Berfield & Berfield (No 2)
[2024] FedCFamC1F 573
•28 August 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Berfield & Berfield (No 2) [2024] FedCFamC1F 573
File number(s): SYC 482 of 2021 Judgment of: HARPER J Date of judgment: 28 August 2024 Catchwords: FAMILY LAW – PROPERTY – Where the husband and the wife seek orders for property adjustment – Assessment of contributions – Where the husband sought add backs in the amount of $410,000 – 3 per cent adjustment in favour of the wife, pursuant to s 79(4)(e) of the Family Law Act 1975 (Cth) (“the Act”) – Final division of 65/35 per cent in favour of the husband – Where superannuation interests are split equally.
FAMILY LAW – PROPERTY – Where the husband’s siblings have been joined as the Second and Third Respondents – Where the husband and the siblings hold equal shares in a property as tenants in common – Planned subdivision of property - Where the husband brought the property to the relationship – Where the husband and the wife made equal contributions to construction of matrimonial home on the property – Where the wife claims equitable relief against the husband and the siblings – Where the wife claims a beneficial interest in property pursuant to constructive trust – Where the wife makes alternative claim for equitable compensation – Whether the wife has established grounds for imposition of a Baumgartner or common intention constructive trust – Consideration of the principles in Muschinski v Dodds (1985) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137 – Whether the wife has established the parties were engaged in a joint endeavour that failed for no attributable blame – Whether the wife established it was unconscionable for the respondents to retain the benefit from the money contributed by the spouse parties where not intended they would if the joint endeavour failed – Where the expenditure on the property was attributable to a personal relationship between the spouse parties and not to a joint endeavour between all parties – Where it was not established there was detrimental reliance on the common intentions of the parties as to ownership of the property –Where the wife’s claim to equitable relief is rejected.
FAMILY LAW – JURISDICTION – Jurisdiction to grant equitable relief against strangers to a marriage – The Court as one of law and equity, pursuant to s 9(1)(b) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) – The Court as a statutory court with powers in the Act to make orders affecting third party interests that mirror equitable relief – Whether the wife’s claim for equitable relief falls within a single justiciable controversy whereby the spousal matrimonial cause constitutes the substantial aspect – Where the equitable claim is not severable from the matrimonial cause – Whether the wife’s claim to equitable relief has an appropriate nexus to the spousal matrimonial cause and/or is itself a separate matrimonial cause under paragraph (f) of the definition in s 4 of the Act – Where determination of the ambit of the matter requires consideration of the parties’ conduct, relationship and the laws that attach rights or liabilities therein.
Legislation: Family Law Act1975 (Cth) s 4, Pt VIII, ss 75, 78, 79, 80, 81
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 9(1)(b), 43, 44, 149
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)
Cases cited: Abano & Abano [2024] FedCFamC1F 331
Aitken & Aitken (2023) FLC 94-142; [2023] FedCFamC1A 69
AJO & GRO (2005) FLC 93-218; [2005] FamCA 195
Akbar & Gandega [2023] FedCFamC1A 174
Anson v Anson (2004) 12 BPR 22,303; [2004] NSWSC 766
Austin v Keele (1987) 10 NSWLR 283
AZC20 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 411 ALR 615; [2023] HCA 26
Bale v Kimberley Developments Pty Ltd [2022] NSWSC 820
Banque Commerciale SA EN Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11
Barnell & Barnell (2020) FLC 93-961; [2020] FamCAFC 102
Bassett v Bassett [2021] NSWCA 320
Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; [1998] HCA 59
Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59
Benson & Drury (2020) FLC 93-998; [2020] FamCAFC 303
Berfield & Berfield [2024] FedCFamC1F 193
Bevan & Bevan (2013) FLC 93-545; [2013] FamCAFC 116
Bijkerk Investments Pty Ltd v Bikic [2020] NSWSC 1336
Bofinger v Kingsway Group Ltd (2009) 239 CLR 269; [2009] HCA 44
Boulton & Boulton [2024] FedCFamC1A 132
Burke and Burke (1981) FLC 91-055; [1981] FamCA 44
C & C [1998] FamCA 143
C Pty Ltd and ors & PGW as Liquidator of S Pty Limited (in liq) (2011) FLC 93-485; [2011] FamCAFC 231
Cabbell & Cabbell [2009] FamCAFC 205
Camden Pty Ltd & Laue (2018) FLC 93-840; [2018] FamCAFC 91
Candle & Falkner (2021) FLC 94-069; [2021] FedCFamC1A 102
Carruthers v Manning [2001] NSWSC 1130
Cosola & Moretto (2023) FLC 94-143; [2023] FedCFamC1A 61
Dare v Pulham (1982) 148 CLR 658; [1982] HCA 70
Delaforce v Simpson-Cook (2010) 78 NSWLR 483; [2010] NSWCA 84
Dickons v Dickons (2012) 50 Fam LR 244; [2012] FamCAFC 154
DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431; [1982] HCA 14
Donis v Donis (2007) 19 VR 577; [2007] VSCA 89
Dougherty v Dougherty (1987) 163 CLR 278; [1987] HCA 33
Fencott v Muller (1983) 152 CLR 570; [1983] HCA 12
Forgeard v Shanahan (1994) 35 NSWLR 206
G and G (2000) FLC 93-043; [2000] FamCA 1075
Galati v Deans [2021] NSWSC 1094
Gilmour & Hofte (No 2) [2024] FedCFamC1A 9
Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10
Grant v Edwards [1986] Ch 638
Green v Green (1989) 17 NSWLR 343
Harris v Caladine (1991) 172 CLR 84; [1991] HCA 9
Harvey v Harvey [2024] NSWSC 623
Horrigan & Horrigan [2020] FamCAFC 25
Jabour & Jabour (2019) FLC 93-898; [2019] FamCAFC 78
JEL and DDF (2001) FLC 93-075; [2000] FamCA 1353
Jemmark Pty Ltd v 10 Egan Street Pty Ltd [2022] NSWSC 865
John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19
Jones v Southall & Bourke Pty Ltd [2004] FCA 539
Kennon v Spry (2008) 238 CLR 366; [2008] HCA 56
Koprivnjak v Koprivnjak [2023] NSWCA 2
Kowalski and Kowalski (1993) FLC 92-342; [1992] FamCA 54
Lloyd v Tedesco (2002) 25 WAR 360; [2002] WASCA 63
M & M [1998] FamCA 42
Mallet v Mallet (1984) 156 CLR 605; [1984] HCA 21
McKay v McKay [2008] NSWSC 177
McKinlay v Woods [2024] NSWCA 122
Muschinski v Dodds (1985) 160 CLR 583; HC, 6 December 1985
NHC & RCH (2004) FLC 93-204; [2004] FamCA 633
Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17
Norman & Norman [2010] FamCAFC 66
NSW Trustee and Guardian v Togias (2022) 110 NSWLR 86; [2022] NSWCA 225
Parsons v McBain (2001) 109 FCR 120; [2001] FCA 376
Peldan v Anderson (2006) 227 CLR 471; [2006] HCA 48
Perlman v Perlman (1984) 155 CLR 474; [1984] HCA 4
Pierce v Pierce (1999) FLC 92-844; [1998] FamCA 74
Q v E Co (2020) 383 ALR 469; [2020] NSWCA 220
QYFM v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 66 Fam LR 369; [2023] HCA 15
Rizeq v Western Australia (2017) 262 CLR 1; [2017] HCA 23
Rodgers & Rodgers (No 2) (2016) FLC 93-712; [2016] FamCAFC 104
Saitannis v Katsolos [2022] NSWSC 1468
Shepherd v Doolan [2005] NSWSC 42
Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19
Soulos v Pagones [2023] NSWCA 243
Stanford & Stanford (2012) 247 CLR 108; [2012] HCA 52
The Commonwealth v Verwayen (1990) 170 CLR 394; [1990] HCA 39
Thynne v Jevny Pty Ltd (No 2) [2023] NSWSC 1465
Tracey v Bifield (1998) 23 Fam LR 260
Trevi & Trevi (2018) FLC 93-858; [2018] FamCAFC 173
Twigg v Twigg (2022) 402 ALR 119; [2022] NSWCA 68
Valceski v Valceski (2007) 70 NSWLR 36; [2007] NSWSC 440
Varinya Pty Ltd v Pedersen [2007] NSWSC 794
Vass v Vass (2015) 53 Fam LR 373; [2015] FamCAFC 51
Warby v Warby (2002) FLC 93-091; [2001] FamCA 1469
Watson & Ling (2013) FLC 93-527; [2013] FamCA 57
West v Mead (2003) 13 BPR 24,431; [2003] NSWSC 161
Willmann & Willmann (No 10) [2023] FedCFamC1F 623
Zao & Lee [2019] FamCAFC 169
Zhang v Metcalf [2020] NSWCA 228
Zhu v Treasurer of NSW (2004) 218 CLR 530; [2004] HCA 56
Division: Division 1 First Instance Number of paragraphs: 182 Date of last submission/s: 2 July 2024 Date of hearing: 11 March 2024 – 13 March 2024, 1 July 2024 – 2 July 2024 Place: Sydney Solicitor for the Applicant: Mr Reeve of Marsden Law Group Counsel for the First Respondent: Mr Duane Solicitor for the First Respondent: Agostino & Co Counsel for the Second and Third Respondent: Mr Katsinas Solicitor for the Second and Third Respondent: Simone Legal ORDERS
SYC 482 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS B BERFIELD
Applicant
AND: MR C BERFIELD
First Respondent
MR D BERFIELD
Second Respondent
MS E BERFIELD
Third Respondent
ORDER MADE BY:
HARPER J
DATE OF ORDER:
28 AUGUST 2024
THE COURT ORDERS THAT:
1.Within 60 days the First Respondent Husband (“husband”) pay to the Applicant Wife (“wife”) the sum of $396,352.
Superannuation
2.Within 21 days of the date of these orders, the husband shall file and serve an affidavit demonstrating that the Trustee of Superannuation Fund 1 (“Trustee”) has been afforded procedural fairness for the purposes of Orders 4, 5 and 6.
3.A base amount of $207,713 (“base amount”) is allocated as required by s 90XT(4) of the Family Law Act1975 (Cth) (“the Act”) to the wife out of the husband's interest in Superannuation Fund 1.
4.Pursuant to s 90XT(l)(a) of the Act, whenever a splittable payment becomes payable in respect of the interest of the husband in Superannuation Fund 1 the wife shall be entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations2001 (Cth) (“Superannuation Regulations”) using the base amount and that there be a corresponding reduction in the entitlement of the husband to whom the splittable payment would have become payable but for this Order.
5.The Trustee shall do all such acts and things and sign all such documents as may be necessary to:
(a)calculate, in accordance with the requirements of the Act and the Superannuation Regulations, the entitlement awarded to the wife in accordance with Order 4; and
(b)pay the entitlement whenever the Trustee makes a splittable payment from the husband’s superannuation interest in Superannuation Fund 1.
6.Order 5 has effect from the operative time, and the operative time for the purposes of this order is 5 business days after the date of service upon the Trustee of a certified sealed copy of these orders.
7.Within twenty-eight (28) days of receipt of these orders, the wife shall serve a certified copy of these orders upon the Trustee, and provide to the Trustee, full particulars as to her name, current postal address, date of birth and, other such particulars as may be required of her by the Trustee.
8.The wife and husband shall forthwith do all such acts and things and sign all such documents as may be required to effect a splittable payment and roll-over of the husband’s entitlements in accordance with these orders into such superannuation fund elected by the wife.
9.The Trustee shall do all such acts and things and sign all such documents as may be necessary to pay the wife’s entitlements created by these orders into such superannuation fund as elected by the wife.
10.The husband shall forthwith authorise the Trustee to communicate with the wife or any person authorised by her in writing to answer any reasonable enquiries as may be made to her in relation to his entitlement in the Fund and provide the wife or her authorised representative, a copy of any notice of any application or request by him which seeks release of the entitlement in the Fund insofar as such release effects the wife’s entitlements under these orders.
