Meehan v Fuller

[1997] QSC 239

IN THE SUPREME COURT

OF QUEENSLAND

No. 1402 of 1994

Brisbane

Before Mr Justice J.A. Dowsett

[Meehan v Fuller]

BETWEEN:
  ANNETTE PATRICIA MEEHAN
  Plaintiff

AND
  GEOFFREY WAYNE FULLER
  Defendant

CATCHWORDS:     EQUITY - constructive trust - de facto relationship - financial and non-financial contributions - unconscionable conduct - compound interest.

Muschinski v Dodds (1984-85) 160 CLR 583

Baumgartner v Baumgartner (1987) 164 CLR 137

Brown v Manuel (C.A. No. 95 of 1995 22.3.96 unreported)  

Dunne v Turner (C.A. No. 196 of 1995 20.8.96 unreported)

Hungerfords v Walker (1988-89) 171 CLR 125

Wallersteiner v Moir (No. 2) [1975] 1 QB 373

COUNSEL:Mr W.J. Hodges for the plaintiff

Mr N.B. McGregor for the defendant

SOLICITORS:          Philippa Power for the plaintiff  

Hopgood & Ganim for the defendant

HEARING DATE:    30 September, 1, 2, 3, 6, 7, October 1997

REASONS FOR JUDGMENT -  DOWSETT J.

Judgment delivered 22 December 1997

The plaintiff was born on 6 November 1951, and the defendant was born on 16 July 1942.  They lived together in a de facto relationship from March, 1979 until the end of March, 1994. There is one child of the relationship, Steven William Fuller, born on 1 February 1984. The plaintiff seeks to establish that she is beneficially entitled to one half of a property at 44 Messines Crescent, Miami on the Gold Coast, which is held by the parties in equal shares as tenants-in- common, and also to a beneficial interest to the extent of one half in certain specified property owned by the defendant. Her entitlement is said to derive from the pooling by the plaintiff and the defendant of their resources, efforts, capital and income during the period of co-habitation.  As a consequence, or perhaps alternatively, it is submitted that it would be unconscionable for the defendant to assert that the plaintiff has no such entitlement.

THE PLAINTIFF’S VERSION

I shall firstly outline the plaintiff’s evidence.  The parties met when they were both working in the hospitality industry in Canada in 1974-75.  They  returned to Australia in March, 1979 and commenced to live together.  According to the plaintiff, she then had about $5,000 in cash and an expectation of inheriting about $15,000 from her deceased father’s estate. She said that the defendant owned a home unit or terrace house in Newtown, Sydney and had between $5,000 and $10,000 in cash. He also had certain Canadian retirement savings plans, but she said that they had no value in Australia.   In the middle of 1979, the parties moved to the Gold Coast where the plaintiff purchased a home unit for $29,000, of which $18,000 was from her cash reserves. She borrowed the balance of $11,000.  The parties lived in these premises until late 1982. According to the plaintiff, each paid $27 per week towards the total weekly mortgage repayment of $54. The plaintiff said that she paid other outgoings, including food, rates and insurance. The defendant performed some renovation work on the unit.

After moving to the Gold Coast,  the plaintiff commenced work as a barmaid, working  four days a week. The defendant was working at the same hotel on a part-time basis. He also undertook work on a prawn trawler for about twelve months. The parties maintained separate bank accounts. At some time in the second half of 1980, a friend told the parties that a restaurant in Surfers Paradise, known as “The Den” had failed financially. The friend considered it to be a good business venture.  The defendant eventually took a lease of the relevant premises in his own name with a view to re-opening the restaurant. He paid a $5,000 bond in connection with the liquor licence and also purchased stock-in-trade and equipment. At the time, the plaintiff was still working as a barmaid, but at a fairly early stage, probably roughly coinciding with the opening of the restaurant, she ceased such employment and went to work there. It traded on six nights each week, being closed on Sundays. Wednesday and Friday nights were particularly busy as the restaurant was used by a “singles” club on those nights. Saturday nights were often also

busy.  Frequently, the restaurant was booked for private functions. The plaintiff often set up the restaurant before and after such functions.  Occasionally, the restaurant would be booked to provide meals to bus tour groups on Sundays. The plaintiff  would work on those days.  From time to time she also assisted in the kitchen or as hostess and performed “letterbox drops” of advertising material.  She regularly laundered the lace overlays used on the tables and attended to the bookwork. She said that she received $70 per week for her work at the restaurant, which sum was calculated as the maximum amount she could earn without incurring tax liability. Food and beverages were taken out of the restaurant for private use by the parties. They also sometimes took meals there without charge.

In late 1983, the plaintiff discovered that she was pregnant. The parties decided that she would work until Christmas.  However the defendant suffered an injury, and so she continued to work in the restaurant in his place until about two weeks before the child was born on 1 February 1984.  She was also forced to return to work a few weeks after he was born because the defendant had again injured himself. The restaurant was sold in mid-1984.

In 1980 or 1981, the defendant sold the Newtown property and bought land at Tweed Heads upon which he erected two residential units, described in the evidence as a “duplex”. The plaintiff’s recollection was that the construction cost was about $37,000 and the land cost about $8,000. Both units were let, more or less continuously. The plaintiff made some minimal contribution towards the furnishing of the units and also twice  assisted in cleaning them between tenancies.  In late 1982, the parties left the Bilinga unit and moved to a unit in Surfers Paradise to be nearer to the restaurant.  The Bilinga unit was then let. According to the plaintiff,  she paid a third of the rent of the Surfers Paradise unit, the defendant paid a third and a third was contributed from restaurant money. 

In 1983, in expectation of the birth of their child, the parties decided to buy a house. However, they found a block of two units at Mermaid Waters, the units being on different levels. Both units were owned by the same person and were for sale. They initially inspected the top unit as the other was tenanted. They inspected it at a later stage. They made offers to purchase both units. The plaintiff said that she had expected that they would buy the two units jointly and that  contracts were initially prepared in that way. However, in the end,  two separate contracts were executed, one for the top unit in joint names and one for the bottom unit in the name of the defendant only. According to the plaintiff, they argued about this, but she eventually gave way. She claims to have contributed $49,000 to the total purchase price of $117,000 for both units. Her contribution was made by a “swap” of the Bilinga unit, which was transferred to the vendor of the Mermaid Waters property. Unfortunately, the relevant contracts are not in evidence.   The plaintiff’s  recollection was that no moneys were then owing on the Bilinga unit. The parties subsequently resided in the upper unit at Mermaid Waters. The lower unit required renovation.  The defendant attended to this, although the plaintiff also assisted with some of the soft furnishings. It was then let.   

According to the plaintiff, from the sale of the restaurant in mid-1984 until mid 1988, both parties undertook only irregular employment, the extent of which is unclear. At some stage, the defendant received unemployment benefits. They both devoted a substantial amount of time to caring for the child. In 1986, the defendant sold the Tweed Heads duplex for about $80,000, of which $15,000 was used to discharge a debt. The balance was placed with a solicitor for lending upon the security of a Real Property Act mortgage. The borrower’s name was Berry, and the property in question was at Noosa Heads. The mortgage was taken  in the joint names of the parties, although the whole of the sum had been derived from the sale of the Tweed Heads property. On a number of occasions, the defendant said to the plaintiff words to the effect that, “We may end up with a Noosa house out of this”,  apparently a reference to the possibility that they might foreclose on the mortgage.   

In 1988, a friend informed the parties that a ballot for Gold Coast taxi licences was to take place. They discussed the matter.  It was necessary to pay $5,000 to enter the ballot and, according to the plaintiff, in the time available, they could acquire enough money to make only one such payment. The defendant borrowed that amount from his mother and entered the ballot.  He was successful and paid, in total, $180,000 for the purchase of the licence and associated assets, including the car. Of this sum, $135,000 was borrowed from the plaintiff’s brothers and of the balance, all but $3,000 was supplied by the defendant’s family. The plaintiff said that she contributed the sum of $3,000. The defendant obtained a taxi driver’s licence and drove for up to twelve hours per shift, five days per week. He regularly worked from 3 a.m. to 3 p.m. He would then return home and go to bed quite early. At a later stage, the plaintiff also obtained a taxi driver’s licence, but  she did not drive very frequently. She  assisted with the associated bookwork, including banking. Of course, she was also  caring for the child at this time and otherwise maintaining the household. 

In about 1988, before the acquisition of the taxi, the plaintiff had become increasingly unhappy in the relationship. She attributed this to the defendant’s attitude. She said that on one occasion, she told him that she wanted to end the relationship, to which he replied, “If you do I will take Steven and you will never see him again”. She claimed that she took this threat seriously, at least partly because he had been so closely involved in the upbringing of the child. She believed that he might have had a good claim to custody notwithstanding that the child was then only about four years of age. I should say at this stage that the plaintiff impressed me as a quite intelligent and articulate woman. She did not strike me as a person who would be easily overwhelmed by a threat, nor as somebody who would be reticent about defending her own rights. I do not mean these comments in any critical way. I am merely seeking to convey my impression of her as an able woman, capable of speaking for herself. She did not leave him at that stage, she said, because she was afraid of losing the child.  I suspect that the reasons were more complicated.

In mid-1988, the Mermaid Beach property was sold for $296,000, yielding about $288,000 nett. Both units were sold to one purchaser. A new home was bought at 44 Messines Crescent, Miami for a purchase price of $200,000, the parties taking the title as tenants in common  in equal shares.  After payment of the expenses associated with the sale and purchase,  there was a surplus of about $88,000. This balance was used to reduce the indebtedness associated with the acquisition of the taxi licence.

