Abano & Abano
[2024] FedCFamC1F 331
•17 May 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Abano & Abano [2024] FedCFamC1F 331
File number: DUC 403 of 2021 Judgment of: HARPER J Date of judgment: 17 May 2024 Catchwords: FAMILY LAW – PROPERTY – INTERIM – JOINDER – Where the wife seeks joinder of the husband’s father to the proceedings – Where parcels of real property are owned by the husband, the father and several trusts – Where the wife seeks declaratory relief that the father holds his right interest and title to farming property on joint endeavour or common intention constructive trust for the husband alone or spousal parties together – Where the father resists his joinder to the proceedings – Necessity of joinder to be determined by consideration of reasonable prospects of success and summary dismissal principles – Where no reasonable prospects of success in the wife’s claims to existence of constructive trusts – Where joinder of the father presently unnecessary – Application for joinder dismissed.
FAMILY LAW – PRACTICE AND PROCEDURE – Subpoenas – Where the Court is unable to determine that the documents sought by the wife have apparent relevance – Subpoenas set aside.
Legislation: Family Law Act 1975 (Cth) Pts VIII and VIIIAA ss 4, 75, 78, 79, 85A, 90AC, 90AE
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 7, 46, 69(4), 56(2)
Federal Circuit and Family Court of Australia (Family Law) Rules2021 (Cth) rr 3.03, 8.18, 10.09, 10.11
High Court Rules2004 (Cth) r 27.09.5
Cases cited: Arthurman & Arthurman (2019) FLC 93-926; [2019] FamCAFC 214
Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337; [1981] HCA 1
ASIC v Edensor Nominees Pty Ltd (2001) 204 CLR 559; [2001] HCA 1
Australian Receivables Ltd v Tekitu Pty Ltd (2011) 7 ASTLR 480; [2011] NSWSC 1306
B Pty Limited and Ors (2008) FLC 93–380; [2008] FamCAFC 113
Baird v Smee [2000] NSWCA 253
Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; [1998] HCA 59
Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59
Bennett v Horgan (Unreported, Supreme Court of New South Wales, Bryson J, 3 June 1994)
Birmingham v Renfrew (1937) 57 CLR 666; [1937] HCA 52
Bofinger v Kingsway Group Ltd (2009) 239 CLR 269; [2009] HCA 44
Commissioner for Railways v Small (1938) 38 SR (NSW) 564
Darmanin v Cowan [2010] NSWSC 1118
Delaforce v Simpson-Cook (2010) 78 NSWLR 483; [2010] NSWCA 84
Dovgan & Dovgan [2021] FamCA 306
Ebner & Pappas (2014) FLC 93-619; [2014] FamCAFC 229
Elliott-Carde v McDonald’s Australia Limited [2023] FCAFC 162
Federal Commissioner of Taxation v Carter (2022) 274 CLR 304; [2022] HCA 10
Federal Commissioner of Taxation v Cornell (1946) 73 CLR 394; [1946] HCA 32
Federal Commissioner of Taxation v Ramsden (2005) 58 ATR 485; [2005] FCAFC 39
Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10
Hancock Family Memorial Foundation Ltd v Fieldhouse (No 3) [2010] WASC 223
Hill v Hill [2005] NSWSC 863
Jensen v Mlynarik [2024] QSC 19
Jones v Southall & Bourke Pty Ltd (2004) 3 ABC(NS) 1; [2004] FCA 539
Jordan & Sutton (No 2) [2022] FedCFamC1F 850
Kauter v Hilton (1953) 90 CLR 86; [1953] HCA 95
Khalif & Khalif (No 2) [2021] FedCFamC1F 308
Kehoe & Seden (No 2) [2022] FedCFamC1F 346
Kennon v Spry (2008) 238 CLR 366; [2008] HCA 56
Korda v Australian Executor Trustees (SA) Limited (2015) 255 CLR 62; [2015] HCA 6
Kriezis v Kriezis [2004] NSWSC 167
Lincoln v Moore (2016) 54 Fam LR 588; [2016] FamCA 547
Lindon v Commonwealth of Australia (No 2) (1996) 136 ALR; [1996] HCA 14
Lloyd v Tedesco (2002) 25 WAR 360; [2002] WASCA 63
Loulach Developments Pty Ltd v Roads and Maritime Services (No 2) [2018] NSWSC 1465
Massalski v Riley (2022) 65 Fam LR 73; [2022] FedCFamC1F 36
Maxwell v Maxwell [2022] NSWSC 1028
Montevento Holdings Pty Ltd v Scaffidi (2012) 246 CLR 325; [2012] HCA 48
McKay v McKay [2008] NSWSC 177
Morris & Morris (No 7) [2024] FedCFamC1F 12
Mullane & Mullane (1983) 158 CLR 436; [1983] HCA 4
Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78
Newett & Newett (No 8) (2023) FLC 94-128; [2023] FedCFamC1A 7
Parsons v McBain (2001) 109 FCR 120; [2001] FCA 376
Public Trustee v Smith (2008) 1 ASTLR 488; [2008] NSWSC 397
Q v E Co (2020) 383 ALR 469; [2020] NSWCA 220
Raulfs v Fishy Bite Pty Ltd [2012] NSWCA 135
Re Sabri; ex parte Brien (1997) FLC 92-732; [1996] FamCA 154
Ritter & Ritter (2020) FLC 93-957; [2020] FamCAFC 86
Scaffidi v Montevento Holdings Pty Ltd (2011) 6 ASTLR 446; [2011] WASC 146
Simmons v Simmons (2008) 40 Fam LR 520; [2008] FamCA 1088
Soulos v Pagones [2023] NSWCA 243
Spellson and Spellson [1989] FLC 92-046; [1989] FamCA 99
Stanford v Stanford (2012) 247 CLR 108; [2012] HCA 52
Townson v Tickell (1819) 106 E.R. 575
Valceski v Valceski (2007) 70 NSWLR 36; [2007] NSWSC 440
West v Mead (2003) 13 BPR 24,431; [2003] NSWSC 161
Woodcock v Woodcock (2021) 64 Fam LR 489; [2021] FedCFamC1F 88
Young v Lalic [2006] NSWSC 379
Division: Division 1 First Instance Number of paragraphs: 121 Date of hearing: 23 February 2024 Place: Sydney Counsel for the Applicant: Mr Loofs SC with Mr Breeze Solicitor for the Applicant: Allwright Bourke Lawyers & Conveyancing Solicitor for the Respondent: No appearance Counsel for the Prospective Respondent: Mr Pesman SC with Mr Alexander Solicitor for the Prospective Respondent: Campbell Paton & Taylor ORDERS
DUC 403 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS ABANO
Applicant
AND: MR C ABANO
Respondent
MR ABANO
Prospective Respondent
ORDER MADE BY:
HARPER J
DATE OF ORDER:
17 MAY 2024
THE COURT ORDERS THAT:
1.Leave to join Mr Abano as the proposed Second Respondent is refused.
2.The Points of Claim filed by the Applicant Wife (“the wife”) on 31 January 2024, to the extent they claim relief against the proposed Second Respondent, be struck out.
3.The wife file and serve amended Points of Claim consistent with this judgment by no later than close of Registry filing 28 days from the date of these orders.
4.The wife’s Amended Application in a Proceeding filed on 4 April 2023 be otherwise dismissed.
5.The subpoenas issued by the wife to D Bank, E Accountants and F Company be set aside.
6.The proceedings be stood over to 5 September 2024 for callover at a time to be advised.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Abano & Abano has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth)
REASONS FOR JUDGMENT
HARPER J:
INTRODUCTION
These are parenting and property proceedings under Pts VII and VIII of the Family Law Act1975 (Cth) (“the Act”) between the applicant wife (“the wife”) and the first respondent husband (“the husband”). The husband’s father (“the father”) is the proposed second respondent.
The parties formed a relationship in 2011. The wife moved to live with the husband on a rural property near Town G known as “H Property” (“H Property”) upon which the husband’s parents had conducted a farming operation. The spouse parties resided in what was called the “second homestead” on H Property. At the time the wife was an educator with a range of tertiary qualifications.
H Property is the umbrella name for 12,000 acres comprised of several parcels of real property.
The father divorced the husband’s mother in 2012. The farming operation has continued on H Property after this divorce. As a result of the final property orders made between the father and the husband’s mother, the father owns as trustee, or controls the corporate trustee who owns, the assets which comprise H Property and the farming operation, which broadly speaking involves crop production.
The spouse parties married in 2014 and separated under one roof in October 2020. The husband moved to separate accommodation on H Property in June 2021. The wife left H Property in November 2022 and rented accommodation in the nearby town of Town J.
There are four children of the relationship, aged between three and seven years old. The wife is the primary carer.
The wife commenced these proceedings on 29 November 2021. There are parenting issues yet to be resolved.
According to the draft balance sheet filed by the husband on 13 November 2023, as between the spouse parties, there is presently a net matrimonial property pool including superannuation of about $3,100,739. Within this pool are two properties, “K Property” and “L Property”, both situated on M Street, which are owned by the husband. It appeared from the wife’s evidence that these two properties form part of H Property.
It is part of the wife’s case that associated with the farming operation is a commercial business known as “N Business” or “The Abano Group”. This business was started by the father well before the spouse parties formed a relationship. It operates a large facility at Town O in New South Wales. N Business is owned by Abano Pty Ltd as trustee of the Abano Discretionary Trust. The father is the sole director and shareholder of the trustee and appointor of the trust. The husband has no interest in this trust, but has been an employee of N Business since 1998.
According to an affidavit filed on 19 December 2022 by the solicitor for the father, Ms U, the properties, apart from “K Property” and “L Property”, which comprise “H Property” are owned by the father as trustee of the P Trust, formerly called the Q Trust. This trust was established in 2006 and is a discretionary trust of which the father is appointor, and the spouse parties, the father and others are discretionary objects. It was common ground that this trust has never made any distribution to the husband, or for that matter, the wife.
In 2018 the father established the H Property Farming Trust with H Property Farming Pty Ltd as trustee, of which the father is sole director and shareholder and appointor of the trust. This trust is also a beneficiary of the P Trust and conducts the farming operations on H Property. It has never made any distributions to the husband, although it appeared to be common ground that he was in the class of discretionary objects.
Another company P Pty Ltd was incorporated in mid-2018, in which the father holds 51 of 100 issued shares while the husband owns the other 49 shares. According to Ms U, this company was inactive at the time she affirmed her affidavit on 13 December 2022.
As will be explained shortly, the wife contends that the father holds his right, interest and title to various relevant property interests, including rights and powers as trustee himself or controller of corporate trustees, on trust for the husband or the husband and the wife. She claims declaratory relief pursuant to s 78 of the Act, and consequential orders pursuant to s 90AE(2). She seeks declarations about the existence of a constructive trust based on common intention.
