Rix v Mahony
[2009] NSWSC 675
•24 July 2009
CITATION: Rix v Mahony [2009] NSWSC 675 HEARING DATE(S): 14/07/09, 15/07/09, 16/07/09
JUDGMENT DATE :
24 July 2009JUDGMENT OF: Forster J at 1 DECISION: See paragraphs 63 to 67 of judgment. CATCHWORDS: REAL PROPERTY - transfer by parents to daughter and son-in-law for nil consideration - presumption of advancement - rebuttal of presumption. CATEGORY: Principal judgment CASES CITED: Brown v Brown (1993) 31 NSWLR 582
Nelson v Nelson (1994) 33 NSWLR 740
Nelson v Nelson (1995) 132 ALR 133PARTIES: Plaintiff: Frederick George Rix
Defendants: Lisa Jane Mahony and Dennis Anthony MahonyFILE NUMBER(S): SC 5097/2008 COUNSEL: Plaintiff:G.R.Waugh
Defendants: G.KennettSOLICITORS: Plaintiff: n/a
Defendants:Paul Wells & Co Solicitors
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
FORSTER J
FRIDAY, 24 JULY 2009
5097/2008 FREDERICK GEORGE RIX v LISA JANE MAHONY & ANOR
JUDGMENT
1 HIS HONOUR: The plaintiff, Frederick George Rix (“Mr Rix”) is a spritely and alert 81 year old. The first defendant, Lisa Jane Mahony (“Mrs Mahony”) is his daughter and the second defendant, Dennis Anthony Mahony (“Mr Mahony”) is her husband.
2 The only other party to the proceedings is Mavis Harriett Rix (“Mrs Rix”) who is Mr Rix’s wife and Mrs Mahony’s mother. Mrs Rix was only recently joined as a defendant to the proceedings in circumstances which I set out in a short judgment that I gave on the first day of the hearing, namely on 14 July 2009. I also made an order pursuant to the UCPR Part 28 rule 28.2, whereby I ordered that all questions pertaining to the rights and obligations of Mrs Rix in relation to any of the other parties be decided separately from, and after the trial of, all other questions raised in these proceedings. Mrs Rix has taken no part in the hearing before me.
3 Until shortly prior to the commencement of the hearing, Mr Rix was self-represented and was the author of his pleadings, including his Statement of Claim. Not surprisingly, Mr Rix being a layman, the Statement of Claim is not expressed in the clearest of terms, but the parties have been able to treat the document as adequately raising the issues that I have to decide.
4 When the plaintiff’s case was opened by Mr G.R. Waugh of Counsel, who appeared for Mr Rix on the hearing before me, he outlined Mr Rix’s claim, as set forth in the Statement of Claim, to comprise the following:
(a) A claim for a 25 percent beneficial interest in the property situated at 216A Gardeners Road, Rosebery (“the property”);
(c) A claim for some form of entitlement to the benefit derived from what was described as a “newspaper run”, which Mr Rix had transferred to Mr Mahony in about 1992.(b) A claim for a beneficial interest in the business currently being carried on by Mr and Mrs Mahony through corporate entities which they own and control; and
5 However, Mr Waugh informed me that Mr Rix was no longer pursuing any claim in respect of the newspaper run referred to in (c) above, and that his claim was restricted to the claims under (a) and (b). I propose to deal with those claims in the order in which they appear.
6 Before doing so, I propose to say something about the credibility of the witnesses who gave evidence before me.
Credibility of the witnesses
7 Each of Mr Rix and Mr and Mrs Mahony gave evidence before me and were cross-examined in the process. In many aspects of the evidence, there were significant conflicts between the evidence given by Mr Rix and the evidence given by Mr and Mrs Mahony. Accordingly, I have had to give some consideration to the credibility of each of those parties as witnesses.
8 I should first state that I do not consider that any of the three witnesses were intentionally telling untruths in the witness box. I formed the view that all of them were doing their best to give their evidence honestly and to the best of their recollection.
