Yeo and Rambaldi v Arifovic and Anor
[2017] FCCA 604
•29 March 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| YEO & RAMBALDI v ARIFOVIC & ANOR | [2017] FCCA 604 |
| Catchwords: RESULTING TRUST – No evidence to support the existence of a resulting trust. CONSTRUCTIVE TRUST – Based on common intention – no evidence to support. CONSTRUCTIVE TRUST – Muschinski v Dodds and Baumgartner v Baumgartner type constructive trust – evidence to support such an equitable interest – examination of complex banking arrangements between bankrupt and his de-facto partner – monetary and non-financial contributions to support an equitable interest to the extent of 32.52% of the value of the net proceeds of sale – balance to the trustees – costs argument held over. |
| Legislation: Bankruptcy Act 1966 (Cth), s.77C Family Law Act 1975 (Cth) |
| Cases cited: Allen v Snyder [1977] 2 NSWLR 685 | ||
| Applicants: | ANDREW REGINALD YEO & GESS MICHAEL RAMBALDI (AS TRUSTEES OF THE BANKRUPT ESTATE OF BROCK SIMON ARIFOVIC) | |
| First Respondent: | BROCK SIMON ARIFOVIC |
| Second Respondent: | TARA SUZANNE HOCKING |
| File Number: | MLG 1141 of 2016 |
| Judgment of: | Judge Wilson |
| Hearing dates: | 12-13 December 2016 1 & 13 February 2017 |
| Date of Last Submission: | 13 February 2017 |
| Delivered at: | Melbourne |
| Date delivered: | 29 March 2017 |
| Orders pronounced: | 19 April 2017 |
REPRESENTATION
| Counsel for the Applicants: | Mr C Moller |
| Solicitors for the Applicants: | Macpherson + Kelley |
| First and Second Respondents in person |
ORDERS
The respondents give vacant possession of the property at
32 Pimpala Avenue, Seaford in the State of Victoria (“the property”) to the applicants within 30 days of this order.
The applicants are at liberty to sell the property for such price and in such manner and on such terms as the applicants consider appropriate in their absolute discretion.
The applicants apply the proceeds of sale of the property in the following manner -
(a)first, in payment of all costs, charges, expenses and disbursements in selling the property;
(b)second, in payment of any mortgage or encumbrance over or in respect of the title to the property together with any outstanding rates, taxes, charges or other similar outgoings affecting the property;
(c)third, in payment of the costs of the applicants as ordered by the Court;
(d)fourth, to the second respondent the sum equivalent to 32.52% of the net balance within 30 days of the calculation of the balance due to her; and
(e)fifth, the net balance to the applicants.
The applicants file and serve written submissions on the question of costs by 17 May 2017.
The respondents file and serve written submissions on the question of costs by 31 May 2017.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1141 of 2016
| ANDREW REGINALD YEO & GESS MICHAEL RAMBALDI (AS TRUSTEES OF THE BANKRUPT ESTATE OF BROCK SIMON ARIFOVIC) |
Applicants
And
| BROCK SIMON ARIFOVIC |
First Respondent
| TARA SUZANNE HOCKING |
Second Respondent
REASONS FOR JUDGMENT
Introduction
In this proceeding, the applicants who are the trustees of the bankrupt estate of Brock Simon Arifovic sought orders for the sale of land at
32 Pimpala Avenue Seaford in the State of Victoria (“the Seaford property”) of which the bankrupt Mr Arifovic is the registered proprietor. Mr Arifovic and Tara Suzanne Hocking (“the respondents”) have shared a de-facto relationship for several years. The second respondent, Ms Hocking, asserted that she was entitled to the whole of the proceeds of the sale of the Seaford property by reason of the fact that over a sustained period of time she had paid expenses associated with Mr Arifovic’s lifestyle. Ms Hocking said she had acquired a beneficial interest in the Seaford property pursuant to a constructive trust.
