Jeffrey-Potts v Garel
[2012] VSC 237
•22 June 2012
IN THE SUPREME COURT OF VICTORIA Not Restricted AT MELBOURNE
COMMERCIAL & EQUITY DIVISION
No. 4614 of 2010
BRENDA EILEEN ZOAY JEFFREY-POTTS Plaintiff v WARREN LEIGH GAREL Defendant ---
JUDGE:
J FORREST J
WHERE HELD:
Melbourne
DATES OF HEARING:
7, 8, 14, 15, 16, 20, 21, 22, 23, 26, 27, 28, 29 March 2012, 26, 27, 30 April, 1, 2, 8, 9 May 2012
DATE OF JUDGMENT:
22 June 2012
CASE MAY BE CITED AS:
Jeffrey-Potts v Garel
MEDIUM NEUTRAL CITATION:
[2012] VSC 237
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CONTRACT – Existence of interest-free loan agreements – Limited documentary evidence – Note recording a loan agreement signed by both parties – Whether loan agreement was incomplete or uncertain – Repayments of loans made irregularly – Burden of persuasion on defendant.
TRUSTS – Existence of an express trust – Intention to create a trust.
EQUITY AND TRUSTS – Resulting trust – Contributions to purchase price – Calverley v Green (1984) 155 CLR 242.
EQUITY AND TRUSTS – Common intention constructive trust – Property acquired in course of mother/surrogate son type relationship – Property held in the name of one party – No common intention to create trust.
EQUITY AND TRUSTS – Remedial constructive trust – Existence of joint endeavour – Muschinski v Dodds (1985) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137 – Provision of funds for the purchase of the properties by both parties – Non-financial contributions made by both parties – Pooling of funds for payment of properties — Whether unconscionable to allow one party to assert sole title – Quantification of contributions of parties – Adjustments to be made.
EQUITY AND TRUSTS – Applicability of the doctrine of laches.
PROPERTY – Lodging of caveats – whether reasonable cause to lodge caveats existed.PRACTICE AND PROCEDURE – Admissibility of evidence after conclusion of trial.
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APPEARANCES:
Counsel Solicitors For the Plaintiff Mr E W Alstergren
Mr C TwidaleVelos & Velos For the Defendant Mr C Hanson Barretts HIS HONOUR:
Introduction
1 This case arises out of a highly acrimonious falling out in April 2010 between two close friends. In the course of their relationship, which spanned nearly 20 years, a sizeable property portfolio was amassed which both now lay claim to.
2 The case has a number of intriguing features. Mr Leigh Garel, the defendant, was 20 years of age in 1988 when he met Ms Zoay Jeffrey-Potts, the plaintiff, who at that stage was 58 and operating a boarding house[1] located at 176 Victoria Avenue, Albert Park. Between 1994 and 2006, twelve units were purchased in Mr Garel’s name and rented out. Ms Jeffrey-Potts claims that he was, in effect, a puppet and that the properties belong to her as only her funds were used in their purchase.
[1]“the boarding house”.
3 It is not in issue that a large sum – probably in excess of $200,000, which came from cash stashes at the boarding house – was provided by Ms Jeffrey-Potts for the purchase of a number of the units but there are major disputes as to the intentions of the parties underpinning the purchases and the amounts contributed by each of them. Ms Jeffrey-Potts says that apart from funds obtained from the bank, the properties were paid for by her and held on trust by Mr Garel. He denies this and contends that the funds provided by her, which supplemented his own contributions, were loans to enable him to build a property portfolio.
4 As I will try to explain, both Ms Jeffrey-Potts and, to a lesser extent, Mr Garel, provided revisionist accounts of what appears to have been a harmonious and close relationship until its termination. Each sought to minimise the role played and the contributions made by the other in the acquisition and management of the units during the term of their relationship.
5 The case is to be resolved by the application of principles of equity and contract law. However at the heart of the case are the factual findings as to the source of the funds, the parties’ intentions at the time the units were purchased and the amounts of money and time invested by both parties in purchasing and managing the properties. One major complicating factor has been Ms Jeffrey-Potts’ determination to deal solely in cash with no documentation to support many of her assertions. This, in conjunction with my reservations as to her credibility as a witness, has made the fact finding task difficult.
Background of the two protagonists
6 Ms Jeffrey-Potts was born on 13 January 1930 in the United Kingdom. She married, and in 1966 gave birth to a daughter Adelle. In 1967, the family emigrated to Australia.
7 In 1969, the couple purchased the boarding house.[2] In the seventies Ms Jeffrey-Potts and her husband separated and he moved to Adelaide with Adelle. Subsequently they divorced.[3] Ms Jeffrey-Potts continued to manage the boarding house.
[2]T187; Exhibit D1.
[3]T185.
8 Up until the 1980s, the boarding house accommodated up to 20 tenants: ten on the ground floor and ten on the first floor. Later, the rooms downstairs were converted into two units and a self-contained flat, which operated independently of the boarding house tenants, whose rooms were situated upstairs. There was also a dilapidated bungalow at the rear of the boarding house which was occupied by tenants from time to time. Gradually the number of boarders decreased to the point that by 2000 Mr Garel was the only boarder still residing at the boarding house.[4]
[4]Another boarder, a printer, kept a room but was rarely resident; T1307.
9 During the 1970s and 1980s, Ms Jeffrey-Potts was involved in the development and management of at least four hotel dining rooms both locally (the Victoria Hotel in Albert Park) and interstate.[5] She owned two properties in Iffla Street, South Melbourne, which she rented out.[6] She managed the properties and collected the rents herself. At one time, she was the part owner of a brothel,[7] and had what she described as “an interest in other properties” – including an art gallery and a caravan park.[8] Each of these businesses appears to have been conducted on a cash basis. There was also the management of the boarding house which involved managing the premises and collecting the rents. In addition, from 1995 she was an office bearer (either the Treasurer or Vice-President) of an organisation known as “Law Watch” which met regularly at a church hall in East Melbourne for several years.
[5]T184.
[6]T508.
[7]T526.
[8]T504.
10 Mr Garel (known as Leigh Garel) was born in Warracknabeal on 2 April 1968 and raised in that town. He was unemployed for a year and a half after leaving school and in 1988 moved to Melbourne to find work. Within a short time of his arrival, he obtained lodgings at the boarding house. By late June, he had obtained regular employment with McDonalds.
11 It was common ground that the two struck up a friendship in the late 1980s. It was also not in issue that in about 1993, Mr Garel ceased paying rent and was not charged for board by Ms Jeffrey-Potts while he resided at the boarding house.
12 In 1994, a unit at 168-174 Victoria Avenue, Albert Park (known as Victoria Court)[9] came on the market and was purchased in the name of Mr Garel. This was the commencement of the purchase of a portfolio of units (twelve in total) in close proximity to the boarding house. All were purchased in the name of Mr Garel.
The issues
[9]“Victoria Court”.
The dispute raises the following issues for resolution:
(a)whether the funds contributed by Ms Jeffrey-Potts for the purchase of the units were provided as a result of an agreement between the two to permit Mr Garel to live rent-free at the boarding house and provide him with domestic help in return for the units being placed in his name; with the result that the properties were held in trust by Mr Garel for Ms Jeffrey-Potts;[10]
[10][3]-[11] of the Further Amended Statement of Claim.
(b)whether the funds advanced by Ms Jeffrey-Potts were, in fact, loans by her to Mr Garel;[11]
(c)whether, given that Mr Garel is the legal owner of the units, equity should intervene in Ms Jeffrey-Potts’ favour either in the form of a resulting trust or a constructive trust and if so, to what extent;[12]
(d)if equity is to intervene in the form of a constructive trust, the determination of:
(i)the funds that were contributed to the purchase of the units by each of the parties;[13] and
(ii)the contribution in terms of labour and skill to the management of the units and/or perhaps the maintenance of the boarding house;
(e)if Ms Jeffrey-Potts has an equitable interest in the units whether she is disentitled to such an interest by reason of laches;[14] and
(f)whether Mr Garel is entitled to damages as a result of the lodging of caveats by Ms Jeffrey-Potts over the properties.
[11][4(c)] of the second Further Amended Defence – also alleged in [35]-[39] of the Further Amended Statement of Claim.
[12][12]-[34] of the Further Amended Statement of Claim.
[13]Compare [6] of the further amended statement of claim with [4(a)] of the Second Further Amended Defence. Mr Garel contributed funds from his earnings, inheritances and a gift from his mother. Mr Garel made no payments towards the purchases.
[14][36] of the Second Further Amended Defence.
The nature of the relationship prior to 1994
14 Ms Jeffrey-Potts, consistent with her evidence throughout the trial, sought to minimise the closeness of the relationship that developed during the six years prior to the first property purchase. On her account, the relationship was, essentially, no more than one of landlord and tenant, although she provided Mr Garel with advice about investments from time to time and permitted him to live rent-free from about 1993.[15] In cross-examination she initially denied discussing leaving Mr Garel an amount of money in her will until it was pointed out that this was an allegation contained in her statement of claim [16]
[15]T198, T1372.
[16]T678-680.
15 Mr Garel says that within a relatively short time of his moving into the boarding house, he struck up a rapport with Ms Jeffrey-Potts. She gave him advice (which he took) about investments and they often dined together in the dining room of the boarding house. In 1992, they travelled by motorcycle to North Stradbroke Island and on at least one occasion had sex together. Mr Garel moved rooms at the boarding house on a number of occasions. Ultimately, in 1993, he moved into room 6, which was adjacent to Ms Jeffrey-Potts’ room.
16 At about this time, he ceased paying rent and assisted with odd jobs around the boarding house, including assisting with the re-roofing of the two bungalows located at the rear of the boarding house. In the evening, they would usually have a meal together in the lounge and, on his account, by 1993, a sporadic sexual relationship had developed. Ms Jeffrey-Potts denied any sexual relationship between the two.
17 Mr Garel’s account of the closeness of their relationship by 1994 is corroborated by a number of their friends who were called as witnesses in the trial. Mrs Mary Brown, Mr John Russo and Mrs Judith McCartney all met Ms Jeffrey-Potts and Mr Garel shortly prior to the acquisition of the first property in December 1994. Each gave evidence of regular social outings with Ms Jeffrey-Potts and Mr Garel – to the extent that Mr Russo and Mrs McCartney who both lived in the outer eastern suburbs, could never recall seeing the two apart from the time they first met until they split in 2010. Mrs Brown, who lived and worked in the area around Albert Park, would see Ms Jeffrey-Potts on her own on occasion but also on social occasions when she was, as I interpret her evidence, invariably accompanied by Mr Garel.
18 I am comfortably satisfied that by 1994 the two had a particularly close and harmonious relationship. It is not necessary for the purpose of this case to reach any final conclusion as to the sexual nature of their relationship. The continuing nature of the relationship after 1994, which I shall refer to in more detail later, demonstrates its enduring nature. One example suffices: when Ms Jeffrey-Potts’ hip was replaced around 2009, Mr Garel was named as her next of kin with the Alfred Hospital.[17]
[17]T695-696.
The competing versions as to the purchase of the units
19 What is hotly in dispute is the respective intentions of the parties at the time the properties were purchased, the amount of the funds contributed by each to the purchase of the properties and the purpose for which the properties were purchased.
