Atuk & Anor and Atuk
[2017] FamCAFC 215
•12 October 2017
FAMILY COURT OF AUSTRALIA
| ATUK AND ANOR & ATUK | [2017] FamCAFC 215 |
| APPEAL AND CROSS-APPEAL – final property orders – where the primary judge adjusted the parties’ interests in property as 52.5 per cent to the wife and 47.5 per cent to the husband – where the husband’s mother cross-appealed – where the cross appellant and her late husband contributed to the purchase price of the matrimonial home – where the primary judge found that no resulting trust existed in respect of that amount – where the primary judge found that no constructive trust existed in respect of that amount due to the absence of unconscionability – whether the primary judge should have found that a constructive trust existed – where the cross appellant’s and husband’s sworn evidence showed the existence of a loan – where that evidence was “struck out” during the course of hearing objections due to it being inconsistent with the cross appellant’s case – where his Honour was in error in treating earlier sworn evidence as irrelevant – where that error did not impact on his Honour’s ultimate finding regarding the absence of unconscionability – whether the primary judge should have taken into account certain liabilities of the husband and his company – whether the primary judge should have taken into account a Centrelink debt as a liability of the parties – whether the primary judge failed to give proper weight to the husband’s mother’s contributions during the relationship – where the husband’s appeal did not demonstrate any errors by the primary judge – appeal dismissed. COSTS – where the appellant and cross appellant were wholly unsuccessful – where the cross appellant’s financial circumstances were not determinative – appellant and cross appellant ordered to pay the respondent’s costs of and incidental to the appeal and cross appeal. |
| Family Law Act 1975 (Cth) s 79, 79(4)(b), 79(4)(c), 117(1), 117(2), 117(2A)(e) |
| AB and ZB (2003) FLC 93-140 Lenova & Lenova (Costs) [2011] FamCAFC 141 Merritt & Merritt [2009] FamCAFC 154 Anthony Dickey, ‘A Question of Priorities: Wives or Unsecured Creditors?’ (1992) 6 Australian Journal of Family Law 229 |
| APPELLANT: | Mr Atuk |
| CROSS-APPELLANT: | Ms B Atuk |
| RESPONDENT: | Ms Atuk |
| FILE NUMBER: | PAC | 4209 | of | 2014 |
| APPEAL NUMBER: | EA | 58 | of | 2016 |
| DATE DELIVERED: | 12 October 2017 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Murphy, Kent & Watts JJ |
| HEARING DATE: | 21 March 2017 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 24 March 2016 |
| LOWER COURT MNC: | [2016] FamCA 179 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr P Cook |
| SOLICITOR FOR THE APPELLANT: | Atila Lawyers |
| COUNSEL FOR THE CROSS-APPELLANT: | Mr T Hodgson |
| SOLICITOR FOR THE CROSS‑APPELLANT: | Erdem Hussein Solicitor & Lawyer |
| COUNSEL FOR THE RESPONDENT: | Mr D Dura |
| SOLICITOR FOR THE RESPONDENT: | McAuley Hawach Lawyers |
Orders
The appeal is dismissed.
The cross-appeal is dismissed.
The appellant and cross-appellant be jointly and severally liable to pay the costs of the respondent of and incidental to the appeal and the cross-appeal, such costs to be as agreed or, failing agreement, to be assessed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Atuk and Anor & Atuk has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 58 of 2016
File Number: PAC 4209 of 2014
| Mr Atuk Appellant/Cross-First Respondent |
And
Ms B Atuk
Cross-Appellant
And
| Ms Atuk |
Respondent/Cross-Second Respondent
REASONS FOR JUDGMENT
On 24 March 2016, Foster J made final property settlement orders pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”). The husband appeals those orders. His mother cross-appeals. The wife opposes both.
The issues before his Honour were numerous but in the ultimate were directed centrally to competing contentions as to an entitlement to $443,859 being the residue of the net proceeds of sale of real property at Suburb C (“the Suburb C property”).
The Suburb C property had been owned by the husband as sole registered proprietor. It was sold by the husband without the wife’s knowledge for $850,000.[1] The residue of those net proceeds formed the vast bulk of the “property of the parties to the marriage or either of them” the subject of the s 79 proceedings.
[1] Reasons, [29].
The husband’s mother claimed an equitable interest in the net proceeds. As will be seen, her claim in that respect was marked by contradiction and an abject lack of clarity. His Honour rejected her claim.
Having done so, his Honour concluded that justice and equity required the parties’ interests in property to be assessed as 52.5 per cent to the wife and 47.5 per cent to the husband. His Honour’s order that the wife be paid $254,194 “with pro rata interest on that sum” reflects that assessment.
The Context for the Appeal and Cross-Appeal
The parties married in Country D in 1998. The husband (and his mother) were resident in Australia; the wife in Country D. The wife moved to Australia in 1999. The husband and wife separated in April 2014.
At the time of marriage, the wife had no assets. The husband was the sole registered proprietor of the Suburb C property and owned a car.
The Suburb C property was purchased by the husband in his sole name in 1998, for $245,000. His parents provided approximately $65,000 to the purchase price which included expenses and stamp duty. The balance of $190,000 was borrowed from Westpac who took a mortgage.
Prior to the parties moving into the Suburb C property, various renovations were undertaken. His Honour found that due to “the mixing of funds of the husband and wife and [the husband’s mother] it [could not] be determined on the evidence as to who paid what”.[2] The husband and wife occupied the property from February 1999.
[2]Reasons, [25].
The husband’s parents had been living in a unit owned by them. They moved into the Suburb C property shortly after the spouse parties. The husband’s father died a few months later in 1999. The husband’s mother resided in the Suburb C property with the husband and wife until separation and its ultimate sale in October 2014[3] – a period of about 15 years.
[3]At [29], his Honour says that the property was sold in August 2014. Nothing turns on this difference.
The parent’s unit was tenanted. Rent was deposited to a joint account maintained by the husband and the wife. The mortgage on the Suburb C property was repaid from this account.
The sale of the Suburb C property earlier referred to occurred about six months after separation. The husband’s mother moved back into her previously tenanted unit.
The husband’s use of joint funds and the accrual of significant debts during the relationship was a central focus of his Honour’s ultimate determination that the husband should bear sole responsibility for certain liabilities.
The husband’s mother’s claim arose through the advance by her (and her husband) of $65,000 which equated to about 26 per cent of the purchase price of the Suburb C property and the payment of rent from their unit into an account which was sourced to pay the mortgage.
The Cross-Appeal
The Asserted Errors
The gravamen of the cross-appeal by the husband’s mother, embraced in an Amended Notice of Cross Appeal,[4] lies in challenges to his Honour’s finding that no “constructive trust” in favour of the husband’s mother should be imposed.
[4]During the hearing of the appeal, leave was given to further amend that Amended Notice of Cross Appeal.
The 18 grounds in the husband’s Notice of Appeal raise no issues in respect of his Honour’s findings the subject of the cross-appeal.
It is asserted in the husband’s mother’s grounds of appeal that the “evidence and circumstances warranted equitable relief” which is said to derive from the husband’s mother (and her late husband) being “induced to act to their detriment”.[5]
[5] Baumgartner v Baumgartner (1987) 164 CLR 137; Muschinski v Dodds (1985) 160 CLR 583.
As will be seen, it is by no means clear that the husband’s mother ever formulated a case at trial founded in estoppel of the type articulated by the High Court in Waltons Stores (Interstate) Ltd v Maher.[6]Rather, to the extent that it is possible to discern the case (or cases) sought to be advanced by the husband’s mother before the primary judge, it appears to have been based on the unconscionable retention of benefits deriving from the failure of a joint endeavour.
[6] (1988) 164 CLR 387.
It is also contended that the primary judge erred in finding that the husband’s mother had not established the element of unconscionable conduct in denying a constructive trust.
Alternatively, it is said that his Honour “erred in failing to find the existence of a constructive trust when the evidence showed that the [husband’s mother] and her deceased husband jointly had provided 26.53% of the purchase monies” for the Suburb C property (emphasis added). The husband’s mother’s apparently confused position with respect to assertions of resulting trust and constructive trust will be referred to below.
Ground 11 consists of a 265 word sentence that, with respect, defies comprehension. Attempts at an oral explanation did not particularly assist. As we understand it, the ground appears to challenge in different terms the finding that no unconscionability was established as, indeed does Ground 12.