On 25 May 1989 the parties executed a deed relating to their property and the welfare of the child (ex. 4). According to the plaintiff , this was the result of a difference of opinion between the parties concerning a proposal that the defendant’s mother come to live with them at Messines Crescent.  There were two separate dwellings on the subject land, the home in which the parties resided, which was at the rear of the allotment, and a separate unit at the front. According to the plaintiff, the defendant proposed that his mother should acquire the land at the front for up to $100,000, that the existing improvements thereon should be demolished and that a new two- bedroom unit should be built at her expense. The plaintiff said that she felt it would be unfair for the defendant’s mother to pay up to $100,000 for the land and refused to take part in the transaction. At this stage, according to the plaintiff, the defendant said, “Well, I think you should learn what is yours and what is mine.” She asked him what he meant, and he replied, “That part of the property doesn’t belong to you. It is only the back part that you have a half interest in.” According to the plaintiff, this was the first occasion on which any such suggestion had been made. She had always understood that they were  co-owners in equal shares. As I have said, the certificate of title reflected that position.  In the course of argument before me, it was conceded that the property could not have been legally subdivided, either in 1989 or at any time thereafter.

According to the plaintiff, the defendant subsequently decided that they should enter into a written agreement as to property. She said that in accordance with their usual practice, he asked her to write down certain terms which he dictated. She did so, and as a result, the draft document, a copy of which is ex. 15, was produced. The draft asserted that the plaintiff’s assets were  “Half share of house, land and furniture and other improvements at the rear of 44 Messines Crescent, Miami, personal accounts, investments, cash, goods and chattels.” The defendant was said to have a half share in the rear premises and also the front house, land and improvements, the taxi, including associated property and “personal accounts, investments, cash, goods and chattels.” The draft required the defendant to assume responsibility for “debts, charges and capital expenses of a necessary nature involved in running 44 Messines Crescent,  car and household”. Provision was also made for joint custody of the child. The draft provided that these conditions were agreed to, “unless varied by following:

1.Consent of both parties;

2.Death of either party (see wills);

3.Separation of signatories:- whereby GWF would relinquish all rights to the rear of 44 Messines Crescent, Miami and expenses incurred by the property after transfer to APM. APM would relinquish rights to all other assets, investments and support of GWF.” 

The deed executed on 25 May 1989, (ex. 4), reflected much of the content of ex. 15. The plaintiff said that she had no recollection of seeing a solicitor in relation to the preparation of the deed, although other evidence suggests to the contrary. She said that she did not take independent legal advice about it. Under cross-examination, the plaintiff said that she did not know whether she or the defendant had first contacted the solicitor concerning the deed. In view of her evidence-in-chief, this is of some significance, particularly as the solicitor (Mr Kozicki) gave evidence that he had first spoken to her rather than the defendant, although one of his partners had evidently taken earlier instructions from either the plaintiff or the defendant. The solicitor also said that at some stage, the parties took away a draft deed so that they could discuss it.

The plaintiff said that she was very unhappy about signing the deed “because it wasn’t fair”. She said, however, that she signed it because the defendant would just “... badger me until I signed it. You know, he’d stop letting me use the car for a few days. He would withhold some housekeeping money. I was continually afraid if I didn’t sign it, that he would take Steven.”  She said that he was, “very manipulative, very angry, very loud voice”. She did not obtain independent legal advice before executing the deed. The execution took place at the  the offices of Messrs Short, Punch & Greatorix. She said that she had misgivings about signing it. She expressed them to the solicitor, saying that she was afraid about her future welfare with Steven and that she would have “to stand by the document”. She said that the solicitor assured her that it was not legally binding and that it was only to apply if they separated. She said that she did not think that they would separate while Steven was still a child. In any event, she signed the deed. Wills were also executed at about the same time. Subject to her surviving the defendant by thirty days, the plaintiff was the sole beneficiary under the defendant’s will. He was the principal beneficiary under her will, again subject to the same survival period.  I will return to consider the deed at a later stage, but it will assist in understanding one aspect of the evidence if I set out the terms of Cl. 6 at this stage. It provides as follows:

“6.That the Husband agrees and acknowledges:-

(i)that he is solely responsible for any debts, charges, rates and/or any expenses of a capital nature which may be incurred or arising out of or in relation to the said property situate at 44 Messines Crescent, Miami in the said State.

(ii)that he is solely responsible and liable for all household expenses during the cohabitation of the parties.”

After execution of the deed, many of the expenses dealt with in Cl. 6 were met from a joint account with Metway Bank, the record of which account is ex. 6. The plaintiff claimed that she paid into this account moneys received by her for her work in keeping the books for the taxi business. She said that initially, $300 per week would be withheld from the taxi takings. Of this, $100 was called “wages” and went into the joint account, and $200 was kept for food and day-to-day expenses.  A second taxi licence was acquired in mid-1991. Thereafter, a total of $350 was retained from the takings, of which $100 was so deposited  and $250 was used for food and other expenses. Although the plaintiff  initially asserted that the amounts so deposited were wages, she also referred to them as “drawings”. See ts.p.57 ll.1-10.  In cross-examination she said that the deposit for the ballot for the second taxi also came from this account, but at another point,  she  said that the account was not opened until after the second licence was obtained. See ts. p.75 ll.28-30.  Rental from the front unit at Messines Crescent totalling $5,300 was also deposited into the account, as were the proceeds of the sale of a motor vehicle in the sum of $7,000. The plaintiff asserts that the defendant’s conduct in paying amounts from the joint account in discharge of debts for which he was liable pursuant to the deed constituted a breach of the deed, entitling her  to determine it. I will return to this matter at a later stage.

I have already mentioned the acquisition of a second taxi licence. After the defendant had acquired the first licence, both parties entered numerous ballots for taxi licences  in their individual names. Although I was told  in the course of argument that it was not possible to participate in such  ballots in joint names, exhibit 8 shows that other persons did so. One imagines that the parties, by  both participating in their individual names, increased their prospects of success. The defendant was again successful in a ballot in May, 1991 and acquired the second licence in his own name.

The parties separated at the end of March, 1994. Immediately after separation, the plaintiff made an application in the Magistrates Court at Southport for custody of the child. A custody order was later made by consent in the Family Court. Under the current legislation, maintenance orders are not made in respect of children, either of marriages or of de facto relationships. An organisation called the Child Support Agency, part of the Australian Taxation Office, quantifies the maintenance which is payable. This has been done in the present case, and the defendant has challenged the determination. The proceedings relating to custody and maintenance are said to demonstrate  that the parties have conducted themselves in a way which is inconsistent with the terms of the deed to which I have referred, indicating either a repudiation of it or, perhaps, a discharge or variation by agreement. I will return to this matter at a later stage. The plaintiff said that when she left the defendant, there was about $70,000 in cash in a canvas bag and about $8,000 in a smaller leather bag, these sums being undeclared income from the taxi business.

The plaintiff called evidence from a number of people who knew the parties during the period of cohabitation, but it is not necessary to refer to their evidence at this stage.  In addition, the plaintiff called  Ms Gooch,  an employee of Broken Hill Proprietary Ltd. Her evidence was in connection with a claim made by the defendant that in the early 1980s, he derived moneys from the sale of BHP shares. Ms Gooch conducted a search of the share register for the period from 1973 to 1984 and found only one holding in the name of Geoffrey W. Fuller or any other similar name. The holding comprised 50 shares which were disposed of on 18 May 1976. The market value at the date of sale was $6.06 per share.  The other major witness called on behalf of the plaintiff was Mr N.C. Calabro, an accountant. His evidence is substantially contained in his report, ex. 3, together with exs. 23 and 24.

THE DEFENDANT'S VERSION

The defendant claimed that he had bought shares, including BHP shares to a value of about $20,000  prior to going to Canada. He said that in 1977, he returned to Australia on a visit and at that time, purchased the Newtown property. The purchase price was about $27,000 or $28,000. He said that he paid a deposit of $4,000 and borrowed $24,000.  He left the property in the care of his mother when he returned to Canada, intending that it be let.  This apparently occurred. He said that after returning to Canada, he remitted a further $10,000 to Australia because the rent was not sufficient to cover the outgoings and mortgage repayments. It is not entirely clear, but my understanding is that this sum was used to reduce the indebtedness incurred in acquiring the property, and so the amount needed to service the loan.             

He returned permanently to Australia with the plaintiff on 2 April 1979. At that time, he held certain savings plans in Canada to which the plaintiff also referred. Other assets remaining  in Canada included a half share in a campervan, a television set and other personal items. In Australia, he claimed to have a bank account in Sydney, the Newtown property and the shares. He also brought back $10,000 in cash. His assets in Canada other than the savings plans yielded  $5,000. The savings plans were worth, in total, about $10,000, but there was some difficulty in realising them. The defendant said that the vast bulk of that sum was eventually repatriated to Australia over a period of some years. 

His account of  the way in which the parties came to reside in the Bilinga unit was substantially similar to that of the plaintiff. He said that whilst they were residing in that unit, he paid  in the vicinity of $50 per week for food and rent. He performed  renovation work in the kitchen.  In 1979 or 1980,  he bought the land at Tweed Heads to which I have previously referred.  The duplex was completed in mid 1980. It cost a total of $52,000, of which $8,000 was the purchase price of the land.  He borrowed $26,000 through a firm of solicitors called Halliday and Stanley and paid the balance of $24,000 from funds in Australia. He retained the duplex until about 1986 when it was sold for $80,000. For most of that time, it was tenanted. He regularly mowed the lawn and attended to cleaning between tenancies. He said that the plaintiff assisted on one occasion.

In 1980 he acquired “The Den” restaurant. He gave a bond of $5,000 in connection with the liquor licence and paid a further sum for plant, equipment and stock. The total investment was $15,000, which he borrowed from Halliday and Stanley. At some stage, this was re-financed by  borrowing the sum in question from the plaintiff’s brother,  Tony and repaying Halliday and Stanley. He also borrowed a further $6,000 from Tony to buy a car for the business. The car was for the defendant’s use. The plaintiff had her own car.  The premises were held on a monthly tenancy. The borrowings and the tenancy were in the defendant’s name, and the defendant’s accounts were prepared on the basis that he was the sole owner of the business. See ex. 26.

