Dunne v Turner [1996] QCA 272

IN THE COURT OF APPEAL [1996] QCA 272 SUPREME COURT OF QUEENSLAND Appeal No. 196 of 1995 Brisbane Before Macrossan CJ Pincus JA McPherson JA [Turner v. Dunne] BETWEEN: HEATHER TURNER (Plaintiff) Respondent AND: JOHN CHARLES DUNNE (Defendant) Appellant REASONS FOR JUDGMENT - THE CHIEF JUSTICE Judgment delivered 20/08/1996. The respondent, Ms Turner, claimed an equitable interest in assets standing in the separate name of Mr Dunne and a judge of District Courts has found in the respondent's favour declaring that a constructive trust arose in the circumstances that prevailed during the parties' period of cohabitation. The relevant facts are set out in detail in the judgment below. It is to be noted that the judge had to deal with a situation where there were no particular conflicts arising on the evidence although there were some areas where, due to fading recollections, precise findings were not possible. The conclusion to which I am drawn leaves me in disagreement with the majority view that -- 1 of 22 -- will prevail in this case. I set out the reasons for my conclusion. First, and by way of summary, I can say that after giving due weight to the appraisal by the learned trial judge of the effect to be attributed to the way in which the parties conducted their relationship and allowing for any advantage which the judge may have had, there does not, with respect, seem to be any sufficient basis for the declaration of a constructive trust. The authorities indicate that in cases of this kind the basis of the Court's entitlement to intervene and declare a trust must be a finding of unconscionable conduct: see e.g. Baumgartner v. Baumgartner (1987) l64 C.L.R. 137 at 148-149. While it is true that "general notions of fairness and justice are relevant to the traditional concept of unconscionable conduct" (Baumgartner at 148), "unconscionability" is not a description automatically attracted whenever there is detected by a judge some departure from what he sees as a broad principle of fairness: cf the dismissive reference to "idiosyncratic notions of what is just and fair" in Baumgartner (supra) at 148. If it were otherwise, it might have to be concluded that ordinary categories of legal ownership could be not much more than provisional in all domestic relationships. Great uncertainty would result from the adoption of such a viewpoint and considerable expense would be involved in resolving it A broad principle of community of property is not automatically imposed upon domestic relationships even where both parties contribute financially to the expenses involved in their relationships. The relevant unconscionability which has been referred to must always be found as a basis for the Court's intervention if the parties' separate legal titles are to be modified. The judge in the present case has, in my respectful opinion, given undue weight to the contribution made by the respondent to the relationship without sufficiently regarding the neutralising effect of the corresponding contribution by the appellant during a long period of cohabitation. In the circumstances more fully described below, the respondent's contribution does not have a significance which would permit the appellant's claim to retain his separate legal property to be characterised as unconscionable. -- 2 of 22 -- The following features should be noted. No financial arrangements were put in place against the wishes of the respondent. No requests were made by her for any alteration of the prevailing arrangements. No sense of being imposed upon seems to have been entertained by the respondent during the subsistence of their relationship. There was no pooling of funds for some joint purpose of acquiring property. Looked at broadly, the parties' respective financial contributions have the character only of contributions to the general living expenses of their joint household. The level of contribution which each made appears to have been accepted by them both as sufficiently equal. Some modest departure from the arrangements just described might be found in that aspect whereby, when the shop was conducted, some deduction was made from the gross returns to repay borrowings before a profit from the business was struck for division, but, in the overall course of their relationship, this should not be regarded as a particularly important feature. There is no suggestion that the consequence of their relationship was that the respondent ended with less in the way of assets than would have been the case if the relationship had not been formed or that the appellant ended with more than he would have had if there had been no association with the respondent. The appellant, through the sale of his milk run, introduced the initial capital to which the existence of the financial assets ultimately standing in his name can be traced. There was no departure by the appellant from an approach to a regime of separate legal ownership adopted early in the course of the relationship and continued throughout it, and this was known to and fully accepted by the respondent. A characteristic of their relationship was that each party retained separate property and conducted separate bank accounts until, belatedly and for a limited purpose, a joint account was set up. The appellant continued in employment for seven years after the respondent had retired and accordingly he would have been a particularly important