Hayes v Grayson - [2001] WASC 251

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION: HAYES -v- GRAYSON [2001] WASC 251

CORAM: SCOTT J

HEARD: 21 & 22 JUNE 2001

DELIVERED : 12 SEPTEMBER 2001

FILE NO/S: CIV 2443 of 1998

BETWEEN: RUSSELL FRANCIS HAYES
Plaintiff
AND
MYRTLE DAWN GRAYSON
Defendant

Catchwords:

Real property - Partition of land - Joint tenancy - Unequal contributions to purchase price - De facto couple - Presumption of advancement

Legislation:

Property Law Act 1969, s 126

Result:

Order for sale of property
Division of proceeds in accordance with contributions

Category: B

Representation:

Counsel:

Plaintiff: Mr K J Edwards
Defendant: In person

Solicitors:

Plaintiff: Peter Ward
Defendant: In person

Case(s) referred to in judgment(s):

Calverley v Green (1984) 155 CLR 242
Muschinski v Dodds (1985-1986) 180 CLR 583

Case(s) also cited:

Nil

SCOTT J: The plaintiff and the defendant entered into a de facto relationship in or about the month of June 1992. They initially lived at a property at 3 Skyline Rise Ballajura which was owned by the defendant.
In about November 1992 the plaintiff and the defendant moved to an address at 12 Island Retreat in Ballajura ("Island Retreat"). The property was owned by the defendant's daughter, Belinda Sharlene Ferrett ("Ferrett").
Initially the rental payments to be paid by the plaintiff and the defendant to Ferrett were $290 a fortnight. I accept that the rental payments were in fact paid by the defendant by way of direct debits to her personal bank account. Receipts however for the payment of rental were made out in the name of the plaintiff so as to enable the plaintiff to use the rental payments as an income tax deduction. Ferrett's evidence was that she wrote out rental receipts in the name of the plaintiff at the joint request of the plaintiff and the defendant in order to assist the plaintiff's business by reducing his tax liability.
In July 1993 Ferrett decided to sell Island Retreat and the plaintiff and defendant decided to purchase the property as joint tenants. Ferrett, who at that time was working in the property section of a bank, realised that the combined incomes of the plaintiff and defendant was insufficient for them to be able to raise the necessary mortgage for the balance of the purchase price. The agreement, however, was that the consideration for the property was $136,000. It is common ground that the plaintiff had recently sold his taxi plates and from the proceeds he authorised the sum of $60,000 to be transferred to Ferrett as the deposit on Island Retreat. In addition the defendant paid a further $6,000 by way of deposit.
The plaintiff understood that the balance of the purchase price for the property was to come from a loan to be arranged as soon as possible. It is common ground however that the property did not settle for some two years after the plaintiff paid the deposit of $63,937.55. The sum of $63,937.55 exceeded the initial $60,000 because of fees and incidental expenses.
Eventually a mortgage was arranged with Bankwest for the sum of $85,000 and on 14 December 1995 the property was transferred to the plaintiff and the defendant as joint tenants.
In my view, the clear intention of the parties was that on settlement they would each equally own the property. Their contribution up to that time had however been unequal for reasons that I have already outlined. The arrangement between the plaintiff and the defendant however was that the defendant would pay 90 per cent of the mortgage repayments while the plaintiff was to pay 10 per cent of those repayments so that their contributions to the purchase price would ultimately balance.
When the property was ready for settlement on 15 December 1995 Ferrett prepared the settlement documents. Her evidence on oath was that she expressed the consideration as $126,000 instead of $136,000. She did so in order to avoid capital gains tax on her own behalf and so as to reduce the stamp duty payable by the plaintiff and the defendant as purchasers. I accept that the plaintiff queried the consideration shown on the Offer of Acceptance but accepted the explanation proffered by Ferrett that it was in everybody's interest for the consideration to be understated.
The failure of Ferrett to settle Island Retreat was a cause of friction between the plaintiff and the defendant particularly because the plaintiff had parted with a substantial sum of money as a deposit on the purchase. The plaintiff was most concerned that the settlement had not been finalised.
When the plaintiff sold his taxi plates, $17,000 of the proceeds were placed into a joint account that the plaintiff and the defendant had established to meet living expenses. The plaintiff maintains that this $17,000 has not been accounted for but on hearing all of the evidence I am satisfied that the money was spent for the joint benefit of the plaintiff and the defendant, largely in relation to living expenses and household purchases for the property.
The plaintiff had operated a taxi truck as part of Swan Taxi Truck Co‑operative. Initially this business was conducted between the plaintiff and his brother with his brother's wife doing the books of account. Eventually the plaintiff bought out his brother's half share and in November 1993 the defendant took over the bookwork of the business. On 26 September 1994 the plaintiff registered the business name of Eagle Taxi Trucks and Removals ("Eagle Taxi Trucks") to operate the business. In January 1995 the plaintiff was approached by drivers who had worked for Swan Taxi Trucks Co‑operative with a view to forming a new company. Swan Taxi Trucks Co‑operative at that time was going out of business. Eventually the plaintiff and other drivers agreed to form and operate a business called Swan Prestige Transport and Removals ("Swan Prestige") which commenced operation in May 1995. The plaintiff's evidence was that when he joined Swan Prestige he "shelved" the business of Eagle Taxi Trucks. However, having heard all of the evidence I am satisfied that the plaintiff did continue to service the customers of Eagle Taxi Trucks after he commenced working for Swan Prestige.
