Ryan v Ryan
[2012] NSWSC 636
•08 June 2012
Supreme Court
New South Wales
Medium Neutral Citation: Ryan v Ryan [2012] NSWSC 636 Hearing dates: 23 May 2012 Decision date: 08 June 2012 Jurisdiction: Equity Division Before: Ward J Decision: Access to some of the funds held in Court permitted - orders to be made following submissions as to regime for payment out.
Catchwords: PRACTICE AND PROCEDURE - application for payment out of moneys presently held in Court in order to find legal expenses of criminal appeal proceedings and forfeiture proceedings - principles applicable on such an application where fund in Court represents moneys over which estate claims a resulting or constructive trust - HELD - order for access to part of the funds subject to provision of satisfactory costs estimates to be applied in priority to criminal appeal proceedings
EQUITY - resulting trusts - property held in joint title - unequal contributions to purchase price - applicant was jointly liable with deceased on mortgage agreement - OBITER - estate has seriously arguable claim for presumed resulting trust
EQUITY - presumption of advancement - the parties were in a de facto relationship at the time that the property was acquired - whether presumption applicable - OBITER - as stands on authority at present cannot assume that a presumption of advancement applies where parties were in a de facto relationship
FORFEITURE RULE - Forfeiture Act 1995 - property held in joint title by deceased and applicant - operation of right of survivorship - OBITER - estate has seriously arguable claim that applicant holds deceased's half interest on constructive trust for the deceased's estate due to forfeiture ruleLegislation Cited: De Facto Relationships Act 1984 (NSW)
Family Law Amendment (De Facto Matters and Other Measures) Act 2008 (Cth)
Family Law Act 1975 (Cth)
Forfeiture Act 1995 (NSW)
Supreme Court Act 1970 (NSW)
Trustee Act 1925 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)Cases Cited: A v C (No 1) [1981] 1 QB 956
Anderson v McPherson [No 2] [2012] WASC 19
Australian Spirit Management Pty Ltd v CMR of Taxation [2012] NSWSC 123
Badman v Drake [2008] NSWSC 968
Black Uhlans Inc v New South Wales Crime Commission & Ors [2002] NSWSC 1060
Buffrey v Buffrey [2006] NSWSC 1349; (2006) 12 BPR 23,619
Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
Calverley v Green (1984) 155 CLR 242
Charles Marshall Pty Limited v Grimsley (1956) 95 CLR 353
Commonwealth Bank v Estate of late Slieman [2010] NSWSC 661
Damberg v Damberg [2001] NSWCA 87
Director of Public Prosecutions for the Commonwealth v Saxon (1992) 28 NSWLR 263
Dwyer v Kaljo (1992) 27 NSWLR 728
Evans v Marmont (1997) 42 NSWLR 70
Gissing v Gissing [1971] AC 886
Grant v Edwards [1986] Ch 638 CA
Harrison Partners Constructions Pty Ltd v Jebena Pty Ltd [2006] NSWSC 317
Helton v Allen (1940) 63 CLR 691
Napier v Public Trustee (1980) 32 ALR 153
New South Wales Crime Commission v Jason Lee [2012] NSWSC 437
PCW (Underwriting Agencies) Ltd v Dixon [1983] 2 All ER 158
Pilkington v Inland Revenue Commissioners [1964] AC 612
Prentice v Cummins (No 6) (2003) 134 FCR 449
Pulham v Delaney [2008] NSWSC 1231
Re Vandervell's Trusts (No 2) [1974] Ch 269
Ruth Chong v Super Equity Invests Pty Ltd & Anor [2012] NSWSC 27
Ryan v Dries [2002] NSWCA 3
Shephard v Cartwright [1955] AC 431
Shepherd v Doolan [2005] NSWSC 42
Wirth v Wirth [1956] HCA 71; (1956) 98 CLR 228Texts Cited: K R Handley, Estoppel by Conduct and Election (2006) Category: Interlocutory applications Parties: Benjamin Keil Ryan (Plaintiff/Respondent)
Helen Kay Ryan (Defendant/Applicant)Representation: Counsel:
M J Heath (Plaintiff/Respondent)
P Barham (Defendant/Applicant)
A Hill (Child in related proceedings)
Solicitors:
Bridge St Lawyers (Plaintiff/Respondent)
Cambridge Law (Defendant/Applicant)
File Number(s): 11/264760
Judgment
HER HONOUR: This is an application brought by Notice of Motion filed on 1 May 2012 by the defendant (Helen Ryan) for the release of funds currently held in Court. In July last year, Mrs Ryan was convicted of the murder of her husband. The funds in Court (approximately $1.032million) represent the proceeds of sale of a farm at Duri that was formerly owned by Mr and Mrs Ryan as joint tenants in equal shares (ownership of which in the ordinary course passed on his death, by right of survivorship, to Mrs Ryan). The application now made by Mrs Ryan is for the release of around $310,000 for anticipated legal expenses in criminal appeal proceedings and for past (and anticipated future) legal costs in these proceedings.
In the current proceedings (to which I refer as the forfeiture proceedings), the executor of the late Mr Ryan's estate (his eldest child from his first marriage) claims that the property (and now the proceeds of sale) is held by Mrs Ryan on a resulting trust for the estate or, alternatively, that Mrs Ryan holds a one half interest in the property on constructive trust for the estate. The executor opposes Mrs Ryan's application on the basis that the estate has a seriously arguable case for relief that, if funds are now released to her, would be defeated.
The estate's principal claim, as pleaded in [7]-[9] of the Statement of Claim, is that the whole of the property (or such other portion as the Court considers just) is held on a presumed resulting trust for the estate (on the basis that Mrs Ryan did not contribute funds to the purchase price for the Duri property. The alternative constructive trust claim (as to the deceased's one half-interest in the property at the time of his death) (pleaded in [10]-[13] of the Statement of Claim) is based on the common law rule known as the forfeiture rule (in effect that, having been involved in and/or alternatively procuring the death of the deceased, Mrs Ryan should not be entitled to profit from his death).
There are also on foot in this Court separate proceedings brought by Mr and Mrs Ryan's daughter (to whom I will refer as C) in which C seeks additional provision from her father's estate. Counsel for the executor, Mr Heath, notes that the payment out of funds to Mrs Ryan will directly affect C's position in the family provision proceedings (presumably by diminishing the moneys that might otherwise have been available to the estate if it is successful in the forfeiture proceedings).
I was informed by Mr Hill (Counsel who appeared on behalf of C on the present application solely to make submissions in her interest, she not being a party to the forfeiture proceedings) that the family provision proceedings had been commenced on the basis that the deceased's portion in the estate that had passed by survivorship to Mrs Ryan could be treated as notional estate. However, it now seems to be accepted that it will be necessary to determine the forfeiture proceedings before the family provision proceedings are heard, since only then will the quantum of the estate be finally known.
Mrs Ryan has filed an Amended Defence in the forfeiture proceedings and denies that the property is held on trust for the estate. Her Counsel (Mr Barham) did, however, concede that if her conviction for murder were to stand then the executor's claim that she holds a one half interest in the property on constructive trust would be well made (though Mr Barham maintains that the executor's claim to the whole of the property cannot be so described). Emphasis is placed by Mr Barham on the fact that Mrs Ryan and the deceased were joint partners both in the ownership of the Duri property and in the operation of the farm on the property; and it is said that any presumption that there was a resulting trust arising from the circumstances in which the property was initially acquired is answered by a presumption of advancement in favour of Mrs Ryan.
