McKay v McKay

[2008] NSWSC 177

CITATION:	McKay & anor v McKay [2008] NSWSC 177
HEARING DATE(S):	19-20 February 2008
JURISDICTION:	Equity Division Expedition List
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	21 February 2008
DECISION:	Plaintiffs entitled to return of the half share transferred to defendant. Defendant liable for occupation fee.
CATCHWORDS:	EQUITY – Joint venture – where substratum fails without attributable blame – whether prima facie remedy is return of contributions or minimum equity to remove unconscionability. - REAL PROPERTY – Co-ownership – rights of co-owners – occupation fee – upon breakdown of domestic relationship – where not reasonably practicable to remain under one roof – whether party remaining in occupation liable to pay occupation fee – improvements – where no evidence that value of property enhanced – whether co-owner entitled to allowance – services rendered – where co-owner performs some obligations to care for other – whether allowance warranted.
LEGISLATION CITED:	(NSW) Contracts Review Act 1980 (NSW) Conveyancing Act 1919, s 66G (NSW) Crimes Act 1900 (NSW) Property (Relationships) Act 1984
CATEGORY:	Principal judgment
CASES CITED:	Baumgartner v Baumgartner (1987) 164 CLR 137 Bennett v Horgan (NSWSC, 3 June 1994, unreported) Biviano v Natoli (1998) 43 NSWLR 695 Chieco v Evans (1990) 5 BPR 11,297 Dennis v McDonald [1982] Fam 63 In the Marriage of V and CL Fedele (1986) 10 Fam LR 1069 Forgeard v Shanahan (1994) 35 NSWLR 206 Galaxidis v Galaxidis (No 2) [2002] NSWSC 831 Giumelli v Giumelli (1999) 196 CLR 101 Griffiths v Kerkemeyer (1977) 139 CLR 161; (1977) 15 ALR 387; (1977) 51 ALJR 792 Hill v Hill [2005] NSWSC 863 Hogan v Baseden (1997) 8 BPR 15,723 Jacobs v Seward (1872) LR 5 HL 464 Kriezis v Kriezis [2004] NSWSC 167 Luke v Luke (1936) 36 SR(NSW) 310 Malsbury v Malsbury [1982] 1 NSWLR 226 Morris v Morris [1982] 1 NSWLR 61 Muschinski v Dodds (1985) 160 CLR 583 O'Neill v Williams [2006] NSWSC 707 Rupchev v Callow [2007] NSWSC 1097 Sirtes v Pryer [2005] NSWSC 1082 Stoklasa v Stoklasa [2004] NSWSC 518 Tory v Tory [2007] NSWSC 1078
PARTIES:	Carolyn Suzanne McKay (first plaintiff) Ferdinando Schiavo (second plaintiff) David McKay (defendant)
FILE NUMBER(S):	SC 4043/05
COUNSEL:	M W Sneddon (plaintiffs) M B Evans (defendant)
SOLICITORS:	Bull Son & Schmidt (plaintiffs) Whitfields Solicitors (defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EXPEDITION LIST

BRERETON J

Thursday 21 February 2008

4043/05 Carolyn Suzanne McKay & anor v David McKay

JUDGMENT (ex tempore)

1 HIS HONOUR: Prior to December 1996, the defendant David McKay and his then de facto wife Jill Bruce were the registered proprietors as tenants in common in equal shares of real property at West Ryde which they occupied as their home. Mr McKay became seriously ill with life threatening conditions which still affect him, and difficulties arose in his relationship with Ms Bruce, who left the property in or about September 1996. Mr McKay told his daughter, the first plaintiff Carolyn Suzanne McKay, that he would need care for the rest of his life and asked her, with her partner (whom she later was to marry), the second defendant Ferdinando Schiavo, to buy out Ms Bruce and to care for him for the rest of his life. She agreed to do so.

2 On 15 November 1996, Mr Schiavo and Ms McKay made an offer in writing addressed to Ms Bruce to acquire her half share of the property for $165,000. On 12 December 1996, Mr McKay and Ms McKay each executed a written agreement – in the form of a deed, but not attested as a deed – relevantly as follows:

THIS DEED made the 12th of December 1996
BETWEEN DAVID MICHAEL MCKAY … ("the Assignor") of the One Part.
AND CAROLYN SUZANNE MCKAY … ("the Assignee") of the Other Part.
WHEREAS-
A. The Assignor is registered as proprietor of an estate in fee simple as tenant in common in equal shares with Jill Bruce in respect of the land referred to in Schedule One hereto;
B. The Assignor has offered to assign the assignee his right title and interest in the land referred to in Schedule One hereto subject to all notifications and encumbrances affecting the land whether registered or not and subject to the terms, covenants and conditions herein contained.
C. The assignor suffers from a chronic vascular condition, a descending dissection of the aorta.
D. The assignee may be required, and covenants, to care for the assignor for the remainder of his life.
NOW THIS DEED WITNESSETH and it is hereby mutually agreed between the parties as follows: -
1. In consideration of the assignee covenanting to care for the assignor, and to provide the assignor with a life tenancy in respect of the property the Assignor, hereby assigns and transfers to the Assignee all his right, title and interest in the land referred to in Schedule One subject to the notifications and occupancies referred to in Schedule Two of this deed.
2. Upon exchange of this Deed, the assignor will deliver to the assignee a transfer in respect of the land duly executed.
3. The assignor shall be entitled to reside in the land for the term of his life.
4. The assignee shall care for the assignor during the term of his life.
5. Each party shall be liable for their own legal costs.
6. The Assignee, by her execution of these present, hereby covenants with the assignor that shall indemnify and keep the assignor indemnified from any liability for the payment of any stamp duty payable upon this Deed, Registration Fees or other expenses which may be payable in respect of the documents described in paragraph 2 hereof.
7. The Assignee further covenants with the assignor that she will pay or cause to be paid all rates, taxes and charges now due and payable on the land referred to in Schedule One and any monies which may now or at any time hereafter be due or become due and payable in respect of the land and any tenancy thereof and that she will indemnify and keep the assignor indemnified from any liability for payment in respect thereof.
8. The interest, the subject of this Deed is assigned subject to any occupancy.
9. The covenants on the part of the Assignee herein contained shall bind the Assignee and her heirs, executors, administrators and assigns.

