Georgeff v Mitchell No. DCCIV-96-78 Judgment No. D3591

[1997] SADC 3591

Court

DISTRICT COURT OF SOUTH AUSTRALIA

Judgment of His Honour Judge Bright

Hearing

18/03/97, 21/03/97, 24/03/97 to 26/03/97, 01/04/97 to 02/04/97.

Catchwords

EQUITY - CONSTRUCTIVE TRUSTS.Unconscionable conduct.Property dispute on dissolution of de facto relationship.Male partner does not prove entitlement to share in house occupied by parties.Does establish entitlement to re-imbursement of certain money paid to Female partner during subsistence of relationship.

Representation

Plaintiff SIMONGEORGEFF:
Counsel: MR R MELLOWS - Solicitors: CHESTERMAN SMITH &; CO.

Defendant HELEN MITCHELL:
Counsel: MR D HAINES - Solicitors: VALERIEARMFIELD

DCCIV-96-78

Judgment No. D3591

18 April 1997

(Civil)

SIMONGEORGEFFVHELENMITCHELL

Civil

Judge D. Bright

The plaintiff and the defendant entered into a defacto relationship in 1980 and lived together for the next fourteen years.Dispute has arisen as to the entitlement of the plaintiff, if any, to a share in the home in which they resided.That home was bought by the defendant and her then husband in 1971, subject to two mortgages.In 1976, the second mortgage was discharged and replaced with a cheaper mortgage to a credit union.The marriage failed. After certain negotiation, the former husband transferred the house to the defendant, undertaking to continue to pay out the second mortgage, in settlement of the defendant's claim to maintenance and property of the marriage.

The transfer into the sole name of the defendant was registered on 31 May 1979.The former husband did complete paying out the secondmortgage, the discharge of which was registered in 1986.The first mortgage, to the State Bank of South Australia, was discharged on 31 July 1989.

The relationship between plaintiff and defendant developed during 1979, with full cohabitation commencing in March 1980.At that time the plaintiff was tenant (at $40 per week) of a unit, and the defendant was registered as sole proprietor of the house, subject to the two mortgages.She was responsible to make payments in respect of the first mortgage.

Usually in these cases the property in dispute is acquired during the course of a relationship.In this case, the original acquisition by the defendant and her then husband jointly, and the subsequent acquisition by the defendant solely of the matrimonial home had nothing to with her relationship with the plaintiff.However, during the period March 1980 to July 1989, the first mortgage was paid out.All, or almost all, payments were made by the defendant.The plaintiff alleges that she was only able to do so because he contributed to a "pool" of money, from which the family was maintained, and that he so contributed in the belief that he was contributing to the acquisition of the unencumberedfreehold of an asset properly to be regarded as a joint asset of the parties, to be used for their joint benefit indefinitely into the future.

Further, the plaintiff points to various improvements and additions effected to the house with, he says, his money and his labour.He says he did that in the belief that he was thereby contributing to an asset of the relationship properly to be regarded as a joint asset.

Finally, he refers to certain cash payments which he made to the defendant, particularly to a payment of $7,800 in 1986.The defendant had borrowed from the State Bank some $10,000, in order to effect improvements to the house. The $7,800 allowed her to pay off that loan much sooner than she had planned. The plaintiff says that his various payments were made in the belief that he was thereby to become entitled to an interest in the house.

The defendant denies ever having had any intention that the plaintiff should acquire any interest of any sort in the house.Having regard to the evidence, that seems clear to me.The plaintiff, as things have turned out, does not really seek to dispute it.However, he alleges that certain words of the defendant actively misled him into the belief that his money and labour were being expended on a property in which he had, or would be granted, an interest. He says that the defendant either actively encouraged, or at least permitted without demur, those payments and those labours, well knowing the plaintiff's misapprehension.

The defendant remains registered as the proprietor of the house - and thereby has the sole benefit of it, and of the improvements, extension and payments which the plaintiff says he made or contributed to.It is, he says, unconscionable that she should be permitted to assert her legal status as sole registered proprietor to defeat his claim in equity to a share in the house. I am asked to impose on the defendant a trust in favour of the plaintiff of a share in the house, proportionate to his contributions.

