Meehan v Fuller
[1999] QCA 37
•26/02/1999
SUPREME COURT OF QUEENSLAND
CITATION: Meehan v Fuller [1999] QCA 37 PARTIES: ANNETTE PATRICIA MEEHAN
(Plaintiff/ Respondent)
v
GEOFFREY WAYNE FULLER
(Defendant/Appellant)FILE NO/S: Appeal No 1323 of 1998
SC No 1402 of 1994DIVISION: Court of Appeal PROCEEDING: Further order
Reasons for judgment delivered 26 February 1999ORIGINATING
COURT:Supreme Court at Brisbane DELIVERED ON: 17 November 1999 DELIVERED AT: Brisbane HEARING DATE: 20 November 1998 JUDGES: de Jersey CJ, Pincus and Thomas JJA ORDER: 1. Appeal allowed.
2. The respondent to pay the appellant's costs of the appeal to be assessed. 3. Order below dated 20 February 1998 varied by deleting the amount of $310,000 and substituting the amount of $186,041. 4. Order for costs in the second numbered paragraph (1) varied by deleting the words "on a solicitor and client basis" and by adding the words "to be assessed" at the end of the order. 5. The reserved costs referred to in the second numbered paragraph (2), as assessed, be paid by the appellant to the respondent. CATCHWORDS: PROCEDURE – JUDGMENTS AND ORDERS – AMENDING,
VARYING AND SETTING ASIDE – forms of orderPROCEDURE – COSTS – costs below – costs of appeal COUNSEL: Mr D R Gore QC for the appellant Mr W J Hodges for the respondent SOLICITORS: Hopgood & Ganim for the appellant
Philippa Power & Associates for the respondent[1] THE COURT: On 26 February 1999 the court published reasons for allowing the appeal, but postponed the making of formal orders until the receipt of further submissions.
[2] The order against which the appeal was brought was in the following terms:
“1.
The plaintiff is beneficially entitled to an unencumbered one half share in the property described as Lot 72 on Registered Plan 44332 in the County of Ward, Parish of Gilston, Land Title reference 1294160 being the property situated at 44 Messines Crescent, Miami in the State of Queensland and the defendant is entitled to the other half share in that property.
2.
The plaintiff is beneficially entitled to an interest in the defendant’s one half share of the property situated at 44 Messines Crescent, Miami in the State of Queensland and in his two taxi licenses, being Regent Taxi License number 121 and number 161 in the amount of THREE HUNDRED AND TEN THOUSAND DOLLARS ($310,000.00)
IT IS ORDERED that:
1. The defendant pay the plaintiff’s costs of and incidental to the action on a solicitor and client basis, but limited to six hearing days on trial, including the costs of and incidental to the appearance on 16 January 1998 and including the costs of the hearing of 20 February 1998 insofar as it concerned the finalisation of the orders made as result of judgment delivered herein.
2. Insofar as the hearing of 20 February 1998 concerned the application for a stay of the orders pending appeal the costs of and incidental thereof be reserved.
AND BY CONSENT IT IS ORDERED that:
UPON the defendant paying to the plaintiff the sum of TWO HUNDRED
THOUSAND DOLLARS ($200,000.00) within seven days of today’s
date;
AND UPON the undertaking of the defendant not to sell, encumber, further
encumber, charge or otherwise deal with the property situated at 44
Messines Crescent, Miami in the State of Queensland pending further order
of this Honourable Court after the determination of the appeal in this action;The orders made herein be stayed pending the defendant appealing such orders and the determination of such appeal.”
The first two paragraphs of the order will be referred to as declaration number 1 and declaration number 2, and the following two paragraphs of the order will be referred to as order number 1 and order number 2.
[3] The parties now agree that no alteration is required to declaration number 1, but that in accordance with this court’s reasons the amount in declaration number 2 should be reduced from $310,000 to $186,041.
[4] A number of submissions were advanced on behalf of the respondent seeking what are in effect determinations by this court of the rights of the parties in the light of various events that have occurred since 20 February 1998 when the above order was made. It is noted that that order granted a stay of the original judgment on condition that the appellant pay to the respondent the sum of $200,000. In accordance with that order the appellant paid the respondent $200,000 on 25 February 1998. It will be seen that that amount slightly exceeds the money sum which this court has decided should be paid to the respondent pursuant to the judgment.
[5] In the course of his reasons for judgment the learned trial judge indicated his acceptance of evidence suggesting that the value of the Messines Crescent property was $240,000. That however formed no part of the order that was made, and no consequential orders were made in relation to the disposition by either party to the other of their respective interests in the Messines Crescent property. Apparently the appellant has continued to make use of that property, and negotiations have ensued between the parties in relation to his acquisition from the respondent of her declared half interest in that property. These negotiations however were not concluded. The final submission in reply on behalf of the respondent purported to seek an order from this court for the sale of the property and for the appointment of trustees.
This misconceives the functions of this court and the issues that are before it. The respondent also sought orders from this court for the payment of money sums by the appellant, on the footing that the appellant should have purchased her half share in the Messines Crescent property for $120,000 some time ago. Once again these submissions misconceive the function of this court.
[6] There is however no good reason to relieve the respondent at this stage of his undertaking not to deal with the Messines Crescent property. The original undertaking contemplated a further order in the Supreme Court after determination of the appeal, and in the light of the unresolved differences between the parties it is better that the undertaking should remain at least for the present.