The grounds of appeal evidence a confusion as to the potentially applicable legal and equitable principles which, in turn, mirrors a confusion in the case presented on behalf of the husband’s mother before the primary judge. Again, we will need to refer further to that issue below.
The confusion to which we have referred did not make his Honour’s task any easier but, we nevertheless respectfully consider that both the trial process and his Honour’s reasons are affected by fundamental errors of principle in respect of the husband’s mother’s claim. Ultimately, we will need to answer the question of whether those errors are material to his Honour’s ultimate orders.
What was the Husband’s Mother’s Case as Pleaded and Deposed to?
The question just posed should, of course, be simple to answer. It is not. The case sought to be advanced on behalf of the husband’s mother at trial was, with respect, mired by a singular lack of clarity, precision and particularity.
The Application in a Case by which the husband’s mother sought to be joined to the proceedings attached the final orders sought by her. Those orders make it clear that the husband’s mother was asserting that the funds to purchase the Suburb C property were advanced by way of loan. Indeed, the orders sought refer to a 5 per cent interest rate and include a calculation of the same. The husband’s mother’s Response filed some three months later on 7 January 2015 was to precisely the same effect.
On 30 November 2015, the husband’s mother filed her Points of Claim ahead of the trial. It is a perplexing document that stretches over 23 pages and, it would seem, purports to be a pleading of a number of alternative claims.
The “pleading” commences by asserting an “oral contract made on or about 1 July 1998”. The contract was for a loan. Terms of the agreement for loan are pleaded: the amount of the loan was $65,000; interest would be paid “at the rate of 5% per annum” and “the principal sum plus interest would be repaid at the time of the sale of the Suburb C property”.[7] In addition it is pleaded that, “[the wife] acknowledged the debt and agreed to join the husband in repaying the debt on at least 60 occasions throughout the marriage”.[8]
[7] Points of Claim, filed 30 November 2015, [2]–[4].
[8] Ibid, [5].
An alternative claim, also founded in contract, asserts that, subsequent to the husband’s father’s death, the debt became owing to the husband’s mother and, again, it is contended that the wife had acknowledged this debt on numerous occasions. Specific conversations are pleaded as “particulars” of the allegation of the wife’s acknowledgement of “the debt” (although they hardly meet that description as it might be applied to a pleading).
A further alternative claim pleads a resulting trust arising by presumption through the husband’s parents advancing “26.53% of the value of the property” but not receiving any legal, or acknowledged equitable, interest in the property. Somewhat oddly it might be thought in respect of a resulting trust claim, purported “particulars” are given that “[t]he Husband acknowledged the interest of [the mother]” and that a debt was owed, plus interest. The Points of Claim also particularised conversation between the husband and his mother to the effect that the mother lodged a caveat over the Suburb C property to “… protect[] the money I lent you and I want to make sure you and [the wife] will pay it back” (emphasis added).[9]
[9] Ibid, [27] “Particulars”.
A further alternative claim is pleaded in constructive trust. The foundation for the claimed constructive trust is pleaded as a failed joint enterprise or endeavour. The “particulars” to that specific “pleading” bear citing in full:
… In about […] 1999 before the husband, the wife, the [husband’s mother] and her late husband, moved into the [Suburb C] property, the [husband’s mother] spoke to the Wife and said, “[Ms Atuk], you know [Mr Atuk] (the Husband) borrowed $65,000.00 from my husband and I to purchase the property [Suburb C property] last year and promised to pay us interest?” The Wife replied to the effect, “Yes I know he told me, we’ll pay you back soon!” Later the Husband approached the Second respondent and her late husband, and asked them, “Dad and mum I am having trouble paying my expenses and the mortgage, will you lend me the rent money you receive from [I Street, Suburb C]? I’ll pay you back with interest at the rate of 5% per annum” The [husband’s mother] and her late husband agreed and replied, “Alright son if it will help you but you have to pay back this money!” Then later after the [husband’s mother] and her late husband started paying the rent from [I Street, Suburb C] to the Husband, the [husband’s mother] spoke to the Wife and said words to the effect, “[Ms Atuk], you know [Mr Atuk’s] current financial position is not good and [Mr Atuk’s] father and I have agreed to pay the rent from [I Street, Suburb C] to you both until your financial position improves? [Mr Atuk] has offered to pay us our money back with interest at the rate of 5% per annum”. The Wife replied to the effect,” Of course we’ll pay you back, thank you!”…
(Bold emphasis added; errors as per original)
Having particularised an agreement for loan (noting that it is that specific word that is used to describe the transaction), the document goes on to plead:[10]
40.As result [sic] of the breakdown of the relationship between the husband and wife and the sale of the home the joint endeavour failed and the [husband’s mother] has been denied the interest in the property in circumstances where it is unconscionable for the Husband and the Wife to retain the benefit of the proceeds of the sale of the property to the exclusion of the [husband’s mother].
(Emphasis as per original)
[10] Ibid, [40].
On 19 February 2016, the husband’s mother filed her affidavit of evidence in chief for the trial. Within it, the amount advanced to the husband for the purchase of the Suburb C property is described, without exception, as a loan.
Moreover, the terms of the alleged loan agreement are deposed to, including alleged statements by the husband and wife to that effect.[11] So, too, it is there deposed that there was an agreement to “amend the terms of the original loan agreement” in 2004, which was subsequent to the death of the husband’s father.[12]
[11] Affidavit of Ms B Atuk, filed 19 February 2016, at, for example, [12]; [14]; [18]; [27]; [28]; [30].
[12] Ibid, at [30].
We interpolate here, as regards the evidence of the husband and his mother as to the $65,000 being advanced as a loan to the husband by his parents, that such evidence, if accepted, removes any scope or foundation for a presumption that the husband ever held any proportion of the beneficial interest in the subject property upon a resulting trust for the parents. On that evidence, the parents acted as lenders, not purchasers. On that evidence, the parents receive consideration for the advance made. The relationship between the husband, on the one hand, and his parents on the other, is limited to that of borrower and lender. The principles of equity as to when a resulting trust will be presumed have no application to these circumstances.[13]
[13] See, J D Heydon, M J Leeming, Jacobs’ Law of Trusts in Australia (Lexis Nexis Australia, 7th ed,
2006) , p 241 citing Aveling v Knipe (1815) 34 ER 80; Stephenson Nominees Pty Ltd v Official
Receiver (1987) 76 ALR 485, 501.
A “Case Outline” was filed on behalf of the husband’s mother for the start of the trial. It is there contended that there is “a challenge to the beneficial ownership of the now sold matrimonial home” which the document goes on to describe as the husband’s mother claiming the “existence of a resulting trust” in respect of “the beneficial ownership” of the Suburb C property.[14]
[14]Case Outline of Ms B Atuk filed 23 February 2016, p 3–4.
Later in the same document under the heading “Constructive Trust or Resulting Trust” a claim in constructive trust is made which relies upon a “common intention that the parties should have a beneficial interest in the property [and] [s]econdly, the persons claiming an interest must have acted to their detriment on the basis of that common intention”.[15]
[15]Ibid, p 5.
Under the heading “Resulting Trust” the document contends that the husband’s mother’s evidence “is clear, unequivocal and believable in respect of the reason for advancing the funds”.[16] As noted, that evidence is actually contrary to the application of the principles as to the presumption of a resulting trust.
[16] Ibid, p 6.
The document was drawn by reference to the filed affidavit of evidence in chief of the husband’s mother. To the extent that this affidavit can be said to be clear and unequivocal at all, it is clear and unequivocal that the funds were advanced by way of loan with defined terms.
The Case Outline goes on to argue in its conclusions that “[t]he husband has given clear evidence of the agreement between himself and his parents, that is, the funds advanced to purchase the home were eventually to be repaid when the husband and wife could afford to purchase [the husband’s mother] and her husband’s share in the property, or upon the sale of the property”. The document asserts further that the husband’s mother’s case “is consistent with that of the husband”.[17]
[17] Ibid, p 6.
That contention is not referenced to any specific evidence. It has ramifications for what will shortly be discussed in relation to evidentiary rulings in respect of the evidence of the husband and his mother and in what appears to have been contended as the terms of the joint undertaking or endeavour apparently founding the alternative claim in constructive trust.
