Kendle v Lee - [2011] SADC 141

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
KENDLE v LEE & ANOR
[2011] SADC 141
Judgment of His Honour Judge Soulio
6 September 2011
REAL PROPERTY - GENERAL PRINCIPLES - INCIDENTS OF ESTATES AND INTERESTS IN LAND - ESTATES FOR LIFE
EQUITY - TRUSTS AND TRUSTEES
Plaintiff living in property owned by defendants - plaintiff paid outgoings - plaintiff asserts entitlement to ownership of property or equitable interest in property or damages.
Claim dismissed.
Law of Property Act 1936 (SA) s 29, referred to.
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266; Spellson v George (1992) 26 NSWLR 666; Byrnes v Kendle [2011] HCA 26 (unreported, French CJ, Gummow, Hayne, Heydon and Crennan JJ, 3 August 2011); Orr v Ford (1989) 167 CLR 316; Gosper v Sawyer (1985) 160 CLR 548; Kauter v Hilton (1953) 90 CLR 86; Bahr v Nicolay [No 2] (1988) 164 CLR 604; Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588; Carson & Ors v Wood & Ors (1994) 34 NSWLR 9; Muschinski v Dodds (1985) 160 CLR 583; Baumgartner v Baumgartner (1987) 164 CLR 137; Walton’s Stores (Interstate) Limited v Maher & Anor (1988) 164 CLR 387; Calverley v Green (1984) 155 CLR 242; Lloyd v Tedesco (2002) 25 WAR 360; Kais v Turvey (1994) 11 WAR 357; Stone v Owen [2001] 1 Qd R 419; Hardman v Hobman [2003] QCA 467; De Lacey v James [2003] QSC 94 (unreported, Cullinane J, 9 April 2003); Hill v Hill [2005] NSWSC 863 (unreported, Campbell J, 24 August 2005); Silovi Pty Ltd v Barbaro & Ors (1998) 13 NSWLR 466; Palinkas v Palinkas [2009] NSWSC 92 (unreported, Austin J, 27 February 2009), considered.

KENDLE v LEE & ANOR
[2011] SADC 141
Summary

The defendants, while in a de facto relationship, purchased a house in 1988. The relationship came to an end. In 1999 the plaintiff, who is the first defendant’s sister, moved into the house. She asserts that by virtue of a promise made by the first defendant, and payments made by her in relation to the house, she is entitled to the house, or an interest in it, or damages. The second defendant sought an order for sale of the house and division of the proceeds. The two defendants reached a compromise of that claim, and agreed to a sale and division. The plaintiff’s claim proceeded. I dismiss the plaintiff’s claim and set out my reasons.
The Action
The de facto relationship between Mr Lee, the first defendant, and Ms Reynolds, the second defendant, commenced in September 1988. In that year they purchased a residential property at Valley View, South Australia (‘the property’). There were two children of that relationship, the first born in 1989, and the second in 1992.
There was some disagreement as to when the relationship came to an end, and as to the precise periods during which the respective defendants resided at the property. However, given the compromise of the legal dispute between the defendants, and the nature of the issues remaining as between the plaintiff and the defendants, it is not necessary for me to make specific findings as to the date of separation nor as to the precise periods of occupation. At the time of separation there was a mortgage with an outstanding balance of approximately $50,000.
The plaintiff, Ms Kendle, is the first defendant’s sister. She alleged by her statement of claim that she had resided in the property from about July 1999 to date, in circumstances giving rise to a claim for a declaration that she is entitled to the property or an interest in it.
There is a significant dispute as to the circumstances surrounding the plaintiff’s occupation of the property. Broadly speaking, the plaintiff’s primary assertion was that Mr Lee told her that she could have the house if she paid the expenses including mortgage repayments.
Following their separation, the defendants did not settle their financial issues nor did they seek to do so until the issues which are the subject of this action were brought to a head. At various times after 1996, the second defendant made requests of the first defendant to sell the property and divide the net proceeds. The defendants were engaged in Family Court proceedings in relation to custody of their children. Ms Reynolds alleged by way of explanation for the delay in seeking to determine the rights and obligations between them, that during the course of Family Court proceedings Mr Lee made threats of harm against her, such that she was in fear for her safety. The result was that she felt unable to approach the first defendant, until recently, to effect a settlement of their finances. I accept that the second defendant held the belief that the first defendant had made such threats against her, albeit that they were apparently relayed to her through a third party, and that that was the reason she did not seek to have contact with the first defendant for the purposes of effecting a financial settlement.
Compromise of the Second Defendant’s Cross Claim
Following the institution of the plaintiff’s action, Ms Reynolds brought a cross action against Mr Lee seeking an order for the sale of the property with the proceeds of sale to be divided, after the costs of the sale, as to each defendant one half, with any interest established by the plaintiff being paid out of the first defendant’s share, or in the alternative, an order for partition and sale.
