Willis v The State of Western Australia [No 3]
[2010] WASCA 56
•31 MARCH 2010
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: WILLIS -v- THE STATE OF WESTERN AUSTRALIA [No 3] [2010] WASCA 56
CORAM: McLURE P
OWEN JA
BUSS JA
HEARD: 9 DECEMBER 2009
DELIVERED : 31 MARCH 2010
FILE NO/S: CACV 15 of 2009
BETWEEN: NATTASHA WILLIS
Appellant
AND
THE STATE OF WESTERN AUSTRALIA
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :TEMPLEMAN J
Citation :LAMERS -v- THE STATE OF WESTERN AUSTRALIA [2009] WASC 3
File No :CIV 2611 of 2003
Catchwords:
Trusts - Constructive trusts - De facto relationship - Whether intention to pool financial resources - Whether joint endeavour - Whether proprietary remedy available
Criminal confiscation - Real property - Property acquired by appellant's former de facto before the relationship commenced - Appellant paid some mortgage and living expenses - Claim of equitable proprietary interest
Legislation:
Criminal Property Confiscation Act 2000 (WA)
Misuse of Drugs Act 1981 (WA), s 32A(1)
Result:
Appeal dismissed
Category: A
Representation:
Counsel:
Appellant: Dr A F Dickey QC
Respondent: Mr M Seaman
Solicitors:
Appellant: Chris Stokes & Associates
Respondent: Director of Public Prosecutions (WA)
Case(s) referred to in judgment(s):
Bathurst City Council v PWC Properties Pty Ltd [1998] HCA 59; (1998) 195 CLR 566
Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137
Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 269
Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101
Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143
Green v Green (1989) 17 NSWLR 343
Jones v Southall & Bourke Pty Ltd [2004] FCA 539
Marist Brothers Community Inc v Shire of Harvey (1994) 14 WAR 69
Morris v Morris [1982] 1 NSWLR 61
Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583
West v Mead [2003] NSWSC 161; (2003) 13 BPR 24,431
McLURE P: I have had the advantage of reading the reasons for judgment of Buss JA. I agree with Buss JA for the reasons he gives that the appellant's claim based on the principle in Baumgartner v Baumgartner (1987) 164 CLR 137, should be dismissed. The appellant failed to prove that she had any equitable interest, proprietary or otherwise, in the Cooloongup property. That relieves this court of the task of identifying and determining the myriad of legal issues that would otherwise have arisen. Those legal issues would include whether:
1.the claimed constructive trust was institutional or remedial and when any associated equitable interest in the Cooloongup property arose;
2.by reason of s 50 and s 51 of the Criminal Property Confiscation Act 2000 (WA) (the Act), the fact and extent of the appellant's interest in the Cooloongup property was limited to that in existence as at the date of the making of the freezing notice on 4 December 2003;
3.confiscation under s 8 of the Act is of the Cooloongup property itself (see s 9(2)) or is limited to Mr Lamers' interest in that property (see s 8(1), s 84(2)).
As the parties did not turn their attention to these issues, this is not a proper occasion for this court to venture an opinion on them.
OWEN JA: I agree with Buss JA.
BUSS JA: The appellant appeals to this court against the dismissal by Templeman J of her application objecting to the confiscation of the land and house at 3 Cambridge Crescent, Cooloongup (the Cooloongup property) pursuant to a freezing notice dated 4 December 2003 issued under s 34(3) of the Criminal Property Confiscation Act 2000 (WA) (the Act).
The issue of the freezing notice and the application of the Act in respect of the property of Robert James Lamers
On 4 December 2003, a Justice of the Peace for Western Australia issued the freezing notice in respect of all property owned or effectively controlled by Robert James Lamers and all property that Mr Lamers had at any time given away.
The basis for issuing the freezing notice was that Mr Lamers had been charged with an offence and he could be declared to be a drug trafficker under s 32A(1) of the Misuse of Drugs Act 1981 (WA) if he was convicted of the offence.
The property the subject of the freezing notice included the Cooloongup property.
On 10 August 2005, Mr Lamers was convicted of the offence, and on that date he was declared to be a drug trafficker under s 32A(1) of the Misuse of Drugs Act.
By s 8(1) of the Act, upon Mr Lamers being declared to be a drug trafficker, the following property was confiscated:
(a)all the property that Mr Lamers owned or effectively controlled at the time the declaration was made; and
(b)all property that Mr Lamers gave away at any time before the declaration was made, whether the gift was made before or after the commencement of the Act.
The primary proceedings
On 24 December 2003, Mr Lamers commenced proceedings, by originating summons, in the Supreme Court objecting to the confiscation of the property referred to in the freezing notice. He did not, however, pursue the proceedings.
On 18 April 2007, the respondent sought various orders in relation to the originating summons at a directions hearing before Martin CJ. On that date, the Chief Justice made orders, relevantly, as follows:
(a)Subject to satisfactory proof of service, Mr Lamers' objection be dismissed.
(b)The originating summons be amended to add the appellant as second plaintiff.
(c)The appellant file and serve any (further) affidavits upon which she intends to rely in support of her objection to confiscation of the property frozen under, relevantly, the freezing notice, by 4.00 pm on 18 May 2007.
Pursuant to the Chief Justice's orders, the respondent filed an affidavit of service and, in consequence, Mr Lamers' objection was dismissed.
The appellant claimed that she had acquired a substantial interest in the Cooloongup property under a constructive trust. Alternatively, she claimed relief under s 82(3) of the Act.
The appellant swore three affidavits in support of her objection, on 21 October 2004, 28 June 2006 and 18 June 2007.