While it is accepted by Mrs Ryan that, if her conviction stands, the funds released for legal expenses will come from her half interest in the estate, the executor's concern is that if the estate's claim is successful (and the property is held on trust for the estate) then the estate will not be in a position to recover the amounts so paid out to Mrs Ryan in the interim.
Background
The relevant factual background can be briefly stated.
Mr and Mrs Ryan commenced a relationship in about July 1994. C was born in 1995.
In May 2001, the Duri property was purchased in their joint names. The executor has deposed, in his affidavit affirmed 30 April 2012, to the circumstances in which the purchase of the Duri property was effected (evidence broadly confirmed by Ms Jacqueline Yates, the chartered accountant who has, since 2002, been responsible for the preparation and submission of personal tax returns for the couple and financial statements for the partnership conducted by them from January 2002).
The purchase price for the Duri property was $570,000. With expenses and stamp duty, the total cost was $597,129.25.
In summary, the evidence filed for the executor is to the effect that the Duri property was purchased in part (as to $280,000) with finance provided through Perpetual Trustee Company Ltd (and secured by a mortgage entered into jointly by the couple as mortgagors) and that the balance of the purchase price came from a sum derived from the sale by Mr Ryan of a part of another property (the Marel property) in May 2001. The primary security for the loan was the property itself but there was collateral security in the form of the Marel property (which had been the subject of an intergenerational transfer from Mr Ryan's mother to Mr Ryan in about 2000).
Ms Yates has deposed (at [20]) that, from her review of the taxation and financial records of the couple and of their partnership, a sum of $370,195.25 was received from the sale of the first parcel of the Marcel land was used to purchase the Duri property. After certain adjustments, she has calculated Mr Ryan's contribution derived from the funds obtained from the sale of the Marel property to the purchase of the Duri property was $317,129.25; his overall contribution thus being that amount plus his share of the joint borrowings.
(The remaining parcel of land from the Marel property was sold in about August 2002. Ms Yates has deposed that the balance of the sale price of that parcel ($119,541.35) was applied in capital reduction of the funds borrowed for the purchase of the Duri property. For the reasons set out later, that does not of itself operate to increase Mr Ryan's beneficial interest in the property.)
The couple married in late November 2001. Therefore, at the time of the purchase of the property they were unmarried though had been in a de facto relationship for some time (a fact of relevance when considering the presumption of advancement on which Mrs Ryan now relies to rebut any presumption of a resulting trust).
The executor has deposed that the Perpetual mortgage was discharged on 3 December 2004, at which time a smaller (interest only) loan ($200,000) was taken out with the Elders Rural Bank Limited. That loan was ultimately discharged when the property was sold after Mr Ryan's death.
Mr Ryan died on 23 October 2009. As noted earlier, Mrs Ryan was convicted of his murder on 4 July 2011. (Another person, Kenneth Brooks, was also separately convicted of his murder.) Mrs Ryan has been sentenced to a term of imprisonment of 36 years with a non-parole period fixed at 27 years.
In mid 2011, the bank called for payment of the loan secured by the property. There was a mediation under the Farm Debt Mediation Act in November 2011 between the bank and the estate, following which agreement was reached as to the sale of the property. (Mrs Ryan did not participate in the mediation process but did agree to the sale process agreed as part of the outcome of the mediation.) The property was marketed for sale at an auction scheduled for 21 December 2011.
The day before the scheduled auction, an application was made to Rein J, sitting as duty judge, for orders in relation to the auction. From his Honour's reasons it appears that Mrs Ryan had at that stage sought to resile from the previous agreement as to the steps for the auction to take place (there being a dispute at that stage as to a proposed change to the reserve to be set for the auction). A dispute had also arisen as to how the net proceeds of sale were to be held after the auction. His Honour noted that the auction had been set in the context of what was a looming mortgagee sale and concern by the estate as to the costs increasing by reason of the continued existence of the mortgage.
For the reasons given in his Honour's ex tempore judgment on 20 December 2011, orders were made to permit the sale to proceed. His Honour further ordered that any surplus funds (if the property sold at auction) were to be paid into Court. In this regard, his Honour considered that the Short Minutes of Order then proposed by the executor were appropriate (and within the spirit of the earlier agreement) and made orders accordingly. The relevance of this is that it appears that the orders by which moneys were paid into Court cannot be said to have been made by consent, though in effect it seems that they were intended to implement the spirit of an earlier agreed regime for the sale of the Duri property.
It is not disputed, as I understand it, that the primary asset of the deceased was his interest in the farm and that (he having held the property with his wife under a joint tenancy) in the normal course his interest in the property would pass to Mrs Ryan by the right of survivorship. Mrs Ryan's solicitor has deposed on the present application that his instructions are that Mrs Ryan has no assets other than her share of the proceeds of sale of the Duri property, a Toyota Landcruiser and a horse float (those vehicles being in the possession of the executor).
The estate commenced the forfeiture proceedings in August last year. Mr Heath has confirmed that the estate has now served virtually all its evidence in chief (there being foreshadowed a further affidavit from Ms Yates to make a final calculation of respective financial interests in the partnership that operated the property). Apart from the three affidavits sworn by her solicitor (Mr Raed Rahal) on the present application, Mrs Ryan has not served any affidavit evidence in the forfeiture proceedings. Mr Rahal has deposed that as part of Mrs Ryan's evidence in reply she requires an expert witness to prepare a report and that he has been unable to engage such an expert without access to funds. (He has also deposed that unless funding is made available for these proceedings and for the criminal appeal proceedings his firm is unable to act in these matters; and that he is unable to, and will not, instruct Counsel to appear in the absence of funding.)
The funds to which Mrs Ryan now seeks access are as follows: $150,000 plus GST for the preparation and hearing of her appeal against her criminal conviction and application for leave to appeal against her sentence; $61,153.20 for payment of an agreed sum for outstanding fees owed to her former solicitors for work in relation to the present proceedings; and $100,000 for the purpose of future legal fees in relation to these proceedings. (I observe, in light of Mr Hill's submission as to the release of funds for the family provision proceeding, that Mrs Ryan's present application does not appear to seek any moneys in relation to the family provision proceedings, to which Mrs Ryan is not a party.)
The basis on which Mr Rahal has estimated the costs of the ongoing conduct of these proceedings or the criminal appeal proceedings is not apparent from his affidavit (save that he has indicated the daily rate of the Senior Counsel his office has sought to instruct in relation to the criminal appeal proceedings). An extension of time has been granted to 22 June 2012 for the filing of a Notice of Appeal.
Legal Principles
Although the orders sought by Mrs Ryan were expressed in her Notice of Motion to be pursuant to Part 55 Rule 55.11 of the Uniform Civil Procedure Rules 2005 (NSW), it is conceded by Mr Barham that the procedure contained in Rules 55.8-11 applies to moneys paid into Court pursuant to Part 4 of the Trustee Act 1925 (NSW) and is thus predicated on the existence of a trust. It was accepted when the matter came before me that the power sought to be invoked on this application by Mrs Ryan is the power under s 23 of the Supreme Court Act 1970 (NSW).
