Patrick Jones Photographic Studios v Catt

[1999] NSWSC 421

CITATION:	Patrick Jones Photographic Studios v Catt [1999] NSWSC 421
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	3604 of 1998
HEARING DATE(S):	22 to 31 March 1999
JUDGMENT DATE:	10 May 1999
PARTIES :	Patrick Jones Photographic Studios Pty Ltd (Plaintiff) Karin Catt (Defendant)
JUDGMENT OF:	Windeyer J at 1

COUNSEL :	Mr. C. Bevan with him Mr. A.C. Iuliano (Plaintiff) Mr. C. Houghton (Defendant)
SOLICITORS:	Surry Partners Michael Evers & Co
CATCHWORDS:	CONTRACTS - general contractual principles - oral agreement between parties - whether terms sufficiently certain to make agreement binding; EQUITY - Equitable charges - appropriate remedy to secure the sum of money expended on property; TRUSTS - resulting trust - no contribution to purchase price; TRUSTS - constructive trust - whether imposition necessary to do equity
ACTS CITED:	Conveyancing Act 1919, ss23, 54A
CASES CITED:	Baumgartner v Baumgartner [1985] 2 NSWLR 406 Calverley v Green (1989) 155 CLR 242 Chalmers v Pardoe [1963] 1 WLR 677 Giumelli v Giumelli (1999) HCA 10 at 10 Morris v Morris [1982] 1 NSWLR 61
DECISION:

- 31 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

DATE

3604/98 PATRICK JONES PHOTOGRAPHIC STUDIOS PTY. LTD v KARIN CATT

JUDGMENT

Outline

1 The question to be decided is whether the plaintiff company, Patrick Jones Photographic Studios Pty. Ltd. (the company) has a beneficial interest in property 3A Rainford Street, Surry Hills (the property) of which the defendant Miss Karin Catt (Catt) is registered proprietor, or whether it should be declared that Catt holds the property upon constructive trust so as to give the company an interest or whether the company has no interest at all in the property.

Facts
2 As will become obvious there is no proper evidence of some important or relevant matters. In addition, while the parties did try to restrict the case to evidence which avoided their personal relationships it became clear that there had developed a very bitter personal conflict between Mr. Patrick Jones (Jones) and Catt so that the case seemed to proceed in a sort of twilight zone.
3 There is no evidence of the shareholders or directors of the company. It was accepted it was controlled by Jones. It was, and presumably still is, a successful photographic company with substantial earnings from its photography and photographic studio operations. It does not appear to have any photographer employees, other than Jones, all such photographers being engaged on a contract basis using the company studios and having a profit sharing arrangement with the company. It does, however, have an administrative manager and at least a receptionist, although the former is engaged on some consultancy basis. Jones and Catt had been friends since 1992 and at least by the end of 1993 had developed a close personal relationship. At that time Jones was living in rented accommodation at Bondi and Catt lived there with him from time to time. The company owned property 26-28 Rainford Street, Surry Hills and Jones himself owned a next door property 22 Rainford Street Surry Hills, in which property Catt also lived from time to time. By this time Catt owned two properties at Newcastle and for the purchase of at least one of these she raised moneys on mortgage from the Newcastle Permanent Building Society. Both were investment properties and both were leased out.
4 In February 1994 Catt commenced work with the company as what Jones described as a trainee photographer. Catt seemed to resist this description, although in her affidavit she said that she was an assistant photographer, claiming that the quality of her work was at least as good as that of Jones. Her wage was $400 per week. In December 1994 Catt entered into a contract for the purchase of the property, which was almost directly opposite the property of the company. The purchase price was $270 000. Catt gave almost incomprehensible oral evidence about the source of the purchase funds none of which was supported by documents. The mortgage on the property to Newcastle Permanent Building Society secured the sum of $165 000. There is evidence that Catt borrowed $68 500 from her parents and that she provided the balance of the moneys, together with the purchase expenses from her own funds, some of which may have been raised on one of the other properties. I am prepared to find that to be the position. Why no one bothered to establish the important facts through the building society records I cannot fathom. Whether from borrowings alone or from borrowings and her own funds, Catt paid the purchase moneys and the associated expenses of about $17 000.
5 The property was in a very run down state on purchase. I accept the evidence that it was uninhabitable and untenantable. Catt expected that she would be able to rent it and cover the mortgage interest through rent, but her attempts to find a tenant failed, due at least in part, and probably in whole, to the condition of the property. Without income Catt was forced to defray the mortgage payments out of her own funds. She was at a time very ill herself, although during this stage the company continued to pay her wage as a trainee photographer. Whatever the position, it was quite unlikely that a salary of $400 per week could support borrowings of $165 000 let alone the additional funds borrowed from her parents, who themselves raised a loan over their Newcastle home to enable them to provide the funds which they did provide.
6 In late 1995 there were discussions between Jones and Catt about the property and its financing. It was clear by then it could not be let in its existing condition. Catt had arranged for some work to be done but it was not sufficient. It was also clear and I find that Catt was in danger of losing the property unless she obtained further financial assistance.
7 Paragraph 10 of the affidavit of Jones sworn 28 August 1998 is as follows:

10. During late 1995, the Defendant informed me that she had run out of money. By this time the Property was still in a derelict condition, so the Defendant and I discussed the possibility of me, through the Plaintiff, assisting the Defendant to complete the renovation of the Property by investing funds into the Property. At the time, the Defendant and I had numerous discussions using words to the following effect:


Jones: I'd be interested in investing some money in 3A Rainford Street to help you complete renovating it. The company could invest some money and take a financial share in the property and use the building for extra studio space. You could live upstairs. This would ease your financial problems and you would not be put in a position where you would have to sell the property. What do you think?

