Kevin Rodney Jahnsen v Gary Alan Jahnsen [2002] NSWSC 995

New South Wales Supreme Court

CITATION : Kevin Rodney Jahnsen v Gary Alan Jahnsen [2002] NSWSC 995 revised - 28/10/2002 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 3546/01 HEARING DATE(S) : 21 October 2002 JUDGMENT DATE : 25 October 2002

PARTIES : Kevin Rodney Jahnsen (Plaintiff) Gary Alan Jahnsen (Defendant) JUDGMENT OF : Bergin J

COUNSEL : DG Charles (Plaintiff) In person (Defendant) SOLICITORS : Aubrey Brown Partners, by city agents Turner Whelan (Plaintiff) CATCHWORDS : [TRUSTS] - Whether common intention at time of acquisition of property between father and son was to pruchase, renovate, sell and share equally in the profits of a property - No argument in relation to presumption of advancement - Admission by defendant that common intention was as plaintiff claims - Defendant claims unfairness. Allen v Snyder [1977] 2 NSWLR 685 Giumelli v Giumelli (1999) 196 CLR 101 CASES CITED : Jones v Padavatton [1969] 2 All ER 616 Muschinski v Dodds (1986) 160 CLR 583 [RP Meagher and WC Gummow, Jacobs Law of Trusts, 6th ed] DECISION : See pars [33] to [35].

