Scanlon v McLeay[2018] QDC 17

DISTRICT COURT OF QUEENSLAND

1. [1]
   The parties were in a personal relationship between approximately May 2008 and September 2013. They commenced co-habiting in March 2010, after a property was purchased at 10 Monserrat St, Chermside (‘the Chermside property’). While the respondent is the registered proprietor of the Chermside property, the applicant contributed $49,000 to the deposit and made other payments to the respondent’s mortgage account. She also paid for the installation of blinds and a fence.

2. [2]
   By an originating application filed on 17 April 2014, the applicant seeks declaratory and other equitable relief relating to the Chermside property arising out of the abovementioned contributions.

3. [3]
   On 18 November 2015, Dorney DCJ QC ordered that the affidavits filed in the proceedings be treated as pleadings. Directions were also made in relation to the provision of expert evidence as to the value of the Chermside property. However, there is no such evidence before the court. Evidence in chief was given by affidavits. The only witnesses cross-examined were the parties and the respondent’s current partner, Kylie Arlott.

4. [4]
   In oral submissions, counsel for the applicant confirmed that her claim for $13,872 for non-financial contributions as claimed in the originating application and deposed to in her affidavit, was not being pursued.^[1]Neither party has sought to make a case based on non-pecuniary contributions. 

Credibility

5. [5]
   I was not prepared to accept that everything said to me by either party was entirely accurate. The applicant was deliberately vague and evasive in aspects of her evidence. An example of this is her lack of memory as to the reason she described the $45,000 deposited into the respondent’s loan account as a ‘loan repayment’.^[2]Another example is her lack of memory as to how she came to take possession of the respondent’s bank statements.^[3]A further example is her reason for not registering her MGB Roadster in her own name.^[4]Other examples are her evidence as to the negligible expenditure associated with her teenage children residing at the Chermside property, and the minimal costs incurred in the running of her childcare business.^[5]

6. [6]
   On the other hand, from my observations of the respondent’s evidence, it was at times coloured by her resentment towards the applicant. For example, the applicant deposed in her affidavit that after the separation there was a discussion whereby the respondent offered to pay back to the applicant the $49,000. In her affidavit, the respondent denied such a conversation having taken place.^[6]However, in cross-examination the respondent conceded that there had been such a conversation and that ‘in the heat of the moment’ she had offered to refund to the applicant the $49,000.^[7]Another example is her evidence in relation to the applicant’s use of the name Olivia Spandex on her Facebook account.^[8]

7. [7]
   Counsel for the applicant was critical of the respondent for her inability to provide details about her wages in 2012, when it would ordinarily be expected that someone in her position would be able to recall such information. It is true that the respondent was unable to give definitive evidence as to whether her salary was significantly reduced in 2012. However, given that the respondent has been working in the family business for 29 years and her wage would fluctuate, it is hardly surprising that she may not recall this level of detail relating to a time period some five years earlier. I do not consider that this reflects adversely on the respondent’s credibility. Further, there is no evidence that there was a reduction in the respondent’s wages over this time.

8. [8]
   I have endeavoured to resolve conflicts on particular issues which appear significant. Otherwise, where I state something as a fact below, I accept the evidence that supports that fact. In general, I thought the respondent’s evidence was more reliable than the applicant’s.

The relationship

9. [9]
   The parties commenced an intimate relationship in around May 2008. At the time, the applicant was living with her two children at a property she owned in Tivoli, North Ipswich. She also had a Pizza Hut business at Brassall which was not performing well. She sold the Tivoli property a few weeks after the relationship commenced and used a proportion of the proceeds from the sale to pay some of the debts associated with the Pizza Hut business.

10. [10]
    The applicant transferred $45,000 to the respondent’s Westpac bank account on 27 May 2009 and described it as a ‘loan repayment’. She then deposited a further $4,000 into the same account at the Brassall Westpac branch on 1 June 2009. This payment was described as a ‘deposit’. The applicant’s evidence was that at the times these monies were deposited, she and the respondent were looking for properties together. This is not disputed by the respondent.

11. [11]
    The Chermside property was purchased in January 2010, and settled in early March 2010. The purchase price was approximately $690,000. The deposit was $100,000. The respondent contributed $51,000 to the deposit. The $49,000 which the applicant had transferred to the respondent’s bank account comprised the remainder of the deposit.^[9]

12. [12]
    The property was registered solely in the name of the respondent. She obtained a loan from Westpac for the balance of the purchase price. The account has a redraw facility.

