Merritt v Hughes[2010] QSC 100

SUPREME COURT OF QUEENSLAND

1. The defendant, Ms Hughes^[1] filed an application on 30 November 2009 returnable on 15 December 2009 that the within proceedings be dismissed.^[2]  She also sought orders in separate proceedings^[3] returnable on the same date that two caveats over property registered in her name at Gatton be removed. 

2. On 15 December 2009 Mr Merritt represented himself.  The applications were adjourned to 11 February 2010.  A request to the Registrar of Titles by Mr Merritt’s solicitors to remove the caveats was made on 9 February 2010.  Those proceedings are, therefore, at an end. On 11 February Mr Merritt, by then represented by Mr Duffy, was ordered to deliver to Ms Hughes a proposed amended statement of claim and to file an application for leave to proceed. 

3. The present proceedings between Mr Merritt and Ms Hughes were commenced by Mr Merritt by writ and statement of claim dated 22 May 1997.  The writ claims, somewhat delphically,

1. Specific performance of the said agreement.

2. Further in the alternative damages for breach of the said agreement.

The statement of claim pleads an oral agreement in November or December 1992, which was reduced to writing on 13 January 1993, between the parties for the division of their assets at the cessation of their de facto relationship.  It is, no doubt, to that agreement that the claim refers.  The agreement contends that Ms Hughes failed to transfer the Gatton property to Mr Merritt as agreed.  Ms Hughes entered an appearance on 11 June 1997.  Thereafter there have been no further steps in these proceedings.

4. Mr Merritt had previously filed a plaint in the District Court^[4] dated 8 February 1995 in which he sought specific performance of a different agreement of 14 October 1994 for the sale of the Gatton property, the subject of the caveats, to him on particular terms.  Ms Hughes entered an appearance and defence on 13 March 1995 and nothing further has occurred with respect to those proceedings.

5. Mr Merritt has complied with the orders made on 11 February.  Ms Hughes’ application to dismiss the proceedings and Mr Merritt’s application for leave to proceed have been heard together.

Chronology

6. Before embarking on a more detailed analysis of the background to these applications, an overview of key events is useful.

• 1982 – 1992: Duration of the de facto relationship.

• District Court Plaint No. 305 of 1995 filed on 8 February 1995 claiming specific performance of an agreement dated 14 October 1994.

• Writ and Statement of Claim filed 22 May 1997 seeking specific performance of an agreement in writing dated 13 January 1993.

• Caveats lodged 31 January 1997 and 16 October 1997.  The interest claimed in each caveat was “an equitable estate or interest as co-owner in equity of half of an estate in fee simple”.  The grounds of the first caveat were:

Pursuant to the payment of mortgage and rates repayments, and other payments for improvements to the land, entitling the said [Merritt] to the estate or interest hereby claimed.

The grounds for the second caveat were:

Pursuant to an agreement entered into between the parties through their solicitors as their Agents on 14 October 1994 entitling the said [Merritt] to the estate or interest hereby claimed.

• Request to remove caveats and to discontinue the Supreme and District Court proceedings of 9 September 2008 and 6 November 2008.

• Application to remove caveats and to dismiss the Supreme Court proceedings filed 30 November 2009.

• Application by Mr Merritt for leave to proceed filed 25 February 2010.

• Application by Mr Merritt to file an Amended Statement of Claim seeking declarations of trust as to a one half interest in the Gatton property.

The relationship and the acquisition of the Gatton property

7. Mr Merritt and Ms Hughes met in about 1982.  Ms Hughes then worked for an insurance company for which Mr Merritt was a tied agent.  They agree that their de facto relationship commenced in about 1982 and concluded in 1992 but agree on little that happened thereafter that is pertinent to these proceedings.  In 1985 Ms Hughes became the registered proprietor of a house property at Wade Street, Virginia.  She obtained a loan on favourable terms through her employer and deposes that she paid the whole of the deposit from gifted monies from her parents.  Mr Merritt, on the other hand, says:^[5]

As far as I can recall, the purchase price for Wade Street was $60,000.00.  I borrowed about $10,000.00 to $11,000.00 from my father and repaid him when I sold my car.  This sum was matched by Kay as contributions to the purchase price.