It is trite law that I have power to do so, if, in accordance with established equitable principles, it is right to do so.I refer generally to "Constructive Trusts" by M. Cope and, in particular, to Part VII, pp 757-896, for a thorough review of the subject.I note the caveat of counsel that I am not free to exercise any idiosyncratic ideas which I may have about the fairness or reasonableness of the situation.For a vitriolic defence of this proposition, see Meagher Q.C. : Constructive Trusts :High Court Developments and Prospects, (1988) Aust. Bar Rev. Vol. 4, p.67.I must determine, whether there is an unconscionable assertion of her legal title by the defendant against the just entitlement of the plaintiff according to law, in all the circumstances, and, if so, determine the extent of the plaintiff's entitlement, andprotect it by appropriate orders.

I turn to the facts.I record some general impressions of plaintiff and defendant.I note the warning of Lord Bridge of Harwich in A.G. of Hong Kong v Wong Muk Ping (1987) AC 501 @ 510:

"It is a common place of judicial experience that a witness who makes a poor impression in the witness box may be found at the end of the day, when his evidence is considered in the light of all other evidence bearing upon the issue, to have been both truthful and accurate.Conversely, the evidence of a witness who at first seemed impressive and reliable may at the end of the day have to be rejected.Such experience suggests that it is dangerous to assess the credibility of the evidence given by any witness in isolation from other evidence in the case which is capable of proving high on its reliability .".

I do not mean to suggest that either has a monopoly on truth, or justice.In the dissolution of any long standing relationship there are likely to be recriminations, self justifications, and like factors at play which will colour perceptions.

The plaintiff is a man of nearly 46.He presents as being surprised and hurt at the turn of events.He professes to be unhappy at his fate.He wishes the relationship had continued, but he was kicked out-after all he had done.He was not good at recounting events in minute detail.He tended to use rather broad brush strokes.When challenged on matters of detail, he was frequently found wanting.It is unsurprising that he tended to exaggerate the value of his contributions, and to minimise criticisms made of him.

The defendant was born in 1949.She appeared to be very frightened about the possible outcome of the case.She was very angry about it and determined to win.The house is her principal asset, so this is not surprising.In her evidence, she went into extreme detail.Often she would analyse questions, looking for the hidden trap.She would then give lengthy answers, avoiding what she perceived to be the traps.Her answers were not always responsive to the questions asked.She was a difficult person to cross examine.

However, it must be said that her attention to detail was backed up by extensive research and records.It is not my view that she sought to mislead me.At times it was clear that she was reconstructing.Where that occurred, she was generally able to point to the document or other source relied on.She made no bones about her struggle to acquire the house and her determination to keep it.

The only other generality of which I wish to deliver myself is that neither side attempted to claim any significant incident or conduct for which the other was to blame and to which I should have regard to in assessing the alleged unconscionability of the defendant.The relationship was enthusiastic and loving at first.It seems to have died for a myriad of small reasons which accumulated over time.

I shall deal first with the allegation that funds were pooled for the joint benefit and that that pool paid off the mortgage.I am not certain that I have the exact incomes of the parties, but I have enough to make general findings. I set out their respective incomes.

YEARPLAINTIFFDEFENDANT

80/1$10,500$5,800

81/2$11,500$5,100

82/3$12,000$5,100

83/4$13,000$11,400

84/5$14,800$12,200

85/6$15,500$13,100

86/7$22,500$14,200

87/8$20,500$15,100

88/9$24,000$16,200

89/90$28,500$12,000

90/91$27,500$11,400

91/2$28,500$9,000

92/3$30,000$11,400

93/4$35,000$9,600

These figures represent nett earnings, largely as disclosed in their tax returns.At relevant times the defendant also received certain other income. She received about $1,000 per annum child endowment.From 1990, her sons paid board, beginning at $1,500 per annum and rising to $5,200 per annum by 1993/4.

The parties' wages were paid into their separate bank accounts.There was never a joint account.From time to time each took out personal loans which were never guaranteed by the other.Loans were taken out for a variety of individual projects.

