power or privilege over, or in relation to, the land.
The term “estate” is similarly defined in that Part as including “any charge, claim, demand, easement, encumbrance, lien, right and title, whether at law or in equity”.
In Hurst-Meyers v Public Trustee and Guardian for the ACT [2018] ACTSC 61 (Hurst-Meyers), McWilliam AsJ said at [24]:
In order for an express trust to be enforceable under s 201 of the [Property] Act, it is not necessary that it be created by writing; merely that it be “in writing”, meaning that there be writing recording the essential elements of the trust.
By operation of s 201(1) of the Civil Law (Property) Act, no legal or equitable estate in land can be created except, relevantly for present purposes, in writing signed by the person creating the estate or their agent. There is no suggestion that Brian Dencio ever granted any legal or equitable estate in the property in writing to the plaintiff even in the limited sense referred to by McWillian AsJ. The application of the provisions of s 201 to express trusts is made even clearer by the provisions of s 201(2), which requires a declaration of trust in relation to an interest in land to be in writing and signed by the settlor. The purported declaration of trust by Brian Dencio would clearly be in relation to an interest in land for the purposes of s 201(2), because it related to his legal interest as half owner of the property.
Another relevant provision of the Civil Law (Property) Act is s 204 which provides:
204 Proceedings do not lie on certain unwritten agreements
(1) A proceeding does not lie against a person on a contract for the sale or other disposition of land unless the agreement on which the proceeding is brought, or a memorandum or note of the agreement, is in writing signed by the person or by the person’s agent properly authorised in writing.
(2) This section—
(a) applies to contracts whenever they were made; and
(b) applies to land under the Land Titles Act 1925; and
(c) does not affect the law about part performance or sales by a court.
The term “disposition” is defined in the Dictionary to the Civil Law (Property) Act as including a declaration of trust.
In Khoury v Khouri [2006] NSWCA 184; 66 NSWLR 241, Hodgson JA said with regard to s 54A of the Conveyancing Act 1919 (NSW) (the Conveyancing Act), a provision in similar terms to s 204 of the Property Act, at [15]:
[A]lthough a declaration of trust in respect of land is a creation of an interest in that land rather than a transfer or assignment of such an interest, it is in my opinion plainly a disposition of an interest in land, within the meaning of s 54A…
In a separate judgment, Handley JA said at [4], [6]:
A declaration of trust of land creates an equitable interest in the land in favour of the beneficiary and does not convey an existing interest to him …
…
[T]here is also authority, if authority is needed, that a declaration of trust is a disposition of property, although the case was not decided on s 4 of the Statute of Frauds. In Richards v Delbridge (1874) LR 18 Eq 11 at 14, Sir George Jessel MR said:
“…A man may transfer his property … in one of two ways: he may either do such acts as amount in law to a conveyance or assignment of the property … or [he] may, by one or other of the modes recognised as amounting to a valid declaration of trust, constitute himself a trustee, … and declare that he will hold it for that time forward on trust for the other person.”
In Meshumar v Otmy [2018] NSWSC 125; 97 NSWLR 615, Robb J said with regard to s 23C(1)(b) of the Conveyancing Act, which is similar to s 201(2) of the Civil Law (Property) Act, at [404]:
[I]f the absence of writing in the present case attracts the application of s 23C(1)(b), the consequence will be that the trust that was created is unenforceable, not that it is void…
There are several exceptions to these principles and where equitable relief may be granted despite an absence of written evidence creating or disposing of an interest in land. One of the exceptions is a constructive trust, a matter to which I will return later in these reasons. Another is equitable fraud. An express trust may be proved by oral evidence where otherwise the statute requiring evidence in writing would be made
“an instrument of fraud”: Allen v Snyder [1977] 2 NSWLR 685 (Allen v Snyder) at 689 per Glass JA cited in Rochefoucauld v Boustead [1897] 1 Ch 196 at 206. In Bloch v Bloch (1981) 180 CLR 390, Brennan J said, at 403:
[T]he principle is that “the Statute of Frauds does not prevent the proof of a fraud; and that it is a fraud on the part of a person to whom land is conveyed as a trustee, and who knows it was so conveyed, to deny the trust and claim the land himself”. Whatever be the classification of the trust which binds the person entrusted with the legal title to property, his repudiation of the terms upon which he was entrusted with that property “is a fraudulent use of another’s confidence, and the statute is not intended to cover fraud”. Scott L.J. said in Bannister v Bannister:
“The fraud which brings the principle into play arises as soon as the absolute character of the conveyance is set up for the purpose of defeating the beneficial interest, and that is the fraud to cover which the Statute of Frauds … cannot be called in aid in cases in which no written evidence of the real bargain is available.”
