Bonaventura v Bonaventura & Anor [2005] QSC 270

SUPREME COURT OF QUEENSLAND CITATION: Bonaventura v Bonaventura & Anor [2005] QSC 270 PARTIES: LINDA SUSAN BONAVENTURA (plaintiff) v JOHN BONAVENTURA (first defendant) ETHEL HELEN BONAVENTURA (second defendant) FILE NO: Mackay S173 of 2001 DIVISION: Trial Division DELIVERED ON: 30 September 2005 DELIVERED AT: Brisbane HEARING DATE: 19-20 April 2005 JUDGE: Mullins J ORDER: The proceeding is dismissed. CATCHWORDS: EQUITY – TRUSTS AND TRUSTEES – CONSTITUTION AND CLASSIFICATION OF TRUSTS GENERALLY – CLASSIFICATION OF TRUSTS IN GENERAL – IMPLIED TRUSTS – CONSTRUCTIVE TRUSTS INDEPENDENT OF INTENTION – GENERAL PRINCIPLES – where the husband had title to the property on which matrimonial home was constructed before the marriage – where the wife and the husband moved into the house with their children after 7 years of marriage – where husband’s parents had lent him significant sums to purchase the property and construct the home - where the husband transferred the title of the property to his parents contemporaneously with their paying off the bank loan secured on that property – where the wife was unaware of the transfer of title – whether a constructive trust should be imposed on part of the property in favour of the wife SUCCESSION – WILLS, PROBATE AND ADMINSTRATION – TESTAMENTARY INSTRUMENTS – CONTRACTS TO LEAVE PROPERTY BY WILL – where the wife seeks a declaration that there was an oral testamentary contract made between the husband and his parents for the purpose of defeating the wife’s alleged interest in the property on which the matrimonial home was erected – where the husband and his mother denied the existence of such a contract – whether there was sufficient evidence to -- 1 of 18 -- 2 prove the existence of such a contract Family Law Act 1975 (Cth) Baumgartner v Baumgartner (1987) 164 CLR 137 Giumelli v Giumelli (1999) 196 CLR 101 Green v Green (1989) 17 NSWLR 343 Jennings v Jennings (1997) FLC 92-773 Muschinski v Dodds (1985) 160 CLR 583 Parsons v McBain (2001) 109 FCR 120 COUNSEL: S G Durward SC and D Honchin for the plaintiff D V C McMeekin SC for the defendants SOLICITORS: Taylors Solicitors for the plaintiff Macrossan & Amiet for the defendants [1] MULLINS J: The plaintiff seeks declarations in the following terms in respect of the property that was referred to in the pleadings and throughout the trial as “the Homebush property”: (a) that the second defendant acquired the Homebush property from the first defendant with knowledge of the plaintiff’s interest in the Homebush property and subject to that interest; (b) that the second defendant holds the Homebush property, or a part of it, as constructive trustee for the plaintiff; and (c) that the first defendant’s interest in the Homebush property is subject to a constructive trust in favour of the plaintiff. Background facts [2] The first defendant purchased the Homebush property in 1974 for the sum of $14,500. The real property description of the Homebush property is Lot 1 on RP 726312 County of Carlilse Parish of Chelona and Eton. In order to assist with this purchase, the first defendant’s parents provided the sum of $4,000. The first defendant’s father was a fisherman and the second defendant ran a fish shop. The first defendant borrowed $7,000 from the National Bank of Australasia Limited. The balance of the purchase price came from the first defendant’s savings. In 1976 the first defendant’s parents provided a further sum of $3,000 to pay out the mortgage debt to the bank, as the first defendant wished to travel overseas. Whilst overseas, the first defendant’s parents paid the rates on the Homebush property and they were not reimbursed by the first defendant. [3] The first defendant and the plaintiff met in England in 1977. Later that year the plaintiff came to Australia. The plaintiff and the first defendant married in 1978. They had two children born in 1980 and 1982. After they were married they lived in rented accommodation at Moranbah, as the first defendant worked at the mine. The plaintiff had been told by the first defendant before they were married that he owned the Homebush property. [4] When the plaintiff and the first defendant lived at Moranbah they would visit the Homebush property occasionally on weekends to check on the horses that were there, check the fences and clear some of the bush. The rate notices for the Homebush property continued to be sent to the first defendant’s parents’ address. -- 2 of 18 -- 3 The first defendant and the plaintiff would give the first defendant’s parents money for the rates, when they were requested to do so and had the money to pay the rates. The second defendant said that she and her husband were “sometimes” reimbursed for the rates they paid. [5] In 1983 the plaintiff and the first defendant commenced to organise the construction of a house on the Homebush property. The first defendant’s brother, Phillip Bonaventura, is a builder. He obtained plans of houses from which the plaintiff and the first defendant chose the design of their home. Mr Phillip Bonaventura quoted for the construction of the house (exhibit 1) and during 1984 and early 1985 built the house in accordance with the plans (exhibit 2) with some modifications that were made at the request of both the plaintiff and the first defendant. The plaintiff selected the tiles and floor coverings and the colour scheme for the house. [6] In late November 1984 the first defendant borrowed $35,000 from National Australia Bank Ltd (“NAB”) for the purpose of constructing the house on the Homebush property. The first defendant estimated that the repayments were about $100 per week. The parents of the first defendant provided him with the sum of $10,000 that he could use for constructing the house and to enable him to procure the loan from NAB. The plaintiff had no involvement in obtaining this loan and did not know what the repayments were under the mortgage. The plaintiff and the first defendant had little or no savings that they could use for the construction of the house. The first defendant earned a relatively good income at the mine with his take home pay being between $450 and $500 net per week. The plaintiff and the first defendant did not manage to save from that income, but they had no debts. I therefore accept as accurate the first defendant’s description of this time that “We lived a pretty fairly good life”. At the first defendant’s parents’ request, Mr Phillip Bonaventura agreed to construct the house at cost on the basis that his wages and that of his worker were paid. Mr Phillip Bonaventura and his worker were paid a total of about $5,000 by the first defendant’s parents. Mr Phillip Bonaventura estimated that the cost of constructing the house, including the wages, was around $48,000 or $50,000. The first defendant’s parents also spent $1,500 in purchasing a water pump and motor and paying for the provision of power and water to the house on the Homebush property. I find that the first defendant’s parents’ financial assistance was essential to enable the construction of