Costs below
[7] The learned trial judge made an order against the appellant requiring him to pay costs for six days including the costs of two later appearances. The costs were ordered to be paid on a solicitor and client basis, pursuant to Order 26 Rule 9(1), in consequence of an offer made by the respondent before trial. By written notice dated 7 July 1997 the respondent offered to settle her claims for an amount of $350,000 inclusive of costs. His Honour considered that at trial she had “done significantly better than that offer”. That was plainly so on the footing that the value of the property declared to be hers in the first declaration was $120,000 and the amount in the second declaration was $310,000. The evidence presented to this court suggests that the respondent’s costs, on a party and party basis, as at 8 July 1997 were $21,000. However when the judgment of this court in relation to declaration number 2 is substituted for that of the learned trial judge, the amount at which the respondent was prepared to settle the action on 7 July 1997 exceeds the amount which she ultimately has been found entitled to (including costs to the time of offer). It seems to us that any justification for an order for indemnity costs thereby disappeared. It is unnecessary to deal with the appellant’s submission that the value of the respondent’s entitlement in the Messines Crescent property ought not to be taken into account in this exercise, because even if it is taken into account, the respondent’s offer was not one which would entitle her to a benefit under Order 26 Rule 9(1).
[8] However the limitation of costs to six days and the other declarations in relation to particular appearances should remain. In the result, the order for costs made by the trial judge should be varied by deleting the words “on a solicitor and client basis” and by adding the words “to be assessed” at the end of that order.
Interest on judgment or on other monies that the respondent alleges should have been paid to her
[9] As the respondent has had the benefit of the $200,000 paid by the appellant within seven days of the judgment below, and still retains the benefit of that payment, it would be inappropriate to order interest to run on the monetary entitlement the subject of the second declaration (ie her entitlement to $186,041). In our view there is likewise no proper basis for ordering interest against the appellant with respect to the first declaration which recognises the respondent's entitlement to a half interest in the Messines Crescent property. It was common ground on the pleading that that property was held by the parties as tenants in common and in equal shares, though the parties' overall equitable entitlements were of course in issue. The respondent may well be entitled to some allowance for rents and profits or other allowance by reason of the benefit the appellant has had of occupancy of the property since trial. But such a matter is not in issue before this court. If the parties are determined to litigate this matter and the associated questions of partition or sale they must do so elsewhere. The short point at present under consideration is whether an order for payment of interest should be made against the appellant on a notional basis of the value of her interest in the Miami property which has not yet been converted to money. In our view no such order should be made.
Costs of appeal
[10] The members of this court indicated in their reasons an intention to order the respondent to pay a limited portion of the appellant’s costs of the appeal, as the points on which the appellant succeeded formed a limited part of the contentions advanced on the appeal. However further submissions have now been received on this question. The appellant submitted that the respondent should be ordered to pay the whole of the appellant’s costs of the appeal (on a party and party basis) in view of certain offers made on his behalf between September and November 1998, shortly before the hearing of the appeal. On 2 November 1998 the appellant offered the respondent a result more favourable than that which has been determined by this court, and the respondent declined the offer. The litigation was of course complicated by a combination of issues including declaration of entitlement to property, payment of a money sum and a complex order for costs below, and we recognise that some difficulty would attend a decision by the respondent in relation to acceptance of the offer. Notwithstanding this, the offer was a good one, and clearly to the respondent's benefit. It is recognised that Order 26 has never applied to the costs of an appeal (Tamwoy v Solomon1) and no submission was made in relation to application of the Uniform Civil Procedure Rules 19992. The Supreme Court (including this court) however has a general discretion of giving a costs benefit to a party who has made an appropriate informal offer to settle3.
[11] Having fully reconsidered the matter of costs of the appeal we think that the offer that was made was sufficiently meritorious to delete any limitation of costs that might otherwise have been imposed by reason of the appellant's lack of success on one of the major issues raised on the appeal. In short the appropriate order for costs should now be the usual order namely that the unsuccessful respondent pay the appellant's costs of the appeal to be taxed.
Orders
[12] The following orders should be made:
1. The appeal be allowed. 2. The respondent pay the appellant's costs of the appeal to be assessed. 3.
The order below dated 20 February 1998 be varied by deleting the amount of $310,000 and substituting the amount of $186,041.
4.
The order for costs in the second numbered paragraph (1) be varied by deleting the words "on a solicitor and client basis" and by adding the words "to be assessed" at the end of the order.
5.
The reserved costs referred to in the second numbered paragraph (2), as assessed, be paid by the appellant to the respondent.
IN THE COURT OF APPEAL [1999] QCA 037 SUPREME COURT OF QUEENSLAND Brisbane Before de Jersey CJ
Pincus JA
Thomas JA[Fuller v. Meehan]
BETWEEN:
GEOFFREY WAYNE FULLER
(Defendant) Appellent
AND:
ANNETTE PATRICIA MEEHAN
(Plaintiff) Respondent
REASONS FOR JUDGMENT - de JERSEY CJ
Judgment delivered 26 February 1999
1. I have had the advantage of reading the reasons for judgment of Thomas JA. I agree with
those reasons, with the orders foreshadowed, and the proposed further course for the
appeal.
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 1323 of 1998
Brisbane
Before de Jersey C.J.
Pincus J.A.
Thomas J.A.[Fuller v. Meehan]
BETWEEN:
GEOFFREY WAYNE FULLER
(Defendant) Appellant
AND:
ANNETTE PATRICIA MEEHAN
(Plaintiff) Respondent
REASONS FOR JUDGMENT - PINCUS J.A.
Judgment delivered 26 February 1999
The appellant raised three points and I agree that they should all be disposed of as proposed
by Thomas J.A., whose reasons I have had the advantage of reading. I set out below some
considerations relevant to one of the points, concerning income tax; I am in substantial agreement
with the reasons of Thomas J.A. on that and the other points, subject to what follows.