(Footnotes omitted).
Counsel for the plaintiff submitted that these principles apply to a consideration of whether it is unconscionable for Brian Dencio, or any of his successors in title, to deny that he held the property on trust for the plaintiff. It has long been accepted that equity will not permit a statutory requirement that particular agreements or transactions be in writing or be evidenced in writing to be used as an instrument of fraud: McCormick v Grogan (1869) LR 4 HL 82 at 97 per Lord Westbury. Fraud in this sense extends beyond actual fraud and includes what has been referred to as constructive fraud: see Nocton v Lord Ashburton [1914] AC 932 per Viscount Haldane LC at 954.
Accepting this proposition, if it were the case that in making the statements he made to the plaintiff, Colin Dencio and Mr Pike, Brian Dencio had intended to create an express trust of the type alleged by the plaintiff, would the use by Brian Dencio (if he were still alive), or the defendant as his successor in title, of the provisions of the Civil Law (Property) Act to avoid giving effect to that intention be fraudulent? In my opinion, the answer is “no”. In order to create an express trust there must be a declaration of trust. The statements made by Brian Dencio to Colin Dencio and Mr Pike were clearly made after the conveyance of his one-half share in the property to him. The same may be said with regard to the statement made by Brian Dencio to the plaintiff. At the very least, I could not be satisfied that the first such statement made by Brian Dencio to the plaintiff was made prior to that conveyance.
In Organ v Sandwell (1921) VLR 622 (Organ) at 630, the Full Court of the Supreme Court of Victoria (Irvine CJ, Cussen and Schutt JJ) said “[i]t has never been doubted that the Statute [of Frauds] applies to a mere voluntary declaration of trust”. Subsequently, in Last v Rosenfeld (1972) 2 NSWLR 923 at 932-933, Hope J cited the decision in Organ and said:
Although Courts of equity would thus not permit the statute to be made an instrument of fraud, ‘By this it cannot be meant that equity will relieve against a public statute of general policy in cases admitted to fall within it’: Maddison v Alderson (1983) 9 App Cas 467 at 474. Thus it has never been doubted that the Statute of Frauds applies to a mere voluntary declaration of trust by a person who at all material times was the owner of the relevant property: Organ v Sandwell.
There is no evidence which establishes that Brian Dencio made any declaration of trust (assuming that his statements were intended to create a trust) until after he became the owner of the relevant property. The provisions of the Civil Law (Property) Act requiring the trust to be in writing, in the sense referred to by McWilliam AsJ in Hurst-Meyers, apply and have not been complied with. Any declaration of trust by Brian Dencio is unenforceable.
Was there a constructive trust?
In Cases and Materials on Equity and Trusts, 8th ed, 2011, J D Heydon and M J Leeming, it is stated at [32.1] that “[c]onstructive trusts arise where no trust has directly or indirectly been declared, but where it would be a fraud for the person on whom the court imposes the trust to assert a beneficial ownership”. The author of Equity and Trusts in Australia 7th ed, 2019, G E Dal Pont, describes it similarly at [16.20]:
[t]he court imposes a constructive trust … where no express trust has been declared, but where, according to the principles of equity, it would be a “fraud” for the person in whom the court imposes the trust (the constructive trustee) to assert beneficial ownership as to the property in issue, or otherwise not to account for a gain or compensate another for a loss as if he or she were a trustee of an express trust.
