Greenwood v Greenwood
[2001] VSC 56
•9 March 2001
SUPREME COURT OF VICTORIA
COMMERCIAL AND EQUITY DIVISION Not Restricted
No. 6198 of 1999
| ANDREA GREENWOOD | Plaintiff |
| V | |
| CHARLES JOHN GREENWOOD | Firstnamed Defendant |
| And | |
| GWENDA MARGARET GREENWOOD | Secondnamed Defendant |
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JUDGE: | Balmford, J. | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22, 26-28 February 2001 | |
DATE OF JUDGMENT: | 9 March 2001 | |
CASE MAY BE CITED AS: | Greenwood v Greenwood | |
MEDIA NEUTRAL CITATION: | [2001] VSC 56 | |
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EQUITY – Upon their marriage, the plaintiff and her husband lived in a property owned by the husband’s parents (the defendants). The plaintiff and her husband made non-commercial rate rental payments to the defendants and maintained the property. They also made significant renovations to the house at their own expense. They subsequently divorced – Whether the beneficial interest in the property is held on a constructive trust by the defendants for the plaintiff (and her ex-husband) – Whether the defendants’ conduct in allowing the renovations to take place gives rise to an estoppel.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Ms A Duggan | Sharkeys |
| For the Defendants | Mr R Cook | Plotkins |
HER HONOUR:
Introduction
In this matter the plaintiff claims a declaration that the defendants hold the property described in Certificates of Title Volume 7139 Folio 718 and Volume 8572 Folio 805 and known as 4 Dennett Street Carrum (“the property”) on a constructive trust for the plaintiff and her former husband (“the husband”), or alternatively that the defendants are estopped from claiming ownership of the property.
The property was given to the defendants (“Mr and Mrs Greenwood”) by the parents of Mr Greenwood, and the defendants have been joint registered proprietors of the land in both titles since 15 February 1965. The defendants lived in the house on the property (“the house”) as their matrimonial home until they moved to Main Ridge in 1982 with two of their three children. A mortgage to the Australia and New Zealand Banking Group Limited was registered over both titles on 26 February 1975 and has not been discharged. The mortgage secures Mr Greenwood’s overdraft with the mortgagee, and he takes advantage of it when, for example, he buys a new car.
Mr Greenwood is an accountant by training, and a retired Customs officer. It was necessary for him to leave the Customs service in his forties because of illness, and it was then that the family moved to Main Ridge to start a new life. At that time he was very concerned about his future. He now owns six properties and he and his wife live in McCrae.
The husband, Alister Greenwood, is the eldest child of the defendants. For the past twenty-three years he has been an officer of the Victoria Police, serving with the Water Police. It was convenient for him to continue living in Carrum, and he remained in the house when his family moved to Main Ridge. In 1984 he married the plaintiff, and from then on they lived in the house. The plaintiff is a primary teacher. She worked full time until 1989, before the birth of her first child, and returned to work in 1994 when her youngest child was 8 months old. Difficulties arose in the marriage, and in 1998 the husband left the house. The plaintiff and the husband are now divorced. The plaintiff has continued to live in the house with the three young children of the marriage.
At all times the defendants paid the insurance premiums on the house and land tax and water rates in respect of the property. The Council rates were paid by the plaintiff and the husband in the years 1986 to 1993, but in all other relevant years were paid by the defendants. Mr Greenwood listed the payments made to him by the plaintiff and the husband, which are discussed below, as income in his taxation returns, and claimed the insurance, rates and land tax as deductions against that income.
The plaintiff and the husband made significant renovations to the house at their own expense, most of those renovations being carried out in the first five years of the marriage. None of the foregoing is in dispute.