Mr Gore Q.C. argued for the appellant that the primary judge's allowance in favour of the
respondent for income from the taxi business discussed in his Honour's reasons was too generous,
because it made no allowance for the appellant's obligation to pay tax on that income. Towards the
end of the hearing in this Court Mr Gore said that the correction in favour of his client on this account should be based on the view that the tax liability was $119,447 for the six years ended 30
June 1994. I have not been able to obtain that figure from the documents in the record. Mr Gore's
initial submission was that the tax liability was $77,536, a figure derived from amended assessments
issued in respect of the three years ended 30 June 1993. Examination of the assessments, however,
shows that the liability for those three years in fact totalled $106,061; the figure of $77,536
represented not the whole tax, but the additional tax and penalties levied by the amended
assessments. If one adds to the tax payable in respect of the three years ended 30 June 1993 Mr
Gore's estimate - plainly a low one - of $21,320 for 1994 tax, the total exceeds Mr Gore's total
of $119,447. It follows that the appellant's claim under this head was, as Mr Gore himself said,
understated.
The impact of income tax on court judgments is a problem which is commonly ignored in
litigation, partly because making an estimate of the amount by which an award should be adjusted,
because of income tax considerations, can be a complex task. The present case illustrates this.
The sums for which the appellant is made liable under the judgment in this case include
substantial interest, allowed by the primary judge on the basis that the appellant was able to make
good use of money which he retained instead of sharing it with the respondent. The interest
allowed, intended to represent the profit made by the appellant by retention of the money in
question, is notional income and not actual income. But had it been actual income, substantial tax
would have been paid on it; the fact that no claim was made under this head encourages the thought
that the appellant's allowance for income tax liability, discussed above, is a modest one. Another
complication is that, although it appears to me unlikely that any part of what the respondent receives
under the judgment in her favour will be subject to income tax in her hands, that point is not
absolutely clear. But this area of the law is one of considerable difficulty, exemplified by the
variance in the opinions expressed in Atlas Tiles Ltd v. Briers (1978) 144 C.L.R. 202, and Cullen
v. Trappell (1980) 146 C.L.R. 1. Since neither of the questions I have mentioned in this paragraph
was argued before us, it is undesirable to say any more about them.
I agree with the order proposed by Thomas J.A.
IN THE COURT OF APPEAL 99.37 SUPREME COURT OF QUEENSLAND
Appeal No. 1323 of 1998
Brisbane
[Fuller v Meehan]
BETWEEN:
GEOFFREY WAYNE FULLER
(Defendant) Appellant
AND:
ANNETTE PATRICIA MEEHAN
(Plaintiff) Respondent de Jersey CJ
Pincus JA
Thomas JA
Judgment delivered 26 February 1999.
Separate reasons for judgment of each member of the Court; each concurring as to the orders made.
APPEAL ALLOWED AND RESPONDENT IS ORDERED TO PAY ONE HALF OF THE APPELLANT'S COSTS OF THE APPEAL TO BE TAXED. PARTIES GIVEN LEAVE TO PRESENT SUBMISSIONS IN WRITING (OR AN AGREED LETTER) STATING THE APPROPRIATE FIGURES FOR INCLUSION IN THE JUDGMENT IN ACCORDANCE WITH THE PUBLISHED REASONS. FORMAL JUDGMENT POSTPONED TO A DATE TO BE FIXED AFTER RECEIPT OF SUCH SUBMISSIONS OR LETTER.
relationship - principles on which relief granted - effect to be given to deed that purported to settle property entitlements - retention of undue proportion of profits from respondent's business - quantification of entitlement - whether compound interest should be allowed on monies unconscionably retained
Counsel:
Mr D Gore QC for the appellant. Mr W Hodges for the respondent.
Solicitors: Hopgood & Ganim for the appellant.
Philippa Power & Associates for the respondent.Hearing Date: 20 November 1998 IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 1323 of 1998
Brisbane
Before de Jersey CJ
Pincus JA
Thomas JA[Fuller v Meehan]
BETWEEN:
GEOFFREY WAYNE FULLER
(Defendant) Appellant
AND:
ANNETTE PATRICIA MEEHAN
(Plaintiff) Respondent
REASONS FOR JUDGMENT - THOMAS JA
Judgment delivered 26 February 1999
These proceedings are in respect of property claims made by Ms Meehan against her
former de facto husband Mr Fuller. When they separated in 1994 he was the legal owner of most
of the property that had been acquired during their relationship. She claimed that he held various
assets upon constructive trust for her, and obtained an order from the learned trial judge that she
was entitled beneficially to a one half share in a certain property ("Messines Crescent") and that she
was further entitled to a beneficial interest in Mr Fuller's half share of Messines Crescent and in his
two taxi licences to the extent of $310,000.00.Mr Fuller now appeals against that judgment. It will be convenient to refer to the parties
by name.
The learned trial judge found that the parties pooled their resources during their relationship
and assisted each other in the earning of income and acquisition of capital assets. His Honour's
declaration concerning Ms Meehan's entitlement to $310,000.00 was mainly based upon findings
that at various times Mr Fuller withheld income from Ms Meehan leading to a corresponding
financial advantage enjoyed by Mr Fuller in the acquisition of assets. It was also based to a small
extent upon a finding of over-contribution by Ms Meehan in the acquisition of a particular asset.
His Honour held that it would be unconscionable for Mr Fuller to assert that Ms Meehan did not
have the entitlements that were identified and quantified.
