Laurette v Walsh

[2010] NSWSC 414

CITATION:	Laurette v Walsh & Anor [2010] NSWSC 414
HEARING DATE(S):	27 and 28 April 2010, 21 May 2010
JUDGMENT DATE :	27 May 2010
JUDGMENT OF:	Ball J
DECISION:	1. Order that by way of adjustment and settlement of property interests pursuant to the Property (Relationships) Act 1984, s 20, the First Defendant pay the Plaintiff the sum of $16,000 on settlement of the sale of the property owned by them jointly. 2. Application for a declaration that the Second Defendant holds his share of the property owned by the parties on trust for the Plaintiff be dismissed. 3. Matter stood over until a date to be fixed in August 2010 for the making of formal orders under s 66G of Conveyancing Act 1919 (NSW). 4. Liberty to apply on 1 day's notice.
CATCHWORDS:	DE FACTO RELATIONSHIP - Property adjustment - Contributions of other family members - Constructive trust claimed over share of property held by Defendant's brother
LEGISLATION CITED:	Property (Relationships) Act 1984 Conveyancing Act 1919
CATEGORY:	Principal judgment
CASES CITED:	Baumgartner v Baumgartner (1987) 164 CLR 137 Bilous v Mudallar (2006) 65 NSWLR 615
PARTIES:	Kym Laurette (Plaintiff) Damon Walsh (First Defendant) Matthew James Walsh (Second Defendant)
FILE NUMBER(S):	SC 2007/256646
COUNSEL:	Ms M Gillies (Plaintiff) J O Anderson (First Defendant) M K Graham (Second Defendant)
SOLICITORS:	White Barnes (Plaintiff) Martin Bell & Co (First Defendant) Hunter Family Law Centre (Second Defendant)

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BALL J

27 MAY 2010

2007/256646 KYM LAURETTE v DAMON WALSH AND MATTHEW JAMES WALSH

JUDGMENT

1 HIS HONOUR: The Plaintiff owns 50% of a hobby farm at Hedgewych Hills which I will refer to as the Kindee property. The First and Second Defendants each own 25% of that property. The property is held by them as tenants in common. The Plaintiff seeks an order pursuant to s 14 of the Property (Relationships) Act 1984 adjusting the interests of her and the First Defendant in the property with the result that she would acquire his 25% interest. The Plaintiff also seeks a declaration that the Second Defendant holds his 25% interest on trust for her and various ancillary orders.

2 The Plaintiff is currently 53 years old and the First Defendant is currently 36 years old. The Second Defendant is the First Defendant’s younger brother.

3 The Plaintiff and First Defendant met in late 1991 and started living together in a relationship in or about mid-1992. They continued to do so until 17 September 2005.

4 At the time the Plaintiff and First Defendant started living together the Plaintiff owned an HQ Kingswood wagon and various items of furniture and jewellery. The First Defendant owned a 4 wheel drive Land Rover Series 3. There are disputes about the value of the property owned by each of them at that time and whether or nor the First Defendant also had $9,000 then. However, I do not think that anything turns on the resolution of those disputes.

5 The Plaintiff had two daughters who lived with her at the time the Plaintiff and First Defendant started cohabitating and continued to do so for approximately 8 years.

6 The Plaintiff was involved in a motor vehicle accident in 1985. Apart from short periods of time totalling about 12 months, she did not work during the period of the relationship. However, she received a parenting pension and subsequently a disability pension. In addition, she received child endowment and child support of approximately $120 per month from her daughters’ father during the time her daughters lived with her.

7 When the Plaintiff met the First Defendant he was an apprentice chef. During the course of their relationship he had approximately 6 or 7 jobs with various restaurants and clubs. His income from those jobs was small. Each of those jobs lasted for a period of no more than 2 or 3 months. He worked for a total period of about 2½ years. At other times, he received Newstart or unemployment benefits and, later, a disability pension.

8 During the period of their relationship, the Plaintiff and the First Defendant pooled their income to pay living expenses, although it appears that, for a time, the Plaintiff continued to be responsible for rental payments in relation to the premises they both occupied.

9 In 1994 the Plaintiff received approximately $82,000 as compensation for her motor vehicle accident. She used part of that money to pay $2,000 in back rent and $5,455 for rent in advance for premises at Cooranbong. The Plaintiff also used part of that money to buy a Torana LXSS V8 hatchback for $5,400 and an HQ Kingswood V8 for $3,500. In addition, the Plaintiff used $27,000 to buy a property at Gin Gin. That property was bought in the name of the Plaintiff and the First Defendant.

