Musgrave v Musgrave

[2001] NSWSC 134

CITATION:	MUSGRAVE v MUSGRAVE [2001] NSWSC 134
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	SC 1652/99
HEARING DATE(S):	15 and 16 June 2000. 14/12/2000
JUDGMENT DATE:	12 March 2001
PARTIES :	Thomas Kevin John Musgrave v David Kevin Musgrave
JUDGMENT OF:	Master Macready at 1

COUNSEL :	Mr M. Gorrick for plaintiff Mr D.B.McGovern for defendant
SOLICITORS:	Craddock, Murray, Newmann for plaintiff Champion Legal for defendant
CATCHWORDS:	Trusts, constructive trusts. Gift of property by father to son. Arrangement whereby son rebuilds property to accommodate his family and the father after reconstruction at the son's expense. Breakdown in relationship. Father evicted. Order for charge in favour of the father.
CASES CITED:	Green v Green (1989) 17 NSWLR 343 Muschinski v Dodds (1985) 160 CLR 583 Baumgartner v Baumgartner (1987) 164 CLR 137 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Cardozo J in Beatty v Guggenheim Exploration Co (1919) 225 NY at 389 "The Remedial Constructive Trust" by David M. Wright 1998 Collins v Kerry, Bryson J 13 September 1989 Walker v McClelland Young J 24 June 1988 Carson v Wood (1994) 34 NSWLR 9. Bryson v Bryant (1992) 29 NSWLR 188 Bennett v Horgan (unreported 3 June 1994) Bryson J Morris v Morris (1982) 1 NSWLR 61
DECISION:	Para 39

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

MASTER MACREADY

Monday 12 March 2001

1652 of 1999 THOMAS KEVIN JOHN MUSGRAVE v DAVID KEVIN MUSGRAVE

1   MASTER: This is the hearing of proceedings in which the plaintiff seeks orders in respect of a property situated at 24 Pegler Avenue, Granville. The plaintiff and defendant are respectively father and son and the subject property prior to the events in question was registered in the plaintiff’s name alone. The plaintiff had a number of children one of whom was the defendant and in 1993 he invited the defendant, his wife and their four children who were living in rented accommodation to come and live with him. This the son did until 1996 when there were some discussions about a proposal to rebuild the property. As a result of those discussions the plaintiff transferred the title in the property to the defendant. The property was unencumbered at the time.

2   It was envisaged in the discussions that the main house on the property would be demolished and a new house erected. Between 1993 and 1996 there had already been some alterations in that a separate garage had been demolished and a new garage was in the course of being completed. The alterations involved, as I have said, demolition of the main house, erection of a new house in its place, construction of a pool between the new house and the garage and some alterations to the garage which was there after called a cabana. After obtaining council approval, which incidentally did not include approval for the garage or cabana to be occupied for living purposes, the defendant and his family moved out into rented accommodation. The plaintiff remained in the property living in the cabana while the main house was demolished and rebuilt. This work proceeded with the defendant raising money by way of mortgage over the property and paying approximately $240,000 for the construction of the new house. The house was not completely finished but at least it was in a state in which it was habitable. The new house had three bedrooms upstairs and a guest bedroom downstairs which would be a suitable residence for the plaintiff. However, the plaintiff declined to take up this offer and remained living in the cabana which was separated from the main house by the new swimming pool. These living arrangements continued for some time until 1999 when relations between the plaintiff and the defendant broke down. The plaintiff was ejected from the property and has not resided there since.

3   The plaintiff originally commenced the proceedings by way of summons but a statement of claim was filed in due course pursuant to orders of the court. The claim as propounded in the statement of claim, filed on 9 April 1999 included in paragraph 25 a claim that the transfer from the plaintiff to the defendant was a forgery. Prior to the hearing the claim in this paragraph was abandoned and the plaintiff accepted that there had been a transfer to the defendant. Having abandoned the claim of forgery, the relief sought in the statement of claim was as follows:-

1. A declaration that the defendant holds legal title to the property being the whole of the land comprised in computer folio reference 75/1/5121 (“the property”) on trust for the plaintiff, in such proportions or interest as the court may determine.
2. Order that the defendant transmit the said interest in the property to the plaintiff.
3. Further or other orders or directions as this court seems appropriate. ….”