At the time of trial Ms Meehan was aged 45 and Mr Fuller 55 years. They lived in a de
facto relationship for 15 years, during the period 1979 to 1994. At the time of separation (March
1994) the trial judge found that the asset position of the parties (as reflected in the legal title) was
as follows:
Meehan:
½ share Messines Crescent $ 120,000.00
TOTAL $ 120,000.00
Fuller:
½ share Messines Crescent $ 120,000.00 2 taxi licences, including associated shares, but excluding cars $ 760,000.00 Cash in bank $ 30,000.00 Cash in hand $ 78,000.00
TOTAL $ 988,000.00
Total Asset value
$1,108,000.00
The above assets were at the material time unencumbered. At the time of trial Mr Fuller
had liabilities totalling about $80,000.00.
Between 1980 and 1984 the parties conducted a restaurant (called "The Den"). The
proceeds of its sale were used to purchase two units at Mermaid Waters. Those units were later
sold and the proceeds used for the purchase of Messines Crescent.
The amount of $310,000.00 to which Ms Meehan was found to be entitled resulted from
three primary conclusions of the learned trial judge. There were:
(a) That in 1984 Ms Meehan contributed an additional $15,000.00 beyond her one
half of the purchase price for the upstairs unit at Mermaid Waters for which Mr
Fuller had never compensated her.
(b) That Mr Fuller retained the benefit of cash reserves of over $80,000.00 derived
from the restaurant business up to the time of its sale in 1984, and that it would
have been unconscionable for Mr Fuller to have denied her an interest in that fund
amounting to $40,000.00.
(c) That Ms Meehan had a beneficial interest in proceeds derived from the taxi
business between 1988 and March 1994 over and above the amounts actually paid
to her during that period. His Honour calculated this at $126,442.00 and
concluded that it would be unconscionable to deny her this further share in that
income. His Honour opined that the nett proceeds should be shared equally, but
that some allowance should be made to Mr Fuller for bearing the risk of that
business, and therefore allowed the plaintiff 45% of "the nett proceeds of the taxi business". His Honour reconstructed the total income of that business between
1988 and 1994, and then deducted amounts ranging between $17,500.00 and
$20,000.00 in each of the years to represent expenditure for joint purchases made
from such income. His Honour then calculated 45% of the balance and arrived at
an overall entitlement in favour of Ms Meehan over this six year period of
$126,442.00.
His Honour then allowed compound interest on the amounts that Ms Meehan ought
notionally to have received and brought the figures for each year up to the date of trial (1997). This
produced an overall figure of $210,765.00.
His Honour likewise performed an exercise of allowing compound interest up to trial on the
sums mentioned in paragraphs (a) and (b) in para 7 above so as to obtain a "present value" figure
for those particular entitlements, arriving at a figure of $101,943.00.
The entitlements found by his Honour in paragraphs a, b and c in para 7 above were
converted to a present value of $312,708.00 which his Honour rounded off at $310,000.00.
The relevant facts may be conveniently stated in the form of a brief agreed
chronology.
Date Event 1974/75 The parties met. 1977 Fuller purchased residential property at Newtown for $28,000.00. March 1979 The parties commenced cohabitation. Mid 1979 Meehan purchased a unit at Bilinga for $29,000.00. Late 1980 Fuller purchased The Den restaurant for $15,000.00. 1980/81 Fuller sold the Newtown property for $37,500.00. Date Event 1980/81 Fuller purchased land at Tweed Heads and constructed a duplex for a
total cost of $59,000.00.January 1984
Fuller and Meehan purchased 2 units at Mermaid Waters for a total cost of about $117,000.00 partly funded by an exchange of Meehan's Bilinga unit at a notional value of $49,000.00.
1 February 1984 The parties son (Steven) was born. June 1984 The restaurant was sold without profit. 1986
The Tweed Heads duplex was sold for about $80,000.00, of which $15,000.00 discharged a debt, and $65,000.00 was lent upon security of a Noosa Heads property.
May 1988 Fuller purchased a taxi licence for about $180,000.00, mostly funded by
loans from relatives.June 1988 The Mermaid Waters units were sold for nett proceeds of $288,000.00. June 1988 Fuller and Meehan purchased the Messines Crescent property for
$200,000.00, using the proceeds from Mermaid Waters and using the
balance of those proceeds to reduce indebtedness associated with the taxi
licence.25 May 1989 Meehan and Fuller entered into a deed to regulate property, custody and
maintenance issues.May 1991 Fuller purchased a second taxi licence at a cost of $240,000.00, partly
financed by a loan from Westpac of $155,000.00.March 1994 The parties separated. 3 January 1995 Due date for the payment by Fuller of additional tax and penalties of
$77,536.00 following reassessment for the 1991, 1992 and 1993 years in
the course of a tax amnesty.
It will be seen from the chronology that the parties entered into a deed in May 1989. This
inter alia recited that the parties' main reason for entering into it was to avoid litigation on the matters
mentioned in the deed at some future time, and the parties acknowledged that "this aspect of the
agreement is to be regarded as paramount". Under the deed Mr Fuller undertook responsibility for
certain expenses. The deed provided for various contingencies including cessation of cohabitation. In the events that happened Ms Meehan became legally entitled as tenant in common in equal
shares with Mr Fuller to the Messines Crescent property while Mr Fuller became legally entitled
to all other major assets, including the other half share in that property, the taxi licence and certain
other assets.