The defendant agreed that the plaintiff gave up her employment at the Coolangatta Hotel and went to work at the restaurant shortly after it opened. He asserted that she was employed  as a waitress who also occasionally did bar work. He agreed that she  washed the lace table overlays but said that she received $30 per week for this service.  He agreed that she sometimes helped out with “letterbox drops”. She was paid on an hourly basis for the work that she did.   Her hourly rate was about $6.70, whilst other staff were paid at the rate of $6.20. He thought the award rate was about $6.00. She also derived benefit from food, drink, rent and car expenses paid through the restaurant. They lived in the Bilinga unit for about two years and then moved to a unit in Surfers Paradise where they stayed for twelve to eighteen months. The rent was $60-$70 per week which was written off as a business expense.  He denied that they had shared the rental as  suggested by the plaintiff.  He agreed that the parties had effectively lived off the restaurant during the period that he operated it. He also agreed that the plaintiff had no other paid employment during the time he was operating the restaurant.

The defendant said that it was necessary to run the restaurant  “pretty tight” because of the seasonal nature of trade on the Gold Coast. It is clear to me that he tried to minimise wages, and one can understand this. It seems likely, however, that this desire to minimise wages would  have led him to maximise his employment of the plaintiff, unless they were distinguishing between their personal and professional relationships in a most rigid and unusual way.  He claimed that he had urged her to make a record of all times which she worked so that she could be paid accordingly. He claimed to have told her, “This is a business, it’s not, you know ,the girlfriend, boyfriend bit. I’ve got to pay someone so I may as well pay you. So just put it down on the pay sheet and that’s fine.” Although I think it likely that he urged her to record the time worked, I am by no means satisfied that they drew such a tight distinction between their business and personal relations. 

At ts. p.186 he was asked and replied:

“Well, after you found out that she was pregnant, did you and she have any discussions about where you were living? 

Yes, we both decided that the rental unit in Surfers wasn’t suitable for bringing up

a child, so we decided ... Annette had a unit in Bilinga and at that time I had about

$50,000 in “The Den” cheque account, so that’s - with that sort of money we went

shopping for a home for - to bring Steven up.”

He said that he had been allowing surplus funds to accumulate in the account in the expectation that he would receive favourable consideration for a home loan when the appropriate time came. He accepted that they had initially intended to acquire the home  “half and half”but said that they found a two storey structure at Mermaid Waters, comprising two separate units, one upstairs and one down. They inspected the upstairs unit and were attracted to it. At the same time, according to him, the agent mentioned that the downstairs unit was for sale. It needed renovation. He said that they inspected it and that, “I decided to put in an offer for the bottom unit because he did say that the lady was very keen to sell.” Both units were owned by the same person. According to the defendant, he and the plaintiff decided to offer $68,000 for the top unit, conditional upon the sale of the plaintiff’s unit, and he made an offer of $48,000 or $49,000 for the lower unit, subject to finance. He said that he discussed his offer for the bottom unit with the plaintiff. The offers were accepted simultaneously. Subsequently, it was arranged that the vendor would take the plaintiff’s unit in part payment for the upstairs unit. The defendant said that after the purchase, he renovated the downstairs unit. He may have spent $15,000 on it. A double garage was also constructed, probably for use in connection with both units.   

He considered that the plaintiff and he had each contributed about $35,000 to the upstairs unit, the purchase price for which was $68,000. His acquisition of the downstairs unit was financed primarily from borrowings. He said that $39,000 came from “The Den” account, of which $35,000 went to pay for his half of the top unit. The balance of $4,000 from that account, together with $15,000 from the Metropolitan Permanent Building Society and $30,000 from Westpac, went towards the purchase of the downstairs unit. The Metropolitan loan was secured on the downstairs unit, and the Westpac loan was secured on the upstairs unit. The defendant asserted that the latter was secured on his interest in the upstairs unit, but the mortgage, ex. 41, is over the whole of the unit and is in joint names.  The mortgage bears stamp duty markings suggesting that a stamp duty exemption was allowed because it related to the acquisition of a principal residence. The markings indicate  that the exemption was for an amount of $20,100 and that duty assessed on the mortgage was nil. This suggests to me that the moneys secured by this mortgage were appropriated to the purchase of the upstairs unit, the chosen joint dwelling of the parties. However there was no cross-examination of the defendant on this matter.

The defendant said that of the $50,000 in “The Den” account, most of  it had been derived from the restaurant, although he thought that up to $20,000 was derived from the sale of  the BHP shares previously mentioned. I should say at this stage that he has produced no documentary evidence as to his holding of BHP shares, nor do such of his relevant tax returns as are available demonstrate that he declared any dividends as income. When this is taken with the evidence of the share register, I am persuaded on the balance of probabilities that he did not own BHP shares at any time after 18 May 1976 and that he therefore did not derive any moneys from the sale of such shares after that date. 

The restaurant was sold in June, 1984. The defendant said that the proceeds from the sale of the restaurant were only sufficient to return the amount of his investment. The moneys borrowed from Tony Meehan were not immediately repaid, apparently because, “Tony wasn’t around at the time and it was just easier to leave it.”  Neither he nor the plaintiff performed substantial work in the years following the sale of the restaurant until 1988 when they acquired the first taxi licence. During this period, he looked after the duplex at Tweed Heads and the downstairs unit, which were income-producing. At some stage, he received unemployment benefits. They were both actively engaged in looking after the child.

In March, 1986 the Tweed Heads duplex was sold for $80,000. All related borrowings had previously been repaid. From the proceeds, he repaid the Metropolitan Permanent Building Society loan on the Mermaid Waters unit and  invested the balance on a first mortgage arranged by solicitors, Short Punch & Greatorix. The borrower was a man called Berry to whom I have previously referred. The amount of the loan was $65,000, secured by a mortgage over a Noosa property in favour of the plaintiff and defendant jointly.  The defendant said that he had not been aware at the time that he and the plaintiff  were joint mortgagees. He thought that such course must have been adopted for tax reasons, to enable them to split the income  whenever that was advantageous. He thought this had occurred on only one occasion. At the time, interest rates were quite high. The rate on the loan was 19%, with a rebate of 2% for prompt payment, yielding more than $900 per month. 

The first taxi licence was acquired in May, 1988. The defendant thought that he had borrowed the deposit from his mother.  He denied discussing the bid with the plaintiff in advance. He purchased the licence for $185,214.00, financed by loans from his sister in the amount of $40,000 and from Tony and Trevor Meehan in the sum of $135,000. By this time, his previous loan from Tony Meehan had been repaid. He contributed about $20,000 to the purchase price for the taxi, including the $5,000 deposit, the latter sum presumably having been repaid to his mother. These moneys came from his own savings. He initially worked long hours, driving the taxi from 3a.m. to 3p.m., at first seven, and later six days per week. In more recent years, he has reduced the amount of time he  spends driving taxis, although  he now owns two.    

In 1988, the parties sold the Mermaid Waters units for $296,000 or $297,000. The net return was about $288,000. By this time, no moneys were owing on the property. The defendant was not entirely sure how he had paid out the Westpac mortgage, but his best recollection was that it must have been from accumulated savings from the restaurant. He said that the plaintiff derived $72,000 from the sale of the Mermaid Waters units, being a half share of  half of the sale price apportioned to the top unit. Her share went into the purchase of the Messines Crescent property. He contributed all but $88,000 of his share to that purchase. The sum of $88,000 went to pay off the loans on the taxi, or at least in reduction of them.  At about this time, Berry repaid the mortgage, and those funds also went to repay the taxi loans. At ts. p. 197 ll 43-4 the defendant said that moneys still remain owing to his sister and to the Meehan brothers in respect of these loans. It is not entirely clear, but I think that he was intending to indicate that moneys were still owing after application of the moneys received from Berry in reduction of the debts.        

The defendant said that the common understanding of the parties had been that they jointly owned the house to the rear of the Messines Crescent property and that he owned the unit at the  front. The factual basis of this belief is not clear.  He said that it was:

“...discussed that we put $72,000 each into the three bedroom house at the rear of Mermaid Waters and that would be the family home and I’d pay the rest of the purchase price and have the unit in the front which would sort of take the place of the unit I’d sold up in Mermaid Waters. That’s basically what happened until the deed.”

He suggested that the taking of the title as tenants in common in equal shares was probably the result of:

“...a bit of confusion about this - because this is the first time that we had a property that wasn’t a strata title one and I don’t think either of us realised that the tenant in common meant something to what we’d been doing before.”

With regard to the deed, he said that the plaintiff approached him, saying that she was concerned for her security in view of the fact that they weren’t married and had a son. He said that as a result of this, the deed was prepared. They saw Mr Kozicki at Short, Punch & Greatorix and indicated their desire for security in the event that they should separate. The defendant said that the plaintiff mentioned her rings and jewellery, and he mentioned his desire to “isolate” his businesses. They mentioned the sale of the Mermaid Waters property and that they had held it in the respective shares of 75% and 25%. They told the solicitor that they had bought a new property which reflected “a similar sort of contribution.” The defendant also said :

“We would have told him that the contribution from Annette was 72 from her proceeds from Mermaid, that I’d put in the rest, that the taxi licences were in my name - the taxi licence I should say - and that was about it.”

Mr Kozicki suggested that the parties jot down on paper exactly what they wanted.  They later discussed the matter between themselves and decided that the plaintiff should get the

“...security of the rear house at Miami, that I would pay all costs, and if either of us wanted to get out of the deal then the other had no right to stand in their way, but the taxis and the unit were mine, the jewellery and so forth were hers...”

The defendant said that the draft document, ex. 15, was a joint effort and not the result of his dictation. He said that there was  another short meeting with the solicitor at which they presented him with the draft. They returned at a later stage to sign the deed. On this occasion, Mr Kozicki  suggested that they should seek separate legal advice, but both declined. He also pointed out that some of the conditions pertaining to the child were not legally binding. The deed was then signed.  The defendant denied threatening to take Steven away from the plaintiff. He also denied having any argument with her about his mother’s proposed purchase of the land at the front of the Messines Crescent property or that he had said to the plaintiff that she had to be told, “what was hers and what was his.” He also denied badgering her into executing the deed.

