Batson and Batson

Case •

[2020] FamCA 123

•

2 March 2020

FAMILY COURT OF AUSTRALIA

BATSON & BATSON [2020] FamCA 123
FAMILY LAW – PROPERTY – Trusts – Where the husband sought a declaration that the second and third respondents held their 99 per cent interest in a real property beneficially in trust for the husband and wife – Where the husband’s equitable claims were not made out – Where the contributions of the parties is assessed as equal – 10 per cent adjustment to the husband for s 75(2) factors.
Family Law Act 1975 (Cth) ss 75(2), 79.
Chorn & Hopkins (2004) FLC 93-204
Smith & Smith (1991) FLC 92-261
APPLICANT: Ms Batson
RESPONDENT: Mr Batson
SECOND RESPONDENT: Mr Garey
THIRD RESPONDENT: Ms Garey
FILE NUMBER: SYC 8148 of 2017
DATE DELIVERED: 2 March 2020
PLACE DELIVERED: Sydney
PLACE HEARD: Sydney
JUDGMENT OF: Rees J
HEARING DATE: 28, 29, 30 & 31 January 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Judge
SOLICITOR FOR THE APPLICANT: Jason Li Lawyers
COUNSEL FOR THE RESPONDENT: Ms Gillies SC
SOLICITOR FOR THE RESPONDENT: Crawford Ryan Lawyers Pty Ltd
COUNSEL FOR THE 2ND RESPONDENT: Ms Judge
SOLICITOR FOR THE 2ND RESPONDENT: Jason Li Lawyers
COUNSEL FOR THE 3RD RESPONDENT: Ms Judge
SOLICITOR FOR THE 3RD RESPONDENT: Jason Li Lawyers

Orders

IT IS ORDERED

  1. That the response of the husband filed 13 February 2018 seeking a declaration as to the beneficial ownership of the property at B Street, Suburb C be dismissed.

  2. That the wife forthwith pay to the husband the sum of $33,611 by way of property settlement.

  3. That the wife and the third respondent forthwith do all things necessary to sell the … Boat in the possession of the wife and to pay the net proceeds of the sale, after payment of the costs of brokerage and advertising, as to 60 per cent to the husband and the balance to the wife.

  4. That other than as provided in these Orders, each party retain the property in his or her possession.

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 Batson & Batson 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).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 8148 of 2017

Ms Batson

Applicant

And

Mr Batson

Respondent

And

Mr Garey

Second Respondent

And

Ms Garey

Third Respondent

REASONS FOR JUDGMENT

  1. Ms Batson (“the wife”) and Mr Batson (“the husband”) commenced living together in late 1984 or early 1985 and married in 1986. They have two, now adult, children. They separated in June 2017.

  2. The second and third respondents to the proceedings are the wife’s parents. The wife’s father is 91 years old and the wife’s mother is 87 years old. The wife’s father works in the finance industry.

  3. Put in its simplest terms, it is the husband’s case that the property at B Street, Suburb C, (“B Street”) which was purchased by the second and third respondents in the 1970s, is held by them beneficially for the husband and the wife, by imposition of a constructive trust.

  4. If the husband does not make out that claim, there is no significant property of the marriage, other than their respective superannuation entitlements.

HISTORY

  1. The relevant transactions are set out here to provide a context in which the respective cases can be understood.

  2. The second and third respondents purchased the property at B Street as joint tenants in 1970. It was their home for many years. It was the security for a line of credit that they used for various investments in property.

  3. The husband and the wife commenced their co-habitation in late 1984 or early 1985. They were both working. The husband was worked in the transport industry. The wife did clerical work. On 11 April 1985 they purchased a property at Suburb D as tenants in common for $84,000. The shares were held as to two thirds by the wife and one third by the husband. There is a dispute as to how the purchase was financed. The husband deposed that the purchase was financed by a deposit from their savings and a mortgage. The wife deposed that they borrowed $77,900 from the NSW Building Society and that her parents paid the balance.

  4. They moved into the Suburb D property and undertook some renovations.

  5. The parties married in 1986 and their first child was born in 1987.

  6. In late 1986, the wife commenced employment in her father’s finance business.

  7. The wife returned to work when their first child started pre-school, working reduced hours.

  8. In 1990, the second and third respondents and the wife’s brother, Mr K Garey (“Mr K”) purchased a property at Suburb E for $247,000. Mr K held a 22 per cent interest.

  9. In 1991 the wife’s father paid a bonus of $10,000 to the wife who applied the money to the Suburb D mortgage.

  10. In 1992, the husband and the wife sold the Suburb D property for $180,000. There is a dispute about the amount they actually received on settlement.

  11. The parties moved into the Suburb E property. There is a dispute about whether, for a time, they paid rent to the second and third respondents and Mr K.

  12. The husband deposed that they purchased the property. The wife deposed that they purchased only the 22 per cent share owned by Mr K.

  13. In January 1997 the husband and the wife purchased a property at F Street, Suburb C (“F Street”) for $382,500. The manner in which the purchase was financed is in dispute. They borrowed $167,511 by way of mortgage from the National Australia Bank (“NAB”). The wife asserts that they borrowed the balance from her parents. The husband asserts that they were entitled to the whole of the proceeds of the sale of Suburb E and that they used those funds to complete the purchase.

  14. Suburb E was sold on … March 1997 for $282,000. The wife asserts that her parents received 78 per cent of the purchase price. The husband asserts that the husband and the wife were entitled to the whole of the sale proceeds.