The defendant's evidence, which I accept, was whilst working as the bookkeeper for the plaintiff she showed a payment of $50 per week for her wages. Her evidence was that she did not in fact receive that money but included that amount as a book entry in order to reduce the plaintiff's income tax. The entries are revealed in the books of account. The account and analysis book (Ex B17) kept by the defendant shows the payments to her. I accept, however, that the entries were for tax purposes only and did not reflect any actual payment to her.
When the plaintiff joined Swan Prestige a contribution of $1000 was required as a joining fee. I accept that the defendant contributed $800 of that fee and the plaintiff $200. The reason for that was that the plaintiff did not have $1000 at the time to make the payment.
Eventually the plaintiff decided to sell his trucking business. The plaintiff and the defendant had discussions concerning the sale. The defendant wished to purchase the business for her son. The plaintiff advertised the trucking business for sale at $25,000 and ultimately agreed to sell the business to the defendant for that sum. There is a dispute however between the plaintiff and the defendant as to whether the business of Eagle Taxi Trucks was included in that price. The plaintiff's evidence is that he only sold the position in Swan Prestige. The plaintiff says that he never sold Eagle Taxi Trucks. The defendant however testified that when she purchased the trucking business, she also purchased the business of Eagle Taxi Trucks. On balance I have come to the conclusion that the defendant's evidence should be preferred on that issue.
Payment for the business which was ultimately agreed at $25,000 included the position which the plaintiff had with Swan Prestige Taxi Trucks. It is common ground that the defendant paid to the plaintiff $19,000 by way of reducing a car loan by $15,000 and reducing the plaintiff's overdraft by $4,000. The balance of $6,000 is in dispute but I accept the defendant's evidence that she settled that amount by paying bills for the plaintiff in that sum. The end result was that the defendant acquired the plaintiff's truck and the business.
It is common ground that the plaintiff and the defendant separated on or about 22 October 1997. The circumstances surrounding the separation are that the defendant was interested in incorporating the business of Eagle Taxi Trucks into a proprietary limited company. She, together with her accountant developed a proposal for incorporation of that business. She and her accountant showed the plaintiff the proposal to establish a proprietary limited company in which the defendant was shown as a director. An argument developed because the plaintiff maintained that he had not sold the business of Eagle Taxi Trucks to the defendant as part of the sale. As a result of the argument the plaintiff and the defendant separated.
It is common ground that after the separation the plaintiff physically took the truck from the defendant. The truck was eventually sold to a third party. The plaintiff's evidence was that he took the truck because $6,000 remained outstanding and so he repossessed it and on sold it.
The plaintiff brings his application under s 126 of the Property Law Act 1969 which provides:
"126.In action for partition Court may direct land to be sold
(1)Where in an action for partition the party or parties interested, individually or collectively, to the extent of a half share or upwards in the land to which the action relates request the Court to direct a sale of the land and a distribution of the proceeds, instead of a division of the land between or among the parties interested, the Court shall, unless it sees good reason to the contrary, direct a sale accordingly."
The plaintiff's case is that Island Retreat should be sold and that the proceeds should be split in such a way as to reflect the contributions of the plaintiff and the defendant to the purchase price and expenses relating to the property. The defendant, on the other hand maintains that the property should be vested in her name because the sums she paid on behalf of the plaintiff during the course of their cohabitation exceed any amount to which the plaintiff is entitled. The defendant has lodged a counterclaim in which she claims for payment of her deposit, the mortgage payments which she says she paid in relation to the property, the stamp duty and fees which she says she paid and the rates, land tax and insurance, all of which she says total $48,010.85. The defendant has counterclaimed for other expenses including the loss of the truck and trucking business, which she says, entitles her to the whole of the land.
In Calverley v Green (1984) 155 CLR 242 the High Court had occasion to consider a similar case involving a de facto relationship where de facto partners had purchased a property as joint tenants. That case also involved a factual situation where there was some inequality in relation to the contribution of funds. Mason and Brennan JJ said at 263:
"In Canada and in some cases in England, the device of the constructive trust has been invoked 'to give relief to a wife who cannot prove a common intention or to a wife whose contribution to the acquisition of property is physical labour rather than purchase money': per Laskin J (as he then was) in Murdoch v Murdoch (1973) 41 DLR (3d) 367 at 388 and see Rathwell v Rathwell (1978) 83 DLR (3d) 289 at Pettkus v Becker (1980) 117 DLR (3d) 257. It is unnecessary to consider whether in some future case the device of a constructive trust might be relied on where property beneficially owned in particular proportions is maintained or enhanced by work done or contributions made in different proportions."
In this case, in my view it is plain that the intention of the parties at the time of the purchase of the property was that they should own it equally. The fact that the property was purchased as joint tenants, in my view is consistent with that intention.