In light of the specific reference in the husband’s mother’s grounds of appeal earlier referred to, it will also be observed that there is no contention of a constructive trust founded upon alleged statements made by the husband to his mother upon which she allegedly relied to her detriment.
The Evidence upon which the Trial Proceeded
Understandably, the background just outlined led to counsel for the wife at the commencement of the trial seeking to have clarified the case agitated by each of the husband and his mother.
That enquiry led to an exchange where it was made clear that the husband’s mother abandoned any case (including any alternative case) founded on there being a loan.[18] Yet, the mother’s sworn affidavit of evidence in chief deposed to circumstances which, if accepted, required a finding that there was an oral contract of loan with specified terms as to interest and repayment. Paragraph 12 of that affidavit, the whole of which was “struck out”,[19] is an example:[20]
My late husband and I agreed to lend [the husband] the deposit, legal fees, stamp duty and the balance of purchase money needed to buy the [Suburb C] property. The terms of the agreement was this money was to attract interest at the rate of 5% per annum on the balance payable and to be repaid when the property was either sold or when the mortgage was repaid whichever event occurred first.
[18] Transcript, 23 February 2016, p 9–10.
[19]Transcript, 23 February 2016, p 49 ln 1 – p 50 ln 26.
[20]See also affidavit of Ms B Atuk filed 19 February 2016, [11]; [12]; [18]; [27]; [28]; [29]; [30]; second wrongly number [30] on page 8; and [33]; and affidavit of the husband filed 15 February 2016, [13]; [16]; [133].
Importantly, by way of contrast, the affidavit did not contain vague assertions of the money being a loan or any deposition as to any uncertainty about the terms of the advance.
The fundamental change to the husband’s mother’s case was not the subject of any request or attempt to lead evidence from her as to how, why and in what circumstances there had been such a fundamental change to her evidence. Rather, upon the “loan” case being abandoned by the husband’s mother, multiple objections were taken to any evidence relating to the advance being as and by way of a loan. Those objections led, in turn, to assertions by the husband’s mother’s counsel that such evidence was “not pressed” or “not read” and consequent rulings that the evidence was “struck out”. The following is, in our view, a striking example:[21]
[COUNSEL FOR MS B ATUK]: 29 is pressed in part:
On [… 1999],my husband died.
[21] Transcript, 23 February 2016, p 55 ln 41 – p 56 ln 20.
That should remain in. And - - -
HIS HONOUR: Sorry – yes. Thank you.
[COUNSEL FOR MS B ATUK]: And that the debt [owed by the husband to his parents] passed to the deponent through survivorship.
HIS HONOUR: Well, there’s no debt.
[COUNSEL FOR MS B ATUK]: In my submission, that’s something she can say and knows.
HIS HONOUR: There’s no debt. You don’t – your case - - -
[COUNSEL FOR MS B ATUK]: I’m sorry. We’re not using the word – no. That’s true. Not pressed.
HIS HONOUR: So the evidence is:
On [… 1999], my husband died.
And that’s the end of that. The rest of the paragraph not read, (omitted)?
[COUNSEL FOR MS B ATUK]: No.
HIS HONOUR: Struck out. Thank you …
(Italics in original; bold emphasis added)
A similar process occurred in respect of the husband’s affidavit of evidence in chief. Bizarrely, as it seems to us, objections to paragraphs 55 and 133 of the husband’s affidavit resulted in an apparent consent arrangement where sworn statements by the husband that, respectively, “my mother lent us” and “[my mother] loaned the sum of” was, in each case, changed to “gave”.[22]
[22]Transcript, 23 February 2016, p 31 ln 13–31. See, to similar effect in respect of paragraph 133 of the same affidavit: Transcript, 23 February 2016, p 40 ln 24–35.
Of course, that purported “change” to sworn evidence speaks potentially to entirely different legal consequences. Again, the change to existing sworn evidence occurred without any request for, or attempt to give, evidence in chief as to how, why or in what circumstances the change occurred.
Despite these apparently consensual changes to his affidavit of evidence in chief (and again noting that no evidence was elicited from him as to how or why that evidence might have changed), when in the witness box under cross‑examination the husband again referred to his parents’ advance being “lent” to him: [23]
Right. And you know that what she wants is about 26 per cent or thereabouts of the proceeds of sale?---Yes.
That’s what she asserts her claim is?---Yes.
Right. And have you undertaken any calculation or any analysis of that amount, as to whether or not it’s appropriate or otherwise?---Yes.
Right. You have, have you?---Well, I based it on what her percentage was on the purchase of the house, of a $65,000 she lent to me when I purchased the house, which was about that percentage.
(Emphasis added).
[23] Transcript, 24 February 2016, p 246 ln 43 – p 247 ln 6.
After the husband’s mother had abandoned any case based on there being a loan between her (and her late husband) and the husband, counsel for the wife first raised his intention to object (inter alia) to those parts of the evidence that made reference to a loan. This exchange occurred:[24]
HIS HONOUR: ‑ ‑ ‑ seems to me that [the husband’s mother] asserts a case completely inconsistent with the relief now sought in her affidavit. Just leave it at that. It’s up to you.
[COUNSEL FOR THE WIFE]: Well, I was going to say, your Honour, the case outline seems to suggest equitable relief.
HIS HONOUR: Yes.
[COUNSEL FOR THE WIFE]: The affidavit asserts something different.
HIS HONOUR: She can’t change her evidence now.
[24] Transcript, 23 February 2016, p 10 ln 3–13.
Yet, by striking out all references to sworn evidence relating to the advance being a loan – assertions entirely at odds with what the husband’s mother was now asserting – his Honour was permitting the husband’s mother to not only change her evidence but also to advance, without explanation, a position totally contrary to that which she had previously sworn to be true.
A party is, of course, entitled to abandon parts (or indeed all) of their pleaded claim. They are also entitled to “not read” or “not press” evidence if that expression is being taken to mean that they are not seeking that evidence be taken into account in respect of the (remaining) case which they now press. Doing so brings with it the consequence that the agitated claim stands or falls on the evidence upon which the party now relies. That is, should a party seek to not rely upon evidence in respect of such of their claim as is not abandoned, they take any burden associated with their failure to rely upon that evidence.
The situation here is, however, entirely different. The husband’s mother, through her counsel, was entitled to “not read” or “not press” such evidence as she might choose. Leave can be sought to adduce evidence seeking to explain the change in evidence or, in the absence of any such evidence, a party can bear the consequences deriving from the failure to adduce the evidence. In no case, however, is a party entitled to omit the previous sworn evidence if doing so thereby creates, without explanation, a picture and resultant case entirely at odds with the earlier sworn evidence which is “not read” or “not pressed”. The previous sworn evidence does not “disappear” as if it had never existed.
In our respectful view, that was the effect of his Honour’s ruling and the consequence was that evidence plainly relevant to the questions which his Honour was bound to decide as to the husband’s mother’s case was not before the court. That in our view is a fundamental error.
During the course of striking out the evidence of loan from the affidavit of the husband’s mother, his Honour commented that the “variety of conversations” deposed to “[don’t] matter in terms of equitable relief”.[25] That statement is, in our respectful view, plainly wrong.
[25]Transcript, 23 February 2016, p 55 ln 12–15.
Central to the husband’s mother’s case in resulting trust was the question of whether admissible evidence of the intention of the relevant parties rebutted the presumption arising from the provider of purchase money for a property receiving no legal or acknowledged equitable interest in it.[26] Conversations the subject of sworn evidence in chief as between the provider of money and the recipient of the money were directly relevant to, and potentially significant forensically to, whether the relevant presumption was rebutted. Of course, that is all the more so when each and all of the relevant conversations deposed to an oral contract of loan and its relevant terms.
[26] Calverley v Green (1984) 155 CLR 242, 258.
The husband’s mother could not, at least without an explanation of how, why and in what manner her sworn evidence had changed, rely upon such sworn evidence as she “cherry-picked” in support of the presumption but simply ignore her other sworn evidence in chief which was directly contrary to the equitable presumption for which she contended. More importantly, in our view his Honour ought not to have permitted her to do so.
In a similar vein, that same evidence was directly relevant to, and potentially forensically significant to, a consideration of the rebuttal of the presumption of advancement which, potentially arose for consideration if the assertion of resulting trust was neglected.
