Chupungco v Henderson [2011] QDC 156

1-1 [2011] QDC 156 DISTRICT COURT CIVIL JURISDICTION JUDGE ROBIN No 2248 of 2011 CESAR JAVIER CHUPUNGCO And ANOR Applicant and REGINALD JOHN HENDERSON And ANOR Respondent BRISBANE ..DATE 14/07/2011 ORDER CATCHWORDS Property Law Act 1974, s 38 declarations made that property acquired in respondents' name with borrowed funds provided by applicants who put their own home up as security held on constructive trust to extent necessary to discharge the mortgage - application adjourned for making of order for appointment of trustee for sale of the property if necessary -- 1 of 6 -- 1-2 ORDER 1 10 20 30 40 50 60 HIS HONOUR: This is an unusual matter, which arises in consequence of things going wrong in the formerly happy relationship between the applicants and the respondents. In 2004 the relationship was such that the applicants agreed to, perhaps offered to mortgage their own house for the purpose of borrowing an amount of $200,000 to be used so that the respondents could purchase another house. The lender was Perpetual Trustees Victoria Ltd, which has a registered mortgage over the applicants' property. As Mr Henderson, who gave evidence, tells it, he was not particularly interested in becoming a house owner as opposed to a renter and felt under some pressure to go along with the applicants' enthusiasm that he become a home owner. Arrangements made through a finance broker or similar person were all verbal. According to Mr Henderson, the applicants were advised to seek legal advice, get things in writing, et cetera, but preferred to leave matters on the basis of trust. Their conveyancing was apparently done in-house by the broker. According to the applicants, it was a matter of surprise when the next property was registered in the respondents' name. So far as funding the purchase is concerned, everything with Perpetual was in the applicants’ name. Things went well for some years until around August last year. Mr Henderson suffered reverses, including the loss of his employment. -- 2 of 6 -- 1-3 ORDER 1 10 20 30 40 50 60 He was unable to keep up the accustomed schedule of payments of $800 a fortnight to Perpetual. Instalments were reduced to $650 a fortnight but he hasn't been able to meet that, and since some time towards the end of last year, the applicants have been paying with a view to ensuring that Perpetual doesn't seek to enforce its security against their home. It seems that some $14,300 has been paid by them. The property presently in the respondents' name, has been mortgaged by them to the Commonwealth Bank. The understanding of Mr Byrne, representing the applicants, was that some $30,000 was secured in that way. Mr Henderson's evidence is that the sum is more likely at $300,000, which will be getting close to the value of the property. It appears to be the common understanding that the value has increased over the years, although the market just at the moment may not be particularly favourable. The principal relief sought by the applicants is a declaration that the property is held on constructive trust for them. It's not a situation of a spouse or child or anything similar to take the case out of the ordinary rule that in circumstances such as the present, a property acquired belongs to those who contribute towards its purchase price in appropriate proportions. Those may have varied in favour of the respondents from the outset, given the extent of mortgage repayments they've made. The applicants are not interested in securing for themselves -- 3 of 6 -- 1-4 ORDER 1 10 20 30 40 50 60 the benefit of any increase in value of the property over the years. What they do want is to be spared the risk of adverse financial consequences to themselves arising from the mortgage they've granted over their own house. I'm satisfied that a declaration ought to be made that the property in the respondents' name is held on a constructive trust for the applicants to the extent needed to produce a fund sufficient to discharge the registered mortgage dealing number 708263421 and reimburse the applicants for amounts paid to the mortgagee, Perpetual Trustees Victoria Ltd, and there'll be declaration to that effect. There's also to be an injunction restraining the respondents from selling or further encumbering or dealing with the property or parting with possession of it other than for the benefit of the applicants. The Court declines to make an injunction requiring the respondents to make repayments to Perpetual. On the evidence before the Court, they have no ability to do that. Indeed, according to Mr Henderson, if a relatively modest amount or a couple of thousand dollars isn't paid within 10 days, the Commonwealth Bank will begin processes to sell the property. Declarations are made that in the event a sale of the property is ordered by the Court or is agreed by the parties, the proceeds ought to be applied in a particular order consistent -- 4 of 6 -- 1-5 ORDER 1 10 20 30 40 50 60 with the declarations above. Necessarily, first priority goes to the Commonwealth Bank. It has been advised of today's application and informed the applicants’ solicitors that it has no objection to orders sought in the application being made, subject to insertion of the word "reasonable" twice in respect of costs of sale - that thought ought to be done, shouldn't it, Mr Byrne? ... HIS HONOUR: I'm adding the words "and reasonable". I don't know why they were wanting reasonable if they had usual, but we might as well indulge them. The application is adjourned to the 8th of August 2011 for convenience, since that is a day in the next week when I'm the applications judge, for the purpose of the Court making an order for sale of the property under section 38 of the Property Law Act 1974, should it not have been sold in the meantime. The Court's pleased to receive the respondents’ undertaking to permit the applicants to list the property with an agent or agents for the purpose of selling it. Mr Henderson's understanding is that it wouldn't be possible to interest any real estate agent in the property at the moment without money upfront. If that be the case, then the applicants may well consider it in their interests to facilitate a sale. Popular wisdom is -- 5 of 6 -- 1-6 ORDER 1 10 20 30 40 50 60 that a better price might be obtained by a sale brought about by the parties on one side or the other then in a forced sale by a mortgagee. Liberty to apply is granted and costs are reserved. It's anticipated that if anything is to occur on the 8th of August 2011, Mr Byrne will come armed with an appropriate consent from a trustee for section 38 purposes. ----- -- 6 of 6 --