Dior, Juston v Sean, Jininna and G I Group Pty Ltd and Sun
[2009] VCC 1775
•30 October 2009
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
Case No. CI-07-05087
| JUSTON DIOR (also known as Joey Sean) | Plaintiff |
| v | |
| JININNA SEAN (also known as Jing Song) | First Defendant |
| and | |
| G I GROUP PTY LTD | Second Defendant |
| and | |
| JU FANG SUN | Third Defendant |
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| JUDGE: | HIS HONOUR JUDGE MISSO |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 25, 28, 29, 30 September and 1, 2 and 5 October 2009 |
| DATE OF JUDGMENT: | 30 October 2009 |
| CASE MAY BE CITED AS: | Dior, Juston v Sean, Jininna & G I Group Pty Ltd & Sun, Fang Ju |
| MEDIUM NEUTRAL CITATION: | [2009] VCC 1775 |
REASONS FOR JUDGMENT
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Catchwords: PROPERTY LAW – application for adjustment of property interests under Part IX of the Property Law Act 1958 – whether the plaintiff and the first defendant were in a domestic relationship – assessment of contributions – financial and non–financial contributions – purchase of a property subsequently registered in the name of the second defendant – purchase of a further property subsequently registered the name of the plaintiff and the third defendant as tenants in common – contributions made by the plaintiff to the purchase of those properties – whether the second defendant and the third defendant held the plaintiff's interests in the properties on a constructive trust.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G Clarke | Francis Lim |
| For the Defendants | Mr T Alexander | MSC Legal Services |
Table of Contents
| THE PROCEEDING | 2 |
| THE PLAINTIFF'S CASE | 4 |
| The Development of the Business Relationship | 4 |
| The Development of the Domestic Relationship | 6 |
| Business/Property Development | 7 |
| The Initial Assets of the Plaintiff and the First Defendant | 8 |
| The Sale and Purchase of the Properties | 8 |
Station Street 8 Tuckwell Road 10 The Sale of Noble Park 11 Refinancing of Tuckwell Road 11 Sale of Tuckwell Road 12 Centre Court 12
| The Income from the Property Investments | 14 |
| Other Contributions Made by the Plaintiff | 14 |
| THE SECOND DEFENDANT’S CASE | 16 |
| THE THIRD DEFENDANT’S CASE | 17 |
| THE FIRST DEFENDANT'S CASE | 18 |
| The Domestic Relationship | 18 |
| The First Defendant's Source of Income | 20 |
| The Purchase of the Properties | 22 |
| The Deficiencies in the First Defendant's Case | 22 |
| The Serious Allegations Not Put to the Plaintiff | 23 |
| THE PLAINTIFF'S SUBMISSIONS | 25 |
| Browne v Dunn | 25 |
| The Domestic Partnership | 27 |
| THE DEFENDANTS' SUBMISSIONS | 27 |
| A DOMESTIC RELATIONSHIP | 28 |
| THE CONSTRUCTIVE TRUST CLAIM | 30 |
| THE QUANTUM OF THE PLAINTIFF'S CLAIM | 32 |
| Domestic Partnership | 32 |
| Constructive Trust | 33 |
| COSTS | 39 |
| FINAL ORDERS | 40 |
| The Part IX claim | 40 |
| The Claim against the Second Defendant | 41 |
| The Claim against the Third Defendant | 41 |
HIS HONOUR:
The Proceeding
1 Mr Clarke of counsel appeared for the plaintiff. Mr Alexander of counsel appeared for the defendants.
2 The plaintiff, David Wei, and the first defendant gave evidence and were cross-examined.
3 The following documents were tendered:
• the plaintiff's Court Book ("PCB") pages 58-361: Exhibit A • a bundle of additional documents: Exhibit B • a bundle of photographs: Exhibit C • the plaintiff's outline of evidence: Exhibit D • the outline of evidence of Benjamin Wei: Exhibit E • affidavit of Nang Young sworn 16 March 2004: Exhibit F • orders made by Her Honour Justice Carter on 17 October 2006: Exhibit G • joint case summary document in the Family Court: Exhibit H • the first defendant's outline of evidence: Exhibit 1 • the defendants’ Court Book ("DCB") pages 56-507: Exhibit 2 4 The plaintiff pleaded that he entered into a domestic relationship with the first defendant, and was entitled to adjustment of property interests pursuant to Part IX of the Property Law Act 1958.
5 Before the domestic relationship began, the first defendant and her ex- husband were registered proprietors of a property. As a result of a property settlement that was reached following the irreconcilable breakdown of the marriage, she became the sole proprietor of that property.
6 In the course of the plaintiff’s relationship with the first defendant, he was introduced to the first defendant's mother, the third defendant, with whom he conducted a business. He also purchased a property with the third defendant in which they were registered as tenants in common.
7 During the domestic relationship the second defendant was incorporated by the plaintiff. He was the sole director for some time, before he was removed from that position. The first defendant was substituted as the sole director of the second defendant. The first defendant's father, Zuyi Song, was the sole shareholder in the second defendant at all times.
8 As a consequence of the domestic relationship and an emerging business relationship, a number of properties were purchased.
9 There were two properties which were the central focus of the proceeding. One was registered in the name of the second defendant. The other registered in the name of the plaintiff and the third defendant as tenants in common.
10 The first defendant had no legal interest in either of those two properties nor did she assert an equitable interest in either of them.
11 The plaintiff alleged that he not only worked in the businesses with the first defendant, and a business which he conducted jointly with the third defendant, but he also contributed a significant sum of money which was used to purchase of the two properties.
12 The plaintiff ultimately claimed that he was entitled to an adjustment of interests in the first defendant's property. He claimed that the second defendant held his interest in the property registered in the name of the second defendant on a constructive trust. He claimed that the third defendant, with whom he was registered as tenants in common in the other property, held his interest in that property on a constructive trust.
13 The first defendant denied the allegations made by the plaintiff, as did the second defendant and the third defendant.
14 Of the defendants, only the first defendant gave evidence. The evidence which she gave in the end was significantly different from the evidence that I expected she would adduce to verify the defence upon which she relied. When submissions were made by Mr Alexander on her behalf, the nature and complexion of her defence completely changed, as will become evident from the summary of the evidence and arguments which I have set out below.
15 The way in which the proceeding was conducted, over seven days of trial, involved evidence from three witnesses: the plaintiff; David Wei and the first defendant.
The Plaintiff’s Case
The Development of the Business Relationship
16 The plaintiff was born on 1 January 1977 in Taiwan. At the time he first met the first defendant he was a student studying information technology at Spheron Technology Institute in Dandenong. At the same time he was working as a web designer on a part-time basis.
17 The plaintiff met the first defendant in about December 2002. At that time the first defendant was a married woman. She and her ex-husband were running a retail jewellery business known as ‘Artini’ which they operated from a shop at 87 Bourke Road, Camberwell.
18 After the plaintiff first met the first defendant’ they entered into discussions relevant to the conduct of the jewellery business. The initial discussions led to the plaintiff entering into a business arrangement with the first defendant and her ex-husband.
19 Eventually a formalisation of the plaintiff’s relationship with the first defendant and her ex-husband occurred. He was employed by the first defendant and her ex-husband in the jewellery business. It was his responsibility to develop the information technology side of the jewellery business by designing a website to expand the jewellery business to online Internet sales, and to maintain the website.
20 As the formalisation of the relationship progressed’ the plaintiff withdrew from his information technology course in order to concentrate all of his efforts on the jewellery business. The plaintiff said that the jewellery business was not performing profitably. A decision was made by the first defendant and her ex- husband to cease trading. This occurred in early 2003.
21 An alternative business enterprise was considered. The first defendant and her ex-husband established a business selling jewellery on a wholesale basis through a company known as Artica International Pty Ltd (“Artica”) It commenced trading in about July 2003.