The same considerations also apply to the husband’s mother’s case framed in constructive trust based upon the alleged unconscionable retention of benefits arising from the breakdown of a joint endeavour. Of course, the sworn facts supporting the conclusion that the relationship was one of creditor and debtor is relevant but so, too, are other matters deposed to but expunged. For example, paragraph 12 of the husband’s mother’s affidavit earlier quoted not only refers specifically to the particulars of a loan but it also contemplates the future sale of the property – a matter which, of itself, is potentially relevant to assertions as to the terms of any joint venture or endeavour.
What Relief did the Parties Ultimately Seek?
The husband’s mother
The transcript of the proceedings below sees his Honour suggesting to counsel for the husband’s mother on a number of occasions that the relief sought by her “vests more in a constructive trust”[27] than in resulting trust. Counsel for the husband’s mother said, “[w]ell, your Honour, I think I’ve retreated to the resulting trust rather than the constructive trust”[28] before going on to submit that “all the elements of the existence of a resulting trust are present in this case”[29] identifying them in answer to his Honour’s question as “the evidence of both the [husband] and the [husband’s mother] that there was a common intention”.[30]
[27] For example, see, Transcript, 25 February 2016, p 325 ln 17 ff.
[28]Transcript, 25 February 2016, p 322 ln 33.
[29]Transcript, 25 February 2016, p 323 ln 4.
[30]Transcript, 25 February 2016, p 323, ln 8–9. See also the argument for resulting trust also based on “common intention” at p 329.
That can be the basis of a constructive trust but not a resulting trust. The two are quite different remedies; they arise from different facts; at different times and the former involves a consideration of intention at the time of purchase while the latter arises independent of intention.
In our view, it is by no means clear which remedy was submitted, ultimately, to avail the husband’s mother.[31] His Honour, in his reasons, considered both resulting trust and constructive trust (as well as express trust and the presumption of advancement).
[31] See, Transcript, 25 February 2016, p 322–329.
The husband
The husband’s mother, through her counsel, had disavowed any suggestion that the monies were advanced by way of loan. She had disavowed her sworn evidence as to the conversations that were initially supportive of an alleged oral contract of loan with specified terms. The husband’s sworn affidavit evidence had been changed so as to alter entirely what it suggested of the arrangement in respect of the money advanced to purchase the Suburb C property. Despite that change, he had given sworn evidence in cross-examination that the money was in fact “lent”.
To add to this entirely confusing mix, counsel for the husband was asked by his Honour during cross-examination of the husband’s mother whether it was “[the husband’s] case that he owes a debt to his mother” to which counsel responded clearly: “[i]t is”.[32]
[32] Transcript, 25 February 2016 p 289 ln 31–33.
Later, in submissions, counsel for the husband was asked by his Honour for her response to submissions by counsel for the husband’s mother “that there should be a finding as to a resulting trust” (which, as we have said, appear to have been based in asserted findings relevant only to the imposition of a constructive trust). Counsel responded that she would “argue in the alternative for a constructive trust”.[33] It is not at all clear to us how that was consistent with her client’s evidence.
[33] Transcript, 25 February 2016 p 340.
Nevertheless, counsel agreed with the primary judge’s suggestion that her claim in constructive trust was based on a joint endeavour. His Honour said:
… there’s no doubt that the original joint relationship or endeavour was, “I will put money into this house to help you buy it. I will be your co‑borrower on the mortgage in consideration of which my husband and I will be able to live in a home as distinct from a unit … [for an] [i]ndeterminate period of time.[34]
[34] Transcript, 25 February 2016 p 341 ln 33–40.
Of course, there could be “no doubt” about any such joint endeavour as founding a constructive trust (if at all) only if the sworn evidence of both the husband and his mother which had been struck out was treated as if it did not exist.
We note in passing, as to his Honour’s quoted statement above, that the husband’s parents did not in fact assume the legal obligations of co-mortgagors as they did not in fact become parties to the subject mortgage.
The wife
Counsel for the wife submitted that:
… it could only be that the moneys are regarded by each of the [husband and his mother] as a debt, but that’s not the relief that they’re seeking. The husband doesn’t seek any relief that protects either a debt owing to his mother or an equitable interest in favour of his mother … His case outline document seeks the payment of $140,000 to [the wife] and the balance to be paid to he and his mother jointly. There’s no declaratory relief or any other relief sought in her favour.[35]
[35] Transcript, 25 February 2016, p 334 ln 41–47.
When counsel referred to “evidence that she had in her affidavit, that these are debts”, his Honour says, “but it’s not read in this case. It has been taken out”, thereby exemplifying the very point we have sought to make.[36]
[36] Transcript, 25 February 2016, p 335 ln 14.
Summary
It will, we think, be clear that we consider that his Honour was in error in treating earlier sworn evidence as irrelevant to the questions which he needed to answer and by permitting a party to disavow, without explanation, earlier sworn evidence so as to advance a case contrary to that sworn evidence.
The question which now must be answered is whether those errors – fundamental though we consider them to be – impact upon his Honour’s ultimate findings, noting that his Honour rejected the arguments that an equitable interest in favour of the husband’s mother should be found.
What did the Primary Judge decide about the Husband’s Mother’s Case?
The primary judge referred briefly to the law in relation to express trusts. No party suggested that any writing evidenced any express trust, nor as far as we can see was the issue otherwise raised.
His Honour then turned to consider the question of resulting trust and the presumption of advancement. His Honour quoted extensively from a decision of the Full Court of this Court in Vadisanis & Vadisanis and Anor[37] (“Vadisanis”) which in turn quoted extensively from the decision of the High Court in Calverley v Green[38] (“Calverley”). The Full Court said at 79,289 citing Calverley at 246:
It is well settled that the relationship between parent and child gives rise to the presumption of advancement … The presumption of advancement will be rebutted where there is evidence that the transferor (intervener) did not intend to gift the property or part of it. For example, if the intervener advanced the $50,000 or part of it as a loan, the loaned portion would evince an intention not to acquire a beneficial interest in the property. The money advanced must be provided in character such that the intention to acquire a beneficial interest is evident …
[37] (2014) FLC 93-593.
[38] (1984) 155 CLR 242.
The evidence of the mother was clearly to the effect that the monies advanced were by way of loan. She pleaded an oral contract of loan and pleaded terms of it. It can be seen that the entire exclusion of that evidence benefitted the husband’s mother’s case potentially in respect of resulting trust but would not have benefitted that case if it remained part of the evidence and she was, for example, cross-examined upon it.
The point made earlier about evidence of the conversations advanced by the husband’s mother in support of her contention for an oral contract of loan being relevant to the case of resulting trust can be seen exemplified in a quote from Trustees of Property of Cummins (a bankrupt) v Cummins[39] which was referred to by the Full Court in Vadisanis and quoted by his Honour:
… whilst evidence of subsequent statements of intention, not being admissions against interest, are inadmissible, evidence of facts as to subsequent dealings and of surrounding circumstances of the transaction may be received.
(Footnotes omitted)
[39] (2006) 227 CLR 278, [65].
In Shephard v Cartwright[40] Viscount Simonds, quotes a passage from Snell’s Equity, 24th ed, p 153:
The acts and declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration … But subsequent declarations are admissible as evidence only against the party who made them, and not in his favour.
[40] [1955] A.C. 431, 445; this passage was also quoted by his Honour at [79].
Again, the point sought to be made earlier in respect of the apparent total exclusion of the evidence of the husband’s mother and the changing of the father’s evidence in chief pertains.
Ultimately, his Honour concluded:
81.There is no evidence from the [husband’s mother] as to any intention on her part at the time of purchase to acquire any equitable interest in the home. Her evidence is that she advanced funds towards the purchase with the intention that she and her late husband would be able to reside in the property so as to facilitate the rental of their home unit with rental income provided to the husband to assist with mortgage payments. It was her contention until trial that the funds were advanced by way of loan.
82.The initial presumption is that the legal and equitable title passed on purchase to the husband. There is no evidence from him as at that time that asserts otherwise. Indeed, he represented to the mortgagee of the property that he was purchasing the home for him and his parents “to reside in”.
83.As a consequence of the relationship of mother and son the presumption of advancement arises and as there is no evidence to displace such presumption any presumed resulting trust is displaced in favour of the husband holding the legal and equitable title to the property.
His Honour appears plainly to find at [83] that “the presumption of advancement arises” and uses that finding so as to conclude that “any presumed resulting trust is displaced in favour of the husband holding the legal and equitable title to the property”.