SCHEDULE ONE

…

SCHEDULE TWO

1. Reservations and conditions in the Crown Grant(s).
2. Covenant created by existing tenancies and occupancies details of which are known to the Assignee.

3 On or about the same day, Mr McKay executed and delivered to Ms McKay a transfer to her of his half share in the property.

4 On 17 January 1997, there was executed and delivered a transfer of the entire property from Ms Bruce and Ms McKay as transferors to Mr Schiavo and Ms McKay as transferees, expressed to be for a price of $165,000. As a result, Mr Schiavo and Ms McKay became registered proprietors of the property as tenants in common in equal shares, although I am inclined to think that the true intention was that they would hold in proportions 75 percent to Ms McKay and 25 percent to Mr Schiavo. The price of $165,000 was paid to Ms Bruce for her half share, and was funded by Mr Schiavo and Ms McKay borrowing on the security of the whole property – not just the half share they acquired from Ms Bruce.

5 It is quite clear that the basis on which Mr McKay transferred his half share to the plaintiffs was that he would be permitted to reside in the property for the rest of his life, and that his daughter would care for him as required for the rest of his life. So much was clear from the 12 December 1996 agreement. Although there was some dispute as to the factual circumstances surrounding its preparation and execution, there was no application to have it set aside or varied under the (NSW) Contracts Review Act 1980, nor was it otherwise impugned on grounds of unconscionability – and, in any event, both Ms McKay and Mr Schiavo accepted, in the course of their oral evidence, that they knew, when accepting the transfer, that the property was being transferred to them on the basis that Mr McKay would receive care, and would be able to reside in the property, for the rest of his life. Mr McKay indicated, and I accept, that one of the reasons for the written agreement was to afford a measure of protection to Ms McKay in case he became bankrupt, by formalising written evidence of consideration for the transfer.

6 Over the ensuing years, at least for some time, Ms McKay provided some domestic care and assistance to Mr McKay, although Mr McKay's health improved somewhat so that not much was then required. Mr Schiavo also provided some practical assistance to him and effected some works and maintenance on the property. Ms McKay and Mr Schiavo paid all the rates and outgoings, and they also carried out and paid for various repairs and improvements to the property, albeit of a relatively minor character.

7 However, the relationship deteriorated, by February 2002 to the point that the plaintiffs vacated the property. Since then Mr McKay has occupied the property alone. Deterioration of the relationship was marked by a number of unfortunate and unhappy incidents, the details of which and the responsibility for which it is unnecessary to recite or analyse. On 12 May 2004, the plaintiffs commenced proceedings in the Local Court for the recovery of $20,000 which they had advanced to Mr McKay. Attempts to resolve the issues having failed, the plaintiffs instituted the present proceedings by summons filed on 20 July 2005 claiming an order appointing trustees for sale of the property pursuant to (NSW) Conveyancing Act 1919, s 66G, and delivery up of certain items of personal property which they alleged were retained by Mr McKay. In due course, the Local Court proceedings were removed into the District Court and subsequently into this Court, where they were consolidated with the present proceedings.

8 Mr McKay contends that the breakdown of the relationship has resulted in circumstances that make it impossible for Ms McKay to provide ongoing care for him, or for him to continue to live in the same property as the plaintiffs, thus destroying the substratum of the relationship on which the transfer of his half interest in the property to them had been based and accepted, and that it is unconscionable for the plaintiffs to retain the benefit of the transfer in circumstances which had not been intended, freed of the obligation to care for him and to permit him to live in the property for the rest of his life. By cross-claim, he propounds a claim for the return to him of his half interest in the property. He originally also claimed the return of personal property said to have been removed by the plaintiffs. In the Local Court proceedings, he opposed the claim for repayment of the advances of $20,000, chiefly on the basis of a defence that no legal relations were intended to be created in respect of those advances.

9 Needless to say, the dispute between the parties has been an unhappy one. The procedural history of the case has also been unfortunate, largely as a result of Mr McKay's ill health. Nonetheless, with the assistance of their counsel, the parties have very sensibly reduced the issues in dispute. Neither, very sensibly, presses the claims previously made for return of personal property. Mr McKay consents to judgment on the claim for repayment of the advance of $20,000. Mr McKay also no longer opposes orders which would require the sale of the property, although he does not concede that the plaintiffs were ever entitled to relief under s 66G. As a result of this very sensible approach by the parties, the only real remaining issue is to determine what are the beneficial interests of the respective parties in the property, and thus in the proceeds of its sale.

10 Mr Sneddon, for the plaintiffs, contends that they are entitled to the whole of the property subject only to an obligation to pay Mr McKay the capitalised present value of his lifetime right of residence, and possibly the value of the care to which he was entitled under the 12 December 1996 agreement. [While, as Mr Sneddon puts, the plaintiffs adduced evidence as to Mr McKay's life expectancy and the rental value of the property which would enable the value of his right of residence to be calculated, it was far from clear on the pleadings that the plaintiffs proposed anything other than their principal claim for relief, namely an order for sale simpliciter, with them to retain the whole of the proceeds. However, the course of the case and the submissions have made clear that the plaintiffs accept that they must, at least, pay Mr McKay out the value of his life interest and the value of his entitlement to care]. Mr Sneddon contends that the rights of the parties are determined by contract – in particular, by the 12 December 1996 agreement – and if, as is common ground, it is no longer practical for Mr McKay to be provided with a lifetime right of residence and care, then the liability of the plaintiffs is simply to pay damages for breach of contract.

