Holmes v Mack

[2010] NSWSC 1365

CITATION:	Holmes v Mack [2010] NSWSC 1365
HEARING DATE(S):	20 & 21 September 2010
JUDGMENT DATE :	26 November 2010
JURISDICTION:	Equity Division
JUDGMENT OF:	Brereton J
DECISION:	Declarations of trust made
CATCHWORDS:	EQUITY – Trusts and trustees – Implied trusts – Resulting trusts – When arising – Joint purchase of land – where one party supplies entire purchase price – EQUITY – Trusts and trustees – Implied trusts – Constructive trusts – Common intention – where common intention arises after acquisition of property – EQUITY – Estoppel – General principles – proprietary estoppel – EVIDENCE – documentary evidence – unstamped documents – admissability where usual undertaking given
LEGISLATION CITED:	(CTH) Family Law Act 1975, s 87 (NSW) Conveyancing Act 1919, s 23C, s 54A (NSW) Property (Relationships) Act 1984 (NSW) Uniform Civil Procedure Rules 2005, r 31.14
CATEGORY:	Principal judgment
CASES CITED:	Allen v Snyder [1977] 2 NSWLR 685 Butler v Craine [1986] VR 274 Calverley v Green [1984] HCA 81; (1984) 155 CLR 242 Davis v Federal Commissioner of Taxation (1989) 86 ALR 195 Ogilvie v Ryan [1976] 2 NSWLR 504 Weston v Beaufils (1994) 122 ALR 240
PARTIES:	09/291262 Sharon Anne Holmes (plaintiff) Donald Mack (first defendant) Laura Mack (second defendant) 10/028396 Laura Mack (plaintiff) Donald Mack (defendant)
FILE NUMBER(S):	SC 09/291262;; 10/028396
COUNSEL:	Mr P Friedlander (Ms Holmes) Mr T Hodgson (Mr Mack) Mr A Gruzman (Ms Mack)
SOLICITORS:	09/291262 Streeterlaw (Ms Holmes) HA Miedzinski Lawyers (Mr Mack) Williamson Isabella (Ms Mack)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Friday, 26 November 2010

2009/291262 Sharon Anne Holmes v Donald John Mack
2010/028396 Laura Mack v Donald Mack

JUDGMENT

1 HIS HONOUR: Laura Mack – the plaintiff in proceeding 10/28396 (“the de facto proceeding”) – came to Australia from the Philippines in 1997, and established a close personal relationship with the defendant Donald John Mack in about August of that year. When her tourist visa expired she returned to the Philippines, but in December 1998 they resumed cohabitation when she came back to Australia, sponsored for immigration purposes by Donald Mack’s daughter Sharon Anne Holmes – the plaintiff in proceeding 09/291262 (‘the trust proceeding”). Because the parties share a common surname, I shall, for the purpose of identifying them and without intending any disrespect, refer to them by their first names.

2 Laura subsequently obtained permanent residency in 2000, and changed her name to Mack by deed poll in 2003. Following a separation in about January 2005, which was followed by a reconciliation in about April 2005, Laura and Donald finally separated in June 2006. Laura commenced the de facto proceeding against Donald in the District Court of New South Wales, claiming an adjustment of property interests pursuant to the (NSW) Property (Relationships) Act 1984. In that proceeding an issue arose as to whether certain property – in particular, the home in which Donald resided at Kogarah, business premises at Carlton, and an antique business carried on from those premises – was beneficially the property of Donald or of Sharon. Sharon then commenced the trust proceeding in this Court, claiming declarations that those properties were held upon trust for her, and sought the adjournment of the de facto proceeding in the District Court pending the resolution of the trust proceeding. Instead, I removed the de facto proceeding from the District Court into this Court, so that all the issues could be dealt with in the one proceeding.

3 There were difficulties and delays in obtaining evidence of value of at least some of the property in issue in the de facto proceeding, and it became apparent that resolution of the issues in the trust proceeding would have a major impact on the course of the de facto proceeding, as if Sharon succeeded there would be practically no property in the divisible pool. Accordingly, it was decided that the issues in the trust proceeding should be determined first, albeit that the present hearing would involve both proceedings, and that evidence in the trust proceeding would be evidence in the de facto proceeding available for use upon the resumed further hearing of the de facto proceeding, if that course were to become necessary.

