New South Wales Supreme Court CITATION : Buffrey v Buffrey & Anor [2006] NSWSC 1349 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 1 December 2006 JUDGMENT DATE : 6 December 2006 JURISDICTION : Equity Division JUDGMENT OF : Palmer J DECISION : Declaration and order as sought in Statement of Claim. CATCHWORDS : RESULTING TRUSTS – PRESUMPTION OF ADVANCEMENT – Competition between presumptions – principles summarised – whether facts rebutted presumption of resulting trust – whether facts rebutted presumption of advancement. - Brown v Brown (1993) 31 NSWLR 582 - Calverley v Green (1984) 155 CLR 242 - Cummins (a bankrupt), Trustees of the Property of, v Cummins (2006) 80 ALJR 589 - Currie v Hamilton [1984] 1 NSWLR 687 - Gissing v Gissing [1971] AC 886 CASES CITED : - Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 - Martin v Martin (1959) 110 CLR 297 - Neilson v Letch (No 2) [2006] NSWCA 254 - Nelson v Nelson (1995) 184 CLR 538 - Ryan v Dries [2002] NSWCA 3 - Shephard v Cartwright [1955] AC 431 - Thompson Haulage Pty Ltd v Leigh [2006] NSWSC 540 William Kenneth Buffrey – Plaintiff PARTIES : Janice Annette Buffrey – First Defendant ORIX Australia Corporation Limited – Second Defendant FILE NUMBER(S) : SC 3332/06 COUNSEL : M.W. Sneddon – Plaintiff T.S. Hale SC, J.K. Chippindall – Second Defendant Stuart J. Latham – Plaintiff SOLICITORS : Tsolakis Solicitors – First Defendant – Submitting appearance M.D. Nikolaidis & Co – Second Defendant 3332/06 Buffrey v Buffrey & Anor JUDGMENT 6 December, 2006 Introduction 1 The Plaintiff, Mr Buffrey, and First Defendant, Mrs Buffrey, are the registered proprietors as joint tenants of an investment property, Unit 2, 208 Gardeners Road, Kingsford ("the Kingsford Property"). Mr Buffrey seeks a declaration that Mrs Buffrey holds her interest in the Kingsford Property upon a resulting trust for him and an order that she convey her interest to him accordingly. 2 The circumstances giving rise to the proceedings are as follows. In 2004, Mrs Buffrey was accused by her former employer, ORIX Australia Corporation Ltd ("ORIX"), of having defrauded it of a large sum of money. ORIX commenced proceedings against her to recover the money and obtained an interlocutory asset-freezing order which affected three properties registered in the names of Mr and Mrs Buffrey as joint tenants, namely, their matrimonial home and two home units acquired as investments, one of which is the Kingsford Property. 3 Mr Buffrey says, and I accept, that he first found out about the accusations of ORIX against Mrs Buffrey and of the proceedings commenced by it against her in March this year. 4 Mr Buffrey was advised to protect his own interest in the Kingsford property and, consequently, he commenced these proceedings against Mrs Buffrey. Mrs Buffrey has not participated in the proceedings at all. However, ORIX obtained an order joining it as a second defendant in the proceedings as its interests might be affected and, otherwise, there would be no proper contradictor. 5 ORIX does not assert that any of the proceeds of Mrs Buffrey's alleged fraud can be traced into the Kingsford Property. However, it says that Mrs Buffrey's interest in that property is an asset against which it can enforce a judgment if it succeeds in establishing its fraud case against her in other proceedings. It is for that reason that ORIX contests the orders sought by Mr Buffrey against Mrs Buffrey in these proceedings. It asserts that Mrs Buffrey's interest as joint tenant is held by her both legally and beneficially. Facts 6 Mr and Mrs Buffrey have been married for thirty-six years and both have worked from the commencement of their married lives. Mr Buffrey has hearing and reading disabilities and he left school at the age of fourteen years. He is unable to read with any degree of facility. He has worked in various jobs, mainly to do with driving. Mrs Buffrey has worked in clerical positions. The evidence suggests that Mrs Buffrey takes responsibility for managing the family's financial affairs. 7 In 1993, Mr Buffrey suffered a severe accident in the course of his employment. His capacity to work thereafter was very much reduced. He commenced proceedings at common law for damages against the party at fault and in July 1997 damages in an amount of $419,030 were awarded in his favour. In August 1997, Mr Buffrey received a nett sum of $226,030 after deduction of legal costs and disbursements. In October 1997, he received an additional amount of $41,373 in respect of workers compensation. 8 Mr Buffrey was forty-eight years old when he received his damages and compensation. He says that he realised that he had to use that money to provide for his future and that he decided, on the advice of a friend, to invest it in real estate. 