Other orders
11.Unless otherwise specified in these orders, the husband and the wife shall retain all interest in and entitlement to:
(a)all personal property now in their possession, custody or control;
(b)all shares, debentures, units in unit trusts, bank, building society or credit union accounts standing in their sole name;
(c)all interests in life insurance policies and superannuation funds standing in their sole name.
12.Each of the wife and the husband shall retain all liabilities including but not limited to debts, loans and credit cards currently held in their sole name, and indemnify the other in respect of any such liability, whether past, present or future.
13.That unless otherwise specified in these orders, and except for the purpose of enforcing the payment of any money due under these or any subsequent orders:
(a)each party shall be solely entitled to the exclusion of the other in both law and in equity to all property (including choses-in-action) in the possession of such party as at the date of this agreement;
(b)each party shall be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders.
14.That in the event the amount referred to in Order 1 above or any portion thereof remains outstanding after the due date for payment, the husband shall pay interest to the wife at the rate prescribed by the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) from the due date until payment is made in full.
15.The wife’s application against the Second and Third Respondents be dismissed.
16.Save and except as provided by these orders, all extant applications and responses be otherwise dismissed.
17.The wife, the husband and the Trustee are granted liberty to apply on seven days' notice regarding the implementation of these orders.
18.Any application seeking an award of costs is to be filed and served with an affidavit in support within 28 days of the date of these orders, and in the event no application is filed within the time specified, there shall be no order as to costs.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Berfield & Berfield has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
INTRODUCTION
These are proceedings for property adjustment under Pt VIII of the Family Law Act1975 (Cth) (“the Act”) between the applicant wife, Ms B Berfield (“wife”) and the respondent husband, Mr C Berfield (“husband”).
The second and third respondents are his brother and sister. Intending no disrespect, for clarity I will refer to them in these reasons as Mr D Berfield and Ms E Berfield and collectively as “the siblings”.
BRIEF BACKGROUND
In 1992 the husband and the siblings purchased a property at J Street, Suburb G (“Suburb G”) for $275,000. They still own Suburb G in equal shares as tenants in common. Mr D Berfield contributed $89,254, Ms E Berfield $34,500 and the husband $52,900 to the purchase. Their parents also contributed $2,200. The husband and the siblings borrowed $110,000 secured by mortgage to complete the purchase. The mortgage was paid off by 1995. The husband and the siblings made significant payments in relation to Suburb G since purchase, as will be explained later in more detail.
There was then, and remains, located at Suburb G a dwelling of modest construction.
The parties met and started a relationship in 1995. They married in 1999 and cohabited from that date. They separated on a final basis in May or June 2020 but are not divorced.
There are three children of the marriage, Mr K born 2000 (now aged 23 years), Mr L born 2003 (now aged 21 years) and Mr M born 2005 (now aged 19 years). Mr L and Mr M continue to live with the husband in the former matrimonial home, which as explained later, is located at Suburb G.
At the start of the relationship, the wife worked full-time as a finance professional earning approximately $60,000 per annum. She held modest assets in the form of a car, some cash, a small amount of superannuation and personal items. She worked until the birth of Mr K, then resigned. She began a small business in late 2001 which earned a modest income. She closed the business shortly before the birth of Mr L in 2003. She worked part-time in 2009 and 2010, and part-time in the last few years of the relationship. She is currently unemployed.
The husband worked full-time as a sales representative earning $35,000 per annum. He had the following material assets:
(1)a one third interest in Suburb G;
(2)a half interest with his sister in a property at N Street, Suburb O (“N Street”);
(3)a parcel of real estate at Region P, QLD (“Region P”), which was unencumbered by 1996, and which the husband continues to own, presently valued at $45,000;
(4)a share portfolio with an approximate value of $40,000.
The husband was made redundant in 2001 but secured further employment. He received a salary of $50,000 by 2005 which had increased to $60,000 by the Global Financial Crisis in 2008. He suffered a mental health episode in 2009 and did not work for a lengthy period. He worked casual jobs in 2010 then found fresh employment in sales. He received a salary of $67,000 which had increased to $85,000 by 2020. He was unemployed between early and late 2020. Since then he has worked mainly casual jobs until early 2022, when he took a position as a sales representative but has been receiving workers’ compensation since early 2023 due to bullying at work.
In 1998 the spouse parties purchased a property at Q Street, Suburb R, NSW (“Suburb R”) for around $95,000. The wife claimed the deposit was paid from the spouse parties’ joint savings but could give no detail in her evidence. The husband claimed the purchase was funded using $40,000 in savings held by him, and the balance was borrowed secured by mortgage. I find the husband’s version more plausible, and I accept it. The parties constructed a dwelling house on the property which cost about $90,000 to build (“matrimonial home”). They resided with the wife’s parents while this home was in construction and moved in around mid-2000.
In 2001 the husband sold some shares realising about $25,000 which was applied to the Suburb R mortgage. The payment for redundancy, mentioned above, that he received at this time was $21,000, which he paid into the parties’ joint account.
In 2005 the husband sold his interest in N Street to his sister for $150,000. He used these funds to discharge the Suburb R mortgage.
In 2007 the spouse parties sold Suburb R for over $450,000 and received about $450,000 in net proceeds of sale. They moved into the dwelling at Suburb G and lived there for the next two years rent free. In 2009 they commenced building the former matrimonial home using the proceeds of sale from Suburb R to fund the construction. The husband claimed that at completion of construction there remained about $130,000 of the proceeds of sale from Suburb R, although there was no dispute that the construction cost was $350,000 in total.
In about May 2020 the spouse parties separated. The husband left Suburb G for a short period, then returned. The wife formed a new relationship in mid-2020 and left the matrimonial home in the second half of 2020.
There was no dispute that at separation the wife took $79,000 from a term deposit owned by the spouse parties. I refer to this again later in these reasons, noting it was agreed this amount should be rounded up to $80,000.
After separation, the husband claimed he received a further $58,000 for redundancy and leave entitlements in early 2021 which he paid into the parties’ joint account. He claimed the wife transferred $45,000 from this account to her own account the day after it was deposited. However, the evidence about this was confusing. It was clear that the wife deposited $45,000 into ANZ account #...43 in early 2020, not 2021. In cross-examination she gave evidence that she transferred this amount into that account to use for making a number of transfers to other accounts for joint expenses and because it applied a higher rate of interest. I accept the wife’s version in this regard.
The wife suffered a serious accident in early 2021 with her new partner. She was hospitalised and required rehabilitation with physiotherapy. In early 2023 the wife received compensation payment which was used in part to purchase a property in Town S, NSW (“Town S”) where she currently resides with her partner. I return to this also later in these reasons.
The husband still held his interest in property in Region P at the date of trial.
PROCEDURAL HISTORY
The wife commenced these proceedings against the husband on 27 January 2021 seeking interim and final orders with respect of property and spousal maintenance in the Federal Circuit Court of Australia, as it was then known, now called the Federal Circuit and Family Court of Australia (Division 2) (“Division 2”).
On 19 July 2022, a senior judicial registrar of this Court made orders by consent joining Mr D Berfield and Ms E Berfield as the second and third respondents. The equitable claims against them were raised and articulated in points of claim incorporated into the wife’s amended Application in a Proceeding filed on 1 June 2022.
The proceedings were transferred to this Court from Division 2 by order of a deputy registrar on 26 July 2022. The wife’s equitable claims were therefore the subject of the order for transfer together with the wife’s matrimonial cause for property adjustment pursuant to s 79 of the Act.
The proceedings were first listed before me on 1 November 2023.
The matter was listed for trial commencing 11 March 2024 in a rolling list.
On 11 March 2024, the final hearing commenced and two preliminary applications were made, one by the husband and the other by the wife, that required determination before proceedings could progress. I delivered ex tempore judgment on both applications in Berfield & Berfield [2024] FedCFamC1F 193. I will not repeat what is set out in there except where relevant for the present judgment. In brief, I made orders that the husband could rely on the Amended Response and affidavit filed 8 March 2024. I further ordered trial would commence on 12 March 2024 for the taking of oral evidence, and subject to any objection by the wife for further time to consider the husband’s affidavit material, proceedings would then be adjourned part heard in order for the parties to receive expert valuation evidence.
On 13 March 2024, the hearing was adjourned part heard. I made orders the spouse parties were to prepare and file a joint balance sheet and the husband to file and serve a Costs Notice, which they did. I also ordered the wife to notify my chambers when further expert evidence was likely to be available, which she did not. I also ordered the matter to be stood over part heard to 1 July 2024 with an estimate of two days.
The final hearing resumed on 1 July 2024 and concluded on 2 July 2024 with judgment reserved.
MATERIAL RELIED UPON
The wife filed no case outline. But she relied upon:
(1)The wife’s Amended Initiating Application filed 14 April 2023;
(2)The wife’s affidavit filed 28 February 2024;
(3)The affidavit of Mr T filed 28 February 2024; and
(4)The wife’s Financial Statement filed 28 February 2024.
According to his case outline filed 10 March 2024, the husband relied upon:
(1)The husband’s Further Amended Response to Initiating Application filed 11 March 2024;
(2)The husband’s affidavit filed 8 March 2024;
(3)The husband’s Financial Statement filed 8 March 2024; and
(4)The husband’s Defence to wife’s Points of Claim filed 21 July 2023.
The siblings relied upon:
(1)The siblings’ Response to Initiating Application filed 8 August 2023;
(2)The affidavit of Mr D Berfield filed 27 February 2024;
(3)The affidavit of Ms E Berfield filed 27 February 2024; and
(4)The siblings’ Defence to Applicant’s Points of Claim filed 14 April 2023.
The parties were cross-examined.
Two single experts were appointed in this matter. One of them, Mr F of H Valuers, who valued Suburb G, was cross-examined. I will discuss his evidence later in these reasons.
The material tendered and relied upon by the parties is set out at Schedule 1 at the conclusion of these reasons.
COMPETING PROPOSALS
By the end of the final hearing, the wife claimed no less than 50 per cent of the property pool including superannuation, upon an assessment of contributions and s 79(4)(e) matters. However, as part of her case she also sought a declaration that the husband and the siblings held Suburb G on constructive trust for her and the husband in the proportions that reflected either the cost of constructing the matrimonial home or their contributions to its increase in value. As will be explained later, this added considerable complexity to the determination of the proceedings.
The husband denied the existence of any constructive trust and claimed an equal split of superannuation with a division of the balance of the spouse parties’ assets up to 70 per cent in his favour.
The siblings also denied the existence of any trust, and claimed that as co-owners they were entitled to set off various amounts against expenditure by the spouse parties on constructing the matrimonial home. They otherwise sought dismissal of the claims against them.
PART VIII
Part VIII of the Act sets out the legislative provisions relating to property orders that may be sought when parties are or were married. The central provision is s 79 of the Act, which gives the Court power to make such orders for alteration of property interests as it considers appropriate.
Section 79(2) of the Act provides that:
The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
Section 79(4) of the Act sets out the matters which must be taken into account in considering what order, if any, should be made.
Section 80 grants specific powers to make a range of different orders to adjust property interests. Section 81 is also relevant, reflecting a policy of making orders which finally determine the financial relationship between the parties and avoid further proceedings.
In Stanford & Stanford (2012) 247 CLR 108 (“Stanford”) the High Court made clear at [37] it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. This is the first step in well settled sequential tasks in which trial judges are to engage, and which the Full Court made clear is set out in s 79 itself (Cosola & Moretto (2023) FLC 94-143 (“Cosola”) at [38]).
Stanford explained that s 79(1)(a) refers to “altering” the property interests of parties to a marriage, so the identification of those interests is fundamental; however there is no “community of ownership arising from marriage” in Australian law, nor any assumption that the parties’ rights to or interests in marital property are or should be different from those that exist at trial, so there must be demonstrated a principled reason to interfere with those interests (at [39]–[41]).
