Matsen v Matsen
[2008] NSWSC 135
•26 February 2008
CITATION: Matsen v Matsen [2008] NSWSC 135 HEARING DATE(S): 5 & 6 February, 3 – 6 September, 25 October 2007 and 8 February 2008
JUDGMENT DATE :
26 February 2008JURISDICTION: Equity JUDGMENT OF: Hamilton J DECISION: Application for appointment of trustees for sale under s 66G refused. Terms of loan from plaintiff to defendant determined. CATCHWORDS: REAL PROPERTY [315] – Partition of land – Statutory trust for sale or partition – Discretion of Court – Existence and extent of discretion – Contractual limit on disposal of interest. LEGISLATION CITED: Conveyancing Act 1919 ss 23C, 54A & 66G CATEGORY: Principal judgment CASES CITED: Callahan v O’Neill [2002] NSWSC 877
Chalhoub v Chalhoub [2005] NSWSC 572
Elton v Cavill [No 2] (1993) 34 NSWLR 289
Goyal v Chandra (2006) 12 BPR 23,553
Grizonic v Suttor (2004) 12 BPR 22,797
Hogan v Baseden (1997) 8 BPR 15,723
In re Buchanan-Wollaston's Conveyance; Curtis v Buchanan-Wollaston [1939] Ch 738
In re Evers’ Trust; Papps v Evers [1980] 1 WLR 1327
Ngatoa v Ford (1990) 19 NSWLR 72
Re Fettell (1952) 52 SR(NSW) 221
Re McNamara and the Conveyancing Act (1961) 78 WN(NSW) 1068
Re Permanent Trustee Nominees (Canberra) Limited [1989] 1 Qd R 314
Stephens v Debney (1959) 60 SR(NSW) 468
Williams v Legg (1993) 29 NSWLR 687
Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,685PARTIES: Ronald Gibson Matsen (P)
Kenneth Leslie Matsen (D)FILE NUMBER(S): SC 6080/05 COUNSEL: T J Rickard then J E Rowe (P)
In person then A A Gomez (D)SOLICITORS: Anthony Scarcella (P)
Self represented then Kenneth Harrison (D)
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
HAMILTON J
TUESDAY, 26 FEBRUARY 2008
6080/05 RONALD GIBSON MATSEN v KENNETH LESLIE MATSEN
JUDGMENT
1 HIS HONOUR: These proceedings concern two brothers, Ronald Gibson Matsen, who is the plaintiff, and Kenneth Leslie Matsen, who is the defendant. They have had a complicated and difficult relationship over most of their adult lives. The aspect of that relationship involved in these proceedings is their co ownership of a property at Dingo Tops, which is behind Wingham. The property is a steep and mostly timbered property of about 200 acres, which the brothers purchased as tenants in common in equal shares in 1993.
2 The principal questions for determination in these proceedings are: (1) whether the brothers own the property beneficially as well as legally in equal shares or in some other proportion; and (2) whether the plaintiff is entitled to have trustees for sale of the property appointed under s 66G of the Conveyancing Act 1919 (“the CA”).
BACKGROUND
3 On two occasions before 1980 the brothers were together involved in motor car accidents. On each occasion the plaintiff was the driver. The defendant claims that in one or both of these accidents he suffered a neck and/or back injury that has caused or contributed to subsequent incapacity. The accidents and incapacity have been a subject matter of recrimination between the brothers. That the defendant has back problems that are incapacitating to a greater or lesser extent seems undoubted. There are candidates other than the driving accidents with his brother for the cause of the defendant’s back problems. It is unnecessary (and, indeed, impossible on the material available) to determine the cause or extent of the defendant’s disability.
4 During the 1980s the brothers were looking, originally in conjunction with their parents, to buy some rural land. The plaintiff was at this time a serving member of the Royal Australian Navy. In about 1984 he wrote to the defendant:
- “the land is to be in your name & I’ll leave the rest to you – maybe I can holiday with you in future years, but get yourself established ASAP.”
5 In the mid 1980s their mother was diagnosed with terminal cancer and the parents dropped out of the project. Shortly after that time, according to the plaintiff, the brothers had a conversation to the following effect:
“Ken: ‘Let’s keep looking for a property together.’
Ron: ‘I’m prepared to continue with the project with just the two of us in equal shares. We each make equal contributions to the purchase and maintenance of the property.’
Ken: ‘I won’t be able to pay my share up front because I’m only on an Invalid Pension. However, with my savings on not having to pay rent to the Housing Commission and the income from my Yoga teaching, I will be able to pay off my share and pay my way.’
Ron: ‘We need a property big enough for me to farm and produce an income for my family because my Navy pension won’t be enough to live on. It needs a good permanent water supply and it can’t be too far out of town because of the kids’ schooling.’
Ken: ‘It has to be on high ground so that I can build a laboratory in which to conduct my experiments, my research and teach Yoga. I need to focus the energy of the property. It has to be big enough for us to each have our own space to do our own thing and to live on with power, water and phone.’
Ken: ‘Agreed.’”Ron: ‘But it can’t be too expensive.’
This conversation is not disputed.
6 The search continued in a desultory fashion from the mid 1980s until 1993. The plaintiff said that “some time” between 1988 and 1991 he gave the defendant a cheque for $5,000 “to be used as a holding deposit when he found a suitable property for us to buy in accordance with our agreement.” The defendant admitted that his brother gave him $5,000, but denied that it was ear marked as a deposit for the purchase of land. He said that it was a gift for general purposes.
EVENTS SURROUNDING PURCHASE
7 In about 1993, the defendant found the property at Dingo Tops, which was for sale through a real estate agent. The defendant said that he telephoned the plaintiff and they had a conversation to the following effect:
“I said: ‘I finally found the land that I want! It looks pretty good to me. I have finally found a piece of land for my work, for my research and for me to teach yoga. At Dingo Tops. It could be a retreat of sorts for people who wanted to get away. Finally, a permanent place for my research. It is isolated and elevated. It is just what I need. I just want to know whether you want to get in on it or not?’
