Szymanska v Szymanski (No 2) - [2015] SASC 191

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
SZYMANSKA v SZYMANSKI (NO 2)
[2015] SASC 191
Judgment of The Honourable Justice Blue
9 December 2015
REAL PROPERTY - PARTITION OF LAND
REAL PROPERTY - PARTITION OF LAND - PARTITION OR SALE IN PARTITION ACTION OR SUIT - SALE IN LIEU OF PARTITION
REAL PROPERTY - PARTITION OF LAND - PARTITION OR SALE IN PARTITION ACTION OR SUIT - COMPENSATION FOR IMPROVEMENTS
An order was previously made for the sale of the property owned by the plaintiff and the defendant as tenants in common.
In 2000 or 2001, the plaintiff moved out of the property. The defendant continued to reside in the property, paying the rates, taxes and other outgoings and undertaking repairs.
The defendant contends that he acquired an additional 19.1% or 16.8% interest in the property in February 2000 by reason of a payment to the plaintiff of $16,810.39 when it was worth $88,000 or $100,000. Alternatively, the defendant claims interest on the payment. The defendant claims contribution for rates, taxes and other outgoings paid and repairs undertaken by him.
The plaintiff seeks to offset against the defendant’s claims an occupation fee for the value of the defendant’s sole occupation of the property.
Held:
1.       The defendant did not acquire an interest in the property by reason of his payment of $16,810.39 to the plaintiff (at [52], [59]).
2.       The parties entered into an implied contract in 2001. Terms of the contract included that the defendant would reside in the property rent free, the plaintiff would have the benefit of the loan interest free and the defendant would pay the rates, taxes and other outgoings and maintain the property (at [68]).
3.       Pursuant to the contract, the plaintiff and defendant are entitled to share equally in the net proceeds of sale of the property subject to the plaintiff paying to the defendant out of her share $16,810.39 (at [70]).
4.       Alternatively, on an equitable accounting as between co-owners, the plaintiff and defendant are entitled to share equally in the net proceeds of sale of the property subject to the plaintiff paying to the defendant out of her share $16,810.39 (at [91]).
5.     The parties are entitled to 50% of the net proceeds of sale of the property. The defendant is entitled to payment of $16,810.39 out of the plaintiff's share of the net proceeds (at [93]).
Guardianship and Administration Act 1993 (SA); Law of Property Act 1936 (SA), s 26, s 29, s 30, s 31; Mental Health Act 1993 (SA), referred to.
Maddison v Alderson (1883) LR 8 App Cas 467, discussed.
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; Chatterton v Chatterton (1989) 52 SASR 337; Cooney v Burns (1922) 30 CLR 216; Croghan v Grosvenor (1991) 57 SASR 545; Industrial Rollformers Pty Ltd v Ingersoll-Rand (Australia) Ltd [2001] NSWCA 111; Integrated Computer Services Pty Ltd v Digital Equipment Corp (Australia) Pty Ltd (1988) 5 BPR 11,110; Kanak v Villamere [2004] SASC 108; Leigh v Dickeson (1884) 15 QBD 60; Ly v Ly [2012] NSWSC 643; McBride v Sandland (1918) 25 CLR 69; Pobjie Agencies Pty Ltd v Vinidex Tubemakers Pty Ltd [2000] NSWCA 105; Regent v Millett (1976) 133 CLR 679; Ryan v Dries (2002) 10 BPR 19,497; Szymanska v Szymanski [2015] SASC 126; W v D (2012) 115 SASR 61, considered.

SZYMANSKA v SZYMANSKI (NO 2)
[2015] SASC 191
Civil:
BLUE J:

Joanna Szymanska seeks an order against her brother Tomasz Szymanski under sections 69 and 70 of the Law of Property Act 1936 (SA) (the Act) for sale of their Kilburn property.
On 27 August 2015, I made an order for sale of the property and adjourned all questions of entitlements of the parties to the proceeds of sale.[1]
[1] Szymanska v Szymanski [2015] SASC 126.
The property has been sold for $422,000 and the net proceeds paid into Court.
Tomasz claims 69.1% or 66.8% of the net proceeds on the basis that he acquired an additional 19.1% or 16.8% interest in the property in February 2000 by reason of a payment made by him to Joanna of $16,810.39 when the property was worth $88,000 or $100,000. Joanna claims that the parties each hold a 50% interest in the property but acknowledges her liability to repay $16,810.39 out of her share of the proceeds.
