B and B
[2001] FMCAfam 13
•6 February 2001
FEDERAL MAGISTRATES COURT OF AUSTRALIA
B & B & ors. [2001] FMCAfam 13
EQUITY – FAMILY LAW – Resulting trust – principles in Muschinski v Dodds 160 CLR 583 – Family Law Act Section 79 – adjustments to reflect the husband’s post separation borrowings and use of funds.
| Applicant: | A B |
| First Respondent: | T B |
| Second Respondent: | G B |
| Third Respondent: | R B |
| File No: | ZC 2127 of 2001 |
| Delivered on: | 6 February 2001 |
| Delivered at: | Canberra |
| Hearing Dates: | 18 & 19 October 2000 13 November 2000 |
| Judgment of: | Brewster FM |
REPRESENTATION
| The Applicant: | In Person |
| Counsel for the First Respondent: | Mr Thorley |
| Solicitors for the First Respondent: | Elrington Boardman Allport, Solicitors |
| Counsel for the Second & Third Respondents: | Mr Nimmo |
| Solicitors for the Second & Third Respondents: | Nimmo Tigwell & Clarke, Solicitors |
FEDERAL MAGISTRATES COURT OF AUSTRALIA AT CANBERRA
ZC 2127 of 2001
A B
Applicant
And
T B
First Respondent
And
C B
Second Respondent
And
R B
Third Respondent
REASONS FOR JUDGMENT
Introduction
This matter concerns an application by A B (“the husband”) concerning the property of him and his wife T B (“the wife”) and a property owned by the husband and the parties’ children R B (“R”) and G B (“G”) situated at 5 M Drive F (“F”).
Background
The husband is aged 65 and the wife 61. They married on 9 April 1965 in Uruguay and separated on 31 December 1998. There are four children of the marriage all of whom were adults by the date of separation.
From the date of the marriage until 1994 the husband was in employment as a printer. After 1994 he did some work as a gardener and was in receipt of a pension. The wife’s role during this period was as a homemaker and parent. Her financial contributions consisted of an inheritance received in 1991 of about $20,000.00. After 1994 she earned some money as a cleaner and received a pension.
The parties migrated to Australia in 1969 and purchased a home in Sydney in about 1970. Following a move to Canberra in the mid 1980s they sold this home and purchased a property in K. This property was sold in about 1990. The net proceeds of the sale were about $25,000.00.
At the end of 1993 F was purchased. It was purchased in the names of the husband, R and G as tenants in common in equal shares. The wife believes that she was omitted from the title by oversight. However having heard the husband I have no doubt that this omission was deliberate. Until 31 December 1998 the parties lived in this property. On that date the husband left. The wife continued to occupy it until its sale.
In 1994 the husband ceased his employment. He received lump sums totalling $78,567.00 by way of termination payments and superannuation. In addition in November 1995 he cashed in an insurance policy receiving $5,500.00.
The F property has recently been sold. The net proceeds will be in the order of $58,000.00.
The financial history in relation to F
F was purchased for $181,000.00. In addition stamp duty and legal costs would have been paid. The husband paid an amount of $10,000.00 and G the sum of $500.00 towards the purchase price. The balance was borrowed by way of mortgage from the State Bank. Evidence was given that the amount borrowed was $176,000.00.
The agreement between the husband, R and G was that each would contribute equally to paying money into an account. From this account the mortgage instalments were paid as well as the rates and other expenses concerning the property. Initially this was $220.00 per fortnight each. In 1995 it increased for a time to $270.00 per fortnight before reverting to $220.00 in 1996. The husband ceased making payments towards the end of 1998.
In addition the husband paid two lump sums of $25,000.00 each towards reducing the mortgage. Later however he borrowed an amount of $10,000.00 for the purpose of travelling overseas by increasing the mortgage.
Whilst during the hearing there was considerable dispute as to how much each ultimately contributed ultimately it was more or less agreed that the figures were as follows
(a)the husband paid a total of $77,210.00. This comprised the initial $10,000.00, the $50,000.00 referred to in paragraph 10 and $27,210.00 by way of periodic instalments less the $10,000.00 referred to in paragraph 10;
(b)R paid a total of $26,320.00;
(c)G paid a total of $27,895.00.
In addition the husband contributed part of his termination payments to build a pergola and make other improvements to the property. The wife maintained that about $3,500.00 to $4,000.00 was spent on this. The husband maintained that it was more in the order of $10,000.00. He produced cheque butts which established $5,117.00 being spent in this way. The husband says that there were additional cash payments. Whilst I suspect that this might be so I cannot be affirmatively satisfied as to this. I propose to credit the husband with payments of $5,117.00 in this respect.
