Penn-Bowen v Gregory

[2003] QDC 452

DISTRICT COURT OF QUEENSLAND

CITATION:	Penn-Bowen v Gregory [2003] QDC 452
PARTIES:	ELIZABETH ANGELO PENN-BOWEN Plaintiff v PHAEDRA SIMONE GREGORY Defendant
FILE NO:	D42 of 2003
DIVISION:	Civil jurisdiction
PROCEEDING:	Action for declaration of trust
ORIGINATING COURT:	District Court Maryborough
DELIVERED ON:	16 December 2003
DELIVERED AT:	Brisbane
HEARING DATE:	3 December 2003
JUDGE:	Boulton DCJ
ORDER:	I order that the defendant pay to the plaintiff the sum of $43,125 plus interest on that amount at 8 per cent per annum from 25 December 2002 to today’s date.  Unless persuaded otherwise I would propose to order that the defendant pay the plaintiff’s costs of and incidental to the action to be assessed.
CATCHWORDS:	Transfer of land – mother to daughter – subject to condition of later payment
COUNSEL:	Mr R P Goodwin for the Plaintiff Mr Everson for the Defendant
SOLICITORS:	Carswell & Company for the Plaintiff McDuff & Daniel Lawyers for the Defendant

REASONS FOR JUDGMENT

1. This action arises out of the transfer from the plaintiff to the defendant of a 5 acre block of land situated at 33 Amos Street, Booral, a copy of the transfer is Ex 1.  It appears to have been executed on 7 March 2002.

1. The plaintiff and the defendant are mother and daughter and at the time of the transfer were on close terms befitting a mother/daughter relationship.  Following a divorce settlement the plaintiff was the owner of two 5 acre blocks of land in Amos Street.  On the first block which was No 25 she had built a house for herself which would seem to have been fully paid for.  She had acquired the second 5 acre block which was No 33 with the assistance of a loan from the Bank of Queensland.  She had secured this loan with a mortgage over her own house property rather than over the vacant land.  She said that this arrangement was made on advice from the bank that leaving the second block of land unencumbered would facilitate its disposal if she ever wanted to sell it.

1. The plaintiff said that the vacant block of land was valued at $65,000 in the divorce settlement with her former husband.  An assessment notice dated 6 February 1998 reveals the consideration for the transfer to be $55,000.  That assessment notice is Ex 3.  A valuation of the property dated 23 February 1998 by L J Hooker, Hervey Bay is in the amount of $55,000.  That valuation is Ex 4. 

1. The plaintiff explains that as part of the divorce settlement there were other factors taken into account.  It seems, in any event, that there was some $55,000 outstanding on the mortgage at the time of the transfer to the plaintiff.  In the four year period to 7  March 2002 it seems that she had reduced the amount of the mortgage to some $45,000.

1. In 2001 the defendant was living in rented accommodation with her two young children and her then boyfriend, Mr Chessun.  She was on a sole parent pension and was studying.  She would also seem have been doing some part time work.  She and her mother had discussions about the Federal Government’s first home buyer’s grant of $14,000 and began to look at ways of avoiding the “rental trap” by acquiring her own home.  Various options were considered.  The defendant approached some banks and at the suggestion of her mother approached Wide Bay Capricorn who offered to lend $57,000 which was significantly more than the banks would offer.  However this was quite inadequate to buy an existing house.  Some consideration was given to building a home on her mother’s 5 acre block.  The ultimate proposal was described by the defendant in her evidence in chief in this way:

“And did your mother have any other proposal that emerged at that time?--  Yes.  Shortly after that proposal she proposed that I could build on the land next door which she also owned.

That is the land that is the subject of this?--  Yes.  I obviously misunderstood what she said at first because I said that won’t work because I can’t afford to pay for that either.  I can’t afford to build a house and buy your land too, yeah.  And then mum had said to me that, well, you know, you are going to get everything in my will anyway, because at that point I was the only person in it, so you might as well take it now while you can use it now and get the first home owner’s grant rather than later on.

When she said, “You might as well take it now”, did you seek clarification of what she meant?--  Yeah, we did have quite a few discussions about that, mum and I, and, you know, I wanted to make clear that I understood it properly because it was a really generous sort of offer, someone giving you a parcel of land, and she said well, you know, you can take that and – because I got everything in the will anyway, so just take it now and use it now.

Did she have any discussions with you about paying for it in any way at any time?--  No.”

1. The plaintiff’s version of events is as follows:

“Can you tell us more about the discussion in relation to the vacant block of land at 33?--  There was lots of discussion about that.  I went to tea quite often at my daughter’s house and on this particular day she decided that she could afford the mortgage.  She could apply for the grant.  She had a builder in mind.  And I discussed with her because I was working at the time I was comfortably making the mortgage repayments on the block of land so that she didn’t have to worry about repaying the mortgage until; the house was all built.
…
On the 3^rd of March whereabouts were you when you were discussing this with your daughter?--  At my daughter’s rented property at Vicki Parade, Torquay, Hervey Bay.

What was the discussion of that date?--  She was trying to make up her mind, do all the figures, all the paperwork what she could afford.  She had all the information.  She gathered all sorts of information from builders and electricians and that and made a decision on that day that she could afford it, she could go ahead and the agreement was made – verbal agreement.  We made a list of figures, list of things to do and I think from that –after tea the next few days I did the transfer and the stamp duty.

Can you just tell his Honour what was the agreement you came to with your daughter?--  That she would pay 45,000, which was the outstanding Bank of Queensland mortgage by instalments – mortgage instalments, the same as I was paying and to start at Christmas 2002; that I was okay, I could pay it up until then, which was about nine months.

