Re Wlodarczyk

[1999] QCA 271

IN THE COURT OF APPEAL	99.271
SUPREME COURT OF QUEENSLAND

Appeal No. 8189 of 1998

Brisbane

[Schmutter v Wlodarczyk]

BETWEEN:

RHONDA GLADYS SCHMUTTER

(Respondent) Appellant

AND:

CHRISTOPHER MARIA WLODARCZYK

(Applicant)	Respondent
McMurdo P Davies JA Thomas JA

Judgment delivered 23 July 1999.

Judgment of the Court.

APPEAL ALLOWED TO THE EXTENT OF ADDING TO THE ORDER BELOW THE

FOLLOWING ORDER:

"3A. THE APPLICANT EXECUTOR IS TO RETAIN $12,000.00 OF THE MONIES RECEIVED UNDER PARAGRAPH 3 ABOVE TO MEET SUCH CLAIMS AS THE RESPONDENT RHONDA GLADYS SCHMUTTER BRINGS AGAINST THE APPLICANT, PROVIDED THAT IN THE EVENT THAT NO SUCH CLAIM IS BROUGHT IN A COURT WITHIN THREE MONTHS OF 23 JULY 1999, THE APPLICANT'S OBLIGATION TO RETAIN SUCH MONIES IS THEREUPON DISCHARGED."

NO ORDER AS TO COSTS.

CATCHWORDS:	REAL PROPERTY - PARTITION OF LAND - STATUTORY TRUST FOR SALE OR PARTITION - QUEENSLAND - co-owner resisting sale of asset by alleging greater entitlement than title would indicate - exercise of discretion conferred by section 38 Property Law Act 1974 - whether proceeds should be distributed equally - whether any viable basis or challenge to co-owner's interest in property - whether failure of consideration, fraud, or additional equitable interest through additional contributions.
Property Law Act 1974 (Qld) s38
Baumgartner v Baumgartner (1987) 164 CLR 137, considered.
Counsel:	The appellant appeared on her own behalf. Ms KE Downes for the respondent.
Solicitors:	The appellant appeared on her own behalf. Chris Wlodarczyk & Co for the respondent.
Hearing Date:	10 June 1999.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 8189 of 1998

Brisbane

Before McMurdo P
Davies JA
Thomas JA

[Schmutter v Wlodarczyk]

BETWEEN:

RHONDA GLADYS SCHMUTTER

(Respondent) Appellant

AND:

CHRISTOPHER MARIA WLODARCZYK

(Applicant) Respondent

REASONS FOR JUDGMENT - THE COURT

Judgment delivered 23 July 1999

1. This is an appeal against an order made by a District Court judge in Chambers vesting

   certain real property at Capalaba in trustees on statutory trust for sale, and directing that the nett

   proceeds of sale be paid in equal shares to the appellant and the respondent.

2. The respondent is the executor of the estate of Mr Drulik who died on 8 February 1997.

   In 1982 and 1983 Mr Drulik and the appellant had certain dealings, which led to their becoming

   co-owners of the property in question.

3. The property consists of two adjacent lots in respect of which a single title deed was issued, and across both of which Mr Drulik built a house in 1983. The land has probably been in the registered co-ownership of the parties since 1982 or 1983. The appellant, who was originally the

   owner of the properties, signed a transfer to herself and Mr Drulik as joint tenants in 1982 and

   subsequently in January 1983 signed a further transfer to them as tenants in common. No claim

   contrary to the registered legal ownership or other than equal beneficial ownership of the properties

   was made by or on behalf of the appellant during the lifetime of Mr Drulik. On the contrary, letters

   produced by the appellant suggest that she fully recognised his entitlement. Her grievances in 1988

   were expressed as claims to be reimbursed for her payments of rates and her purchase of some

   materials and other outlays in respect of the house that he built on the land. There were also

   complaints of his failing to obtain rent for her from what the appellant describes as "my half" of the

   premises contrary to his alleged promises to do so. A similar position was maintained by her

   solicitors on her behalf until after the commencement of the present proceedings.

4. There is no suggestion of any special relationship between the appellant and Mr Drulik.

   Their dealings seem to have been essentially business dealings between the appellant and a man she

   regarded as a recently arrived Polish refugee. The condition of the house which Mr Drulik had built

   upon one of the allotments, in which he had lived until his death, apparently led to the issue of

   various notices by local authorities, and the incurring of substantial expense by the appellant as a co-

   owner. The material filed in evidence suggests that Mr Drulik had plans drawn up that were

   approved by the Council, but that the house was not built in accordance with those plans. Not long

   after Mr Drulik's death in 1997, about 14 years after the house was built, the local council called

   upon the appellant and the respondent to show cause why a demolition notice should not issue in

   view of the fact that the building was "considered filthy, dilapidated, improperly constructed and is

   unfit for use or occupation". Other expenses were involved in removing over-grown vegetation and vermin proofing. The question of demolition does not yet appear to have been resolved, but

   substantial expenditure seems to be necessary if the property is to remain in its present ownership.