13. [13]
    The respondent, the applicant and her two children, who were aged 17 and 16 respectively, moved into the Chermside property, and remained living there until the breakdown of the relationship between the applicant and respondent in September 2013.

14. [14]
    During the period that the parties cohabited, the respondent worked in her parents’ Brisbane Locksmith business. The applicant was not working initially, and then she commenced operating from the Chermside property, a child minding business, Kris Kindy. It is not clear when the applicant commenced operating the business. However, it appears that it did not commence making a profit until early February 2012.

15. [15]
    It is not in dispute that apart from the $49,000 contribution to the deposit as discussed above, the applicant did not otherwise make any significant financial contributions to the relationship prior to February 2012 as she ‘wasn’t really making any money’.^[10]In other words, the respondent met all mortgage repayments and the great majority of the household expenses over this period of some two years.  There are no bank statements or other financial documents in evidence relevant to this period of time.

16. [16]
    Between 7 February 2012 and 29 August 2013, the applicant deposited $86,127.99 into the respondent’s bank account, which the respondent described as an offset account. However, the bank statements indicate that these monies were in fact deposited into the respondent’s mortgage account and this account has a redraw facility. The bank account statements show that over the same period of time the respondent deposited into this account a little in excess of $92,000. This was comprised of income from her employment in the locksmith business and of monies transferred from other accounts linked to this account.

17. [17]
    The initial amount deposited by the applicant into the mortgage account was for $860. For the following six weeks, a weekly sum of $940.81 was deposited, and $941 weekly for the following 12 weeks. The remaining monies were deposited in variable amounts on a more sporadic basis. On each occasion the deposits were described as ‘Mortgage Repayment’.

18. [18]
    The respondent explained in evidence that while these payments were described in this way, they were also used for general living expenses, including insurance, utility bills, groceries and other household expenses. Support for this can be found in the relevant bank statements which are annexure ‘CRS2’ to the applicant’s affidavit.^[11]

19. [19]
    Blinds were installed in the house by the applicant at a cost of $3,500. These blinds remain in the house. The respondent deposes to the applicant having claimed this expense on her tax, on the basis that they were installed for the purpose of her child minding business. The applicant’s evidence was that these blinds were also installed in the media room and the master bedroom of the house. I am not satisfied on the balance of probabilities that the applicant paid all of this amount for the common intention of the parties. Based on the limited evidence on this point, I have assessed half of it as having been for the applicant’s own business interests.

20. [20]
    The applicant also claims to have paid $5,420 for a front fence for the Chermside property. The invoice for the fence is in the respondent’s name, but the applicant claims to have paid it as a surprise for the respondent’s birthday. It was the evidence of the respondent that while she has no recollection of the applicant having paid the invoice, that she herself did not pay it. I am satisfied that the applicant paid for the fence.

21. [21]
    Therefore, the total of the applicant’s financial contributions to be considered, excluding the $49,000 deposit, is $93,297.99.

22. [22]
    Between May 2012 and the end of the relationship in September 2013, the respondent paid for some of the expenses incurred by the applicant in the operation of the Kris Kindy business. This included an amount of $295 for safety film applied to glass, $139.90 for two port-a-cots, and $167.09 for two Telstra bills. The applicant also owned a MG motor vehicle that she asked the respondent to register in the respondent’s name. The respondent did not drive the motor vehicle, but in 2012 she paid $681.35 for it to be registered for 12 months. These expenses total $1,283.34. This is not disputed by the applicant.

23. [23]
    There was evidence that the parties enjoyed a number of overseas trips together to Singapore, Bali, Malaysia, Hong Kong and Paris. Adopting the necessary broad brush approach, I am satisfied the expenses of these trips were shared between the parties.

24. [24]
    It is common ground that when the parties separated, there was no discussion regarding the property. Shortly prior to the separation, a real estate agent visited the property. The applicant says the purpose of the visit was to estimate the value of the property in the event that the parties separated. The respondent deposes that it was her understanding that the purpose of the valuation was to ascertain the likely price the house would attract should she wish to sell it in the future. I do not consider it necessary to resolve this conflict.