9 In early 1998, Mr Buffrey became aware that the Kingsford Property, which his daughter had been renting for about three years, was coming up for sale. He decided to purchase it as an investment. The purchase was completed on or about 13 May 1998 and Mr and Mrs Buffrey became registered proprietors of the property as joint tenants. 10 There is no dispute that the acquisition cost of the property, $195,932.94 (which includes the purchase price and the costs and expenses of the acquisition) was provided as follows: – as to $145,932.94: by Mr Buffrey from the monies received by him from the common law litigation and his workers compensation; – as to $50,000: by a mortgage over the Kingsford property given by Mr and Mrs Buffrey to the St George Bank. Taking Mrs Buffrey's contribution to the total acquisition costs of the property as half of the sum borrowed from the St George Bank, the proportionate contributions of Mr and Mrs Buffrey respectively are 87.24% and 12.76%. 11 The evidence shows that: – Mr and Mrs Buffrey's daughter has continued to live in the Kingsford Property and has paid rent into an account with St George Bank in the joint names of Mr and Mrs Buffrey; – the mortgage repayments to St George Bank have been deducted from the joint account; – Mr and Mrs Buffrey's tax returns show that rental income from the Kingsford Property is shared equally between them, as are expenses and outgoings; – the rent from the Kingsford Property is mostly more than sufficient to meet mortgage repayments and outgoings for the Kingsford Property. 12 Mr Buffrey asserts that: – he provided all of the equity for the acquisition of the Kingsford Property; – Mrs Buffrey has made no financial contribution to the acquisition costs; – the whole of Mrs Buffrey's interest in the property as joint tenant is held on a resulting trust for him; – alternatively, if Mrs Buffrey's joinder in the mortgage to St George Bank represents a contribution by her to the acquisition cost of the property, she holds her interest as joint tenant upon a resulting trust so that the beneficial interests in the property reflect the parties' proportions of contributions, i.e., as to 87.24% to Mr Buffrey and as to 12.76% to Mrs Buffrey; – the presumption of advancement as between husband and wife does not operate so as to rebut the presumption of resulting trust because Mr Buffrey, at the time of acquisition of the property, had no intention to make a gift of any beneficial interest in the property to Mrs Buffrey. 13 ORIX asserts that: – the evidence demonstrates that Mr and Mrs Buffrey had a common intention at the time of acquisition of the Kingsford Property that their interests in it be equal, so that the presumption of resulting trust is rebutted; – alternatively, the evidence does not demonstrate that the presumption of advancement has been rebutted. The principles 14 The presumptions of resulting trust and advancement often compete in cases between husband and wife, or de facto spouses, or between parent and child, where title to property is held in joint names but the parties have made unequal contributions to the cost of acquisition. The principles upon which the Court proceeds are now well settled and can be summarised thus: (1) one begins with the presumption that the equitable title to the property is at home with the legal title but that presumption, like all evidentiary presumptions, gives way to facts showing the contrary; (2) where property is held in joint names but the joint tenants have not contributed equally to the cost of acquisition, it is a presumption of equity, not lightly displaced, that the beneficial interests in the property are to be held between the parties upon a resulting trust in proportion to their respective contributions to the acquisition cost; (3) the presumption of resulting trust may be rebutted by showing that there is a relationship between the parties giving rise to the presumption of advancement so that the party who has contributed less or nothing to the acquisition cost is nevertheless to have an interest in accordance with the legal title; (4) if a presumption of resulting trust or a presumption of advancement arises where one party has contributed the whole of the acquisition cost of the property but the title to the property is placed in the name of another party: a) whether either presumption is rebutted depends upon the intention solely of the party who provided the money because the question is whether that person intended to make a gift of an interest in the property to the person who did not contribute to its acquisition; b) evidence by the