On the finding that the presumption of advancement applied, the advance made by the parents was a gift and in the absence of evidence of contrary intention of the donors, as a gift to the husband to be treated as a contribution by him. Moreover, on that finding, there could be no scope for the imposition of a constructive trust. However, his Honour goes on to consider “[c]onstructive trust” under that heading.
His Honour attributes to the husband’s mother a contention that in the absence of a resulting trust the property or proceeds of sale should be held on constructive trust “in part for [the husband’s mother]”. We apprehend that despite counsel for the husband’s mother erroneously referring to common intention as founding a claim in resulting trust, his Honour determined to treat that submission as an alternative claim in constructive trust. At [89] his Honour found:
The evidence of the husband is that the purchase of the property by him was to provide accommodation for him and his parents into the future. It was agreed that the husband’s parents would reside in the property and the husband’s parents agreed to pay a portion of the initial purchase price and further agreed to provide to the husband the rental income from their unit that they were now able to let out by reason of their occupation of the home. This was the joint venture.
His Honour then proceeded to find that the joint endeavour so found had failed:
90.Did the joint venture fail? It did, by reason of the breakdown of the marriage of the husband and wife in respect to which there can be no attributable blame and by reason of which the property was sold and the [husband’s mother’s] occupation of the home ended.
The issue of the expunged evidence aside, the joint venture as expressed at [89], has been carried out as the joint venturers contemplated that it would be. The purchase of the property did in fact provide accommodation for the husband and his parents “into the future”. The parents did in fact reside in the property and they did in fact agree and pay a portion of the initial purchase price. They provided the husband with rental income from their unit that they were “now able to let out by reason of their occupation of the home”.
It is true that the joint venture came to an end by reason of the sale of the home, but in our view that is by no means the same thing as concluding that the joint venture agreed to between the parties had in fact failed in the sense in which that expression is used in decisions such as Baumgartner v Baumgartner[41] and Muschinski v Dodds.[42]
[41] (1987) 164 CLR 137.
[42] (1985) 160 CLR 583; For further example, see the summary of the necessary elements given by
Campbell J in West v Mead [2003] NSWSC 161 cited by his Honour at [87].
The scope of the joint endeavour, including the length of time over which it was envisaged, was relevant to the determination of whether it had “prematurely terminated”.
His Honour then turned to the question of “unconscionable retention of benefit” and cited a number of different decisions.[43] Among them was a decision of Hodgson JA with whom Tobias and McColl JJA agreed in Cetojevic and Anor v Cetojevic[44] where, at [34] his Honour said:
I accept that it is insufficient for the establishment of a constructive trust that it be considered inconvenient or unfair that legal rights be relied on. I accept that in the circumstances of this case, it was necessary for the respondent to show both that circumstances had arisen which were so outside the contemplation or intentions of the parties at the time of entry into the joint endeavour that it can fairly be said that the joint endeavour had broken down, and also that in those circumstances it was unconscionable for the appellants to rely on their legal rights.
[43] Baumgartner, above; Muschinski, above; West v Mead, above; Cetojevic and Anor v Cetojevic [2007] NSWCA 33.
[44] [2007] NSWCA 33.
Again, the relevance of evidence entirely expunged from the proceedings can be seen. Evidence as to the parties’ intentions and what they did or did not agree, including the specific conversations said to evidence the same, were directly relevant to a consideration of whether the circumstances that had arisen were outside the contemplation or intentions of the parties.
His Honour found that there was a joint venture and that it “ended prematurely without attributable blame”. As we have said we consider that his Honour was wrong to ignore the sworn evidence of the husband’s mother in particular. Had that evidence been considered, we do not consider that either finding would have been open to his Honour.
That said, his Honour went on to find that:
102.Yet the parents, in particular the husband’s mother, have had the benefit of occupation for about 15 years with the wife being to a degree her career [sic] until separation particularly in the latter years of that period. They were able to rent out their property and the [husband’s mother] retained that property during the same period and now resides back in her own home.
Conclusions as to the Cross-Appeal
In our opinion, in the absence of any cogent explanation from the husband and his mother for their respective fundamental changes in sworn evidence, his Honour was wrong to strike out the evidence of the husband’s mother, and to change the evidence of the husband in the manner which we have earlier outlined. It was highly relevant and remained admissible despite the husband’s mother “not reading” it in her case and despite the wife’s objection to it. His Honour’s error in this respect was ameliorated to some extent by the references his Honour made to the evidence of those parties “until trial”.
That evidence should have been available and considered so as to inform cases apparently asserted in resulting trust and constructive trust by the husband’s mother. The failure to fully consider that evidence in respect of those asserted cases is in our view an error.
That evidence should also have been available so as to determine the husband’s case that the money was “lent” for the purchase of the home notwithstanding an apparent attempt on his behalf to suggest a constructive trust. If that constructive trust case was to be considered, it should have been considered in the context of all of the circumstances which included the sworn evidence by each of him and his mother.
If that sworn evidence had been available, it would not in our view have been open for either the husband or his mother to propound cases for equitable relief nor for his Honour to find either a resulting trust or a constructive trust. In respect of each, the sworn evidence of the relevant protagonists was plainly to the effect that the monies were advanced by way of a loan with specified terms. That clear evidence put paid to any presumption of a resulting trust. It equally put paid to any suggestion that there was a presumption of advancement. It equally put paid to any suggestion that monies were advanced pursuant to a joint venture not otherwise explained by legal relationships which would attract the intervention of equity.
In our opinion, there was no foundation on the evidence which ought to have properly been before his Honour for the granting of the equitable relief sought by the husband’s mother and, it seems, ultimately by the husband.
Moreover, we consider the significance of the wholly unexplained fundamental changes to the sworn evidence of each of the husband and his mother to the onus of proof each of those parties bore as to the cases they each ultimately propounded cannot be over-emphasised. As but one example, once the evidence of loan was expunged at their request, their task to rebut the presumption of advancement, given their onus to do so, was all the more demanding given their fundamentally conflicting cases and inconsistent evidence which necessarily impacted upon the credibility of their evidence.
The Notice of Cross-Appeal, however, assumes the state of the evidence by reference to the total exclusion of the evidence to which we have earlier referred. The case was conducted on that basis and submissions made accordingly. Confined to the evidence thus available we consider respectfully that it was not open to his Honour to find that a joint venture had been prematurely terminated or ended in the sense to which the relevant authorities refer. While his Honour found to the contrary, his Honour concluded that unconscionability could not be established. We agree with that conclusion.
Equity intervenes so as to prevent injustice by reference to defined categories of relief. In the circumstances of the present case, which were identified by his Honour, we consider with respect that it was a correct conclusion that no unconscionability was established.
The result of our consideration of the matter is, then, that although his Honour’s process is attended by significant errors in the manner which we have sought to explain we can nevertheless safely conclude that they do not impact upon the decision ultimately made.
That is because, in our view, the record reveals that it was not reasonably open to his Honour to find that either a resulting trust or a constructive trust should be found in favour of the husband’s mother. That conclusion would have effectively been inevitable had the evidence we consider his Honour should not have excluded been available to him and considered as it ought to have.
As a consequence, the intervention of this Court is not warranted and the Cross-Appeal should be dismissed.
It was common ground in the proceedings before his Honour that if neither debt nor equitable interest was established, the husband’s parents’ injection of the funds for the purchase of the property and, subsequently, the rent from their unit to the repayment of its mortgage, was a significant direct financial contribution made on behalf of the husband. It was so treated by his Honour although, as we now turn to consider, the husband’s Notice of Appeal asserts that errors were made in his Honour’s orders for settlement of property.
The Appeal
Issues to be Determined
Many of the husband’s grounds are interrelated. Both the Notice of Appeal and the Summary of Argument deal with them under distinct headings. A similar approach is adopted by us.
Grounds 1 – 8 relate to the value of the husband’s company, F Pty Ltd (“the company”). Grounds 9 – 11 relate to the value of the ABC Super Fund (“the ABC Fund”). At the core of these 11 grounds of appeal are two primary contentions by the husband:
a)That the primary judge erred in finding that there was “no evidence from the husband” that a debt owing by the company to the ABC Fund would “not be repaid” (at [116(d)]; and
b)Effectively consequent upon that, the primary judge erred by including the debt owing by the company as an asset of the ABC Fund and therefore as part of the property or superannuation interests of the parties.