25. [25]
    Since September 2013, the respondent has continued making loan repayments and paying all other expenses associated with the Chermside property. She is solely responsible for repaying the current mortgage debt to the bank, which is in the order of $580,000.^[12]

26. [26]
    Dorney DCJ QC made directions in November 2015 in relation to the provision of an expert valuation report. However, no such evidence was relied on by either party at the hearing. Attached to the affidavit of the applicant is a Residex Comparative Market Analysis report of the Chermside property, which estimated it to be worth $628,000 in July 2014. Appropriately, neither party seeks to rely on this report as to the current value of the Chermside property. There are two obvious limitations in relation to it. First, it is not current. Second, it is not an expert valuation report. Rather, the report is simply derived from the results of various tests and such reports are electronically generated.

Resulting trusts

27. [27]
    If all that is known about the purchase of a property, is that the parties were living in a de facto relationship and the purchase money for the property is provided by both parties, but the property is conveyed into the name of only one of them, there is a presumption that the parties take a beneficial interest in the property as tenants in common in shares that reflect their respective financial contributions to the purchase price.^[13]

28. [28]
    The presumption can be rebutted and the onus is on the party against whom the presumption applies. If the presumption is not displaced, it determines the conclusion to be reached.

29. [29]
    One way the presumption of a resulting trust can be rebutted is a presumption that a gift was intended by virtue of the relationship between the parties. Equity infers that a gift was intended where the nature of the relationship is such, as for example with a parent and child, the parent is under an obligation to make provision for the child.

30. [30]
    Another way it can be rebutted is by evidence of common intention inconsistent with the contributions made by each party to the purchase price.  This was explained by Lord Diplock in Gissing v Gissing in the following way:             

“… the relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s works or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some other different intention that he did not communicate to the other party.  On the other hand, he is not bound by an inference which the other party draws as to his intention unless that inference is one which can reasonably be drawn from his words or conduct.  … It is for the court to determine what those inferences are.”^[14]

31. [31]
    Where both parties have contributed to the purchase price, the intentions of both parties are material.^[15]

32. [32]
    The admissible evidence relevant to a determination of the intention of the parties will comprise ‘the acts and declarations of the parties before or at the time of the purchase … or so immediately thereafter as to constitute a part of the transaction”.^[16] It may be inferred by words and conduct of the parties and the context of the making of the payments at the time, including the relationship that existed between the parties.  It is necessary to determine the actual intention of the parties, rather than the imputation of an intention which might be regarded as producing a just result. 

Constructive trusts

33. [33]
    Unlike a resulting trust, a remedial constructive trust will be imposed in appropriate cases, irrespective of the intention of the parties.^[17]Deane J said in Muschinski v Dodds:

“It differs from those other forms of trust, however, in that it arises regardless of intention ... When established or imposed, it is a relationship governed by a coherent body of traditional and statute law. Viewed in its modern context, the constructive trust can properly be described a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) 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.”^[18]

34. [34]
    As his Honour explained in the following passage, mere fairness will not be a sufficient basis for the imposition of a constructive trust:

“Such equitable relief by way of constructive trust will only properly be available if applicable principles of the law of equity require that the person in whom the ownership of property is vested should hold it to the use or for the benefit of another. That is not to say that general notions of fairness and justice have become irrelevant to the content and application of equity. They remain relevant to the traditional equitable notion of unconscionable conduct which persists as an operative component of some fundamental rules or principles of modern equity.”^[19]

35. [35]
    Equitable intervention is premised on proof of unconscionable conduct. In the circumstances of the collapse of the relationship, equity will impose a constructive trust to prevent undue advantage being taken by one party of a benefit derived at the expense of the other party.^[20]This means that the mere existence of a de facto relationship will not suffice for a constructive trust to be imposed in relation to a shared home owned by one of the parties.  This is so irrespective of the length of the relationship and even if a long-term relationship is combined with the sharing of domestic tasks and of household related living expenses.^[21]

36. [36]
    In Hardman v Hardman,^[22] Dutney J summarised the law in the following way at [10]:

“… a constructive trust with respect to an interest in property in the name of one party to a relationship may be created in favour of the other party where the demands of equity and good conscience so require having regard to the contributions (both financial and non-financial) made to the acquisition or retention of the property by the party in whose favour the trust is declared.”

37. [37]
    In quantifying the relevant contributions for the purpose of allocating beneficial interests under a remedial constructive trust, the High Court in Baumgartner v Baumgartner^[23] emphasised that where possible, the court should strive to arrive at an outcome consistent with the notion of practical equality, rather than pursuing complex factual inquiries or engaging in mathematical accounting analysis.