person making the payment as to his or her intentions at the time of the transaction is admissible but the Court will treat that evidence with caution as the evidence of an interested party; c) the Court is more assisted in determining the subjective intention of the person making the payment by evidence of that person's contemporaneous statements of intention, subsequent admissions against interest, subsequent dealings with the property, and by evidence of other relevant surrounding circumstances; (5) If the presumption of advancement arises where joint tenants have made unequal contributions to the acquisition cost: a) whether the presumption is rebutted depends upon the intention solely of the party who provided the larger contribution because the question is whether that person intended to make a gift conferring equality of interest in the property on a person who did not contribute equally to its acquisition; b) evidence as to the intention of the person making the larger contribution is admissible and assessed in the same way as in the case where one party has provided the whole of the acquisition cost; (6) if the presumption of resulting trust arises where the joint tenants have made unequal contributions to the acquisition cost: a) the presumption may be rebutted by evidence showing that the common intention of the parties at the time of acquisition was for equality of interests despite inequality of contributions; b) evidence of the subjective and uncommunicated intention of one of the parties is inadmissible as going to prove the common intention; c) the common intention of the parties may be ascertained from the evidence as to their contemporaneous communicated statements of intention, subsequent admissions against interest, subsequent mutual dealings with the property, and from evidence as to other relevant surrounding circumstances; (7) for the purposes of the presumptions of both of resulting trust and of advancement: a) the acquisition cost of property includes the costs, fees and disbursements incidental to its acquisition; b) a party contributes to acquisition cost by borrowing funds necessary to make up the acquisition cost, whether or not that party subsequently contributes to payment of principal and interest due on the borrowing; c) parties borrowing jointly in order to make up the acquisition cost are treated as having contributed the borrowed capital in equal shares; d) a party who does not borrow funds to make up the acquisition cost but who subsequently pays, or contributes to payment of, principal and interest on such a borrowing does not, by that fact alone, make a contribution to acquisition cost. For authority in support of these propositions see: as to (1): Currie v Hamilton [1984] 1 NSWLR 687, at 690; Martin v Martin (1959) 110 CLR 297, at 303; as to (2): Calverley v Green (1984) 155 CLR 242, at 246, 258-259; Shephard v Cartwright [1955] AC 431, at 455; Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353, at 365; Brown v Brown (1993) 31 NSWLR 582, at 596; as to (3): Martin v Martin (supra); Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 80 ALJR 589 [55]; as to (4)(a) and 5(a): Nelson v Nelson (1995) 184 CLR 538, at 547; Charles Marshall Pty Ltd v Grimsley (supra) at 364-365; as to (4)(b) and (5)(b): Martin v Martin (supra) at 304; Calverley v Green (supra) at 261; R.S. & G.S. Thompson Haulage Pty Ltd v Leigh [2006] NSWSC 540, [15] per White J; as to (4)(c) and (6): Cummins (supra) 65; Neilson v Letch (No 2) [2006] NSWCA 254 [28] per Mason P; Gissing v Gissing [1971] AC 886, at 906; Calverley v Green (supra) at 261; as to (7)(a): Ryan v Dries [2002] NSWCA 3, at [52]-[53]; as to (7)(b), (c) and (d): Calverley v Green (supra) at 251, 267-268. Issues 15 The issues are: i) did Mr Buffrey alone provide the acquisition cost of the Kingsford Property or did Mrs Buffrey, by becoming a co-mortgagor, also contribute; ii) if Mrs Buffrey contributed, is the presumption of resulting trust rebutted by evidence establishing that the parties had a common intention that their interests in the Kingsford Property would be equal despite their unequal contributions; iii) is the presumption of resulting trust displaced by the presumption of advancement or does the evidence establish that Mr Buffrey did not intend to make a gift to Mrs Buffrey so as to make her share in the property equal to his, so that the presumption of advancement is rebutted. Who provided the purchase price 16 I have set out above how the money required for the acquisition of the Kingsford Property was provided. All of the equity came from Mr Buffrey and the mortgage payments and outgoings largely, if not always entirely, came out of the rent of the property. In that sense Mrs Buffrey provided no money, or very little which is identifiable, out of her own pocket. Mr Buffrey relies upon that circumstance to assert that he, in effect, provided the whole of the cost of acquisition of the Kingsford Property. 