The trustees recognise the existence of a constructive trust in respect of which Ms Hocking held a beneficial interest. However, the trustees said her interest was limited to the extent of 32.52% whereas
Ms Hocking asserted that her interest pursuant to a constructive trust was in the order of 100%.
Synopsis
For the reasons that follow, in my judgment the trustees correctly assessed the extent of Ms Hocking’s beneficial interest. I order the Seaford property to be sold and after payment of expenses associated with the sale as well as the trustees’ costs, that 32.52% of the remainder be paid to Ms Hocking.
Relevant factual narration
Pursuant to orders made by a registrar of this Court, on
17 February 2015 Mr Arifovic was declared bankrupt consequent upon the making of a sequestration order against his estate.
To better understand the way Ms Hocking advanced her claim to a constructive trust, it is necessary to trace certain historical information.
Ms Hocking and Mr Arifovic commenced a domestic relationship in 2012. Both had been previously married. In or about June 2014
Mr Arifovic suffered a mental and emotional breakdown and was hospitalised for a period.
Slightly earlier on 21 December 2013 Mr Arifovic purchased the Seaford property solely in his name under a contract for sale financed in part by mortgage funds of $338,876.00 obtained from Commonwealth Bank of Australia (“CBA”). Mr Arifovic was the
sole mortgagor.
On 9 July 2014 Ms Hocking lodged caveat AL216137B on the title to the Seaford property claiming an interest under an “implied, resulting or constructive trust”.[1] Mr Arifovic’s former wife Sarah Arifovic also lodged a caveat and asserted an “implied, resulting or constructive trust”.[2] Soon after their appointment as trustees over the bankrupt estate of Mr Arifovic, the trustees settled the family law proceeding between Mr Arifovic and his former wife Sarah and thereby procured the withdrawal of Sarah’s caveat over the Seaford property.
In March 2016, the trustees served a notice under s.89A of the
Transfer of Land Act1958 (Vic) in respect of Ms Hocking’s caveat. She did not commence a proceeding to substantiate the interest she asserted in her caveat with the consequence that it lapsed.
[1] Exhibit “GMR-1” to the affidavit of Gess Michael Rambaldi sworn 27 May 2016.
[2] Ibid.
Prior to the commencement of the trial of this proceeding, neither respondent participated in this litigation beyond Mr Arifovic’s appearance at a directions hearing. Neither respondent complied with orders I made for filing of affidavit material. Instead, on the day fixed for trial – 12 October 2016 – Ms Hocking appeared but Mr Arifovic did not. She produced an affidavit that raised for the first time an array of allegations, some of which went to the contentions about the existence of a constructive trust.[3] Ms Hocking raised factual matters that called for investigation. She informed me that she was a litigant in person, unfamiliar with the court process, whose de-facto partner (Mr Arifovic) had suffered mental complications and that she was not ready to proceed at trial. I ordered the trustees to file any answering material on which they intended to rely within 14 days and listed the trial to commence on 12 December 2016 on an estimated duration of two days.
[3] Affidavit of Tara Suzanne Hocking sworn 11 October 2016.
The trial ran for double the estimated duration.
Before turning to the assessment of Ms Hocking’s version of events,
it is as well to record the essence of her factual contentions.
In September 2012 or thereabouts, Ms Hocking separated from her former husband and was in the process of selling the
former matrimonial home in Forest Hill (“the Forest Hill property”). Juless Pty Ltd, a company owned and controlled by Ms Hocking and her former husband, was the registered proprietor of their former matrimonial home. The Forest Hill property sold after Mr Arifovic purchased the Seaford property. Settlement of the sale of the
Forest Hill property had been effected by the conclusion of the trial in this proceeding, although distribution of the net proceeds of the sale had not been finalised as between Ms Hocking and her former husband.