In the alternative to his primary claim, Tomasz claims interest on $16,810.39 since February 2000 at interest rates applicable to six month bank term deposits. Joanna contends that no interest is payable or alternatively it should be based on the interest rates applicable to at call bank deposits.
Tomasz claims contribution proportionate to the parties’ respective beneficial ownership of the property for amounts expended by him in respect of the property since Joanna moved out in February 2000 or May 2001. These are for repairs and maintenance undertaken to the property and for council rates, emergency services levy and the fixed components of water rates and electricity supply charges in respect of the property.
Joanna claims to offset against Tomasz’ claims an occupation fee representing the incremental value of Tomasz’ sole occupation of the property since May 2001 over the value of occupation shared in proportion to their respective beneficial interests.
The following issues arise:
1.Did Tomasz acquire a proportionate interest in the property by reason of his payment of $16,810.39 to Joanna in February 2000?
2.Did the parties enter into a contract upon or before Joanna’s departure from the property governing their rights and duties as co-owners?
3.If not, to what amounts are the parties entitled on an equitable accounting as between co-owners?
Background
In July 1989, Joanna and Tomasz inherited the property from their father upon his death. They continued to live in it together with their mother, who moved into a retirement village in July 1999. It was not transferred into their names until December 2000 when they became registered proprietors as tenants in common.
In 1999, Joanna started looking to buy her own house. Joanna gave evidence that she had several discussions with Tomasz in which she said that she would need money to help her to buy a house and furniture and that the Kilburn property was worth around $100,000. She asked Tomasz if he would like to buy her interest for $50,000 or would agree to their selling the property and he would not agree to either course. Tomasz gave evidence denying any such discussions in 1999 or 2000 but saying that there was a discussion in 1989 after their father died about the possibility of his purchasing Joanna’s interest. I address this difference below.
In February 2000, Joanna located a land and house package at Walkley Heights that she wished to purchase. The total cost was about $172,000. She told Tomasz about it and said that she would need to borrow money on mortgage which she would be paying off for a long time. Joanna gave evidence that she again asked Tomasz if he would buy her interest in, or would agree to their selling, the property and he would not agree to either course. Tomasz gave evidence denying any such discussion in February 2000. I address this difference below.
Shortly thereafter, during a further discussion, Joanna asked Tomasz if he would assist her financially to buy the house and furniture.
At that time, Tomasz had approximately $16,000 in a term deposit. On 21 February 2000, he cashed the term deposit and was given a bank cheque in return for $16,810.39 intending to give it to Joanna. He did not give it to her immediately.
On 23 February 2000 Joanna executed a building contract with Statesman Homes to construct a house on the Walkley Heights land for $115,205.
In February 2000, during the course of an argument, Tomasz screwed up the bank cheque and threw it at Joanna, who caught it. Joanna used the money mainly towards furniture for the Walkley Heights house.
On 18 March 2000, Joanna signed a land purchase agreement with the developer to purchase the Walkley Heights land for $56,950.
On 18 April 2000, Joanna settled on the purchase of the Walkley Heights land.
On 18 April 2001, Statesman Homes issued a certificate of practical completion of the house at Walkley Heights.
It is in dispute when Joanna moved out of the Kilburn property. Joanna gave evidence that it was in May 2001. Tomasz gave evidence that it was in or before February 2000. I address this difference below.
After Joanna moved out of the Kilburn property, Tomasz continued to live in the property. Tomasz paid the rates and taxes and undertook various items of maintenance to the property. Tomasz did not pay rent to Joanna in respect of the property.
Between 2006 and 2008, the relationship between Joanna and Tomasz deteriorated.
In July 2008, Tomasz was admitted to and detained at Glenside Hospital under the Mental Health Act 1993 (SA) as a result of a notification to the authorities by Joanna. Tomasz was discharged in September 2008.
In July 2008, on application by Joanna and a social worker, the Guardianship Board appointed Joanna as administrator of Tomasz’ estate under the Guardianship and Administration Act 1993 (SA).
These events resulted in a worsening of the relationship between Joanna and Tomasz and there was no contact between them over the next five and a half years.
In December 2008, Joanna resigned as administrator and was replaced by the Public Trustee.