On 19 November 2008, the primary judge heard the appellant's claim. At the hearing, the appellant was cross‑examined on her affidavits. On 16 January 2009, his Honour delivered judgment. He dismissed the appellant's objection to the confiscation of the Cooloongup property.
The primary judge's findings of fact, reasoning and conclusions and facts not in dispute
The primary judge made these findings of fact:
(a)In 1998, Mr Lamers purchased the Cooloongup property for $84,000.
(b)Mr Lamers paid $20,000 of the purchase price from a workers' compensation payment. The balance of $64,000 was paid from a loan advanced by the Commonwealth Bank. The loan was secured by a mortgage over the property.
(c)In about June 2000, the appellant commenced a de facto relationship with Mr Lamers. She had been his next door neighbour.
(d)In about November 2001, the appellant moved into the Cooloongup property, together with her daughter from a previous relationship, and commenced living with Mr Lamers.
(e)On 6 June 2002, the appellant gave birth to a child from her relationship with Mr Lamers.
(f)In about February 2004, the appellant and Mr Lamers separated. They continued, however, to have a casual relationship.
(g)In February 2005, Mr Lamers was imprisoned. He was released in early June 2006.
(h)When the appellant moved into the Cooloongup property, the electricity and water services had been disconnected for non‑payment of fees and charges.
(i)The appellant paid about $600 in outstanding electricity charges and $1,000 in outstanding water charges. On payment of these amounts, the services were reconnected.
His Honour referred to the appellant's affidavit evidence and her evidence under cross‑examination, as follows:
In her first affidavit, sworn on 21 October 2004, [the appellant] said:
9.Throughout the period since I moved into the [property], I have had two scources [sic] of income, one from social security payments and another from casual employment as a barmaid at the Waikiki Hotel, where I have been, and remain, employed on a casual basis as a barmaid for about six years. All of the general living expenses were paid from my income. By 'general living expenses' I mean all utilities (gas, electricity and water), shire rates, groceries, clothing and any other expenses incidental to normal living.
10.As far as I am aware, the only source of income Lamers had, and continues to have, is from social security payments. The mortgage repayment for the [property], a sum of $110.00 per week, was made by Lamers from his bank account. The remainder of his social security payment was used by Lamers to contribute to general living expenses, entertainment and for his personal use.
…
The Bank Account
12.Monies deposited into this Bank Account were, including his social security payment, the joint property of Lamers and I. The money was collected over a period of time by both of us putting our spare coinage in [the] bedside vase. I also put the tips I received from my work in the vase.
In the course of cross-examination, [the appellant] was asked whether the money that went into the account referred to in par 12 above was Mr Lamers' social security payments. [The appellant] said that it was 'mostly': and that the balance was her and Mr Lamers' spare change (ts 13).
[The appellant] went on to say that she contributed half the funds to the account. She said she put 'cash money' into the vase referred to in par 12 above, as well as tips.
When asked about the statement in par 10 above that the mortgage payments of $110 per week had been paid by Mr Lamers from his bank account, [the appellant] said the statement was intended only to mean that the payments came from the account: not that Mr Lamers had provided the funds (ts 14). [The appellant] said she put the money, or a good part of it, into the account.
In re-examination, [the appellant] produced a schedule (exhibit 4) which I accept she prepared from the statements of her Westpac account number 70-6964. It showed withdrawals and fund transfers from that account, from 6 November 2002 to 5 July 2005, a period of approximately 138 weeks.
By my calculation, the total amount of withdrawals and transfers during that period was $15,150. This is an average of almost exactly $110 per week, which was the amount then due in respect of mortgage payments.
This evidence suggests that in the period to which the schedule relates, [the appellant] provided the funds for all the mortgage payments. However, that is inconsistent with her evidence that she contributed half of the funds which (as I understand it) found their way into Mr Lamers' account.
There is no documentary evidence about the source of the funds used to pay the mortgage instalments in the period November 2001 to November 2002, when the schedule commenced [8] ‑ [15].
The primary judge held that, although he accepted the appellant's evidence that there was 'a pooling of her and Mr Lamers' resources from November 2001 until July 2005' [16], he was unable to make a finding as to the amount actually contributed by the appellant towards the mortgage payments.
His Honour said that in July 2005 the circumstances changed. He accepted the appellant's evidence that she then entered into an arrangement with the Commonwealth Bank under which mortgage payments were made by direct deduction from a new account in her name. This arrangement had continued and remained current [17].
The primary judge decided that the appellant had not proved an actual intention by her and Mr Lamers to pool their resources for the purpose of a joint endeavour [34] ‑ [35]. His Honour explained this conclusion:
Here, Mr Lamers purchased the property some two years before he and [the appellant] commenced their relationship; and some three years before she moved into the property with him. Until then, there could be no doubt that Mr Lamers was both the legal and beneficial owner of the property.
[The appellant] moved in with Mr Lamers in or about November 2001. Their child was born on 6 June 2002. I think it reasonable to draw the inference that the purpose of their co-habitation was to provide the security of a home for them and the expected child. However, that arrangement would not give rise to an implied agreement that Mr Lamers would either make a gift to [the appellant] of some interest in his property or to [sic] permit her to acquire an interest by making mortgage payments (which were largely payments of interest in any event) [35] ‑ [36].
His Honour noted the appellant's admission in cross‑examination that she had received rental assistance from Centrelink. It was put to her that she had received this assistance between 2003 and 2006, but the appellant insisted that it had not been 'for that long' (ts 16). The relevant cross‑examination reads:
COUNSEL: May I ask why you received rental assistance?
[THE APPELLANT]: Because we went into a de facto relationship and Centrelink did know about that.
COUNSEL: But Mr Lamers owned the property, didn't he? He was on the title?
[THE APPELLANT]: Yes.