The Plaintiff said: ‘It sounds good. As you know, I have been looking for a bit of country for my sons, for them to visit on the holidays. Yes, I do want to get in on it. In case of social disruption, I want to be able to retreat to it with my family. But I want to see it first.’
I said: ‘Before you say yes, you must understand that the land is for my sons. I want to leave it to them when I am gone. I want them to be taken care of. If you come in on the land, I want the majority share. If you want to get out of the land, you have to sell it to me only for the amount of money you put in. It is not ever to be sold for profit. It is for the family. It should always remain in the family. If you do not agree, Kev [Mr Lynch] will come in on the land with me. He is willing to help me pay for the land if you do not want to come in on the land. But Kev [Mr Lynch] will back out if you want in.’
The Plaintiff said: ‘Okay. I will agree to what you want.’
I said: ‘Also, there is good timber on the land. I asked Kev [Mr Lynch] and he told me that the timber would pay for the land. It would be great for my boys, the timber would be able to take care of them when I’m gone. It would be a good idea to capitalise on the timber on the land.’
I said: ‘Come up and see it. I am not sure what else you could do on it but the person to ask is Kev [Mr Lynch]. We can go up together. And you can have 2 weeks to think about it before you decide.’”The Plaintiff said: ‘That would be great. We could pay for it and then get our money back from the timber and any money left over, we will split it 50/50. I wonder what else we could do on the land?’
In a subsequent affidavit, he stated that, after the words “… it is not ever to be sold for profit”, he added the words “I’m never going to sell the land”.
8 The plaintiff did not deny that a telephone conversation took place at the time of that set out above. However, he did say that it was after the purchase of the property (not before) that the defendant told the plaintiff that he could only ever sell his interest in the property to the defendant, and for the amount that the plaintiff put in, and that the defendant was not ever going to sell the property; but the plaintiff said that he did not at any time agree to any of these propositions.
9 The plaintiff lived in Sydney. He went to the North Coast and visited the property with the defendant and the real estate agent. The plaintiff said there were two such visits before the property was bought. The defendant spoke of only one such visit and said that his friend Kevin Lynch was also present.
10 The plaintiff said that on the first visit he was unenthusiastic about the property and told the defendant so.
11 The plaintiff said that the second visit took place on a weekend in early May 1993. He agreed that Mr Lynch was present on that occasion. The plaintiff’s version of the conversation was that the following conversation took place between the brothers in the absence of Mr Lynch:
“Ken: ‘Why don’t you want to buy it?’
Ron: ‘There’s no accommodation for you to live in.’
Ken: ‘I’ve spent 10 years building my infrastructure in this area. My friends will help build my lab. I can live in it and teach yoga.’
Ron: ‘There is no power or phone.’
Ken: ‘I don’t need power, I can get a generator. I can buy a mobile phone so that’s no problem.’
Ron: ‘It’s too far from town. Your old car won’t do the trips for long.’
Ken: ‘I won’t have to go to town too often, only about once per month or so for food and supplies. Besides, my friends and students will help out if I need it.’
Ron: ‘The place is too remote and too far from town. What if you get crook and need your doctor?’
Ken: ‘I can phone them and they’ll send an ambulance if I need it.’
Ron: ‘The road is too steep and ambulances aren’t four wheel drives, so it won’t be able to get here in the wet.’
Ken: ‘No problem they can fly a helicopter up here if I need it.’
Ron: ‘Where can a helicopter land up here? There are too many trees and not enough clearing?’
Ken: ‘I’ll cut down a few of these trees around this flat spot. No problem.’
Ron: ‘It’s too steep. We’ll need a four wheel drive to get around the place, especially when it is wet.’
Ken: ‘No we won’t.’
Ron: ‘What if you have to go to the creek to get water?’
Ken: ‘I’ll buy a postie motorbike at auction to go down there and back. Besides, I’ll have tanks up here at the lab. Ron, I have done my research. It rains up here a lot and it has a good climate. That’s why this place is ideal for my work. I won’t have to go to the creek for water very often because the rain will keep the tanks at the lab full. Water won’t be a problem. Trust me I know what I am doing.’
…………………
Ken: ‘My Yoga students will pay big money to come up here. It’s pristine, remote and unpolluted. It’s the perfect environment to teach my Yoga.’
Ron: ‘If I put in my Long Service Leave pay of about $30,000.00 and the price is only $39,500, I want the $30,000.00 share of the land.’
Ken: ‘No way! I found it, so I want half.’
Ron: ‘So, you’ll put up half, being $19,250.00?’
Ken: ‘No I can’t. I don’t have it.’
Ron: ‘Why not? You got $5,000.00 “go away money” from Mum and Dad; $5,000.00 deposit from me and $10,000.00 from Grandad Griffiths.’
Ken: ‘Yeah but I have to live. So I’ve had to spend some of it. My pension isn’t much you know.’
Ron: ‘So how much can you put up?’
Ken: ‘I don’t know. Not much. I need most of what I have to build my lab.’
Ron: ‘If I’m putting in most of the money, I am entitled to most of the land.’
Ken: ‘No way! I found it. So, I want my half.’
Ken: ‘I’ve told you, my friends up here will help build my lab and I can live in it, teach my Yoga and do my research and experiments.’”Ron: ‘I’ve been looking too, you know. Just because you want this block, doesn’t automatically entitle you to half. There is no house or anything, where are you going to live?’
12 The plaintiff said that the following further conversation occurred in Mr Lynch’s presence:
“Ken: ‘You’ve got everything, you’ve got your house in Sydney and I’ve got nothing. You’ve still got you [sic] family but I haven’t. Why can’t I have something? Why can’t you help me?’
Ron: ‘Alright, how can we make this work?’
Ken: ‘I’ll build my lab on the high ground. You can build anywhere else you want.’
Ron: ‘We must build on the same sized area, but no more than an acre.’
Ken: ‘Okay, no problem. My lab won’t take up much room.’
Ron: ‘If you want half how are you going to pay for your half?”
Ken: ‘I’ll move up here as soon as possible. The rent, electricity etc. I save on my Libya Street Housing Commission house will be plenty. Besides, I’ll be teaching Yoga and my students will pay.’
