KELTON v Brownrigg - [2004] SASC 408

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
KELTON v BROWNRIGG
Judgment of The Honourable Justice Perry
7 December 2004
REAL PROPERTY - GENERAL PRINCIPLES - INCIDENTS OF ESTATES AND INTERESTS IN LAND - JOINT TENANCY AND TENANCY IN COMMON
REAL PROPERTY - PARTITION OF LAND - PARTITION OR SALE IN PARTITION ACTION OR SUIT
The plaintiff claimed an order for sale of a suburban house property owned by him and the defendant as tenants in common, and division of the proceeds between them - the parties contributed in unequal amounts towards the purchase of the property, and financed the balance of the purchase price by way of an unsecured loan from a friend - the parties cohabited in the property for less than two months before separating, and the defendant has had exclusive occupation of the property since then - a third party has offered to buy the property for $180,000, which is more than the parties paid to buy it - discussion of the nature of the equitable jurisdiction pursuant to which orders for partition or sale may be made under Part 8 of the Law of Property Act 1936 - held that in the circumstances the appropriate order was that the defendant be given an opportunity to purchase the plaintiff’s share of the property for the amount which he contributed to the purchase of it, together with one half of the net equity in the property, assuming a notional value of $180,000, and that in default of purchase by her on those terms, that the property be sold to the third party who had offered to buy it, or if he was no longer willing to do so, that the property be put up for sale by public auction and the net proceeds divided on the same basis.
Law of Property Act 1936, Part 8, s 71 and s 83, referred to.
Chatterton v Chatterton and Anor (1989) 52 SASR 337; Sidney Smith, Principles of Equity page 210; Story, Equity Jurisprudence 14th ed, 1918, Ch xiv ; Croghan v Grosvenor (1991) 57 SASR 545; Story v Johnson 160 ER 529; Leigh v Dickeson (1884) 15 QBD 60; Brickwood v Young (1905) 2 CLR 387; Waite v Bingley (1882) 21 Ch D 674, considered.

KELTON v BROWNRIGG
[2004] SASC 408
Civil

PERRY J. The plaintiff and the defendant own a house property at 9A Marlow Road, Keswick, as tenants in common. The plaintiff claims an order for sale of the property and division of the proceeds between them.
The claim is brought pursuant to Part 8 of the Law of Property Act 1936 (“the Act”) which deals with proceedings for partition or sale.
As will be seen, the plaintiff claims to be entitled to more than an equal share of the proceeds of sale, should sale be ordered.
For a time, the plaintiff and the defendant cohabited together in the subject property. They parted in circumstances which were less than harmonious.
The case proceeded on affidavits sworn by the parties, rather than pleadings. The parties each gave oral evidence in addition to tendering their affidavits. One other witness, John Kaplan, to whom I will refer in due course, was called by the plaintiff. The only other witness was the defendant’s father, Ronald Brownrigg, who gave evidence on her behalf.
The defendant gave her evidence in an emotional and at times irrational way. She was unrepresented at the hearing, and it was difficult to confine her evidence, her cross-examination of the plaintiff, and her submissions, to matters relevant to the determination of the issues.
I was impressed with the manner in which the plaintiff gave his evidence.
Having regard to the defendant’s demeanour when giving evidence and the manner in which she conducted her case, and my view of the plaintiff’s credit, I prefer the evidence of the plaintiff where it is necessary to choose between the account given by each of the parties. In reaching that view, I take into account also the nature of the very extensive correspondence which passed between the parties before the proceedings were instituted.
Background
The parties met in 1998 and cohabited together in Melbourne between September of that year and January 2000, when the plaintiff moved to Adelaide.
The defendant came to Adelaide in December 2002, after she had asked the plaintiff to give their relationship a second chance.
For the next twelve months the defendant lived with the plaintiff in a property which the plaintiff was renting.
In December 2003, despite some tensions which had arisen in their relationship, the parties agreed to buy the subject house property. It was purchased by them at auction on 10 December 2003 for a price of $163,750.
Settlement of the purchase took place on about 12 January 2004. The parties moved in a few days later.
Including stamp duty and other fees and adjustments, the total amount paid by the parties on settlement of the sale was $170,775.64.
The plaintiff paid $59,282.82 from his own moneys, and the defendant contributed $51,500.32.