The categories of cases in which a court will impose a constructive trust are not closed; as Slade J said in English v Dedham Vale Properties Ltd [1978] 1 All ER 382 at 398 “I do not think that the categories of fiduciary relationships which give rise to a constructive trusteeship should be regarded as falling into a limited number of
strait-jackets or as being necessarily closed. They are, after all, no more than formulae for equitable relief…”.
The plaintiff’s written submissions appear to suggest that she has made a much more significant financial contribution to the acquisition of the property than Brian Dencio, taking into account her contributions to the initial purchase, and subsequent payment of the mortgages over the property. She suggests that in light of the limited payments made by Brian Dencio, if he were still alive it would be unconscionable for him to assert any beneficial interest in the property at all. In the alternative, the plaintiff submits that it would be unconscionable for him to assert any beneficial ownership in excess of
25 per cent of the value of the property. The plaintiff further submits that the defendant cannot assert any entitlement to beneficial ownership which Brian Dencio could not assert if he had lived.
The plaintiff submitted that she relies on the principles expressed in cases such as Baumgartner v Baumgartner (1987) 164 CLR 137 (Baumgartner v Baumgartner), Muschinski v Dodds (1985) 160 CLR 583 (Muschinski v Dodds), Higgins v Wingfield (1987) VR 689 (Higgins v Wingfield), Hohol v Hohol (1981) VR 221 (Hohol v Hohol), and Grant v Edwards [1986] Ch 638 (Grant v Edwards). It is therefore appropriate to briefly consider these cases.
The first in time of these decisions is Hohol v Hohol, where the plaintiff and defendant were unmarried but had lived together as man and wife for 25 years, during which time they raised four children and resided in various matrimonial homes as a family. The wife claimed that certain properties in the name of the defendant were held in trust for her. The case was conducted on the basis that a constructive trust was created because it was the common intention of the parties at the relevant time that the plaintiff should receive a beneficial interest in each property and that each property was acquired by the defendant to give effect that intention. After reviewing the cases of Gissing v Gissing [1971] AC 886 and Allen v Snyder, O’Bryan J said at 225:
[F]rom the cases I have referred to it can be said that the essential elements of the trust are, first, that the parties formed a common intention as to the ownership of the beneficial interest. This will usually be formed at the time of the transaction and may be inferred as a matter of fact from the words or the conduct of the parties. Secondly, that the party claiming a beneficial interest must show that he, or she, has acted to his, or her, detriment. Thirdly, that it would be a fraud on the claimant for the other party to assert that the claimant had no beneficial interest in the property…
The onus of establishing these three essential elements is on the claimant: Hohol v Hohol at 226.
The next decision in point of time is Muschinski v Dodds. The headnote to the report in the Commonwealth Law Reports succinctly sets out the factual background:
An unmarried couple purchased land by a contract under which they were jointly and severally liable. They intended to renovate a cottage on the land which would be used by the woman as an arts and crafts centre and to buy a prefabricated house which was to be erected on the land. The woman paid the price of the land from her own funds and agreed to include the man’s name on the title if he undertook to renovate the cottage and pay for the prefabricated house. The land was transferred to them as tenants in common in equal shares. The parties separated without the cottage having been renovated or the house acquired. The woman claimed sole beneficial ownership of the land.
Gibbs CJ rejected a submission that the respondent held his one-half share on a constructive trust in favour of the appellant, on the basis that the parties had not formed a common intention that that should be the case. His Honour went on to say, however, that upon the sale of the land there must be an equitable accounting between the parties. The contract for purchase of the land made the parties jointly and severally liable to pay the purchase price, and to the extent that one party paid more than their proper share they could call on the other for contribution.
Deane J, with whom Mason J agreed, did not accept that there was any “express or implied agreement, arrangement or understanding between the parties that they should hold their legal interests upon trust for themselves in shares corresponding to their respective contributions” at 611. To the contrary, their shared intention was that each should have a full one-half beneficial and legal interest in the property. It followed that no relief was available to the appellant on the grounds of breach of express or implied trust. His Honour then turned to the question of constructive trust, observing that such a remedy is not to be imposed based on undefined judicial notions of fairness or justice. A constructive trust “can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle”: at 614.