22 The first defendant and her ex-husband owned 70 per cent of the shares in Artica, and the plaintiff's mother owned 30 percent. The plaintiff and her ex- husband contributed $3,500, and the plaintiff’s mother contributed $1,500. The sum of $5,000 was the total establishment cost of the business.
23 The wholesale business was conducted from a property owned by the plaintiff at 6 Theodore Avenue, Noble Park (“Noble Park”), and from property owned by the first defendant and her ex-husband at 33 Botanic Walk, Mont Albert North (“Botanic Walk”).
24 Before the jewellery business ceased operating in early 2003, the plaintiff assisted the first defendant in renovating the shop premises, and specifically, he said he undertook painting, installing electrical cabling, undertaking information technology work, setting up three websites, managing the e-mail server of the jewellery business and otherwise providing information technology support services. He also worked in the shop as a shop assistant.
25 The plaintiff performed similar work for Artica as he did for Artini. In consideration for the work which he undertook for Artica, it was agreed between the plaintiff and the first defendant and her husband that he would be paid a wage of $1,400 per month.
26 Artica proved not to be profitable. It ceased trading in about November 2003. The contribution of $1,500 by the plaintiff’s mother was retrieved by the plaintiff, and the contribution of the first defendant and her ex-husband was retrieved by them.
The Development of the Domestic Relationship
27 In about September 2003, it was clear to the plaintiff, from his conversations with the first defendant, that her marriage was failing. It was from about that time that his relationship with the first defendant became closer, eventually leading to them entering into a domestic relationship.
28 The domestic relationship endured until the early part of 2006 when it was evident to the plaintiff that their domestic relationship was deteriorating. The domestic relationship ended in about October 2006.
29 The plaintiff and the first defendant began living together in about September 2003. At first their relationship involved staying at each other's homes. At that stage the plaintiff was living at Noble Park and the first defendant was living at Botanic Walk. Most of the time they stayed at Noble Park.[1]
[1] Transcript 82
30 The plaintiff and the first defendant moved to Sydney together in about April 2005, where they continued to live in a domestic relationship in Sydney at a property at 54 Tuckwell Road, Castle Hill (“Tuckwell Road”) which they purchased. They lived together at Tuckwell Road for some time.[2]
[2] Transcript 121
31 The plaintiff's relationship with the first defendant was a loving relationship. They talked about marriage. The nature of their relationship was such that the plaintiff changed his name to Joey Sean. It was his intention that he and the first defendant would live in Sydney and start a family.[3]
[3] Transcript 202
32 Throughout the plaintiff’s relationship with the first defendant they lived as husband and wife. They shared the cleaning, cooking and the financial contributions to their joint household.[4]
Business/Property Development
[4] Transcript 77-78
33 After Artica ceased trading the plaintiff and the third defendant established a business known as ‘Hi Fashion’. The name was registered as a trading business in their names.
34 The business conducted by Hi Fashion involved using the name Artini and Artica as brand names for the sale of jewellery. This was because both names had been previously used and had market exposure.
35 The third defendant used a banking account with the Hong Kong Shanghai Bank. The first defendant was a signatory of, and had access to, that account. The first defendant used it for her own benefit. That bank account was used by the plaintiff and the third defendant as their trading account for the business conducted by Hi Fashion. The plaintiff was never a signatory to that account; however, he had access to it via Internet banking.
36 The plaintiff said that the business conducted by Hi Fashion was the online sale of jewellery over the Internet. The plaintiff developed the website, the e- mail server, set up the web store, set up sales on eBay, produced photographs of products and made product CDs. He conducted sales of jewellery, prepared option lists, tracked accounts of sales and was involved in the general operations of the business of Hi Fashion.
37 Hi Fashion generated income which was used for the daily living expenses of the plaintiff and the first defendant. It also provided funds which were used for the business and property investments.
38 No income taxation returns were produced by the plaintiff, the first defendant or the third defendant to demonstrate what income Hi Fashion earned, and if it did earn income, what income was distributed between the plaintiff and the third defendant.
The Initial Assets of the Plaintiff and the First Defendant
39 At the commencement of the domestic relationship, the plaintiff was the registered proprietor of Noble Park. He had about $20,000 in savings; furniture and chattels of about $10,000, and a Ford Laser motor car.
40 The first defendant had an interest in Botanic Walk. It was the former matrimonial home of the first defendant and her ex-husband. The first defendant also had some savings, furniture and chattels and a Hyundai motor car.
41 Following the irretrievable breakdown of the first defendant's marriage, she obtained a property settlement which entitled her to a transfer of Botanic Walk into her name as the sole proprietor.
The Sale and Purchase of the Properties
Station Street
42 A property at Unit 2, 115 Station Street, Burwood (“Station Street”) was purchased by a Contract of Sale dated 14 January 2005. The purchaser was described as the plaintiff “and/or Nominee”.[5] The property was registered in the names of the plaintiff and the third defendant as tenants in common as to ten shares to the plaintiff and ninety shares to the third defendant.
[5] PCB 94
43 The purchase price was $312,000. A holding deposit of $1,000 was paid on the day of the signing the Contract of Sale, requiring the balance of the deposit of $15,600 and the balance of the purchase moneys of $296,400 to be paid by 11 February 2005.
44 The plaintiff paid the holding deposit. He obtained a receipt from the selling agent.[6] The balance of the deposit was paid from the third defendant’s HSBC account. The plaintiff referred to a page of an HSBC bank statement which disclosed a withdrawal of $14,607 on 13 January 2005 which was paid to the selling agent.[7]
[6] PCB 96
[7] DCB 123
45 Curiously, the sum of the holding deposit of $1,000 and the withdrawal of the sum of $14,607 adds up to $15,607, which is $7 more than the sum of the deposit. The bank statement reveals the abbreviation “BC” which I assume means that the balance of the deposit was paid by bank cheque. I assume that the sum of $7 was a bank fee charged for the drawing of a bank cheque.
46 The plaintiff must have agreed on the purchase price of Station Street prior to signing the Contract of Sale. That is most likely the case because a facsimile sent to the plaintiff by the selling agent has a date imprint on it of 7 January 2005. The facsimile refers to the Section 32 Statement and the referral of offers (presumably to the vendors) on the following day, being 8 January 2005.
47 The foregoing explains why a holding deposit was paid of $1,000 and a bank cheque was drawn on 13 January 2005, following which the Contract of Sale was signed on 14 January 2005, on which date the balance of the deposit must have been paid.
48 The balance of the purchase monies was obtained by way of a loan from the St George Bank. The plaintiff referred to a residential loan agreement offer which described the plaintiff and the third defendant as the borrowers. The loan amount is described as $249,600, which is $46,800 less than the purchase price.
49 By the time Station Street was purchased the business of Hi Fashion was generating between $2,000 and $3,000 in monthly online sales. The first defendant was renting rooms in Botanic Walk as student accommodation. The rental generated was between $1,700 and $2,000 per month. This income was deposited in the third defendant's HSBC account. It was applied to the purchase of Station Street to make up what was required to complete the purchase.
Tuckwell Road
50 Tuckwell Road was purchased by a Contract of Sale dated 24 December 2004. The purchaser was described as the plaintiff “and/or Nominee”.[8]
[8] PCB 64. Although the Contract of Sale for Tuckwell Road preceded that of Station Street, the settlement of Tuckwell Road occurred after the settlement of Station Street
51 The purchase price was $440,000. A holding deposit of $1,100 was paid on the day of the signing of the Contract of Sale, requiring the balance of the deposit of $22,000 to be paid by an unspecified date, and the balance of the purchase moneys of $418,000 by an unspecified date.[9]
[9] PCB 64
52 The plaintiff paid the holding deposit which he obtained from his HSBC account. He referred to a page of his HSBC account which disclosed that on 29 December 2004, the sum of $1,100 was paid to the selling agent.[10] The balance of the deposit was paid by a St George Bank deposit protect bond in the sum of $20,900 issued on 17 January 2005 to the plaintiff and the third defendant.[11]
[10] PCB 67
[11] DCB 91
53 The balance of the purchase moneys was obtained by way of a loan from the St George Bank of $536,000.[12] That sum was in excess of the amount required to pay the balance of the purchase moneys by $96,000.