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

BERGIN J

25 OCTOBER 2002

3546/01 KEVIN RODNEY JAHNSEN v GARY ALAN JAHNSEN JUDGMENT 1 This is a dispute between a father, the plaintiff, Kevin Rodney Jahnsen, and a son, the defendant, Gary Alan Jahnsen, in relation to a property at 73 Wolseley Avenue, Tacoma in the state of New South Wales (the property). 2 By Amended Summons the plaintiff claims a declaration that the defendant holds his interest in the property for the plaintiff and himself beneficially in shares proportionate to their contributions to the costs, acquisition and improvements of the property. Alternatively the plaintiff seeks a declaration that the defendant holds his interest in the property as trustee for himself and the plaintiff in equal shares so that the plaintiff's share is 50 per cent and the defendant's share is 50 per cent. The plaintiff also seeks a consequential order that the defendant execute a Memorandum of Transfer in registrable form with the plaintiff and the defendant as tenants in common. 3 The plaintiff makes a further alternative claim for a declaration that the defendant holds his interest in the property subject to an equitable charge on the property in favour of the plaintiff to secure the sum of $62,417.05 together with interest thereon from 13 July 2001. That was amended during the trial to a figure of $53,111.04 plus interest totalling $59,510.51. 4 This matter was heard by me on 21 October 2002 when Mr DG Charles, of counsel, appeared for the plaintiff and the defendant appeared in person. Facts 5 The defendant is presently aged thirty-three years. In 1986 the plaintiff was going through a bitter divorce from his second wife and he and the defendant moved to the Central Coast of New South Wales. After living in caravan parks they moved into a home unit at Gorokan. The defendant left school so that he could obtain work to assist with the rent and food bills because the plaintiff was being treated for depression and was not working. The defendant worked as a trolley attendant at Franklins at Wyong Plaza Shopping Centre. 6 After some months the plaintiff returned to work as a roof tiler, a trade that he had practised previously in his own roof tiling business. In October 1986 the plaintiff offered the defendant a job as his labourer in the roof tiling business. The plaintiff and the defendant agreed to form a business partnership, Jahnsen Roofing. This was, it seems, a loose arrangement with no written agreement. It was however agreed that the defendant would be paid $50 per day except on wet days. The payment of $50 lasted six to eight weeks and was then reduced because the plaintiff could not afford to pay the defendant the full amount because they were trying to build "the business bank account for work-related expenses". 7 In 1987 the property settlement between the plaintiff and his former wife was finalised. Part of the arrangement was that the plaintiff purchased his former wife's half share in a vacant block of land at Coomba Park that they had owned jointly during the marriage. Also in 1987, in consideration of the defendant having worked for the plaintiff for "next to nothing" for quite some time, the plaintiff decided to give the Coomba Park property to the defendant. The defendant's unchallenged evidence was that they could not afford to have the property transferred into his name so they left it in the plaintiff's name for the time being. 8 Some time prior to 1989 the plaintiff and the defendant moved into premises at St Johns Road, Warnervale. It is apparent that the deposit for the Warnervale property was paid out of the Jahnsen Roofing account (JR account). These premises had no electricity and no running water. At about Christmas 1989 the plaintiff and the defendant had a discussion about their future and their joint decision was to move elsewhere rather than spend money connecting the utilities to the Warnervale property. 9 There is no issue that in 1989 the plaintiff and the defendant decided that they would pool their resources, purchase a property, renovate that property, sell it and split the proceeds 50/50. The defendant agreed that this was the original intention. The property was found in mid-1990 and the plaintiff and defendant agreed to purchase it at a price of $70,000. At the time of purchase the dwelling on the property was a small, fibro-clad cottage with no internal doors, with an area of approximately 48 square metres. 10 The Coomba Park property was sold and the net proceeds were used as a deposit for the property. The plaintiff's unchallenged evidence is that the property was registered in the defendant's name because he asked the plaintiff to do so because he had never owned anything in his own name. The defendant does not suggest that this is evidence that the property was to be his alone. The plaintiff and the defendant obtained a loan from the State Bank in the amount of $59,000 for a period of fifteen years with monthly repayments of $890. The Bank holds a first mortgage over the property. 11 The plaintiff and the defendant moved into the property in 1990. They continued to work together at Jahnsen Roofing and all income from that business was paid into the JR account. The mortgage payments were made fortnightly from the JR account by direct debit in the amount of $445. In October 1990 the plaintiff received $15,000 by way of retained deposit on the proposed sale of the Warnervale property that fell through. He paid that amount into the JR account to assist with the mortgage payments and business expenses. 12 In June 1993 the defendant moved out of the premises as a result of what he referred to as "constant arguments". He returned eighteen months later and as there was "no peace or harmony" the plaintiff moved out of the property in April 1996. When the defendant moved out of the property in 1993 he ceased working in the Jahnsen Roofing business. He operated his own roof repair business, Wyong River Roofing, as a sole trader. In 1999 he had dealings with a person he described as "unscrupulous" and by reason of a disadvantageous contract, lost his business. Later in 1999 the plaintiff offered the defendant a job to assist with roof tiling work for another contractor. After about eight weeks the plaintiff and the defendant had a disagreement about the property, the details of which are not in evidence, and the defendant was sacked. 