Ku v You - [2008] NSWSC 712

No judgment structure available for this case.

CITATION: Ku v You [2008] NSWSC 712
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 04/12/07, 05/12/07, 29/01/08, 30/01/08, 19/05/08, 20/05/08, 02/06/08

JUDGMENT DATE :
15 July 2008

JURISDICTION: Equity Divison

JUDGMENT OF: Macready AsJ at 1

CATCHWORDS: Equity - General Principles - Trusts. - Property purchased by two persons. Deductions as to proportional ownership and findings as to an account of mortgage repayments and outgoings on the property.

PARTIES: Ja Kil Ku v Yern Sung You

FILE NUMBER(S): SC 5384 of 2005

COUNSEL: Ms G. Mahoney for plaintiff
Mr RA Parsons and Mr JE Armfield for defendant

SOLICITORS: Dahan Lawyers for plaintiff
Deutsch Partners Lawyers Pty Ltd for defendant

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Associate Justice Macready

Tuesday 15 July 2008

5384/05 Ja Kil Ku v Yern Sung You

JUDGMENT

1 His Honour: This is the hearing of proceedings concerning the ownership of a property at Balmoral Road, Kellyville held by the plaintiff and defendant as tenants in common in equal shares. There is also a notice of motion filed 5 December 2007 for the taking of accounts in respect of the contributions by the parties to the mortgage over the property. Trustees for sale appointed earlier in the proceedings are selling the property and it is expected that it will be sold for in excess of three million dollars.

Background matters

2 The property was purchased by the plaintiff and defendant as joint tenants under a contract which was completed on 27 January 1998. The purchase price was $730,000 and the parties borrowed $270,000 to complete the purchase.

3 The plaintiff contributed $290,000 and the defendant $170,000 to the purchase price. The parties are at issue as to who paid the stamp duty of $28,344 and legal expenses of $1,725.

4 Initially from 27 January 1998 the defendant and his wife lived in the property. From 24 October 1998 both parties and their wives lived in the house until 18 November 2002. At this time the defendant and his wife vacated the property and thereafter the plaintiff has occupied the property alone. The plaintiff and defendant were at the time of purchase brothers in law as the plaintiff had married the sister of the defendant’s wife. They have now separated.

5 The defendant’s wife is the second cross defendant to the first cross claim as she apparently signed some of the mortgage documentation although she is not shown on the title and has not taken any part in the proceedings other than to swear an affidavit in support of the defendants case. She contributed no funds to the purchase.

6 The mortgage repayments (including the increases and the refinancing loan agreements) were normally transferred by direct debit from National Australia Bank Account no: 68 205-xxxx (“the NAB Account”) for the period 27 January 1998 to January 2005. From February 2005, the mortgage repayments were effected from the plaintiff’s Commonwealth Bank Account (Account No. 1022xxxx).

7 As at the commencement of the repayment of the mortgage, being 27 January 1998, the NAB account was solely in the name of the defendant. On 29 July 1998, the plaintiff was made a non-withdrawing signatory to the NAB Account.

8 The parties from time to time increased the amounts borrowed. The details are:

Date	Amount	Lender
2nd loan	20 August 1999	$50,000	Fiduciary Services Limited	Increased mortgage to $313,000
3rd loan	22 October 2002	$443,000	Perpetual Trustees Victoria Limited	Refinanced 1st and 2nd loans.
4th loan	16 October 2003	$150,000	Perpetual Trustees Victoria Limited	Increased loan to $593,000
5th loan	22 April 2004	$900,000	Perpetual Trustees Victoria Limited	Refinanced of 3rd and 4th loans

9 The situation in respect of these additional borrowings was for each of the above loans:

10 The purpose of the increases and the application of funds arising from these increases was the subject of debate in the proceedings.

The parties’ claims in respect of the ownership of the premises

11 The plaintiff claims that he is entitled to a 65.79% share with the defendant having the remaining share of 34.21%. This result is predicated upon the court accepting that he provided the incidental expenses and apportioning the mortgage as to 2/3 to the plaintiff and 1/3 to the defendant consistent with the difference in cash contribution. If the court found that the defendant paid the incidentals the shares would instead be 61.84% for he plaintiff and 38.16% for the defendant.