contributor to the domestic expenses of them both through that period. In the early period of the parties' relationship when the mixed business was being conducted, there is no doubt that they both worked very hard in it but they divided (i.e. did not hold jointly) the -- 3 of 22 -- profits that resulted from it. There is no suggestion that as a result of the respondent's working in that business she received less by way of a share of profits than she would have received if working for wages, and there is no finding that she received a lesser financial return working there than she would have had if she had chosen to engage in some other employment. The appellant was the one who introduced the initial capital which made the mixed business enterprise possible. Thereafter the asset that this business represented was transmuted into other real property that was held, including, finally, the house at Birkdale. The contributions which each made to improving the houses purchased in turn, do not seem to have been particularly different from those commonly made by energetic homemakers responding to an urge to improve their joint surroundings. Many parties to a domestic relationship stay busy with separate occupations as well as participating in their area of joint domestic concern and there does not seem to have been anything particularly out of the ordinary in that respect in the case of the parties here. For lengthy periods both engaged in their separate employments, as already mentioned maintained separate bank accounts and, to a varying extent, held separate assets. The effect of these features taken together, in my view, is that the appellant's denial of the respondent's claim upon his separate legal assets cannot be characterised as unconscionable. I would, as a separate matter, find it difficult to regard the present case as one where an apportionment as high as 2:3 should be found as the respondent's equitable share even if the basic claim of unconscionability were to be accepted, but it is unnecessary in the circumstances to examine that matter further. I would allow the appeal, set aside the judgment below and enter judgment for the appellant. REASONS FOR JUDGMENT - PINCUS J.A. Judgment delivered 20/08/1996 This is an appeal from a judgment of the District Court relating to a property dispute. The parties were for many -- 4 of 22 -- 3 years in a defacto relationship which broke up in 1993, leaving the respondent woman in a substantially worse position than the appellant man. The primary judge made an order the effect of which was that assets which were legally owned by the appellant were declared to be subject to a trust for the parties, as to 60% for the appellant and as to 40% for the respondent. The notice of appeal, which has not been amended, asked that the judgment below be set aside and that in lieu there be judgment in the action for the appellant; however, that must be taken to be a slip, for reference to the grounds shows that the intention was to challenge the 60/40 apportionment as well as the finding that there was a trust. Counsel for the appellant informed the Court that there was no attack upon the primary judge’s findings, and although he later resiled from that stance in one respect, those findings are in substance accepted. The respondent is aged 71, 6 years older than the appellant. When the two met, about 1961, she was married but separated; she was living with her brother and daughter in rented accommodation and working as a nurse. She said in evidence that her earnings were then about £200 a week, but that is far too high and cannot be right. The error is not surprising when one reads her other evidence; she is and appears always to have been a woman with limited knowledge of, and indeed interest in, financial affairs. They were, so far as they concerned the two parties, largely left to the appellant. -- 5 of 22 -- 4 Although as I have mentioned, the notice of appeal contends that the 60/40 apportionment was too favourable to the respondent, the principal argument advanced for the appellant was that no trust should have been declared. It was contended that the parties had separate financial affairs throughout their relationship, throughout which they lived "according to an established and accepted financial regime" with which the court should not have interfered. Although not so put, the argument appeared to amount to this: that what the court did was contrary to an agreement deducible from the parties’ conduct. Further, it was contended that a finding of unconscionable conduct on the part of the appellant could not be upheld because there was present neither of the two elements which, it was said, characterised the cases in which a declaration of trust was founded on unconscionability. In all of them, counsel said, there was either a consistently maintained common intention from which one party attempted to resile, or something akin to an estoppel; the appellant said that neither element was present here. The judge analysed the history of the parties’ relationship, insofar as it was relevant to the claim made, in some detail, but it is convenient to refer first to her Honour’s more general factual conclusions, found at pp. 12- 14 of the reasons; these are substantially unchallenged, as I have mentioned, and I summarise them:- For most of the period of the relationship the -- 6 of 22 -- 5 parties worked for remuneration outside the home. Although