Ron: ‘What about your accommodation, power, water and phone?’
Ken: ‘Me and my friends have that covered.’
Ron: ‘What about the rates?’
Ken: ‘You pay your half and I’ll pay mine.’
Ron: ‘Okay but if the rates increase because one us builds something that causes the rates to increase, that person is to pay the difference.’
Ken: ‘Okay, no problem.’
Ken: ‘No way! What for? There is no need. I’m your brother you can trust me. I’ve given you my word of honour. I won’t screw you.’”Ron: ‘Okay. I’ll get an agreement sorted out.’
13 The plaintiff said that the brothers then shook hands on the agreement and the following conversation ensued:
“Ken: ‘How are you going to pay for it?’
Ron: ‘You’ve got the $5,000.00 deposit I advanced to you a year or so ago. I’ll put in my Long Service Leave pay of about $30,000.00 and you pay all the rest.’
Ron: ‘My Long Service Leave pay won’t come through until after my discharge date on 12 July 1993. I’ll have to organise a bank loan to make it happen sooner. So, you pay the deposit of $5,000.00 to hold the property until the other money comes through.’“Ken: ‘Okay, if that’s the way it has to be. I really want this block, it’s got everything I need.’
14 The defendant’s version, which clearly relates to what the plaintiff said was the second occasion, was as follows:
“I said: ‘So Ron [the Plaintiff], what do you think of the land? It is land that would be great for my research. The land is primarily for my research. I have to have the upper part of the land and the majority share. I have to have the 101 acres up top for myself. You will have use of the 90 acres below either on the other side of the land or along the river. If you do not agree to my terms than [sic] I will get help from Kev [Mr Lynch] to purchase the land.’
The Plaintiff said: ‘I like the land but I want to know what I can do on the land? Can I have cattle on it or use it for agriculture?’
Mr Lynch said: ‘Not for agriculture. The land is too steep and there is too much bush on the land for beef. You might be able to grow something down by the creek but that is all.’
I said: But the timber on the land is good. The timber would finance the land, both the buying and the maintaining of the land.’
Mr Lynch said: ‘The timber on the land will be able to cover the cost of its purchase. The timber that you need for that can be logged immediately. I can help Ken [the Defendant] with that.’
I said: ‘Whatever money we put in to purchase the land, we will get back through the timber.’
I said: ‘I want the land. Kev [Mr Lynch] will swing in and help me get the land if you do not want it. If you want it, you have 2 weeks to make up your mind. If not, I am going in with Kev [Mr Lynch].’”The Plaintiff said: ‘That is good. I will have to think about this.’
15 Mr Lynch works as a grazier on his family properties of 1500 to 2000 acres at Koolombakh. He has been working with timber virtually all his life. His evidence followed an unusual course. On the second day of the trial an affidavit of his prepared by the defendant, who was then appearing in person, was read, but was largely rejected. He was then examined in chief by the defendant and cross examined by Mr T Rickard of counsel, who was then appearing for the plaintiff. Subsequently, the present counsel commenced to appear for the parties, Mr J E Rowe for the plaintiff and Miss A A Gomez for the defendant. After that a further affidavit by Mr Lynch was read.
16 Mr Lynch gave evidence that, before the contract for sale was entered into, he was present at conversations between the plaintiff and the defendant concerning the acquisition of the property on three or four occasions. He was present on the property on the day of the lengthy discussions between the two brothers of the terms on which the property was to be bought. His evidence was that he was with one or both the brothers at all times on that visit to the property, so there was no opportunity for conversation between them in his absence. He gave the following evidence in chief:
“Q What were the other conditions that Ken stipulated in Ron’s presence on this day?
A That the land was never to be sold, that it was never to be sold at profit; that it was purchased to stay with the family forever; that it was something that Ken had from the outset from when we were looking for land in the eighties. Ken had always said that this land --
Q You are being asked what was said on this particular day?
A That was said too. I mean, it was re-affirmed --
Q Don’t worry about what was reaffirmed, what was said on the day?
A It was said on the day, as Ken has said - yeah, Ken has said he always wanted land to be held for the family for the future.
…………..
Q Did he say this on this day?
A Yes, he said that at me [sic] house as well.
Q You’re only being asked about this day?
A So there was discussions as to why - the reasons for the purchase of the land, it was to make a secure place for the family to retreat to.
Q Anything else you can remember that was said on that day?Q For Ron Matsen’s family?
A For Ron Matsen’s family as well as for Ken’s, to be held forever and never to be sold in that instance.
A If it was to be sold it was to be sold for non-profit to the other persons to be given the offer of purchasing at the purchase price [sic]. There was never to be an increment of value on the land because it was part of Ken’s desire that this would be part of the agreement.”
17 Mr Lynch also said on that occasion that he was prepared to buy the property with the defendant if the plaintiff did not wish to do so; that there was more than adequate timber on the property “to pay for the 15 to 20,000 dollars which would have been Ken’s part of the property”; that it was agreed between the plaintiff and the defendant that the defendant was to have the primary right of occupancy of 101 acres and the plaintiff of 90 acres; and that the upper part of the property was poor grazing land, but that there was potential for growing fruit trees and some vegetables on the lower part of the land. Mr Lynch re emphasised in cross examination that agreement was reached at the property, but was also reconfirmed at his house that evening. There the defendant had repeated that the “property is never to be sold, it is to stay in the family for the future” and that the plaintiff agreed to that proposition. He said that the brothers paid a subsequent visit to the property together, but that he was not present on that occasion.
18 Mrs Ford gave oral evidence that she was in a relationship with the defendant between 1991 and 1995. She said that she was present at a conversation between the plaintiff and the defendant before the purchase of the property in which it was said that “what would happen is that the land wasn’t to be sold, it would be passed to the boys and kept in the family and the family could actually live … on the land. It was like 50/50 or half and half, like half and half.” This conversation appears to have been away from the property.
19 The defendant’s eldest son, Andrew Garth Matsen, deposed that before the purchase he was present at a conversation between the plaintiff and the defendant at the defendant’s home to the following effect:
“Mr father said: ‘There should be no restrictions to access to the creek for water. No restrictions on using the road to get to the creek.’