The significance of that distinction is that the requirements for matters to be proved in order for a payment out of Court under Rule 55.11 (considered in cases such as Ruth Chong v Super Equity Invests Pty Ltd & Anor [2012] NSWSC 27 and Commonwealth Bank v Estate of late Slieman [2010] NSWSC 661) are not strictly applicable on the current application. (In Slieman, Slattery J noted that an applicant under Rule 55.11 must establish three matters to justify an order for the payment of money out of court: first, identification of the person who is primarily entitled to any funds paid into court and the basis of that entitlement (and that notification has been given to that person); second, that the applicant is not merely an unsecured creditor against the person primarily entitled to the fund but is a person who has an beneficial interest in the very fund that has been paid into court; and, third, identification of any other potential claimants to the fund in court and proof that they were notified of the claim.)
Here, however, as it is accepted that the Part 55 procedure does not apply, it is a question as to whether in all the circumstances it is appropriate to order the payment of funds out of those presently held in Court to Mrs Ryan, in advance of a final determination as to who is entitled to those funds, in order to assist Mrs Ryan to fund part or all of her anticipated forthcoming legal costs (or her already incurred legal costs of these proceedings).
In that regard, Mr Heath submitted that in a practical sense (having regard to the orders made by Rein J pursuant to which payment was made into Court in the first place) the current state of affairs is analogous to that where an injunction is sought (or an application has been made for release of funds in the face of an injunction that has been granted) in aid of a proprietary right, as opposed to the situation where such an application is made in the face of a freezing order or 'Mareva' injunction.
The distinction between such scenarios was drawn in Badman v Drake [2008] NSWSC 968 at [8] by Brereton J, his Honour referring to the judgment of Robert Goff J (as his Lordship then was) in A v C (No 1) [1981] 1 QB 956 and to PCW (Underwriting Agencies) Ltd v Dixon [1983] 2 All ER 158. For present purposes, the relevance of the distinction is that it has been said that where funds have been (or are to be) retained by injunction granted in aid of a claimed proprietary right (in order to preserve those funds), the principles that ordinarily lead to a more ready pay-out of funds for legal expenses in a Mareva situation (where the purpose of the order is to prevent the dissipation of assets out of which a judgment debt might ultimately be met) do not apply.
As Brereton J noted in Badman, the basis of the distinction between the two types of case is that in the first the concern is that, absent a preservation order, the very subject matter of the proceedings might be dissipated before the hearing and equity would then have been invoked in vain (or, as was said in PCW, quoting Templeman LJ in an earlier case, "it is the concern of any court of equity to see that the stable door is locked before the horse has gone"). Precisely that kind of issue seems to me to arise in the present case.
Mr Barham submits that no such analogy is appropriate in circumstances where the orders for payment into Court were not made in response to either such claim. Nevertheless, it seems to me that there is force in the observation that the present circumstance is one in which the very fund the subject of the claimed trust (be that resulting or constructive) is the fund to which access is sought by Mrs Ryan and payment out of moneys from that fund will necessarily affect the estate's ability to recover those moneys if it is successful in its principal claim.
Hence, I accept that the reasoning in the Badman line of cases informs the exercise of the discretion in the present case in that the application by Mrs Ryan should not be approached on the basis that there is an expectation that the Court will release funds for legal expenses (even in light of Mrs Ryan's impecuniosity and the seriousness of her current situation). Therefore, I consider that little can be drawn from the suggestion in the Practice Note SC Gen 14 on freezing orders to the effect that a carve-out for legal expenses will normally be permitted, to which Mr Barham has referred, and as recognised in Amalia Investments Ltd v Virgtel Global Networks NV [2009] FCA 39 per Collier J at [15].
It was accepted by Mr Barham that relevant considerations to be taken into account on the present application are those enumerated by Mr Heath, namely:
(i) whether the estate has a seriously arguable claim;
(ii) the strength of the estate's claim;
(iii) the effect on the funds presently held in Court if an order releasing funds is made; and
(iv) whether, as a matter of discretion, the application ought to be refused.
The first two of those matters require a consideration of the estate's claim. The latter two go to balancing the prejudice that will be suffered by the estate if funds (to which it is later found that Mrs Ryan was not entitled) are released as against the prejudice that will be suffered by Mrs Ryan if access to funds (to which she is later found to have had an entitlement) is not permitted.
- Claims made by the estate
The estate's claim rests on two propositions: first, that although Mrs Ryan was registered on the title to the property as a joint tenant in equal shares, her interest in the property was held on resulting trust for Mr Ryan (and hence that interest is now held on resulting trust for his estate); and, second, that the one-half interest Mr Ryan held as joint tenant in the property as at the date of his death (which would ordinarily have passed on survivorship to Mrs Ryan) is liable to be forfeited by operation of the common law forfeiture rule and is held on constructive trust for the estate.
As to the alternative constructive trust claim, it is in effect conceded by Mr Barham that the estate has a seriously arguable case, since (as noted earlier) he concedes that if the conviction were to stand the claim would be well-founded. Mr Heath submits that that is so whether or not Mrs Ryan's conviction is overturned on appeal (and hence that there is no realistic opposition to the estate's forfeiture claim) on the basis that even if Mrs Ryan's conviction were overturned on appeal, a claim for unlawful killing would be still be able to be raised in order to invoke the forfeiture rule.
Reliance was placed in this regard on Helton v Allen (1940) 63 CLR 691 at 709 where the High Court noted that in civil proceedings one party is not estopped by an acquittal of the other from showing that the other was guilty of the crime in question. Mr Heath submitted that it would be sufficient to show Mrs Ryan's involvement in an unlawful killing even if the murder conviction were not to stand. (Mr Heath also points out that no cross claim seeking to ameliorate the consequences of the public policy rule pursuant to the Forfeiture Act 1995 (NSW) has been filed by Mrs Ryan in these proceedings.)
It cannot in my view be disputed that the estate has a seriously arguable case that the interest in the Duri property that passed to Mrs Ryan on survivorship is forfeited to the estate. At this stage, this is a strong claim.
However, Mr Barham submits that this affects only the one-half interest Mr Ryan held in the property as registered proprietor at the time of his death and leaves Mrs Ryan's corresponding one-half interest unaffected. Were she ultimately to be entitled to a half share of the proceeds of sale that would amount to some half a million dollars.
That brings me to the estate's resulting trust claim. It is submitted by Mr Heath that the estate again has a seriously arguable claim as to the existence of a resulting trust. (Mr Heath points out that Mrs Ryan has not put on any evidence in opposition to that claim other than that which emerges from her solicitor's affidavits on the present application).
Mr Barham dismisses the estate's case as hopeless on the basis that the evidence discloses a contribution by Mrs Ryan to the purchase price for the property (represented by the joint borrowing made at the time of purchase) and that she was in an existing relationship at the time of the purchase (and had made contributions as a homemaker and parent). (It is submitted that the Court would not draw an inference that would permit a finding of resulting trust and, in effect, that if such an inference were to be drawn that would open the floodgates to litigation where wives who are homemakers and parents would be exposed to the loss of their interests in the matrimonial property on the basis of an alleged resulting trust based on disproportionate contribution to the purchase price - a submission that seemed to conflate contributions to and after the purchase of the home and that, in any event, would seem to be met by the presumption of advancement in the marital situation.)