Evidence was given by an experienced building estimator to the effect that the renovations would have cost $119,601 for labour and materials at January 1999 prices. It is not in issue that almost all of the labour for the renovations was carried out by the husband, and very little labour was paid for. The plaintiff assisted him as far as she was able. The evidence of the husband was that a number of the materials were acquired secondhand, or otherwise more cheaply than the estimate indicated. Furthermore, most of the renovations were effected more than ten years before the date of the estimate. Counsel for the defendants suggested after analysing the evidence that the actual cost of the renovations when they were done would have been approximately $76,000. The plaintiff had suggested in evidence that the cost could have been some $80,000.
Asked about the attitude of the defendants to the renovations, the plaintiff said:
Only in that they thought they were wonderful, they thought they were really good the work that was being done. I mean any comment that we had from them was positive and that's a great idea and you've done a wonderful job and there was never any - not at any time did John or Gwenda Greenwood say "What are you doing?" or "Why are you doing that?" They said, "That's wonderful, you've done a fabulous job and it looks really good."
The impression gained from the evidence of Mr and Mrs Greenwood and of the husband, however, was that the defendants did not approve of all the work that was carried out, but they made the best of the situation. They were clearly aware, as time went on, of the nature of what was being done.
Two valuations of the property by the same valuer were obtained by the plaintiff and were not challenged by the defendants. The property was valued at $85,000 as at 1 March 1984, and at $430,000 as at 12 February 2001. At each date the valuer commented that the highest and best use for the property would be as a redevelopment site for units or townhouses (in 1984) or home sites (in 2001). On that basis it can be said that, whatever the cost of the renovations, they did not add to the value of the property, which is ultimately governed by the land value rather than the value of any improvements.
The Claim
In respect to the claim of a constructive trust, Ms Duggan, for the plaintiff, relied on Hohol v Hohol [1981] VR 221 at 225, where O’Bryan J said, after considering authorities on constructive trusts:
From the cases I have referred to it can be said that the essential elements of the trust are, first, that the parties formed a common intention as to the ownership of the beneficial interest. This will usually be formed at the time of the transaction and may be inferred as a matter of fact from the words or conduct of the parties. Secondly, that the party claiming a beneficial interest must show that he, or she, has acted to his, or her, detriment. Thirdly, that it would be a fraud on the claimant for the other party to assert that the claimant had no beneficial interest in the property.
The “common intention as to the ownership of the beneficial interest” which is claimed in the present case appears to be that the beneficial interest in the property is held by the defendants on trust for the plaintiff and the husband.
The initial requirements for the establishment of an equitable estoppel appear from the judgment of Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428-9. His Honour said:
… it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation . . For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant’s property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff’s reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.
The “particular legal relationship” which is claimed in the present case appears to be that the beneficial interest in the property is held by the defendants on trust for the plaintiff and the husband.
Both the claim of a constructive trust and the claim of an estoppel depend initially on the evidence of the plaintiff that certain words were said to her and the husband by Mr Greenwood. She said in examination in chief that when she and the husband were engaged to be married:
I can recall discussions sort of when we would go down to where they were living at Main Ridge and the father would say that, "the house is yours and you can do what you like with it". This is the Carrum residence after - after our marriage, that it was going to be our house and we could do what we like with it. . . . That was before we were married. When we were engaged and I think we'd go down there for tea. We'd just have a general sort of discussion about, you know, our life and we were to live in the house and do the - you know, treat it as our own and do what we wanted with it. It was our - marital home.
and later:
Well, we just started living there and I can remember John Greenwood - - - [she then confirmed that she was referring to the first defendant]--- saying, "Look, you can - you live there, the place is yours." It was around about that time when we first married and he said, "Don't worry about the rent so to speak" because I think Al was paying him a regular payment before then. He said, "Don't worry about that. Look, you can give me a token payment to pay for bills and when I need some money, I'll come and ask you for some money to cover some bills as I need it" so that was the understanding. We live in the house, it's our home. "You can give us some token payment to help with the bills and I'll come and - when I need it I'll come and ask you for it" and which he did.
The relevant cross-examination reads:
What was the first time that some representation was made to you about living in the house by Mr or Mrs Greenwood, the defendants? - That was during our engagement.