10 On the material before me, it is not possible to determine how the balance of the $82,000 was dispersed. The Plaintiff attempted to give detailed evidence in relation to that question. However, the material she relies on is organised in a way which means it is not possible to determine what amounts have been double counted. In addition, a significant amount of the supporting material on which she relies does not obviously support the assertions she makes. It appears, however, that the balance of the $82,000 was applied largely towards paying the Plaintiff’s and First Defendant’s living expenses, to some traffic fines incurred by the First Defendant and to IVF treatment undertaken by the Plaintiff.

11 On 29 December 1995, the Plaintiff and First Defendant were both injured in another motor vehicle accident. Both made claims in respect of that accident. On 23 May 1997, the Plaintiff received $10,000 in advance in respect of her claim. The evidence suggests that the Plaintiff paid that amount to the First Defendant.

12 In December 1997 the property at Gin Gin was sold for $28,000 and the proceeds from the sale were paid into a bank account controlled jointly by the Plaintiff and First Defendant.

13 In November 1998 the Plaintiff received the sum of approximately $98,000 as compensation for the second motor vehicle accident. Again, it is not possible from the evidence to determine precisely how that money was dispersed. The Plaintiff contributed approximately $30,000 towards the purchase of the Kindee property about which I say something more shortly. She also appears to have bought a number of motor vehicles and two boats. The balance of the compensation payment appears to have been used to pay household expenses, further costs in relation to IVF treatment, some additional traffic fines payable by the First Defendant and other miscellaneous expenses.

14 The First Defendant received a net amount of approximately $119,000 in respect of his compensation claim in June 2000. For the most part, the First Defendant gives no account of what he did with that money. He contributed $20,130.90 towards the purchase of the Kindee property. I accept that he paid moving expenses totalling approximately $10,000 and contributed some amount of money towards household expenses and upkeep of the Kindee property. The First Defendant says that he purchased “quite a few cars” from the proceeds of his compensation payment. However, he does not identify which ones they were. I find that he spent a large proportion of the amount he received on himself.

15 The Plaintiff and First Defendant lived in a number of rented places from the time they established their relationship until May 2002. In May 2002, they bought the Kindee property. The purchase price was $208,000. Part of that amount plus stamp duty and legal fees of $6,274 and other expenses associated with the purchase were contributed by the Plaintiff and First Defendant in the amounts I have referred to. The balance ($166,400) was borrowed from the Commonwealth Bank and was secured by a mortgage over the property. The Bank was not prepared to lend the Plaintiff and First Defendant the amount to be borrowed because neither of them worked. As a consequence, the Second Defendant, who was working as a panel beater at the time, agreed to become a party to the loan agreement and took a 25% interest in the property. The precise way in which that came about is the subject of a dispute. What is clear, however, is that it occurred at the request of the First Defendant and either directly or indirectly at the request of the Plaintiff. The likelihood is that the Plaintiff proposed that she take a 50% interest and with the result that the First and Second Defendants took a 25% share each.

16 On 8 August 2003, the amount of the loan was increased by $15,000 and on 25 May 2004 it was increased by a further $22,600. Again, it is not clear how that money was used. However, it appears that a significant proportion of it was used to improve the property and possibly to buy livestock.

17 The mortgage repayments were made from a joint account in the name of the Plaintiff and First Defendant. The Second Defendant did not make any contributions to those mortgage repayments. He lived on the property for approximately 6 months and, during that time, he paid rent of $150 per week, although it appears that that amount was paid to the First Defendant, not the Plaintiff. The Second Defendant also did some work on the property whilst he was living there and, periodically, when he stayed for weekends. He also made some contribution to the household expenses during those times.

18 On 17 September 2005 the Plaintiff and First Defendant ceased to cohabit. The break up was acrimonious. At that time, the Commonwealth Bank mortgage balance was approximately $202,000. It appears that there were approximately 57 head of cattle on the property at that time. In addition, there were a number of motor vehicles, a caravan and at least one boat on the property.