4 The issues for present determination are:

· Whether (as Sharon and Donald contend, but Laura disputes) Sharon is the beneficial owner of the antique business; and

· Whether (as Sharon and Donald contend, but Laura disputes) Sharon is the beneficial owner of the Carlton property;

· Whether (as Sharon and Donald contend, but Laura disputes) Sharon is the beneficial owner of the Kogarah property.

5 The prospects of a parent colluding with his or her child of an earlier relationship to defeat a claim by the parent’s estranged subsequent spouse are sufficiently strong and common that one should approach the evidence of Sharon and Donald from the starting point that it must be closely scrutinized. Moreover, the credibility of their evidence is seriously affected by the circumstance that whereas in the late 1990s, when they were supporting Laura’s visa application, they made statements in official documents and elsewhere unambiguously asserting that there was a de facto marital relationship between Donald and Laura, nonetheless in their affidavit evidence in this case they denied the existence of any such relationship, and maintained – somewhat incredibly – that the arrangement by which Laura resided at Kogarah was merely a commercial “home-sharing arrangement”. Indeed, they composed a sophisticated case to support that contention. Nor is their credibility assisted by Donald’s failure to produce tax returns when called for – although some allowance must be made in this respect for the impact of age, and his poor medical condition, on Donald’s memory.

6 On the other hand, Laura generally speaking presented credibly. Her evidence was not over-stated, and she made appropriate concessions when called for. Although, as will appear, I do not accept her assertion that she would not have returned to Australia in 1998 but for the belief that Donald owned the disputed properties, there was generally little reason to doubt her evidence when it related to matters of fact reported by her. Ultimately, however, I think Laura’s perceptions on some central issues about who owned relevant properties have been significantly influenced by assumptions she may have (not unreasonably) made as to who owned them, rather than by any distinct representations made to her as to their ownership.

Background

7 Donald and his former wife, Sharon’s mother Beverley, separated in the late 1970s, and they were divorced in or about 1981. At the time of their separation, Donald and Beverley jointly owned the Kogarah home, and the antiques business which then traded from XX6 Railway Parade, Carlton (it later moved to XX0- XX2 Railway Parade). In 1979, financial matters between them were settled by a maintenance agreement pursuant to (CTH) Family Law Act 1975, s 87, and it appears that pursuant to that settlement, Beverley transferred to Donald her interest in the Kogarah home, together with its residual contents (after she had taken those selected by her). In any event, Donald became the sole registered proprietor of the Kogarah property. In the early to mid 1990s, Donald gave Sharon the Certificate of Title to the Kogarah property. Since at least before mid-1996, Sharon has paid all the outgoings in respect of the Kogarah property.

8 The maintenance agreement apparently provided that Donald and Beverley would continue to conduct the antiques business on terms that Beverley would be responsible for the retailing and Donald for the purchasing, and that they divided the profits after providing for expenses and a wage for Beverley; in the event of a sale, Beverley was to receive the goodwill and Donald the stock, fixtures and fittings. No admissible evidence explains the subsequent devolution of Beverley’s interest in the business, but there is no suggestion that she still retains it, and it seems that her share passed to Sharon.

9 The property at XX0- XX2 Railway Parade, Carlton includes the premises from which the antiques business traded. Originally, Sharon and Donald held it as lessees, under a lease from the then registered proprietor Mavis Ruth Miller. On 17 May 1985, the lessor granted to Sharon (or her nominee) an option, exercisable by 19 May 1995, to purchase the property for $58,000 (increasing at the rate of 8% per annum). A previously proposed option, in favour of Sharon and Donald jointly, had not proceeded.

10 On 7 November 1990, Sharon deposited into the trust account of John H Hastings, solicitor, a bank cheque in the sum of $63,900. The receipt records that the cheque was purchased “on behalf of Sharon Anne Holmes”. This was the balance purchase price for the Carlton property. On the same date, Sharon also obtained a bank cheque for $11,809, for legal costs and stamp duty. It is apparent that Donald had some involvement in the purchase transaction; notes and handwriting of his appears on some of the contemporaneous documents relating to calculation of moneys required. On 9 November 1990, a transfer from Mavis Ruth Miller to Sharon Anne Holmes and Donald John Mack as tenants-in-common in equal shares, acknowledging receipt of payment of $71,000, was accepted by J H Hastings as solicitor for the transferee.