As to the taxi business, the defendant said that after the acquisition of the first licence, the plaintiff did the bookwork associated with it and was paid $100 per week for this. After he acquired the second taxi, she obtained a taxi driver’s licence but only drove for about twelve half-shifts. He said that she obtained the licence because she was “a bit tired of waitressing....” The acquisition of the second taxi licence occurred after the execution of the deed and was because of his additional responsibility under it to pay for Steven’s schooling. He realised the need to generate more income and so decided to seek another licence.  He said that the plaintiff’s entries into the ballots for taxi licences were on the understanding that her brother would finance any purchase if she were to win. He also said that she had entered the ballots on behalf of her brother, but it was common ground that such evidence was not admissible. He repeated it without objection in cross-examination.

Prior to the acquisition of the second taxi licence, the plaintiff was drawing $100 as wages for doing the books,  and the defendant was drawing $100 to $200, of which $100 went into his personal account to pay household expenses, rent and director’s fees. The meaning of the reference to “director’s fees” is unclear. The balance was his spending money. He said that at the time of execution of the deed, they had separate bank accounts but that at some stage, the accountant advised them to change this as:

“Annette was being paid on an income-splitting situation. She was being paid $17,000 or $18,000 a year and because she wasn’t an arm’s length person, he suggested we establish a joint account and that account became - it was basically my account - my personal account and just the name was changed.” 

This was in or about 1992. He agreed that he used this joint account to pay household expenses.  I have some difficulty in understanding the reference to the plaintiff’s annual income of $17,000 or $18,000. The defendant’s case, as I understand it, is that she was then being paid $100 a week. I suspect that the annual sum must have been the defendant’s perception of the outcome of their “income-splitting” arrangements. The defendant’s 1992-93 and 1993-94 income tax returns show payments of this order to “associated persons”. I will return to this matter at a later stage.

The second taxi licence cost $240,000, most of which was financed by a loan from Westpac in the amount of $155,000 and a loan of $40,000 from the defendant’s mother. The balance came from the taxi trading account. The defendant said that his mother’s advance was made as to $5,000, by way of the deposit, which he subsequently repaid, and a further sum of about $33,000 which she has been forgiving at the rate of $10,000 per calendar year, reducing the loan to about $5,000. Ex. 35 is the loan agreement between the defendant and his mother. It supports his evidence to the extent that it shows an advance of $25,000 in July 1991 and two reductions by gift, each of $10,000 on 30 June, 1993 and 30 June, 1994. It also shows a further advance of $50,000 on 31 August 1994, which apparently went to pay out other debts relating to acquisition of the taxis.

The defendant agreed that  he had been concealing income from the taxi business for tax purposes. In the course of a tax amnesty, the Tax Office re-assessed him  for the years 1990-91, 1991-92 and 1992-93. The notices of re-assessment are contained in exhibit 3. He borrowed $80,000 to assist in meeting this obligation to the Tax Office and subsequently paid an additional $30,000 or $50,000, according to the transcript. See ts.p.212 ll.20-30. It may be that this should have been $13,500. See ts. pp. 212 ll.50-55. The following year, he paid provisional tax in the amount of about $30,000. The loan was  taken out through the Queensland Police Credit Union. A current statement is ex. 34. As to cash in hand at the time of separation, he said that he had about $60,000 in cash in a canvas bag. This was an estimate based upon his finding  $70,000 there when he counted it in the middle of 1994. He assumed that he had added further amounts  since the separation. He said that the plaintiff was therefore incorrect in her assertion that there was then $80,000 in the bag. The fund had been depleted prior to the separation by spending in connection with holidays. He denied that there was any other significant amount in a leather bag. There was also $30,000 in a taxi account. The defendant remains in the Messines Crescent property. The unit at the front  has been occasionally let since the separation. The weekly rental is $100 to $135. The  present tenant is one of the defendant’s drivers. It was unlet for about 12 months during the last financial year.

In cross-examination the defendant said that when he returned to Australia in 1979, he had $10,000 in cash and $3,000 in a Sydney account. He received a further $5,000 from Canada at a later stage, and the bulk of $10,000 from the savings plans over the next two or three years, a total of $28,000. He also had the Newtown property. As I have said, I reject his assertion that he owned a parcel of shares in BHP at this time. He  agreed that the Newtown property was sold for $37,500. At the time of sale there was an outstanding debt of $13,500, giving him a nett yield of $24,000. His estimate of $3,000 as the amount then remaining in the Sydney account was merely a guess. He agreed that there may have been incidental expenses associated with the sale of the Newtown property, reducing  the nett return to him by up to $2,000. He said that he contributed $26,000 of his own money to the Tweed Heads acquisition and development  and borrowed $26,000.  When put to him that he must also have expended money on furnishings for the duplex, he replied that he had let the premises unfurnished. However his accounts for the financial year 1980-81 indicate an amount of about $7,000 for furniture and fittings, in addition to the $52,000 for building and acquisition of the land. The purpose of this cross-examination was to establish that after the completion and fitting out of the Tweed Heads property, his savings would have been exhausted. He denied this.

He  agreed that the financial statements for the years 1980-81, 1981-82, 1982-83 and 1983-84 do not necessarily  reflect accurately the financial affairs of the restaurant, but he was unable to say how much better the restaurant may have performed than as disclosed in those statements. He said that the only money taken out of the restaurant and not accounted for would have been “a few dollars out of the till here and there”.  He was reluctant to admit that prior to acquiring the restaurant, he had discussed with the plaintiff her working there or  his entering into the restaurant venture. Under sustained questioning, he agreed that they had discussed her working in the restaurant. Given the plaintiff’s previous experience in the hospitality industry, and given that they were living together, I cannot accept that he would not have discussed the possibility of opening a restaurant with her. I also find it impossible to believe that he contemplated acquiring the restaurant without also contemplating the possibility, or even assuming that she would go to work in the restaurant as an integral part of such operation. He denied that because of his injury, the plaintiff had run the restaurant during her pregnancy. He said that he continued to attend and to do such work as he could. He agreed, however, that the plaintiff went to work during that period. He agreed that he was injured again after the birth but said that he also continued to work at that time.  He said that ... “mostly the child came to work anyway with the pair of us.” He insisted that it was for the plaintiff to choose whether she came to work or not after the birth of the baby, but he agreed that she regularly did so.

Concerning the Mermaid Waters property, he said that they paid cash for the jointly owned unit. As I have said, he was not questioned about the stamp duty markings on the Westpac mortgage. He said that he borrowed the moneys secured by that mortgage, notwithstanding the fact that the charge was in joint names over property which was jointly owned. He asserted that the parties had each  paid $35,000 for the top unit, although he agreed  that the Bilinga unit was swapped for a notional sale price of $49,000. As to the difference, he suggested that the plaintiff may have had to repay moneys owing on a mortgage, but he was by no means sure of that. He agreed that the Westpac mortgage over the Mermaid Waters property was repaid prior to the purchase of the first taxi but was unaware of the source of the funds. He said:

“It has obviously come from dribs and drabs. Rental income, Tweed is paid, 150 bucks a week coming out of that, there is my personal account, a bit left over from The Den. Where it actually came from, I can’t prove, I am afraid, so that’s all I can say about it.” (ts.p.300 l.53-p.301 l.3)      

At p.307 this passage appears:

“Well, if you were keeping your finances so separate and what was Annette’s was hers and what was yours was yours, and you had - The Den restaurant was only yours, you had the Tweed and it was only yours and you had the Mermaid Beach lower unit, it was only yours, if that’s really the truth, why would you be acknowledging and giving instructions to the solicitor to put (the Berry) moneys as mortgagee in joint names? -- This mortgage was taken out to increase the amount of money available for housekeeping. That’s - it was a better return than the duplex was giving and we had been going two years with neither working very much, and this gave an opportunity to use that money which we were using to live on, to increase that, and this would have given also the benefit of using two tax-free thresholds as far as taxation was concerned.

You were maximising the income available to your family household, weren’t you? -- That’s correct.”

The thrust of the balance of the passage is that it had been hoped that they would be able to apportion the income from the mortgage in such a way as to minimize their total tax liability.   In light of this passage, it is difficult to accept at face value the assertion that the parties’ kept their affairs separate. 

The defendant denied that prior to the acquisition of the first taxi, there had been any discussion of the plaintiff’s leaving or any threat by him to take Steven away from her. He said that the plaintiff had not been a party to the discussion at which he learned of the forthcoming taxi ballot and that he did not discuss the matter with her before entering the ballot, although they later discussed it after he had done so. He said that he hadn’t seen her “in that period”, presumably the period between when the matter was raised at dinner and when he entered  the ballot. This is a little difficult to accept at face value. He acknowledged having made a remark in connection with the Berry mortgage to the effect that, “We may end up with a Noosa house out of this.” He then said he wasn’t sure whether the word “we” had been used. He said this was intended as a joke.

He said with respect to the Messines Crescent property that prior to the contract, they had discussed the acquisition and agreed that, “we contributed to the rear house the same as up at Mermaid, and the unit was mine.” However under further cross-examination, he said that he did not recall any such discussion. He also said that there was no discussion between the parties after signing the contract as to the proportions in which they were to hold the property. He denied that the plaintiff had intervened in his negotiations with his mother for her purchase of part of the land. He also denied having said, “I think you should learn what is yours and what is mine.” He agreed  that ex. 15 may have been prepared before the first meeting with the solicitors.  He agreed that a draft deed was prepared and that they took it home to consider, but he denied that the plaintiff was unhappy with it or that he badgered her into signing it. He asserted that she was the instigator of the attempt to identify their respective property. He denied depriving her of housekeeping money or of the car, or of making threats about taking Steven from her. He said that the solicitor told them that the parts of the deed relating to the child were not binding in New South Wales and wouldn’t be binding on a court. The defendant said that the solicitor had not suggested that the document was other than binding insofar as concerned property. He  said that the moneys invested in the second taxi came from income from the first taxi which was not undeclared income. He again asserted that the plaintiff’s participation in taxi ballots had been on behalf of her brother Tony.

With regard to the joint account to which I have previously referred, he said that the plaintiff put no money into it and that his drawings were deposited there. He agreed that notwithstanding his assertion that their affairs had been kept separate, they had jointly participated  in attempts to minimize taxation. He denied that the plaintiff had paid $3,000 towards the purchase of the first taxi licence. He  thought that she had lent him $3,000 in connection with the purchase of the Messines Crescent property to pay for the legal costs and stamp duty. This “loan” was not repaid because he spent a substantial amount of money on renovations to the property.  The amount is not significant for present purposes.