19 On 26 April 2006, the Plaintiff moved back to the property for about one month while the First Defendant was away. The parties give diametrically opposed accounts of what happened during that time. The Plaintiff says she went to considerable effort to improve the property for sale. The First Defendant says that when he returned to the property he found that considerable damage had been done to the house and the motor vehicles and that the house had been left in a filthy state. He also said that the Plaintiff had taken various items from the property, including a washing machine and his chef knives. The First Defendant said that he took a number of photographs of the condition of the house on his return, some of which were tendered as evidence. On balance, I accept the First Defendant’s version of these events. As I have said, the split was acrimonious. The Plaintiff was in residence for a month knowing that the First Defendant would return and that she would have to move out. The only other possible explanation for the photographs is that the First Defendant caused the damage and mess for the purpose of taking photographs in order to fabricate a story about what the Plaintiff did. That seems to me to be unlikely. I also accept the First Defendant’s evidence that he has carried out some repairs to the property following the Plaintiff’s departure. On the other hand, I think the First Defendant has exaggerated in his evidence the extent of the damage that was caused by the Plaintiff.

20 After the First Defendant returned to the property he sold all of the cattle on it and most of the motor vehicles. Some of the motor vehicles he says could only be sold as scrap. One of the motor vehicles (an LXSS Torana) he concedes was sold for an amount of approximately $12,000. There is some evidence that he also obtained approximately $12,000 from the sale of the cattle. However, it is not possible from the evidence to know whether that was the total amount he received from the sale of cattle. Nor is it possible to know what amount he received from the sale of the motor vehicles, although, having regard to their age and state, the likelihood is that it was small. There was also a caravan and one or two boats on the property but, so far as the evidence goes, their value also was small. Consequently, the only significant property owned by the Plaintiff and the First Defendant at the time of their separation was their interest in the Kindee property, the cattle and the LXSS Torana. The remaining property, I think, can be discounted as insignificant, particularly since it seems already to have been split between the parties.

21 Following the Plaintiff’s departure from the property, she ceased to contribute towards the repayment of the loan. At least two default notices were issued by the Bank. The First Defendant appears to have used at least part of the money raised from the sale of cattle and the motor vehicles to pay the amount in arrears. He also admits that he used part of the proceeds of sale of the LXSS Torana to pay legal fees.

22 On 30 July 2008, the Court made consent orders in relation to the sale of the property. Under the terms of those orders, if the property was not sold within 6 months it was to be listed for sale by public auction with the reserve price to be agreed by the parties or, in the absence of agreement, to be stipulated by a nominee appointed for that purpose by the President of the Real Estate Institute of NSW. Those orders have not been complied with because none of the parties has paid in advance the auctioneer’s fees. According to the Plaintiff, she does not have the resources to do so.

23 Shortly before the hearing, an offer of $340,000 was made for the property. The parties agreed that they would accept an offer of $365,000. However, the First Defendant gave evidence on the second day of the hearing that the offer of $340,00 had been withdrawn. The likelihood is, then, that the total amount in dispute is in the order of $140,000 less the costs of sale.

24 Before considering whether any order should be made under the Property (Relationships) Act, it is necessary to make a determination of the parties’ interests in the property.

25 The Plaintiff maintains that the Second Defendant holds his 25% share on trust for her and the First Defendant in accordance with the principles set out in Baumgartner v Baumgartner (1987) 164 CLR 137. In that case the parties were in a de facto relationship. They originally lived in a unit owned by the man. That was sold and they bought a house in his name. They had pooled their earnings and from those pooled earnings paid the mortgage on the house and other expenses associated with it. When their relationship ended the man maintained the house belonged to him. The High Court held that it was, in the circumstances, unconscionable for the man to refuse to recognise that the woman held an equitable interest in the property. Consequently, it imposed a constructive trust as a remedy to circumvent that unconscionable conduct.

26 Applying those principles, the question is whether it is unconscionable for the Second Defendant to assert that he has a 25% interest in the property. In my opinion, the Second Defendant has not engaged in unconscionable conduct by doing so. The Plaintiff would not have been able to acquire her 50% interest in the property unless the Second Defendant had agreed to become liable for repayment of the loan. He agreed to do so in exchange for the interest that he obtained. The Plaintiff accepted that agreement. As a result of that agreement, the Second Defendant became exposed to a substantial liability to the Bank. The Second Defendant did not receive anything in exchange for undertaking that liability apart from his interest in the property. Although the mortgage repayments were met by the Plaintiff and First Defendant, they were the ones who enjoyed the benefit of the property. When the Second Defendant did reside at the property, he paid rent. He also did some work on the property. In those circumstances, I do not think it is unconscionable for him to assert the interest he has.