Consistent with Deane J’s observation that a constructive trust will only be imposed where required by equitable principle, his Honour stated that the relationship between the parties had been a mixed commercial and personal relationship, encompassing a form of joint venture and development of the land for both commercial and personal purposes. His Honour went on to say, at 619:
[I]f the relevant relationship is a partnership, the prima facie rule of equity on premature dissolution is, as in the case of an ordinary dissolution, that the parties are, after the discharge of partnership debts, entitled to be repaid their respective capital contributions. More important for present purposes, if a premium has been paid by a fixed term partner who is not to be held responsible for the premature dissolution, an equity court will order a refund or partial refund of the premium to the extent that its retention by the other partner would be unconscionable: cf. Atoowd v Maude. If the relevant relationship is not a partnership but takes the form of a contractual joint venture for the pursuit of some commercial advantage, a similar prima facie rule of equity applies in the event of the premature collapse of the joint venture and the consequent preclusion of the attainment of the commercial advantage, namely, that, to the extent that the joint funds allow, the joint ventures are entitled to the proportionate repayment of their capital contributions to the abortive joint venture…
(Footnotes omitted).
Deane J stated that the particular circumstances of the case provided the necessary context for the operation of that general principle. The appellant’s payment of the purchase price was made on the basis and for the purposes of their planned venture with respect to the land. Where the substratum of that venture was removed without attributable blame and the joint endeavour collapsed, it was unconscionable on the part of the respondent to assert a one-half beneficial ownership in the property.
The next case referred to by the plaintiff is Grant v Edwards. In that case the appellant and respondent had lived in a de facto relationship for a number of years. The appellant had two children from a prior relationship and another child was born of her relationship with the respondent. The respondent decided to purchase a home after the birth of that child for the family to live in. The house was purchased in the names of the respondent and his brother, although there was no intention that the brother would enjoy any beneficial ownership of the property. The respondent told the appellant that her name was not going on the title because it would cause some prejudice in matrimonial proceedings between the appellant and her former husband that were then pending or anticipated. The trial judge found that the respondent had never had any real intention of replacing his brother with the appellant on the title once those proceedings had concluded. The total purchase price was paid by the respondent by way of monies borrowed from two institutions and secured by way of two mortgages. During the course of their relationship, the appellant generally engaged in employment and paid money to the respondent. The trial judge found, contrary to the respondent’s assertion, this was not paid as rent. The trial judge determined that the appellant also made a very substantial contribution by way of her earnings to the housekeeping and to the feeding and bringing up of the children. The trial judge found, however, that her contributions were not sufficiently substantial to give the appellant a beneficial interest in the house.
On appeal, Nourse LJ, with whose analysis Sir Nicholas Browne-Wilkinson VC agreed, considered whether the evidence supported the imposition of a constructive trust
at 10-11:
In a case such as the present, where there has been no written declaration or agreement, nor any direct provision by the [appellant] of part of the purchase price so as to give rise to a resulting trust in her favour, she must establish a common intention between her and the [respondent], acted upon by her, that she should have a beneficial interest in the property. If she can do that, equity will not allow the [respondent] to deny that interest and will construct a trust to give effect to it…
Nourse LJ referred to the decision in Eves v Eves (1975) 1 WLR 1338 where
Brightman J, in upholding an appeal from a decision at first instance denying the plaintiff a beneficial interest in a house purchased in the name of her de facto partner, said
at 1345B:
The defendant clearly led the plaintiff to believe that she was to have some undefined interest in the property, and that her name was only omitted from the conveyance because of her age. This, of course, is not enough by itself to create a beneficial interest in her favour; there would be at best a mere ‘voluntary declaration of trust’ which would be ‘unenforceable for want of writing’; per Lord Diplock in Gissing v Gissing (1971) AC 886, 905. If however, it was part of the bargain between the parties, express or to be implied, that the plaintiff should contribute her labour towards the reparation of a house in which she was to have some beneficial interest, then I think that the arrangement becomes one to which the law can give effect.