4   The defendant maintains that the transfer of the property was in fact a true gift and that in any event a presumption of advancement would apply. He submits that no evidence to rebut the presumption has been advanced and denies that there was ever any arrangement for the plaintiff to live in the property indefinitely. It was submitted that in the circumstances no constructive trust should be imposed. To the extent that something less than a constructive trust giving an interest in the property was appropriate the defendant opposed the claim on the basis that the plaintiff had not pleaded that claim for relief and that the case had not been fought on that basis.

5   The proceedings were heard before me on 15 and 16 June 2000 and written submissions were lodged with the Court some time later. In those written submissions the defendant made it perfectly clear that the case as put by the plaintiff was outside the terms of the pleaded case. Following the ignoring of this by the plaintiff and comments to a similar effect which had been made in oral submissions at the conclusion of the hearing the Court of its own motion wrote to the parties to enquire whether the Statement of Claim was to be subject of an application for amendment. In October a motion for amendment was filed and I heard that motion. On 18 October 2001 I gave leave to amend the Statement of Claim and there was a further hearing before me on 14 December 2000. Further evidence was heard on that day. The new pleading added an allegation that the plaintiff at the relevant time owned no other property and had no other home or place of secure tenure to the knowledge of the defendant. It then pleaded by reason of these and other matters that were already in the Statement of Claim the Court could impute a common intention that the defendant would hold the property on trust for the plaintiff for life or, alternatively, he was bound in equity and good conscience to provide accommodation for the plaintiff for life. A further alternative claim for relief was included, namely, that the plaintiff have an equitable charge over the property in such sum as the court may determine together with interest thereon and at such rate and from such date as the court may determine. Although the Amended Statement of Claim included the former paragraph 25 the parties continued to conduct the case on the basis that this claim was not advanced.

6   I turn to the matters central to the arrangements alleged between the parties. The first of these is the arrangement for the defendant and his family to come and live with the plaintiff. According to the plaintiff he made a suggestion to the defendant that he and his family should come and live with him, as they were only paying rent which was dead money and they could then get on their feet by not having to pay rent. He says there was agreement that his son would pay the rates and expenses on the property. On the defendant’s side the suggestion was that he had found his father was in a poor state, did not have money to meet his bills and that he had suffered, on Father’s Day evening in 1993, an accident when he had haemorrhaged from his nose and needed assistance. The precise resolution of the difference between the parties is not important for the purpose of the case as the defendant and his family moved in and the defendant did in fact pay the rates and expenses on the property thereafter.

7   So far as the arrangements in 1996 are concerned the plaintiff suggested that it was his son who suggested to him in 1996 that because his business was going well that he would build a unit on the land at the back of the property for him, his son would demolish the house and build a new house in the front with a pool in between the house and the unit. He says that during the course of completion his son sought to change the arrangement about the unit at the back as his son wanted it for a cabana for entertaining or for his own son’s residence.

8   It was also alleged by the plaintiff that there was an arrangement in which his son would take over his father’s car which was costing too much money and buy his father a new one. The terms of that promise caused friction between the parties in the hearing before me although it plays little part in the final resolution of the matter. The defendant for his part in respect of conversations which led up to the alterations denied statements that were attributed to him by the plaintiff. He says that the plaintiff said:

“I want to give you the house. You have done a lot for me and I don’t want any trouble for you when I go with the other children.”