  15. It is agreed that, in 1998, the B Street property had a value of about $600,000.

  16. In 1998 the husband and the wife moved from the F Street property into the B Street property. There is a dispute about the intention of the respective parties in relation to this transaction. The wife and the second and third respondents assert that it was intended that the husband and the wife could live in the B Street property but that it remained the property of the second and third respondents. The husband asserts that there was an agreement between the husband and the wife on the one hand, and the second and third respondents on the other, that the husband and the wife could purchase the B Street property. The terms on which that purchase would take place, according to the husband’s evidence are unclear.

  17. In October 1998, the husband and the wife sold F Street for $430,000. There is a dispute about how the proceeds of sale were used.

  18. In December 1998, the second and third respondents transferred to the wife a 1 per cent interest in B Street. The circumstances surrounding that transfer will be fully examined later in these reasons.

  19. The husband and the wife lived in the B Street property as their family home until they separated in 2017. The wife remains in the property with their adult son.

THE HUSBAND’S CASE

  1. The husband seeks an order in the following terms:

    That there be a declaration that the Second and Third Respondents, Mr Garey and Ms Garey hold their 99/100th interest in the real property situate and known as B Street, Suburb C, being the whole of the land more particularly described in Folio Identifier: …, (“the B Street property”) beneficially in trust for the Applicant, Ms Batson and the First Respondent, Mr Batson as tenants in common in equal shares.

  2. His equitable claim is enunciated in a document entitled “Statement of Claim” in the following terms:

    Equitable claims

    Proprietary estoppel

    48.      [The husband] relied on the Representation to his detriment, as follows:

    a.[The husband] permitted the sum of $229,624.66, being the whole of the proceeds of the F Street property, to be paid to [the second and third respondents];

    b.[The husband] permitted [the wife] to withdraw money from his bank account:

    c. [The husband] did not take steps to verify the legal title to the B Street property until the commencement of these proceedings.

    49.By reason of the matters pleaded at paragraphs 38 to 47 above, [the second and third respondents] are estopped from denying that they hold their 99% legal interest in the B Street property beneficially in trust for [the husband and the wife] as tenants in common in equal shares.

    Resulting trust

    50.      By reasons of the matters pleaded at paragraphs 28 to 47 above,

    a.[The wife] held half of the net proceeds of sale of the F Street property on trust for [the husband];

    b.the whole of the net proceeds of the sale of the F Street property were paid to [the second and third respondents];

    c.[The husband and the wife] intended that they be joint beneficial owners of the B Street property.

    51.In the premises, [the second and third respondents] hold their 99% legal interest in the B Street property on resulting trust in favour of [the husband and the wife] as tenants in common in equal shares.

    ‘Common intention’ constructive trust

    52.By reason of the matters pleaded at paragraphs 38 to 47 above, there was a common intention shared between [the husband, the wife, the second respondent and the third respondent] that [the husband and the wife] would acquire [the second and third respondents’] 99% legal interest in the B Street property, as tenants in common in equal shares.

    53.[The husband] acted on that common intention to his detriment, as follows:

    a.[The husband] permitted the sum of $229, 624.66, being the whole of the proceeds of the F Street property, to be paid to [the second and third respondents];

    b.[The husband] permitted [the wife] to withdraw money from his bank account;

    54.[The husband] did not take steps to verify the legal title to the B Street property until the commencement of these proceedings.

    55.By reasons of the matters pleaded in paragraphs 38 to 47 above, [the second and third respondents] hold their 99% legal interest in the B Street property on ‘common intention’ constructive trust in favour of [the husband and the wife] as tenants in common in equal shares.

  3. It is the husband’s case that the wife managed their financial affairs and that he did not become aware of the true history of the acquisition and disposition of various properties until after the parties separated and he has reconstructed their financial history using the available records, including the records of the Registrar General.

  4. He asserts that a trust arises because the Court will trace the history of the purchases and sales of the properties by the husband and the wife, and conclude that the ultimate profits derived by them were used to purchase B Street from the second and third respondents.

  5. The husband bears the onus of proving those assertions on the balance of probabilities.

THE WIFE’S CASE

  1. The wife asserts that the registered title of the property at B Street reflects the legal and equitable ownership.

  2. It is her case that, during their marriage, the family lived beyond its means and were never able to save or to afford to buy substantial property after the sale of Suburb D.

  3. The wife asserts that the family finances were constantly “propped up” by her parents lending money.

THE EVIDENCE

  1. The husband relied on affidavits sworn by him and by his sister. The husband’s sister had no relevant firsthand knowledge.

  2. The husband deposed that the wife conducted their financial affairs and that he largely left such matters to her. He had no knowledge of the details of many of the relevant transactions.

  3. On numerous occasions in the course of his cross-examination, the husband said that his memory was poor. He had no recollection of significant financial events such as signing important documents. He could not remember how much superannuation he had at separation or what he had done with a substantial amount of that superannuation after separation. He said words to the effect of “I’ve got no reference material and I don’t have a good memory” and “my memory is not good” and “my memory has never been good – it’s been a defence mechanism all my life”. He also said “I’m hopeless with money – as far as organising it”.

  4. Throughout his cross-examination, the husband said that he had “assumed” that the parties owned various real properties although he could not say how they could have paid for the respective properties after the sale of the Suburb D home. He “assumed” or “believed” that he and the wife owned the properties in which they lived from time to time.

  5. It is likely that, having with the assistance of his lawyers searched for and found relevant (and irrelevant) documents, the husband reconstructed past events to “fit” the historical documents.