Indeed, Mrs Ryan relies on a presumption of advancement as rebutting any presumption of resulting trust arising from the disproportionate contributions to the property at the time of its acquisition.
Presumption of resulting trust?
The initial presumption arising from the registration of ownership on the title to property is that the registered owner or owners (as the case may be) has (or have) ownership in the property in the interest specified on the title and that there is no beneficial interest in favour of someone else (Black Uhlans Inc v New South Wales Crime Commission & Ors [2002] NSWSC 1060 at [128]). However, where the legal title does not reflect the proportionate contributions of the parties, then (at least absent a presumption of advancement) it will be presumed that the beneficial ownership of the property is held in the proportions in which they contributed the purchase money. I was referred by Mr Barham in this regard to the analysis of resulting trusts (and the presumption of advancement) given by Edelman J in Anderson v McPherson [No 2] [2012] WASC 19.
The relevant time for a finding of a resulting trust is the time of acquisition of the property or "so immediately after it as to constitute a part of the transaction" (Calverley v Green (1984) 155 CLR 242). Relevantly, in the context of the submissions made by Mr Barham as to the contributions of Mrs Ryan to the domestic relationship and to the farm partnership, White J noted in Shepherd v Doolan [2005] NSWSC 42 at [23] that where a presumption of a resulting trust arises (and is not displaced) then unless there is a later agreement to alter the equitable interest in the property acquired (or the beneficial interests arising under the resulting trust are displaced by an interest arising under a constructive trust), the interest is not changed by later contributions to the conservation or improvement of the property. As to mortgage repayments after the initial purchase, in Calverley v Green Mason and Brennan JJ said (at 263):
Mortgage payments may quantify the parties' interests under a resulting trust of a property acquired as a mortgage-free investment, but they would rarely quantify the interests of parties under a resulting trust of a house property acquired as home to live in.
In Shepherd, White J further said that:
If the evidence establishes that it was the intention of the parties that their respective interests should be in accordance with something other than their contributions to the purchase price, such as their contributions to the purchase of the land and discharge of a mortgage, effect will be given to that intention so that although the trust will arise at the time of purchase, the quantum of their interests will fluctuate in accordance with that intention. (Bloch v Bloch (1981) 55 ALJR 701 at 704; Currie v Hamilton at 692; Calverley v Green at 262-263).
What constitutes the purchase price (for the purposes of calculating beneficial interests under a resulting trust) includes the incidental costs of the purchase, such as legal expenses, stamp duty and registration fees (Shepherd v Doolan; Ryan v Dries [2002] NSWCA 3 at [52]-[53]).
As to the proof of the respective parties' contributions, in Cetojevicv Cetejevic [2006] NSWSC 431 when considering whether there was a resulting trust, Campbell J, as his Honour then was, said (at [36]):
In coming to that conclusion, I bear in mind that in an exercise such as this precise accounting is often not to be expected, and that sometimes a broad brush estimate needs to be made to ensure that the onus of proof does not itself become an instrument of injustice. However, it is still necessary for the tribunal of fact to be in a position of being persuaded that, at the least, a certain amount of contributions were made by one particular party, and to be satisfied as to how those contributions relate to the contributions made by the other party.
In Buffrey v Buffrey [2006] NSWSC 1349; (2006) 12 BPR 23,619, Palmer J (summarising the principles on which the court proceeds in relation to matters involving presumptions of resulting trust and advancement) noted (at [14]) that, for the purposes of both such presumptions: first, the acquisition cost of property includes the costs, fees and disbursements incidental to its acquisition; second, a party contributes to acquisition cost by borrowing funds necessary to make up the acquisition cost (whether or not that party subsequently contributes to payment of principal and interest due on the borrowing); third, and relevantly in the present case, that parties borrowing jointly in order to make up the acquisition cost are treated as having contributed the borrowed capital in equal shares; and, fourth, a party who does not borrow funds to make up the acquisition cost but who subsequently pays, or contributes to payment of, principal and interest on such a borrowing does not, by that fact alone, make a contribution to acquisition cost.
As noted earlier, the resulting trust claim alleged by the executor is based on the allegation that Mrs Ryan did not contribute funds to the purchase price of the Duri property ([9] of the Statement of Claim). However, there is evidence that Mrs Ryan was a joint borrower of the $280,000 loan funds that were contributed to the purchase price (and jointly assumed obligations in relation to the repayment of those funds, whether or not the repayments were in fact made by her). Hence, applying the principles summarised by Palmer J in Buffrey, Mrs Ryan's contribution to the purchase price via the borrowed funds would be at least $140,000.
Absent some later agreement between Mr and Mrs Ryan as to how the contribution by Mr Ryan of the funds from the sale of the second parcel of the Marcel property to the discharge of the mortgage was to be treated, when assessing the contributions of the parties for the purposes of the resulting trust claim Mrs Ryan's contribution would remain a contribution of $140,000 (even though that was later discharged by moneys from Mr Ryan's own property).
Insofar as the evidence before me indicates that the contributions to the purchase price in monetary terms were unequal (Mr Ryan contributing something in excess of $317,000 plus his share of the joint borrowing and Mrs Ryan contributing only her share of the joint borrowing), a presumption of resulting trust would arise (unless prevented by the so-called presumption of advancement, which I consider below).
The presumption of resulting trust so arising, unless rebutted by Mrs Ryan (and unless there were evidence as to a later arrangement when the second parcel of the Marel property was sold so as to increase Mr Ryan's beneficial interest in the property), would seem, at its highest, to give rise to a claim by the estate that Mrs Ryan's one-half interest in the property as recorded on the title should be adjusted to reflect her disproportionate contribution by way of the borrowed funds (ie that her contribution was $140,000 out of the total purchase cost of $597,129.25 (or 23.45%) and that Mr Ryan's contribution was 76.55%).
In other words, there seems to me to be a seriously arguable claim on behalf of the estate, based on a presumed resulting trust, to a share of the proceeds referable to the difference between Mrs Ryan's one half interest as recorded on the register and the 23.45% interest that corresponds to her contribution to the purchase price. Coupled with the forfeiture claim, this would mean that the estate has a seriously arguable claim to 76.55% of the proceeds of sale. If that is correct, then Mrs Ryan would nevertheless retain an entitlement to 23.45% of the proceeds held in Court (since that interest in the property was held by her prior to Mr Ryan's death and not gained by her by way of profit from Mr Ryan's death), that now being somewhere in the order of $242,004. (There remains, however, a possibility that the estate could establish a higher entitlement to the proceeds if there is evidence that enables the later discharge of the Perpetual mortgage by Mr Ryan's money to be taken into account in that regard.)
Rebuttal of the presumption of resulting trust?
Having said that there appears to be an arguable case as to a presumed resulting trust arising from the seemingly disproportionate contribution to the purchase price, I note that the presumption of a resulting trust will not arise if there is a presumption of advancement and that in any event the presumption of resulting trust may be displaced by evidence that the actual intention of the parties was that the beneficial interest be vested in the parties in the amount for which they were registered as owners on the title.