To make up the balance of the amount due at settlement, the parties borrowed $60,000 from a friend of the defendant, Alan Herriman.
At times, the defendant has said that the loan was to her rather than to both of the parties. Nothing turns on that issue, as both parties agree that if the property is sold, the loan should be repaid from the proceeds.
The loan was unsecured. Furthermore, according to the evidence of both the plaintiff and the defendant (I have not heard from Mr Herriman), the loan was interest free for one year, that is, until January 2005.
The parties were registered on the title as tenants in common. The search copy of the Certificate of Title tendered in evidence, records the plaintiff and the defendant each as registered proprietors of one undivided second part.
The title search does not indicate that the title describes them in as many words as tenants in common, which historically was the way in which the Registrar General would record such an interest on the title. I accept the intimation of Mr Jamison, of counsel for the plaintiff, that the words used on the title reflect current conveyancing jargon for a tenancy in common.
The parties’ cohabitation in the subject premises was short lived.
On 1 April 2004 in the Magistrates Court sitting at Adelaide, the defendant obtained an apprehended domestic violence restraining order directed to the plaintiff, which, amongst other things, restrained the plaintiff from being on the subject premises.
He left the premises on or about that date. He has not cohabited with the defendant since then.
I accept the evidence of the plaintiff that on 8 April 2004 he offered to sell his share in the house to the defendant for $65,000, and that the offer was refused.
Subsequently, about a week later, he offered to sell his half interest in the property to her for $60,000, which is approximately what he had contributed to the purchase of the property.
There followed a long and tortuous process of offer and counter-offer, interspersed with ineffectual attempts by the plaintiff to secure the defendant’s agreement to selling the property. Much evidence was given at the trial as to the detail of these dealings. Both the plaintiff and the defendant suggested that the other was acting unreasonably.
It is unnecessary for me to make a finding as to whether one or other or both were being unreasonable. I find, however, that the defendant kept changing her position and was difficult to deal with.
At one stage, the defendant placed a sign in the front window of the house advertising it for sale. John Kaplan saw the sign and spoke to the defendant, who suggested he make an offer. He offered $180,000. He signed a printed form of contract to purchase the property at that price, but the defendant indicated that she was not satisfied as to the terms, and refused to sign.
A further contract note was prepared. This was in terms that the purchase price would be $180,000; that there would be a deposit of $18,000 payable on execution of the contract; that the contract was subject to the purchaser, Mr Kaplan, obtaining a building inspection report satisfactory to him within seven days of the vendor accepting the contract; and further, that the agreement was conditional upon finance being provided by BankSA.
A copy of that form of contract was tendered in evidence. It is dated 27 June 2004 and is signed by Mr Kaplan and the plaintiff.
I accept Mr Kaplan’s the evidence that he asked the defendant to sign the contact, and that she was unwilling to do so and did not give a reason.
Mr Kaplan’s evidence was that the requisite loan from BankSA has been approved and that he is ready to settle, and willing to do so, subject to the inspection by a building inspector.
In his “statement of claim/orders sought” the plaintiff first claims an order that the land be sold to Mr Kaplan for $180,000 “subject to a satisfactory building inspection within thirty (30) days of this order”.
Failing a sale to Mr Kaplan, he seeks an order for sale by public auction.
In her defence, the defendant seeks a number of orders, including the following:
“The orders sought are:
1.The Defendant pays the Plaintiff the amount of $59,282.82 as consideration of the Plaintiff’s interest in the land comprised in Certificate of Title Register Book Volume 5406 Folio 351 within 28 days of the date of the order of this Honourable Court.
2.Costs associated with transferring the title to the Property are to be borne by the Plaintiff.
3.Failing payment by the Defendant to the Plaintiff within 28 days, that the land be sold to John Zsolt Kaplan of 1 Junction Street Mile End South Australia for the sum of $180000 subject to a satisfactory building inspection within a further 30 days.
4.Should the sale to Mr Kaplan fail, then the parties have a further 14 days to sell the Property to other prospective purchasers who expressed interest in the Property prior to retaining an Agent.
5.Failing sale as set out above, then a sale of the Property to be conducted in such a manner and upon such terms and conditions as may be agreed between the parties, by retaining the services of Century 21 Goodwood or such other licensed land agent as may be agreed between the parties.
