DISTRICT COURT OF QUEENSLAND
CITATION:
Krasnoff v Krasnoff [2017] QDC 100
PARTIES:
GEORGE KRASNOFF
(applicant)v
MARIA KRASNOFF
(respondent)FILE NO/S:
BD 2623/2015
DIVISION:
PROCEEDING:
Applications
ORIGINATING COURT:
District Court at Brisbane
DELIVERED ON:
28 April 2017
DELIVERED AT:
Brisbane
HEARING DATE:
17 March 2017
JUDGE:
McGill SC DCJ
ORDER:
Matter to be relisted for further consideration.
CATCHWORDS:
JUDGMENTS AND ORDERS – Consent orders – interpretation – reference to adjustments for rent and outgoings – scope of “outgoings”.
EQUITY – Equitable remedies – account – no reference in order for account to time period – whether operation of limitation period to be implied.
TORRENS SYSTEM – Joint tenancy – sale and division of proceeds – adjustments for rent and outgoings – whether includes capital expenditure.
WORDS AND PHRASES – “outgoings”.
Property Law Act 1974 ss 37A, 38, 42, 43.
Re Bennett [1896] 1 Ch 778 – followed.
Brasington v Overton Investments Pty Ltd [2003] FCA 1523 – cited.
Re Cleveland [1894] 1 Ch 164 – followed.
Country Estates Co Ltd v Graves [1895] AC 113 – considered.
Crosse v Raw (1874) LR 9 Ex 209 – considered.
FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343 – considered.
Fisher v Oborn [1968] 3 NSWR 447 – considered.
Foregard v Shanahan (1994) 35 NSWLR 206 – cited.
Fried v National Australia Bank Ltd (2001) 111 FCR 322 – cited.
General Credits (Finance) Pty Ltd v Fenton Lake Pty Ltd [1985] 2 Qd R 6 – cited.
Re Highett & Bird's Contract [1903] 1 Ch 287 – considered.
Horne v Coetmore [1975] VR 75 – cited.
Jacobs v Seward (1872) LR 5 HL 464 – cited.
Re Jacobs’ & Stedman’s Contract [1942] Ch 400 – followed.
Re Jose [1941] SASR 26 – considered.
Leconfield Estate Co v Inland Revenue Commissioners [1970] 1 WLR 1133 – considered.
Lee v Australia and New Zealand Banking Group Ltd [2013] QCA 236 – cited.
Lowther v Clifford [1927] 1 KB 130 – cited.
Midgley v Coppock (1979) 4 Ex D 309 – cited.
Muschinski v Dodds (1985) 160 CLR 583 – applied.
Nessdale Pty Ltd v Woodwark Bay Development Corporation Ltd [1991] QSC 161 – followed.
Newman v McNicol (1938) 38 SR (NSW) 609 – considered.
Patronis v Oinoi & Kampi Pty Ltd (Supreme Court NSW Eq Div, W4631/93, Young J, 23.2.94, unreported; BC 9402297) – considered.
Patterson v Farrell (1912) 14 CLR 348 – cited.
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 – cited.
R v Shaw (1848) 12 QB 427 – cited.
R & J Lyons Family Settlement Pty Ltd v 155 Macquarie Street Pty Ltd (2008) 13 BPR 25,161 – cited.
Ranger v Ranger [2009] QCA 226 – cited.
Re Read & Park’s Contract [1956] VLR 745 – considered.
Smith v Smith [1939] 4 All ER 312 – cited.
Southcap Pty Ltd v Lend Lease Financial Planning Ltd (1997) Q Conv R 54-494 – considered.
Southcap Pty Ltd v Lend Lease Financial Planning Ltd [1998] QCA 117 – considered.
Squire v Rogers (1979) 39 FLR 106 – considered.
Stockdale v Ascherberg [1904] 1 KB 447 – considered.
Tito v Waddell (No 2) [1977] Ch 106 – cited.
Tooth & Co Ltd v Newcastle Developments Ltd (1966) 116 CLR 167 – cited.
Warner Brothers First International Pictures Pty Ltd v Sydney County Council (1958) 58 SR (NSW) 270 – cited.
Washband v Buck [1997] QSC 117 – cited.
Watson v Scott [2015] QCA 267 – applied.
Re Wlodarczyk [2000] 2 Qd R 216 – cited.COUNSEL:
D J Ananian-Cooper for the applicant
S D Anderson for the respondent
SOLICITORS:
Plastiras Lawyers for the applicant
JHK Legal for the respondent
In this matter there is a dispute between the parties as to the correct interpretation of an order which was made by consent on an application to appoint trustees for sale of property held by the applicant and respondent as co-owners. The property has since been sold. The order provided a mechanism for the trustees to perform what appears to have been intended to be essentially an accounting process between the parties in relation to certain matters prior to arriving at a balance to be divided between them. The order however contemplated that the division may prove unacceptable to one of the parties, under which circumstances the matter could come back before this court. That is what has occurred.
The parties are mother and son, and at one time owned as joint tenants a parcel of land at Red Hill in Brisbane on which a house was constructed. The property had been owned by the parties since 1996, when it was purchased with the assistance of a loan from the Commonwealth Bank of $140,000, secured by a mortgage.[1] By January 2012 the principal had been reduced to little under $100,000, but that amount was then paid out using part of a loan obtained by the respondent from Suncorp, to which the applicant was not a party and not secured by a mortgage on the property.[2] It appears that this was done by the respondent on her own initiative, and led to the discharge of the Commonwealth Bank mortgage. To the extent that the respondent has paid more than her fair share of the amount payable to the Commonwealth Bank under the mortgage and loan agreement, the respondent had a right of contribution from the applicant, subject to the operation of the Limitation of Actions Act 1974.
[1]Affidavit of the applicant filed 1 July 2015 paras 1 – 5; Exhibits GK1, GK4.
[2]Affidavit of respondent filed 12 December 2016 para 11, Exhibit MK1; affidavit of respondent filed 25 January 2017 para 14.
On 1 July 2015 an originating application was filed in this court by the applicant seeking the appointment of trustees for sale of the land and the division of the proceeds pursuant to the Property Law Act 1974 (“the Act”) s 38. The applicant, in an affidavit filed with the originating application, said that the acquisition of the property was his idea, that he located it and wanted to buy it as a personal investment because he foresaw good capital gains.[3] The applicant said that it was his intention to rent the property out after acquisition but the respondent decided to live in the two-storey property instead, using one level for a business, which he said was carried on by both of them in partnership, and living on the other. The respondent denies that the applicant had anything to do with the business, but a business name search shows that between 9 March 1993 and 7 May 1997, when the business name was cancelled, the business was operated by a partnership constituted by the parties.[4] According to the applicant, in the year 2000 the respondent became involved with a man, as a result of which the business was transferred to two companies controlled by them.[5]
[3]Affidavit of the applicant para 5-11.
[4]Ibid Exhibit GK3.
[5]Ibid para 24.