20 Ms Jeffrey-Potts put forward the following scenario: she wished to establish a property portfolio for her retirement. She did not have a bank account but had very large amounts of cash on hand, which she kept at the boarding house. She also received about $120,000 in settlement of a claim against a firm of solicitors.[18] She determined not to purchase any properties in her own name because she was concerned that her daughter, whom she believed to be taking drugs, would exercise influence over her in relation to those properties. Mr Garel volunteered to place the properties in his name and said that he would hold them in trust for her. She, however, paid the full amount of the purchase prices (deposit and settlement funds), except where financed by bank loans. The deposits, at times running into many thousands of dollars were paid in cash from money kept by her at the boarding house. She rejected outright the suggestion that she loaned moneys to Mr Garel for the purpose of his purchase of the initial property or any others. Throughout her evidence she maintained that the properties were held on trust for her by Mr Garel, and that she “trusted” him with her properties and her money. [19]
[18]“the solicitors claim”.
[19]T324-T325, T423, T426-T427, T560, T657, T664.
21 Mr Garel paints a very different picture: the provision by Ms Jeffrey-Potts of funds was solely by way of interest-free loans. After Ms Jeffrey-Potts paid the initial deposit on the first unit of $1,000, he paid $12,200 being the balance of the deposit. He then obtained funds from his uncle and mother which allowed him to pay approximately $33,500 towards the purchase price of the unit with the balance paid by Ms Jeffrey-Potts. He accepts that Ms Jeffrey-Potts provided funds for the purchase of a number of the properties by way of loans, the first of which was later acknowledged and signed by her.[20] On his account it was always intended that he own the properties but Ms Jeffrey-Potts, altruistically, assisted with the financing of his purchases.
[20]Exhibit P14.
22 Before returning to the analysis of which of these two versions is to be accepted (or, for that matter, whether either can be accepted), it is necessary to return to an issue I have already mentioned. This case turns to a large extent upon the credibility of both parties and the available contemporaneous documentation.
23 Ms Jeffrey-Potts’ evidence was, for reasons which I will set out, unpersuasive on many of the contentious issues. For instance, I do not accept Ms Jeffrey-Potts’ vague account of the source of the money used to purchase a number of the properties and her alleged motive for placing the properties in Mr Garel’s name. Her reliance upon cash in making contributions to the purchases and the ongoing management of the units, with an absence of any records, makes acceptance of parts of her account difficult and highlights the importance of the contemporaneous documentation.
24 Aspects of Mr Garel’s evidence were also not without difficulties. A number of events described in his evidence-in-chief were not put to Ms Jeffrey-Potts in cross-examination and whilst some of these omissions were understandable, others smacked of recent invention. There is no independent confirmation of his mother’s gift of $120,000 which, on his account, was used to finance the first purchase. His evidence as to the level of Ms Jeffrey-Potts’ contributions to the purchase of the first unit was a moving feast. In addition, whilst he accepted that Ms Jeffrey-Potts had made sizeable contributions to the purchase of the properties, in excess of $200,000, these were characterised as interest-free loans which were, so he said, ultimately forgiven in an act of generosity by Ms Jeffrey-Potts. Only a couple of documents exist to support his version of events and primarily in relation to the purchase of the first unit.
25 In these conflicting accounts, neither party (particularly Ms Jeffrey-Potts) was able to recognise what was apparent from the evidence of virtually every other witness that was called in the trial: that from 1994 to 2010 the two had a particularly close and apparently harmonious relationship and spent much of their time together either socially or in the management of the properties.
26 All in all, the evidence given by both parties (and particularly Ms Jeffrey-Potts) was less than satisfactory and, as I will endeavour to explain, it is impossible to resolve the case on total acceptance of one version of events as opposed to the other. Rather, I have been compelled to do my best and have primarily relied upon the contemporaneous documents and then reached limited findings of fact based on the oral testimony and drawing inferences as to the most likely course of events between 1994 and 2010.
The property purchases
27 By 2006, Mr Garel was the registered proprietor of five units in Victoria Court and seven units around the corner at 82 and 84 Beaconsfield Parade.[21]
[21]“Beaconsfield Parade”.
28 The Victoria Court block is located about one hundred metres east of the intersection of Victoria Avenue and Beaconsfield Parade. It is in effect, next door to (the northeast of) the boarding house with entrances facing Victoria Avenue and Reed Street. It is owned by a company, Victoria Court Pty Ltd; a parcel of shares entitles the owner to exclusive occupancy of a unit.
29 The Beaconsfield Parade units (located at 82 and 84 Beaconsfield Parade) are on strata titles and are located a short distance from Victoria Avenue facing the beach (i.e. to the southwest). The lane that separates the boarding house from Victoria Court also provides access to the rear of the Beaconsfield Parade units. Although in two separate blocks (numbered separately) and with two separate bodies corporate, these units were effectively managed jointly.[22]
[22]Exhibit P81.
30 The table below sets out the details of each of the twelve purchases.
Year Settlement Date Property purchased Purchase Price 1994
5/12/1994
Unit 2, Victoria Court
$132,000 ($13,200 deposit)
1995
21/6/1995
Unit 6, 84 Beaconsfield Parade
$67,000 ($6,700 deposit)
1995
6/9/1995
Unit 14, 82 Beaconsfield Parade
$62,500 ($6,000 deposit)
1996
30/05/1996
Unit 7, 84 Beaconsfield Parade
$67,000 ($6,700 deposit)
1996
18/6/1996
Unit 18, 82 Beaconsfield Parade
$67,250 ($6,700 deposit)
1996
14/11/1996
Unit 1, 84 Beaconsfield Parade
$68,100 ($6,000 deposit)
1997
31/12/1997
Unit 1, Victoria Court
$191,000 ($17,000 deposit)
2000
9/2/2000
Unit 12, Victoria Court
$283,000 ($28,000 deposit)
2000
18/4/2000
Unit 3, 84 Beaconsfield Parade
$125,250 ($12,525 deposit)
2003
13/8/2003
Unit 10, 84 Beaconsfield Parade
$204,250 ($20,000 deposit)
2004
21/3/2004
Unit 4, Victoria Court
$370,000 ($18,500 deposit)
2006
22/12/2006
Unit 11, Victoria Court
$345,000 ($34,500 deposit)
31 The common theme running through each of the purchases and their subsequent management was the absence of any sign of Ms Jeffrey-Potts’ involvement in the ownership of the properties:
(a)Mr Garel was the transferee and became the registered proprietor under the Transfer of Land Act1958 (Vic)[23] of the Beaconsfield Parade units;[24]
[23]“Transfer of Land Act”
[24]Exhibits P17, P22, P27, P37, P43, P59 and P64; T650, T1026.
(b)the Victoria Court units purchased as a result of share acquisitions in Victoria Court Pty Ltd were in the name of Mr Garel;[25]
(c)the rent from each of the properties was paid into bank accounts held in Mr Garel’s name;[26]
(d)rates and services payments were made in Mr Garel’s name;
(e)accounts for repairs were rendered to Mr Garel;[27]
(f)on occasions when finance was arranged for a purchase (for the settlement funds or deposit or both), the loan applications were in the name of Mr Garel;[28]
(g)Mr Garel was the mortgagor of the properties used to secure loans to finance new purchases;[29]
(h)from 1995 onwards, income tax returns disclosing rental income and expenses were filed in Mr Garel’s name;[30]
(i)objections to proposed planning changes were in Mr Garel’s name;[31]
(j)residential tenancy agreements were entered into in Mr Garel’s name (as were any notices to tenants);[32] and
(k)the conveyancing for the transfer of all the units, except for the first acquisition, was conducted in Mr Garel’s name.[33]
[25]Exhibits P8, P59 and P64; T650, T1026.
[26]T315.
[27]Exhibits P94, P95, P83, P86, P100 and P116; T757, T778.
[28]Exhibits P38, P77, P117-119; T1053.
[29]Exhibit D28; T1053.
[30]Exhibit D25; T650.
[31]Exhibit D13; T696, T693.
[32]Exhibits D9, D19, D20, D21, D23; T660, T1079, T1182, T1188, T1191.
[33]Exhibits P4-8, P10, P12, P17-18, P20-25, P27-9, P32-5, P37, P39, P41-6, P48, P51, P53, P55-7, P59-60, P62, P64-5, P67-8, P70, P72-3, P75-6; T785-786, T801, T821, T835.
32 The properties were managed from Mr Garel’s room at the boarding house, which partly filled the role of an office.[34] The records for each unit were kept in a filing cabinet in the room. A rent receipt book was kept and the income from the tenants (or at least some of it) was paid into accounts held at the Bank of Melbourne (later Westpac) in South Melbourne.[35] That bank also provided loan funds used for the purchase of a number of the properties.[36]
[34]T341, T612-613.
[35]Exhibit P9.
[36]Exhibits P117-8.
33 Bank of Melbourne records demonstrate that the first property which was the subject of finance was that of the fourth purchase, a Beaconsfield Parade unit (Unit 18).[37] In October 1996, Mr Garel completed a loan application and the sum of $53,000 was advanced, secured by a mortgage over that property.[38]
[37]Exhibit D28.
[38]Exhibit P38.
34 Bank records also reveal that from 1996 further loans (or redraws) accompanied by mortgages were taken out in respect of the purchase of the balance of the properties. The loan applications were made in Mr Garel’s name and, of course, the mortgages were registered against the title in his name.
The financial position of Ms Jeffrey-Potts and Mr Garel
35 The following matters were established by contemporaneous documentary evidence or were uncontested and are my findings of fact (including any inferences I have drawn from these facts).
36 On 13 May 1969, Ms Jeffrey-Potts and her husband were registered as joint proprietors of the boarding house.[39]
[39]Exhibit D1.
37 On 22 March 1977, Ms Jeffrey-Potts became the sole proprietor of the boarding house.[40]
[40]Exhibit D1.
38 During the 1970s and 1980s, Ms Jeffrey-Potts “had quite a lot of different business”.[41] In addition to the boarding house, she had, with others, managed hotel dining rooms in Sydney, Adelaide, Tasmania and Melbourne.[42] She had an investment in an art gallery in Hawthorn[43] and was the part owner of a brothel.[44] She had also owned at one time two investment properties in Iffla Street, South Melbourne[45] which were rented out.[46]
[41]T184.
[42]T505.
[43]T506.
[44]T526.
[45]T526.
[46]T508.
39 In October 1984, Ms Jeffrey-Potts was advanced $84,000 by the Williams, Winter & Higgs mortgage practice,[47] secured by a mortgage over the boarding house.[48]
[47]T1470.
[48]Exhibit D1.
40 On 10 November 1988, Ms Jeffrey-Potts gave a charge to the Legal Aid Commission, which in turn lodged a caveat on 2 June 1989 over the boarding house.[49] I infer that the Commission provided legal assistance for the prosecution of a civil claim by Ms Jeffrey-Potts against a firm of solicitors.[50]
[49]Exhibit D1.
[50]T512-516, T1476.
41 The solicitors claim was settled in 1992. Cheques were made out to Ms Jeffrey-Potts by her litigation solicitors Nicholas O’Donohue & Co in the following sums: $70,000 on 3 December 1992, $18,000 and $420 on 14 September 1993.[51]
[51]T1326, T1600.