12 The defendant on the other hand sought to suggest that there was agreement about the sharing of the mortgage as to 1/3 to the plaintiff and 2/3 to the defendants which should be reflected in the parties shares in the ownership of the property and also that the defendants share should be held by he and his wife who although a party has made no claim in the proceedings.

13 The plaintiff referred to a useful summary of the law In Neilson v Letch (No 2) [2006] NSWCA 254, his Honour Justice Mason, with whom their Honours McColl and Basten JJ agreed, held:

Trustees of the Property of Cummins (a bankrupt) v Cummins

Calverley

14 His Honour continued:

Cummins

Ca

verley

Gissing v Gissing

‘As in so many branches of English law in which legal rights and obligations depend upon the intentions of the parties to a transaction, the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party. On the other hand, he is not bound by any inference which the other party draws as to his intention unless that inference is one which can reasonably be drawn from his words or conduct.’ ”

15 As was pointed out by the plaintiff in submissions the determination of the interests is, as observed by his Honour Justice Gibbs CJ in Calverley v Green (1984) 155 CLR 242 at 252, at the time of the transaction not at a later date:

“The extent of the beneficial interests of the respective parties must be determined at the time when the property was purchased and the trust created. The fact that the mortgage debt was repaid by the appellant is therefore not relevant in determining the extent of the interests of the parties in the land, although it may be relevant on an equitable accounting between the parties.”

16 Reference was also made to Ryan v Dries [2002] NSWCA 3, where the Court of Appeal set out the following procedure to be applied when determining the relative interests of each of the parties:

And then ascertaining the percentage of the capital contribution of each party in relation to the total of (a), (b) and (c). This is of course subject to any express agreement about the matters.

17 The plaintiff submitted that there were two aspects to the resulting trust issue in the current circumstances:

18 On this aspect of the case the first matter to be considered is the evidence in respect of the payment of the incidental expenses.

Payment of incidental expenses on purchase

19 The amount of the stamp duty and expenses were paid from the plaintiff’s bank account. The plaintiff claimed that he received no contribution for these expenses from the defendant.

20 The defendant’s case was that he, at the request of the plaintiff for money for stamp duty, gave him $12,000 in cash from his taxi business and arranged for his wife to give him $18,000 from funds she had received from her sister.

21 This raises the question of the credit of the various witnesses.

22 The plaintiff was cross-examined through an interpreter for a period of about four days. At times his memory was not good and he appeared to be obstructive when answering questions. While appreciating that an affidavit would be used in the proceeding he professed not to know that he was swearing it on oath. From time to time in cross-examination he gave evidence which had not been set out in his affidavit evidence when there had been adequate opportunity for him to do so. Examples are that he received a $100,000 loan from his brother to purchase a Mercedes Benz and that he lent the defendant’s family $250,000 to enable them to holiday in the United States and to repay some debts of their parents.

23 At times the plaintiff gave misleading evidence. Examples of this were his claim that $20,000 was paid out of $50,000 made available to him, the extent of the joint endeavour to purchase the property and additional cash payments paid to the defendant from the advance of $150,000. At times his answers were non-responsive and there were several occasions when he contradicted the sworn evidence that he had given. As a result of these matters I have difficulty in accepting the plaintiff as a witness of truth.

24 The defendant initially gave his evidence in what appeared to be a straightforward way. However, it became apparent that he was not accurate when he gave his evidence. He gave evidence of a number of loans which he claimed were all recorded in his wife’s diary. In due course the diary was produced and in cross-examination it was apparent that he had no record of many of the loans. On a number of occasions he denied that various expenses related to his family. However, he ultimately conceded that these answers were not correct once evidence of a payment were put to him. In his affidavit he said he had made loans to the plaintiff but in due course in cross-examination it appeared that these loans were to other people such as his niece, the country club and others.

25 These difficulties showed that the defendant was prepared to inaccurately classify items in order to assist his case against the plaintiff when these matters had nothing to do with the plaintiff. Generally his record keeping was not good and for the matter with which I am now concerned, namely, the payment of the incidentals, he had no records to support the very large cash payments.

26 It will be recalled that the defendant says that he gave $12,000 in cash from his taxi business and arranged for his wife to give him $18,000 from funds which she received from her sister. I would have thought it unlikely that he would have cash funds of $12,000 from the taxi business. I note that there was no serious attack on the credit of his wife or her sister who swore to providing the $18,000.

