Sellick and Sellick and Huntley
[2008] FMCAfam 1066
•4 September 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SELLICK & SELLICK & HUNTLEY | [2008] FMCAfam 1066 |
| FAMILY LAW – Property – nature of second respondent’s interest in the matrimonial property – equitable charge. |
| Family Law Act 1975 (Cth) ss.79, 117(1) & (2) |
| Morris v Morris [1982] 1 NSWLR 61 Chalmers v Pardoe [1963] 1 WLR 677 Giumelli v Giumelli (1999) 196 CLR 101 Cierpiatka v Cierpiatka (1999) FLC 99-864 |
| Applicant: | MR SELLICK |
| First Respondent: | MS SELLICK |
| Second Respondent: | MS HUNTLEY |
| File Number: | PAC 6719 of 2007 |
| Judgment of: | Henderson FM |
| Hearing dates: | 1 & 2 September 2008 |
| Date of Last Submission: | 2 September 2008 |
| Delivered at: | Parramatta |
| Delivered on: | 4 September 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr Maddox |
| Solicitors for the Applicant: | Dooley & Associates Solicitors |
| Counsel for the First Respondent: | Mr O’Gorman |
| Solicitors for the First Respondent: | Glenn R Walters & C0 |
| Counsel for the Second Respondent: | Mr Thistleton |
| Solicitors for the Second Respondent: | Olivers Lawyers |
ORDERS
A declaration of an equitable charge on the interest of the registered proprieties of the real property at Property K, (“the real property”) in favour of the second respondent Ms Huntley.
The applicant and first respondent be estopped from selling the real property unless on settlement they discharge the equitable charge of the second respondent by payment to her of the sum of $440,135.
The applicant and first respondent be restrained from interfering with the second respondent’s quiet enjoyment of the real property pending its sale.
The second respondent’s costs on a party-party basis as agreed or taxed from 6 May 2008 be paid to her from the net proceeds of sale of the real property and prior to any distribution to the applicant and first respondent.
IT IS NOTED that publication of this judgment under the pseudonym Sellick & Sellick & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PARRAMATTA |
PAC 6719 of 2007
| MR SELLICK |
Applicant
And
| MS SELLICK |
First Respondent
| MS HUNTLEY |
Second Respondent
REASONS FOR JUDGMENT
This is a property matter heard on 1 and 2 September 2008. Mr Maddox of Counsel represented the applicant husband, Mr O'Gorman of Counsel represented the respondent wife, and Mr Thistleton, of Counsel represented the second respondent the maternal grandmother, Ms Huntley.
Ms Huntley’s application is contained in a statement of claim attached to her filed response.
This judgment will be delivered in two parts: Ms Huntley’s claim will be delivered first and the parties’ family law matter second although both matters were heard together. The matter came on for Final Hearing very quickly due impending action by the Bank to force a mortgagee sale of the property. I am grateful the parties were able to prepare the matter in such a short time frame.
The second respondent, Ms Huntley’s claim is that she has an interest in the husband and wife's property at Property K by way of an equitable charge. This charge creates a lien on the property the quantification of which is the money she expended in building a separate, although attached, dwelling on the husband and wife’s land. Ms Huntley has quantified the sum expended at $440,135 which sum is agreed.
The wife agrees her mother should be paid this sum from the proceeds of sale the matrimonial home. All parties agree the home is to be sold.
The husband asserts that his former mother-in-law be paid a lesser sum: namely, the value her dwelling has added to the total value of he and his wife’s property. That value has been quantified by Mr S, Valuer, in a valuation dated 24 May 2008 at $330,000. That valuation was marked Husband's Exhibit 3. The husband says Ms Huntley should be paid this amount or one third of the net proceeds of sale whichever sum is the greater.
All parties agree that Ms Huntley, although having no legal interest in the property, has an equitable interest in the property and should be paid a sum of money from the net proceeds of sale.
The issue is how that sum ought to be quantified.