5        Unfortunately neither party would seem to have any funds that could arrange for appropriate

redevelopment of the property. The condition of the house would seem to be deteriorating and the

evidence suggests that the land value of the property overall (including the house) as at November

1997 was between $75,000 and $78,000, as "land value only", and that it would cost $10,000 to

remove all the rubbish from the site. The Valuer-General's valuation of the unimproved value of the

land as at March 1998 was $72,000.

1. Although the appellant raised a number of issues by the presentation of material in the

   proceedings below, the learned chamber judge was not asked to determine the merits of claims that

   were foreshadowed on behalf of the appellant. Indeed it would seem to have been impossible to

   have done so satisfactorily on the affidavits. It was apparently understood below that if the

   appellant wished to bring any claims against the respondent she should do so by separate

   proceedings, and that no estoppel would arise between the parties on any issue such as money

   entitlement or equitable entitlement in the property in consequence of any order in the present

   proceedings. His Honour's task was to determine whether in the circumstances the property should

   be sold, and what the trustees should be directed to do with the proceeds.

2. The question is whether his Honour erred in exercising the discretion conferred upon him

   by s 38 of the Property Law Act 1974 to order sale, and in going on to direct that the proceeds

   be distributed equally.

7 The present case is one where a co-owner resists sale of the asset by alleging a greater
entitlement (and accordingly an entitlement to a greater share of the proceeds) than the title would

indicate. When claims are made to a particular equitable entitlement in real property, the real

property may sometimes be preserved by the court pending determination of the parties' respective

entitlements through the grant of an injunction preventing disposition of the property until such

determination. But such an injunction is not granted as of course. Its grant depends upon issues

such as whether there is a serious question to be tried, and the balance of convenience. Indeed the

court has regard to factors such as the adequacy of damages, alternative remedies, laches, delay,

the strength of the claim and of defences to the claim, undertakings that either party might be

prepared to give, hardship and the balance of convenience[1]. In refusing an injunction the court does

not shut out the claimant from litigating his or her claim against the other party, but such an order

means that the ultimate remedy, if the claimant is found to be entitled to one, will be a money claim

rather than a secured remedy. In the present case the appellant has neither commenced any

proceedings nor sought any injunction. The above reference to injunctions is made only by way of

analogy. In cases under s 38 of the Property Law Act 1974, even when there are strongly

arguable claims to entitlement that may take some time to resolve, circumstances may still make it

desirable to proceed to sale immediately. In cases for example of a wasting asset, sale will normally

be ordered in any event, although the proceeds might be the subject of a preservation order to abide

the result of pending or threatened litigation.

[1]            Meagher, Gummow and Lehane, Equity Doctrines and Remedies (3rd ed., 1992) para

1. In the present case, the property in question might fairly be described as a wasting asset,

   in that it is the subject of attention from government authorities and likely to involve the owners in

   continuing expenses which will not add to the value of the property. For this reason it is difficult to

   find any error in the exercise of his Honour's discretion to appoint trustees and direct a sale.
   However different considerations may arise in relation to the disposition of the proceeds.

2. Despite the passage of 17 years since she was aware that Mr Drulik was a co-owner, the

   appellant has brought no claim against him (or his estate) for alteration of the legal or equitable

   interest in the land, or even a money claim, although claims of the latter kind were foreshadowed.

   However in responding to the present application for sale, her counsel formulated three possible

   claims which deny or reduce the respondent's apparent property entitlement. These may shortly

   be described as:

   (a)         total failure of consideration;

   (b)        fraud; and

   (c)         additional equitable interest on the appellant's part through additional contributions.

3. The question is whether the material presented on the appellant's behalf was sufficient to

   require the court to order that the proceeds of sale, or a specified part of them, be retained in order

   to satisfy such possible claims.

4. The appellant specifically asserts that she does not have the money to finance the litigation

   necessary to determine such claims, and in turn, Mr Drulik's estate is small, this property being its

   only asset. The prospect of extensive litigation between the parties who have an interest in this

   modest asset is obviously undesirable.

5. The appellant appeared for herself upon the appeal. Unfortunately her submissions were not logical or helpful to the court. She alleged many inadequacies on the part of Mr Drulik, most of which were not the subject of evidence below, about the defective nature of the house that he

   built and the filthy condition in which he had left it. Her final submission is "[h]e was found to be

   such a crook and the place was unfit for human habitation, why wasn't it all put back in my name?"

6. The first matter that needs to be considered is whether any viable basis or challenge to Mr

   Drulik's interest in the property has been shown. It may be noted that no challenge was made to

   the original transfer which was to the appellant and Mr Drulik as joint tenants in 1982, although

   claims are made that he breached his promises to build a "habitable" house on the land and to make

   the top floor available for the appellant to rent. Challenge however was made to the evidence

   produced by the respondent in relation to events preceding the subsequent transfer to the parties

   as tenants in common. The appellant admits signing the transfer, but challenges the existence of the

   deed between the parties to which reference was made in the transfer. She says that her alleged

   signature on a deed in Polish and a translation of it in English are forgeries. She also denies the

   respondent's evidence that Mr Drulik acquired his interest in the land by paying her $12,000 in cash.