Grounds 12 – 14 relate to his Honour’s treatment of various credit card and personal loan liabilities. In essence, it is said that his Honour erred by not including them in the net property and, thus, leaving the husband as solely responsible for them. The husband argued they were joint liabilities. His Honour concluded that the husband “[had] adduced no evidence to support” a contention that they were joint liabilities.
Similarly, Grounds 15 – 16[45] involve his Honour’s decision to exclude a Centrelink debt as a joint liability of the parties. His Honour found that this debt arose due to the husband receiving approximately $13,000 in family assistance benefits post-separation. Upon filing the parties’ 2014 tax returns, “[the husband] was assessed at an overpayment of $10,000”. His Honour concluded that because the husband received the whole of the benefit he should retain the whole of the debt owing to Centrelink.[46] The husband contends that this amount was a joint liability that should have been borne by both parties.
[45]The Grounds of Appeal are numbered differently between the Notice of Appeal and the Summary of Argument. In the Summary of Argument, Grounds 15 and 16 have been combined to form one Ground 15. Therefore Ground 16 in the Summary of Argument reflects Ground 17 in the Notice of Appeal; Ground 17 in the Summary of Argument reflects Ground 18 in the Notice of Appeal.
[46]Reasons, [116](g).
Ground 17 alleges an error of law in the primary judge’s assessment of contributions. His Honour at [120] acknowledged that although the husband’s mother “assisted in the home and at times with the children” that did not amount to “contributions by ‘a party to the marriage’ as contemplated by s 79(4)(c)”. The husband asserts that “[w]hilst [the husband’s mother] is not a party to the marriage [her] non-financial contributions … were sufficiently significant to be considered under section 75(o) [sic]” and that his Honour “should have found that these non-financial contributions were made on behalf of the husband”.
Finally, Ground 18 challenges the weight given by his Honour to the financial and non-financial contributions made by the husband’s mother. Grounds 17 and 18 will be dealt with together.
The Loan Owing to the ABC Fund
In 2012, the husband set up the ABC Fund and deposited approximately $41,500 into the fund account.[47] The source of this initial deposit is unclear.[48]
[47]Reasons, [63].
[48]Reasons, [64].
The husband deposes that at about this time, in his capacity as trustee of the ABC, he entered into a loan agreement with the company (which operates his Entertainment business).[49] The effect of this loan agreement was that between June 2012 and May 2014, the husband caused approximately $49,797 to be advanced from the ABC Fund to the company.[50] His Honour found that as at August 2014, the balance shown in the ABC Fund accounts was $1.91 and the loan owed to it would have been accruing at a rate of 4% per annum, as provided by the loan agreement.[51]
[49]Affidavit of the husband filed 15 February 2016, paragraph 106.
[50]Affidavit of the husband filed 15 February 2016, paragraph 107.
[51]Reasons, [63], [65]; Affidavit of the husband filed 15 February 2016, ‘Annexure AH’.
Counsel for the husband at trial argued that the $49,797 should be deducted from the property of the parties as a liability owed by the company and, thus, be taken into account as a liability borne by the parties in the proportion ultimately determined as governing the parties’ respective entitlements.
During the course of an exchange between the husband’s counsel and the bench, his Honour noted that the liability owing to the ABC Fund was “only one aspect of the balance sheet” of the company.[52] His Honour was of the view that the husband’s contention could not be sustained in circumstances where no other assets and liabilities of the company were sought to be included in the property of the parties.
[52]Transcript, 25 February 2016, p 365 ln 39.
As a result, at [117], his Honour recorded the value of the company as “NK” (i.e. not known) and the value of the ABC Fund as $49,797. That conclusion was based on a finding by his Honour that there was no evidence “as to the financial circumstances of the company” nor “that the debt [would] not be repaid”.[53] Important to that conclusion was the fact that the husband, as the party with effective control of the company had chosen not to obtain a valuation of it nor obtain expert evidence, nor otherwise offer evidence of its current capacity to pay the debt save for the husband’s own assertion.
[53] Reasons, [116](d).
As his Honour expressed it in the course of the proceedings, in the absence of any reliable evidence in respect of the company’s capacity to pay that debt (or any debt), “the super already [had] an asset which [was] a loan … owed to it by a third party”.[54]
Did the primary judge err in concluding there was “no evidence” that the loan to the company would not be repaid?
[54]Transcript, 25 February 2016, p 364 ln 46–47.
Ground 2 has no merit. The ground contends that the primary judge made a finding that “money advanced from [the ABC Fund] to [the company] is a debt owing … to the husband”. No such finding was made.
At [65], his Honour clearly stated that the funds were advanced from the ABC Fund to the company. The reference to the funds being owed to the husband is simply a recognition that as a member of a superannuation fund, the husband’s member benefit entitlement as revealed by the accounts of the ABC Fund will ultimately be received by him upon satisfaction of the relevant vesting event. His Honour at [116(d)] concluded that the husband had failed to adduce evidence as to the financial circumstances of the company and whether the debt owing to the ABC Fund would be repaid.
Counsel for the husband referred to the husband’s affidavit which annexed the financial statements of the company for the 2013 and 2014 financial years. The balance sheet in the 2014 financial statement recorded an excess of liabilities over assets equating to $29,325. The husband contended that those dated accounts demonstrated that the company was “trading at a loss” and did not have any available capital to pay back the debt.
The determination by his Honour that the husband had an “obligation” to adduce either single expert or adversarial evidence as to the value of the company was based on a finding that the husband had contended during the trial that “the value of the company was in fact negative equal to the debt owed to the super fund”.[55] This is misconceived. In fact, at no stage during the course of the trial did counsel for the husband make submissions as to the actual value of the company, except to the extent that the debt was sought to be included as a liability of the parties. During the course of the trial proceedings, counsel for the husband stated “[w]e’re not saying it’s a valuation … [w]e’re saying it’s a debt”.[56] Additionally, the joint balance sheet of the parties showed that on the husband’s case, the company was to be attributed a “NIL” value, and the debt was included under the separate heading, “Liabilities”.
[55]Reasons, [116](d).
[56]Transcript, 25 February 2016, p 366 ln 1–5.
At trial, counsel for the husband acknowledged that the husband had not directly deposed to any lack of ability to repay the debt. In fact, the husband in his affidavit had stated that “[the company] is a business to keep investing in as it has a potentially viable future”.[57] His Honour was plainly cognisant of, and referred explicitly to, the fact that as at 30 June 2014, the company’s liabilities exceeded its assets. It was for the husband to adduce evidence of the company’s current liquidity.
Did his Honour err in the exercise of the discretion to include the loan as an asset of the ABC Fund and therefore the parties?
[57]Affidavit of the husband filed on 15 February 2016, paragraph 31 .
Counsel for the husband contends that the primary judge could not consider whether the debt would ultimately be repaid, because his Honour could only adjudicate “on the assets and liabilities of the parties … at the date of hearing”.[58]
[58]See for example, Omacini and Omacini (2005) FLC 93-218, 79,620.
So much is, of course, true but the submission ignores the fact that his Honour had to make findings as to those assets and liabilities on the evidence before him. In this case, that task had to be undertaken by his Honour doing the best he could on such evidence as he had before him.
Compliance issues for the ABC Fund relating to it lending money to the company were not addressed in any evidence before his Honour. Prima facie, the money needed to be, and could be expected to be, returned. By reason of the matters just discussed, we consider that his Honour was entitled to find that the money would be repaid to the ABC Fund as it should have been. Upon repayment, the husband was entitled to his member benefit entitlement. The best evidence of the amount of the husband’s superannuation interest was the amount of that entitlement which was the amount of the loan to be repaid.
We consider that no error is demonstrated.
Credit Card Liabilities and Personal Loans
In 2004 and 2008 the husband refinanced the mortgage owing on the Suburb C property. On both occasions, the rationale for doing so was to discharge the original mortgage and allow the husband to draw on further funds to pay off credit cards and create a redraw facility.
At the time of the 2008 refinance, $164,000 was owed on the primary mortgage debt and approximately $67,000 was owed on a supplementary loan obtained in the 2004 refinance. The husband in 2008 borrowed an additional $200,000 which was used to pay off the supplementary loan and $115,713 worth of credit card debt and personal loans.[59]
[59]Reasons, [43]–[45].