COUNSEL: And there was a mortgage?
[THE APPELLANT]: Yes.
COUNSEL: Why were you claiming rent?
[THE APPELLANT]: Because we could.
COUNSEL: Because you could? Weren't you claiming rent because he was in fact charging you rent to live in the house?
[THE APPELLANT]: No. He never charged me rent for the house.
The rental assistance was paid at the rate of about $122 per fortnight.
The primary judge found that the appellant would not have received rental assistance unless she had informed Centrelink that she was paying rent (whether actually charged or not) and the only person to whom she could have been making rent payments was Mr Lamers, as the registered proprietor of the Cooloongup property [43].
His Honour said that the appellant's receipt of rental assistance was inconsistent with her claim to be a beneficial owner of the Cooloongup property [44]. He then noted the appellant's evidence in par 11 of her affidavit sworn 18 June 2007 that:
From the commencement of my relationship with Robert Lamers he had no regular employment. He frequently asked me for money to make his mortgage payments. He often told me of phone calls he received from the bank demanding his outstanding mortgage payments. It was only when I set up the Commonwealth Bank account that the mortgage payments were regularly made.
His Honour concluded from this evidence, combined with the appellant's evidence as to her initial payments for reconnecting the electricity and water services, that the pooling of her resources with those of Mr Lamers was more probably a matter of practical convenience, for the purpose of ensuring that essential household bills were met, rather than for the purpose of some joint endeavour [46].
The primary judge was therefore not persuaded that the appellant had made out her claim to an interest in the Cooloongup property. His Honour said that he reached this conclusion without placing any weight on par 11 of the appellant's affidavit sworn 21 October 2004, which reads:
It was, and remains, an agreement between myself and Lamers, that because of our de facto relationship and that I am the mother of, and primary care-giver to, our child, I am joint owner of the [property]. Nothing Lamers has said or done has given me reason to believe that this agreement is not still valid.
Counsel for the respondent had objected to the admissibility of this evidence. His Honour found it unnecessary, however, to resolve the point:
In my view, it is not necessary to resolve these issues because, on reflection, it seems to me that even if there was some such agreement as that to which [the appellant] refers, it would be of no effect, having regard to s 34(1)(a) of the Property Law Act 1969 (WA). This provision prohibits the creation of an interest in land 'except by writing signed by the person creating or conveying the interest …'
Section 34(2) provides that the section does not affect the creation or operation of resulting, implied or constructive trusts. However, for the reasons given above, I am not persuaded that a constructive trust has been or should be created [51] ‑ [52].
There were some other facts, not referred to by the primary judge but not in dispute, as follows. After the appellant moved into the Cooloongup property, she arranged and paid for the scheme gas to be connected to the premises (GAB 39). Also, she arranged and paid for the installation of gas appliances (GAB 39). When the appellant commenced the de facto relationship with Mr Lamers, the outstanding principal amount of the loan advanced by the Commonwealth Bank remained at about $64,000 (GAB 42). At all material times after about February 2004, when the de facto relationship disintegrated, the appellant continued to reside at the property (ts 9, GAB 47, 49, 51).
The grounds of appeal
There were originally six grounds of appeal. At the commencement of the hearing before this court, counsel for the appellant abandoned grounds 2, 3 and 5. The remaining grounds read:
1.The learned primary Judge erred … in fact and law in finding that the pooling of financial resources by the Appellant and Robert Lamers was a matter of practical convenience rather than for the purpose of a joint endeavour.
…
4.The learned trial judge erred in fact and law in failing to find that the Appellant had discharged her burden of proving, within the meaning of section 34(2) of the Property Law Act, that the Respondent was bound by the term of a constructive trust in respect of the properties [sic].
…
6.The learned trial judge erred in fact and law in finding that the Appellant's mortgage payments were only made out of necessity.
Particulars
(a)The appellant and Robert Lamers commenced their relationship in June 2000 but did not commence cohabitation of the Property until November 2001;
(b)There was no evidence the Appellant was compelled to commence cohabitation with Robert Lamers as of November 2001 or that the Appellant lacked the capacity or ability to locate alternative accommodation between November 2001 and August 2005 (when Robert Lamers was convicted under s 6(1) of the Misuse of Drugs Act);
(c)There was no evidence that the Appellant was compelled by necessity to make [sic] commence meeting the mortgage, the payments in respect of shire and water rates and the maintenance costs relating to the Property as of the [sic] November 2001 (and thereafter) out of necessity.
The appellant's submissions
Counsel for the appellant submitted that, on the authority of Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137, the appellant would not be entitled to a beneficial interest in the Cooloongup property unless she established the following. First, the existence of a joint endeavour between herself and Mr Lamers for the object or purpose of providing permanent financial security and benefits. Secondly, valuable contributions by the appellant to the joint endeavour. Thirdly, an increment in wealth having accrued to Mr Lamers as a result of the joint endeavour. Fourthly, the unconscionability of the retention of that wealth by Mr Lamers to the exclusion of the appellant. Counsel accepted that proof of a joint endeavour required proof (either by direct evidence or by inference from all the facts and circumstances) of an actual intention to pool resources for the purposes of the endeavour.
It was submitted that the primary judge should have found the existence of a joint endeavour based on his finding that the purpose of the cohabitation of Mr Lamers and the appellant was to provide the security of a home for them and their expected child [36]. According to counsel, there is no reason why establishing a home cannot itself be a 'proper joint endeavour', at least where this involves financial contributions which are applied for the 'preservation of the property'.