My father said: ‘The land must never to be sold outside the family. It had to be sold within the family for the purchase price.’”My uncle said: ‘I agree to that.’
20 Robert McMaster of Nabiac is a fourth generation farmer and producer of beef cattle and he has also been involved in timber milling since 1976. He deposed that he had a conversation with plaintiff and the defendant shortly before the settlement of the purchase. The conversation took place at his home as follows:
“Mr Matsen said: ‘I am going to buy that land I was telling you about. I am going to use the land for my research. I am going to finally build my laboratory. And I will be able to do my Yoga there as well. The land will be good for my boys as well. The land must stay in the family for perpetuity. For our boys. It must never be sold for profit. It will be for the family only.’
Throughout what Mr Matsen was saying, the plaintiff was nodding his head.
I said: ‘Ron [the Plaintiff], you agree that the land is not to be sold ever? That the land is for Ken’s [Mr Matsen’s] research.’
The Plaintiff said: ‘Yes, the land will be only for the family.’
I said: ‘Should both of you not have this in writing?’
Mr Matsen said: ‘There is no need. We are both excited about this.’
The Plaintiff said: ‘Yes. This is a great idea for the boys. This would be good for the family. This would also help Ken [Mr Matsen] out.’
Mr Matsen said: ‘We have said that I would get the top half of the land as I need a remote area that is not accessible to the public. I do not want children to play with my equipment or to get injured by my experiments.’
The Plaintiff said: ‘That works for me as I want the lower area, near the creek. Just an area for my boys to visit. And I can grow some fruit trees there as well.’
I said: ‘Well you can but you are going to have to protect the fruit trees from the native animals. It would be very labour intensive until established. And it definitely has to be near the creek. The area is flat and you can grow what you need and more. But you have to take lots of care of it. In Ken’s [Mr Matsen’s] area, you can only grow a small number of vegetables and fruits, but only if beds are made.’
Mr Matsen said: ‘Can the timber on the land pay for the land?’
I said: ‘Before selling land with timber, the timber would most likely be logged before you get it. Also, Forestry has logged the area. The timber on the land would therefore not be ready for felling. There has been a dry period from 1988 through to 1989 and the trees would not have matured to the stage where they could be harvested for commercial use. The first cull could be in the first 6 years. But you would have to wait about 10 or 15 years before you can realise a viable harvest, before you can harvest the timber fully. I can help you with milling the timber on the property to sell it as value added product and not just for a royalty. Kevin [Kevin Lynch] with [sic] help too.’
Mr Matsen said: ‘But can we harvest the timber now?’
I said: ‘Yes you can harvest it now but to get a viable return on the timber, you are going to have to wait at least 6 to 7 years.’”The Plaintiff said: ‘Yes, can we get some money from it now?’
21 On 8 May 1993 the plaintiff wrote to the defendant a letter that contained the following:
“…the land looks good and should be a ‘goer’. Both Michael and Scott have agreed to contribute their savings to make it happen. However, before I committ [sic] their money and the bulk of my ‘golden handshake’ (their birthright) I think we need to agree on a few principles regarding our joint ownership.
As I understand the idea, the purchase was to give you and me plus our boys a place to go/escape to should the need arise. The idea is sound and fully supported but I would like our thoughts on the following:
1 All timber, mineral, flora, fauna, water, access rights and profit will be shared 50/50 between you and me.
2 The basic land rates to be split 50/50.
3 An area of one acre to be cleared for each of us to do with as we want and the rest to remain ar la natural [sic].
4 Pollution of any sort is of course a NO NO.
5 Dam construction is to be agreed.
6 No outsiders (non-family) are to live permanently on our property. Within your one acre that’s your problem.
What do you think Ken, can we make it work? I believe we can.”We are prepared to enter into partnership with you and your boys, however, outsiders are a different matter. Due to the terrain, I do not believe that the block can be split in two in any agreeable way (high and low, north and south) because I believe that both our dwellings MUST be above the fog and frost line and have a northerly aspect.
22 The plaintiff then listed 12 questions that he proposed to ask the lawyer. The last sentence of the letter is:
- “Let’s go for it, and make it happen so our boys are more secure.”
23 On 14 May 1993 the plaintiff wrote the defendant another letter stating that they had not discussed the finance in detail. This letter appeared to acknowledge that the defendant had contributed or would contribute deposit and costs totalling $7,000 without any suggestion that any part of these funds was from a loan by the plaintiff to the defendant.
24 The plaintiff in May 1993 approached the Commonwealth Bank of Australia for a loan and a letter to him from the Commonwealth Bank at Epping dated 2 June 1993 conveyed approval of a loan to him of $31,500.
25 The solicitor who acted on the purchase, Joan Pierpoint of Taree, did not give evidence. Initially the defendant engaged her because she was in the district where the property was located. There is in evidence a letter from her dated 17 May 1993 addressed to the defendant only, which stated that it enclosed the contract for the sale of the property. It seems on the evidence that the contract and very likely this letter came into the possession of the plaintiff, who took the contract to the Newcastle Gem Festival for the defendant to sign. The contract is not in evidence. It is clear from this letter that Ms Pierpoint recorded the purchasers in the contract as the plaintiff and the defendant as tenants in common in equal shares. The conclusion is inescapable that that was consistent with her instructions at the time. I do not accept that the defendant believed that the plaintiff’s name was on the contract only for some limited purpose and that the intention at that time was that title was to be taken in the defendant’s name alone.
26 Although it is not in evidence, a letter was written to Ms Pierpoint on 21 May 1993 posing the 12 questions listed in the plaintiff’s letter to the defendant of 8 May 1993. On 24 May 1993, Ms Pierpoint wrote a letter addressed to both the plaintiff and the defendant referring to the letter of 21 May 1993 and answering the 12 questions.
27 Mr Ferenc Godny gave oral evidence that the plaintiff brought documents to the defendant at the Gem Festival in Newcastle. Mr Godny witnessed the defendant’s signature on what he observed to be a contract for the sale of land; that was on the Queen’s birthday weekend.