8. The parties lived in the house at Wade Street.  Each has a different recollection of contributions.  The mortgage repayments were deducted from Ms Hughes’ pay but Mr Merritt deposes that he contributed to other living costs.  Ms Hughes deposes that she paid for the running costs of the house.

9. In 1989 a property near Gatton of some 80 acres was purchased by Ms Hughes for $50,000.  Mr Merritt deposes that it was purchased by Ms Hughes to give her a tax advantage, as by then she had moved into a more senior position.  Mr Merritt says that he had an interest in beef cattle genetics and pasture management and proposed to use the property to carry stock.  He deposes that Ms Hughes borrowed $30,000 for the purchase and the balance of $20,000 was contributed equally by himself and Ms Hughes.  Ms Hughes’ recollection is:^[6]

I cannot recall whether the plaintiff contributed any amount to the deposit I paid for the Gatton property.  If he had done so, I would have considered that any such contribution would have been by way of recompense to me for what I paid for the Wade Street property.

10. Mr Merritt introduced about two dozen cattle to the property, for which he paid. He increased the livestock over the following three years and deposes that when stock were sold the proceeds were shared equally between himself and Ms Hughes.  He deposes that Ms Hughes managed all of the bookwork associated with “our landholdings and other household expenses”:^[7]

I simply handed over money as and when she required it and she looked after the household finances.^[8]

11. Mr Merritt deposes that he undertook the management and care of the property and paid all expenses associated “with the operations” and “the receipts [were] made available to [Ms Hughes]”.^[9]  Mr Merritt estimates that he contributed approximately $32,000 to the property in constructing a new dam and road, maintaining fences, clearing and replanting.

Dealings with the Gatton property after 1992

12. The relationship came to an end in about mid-1992. Thereafter, Ms Hughes deposes she met all expenses in relation to the Gatton property.  On the other hand, Mr Merritt deposes that between 1992 and 1997 he

… continued making payments on the [Gatton] Mortgage.  Whenever I was asked by [Ms Hughes] to make contributions to utilities I did so.^[10]

This, Ms Hughes flatly denies.

13. The parties negotiated a financial settlement when their personal relationship ended. Ms Hughes’ account is that:

It took approximately one year before all the outstanding financial issues between the plaintiff and me were resolved.  To the best of my recollection that took place in 1993.  The negotiations for financial settlement were drawn-out and took place in part through solicitors.  I recall that there were several issues which required resolution, including the Wade Street and Gatton properties, as well as leased vehicles and tax matters.

The principal terms of our financial settlement involved the plaintiff buying my share of the Wade Street property (which I believe was then worth approximately $150,000.00), and me keeping the Gatton property (which I believe was then worth approximately $40,000.00).  I do not recall all the details of other aspects of the settlement, other than to say that there was a clean break, and all outstanding matters were resolved at the time.^[11]

14. Mr Merritt deposes^[12] that:

It was agreed between [Ms Hughes] and I that I would acquire the property at Wade Street, Virginia.  She would transfer the property to me, I would take over the then existing Mortgage and I would pay her the sum of $17,500.00 representing her half interest in the then acquired equity in that property.

With respect to the Gatton property Mr Merritt has a different recollection.  He deposes that he did not have capacity to borrow any more money and:

… it was agreed that she would hold the property on behalf of both of us in equal shares and until such time as either one of us had the capacity to pay out the other or it was sold after which time the net proceeds of sale would be divided equally.  In addition, we agreed to attend to payment of all utilities and mortgage payments equally until such time as the divestment of the then current registered proprietorship.^[13]

15. Mr Merritt says that the parties were assisted by his then solicitor, Mr Mark Richards, in recording the terms of their agreement in writing.  Mr Merritt notes that Ms Hughes’ father had been giving her advice and was of the view that the agreement ought to be in writing.  Mr Merritt says that he met with a solicitor in Mr Richards’ firm in January 1993 and gave him instructions about the agreement which was prepared a week or so later.  Mr Merritt recalls that he attended upon Ms Hughes with the agreement at Wade Street where she had arranged for a Justice of the Peace to attend and witness her execution of the agreement.  He deposes that he had already executed his part of the agreement and had it witnessed.  He recalls that there were three signed copies of the document and that Ms Hughes retained one, he retained one and the third was returned to Mr Richards.^[14] 