This issue must be dealt with before I determine the rights of the husband and wife as the determination of Ms Huntley's entitlement to the net proceeds of sale will impact on the monies available for division between the husband and wife. Once I ascertain what is left to be divided between the husband and wife I can proceed to finalise the husband and wife's percentage entitlement.
The parties are awaiting confirmation of the husband's superannuation entitlement before submissions from the husband's and wife's respective counsels can be made. I have stood the matter over for identification of the husband’s superannuation entitlement and then submissions to Wednesday 1 October 2008.
All three parties agree that I proceed to deal with quantification of
Ms Huntley's claim as soon as possible so that the home can be marketed and sold at the best price obtainable in the current climate.
Evidence
The evidence I read was as follows:
For the applicant husband I read the following:
a)The husband's amended application filed 6 August 2008;
b)His affidavit of 7 December 2007;
c)His financial statement of 27 August 2008;
The husband was examined and cross-examined and I read a case outline prepared by his Counsel.
The husband tendered:
a)Husband’s Exhibit 1: Husband’s Superannuation Statement as at separation;
b)Husband’s Exhibit 2: A letter from State Super dated 10 January 2008;
c)Husband’s Exhibit 3: A valuation of the matrimonial home and the second respondent's addition;
d)Husband’s Exhibit 4: Orders of 22 February 2008 made by me concerning a sale of the property pending final hearing;
e)Husband’s Exhibit 5: Four RPdata documents printed out by the husband setting out the history of sale and purchases of him of property. It was conceded by the wife during the hearing that the husband had a much better recollection than she of properties bought and sold during the relationship and the costs thereof;
f)Husband’s Exhibit 6: Child support estimator from the internet which the wife obtained and filled out to determine what she said should be the child support payable by the husband;
g)Husband’s Exhibit 7: Three letters to the second respondent's solicitors which are relevant to the issue of costs.
For the respondent wife I read the following:
a)Her affidavit of 27 August 2008;
b)Her financial statement of 27 August 2008;
c)Short minutes of proposed Order and a case outline prepared by her Counsel.
The wife was examined and cross-examined
The wife tendered:
a)Wife’s Exhibit 1: An Application for Divorce filed by the husband on 27 June 2008; and
b)Wife’s Exhibit 2: The father's handwritten document, "Term 3 Arrangements" being his time to spend with his boys in Term 3.
For the second respondent I read the following:
a)Her affidavit of 26 August 2008; and
b)Her response which contained a statement of claim.
The second respondent was examined and cross-examined
The second respondent tendered:
a)Second Respondent’s Exhibit 1: A copy of the front page of the contract of sale of the home at Property G sold at an undervalue to her daughter, Ms J, the wife’s’ sister;
b)Second Respondent’s Exhibit 2: Correspondence between her solicitors and the husband's solicitors in relation to her claim which went to the issue of costs.
Second Respondent’s Claim
The second respondent's claim is contained in a statement of claim attached to her response. She has invoked the accrued jurisdiction of this Court to deal with her equitable interest in land owned by the husband and wife.
Clearly, section 79 of the Family Law Act gives the Court power to deal with the assets of married parties, but I must rely upon the Court's accrued jurisdiction to deal with the rights of a stranger to the marriage who, nevertheless, asserts an equitable or other interest to the property of married couples.
The second respondent’s statement of claim in summary is as follows and is agreed to by the husband and wife.
The husband and wife are the registered proprietors of the real property at Property K.
The second respondent has no registered legal interest in the property or the mortgage over the property. The mortgage is a debt of the husband and wife.
The second respondent sold her home at Property G in April 2004 to her daughter Ms J at an undervalue.
The second respondent spent, with the consent, agreement and encouragement of the husband and wife, $440,135 from the proceeds of sale of her Property G home to construct a dwelling for herself on their land.
That dwelling was constructed and completed in about 2005 at which time the second respondent commenced to live in the dwelling with the expectation agreed to by all the parties that she would be able to reside in the dwelling indefinitely. .
That the husband and wife had encouraged the second respondent to believe she would be able to reside in the dwelling indefinitely.