The defendant also called the solicitor responsible for drafting the deed, Mr Kozicki. One of his partners had asked him to make contact with the parties to prepare the deed.  He obtained a contact number for the plaintiff and telephoned her on 12 April 1989. He took historical information from her pertaining to the acquisition of the various assets and as to the child. He saw the parties on 18 April and 25 May.  He had access to a draft deed, probably ex. 15, but didn’t know who had prepared it.

The plaintiff told him that prior to their de facto relationship, the defendant had a house in Sydney and she  had a unit at Bilinga. Those assets were probably of equal value. She told him that the defendant had sold the house in Sydney and built the duplex at Tweed Heads, borrowing money for the construction. The defendant had purchased the restaurant from his own funds and  had operated it for about four years. They subsequently sold the duplex at Tweed Heads and bought a duplex at Mermaid Beach. The funds for that acquisition came from the sale of the Tweed duplex and the sale of the plaintiff’s unit at Bilinga. She told him that they  lived in one of the units at the back of the property and that the unit at the front was rented.  The rental went  solely to the defendant, and he repaid the mortgage.  This seems to involve a confusion of the circumstances surrounding the Mermaid Waters property with those surrounding the Messines Crescent property. The plaintiff told Mr Kozicki that the duplex was sold in 1988, and that they then bought two houses on one block in Miami with the title in joint names. She contributed one quarter of the price, and he contributed the balance. They had intended to “strata title”, subdivide and sell the front dwelling which was to belong solely to the defendant.  As to the child, he was to remain with the plaintiff if the parties separated, although they were to have what was described as “half access”, dependent upon the child’s age. The actual instructions concerning this question were rather complex and probably need not concern me further. Mr Kozicki  thought that he had received ex. 15 from his partner. 

Mr Kozicki saw the parties on 18 April when they perused the documents which he had  prepared.  He remembered their being confused by the multiplicity of possibly relevant jurisdictions - Queensland, New South Wales and the Family Court. He discussed with them what he described as “independent advice certificates”,  which appear to be required or desirable under legislation concerning de facto partnerships in New South Wales. They inquired as to the binding nature of the deed and what would happen if they subsequently married. Mr Kozicki advised them that the document was drawn on the basis that they both ought seek independent legal advice. 

There is some confusion at pp. 364 and 365 of the transcript as to which of the various meetings is being discussed. It appears that Mr McGregor, in leading the evidence, may not have been ad idem with the witness. My understanding is that the account I have just given was of the first meeting between the parties and Mr Kozicki. After that evidence was given, Mr McGregor asked what happened on 18 April, to which the witness replied that the parties perused the deed and the wills which had been prepared and that he gave them advice about the New South Wales legislation, the Family Court and the common law jurisdiction. They took the documents away to discuss them further and were to contact Mr Kozicki about them.  He received certain amendments and the deed was re-engrossed. On 25 May, they executed it. He could not remember whether he referred to the New South Wales legislation again on that day, but he did  refer them to the relevance of the Family Court jurisdiction should they marry. He repeated his advice concerning the Family Law issues because he suspected that they might marry. He subsequently confirmed in writing his advice that the arrangements relating to custody and maintenance would not be binding in any Family Court proceedings.

The defendant also called evidence from Mr Flynn, an accountant.

RELATIVE CREDIBILITY AND FINDINGS

I have previously indicated that I consider the plaintiff to be an able woman, quite capable of defending her own position. Her evidence concerning the execution of the deed was inconsistent with Mr Kozicki’s, and I saw no reason to doubt him. This  leads me to conclude that with respect to that issue, the plaintiff was sufficiently conscious of what was in her best interests in this litigation as to be able to tailor her evidence to assist her case. That she was willing to do so causes me to have some doubt as to the reliability of her evidence in general.

The defendant’s evidence was also unpersuasive  at a number of points,  particularly where he tried to deny or minimize the extent of his consultations with the plaintiff concerning the acquisition of the restaurant, the purchase of the second unit at Mermaid Waters and the purchase of the first taxi licence.  His assertion that the plaintiff was nothing more than an employed waitress at the restaurant, notwithstanding that she was free to work such hours as she chose,  was paid more than other employees, worked until very close to the birth of her child and returned shortly after that birth, bringing the child with her, suggests that the defendant was not being honest in this regard, and I so find. His evasiveness under cross-examination also caused concern.  In the end, I was left with a preference for the evidence of the plaintiff, but  not a marked preference. In any event, such differences as there were between the evidence of the parties related more to matters of inference to be drawn from facts than to the facts themselves.           

I am satisfied that the parties lived together in the Bilinga unit from the time of its acquisition until they moved to Surfers Paradise, probably late in 1982. During that period they contributed equally towards the mortgage repayments and I expect, other outgoings. The defendant was, of course effectively paying rent for accommodation.  Once the defendant commenced to trade in the restaurant, they probably more or less “lived off” it. I am satisfied that the plaintiff commenced work at the restaurant at, or shortly after its opening. I accept her evidence that during the time she worked there, she received $70 per week and that this figure was calculated having regard to the maximum which she could earn before exposing herself to a tax liability. I am also satisfied  that her work hours were recorded and that she was notionally paid at an hourly rate which was in excess of that paid to other employees and of that prescribed by the relevant award. I am  satisfied that she worked  until the birth of her child and went back to work shortly thereafter, taking the baby to the restaurant with her. I am satisfied that after they moved to Surfers Paradise, the rent for the unit was paid from restaurant funds, although I would not be surprised if there were some notional apportionment of the sort mentioned by the plaintiff in her evidence. I accept that whilst the defendant operated the restaurant, the plaintiff  devoted all of her time either to that business or to maintaining the shared home, and after the birth of the child, to caring for him. All of these matters lead me to the conclusion that the parties saw the restaurant as a joint venture, using that expression in a non-technical sense. To this venture, each of them brought experience in the hospitality industry and their personal skills, talents and labour. The defendant also made a capital contribution but the plaintiff also contributed by drawing less than the amount she would have earned as an employee. 

In the circumstances, it is impossible to avoid the conclusion that both parties saw themselves as working for their mutual, long-term security and comfort. If the defendant made a greater contribution at the restaurant, this was  because the plaintiff was making a greater contribution at home, or at least so I would infer from the evidence.  Had the plaintiff not been available to provide a home for the defendant, then it is likely that he would have had to make some cash outlay in order to secure housekeeping services of one kind or another. Alternatively, he may have chosen to work shorter hours himself and employ more staff.

As to the circumstances surrounding the acquisition of the Mermaid Waters properties, I am satisfied that at the outset, the parties intended to acquire a property in equal shares using the expected sale price of the Bilinga unit and the sum of $50,000, some or all of which came from the restaurant. This suggests an intention to pool assets for  joint use. It is clear, however, that the  plan was changed, the defendant deciding to acquire one unit in joint names and one in his own name. The defendant must have acquired his interests in these units with funds derived substantially from the restaurant. I accept the plaintiff’s evidence that the Bilinga unit was then debt-free and was “swapped” at a notional value of $49,000. I will return to this matter at a later stage.

The defendant’s  attitude to the Berry mortgage is also of some present significance. I infer that the mortgage was taken in joint names at his instigation, notwithstanding that the moneys came from the sale of the Tweed Heads duplex, which was his sole property. I reject as improbable his suggestion that he did not know at the time that this had been done. It is difficult to avoid the conclusion that in taking the mortgage in joint names, he was acknowledging the parties’ respective contributions to their joint financial position.  As to the acquisition of the Messines Crescent property, I accept the plaintiff’s evidence that there was no suggestion that the acquisition was other than in equal shares until shortly before execution of the deed (ex.5), although she appears to have accepted the assertion at the time and instructed the solicitor accordingly. This conclusion does not obviate the need to examine the parties’ respective contributions to the purchase price.  I will return to this matter at a later stage. 

I reject the plaintiff's assertion that she executed the deed in circumstances of duress. The inconsistencies between her evidence and that of Mr Kozicki weigh heavily in this regard. If the  deed had been the creature of the defendant, one would not have expected him to allow her access to the solicitor other than in his presence. The solicitor's evidence does not suggest that the plaintiff appeared to have been overborne by the defendant, and her own evidence as to duress was quite vague and unpersuasive.  I am not satisfied that duress has been established on the evidence. It may be that the plaintiff had an imperfect knowledge of the full extent of the defendant's financial position at that time and as to the law which is under consideration in these proceedings.  She may, as a result, have agreed to an arrangement which was not fair to her, but that is not duress.

I turn to the question of the taxi licences and associated assets. In view of the disagreement concerning title to the Mermaid Waters properties, it is difficult to avoid the conclusion that thereafter, the defendant was deliberately distinguishing between joint property and sole property.  Although I feel sure that he discussed acquisition of the first licence with the plaintiff before entering the ballot, and I accept that she  made a small contribution to its cost, I am also sure that there was no suggestion that it was to be a jointly-owned asset. The deed, ex.5, therefore reflects the pre-existing position concerning ownership of the first taxi licence. The second licence was acquired upon the same basis.  Notwithstanding this, however, the parties thereafter pooled their resources to utilize the licences and so to yield a benefit to themselves and their child. The defendant worked long hours, but there can be no denying the additional demands which must have been made on the plaintiff as home-maker and parent to compensate for his absence and to provide the domestic support necessary to such an effort. In addition, the plaintiff offered actual support to the business in the form of book-keeping.  She also made a further contribution by acquiring a licence and driving for some shifts. It may be that she did not drive for many shifts, but the security of the business would have been enhanced by the availability of another driver on short notice. Finally,  I accept the plaintiff’s evidence as to the cash in hand at the time of separation.