Nourse LJ observed that in his Honour’s analysis, Brightman J concluded that if the work had not been done by the plaintiff, the common intention of the parties would not have been enough. Secondly, if the common intention had not been orally made plain, the work done by the plaintiff could not be conduct from which it could have been inferred. Thirdly, the work performed was conduct which amounted to acting on the common intention by the plaintiff. A distinction was to be made between the conduct from which a common intention may be inferred and conduct which amounts to acting on the common intention.
The next case referred to by the plaintiff is Baumgartner v Baumgartner. In that case the parties lived together in a de facto relationship for four years, initially in the appellant’s home unit and later in a house built on land purchased in the appellant’s name and with money borrowed on mortgage. The parties pooled their incomes with the respondent contributing about 45 per cent and the appellant 55 per cent. The parties pooled their income with a view to meeting all the expenses and outgoings arising from their living together as a family. Both had children from previous relationships, and a child was born of their relationship. Upon the breakdown of the relationship the respondent claimed an entitlement to an interest in the property. At first instance she was unsuccessful, but was successful in the Court of Appeal, with the majority of that Court finding that there was a common subjective intention to create a trust.
On appeal to the High Court, the plurality (Mason CJ, Wilson and Deane JJ) determined that the finding of the majority of the Court of Appeal of a common intention to create a trust could not be sustained. They went on, however, to consider whether the evidence demonstrated that the respondent was entitled to relief by way of constructive trust. After referring to the decision in Muschinski v Dodds the plurality observed that throughout the relationship, or most of it, the parties considered it to be a stable,
long-term relationship. Marriage was under continuous contemplation. The land was acquired and the house built for the purpose of that relationship. The parties planned the building of the house together and they inspected it together during the course of construction. When the house was constructed, they moved into it together and made it their home. The plurality concluded, at 149:
The case is accordingly one in which the parties have pooled their earnings for the purposes of their joint relationship, one of the purposes of that relationship being to secure accommodation for themselves and their child. Their contributions, financial and otherwise, to the acquisition of the land, the building of the house, the purchase of the furniture and the making of their home, were on the basis of, and for the purposes of, that joint relationship. In this situation the appellant’s assertion, after the relationship had failed, that the Leumeah property, which was financed in part through the pooled funds, is his sole property, is his sole property beneficially to the exclusion of any interest at all on the part of the respondent, amounts to unconscionable conduct which attracts the intervention of equity and the imposition of a constructive trust at the suit of the respondent…
The final case to which I will refer is Higgins v Wingfield, another case arising out of the breakdown of a de facto relationship. The plaintiff claimed a beneficial interest in a home unit in which she and her de facto partner had resided for about three years before his death. The unit had been purchased in the name of the deceased and using only his funds. It was accepted that the deceased had referred to this unit as “our house”, referring to himself and the plaintiff. He had also told members of his family that he was going to leave the unit to the plaintiff in his will, and he told the plaintiff that it was to be her house. Each had adult children from previous relationships and each owned other properties. At first instance, the plaintiff obtained a declaration that she was entitled to the whole interest in the unit. On appeal, the substantial question was whether the evidence supported the imposition of a constructive trust in favour of the plaintiff.