In May 2009, Joanna sent a letter to the Public Trustee saying that she wished to sell the property. In August 2009, the Public Trustee sent a letter in response saying it would be reluctant to move Tomasz and would seek an opinion on the best options for him.
On 19 April 2014, Joanna and Tomasz had a discussion. Joanna said that she wanted the property sold and the proceeds divided between them. Tomasz said that he did not want to sell the property. There was discussion about the prospect of Tomasz purchasing Joanna’s interest in the property but no agreement was reached. There was discussion about whether Tomasz should be paying rent of $100 per week to Joanna but no agreement was reached. Tomasz gave or sent to Joanna at about that time a copy of a letter dated 28 January 2014 he said he had posted to her former address and which she had not received. In the letter, he said that he had acquired a 19.1% interest by paying $16,810.39 in 2000 when the property was valued for council rate purposes at $88,000.
In May 2014, Joanna asked Graham Brown, a land agent, for an appraisal of the property. He appraised it without seeing inside the house as having a value of between $330,000 and $350,000. He assessed the rental value as being between $275 and $290 per week.
In June 2014, Joanna’s solicitors wrote to Tomasz offering to sell her interest based on a valuation to be obtained of the property and alternatively proposing that the property be sold. They said that until the property was sold Joanna required that rent be paid to her of $100 per week commencing forthwith. Correspondence ensued between the parties without resolution.
In October 2014, Joanna issued the summons in this action seeking partition and sale of the property.
Between May 2001 and September 2015, Tomasz paid the following rates and taxes:
·Council rates  $10,018.85
·Emergency services levy  $972.45
·Water rates supply charge[2]  $7,528.34.
[2]    This is the fixed component payable regardless of water usage or connection to the mains.
Between May 2001 and September 2015, Tomasz paid supply charges[3] for electricity totalling $3,368.
[3] This is the fixed component payable regardless of electricity usage but dependent upon connection to the electricity grid.
The trial
Joanna and Tomasz gave affidavit and oral evidence in chief and were cross-examined.
Joanna gave evidence that in 1999 she started looking for a house. She told Tomasz that she needed money to help her with the purchase of a property and furniture. She asked Tomasz if he would buy out her interest in, or agree to their selling, the Kilburn property. She said that the rates valuation was $88,000 and she thought that the property was worth around $100,000. Tomasz said that he did not have $50,000 and he was not going to sell the property. Joanna raised the topic several times before February 2000. Each time they had an argument and Tomasz would not agree to buy her interest in or to sell the property.
Tomasz gave evidence that there had been a discussion between Joanna and himself 10 years earlier in 1989 after their father died about his purchasing her interest in the property but his recollection was that it was not discussed again in 1999 or 2000.
I find that there were conversations in 1999 and early 2000 between Joanna and Tomasz in accordance with Joanna’s evidence. I make this finding based on my assessment of the evidence given by Joanna and Tomasz and because it is inherently likely that Joanna would have raised the topic in 1999 when she started looking to buy her own house. I find that Joanna mentioned selling the property as well as Tomasz’ buying out her interest for the same reasons.
Tomasz gave evidence that a few days or weeks before he gave the cheque to Joanna they had a conversation about her purchasing the land and house package at Walkley Heights. Joanna said that she would never be able to pay off her home loan and would die before doing so. Tomasz did not respond. Joanna in her evidence agreed that she said that it would take a long time to pay off the mortgage but denied saying that she would never do so. I find that Joanna said that it would take her a long time to pay off her home loan. It is inherently unlikely that she said that she would never pay it off.
Tomasz gave evidence that he felt sorry for Joanna and thought to himself that he might as well just pay her his savings to assist her. He went to the bank and withdrew his term deposit, receiving the bank cheque for $16,810.39. Based on the date of the cheque, this must have been on 21 February 2000.
Tomasz gave evidence that on another occasion a short time later he was having an argument with Joanna. By that time, he had told Joanna that he would give her his savings to help her. He said to Joanna “Look, if I give you all of my savings, I won’t have any money left. I will only have $1,000 left. I want to have some money left over. If I don’t have an emergency fund, if something goes like the hot water system or the stove, I’ve only got $1,000 in my pocket, that’s it. All of my savings gone.” I find that there was a conversation to this effect in accordance with Tomasz’ evidence.
Joanna gave evidence that she told Tomasz that she would repay the monies when the Kilburn property was sold. Tomasz gave evidence that Joanna did not say this.
