Neilson v Letch (No 2)

[2006] NSWCA 254

New South Wales

Court of Appeal

CITATION:	NEILSON v LETCH (No 2) [2006] NSWCA 254
HEARING DATE(S):	11 August 2006
JUDGMENT DATE:	22 September 2006
JUDGMENT OF:	Mason P at 1; McColl JA at 43; Basten JA at 44
DECISION:	Appeal allowed.
CATCHWORDS:	TRUSTS AND TRUSTEES – Implied trusts – Resulting trusts – Domestic relationships – De facto couple – Unequal contributions to purchase of property – No presumption of advancement – Presumption of resulting trust – Rebuttable by evidence of contrary intention – Evidence of requisite intention. (ND)
LEGISLATION CITED:	Property (Relationships) Act
CASES CITED:	Forgeard v Shanahan (1994) 35 NSWLR 206 Gissing v Gissing [1971] AC 886 Mackowik v Kansas City St J & C B R Co 94 SW 256, 262 (1906) Neilson v Letch [2005] NSWCA 430 Trustees of the Property of Cummins (a bankrupt) v Cummins [2006] HCA 6, 224 ALR 280, 80 ALJR 589 Vandervell v Inland Revenue Commissioners [1967] 2 AC 291
PARTIES:	Mary Ann Neilson Darryl Richard Letch
FILE NUMBER(S):	CA 40258/05
COUNSEL:	Appellant: C M Simpson Respondent: No appearance
SOLICITORS:	Appellant: Adrian Twigg & Co Respondent: Ceased to act filed 24.4.06
LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	SC 2122/03
LOWER COURT JUDICIAL OFFICER:	McLoughlin AsJ
LOWER COURT MEDIUM NEUTRAL CITATION:	[2004] NSWSC 1246

CA 40285/2005
SC 2122/2003

MASON P
McCOLL JA
BASTEN JA

Friday 22 September 2006

Mary Ann NEILSON v Darryl Richard LETCH (No 2)

JUDGMENT

1 MASON P: A contested application for leave to appeal in this matter was heard before Hodgson and Ipp JJA on 29 September 2005. At that stage, the respondent was represented by counsel (Mr J Drummond) instructed by solicitors (Hartmann & Associates). Because of the inadequacy of the material provided to the Court, judgment was reserved and directions given to provide further material. Leave to appeal was granted on 6 December 2005. Reasons were provided, indicating that there were substantial grounds available to challenge the result at first instance (see Neilson v Letch [2005] NSWCA 430).

2 The Notice of Appeal was filed on 19 December 2005 and it was served on Hartmann & Associates. On 15 March 2006, Hartmann & Associates informed the appellant’s solicitor that their client had not given any further instructions to act in the matter.

3 There were subsequent directions hearings and callovers before the Registrar. The appellant was granted leave to amend her notice of appeal and an amended notice of appeal was served on 17 March 2006.

4 On 20 April 2006 the respondent was directed to file and serve submissions on or before 9 June 2006.

5 On 24 April Hartmann & Associates filed notice of ceasing to act as the respondent’s solicitor. The notice, which was served on 26 April, indicated the last known residential address of the respondent, being an address in Thailand. Subsequently, pursuant to directions by the Registrar, letters were forwarded to the respondent at that address enclosing copies of the appellant’s submissions and chronology, informing the respondent of the Registrar’s directions that he file his submissions by 30 June 2006, and informing the respondent of a change in the appointed hearing date for the appeal.

6 None of these communications elicited any response. Nor were the documents returned.

7 When the matter was called for hearing the respondent did not appear.

8 The orders from which leave to appeal was sought were made on 17 December 2004 by Master McLaughlin in proceedings in which the appellant Ms Neilson had sought an order against the respondent Mr Letch for the sale of the property 14/103 Kirribilli Avenue, Kirribilli and an equal division of the net proceeds. The Kirribilli property had been acquired by the parties as joint tenants and as an investment. The purchase price was $181,000. $150,000 was borrowed from the Commonwealth Bank secured by a joint mortgage.