On appeal, the Full Court of the Supreme Court of Victoria affirmed the necessity in cases where a remedial constructive trust was asserted for the claimant to establish not only a common intention as to the parties beneficial interest in the property, but also that the claimant had done some act detrimental to their interests based on the common intention. McGarvie J, with whom Murray J agreed, stated at 695 that: “[t]he required nature and quality of the acts capable of amounting to detriment and their relationship to the common intention have not been settled”. His Honour went on to say that where acts constitute a sufficient detriment to raise a trust, there is no reason for regarding them as having a different rationale from that explained by Dixon J in
Grundt v Great Boulder Pty Gold Mines Ltd(1937) 59 CLR 641, with regard to the rationale of acts of detriment that will found an estoppel. In that case, Dixon J said at 674-675:
[I]t is often said simply that the party asserting the estoppel must have been induced to act to his detriment. Although substantially such a statement is correct and leads to no misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the faith of it cannot complain. His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own original change of position will operate as a detriment. His action or inaction must be such that, if the assumption upon which he proceeded were shown to be wrong and an inconsistent state of affairs were accepted as the foundation of the rights and duties of himself and the opposite party, the consequence would be to make his original act or failure to act a source of prejudice…
Consideration
Applying the principles from these cases to the present, before a finding that a constructive trust in favour of the plaintiff may be imposed, I must be satisfied that the plaintiff and Brian Dencio had a common intention regarding their respective beneficial interests in the property at the time the one-half share was conveyed to Brian Dencio. In addition, I must be satisfied that the plaintiff acted to her detriment based on that common intention.
This is not a case in which a property was purchased in the name of only one party to a relationship, but based upon a common understanding that beneficial ownership was to be shared by the parties. There is, however, no reason for treating the conveyance of the one-half share in the property to Brian Dencio in May 1997 as differing in principle from a purchase by them of that property at the time.
The Deed and the evidence of the plaintiff and her witnesses establish that in May 1997 there was a common understanding between the plaintiff and Brian Dencio. The plaintiff owned the property, but subject to a mortgage securing a debt equivalent to about half of the value of the property. She was without the income needed to repay the mortgage. Brian Dencio had, or was able to earn, that income. In exchange for a one-half share in the property Brian Dencio agreed to become personally liable for the debt secured by the mortgage and to use his income to make the required payments under the mortgage. Leaving aside for one moment the “refinance” in 2002, this arrangement, if fulfilled according to the parties’ intention, would result in Brian Dencio paying a sum equivalent to 50 per cent of the value of the property as at May 1997 while the plaintiff retained her 50 per cent share.
This arrangement was not a commercial relationship, but one founded on their family relationship. The object of the arrangement was to ensure that the plaintiff was able to continue to reside in the property during her lifetime. I doubt whether either party turned their mind to any other consequences of the arrangement. The inference that I draw from the evidence is that it was the common intention of the parties in 1997 that their beneficial interests in the property were to be in proportion to their respective contributions to the “purchase” of the property. It was the intention of the parties that Brian Dencio would use his income to pay for his half share in the property. This he did for many years, but unfortunately his death meant that he was unable to carry out his part of the common intention of the parties in full.
After Brian Dencio’s death, Colin Dencio, also acting as a dutiful son, made payments to the mortgage account in the plaintiff’s name as gifts to the plaintiff. It was effectively the plaintiff’s money that reduced the balance on the mortgage account. When
Brian Dencio died, the balance on the mortgage account was about $95,000.00, constituted of the original $60,000.00 loan from 1997 and the $50,000.00 refinance in 2002, less repayments made between 1997 and 2012.
The 2002 refinance, although undertaken to advance the parties’ common intention in May 1997 that Brian Dencio earn an income sufficient to service the mortgage over the property, was entirely outside the contemplation of the parties in 1997. It is nevertheless sufficiently connected to that common intention to enable me to take it into account in crafting any form of equitable relief. As I understand it, the plaintiff and Brian Dencio were jointly and severally liable to repay that sum of $50,000.00 although in reality it was probably anticipated that Brian Dencio would have paid it in its entirety had he survived and continued to earn an income.
One thing is clear to me. By virtue of the payments made by the plaintiff since 2012
(by way of the gifts received from Colin Dencio), she has paid a considerable proportion of the original $60,000.00 borrowing and more than her equal share of the $50,000.00 borrowed in the 2002 refinance. In the circumstances where the parties in May 1997 had a common intention that their beneficial ownership of the property would correspond to their respective contributions, if Brian Dencio were still alive it would be unconscionable for him to claim 50 per cent beneficial ownership of the property. In my opinion, the defendant cannot stand in any better position than Brian Dencio.