During the course of the trial the defendants reached a compromise of the cross claim on the basis that there be a sale of the property and an equal division of the net proceeds. Such a settlement could not bind the plaintiff.
Ms Reynolds asserted that the interest of the plaintiff, if any, could be no more than the interest of the first defendant, as the first defendant was not authorised to deal with the second defendant’s interest.
The Plaintiff’s Claim
The plaintiff alleged by her statement of claim that Mr Lee purchased the property in May 1995, that Ms Reynolds left the property in mid 1995, and that Mr Lee left the property on 1 July 1995 and rented the property to others. She alleged Mr Lee lived in Queensland until December 1998, and in the intervening period made no mortgage payments or improvements to the property.
She alleged that she moved to Adelaide from Queensland in January 1999 and has lived in the property since July 1999. She asserted that the defendants were in default of mortgage payments and rates and taxes as at January 1999, and had abandoned the property.
She alleged that she made an oral agreement (‘the agreement’) with the first defendant in January 1999, whereby he agreed to give possession of the property to her, and she agreed to occupy the property, and make all mortgage and other related payments, and consequently would be entitled to the benefit of the property.
She alleged that she negotiated repayments with the mortgagee and the local council, and that since January 1999 she had paid all rates and taxes totalling some $7500, all mortgage payments including additional payments and interest totalling some $75,000, all water rates totalling $5036.24, and had made improvements to the property at her own expense in the amount of not less than $45,000.
By her statement of claim, the relevant paragraphs of which are set out, the plaintiff initially pleaded her case on a number of bases:
14As a result of the Agreement the First Defendant holds the property on trust for the Plaintiff as to her interest pursuant to the Agreement and having paid mortgage repayments and all rates, taxes and other service rates and improved the Property.
15Further and/or in the alternative, as a result of the Agreement between the Plaintiff and the First Defendant, the Defendants hold the Property as equitable trustees as to an undetermined share of the Property for the benefit of the Plaintiff.
16Further and/or in the alternative, the Plaintiff is entitled as mortgagee to the benefit of repayments made by her from the Defendants or all moneys advanced for the purpose of the maintenance, improvement and payment of all mortgage payments in relation to the Property in addition to interest as equitable mortgagee.
17Further and/or in the alternative, it can an implied term of the Agreement that the conduct of the Plaintiff in maintaining possession of the Property with the Defendants’ consent and knowledge, that the Plaintiff be entitled to rights of ownership of the Property, such term to be implied so as to give the Agreement business efficacy.
Her prayer for relief seeks:
1.1A declaration that the Defendants and each of them hold the Property on trust for the Plaintiff;
1.2An order and/or direction after enquiry as to the repayment of all moneys paid by the Plaintiff towards the mortgage, rates and taxes and improvements in relation to the property in addition to interest on the moneys calculated;
1.3An order for partition and sale of the property for the purpose of payment to the Plaintiff as equitable transferee and/or equitable mortgagee;
1.4 Alternatively, damages at law or in equity;
Further, the plaintiff claimed that she was entitled to establish her interest against both defendants, given that the second defendant, she asserted, had known of and acquiesced in the plaintiff’s occupation of the property and in the plaintiff’s payment of outgoings in relation to the property.
The Defendants’ Response
Mr Lee’s response was that he offered to let the plaintiff live in the property on the basis that she make the mortgage repayments, and maintain the property, in lieu of rent.
Ms Reynolds’ position was that whatever transpired between Ms Kendle and Mr Lee, no-one was authorised to deal with her share of the property.
The second defendant’s position, adopted by the first defendant, was that the relationship between the first defendant and the plaintiff was simply one of landlord and tenant. Further, the second defendant’s interest in the property was not affected by any arrangement between the plaintiff and defendant.
The Witnesses
The plaintiff gave evidence and tendered a significant volume of documents, to which I will refer as necessary. I formed an unfavourable impression of the plaintiff. She was no doubt passionate about this matter. She may well have come to feel an entitlement to remain in the house, as the years passed and no challenge was made to her occupation of the property. She gave evidence in a florid manner, designed to advance her cause at every opportunity at the expense of accuracy.
An example, not necessarily significant in determining the issues, was the plaintiff’s assertion that she always made mortgage payments on time. The bank statements show that late fees in relation to the mortgage payments were incurred in 2002 and 2003 at the rate of about $50 per payment. Another example of her unreliability is that, despite her pleadings asserting that the first defendant resided in Queensland between about July 1995 and December 1998, in evidence when asked whether the defendant had been living in Queensland she said “No, he came to visit with some friends.”
Another was her description of the dilapidated state of the premises when she moved into the property. I reject the plaintiff’s evidence given my acceptance of Ms Reynolds’ evidence as to the state of the house when she left; the photographs taken by Ms Reynolds before she left; and the first defendant’s evidence of the state of the property when the plaintiff moved in. I find that at the time the plaintiff commenced occupation of the property it was in reasonable condition.