13 Three years after he left the property, the plaintiff received notification from the Bank that the mortgage payments were in arrears. In his affidavit sworn 12 July 2001 the plaintiff gave evidence that he telephoned the defendant in November 1999 and asked him "Why are the bank repayments behind? They were in advance when I left, you are living in the house and I feel it is your responsibility to meet those payments, the same as I did when I was living there after you left." The plaintiff's unchallenged evidence is that the defendant laughed and said, "It was a good scam, wasn't it?" 14 In November 2001 the plaintiff and the defendant had a telephone conversation. The unchallenged evidence of the plaintiff is as follows: In early November 2001 I received a notice from the Bank threatening legal action, and I shortly thereafter telephoned the Defendant and said to him "Did you receive a notice from the Bank threatening legal action if the arrears weren't paid?" He replied "Yes." I said, "Do you realise the Bank will sell the property and we will all be the losers if the arrears are not paid?" He replied "It is all under control, by the way could you give me $10,000.00 to fix up the house and finish it off?" I said, "I don't intend to put another cent into the house." He replied "Come on, you want a retirement fund, and I want a life, come on, can we come to a deal?" I said "Yes 50/50." The Defendant swore at me and then hung up. 15 During the period 1993 to 1996 the mortgage payments were continued by direct debit from the JR account. At the time the defendant ceased working at Jahnsen Roofing the JR account had a credit balance of $3,568.71. It is apparent from the evidence that the defendant did not receive any payment on his departure after having worked in the business for seven years. Whilst working in the business he was not paid for any sick leave nor did he receive any holiday pay. 16 Between 1993 and 1996 the defendant contributed approximately $2,000 to the mortgage payments by paying that amount directly to the plaintiff. In 1996 when the plaintiff moved out of the property the direct debits from the JR account ceased. It is apparent from a document in evidence that the amount outstanding on the loan at that time was $23,529. In early 1996 the defendant arranged for the mortgage payments to be debited directly from his personal bank account with the State Bank at Toukley. He has continued to make the mortgage payments since 1996 but has, from time to time, fallen into arrears. The Bank is now threatening legal action to recover the amount outstanding under the loan. 17 The renovations and extensions carried out by the plaintiff and the defendant have improved the property, increasing it to 150 square metres. The plaintiff's evidence is that he carried out most of the extensions and renovations himself and otherwise supervised work which included the electrical work, connection of the plumbing to the sewer and the spreading of soil as fill. The plaintiff also prepared all the measurements for the extensions and arranged the design work for the renovations of the existing dwelling. He ordered all the material and conducted all negotiations with the local council in relation to the plan approvals. The renovations and extensions took over two years and the plaintiff spent nearly every weekend and any spare time he had after work on the extensions and renovations. This evidence was unchallenged. 18 The plaintiff paid for most of the materials by cheque. The plaintiff set out in his affidavit evidence amounts that he paid for materials and labour in relation to the renovation of the property. The payments for the renovations that were made from the JR account up to the time the defendant ceased working with the plaintiff total $18,403. The plaintiff paid additional amounts totalling $679 out of the JR account for materials between June 1993 and October 1994 after the defendant had ceased work with the plaintiff. The plaintiff also paid $4,350 cash for materials and services in relation to the renovations. The defendant accepted the plaintiff made such payments. 19 The plaintiff also paid $32,930 representing seventy-four fortnightly mortgage payments from the JR account after the defendant ceased working at Jahnsen Roofing in 1993. The plaintiff also paid $4,860 for rate payments for the period 1993 to 1996, $448 for deferred stamp duty and $747 for insurance. 20 Since 1996 the defendant has continued to renovate the property. Although a second-hand kitchen was purchased for $350 in 1990, the defendant has removed it and installed five new kitchen boxes with new polyurethane doors, brass handles, new bench tops and new tiling. He has also replaced the floor of the bathroom, re-done the tiling and replaced the window by installing glass bricks. He has re-tiled the laundry and installed new tubs and new taps. These renovations have not been valued, however it is apparent the defendant borrowed $1,800 to purchase the materials and items for the renovations to the kitchen. 21 The task is to ascertain the property rights at the time of the acquisition of the property. But for the agreement by the defendant as to the common intention at the time of acquisition, there may have been an entitlement in the defendant to rely upon the presumption of advancement: R P Meagher and W C Gummow, Jacobs Law of Trusts, 6th ed., par [1212]- [1215]. The defendant candidly agreed that the agreement was to pool resources, to purchase the property, renovate it, sell it and share 50/50 in the proceeds of sale. 22 The defendant handled his case with apparent deference to the plaintiff. He did not wish to cross-examine him and conceded that the plaintiff would have paid the amounts he claimed he paid even when the amounts were not supported by any records. He also conceded that the plaintiff would have done the work on the property as outlined in his two affidavits. Notwithstanding that apparent deference, the defendant has put a submission that he did not think it was "fair" that the original intention be fulfilled because his father had not paid anything towards the property for the last six years. 