9 By the time of the Master's judgment, the parties agreed that the property should be sold. Contracts were exchanged on 9 March 2004 at a sale price of $400,000. Settlement was effected on 23 April 2004. The net proceeds of sale ($276,420) were deposited in an interest-bearing controlled moneys account in the names of the parties, to be held until further order of the Court. By the time the Master made his orders, the invested amount was $280,230.

10 The Master declared that the parties were entitled to the proceeds in the amounts of $88,986 for Ms Neilson and $191,245 for Mr Letch; and he left the parties to bear their own costs of the proceedings.

11 The Court was informed that the proceeds of the fund were divided between the parties in accordance with the Master’s orders some time before the appeal was launched.

12 The Master made the following factual findings:

22 The parties met in 1982. The de facto relationship between the parties commenced in September 1989. In the meantime, however, on 29 May 1989 the Plaintiff, at the request of the Defendant, who was the proprietor of a liquor shop at that time, lent to the Defendant the sum of $30,000 in order that he might meet certain Liquor Board fees. That sum has never been repaid.
23 In December 1989 the Plaintiff advanced a further sum of $40,757 to the Defendant, which sum was used by him towards the purchase in his sole name of a residential property situate at and known as 9/378 Miller Street, Cammeray.
24 In March 1990 a property at Nelson Bay which had been owned by the Defendant before the commencement of his relationship with the Plaintiff (and, indeed, before he had even met the Plaintiff) was sold.
25 In April 1993, during the course of the de facto relationship between the parties, the Plaintiff through her Solicitors sought payment to her by the Defendant of the sum of [$70,000]. That sum was not paid to her.
26 In September 1993 the Kirribilli property was acquired by the parties at auction for the sum of $181,000. As I have already recorded, that property was purchased in the names of the Plaintiff and the Defendant as joint tenants. That purchase was funded by a mortgage loan of $150,000 from the Commonwealth Bank at Northbridge in the joint names of the parties. Despite the assertions of the Plaintiff that she was ultimately responsible for such funds, the deposit of $18,100 was paid by the Defendant from his bank account with the Commonwealth Bank at Northbridge on 13 September 1993. In addition, the Defendant paid stamp duty of $4,829 from the same bank account, and upon settlement paid a further sum of $13,000. The Defendant said that to the best of his recollection he also paid the legal fees on the purchase in an amount of about $1,000. According to the Defendant those funds paid by him had their source in the proceeds of the sale of the Defendant's property at Nelson Bay and of the sale of the Defendant's Porsche motor car.
27 At the outset, in February 1993 the mortgage repayments were in an amount of $1,361 a month. They continued in that amount until February 2002, when the Defendant negotiated a variation to $1,109 a month.
28 The Kirribilli property had been purchased by the parties with the intention that it should be an investment property. It was not the intention of the parties that it should be a residence for either or both of them.
…
30 The parties separated on 13 July 1996 and the de facto relationship which had formerly obtained between them terminated on that date.
31 In mid-1999, when the then current lease of the Kirribilli property came to an end, the Defendant moved into residence therein.
32 In February 2002, the Defendant negotiated a reduction in the mortgage loan repayments, those repayments being (as I have already recorded) then reduced to $1,109 a month. However, the Defendant, although accepting responsibility for the outgoings from February 2002 did not make any payment of strata levies after November 2002.
33 I have also already recorded that the subject property was subsequently sold in April 2004, consequent upon orders made according to Short Minutes agreed upon between the parties on 9 October 2003 (which included reservation of the Plaintiff's costs), and that the net proceeds of sale are presently held in an interest bearing controlled moneys account in the names of the two parties. The most recent information presented to the Court was that as at 31 August 2004 the balance of that account (representing those net proceeds of sale together with accrued interest thereon) was $280,230.

13 At first instance the appellant relied primarily on her legal entitlement as the legal owner of a one-half share in the property. The respondent contended that he had contributed more than the appellant to the acquisition of the property, with the consequence that the legal estate was held in trust for the parties as tenants in common proportionate to their respective contributions.