The husband does not agree that the second respondent’s claim is by way of an equitable charge that can only be satisfied by her receiving the money she has expended on their land.
In April 2008, the second respondent registered a caveat on the title to protect her interests.
The issue I am asked to adjudicate is the quantification of Ms Huntley's equitable interest in the husband's and wife's land now that her expectation of being able to live in the home indefinitely can no longer be met because the property is to be sold.
The husband and wife agree Ms Huntley has an equitable interest over their land and that she expected to live in the home she paid to be built for an indefinite period.
Mr Thistleton says the answer is simple. The decision of Morris v Morris [1982] 1 NSWLR 61, a decision of McClelland J, is on point and should be followed. Mr Thistleton says this decision is ad idem with the facts in this matter and is authority for the proposition that, where an equitable charge is found to be the appropriate remedy, the satisfaction of the resulting lien over the land is repayment of the money expended, plus interest.
Ms Huntley does not seek interest on her claim as unlike the facts in Morris she has continued the uninterrupted and quiet occupation of her home since the husband and wife’s separation.
The facts in Morris were as follows. The husband and wife owned a home and land. The husband's father, the paternal grandfather, sold his home unit and paid $28,000 towards an extension to the home for him to occupy. He constructed an upper dwelling for himself with a separate entrance. It was found that the plaintiff, "the widow", paid for the extension on the home to provide accommodation for himself indefinitely and to live there as part of his son and wife's family.
Subsequent events which were not contemplated by any of the parties including the breakdown of his son's marriage and his departure from the home and then the breakdown of the personal relationship between the plaintiff and his former daughter-in-law, which resulted in the plaintiff no longer being able to live at the home.
His Honour McClelland J held that there was nothing in this matter from which he would infer that there was an intention to create a trust of the plaintiff’s equitable interest nor were there sufficient facts from which a trust could be implied. Nevertheless, it would be unconscionable and inequitable for the defendants, the husband and wife, to retain the benefit of the plaintiff's expenditure and in the circumstances of this particular case, the appropriate remedy was an equitable charge on the property to secure the amount of the expenditure and interest from the date of the commencement of the proceedings.
Going to the judgment which is mercifully short and succinct, His Honour says:
In my view, on the wider equitable principles operate in the present case. The plaintiff spent money on the defendants’ property in the expectation, induced or encouraged by the defendants that he would be able to live there indefinitely as a member of their family. This expectation has been defeated by the occurrence of events which were not in contemplation when the money was spent and as a result of which any subsisting right of residence by the plaintiff in the property is now of no practical consequence.
These facts are almost identical to the facts in this matter. .
His Honour went on to say:
Consequently an equity arises in favour of the plaintiff and the Court must determine how in all the circumstances justice requires that equity be satisfied. What a plaintiff in such a case as this should in justice receive will not necessary correspond with what, when the relevant expenditure was made, he expected to receive.
The Judgment refers to an older decision of Chalmers v Pardoe [1963] 1 WLR 677. In discussions of equitable interest in land the Court says:
where an owner of land has invited or expressly encouraged another to expend money upon part of his land upon the face of an assurance or promise that that part of the land will be made over to the person so expending his money, a court of equity will prima facie require the owner by appropriate conveyance to fulfil his obligation; and when, for example for reasons of title, no such conveyance can effectively be made, a court of equity may declare that the person who has expended the money is entitled to an equitable charge or lien for the amount so expended.
His Honour McClelland J says that the principle illustrated in the extract from Chalmers v Pardoe demonstrates the equitable remedy is flexible and has been applied in a great variety of situations:
In the present case the assurance or promise to the plaintiff of an indefinite right of residence in the defendant's property is the operative equivalent of the assurance or promise to make over part of the land referred to in Chalmers v Pardoe. The remedies to which the principle gives rise are imposed, as is a constructive trust, in order to satisfy the demands of justice and good conscience. Indeed in some circumstances the appropriate remedy may well be the imposition of a constructive trust. However, in the particular circumstances of the present case the plaintiff's equity would in my opinion be satisfied by his having an equitable charge over the Kingsgrove property of the money he expended, plus interest.