The appropriate approach
The way I propose to deal with this case is firstly to determine the way in which F should be divided between the husband and R and G. I would add at this point that no claim was made on behalf of the wife that she has any beneficial interest in that property. Given that the initial $10,000.00 came from the monies remaining from the sale of a jointly owned property any such claim might have some merit but, given that this would not increase the pool available for division between her and the husband, the wife has taken the sensible course of keeping out of the dispute as to the ownership of F and has based her case on Section 79 of the Family Law Act. The pool of matrimonial assets then having been determined I will make orders under Section 79 dividing these assets between the husband and the wife.
The division of F
The entitlements of each of the proprietors in this property must be determined by common law principles (using that term to include principles of equity). Unlike the process under Section 79 no exercise of any discretion is involved.
At law the parties are each entitled to a one third share each representing their legal shares as registered proprietors of the property. Unless the circumstances are such that the rules of equity would indicate that their beneficial interests are different to their legal interests this will represent their shares in the property. The first question requiring an answer is whether or not the circumstances are such as to attract the intervention of equity.
There are a number of equitable principles that could be applied to the facts of this case. I will outline those I consider relevant.
If two or more people join in purchasing a property as tenants in common in equal shares (or as joint tenants) but do not contribute equally to the purchase price the rules of equity decree that unless there is evidence that they intended their beneficial interests to be the same as their legal interests it will be assumed that they intended that their beneficial interests would be in the proportion to their initial contributions to the purchase price. In this respect money that is borrowed by way of mortgage by a party is considered to be a contribution to the purchase price. This would not necessarily be the end of the matter as a subsequent imbalance of contributions might require an accounting between the parties to determine their final shares.
If however the parties have a specific relationship to each other, such as in this case father and children, and the father makes the greater initial contribution the presumption referred to in paragraph 17 will not apply. It will be presumed, unless there is evidence to the contrary, that the father intended, in effect, to make a gift of the extra contribution to the children and that the parties’ beneficial shares should be the same as their legal interests. Whilst it is somewhat a misnomer this principle is called the presumption of advancement.
The principles set out in the above two paragraphs are summarised in Calverley v Green 155 CLR 242.
In this case, as in most others I have experienced, the parties have not acted in the ways the law would assume they will act and their actions are not capable of being readily slotted into any particular equitable pigeon hole. They consulted a solicitor in relation to the purchase and in a letter written to R the solicitor gave some consideration to the beneficial interests the parties would have in the property. However it is unclear to me at least what that part of the letter means and in any event it cannot be used to ascribe any intention to the husband.
Nevertheless I am satisfied that the presumption of advancement is rebutted. I am satisfied that the husband did not intend during his lifetime to make any gift to his children. I am satisfied that the basis of the arrangement was that he wanted a house to live in and not have to pay rent. His share of the mortgage repayments, I believe, would have been less that the rent payable on a comparable property. He did not have the capacity to buy the property on his own. By including the two children it would be possible to buy the property and, ultimately, he assumed that on his death they would become the owners of it. He assumed that he could continue to occupy the property until his death. R and G were prepared to enter into the arrangement so that their parents could live in the property, also on the assumption that ultimately they would be the owners of it. In the meantime they would be entitled to some taxation advantages. No consideration was given by any of the parties as to what should happen if the husband and the wife were to separate.
In the circumstances there is nothing to rebut the presumption of a resulting trust. The husband contributed $68,667.00 to the acquisition of F. This is comprised of his payment of $10,000.00 plus his one third share of the mortgage. This represents 37% of the total acquisition costs and indicates that he would have a beneficial interest of 37% in the property.
If the husband’s beneficial interest were to be fixed at this level he would be entitled to 37% of the sale price of the property less one third of the costs of sale and one third of the amount required to discharge the mortgage. I have not calculated what this would be as in my opinion, given what transpired subsequent to the purchase, it would be unconscionable for the parties’ interests in the property to be governed by what occurred at the time of purchase.
In my opinion the most appropriate categorisation of the transaction is that the husband and the two children entered into the arrangement on certain assumptions, those being the assumptions set out above. Events occurred which frustrated those assumptions. In my opinion the appropriate principles to be applied in this situation are basically those set out in the judgment of Deane J in Muschinski v Dodds 160 CLR 583.
Those principles can be summarised in the context of this case by saying that where two or more persons purchase a property with certain expectations or assumptions in mind and events occur which were not contemplated by the parties and which defeat those expectations the law will not necessarily allow the parties’ legal interests (or equitable interests derived from a resulting trust) to dictate their shares in the property but may, if the circumstances require it, intervene and, whether through the imposition of a constructive trust or otherwise, alter, or effectively alter, those interests. Unequal contributions by the parties to the property after its acquisition may justify such intervention. In such a case the order that will usually be made is that before any division of the property the parties are refunded, to the extent possible, their contributions.