27 The plaintiff denies that he made any request to the defendant or that he paid or received any money for stamp duty and legal costs. As I have said the documentary evidence shows that he paid the amount from his account. At the time he paid the stamp duty his account was $259,157.63 in credit. At the time he paid the legal fees of some $1,700 he had $7,972.77 in his account. Given these funds he had the capacity to pay the amounts. As the plaintiff and the defendant were both buying the property and he may well have asked for a contribution from the defendant. The defendant does not identify how much he withdrew from his account and how much cash he had in respect of the $12,000 he says he contributed to the $30,000. There has been no identification of the deposit of these amounts to the plaintiff’s bank account. The plaintiff was a gambler and the evidence shows that he gambled at Star City Casino on the poker machines. There was no evidence of the extent of his gambling problem but reference was made to withdrawals from ATM machines of $500 on each occasion. There is nothing to suggest that he had anything more than a minor gambling habit and, accordingly, I do not think that his gambling would have been something that would have prompted him to make the request for cash funds when he had the money already in his bank account to meet the expenses.

28 The documentary evidence shows that the plaintiff made the payments and I am not satisfied that the defendant has demonstrated that it was him who made the payment for the stamp duty. Accordingly, I accept that the plaintiff made the contributions to stamp duty and legal expenses.

Arrangements for the responsibility for payment of mortgage instalments

29 The defendant gave evidence of a conversation he had with the plaintiff in the presence of their wives when discussing the proposed purchase in these terms:

“JK: "I've spoken to Terry and the best price he can give us for the [Kellyville Property] is $730,000. Stamp duty will be another $30,000 on top of that."

YY: "All up that's $760,000. We'll probably need some extra money for other expenses."

JK: "Given the amounts that you and I can contribute, I think we'll have to borrow about $270,000. Of that amount, I will be responsible for repaying one third of the mortgage and you and your wife will be responsible for repaying two thirds of the mortgage. However, as I have no income, you and your wife will have to make all mortgage repayments."

YY: "OK. My wife and I will accept responsibility for making the mortgage repayments. "”

30 The plaintiff denied that these conversations occurred.

31 The defendant’s wife gave the following account:

“JK: "The most money I can contribute is $290,000. My brother will lend me some of this money. I won't be able to borrow any money from the mortgage company as I do not have an income. They will not lend me any money. You will have to borrow the money and be responsible for the repayment of the mortgage."

YY: "That's fine. I can contribute $170,000 in cash towards the purchase price of [the Kellyville Property] and I will pay for the expenses [i.e. stamp duty and legal fees]. I will be responsible for the mortgage repayments.””

32 The plaintiff also denied that this conversation occurred.

33 The defendant’s sister-in-law and estranged wife of the plaintiff gave the following account:

“GY: "We will still need a mortgage to buy the Kellyville Property."

JK: "I cannot afford to make any mortgage repayments. I have already borrowed money from my brother."

GY: "OK. We'll take out the mortgage in our names [i. e. my sister and her husband] and make the mortgage repayments."

JK: "OK. Let's do it like that."”

34 The plaintiff denied that that he had this conversation and he expressly denied that he said, “I can not afford to make the mortgage payments”.

35 The parties then went to see Mr Paul Chong, the defendant’s former solicitor who had provided finance for their purchase at Eastwood where they discussed the matter further. The defendant’s wife gave evidence of the following conversations:

PC: "You purchased the house in Eastwood for $330, 000 and then you sold it for $393, 000 in 6 months. You are very lucky.

YY: "We need to borrow $270,000. Is that possible?"

PC: "Certainly. From BMC's perspective, you have a good credit rating. You made your mortgage repayments on time. You'll get it. You're working now, so with your income you can apply for the loan. Will the [Kellyville Property] you purchase be in your wife's name as well?"

"The [Kellyville Property] is only in the men's names."

"Why don't we put the [Kellyville Property] in your name as well?" To which Mr Ku responded:

"Leave the [Kellyville Property] in the men's names. "

Mr Chong then said to my husband:

36 The plaintiff’s wife described the conversation in these terms:

of the purchase

PC: "The main mortgage applicant should be Mr You. However, Mr Ku's name has to be on the mortgage documents as well as he will be a joint owner of the [Kellyville Property]. Because Mr Ku doesn't have a job, we had better put Mrs You's name on the mortgage documents as well. "

Mr You then turned to Mr Ku and said:

YY: "If my wife's name is put on the mortgage documents, why don't we also put the [Kellyville Property] into our wives' names as well as ours?"

