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King v Fister[2022] QCA 47

SUPREME COURT OF QUEENSLAND

CITATION:

King & Anor v Fister & Anor [2022] QCA 47

PARTIES:

ANDREW ROBERT KING

JODI LEANE KING

(appellants/cross-respondents)

v

KAREN AMANDA FISTER

(first respondent/first cross-appellant)

CHRISTOPHER ROBERT HALL

(second respondent/second cross-appellant)

FILE NO/S:

Appeal No 595 of 2021

DC No 14 of 2018

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

District Court of Queensland at Cairns – [2020] QDC 333 (Fantin DCJ)

DELIVERED ON:

5 April 2022

DELIVERED AT:

Brisbane

HEARING DATE:

10 May 2021

JUDGES:

Sofronoff P and Mazza AJA and Davis J

ORDERS:

  1. Allow the appeal against the dismissal of the equitable damages claim.
  2. Award equitable damages in favour of the appellants against the respondents calculated as the difference between the entitlement of the respondents ($20,370.80) and the sum they received ($37,821.08) being $17,450.28 with interest as calculated under s 58 of the Civil Proceedings Act 2011 and Practice Direction 7 of 2013 from the date of sale of the property to the date of judgment on the appeal.
  3. Dismiss the cross appeal.
  4. Allow the appeal against the costs order.
  5. Order the respondents to pay the appellants’ costs of the proceedings including the appeal and cross-appeal on the standard basis.

CATCHWORDS:

EQUITY – TRUSTS AND TRUSTEES – IMPLIED TRUSTS – CONSTRUCTIVE TRUSTS – COMMON INTENTION – ACTING TO DETRIMENT – where the parties formed a venture – where the respondents would purchase a house and borrow most of the money to effect the purchase – where the appellants would contribute to the purchase price – where the appellants would pay the payments due on the mortgage – where the appellants would pay outgoings and maintenance on the house – where the appellants would acquire a loan to pay out the existing mortgage and take a transfer of the title – where the respondents made further withdrawals on the loan account – where the venture failed – where the house was sold – whether the proceeds of sale were held pursuant to a constructive trust – where the trial judge found both a common intention constructive trust and a joint endeavour constructive trust – whether the respondents had to account for the further withdrawals – where the trial judge found that case not proved – where the appellants appealed against the dismissal of their claim concerning the redraws – where the respondents cross-appealed against the finding that the sale proceeds were held on constructive trust for the appellants – whether a common intention constructive trust was proved – whether a joint endeavour constructive trust was proved – whether account should be taken of the redraws – whether apportionment was required

Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59, followed

Clancy v Salienta Pty Ltd [2000] NSWCA 248, cited

Giumelli v Giumelli (1996) 196 CLR 101; [1999] HCA 10, followed

Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc [2018] VSC 413, followed

Munro v Munro [2018] VSC 747, cited

Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78, followed

Nathan v Williams & Anor [2020] QCA 138, cited

Parsons v McBain (2001) 109 FCR 120; [2001] FCA 376, cited

Staatz v Berry (No 3) (2019) 138 ACSR 231; [2019] FCA 924, cited

West v Mead [2003] NSWSC 161, cited

COUNSEL:

C J Ryall for the appellants/cross-respondents

M A Jonsson QC for the respondents/cross-appellants

SOLICITORS:

Preston Law for the appellants/cross-respondents

Murray & Lyons Solicitors for the respondents/cross-appellants

  1. [1]
    SOFRONOFF P:  I agree with the reasons of Davis J.
  2. [2]
    MAZZA AJA:  I agree with the reasons of Davis J.
  3. [3]
    DAVIS J:  This is an appeal and cross-appeal from a judgment given in the District Court in Cairns.[1]
  4. [4]
    The appellants were successful in the proceedings to the extent of securing a declaration that they are beneficially entitled to the sum of $64,032.90 which is presently held in a solicitor’s trust account.  It was also ordered that the respondents pay 80 per cent of the appellants’ costs of the proceedings assessed on the standard basis.
  5. [5]
    The appellants appeal against the dismissal of their further claim for equitable damages of $37,821.08.  On appeal, they seek that sum plus interest.  They also appeal the costs order and submit that the respondents should pay all their costs calculated on the indemnity basis, or alternatively on the standard basis.
  6. [6]
    By cross-appeal, the respondents challenge the declaration and submit that the appellants’ claim ought to have been dismissed.  Alternatively, they say that the appropriate declaration was that the appellants and respondents share in the fund equally.  They resist the equitable damages claim.