On Ms Hocking’s version of events, the amount each was to receive vascillated. In opening, Ms Hocking said her former husband and she were to receive $630,000.00 to be split between them. In
cross-examination, she said the Forest Hill property sold for $770,000.00, that $220,000.00 or thereabouts had to be applied to the mortgagee leaving $422,000.00 for distribution. She also said she had received $100,000.00 of the proceeds and that her former husband had received the same amount but that finality of the distribution of all sums had not been achieved.
So far as Mr Arifovic’s acquisition of the Seaford property was concerned, Ms Hocking gave evidence that on 23 December 2013 she saw the Seaford property advertised for $350,000.00 so she inspected the property on that very day. Ms Hocking said that Mr Arifovic contacted a financial adviser whose only name she gave was Stewart. She said Stewart provided advice to the effect that the purchase of the Seaford property had to be in Mr Arifovic’s name as Ms Hocking had not been in gainful employment for two years and that the deposit had to be paid from funds that had been in an account for three months.
Ms Hocking gave evidence that Mr Arifovic had $50,000.00 at his disposal, being a sum given to him by his father. During the course of the trial it became apparent that the sum of $50,000.00 related to the sale of a Boston Whaler Boat. The evidence about the sale of that boat was confusing and it was hotly contested by Ms Hocking. In their letter dated 21 May 2015 to Ms Hocking,[4] the trustees stated that –
a)their investigations revealed that the boat had been purchased in 2011;
b)it was sold in 2012 for $50,000.00 to a company associated with Mr Arifovic’s father;
c)Mr Arifovic’s father gave Mr Arifovic the sum of $50,000.00 to assist in the purchase of the Seaford property; and
d)
in early 2014 Mr Arifovic sold the boat to a third party for $95,000.00 following which the net proceeds (less mooring fees and repair costs) were paid into an ANZ account maintained by
Ms Hocking.
[4] Exhibit “GMR-1” to the affidavit of Gess Michael Rambaldi sworn 27 May 2016.
Precisely how Mr Arifovic had power to sell the boat to a third party when the boat had already been sold to a company associated with his father was not stated in evidence. Nor was it stated in evidence how the boat was “sold” to a third party for nearly twice the price at which the boat had been sold to Mr Arifovic’s father’s company. Be that as it may, Ms Hocking said Mr Arifovic settled his purchase of the Seaford property using the $50,000.00 from the sale of the boat.
Following their appointment, the trustees investigated Mr Arifovic’s financial affairs as well as Ms Hocking’s claim to an entitlement to an interest in the Seaford property as a beneficiary under a constructive trust. To say that Ms Hocking was less than cooperative is a massive understatement. Throughout, Ms Hocking defiantly rejected any step taken by the trustees in the discharge of their statutory duties under the Bankruptcy Act 1966 (Cth) (“the Act”). Rather than supplying the trustees with documents in response to their many requests,
Ms Hocking failed to respond and when she did respond,
she threatened to sue the trustees. Her threats were ill-founded as she asserted that the trustees had somehow contravened laws relating to persons suffering mental ill-health, an obvious reference to
Mr Arifovic. It is a fair distillation of the evidence that Ms Hocking failed to respond to almost every request for information from the trustees. Those requests were entirely proper. Ms Hocking should have responded to them. The situation did not alter even when Ms Hocking for a brief period retained a solicitor.
During the trial of this proceeding, on several occasions Ms Hocking made wild and unfounded allegations of impropriety against the trustees. At one stage I had to warn her to desist.
At the end of the second day of the trial on 13 December 2016,
Mr Moller of counsel for the trustees informed me that the balance of the trial could take up to two further days. I fixed 1 and
2 February 2017 for the balance of the trial. Between
13 December 2016 (the end of the second day) and 1 February 2017 (the third day of the trial) the trustees served notices under s.77C of the Act requiring Australia and New Zealand Banking Group Limited (“ANZ”) to produce statements in relation to accounts that Ms Hocking maintained with ANZ. Mr Moller cross-examined Ms Hocking on those statements.