The identification and valuation of the parties' property, liabilities and financial resources at the date of the hearing, is followed by the identification and assessment of the contributions of the parties as referred to in s 79 of the Act and consequent entitlements, often expressed as a percentage of the net value of their property, followed by consideration of the matters referred to in s 75 of the Act and determination of the adjustment (if any) to be made to the contribution entitlements; the final step is to consider the effect of the earlier steps and resolve what order is just and equitable in all the circumstances of the case.
These are well settled steps which constitute a preferred process because they lend structure and discipline to a trial judge’s approach even though they are not mandated by s 79 nor binding rules (Bevan & Bevan (2013) FLC 93-545 (“Bevan”); Boulton & Boulton [2024] FedCFamC1A 132 at [93]–[99]).
The Full Court has emphasised that having regard to the language of both s 79(1) and s 79(2) of the Act, the Court is required to make orders which are not only “just and equitable” but also “appropriate” (Zao & Lee [2019] FamCAFC 169 at [48]; Aitken & Aitken (2023) FLC 94-142 at [59]).
Stanford also made clear that the requirement pursuant to s 79(2) that it would be just and equitable to make orders altering property interests should not be conflated with the requirements of s 79(4). However, recent Full Court authority is to the effect that the separate consideration for the purposes of s 79(2) can take account of the matters requiring consideration in s 79(4), even if such consideration is not mandatory (Cosola at [41]–[43]).
The parties accept it would be just and equitable to make some form of adjustment. I accept the just and equitable requirement in s 79(2) has been satisfied by the fact of separation, the issues joined and the way the case was conducted (Stanford at [41]–[42]). The Court must then also be satisfied that its proposed final orders are themselves just and equitable. I will return to this question later in these reasons.
ASSETS, LIABILITIES AND FINANCIAL RESOURCES AT THE DATE OF THE HEARING
A joint balance sheet was tendered by the parties, which became Exhibit 14. The items disputed and requiring adjudication are as follows, noting the reference to item numbers is a reference to the item number on Exhibit 14.
Suburb G
Value
There was no dispute that the husband owns a one third share in Suburb G as tenant in common with his siblings. Ultimately, the wife claimed the Court should find the value of the husband’s interest is $2,176,000. The husband argued the value is $1,633,333. I will resolve the dispute about value before considering the wife’s claims of a constructive trust over some or all of Suburb G.
Mr F attributed a market value of $4,900,000 to Suburb G in its present condition, with development consent for subdivision, the original dwelling and the former matrimonial home. The husband accepted this overall value, and accordingly accepted his one third share had a value of $1,633,333.
Mr F adopted two valuation methods: direct comparable sales and a residual value analysis based upon a hypothetical gross realisation assessment, that is, as if the subdivision had been completed and the property was divided into four separately titled and serviced building lots, including retention of the former matrimonial home as at date of valuation. He then “deducted a range of development costs including acquisition and selling costs, demolition costs, construction costs, allowance for developer profit and risk, legal costs, holding and finance costs etc. to arrive at an estimate of land value ‘As Is’”.
The wife cross-examined Mr F. He agreed that it was difficult to find comparable sales to value Suburb G, which was one reason to also use the hypothetical gross realisation assessment. The wife put to Mr F that some of the deductions for which he made allowance, such as holding costs, would not be applicable if a special value to an existing owner was assessed at the date of valuation and that a removal of these costs would have the consequence of increasing the value assessed on a hypothetical gross realisation basis. Mr F rejected this suggestion, calling it “fanciful” because value is a relational concept requiring exchange in a marketplace. In other words, it is the value to the willing but not anxious purchaser which is assessed, not an existing owner. He also pointed out that he had not been asked to value the property or any interest in it on the basis of a special value to the existing owner.
As the husband also argued, any claim to a special value to the existing owners had never been part of the wife’s case before trial. I agree. In any event, there is no persuasive reason to depart from Mr F’s value of $4,900,000 as a hypothetical gross realisation assessment. His evidence was cogent and survived cross-examination unscathed. The attempt by the wife to increase the value of Suburb G by positing removal of certain categories of costs was artificial. The wife in final submissions did not press her proposed value on this basis with any vigour.
I therefore accept Suburb G has a present value of $4,900,000 and the husband’s individual interest is valued $1,633,333, subject to the wife’s claims of constructive trust, to which I now turn.
Equitable relief - Constructive trust or personal remedy
The wife’s claim to an equitable interest under a constructive trust or other equitable relief raised a number of complex issues, factually and legally including the impact on the siblings.
By her points of claim the wife appeared to articulate several bases for equitable relief: the failure of a joint endeavour between the parties without attributable blame, detrimental reliance on a common intention that the spouse parties would have an interest in a subdivided lot or lots in Suburb G or possibly detrimental reliance on representations to the same effect. These allegations are said to support declarations as to the existence of a constructive trust to the effect that the husband and the siblings hold Suburb G on trust for the wife in part, and for the husband in part, and declarations that the wife and the husband are each entitled to equitable compensation equal in effect to one half of the amount by which the value of Suburb G has been enhanced by the construction of the former matrimonial home, with such amount secured by a charge over Suburb G. The points of claim also mention unjust enrichment and restitution.
This Court is not a court of pleadings. However, in some property disputes, points of claim are often ordered to compel the precise articulation of claims for specific relief, particularly where these claims seek relief of a general law nature, against the interests of strangers to the marriage. The wife’s points of claim in this case are in the nature of a statement of claim, to require her to particularise her claim so the respondents knew what case they had to meet, and define the issues and provide a basis to assess questions of relevance in the evidence; therefore unless the parties choose to disregard the pleadings, the relief must be founded on the pleadings (Dare v Pulham (1982) 148 CLR 658 at 664; Banque Commerciale SA EN Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 296–297).
In understanding how the wife put this part of her case, it is important to repeat that although her points of claim articulated a range of alternatives, she filed no case outline nor any written submissions which developed the detail of her arguments. Her case concerning to equitable relief, as ultimately formulated, had to be gleaned from her pleadings, the evidence and final submissions made orally.
By the end of the trial, the wife primarily pressed her claim to a constructive trust over Suburb G on the basis that the parties, including the wife, became engaged in a joint endeavour to subdivide Suburb G and improve the property by the construction of the former matrimonial home for mutual benefit, and that joint endeavour has failed for no attributable blame. There was no dispute the overall value of Suburb G had been increased by $400,000 at the date of trial by the presence of the matrimonial home, nor that the spouse parties had spent $350,000 constructing it. Accordingly, so the wife argued, it would be unconscionable for the husband and siblings to retain the benefit, derived from the money contributed by the spouse parties to the construction, where it was not intended the husband and the siblings should enjoy the benefit if the joint endeavour failed for no attributable blame. She also claimed an entitlement to equitable compensation as an alternative remedy to this constructive trust.
In Giumelli v Giumelli (1999) 196 CLR 101 (“Giumelli”) at [4] the High Court explained that a constructive trust may be a proprietary or personal remedy:
The term “constructive trust” is used in various senses when identifying a remedy provided by a court of equity. The trust institution usually involves both the holding of property by the trustee and a personal liability to account in a suit for breach of trust for the discharge of the trustee’s duties. However, some constructive trusts create or recognise no proprietary interest. Rather there is the imposition of a personal liability to account in the same manner as that of an express trustee.
This statement of principle has been followed many times and is binding upon me. There is no occasion in this judgment to explore the implication that the equitable personal remedy contemplates the existence of a trust without trust obligations relating to property (as noted by Robb J in Thynne v Jevny Pty Ltd (No 2) [2023] NSWSC 1465 at [44]).
In Jones v Southall & Bourke Pty Ltd [2004] FCA 539 (“Jones”) at [62] Crennan J (as she then was), in a passage cited with approval in Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 at 289–290, [45]–[48], said that the authorities make plain:
... the term “constructive trust” covers both trusts arising by operation of law and remedial trusts. Furthermore, a constructive trust may give rise to either an equitable proprietary remedy based on tracing or, whether based on or independently of tracing, an equitable personal remedy to redress unconscionable conduct. The equitable personal remedies include equitable lien or charge or a liability to account ...
In the same passage from Jones, Crennan J continued:
... The difference between an equitable proprietary remedy and an equitable personal remedy, is that a constructive trust giving rise to an equitable proprietary remedy gives the beneficiary an ‘ownership’ interest in the property whereas personal remedies, such as an equitable lien or charge, give the beneficiary ‘a security interest’... In the remedial context, it is for the court to choose the most appropriate remedy: see Giumelli v Giumelli (1999) 196 CLR 101; Warman International Ltd v Dwyer (1995) 182 CLR 544 ...
(Some references omitted)
The personal remedies available in equity include equitable compensation supported by charge or lien (see Varinya Pty Ltd v Pedersen [2007] NSWSC 794 at [16]; Twigg v Twigg (2022) 402 ALR 119 at [180] per Brereton JA).
The type of constructive trust upon which the wife most obviously relied therefore is what is often called a Baumgartner type trust, according to the principles articulated by Deane J in Muschinski v Dodds (1985) 160 CLR 583 (“Muschinski”) at 614–615 and ultimately adopted in Baumgartner v Baumgartner (1987) 164 CLR 137 (“Baumgartner”) (see also Parsons v McBain (2001) 109 FCR 120 at [9]–[13]; Soulos v Pagones [2023] NSWCA 243 at [470] (“Soulos”)).
The essence of the Baumgartner trust was explained by Deane J in Muschinski at 618 as follows:
…where money or other property is paid or applied on the basis of some consensual joint relationship or endeavour which fails without attributable blame, it will often be inappropriate simply to draw a line leaving assets and liabilities to be owned and borne according to where they may prima facie lie, as a matter of law, at the time of the failure.
In Galati v Deans [2021] NSWSC 1094 (“Galati”) at [913] Ward CJ in Eq. (as she then was) identified the three essential elements as follows:
…first, there must be both a joint relationship or endeavour, in which expenditure is shared for the common benefit in the course of and for the purposes of which an asset is acquired; second, the substratum of that joint relationship or endeavour must have been removed or the joint endeavour prematurely terminated “without attributable blame”; and, third, it must be unconscionable for the benefit of those monetary and non-monetary contributions to be retained by the other party to the joint endeavour.
It is important to make clear the wife’s emphasis on a Baumgartner trust, because her submissions were formulated by reference to an asserted joint endeavour, while some of the siblings’ submissions had a tendency to elide a Baumgartner trust with a constructive trust based upon detrimental reliance on a common intention. However, these bases are juristically distinct with important differences, if only because the former type of trust is a form of relief that can be imposed irrespective of intention (Giumelli at [12]), while the latter requires a finding of common intention (Shepherd v Doolan [2005] NSWSC 42 (“Shepherd”) at [31]–[36]); Jemmark Pty Ltd v 10 Egan Street Pty Ltd [2022] NSWSC 865 (“Jemmark”) at [74]). Nonetheless, intentions are relevant to a Baumgartner trust to the extent they form part of the factual matrix showing that the benefit of money or other contributions was provided on the basis and for the purpose of the asserted joint endeavour (NSW Trustee and Guardian v Togias (2022) 110 NSWLR 86 (“Togias”) at [62]; McKinlay v Woods [2024] NSWCA 122 (“McKinlay”) at [84]).
Before considering the factual basis of the wife’s trust claim, it is necessary to mention the question of the jurisdictional foundation for the grant of purely equitable relief in this Court. The parties’ submissions did not address this question to any extent, and they appeared to assume this Court had jurisdiction to grant the relief sought by the wife. While I accept this is correct, as explained below, parties cannot consensually invest the Court with jurisdiction that it lacks (Harris v Caladine (1991) 172 CLR 84 at 133) The first duty of every court is to ensure it has jurisdiction to entertain the proceedings before it (QYFM v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 66 Fam LR at [27])
Apart from the claim to equitable relief, the wife’s application against the husband is a routine matrimonial cause for property division under Pt VIII of the Act as defined in paragraph (ca) of the definition in s 4 of the Act. But the constructive trust claim is made against the siblings, as well as the husband. Since this is an equitable claim according equitable principles in the general law against strangers to the marriage, it falls partly outside s 79. Thus it is appurtenant to, but not entirely within, the determination of the matrimonial cause between the spouse parties.