The learned trial judge rejected Ms Meehan's assertion that she executed the deed in
circumstances of duress, and similarly rejected her claim that the deed should be avoided because
Mr Fuller had breached his commitment to meet household expenses. The main facts to be noted
are that when the parties commenced to live together in 1979 Ms Meehan had about $5,000.00
in cash and an expectation of a further $15,000.00 from her deceased father's estate. At that time
Mr Fuller owned a terrace house in Newtown, Sydney, and had between $5,000.00 and
$10,000.00 in cash. In mid-1979 the parties moved to Bilinga where Ms Meehan purchased a
home unit for $29,000.00 of which $18,000.00 was from her cash reserves, the remainder being
borrowed. Further transactions and developments can be seen from the above chronology. It is
enough to note that Mr Fuller brought capital of somewhat greater value to the association than Ms
Meehan but that thereafter they were jointly involved in the acquisition and building up of assets,
pooling their resources to do so.
Whilst Mr Fuller was the major income earner, in running the restaurant business and in the
acquisition of taxi licences and the running of the profitable taxi businesses, Ms Meehan's
contributions to these enterprises were by no means insignificant. His Honour likened their conduct
of the restaurant business to a joint venture "using that expression in a non-technical sense", noting
that each of them brought experience in the hospitality industry and their personal skills, talents and
labour to the venture, and noting that Ms Meehan contributed by drawing less than she would have earned as an employee. In relation to the taxi business Ms Meehan contributed substantial time and
effort, including performance of book-keeping and obtained a licence so that she could drive some
shifts. His Honour observed that she may not have driven many shifts but that the security of the
business was enhanced by the availability of another driver at short notice. His Honour further
noted that Mr Fuller could not have worked such long hours but for the support of Ms Meehan,
particularly so given that they had a child. His Honour observed that without Ms Meehan's home-
making services Mr Fuller would have had to pay for them or would have been compelled to reduce
his hours of work. His Honour concluded that overall the parties worked jointly for their mutual
long term benefit and for that of their son.
His Honour concluded:
"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".
Of course the mere fact that it would be unfair or against conscience or "unconscionable"
for one party to have more assets than the other, or the fact that a party has withheld money from
the other which he might reasonably be expected to have shared with that person, is not enough to
justify a declaration of constructive trust. Such relief will only 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"[4]. In cases arising out of de facto domestic relationships
such principles are sometimes found by analogy with a failed joint venture, and of course a number of fact situations in such cases (for example financial contributions, pooling of assets or resources,
direct or indirect contributions to income or assets of either party, domestic assistance that permits
the other partner to be a more productive earner or to acquire more assets, and declarations of
actual intention of agreement) now provide some precedent for the giving or withholding of relief.
These factors (or any relevant combination of them) are overarched by the requirement that it
would be against conscience for the defendant to retain the advantage thereby attained. Further,
it would seem in principle that before a constructive trust could be held to arise there would
ordinarily need to be some nexus between the conduct giving rise to it and the property that it is to
be impressed with the trust.
[4] Per Deane J in Muschinski v Dodds (1985) 160 CLR 583, 616.
The precise reasoning that raises a constructive trust on behalf of Ms Meehan over
particular assets of Mr Fuller out of his obtaining the above benefits was not expressly stated.
However with respect to restaurant earnings withheld by Mr Fuller, his Honour observed: "Had the parties separated while the defendant had that money in his hands, a constructive trust in favour of the plaintiff would have been imposed upon part of it".
and
"It would have been unconscionable for him to deny that her interest in that fund amounted
to $40,000.00".It would have been appropriate to charge such an entitlement upon the restaurant business
in which both parties worked and from which Mr Fuller derived the relevant advantage, and in turn
to treat Mr Fuller as constructive trustee with respect to that property. Pursuant to the equitable
remedy of tracing it would be appropriate to take a similar approach to assets acquired in due
course from the proceeds of sale of such property. Similarly, although his Honour expressed himself
as "allowing" the plaintiff 45% of the nett proceeds of the taxi business in circumstances where the parties had not intended that Ms Meehan be an owner of either taxi licence, the critical finding was
of "the unconscionability... of his conduct in asserting sole ownership of the licences". Just as the
conduct of parties, who occupy a home without intending the claimant party to have any property
rights in it, may ultimately establish an equitable entitlement in the claimant to such property, it would
be open to Ms Meehan who worked substantially in the taxi business to establish her entitlements
in the form of a constructive trust over the taxi licences. Similarly, Ms Meehan's entitlements under
para 7(a) and 7(b) above arose in respect of the restaurant and the Mermaid Waters unit, the
proceeds of which found their way into the assets of Mr Fuller which are now the subject of the
constructive trusts.
No point was taken on appeal on these particular questions. I have discussed them with
a view to understanding the basis of these particular orders and of his Honour's ultimate resolution
of the case. Without a clear understanding of the basis of the declarations it is impossible to give
proper consideration to the question of quantification of the interest.
Although the case was factually complicated, it is not necessary to set out the facts at greater
length. They are fully stated in the comprehensive reasons published by the learned trial judge and
are not challenged on the appeal. The parties' legal advisers deserve credit for narrowing the issues
to the bare minimum and have been able to produce a short and concise record, as well as a
substantially agreed statement of relevant facts in the outlines of argument.
The appeal is based upon three principal arguments, namely:
(1) His Honour's conclusions on unconscionable conduct gave no or insufficient weight to the 1989 deed.
(2) His Honour's calculation of the disposable income from the restaurant business took
no account of the income tax payable on the nett taxable income.(3) It was inappropriate to award compound interest on all of the above sums.
Effect to be given to the deed
The deed seems to have been the product of a serious attempt by the parties to settle future
differences which they at that time anticipated or feared. Detailed consideration was given by them
to various contingencies including the possibility of cessation of cohabitation, and the deed
recognised ownership by one party or the other of particular assets according to the events that
might happen. Prima facie such an agreement ought to be recognised and given effect to[5].