  6. On many occasions during cross-examination, where the husband’s evidence relied on his memory of events, it was easily disproved by documents or was conceded by him to be wrong.

  7. The wife relied on affidavits by herself, her father (the second respondent), her mother (the third respondent), her brother Mr K and her sister, Ms G.

  8. It is likely that they, too, reconstructed the evidence to “fit” the documents. They had the advantage that the second and third respondents, because of their involvement in the financial affairs of the husband and the wife, and the fact that they ran an accountancy practice, had kept many relevant documents.

  9. Many of the documents that were relied on by all the deponents in the wife’s case, and exhibited to their respective affidavits, were the same and appeared to have come from the second and third respondents. For example, they all relied on a letter written by the third respondent in September 1993 but they all had the same copy, one which had been annotated in handwriting by the second respondent in 2017.

  10. But one example of their having reconstructed events was their mutual insistence that the second and third respondents had received $237,963.85 from the sale of F Street, based on a letter addressed to Mr K dated August  1998, some three months before the settlement of the sale of F Street.

  11. Mr K and Ms G conceded that before they swore their affidavits they asked their parents for documents and it appears that everyone in the wife’s family had discussed what had occurred before their affidavits were prepared.

  12. The wife made various assertions against the husband, including (but not limited to) excessive use of marijuana; excessive use of alcohol; excessive spending and serious family violence.

  13. None of those allegations was made out and they were either not the subject of submissions or, in the case of the allegations of family violence, specifically abandoned.

  14. None of the evidence was reliable where it relied on memory, or reconstruction.

  15. I prefer, in these reasons, to rely on the documents which were created at the relevant times.

FACTUAL DISPUTES

  1. From the narrative above, the following issues arise to be determined:

    ·    How was the purchase of Suburb D funded?

    ·    What were the net proceeds of sale of Suburb D?

    ·    In what manner were those funds used?

    ·    What was the agreement between the husband and the wife and the second and third respondents and Mr K about the purchase of Suburb E?

    ·    Did the husband and the wife rent Suburb E for any period?

    ·    Was the legal and equitable ownership of Suburb E reflected on the Certificate of Title.

    ·    How was the purchase of F Street funded?

    ·    What was the entitlement to the proceeds of sale of Suburb E and how was the money actually disbursed?

    ·    Was there any agreement between the husband and the wife on the one hand and the second and third respondents on the other that the husband and the wife would purchase B Street?

    ·    Is the legal and equitable ownership of B Street reflected on the Certificate of Title.

SUBURB D

  1. The Suburb D property was purchased in April 1985. The parties had been living together for four months on the wife’s case or a little more on the husband’s case.  

  2. The husband was working in the transport industry. He deposed that this was a “well paid position” and that he worked overtime enabling him to save money. He asserted that he was earning $60,000 per annum. The wife disputed that assertion. He did not tender any document to support his assertion. In 1985, when a house in Suburb D could be purchased for $84,000, $60,000 was a high income. It is unlikely that the husband was earning that amount in the transport industry, even if working overtime.

  3. The husband did not have a bank account. How his alleged savings were kept was never explained.

  4. In his trial affidavit, the husband deposed to having authorised the wife to operate on his bank account. In cross-examination, he agreed that he did not have a bank account in 1985, although the wife did.

  5. He also deposed to having a joint account with the wife which he also conceded was not correct.

  6. The husband deposed “my best recollection is that we had savings of approximately $8,000 deposited with the Commonwealth Bank ...”

  7. The purchase price of the Suburb D property was $84,000. The deposit was $8,400. The second respondent deposed that he advanced that sum together with a further $1,680 to pay the stamp duty. The wife deposed that the second respondent advanced the money.

  8. I accept that the husband believes that he and the wife had saved that sum in the short period of their co-habitation. However, there is no evidence to support that belief.

  9. In an affidavit in response the husband deposed:

    ... I do have a recollection of [the wife] saying to me words to the effect of, “We have to pay Mum and Dad back” and that we paid some money to them after we acquired the Suburb D property in discharge of a loan from them.

  10. I accept the evidence of the wife and the second respondent that the second respondent lent the husband and the wife about $10,000.

  11. However, I do not accept that the husband and the wife repaid that money while they were living at Suburb D. There is no evidence to support that assertion and no evidence that they were in a position to do so. It is likely that they repaid the funds at the time of the sale of Suburb D.

  12. The title of the Suburb D property was registered in the names of the husband and the wife as tenants in common. The wife’s share was 66 per cent. The second respondent said that he insisted on that arrangement to protect his investment.

  13. The husband deposed that he did not know they were not equal owners.

  14. The husband and the wife borrowed $77,900 from the N.S.W. Building Society, later the Advance Bank.

  15. The husband deposed to his belief that the parties had “greatly reduced” the mortgage by making additional payments over and above those required. The mortgage statements demonstrated that this was a mistaken belief.

  16. The only significant reduction of the mortgage occurred in February 1991 when the second respondent paid the wife a bonus of $10,000 which was deposited in the mortgage account. The husband deposed that he was not aware of this transaction. However, the relevant deposit slip was in evidence.

  17. The Suburb D property was sold for $180,000, settlement occurring on …October 1992.

  18. The husband deposed that the husband and the wife received $162,022.38 on settlement. That figure appears to have been taken from the settlement statement. However that, too, is not correct.

  19. The settlement statement is in evidence. The sale price was $180,000. The balance due to the mortgagee was $66,484 including costs of discharge.