Joinder
Pursuant to procedural orders made by Schonell J, the wife filed a Second Further Amended Initiating Application (“FFAIA”) on 14 November 2023. One of the interlocutory orders sought in that amended application is for the joinder of the father as the second respondent.
The principles relating to joinder were not in dispute. I adopt the relevant law as stated by me in Jordan & Sutton (No 2) [2022] FedCFamC1F 850 at [38]–[44] (“Jordan & Sutton (No 2)”). It is unnecessary to set out those passages here.
Reference should however be made to the Federal Circuit and Family Court of Australia (Family Law) Rules2021 (Cth) (“the Rules”). Rule 3.01 provides:
A person whose rights may be directly affected by an issue in a proceeding, and whose participation as a party is necessary for the court to determine all issues in dispute in the proceeding, must be included as a party to the proceeding.
Pursuant to r 3.03(2) of the Rules a party may add another party after a proceeding has started “by amending the application or response to add the name of the party”, subject to filing and serving the material specified in r 3.03(3). Rule 3.03(4) stipulates that a party “may only add another party after the first court date with the leave of the court”. The FFAIA was filed well after the first court date. The wife requires leave to join the father. The wife filed an Application in a Proceeding seeking his joinder pursuant to r 3.03(4) on 10 October 2022. This application was amended on 4 April 2023 (“Amended Application”) to include a range of declaratory relief as well as orders for disclosure from the father.
It is well known that this is not a court of pleadings, but where the interests of third parties to a marriage or de facto relationship are in issue, it is often appropriate for pleadings to be ordered. The wife was ordered to, and did, file and serve a Further Amended Points of Claim on 31 January 2024 (“Points of Claim”).
The father resists his joinder on the basis that the claims the wife makes affecting him have no reasonable prospect of success, would not survive summary dismissal if he was joined and thus her Amended Initiating Application is liable to be struck out. He filed a Further Amended Response to the wife’s Amended Application on 5 April 2023, seeking summary dismissal of the wife’s claims against him, dismissal of the wife’s Amended Application, that her Points of Claim be struck out, indemnity costs, and his removal from the proceedings. He also seeks security for costs in the event any aspect of the wife’s claims is permitted to go forward against him, as well as directions about payment of valuations and the extent of the father’s involvement in the proceedings.
In B Pty Ltd and Ors (2008) FLC 93-380 at [52] (“B Pty Limited”), the Full Court drew an analogy between the criteria applicable for a joinder application and those applicable to an application for summary dismissal of the proposed claim against the joined parties. Justice Le Miere in Hancock Family Memorial Foundation Ltd v Fieldhouse (No 3) [2010] WASC 223 observed “[i]t would be futile to order that a person be joined as a defendant if the material before the court disclosed that if the person, having been joined as a defendant, applied for summary judgment the application would succeed” (at [27]).
Accordingly, as I understood the submissions, the father implicitly concedes his joinder and participation is necessary if the Court is unable to conclude the wife has no reasonable prospects of success in any of her claims affecting his rights or property interests and declines to strike out the entirety of the Points of Claim so far as they affect him. This position is also accepted by the wife. If the father is not joined, no question of security for costs arises.
Summary dismissal
The relevant power to order summary dismissal in this Court is now found in s 46 of Federal Circuit and Family Court of Australia Act 2021 (Cth) (“the FCFCOA Act”) as follows:
46 Summary judgment
(1) ...
(2) The Federal Circuit and Family Court of Australia (Division 1) may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
(4) This section does not limit any powers that the Federal Circuit and Family Court of Australia (Division 1) has apart from this section.
Section 46 applies to the wife’s application for joinder, since it falls within the definition of a “Proceeding” in s 7 of the FCFCOA Act, and the father is a party to it.
In addition, r 10.09(1)(d) of the Rules empowers the Court upon application to make summary orders where an application has “no reasonable likelihood of success”. Nothing turns on the difference between “no reasonable prospects” in s 46 of the FCFCOA Act and “no reasonable likelihood” in r 10.09. Rule 10.11(1) empowers the Court to make a range of summary orders, including dismissing all or part of the proceedings.
In Ritter & Ritter (2020) FLC 93-957 at [27], the Full Court adopted the statement of principle by Kirby J in Lindon v Commonwealth of Australia (No 2) (1996) 136 ALR 251 at 255–256, which included the caution that:
3. An opinion of the Court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant summary termination. Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment.
(Footnotes omitted)
But the expressions “reasonable prospects” and “reasonable likelihood” introduce a standard of reasonableness in exercising a power to summarily dispose of proceedings. Accordingly, the Full Court has recognised that although a respondent’s case is not hopeless or bound to fail, nonetheless it has no reasonable prospects of success (Ebner & Pappas (2014) FLC 93-619 at [62]; Arthurman & Arthurman (2019) FLC 93-926 at [17]–[18]).
More recently, in Newett & Newett (No 8) (2023) FLC 94-128 the Full Court explained:
57.Section 46(2) of the FCFCOA Act empowers the Court to grant summary disposal against a party who has no reasonable prospect of successfully prosecuting a proceeding or part of a proceeding. It is important to stress that to conclude a proceeding has no reasonable prospects of success, it is not necessary to find it is either hopeless or bound to fail (s 46(3)). Rules 10.09 and 10.11 of the Rules also grant a power to summarily dismiss proceedings with no reasonable “likelihood” of success.
58. The principles governing an exercise of discretion to summarily dismiss proceedings are well known. As can be seen, the legislation has introduced the concept of reasonableness in assessing the prospects of a claim. In Spencer v Commonwealth of Australia (2010) 241 CLR 118, the High Court construed the wording identical to s 46, used in s 31A of the Federal Court of Australia Act 1976 (Cth). At [22], French CJ and Gummow J said “the criterion of a ‘reasonable prospect’ of success has been understood in analogous statutory settings to mean a ‘real’ rather than ‘fanciful’ prospect”, and the expression ‘no reasonable prospects of success’ applies to a case in which the pleadings disclose “no reasonable cause of action and their deficiency is incurable.” Hayne, Crennan, Kiefel, and Bell JJ further held at [52]:
... effect must be given to the negative admonition in sub-s (3) that a defence, a proceeding, or a part of a proceeding may be found to have no reasonable prospect of successful prosecution even if it cannot be said that it is “hopeless” or “bound to fail”. ... [I]t is important to begin by recognising that the combined effect of sub-ss (2) and (3) is that the enquiry required in this case is whether there is a “reasonable” prospect of prosecuting the proceeding, not an enquiry directed to whether a certain and concluded determination could be made that the proceeding would necessarily fail.
59. Consequently, the threshold for finding a proceeding has no reasonable prospect of success is different and less onerous than for other bases upon which to order summary dismissal. For example, the High Court has recently reiterated that concluding that an issue or cause is vexatious or frivolous requires the satisfaction of a higher threshold than finding it has no reasonable prospects of success: Citta Hobart Pty Ltd v Cawthorn (2022) 400 ALR 1 at [70]–[71].
60. This means that there may be cases in which although a proceeding is not hopeless or bound to fail, it does not have a reasonable prospect of success. Nonetheless, the power to summarily dismiss must always be exercised cautiously because it is a serious matter to deprive a person of access to courts of law: Lindon v Commonwealth of Australia (No 2) (1996) 136 ALR 251 at 255–256; Bigg v Suzi (1998) FLC 92-799 at 84,974–84,975; Pelerman v Pelerman (2000) FLC 93-037 at [46]; Korsky and Bright (No 2) (2007) FLC 93-352; Simmons & Simmons (2008) 40 Fam LR 520 at [51]; Friar & Friar [2011] FamCAFC 71 at [51]; Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd (2013) 42 VR 27 at [27]; Ebner & Pappas at [57]; Olman & Teitzel [2020] FamCAFC 136 at [28]; Karlsson & Karlsson [2020] FamCAFC 207 at [38] and [41].
61. The question of whether a proceeding has no reasonable prospect of success necessitates the making of value judgments “in the absence of a full and complete factual matrix and full argument”, with the result that the provision vests a discretion in the Court: Kowalski v MMAL Staff Superannuation Fund Pty Ltd (2009) 259 ALR 319 at [28]. However, the incompleteness of the factual matrix is accommodated in favour of the respondent to the summary dismissal application by taking their evidence “at its highest”. In Ritter & Ritter (2020) FLC 93-957 at [66], the Full Court explained:
The determination of [summary judgment] must only take into account the material on which the respondent seeks to make out the case, or as often expressed takes the respondent’s case “at its highest” unless the respondent’s version is inherently incredible or unreliable (see Munnings v Australian Government Solicitor (1994) 68 ALJR 169 at 171; Bigg & Suzi (1998) FLC 92-799; Webster v Lampard (1993) 177 CLR 598 at 608) ...
In Massalski v Riley (2022) 65 Fam LR 73 at [110]–[118] (“Massalski”) I also expressed the view, to which I adhere, that the duty to avoid a multiplicity of proceedings, stipulated in s 43 of the FCFCOA Act, and to conduct litigation consistently with, and to promote, the overarching purposes set forth in s 67 and s 68 of the FCFCOA Act, is relevant to a determination of whether a litigant’s prospects of success are “reasonable”. For example, s 43 of the FCFCOA Act imposes a duty on the Court to avoid a multiplicity of proceedings. In Massalski, I observed:
110. … The obligation is imposed upon the Court, not the parties. The Court “must” grant such remedies as far as possible to determine matters finally and to avoid a multiplicity of proceedings. Section 43 replicates in material respect s 22 of the Federal Court Act, which itself stands in a long tradition of similar provisions deriving from s 24(7) of the Supreme Court of Judicature Act 1873 (UK), the point of which, in part, is to avoid needless litigation: Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at [9] per Gibbs J (as he then was).
…
114. Sections 43, 45, 67, and 68 should be read together. As a matter of construction, it seems to me that the Court must, in the context of all proceedings before it, including an application for summary dismissal, grant all remedies to avoid a multiplicity of proceedings, as part of achieving the overarching purpose. For example, the efficient use of the judicial and administrative resources available for the purposes of the Court, the efficient disposal of the Court’s overall caseload and the disposal of proceedings in a timely manner, and the resolution of parties’ disputes at a cost that is proportionate to the importance and complexity of the matters in dispute, are all objectives which are assisted by avoiding a multiplicity of proceedings.
Summary disposal is one way to avoid needless litigation, in the sense it can bring to an end early in the process, claims which lack reasonable prospects. The efficient use of judicial and administrative resources, the duty to dispose of proceedings in a timely manner and a concern for proportionate cost are, in my view, also relevant considerations in determining whether a poorly articulated or tendentious claim is reasonable and should be permitted to go forward.