17 I am unable to accept that submission. Mrs Buffrey was unquestionably liable as a co-mortgagor for the principal and interest under the mortgage from St George and it was that principal which made up the shortfall between the purchase price of the Kingsford Property and the amount provided by Mr Buffrey out of his own money. Accordingly, Mr and Mrs Buffrey are regarded as co-contributors to the purchase price: see proposition (7)(b) above. Mrs Buffrey's contribution is half of the principal borrowed under the St George mortgage: see proposition (7)(c) above. The respective contributions of the parties to the purchase price are, therefore, as previously set out: 87.24% from Mr Buffrey and 12.76% from Mrs Buffrey. Was there a resulting trust 18 By reason of the unequal contributions of Mr and Mrs Buffrey to the acquisition cost of the Kingsford Property, a presumption of resulting trust arises. ORIX has the evidentiary burden of rebutting the presumption. The presumption is not lightly displaced: see proposition (2) above. 19 Mrs Buffrey has not given evidence. There is no evidence of contemporaneous and communicated statements of intention between Mr and Mrs Buffrey as to how the interests in the property are to be held. There is no subsequent express admission against interest by Mr Buffrey. 20 ORIX points to the following circumstances as supporting the inference of a common intention of equality: – the Kingsford Property was placed in the names of both Mr and Mrs Buffrey as joint tenants; – the tax returns of Mr and Mrs Buffrey showed each as having an equal share of income from rent of the property; – rent from the property was placed in a joint account; – mortgage payments to St George Bank were made out of the joint account. 21 The fact that the property was placed in the names of Mr and Mrs Buffrey as joint tenants is, of course, material but insufficient on its own to give rise to the inference of a common intention of equality. The presumption of a resulting trust can only arise where the equality demonstrated by the legal title is inconsistent with the parties' contributions to the acquisition cost. 22 More persuasive, both as an implied admission by Mr Buffrey against interest and as a relevant subsequent mutual dealing between the parties, is the fact that Mr and Mrs Buffrey's income tax returns show them as equally entitled to the rent from the property and that the rent went into a joint account at St George Bank. 23 I take into account the following additional relevant surrounding circumstances. 24 First, Mr Buffrey's evidence is that Mrs Buffrey is shown on the title to the property only because the St George Bank would not lend on the security of the property to him alone as he was then unemployed, whereas Mrs Buffrey was employed. I accept that evidence. It was not challenged and it is inherently probable, as I shall explain further below. 25 Second, all of the equity came from Mr Buffrey's damages pay-out; no contribution to equity came from Mrs Buffrey other than the fact that she joined in the mortgage as co-mortgagor. 26 Third, I accept the unchallenged evidence of Mr Buffrey that at all relevant times he and Mrs Buffrey were earning separate incomes from their separate and independent activities and that: "I run my side, my wife run her side" : T24.35-.55 27 Fourth, the property was an investment, not the matrimonial home. People may have different attitudes to joint ownership of investment property and property which is acquired for the use of the family. 28 Fifth, I accept without hesitation Mr Buffrey's evidence that he was never aware of how and why his accountant arranged the tax affairs of his wife and himself. His reading and numeracy difficulties were obvious in the witness box – for example, he could say that he had been married at the age of twenty-one and that he was now fifty-seven years old, but he could not say how many years he had been married or even in what year he was married. He had difficulty in understanding some questions and concepts. He had no familiarity with legal or business terms. I accept that Mr Buffrey left management of matters such as tax returns and banking arrangements to his accountant. From his evidence generally and from my observation of him in the witness box, I do not think that Mr Buffrey had any real understanding of what his tax returns provided or why, or as to what the legal implications might be. It would be quite unjustified to assume that Mr Buffrey's tax returns reflected his own intentions as to ownership of the Kingsford Property at the time of its acquisition. 