Berge and Berge and Ors

FAMILY COURT OF AUSTRALIA

BERGE & BERGE AND ORS

[2009] FamCA 968

FAMILY LAW – PROPERTY – joint venture between the husband and the husband’s father – wife sought orders that the husband and his father hold the property on trust for them equally – the orders were opposed

Family Law Act 1975 (Cth)

APPLICANT:

Ms Berge

1^st RESPONDENT:

Mr N Berge

2^nd RESPONDENT:

Mr J Berge

3^rd RESPONDENT:

Ms Tolstoia

FILE NUMBER:

SYF

4280

2006

DATE DELIVERED:

9 October 2009

PLACE DELIVERED:

Sydney

PLACE HEARD:

Sydney

JUDGMENT OF:

Justice Fowler

HEARING DATE:

29-30 June 2009, 1-2 July 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Lloyd

COUNSEL FOR THE 1^ST RESPONDENT:

Mr Foster

2^ND RESPONDENT:

In person

3^RD RESPONDENT:

In person

Orders

The husband’s Amended Response to an Initiating Application filed 29 June 2009 is dismissed.
The second respondent’s Response to an Application for Final Orders filed

30 April 2007 is dismissed.
The husband’s application for orders against the third respondent is dismissed.
The husband pay the costs of the third respondent as agreed between them or in the absence of agreement, as assessed.
Declaration that the husband and the second respondent hold the property known as C property in the State of New South Wales (“the C property”) as trustees for the benefit of the husband and the second respondent for their respective entitlements under the terms of a joint venture agreement made between them.
Declaration that the husband and the second respondent entered into a joint venture agreement for the subdivision and development of the C property and an adjacent parcel of 25 acres known as Lot B, and the terms of which were:
(a)the costs and profits of the joint venture were to be shared equally between the husband and the second respondent;
(b)the land was to be subdivided into three main lots;
(c)the benefits arising from the joint venture were to be shared as follows; namely, that the second respondent was to retain for his own use one Lot with a home to be built on it for his use and benefit and at a cost to be financed from the second respondent’s share of the proceeds of sale of Lot B; and
(d)from the proceeds of the sale of an adjacent parcel of land described as Lot B, containing about 25 acres and adjacent to the C property, the husband and the second respondent would, subject to an agreed reduction of the mortgage otherwise charged on C and the payment of a loan made in relation to the acquisition of C, each receive the sum of $65,000.
Declaration that the husband received the sum of $65,000 as agreed and applied $15,000 for his own purposes and contributed the balance to a fund controlled by the second respondent.
Declaration that as between the husband and the second respondent, the husband shall bear the sole responsibility for the repayment of the sum of $126,600, the portion of the borrowings secured on C property and applied to his own use. The husband shall bear the payment of all interest charges thereon.
Declaration that the second respondent shall bear the costs of erection of his home to the extent that those costs exceed the sum of $65,000 being the sum received by him from the sale of Lot B.
Declaration that as between the second respondent and the husband, the second respondent shall bear the sole responsibility for monies borrowed and all interest accruing thereon and applied for his own use by way of investment in and costs of acquisition and financing of a Darwin property, known as

… in the Northern Territory held by P Company Pty Ltd ACN … which he is the sole director and shareholder and which together with its beneficiary trust, namely the B Property Investor Trust, is the alter ego of the second respondent.
Declaration that the sale of a certain parcel of land to adjoining owners,

Mr and Mrs O, and the monies derived thereby is a sale required in order to complete the subdivision and that the net proceeds of such sale are monies which are the property of the joint venture.
The husband is to pay to the wife the sum of $120,990 within one month of the date hereof.
The husband and the second respondent each are to charge all their right, title and interest in the C property with the due performance and observance of the obligations imposed by these Orders on the husband under Order 12 hereof.
The husband and the second respondent are restrained from mortgaging, encumbering or disposing of their interest in the C property pending payment of the sum referred to in Order 12 above, except for the purpose of complying with the Order.
The husband and the wife otherwise than as specified in these orders are as against each other declared the beneficial owner of all property, superannuation and resources within their ownership, possession, power or control.

Notations

In these orders the reference to “the parties” is a reference to the husband, the second respondent and the wife.