The power in this Court to strike out a pleading as disclosing no cause of action is not expressly found in the Rules. Rule 8.18 empowers the Court to strike out objectionable parts of an affidavit, and s 69(4)(b) of the FCFCOA Act empowers the Court to strike out a claim for non‑compliance with Court orders. Neither rule applies here. Rule 10.11(1)(a), which empowers the Court to dismiss “any part of the proceeding”, may be sufficient. However, s 56(2) of the FCFCOA Act provides that the Rules of the High Court apply, “mutatis mutandis, so far as they are capable of applying” if the Rules are insufficient. Rule 27.09.5 of the High Court Rules2004 (Cth) applies in these circumstances and provides as follows:
27.09.5 Where a pleading:
(a) does not disclose a cause of action or defence;
(b)is scandalous, frivolous or vexatious;
(c) may prejudice, embarrass or delay the fair trial of the proceedings; or
(d) is otherwise an abuse of the process of the Court;
the Court or a Justice may order the whole or part of the pleading be struck out or amended.
In my view, r 27.09.5 applies in the present situation. By its terms it gives the Court a discretion to strike out a pleading for one of the nominated bases, including where a pleading does not disclose a cause of action or may prejudice, embarrass or delay a fair trial. The criteria for striking out embodied in r 27.09.5 does not incorporate the test of no reasonable prospects of success explicitly, but there is overlap. It seems to me that if a claim has no reasonable prospect of success this also means it may prejudice, embarrass or delay the fair trial of the proceedings, even if it is arguable that it discloses some cause of action or defence.
In summary, therefore, the questions of both summary disposal and striking out and thus the competing applications are to be resolved by deploying summary disposal principles, set out above, as the father seemed to accept. I will treat the Points of Claim as a pleading which makes the allegations of material facts which are said to support the range of relief the wife claims, and the necessity of joining the father. If they do not disclose a cause of action, would prejudice or delay a fair trial, or have no reasonable prospect of success against the father, they should be struck out and the joinder of the father refused. This necessitates a close consideration of the wife’s claims, and her evidence in support. It is a significant step to summarily dispose of a claim. But, as will be explained, despite the complexity of the way the wife’s claims are formulated, after careful consideration, I am not satisfied she has demonstrated a reasonable prospect of success and her pleading so far as it affects the father, should be struck out.
The wife’s claims
No Points of Defence have been filed. Indeed, since the father resists his joinder, such a response from him would be premature. The husband has yet to file a Response to the FFAIA. He has filed no Points of Defence to the Points of Claim. Nonetheless, as the authorities cited above make clear, for the purposes of this judgment the Court should take the allegations in the Points of Claim, and wife’s evidence in support, at their highest. The Court must also proceed cautiously.
The articulation of the wife’s claims in the Points of Claim is lengthy and somewhat unkind to the reader. The way her claims are articulated raises issues of some complexity, as the ensuing discussion will demonstrate. In summary, the wife seeks declaratory relief pursuant to s 78 of the Act, to the effect that the father holds his right, interest and title, either wholly or in such proportion as the Court determines, to the following items of property on constructive trust for the husband alone or the spouse parties together:
(1)Real estate
(a)Lot … in DP …;
(b)Lot … in DP …;
(c)Auto Consol …;
(d)Auto Consol …;
all of which are situated at R Street, Town G in the State of New South Wales; and
(e)K Property comprising Lot … in DP … situated at M Street, Town G.
(2)Water licences
(a)WAL …;
(b)WAL …;
(c)WAL …;
(d)WAL …;
(e)WAL …; and
(f)WAL ….
(3)Venue
(a)“S Venue” T Street, Town G in the State of New South Wales comprising Lot … in DP … (“S Venue”).
(4)Trusts
(a)P Pty Ltd as trustee for the Abano Discretionary Trust;
(b)The power of appointment for such trust;
(c)H Property Farming Pty Ltd as trustee for the H Property Farming Trust; and
(d)The power of appointment for such trust.
(“the nominated assets”).
The father is the registered proprietor of the real estate identified in subparagraph (1), apart from K Property. The evidence showed he owns these properties as a trustee. He also owns the water licences identified in subparagraph (2) as trustee.
The wife further seeks a declaration that the H Property Farming Trust settled in 2018 was a “post nuptial settlement” within s 85A of the Act, coupled with an order that the Court make a “distribution to the [husband] that is just and equitable in all the circumstances”.
The evidence did not make clear whether P Pty Ltd is the trustee of the Abano Discretionary Trust rather than the father himself but I will assume either the father is trustee or he controls the trustee if not him.
It is necessary to set out, in summary form at least, the wife’s claims and allegations, as they can be extracted from the Points of Claim:
(a)At the commencement of cohabitation the husband (not the father) represented to the wife that the father had promised the farm and rural enterprise would be the husband’s, the father’s assets would be owned by the spouse parties and their financial future was secure. The husband ran the farming operation on H Property, while the wife would not be able, and would have no financial need, to continue her employment as an educator. The wife would be engaged in a “matrimonial partnership” with the husband “in the operation of the combined rural enterprise” (paragraph 12(h)). Then in 2012 the father represented to the wife that although he was “number one boss” and the husband “number two boss”, when the father dies the husband would become “number one boss” (paragraph 14(a)), the consequence being that the farm and combined rural enterprise would “be theirs” (paragraph 14(b));
(b)The wife alleges that the husband made these representations as agent for the father and the father made his representations knowing that the husband had made his representations to the wife;
(c)After cohabitation when the wife moved to H Property, she became aware of a range of matters as the result of further representations by the husband and the father to the effect that the husband controlled the rural enterprise, made all management decisions, that the combined rural enterprise operated in tandem with N Business conducted by the father and the father relied on the husband for the prosperous operation of the combined rural enterprise (paragraph 20);
(d)The trustee from time to time of the Abano Discretionary Trust conducted a business growing and selling crops on H Property and K Property from 2008; the spouse parties and the father were discretionary objects; the father controlled the trustee, was appointor of the trust, and no discretion had ever been exercised by the trustee distributing trust property in favour of any discretionary object other than the father. Thus, the father viewed the trust and N Business as his property;
(e)It “became known” to the wife that the husband had broad and fundamental management responsibilities for the combined rural enterprise and N Business, such as employing staff, designing infrastructure, strategic planning, and determining water rights, as a result of which the husband was precluded from undertaking any other employment or commercial activity (paragraphs 33(a)–(k)). These matters became known to the wife by representations made to her in conversations with the husband and the father, in which the husband spoke as agent for the father;
(f)In reliance upon the representations, the spouse parties remained on H Property “engaged in the operation of the combined farming enterprise” (paragraph 38);
(g)As part of a joint endeavour, the spouse parties undertook arduous toil, the husband shouldered management responsibilities and the wife in particular provided homemaker and parenting contributions, towards the combined farming operations on H Property in reliance on the representations pleaded, and the wife would otherwise have pursued her career as an educator; the spouse parties as a result had a legitimate expectation that “H Property” would pass to them on the passing of the father;
(h)The separation of the spouse parties brought the joint endeavour to an end and it would be unconscionable, in accordance with the principles set forth in Baumgartner v Baumgartner (1987) 164 CLR 137 (“Baumgartner”), for the father to hold “H Property” “without recognition of the contributions” of the husband and wife who had accrued “enforceable equitable rights” against the father which were property for the purposes of the Act;
(i)As a result of the representations and the conduct said to manifest them, there should be inferred the existence of an unwritten agreement between the husband and the father that the father would supply H Property and its infrastructure for the combined rural enterprise while the husband would provide L Property, acumen, labour and decision‑making for its benefit and N Business which would supply capital and water licences for the combined rural enterprise. The husband and the father conducted themselves in accordance with the agreement, including the purchase of the water rights, referred to above;
(j)In furtherance of the agreement:
(i)H Property Farming Pty Ltd was incorporated by the father, allocating 51 of 100 issued shares to himself and 49 to the husband. H Property Farming Pty Ltd became trustee of H Property Farming Trust in mid-2018 in which the spouse parties were beneficiaries. The H Property Farming Trust took over the business operated by the Abano Discretionary Trust, the husband continued to work full time in the business and represented to the wife that the effect of these arrangements was that “the farm” would be theirs (paragraphs 44–45); and
(ii)The husband incorporated or gained control of S Venue Pty Ltd which was the trustee of S Venue Trust which purchased S Venue.
(k)The combined farming enterprise was conducted between the father, either personally or as trustee of the P Trust, Abano Pty Ltd as trustee of the Abano Discretionary Trust, the husband and later the H Property Farming Trust; on an unspecified date the father and husband reached a common understanding that the husband would control the farming enterprise which created an estoppel by convention or common intention precluding the father from resiling from the common understanding and from interfering with the husband’s control; this estoppel created choses in action in favour of the husband;
(l)The failure of the P Trust, the Abano Discretionary Trust and the H Property Farming Trust to make any distributions to the husband in the circumstances of his toil in the farming enterprise gave rise to either removal of the trustees or choses in action as a beneficiary;
(m)The wife then pleads that the wife and the husband accrued enforceable equitable rights against the father, by which I assume it is meant choses in action being claims to a proprietary interest in the father’s assets enforceable by action (paragraphs 49, 49H, 49R);
(n)Paragraphs 50 to 90 set out proposed orders which, in summary, seek an exercise of the Court’s discretion pursuant to s 90AE(2) of the Act based on rights, said to be property of the husband, arising under P Trust, the Abano Discretionary Trust, the S Venue Trust and the H Property Farming Trust, for the trustees of those trusts to exercise their discretion to distribute trust property to the husband;
(o)In relation to the claim pursuant to s 85A of the Act, the Points of Claim alleged the H Property Farming Trust was a settlement caught by the section and;
Neither [the wife] nor [the husband] have received financial distributions from such trust, in circumstances where both lived in extreme modesty and would have derived significant well being had such distributions been made, and the Court ought order that such distributions be made to both.
(paragraph 49J) (Emphasis altered)
I accept that the wife’s Points of Claim constitute more than simply paragraphs in an application. Rather they assert facts which the wife contends, if proved, would justify the relief sought (B Pty Limited at [52]). I also accept, as the wife argued, that the Points of Claim do not need to plead “ambulatory facts which may be ascertained in the ordinary process of procedural inquiry”, may make claims in the alternative and include reasonably inferred facts (Wife’s written submissions filed 19 February 2024, paragraph 4(a); Young v Lalic [2006] NSWSC 379).