29 Sixth, although Mrs Buffrey may well be better than Mr Buffrey at understanding the reasons for, and implications of, showing the income of the Kingsford Property in the couple's tax returns as shared equally between them, there is no direct evidence that she had any particular understanding at the time of acquisition and that she had it in common with Mr Buffrey. 30 Seventh, the fact that the rents of the property were paid into the parties' joint account at the St George Bank may well have been part of the arrangement insisted on by the St George Bank when approving the mortgage, bearing in mind that it would only approve the mortgage if Mrs Buffrey was shown on the title and was joined in the mortgage. The few bank statements relating to the joint account which are in evidence show that there were weekly credits of rent of $200 into the account followed by weekly debits of $200 on account of the mortgage payments due to the Bank. There do not seem to be any transactions on this account other than the payment in of rent and the payment out of loan repayments. I cannot assume that the establishment of the joint account for the receipt of rent and the payment therefrom of mortgage repayments reflected any broader agreement or understanding between Mr and Mrs Buffrey than that the Bank required such an account to be established as part of the arrangements for the loan, just as it had required Mrs Buffrey's name to be shown on the title and the mortgage. 31 Bearing in mind all of these circumstances, I do not feel satisfied that the tax returns of the parties and the payment of rent into the joint account with St George Bank have the significance that ORIX would place upon them. The state of the evidence as to the common intention of the parties is equivocal at best. I do not think that it is sufficient to displace the presumption in favour of resulting trust. Is the presumption of advancement rebutted 32 Mr Buffrey bears the onus of proving facts which displace the presumption of advancement in favour of Mrs Buffrey. He seeks to discharge this onus only by his own evidence as to his intention at the time of the transaction. He is entitled to adduce such evidence but it is regarded cautiously by the Court. The essential question is whether I believe Mr Buffrey when he says that he did not intend that Mrs Buffrey have an interest in the Kingsford Property equal to his, despite the surrounding circumstances invoked by ORIX which, it says, indicate that Mr Buffrey had a contrary intention or had no sufficient intention at all. 33 I begin by saying that I found Mr Buffrey to be a witness who was honestly endeavouring to tell the truth and to be accurate, to the best of his ability. In giving his evidence he was hampered by the fact that he was taking medication for depression, that he was sometimes overcome by emotion because of the trouble his wife was in and how it had affected their relationship and their family, by his difficulty in reading, by his limited education, and by his general lack of familiarity with business and legal matters. Nevertheless, to my observation, he tried his best to answer questions directly. 34 Mr Buffrey's unchallenged evidence was that he decided to buy the Kingsford Property as a result of advice given to him by a solicitor, Mr Vizzone, a friend of his who had played football with him. Mr Vizzone had told Mr Buffrey that the money he had received in damages and compensation would not last long and that he should buy real estate as an investment so that he would have money later. Mr Buffrey said that he followed this advice. 35 Mr Buffrey was asked about the earnings he made from a small business and his wife's earnings. He said: "A. I run my side, my wife run her side. She had super. I bought that property at Kingsford for my super. I had no super, so I had to so Vizzone advised me for my super to buy the property at Kingsford, 'and buy as much property as you can', he said." Mr Buffrey insisted throughout his evidence that the Kingsford Property was his "super", i.e. superannuation fund, because he could no longer be employed, unlike his wife who had her own superannuation: T30.1-.4, T30.45-.51, T31.12; affidavit 13 September 2006, paras 29, 30. 36 Mr Buffrey said that he could have paid the purchase price of the Kingsford Property out of his own money without taking a loan but decided to borrow $50,000 because he needed money to live on and to buy another business. He said that it was because he was unemployed that the St George Bank required his wife to be a co-mortgagor of the property. 