[12] PCB 70
54 $76,357.72 of the sum of $96,000 was deposited by the plaintiff into his St George Freedom Offset account on 1 March 2005 by cheque.[13] He did not say what happened to the balance of $19,642.48, nor did the first defendant. The overdraw was used to meet home loan repayments, living expenses, renovation costs on Station Street, and to also meet the deposit on the purchase of another property.
The Sale of Noble Park
[13] PCB 80
55 Noble Park was used as collateral to set up the purchase of Station Street. Noble Park was sold for $203,000. After payment of various costs associated with the sale, the plaintiff received $194,739. He deposited $13,134.50 into his St George Freedom Offset account,[14] and he applied the balance of $181,604.73 in reduction of the loan from St George Bank over Tuckwell Road, reducing the loan from $533,574.58 to $351,969.85.[15]
Re-financing of Tuckwell Road
[14] PCB 159. The figures were taken from evidence of the plaintiff. They do not quite add up.
[15] PCB 161
56 An application was made to Colonial-CBA for finance. Tuckwell Road was re- valued at $535,000. The loan was negotiated to the extent of 90 per cent of the re-valuation, providing an amount of $478,015.[16] The borrowers were described as the plaintiff and the third defendant.[17]
[16] 90 per cent is actually $481,500. However, the amount actually loaned is verifiable at DCB 108
[17] DCB 108
57 The sum $478,015 was used, firstly, in discharge of the loan from St George bank, which stood at $350,439.69.[18] The overdraw, after discharging the loan to St George bank, was said to amount to $127,046. The sum of $57,799.62 of the overdraw was applied to the settlement of the purchase of 6 Centre Court, Burwood (“Centre Court”). The plaintiff referred to the Statement of Adjustments and Settlement Statement of the solicitor engaged to undertake the conveyance, which confirms that $57,799.62 was applied to the purchase of Centre Court.
[18] PCB 69
58 The balance of the overdraw of $69,246.38 was deposited in the Colonial- CBA account in the name of the plaintiff and the third defendant on 29 November 2005. The actual amount deposited was $61,240.[19] Neither plaintiff nor the first defendant gave any evidence as to what happened to the balance sum of $8,006.38.
Sale of Tuckwell Road
[19] DCB 68
59 Tuckwell Road was sold by a Contract of Sale dated 12 October 2006 for $560,000.
60 The net proceeds of sale amounted to $70,000. The plaintiff and the first defendant agreed that the net proceeds of sale would be distributed by the plaintiff receiving $55,000 and the first defendant receiving $15,000.
Centre Court
61 A property at Centre Court was purchased by a Contract of Sale dated 19 July 2005 for $345,100. The purchaser was the second defendant.[20] The property was registered in the name of the second defendant.
[20] PCB 134
62 The purchase price was $345,100. A holding deposit of $1,000 was paid on the day of the signing the Contract of Sale, requiring the balance of the deposit of $34,000 to be paid on 26 July 2005, and the balance of the purchase moneys of $311,100 by 21 October 2005.[21]
[21] PCB 134
63 The plaintiff paid the holding deposit. He referred to a receipt which he obtained from the selling agent.[22] He paid the balance of the deposit of $33,000 by withdrawing that amount from his St George Freedom Offset and account. He referred to a page of a bank statement which disclosed that on 26 July 2005, he obtained a bank cheque for $33,100.
[22] PCB 136
64 The balance of the purchase moneys were obtained through the $57,799.62 obtained from the re-financing of Tuckwell Road and a loan secured by the second defendant from the National Australia Bank.[23]
[23] PCB 155
65 The bank cheque is for $100 more than the balance of the deposit. The bank statement also discloses the bank cheque fee was only $8. No other explanation for the bank cheque being for $100 more than the balance of the deposit was given by the plaintiff.
66 The first defendant said that the $33,100 withdrawn by the plaintiff on 26 July 2005 could not have been paid as the balance of the deposit because the receipt of the selling agent is not only dated 25 July 2005, which is the day before the bank statement disclosed that the plaintiff obtained the bank cheque, but the receipt is for $33,000 not $33,100.
67 The plaintiff was not cross-examined about any of these matters. The first defendant did not point to any other use to which the plaintiff put the bank cheque of $33,100.
68 The date of the bank cheque and the receipt do not coincide nor does the amount of the bank cheque with the sum noted on the receipt. It seems odd that the plaintiff would withdraw a sum from his St George Freedom Offset account by a bank cheque, which happens to coincide with the payment of the balance of the deposit, and have put it to some other use.
69 What is also odd is that, despite the first defendant challenging the plaintiff’s evidence that the bank cheque must have been used for some purpose peculiar to the plaintiff, she did not point to any other source from which the balance of the deposit was obtained.
70 I consider that it is more likely than not that the bank cheque obtained by the plaintiff was for the payment of the balance of the deposit and that either the date of the bank statement recording the date when the bank cheque was obtained, or the receipt, is wrong.
71 In relation to the bank cheque being for $100 more than the amount of the balance of the deposit, I can only conclude that the receipt evidenced the balance of the deposit, and the sum of $100, was applied in some other way and for some other purpose related to the purchase.
The Income from the Property Investments
72 From about the time when the plaintiff and the first defendant separated the income from Station Street and Centre Court was applied in repayment of the loans on each property.
73 Mr Clarke complained that the defendants had failed to discover any documents relevant to a recording of the income earned or how the income was applied, and in particular, whether any profit was made. Mr Clarke submitted that if a profit was made, then proper accounting of it was required because the plaintiff claimed that his direct financial contribution from the sale of Noble Park was partly responsible for the purchase of Station Street and Centre Court, and therefore, the earning of a profit.
74 The evidence from both the plaintiff and the first defendant was very unsatisfactory in relation to the tenancy of Station Street and Centre Court and the rental income earned. The only conclusion that I am able to reach is that rental income was earned which was sufficient to pay the instalments of the loans over the properties and that there was probably some profit made.
Other Contributions Made by the Plaintiff
75 The plaintiff said that he contributed to the renovation of Botanic Walk, Tuckwell Road, Station Street and Centre Court by performing work on each property and by supervising the undertaking of work by others in order to turn Botanic Walk, Station Street and Centre Court into student accommodation.
76 The plaintiff referred to photographs of work which he said he undertook at Botanic Walk. He said that the photographs show the subdivision of rooms to turn the property into student accommodation, and extensive gardening work being undertaken. There is no doubt that the photographs confirm that the subdivision of rooms occurred, and that the plaintiff and the first defendant are shown in several photographs in the garden where work was obviously being undertaken.[24]
[24] PCB 162-163
77 The plaintiff referred to photographs of work which he said he undertook at Tuckwell Road. The photographs show a number of rooms which were obviously under renovation. The plaintiff was shown in a number of the photographs carrying tools which he said he used in undertaking some of the renovations. Other photographs show kitchen benches, removed from the kitchen at the premises, on the nature strip awaiting removal, and the plaintiff undertaking gardening work.[25]
[25] PCB 81-84
78 The plaintiff referred to photographs of work which he said he undertook at Station Street. The photographs show steps which were built at the rear of the house. They show a number of photographs that show that the subdivision and the furnishing of rooms occurred for the purpose of turning the same into student accommodation.[26]
[26] PCB 98-100
79 The plaintiff referred to photographs of work which he said he undertook at Centre Court. Again, there is no doubt that the photographs confirm that gardening work was undertaken. The plaintiff is shown in two of the photographs at a time when it is obvious that some garden renovation work was being undertaken.[27]
[27] PCB 151
80 The plaintiff said that he used his Amex card, Commonwealth Visa card and HSBC account to purchase hardware items which were used in the renovation of the properties over 2005-2006, and for the purchase of furnishings which were placed in the properties after they were turned into student accommodation.[28]
[28] AMEX card from 8 November 2004 to 20 March 2005 at PCB 101-103; 15 April to 23 April 2005 at PCB 105-107; 16 August to 2 October 2005 at PCB 85-88 and 23 December 2004 to October 2005 at PCB 198-208; Commonwealth Visa card from 19 December 2005 to 14 August 2006 at PCB 187b- 187n, and HSBC account from 9 March to 1 April 2005 at PCB 189
81 The plaintiff also referred to the fact that the first defendant used the plaintiff’s Amex card account, through a subsidiary card, which was consistent with the plaintiff and the first defendant being in a domestic relationship.[29]
[29] PCB 106-107
The Second Defendant’s Case
82 The plaintiff incorporated the second defendant. He did it online, that is, over the Internet. He paid the fees relevant to its incorporation.
