Patrick Jones Photographic Studios v Catt [1999] NSWSC 421

New South Wales Supreme Court CITATION : Patrick Jones Photographic Studios v Catt [1999] NSWSC 421 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 3604 of 1998 HEARING DATE(S) : 22 to 31 March 1999 JUDGMENT DATE : 10 May 1999

PARTIES : Patrick Jones Photographic Studios Pty Ltd (Plaintiff) Karin Catt (Defendant) JUDGMENT OF : Windeyer J at 1

COUNSEL : Mr. C. Bevan with him Mr. A.C. Iuliano (Plaintiff) Mr. C. Houghton (Defendant) SOLICITORS : Surry Partners Michael Evers & Co CATCHWORDS : CONTRACTS - general contractual principles - oral agreement between parties - whether terms sufficiently certain to make agreement binding; EQUITY - Equitable charges - appropriate remedy to secure the sum of money expended on property; TRUSTS - resulting trust - no contribution to purchase price; TRUSTS - constructive trust - whether imposition necessary to do equity ACTS CITED : Conveyancing Act 1919, ss23, 54A Baumgartner v Baumgartner [1985] 2 NSWLR 406 Calverley v Green (1989) 155 CLR 242 CASES CITED : Chalmers v Pardoe [1963] 1 WLR 677 Giumelli v Giumelli (1999) HCA 10 at 10 Morris v Morris [1982] 1 NSWLR 61 DECISION :

- 31 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

WINDEYER J

DATE

3604/98 PATRICK JONES PHOTOGRAPHIC STUDIOS PTY. LTD v KARIN CATT JUDGMENT Outline

1 The question to be decided is whether the plaintiff company, Patrick Jones Photographic Studios Pty. Ltd. (the company) has a beneficial interest in property 3A Rainford Street, Surry Hills (the property) of which the defendant Miss Karin Catt (Catt) is registered proprietor, or whether it should be declared that Catt holds the property upon constructive trust so as to give the company an interest or whether the company has no interest at all in the property. Facts 2 As will become obvious there is no proper evidence of some important or relevant matters. In addition, while the parties did try to restrict the case to evidence which avoided their personal relationships it became clear that there had developed a very bitter personal conflict between Mr. Patrick Jones (Jones) and Catt so that the case seemed to proceed in a sort of twilight zone. 3 There is no evidence of the shareholders or directors of the company. It was accepted it was controlled by Jones. It was, and presumably still is, a successful photographic company with substantial earnings from its photography and photographic studio operations. It does not appear to have any photographer employees, other than Jones, all such photographers being engaged on a contract basis using the company studios and having a profit sharing arrangement with the company. It does, however, have an administrative manager and at least a receptionist, although the former is engaged on some consultancy basis. Jones and Catt had been friends since 1992 and at least by the end of 1993 had developed a close personal relationship. At that time Jones was living in rented accommodation at Bondi and Catt lived there with him from time to time. The company owned property 26-28 Rainford Street, Surry Hills and Jones himself owned a next door property 22 Rainford Street Surry Hills, in which property Catt also lived from time to time. By this time Catt owned two properties at Newcastle and for the purchase of at least one of these she raised moneys on mortgage from the Newcastle Permanent Building Society. Both were investment properties and both were leased out. 4 In February 1994 Catt commenced work with the company as what Jones described as a trainee photographer. Catt seemed to resist this description, although in her affidavit she said that she was an assistant photographer, claiming that the quality of her work was at least as good as that of Jones. Her wage was $400 per week. In December 1994 Catt entered into a contract for the purchase of the property, which was almost directly opposite the property of the company. The purchase price was $270 000. Catt gave almost incomprehensible oral evidence about the source of the purchase funds none of which was supported by documents. The mortgage on the property to Newcastle Permanent Building Society secured the sum of $165 000. There is evidence that Catt borrowed $68 500 from her parents and that she provided the balance of the moneys, together with the purchase expenses from her own funds, some of which may have been raised on one of the other properties. I am prepared to find that to be the position. Why no one bothered to establish the important facts through the building society records I cannot fathom. Whether from borrowings alone or from borrowings and her own funds, Catt paid the purchase moneys and the associated expenses of about $17 000. 5 The property was in a very run down state on purchase. I accept the evidence that it was uninhabitable and untenantable. Catt expected that she would be able to rent it and cover the mortgage interest through rent, but her attempts to find a tenant failed, due at least in part, and probably in whole, to the condition of the property. Without income Catt was forced to defray the mortgage payments out of her own funds. She was at a time very ill herself, although during this stage the company continued to pay her wage as a trainee photographer. Whatever the position, it was quite unlikely that a salary of $400 per week could support borrowings of $165 000 let alone the additional funds borrowed from her parents, who themselves raised a loan over their Newcastle home to enable them to provide the funds which they did provide. 6 In late 1995 there were discussions between Jones and Catt about the property and its financing. It was clear by then it could not be let in its existing condition. Catt had arranged for some work to be done but it was not sufficient. It was also clear and I find that Catt was in danger of losing the property unless she obtained further financial assistance. 7 Paragraph 10 of the affidavit of Jones sworn 28 August 1998 is as follows: 10. During late 1995, the Defendant informed me that she had run out of money. By this time the Property was still in a derelict condition, so the Defendant and I discussed the possibility of me, through the Plaintiff, assisting the Defendant to complete the renovation of the Property by investing funds into the Property. At the time, the Defendant and I had numerous discussions using words to the following effect: Jones: I'd be interested in investing some money in 3A Rainford Street to help you complete renovating it. The company could invest some money and take a financial share in the property and use the building for extra studio space. You could live upstairs. This would ease your financial problems and you would not be put in a position where you would have to sell the property. What do you think?