Background

  1. [7]
    The first respondent (Karen) and the first of the two named appellants (Andrew) are brother and sister.  Andrew had experienced financial difficulties.  He and his wife, the second-named appellant (Jodi), were living with their children at Andrew and Karen’s mother’s house.  That had become uncomfortable and the family needed a house of their own.  However, the appellants could not raise money to purchase a house.  That led to an arrangement being struck between the appellants and Karen and her partner, the second respondent (Christopher).  As a result, a property at 77 Tills Street, Cairns (the property) was purchased in the name of the respondents using money borrowed by Karen and Christopher from a bank, and money borrowed by Andrew and Jodi from Andrew and Karen’s mother.  The respondents and their children took up residence in the property.
  2. [8]
    About seven years later the property was sold and the fund the subject of the declaration was the net sale proceeds.
  3. [9]
    The arrangement struck between the parties was oral.  There was substantial dispute as to the terms of the arrangement.  The appellants’ case at its most basic was that the property was purchased by the respondents on the understanding that it would be the appellants’ house, at least at some stage.  The respondents accepted that there was an arrangement which may ultimately lead to the house being transferred to the appellants.  For reasons explored at the trial, a tenancy agreement was entered into between Jodi and the respondents.  The existence of a tenancy was inconsistent with the appellants’ case.
  4. [10]
    After generally preferring the evidence of the appellants where it conflicted with that of the respondents, the learned trial judge made the following factual findings as to the terms of the arrangement:

[230] I am satisfied that the terms of the agreement between the parties were essentially in the terms alleged by the plaintiffs.[2] That is, that in or about September 2011 Andrew and Karen agreed to cooperate in the purchase of the property with the objective that the property would become the residence for Andrew and his family, that would ultimately be wholly owned in law and equity by Andrew and Jodi on the following terms:

  1. the parties would attempt to acquire the property at auction;
  1. the plaintiffs would borrow sufficient money for the deposit from Ila;[3]
  1. the defendants[4] would borrow funds sufficient to complete the purchase including stamp duty and legal costs;
  1. the purchasers would be the first defendant[5] or both defendants;[6]
  1. the plaintiffs would be responsible for payment of all mortgage loan repayments and other charges related to the borrowings to complete the purchase, together with council rates, water charges, insurance, maintenance, and other holding expenses;
  1. the plaintiffs and their family would occupy the property;
  1. if the plaintiffs were able to obtain the finance necessary to do so, the plaintiffs would discharge the balance of the indebtedness of the defendants remaining in respect of the purchase of the property and the defendants would convey the legal title in the property to the plaintiffs.

[231] I am satisfied that that the agreement did not include any or all of the following terms:

  1. the plaintiffs would live in the property as the defendants’ tenants;
  1. both plaintiffs would both sign a residential tenancy agreement;
  1. the plaintiffs would purchase the property from the defendants within two years by payment of an agreed purchase price; and
  1. if the plaintiffs did not purchase the property within two years, the defendants would sell the property on the open market.”
  1. [11]
    Her Honour went on to find that in addition to making payments pursuant to the arrangement, the appellants also expended money, time and labour improving the property.  They did so in reliance upon the arrangement.[7]
  2. [12]
    The appellants did not obtain a loan so as to pay out the respondents’ loan and take a conveyance of the title of the property.
  3. [13]
    As time wore on, there was tension between the appellants and the respondents.  The respondents wanted their obligations under the loan discharged so they were free to borrow for other purposes.
  4. [14]
    The respondents recovered possession of the property and sold it.
  5. [15]
    After the sale, it became clear that the respondents had drawn on the loan account for purposes other than the acquisition of the property.  The trial judge heard expert evidence from an accountant, Mr Hastings.  Mr Hastings identified those withdrawals from the account which were not related to the purchase or improvement of the property and then calculated the interest which had accrued on the amounts the subject of those withdrawals.  He then added the amount of the withdrawals to the interest calculation and arrived at a figure of $37,821.08.
  6. [16]
    On Mr Hastings’ evidence, had the withdrawals not occurred, the total net proceeds of sale would have been $101,853.98 with $64,032.90 being the sum the subject of the declaration and the $37,821.08 as calculated by him.
  7. [17]
    The appellants claimed a proprietary interest in the sum of $64,032.90 held by the solicitors[8] on the basis of either a common intention constructive trust or a failed joint venture constructive trust.  They claimed equitable damages of $37,821.08.
  8. [18]
    The trial judge found both the common intention constructive trust[9] and the failed joint venture constructive trust.[10]  The equitable damages claim was rejected for this reason:

[258] I accept the defendants’ submission that the calculation arrived at by Mr Hastings was a mechanical exercise necessarily based on certain instructions received from the plaintiffs’ solicitors. The calculation and assumptions did not take into account or quantify a number of matters including the parties’ respective capital contributions nor whether any party had disproportionately contributed towards repayments. The plaintiffs accepted in final addresses that the equitable compensation claim was not ‘perfectly calculated’ and that it did not take into account the benefit from the set-off for the renovation works. The plaintiffs abandoned a claim for relief in the form of an account.”

The appeal

  1. [19]
    Putting aside the costs issue, the appellants’ appeal only concerns the claim for equitable compensation.  The appellants’ submission is that having found the existence of a constructive trust, the only reason given by the trial judge for dismissing the claim for equitable damages was an insufficiency of evidence upon which to make the relevant calculation.[11]  The appellants submit that there is ample evidence to support the claim.
  2. [20]
    The respondents, by the cross-appeal, challenge the finding that a constructive trust arose.  Given the way the case was presented, the equitable damages claim depends upon a constructive trust being established.  If the respondents are successful in their challenge to the finding of a constructive trust, then the appellants’ appeal necessarily fails.
  3. [21]
    It is therefore convenient to firstly deal with the cross-appeal.

Principles concerning constructive trusts

  1. [22]
    Trusts are often categorised as express, resulting, or constructive.  An express trust is based on an actual or inferred intention to create a trust.  A resulting trust arises upon the presumed intention to create a trust upon the payment of money or transfer of property.  A constructive trust is one that is imposed independently of the parties’ intentions.[12]
  2. [23]
    The delineation between the various categories of trusts is not precise as is demonstrated by the common intention constructive trust which, as its name suggests, is a species of constructive trust founded upon the intention of the parties.[13]
  3. [24]
    Constructive trusts are often viewed as either “institutional constructive trusts” or “remedial constructive trusts”.[14]  An institutional constructive trust is one where the facts give rise to a proprietary interest in the property in question.  It arises at the point in time when the relevant facts which establish the trust happen.[15]  A remedial constructive trust is, as its name suggests, one imposed by way of remedy in order to do equity.  It is a trust imposed by the court and arises at the time of the making of the order.[16]
  4. [25]
    A common intention constructive trust is an institutional constructive trust.  Its basis is a detrimental reliance by the claimant of the trust upon an actual or inferred common intention as to the claimant’s beneficial interest in property.[17]
  5. [26]
    In Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc,[18] McMillan J described the elements of a common intention constructive trust as:

[402] The second class of constructive trust is a common intention constructive trust, which is distinct from the joint venture constructive trust. The court will construe a common intention constructive trust where:

  1. (a)
    there is an actual or inferred common intention of the parties as to their beneficial interest in a property;
  1. (b)
    there has been detrimental reliance on that common intention by the claimant; and
  1. (c)
    it would be an equitable fraud on the claimant to deny his or her interest in the property.”