9 However, I found the evidence given by Mr Rix to be less satisfactory than that given by Mr and Mrs Mahony. As I have already noted, Mr Rix is a person of 81 years of age and, not surprisingly, his recollection of events, some of which occurred as long as 26 years ago, was not at all reliable. By way of example, his evidence relating to various improvements that were made to the property at some time in the late 1970s or the very early 1980s, about which he was adamant that they occurred between 1983 and 1985, were proved objectively to have been effected before that period.
10 The other difficulty that I found in accepting the evidence of Mr Rix was that he tended to be extremely firm and unshakeable in respect of matters about which it would have been almost impossible to be firm and unshakeable. He held and expressed views in a way that brooked no opposition, and his lack of any flexibility gave me the impression that in many respects, he had firmly convinced himself in relation to the events in question, notwithstanding that the bases upon which he so persuaded himself either could not be confirmed or were clearly erroneous.
11 By comparison, I found that Mr and Mrs Mahony appeared to have a clearer recollection of the events in question. They were more willing to accept propositions that were put to them even if those propositions did not advance their case. I found them both to be reliable witnesses and have concluded that, in the absence of any substantial objective corroborative evidence to the contrary, where the evidence of Mr Rix was in conflict with the evidence given by Mr or Mrs Mahony, I should prefer the evidence of Mr or Mrs Mahony to that given by Mr Rix.
(a) The claim in respect of the property
(i) The position prior to 1983
12 At all relevant times, Mr and Mrs Rix were the owners of the property both at law and in equity and were its registered proprietors as joint tenants. They lived there with their family, which included Mrs Mahony until she married Mr Mahony in February 1981.
13 There was a substantial amount of evidence given before me as to what improvements had been effected to the property by mid-1983. Mr Rix gave evidence to the effect that a substantial amount of work was completed and paid for by him at some time between mid-1983 and 1985. These works were said to include conversion of the lower ground floor area of the property so as to enable it to be used as a chiropractic practice, the construction of an in-ground swimming pool and a pool cabana, the erection of a courtyard wall around the perimeter of the property and the combination of structural alterations to the front of the property to comply with Council Regulations.
14 By contrast, Mrs Mahony, who also lived at the property until her marriage and who continued to visit regularly after that time, gave evidence to the effect that, contrary to Mr Rix’s evidence, all of those works had been completed prior to 1983. Her evidence was corroborated by a number of photographs which are in evidence, and which show the improvements at various stages. The dates at which a number of those photographs were taken could be identified by observing the apparent ages of various of Mr Rix’s grandchildren depicted in them.
15 Having regard to the photographs in question as well as the comments that I have made above concerning the credibility of the various witnesses, I accept the evidence of Mr and Mrs Mahony on this issue and find that those improvements were not effected in the period from mid-1983 to 1985.
(ii) Events between 1983 and August 1992
16 It is common ground that in early 1983, Mr and Mrs Mahony were looking for a home to buy. On learning that to be the case, Mr Rix suggested that rather than buying a home for themselves, they should construct a second storey on the property with a view to living there. It is also common ground that Mr and Mrs Mahony agreed to that suggestion and that Mr and Mrs Rix and Mr and Mrs Mahony discussed how their arrangement would be recorded.
17 According to Mr Rix, the others all agreed with him when he said that depending upon how much the extension cost, the parties would work out on a percentage basis, presumably having regard to the value of the property, the amount of Mr and Mrs Mahony’s equity in the property and have it recorded on “the deeds”. His evidence was that there was no agreement at the time as to the percentage in question, and that the relevant percentage would have to depend on the final costs incurred by Mr and Mrs Mahony.
18 By contrast, the evidence of Mr and Mrs Mahony was that their equity was to be measured by reference to the costs they would incur, and that it was agreed in advance that on completion of the extensions, the equity in the property would be 1/3rd Mr Rix, 1/3rd Mrs Rix and 1/3rd Mr and Mrs Mahony. It was their evidence that those percentages were worked out in advance on the basis of an estimate that the costs which would be incurred by Mr and Mrs Mahony would be $100,000 and that, after the extension had been completed, the property would be worth around $300,000. Mr Rix disputes that any such amounts or percentages were agreed to in advance.
19 In order to determine whose evidence I should accept, I have had regard to such other evidence as was adduced before me.