  1. The husband and the wife were owed $94,846 on settlement. After deducting solicitors’ costs of $625, they received $94,220. They would presumably have also received the balance of the deposit after the deduction of the agents’ commission, about $3,600, assuming commission of 2 per cent. In total they may have received about $99,000. From that sum, I accept that they paid about $10,000 to the second respondent in repayment of the money he advanced at the time of the purchase, leaving about $89,000.

  2. The wife’s evidence is that she deposited the cheque from the solicitor in her account because they never had a joint account and the husband did not, at that time, have a bank account. She deposed that she then caused one third of that sum to be paid to the husband and he deposited those funds in an account in his own name.

  3. Having regard to the evidence of the husband and the wife that it was the wife who controlled their financial affairs, it is unlikely that she gave any portion of the settlement funds to the husband.

  4. I accept that, as at 1 October 1992, the husband and the wife had about $89,000 available.

SUBURB E

  1. Suburb E was purchased in February 1990 for $247,000 by the second respondent as to 39 per cent, the third respondents as to 39 per cent and Mr K as to 22 per cent. It was unencumbered at the time of purchase. The 22 per cent share of Mr K was therefore valued at $54,340.

  2. It was agreed at trial that the value of Suburb E was not less than $247,000 in 1992.

  3. The husband and the wife moved into Suburb E before they sold Suburb D. It is likely that they moved in in late 1991 or early 1992. The wife deposed that she was pregnant with their second child. The husband, having deposed that they moved to Suburb E after the settlement of the sale of Suburb D, conceded in cross-examination that their second child, born in April 1992, “came home to Suburb E”.

  4. The husband deposed that he was unaware that the second and third respondents and Mr K owned Suburb E. He denied that they paid rent for Suburb E after they moved in. It is likely that, as the wife deposed, rent was paid. The husband himself, in cross-examination said “there’s nothing for nothing from [the second respondent]”.

  5. On 2 October 1992, the day after the settlement of the Suburb D sale, a transfer document was signed, transferring the 22 per cent share of Mr K to the wife for a consideration of $51,700.

  6. The wife deposed that she used the funds retained by her from the sale of Suburb D together with money borrowed from her father to purchase the interest in Suburb E. The wife had, on any version of the transaction, significantly more than $51,700 available to her from the Suburb D sale. The second respondent does not depose that he lent any funds to the wife for the purchase of Suburb E. In cross-examination, the second respondent said that he did lend money for the transaction but, confronted with the settlement figures, conceded that he could not understand why that might have been necessary.

  7. A letter written by the third respondent, referred to in her evidence as her “Epistle” refers to a loan of $10,000 made by the husband and the wife to the second respondent in relation to Suburb E. Neither the second respondent nor the wife could explain that notation.

  8. I do not accept the wife’s evidence that she borrowed from her father to assist with the Suburb E purchase.

  9. The husband deposed that, to the best of his knowledge, the whole of Suburb E was purchased by the husband and the wife. Nowhere does he give evidence about how that purchase could have been funded using the $89,000 that they received from the sale of Suburb D.

  10. There is no evidence that any mortgage was registered on the title of the Suburb E property at the time the wife acquired her interest. The husband had no recollection of making a loan application or signing a mortgage.

  11. It was not suggested to the wife in cross-examination that any funds were borrowed for the purchase.

  12. The third respondent tendered a letter written by her to her children (including the wife) dated 10 September 1993. She deposed that she was in the habit of writing these “Epistles” to the children to put on record their property dealings from time to time and the testamentary intentions of herself and her husband. She was adamant in cross-examination that this “Epistle” was provided to her children and their partners at a family function at the end of 1993. The husband denied that he had been present or had ever seen the document.

  13. The document, written by the third respondent, with input from the second  respondent records in relation to Suburb E:

    Owned 78% by Mum & Dad. 22% is owned jointly by [the husband and the wife]. [The wife] will be left 78% in our Wills.

  14. The husband has not established, on the balance of probabilities, his assertion that the wife or the husband and the wife, owned the whole of the Suburb E property.

  15. I accept that the legal and beneficial ownership of the Suburb E property was as recorded on the Certificate of Title.

F STREET

  1. The husband deposed to his belief that they used the proceeds of sale of Suburb E to purchase F Street.

  2. F Street was purchased in January 1997 for $382,500, some three months before Suburb E was sold.

  3. The husband and the wife borrowed $167,511 from the National Australia Bank (“NAB”).

  4. The wife deposed that her parents lent some $220,000 to $230,000 to enable them to complete the purchase.

  5. On 18 December 1996, the second respondent delivered to the real estate agent a bank cheque in the sum of $37,750 with a letter which referred to a holding deposit of $500 having already been paid. There is no evidence about who paid the holding deposit.

  6. The second respondent deposed that, in order to lend money to the husband and the wife, he cashed in an insurance bond. He tendered correspondence between himself and N Bank in January 1997.  I accept that N Bank drew a cheque in favour of the NAB in the sum of $192,264 which was used to fund the purchase of F Street.

  7. There is no evidence that the husband and the wife had any savings as at January 1997.

  8. The settlement statement for the purchase is not in evidence. However, the amount required on settlement would have been:

    Purchase price  $382,500

    Less deposit  $ 38,250

    Balance  $344,250

    Mortgage advance              $167,510

    Balance required                 $176,740

  9. It is likely that the money provided by the second respondent also covered the stamp duty and legal fees. It is agreed that the stamp duty would have been about $11,900.