THE LAW

In Muschinski v Dodds (1984-85) 160CLR 583, an unmarried couple had purchased land pursuant to a contract under which they were jointly and severally liable. They intended to renovate a cottage on the land which was to be used by the woman as an arts and craft centre. They also intended to buy a pre-fabricated house to erect on the land. The woman paid for the land and had the man’s name included on the title. This was done upon his undertaking to renovate the cottage and to pay for the pre-fabricated house. The land was transferred to them as tenants-in-common in equal shares, but they separated without the cottage having been renovated or the house acquired. The woman claimed sole beneficial ownership of the land. The majority in the High Court (Gibbs CJ, Mason and Deane JJ) considered that the parties held their respective legal interests as tenants in common upon trust, after payment of any joint debts incurred in improving the property, to repay to either of them any contribution and as to the residue, in equal shares. Gibbs CJ considered that the parties were jointly and severally liable under the contract. The woman having paid the whole purchase price, she was therefore entitled to a contribution as to one half from the man. Mason J. said at p. 599:-

“The failure of the projected development ... through no fault of the parties, provides a firm basis for declaring that the parties hold their respective interests in the property as tenants in common on a constructive trust, after payment of any debts incurred in the improvement of the property, to repay to each his or her respective contributions and as to the residue for them both in equal shares.  The circumstances of the case, viewed in the light of the common intention that Mr. Dodds was to take an immediate and unconditional interest in the property, did not make it inequitable that he should retain that interest, notwithstanding the failure of the projected development.  But it would be inequitable for him to retain his interest without crediting to Mrs. Muschinski the contributions which she made to the acquisition and improvement of the property.  Although Mrs. Muschinski intended that he should take an immediate and unconditional half interest, that intention was accompanied by an expectation, shared by Mr. Dodds, that the projected development would take place for their mutual benefit and that Mr Dodds would be making substantial contributions to it.  I agree with Deane J. that the general principle underlying the proportionate repayment of capital contributions to joint venturers on the failure of a joint venture is wide enough to support this aspect of the constructive trust.” 

Deane J said at pp.613-5:

“Like express and implied trusts, the constructive trust developed as a remedial relationship superimposed upon common law rights by order of the Chancery Court.  It differs from those other forms of trust, however, in that it arises regardless of intention.  It demands the staple ingredients of those trusts: subject matter, trustee, beneficiary (or, conceivably, purpose), and personal obligation attaching to the property ...  When established or imposed, it is a relationship governed by a coherent body of traditional and statute law.  Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle. 

“...The old maxim that equity regards as done that which ought to be done is as applicable to enforce equitable obligations as it is to create them and, notwithstanding that the constructive trust is remedial in both origin and nature, there does not need to have been a curial declaration or order before equity will recognise the prior existence of a constructive trust ... Where an equity court would retrospectively impose a constructive trust by way of equitable remedy, its availability as such a remedy provides the basis for, and governs the content of, its existence inter partes independently of any formal order declaring or enforcing it.

“... Indeed, in this country at least, the constructive trust has not outgrown its formative stages as an equitable remedy and should still be seen as constituting an in personam remedy attaching to property which may be moulded and adjusted to give effect to the application and interplay of equitable principles in the circumstances of a particular case.  In particular, when competing common law or equitable claims are or may be involved, a declaration of constructive trust by way of remedy can properly be so framed that the consequences of its imposition are operative only from the date of judgment or formal court order or from some other specified date.  The fact that the constructive trust remains predominantly remedial does not, however, mean that it represents a medium for the indulgence of idiosyncratic notions of fairness and justice.  As an equitable remedy, it is available only when warranted by established equitable principles or by the legitimate process of legal reasoning, by analogy, induction and deduction, from the starting point of a proper understanding of the conceptual foundation of such principles ...”

At p.616 his Honour said:

“... The mere fact that it would be unjust or unfair in a situation of discord for the owner of a legal estate to assert his ownership against another provides, of itself, no mandate for a judicial declaration that the ownership in whole or in part lies, in equity, in that other ... Such equitable relief by way of constructive trust will only properly be available if applicable principles of the law of equity require that the person in whom the ownership of property is vested should hold it to the use or for the benefit of another.  That is not to say that general notions of fairness and justice have become irrelevant to the content and application of equity.  They remain relevant to the traditional equitable notion of unconscionable conduct which persists as an operative component of some fundamental rules or principles of modern equity...”

At pp.619-20 his Honour continued:

“The prima facie rules respectively entitling the fixed term partner to a proportionate refund of his or her premium and a contractual joint venturer to the 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 ... and to the rationale of the particular rule of contract law to which reference has been made (i.e. as to frustration) ... 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 ... The circumstances giving rise to the operation of the principle were broadly identified by Lord Cairns L.C., speaking for the Court of Appeal in Chancery, in Atwood v. Maude: where ‘the case is one in which, using the words of Lord Cottenham in Hirst v. Tolson, 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 other parties 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 ...”

Finally at pp.621-2, his Honour returned to the facts of the case in question and said:

“As has been seen however, the relationship between the parties in the present case was not merely a commercial one.  It was a mixture of the commercial and the personal.  The personal relationship provided the context and explains the content of the planned commercial venture.  If the personal relationship had survived for years after the collapse of the commercial venture and the property had been unmistakenly devoted to serve solely as a mutual home, any assessment of what would and would not constitute unconscionable conduct would obviously be greatly influenced by the special considerations applicable to a case where a husband and wife or persons living in a ‘de facto’ situation contribute, financially and in a variety of other ways, over a lengthy period to the establishment of a joint home.  In the forefront of those special considerations there commonly lies a need to take account of a practical equation between direct contributions in money or labour and indirect contributions in other forms such as support, home-making and family care.  In fact, of course, the personal relationship also failed in the present case.”

Although Mason J. agreed with the conclusions reached by Deane J. and with his Honour’s joint venture analogy, the former did not adopt all of the latter’s reasoning.  Clearly, none of the other members of the Court approved that reasoning. 

In Baumgartner v Baumgartner (1987) 164 CLR 137, the majority (Mason CJ, Wilson and Deane JJ) endorsed the general approach adopted by Deane J in Muschinski v Dodds.  See pp.  147-148.  Mason CJ was content to accept that he had concurred with the reasons of  Deane J. in the earlier decision.  Toohey and Gaudron JJ, in separate judgments, appear also to  accept those reasons.  In Baumgartner, the Court was concerned with a de facto relationship in which the parties had pooled their incomes for living expenses and fixed commitments.  They initially lived in a home unit owned by the man.  This was subsequently sold and a house purchased, also in his name.  The purchase was financed with the assistance of a mortgage in his name, and he contributed the net proceeds of the sale of the unit. During the period of cohabitation, they respectively contributed to their aggregate earnings, as to the man, 55% and as to the woman, 45%.  This calculation took into account the notional income which the woman would have received had she worked during a period of three months of unemployment associated with the birth of their child.

After considering Muschinski v. Dodds Mason CJ, Wilson and Deane JJ  said at pp.148-50:

“In the present case the parties pooled their earnings with a view to meeting all the expenses and outgoings arising from their living together as a family.  The individual contributions of each party were not allocated to a particular category or particular categories of expenses and outgoings.  The pool of earnings was used to pay outgoings associated with accommodation - mortgage instalments on the unit at Cabramatta and the property at Leumeah - as well as other living expenses.  There was no suggestion that the respondent’s contributions were paid and received by way of rent or a charge for use and occupation and for living expenses.  Such a suggestion would be inconsistent with the relationship that came into existence between the appellant and the respondent, a family relationship which was for the most part until 1982 a long-term stable relationship in which marriage was under continuous contemplation.  The land at Leumeah was acquired and the house on it was built in the context and for the purposes of that relationship...

In this situation it is proper to regard the arrangement for the pooling of earnings as one which was designed to ensure that their earnings would be expended for the purposes of their joint relationship and for their mutual security and benefit.

...

The case is accordingly one in which the parties have pooled their earnings for the purposes of their joint relationship, one of the purposes of that relationship being to secure accommodation for themselves and their child.  Their contributions, financial and otherwise, to the acquisition of the land, the building of the house, the purchase of furniture and the making of their home, were on the basis of, and for the purposes of, that joint relationship.  In this situation the appellant’s assertion, after the relationship had failed, that the Leumeah property, which was financed in part through the pooled funds, is his sole property, is his property beneficially to the exclusion of any interest at all on the part of the respondent, amounts to unconscionable conduct which attracts the intervention of equity and the imposition of a constructive trust at the suit of the respondent.

It therefore becomes necessary to determine the terms of that constructive trust... Equity favours equality and, in circumstances where the parties have lived together for years and have pooled their resources in their efforts to create a joint home, there is much to be said for the view that they should share the beneficial ownership equally as tenants in common, subject to adjustment to avoid any injustice which would result if account were not taken of the disparity between the worth of their individual contributions either financially or in kind.”

In Brown v. Manuel, (C.A. No. 95 of 1995, 22.3.96, unreported) the parties had cohabited from 1972 until 1990, save for a separation of some months in 1985.  They lived in a succession of homes, all of which were bought in the man’s name with money provided by him.  However, during the period of cohabitation, the woman paid for food and clothing for both of them.  She also paid the electricity and gas bills for much of the time they were together.  The man had not, by anything which he had said or done, created an expectation in the woman that she would acquire a proprietary interest in any of their homes.  Indeed, when she returned to him in 1985 after a period of separation, she knew that he would never recognise that she had any interest in their home.  The Court of Appeal considered that it was not necessary that there be conduct inducing such an expectation in order that a constructive trust be applied, nor was it necessary, in order to imply a constructive trust, that the parties should have pooled their resources.

In Dunne v. Turner (C.A.  No.196 of 1995, 20.8.96, unreported) the parties had lived together for many years in a de facto relationship.  At the time of trial, the respondent woman was aged 71 and the appellant man, 65.  During the relationship, both parties had worked for remuneration outside of the home, and the respondent had contributed most of her money for their joint benefit.  The relationship lasted for about 30 years.  She had been the prime home-maker - cooking, cleaning, washing, shopping and ironing - and thus contributing to the appellant’s comfort and assisting him financially.  Her contribution, both financial and non-financial, had contributed to his acquisition of assets.  There was no pooling of funds to acquire those assets, but both parties had spent moneys for the purposes of the relationship.  Pincus JA considered that the following propositions could be derived from Baumgartner v. Baumgartner (supra) and Muschinski v Dodds (supra):-

1.A constructive trust may be imposed even though the person held to be trustee had no intention to create a trust or to hold property on trust.