As to the standard of proof in this regard, there are cases in which it has been suggested that the presumption of a resulting trust is not lightly displaced (see Buffery v Buffery, though Prentice v Cummins (No 6) (2003) 134 FCR 449 suggested (at [61]) that relatively slight evidence may be sufficient to displace a presumption of resulting trust where a married couple purchases in their joint names what is to be their matrimonial home having both made substantial, albeit unequal contributions to the acquisition). Heydon JA, as his Honour then was, in Damberg v Damberg [2001] NSWCA 87 made it clear that the suggestion in the authorities that certain presumptions are not lightly rebutted does not reflect any alteration of the standard of proof. His Honour said:
Hence the standard of proof to be met in order to rebut the presumption does not call for application of the principles discussed in Briginshaw v Briginshaw (1938) 60 CLR 336, or rest on any analogy with the high standard of proof in rectification. But it does call for proof of a "definite intention" to retain beneficial title, not a "nebulous intention to rely upon the ... relationship as a source of control over the property": Drever v Drever [1936] ALR 446 at 450 per Dixon J (dissenting, but not on this point).
The interrelationship between the presumptions of resulting trust and of advancement was considered by the High Court in Charles Marshall Pty Limited v Grimsley (1956) 95 CLR 353 (and revisited more recently by Edelman J in the Anderson case). In Charles Marshall, the High Court quoted Viscount Simonds in Shephard v Cartwright [1955] AC 431:
I think that the law is clear that on the one hand where a man purchases shares and they are registered in the name of a stranger there is a resulting trust in favour of the purchaser; on the other hand, if they are registered in the name of a child or one to whom the purchaser then stood in loco parentis, there is no such resulting trust but a presumption of advancement. Equally it is clear that the presumption may be rebutted but should not, as Lord Eldon said, give way to slight circumstances: Finch v Finch (1808) 15 Ves Jun 43 (33 ER 671) [1955] AC, at p 445.
The burden of rebutting such a presumption falls upon the party against whom the presumption is raised (in this case Mrs Ryan in relation to the presumption of resulting trust; the estate in relation to any presumption of advancement).
Is there an applicable presumption of advancement?
Turning first to the question whether there is a presumption of advancement in the present case, the relationship between husband and wife is one where there has historically been recognised to be a presumption of advancement. However, in the present case it is clear that the Ryans were not married when the property was acquired.
A majority of the High Court considered in Calverley v Green that the categories of relationships to which a presumption of advancement applied did not include that of a "de facto" husband and wife. Mason and Brennan JJ noted that the phrase "de facto relationship" embraced a wide variety of relationships and that it was a term "obfuscatory of any legal principle except in distinguishing the relationship from that of husband and wife" (at 260). Their Honours then went on to say:
In a case where a man and woman are cohabiting though unmarried there is no presumption, either of equity or human experience, that they intend their relationship to have the same consequences upon their individual property rights as marriage has upon the property rights of spouses. An assumption that the parties to such an arrangement intend to maintain independent control of money and property and to retain a testamentary power to dispose of assets in which they have an interest is more likely to coincide with reality than an assumption of joint ownership. The provisions of ss 79 and 80 of the Family Law Act 1975 (Cth) now furnish a further ground for not applying the special rules governing the title to property in the case of spouses in order to resolve property disputes between parties who have cohabited but who have not married. On dissolution of a marriage, ss 79 and 80 confer a discretionary power upon the Family Court of Australia to alter the property interests of the parties to the marriage if it just and equitable to do so. On the termination of an association between a man and a woman who are not married to each other, no discretionary power may be exercised and the jurisdiction of the courts of equity is simply to declare the proprietary rights of the right parties - a jurisdiction which a court of equity is not a liberty to exceed either in the case of husband and wife or in the case of a man and woman who are not married.
Deane J considered that, although in some adjustment might be necessary to the existing categories of relationships in order to reflect "modern concepts of the equality in and status and obligations" between certain parties, such as wife and husband, such adjustment must be made by reference to "logical necessity and analogy and not by reference to idiosyncratic notions of what is fair and appropriate". His Honour then agreed with Mason and Brennan JJ in denying that the presumption should be extended so as to apply to the particular case at hand (at 268):
In their judgment in the present case, Mason and Brennan JJ advance what seem to me to be convincing reasons for denying that either logic or analogy warrant the extension of those categories of relationships to encompass the relationship which existed between Mr Calverley and Miss Green at the time of the purchase of the Baulkham Hills property.
His Honour's reasons do not go so far as to deny that a presumption of advancement can arise in any de facto relationship, being circumscribed to the particular relationship considered in Calverley v Green. His Honour also referred to Napier v Public Trustee (1980) 32 ALR 153 as having already decided the question in favour of no presumption of advancement arising in favour of a de facto wife.
Gibbs CJ dissented. His Honour was of the view that a presumption of advancement should be recognised, considering that Napier was not authority for the contrary proposition. His Honour said (at 250) that:
I do not regard Napier v Public Trustee (WA) as concluding the question in favour of the view that a presumption of advancement can never arise in such a case. In that case, Aickin J, with whom Mason, Murphy and Wilson JJ agreed, said that it is "well established that no presumption of advancement arises in favour of a de facto wife". However, the question was not argued in that case and it was not necessary to decide for the purposes of the decision; I left the question open.
Gibbs CJ then went on to characterise the de facto relationship as one with a degree of permanence which he considered made it more probable than not that a gift in question was intended where property was purchased by one in the name of the other (and therefore that the presumption should apply). With respect to the particular relationship there being considered, his Honour said:
The relationship in question is one which has proved itself to have an apparent permanence, and in which the parties live together, and represent themselves to others, as man and wife. It is true that in some cases a person may maintain a de facto relationship for the very purpose of preventing the other party to the relationship from obtaining any right or claim to property, but the question now asked arises only when the party has taken the deliberate step of purchasing property in the name of the other...it seems natural to conclude that a man who puts property in the name of a woman with whom he is living in a de facto relationship does so because he intends her to have a beneficial interest and that a presumption of advancement is raised.
There appear to be few recent cases that have considered whether or not a presumption of advancement arises in the context of a de facto relationship. In Pulham v Delaney [2008] NSWSC 1231, Hamilton J noted that (at [3]) that "[a] de facto spouse did not, in 1964, have the benefit of a presumption of advancement", citing Napier v Public Trustee (WA) in support of that proposition.
The reasoning of Mason and Brennan JJ in Calverley v Green turned, in part, on the differential treatment under the Family Law Act1975 (Cth) accorded to de facto couples vis-à-vis married couples, particularly in relation to property disputes, as furnishing a reason for not extending the presumption of advancement to de facto couples. A number of changes to the legislative regime governing property division between de facto couples upon dissolution of their relationship have taken place between 1984 (when Calverley v Green was decided) and now. These changes may support some adjustment to the existing categories of relationships in order to reflect "modern concepts of equality" as referred by Deane J in Calverley v Green.
For instance, in Dwyer v Kaljo (1992) 27 NSWLR 728, Handley JA considered s 20 of the De Facto Relationships Act 1984 (NSW) and whether the powers conferred upon a Court under that provision were as those conferred upon a Court in relation to property disputes upon a dissolution of a marriage pursuant to ss 79 and 80 of the Family Law Act. His Honour (with whom Priestley JA agreed) held that s 20 did confer such a broad jurisdiction upon the Court and commented in passing (at 744) that:
Similarly, the court may be entitled to find that it would be equitable to treat de facto couples as if the presumption of advancement applied to them: compare Wirth v Wirth (1956) 98 CLR 228.