Prima facie, this Court has authority to decide the wife’s claims as formulated at the date of transfer (above at [21]) by reason of the transfer order from the lower court, Division 2 (s 149 of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“FCFCOA Act”)). This Court is a court of law and equity (s 9(1)(b) of FCFCOA Act) but it is also a statutory court. It has authority to decide the claim to equitable relief against the siblings, if the claim falls within a single justiciable controversy or “matter” in respect of which the matrimonial cause between the wife and the husband constitutes the substantial aspect, and the equitable claim is not severable from the matrimonial cause (Warby v Warby (2002) FLC 93-091 at [90]–[92]; Valceski v Valceski (2007) 70 NSWLR 36 (“Valceski”) at [43], [50]; Akbar & Gandega [2023] FedCFamC1A 174 (“Akbar”)). In such circumstances it is not necessary to rely upon a statutory power in the Act to give a remedy (Fencott v Muller (1983) 152 CLR 570 at 603–608; Valceski at [38]–[59]; Rizeq v Western Australia (2017) 262 CLR 1 at [49]–[57]). Determining the ambit of the “matter” requires consideration of the conduct of the parties, the relationships between them, and the laws which attach rights or liabilities to such conduct and relationships (AZC20 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 411 ALR 615 at [52]; Akbar at [31]–[32]).
However, it is also true that a separate matrimonial cause is defined in the Act as “any other proceedings (including proceedings with respect to the enforcement of a decree or the service of process) in relation to concurrent, pending or completed proceedings” being any another matrimonial cause (paragraph (f) of the definition in s 4 of the Act). The expression “in relation to” in this definition of “matrimonial cause” is of wide and general import and connotes an appropriate nexus between two sets of proceedings (Perlman v Perlman (1984) 155 CLR 474; Kennon v Spry (2008) 238 CLR 366 at 440). For example in C Pty Ltd and ors & PGW as Liquidator of S Pty Limited (in liq) (2011) FLC 93-485 proceedings on a guarantee involving third parties were found to be a necessary part of a winding up process which ensured orders made pursuant to s 79 could be adhered to, and were thus a matrimonial cause. In this way a “matrimonial cause” may include a common law claim against third parties. But as the Full Court explained in Akbar, such a cause is circumscribed by the fundamental requirement to be part of a single controversy, of which the matrimonial cause to which it is appurtenant is the substantial part.
The identification of the basis of this Court’s authority to decide the wife’s claims has implications for the range of relief available within the Court’s powers. Section 43 of the FCFCOA Act obliges this Court to grant absolutely “all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by a party in the matter” to finally determine the controversy and avoid a multiplicity of proceedings. In addition to the jurisdiction to grant equitable relief in an appropriate case as described above in [70], this Court has extensive statutory powers which can be used to make orders affecting the interests of third parties and can mirror equitable relief. In Abano & Abano [2024] FedCFamC1F 331 (“Abano”) at [69] I also made the following attempt, which I venture to repeat, at broadly identifying statutory powers in the Act which could accommodate orders which mirror equitable remedies, as follows:
69… I accept s 78 is wide enough to declare proprietary interests arising from an institutional constructive trust involving the interests of a third party (Khalif & Khalif (No 2) [2021] FedCFamC1F 308 at [37]; Valceski v Valceski (2007) 70 NSWLR 36 at [30]–[36]). If a declaration is made pursuant to s 78(1) of the Act, s 78(2) is available to make consequential orders. Once a declaration is made under s 78, the provisions of ss 79(1), 80(1)(h)(i), 80(1)(h)(k), and 90AE of the Act, together with s 44 of the FCFCOA Act, are also available to make appropriate consequential orders, including orders affecting the interests of third parties. These sections “must be construed in as plenary a manner as the words of the statute permit” (ASIC v Edensor Nominees Pty Ltd (2001) 204 CLR 559 at [148] per McHugh J; Elliott-Carde v McDonald’s Australia Limited [2023] FCAFC 162 at [131]). The orders which this Court can make pursuant to those sections of the Act can mirror the nature of purely equitable relief.
Where this Court exercises its statutory powers to make orders under the Act, conventional equitable relief can, in my view, guide the formulation of the appropriate form of order (Valceski at [60]: “mirror image of relief claimed…in the equity suit”). Thus, for example, where a spouse party claims compensation which is equitable and truly consequential upon, or alternative to, an established right to equitable relief in the form of an institutional constructive trust, the provisions of the Act, referred to in the previous paragraph, are available to make compensatory orders.
In this regard, although Deane J in Muschinski at 614 described a distinction drawn between “institution” and “remedy”, at least where a Baumgartner type trust is asserted, as “ephemeral”, recent authority continues to recognise a difference between an “institutional” constructive trust, which comes into existence at the time of the conduct which gives rise to the trust, and a “remedial” constructive trust which the Court declares at the time of judgment as a remedy for unconscionability (e.g. Soulos at [470]). In Bale v Kimberley Developments Pty Ltd [2022] NSWSC 820 at [655], Ward P called a remedial constructive trust “an enforceable equitable obligation that is retrospective in nature” citing Baumgartner. The wife argued she was entitled to an “institutional” constructive trust, in other words an existing proprietary interest.
The difference between an institutional trust and a personal remedy has some implications for this Court’s statutory powers, particularly s 78. Section 78(1) empowers the Court to declare “title or rights” in respect of existing property, not prospective property. It can be used to declare a property interest under an “institutional” constructive trust, followed by consequential orders because such a proprietary interest exists before the judicial determination. There is also precedent that where this Court has authority to decide a single justiciable controversy, s 78 can enable one spouse party to litigate a claim to equitable relief for the other spouse party by way of declaring an existing property interest (Camden Pty Ltd & Laue (2018) FLC 93-840 at [186]–[191]; Willmann & Willmann (No 10) [2023] FedCFamC1F 623 at [53]–[54]).
It is also worth pointing out that, since s 78(1) empowers the Court to declare title or “rights” in respect of property, it enables the declaration of the existence of a chose in action, being the right to claim a remedial constructive trust or other non-proprietary equitable relief, such as compensation supported by a charge. This is so because “an enforceable equitable obligation that is retrospective in nature” equates to a right to claim as a form of personal property, if such a declaration was necessary to quell the controversy. The value of this chose in action would prima facie be co-extensive with a determination of the success of the claim to equitable relief and the value of that relief.
Accordingly, it is necessary in my view to make a factual finding as to whether the equitable claims of the wife involving the siblings as third parties to the marriage are sufficiently connected to the matrimonial cause between the spouses to enable the exercise of this Court’s accrued or associated jurisdiction in equity or to itself constitute a separate matrimonial cause falling within paragraph (f) of the definition.
In the present case, I am satisfied the matrimonial cause between the spouse parties falling within paragraph (ca) of the definition is the substantial aspect of the relevant single controversy. The primary dispute is the competing claims for property adjustment by the spouse parties, requiring the assessment of the matters stipulated in s 79 of the Act. The identification of the spouse parties’ assets and liabilities is the essential first step in deciding that matrimonial cause. Suburb G is the single property which is central to the controversy between all the parties. It is part of the matrimonial pool already to the extent of the husband’s interest in it. The wife’s claim to equitable relief is a claim against both the husband, who is a party to the marriage, and the siblings who are strangers to the marriage, but on the basis they are all co-owners of Suburb G. It is not “severable” from the matrimonial cause. The circumstances in which the former matrimonial home came to be constructed are essential to both an assessment of contributions and the wife’s claim to equitable compensation because the contributions by the wife and husband to improving Suburb G have enhanced its overall value to the financial benefit of the husband and the siblings. The claim to equitable relief arises from a factual substratum that plainly overlaps with and includes the same facts which, in part, demonstrate financial contributions by the spouse parties in their marriage. The equitable claim by the wife is not “purely coincidental” to the marriage relationship (Dougherty v Dougherty (1987) 163 CLR 278 at 286; Akbar at [38])). Alternatively, and for the same reasons, the wife’s claim to equitable relief has an appropriate nexus to the pending spousal matrimonial cause and is itself a matrimonial cause falling within paragraph (f) of the definition in s 4 of the Act.
Joint Endeavour
Returning to the wife’s claim to a constructive trust, she accepted that if no finding of a joint endeavour involving the wife was made, her trust claim must fail (Transcript 2 July 2024, p.272 lines 40–45). The proponent of a Baumgartner constructive trust must establish as facts that the asserted joint endeavour existed, and its scope, recognising that the joint endeavour might change from time to time (West v Mead (2003) 13 BPR 24,431 (“West”) at [59]; Togias at [62]). In Zhang v Metcalf [2020] NSWCA 228 at [57] the NSW Court of Appeal emphasised:
An essential aspect of the Baumgartner principle is a joint relationship or endeavour, and an asset acquired in the course of, or for the purposes of, that joint relationship or endeavour: Baumgartner at 149. That involves identifying the scope of the joint endeavour, which is a question of fact.
In determining the issue of the existence of a joint endeavour, many authorities, including Baumgartner itself, articulated the relevant principles by analysing contributions of a financial nature between de facto couples, where one party held no legal interest, while the other party held it entirely. Financial contributions are relatively easy to value. These cases also discussed the more difficult question of how to attribute value to non-financial contributions of one party to a joint endeavour, such as love and support as homemaker or caregiver, for the purposes of quantifying the relevant equity where the other party has made financial contributions (Togias at [61]–[87]). Thus non-financial contributions can in some cases be relevant to determining the existence and scope of the asserted joint endeavour. In Muschinski at 621 Deane J adverted to the possibility of a joint endeavour defined by a mixed commercial and personal relationship. Some later authorities have confined the principle to joint endeavours “of a commercial nature” in which non-financial contributions could play a part (Lloyd v Tedesco (2002) 25 WAR 360 (“Tedesco”) at [83]–[90]).
In Tedesco Murray J at [30]–[31] pointed out the connection between the nature of the joint endeavour and the element of unconscionability:
30. The guiding principle is unconscionability. In this, as in every such case of a failed de facto relationship, there must be more than simply the performance by the plaintiff of the valuable role of the provision of love, care and support. The provision of such a contribution will be sufficient only if it is related in some factual way to the generation of wealth as part of a joint effort or endeavour to provide for the parties’ mutual material welfare and security. That need not, of course, be the only purpose of the provision of such assistance to the defendant, but it must be one of the material purposes because it is that which marks out the character of the joint endeavour as being one which will generate a claim, upon the failure of the relationship, without the fault of the plaintiff, to a share in the property created, acquired, maintained and improved during the course of the relationship, where the endeavour can be seen to be related to particular items of property, or will generate a claim for compensation representing the value of the contribution made by the claimant to the increase in the material wealth which was intended to be enjoyed by the parties jointly.
31. A joint endeavour of this character is one which has the aim of adding to the parties’ material wealth for their mutual benefit rather than being one where the plaintiff simply provides loving care and support to the defendant as a normal incident of a de facto relationship. In that sense it is right to say that the joint endeavour must be one intentionally or deliberately entered into for the purpose of advancing the parties’ mutual material wealth. Only if it bears that character will it be unconscionable to allow the defendant to retain the entirety of the beneficial interest in that wealth. To hold otherwise, and in particular to hold that it would be sufficient if in fact the efforts of the plaintiff advanced the defendant’s capacity to acquire wealth, would, in my opinion, be to commit the error to which Deane J adverted in Muschinski of giving undue rein to the court’s idiosyncratic notions of fairness and justice.