16. Ms Hughes disagrees that she signed any agreement on 13 January or on any other date.^[15]  She denies that Mr Merritt made any repayments on the Gatton property or that he made any contribution to utilities and that she made no request of him to do so.^[16]  Mr Merritt alleges that he had regularly made enquiries at Metway Bank (the lender to Ms Hughes) as to the status of the loan over the Gatton property and that up to 1997 that information was readily available to him.  In the latter half of 1997 when enquiring about the current state of the mortgage, he was informed that he could have no information about the status of the loan.  He deposes that he contacted Ms Hughes to find out why he had been denied the information, to which she allegedly responded that she wished to borrow against the property.^[17]

17. Ms Hughes denies that she ever authorised Mr Merritt to make enquiries in relation to her mortgage nor did she authorise her lender to respond to any queries.  She denies that she has ever been contacted by the bank about any enquiries by Mr Merritt about the mortgage or any of her affairs.^[18]  Mr Merritt deposes that as a consequence of this refusal of information about the status of the mortgage, he sought legal advice from Mr Richards who recommended that a caveat be placed on the Gatton land.^[19]  It appears that three caveats were lodged over the land, although only two are in the material.

18. As mentioned, on 8 February 1995 Mr Merritt commenced proceedings in the District Court against Ms Hughes seeking specific performance of an agreement “entered into between the parties through their solicitors as their Agents on 14 October 1994”.  While Ms Hughes admits the offer in the defence, it was on terms very different from those alleged by Mr Merritt.  He alleges that the offer was for him to purchase the Gatton property for $15,000 and was open for acceptance up to 27 September 1994.  Ms Hughes alleges that the offer (through her then solicitors) was to sell the Gatton property to the defendant for $15,000 and for him to refinance the existing debt in his own name.  They disagree about the extension of time granted by Ms Hughes to accept the offer.  Ms Hughes alleges that the offer was not accepted within the extended time or at all.

19. On 22 May 1997 Mr Merritt filed a claim and statement of claim initiating these proceedings, alleging breach of oral agreement of November or December 1992, reduced to writing on 13 January 1993.  The pleadings throw no light upon the terms of that agreement, merely alleging that Ms Hughes has refused to perform the agreement about the Gatton property.  No defence has been filed.

20. The caveats, as mentioned, were lodged on 31 January 1997 and 16 October 1997 respectively.

21. Mr Merritt terminated Mark Richards’ retainer in 1999 and his firm has been subsumed by another firm.  Mr Merritt has been unable, after searches including in his former solicitor’s files, to find any copy of the 13 January 1993 agreement and he has not retained a copy.

22. Between 1994 and 2004, Mr Merritt deposes to regular contact with Ms Hughes, some initiated by her, about Mr Merritt purchasing the Gatton property.  This included at least four alleged “agreements” to sell the property and on each occasion at a higher price than the agreement previously.  Ms Hughes says that there was no personal contact during these years save for a short telephone call in 2000 when Mr Merritt congratulated her on her first pregnancy.  In her defence in the District Court proceedings, as mentioned, Ms Hughes does admit to negotiations between the parties’ solicitors for the sale of the Gatton property to Mr Merritt which did not result in an agreement.

23. Mr Merritt deposes that between 2004 and 2006, he returned to studies, had no income and made no contact to attempt to acquire the property. He alleges that Ms Hughes telephoned him to inform that she had sold the property.  This Ms Hughes denies.  Ms Hughes’ solicitors wrote to Mr Merritt twice, in September and October 2008, seeking removal the caveats.  Some unsuccessful negotiations ensued. 