11 Mr Evans, for the defendant, contends that Mr McKay is entitled to the return of his half share in the property – subject to such adjustments as are necessary in the circumstances to do justice between the parties and, in particular, to take account of supervening contributions of the parties. He contends that this was a personal joint venture which failed without attributable blame, and that the relevant contract does not provide for that eventuality; as a result, in equity each party recovers its contributions, subject to such adjustments as are necessary to do justice in the particular circumstances.

12 The submissions for both parties commenced with the judgment of Deane J in Muschinski v Dodds (1985) 160 CLR 583, in particular at 618, where his Honour said:

Both common law and equity recognise that, where money or other property is paid or applied on the basis of some consensual joint relationship or endeavour which fails without attributable blame, it will often be inappropriate simply to draw a line leaving assets and liabilities to be owned and borne according to where they may prima facie lie. As matter of law, at the time the failure. Where there are express or implied contractual provisions specially dealing with the consequences of failure of the joint relationship or endeavour, they will ordinarily apply in law and equity to regulate the rights and duties of the parties between themselves of the prima facie face legal position will accordingly prevail. Where, however, there are no applicable contractual provisions or the only applicable provisions were not framed to meet the contingency of premature failure of the enterprise or relationship, other rules or principles will commonly be called into play.

13 His Honour then proceeded to illustrate that principle by reference to the examples of frustrated contracts, partnership, and contractual joint ventures, in each of which cases, as his Honour showed, upon premature failure, equity decreed a return to each of the parties of their contributions. His Honour then continued (at 619-620):

The prima facie rules respectively entitling a fixed term partner to a proportionate refund of his or her premium and a contractual joint venturer to a proportionate repayment of his or her capital contribution on the premature dissolution of the partnership or collapse of the joint venture are properly to be seen as instances of a more general principle of equity. That more general principle of equity can also be readily related to the general equitable notions which find expression in the common law count for money had and received (cf Moses v Macferlan (1760) 2 Burr 1005 at 1012 ; [97 ER 676 at 680–1]; J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 41 ALR 539 ; 61 FLR 108 at 120) and to the rationale of the particular rule of contract law to which reference has been made (cf Fibrosa , supra, at pp 61ff and esp at p 72). Like most of the traditional doctrines of equity, it operates upon legal entitlement to prevent a person from asserting or exercising a legal right in circumstances where the particular assertion or exercise of it would constitute unconscionable conduct (cf Story: Commentaries on Equity Jurisprudence , 12th ed (1877: Perry), vol 2, para 1316; Legione v Hateley , 152 CLR at p 444). The circumstances giving rise to the operation of the principle were broadly identified by Lord Cairns LC, speaking for the Court of Appeal in Chancery, in Atwood v Maude , supra, at p 375 where “the case is one in which, using the words of Lord Cottenham in Hirst v Tolson (1850) 2 Mac and G 134 ; 42 ER 52, a payment has been made by anticipation of something afterwards to be enjoyed [and] where … circumstances arise so that future enjoyment is denied”. Those circumstances can be more precisely defined by saying that the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do (cf Atwood v Maude at pp 374–5 and per Jessel MR, Lyon v Tweddell (1881) 17 Ch D 529 at 531).

14 His Honour's judgment, and in particular the passage which I have last quoted, was approved by Mason CJ, Wilson J and Deane J in Baumgartner v Baumgartner (1987) 164 CLR 137 (at 147-148), where their Honours referred to the general equitable principle "which restores to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them".

15 For the plaintiffs, Mr Sneddon submits, first, that the principles in Muschinski v Dodds are not applicable in the present case because this was not a case of a joint venture but a mere contractual relationship. I am unable to accept that submission. First, the relationship between the parties involved co-ownership and co-occupation of property for residential purposes. Secondly, the relationship necessarily involved elements of mutual trust and confidence between them. Thirdly, it involved ongoing obligations to provide care and accommodation. Fourthly, it arose in a family context. To my mind, in these respects it is indistinguishable from the relationships in cases such as Kriezis v Kriezis [2004] NSWSC 167, Malsbury v Malsbury [1982] 1 NSWLR 226, and Sirtes v Pryer [2005] NSWSC 1082. There is also a passage in Ms McKay’s evidence which tends to confirm that the plaintiffs did not regard the transfer to them as an out-and-out transfer. In paragraph 115 of her affidavit, she deposes to a conversation with Mr McKay with respect to a proposal that he had made for resolution in late 2001. In the course of that conversation, (emphasis added) she said: "I do not agree to allow the property to be left in my name. I don't trust that you won't run up bills in my name. Fred and I would be happy to sell you and your friend our half share provided you also pay us the half of the rates and other moneys we have expended on the house and the board that you haven't paid ... ". Implicit in this is that the other half share was not theirs, at least absolutely.

16 Both parties accept that the substratum of the relationship has been destroyed, so that continued co-occupancy of the property by the plaintiffs with the defendant and the provision of care by Ms McKay to Mr McKay is impossible. Both parties also accept that, in the relevant sense, the breakdown of the relationship should be regarded as being without attributable blame. In this respect, I respectfully adopt what was said by Bryson J in Bennett v Horgan (NSWSC, 3 June 1994, unreported), in a passage that has been approved by Burchett AJ in Kriezis (at [23]), and by Campbell J (as his Honour then was) in Hill v Hill [2005] NSWSC 863, [35]:

The concept of attributable blame must be understood and applied with some tolerance; in my view it does not call for a judgment attributing blame among members of a family for the continuing relationship becoming intolerable, unless perhaps in particularly gross cases. Such judgment would be difficult and unreliable, as it is rare indeed that something or other which could be said to be a ground for blame cannot be identified and laid to the charge of each of the persons concerned. Leaving gross cases involving criminality or similarly reprehensible behaviour on one side, it should usually be understood, in my opinion, that where personal relationships deteriorate and the sharing of a dwelling becomes intolerable to some or all of those concerned, there is, within the meaning of Deane J’s expression, no attributable blame and the case is one for an equitable adjustment.