At about the same time, the house burnt down. An insurer paid out almost $200,000, but the applicant said the respondent took control of the money and the rebuilding process, and would not adopt the approach he suggested.[6] The respondent took control of the property after it was rebuilt and received all of the rental income from it. Evidently, the relationship between the parties has broken down. The applicant said that attempts on his part to contact the respondent were unsuccessful.
[6]Ibid paras 20 – 22.
The consent order
After the application was served, negotiations occurred between the solicitor for the applicant and the solicitor for the respondent, as a result of which another judge on 18 September 2015 made an order by consent for the appointment of two solicitors as trustees of the property, and ordered that the property vest in those trustees subject to encumbrances affecting the entirety upon the statutory trust for sale.
Paragraph 4 of that order provided as follows:
“That the trustees distribute the net proceeds of sale, after costs and expenses associated with the sale, as follows:
(a) To the applicant, 50% (from which the applicant must satisfy the debt due to the mortgagee).
(b) To the respondent, 50%.
(c) Adjusted for the rental income received by the respondent to the exclusion of the applicant, and any outgoings paid by the respondent and/or the applicant.”
Paragraph 5 then dealt with the costs of the application. The order went on to make the following directions:
“6.For the purposes of the adjustment and order 4(c), by no later than 5 October 2015, the respondent provide to the trustees and copy to the applicant:
(a) Any information and evidence the respondent wishes the trustees to take into account in making the adjustment with respect to outgoings paid by the respondent for the property;
(b) Any document (such as an end of financial year statement from a real estate agency) which evidences the gross and net rental income received by the respondent with respect to the property for each financial year prior to the year ended 30 June 2011, for which the respondent seeks an adjustment for outgoings paid.
7. For the purposes of the adjustment at order 4(c), by no later than 19 October 2015, the applicant provide to the trustees and copy to the respondent, any further evidence, information or submissions regarding the information supplied by the respondent to the trustees that the applicant wishes the trustees to take into account in making the adjustment.
8.The trustees are to have regard to any credible information or evidence supplied by the applicant and/or respondent regarding rental income and outgoings and, upon settlement of the sale of the property:
(a)The trustees will provide the applicant and respondent with the trustees’ calculations of the proposed adjustment and distribution of proceeds pursuant to order 4;
(b)If the applicant and/or respondent disagree with the trustees’ proposed adjustment calculation and distribution then:
(i)The applicant and/or respondent have liberty to apply to the court for directions within 7 days of receiving those calculations; or
(ii)The applicant and/or respondent have liberty to mutually agree upon an alternative distribution of proceeds and notify the trustees within 7 days of receiving those calculations;
(c) If no application or notification is made pursuant to 8(b), the trustees must distribute the proceeds in accordance with the calculations specified at 8(a).”
As contemplated by the directions, each of the parties provided information and evidence to the trustees, and the trustees have provided the parties with their calculations of the proposed adjustment and distribution of proceeds pursuant to order 4. The parties have not agreed upon an alternative distribution of proceeds, but within 7 days of receiving those calculations an application for directions was made to this court by the respondent. Accordingly, para 8(c) was not triggered.[7] That application was initially made by application filed on 25 January 2017. It was returnable on 6 March 2017, but on 8 March 2017 a Deputy Registrar by consent adjourned the application to 17 March 2017, when it came before me.
[7]The balance remains in the hands of the trustees, where it should remain for the time being. The trustees’ costs and remuneration have yet to be determined and deducted.
On 10 March 2017, the applicant filed an application seeking the leave of the court to enforce a contract for sale of land dated 19 April 2016 between the trustees and the respondent. That application can for the moment be left to one side. His application also sought a declaration as to the proper interpretation of the order made by consent on 18 September 2015. That application also came before me on 17 March 2017.
No material was filed by the respondent prior to making the consent order. The first affidavit sworn by the respondent was filed on 12 December 2016. She spoke about the property from para 5 as though the applicant was not involved with it at all. According to the respondent, in January 2012 she refinanced with Suncorp and borrowed over $130,000 to complete the rebuilding of the property. She said that in November 2003 she entered into a contract with a builder (para 24) which was terminated in September 2004 after a dispute in relation to the footings, and incurred legal fees in pursuing a claim from which she said she received an amount of approximately $200,000 from the Building Services Authority (para 27), though she has later claimed that she did not actually receive this money but that it was paid directly to another contractor doing further work on the property. In June 2007 she then entered into a further building contract with another builder which she also terminated in July 2011. Again there was a dispute, but on this occasion nothing was recovered from the Building Services Authority: para 33. In spite of these two building contracts, she claimed in para 38 that she and her de facto husband predominately did all of the rebuilding and construction work on the property.[8]
[8]See also affidavit of respondent filed 27 February 2017 paras 45 – 50.
There is no evidence of valuation before me, so far as I have seen, nor is there even a copy of a rates notice which quotes the site value determined by the valuer-general.[9] Given the location of the property, and that, as a relatively recent rebuild, it would not be subject to the full rigours of character housing restrictions, I am not prepared to assume that the market value of the property in its current state exceeds the value of the land, that is to say, I am not prepared to assume that the improvements effected by the respondent have in fact added anything to the value of the property.[10] Given the amount claimed by the respondent, and bearing in mind that this is after making allowance for an amount of almost $200,000 received in respect of the fire insurance and a further $200,000 received in respect of the BSA insurance, or at least applied in addition to the money spent by the respondent in rebuilding this property, if there is any substance to the respondent’s allegations, the total amount supposedly expended on rebuilding the property after the fire was obviously well in excess of any enhanced value thereby achieved, and on the face of it looks to me to have been improvident. That however is not really the issue at the present time.
[9]Despite the fact that the respondent has put in evidence large numbers of other documents, and a statement of rates paid.
[10]The trustees reduced the sale price to the ultimate purchasers by $40,000 after building inspection reports into the state of the property were presented: affidavit of Anderson filed 14 March 2017 para 20, Exhibit KA30.
Interpretation of the consent order
Neither party sought to go behind the terms of the consent order, but there was a dispute between them as to its correct interpretation. There was no dispute that the order, and in particular that part of the order which dealt with the distribution of the proceeds, is valid and remains binding upon the parties, the only issue between the parties being as to its correct interpretation. The approach to the interpretation of the order in my view is similar to the approach to the interpretation of a contract between the parties,[11] bearing in mind that as a consent order it reflected an agreement between the parties on the question of how the proceeds of sale of the formerly jointly owned property were to be distributed. This however is not an example of a commercial contract made without the assistance of legal advice, since the terms of the draft order were the subject of negotiation between solicitors acting for each party.
[11]Conveniently expounded in Watson v Scott [2015] QCA 267 at [30].