6.In default of agreement by the parties the property be sold at public auction in accordance with the conditions of sale for auctions approved by the Real Estate Institute of South Australia Incorporated by such auctioneer and at such reserve price as may be agreed upon between the parties or in default of agreement as may be determined by a Master on the application of either of them.
7.The costs of advertising the sale by auction be limited to the sum of $2000.
8.If the property is not sold at the auction or within such further time after the auction as the auctioneer may have the sole right to right to sell the parties may nominate one land agent for the purpose of arranging a sale by private treaty at the price and upon such terms and conditions as may be agreed upon between them or in default of agreement as may be determined by a Master on the application of either of them.
9.The net proceeds of the sale of the property in any manner specified above after the deduction of all proper expenses and the payment of the amount due under any mortgage over the property be paid into Court to the credit of this action 741 of 2004 there to abide the further order of the Court.
10.The Plaintiff will be responsible at all times to pay the costs associated with conveyance of the property, where ordinarily the responsibility of the parties.
11.Either party may bid at the auction and upon becoming the purchaser of the property shall pay into Court one-half of the net proceeds of the sale.
12.…”
In the course of the defendant giving her evidence, I asked her what her present position was.
She said that she stood by the orders sought in the defence, with the qualification that she would “round up” the offer to the plaintiff as set out in paragraph 1, to $60,000.
She submitted that if any moneys were paid into court on sale of the property to a third party, 43 per cent of the net proceeds should be paid to the plaintiff and 57 per cent to her. She said in her evidence that division in those percentages reflected an appropriate allowance for the parties’ respective inputs into the property.
I found the defendant’s evidence confusing, and to the extent that it was understandable, unconvincing, as to the basis upon which she considered it appropriate that there be that differentiation in the proportions upon which any proceeds of sale were to be divided.
Beyond the defendant’s initial contribution to the purchase of the property, there is no evidence of any substantial further expenditure by her of a kind which would improve its value. It appears that she did some very minor maintenance work, such as some re-grouting in the bathroom, fixing some new locks and cleaning out a drainpipe which was flooding the eaves at the front of the property.
At one stage, the defendant suggested that she was entitled to have an adjustment made in her favour to reflect her efforts in promoting the sale of the property.
However, in the first place, there is no evidence that she did anything other than to put a sign up in the window. In the second place, I doubt that she ever had a genuine intention to allow the property to be sold to a third party, given her clearly stated preference, in her defence and in giving evidence, that she first be given an opportunity to buy out the plaintiff’s share.
In any event, during the course of the hearing, she abandoned her claim for an express adjustment equating the amount which would be payable to a licensed land agent by way of commission on sale. But she suggested that she had taken that into account in estimating the percentage by which she submitted any moneys paid into court should be divided.
The defendant’s father, Mr Ronald Brownrigg, gave evidence that before settlement of the purchase by the parties of the subject property, he had offered to financially assist his daughter to effect the purchase, but he did not proceed to do so after she explained to him that she had secured a loan from Mr Herriman.
He said further that on about 16 February 2004 when the defendant had told him that the plaintiff wanted to “pull out of the deal”, he offered to buy out the plaintiff’s share.
His evidence does not assist me to resolve the matter.
Legal principles
Clearly, this is a case where the court should exercise the jurisdiction conferred by Part 8 of the Act.
Furthermore, given the nature of the subject property, partition is not a practical option, and the case calls for an order for sale. Indeed, subject only to the possibility that the defendant buys out the plaintiff’s interest in the property, that is the only order sought.
Section 83 of the Act is cast in terms which amount to something of an oxymoron. The section provides:
“In an application for partition it shall be sufficient to claim a sale and distribution of the proceeds, and it shall not be necessary to claim a partition.”
Section 71 of the Act, including the heading of the section, is as follows:
“As to purchase of share of party desiring sale
71.On any application for partition, if any party interested in the property requests the court to direct a sale of the property and a distribution of the proceeds instead of a division of the property between or among the parties interested, the court may, if it thinks fit, unless the other parties interested in the property, or some of them, undertake to purchase the share of the party requesting a sale, direct a sale of the property, and give all necessary or proper consequential directions, and in case of such undertaking being given the court may order a valuation of the share of the party requesting a sale in such manner as the court thinks fit, and may give all necessary or proper consequential directions.”