In this matter Ms Huntley has constructed a separate but attached dwelling to the husband and wife's home with its own separate entrance, with an expectation of living there for as long as she wished. On the facts, Ms Huntley's claim and Mr M Senior's claim are virtually identical save that Ms Huntley has continued in occupation of her dwelling.
The parties all agreed Ms Huntley built the extension to the house to house herself in the future and that, ultimately, it would form part of her daughter's inheritance because it would remain attached to her daughter's home, to be rented out or used by her grandsons when
Ms Huntley no longer has use of or needed the dwelling.
The promise of the parties in this matter resulted in Ms Huntley selling her home at undervalue to her daughter, Ms J, as part of Ms J’s inheritance, and using the funds resulting to build a home for herself on the husband and wife’s property. Further when Ms Huntley no longer required the dwelling for her needs, it would become Ms Sellick’s inheritance as the cheaply sold home to Ms J had become her inheritance. The husband cannot escape these facts. They are clear on the evidence.
Ms Huntley and the wife say there was an agreement between them all that if the Property K home was sold prior to Ms Huntley's vacating her dwelling, then she would get her money back. The husband denied any such agreement.
As I see it, I do not need to find any such agreement exists between the parties for the principles enunciated in Morris to apply.
The relevant findings for the principles in Morris to apply are these:
a)Ms Huntley built a dwelling for her occupation on the husband and wife’s property;
b)the husband and wife encouraged, joined in and took part in assisting with the building of Ms Huntley’s dwelling including the husband dealing with the difficult negotiations with council for approval of plans to build as they had rejected the first set of plans and;
c)the husband was paid some $27,500 to paint Ms Huntley's dwelling;
d)the mortgage on the Property K property had nothing to do with the second respondent and nor did she ever contribute to rates and taxes on the land;
e)
prior to the breakdown of the parties' marriage and whilst
Ms Huntley's home was being constructed, all parties had an easy and cordial relationship which is, unfortunately, in stark contrast to today;
f)Ms Huntley sold her property at Property G on 1 April 2004;
g)the husband and wife were aware she sold her property at Property G for an undervalue to Ms J and she sold it to enable her to build a home for herself at the parties' Property K property;
h)Ms Huntley had a reasonable expectation that she would be able to live in the dwelling indefinitely and this belief was reasonably based on the facts and is agreed to by the husband and wife;
i)Ms Huntley's expectation can no longer be fulfilled and her only remedy is a monetary one.
These are clearly the same facts that operated on His Honour's mind in Morris v Morris.
It is, therefore, clear that an equitable right arises in Ms Huntley's favour. The question is: is it a lien for money expended by her or is it some other monetary amount based on some other process.
I was referred to Peter Butt's Land Law by Mr Maddox of Counsel to convince me that his submission that Ms Huntley is not entitled to the money she has expended but, as it turns out, a lesser amount based upon the either a percentage share of the value of the whole property or the assessment of value of Ms Huntley’s dwelling as valued by
Mr S, whichever is the greater. Reading from that text, it says as follows:
Equity will prevent a landowner from asserting an unfettered title where the person building on the land (the claimant), although knowing the land belongs to another, has expended money or labour in reliance on the owner's clear assurance the claimant would acquire some right or interest in the land.
The text continues:
Where the requirements for proprietary estoppel are satisfied, equity moulds the remedy so as best to reflect the merits of the claim. In this, equity's object is to achieve “the minimum equity to do justice to” the claimant. The purpose is not so much to compel the landowner to fulfil the claimant's assumption or expectation, as to avoid the detriment to the claimant if it is not fulfilled. So, depending on the circumstances, the court may award the claimant an irrevocable licence to occupy the land; or a long term lease; or a licence to occupy the land for a particular period; or, possession of the land until the expenditure is repaid; or a lien or charge over the land for the amount of the expenditure or the present value of the improvements and the land on which they stand; or even ownership of the land in whole or in part. Or the Court may order a sale of the property, with the claimant to have part of the proceeds, or it may order the claimant to remove the building within a specified time, but with a right to reside in it until removal.