11 Sharon and Donald both say that the inclusion of any reference to him as a tenant-in-common was erroneous. On 16 July 1993, Donald sent a letter to the Registrar-General disavowing any interest in or claim to the Carlton property, and requesting that his name be removed from the title. It seems that the Registrar-General forwarded to Donald a blank transfer to facilitate that purpose, but it was never signed; reluctance to incur stamp duty or other expense may well have been a factor in this course not being pursued. Since May 1995, Sharon has been solely responsible for outgoings, including land tax, in respect of the Carlton property.

12 The antiques business ceased to operate in 1996, although some minor activities have continued at the premises. On 28 June 1996, Sharon and Donald – evidently without legal assistance – entered into a “Deed of Dissolution of Partnership”, which relevantly provided that, with effect from 1 July 1996, Sharon would hold the trade names and business assets, and Donald relinquished all rights and claims to the business funds, assets, stock, furnishing and fittings, plant, goodwill, books, records and real estate at the Carlton property. The Deed also provided for the partnership to be wound up, and for Sharon to be entitled inter alia to the real estate held under joint names, and with effect from 1 July 1996 to have independent ownership of the property.

13 The business name “Mack’s Antiques” nonetheless remained registered in joint names until 2003. However, there was no renewed declaration after 1996 that Donald was a proprietor; merely the return of a renewal form. Sharon explained, in my view plausibly, that she continued to renew registration of the business name each year when the renewal form was sent to her, until it became necessary to confirm that the business was being carried on, whereupon she ceased to renew the registration. Laura tendered a “Mack’s Antiques” business card which showed the proprietors as “D.J. & S.A. Mack”, but it refers to the address at XX6 Railway Parade and an old telephone number; it says nothing as to ownership of the business after 1996.

14 Laura claims that Donald said, of the shop at XX0 Railway Parade, “I put that one in the name of Sharon, we run it together”; but even if said, that does not amount to an unequivocal assertion of beneficial ownership or interest. Elsewhere, she attributes to Donald the statement, “The business is in tenancy in common with Sharon but while I’m alive I have control”; but even if said, that referred to the business, as distinct from the real property. There is no clear evidence of any other assertion on Donald’s part that he had a half interest in the Carlton real property.

15 On 30 June 1996, Sharon and Donald entered into a “Formal Contract Agreement” – in writing, but again evidently without legal assistance -which they executed in the presence of a Justice of the Peace, and which relevantly provided as follows:

I Donald John Mack of XX Union Street, Kogarah in the State of New South Wales do fully understand the terms and conditions of this agreement. From here on in known as the 1st Party.
I Sharon Anne Mack of XX Union Street, Kogarah in the State of New South Wales do fully understand the terms and conditions of this agreement. From here on in known as the 2nd Party.
That from the date of signing this agreement the first party relinquishes his ownership rights to the contents and property of the family home including all items held in trust from his late father Sydney Leslie Mack and late mother Elsie Mack.
That the first party shall continue to reside at XX Union Street, Kogarah in the State of New South Wales until his death. At no time can the first party be evicted by the second party and any attempts to do [so] shall render this agreement void and all expenses incurred by the second party be recouped. Only under “Power of Attorney” for medical or health reasons to a nursing home can the first party be moved prior to his death.
The second party agrees to maintain the first party’s lifestyle, pay all bills, maintenance of the property supply a car for personal use and continue to live rent free at XX Union Street, Kogarah in the State of New South Wales. In return the first party fully agrees to relinquishing the said property of XX Union Street, Kogarah in the State of New South Wales also known as the family home all contents including item[s] held in trust to the second party and upon my death shall be the sole property of Sharon Anne Mack.
That the second party agrees to set aside for the son of Donald John Mack also known as Stephen John Mack, the brother of Sharon Anne Mack the sum of $60,000.00 which can be in the form of cash and assets to the value of. At no point can Stephen John Mack (known from here on in as the 3rd Party) force a sale of assets held by Sharon Anne Mack to receive this sum. Also that the second party shall not with hold this sum from the third party and shall agree to pay this amount within a reasonable time frame or by yearly instalments until amount expelled.
Upon relinquishing all rights to the second party and the future ownership of the property and contents to be given to Sharon Anne Mack she does agree [to] pay all household accounts, maintenance of the property and its contents and keep the first party accustomed to the life style presently enjoyed. That from this day forward Donald John Mack is a guest in the family home and at no point can be evicted. In saying that Donald John Mack also agrees to uphold this agreement. The longer the agreement only confirms and aids to the strength of trust that each party has entrusted each other with.
That Donald John Mack and Sharon Anne Mack are of sound mind and fully understand and agree to the terms;