I find that Joanna did say to Tomasz that she would repay the monies when the Kilburn property was sold. I make this finding based on my assessment of the evidence given by Joanna and Tomasz.
Tomasz gave evidence that on another occasion a short time later he screwed up the cheque and threw it at Joanna, who caught it. Joanna gave evidence to the same effect.
Joanna gave evidence that she did not move out of the Kilburn property until May 2001 when the Walkley Heights house was completed. Tomasz gave evidence that when he threw the cheque at Joanna in February 2000 she had already moved out of the Kilburn property. He based this on his recollection that Joanna came to the front door with a friend and he spoke to her through the screen door just before he threw the cheque at her. Tomasz did not recall Joanna moving into any other house when she left the Kilburn property and his recollection was that she moved straight into the Walkley Heights house.
I find that Joanna did not move out of the Kilburn property until May 2001. The documents tendered by her prove that settlement on the purchase of the Walkley Heights land did not occur until April 2000 and practical completion of the construction of the house was not achieved until April 2001. This proves that Joanna could not have moved into the Walkley Heights house in February 2000. There is no reason to find that Joanna moved into any other house when she left the Kilburn property. Tomasz’ evidence was based on reconstruction from his recollection of Joanna coming to the front door rather than a direct recollection that she had moved out by February 2000.
Joanna gave evidence that in May 2001 she had a conversation with Tomasz about payment of rates, taxes and utilities. She said that as she would have to pay her own for the Walkley Heights house and Tomasz would be living at the Kilburn property, he should pay them. She said that he agreed. Tomasz in his evidence said that he did not recall such a discussion. I find that there was a discussion in accordance with Joanna’s evidence. I make this finding based on my assessment of the evidence given by Joanna and Tomasz, because it is inherently likely that Joanna would have raised the topic and because Tomasz in fact paid the rates, taxes and utilities.
Joanna gave evidence that in or after 2008 the lock to the front door of the Kilburn premises was changed and she did not have a key for the new lock. She did not recall whether this was in consequence of the police damaging the door when they broke into the house and her not retaining a key when she arranged to change the lock or because Tomasz changed the locks. Tomasz gave evidence that he did not recall changing the locks. I find that he did not do so.
Joanna gave evidence that she made a few inquiries of Public Trustee as to whether the Kilburn property could be sold and/or rent paid but nothing came of her inquiries. She tendered the correspondence with Public Trustee in May and August 2009 addressed above which referred to sale of the property but not to rent. She did not give any details of communications with Public Trustee about rent. Tomasz said that Joanna admitted to him that she had not had communications with Public Trustee about rent. I am not satisfied that there were any such communications.
Joanna tendered an affidavit by Mr Brown in which he expressed the opinion that in 2015 the rental value of the property was $275 to $290 per week. She also tendered a letter from Mr Brown in which he expressed the opinion that in 2002 the rental value of the property was $260 to $280 per week. He said that the rise in the market between 2002 and 2015 was offset by a lack of attention and upkeep to the property.
Acquisition by Tomasz of interest in property
Tomasz contends that, by virtue of his payment to Joanna of $16,810.39 in February 2000, he acquired a proportionate interest in the property representing the proportion of $16,810.39 to the value of the property as at February 2000. My understanding is that his ultimate contention is that he acquired a 16.8% interest based on an agreed value of $100,000 rather than a 19.1% interest based on the Valuer-General’s valuation of $88,000.
Joanna contends that there was no agreement for Tomasz to purchase a proportionate interest in the property and the transaction was one of loan rather than purchase. Joanna contends that in any event a contract for the sale of a proportionate interest in the property would have been unenforceable under section 26 of the Law of Property Act 1936 (SA) because it was not in writing and there was no part performance.
Existence and terms of contract
I find that a contract came into existence between the parties in February 2000. It is common ground that the payment of $16,810.39 by Tomasz to Joanna was not a gift. The transaction must have been either a loan (Joanna’s case) or a purchase of an interest in the property (Tomasz’ case). In either event, a contract came into existence.