[5] Muschinski v Dodds above at p618; Harmer v Pearson (1993) 16 Fam LR 596, 596- 599, 600.
Although his Honour declined to find any common law basis for setting aside the deed, (for
example by reason of duress or repudiation), he did not state the weight, if any, that he attached to
the deed in determining the parties' rights. The overall approach seems to have been that his
Honour considered it unconscionable to give effect to it as barring further entitlements on Ms
Meehan's part.
Counsel for Mr Fuller submitted that his Honour gave no effect to the deed, but that would
not seem to be correct. Indeed his Honour's approach was to recognise the ownership of assets
according to the outcome of the deed. Although the provisions in clause 7 are obscure, the parties
are agreed that in the events that happened Ms Meehan became entitled to a half interest in Messines Crescent, notwithstanding that schedule A of the deed prima facie recognised her as
having a one half interest in only the rear portion of that property upon which the matrimonial home
stood. It would seem that the parties, recognising that the property was not subdivided, agreed that
under sub-clause 7(iii) of the deed Ms Meehan's interest was as a tenant in common in equal shares
in the whole of Messines Crescent. Similarly, consistently with the deed, his Honour accepted Mr
Fuller as the owner of the other assets, and in particular the taxi licence mentioned in the deed, and
the second taxi licence that he acquired in his own name subsequently. The basis of his Honour's
judgment is a recognition of a money entitlement on Ms Meehan's part deriving from the withholding
from her of money which in equity she should have received. In the end although his Honour's order
is inconsistent with the overall disposition contemplated by the deed because Mr Fuller's assets have
been made subject to Ms Meehan's equitable entitlements, it cannot be said that it has been
completely disregarded.
It may be that the deed actually barred the making of the claim which Ms Meehan brought
to court, although I do not understand that to have been either specifically pleaded or argued. Other
than in sub-clause 7(iv) there is nothing explicit in relation to the bringing of claims, and although it
expresses the parties' intention to avoid litigation on the matters mentioned in the deed, it is arguable
whether it purports to exclude the making of equitable claims of the present kind. However I do
not understand counsel for Mr Fuller to found his submission that his Honour disregarded the deed
upon the fact that the claim was entertained.
Counsel for Mr Fuller further submitted that his Honour gave insufficient weight to the deed.
A deliberate step taken by the parties such as entering into the deed might be capable of carrying
some weight in the final resolution of the parties' dispute, such as producing a tendency or inclination towards the result that the parties had agreed, even if the court declined on the ground of
unconscionability to enforce the deed as such. The making of such an agreement amounts to
relevant conduct of the parties, as Pincus JA observed in Dunne v Turner[6]. Illustrations are
available as to how an agreement may assist a court as an indication of admissions made against
interest, even though the agreement as such is not enforced[7].
[6] BC9604833, CA No. 196 of 1995, 20 August 1996, page 7, "Short of an agreement, a mere promise relating to property may be important or even decisive".
[7] Harmer v Pearson (1993) 16 Fam LR 596.
With this in mind it was submitted on Mr Fuller's behalf that the deed should have been
regarded by the learned trial judge as important to, if not decisive of, the issue of unconscionable
conduct, as prima facie it is not unconscionable for parties to regulate their rights by means of legal
arrangements seriously undertaken. Counsel for Mr Fuller further submitted that the process
performed by his Honour in relation to the $40,000.00 from the restaurant business is inconsistent
with the deed which was entered into in the year after that business was sold. But in the end this
submission cannot be decisive of the question of unconscionability of depriving Ms Meehan of that
benefit. Counsel for Mr Fuller further submitted that whilst the income from the taxi business
continued to be earned after the making of the deed, the deed had made it clear that the taxi licence belonged "solely and exclusively" to Mr Fuller. It does not follow however that Ms Meehan might
not equitably be entitled to income from the enterprise to which she so materially contributed.
Upon analysis his Honour recognised the division of assets that the deed recorded. The
judgment does not find unconscionability in the retention of ownership of relevant assets by Mr
Fuller, including the all important taxi licences. It is based upon conclusions that it would be
unconscionable for Mr Fuller to deny that Ms Meehan was entitled to a greater share of the income,
namely "to a substantial part of the funds derived from the restaurant" and "a substantial share in the
income derived from the taxi business", and upon other equitable financial adjustments. The
judgment is based on those adjustments and on the shortfall in income from these sources that has
been quantified and converted into a present day value which is now charged upon the assets
retained by Mr Fuller consistently with ownership of items of property as stated in the deed.
In support of his Honour's preparedness to treat Ms Meehan as not strictly bound by the
deed, counsel for Ms Meehan relied upon a number of inaccuracies in the deed which were noted
by his Honour, and further submitted that her contribution to the Mermaid Waters property was
substantial and considerably more than the 25% contribution recited in the deed. The Mermaid
Waters property to which Ms Meehan significantly contributed netted $288,000.00, enabling the
parties to purchase the Messines Crescent property and to reduce the debt on the first taxi by some
$80,000.00. It may be noted that Ms Meehan in entering into this deed relinquished rights to
maintenance in the event of separation, and contemplated receiving even less than her half share in
the Messines Crescent property in that she accepted the possibility that she had only a half share
in the house at the rear of the property. On this aspect his Honour observed "I consider it likely that
her acceptance was based upon her less than full appreciation of the true financial position of the parties or of her entitlement" and "there is no suggestion that the acquisition was other than in equal
shares until shortly before the execution of the deed". When these factors are taken into account
along with the trial judge's findings concerning the co-operative long term approach of the parties,
and the very substantial disparity in the contemplated ownership of assets, the conclusion that it
would be unconscionable to enforce the deed was clearly open.