The plaintiff said that, from his earnings, he contributed to the pool from which family expenses were met.The defendant paid the mortgage from her separate bank account, by banker's order, but, it was said, was only able to do so because of the plaintiff's contributions to other expenses.The plaintiff said that he did not make a regular pre arranged payment.He said that, as required to meet bills, he put in money.He said that, in the first two years it was $100 "on a weekly, fortnightly, monthly basis".He also paid for medical benefits most years.His evidence did not attempt to put any finer figure on his contribution.

The defendant said that, at first, he began to put $30 per week on the dressing table, of his own volition, and without request from her.In 1983 it went to $50 per week, in 1985 to $60 per week, in 1986 to $70 per week, in 1987 to $100 per week, in 1988 to $110 per week, in 1989 to $120 to $130 per week, and in 1990 to $150 per week.This continued until the end of the relationship, except that he also paid, on an ad hoc basis, a variety of electricity, gas, and like bills.He sometimes paid supermarket food bills.

The plaintiff invited me simply to take a broad axe, and to accept his estimate that he paid about 60% of the family expenses throughout.He invited me to compare the respective incomes and, thereby, to conclude that he must have contributed far more than she.I am asked to find that the defendant could not have survivedwithout his contributions.While both of these contentions might be of some use as corroboration for what other evidence might suggest, by themselves they are a poor guide.

The defendant did survive, with her children, on what she got before the plaintiff came on the scene.She then received a supporting mother's pension, which was discontinued when the defendant moved in.In particular, she kept up mortgage payments.The evidence could not hope to disclose every single purchase made by each, either for separate, or for joint benefit;which may be just as well.Such evidence as there is suggests that the plaintiff spent more on property for his personal use than the defendant did for hers.A number of items were retained by the plaintiff after the split, which he says are his.I refer to electronic goods, and the like.There is dispute about whether he had given them to the defendant, or to the family generally.When spread over fourteen years, they do not demonstrate wild self indulgence.I accept that the defendant felt that that expenditure by him was unnecessary. It is likely that she could not afford to buy such things for herself.

Coupling this with the separate personal loans that each took out from time to time, I certainly cannot find that all income for both was pooled in some way. Nor can I simply take the ratio of their incomes and apply that to any alleged asset of the relationship in order to value their respective shares.

It is only the money properly to be regarded as used or available for joint purposes which could give rise to joint ownership.Money spent by the plaintiff on himself cannot do that.I do not wish to decry the plaintiff's contributions, but he has not proved general contributions beyond what the defendant has acknowledged.

Even with regard to the payments he made for medical benefits, and accepting that having such cover was good for the family, it is not known whether the defendant had cover before, or whether she would have taken cover if he had not paid for it.Many people do not.I cannot find that payment for this cover produced any identifiable increase in the defendant's ability to pay the mortgage.

I remind myself that it is only payments off the mortgage which could be said to have resulted in acquisition of the house during the relevant period.

There is dispute as to whether the plaintiff put in more than he cost.Each side made bald assertions.The defendant explained the plaintiff's increasing contributions, which she acknowledges, by reference to her own complaintsto him that he was not contributing his share.He got accommodation and food. He had a penchant for larger, hungrier, dogs than she is likely to have owned -though she also enjoyed, and was protected by them.His hobby was to race, or assist his brother in racing greyhounds.

I cannot identify any sum, or proportion, of money contributed towards general living expenses by the plaintiff, which is so clearly in excess of his own costs of living as to demonstrate that he generated a surplus, thereby enabling the defendant to make payments, or part payments, off the mortgage, which she otherwise could not have made, or which she would have struggled to make.It is not proved that his money went into the mortgage.It is not proved that he put in such sums of money on a regular basis that he could be said to have suffered a detriment.Wherever he was, it would have cost money for him to live.It is not shown that he paid more than it would have cost him elsewhere, or more than it cost in this location.

I turn to a series of specific expenditures on projects alleged to have improved the house.There is dispute about the amount of some claims, even as to who paid particular bills;but it is accepted that a number of tasks were performed.At least some of the works resulted in improvement to the value of the house.Even allowing for disputes, the plaintiff did incur expenditure, which can be classed as a detriment to him.In each case, he also had at least some benefit-the improvements and items were used by him.I shall mention some of them.