Counsel for the appellant submitted that the primary judge's finding that the arrangement between Mr Lamers and the appellant, in relation to cohabitation, 'would not give rise to an implied agreement that Mr Lamers would either make a gift to [the appellant] of some interest in his property or … permit her to acquire an interest by making mortgage payments (which were largely payments of interest in any event)' [36], was irrelevant. According to counsel, the only intention that was necessary on the part of the parties was an intention to participate in a joint endeavour.
It was submitted that at all material times Mr Lamers was without regular employment. His only income was social security payments. When the cohabitation commenced, the Cooloongup property had no electricity, water or gas connection. The electricity and water services had been cut off for non‑payment. The appellant paid for the electricity and water services to be restored and for a gas connection to be installed. Since then she has maintained the services at her own cost.
Counsel referred to the appellant's financial contributions to household expenses during the period of cohabitation. These contributions, so it was submitted, enabled the parties and their child to live as a family. The expenses included the mortgage payments.
It was submitted that there is no requirement of an actual pooling of resources. It is sufficient that one party has applied money for the purchase of property and the other has applied money for the benefit of the joint endeavour.
Counsel emphasised that Mr Lamers and the appellant lived together in a de facto relationship from November 2001 until February 2004. This was not a case of a very short period of cohabitation or a case where Mr Lamers permitted the appellant to live in the Cooloongup property only as a matter of convenience. The appellant's financial contributions enabled the parties to live together as a family for more than two years.
The relevant provisions of the Act
The primary purpose of the Act is to provide for the confiscation, in certain circumstances, of property acquired as a result of criminal activity and property used for criminal activity.
The relevant provisions of the Act, for the purposes of this appeal, are these.
Part 3 of the Act is concerned with identifying and recovering confiscable property. Property is confiscable for the purposes of the Act if it is, relevantly, owned or effectively controlled, or has at any time been given away, by a 'declared drug trafficker'. See s 142(e). See also the definition of 'declared drug trafficker' in s 159.
The Director of Public Prosecutions (DPP) is entitled under s 30(1) to apply to the court for a declaration that property has been confiscated. Pursuant to s 30(2), if the court finds that the property described in the DPP's application has been confiscated under, relevantly, s 8, the court must make a declaration to that effect.
Part 4 of the Act is concerned with preventing dealings in confiscable property.
Section 34 provides for the issue of freezing notices. By s 34(3), a Justice of the Peace may issue a freezing notice for all or any property that is owned or effectively controlled by a person, or that the person has at any time given away, if:
(a)the person has been charged with an offence, or the applicant for the freezing notice (who may be the DPP or a police officer) advises the Justice of the Peace that the person is likely to be charged with an offence within 21 days after the day on which the freezing notice is issued; and
(b)the person could be declared to be a drug trafficker under s 32A(1) of the Misuse of Drugs Act if he or she is convicted of the offence.
Section 38 specifies the duration of freezing notices for registrable real property. By s 38(1), such a notice comes into force when a memorial of the issue of the notice is registered under s 113(1). By s 38(2), such a notice stops being in force when a memorial under s 38(4) or s 38(5) in relation to the property is registered under s 113(1). Section 38(5) provides that if a freezing notice for 'registrable real property' was issued under s 34(3) on the basis that a person has been or is likely to be charged with an offence, the applicant for the freezing notice must lodge a memorial with the Registrar of Titles if, relevantly, the freezing notice is set aside under pt 6 or the property is confiscated under s 8. The term 'registrable real property' means property to which the Transfer of Land Act 1893 (WA) applies. See the glossary to the Act.
Part 2 of the Act is concerned with the confiscation of property. It comprises s 6 ‑ s 10.
Section 8 deals with the confiscation of a drug trafficker's property. It provides, relevantly:
(1)When a person is declared to be a drug trafficker under section 32A(1) of the Misuse of Drugs Act 1981 as a result of being convicted of a confiscation offence that was committed after the commencement of this Act, the following property is confiscated -
(a)all the property that the person owns or effectively controls at the time the declaration is made;
(b)all property that the person gave away at any time before the declaration was made, whether the gift was made before or after the commencement of this Act.
Registrable real property that is confiscated under s 8 vests absolutely in the State when the court declares under s 30 that the property has been confiscated and a memorial of the making of the declaration is registered under s 113(1). See s 9(1). By s 9(2) and s 9(3):
(2)When registrable real property vests in the State under subsection (1) ‑
(a)the property vests free from all interests, whether registered or not, including trusts, mortgages, charges, obligations and estates, (except rights‑of‑way, easements and restrictive covenants);
(b)any caveat in force in relation to the property is taken to have been withdrawn; and
(c)the title in the property passes to the State.
(3)If registrable real property has been confiscated under section 6, 7 or 8, but has not vested in the State under subsection (1), sections 50 and 51 and Part 7 apply to the property as if it were subject to a freezing order.
Section 50(1) provides that a person must not 'deal with' seized or frozen property in any way. The word 'deal', in relation to property, has the meaning given in s 151. Section 151 states, relevantly, that a reference in the Act to dealing with property includes a reference to creating, increasing or altering (or attempting to create, increase or alter) any legal or equitable right or obligation in relation to the property. By s 51, despite any other enactment, any dealing with property that contravenes s 50 has no effect, whether at law, in equity or otherwise, on the rights of the State under the Act.
Part 6 of the Act comprises s 79 ‑ s 87 and is concerned with objections to confiscation. It is also concerned with the release of property that has been confiscated under s 6 or s 7 (but not under s 8). See s 85.
Section 79 regulates the filing of objections to the confiscation of frozen property. It reads:
(1)A person may file an objection to the confiscation of frozen property.
(2)If a copy of the freezing notice or freezing order was served on the objector, the objection must be filed ‑
(a)within 28 days after the day on which the copy of the notice or order was served on the objector; or
(b)within any further time allowed by the court.