20 Mr Rix gave evidence to the effect that in his opinion the property had a value of $450,000. It is not clear on the evidence whether in his opinion, that was the value of the property even before the extension or only after the extension had been completed. To his credit, however, Mr Rix admitted that his assessment of value was the amount for which he would have been willing to sell the property, not what others may have been prepared to pay for it. In that sense, his “valuation” is of little objective significance.
21 The evidence given by Mr Rix was that Mr and Mrs Mahony spent no more than $60,000 or $70,000 on the extension. His reason for saying so was that he had not been able to find any documentary evidence that would support their claim that they paid any more than that amount. In addition, he gave evidence that his assessment did not include the cost of installing a kitchen. By comparison Mr and Mrs Mahony gave evidence, and I consider did so truthfully, to the effect that the costs incurred by them, including the costs incurred for the kitchen was probably close to $90,000 or thereabouts. I consider that the cost of installing the kitchen should be included in the costs of the extension.
22 The significance of this conflict of evidence is that by a Transfer dated 15 July 1983, Mr and Mrs Rix transferred the property as to a 4/5th share to themselves and as to a 1/5th share to Mr and Mrs Mahony. The evidence of Mr and Mrs Mahony was that when that document was put before them for signature, they expressed the view that it conflicted with the agreement that had been reached between the parties to the effect that they would be obtaining not a 1/5th, but a 1/3rd interest in the property. Mr and Mrs Mahony gave evidence to the effect that they remonstrated with Mr Rix about the form of the Transfer, only to be told by Mr Rix that the reason for showing only a 1/5th interest was to save on stamp duty and that, in accordance with their earlier agreement, the property would be held on the basis that Mr Rix would own a 1/3rd interest, Mrs Rix a 1/3rd interest and Mr and Mrs Mahony would own a 1/3rd interest between them.
23 Mr Rix denies that any such conversation occurred. He claims that the only conversation that took place at the time was that he said to both Mr and Mrs Mahony:
“The cost of the amount you have paid to Builder Eric Leeming is approximately $60,000 to $70,000 a fair share would be 4/5ths to Mavis and I and 1/5 to both you and Dennis”
24 I do not accept the evidence given by Mr Rix for a number of reasons. First, for the reasons I have already stated, I do not accept that the total amount spent by Mr and Mrs Mahony was only $60,000 to $70,000. It was more than that, namely approximately $90,000. In those circumstances, I find it unlikely that Mr and Mrs Mahony would not, at the very least, have disputed the assertion that they had only spent $60,000 to $70,000.
25 Secondly, whatever conversation in fact took place must have taken place before the Transfer was executed, which appears to have been no later than 15 July 1983. At that time, the work had not been completed, and indeed would almost certainly have been at an early stage. The evidence of Mrs Mahony, which I accept, is that they only moved into the extension in about June 1984. According to both Mr and Mrs Mahony, the work on the extension had only commenced in April or May 1983. Thus, at the time of the conversation, it would not have been possible for Mr Rix to assert how much Mr and Mrs Mahony had paid to the builder. That figure would only have been known once the extension had been completed. That factor of itself makes it almost impossible to accept Mr Rix’s evidence on this issue.
26 Thirdly, the consideration shown in the transfer is the sum of $27,000. It is common ground between the parties that no such amount was paid by Mr and Mrs Mahony to Mr and Mrs Rix. None of the witnesses could explain how that amount came to be shown as the consideration. In the course of submissions, Mr G. Kennett of Counsel, who appeared for the defendants, noted that the transfer had been stamped at $376.00 and noted further that at the time, a conveyance for a consideration of $27,000 attracted a stamp duty of approximately $376.00. He put forward the hypothesis, which I must say I found attractive, that the $27,000 was intended to represent the value of the 1/5th interest being conveyed by the Transfer, which, if extended, would have valued the property, prior to the extensions, at $135,000.
27 The figure of $135,000 might be a little low, as one might suspect that the consideration would hardly have been overstated, but an anticipated injection of an amount of $100,000, or even a little less, could reasonably have been expected to increase the value of the property to sufficiently close to $300,000 so as to earn Mr and Mrs Mahony a 1/3rd interest.