And later:

[405] A common intention constructive trust creates substantive rights and is not merely a remedy that arises when a court makes a declaration to that effect. The trust will generally take effect from the moment at which the conduct giving rise to its imposition occurs. The interest created may, however, be deferred in accordance with principles governing priority between competing equitable interests.”

  1. [27]
    A failed joint endeavour constructive trust is a remedial constructive trust based on principles of unconscionability.[19]  Where property has been purchased and financial contributions have been made to it but the venture has failed, “equity will not permit [a] party to assert or retain the benefit of the relevant property to the extent it ought be unconscionable for him so to do …”.[20]

Was the finding of a common intention constructive trust correct?

  1. [28]
    In reasoning that a common intention constructive trust existed in favour of the appellants, the learned trial judge reasoned in this way:
  1. The agreement was in the terms which are set out at paragraph [10] of these reasons.
  2. The appellants did the following things in reliance upon the agreement:
    1. (i)
      they paid the deposit;
    2. (ii)
      they expended their own money, time and labour improving the property;
  3. they made payments beyond their monetary obligations under the tenancy agreement;
  4. “I am satisfied they did so on the faith of an expectation they would later acquire the property”;[21]
  5. “The parties’ agreement, and their subsequent conduct, support a finding that it was their common intention that the defendants would hold the property on a constructive trust for the benefit of the plaintiffs”.[22]
  1. [29]
    The learned trial judge did not find that at the time of entering into the arrangement, it was intended that the appellants would then acquire a beneficial interest in the property.  To the contrary, her Honour found:
  1. “an expectation [the appellants] would later acquire the property”;[23]
  2. title to the property would pass to the appellants “if [they] were able to obtain the finance necessary to do so …”.[24]
  1. [30]
    By finding a common intention construction trust, the trial judge has affixed a trust to the proceeds of sale of the property by the respondents in circumstances where the appellants never discharged the indebtedness to the bank and never took a transfer of the property.  That was never the common intention of the parties.
  2. [31]
    In my view, the trial judge erred in finding a common intention constructive trust.

Was the finding of a joint endeavour constructive trust correct?

  1. [32]
    The learned trial judge was right to find that there had been a joint endeavour.  Her Honour was also correct to find that it had failed.  The respondents argue that there was no common benefit contemplated by the arrangement which the respondents say is what distinguishes a common contract from a constructive trust.  The requirement of mutual benefit is recognised in cases such as Baumgartner v Baumgartner,[25] Muschinski v Dodds,[26] West v Mead,[27] and Clancy v Salienta Pty Ltd.[28]
  2. [33]
    Here, there is mutuality.  As the respondents correctly submitted, the trial judge found that the obligation to transfer the property to the appellants only arose if the appellants raised sufficient money to pay out the mortgage.  Therefore, the respondents acquired legal title to the property as a result of the appellants paying the deposit and the outgoings on the property, in circumstances where the obligation to divest themselves of the property in favour of the appellants was conditional.
  3. [34]
    The joint venture having failed, the respondents retained legal title to the property which they then sold.  In my view, a remedial trust in the form of a joint venture constructive trust arose over the sale proceeds because of the contributions made by the appellants pursuant to the arrangement with the respondents.  The cross appeal fails.
  4. [35]
    The respondents, in my view, are correct when they submit that the formulation of the remedy ought involve an assessment of the respective contributions of the parties.  An example of such an assessment being undertaken is Muschinski v Dodds.[29]
  5. [36]
    The trial judge’s assessment of the respective contributions of the parties was:

[273] However, it was never intended that the defendants would retain the entire benefit of the plaintiffs’ payments and the value of the improvements made by the plaintiffs, should the relationship come to an end. The joint endeavour here was not framed to meet the contingency of failure of the endeavour. The parties did not turn their minds to, or make provision for, what would happen if their relationship broke down, or if plaintiffs did not acquire the property. In the circumstances, in my view there should be a declaration that the property was held on trust by the defendants for the plaintiffs pursuant to a constructive trust because the only parties who made a significant positive contribution to its purchase, maintenance and improvement were the plaintiffs. Any liabilities incurred by the defendants have already been recovered or indemnified by funds drawn on the loan facility which in turn was discharged on the sale of the property.”