37 The plaintiff did not deny either of these conversations. Mr Chong, his solicitor, gave no evidence in the matter.

38 The fact of the matter is that the defendant’s wife did sign the mortgage and the defendant was the only one who had any regular employment. Although the defendant suggested that their wives be included on the title the plaintiff did not accept this suggestion. It seems likely that the plaintiff may have been embarrassed about the evidence that he said he could not afford any repayment and this may have led to the denial of the defendant’s account of this matter in his affidavit evidence. In cross-examination he changed his account of this matter and suggested that there had been a discussion about the responsibility for the mortgage and suggested that he was responsible for paying two thirds of the mortgage. In the circumstances it seems to me that it is quite likely that a discussion about who would be responsible for the mortgage would have occurred. I accept that there was agreement that the defendant would have to meet the mortgage repayments for the time being.

39 The question is whether the discussions might have led to a common intention to share a different interest in the premises to that reflected by their contributions or that the mortgage advance should be treated as a contribution to the purchase price in other than equal shares. Even on the defendant’s version of the conversation, the conversation was only directed to the responsibility for repayment of the mortgage not the shares in the ownership of the property resulting from the cash contributions. I am satisfied that the relevant contrary intention has not been demonstrated. However the discussion about responsibility for the mortgage clearly indicates an intention that the plaintiff would contribute by way of repayment of one third of the mortgage amount and the defendant and his wife two thirds. That discussion is inherently probable given the greater cash contribution to be made by the plaintiff and would lead to an equal contribution. I am prepared to accept the defendant’s version of the conversation and the mortgage advance should be apportioned accordingly. The payment of all the mortgage repayments by the defendant was plainly a temporary measure that did not reflect the permanent arrangement for responsibility and can be accommodated in any accounting.

40 The conversations throw some light on whether the defendant’s wife was to have an interest in the property. Although she had an opportunity to protest about her exclusion, the defendant’s wife raised no objection. Cross-examination showed that he had no independent income and that she never intended to make an independent contribution to the mortgage payments. She was relying on her husband to make those payments. Her husband put no property in her name so no presumption of advancement applies. She was put on the mortgage to satisfy the lender and although she had a liability to the lender she also had a right to indemnity from her husband. She was a party to the initial discussions on the percentage responsibility for the loan and accepted a liability to the lender. To that extent she contributed $90,000 towards the purchase. The cross-claim against the plaintiff and the defendant’s wife raises an alternative question of her ownership by contributions to the property by signing the mortgage. Although she did not defend the cross-claim the issue is before the Court and it must decide the question. Having regard to the discussions as to responsibility for the loan and the joint liability which the second cross-defendant provided, she and her husband should each be regarded as having provided one third of the loan advance.

Conclusion as to beneficial ownership

41 Apportioning the mortgage in the way contended by the defendant and accepting that the plaintiff paid the incidentals, the proportionate shares of the parties are 53.94% for the plaintiff and 34.22% for the defendant and 11.84% for the second cross-defendant.

Accounting

42 In Forgeard v Shanahan (1994) 35 NSWLR 206, the leading judgment was by Meagher JA, with whom Mahoney JA agreed; Kirby P dissented. As to the discharging of joint debts, Meagher J said:

“The discharging of joint debts stands in a different position. An adjustment occasioned by such a discharge is not necessarily made in a partition action: it could be made in an action for contribution, which could be brought quite independently of a partition action (or its equivalent). In the present case, for example, the defendant could have brought an action for contribution before or after the s 66G case. In these circumstances to equate a claim for contribution with a claim for an allowance for improvements does not seem to me to carry much conviction.” (at 225)

43 His Honour Justice Meagher further observed the law to be:

Muschinski v Dodds

44 It was the plaintiff’s submission that the subsequent increasing and re-financing of the original loan does not alter the equities in the Kellyville property but rather leaves open for the parties to take account of those additional funds in the accounting between the parties. The same it was submitted applied to the joint debts paid by one or other of the parties, such as council rates and utilities.