83 The plaintiff referred to a page of his Amex statement of account for 12 July 2005 which showed a debit in favour of "incorporator.com.au", and a tax invoice from that organisation confirming the online incorporation of the second defendant.[30]
[30] Exhibit B
84 The extract of the current position and history of the second defendant discloses that it was first registered on 14 July 2005 as a proprietary company limited by shares. The registered office was Station Street.
85 The plaintiff was a director of the second defendant from 14 July 2005 until 17 August 2006. The first defendant became a director on 17 August 2006 and continues to be a director. Zuyi Song is its only shareholder. He holds 100 ordinary shares.
86 The plaintiff obtained advice that the second defendant should be used as the trustee of a discretionary trust known as Sean's Investment Trust. The settlor was David Wei, a solicitor, and the appointor was the plaintiff. The beneficiaries were the plaintiff and Zuyi Song.
87 Following the breakdown of the relationship between the plaintiff and the first defendant, the plaintiff was removed as the director of the second defendant. The first defendant was appointed its sole director. The plaintiff then removed the second defendant as the trustee of Sean’s Investment Trust and appointed Ku Investments Pty Ltd as its trustee.
88 The plaintiff instructed his present solicitors to demand that the first defendant effect a transfer of the title of Centre Court into the name of the substitute trustee. The first defendant refused, saying that she was unaware that the plaintiff had established a discretionary trust, and that he had done so without her consent.
89 The only evidence given by a person who could speak on behalf of the second defendant with authority was the plaintiff. He was a director at all times material to the purchase of Centre Court and the establishment of the discretionary trust.
90 The first defendant was not a director at any material time to the purchase of Centre Court nor the establishment of the discretionary trust.
91 Zuyi Song was not called to give evidence regarding the incorporation of the second defendant, the appointment of the plaintiff as its sole director nor as to why it was decided that Zuyi Song was to be the sole shareholder.
The Third Defendant’s Case
92 The first defendant attempted to give evidence that the third defendant and Zuyi Song provided her with substantial sums of money, which the she said she used to purchase Tuckwell Road, Station Street and Centre Court.
93 Mr Clarke objected to the first defendant giving that evidence. He submitted that there was no evidence from third defendant that she had provided any moneys to the first defendant. Mr Clarke submitted that if the allegations contained in the Draft Amended Notice of Defence[31] were true, then it was extraordinary that the third defendant did not give evidence, given that she alleged in paragraph 8 of the Draft Amended Notice of Defence that she made direct financial contributions to the financial position of the first defendant amounting to $246,500.
[31] Mr Alexander sought my leave to file and serve a Draft Amended Notice of Defence on the second day of trial. I granted him that leave after hearing the evidence of the first defendant.
94 No evidence was adduced on behalf of the third defendant to verify financial contributions made by her of that order. The only admissible evidence given by the first defendant that any moneys were contributed by the third defendant was a withdrawal of $50,000 in Australian currency from a banking account of the third defendant. The first defendant said she carried that sum in cash from China to Australia in her handbag.
95 The first defendant said that on arrival in Australia the plaintiff told her to redistribute the money between the two of them in order to pass through customs undetected. The plaintiff denied that such an event occurred or that any moneys were brought into Australia from China in cash on any of the three occasions when he and the first defendant travelled to China together.
The First Defendant’s Case
The Domestic Relationship
96 The first defendant was born on 10 September 1970 in China. She migrated to Australia in 2000 with her ex-husband, Nang Young.
97 The first defendant denied all of the allegations made by the plaintiff, save for admitting that they were in some measure of a business relationship in Artini and Artica; that they lived in a number of houses together between late 2003 and October 2006, during which time they engaged in a casual sexual relationship, but that the relationship did not have the characteristics of a domestic relationship; that the plaintiff was involved in a business with the third defendant known as Hi Fashion, and that the plaintiff did sell Noble Park, after which he deposited $181,604.73 in reduction of the loan from St George Bank over Tuckwell Road, reducing the loan from $533,574.58 to $351,969.85.
98 The first defendant said that on her construction of the movement of moneys the plaintiff extracted moneys which he put to his own use and took back what he had contributed in full.
99 The first defendant admitted that she had a sexual relationship with the plaintiff which she said was a casual sexual relationship. She occupied a separate bedroom in the houses where she and the plaintiff lived together.
100 Mr Alexander cross-examined the plaintiff that he had a relationship in about September 2003 with a girl named ‘Cissy’. The plaintiff admitted that he had a boyfriend/girlfriend relationship with Cissy, but that it ended in about June 2003.
101 Mr Alexander also cross-examined the plaintiff that he was in a homosexual relationship with his friend Benjamin Wei. The plaintiff denied he was a homosexual. He said he only liked women. Mr Alexander also cross- examined Mr Wei on the same subject. He denied that he had ever been in a homosexual relationship with the plaintiff.
102 The first defendant did not give any evidence herself that the plaintiff was in a relationship with another woman. Nor did she give any evidence that she believed that the plaintiff was a homosexual or was a person who engaged in homosexual activity.
103 The first defendant said that not only did she not enter into a domestic relationship with the plaintiff at any time, but that she was trying to reconcile with her ex-husband after September 2003 when it became evident to her that there were serious fractures in her marriage.
104 The first defendant discovered an e-mail which led her to believe that her ex- husband was having an affair.[32] She travelled to China with the plaintiff in about October 2003 in order to determine whether her ex-husband was having such an affair.
[32] Transcript 326
105 The first defendant sought legal advice, and on that legal advice she commenced proceedings in the Family Court seeking property orders. She commenced those proceedings in January 2004 despite trying to reconcile with her husband until June 2004, by which time she appreciated that her matrimonial breakdown was irreconcilable.[33]
The First Defendant's Source of Income
[33] Transcript 326-328
106 In her outline of evidence[34] the first defendant described Artini, Artica and Hi Fashion as not being viable businesses. However, the first defendant did not give any evidence of her sources of income nor the plaintiff’s sources of income which established how the purchases of the various properties were actually funded over and above the capital that was borrowed.
[34] Exhibit 1
107 Nor did the first defendant give any evidence of the sources of the moneys used to undertake the renovations of Botanic Walk, Tuckwell Road, Station Street and Centre Court, nor the source of the moneys which she and the plaintiff used for their general living expenses.
108 What added to the difficulty in understanding the first defendant's evidence regarding her sources of income was an extract from her taxation return for the year ending 30 June 2006. She asserted that her taxable income was $45,162. She claimed expenses totalling $20,410, of which the sum of $19,760 was referred to twice as an expense incurred by her. It was claimed as “purchasers and other costs” and as “cost of sales”.