24. Mr Merritt alleges that he entered into negotiations with the Gatton Shire Council “[b]etween the early 1990’s and around 1996”^[20] about fencing an access road and that the Council:

… by way of compromise agreed to allow me to place grids across the road at each end of the property in exchange for which the Council would grant a moratorium of rates for a period of three years regardless of whether the grids were installed.^[21]

Mr Merritt contends that he agreed to this arrangement on Ms Hughes’ behalf and sent the ensuing documentation to her to sign.^[22]

25. Ms Hughes made enquiries of the Council (providing the Council officer with the relevant paragraphs of Mr Merritt’s affidavit).  Mr Derek Sellers, Director Finance & Information Services of the Lockyer Valley Regional Council (formerly the Gatton Shire Council), responded:

I have been unable to locate any correspondence between Gatton Shire Council and yourself or Keith Merritt regarding negotiations concerning fencing or grids on the road at each end of Lot 64 …

Similarly, I have been unable to locate any correspondence relating to a moratorium on rates on the property between 1990 and 1996.  I have never heard of an arrangement where a moratorium on Council rates has applied to rateable land in the region.  In the event that rates where [sic] unpaid by the due date, discount would have been foregone and interest would have applied to the outstanding amount.

Council deals with the owner of the property when discussing and dealing with property rating matters.^[23]

The proposed amended statement of claim

26. Mr Duffy, for Mr Merritt, has prepared an amended statement of claim^[24] should leave to proceed be granted.  In it, Mr Merritt alleges that the Gatton property was acquired for the dual purposes of his beef cattle propagation business and to give Ms Hughes some tax benefit.  Each party was to, and did, contribute $10,000 to the purchase, with the remainder of $30,000 to be borrowed from Metway Bank.  Mr Merritt does not plead, but it may be inferred, supported by the endorsement on the caveats (no longer present) and Ms Hughes’ affidavit, that she borrowed the money and Metway secured the loan by taking a registered mortgage over the land.  Mr Merritt pleads a resulting trust by virtue of his contribution towards the purchase price. 

27. Mr Merritt then pleads that between the purchase of the property and 1992 when the relationship ceased he:

●Bought, with his own funds, approximately 24 beef cattle at a cost of approximately $12,000 and located them on the property;

●Arranged access to an adjoining property to run the cattle; and

●Conducted the farming operation and purchased further cattle to a herd of 40 cows and 3 bulls.

He pleads that he is presently unable to particularise the purchases.  He then pleads that he:

●Worked the property for 10 hours per week undertaking maintenance, etc;

●Conducted the farming operation; and

●Paid mortgage payments to Metway Bank from joint funds held with Ms Hughes.

He pleads that until disclosure, he is unable to further particularise any payments.

28. Mr Merritt then pleads that:

●They both received the benefit of income from sales of cattle; and

●He purchased, from his own funds, any chemicals, tools and equipment for the farming operation.

He pleads that he is presently unable to further particularise any purchases.  Mr Merritt pleads that he undertook improvements and particularises them as building a dam and constructing a road, fencing, etc but is “presently unable to better quantify or particularise the cost to him of carrying out those improvements”.

29. After the relationship ceased in 1992, Mr Merritt pleads that he continued to purchase, from his own funds, any necessities for running the farming operation but is unable to particularise those purchases.  Until about 1997, he alleges that he paid half of the mortgage payments to Metway Bank by making the required payment every second month, with Ms Hughes making the payment in alternate months.  He is unable to particularise this allegation until after disclosure.

30. He pleads a common intention between the parties that Ms Hughes would hold the property on trust for Mr Merritt as to a one half interest and that it would be unconscionable, because of his contribution to the enhancement of the value of the property and by making payments to the mortgage, for him not to be given a one half interest in the property.

Discussion

31. Ms Hughes deposes, in response to Mr Merritt’s allegation that he made various payments and contributions to the properties, that after preliminary searches of her records, due to the passage of time, she has not kept copies of all invoices, payments and receipts which

would be relevant to the matters that … the plaintiff would seek to prove at a trial of this action.^[25]

It may be inferred, consistently with his pleadings, that Mr Merritt has no documentation to support his allegations.