28 Finally, as I have noted above where there is a conflict of evidence between Mr Rix on the one hand and Mr and Mrs Mahony on the other I prefer the evidence of Mr and Mrs Mahony.
29 There is one further matter I should deal with, namely the nature of various invoices addressed to Mr Rix by a person whose name is not identified except that he appears to have been known as “Dan”. Those invoices, which are contained in Exhibit 2 in these proceedings, are for relatively small amounts and together add up to approximately $7,500. I am not satisfied that the work for which those invoices were rendered form part of the extensions undertaken by Mr and Mrs Mahony or that they bear upon my determination of the issues before me.
30 For those reasons, I find that upon Mr and Mrs Mahony having paid for the extensions in question, in accordance with the agreement reached between the parties, the registered proprietors held the beneficial interest in the property on trust as to a 1/3rd interest for Mr Rix, a 1/3rd interest to Mrs Rix and a 1/3rd interest to Mr and Mrs Mahony between them.
(iii) Events between September and November 1992
31 In about June 1990 Mr Rix was charged with certain offences involving the wrongful receipt of social security payments. By an order made on 13 July 1990 under the Proceeds of Crime Act 1987, this Court made a restraining order in relation to the property. Mr Rix was subsequently tried and convicted and was due to be sentenced in late November 1992.
32 In the period September–October 1992, there were a number of discussions involving Mr and Mrs Rix and Mr and Mrs Mahony. It is now common ground that those parties were all of the view that Mr Rix would likely be treated more favourably at his sentencing if the amount that Mr Rix had been convicted of receiving unlawfully was repaid. The amount involved was a little under $80,000. It is now also common ground that it was agreed that if Mr and Mrs Mahony paid off that debt, such payment would be regarded as constituting the purchase price for a further interest in the property.
33 Following those discussions, Mr and Mrs Mahony paid to the Commonwealth on 6 November 1992 an amount of $79,281.77. They did so by borrowing funds from Avco Finance on the security of certain business equipment owned by the business that they controlled. At no time have Mr and Mrs Mahony sought to have that amount repaid by Mr Rix, nor is there any evidence of Mr Rix ever having done, or having attempted to do so. The burden of that borrowing has fallen entirely on Mr and Mrs Mahony.
34 According to the evidence of Mr Mahony, he told Mr Rix that the proportion of the property deemed to have been purchased by the payment out of those funds should be based on a valuation of the property by a proper valuer and the total cost that he and Mrs Mahony would incur. He said he told Mr Rix that in addition to the $80,000, they would wish to include, for the purpose of determining the relevant proportion of the property, that they were acquiring the insurance premiums on the property that he and Mrs Mahony had been paying since moving in and the stamp duty and legal expenses which he assumed they would have to bear. Mr Rix says he has no recollection of any such conversations.
35 There are two valuations of the property as at about that time. The first valuation is referred to in a letter from R. F. Giles, Payne and Co Solicitors, dated 13 November 1992, addressed to Mr and Mrs Mahony. That letter refers to a valuation by Gray and Mulroney, valuers, also dated 13 November 1992 which valued a 3/10th share of the property at $157,500. On that basis, the whole of the property would have been valued at $525,000. At about the same time, namely on 23 December 1992, presumably for mortgage purposes Citibank valued the property at $460,000.
36 Dealing with the additional items referred to by Mr Mahony, so far as the insurance premiums referred to by Mr Mahony are concerned, the only evidence before me is that contained in paragraph 34 of Mr Mahony’s affidavit in which he deposed that since 1983 he and Mrs Mahony had paid for the building and contents insurance on the property. He said that he no longer had receipts for all of the insurance premiums paid but that he attached, and ultimately put in evidence, such receipts as he did have. I have reviewed the documents to which he referred, being at pages 53 to 82 of what became Exhibit 1, but, as best I can tell, the only receipt that appears in that bundle which could come within the category of receipts for insurance premiums that had been paid prior to these conversations in September or October 1993, was one receipt in an amount of what appears to be $278.75. All of the other receipts appear to relate to the period subsequent to September to October 1992. No other evidence is before me as to the amounts paid by Mr and Mrs Mahony prior to the conversation with Mr Rix.