42 Ms Jeffrey-Potts made regular payments to Williams, Winter & Higgs, (totalling $67,974)[52] and paid out the loan of $84,000 on 3 December 1992,[53] the same day the cheque for $70,000 was made out. She was provided with a discharge of mortgage. Mr Garel said one of the cheques was made out to the mortgagees.[54]
[52]T1464.
[53]Exhibit P114; T1470.
[54]T1323.
43 On 23 June 1994, the discharge of mortgage was lodged with the Titles Office, as was the withdrawal of the Legal Aid Commission caveat; the end result being that as at June 1994, the boarding house was unencumbered.
44 Ms Jeffrey-Potts kept large sums of cash in her bedroom and other rooms at the boarding house. Given the amounts that were paid for the first three units, it is clear that she had at least $200,000 stored in cash at the boarding house. The provenance of these funds, which figure significantly in this case, remains a mystery. Mr Garel said that Ms Jeffrey-Potts had at least $100,000 in cash under her bed.[55]
[55]T1528.
45 So in summary, notwithstanding the absence of any evidence in the form of tax returns, bank statements, BAS or IAS statements, it was nevertheless clear that by 1994 Ms Jeffrey-Potts had a number of assets:
(a) she owned the boarding house outright;
(b)the cash stash (as it was described in evidence) was, in all likelihood, at least $200,000; and
(c)she had some proceeds (probably about $18,000) from the solicitors claim, although I infer that the cheque for the largest amount, $70,000, was applied to paying out the Williams, Winter & Higgs loan.
46 In addition, in 1994 Ms Jeffrey-Potts was in receipt of regular income from boarders residing upstairs and the tenants of the two units and the bedsit downstairs, as well as (at times) the bungalow at the rear of the boarding house. Again, the absence of any documentary evidence as to the income received is stark but there seems no question that there was a reasonable amount of income being produced from the tenants and boarders.
47 Mr Garel’s financial position was in distinct contrast to that of Ms Jeffrey-Potts. He did not work for a year and a half after leaving school. When he left Warracknabeal and came to Melbourne in 1988 at the age of 20 he obtained intermittent casual work as a builder’s labourer.[56]
[56]T960, T962.
48 In June of that year, he obtained permanent employment with McDonalds which continued through to 1994 (and, indeed, to the present time). Prior to 1994, most of his savings had been depleted by bad investments in Pyramid and Estate Mortgage. He could not provide any accurate estimate as to the amount invested[57] and subsequently lost, other than it could have been a little more than six thousand dollars.[58]
[57]T970-971.
[58]T1305-1306.
49 There is no satisfactory evidence as to the amount of savings or disposable funds available to him in 1994, although absent a gift or a very successful day at the races, it would seem likely that such funds were unsubstantial.
50 One could infer that his 1994 wage was around $350.00 net per week. As at the end of 1996, he was earning around $400 net per week[59] with outgoings which, I would estimate on his evidence, at between $100 to $150 per week.
[59]Exhibit P101; T1300.
51 Mr Garel’s tax returns from the financial year ended June 2003 to June 2009 were tendered.[60] It is not necessary to refer to each return other than to cite a couple of examples. In 2004, his take home pay from McDonald’s was approximately $522.00. By 2009, it had risen to $663.00. During this period his taxation returns also revealed income from the rental of the properties.
[60]Exhibit D25.
The purchase of the first unit (Unit 2 Victoria Court) in 1994
52 The following facts (which are my findings) are not in issue in respect of the purchase of Unit 2 Victoria Court in November 1994:
(a)prior to its purchase both Ms Jeffrey-Potts and Mr Garel inspected the unit;
(b)it was also inspected by a building consultant engaged by Ms Jeffrey-Potts and Mr Garel prior to purchase;
(c)it was purchased for the sum of $132,200 in Mr Garel’s name;[61]
(d)an initial deposit of $1,000 in cash was paid on 16 November 1994 by Ms Jeffrey-Potts to Mr Ian Hill of Parkside Real Estate, the vendor’s agent, with a receipt issued in the name of “Mr Garle”;[62]
(e)the balance of the deposit of $12,200 in cash was paid on 23 November 1994 to Ms Glenda Beer of Parkside and the receipt issued in the name of Mr Garel;[63]
(f)the contract of sale and the transfer of shares were in the name of Mr Garel;[64]
(g)the solicitor’s account for conveyancing fees was rendered to Mr Garel;[65]
(h)settlement occurred on 5 December 1994 with the sum of $118,425.34 being paid;[66]
(i)from January 1995 the unit was rented out; and
(j)rent derived from the unit was collected in cash and paid into a Bank of Melbourne account opened in Mr Garel’s name.
[61]Exhibit P8.
[62]Exhibit P4.
[63]Exhibit P3.
[64]Exhibit P8.
[65]Exhibit P5.
[66]Exhibit P7.
53 There were two matters fundamentally in dispute as to the purchase of the unit:
(a)the provenance of the funds used in its purchase; and
(b)the purpose underpinning its purchase.
54 Ms Jeffrey-Potts gave evidence that she, with the assistance of Mr Garel, commenced searching for appropriate properties so that she could build up an investment portfolio for her retirement.
55 She steadfastly denied the proposition that any part of the inspection of the unit or negotiations for its purchase was for the purpose of providing Mr Garel with an investment or that her funds used for the purchase were a loan to him.
56 Ms Jeffrey-Potts swore that prior to negotiating the purchase of the unit in 1994 she and Mr Garel had a discussion in the lounge room at the boarding house to the following effect: she was worried about her daughter getting her hands on her money which she suspected would be used to buy drugs and asked him to put the property in his name and hold it in trust for her:[67]
I said to him that I was very concerned about my daughter and I thought – I didn’t see her smoking but when I saw those photos and she was very thin and had her hair cut and what have you the way she had I thought she was a druggie. And I didn’t want my money that I was going to invest, going to someone who was on drugs. I didn’t want my money spent in that way and if it was in my name she could have kind of put pressure on me to get money from me, but if it was in Garel’s name she wouldn’t know. And so he offered to look after my properties and put them in trust for me, and that was the word that was used. I’d trust him with my properties if they were – yes. That was the deal. And he was a young boy and I thought I could educate him a little bit for his future.[68] (emphasis added)
She went on to explain that in effect this was “an ideal situation” for her superannuation.[69] She said that on many occasions Mr Garel had said to her that she could have the properties at any time[70] and that he would look after the properties for her. She accepted Mr Garel’s word (rather than formulating an agreement to this effect in writing) because that was the way her father had done business.[71] Throughout her evidence she continually reiterated that the purchase of this unit was solely for her benefit.
[67]T197,T541-542.
[68]T198.
[69]T198-199.
[70]T198.
[71]T199.
57 Ms Jeffrey-Potts said that she alone carried out the negotiations to purchase the unit.[72] Whilst Mr Garel was present at both the inspection of the unit and during the course of the dealings with the agent it was, essentially, as part of his relationship with her. Mr Garel also did not dispute that in dealing with agents it was Ms Jeffrey-Potts who conducted the negotiations and, in effect, did the deal for the purchase of the unit.
[72]T205.
58 As I mentioned earlier, Ms Jeffrey-Potts was adamant that the source of the funds for the two payments of the deposit ($1,000 and $12,200 paid to Parkside Real Estate, the agent for the vendor) and the balance of the purchase funds came from monies held by her,[73] or to put it more bluntly, cash she kept at home “under the bed”.[74]
[73]T207, T212, T528.
[74]T205.
59 Mr Garel gave evidence that in the years preceding the purchase he and Ms Jeffrey-Potts discussed finances. After a couple of bad investments he was advised by her to invest in property. On his account, the two looked at properties with an eye to purchasing an investment property for Mr Garel. In 1994 in particular, they looked at a unit in Withers Street, Albert Park.
60 They then became aware that Unit 2 Victoria Court was on the market and inspected the property and went to the agent together (which does not seem to be in issue). Ms Jeffrey-Potts conducted the negotiations for its purchase. Mr Garel agreed that the first amount of $1,000 was paid by Ms Jeffrey-Potts in cash to Mr Hill, the agent.[75] However, he asserts that the $12,200, the balance of the deposit, was provided by him from his savings account with the Commonwealth Bank.[76] Mr Garel said that the money used to provide the balance of the settlement monies – in the region of $120,000, comprised a combination of funds advanced to him by Ms Jeffrey-Potts and his own money. He obtained $120,000 by way of a gift from his mother and $3,000 from his uncle as a result of meetings in Warracknabeal.[77] To put it more precisely, he says that the amount of $85,000 in total was provided by Ms Jeffrey-Potts towards the purchase and he provided the balance of around $33,500. Ms Jeffrey-Potts (who Mr Garel says accompanied her on the trips to Warracknabeal) denies any such visit occurred.[78]
[75]Exhibit P3.
[76]T1339.
[77]T1339.
[78]T576.
61 Mr Garel denied the conversation set out at [56] took place and also denied ever saying that Ms Jeffrey Potts could have the units back at any time.
62 At this stage it is convenient to turn to the evidence, outside of the two protagonists, relevant to the purchase of this unit. This body of evidence was admissible by reason of s 64(3) of the Evidence Act 2008 (Vic) and was probative in that it was said to go to Ms Jeffrey-Potts’ state of mind at the time of the relevant conversations.
63 Mrs Mary Brown, a friend of Ms Jeffrey-Potts, gave evidence as to a discussion in 1994 with Ms Jeffrey-Potts. Ms Jeffrey-Potts told her that she had $120,000 to invest and asked her what options were available to her and mentioned a court case she had won. Mrs Brown referred her to an adviser at the ANZ Port Melbourne branch.[79] She also recalled that in November of that year Ms Jeffrey-Potts told her that she had put a deposit on a property in Victoria Avenue.[80] She had told Mrs Brown that she wanted to build a property portfolio for her retirement.[81]
[79]T845-846.
[80]T846.
[81]T847.
64 Mr Ian Hill was the sales manager at Parkside in Albert Park in 1994. Unit 2 Victoria Court was listed with his company and handled by Mr Gerard Ballantyne, a Parkside employee. Mr Hill was asked by Mr Ballantyne to assist as the sale involved a company share transfer rather than a strata title transfer.[82] Ms Jeffrey-Potts conducted the negotiations.[83] He had several meetings with Ms Jeffrey-Potts in relation to the purchase of the unit. Ms Jeffrey-Potts told him on the first occasion when he went to the unit with Mr Ballantyne that she wanted to develop an investment portfolio and that it was a good area to invest in.[84]
[82]T815-816, T820.
[83]T816.
[84]T817-818.
65 Although Mr Ballantyne handled the negotiations, it was Mr Hill who accepted the first deposit of $1,000 in the boardroom at the Parkside offices on 16 November 1994. He regarded Ms Jeffrey-Potts as being the driving force behind the purchase. Mr Hill recalled Ms Jeffrey-Potts bringing $1,000 in cash for which he provided a receipt.[85] He wrote out the receipt in the name of Mr Garel, having been told by her that it was going to be placed in Mr Garel’s name as she did not want it in her name:
Zoay informed me that it was going to be in the name of Leigh Garel’s name and he was going to act as trustee for her because she didn’t want the property in her name, for reasons that I didn’t ask that were private.[86]
He did not recall whether Mr Garel was present. She said she would pay the balance in seven days.[87]
[85]Exhibit P3.