The basis of the constructive trust asserted
Ms Hocking argued that she applied her funds towards paying
Mr Arifovic’s debts and expenses including credit card liabilities,
legal fees and medical expenses. She said she paid amounts due to the mortgagee. Ms Hocking also said she spent over $80,000.00 in renovations and improvements to the Seaford property. She gave evidence that she undertook the majority of the work herself, that she applied “many funds to expenses associated with the property”[5] and that she made non-financial contributions when undertaking labouring tasks at the Seaford property in order that she was not required to spend money on tradesmen.
[5] Paragraph 16 of the affidavit of Tara Suzanne Hocking sworn 11 October 2016.
Four accounts were relevant in this case - two operated by Mr Arifovic and two by Ms Hocking. It is necessary to turn to the detail of each.
Mr Arifovic operated an account with CBA styled “complete access account” being numbered 06 3791 10840587. The second was styled “rate saver home loan” being numbered 557239705.[6]
[6] Exhibit 1 – Court Book containing ANZ and CBA account statements for Tara Suzanne Hocking and Brock Simon Arifovic.
Several important transactions into and out of the complete access account were shown in statements for that account. Among them were the following –
a)until July 2014 CBJ Stainless (Mr Arifovic’s father’s company) paid Mr Arifovic a weekly salary of $2,000.00 or thereabouts;
b)on 10 October 2013 $50,000.00 was deposited into that account;
c)on 23 December 2013 $35,000.00 was debited from the account in a transaction narrated as “Deposit Pimpala”, meaning that $35,000.00 was applied by way of deposit for the acquisition of the Seaford property;
d)on and from 3 March 2014, monthly amounts were applied in reduction of the outstanding balance, those monthly amounts emanating from the rate saver home loan account with a payment of $10,000.00 on 3 February 2015 being applied in reduction of the mortgage debt;
e)regular withdrawals were made in payment of amounts referenced to living expenses, described in the relevant pages of the account statement as Go Go Charcoal Chicken, Richies Seaford, Safeway, United Petroleum, Masters and Dan Murphy’s;
f)payments described as “child support” were made from that account;
g)
the proceeds of sums due under an income protection policy were paid into this account, namely $16,655.09 on 1 October 2014, $7,120.74 on 22 December 2014, $34,637.23 on 22 January 2015 and $2,917.21 on 19 February 2015. The sum of $6,342.01
was transferred out of that account by the trustees on
24 February 2015 on account of the sequestration order made against Mr Arifovic’s estate on 17 February 2015. After
24 February 2015, payments of amounts due from the income protection policy were deposited into Ms Hocking’s progress saver account;
h)
on 8 October 2014 the sum of $8,000.00 was transferred from this account to Ms Hocking’s progress saver account and between
3 and 18 February 2015 $11,000.00 was transferred to the same account, all such transfers described as “household expenses” or “home”; and
i)on and from 17 March 2015 various transfers from Ms Hocking’s progress saver account to this account were made, subsequently disbursed in payments described as mortgage repayments, payments to HCF and child support.
Returning to the $50,000.00 deposited on 10 October 2013, considerable debate was exchanged between Mr Moller for the trustees and Ms Hocking about whether that sum was in payment for the boat or whether it was a gift. It seemed to me that the characterisation of the payment, whether as proceeds of the sale of the boat or as a gift,
was neither here nor there because Ms Hocking conceded that the $50,000.00 were funds to which Mr Arifovic was properly entitled.
As mentioned above, Ms Hocking maintained two accounts of relevance to this litigation, namely, her “online saver account” being numbered 013-400 1813-20053 and her “progress saver account” being numbered 013-304 5826-94515, each being ANZ accounts.[7]
[7] Exhibit 1 – Court Book containing ANZ and CBA account statements for Tara Suzanne Hocking and Brock Simon Arifovic.