the house on the Homebush property to proceed. [7] The plaintiff and the first defendant and their children moved into the house on the Homebush property as their family home in early 1985. For at least the first six months they resided there, the first defendant continued to work at the mine during the week and returned to the Homebush property on the weekends. It took two hours for the first defendant to drive between Moranbah and the Homebush property. The first defendant had a period of about three months on worker’s compensation when he was suffering tendonitis. [8] The first defendant had always had horses on the Homebush property. The plaintiff and the first defendant kept horses on the property throughout their marriage. The plaintiff had a horse to ride and the first defendant trained racehorses. The first defendant was keen on pig shooting and kept dogs that were described as “pig dogs” for pig shooting. The plaintiff had a couple of German shepherds. -- 3 of 18 -- 4 [9] After the first defendant resigned his mine job in 1986, he was self-employed as a welder, did casual work at an abattoir and at other times worked for an engineering business. The second defendant provided the funds for the purchase of the welding equipment that the first defendant used in the welding business which he undertook with another person. That equipment cost $6,000. When the first defendant fell out with his work partner, he bought the partner’s equipment for $6,000 with funds that were provided by the second defendant. The second defendant described these payments as being made by her to purchase the equipment, whereas the first defendant described them as loans. [10] It was common ground that, when the first defendant left the mine, the financial position of the plaintiff and the first defendant was not as secure as it was when the first defendant was working at the mine. [11] The plaintiff described her relationship with the first defendant as “volatile from the beginning”. She stated that as the first defendant “bullied” her, when she expressed opinions with which he did not agree, she then did not bother to express her opinions. She stated that there were a lot of arguments, some of which would “get violent” and referred to the first defendant having a bad temper. The plaintiff stated that she did not therefore pursue matters which she thought might upset the first defendant. Although the plaintiff gave evidence of subsequent difficulties in the relationship that occurred in 1997, it was implicit in the evidence that she gave about the early years of the marriage that it was a stable and continuing relationship. That was consistent with the first defendant’s evidence that his view of the state of the marriage at the time that they moved to the Homebush property was that it was “fine”. There is no suggestion in the evidence that there were outward signs of troubles in the marriage of the plaintiff and the first defendant at that stage. [12] On 2 September 1985 the first defendant signed a memorandum of transfer of the Homebush property in favour of his parents. The consideration was shown as the sum of $35,000, but the stamping notation on the transfer dated 9 September 1985 shows that it was stamped on the basis of a valuation of $77,400. [13] In connection with the transfer, Mr Bruce Gibson, who was the accountant for the second defendant and her husband prepared a letter to reflect what he understood the arrangements were between the first defendant and his parents in relation to that transfer. That letter (exhibit 5) was dated 16 October 1985 and was addressed by the first defendant to his parents in the following terms: “This letter will confirm discussions that have taken place between the three of us in recent times in relation to the property purchased by me in June, 1974. You will recall that the property at Homebush described as Lot 1, Registered Plan 26312, Volume 912, Folio 116, County Carlisle, Parish Eton, Containing area 4.049 perches, was purchased with assistance by a loan from yourselves. Earlier this year, a house was erected hereon by brother Phillip with assistance from yourselves and a bank loan obtained for the sum of $35000 to meet the cost. As the house was erected by members of the family, we saved approximately $10000 in costs and for this assistance I am most grateful. I further recall with much appreciation that whilst I was overseas, you acted as caretakers and paid numerous expenses that were incurred during this -- 4 of 18 -- 5 period. These expenses were of a varied nature and during the period would have totalled a considerable number of dollars. Recently, due to my financial situation, you agreed to re-purchase the property from me for $77500 in accordance with the valuation and contract documents. This was necessary because of my financial situation and being unable to meet my bank commitments. In consideration of the purchase money, you took over my debts amounting to $35606 and I now consider that in view of all circumstances, that no money is owing between us as a result of these transactions. I would acknowledge that you are allowing me to continue to reside in my home and maintain my property and that a rental of $50/week will be payable. In addition to rental, I undertake to pay all rates, insurance and repairs to maintain the property in good order and condition. This letter has been written to not only record history in relation to this property but also to allow you to acknowledge that the contents are correct and that the arrangements set out herein are acceptable.” There was a typed acknowledgement at the foot of the letter that amounted to a confirmation by the second defendant and her husband that they confirmed the facts contained in the letter and were agreeable to the arrangements. That acknowledgement was signed by the second defendant. It was not signed by the second defendant’s husband. He did not read or write. [14] The transfer was lodged for registration on 17 October 1985 and was registered. It was accompanied by a statutory declaration made by the first defendant that stated: “The transfer is not intended to operate as security for any obligation whether existing or to be created and the consideration expressed in the Memorandum of Transfer is the true and sole consideration for the transfer.” [15] After the transfer had been registered, the rate notices continued to be sent to the address of the first defendant’s parents, but they were the addressees. The same arrangement for payment of the rates that had applied prior to the transfer continued. The second defendant would advise the plaintiff or the first defendant of the amount required to pay the rates and the second defendant and her husband would pay the rates, if the plaintiff and the first defendant had not provided them with the money to do so. The second defendant said that the first defendant and the plaintiff paid the rates “sometimes”, but the second defendant was unable to specify how often. The rate notice for the half year ended 30 June 1997 was tendered (exhibit 7). The plaintiff