14 The Master noted a submission for the appellant that the presumption of a resulting trust relied upon by the respondent in consequence of his greater contribution to the acquisition costs was rebutted. Had the submission been accepted, the accounting would have proceeded from a starting point that the legal and equitable titles were coincident. Having implicitly (but without giving reasons) rejected the appellant’s submission, the Master proceeded to work out the contributions of the respective parties in acquiring, improving and maintaining the property.

15 The Master treated the respondent as having provided the deposit ($18,100), the balance of the settlement moneys ($13,000), stamp duty and legal fees. These sums totalled $36,829 and were paid from the respondent’s cheque account at the Commonwealth Bank. The remaining $150,000 provided on settlement came from the Bank and was subject to a joint mortgage.

16 The Master thus found an initial contribution by the respondent of $36,829 to which he added one-half of the $154,123 which the respondent had actually paid in respect of the mortgage, giving $113,890. This represented 60.96% of what had been paid, with the consequence that the respective interests of the parties in the property were 60.96% for the respondent and 39.04% for the appellant. Applied to the proceeds of sale, this yielded $170,828 to the respondent and $109,301 to the appellant.

17 The Master found the respondent had paid mortgage payments of $154,123, strata fees of $13,646, rates of $3,597 and water rates of $2,826, a total of $174,193; and that the appellant was liable to contribute half of that, $87,097. He found that the appellant had made mortgage payments of $3,600, that the respondent had received rents of $72,494 and that the value of the respondent’s sole occupation of the property was $57,270; and he found the appellant was entitled to a credit for half these sums, totalling $66,682. The difference between this figure and the respondent’s $87,097, namely $21,415, when subtracted from $109,401, gave the figure of $88,986 which was ordered to be paid to the appellant.

18 The Master rejected a submission for the appellant that she should be given credit for amounts of $30,000 and $40,757 lent by her to the respondent in 1989. He said:

70 I do not overlook the submission of the Plaintiff that there should also be added to her entitlement the amount of $41,757 (being the totality of moneys acknowledged by the Defendant to have been paid into his cheque account by the Plaintiff, almost four years before the acquisition of the Kirribilli property) and the amount of $30,000 (which was advanced by the Plaintiff to the Defendant in order to meet his indebtedness to the Liquor Licensing Board, more than four years before the acquisition of the Kirribilli property).
71 However, it must be appreciated that at the time when those payments were made the parties were living in a de facto relationship. Further, I am presently concerned only with the entitlement of the parties to the proceeds of sale of the subject property; I am not concerned with the rights of the parties under the Property (Relationships) Act . It is possible, although I express no concluded view in this regard, that the Plaintiff may be able to establish that the foregoing moneys were in the nature of loans made by her to the Defendant. If so, she may still have some right of recovery (subject, of course, to any limitation defence). However, I do not consider that it is appropriate for those amounts to be taken into consideration in calculating the entitlements of the parties to the proceeds of sale of the subject property (in the performance of the exercise which may compendiously be described as an equitable accounting).

19 The Master had previously noted that proceedings had been brought by the appellant under the Property (Relationships) Act, but had been dismissed by the Registrar. An application to vacate that order was dismissed.

20 It had been common ground at trial that the appellant had advanced or lent to the respondent $40,757 towards the purchase of a unit at Cammeray. This had been acquired in the respondent’s name in early 1990 for $175,000 subject to a bank mortgage of $65,000.

21 The $30,000 and $40,757 loans made by the appellant to the respondent in 1989 had left the respondent with no significant cash reserves.

22 Throughout the de facto relationship the parties identified as a married couple. Each was in paid employment for most of the time. Household expenses were shared (“amalgamated” in the respondent’s words), with the appellant performing the domestic and housekeeping duties.