109 The taxation return also discloses that the first defendant earned $18,200 from the rental of the Botanic Walk. She earned $21,550 as “allowances, earnings, tips, director's fees etc”. She received $4,949 by way of an Australian government allowance (unemployment benefits).
110 It would appear that the first defendant added the rental of $18,200 ($17,078 after deductions were claimed) to $21,550 (less some other small deductions) as the major part of the net taxable figure referred to in the Notice of Assessment of the Australian taxation office.[35]
[35] DCB 348-373
111 The sum of $19,760 was paid to the plaintiff partly as the cost of services he provided to the first defendant, and partly for goods which he purchased from her.[36] What I am unable to determine is whether the sum of $19,760 claimed as an expense was claimed as a deduction. Curiously, it appears not to have been.
[36] Transcript 357-358
112 In any event, it is clear that the first defendant was deriving an income from a source. She gave no evidence of following any particular occupation in 2006. The only inference I can draw is that the income she earned in that year was derived from the business ventures which started with Artini, then Artica, then probably Hi Fashion.
113 The only hint the first defendant gave of the source of the $21,550 was that it was paid to her by the second defendant for finding Centre Court. She said she was an employee of the second defendant.[37] She received that payment as a result of an agreement which she arrived at between herself and her parents.
[37] Transcript 365-368
114 Again, I found this to be odd because her parents had nothing to do with the second defendant, save for her father being the only shareholder.
115 What is revealed by the taxation return is contrary to the first defendant's evidence that the businesses were not viable. If they were not viable then her failure to explain the taxation return and the income which she derived (other than rental income) is very perplexing and confusing.
The Purchase of the Properties
116 What is clear from the first defendant’s outline of evidence and from her oral evidence is that she and the plaintiff agreed that Tuckwell Road, Station Street and Centre Court were purchased with finance borrowed from a number of financial institutions. Where they parted company was the identification of the source of other funds applied to the purchase and renovation of those properties.
117 The first defendant agreed that after Tuckwell Road was sold, that she entered into an agreement with the plaintiff that the profit would be divided as to $55,000 to the plaintiff and $15,000 to herself.
118 Station Street was rented for $4,000 per month and Centre Court was rented for about $2,254 per month. That income was applied against the capital borrowed in relation to the purchase of both of those properties. What profit was earned was deposited into a banking account controlled by the first defendant.
The Deficiencies in the First Defendant’s Case
119 The true financial position of the first defendant during the time she had any degree of association with the plaintiff was clouded by her failure to make discovery of documents which were fundamental to the case which she endeavoured to put before me:
•
She did not produce any taxation returns for any relevant years, other than 30 June 2006, to demonstrate what income she earned and the sources of such income.
•
She did not produce any taxation returns relevant to the businesses conducted through Artini, Artica or the second defendant.
•
She did not produce any, or any sufficient banking records of the banking institutions through which the finances of Artini, Artica or the second defendant were conducted.
•
She did not produce the banking records of the second defendant even though she admitted that as a director of the second defendant she was in a position to request those records. In the course of Mr Alexander's final address, he announced that the first defendant could produce those records, but in four days’ time.[38]
•
She did not call Zuyi Song or the third defendant to give evidence to confirm what arrangements existed relevant to their involvement with the first defendant in the various businesses and in the purchase of any of the properties.
•
Despite being served with a Notice to Produce documents relevant to the proceeding between herself and her ex-husband in the Family Court, she failed to do so until the matter was ventilated before me and as a result of a ruling I made that the documents be produced. The documents produced were incomplete.
[38] I reserved the position of both the plaintiff and the defendants to submit written submissions. None was submitted by the first defendant. No effort was made by the first defendant to apply to re-open her case to admit further evidence of any kind, and in particular, evidence of financial records under her control
The Serious Allegations Not Put to the Plaintiff
120 The first defendant also made a number of allegations in her outline of evidence which were not put to the plaintiff, many of which were very serious allegations:
•
The plaintiff used the second defendant’s e-mail account to send notices to tenants of Station Street and Centre Court to advance his own interests by directing them to pay their rent into the plaintiff's own banking account.[39]
•
The plaintiff attempted to blackmail the first defendant by threatening to publish photographs of the first defendant in her nightie over the Internet unless Centre Court was transferred to the plaintiff in consideration of a transfer by the plaintiff of his interests in Tuckwell Road and Station Street to the third defendant.[40]
•
The plaintiff set up the discretionary trust without the knowledge or consent of the first defendant. At that stage the plaintiff was the only director of the second defendant. No evidence was adduced from Zuyi Song or from the third defendant that they were not aware of the existence of the discretionary trust.[41]
•
The plaintiff appointed Exceland Real Estate to manage Station Street without the consent of the third defendant and directed rent earned from that property to himself of $15,000. The first defendant described that as theft by the plaintiff of moneys which he should have accounted for to the third defendant.[42]
•
The plaintiff forged the first defendant's signature on an application which was provided to Exceland Real Estate relevant to the release of a bond.[43]
•
The plaintiff defrauded the second defendant of two months’ rent from Centre Court amounting to $4,508, resulting in a default on the home loan, requiring Zuyi Song to make good that default.[44]
[39] Paragraph 43
[40] Paragraph 64-65
[41] Paragraph 68 and 89
[42] Paragraph 82
[43] Paragraph 83
[44] Paragraph 95
121 Even though the cross-examination which Mr Alexander was instructed to conduct of the plaintiff went to whether there was a domestic relationship, the circumstances under which the various businesses were conducted and the circumstances under which the properties were purchased, no serious allegation was made during that cross-examination consistent with the plaintiff having committed acts of blackmail, fraud and misappropriation of funds belonging to the defendants.
122 The case ultimately put by the first defendant was reduced to an attempt to use the exhibited documents as a paper trail demonstrating the source of funds and how they were used. Mr Alexander produced a six-page diagrammatic demonstration of the property transactions and their interrelationship with various banking accounts from which moneys were sourced for the successful undertaking of the property transactions.
The Plaintiff’s Submissions
Browne v Dunn
123 Mr Clarke referred to the allegations made by the first defendant in her outline of evidence that the plaintiff had committed acts of blackmail, fraud and misappropriation of funds.
124 Mr Clarke submitted that the cross-examination conducted by Mr Alexander barely made those allegations. He also submitted that to a great extent the evidence given by the first defendant in the end was not put to the plaintiff. He submitted that this failure put the plaintiff at a serious disadvantage.
125 Mr Clarke referred me to what in practice is now known as the rule in Browne v Dunn.[45] The rule, as it applies in Australia, was formulated by Hunt J in Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation:[46]
"It has in my experience always been a rule of professional practice that, unless notice has already clearly been given of the cross examiner's intention to rely upon such matters, it is necessary to put to an opponent’s witness in cross-examination the nature of the case upon which it is proposed to rely in contradiction of his evidence, particularly where that case relies upon inferences to be drawn from other evidence in the proceedings. Such a rule of practice is necessary both to give the witness the opportunity to deal with that other evidence, or the inferences to be drawn from it, and to allow the other party the opportunity to call evidence either to corroborate that explanation or to contradict the inference sought to be drawn."
[45] (1893) 6 R 67
[46] [1983] 1 NSWLR 1, at 16
126 The sanctions which flow from a breach of the rule in Browne v Dunne are: firstly, if a witness is not cross-examined on a point, then cross-examining counsel may be taken to accept it and may not be permitted to address in a fashion which asks the court not to accept it; and, secondly, if the witness has not been cross-examined on a particular matter, that may be a very good reason for accepting that witness's evidence, particularly if it is not contradicted by other evidence.