Catt: How would you work it?

Jones: So far, you have invested $30,000.00 of your own money and put in the $275,000.00 from the Newcastle Building Society. The company will finance the renovations. The company will pay three-quarters of the mortgage and you will pay one-quarter. We will also run and administer the property. At the end of a pre-determined time, say 2 or 3 years, with extension options, the company will have the option to get out of the deal. The formula for this is that you will be repaid your $30,000.00 investment plus interest. The company will be repaid its investment plus interest. The $275,000.00 from the Newcastle Building Society will be taken out and what is left after the property is valued is the net profit. This will be divided equally between you and the company. You will have first option to buy the company's financial share in the property. If you don't want to keep the building, the company will have the first option to buy the building from you. If either party wants to sell the property, it will be sold at public auction and the proceeds will be applied using the same formula.

Catt: I agree to this. If possible, I will try to raise some money to assist with the renovations.

8 As I will show, when I deal with the pleadings, the plaintiff's claim is founded on the agreement Jones says was arrived at through these words. In cross-examination Jones was asked to state again what was said. The following appears on pp 61-64 of the transcript:

Q. In the position she was in?
A. Of course, if you would like me to read the formula for you, she didn't have to put any money in. She only had to pay a quarter of the mortgage each week and for that she had a place to live.

Q. A place to live - all right. What do you say the actual agreement was between you in November 1995?
A. Is this the financial agreement?

Q. Yes?
A. The financial agreement is whatever Karin put in --

Q. Number one --
A. She had --

Q. Take it slowly --

HIS HONOUR: He is trying to tell you what she put in.

WITNESS: She invested - I said to Karin you have invested $30,000 of your own money.

HOUGHTON: Q. Yes?
A. And you have borrowed $270,000 from the building society, is that not correct? She said yes. I said, the company --

OBJECTION

HOUGHTON: Excuse me, your Honour, I would ask that the witness not read from his affidavit.

WITNESS: I'm sorry. She would put in - I asked her - I said "You put in $30,000" and she said, "Yes" - "From your own money". I said, "You have borrowed $275,000 from the building society" and she said, "Yes."

Now, I said, "What we will do is we will complete the renovations for the financial share in the property. You will have somewhere to live in the property and we will use the rest of the property as photographic studios for extra work."

Q. I'm sorry?
A. For extra work that may overflow from our main studio.

Q. So you would sublet, is that what you mean?
A. There was a certain amount of subletting.

HIS HONOUR: It is quite impossible for this witness to tell you what the agreement was if he keeps being interrupted.

BEVAN: I ask that the last exchange be struck out.

WITNESS: So I said there is a formula; the formula will be for the deal and the formula is "whatever you put in Karin you get back", so at this point she put $30,000 in. Whatever you put in you get back with interest and whatever we put in, whatever money we invest we get back with interest. At the end of the deal we pay whatever is owing to the Newcastle Building Society on the $275,000 mortgage and what is left over we split between you and the company, fifty fifty.

We will pay three quarters of the mortgage and you will pay one quarter of the mortgage.. The deal will be for ten years with every two years we will have the option to get out of the deal - every two to three years. At the end of ten years the options will return to Karin.

Now, how that would work would be: that at the end of, say, three years, if we decided that we couldn't afford to be there or if there was some reason that we wanted to get out of the deal we would get two independent valuers and those independent valuers would give their valuation - one from Karin and one from me - and we would come up with an average price that the property was worth.

So whatever Karin put in the building she would get back, with interest. Whatever the studio put in we would get back with interest. The building society would be paid back and the net profit would be divided fifty fifty between the two of us.

Now, Karin had the first option. If we wanted to get out of the deal she paid us back according to that formula. If we wanted - if she didn't want to take her option up we had first option by the same formula to buy the property. If neither of us wanted to own the property we would put the property up for public auction and we would split the money according to the deal.

And when I said this, I told Karin this deal and she said - I said, "Do you understand it?" and she said, "Yes, I understand it." And I said, "Do you agree with this? Do you want to do this?" and she said, "Yes, I am prepared to do this, I agree and will do it".

She also said to me that she was going to try and raise some money of her own to put into the project, but as it turned out she couldn't. She never - she couldn't raise any more finances.

Q. Is that it?
A. That was the deal.

Q. Well, let me ask you this --
A. That was the financial deal.

Q. What other deals were there?
A. Well, there was now we would run the property. We would look after the management and the running of the building. We would pay the electrical bills, the gas bills, the rates, the council rates --

Q. This is a separate deal, is it?
A. No, this is part of this deal. It was just the running of the deal.

Q. Could you just repeat what you said?
A. We would manage and run the building, the studio would. Karin would live somewhere in the building. We would use sections of the building as a photographic studio. We would ran and manage - we would pay the electrical bills, the gas bills, the water rates, the council rates as part of our obligations.

Q. Any other deals?
A. No, I think - I mean, I might be forgetting some little point on it, but in essence that was our arrangement and that was the deal that Karin agreed to and that is the deal, that is what we are arguing over essentially in a nutshell.

Q. You were concerned to acquire an interest in the land, weren't you?
A. No, I was interested in - it was a financial deal that I made with Karin as far as I was concerned.

Q. Yes --
A. Regarding the property.

Q. It was a deal for ten years, wasn't it?
A. We had the options for ten years, and then Karin had the options after that.

Q. It was a deal for ten years, wasn't it?
A. No, it was a deal that we could get out of every two or three years.

Q. What, at your --
A. According to the formula I just stated.

Q. So that you could do that at any time, could you?
A. No, at the end of every two or three years.

Q. So it would be wrong for me to say you could get out of it at any time. When you could get out of it was every two or three years, is that right?
A. That's right, unless --

Q. Well --

OBJECTION

HIS HONOUR: Let him answer the question.