To this general rule must be added the proviso that if one or other of the parties has derived a benefit from the property an accounting may need to be made with respect to that benefit. In this case the husband had the benefit of occupying the property in the period he made payments towards it.
In my opinion the extent of the imbalance of the respective contributions requires the intervention of equity and an adjustment in accordance with the principles set out above.
I am further of the view that the benefits the husband received by reason of his occupancy of the property requires an accounting as set out above.
G compiled a schedule detailing what she claimed was the various payments made by each of the parties and the figures in paragraph 11 above are taken from that document. She categorised the periodic payments of $220.00 or $270.00 per fortnight as “rent.” It appears that in order to give her and R a basis for claiming a tax deduction this was the way it was categorised by her accountant. The husband objected to those payments being so categorised. No evidence was adduced as to what the market rental would have been with respect to the property. However I am prepared, under Section 144(1) of the Evidence Act 1995 (C’wth), to take judicial notice of the fact that the market rent would not have been less than the maximum ever paid by the husband of $270.00 per fortnight. I propose, in taking accounts between the parties, to disregard the fortnightly payments made by the husband so that for the purpose of, to the extent possible, returning to the parties what they have paid his contributions towards the mortgage will be confined to the lump sums paid. In the absence of evidence as to a market rental I am not prepared to fix a higher figure to be deducted to reflect the value to the husband of his occupation of the property.
I should add that I have not overlooked the fact the R and G also obtained a benefit from the property as it gave them tax deductions. No evidence was led as to the extent of those benefits but I am satisfied that the “occupation fee” I am deducting is sufficiently below the market rental of the property for me to ignore this.
In theory the result of this is that the parties would be refunded the monies that they contributed after the acquisition of the property and the remainder divided on the basis that the husband had a 37% beneficial interest in that property. Infact in this case it is impossible to return to the parties the money they have contributed to it post purchase and the principles that create a resulting trust in favour of the husband have no practical application. The monies to be returned must therefor be apportioned pro rata. In this exercise all the monies contributed by the parties, not just those contributed post acquisition, should be included.
The contributions by the parties that I take into account are therefore as follows:
(a)the husband’s contribution is $50,000.00 in contributions towards the mortgage and $5,117.00 towards improvements on the property making a total of $55,117.00;
(b)R’s contribution is $26,320.00;
(c)G’s contribution is $27,895.00.
The total is therefore $109,332.00.
In percentage terms, rounding off to the nearest whole number, the division will be the husband 50%, R 24% and G 26%.
50% of $58,000.00 is $29,000.00.
The section 79 application
The wife’s application seeks that she be paid the whole of the whole of the proceeds of sale of F after payment to R and G of their share. She also sought orders as to the division of chattels.
The husband sought that he receive 70% of his share of F. He also sought an orders as to the division of chattels.
I propose to approach this matter using a three stage approach. The first task is to make findings as to the pool of property. The second is to determine on the basis of the matters set out in Section 79(a) to (d) (the “contribution factors”) whether or not the provisions of Section 79(2) are satisfied and an alteration of the parties legal or beneficial interests in that property is appropriate, and, if so, what an appropriate division would be. The final stage is to consider on the basis of the matters set out in Section 75(2) whether, if the Section 79(2) has otherwise not been satisfied, those matters satisfy that subsection or, if that subsection has been satisfied, whether or not an alteration of the “contribution based” division should be made.
The property pool
The property of the parties that presently exists is as follows:
(a)the husband’s interest in F of about $29,000.00;
(b)a car, furniture and effects at F which have been valued at $5,975.00.
The amount remaining at separation from the termination and insurance payments is not in evidence. In his Financial Statement filed on 8 March 2000 the husband disclosed savings of $4,000.00 which I infer must have come from these payments. In my opinion that amount should be added to the pool as notional property in accordance with the guidelines set out in Townsend (1993) FLC 92-356.
The wife maintains that the husband has NRMA shares. He denied this and I accept his evidence in this respect.
Contributions
It should be stated at the outset that there can be no question that the threshold requirement set out in Section 79(2) has been satisfied. This was a long marriage which produced four children. I have no doubt that the wife made substantial contributions as a homemaker and parent. The position in relation to F is that she has at most only a small beneficial interest in that property and there can be no doubt that it is just and equitable to alter that position in her favour. Indeed the orders the husband seeks in effect concedes this.
During the time he was in employment the husband was the breadwinner of the family. The wife’s role was as homemaker and parent. There is no reason in this case to value the financial contributions made by the husband during this period as being of more significance than the non financial contributions of the wife or vice versa. In this respect there is no reason to attribute any particular significance to the lump sums contributed by the husband. See in this respect Burke (1995) FLC 92-569. The real issue in this case whether or not there are factors which indicate that contributions made during the marriage or afterwards should be treated as other then equal.