(3)If a copy of the freezing notice or freezing order was not served on the objector, the objection must be filed ‑
(a)within 28 days after the day on which the objector becomes aware, or could reasonably be expected to have become aware, that the property has been frozen; or
(b)within any further time allowed by the court.
(4)The court may allow further time under subsection (2) or (3) even if the time for filing the objection has expired.
Section 81(1) provides that on the hearing of an objection, the court may set aside the freezing notice or freezing order 'to the extent permitted under section 82, 83 or 84'. By s 81(2), if the property was frozen on two or more grounds but the court does not set aside the freezing notice or freezing order in relation to both or all of the grounds, the notice or order continues in force as if it had been made on each remaining ground.
Section 84(2) permits the court to set aside, relevantly, a freezing notice issued for property under s 34(3) if the court finds that it is more likely than not that the person who is or will be charged with the offence does not own or effectively control the property, and has not at any time given it away.
Constructive trusts and domestic relationships: relevant legal principles
The word 'constructive', in the context of the term 'constructive trust', is derived from the verb 'construe'. The court construes the facts and circumstances of a particular case by explaining or interpreting them. See Scott on Trusts, 4th ed (1989), vol 5, §462.4; Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 [2] (Gleeson CJ, McHugh, Gummow & Callinan JJ).
As Gleeson CJ, McHugh, Gummow and Callinan JJ noted in Giumelli, the term 'constructive trust' is used in a variety of senses when identifying a remedy provided by a court of equity [4]. Some constructive trusts create or recognise no proprietary interest but, instead, impose a personal liability. See Bofinger v Kingsway Group Ltd [2009] HCA 44; (2009) 239 CLR 269 [47] (Gummow, Hayne, Heydon, Kiefel & Bell JJ); Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143, 152 ‑ 153 (McLelland AJA, Priestley & Meagher JJA agreeing).
In Bofinger, the High Court referred with approval to Crennan J's observation in Jones v Southall & Bourke Pty Ltd [2004] FCA 539 that the authorities:
[M]ake plain [that] the term 'constructive trust' covers both trusts arising by operation of law and remedial trusts. Furthermore, a constructive trust may give rise to either an equitable proprietary remedy based on tracing or, whether based on or independently of tracing, an equitable personal remedy to redress unconscionable conduct. The equitable personal remedies include equitable lien or charge or a liability to account [62].
See also Giumelli [4], [51].
Before imposing a constructive trust, the court should first decide whether, based on the questions in issue between the parties, there is an appropriate equitable remedy which falls short of the imposition of a trust. See Bathurst City Council v PWC Properties Pty Ltd [1998] HCA 59; (1998) 195 CLR 566 [40] ‑ [43] (Gaudron, McHugh, Gummow, Hayne & Callinan JJ); Giumelli [10].
This point is illustrated by Morris v Morris [1982] 1 NSWLR 61. The plaintiff paid $28,000 towards an extension to a home jointly owned by the defendants (his son and daughter-in-law) pursuant to an arrangement that would provide him with accommodation indefinitely as part of his son's family. Subsequent events, not contemplated by any of the parties, included the failure of the defendants' marriage, the departure of the son from the home and a breakdown in the relationship between the plaintiff and his daughter-in-law. The plaintiff then left the home. McLelland J held that it would be unconscionable and inequitable, in the circumstances, for the defendants to retain the benefit of the plaintiff's monetary contribution towards the improvement of the home free from any obligation of recoupment. His Honour said in relation to the appropriate remedy:
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 in the sum of $28,000 together with interest thereon at the rate of 10 per cent per annum as from the date of commencement of these proceedings, namely, 19th May, 1980 (64).
In Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583, the appellant and the respondent were an unmarried couple who had been living together since 1972. In 1975 they purchased a property on which stood a dilapidated cottage. They intended to restore it for use by the woman (the appellant) as an arts and crafts centre and to construct a prefabricated house on another part of the property in which to live. The appellant paid the purchase price of the property ($20,000) from her own funds and agreed to include the respondent's name on the title if he undertook to renovate the cottage and pay for the prefabricated house. The property was transferred to the parties as tenants in common in equal shares. In 1980 the parties separated permanently. The cottage had not been renovated and the prefabricated house had not been acquired. The appellant claimed sole beneficial ownership of the property. The High Court, by a majority (Gibbs CJ, Mason & Deane JJ, Brennan & Dawson JJ dissenting), decided that the parties held their legal interests in the property upon trust, after payment of any joint debts incurred in improving the property, to repay to each of them his or her contribution, and as to the residue for both of them in equal shares. Mason and Deane JJ based this conclusion on their finding that it would be unconscionable, after the failure of the joint venture between the parties, for the respondent to assert his legal entitlement without recognising the appellant's payment of the purchase price.
Deane J explained the basis on which equity intervenes for the purpose of preventing unconscionable reliance by a party to a relationship, which has failed, on his or her legal rights:
[T]he principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do … (620)
This passage was approved and applied in Baumgartner by Mason CJ, Wilson and Deane JJ (148).
It is unnecessary, in this appeal, to consider the content or significance of 'attributable blame' within Deane J's formulation of principle.
In Baumgartner, the parties lived in a de facto relationship between about September 1978 and August 1982. Initially, they lived in a home unit owned by the man (the appellant). In about October 1979, the appellant purchased land at Leumeah in his own name. The parties had decided that the home unit was too small and should be sold. The appellant took the initiative in deciding to purchase the Leumeah land, but he consulted with the respondent about the matter. A house was constructed on the land. Some time before October 1980, the appellant sold the home unit and the parties lived in rented accommodation until October 1980 when the house on the Leumeah land was completed. The land was purchased and the house on it was built with the assistance of a loan advanced by a building society to the appellant, and secured by a mortgage over the property, and the net proceeds of sale of the unit. Early in the relationship of the parties, they pooled their joint incomes.