17 The chief difference between the parties is whether, on the facts of the case, the principles in Muschinski v Dodds are attracted having regard to the terms of the agreement of 12 December 1996. Founding on Deane J's judgment (at 618), Mr Sneddon submits that this is a case in which the contractual provisions implicitly if not expressly provide for the consequences of the failure of the joint relationship, and accordingly should prevail. Mr Evans, to the contrary, submits that this is a case in which the contractual provisions do not specially deal with the consequences of failure of the joint relationship.

18 In my view, it is not without considerable significance that in that passage of his Honour's judgment, Deane J speaks of "express or implied contractual provisions specially dealing with the consequences of the failure of the joint relationship or endeavour", and that (at 620) in stating the principle, his Honour refers to the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour, otherwise being enjoyed by the other in circumstances which were not specifically intended or specially provided that the other party should so enjoy it specifically. Those passages, to my mind, involve the concept that the parties have turned their minds to the question so as to form a specific intent on it.

19 In the present case, the contract plainly does not make express provision for what is to happen if the relationship breaks down so that further performance of the contract becomes impossible; it is silent on the issue. Mr Sneddon submits that the contract makes implicit provision in that behalf, in the sense that if a lifetime right of residence and lifetime care is not provided, then there is a breach of contract, and the implicit intention is that damages are payable. However, I do not accept that an officious bystander who asked these parties at the time of making the contract what would happen if the relationship broke down, would have been testily suppressed with “Then the plaintiffs will keep the land and pay the defendant damages". Indeed, it is quite unrealistic to suppose that would have been the attitude of the parties, had they turned their mind to the question. To the contrary, it seems to me that it was never intended that the plaintiffs should have a half share of the property unencumbered by an obligation to provide care and a lifetime right of residence. At the very least, to borrow Deane J's words, "it was not specifically intended nor specially provided" that they should retain the property in these circumstances. It follows that this is a case to which the equitable principle enunciated by Deane J in Muschinski v Dodds applies, and the parties should not be left to their rights at law – namely, to recover damages for breach of contract – which would be the effect of acceding to the plaintiffs' submissions.

20 In those circumstances, is there any reason why in equity the result should not be a return of the contributions? In Muschinski v Dodds, Deane J concluded the passage (at 620), already quoted above, in which his Honour stated the principle, with the words "Equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do". At least on one view, that might leave open the possibility that equity would permit the other party to retain the benefit of the relevant property in return for a payment or other adjustment that removed the element of unconscionability. Nonetheless, in Muschinski v Dodds the result was a declaration of the beneficial entitlements to the relevant property according to the proportionate contributions of the parties to its acquisition and improvement.

21 In Baumgartner v Baumgartner, as I have already mentioned, the principle was described as one concerned with the restoration to the parties of contributions made to a joint endeavour which failed. The result was a declaration of the beneficial interests in the relevant property according to the respective contributions of the parties - in that case 55 percent to 45 percent - with further adjustments required in the interests of justice to recognise other contributions made by one partner before the inception and after the termination of the joint relationship.

22 In Malsbury v Malsbury a father (the plaintiff) and his wife sold their house in England and came to Australia where they arranged with their only son and the son's wife to contribute an agreed sum towards the purchase by the son and his wife of a home in which the plaintiff and his wife should be entitled to live in separate accommodation – without being required to contribute to maintenance, repairs or improvements – for the rest of their lives, and to be taken care of by the son and his wife. The plaintiff's wife died, and subsequently the son and his wife separated and were divorced. The plaintiff and the son's wife remained in the house. Needham J dealt with the case on the basis of trust, and concluded that because of the impossibility of the performance by the trustees of all the substantial terms of the original express trust, a constructive trust arose and the Court should declare the son and his wife constructive trustees of the property for themselves and the plaintiff in shares proportionate to their respective contributions towards its purchase. Although the case was resolved on the basis of trust, nonetheless, in circumstances very similar to the present, the result was a return of contributions.

23 In Morris v Morris [1982] 1 NSWLR 61, the plaintiff was a widower who, having sold his home unit, paid $28,000 towards an extension to a home jointly owned by his son and daughter-in-law, the defendants, on the basis that he would be accommodated there indefinitely as part of the son's family. Subsequent events, not contemplated by any of the parties at the time, including the breakdown of the son's marriage, his departure from the home and the breakdown of the personal relationship between the plaintiff and his daughter-in-law, culminated in the plaintiff's departure also. McLelland J, as he then was, applied the equitable principle that the plaintiff, having spent money on the defendants’ property in the expectation, encouraged by the defendants, that he would be able to live there indefinitely, which was defeated by the occurrence of events not in contemplation when the money was spent and as a result of which any subsisting right of residence had become of no practical consequence, it would be unconscionable for the defendants to retain the benefit of the plaintiff's expenditure on their property, free of any obligation of recoupment to him. Consequently, an equity arose in favour of the plaintiff. Having pointed out that what a plaintiff in such a case should in justice receive would not necessarily correspond with what, when the relevant expenditure was made, he expected to receive, his Honour decreed a charge over the property, securing to the plaintiff a sum of $28,000 together with interest.

24 His Honour referred to the flexibility of the remedies which equity might provide in such circumstances in order to satisfy the demands of justice and good conscience, and acknowledged that in some cases the appropriate remedy may well be the imposition of a constructive trust, but concluded on the facts that a charge was sufficient. But it is noteworthy that the charge was one which secured to the plaintiff a return of his contributions, just as a constructive trust would have reflected the plaintiff's contributions. The remedy was based on what the plaintiff had contributed, not on what the plaintiff expected; in particular, it was not calculated according to the value of the plaintiff's right of residence.