Having regard to the manner in which the case has been conducted, and the fact that clearly the defendant would prefer to have an opportunity to buy the share of the plaintiff in the property herself, rather than see the property sold to Mr Kaplan or on the open market, it seems to me that it would be within the power of the court to fashion an order which would give an opportunity for the defendant to purchase the plaintiff’s share in the property, and in default of her doing so, for Mr Kaplan, to purchase the property.
Such an order is, in my view, within the powers of the court under Part 8 of the Act.
The jurisdiction conferred by Part 8 of the Act is equitable in nature, and in ordering partition or sale, the court may, for example, remedy an inequality which otherwise might arise.
In Chatterton v Chatterton and Anor,[1] Jacobs J made the following observations:[2]
“Historically, the remedy of partition was available at common law and in equity, but at least since the Partition Acts in England, on which the statute of 1881 is based, the jurisdiction is equitable;[3] but the difference between the two jurisdictions is of some importance in defining the scope of the jurisdiction in partition now entrusted in this Court … It is described thus in Story:[4]
‘654. In regard to partitions there is also another distinct ground upon which the jurisdiction of Courts of Equity is maintainable, as it constitutes a part of its appropriate and peculiar remedial justice. It is that Courts of Equity are not restrained, as Courts of Law are, to a mere partition or allotment of the lands and other real estate between the parties according to their respective interests in the same and having a regard to the true value thereof. But Courts of Equity may, with a view to the more convenience and perfect partition or allotment of the premises, decree a pecuniary compensation to one of the parties for or equality of partition, so as to prevent any injustice or unavoidable inequality. …
655. Cases … involving equitable compensation to which a Court of Law is utterly inadequate may easily be put; such for instance as cases where on party has laid out large sums in improvements on the estate. For although under such circumstances the money so laid out does not in strictness constitute a lien on the estate, yet a Court of Equity will not grant a partition without first directing an account and compelling the party applying for partition to make due compensation.’”
[1] (1989) 52 SASR 337.
[2] Ibid 340-341.
[3] Sidney Smith, Principles of Equity, p 210; Story, Equity Jurisprudence (14^th ed, 1918), Ch xiv.
[4] Op cit, pp 661-663.
Jacobs J goes on to refer to authorities which support the proposition that in a suit for partition, it was not open to a co-owner to claim occupation rent from the other co-owner, who may have remained in sole occupation, unless the other co-owner had excluded the claimant from occupation.
Confirmation of the breadth of the equitable jurisdiction which may be exercised under Part 8 of the Act appears from the decision of Debelle J in Croghan v Grosvenor.[5] In that case, Debelle J said:
“… equity did not regard itself as bound by the interests of the parties. It had regard also to what the parties had respectively expended when determining the partition or, if that could not be done, by ordering compensation. As was said in Story v Johnson,[6] a court of equity will, on a bill for partition, adjust the equitable rights of all the parties interested in the estate. …
Thus, in a suit for partition, it was usual to have an inquiry, if necessary, as to the respective rights and interests of the parties, and regard would be had to what had been expended including expenditure on improvement or repair: see also Leigh v Dickeson[7] cited with approval in Brickwood v Young.[8] For an example of a case where inquiries were conducted on a number of matters including inquiries as to the persons interested, their respective shares and proportions, and whether it was desirable to sell the subject property, see Waite v Bingley.[9] The jurisdiction exercised by the Courts of Equity to determine, where the parties did not agree, the share to which each party was entitled and to achieve equality of partition by decreeing pecuniary compensation to one of the parties is a jurisdiction which, of course, has survived to be exercised by the Supreme Court as a court of law and equity.”
[5] (1991) 57 SASR 545.
[6] (1837) 2 Y & C Ex 586; 160 ER 529.
[7] (1884) 15 QBD 60 at 67.
[8] (1905) 2 CLR 387 at 394.
[9] (1882) 21 Ch D 674.
Conclusion

I have already indicated that in my view it is within the power of the court to fashion an order which would give to the defendant an opportunity to purchase the plaintiff’s share in the property, on the footing that if she failed to do so, Mr Kaplan would have the right to buy the property.
The case is unusual in that no evidence as to the present value of the property was led by either party. The reason is that both parties have proceeded on the basis that the offer by Mr Kaplan of $180,000 represents a fair value for the property.
Bearing in mind the relatively short period of time which has elapsed since the property was purchased, the even shorter period of time during which the parties cohabited in the property, and the other relevant circumstances, it seems to me that an equitable result would be an order which in the first place reimbursed the parties for the moneys which were actually contributed by them towards the purchase of the property.