And where was that? - At Red Hill.
At their property at Red Hill and do you remember, was it at lunchtime or in the afternoon or - - -? - It was probably of an evening. We often used to go down there for an evening meal and we would have discussions about our forthcoming marriage and John Greenwood would say that we were going to live in the house at Carrum and that was our home and we could do what we wanted.
Did he say to treat it as your own home or what did he say? - No, he said that the place was ours and we were to live in it and do what we wanted with it. Not treat it as your own.
Did he say that once or twice? - On numerous occasions, during our engagement, after our marriage, during the renovations. "The place is yours, do what you want to it, do you what you wish with it".
The plaintiff said that Mrs Greenwood had told her, “early in the piece”, that she and Mr Greenwood would not transfer the title into the names of the plaintiff and the husband, “in case there’s a breakup in the marriage”. Mrs Greenwood said that she did not remember saying that.
On the question of payment, the examination in chief of the plaintiff continued:
And so it was your understanding that Alister was paying a token payment? --- --- Prior to that time he was paying - well, it was like a token payment really, I mean because Alister had no lease or anything and he just continued on, we continued on from there.
So you said the arrangement was that you would pay sums of money? --- Sums of money as we were asked - John Greenwood, that's what he said to me. He said, "Look, when I've got some bills, I'll come and get some money off you and pay some - use it to pay bills and general living expenses" and it would be like a token payment to help him out and we lived in the house and did what we wanted to it.
So did that occur, did you make payments? --- I can remember - I'm not quite sure of the exact time or year but I can clearly remember him asking for a sum of $2500 to purchase - it was either a dining setting or a lounge suite and I remember that, it stands out because it was quite a large sum of money and he said, "Look, we're going to buy this lounge suite and dining table and could you give us around about $2500" so it was quite a large lump sum of money which we did. And that's one occasion when I can remember him asking for a lump sum.
. . .
Do you recall making any other payments such as the $2500? --- Well, I've got a couple of VTU statements that show a lump sum of $600 coming out in round about 1985 and there's also another lump sum of about 550 and all of this goes back such a long time that it's hard to remember precisely but say in 84/85 he asked for lump sums every now and then when he had a bill or he had to pay a bill or something.
The evidence of Mr Greenwood was that he never made the statements attributed to him by the plaintiff. The arrangement had always been that the plaintiff and the husband could stay in the house for as long as they liked, paying rent. He agreed that in the earlier years the rent had been paid irregularly, in occasional lump sums, but denied that he had ever asked for payment to cover specific bills. He remembered saying on several occasions when asking for payment, “Come on you lot, I’ve got bills to pay too. How about some rent?”.
He said that when his son was living in the house before his marriage, the arrangement was that he was to pay $45 per week rent, and attend to the maintenance of the property. When he married, the rent was raised to $70 per week, on the basis that both husband and wife were earning money, but the arrangement was otherwise unchanged. In the years when the Council rates were paid by the plaintiff and the husband, the rent was slightly reduced, to $280 per month. The rent was raised to $85 per week in 1994-96 when they ceased paying the rates, and to $100 per week in 1997-99. In 1997, when the marriage was in difficulties, collection of the rent was put in the hands of an agent.
Mr Greenwood conceded that he had claimed taxation deductions in respect of moneys spent on the property by the plaintiff and the husband and not by himself. He sought, without success so far as the Court was concerned, to justify this conduct, on the basis that the husband had made the invoices available to him by way of repayment of loans. Both he and the husband were extremely vague as to the nature of those loans, which in any case could not be said to have any relevance to his claim for those deductions. I accept the submission of Ms Duggan that this conduct must be taken into account in evaluating Mr Greenwood’s evidence. However, on balance, having observed him in the witness box, I am satisfied as to the genuineness of his evidence on the significant matters in issue.