37 So far as stamp duty and legal costs are concerned, as events transpired, no such stamp duty or legal costs were incurred at that time. In circumstances to which I turn below, when the whole of the legal estate was subsequently transferred to Mr and Mrs Mahony on 11 March 1993, stamp duty in an amount of $12,050 was paid. However, that amount was calculated on the assumption that the transaction was a transfer of a 4/5th interest in the property. It is clear that the stamp duty on the transfer of the equity represented by the payment of the debt to the Commonwealth would have been substantially less than $12,050. Indeed, the letter from R.F.Giles, Payne and Co advised that the stamp duty calculated on the transfer of a 3/10th share would be in the vicinity of $4,000. My earlier findings suggest that the share to which Mr and Mrs Mahony became entitled as a result of the payment to the Commonwealth was substantially less than a 3/10th share, so that in the circumstances, the stamp duty on the transfer of their newly acquired share would more likely have been in the vicinity of $2,000.
38 So far as legal costs are concerned, the costs incurred in relation to the transfer of the whole title was $1,630. Accordingly the total amount for which Mr and Mrs Mahony could claim to have become additionally entitled in respect of insurance, stamp duty and legal costs would have been in the vicinity of $4,000. That amount, when added to the amount paid to the Commonwealth, would have brought their “contribution” to approximately $84,000.
39 There was one further amount that Mr and Mrs Mahony claimed ought to have been added to the said $84,000. They have both given evidence to the effect that in February or March 1993, they became aware that Mr Rix had a debt secured by a mortgage over the property, which debt had to be repaid by them in order to have the property transferred to them, and so as to clear the title for Citibank, the incoming mortgagee. Mr Mahony did not recall the amount involved, but Mrs Mahony said that she clearly recalled the amount being in the order of $20,000. I accept the evidence of Mrs Mahony that there was a further $20,000 to repay. However, that fact of itself does not entitle Mr and Mrs Mahony to add that amount to the figure that was to represent the purchase price for part of the equity in the property.
40 As I noted earlier, there had been orders made by this Court restraining any person from disposing of or otherwise dealing with the property. However, those orders were varied so as to include the proviso that a particular bank account in the names of Mr and Mrs Rix with the National Australia Bank, the repayment of any indebtedness whereunder was secured by a second registered mortgage over the property, could be dealt with so as to enable Mr Rix to obtain advances from time to time up to a total indebtedness of $6,750. There was no evidence before me as to how a $20,000 debt had been incurred. I am not prepared to assume that Mr Rix would have contravened an order of the Court particularly in circumstances where he was already subject to a criminal charge by the Commonwealth. In any event, Mrs Mahony gave evidence in the witness box, when asked whether when she made the discovery in relation to the $20,000, that changed her understanding of the respective shares in the property that the parties were to be entitled to, she replied that she did not think so. So far as Mr Mahony was concerned, his evidence was that while he believed that this amount would further increase the share of the property to which he and his wife were entitled, he conceded that he did not discuss with Mr Rix the implications of their having to pay this further amount. In the circumstances, I do not intend to include in the calculations the said sum of $20,000 or any part of it.
41 Accordingly, on the basis that the property was at that time worth $525,000, the sum of $84,000 represented approximately 16 percent of the value of the property and if the property was worth only $460,000 the relevant percentage was approximately 18.3 percent.
42 If one adds those percentages to the 33 1/3rd percent which I consider Mr and Mrs Mahony had “earned” by paying for the extensions to the property, their interest was either 49.3 percent or 51.6 percent of the property. Both figures are close enough to 50 percent.
43 There is one further piece of evidence to which I should refer as having occurred in the period September to November 1992. Mrs Mahony gave evidence at Mr Rix’s sentencing hearing. Part of the transcript has been admitted into evidence. In the course of that evidence, Mrs Mahony was cross-examined, and it was put to her that she and Mr Mahony had a 1/5th share as joint tenants in the property. Mrs Mahony gave the following answer:
“Yes but that will be changed. We are going to go for one half share”.