45 It is necessary to decide on the following matters:

(a) who made payments for the council and water rates,
(b) who made payments for utilities,
(c) who made the mortgage repayments,
(d) who received the benefit of the further loans and in what amounts, and

46 The accounting is not concerned with other loans that were made between the parties, which were not related to the subject property.

Council and water rates

47 Fortunately the parties are agreed on this aspect. The amounts each paid are:

Liability paid	Paid by defendant	Paid by plaintiff
Council rates	$6,000.89	$8,686.87
Water rates	$2,217.05	$466.70
Total	$8,217.94	$9153.57

48 These sums will also have to be apportioned to the defendant’s wife to reflect her share of the property.

Utilities

49 The defendant’s claim was for insurance and electricity charges. The latter are personal to the user and are not susceptible of an account in respect of a contribution claim between co-owners; see Forgeard v Shanahan (1994) 35 NSWLR 206 at 225. The amount of the insurance paid by the defendant was said to be $6317.34 but as I understand the parties’ present agreement as to outgoings and no claim is made for these sums.

Who received the benefit of the further loans and in what amounts?

50 As mentioned earlier in addition to the first loan in the amount of $270,000, the parties are agreed that the following further amounts have been borrowed:

Date	Amount	1 Notes
2nd loan	20 August 1999	$50,000	Increased mortgage to $313,000
3rd loan 1st facility	22 October 2002	$293,000	Refinanced 1st and 2nd loans.
3rd loan 2nd facility	22 October 2002	$150,000
4th loan	16 October 2003	$150,000
5th loan	22 April 2004	$900,000	Refinanced of 3rd and 4th loans

51 They also agree that the initial advance from these loans were paid directly to accounts controlled by the nominated persons as indicated on the following table:

Loan	Plaintiff’s Account	NAB Account controlled by Defendant
2nd loan (20 August 1999)	$ nil	$46,870.50
3rd loan (22 October 2002)	$147,152.72	$ nil
4th loan (16 October 2003)	$148,946.25	$ nil
5th loan (22 April 2004)	$292,484.45	$ nil

52 I turn to the first loan increase.

53 The extra monies provided for in the first loan increase $46,870.50 were paid into the defendant’s account with NAB on 20 August 1999 according to the defendant. He paid $33,606 to the plaintiff. This was said to have occurred by payment of two cheque amounts and two cash payments. The two cheques were for $10,306 and $10,000 and the two cash payments were said to be for $12,000 and $1,300. As is apparent from page 31 behind tab 3 of exhibit YSY1 these are the substantial withdrawals made a few days after the deposit. The documentary evidence establishes that the cheque for $10,306 was paid to the plaintiff’s account and he accepts this amount. He denies that he received any other amounts from the defendant. A perusal of the plaintiff’s Westpac account shows the deposit for $10,306 but no other large amounts at that time. The defendant has submitted no other evidence such as the cheque butt for the other cheque for $10,000 which would suggest that the monies went to the plaintiff. In the circumstances I am not satisfied with the explanation but I accept for the purposes of the accounting that the plaintiff received the benefit of $10,306 and that the defendant retained the benefit of $36,564.50. The associated costs of $1,564.75 should be divided equally between the two parties.

54 I turn to the third loan which was the second increase. This loan was in two separate facilities. The first facility was in the amount of $293,000 which directly replaced the first and second loans and so the parties’ liability for that facility remains the same. The second facility was for $150,000. The amount deposited to the plaintiff’s account with the benefit of this facility was $147,152.72. Of this sum $54,843.36 was paid to the defendant. Accordingly, I am satisfied that in respect of this advance the plaintiff retained the benefit of $92,309.36 and the defendant retained the benefit $54,843.36. The associated cost should be split equally between the parties by reference to the amount of the benefit that each retained and adopting a 60% and 40% split the plaintiff’s share is $1,708.37 and the defendant’s $1,138.91.

55 The fourth loan was for a further amount of $150,000. The amount deposited to the plaintiff’s account was $148,946.25. I am satisfied that the plaintiff retained the benefit from this amount of $78,946.25 and the defendant retained the benefit of $70,000. The relevant cost should be split between the parties in equal amounts, namely, $526.87 for each party.