Several important transactions into and out of the online saver account were shown in statements for that account. Among them were the following –
a)
the sum of $8,000.00 was deposited into the account described as “Juless fin settlement Pl”. Ms Hocking’s explanation of that entry was imprecise. It seems that the $8,000.00 formed part of the property settlement between Ms Hocking and her former husband. Ms Hocking gave evidence to the effect that she used $2,500.00 of the $8,000.00 to meet one of Mr Arifovic’s legal fees. A closer examination of the material showed that a legal fee of $2,500.00 had in fact been paid to Lander & Rogers in the period February to March 2014. However, the source of funds for the payment was the refunded bond money on the property
Ms Hocking and Mr Arifovic rented at 3 Barmah Court;
b)
in June 2014 seven separate amounts were deposited into this account totalling $81,200.00, each deposit being described as “Juless payout”. In cross-examination, Ms Hocking explained that she received about $100,000.00 as the net proceeds following the sale of the former matrimonial home. While the sum of $81,200.00 was less than the sum of $100,000.00 about which
Ms Hocking spoke, it appeared to me that the sum relevant to this deposit was the balance of the proceeds of sale of the former matrimonial home;
c)
amounts described as rental payments from Ms Hocking’s daughter were deposited into this account. The evidence in relation to amounts received from Ms Hocking’s daughter was equivocal. While Ms Hocking and her former husband once owned real estate at Mount Buller along with a caravan at
Port Fairy and that Ms Hocking’s daughter occasionally rented the Mount Buller property or the caravan, Ms Hocking also said the so-called rent sums received from Ms Hocking’s daughter were actually repayments to Ms Hocking of sums given to her daughter in relation to the daughter’s European travels; and
d)over the period 20 June 2014 and 1 September 2015, 44 separate transfers were made from this account into Ms Hocking’s progress saver account totalling $85,600.00.
Records of Ms Hocking’s second ANZ account relevant to this litigation, her progress saver account, revealed transactions into and out of that account. Among them were the following –
a)
on 12 March 2014 the sum of $89,500.00 was deposited into this account. The evidence about the source of funds in relation to a deposit of that size was equivocal. One of the trustees swore in paragraph 9 of his affidavit made 26 October 2016 that during a meeting between the trustee, Mr Arifovic and Ms Hocking on
22 May 2015, Ms Hocking and Mr Arifovic told the trustee that $89,500.00, being the proceeds of the sale of a boat, had been deposited into that account on 12 March 2014. Prior to that deposit, a credit balance of that account stood at $13.64. Despite the varying accounts of the boat sale price and how the proceeds of the sale were characterised, on the balance of probabilities I am prepared to conclude, based on the information given by
Mr Arifovic and Ms Hocking to the trustees on 22 May 2015 that the amount of $89,500.00 was in fact the proceeds of the sale of the boat;
b)sums totalling $69,100.30 in 11 separate transactions had been withdrawn from this account up to 20 June 2014 leaving the balance on 20 June 2014 at $3,283.39;
c)between 20 June 2014 and 11 September 2015 44 transfers into this account were made totalling $85,600.00 from Ms Hocking’s online saver account;
d)regular withdrawals were made from this account relating to living expenses;
e)
on 8 October 2014, the sum of $8,000.00 was transferred to this account from Mr Arifovic’s complete access account from which some four cash withdrawals were made between 10 and
30 October 2014 totalling $4,500.00 to pay household expenses;
f)
between 3 and 19 February 2015 amounts aggregating $11,000.00 were transferred from Mr Arifovic’s complete access account to this account so as to enable living expenses to be met such as Masters, Coles, Bunnings, Safeway, Richies Seaford and
United Petroleum plus cash amounts totalling $6,600.00 to be paid on 24 and 26 February 2015;
g)since March 2014 regular monthly payments in relation to income protection were deposited into this account, the first of which in March 2014 was $9,724.05;
h)from March 2015 small deposits were made to this account being takings of Ms Hocking’s business;
i)amounts were paid from this account to Mr Arifovic’s treating psychologist and health fund rebates were deposited into this account; and
j)
from March 2015 payments from this account were made to
Mr Arifovic’s complete access account, in respect of which
Ms Hocking stated she maintained the mortgage payments for the Seaford property.