  10. The husband and the wife instructed solicitors to act for them on the purchase of F Street. The husband said in cross-examination that he had no recollection of consulting solicitors or signing documents although he conceded that must have happened. The Certificate of Title records their ownership of F Street in equal shares as joint tenants.

  11. There was no mortgage or other documentation relating to the funds provided by the second respondent.

SALE OF SUBURB E

  1. It is the husband’s case that the husband and the wife were entitled to, and received, the whole of the proceeds of the sale of Suburb E.

  2. In cross-examination, he said that nobody told him that but he assumed it was so.

  3. The Suburb E property was sold in March 1997 for $282,000. The wife deposed that the net proceeds, I assume after the payment of legal costs and agents’ commission, were about $275,000.

  4. The second and third respondents were entitled to 78 per cent of the proceeds or about $214,500. They received $230,138 or $15,638 more than the sum to which they were entitled.

  5. The wife deposed that she repaid some $15,000 to her father, being funds advanced by him for the purchase of Suburb E. Having explained that I do not accept her evidence that she borrowed for the purchase, I do not accept that she repaid funds received for that purpose.

  6. However, it is likely that other funds had been advanced by the second respondent.

  7. It is likely that the wife received about $45,000 from the Suburb E sale.

  8. The wife deposed that they bought new furniture, a second hand car and paid for a family holiday to Queensland. She deposed that the husband went on a holiday with his friends to New Zealand at a cost of about $5,000 and that their oldest child was then engaged at competitive swimming at a high level involving expenses including travel expenses to and from competitions. She was not challenged in relation to that evidence.

  9. There is no evidence that the husband and the wife, from their share of the proceeds of sale of Suburb E, could have repaid to the second respondent the funds he advanced for the purchase of F Street.

SALE OF F STREET

  1. F Street was sold on … October 1998 for $430,000. I have assumed that there had been no reduction in the amount borrowed by way of mortgage. It is agreed that the agents’ commission would have been 2 per cent. No settlement statement was provided but the transaction, in its simplest terms can be seen as follows:

    Sale price  $430,000

    Less agents’ commission     $  8,600

    Less mortgage  $167,000

    Balance available                $254,400

  2. The second respondent had provided $230,000 for the purchase of F Street. Neither he nor the wife had given evidence that interest was payable on the loan.

  3. In August 1998, NAB had written a letter to the second and third respondents, Mr K and the husband and the wife in relation to a mortgage facility of $780,000 being extended to the second and third respondents for the purpose of purchasing a property. The letter, which confirms the disbursement of funds totalling $884,467.83, lists as one of the sources of funds “Proceeds of settlement for sale of ...F Street...$237,963.85”.

  4. The letter, and the settlement of the purchase to which it refers, predates the actual settlement of the sale of F Street by some three months. I must assume that the reference to the sale proceeds of F Street is a reference to an expectation on the part of the NAB and the second and third respondents.

  5. I do not assume that the second and third respondents actually received $237,964 from the sale of F Street.

  6. The wife deposed that, after the repayment of the money advanced for the purchase of F Street by the second respondent, the “profit” was evenly divided between the second and third respondents on the one hand and the husband and the wife on the other. She deposed that she and the husband received about $10,000 or $12,000 and the second and third respondent about $13,000 to $14,000. The balance available was about $23,000. Why the second and third respondents were entitled to receive any of the “profit” was unexplained.

  7. The second respondent was unable to explain in cross-examination why, as a mere lender, he should have been entitled to a share of profit.

  8. The most likely explanation is that neither the wife nor the second respondent can remember, or have a record, of what happened to the proceeds of sale of F Street and that they have both reconstructed using the August 1998 letter from NAB as their basis.

B STREET

  1. When F Street was sold, the husband and the wife moved into B Street.

  2. It is the husband’s assertion that the second and third respondents received the whole of the proceeds of sale of F Street. The husband deposed that he believed that he and the wife raised money by way of mortgage which they were paying off.

  3. The husband deposed to a conversation with the second respondent “during the latter part of 1998” where he said to the second respondent “when you get to [sic] old to manage [B Street], I would like to try and buy the property from you”.

  4. He deposed to a subsequent conversation with the second respondent where the second respondent said to him, referring to B Street:

    If you sell F Street and give us the whole of the proceeds and borrow some money you can have this place.

  5. He deposed to a further conversation with the second respondent, in the presence of the wife, where the second respondent said “you will need to pay $400 per week to the mortgage”.

  6. The second respondent denied that conversation in those terms ever took place. It was his evidence that the line of credit which was secured over B Street was an important facility in his financial strategy and it was used by himself and the third respondent to fund their various property purchases. He considered that line of credit to be a valuable asset. Further, it is unlikely that the second and third respondents would have agreed to sell B Street for an undetermined price. The second respondent appeared, in giving his oral evidence, to be a precise man who generally acted to protect his interests and those of his wife. There is no doubt he and the third respondent were generous to all of their children but that generosity was generally documented and recorded.

  7. The wife deposed that, in 1998, she and the husband were struggling to meet the mortgage payments on F Street.

  8. The second and third respondents purchased an apartment at Suburb M in August 1998 as is evidenced by the letter from NAB to which reference has been made earlier in these reasons. When the second and third respondents moved into the Suburb M apartment, Mr K remained living at B Street where he had lived since childhood.

  9. The wife deposed to a conversation with the second respondent, in the presence of the husband, where the second respondent said to them:

    ...you can move into the B Street Property, rent free, provided that you pay all the outgoings such as electricity and rates. You also have to let Mr K continue to reside in the B Street property for as long as he wants to.