· First party relinquishes from this day forward the title and understands that he cannot sell or dispose of the contents and the family property known as XX Union Street Kogarah in the State of New South Wales to his daughter Sharon Anne Mack.

· That the second party shall receive full ownership of the property and its contents being for financial contribution to Donald John Mack[’s] lifestyle [and] health, providing a roof over his head – protecting the family assets from all outsiders including those directly related to the mentioned parties within this agreement.

· That in the event of Sharon Anne Mack[’s] demise prior to her father that her will or her [executor] set aside a trust to uphold this agreement. If there are grandchild[ren] of Donald John Mack from [his] daughter that they receive Sharon Anne Mack’s share and still uphold the allotted sum to Stephen John Mack.

· That if Sharon Anne Mack survives Donald John Mack from that day she is free to do what she like[s] as the property and contents are hers.

16 As the document records, the purpose of the parties in entering into this transaction included “protecting the family assets from all outsiders including those directly related to the mentioned parties within this agreement”. However, it is to be remembered that Laura was not yet on the scene.

17 Laura says that, in August 1997, Donald said to her: “This is my house, if anything happens to me it will be yours”. Elsewhere, she says that Donald often referred, in Sharon’s presence, to the Kogarah property as “my home”, and that Sharon said nothing to the contrary. Donald admits that he referred to the Kogarah property as “my home”. It was indeed his home – the place where he resided – even if he did not beneficially own it. Such statements are equivocal, and even if they were made, do not amount to a representation of beneficial ownership or entitlement, and are not inconsistent with his now denying any beneficial interest.

18 Sharon says that when the proposal that Laura move in with Donald was under consideration – presumably in 1997 or 1998 – she had a conversation with Laura in which Sharon said, in respect of the Kogarah property and its contents: “If it’s money you’re after, don’t bother. This is all mine”. Laura disputes that Sharon said any such thing. Although such a statement would be entirely consistent with the surrounding circumstances, including the June 1996 transactions, in light of my reservations about the credit of Sharon, I am not prepared affirmatively to find that such a statement was made.

19 It was submitted that Donald Mack’s failure to lodge land tax returns disclosing that he held the property upon trust somehow told against his denial of a beneficial interest in the Kogarah property. However, that property remained his primary place of residence. No obligation on the part of a mere legal owner of land, who occupies it as his primary place of residence, to lodge any land tax return in respect of it, was identified. Even if there were such an obligation, failure on the part of Donald to comply with it in those circumstances would hardly be an indication that he believed that he had a beneficial interest.

20 Notwithstanding my reservations about the credibility of Donald and Sharon, acceptance of the essential elements of their case is supported by independent or objective factors. First and foremost are the written instruments of 28 and 30 June 1996. Each was witnessed by the same Justice of the Peace, whose affidavit evidence as to her practice in witnessing such documents was not challenged. No evidence, of forensic examination or otherwise, was adduced to cast any doubt on the authenticity of those documents. Next, there is Donald’s letter to the Registrar-General in 1993. Together, these provide strong evidentiary support for Sharon’s case.