However, in Evans v Marmont (1997) 42 NSWLR 70, a five-bench Court of Appeal overturned Dwyer v Kaljo, with Gleeson CJ and McLelland CJ in Eq (with whom Meagher JA agreed) taking the view that s 20 was not as broad as described by Handley JA in Dwyer v Kaljo. In their reasons, Gleeson CJ and McLelland CJ in Eq said (at 78) that:
The issue is as to the true construction of an Act of 1984. Community attitudes towards de facto relationships have changed significantly in recent decades, and the process of change is still going on. There may be some who think that the policy which was adopted by the New South Wales Parliament in 1984 does not go far enough to make appropriate provision with respect to de facto partners. There may be others who think that it goes too far. The role of the court, however, is to interpret and apply the 1984 legislation. One thing is clear. It was not the intention of the New South Wales Parliament in 1984 to equate de facto relationships with marriage, or to make the same provisions with respect to de facto partners as the Family Law Act, at the time, made with respect to married people.
There are some similarities between the provisions of the Family Law Act and those of the De Facto Relationships Act. There are also differences. Those differences are substantial, conspicuous, and deliberate.
Insofar as an argument may be made that reference to family law legislation indicates the extent to which presumptions applicable to married couples should be applied by analogy to de facto relationships, then it may be that recent legislative amendments to the Family Law Act 1975 (Cth) provide stronger ground for extending the presumption of advancement to de facto couples. The Family Law Amendment (De Facto Matters and Other Measures) Act 2008 (Cth) inserted a new Part VIIIAB into the Family Law Act, which reflects those provisions applicable to married couples under Part VIII (including ss 79 and 80 to which Mason and Brennan JJ referred in Calverley v Green). Such amendments may provide the "logical necessity and analogy" to which Deane J referred in bringing about adjustments to the existing law regarding presumptions of advancement.
However, whilst these legislative developments may invite reconsideration of established categories to which the presumption applies, they do not necessarily compel the extension of the presumption. (They may, in fact, invite consideration of whether the presumption is still relevant in any event.) Until Calverley v Green falls to be re-considered at an appellate level, in light of these legislative amendments and other relevant factors such as (perhaps) current views in society as to familial obligation, the decision would no doubt be accorded the appropriate precedential weight by a judge hearing the present case. Hence the fact that the Ryans were in a de facto relationship at the time of purchase would not necessarily give rise to a presumption of advancement in Mrs Ryan's favour.
In Anderson, Edelman J noted that the word "advancement" has been described as a legal expression which had "a limited range of meaning, since it was thought to convey the idea of some step in life of permanent significance" (citing Pilkington v Inland Revenue Commissioners [1964] AC 612 at 634 per Viscount Radcliffe). His Honour went on to say at [125]:
Historically, the primary basis asserted for the presumption of advancement in circumstances such as a purchase by a person in the name of another was that the purchaser was "under a species of natural obligation to provide for the nominee": Murless v Franklin (1818) 1 Swan 13 at 17; (1818) 36 ER 278, 280 (Lord Eldon). A distinction was drawn between a father-child relationship to which the presumption of advancement applied and a mother-child relationship to which it did not, because there was "no obligation according to the rules of equity - on a mother to provide for her child": Bennet v Bennet (1879) 10 Ch D 474 at 478 (Sir George Jessel MR).
Edelman J noted at [127] that in Wirth v Wirth [1956] HCA 71; (1956) 98 CLR 228, Dixon CJ (at 237) argued that the presumption of advancement had moved to a different foundation, namely that of the greater prima facie probability of a beneficial interest being intended but went on to note at [128] that the foundation formulated by Dixon CJ had not yet been accepted. His Honour concluded that the presumption of advancement did not necessarily require either a relationship where advancement might be expected or one where a moral duty to provide was recognised in equity ([128]) and that the presumption of advancement did not extend to every relationship where the ties of love and affection might give rise to a probability, or expectation based upon common experience, that a gift was intended [131].
His Honour considered (at [132]) that all that could be said of the law in relation to the presumption of advancement was that it provided for a list of relationships where the presumption of resulting trust does not apply (citing the quotation in Wirth v Wirth to the effect that the presumption of advancement was "to preclude a resulting trust from arising for the purchaser").
In this regard, I was referred by Mr Hill to Grant v Edwards [1986] Ch 638 (and to the discussion of that case by Handley JA writing extra-judicially in Estoppel by Conduct and Election). There, consideration was given to a claim by a woman in a de facto relationship to an interest in property under a constructive trust. Handley JA noted that this authority brought together the principle considered in Gissing v Gissing [1971] AC 886 and the principles governing proprietary estoppel by encouragement. However, there is no such claim by Mrs Ryan in the forfeiture proceedings.
In the present case, when assessing whether the estate has a seriously arguable case (and the strength of that case) based on a presumed resulting trust, it seems to me that it cannot be assumed that a presumption of advancement will be able to be relied upon by Mrs Ryan based on the authorities referred to above.
Rebuttal of presumption by evidence of objective intentions?
As to the possibility in the present case that the presumption of resulting trust might be rebutted by evidence as to the objective intentions of the parties at the time of the acquisition of the property, in Calverley v Green, Deane J noted that "[r]egardless of whether the circumstances are such as to bring the case into one of the categories of advancement, evidence of the relationship - both legal and factual - between the parties will always be admissible" and went on to say:
More importantly, the subsequent judgment of Dixon CJ, McTiernan, Fullagar and Windeyer JJ in Martin (at 303-5) accepted, as correct, statements of Stuart VC and Cussen J to the effect that, in a case where the subjective intention of a person is relevant, the evidence of that person of his intention at the time of the purchase is admissible notwithstanding that "it must in every case be liable to observations which tend to diminish its weight" (see also Devoy v Devoy (1857) 3 Sm & G 403 at 406; 65 ER 713 at 714; Fowkes v Pascoe (1875) 10 Ch App 343 at 349).
In Anderson, Edelman J noted at [98] that the intention to be discerned in a resulting trust is an objective, manifest intention (not an unexpressed subjective intention) referring to Calverley v Green; Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253; and Re Vandervell's Trusts (No 2) [1974] Ch 269 at 294.
On the material before me there is little to indicate whether it is likely, at the hearing of these proceedings, that Mrs Ryan will be able to rebut a presumption of resulting trust arising from the disproportionate contributions to the purchase price. She has served no affidavit evidence other than that of her lawyers (and that evidence goes largely to her present financial position and the consequences thereof in terms of her ability to fund legal proceedings). While I note that the transfer and mortgage documents are both in the name of Ryan (at a time before the couple was married), it is unclear what, if any, inference could be drawn from that. Similarly, the fact that Mrs Ryan had been a homemaker and parent for some time before the purchase (on which Mr Barham placed no little weight) does not seem to me necessarily to displace the presumption of resulting trust.
Conclusion on this issue
Therefore, I am left to conclude that: the estate has a seriously arguable claim for a resulting trust to reflect the disproportionate contributions to the purchase price (which appears on the evidence before me to be a reasonably strong claim but one which may potentially be rebutted by evidence at the hearing of the parties' intentions at the time of acquisition of the purchase); it is unlikely on the present state of the authorities that a presumption of advancement would arise so as to preclude the presumption of resulting trust arising (though if Calverley v Green were in due course to be revisited that might well be the case); and, in any event, there is a seriously arguable (and stronger) claim by the estate to a constructive trust over the half share of the property which passed to Mrs Ryan on survivorship.