9   It is common ground that after the initial conversations an appointment was made to see Grace Fung, solicitor, at G.H. Healey & Co at Auburn on 29 March 1996. It seems apparent that there were at least two visits. The first one required the obtaining of a valuation of the property. It was eventually obtained and valued the property at $140,000. There is now no debate as to the execution of the transfer nor ultimately a statutory declaration which was signed at the time by the plaintiff. The transfer was for a consideration of $1.00 coin and there was some apparent handing over of a $1.00 at the time it was signed. There was also a statutory declaration by the plaintiff which he signed which said:-

“I will transfer to my son, David Kevin Musgrave, 24 Pegler Avenue, Granville in the State of New South Wales the property known as 24 Pegler Avenue, Granville (volume 3400 folio 117) as a gift.”

10   The plaintiff’s evidence did not deal in a satisfactory way with what occurred on the signing of the transfer particularly as he had abandoned the claim of the transfer being a forgery. In the witness box he tried to suggest that the transfer was to be “on his demise”. No such case was pleaded or referred to in his affidavit evidence. Generally I found the plaintiff not to be a satisfactory witness he being argumentative in giving his evidence. He was also unreliable in that he retreated at times to statements like “everyone understood the situation” without being able to give the necessary evidence. In any event, apart from this reference to his demise, there was no suggestion by the plaintiff of a conversation in which the plaintiff was promised he could live in the house indefinitely or for the rest of his life. The son gave evidence of conversations that occurred in the discussions with Miss Fung which substantially mirrored some evidence which was available from her. He denied that he had promised that his father would be secure in his home. Miss Fung had during the course of the proceedings sworn a statutory declaration which was annexed to an affidavit of the defendant of 4 May 1999. There was no objection on the plaintiff’s part to that evidence. Miss Fung had been subpoenaed to be at the first hearing but as objection was not taken to her evidence no doubt it was not necessary for her to be called. On the second hearing she was called by the defendant and further examined. I first set out her evidence which was in the Statutory Declaration:-

“1. I am the principal of Grace Fung & Associates, Solicitors carrying on business at 26/1 Civic Road, Auburn aforesaid.
2. I was admitted as a Solicitor of the Supreme Court of New South Wales in April, 1994. In March, 1996, I was employed as a solicitor by G.H. Healey & Co. My work was mainly in the handling of Conveyancing work in their Auburn branch.
3. I recalled that both the Plaintiff and the Defendant of Supreme Court of New South Wales Equity Division No. 1652 of 1999 came to see me around a week to two weeks before the 22 March, 1996 which is the date of the Valuation report on the subject property, 24 Pegler Avenue, Granville. I recalled I had advised them a valuation report would be required for stamping if the property was transferred for a nominal consideration.

4. I recalled that in the initial interview, I had asked the Plaintiff father if he was sure he really wanted to transfer the property to the Defendant son for free. I recalled I had explained to him that by signing the Transfer and having the same registered with the Land Titles Office, his son will be the lawful owner and he could even sell the property.

5. The father told me this was a family arrangement and he wanted to transfer the property to his son for free. The Defendant son then told me that the house was very old and in a very poor condition. He had put in much labour and work to put the house in a livable condition since he moved in to live with his father. The house still required lots of maintenance and work and he wanted to put it down, build a new house on the land and to get a new car for his father. The way to carry out this plan was to have the property transferred to his name so that he could apply to the Bank for finance with the property as a security. He also mentioned that he would carry out this arrangement as his father so wished only if the property would be under his sole name.
6. Both father and son expressed that they did not want to put down the family arrangement in writing as they wanted to save cost and being one family living under one roof, a Deed of Family Arrangement will not be required.
7. I advised that the simple way was for the father to sign a Transfer which would cost them $250.00. The cost for a valuation report would be between $200.00 to $300.00. The son told me he would arrange for the valuation report. Before they left the office, the son told me they will call again when the valuation report would be ready and I also reminded them to bring the original certificate of title when they came next time as I required the certificate of title to prepare the Transfer.

