Ridgway v Hudson - [2000] WADC 328

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: RIDGWAY & ANOR -v- HUDSON & ORS [2000] WADC 328

CORAM: CHARTERS DCJ

HEARD: 20, 21 NOVEMBER 2000

DELIVERED : 14 DECEMBER 2000

FILE NO/S: CIV 1678 of 1999

BETWEEN: HEBER ALFRED RIDGWAY
First Plaintiff
ETHEL ELIZABETH RIDGWAY
Second Plaintiff
AND
ROBYN ELIZABETH HUDSON
DOUGLAS HENRY ALBERT THORP
RICHARD SYDNEY THORP
LYNETTE JOY VANSTAN
Defendants

Catchwords:

Contract - Implied term - Turns on its own facts

Legislation:

Nil

Result:

Claim and counterclaim dismissed

Representation:

Counsel:

First Plaintiff                :     Mr M Rennie
Second Plaintiff            :     Mr M Rennie
Defendants:     Mr D H A Thorp - In Person

Solicitors:

First Plaintiff                :     Michael Rennie
Second Plaintiff            :     Michael Rennie
Defendants:     In Person

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Nil

CHARTERS DCJ: The plaintiffs are respectively the stepfather and the mother of the four defendants and bring this action to seek repayment of the balance of a loan of $160,000 said to have been advanced to the defendants on 12 December 1988.

Pleadings

In their statement of claim the plaintiffs say that in or about December 1988 the first plaintiff agreed to lend the defendants in the latters' capacity as trustees of the Rodorilly (sic - Rodorily) Trust, the sum of $80,856.79. In or about February 1988 (sic) the second plaintiff agreed to lend the defendants the sum of $80,856.79.
Pursuant to the terms of the agreement, on or about 12 December 1988 the plaintiffs paid the total sum of $161,713.58 by way of loan to the defendants.
By deeds between each of the plaintiffs and the defendants in their capacity as trustees of the Rodorilly (sic) Trust dated 17 March 1989 the defendants agreed to repay to each plaintiff the sum of $80,956.79 (sic) by monthly instalments of $500.
The plaintiffs plead that the defendants have repaid some moneys - $24,178.14 to the first plaintiff and $17,643.21 to the second plaintiff - but despite demand they have not repaid the balance.
There is owing to the first plaintiff $56,678.65 and to the second plaintiff $63,213.58 - an overall balance of $119,892.23.
I observe that until the morning of trial the statement of claim pleaded the repayments to the plaintiffs as $4,859.17 and $5,662.21 respectively. It has not been suggested there has been any repayment since the writ was issued in 1999.
The defence claims that by the deeds dated 17 March 1989 (the loan agreements) the instalments payable by the defendants were ascertained by reference to a lease agreement entered into between the plaintiffs as lessees and the defendants as lessors of the property situated at 84 Alexandria Road, East Fremantle ("the property"). Under the terms of that lease agreement the plaintiffs agreed, amongst other things, to pay to the defendants rental for the property at the rate of $1,000 per calendar month commencing 12 December 1988. Under the loan agreements the defendants agreed to repay the principal sum to the plaintiffs by calendar monthly instalments of a sum calculated by dividing by 2 the rent paid by the plaintiffs to the defendants pursuant to the lease agreement.
The defendants claim that part of the obligation of the plaintiffs was to pay the Shire and Water Authority rates and land tax assessed on the property after 12 December 1988 but I understand that that plea is abandoned for the lease agreement plainly states otherwise.
The loan agreements contain no other provisions for repayment of the principal sum and the defendants claim that they were not liable to make any payments to the plaintiffs if the plaintiffs did not make any payments of rent to the defendants under the terms of the lease agreement.
After the expiration of a few months from the date of signing the lease agreement the plaintiffs ceased making rent payments to the defendants, the defendants continued to make payments for and on behalf of the plaintiffs when the plaintiffs made payments of rent to them and the defendants deny that they are indebted to the plaintiffs in any amount.
It is in any event said by the defendants that they made payments to the plaintiffs which equalled or exceeded their obligations and they seek to set‑off and counterclaim for those and any excess payments.
In reply to the defence and counterclaim the plaintiffs plead that there was an implied term of the loan agreements that, if the defendants were no longer the proprietors of 84 Alexandria Road, East Fremantle, the principal sum outstanding pursuant to the loan agreements would be repayable by the defendants on demand. They plead this implied term on the bases:
"(a)that such a term is reasonable and necessary to give business efficacy to the loan agreement;
(b)it is so obvious that it goes without saying; and
(c)it is fair and equitable in the circumstances."
It is plain from the manner in which the defendants have approached this action that they deny that any such term can be implied in the agreements.
At the conclusion of these proceedings Mr Douglas Thorp, the second defendant, on behalf of the defendants, said that the defendants abandoned any counterclaim if indeed the claim is dismissed because the term pleaded cannot be implied in the agreements.