32. Ms Hughes’ principal contention of is that, due to the passage of time and the overall circumstances, a fair trial of the proceedings is no longer possible and that the maintenance of the proceedings thereby is an abuse of process.  Alternatively, she contends that the proceedings should be dismissed for want of prosecution.  Whatever path is taken, the central issue is whether a fair trial may be had and if it is in the interests of justice to return the trial to the list.

33. Although the proceedings concern the Gatton property, in order to give effect to the equitable nature of the claim and to rebut a finding of a resulting trust in favour of Mr Merritt (should he be able to establish his payment of $10,000 towards the deposit), much of the complete financial history of the relationship will need to be traversed.  The Wade Street property was purchased in 1985.  The Gatton property was purchased in 1989.  These are events which occurred more than 20 years ago.  Mr Duffy contended in his written submissions:

Obviously, memories will not be as good as they once were, but these are matters that it is likely each of the parties will remember.

That seems to me to be a very sanguine view of the parties’ memories, with all the fallibility to which research tells us they are prone,^[26] particularly as Mr Merritt appears to have no documents to support his claims and Ms Hughes’ documents are limited.

34. The claim against Ms Hughes as pleaded in the proposed amended statement of claim is a new cause of action to that in the original proceedings commenced on 22 May 1997.  It is not submitted that any limitation period operates against Mr Merritt’s new claim.  Mr Duffy submitted that there would be no utility in refusing leave, that is, effectively bringing these proceedings to an end, because new proceedings could be commenced.  Such a course may face an obstacle if it is found that a fair trial may no longer be had.^[27]  The joint judgment in Batistatos (a case where the operation of the limitation period was suspended during the disability of the plaintiff) observed that to say the limitation period has not “run” is to say no more than “that the potential defendant, if now sued, has no accrued defence to the action”.^[28]

35. Had Ms Hughes not sought to have the caveats removed from the title to her land the proceedings would, in practical terms, have ceased, unless Mr Merritt sought and obtained leave to proceed.^[29]  But the caveats remained as a fetter on her title and if she wished to sell the property or to borrow against it, the caveats needed removing.

Approach to an application for leave to proceed

36. An applicant for leave to proceed must satisfy the court that grounds exist for exercising the discretion in his favour.^[30]  In a sense, the converse is an application to strike out either under r 5 or r 280 of the UCPR or the inherent power of the court to control its processes.^[31]  The well known and helpful list of factors to which a court exercising its discretion under r 389 may have resort enunciated by Atkinson J (with whom McMurdo P and McPherson JA agreed) in Tyler v Custom Credit Limited^[32] need not be set out here because whether a fair trial may be had is the factor which prevails over all others.

37. Mr Duffy contends that because the grounds of the caveat refer to an equitable half interest in the land, Ms Hughes has been on notice since 1997 about the true nature of Mr Merritt’s claim.  As to that, Ms Hughes was entitled to rely on the proceedings commenced by Mr Merritt to support the caveats.  They alleged two agreements but did not make claims in equity.  This is particularly so as Mr Merritt does not dispute the contention that after extended negotiations all financial matters were concluded, and that at best for him, on the pleadings, all that was in dispute were the terms of an agreement to sell Gatton to him.

38. Mr Duffy has submitted that the delay was not all one sided and that Ms Hughes was content to let the caveats lie and while they did, the defendant was protected.  It may be commented that caveats only become a practical concern if borrowing against the security of the land or if selling.  Since the solicitors’ letters in 2008 requesting removal of the caveats bore no fruit, an application to this court would have been necessary and that is an expensive procedure for an individual of ordinary means.  If there was then no need to do so, Ms Hughes cannot be criticised for not doing so.

39. Mr Merritt has proffered no explanation which excuses or explains this delay, apart from two years of inaction after return to study.  He has allowed the years to slip by and, clearly nursing a desire over a long period to own the Gatton property, has done nothing relevant to advance matters.  If he did believe that he had an equitable claim to a half interest on the basis now pleaded, it behoved him to move reasonably promptly to secure his records and to alert Ms Hughes that she needed to do so as well, especially as he now appears to suggest that he gave them all to her.  The caveats were lodged 12 years ago.  From Ms Hughes’ perspective, the rather protracted negotiations to conclude their relationship had brought matters to an end in 1993.  That Mr Merritt wished to purchase Gatton subsequently, as the 1994 solicitors’ correspondence would demonstrate, does not mean that Ms Hughes was in error in concluding that their financial relationship had been resolved.  It merely meant, so far as Ms Hughes was concerned, that Mr Merritt wished to purchase the Gatton property from her as a fresh transaction.