25 In Kriezis v Kriezis, the plaintiff Sofia was the daughter-in-law of the defendant Helen, who had come to Australia in 1965 with her husband Michael; their son Jim married Sofia. The four reached an agreement in 1975, the substance of which was that Michael and Helen would sell their home, contribute the proceeds to the acquisition of a larger house in which they would live with Jim and Sofia, free of rent and other charges, and be cared for, but upon their death the house would be the property of Jim and Sofia. Having regard to the relative ages of the parties, they sought to give effect to this arrangement by acquiring the new property as joint tenants, in the belief that survivorship would result in the house ultimately passing to Jim and Sofia. Michael was the first to die, but subsequently Jim died prematurely. The result was that Sofia and Helen became the registered proprietors. The relationship between them broke down. Helen wished no longer to live in the property and to have it sold and the proceeds divided. Sofia contended that the original contract should be upheld. Burchett AJ said:

[21] The primary contention urged by counsel for the plaintiff, that the problem is to be solved by a simple enforcement of a contract made in 1975, seems to me to be met by insuperable problems. For Sofia Kriezis to continue now to “look after” her mother-in-law has become impossible by reason of a complete breakdown in their relationship. That I do not think this breakdown is to be attributed to fault on her part is not to the point. The fact is she cannot fulfil the required role, being barred by a wall of personal antagonism if not, as the defendant melodramatically asserts, by hatred.

[22] But the very breakdown in relations which has erected a barrier against one solution to the case opens a gateway to another. Where an interest in property is put in the name of one party on the basis and for the purposes of a relationship with another party, who pays for that interest in property, and the substratum of the relationship is removed without attributable blame, so that unless equity intervenes, the former party would enjoy the benefit of the property in circumstances in which it was not specifically intended or specially provided he or she should enjoy it, the Court may hold that for him or her to so would be unconscientious.

26 His Honour found that Jim and Sofia had expended substantial sums over and above the cost of the half interest transferred to them upon the acquisition of the house, the other half interest having been put into the names of Michael and Helen, for the purpose and upon the basis of the family relationship between aging parents on the one hand and son and daughter-in-law on the other:

An unforeseen death and the deterioration of the relationship between mother and daughter-in-law have taken away the foundation of the arrangement with respect to the property. It was not specifically intended or specially provided that, in these circumstances, Helen Kriezis should retain for realisation one-half of the beneficial interest in the house. An equitable adjustment is required.

27 His Honour decreed a trust according to the contributions of the parties to the acquisition of the property, with the result that Sofia obtained a substantially greater share than the half share which she held legally. Thus the case was resolved by a restoration of contributions. His Honour referred – as McLelland J had in Morris v Morris – to the flexibility of the remedies that equity may afford in this type of case.

28 In Sirtes v Pryer the plaintiff Mrs Sirtes had transferred into the name of her daughter-in-law Ms Pryer a one-quarter interest in her home, upon the basis that Ms Pryer would contribute to the redevelopment of the property funds to be raised from security over another property of Ms Pryer. That did not happen, and instead the relationship between Ms Pryer and her husband Mrs Sirtes’ son, broke down. Applying Muschinski v Dodds, Burchett AJ decreed a return to Mrs Sirtes of the contribution that she had made to the joint venture – a result which ultimately was not opposed – but imposed a charge for the value of improvements effected by Ms Pryer. Again, his Honour made reference to the flexibility of equitable remedies in this territory, referring in particular to the decision of Young J, as his Honour Chief Judge then was, in Knox v Knox (16 December 1994, unreported), in which his Honour had said:

Equity in the current situation, where it finds that it would be unconscionable for a person to take the whole beneficial ownership without recognising a contribution of some other party, only makes the minimal order that is necessary to relieve the conscience of the legal owner ...

29 This passage was adopted by Beazley JA, with whom Mason P and Stein JA agreed, in Hogan v Baseden (1997) 8 BPR 15,723, at 15726.

30 The cases to which I have referred all show that the fundamental principle in this area of discourse is the restoration of contributions upon failure of the substratum of a joint venture. They also show that in those cases that has actually been the result. None of those cases saw one party being permitted to retain the benefit of the other’s contribution in return for paying out the other. Such a result would be inconsistent with the basal concept of a return of the contributions on failure of the joint venture.

31 However, too many authorities stress the flexibility of equitable remedies in this area to deny that there is at least some flexibility in what equity can decree. In particular, there is no doubt that, in an appropriate case, a charge securing the return of the contribution may be preferred to a constructive trust based on the contributions. But, from the perspective of principle and certainty, it is unsatisfactory and unhelpful, as well as inaccurate, to state that the remedy is an entirely flexible one. One needs to identify a principle that guides what is the appropriate remedy, or at least the prima facie remedy or starting point.

32 Thus, after toiling for some time with the concept of the minimum equity to do justice in the field of proprietary estoppel, the law has moved to the position that the prima facie remedy in such a case is the making good of the relevant assumption on which the plaintiff acted, although where that relief would be disproportionate to the requirements of conscionable behaviour, equity may, as a matter of discretion, decree something less [Giumelli v Giumelli (1999) 196 CLR 101; Galaxidis v Galaxidis (No 2) [2002] NSWSC 831 [52]-[55]; O'Neill v Williams [2006] NSWSC 707 [73]; Tory v Tory [2007] NSWSC 1078].

33 In the field of the premature failure of the substratum of joint ventures, the cases made clear that the guiding principle is the return of contributions. Once again, it may well be that, as a matter of discretion, equity can decree something less than that where to so would be disproportionate to requirements of conscionable behaviour. But, in my opinion, the prima facie remedy in such a case is the return of contributions.