had noted the cheque number and the amount that was paid in respect of that rate notice on the rate notice. The plaintiff had recorded that an amount of $67.20 was deducted for garbage, as the first defendant objected to paying for a garbage service that was not provided. The plaintiff was cross- examined about the fact that the rate notice showed the second defendant and her husband as the owners of the Homebush property. I accept the plaintiff’s evidence that she had no experience of what rate notices showed and, as the rate notices for the Homebush property had always been sent to the first defendant’s parents, she did not appreciate the significance of the rate notice being addressed to them. -- 5 of 18 -- 6 [16] The plaintiff produced the invoices for the building and contents insurance for the Homebush property for the period of 12 months commencing 12 October 1994 (exhibit 6). She had noted in her handwriting on each invoice that they had been paid on 30 November 1994 and written a cheque number which the plaintiff said was from her account. The invoices were addressed to the first defendant. The plaintiff stated that this insurance was effected through the same insurance broker that was used by the second defendant and that on some occasions the second defendant would pay insurance in respect of the Homebush property and the plaintiff would reimburse the second defendant with cash. [17] The first defendant and his father built stables and dog-runs on the Homebush property. The first defendant’s parents paid for the timber used for the main bearers and the iron for the roof of the stables. That is estimated by the defendants to have costs about $3,000. The first defendant borrowed about $2,000 from the bank to buy a pre-fabricated shed for the Homebush property that had to be dismantled where it was sited and put up on the Homebush property. Before that was done, the first defendant’s parents paid for the concrete pad for the shed which was approximately $3,000. The first defendant and his father then erected the shed. Mr Phillip Bonaventura built a carport onto the side of the house for cost which he estimated was about $5,000. His parents paid for that. The second defendant estimated the cost of the carport was $6,000 or thereabouts. There was a problem with the water supply to the Homebush property and the first defendant organised for a bore to be installed. The first defendant’s parents paid for the motor for that bore and that was estimated by the second defendant to cost $2,500. [18] The plaintiff earned commission from selling Tupperware from the time the younger child was at pre-school for about 2 years. The plaintiff started part-time work as an office manager in an engineering firm in 1988 when the children were both at school. The plaintiff had borrowed money from the second defendant to buy a second hand Toyota Hilux which she repaid from her wages over 12 months. After working part-time for somewhere between 12 and 18 months, the plaintiff started working full time for the same engineering firm. [19] At some stage the plaintiff and the first defendant opened a joint account. Neither party could precisely recall when this occurred. Cheque butts were disclosed by the plaintiff for the purpose of the proceeding with purport to be from a joint account. They cover the period from June 1990 to June 1995. The plaintiff also had a cheque account in her name and some of the cheque butts for that account were also disclosed. Both the plaintiff and the first defendant contributed to the joint account. It does not appear that either paid all his or her income into the joint account. In the main the plaintiff met the expenses of sending the children of the marriage to private schools, as the first defendant did not support that decision. The plaintiff used some of her funds for purchasing items of furniture for the house. The plaintiff put money aside for her overseas trips which commenced in 1995. The first defendant incurred significant expenses in respect of his horses and dogs. [20] In 1993 the first defendant organised for a cottage to be constructed on the Homebush property for a friend who was ill. The friend met the construction costs. When the friend died, he left funds to the first defendant and the two children of the first defendant and the plaintiff. Most of those funds were invested in buying a property referred to as Colston Park in the name of the first defendant and the two children. -- 6 of 18 -- 7 [21] The plaintiff commenced working for an orthodontist in May 1995. In 1995 the plaintiff travelled to England with her children to visit her family who still lived in England. The plaintiff stayed for three months. The plaintiff paid for her trip from what she had saved from working. The fares for the children were paid from the proceeds of life insurance policies that had been taken out by the first defendant on their lives when they were born. The first defendant claims that the proceeds were $10,000 and all of that went to the plaintiff for this trip. The plaintiff disputes that the proceeds were $10,000. [22] Neither the plaintiff nor the defendant adduced any precise evidence of the income each earned during the course of their relationship. What is clear is that the first defendant was the sole income earner from the commencement of the marriage until around 1986 when the plaintiff commenced earning commission from Tupperware sales. The plaintiff did not suggest that was a particularly remunerative enterprise. It is an admitted fact on the pleadings that the plaintiff’s engagement in part-time work commenced in 1988. After the first defendant left the mine, except for the period when the first defendant worked at the engineering firm for two to three years, the first defendant’s work was either on his own account or casual, but there was no suggestion that it was not consistent. During the marriage the plaintiff was the person who looked after the household chores and was the primary carer of the children. The plaintiff could not recall how much each of the plaintiff and the first defendant contributed to the joint account. The plaintiff stated in evidence that she put most of the money into the joint account. In light of the evidence of their respective work histories and expenditures, I am not satisfied that the plaintiff is able to show that she contributed most of the funds to the joint account over the period of its operation. [23] The first defendant’s father died on 17 April 1997. [24] The second defendant made a new will on 8 May 1997 in which she devised the Homebush property to the first defendant and divided the rest of her property equally between the first defendant and his brother. [25] The plaintiff stated that she did not become aware of the transfer of the Homebush property to her parents-in-law until the first defendant told her about it on 31 August 1997 at a time when they were having difficulties in their marriage. Those difficulties continued thereafter. Both the plaintiff and the first defendant stated that the first defendant closed the joint