Early in the relationship, in 1980, the plaintiff's brother suggested to him that certain wallpaper should be stripped.It was unglued at the edges. There was a little dampness penetrating from a shower recess into the hall on the far side of the intervening wall.The plaintiff and his brother removed the paper, sealed the shower and lined the hall with wood veneer panelling. He says he spent $200.No doubt it was useful, but it had no bearing on the value of the house, either then or at the time of separation.I do not accept that it was done with any thought of acquiring an interest in the house.I find it did not confer any interest.

Venetian blinds were installed in the front bedroom.The plaintiff says he bought and installed them.The defendant says that she bought them from "Burns for Blinds", who installed them.I prefer her evidence on this point, but, again, even if he did buy them, they did not cost a lot and were not acquired on any basis which would give rise to an interest in the house.

In 1982, the plaintiff, his brother, and others erected a 40 feet by 10 feet steel framed rectangular back verandah, and laid concrete under it.He said it cost $2,400.The defendant agreed that the work was done and that it was of use to her.She believed it did not cost that much, but could not say how much.

The need for such a verandah was in dispute.The plaintiff described the area as prone to standing water and mud after rain.The defendant said that the area had been under lawn, until the plaintiff's dog destroyed that lawn. In any event, it was an improvement, and was used extensively by both parties. As of the time of separation, a valuer. Mr. Metters, did not put a separate value on the verandah, though he noted that the paving beneath it added about $1,000 to the value of the house.

The plaintiff says that discussion about marriage occurred around a year in to the relationship-perhaps in 1981.The defendant did not agree to marry him.The defendant says that, having just suffered a broken marriage, she was very cautious.He thought the relationship was for the long term;she that she would see how things went.

The plaintiff and defendant agree that the plaintiff raised the topic of putting the house in joint names.The defendant was quite clear that she had no intention of doing so-but she fobbed the plaintiff off with an excuse about the cost of doing so, rather than refusing outright.The plaintiff said that this happened in "the early eighties, from 1980 up to about 1988".From other evidence, to which I shall refer later, I find that it must have been before 1986.

There is no evidence that it was before the verandah went up.There is no evidence of any agreement (or misrepresentation) by that time.The plaintiff may have entertained hopes of a long term relationship, but there was nothing to suggest the acquisition of a share in the house.He did not get one as a result of the verandah.

In 1984/5, over two or three weekends, the plaintiff attached a pergola to one end of the rear verandah.The defendant painted it.The plaintiff believes he spent about $600 on timber and fittings.The defendant bought the paint. This was clearly a joint project.There may be doubt as to the exact amount spent by the plaintiff, but I am content to find that it must have been at least $400, and may have been more.It seems to me typical of the sorts of projects which might be undertaken by a couple in a stable relationship, looking to that state continuing indefinitely.

It was not a project designed for identifiable cash or capital benefit on some foreshadowed disposal of the house.By this time there may well have been conversation about putting the house into joint names, including the defendant's fobbing off of the plaintiff.It does not seem to me that that conversation gave rise, or could reasonably have given rise, to a belief by the plaintiff that he had any present interest in the house.I think that he realised this, but continued to hope that he would persuade the defendant to grant him an interest at some time in the future.

His good works were, no doubt, in his own mind, proof of his good intentions. He hoped he would persuade the defendant to agree to marry.He hoped to create a situation in which she would agree to joint ownership of "family" property, including the house.I do not find that he embarked on any sinister plan to acquire an interest.He may have been pushy, even manipulative, in his attempts to persuade the defendant, but I do not find any dishonesty in that.However, hopes and entitlements are not the same.

There were various other projects, each costing less than $1,000.In a number of cases there is serious dispute about the cost, and as to who paid. Some projects were of dubious value to the defendant, though of use to the plaintiff.For example, he replaced a boundary fence.He says he did so because the old fence was bowed and supported by rotten timber.He was backed in this by his brother.The plaintiff says that the old boundary fence was sound.She points to other boundary fences which were constructed at the same time, in the same way, and which are still sound.She produced photographs, which do not show the old fence particularly well, but which certainly lend no support for the suggestion that the old fence was decrepit.She says that the old fence was replaced only because it was low enough for passersby to see into the yard and to detect that the plaintiff was keeping too many dogs.The new fence was higher.I prefer the defendant.