(iv) Events between December 1992 and December 1993
44 In December 1992, before any steps had been taken to record the change in the beneficial interests in the property as a result of Mr and Mrs Mahony making the payments to which I have just referred, Mr Mahony lost his job. He and Mrs Mahony decided to start their own business. In January 1993 Mr and Mrs Mahony formed a company under the name of “Reflective Images Pty Ltd” in which they have at all times been, and still remain, the sole beneficial shareholders.
45 Mr Mahony gave evidence, which I accept, that when he sought to obtain fabrics required for the business from 3M Australia, the principal supplier of those fabrics, that company would not agree to supply them with a 60 day credit facility unless Mr and Mrs Mahony could grant a mortgage over the whole of the property by way of security. If Mr and Mrs Mahony were only able to grant a mortgage over a fifty percent interest in the property, 3M would only be prepared to supply fabrics on a 30 day credit facility which, it would appear, would have been significantly less attractive.
46 It is common ground between the parties that in or about February 1983 Mr and Mrs Mahony had a conversation with Mr and Mrs Rix. Mr Mahony deposes to a conversation which I accept as being in words to the following effect:
- “ Mr Mahony : We need to do a property transfer to record the proper entitlement of Lisa and me for the money we have paid.
- Also, 3M want to take a second mortgage over the property to give me credit for the business. They want Lisa and me to be the proprietors of the house.
- How would you feel about signing the legal interest over to Lisa and me? That would enable the asset to be used to develop our business.
Mr Rix: We might as well put everything in your name-you and Lisa. I don’t want to have any assets in my name. You have one quarter and Lisa three quarters”.
47 In due course, by the Transfer to which I have already referred, which bears the date 11 March 1993, Mr Rix and Mrs Rix “in 4/5 share” and Mr and Mrs Mahony “in 1/5 share” transferred the property for a consideration stated to be “nil” to Mrs Mahony “in 3/4 share” and Mr Mahony “in ¼ share”.
48 Prior to the execution of that Transfer, namely on 19 February 1993, a document drafted by Mr Rix and titled “To whom it may concern” was signed by Mrs Mahony and Mr Rix. The terms of that document were as follows:
“This is a personal agreement between Frederick George Rix and Lisa Jane Mahony.
The agreement is that as of todays date, four people own twenty-five percent each of the property at 216A Gardeners Road, Roseberry. These people being Frederick George Rix, Mavis Harriet Rix, Dennis Anthony Mahony and Lisa Jane Rix.
As of Monday, February 1993, the fifty percent shares of Frederick George Rix and Mavis Harriet Rix will be signed over to Lisa Jane Mahony, this being for the purpose of Lisa and Dennis to obtain a loan to start their business.
I have agreed to sign this declaration stating that I owe Frederick George Rix either of the following, that being of his choice.
(a) The price of $150,000 being for his share of the property at 216A Gardeners Road, paid at his request:
or;
I do this in good trust.”(b) That if any or all of the above listed four (4) wishes to sell the property at 216A Gardeners Road each receives his/her twenty-five percent value of the home.
49 It will be noted that the document recites that as at that date, namely as at 19 February 1993 (which preceded the transfer of the whole legal estate) four people owned 25 percent each of the property, those people being Mr Rix, Mrs Rix, Mr Mahony and Mrs Mahony. Mrs Mahony was cross-examined in respect of that document. Although Mrs Mahony said that she considered the price of $150,000 representing a ¼ share of the property, as being too high, in all other respects she said that she agreed with the contents of that document.
50 Certainly Mrs Mahony had no difficulty acknowledging that she understood that at about that time, she and Mr Mahony were between them entitled to a half share of the property. She conceded this in cross- examination.
51 Mr Mahony’s evidence was somewhat different. He deposed to having an “understanding” in about February 1993 that he and Mrs Mahony were entitled to “somewhat more than 50 percent of the property”, although he conceded that he had not made a detailed calculation taking all of their respective contributions into account. Later in his affidavit, when dealing with the period after 1993, he said that he acted on the understanding that he and Mrs Mahony owned approximately 2/3rds of the property with 1/3rd belonging to Mrs Mahony’s parents. However, he did not suggest that he had discussed these percentages with anyone, including Mr Rix.