account at the time of their dispute in August 1997. [26] In December 1999 the plaintiff went to England for an extended stay. She returned to Australia and the Homebush property for 3 weeks in about September 2000. The plaintiff then returned to England. Her next trip to Australia was in June 2001. She stayed at the Homebush property. During this stay the first defendant caused the plaintiff to be served with an application for dissolution of the marriage. The second defendant by her solicitors’ letter dated 4 July 2001 gave notice to the plaintiff that any permission that the plaintiff had to occupy and/or enter onto the Homebush property was withdrawn and required the plaintiff to vacate the property. The plaintiff left the property after having been in occupation on this occasion for about six weeks. -- 7 of 18 -- 8 [27] The second defendant made a new will on 27 July 2001. Under this will she bequeathed the whole of her estate equally to the first defendant and his brother. In cross-examination the second defendant was unable to explain why she changed her will in 2001. [28] This proceeding was commenced by the plaintiff on 16 October 2001. The plaintiff and the first defendant are also parties to a property settlement proceeding in the Family Court which remained unresolved at the hearing of this proceeding. Valuation evidence [29] The plaintiff obtained valuation reports from valuer Mr Justin Smith of J Dodds & Associates. The defendants obtained reports from valuer Mr Jeff Wickins of Herron Todd White. Both valuers valued the Homebush property at various dates. [30] Mr Smith’s valuation of the Homebush property around the time of the transfer to the first defendant’s parents was $90,000 apportioned as to $28,000 to land and $62,000 to improvements. Mr Smith had included improvements that were constructed after that time. The value apportioned to those improvements was $11,750. That reduced Mr Smith’s valuation to $78,250. Mr Wickens’ valuation of the Homebush property as at 2 September 1985 was $77,500 apportioned as to $25,000 to the land and $52,500 to the value of improvements. The valuation obtained by the defendants for the purpose of the stamping of the transfer of $77,400 at the time of the transfer therefore was a reflection of actual value at the time. [31] Mr Smith’s assessment of value of the Homebush property as at 22 March 2005 was $305,000 apportioned as to $140,000 to land and $165,000 to improvements. There was therefore no significant difference with Mr Wickens’ valuation as at 13 April 2005 which was $285,000 apportioned as to $140,000 to land and $145,000 to improvements. Issues [32] The final version of the statement of claim for the proceeding was that for which leave to file was given on 20 April 2005. Paragraphs 10, 12 and 13 of the statement of claim allege: “10. On or about 2nd September 1985 the First Defendant, without the knowledge or consent of the Plaintiff, transferred or caused to be transferred to the Second Defendant and Sebastian Bonaventura jointly (the Second Defendant’s husband at the time of the transfer) the Homebush property. The Second Defendant knew or ought to have known that at all material times the Plaintiff had an interest in the said property. … 12. The First Defendant presently holds, and has previously held, an interest in the Homebush property as a result of the making of the Will of the Second Defendant and previously as a result of the making of the Will of the Second Defendant’s deceased husband consequently by which the First Defendant will be entitled to the Homebush property upon the death of the Second Defendant. The making of the Will as pleaded was as -- 8 of 18 -- 9 a consequence of an agreement or understanding between the First Defendant and the Second Defendant and her late husband that the Homebush property be devised back to the First Defendant by the Second Defendant and her late husband. The actions of the First Defendant and the Second Defendant in transferring the Homebush property to the Second Defendant and the Second Defendant’s late husband in the premises without the consent of the Plaintiff had as an object the defeat of the Plaintiff’s interest in the Homebush property. PARTICULARS OF AGREEMENT OR UNDERSTANDING (a) To the extent the agreement was oral it was made between the First Defendant and the Second Defendant and the Second Defendant’s late husband, at or about the time of the transfer of the Homebush Property to the Second Defendant and Sebastian Bonaventura jointly; (b) The Plaintiff does not know the words used to make the agreement as she was not present, but the effect of them was that irrespective of any other consideration the First Defendant would transfer his interest in the Homebush Property to the Second Defendant and Sebastian Bonaventura jointly, in return for a promise for the Second Defendant and Sebastian Bonaventura, to devise the Homebush Property back to the First Defendant upon their deaths. (c) In pursuance of his obligations under the agreement, the First Defendant transferred his interest to the Second Defendant and Sebastian Bonaventura jointly on about 2nd September 1985. 13. In all the circumstances it is unconscionable for the Second Defendant to take and have an interest in the Homebush property to the exclusion of the interests of the Plaintiff. In all the circumstances it is unconscionable for the First Defendant to have or expect to have an interest in the Homebush property to the exclusion of the interests of the Plaintiff. PARTICULARS OF UNCONSCIONABILITY ( a) The transfer of the property without notice to, or the knowledge of the Plaintiff; (b) The First Defendant’s acceptance and enjoyment of the contributions to the property and the family unit by the Plaintiff during the marriage; (c) The denial by the First and Second Defendants of an interest the Plaintiff would have been entitled to in a Family Law Act 1975 matrimonial property proceeding, namely: (i) Direct financial contribution from income earned by the Plaintiff through pooling of financial resources -- 9 of 18 -- 10 with the First Defendant or by way of direct payments; (ii) Indirect contribution in the form of the Plaintiff’s care, devotion and services as homemaker.” [33] The statement of claim therefore raises two issues. The first issue is whether the second defendant’s title to the Homebush property is subject to a constructive trust in favour of the plaintiff. The matters that are raised in connection with this issue are: (a) whether the second defendant knew or ought to have known at the date of the transfer of the Homebush property to the second defendant and her husband that the plaintiff had an interest in the Homebush property; (b) whether it was unconscionable for the second defendant and her husband to accept the transfer of the Homebush property without notice to, or the knowledge of, the plaintiff of the transfer; (c) whether the transfer was unconscionable as amounting to a denial by the first and second defendants of an interest in the Homebush property that the plaintiff would have been entitled