It is quite clear that the plaintiff has acted to her detriment based on the common understanding shared by the parties in 1997. The plaintiff, based on that understanding, transferred a one-half legal interest in the property to Brian Dencio. She allowed
Brian Dencio to reside at the property and she paid all outgoings on the property despite Brian Dencio being jointly liable for these payments.
Subject to addressing two matters raised by the defendant, I am satisfied that the evidence satisfies the requirements for the intervention of equity in favour of the plaintiff. First, the defendant submitted that she was entitled to the indefeasibility of title given by registration as a proprietor of a one-half share of the property in circumstances where there was no allegation of fraud or other matters which could defeat the indefeasibility of title conferred by such registration. This may be answered very briefly. In Byrnes v Kendle, Gummow and Hayne JJ stated at [47] that title by registration under the Torrens system is subject to enforcement of a trust by a court of equity, citing
Fink v Robertson(1907) 4 CLR 864 at 891, and Barry v Heider (1914) 19 CLR 197 at 206. The system of registration of title in the ACT is essentially a Torrens system.
The second matter raised by the defendant is the submission that the plaintiff is barred from obtaining a remedy by her own laches. I do not accept that submission. As
White J observed in Ciaglia v Ciaglia [2010] NSWSC 341; 269 ALR 175 at [36], the “two matters relevant to the defence of laches are the length of the delay and the nature of the acts done by the defendant during the period of delay which are material to the justice of allowing or depriving the plaintiff of an equitable remedy”. In the present case, the delay of about six years was not insubstantial, but there is no evidence that the defendant has been in any way prejudiced by the delay.
I will add for completeness that the plaintiff’s unjust enrichment claim, seeking equitable compensation be paid to Colin Dencio, could not succeed on the basis that the sums advanced by him were a gift to the plaintiff.
In determining the appropriate remedy, I would have preferred to impose a constructive trust based on the proportion of beneficial ownership of the property which each party should be held to possess by reason of the respective contributions of the plaintiff and Brian Dencio. The common intention of the parties in 1997 was that each party should have an equal beneficial share in the property, based on a valuation of $120,000.00 and Brian Dencio paying the $60,000.00 loan secured by the NAB mortgage. Unfortunately, the evidence does not establish the value of the property in 2012 when Brian Dencio died, so it is not possible to know what proportion the amount owing by Brian Dencio on the NAB loan was of the value of the property at that time. It would be inappropriate to give the plaintiff the entire benefit of any increase in the value of the property between 1997 and 2012 or, indeed, to the present date. It is also important to acknowledge that by making regular mortgage payments from 1997 to 2012,
Brian Dencio enabled the retention of the property. His contribution cannot be measured simply by determining how much of the capital of the loan was repaid during his lifetime by his payments.
The plaintiff has paid, by way of gift from Colin Dencio, a total of $116,379.00 between 2012 and 2017 in discharging the NAB mortgage. It would be appropriate to reduce that sum by $25,000.00, or 50 per cent of the sum borrowed in 2002, to reflect that this sum was borrowed for the benefit of both Brian Dencio and the plaintiff and was not a borrowing that was in the contemplation of the parties in forming their common intention in 1997. This would leave a sum of $91,379.00 as representing the overpayment by the plaintiff. In the absence of evidence of the present value of the property, it is not possible for me to determine the proportion of the defendant’s half share that this sum represents. It appears to me that two alternatives are available. The defendant may be ordered to pay the plaintiff compensation in the sum of $91,379.00, or the parties may agree on (or call evidence of) the proportion of the defendant’s half share that this sum represents.
I will not make formal orders at this time. The parties may file further submissions within 14 days confined to whether the Court should receive further evidence of valuation of the property and/or what formal orders should be made. I encourage the parties to attempt to reach agreement on these matters so as to avoid unnecessary costs.
| I certify that the preceding one-hundred and nine [109] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Burns. Associate: Date: |
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