Q. "Unless" - do you want to say something more?
A. No, but in our deal it was every - we hadn't finalised the drafting of the document. We had agreed to the deal and Karin had agreed to the deal. We hadn't finalised the documenting, putting it on paper, and that was a dilemma for the next couple of years.

9 Catt did not deny the conversation, although she denied that she had run out of money. She said in those parts of paragraphs 32 and 33 of her affidavit of 26 February 1999 which were admitted in evidence and which might be an indirect denial as follows:

32. … However, some time in about November 1995, the precise date of which I cannot recall, I had a conversation with Jones at 26 Rainford Street to the following effect:


Jones: I have been thinking about your plans for 3A and we may be able to help each other. I have got Tim (Robinson) complaining that I haven't got enough space for him and that I am renting the studio out to other photographers when he should be using it. So why don't I help you finish it off and rent it back off you at a reduced rate. How does that sound?

Catt: I will have to think about it. I was going to live there myself.

Jones: Well you can live in when ever you like. I will continue to teach you and employ you as a photographer. You can have access to any of the studios for your own work.

Catt: I would still like to think about it.

33. I considered the offer … I approached Jones and we had a conversation to the following effect :


Catt: I have thought about your offer. Can I ask you what you had in mind?

Jones: I will pay to finish off the place in accordance with your plans and turn it into two studios. I will rent it back off you and pay up to $500.00 per week for up to ten years. I will continue to employ you as a photographer throughout the term.

Catt: I agree.

10 There is no documentary evidence of the amount of the mortgage payments. From mid-December 1995 the company paid to Catt $450 per week, Jones saying that it amounted to three quarters of the mortgage payment of $650 per week. In fact if the $650 figure was right, the payments were less than 75%.
11 Mr. Coombe was engaged in October 1995 to provide managerial and financial consulting services to the company. As I understand the evidence this was a full time position. Coombe said that both Jones and Catt told him on many occasions that the company was investing in the property to turn it into studios, that it was to pay her $450 per week which was three-quarters of the mortgage payment; that the company would have a one half share in the property and use it as studios and Catt would live in the top deck accommodation. He drew the first cheque for $450 on 29 November 1995. He said that prior to doing so Catt came to his office and the following conversation took place:

Catt: You should call Patrick's contribution towards the mortgage rent.

Coombe: Why is that Karin?

Catt: Because I need to negatively gear the property.

Coombe: But Patrick has told me that this is a mortgage payment.

Catt: What you call it will not affect Patrick's financial share in the property.

