New South Wales Supreme Court CITATION : Americana Leadership College v Coll [2005] NSWSC 15 HEARING DATE(S) : 21/09/04 JUDGMENT DATE : 3 February 2005 Equity Division JURISDICTION : JUDGMENT OF : Barrett J DECISION : Short minutes to be brought in CATCHWORDS : EQUITY - equitable charge imposed by court - whether product of implied contract - whether affected by limitation period applicable to "quasi contract" - date from which interest should run on secured moneys Americana Leadership College Pty Limited v Coll [2003] NSWSC 295 CASES CITED : Giumelli v Giumelli (1999) 196 CLR 101 Johnson v The King [1904] AC 817 Americana Leadership College Pty Limited - Plaintiff PARTIES : Mary Annette Coll - Defendant FILE NUMBER(S) : SC 5217/01 Mr M.R.J. Ellicott - Plaintiff COUNSEL : Mr S.Y. Reuben - Defendant John R. Quinn & Co - Plaintiff SOLICITORS : Gary Cassim & Associates - Defendant LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BARRETT J THURSDAY, 3 FEBRUARY 2005 5217/01 – AMERICANA LEADERSHIP COLLEGE PTY LIMITED v MARY ANNETTE COLL JUDGMENT 1 On 15 April 2003, I published reasons for conclusions that, first, the plaintiff had failed to make out any of its claims to be recognised as the owner of the Elizabeth Bay property of which the registered proprietors are the defendant and her former husband, Francisco Coll, who died on 15 December 1999; second, that the plaintiff was entitled to an equitable charge for strata levies, local government rates and water rates by the plaintiff in respect of the property together with interest and, third; that the defendant's title to the property is charged with the payment of the sum payable by the defendant to the plaintiff, such sum to be determined by inquiry by a Master: see Americana Leadership College Pty Limited v Coll [2003] NSWSC 295. 2 Attempts were made by the parties to agree the sums concerned. Those attempts brought to light matters that the defendant later incorporated into new points of defence which, with leave, were filed on 7 May 2004. These raised issues of law on which I heard argument on 21 September 2004. 3 In paragraph 1 of the points of defence, the defendant admitted that the equitable charge secures amounts paid by the plaintiff for strata levies, local government rates and water rates since the death of Francisco Coll. The plaintiff sets out a quantification of those items ($23,976.13) and claims a set-off for the amount of agreed mesne profits ($13,650.00). These aspects of the points of defence call for no comment at this point. They do no more than to recognise the equitable charge, at least in respect of items arising after the death of Francisco Coll, and enter upon the territory of quantification which is for subsequent argument and determination. 4 Paragraphs 2 and 3 of the points of defence deny the plaintiff's entitlement to have secured by the equitable charge (and to enjoy the benefit of the equitable charge in respect of) any of the relevant outgoings paid by the plaintiff in respect of items arising before the death of Francisco Coll. This contention is advanced on two bases: first, that there was, while Francisco Coll lived, an agreement between him and the plaintiff that the plaintiff would have the benefit of possession of the property provided it paid the charges (paragraph 2); and, second, on the basis of laches (paragraph 3). I shall deal with these separately. 5 The contention in paragraph 2 is based on the proposition that the plaintiff can be protected by the equitable charge (to which I have already found it to be entitled) only in respect of moneys agreed (either expressly or by implication) to be paid to the plaintiff by the property owners (or, as the argument is put, by one of the joint tenants, being Francisco Coll). But this approach overlooks the foundation of the equitable charge as stated in my judgment. After identifying strata levies, local government rates and water rates as outgoings of the relevant kind (which I designated "the first category"), I said: "[84] There is a question whether the course of conduct involved in the making by the plaintiff of the payments in the first category justifies the imposition of a constructive trust or, as in Giumelli v Giumelli (1999) 196 CLR 101, some form of equitable charge in favour of the plaintiff in respect of first category sums expended by it. [85] I do not think that the events involving the payment of these outgoings can be seen as justifying a finding that a constructive trust should be imposed in respect of the property. The payments by the plaintiff were not referable to some belief of ownership. I have already referred to the events involving the mortgages which show that the plaintiff cannot have believed that it was the owner entitled to require the registered proprietors to execute the mortgages. But the possibility remains that some lesser form of equitable relief in respect of the property may be warranted by the plaintiff's having made the first category payments. As the majority judgment in Giumelli v Giumelli shows, some such lesser relief will be appropriate if it avoids going beyond what is required for conscientious conduct of the defendant and also avoids injustice to the plaintiff. [86] A person who spends money on the property of another prima facie does not thereby acquire a proprietary interest in the property. But where the payments preserve the property by avoiding or forestalling consequences that would otherwise see the owner deprived of that property, the situation is one where, in a real sense, the owner's continuation of ownership has been preserved by the person making the payment so that there has been a tangible contribution by that person to maintenance of title to the property. In line with the approach in Giumelli v Giumelli , it is appropriate that the paying party be recognised as entitled to recover accordingly out of the preserved property the amount outlaid and that the property itself be the source of security for that amount. As in Giumelli v Giumelli , it is appropriate that the paying party be recognised as entitled to recover accordingly out of the preserved property the amount outlaid and that the property itself be the source of security for that amount. In words used in Giumelli v Giumelli , the result in this case 'points inexorably to relief expressed not in terms of acquisition of title to land but in a money sum'. [87] The court should accordingly declare that the plaintiff is entitled to payment by the defendant of a sum representing the aggregate of the several sums outlaid by it by way of strata levies, local government rates and water rates in respect of the Elizabeth Bay unit, as determined by inquiry to be made by a Master, such aggregate, when ascertained, to be charged upon the Elizabeth Bay unit with interest under s.94 of the Supreme Court Act . In the course of the hearing, there was reference to this eventuality and I said that, if it arose, it should be dealt with on the basis that, upon the inquiry by