8. The conversation on this initial interview was not recorded as they basically wanted a quote first and had to wait for the valuation report before they would formally instruct me to prepare the documents

9. I recalled on the 29 March, 1996, the father and son came to my office again and this time they bought with them the valuation report and the original certificate of title. I made a copy of the valuation report and the Certificate of Title and returned the original documents to them. I also recalled telling them that the Transfer will be for a nominal consideration of $1.00 and a Statutory Declaration to this effect must be signed by the father for the purpose of stamping the Transfer and as a record of his intention to transfer the property to his son for a nominal consideration. Then they were asked to leave my office to wait outside the reception or to return in an hour to two for the documents to be drafted and typed.
10. After they left my office, I drafted the Transfer and the Statutory Declaration of the Plaintiff and asked the junior secretary to get the draft typed and to open a file for this matter. The date the file was opened was the 29 March, 1996. I recalled that both father and son returned to my office about an hour or two later on the same date and the Plaintiff signed the Transfer and Statutory Declaration in my presence.
11. I verily believe that the Plaintiff was aware of the legal consequences when he signed the statutory declaration and the Transfer. He wanted his son to carry out his promise in return for the transfer of the property to him. The whole transaction is a family arrangement.
12. I recalled that between nine months to probably about a year ago, the Plaintiff came to my old office in 1/58A Auburn Road, Auburn. I have moved into my new office since 25 August, 1998 and when the Plaintiff visited me in my old office, I had not yet confirmed moving to my new office. At that interview, he asked if I could remembered him. That he had signed the Transfer in my old office at G.H. Healey & Co. and that his son had now broken his promise under the family arrangement between themselves. He told me that the car his son gave him was only under hire purchase and that he always took the car away for his own use and leaving him with no vehicles to move around. He asked me to help him to take back the property from his son. I explained that if his son was in breach of his promise, he should have some equity over the property. But I could not help him because firstly I did very little litigation work and secondly I had acted for both parties before.”

11   It seems to me that substantially this sets out most of the arrangements between the parties except for the qualifications that emerged in her oral evidence. These related to the reference in paragraph 6 to a Deed of Family Arrangement not being required and the reference in paragraph 4 that the son could even sell the property. Initially Miss Fung agreed that there was no suggestion that the father would remain in the property for the rest of his days. Examination then established that Mr Musgrave to her observation clearly understood that his son could sell the property as was set out in paragraph 4 of the Declaration. The examination continued as follows:-

“Q. It follows, doesn't it, that there could not have been any suggestion to you made by anybody that the father was going to spend the rest of his days at that property because it could always be sold?
A. It was not, but that was the intention.

Q. The intention was that he could sell it?
A. No, the intention was that he could live in the house.

Q. Where do I see that?
A. Nothing, because of the scheme behind--

Q. Where is the scheme?
A. The scheme behind is that the father needs somebody to look after him. He needs to have a granny flat built at the back and the son can't comply with that requirement until he obtain a loan and for the loan the bank won't allow anything unless it is a gift; otherwise he can't get a loan. You can refer to the documents from the file as to the credit union, they require that.

Q. Why is it you told us in your statutory declaration that you told the father that the property could be sold immediately thereafter?
A. Yes, because theoretically, that is the legal point, I have to explain legal aspects, but what is behind it is another matter.

Q. There was never any suggestion made to you that the father would be the borrower of money from the bank, was there?
A. He can't because he is a pensioner.

Q. The whole purpose of the arrangement was to enable the son to be able to borrow money because he was earning income - correct?
A. Yes.

Q. And both the father and the son from what you spoke to them about, clearly understood that the only way in which the proposal could be implemented was if the son became the owner of the property?
A. Yes.

Q. And did you impress upon the father that that would have to be both legally and equitably the case?
A. Yes.”

12   In cross examination Miss Fung agreed that the defendant told her that he intended to build a granny flat at the back of his home for his father. The cross examination concluded with these questions:-

“Q. Was anything said at that first meeting about where the plaintiff would live?