56 The last loan replaced both facilities of the third and fourth loans and was for an amount of $900,000. At the time the earlier loans totalled $606,652.55 and this left an additional benefit of $293,347.45. The defendant did not receive a benefit from this loan and accordingly the plaintiff has received the benefit of the whole of the additional advance and should bear the fees in respect of that amount.

Mortgage repayments

57 The parties agree the mortgage repayments (including the increases and the refinancing loan agreements) were transferred by direct debit from National Australia Bank Account no: 68 205-6801 (“the NAB Account”) for the period 27 January 1998 to January 2005. In February 2005, the mortgage repayments were effected from the plaintiff’s Commonwealth Bank Account (Account No. 10227698).

58 Exhibit E demonstrates that for the period 13 February 1998 (being the first repayment) to 1 November 2007 the following amounts have been paid by way of mortgage repayment, with agreement between the parties as who made the entries marked in bold:

Loan	Total Paid	Payment made by
1st & 2nd Loan	$116,684.54	In dispute – payment from NAB Account
3rd loan – 1st facility	$26,220.20	In dispute – payment from NAB Account
3rd loan – 2nd facility	$13,423.28	In dispute – payment from NAB Account
4th loan	$4,209.56	In dispute – payment from NAB Account
5th loan	21/5/04 – 21/01/05	$47,131.39In dispute – payment from NAB Account
5th loan	21/02/05 – 21/9/05	$42,841.96Plaintiff through his Commonwealth Account
5th loan	02/11/05 – 20/02/06	$21,744.06In dispute – payment from NAB Account
5th loan	21/02/06 – 09/06/06	$21,415.67$10,707.83 each
5th loan	21/07/06 – 01/11/07	$71,340.34Defendant through the NAB Account
TOTAL PAID	$365,011.00

59 As at the commencement of the repayment of the mortgage, being 13 February 1998, the NAB account was solely in the name of the defendant. On 29 July 1998, the plaintiff was made a non-withdrawing signatory to the NAB Account.

60 The plaintiff gave evidence that he deposited substantial sums of money to the NAB account which is in dispute between the parties. He identified transfers totalling $61,750 which were made from his Westpac Classic and Commonwealth accounts to the NAB account. In respect of one of these a payment on 24 January 2002 for $20,000 it was suggested by the defendant that this was supposedly a payment for Mr Ku’s brother to Mr You for managing the rental for his property. I do not accept this. I am satisfied that the plaintiff transferred $61,750 to the NAB account from which the payments were made.

61 There was also a submission that the Court should find that the plaintiff contributed equally to the payments for the mortgage from the NAB account in the period from February 1998 to February 2005. The total of these payments were $207,668.97.

62 This submission was based on the financial means of the defendant based on his limited income from his driving a taxi and the expenses which he would have to bear. The defendant’s gross income for the relevant period was $325,491. He gave evidence of having received an additional $59,280 from his family overseas. The evidence is such that I could not conclude that he was unable to make the balance of the payments for the period which was in the order of $145,918. I am satisfied that the only contributions by the plaintiff in this period to the NAB account are the amounts of $61,750.

Rents collected by the plaintiff for the warehouse

63 The defendant seeks an accounting in respect of what are said to be rent collected by the plaintiff from the tenants of the warehouse at the back of the property. The matter arose because the plaintiff’s wife gave evidence that she saw the plaintiff collect such rents. In this case neither party suggests that there are any improvements which have to be taken into account.

64 In Forgeard v Shanahan (1994) 35 NSWLR 206 at 222, Meagher JA noted the law, as is relevant to an account of profits for joint owners in the position of the defendant and plaintiff:

“The position may, I think, be summarised as follows:

3. A co-owner out of occupation could not even recover his share of rents and profits if the co-owner in occupation appropriated them to himself: no action of account lay either at law or in equity: Henderson v Eason (1851) 17 QB 701 at 716-719; 117 ER 1451 at 1457 per Parke B.

4. Apart from statute, a co-owner out of occupation had remedies at law in two situations, and no more. If he had been ousted, he could bring ejectment and mesne profits: Goodtitle v Tombs (1770) 3 Wils KB 118; 95 ER 965; Luke v Luke (1936) 36 SR (NSW) 310; 53 WN (NSW) 101; Dennis v McDonald [1982] Fam 63; [1982] 1 All ER 590. If, on the other hand, his co-owner were in occupation by agreement that co-owner became an agent or bailiff and rendered himself liable in a common law action of account. In either case (that is, of ouster or occupation by agreement) he would be liable for rents actually received and possibly also for an occupation fee.