34 Mr Sneddon invoked the judgment of Gzell J in Stoklasa v Stoklasa [2004] NSWSC 518, and it must be acknowledged that at first sight that case lends some support to his argument. There, the plaintiff and his wife had owned their house as joint tenants. Before the wife's death, the plaintiff and the defendant (his son) agreed that the defendant would purchase the house, which then had a market value of about $90,000, for $50,000; and that the plaintiff should be entitled to reside in it for the rest of his life and to be looked after by the defendant. The transaction took place, but the relationship broke down. It was accepted that the defendant had paid the $50,000 – $25,000 to the wife's estate and $25,000 to the plaintiff. In addition, the defendant expended a further $50,000 or so on renovations and repairs to the house. Gzell J distinguished Muschinski v Dodds, saying (at [35]):

That case bears no direct correlation to the instant circumstances. It was the defendant who paid the purchase price and the defendant who provided the renovations and repairs. The only contribution made by the plaintiff being half the grocery expenses and an occasional contribution of small amounts to the payment of electricity and water. There was no element of unconscionability which would require the contractual arrangements to be put aside and a declaration made that the defendant held a beneficial interest in the house.

35 His Honour subsequently referred to Morris v Morris and then said of the case before him:

[40] This was not a case of recoupment of expenditure. If the value of the obligation to provide accommodation and care was less than the difference between $50,001 and the market value of the house at the time of transfer, it was a case of sale of an interest in property at an under value to a son on terms that the plaintiff obtain care and accommodation for life. But the principle is the same. On my findings the defendant lacked cause to evict the plaintiff. It would be unconscionable and inequitable for him to retain the benefit of the transfer of the house at an under value freed from the obligation of providing care and accommodation.

[41] I do not regard it as unconscionable or inequitable for the defendant to retain the benefit of the transfer at any undervalue. In my view the presumption of advancement between father and son arose ( Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353) and was not rebutted.

[42] In the tragic circumstances of this breakdown in family relationships it is inappropriate that the defendant should take the plaintiff back into the house. It seems to me that the appropriate form of order is an equitable charge over the house in favour of the plaintiff for the value of the obligation to provide him with care and accommodation as at 1 November 2002 plus interest thereon and for an inquiry to be made by a Master to determine the amount of the charge.

36 On one view, analogy with Morris v Morris would have resulted in a charge, not for the value of care and accommodation to be provided under the arrangement, but for the amount of the under-value at which the property was transferred – which was, in effect, the true contribution of the plaintiff. But perhaps the better view is that Stoklasa is an illustration of the application of the principle that, in an appropriate case, equity may decree a remedy less than the prima facie remedy where to do so would be disproportionate to the requirements of the conscionable behaviour. As Gzell J pointed out in Stoklasa, the defendant had paid a price of $50,000 and another $50,000 for substantial renovations and repairs, which makes the case quite a different one, as to where the balance of equity and justice lies, from one in which the defendant has received, in effect, a voluntary transfer. In the present case, as distinct from Stoklasa, the plaintiffs gave no consideration for the transfer of Mr McKay’s share, save that their agreement to provide a lifetime right of residence and care, which can no longer be provided.

37 The practical problems of the Stoklasa approach in a case such as the present involve the difficulty of valuing, not just the lifetime right of residence, but the right to receive care. Personal injury cases of seriously disabled plaintiffs show that the cost of care can be enormous. It is quite unknown whether, and if so for how long, Mr McKay would require intensive care in the future. While, as in common law personal injury cases, an estimate can be made, it is an unsatisfactory approach in the context of Mr McKay’s reduced life expectancy, where the risk of error and consequent injustice is magnified in quantum. The Court might easily allow too much or too little in financial terms to care for him in the events which ultimately transpire.

38 Stoklasa does not affect the proposition that the principle and the prima facie remedy is the return of contributions. It is clear – indeed, from Muschinski and Baumgartner themselves – that adjustments may be made where justice and equity so require, but as a matter of principle the cases are not concerned with enabling one party to retain the benefit of the other’s contribution at the price of paying damages to the other.

39 Two matters on the facts were advanced against the application of the prima facie remedy. The first was that for some time after the transfer – the parties agreed at least until early 1999 – Ms McKay cared for Mr McKay in accordance with the 12 December 1996 agreement. That circumstance features in a number of the authorities. It featured in Kriezis, where performance of the arrangements for years did not preclude relief by way of return of the contributions when the substratum failed. There may well be cases in which the performance of the arrangements so affect the equities arising from the initial contributions that a return of contributions would be disproportionate to the requirements of the conscionable behaviour; indeed, Stoklasa was such a case. But this is not one of them. The second matter advanced was that improvements had been effected to the property in the meantime. But so too had improvements been effected in Sirtes v Pryer, and in that case the counter-equity that arose as a result was satisfied by a charge for the value added by those improvements.

40 The facts of the present case are far removed from those in Stoklasa. They do not justify any remedy other than the prima facie one. To the extent that justice requires recognition of any other contributions, they may be dealt with by allowance or adjustment from the position produced by the prima facie remedy, rather than by adopting some different starting point. Accordingly, I am not satisfied that in the present case there is any sufficient reason why the prima facie remedy should not apply: that is, the return to Mr McKay of the half share that he contributed.

41 Several potential allowances or adjustments have been proposed or require consideration: first, the rendering of care services, at least until early 1999, by Ms McKay; secondly, the effecting of improvements to the property, principally by Mr Schiavo; thirdly, the mortgage debt, instalments in respect of it and the circumstance that it used the whole of the property, including Mr McKay’s share, to acquire the half interest of Ms Bruce; fourthly, whether an occupation fee should be charged against Mr McKay from early 2002, since when he alone has been in occupation; fifthly, rates and outgoings paid by the plaintiffs; and sixthly, the benefits derived by the plaintiffs from being accommodated in the property, in particular, by freeing Mr Schiavo's Seven Hills property to generate rental income. I shall deal with each of these in turn.