37 Mr Buffrey denied that he had wanted the Kingsford Property to be in his wife's name and he insisted that his wife was on the title only because the Bank required for the purpose of making the loan: T31.27-.53. 38 Mr Buffrey was cross examined searchingly. His disabilities are such, to my observation, that I find it hard to believe that he is capable of sustained dissembling. Yet he was not shaken in his evidence as to his intention in purchasing the Kingsford Property or as to the reason that his wife's name was placed on the title. There was no inherent implausibility in this evidence. 39 I have explained earlier why, in my opinion, it is not of decisive weight in assessing Mr Buffrey's intentions that his tax returns show the income from the Kingsford Property as shared equally with Mrs Buffrey and that the St George Bank joint account was used to receive rent from the property and pay mortgage repayments. Had Mr Buffrey been a more sophisticated person and had he not been so completely dependent upon others to arrange his financial affairs, those circumstances would have greater weight as evidence of Mr Buffrey's own intentions as to ownership of interests in the property. However, I am persuaded that Mr Buffrey did not understand at any material time the significance of the tax returns and the joint account as indicating his intention to make a gift to Mrs Buffrey of a full half-interest in the Kingsford Property. 40 I am satisfied that Mr Buffrey actually had an intention as to ownership of interests in the Kingsford Property at the time of his acquisition, and that that intention was that the property would represent his own superannuation fund, just as his wife would have her own superannuation fund. I am satisfied that Mr Buffrey did not consider this to be at all unfair to Mrs Buffrey, despite the fact that she was a co-mortgagor, because all of the equity for the purchase had come from him and the rent from the property would be sufficient to relieve Mrs Buffrey of any obligation to pay mortgage principal and interest and outgoings in respect of the property from her own money. 41 I accept Mr Buffrey as a witness of credit. In doing so, I take into account the inconsistency between paragraph 31 of his affidavit of 13 September 2006 and paragraph 29 of an affidavit sworn by him on 5 April 2006 in proceedings commenced by ORIX against Mr and Mrs Buffrey seeking the extension of caveats placed over their properties. In paragraph 31 Mr Buffrey says that Mrs Buffrey has made "no payments whatsoever" towards the mortgage over the Kingsford Property and towards the outgoings of that property. However, in paragraph 29 of the earlier affidavit Mr Buffrey says that at all times since he and Mrs Buffrey purchased the property: "… we have paid all of the loan repayments and outgoings in relation to it, such as, rates and maintenance expenses from the rental income from it and from my earnings and wife's earnings from our various employment we have had over the years." 42 I do not think that this inconsistency is indicative of a general unreliability in Mr Buffrey's evidence. The affidavit of 5 April 2006 was directed to demonstrating that ORIX had no caveatable interest in any property because none of the proceeds of Mrs Buffrey's alleged fraud could possibly have been used to acquire the Kingsford Property. I do not find it surprising that paragraph 29 was in general terms and asserted that the source of funds for the acquisition and servicing of the interest was Mr and Mrs Buffrey's own money and earnings, whereas in the present proceedings, which concern the rights as between Mr and Mrs Buffrey, paragraph 31 should be more directed to which of the two of them had provided what particular funds. I bear in mind also Mr Buffrey's difficulties in dealing with concepts and issues, which may go some way in explaining how the inconsistency could have arisen. 43 For these reasons, I am satisfied that Mr Buffrey has proved facts rebutting the presumption of advancement in favour of Mrs Buffrey. Orders 44 I find that the interests of Mr and Mrs Buffrey in the Kingsford Property are held upon a resulting trust as to 87.24% for Mr Buffrey and as to 12.76% for Mrs Buffrey. 45 There will be a declaration accordingly, as sought in paragraph 3 of the Relief claimed in the Statement of Claim. There will be an order for transfer of interests in the property in terms of paragraph 4 of the Relief. 46 I will hear the parties as to costs. – oOo - 06/12/2006 - Addition of Counsel for Second Defendant - Paragraph(s) N/A 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.