Since the last refinance and at about the time of trial, the amount owing on these credit cards and personal loans had accrued to approximately $132,600.[60] His Honour’s decision at [116](f) to exclude these liabilities (expressed more accurately as deciding that it was just and equitable for the husband to bear those debts solely) was based on a finding that the husband had “adduced no evidence to support” the debts being included as joint liabilities of the parties.
[60]Joint Trial Balance Sheet filed on 19 February 2016.
The first point to be noted is that the primary judge’s findings were premised on the apparent lack of full and frank disclosure by the husband. The husband in Ground 13 asserts that the credit cards and personal loans were debts to be shared and that the onus of proving otherwise should be borne by the wife. Counsel for the husband at paragraph 24 of the Summary of Argument contends that the “presumption should be that [the credit cards and personal loan] are joint liabilities unless the contrary is proved”.
No authority is cited for the proposition that there is any “presumption” as contended for by the husband. Indeed, that submission is contrary to Full Court authority to which we shall shortly refer. The conclusion as to whether one or both parties should bear responsibility for a debt is a conclusion drawn from the evidence as a whole. An evidentiary onus might arise if the evidence taken as a whole suggests that debts were incurred for joint purposes within the context of the broader marital relationship, but that is a long way removed from suggesting a “presumption” of the type asserted by counsel.
The evidentiary considerations inform a conclusion as to what justice and equity demands should be the treatment of particular liabilities.
In Merritt & Merritt,[61] the Full Court said at [27], in the context of the primary judge’s exclusion of certain liabilities from the assets and liabilities of the parties, that:
… it is necessary in property settlement proceedings…not only to establish the existence of a particular liability, but also to establish that it is a liability which should be taken into account in determining the value of the property to be divided between the parties to the proceedings; in other words, that it is a liability, the burden of which the other party should share.
(Citations omitted)
[61][2009] FamCAFC 154.
Further, as noted by Anthony Dickey:[62]
… the court may properly decide not to take into account – or alternatively discount the value of – a liability in certain circumstances. It may decide to ignore or discount a liability in certain circumstances. It may decide to ignore or discount a liability if it is vague or uncertain, or if it is unlikely to be enforced, or if it was unreasonably incurred [noting that] [t]here may perhaps be other exceptional cases as well.
[62]Anthony Dickey, ‘A Question of Priorities: Wives or Unsecured Creditors?’ (1992) 6 Australian Journal of Family Law 229, p 230, footnoting Af Petersens and Af Petersens (1981) FLC 91-095 at 76,669; Prince and Prince (1984) FLC 91-501, 79,076–7 and Reynolds and Reynolds (1985) FLC 91-632, 80,110.
It is true that in very many s 79 cases, the court will deduct liabilities of all types so as to arrive at a net value of the parties or either of them. In Rodgers & Rodgers (No 2)[63] (“Rodgers”), the Full Court, in referring to an earlier Full Court decision in Campbell v Kuskey,[64] said:
32.… some of the statements in that case might perhaps suggest that there is indeed a “rule” that the court must deduct liabilities unless the case falls into “one of the exceptional categories”. However, while the Court in Campbell expressed itself in terms of there being a “general rule” as to the manner in which a relevant liability might be treated, it is qualified in each case by reference to its application in “most cases”.
33.In our view, nothing said by the Full Court suggests that the rule has the force of a binding rule of law the failure to comply with which constitutes, of itself, error. Nor do we consider that any such binding rule of law emerges from any other authority as the following authorities spanning more than 20 years illustrate.[65]
[63] (2016) FLC 93-712.
[64] (1998) FLC 92-795, per Baker, Lindenmayer, Maxwell JJ.
[65]The Full Court thereafter refers to: Prince, above; Rowell and Rowell; Deputy Commissioner of Taxation (Intervener) (1989) FLC 92-026; Biltoft and Biltoft (1995) FLC 92-614; Chorn and Hopkins (2004) FLC 93-204 and Noetel and Quealey (2005) FLC 93-230.
Contrary to the submission of counsel for the husband, the Full Court went on to say in Rodgers at 81,490:
40. It is in our view important to reiterate and emphasise what was said in Biltoft above: there is no statutory prescription which suggests that any such treatment of the liability is mandatory. Despite the frequency with which the “rule” is applied we have not been taken to any authority, nor are we aware of any authority, which suggests that any such “rule” has the effect of a binding rule of law [As to which see, Norbis and Norbis (1984) FLC 91-543 and the discussion in Hoffman & Hoffman (2014) FLC 93-591, [21]-[31]]. What emerges from the authorities is that while there might be a “rule” the application of which is appropriate in the vast majority of cases, the manner in which a particular liability should be treated is, ultimately, dependent upon the nature of the liability, the circumstances surrounding the liability and the dictates of justice and equity shaped by each.
41. The usual practice or “rule” sits comfortably and conformably within that rubric – in many cases, perhaps almost all, liabilities will be deducted from the “gross” value of the property because it will be clear (and even if not expressly stated, determined) that the justice and equity of the case demands that the liabilities should be met by the parties in the proportions in which the court determines the property is to be divided [As “a debt to be shared” between the parties “as part of the vicissitudes of the economic life of the parties”: DJM v JLM (1998) FLC 92-816, at 85,261 per Baker, Kay, Morgan JJ]. Liabilities that are vague, uncertain, unlikely to be enforced and the like might be treated differently because those circumstances might, in the circumstances of the particular case, render it unjust and inequitable for liabilities to be deducted in that manner. Those so-called “exceptional cases” are but instances of the broader consideration of the justice and equity of the particular case.
The proponent of an assertion bears at least the evidentiary onus of proving that assertion. The credit cards and personal loans are liabilities in the husband’s name and derive in circumstances where the general tenor of the evidence of the wife before his Honour was plainly to the effect that she knew little if anything of expenditure by the husband and how and in what circumstances the majority of the credit card debts accrued.
The evidence purportedly demonstrating that the debts should be joint liabilities of the parties is contained in the husband’s affidavit. In particular, the husband contended that the expenditure went towards paying the family’s travel costs to and from D Country[66] and renovations to the Suburb C property.[67] The husband also referred to a payment he made to the Country D government in lieu of compulsory military service.[68] Counsel for the husband submitted that due to the very modest income of the parties during the marital relationship, much of these expenses would have been financed through credit cards and personal loans.[69]
[66]Affidavit of the husband filed 15 February 2016, paragraph 34 – 35 and 123,.
[67]Affidavit of the husband filed 15 February 2016, paragraph 38 and 42;.
[68]Affidavit of the husband filed 15 February 2016, paragraph 40.
[69]Husband’s Summary of Argument, paragraph 18 – 20.
At the appeal hearing, counsel for the husband brought to our attention four exhibits[70] which are said to demonstrate that the debts were accrued during the relationship and for the benefit of both parties. The exhibits tendered included a huge bundle of bank statements from Westpac, X Bank and ANZ personal and credit card accounts. Counsel for the husband submits that these documents “speak for themselves in terms of identifying what the liabilities were incurred for”. In particular, attention was drawn to many transactions occurring at retail outlets.
[70]Exhibits R, S, T and W.
Notably, his Honour stated at [50] that “[n]o analysis of the card transactions was provided to justify the wife bearing some responsibility” and at [51] his Honour went on to say that “[n]o documents were provided to assist” the husband’s assertions (referred to in his affidavit) as to how the money was spent.
Although it was accepted by his Honour that “some [of the] expenditure relat[ed] to matrimonial expenses”, his Honour also noted that “a most significant portion of the funds expended were cash advances”. As we said during the appeal hearing, our overall examination of the huge number of documents comprising the exhibit bears that out. Additionally, during cross‑examination the husband conceded that at least some of the funds had been gambled,[71] and that some cash advances (as evidenced by the exhibits) were withdrawn from the XYZ Casino.
[71]Transcript, 24 February 2016, p 195 ln 4–28.
We do not accept the submission by counsel for the husband that there is an “underlying tone and assumption throughout the judgement [sic] that the husband gambled a significant amount of money”.[72] The facts are that the husband conceded that some of the money (albeit that he would not, or could not, specify an amount or proportion) was spent on gambling. Critically, he confirmed the wife’s evidence that the credit cards were used solely by him,[73] and adduced no meaningful evidence which satisfactorily explained how the very substantial credit card debts were comprised.
[72]Husband’s Summary of Argument, paragraph 22.