28 On 5 June 1993 the plaintiff forwarded to the defendant a “land partnership agreement” in the following terms:
- “1 We, both Ronald & Kenneth agree to share this property, with Ken building his LAB on the highest point of the property and Ron building his house/dwelling on any other section of his choosing. The site of each individual structure is not to be more than one acre and are to be of equal area.
2 We, both Ron + Ken agree to pay one half of all annual land expenses (rates etc). If any land improvement [sic] cause any council rate increase, whoever is responsible for the improvements + subsequent rate rise will pay accordingly.”
This was not signed by the defendant.
29 On 23 June 1993, Ms Pierpoint wrote a further letter addressed to the plaintiff and the defendant confirming settlement of the purchase on that day. The letter indicates that in addition to the $31,500 received from the Commonwealth Bank of Australia a total of $3,338 (in addition to the deposit of $4,000) was received from “you” towards the purchase price and costs. The $31,500 that the plaintiff had raised from the Commonwealth Bank was applied to the purchase price.
30 The plaintiff admitted that both he and the defendant said before the purchase that it was intended that the property remain in the family. However, as noted at [8] above, he denied that it was ever said before the purchase that if he wished to sell the land that he must sell it to the defendant and for the amount contributed by the plaintiff to the purchase price. He further denied that he ever consented to that proposition.
SUBSEQUENT EVENTS
31 After settlement, the defendant with the aid of friends built himself two huts that provided him with accommodation on the property. On or about 14 June 1994, a bushfire on the property destroyed those huts and personal property of the defendant. There was a Coroner’s inquiry into the fire at which the plaintiff and the defendant were represented by Joseph Busuttil, a barrister who was a fellow member with the plaintiff of the Royal Australian Navy. The plaintiff and the defendant were greatly dissatisfied with Mr Busuttil’s services. The plaintiff and the defendant made complaints about these services. These included a complaint by the defendant to the Royal Australian Navy. Mr Busuttil exerted great pressure on the plaintiff to have that complaint withdrawn. In that context the defendant gave evidence that he had a conversation with the plaintiff as follows:
“I said: ‘What is wrong? You do not look good.’
The Plaintiff said: ‘My superiors want me to get you to drop this claim against Busutill [sic]. They say that they will destroy us if we continue. They will sack me and I will lose my pension. I will be ruined. You have to drop the claim against him. Please. You have to do it now.’
I said: ‘But if I do that, I will not have any chance of compensation. I have been destroyed by the fire. Without the compensation, I will not be able to go on. I have been made a bankrupt by the fire.’
The Plaintiff said: ‘You have to drop the claim. There is no other way. You are my brother. You have to do this for me. I will take care of you. You have the land. I will compensate you for your losses. But you have to withdraw the claim now. For me.’
The Plaintiff said: ‘I will take care of you. I promise. The land will no longer be a problem.’I said: ‘Okay. I’ll do it. But I am not happy about it.’
32 A few days later, the defendant withdrew the complaint against Mr Busuttil made to the Royal Australian Navy. The plaintiff on being asked about this conversation said that he did not recall it.
33 After the bushfire the defendant built a second home on the property, which is said to have been “destroyed by a burglary.” After that event he built a third home on the property, which was a cave dug with an excavator. He still lives in this cave.
34 There was a mediation between the brothers in 1997 at the Community Justice Centre in Newcastle at which an agreement was apparently reached. However, that agreement has never been carried into effect. From 1997 the relationship between the brothers has deteriorated and they are on bad terms. The plaintiff and his family no longer go to or use the property.
35 About 2005, Timothy Kent Matsen, a son of the defendant, had a telephone conversation with the plaintiff in which he offered to pay the plaintiff for his share of the property for his father, but added, “I’ll only put in what you paid for it.” The plaintiff indicated that he wanted $100,000 and would not sell for the amount offered.
THE PLEADINGS
36 The plaintiff by his amended statement of claim seeks a declaration that there is a resulting trust under which the plaintiff and the defendant hold the legal estate in the property in trust for themselves as tenants in common in shares proportionate to their contributions to the purchase price; alternatively he seeks a declaration of a constructive trust in the same terms; and, in the further alternative he seeks a declaration, that the plaintiff lent the defendant $17,250 at interest for the purchase of the property. The plaintiff also seeks an order for the appointment of a trustee for sale under s 66G of the CA and ancillary orders as to the contributions by the parties to the purchase and the upkeep of the property. The plaintiff pleads that it “was the common intention of the parties that they would contribute equally to the purchase of the Property and therefore own it equally, but that if it did not happen, the ultimate beneficial ownership of the Property would reflect their actual contributions”. In particulars appended to paragraph 4 it was alleged that by an oral agreement made on or about 5 June 1993 and on the land partnership agreement dated June 1993 the plaintiff and the defendant agreed the basis on which they would purchase the property, including the following relevant terms:
- “(a) The Defendant could build his house/lab on the highest point of the Property.
(b) The Plaintiff could build his house on any other part of the Property.
(c) Each party could use up to one acre for their respective house and surrounds.
(d) The Defendant would repay to the Plaintiff in a reasonable time the amount paid by the Plaintiff towards the purchase price on his behalf.
(e) Each party would pay one half of the outgoings, but if any improvements by one party resulted in an increase of the outgoings, that party would pay the increase.”
37 The plaintiff in paragraph 6 asserts that he is entitled to a 93.4 per cent share of the property; alternatively, he claims that the plaintiff is entitled to the same beneficial interest under a constructive trust; alternatively he asks for the declaration of a loan as outlined above.
38 The defendant filed an amended defence to the amended statement of claim. He also relies on an amended statement of cross claim that pleads his substantive case. This is put on a number of alternative bases. In the first instance he makes a claim, whether in contract, founded on a constructive trust or founded on estoppel, based on an agreement or representations, said to have been made in the 1990s, under which he was to be the sole owner of the property and other terms of the agreement or representations are set out.