IT IS NOTED that publication of this judgment under the pseudonym Berge and Berge is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 4280 of 2006

MS BERGE

Applicant

And

MR N BERGE

1^st Respondent

And

MR J BERGE

2^nd Respondent

And

MS TOLSTOIA

3^rd Respondent

REASONS FOR JUDGMENT

Introduction

The proceedings before the Court are proceedings between the parties to a marriage seeking alteration of their property interests and settlement of property.
In addition, the wife’s mother (the 3^rd respondent) and the husband’s father (the 2^nd respondent in this judgment, called “the father”) have also been joined as parties to the proceedings.
The father seeks a declaration that an interest in certain property at

C (“the C property”) held by the husband jointly with the father be declared to be held on trust for the father.
The husband seeks the like declaration. The husband also seeks an order that certain monies held by the wife in trust for the child of the marriage be held by them jointly with a provision that it be applied for and toward the maintenance, education and advancement of the child. The wife asserted, and the husband agreed, in the course of the hearing, that the sum was to be applied to the costs of the child’s tertiary education.
The wife seeks orders that the husband and the father hold certain property in trust for them equally. The wife seeks payment to her of a portion of the husband’s entitlement.
The husband sought orders that the wife’s mother’s property was impressed with a trust, but wisely discontinued with the application and withdrew it.
The 3^rd respondent sought on the hearing only that she be reimbursed by the husband for her costs, nothing was put in opposition and I propose to make that order.

Background Facts

In this judgment, unless otherwise indicated, where I make a statement of fact, it is my finding on that fact.
The husband was born in 1970 and is now 39 years of age.
The wife was born in 1973 and is now 36 years of age.
The parties commenced cohabitation in August 1996. The wife contends that the cohabitation commenced at an apartment in M and the husband asserts that it commenced in an apartment in N.
The wife says that at the time of the commencement of cohabitation the husband worked as a sales executive for S Pty Limited, having procured a degree of a Bachelor of Business in Finance and Accounting.
The husband was as at the date of the commencement of cohabitation a beneficiary in the Berge Family Discretionary Trust. The trustee of that trust is a company, L Company Pty Limited. The husband’s evidence is that the trust was established by his parents in 1989.
The wife’s evidence is that she was, at the commencement of cohabitation, employed by the NSW public service and was a Certified Practising Accountant, however it seems that in 1996 she procured alternative employment with W Company as an accountant.
At the commencement of cohabitation the wife says she had some savings, superannuation, personal effects and furniture and a sum of $55,000 on deposit. The wife asserts that the husband had a Honda Prelude car, personal effects, furniture and superannuation.
The husband asserts that he had $5,000 in savings and a debt owed to him by his parents of $15,000, his Honda Car valued at about $15,000 and superannuation, furniture and household effects. He says that the wife had savings and superannuation of an indeterminate figure and a Toyota car of value of about $10,000.
In March 1997 the parties became engaged.
The husband’s evidence is that his parents approached him in 1997 to assist in their purchase of the C Property, an adjacent Lot B, and contracts for the purchase having been exchanged in 1998. That property was comprised in two titles of 25 acres and 85 acres. The property was purchased under a contract which provided that it would be bought in the names of the husband and the father.
The title to the C property was acquired in the name of the father as to a 20/25 share and as to the husband in a 5/25 share as tenants in common. The husband filed a number of Financial Statements in these proceedings in which his interest was differentially defined as a 25% interest and later as a 20% interest in the land. There was in those documents no indication that he held the share other than beneficially. Subsequently, Financial Statements were filed by the husband in which he claimed that he held his interest in the property as trustee for his father and had no beneficial interest in the property.
No written instrument creating the trust was produced in evidence nor was any such instrument asserted to have existed.
It is asserted by the wife that the husband informed her in late 1997 that the contracts for the purchase of the C property were exchanged. At that time the wife says that she was informed by the husband that his parents would live on one portion of the property and the father said that a portion would be sold and that the husband would acquire enough money to purchase his own property and that a further portion would be developed and would be sold with a view to the husband and his father sharing in the profit derived therefrom.
The purchase was settled in May 1998 and the purchase price was $250,000. The acquisition of the C property, the wife asserts, was financed by way of residential mortgage in the sum of $200,000 with the Illawarra Mutual Building Society with the husband and the father being joint borrowers.
The source of the balance of the purchase price was a matter of controversy but it was admitted that the husband made the payments set out below in addition to assuming liability for the debt due to the mortgagee, equally with his father.
The husband in his affidavit asserts that his sole contribution (other than taking responsibility for the mortgage advances) was the sum of $14,103.28 and he says that he paid no other amount toward the acquisition costs of the property.
The wife asserts that following the acquisition of the property the husband made payments of $11,882 towards the mortgage.
The husband and his father at first denied that this was so but late in the day filed an affidavit and the husband says that having examined certain documents it appeared to be the case that the payments had been made.
Those payments, he says totalled $14,218 and not the sum of $11,882 and were made from his N Credit Union Account.
The husband seemed to put the blame for the inaccuracy on his former solicitors. The total amount contributed by him was $28,321.28.
On the sale of the smaller lot the husband was repaid $15,000.
The balance of the sum after the repayment of an amount to reduce the mortgage in the sum of approximately $30,000 and a small loan, was paid either to the father or to L Company Pty Limited - the trustee of the Berge Family Trust. The wife asserts that portion of that sum, amounting to $50,000, was the entitlement of the husband to a fifty percent share in the proceeds. This was precisely the amount she was informed by him would be his entitlement (together with the $15,000 paid). The aggregated amount represents his share of the profits of the venture on the sale of that Lot. That payment constituted an interest in 50 per cent of the net proceeds.
The husband is said to have informed the wife that the sum of $50,000 had for the time being been banked to the credit of the account of L Company Pty Limited but made no indication that that sum would not become subsequently available. Indeed the wife made inquiries, with the encouragement of the husband, in seeking out properties for them to purchase.
The wife was employed by N Company between 1998 and May 1999 as an accountant and then as a project accountant. Both parties resigned from their employment in anticipation of their wedding.
The wife through her employer purchased for $2,000 two round-the-world business class airfares.
The parties were married in June 1999.
The parties travelled throughout Europe and the wife asserts that she contributed substantially to the costs of the travel. This extended honeymoon continued until November 1999.
The husband and wife were divorced on 18 December 2005.