A. At the granny flat to be built.

Q. And who said that?
A. Both.”

13   A consideration of all this evidence seems to me to indicate that it is likely that both parties said that it was intended that Mr Musgrave, Senior, could live in the house or the granny flat after the house was rebuilt. Having regard to the some of the earlier answers given by Miss Fung I would not accept that there was any statement that the plaintiff would spend the rest of his days at the property or that he could remain there indefinitely.

14   It is clear that the plaintiff moved out into the cabana prior to the house being demolished. According to the plaintiff that was the original agreement with the defendant but this is denied by the defendant. There was some evidence from a Mr Richardson who was the person who drew the plans for the alterations to the house and to the cabana. He gave evidence of a discussion between himself and the parties concerning the plans. In this discussion there was reference by the defendant to the plaintiff pointing out his new room and bathroom in the main house and the building of a large walk in wardrobe in the house. No comment was made by plaintiff in response to being shown where he was to live in the new house. The plans for the change of the garage to a cabana and the construction of the new house appear to have been approved on 29 July 1997. Although they were separate plans it is clear that the cabana was about 95 percent complete prior to the old house being demolished. At this stage the plaintiff moved into the cabana. I am satisfied that this was contrary to his son’s wishes and I am also satisfied that the plaintiff knew that the Council approval did not extend to using the cabana as an area for habitation. The plaintiff’s attitude seemed to he predicated upon the fact that people up the road had managed to do that successfully for a year without the Council knowing about it.

15   I am satisfied that the defendant did make available the downstairs bedroom with ensuite and walk-in wardrobe which was situated in the main house for his father. This was declined by the father as he decided to live in the cabana. That he continued to live there was probably one of the factors that led to the breakdown of the relationship between the parties and ultimately the eviction of the plaintiff from the home of the defendant.

16   I turn to a discussion of the resolution of the matter according to the claims which are made by the plaintiff. In paragraph 35 it is alleged that the Court can infer or impute that it was the common intention of the parties that at the time the property was transferred to the defendant the defendant would hold the property on trust for the plaintiff for life. This claim of itself does not deny that the property was transferred as a gift to the defendant. Indeed, given the presumption of advancement the property clearly became the defendant’s property as a result of the gift by the plaintiff. That this legal result should be achieved and that it is likely to be what was intended by the parties is borne out by a number of other circumstances in the case. These were:-

17   1. The plaintiff was an educated, qualified pharmacist who worked in his own business for some 25 years and had in earlier transactions between himself and his son arranged transfers of property. He understood the nature of such a transaction.

2. The plaintiff’s other children were living their own separate lives and it was the defendant who involved himself in the plaintiff’s life from 1993 onwards. In particular in the period prior to the transfer proposal the defendant himself had spent upwards of $20,000 on repairs and improvements to the property and the construction of the garage. At that time the defendant had no legal entitlement to the property or any right of occupation or tenure.

3. There had been a transaction between the two parties in respect of the defendant’s block of land in Queensland. Apparently the plaintiff, according to the defendant, had some difficulties in meeting his tax obligations and needed to borrow money to pay the Commissioner of Taxation. To do this he needed some security. The defendant spoke to his brothers and sisters who all declined to help their father. As a result the defendant and his wife transferred the title to a vacant block of land which they held in Queensland to the his father, the plaintiff. The transfer by the defendant and his wife to the plaintiff was on 29 August 1991. According to the defendant, contrary to the arrangement, the plaintiff in fact sold the property by Transfer dated 14 January 1992 for $65,000. The defendant eventually received from his father some $5,000 and the balance apparently was used by his father. The plaintiff suggested that in fact his son had owed money to him at the time and that he was entitled to sell the property. The terms of the evidence given by the defendant about the circumstances in which he found out about the sale tend to add credence to the defendant’s version. The plaintiff produced no documents or other matters to suggest in any way the basis for monies said to be owing to him by his son as a foundation for the arrangement. In the circumstances I prefer the defendant’s explanation of the arrangement and what transpired.