I cannot see that any single project can be pointed to as establishing a basis for an interest in the house.I must also look at the totality of the situation.The suggestion that the only moment to consider is the moment when money or labour is expended, though often appropriate, is not always correct. The plaintiff's own estimate of the total cost of works on which he relies to establish his claim is $10,000, spent over fourteen years.Allowing for the various disputes, I doubt that it was much more than $5,000.(Their value by 1984, at separation, was put at $4,500.)At either level, the amount spent is not so great as to be proof in itself that it could only have been incurred in reliance on a promise or obligation to grant an interest.Nor does it establish that it would be unconscionable in the defendant to assert her title to the house in opposition to the plaintiff's claim on that account.

There is a further basis for the claim.It relates to payments alleged to have been made directly towards the mortgage and towards a loan taken out by the defendant to pay for extensions effected in 1986 to the house.

The defendant claims to have made two payments of $119, being two monthly mortgage payments.He has no proof.Looking at bank records, it appears probable that $119 was never the exact rate for a monthly payment.The defendant paid the mortgage entirely by banker's order from her own bank account.Faced with this, the plaintiff suggested that he had paid these amounts to the defendant, thereby enabling her to put her bank account in funds.I prefer her evidence on this topic, but the amount is so small that it does not matter.It is consistent with an entitlement, but cannot possibly prove it.

Then there is a claim that $1,600 was specifically advanced to pay out the first mortgage.The situation is the same as with the earlier two payments. There is no written evidence of it.It is denied by the defendant.It does not show up in her bank records, either as a payment going in, or as one going out.It is a sum of money recalled by the plaintiff after pleadings closed, and not referred to in pleadings.I accept the defendant.

It is common ground that the plaintiff changed his job in 1986.On terminating his original employment, he received about $14,000 or $15,000 in termination and superannuation pay.The superannuation pay was by separate cheque for $7,800.The other termination pay, before tax, appears to have been $8,969, by separate cheque.It is common ground that he gave his superannuation payment of $7,800 to the defendant.There is some disagreement about the precise circumstances.The defendant says that there were several conversations about the house and about the superannuation money.I do not overlook the request for an interest in the early 1980's.

A little before he resigned, the plaintiff had ideas about starting a business of his own.He would need some capital.He suggested borrowing against the house.The defendant, to his disappointment, turned him down flat.In retrospect there is some ambiguity as to whether this was because she did not want to risk money in the business venture (and I think she did not), or whether it was a further indication that she did not believe him entitled to any interest in the house.I accept that that was her view, but I can see that the refusal may not have been made completely clear to a man viewing through rose-tinted glasses.At the very least, it offered no encouragement to a positive belief by the plaintiff that he had an entitlement.

At around the time of resignation, there were three further conversations. In the first, the plaintiff referred to the money he was about to receive.He offered to use it to pay out the balance of the personal loan taken out by the defendant to finance the home extensions.The defendant says she told him not to.It was his, for use when he retired.He should roll it over into superannuation available with his next job.

Shortly after this, according to the defendant, he raised the subject again. He said words to the effect:"I owe it to you".She refused, on the same grounds.By the third occasion, the defendant, had been considering the suggestion that he did "owe" her for past support and accommodation.She claimed he had always been mean with his contributions to expenses.She says she accepted, on the basis that it did even up his contributions.She denies that she ever saw it as payment for a share in the house, or that she, in any way, held out to him any spoken, or unspoken, representation that it would.

In chief, the plaintiff simply said that he paid off $7,500, or $7,900, he could not recall which, to clear the mortgage.It is plain that he meant the loan for the extension.He claimed that he endorsed his superannuation cheque over to the defendant.He claimed that the balance of his termination payments was largely used to buy "bits and pieces" to complete the fitting out of the extension.He could not give much detail.He could only refer to "ceiling fans, curtains, the toilet bowl, paint-the internal nitty gritties of the room".When pressed for detail, he was vague.