127 However, where there has been a breach of the rule, it does not necessarily follow that a court must accept the evidence which was not subject to cross- examination where the witness's evidence appears to be incredible or unconvincing.[47]
[47] Bulstrode v Trimble [1970] VR 840, per Newton J, at 849
128 The frustration which emerged from the way in which the first defendant conducted her case was aptly described by Wells J in Reid v Kerr,[48] who observed that it is frustrating for a trial judge, in making findings of fact, when two important bodies of evidence which are inherently opposed have not been brought into direct opposition and serenely pass one another like two trains in the night.[49]
The Domestic Partnership
[48] (1974) 9 SASR 367, at 373-374
[49] The first defendant chose not to instruct Mr Alexander to address me on any of the issues which were not put to the plaintiff, but rather to follow the paper trail of the moneys used to undertake the property transactions and consistent with the oral evidence of the plaintiff
129 Mr Clarke submitted that I should find that the plaintiff and the first defendant were in a domestic relationship between September 2003 and October 2006. He submitted that the plaintiff had made significant contributions of the kind referred to in section 285(1)(a) of the Property Law Act 1958 entitling the plaintiff to an adjustment of interests in his favour from the asset pool.
130 The only claim which the plaintiff potentially has against the first defendant is in relation to Botanic Walk for the financial and non-financial contributions which he made directly or indirectly to the improvement of Botanic Walk. The plaintiff's contributions appear to me to have been modest.
131 Mr Clarke submitted that if I concluded that the first defendant had no legal or equitable interest in Station Street or Centre Court, and that the only asset of the domestic relationship was Botanic Walk, then the plaintiff would press the alternative: that the plaintiff contributed to the acquisition and maintenance of Station Street and Centre Court. On that footing, it was submitted that it would be unconscionable for the second defendant and the third defendant to assert their legal interests in Centre Court and Station Street respectively to the exclusion of any interest which the plaintiff has.
132 Mr Clarke submitted that the unconscionable conduct on the part of the second defendant and the third defendant would give rise to a constructive trust, that is, the second defendant holds the plaintiff's interest in Centre Court on trust, as does the third defendant in Station Street.
The Defendants’ Submissions
133 As I have already stated, the instructions given by the first defendant and by the other defendants to Mr Alexander was to essentially to disavow the defendants’ reliance on much of the evidence in the first defendant's outline of evidence and her oral evidence.
134 Instead, Mr Alexander relied on a paper trail to demonstrate that the plaintiff did contribute moneys from the sale of Noble Park, however, he recovered those moneys and has no legal or equitable interest in Station Street or Centre Court.
135 The first defendant denied the existence of a domestic relationship and submitted that the plaintiff had no interest of any kind of Botanic Walk.
A Domestic Relationship
136 A domestic relationship is defined in section 275(1) of the Property Law Act 1958 as a relationship between two people who, although not married to each other, are living or have lived together as a couple on a genuine domestic basis.
137 Section 275(2) provides that for the purpose of the definition of “domestic relationship” and whether one existed or not, all of the circumstances of the relationship are to be taken into account, including any one or more of the following matters as they may be relevant in a particular case:
"(a) the duration of the relationship; (b) the nature and extent of any common residence; (c) whether or not there was a sexual relationship; (d) the degree of financial interdependence, and any arrangement for support between or by the parties; (e) the ownership, use and acquisition of property; (d) the procreation of children; (e) the care and support of children; (f) the performance of household duties; (g) the degree of mutual commitment and mutual support; (h) reputation and 'public' aspects of the relationship."
138 I accept the plaintiff’s evidence that he entered into a relationship with the first defendant in about September 2003, and probably at a time when the first defendant was uncertain about the intentions of her ex-husband regarding the future of their marriage.
139 By January 2004, the first defendant filed proceedings in the Family Court. I find she must have filed that proceeding only when she was certain that her marriage was at an end. I do not accept that she filed those proceedings while the embers of her relationship with her ex-husband were still burning. It strikes me, that taking such a dramatic step is a clear demonstration by her that not only was her marriage over, but she was intent upon protecting her interests in the asset pool relevant to that relationship.
140 From September 2003, the relationship between the plaintiff and the first defendant emerged from a friendship and business relationship into a relationship where they shared a number of houses; engaged in a sexual relationship; shared domestic tasks in their common households, and applied moneys which they each had for their mutual benefit.
141 I accept the plaintiff’s evidence that their move to Sydney was accompanied by an intention on the part of both the plaintiff and the first defendant to consider marriage and to establish a family unit.
142 I find the first defendant's evidence to be entirely unacceptable in almost every respect relevant to whether there was a domestic relationship or not. She would have it that the occasions when she and the plaintiff lived in the same house were for short periods of time only, and that their sexual relationship was casual and non-committal, and that any relationship that they had was in actuality business-based.
143 I am fortified in reaching the conclusions that the plaintiff and the first defendant were in a domestic relationship by the orders obtained by the first defendant against the plaintiff on 4 April 2006 from the Parramatta Local Court.[50]
[50] PCB 171-180
144 The first defendant alleged that the plaintiff assaulted her on 7 March 2006. She lodged a complaint with the police, who brought a criminal proceeding against the plaintiff by a complaint and summons filed on 10 March 2006. The circumstances of the complaint included an allegation that the plaintiff and the first defendant had been in a de facto relationship for the past two years.
145 The first defendant denied that she gave instructions to the investigating police officer that she was in a de facto relationship with the plaintiff. She also said that she had no control over whether the prosecution proceeded or not. Curiously, she admitted driving the plaintiff to the Parramatta Local Court on the day he was required to appear before that Court. She remained in the car and waited for him.
146 I do not accept that the investigating police officer invented the allegation that the plaintiff and the first defendant were in a de facto relationship for two years. I do not accept that the first defendant did not understand the nature of the complaint she made, its basis and the ramifications in making a complaint of that kind.
147 It occurs to me that many of the aspects of the relationship described by the plaintiff are consistent with the considerations referred to in section 275(2) of the Property Law Act 1958: their relationship was about three years in duration; they shared common residences; they had a sexual relationship; there was a degree of financial interdependence; they did mutually support each other financially; they pooled their assets and purchased properties; they performed household duties for each other's benefit, and there was a degree of mutual commitment and support and knowledge by their peers of their relationship.
The Constructive Trust Claim
148 Although Station Street was registered in the name of the plaintiff and the third defendant as tenants in common, and Centre Court was registered in the name of the second defendant, I find, on the basis of the analysis of the financial relationship which existed between the plaintiff and the defendants, that the plaintiff made a significant financial contribution from the proceeds of sale of Noble Park.
149 In the absence of any evidence from the third defendant in relation to the purchase of Station Street; and reasons as to why the third defendant and plaintiff were registered in tenants in common; and in the absence of any persuasive evidence from the first defendant why Centre Court was registered in the name of the second defendant; and also given the very unsatisfactory nature of the evidence of the first defendant, I find that the plaintiff did contribute to the purchase of those properties.
150 By their Defence, the second defendant and the third defendant deny that the plaintiff has any interest in Centre Court and Station Street.
151 The basis for finding a constructive trust was stated by Deane J in Muschinski v Dodds,[51] as follows:
“… the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do.”[52]
[51] (1985) 160 CLR 583
[52] at 620
152 That principle was applied in Baumgartner v Baumgartner.[53] In both Muschinski v Dodds and Baumgartner v Baumgartner, it was held that the existence of a constructive trust will only be recognized to the extent necessary to prevent conduct that is regarded as unconscionable, pursuant to equitable principles upon the failure of a relationship between the parties.[54]
[53] (1987) 164 CLR 137
[54] Muschinski v Dodds (supra), per Deane J, at 621
153 The question that falls for consideration here is whether, in the circumstances of the failed relationship between the plaintiff and the second defendant in relation to Centre Court, and the failed relationship between the plaintiff and the third defendant in relation to Station Street, a constructive trust of the kind referred to in Muschinski v Dodds and Baumgartner v Baumgartner should be imposed?