to under the Family Law Act 1975 (Cth) (“FLA”) in a matrimonial property proceeding relying on direct financial contribution from income earned by the plaintiff through pooling of financial resources with the first defendant or by way of direct payments and indirect contribution in the form of the plaintiff’s care, devotion and services as homemaker; (d) whether the sum of $35,606.45 paid by the second defendant and her husband to discharge the debt to the NAB was a gift to the first defendant or to the plaintiff and the first defendant. [34] The second issue raised by the plaintiff is whether the transfer of the Homebush property was made pursuant to an agreement or understanding between the first defendant and his parents whereby the first defendant transferred the Homebush property to them in return for a promise that they would devise the Homebush property to him upon their deaths. The particular of unconscionability set out in subparagraph (b) of paragraph 13 of the statement of claim, namely the first defendant’s acceptance and enjoyment of the contributions to the Homebush property and the family unit by the plaintiff during the marriage, must relate to this issue, as this particular is relevant only to a claim of unconscionability against the first defendant. The allegation in the second sentence of paragraph 13 of the statement of claim appears to follow from the allegation made in paragraph 12 of the statement of claim. Evidence relating to the transfer of the Homebush property [35] Although the plaintiff could not recall when the loan to the NAB obtained to construct the house on the Homebush property was paid out, the plaintiff did state that she knew at the time the loan was paid out because she said that the second defendant and her husband told her that they were paying it out and that the first defendant also told her that his parents were paying out the mortgage. The plaintiff related the occurrence of these conversations to the timing of the receipt by the first defendant’s father of his inheritance from his father’s estate. The first defendant’s grandfather, Mr Giovanni Bonaventura, died on 19 June 1984. When the plaintiff was asked whether the word “gift” was used by the first or second defendants in these conversations, the plaintiff stated that it was and said of the second defendant: -- 10 of 18 -- 11 “She also told me that she was going to give the exact same amount of cash to his brother and, in her words, ‘you can’t give one without the other’.” The plaintiff also stated that she did not know at the time what amount was paid by the second defendant and her husband to pay out the loan. [36] The first defendant stated that he did not discuss with the plaintiff the transfer of the Homebush property to his parents at any time. [37] The first defendant stated that when he was deciding to end working at the mine and to set up his own business, he was concerned about the debt to the bank, the debt to his parents and that he had to support the plaintiff and the children. He stated that the interest rates were high and that he wanted to “get rid of the bank loan” because he was concerned that he would not be able to make the payments. He stated that he considered selling the Homebush property at that time. The first defendant stated that he discussed his concern with his parents and that he was considering selling the Homebush property and that they said “Well we will pay it out but we want to hold the property”. The first defendant stated that there was no discussion or any agreement with his parents that they would make wills and leave the Homebush property in any particular way in their wills. The first defendant stated that his mother said that he and his family could continue to live in the home and that the letter prepared by the accountant Mr Gibson reflected the discussions he had with his parents. When cross-examined, the first defendant conceded that he was not certain that the matters referred to in that letter had been referred to in discussions with his parents before the transfer of the Homebush property was signed by him. [38] When the second defendant was giving evidence in chief, she said that she could not remember what had been said at the time she had a discussion with the first defendant about paying out the money that the first defendant owed to the NAB. The second defendant could recall that when the first defendant told her that he wanted more money, she said to him “No. No more. Enough is enough. No more. I had enough”. The second defendant then stated that she thought “John said he was going to sell it at that time” and that she responded “Well if you were going to sell it, we will buy it. We will purchase it”. The second defendant stated that by that time she and her husband had an inheritance that was in a savings investment account with the NAB. The passbook was in evidence (exhibit 35) and it showed that on 18 September 1985 the sum of $35,606.45 was withdrawn from that account. The second defendant and her husband did not make a similar payment to Mr Phillip Bonaventura. The second defendant was adamant when she stated in cross-examination that, when it came to her sons, she would loan and did not give money to them. The second defendant stated that no discussions took place with the first defendant at the time of the transfer of the Homebush property to the second defendant and her husband about the Homebush property being left to him under their wills. The second defendant confirmed that she did not at any time ever disclose to the plaintiff that the Homebush property had been transferred to her husband and herself. When the second defendant was asked whether she inquired of the first defendant whether he had told the plaintiff about the transfer, she responded “I never interfered in that marriage in my life”. The following exchange took place in cross-examination: “Did you think when the loan was sold – the property was sold to you, that that was something that Linda should know about it?-- -- 11 of 18 -- 12 Their marriage, not mine. They’re husband and wife, not mine. If my husband went and bought a fishing boat and didn’t tell me, too bad, how sad. I see?-- I got on with life. Did it – did you think in your mind – I’ll rephrase that. When the land was transferred to you, did you consider that – give any consideration to what Linda might have thought about it?