The remedy granted will not necessarily correspond with what the claimant expected to receive when making the expenditure. And the Court may grant what it considers an appropriate proprietary interest even though the claimant did not have a clear understanding of the nature of the interest he or she expected to receive.
In appropriate instances, the Court may conclude a monetary payment is the sufficient remedy.
I accept Mr Maddox's position that, from reading Mr Butt's Land Law, the equitable remedy is, as said by McClelland J, flexible and that what a Court is endeavouring to do is justice and equity between the parties, having regard to the expectation, the acting upon the promises and the inability for that promise or expectation to be fulfilled.
Ms Huntley clearly cannot have what she expected to receive, a right to live in her dwelling indefinitely and her only compensation is monetary.
The case cited by Mr Butt in his book for the principle of present value of improvements and on land as means of fulfilling a monetary remedy is the decision of Giumelli v Giumelli (1999) 196 CLR 101. In that case the trial court found a constructive trust in favour of a son who had built a home with his first wife on a parcel of land he expected to receive and who had worked on the farm and had replanted an orchard. When he married his second wife, a woman of whom his parents did not approve, the partnership with his parents and brother and his right to occupy his home and work the farm and orchard was denied him and he was ejected from the property.
The lower Court found there was a promise to give land to a son for hard work in the orchard and on the property generally which was the land upon which he had built the home and ordered amongst other things a transfer of land to the son.
The High Court disagreed with the lower Court's decision of a transfer of land. The High Court said that this was a case for fixing a monetary sum as compensation to the young Mr Giumelli, having regard to all the affected parties which were his mother, his brother and the partnership that ran the farming business. The order the High Court made was that the matter be remitted for re-hearing to the Supreme Court and the Supreme Court was to determine the entitlement to a payment of a sum representing the present value of the promised lot, taking into account all the considerations so as to do justice and equity between the parties.
The case cited for the equitable remedy applied in Morris v Morris that the quantification of a monetary satisfaction of an equitable lien over the land is the repayment of the monies expended is Cierpiatka v Cierpiatka (1999) FLC 99-864 a decision of the Full Court of the Family Court .
The facts in Cierpiatka were that the husband and his wife built a separate house on land owned by his parents and which was capable of subdivision but had not been subdivided at the time of his father's death. At the father’s death the whole of the land, including the land upon which the husband and wife’s home was built, went to the mother. At the cessation of the husband’s and wife’s relationship there was dispute as to how the husband and wife were to be compensated
The Full Court found that, in the circumstances of that case, the satisfaction of the lien was the money expended by the husband and wife on his parents land plus interest and the decision of Morris was cited. The Court also quoted from a decision of Lord Denning at page 92- 864:
It is for the Court to say in what way the equity can be satisfied.
There is a significant factual difference between Ms Huntley’s matter and Giumelli. The facts of Ms Huntley’s case are much more closely related to the facts in Morris and in parts to Cierpiatka.
There is no identifiable lot that could ever be transferred to
Ms Huntley, as was also the case in Morris. Ms Huntley and Mr M senior built attached but separate dwellings for themselves on their children’s properties.
Secondly and most importantly neither Ms Huntley, Mr M senior or their children and spouses ever intended the parents receive a portion of their real estate. The intention was a right to occupy indefinitely. This intention is further supported in this matter as Ms Huntley was never requested to pay for any outgoings or ongoing costs on the land such as, rates, taxes and the like.
In Giumelli and Cierpiatka the intention was to transfer land upon which a home had been built. In Giumelli the intention was based upon not just the building of a home but the work the son did on the farm including planting an orchard. Clearly, in Giumelli the son had an expectation he would receive a portion of the actual land. That fact could not be more different from the facts in this matter and Morris.
What has been promised here was an indefinite right to Ms Huntley to occupy the dwelling she constructed from her own funds on the husband and wife's property and that is precisely the same right, the same promise, the same expectation Mr M senior had in the decision of Morris.