18   From a factual point of view the above three matters certainly support the likely intention of the plaintiff to make the gift at the time he made the gift. This is consistent with the defendant’s account of the plaintiff’s statement of reasons for making the gift. (See para 8 above.)

19   In discussion of the factual matters above I have already identified that at the time of the gift there was agreement that the plaintiff would live in the house after the alterations. I have found that nothing was said about him living in the house either indefinitely or for life. The matter was simply not addressed by the parties. On some occasions prior to the arrangements in question the plaintiff had expressed to his son a view that he might wish to go and live with his sister. From time to time courts infer a common intention. For example that a person might have a beneficial interest in property merely from the fact of contribution by each party to the property. See Green v Green (1989) 17 NSWLR 343 at 355. In the circumstances of this case and as I have outlined them I do not see how one could infer the property was to be held on trust for the plaintiff for life. This is expressly contrary to the clear evidence of an outright gift to the defendant.

20   Paragraphs 36 and 37 articulate that the plaintiff alleges the defendant was bound by equity and good conscience to do various things or that he had acted unconscionably and inequitably in retaining the title to the property in evicting the plaintiff without providing other accommodation. In essence they are a number of different ways of suggesting that a constructive trust arose in the circumstances. It trite to say that there has been a substantial development in the law of constructive trusts in recent years in Australia. Much of this extends from what was said by Mr Justice Deane in Muschinski v Dodds (1985) 160 CLR 583 and the adoption of his conclusion by the majority in Baumgartner v Baumgartner (1987) 164 CLR 137. By way of general warning His Honour said in Muschinski v Dodds at page 615:-

“…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 processes of legal reasoning, by analogy, induction and deduction, from the starting point of a proper understanding of the conceptual foundation of such principles.”

21   His Honour went on to say at page 616 the following:

“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: of. Hepworth v. Hepworth 89 (1963) 110 CLR 309, at pp. 317-318.. 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: cf., e.g., Legione v. Hateley 90 (1983) 152 CLR 406, at p. 444.; Commercial Bank of Australia Ltd. v. Amadio (1983) 151 CLR 447, at pp. 461-464, 474-475.
The principal operation of the constructive trust in the law of this country has been in the area of breach of fiduciary duty.”

22   His Honour’s conclusion which it must be remembered was in respect of a consideration of the parties’ property interests after the breakup of their de facto relationship appears at page 620 of the report in the following terms:-

“Those circumstances can be more precisely defined by saying that the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do: cf. Atwood v. Maude 107 (1868) L.R. 3 Ch. App., at pp. 374-375., and per Jessel M.R., Lyon v. Tweddell 108 (1881) 17 Ch. D. 529, at p. 531.”

23   His Honour’s conclusion was adopted by the majority in Baumgartner v Baumgartner (1987) 164 CLR 137.

24   The flexibility of a constructive trust appears in a number of cases. For instance in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 108 Mr Justice Mason, as he then was, quoted Cardozo J in Beatty v Guggenheim Exploration Co (1919) 225 NY at 389 who said:-

“A court of equity in decreeing a constructive trust is bound by no unyielding formula. The equity of the transaction must shape the measure of relief.”

25   In Green v Green (supra) at 358 Chief Justice Gleeson as he then was referred to the area being one in which equity is at its most flexible.

26   In Muschinski v Dodds (supra) a number of members of the Court referred to the uncertain area to which a constructive trust applies. At p595 Justice Gibbs said:-

“There is no need in the present case, to attempt to chart further the ill-defined limits of the rules relating to constructive trusts..”