(Emphasis added)
In McKinlay at [105] the NSW Court of Appeal (Leeming JA, with whom White JA and Griffiths AJA agreed) explained the qualification expressed by Murray J as follows:
The point of the qualification in Lloyd v Tedesco is to discount the valuable contribution commonly made in such cases in the form of unpaid care and domestic assistance, on the basis that that is attributable to the personal relationship between the parties (who are often de facto partners) and therefore not to be taken as directed to the joint endeavour.
Leeming JA also explained in McKinlay at [82]:
When determining whether an assertion of legal title is unconscionable, regard is had to the entirety of the parties’ conduct, including for example payments servicing or reducing a mortgage debt taken out in order to acquire the property. That is because whether there is an unconscionable assertion of legal right falls to be assessed at the time of the hearing, rather than at the time the jointly owned asset is acquired. That more expansive approach is not confined merely to the quantification of calculating payments made in furtherance of the joint endeavour (such as interest and outgoings and repayments of principal). In Green v Green (1989) 17 NSWLR 343, Gleeson CJ observed that while a number of judgments referred to intention or conduct “on acquisition” of the property, “in a given case the relevant events leading to the finding of an interest in the claimant may occur after acquisition, and beneficial interests may change in the course of the relationship between the parties”: at 355-356.
In West at [84] Campbell J explained the connection between unconscionability and the time when a Baumgartner trust may be said to arise:
A constructive trust on the Baumgartner principle can arise no earlier than the time when the conditions for its exercise are in existence — that is, than the time when the relationship has broken down, without attributable fault, and one of the parties seeks to assert legal rights in relation to property acquired in the course and for the purposes of the joint relationship, in a way which is unconscionable.
As he later explained in Anson v Anson (2004) 12 BPR 22,303 at [36]:
It is only then that the court can tell whether, given the contributions which the various parties have made to the joint endeavour, it would be unconscionable to allow the property rights in the assets which were part of the joint endeavour to be split up in accordance with legal entitlements which exist independently of the imposition of a constructive trust.
These authorities make clear in my view that it is appropriate to approach the analysis of a factual situation in search of a joint endeavour said to give rise to a Baumgartner type trust, by drawing a distinction between personal and commercial relationships, even if both can be present in the same situation. The broad question of unconscionability is then assessed at the date of trial by taking account of all the circumstances, and the entirety of the relevant parties’ conduct.
In summary, the wife accepts that the respondents purchased Suburb G for the purpose of subdivision in 1992. She obviously made no financial contribution to its acquisition. All three siblings contributed to the repayment of the mortgage but unequally. The mortgage was repaid in full by 1995. The loose intention at that time was for the property to be subdivided into four lots with each sibling to take one lot and the fourth to cover subdivision costs and repay Mr D Berfield for his contributions over and above those of the husband and Ms E Berfield. However, the progress towards subdivision was slow. No subdivision had taken place by the time the spouse parties formed a relationship in 1995.
The existing dwelling on the property was rented until 2005 when Mr D Berfield began to live in it. Until then the rent was paid into a joint account from which the costs of holding the property were paid. Between 2001 and 2003 some repairs were carried out and refurbishment. The spouse parties lived in the existing dwelling for a time between 2007 and 2010 while the former matrimonial home was being built.
The siblings began fresh discussions about the subdivision in 2003. In 2005 they decided to lodge an application for subdivision. A number of costly reports and other expenses were necessary to support the application.
The four lot subdivision plan was further discussed at about this time. The wife was involved in these discussions which included consideration of the spouse parties owning a lot together. The discussions progressed to a more detailed consideration of which lot each of the siblings and the spouse parties would take. These discussions evolved over several iterations to the position where the spouse parties and siblings agreed on specific lots with the spouse parties to take what were called the “lower two” lots. However, this position was not reached without a high level of tension before any consensus was reached.
The subdivision was approved and boundary lines for proposed lots were marked out by surveyors. The wife then proceeded to undertake the redesign of the spouse parties’ proposed dwelling to be located on the proposed lower two lots once the subdivision was approved. The former matrimonial home was constructed on the agreed lots in accordance with the plans the wife helped to create.
I record here that it was common ground that if the subdivision was brought to fruition the four proposed lots would number 1, 2, 3 and 4. The two “lower” lots were 3 and 4. The matrimonial home was constructed on the area allocated to proposed lot 3. The other “lower” lot, 4, is flood affected. Mr F was asked to value the four proposed lots separately on a hypothetical gross realisable value basis assuming “all subdivision works had been completed in a good and workmanlike manner in accordance with all approvals, good and marketable title existed for each proposed lot and the assumption of an orderly sell down after proper marketing”. On this basis, lot 3 with the existing former matrimonial home had a gross hypothetical value of $2,550,000 and lot 4 had a value of $1,750,000. However, once the development, sale subdivision and holding costs were deducted, the residual value was $4,900,000 for the entire block or an average value of $1,225,000 per lot.
According to Mr F the costs of bringing the subdivision to fruition, based on other expert evidence, was in the order of $541,691. This was not controversial.
The subdivision has proceeded no further at the date of trial.
The wife’s claim is that the husband and the siblings hold Suburb G on trust to the extent of either $400,000 being the agreed amount by which the overall value of the property has increased by reason of the construction of the former matrimonial home upon it, or $350,000 which is the agreed cost of constructing the former matrimonial home.
In relation to the costs of construction, there was one factual issue which it is convenient to determine at this point. The husband claimed that his parents provided $40,000 to pay for the concreting of the driveway at the former matrimonial home, and this amount formed part of the total costs of $350,000. The wife was cross-examined to the effect that the husband’s father gave her $40,000 towards the concrete driveway at the matrimonial home. She denied this and that the husband’s father paid for the driveway. The husband claimed in his trial affidavit that this amount was paid by his parents to the concreter. However, it became clear in his cross‑examination that this did not happen. Rather, he agreed the wife caused about $35,000 to be paid from the parties’ joint ANZ account to the concreter in two cheques. The husband changed his version and claimed that he gave the wife $40,000 in cash but he had no idea how it was spent. Mr D Berfield supported the husband’s version to the extent that he asserted in his trial affidavit that his parents contributed $40,000, but he gave no detail. So the husband’s case suggested three versions of the alleged payment for concrete: his parents paid the concreter directly, his father paid $40,000 in cash to the wife for concreting, or he himself received $40,000 from his father in cash which he then gave to the wife. These different versions undermine the credibility of the husband’s case concerning the alleged payment of $40,000. I do not accept the husband’s parents provided $40,000 towards the construction of the former matrimonial home. I find the spouse parties paid $350,000 as the costs of construction.
The wife argues that even though the husband and siblings may have been the parties to the initial joint endeavour formed in about 1992, from no later than 2006, the joint endeavour had come to include her as well, demonstrated by her involvement in the discussions about which lot or lots the spouse parties would take, and her involvement in the design and construction of the former matrimonial home, which has increased the value of Suburb G.
The siblings accepted that there existed a joint endeavour involving them and the husband to purchase Suburb G and subdivide it. But the property was purchased before the wife formed a relationship with the husband. They argued there has been no acquisition of property or pooling of resources for mutual benefit between the spouse parties and the siblings since then. Rather, the design and construction of the former matrimonial home was a joint endeavour between the husband and wife for their mutual benefit, and did not involve the siblings. Mr D Berfield and Ms E Berfield both gave evidence, which I accept, that before the spouse parties embarked on the construction of the matrimonial home, Mr D Berfield and Ms E Berfield both made clear they were not in a position to progress the subdivision and would not be until they had settled down and started families.
The wife’s argument was unclear about the ultimate consequence for the balance sheet between the spouse parties if the claimed trust was established. On one view, as regards the husband, it would be that the value of his existing proprietary interest in Suburb G increases by either $200,000 or $175,000, being one half of the expenditure or the increase in value, since there was no evidence that the spouse parties’ contributions to the construction of the former matrimonial home were other than equal, putting to one side whether any other party made a contribution to the cost. The difficulty is determining whether the burden of compensating for this additional value falls across the interest of all three owners, or in some other proportion. However, on the view I take, it is unnecessary to decide this question.
But there are two reasons why it is not necessary in relation to the husband. The first is that, as regards his own one third share as a tenant in common with his siblings, it is a fundamental principle of both common law and equity that “the holder of an estate in fee simple cannot be a trustee of that fee simple for himself” (DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 at 463). This because where the whole legal and beneficial interest in property is united in one owner, there is no separate beneficial interest in existence (Peldan v Anderson (2006) 227 CLR 471 at 485).
Secondly, as regards the separate interests of his siblings as co-owners as tenants in common, the husband has disavowed any beneficial interest under a trust. A trust cannot be forced upon an unwilling beneficiary and any evidence of disavowal or dissent by a beneficiary is sufficient to prevent any property passing (Abano at [100] and the authorities cited there). The husband unequivocally denied the existence of a trust. Accordingly, he does not hold any interest in Suburb G pursuant to an institutional constructive trust, which could extend beyond his legal estate as a co-owner with his siblings.
For the same two reasons, I am unable to find the husband holds, as an item of personal property, a chose in action in the form of a claim to an enforceable equitable obligation that is retrospective in nature, supporting a remedial constructive trust or other relief such as equitable compensation. He simply holds one third of Suburb G as an equal tenant in common in fee simple with his siblings, the value of which, I note here, incorporates in part the increase in the overall value of Suburb G brought about by the construction of the former matrimonial home.
However, the siblings argued principles applicable to contributions and adjustments between co-owners where they have made unequal contributions to improvements or repairs are relevant (Forgeard v Shanahan (1994) 35 NSWLR 206 at 224). For the purposes of the position between the spouse parties, I accept the husband owns a chose in action being a right to claim against his siblings, the value of which is unclear, and which he does not seek to enforce in these proceedings. The wife made no argument that I should declare the existence of this property in the husband pursuant to s 78 at her suit, as the authorities referred to above at [71] suggest is open. However I can take this putative claim into account later as a relevant matter pursuant to s 75(2), together with any right to claim enjoyed by the siblings against the husband as a co-owner.
As regards the wife, if the trust is established as claimed, the wife herself has a proprietary interest in Suburb G, or a chose in action, being a claim in equity to compensation to the extent of either $200,000 or $175,000.
However, I do not accept the wife has established a claim to a constructive trust in her favour of a Baumgartner type, for three reasons. First, the former matrimonial home was built on one proposed lot of a subdivision which has yet to be perfected. I consider that the appropriate characterisation of the facts is that the husband and the siblings entered into a joint endeavour of a commercial nature to acquire Suburb G and subdivide it, well before the wife had any involvement. I do not accept that joint endeavour has failed, in any event, because its substratum has not been removed and subdivision has not been definitely abandoned. As mentioned, the process of subdivision has commenced by marking out putative lots. It was the evidence of the siblings that they acknowledged doubt that the subdivision could be completed because of their age and delay and cost caused by these proceedings. But although the subdivision cost has become an impediment, and the siblings have clearly lost enthusiasm for it, the joint endeavour has not clearly failed. It was the tenor of the oral evidence, and the siblings maintained in their final submissions, that once these proceedings are finalised, they may decide to progress the subdivision.
Secondly, I do not find there was any joint endeavour between the wife, the husband and siblings. There was no pooling of resources by the spouse parties and the siblings intended for mutual benefit. The construction of the former matrimonial home may have been a joint endeavour between the spouse parties, but this does not assist the wife in her claim to a Baumgartner trust over the siblings’ interests because it did not include them. The fact that the siblings agreed the former matrimonial home could be built on a specific part of Suburb G did not make them part of a joint endeavour with the spouse parties in which Suburb G was “pooled” by the siblings with the spouse parties for the mutual benefit of all. The evidence does not support a conclusion that the construction of the home was for the purpose of improving the material wealth of all four individuals. On the contrary, there was no intention to benefit the siblings materially. In fact, if the subdivision had been perfected as discussed, Mr D Berfield and Ms E Berfield would have derived no benefit from the construction of the matrimonial home because it would have added no value to their proposed lots. Any non financial contributions during the marriage after the matrimonial home was constructed do not change this conclusion. I am satisfied the expenditure on the home is attributable to the personal relationship between the spouse parties and not to be taken as directed to a joint endeavour based upon a commercial intention which involved the siblings and the spouse parties collectively. At most, the construction of the home was a limited joint endeavour between the spouse parties alone, of a more personal nature, to acquire domestic accommodation as a family. This is sufficient to reject the wife’s claim to a Baumgartner constructive trust in her favour.