As an arithmetical exercise the trustees added the amounts to which
Ms Hocking said she was entitled and arrived at the figure of $141,176.90. The precise breakdown of that amount was set out in schedule A to the trustees’ written submissions.[8] The trustees submitted that of the overall contributions totalling $518,628.68, Mr Arifovic’s contribution was approximately 70%.
[8] Applicants’ submissions filed 10 February 2017.
Mr Moller for the trustees said that the calculations at which the bankrupt’s contributions were assessed at 70% recognised that
Ms Hocking had been given the benefit of all deposits to her accounts from November 2012, a point in time that preceded the purchase of the Seaford property. Further, Mr Moller pointed out that Mr Arifovic’s salary from CBJ Stainless over the same period totalling $272,105.27 had not been included.
So far as cash withdrawals from Ms Hocking’s account from
automatic teller machines in Ivanhoe, Heidelberg, Seaford and
Caribbean Gardens were concerned, the trustees proceeded on the basis that sums so withdrawn were applied to the joint benefit of
Ms Hocking and Mr Arifovic. The total of those withdrawals was $24,108.70 and the particulars of the amounts and dates were given in schedule B to the trustees’ written submissions.[9] A debate existed about whether those amounts were purely for Mr Arifovic’s benefit or whether they were for the joint benefit of Mr Arifovic and Ms Hocking. Having heard from Ms Hocking on the point, I am satisfied that those withdrawals were solely for Mr Arifovic’s benefit. Adjustment must be made to make commensurate reduction in his contributions.
The trustees made that adjustment altering Mr Arifovic’s contributions to $353,343.08, representing 68.13% of the total contributions.
[9] Applicants’ submissions filed 10 February 2017.
As has been recorded above, the sum of $100,000.00 was mentioned in Ms Hocking’s evidence as representing the cash payments from the sale of her formal joint matrimonial home. Of that amount, the trustees took $95,000.00 into account in Ms Hocking’s favour and they gave her the benefit of the balance of $5,000.00. When that arithmetical exercise was performed, Ms Hocking’s contributions totalled 32.52%.
It will be recalled that Ms Hocking asserted she made non-financial contributions in the form of time and labour expended on improving the Seaford property. She attributed a sum of $60,000.00 applying a rate of $30.00 per hour.
Ms Hocking gave evidence that she would not have levied a charge for her work had it not been for the fact that the trustees made a claim against her in relation to the Seaford property. I took her to mean that she would not have made any such claim for labour at the rate she asserted but for the trustees’ claim in this case. That approach accorded with what most homeowners do in relation to personal exertion expended on improvements of their principal place of residence – they do not render a fee for the work. I see no lawful basis to allow
Ms Hocking any amount for her work improving the Seaford property.
Applying the arithmetic set out above I am satisfied that Ms Hocking’s contributions amount to 32.52%.
Having set out the complex arithmetic surrounding the contributions made by Ms Hocking and Mr Arifovic, next it became necessary to record the legal principles that applied in this case.
Constructive or resulting trusts?
Various categories of constructive trusts are known to the law where contributions are made to property by a person who is not the legal owner of the property.
The first is colloquially called the “common intention constructive trust”. The second is, equally colloquially, called the “Baumgartner v Baumgartner[10] or Muschinski v Dodds[11] constructive trust”, taking the name after the two High Court decisions from which the relevant legal principles originated. Before going to those, let me close off issues about a resulting trust, in view of the direction the debate on the point went in this case.
[10] (1987) 164 CLR 137.
[11] (1985) 160 CLR 583.
In essence, the trustees submitted that the question of the existence of a resulting trust was to be decided at the time when the real property was acquired. They relied on the observations of the High Court in Calverley v Green[12] (Mason and Brennan JJ) to that effect as well as the earlier High Court decision in Charles Marshall Pty Ltd v Grimsley[13] (Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ).