-- None of my business.” [39] The second defendant stated that she told the first defendant that he and his family could continue to live at the Homebush property, but they would have to pay the rates and the insurance and maintain the home. She also said that she asked for rent of $50 per week. No rent was ever paid by the first defendant. The situation with the rates continued, as it had previously, in that the second defendant and her husband would request money from the first defendant and the plaintiff for rates and if they did not provide the money, the second defendant and her husband would pay the rates themselves. The second defendant has not maintained records of when the first defendant and the plaintiff provided the funds for payment of the rates. [40] The wills of the second defendant and her husband that were current at the time of the transfer to them of the Homebush property were wills made in 1970. Under those wills each gave his or her whole estate to the other, but if the other did not survive, it was left equally between the children. Credit [41] Counsel for the plaintiff submitted that the plaintiff was “a consistently frank, impressive and believable witness” and that the first and second defendants were unreliable witnesses. Counsel for the defendant submitted that the plaintiff endeavoured to paint herself in the best light possible and that where there was disputed fact the evidence of the first and second defendants should be preferred to that of the plaintiff. [42] This is not the sort of case where either the plaintiff or the first defendant can generally be described as more credible than the other. Each of them was affected by the difficulty in accurately recalling events and transactions that occurred over a period of over 25 years, particularly when many of the conversations and day to day activities would not have been significant at the time they took place. It was not surprising that there were inconsistencies in the evidence between witnesses and that on occasion the evidence of a witness was otherwise shown to be inaccurate. Apart from the fact that recollections were affected by the passing of time, each of the plaintiff and the first defendant was also affected by a degree of self-interest which clearly coloured how each recalled relevant events. Where it is necessary to make a finding based on the evidence of one rather than the other, I have endeavoured to explain in each case why I have made that finding. [43] The second defendant was 75 years old when she gave evidence. The second defendant had difficulty in giving answers when she was asked to explain her conduct about matters which involved concepts with which she was apparently not familiar, such as why she changed her will in 2001. When it came to the second -- 12 of 18 -- 13 defendant giving evidence about her dealings with the plaintiff and the first defendant on money matters, the second defendant was then giving evidence on a topic with which she was more familiar. On occasions the second defendant became confused when giving her evidence, but generally she responded in a straightforward manner and frankly acknowledged when she could not recall the fact or matter about which she was being questioned. Overall, I considered the second defendant’s evidence to be reliable, particularly on money matters. Testamentary contract [44] The plaintiff bears the onus of proving the agreement or understanding that is alleged in paragraph 12 of the statement of claim. [45] The plaintiff’s claim depends on being able to show that the transfer from the first defendant to the second defendant and her husband of the Homebush property was effected, because of a specific arrangement or understanding between the parties, as to what the second defendant and her husband would do with the Homebush property under their wills. The first defendant as one of two sons of the second defendant and her husband had an expectation at all material times that he would benefit under the will of the survivor of his parents because of that relationship. That was certainly the case in respect of the 1970 wills of the second defendant and her husband. An existing expectation that was not articulated or referred to by the parties in their discussions preceding the transfer cannot amount to a promise or acknowledgment to make a will in a specified way. In the circumstances it was likely to be the case, and I accept the evidence of the first and second defendants on this aspect, that there was no relevant discussion about the content of the wills of the second defendant and her husband by them with the first defendant at the time of the transfer of the Homebush property. I am not satisfied that the terms of the second defendant’s will made in 1997 were referable to any agreement or understanding made between the first and second defendants at the time of the transfer of the Homebush property. On the basis of the evidence the plaintiff fails in proving the agreement or understanding in the terms that are alleged in paragraph 12 of the statement of claim. It follows that the plaintiff cannot succeed in obtaining the declaration against the first defendant which was sought on the basis of the existence of a testamentary contract. Whether second defendant made gifts or loans to first defendant [46] From the time the first defendant purchased the Homebush property in 1974 until the transfer of the Homebush property by him to his parents in 1985, the second defendant and her husband provided him with or the benefit of significant sums of money that facilitated the purchase of the Homebush property and the construction of the house. The first and second defendants contend that such sums were all advanced as loans. The plaintiff contends that they were gifts. [47] Apart from the inheritance obtained from the first defendant’s grandfather, the second defendant and her husband had savings due to their hard work. This was illustrated by the second defendant’s evidence about the assistance the second defendant provided to enable the first defendant to build the house on the Homebush property. She stated: “I was working all of the time and I said if he wanted a home built, I would lend him a deposit on the – to build a home.” -- 13 of 18 -- 14 [48] Both the first and second defendants described each of the sums provided by the second defendant and her husband that assisted in the acquisition of the Homebush property, the construction of the house and the payout of the loan obtained to purchase the Homebush property and the loan obtained to construct the house as loans. These payments were the sum of $4,000 in March 1974 to assist with the purchase of the Homebush property, the sum of $3,000 to discharge the mortgage over the Homebush property in 1976, the sum of $10,000 to enable the first defendant to borrow from the NAB for the construction of the house that was also used for the construction of the house, the sum of $5,000 paid to Phillip Bonaventura for wages in constructing the house and the sum of $35,606.45 paid to the NAB on 18 September 1985 and the sum of $1,500 to purchase the water pump and motor and provide power and water lines to the house. [49] Prior to the transfer of the Homebush property to the second defendant and her husband, they did not expressly request the first defendant to repay the various significant sums which had been provided by them for the purpose of the Homebush property. [50] The second defendant was acutely aware of the lack of funds that the first defendant and the plaintiff had for the purpose of building a house on the Homebush property. That was reinforced by the occasions on which the plaintiff and the first defendant were late in reimbursing or failed to reimburse the second defendant and