21 Moreover, Laura agrees that she accompanied Donald to the Land Titles Office on at least one occasion, although she says she knows not for what purpose. Donald said that he visited the Land Titles Office to endeavour to have his name removed from the register; and no other reason for him to do so is apparent. Laura also conceded that Donald had told her, at one stage, that the Kogarah property was owned by a family trust. In one of the immigration application documents from 1998 so much is stated, apparently inserted by Sharon. Further, it was Sharon who was nominated as the financial sponsor for Laura’s immigration, and Sharon and her husband (not Donald) who provided an undertaking to support her; this tends to suggest that they, as distinct from Donald, had the resources to meet that undertaking. Laura concedes that it was with Sharon that she made arrangements to return to the Kogarah property in March 2005, after the initial separation.

The Business and Carlton

22 Prior to June 1996, Donald and Sharon were partners in the antiques business, and were at least nominally registered proprietors as tenants in common in equal shares of the Carlton property. However, Sharon had provided the whole of the purchase moneys for the Carlton property. In those circumstances, the presumption of advancement not being applicable, there is a presumed resulting trust in her favour [see, for example, Calverley v Green [1984] HCA 81; (1984) 155 CLR 242]. Moreover, there is substantial corroboration for Sharon and Donald’s case that inclusion of Donald as a tenant in common was a mistake: first, the circumstance that the option was granted to Sharon alone, although that is of but slight significance; secondly, Donald’s 1993 letter to the Registrar-General disavowing any interest in the property; thirdly, the bank cheque receipt, evidencing that the balance purchase price was paid “on behalf of” Sharon; and fourthly, the circumstance that from 1985 onwards, Sharon paid all the outgoings including land tax. Accordingly, even prior to June 1996, Sharon was beneficially entitled to the Carlton property, to the exclusion of Donald.

23 To the extent that she was not (and also in respect of the antiques business), the 28 June 1996 Deed of Dissolution had the effect of vesting the beneficial ownership of the business assets (and the real estate, to the extent that it was not already hers) in Sharon. The Deed of Dissolution was in writing, and signed by the parties. It was for valuable consideration, providing as it did for the payment of $5,000 by Sharon to Donald; evidence, albeit belatedly produced, proves payment of that sum. Accordingly, it was sufficient, in form, to comply with (NSW) Conveyancing Act 1919, s 23C and s 54A. It was not a voluntary transaction, but supported by consideration and thus effective in equity. It is true that the document was not stamped, but it was received into evidence upon the solicitor’s usual undertaking as to stamp duty referred to in (NSW) Uniform Civil Procedure Rules 2005, r 31.14, in which circumstances it may be admitted [see the judgments of Hill J of the Federal Court of Australia in Davis v Federal Commissioner of Taxation (1989) 86 ALR 195 and Weston v Beaufils (1994) 122 ALR 240].

24 Being expressed to take immediate effect, it could not be a conditional gift. And even if payment of the $5,000 was a condition, the evidence establishes that the condition was satisfied; in any event, while failure of the condition might have entitled the innocent party to rescind, there is no hint of any attempt to do so.

The Kogarah Property

25 Prior to the early 1990s, Donald was the legal and beneficial owner of the Kogarah property. Assuming that the delivery to Sharon of the certificate of title was accompanied by the requisite intention to make a gift, it was an imperfect one, as Donald as donor had not done all things necessary on his part to effect it; in particular, he had not executed and delivered a transfer. Being unsupported by consideration, any such gift was ineffective in equity.

26 However, this position was affected by the 30 June 1996 agreement, which imposed reciprocal obligations on each party: Donald to relinquish title, and Sharon to permit Donald to reside in the property, and to fund his lifestyle and pay the outgoings. Those reciprocal obligations imported consideration. The agreement was plainly intended to create legal relations. It was in writing and signed by the parties, and thus sufficiently compliant with Conveyancing Act, ss 23C and 54A. Although stamp duty had not been paid, it was admitted pursuant to the solicitor’s usual undertaking as explained above. It was plainly intended to have immediate effect, and was not conditional.

27 The consequence is that, although Donald remained the registered property of the Kogarah property, the beneficial interest was vested in Sharon. Several equitable doctrines overlap to produce this result. The first is a specifically enforceable agreement, supported by consideration, contained in the 30 June 1996 contract. The second is a common intention constructive trust: the 30 June 1996 agreement evidences the common intention of Sharon and Donald that Sharon would be beneficially entitled to the property; in reliance upon that common intention Sharon has paid the outgoings and funded other expenditure in respect of Donald. As Glass JA said, in the Court of Appeal, in Allen v Snyder [1977] 2 NSWLR 685, at 691:

(5) The Court gives effect to the trust created by the agreement or common intention that, if the spouses contribute as contemplated, the beneficial interest will be held in accordance with their agreement or common intention: Gissing v. Gissing .