  10. The second respondent deposed to a conversation where both the husband and the wife said they were having difficulty paying the mortgage on F Street. He said:

    If we move to Suburb M, you two could move to B Street. But, I have one condition. You are to allow Mr K to live downstairs.

    He deposed that both the husband and the wife agreed.

  11. The third respondent was adamant in cross-examination that she had never agreed to transfer B Street to the husband and the wife.

  12. It is more likely that events occurred as the wife and the second and third respondents claimed.

  13. On 12 November 1998, the second and third respondents transferred to the wife a 1 per cent interest in B Street for a stated consideration of $6,000.

  14. The second respondent deposed that this was to avoid paying land tax which was not payable if the property was occupied by an owner. The second and third respondents subsequently transferred to Mr K a 1 per cent share in each of their two apartments in Suburb M for the same stated reason, that is, that if Mr K ever occupied either unit, no land tax would accrue.

  15. It is agreed that B Street was worth about $600,000 in 1998. The entitlement of the husband and the wife to the proceeds of sale of F Street was no more than about $23,000.

  16. The husband does not assert that the second and third respondent offered to provide vendor finance for the purchase of B Street.

  17. There is no evidence that the husband and the wife ever borrowed money by way of mortgage to finance the purchase of B Street.

  18. The third respondent deposed that, in September 2004, she was asked by the wife to help with the payment of outstanding credit card debts. On 15 September, the second and third respondents redrew $50,000 from their line of credit over B Street and deposited those funds in the third respondent’s bank account. She then drew cheques totalling $44,628.65 to seven finance providers. She deposed that the remainder of the $50,000 was applied to other debts of the husband and the wife. The second and third respondent regarded the husband and the wife as responsible to repay the $50,000.

  19. The third respondent wrote an “Epistle” dated 14 November 2007 in which she stated:

    [B STREET] MORTGAGE PAID OUT BY M/D BUT NOW THE BALANCE OF $50,000 APPROX. OWED BY [THE HUSBAND AND THE WIFE] AS WE ALLOWED THEM TO REDRAW FOR PERSONAL USE – THEY ARE TO REPAY THIS PER MONTH TO THE NAB BANK – NOTHING OWING BY M/D. GUARANTEED BY M/D BUT RESPONSIBIITY TO REPAY IS [THE HUSBAND AND THE WIFE’S].

  20. The second respondent deposed that the husband and the wife repaid the redraw of $50,000. Whether the repayments of $400 per week, or $400 per month as the husband variously asserts, related to the redraw is not known.

  21. As the title to B Street remained in the names of the second and third respondents, so the utility bills were addressed to them at the property. The husband gave evidence that he was always aware of that fact. He said that he “couldn’t even change the Foxtel to my name”.

  22. The second respondent continued to pay for repairs and improvements to B Street, which is inconsistent with the husband’s assertion that ownership had changed hands.

  23. Cheque butts tendered by the second respondent show payments to tradesmen in the sum of $35,435 in 2005 and $40,572 in 2006.

  24. I am not satisfied that the husband and the wife paid the second and third respondents $600,000 or any other sum for B Street.

  25. The evidence does not support the husband’s assertion that the second respondent agreed to transfer the legal title of B Street to the husband and the wife as the husband asserts and I do not accept that the conversations between the husband and the second respondent occurred as the husband asserts.

  26. There is no evidence that any money was paid to the second and third respondents in consideration for the transfer of the 1 per cent interest in B Street to the wife. The second and third respondents intended that the wife would beneficially own 1 per cent of B Street.

  27. The legal and equitable ownership of B Street is reflected on the Certificate of Title.

THE HUSBAND’S EQUITABLE CLAIMS

  1. Dealing firstly with the assertion of promissory estoppel as pleaded:

    ·    I do not accept, for the reasons expressed above, that any promise was made to the husband by the second respondent.

    ·    The husband did not permit the whole of the proceeds of sale of F Street to be paid to the second and third respondents. On his own evidence, he was unaware of the fact.

    ·    The husband did not permit the wife to withdraw money from his bank account for the purpose of purchasing B Street. On his own evidence, the wife had operated the husband’s bank account from the time he first opened an account.

  2. The husband’s claim is not made out and no estoppel arises.

  3. As to the claim of a resulting trust:

    ·    The wife was not beneficially entitled to the whole of the proceeds of the sale of F Street.

    ·    The wife therefore did not hold half of the proceeds on trust for the husband.

    ·    In so far as the proceeds of the sale of F Street were paid to the second and third respondents, they were entitled to about $230,000 as repayment for the loan extended by them for the purchase of the property in 1997.

    ·    If any funds were paid to the second and third respondents, over and above the amount they were owed, those funds did not exceed $23,000 and may have been as little as $12,000.

    ·    The wife did have the intention that she become a beneficial owner of B Street.

    ·    A resulting trust could have arisen if the husband and the wife had paid the second and third respondents $600,000 to purchase B Street. They did not.

  4. No resulting trust arose at the time of the transfer to the wife of the 1 per cent share in B Street.

  5. A constructive trust would be imposed if it were established that there had been an agreement between the second and third respondents on the one hand, and the husband and the wife on the other, that, on payment of an agreed sum, the second and third respondents would sell B Street to the husband and the wife and the agreed sum was paid.