The unconscionability of enforcing the deed is most clearly seen when one takes into
account the respective contributions of the parties over extended periods, including the circumstance
that Ms Meehan is entitled to have account taken of domestic contributions that made it possible
for Mr Fuller to undertake commercial activities. If the parties were confined to the effect achieved
by the deed the result would be quite disproportionate. It gave Ms Meehan an assured legal
entitlement to one asset only, with a value at the time of separation of $120,000.00 when the total
value of the joint assets was over $1 million. Had effect been given to the deed she would have
emerged from the separation owning a little under 12% of the assets. Having regard to the serious
nature of their relationship, including the fact that they raised a child, to the fact that each contributed
in a commercial way to improving their combined capital assets, and to the additional domestic
contribution of Ms Meehan which enabled Mr Fuller to earn more than she could, the effect of the
deed is suggestive of unfairness and oppression to Ms Meehan, and it might be thought
unconscionable to give full effect to it.
It may have been open to his Honour to have given greater effect to the deed than appears
to have been given in which case less could have been assessed as Ms Meehan's entitlement.
However it cannot be said that his Honour erred in giving insufficient weight to it. The finding of
unconscionability was open, and his Honour's approach in quantifying Ms Meehan's entitlement through financial assessment of particular advantages unfairly taken by Mr Fuller (that is to more
income from the businesses than she received and other financial adjustments) cannot be said to be
erroneous in principle. The separate question whether specific errors are shown in his Honour's
assessment of those entitlements will now be discussed.
Failure to allow for obligation of Mr Fuller to pay tax
This point concerns the entitlement mentioned in paragraph 7(c) above.
His Honour in effect awarded Ms Meehan the equivalent of a greater share of the income
of the taxi business over the period between 1988 and 1994. Assessment of this was complicated
by the fact that Mr Fuller understated his income to the Taxation Authorities, leading to
reassessments at a later time.
After adverting to the adjusted taxable income and adding on payments received by Ms
Meehan from the business, his Honour arrived at the following "total income figures in each of the
following years".
Year Total Income 1988-89 $41,229.00 1989-90 $45,214.00 1990-91 $49,293.00 1991-92 $95,616.00 1992-93 $98,891.00 1993-94 $77,662.00
His Honour treated those amounts as available for distribution to the parties. Plainly this
made no allowance for the tax that had to be paid. That would seem to be a plain error, as the
essential concept being applied is the amount that Ms Meehan ought to have received out of
available monies in Mr Fuller's hands.
| 36 | The following table shows the process by which his Honour then, in each year, deducted joint expenses from the above income figures, finally taking 45% of the balance as the figure to |
which Ms Meehan would have been entitled to receive at that time.
Year Total Income Deduct Joint Balance $45% of Expenses Balance 1988-89 $ 41,229.00 $ 17,500.00 $ 23,729.00 $ 10,678.00 1989-90 $ 45,214.00 $ 17,500.00 $ 27,714.00 $ 12,471.00 1990-91 $ 49,293.00 $ 17,500.00 $ 31,793.00 $ 14,306.00 1991-92 $ 95,616.00 $ 20,000.00 $ 75,616.00 $ 34,027.00 1992-93 $ 98,891.00 $ 20,000.00 $ 78,891.00 $ 35,500.00 1993-94 $ 77,662.00 $ 20,000.00 $ 57,662.00 $ 19,460.00(i) TOTALS $407,905.00 $112,500.00 $295,405.00 $126,442.00 Note: (i) $25,947.00 reduced by 25% to $19,460.00 because cohabitation ceased in March 1994.
On the submissions of counsel for Mr Fuller, if the figures are reconstructed to take into
account the tax that the appellant ultimately had to pay in respect of those years, the error against
Mr Fuller in consequence of failing to bring into account such tax is $119,447.00 in the Total
Income column, and in turn in the Balance column. This error converts in the final column (45% of
Balance) to $53,751.00. These figures are said to be conservative and no contrary submission was
advanced. Counsel for Ms Meehan however submitted that Mr Fuller had the use of the
undeclared monies over a five year period before he was required to pay the full amount of tax.
There was no doubt some monetary advantage in that circumstance and arguably (although it was
an unlawful advantage) it ought notionally to be shared with Ms Meehan. The evidence would not
permit any reliable valuation of such benefit. In my view the advantage obtained by Mr Fuller in this
respect must be quite slight by comparison with the disadvantage to which he has been subjected
by an assessment which takes no account of his obligation to pay tax over the six year period. This argument is best dealt with by conceding it a small degree of merit which cannot be precisely
calculated, but which can be accommodated by adjusting downwards any alteration made in favour
of Mr Fuller for the omission to recognise his tax obligations.
Counsel for Ms Meehan also submitted that Mr Fuller had the benefit of income splitting
during the years 1989 to 1994 but I do not consider that this affects the present exercise. Counsel
for Ms Meehan further referred to an arguendo comment by the learned trial judge after delivery
of his reasons when argument was proceeding on costs. His Honour observed that "[w]hat was
really happening throughout the relationship, as I see it, was that the defendant was effectively
enhancing his own position using proceeds which, in my view, ought to have been shared". Even
if these comments are taken as further reasons for judgment they do not meet the argument that a
calculation of the kind here undertaken should have taken account of taxation payments that Mr
Fuller was obliged to make in those particular years.
Counsel for Ms Meehan submitted that although there were many figures and steps in the
mathematical calculations, his Honour was in effect performing a broad exercise of discretion and
that a broad brush approach was justifiable. I do not think that the "broad exercise of discretion"
submission is sufficient reason to overlook what appears to be a clear oversight that has resulted
in a material disadvantage to Mr Fuller. It was an error which was compounded by the application
of compound interest for periods up to nine years.