39 In the second instance, he bases his claim on a set of terms or representations, which are alleged to constitute a contract or to found a constructive trust or an estoppel. These terms or representations are said to have been agreed or made “in or around 1993” and are as follows:
- “(a) The land was to be purchased by the Plaintiff and the Defendant with equal contributions to be made to the purchase price;
(b) The timber on the land was to be logged and sold by the Plaintiff and the Defendant;
(c) The Defendant’s share of the purchase price was to be repaid by the selling of timber on the land;
(d) The Plaintiff was to pay the balance of the purchase price that was not paid by the Defendant inclusive in that, the Plaintiff’s own half share of the purchase price of the land;
(e) The Plaintiff’s share of the purchase price including what was paid as part of the Defendant’s share of the purchase price was to be repaid by the selling of the timber on the land;
(f) The selling of the timber on the land was also to go the payment of the outgoings of the land;
(g) Any income derived from the sale of the logged timber from the land, in excess of the repayment of the Plaintiff’s contribution to the purchase price of the land and the outgoings of the land would be divided equally between the Plaintiff and the Defendant;
(h) The Defendant was to use 101 acres, the top portion of the land;
(i) The Plaintiff was to have the use of 90 acres, the lower portion of the land;
(j) The Plaintiff and the Defendant were to have unlimited access to the creek on the land;
(k) The Plaintiff and the Defendant would do all work necessary to maintain their allotted acres of the land; and
(l) That if the Plaintiff wanted to sell his interest in the land, it could only be sold to the Defendant and only for the amount of his contribution to the purchase price taking out any moneys already paid to him from the proceeds of the sale of the timber on the land.”
40 The defendant alternatively claims that in 1995 there was an oral agreement between the plaintiff and the defendant that the plaintiff would transfer his interest in the property to the defendant if the defendant withdrew the complaint that he had made to Royal Australian Navy against Mr Busuttil and the defendant did withdraw that complaint. It is alleged that there were terms of the agreement that the plaintiff would maintain his right to use his 90 acres of the land and the plaintiff and the defendant were both to have unlimited access to the creek, the plaintiff’s access to be for life. The defendant also alleges that the plaintiff is estopped from denying such an agreement.
41 As a further alternative, the defendant alleges that the plaintiff lent him $31,000 to buy the land. The loan was alleged to be interest free and repayable when the timber on the property was logged and sold. Again, it is alleged in the alternative that the plaintiff was estopped from denying such an agreement.
42 The plaintiff filed a defence to the amended statement of cross claim traversing virtually all the allegations. He also filed a reply to the defendant’s defence in which he asserts that, if there was an agreement never to sell the property, it would be void as a restraint on alienation. Sections 23C and 54A of the CA were not raised in the pleadings.
CREDIT OF WITNESSES
43 The only witness who gave oral evidence for the plaintiff was the plaintiff himself. The following witnesses gave oral evidence for the defendant: the defendant himself, Lynette Ford, Ferenc Godny, Kevin Lynch, Andrew Matsen, Timothy Matsen and Robert McMaster.
44 I have observed in [1] that the relationship of the parties has been complicated and difficult over most of their adult lives. On the one hand, they have both evinced a regard for the importance of family relationships. On the other hand, there have been many hostilities over the years on subject matters including the motor car accidents, the fact that the fortunes in life of the plaintiff were better than those of the defendant, the bushfire and the problems with Mr Busuttil, as well as a variety of disagreements over the property. They both have deeply rooted views concerning these matters that, together with the defendant’s lack of legal representation in the early stages of the trial, have led to there being in evidence much material that is of remote relevance to the real issues in this matter. The fixity of their views also brings into play the tendency of the human mind to believe what it is advantageous or necessary for a person to believe in a particular situation. For these reasons, I approach the evidence of both brothers with great caution. I am not inclined to make positive findings on the evidence of either of them if it is uncorroborated.
45 Among the defendant’s witnesses I regard Mr Lynch as a witness of particular importance, because of both the content of his evidence and the manner in which he gave it. Mr Rowe, of counsel for the plaintiff, made submissions attacking Mr Lynch’s credit. However, in general terms, I do not accede to these. The evidence of Mr Lynch, as of all other witnesses in this case, must be scrutinised with care, because of the distance of time between the events and the recounting. However, I found Mr Lynch a witness who took care to distinguish between what he could remember and what he could not remember concerning past events. I did not think his evidence was substantially compromised by cross examination. In accepting, in general terms, his evidence I have taken into account his demeanour, as well as the considerations already mentioned.
46 Mrs Ford had a much less clear recollection than Mr Lynch of the events of the early 1990s. Despite this, she appeared to me to be attempting to give the Court a careful and accurate account of what she could recall. The defendant’s sons Andrew and Timothy were only very shortly cross examined. They appeared to me straightforward witnesses and there appeared to me no reason not to accept the limited evidence that they gave. The evidence of Mr Godny was not really controversial and there is no reason why it should not be accepted at face value.
47 Robert McMaster was a witness whose evidence was seriously compromised in cross examination. This was by reason of the fact that he expressed equal certainty that the conversation he recounted as set out in [20] above had occurred before settlement of the purchase of the property (as, indeed, it must have from its content) and that the mediation at the Newcastle Community Justice Centre took place prior to that conversation, which on all the evidence in the case it did not. Although his evidence of the conversation cannot be totally discarded, little weight can be given to it because of this inconsistency.
FINDINGS OF FACT
48 I find that there was no agreement between the parties at the time of the contract for the purchase of the property that the title should be taken in the defendant’s name alone. There is little doubt, from the letter quoted in [4], that there was such a proposal in the mid 1980s. However, a lot of water flowed under the bridge between that time and the time of the agreement in 1993. The bulk of the evidence clearly indicates that the proposal in 1993 was that title should be taken by the parties as tenants in common in equal shares. Particularly important in this regard is the evidence relating to the instructions of Joan Pierpoint, solicitor, from which it is to be clearly inferred that the instructions that she held from both parties was that title was to be taken in their names as tenants in common in equal shares. For this reason I reject the defendant’s claim based on an agreement “made in the 1990s” under which he was to be the sole owner of the property.