  6. I do not accept that there was such an agreement.

  7. I do not accept that the second and third respondents were paid $600,000, or any sum, for their interest in B Street.

  8. The assertion of a constructive trust must fail.

  9. What, then, are the assets and liabilities of the husband and the wife?

THE BALANCE SHEET

  1. At the commencement of submissions, a balance sheet was tendered, setting out the various contentions of the husband and the wife. The document, as it was finally agreed in submissions, is set out below. I will deal with the issues in dispute using the numbers on the document.

Ownership Description Applicants value Respondents value
ASSETS
1. H & W 1% interest in the property situated at B Street NSW (Disputed as to interest) $         18,000 $     1,800,000
12. H … Boat $              NK $              NK
Total
ADDBACKS
13. H Husband’s legal fees $  E45,000.00 $             NIL
Total $ $
LIABILITIES
14. W Personal loan from Mr Garey $ E261,359.41 $             NIL
15. W L Bank credit card $        E5,500 $             NIL
16. W Income tax assessed and unpaid for last financial year $        E4,500 $             NIL
17. H H Bank Credit Card $              NK $         11,067
18. H NAB Premium Credit Card $              NK $         14,632
19. H J Bank Mastercard $              NK $           4,805
20. H H Bank Platinum Awards Card $              NK $           2,417
21. H ANZ Low Rate Credit Card $              NK $         16,312
22. H Westpac Mastercard $              NK $           4,147
Total $ E271,359 $         53,380
SUPERANNUATION
Member Name of Fund Type of Interest Applicants value Respondents value
23. W Super Fund 1 Accumulation $ E131,117.12 $
24. H Super Fund 2 Accumulation $              NK $   108,773.29
25. H Super Fund 3 Accumulation $              NK $     39,254.15
Total $ E131,117.12 $ 148,027.44

Item 1 – B Street

  1. For the reasons expressed above, the wife holds 1 per cent of B Street with an agreed value of $18,000.

Item 2 – the boat

  1. The wife contends that the boat should not be included in the balance sheet. The boat was not valued. It was purchased in August 2008 for $46,000, all of which was provided by the second and third respondents by way of a loan. The loan was forgiven in 2015. Both the second and the third respondents gave evidence that the boat was the property of the husband and the wife. It is an item of property and should be included.

Item 13 – claimed add back of the husband’s paid legal fees

  1. The husband gave evidence that from his superannuation he paid $45,000 in legal fees for legal assistance in relation to these proceedings and in relation to his defence of proceedings whereby the police sought an Apprehended Domestic Violence Order (“ADVO”) on behalf of the wife after separation.

  2. The husband’s superannuation was an asset of the marriage otherwise available for distribution.

  3. In Chorn & Hopkins (2004) FLC 93-204 the Full Court stated, in relation to paid legal costs:

    If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions), then such funds should be added back as a notional asset of the party, who has had the benefit of them.

  4. The husband’s paid legal costs will be notionally added back.

Item 14 – wife’s asserted loan from her father

  1. The wife asserts that she owes her father “$E261,359.41”. There is no evidence of the asserted loan other than that it is included as a liability in her Financial Statement. It is not suggested that the money was advanced during the course of the marriage.

  2. There is no evidence to establish when the funds were advanced, for what purpose or on what terms.

  3. No reference is made by the wife’s father in his affidavit to having advanced funds to the wife or to any expectation on his part that such funds, if advanced, will ever be repaid.

  4. Even if the money were established to have been advanced after separation and that the advance is repayable, it would not be just and equitable to visit upon the husband any liability for the loan.

  5. This item will be removed from the balance sheet.

Item 15 – the wife’s L Bank debt

  1. It is conceded that the debt was incurred after separation.

  2. It would not be just and equitable to visit upon the husband any liability for the loan.

  3. This item will be removed from the balance sheet.

Item 16 – the wife’s tax for the 2017/8 financial year.

  1. No documents were tendered to show how the asserted debt arose or on what gross income tax was assessed.

  2. The husband and the wife had separated. The wife received the benefit of the relevant income.

  3. She should bear the tax.

  4. This item will be removed from the balance sheet.

Items 17 to 22 – the husband’s credit card debts

  1. The husband had a number of credit cards during the marriage and the wife held supplementary cards. All of the credit cards used during the marriage were in the husband’s name.

  2. The wife, who was in charge of the administration of their finances, received the bills and organised the payments on the cards.

  3. When they initially separated in February 2017, the wife continued to pay interest on the cards from her own income.

  4. After their final separation in June 2017, the husband took over that responsibility.

  5. In March 2018 the amount owing on the eight credit cards was $61,200.

  6. Since that time, the husband has made the minimum payments of interest and some lump sum payments to reduce the balances. When the husband swore his Financial Statement in October 2019, the amount owed was $52,538. No purchases were made on the cards after that date. At trial the amount owed was $53,380.

  7. The wife asserted, but did not prove, that the husband spent money using the cards irresponsibly and she asserted that he should be solely responsible for the debt.

  8. The wife had in her possession all of the relevant statements. If they were capable of demonstrating that the husband was responsible for the spending, no doubt they would have been tendered.

  9. They were not.

  10. The credit card debt was incurred during the marriage for the purposes of the family.

  11. The debt will be included on the balance sheet as a joint debt.

  12. It is the husband’s position that they should each repay half of the debt.

Items 23 – 25 - Superannuation

  1. Each of the parties has reached an age where he or she is entitled to withdraw superannuation tax free. They each seek 60 per cent of the available superannuation pool.