I reject the plaintiff’s evidence as to the value and extent of the improvements she claims to have made. In cross-examination she conceded that her evidence was exaggerated. There were no receipts for most items. She conceded that her husband had carried out much of the work without charge. Importantly, the more expensive items of suggested improvements were undertaken after the issues were joined in this case by the sending of letters of demand and by the lodging of a caveat by the plaintiff.
Where the plaintiff’s evidence is contradicted by that of the first defendant, or the second defendant, or by documentary evidence, I am not prepared to rely on her evidence at all.
The first defendant gave evidence as did Mrs Gernick, the sister of both the plaintiff and the first defendant. I accept that the first defendant did his best to tell the truth. As he acknowledged, his recollection was faulty in certain respects. He appears to have paid scant regard to formalities in relation to arrangements which he regarded as being conducted within his family. Whilst I have no reason to doubt the evidence of Mrs Gernick, that evidence was not of particular assistance in determining the issues in the case. The second defendant was a careful and honest witness. I am prepared to rely on her evidence.
Findings
Agreement Between the Plaintiff and First Defendant
The plaintiff alleged, as I have said, that by an agreement made in January 1999 the first defendant agreed to give possession of the property to the plaintiff and the plaintiff agreed to occupy the property, make mortgage and related payments, and would thereby be entitled to the benefit of the property. There was no agreement in writing. The purported agreement only arose from discussions between the plaintiff and the first defendant. The second defendant took no part in those discussions and was not aware of them.
In evidence in chief the plaintiff said that while in Queensland, presumably in late 1998, she told Mr Lee that she was moving back to Adelaide because members of her family had issues. She said the first defendant responded by saying “come and live with us, come and live with me, and you know, you can share the house with me”. The plaintiff ultimately conceded that there was no detailed discussion, but the first defendant simply said words to the effect that “you pay (the outgoings) because you live here”.
The test for the implication of a term into a contract as set out in, for example, BP Refinery (Westernport) Pty Ltd v Hastings Shire Council[1] is not made out. An agreement to occupy the premises on the basis of meeting mortgage payments and outgoings would, in any event, be effective as constituting an informal lease, whether or not the payments gave rise to ownership.
[1] BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266.
I reject the plaintiff’s evidence that the first defendant agreed to transfer any interest, in the land, or grant any beneficial interest to the plaintiff in exchange for the payment of outgoings. I accept Mr Lee’s evidence that he permitted the plaintiff to reside in the property in exchange for her paying the outgoings, by way of an informal lease.
What Payments Did the Plaintiff Make?
Mortgage Payments
For extended periods between 1999 and 2001 the plaintiff was living at addresses other than at the property. She was paying or contributing to rental payments at the other addresses and not making mortgage payments in respect of the property.
Prior to the plaintiff’s occupation of the property the first defendant had residing with him a number of boarders. That board was subsequently collected by the plaintiff, while she was living elsewhere, and used to make mortgage payments on behalf of the first defendant.
While the plaintiff was living at the property she also had boarders living in the property[2] and said that she has had people living in the house for almost the entire time that she has been there. As at the time of the hearing, the plaintiff was charging a sub-tenant $100 per week for the right to reside in a shed at the back of the property, which had been turned into residential accommodation.
[2] T 86.23.
I accept that after the plaintiff moved into the property presumably in about 2001 she made mortgage repayments.
Payments to Improve the Property
The plaintiff by her pleadings, asserted that a sum in the order of $45,000 had been spent on improvements. She prepared and tendered a schedule to that effect. However, there was very limited evidence as to the so-called improvements.
I inspected the property on a view taken following an application by the plaintiff in order to understand the evidence, and the photographs tendered. I find that the improvements were of a superficial and amateurish nature. There is no evidence that they have added to the value of the property, and indeed apart from some items of maintenance, could not be said to have done so. I do not accept that the value of improvements was of the order alleged by the plaintiff. Indeed during addresses counsel for the plaintiff acknowledged as much.
It is illustrative to examine a number of specific items of improvement of the premises alleged by the plaintiff to have been carried out at her expense in reliance on the first defendant’s agreement. The plaintiff asserted that she had installed a remote control roller door. The only receipt was for a motor for $396.60 and for $60.50 for a handset. Those items were purchased in August 2009, after the proceedings were instituted. Further, the evidence of the first defendant, which I accept, was that the roller door itself, although not the motor, was already fitted when he left the property.
The plaintiff asserted that she installed a stove in the property. That stove was however purchased in January 2009, after the time the plaintiff became aware that the second defendant claimed an interest in the property.