Details of the pooling arrangement were described by Mason CJ, Wilson and Deane JJ, in their joint reasons, as follows:
[The trial judge] found that when the parties commenced to live together the respondent generally gave the appellant her pay packet. They regarded this as a pooling of resources. The appellant paid rent, mortgage instalments and other expenses associated with the living accommodation. He also paid the ordinary expenses of running the household, including entertainment and the costs of the motor vehicle. At the time of the purchase of the Leumeah property the appellant still owed money on his unit. From the pooled resources he was able on about four occasions to make 'double payments' in relation to his unit, the standard monthly mortgage payment being $170 per month. However, there was, so the primary judge found, no agreed division in relation to the respondent's contributions to the family finances. Nonetheless it is probable that the pooling of resources, as Priestley JA pointed out, had the effect of reducing the mortgage debt on the home unit more quickly than it would have been reduced had they not been pooling their resources. While the evidence about the appellant's earnings was somewhat imprecise, the parties have agreed that the total earnings of the parties available for contribution to the common pool during the period of cohabitation were $89,188.63 of which the appellant's share was $50,981.99 and the respondent's share $38,206.64. The difference is partly explained by the fact that the respondent was not earning for a period of three months in which she gave birth to Dallas and was subsequently caring for him. If we credit the respondent with the income of $3,000 which she would have earned in the period of three months, the aggregate earnings of the parties were contributed by the appellant as to 55 per cent and the respondent as to 45 per cent approximately (141 ‑ 142).
The High Court held that the appellant's assertion, after the relationship had failed, that he was the sole beneficial owner of the Leumeah property, to the exclusion of any interest at all on the respondent's part, constituted unconscionable conduct. This conduct attracted the intervention of equity and the imposition of a constructive trust for the respondent's benefit.
Mason CJ, Wilson and Deane JJ referred to Deane J's statement of principle in Muschinski (620), and then observed:
His Honour pointed out that the constructive trust serves as a remedy which equity imposes regardless of actual or presumed agreement or intention 'to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle' ((1985) 160 CLR, at p 614): see also at p 617. In rejecting the notion that a constructive trust will be imposed in accordance with idiosyncratic notions of what is just and fair his Honour acknowledged that general notions of fairness and justice are relevant to the traditional concept of unconscionable conduct, this being a concept which underlies fundamental equitable concepts and doctrines, including the constructive trust ((1985) 160 CLR, at p 616) (148).
It is useful to reproduce their Honours' analysis of the facts and circumstances in Baumgartner:
In the present case the parties pooled their earnings with a view to meeting all the expenses and outgoings arising from their living together as a family. The individual contributions of each party were not allocated to a particular category or particular categories of expenses and outgoings. The pool of earnings was used to pay outgoings associated with accommodation ‑ mortgage instalments on the unit at Cabramatta and the property at Leumeah ‑ as well as other living expenses. There was no suggestion that the respondent's contributions were paid and received by way of rent or a charge for use and occupation and for living expenses. Such a suggestion would be inconsistent with the relationship that came into existence between the appellant and the respondent, a family relationship which was for the most part until 1982 a long-term stable relationship in which marriage was under continuous contemplation. The land at Leumeah was acquired and the house on it was built in the context and for the purposes of that relationship. Together they planned the building of the house. Together they inspected it in the course of its construction. Together they moved out into it and made it their home after it was built.
In this situation it is proper to regard the arrangement for the pooling of earnings as one which was designed to ensure that their earnings would be expended for the purposes of their joint relationship and for their mutual security and benefit. To the extent which the pooled funds were the source of payment of mortgage instalments by the appellant, the pooled funds contributed not only to present accommodation expenses but also to the security of the parties' accommodation in the future. In this context it would be unreal and artificial to say that the respondent intended to make a gift to the appellant of so much of her earnings as were applied in payment or mortgage instalments. There is no evidence which would sustain a finding that the respondent intended to make a gift to the appellant in this way.
The case is accordingly one in which the parties have pooled their earnings for the purposes of their joint relationship, one of the purposes of that relationship being to secure accommodation for themselves and their child. Their contributions, financial and otherwise, to the acquisition of the land, the building of the house, the purchase of furniture and the making of their home, were on the basis of, and for the purposes of, that joint relationship (148 ‑ 149). (emphasis added)
The declaration of a constructive trust to preclude the unconscionable assertion of legal title may be made regardless of actual or presumed agreement or intention. However, as Campbell J noted in West v Mead [2003] NSWSC 161; (2003) 13 BPR 24,431, it does not follow from this proposition that the intention of the parties is necessarily irrelevant in determining whether a constructive trust should be declared or not. His Honour said:
Part of the justification for imposing the Baumgartner constructive trust is that the parties have jointly been building up assets, on the basis that those assets will be available for the joint endeavour in future. Part of the reason why it can be unconscionable to let the legal title lie where it falls, if the relationship fails, is that each knew that the other was contributing to a common pool on the basis that the pool, and assets acquired from it, would be used for their ongoing common benefit. It is unconscionable for the party who ends up, at the end of the relationship, with a disproportionate share of the assets which were built up during the relationship, to keep those assets when he or she knew that that was the basis on which the assets were being built up.
Another way in which the intention of the parties would be relevant would be if they had formed an express intention about what was to happen in the circumstance which has in fact arisen. If the parties have expressly contemplated the very situation which has arisen, and have, in advance, agreed how the assets built up as a result of their joint efforts should be divided in that situation, it would often be the case that there is nothing unconscionable in holding the parties to their agreement.