her husband for paying the rates in respect of the Homebush property. The second defendant observed in her evidence: “Well, he had no money to build anything … There was no money saved there … Easy come, easy go.” The second defendant was unimpressed about the first defendant’s inability to save money in the early years of his marriage. Although I accept that from the time the plaintiff and the first defendant were married until the transfer of the Homebush property there were occasions on which they failed to reimburse the first defendant’s rates in respect of the Homebush property that were paid by the first defendant’s parents, I am not satisfied that the number of such occasions can be estimated with any accuracy in the light of the imprecise evidence on this matter. It was obviously of relevance to the second defendant in forming her attitude to the first defendant’s request for financial assistance when he was proposing to leave his job at the mine that there were occasions when the rates for the Homebush property had been borne by the second defendant and her husband. [51] It is consistent with the attitude that the second defendant had to providing financial assistance to her son from the hard earned savings of her husband and herself that the significant sums provided to or for the benefit of the first defendant were considered to be loans rather than outright gifts. It is also consistent with the second defendant’s disillusionment about her son’s financial position when he came to borrow more funds from the second defendant and her husband in 1985 that she was prepared to provide the funds only if they received the title to the property in return. The fact that the first defendant’s parents required the Homebush property to be transferred to them is inconsistent with the payment of the sum of $35,606.45 to obtain the release of the NAB mortgage being a gift. I accept the second defendant’s evidence that by that stage she was not prepared to lend any further funds without receiving something in return. I do not consider, in the -- 14 of 18 -- 15 circumstances, that it was likely that the second defendant told the plaintiff that she was going to make a gift of the sum of $35,606.45 to the first defendant. The plaintiff’s recollection about this is mistaken. Constructive trust [52] The plaintiff relied on the approach taken by the High Court in Muschinski v Dodds (1985) 160 CLR 583 (“Muschinski”) and Baumgartner v Baumgartner (1987) 164 CLR 137 (“Baumgartner”) to assert that a constructive trust should be imposed against the second defendant in respect of the ownership of the Homebush property in favour of the plaintiff on the basis of the unconscionable conduct of the first and second defendant which had the effect of excluding the plaintiff from obtaining a proprietary interest in the Homebush property. [53] In Muschinski Deane J stated at 614: “Viewed in its modern context, the constructive trust can properly be described as 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.” Although the remedy of a constructive trust can be used to moderate the harshness of the strict consequences a legal transaction, it is not unconfined in its operation. Deane J explained in Muschinski at 615: “The fact that the constructive trust remains predominantly remedial does not, however, mean that it represents a medium for the indulgence of idiosyncratic notions of fairness and justice. As an equitable remedy, it is available only when warranted by established equitable principles or by the legitimate processes of legal reasoning, by analogy, induction and deduction, from the starting point of a proper understanding of the conceptual foundation of such principles ….. Viewed as a remedy, the function of the constructive trust is not to render superfluous, but to reflect and enforce, the principles of the law of equity.” See also Giumelli v Giumelli (1999) 196 CLR 101, 112. [54] The judgment of Deane J in Muschinski was applied by the High Court in Baumgartner. Both Muschinski and Baumgartner were concerned with property disputes between de facto partners. That category of case is concerned with the apportionment of the property interests arising from a joint relationship where the relationship has failed and it would be unconscionable for one of the parties to rely on strict legal title to property acquired or used for the joint relationship. See Baumgartner at 149. Deane J explained the operation of the equitable principle at 620 of Muschinski: “Those circumstances can be more precisely defined by saying that the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in -- 15 of 18 -- 16 circumstances in which it was not specifically intended or specially provided that the other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do….” [55] For a constructive trust to be imposed in respect of property there must be more than the existence of a relationship of marriage or de facto partners: Green v Green (1989) 17 NSWLR 343, 353. There has developed the category of case described as the “common intention” constructive trust which is frequently resorted to in cases involving married or de facto partners: Parsons v McBain (2001) 109 FCR 120. Another category of case where equitable principle supports the imposition of a constructive trust to relieve against unconscionability is equitable estoppel: Giumelli v Giumelli (1999) 196 CLR 101. [56] The fact that the plaintiff was excluded by the first and second defendants from their discussions about the transfer of the Homebush property is consistent with the attitude of the first and second defendants that such transfer did not concern the plaintiff. I infer that the first and second defendants had this attitude because the title to the Homebush property was in the name of the first defendant and the plaintiff had at that stage made no direct financial contribution to the Homebush property. I also find that at that stage, because there were no apparent marriage difficulties between the plaintiff and the first defendant, neither the first nor the second defendant adverted to the possibility of future matrimonial proceedings between the plaintiff and the first defendant. [57] Although I expressed concerns during the course of the hearing about the first defendant’s motivation for transferring the Homebush property to his parents, when that was the site of the matrimonial home, without disclosing that transfer to the plaintiff, I am satisfied, after having considered all the evidence, that the transfer was effected because of the dealings between the first defendant and his parents, rather than for the specific purpose of putting the Homebush property beyond the plaintiff’s reach in any future property settlement proceeding under the FLA. I find that it suited the first defendant to shed himself of the liability to the NAB and the outstanding obligation he owed to his parents in respect of the various advances which they had made to enable him to acquire the Homebush property and construct the house on that property. [58] Although the letter dated 16 October 1985 