Thirdly, even if it be held there did exist a joint endeavour between the spouse parties and the siblings, the wife did not establish a persuasive reason why the interests of the siblings in Suburb G should be burdened with a proprietary interests under a constructive trust in her favour, in other words, the element of unconscionability is not established. It was at the heart of the wife’s case that it would be unconscionable for the siblings to continue to assert their legal title against her while taking the benefit of the spouse parties’ payments for, or the increase in value brought about by, the construction of the home, to which she contributed. But whether the siblings’ assertion of their legal title as against the wife is unconscionable needs to be determined by taking account of all the conduct of the parties as at the date of trial.
There are several factors which repudiate a conclusion of unconscionability. Where the wife has derived a benefit from use of the siblings’ property, or otherwise from their contributions to it, denying an equitable interest to the wife may not be unconscionable (Tracey v Bifield (1998) 23 Fam LR 260 at 269–270), just as countervailing benefits can be taken into account where a claim is based on detriment (Q v E Co (2020) 383 ALR 469 at [155]).
The contributions of the siblings and the husband in relation to Suburb G were considerable, in paying the acquisition costs, and repaying the mortgage by 1995. After the spouse parties began cohabitation, Mr D Berfield paid $15,757 towards the costs of bringing about the subdivision, and at least $34,408 in land tax. Mr D Berfield, the husband and their father undertook repairs and maintenance. The spouse parties received the rent from the dwelling between 2010 and separation. The wife claimed she accounted for the rent to the siblings, however the evidence in this regard was unclear. Although the subdivision is incomplete, its outline provided the location where the former matrimonial home could be built at Suburb G. The outline came about through expenditure by Mr D Berfield primarily. When the expenditure of the siblings and the husband is taken into account, and in comparison to the expenditure of the spouse parties on the matrimonial home, I do not accept their assertion of legal title is unconscionable as against the wife.
Even if it be assumed in the wife’s favour that there was a failed joint endeavour, Brereton J pointed out in McKay v McKay [2008] NSWSC 177 at [33] after a thorough review of the authorities, “In the field of the premature failure of the substratum of joint ventures, the cases made clear that the guiding principle is the return of contributions”, and “equity can decree something less than that” where return of contributions “would be disproportionate to requirements of conscionable behaviour”. A return of contributions to the spouse parties would be disproportionate in this case, for the reasons already given, and by reason of the existence of the wife’s claim to an alteration of property interests between her and the husband, as explained more fully below at [126].
Common Intention
As already pointed out, the wife did not clearly articulate a case of constructive trust arising out of detrimental reliance, either upon a common intention or upon representations supporting an estoppel. However, I consider it appropriate to express a view about a claim formulated based on common intention, because it was raised obliquely by the wife, but specifically addressed by the siblings in argument.
In Bijkerk Investments Pty Ltd v Bikic [2020] NSWSC 1336 at [118]–[119] Leeming JA, sitting at first instance, questioned whether common intention constructive trusts survive in Australian law as an institution separate from an entitlement based in proprietary estoppel, partly because detrimental reliance is an essential element of both. There is however, no binding or compelling authority which definitively establishes common intention constructive trusts are now subsumed within the doctrine of estoppel (see e.g. Jemmark at [69]; Harvey v Harvey [2024] NSWSC 623 at [22]). Nonetheless, both doctrines require proof of detrimental reliance and lead to the same considerations regarding relief. Therefore, I will assume the wife has made an alternative claim to relief under a common intention constructive trust, acknowledging it is juristically closely related to, but separate from, a claim based upon proprietary estoppel, but here no estoppel claim was pressed or developed in final submissions.
The relevant principles are well known. The claimant must prove the relevant parties had a common intention that the claimant would have a beneficial interest in property legally owned by the other parties, that they relied upon the common intention to their detriment and that it would be unconscientious for the owner to deny the claimant’s asserted beneficial interest. The inquiry is as to the actual intention of the parties. The intention need not identify a specific share of the property; a beneficial interest or ‘some form of proprietary interest’ is sufficient. The claimant must also show that he or she acted to their detriment in a way referable to the agreement or intention that they have an interest in the property. The quantum of the claimant’s beneficial interest will be that which the parties agreed upon or intended, but if a finding as to the precise size, nature and extent of the intended beneficial cannot be made, one starts with the maxim that equality is equity which can and should be departed from where the parties make disproportionate contributions, but a common intention constructive trust may arise after the acquisition of the relevant property if the evidence establishes that the relevant common intention was formed at some later time (Grant v Edwards [1986] Ch 638 at 648, 654; Green v Green (1989) 17 NSWLR 343 at 355–356; Austin v Keele (1987) 10 NSWLR 283 at 291; Carruthers v Manning [2001] NSWSC 1130 at [124]; Shepherd at [34]–[36]; Bassett v Bassett [2021] NSWCA 320; Koprivnjak v Koprivnjak [2023] NSWCA 2 at [24]; Galati at [54]).
In the present case the evidence was clear that the spouse parties and the siblings had a common intention the spouse parties would have an interest in Suburb G, in the form of two lots in the proposed subdivision. This intention arose no later than 2009 when construction commenced on the former matrimonial home, which was well after the acquisition of Suburb G. The size, nature and extent of the intended interest was clear being the two proposed lots, 3 and 4. In reliance upon that intention, the spouse parties constructed the former matrimonial home, spending $350,000 to do so, on proposed lot 3.
As already noted, equitable relief is framed by reference to considerations of proportionality. The close relationship between estoppel by encouragement and common intention constructive trusts, adverted to earlier, has allowed a unity of approach to the formulation of the appropriate relief. Proportionality of the claimed interest or remedy is undeniably a relevant consideration, but should not be transformed into a necessary constitutive element of a cause of action to be pleaded or proved by the party seeking relief (Delaforce v Simpson-Cook (2010) 78 NSWLR 483 (“Delaforce”) at [4]).
It has long been recognised that, for example in the context of estoppel, justice to a promisee may require performance of the promise, rather than the payment of compensation such as damages (Zhu v Treasurer of NSW (2004) 218 CLR 530 at [128]) or in the case of common intention, realisation of the common intention. It is usually a starting point that the relief should be framed on the basis of the intended state of affairs (Sidhu v Van Dyke (2014) 251 CLR 505 (“Sidhu”) at [84]–[85]) which will yield to the specific circumstances of the case (Donis v Donis (2007) 19 VR 577 (“Donis”) at [20]; Delaforce at [42]).
The question is whether the potential damage to an alleged promisor, or party sharing the common intention, would be disproportionately greater than any detriment which would be sustained by the other party “to an extent that good conscience could not reasonably be seen as precluding a departure from the assumed state of affairs” (The Commonwealth v Verwayen (1990) 170 CLR 394 at 441 per Deane J). In Giumelli at [40]–[48], the High Court concluded the appropriate measure of relief was not a declaration of constructive trust over the entire relevant property coupled with an order compelling to completion of a subdivision and conveyance of a promised lot. Rather, the appropriate remedy was the fixing of a money sum to “represent the value of the equitable claim…to the promised lot” (Giumelli at [51]).
In Sidhu, the promisor had promised to subdivide a property and gift one subdivided lot to the promisee. The consent of the promisor’s wife was necessary for the subdivision to proceed. At [84]–[85], the High Court acknowledged the distinction between “a relatively small, readily quantifiable monetary outlay” on the faith of the relevant assurances and “detriment suffered is of a kind and extent that involves life‑changing decisions with irreversible consequences of a profoundly personal nature” referring to the decision of Nettle JA in Donis at 588–589, [34].
The High Court upheld the decision of the NSW Court of Appeal that equitable compensation measured by reference to the value of the respondent's disappointed expectation was the appropriate form of relief. This was so because the “assurances to the [promisee] were expressed categorically so as to leave no room for doubt that [the promisor] would ensure that the subdivision would proceed and that the consent of [his] wife would be forthcoming” (Sidhu at [86]).
In the present matter, in light of the construction of the matrimonial home, it may fairly be said that “the circumstances appear to lie somewhere along the spectrum between a small, readily quantifiable monetary outlay and life-changing decisions with irreversible consequences” as Robb J put it in Saitannis v Katsolos [2022] NSWSC 1468 at [105].
But the wife did not argue that she was entitled to compensation assessed as if the subdivision had been completed and the intention that she and the husband would receive lots 3 and 4 had been realised, because they made “life changing decisions with irreversible consequences of a profoundly personal nature” in building the former matrimonial home. If such arguments had been pressed there may have been raised questions about the application of equitable defences such as laches and acquiescence in the decision to suspend the subdivision, in light of the wife’s own evidence that she made a complaint about that decision in 2010, but neither spouse party took any step to pursue an equitable claim thereafter for at least a decade. Moreover, no categorical assurance was ever given that the husband and his siblings would ensure the subdivision would be completed. The outlay by the spouse parties was also in the circumstances relatively small and readily quantifiable.
Rather, the wife limited her relief to a claim to either the construction costs of $350,000 or the increase in value of $400,000 for the spouse parties together, or half these amounts for herself alone.
But in any event, the intended interest relied upon the finalisation of the subdivision by the co‑owners. It was contingent on the perfection of a subdivision which has not happened. The wife contributed nothing to the costs of progressing the subdivision at least to the point where surveyors pegged out the boundaries of the proposed lots. The evidence showed that a further expenditure of $541,691 was necessary before the subdivision could be completed. It is also important to repeat that before the spouse parties embarked on the construction of the matrimonial home, Mr D Berfield and Ms E Berfield made clear they were not then in a position to progress the subdivision and would not be until they had settled down and started families. In light of the wife’s knowledge that the creation of the subdivided lots was always contingent and reliant upon Mr D Berfield and Ms E Berfield’s circumstances allowing the formal creation of the lots to happen, I am unable to find the reliance by the co-owners upon their legal title to be unconscionable. In addition to [120]–[121] above, for the reasons given at [108]–[110], I again do not accept the assertion by the husband and the siblings of their legal title is unconscionable as against the wife by reason of any detrimental reliance.
A further point should be made here which answers the wife’s claim to equitable relief in respect of property interests of the siblings, whether framed by reference to a joint endeavour or a common intention. The difference between an equitable proprietary remedy and a personal remedy is important where the property interests of third parties are exposed. The Court does not have jurisdiction to declare an owner to be trustee of their property for another because it thinks it would be fair (Muschinski at 608). The High Court has made clear, in a passage cited and applied many times, in Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 at [42]: “[B]efore the court imposes a constructive trust as a remedy, it should first decide whether, having regard to the issues in the litigation, there are other means available to quell the controversy”. The remedy must be proportionate (Delaforce at [42]–[44], [61]–[70]). In John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1, the High Court said at [128]–[129]:
128.A constructive trust ought not to be imposed if there are other orders capable of doing full justice…
129.… One point made in the Giumelli v Giumelli line of cases is that care must be taken to avoid granting equitable relief which goes beyond the necessities of the case. Another point in those cases is that third party interests must be borne in mind in deciding whether a constructive trust should be granted. That line of cases does not permit a constructive trust to be declared in a manner injurious to third parties merely because the plaintiff has no other useful remedy against a defendant.
Clearly, in any case where a claim to a constructive trust is made as a form of equitable proprietary relief, especially where the property interests of third parties are involved, the Court must consider whether it is a proportionate remedy.