  2. I therefore find that the assets and liabilities of the parties are:

    Assets

    Share of B Street  $  18,000

    Boat  Unknown

    Husband’s paid legal fees  $45,000

    Husband’s superannuation  $148,027

    Wife’s superannuation  $131,117

    Total  $342,144

    Liabilities

    Credit card debts  $  53,380

    Net   $288,764

  3. Thus the parties have net assets of $288,764 and a boat of undetermined value.

SECTION 79(2)

  1. Both the husband and the wife ask the Court to make an adjustment of their available assets and liabilities. In the circumstances of this case, it is not appropriate that the husband should bear the whole of the jointly incurred liabilities.

CONTRIBUTIONS

  1. Neither of the husband or the wife had any significant assets at the commencement of co-habitation.

  2. Any money contributed by the wife’s father to the purchase of properties by the husband and the wife was repaid, although those loans were without interest.

  3. Both parties worked and applied their respective incomes to family purposes.

  4. The wife’s father contributed $10,000 to the repayment of the Suburb D mortgage.

  5. Wife received a gift of $30,000 from a family friend who also gave the wife a car although there is no evidence of its value.

  6. The wife’s parents paid $46,000 for the boat. There is no evidence of the current value of the boat.

  7. The wife’s contributions marginally exceed those of the husband but the known amount of the contributions made on her behalf does not justify any adjustment in her favour. The parties’ contributions should therefore be assessed as equal.

SECTION 75(2)

  1. The wife is aged 63 years and the husband is aged 61 years.

  2. The wife works in finance. In her Financial Statement she deposed to earning $37,000 per annum. In her affidavit sworn one month earlier, she deposed to earning $50,000 per annum. Although the wife conceded in cross-examination that she had Business Activity Statements for the past year, and there was a call for the statements, they were not produced. I am not satisfied that the wife has properly disclosed her income.

  3. In addition to her income, the wife deposed in her Financial Statement that she receives assistance from her father for rates, taxes, motor vehicle expenses, food, household and other expenses, and legal expenses of $1,100 per week. Although any assistance for legal expenses will cease, I accept that her father will continue to provide significant financial assistance to the wife.

  4. She lives in the B Street property owned by her parents and does not pay rent. That situation is likely to continue.

  5. The husband is not in paid employment and has not been employed since separation. He lives in his sister’s home and contributes to utilities when he can.

  6. He receives a Newstart allowance of $260 per week or $13,520 per annum.

  7. The other matter which significantly affects the section 75(2) adjustment is the husband’s use, after separation, of money from his superannuation funds.

  8. When the parties separated in June 2017, the husband had $268,568 in superannuation.

  9. In December 2017, the wife brought an application to restrain the husband from disposing of his superannuation. In March 2018, when that application was heard, the Court noted, by consent, that the husband had $214,715 in superannuation. The funds had diminished by $53,853 in eight months. In cross- examination he said that he withdrew that amount but that he didn’t spend it. He said that he put half of the money, in cash, in a jar and buried it in the back yard. Ultimately, it appeared that he put some or all of the money in his bank account with the ANZ Bank.

  10. At trial, the husband had superannuation of $148,027, some $120,541 less than at separation.

  11. He had difficulty accounting for his use of the funds.

  12. When asked how he had spent the money, he said that he didn’t know. Pressed he explained that $45,000 had been used for legal fees and some of the remainder had been used to maintain the credit card payments. He had paid fines for failing to submit tax returns but did not give evidence of the amount.

  13. In the context of a net asset pool of $288,764, the husband’s unexplained spending of some $75,000 is a significant matter. However, I consider it to be less significant than the wife’s continuing occupation of the B Street property.

  14. Taking all of those matters into account, there should be an adjustment in favour of the husband of 10 per cent with the net assets being divided as to 60 per cent to the husband and 40 per cent to the wife.

  15. In relation to the boat, it is the wife’s position that she should keep it. The husband seeks an order that the boat be sold and the proceeds applied to the repayment of the credit card debts.

  16. Had the boat been valued, this issue would have been easily determined by making a cash adjustment in the percentage distribution. However, there is no valuation and no indicative value given by either party.

  17. It would be unjust to the husband to allow the wife to keep the boat without making some adjustment in his favour and it is not possible to ascertain what adjustment is appropriate.

  18. In 1991, the Full Court in Smith & Smith (1991) FLC 92-261 held:

    ...where the state of the evidence makes the process of valuation hazardous or uncertain, or where there are wide differences between legitimate valuations... the ascertainment of value by judicial process may become too uncertain and the preferable course is to order the sale of the property so that its real value can be revealed by market forces.

  19. Those comments are equally apposite to the present situation where the parties have provided no evidence of value.

  20. The fairest course is to order that the boat be sold and the proceeds of the sale be divided between the parties in the same proportion as the asset pool.

  21. The boat is registered in the name of the third respondent because she was the person with the legal right to use the mooring. She is a party to the proceedings and, through the second respondent, does not assert ownership of the boat. The orders will require the third respondent to sign any documents required to facilitate the sale of the boat.

CONCLUSION

  1. The net assets of the parties are $288,764. The husband is entitled to 60 per cent or $173,258. The husband has gross assets of $193,027 (including the legal fees added back) and he will have the liability for the credit card debts of $53,380, leaving him with net $139,647.

  2. The wife will pay the husband $33,611.

I certify that the preceding two hundred and fourteen (214) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 2 March 2020.

Associate: 

Date:  02/03/2020

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  • Family Law

  • Equity & Trusts

  • Civil Procedure

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