52 I do not consider that Mr Mahony’s understanding of their respective interest in the property was accurate. My own calculations, which I have set out above, suggest that Mrs Mahony’s belief, which appears to have been the same as Mr Rix’s belief, was in fact correct. Further, it seems to me that Mr Mahony must himself have at least realised that Mr Rix’s view did not conform with his belief, otherwise it would have made no sense to have the legal title split as to a 1/4th share to him and as to a ¾ share to Mrs Mahony.
53 What then was the effect of the transfer? There was little debate on this issue, as the law seems well settled. Given the findings I have made above, there can be little doubt (and I gathered that it was substantially common ground between the parties) that Mr Mahony, to whom a 1/4th share of the property was transferred at law, was intended to hold that share for himself absolutely.
54 The position of Mrs Mahony is somewhat more complicated. On the basis that Mrs Mahony was entitled to a 1/4th share in the beneficial ownership of the property prior to the transfer to her of the legal title to a 3/4th interest, the issue that arises is how the additional one half share (belonging as to a 1/4th share to Mr Rix and as to the other 1/4th share to Mrs Rix) should be treated.
55 In relation to the 1/4th share belonging to Mr Rix, it is well established that where a father transfers property to his child, the presumption of advancement applies. It has been said that this presumption of advancement:
- “is perhaps not strictly a presumption at all. Rather, the position is that there are certain relationships from which equity infers that any benefit provided for one party at the cost of the other has been provided by way of ‘advancement’. The consequence is that the equitable estate follows the legal estate and is at home with the legal title; there is an absence of any reason for assuming that a trust arose;”
See Nelson v Nelson (1995) 132 ALR 133 at 140 per Deane and Gummow JJ, citing Calverley v Green (1984) 155 CLR 242.
56 However, it is clear that the presumption of advancement (for want of a better description) may be rebutted by evidence of the father’s actual intention at the time of the transfer. In the present case, that presumption is clearly rebutted by the document of 19 February 1993 to which I have already referred and whose terms I have set out above. In that document, in my opinion Mr Rix had made it patently clear that he did not intend by the transfer, which was by then in the contemplation of the parties, to dispose of his beneficial interest in the property. On the contrary, he made it clear that he expected Mrs Mahony to hold his beneficial interest on a continuing trust for him.
57 Mr Kennett submitted that the document in question is not a declaration of trust but rather imposes upon Mrs Mahony the contractual obligation to act in the manner referred to in “A” or “B” thereof as Mr Rix chose. Even if that were so, it would not negative what I consider to be a clear expression of Mr Rix’s intention to rebut the presumption of advancement and to make it quite clear that he intended to retain his beneficial interest notwithstanding the transfer of the legal estate.
58 So far as Mrs Rix is concerned, it is now also established that the presumption of advancement also applies to the relationship of mother and child: Brown v Brown (1993) 31 NSWLR 582 at 591, at 598-599; Nelson v Nelson (1994) 33 NSWLR 740 and on appeal from that decision: see Nelson v Nelson (supra).
59 However, I am in no position to determine, and I do not determine, whether the presumption as between Mrs Rix and Mrs Mahony has been rebutted. As I have earlier noted, Mrs Rix did not take part in these proceedings and the determination of the question of her interest in the property has been postponed to a later hearing. Accordingly, I am in no position to determine, one way or another, the state of her interest in the property.
(v) Events between 1994 and 2008
60 There was quite an amount of evidence adduced by both parties as to the various expenses incurred in respect of the property since the transfer in 1993. There is no doubt that both parties have spent money on the property, but each of them also had the benefit of living there. There was no evidence before me to suggest that the parties ever agreed, or even discussed, that their respective expenditures would in any way alter the beneficial ownership of the property. In those circumstances, I do not consider that those expenditures, or for that matter, any work performed in or about the property, in any way altered their respective beneficial interest in the property. Nor do I consider it appropriate in the circumstances to impose a charge in favour of any party in respect of his or their contributions (financial or physical) given that over time, those contributions were neither extensive, having regard to the current value of the property, nor did they rise so far above the levels of expenditure or labour that could be reasonably expected to enhance the quality of the parties’ enjoyment of living in the property as to make it inequitable not to impose a charge.
