The High Court has handed down its decision in Byrnes v Kendle, in which an estranged husband was ordered to account to his estranged step-son for uncollected rent from a property owned by the husband, partly held in trust for the wife, and occupied by the husband's biological son.
That the case was in the High Court at all was the subject of comment in a number of the judgments. Chief Justice French noted that the case concerned a husband and wife in their 80s, now separated, who had been engaged in litigation with each other for more than two and half years over "relatively small sums of money" (almost $75,000...which may not be "relatively small" to most Australians). It was, according to French CJ, "a great misfortune for them and their families" that they should be involved in such litigation at this time of their lives (again, the wife's son may not have considered his success in being awarded $75,000 plus costs to be a "great misfortune"). In a similar vein, Justices Heydon and Crennan described the litigation as "lamentable and ill-starred." Perhaps unsurprisingly, there was no such emotive language from Justices Gummow and Hayne.
In any event, back to the decision at hand. The husband and wife married in 1980 and separated in 2007. At the time of their marriage, each had children from previous marriages. In 1984 the husband purchased a home unit in Brighton, South Australia using finance provided under a scheme for members of the defences forces. He was the sole registered proprietor of the property. In 1989 the wife's son (a solicitor, and the party to the proceedings who ultimately will be paid the $75,000) instigated the execution of a deed by which the husband acknowledged that he held one half of his interest in the property upon trust for the wife.
The Brighton property was sold in 1994 and the proceeds applied to the purchase of another property (the "Rachel St property). Again, the husband was the sole registered proprietor. In 1997, and again at the instigation of the wife's son, a further deed was executed whereby the husband acknowledged that he held one half of his interest in the property upon trust for the wife.
In 2001 the husband and wife moved out of the Rachel St property which was then let to the husband's son. He lived there until 2007, but paid rent only for the first two weeks. It was in 2007 that the husband and wife separated, the Rachel St property was then let to a paying tenant, and the wife's interest in the property/trust was assigned to her son (the solicitor, who had instigated the execution by the husband of the deeds acknowledging the trust).
At issue in the case was:
(a) whether the husband in fact held one half of his interest in the property on trust for the wife;
(b) if he did so, whether he was in breach of his obligations as trustee in failing to collect rent from his son (and account for one half of that rent to the wife);
(c) whether the wife had acquiesced in the breach of trust.
The question of whether the husband held half the property on trust for the wife should have been a non-issue. The deeds clearly stated that he did. However, the trial judge had held that when the husband signed the deeds all he intended to do was to acknowledge that upon the eventual sale of the Rachel St property the wife was entitled to half the proceeds. It was this finding as to the subjective intention of the husband that led to the trial judge holding that there was no trust created. In dealing with this issue, the three judgments in the High Court emphasised that while there must be an intention to create an express trust, that intention is to be discerned not by determining what the husband intended to do, but what he in fact did by executing the deed. In other words, the question is not "what did the husband mean to say" but "what was the meaning of the words the husband in fact employed". Or, in the rather more colourful words of Charles Fried adopted by Justices Heydon and Crennan, one should not "take the top off the heads of authors and framers - like soft-boiled eggs - to look inside for the truest account of their brain states at the moment the texts were created" but rather "the words and text are chosen to embody intentions and thus replace inquiries into subjective mental states...the text is the intention of the authors or framers."
The question of whether the husband was in breach of his duties as trustee in failing to collect unpaid rent had been dealt with by the Full Court in South Australia by reasoning that the trust was simply a "device" to produce a position whereby the husband and wife were in substance, although not at law, co-owners of the property, and that had they simply been co-owners of the property there would have been no obligation on the part of the husband to let the property and get in rent. However, as Justices Gummow and Hayne noted, this rather seems to reverse the relationship between law and equity, and is without logic. As the trust property was land, it was the husband's obligation as trustee to render that land productive by leasing it, and the benefit of the obligation to pay rent was held by the husband on trust for the wife.
The question of acquiescence in the breach was based upon findings by the trial judge that the wife was well aware of her rights in respect of the property, and despite the advice given by her son (the solicitor) that the husband owed duties to her to collect the rent, for the sake of matrimonial harmony she unwillingly consented to her husband's decision not to press for the rent. This, the High Court held, was insufficient to amount to acquiescence in the breach.
Perhaps the most useful aspect of the judgment is the collection of references in relation to the inadmissibility of evidence as to the subjective intention of parties in construing a written instrument, and conversely the limited circumstances in which such evidence is admissible for the different purpose of evidencing the contest in which the instrument was executed.
Perhaps the most interesting thing about the judgment is that Justices Gummow and Heydon (Heydon now being an author of the leading trusts and equity texts in Australia that were, until the last edition of each, co-authored by Gummow) could not join in a judgment in this case.