23 In granting leave to appeal Hodgson JA (Ipp JA agreeing) said that the real question concerned whether there was error in the finding of a resulting trust or failure to address the question of its rebuttal and/or not giving any credit to Ms Neilson for $30,000 or $40,757. Hodgson JA continued:

11 In my opinion there are arguable errors in those respects, including the following:
1. Failure to advert to evidence that the proceeds of sale of the Cammeray property, purchased by Mr. Letch using $40,757.00 provided by Ms. Neilson, went towards the funds from which Mr. Letch paid $36,829.00 towards purchase of the Kirribilli property, when this matter would be relevant both to the question whether $36,829.00 was in substance all Mr. Letch's money and to the question whether the presumption of resulting trust was rebutted.
2. Failure to address the question whether the presumption of resulting trust was rebutted. This being a case where both parties contributed to the purchase, objective circumstances were more important than uncommunicated intentions: Calverley [ v Green (1984) 155 CLR 242] at 261-2; and there were objective circumstances that could support rebuttal of the presumption, including the circumstance that at the time of the purchase Mr. Letch was not only using money that may be found to have included proceeds of Ms. Neilson's $40,757.00 but also owed her a further $30,000.00 of which she had recently sought repayment.
12 If it is found that there were such error, and if it is found that the $36,829.00 was paid from an amalgam that included something like $40,000.00 of Ms. Neilson's money, it could also be found that much of Mr. Letch's pre-separation payments of mortgage instalments and other outgoings were made from an amalgam that included a remainder of about $22,000.00 of Ms. Neilson's money, at a time when Mr. Letch also owed Ms. Neilson a further $30,000.00; and in those circumstances, the basis for the adjustment of $21,415.00 in favour of Mr. Letch by reason of his payments of mortgage instalments and outgoings could be undermined. If the result were an equal division of the proceeds of sale, this could result in a costs order in favour of Ms. Neilson.
13 In my opinion, if there are such errors and they remain uncorrected, this would involve significant injustice to Ms. Neilson, particularly as otherwise she may not be able to recoup any part of the total of $70,757.00, by reason of the limitation statute. Accordingly, in my opinion leave to appeal should be granted.

24 I am satisfied that the errors tentatively detected by Hodgson JA were made. I respectfully adopt Hodgson JA’s reasoning.

25 Where two or more persons have contributed the purchase money in unequal shares and the property is purchased in joint names, there is, in the absence of a relationship that gives rise to a presumption of advancement, a presumption that the property is held by the purchasers in trust for themselves as tenants in common in the proportions in which they contributed the purchase money (Trustees of the Property of Cummins (a bankrupt) v Cummins [2006] HCA 6, 224 ALR 280, 80 ALJR 589 at [55]). Calverley held that the presumption of advancement does not apply to a de facto relationship.

26 The resulting trust that is presumed in the circumstanced referred to in the previous paragraph is itself capable of being displaced by evidence showing that the parties had a common intention to share an equal interest in the property and/or that the party making the disproportionate contribution intended that the parties would have an equal interest in the property notwithstanding. As an American judge (Lamm J) stated in Mackowik v Kansas City St J & C B R Co 94 SW 256, 262 (1906):

Presumptions … may be looked on as the bats of the law, flitting in the twilight, but disappearing in the sunshine of actual facts.

27 Lord Upjohn said in Vandervell v Inland Revenue Commissioners [1967] 2 AC 291 at 313:

In reality the so-called presumption of a resulting trust is no more than a long stop to provide the answer when the relevant facts and circumstances fail to yield a solution.

28 Evidence of the intention of the relevant party or parties may be drawn from contemporaneous statements of intention, subsequent admissions or inferred from the “facts as to subsequent dealings and of surrounding circumstances of the transaction” (Cummins at [65]). In Calverley, Mason and Brennan JJ (at 261) cited with approval Lord Diplock’s statement in Gissing v Gissing [1971] AC 886 at 906:

As in so many branches of English law in which legal rights and obligations depend upon the intentions of the parties to a transaction, the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party. On the other hand, he is not bound by any inference which the other party draws as to his intention unless that inference is one which can reasonably be drawn from his words or conduct.