The wife also gave affidavit evidence in support of her Points of Claim, which expanded upon her pleaded allegations, for example, in the following ways:
(a)When she first came to “H Property” in 2011 the husband said to her “the farm will be mine” (Wife’s affidavit filed 1 March 2023, paragraph 36(a));
(b)She observed the husband undertaking the day to day running of the “farm”, making numerous administrative and management decisions;
(c)The husband went to the father’s home almost every afternoon to discuss what was happening on the farm, and also talked to him during the day (Wife’s affidavit filed 1 March 2023, paragraph 36(c));
(d)The father deferred to the husband in respect of work and improvements on the farm (Wife’s affidavit filed 1 March 2023, paragraph 36(h));
(e)The husband said to the wife such things as “this is our future” and “I am working this hard for our future” (Wife’s affidavit filed 1 March 2023, paragraphs 36(g) and (e));
(f)The father lived in the eight bedroom homestead and said “this is my house for as long as I want to be here and then it will be [the husband’s]” and the husband said “when [the father] gives me the farm, we are going to build the homestead again” (Wife’s affidavit filed 1 March 2023, paragraph 36(i) and (j));
(g)Every year between 2012 and 2020 the bank manager would go to the father’s house to meet with the father and the husband (Wife’s affidavit filed 1 March 2023, paragraph 36(v)); and
(h)Between 2011 and 2014 the wife was employed by N Business. She undertook labour for the crop season (Wife’s affidavit filed 1 March 2023, paragraph 36(x)).
It was necessary to summarise the Points of Claim because in her written submissions, filed 19 February 2024, the wife categorises her pleadings into primary and secondary causes of action which diverge to some extent from the Points of Claim, as follows:
Primary causes of action available against the Second Respondent:
a. A Baumgartner constructive trust claim pursuant to which the wife, husband and father intentionally pooled their resources for the furtherance of the farming enterprise conducted on and connected with “[H Property]” (paragraphs 12 - 21, 33 - 38, 48A - 48G);
b. Alternatively a common intention constructive trust available to the husband alone by which, at some time between 2008 and 2011, he and his father intended either that he manage the enterprise, either for the benefit of it as a whole ("the combined rural enterprise”) or for the benefit of [N Business], in recognition that the husband would obtain an interest in either to the extent of his contributions (paragraphs 12 - 21, 33 - 47) or (paragraphs 12 - 47), or alternatively a joint venture to that effect (47);
c. Further in the alternative a second common purpose constructive trust available to the husband alone by which in exchange for the First Respondent applying his labour and expertise for a nominal wage he was given the control of the combined farming enterprise by the Second Respondent, which control permitted him to determine how profits were to be applied, whether assets were to be sold and whether any resource of the combined farming enterprise was to be applied to the benefit of the First or Second Respondents (paragraphs 12‑21, 33–38, 49A–49H);
d.A Birmingham v Renfrew Constructive trust available to the husband alone by which in exchange for the husband undertaking the labour and using his expertise to advance the combined farming enterprise for a nominal wage incommensurate with the hours and expertise he gave to it, the Second Respondent would leave his assets, including “[H Property]”, to the First Respondent (paragraphs 12 - 21, 33 - 38, 48).
Secondary causes of action available to the First Respondent against the Second Respondent
a. Paragraphs 49I and 49R are not pressed as choses requiring evaluation by this Court. However, it is clear that no financial records have been provided with respect to the following trusts, of which the husband and the wife were both beneficiaries, both of whom would be entitled to such records (see Silkman v Shakespear Hanly Limited), and the issue raised by these paragraphs ought best be treated as a formal request for the following:
The [Q Trust] (established by deed 2 August 2006) Financial records from 2 August 2006 to date
b.The s85 claim at paragraphs 49I and 49J is pressed and property pleaded for reasons set out below.
The 90AE Pleadings:
c. To the extent that s90AE is relied upon to seek distribution of discretionary trusts, these claims are not pressed. The alternate claims for valuation of the choses in action are, as are the claims seeking s90AE to give effect to the choses pleaded above.
(paragraph 27) (Footnotes omitted)
The reference to paragraph 49I of the Points of Claim appears to be erroneous. Rather paragraphs 49H and 49R of the Points of Claim refer to the “bundle or rights or choses in action” arising under trusts but they now are not pressed as property requiring valuation. The “s 85 claim” refers to the contention in the Points of Claim which appears to be in truth a claim under s 85A of the Act to set aside the settlement of the H Property Farming Trust.
The submissions about s 90AE pleadings indicate that most of the relief claimed in paragraphs 50 to 90 of the Points of Claim is not pressed, and can be taken not to form part of the wife’s case.
It can be seen that in her submissions the wife founds her claims squarely on claims to the existence of constructive trusts. In particular, as regards the wife herself, she claims to be the direct beneficiary only under “a Baumgartner type” constructive trust. I will return to this below. Otherwise she claims relief declaring the husband’s interests under such a trust or common intention constructive trust in which she is not a beneficiary.
It should be pointed out in particular that the Points of Claim, for example, in paragraph 7A, seek a declaration that “in the circumstances that have come to pass, pursuant to either the common intention constructive trust or conventional estoppel”, but the claims of the wife as categorised in her submissions do not expressly rest on estoppel, except to the extent her submissions nominate a common intention constructive trust based on the asserted control of the farming enterprise which was “vested” in the husband.
According to the wife, if her contentions are successful, the net property pool increases by some $48 million.
It is fundamental to the case propounded by the wife that the farming operations on, and the properties comprising “H Property”, the other the nominated assets and N Business should be understood as components of a combined farming enterprise which was a joint endeavour. The identity of the participants in this joint endeavour was not entirely clear. But arising from the allegations in the Points of Claim, the possible combinations appear to be the father, either personally or as trustee of the P Trust, Abano Pty Ltd as trustee of the Abano Discretionary Trust conducting the business of N Business, the husband and the wife during the marriage.
The wife’s case is that the husband’s contributions to the joint endeavour were time, effort and expertise and the possession and exercise of full control and management responsibility. The wife argues these contributions to the joint endeavour were so significant that he controlled both the combined rural enterprise and N Business and built up the value of its business and assets.
The wife alleges that by reason of these matters either a common intention constructive trust arose, under which the husband acquired a proprietary interest commensurate with his contributions in respect of the assets owned by the father and, it appears, assets owned by the trusts, or there existed a joint venture or partnership between the husband and the father.
She further claims that she herself laboured for the benefit of the combined rural enterprise by undertaking certain work at the husband’s direction, homemaker and parenting duties together with farming duties such as checking equipment, obtaining machinery parts and escorting machinery to various locations, all being activities which freed the husband to participate in and contribute to the combined joint farming enterprise as described above at [38].
She alleges neither spouse received remuneration “which remotely reflected the commercial value” of their labour. The wife claims both she and the husband continued to act to their detriment in this way during the marriage, in reliance on the representations made, which created a legitimate expectation that they could continue to reside on H Property and would receive it upon the death of the father. This created enforceable equitable rights in both the wife and the husband which, as choses in action, are assets of the spouse parties falling within the definition of “property” in s 4 of the Act.
Alternatively, the wife alleges the husband enjoys rights based upon estoppel which precludes the father from denying that an agreement or understanding exists between him and the husband that control of the combined farming enterprise has “vested” in the husband with the consequence that the father is disabled from exercising any control of the relevant trusts or trustee companies inconsistently with that understanding. The wife alleges these are a bundle of rights or choses in action which are property of the husband.
I pause here to observe that none of the wife’s evidence adequately established the factual assertion that the spouse parties’ remuneration even “remotely reflected the commercial value” of their labour. However, I consider it appropriate to assume this is correct in the wife’s favour for the purposes of this judgment. However, to the extent this fact is pointed to by the wife as part of the detriment said to support a claim to a proprietary interest based on estoppel, I also observe that on its own such a fact is equivocal or at least difficult to assess. The wife’s evidence also shows the spouse parties received what could be countervailing benefits, such as accommodation. These can be taken into account in considering detriment (Q v E Co (2020) 383 ALR 469 at [155]). A constructive trust must be a proportionate remedy (Delaforce v Simpson-Cook (2010) 78 NSWLR 483 at [3]–[4], [59]–[62] (“Delaforce”)) especially where detrimental reliance is alleged. However, for present purposes, I will assume there was some detriment although its extent cannot be adequately determined on the wife’s evidence.
As pointed out, to the extent the pleading seeks relief to the effect that the Court should deploy s 90AE(2) of the Act to compel the father to cause trustees to make a distribution to the husband, this relief is no longer pressed.
Constructive Trusts
Before considering the wife’s claims more closely, it is necessary to make some general observations about constructive trusts. The wife’s claim is that she and the husband or the husband alone already have a beneficial interest in the nominated assets (above at [34]). In other words, she claims what is usually called an institutional constructive trust, treated as coming into existence at the time of the conduct which gives rise to the trust, as opposed to a remedial constructive trust coming into existence at the time it is so declared by the court. In Soulos v Pagones [2023] NSWCA 243 at [470] (“Soulos”) Ward P explained the distinction:
470. … it has certainly been recognised that what some have referred to as an institutional constructive trust will ordinarily be treated as coming into existence at the time of the conduct which gives rise to the trust (see Muschinski v Dodds (1985) 160 CLR 583 (Muschinski v Dodds) at 614; [1985] HCA 78; Parsons v McBain (2001) 109 FCR 120; [2001] FCA 376 at [9]-[13]; Secretary, Department of Social Security v Agnew (2000) 96 FCR 357 at 365; [2000] FCA 59; In re Sharpe (a Bankrupt); Ex parte Trustee of the Bankrupt’s Property v The Bankrupt [1980] 1 WLR 219 at 225; [1980] 1 All ER 198, Ch D; see also Young, Croft and Smith, On Equity (Thomson Reuters, 2009) at [6.850], A J Oakley, Constructive Trusts (3rd ed, 1997, Sweet & Maxwell)); as opposed to a remedial constructive trust coming into existence at the time it is so declared by the court (see, for example, Muschinski v Dodds at 615; Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 714).
It is necessary to keep in mind that a constructive trust is essentially a flexible form of equitable relief. In Re Sabri; ex parte Brien (1997) FLC 92-732 Chisholm J pointed out at 83,866–83,867 that the remedy of constructive trust was flexible and;
… courts should not take a rigid or unduly categorical approach when the question arises whether to apply the doctrine of constructive trust to novel situations. It is clear that there is a degree of flexibility in formulating the appropriate order in cases of constructive trust … Such flexibility in moulding the appropriate order, however, is consistent with the view that there was some pre-existing right or interest that the order is designed to enforce or protect …
In Giumelli v Giumelli (1999) 196 CLR 101 (“Giumelli”) the High Court considered facts which have some similarity to the present matter. A son was in partnership with his parents who had promised that he would become the owner of part of their rural property. In reliance upon the promise, he remained in the partnership and worked to improve the property. The High Court found that a constructive trust was not the appropriate remedial response to the strength of the son’s equity. Rather he was entitled to compensation equal to the value of the promised lot, secured by charge over the whole of the parents’ property.