49 I find that it is not established that the $5,000 cheque given by the plaintiff to the defendant as alleged in [6] was a loan to be used by the defendant to pay a deposit on land and to be repaid by the defendant in due course. The fact that there was no particular piece of land, the purchase of which was under contemplation at the time, reduces the likelihood of the plaintiff’s version. The only evidence given that it was a loan was the plaintiff’s uncorroborated evidence. Most importantly, the plaintiff did not, in his letter of 14 May 1993 referred to in [23] above, allege that the deposit on the property had been paid with funds lent by him. Instead, against “deposit” there appears “$4,000 (Ken)”. In these circumstances I do not regard the plaintiff’s allegation of a loan of $5,000 as established.
50 The next question is whether the agreement alleged by the defendant as set out in [39] above (“the 1993 agreement”) is established. The conclusion that I have come to is that all the terms set out in that paragraph are established. In particular, I find that the plaintiff and the defendant were to make equal contributions to the purchase price; that the plaintiff was to contribute to that price the $31,500 that he was to borrow; that, in so far as that constituted an advance to the defendant, that advance was to be repaid out of the sale of timber cut on the property; that the defendant was to have the use of 101 acres on the top portion of the land and the plaintiff to have the use of 90 acres on the lower portion of the land; and that the expenses of the land were to be borne by the plaintiff and the defendant equally, save that, if the activities of one of them caused an increase of rates, that party alone was to bear the burden of that increase. These findings are based on the evidence of the witnesses, the correspondence and the surrounding circumstances that I have set out above.
51 I should add that in the plaintiff’s written submissions it was stated that only the term discussed in the next paragraph is relevant to these proceedings.
52 The term about which there was most controversy was the alleged term that, if the plaintiff wanted to sell his interest in the property, it could only be sold to the defendant and only for the amount of the plaintiff’s contribution to the purchase price. This was hotly denied by the plaintiff. However, there is evidence supporting its existence from Mrs Ford, Andrew Matsen, Mr McMaster and, most importantly, Mr Lynch. Mr Lynch’s evidence is important because he was present at the discussions between the plaintiff and the defendant on the day the three were at the property together. He was also present at their discussions at Mr Lynch’s house that evening. He actually participated in the discussions, because his advice concerning various matters was being sought. He had a particular interest in the negotiations since, if they did not lead to agreement between the brothers, he was to participate in the purchase with the defendant. Mr Lynch’s attention is likely to have been closely focussed on what was being said. I have indicated that I place little weight on Mr McMaster’s evidence, although I do not discard it entirely. I am aware that the other witnesses all had some relationship with the defendant, Mrs Ford as his then girlfriend, Andrew Matsen as his son and Mr Lynch as a friend and, at least informally, a yoga pupil. However, that fact does not deter me from accepting their evidence, as I have indicated that I am inclined to do. There is no evidence that supports the plaintiff’s denial of this term. He conceded an interest in the property being kept for his sons. I do not think the absence of mention of the term from any written record is of particular significance, bearing in mind that there is no document that purports to contain the entirety of the arrangement between the parties. The term, as I find it, is that, if a party to the agreement wished to sell his interest in the property, it could only be sold to the other party and only for the amount of that party’s contribution to the purchase price.
53 A submission was put that there was no consideration moving from the defendant to support the plaintiff’s promise contained in the term, discussed in the last preceding paragraph. It is clear to me that the consideration given by each of the parties in relation to that term and to the whole of the 1993 agreement was the entry of that party into the agreement. A submission was also put that there was no intention to enter into legal relations in respect of the 1993 agreement but bearing in mind the whole of the circumstances shown in the evidence I am of the view that the parties had such an intention.
54 I find that the 1993 agreement as alleged by the defendant, but incorporating the term as to sale of a party’s interest in the property as I have found it in [52], is established.
55 The defendant alleges an oral contract for the transfer of the plaintiff’s interest in the property to him made shortly before the withdrawal of the complaint to the Royal Australian Navy against Mr Busuttil. The only evidence of this is the defendant’s uncorroborated account of a conversation, which the plaintiff deposed that he did not recall. I am not prepared to find on the basis of the defendant’s uncorroborated version that such a conversation took place or that any such contract was made. I find that such a contract is not established.
RELEVANT LAW
56 The first question is the extent of the Court’s discretion to appoint trustees for sale under s 66G(1) of the CA. That subsection provides as follows:
- “(1) Where any property (other than chattels) is held in co-ownership the court may, on the application of any one or more of the co-owners, appoint trustees of the property and vest the same in such trustees, subject to incumbrances affecting the entirety, but free from incumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition.“
57 The use of the word “may” in the subsection is indicative of a discretion. However, in Re Fettell (1952) 52 SR(NSW) 221, McLelland J held that no discretion existed to refuse an application under s 66G(1) made by a person with a right to make such an application. But Myers J refused to follow Re Fettell in Stephens v Debney (1959) 60 SR(NSW) 468 and Re McNamara and the Conveyancing Act (1961) 78 WN(NSW) 1068. In Ngatoa v Ford (1990) 19 NSWLR 72 Needham J said at 75:
His Honour said (at 470; 224):“Myers J, in Stephens v Debney , declined to follow Re Fettell . He doubted whether McLelland J intended to decide that an order must be made in favour of a co-owner regardless of the circumstances. He instanced the case of two trustees, whose power of sale was defined in the trust instrument; he declined to accede to the proposition that, regardless of the terms of the trust instrument, one trustee could force a sale at any time.
- ‘… I am not prepared to attempt to define the matters which would serve to defeat an application under the section, but I am of opinion that the existence of a covenant not to make such an application would be a sufficient answer to an application.’
His Honour reiterated his view that the Court had no general discretion which would enable it to refuse an application on such grounds as hardship or unfairness.”
In Re McNamara and the Conveyancing Act , his Honour expanded somewhat on his previously expressed views. He said: ‘… what I had in mind was some proprietary right, or some contractual or fiduciary obligation with which an order for sale would be inconsistent.’
Needham J’s view was approved by the Court of Appeal in Williams v Legg (1993) 29 NSWLR 687 at 691 – 692.
58 There was a general review of the law to that time by Santow J in Woodson (Sales) Pty Ltd v Woodson (Australia) Pty Ltd (1996) 7 BPR 14,685.