27   On a more positive note Dean J at 614 said:-

“The acknowledgment of the institutional character of the constructive trust does not involve a denial of its continued flexibility as a remedy…”

28   He went on to say at 616 to 617:-

“The principal operation of the constructive trust in the law of this country has been in the area of breach of fiduciary duty. Some text writers have expressed the view that the constructive trust is confined to cases where some pre-existing fiduciary relationship can be identified: see, e.g., Lewin on Trusts, 16th ed. (1964: Mowbray ed.), p 141. Neither principle nor authority requires however that it be confined to that or any other category or categories of case: cf., generally, Professor R.P. Austin's essay on "Constructive Trusts" in Essays in Equity, (Finn ed.) (1985), esp. at pp. 196-201; Waters, op. cit., p. 28ff. Once its predominantly remedial character is accepted, there is no reason to deny the availability of the constructive trust in any case where some principle of the law of equity calls for the imposition upon the legal owner of property, regardless of actual or presumed agreement or intention, of the obligation to hold or apply the property for the benefit of another: cf. Hanbury and Maudsley, op. cit, p. 301; Pettit, op. cit, p. 55.”

29   There has started to emerge more writings upon the result which has been achieved as a result of the decisions of Muschinski and Baumgartner. See for example, “The Remedial Constructive Trust” by David M. Wright 1998. At page 66 he deals with a number of different interpretations which can be placed upon the judgments of the High Court in those cases. One important point he makes is that it is fairly clear that the availability of the constructive trust is not limited to domestic property situations. First, there is nothing in the judgments to indicate this and, indeed, various comments by members of the court indicate that the bounds are somewhat wider. Since the two cases there have been a number of cases applying the principles in a commercial context. See for example, Collins v Kerry, Bryson J 13 September 1989, Walker v McClelland Young J 24 June 1988 and Carson v Wood (1994) 34 NSWLR 9.

30   The second important matter is the question as to whether one adopts a somewhat conservative view of what was said and thus a need to find some appropriate triggering situation in order to attach a constructive trust. In Muschinski Justice Deane found the triggering situation was the analogy between the failed personal relationship and a joint venture which failed without attributable blame. The perhaps more liberal approach to the judgments is one which as Mr Wright indicates involves greater emphasis on the concept of unconscionability. This approach abandons entirely the triggering situation requirement and replaces it with a liability based on unconscionablity. Mr Wright at page 67 describes this approach in these terms:-

“This (restrained) unconscionability approach is restrained in that a claim can only be brought where the unconscionability is actionable. The unconscionability will only be actionable when it is informed by the traditional process of legal reasoning, deduction, induction and analogy. Under this approach unconscionability is not a head of liability which is a ‘formless void of individual moral opinion’ as it is informed by equitable notions of unconscionability although it is not filtered through any of them.”

31   There are two cases at appellate level in New South Wales which have touched these boundaries. One is Bryson v Bryant (1992) 29 NSWLR 188 and Carson v Wood (1994) 34 NSWLR 9. Both cases tend to support the restrained unconscionability approach referred to by Mr Wright. This however is not of great significance in the present case because what we are concerned with here are personal domestic relationships although not necessarily those between partners living in a de facto relationship. The relationship in the present case can be described fairly succinctly. It was:-

1. That the plaintiff would give his property to the defendant as a gift.
2. The defendant would demolish the house and with funds he borrowed would erect a new house on the property.

3. The new house would include a bedroom and ensuite bathroom for the plaintiff.

4. The plaintiff would on completion of the reconstruction have the use of the bedroom and ensuite and would reside with the defendant’s family in the house.

32   It will be noted that in Mr Justice Deane’s formulation of the principal he describes a breakdown of the relationship as being without “attributable blame”. In Bennett v Horgan (unreported 3 June 1994) Bryson J had the following to say about the expression “attributable blame”:-