[73]Transcript, 24 February 2016, p 189 ln 1, p 193 ln 9–18, p 198 ln 1.
The Centrelink Debt
At [116](g), his Honour refers to a contention by the husband that a Centrelink debt of approximately $10,500, should be included as a liability of the parties with “the wife [bearing] some responsibility for same”. His Honour concluded otherwise and held that the liability should be offset against family assistance benefits received by the husband from Centrelink post-separation. Those benefits totalled $13,056.
The circumstances surrounding the receipt of the family assistance benefits and the accrual of this Centrelink debt are, like so much of the evidence before his Honour, unclear.
The family assistance benefits, against which the Centrelink debt was offset, were received by the husband approximately five months after separation in September 2014.[74] During cross-examination, the husband said that this payment “was based on the 2013/2014 financial year” and it was a “payment based on Centrelink paying us … child allowance payments”.[75] Otherwise, no further evidence (in particular, Centrelink correspondence that may have indicated why the benefits were received and for whose benefit they should have been directed) was adduced.
[74]Transcript, 24 February 2016, p 239, ln 34–45.
[75]Transcript, 24 February 2016 p 239 ln 44–45, p 240 ln 1–2.
No documentary or other independent evidence was adduced as to when the Centrelink debt was incurred. Annexure AE of the husband’s affidavit attaches a letter requested by the husband from Centrelink indicating that the debt “is due to your and your former partner’s ([Ms Atuk]) low combined income estimate” and that the debt was incurred because of an amendment to the “entitlement for Family Tax Benefit [for the 2012/2013 financial year] … due to late lodgement by your former partner”.
Although it is clear that the debt was incurred during the parties’ marriage, what is not clear is the circumstances pertaining to payment of the family assistance benefit. The issue has echoes in the evidentiary omissions and the findings and inferences pertaining to the issue relating to the credit card debts just discussed. The money was spent by the husband in a manner unexplained and the inference drawn by his Honour was that the husband spent it on himself.
We consider that finding open on the evidence (and lack of evidence) before his Honour.
The husband’s argument, when referenced to such evidence as was adduced before his Honour and his Honour’s findings, is that the husband should retain the benefit of the monies received but that the burden of the liability should be shared. The effect of his Honour’s finding is that the husband should retain the benefit of the monies and bear the burden of the liability in an approximately similar amount.
We are not persuaded of any error by his Honour.
Contributions by the Husband’s Mother
The grounds of appeal relating to this issue, as set out in the Summary of Argument, bear repeating in full:
Ground 16 – [The Husband’s Mother’s] Contributions
The learned Judge erred in not taking into account the paternal grandmother’s non-financial contributions on the grounds that she was not a “party to the marriage” under section 79(4)(c) (at paragraph 120). Whilst she is not a party to the marriage the non-financial contributions of the paternal grandmother were sufficiently significant to be considered under s 75(o) [sic] and his honor [sic] should have found that these non-financial contributions were made on behalf of the husband, and, as such, were additional contributions by the husband. This is an error of law.
Ground 17 – Contribution Assessment Prior to Section 75(2) factors
The learned Judge erred in his assessment of contributions over the marriage by assessing the contributions as favouring the husband 57.5%/42.5% (at paragraph 125). This is an error of fact. The contributions made by the husband prior to the marriage, the financial contributions made by the paternal grandmother prior to and during the marriage and the non-financial contributions made by the paternal grandmother (considered under s 75(0) [sic] are of such significance that his honor [sic] should have assessed contributions as favouring the husband 67.5%/32.5%.
A number of observations should immediately be made:
·No authority is cited for the proposition that his Honour erred in failing to take account of the husband’s mother’s contributions pursuant to s 79(4)(c);
·That section, by its terms, refers to contributions “by a party to the marriage”. The husband’s mother is not a party to the marriage. There is no error of law as asserted in Ground 16.
·By contrast, s 79(4)(b) refers to “the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage” (emphasis added).
·Indirect contributions in the nature of domestic tasks and the like provided by a parent of one of the parties who live with them requires evidence of, and a consideration of, a number of factors including whether benefits were obtained from the cohabitation and whether the contributions were made on behalf of one of the parties or on behalf of both parties.[76]
[76]See, the discussion in Sane Daramy & Gueye Sane [2015] FamCA 180, [195] – [204], including the analysis there of what was said in turn in AB and ZB (2003) FLC 93-140; Rickaby and Rickaby (1995) FLC 92-642; Aleksovski v Aleksovski (1996) FLC 92-705; Gosper and Gosper (1987) FLC 91‑818 and Kessey and Kessey (1994) FLC 92-495.
It seems to us that his Honour had in mind just those considerations when making the comment “that is what grandparents do” which is sought to be impugned in the husband’s Summary of Argument.
The husband’s Summary of Argument asserts that the wife’s homemaker role “was significantly diminished” as a result of the husband’s mother’s contributions and that the contributions freed up the parties to make such other contributions as they each made. Such a contribution might be recognised, but, again, there obviously needs to be an evidentiary foundation for it. We are not persuaded that the passages in the husband’s mother’s affidavit to which we were referred fulfil that requirement.
Moreover, each of the matters just discussed are impacted by his Honour’s finding at [14] that:
… the husband conceded that during cohabitation the wife was a carer for his elderly mother such that following separation he was required to assume that role and take leave from full time employment from [omitted] 2014. He now receives a government carers benefit in relation to his care of his mother yet does not live with her and has not done so since shortly after sale of the [Suburb C property].
Ground 17 asserts that what is stated is “an error of fact”. It is not. The ground in terms asserts no more than that, first, a different result should have been arrived at and, secondly, that different result should have been about $50,000 higher than what was assessed by his Honour. At best the ground asserts an error in the attribution of weight. The burden upon an appellant challenging a wide discretion relying upon attributions of weight has been traversed in a long line of authority and need not be repeated.
It cannot be legitimately asserted that his Honour failed to take account of all the significant contributions made by the husband’s parents in providing the equity for the Suburb C property and, later his mother solely in availing the rental monies from their unit to assist in paying the mortgage. (It should be noted that the latter was contributed to the parties’ joint account to which each also contributed directly and from which household expenses, including those for the husband’s mother, were paid).
His Honour set out the husband’s mother’s contributions and plainly took them into account when assessing the contributions of all types made by or on behalf of each of the parties. His Honour, specifically recognised, in rejecting the wife’s submission that contributions should be assessed as equal, that “… there must be recognition of the husband’s initial contribution and the receipt of funds through the [husband’s mother]”.[77]
[77] Reasons, [122].
We may have assessed the husband’s contributions as greater than his Honour and s 79(4)(e) as less than that assessed by his Honour (or we may not have) but, as has frequently been emphasised that is not the test.[78]
[78] See, for example, the recent discussion in Rodgers & Rodgers (No 2) (2016) FLC 93-712.
We are not persuaded of any discretionary error.
Conclusion
The appeal and the cross-appeal should each be dismissed.
Costs
Submissions were sought from each of the parties in respect of costs at the hearing of the appeal in contemplation of whatever the result might be.
Costs of appeals are governed by s 117(1) of the Act just as any other proceedings under the Act. An appeal involves, however, a challenge to a party receiving the fruits of their judgment and is a step taken, here on advice, in light of the reasons for judgment. A party being “wholly unsuccessful” in an appeal within the meaning of s 117(2A)(e) can be seen as an important factor in determining whether there are, within the meaning of s 117(2), “circumstances that justify” departing from the position prescribed in s 117(1).
We consider that factor of considerable importance in the instant case, particularly by reference to the nature of the challenges contained in the grounds.
We are urged to consider in particular the financial circumstances of the husband’s mother and we agree that is a matter that should be taken into account. However, as has often been said, if financial circumstances were determinative, appellants could litigate with both impunity and immunity.[79]
[79] See, for example Lenova & Lenova (Costs) [2011] FamCAFC 141.
An order for costs should be made in favour of the respondent. The appropriate order is, in our view that the husband and his mother should be jointly and severally liable for the wife’s costs of and incidental to the appeal and the cross-appeal. No material put before this Court allows us to fix the amount of costs. Costs will be assessed unless otherwise agreed in writing between the parties.
I certify that the preceding one hundred and sixty-two (162) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Murphy, Kent & Watts JJ) delivered on 12 October 2017.
Associate:
Date: 12 October 2017
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