12 He said he continued to do this, that it was unlikely Jones saw the cheque butts, and that he did what Catt told him as she was obviously in a position of power in the organisation. The company claimed the outgoings of rent in its tax returns. Coombe did not prepare these and was not prepared to admit that he considered them carefully. Jones has a serious reading problem and I am satisfied he signed whatever was put in front of him by his accountants. He said that he did not know until the case commenced that the cheque butts had shown the payments to be payment for rent and that when he found out he immediately gave instructions to the company's accountants to file amended tax returns.
13 The payments to Catt of $450 per week continued until March 1998. Jones said that Catt then said that she could not afford to make the weekly payments to the building society. Mr. Coombe said that Catt told him that she wanted him to pay the building society direct and said "I want you to start paying my building society directly. You can take $200 per week out of my wages and add that to Patrick's contribution of $450 towards the mortgage to make a $650 per week direct deposit." Arrangements were then made to pay $650 direct to an account of Catt with the building society, which, as far as can be gleaned from the inadequate evidence, was not the mortgage loan account. Whether by direct payment or by subsequent payment by Catt the $450 at least is accepted as being put towards the mortgage repayments, although Catt said it remained properly categorised as rent. That continued until 2 July 1998 when the employment of Catt by the company came to an end. For some two weeks thereafter reduced payments of $450 were made because there were no wages from which the $200 could be deducted. Payments were not made after 15 July 1998 because, according to Jones, Catt had locked the company out of the property.
14 Catt did not deny the conversation which Mr. Coombe said took place or the evidence of Jones as to mortgage payments, until she did so, in paragraph 13 of an affidavit sworn the day the hearing commenced. This was overlooked by counsel for the plaintiff, which is not surprising as the affidavit was in reply to one of Jones sworn 16 March 1999. It explains the stated reason for not cross-examining on the matter. Mr. Coombe was cross-examined about this but not shaken. Although it is obvious enough that Mr. Coombe is not entirely disinterested in view of his employment situation, I thought that he was an acceptable witness. I accept the evidence of Mr. Coombe which I have set out.
15 Catt does not suggest there was no conversation about the property or that there was an initial agreement. Her case is that Jones or the company was to pay to fit out the property and lease it at a reduced rent for ten years. No evidence was given as to the true rental value in spite of this being the subject of the cross-claim.
16 It is now necessary to see what happened between the end of 1995 and July 1998. Jones met his bank manager on 21 November 1995 at the company's studios at 26-28 Rainford Street, Surry Hills. The bank manager was a Mr. Wilson. He gave evidence that Jones had told him that he "was going to invest in a property across the road" and had said "I'm going to take a share in the property. I won't be on the title. I'll have a financial share in return for investing money in the place". There was some further discussion because Jones needed additional finance from the bank to enable him to pay for the renovations. He told Mr. Wilson that for putting money into the property and contributing to the mortgage he would have a one half share in the property. The bank did provide the additional funding, but as it was already adequately secured no further security was required. On 24 April 1996, Mr. Jones made a request for some further funding saying that it had been decided to do additional work on the property. The first conversation with the bank manager was close to the time when Jones said agreement was reached. His application for a loan for the purposes claimed was consistent with his claimed arrangements. It could not, I think, be referrable to the claim by Catt, that all the company was to get was a lease at a low rent. Jones's evidence was entirely consistent with that of the bank manager, namely that he said that he told Mr. Wilson that he would have a financial share in the property in return for investing money in the place, but he would not be on the title. This evidence is of course relevant to the claim of part performance, but it does at least show conduct consistent with the claimed oral agreement.
17 The proposed renovations to the property were substantially carried out between January and June 1996. It is admitted that the plaintiff spent $121 032.55 on those renovations. From then on the company used the premises from time to time for studio space; it stored equipment there; and from time to time it let out space to other photographers, it keeping all the rent. Catt for most of the time lived in separate accommodation in the premises. Jones says that from 1996 he was anxious to get the agreement documented. He said that he was concerned that something might happen to Catt. While it is not clear when the first draft of a number of draft agreements documenting the arrangements was prepared, the significant thing about all those which are in evidence, - whether they were prepared by Jones or for him, or by Mr. Catt the defendant's father, or by Mr. Alderson, a solicitor of Messrs. Gray & Perkins, who became what the defendant described as her boyfriend during the period under discussion, - is that they all proceeded on the basis that the plaintiff had an interest in the property and they all contain a provision as to how that interest is to be calculated if the property were sold or if the parties brought it to an end in one way or another. Mr. Alderson says that to a great extent the documents included the contentions of Jones rather than those of his client Miss Catt. He does accept however that Miss Catt was his client and I am unable to accept that claim at least so far as it went to attempt to establish that the plaintiff had no interest in the property. Catt said she always maintained the position that the arrangement was one of lease alone. Were that the position then there was no possible reason for Mr. Alderson acting as Catt's solicitor in December 1997 to send to Jones four documents, one of which set out the proposed term of the lease and another of which set out a basis for establishing the interest of the company in the property. In all the documents after that date a method of calculating the company's interest is included. Catt does not accept any of the documents put in terms the agreement reached. Neither does Jones, although he says that one being that on page 39 of exhibit A, came closest to setting out an agreement which, although differing from that which he said was arrived at, was in general terms more or less acceptable to him.
18 In 1996 Jones was going overseas. Catt was anxious that he should make a will and in some haste he asked Mr. Alderson to prepare a will for him. Jones says that he discussed his wishes with Catt about the future of the company and its structure and that upon Catt agreeing to be bound by those wishes, he went ahead and made her the residuary beneficiary under the will. The will included a clause releasing Catt "from any and all debts owing to me at the date of my death in connection with the property at 3A Rainford Street, Surry Hills NSW 2010 and interest owing on any and all such debts". Why this clause was considered necessary as Catt was a residuary beneficiary was never explained. The significance however is that Mr. Alderson initiated its inclusion and thus it seems accepted that something other than rent was involved in the interest of Jones in the property, but against that it is to be remembered that in making the will Mr. Alderson was acting as solicitor for Jones not solicitor for Catt.
19 Perhaps not surprisingly in this case, which was full of emotion and tension, the witnesses fell into two camps. All of the witnesses for the plaintiff said that the defendant had always acknowledged or stated that the plaintiff had an interest in the property; some of them said that when acknowledging this Catt had said she saw no need to document the interest. On the Jones side Aloma Trompp, an administrative assistant for the plaintiff, deposed in paragraph 15 of her affidavit of 3 November 1998 that Catt had said to her some time after February 1998:

Catt: I am sick. I can't work. I haven't eaten. Why does Patrick want me to sign anything about the money he put into the building. I want things to be the way they were. He knows he's got an interest in the building. I've never denied that. My parents know that. Matthew (Alderson) knows that. I just don't want to sign anything. We've had a verbal agreement up until now, so why does he want to change things. Why didn't he tell me he went to Bali. Please talk to him for me.

20. She also said that on the evening of 29 June 1998, when it is accepted by Jones that he agreed to settle the dispute on some lesser terms than those to which he claimed to be entitled, which were incorporated in a document which was signed by him and on which the defendant wrote "seen" but refused to sign, she had gone with Jones to the property for that purpose as she described it, "to reason with the defendant" and had said to the defendant "well just tell Patrick what you really want before you are prepared to put the agreement in writing" to which the defendant had replied

Patrick you know I have never denied that you own half the property. I'll tell you what I want to sign a document. I want you to fire Mike Coombe, the little fat pig. I want a position of authority in the business. I want first option to buy the business and the studios if you ever decide to sell and I want it in writing. I want it stated in a document, that can't be overturned by a will, that if you die the business and the studios will be mine.