“A breakdown in personal relationships among the persons who were to share occupancy of a dwelling is the kind of event which can remove the substratum of the whole arrangement. There were such circumstances in Morris v Morris.
Such arrangements are made among persons with a familial relationship in the contemplation that personal relationships will continue to be acceptable to all concerned, and it must be understood that if the parties foresaw that the relationship would change and they would become intolerable with each other, or that some would become intolerable to others, the arrangement to share occupancy would not be made at all. The concept of attributable blame must be understood and applied with some tolerance; in my view it does not call for a judgment attributing blame among members of a family for the continuing relationship becoming intolerable, unless perhaps in particularly gross cases. Such judgment would be difficult and unreliable, as it is rare indeed that something or other which could be said to be a ground for blame cannot be identified and laid to the charge of each of the persons concerned.
Leaving gross cases involving criminality or similarly reprehensible behaviour on one side, it should usually be understood, in my opinion, that where personal relationships deteriorate and the sharing of a dwelling becomes intolerable to some or all of those concerned, there is, within the meaning of Deane J's expressions, no attributable blame and the case is one for an equitable adjustment. It is a sadly recurring judicial experience to see that family relationships do deteriorate and become intolerable, and that the persons involved did not foresee that this might happen.

33   I concur with His Honour’s sentiments and although there is clearly an obvious difficulty with the plaintiff staying in the cabana I would not think it appropriate to find that there was attributable blame on his part. There were enough references in the evidence about the lack of trust between the plaintiff and the defendant for one to be cautious about adopting an approach other than that adopted by His Honour Mr Justice Bryson.

34   The factual situation in the present case involving a breakdown in a personal relationship is not uncommon. These matters are frequently before this Division including, for example, a case frequently relied upon Morris v Morris (1982) 1 NSWLR 61. There His Honour Mr Justice McLelland, as he then was, found that there was no discussion as to the duration of the proposed living arrangement, as to what was to happen if the harmonious relationship broke down or as to what would happen if the house was to be sold. Leaving this last point aside the first two are common to the present case. Those facts, however, were sufficient for His Honour to infer that the person who spent the money in that case did so in the expectation induced or encouraged by the defendants that he would be able to live there indefinitely as a member of their family.

35   In the present case it must be borne in mind that one of the objectives of the rebuilding, apart from accommodating the defendant’s family, was also to provide comfortable accommodation for the plaintiff. In these circumstances it is clear that at least there was an expectation on the part of the plaintiff no doubt as a result of what was proposed by the defendant that he would be able to live there for an indefinite period.

36   In these circumstances it would seem that in principle it is an appropriate case where there should be some imposition of a constructive trust.

37   In the present circumstances suggestions that the defendant should provide some accommodation for the plaintiff are impracticable and the most appropriate type of remedy would be to provide a charge for an appropriate amount over the property in favour of the plaintiff.

38   The plaintiff’s contribution to the joint venture was the land and house which he owned. The house and land at the time of transfer was valued at $140,000. Shortly prior to that on 1 July 1995 the unimproved value of the land was determined by the Valuer General’s Office at $86,500. The arrangement between the parties acknowledged and contemplated the demolition of the existing house at the defendant’s expense. In those circumstances it would seem that the measure of the plaintiff’s contribution would be the unimproved value of the land, namely, $86,500. Given my findings in respect of the Queensland transaction which preceded this present transaction by only a few years, it seems to me that such transaction provided much of the impetus for the plaintiff to make what he clearly conceded was a gift. The benefit to the plaintiff of that transaction was approximately $60,000 in 1992. In deciding matters of this nature there are always a number of factors that can be put in the balance and the ultimate result cannot be precise. I bear in mind that the benefit the plaintiff would expect from the arrangement would not be a life interest but would be some form of indefinite right to occupy, perhaps terminable upon some reasonable notice and conditions. He made an outright gift in part prompted no doubt by what his son had done for him including the provision of some $60,000.

39   In the circumstances I think the appropriate result is that I declare a constructive trust which will be satisfied by the payment of $20,000 by the defendant to the plaintiff such sum to be charged upon the defendant’s interest in the subject land. Having regard to the timing of the various payments no additional interest should be payable until after judgment. The parties can bring in short minutes and argue the question of costs.

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Last Modified: 03/19/2001