I find that the contract was for a loan repayable upon the sale of the property. This follows from my acceptance of Joanna’s evidence that she told Tomasz that she would repay the money upon the sale of the property. I would in any event have made this finding if I had not accepted that evidence. On Tomasz’ evidence, there was no discussion with Joanna in which either party suggested that by the payment Tomasz would acquire a proportionate interest in the property. At that point, Joanna was intending to move out of the property and it must have been contemplated by both parties that Tomasz would have the benefit of sole occupation of the property thereafter. In the circumstances, it is inherently unlikely that Joanna would have been prepared to agree to sell a proportionate interest in the property to Tomasz. The position is quite different to the proposition Joanna had put to Tomasz of selling her entire interest in the property to Tomasz for $50,000.
Requirement for writing
Given my conclusion, it is not strictly necessary to deal with Joanna’s alternative contention that a contract for the sale of a proportionate interest in the property would have been unenforceable because it was not in writing.
Sections 26 and 29 to 31 of the Law of Property Act 1936 (SA) relevantly provide:
26—Contracts for sale of land to be in writing
(1)No action shall be brought upon any contract for the sale or other disposition of land or of any interest in land, unless an agreement upon which such action is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some person thereunto by him lawfully authorised.
(2)This section does not affect the law relating to part performance, or sale by the court.
29—Instruments required to be in writing
(1)Subject to the provisions hereinafter contained with respect to the creation of interests in land by parol—
(a)no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law;
(b)a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will;
(c)a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will.
(2)This section shall not affect the creation or operation of resulting, implied, or constructive trusts.
30—Creation of interests in land by parol
(1)All interests in land created by parol and not put in writing and signed by the persons so creating the same, or by their agents thereunto lawfully authorised in writing, shall have, notwithstanding any consideration having been given for the same, the force and effect of interests at will only.
…
31—Savings in regard to last two sections
Nothing in the two last preceding sections shall—
…
(c) affect the right to acquire an interest in land by virtue of taking possession; or
(d) affect the operation of the law relating to part performance.
There is no document signed by Joanna or otherwise comprising or evidencing an agreement by her to sell a proportionate interest in the property to Tomasz within the meaning of section 26 or to dispose of or deal with Joanna’s interest in the land within the meaning of sections 29 and 30.
If I had found that the parties entered into a contract in February 2000 for the sale of a proportionate interest in the land, subject to the doctrine of part performance the contract would have been unenforceable under section 26. If I had found that Joanna had purported to dispose of or deal with her interest in the land, subject to the doctrine of part performance the disposal or dealing would have been ineffective under sections 29 and 30.
To amount to part performance for the purpose of the doctrine of part performance, an act must of its own nature be unequivocally referable to some such agreement as that alleged. In Maddison v Alderson,[4] in a passage subsequently cited with approval by the High Court,[5] Lord Selborne LC said:
All the authorities shew that the acts relied upon as part performance must be unequivocally, and in their own nature, referable to some such agreement as that alleged.
[4] (1883) LR 8 App Cas 467.
[5] McBride v Sandland (1918) 25 CLR 69 at 78 per Isaacs and Rich JJ and 99 per Powers J; Cooney v Burns (1922) 30 CLR 216 at 222 per Knox CJ, 231-232 per Isaacs J and 243-244 per Starke J; Regent v Millett (1976) 133 CLR 679 at 682-683 per Gibbs J (with whom Stephen, Mason, Jacobs and Murphy JJ agreed).
In the present case, “some such agreement as alleged” means an agreement for the sale of an interest in the property. The act of payment of $16,810.39 is not of its own nature or unequivocally referable to an agreement for the sale of an interest in the property. It might equally be a loan or gift. The act of Tomasz continuing to reside in the property is not referable to an agreement for the sale of an interest in property: as co-owner Tomasz had a right to possession of the property.
There are no relevant acts of part performance. Any contract for the sale of a proportionate interest in the property would have been unenforceable and any disposition of such an interest would have been ineffective by reason of sections 26, 29 and 30 of the Law of Property Act 1936 (SA).
Equitable interest in the property
In some circumstances, the payment of money to an owner of property can result in the payer obtaining an equitable interest in the property by way of constructive trust or equitable charge when those monies are applied by the owner to enhance the value of the property.
In the present case, the money paid by Tomasz to Joanna was not to be used and was not in fact used for the property at all. It was to be used and was in fact used for other purposes altogether. Tomasz did not obtain any equitable interest in the property by reason of the payment.