29 This is the principle which the Master failed to address, as Hodgson JA pointed out in the passage quoted above, with which I respectfully agree.

30 In my view, the circumstances surrounding the acquisition of the Kirribilli property were redolent with material that pointed to both a common intention and an intention of the part of the respondent that the beneficial as well as the legal interest in the Kirribilli property would be held equally.

31 In the first place, the parties were at the time living together as husband and wife, each working and each contributing to the expenses of a common household.

32 Secondly, the subject property was acquired by such a couple in their joint names, subject to a joint mortgage that each had the capacity (and, I infer) the intention to contribute towards.

33 Thirdly, the property was acquired shortly after the appellant had lent the respondent moneys totalling $70,757. The funds from the appellant’s “advance” of $40,757 had gone into the respondent’s cheque account that was used to acquire the subject property at Kirribilli. Neither the $40,757 nor the earlier $30,000 advanced by the appellant were repaid, despite formal request for repayment five months before Kirribilli was purchased. The parties continued to live together as man and wife for almost three years after the purchase. During cross-examination, the respondent said he intended to pay the money back, adding “but the way it would be paid back would be through the proceeds of the sale of Kirribilli” (Black 27).

34 In cross-examination the respondent admitted that the money in the bank account included the net proceeds of sale of a unit at 9/378 Miller Street, Cammeray (Black 31-2). This property had been sold in July 1992. It had been acquired in early 1990 in his name. The purchase price was $175,000 and there was a bank mortgage of $65,000. $40,757 of the money came from the appellant in the form of an advance made by the appellant. She said in her affidavit:

In about December 1989 the defendant on several occasions asked whether I could transfer the rest of my money and still leave it in an interest bearing account with the Commonwealth Bank at Northbridge. The bank manager was very concerned with the overdraft of Castlecrag Cellars [the defendant’s business] and wanted more security. He arranged for me to go and meet with the bank manager so I could transfer the rest of the money held by me with Barclays Bank. I agreed. I was advised by the defendant of his banking details which to the best of my recollection were at the Commonwealth Trading Bank.

35 During the leave hearing, the respondent’s counsel advanced submissions to the effect that the Cammeray property yielded no profit on sale; and that the source of the funds applied by the respondent in the acquisition of Cammeray were commercial bills representing the proceeds of sale of a property at Nelson Bay belonging to the respondent. Hodgson JA responded to these submissions in the following terms:

14 Before concluding this judgment, it is necessary, in the interests of avoiding further confusion, to note some submissions made by Mr. Letch's Counsel:
(1) That when the Cammeray property was sold on 21 July 1992, "The proceeds received by the opponent were `practically zero'".
(2) The property known as Waters Road, Neutral Bay "was purchased shortly following the sale of the Cammeray property", "using funds deposited into the account from the sale of the Cammeray property".
(3) The sum of $80,448.98 deposited into the account on 6 September 1993 (and used in part for the purchase of the Kirribilli property) were the proceeds of commercial bills "acquired by the opponent in 1990 following the sale of the Nelson Bay property".
(4) That by the time the Kirribilli property was purchased in September 1993, the claimant's $40,757.00 "had been disbursed either in the purchase of the Neutral Bay property or expended on living expenses".
15 As regards (1), Mr. Letch's oral evidence at T25 was that the profit was zero; and although at T24 he also said the net proceeds were practically zero, his evidence at T31 makes it clear that he could only have been referring to zero profit. The property was sold for $221,000.00, and par.[31] of Mr. Letch's affidavit sworn 7 November 2003 suggests that the net proceeds of sale were in the order of $150,000.00.
16 As regards (2), in par.[33] of Mr. Letch's affidavit, Mr. Letch swears that the Neutral Bay unit was purchased on 6 September 1994, that is, about a year after the purchase of the Kirribilli property.
17 As regards (3), in par.[34] of Mr. Letch's affidavit, Mr. Letch swears that the proceeds of sale of the Nelson Bay property were applied to the liquor store business at Castlecrag and also to the purchase of the Cammeray unit; and in par.[32], Mr. Letch swears that, apart from $15,000.00, all or the greater part of the proceeds of sale of the Cammeray property (that is, it would seem, in excess of $100,000.00) were applied to bank bills, that $18,100.00 and a further $13,000.00 were paid for the purchase of the Kirribilli property in about September 1993, and $6,750.00 was applied to the purchase of the Neutral Bay unit on 6 September 1994. The only suggestion to the contrary of this was Mr. Letch's oral evidence (T14) that moneys deposited into the bank bills came "from the profits of the Nelson Bay property"; but Mr. Letch did not say that what he had sworn in his carefully prepared affidavit was incorrect. Further, at T31-2, he admitted that what was received from Cammeray was part of the amalgam to acquire Kirribilli.
18 As regards (4), as shown by the above commentary, it is plainly contrary to the evidence.