[86]T820.
[87]T821.
66 Mr Hill also recalled a discussion with Ms Jeffrey-Potts in which she said that she would continue to look for property within the area to build up her nest egg or investment portfolio which she proposed to put in Mr Garel’s name as trustee for her.[88] Mr Garel denied this conversation.[89] Mr Hill thought that Mr Garel was present at the meeting at the unit[90] but could not recall whether he was present when the deposit of $1,000 was paid. As he put it “I was transacting business with Zoay really. That was what it came to”.[91]
[88]T825.
[89]T1335.
[90]T832.
[91]T839.
67 Mr Hill also gave evidence of a subsequent discussion with Ms Jeffrey-Potts (after payment of the deposit) in the backyard of the boarding house where he spoke to her about what he perceived were the risks of placing the property in Mr Garel’s name. On his account, he said to her words to the effect “Do you know what you are doing?” to which she replied: “Yes, I’m happy with what I am doing”.[92]
[92]T825.
68 Although Mr Hill was recalling events which transpired nearly 17 years earlier and had engaged in many, many transactions since that time in his job as a real estate agent, I accept his evidence as to these conversations. He has no interest in the litigation and had no ongoing relationship with Ms Jeffrey-Potts as he left the area six months later.[93]
[93]T837.
69 Ms Glenda Beer was also employed at Parkside and accepted the second instalment of the deposit in cash on 23 November 1994. She wrote out the receipt for the payment of $12,200. She said she had first met Ms Jeffrey-Potts when “they purchased property at [Victoria Court]”[94] – referring, I assume, to Ms Jeffrey-Potts and Mr Garel. As proved to be the norm over the ensuing years, on this first occasion Ms Jeffrey-Potts and Mr Garel came to the office together. Ms Jeffrey-Potts did the talking and instructed Ms Beer to put the receipt in Mr Garel’s name. She could not recall whether Mr Garel or Ms Jeffrey-Potts handed the cash to her. I accept her evidence as to the circumstances surrounding the payment of the deposit.
[94]T782.
70 In addition to contemporaneous statements made by her around the time of the purchase, Ms Jeffrey-Potts also relied upon subsequent statements made by her to others as to ownership and admissions (either in the form of direct statements or by silence) on the part of Mr Garel.[95]
[95]Ms Jeffrey-Potts also relied upon the uncontradicted statements made by her to Mr Hill in the presence of Mr Garel as an admission by conduct. See also [66] above.
71 Mrs Mary Brown gave evidence that on three separate occasions she discussed ownership of the units with Mr Garel. On the first occasion at a body corporate meeting of Victoria Court in 2003, Mr Garel said that he was not proxying for Ms Jeffrey-Potts because “the properties are in my name in trust for Zoay, the boss”.[96] On the second occasion in 2004 or 2005 at the boarding house, when asked by Mrs Brown as to the ownership of the Victoria Court properties Mr Garel said “Zoay; the boss” owned the properties.[97] On the third occasion, again at the boarding house in 2005, when asked whether the keys on the back of the door were for Zoay’s properties he replied “Yes”.[98]
[96]T873.
[97]T875.
[98]T875,
72 In cross-examination, Mrs Brown was not shifted from her account of these conversations, however she acknowledged that Mr Garel “was involved with the properties too”[99] and it was necessary to involve him in correspondence concerning the properties.[100]
[99]T901.
[100]T901.
73 Mr Garel denied each of these conversations and particularly ever using the expression “Zoay the boss”.[101]
[101]T1667.
74 I accept that Mrs Brown endeavoured to give truthful evidence but on this point I am unable to reach a concluded view as to the veracity of one or other of these accounts. Whilst I have doubts about aspects of Mr Garel’s evidence I think it unlikely he used the expression “Zoay the boss”. I also cannot reconcile such a statement with my subsequent conclusion as to the ownership of Unit 2 Victoria Court and in particular, the documentary evidence. In the result, I am not persuaded that Mr Garel made such statements.
75 Mr John Russo also related conversations in which Ms Jeffrey-Potts spoke of her ownership of the units in the presence of Mr Garel and to which Mr Garel did not demur.[102] He specifically recalled a conversation in which she announced that she had bought a property “in Leigh’s name”.[103]
[102]T911-913.
[103]T911-912, T925.
76 Mrs Judith McCartney recalled many conversations both at her home and at restaurants in Mr Garel’s presence in which Ms Jeffrey-Potts had declared her ownership of the units, again with no demur from Mr Garel.[104] Although she thought that these discussions took place around 1993, they related to Beaconsfield Parade properties and it would seem more likely to have been several years later.[105] In any event, she recalled distinctly Ms Jeffrey-Potts stating that she was buying “a property” and that she was “putting them into Leigh’s name”.[106]
[104]T931-934.
[105]T930.
[106]T932.
77 Subject to my remarks concerning Mrs Brown’s evidence I accept the evidence of each of these witnesses concerning these discussions. Mr Garel’s failure to make any denial is consistent, I think, with Mr Garel’s character as each of the witnesses stated – he was a much younger person in the relationship with Ms Jeffrey-Potts’ friends; Ms Jeffrey-Potts invariably did most, if not all, the talking. Ms Glenda Beer described him as being “incredibly shy”.[107] Putting to one side Mr Garel’s failure to deny these statements, they are consistent, as discussed subsequently, with the fact that Ms Jeffrey-Potts made contributions to the purchase of the units over a number of years.
[107]T791.
78 Mr Garel also relied upon admissions made by Ms Jeffrey-Potts inconsistent with her declarations of ownership. There was the testimony of Ms Diane Downes and Mr Maurice Peachey. Each gave evidence of admissions made by Ms Jeffrey-Potts in relation to ownership of the units. Both referred to a conversation with Ms Jeffrey-Potts at a family function in which she said that Leigh, Mr Garel, was a millionaire and owned two blocks of units as she had taught him to invest.[108] Ms Downes also mentioned conversations in which Ms Jeffrey-Potts said “we have to be home by Sunday, for Sunday is rent day, Leigh has to collect his rents”. Ms Jeffrey-Potts denied such a conversation.[109]
[108]T1085.
[109]T708-709.
79 Ms Downes’ credit was attacked on the basis that she had not mentioned all of these conversations in an affidavit filed by her in this proceeding. However, given it was an interlocutory application, one would not expect every conversation to be deposed to. I took the view that she was a believable witness whose evidence was accurate and at least one of the conversations was corroborated by her partner Mr Peachey, whose evidence I also accept.
80 Mr Peachy’s evidence, not shaken by cross-examination, was that Ms Jeffrey-Potts at a family function mentioned that “Leigh owns the units, and how he’s invested his money in these units and how he’s going to be a very – he’s going to be a millionaire”.[110] This type of statement was repeated on other occasions – including at the name day for a grandson.[111]
[110]T1118.
[111]T1120.
81 Mr Tony Thompson, a Westpac home finance manager responsible for the loans taken out by Mr Garel, met on a number of occasions with Mr Garel and Ms Jeffrey-Potts – he estimated between six to ten occasions.[112] The loans were taken out in Mr Garel’s name and the bank’s calculations based on Mr Garel’s income.[113] At no time at these meetings did Ms Jeffrey-Potts suggest that she had any interest in the properties or that they were held in trust.[114] Mr Thompson had never been told that Ms Jeffrey-Potts had put money towards these properties.[115]
[112]T1256.
[113]T1253.
[114]T600, T1256.
[115]T1264.
82 Mr Gary Trowsdale, the accountant, saw Ms Jeffrey-Potts and Mr Garel approximately once a year over a period of nearly fifteen years for the preparation of Mr Garel’s tax returns. It was never suggested by Ms Jeffrey-Potts that she had an interest in the properties. At no time did Ms Jeffrey-Potts mention advancing funds to Mr Garel or that he held the properties in trust for her.[116]
[116]T497-498.
83 The evidence of both Mr Thompson and Mr Trowsdale was relied upon by Mr Garel as giving rise to admissions by conduct in the form of silence on the part of Ms Jeffrey-Potts.
84 The end result of this miscellany of evidence both as to state of mind and admissions is, I am afraid, inconclusive, particularly so when added to the other pieces of evidence concerning ownership of this unit and the other units. Simply put, it is impossible to reconcile the various accounts (notwithstanding my acceptance of the evidence of a number of the witnesses) and to draw any affirmative conclusion one way or another based on the statements made to others or their respective silence, other than it is clear that Ms Jeffrey-Potts made contributions to the purchase of these units. It is equally as clear that Ms Jeffrey-Potts was aware of the risks of the properties being placed in the name of Mr Garel.
85 I should now go to the documentary evidence which I regard as critical to determination of the dispute concerning this unit. Remembering that settlement was effected on 5 December 1994, there are three pieces of documentary evidence relating to the dealings between the two around this time.
86 The first in time is a copy of an instruction given by Ms Jeffrey-Potts on 21 November 1994 on the back of an envelope. It reads as follows:
I spoke to Katz Solicitors a Mr Raleigh at 9.AM Monday 21 Nov 94.
Explaining our settlement was on DEC 5th & the prospectus says we have 14 day (sic) in which to reply and today Monday 21 Nov is 14 days from the 5 Dec. could he see us earlier. I also explained that the VENDOR ASKED US FOR AN EARLIER SETTLEMENT BECAUSE WE HAD PLANNED A SIXTY DAY SETTLMENT. SO AT HIS REQUEST WE WERE ENDEAVOURING TO COMPLY.
KEEP THIS AS EVIDENCE PLEASE.
PLEASE WRITE TIME OF APPOINTMENT AND LEAVE ON MY CHAIR.[117]
[117]Exhibit P91.
87 As is apparent, the document refers to “our settlement” and its other references to the settlement are in the first person plural.
88 Ms Jeffrey-Potts said that this was a contemporaneous note made of discussions with the solicitor acting, at least nominally, for Mr Garel and that the instructions contained within it were directed to Mr Garel.[118] Mr Garel did not dispute this interpretation.
[118]T408.
89 The next is a copy of a hand written note[119] of Mr Garel dated 19 December 1994 and also signed by Ms Jeffrey-Potts which reads as follows:
I owe B.E. Zoey Jeffrey-Potts the some [sic] of $88,000 borrowed on 5 December 1994 for Unit 2, 174 Victoria Avenue Albert Park. Payment to commence 1 Jan 1995 for six years ending 1 Jan 2001. $282.05 is to be paid weekly. In the case of B.E. Zoey Jeffrey-Potts death this debt is cleared. If W. Lee D Gorel dies the unit belongs to B.E. Zoey Jeffrey-Potts.[120]
[119]“the loan acknowledgement”.
[120]Exhibit P14.
90 Ms Jeffrey-Potts did not dispute that she signed the original and dated it 19 December 1994.[121] She explained the circumstances as follows: it was bought to her already written out by Mr Garel and presented to her in the lounge at the boarding house. Ms Jeffrey-Potts then gave the following extraordinary and incomprehensible description of the circumstances surrounding the signing of the loan acknowledgement:
[121]T263.