the respondent probably spent some small amounts of money on her children, most of her earnings were used for the benefit of the relationship. The respondent, in the period 1966 to 1972, made a significant financial contribution through her labour and helping a shop (which the appellant had bought) to run at a profit; her labour contributed to the capital gain made when the shop was sold, and contributed to household expenses. But the proceeds of the sale, insofar as they were not invested in the appellant’s name, were used to buy a house in his name. During periods in which the appellant was unemployed the respondent contributed additional amounts to the running of the household. She also assisted in maintaining and augmenting the value of the house just mentioned (at Chermside) by making curtains for it, painting, gardening and restoring furniture; similarly, with respect to a house at Birkdale, which was bought to replace the Chermside house and was also in the appellant’s name, work the respondent did by way of landscaping increased its value. Over the 30 year relationship the respondent had been the prime homemaker, cooking, cleaning, washing, shopping and ironing, and this had contributed to the -- 7 of 22 -- 6 appellant’s comfort and helped him financially. Her contribution both financial and non-financial had contributed to the appellant’s acquisition of assets. There was no pooling of funds to acquire them, but both parties spent monies for the purpose of the joint relationship. The appellant’s attitude that he was entitled to the entire beneficial interest in the relevant property was unconscionable, as it would give him a gain from the respondent’s many contributions and efforts to which reference has been made. Of "particular financial significance" was the respondent’s help in acquiring assets from 1966 to 1972 and the use of her pension for the purposes of both of them from 1989 until they separated. Although for the purposes of determining the correctness of the appellant’s subsidiary argument, the complaint about the 60/40 apportionment, more details of the facts must be given, what has been stated above is enough to lead to consideration of the main point, that no trust should have been declared. The most important source of authority as to the principles upon which the Court should act in such cases is the principal judgment in Baumgartner v. Baumgartner (1987) 164 C.L.R. 137. That establishes or confirms the first -- 8 of 22 -- 7 three of the following propositions which are of present relevance: 1. A constructive trust may be imposed even though the person held to be trustee had no intention to create a trust or to hold property on trust. 2. An intention to create a trust may be imputed where it is necessary to do so "in good faith and in conscience". 3. A principle which may be applied is that which restores to a party contributions made to a joint endeavour which fails, when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them. 4. Contributions, financial and otherwise, to the purposes of the joint relationship are relevant for this purpose. The question, raised by point 4, whether contributions other than those of a financial kind have to be taken into account when determining whether a trust should be imputed, was answered affirmatively by Deane J. in Muschinski v. Dodds (1986) 160 C.L.R. 583 at 622. In the Baumgartner judgment mentioned above, there is a reference to earnings which the woman would have made during a period of three months when she was having and caring for a child of the relationship; it appears to have been accepted that the woman was entitled to be credited with that sum (150.3), although it could not possibly be thought of as a financial contribution. In Bryson v. Bryant (1992) 29 N.S.W.L.R. 188 -- 9 of 22 -- 8 at 201, Kirby P (as he then was). quoted with approval part of the reasons of Deane J. in Muschinski to which I have referred and so (as it appears to me) did Sheller J.A. at 219; Samuels A-J.A. was of a contrary opinion (227). Allusions to this problem - the relevance of non- financial contributions - are to be found in some other authorities, but it appears that there is no binding authority on the point. My conclusion is that the judge was right, in the present case, to take into account non- financial contributions by the respondent; indeed, the contrary proposition was not put. I approach the case on that basis principally because it appears to accord with the weight of authority. Also, if it matters, the other view would lead to some odd results: a defacto wife who paid, out of her salary, for necessary household help to the parties would be entitled to have that financial contribution to the relationship taken into account, whereas one who, to save money, did all the household work herself would have that contribution ignored. Similar considerations apply when one considers maintenance of a house and garden, which might be done "cost free" by one of the partners, or housekeeping and gardening services might be paid for. To return to the main arguments advanced on behalf of the appellant, it seems to me impossible to read Baumgartner -- 10 of 22 -- 9 in a way which is consistent with them. I can find nothing in the reasons to support the view that a necessary foundation of a constructive trust, in situations of this kind, is that there be a common intention on which one party relied to its detriment, or