40. The observations of Mc Pherson JA in Cooper v Hopgood & Ganim^[33] are apt, particularly when two people have brought a personal relationship to an end many years previously – in this case 18 years ago – and have led separate lives since.  His Honour mentioned the factors which were relevant to exercising the discretion to dismiss proceedings for want of prosecution including:

… the progressively growing problem of effectively hearing and determining questions of fact arising out of events that have taken place many years before.

He concluded:

This list is not, and is not intended to be, exhaustive; and it takes no account of another factor that is often likely to be material, which is that ordinary members of the community are entitled to get on with their lives and plan their affairs without having the continuing threat of litigation and its consequences hanging over them.  The psychological as well as the commercial affects of such a state of affairs ought not to be underestimated.^[34]

41. To those observations should be added the philosophy of the UCPR, particularly r 5 - rules which guide the management of the court’s business for the benefit of litigants who use its services - which requires a party to undertake to the court and the other parties “to proceed in an expeditious way”.  The change in emphasis articulated in the UCPR from attitudes in the past is affirmed in cases such as Batistatos, departing from the Birkett v James^[35] approach, and Aon Risk Services Australia Limited v Australian National University.^[36]

42. In Batistatos, Callinan J (dissenting with Kirby and Heydon JJ, each in separate reasons) observed:^[37]

In an adversarial system under the most ideal of circumstances so far as time limits are concerned, a court is often obliged to make decisions on incomplete facts.  Parties are not bound to bring to the attention of the courts facts which are detrimental to their cases.  Sometimes, by reason of the absence, or sudden death of a witness or a witness’ departure, or for any number of other reasons, key facts cannot be established.  The courts have to do the best they can on the material before them, and, in so doing, may make allowances for the circumstances in which each of the parties finds himself or herself.  As Gleeson CJ, Gummow and Callinan JJ said in Vetter v Lake Macquarie City Council a case in which there was a paucity of relevant material:

As long ago as 1774 Lord Mansfield said that all evidence is to be weighted according to the proof which it is in the power of one side to have produced and the power of the other to have contradicted.

43. That observation may be applicable where there has been no undue delay attributable to one party rather than another and justice requires the matter proceed. That is not this case. Mr Merritt deliberately chose not to proceed with his claims so that the deficits in the evidence to which I have referred have occurred.  It is not a case of the court doing the best it can with the available evidence. 

Conclusion

44. When regard is had to the long delay from the date of the settlement of the matters between the parties, the commencement of two inconsistent proceedings against Ms Hughes well over a decade ago, the desire now to bring proceedings in support of a different cause of action requiring a significantly greater range of documents and a detailed recollection of events long past, the failure of Mr Merritt to produce any supporting documents for his claim, and Ms Hughes’ sworn poor recollection of relevant details or retention of documents, the conclusion must be, that as presently informed, a fair trial of this matter would not be likely to be achieved.  It would not be just to require Ms Hughes to defend these proceedings so long after the relevant events.

45. I have not dealt with the strength of Mr Merritt’s case. The authorities discourage close scrutiny, particularly where little of the evidence apart from assertion is before the court. But what evidence there is, is not particularly encouraging for Mr Merritt.  One matter on which some third party evidence was sought by Ms Hughes relating to the arrangements with the then Gatton Shire Council produced an answer not consistent with Mr Merritt’s contentions.

46. The conclusion on the application for leave to proceed is that that application be refused.

47. For the reasons set out above, the application to strike out the proceedings should be granted on the ground of want of prosecution.

48. Unless there are submissions to the contrary, the plaintiffs should pay the defendant’s costs of, and incidental to, both applications, to be assessed on the standard basis.