23 In this case the conduct subsequent to the acquisition is only relevant to any declarations against interest because there is agreement as to the common intention at the time of acquisition. The statements made by the plaintiff in 1999 and 2001 in my view do not assist the defendant. They do not seem to me to amount to any declarations by the plaintiff against his interest. 24 The discussions in 1989 and 1990 between the plaintiff and the defendant were not mere personal or domestic talk as referred to in Jones v Padavatton [1969] 2 All ER 616. These discussions had financial and occupational significance for both parties. The acquisition of the property was dependent upon the continuing flow of funds from the business, Jahnsen Roofing, to pay the mortgage repayments. The commitment by both the plaintiff and the defendant to continue on with that work was therefore important. 25 The following matters are relevant in relation to the defendant's claim that it would now be "unfair" for the plaintiff to have the 50% ownership or share of the property as was the common intention at the time of acquisition: (a) The plaintiff paid $30,000 off the loan during the period when the defendant made no contribution towards either the upkeep of the property or the mortgage payments. This takes into account the $2,000 the defendant said that he provided to the plaintiff. These payments by the plaintiff enabled the principal amount of the debt to be reduced; (b) The unchallenged evidence of the plaintiff was that he worked constantly for two years on weekends and every chance that he had out of working hours to improve and extend the property; (c) Although the plaintiff has not contributed for six years it is clear that the loan was only reduced from approximately $23,000 at the time the plaintiff left in 1996 to approximately $19,000 in the year 2000, whereas it was reduced from $59,000 in 1990 to $23,000 in 1996. 26 Even if fairness were to dictate the outcome of this case it does not seem to me to be a case in which it would be unfair to enforce the original common intention of the parties. It is twelve years since the property was purchased and in one way or another both parties have contributed to the improvements of the property. 27 In any event fairness is not the dictator of the outcome of this case: Muschinski v Dodds (1986) 160 CLR 583 at 608. As Glass JA said in Allen v Snyder [1977] 2 NSWLR 685 at 693: … courts are giving effect to an arrangement based upon the actual intentions of the parties, not a rearrangement in accordance with considerations of justice, independent of the intentions 28 This is not a case in which the legal owner, the defendant, is claiming sole beneficial ownership. It is a case in which the common intention is recognized and agreed, but by reason of the stormy relationship between the parties the defendant claims that the plaintiff's claim should not be enforced. 29 Although the common intention or agreement was inarticulated or imprecise as to the time of fulfilment, I am not satisfied that such imprecision negates the existence of the common intention. The flexibility of the timing was accepted by both the plaintiff and the defendant. Both lived together in the property until 1993 and each has lived separately in the property for periods of time during which the extensions and renovations have been made. The property is now to be sold with a prospect of receiving a purchase price some three times greater than the price paid by the plaintiff and defendant in 1990. 30 I am satisfied that the legal owner of the property, the defendant, acquired his title pursuant to a bargain with the plaintiff that the plaintiff's beneficial interest of 50% was reserved to the plaintiff. The plaintiff acted to his detriment in paying the amounts that he did and in working for the years that he did in extending and renovating the property. 31 Before a trust is imposed and pursuant to the obligation expounded by the High Court in Giumelli v Giumelli (1999) 196 CLR 101 at 113, it necessary to first decide whether, having regard to the issues in the case, there is an appropriate equitable remedy which falls short of the imposition of a trust. There is in my view nothing short of the imposition of a trust in this case that is an appropriate equitable remedy. The relationship of the parties is so stormy that it is impossible to have any confidence that anything short of such imposition will ensure a determination of the rights and titles of the parties. The defendant is unemployed and although he has entered into the Agency Agreement to sell the property, some certainty needs to be brought into this relationship in regard to the property for each party's interests. 32 The plaintiff's principal claim is that this is an express trust which lacks writing. That seems to me to be the correct characterisation of the case and in the circumstances it would be appropriate to enforce the trust, notwithstanding a lack of writing, because it would be unconscionable for the legal owner to rely on the Statute of Frauds to defeat the plaintiff's beneficial interest: Allen v Snyder per Glass JA at 692-693. Alternatively it would be appropriate to impose a constructive trust. In this regard such reference is to a trust defined by the High Court in Giumelli in par [3] as: … a remedial response to the claim to equitable intervention made out by the plaintiff. It obliges the holder of the legal title to surrender the property in question, thereby bringing about a determination of the rights and titles of the parties. 33 I declare that the defendant holds his interest in the property being that contained in folio identifier 73/27/4526 and known as 73 Wolseley Avenue in Tacoma in the state of New South Wales as trustee for himself and the plaintiff in equal shares so that the plaintiff's share is 50% and the defendant's share is 50%. 34 I order that within 28 days the defendant execute and deliver to the plaintiff a Memorandum of Transfer of the property in registrable form so that the plaintiff and the defendant are registered as tenants in common of the property. 35 If the defendant fails to execute and deliver the Memorandum of Transfer to the plaintiff within 28 days, I order that the Registrar in Equity execute such Memorandum of Transfer and deliver it to the plaintiff. If the parties are unable to agree on a costs order I will hear argument in due course. ***