In his final submissions counsel for the wife did not seek that any adjustment be made by reason of any greater contribution as such made by the wife. Rather he argued that there should be an adjustment made in favour of the wife by reason of the fact that the husband had frittered away the proceeds of the sale of the Kambah property and the termination and insurance payments for his own benefit and not for the benefit of the family. In particular it was submitted that
(a)the husband indulged himself (for example in his standard of dress, purchasing expensive wine etc) and gave the wife only a niggardly allowance.
(b)the husband made three overseas trips on his own and, as referred to in paragraph 10 above, drew down the mortgage on F by $10,000.00 to pay for one of those trips. He also made a trip to Tasmania.
I do not accept the first of these contentions. After the husband ceased full time employment the only income the parties had was from social security and some part time work. I accept the husband’s explanation that the monies were used for day to day expenses for the benefit of the family.
Insofar as the drawing down of the mortgage by the husband to fund a trip overseas is concerned I believe that this should be taken into account. It was a trip for his own purposes and the wife derived no benefit from it. The result of this is that the husband’s share of F was diminished. If he had not drawn down the mortgage in this way the figure that would have been applied to determine his share would have been $65,117.00. This as a percentage of the revised total of $119,332.00 is 55%. The equity in F would have been increased by $10,000.00. The net result is that the pool of property available for division between the parties would have been increased by about $8,000.00.
The other overseas trips and the trip to Tasmania seem to have been comparatively inexpensive but nevertheless it is reasonable to assume the monies remaining from the termination moneys were utilised to meet the cost of these trips. The wife herself made overseas trips earlier in the marriage but, given the fact that she also received money from an inheritance, I do not propose to take these into account. In all the circumstances I regard it as appropriate to make an adjustment with respect to these matters. With such a small pool a percentage adjustment is somewhat meaningless and I believe a cash adjustment is appropriate.
I might add that there are other matters which might justify a further adjustment in favour of the wife. Examples of this are the fact that the husband during the marriage sent monies to his family in Uruguay and the fact that he kept payments for a gardening contract when part of the work had been done post separation by the wife. However there are other offsetting factors such as the wife having the benefit of occupying F post separation and making payments much less than a market rent and in any event I believe it would be unfair to deprive the husband of some share of what remains of the parties’ property.
Section 75(2) matters
Neither party is employed and neither has any realistic prospects of employment. Neither has any special needs. There are no dependant children. There are no matters referable to Section 75(2) that would justify an adjustment in favour of either person.
Conclusion
In my opinion the property of the parties should be divided equally except that the wife should receive an extra amount of $2,000.00 by reason of the matters referred to in paragraph 40, $4,000.00 by reason of the matters set out in paragraph 46 and $2,000 by reason of the matters set out in paragraph 47. To ascertain what this means in terms of the division of the proceeds of the sale of F it is necessary to consider the matter of chattels.
Each party submitted lists indicating the division he or she sought. Little time was spent at the hearing exploring the basis upon which each formulated his or her claim. This was entirely appropriate in the circumstances. While it is somewhat arbitrary I propose to adopt the division proposed by the wife which equates to an almost even division based on the values ascribed to each item.
There was an issue at the trial about a computer which the wife said was in the possession of, and the property of, the parties’ daughter C. The husband said that he had data on the hard disc of that computer which was of value to him. The wife at the hearing undertook to request C to copy this data onto a floppy disc and send it to the husband.
Orders
The orders I make are as follows:
(1)That the parties divide the net proceeds of the sale of the property known as 5 M Drive, F between them as follows:
(a)to R — 24%;
(b)to G — 26%;
(c)to the husband — 50%.
(2)That the husband and the wife cause the husband’s share of the monies referred to in Order 1 be divided between them as follows:
(a)to the wife one half of those proceeds plus $8,000.00;
(b)the balance to the husband.
(3)That the parties take all steps necessary to divide their chattels between them as per annexure I to the wife’s affidavit filed
12 October 2000.(4)That the wife forthwith, if she has not already done so, request the parties’ daughter C to transfer all material on the computer in her possession relating to the husband to a floppy disc and to send it to the husband.
(5)That there be liberty to apply on 7 days notice as to the implementation of these Orders.
Since the hearing the husband contacted my associate to inform her that he would be outside the jurisdiction until 1 March 2001. In the circumstances I propose to formally take out the Orders on that date so that the time to appeal will not commence to run until he has returned.
I certify that the preceding fifty-four (54) paragraphs are a true copy of the reasons for judgment of Brewster FM
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