COUNSEL: Right. And do you know why he wrote it out? Did he tell you the – why he was giving it you or why he presented it to you?---Well I said that they were my properties and I signed it that that wasn’t so, I told him.
…
COUNSEL: What was said?---I said that I wouldn’t – that he wanted, I think to buy them from me but I told him no, they were mine.
…
COUNSEL: Yes. And are you saying that Mr Garel wanted to buy that unit from you? ---Yes.
COUNSEL: Had he paid you any money?---No.
COUNSEL: All right. Now why then did you sign this document?---Because I told them there was no deal.
COUNSEL: Yes. And what did he say to that?---Accepted it.[122]
[122]T264.
COUNSEL: Now, this provides for payments of $282.05 per week paid weekly for six years, did he ever pay you any monies?---No, it never transpired.
COUNSEL: All right, it also says in the case of B E Zoay Jeffrey-Potts debt, this debt is cleared---It says that, yes.
COUNSEL: Is that what you agreed to at the time?---Well no, because I mean I told him it wasn’t on.
COUNSEL: But did you recall discussing any of these words with him at the time you signed the document or prior to signing?---Yes, I’d signed it that I’d sighted it.
HIS HONOUR: I’m sorry, say that again. I’m sorry Mrs Jeffrey-Potts, say that again.---I signed it that I’d sighted it but I knew that he couldn’t afford to pay me that much money.
HIS HONOUR: You say I signed it but I sighted it, what does that mean?---Well I’d seen what he’d written, but I didn’t agree to it.
HIS HONOUR: But is that your signature on the document?---Yes sir.
HIS HONOUR: Is it Mr Garel’s signature on the document?---Yes. .[123]
Ms Jeffrey-Potts’ evidence in cross-examination as to the signing of the loan acknowledgement was equally as incomprehensible.[124]
[123]T266.
[124]T566-567.
91 I do not accept Ms Jeffrey-Potts’ explanation that she did not understand the terms of the December note signed by her shortly after settlement of the purchase of the unit. Nor do I accept that she signed it without regard to its contents. It would have been easy for Ms Jeffrey-Potts to have compiled a document affirming that the property was held on trust. Rather than do that, the note, particularly the use of the words “I owe” and “debt” support Mr Garel’s account that the funds provided by Ms Jeffrey-Potts and used to purchase the unit were loaned to Mr Garel,[125] as does of course the stipulation in relation to weekly payments.
[125]T997.
92 Ms Jeffrey-Potts, in cross-examination, described the document as laughable[126] because, so she asserted, it was impossible given Mr Garel’s income for him to be able to maintain the payments at the rate stipulated. Given that he was earning in the region of $400 net per week then that proposition may or may not be correct - but it does not affect the fact that she signed the document.
[126]T566.
93 I reject Ms Jeffrey-Potts’ suggestion, maintained by counsel in closing submissions, that the true purpose of the loan acknowledgement was to provide for the eventuality of one or the other dying.[127] Self-evidently, that purpose would have been easy to achieve by compiling a document that did not purport to verify a loan. Similarly, I reject the attack on the contents of the loan acknowledgement on the basis that Mr Garel could not have afforded to repay that weekly sum (just over $280) given that his wage was no higher than $400. True it is that, as counsel submitted, Mr Garel never made such a weekly repayment,[128] however the plain fact is that the document on any sensible reading records the existence of a loan and a method of repayment and was signed by both parties. Whether the repayments were made in the future is neither here nor there if I accept the veracity of the document. It is to be remembered that on this point Ms Jeffrey-Potts did not contend that the document was a forgery, that she had not signed it or, for that matter, that she was placed under duress at the time she signed it.
[127]T568.
[128]T1393.
94 Mr Garel’s account is that he was instructed by Ms Jeffrey-Potts after the settlement to draw up a document confirming that he had borrowed $88,000 from Ms Jeffrey-Potts to facilitate the purchase of the unit. That version is consistent with the contents of the loan acknowledgement. In addition, this sum is consistent with the contents of the third document if Mr Garel’s evidence as to the manner in which it was prepared is accepted.
95 The third document is a copy of two pages which appear to be part of a 1991 diary kept by Ms Jeffrey-Potts. The pages bear the dates 27 and 28 December,[129] and contain entries that are mostly in Mr Garel’s handwriting.[130] It is headed in Mr Garel’s writing – “Money owed to Zoay by Leigh”. According to Mr Garel, the original two pages were within this diary which he referred to as a loan book. Mr Garel last saw the diary in 2004. When the diary was produced in court from the possession of Ms Jeffrey-Potts,[131] many pages had been removed, including those for 27 and 28 December 1991. There was no explanation for the removal of these pages, although each appeared to suggest that the other had effected the removal.[132]
[129]Exhibit P13 (“the December pages”).
[130]T240.
[131]Exhibit P9.
[132]Counsel for Ms Jeffrey-Potts relied upon telephone records of the boarding house phone to suggest that Mr Garel had returned to the boarding house after 26 April 2010 and used the home telephone to make calls to Warracknabeal (see Exhibit P103). It was suggested that he removed items from the boarding house. Mr Garel denied doing so (T1726) and another witness, Ms Downes – whose Warracknabeal number appears in the records at this time – swore that she had, in fact, been rung by Ms Jeffrey-Potts shortly after the break up (T1086, T1109). Ms Jeffrey-Potts denied such a conversation (T705). I accept Ms Downes’ evidence.
96 The December pages appear to record payments made from 15 November 1994 to 8 February 1996. On its face, the document records a number of payments made by Ms Jeffrey-Potts in relation to the purchase of the first unit and after 19 December 1994, payments apparently made in reduction the amount owing as at 19 December. The largest amount recorded prior to 19 December is for $84,846.34 paid to the vendor (as noted subsequently on the document by Ms Jeffrey-Potts). Given the nature and dates of the entries they are unlikely to relate to any subsequent property purchase. Each entry from 19 December 1994 is initialled by both Ms Jeffrey-Potts and Mr Garel. Mr Garel said that this was a running account of monies he owed to Ms Jeffrey-Potts in relation to this unit with entries recording payments made by both of them.[133]
[133]T1030-1040.
97 Each were agreed that the diary in its original form contained a record of monies paid in relation to the purchase of the first unit and subsequent purchases. However, according to Ms Jeffrey-Potts, the diary simply recorded payments made by her in relation to particular properties – it was certainly not a “loan book”; rather, a record of monies expended by her on the properties.
98 Mr Garel said the “loan book” in its original form not only recorded monies paid towards the purchase of properties, at times financed by Ms Jeffrey-Potts, but also any reductions to what he said were loan funds effected by his repayments.[134] He said that in 2004 he wrote out on a piece of paper the total monies outstanding in relation to each of the properties at that time as recorded in the loan book – which totalled $244,473.00.[135]
[134]T1030-1040.
[135]Exhibit P15
99 Ms Jeffrey-Potts, whilst conceding that she first saw the December pages (as tendered in two loose sheets) after February 2006,[136] and that her initials appear on many of the entries, disputed that the original was a running document: rather it was initialled by her on one occasion;[137] it was materially different from the original pages of the diary. On her version, the running totals and the minus sign “-“ had been made subsequent to the time when she initialled the entries – as had the wording at the top of the document.[138]
[136]T242, T573.
[137]T249.
[138]T242-246.
100 One entry, in particular, is consistent with Mr Garel’s contention as to the manner in which the entries in the December pages were made: on its face on 19 December 1994 a payment of $48.34 was made to reduce the debt to $88,000 - the amount specified in the loan acknowledgement of the same day. On Ms Jeffrey-Potts’ version, this amount would have been added to the debt and produced a sum of $88,096 approximately: she said it recorded payment by her of an unspecified bill. I think this is highly unlikely, particularly given the contents of the loan acknowledgement.
101 I also think it more likely that the individual initialling of the December pages[139] was made on a contemporaneous basis rather than on one occasion in 1996 as asserted by Ms Jeffrey-Potts. If it was to be acknowledged in 1996, then one acknowledgement at the conclusion of the document or, at the least, at the bottom of the page, would be more likely as opposed to the initialling of different parts of the document.
[139]T572.
102 There is a further problem with Ms Jeffrey-Potts’ account. One of the amounts paid by her (on her version) was in the sum of $55,000 which she said was by cheque to Mr Garel (consistent with the notation on the document). However, on her evidence she had no cheque account at this time and no other source for the cheque was established. She vaguely referred to another unidentified venture as being the source.[140]
[140]T568-569. In final addresses, counsel for Ms Jeffrey-Potts advanced a theory based on accumulation of rental as the source of this amount. This was never attested to by Ms Jeffrey-Potts and fails to deal with her asserted lack of a cheque account.
103 I should say something here about the burden of proof. In this proceeding the legal burden of proof in establishing an equitable interest in one or all of the properties rested on Ms Jeffrey-Potts. It follows that she also carried the evidential burden to establish her particular claims. That burden remained constant. However, Mr Garel, in my opinion, also carried a burden of persuasion in relation to the existence of a loan to counter Ms Jeffrey-Potts’ case based upon an equitable interest.
104 In discussion with counsel at the conclusion at the case I think it was accepted that in this regard Mr Garel carried a burden of persuasion. The nature of this burden was identified by Heydon J in Strong v Woolworths Ltd.[141] Although in dissent in the result, his Honour’s statement of principle is not, I suggest, controversial:
[141][2012] HCA 5.
[51] Of the expression “evidential burden”, Sir Nicolas Browne-Wilkinson V-C said that in his “experience, every time the phrase “evidential burden” is used it leads to error”. It can be used in at least three senses.
[52] In the first sense, “evidential burden” refers to the duty of one party (usually the party bearing the legal (ie persuasive) burden, who in most instances will be the plaintiff) to call sufficient evidence to raise an issue as to the existence or non-existence of a fact in controversy. This must be done to prevent a no case submission succeeding (or if the relevant evidential burden rests on the defendant, to prevent the issue otherwise being withdrawn from the jury). The Privy Council (Lord Hodson, Lord Devlin, Viscount Dilhorne, Lord Donovan and Lord Pearson) criticised the expression “evidential burden of proof” as follows:
It is doubtless permissible to describe the requirement as a burden, and it may be convenient to call it an evidential burden. But it is confusing to call it a burden of proof. Further, it is misleading to call it a burden of proof, whether described as legal or evidential or by any other adjective, when it can be discharged by the production of evidence that falls short of proof.
However that may be, this is what Wigmore called the duty of producing evidence.
[53] In the second sense, “evidential burden” refers to circumstances in which a plaintiff calls evidence sufficiently weighty to entitle, but not compel, a reasonable trier of fact to find in the plaintiff’s favour. There is then said to be an “evidential burden” in the sense of a “provisional” or “tactical” burden on the defendant: if the defendant fails to call any or any weighty evidence, it will run a risk of losing on the issue — that is, a risk that at the end of the trial the trier of fact will draw inferences sufficiently strong to enable the plaintiff to satisfy the legal (ie persuasive) standard of proof. The “provisional” or “tactical” burden raises the question whether a defendant should as a matter of tactics “call evidence or take the consequences, which may not necessarily be adverse”.