Findings of fact

The second plaintiff ("Mrs Ridgway") married the first plaintiff ("Mr Ridgway") after her first husband died on 4 January 1959. The plaintiffs are in their 80's.
In 1960 both the plaintiffs purchased the property and held it as joint tenants. They obtained a loan secured by mortgage from the Director of War Service Homes and by December 1988 outstanding upon that loan was $3,300.
In 1986 Mrs Ridgway's daughter Robyn Hudson (the first defendant) wanted to borrow some money from United Credit Union and the plaintiffs guaranteed that loan which was secured by a second mortgage - a loan of approximately $38,000. That mortgage was registered against the title on 4 December 1986. Robyn Hudson defaulted on the repayment and following a default notice from the United Credit Union threatening to sell the property Mrs Ridgway approached Douglas Thorp. Mrs Ridgway did not wish to trouble Mr Ridgway - the latter did not enjoy a good relationship with the children.
At a meeting in Fremantle in about September 1988 Richard Thorp (the third defendant) presented the proposal to create a family trust, sell the property to the trust and borrow against the security of the property to pay the United Credit Union and various other debts. I accept the evidence of Douglas Thorp on these issues. Richard Thorp named the trust the Rodorily Trust, an acronym being the first two initials of the first name of each child.
Under the proposed trust only the four children were to be the beneficiaries - they were also the trustees. The children's intention was to preserve the family home. Mr and Mrs Ridgway were to pay rent because they would have rental assistance from the government and contemporaneously the trust would pay Mr and Mrs Ridgway an equivalent sum of money. It was intended that Mr and Mrs Ridgway would occupy the property throughout their lives. The amount of $1,000 was accepted as the monthly rental and the loan repayments.
Mrs Ridgway liked the idea because she thought it would be a way to ensure that should she predecease her husband, the children would not lose the property.
Mr Ridgway was not enthusiastic about the idea but he agreed to it.
Richard Thorp was an accountant and Mrs Ridgway had complete confidence in him.
A number of documents were given to Mr and Mrs Ridgway to sign and they had little idea what they were signing but they knew that the property was to be transferred to the Rodorily Trust.
In the result a transfer was executed by Mr and Mrs Ridgway transferring the property to the defendants for the consideration of $160,000. They also executed on 17 March 1989 the loan agreements (exhibits F and K), the lease agreement ("Agreement to Take Residential Premises" exhibit G) on 21 February 1989 and on 10 March 1989 Mrs Ridgway executed a will which purported to leave her estate to her husband if he should survive her, but that if he should not survive her for 30 days then $1,000 to her grandson, Paul Douglas Hudson, and the residue of her estate to the Rodorily Trust.
The relevant parts of the lease (exhibit G) and the loan agreements (exhibits F and K) are these:
Exhibit G -
"1.THE LANDLORD LETS and the Tenant takes the premises …
THE RENT IS $12000 (Twelve thousand dollars) payable in arrears by monthly instalments of $1000 (one thousand dollars) on the 12th day of each and every Month with the first (adjusted) payment to be made on or before the 12th day of January 1989 and subject to review as provided in Special Condition 5.
2.…
3.THE LANDLORD
(i)…
(ii)…
(iii)The Landlord agrees that he will pay all land tax, metropolitan region improvement tax, Council Rates and water, sewerage and drainage rates (excluding excess water which is paid as set out in 2 (ii) above)."
Exhibits F and K -
"6.The Schedule
The Manner of Payment of Principal Sum
6.1The Borrower shall pay the Principal Sum to the Lender by calendar monthly instalments of a sum calculated by dividing by 2 the rent paid by the Lender and (the other lender) to the Borrower pursuant to the Agreement for Lease of even date made between the Borrower as Lessor of the one part and the Lender and Ethel Elizabeth Ridgway of the second part. The instalments are to be paid calendar monthly in arrears on the 12th day of each and every month the first of such payments to be made one calendar month from the Date of the Loan.
6.2The Borrower may pay to the lender from time to time and at the discretion of the Borrower further sums in addition to the payments pursuant to clause 6.1 hereof.
The nature of the transaction therefore was such that effectively there was to be no monetary liability either way save that the children as trustees of the trust would be responsible for some outgoings, such as rates.