[12] (1984) 155 CLR 242, 261.
[13] (1956) 95 CLR 353, 363.
The intention of the purchaser (relevantly here, Mr Arifovic) was the important issue in determining whether the person who provided none of the purchase money (relevantly here, Ms Hocking) acquired a beneficial interest in the property. Gibbs CJ in Calverley v Green held as much.
In the absence of a relationship that gave rise to the presumption of advancement, it is presumed that the purchaser (Mr Arifovic) did not intend the other person (Ms Hocking) to take beneficially. Again, the observations of Gibbs CJ in Calverley v Green are authority for that proposition.
If the person asserting a beneficial interest is unable to show contributions to the purchase price, that person will not be able to demonstrate that he or she is entitled to an equitable interest based on a resulting trust. In addition to the observations of the High Court in Calverley v Green on point, in the Supreme Court of Victoria Kyrou J made observations to similar effect in Sivritas v Sivritas[14] (“Sivritas”).
[14] (2008) 23 VR 349, 372.
The person asserting the existence of a resulting trust bears the onus of establishing payments that are said to give rise to it, a point also made in Sivritas.
The trustees pointed out that Mr Arifovic acquired the property solely in his own name and that he also assumed the liability as mortgagor alone. At the time the Seaford property was purchased, Ms Hocking made no financial contribution to its acquisition. The bankrupt then became registered proprietor of the legal interest. At the date of purchase, the bankrupt also acquired full beneficial interest in the Seaford property.
In my judgment, Ms Hocking did not acquire an interest under a resulting trust.
Constructive trusts
Constructive trusts do not arise merely because the person asserting the existence of a constructive trust says it is just and fair to impose one. That said, embedded in the equitable doctrine of constructive trusts is the basic notion that the remedy prevents a person (here, Mr Arifovic) from unconscionably asserting his legal rights to the property.
In essence, the Muschinski v Dodds/Baumgartner constructive trust arises where one person (here, Ms Hocking) contributed the benefit of money or property on the basis and for the purpose that the relationship would otherwise be enjoyed by the other (relevantly here, Mr Arifovic) where it was not specifically intended that the other party should so enjoy it. In that situation, equity will not permit that other person
(here, Mr Arifovic) to retain the benefit of the property to the extent that it would be unconscionable for him to do so.
Where parties pool their earnings for the purpose of a joint relationship for accommodation, as was the situation in Baumgartner, the making of financial and non-financial contributions towards building a house, purchasing furniture, or making a home on the basis of that joint relationship may render it unconscionable for the sole registered proprietor to assert that the property was his alone. In those circumstances, equity intervened by the imposition of a constructive trust in favour of the party who was not registered as a proprietor.
That was the case here.
The matters a court can take into account in determining whether a constructive trusts exists include contributions of labour, as was the situation in Miller v Sutherland[15] and even parenting and homemaker contributions, as was the case in Read v Nicholls.[16] Repairs and renovations to the property are also relevant in the appropriate case,
as was the situation in Hibberson v George.[17]
[15] (1990) 14 Fam LR 416, 424.
[16] [2004] VSC 66.
[17] (1989) 12 Fam LR 725,742.
Where financial contributions have been made for a substantial period of time, it can sometimes be the case that the parties hold the beneficial interest in equal shares as tenants in common, with suitable adjustments to take into account actual contributions, financially or in kind, as was held in Baumgartner.
The other type of constructive trust of relevance in this case was the common intention constructive trust. It was canvassed in such cases as Allen v Snyder,[18] Hohol v Hohol[19] and Rasmussen v Rasmussen.[20]
A common intention constructive trust will arise where there is an actual or inferred common intention of the parties as to their entitlements to the beneficial interest in the property and there has been detrimental reliance on that intention such that it would be an equitable fraud on the claimant to deny his or her interest in the property.