154 The conclusion I have reached is that, in relation to the second defendant and the third defendant, that a constructive trust derives from the contribution made by the plaintiff from the proceeds of Noble Park to the reduction of the loan over Tuckwell Road, and consequent upon the sale of Tuckwell Road, the use of those proceeds of sale in the financing of the purchase of Station Street and Centre Court.
The Quantum of the Plaintiff’s Claim
Domestic Partnership
155 I will, firstly, turn to the plaintiff's claim against the first defendant relevant to the claim he makes against her under Part IX of the Property Law Act 1958.
156 The conclusion which I have reached is that the work the plaintiff undertook in renovating Botanic Walk was modest, however, it does constitute a financial and non-financial contribution made by him directly to the improvement of that property. It was that work which assisted the first defendant to bring it to a position where it could be rented as student accommodation.
157 The approach that a trial judge is to take, in making an adjustment of interests in property from the asset pool of the domestic partners, is to, firstly, identify the value of the assets of the parties; secondly, to assess the contributions of each party; thirdly, to determine whether those contributions have been sufficiently recognized and compensated for; and fourthly, to determine the orders to be made to ensure that the parties’ contributions are recognized and compensated for.[55]
[55] Kenyon v Akeroyd [2008] VSCA 277, at paragraph 8, and Giller v Procopets [2008] VSCA 236, per Neave JA, at paragraph 314
158 The only asset over which the first defendant has legal ownership is Botanic Walk. Station Street is owned by the plaintiff and the third defendant. Centre Court is owned by the second defendant.
159 The only claim which the plaintiff potentially has against the first defendant in relation to Botanic Walk is for the financial and non-financial contributions which he made directly or indirectly to the improvement of Botanic Walk.[56]
[56] Section 285(1)(a) of the Property Law Act 1958
160 I consider that there should be some modest adjustment of the interest of the plaintiff and the first defendant to reflect those contributions made by the plaintiff, which I assess at $5,000. It is consistent with the moneys expended by the plaintiff in the purchase of hardware items, the assistance he provided the first defendant in organising for the renovation of that property and putting it in a rentable condition.
Constructive Trust
161 The plaintiff contributed the whole of the sale price of Noble Park to the joint- venture on which he and the defendants engaged.
162 The plaintiff contributed $181,604.73 directly against the loan from St George Bank over Tuckwell Road, which reduced it from $533,574.58 to $351,969.58.[57] The balance of the sale price of $13,134 was deposited in the plaintiff's St George Offset account.[58]
[57] PCB 159
[58] PCB 161
163 The first defendant admitted that the plaintiff contributed the sum of $181,604.73. She denied that the sum of $13,134 was used to make payments on the loan to St George Bank or to joint living expenses or renovation costs. I accept the plaintiff’s evidence that the sum of $13,134 was used in the ways described by him.
164 I accept the plaintiff’s evidence that Colonial-CBA accepted a re-valuation of Tuckwell Road of $535,000. I also accept the plaintiff’s evidence that the re- valuation was used to borrow $478,015 from Colonial-CBA which represented 90 percent of the re-valuation, of which $351,969.85 was used to discharge the loan provided by St George Bank.
165 I accept the plaintiff’s evidence that there was an overdraw of $61,240[59] which was used to renovate Tuckwell Road. The first defendant does not deny that renovations were undertaken. In paragraph 8 of the Draft Amended Notice of Defence, the third defendant pleaded that she contributed moneys toward the purchase of the various properties, and in particular, that the cost of the renovations to Tuckwell Road was $80,000.
[59] See paragraph 51 above
166 Mr Clarke submitted that whilst I should not accept any evidence given by the first defendant of the conduct of the third defendant, he submitted that I should accept the third defendant’s admissions contained in the Draft Amended Notice of Defence which confirmed the plaintiff’s evidence that moneys were expended on renovations of Tuckwell Road.
167 The plaintiff said that the renovations cost between $50,000 and $70,000. It is obvious that the plaintiff was making an estimate of the cost of the renovations. No documentary evidence was produced to confirm that estimate. The figure pleaded to by the third defendant is broadly consistent with the plaintiff’s evidence of the cost of the renovations. I accept the plaintiff’s evidence that moneys were expended on renovations on Tuckwell Road at a cost consistent with the estimates he gave.
168 The plaintiff and the first defendant agree about very little concerning the purchase of Station Street and Centre Court except that they were purchased and turned into student accommodation.
169 The major disagreement between the plaintiff and the first defendant is the source of moneys used to pay the deposits and the balance of purchase moneys.
170 The real difficulty in determining the source of the holding deposits, the full deposits and the balance of the purchase moneys is that the evidence of the plaintiff and the first defendant was diametrically opposed.
171 In relation to Station Street, the first defendant said that apart from the finance required to complete the purchase, all of the other moneys relevant to its purchase were provided by the third defendant.
172 In relation to Centre Court, the first defendant denies that the plaintiff paid the holding deposit of $1,000. She agrees that $57,799.62 was contributed by the overdraw through the refinancing with Colonial-CBA. She said that the balance of the deposit of $33,000 came from the plaintiff's St George Freedom Offset account, but that sum was derived from moneys provided by the third defendant.
173 Before the plaintiff applied $181,604.73 in reduction of the loan over Tuckwell Road, the capital debt stood at $533,574.58. On re-valuation it had a value of $535,000. If the plaintiff had not contributed $181,604.73, then there was no equity in Tuckwell Road.
174 It was only after the plaintiff contributed $181,604.73 in reduction of the loan over Tuckwell Road that a net equity was established, and that net equity was used to obtain a re-valuation, and then further loans which were used to purchase Station Street and Centre Court.
175 I find that the plaintiff and the first defendant were occupied in conducting a business using the names Artini and Artica to generate the sort of income which the first defendant disclosed in her taxation return for the year ending the 30 June 2006.
176 That income, together with overdraws and income obtained through the rental of Station Street and Centre Court, provided sufficient moneys for the plaintiff and the first defendant to pay their own daily living expenses and to meet the loan over Tuckwell Road before it was sold, and then over Station Street and Centre Court.
177 After Tuckwell Road was sold, the plaintiff and the first defendant distributed the profit from that sale. The plaintiff received $55,000 and the first defendant received $15,000. The distribution occurred by agreement. It must have occurred in those proportions in recognition of the plaintiff's contribution from the sale of Noble Park.
178 Mr Clarke submitted that the agreement should be the basis for a determination of the interest of the plaintiff in Station Street and Centre Court in proportions of 55:15, and that the second defendant and the third defendant hold the plaintiff's interest in those proportions in trust on a constructive trust.
179 I consider the submission made by Mr Clarke, that the quantification of the plaintiff's claim against the second defendant and the third defendant should be undertaken by reference to the proportions of the distribution of the profit on the sale of Tuckwell Road, to be simplistic and not supported by the evidence.
180 Firstly, the submission ignores the fact that the plaintiff did not establish that the first defendant had a legal or equitable interest in Station Street or Centre Court. Whilst the first defendant spoke about those properties as if they were her own, the fact remains that she did not adduce any evidence to prove that she has either a legal or equitable interest in either property. Therefore, to operate on the assumption that in some way the first defendant has an overriding equitable interest in Station Street and Centre Court has no basis in fact or as a matter of law.
181 Secondly, the submission fails to give consideration to a number of relevant matters. It fails to take account of the fact that the first defendant contributed the rent earned from Botanic Walk, the income that she undoubtedly earned from the businesses which she disclosed in her taxation return to the year ending 30 June 2006, and the rental from Station Street and Centre Court from the time when the plaintiff and the first defendant separated.
182 The domestic relationship between the plaintiff and the first defendant was relatively short, that is, from about September 2003 to October 2006. The business relationship probably commenced before September 2003, but likewise ended by about October 2006, if not earlier, when the domestic relationship deteriorated.
