McCormack v Graham & Anor [2004] NSWSC 707

New South Wales Supreme Court

CITATION : McCormack v Graham & Anor [2004] NSWSC 707 HEARING DATE(S) : 14/07/04 JUDGMENT DATE : 9 August 2004

JUDGMENT OF : Gzell J DECISION : Declarations of trusts interests refused. Order for repayment of loan.

CATCHWORDS : EQUITY - Equtiable Estates and Interests - Whether plaintiff contributed to purchase price of house registered in the names of her daughter and son in law or whether she lent the moneys to them. André et Compagnie SA v Marine Transocean Ltd [1981] 1 QB 694 CASES CITED : Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal [1983] AC 854 Morris v Morris [1982] 1 NSWLR 61 Beryl McCormack - Plaintiff PARTIES : Christine Ann Graham - 1st Defendant Bruce John Graham - 2nd Defendant FILE NUMBER(S) : SC 5967/03 COUNSEL : Mr Peter Cullen - Plaintiff Mr John Turnbull - Defendants SOLICITORS : Woolf Associates Adamson Solicitors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

GZELL J

MONDAY 9 AUGUST 2004

5967/03 BERYL MCCORMACK v CHRISTINE ANN GRAHAM & ANOR JUDGMENT 1 The first defendant, Christine Ann Graham, and the second defendant, Bruce John Graham, her husband, purchased a house in Narrabeen, New South Wales in 1975 for $35,000. They paid a deposit of $16,000 and raised the balance by mortgage. The $16,000 was provided by the plaintiff, the first defendant's mother, Beryl McCormack. The house was registered in the names of Mr and Mrs Graham. The question is whether Mrs McCormack has a 16/35th interest in the house. 2 It was common ground that if Mrs McCormack lent the money to Mr and Mrs Graham, as they contended, Mrs McCormack had no equitable interest in the house. Her claim to a resulting or constructive trust over an interest in the house depended upon a contribution by her to its purchase price. Did Mrs McCormack lend the money? 3 The first question, therefore, is whether Mrs McCormack lent the $16,000 to Mr and Mrs Graham. 4 Mr Graham said that when he and his wife went to the solicitor's office to sign the papers for the purchase of the house, the solicitor produced a loan agreement that Mrs McCormack wished them to sign. He said he agreed to sign it because he had every intention of paying back the money. He did not see the document again. He said the document required repayment within a specified time which he did not recall and there was no mention of interest. 5 Mrs Graham remembered signing papers but did not remember what they were, other than that they related to the house. In particular, she did not recall any document recording a $16,000 loan. 6 Mrs McCormack denied making a loan and said she did not attend any solicitor's office with respect to the purchase of the house. 7 In cross examination, Mr Graham said it was possible he had confused a loan document with the mortgage document. 8 I make no finding as to the existence or otherwise of a loan document because both sides asserted that the characterisation of the arrangement under which the $16,000 was paid depended upon the terms of conversations between Mrs McCormack and the Grahams. 9 In her first affidavit, Mrs McCormack said she gave Mr Graham two cheques made out to him totalling $16,000 and said to the Grahams words to the effect: "This is for the deposit on the house". Mrs McCormack was 83 years of age when she swore that affidavit which was some 28 years after the conversation in question. 10 Mrs Graham said her mother used words to the effect: "I will loan you $16,000 and when Bruce sells his land in Western Australia you can pay me back. I don't want any interest or anything. I just want to be able to help you out". 11 Mr Graham said the words were to the effect: "If you want to buy a house I will lend you the deposit and you can pay me back sometime in the future". 12 Mrs McCormack swore an affidavit in response in which he denied these conversations. She reiterated what she had said in her first affidavit. And she added further words: "I will pay the deposit – that's my contribution to the home". 13 The day before the hearing, Mrs McCormack swore a third affidavit in which she said that the words she used were: "I will give you the deposit of $16,000 for this house providing that I can live here for the rest of my life". 14 In cross examination, Mrs McCormack said that the version of the conversation in her first affidavit was of a second conversation. She said that before it she had said: "I will give you the deposit on the house providing I can live here the rest of my life". 15 When the differing versions of the conversations were put to her in cross examination and she was referred to the evidence of her daughter, Mrs McCormack said: "When I made the first and second statements I thought that would suffice, that it was understood. When I read their statement, I realised that I had to clarify that it was to be my home for the rest of my life". 16 Mrs McCormack said she had absolutely no doubt about what she had said. 17 If Mrs McCormack recalled a conversation that preceded the one to which she deposed in her first affidavit that, critically for her case, referred to a condition that she reside in the house for the rest of her life, one would have expected her to have referred to that conversation in the affidavit. Her answer that she had to clarify the situation is an odd way of referring, if it does, to a recollection of a conversation in different terms. I do not accept her assertion that she had absolutely no doubt about the terms of the conversations. The differing versions of the conversations suggest an imperfect recollection as one would expect of an elderly lady trying to recall what had happened so long ago. 18 Because of a deterioration in her relationship with her daughter, Mrs McCormack moved out of the house to live with her sister from about 1979 until she returned in about 1981. She made no claim in that period to enforce any equitable interest in the house. 19 Because of further deterioration in the relationship with her daughter, Mrs McCormack moved out of the house again on 26 December 1998 and has not returned. She made no claim to any equitable interest in the house until July 2003 when her solicitors wrote to Mr and Mrs Graham. 20 Mrs McCormack had inherited money, portion of which she invested in bonds that she placed in the name of Mrs Graham. On 5 March 2003, Peter O'Neill, a solicitor, wrote to Mrs Graham stating that he acted on behalf of Mrs McCormack who had advised him that she held several investments in Mrs Graham's name. The investments were specified and the letter required Mrs Graham to sign a redemption form with respect to one of the bonds. 21 Mrs McCormack denied giving instructions to Mr O'Neill or ever having met him or spoken with him. She was as adamant in this testimony as she was in saying there was no shadow of a doubt in her mind that she was not mistaken in her testimony as to the conversations. 22 Mr O'Neill's letter contained a detailed specification of the bonds in question. Mrs McCormack accepted that the descriptions were accurate. 23 I reject Mrs McCormack's evidence that she did not instruct Mr O'Neill. It is highly unlikely that a solicitor would write such a letter if not acting for Mrs McCormack. It is impossible that a solicitor would have the details of her investments unless he had been informed of them and that suggests it was unlikely that he received no instructions from her. 24 While the letter referred to the investments, no claim was made that Mrs McCormack had any equitable interest in the house. 25 The inconsistencies in the evidence of Mrs McCormack compared with the consistencies in the evidence of Mr and Mrs Graham leads me to find that Mrs McCormack did not have a clear recollection of the conversations in question. That is not surprising considering the time that has elapsed since the event and her age. I prefer the evidence of the Grahams. I find that Mrs McCormack lent Mr and Mrs Graham $16,000 without interest to be repaid on her demand at some time in the future. To what relief is Mrs McCormack entitled? 26 Mrs McCormack sought declarations that she had an equitable 16/35th interest in the house and an order for sale. I allowed a late amendment to include a claim for further or other relief. 27 It was submitted that Mrs McCormack was entitled to an order for payment of an amount representing her lost opportunity for investment of $16,000 from 1975 to the present. No basis was put for this submission. I have found that there was a contract of loan between the parties. Subject to what appears below, Mrs McCormack is entitled to the benefit of her contract. She might have called for the repayment of the moneys under it. She said she did not. I see no basis to depart from the contract and impose upon the borrowers an obligation to restore her to some position she may have been in had she chosen to invest the funds in a different way in 1975.