the Master, each party should have full opportunity to put on further evidence as to quantum. It will be appropriate to incorporate that in the orders; also that the interest component should be determined by the Master. All this assumes, of course, that the plaintiff's remaining claim to title to the property does not succeed, being the claim to title by possession. It is to this that I now turn." 6 Contract, express or implied, does not represent the foundation of the equitable charge so described. That foundation is, rather, the two lines of reasoning described in the following extract from the judgment of Gleeson CJ, McHugh, Gummow and Callinan JJ in Giumelli v Giumelli (1999) 196 CLR 101 at p.122: "In Olsson v Dyson (1969) 120 CLR 365 at 378, Kitto J observed that the judgment of the Lord Chancellor in Dillwyn v Llewelyn seemed to contain two concurrent lines of reasoning. One was that, assuming there was no contract, nevertheless the conduct of the father was such as to bind him in conscience to make the legal situation correspond with the implication and the encouragement given the son to lay out the money. The other was that the father's conduct in encouraging the son to build the house on the footing that the land would be his, when acted upon by the son, created an equity which bound the father to make good the son's expectation." There is a binding in conscience by equity apart altogether from any contract and any imputation of contractual behaviour or content. The limitation contended for in paragraph 2 of the points of defence by reference to implied contract is not operative. 7 The main submission in support of the laches defence raised in paragraph 3 of the points of defence is that the delay by the plaintiff in seeking recoupment of the outgoings paid by it until after the death of Francisco Coll means that there is no way that the contractual basis for the claim can be certified or tested. There is thus again reference to a contractual basis for the equitable charge which is at odds with its nature as stated in the judgment. 8 As to paragraph 3 of the points of defence, it is true that the plaintiff did not foreshadow any claim for an equitable charge in respect of outgoings paid by it until shortly before the hearing in February 2003. At that point, of course, it was seeking to make out a claim to a much more comprehensive interest, namely, full beneficial ownership. Such a claim had first been pursued in 1996 in proceedings referred to in paragraph 5 of my earlier judgment. Someone who makes a claim to beneficial ownership of particular property by way of resulting trust or constructive trust in respect of that property, without any defence of laches being raised, cannot be heard to rely on that defence when a lesser and limited entitlement to the property is recognised by way of equitable charge imposed as a means of doing equity. It is simply not the case that the plaintiff has stood by and led the defendant to think that it has no claim in respect of the property. 9 Paragraph 4 of the points of defence seeks to raise a defence by reference to the Limitation Act 1969. The submission is that, although the relief by way of equitable charge is equitable relief, it is similar to relief arising out of contract or agreement so that there is an analogy with "a cause of action founded on contract (including quasi contract)" as referred to in s.14(1)(a) of the Act which imposes a limitation period of six years from the time the cause of action first accrued. As the above extract from Giumelli v Giumelli emphasises, this is not a case of contract as such. Is it properly regarded as a case of "quasi contract"? 10 Section 14 was enacted in 1970. By referring to "a cause of action founded on contract (including quasi contract)", it no doubt encompasses some claims which today would come under the general rubric of unjust enrichment. But as is recognised at paragraph 2717 of Mason and Carter, "Restitution Law in Australia" (1995), unjust enrichment, as a concept, is wider than quasi contract. In my opinion, the basis described in the above extract from Giumelli v Giumelli makes it clear that the particular form of relief by way of equitable charge, which is not the product of any assumed or implied promise but of the operation of equity upon conscience, is not so allied to contract as to be comprehended by the notion of quasi contract. There is, in any event, the point that the cause of action asserted was not a "a cause of action founded on" the right to an equitable charge. The cause of action was "founded on" a right to such equitable relief as was appropriate to the circumstances of the case, with the result that s.23 of the Limitation Act must be seen as displacing any operation that s.14 might otherwise have. 11 Paragraph 5 of the points of defence deals with the question of interest on the moneys outlaid by the plaintiff which are the subject of the equitable charge. The defendant maintains that interest should be allowed only from the time at which the claim for interest was specifically made. I accept that submission. There is no evidence that the plaintiff ever made a claim for reimbursement of the moneys outlaid by it. The outlays were voluntarily made by the plaintiff. The defendant submits that an analogy may be drawn with a case of voluntary payment by mistake, so that, in the absence of fraud, recovery should be without interest: see Johnson v The King [1904] AC 817. The analogy is, in my opinion, valid and means that interest, as specified at paragraph [87] of my earlier judgment, should be computed and payable only from the time when the plaintiff asserted the right to recover the moneys concerned, that is, upon the filing of the amended summons on 14 February 2003. 12 Finally, by paragraph 6 of the points of defence, the defendant claims an equitable set-off and account from the plaintiff arising from the plaintiff's possession of the property and its receipt of the rents and profits. The plaintiff's response is twofold: first, that it has not been shown by proper evidence that any rents and profits were received by the plaintiff; and, second, that this aspect of the defendant's claims will be more appropriately and more constructively addressed in the light of evidence as to quantum and financial flows yet to be forthcoming in connection with the inquiry to be made by a Master. I accept the second limb of that submission. The set-off issue should be reserved for further argument at a later stage. As a matter of efficiency, that aspect should be addressed by the Master by whom the inquiry is undertaken, with such order for referral to the Master as is needed being made. 13 It remains only to create a framework for the inquiry by the Master in conformity with my original judgment and these reasons. I direct that, within 21 days, the parties file by delivery to my Associate short minutes of orders and directions creating such a framework. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.