183 It is because of the relatively short duration of the domestic relationship and the business relationship between the plaintiff and the defendants that I consider that the quantum of the plaintiff's claim against the second defendant and the third defendant equate to the moneys which he contributed from the sale of Noble Park with some adjustment for the work which he contributed to the renovation of both properties to turn them into student accommodation.
184 After the sale of Tuckwell Road, the plaintiff had returned to him the sum of $55,000. Having accepted that the plaintiff contributed $194,739, that means that the residue of $139,739 was contributed subsequently to the purchase of Station Street and Centre Court.
185 It is that amount which I consider represents the first part of the quantification of the plaintiff's claim against the second defendant and the third defendant.
186 Insofar as the sum of $139,739 is concerned, there is no evidence to suggest that it should be borne by only the second defendant or the third defendant. It seems to me that it would be fair to require the first defendant and the second defendant to bear that sum equally.
187 Therefore, I conclude that the second defendant holds, on a constructive trust, the sum of $69,869.50, and the third defendant holds, on a constructive trust, the sum of $69,869.50.
188 The second part of the quantification the plaintiff's claim is the extent to which he made a contribution to the improvement of both Station Street and Centre Court.
189 It is important to note at this point that notions of simple fairness play no part in the determination of whether a constructive trust exists and the quantification of the amount of such a claim. Deane J made that very point in Muschinski v Dodds (supra) when he observed that equity would not intervene to provide a remedy based upon some idiosyncratic notion of justice and fairness. He added that where relief is unavailable, equity will intervene to entitle each party to a relationship to a proportion of the repayment of capital contributions made by them to a particular venture.[60]
[60] Pages 615-616 and 618 and 619
190 Kaye J, in Cressy v Johnson (No. 3),[61] reviewed the authorities to which I have referred and encapsulated the essence of this point as follows:
"In other words, the remedy of a constructive trust is not a response by equity to a perceived unfairness where, on the termination of a personal relationship, the legal arrangements between the parties do not reflect the commitment and contributions of each party to that relationship. Rather, the equitable remedy of a constructive trust is available to adjust the legal interests in property of a party or parties to a relationship, where, during and on the basis of the continuation of the relationship, one party has made a contribution to the acquisition, maintenance or improvement of the property, such that it would be unconscionable for the other party, on the failure of the relationship, to insist strictly on his (or her) legal rights without an appropriate adjustment commensurate with the contribution made by the former party to the property. Accordingly, in order to be entitled to an interest under a constructive trust, the plaintiff must establish that the contribution, on which she relies, was not simply directed to advancing the welfare of the defendant, and of the family unit of which he was then a part. Rather, the contribution of the plaintiff, on which the constructive trust is to be based, must have been directed to the acquisition and maintenance of the assets in respect of which the plaintiff claims an interest under the constructive trust."[62]
[61] [2009] VSC 52
[62] at paragraph 197
191 Like the plaintiff's claim against the first defendant relevant to the domestic relationship, it is not possible to quantify this claim in precise terms. However, it is clear that the plaintiff did make contributions to the renovation of those two properties by physically undertaking work and by paying for various items necessary to complete the renovations to the properties.
192 It would be unconscionable for the second defendant and the third defendant to assert otherwise, because in the end they have profited by the work undertaken by the plaintiff through the rental earned from those two properties. I consider that an appropriate adjustment which is commensurate with the work the plaintiff undertook is $5,000 in relation to Station Street and $5,000 in relation to Centre Court.
Costs 193
The conduct of the defendants in the lead up to the trial resulted in the plaintiff suffering costs thrown away on 23 September 2009 when the proceeding was in the trial list before His Honour Judge Coish. On the day preceding, the first defendant served an outline of evidence containing extensive and serious allegations of fraud and misconduct on the part of the plaintiff. Despite serving the document, the first defendant did not then seek to rely upon it, but rather an edited version of it. The service of it so late resulted in the plaintiff considering applying for an adjournment.
194
The proceeding was referred to me to commence on 24 September 2009. Mr Alexander applied to have the proceeding adjourned to the following day so that he could amend the defendants’ Defence. I reluctantly granted the adjournment on the basis that the defendants pay the plaintiff's costs thrown away on an indemnity basis, but I reserved for further argument whether that order for costs should extend to 23 September 2009.
195
After the defendants closed their case on 1 October 2009, I assumed that Mr Clarke and Mr Alexander would commence their addresses on 2 October 2009. Mr Alexander applied for an adjournment to prepare a number of diagrams which he said would assist me in determining the money trail relevant to the various businesses and the purchase of the properties, and also to prepare written submissions which would explain the diagrams.
196
Again, I reluctantly granted the adjournment, but only on the basis that the defendants pay the plaintiff's costs thrown away on an indemnity basis.
Final Orders
197 On the basis of the foregoing reasons, I propose to make orders as follows:
The Part IX claim
(a)
A declaration that the plaintiff and the first defendant were in a domestic relationship between September 2003 and October 2006.
(b)
Pursuant to section 285(1) of the Property Law Act 1958, I adjust the interests of the plaintiff and the first defendant in Botanic Walk by ordering that the first defendant pay the plaintiff the sum of $5,000.
(c)
The plaintiff have judgment against the first defendant for the sum of $5,000.
(d)
There be a stay on execution of the judgment for a period of thirty (30) days from the date of delivery of this judgment.
(e)
If the first defendant defaults in paying the sum of the judgment to the plaintiff by the due date, then the plaintiff be entitled sell Botanic Walk as if he were a mortgagee in possession.
(f)
That upon such sale, the plaintiff disperse the net proceeds of sale (being the amount of the sale price less the reasonable actual expenses of sale including agent’s commission and legal expenses) as follows:
(i) by paying out the full amount owed to the mortgagor/s (if any) in respect of any mortgage/s secured over the property;
(ii) by retaining $5,000; and
(iii) by paying the remaining balance to the first defendant.
The Claim against the Second Defendant
(a)
A declaration that the second defendant holds the sum of $74,869.50 on a constructive trust for the plaintiff.
(b)
The plaintiff have judgment against the second defendant for the sum of $74,869.50.
(c)
There be a stay on execution of the judgment for a period of thirty (30) days from the date of delivery of this judgment.
(d)
If the second defendant defaults in paying the sum of the judgment to the plaintiff by the due date then the plaintiff be entitled sell Centre Court as if he were a mortgagee in possession.
(e)
That upon such sale, the plaintiff disperse the net proceeds of sale (being the amount of the sale price less the reasonable actual expenses of sale including agent’s commission and legal expenses) as follows:
(i)
by paying out the full amount owed to the mortgagor/s (if any) in respect of any mortgage/s secured over the property;
(ii) by retaining $74,869.50; and (iii) by paying the remaining balance to the second defendant. The Claim against the Third Defendant
(a)
A declaration that the third defendant holds the sum of $74,869.50 on a constructive trust for the plaintiff.
(b)
The plaintiff have judgment against the third defendant for the sum of $74,869.50.
(c)
There be a stay of execution of the judgment for a period of 30 days from the date of delivery of this judgment.
(d)
Contemporaneously with the payment of the judgment sum the plaintiff sign all documents necessary to transfer his right title and interest in Station Street to the third defendant.
(e)
If the third defendant defaults in paying the sum of the judgment to the plaintiff by the due date then the plaintiff be entitled sell Station Street as if he were a mortgagee in possession.
(f)
That upon such sale, the plaintiff disperse the net proceeds of sale (being the amount of the sale price less the reasonable actual expenses of sale including agent’s commission and legal expenses) as follows:
(i)
by paying out the full amount owed to the mortgagor/s (if any) in respect of any mortgage/s secured over the property;
(ii) by retaining $74,869.50; and (iii) by paying the remaining balance to the third defendant. 198 I propose to make an order for costs against the defendants, which order will include an order for the costs thrown away referred to above on an indemnity basis.
199 I shall hear the parties on the formulation of the orders which I propose to make and the formulation of the order for costs.
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