was prepared by Mr Gibson after the transfer of the Homebush property had been signed and stamped, I am satisfied that, apart from specifying the agreed purchase price as $77,500, it reflected what he was informed by both the second defendant and the first defendant about their arrangement. There are inconsistencies between that letter which refers to the payout of the NAB loan as well as numerous previous advances made by the first defendant’s parents in respect of the Homebush property and other assistance and the declaration signed by the first defendant on 2 September 1985 that accompanied the transfer when it was lodged for registration. That declaration was prepared by the solicitors for the first defendant’s parents and reflected the payment that was made by the first defendant’s parents contemporaneously with the transfer. The inconsistencies are explicable by the different concerns of the solicitors and the accountants in acting for the second defendant and her husband at the time of the transfer. I accept that the second defendant and her husband arranged that rent -- 16 of 18 -- 17 should be paid by the first defendant, but did not pursue payment of rent from the first defendant. I infer that the second defendant and her husband placed more importance on having the title to the Homebush property in their names, than the potential to earn rental income from the Homebush property. [59] The amount involved in the forbearance by the first defendant’s parents to recover significant sums advanced by them in connection with the acquisition of and construction of improvements on the Homebush property together with the amount paid to discharge the NAB loan in September 1985 falls short of the market value of the Homebush property at the date of the transfer by approximately $18,000. Notwithstanding that shortfall, there was good consideration for the transfer of the Homebush property and I find that the first defendant intended to confer the beneficial ownership to the Homebush property on his parents, despite the gap between the value of the consideration and the value of the Homebush property at the time of the transfer. [60] Although there was no breakdown in the relationship between the plaintiff and the first defendant at the time of the transfer of the Homebush property to the first defendant’s parents, the plaintiff had an existing right (if so advised) to bring a proceeding for alteration of the property interests of the plaintiff and the first defendant based on her contributions as homemaker and carer of the children of the marriage. Proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them are proceedings arising out of the marital relationship and therefore fall within the definition of a “matrimonial cause” contained in s 4(1) of the FLA: Jennings v Jennings (1997) FLC 92-773 at 84,535-84,536. [61] The issue is therefore whether the complete disregard by the second defendant (and her husband) of the plaintiff’s right under the FLA to seek to enforce an interest in respect of the Homebush property affected the title of the second defendant to the Homebush property. If the first defendant in September 1985 had transferred the Homebush property to a bona fide third party for value, the Homebush property would have been put beyond the reach of the plaintiff for all time. Does the fact that the second defendant (and her husband) knew the plaintiff had been married to the first defendant for seven years with the obvious contribution to the marriage that entailed and that the plaintiff was not informed about the proposed transfer of the Homebush property on which the matrimonial home had been constructed affect the second defendant’s title to the Homebush property? [62] The difficulty for the plaintiff is that the title to the Homebush property is held by the second defendant who is not a party to the marriage. The plaintiff’s case against the second defendant is not analogous to that in Baumgartner which is based on the failure of a joint relationship where the parties have pooled their resources for the purpose of the relationship and the title to property acquired or used for the purposes of the relationship does not reflect the contributions of the parties to the pooled resources. It is also not a case for the imposition of a common intention constructive trust, as there was no common intention between the plaintiff and the second defendant at any relevant time. Any common intention between the plaintiff and the first defendant did not extend to the second defendant. The plaintiff cannot rely on equitable estoppel. The second defendant and her husband were not in a trust relationship with the plaintiff or otherwise under any duty to the plaintiff in respect of the Homebush property. The case is pleaded against the second -- 17 of 18 -- 18 defendant on the basis that unconscionability can be established against the second defendant at the date of the transfer of the Homebush property. Ultimately what the plaintiff is relying on to advance her case for a constructive trust against the second defendant is the unfairness of the transaction in the light of the subsequent history of the contributions by the plaintiff to the marriage and the eventual breakdown of the relationship between the plaintiff and the first defendant. [63] The conduct relied on by plaintiff against the second defendant to establish unconscionability of taking the transfer of the Homebush property without notice to or the knowledge of the plaintiff and in disregard of the plaintiff’s right under the FLA to seek to enforce an interest in the Homebush property arising from the marriage between the plaintiff and the first defendant does not in the context of the parties’ relationship suggest any legal or equitable principle that can support the imposition of a constructive trust. The categories of case in which a constructive trust will be imposed are not closed. It is critical, however, that there exist some equitable or legal principle beyond general notions of fairness to support the imposition of a constructive trust. The plaintiff has failed to show the existence of such legal or equitable principle in this case that justifies a finding of unconscionability against the second defendant. [64] It was common ground during this proceeding that the plaintiff had to be successful in her claim against the second defendant, because the plaintiff was seeking to establish an interest in the Homebush property which is held by the second defendant. This proceeding was not concerned with the plaintiff’s claims against the first defendant under the FLA or otherwise, except insofar as they were pleaded for the purpose of advancing the plaintiff’s case against the second defendant. [65] It follows that the plaintiff fails in establishing any basis for the imposition of a constructive trust against the second defendant. The plaintiff does not succeed in this proceeding against either the first or the second defendants. The proceeding must be dismissed. I will hear submissions from the parties on the issue of costs. -- 18 of 18 --