[54] The third sense in which the expression “evidential burden” is employed arises where a plaintiff, in discharging the evidential burden in the first sense, calls evidence so strong that a reasonable trier of fact would be bound to decide the issue in the plaintiff’s favour if the defendant calls no evidence. It is sometimes said that an “evidential burden” rests on the defendant which, if not discharged, will cause the defendant to lose and which, if discharged so as to cause the trier of fact either to reject the plaintiff’s evidence or to be undecided, will result in the legal (ie persuasive) burden on the plaintiff not being satisfied.[142] (citations omitted)
[142]Ibid, [51]-[54].
105 Here, the second category applied. Ms Jeffrey-Potts led evidence of contributions to a number of the units (either by way of deposit or by settlement funds or both). The evidential burden in relation to establishing the existence of a loan or loans required Mr Garel to lead “weighty evidence” or risk losing on the issue. He does not carry the legal onus to establish the existence of a loan but there must be sufficient evidence available to displace a conclusion on the balance of probabilities that the monies were provided by Ms Jeffrey-Potts by way of contribution to the purchase price; not as part of a loan agreement.
106 I am satisfied that the loan acknowledgement means what it says and that it was signed by both Mr Garel and Ms Jeffrey-Potts. This is consistent with the entries in the December pages. Ms Jeffrey-Potts’ explanations, as I have discussed, for signing the document are implausible. Whilst I accept the November instruction may point more to a joint enterprise than a loan, it is a document that works both ways (i.e. it may be consistent with the two acting together on the basis that the money would be loaned; alternatively on the basis that this was a joint enterprise). Whatever the case, the stark reality is that the loan acknowledgement was signed by Ms Jeffrey-Potts and it makes it abundantly clear that the monies were advanced by way of loan. I accept Mr Garel’s evidence as to the circumstances surrounding the compilation of the acknowledgement and its purpose.
107 In reaching this conclusion I have taken into account the contemporaneous statements made by Ms Jeffrey-Potts to others as to her ownership of this unit and others as well as later accounts to her friends – which are to be balanced against statements by her acknowledging that Mr Garel owned the properties. In particular, I have taken into account the evidence of Mr Hill which I regard as significant. Ultimately I am forced to the conclusion that Ms Jeffrey-Potts said different things to different people and that her state of mind and intentions (at least as may be determined objectively) fluctuated to such an extent that the vast majority of statements made by her (whether on oath or out of Court) are unreliable. I have also taken into account the asserted admissions (by conduct) made by Mr Garel which I have set out at [62]-[76] – none of which persuades me to view the documentary evidence in any different light. Nor do the criticisms of Mr Garel’s evidence on this issue by Ms Jeffrey-Potts’ counsel persuade me otherwise. One criticism was the paucity of documentary evidence to support the provision of such a loan. To use the vernacular, this was “a bit rich” given that Ms Jeffrey-Potts went out of her way to avoid any documentation connecting her with the properties; moreover she has not identified one piece of documentary evidence to support the existence of an express trust – her primary case. More importantly, there is documentary evidence supporting the existence of the loan and which I regard as critical, namely the loan acknowledgement.
108 I also reject the proposition advanced by counsel for Ms Jeffrey-Potts that any Jones v Dunkel[143] inference can be drawn against Mr Garel on the basis that he did not call his uncle as to the provision of family funds at this time. It is sheer speculation to endeavour to determine what evidence his uncle could have given about his mother’s gift of $120,000. Patently, the relevant witness on this point would have been his mother who is now deceased.
[143](1959) 101 CLR 298.
109 It follows from my acceptance of the loan acknowledgement and the interpretation of the December pages that Ms Jeffrey-Potts’ account of the discussion in late 1994 in the boarding house cannot be accepted. She could not have signed the loan acknowledgement if there was, in fact, an arrangement with Mr Garel to hold the unit or units in trust for her. It should be rejected on that basis alone and the account of Mr Garel on this point should be accepted. There are, however, other good reasons which I now set out for rejecting Ms Jeffrey-Potts’ account which also go to her credibility overall.
110 First, I do not accept her account of the motive behind placing the property in the name of Mr Garel. In 1992, Adelle (who she only saw and spoke to occasionally) returned to Australia from a visit to the United Kingdom. She stayed for a couple of days with Ms Jeffrey-Potts and met Mr Garel. There is a dispute between Mr Garel and Ms Jeffrey-Potts as to how the film in Adelle’s camera came to be developed by Mr Garel (or at least he arranged for its development). It is not necessary to resolve that contest: according to Ms Jeffrey-Potts, when the photographs were developed, two photographs showed plants hanging in a cupboard which Mr Garel told her was marijuana.[144] On this basis, plus the fact that Adelle looked sad at the time of the visit, Ms Jeffrey-Potts concluded that she was taking illicit drugs. On a subsequent visit to Adelaide, Adelle failed to invite her into her house and this, according to Ms Jeffrey-Potts, confirmed her suspicions. So, it was said, she determined to place not only the first unit but all the other units purchased over a period of twelve years in Mr Garel’s name.
[144]T196-204.
111 As mentioned subsequently, several witnesses recalled that they had been told by Ms Jeffrey-Potts that Adelle was on drugs and that this was the reason for the properties being held in Mr Garel’s name. Indeed, Mr Garel confirmed this account which he qualified by stating that Ms Jeffrey-Potts only told people her daughter was on drugs to explain to others why they were estranged.[145] Mr Garel said that in 1992 he had developed photographs from Adelle’s camera but that he did not mention anything about marijuana. On his account, Ms Jeffrey-Potts pointed out the plants and told him that this confirmed her belief that her daughter was “a druggie.”[146]
[145]T1352.
[146]T999.
112 As I mentioned earlier, I permitted evidence to be given by a number of witnesses as to discussions in 1994 with Ms Jeffrey-Potts in relation to this purchase. Some of the statements were made in the presence of Mr Garel, however others made in his absence were clearly firsthand hearsay. I ruled that this was admissible as an exception to the hearsay rule by reason of s 67(4) of the Evidence Act 2008 (Vic) and may have probative value as to Ms Jeffrey-Potts’ intentions at this time.
113 I have already referred to aspects of the evidence of Mrs Mary Brown. She also said that she was told by Ms Jeffrey-Potts, in 1995, that she had placed another property (that is, subsequent to the first purchase) in Mr Garel’s name as she was estranged from her daughter and did not want her money spent on drugs and that she trusted Mr Garel.[147]
[147]T871-872, T895.
114 Mr Lindsay Beer recalled a conversation with her to the effect that she had put the units in Leigh’s name as she had a problem with her estranged daughter.[148]
[148]T757-758, 761.
115 Ms Glenda Beer recalled Ms Jeffrey-Potts telling her at the time of the purchase of the first unit that she did not want her daughter getting at her assets.[149]
[149]786-787.
116 Mr John Russo gave evidence that Ms Jeffrey-Potts told him in the presence of Mr Garel, that she had purchased another property in Mr Garel’s name and she did so because her daughter had a drug problem and she wished to keep her properties “at arms length”.[150] On his account, this conversation, which occurred at his home in the presence of his wife and Mr Garel, was not contradicted by Mr Garel.
[150]T912-913, 918.
117 Mrs Judith McCartney also recalled being at a restaurant in 1994 with Mr Garel and Ms Jeffrey-Potts and being told the property she was purchasing was going to be put in Leigh’s name as she was estranged from her daughter in Adelaide.[151] It was not suggested that Mr Garel contradicted this statement.
[151]T932-933.
118 Whilst I accept the evidence of each of these witnesses as to what they were told by Ms Jeffrey-Potts, I do not accept that this was the true reason behind the properties being placed in the name of Mr Garel. To put it bluntly, I do not accept the truth of the statements made by Ms Jeffrey-Potts.
119 Notwithstanding what she told others, the explanation is inimical to common sense – with no other evidence, Ms Jeffrey-Potts determined that photographs taken two years prior to 1994 demonstrated that her daughter was a drug addict to the extent that she would endeavour to exert influence upon her in relation to her properties or money. Although it is a question of the belief of Ms Jeffrey-Potts, I note that there was not a skerrick of evidence that Adelle had at any time taken drugs nor that she had made any demands or requests upon her mother.
120 Far from being an innocent in the commercial world, Ms Jeffrey-Potts was well able, in my opinion, to protect her own interests without resorting to placing the properties in the name of Mr Garel. She was (at least from 1995 onwards) an office bearer of an organisation known as Law Watch. She had for many years run the boarding house, and been involved in a number of commercial enterprises. This is hardly the background of someone who needed the protection of a front person in her property investments.
121 Even if one accepted that there was some risk of her daughter exerting influence in relation to the first purchase, those purchased later in the 1990s and during the 2000s were, in the absence of some persisting course of conduct of Adelle, one could reasonably have thought, unlikely to be the subject of any claim by her. Indeed, the evidence was that Adelle visited her in 2004 and also when Ms Jeffrey-Potts was hospitalised around 2009.
122 Then there are the inconsistencies in previous accounts of her motivation for putting the properties in the name of Mr Garel. In two affidavits sworn in May and August of last year, Ms Jeffrey-Potts set out several other bases (apart from that of quarantining the properties from the advances of her drug addict daughter) as to the purpose of placing the properties in Mr Garel’s name. In an affidavit sworn on 5 May 2011,[152] she said as follows:
[152]Exhibit D6 (“the May affidavit”).
I did not maintain a bank account for many years as I had developed a neurological disorder that prevented me from writing correctly. I therefore considered it unwise to operate an account and instead relied on the defendant to conduct all banking. This remained the position when the properties were first purchased.
I had substantial savings which I mostly kept in cash and income from tenants in my two flats on the ground floor of my house at 176 Victoria Avenue, Albert Park and from rooms I let to boarders on the first floor of 176 Victoria Avenue. I built this cash reserve up over many years and as well received money from estates of members of my family.
I decided to purchase the properties as they were flats on real estate abutting the northern and eastern boundaries of my property, making them easy for me to manage them and providing me with a passive income.
I was 64 years old when the first property was purchased. As I needed to borrow funds, and did not have a bank account or employment, I asked the defendant if he would agree to hold the properties in trust in his name, which he did. (emphasis added)
Subsequently, in an affidavit sworn on 5 August 2011, she said as follows:
This proceeding involves a claim made by me relating to 12 investment properties I purchased between 1994 and 2006. the particulars of each property are set out in Schedule A attached to the statement of claim I caused to be filed in this proceeding. they principally relate to two sets of apartments, the first located at 82-84 Beaconsfield Parade, Albert Park, and the second relating to 168-175 Victoria Avenue, Albert Park which were purchased strategically for me to develop in due course as I have resided at 176 Victoria Avenue since I arrived from England in 1967. In 1994 I had been estranged from my daughter since she was 13 years old. I did not want to put the properties in her name in case she made a claim against my estate. Warren Leigh Garel (“Garel”) was aware of this situation and offered to put the properties in his name to be held on trust for me so I could build up my property portfolio. I agreed to do so on the basis that in return I would house and care for him rent free. At the time Garel was a cleaner working at McDonalds and earned about $26,000.