21 Tina Irving, who is a friend of the defendant and lived with her for a time in Jones' property at 22-24 Rainford Street, Surry Hills said that in late 1995 the defendant said to her "I've made an arrangement with Patrick. He is going to renovate 3A and help with mortgage payments. I'll be able to live there and use the studio space. He'll run a studio and will have a financial share in the property".
22 Timothy Robinson, a director of the company, said that he was aware that the company had an interest in the property and was aware that mortgage payments were being made in respect of that property, but he did not know the details.
23 Christopher Walsh, who is a photographer and who had at least for a time, worked out of the plaintiff's studios, said that he had discussions with both Jones and Catt on separate occasions and Catt said words to the effect "Patrick's my friend, but he keeps on wanting to document his investment in my building. I'm not going to rip him off."
24 The defendant could not counter all this evidence with evidence her way. For instance her father, who was an acceptable witness, said that when he came to Sydney the first time and made some notes which he transformed into a draft agreement, he did so after talking to both Jones and his daughter. While he went on to say the documents which he prepared or commented on were prepared incorporating information given to him by Jones, he did not suggest that his daughter ever said to him that the arrangement which the parties had come to was a lease arrangement only. The defendant tried to counter by saying that her father was not doing what she wished but what Jones wished and that this had brought about a falling out with her parents. In the same way it was impossible for Mr. Alderson to explain the documents which he drew up as solicitor for the defendant, without accepting that there was some arrangement for the plaintiff company to have an interest in the property.
25 Mrs. Catt, the defendant's mother in oral evidence said on a number of occasions that the agreement between Jones and her daughter was a lease agreement. It is difficult if that was the position how she could have given the serious attention which she says she gave to the draft agreements passing between the parties or their assistants. I do not accept her evidence.
26 It is now necessary to find as a fact whether the conversation Jones said took place did take place substantially as he claims. I find it did. I accept the evidence of Mr. Coombe, Miss Trompp and Miss Irving, which supports the version of Jones. I thought they were all quite convincing witnesses. The texts of the written draft documents are all consistent with the claim and impossible to explain unless the plaintiff were to have an interest. The only evidence to support the defendant, apart from her own, is the cheque butts showing the payments as rent, the payments claimed as outgoings for rent in the plaintiff's tax returns, and the fact the payments were made to her not to the mortgagee, although the later payments to her account direct counter this to some degree. Once the evidence of Mr. Coombe is accepted this loses its force, and whatever the conduct of the plaintiff in its tax affairs, it is insufficient to carry the day for the defendant. I am satisfied that what Jones told his bank manager was a proper explanation of the arrangement to use a neutral term. No one other than Mrs Catt supports the defendant's story of the lease arrangement. It is not impossible but highly unlikely a tenant would pay an unknown amount for a fit out of premises, even for a long lease, where the owner retained a say in the fit out and a right to occupy part of the premises. I accept that conversation relied upon took place and I reject the defendant's claim of an arrangement limited to a lease.
27 It is proper to add that neither Jones nor Catt was a convincing witness, but I thought the poisonous relationship between them, made obvious in court, probably accounted for this lack of appeal. But Jones was more convincing than Catt.
28 Matters between the parties reached a critical point towards the end of June 1998. I accept the evidence that Jones told the defendant if she did not agree to his final proposal then her employment would be at an end and in fact her employment was terminated shortly thereafter. At a time when Jones had encouraged the defendant to be absent from 3A, the plaintiff company, through Jones and with the aid of various of its employees arranged to remove all its property from 3A and at the same time removed some of the defendant's property, although according to Jones, that has since been returned. As the property taken included all the kitchen equipment and some of the bathroom fittings, I do not think it could seriously be said that this equipment was not part of 3A. The kitchen equipment obviously amounted to built in fittings and the pedestal basin in the bathroom was clearly a fixture. The attempt by Jones to lead evidence to establish it was merely a photographic prop was pure nonsense.
29 On 3 July after the equipment had been removed by the plaintiff and his company the defendant changed the locks on the property and locked the plaintiff company out. The plaintiff continued to make the payments to the defendant's account with the Newcastle Building Society until 16 July when those payments ceased. As I have said the payments were reduced to $450.00 after the employment of the defendant ceased. The plaintiff company then entered a caveat against the title to the property claiming an equitable interest in the land by virtue of "funds advanced by the caveator on behalf of the registered proprietor to improve the land affected by the caveat". No agreement was claimed to give entitlement to this interest. During July there was correspondence between the parties as to the caveat and the plaintiff's claim, some of which, although emanating from Messrs. Michael Evers & Co, was in fact drafted by Mr. Alderson. In any event the defendant, by letter dated 8 July 1998, claimed that the plaintiff company had vacated and quit her premises and that even if it had not done so, she had terminated any right it had to occupy the property.
30 Finally there is evidence of value of the property with the improvements at various dates as follows:
December 1995 and January 1996 $ 290 000

June 1996 $ 400 000
March 1998 $ 600 000
January 1999 $ 670 000

31 It is accepted that the improvements and restoration of the property was more or less completed by June 1996 so that the increase in value after that date came about as a result of market forces and inflation.

Pleadings
32 The plaintiff's claim based on an agreement is set out paragraphs 3 to 6 of the amended statement of claim as follows:

3. In late 1995, the Plaintiff and Defendant entered into an agreement (" Agreement" )

Particulars of Agreement


The Agreement was an oral agreement made between the Plaintiff and Defendant as a result of discussions held between Patrick Jones, on behalf of the Plaintiff, and the Defendant that occurred in late 1995.

4. The Plaintiff craves leave to refer to the Agreement as if fully set out herein.

5. The Agreement provided, inter alia, for the following three express terms:


(a) in consideration of the Plaintiff provided moneys to the Defendant to enable the Defendant to improve the Property;

(b) in consideration of the Plaintiff paying three-quarters of the Defendant's loan repayment instalments of $650.00 per week in respect of the loan obtained by the Defendant to purchase the Property and council rates and charges levied on the Property to enable the Defendant to acquire the Property;

(c) in consideration of the Plaintiff occupying, preserving and administering the Property,

the Defendant would give to the Plaintiff a beneficial interest in the Property that would be commensurate with the Plaintiff's entitlement to the net proceeds of sale of the Property calculated as follows:

(i) $275,000.00, being the amount of the loan obtained by the Defendant to purchase the Property, would be repaid as follows:


(a) the outstanding balance due under the loan obtained by the Defendant to purchase the Property would be repaid to the Newcastle Permanent Building Society Limited;

(b) the Defendant would be repaid the contributions she made to the acquisition of the Property, by way of paying one-quarter of the weekly loan repayments of $650.00, in reduction of the loan the Defendant obtained.