Gleeson CJ, McHugh, Gummow and Callinan JJ, in their joint judgment in Giumelli at 112 explained, in a passage frequently cited, the difference between constructive trusts which create proprietary interests and those which merely impose a personal liability in equity such as to account as a trustee:
… A constructive trust of this [proprietary] nature is a remedial response to the claim to equitable intervention made out by the plaintiff. It obliges the holder of the legal title to surrender the property in question, thereby bringing about a determination of the rights and titles of the parties.
The term “constructive trust” is used in various senses when identifying a remedy provided by a court of equity. The trust institution usually involves both the holding of property by the trustee and a personal liability to account in a suit for breach of trust for the discharge of the trustee’s duties. However, some constructive trusts create or recognise no proprietary interest. Rather there is the imposition of a personal liability to account in the same manner as that of an express trustee. An example of a constructive trust in this sense is the imposition of personal liability upon one “who dishonestly procures or assists in a breach of trust or fiduciary obligation” by a trustee or other fiduciary.
In the present case, the constructive trust is proprietary in nature. It attaches to the … property. Such a trust does not necessarily impose upon the holder of the legal title the various administrative duties and fiduciary obligations which attend the settlement of property to be held by a trustee upon an express trust for successive interests. Rather, the order made by the Full Court is akin to orders for conveyance made by Lord Westbury LC in Dillwyn v Llewelyn (1862) 4 De G F & J 517 at 523 [ER 1285 at 1287] and, more recently, by McPherson J in Riches v Hogben [1985] 2 Qd R 292 at 302.
In these cases, the equity which founded the relief obtained was found in an assumption as to the future acquisition of ownership of property which had been induced by representations upon which there had been detrimental reliance by the plaintiff. This is a well recognised variety of estoppel as understood in equity and may found relief which requires the taking of active steps by the defendant …
In Parsons v McBain (2001) 109 FCR 120, the Full Court of the Federal Court (Black CJ, Kiefel and Finkelstein JJ) at [9]–[15] made clear that “the notion that a ‘common intention constructive trust’ first comes into existence [only] when so declared by the court must be rejected”.
In Jones v Southall & Bourke Pty Ltd (2004) 3 ABC(NS) 1 (“Jones”), Crennan J (as she then was) said that the authorities make plain:
62.… the term “constructive trust” covers both trusts arising by operation of law and remedial trusts. Furthermore, a constructive trust may give rise to either an equitable proprietary remedy based on tracing or, whether based on or independently of tracing, an equitable personal remedy to redress unconscionable conduct. The equitable personal remedies include equitable lien or charge or a liability to account …
(cited with approval in Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 at 289-290 [45]–[48]).
In the same passage from Jones, Crennan J continued:
62. … The difference between an equitable proprietary remedy and an equitable personal remedy, is that a constructive trust giving rise to an equitable proprietary remedy gives the beneficiary an “ownership” interest in the property whereas personal remedies, such as an equitable lien or charge, give the beneficiary “a security interest”. Meagher RP and Gummow WMC, Jacobs’ Law of Trusts in Australia, (6th ed, Butterworths, 1997), pp 736-740; RP Meagher RP, Heydon JD and Leeming MJ, Meagher, Gummow and Lehane’s Equity Doctrines and Remedies, 4th edn, Butterworths, 2002, pp 200-210; AW Scott and WF Fratcher, The Law of Trusts (4th ed, Little Brown and Company, 1989) Vol V, §462. In the remedial context, it is for the court to choose the most appropriate remedy: see Giumelli v Giumelli (1999) 196 CLR 101; Warman International Ltd v Dwyer (1995) 182 CLR 544 ...
The vexed question of how a constructive trust may affect the interests of third parties has been touched on many times and raises the question in each case whether it is the appropriate remedy (Giumelli at 113–114). In Australian Receivables Ltd v Tekitu Pty Ltd (2011) 7 ASTLR 480 Ward J (as she then was) said:
132. While there is a need to have regard to the prejudice which might be done (by the imposition of a constructive trust) to the claims of third party creditors who could not have been aware of the circumstances giving rise to the constructive trust, there is a fairly clear (though not uncontradicted) line of authority from Re Jonton Pty Ltd [1992] 2 Qd R 105 to Re Sabri; Ex parte Brien v Australian & New Zealand Banking Group Ltd (1996) 137 FLR 165 to Parsons v McBain in which such prejudice does not appear to have prevented the imposition of a constructive trust. In each case, the question appears to be what would be an appropriate or available remedy “to quell the controversy” (adopting their Honours’ terminology in Bathurst) and whether this would involve a remedy short of the imposition of a constructive trust (and (if not) whether any constructive trust so imposed should be fashioned so as to avoid or minimise prejudice to unsecured creditors in some way).
In the present matter, one of the ways the wife puts her case is as a claim to a proprietary interest in “H Property” for the husband alone or herself and the husband arising from detrimental reliance on representations made by the father to the husband and by the husband to the wife as agent for the father. The relevant representations, according to the wife’s evidence, were to the effect that “H Property” would be the husband’s or the spouse parties’ property in the future either when the father gave the property to the husband or upon his demise.
The wife’s evidence does not make clear how it is said the father constituted the husband as his agent in making the relevant representations. Such an agency may be inferred from other facts. I will assume that such an agency existed for the purposes of this judgment.
In Soulos Ward P confirmed that:
406. Accordingly, while equity goes no further than is necessary to prevent unconscionable conduct (see [Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387] at 419), where that conduct involves resiling from a representation that has induced detriment, the relief that is “necessary” is typically to make good that representation ([Sidhu v Van Dyke (2014) 251 CLR 505] at [85]).
Where the constructive trust is said to arise by detrimental reliance on representations that property will be received on the representor’s demise, unconscionability giving rise to the equity supporting a constructive trust is assessed at the date of death, if the representation is departed from at that point in time. In Soulos Ward P explained:
471. The time at which a constructive trust arises was considered in McNab v Graham (2017) 53 VR 311 … where the Victorian Court of Appeal (at [102], [107], [108]) confirmed that, generally speaking and subject to consideration of all the relevant circumstances (as to which, see the discussion in Giumelli and [Delaforce v Simpson-Cook (2010) 78 NSWLR 483]), where detrimental reliance upon a promise gives rise to a constructive trust, in the context of an estoppel, the constructive trust comes into existence before a court makes any order; it comes into existence at the time of the conduct which gives rise to the trust (the relevant time as to reliance on a promise giving rise to the estoppel being the time of the reliance which would render departure from the fulfilment of the promise unconscionable). In the context of the present case, the time at which departure from the fulfilment of the promise would be unreasonable would be the date of the deceased’s death (at which time the Will, which did not make provision for the … Property to go to [the claimant], became operative); not the date of the making of the Will.
This distinction is important for the way the wife puts her claim. It is a claim to an existing proprietary interest enjoyed by her and the husband or the husband alone, arising from past facts rather than a claim to a form of equitable declaratory relief which itself would have the effect of bringing a proprietary interest into being. Her claim is in substance for a declaration that the spouse parties or the husband has a present enforceable equity of sufficient strength that is can only be satisfied by recognising a proprietary interest in the nominated assets. The importance of this observation is that the nominated assets would then fall within the matrimonial pool and be available for division pursuant to s 79.
I should pause here to make clear that the wife does not seek the imposition of purely equitable remedies by this Court. There may be some question about the jurisdiction of this Court to grant such relief. But it is unnecessary to consider this question. The wife relies on statutory power in s 78 of the Act to declare the “title or rights” in property. It is not necessary to set out the numerous declarations sought by the wife. There may be some doubt whether all of them can be said to declare “title or rights” in property within s 78. However, this is not presently important. This Court is a creature of statute. Whatever limitations may have previously existed upon its jurisdiction to grant declaratory relief (see for example Lincoln v Moore (2016) 54 Fam LR 588 at [82]–[99]), I accept that s 44 of the of the FCFCOA Act grants the power to make orders “of such kind as the Court considers appropriate” and this includes declaratory relief.
For present purposes, I accept s 78 is wide enough to declare proprietary interests arising from an institutional constructive trust involving the interests of a third party (Khalif & Khalif (No 2) [2021] FedCFamC1F 308 at [37]; Valceski v Valceski (2007) 70 NSWLR 36 at [30]–[36]). If a declaration is made pursuant to s 78(1) of the Act, s 78(2) is available to make consequential orders. Once a declaration is made under s 78, the provisions of ss 79(1), 80(1)(h)(i), 80(1)(h)(k), and 90AE of the Act, together with s 44 of the FCFCOA Act, are also available to make appropriate consequential orders, including orders affecting the interests of third parties. These sections “must be construed in as plenary a manner as the words of the statute permit” (ASIC v Edensor Nominees Pty Ltd (2001) 204 CLR 559 at [148] per McHugh J; Elliott-Carde v McDonald’s Australia Limited [2023] FCAFC 162 at [131]). The orders which this Court can make pursuant to those sections of the Act can mirror the nature of purely equitable relief.
I observe here also that the wife’s approach of seeking an institutional constructive trust seeks to avoid the inherent problems of characterising the alleged equity as requiring a form of relief which is personal and something less than a proprietary interest attaching to the nominated assets, such as compensation supported by a charge or lien, or a taking of accounts (Giumelli, above at [57]). For the purposes of the exercise of the Court’s discretion under s 79, such an equity would be a chose in action and thus property, but it would be impossible to divide. It may be more readily characterised as a financial resource and not susceptible to division itself, although clearly, by reason of s 79(4)(e), it could affect how the actual assets are divided. Or again if the basis for such an equity was established, it may permit a form of order pursuant to the provisions of the Act which mirrored equitable relief to the extent necessary. I take these considerations into account in assessing the prospects of the wife’s claims.
The existence of a constructive trust
In light of the general principles concerning constructive trusts, it is convenient to deal first with the wife’s claims concerning the type of constructive trust now usually called a Baumgartner trust. The name is taken from Baumgartner, where the High Court adopted the earlier articulation of principle by Deane J in Muschinski v Dodds (1985) 160 CLR 583 at 618 (“Muschinski”):
… Both common law and equity recogni[s]e that, where money or other property is paid or applied on the basis of some consensual joint relationship or endeavour which fails without attributable blame, it will often be inappropriate simply to draw a line leaving assets and liabilities to be owned and borne according to where they may prima facie lie, as a matter of law, at the time of the failure … Where ... there are no applicable contractual provisions … other rules or principles will commonly be called into play …
It is important to emphasise that the wife claims both she and the husband are direct beneficiaries under such a constructive trust.