The plaintiff tendered an invoice for a tile cutter, purchased at a cost of $60.37. That is an item of equipment, rather than a fixture to the property. It was said to be supportive of the plaintiff’s case that tiling work had been carried out. However, that was purchased in October 2009, again well after proceedings were instituted. Even if tiles were also purchased (of which there was no evidence), given that the proceedings were on foot, it could not be said that the purchase of those items constituted a detrimental reliance by the plaintiff on a representation made by the first defendant.
The plaintiff tendered an invoice for $361.57 relating to the purchase of three ladders. They are not fixtures and remain the property of the plaintiff. In any event the invoice was made out to a third party. The only other documentary evidence was an invoice for window locks in the sum of $32.90.
I will deal generally with the remaining evidence said to prove expenditure by the plaintiff. The plaintiff claimed, by her schedule, that she had incurred dumping fees of $3000. In evidence, however, she said there may have been 10 or 12 trips to the dump to remove rubbish, at perhaps $50 a visit. There were no receipts tendered. The first defendant gave evidence that he in fact took rubbish to the dump and that there were about three loads. I accept the evidence of the first defendant. The plaintiff has exaggerated the expenditure.
The plaintiff said that the first defendant was paid to remove a tree which had fallen. I prefer his evidence that he removed the tree at no cost. That tree had fallen and damaged a fence. In her schedule the plaintiff claimed that the fence repairs cost $600. In evidence she estimated that about 35 sheets were used to replace the fence, at an estimated cost of $45 per sheet. The sheets were second-hand sheets. It is not clear that they were required to repair damage. It is impossible to estimate their cost other than as the nominal cost which might be paid for building salvage material.
The plaintiff claimed the cost of an awning. Again, that expense was incurred at a time after proceedings had been issued.

The plaintiff asserted that the front pergola was fixed by her husband, at a cost she estimated at a few hundred dollars. Sheets of metal were fixed to the outside storage area in lieu of the picket fence which is shown in photographs.[3] Some fence posts had been replaced without evidence as to cost. The first defendant said he had provided the materials. I accept his evidence.
[3] Exhibit 2D3.
An air conditioner had been placed on the roof, but had not been connected. The cost of that was claimed at $2700 in the schedule. In fact, during the plaintiff’s evidence it emerged that the air conditioner was part of a job lot of salvage material, including kitchen cabinets, purchased by the plaintiff from her sister, at a total cost of $500.
Some ceiling fans had been installed, and some re-wiring done although no evidence was led as to the cost. Similarly, a hot water system was asserted to be part of the improvements of the property effected by the plaintiff, although there was no evidence as to cost. Some small pieces of timber were replaced on the rear veranda and a shade cloth put up. Carpets were removed although there was no information as to the cost, or whether there was in fact any cost incurred. The first defendant said, in any event, that he assisted in removing the carpets, and I accept his evidence in that regard.
Interestingly, the first occasion on which the plaintiff insured the property for building damage was from 4 June 2008. She said she did so as a result of aggressive comments made by the first defendant after the dispute arose as to her entitlement to remain in the property. Had she held a belief that she was entitled to ownership of the property she might have been expected to effect building insurance at an earlier time.
As to the reason the work was done, when the first defendant was asked the rhetorical question as to why the plaintiff would have carried out such work if she was not to take the ownership of the house, the first defendant said “for her own comfort”. I find that the reason for items of work being carried out from time to time was merely for the convenience of the plaintiff, at nominal cost, and generally performed by the plaintiff’s husband who was a painter and handyman, or by the first defendant himself.
Did the Second Defendant Consent or Acquiesce?
Even if, contrary to my findings, the first defendant entered into an agreement which created some form of transfer of beneficial ownership in the property, that could not extend to the second defendant’s interest in the property. Indeed, despite the plaintiff pleading that the first defendant purchased the property on or about 10 May 1995, and that it was an implied term of the agreement that her conduct in maintaining possession of the property with the first defendant’s consent and knowledge, meant that she was entitled to rights of ownership of the property; the plaintiff specifically said in cross-examination: “I was always aware Michelle (the second defendant) was part owner of the property. My brother told me”,[4] and “half of the house was his. I assumed because half of the house was his he could do the things he did”.[5]
[4] T 48.16.
[5] T 48.22.
The plaintiff agreed that by the end of 2008 she was aware that the second defendant was still claiming an interest in the property. She instructed her solicitors to write to the second defendant’s solicitors, making an open offer to pay the second defendant $10,000 in full satisfaction of any claim the second defendant might make in relation to the property.[6]
[6] By letter dated 25 March 2009 (Exhibit 2D5).
Although admittedly in the context of considering acquiescence in the context of a breach of trust, as Handley JA observed in Spellson v George:[7]
Consent may take various forms. These include active encouragement or inducement, participation with or without direct financial benefit, and express consent. Consent may also be inferred from silence and lack of activity with knowledge. However consent means something more than a state of mind. The trustee must know of the consent prior to the breach.