38. [38]
    Contributions relevant to the scope of a constructive trust can stem from the parties’ pooling of financial resources for the purpose of their joint relationship. The resources can be used to pay outgoings associated for example, with general living expenses and mortgage instalments.

39. [39]
    It is not necessarily unconscionable to deny a party an equitable interest in a property in the amount claimed, if that party has derived a benefit from living in the subject property or otherwise derived a benefit from the other party’s contributions.^[24]

40. [40]
    Where contributions are made not for the common intention of the parties, but rather for a party’s business interests, it may not be unconscionable to deny any such entitlement.^[25]

Deposit contribution of $49,000

41. [41]
    It is common ground that the applicant made a $49,000 contribution to the deposit for the purchase of the Chermside property,^[26] and the legal title to the property was put in the respondent’s name only.  Therefore, a presumption of resulting trust arises and the onus is on the respondent to rebut the presumption. 

42. [42]
    It was not contended for by either party that a presumption of advancement applies. This is appropriate given the nature of the relationship between the parties. Therefore, the question remains as to whether the parties had a contrary intention at the time the applicant made the contribution of the $49,000 to the deposit.

43. [43]
    In his oral submissions, counsel for the respondent submitted that it was the intention of the applicant and the respondent that this contribution to the purchase price by the applicant was to be a gift to the respondent. The problem with this submission is that there is no evidence to support it. It does not feature in the respondent’s affidavit and she did not give evidence to this effect. To the contrary, the respondent’s evidence was that the applicant told her that the reason she had described the $45,000 as a ‘loan repayment’ when depositing this amount in the off-set bank account, was so that it would appear to the applicant’s creditors that it was money she owed to the respondent.  Further and importantly, the respondent’s claim that it was intended to be a gift to her was not put to the applicant in cross-examination so that the applicant had an opportunity to respond.

44. [44]
    In all the circumstances, I am satisfied that the submission by the respondent as to an intention on the part of the applicant to make some kind of gift of her contribution to the purchase price as a contribution to her then relationship with the respondent, is mere speculation at best. This is clearly insufficient, as rebuttal of a presumption of resulting trust requires proof of a definite rather than a nebulous intention.^[27]

45. [45]
    As is common with many domestic relationships, the parties did not foresee or attempt to provide for the contingency of the premature end to their relationship. Given the circumstances that prevailed at the time the property was purchased and immediately thereafter, including the financial circumstances of the applicant, I consider it is highly improbable that the applicant would give up control of the $49,000 by making it a gift to the respondent, irrespective of whether the relationship continued. Rather, I am satisfied she intended to acquire a beneficial interest in the Chermside property to the extent of her contribution to the purchase price. Therefore, the contention by the respondent of unqualified legal entitlement in the property on this basis becomes unconscionable. To avoid this unconscionability, equity requires that the rights and obligations of the parties be adjusted to compensate the applicant for her contribution to the deposit.

46. [46]
    In the applicant’s written submissions, it is claimed in the alternative that there is a constructive trust in her favour arising from her contribution to the deposit. Given my conclusions above, it is unnecessary for me to consider this alternative proposition.

Other financial contributions

47. [47]
    The applicant’s principal contention in relation to the various amounts totalling $86,127.99 that she deposited into the respondent’s off-set account, is that they also give rise to the presumption of resulting trust in her favour.  This is on the basis that they comprised mortgage repayments and are therefore categorised as contributions to the purchase price of the Chermside property. 

48. [48]
    There is some dispute between the parties as to whether these payments by the applicant were in fact utilised to pay instalments that were due under the respondent’s mortgage. I am satisfied that some but certainly not all of the payments made by the applicant were utilised for this purpose.

49. [49]
    A review of the bank statements confirms that over the 18 month period that the applicant contributed the sum of $86,127.99 to the respondent’s mortgage account, the mortgage was only paid down to the extent of some $12,000. The account’s redraw facility was being used extensively, with the consequence that the majority of the money deposited in the mortgage account by both the applicant and the respondent, was being withdrawn to pay for general living expenses, including groceries and pharmaceuticals, credit cards, insurance and veterinary expenses.