Thus I am bound to follow the decision of Morris v Morris which has been followed by the Full Court of the Family Court in Cierpiatka. Accordingly I find that the second respondent's equitable interest in the husband and wife's land is an equitable charge over their property which lien is to be satisfied by a monetary payment to her of the money she expended being $440,135 and I will so order.
Ms Huntley’s claim is not related to nor dependant upon the value of the land as a whole or the value of her additions to the land. Accordingly Mrs Huntley’s entitlement would not result in her sharing in any increase or in any decrease in the value of the property as a whole.
Costs
An application was made by the second respondent for her costs from 18 February as agreed or taxed.
This was resisted by the husband and by the wife.
The wife says, if a costs order is made, the husband should bear those costs as she had agreed early on and before March 2008 that her mother should be reimbursed for the full cost to her of building her dwelling on the land.
The second respondent sent a letter to the husband's lawyers on
18 February 2008which was replied to on 4 March 2008.
The letter of 18 February from the second respondent's solicitors advises them that they have been provided with copies of the husband's application. It refers to cost of building Ms Huntley's dwelling as $438,135. It further advises that Ms Huntley has an equitable charge over the property for this sum and that unless it is agreed that this sum is paid to her on the sale of the property a caveat will be lodged to protect her interests. A reference is made to the decision of Morris v Morris.
The husband's solicitors write back:
Our client and Ms Sellick are in the process of making arrangements for a valuation of the property to be undertaken. This valuation will be necessary to ascertain how much of your client's contribution has added to the value of the property.
The letter also advised of the conciliation conference which the second respondent did not attend.
A further letter was sent by the husband’s solicitor to the second respondent’s solicitor on 2 May 2008 stating that as the second respondent had no objection to the sale of the land. "Would she please remove the caveat so that a sale of the property can go ahead."
In response to that letter is the second respondent’s letter of 6 May 2008:
Ms Huntley cannot consent to the sale of the property in the current circumstances. I note that there is no agreement in relation to payment to Ms Huntley of the money she expended towards the residence. If the property is sold without that agreement this will render Ms Huntley homeless. It does not satisfy her equity to simply place the proceeds of sale in trust pending a later agreement as to how they are to be distributed.
An offer is made:
I advise Ms Huntley will consent to removal of the caveat and provide a withdrawal of caveat on settlement if the debt to her is acknowledged, and an agreement is reached that the sum of $438,135 is to be paid to her at settlement.
The response to that is a letter of 12 May 2008:
Your client has chosen not to be joined as a party in the proceedings, and your instructions that she insists on obtaining from the sale all moneys she says she spent on the additions to the property, despite living there for some years, are remarkable in our view…
… we have no objection to your client commencing proceedings in the Supreme Court, but we would ask that she do so within 14 days so that the Family Court proceedings are not delayed.
On 8 July 2008 a reply is issued which says that the issue between
Ms Huntley and the Sellicks is not a matter for the Family Court. Clearly that is wrong.
On 6 May 2008 the second respondent offered to settle her claim by a payment to her of $438,135, some $2,000 less than I have ordered she be paid today. Her daughter agreed with that offer. The offer was not accepted by the husband.
The husband was made aware of the basis of the second respondent’s claim as early as 18 February 2008 and the decision of Morris was cited to his lawyer. Ultimately I have found the facts of this case and Morris cannot be distinguished.
This is a costs application not of a Family Law dispute but a dispute under State Law and costs always follow the cause in that jurisdiction. In those circumstances, I will order the second respondent’s costs to be paid from 6 May 2008 when the offer to settle was made by her.
Even if I was exercising my discretion under s.117(2) of the Family Law Act given that an offer was made to settle this matter on 6 May 2008 for $2000 less than the second respondent has received, I would have found it was proper that her costs be paid in any event.
Therefore, I make orders in accordance with those as set out at the commencement of this judgment.
I certify that the preceding eighty-four (84) paragraphs are a true copy of the reasons for judgment of Henderson FM
Deputy Associate: A. Morris
Date: 30 September 2008
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