The other factor to bear in mind is that the context of the order was that it was an order for appointment of trustees to hold land on the statutory trusts for sale pursuant to the Act s 38(1), which means that, subject to any modification effected by the terms of the order, the property is held on the statutory trust for sale as defined in the Act s 37A. That section contemplates that the trustees will arrive at an amount constituting the net proceeds of sale after payment of costs and expenses, a figure which would also take into account the necessity to discharge any encumbrance affecting the entirety. There was at the time of the order a mortgage registered against the property, and cl 4(a) expressly provided that the cost of satisfying the debt due to the mortgagee was to be borne by the applicant.[12] That amount must have been paid on settlement of the sale in order to secure the discharge of that mortgage, but the effect of order 4 is that it was not taken into account when determining the net proceeds of sale, but deducted from the share otherwise payable to the applicant.
[12]The applicant accepted that this secured a loan obtained by him.
Otherwise, on the face of it the net proceeds of sale are to be distributed equally between the parties, subject to the adjustment provided for in para 4(c). The order said nothing about the distribution of net income until sale. The property had been rented, and it was still being rented at the time of the order. Between then and the date of sale, the rent was apparently paid to the trustees.[13]
[13]Affidavit of respondent filed 25 January 2017 para 5, Exhibit MK11.
In relation to this matter, the substantial dispute between the parties is in relation to the term “outgoings” in para 4(c). The applicant’s position is that outgoings are only concerned with expenses of maintaining the property as a rental property, the kind of expenses which would be set off against the gross rent received in order to achieve the net rental income of the property. In that regard, the term would not extend to the cost of improvements to the property effected by the respondent. The applicant also submits that the amount which may be set off in respect of outgoings should be limited to the amount of rental income. That is to say, the applicant should not be required to contribute to a situation where the respondent was operating the rental premises at a cash loss.
The respondent’s position is that she is entitled to claim as outgoings all money that she has ever spent in respect of the property since it was purchased. This would cover a great deal of money, because in 2000 the property was severely damaged by fire, and among the amounts claimed by the respondent are the costs to the respondent of rebuilding it. The amounts claimed are quite substantial. The contract price for which the property was sold was $661,000, which after deducting costs of sale produced a balance for distribution of a little over $650,000, from which a mortgage is to be discharged which is the sole responsibility of the applicant. The respondent has identified rental income which she has received of $189,352.24, but claims a total for “outgoings” of $593,813.90.[14] In substance, the respondent claims that the whole of the net proceeds of sale should be paid to her.
[14]Affidavit of respondent filed 27 February 2017 paras 4, 57, if I understand it correctly.
“Outgoings”
The Oxford English Dictionary gives the third meaning of the term “outgoing” as “money which goes out in the way of expenditure; outlay, expenses, charges”. It is noted that it is used mostly in the plural. The passages cited include one from 1622, “Where…the return does not countervail the outgoing”, one from Blackstone’s Commentaries in 1765, “other very numerous outgoings, such as secret service money, pensions, and other bounties”, one from 1816, “the tenant paid for repairs and outgoings”, and one from the Law Times in 1885: “the balance of income over outgoings was only £60 a year.” Interestingly, two of the four used the term in the context of money spent which relates to money received, and one used the term in the context of a tenant’s obligation under a tenancy.
In Jowitt’s Dictionary of English Law (2nd Ed 1977) at p 1296, the term is defined as:
“Payments which have to be made out of the gross returns of a property or business before its net proceeds can reach the owner, as a drainage rate on land, or the salaries of clerks in the management of a business. Outgoings is a most comprehensive general expression in a lessee’s covenant to pay taxes and other charges.”
- In leases
One context in which “outgoings” is often used is in a covenant in a lease for the tenant to pay them as well as rent. There have been numerous cases dealing with such use, where it has been said that the precise meaning may be open to doubt but it is certainly a large word and fairly comprehends rates and taxes.[15] In this context it would be unsurprising if the intention was that the word would have a very wide meaning; such covenants are drafted by landlords, and frequently the drafting shows an attempt to make them particularly wide.[16] In Crosse v Raw (1874) LR 9 Ex 209 at 212-3, Bramwell B said of the expenditure in issue that:
“It would certainly be something which had gone out, an expense which [the landlord] had been at in respect of the premises, and it would have been an expense imposed upon him; and [the tenant] would therefore have been bound to indemnify him against it.”
[15]R v Shaw (1848) 12 QB 427, cited in Stroud’s Judicial Dictionary, (4th Ed Vol III 1973) p 1896. See also Tooth & Co Ltd v Newcastle Developments Ltd (1966) 116 CLR 167.
[16]Even in that context, there are limits: FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343; [1993] V ConvR 54-466. It does not include expenses incurred by a landlord pursuing its own interest: Brasington v Overton Investments Pty Ltd [2003] FCA 1523. I doubt periodic payments by the landlord to a mortgagee or builder would be included.
At one time it was common in England for local and other statutory authorities to carry out improvements to property, in the way of paving roads or footpaths, or installing sewerage or effecting other improvements, by requiring the individual property owners either to contribute to a general levy to support the cost of the works, or to pay for the particular works associated with that property. In general, levies and other costs imposed in this way were held to be included in a covenant in a lease for the tenant to pay “outgoings”, even if they were expenditure which had the effect of providing some permanent improvement to the demised property.[17]
[17]Woodfall, “Landlord and Tenant” (27th Ed 1968) at para 1357, 1359, although even here the covenant had to be read with other covenants in the lease: para 1360.
That a tenant can be liable for outgoings of a capital nature under an outgoings clause in a lease is shown, perhaps most graphically, by the decision in Stockdale v Ascherberg [1904] 1 KB 447, where a lease of a house for three years with a covenant to pay “all outgoings in respect of the premises” was held to cover the cost of work the landlord was required to do by the local authority to make good drains on the premises which were defective, at a cost said to be more than half the total rent payable under the lease. Collins MR with whom the other members of the court agreed said at p 449-50:
“Such an order is no doubt a drastic one, but one which cannot be considered as unlikely to be made having regard to the condition of the demised premises. The defendant took the premises in an insufficient condition as regards drainage. It seems to me impossible to regard it as so far outside the contemplation of the parties that the local authority whose duty it is to see that the drainage in the premises is kept up to requisite standard of sanitary efficiency, should make such an order, that it would be unreasonable to suppose that the defendant undertook such a liability by the agreement.”[18]
[18]In other words, it was all the tenant’s fault for agreeing to lease such a dump in the first place, an attitude which no doubt warmed the cockles of many a landlord’s cold heart.
That decision was followed by the Court of Appeal in Lowther v Clifford [1927] 1 KB 130 at 136, where the point was made that a covenant to pay outgoings can be worded so widely as to catch obligations which are unknown and uncertain as well as obligations experience has led the tenant to expect. It was also followed in Smith v Smith [1939] 4 All ER 312, where the tenant sought to enforce a statutory right to recover a drainage rate from the landlord, and it was held that by such a covenant the tenant had contracted out of the statutory right.
In FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343 the Victorian Full Court held that a covenant in a lease for the lessee to pay outgoings in respect of a demised premises did not oblige the lessee to reimburse the lessor for premiums under insurance policies the lessor held in relation to the building, though this was by reference, not to the interpretation of the term “outgoings”, but the interpretation of that part of the relevant clause which it was held limited its application to expenses imposed by some authority or other third party, rather than an expense voluntarily undertaken by the lessor: p 346.[19]
[19]The decision is also authority for the proposition that the construction of a written contract is a question of law: p 351.