[7] Spellson v George (1992) 26 NSWLR 666 at 669-70.
In Byrnes v Kendle[8] the Court cited with approval the observations of Deane J in Orr v Ford:[9]
Deane J said:
Strictly used, acquiescence indicates the contemporaneous and informed ('knowing') acceptance or standing by which is treated by equity as 'assent' (i.e. consent) to what would otherwise be an infringement of rights ….
Deane J then said that the word "acquiescence" is commonly used also to refer “to a representation by silence of a type which may found an estoppel by conduct”. …
[8] Byrnes v Kendle [2011] HCA 26 (unreported, French CJ, Gummow, Hayne, Heydon and Crennan JJ, 3 August 2011) [133-136] (Heydon, Crennan JJ).
[9] Orr v Ford (1989) 167 CLR 316.
Deane J further said that "acquiescence" is commonly used to refer to "acceptance of a past wrongful act in circumstances which give rise to an active waiver of rights or a release of liability".(footnotes omitted)
I am unable find that the second defendant knew at any time that the plaintiff was making mortgage payments or any other payments. I find that even if the second defendant knew that the plaintiff was living in the property, she did not know that the plaintiff was making mortgage payments, and, that even if she had, that was far from being an acquiescence in the granting of any interest in the property, by the first defendant, on behalf of the second defendant, to the plaintiff.
The second defendant was not consulted about any of the expenditure. The plaintiff conceded in cross-examination that she did not understand that she owned any part of the second defendant’s share in any event. I am unable to find that the plaintiff spent any significant amount of money on the property, nor am I able to find that she did so on the assumption that she was entitled either to a beneficial interest in the property, or to repayment of the monies she had paid.
Did the Plaintiff Benefit from her Occupation of the Property?
The plaintiff conceded in cross-examination that in 1999 she did not personally have funds to purchase a house and that she did not have sufficient funds to pay a deposit on a house in South Australia. She agreed that had she not moved into the defendant’s house she would have had to lease a house, either in Queensland or in South Australia.
Even if I were to accept the plaintiff’s evidence as to the extent of the payment of outgoings, I find that she received a net benefit in that such payments were considerably less than rental payments would have been. The plaintiff said that when she was living in a house at Somerset Street, in about 1999 or 2000 she was paying $175 per week rent in addition to power bills. She was asked about the current rental costs to live in her house and said “some properties you can get for $250. They are not flash but you can get properties for $250 a week.”
For the period from the year 2000 to the year before trial the average weekly amount spent on a total of the mortgage and rates and taxes ranged between $104.44 and $142.09. Although there is limited evidence as to the market rate of residential rent during that period, the plaintiff was paying more than that by way of rent in 1999 at the alternative premises. The current rental value of the property is about $270 per week, and was about $150 per week in 1999.
The plaintiff said she is currently paying $500 per month as mortgage payments and in addition pays water rates, council rates, levies and repairs. However, when it was put to her that “so even at $500 a month mortgage plus other expenses you are still getting cheap accommodation aren’t you”, she said “no I don’t believe so”.[10] I reject that evidence, and find that if it were not for the informal arrangement she made with the first defendant to reside at the property, in exchange for payment of the mortgage and other outgoings, the plaintiff would have incurred greater costs in leasing a house.
[10] T 93.5.
Indeed counsel for the plaintiff conceded, quite properly, that it could not be suggested that payments made by the plaintiff exceeded the market rent.
Express Trust
The rules for the construction of contracts also apply to trusts,[11] and the contractual relationship provides one of the most common bases for the determination of the existence, as of the terms, and for the definition of a trust.[12]
[11] Byrnes v Kendle [2011] HCA 26 (unreported, French CJ, Gummow, Hayne, Heydon and Crennan JJ, 3 August 2011).
[12] Gosper v Sawyer (1985) 160 CLR 548 at 568-9.
Section 29 of the Law of Property Act 1936 (SA) (‘the Act’) provides:
(1)Subject to the provisions hereinafter contained with respect to the creation of interests in land by parol—
(a)     no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law;
(b)     a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will;
(c)     a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will.
(2)This section shall not affect the creation or operation of resulting, implied, or constructive trusts.
The second defendant submitted that there could be no express trust, as s 29 had not been complied with and that the first defendant, as one of two joint tenants had no authority to grant any interest in the land to the plaintiff.
Section 29(1)(b) of the Act requires that a declaration of trust respecting "any land or any interest therein", "be manifested and proved by some writing signed by some person who is able to declare such trust". The words quoted have a legislative history beginning with s 7 of the Statute of Frauds 1677.[13] As explained in Kauter v Hilton,[14] s 7 did not require that a trust of land be created by writing, but that, however created, the trust "be manifested and proved by writing".[15]
[13] 29 Car II c 3.
[14] Kauter v Hilton (1953) 90 CLR 86 at 98.