  1. [37]
    The finding that the respondents made no “significant positive contribution to [the property’s] purchase, maintenance and improvements” was erroneous.
  2. [38]
    The respondents paid 90 per cent of the purchase price.  They achieved that by borrowing the money and being personally liable to the bank under the loan.  They remained liable to the bank for almost seven years.
  3. [39]
    The fact that the loan was repaid is no answer to the respondents’ claim that their contribution to the purchase of the property should be recognised.  What is relevant are all contributions, both monetary or otherwise, to the acquisition and maintenance of the property.[30]
  4. [40]
    The respondents also performed work on the property in an amount of $7,787.12.[31]
  5. [41]
    Contributions by the appellants were:
  1. Payment of the deposit of $26,000.  This was borrowed from Andrew and Karen’s mother by Andrew and repaid to her by him.[32]
  2. Payment of interest on the loan and capital in the sum of $132,445.88.
  3. The doing of improvements on the property in the value of approximately $174,000.[33]
  4. Payment of outgoings and maintenance.
  1. [42]
    While it is true that the appellants serviced the loan, paid all outgoings and made cash contributions and improvements, they also had the enjoyment of occupation of the property.  The respondents contributed substantially to the purchase and holding of the property.  They did this primarily by incurring liability to the bank and maintaining that loan for almost seven years.
  2. [43]
    In Baumgartner,[34] the approach was to have regard to financial contributions but make necessary adjustments for contributions even if the contributions are of a non-financial nature.[35]
  3. [44]
    The final fund realised after the sale reflects the direct financial contributions of the appellants to the payment of loan repayments, repairs and improvements and outgoings.  It would be unconscionable for the appellants not to recognise the contribution of the respondents in borrowing the purchase price from the bank, and payment of $7,787.12 readying the property for sale.  Taking all these circumstances into account, the contribution should be assessed at 20 per cent.
  4. [45]
    As already observed, the trial judge dismissed the equitable damages claim for $37,821.08.  Her Honour did this for the reasons set out at paragraph [258] of the judgment which appears at paragraph [18] of these reasons.
  5. [46]
    The trial judge criticised Mr Hastings’ calculation on three bases:
  1. The calculation did not take into account capital contributions.
  1. The calculation did not take into account whether any party had “disproportionately contributed towards payments”.
  2. There was a concession that the calculation did not take into account “the benefit from the set-off for the renovation works”.
  1. [47]
    The concession to which her Honour referred is:

“MR RYALL: - - - addition of all those invoices, of 78712. Mr Hall said they – those were – I don’t know if he did say they were paid but he said, if he did, they were drawn down on the mortgage and the plaintiff, having not really appreciated that until that evidence was given, hasn’t sought any extra relief for an adjustment in its favour, should the counterclaim fail. So, we will just not – we would just say that the equitable compensation is not perfectly calculated anyway because it doesn’t take into account the benefit from the set-off for renovation works, so we’re just going to leave that where it is – that’s an election to say we will seek the relief I’ve already told your clients – I’ve told your Honour if successful.”[36]

  1. [48]
    Her Honour was wrong in relation to the first two criticisms.  The sum of $37,821.08 took into account both the withdrawals on the account by the respondents and the payments they had made.  It, therefore, did take into account capital contributions and did calculate the contribution made by the respondents.
  2. [49]
    Counsel is only saying in the passage set out above that the calculation was not perfect in the sense that it was not complete.  There were further claims that could have been made by the appellants against the respondents.  He was not conceding that the appellants had failed to establish their claim to the extent of $37,821.08.
  3. [50]
    In my view, the trial judge ought to have taken the sum of $37,821.08 into account in her calculations.