In this respect an error has been made, and in the circumstances $50,000.00 should be
deducted from the assessed figure of $126,442.00, before the question of interest is considered.
It is now necessary to consider how that sum and other notional entitlements of Ms Meehan should be converted to present day value.Award of compound interest
It is not doubted that a court of equity may in an appropriate case direct a trustee to pay
compound interest on trust monies withheld or misapplied by the trustee[8]. Of course the present
constructive trusts were not asserted until the writ in 1994 and not established until the judgment in
1997, but that does not in principle insulate a constructive trustee, who is unaware of his trust, from
an obligation to pay compound interest if the court considers that justice requires it to be paid.
"[T]here 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"[9].
[8] Hungerfords v Walker (1989) 171 CLR 125, 148; Wallersteiner v Moir (No 2) [1975] 1 All ER 849, [1975] 2 WLR 389, [1975] QB 373, 388, 397, 406; President of India v La Pintada Compania Navigacion SA [1984] 2 All ER 773, [1985] AC 104, 116.
[9] Per Deane J in Muschinski v Dodds above at p614.
However some caution might be appropriate before awarding compounding interest in such
a case, particularly in the case of a party who has the assurance of the claimant in a deed into which
they both seriously entered that the claims in respect of his property were limited.
Consistently with the above authorities "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[10]". The main object seems to be to prevent the trustee from
making a profit out of his breach of trust.[11] The court does not award such interest by way of
punishment, but rather by a perception of the use that has been made of the claimant's money.
There is however a greater inclination to award such interest against a trustee who has retained
money by fraud.[12]
[10] Per Scarman LJ in Wallersteiner above at p406. Compare Buckley LJ's comments ibid p397.
[11] Per Lord Denning MR in Wallersteiner at p388.
[12] President of India v La Pintada Compania Navigacion SA above at p116; Hungerfords
The learned trial judge referred to the authorities supporting the existence of the discretion
to award compound interest, and decided to do so in this case. However his Honour did not advert
to the reasons why it was considered appropriate to do so.
Compound interest was allowed at 14% on the amounts in sub-paragraphs (a) and (b) for
the period 1984 to 1988. His Honour then subtracted credits to which he held Mr Fuller entitled,
comprising $31,200.00 in living expenses provided by him to Ms Meehan between 1984 and 1988 (which it may be noted had been progressively provided13), and a further $28,000.00 representing
over-contribution by Mr Fuller in the purchase of the Messines Crescent property in 1988. His
Honour then allowed further compound interest on the balance ($35,407.00) at 16% for 18 months
to the end of 1989, and then at 11% for the remaining eight years to the date of trial.
On his Honour's findings the amounts assessed under paragraphs (a) and (b) of paragraph
7 above resulted in notional entitlements in 1984 of $15,000.00 and $40,000.00 respectively in Ms
Meehan, and in a corresponding financial advantage to Mr Fuller to that extent. This would seem
to have resulted principally in the application by him of additional monies towards domestic
expenses and in payments towards the acquisition of assets including those which in due course
were used in the acquisition of Messines Crescent which of course has benefited both parties.
Some of the benefits can be seen to have flowed into the assets of which Mr Fuller has sole
ownership (subject to Ms Meehan's charge) but this is certainly not a case where the extra monies
held by him at the claimant's expense can be seen to have resulted in the sole or even close to sole
v Walker above at p148.
13 The deduction of living expenses as a lump sum at the end of the four year period instead of year by year would seem to err against Mr Fuller. However the point was not taken on appeal.
commercial advantage of the trustee such as to justify the imposition of commercial compound
interest.
So far as the retention by Mr Fuller of an excessive amount of the proceeds of the taxi
business is concerned[14] the position is less clear. His Honour took the view that Mr Fuller had
made effective use of the funds which were available to him in order to improve his asset position,
and it would seem that that view was reasonably open. His Honour has allowed compound interest
on the figure of $126,442.00 (which for reasons given above needs to be reduced to $76,442.00)
over a period of up to eight and a half years. However I do not think that his Honour can be said
to have erred in deciding that compound interest should be allowed on the excess funds held by Mr
Fuller in this respect.
Conclusions
[14] See paragraph 7(c) above.
The appeal should be allowed. The monetary amount of $310,000.00 in the second part
of the order below should be reduced in accordance with the conclusions expressed in these
reasons. In particular -
(i) The amounts referred to in paragraph 7(a) and 7(b) of these reasons should
be the subject of simple interest, at the rates specified by the learned trial
judge, up to the date of judgment (22 December 1997);
(ii) With respect to the quantification of the entitlement mentioned in paragraph
7(c) above, the amount upon which interest is to be calculated should be
$76,442.00. Compound interest should be allowed thereon at the same rates as those specified by the learned trial judge up to the date of
judgment (22 December 1997).
The parties have leave to present submissions in writing, or an agreed letter stating the appropriate
figures. Formal judgment will be postponed to a date after the receipt of such submissions or letter.
The appellant was justified in bringing the appeal, but the points upon which he has succeeded
comprise a relatively small part of the contentions and ambit of the appeal. In the present circumstances
I would order the respondent to pay one half of the appellant's costs of the appeal to be taxed.
1 [1996] 2 Qd R 93.
2 Eg Rules 352 to 365.
3 Smith v Smith [1987] 2 Qd R 807, 809-810, 813; Cutts v Head [1984] Ch 290; Transit Australia Pty Ltd v Crewford Australia Pty Ltd [1998] 1 Qd R 690.
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