50. [50]
    I do not accept counsel for the applicant’s submission that payments made by the applicant to reduce the respondent’s mortgage can be categorised as contributions to the purchase of the property. In support of his submission, reliance was placed on the following observations of Mason and Brennan JJ in Calverley at [493]:

“The defendant's payment of the instalments due under the memorandum of mortgage, in accordance with the arrangement made between the parties, may be thought to be, or to be the equivalent of, the provision pro tanto of the purchase price of the property.”

51. [51]
    However, their Honours then go on to observe in that paragraph:

“It is understandable but erroneous to regard the payment of mortgage instalments as payment of the purchase price of a home.  The purchase price is what is paid in order to acquire the property; the mortgage instalments are paid to the lender from whom the money to pay some or all of the purchase price is borrowed.  In this case, the price was $27,250, of which $18,000 was borrowed from the mortgagee by the plaintiff and defendant jointly.  The balance was paid by the defendant out of his own funds, being part of the proceeds of the sale of the Mt Pritchard property.  Thus the plaintiff and defendant both contributed to the purchase price of the Baulkham Hills property.  They mortgaged that property to secure the performance of their joint and several obligation to repay principal and to pay interest.  The payment of instalments under the mortgage was not a payment of the purchase price but a payment towards securing the release of the charge which the parties created over the property purchased.”

52. [52]
    In these circumstances, any contribution by the applicant to the mortgage repayments does not represent a contribution to the purchase price of the property and a resulting trust therefore does not arise.

53. [53]
    It is also the applicant’s case that her payments for the blinds and the fence give rise to a resulting trust in her favour. I do not accept this submission. Like the mortgage repayments, these were not contributions made at the time the property was purchased or shortly thereafter and therefore are not relevant to an analysis of the beneficial interest of the applicant arising by reason of a resulting trust. They are subsequent contributions which may be relevant to the equitable accounting between the parties.

54. [54]
    Alternatively, the applicant claims that the $86,127.99 that she paid into the respondent’s account and the additional sums that she outlaid for the blinds and fence give rise to a justification for equitable intervention via a remedial constructive trust. This is because it is unconscionable for the respondent to deny her an equitable interest in the Chermside property reflective of these contributions. The resolution of this issue revolves around the extent to which the applicant’s contributions entitle her to an interest in the Chermside property.

55. [55]
    There is insufficient evidence from which to arrive at any precise calculation of the respective contributions of the parties to their mutual financial benefit. Whilst this makes the task more challenging, it is clear from the authorities that equity and good conscience do not require precise mathematical accounting of the relationship between the parties. Consistent with these well-established principles, I have necessarily dealt with the matters in a broad brush way.

56. [56]
    Throughout their cohabitation, the respondent contributed her earnings to the joint property pool. As far as the applicant is concerned, there is no dispute that for almost two years, her financial contributions were minimal. It was not until early February 2012 that she made the first deposit into the respondent’s loan account. Therefore, there was a period of nearly two years where she had use of the Chermside property with her two teenage children, during which time she did not pay rent or any other contributions of the kind commonly made by persons sharing rented accommodation or, for that matter, by a person renting accommodation in a house owned by the other occupant. Over the 18 month period when she did financially contribute, the bank statements suggest that her contributions were comparable in dollar terms to the contributions being made by the respondent. Further, since September 2013, the respondent has continued to pay the mortgage payments and all other expenses relating to the Chermside property.

57. [57]
    Adopting a broad brush approach and taking into account the respective contributions, so far as they can be ascertained or valued, the nature and extent of those made by the applicant make it difficult to glean the required unconscionability for the imposition of a constructive trust. This is because I am satisfied that her contributions have been more than adequately compensated by her and her children having had occupation of the Chermside property for the period that they did. The relevant circumstances do not render it unconscionable for the respondent, as the owner of the Chermside property, to retain the benefits that may have been provided by the applicant during the cohabitation. I am not satisfied that the payment of these monies necessitates the imposition of a constructive trust as a remedy.

Conclusion

58. [58]
    Counsel for the applicant submitted that it was appropriate for my judgment to reflect quantification in dollar terms of the applicant’s interests. So, in order to give effect to these findings in this way, there will be a declaration that the respondent holds her legal interest in the Chermside property on trust for the applicant to the extent of $49,000.

59. [59]
    The originating application is otherwise dismissed.

60. [60]
    I will hear the parties as to the appropriate form of the orders for performance of the trust and costs.