2.An intention to create a trust may be imputed where it is necessary to do so ‘in good faith and in conscience’.   

3.A principle which may be applied is that which restores to a party contributions 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.

4.Contributions, financial and otherwise, to the purpose of a joint relationship are relevant for this purpose.

At p.7 his Honour said:-

“It is clear from the principal judgment in Baumgartner that a trust may be imposed ‘regardless of actual or presumed agreement or intention’.  An agreement between the parties as to their respective shares in property may be important in determining whether or not one has been guilty of unconscionable conduct, as is illustrated by Harmer v. Pearson.  Short of an agreement, a mere promise relating to property may be important or even decisive: Willetts v. Marks.  But authority for the proposition that the failure of one party to the relationship to dispute, during the relationship, the other party’s assertion that property acquired was his or hers alone does not prevent the imposition of a trust is to be found in the decision of the New South Wales Court of Appeal in Hibberson v George.....”

The reasons of McPherson JA were to similar effect.

CONCLUSIONS

This case is far more complex factually than were the earlier cases to which I have referred  I keep in mind the adjuration of the majority in Baumgartner (supra) at p. 150 to “...strive to give effect to the notion of practical equality, rather than pursue complicated factual enquiries...”, but I do not understand that to mean that I should ignore the inevitable complexities associated with the acquisition of substantial assets. As I must approach the case with no preconceptions as to the parties’ respective contributions to their current asset positions, an assessment of their dealings with cash and assets throughout their relationship is necessary in order to form an opinion as to those contributions.

Again, it may be necessary to make some allowance to recognize the defendant’s investment of “risk” capital but subject to that, it would be unconscionable to deny the plaintiff  a substantial share in the income derived from the taxi business. It is true that whilst they cohabited, she was being paid a weekly “wage”, but this seems to have gone towards household expenses. If I am to use the taxable income figures to calculate the actual financial benefit derived from the taxi licences, it is necessary to consider the significance of moneys taken out of the business and also the concealment of proceeds for tax purposes.

For the tax years 1988-89, 1989-90, 1990-91 and 1991-92, the defendant’s tax returns show annual deductions for wages of about $5,000, roughly corresponding to the plaintiff’s evidence as to the “wages” paid to her. In the years 1992-93 and 1993-94, much more substantial sums were claimed as having been paid to “associated persons” - $18,200 in 1992-93 and $14,372 in 1993-94. It is likely that the plaintiff is the “associated person” in question. Her tax returns support this inference as does the defendant’s evidence.  The tax returns indicate that some income was also derived (or in some cases, losses were made) as a result of letting part of the Messines Crescent property. In view of my findings, it is appropriate that the plaintiff  share in the benefit or detriment flowing from that asset. The amounts are small.

The defendant’s returned taxable incomes for the years between 1988-89 and 1993-94 were as follows:

1988-89          $12,292 (including a deduction of $5,052 for wages)
1989-90          $12,218 (including a deduction of $5,050 for wages)
1990-91          $11,149 (including a deduction of $5,850 for wages)
1991-92          $38,841 (including a deduction for payment to the plaintiff of $5,200 for wages)
1992-93          $36,543 (including a deduction for  payments to “associated persons” of $18,200,                  presumably to the plaintiff)
1993-94          $63,290 (including a deduction for payments to “associated persons” of $14,372,                    presumably to the plaintiff)

Notwithstanding the amounts shown as moneys paid to “associated persons” in the years 1992-93 and 1993-94 (which amounts also appear in the plaintiff’s tax returns) I accept that the plaintiff only received the amount of about $100 per week of which she gave evidence and that such sum was used for joint purposes. The larger sums shown above were merely shown for tax purposes.  To evaluate the total income derived by the parties, it is  appropriate to add back into the taxable incomes the amounts paid to the plaintiff. It will then be necessary to deduct estimated amounts spent for joint purposes.

During the operation of the taxi business, some income was not declared for tax purposes.  Re-assessments were issued to the defendant for the years 1990-91, 1991-92 and 1992-93. However I infer from his evidence that he adopted that practice from the acquisition of the first taxi licence.  It is not clear whether the cash held in the house at the time of  separation was declared for tax purposes in the 1993-94 tax year. The evidence suggests that the defendant had sorted out his position with the Taxation Department by November, 1994. His tax return for 1993-94 was lodged in December, 1994. The outstanding moneys were banked in the early part of 1995. The defendant said that by that time, the undeclared money had been “legitimized”. I therefore infer that it was declared in the 1993-94 return. This is relevant because if I quantify the plaintiff’s claim relying upon the defendant’s returned income for 1993-94, and the cash was included in the return,  then no further allowance should be made for it.

It appears from the evidence of the defendant’s accountant, Mr Flynn that the Commissioner of Taxation adjusted the defendant’s assessments to reflect concealed income.  Appendix 2 to Exhibit B to Mr Flynn’s affidavit gives the gross takings as adjusted by the Commissioner. The figures for each of the relevant years, as declared and as subsequently adjusted by the Commissioner, are shown below:

Gross takings   Adjusted         Difference        Percentage      

as returned      gross takings                          Increase

1990-91          $73,174.00     $106,678.00    $33,504.00     45.78%

1991-92        $134,467.00     $186,676.00    $52,209.00        38.82%     

1992-93        $141,165.00     $185,202.00    $44,047.00     31.2%

Broadly speaking, the Commissioner then  increased the amount of taxable income by the amount of undisclosed takings. This approach assumes, probably correctly, that all relevant outgoings had been declared as deductions. For present purposes, I will adopt the same approach for those three years. I assume that the 1993-94 return is sufficiently accurate for present purposes. This leaves only the  years 1988-89 and 1989-90.  The returned taxable incomes for the years 1988-89 and 1989-90 are similar to that for 1990-91, which was re-assessed. This supports the view  that he was concealing income in the earlier years. It would therefore be appropriate to increase the gross takings as declared (and therefore the taxable income) for each year by a percentage equivalent to that demonstrated for the later years. In his evidence, the defendant suggested that there was, at the time, a received view in the industry as to the percentage of takings which could be so concealed, although the above figures do not suggest a consistent approach. A figure of 40% is probably a reasonably conservative approach for present purposes.  The declared gross takings for 1988-89 and 1989-90, together with figures representing 40% of each amount are:-

Declared Gross Takings          40% of Declared Gross Takings

1988-89  $59,714.00  $23,885

1989-90  $62,014.00  $27,946

The taxable income for each of the years 1988-89 and 1989-90 should be increased by the amounts shown in the 40% column above. The following table is self-explanatory:-

Taxable Income     Adjusted Taxable    Add Payments to Plaintiff     Total

as Returned                 Income  Income

1988-90          $12,292  $36,177  $5,052            $41,229
1989-90          $12,218  $40,164  $5,050            $45,214
1990-91          $11,149  $43,443  $5,850            $49,293
1991-92          $38,841  $90,416  $5,200            $95,616
1992-93          $36,543  $80,691                   $18,200                   $98,891
1993-94          $63,290  $63,290                   $14,372                   $77,662

Obviously, some of this money was spent for joint purposes. Much of the rest probably went towards repaying loans on the taxis. The plaintiff said that prior to the acquisition of the second taxi in mid-1991, the parties were retaining $300 in cash, of which $200 was used for food and $100 was deposited to the joint account. The account was, as I have found, also used for joint purposes although the plaintiff considered the $100 to be her wages.  After the acquisition of the second taxi, a total of $350 was retained, of which $100 was deposited and the balance used for food and other expenses. The defendant’s evidence on this score was not much different from that of the plaintiff, although he claimed that the deposits were of his earnings.  I prefer the plaintiff’s evidence in this regard, but it does not really matter as all of the money was spent for joint purposes. It is likely that other sums were, on occasions, similarly expended for joint purposes, probably derived from concealed funds. To allow for expenditure for joint purposes,  I will reduce the above figures by $17,500 for the years 1988-89, 1989-90 and 1990-91 and by $20,000 for the later years. Those deductions are based on the above evidence with some small additional amounts included for other expenditure as, for example, on holidays. The defendant suggested that undeclared income had been used for such a purpose on at least one occasion. 

Some allowance should be made to the defendant for bearing the risk of the taxi business, but otherwise,  the net proceeds should be shared equally.  I allow the plaintiff  45% of the net proceeds of the taxi business.  I have not made any allowance for interest on borrowings in connection with the taxis. Those amounts were apparently claimed as business deductions, and so the taxable income figures are “clear” of them and other business expenses.  An appropriate “apportionment” of the income from the taxi business is therefore:-

Total Income       Deduct Joint Expenses     Balance     $45% of Balance.          

1988-89             $41,229                  $17,500                 $23,729                  $10,678         
1989-90             $45,214                 $17,500            $27,714                  $12,471
1999-91             $49,293                  $17,500                 $31,793                   $14,306
1991-92             $95,616                  $20,000                 $75,616                   $34,027       
1992-93             $98,891                  $20,000                 $78,891                   $35,500       
1993-94             $77,662                  $20,000                 $57,662                   $19,460 (i)   

$126,442

Note: (i)  $25,947 reduced by 25% to $19,460 because cohabitation ceased in March 1994.

The elements to be considered in assessing the appropriate outcome are therefore:

(a)That the plaintiff holds a half share in the Messines Crescent property, but that her right of occupation has been surrendered;

(b)That the plaintiff contributed an additional $15,000 beyond her one half of the purchase price for the upstairs unit at Mermaid Waters, for which the defendant  has not compensated her;

(c)That the defendant retained the benefit of moneys derived from the restaurant business although the plaintiff  was entitled to part thereof  ($40,000);

(d)That the plaintiff has a beneficial interest in the proceeds of the taxi business derived between 1988 and March 1994.