36 The respondent has not advanced any material to answer these compelling criticisms of his then case. Once again I respectfully adopt these findings.

37 Fourthly, the Kirribilli unit was acquired with moneys to which both parties had made a substantial contribution. The direct source of the $36,829 paid with respect to deposit, stamp duty and legal expenses was the cheque account of the respondent at the Commonwealth Bank. But that account had practically no money in it until a week before the debiting of the cheque for $18,100 used to pay the deposit. Seven days before that date $80,448 was paid into the account. It represented funds then invested in commercial bank bills. Those bills in turn represented most of the net proceeds of the sale of the Cammeray unit referred to above.

38 Fifthly, the respondent gave no evidence at trial as to his intention not to treat the equitable title as being at home with the legal title, ie negating the likelihood that he intended the appellant to have a potential share in the land commensurate with his own (see Cummins at [56]).

39 This leaves the question of adjusting unequal contributions towards the mortgage payments, rates and strata fees. Before the parties separated on 13 July 1996, the couple were effectively pooling their moneys, as Hodgson JA recognised in par 12 of his reasons (see [22] above). But, after separation, the doctrine of contribution requires adjustments to be made with respect to unequal payments of moneys due under the mortgage, strata fees and rates (Forgeard v Shanahan (1994) 35 NSWLR 206 at 224, item 16).

40 The following calculation gives effect to these principles and explains the judgment in the appellant’s favour in the sum of $42,012 that is proposed:

Appellant’s entitlement to one half of net proceeds of sale and accrued interest (one half of $280,230)

$140,115

Less paid to appellant under Master’s order

$ 88,986
$ 51,129

Respondent’s payments from separation to sale

- Mortgage payments at $1,361pm

- total allowed by Master

- less pre-separation payments (3 yrs 5 mths)

$154,123

$ 55,801
$ 98,322

- Less post-separation rentals (calculated approx from
respondent’s affidavit of 17.11.03)

$ 34,477
$ 63,845

- Less notional occupation fee (See Master’s judgment
para 68)

$ 57,270
$ 6,575

- Plus post-separation strata levies
municipal rates ($3,597-$278)
water rates ($2,826-$398)

$ 5,913
$ 3,319
$ 2,428
$ 18,235

Adjustment to respondent (one half)

$ 9,117

Appellant’s entitlement ($51,129 - $9,117)

$ 42,012

41 The appellant has been substantially successful on a point raised at trial. She should therefore recover the costs of the trial.

42 I therefore propose the following orders:

1. Appeal allowed.

2. Declare that the parties held their interest in the property 14/103 Kirribillii Avenue, Kirribilli as joint tenants both at law and in equity.

3. Order that the respondent pay the appellant $42,012 plus interest at Supreme Court rates from 17 December 2004.

4. Respondent to pay appellant’s costs of the trial.

5. Subject to order 3 made on 6 December 2005, respondent to pay appellant’s costs of the appeal and to have a certificate under the Suitors’ Fund Act 1951 , if qualified.

43 McCOLL JA: I agree with Mason P.

44 BASTEN JA: I agree with the orders proposed by the President, for the reasons he has given.

**********