The position in contract
On an application for partition or sale in lieu of partition, the Court has jurisdiction in equity to take an account of the dealings between the parties in respect of the use of the property, the income derived from the property and the outgoings necessarily incurred by reason of ownership of the property.[6]
[6] Chatterton v Chatterton (1989) 52 SASR 337 at 340-341 per Jacobs J; Croghan v Grosvenor (1991) 57 SASR 545 at 550 per Debelle J; Kanak v Villamere [2004] SASC 108 at [10]-[14] per Besanko J.
However, if and to the extent that the rights and duties of the parties are governed by contract, the contract will prevail.
Subject to statutory requirements, a contract can be in writing, oral or implied. A contract can be wholly implied from the conduct of the parties.[7] If the parties’ conduct unequivocally demonstrates an intention to contract on certain terms, it does not matter that there is no precise time when it can be said that the contract comes into existence.[8]
[7] Integrated Computer Services Pty Ltd v Digital Equipment Corp (Australia) Pty Ltd (1988) 5 BPR 11,110 at 11,117-11,118 per McHugh JA (with whom Hope and Mahoney JJA agreed); Pobjie Agencies Pty Ltd v Vinidex Tubemakers Pty Ltd [2000] NSWCA 105 at [22]-[32] per Mason P (with whom Meagher and Handley JJA agreed); Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61, (2001) 53 NSWLR 153 at [71]-[80] per Heydon JA (with whom Mason P relevantly agreed) and Industrial Rollformers Pty Ltd v Ingersoll-Rand (Australia) Ltd [2001] NSWCA 111 at [136]-[149] per Giles JA (with whom Priestley and Meagher JJA agreed).
[8] Integrated Computer Services Pty Ltd v Digital Equipment Corp (Australia) Pty Ltd (1988) 5 BPR 11,110 at 11,118 per McHugh JA (with whom Hope and Mahoney JJA agreed).
When the issue is the existence, as opposed to the terms, of a contract, conduct of the parties after the contract allegedly came into existence is admissible.[9]
[9] It is not necessary to consider whether and in what circumstances post-contractual conduct is admissible to determine the terms or construction of the terms of a contract.
In the present case, the parties entered into a contract in February 2000. The terms of the contract included that Tomasz would lend to Joanna $16.810.39 and Joanna would repay it upon the sale of the property.
The parties entered into the February 2000 contract in contemplation that Joanna would move out of the property and Tomasz would continue to reside in it. In the circumstances, it was not an implied term of the contract that Joanna would pay interest on the amount of the loan. It is possible that there were additional terms of the contract addressing amongst other things maintenance of and outgoings in respect of the property, but it is unnecessary to decide that question in light of subsequent developments.
In May 2001, Joanna moved out of the property into her new house at Walkley Heights. I have found that it was agreed at that time that Tomasz would pay the rates and taxes and for utilities after Joanna moved out. There was no suggestion that Tomasz would pay rent or other compensation to Joanna for the exclusive use of the property or discussion as to maintenance of the property. In the circumstances, and disregarding for the time being the parties’ subsequent conduct, the conduct of the parties up to and upon Joanna’s departure unequivocally evinced an intention to enter into a contract. The contract was on the following terms.
1.Tomasz would have the benefit of the exclusive use of the property without paying rent or other compensation to Joanna for the benefit.
2.Joanna would have the benefit of the interest-free loan of $16,810.39.
3.Tomasz would pay the rates and taxes on the property and for all utilities.
4.Tomasz would maintain the property.
5.The agreement could be terminated by either party on reasonable notice to the other in which event (absent supervening agreement) the property would be sold and Joanna would repay the loan of $16,810.39 out of the settlement proceeds.
The subsequent conduct of the parties from May 2001 to the end of 2013 confirms that the parties entered into an agreement in these terms. Joanna did not seek rental or other compensation for the exclusive use of the property. Tomasz did not seek interest on the loan. Tomasz paid rates and taxes on the property and for all utilities. Tomasz maintained the property at his own cost.
In accordance with the terms of the contract, the net proceeds of sale of the property should be divided equally between Joanna and Tomasz subject to Joanna paying to Tomasz out of her share the sum of $16,810.39.
The position in equity
On an application for partition or sale in lieu of partition, to the extent that a contract does not govern the rights and duties of the parties, the Court has jurisdiction in equity to take an account of the dealings between the parties in respect of the use of the property, the income derived from the property and the outgoings necessarily incurred by reason of ownership of the property and order equitable compensation to be paid by one party to the other of the balance of the account.[10]
[10] See [62] above.