[15] Byrnes v Kendle [2011] HCA 26 (unreported, French CJ, Gummow, Hayne and Crennan JJ, 3 August 2011) [48].
In Associated Alloys v ACN 001 452 106[16] the Court said that even if “the language employed by the parties … is inexplicit”, the court can infer an intention to create a trust “from other language used by them, from the nature of the transaction and from the circumstances attending the relationship between the parties.”[17]
[16] Associated Alloys Pty Ltd v ACN 001452 106Pty Ltd (in liq) (2000) 202 CLR 588 at 605.
[17] Byrnes v Kendle [2011] HCA 26 (unreported, French CJ, Gummow, Hayne, Heydon and Crennan JJ, 3 August 2011) [112].
In Bahr v Nicolay[18] Mason CJ and Dawson J approved of the expression of the “traditional attitude” by du Parcq LJ[19] that “unless an intention to create a trust is clearly to be collected from the language used and the circumstances of the case, I think that the court ought not to be astute to discover indications of such an intention”.[20]
[18] Bahr v Nicolay [No.2] (1988) 164 CLR 604 at 618.
[19] In re Schebsman; Official Receiver v Cargo Superintendents (London) Ltd [1944] Ch 83 at 104.
[20] Byrnes v Kendle [2011] HCA 26 (unreported, French CJ, Gummow, Hayne, Heydon and Crennan JJ, 3 August 2011) [49].
There was clearly no express trust. There was no declaration that the land was held on trust for the plaintiff. There was no writing evidencing such a declaration within the terms of s 29 of the Act.
I find that Mr Lee did not intend to, nor did he, create a trust in favour of the plaintiff.
Constructive Trust
Counsel for the plaintiff made the primary submission that “the plaintiff asserts total ownership”. In the alternative, he said, the plaintiff is entitled to the benefit of a constructive trust as to the amount to which she improved the property.”
In relation to the work said to have been performed in relation to the property, counsel for the plaintiff submitted that the absence of evidence as to the value of such work was irrelevant. He submitted that the work was undertaken at a detriment to the plaintiff, and accordingly was work that would not need to be carried out by the defendants when they resumed possession of the property.
Counsel for the plaintiff relied in argument on Carson v Wood,[21] referring to Muschinski v Dodds,[22] and contended that the principles enunciated in Baumgartner,[23] a de facto relationship case, could also apply in commercial arrangements. Counsel also relied on Palinkas v Palinkas[24] to contend that on the evidence the plaintiff was entitled to an equitable charge over the property. Counsel for the plaintiff suggested that the second defendant was estopped from denying the plaintiff’s entitlement and relied on Walton’s Stores v Maher.[25]
[21] Carson & Ors v Wood & Ors (1994) 34 NSWLR 9.
[22] Muschinski v Dodds (1985) 160 CLR 583.
[23] Baumgartner v Baumgartner (1987) 164 CLR 137.
[24] Palinkas v Palinkas [2009] NSWSC 92 (unreported, Austin J, 27 February 2009).
[25] Walton’s Stores (Interstate) Limited v Maher & Anor (1988) 164 CLR 387, cited by Priestly J in Silovi Pty Ltd v Barbaro & Ors (1998) 13 NSWLR 466 at 472.
Further, counsel for the plaintiff contended that given the specific understanding between Mr Lee and Ms Kendle there was no need to take into account the benefit derived by the plaintiff by virtue of occupation of the property, and the fact that commercial rental may well have been above what the plaintiff contributed was irrelevant in the circumstances because of the understanding in the arrangement that the plaintiff was entitled to received an equitable interest in the property. I reject that contention.
Whilst as I have said, the plaintiff’s claim was pressed on a number of bases, ultimately counsel for the plaintiff conceded, in his address, that the monetary value of the plaintiff’s claim could be no more than the amount she had spent by way of mortgage payments, council rates and taxes, and the cost of improvements, together with interest on those amounts. He articulated the plaintiff’s claim on the basis that while there may not have been much improvement to the property, and that the proven value of the work was about $5000, the mere fact that work was done at all without seeking re-imbursement demonstrates that the arrangement was not a rental arrangement, but the creation of a trust. I reject that proposition for the reasons previously outlined.
Counsel for the plaintiff submitted that Ms Reynolds did not know of the arrangement, but later became aware, and acquiesced in the arrangement. For the reason already outlined, I reject that proposition.
The plaintiff’s position was ultimately put on the basis that the plaintiff had “some species of ownership interest.” Counsel for the plaintiff conceded that the evidence did not establish an entitlement to ownership of the property, or of half of the property. He contended that she was entitled to a constructive trust to the extent of the payments made on the mortgage, plus interest, plus an assessment of the value of the works performed on the property. Again, for the reasons outlined, I reject that proposition.