At 620 in Muschinski Deane J continued:
... [T]he principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specifically provided that that other party would so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable to do so …
In Baumgartner itself Mason CJ, Wilson J and Deane J at 147–148 referred to the general equitable principle “which restores to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them” and continued at 149–150:
… The facts that the … property was acquired and developed as a home for the parties and that, at least indirectly, it was largely financed out of money drawn from the pool of their earnings, this being one of the purposes which the pool was to serve, combine to support an equality of beneficial ownership at least as a starting point. Equity favours equality, and, in circumstances where the parties have lived together for years and have pooled their resources and their efforts to create a joint home, there is much to be said for the view that they should share the beneficial ownership equally as tenants in common, subject to adjustment to avoid any injustice which would result if account were not taken of the disparity between the worth of their individual contributions either financially or in kind …
The ambit of the expression “without attributable blame” was explained by Bryson J in Bennett v Horgan (Unreported, Supreme Court of New South Wales, 3 June 1994) as follows at 11:
… The concept of attributable blame must be understood and applied with some tolerance; in my view it does not call for a judgment attributing blame among members of a family for the continuing relationship becoming intolerable, unless perhaps in particularly gross cases. Such judgment would be difficult and unreliable, as it is rare indeed that something or other which could be said to be a ground for blame cannot be identified and laid to the charge of each of the persons concerned. Leaving gross cases involving criminality or similarly reprehensible behaviour on one side, it should usually be understood, in my opinion, that where personal relationships deteriorate and the sharing of a dwelling becomes intolerable to some or all of those concerned, there is, within the meaning of Deane J’s expression, no attributable blame and the case is one for an equitable adjustment …
This statement of principle has been adopted and followed numerous times (Kriezis v Kriezis [2004] NSWSC 167 at [23]; Hill v Hill [2005] NSWSC 863 at [35]; McKay v McKay [2008] NSWSC 177 at [16]; Darmanin v Cowan [2010] NSWSC 1118 at [256]; Raulfs v Fishy Bite Pty Ltd [2012] NSWCA 135 at [73]).
In West v Mead (2003) 13 BPR 24,431 (“West”) Campbell J commented further on the concept of a joint enterprise or endeavour :
59. … [A] plaintiff needs to establish that there is indeed a joint endeavour between the parties, in which expenditure is shared for the common benefit. It is also necessary to identify what the scope of that joint endeavour is. It is a question of fact, for any couple, what the scope of the joint endeavour they are engaging in is. Further, for any couple, the scope of the joint endeavour they are engaged in might change from time to time. If, within the scope of a joint endeavour which lasts for years, an asset is acquired, as a result of contributions both parties have made, and for a purpose of the ongoing joint endeavour of the parties, this gives rise to the presumption that the beneficial interest ought be shared equally. That presumption can be displaced if one party is able to show that the contributions, both financial and non-financial, to that asset should be regarded as unequal …
In West Campbell J also explained that a Baumgartner constructive trust, unlike, for example, a resulting trust which enforces the presumed intention of the parties, is imposed to prevent an unconscionable assertion of legal title “in circumstances where the parties had no explicit intention about how the legal title would be held in the circumstances which have arisen” (at [62]). The High Court has explained that a Baumgartner constructive trust is “a remedy which equity imposes regardless of actual or presumed intention” (Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 at [40]; Korda v Australian Executor Trustees (SA) Limited (2015) 255 CLR 62 at [8]).
In West, Campbell J continued:
62. … Even so, that is not to say that the intention of the parties has no role to play in whether a Baumgartner constructive trust should be held to exist. Part of the justification for imposing the Baumgartner constructive trust is that the parties have jointly been building up assets, on the basis that those assets will be available for the joint endeavour in future. Part of the reason why it can be unconscionable to let the legal title lie where it falls, if the relationship fails, is that each knew that the other was contributing to a common pool on the basis that the pool, and assets acquired from it, would be used for their ongoing common benefit. It is unconscionable for the party who ends up, at the end of the relationship, with a disproportionate share of the assets which were built up during the relationship, to keep those assets when he or she knew that that was the basis on which the assets were being built up.
…
64. A further way in which the intention of the parties is relevant is that the Baumgartner basis for a constructive trust arises only when there is a premature termination of the relationship. To decide whether this has happened, one must look at what the intention of the parties was, about how long their relationship would endure. To take an extreme example, if one of the partners makes clear that he or she is making no commitment whatever to the relationship, and is free to walk out at any time and keep any property he or she has acquired during the relationship, it is hard to see how there is anything unconscionable in the property interests lying where they fall when the relationship ends.
(Emphasis in original)
The intention to increase the joint material wealth is essential. In Lloyd v Tedesco (2002) 25 WAR 360 at [31] the Court of Appeal of the Supreme Court of Western Australia per Murray J said:
31.… [T]he joint endeavour must be one intentionally or deliberately entered into for the purpose of advancing the parties’ mutual material wealth. Only if it bears that character will it be unconscionable to allow the defendant to retain the entirety of the beneficial interest in that wealth …
Therefore, the concept of a joint endeavour, meaning a mutual pooling of resources with shared expenditure to improve mutual material wealth and a failure of the substratum of the enterprise “without attributable blame” with unconscionable retention of a benefit, are the central elements of this cause of action propounded by the wife.
It is in dispute as to whether there existed a joint endeavour between the husband and his father, and the trusts of which the father is or has control of the trustee, prior to cohabitation and the marriage. The position of the father is that the husband was a paid employee only in the combined rural enterprise and N Business. I will assume in the wife’s favour that such a joint endeavour existed at the point in time when the wife came to live on H Property.
As I understood her arguments, the wife’s position is that by marrying the husband she became a party to the joint endeavour, and her homemaker and parenting nonfinancial contributions to the marriage, which clearly are relevant for the purposes of s 79(4) of the Act, are also to be understood as contributions to the joint endeavour, as are the bookkeeping contributions she made to the business of N Business. Then, so the argument goes, the joint endeavour failed, with no attributable blame, upon her separation from the husband and her ceasing participation in the joint endeavour. Therefore, the assets and undertaking of the rural enterprise, and, it appears, N Business, are held by the father on constructive trust for the spouse parties. She then resorts to s 90AE(2) for this Court’s power to compel the father to transfer his right, interest and title in the property identified earlier to the wife and the husband or the husband alone.
However, in my view there are four insuperable obstacles to concluding the wife has a reasonable prospect of success in establishing a Baumgartner type constructive trust as pleaded, whether it involved her and the husband or the husband alone as beneficiaries.
The first is that whether it be assumed the parties to the joint enterprise were her and the husband, or the husband alone, together with the father, the presence of the relevant corporations and trusts were not in dispute as legal entities through which the joint enterprise was carried out. The tenor of the wife’s submissions invites the Court to ignore the father or corporations as trustees as separate legal entities. The starting point for the argument is that the Court should treat all the relevant trust assets as assets of the father.
The High Court has long emphasised the difference between proprietary rights and personal rights in the context of s 79 of the Act. In Mullane & Mullane (1983) 158 CLR 436, the High Court said at 445:
… In our opinion, therefore, s. 79 on its proper construction refers only to orders which work an alteration of the legal or equitable interests in the property of the parties or either of them. An interest in property is a right of a proprietary nature, not a mere personal right …
In Stanford v Stanford (2012) 247 CLR 108 the High Court made clear that when exercising the discretion to alter property interests under s 79:
37. First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself ...
There is an important difference between the determination of the property of spouse parties which falls within the statutory expression “property of the parties to the marriage or either of them” and the property of a third party. The High Court in Kennon v Spry (2008) 238 CLR 366 (“Kennon”) expressly recognised that what falls within the statutory collocation may not be co‑extensive with property which ordinary legal and equitable principles would identify. In Dovgan & Dovgan [2021] FamCA 306 (“Dovgan”), I pointed out that:
268. … In Kennon, the husband owned the trust assets as trustee, was settlor of the trust, and a beneficiary. The plurality made clear that the power of a trustee to apply income or capital under the terms of the trust deed was not a species of property under the general law, but it can fall within the definition of “property” in s 4(1) of the Act as well as within the collocation “the property of the parties to the marriage or either of them” in s 79; on the other hand, the right of a beneficiary to due consideration and administration of the trust, which, as an equitable chose in action, is a species of personal property according to ordinary general law principles (at [48], [75], [79], [126]) …
There is no doubt, and considerable authority which has held, that assets owned by a trust may be found, in circumstances of control by a spouse making the entity the spouse’s alter ego, to be the assets “of” that spouse and fall within the specific statutory collocation “property of a party to the marriage” in s 79 of the Act (Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337 at 354–355 (“Ascot Investments Pty Ltd”); Kennon at [64], [78]–[79], [91]; at Dovgan at [270]–[274] and the authorities discussed there).
In relation to the interest of the appointor under a trust instrument, statutory definitions and collocations can make considerable difference and amplify what falls within the concept of property, as statutorily defined. In Scaffidi v Montevento Holdings Pty Ltd (2011) 6 ASTLR 446 Murphy JA and Hall J commented:
151. If, however, on the proper construction of the instrument, the power of the appointor to remove and appoint trustees may be exercised for the purpose of controlling the trust estate for the appointor’s benefit, the trust property may be regarded, at least for certain statutory purposes, as effectively owned by the appointor, or as property in which the appointor has a contingent interest: Australian Securities and Investments Commission v Carey (No 6) (2006) 153 FCR 509 [19], [29],[37]–[46]; Public Trustee v Smith (2008) 1 ASTLR 48; [108]–[138]; In the Marriage of Goodwin (1990) 101 FLR 386 at 392; In the Marriage of Davidson (No 2) (1990) 101 FLR 373.
(the dissent of Buss JA, which the High Court upheld in Montevento Holdings Pty Ltd v Scaffidi (2012) 246 CLR 325, does not affect this statement of principle).
The wife did not cite any authority to support the contention that the position of the father either himself or as a trustee, who is a stranger to the marriage, is also governed by the same or similar authority for the purposes of either s 78 or s 79 of the Act. In relation to property held by a third party to a marriage there is no statutory definition or expression which extends the notion of property in the hands of the third party. The wife referred to evidence that the father himself held the view that he owned all the relevant assets after the property settlement with his ex‑wife and the orders made on 21 February 2012. But assuming the father holds this view, it does not determine the legal position.
Where, as here, the property interests of a stranger to the marriage are alleged to be held beneficially by one or both of the parties to the marriage, either wholly or partially, ordinary common law and equitable principles identifying the stranger’s interests in property are of considerable importance. In Stanford at [39] the High Court said: “[q]uestions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be “decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses”. In short, if the scheme of legal titles and equitable principles are predominant as between spouses, in ascertaining the property of a non-spouse and the stranger to the marriage, unlike the position with spouse parties, there is no warrant in the Act to go beyond concepts of property which ordinary legal and equitable principles would identify. The wife did not argue, or plead, for example, that the any of the trusts were shams in some way. This Court “cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns [the relevant property]” (Ascot Investments Pty Ltd at 354–355).