5. Apart from statute, in equity the plight of a co-owner not in occupation was little better. There did not seem to be any action which would render a co-owner in occupation liable to refund any rents received, much less liable for an occupation fee. It is true that there is a solitary and curious decision in 1685 which might suggest the contrary. That case is Strelly v Winson (1685) 1 Vern 297; 23 ER 480, an Admiralty case which seems to have wandered into the Chancery courts. In the course of the judgment the Lord Keeper said (at 297; 480): “and so where one tenant in common receives all the profits, he shall account in this court as bailiff to the other two for two-thirds” a proposition which has never been relied on, or even noticed, in any case decided since that date.

6. In 1705 things improved a bit with a Statute of Anne. That statute is properly cited as 4 & 5 Anne c 3 s 27, although — curiously — often referred to as 4 Anne c 16 s 27. In so far as it is here relevant it provides:

“An from and after the said first day of Trinity term, … shall and may be brought by one joint tenant, and tenant in common, his executors and administrators, against the other, as bailiff for receiving more than comes to his just share or proportion, and against the executor and administrator of such joint tenant, or tenant in common (sic)…”

Thereafter, as far as rents actually received were concerned, a non-occupying co-owner had a statutory right of action both at law and in equity, which caused the courts no problem subject to occasional disputation about what constituted an accountable “rent”: see, eg, Wheeler v Horne (1740) Willes 208; 125 ER 1135 and Squire v Rogers (1979) 39 FLR 106 at 121-122; 27 ALR 330 at 343.

65 In this case there is no evidence of ouster. What occurred was that the defendant and his family left the property, according to him, because of “arguments we were having with the plaintiff resulting from his failure to make contributions for anything”. The plaintiff suggested it was for other family reasons connected with the defendant’s children’s schooling. Without resolving that dispute the defendant’s evidence does not show an ouster.

66 However, in Ryan v Dries [2002] NSWCA 3 Hodgson JA made the following obiter comments on the comments of Meagher JA in Foregard.

“63 There is a quite detailed discussion of the principles by Meagher JA in Forgeard v. Shanahan (1994) 35 NSWLR 206 at 221-6. Mahoney JA (at 219) agreed in the principles stated by Meagher JA. However, some of the statements of principle in that case were obiter only, and in some respects I am not in complete agreement with them. Because some of these principles are relevant to this case, I should indicate the areas where I have some disagreement.

64 At 222, Meagher JA said that, apart from statute, there did not seem to be any action by which one co-owner could recover a share of rent received by the other co-owner. He referred to the case of Strelly v. Winson (1685) 1 Vern 297; 25 ER 480, which decided otherwise, but pointed out that this case had not subsequently been relied on or noticed. He noted that the same result was provided by a 1705 statute; but that this statute had been repealed in New South Wales by the Imperial Acts Application Act 1969, so that the remedy provided by the 1705 statute was not available in New South Wales.

65 For my part, with respect, I would be prepared to act on the authority of Strelly v. Winson, and would treat its lack of subsequent celebration as explicable by reason of the passing of the statute just twenty years later. For my part, I cannot accept that a court exercising equitable principles would not treat a co-owner of property who had collected rents paid for the use of that property as having done so as an agent for all co-owners and liable to account to other co-owners. I would respectfully agree with the statement made in the 1670s in Lord Nottingham’s “Manual of Chancery Practice” and “Prolegomena of Chancery and Equity” (D.E.C. Yale ed., Cambridge University Press, 1965) at p.214 that in such a case “equity construes all receipts to the common profit, and that without great strain”.”

67 His Honour’s comments on this aspect seem to be an example of some aspects of the judgment of Meagher JA in Forgeard in which His Honour was not in complete agreement. His Honour’s comments are obiter and on this aspect I am bound to follow the decision in Forgeard and the comments of Meagher JA on this aspect. I note that in Ryan v Dries the Court allowed a claim for an occupation fee when one party remained in occupation where there was also a claim for an accounting in respect of mortgage repayments. In this case there has not been a claim for an occupation fee and accordingly the matter does not arise.