anything analogous to an estoppel. The other contention put forward in support of a conclusion that there was no trust amounts, as I have said, to an argument that an agreement to that effect was deducible from the parties’ conduct. In Harmer v. Pearson (1993) 16 Fam.L.R. 596, there was alleged to be a constructive trust relating to property acquired during a homosexual relationship. Since there was "little, if any, basis for concluding that the events up to and including the acquisition of" the relevant property entitled the appellant to a share greater than the amount he had contributed to the purchase price (598), the appellant’s claim that denying him a greater share was unconscionable may not have been a strong one. The Court decided the case against the appellant, principally on the basis that the parties had agreed in writing as to the extent of their proportionate shares (599) and there was no evidence impugning that agreement (600). But that case is not authority for the view that, if during the relationship one party has acquiesced in the other having financial dominance, no constructive trust can arise. It is clear from the principal judgment in Baumgartner that a trust may be imposed "regardless of actual or -- 11 of 22 -- 10 presumed agreement or intention" (148). An agreement between the parties as to their respective shares in property may be important in determining whether or not one has been guilty of unconscionable conduct, as is illustrated by Harmer v. Pearson. Short of an agreement, a mere promise relating to property may be important or even decisive: Willets v. Marks (C.A. No. 115 of 1993, 14 February 1994). But authority for the proposition that the failure of one party to the relationship to dispute, during the relationship, the other party’s assertion that property acquired was his or hers alone does not prevent the imposition of a trust is to be found in the decision of the New South Wales Court of Appeal in Hibberson v. George (1989) 12 Fam.L.R. 725. It is perhaps enough to quote part of the explanation of that case in Green v. Green (1989) 17 N.S.W.L.R. 343 at 368, per Mahoney J.A.: "In Hibberson v. George the matter was, in this Court, taken significantly further. The respondent had paid all the moneys to acquire a house and all the mortgage instalments on what was borrowed to do it. He had paid for physical improvements to it. And he had made it clear that the house was his alone. Notwithstanding that she knew of his attitude to ownership and had not contested it, the defendant Miss Hibberson claimed a trust should be imposed on it for her benefit. She claimed to have spent money on improvements made to the house: the majority of this Court over-ruled the trial judge on the quantum of her expenditure and held that conscience required she had a trust for it". So the situation in which a trust was held to exist in that case has some resemblance to that with which we are presently concerned. Looking at the point more broadly, acceptance of the appellant’s contention would seem to lead -- 12 of 22 -- 11 to the rule that whatever the respective extent of the parties’ contributions, insistence by one party, during the relationship, that all property acquired belongs to him or her will, if not then resisted by the other party, defeat any later claim by that other party to an equitable interest; I have found no authority in support of that view. I conclude that the main contentions made on behalf of the appellant must be rejected; on the judge’s factual conclusions, summarised above, the case is one in which the respondent made substantial contributions, financial and otherwise to "a joint endeavour", to use the High Court’s expression from Baumgartner. It is true that the property purchased was throughout the relationship placed in the one party’s (the appellant’s) name, but that is commonly so in disputes of this kind. On the judge’s factual conclusions, the Court was entitled to conclude that the appellant’s denial of an interest in the respondent was unconscionable. I pass to consider the subsidiary argument advanced on behalf of the appellant, that the 60/40 apportionment of the property was inequitable; this raises a question of some difficulty. As I have foreshadowed, it is necessary for this purpose to discuss the facts in rather more detail than -- 13 of 22 -- 12 appears above. There was no finding that the parties’ separation was the fault of either; the respondent said that she had her sigmoid colon surgically removed in 1992 and that affected the parties’ relationship, which concluded in the following year. The judge listed the amounts the couple had between them at the date of separation and totalled them at $101,000. The respondent retired first, in 1982, when she was 58; the appellant worked until age 60, retiring in 1989. When the parties separated the respondent was left with $24,000; of that, $15,000 was an investment in Bankers’ Trust, which had been in joint names, and $9,000 was taken from a joint bank account and placed in a separate account in the respondent’s name. The evidence was to the effect that the appellant arranged for the respondent to receive the $24,000; it seems clear that the figure of $24,000 was fixed on by the appellant who, as I have explained made the financial decisions during the relationship, as being the amount of cash which the respondent had had when she retired from work about 10 years before