I consider the position in equity on the assumption that, contrary to my conclusion reached in the previous section, the position was not governed by contract.
The following general principles now apply[11] to the determination of equitable compensation on an order for partition or sale in lieu of partition in circumstances in which one co-owner has been in sole possession of the property for a period of time before the order is made and the parties have not otherwise agreed.
1.Where the co-owner in possession has paid principal and/or interest payable under a loan for the purchase or improvement of the land the subject of a mortgage over the land, prima facie the amount of those payments is to be credited in favour of that co-owner.[12]
2.Where the co-owner in possession has paid the rates and taxes being fixed charges imposed on the owners regardless of possession or use, prima facie the amount of those payments is to be credited in favour of that co-owner.[13]
3.Where the co-owner in possession has expended monies or effort in repairs or improvements to the property which have the effect of enhancing or preserving the value of the property, prima facie the value of the repairs or improvements (prima facie measured by reference to their cost or the difference in value if lower) is to be credited in favour of that co-owner.[14]
4.Where the co-owner in possession has wrongfully excluded the other co-owner from possession, prima facie the excluded co-owner is entitled to a credit by way of occupation fee for the difference in value of the possession on the different basis.[15]
5.Where the co-owner in possession seeks credit for expenditure on items such as those referred to in 1, 2 and 3 above, prima facie the other co-owner is entitled to a credit by way of offset for an occupation fee for the value of exclusive as opposed to shared possession enjoyed by the first co-owner.[16] Prima facie the occupation fee is equal to a proportion of the market rent of the whole property equal to the proportion of the other co-owner’s interest in the property out of the whole interest in the property.[17]
[11] Some of these principles have been recognised relatively recently and involve a departure from previously recognised principles.
[12] Ryan v Dries [2002] NSWCA 3, (2002) 10 BPR 19,497 at [71]-[74] per Hodgson JA (with whom Sheller JA agreed); W v D [2012] SASCFC 142, (2012) 115 SASR 61 at [14], [21]-[27], [40] and [58] per Kourakis CJ (with whom Anderson and David JJ agreed). Mortgage payments are also recoverable where the payment has been disproportionate to co-ownership regardless of who is in possession but that question does not arise in the present case. There were no mortgage payments in the present case.
[13] Ly v Ly [2012] NSWSC 643 at [19] per Rein J. Although not directly arising, the Court proceeded on the basis that rates and taxes were recoverable and this was consistent with the general approach of the Court in W v D (2012) 115 SASR 61 at [8] per Kourakis CJ (with whom Anderson and David JJ agreed). Rates and taxes are also recoverable where the payment has been disproportionate to co-ownership regardless of who is in possession but that question does not arise in the present case.
[14] Leigh v Dickeson (1884) 15 QBD 60 at 67 per Cotton LJ; Ryan v Dries (2002) 10 BPR 19,497 at [66]-[71] per Hodgson JA (with whom Sheller JA agreed); W v D (2012) 115 SASR 61 at [37] and [56] per Kourakis CJ (with whom Anderson and David JJ agreed). Repairs and improvements are also recoverable where the payment has been disproportionate to co-ownership regardless of who is in possession but that question does not arise in the present case.
[15] W v D (2012) 115 SASR 61 at [33]-[34], [70] and [74] per Kourakis CJ (with whom Anderson and David JJ agreed).
[16] W v D (2012) 115 SASR 61 at [11], [72]-[76], [80] per Kourakis CJ (with whom Anderson and David JJ agreed).
[17] W v D (2012) 115 SASR 61 at [77]-[79] per Kourakis CJ (with whom Anderson and David JJ agreed).
Rates and taxes
Tomasz paid $18,519.64 for council rates, emergency services levy and the fixed supply charge for water rates between May 2001 and September 2015. On an equitable accounting, he is entitled to a credit for that amount.
Tomasz also paid $3,368 as the fixed electricity supply charge over that period. However, electricity supply charges are payable by the occupier (or indeed anyone contracting with the electricity supplier) and not by the owner of the property. In addition, they are voluntary. In both respects, they are quite different from the fixed component of water rates. Tomasz is not entitled to a credit on an equitable accounting for this amount.
Repairs
Tomasz gave evidence that he expended various amounts on undertaking repairs to the property. He tendered receipts totalling approximately $1,500 over the period from May 2001 to September 2015.