A constructive trust will only be imposed in circumstances where, according to equitable principles, it would be unconscionable for the legal owner of the property to retain the beneficial interest in the property. The imposition of such a trust is a response to the conduct of the person against whom it is imposed. Whilst there may be some debate as to whether a constructive trust is an independent legal right, or is a remedy for unconscionable conduct, the overriding theme is that there must have been unconscionable behaviour by the legal owner of the land. Mere unfairness alone does not give rise to a constructive trust.[26]
[26] Muschinski v Dodds (1985) 160 CLR 583 at 594-595; G E Dal Pont and D R C Chambers, Equity and Trusts in Australia (4^th ed, 2007) [38.185].
Proprietary rights fall to be governed by principles of law and not by judicial discretion or subjective views about which party "ought to win". The mere fact that it would be unjust or unfair in a situation of discord for the owner of a legal estate to assert his ownership against another, provides of itself, no mandate for a judicial declaration that the ownership in whole or in part lies, in equity, in that other. Such equitable relief by way of constructive trust will only properly be available if applicable principles of the law of equity require that the person in whom the ownership of property is vested should hold it to the use or for the benefit of another. That is not to say that general notions of fairness and justice have become irrelevant to the content and application of equity. They remain relevant to the traditional equitable notion of unconscionable conduct which persists as an operative component of some fundamental rules or principles of modern equity.[27]
[27] Muschinski v Dodds (1985) 160 CLR 583 at 616.
Although a constructive trust can be imposed against the intention of the parties, in the cases concerning de facto relationships, or where contributions are made to the acquisition or maintenance of the property, a key theme is the concept of a joint endeavour for the purpose of advancing the mutual wealth of the parties.[28]
[28] Baumgartner v Baumgartner (1987) 164 CLR 137.
[28] Palinkas v Palinkas [2009] NSWSC 92 (unreported, Austin J, 27 February 2009).
[28] Walton’s Stores (Interstate)Limited v Maher & Anor (1988) 164 CLR 387.
Contributions to mortgage payments are not contributions to the purchase price. The purchase price is what is paid in order to acquire the property; the mortgage instalments are paid to the lender from whom the money to pay some or all of the purchase price is borrowed.[29]
[29] Calverley v Green (1984) 155 CLR 242.
The plaintiff submitted that there had been increase in the value of the property between 1999 and 2010. The valuation reports show that the property market as a whole has increased in value since 1999, and do not suggest that the ‘improvements’ have lead to an increase in the value. Any reduction of the mortgage has not contributed to the increase in value of the property.
It is not sufficient that one person has merely benefited from the contributions of another; those contributions must be linked, albeit indirectly, to the purchase, maintenance and improvement of the property.[30] A constructive trust does not operate to convert contributions made to property, entirely by one party in the absence of any relevant contribution by the other party, into a proprietary interest in favour of the paying party, unless those contributions can be said to have been provided on express trust for that party.[31] Nor do contributions made other than for the purposes of a joint relationship give rise to constructive trust liability.[32]
[30]   Lloyd v Tedesco (2002) 25 WAR 360 at 365; G E Dal Pont and D R C Chambers, Equity and Trusts in Australia (4^th ed, 2007) [38.170].
[31]   Arthur v Public Trustee (1988) 90 FLR 203 at 213.
[32]   Kais v Turvey (1994) 11 WAR 357.
Even if a constructive trust was found to exist, it would be necessary to set off the benefit derived by the plaintiff from living in the property (‘occupation rent’), any other material benefit the plaintiff has secured from the defendant. In Hill v Hill where a son claimed to be entitled to an interest in his mother’s property as a result of making contributions to improvements of $70,000, but had lived in the property for 12 years, Campbell J declined to find it unconscionable for the mother to retain the full beneficial title in the property.[33]
[33] Hill v Hill[2005] NSWSC 863 (unreported, Campbell J, 24 August 2005).

Here, the plaintiff did not contribute to the purchase price; has not, I have found, performed any improvements which have added value to the property; has only reduced the mortgage on the property from about $50,000 to about $30,000; and yet has had the benefit of occupying the property at a cost far less than the fair market rent, even taking into account the plaintiff’s payment of council rates and other items of expenditure.
The second defendant further asserted that there could be no constructive or resulting trust, as the plaintiff had not demonstrated that it was unconscionable for the defendants to deny that she had any ownership of the land. In assessing whether it would be unconscionable, it is necessary to take into account the benefit received by the plaintiff.[34] I have already found that the plaintiff derived a greater benefit from occupying the property than she had expended.
[34] Stone v Owen [2001] 1 Qd R 419 at 424-425; Hardman v Hobman [2003] QCA 467 at 23-24; De Lacey v James [2003] QSC 94 (unreported, Cullinane J, 9 April 2003) [47].
As I have said, my finding is that the first defendant agreed only to rent the property to the plaintiff in exchange for payment by her of outgoings including mortgage payments. I find that there is no basis for asserting that there is a constructive trust in favour of the plaintiff.