A further way in which the intention of the parties is relevant is that the Baumgartner basis for a constructive trust arises only when there is a premature termination of the relationship. To decide whether this has happened, one must look at what the intention of the parties was, about how long their relationship would endure. To take an extreme example, if one of the partners makes clear that he or she is making no commitment whatever to the relationship, and is free to walk out at any time and keep any property he or she has acquired during the relationship, it is hard to see how there is anything unconscionable in the property interests lying where they fall when the relationship ends [62] ‑ [64].
In Green v Green (1989) 17 NSWLR 343, 353, Gleeson CJ (Priestley JA agreeing) emphasised that the mere existence of a de facto relationship, in combination with express or implied undertakings to provide support and accommodation, will not constitute a sufficient basis for imposing a constructive trust under which a proprietary interest in the home occupied by the parties is created. His Honour elaborated:
In a legal system which does not include concepts of family or community property, and where an obligation on the part of a husband to house and provide for his wife is commonly regarded as an incident of the matrimonial relationship, an undertaking of the kind referred to cannot of itself confer upon a wife a legal or equitable interest in the matrimonial home. If the matter is considered in terms of a promise or representation by the husband, and an acting by the wife to her detriment on the faith of that promise or representation, then a claim made on the narrow basis set out above would normally fail at both levels. The acceptance of an obligation on the part of the husband to house his wife would not normally be regarded as an undertaking to give her a proprietary interest in the home in which they live, and wives usually have reasons for living with their husbands other than an expectation that they will increase their assets (353).
Gleeson CJ then acknowledged:
Nevertheless, it is now well-settled that there are circumstances in which a court of equity will intervene to declare the existence of a proprietary interest in a family home on the part of [a] spouse or de facto partner, and the unifying principle underlying the cases where such intervention is regarded as appropriate is that in the circumstances of the case, and in accordance with equitable doctrines, it would be unconscionable on the part of the person against whom the claim is set up to refuse to recognise the existence of the equitable interest: Baumgartner v Baumgartner (1987) 164 CLR 137at 147 per Mason CJ, Wilson and Deane JJ.
The most common case of intervention of that kind to be found in the law reports is the case where the person in whose favour a constructive trust is found has, directly or indirectly, made a financial contribution towards the cost of acquiring, improving, or maintaining the property in question (353).
The merits of the appeal
Counsel for the appellant conceded (properly) that if the appellant did not have an equitable proprietary interest in the Cooloongup property by 10 August 2005, when Mr Lamers was declared to be a drug trafficker under s 32A(1) of the Misuse of Drugs Act and in consequence his property (including the Cooloongup property) was confiscated under s 8(1) of the Act, the appellant's claim must fail and the appeal should be dismissed. The appellant's financial expenditure in connection with the property after 10 August 2005 is therefore irrelevant.
The appellant's claim was based on the alleged existence of an equitable proprietary interest in the Cooloongup property. She did not claim at any material time an equitable personal remedy against Mr Lamers.
Counsel for the appellant also conceded (properly) that:
(a)there were numerous deficiencies in the manner in which the appellant's case was advanced in the primary proceedings; and
(b)the appellant had a proper opportunity to advance her case before the primary judge, and it is not possible now to ameliorate those deficiencies.
The evidentiary deficiencies in the appellant's case included the following. First, there was inadequate evidence as to the nature and extent of the appellant's financial contributions before 10 August 2005. The evidence revealed that before 10 August 2005 she had made some financial contributions, but no attempt was made at the hearing before the primary judge to quantify their amount. Secondly, there was no evidence as to the proportion which her financial contributions bore to Mr Lamers' financial contributions. Thirdly, there was no evidence as to the market value of the fee simple estate in the Cooloongup property at any time between about June 2000 (when the de facto relationship commenced) and 10 August 2005, apart from the appellant's mere assertion in one of her affidavits that the property was worth about $86,000 when she commenced living there in about November 2001 (GAB 42). Fourthly, there was no evidence as to the market rental value of the property at any time between about June 2000 and 10 August 2005. Fifthly, there was no evidence as to the state of the mortgage account with the Commonwealth Bank (in particular, whether it was in credit or arrears) at any time between about June 2000 and 10 August 2005, beyond the appellant's mere assertion in one of her affidavits that the amount owing to the Commonwealth Bank was 'still at $64,000' when she moved into the property in about November 2001 (GAB 42). Sixthly, there was no evidence as to whether her financial contributions before 10 August 2005 reduced the outstanding principal amount of the mortgage and, if so, the amount of the reduction, or whether her contributions avoided the Bank exercising its powers on default.
The appellant's case was run on the basis of her financial contributions. It was not run in reliance on any non‑financial contributions she may have made.
It was necessary for the appellant, as claimant, to identify with some precision, the nature, purpose and scope of her alleged joint endeavour with Mr Lamers. The de facto relationship between them, combined with any express or implied promise to provide support and accommodation, was not, of itself, a sufficient basis for creating or recognising a proprietary interest in the Cooloongup property. Counsel for the appellant suggested, in argument before this court, that 'the basis of the joint endeavour' was 'the creation of the family unit and the furthering of the family unit' (appeal ts 25). That general and unqualified submission is extraordinary and unsound. Mere cohabitation, without more, does not provide any basis for inferring the existence of a joint endeavour between the cohabitating parties which has as its purpose the acquisition, improvement or maintenance of the property in which the members of the family unit make their home.