In Southcap Pty Ltd v Lend Lease Financial Planning Ltd (1997) Q Conv R 54-494 Thomas J dealt with and rejected an argument that an agreement for lease made just by an exchange of letters, without the full terms of the lease being agreed, was void for uncertainty. One of the matters relied on was that the letters referred to the tenant’s obligation to pay “outgoings” without identifying what that covered and how the tenant’s obligation was to be calculated. His Honour said at p 59,954-5:
“Outgoings is a word of wide import. But of course there has to be some nexus between outgoing and the demised premises or their occupancy by the tenant. An outgoing in the context of landlord and tenant is necessarily understood (in the absence of contrary stipulation) as an outgoing in respect of the premises or their occupancy. Thus in Patronis [v Oinoi & Kampi Pty Ltd BC9402297, (unreported)] Young J rejected the submission that a promise to pay outgoings obliged the promisor to pay the personal liability of a party for his own mortgage, or interest on a mortgage over assets which he had agreed to sell to the purchaser free from encumbrance.”
His Honour added subsequently:
“Without purporting to give a comprehensive denotation of potential items covered by that term in the context of the present case, outgoings relevant to office premises which are part of a complex such as this would include rates, water rates, management and administration expenses, insurance, external common lighting, fire protection and fire brigade levy, pest control, repairs and maintenance, security, gardening, air conditioning repairs and maintenance, lift and air conditioning electricity and lift repairs and maintenance.”
An appeal from that decision was dismissed: [1998] QCA 117. McPherson JA said at p 11 of the term “outgoings”:
“It is an expression that has been in common use over the last 150 years in leases and in contracts for sale of land. In those contexts there are literally dozens of reported decisions in England, as well as some in Australia, in which its content has been considered in relation to particular charges. In covenants in leases, it is commonly tacked on to a provision imposing on the lessee an obligation to pay all rates and taxes in respect of the premises occupied.”
His Honour referred to examples of earlier decisions, and concluded that the expression was not so indefinite and precise as to be devoid of content, so as to render the agreement void for uncertainty. Pincus JA at p 16 noted an unreported decision in New South Wales[20] which stated: “The law and the court know no standard clause relating to contributions to outgoings,” and conceded that there was some force in the proposition that the agreement in the letters did not produce an absolutely certain agreement as to what outgoings should be reimbursed or as to the basis of apportionment, but agreed with the decision under appeal in view of the reluctance of courts to hold that commercial contracts are void for uncertainty. Derrington J agreed with McPherson JA.
[20]Dellwest Pty Ltd v Cafabe Pty Ltd (Supreme Court NSW, Bryson J, 26.11.97, unreported).
It has been said that “outgoings”, even in the context of a covenant in a lease, would not include a single non-recurring payment of a capital nature which may be required to be made by a lessor.[21] The example given was R & J Lyons Family Settlement Pty Ltd v 155 Macquarie Street Pty Ltd (2008) 13 BPR 25,161, where the owner of a strata title property had to pay a substantial sum to the Owners Corporation to obtain an easement which would benefit the lessees of the property, and that was held not to be within the terms of the covenant to pay outgoings.
- In contracts for sale
[21]Duncan & Christensen “Commercial Leases in Australia” (7th Ed 2014) p 208.
Another situation where the term frequently appears is in a contract for the sale of land, where outgoings between the date of contract and the time of completion are generally to be paid by the vendor.[22] In Re Highett & Bird's Contract [1903] 1 Ch 287, there was a contract for the sale of a lease of a house but between the time when it was signed and the date for completion, the local authority acting under the London Building Act required the occupier of the house to take steps to prevent the building becoming dangerous to passers-by. In the event the matter was decided on the basis that the vendor as the tenant of the leasehold property was in breach of his covenant of repair and therefore had not made good title, but on the question of when the obligation imposed under the statute had arisen the court said that the point was of some nicety. There appears however to have been no dispute that such a charge would amount to an outgoing, the only question being when it became an outgoing for the purposes of the contract.[23]
[22]Under the old system, up until a good title was first shown: Walford “Contracts and Conditions of Sale of Land” (2nd Ed 1957) p 28.
[23]Such cases led to very detailed provisions in standard form land sale contracts: see Walford p 294-9.
The practice in contracts for the sale of land has been to provide that outgoings are to be apportioned between vendor and purchaser by reference to the period of the time covered by them.[24] In Country Estates Co Ltd v Graves [1895] AC 113, the contract contained a provision that “all rates and other outgoings” should “be adjusted as usual.” The contract was for the sale of a parcel of land which was below the threshold for the imposition of land tax, and it was held by the Privy Council that the purchaser did not under this provision have to pay for a proportion of the land tax imposed on the vendor in respect of a holding which included this parcel of land, adjusted on a pro rata basis. The Privy Council said that the clause applied only to “outgoings” which would enure for the benefit of the purchaser when he became the owner; not outgoing the benefit of which and the liability to which would necessarily determine once the purchase was completed.[25]
[24]Christensen et al “Land Contracts in Queensland” (3rd Ed 2011) para 6.4.1. See also para 6.4.3, where it is said that the word “outgoings” in this context does not include payments of a capital nature.
[25]The position is different if both parties are liable to the same Land Tax in respect of the property: Patterson v Farrell (1912) 14 CLR 348 at 352; Warner Brothers First International Pictures Pty Ltd v Sydney County Council (1958) 58 SR (NSW) 270.
In Newman v McNicol (1938) 38 SR (NSW) 609, there was a contract for sale in the purchase of a rural property in respect of which there had been an electricity supply agreement under which the vendor was to pay an additional charge for supply above that imposed for electricity usage. A clause in the contract for sale provided that as from a specified date the purchaser would be entitled to all profits of the property and be liable to bear working expenses and all charges and outgoings in respect of the property, with charges and outgoings being apportioned. The purchaser refused to pay a service charge in relation to electricity supply as distinct from current charges, on the basis that this was a payment by instalments of the capital cost of installation effected before the date of completion and hence not an outgoing. That view was rejected by Long Innes CJ in Eq at 622, but on the factual basis that the service charge did not have that character, but was “a charge which continues indefinitely so long as electricity is supplied to the particular premises, and which represents not only interest and depreciation on the equipment and cost of installation but also the operation charges incurred by the department. To my mind it is closely analogous to the charge for rental paid by subscribers to a telephone.” Having arrived at this conclusion his Honour said at p 625:
“It is not disputed that the term ‘outgoings’ is of very wide import and includes, in addition to rates, taxes and repairs, the ordinary expenses of cultivating and managing the property.”