Pursuant to an arrangement, I purchased each of the properties by way of paying the deposit for each property in cash to the vendors’ estate agents and then arranging, with Garel to take loans out against each property which were put in his name to be held on trust for me. I went to the Bank of Melbourne in Clarendon Street South Melbourne to get the loans. I then collected the rent from each property and proceeded, over a period form 1994 onwards to pay off the loan on six of the twelve properties. (emphasis added)
123 In effect, the affidavits disclose two other motives for placing the properties in the name of Mr Garel: her resistance to opening a bank account in her own name owing to problems in the past with her handwriting and to avoid any claim being made by Adelle on her estate.
124 The clear inference to be drawn from the May affidavit was that her handwriting had continued to trouble her for some time, to the extent it was her belief that she could not operate a bank account in her own name. However, at the time of the purchase she did not have a neurological disorder (it was allegedly a result of an accident some 25 years earlier) and her handwriting was not affected.[153] No medical evidence was adduced to support this proposition. Her handwriting in her 1991 diary (which I have mentioned),[154] as well as other documents,[155] demonstrate that there was no difficulty whatsoever with her writing.
[153]T550.
[154]Exhibit D7.
[155]See examples in Exhibit P9.
125 I do not accept her contention that she perceived it was unwise to open a bank account because of her previous affliction. In my view, this was nonsense. Equally so, the suggestion that she was concerned about her daughter getting her hands on her property.
126 The evidence-in-chief of Ms Jeffrey-Potts was particularly evasive on this issue. I endeavoured to clarify her answer to a question from her counsel:
Why was it in Mr Garel’s name?---Because of my daughter. I didn’t want her to get the properties and I thought it was better to have everything in his name for all reasons, tax purposes and everything else. And that’s why I did it. To make life simpler.
HIS HONOUR: What did you mean by the last answer in relation to tax purposes?---Well, it was easier for him to give one – if – if I didn’t know how the tax system would work and it was much better for everything to be in his name even though I gave the money so that there was no discrepancies.[156]
This answer was disingenuous as were her explanations in cross-examination of these inconsistencies.[157] They demonstrate the lengths that Ms Jeffrey-Potts would go to in dissembling as to the motive for Mr Garel’s ownership of the properties.
[156]T237.
[157]T542-549.
127 Subsequently, and again in evidence-in-chief, she said of a conversation with Mrs Mary Brown:
I was putting them in trust to Leigh Garel because he had facilities for banking and I did not have a bank account at that time.[158]
[158]T483.
128 The end result is that I am unable to make a finding as to exactly what motive Ms Jeffrey-Potts had for avoiding any legal connection with the properties other than that I regard the explanation relating to her fears concerning her daughter as false.
129 Secondly, her account of the source of the funds for this and the following two purchases was vague and inconsistent. By this I mean both how she came to acquire over $200,000 for the purchase of the first three units, as well as the manner in which it was provided to the vendors at settlement.
130 Ms Jeffrey-Potts was unable to say what amount she had in cash in 1994;[159] she could not remember whether she had $1,000 or $100,000 in cash at the time of the purchases.[160] Given what I perceive to have been her considerable business acumen, the idea that Ms Jeffrey-Potts did not know, at least in general terms, the amount of cash that she had on hand at any point in time is, simply put, inconceivable.
[159]T515.
[160]T515.
131 Ms Jeffrey-Potts also referred vaguely to an inheritance from her family and owning four properties in England prior to moving to Australia but the only documentary evidence provided in the course of the trial was that of an inheritance received by her nearly ten years later (in June 2004).[161] It was an extraordinary feature of this case that no bank statements, no tax returns, no BAS or IAS statements and no statements as to estate distribution were produced to demonstrate how it was she had accumulated the substantial amount of cash used to purchase the first three units, nor were the terms of settlement produced in relation to the solicitors claim. Ms Jeffrey-Potts simply relied upon her own assertion and scoffed at any alternative account.
[390]See [313]- [315] below.
[391]T423-429.
300 Mr Garel received two amounts in 2002 as a result of inheritances from his father, namely $30,000 and $81,026.78 and one from his mother’s estate of $40,336.78. He said these amounts were paid into Westpac loan accounts thus reducing the bank debt. Ms Jeffrey-Potts could not recall how these funds were used.[392] The documentary evidence set out in the summary prepared by Mr Garel’s counsel confirms Mr Garel’s contention that these funds were used in this way.[393] I accept that these amounts are to be treated as contributions to the joint enterprise.
[392]T623-624
[393]Exhibit D30.
301 It is necessary now to summarise the conclusions I have reached in relation to financial contributions (rounded out) of both parties in relation to the fourth to twelfth properties.
302 Ms Jeffrey-Potts:
(a)$13,700 – for the fourth purchase;
(b)$16,700 – for the fifth purchase;
(c)$15,000 –for the sixth purchase;
(d)$51,000 – for the seventh purchase;
(e)$35,430 – for the eighth purchase; and
(f)$8,000 – for the ninth purchase.
TOTAL:$139,830.00
303 Mr Garel:
(a)$4,525 – deposit for the ninth purchase;
(b)$30,000 – interim distribution from father’s estate;[394]
(c)$81,020 – final distribution from father’s estate;[395] and
(d)$40,330 – distribution from mother’s estate.[396]
TOTAL:$155,875
[394]Exhibit D27, D30.
[395]Exhibit D30.
[396]Exhibit D30.
304 Also, I think it necessary to consider the $19,000 still owed by Mr Garel to Ms Jeffrey-Potts in relation to the first unit. True it is that at common law a claim for this amount may be statute barred, however given the nature of this relationship it should be brought into account in any equitable resolution of the enterprise’s dealings, notwithstanding my finding in relation to the purchase of the first unit.
305 As I mentioned earlier I have found it close to impossible to determine who paid the outgoings and expenses for the units.[397] It is clear that some were paid by Mr Garel on his credit card; Ms Jeffrey-Potts says he was reimbursed for these payments – he denies it. Some funds for these payments came from the rental receipts – but cannot be traced. Some, it can be assumed, came from the cash kept at the boarding house. I am satisfied that Mr Garel expended part of his income on outgoings and expenses but absent any proper bookkeeping I cannot say how much – just as I cannot reach a conclusion about how much Ms Jeffrey-Potts contributed.
[397]See [254]–[257] above.
306 I have set out at [231]-[257] the evidence and my conclusions concerning the non-financial or indirect contributions made by both.
307 A further issue arises here: what if any recognition is to be given to the competing contentions relating to life at the boarding house. Ms Jeffrey-Potts argues that I should take into account the fact that Mr Garel lived rent-free at the boarding house for nearly sixteen years and had the use of Ms Jeffrey-Potts’ car as part of their relationship. Mr Garel counters by asserting that he spent considerable amounts of time carrying out repair work on the boarding house during his time as a tenant. It was not in issue that Mr Garel lived rent-free from 1993 onwards. I cannot make a finding one way or another as to the provision of food as each gave conflicting accounts of how the food was paid for.[398] I suspect the reality lies somewhere between the two accounts.
[398]T486,T680-681,T1308-1310.
308 I am also satisfied that Mr Garel spent at least one or two weeks a year assisting with repairs and maintenance to the boarding house and the bungalow at the rear.[399] There was lengthy cross-examination of Mr Garel on the point and I think in general his evidence as to the work he performed should be accepted. He also assisted Ms Jeffrey-Potts with planning matters concerning the boarding house. To this may be added the fact that he was, in effect, a chauffeur for Ms Jeffrey-Potts, albeit using her car, particularly as she aged and, quite clearly, in his younger days performed errands on her behalf.
[399]T681-685.
309 The end result is that I regard life at the boarding house as being of mutual benefit to both, in relation to companionship as well as the provision of basic needs. In my opinion it is appropriate, given the contribution made by each to the others existence, to put to one side this aspect of their relationship and focus on the joint endeavour in relation to the purchase and management of the units.
310 Baumgartner stands for the proposition that where capital has been pooled in roughly equal amounts, then equality should prevail.
311 The financial contributions by Mr Garel outweigh those of Ms Jeffrey-Potts. But there is an adjustment in respect of the outstanding loan amount of $19,000 which should be taken into account in Ms Jeffrey-Potts’ favour making the financial contributions roughly proportionate. Mr Garel, of course, assumed the risk by taking out loans and mortgages in his name alone.
312 As to indirect contributions, Ms Jeffrey-Potts’ contribution to the enterprise, particularly of capital and management, in its formative stages is significant just as Mr Garel’s management of the enterprise was important in the latter stages. Whilst I think this is a case where equity should favour equality particularly as the capital contributions with adjustments are relatively similar I am of the view that but for Ms Jeffrey-Potts’ capital injections and expertise the enterprise could not have flourished as it did. She provided the resources and skill which set up the business and permitted it to grow. This, I consider, means that there should be a slightly greater recognition of her contribution to the enterprise than that of Mr Garel. The constructive trust to be imposed in relation to the fourth to twelfth units should declare the beneficial interest of Ms Jeffrey-Potts to be sixty per cent and Mr Garel to be forty per cent.
The other allegation made by Ms Jeffrey-Potts – the misuse of $127,253
313 Ms Jeffrey-Potts alleged that Mr Garel has misused the inheritance forwarded to her in 2004.[400] On her instruction[401] the funds had been electronically transferred by the solicitors in England to a nominated account number – 03-13555-5109 - in Mr Garel’s name. However the allegation fell away as the evidence demonstrated that this was a Westpac loan account in relation to the purchase of Unit 10 Beaconsfield Parade, consistent with Mr Garel’s evidence that the money was used to pay “the lowest loan off and that the residue was transferred to another loan”.[402]
[400]See [9] and [10C] of the Further Amended Statement of Claim.
[401]T664.
[402]T1779.
314 These funds were subsequently the subject of a separate claim and Ms Jeffrey-Potts was repaid in 2010.[403]
[403]T133, T423-429.
315 At best, Ms Jeffrey-Potts’ complaint came down to the fact that the monies were, contrary to her instruction, not placed in an offset account. Even if I accept that this was her instruction, nothing turns on it.
Does the doctrine of laches apply?
316 Mr Garel maintains that Ms Jeffrey-Potts should be disentitled to any equitable relief she seeks by reason of laches. This defence was never fully aired by Mr Garel’s counsel during the course of the trial despite Mr Garel bearing the onus of proof.[404] However, in essence it amounts to an assertion that by reason of Ms Jeffrey-Potts’ delay in asserting her claim over the properties, it is inequitable and unreasonable to award her equitable relief because of the irreparable prejudice that the delay has had on Mr Garel.[405]
[404]Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221.
[405]Orr v Ford (1989) 167 CLR 316 per Deane J, Fysh v Page (1956) 96 CLR 233 per Dixon CJ, Webb and Kitto JJ; Hourigan v Trustees Executors and Agency Co Ltd (1934) 51 CLR 619.