Upon the transfer of the property to the children a loan was taken from RESI Corporation (Bank of Melbourne) for about $121,000, secured by mortgage. Interest rates initially were thought to be manageable but then rose rapidly to 17 per cent per annum. The debt to United Credit Union was paid and some other debts of Robyn Hudson. The children drew up a budget for Robyn Hudson to control her spending - but she did not keep to the budget. By 28 December 1988 her borrowing had increased to $51,000. Richard Thorp then borrowed from the trust to buy into a partnership and Lynette Vanstan borrowed $5,000. Douglas Thorp borrowed $5,000 on 20 April 1989 and his financial circumstances continued to deteriorate. The debt to the Bank of Melbourne grew.
In an attempt to solve the problems, on 12 December 1991 the children sold the property to one Michael Horner, who was living with Lynette Vanstan, for $140,000. He was regarded as a friend of the family. No profit was made by the trust. The arrangement was that Horner would receive the monthly rental payments of $1,000 to maintain the occupation by Mr and Mrs Ridgway of the property. A "gentleman's agreement" was reached with Horner that if he wanted to sell the property he would give first option to the trust to buy it at the same price - $140,000.
The monthly rental payments could not be met. Horner and Lynette Vanstan separated.
To try to preserve Mr and Mrs Ridgway's occupation of the property in January 1994, Douglas Thorp and Mrs Ridgway's grandson, Paul Hudson, (Robyn Hudson's son) bought back the property from Horner - but the latter insisted on a higher consideration - $240,000. Paul Hudson and Douglas Thorp borrowed $160,000 upon the security of the property and Horner, as vendor, lent $80,000 to enable the property to be transferred to Paul Hudson and Douglas Thorp as tenants in common in equal shares. None of the other trustees was financially able to participate in this venture.
On 12 January 1994 Douglas Thorp and Paul Hudson as owners entered into a "Fixed Term Agreement" - exhibit 3 - with Mr and Mrs Ridgway as tenants. This provided for the payment of rent of $1,000 per month. Mr and Mrs Ridgway agreed to pay the outgoings.
On 21 April 1999 solicitors for Mr and Mrs Ridgway, by letter (exhibit H(2)), wrote that "the amount of each loan is in fact $80,856.79" and they had been instructed to issue a writ for recovery of these loans.
In the first place I find it impossible to calculate with any certainty the amounts paid by Mr and Mrs Ridgway as "rent" and the amounts paid by the trust. The documents are incomplete and to the extent they show anything, the "rental repayments" total $18,000 and the "loan repayments" $40,149.30. There appear to have been no payments since 19 April 1991. While cheque stubs have been put in evidence by the plaintiffs there is no evidence (outside the trust's records) that any of these amounts has been credited to the defendants or debited to the accounts of the plaintiffs. I would make no order upon the matters of set‑off and counterclaim.
Secondly, and this is the crux of the action, I am invited by Mr and Mrs Ridgway to find the pleaded implied term. This is the basis for their claims.
This I cannot do.
It was never intended by the parties that the property be paid for by the children in the real sense of a loan repayment. The property was to be that of the children, with their obligation to pay outgoings. Mr and Mrs Ridgway were to have the right to occupy the property during their lifetime - or the lifetime of the survivor of them.
The disastrous dealings by the children have placed in jeopardy the occupation of the property by Mr and Mrs Ridgway but this cannot now be said to raise the implied term pleaded.
It is well settled that the court should be slow to imply a term and for a term to be implied, the following conditions must be satisfied:
1)it must be reasonable and equitable;
2)it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
3)it must be so obvious that "it goes without saying";
4)it must be capable of clear expression; and
5)it must not contradict any express term of the contract.
The term I am asked to imply in this contract is contrary to the intent of the parties. It could not be reasonable and equitable to imply it and it would not be necessary to imply it to give "business efficacy" to the contract.
The intent of the parties may fail so far as the occupation of the property is concerned, though that is not yet the reality. The mortgagee has threatened action but has not yet exercised its rights under the mortgage. This does not, however, require that the term sought is to be implied.
The plaintiffs' claims are dismissed.
The counterclaim also is dismissed.