The claims of the wife about the level of control exerted by the father as trustee over trust assets clearly point to powers which give him control. But according to orthodox property principles, powers as a trustee are not the same as ownership of trust assets. As White J pointed out in Public Trustee v Smith (2008) 1 ASTLR 488:
108. In my view, on orthodox principles, neither the fact that Dr Ward was in a position to control the exercise of the trustee’s powers, and was in any event entitled to remove the trustee and appoint a new trustee, nor the fact that she could cause the trustee to appoint the income or capital of the trust to herself, would mean that she was the beneficial owner of the trust property prior to causing the trustee to appoint the property to herself. Even a donee of a general power of appointment is not the beneficial owner of the property prior to the exercise of the power, although for many purposes such a donee will be treated as if he or she were the beneficial owner. As Fry LJ said in Ex Parte Gilchrist; Re Armstrong (1886) LR 17 QBD 521 at 530-531:
“The question is, whether the general power of appointment given to the bankrupt is her ‘separate property’ within the meaning of sub-s. 5 of s. 1 of the Act of 1882. To my mind the question is one of the most elementary description, and, if it had not been argued as it has, I should have thought it unarguable. No two ideas can well be more distinct the one from the other than those of ‘property’ and ‘power’. ... A ‘power’ is an individual personal capacity of the donee of the power to do something. That it may result in property becoming vested in him is immaterial; the general nature of the power does not make it property ... Not only in law but in equity the distinction between ‘power’ and ‘property’ is perfectly familiar.”
(Emphasis altered)
According to ordinary legal and equitable principles, the father is the owner as trustee, or controls the trustee, of many of the assets subject to the wife’s claims. But the wife did not explain why the presence of the trusts, together with their attendant rights and duties, should just be ignored, and the trust assets be treated as owned by the father. Other than the father, she makes no application to join any other legal person as a party. In my view it is not open to the Court to simply ignore the legal reality of the trusts and hold that the trust assets are property “of” the father. Her claims as formulated against the father fail for this reason.
Secondly, even if it be assumed that the father is the owner of the relevant assets, I am not persuaded the wife has any reasonable prospect of establishing a Baumgartner type trust of which she herself is a beneficiary. The fact of the wife marrying the husband, making direct financial contributions or non-financial contributions during the marriage as parent and homemaker, and performing work as an employee does not, in my view, establish that the wife became a party to a relevant joint endeavour with the husband and the father, or that upon marriage some fresh joint endeavour was formed by the father, the husband and the wife.
The wife may have made contributions in the context of the marriage for the purposes of s 79. The boundary between contributions to a marriage or de facto relationship and pooling resources for a wider associated joint endeavour may not always be crystal clear. But on the facts of this case as presented by the wife, her contributions cannot be transmuted into contributions to a joint endeavour constituted by the combined farming operation and N Business which had been operating for some time before the marriage. There may possibly be cases where the facts establish that a fresh joint endeavour was formed between the spouse parties and third parties supporting a conclusion that there exists a joint endeavour sufficient for a Baumgartner constructive trust. But that is not this case.
Taking the wife’s evidence at its highest I am unable to find any mutual pooling of resources by the father, the husband and the wife together to create wealth. In this regard, it is relevant to note that even on the wife’s case, none of the assets said to be involved in the joint endeavour were contributed by her. Nor does the wife’s evidence show that it was not specifically intended or specifically provided that that the father or the relevant trusts would enjoy benefit of property or money contributed by the spouse parties (Baumgartner above at [72]).
On the contrary, her evidence establishes that the father and the relevant trusts were intended to take any benefit. The evidence of the alleged intention must be clear and the property subject to the trust reasonably certain (Kauter v Hilton (1953) 90 CLR 86 at 97). Here the wife’s evidence, taken at its highest, shows that the parties had an explicit intention about how the legal title to the farming and commercial assets would be held which did not include either the husband or the wife while the father was alive. The nominated assets were not “pooled” in any relevant sense. The father had an explicit intention to remain in control as “number one boss” and the husband was an employee, as “number two boss” (Points of Claim, paragraph 14(a)). He clearly, according to her evidence, intended to remain in control until his demise. Although a Baumgartner trust may be imposed contrary to actual intention, where the parties to the relevant joint endeavour clearly intend any interest in the relevant asset to arise only upon the death of one of them, it is difficult to conclude there would be any unconscionability supporting a Baumgartner constructive trust prior to that point in time. As I understood her submissions, the wife did not contend otherwise in this respect.
Thirdly, I am not persuaded that by marrying the husband the wife changed the character of any joint endeavour such that upon her separation from the husband the joint endeavour can be said to have failed at all. Rather it continues in the form it had before the marriage and any involvement of the wife. The wife did not explain in her evidence or submissions how the fact of the marriage breakdown rendered any conduct of the father, or any other relevant trustee, unconscionable, if they retained the nominated assets unburdened by a trust in favour of the wife.
Fourthly, in so far as the husband is concerned, the wife alleges he has a claim to equitable relief in the form of an institutional constructive trust, which I accept is a chose in action and form of property in equity for the purposes of s 79 of the Act. But the point is that this sort of personal property, putting to one side any question of its value, is an intangible form of property, being a claim which requires vindication through Court proceedings, usually taken by the putative beneficiary. A fundamental problem exists with the wife’s claim in that it seeks to declare the existence of the husband’s property using s 78 and must presume that the husband would accept his position as a beneficiary under the trust or trusts alleged by the wife. He may be disinclined to do so by reason of these proceedings themselves. There must be assent before any property can pass to a person, a beneficiary of a trust may disclaim a beneficial interest on its coming to their knowledge, and such disclaimer operates retrospectively, and any evidence of dissent is sufficient (Federal Commissioner of Taxation v Cornell (1946) 73 CLR 394 at 401–402 (“Cornell”); Federal Commissioner of Taxation v Ramsden (2005) 58 ATR 485 at [30]). Where an estate is disclaimed the effect is that “the estate was never in him at all” (Maxwell v Maxwell [2022] NSWSC 1028 at [201] per Ward P citing Townson v Tickell (1819) 106 E.R. 575 (“Tickell”)). Although there is a strong presumption of assent by a donee of property (Federal Commissioner of Taxation v Carter (2022) 274 CLR 304 at [30] (“Carter”)), it has long been held that a trust cannot be forced upon an unwilling beneficiary and a proprietary estate “cannot be forced on a man” (Tickell at 577–578; Cornell at 401–2; Spellson and Spellson [1989] FLC 92-046 at 77,538–77,539; Morris & Morris (No 7) [2024] FedCFamC1F 12 at [193], [211]–[216]; Jensen v Mlynarik [2024] QSC 19 at [17]).
The question here is whether, in the context of an acrimonious matrimonial dispute and an assessment of the wife’s reasonable prospects of success or otherwise, the Court should simply apply the presumption of assent. It is not an evidentiary presumption but a presumption of law (Carter at [30]). Consequently, the question of its application is not resolved by taking the evidence of the wife at its highest. No submissions were made about the presumption. It is true that the husband took no part in the hearing of the wife’s application for joinder nor did he read any evidence in relation to it, including any evidence disclaiming the alleged trust. But he filed a Response to the wife’s Amended Application on 5 April 2023, in which he sought orders that it be dismissed and that she pay costs. As mentioned, the father tendered the current version of the spouse parties draft joint balance sheet, filed by the husband on 13 November 2023, in which the husband makes no claim under the alleged trust. This implicitly rejects the existence of the Baumgartner constructive trust, indeed any trust, claimed by the wife as the basis for joining the father. Since any evidence of dissent is sufficient, I infer from his resistance to the father’s joinder, and refusal to acknowledge the alleged beneficial interests on his draft balance sheet, despite the wife having put their existence in issue, that the husband disclaims, or would disclaim, any interest under the alleged trusts. In the context of these proceedings it would be highly artificial to hold otherwise. Consequently, I consider the wife has no reasonable prospect of establishing the asserted trust in the husband’s favour.
I should also record my conclusion that even if it be assumed the husband would assent to being a beneficiary of the alleged trusts and becomes a putative claimant against the father to an equitable interest in the nominated assets as a beneficiary, I am still unable to conclude the claim has a reasonable prospect of success. As pointed out already, the wife claims the husband and his father intended that he manage the enterprise, either for the benefit of the combined rural enterprise or for the benefit of N Business, in recognition that the husband would obtain an interest in either of them to the extent of his contributions. It is not explained how the nature of the asserted beneficial interest “to the extent of his contributions” is connected with the asserted relief, that is, beneficial ownership in 100 per cent of the nominated assets (see above at [34]). If the claim is to a non proprietary equity, again this may be a chose in action, but that is separate and different property to any of the nominated assets and of itself gives the husband no proprietary interest in those assets.
But again the wife’s own evidence is not consistent with any such common intention. On the contrary, her evidence shows there was no common intention other than the husband or the spouse parties taking “the farm” upon the father’s demise. Her evidence shows the father holds, and has represented that he holds, an intention to place the relevant assets in the hands of the husband in the future but has not yet done so. There is no suggestion that the father has resiled from that intention, enlivening the principles which would compel him to make good the representation. I am not persuaded the wife’s pleading discloses a cause of action which has a reasonable prospect of success in this regard.
I am not persuaded the husband has an arguable present interest as beneficiary under an institutional constructive trust of which the assets are those nominated by the wife, set out above at [34]. Even if the claim is otherwise arguable, in the absence of any evidence of assent by the husband, and in light of evidence of dissent, I do not accept the wife’s pleading or evidence disclose an arguable cause of action that a Baumgartner trust, as alleged in favour of her or her and the husband, should be construed out of the circumstances, nor that any such claim has a reasonable prospect of success. I also find that permitting her claim to progress as pleaded is likely to prejudice or delay the fair trial of the proceedings.
I turn then to the other types of common intention constructive trusts alleged by the wife, said to be available to the husband alone. The same reasoning and problems apply to these types of constructive trust. The wife’s evidence does not establish a common intention that the husband would have a beneficial interest under a trust other than upon the father’s demise, and even if this is wrong, again for present purposes I consider it more likely than not that he would disclaim his interest, possibly for the very reason that the wife is pressing such a claim.
Moreover, to the extent the wife bases her claim to a constructive trust on detrimental reliance on the pleaded representations, there is no evidence that the father is seeking to resile from them. According to her pleading and evidence, the representations upon which she relies, were made to the spouse parties in an intact marriage. The wife’s claim here seems to equate the breakdown of the marriage with the father repudiating the promises made or expectations created by the representations. But the wife’s evidence goes no distance to establish this or any other relevant unconscionable conduct by the father which could support a constructive trust as the proportionate remedy (Delaforce at [42]–[44], [61–[70]).