27 The next question is whether the Plaintiff is entitled to an order under s 14 of the Property (Relationships) Act 1984 adjusting the Plaintiff’s and First Defendant’s interests in the Kindee property.

28 In answering that question, several points should be borne in mind.

29 First, although the only property left to be divided is the parties 75% interest in the Kindee property, I think that, in considering what division is appropriate, some account must be taken of the fact that the First Defendant received, even on his own evidence, $24,000 for the sale of the LXSS Torana motor vehicle and the cattle. I do not think that these amounts can be regarded as insignificant in the context of this case. Moreover, I think that it is appropriate to take at least that amount into account given that the First Defendant has produced no evidence at all of what he actually received and there is some evidence to suggest that the cattle, at least, were worth more than what he says he received for them.

30 Second, in considering whether to make an order the Court is required under s 20 of the Act to consider the financial and non-financial contributions made directly or indirectly by or on behalf of the parties to the relationship to the acquisition, conservation or improvement of any of the property of the parties or the financial resources of the parties and any contribution made by them to the welfare of the other party to the relationship. The Court is not concerned with the future needs of the parties. Nor is it concerned with the general conduct of the parties during the course of the relationship.

31 Third, the Court has a broad discretion in determining the approach to adopt in considering what orders should be made. In the majority of cases, a global approach is likely to be more convenient than an asset by asset approach: Bilous v Mudallar (2006) 65 NSWLR 615 at [42]. In my opinion a global approach is necessary in this case having regard to the state of the evidence and to the fact that the Plaintiff places considerable weight on the contributions she made which are not directly referrable to the assets to be divided or to be taken into account in dividing them.

32 The Plaintiff currently has a two-thirds interest in the remaining property of the relationship. I do not think that she has established that she made a greater contribution than that. I accept that she made a substantially greater contribution than the First Defendant to household expenses and to the running of the Kindee property generally. I also accept that, on occasions, the Plaintiff paid expenses on behalf of the First Defendant, although it is not possible on the evidence to quantify that amount. On the other hand, the First Defendant contributed $20,000 to the acquisition of the Kindee property (which is more than a third) and he contributed the whole of his pension entitlements to payment of the mortgage and, to the extent that there was any money left over, to household expenses. I also accept that the First Defendant made some improvements to the property following the Plaintiff’s departure and made some contribution while she was there. In these circumstances, I think a one-third/two-third apportionment is reasonable.

33 That leaves the $24,000 received from the sale of the LXSS Torana motor vehicle and cattle. On the approach that I have adopted, the Plaintiff’s contribution to those assets should be regarded as being two-thirds. Whether that contribution was a direct or indirect one does not matter. On the other hand, the First Defendant has received the benefit of those assets. On his own evidence, some of the money was used to pay his legal fees. Some of the money was also used to pay amounts due in respect of the mortgage. However, the First Defendant had exclusive use of the property when those mortgage payments were made. Consequently, I do not think those payments can be regarded as benefiting the Plaintiff. Nor do I think it is any answer to this last point to say that the Plaintiff has also been entitled to occupy the property. In the circumstances of this case, that right is illusory. As a result, I think that the First Defendant should give the Plaintiff credit for two-thirds of the amount he has received from the sale of the cattle and motor vehicle – that is, $16,000. That amount should be paid out of the proceeds of sale of the Kindee property.

34 The parties accept that the property must be sold. In those circumstances, I think it would be appropriate to make an order under s 66G of the Conveyancing Act 1919 appointing one or more trustees for the sale of the property. However, I am not prepared to make that order until the Plaintiff has identified a suitable trustee or trustees who have filed affidavits consenting to their appointment. In addition, I think it would be sensible to give the parties some time to see whether the property can be sold without the need for the appointment of a trustee. It would be unfortunate if a significant part of what little equity the parties have in the property were absorbed by the fees a trustee is likely to charge.

35 In these circumstances, I propose to stand the proceedings over for 3 months. Unless the parties otherwise agree and subject to the identification of an acceptable consenting trustee, I will make formal orders for the appointment of a trustee at that time. I give the parties liberty to apply on 1 day’s notice.

36 I will hear the parties in relation to the question of costs.

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