The difficulty for the vendor in that case however arose from the fact that the service charge was not one imposed by law on the owner for the time being of the property, it was one payable under a contract between the vendor and the electricity supply authority. The vendor’s argument depended on the proposition that the clause for the apportionment of outgoings implied an agreement by the purchaser to indemnify the vendor in respect of the vendor’s future liability under that agreement, a proposition which his Honour rejected.[26] A different result was indicated in dicta in Fisher v Oborn [1968] 3 NSWR 447 at 450 where the payment under an agreement of a sum each year for 25 years to cover the capital cost of installing the connection was said to be an outgoing falling on the purchaser. In fact the purchaser had paid it since completion, but if the agreement had been enforced against the vendor, he would have been entitled to be indemnified by the purchaser. Else-Mitchell J also said that it was not subject to apportionment, as it did not accrue from day to day.[27]
[26]Somewhat surprisingly, in my view, since if the service charge under the contract was properly characterised as an “outgoing” it is difficult to see why it was not caught by the term of the contract that “the purchaser…shall bear all…outgoings in respect of the property…”
[27]This appears contrary to Patterson v Farrell (supra). Else-Mitchell J was counsel for the unsuccessful party in Warner Brothers (supra) where this proposition, which he had argued (p 271), was rejected by McLelland J as contrary to Patterson v Farrell.
There is however authority that in this context the term “outgoings” does not extend to payments of a capital nature. In Re Jacobs’ & Stedman’s Contract [1942] Ch 400 it was held that war damage contributions on the owner of a property were not an “outgoing” subject to apportionment under the Contract of Sale of the relevant land. Farwell J at p 402 said:
“The word ‘outgoings’ generally speaking does not include payments of a capital nature, and the Act provides… that contributions made under the Act are to be treated as outgoings of a capital nature.”
That decision has been referred to as an authority for that proposition in modern Australian texts.[28]In Re Read & Park’s Contract [1956] VLR 745 a charge imposed by a local authority for street improvements was held not to be an “outgoing” for the purpose of a clause in a contract of sale of land making the purchaser liable for “outgoings” from the date of settlement, and providing for their apportionment: p 754. This appears to be different from the approach under the English lease cases.[29] In Horne v Coetmore [1975] VR 75 the decision in Re Reid & Park’s Contract (supra) was followed, but not specifically in respect of the interpretation of a covenant in a sale of land in relation to “outgoings”.
[28]Voumard “The Sale of Land” (6th Ed) para 9300 n 3; Christensen et al “Land Contracts in Queensland” (3rd Ed 2011) p 342 n 59.
[29]And that in Midgley v Coppock (1979) 4 Ex D 309.
The passage in Newman (supra) at p 625 was cited in Patronis v Oinoi & Kampi Pty Ltd[30] where the question was whether the purchaser of a milk bar business was liable to pay instalments on a finance lease in respect of certain equipment used in the business under a covenant to pay various things including “all other outgoings in respect of the business.” Young J at p 7 accepted that the cost of leased equipment was a normal running expense of a business, so that on completion the purchaser would have to bear the cost of the operating leases, but in circumstances where the contract of sale included the leased property which the vendor had agreed to sell to the purchaser, the position was simply that the finance lease was in the nature of an encumbrance which the vendor had to discharge in order to pass title free from encumbrance on the property agreed to be sold. Young J at p 8 referred to the quote from Newman (supra) and other authorities which he said supported the view that the word “outgoing” is a wide one but in the context of the document as a whole it did not “connate a personal liability of a party to pay off his own mortgage or to pay interest on the mortgage over assets which he has agreed to sell to the purchaser free of encumbrance.” This was the decision cited by Thomas J in Southcap Pty Ltd v Lend Lease Financial Planning Ltd (supra).
- Other contexts
[30]Supreme Court NSW Eq Div, W4631/93, Young J, 23.2.94, unreported; BC 9402297.
Where the word is used in relation to the earning of income, the meaning is commonly somewhat narrower, and related in some way to the income which is being earned. In the latter sense, it is used in s 37A of the Act itself, which speaks about the net income until sale of the property “after payment of costs, expenses and outgoings, and in the case of land of rates, taxes, costs of insurance, repairs properly payable out of income, and other outgoings upon such trusts…” That is concerned with the situation between when the trustees are appointed and when the sale is effected, but it does provide an example of the use of the term in a context which is particularly relevant. Unfortunately I am not aware of any authorities specifically on the meaning of the term “outgoings” in that section.
In Re Cleveland [1894] 1 Ch 164, the question was what “outgoings” were covered when a testator by will left all the arrears of rent due on certain land on his death to a particular beneficiary, but only after first discharging “all outgoings of the [property] properly chargeable against such arrears….”. It was clear that the beneficiary was not to pay more than he was entitled to receive (p 171). In that case it was held that the outgoings included both the amounts lawfully chargeable to third parties in respect of the land, and also costs to the testator of operating the land such as wages of workmen due, cost of repairs incidental to the proper management of the estate, commission payable to the land agent and other costs associated with the ordinary and accustomed management of the estate as a going concern: p 172. Davey LJ said at p 175 that the expression:
“… ought to be construed in the larger and popular sense as including every expense relating to the estate which, in the ordinary course of management, would require to be made in order to maintain the estate in a fit state to earn rent, or would be a proper deduction before ascertaining the net rent receivable as income. We think also, that it is competent for the court in construing the will to have regard to the testator’s mode of management.”
In Re Bennett [1896] 1 Ch 778, Lindley LJ said at p 784:
“By an ‘outgoing’ is generally meant some payment which must be made in order to secure the income of the property.”
In Re Jose [1941] SASR 26 a provision in a will allowed a housekeeper to live on in the testator’s home during her lifetime free from “rent, rates, taxes, insurance or other outgoings” with the trustees of the estate to pay “all such annual payments and outgoings” from the income of the residuary estate. It was held that expenditure on repairs was not included within the expression “other outgoings,” although this was influenced by the consideration that the expression “such annual payments and outgoings” indicated that what was contemplated by outgoings was annual payments similar to rates, taxes and insurance premiums ordinarily payable by a tenant for life, and tenants for life would not be liable to pay for repairs because they were not liable for waste: p 30. This decision is an example of the word “outgoings” readily taking its colour from the context in which it appeared.
In Leconfield Estate Co v Inland Revenue Commissioners [1970] 1 WLR 1133 at 1143, Megarry J said that the term “outgoings” is “one of great amplitude of meaning…the largest word which can be used”.[31] On the other hand, when dealing with the correct interpretation of a particular revenue statute then in issue he said on the same page:
“The wider and more indefinite the meaning of the word “outgoings” the less likely it seems to be that Parliament intended it to be the touchstone for determining which of two different systems was to apply.”
[31]Citing Tubbs v Wynne [1897] 1 QB 74 at 78, a decision on its use in a covenant in a contract for the sale of land.