[18] [1977] 2 NSWLR 685.
[19] [1981] VR 221, 225.
[20] [1995] 1 VR 613.
So far as proofs were concerned of the elements of the constructive trust, the onus was on the party asserting the existence of the constructive trust, here Ms Hocking. The mere fact of a de-facto relationship in and of itself will not form the basis for concluding that a constructive trust existed. So much so was held by Gleeson CJ then of the Supreme Court of New South Wales in Green v Green.[21] The same observations were made in Brandling v Weir.[22] Conduct of the parties can be examined where the claim is based on asset post-acquisition conduct. That concept can be traced to the observations of
Vice Chancellor Browne-Wilkinson in Grant v Edwards.[23] But if the fact of payments being made can be explained on some basis such as a desire to share expenses, a constructive trust will not necessarily arise, a matter pointed out by Lord Diplock in Gissing v Gissing.[24]
[21] (1989) 17 NSWLR 343, 353.
[22] [2003] NSWSC 723.
[23] [1986] Ch 638.
[24] [1971] AC 886, 909.
The trustees submitted that the evidence in this case was insufficient to establish a common intention constructive trust by reason of the absence of evidence of any such common intention as well as the absence of any detrimental reliance. I agree. There was no such evidence. It must not be overlooked that Ms Hocking had not worked for some considerable time. It must also be recognised Ms Hocking did not pay the mortgage sums between February and June 2016 despite her general and sweeping comment that she maintained the mortgage payments associated with the Seaford property. Whilst it was true that Ms Hocking’s account was used as the account from which amounts applied in reduction the mortgage debt were made, payments from that account were made only after the income protection payments were deposited into that account. In other words, the mortgage payments were made from money to which Mr Arifovic was entitled, even though the funnel through which the payments passed was
Ms Hocking’s account. Similarly, Ms Hocking stated she paid legal fees to a firm of solicitors. While the money used came from funds in her account, the funds in her account to pay those legal fees came from the proceeds of the sale of the boat.
The trustees correctly submitted that no common intention existed for Ms Hocking to have a beneficial interest in the Seaford property.
No basis was shown for the imposition of a common intention constructive trust.
So far as a Muschinski v Dodds/Baumgartner constructive trust was concerned, in my view such a constructive trust was proved. Disproportionate contributions are to be taken into account, as was held in Shepherd v Doolan.[25]
[25] [2005] NSWSC 42.
In view of the arithmetical analysis set out above, in my judgment
Ms Hocking is entitled to a declaration that she holds a beneficial interest in the Seaford property to the extent of 32.52%.
An order for sale will be made. Once the net proceeds are ascertained,
I order 32.52% of those proceeds to be paid to Ms Hocking.
The trustees have asked to be heard on costs. I shall fix a date for the hearing of the costs argument.
Finally, more than once during the hearing before me Ms Hocking broke down stating that an order representing any percentage in or around 30% being her beneficial interest would occasion impossible hardship to her. Up to a point I feel some sympathy for her. She has provided care for Mr Arifovic while he suffered mental ill-health.
Ms Hocking has also provided a significant amount of her wealth towards a relationship that did not return to her all that she said
she contributed to it. She hinted at seeking remedies under the
Family Law Act 1975(Cth). Whether she does that remains be seen. But Ms Hocking is not entitled to express her frustration in the result that has been obtained in this case by mounting the personal vitriol that she has shown towards the trustees. They are officers of the court charged with the difficult task of examining the often confusing and conflicting financial arrangements of bankrupts. They did that in this case with little to no assistance or cooperation from Mr Arifovic or from Ms Hocking. Insofar as that bears on the question of costs,
I mention it now to enable Ms Hocking to prepare to meet any arguments along those lines the trustees may later advance.
I certify that the preceding sixty (60) paragraphs are a true copy of the reasons for judgment of Judge Wilson
Associate:
Date: 29 March 2017
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