Even making allowance for these matters, there is a substantial discrepancy between the  asset position of the plaintiff at separation and that of the defendant, a discrepancy which in no way reflects their relative positions at the time at which the relationship commenced, nor their respective contributions to their total asset position as at the date of separation. This is  because  no allowance has been made for the benefit which the defendant has derived from having the use of money which he held for the benefit of the plaintiff. Clearly, the defendant has made effective use of the funds which were available to him in order to improve his asset position.  The purchase of the Mermaid Waters units, in particular, yielded a very substantial benefit to him and as I have demonstrated, his acquisition was partially achieved by the use of funds in which the plaintiff had an equitable interest. He has retained the benefit so derived and built further on it. This inequity can be addressed by way of an award of interest.

Given the very productive use which the defendant has made of the money, one is inclined to the view that something more than simple interest is called for in order to compensate the plaintiff. There is compelling authority for the proposition that in a situation such as this, it may be appropriate to award compound interest. In Hungerfords v Walker (1988-89) 171 CLR 125, Mason CJ and Wilson J said at p. 148:-

“Equity has adopted a broad approach to the award of interest. It has long been accepted that the equitable right to interest exists independently of statute: Wallersteiner v Moir (No. 2). Equity courts have regularly awarded interest, including not only simple interest but also compound interest, when justice so demanded, e.g. money obtained and retained by fraud and money withheld or misapplied by a trustee or fiduciary: La Pintada.”

The cited authorities clearly support the proposition advanced by their Honours. In Wallersteiner v Moir (No. 2) [1975] 1 QB 373 at p. 388 Lord Denning MR said:

“Equity now prevails in all courts; and equity was in the habit of awarding interest when it was considered equitable to do so. In some cases it awarded simple interest. In others compound interest, i.e., with yearly rests.

The principle on which the courts of equity acted are expounded in a series of cases ... Those judgments show that, in equity, interest is never awarded by way of punishment. Equity awards it whenever money is misused by an executor or a trustee or anyone else in a fiduciary position  - who has misapplied the money and made use of it himself for his own benefit. The court:

‘presumes that the party against whom relief is sought has made that amount of profit which persons ordinarily do make in trade, and in these cases the court directs rests to be made’, i.e. compound interest: ...

The reason is because a person in a fiduciary position is not allowed to make a profit out of his trust: and, if he does, he is liable to account for that profit or interest in lieu thereof.”

At p. 397, Buckley LJ said:-

“It is well established in equity that a trustee who in breach of trust misapplies trust funds will be liable not only to replace the misapplied principal fund but to do so with interest from the date of the misapplication. This is on the notional ground that the money so applied was in fact the trustee’s own money and that he has retained the misapplied trust money in his own hands and used it for his own purposes. Where a trustee has retained trust money in his own hands, he will be accountable for the profit which he has made or which he is assumed to have made from the use of the money....

This is an application of the doctrine that the court will not allow a trustee to make any profit from his trust. The defaulting trustee is normally charged with simple interest only, but if it is established that he has used the money in trade he may be charged compound interest... The justification for charging compound interest normally lies in the fact that profits earned in trade would be likely to be used as working capital for earning further profits. Precisely similar equitable principles apply to an agent who has retained moneys of his principal in his hands and used them for his own purposes...”

Finally, at p. 406, Scarman LJ said:-

“I agree that we have power under the equitable jurisdiction of the court to include interest in the judgment ...

The question whether the interest to be awarded should be simple or compound depends upon evidence as to what the accounting party has, or is presumed to have done with the money. As Lord Hatherley LC said in Burdick v Garrick ...

‘The Court does not proceed against an accounting party by way of punishing him for making use of the plaintiff’s money by directing rests, or payment of compound interest, but proceeds upon this principle, either that he has made, or has put himself into such a position as that he is to be presumed to have made, 5%, or compound interest, as the case may be.’”

Similarly, in President of India v La Pintada Compania Navigacion S.A. [1985] 1 AC 104

at p. 116 Lord Brandon of Oakbrook (with whom the other members of the House of Lords

agreed) said:

“The Chancery courts, again differing from the common law courts, had regularly awarded simple interest as ancillary relief in respect of equitable remedies, such as specific performance, rescission and the taking of an account.  Chancery courts had further regularly awarded interest, including not only simple interest but also compound interest, when they thought that justice so demanded, that is to say in cases where money had been obtained and retained by fraud, or where it had been withheld or misapplied by a trustee or anyone else in a fiduciary position.”

The defendant is in the position contemplated by these authorities. He has retained moneys to which the plaintiff is beneficially entitled and has derived substantial benefit from the use of those moneys. It does not matter that at the time, the existence of the trust had not been established.  In Muschinski v  Dodds (supra) at p. 614, Deane J. said:-

“... there does not need to have been a curial declaration or order before equity will recognize the prior existence of a constructive trust ... Where an equity court would retrospectively impose a constructive trust by way of equitable remedy, its availability as such a remedy provides the basis for, and governs the content of, its existence inter partes independently of any formal order declaring or enforcing it.”

It is consistent with the decisions in Wallersteiner and La Pintada to award compound interest. The  quantification of interest is somewhat complex. There are three different categories of funds which must be considered:- the $15,000 excess contribution to the purchase of the Mermaid Waters property, the sum of $40,000, being  the  plaintiff’s share of the proceeds from the restaurant business and her share of proceeds from the taxi business and rental from Messines Crescent.

In assessing interest on moneys held between mid-1984 and mid-1988, it must be kept in mind that during that period, the parties and their son lived off such investments as the parties had.  It should also be noted that from the end of that period, the defendant’s “indebtedness” to the plaintiff should be reduced by $28,000 in recognition of her notional contribution to the purchase price of Messines Crescent beyond the amount yielded by the sale of Mermaid Waters.  It is appropriate, therefore, to consider the question of interest for 1984-88 in isolation from the period from 1988 to date.

The sum of $15,000 should bear interest from the acquisition of the Mermaid Waters property (or the disposal of the Bilinga unit) until mid-1988, a period of 4½ years. The sum of $40,000 should bear interest from the date of sale of the restaurant (mid-1984) until mid-1988, a period of 4 years. Exhibit 44 contains a schedule obtained from the Reserve Bank giving various interest rates from January 1979 until August of this year. The bank rates for housing loans and small business loans seem most appropriate for present purposes. Over the period since December 1983, interest rates have varied widely, peaking in late 1989 or early 1990. They are presently at the lowest level for that period.  For the period from the end of 1983 until mid-1988, the rate for housing loans started at 12% and finished at 13.5%, whilst the rate for small business loans started at 13.6% and ended at 15.25%.  However, during that period, the former rate reached 15.5% and the latter 18.5%.  These figures suggest 14% as an appropriate rate. Awarding compound interest on $15,000 at 14% per annum on yearly rests for 4½ years increases that capital sum  to $27,049.  The sum of $40,000 for four years at 14% increases the principal to $67,558. Thus the total amount of the debt as at mid-1988 was $94,607.  Of this sum, I  apply $28,000 to equalize the plaintiff’s contribution to the purchase of Messines Crescent. 

The evidence shows that from 1988 until 1991, the parties were spending at least $300 per week on household expenses. Assuming the same expenditure for the period 1984-88, this would total $62,400.  Of course, this was a period of high inflation as appears from the evidence as to interest rates. It is probable that the cost of living increased between 1984 and 1988. On the other hand, as the purpose of the present exercise is to calculate the interest which should be paid by one party to the other on moneys owed, notional interest should also be allowed on the accumulating total of joint outgoings met by the defendant from his income. It is probably reasonable to treat the sum of $300 per week as appropriate for the whole period upon the basis that such treatment includes an allowance for interest.  I infer that the plaintiff took the benefit of half of $62,400, $31,200 in living expenses between 1984 and 1988. The defendant’s “debt” of $94,607 should be reduced by $59,200 ($28,000 plus $31,200), to allow for these matters, leaving a balance of $35,407 as at mid-1988. This sum should bear interest from then until now, a period of 9½ years.

During that period, the bank housing rate started at 13.5% and ended at 6.7%, peaking at the end of 1989 at 17%. The business loan rate started at 15.25% and ended at 8.25%, peaking at the end of 1989 at 20.5%. The fair course is to use one interest rate for the period to the end of 1989 and a second rate thereafter. Having regard to ex. 44, I will use the rate of 16% for the first period and 11% for the second period. $35,407 for 1½ years at 16% shows $44,236. The latter figure at 11% for 8 years shows $101,943. 

Interest ought  be allowed on the plaintiff’s “share” of the income from the taxi business.  The interest rate and period will vary according to the year in which the amount in question was earned. Using the same process as is explained above, I fix the following rates for the amounts earned in the following years, yielding the sums shown:-

Total of Principal

of Interest

1988-89          10%     for 8½ years     on  $10,678  $24,006

1989-90          10%     for 7½ years     on  $12,471  $25,488

1990-91          10%     for 6½ years     on $14,306  $26,580   

1991-92          10%     for 5½ years     on $34,027  $57,475          

1992-93           8.5%  for 4½ years     on $35,500  $51,246

1993-94           8.0%  for 3¾ years⁽ⁱ⁾   on $19,460      $25,970          

$210,765

Note: (i)          For each year other than 1993-94, interest has been allowed from the

end of the financial year. In the case of 1993-94, interest has been allowed

from the date of separation.

Thus the plaintiff’s interest, apart from her share in the Messines Crescent property, is

derived as follows:-

Present value of her additional contribution to the acquisition of

Mermaid Waters and her share of proceeds from  restaurant

business                 $101,943

Present value of share of proceeds from taxi licences

and Messines Crescent   $210,765

$312,708

Given the nature of the exercise, that figure can be rounded off to $310,000

I propose the following declarations :-

(a)That the plaintiff is beneficially entitled to an unencumbered one-half share in the property

at Messines Crescent;

(b)That the plaintiff is beneficially entitled to an interest in the defendant’s one half share in the Messines Crescent property and in his two taxi licences in the amount of $310,000.

I will adjourn the matter to enable the parties to formulate the precise terms of the declarations, to check my arithmetic and to identify any further findings of fact which they may require.