The siblings argued that in any event, equitable relief was unnecessary against them, because the husband already enjoyed a one third interest in Suburb G, the value of which partly reflected the increase in value brought about by the construction of the former matrimonial home. They pointed out that if the wife succeeded in establishing an institutional constructive trust in her favour, she would be treated as a co-owner with attendant rights and obligations, including exposure to claims for adjustment as between co-owners (see above at [103]). But more generally they argue that it is possible in the circumstances to bring about a just and equitable result between the spouse parties pursuant to s 79, without impinging upon the property interests of the siblings. I broadly accept this argument. As will be explained, the outcome between the spouse parties can indirectly recognise the increase in value to Suburb G in favour of both spouse parties without resort to equitable relief against the siblings. This is a further aspect of proportionality in this case which also negates the existence of the necessary element of unconscionability to found equitable relief against the siblings.
Conclusion
I reject the wife’s claim to an interest in Suburb G under a Baumgartner or common intention constructive trust and any claim to equitable compensation.
A further point should be made here. I note that the wife’s points of claim included causes of action or claims expressed as restitution, unjust enrichment or money had and received against the husband and the siblings. However, mere unjust enrichment is not a sufficient basis for the award of a constructive trust (Muschinski at 617), and no submissions were made in support of these proposed claims, rather the wife relied upon her claim of constructive trust. I do not need to say anything further about them.
Added Back or Notional Property.
The husband claimed a total of $410,000 should be added back to the property pool as notional property of the wife.
It is well settled that adding back property is exceptional and may be appropriate where the parties have expended money on legal fees, where there has been a premature distribution of matrimonial assets, or “waste” or wanton, negligent, or reckless dissipation of assets designed to reduce the property pool (Candle & Falkner (2021) FLC 94-069 at [52]–[58]). Adding back non-existent property can have a distorting impact on the reality of property available for division (Bevan at [79]). Proper consideration must be given to existing interests in property (Vass v Vass (2015) 53 Fam LR 373 (“Vass”) at [139]).
Adding back property reflects a decision that, exceptionally, in the particular circumstances of a case, justice and equity requires it, for example, to address the inherent unfairness where but for the impugned expenditure the property interests available for division would be significantly greater (Watson & Ling (2013) FLC 93-527 at [29]–[34]). In cases that are not “exceptional”, justice and equity can be achieved not by adding back, but by taking up the same as a relevant s 75(2) factor which is, perhaps, “technically more correct” (Bevan at [79]; Trevi & Trevi (2018) FLC 93-858 (“Trevi”) at [30]; Vass at [138]–[139]).
Parties do not “go into a state of suspended economic animation” at separation and are entitled to reasonably conduct their affairs and expenditure post-separation in a manner that is consistent with properly getting on with their lives (M & M [1998] FamCA 42 at [2.11]; C & C [1998] FamCA 143 at [46]; NHC & RCH (2004) FLC 93-204 (“NHC & RCH”) at [24]; Trevi at [29]).
There needs to be some assessment of the reasonableness of the expenditure (AJO & GRO (2005) FLC 93-218 at [39]). For example, reasonable living expenses are not usually added back (Gilmour & Hofte (No 2) [2024] FedCFamC1A 9 at [18]).
Adding back emphasises the point that satisfying the respective requirements of s 79(2) and s 79(4) of the Act to do justice and equity can require an “accounting” or “balance sheet” exercise, “so as to include the value of the dissipated property or expended sums within the total value of the parties’ existing interests in property, and to credit the value of same against the assessed entitlement of the dissipating or spending party” (Trevi at [47] per Murphy J).
Item 13
There was no dispute that the wife at separation took $80,000 (rounded up) in an ANZ Term Deposit. The wife claimed she used this money for living expenses. Fearing the possibility of her bank accounts being restricted, the wife claimed she kept this money in cash. She gave no clear evidence about how these funds were expended. However, she gave evidence that she left the former matrimonial home with few possessions, and had to buy appliances. I find it was likely spent on reasonable living expenses and will not add it back.
Item 14
There was no dispute that in late 2021 the wife sold two motor vehicles. She claimed she sold Motor Vehicle 1, which had a number of defects, to the father of her new partner for $3,250 which she used for living expenses. She sold Motor Vehicle 2 by auction for $26,000, from which she received $8,100, with $17,900 being paid to her partner’s father on account of rent and other living expenses he had met on behalf of the wife and her partner.
The husband claimed that $85,000 should be added back because the wife sold the vehicles at an undervalue and did not explain how the sale proceeds were used. I disagree. I accept the wife’s evidence in this regard.
Item 15
There was also no dispute that the wife received $32,000. There was some evidence that part of this amount was repaid into the spouse parties’ joint account. I am not satisfied the husband has demonstrated this money even if expended by the wife falls into the category of an add back.
Item 16
As mentioned, the wife was involved in an accident in early 2021, together with her partner. Both suffered severe injuries. The wife received a compensation payment of $375,000, from which $62,000 was deducted for legal fees, leaving $313,921 in her hands.
The husband claimed that $123,000 from this amount should be added back because the wife had not explained how it had been spent.
There was no dispute that from the $313,921, $186,000 was utilised to purchase Town S. There was ultimately no dispute that from the remaining approximately $130,000 acquisition costs of Town S were paid, although no precise figure for these were available. The wife gave evidence that she did not pay stamp duty and used $4,000 to buy an animal. She spent a further approximately $26,000 on a new vehicle and gear for her partner. She pointed out that at the time she received the compensation payment, neither she nor her partner had employment and she used the balance of the compensation funds (about $96,000) for living expenses. I accept this evidence. $123,000 will not be added back.
Item 17
The husband claimed that the wife took $90,000 in cash at separation. In cross-examination he conceded he did not know if this had happened but undertook his own calculations based on what he claimed the wife had told him she had received by way of income. I reject this add back.
Liabilities – Item 20
The husband seeks to include a potential liability for capital gains tax of $238,000 if Suburb G is required to be sold to meet any payment to the wife. He argued this was a very significant liability which should appear on the balance sheet. However, it was clear that this liability would only crystallise if he sold his interest in Suburb G. It is not an error to exclude a future tax liability from the balance sheet where the liability, although its calculation seems fairly certain, has not crystallised at the date of trial, and it can be taken into account under s 75(2) (Rodgers & Rodgers (No 2) (2016) FLC 93-712 (“Rodgers”) at [22]–[42]). Ultimately, the manner in which a particular liability should be treated is dependent upon the nature of the liability, the circumstances surrounding the liability, and the dictates of justice and equity shaped by each (Rodgers at [36], [40]). Whether both parties should bear responsibility for taxation debts of one party to the marriage is to be decided by reference to what is just and equitable (NHC & RCH at [71]). The fact that both spouse parties share the benefit of the capital gain in the value of the husband’s share of Suburb G on the balance sheet, may appear to justify including the tax liability for that gain as a corresponding liability. However, I will exclude this liability because it is potential, not accrued, and although the figure was agreed, it is not clear that the husband will need to sell or transfer his interest in Suburb G to satisfy the wife’s entitlement, as explained later. The position of the siblings at trial was that they may wish to reinvigorate the subdivision even if enthusiasm for the idea had waned. Satisfaction of the wife’s entitlement may be achieved by financing rather than sale. I will take account of the potential capital gains tax under s 79(4)(e).
Conclusions and asset pool
Based on these conclusions, the asset pool (figures rounded) is as follows:
Ownership
Description
Agreed value
ASSETS
1.
Joint
Contents at Suburb G property (equipment and vehicles)
$25,000
2.
Husband
J Street, Suburb G
$1,633,333
3.
Husband
U Street, Region P
$45,000
4.
Husband
Westpac Choice Account #...42
$8,378
5.
Husband
Shares
$342
6.
Husband
Motor Vehicle 3
$2,500
7.
Wife
V Street, Town S
$186,000
8.
Wife
ANZ (#...04) (joint with partner)
$219
9.
Wife
Household contents
$7,500
Total
$1,908,272
LIABILITIES
10.
Wife
ANZ Platinum #...85
$5,200
11.
Husband
Westpac Mastercard #...01
$3,500
Total
$8,700
SUPERANNUATION
Member
Name of Fund
Type of Interest
Agreed value
12.
Wife
Superannuation Fund 2
Accumulation
$17,217
13.
Husband
Superannuation Fund 1
Accumulation
$432,642
Total
$449,859
NET POOL (INCLUDING SUPERANNUATION):
$2,349,432
Consequently, if there was no property adjustment, with the percentages rounded, the husband would hold 91 per cent and the wife 9 per cent of the net assets. As noted, both parties agreed there should be a just and equitable property adjustment, and it was therefore not appropriate to leave the assets and liabilities undisturbed.
I turn now to consider the application of Pt VIII of the Act and the factors set forth in s 79 and s 75(2).
CONTRIBUTIONS
Section 79(4) sets out the considerations to be taken into account by the Court in determining what order (if any) should be made under s 79 in property settlement proceedings.
There was no dispute that I should take a global approach to the non-superannuation asset pool (Norbis v Norbis (1986) 161 CLR 513). The husband contends that the parties’ superannuation interests should be dealt with separately and split equally.
In accordance with s 79(4) of the Act, it has been settled for many years that the Court must consider all the contributions, both financial and non-financial, to the acquisition, conservation, and improvement of the parties’ assets, as well as to the welfare of the family during cohabitation and after separation. The Court must consider the contributions in an overall sense (Norman & Norman [2010] FamCAFC 66; Kowalski and Kowalski (1993) FLC 92-342; G and G (2000) FLC 93-043). A broad approach is preferred, rather than reference to precise mathematical calculations (Burke and Burke (1981) FLC 91-055), although an evaluation of each party’s respective contributions is necessary (JEL and DDF (2001) FLC 93-075). Assumptions about equality of contributions should not be made, and there is no assumption that equal division is the starting point for any exercise of the Court’s discretion (Mallet v Mallet (1984) 156 CLR 605 at 610, 613, 625, 635–636, and 646–647).
In Dickons v Dickons (2012) 50 Fam LR 244, the Full Court said:
18. Any and all such contributions, whether or not they sound in, or are directly linked to, the property available for distribution, should be considered and assessed together with the nature, form and extent of all other contributions of all types contemplated otherwise by s 79(4).
19…
20…
21. … the requirements of the section are met by approaching the assessment of contributions holistically and by analysing the nature, form, characteristics and origin of the property currently comprising that to which s 79 applies, and, in turn, analysing the nature, form and extent of the contributions (of all types) contemplated by s 79. That task is also undertaken by reference to the nature and form of the particular marriage partnership manifested by the particular circumstances of this particular marriage. Is it, for example, a relationship, as Deane J put it in Mallett at 640-641 “where the parties have adopted the attitude that their marriage constituted a practical union of both lives and property” or is it, for example, a union where parties lived very separate domestic and financial lives?
(See also Jabour & Jabour (2019) FLC 93-898 at [31]–[87]; Horrigan & Horrigan [2020] FamCAFC 25 at [35]–[49]; Barnell & Barnell (2020) FLC 93-961 at [30]–[43]; Benson & Drury (2020) FLC 93-998 at [35]).
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage
Initial contributions
I have described the initial contributions earlier in these reasons. There is no doubt the husband made far greater initial financial contributions.
Financial contributions during the relationship
I have also described above and have taken into account the financial contributions of the parties during the relationship, including the joint contribution of the spouse parties to the construction of the former matrimonial home. I also take account of the fact that although the spouse parties contributed equally to the construction of the former matrimonial home, it was the husband who brought Suburb G to the relationship, and, as between the spouse parties, it was he who made payments to discharge the original mortgage (Pierce v Pierce (1999) FLC 92-844 at [28]; Cabbell & Cabbell [2009] FamCAFC 205 at [24]).
I am satisfied that on balance the husband made a greater financial contribution during the marriage, although the wife contributed financially as well.