If the parties’ contributions to the purchase were to be satisfied, and an allowance made for repayment of the loan advanced by Mr Herriman, there would be a balance of the order of $9,000, assuming a value of $180,000.
In my view, any increase in the notional value of the property over and above the parties’ cash contributions to its purchase, should be shared equally between them.
A case could be made out to justify an adjustment in favour of the plaintiff, on account of the exclusive occupation of the property by the defendant since the plaintiff left at the beginning of April this year. It may well be that the action of the defendant in securing an apprehended domestic violence restraining order directed to the plaintiff is tantamount to the defendant ejecting him, which would give rise to an equitable right in the plaintiff to compensation for the defendant’s exclusive occupation of the property thereafter. However, the plaintiff does not seek such an adjustment.
In determining what would be a fair price to expect the defendant to pay to the plaintiff in the event that she is able to purchase his share, I invited Mr Jamison of counsel for the plaintiff to furnish figures to the court indicating what the plaintiff would expect to receive:
Ÿ   if the property was to be sold to Mr Kaplan for $180,000;
Ÿ   if the parties were to be paid back their initial contributions to the property;
Ÿ   if Mr Herriman’s loan of $60,000 was to be repaid;
Ÿ   if the balance was to be divided equally between them.
In response to that request, Mr Jamison submitted the following details:
“In accordance with your Honour’s directions made the 20^th of October 2004, we now provide an estimate of what the parties would receive from Mr Kaplan if he was to settle on this property on the 30^th of November 2004:
1.Purchase Price: $180,000.00
2.Calculation of adjustment of Council rates, City of West Torrens, annual rate $487.40 (daily rate $1.33), credit Purchaser 152 days $202.97.
3.Emergency Services Levy $66.00 per annum, credit Purchaser 152 days $27.48.
4.SA Water and Murray River levy, annual base rate $291.60, credit Purchaser 152 days $121.43.
5.Net sum payable at settlement $179,648.12.
This settlement statement is predicated on the assumption that all accounts for the above were paid to the 30^th of June 2004.
Assuming:
1.the Defendant receives back her initial investment of $51,500.00;
2.the Plaintiff receives back his initial investment of $59,282.00;
3.the $60,000.00 loan is repaid;
4.the conveyancer is paid $698.00,
then the balance in dispute is $8,168.12.
The Defendant has indicated that she will seek part reimbursement of monies paid by her for rates, taxes and other outgoings paid by her since the date that the Plaintiff was excluded from the property. She also objects to this letter because of the assumption that the parties are to have their initial investments returned.”
If those figures were to be adopted as a broad guide, and the net equity divided equally between them, the plaintiff would receive approximately $4,000 more than the amount which he contributed initially to the purchase of the property.
Insofar as the defendant has apparently suggested to Mr Jamison that she had paid some outgoings on the property referrable to the period since the plaintiff left the property, I do not think that this calls for an adjustment in her favour, given that she has had exclusive occupation of the property since then.
It may be, however, that she could justify some further small adjustment.
I do not overlook the fact that after the completion of the hearing, the defendant wrote to the court enclosing a copy of further correspondence between the parties, beyond what had been tendered at the hearing. She also made some further submissions as to adjustments which she suggests should be made in her favour.
There is nothing in her letter or in the enclosures which causes me to change the conclusions which I have reached.
From the practical point of view, the best course to follow to give expression to those conclusions would be to give to the defendant an opportunity of paying into court within, say, 14 days of the date of the final order which I pronounce, the sum of $63,500, on the footing that if she does so, I would then order the plaintiff to transfer his share of the property to her.
If the money was not paid, I would further order that the property be sold to Mr Kaplan for a sum of $180,000, if he is still willing to purchase it, and that the net proceeds of sale, after allowing for the usual adjustments, be paid into court. In that event, I would direct payment out on the same basis, that is, on the footing that the parties would be reimbursed their respective contributions to the purchase price, together with one half of the net balance remaining after the loan to Mr Herriman was discharged.
In default of purchase by Mr Kaplan, I would order that the property be sold by public auction, and that the net proceeds be paid into court to be disposed of in the same manner.
At the time of publication of these reasons, I will furnish to the parties a draft order giving formal expression to the view which I have expressed.