Any further arrangement?--  The remainder from 45 to the 65,000 I wanted for the block we would make arrangements at a further date whether she could refinance, remortgage, win Tattslotto.  It wasn’t imperative to me.  What was imperative was that – the weekly payments.

What was the agreed price for the land?--  $65,000.”

1. The plaintiff gave evidence that prior to filling out the transfer she contacted the Stamp Duties office and the Land Registry explaining the situation that there was not actually any money changing hands at the time.  It was suggested that she insert into the transfer “natural love and affection” in item 4 and get a valuation from an estate agent for the market price of that particular land for the purpose of stamp duty.  She got a valuation which is Ex 2 for $46,500 and this became the basis for the calculation of stamp duty.  It was agreed that the defendant would reimburse her the stamp duty and other outgoings from the first periodic payment from the mortgagee during the construction of the dwelling.  This was what subsequently occurred.

1. In or about September of 2002 the plaintiff was retrenched from her work with the Department of Corrective Services and encountered difficulty in paying the mortgage instalments.  She gave evidence of saying to the defendant “don’t forget you’ve got to start paying me at Christmas” to which the defendant replied “yeah yeah”.

1. The defendant agrees that there was a request for payment in September and again around Christmas time but denies that the taking over of the mortgage payments by her had been part of the original agreement.

1. On the issue of the mortgage repayments I prefer the evidence of the plaintiff who impressed as a woman of considerable business ability.  It was a seemingly impossible task to get the defendant into ownership of her own house and land but the approach mapped out by the plaintiff was very effective.  By transferring the vacant land to the defendant unencumbered the defendant was thereby enabled to obtain a loan of approximately $79,000 which, with the home buyer’s grant, was sufficient to build the house.  The plaintiff arranged the purchase of some materials which resulted in a saving of some $10,000 of building costs and made contact with the builder, Mr Keith, who had built her own house very economically.  By meeting the mortgage repayments until the Christmas the house could be completed.  In its completed state it could readily support a refinancing if that were desired.  The total expenditure of approximately $81,000 on the house and a little under $45,000 on the mother’s mortgage - after the first homebuyer’s grant is taken into account would total less than $113,000.

1. I do not accept that there was any provision as to the repayment of the difference between the $45,000 mortgage and the $65,000 stated value of the land.  I do accept, however, that the assumption of the mortgage debt was part of the agreement.  Indeed the statement referred to by the defendant and by one of the defendant witnesses that on the mother’s death the defendant would be entitled to the land does not appear to be inconsistent with this view.  The mother’s estate would have been burdened with repayment of the $45,000 mortgage anyway.  I am satisfied that the plaintiff exercised all of her skill in getting her daughter into ownership of house and land but that this did not extend to the plaintiff then continuing to pay into the future.

1. I have already mentioned that the plaintiff was retrenched from her employment in or about September of 2002 and that this affected her capacity to meet the mortgage payments.  A further complicating factor is that relations between mother and daughter would seem to have soured somewhere around the same time.  In the passage to which I have referred, the plaintiff reminded the defendant in or about September that she would need to take over the mortgage payments at or about Christmas time.  However, in this court the plaintiff goes further and alleges that there was an agreement to pay the entire $65,000 which she contends was the full value of the land and that this was the agreement struck as from 3 March 2002.  I certainly do not accept that this was so.  In the first place the valuations before the court would not support a valuation of $65,000 at or about that time.  Secondly the transfer of the land to the defendant in return for full payment albeit at some time in the future would have been unlikely to attract the interest of the defendant and would have represented little concession on the part of the plaintiff.

1. The difficulty that I have in rejecting the plaintiff’s evidence on this particular issue is whether I should, as a result, disregard her evidence altogether.

1. I take the view that the transfer of the land in March 2002 along with the plaintiff’s continuing the mortgage payments for the remainder of the year did amount to a generous offer on the part of the plaintiff which was essential to the strategy.  References to the plaintiff’s generosity in  transferring the land would have been apt particularly in the presence of outsiders who might not have been put on notice of the fact that there was an anticipation of mortgage payments being undertaken in the future.  One would imagine that the lending authority in particular would not have been made privy to this detail.

1. The defendant’s counsel has submitted that the presumption of advancement is central to the present case.  It was pointed out by Gibbs CJ in Calverley v Green (1984) 155 CLR 242 at 247 that on the authorities a presumption does not arise in a transaction made by a mother in the name of her child. There was no moral legal obligation in the present circumstances that obliged the plaintiff to transfer the land to her daughter. However, quite independently of any presumption of advancement there was a clear intention on the part of the plaintiff to benefit the defendant and to transfer to her the full legal and beneficial interest in the land subject only to the defendant at a later point of time assuming responsibility for the payments of the mortgage on behalf of the plaintiff.

1. I note that the mortgage sum of $55,000 would seem to have been reduced to $45,000 over a four year period and that the further payments over the nine month period between March and December would very likely then have reduced the mortgage debt by a figure of approximately $1,875 if we adopt an equivalent rate.  As at Christmas 2002 the mortgage debt would have been in the vicinity of $43,125 which under the agreement the defendant had an obligation to pay either in lump sum or by making the recurrent mortgage payments.

1. I order that the defendant pay to the plaintiff the sum of $43,125 plus interest on that amount at 8 per cent per annum from 25 December 2002 to today’s date.  Unless persuaded otherwise I would propose to order that the defendant pay the plaintiff’s costs of and incidental to the action to be assessed.