68 Applying Forgeard to the facts showing there is no ouster, there is no ability to recover any rent collected by the plaintiff.

69 There are a number of other practical problems with this claim not the least of which are the difficulties with the evidence of what rent was collected. Evidence was given by the defendant’s wife that for a year following the purchase of the property it was rented at $260 per month. Her evidence was that from December 1999 it was rented for two and half years for $500 a month. In addition in January 2003 it was leased to a pool shop which continued to use it and pay rent of $700, presumably monthly. Evidence was also given by the plaintiff’s wife that the plaintiff collected the rent which he occasionally showed to her after collection. The plaintiff did not respond to the evidence given by these two witnesses until he was cross-examined when he attempted to deny it.

70 The defendant also conceded that he received an amount of $2,800 from the plaintiff. The plaintiff’s Westpac Classic account statements show a number of deposits which are explicable as being the amount of rent collected by him and deposited to his account which correspond with the amounts which the tenants were paying. In respect of these payments a number of the deposits really represent an assumption of a total for a series of rental payments but there is no evidence to support this. For this reason I will discount the first two claims of $1,040 and $1,820. This leaves an amount of $18,900 as having been identified as deposited in the plaintiff’s account and representing rental payments. I am satisfied the plaintiff received and retained these amounts. The amount should be apportioned if it ever became necessary due to a different view is being taken of the law in the matter and an allowance made for a receipt of $2,800 by the defendant.

71 Another matter which was not argued before me was the question of whether there was an ability to recover amounts in respect of the period prior to the time when the defendant ceased to be in occupation which was on 18 November 2002. In Henderson v Eason referred to in Forgeard Parke B described the state of the law in these terms:

“There is no doubt as to the law before the statute of 4 Ann. c. 16. If one tenant in common occupied, and took the whole profits, the other had no remedy against him whilst the tenancy in common continued, unless he was put out of possession, when he might have his ejectment, or unless he appointed the other to be his bailiff as to his undivided moiety, and the other accepted that appointment, when an action of account would lie, as against a bailiff of the owner of the entirety of an estate.

Until the Statute of Anne this state of the law continued. That statute provides by section 27, that an action of account may be brought and maintained by one joint tenant and tenant in common, his executors and administrators, against the other, for receiving more than comes to his just share or proportion, and against the executor and administrator of such joint tenant or tenant in common, and the auditors are authorized to administer an oath.
Declarations framed on this statute vary from those at common law, as it is an essential averment in them that the defendant has received more than his share. This was held in the case of Wheeler v. Horne (Willes, 208), and in Slurton v. Richardson (13M,&W.17.)”

72 On the facts in that case the present issue did not arise. However, it would seem that, absent ouster or an express appointment as bailiff, there was no available cause of action to the co-owner as he did not have title to sue. In these circumstances as the plaintiff has not been ousted or appointed his co-tenant a bailiff prior to commencing the proceedings, he does not have the right to claim for rent received by the plaintiff. It matters not whether the rents were received when both or only one person were in occupation.

73 I direct the parties to bring in short minutes to give effect to the findings in this judgment.

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15/07/2008 - Bank account numbers have been changed so they are anonomous. - Paragraph(s) 6

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Citations

Ku v You [2008] NSWSC 712

Cases Citing This Decision

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Cases Cited

6

Statutory Material Cited

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Neilson v Letch (No 2) [2006] NSWCA 254

Calverley v Green [1984] HCA 81

CITATION:	Ku v You [2008] NSWSC 712 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	04/12/07, 05/12/07, 29/01/08, 30/01/08, 19/05/08, 20/05/08, 02/06/08
JUDGMENT DATE :	15 July 2008
JURISDICTION:	Equity Divison
JUDGMENT OF:	Macready AsJ at 1
CATCHWORDS:	Equity - General Principles - Trusts. - Property purchased by two persons. Deductions as to proportional ownership and findings as to an account of mortgage repayments and outgoings on the property.
PARTIES:	Ja Kil Ku v Yern Sung You
FILE NUMBER(S):	SC 5384 of 2005
COUNSEL:	Ms G. Mahoney for plaintiff Mr RA Parsons and Mr JE Armfield for defendant
SOLICITORS:	Dahan Lawyers for plaintiff Deutsch Partners Lawyers Pty Ltd for defendant