42 As to the rendering of care services by Ms McKay, the parties agree that between late 1996 and at least early 1999 she cared for Mr McKay as required by the December 1996 agreement. However, that agreed fact is equivocal as to the quantum and quality of the care provided. Mr McKay says that, in fact, very little was provided. Ms McKay says [paragraph 65 of her affidavit] that on her return from work or her sporting commitments she cooked dinner, sometimes prepared meals for Mr McKay to take to work, cleaned the kitchen and washed up, washed, dried and folded clothes, shopped for groceries and household supplies, washed the floors, for the first 12 months cleaned Mr McKay's rooms, vacuumed the floors, took him to medical appointments when necessary and took him to the library to borrow books. But she also says [paragraph 70] that in early 1997 Mr McKay's condition improved to the extent that he was working at his factory at Revesby, and that he could lift things that she would find difficult to lift.

43 In other cases – I have already mentioned Kriezis – the rendering of the services contemplated by the arrangements for some considerable time have not only not precluded a return of contributions, but also have not resulted in any allowance. Indeed, I am not aware of a case in this area of discourse in which an allowance has been made for the provision of care. That is not to say that in an appropriate case, if appropriate evidence were adduced, such an allowance could not be made. But there is nothing in this case to suggest that Ms McKay gave up her employment, or forewent other opportunities, in order to render care to her father over the period in question, and there is even less to attribute any value in financial terms to what she did. The evidence does not descend to the detail that would be required to support a Griffiths v Kerkemeyer claim in a personal injuries action. In those circumstances, I do not think it is possible or appropriate to make any allowance for the rendering of care services.

44 The second question is an allowance for improvements. A co-owner who improves property is entitled to an allowance for those improvements [Forgeard v Shanahan (1994) 35 NSWLR 206, 223F]. For this purpose, improvements involve something more than mere repairs and maintenance [Forgeard v Shanahan, 224C]. Such an allowance is not a reimbursement for expenditure, but an allowance in respect of the amount by which the improvements have increased the value of the property [Forgeard v Shanahan, 223F]. Mr Schiavo described the improvements he undertook [paragraph 43 of his affidavit]. Many of them – such as mowing lawns, general gardening work, general maintenance jobs, replacing taps and hoses, replacing sewer pipes, clearing tree roots, and washing and painting walls and ceilings, were plainly in the category of mere repairs and maintenance. Some – such as renovation of the kitchen and building a carport – might exceed mere repairs and maintenance, but there is no evidence that those works have enhanced the value of the property at all, let alone as to the amount by which they might have done so. On the evidence, I am unable to be satisfied that there is a case for an allowance for improvements.

45 The third matter is the mortgage. As I have recorded, the price paid to Ms Bruce was raised by the plaintiffs on the security of the whole of the property, including Mr McKay's share. As between the parties, it is plain that the plaintiffs alone are liable for the mortgage debt and that Mr McKay is entitled to be exonerated and have the mortgage borne by the plaintiffs' share. Although the plaintiffs have themselves serviced the mortgage to this point. The plaintiffs have had the use of Mr McKay's half share as security for the borrowings with which they purchased their own half, no value has been attributed to this benefit, nonetheless, it is a countervailing benefit which they have enjoyed, and adds to the reasons for declining to make an allowance on account of care services rendered.

46 The fourth question is an occupation fee. A co-owner in occupation is not liable to pay an occupation fee to other co-owners unless he claims an allowance for improvements or he has excluded the other from the property; absent exclusion or ouster, the law treats a co-owner not in occupation simply as one who chooses not to exercise his or her legal right to occupy the property [Forgeard v Shanahan, 221G]. On the other hand, a co-owner who has been ousted from the property can bring proceedings for possession and for mesne profits [Forgeard v Shanahan, 222B]. The remedy is said to have been depended on an exclusion being a legal wrong [Luke v Luke (1936) 36 SR(NSW) 310, 314].

47 There is no little controversy as to what amounts to ouster, particularly in the context of a failed domestic relationship. On the one hand, authority establishes that a co-owner who obtains an apprehended personal violence order, or an order for exclusive occupation of the property under matrimonial laws, does not thereby exclude the other unlawfully and is not therefore liable for an occupation fee [Biviano v Natoli (1998) 43 NSWLR 695]. On the other hand, there is authority that a domestic partner who, upon the breakdown of the relationship, vacates in circumstances that it is no longer reasonable to expect him or her to remain in occupation with the other, may be regarded as having been excluded and may be entitled to an occupation fee [Dennis v McDonald [1982] Fam 63, 71]. The first instance judgment of Purchas J, as his Lordship then was, in Dennis v McDonald was upheld in the Court of Appeal, although the present point was not an issue on the appeal. Though doubted by Young J in Chieco v Evans (1990) 5 BPR 11,297, it was endorsed by Beazley JA, with whom Stein JA agreed, in Biviano v Natoli (at 702). The controversy was referred to, but not resolved, by Bell J in Rupchev v Callow [2007] NSWSC 1097.

48 The jurisdiction of matrimonial courts – including this Court in exercise of its jurisdiction under the (NSW) Property (Relationships) Act 1984 – to grant injunctions and make orders for the exclusive occupation of property is not fault based. The touchstone for such an order is that it is no longer reasonable or practicable to expect the parties to continue to live together in the same property [see, for example, In the Marriage of V and CL Fedele (1986) 10 Fam LR 1069, 1073 and the cases there cited]. Once that finding is made, the decision is made according to the balance of the convenience including, for example, where one party has the custody of children, whether it is preferable that that party or the other continue to occupy the former matrimonial home. The explanation offered by Powell JA in Biviano v Natoli – that the result in Dennis v McDonald is to be explained on the basis of one party effectively being responsible for the other not being able to live there – does not, with respect, sustain examination in that context.

49 It would be unfortunate if a party by vacating voluntarily, even in the face of a threatened application for exclusive occupation, could be regarded as having been excluded so as to claim an occupation fee, whereas one who was ejected by such an order after having opposed it, on considerations of balance of convenience but without fault, was not entitled to an occupation fee; yet that appears to be the effect of the current state of the authorities.