   While the appellant denies the respondent's version of the events preceding that transfer, there is

   no allegation on her behalf of any improper activity on behalf of Mr Drulik inducing her to change

   his then existing interest as joint tenant into one as tenant in common. Such a change is commonly

   effected for reasons of legal convenience and would not need to be accompanied by additional

   consideration. No objection or unwillingness on her part to effect that particular change is

   suggested. She denies the respondent's version, but in her own version nothing more is suggested

   than that Mr Drulik's solicitor asked her to sign another transfer and she did so.

7. The attempt by the respondent to prove a further entitlement in 1983 by reason of the payment of cash and the appellant's strong denial of this would seem in the end to be something of a red herring. The basis of Mr Drulik's original entitlement (which was executed by the first transfer)

   was his oral promise to build a house on the appellant's property in consideration of her making him

   a joint tenant in the property. The evidence suggests that he breached these obligations in a number

   of respects, but he did build a house. It is difficult to find any proprietary remedy on behalf of the

   appellant as distinct from breach of contract, and in any event the subsequent history strongly

   suggests affirmation of the contract and transfer, followed by the assertion of claims for breach of

   the contract. If any proprietary remedy existed, it is difficult to see how the appellant could resist

   findings of acquiescence and laches.

8. Looking at the evidence as a whole we do not think that it can be said that there is a serious

   question to be tried concerning the allegation that the transfer of 4 January 1983 was not the

   intentional act of the appellant, or that it was induced by fraud on Mr Drulik's behalf.

9. While there may be an adequate case in the appellant's favour of breaches of contract on

   the part of Mr Drulik (subject of course to problems under the Limitation of Actions Act 1974),

   it could not be successfully maintained that there was a total failure of consideration on his part. A

   large house was built by him and it was not suggested until many years later that he had not built

   what he had promised to build.

10. So far as the allegation of constructive trust by reason of additional monetary contributions

    made by the appellant is concerned, there is no evidence to suggest that rights such as those

    discussed in Baumgartner v Baumgartner[2] arose. Prima facie the allegations of the appellant in

    this regard, taken at their highest, tend to establish that she made advances towards the cost of the

    building which were not repaid, and that she made overpayments of outgoings as co-owner as to

    which a right of contribution may exist against the other co-owner. They do not show that the

    parties were in such a relationship or had dealings such as would create equitable interests in the

    land according to the quantum of financial or other contributions. The most substantial part of the

    payments mentioned by her consist of $16,000 outlaid in order to comply with the requirements of

    the Redland Shire Council imposed after Mr Drulik's death. It was conceded on behalf of the

    respondent that there might be a valid claim against the respondent's executor for half of those

    expenses. That however would be a money claim.

    [2] (1987) 164 CLR 137.

11. It is relevant to note that the expression of the appellant's instructions by her solicitors in

    letters of 2 September 1997 and 25 September 1997 made no allegation that the property

    entitlements of the parties were other than equal, her claims consisting of a series of money claims

    which it was contended should be met before the proceeds of proposed sale of the property were

    distributed half each to the parties.

12. The effect of the evidence placed before the court is that the appellant seems to have done

    rather badly in consequence of her dealings with Mr Drulik, although she has contributed to her own

    difficulties by failing to insist upon her entitlements at the appropriate time. Even so, having regard

    to the impecuniosity of Mr Drulik's estate it would be inappropriate to allow all of the proceeds of sale to be distributed and spent immediately. There is some evidence of viable money claims, and

    in the necessary accounting that may be anticipated between the parties there is reason to think that

    at least the costs attributable to cleaning up the unsavoury condition of the premises were

    attributable solely to the acts of Mr Drulik and should be borne solely by his estate. There has been

    no undertaking offered on behalf of the respondent that would prevent the dissipation of monies to

    be received by it. A proper order in our view would secure the retention of a sum of money out

    of the proceeds of sale in order to meet any claims that the appellant may bring. In the absence of

    any clear particularised claim capable of assessment it is necessary that the selected figure be

    somewhat arbitrary. Doing the best we can we would fix it at $12,000. If the appellant brings no

    such claim within a period of three months from today's date the respondent should be freed from

    the obligation to retain such monies. The event that the appellant might not prosecute such claims

    with appropriate diligence can be met under the existing order which contains liberty to apply.

    Orders

13. The appeal should be allowed only to the extent of adding to the order below the following

    order:

"3A.	The applicant executor is to retain $12,000 of the monies received under
paragraph 3 above to meet such claims as the respondent Rhonda Gladys
Schmutter brings against the applicant, provided that in the event that no
such claim is brought in a court within three months of today's date, the
applicant's obligation to retain such monies is thereupon discharged."

1. In the circumstances there should be no order with respect to the costs of the appeal.