Plaintiff’s Claim for Life Interest
During the course of the trial the plaintiff gave evidence that the first defendant said, at some stage, words to the effect that “this is your home” or “this will always be your home”. During the course of her cross-examination the plaintiff said that the discussion was not to the effect that she would own the property, but rather would have the right to live there for the period of her life. In cross-examination the plaintiff said: “He didn’t offer me ownership of Michelle’s part of the property, he never has. He offered me a home to live in for the rest of my life and then it would be passed back to him.”[35] That, as counsel for the second defendant pointed out, was neither pleaded nor referred to in the caveat she lodged.
[35] T 48.29.
The plaintiff’s claim in that regard was also based on her allegation, raised for the first time in evidence that the defendant said to her “It is yours sis, for as long as you live it is yours.”
The plaintiff said in evidence that she had previously asked the defendant to record the arrangement in writing saying “for (the) safety of your house and me living here you have to put it in writing that it is okay for me to live here,” and said specifically:
QAnd were you talking about the fact that you would live there or the fact that you would have ownership of part of the property
ATo live there.[36]
[36] T 49.17.
The plaintiff agreed that she had asked her brother to sign a document entitled ‘Deed of Family Arrangement’.[37] She showed it to the first defendant and then read it to him because he didn’t understand it. She agreed that the first defendant sometimes had trouble understanding letters and documents. She said that the first defendant wanted to take it to a lawyer but then took it to his other sister, who advised him not to sign the document.
[37] Exhibit 1D10.
I reject the plaintiff’s claim in so far as she purports to claim a life interest. That did not form part of her claim at the time a caveat was lodged nor was it pleaded. No application was made by the plaintiff to amend the statement of claim to allege that she was entitled to a life interest in the property. In any event, I do not accept that Mr Lee made the statements attributed to him by the plaintiff. Whilst Mr Lee permitted the plaintiff to reside in the property I find that the only statement made to the plaintiff, by Mr Lee, as to the long term disposition of the property, was to the effect that if anything happened to him the property was to pass to his daughters. That is inconsistent, in my view, with the granting of a right to the plaintiff to occupy the property for life.
In any event, one of two joint tenants cannot convey a life interest to the plaintiff, and the plaintiff understood, as she ultimately conceded, that the first defendant did not have the authority to deal with the second defendant’s interest in the property.
Plaintiff’s Claim for Repayment of Monies
The plaintiff agreed that she had instructed solicitors to lodge a caveat and that the claim referred to in support of the caveat was “an interest arising pursuant to an oral agreement between the caveator and the caveatee in January 1999 for advances and on acknowledging a loan to be made”. She said that as she was paying everything, she felt that that she was entitled to have something come back to her. She said “my brother owes me money, he was putting me out on the street and I wasn’t going to wear it”.
Counsel for the second defendant suggested to the plaintiff in cross-examination that when she had discussions with the first defendant in 1999, there was no discussion with him that he would ever need to repay money for mortgage payments made on the property. She responded by saying “he never discussed things. We never discussed that he would have to pay me. We never discussed anything about payment. We discussed that “this is your home, you do whatever you want to do, it is yours to spend. I am happy for you to do this”. We never discussed whether he was going to pay me back or I was going to pay him. It was never brought up in a conversation between my brother and myself. What was brought up in the conversation was that this was my home for as long as I needed a home.”
Further, the plaintiff stated “my brother and I never discussed money: moneys that I give to him, or moneys that he give to me. It was never part of the discussion. The discussion was that I live there and that was part of the discussion. And that has always been the discussion up until the start of this court case.”[38]
[38] T 50.37-51.20.
As to the plaintiff’s claim to be entitled as mortgagee to repayment of all the monies spent by her, the plaintiff conceded that there was no agreement that the monies paid in respect of the mortgage and outgoings would ever be treated as a loan, much less a mortgage granted to secure repayment of any loan.
The plaintiff also conceded that there was no discussion about a liability on the part of the first defendant to repay any amounts that the plaintiff spent on mortgage payments or other outgoings. She conceded that that aspect of her claim was more by way of a response to the request from the first defendant that she vacate the property. There is no basis to the plaintiff’s claim to be an equitable mortgagee.
Conclusion
I find that the only agreement between the plaintiff and the first defendant was a tenancy agreement for an undefined term, by which the plaintiff had the right to occupation of the property, and in return paid the mortgage payments and outgoings.
The plaintiff has derived a greater benefit from living in the premises, than she has paid out by way of mortgage payments, outgoings, and the minimal maintenance and additions to the property. She is not entitled to any legal or equitable interest in the property. She is not entitled to be paid or to be repaid any monies.
It follows that the plaintiff’s claim must be dismissed.
I will hear the parties as to consequential orders and as to costs.