(c) the Plaintiff would be repaid the contributions it made to the acquisition of the Property, by way of paying three-quarters of the weekly loan repayment instalments of $650.00 and council rates and charges levied on the Property, in reduction of the loan the Defendant obtained.


(ii) the Defendant would be repaid the sum of $30,000.00 which she expended on the improvement of the Property:

(iii) the Plaintiff would be repaid the sum of $121,032.55 which it expended on the improvement of the Property;

(iv) the Plaintiff and Defendant would each be paid interest on their respective contributions made to the acquisition and improvement of the Property being contributions made by way of actual payments of money and in particular contributions under paragraphs 5(i)(b), 5(i)(c), 5(ii) and 5(iii) above;

(v) the balance of the net increase in value of the Property since its purchase by the Defendant would be paid to the Plaintiff and Defendant in equal shares,

("Plaintiff's Interest")

6. The Agreement also included the following express terms:


(a) the Plaintiff could elect to realise the Plaintiff's Interest in the Property at its discretion ( "Election" );

(b) the Defendant would have a right of first option to purchase the Plaintiff's Interest in the Property "Defendant's Option" );

(c) in the event that the Defendant did not wish to exercise the Defendant's Option, the Plaintiff would have a right of first option to purchase the Defendant's beneficial interest in the Property ( "Plaintiff's Option );

(d) if neither party wished to exercise their respective option, the Property would be sold at public auction and the proceeds would be distributed according to the Plaintiff's Interest in the Property and the Defendant's beneficial interest in the Property as determined pursuant to the express terms of the Agreement pleaded above in paragraph 5.

33. It is then pleaded that the plaintiff had performed its obligations by way of part performance in making payments of $450 per week; paying the costs of improvements to the property; paying the outgoings on the property; that it had occupied and preserved the property having made payments which are now all admitted of $121 032.55 for improvements, $59 888 for total weekly payments each of $450 and $4 517.38 for council rates and charges. The plaintiff claims that the defendant breached the agreement by changing the locks on the property and thereby locking the plaintiff out; that this breach was not accepted as a repudiation but rather the plaintiff affirmed the agreement and it claimed its obligations to perform were suspended during the breach; that the plaintiff exercised the election thereby compelling the defendant to sell the property to realise the plaintiff's interest in it.
34. This was the main claim of the plaintiff. The claim is put in a number of alternative ways. First that by the agreement the defendant became trustee of the plaintiff's interest, the agreement operating as an express oral trust; second that there is an agreement to create an express trust which should be specifically enforced; third that the conduct of the plaintiff in paying the admitted sum of $185 437.93 towards the acquisition and improvement of the property gave rise to a resulting trust or in the alternative a constructive trust under which the defendant holds the plaintiff's interest in the property on trust for the plaintiff; fourth it is claimed that the defendant has been unjustly enriched to the extent of $185 437; fifth it is claimed that the defendant is estopped from denying the plaintiff's beneficial interest in the property because the plaintiff relied on the promises of the defendant and assisted in the acquisition and improvement of the property, that but for those promises and an expectation that the plaintiff would acquire a beneficial interest the plaintiff would not have paid the said amounts so that the plaintiff is entitled to a beneficial interest in the property commensurate with its interest as pleaded, or in the alternative to a registered charge over the property to secure the amounts expended by the plaintiff.
35. The plaintiff seeks an order extending the operation of the caveat and a declaration that the defendant holds the property on trust for the plaintiff to the extent of the plaintiff's interest in it, together with an order that all necessary documents and deeds be executed to give effect to that interest, or to enable that interest to be paid to the plaintiff. Alternative declarations and orders are sought to give effect to the alternative ways in which the plaintiff's claim is put, such as a charge over the property, restitution of the sum of $185 437.93 for unjust enrichment or for damages for breach of trust or for breach of the agreement. It is fair to say that it is not a claim which is very clearly enunciated.
36. The defendant (a) denies the agreement; (b) denies that the plaintiff took any steps in part performance of the pleaded agreement it being admitted that various payments were made (and those payments claimed now having been admitted since the trial began). The defendant says that any moneys paid by the plaintiff for improvement were expended by it for the purpose of fitting out the property for use by the plaintiff as photographic studios. It is further pleaded that the funds used for the purchase were provided as follows:

Newcastle Permanent Building Society $ 165 000.00

sum borrowed from defendant's parents $ 68 500.00

Defendant's own funds $ 49 491.44

$ 282 991.44
37. The defendant further says that if there were any agreement at all then by abandoning the premises, removing the fixtures and fittings without notice the plaintiff repudiated the agreement. There is a general denial of all the other facts stated to give rise to the alternative forms of relief, and finally the defendant says that any agreement is void for uncertainty, but if there were an agreement it is an agreement dealing with an interest in land not in writing and unenforceable under the Conveyancing Act 1919.
38. In ordinary circumstances one would have expected a reply of part performance to the defences of lack of writing presumably based on s23 and s54A of the Conveyancing Act, but nothing turns on that as part performance is pleaded in the statement of claim in terms equally referable to a claim under contract or a claim to enforce a trust. If these claims are otherwise made out it is clear that the claimed acts of part performance are made out.
39. By way of cross-claim the defendant claims the difference between the amount paid by the plaintiff for occupation and a fair and commercial rent, and further orders for removal of caveat, damages for breach of the agreement and presumably for wrongful entering of the caveat.

Cross claim
40. It is convenient to deal with this matter first. As there is no evidence of the fair commercial rent for the property the cross-claimant's claim for the difference between the amount which she says was paid for occupation of the property and a fair commercial rent would have to be dismissed. As to the balance, if the plaintiff's claim for an interest in the property succeeds then the caveat will be left in place and if it fails the caveat will be removed. If the caveat is removed then as there is no evidence of any damage sustained by the plaintiff as a result of the caveat there does not appear to be any basis for a reference to the Master to inquire into damages sustained as a result of the caveat being wrongly entered, but I would be prepared to hear further argument on that aspect.