Thus it seems to me that the estate has a strong claim to at least 50% and probably 76.55% of the proceeds of sale. While it seems to me less likely that the estate will be able to maintain a claim to the whole of the proceeds of sale, that may depend on what weight is placed on the later discharge of the Perpetual mortgage from funds derived from the sale of the balance of the Marel property (and whether that evidences an intention or agreement that would alter the beneficial interests as they were at the time of purchase). Therefore, in my view it cannot be said that the estate's claim to the whole of the proceeds is not arguable.
- Effect on fund if assets dissipated
There seems little likelihood that any funds now released for the payment of legal fees will later be recoverable from Mrs Ryan if the estate is successful in maintaining its claim (to the whole or a substantial proportion of the proceeds of sale), having regard to the evidence of her solicitor. Certainly, it was not suggested that there was any source from which those funds might later be recovered (other than, perhaps, the vehicles in the possession of the executor). Mr Heath thus submitted, and I accept, that the effect of releasing any funds is likely to be that the equitable relief sought by the estate in relation to such funds will be in vain.
Mr Heath points out that the consequence of the release of funds has a direct relevance to C's claim against the estate (as it diminishes the amount available for provision out of the estate). (In this regard, however, Mr Hill submitted that it would be in the interests of the daughter for the funds to be released to enable the expeditious prosecution of the forfeiture proceedings, with which the family provision claim is linked.)
- Balance of Convenience
In terms of the balance of convenience, in Badman v Drake, Brereton J pointed to the risk (also evident in the present case), where the fund out of which the moneys are sought represents the subject matter of the proceedings, that relief (such as, here, the application to pay moneys out of the preserved fund) is wrongly granted then the subject matter of the proceedings will be diminished. His Honour noted that, in those circumstances, the principles applicable to a Mareva injunction (which dictate that an exception will always be made to permit expenditure on reasonable living expenses and legal costs) do not apply on such an application.
Mr Barham noted that in PCW (involving a tracing claim where Lloyd J doubted that the plaintiffs could bring the case within the wider ground of preservation of trust property - on the basis that the whole of the defendant's assets could not be regarded as a fund in that sense even if part might be comprised of money improperly come by) his Honour had nevertheless concluded that:
... I would regard it as even more unjust that he should be prevented from defending himself properly (for that is what it would amount to), merely because the plaintiffs say that in doing so he is using somebody else's money.
...
In my view justice and convenience require in the present case that the first defendant should be allowed the means of defending himself, even if it could be said that the plaintiffs had laid claim to the whole of his assets as a trust fund. Similarly justice and convenience require that he should be able to pay his ordinary bills and continue to live as he has been accustomed to live heretofore. So whether the case is put on the basis of the Mareva jurisdiction or the so-called wider jurisdiction to trace in equity I reach the same conclusion.
In Badman, however, where Brereton J recognised that an injunction to restrain dealing with the identifiable fund would have a serious impact on the ability of the Drakes to defend the proceedings (in circumstances where he had concluded that the Drakes had a seriously arguable defence) and that "[t]o shut out a litigant from the means of defending proceedings is a very serious step, particularly when it cannot be said that their case is a manifestly weak one", his Honour nevertheless also noted that this had to be balanced against the prejudice if the injunction were wrongly declined and the subject matter of the proceedings lost.
Hence, I approach the present application on the basis that there is no pre-disposition to grant access to the funds for the purposes of legal fees (as there would be had the funds represented moneys preserved from dissipation by a freezing order).
In balancing the interests of the parties, there is in my view a distinction to be drawn between release of funds to meet past expenditure (which assists Mrs Ryan in meeting her debts but is not strictly necessary for the ongoing prosecution of these proceedings or of her criminal appeal proceedings) and future expenditure. Mr Heath notes that part of the funds sought to be released (roughly $61,000) are funds for the payment of past legal expenses. (He also points to the delay in the making of the present application since the forfeiture proceedings were commenced on 17 August 2011, though Mr Barham submits this is irrelevant and that there was delay on the plaintiff's part in the conduct of the proceedings.)
In Australian Spirit Management Pty Ltd v CMR of Taxation [2012] NSWSC 123, Black J (there proceeding on the assumption that each party had a reasonably arguable claim to the funds) considered that the balance of convenience did not favour the orders sought for release of the funds pending the hearing in part because certain of the expenditure sought to be paid from those funds had already been incurred and reimbursement of such expenses did not need to be decided on an urgent listing. (His Honour also pointed to the lack of evidence that the legal representatives would withdraw if no funding were available - something met on the present case by Mr Rahal's affidavits in which he makes clear that he and his firm are not prepared to provide legal assistance to Mrs Ryan without funding in place.) I am not persuaded that the existence of debts for past legal fees (the satisfaction of which is not suggested to be necessary for Mrs Ryan's future representation) outweighs the estate's interest in the preservation of the fund until the parties' rights are finally determined. The future legal costs are in a different category.
The seriousness of the position in which Mrs Ryan is faced, and her ability to prosecute an appeal against her conviction, must be taken into account. In Director of Public Prosecutions for the Commonwealth v Saxon (1992) 28 NSWLR 263, the Court of Appeal, construing legislation that made provision for the retention of the accused's funds and noting that the fund in question was ostensibly the defendant's own property not amassed by the wrongdoing in question (as would be the case here for any part of the interest acquired by Mrs Ryan on the initial purchase of the land as opposed to the interest acquired by right of survivorship) was of the view that he should not be deprived of the use of his property for the proper defence of those proceedings unless the legislation there under consideration obliged such a course. Their Honours said that the suggestion that "a person should be deprived of the means to be legally represented in any serious criminal proceedings, at least one in which his liberty is potentially affected, is offensive" and construed the legislation with that in mind.
Mr Barham, anticipating an argument that there might be a distinction between costs of a criminal trial and those of prosecuting an appeal, drew my attention to the decision in New South Wales Crime Commission v Jason Lee [2012] NSWSC 437 where Hidden J considered such a submission and said at [11]:
... I see the appeal process as an integral part of the criminal justice system. An accused person might contend on appeal that the verdict is unreasonable and that he or she should be acquitted, or that the trial process was affected by error and there should be a new trial. In either event, the accused seeks to demonstrate that there has been a miscarriage of justice. The criminal proceedings against the accused remain on foot until the appeal is determined and, indeed, they continue thereafter if a new trial is ordered. The whole of this process should properly be seen as part of the defence of the criminal charge in question and, accordingly, is susceptible to provision for legal reasonable expenses under s 10B(3)(d).
Therefore, weight should be given to the need for Mrs Ryan to obtain appropriate legal advice and representation in her criminal appeal proceedings. (The same weight does not seem to me necessary to be accorded to the forfeiture proceedings in which Mrs Ryan's liberty is not in issue.)