61 If I am wrong in the conclusion I have reached above in relation to the 19 February 1993 document, and if the document represents nothing more than evidence of an absolute transfer subject to the contractual obligations contained in it, there would likewise be no accounting for the post-1993 expenditures.
62 In light of the foregoing, I am of the opinion that:
(b) Mrs Mahony holds her 3/4 legal interest upon trust:
(a) Mr Mahony holds his 1/4 th legal interest beneficially for himself; and
(ii) as to a ¼ interest in the property for herself absolutely.(i) as to a ¼ interest in the property upon trust for Mr Rix; and
63 I make no finding as to the manner in which Mrs Mahony holds the remaining ¼ interest in the property, and in particular whether she holds it for herself absolutely or in trust for Mrs Rix or in some other way or in some other proportion.
(b) The Claim in respect of the Business
64 This claim can be more easily disposed of. The only evidence to suggest that Mr Rix has any interest in the business conducted by Mr and Mrs Mahony through their various companies is the evidence of Mr Rix who has asserted that, at the time Mr and Mrs Mahony requested that the title to the property be put in their names for the purposes of obtaining better credit facilities from 3M, he said to them words to the following effect:
- “The house as always been called a family home build for a family unit to enjoy, any business arrangement would have to include all family members, your mother and I would only risk their future share in t he home I the home and business was a family concern and we would then be in the gamble of sharing any success together or running the risk of loosing everything (sic)”.
65 Both Mr and Mrs Mahony emphatically denied that any conversation to that effect ever took place and I accept their denial. I also accept their evidence, and indeed evidence to the same effect by Mr Rix, that he at no time participated in any aspect of the business, was not involved in its management and never sought or received any amount from the business. Indeed he had little familiarity with the business other than that he was aware that it was successful.
66 No doubt Mr Rix feels that he, and indeed other members of his extended family, should receive some benefit from the success of the business, given that as the property was, in his eyes, a family home owned by the family unit, the business, whose credit lines were first based on the property, should also be a family business. Indeed, he said that he thought that not only he and Mrs Rix, but also his sons, their respective wives and children, were also entitled to some unspecified share in that business.
67 However, I see no basis whatsoever for finding that either Mr Rix, Mrs Rix or any other member of his family have any entitlement whatsoever to the business or to any share of it. In my opinion it makes no difference that the property was from time to time the subject of various mortgages securing facilities in favour of Mr and Mrs Mahony and the companies that they managed. While I accept that suffering a mortgage to be placed on the subject property did expose them to a risk that the principal debtors may default, that was a risk that Mr and Mrs Rix freely accepted, and there is no basis for them now to impose conditions that were not agreed to at the time.
Orders
68 I have been informed from the bar table that Mr and Mrs Mahony are anxious to have the property sold at the earliest opportunity. I was also informed that were that to occur, trustees for sale may need to be appointed. Counsel for both parties indicated that attempts would be made to reach agreement as to the manner in which the property would be sold and if trustees for sale were to be appointed, the identity of those trustees. It was hoped that the parties would be able to agree on the mechanics of how their financial relationship should be disentangled.
69 At the same time, I expressed the hope that some agreement may be reached between Mr and Mrs Mahony and Mrs Rix in relation to Mrs Rix’s interest in the subject property, particularly given the continuing closeness between Mrs Rix and her daughter, Mrs Mahony.
70 Finally, I was requested by Counsel for the defendant, Mr Kennett, not to deal with the question of costs until after the parties have had an opportunity to address me once my reasons for judgment have been published.
71 In the circumstances, the only order that I presently make is that I stand over the proceedings before me for further directions on a day to be arranged in consultation with my Associate.
72 On that day, I expect the parties to bring in draft Short Minutes setting out the formal orders they wish me to make to reflect my foregoing reasons. If the parties cannot agree, they are to bring in their own respective draft orders.
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