59 In Hogan v Baseden (1997) 8 BPR 15,723, Mason P said at 15,723 that it “would not be a proper exercise of discretion of the power to decline relief under s 66G … to refuse an application on grounds of hardship or general unfairness”, citing Re McNamaraand the Conveyancing Act and Ngatoa v Ford. Mason P added that:
- “in the unhappy event that the parties are unable to settle their differences then the making of an order appointing trustees for sale seems inevitable unless the respondent could establish a legally binding agreement not to put her out of occupation of her home, or circumstances that would ground some estoppel to similar effect”.
60 In Callahan v O’Neill [2002] NSWSC 877, on facts not dissimilar to the present, Young CJ in Eq refused to make an order under s 66G. See also the decision of McLaughlin AsJ in Chalhoub v Chalhoub [2005] NSWSC 572. There is a general review of the law by Campbell J (as his Honour then was) in Grizonic v Suttor (2004) 12 BPR 22,797 at [8].
61 Appellate decisions in other jurisdictions to the same effect as these New South Wales decisions include Re Permanent Trustee Nominees (Canberra) Limited [1989] 1 QdR 314 and In re Buchanan-Wollaston's Conveyance; Curtis v Buchanan-Wollaston [1939] Ch 738; see also In re Evers’ Trust; Papps v Evers [1980] 1 WLR 1327.
62 Thus the courts have held that an agreement limiting the manner in which a person may dispose of his or her interest as a co owner may provide a ground for refusal of an application for an order under s 66G.
63 Furthermore, the Courts have held that such an agreement does not amount to a restraint on alienation so as to be invalid: see the decisions of Young J (as his Honour then was) in Elton v Cavill[No 2] (1993) 34 NSWLR 289 and of Brereton J in Goyal v Chandra (2006) 12 BPR 23,553. In the latter case, Brereton J said at [23]:
- “It seems to me that if one co-owner, and it matters not for present purposes whether he or she be joint tenant or tenant-in-common, binds himself or herself to deal with his or her interest only in a particular way — namely, by transferring it or devising it, or leaving it to pass by way of survivorship to the other — that is not a restraint on alienation. The property itself remains alienable. The owner undertakes a personal obligation to deal with it only in a particular way. Anyone who enters into a contract for sale does that. Any owner of land who creates in another an equitable interest by way of proprietary estoppel does that. Such an agreement or arrangement is not void as a restraint on alienation. It follows that an agreement not to sever a joint tenancy is similarly not void as a restraint on alienation.”
64 Some argument was put in submissions based on CA ss 54A and 23C. I have already remarked that those sections were not pleaded. But, in any event, an agreement as found in [54] does not fall within s 54A because it is not a contract for the sale or other disposition of an interest in land. Neither is s 23C applicable.
CONCLUSIONS
65 In my view, the term of the agreement between the parties as to sale of a party’s interest as found by me in [52] above amounted in the context to an agreement that if one party wished to dispose of his interest in the property he should offer it to the other party for the stipulated price. In my view that amounts to an agreement, as contemplated in Ngatoa v Ford, that that party would not, at least unless he had complied with that obligation, seek to dispose of his share in the property through the appointment of trustees for the sale of the whole property pursuant to s 66G. If such an offer were not made, the party would not, by virtue of the agreement, be at liberty to obtain an order for the appointment of trustees for sale and the Court would be entitled to exercise its discretion to refuse an order under s 66G. What the situation would be if such an offer were made and not accepted does not arise in these proceedings.
66 On the evidence, the plaintiff has not made such an offer before proceeding to apply for a s 66G order. In fact, the evidence of Timothy Matsen, which I accept, shows that the plaintiff specifically rejected the suggestion that he should dispose of his interest in the property on those terms, indicating that he would not accept anything less than $100,000 for his interest.
67 The findings that I have made above lead to the rejection of the plaintiff’s claim of an oral agreement as referred to in [36]. In view of the agreement I have found, the plaintiff’s claim for a declaration of a resulting trust in proportion to the parties’ contributions to the purchase price is rejected. I have found that the terms agreed between the brothers were that the plaintiff would lend the defendant out of his bank loan of $31,500 sufficient funds to make up the defendant’s half share of the purchase price. The defendant therefore contributed his half share, but became liable to repay the loan to the plaintiff out of the proceeds of timber cut on the property. There was no term of the agreement that, if this did not occur by a particular time, the beneficial interests in the property were to be changed or adjusted. The plaintiff’s claim for a declaration of a constructive trust is equally to be rejected.
68 So far as the plaintiff’s claim for the declaration of a loan is concerned, I am of the view, as I have already indicated, that there was a transaction of loan between the plaintiff and defendant. Equal contributions to the purchase of the property were required from the plaintiff and the defendant. So much of the plaintiff’s $31,500 bank loan as was necessary to make up the defendant’s half share was to constitute a loan of that amount by the plaintiff to the defendant. The loan was to be without interest and was to be repaid out of the proceeds of the cutting of timber on the property, which has not yet occurred.
69 I find that the defendant contributed the whole of the cost of purchase of the property other than the plaintiff’s $31,500 bank loan. I make this finding on the basis of Ms Pierpoint’s letters at the time of settlement and the plaintiff’s letter of 14 May 1993. That means that the difference between $31,500 and the plaintiff’s half share of the cost of the property is the amount to be taken as representing the amount contributed to make up the balance of the defendant’s half share and therefore the amount of the loan. It is this last mentioned amount that I intend to declare was lent to the defendant and is owing by the defendant to the plaintiff.
70 As the result of my findings that the 1993 agreement is established and that the plaintiff has refused to offer to sell his interest in the property to the defendant for the plaintiff’s contribution to the purchase price, I refuse the plaintiff’s application for the appointment of trustees for sale under s 66G of the CA.
71 In view of the conclusions that I have come to above, I do not need to determine the defendant’s claims for the declaration of a constructive trust or his claims based upon estoppel.
72 Short minutes should be brought in to encompass my decisions. Questions of costs may be raised at that time.
8
7
1