Is the pleaded agreement proved?
41. The simple answer to this is no. The reasons for this are as follows:

A. Jones and therefore the plaintiff understood that the defendant would occupy part of the property;

B. The plaintiff assumed and the agreement pleaded was predicated upon the assumption that the whole of the purchase moneys were provided by the building society, which was not the case. The agreement appears to be based on the requirement to pay $650 per week to the building society. There is no proof that this was the weekly amount due to it.

C. The amounts of $30 000 and $121 032.55 which it is pleaded would be repaid to the parties were unknown or certainly the latter figure was unknown when any agreement was made.

D. It was not necessarily the balance of the net increase in value which on the evidence was to be divided between the parties, although that may not be significant.

E. The agreement as pleaded included a term that the plaintiff could elect to realise its interest in the property at its discretion. That is the election the plaintiff has purported to exercise. The evidence was, according to Jones, that the option could be exercised every two or three years.

F. Jones said that it was a term that the agreement as to occupation would last for ten years unless terminated in the meantime.

An agreement in accordance with the pleaded terms is not made out on the evidence.

Was there a binding agreement which was not in accordance with the pleaded agreement?
42. The answer to this question would depend upon whether the words in the affidavit of Mr. Jones, which I have set out, as restated by him in cross-examination in the passage set out, constitute a binding agreement.
43. The fact that I have accepted the evidence of the plaintiff and his witnesses does not in itself make out the plaintiff's case on the agreement which was denied on the pleadings. It is necessary to decide whether or not there was an enforceable agreement with the required certainty and consensus as to terms, - leaving aside for the moment the question of any requirement for writing. I have come to the conclusion that there was no concluded agreement because there is too much uncertainty as to its terms. The agreement put forward by Jones was made on the basis: (a) that the whole of the purchase price of $270 000 or $275 000 was borrowed from Newcastle Building Society; (b) that the weekly payment due under the building society mortgage was $650; (c) that $450 was three quarters of that weekly payment; (d) that there was an option to terminate every two or three years, but subject to that the "deal" would last for ten years; (e) that by the time the agreement was made the defendant had put in $30 000; (f) that each party would get back on termination their contributions (not borrowed sums) with interest, that the building society would be repaid the balance of the $270 000 loan and the balance would be shared equally.
44. The sum of $165 000 was raised on the security of the property; $68 500 was borrowed from the defendant's parents; some further sum was more likely than not raised by the defendant on the security of another property in Newcastle, but this is not clearly established. $450 per week is not three quarters of $650; the payments were never made direct to the building society and there is no evidence of the weekly payments due to it. It was never envisaged by the plaintiff that moneys had been borrowed from the defendant's parents, and until Mrs. Catt gave evidence there did not appear to have been any understanding that any borrowings made from her and her husband might have been repaid, although it seems there have been substantial repayments. There was no agreement about how this was to be dealt with nor that it had to be dealt with nor any agreement or understanding as to the interest rate to be charged on the parents' loan funds or on contributions, nor whether so far as improvements are concerned interest was to be charged as payments were made or after completion occurred; nor so far as the weekly payments were concerned whether interest was to run from the date of each payment. The pleaded agreement contained a right to terminate at the plaintiff's discretion; the agreement put forward in evidence gave the right to terminate to the plaintiff every two or three years. That difference between 2 or 3 years in itself is too great to be left uncertain for such an important right even without the uncertainty of the commencement date. It is an essential term but an uncertain one. The plaintiff has purported to terminate or to exercise its right to elect to terminate by its pleading in the amended statement of claim filed on 31 August 1998 and not otherwise. Nothing else has been put forward. It is not suggested that this was done in accordance with a right to do so every two or three years. In fact in the original statement of claim filed on 24 August 1998, but signed and verified on 20 August 1998, the plaintiff claimed the defendant had repudiated the agreement by locking the plaintiff out and purported to accept such repudiation and to terminate for breach. In the amended statement of claim the plaintiff claims breach by locking out, no acceptance of this breach as a repudiation, affirmation by the plaintiff of the agreement and election to terminate. Whether it was open to the plaintiff to adopt these contrary positions was not argued. The significance is that the election relied upon by the plaintiff does not accord with the agreements set up by the affidavit and oral evidence of Mr. Jones. Thus the pleaded contract is not supported by the evidence; the evidence does not establish with sufficient certainty the terms of any oral contract different from the pleaded contract; there was a lack of consensus on important matters; and the basis on which the election is said to have been exercised does not accord with the entitlement set up in evidence.
45. The claims that the defendant holds the property on trust in accordance with the terms of the claimed agreement, namely for herself and the plaintiff on those terms, and the claim for specific performance of an agreement to hold the property on those trusts should be dismissed.

Claim for a resulting or constructive trust
46. In dealing with these claims it is necessary to understand that when the plaintiff's "interest" is referred to in the pleadings, that is the interest which is defined in paragraph 5 of the statement of claim, which I have set out.
47. The claim for a resulting or constructive trust is set out in paragraph 21 of the amended statement of claim as follows:

21. In the alternative, and in the premises, the conduct of the Plaintiff in paying the amount of $185,437.93 to the Defendant and the Defendant's conduct in applying it towards the acquisition and improvement of the Property gave rise to a resulting trust or, in the alternative, a constructive trust, under which the Defendant, as Trustee, holds the Plaintiff's Interest in the Property in trust for the Plaintiff's benefit.