The point of that decision for present purposes is that the word can have an extremely wide meaning, but ultimately the meaning has to be ascertained from the context in which it appears. In Nessdale Pty Ltd v Woodwark Bay Development Corporation Ltd [1991] QSC 161 de Jersey J as he then was had to resolve various disputes about the interpretation and operation of a joint venture agreement, including one as to whether the amount payable as interest on money borrowed for capital expenditure was “outgoings” for the purpose of a particular provision for computing the amount payable for the purchase of the interest of one joint venturer. He said at pp 5-6: “The meaning of the word “outgoings” taken out of any particular context is very broad, extending to any outlay, expense or charge. But taking account of the requirement that these “outgoings” be considered in the determination of net income, the other element of the calculation being rental, I consider that the meaning of the word here is narrower and not apt to include interest charges incurred with respect to the building of the capital structure.” An argument that the term in the agreement did not include expenditure of a capital nature was accepted.
Legal Position before the order
Both parties made submissions in relation to the rights of co-owners’ interests in circumstances where property has been occupied by one of them, or where the property has been rented out and the rents have been received by one of them. As a general proposition,[32] all co-owners have a right to the use and enjoyment of jointly owned property, but if one of two co-owners does not take advantage of that right, without having been excluded by the other, the one out of occupation does not at common law have an entitlement to either an occupation rent, or a share in rent received by the co-owner in possession. The former situation can however be modified in certain circumstances. If on the sale of the property, the co-owner in possession claims more than a half share of the proceeds on the basis of lasting repairs and improvements effected at the expense of that co-owner to the property, which have enhanced its value, such an allowance may be made but only on the condition that the co-owner in occupation be subject to an occupation rent.
[32]See Foregard v Shanahan (1994) 35 NSWLR 206 at 221-224.
During the continuation of the co-ownership, one co-owner who has expended money on repairs and improvements is not entitled to claim contribution from the other, but if the repairs and improvements achieve an increase in the value of the property, on a sale and division of the proceeds the co-owner who has paid for those improvements is entitled to credit for either the cost of the improvements or the enhanced value achieved by them, whichever is the less. It is then from this figure that any occupation rent is to be deducted. Where co-owners are subject to a common liability to a third party, one who has paid more than his or her fair share is entitled to contribution at law from the other, on ordinary restitutionary principles.[33]
[33]Goff and Jones “The Law of Unjust Enrichment” (8th Ed 2011) p 519-21; Muschinski v Dodds (1985) 160 CLR 583 at 596-7.
The common law has been modified in relation to the receipt of rents and profit by statute, derived from a statute of 1705,[34] and now appearing in the Act at s 43(1):
“A co-owner shall, in respect of the receipt by the co-owner of more than the co-owner’s just or proportionate share according to the co-owner’s interest in the property, be liable to account to any other co-owner of the property.”[35]
[34]4 & 5 Anne Ch 3 s 27, the Administration of Justice Act.
[35]One co-owner can grant an effective tenancy of land. Indeed, both co-owners may do so, which can produce complications: Jacobs v Seward (1872) LR 5 HL 464. In England since 1925 joint tenants are trustees and accountable as such.
The position of a co-owner who had been left in sole possession of the property and who had used it to operate a business of renting out flats, rooms and caravan sites, when the property was finally sold under a provision similar to s 38, was considered by the Full Federal Court in Squire v Rogers (1979) 39 FLR 106. In that case at trial an order for an account had been made, but the order did not deal with the various matters of detail which ought to have been included in such an order: p 123. It was conceded by counsel for the plaintiff, the co-owner out of possession, that the local equivalent of the Limitation of Actions Act meant that any entitlement to account was limited for a period of six years before the issue of the writ, and that on the taking of an account the defendant was entitled to an allowance for his time and labour for the earning of the rents and profits for which he was liable to account. Apart from this however, there was in that matter no clear definition of what receipt should be included and what outgoings should be allowed on the taking of the account: p 123.
In that case Deane J with whom the other members of the court agreed said at p 127-8 of the plaintiff:
“She voluntarily left [the land] in the occupation of the defendant in the expectation that the defendant would spend money on improvements and, by so spending it, preserve their joint leasehold interest in the land by complying with the covenant requiring the making of improvements. She was aware of the defendant's activities on the land and the fact that he was effecting improvements and made no complaint in that respect. In the circumstances, the plaintiff is not entitled to a one-half share of the rents and profits which the defendant received in respect of the subject land as a result of the use of the improvements which he had effected while denying the defendant's entitlement to an allowance in respect of their cost. In my view, she is, in the circumstances, only entitled voluntarily to adopt the benefit of the improvements by claiming and receiving one-half of any profit resulting from their use at the price of being liable to contribute to, or make an allowance in respect of, their cost over and above the amount included in the restricted allowance to which the defendant was independently entitled on partition or sale. If she accepts the benefit of the profit earned, she must bear her share of the burden of earning it.”
Ultimately the court held that, in the absence of further agreement, the matter should be remitted to the Supreme Court to enable the definition with some precision of the receipts and outgoings to be included on the taking of the account, and to allow for the concessions made on behalf of the plaintiff: p 128.
That decision was cited by Meagher JA, with whom Mahoney JA agreed, in Foregard v Shanahan (1994) 35 NSWLR 206 at 222, but simply as an example of an application of the statutory entitlement to account. The decision was also cited by Muir J in Washband v Buck [1997] QSC 117 in support of the proposition that where receipt of a benefit by a co-owner would be otherwise unfair, a co-owner effecting the improvements is entitled to an allowance for his or her expenditure on such improvements to the extent to which they result in present enhancement of the value of the property: p 5. In that case however, no allowance was made in respect of the cost of the improvements because there was no evidence as to the extent, if at all, to which they had increased the value of the property.
On the face of it the decision in Squire v Rogers assists the defendant since the pre-existing improvements were largely destroyed by Cyclone Tracy in December 1974 and the improvements for which allowance was sought included virtually the whole cost of constructing anything by way of an improvement on the land. The proceedings in that case were instituted on 14 December 1976, and accordingly the reconstruction after Cyclone Tracy occurred within the six year limitation period for the taking of an account. It seems to follow from this decision that it was a matter for the plaintiff to decide whether or not to pursue the claim for an account of the rent and other income, if it came at a price of having to contribute towards the capital expenditure which made those rents possible. The entitlement to sale of the asset and division of the proceeds remained, subject only to the rule about not taking the benefit of the enhancement in the value of the land associated with the capital expenditure, which on the facts in that case was quite small. The effect of the decision of the Full Federal Court was that, if a claim for a half share of rent received would expose the plaintiff to a liability for a much greater sum in terms of contributing to the money spent on earning income, including capital expenditure, it would be open to the plaintiff not to pursue that remedy, which would leave the plaintiff with an entitlement to a half share in the proceeds of sale, subject only to an adjustment because of any enhancement of value due to the expenditure of the defendant.