the date of separation. There was also the parties’ home at Birkdale, which I have mentioned, whose value was agreed to be $111,000; in addition there were cash and investments amounting to $101,000, the total being $212,000. The appellant allowed the respondent to take certain chattels from the Birkdale home, but it does not appear that any particular value was attributed to them. The appellant’s division of the property, then, gave him nearly -- 14 of 22 -- 13 eight times as much as the respondent’s share (if one ignores the chattels I have mentioned), whereas the judge’s order would leave him with an amount 1½ times the respondent’s share. When the parties met, about 1960, the appellant had a milk run which he sold for £4,500 after they began to live together. With his savings, he then had £5,500 in all. He was unemployed for some months and then obtained a job at the hospital at which the respondent worked; this apparently occurred by the use of the respondent’s connections. When the parties began to live together the appellant did not contribute to the rent, but sometimes would pay money towards household goods. The respondent said she did not press him for money because he paid the bill when they went out together. Initially, the respondent owned all the furniture in the rented house in which the parties lived, and during the relationship items of it were replaced; an example, mentioned in evidence, was a washing machine which was replaced with one of which the parties shared the cost. The respondent suggested marriage during the relationship, not liking passing herself off as "Mrs Dunne", but the appellant rejected that notion. While the appellant was working at the hospital he became interested in being self-employed and asked the respondent to "come into" a -- 15 of 22 -- 14 shop, which had some accommodation with it, with him and she agreed on the condition, which was not complied with, that she would have two days off a week "to do all the household chores and everything". The leasehold was bought in 1966 for £3,500 and then the freehold in 1969 for $10,000, $5,000 being borrowed. It was the judge’s treatment of payment for the shop which was the only significant criticism made of her Honour’s findings, on behalf of the appellant. The criticism was, rather inconveniently, made by the appellant’s counsel in a written submission on evidence, produced to the Court after conclusion of the oral submission on behalf of the appellant, while counsel for the respondent were addressing the Court. One finds in that document an assertion that no part of the respondent’s money went into the acquisition of the shop and that the judge erred in finding, as she did, that interest on money borrowed to buy the freehold was deducted prior to the division of profits "so that [the respondent] contributed to that expense". The appellant’s written argument omits reference to the passages in the evidence supporting her Honour’s conclusion. The appellant agreed in evidence that the interest payments on the loan would have been "a business expense . . . before the profit of the business was determined"; the evidence was that the profit from the business was to be divided evenly. In short, the complaint that the judge’s finding relating to the interest on the loan was unsupported has no -- 16 of 22 -- 15 substance. The appellant sold the business for $34,000 in 1972. There is no finding as to whether the enormous effort which both parties put into the business during the relatively short period they worked it brought about the considerable increase in the value of the business, reflected in the difference between the purchase and sale prices; but it seems a reasonable inference that the work done in the business helped to augment the price obtained. The parties had a holiday for some months and then agreed to buy a house at Chermside as a home for them both. The money came from what was obtained from the sale of the shop and flats. Shortly after moving into the Chermside house the parties began to work for wages again and each contributed towards their joint expenses; it does not appear that any precise accounting was made to ensure equality. The respondent paid for furniture and furnishings in the house and for items for the house and garden. The respondent was obliged to give up work for a few months because of an injury to her son and then the appellant was mainly unemployed for a substantial time, during which period the respondent was the major income earner. While the appellant was unemployed the respondent continued her role as housekeeper and gardener. The parties worked together improving the house and garden. As I have mentioned, the respondent retired some years before the appellant did and while he was working and she not, the household expenses were paid from his earnings and her savings. The parties decided to sell the Chermside house and that was done at a -- 17 of 22 -- 16 substantial profit. The Birkdale house in which they lived at the time of the separation was then bought and again the parties worked together, principally in the garden, improving that property. After the appellant retired, at age 60, the respondent was eligible for a part-pension, but he then received no pension. Her pension went into a joint bank account and was used for living expenses. The only other significant point requiring mention in that in 1990 the parties made wills; the respondent