…

(7) ... Whether the arrangement discloses an agreement or common intention referable to the beneficial enjoyment of the home is a problem of evidence, not of law.

...

(9) By appropriate evidence, it may be proved that an agreement or common intention arose after the home had been acquired: Gissing v Gissing .

28 [See also Ogilvie v Ryan [1976] 2 NSWLR 504 (Holland J); Butler v Craine [1986] VR 274, 285-7]. Thirdly, the same result may be reached by application of the doctrine of proprietary estoppel: Sharon assumed that she was or would be beneficially entitled to Kogarah; Donald by giving her the title and subsequently entering into the contract was implicated in the creation of that assumption; Sharon has, in reliance upon that assumption, paid the outgoings and funded other expenditure in respect of Donald; Donald knew she was doing so and either encouraged her to do so or at the very least stood by knowing that in doing so she believed she was beneficially entitled to the property; if the truth of Sharon’s assumption be now denied, she will suffer detriment, in that she will have incurred irrecoverable expenditure.

Counter-estoppel

29 Although Laura did not distinctly plead nor contend for it, there was from time to time in her case at least a hint of an argument that Donald and Sharon should be estopped from denying that Donald was beneficially entitled to the disputed properties. This was seemingly based on what were said to be representations made by each of them to the effect that the properties were Donald’s; an assumption on the part of Laura to that effect; reliance on that assumption in her decision to return to Australia in 1998; and detriment if the assumption were now falsified.

30 As already explained, however, I am unpersuaded that any distinct representation to the effect that Donald had a beneficial interest (as distinct from a right to reside) in any of the disputed properties was ever made to Laura. To the contrary, on her own evidence she had been told that the Kogarah property was owned by a family trust (although it must be acknowledged that she apprehended that the children of her prior marriage were among the beneficiaries). Before she formed any relevant assumption, she was already in Australia and in a de facto marital relationship with Donald. Her circumstances in the Philippines had been very poor. I am unable to accept her assertion that she would not have returned to Australia had she not believed Donald to be beneficially entitled to the disputed properties. (That is not to say that I would not accept her assertion that she would not have returned to Australia had she understood the relationship contemplated by Donald to be a merely commercial home-share arrangement of the type described in his evidence). And even if it could be said that she had ordered her affairs on the basis of any such assumption, it is difficult to see any such detriment arising from its falsification as would render it unconscionable for Donald or Sharon now to deny it.

Conclusion

31 It follows that in my view the beneficial interest in the Kogarah property, the antiques business (such as it is) and the Carlton property is vested in Sharon to the exclusion of Donald, and Donald holds upon trust for Sharon any legal interest he has in those properties. In respect of Kogarah, Sharon’s beneficial interest is subject to Donald’s equitable right of lifetime residence. Sharon is therefore entitled to the relief she seeks.

32 In proceeding 2009/291262, my orders are:

1. Declare that the defendant Donald John Mack holds the property situate at and known as XX Union Street, Kogarah being the land comprised in folio identifier 6/F/15XX upon trust for the plaintiff Sharon Anne Holmes, subject to an equitable right for Donald John Mack to reside in the property for his lifetime.

2. Declare that the defendant Donald John Mack holds his interest as tenant-in-common with the plaintiff in the property situate at and known as XX0- XX2 Railway Parade, Carlton, being the land comprised in folio identifier Auto Consol 15494-XXX upon trust for the plaintiff Sharon Anne Holmes absolutely.

3. Declare that the plaintiff Sharon Anne Holmes is beneficially entitled to the exclusion of Donald John Mack to any antiques business known as “Mack’s Antiques” or “Abacus Antiques” and carried on from and at the Carlton property.

4. Order that the second defendant Laura Mack pay the plaintiff’s costs.

5. No order as to costs as between the first and second defendants, to the intent that such costs be taken into account in proceeding 10/028396.

**********