When jointly owned property is sold under the Act, it is open to the court to resolve disputes about the distribution of the proceeds of sale, and for that purpose to determine the equitable interests in the property, which may well differ from the legal interests. This could range from a claim that one co-owner holds the whole of his or her beneficial interest on a constructive or resulting trust in favour of the other, to relatively minor adjustments for various reasons which would impact on the equitable interest in the property. These however, were matters which, if and to the extent they were in issue, were resolved by the consent order. One aspect of this is that, if one co-owner has unilaterally constructed improvements which enhance the value of the asset sold, that co-owner is entitled on sale to credit for the increased value or the cost of the increase, whichever is the lesser. Again, this is something which is taken into account in relation to the distribution process, and has been finally resolved by the consent order. In the absence of evidence that anything done by the respondent enhanced the value of the property at the time of sale, there would have been no grounds for making an adjustment on this basis anyway.
Apart from the distribution of proceeds of sale in accordance with the true beneficial interest of the parties, it is open in a proceeding of this nature for one co-owner to pursue a claim for an account under s 43.[36] This is not a claim which has to be pursued in proceedings under s 38, but I think it follows from the terms of the application that such a claim was made in this case. Accordingly any such claim is also covered by the consent order. Squire v Rogers (supra) is authority for the proposition that a party pursuing such a claim can be required to give credit for the cost of improvements effected by the other party by which such rent or income was received, but again insofar as that was a relevant consideration that was covered by the terms of consent order.
[36]An “account” is an equitable remedy, the former common law remedy of account having become obsolete in the 18th century: Meagher, Gummow & Lehane “Equity Doctrines and Remedies” (3rd Ed 1992) p 659, 60; Tito v Waddell (No 2) [1977] Ch 106 at 250.
As well, where either party has discharged more than that party’s appropriate share of a liability which fell on both of the parties, there is a restitutionary claim for contribution, subject to the operation of the Limitation of Actions Act. That would appear to apply to the claim in relation to payments in discharge of the mortgage securing a loan to the Commonwealth Bank made to both parties by which the property was purchased. This is a matter which can be taken into account in proceedings of this nature, indeed it is a factor which can affect the distribution of the equitable interest in the land, but it is a claim which can be pursued independently, that is, it is not one which depends for its existence on the sale of the jointly owned property. If pursued as a claim for contribution, it would be subject to the operation of the limitation period. Indeed, such a claim could be brought now by the respondent, in respect of payments made off the joint mortgage loan during the last six years, subject I suppose to an argument that such a claim would now be barred by an estoppel of the kind in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, a proposition which can be difficult to establish.[37]
[37]See Lee v Australia and New Zealand Banking Group Ltd [2013] QCA 236 at [78].
Under s 42 of the Act, the court has power in a proceeding seeking an order under s 38 to determine questions of title, and to direct enquiries and accounts necessary for the purpose of ascertaining and adjusting the rights of parties. At one time there was some reluctance to deal with these issues on an application under s 38, but more recently it has been common enough for even substantial questions to be determined in a proceeding commenced in this way, which can allow for the early sale of the property and in an appropriate case the distribution of part of the assets before the dispute is finally resolved.[38] However the dispute about the extent of the equitable entitlement can be carried on in other proceedings, particularly if commenced before the originating application for an order under s 38 was filed.
[38]Ranger v Ranger [2009] QCA 226; Re Wlodarczyk [2000] 2 Qd R 216.
Ultimately however I do not consider that the correct approach in the present case is to proceed on the basis that the order made should be interpreted as an attempt by the parties to reflect, in terms which may have been a little too concise, their respective positions at law or in equity in a situation such as this. This was a consent order, and it may involve a compromise of the parties’ respective positions in a practical way. What matters is what the order actually made really means.
Analysis
Turning to the wording of the order, there are some indications here of a connection between the term “outgoings” and “rental income”. Both are referred to in para 4(c), although if looked at in isolation that would not justify limiting the adjustment for any outgoings paid by the parties to the amount of the adjustment for rental income. But para 6 of the order, which talks about information to be provided, speaks of “outgoings paid by the respondent for the property”, and in the second part of the paragraph documents evidencing the rental income with respect to the property “for each financial year prior to the year ending 30 June 2011 for which the respondent seeks an adjustment for outgoings paid.” That paragraph suggests some connection between the outgoings claimed and rental income received by the respondent, though it must be conceded that it does not say in terms that outgoings can only be claimed in respect of a financial year where there was rental income received by the respondent.
It also may be noted that there is no particular temporal limitation in relation to either the claim for outgoings or the documentation of rental income, except that the paragraph contemplates that there will be rental income in respect of any financial year for which outgoings are claimed. Indeed, read literally if the respondent did not claim any outgoings it would not be necessary to provide any information about any financial year, apart I suppose from the year ended 30 June 2011 which would seem to produce a perverse outcome, defeating the purpose of claiming an account. In the present case of course that situation has not arisen, because the respondent has claimed outgoings since 1996, which are vastly in excess of the rental income received.
The document setting out the respondent’s claim is a little difficult to follow, but it appears that she is claiming the full amount of the principle advanced by the Commonwealth Bank, and the interest that has been paid, either to the Commonwealth Bank or in respect of that part of the loan from Suncorp which was used to pay out the balance of the Commonwealth Bank loan, on that loan since 1996.
The respondent also claims the costs of rebuilding the property after it was substantially damaged by fire. At the time there was insurance on the property, and an amount of nearly $200,000 was paid out by an insurance company. The applicant claims that the respondent insisted upon making her own arrangements for the rebuilding, into which he provided no input, and it is apparent from the amounts that the respondent claims that (if true) this involved the expenditure of a very large amount of money. The respondent claims this was artificially increased by the fact that the first builder did not complete the job and it was necessary to engage a second builder, and there was a dispute with both of the builders which led to the incurring of legal expense on her part; she has claimed for all of this expense as an outgoing.
The respondent has also made a very substantial claim for the cost of her own time and labour in what she refers to as repair and maintenance, and the cost of her de facto husband, though he is not a licensed builder and as such has no entitlement to claim remuneration for any such work. The applicant disputes both of those claims. There is also a dispute between the parties as to the extent to which the property was rented; the respondent alleges that apart from brief periods in 1996 and 1999 the property was only rented from March 2010 until December 2016, though this is disputed by the applicant.
I note that the originating application filed by the applicant sought a division of the proceeds, and an adjustment for rental income and outgoings received by and paid by the respondent. Although the material did not say so, that part must have been an application based on the Act s 43. The only change between the originating application and para 4 of the order made was the insertion of the reference to outgoings paid by the applicant, a curious change in circumstances where there was no evidence from either party that the applicant has ever paid anything, or claims to have paid anything, which could be characterised as an outgoing on any interpretation of that term.
A claim for an account under s 43 is subject to the operation of the Limitation of Actions Act 1974; see s 10(2).[39] Although technically the operation of a limitation period is a matter for the respondent to raise, the approach of the Full Federal Court in Squire v Rogers (supra) suggests that even if an order for an account has been made apparently without temporal limitation, it ought to be understood to be subject to the operation of the statutory limitation period in the absence of some specific indication to the contrary. That certainly seems to me to be the more reasonable and practical interpretation of the order, particularly if made in a matter where there were no pleadings in which the point could be taken. The idea that what was contemplated here was that there would be an account of rental income and outgoings dating back to the acquisition of the property in 1996 strikes me as a most unreasonable interpretation of the order, and not one which would be readily adopted.[40]
[39]Meagher, Gummow & Lehane, op cit, p 780.