317 In his closing submissions, counsel for Mr Garel identified Ms Jeffrey-Potts’ delay in lodging the caveats over the properties (which were, according to counsel for Mr Garel lodged on 30 May 2010 and counsel for Ms Jeffrey-Potts lodged in August 2010) as the relevant delay that attracted the defence of laches. The documentary evidence suggests the caveats were lodged in May and June of 2010.[406] It was submitted that until that point, Mr Garel was entitled to deal with the properties as if he was the sole owner. In particular it was said that his purchase of a property at Horsham in May 2010, entirely through borrowed funds, was undertaken in the belief that each of the properties belonged to him alone and could be used to provide security for the Horsham purchase. Counsel for Mr Garel identified the following principles in Hourigan v Trustees Executors and Agency Co Ltd[407] as relevant to whether the defence applied:
If a party in a position to claim an equitable right which is not undisputed lies by and acts in such a way as to lead to the belief that he has no such claim, or will not set it up, and thus encourages the party in possession to so deal with his own affairs that it would be unfair to him… to tear up the transactions and go back to the position which might originally have obtained, the Court of equity will not, even where the claim is that an express trust is created, disregard the election of the party not to institute his claim and treat as unimportant the length of time during which he has slept on his rights and induced the common assumption that he does not possess any.[408]
[406]Exhibit D28.
[407](1934) 51 CLR 619.
[408](1934) 51 CLR 619 at 629-630 per Rich J.
318 It is clear from the evidence that prior to 26 April 2010, with the possible exception of the early months of 2010, the relationship between Ms Jeffrey-Potts and Mr Garel was harmonious. Moreover, it seems plain that before the breakdown of the relationship, it would not have been foreseeable that either party would have dealt with the properties without the involvement of the other. It follows, as identified by counsel for Mr Garel, the only delay that could attract the defence of laches is the time taken between the breakdown of the relationship on 26 April 2010 and the lodging of the caveats in May and June 2010, and with the only prejudice to Mr Garel being the liability he assumed in relation to the purchase of the Horsham property.
319 In determining whether this delay attracts the defence of laches, the Court is required to look at the length of the delay, the nature of the acts done during the interval period, the nature of the right claimed and the property in which it is claimed.[409] In my opinion, a delay of approximately six to seven weeks is neither inordinate nor unreasonable particularly given Ms Jeffrey-Potts’ age and the need to obtain legal advice about her position, which as this trial has demonstrated, was complex.
[409] Fysh v Page (1956) 96 CLR 233 at 243-4 per Dixon CJ, Webb and Kitto JJ; Boyns v Lackey (1958) SR (NSW) 395 at 402; Orr v Ford (1989) 167 CLR 316 at 341 per Deane J and Baburin v Baburin (No 2) [1991] 2 Qd R 240.
320 Further, the nature and length of the relationship between Ms Jeffrey-Potts and Mr Garel (and its acrimonious termination) should have put Mr Garel on notice of a potential claim against the properties. His decision to purchase the property in Horsham shortly after the dissolution of the relationship must have been made with this knowledge, particularly given his offer of 22 April 2010 to “gift” the Beaconsfield Parade properties.
321 In short, there is no merit in this point.
Mr Garel’s counterclaim
322 The counterclaim filed on behalf of Mr Garel included a number of allegations which have been dealt with as part of the assessment of the contributions made by each towards both the enterprise and their mutual existence at the boarding house. I need say no more about those matters.
323 I am not satisfied that there was an agreement between the two that Mr Garel would take an interest in the boarding house in the event of the relationship coming to an end. This was denied by Ms Jeffrey-Potts[410] and the evidence of Mr Garel is unpersuasive.
[410]T497.
324 The remaining substantive allegation in the counterclaim relates to the lodging by Ms Jeffrey-Potts of caveats over the properties to which I now turn.
325 In May and June 2010, Ms Jeffrey-Potts lodged caveats in relation to each of the Victoria Court and Beaconsfield Parade units which have prevented Mr Garel from dealing with the properties.[411]
[411]Exhibit D28.
326 Mr Garel’s counterclaim is premised on establishing that caveats lodged by Ms Jeffrey-Potts were “without reasonable cause”.
327 Section 118 of the Transfer of Land Act provides for the recovery of compensation where a caveat is lodged “without reasonable cause”. In Commonwealth Bank of Australia v Baranyay,[412] Hayne J said:
It is clear that the onus is on the bank to show that the caveator acted without reasonable cause. Is it enough for the bank to show that Baranyay had no caveatable interest or must it show more? Authority suggests that more must be demonstrated. Without in any way seeking to give an exhaustive definition of the circumstances covered by the very general expression “without reasonable cause” it would seem to me to be likely that the foundation for reasonable cause will often be as Wootten J said in the Bedford Properties Case “not the actual possession of a caveatable interest but an honest belief based on reasonable grounds that the caveator has such an interest.” However, as his Honour went on to say, honest belief on reasonable grounds may not always be enough to show reasonable cause for lodging a caveat, eg in the case where a caveat is lodged not for protection of the caveator’s interest but for an ulterior motive and without regard to the effect on transactions to which the caveator had agreed...[413] (authorities omitted)
[412][1993] 1 VR 589.
[413]Ibid, 600.
328 Baranyay was considered by the Victorian Court of Appeal in Disctronics Ltd v Kingston Links Country Club Pty Ltd:[414]
[414](2005) 12 VR 513.
[91] It is true that, to recover compensation for the lodging of a caveat, the aggrieved party must go further than showing simply that the caveator never had a caveatable interest. As Hayne J said in Baranyay, more must be demonstrated…
In that case, Hayne J went on to accept, on the evidence, that the caveator did ‘honestly believe that he had the interest that he claimed’ and further that it had not been shown that he had no reasonable grounds for that belief.
[92] Baranyay was decided in 1992. In 1994, the Court of Appeal in New South Wales decided Gustin v Taajamba Pty Ltd. In that case, there was a long history of dispute between the parties in relation to a contract for the sale of land and upon the vendor’s purported rescission of the contract for breach by the purchaser, the purchaser lodged a caveat to protect its interest under the contract and sought specific performance. Interlocutory relief was obtained on the usual undertaking as to damages and the court subsequently granted a declaration that the contract had been validly terminated. The question was what damages ought to be paid, either by virtue of the undertaking or because the caveat had been lodged without reasonable cause, if such was the case. As to the latter, Handley JA (with whom the other judges agreed) said:
In my opinion the caveator did have reasonable cause to lodge and maintain his caveat while his proceedings were pending in the equity division of this court. He applied and obtained ex parte interlocutory relief on 24 December 1985 and in doing so necessarily persuaded the judge that there was a substantial question to be tried in the proceedings. Thereafter, until the dismissal of the proceedings ... on 13 October 1986 an interlocutory injunction remained in force ...
... Although the proceedings were dismissed, [the] history [of the proceeding] demonstrates that there was reasonable cause for lodgement of the caveat. Following the appeal to this court ... the plaintiff again moved for interlocutory relief which was granted ... This remained in force until the appeal was dismissed.
Once again, the grant of such interlocutory relief either by judicial decision or as a matter of admission by the respondent, demonstrates that there was a substantial question to be determined on the appeal. Apart from the history of the proceedings there was no other evidence to establish that the caveat had been lodged without reasonable cause.’
Wanting any other evidence, it was accepted that the plaintiff believed that he had reasonable cause to maintain the proceedings and equally that he had reasonable cause to maintain the caveat. There was no evidence that the plaintiff at any stage thought or was advised that he had no reasonable cause for lodging or maintaining the caveat. This was despite the failure of the plaintiff to give evidence and expose himself to cross-examination…
[93] …It was, I think, only the fact that Disctronics was the caveator that led her Honour to conclude that the caveat was lodged without reasonable cause.[415]
[415]Ibid, 548-549. See also the discussion by Croft J in RDN Developments Pty Ltd v Shtrambrandt & Ors [2011] VSC 130.
329 Ms Jeffrey-Potts has established that she has an equitable interest in eleven of the twelve units and this of itself is sufficient to dispose of the application in relation to those caveats.
330 In relation to the first unit, I am not satisfied that Ms Jeffrey-Potts acted without reasonable cause in lodging the caveat. Even though my findings result in Ms Jeffrey-Potts not having a caveatable interest in the property and notwithstanding my views as to her credit, it is clear that her funds were used in the purchase of the property and that funds remained outstanding to her notwithstanding my rejection of her case based upon an express trust or other form of caveatable interest. As these reasons have demonstrated, the position was anything but simple. I am satisfied that she believed that she had a reasonable cause to maintain her claim and the caveat.
Summary of my conclusions
331 My conclusions are as follows:
(a)the first unit, Unit 2 Victoria Court, remains in the legal ownership of Mr Garel;
(b)the second and third units, Unit 6, 84 and Unit 14, 82 Beaconsfield Parade are each held by Mr Garel on trust for Ms Jeffrey-Potts, who holds the entire beneficial interest;
(c)the remaining units are the subject of a constructive trust based on the joint endeavour of the parties;
(d)the beneficial interest, pursuant to the constructive trust, of Ms Jeffrey-Potts is 60% and Mr Garel 40%;
(e)the defence of laches is not made out; and
(f)Mr Garel is not entitled to compensation under s 118 of the Transfer of Land Act in relation to the lodging of the caveats by Ms Jeffrey-Potts.
Some further matters
332 After the conclusion of the evidence, Mr Garel’s solicitors sought to tender Mr Garel’s tax returns for the financial year ended June 1995 to 2002. The request was made on 13 June (over one month after the evidence concluded) and nine days prior to the delivery of judgment. My associate requested that the parties consider the matter and if it could not be agreed to admit the tax returns by consent, to provide submissions by 18 June 2012. On that day, the solicitors for Ms Jeffrey-Potts wrote to my associate indicating that they had not received copies of the documents which were sought to be tendered and, in any event, opposed the application. The solicitors for Mr Garel sought a further one day’s delay in finalising submissions. I rejected this application and Mr Garel’s submissions were filed that afternoon.
333 I think Mr Garel’s application should be rejected. I am prepared to accept that the documents may be of some probative value[416] although I note that the tax assessments for these years have been tendered. In my opinion the application was made far too late. There is no evidence as to why these documents could not have been adduced in the course of the trial and no satisfactory explanation for their delivery at such a late time. The failure to provide Ms Jeffrey-Potts’ solicitors with the documents only exacerbates the problem particularly in the light of the delivery of judgement on 22 June. In those circumstances, I was not prepared to permit the adducing of further evidence.
[416]Although it is doubtful whether the evidence would be so material that the interests of justice require it or that the evidence would affect the result. See Murray v Figge (1974) 4 ALR 612.
334 There is then an outstanding issue about the rental payments that have been made since this dispute erupted. It will be necessary for adjustments to be made concerning those amounts as a consequence of my findings. One would have thought that the parties could sit down and sort this out. Hope springs eternal. Failing that, I propose to appoint a special referee to report as to the appropriate distribution.
335 It may also be necessary to make consequential orders concerning the sale of the units and the removal of caveats. The parties will have 28 days to consider my findings and endeavour to bring in orders reflecting my conclusions.
336 There is one final matter. It was accepted that Ms Jeffrey-Potts has not filed a tax return or any other financial document required under Commonwealth taxation legislation with The Australian Tax Office since at least 1992 despite her receipt of income from tenants of the units in the boarding house.[417] There is also no evidence (apart from her weak unsubstantiated protestation that she had at some point of time in the past paid income tax) of her having filed a tax return at any earlier point of time notwithstanding her receipt of income from multiple sources prior to that year. The very large amount of cash held by her has never been satisfactorily explained. It is appropriate to refer my findings to the Deputy Commissioner of Taxation.
[417]The only evidence that Ms Jeffrey-Potts completed a return around 1992 was her own unsubstantiated account. See T649.
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