I am satisfied, on the primary judge's findings of fact and the other facts that were not in dispute, that no secure foundation exists for inferring that, at any material time, the appellant and Mr Lamers embarked upon a joint endeavour to increase the equity in the Cooloongup property (Mr Lamers having purchased it in 1998) or to improve or maintain the property. The primary judge was, in my respectful view, correct in deciding, on the evidence before him, that:
(a)although the appellant and Mr Lamers pooled their resources from November 2001 until July 2005, his Honour was unable to make a finding as to the amount actually contributed by the appellant towards the mortgage payments; and
(b)the pooling of resources was, on balance, a matter of practical convenience, for the purpose of ensuring that essential household bills were met, rather than for the purpose of some joint endeavour.
Further, the evidentiary deficiencies in the appellant's case precluded any findings as at 10 August 2005 or any earlier date in relation to:
(a)the amount of the appellant's financial contributions;
(b)the proportion which her financial contributions bore to Mr Lamers' financial contributions;
(c)the state of the mortgage account with the Commonwealth Bank; or
(d)whether her financial contributions had reduced the outstanding principal amount of the mortgage (and, if so, the amount of the reduction) or had avoided a default.
In addition, the evidentiary deficiencies did not permit the making of a finding as to when any joint endeavour may have commenced. Presumably, any such endeavour would have come to an end in about February 2004 upon the relationship between the parties breaking down irretrievably and Mr Lamers ceasing to reside at the Cooloongup property.
The appellant's admission in cross‑examination that she had received rental assistance from Centrelink at the rate of about $122 per fortnight, the primary judge's finding that she would not have received this assistance unless she had informed Centrelink that she was paying rent (whether actually charged or not) and his Honour's finding that the only person to whom she could have been making rent payments was Mr Lamers, were inconsistent with the existence of a joint endeavour of the kind necessary for the creation or recognition of a proprietary interest in the Cooloongup property.
The more plausible inference from the primary judge's findings of fact, the other facts that were not in dispute and the evidentiary deficiencies in the appellant's case, taken together, is that the appellant's financial contributions were paid and received, in part, in consideration of the benefits attributable to her use and occupation of the Cooloongup property and, in part, as her contribution to joint and other living expenses.
Even if, contrary to my opinion, there was a joint endeavour between the appellant and Mr Lamers at material times to increase the equity in the Cooloongup property or to improve or maintain the property, the facts and circumstances, as revealed by the evidence, indicate that any equitable relief to which the appellant may have been entitled as against Mr Lamers would have been confined to an equitable personal remedy, perhaps secured by a charge or lien, and would not have extended to an equitable proprietary interest in the property. On the findings of fact made by the trial judge, the other facts that were not in dispute and the evidentiary deficiencies in the appellant's case, taken together, there would have been nothing unconscionable or contrary to equitable principle in Mr Lamers asserting as at 10 August 2005 or any earlier date that, as between himself and the appellant, he was the sole beneficial owner of the property.
I am satisfied that the appellant did not establish any basis for concluding that she had an equitable proprietary interest in the Cooloongup property by 10 August 2005, when Mr Lamers was declared to be a drug trafficker under s 32A(1) of the Misuse of Drugs Act, and as a result of which his property (including the Cooloongup property) was confiscated under s 8(1) of the Act.
I am not persuaded that the primary judge made a material error when he said that the arrangement between the appellant and Mr Lamers did not give rise to 'an implied agreement that Mr Lamers would either make a gift to [the appellant] of some interest in his property or … permit her to acquire an interest by making mortgage payments' [36]. It is true, as counsel for the appellant submitted, that the only intention that was necessary on the part of the parties was an intention to participate in a joint endeavour, but, as I read his Honour's comments in the context of his reasons as a whole, he was referring to an additional or alternative basis on which the appellant's case might have been put.
The respondent rightly objected to the admissibility of par 11 of the appellant's affidavit sworn 21 October 2004. The appellant deposed in par 11, relevantly, that there was, and remained, an agreement between her and Mr Lamers that, because of their de facto relationship and because she was the mother of and primary caregiver to their child, she was 'joint owner' of the Cooloongup property. This unparticularised allegation of an agreement is, in substance, an inadmissible opinion that an agreement in the general terms specified was made between the parties and continued to subsist. In any event, no weight could reasonably be attached to such a generalised assertion.
The grounds of appeal ultimately relied on by the appellant are without merit. I would dismiss the appeal.
Some concluding observations
Some additional observations should be made about the proceedings.
First, the parties ran the case before the primary judge and conducted the appeal on the assumption that a memorial of the issue of the freezing notice in question was registered under s 113(1) of the Act on or about the date of issue of the notice. This is relevant to the date on which the freezing notice came into force in relation to the Cooloongup property. As I have mentioned, by s 38(1) of the Act, such a notice comes into force when a memorial of the issue of the notice is registered under s 113(1). The State should ordinarily, in proceedings of this kind, either prove the registration of the memorial or there should be an express agreement between the parties on the point. The matter should not proceed on the basis of a joint assumption.
Secondly, I should not be taken to accept or approve the primary judge's brief expression of view in relation to s 34(1)(a) of the Property Law Act 1969 (WA) or its application to the present case. It is unnecessary in this appeal to decide the issue. See, however, Marist Brothers Community Inc v Shire of Harvey (1994) 14 WAR 69.
Thirdly, the appeal was conducted on the basis that it was necessary for the appellant to establish the existence of an equitable proprietary interest in the Cooloongup property by 10 August 2005, when Mr Lamers was declared to be a drug trafficker and, as a result, his property was confiscated. No argument was addressed to whether it was necessary for the appellant to have an equitable proprietary interest at an earlier time (for example, when the freezing notice came into force) or as to the effect of s 9(2) of the Act. The basis on which the parties conducted the appeal, and the appellant's failure to make out her case as at the date of confiscation, make it unnecessary to resolve this point.
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