As to the quantum of the costs in question (and the submission by the estate that the costs or some of the costs incurred to date have been excessive), in Harrison Partners Constructions Pty Ltd v Jebena Pty Ltd [2006] NSWSC 317 Brereton J (albeit in a case involving a Mareva injunction, which does not seem to me to be the applicable analogy in the present case) said at [10]:
Generally speaking, the proper legal costs of the defence should be exempted from the scope of an asset preservation order [Clark Equipment Credit of Australia Ltd v Conto Factors Pty Ltd (1988) 1 NSWLR 552 at 569; Glenwood Management Group Pty Ltd v Mayo [1991] 2 VR 49; Frigo v Culhaci (NSWCA, 17 July 1998, BC9803225)]. It is a principle of "Mareva" relief that it should not be allowed to stultify the proper defence of the proceedings [Clark Equipment Credit of Australia Ltd v Conto Factors Pty Ltd (1988) 1 NSWLR 552 at 569; Lewis v Nortex Pty Ltd (in liq) (NSWSC, Hamilton J, 16 February 2004, BC200400815].
and went on at [11]:
In this context, the proper legal costs of the defence should not be viewed in any narrow way, and are not limited to the bare essentials which might be allowed on a party/party assessment. The proper purpose of the Mareva jurisdiction is not to confer on a plaintiff any priority or security or anticipatory execution, nor to constrain the legitimate conduct of the defendant, but only to prevent an abuse by the defendant of its dispositive power in a manner calculated to produce the result of defeating an anticipated judgment in favour of the plaintiff. Generally, it is not an abuse of a defendant's dispositive power to fund its own defence, even on a lavish scale, so long as the expenditure is bona fide for that purpose. Courts should not deny such expenditure, even if the defence chooses to engage the most expensive law firm and counsel, unless the expenditure is not bona fide for the purpose of defending the proceedings.
Here, of course, the question is not whether payment of excessive legal costs (and I note that I make no comment on the quantum of the costs already incurred or that have been estimated in future) would be an abuse of Mrs Ryan's dispositive power of her own assets in order to defeat an anticipated judgment of the estate. It is a question as to the quantum of any funds that should be permitted to be released from the moneys held in Court where those moneys may ultimately be held to have been impressed with a trust in favour of the estate.
Perhaps tellingly, in the present context, his Honour at [16] considered that the procedure applicable where orders were sought for security for costs (where it may often be appropriate to deal with such applications in stages as a case progresses, rather than once and for all) might be appropriate. I note this because the evidence put forward on the current application as to the estimated fees was hardly what one would expect on a security for costs application - amounting to little more than ball park estimates without any real attempt to break down the costs into the tasks at hand or likely to be undertaken. Moreover, there is nothing to suggest that the costs of an appeal of the kind Mrs Ryan wishes to pursue in respect of her conviction would be warranted having regard to any assessment of the prospects of success of such an appeal. Rather, it appears from Mr Rahal's affidavit that any advice as to appeal prospects may not yet have been sought.
Conclusion
There is a seriously arguable claim by the estate under the forfeiture rule that any interest passing to Mrs Ryan on her husband's death by way of survivorship is forfeited to the estate and subject to a constructive trust. The strength of that claim on the material before me is such that it seems likely that the estate will be found entitled to at least a 50% share of the proceeds of sale.
There is also, in my opinion, a seriously arguable claim (by reference to the unequal contributions made by the two to the initial purchase price) that as from the time of purchase Mrs Ryan held her 50% interest in the property on resulting trust for Mr Ryan as to a share corresponding to his greater contribution to the purchase price (such that, coupled with the constructive trust claim, the estate would now have a claim to a 76.55% share of the proceeds).
As to the likelihood that the presumption as to a resulting trust can be rebutted by reference to the parties' objective intentions at the relevant time, this is not a matter on which any concluded assessment could be reached at this stage, as it must depend at least in part on whatever evidence may be adduced by Mrs Ryan. Similarly, the ability of the estate to contend that the later discharge of the mortgage operated to alter the beneficial interests further in Mr Ryan's favour is something the likelihood of which cannot presently be assessed.
Therefore, the estate's claim to a proprietary interest in the proceeds of sale if the resulting trust claim is established seems to me to be likely to be for at least 50% of the proceeds ($516,000) and potentially for at least 76.55% of the proceeds (leaving Mrs Ryan on the latter scenario with a 23.45% share amounting to $242,004).
The possibility that the estate may be entitled to a resulting trust over the whole of the proceeds seems less likely but not beyond argument. However, this means that while up to $242,004 could probably be released without a real likelihood of prejudice to the estate's ability to recover moneys from the fund, I cannot discount the possibility that the estate's claim may ultimately be found to be for the whole of the proceeds in which case the payment out of funds at this stage will diminish the value of any judgment so obtained.
There is a recognised public interest in a person in Mrs Ryan's position being able to obtain legal advice as to any grounds for appeal against her conviction and/or sentence and to prosecute such an appeal if so advised. The prejudice she may suffer if she is unable to do so seems to me to outweigh the risk that there will be insufficient funds for the estate to recover at least the upper end of what I consider to be the likely outcome of a favourable finding on its resulting trust claim.
Balancing those matters, I consider that payment should be allowed out of the fund at least in such amount (not exceeding $242,004) as would permit payment of the reasonable costs of advising on and preparing and conducting the criminal appeal (with the one qualification which I raise below), on the basis that this would leave a balance of moneys held in Court which would be available to meet a judgment for the estate (were it ultimately to be successful in the proceedings) within the range of what I consider on the evidence to be the reasonably likely range of outcomes.
The same public policy imperatives as those applicable when considering the ability to fund the criminal appeal proceedings do not apply to the future costs of funding the present litigation (and they do not apply at all to the payment of already incurred costs). It seems to me that funding the costs of the present proceedings is of less priority than funding of the criminal appeal proceedings (for the reason that the latter will potentially affect Mrs Ryan's liberty while the former do not).
On the (unsatisfactorily broad brush) estimates provided by Mrs Ryan's present solicitor, it would be possible largely to fund both the criminal appeal proceedings and the future costs of the forfeiture proceedings out of a 23.45% share of the proceeds of sale held in the Court. However, to the extent that the estimates were no more than ballpark estimates it is difficult to be confident as to the position in that regard. Balancing the respective parties' interests in this regard it may be that some (limited) release of funds would be warranted at least to enable Mrs Ryan to serve her evidence in the forfeiture proceedings (so that the Court will have before it her account of the relevant events).
The qualification to which I have referred above is that it is by no means clear to me that I can place any weight on the ballpark costs estimates that have been given. I do not consider that the public policy imperatives to which I have referred above mean that the estate's claim to these funds should be ignored or that I should accept the broad estimates I have been given (and release almost a quarter of the funds on the basis of those estimates alone).
Accordingly, I am inclined to order in the first instance that Mrs Ryan should be paid out of the funds held in Court an amount to meet the costs of obtaining advice as to the prospects of her criminal appeal and (on the assumption that there is advice received from Counsel that there are at least reasonably arguable grounds of appeal) the costs of representation by Counsel on the appeal. As to the future costs of the forfeiture proceedings, I consider that application for such costs should be made in stages and that there should be provision only for such costs as are reasonably necessary for the purpose of those proceedings and on the provision of satisfactory evidence as to the basis on which the costs have been quantified. I will invite submissions as to how a regime can be put in place in order to enable the release to Mrs Ryan of such funds. Any funds so released should not exceed an aggregate of $242,004 (though I am by no means suggesting that this is the amount that should ultimately be paid out of the fund).
I will hear submissions from Counsel in relation to the above and will defer making final orders until that time.
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Decision last updated: 08 June 2012
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