left her assets to her family and the appellant left the house to his family, but gave the respondent the right to live in it as long as she wished. The factor which, as it seems to me, principally justified the judge’s view that the appellant was entitled to half as much again as the respondent was that he did and she did not have financial substance when they began to live together; I refer to the milk run and his savings which, when the run was sold, produced a total of £5,500. It seems likely that without that start there would have been considerably less by way of property and cash at the end of the 30 years relationship. There is, in my opinion, something to be said for the view that an approach which was less generous to the respondent might have been taken by the judge. But the evidence from both sides as to the extent of -- 18 of 22 -- 17 their respective contributions, over their long period of cohabitation, was by no means such as to enable the judge to make any precise calculations of relative value. The proper apportionment of the property subject to the trust was very much a matter of fact and degree, in respect of which this Court would not ordinarily interfere unless confident that the apportion adopted could not be defended; an analogy is the approach towards apportionment of degrees of responsibility in negligence cases. While I am not sure I would, deciding the matter at first instance, have apportioned as much as 40% to the respondent, I have been unable to reach a conclusion that an alternative apportionment, rather less favourable to the respondent, should be adopted. -- 19 of 22 -- 18 I would dismiss the appeal with costs. REASONS FOR JUDGMENT - McPHERSON J.A. Judgment delivered the 20th day of August 1996 At trial the question for determination in this action was whether the appellant's claim to ownership of assets, to which he was in law solely entitled, was to be affected by a constructive trust in favour of the respondent, who had for many years been his defacto wife. In answering that question in the affirmative, the learned trial judge decided that the assets were held as to 60% for the appellant, and as to 40% for the respondent. In this Court the appellant has challenged the conclusion that there was a proper basis for imposing a constructive trust. Recent decisions of the High Court have established that, when an enduring joint relationship between a man and a woman comes to an end, their respective rights in and to property do not, or do not necessarily, fall to be determined according to strict legal entitlement. Ownership at law may be qualified by the equitable remedy of a constructive trust, which may be imposed "regardless of actual or presumed agreement or intention" on the part of those concerned. See Baumgartner v. Baumagartner (1987) 164 C.L.R. 137, at 148 (Mason C.J., Wilson and Deane JJ). The criterion for imposing an equitable constructive trust is, to my mind, somewhat less easy to determine. In Muschinski v. Dodds (1986) 160 C.L.R. 583, the analogy of a -- 20 of 22 -- 19 failed partnership or joint venture was adopted by Deane J., with whom Mason J. agreed. In Baumgartner, the parties had during the subsistence of the relationship pooled their earnings, which were described as having been expended "for the purposes of their joint relationship and for their mutual security and benefit" (at 149). I do not, however, consider that a "pooling of earnings" is indispensable to relief. Their Honours in that case went on (at 149) to speak of "contributions" being made "on the basis of, and for the purposes of, that joint relationship". That feature is, as shown in the reasons of Pincus J.A. on this appeal, manifest in the evidence and findings in the present case. It was therefore open to the primary judge to decide that the appellant's ownership of the assets in dispute was subject to a beneficial interest in favour of the respondent. -- 21 of 22 -- In determining the extent or value of the respondent's beneficial interest, it was also proper for his Honour to take account of contributions that were not pecuniary. The judgment in Baumgartner v. Baumgartner (1987) 164 C.L.R. 137, at 149, speaks of contributions "financial and otherwise"; and (at 150) of "individual contributions either financially or in kind". As Pincus J.A. points out in his reasons, the Court in that case treated earnings which would have been made, but were foregone, during a period of child bearing and rearing as relevant for this purpose. When to that there is added the further consideration (164 C.L.R. 137, at 150) that "the court, should, when possible strive to give effect to the notion of practical equality, rather than pursue complicated factual inquiries which will result in relatively insignificant differences in contributions and consequent beneficial interest", it becomes difficult in the present case to find fault with the trial judge's conclusion that the appellant's assets were held beneficially in the proportions arrived at. Baumgartner v. Baumgartner was a case in which it was said to be possible to treat the respective financial contributions of the parties as approximately equal (at 150); but, allowing for that factual difference, the result arrived at here satisfactorily gives effect to what was said in that case about the way in which that question is to be disposed of. Like Pincus J.A., I would dismiss the appeal with costs. -- 22 of 22 --