[40]The respondent’s affidavits speak in various places of her inability to produce full records dating back to 1996, or of difficulties in obtaining old records.
The other difficulty with the respondent’s argument is that it interprets the word “outgoings” as in effect covering any money that the respondent has ever spent in any way in connection with the property. The notion that the term would extend to the cost of acquiring the property in the first place, and the cost of rebuilding the property after a fire 15 years earlier, strikes me as surprising, and unreasonable.
Conclusions
In my opinion, the context in which this word appears, in an order for an account, governs its meaning here, and requires that it be given a meaning appropriate to that context. An order for an account under s 43 involves taking into account not only the gross receipt by way of rent but also those expenses properly incurred in earning that rent, so that what the co-owner who has taken the benefit of the rent from the jointly owned premises must share with the other co-owner is the net rent rather than the gross rent. Accordingly in my opinion it includes all expenses which would be allowed on such an account, that is, those of a revenue nature, of the kind discussed in Re Cleveland (supra) by Davey LJ.
This would include amounts payable by way of rates and such utilities as were not paid by the tenant, commission to the managing agents, insurance, pest control services, and the sort of routine repairs and maintenance necessary to satisfy any obligation on the landlord to maintain and repair the premises; but it would not in my opinion include expenditure of a capital nature. If the originating application had proceeded to a hearing, it would have been possible for the respondent to argue, on the basis of Squire v Rogers (supra), that capital expense in the form of rebuilding costs should be taken into account, but that would have required consideration of an occupation rent, and the providence of the expenditure in fact undertaken by the respondent, as well as giving the applicant the opportunity to abandon a claim for an account of the profits if a negative balance threatened. But that did not occur, and the question is whether in this context the term “outgoings” includes expenditure of a capital nature. In my opinion it does not.
On the question of whether the respondent is entitled to an allowance for her own efforts, it may be that in an appropriate case an allowance could be made on the taking of an account under s 43, but I cannot see how the term “outgoings” can extend to an allowance to the respondent for her personal time and effort, because this is not an expense that she has incurred. The same applies to an allowance for her de facto husband for his time and effort. Insofar as it is asserted that he has done building work for her, this is not work for which she is liable to renumerate him, since on the evidence he is not a licenced contractor and hence under the statute is not entitled to recover remuneration for any work he has done.[41] I consider the applicant’s objections to these amounts were justified.
[41]Affidavit of Anderson filed by leave 17 March 2017; Queensland Building and Construction Commission Act 1991 s 42.
In the circumstances therefore I am prepared if necessary to hear further submissions from the parties as to the identification of the particular items claimed by the respondent in relation to the concept of “outgoings,” but subject to that the exercise is essentially one of taking the account on the basis of the amounts claimed by the respondent; this ought to be straightforward, but I am prepared to hear further submissions on the matter. As I have indicated, I consider that the order operated by reference to the period allowed for taking an account under the Limitation of Actions Act 1974 s 10(2), that is for 6 years prior to the commencement of the proceeding on 1 July 2015.
I am also prepared to hear further submissions in relation to the question of whether the respondent’s claim for contribution at law is a matter which should be taken into account in this proceeding, on the basis that within the last six years she has paid more than her fair share of the amount necessary to discharge a common liability, and the amount involved. Although the terms of the order between the parties foreclose any claim by the respondent that such expenditure gave her a greater equitable interest in the property, it seems to me that, subject to the question of estoppel, an entitlement at law remains to her subject to the operation of the Limitation of Actions Act.
Claim for breach of contract
The other matter raised by the applicant’s application relates to the circumstances surrounding the sale of the property by the trustees. The trustees held an auction of the property on 19 April 2016, at which the respondent bid $815,000, and the auctioneer sold the property to her.[42] The respondent was entitled under the Act s 40(1) to bid at the auction; no special terms were imposed by the court order. She was that day given a contract to sign, in accordance with the ordinary practice at an auction,[43] and paid a deposit of $20,375 to the agent on or about 22 April 2016. The contract was not subject to finance, but the respondent in fact required finance in order to complete it and was not able to obtain such finance. She defaulted on completion and the contract was terminated by the trustees, who resold the property for $661,000.[44] On the face of it, the respondent was in breach of the contract, and in accordance with its terms is liable to forfeiture of the deposit, and to pay damages by reference to any deficiency on the resale of the property, after making allowance for the deposit.
[42]Affidavit of respondent filed 16 March 2017 para 6, 8; affidavit of Anderson filed 14 March 2017 para 11, Exhibit KA21.
[43]Christensen et al, op cit, p 199; Wright v Madden [1992] 1 Qd R 343.
[44]Affidavit of respondent filed 25 January 2017 para 4.
The applicant claims that the trustees have taken the attitude that they will not pursue a claim for damages against the respondent, however, and the applicant by this application is seeking leave to bring the claim on behalf of the trustees. The trustees’ claim would be one in law for damages for breach of contract, or for recovery of an amount payable under a contract. In these circumstances the correct procedure for the applicant is to bring an action against the trustees for an execution of the trust, and then obtain appointment of a receiver to use the trustees’ name to institute the proper action against the respondent.[45] It occurs to me, however, that the involvement of the trustees in such a proceeding would be essentially nominal, and it would be more convenient for that claim to be resolved in the current proceeding, pursuant to the requirements of the Civil Proceedings Act 2011 s 7(1).[46]
[45]Jacobs’ Law of Trusts in Australia (5th Ed 1986) p 640, citing Sharpe v San Paulo Railway Co (1873) 8 Ch App 597. There is some authority that, in special or exceptional circumstances, the beneficiaries may sue in their own name, even to enforce a claim at law: Dal Pont “Equity and Trusts in Australia” (6th Ed 2015) p 724-6.
[46]A broad view was taken of earlier legislative provisions to this effect in General Credits (Finance) Pty Ltd v Fenton Lake Pty Ltd [1985] 2 Qd R 6 at 9. I would be prepared to join the trustees as respondents if they or the respondent sought the protection this would give: Fried v National Australia Bank Ltd (2001) 111 FCR 322 at 373, 376.
Hence the appropriate course is for me to hear and determine that issue in the current proceeding, so that any adjustment relating to any obligation of the respondent because of a breach of contract with the trustees can be brought to account. The fact that this issue is not one covered by the consent order does not present a difficulty, in view of the terms of s 11 and bearing in mind that this was a matter which arose after the consent order was made: UCPR r 668. In my opinion this is the most convenient course to adopt, but it is appropriate first to list the matter to receive further submissions and evidence in relation to the question of whether the respondent has any and what liability to the trustees in respect of the contract with her which was not completed.
I therefore propose to deliver these reasons, and list the matter for further consideration after the parties have the opportunity to prepare to deal with the matters remaining in issue.