Mrs Greenwood, whom I regard as a witness of truth, said that financial matters were dealt with by her husband, but that she was generally aware of what was happening. Her evidence was consistent with that of Mr Greenwood as to the nature of the arrangement regarding the property. She said that she did not recollect any words being spoken such as “the house is yours and you can do what you like with it”. She said, “I never thought for one moment that I was not the owner or a co-owner”.
The evidence of the husband as to the nature of the relationship was consistent with that of the defendants. He said that the renovations had been carried out because his wife wanted them and he was concerned to make the property as comfortable as possible for both of them.
Ms Duggan submitted that the evidence of the plaintiff as to the representations made by Mr Greenwood should be believed. She stressed the significance of the defendants’ allowing substantial renovations to be carried out to the property, which in her submission was explicable only on the basis that the property was to belong to the plaintiff and the husband. That conduct of the defendants constituted a representation of encouragement, from which the Court could infer a common intention among the parties as to the beneficial ownership of the property; the withdrawal of the defendants from that position was unconscionable conduct, giving rise to a constructive trust. Alternatively, the conduct of the defendants in allowing the renovations was conduct supporting the earlier representations, so as to give rise to an estoppel.
Having considered the matter, I am not satisfied that the representations which the plaintiff claims were made by Mr Greenwood were in fact made, although the plaintiff may well have convinced herself that they were made. I accept the evidence that the arrangement was from the beginning an agreement that the husband before his marriage, and later the plaintiff and the husband, could live in the house, paying the rent demanded from time to time, and maintaining the property. For some years they were, in addition, to pay the Council rates. The acceptance by the defendants of the extensive renovations is explicable on the basis that, as Mrs Greenwood said, “ They were the people who benefited by it . . . that was a family arrangement”. It was not suggested at any stage that the rent was charged at an ordinary commercial rate. It was clearly well below such a rate. The acceptance of the renovations was consistent with the charging of a non-commercial rent in the context of a family arrangement.
There are other matters which support the conclusion that the plaintiff and the husband lived in the property simply as tenants paying rent, albeit a less than commercial rent, that they knew that this was the basis upon which they lived there, and that no such representations as are claimed were in fact made:
(a)In a financial statement sworn on 9 July 1999 in Family Court property settlement proceedings, the plaintiff stated that she was paying rent of $100 per week;
(b)In a “response to an application to change your child support assessment” signed on 7 October 1998, the plaintiff stated “I am living in a property owned by [the husband’s] parents. . . My rent may increase dramatically”.
(c)Mr Greenwood had significant concerns about his and his wife’s financial position, and had two other children. He is clearly a person who is careful about his financial affairs.
(d)If the recollection of the plaintiff is accurate, Mrs Greenwood told her that she and Mr Greenwood would not transfer the title into the names of the plaintiff and the husband, in case of a breakup in the marriage.
(e)The arrangement is described by the defendants as being essentially the same after the marriage as before, save for the change in the amount of the rent.
(f)The representations were claimed to have been made by one joint owner only, without any statement as to authorisation by the other joint owner.
(g)The evidence of the husband as to how the arrangement was intended and understood was consistent with the evidence of the defendants.
And, in particular:
(h)From time to time Mr Greenwood used the overdraft facility that was secured by the mortgage on the property, and he took no steps to discharge the mortgage. He refused his son’s request to allow him to have the title so as to borrow against the property to pay for the renovations.
(i)Save for the period when the plaintiff and the husband paid the Council rates, Mr Greenwood and his wife paid the outgoings on the property. It was not suggested that the plaintiff and the husband were unaware that this was the situation.
Thus I do not find established any common intention that the beneficial interest in the property is held by the defendants on trust for the plaintiff and the husband, so as to meet the first element of a constructive trust as set out in the passage cited above from Hohol v Hohol. Nor do I find established any basis on which it could be said that the defendants allowed the plaintiff and the husband to assume that the property was so held, in terms of the passage set out above from Waltons Stores.
For the reasons given, the plaintiff’s claim fails. Counsel may wish to make submissions as to costs.
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