Tomasz gave evidence of some of the repairs he undertook. One involved repair of a leaking copper pipe in the kitchen which necessitated the removal and replacement of part of two masonry walls and re-rendering and re-tiling them. One involved painting the exterior woodwork of the house. One involved rendering salt damp in the garage. One involved replacing the doorbell transformer. One involved replacing a drainpipe in the kitchen.
It is difficult to assess the value of the work undertaken by Tomasz. Wielding a broad axe, I assess the value of the work at $2,000. Ultimately, for reasons that will become apparent, the quantification of that value does not affect the overall result of an equitable accounting.
Occupation fee
Joanna is entitled to a credit by way of occupation fee on an equitable accounting for the value of Tomasz having exclusive instead of shared use and possession of the property by way of offset against credits to which Tomasz is entitled.
Mr Brown expressed the opinion that the market rental value of the property in 2002 was $260 to $280 per week and in 2015 was $275 to $290 per week. He said that the rise in the market between 2002 and 2015 was offset by a lack of attention and upkeep to the property.
I conservatively assess the market rental value of the property between May 2001 and September 2015 at $250 per week. Joanna is entitled to a credit for 50% of that value being $125 per week. This amounts to a total credit over the period of $93,166. This credit in favour of Joanna exceeds the total of the credits in favour of Tomasz referred to above by $72,646.
Exclusion of Joanna
Joanna does not contend that she was actually or constructively excluded from occupation or use of the property until 2008.
Joanna contends that she was so excluded in 2008 due to Tomasz changing the locks, displays of aggression by Tomasz and the very poor relationship between them.
I reject that contention. I have found that Tomasz did not change the locks. Joanna had voluntarily left the property seven years earlier in 2001 and had no intention of or interest in returning. Any conduct by Tomasz was irrelevant to her not returning to live in the property.
Joanna is entitled to a credit by way of occupation fee for the value of Tomasz having exclusive instead of shared use and possession of the property only by way of offset against credits to which Tomasz is entitled.
Interest on $16,810.39
Tomasz is not entitled independently of an equitable accounting to interest on the loan of $16,810.39.
Tomasz would be entitled to a “loan fee” (analogous to an “occupation fee”) if the loan was sufficiently connected to the co-ownership of the property that it ought to be brought to account as part of the equitable accounting between the parties in connection with that co-ownership. It is unnecessary to decide this question for reasons that become apparent below.
If Tomasz is entitled to a loan fee, it should be assessed by reference to the value of the loan. In all of the circumstances, an appropriate measure of that value is the six-month term deposit rate paid by Australian banks from May 2001 to September 2015. This is greater than the at call deposit rate paid by Australian banks but is less than the rate that would have been paid by Joanna on a mortgage loan. It also represents the rate that Tomasz had been receiving before he withdrew the monies from his term deposit and paid them to Joanna.
Joanna tendered a spreadsheet downloaded from the Reserve Bank of Australia website entitled “Retail deposit and investment rates” showing various interest rates since February 2000. One column shows “Retail deposit and investment rates; Banks’ term deposits ($10,000); 6 months”. The interest rates vary from 4.60% in February 2000 with fluctuations between 2.00% and 7.50% thereafter and 2.25% in September 2015.

Calculating interest on $16,810.39 at those interest rates compounding six monthly gives total interest from February 2000 to September 2015 of $10,235. This amount is substantially less than the net credit in favour of Joanna by reason of the occupation rent referred to above of $72,646. For this reason, it is unnecessary to decide whether Tomasz is entitled to a loan fee as part of the equitable accounting.
Net result
On an equitable accounting, leaving aside the principal sum of $16,810.39 which is payable in any event pursuant to the February 2000 contract and the liability to pay which is acknowledged by Joanna, there is no net amount payable by either party to the other because the occupation fee exceeds the sum of the rates and taxes paid and maintenance undertaken by Tomasz and any loan fee that might be credited in favour of Tomasz.
Conclusion
Joanna and Tomasz have a 50% interest in the property. There was no contract to convey and no conveyance of a proportionate interest in the property in February 2000.
Joanna and Tomasz are entitled to 50% of the net proceeds of sale of the property. Tomasz is entitled to payment of $16,810.39 out of Joanna’s share of the net proceeds.
I will hear the parties as to final orders.