Particulars of Resulting Trust or Constructive Trust

The Plaintiff's conduct in paying money to the Defendant for the acquisition of the Property (namely, the payment of three-quarters of the weekly loan repayment instalments and council rates and charged [sic] levied on the Property pleaded above) and for the improvement of the Property (namely, for the renovation of the Property) which totals $185,437.93.

In fact the sum paid for improvements was paid over a time and payments which for the most part were made direct to contractors and suppliers, and not to the defendant.

48. It is not really easy to see on the pleadings how the claim for a resulting trust would arise on the basis there set out, but it was submitted in address that the defendant held an interest in the property on resulting trust for the plaintiff the proportionate interest being either (1) the fraction arising with the numerator as 120 032 representing the dollar value of improvements and the denominator being 400 000 by the value of the property with the improvements complete; or (2) the fraction with the numerator being 185 437 being the dollar value of all contributions of the plaintiff and 600 000 being the dollar value of the property when the agreement came to an end.
49. It is not suggested the plaintiff contributed to the purchase price. Unless some binding agreement were proved, which it has not been, no resulting trust as to some proportionate share in the property could arise from payments for improvement or payment of mortgage obligations. The presumption as to resulting trust arises upon payment of or contribution to the purchase price not otherwise Calverley v Green (1989) 155 CLR 242 at 252.
50. So far as the claim for a constructive trust for the same interest is concerned, as I have explained and found that interest is too uncertain to be established. If there was no agreement which would give rise to an express trust on the certain terms then I do not consider a constructive trust could be imposed to give effect to the same uncertain terms. The argument for the imposition of a constructive trust was more widely stated in submissions than pleaded and I will deal with this under the claim for a charge.

Claim for unjust enrichment and claim based on estoppel
51. The particulars of the unjust enrichment claim state that if the plaintiff does not recover "the plaintiff's interest" in the property then the plaintiff will have received nothing for payment of the sum of $185 437. The difficulty with this claim is that is not the fact because there can be no doubt that the plaintiff company did have the benefit of use and occupation of a substantial part of the property for a period of two years. Not only that, but the plaintiff did receive some payments of rent for the property during that period and kept those rent payments for itself.
52. Much the same difficulty applies to the claim that the plaintiff is estopped from denying the plaintiff has a beneficial interest in the property commensurate with the plaintiff's interest as pleaded. I have found that it was intended by both parties and agreed by the defendant that the plaintiff would have some interest in the property. The difficulty is that the extent of that interest was never agreed. The claim based on estoppel relied on the pleaded agreement which was not made out.

Claim for a charge
53. This claim was really put under the estoppel and constructive trust heads but submissions were made on it as a separate claim and I consider it proper to deal with it on that basis. If an amendment were required to the statement of claim for that purpose I would allow it.
54. It was intended by the parties and agreed by the defendant that the plaintiff would have some interest in the property, the terms of which were not agreed upon. There is a further difficulty because while the plaintiff claims that part of the agreement was that it would occupy preserve and administer the property the plaintiff company did actually vacate the property, Mr. Jones having formed the view that when the defendant failed to sign some document evidencing his interest then he was best advised to remove all the plaintiff's property from those premises. The plaintiff acted as it did in making payments, upon the representations or agreements of the defendant that it would have an interest in the property, and it would be entirely unconscionable to allow Catt to deny any interest. Contributions of a particular nature clearly paid on the statements of the defendant that they would give rise to an interest in the property clearly raise an equity in the plaintiff which must be satisfied. Chalmers v Pardoe [1963] 1 WLR 677. However, I do not think the position arises where it is either proper or necessary to construe a trust, to give effect in equity to the plaintiff's claim. That is so, particularly having regard to the uncertainty as to the source of all the purchase moneys, the intentions had the facts been known, and the uncertain evidence as to the current state of the loans entered into for the purpose of paying those purchase moneys. As has been most recently pointed out in Giumelli v Giumelli (1999) HCA 10 at 10 once it is decided that there is an equity in the plaintiff which ought to be satisfied the question then is to decide whether or not there is an appropriate remedy which falls short of the imposition of a trust. See also Morris v Morris [1982] 1 NSWLR 61 at 64; Baumgartner v Baumgartner [1985] 2 NSWLR 406 at 419 (approved in Giumelli). I consider in this case, in view of the uncertainty, and the determination of the agreement, the appropriate remedy is the imposition of a charge over the property in favour of the plaintiff to secure the sum spent on the renovations and the contributions towards the monthly repayments and rates together with interest. So far as the sum of $121 032 is concerned as it was paid at various times and in different amounts after December 1995 and mostly before June 1996. The plaintiff has only sought interest from 1 July 1996 and it is reasonable to allow interest on the full amount from that date as that will balance in a reasonable way those payments made before that date and those payments made after that date. The weekly payments of $450 should each carry interest at the prescribed rate from the date of payment until 16 July 1998. Thereafter interest should be calculated at the prescribed rate on the full amount of $59 888. To avoid any problems of calculation I will hear argument on whether a proper result as to this interest calculated can be achieved as it is in Common Law actions, by allowing interest at the prescribed rate on one half of the $59 888 from 29 November 1995 until 16 July 1998 and the parties can then make the necessary calculations for a figure up to a date when final orders can be made. I will also hear argument as to when interest should commence on the sum of $4 517.30. I would then propose to make an order that the total of the amount including interest, together with prescribed interest be paid to the plaintiff within two months; that the property be subject to a charge in favour of the plaintiff to secure that sum, that there be liberty to apply to enforce the charge and that the caveat be withdrawn upon payment of the amount of the charge. I will hear any argument on costs on that day. The cross-claim should be dismissed.

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Last Modified: 05/12/1999