Conclusions

  1. [51]
    The benefit which flowed from the sale was a total of $101,853.98 being the cash of $64,032.90 and the value of the money withdrawn ($37,821.08).  A constructive trust applies so the entitlement is as to 80 per cent to the appellants and 20 per cent to the respondents.  That calculates to $81,483.18 to the appellants and $20,370.80 to the respondents.  The respondents have received $37,821.08 being $17,450.80 beyond their entitlement.  I would therefore:
  1. Allow the appeal against the dismissal of the equitable damages claim.
  2. Award equitable damages in favour of the appellants against the respondents calculated as the difference between the entitlement of the respondents ($20,370.80) and the sum they received ($37,821.08) being $17,450.28 with interest as calculated under s 58 of the Civil Proceedings Act 2011 and Practice Direction 7 of 2013 from the date of sale of the property to the date of judgment on the appeal.
  3. Dismiss the cross appeal.
  1. [52]
    I would set aside the costs order made below.  The appellants were substantially successful and are entitled to their costs of the trial on a standard basis.
  2. [53]
    The appellants have succeeded to the extent of improving their position by the sum of $17,450.28.  The cross-appeal failed.  I would order the respondents to pay the appellants’ costs of the appeal and cross-appeal on the standard basis.

Footnotes

[1] King & Anor v Fister & Anor [2020] QDC 333.

[2]  Now the appellants.

[3]  Andrew and Karen’s mother.

[4]  Now the respondents.

[5]  Karen.

[6]  Karen and Christopher.

[7]  At [234].

[8]  The net sale proceeds.

[9]  At [255].

[10]  At [237].

[11] King & Anor v Fister & Anor [2020] QDC 333 at [258].

[12]  Equity and Trusts in Australia, GE Dal Pont, Thomson Reuters, 7th edition, at [38.20].

[13]  See Munro v Munro [2018] VSC 747 at [88].

[14] Muschinski v Dodds (1985) 160 CLR 583 at 612-614 and Dal Pont at [38.05]-[38.15].

[15] Giumelli v Giumelli (1996) 196 CLR 101 at 112.

[16] Giumelli v Giumelli (1996) 196 CLR 101 at 112, Parsons v McBain (2001) 109 FCR 120 at 125.

[17] Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc [2018] VSC 413 at [402] followed in Staatz v Berry (No 3) (2019) 138 ACSR 231 at [166] and Nathan v Williams & Anor [2020] QCA 138.

[18]  [2018] VSC 413.

[19] Muschinski v Dodds (1985) 160 CLR 583 at 620.

[20] Muschinski v Dodds (1985) 160 CLR 583, per Deane J, at 620, see also Baumgartner v Baumgartner (1987) 164 CLR 137.

[21]  At [234], emphasis added.

[22]  At [248].

[23]  At [234].

[24]  Paragraph [230], element 7, emphasis added.

[25]  (1987) 164 CLR 137.

[26]  (1985) 160 CLR 583.

[27]  [2003] NSWSC 161.

[28]  [2000] NSWCA 248.

[29]  (1985) 160 CLR 583.

[30] Baumgartner v Baumgartner (1987) 164 CLR 137 at 149.

[31]  Reasons [51].

[32]  Reasons [123]-[128].

[33]  Reasons [117].

[34]  (1987) 164 CLR 137.

[35]  At 149-150.

[36]  T 2-95.

Close

Editorial Notes

  • Published Case Name:

    King & Anor v Fister & Anor

  • Shortened Case Name:

    King v Fister

  • MNC:

    [2022] QCA 47

  • Court:

    QCA

  • Judge(s):

    Sofronoff P, Mazza AJA, Davis J

  • Date:

    05 Apr 2022

  • White Star Case:

    Yes

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2020] QDC 33322 Dec 2020-
Appeal Determined (QCA)[2022] QCA 4705 Apr 2022-
Application for Special Leave (HCA)File Number: B17/202202 May 2022-

Appeal Status

Appeal Determined (QCA) Special Leave Sought (HCA)

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