50 In matrimonial proceedings, this situation is typically addressed by taking into account, in evaluating the respective contributions of the parties for the purposes of discretionary property adjustment, the fact that since separation one has had the benefit of exclusive occupation of the former matrimonial home – either as a contribution by the other, or as a benefit already received by the party who remains in possession.

51 When, in cases such as Luke v Luke, it was said that an occupation fee was available only where there was a legal wrong, there was no jurisdiction to exclude a co-owner for personal reasons, despite the co-owner's legal rights; that jurisdiction, whether in the domestic violence provisions of the (NSW) Crimes Act 1900 or under matrimonial legislation, has been created since. When Long Innes J referred, in Luke v Luke, to the exclusion being a legal wrong, there was no difference between a positive (actionable) legal wrong, and the denial of a legal right. However, while a party who obtains an order for exclusive occupation or an APVO does no legal wrong by excluding the other, that other's legal rights as a co-owner to occupy are, nonetheless, denied. If a party is excluded by such an order, it can no longer be said to be a case of the party out of possession being one who merely chooses not to exercise his or her right of occupancy as a co-tenant; rather, he or she is prohibited from doing so. I, therefore, agree with Purchas J in Dennis v McDonald and Beazley JA in Biviano v Natoli, that the basic principle that a tenant in common is not liable to pay an occupation rent by virtue merely of his being in sole occupation of the property does not apply in the case where a matrimonial or similar relationship has broken down and one party is, for practical purposes, excluded from the family home. Upon breakdown of a domestic relationship, if it becomes no longer reasonable or practicably sensible to expect the partners to co-occupy the one property, the one who remains in possession may be taken to do so to the exclusion of the other, and to be liable to pay an occupation fee. At present, however, Biviano would seem to restrict that to a case in which the exclusion was not authorised by a court order – whether under matrimonial legislation or an APVO.

52 In this case, the plaintiffs left the property, in a sense voluntarily, in February 2002. However, I think it was not reasonable or sensible to expect them to continue to live there with the defendant. That involves no attribution of fault, simply that it was no longer sensible to expect all three to live there when there had been unpleasant, even violent, incidents between them. That would, on my view, entitle them to an occupation fee. But in this case, there is, in any event, more. The plaintiffs returned to the property once, but on their second attempt to return, found that the gates had been locked. The mere placing of a lock on a gate may not be enough to amount to exclusion [Jacobs v Seward (1872) LR 5 HL 464, 473]. However, in that case Lord Hatherley LC pointed out first, that there was no evidence as to whether the gate was kept locked or not – simply that there was a lock on it; secondly, that the defendant had allowed the plaintiff’s son to enter when a request had been made; and, thirdly, that there was no evidence as to what was the object and intent of putting on the lock. In the present case, the evidence is that the gate was in fact locked. Moreover, the plaintiffs requested they be provided with keys and there was no response to their requests. In the course of this oral evidence, Mr McKay – when asked what he would have done had the plaintiffs attended and asked to be let in – said, "I would have made sure I had a witness and if they'd asked to come in, I'd have let them in, but I wouldn't have let them come in the place when I wasn't present because I was fearful of goods being taken and I would not have wanted them to come in unless I had somebody with me because of their actions and the way they had been behaving towards me". That intent is quite inconsistent with the rights of the plaintiffs as co-owners to occupy the property and to come to and from it as they please.

53 Thus, while it is true that in a sense they departed voluntarily from the property, that was in circumstances where it was desirable if not inevitable that one or other of the parties do so. After they departed, they were excluded physically by the lock on the gate, and that lock was accompanied by an intention inconsistent with their legal rights as co-owners. In those circumstances, I am satisfied that they were excluded in the relevant sense, and are entitled to an occupation fee against Mr McKay.

54 The proper measure of an occupation fee would seem to be half of the market rent of the property for the period of the exclusion [Biviano v Natoli]. The evidence establishes that the market rent was $430 per week as at 28 April 2007. Accordingly, the appropriate allowance for an occupation fee is half of that amount for the period from February 2002 until Mr McKay vacates. As the evidence of value is in today's values, it would be inappropriate to allow interest.

55 The fifth item is rates and outgoings. The plaintiffs have paid all the council and water rates since December 1996. They have also paid all of the outgoings for electricity, and they have kept the property insured. In my view, they are entitled to recoup by way of contribution for a debt paid on behalf of all of the parties half of their expenditure on council and water rates [Forgeardv Shanahan, 224F]. The apportionment which they propose so far as electricity is concerned, namely, 33 percent to Mr McKay up until February 2002 and 100 percent to him thereafter is appropriate, and they are entitled to recover those proportions of the amounts they have paid. However, they are not entitled to recoup insurance premiums; it has not been shown that the insurance was for the benefit of Mr McKay [Forgeardv Shanahan, 225B].

56 The final matter is that it was suggested on behalf of Mr McKay that the plaintiffs ought to be required to bring to account the value of the benefit to them of letting Mr Schiavo's Seven Hills property for rent, which only became available to them by reason of their ability to occupy the Ryde property. As they were co-owners of the Ryde property, for a half-share in which they paid, they were entitled to occupy it if they so chose. I can see no basis whatsoever for requiring them to give credit for benefits that they derived from letting the Seven Hills property.

57 It follows that, in my view, trustees should be appointed to sell the property and to pay from the proceeds of sale the costs of sale; to divide the balance into two shares, called the plaintiffs' share and the defendant's share; from the plaintiffs' share to deduct the amount required to discharge the mortgage and to pay the balance to the plaintiffs; and from the defendant's share to deduct and pay to the plaintiffs the occupation fee calculated in the manner I have indicated, and the amount of rates and outgoings to which the plaintiffs are entitled as I have already indicated, and then to pay the balance remaining of the defendant's share to the defendant. There should be judgment that the defendant pay the plaintiffs the sum of $20,000 together with interest at the appropriate rate. All the consolidated proceedings should be otherwise dismissed. I will hear the parties on the question of costs.

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

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