Financial contributions post-separation
By reason of the compensation payment used and received by the wife she made a greater financial contribution after separation. The husband has been receiving the rent from the tenant of the dwelling since separation.
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage
I also take account of the wife’s non-financial contributions in planning the former matrimonial home and dealing with tradesmen and subcontractors for its construction.
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent
I find that both spouse parties made parenting and homemaker contributions during the marriage, but the wife made the greater contributions in this regard.
(d) the effect of any proposed order upon the earning capacity of either party to the marriage;
The orders will not have an effect upon the earning capacity of either party.
ASSESSMENT OF CONTRIBUTIONS
Overall, I assess the contributions of the parties 68 per cent in the husband’s favour and 32 per cent to the wife.
I now turn to s 79(4)(e) and the s 75(2) factors.
SECTION 75(2) ADJUSTMENT
By reason of s 79(4)(e), the Act requires me to take into account the matters referred to in s 75(2) of the Act, so far as they are relevant, when considering what orders should be made in these proceedings. As disclosed in the arguments of the parties, the following matters are relevant.
(a) the age and state of health of each of the parties
The wife is 49 years of age. The husband is almost 60 years of age.
Both spouse parties have health problems. The wife has residual pain from her accident. The husband has anxiety and depression.
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment
I have already described the assets of the parties.
The wife is presently unemployed. She proposes to apply for a disability support pension, but was not in receipt of such a pension at the date of trial.
The husband earned $65,003 for the financial year ended June 2023. Since about August 2020 the husband has received $200 per week for the rent of the older dwelling on Suburb G. He will have to account to the siblings for this rent in part.
The husband holds superannuation with Superannuation Fund 1 with an agreed value of $432,642. The wife holds superannuation with Superannuation Fund 2 valued at $17,217.
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain;
The husband presently cares for two adult children who live with him. They do not contribute to household expenses. He pays for their health insurance.
(m) if either party is cohabiting with another person-the financial circumstances relating to the cohabitation
The wife’s partner has been employed as a transport worker on a casual basis since mid-2023. There was no evidence about her partner’s current financial circumstances beyond this.
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account
Under this subparagraph I take account of the fact, already mentioned, that in addition to the increased value of his own share in Suburb G, the husband has rights as co-owner in respect of the siblings, whose one third shares have also enjoyed an enhancement of value by reason of the construction of the matrimonial home, just as they have rights against him for adjustments according to contributions. There is no way to value these rights, but as regards the husband, they indirectly take into account the benefit received by the siblings through the enhancement in the value of Suburb G.
I also take account of the possibility that the subdivision endeavour has not failed and may, if progressed in the future, result in further capital growth for the owners of Suburb G, including the husband.
I also take account here of the potential capital gains tax liability of the husband, quantified at $238,000, if he and the siblings decide to partition or sell, or he is compelled to transfer his interest in, Suburb G.
Conclusion
Taking account of these matters I conclude that there should be an adjustment in the wife’s favour of 3 per cent under s 79(4)(e).
PROPOSED ORDERS
The assets of the spouse parties should be divided overall 35 per cent to the wife and 65 per cent to the husband. In light of the wife’s younger age, I consider an equal split of superannuation interests to be just and equitable, as part of reaching this overall position. This will require a superannuation payment from the husband’s fund to a fund nominated by the wife in the amount of $207,713. Then in order for the wife to receive her entitlement, the husband will be ordered to make a cash payment to her of $396,352. Otherwise the spouse parties’ assets and liabilities should be left undisturbed.
Since I have found the wife’s claim to equitable relief has failed, her case against the siblings will be dismissed.
Two questions remain requiring comment. The first is that the husband, despite advocating for a superannuation splitting order, did not provide a form of proposed order, nor demonstrate that the relevant trustee had been afforded procedural fairness. It will be necessary to frame an order for a superannuation split including an order for evidence demonstrating procedural fairness being afforded to the relevant trustee, with liberty to apply in relation to implementation.
The second is the question whether in default of the husband making the payment of $396,352 there should be an order for sale of Suburb G. Since the wife failed against the siblings, I do not consider it appropriate to make an order for the siblings to be bound by an order for sale. Furthermore, the wife did not seek any form of order for sale in default of payment, so I will not make any order to that effect. If the husband fails to make a payment, the wife has enforcement remedies under the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
WHETHER THE PROPOSED ORDERS ARE JUST AND EQUITABLE
Section 79(2) of the Act provides that:
The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
The High Court in Stanford commented at [36] on the meaning of “just and equitable” as follows:
The expression "just and equitable" is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds.
(Footnotes omitted)
Although the parties agree that it would be just and equitable to make an order adjusting their property interests, s 79(2) requires the Court to be satisfied the proposed order itself is appropriate, just and equitable. The proposed payment from the husband to the wife combined with an equal split of superannuation interests and otherwise leaving the assets undisturbed is just and equitable in the circumstances of this case.
On a 35/65 percentage division and with superannuation split equally, the wife and husband will have the assets and liabilities as set out in the below table (figures rounded).
Assets and liabilities to be retained by the husband
Value ($)
J Street, Suburb G
$1,633,333
U Street, Region P
$45,000
Westpac Choice Account #...42
$8,378
Shares
$342
Motor Vehicle 3
$2,500
Contents at Suburb G property
$12,500
Superannuation – Superannuation Fund 1
$224,930
Westpac Mastercard #...01
-$3,500
Payment to the wife
-$396,352
Total:
$1,527,131
Assets and liabilities to be retained by the wife
Value ($)
V Street, Town S
$186,000
ANZ (#...04) (joint with partner)
$219
Payment from the husband
$396,352
Household contents
$7,500
Contents at Suburb G property
$12,500
Superannuation – Superannuation Fund 2
$17,217
Superannuation – Superannuation Fund 1
$207,713
ANZ Platinum #...85
-$5,200
Total:
$822,301
COSTS
I will order that any party who seeks costs to file the relevant application within 28 days of these orders.
CONCLUSION
For all the foregoing reasons I am satisfied the orders set out at the commencement of these reasons should be made.
I certify that the preceding one hundred and eighty-two (182) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 28 August 2024
SCHEDULE 1 – MATERIAL TENDERED AND RELIED UPON BY THE PARTIES
Exhibit Label Document Tendered by 1 Letter from Marsdens Law Group to Mr F re: valuation of J Street RH 2 Sequence showing exchanges between parties’ solicitors dated 01/02/2024 to 21/02/2024 1 RH’s tender bundle subject to any objection to individual documents RH 3 Photograph of sports club where husband is described as assistant coach dated 2009 RH 4 Images of father working on house RH 5 Contract note re: shares dated 17/09/2001 RH 6 ANZ document relating to entry dated 06/11/2006, shares, $2800 RH 7 ANZ letter dated 26 June 2024 AW 8 Photocopy of a page from an ANZ cheque book AW 9 Letter from ANZ bank dated 1 July 2024 AW 11 AW’s tendered documents – list of documents ruling that it will include the documents listed AW 12 RH’s tendered documents – list of documents ruling that it will include the documents listed RH 13 Bundle of documents re: construction RH 14 Joint balance sheet Joint 15 Bundle of text messages regarding care of the children RH ANNEXURE “A” – MINUTE OF ORDERS SOUGHT BY THE WIFE
(1)These Orders are made by way of alteration of property interests pursuant to Section 79 of the Family Law Act 1975.
(2)That the Applicant Wife receive a cash adjustment equivalent to 55% of the net asset pool.
(3)The Court notes that the net asset pool includes the land and property found by the Court to beneficially belong to the Applicant Wife and the Respondent Husband as a result of the operation of the Statement of Claim annexed and marked ‘A’.
(4)That the Applicant Wife shall retain all interest in and entitlement to:
(a)All personal property now in his possession, custody or control.
(b)All shares, debentures, units in unit trusts, bank, building society or credit union accounts standing in his sole name.
(c)All interests in life insurance policies and superannuation funds standing in his sole name.
(5)That the Respondent Husband shall retain all interest in and entitlement to:
(a)All personal property now in her possession, custody or control.
(b)All shares, debentures, units in unit trusts, bank, building society or credit union accounts standing in her sole name.
(c)All interests in life insurance policies and superannuation funds standing in her sole name.
(6)That the Applicant Wife shall retain all liabilities including but not limited to debts, loans and credit cards currently held in her sole name, and indemnify the Respondent Husband in respect of any such liability, whether past, present or future.
(7)That the Respondent Husband shall retain all liabilities including but not limited to debts, loans and credit cards currently held in his sole name, and indemnify the Applicant Wife in respect of any such liability, whether past, present or future.
(8)That unless otherwise specified in these Orders, and except for the purpose of enforcing the payment of any money due under these or any subsequent Orders:
(a)each party shall be solely entitled to the exclusion of the other in both law and in equity to:
(i)all property (including choses-in-action) in the possession of such party as at the date of this agreement;
(b)each party shall be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.
(9)The parties hereby declare that they are not aware of any liability which either of them has which is a joint and/or several liability with the other including, but without limiting the generality of the foregoing, in respect of or pursuant to bank, credit or charge accounts, guarantees or as a result of any of the parties’ previous business (if any) or other dealings.
(10)That if it is subsequently found that any such liability as is described in Order 9 above, the party pursuant to whose business or other dealings such liability arose, shall indemnify the other against any liability to contribute towards any claims, costs, demands, suits, actions, proceedings, orders or judgments whenever arising which may be made, brought against or incurred by the other party in respect thereof.
(11)That in the event amount referred to in Order 2 above or any portion thereof remains outstanding after the due date for payment, the Respondent shall pay interest to the Applicant at the rate prescribed by the Family Law Rules from the due date until payment is made in full.
(12)That the parties shall do all acts and things necessary and give all consents and execute all documents and writings to give effect to these Orders in the time periods prescribed.
(13)That in the event that either party refuses or neglects to execute any deed, document or instrument necessary to give effect to these Orders, the Registrar of the Court be appointed pursuant to Section 106A of the Family Law Act to execute such deed, document or instrument in the name of the said party and do all acts and things necessary to give validity and operation to the deed, document or instrument upon the Registrar being provided with verification of such refusal or failure by way of affidavit.
(14)That the Respondent Husband pay the Applicant Wife’s costs of and incidental to this Application.
ANNEXURE “B” – MINUTE OF ORDERS SOUGHT BY THE HUSBAND
(1)That for the purposes of determining the matrimonial property of the Applicant Wife and Respondent Husband, the Respondent Husband is declared to hold a one third interest in the property known as and situate at J Street, Suburb G (“the Property”).
ORDERS
(2)That the Amended Initiating Application filed 14 April 2023 by the Applicant Wife be dismissed.
(3)That as between the Applicant Wife and the Respondent Husband, the Respondent Husband be solely entitled, to the exclusion of the Applicant Wife, to his one third interest in the Property.
(4)That within 60 days of the date of these Orders, the Respondent Husband shall cause to be paid to the Applicant Wife such sum that represents 25% of the matrimonial pool.
(5)That as and from the date of these Orders, and except as otherwise provided for by these Orders:
(a)Each party shall be solely entitled, to the exclusion of the other party, to any shares, bank accounts, motor vehicles, household items, personal effects, investment accounts and any other assets in their sole name or possession not otherwise dealt with in these Orders.
(b)Each party shall be solely entitled to any superannuation interests in their sole name to the exclusion of the other party.
(c)Each party shall be solely liable for any and all liabilities in their sole name not otherwise dealt with in these Orders and shall indemnify the other party in relation to such liabilities.
(6)That the Applicant Wife pay the Respondent Husband’s costs of and incidental to these proceedings.
ANNEXURE “C” – MINUTE OF ORDERS SOUGHT BY THE SECOND AND THIRD RESPONDENT
(1)That the relief sought by the Applicant that affects the interest of the Second and Third Respondent in the property located at J Street, Suburb G NSW being Lot … DP … be dismissed.
(2)That the Applicant pay the costs of the Second and Third Respondent.
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