The wife then pleads that the husband would be entitled to all the assets of the father upon the latter’s death, that is, the father’s estate would be impressed with a trust in favour of the husband consistent with representations or agreements between them (Birmingham v Renfrew (1937) 57 CLR 666 at 682–691 (Dixon J); Baird v Smee [2000] NSWCA 253 at [65]). Taking her evidence at its highest, such a conclusion may be open. But for present purposes the pleading accepts the relevant trust could not arise until the father’s demise, as the wife’s evidence clearly shows. The father is alive. If it be assumed the husband would assent as beneficiary of such a trust, this claim appears at most a potential financial resource of the husband, not an asset, because there can be no certainty as to what assets would be subject to any such trust at the death of the father. I am not persuaded that this claim makes the joinder of the father necessary.
In her submissions the wife also made reference to choses in action which the husband owns by reason of being in a class of discretionary objects in one or more of the trusts referred to earlier. She argued, correctly, that these are personal property of the husband. However, a basic question is always whether they have value. As has been observed by French CJ in Kennon at [78] such choses in action may be capable of valuation. But as I explained in Dovgan:
299. It is usually, and correctly, said an individual object of an exhaustive or non‑exhaustive discretionary trust cannot claim any part of the trust fund or its income because they are not entitled to any interest in it unless and until the trustees exercise their discretion in their favour; in that sense discretionary objects are in competition with each other for due consideration and “what the trustees give to one is his alone”: Richstar [Enterprises Pty Ltd; Australian Securities and Investments Commission v Carey (No 6) (2006) 153 FCR 509] at 517 citing Gartside v IRC [1986] AC 553 at 617.
Valuation of this type of chose in action is closely connected to an exercise of a trustee’s discretion to appoint trust property to a given beneficiary. The possibility of valuing such choses has been accepted in this Court as arguable. But valuation is difficult and to the extent the authorities have commented on the possibility, any valuation is analogous to valuing a chance and would likely look to a past history of distributions to the relevant spouse party as a starting point. The underlying trust assets, on the other hand, could bear at best no more than indirectly upon the value, if any, of those choses in action (Simmons v Simmons (2008) 40 Fam LR 520 at [122]; Dovgan at [299]–[301]; Woodcock v Woodcock (2021) 64 Fam LR 489 at [78]–[81]).
By comparison, in Kennon, the husband was the trustee of the relevant trust. French CJ, and Gummow and Hayne JJ (at [78]–[80], [126], [137]) explained that the trustee’s power to appoint the entire trust assets to either husband or wife absolutely and the fact that the assets of the trust were acquired by or through the efforts of a party or parties during their marriage, meant that, for the purposes of s 79, the value of the wife’s choses in action, being the rights as a beneficiary to due consideration and a fiduciary exercise of the trustee’s power of appointment, was the same as the value of the trust assets. But that is not the case here.
Where, as here, neither spouse party is a trustee, it is undisputed that there has been no history of any distributions to the husband over many years, and where the very existence of the present proceedings may well disincline the father, either as the controller of, or himself as, the trustee, to exercise the trustee’s discretion in favour of the husband, acting in accordance with the trustee’s fiduciary duties, or where, as is likely here, it is reasonable to infer the husband may disclaim any interest as beneficiary, it may be hard to find any value in the husband’s choses in action.
More to the point for present purposes, the wife does not propose any specific approach to valuation. She submits she should be permitted an opportunity to present a case as to how such choses might be valued. Accepting this much as correct, the wife did not explain why an attempt at valuation would require joinder of the father as a party.
It is also necessary then to consider the wife’s reliance on the provisions of Pt VIIIAA of the Act, which is directed to orders binding third parties. The provisions of Pt VIIIAA have effect despite anything to the contrary in a trust deed or instrument (s 90AC(1)). I repeat and adopt what I said in Dovgan concerning s 90AE:
295. The range of orders that the Court can make is broad. For example, orders can be made under s 90AE(2)(b) or s 90AF(2)(b) altering “the rights, liabilities or property interests of a third party in relation to the marriage”. The expression “in relation to the marriage” is important and has been held to mean the exercise of discretion is carefully linked and sufficiently connected to the subject matter of the marriage and matrimonial causes: [Hunt & Hunt (2006) 36 Fam LR 64; [2006] FamCA 167 (“Hunt & Hunt”)] at [119]; XYZ Pty Ltd and Anor & Charisteas & Ors; ABC Pty Ltd & Charisteas and Ors (2017) FLC 93-782; [2017] FamCAFC 112 at [89]. By reason of s 90AC(1), such an order overrides the provisions of a trust deed. In Hunt & Hunt … O’Ryan J held that Part VIIIAA did not contemplate “some arbitrary invasion of the rights of a third party but an alteration of those rights where they are sufficiently connected to the division of the property between parties to a marriage”. The Full Court in B Pty Ltd & Ors [2008] FamCAFC 113; (2008) FLC 93-380 at [63] made clear that any order made under these sections must be for the purpose of effecting the division of a property between the parties, and cannot be used for the purpose of increasing the property of the parties. In Allan and Allan and Ors [2009] FamCA 553; 41 Fam LR 565 at [99] Watts J emphasised that the sections cannot be used “to deprive a third party of its rights simply to benefit a party to the marriage”. The same comment applies to property interests.
296. In Commissioner of Taxation v Tomaras (2018) 265 CLR 434; (2018) 93 ALJR 118; [2018] HCA 62 Gordon J at [73] said Part VIIIAA is “facultative and protective”. In that decision the High Court emphasised Part VIIIAA sits alongside and is ancillary to s 79 of the Act (at [4], [66]) and the power to make orders binding third parties only arises if the conditions in s 90AE(3), or by parity of reasoning, s 90AF(3) (see XYZ Pty Ltd at [89]), are satisfied. For example, in s 90AE(3) these conditions include:
(a) the making of the order, or the granting of the injunction, is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage
(b) ...
(c) the third party has been accorded procedural fairness in relation to the making of the order or injunction; and
(d) the court is satisfied that, in all the circumstances, it is just and equitable to make the order.
I have accepted in Jordan & Sutton (No 2) at [59], that in some circumstances the provisions of Pt VIIIAA may be engaged to affect the interests or rights of third parties without their joinder, so long as they are afforded procedural fairness. However, that possibility did not form part of any argument in relation to the joinder of the father.
The wife denies that her resort to s 90AE of the Act would result in the property pool being increased. Rather she argues her claim to an institutional constructive trust seeks to recognise a pre-existing beneficial interest. However, as pointed out above she also submitted those same claims would increase the pool, by up to $48 million. In my view, this could only happen if the claim to a constructive trust resulted in the entirety of H Property being held to be property at least of the husband. The same problems exist with a resort to s 90AE for orders mirroring equitable relief which would recognise some lesser proportionate interest of the husband or even both spouse parties in the nominated assets. This result could only be reached if the property interests of the father, as asserted by the wife, were entirely or partly overcome. Even if s 90AC means the existing trusts and any relevant trust deeds could not of themselves prevent this from happening, the Court, among other things, would have to be satisfied that any order having this effect would be just and equitable as between the wife on the one hand, and the father and/or the corporate trustees holding the nominated assets on the other, in all the circumstances (s 90AE(3)(d)). Since I am not persuaded the wife has demonstrated a reasonable prospect of establishing a present entitlement enjoyed by herself or the husband to a beneficial interest in the nominated assets pursuant to any constructive trust, her reliance on s 90AE is for the purpose of depriving the father, other trustees or beneficiaries of their rights and increasing the property pool for the benefit of a party to the marriage. Again, I do not consider such a claim has any prospect of success on the current state of the law.
I return here briefly to the wife’s reliance on s 85A of the Act in respect of the H Property Farming Trust. As already noted, her pleading simply seeks an order compelling the exercise of the trustee’s discretion in the husband’s favour, despite abandoning such similar relief pursuant to s 90AE. The wife’s pleading makes no allegations of material fact to support such relief beyond contending each spouse party had lived modestly and would have derived “significant well-being” from the trust if distributions had been made in their favour. That much may be accepted. But there must be sufficient connection as between the alleged nuptial settlement and the particular marriage which is the subject of the proceedings, for the purposes of s 85A; in the context of a trust the ambit of the relevant connection is informed by whether the trust assets “constitute property, much of which was obtained by way of the parties’ contributions to the marriage” (Kennon at [216]–[225]). There is no allegation, and nor could there be on the evidence of the wife, that the H Property Farming Trust holds property which otherwise would be matrimonial property, as was the position in Kennon (see French CJ at [81]).
Generally, in assessing the wife’s prospects of success I have borne in mind the fact that the wife has had ample time and made several attempts to plead her claims against the father. She commenced the proceedings in November 2021, filed Points of Claim in September 2022 followed by amendments in March and November 2023 and the present version on 31 January 2024. But she has failed to demonstrate reasonable prospects, according to the preceding discussion. Consideration of the overarching purpose, and in particular the efficient use of judicial and administrative resources, the duty to dispose of proceedings in a timely manner and a concern for proportionate costs also militate against any conclusion that the wife’s prospects are reasonable against the father, and against further latitude being given to attempt a reformulation of such a claim.
Accordingly, I am not persuaded the wife’s claims demonstrate the joinder of the father is necessary and I decline to do so. It also follows that her claims against the father should be dismissed and the Points of Claim struck out as disclosing no reasonable cause of action.
This conclusion means it is unnecessary to consider the father’s application for security for costs.
Subpoena objections
That leaves the objections to the wife’s subpoenas to be dealt with. The recipients of the relevant subpoenas which have been issued are D Bank, E Accountants and F Company. The father has objected to each of the subpoenas on the basis that the schedules seek documents “associated with” various entities, the last of which is described as “[a]ny other entity in which [the husband] has an interest”. The vice here is that the recipient is burdened with the task of determining what documents fall within the subpoena. The subpoenas were not in evidence and few submissions were directed to the objections, but I accept this is not permissible (Commissioner for Railways v Small (1938) 38 SR (NSW) 564 at 573; Loulach Developments Pty Ltd v Roads and Maritime Services (No 2) [2018] NSWSC 1465 at [5] and [9]–[14]). Moreover, I am not able, on the material provided, to determine whether the subpoenas seek documents which have “apparent relevance” (Kehoe & Seden (No 2) [2022] FedCFamC1F 346 at [15]–[20]).
In light of this deficiency and my conclusions refusing joinder of the father, I consider it appropriate to set aside the subpoenas. The wife can then consider these reasons in formulating any future subpoenas.
I certify that the preceding one hundred and twenty-one (121) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 17 May 2024
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