In cross examination, the defendant's version was put.The plaintiff said he could not remember what he had said-ten years was too far back for him. He denied the defendant had said anything about him "rolling over" his superannuation.He emphatically denied saying words to the effect that he "owed" it to her.

I think there is real reason to be cautious about accepting either version as being exactly accurate, after more than ten years, with both sides now having strong reason for remembering the incident the way that they want to.As he presents now, I cannot imagine the plaintiff saying those words, or making a gift on that basis.However, both parties were different then.Whatever the frictions and disagreements between them, they loved each other and expected to enjoy an indefinite relationship.

In all the circumstances, I think it would be fair for the plaintiff to get back his $7,800.But that is not the test.As I commented earlier, he must come within established principle, if he is to recover.

Just as I have held that it is not proved that the plaintiff put in significantly more money than he cost towards general living expenses, I also hold that it is not established that he put in significantly less.On the evidence, it is simply not possible to reconstruct any meaningful account in respect of those expenses and contributions by the parties.I have no more than bald assertions from each that his contribution was greater, or less, than it should have been.

I accept that the plaintiff's intention was that his $7,800 should be used to pay off the loan for the house extension.It was so used.It may well be that the defendant rationalised accepting a gift, about which she had some doubts, as being a payment to which she had some sort of moral claim.People in the relationship the parties then enjoyed do not minutely analyse their feelings all the time.I find that, even if the defendant did rationalise receipt of that money as beingsome sort of reparation for past inadequate contributions, that was not the basis on which the plaintiff paid it.I think it is likely that some words to that effect were spoken by her, but, if so, I do not think that they were accepted by the plaintiff as the basis for payment. They would have been seen as a face saving formula, a sort of mantra.I find that the defendant knew that the plaintiff did not accept her basis.

I find that the payment was seen by the plaintiff as an investment in the future of the relationship between them, specifically by assisting to pay for improvements to the house in which he reasonably expected their lives to continue.There was no misrepresentation, spoken or unspoken, made to him about that by the defendant.She expected continuity too.I find that he would not have put in that money if he had considered the possibility of separation without recompense.

In my opinion, it is unconscionable for the defendant to assert her legal title to the house to defeat his claim to an interest referable to that payment.I do not propose to order that he be entitled to a nominated proportion of the value of the house.I do not think his payment entitles him to interest on the payment, or to some proportion of capital gain in the value of the house.Any such claim is met by the fact that he continued for a further seven years to occupy the house and to enjoy the relationship.

I think that he should be granted an equitable charge over the house to secure repayment to him of $7,800, within a time to be fixed as reasonable in all the circumstances.It is not my intention to precipitate sale of the house.I will hear from the parties as to how best that amount can be paid.

The plaintiff and defendant are jointly liable for payments in respect of a houseboat time share they purchased.This was an improvident purchase, the cost of which has been almost entirely met by the plaintiff.I understand that the defendant is prepared to transfer to the plaintiff any interest she may have in it.If orders are needed from me to effect that, I shall hear from the parties.

FRIDAY 18 APRIL, 1997

Judgment for the plaintiff in the sum of $7,800.

Further consideration as regards orders and question of costs adjourned to FRIDAY, 2nd MAY, 1997 AT 9.30A.M.

FRIDAY 2 MAY, 1997

ORDER -

1.I declare that the plaintiff is entitled to an equitable lien over the whole of the property comprised and described in certificate of title register book, volume 3397 folio 148 in the sum of $7,800 together with interest thereon at the rate of 7.5% per annum from 2 May, 1997.

2.On payments to the plaintiff of that sum the equitable lien will be satisfied and discharged thereupon the plaintiff is to remove the caveat from the said certificate of title.

3.The defendant is to transfer to the plaintiff all her interest of whatsoever nature in the Murray River Boat Share Trust in respect of the houseboat, Ibis.

4.The parties are to do all such things as are necessary to implement these orders.

5.Action to enforce this judgment is stayed until 3 June 1997.

6.Liberty to the parties to speak to minutes of order.

ORDERTOBEDRAWNUP.

NO ORDER for costs in favour of either side, except the two orders for costs in any event, each in the sum of $85, which were made earlier.