A further similar case was Muschinski v Dodds (1985-1986) 180 CLR 583 where Gibbs CJ said at 596:
"For these reasons I consider that the learned Judges in the Supreme Court were correct in concluding that the half interest of the respondent in the land was not subject to any trust in favour of the appellant. However, that is not the end of the matter. Upon the sale of the property, when the proceeds are distributed, there must be an equitable accounting between the parties. The question what will be the rights of the appellant on such an accounting was not raised or considered in the Supreme Court, although it directly arose, at least on the respondent's cross‑claim which sought an equal division of the proceeds of the sale between the parties."
In the same case Deane J said at 622 – 623:
"It follows that equity requires that the rights and obligations of the parties be adjusted to compensate for the disproportion between their contributions to the purchase and improvement of the Picton property. In the absence of any suggestion of direct payment by Mr Dodds to Mrs Muschinsky to achieve a like result, that adjustment requires, at the least that the parties be proportionally repaid their respective contributions to the extent allowed by the proceeds of any sale. It becomes necessary to consider their entitlement in equity to share in any surplus after the discharge of any debts incurred in their joint undertaking and the repayment to them of their respective contributions. As has been seen, the extent to which the relevant principle of equity operates to qualify legal entitlement is only that to which it positively appears that it would be unconscionable for one party to assert or retain the benefit of property contributed by the other party. It could well be circumstances in which equity and good conscience would require that the party who has made the major contribution to a failed joint endeavour should obtain a correspondingly greater share of any surplus remaining after repayment of the respective contributions. The conclusion which I have reached in all the circumstances of the present case is, however, that Mrs Muchinsky has failed to establish that it would be unconscionable conduct on the part of Mr Dodds to assert and retain the one half share in the residue of the proceeds of sale of the Picton property to which his legal entitlement and the consensual arrangement between them otherwise entitles him."
As the case resolves itself, in my view, the plaintiff contributed $63,937.55 to the purchase price by way of the original deposit. That amount was part of the sum received by the plaintiff from the sale of the taxi plates. The defendant on the other hand contributed $6,000 to the deposit plus $7,913 by way of mortgage credits. In addition, in my view by way of counterclaim or set‑off the defendant is entitled to credit for the loss of the trucking business which she purchased from the plaintiff. In my opinion that credit should be in the sum of $25,000 being the amount she paid and the amount the defendant accepted at the time that sale and purchase was effected. It follows, in my view that the plaintiff, is entitled to a credit in the sum of $63,937.55 being the deposit that he paid on the property. The defendant is entitled to credit to the sum of the $6,000 deposit, $7,913 payment for mortgage credits plus $25,000 being reimbursement for the trucking business which she totally lost when the plaintiff took the truck from her. The defendant's credit is therefore $38,913.
As to any other amounts which the defendant claims were paid by her towards the property including rental, rates and taxes, the joining fee for Swan Prestige and insurance in my view they were amounts paid as part of the accounts ordinarily paid by partners living in a de facto relationship. In that respect what is known in law as the "presumption of advancement" would apply. That presumption was explained by Gibbs CJ in Calverley v Green (supra) at 246:
"Where a person purchases property in the name of another, or in the name of himself and another jointly, the question whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser. However, in such a case, unless there is such a relationship between the purchaser and the other person as gives rise to a presumption of advancement, i.e., a presumption that the purchaser intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take beneficially. In the absence of evidence to rebut that presumption, there arises a resulting trust in favour of the purchaser."
In my opinion, the appropriate resolution of this matter is an order that the property be sold and that from the proceeds after payment of the mortgages the plaintiff should be credited with the sum of $63,937.55 and the defendant should be credited with the sum of $38,913. Those payments reflect an appropriate accounting balance between the parties. In my view, as the intention of the parties was that they should own the property jointly, the balance of the proceeds (if any), should be divided between the plaintiff and the defendant equally. As I have said, the intention of the parties when the property was purchased was that they should jointly own the land. In my view, they are each equally entitled to the balance of the proceeds, including any capital appreciation.
I will hear from the parties as to how the sale is to be effected. If the parties cannot agree, then, in my view, it will be necessary for the Court to appoint a receiver to handle the sale of the land, discharge the encumbrances and divide the proceeds as I have indicated. I will invite the solicitor for the plaintiff to prepare a minute of proposed orders which gives effect to these reasons. As the defendant is unrepresented, a copy of the proposed minutes should be provided to her so that she may take legal advice on the proposed orders before final orders are made.
I will hear the parties on the question of costs.