The Issues

The property of the parties or either of them

It is necessary to identify the property of the parties or either of them.

A portion of the property of the parties was agreed between them and is set out below:

Asset	($)
1	[N] Credit Union Account (w)	69,800
2	Telstra Shares (w)	6,000
3	TABcorp Shares (w)	300
4	Volvo car (w)	4,500
5	PSS Public Sector Superannuation (w)	90,000
Total for the wife	$170,600
6	[N] Credit Union Account (h)	89
7	NIB shares (h)	1,520
8	Colonial Savings Plan (h)	1,155
9	Honda car (h)	500
11	MLC Masterkey Superannuation (h)	60,000
Total for the husband	$63,264
Liabilities
14	St George Portfolio Loan (h)	$126,600

In issue is whether or not the husband has any, and if so what, beneficial interest in the C property.
The husband is a registered proprietor of the property as tenant in common with the father to the extent of a 5/25 share.
In the absence of other evidence which, on the balance of probabilities, satisfies me otherwise, that share is presumed to be beneficially held, as is the share of the father.
In order to hold that that property is held otherwise, I have to be satisfied that there was either an express trust or that in the circumstances of the case and in order to provide an appropriate remedy and to do sufficient equity, it is necessary to declare a constructive trust in relation to the property.
In this case it is asserted by the wife, and denied by the husband and the father, that the property is held upon a trust for the husband and his father for them beneficially in equal shares. The wife says that the trust arises from an agreement made between the husband and the father to enter into a joint venture in relation to the purchase, development and sale of two parcels of land at C, one 25 acres and one of 85 acres approximately.
It was proposed, she says, that the 25 acre property be sold and that the remainder of the property be divided into three lots (Lots 121, 122 and 123) and that the husband’s parents would build a home on one lot (the proposed Lot 122), and that the remaining lots were to be sold. The husband and his father would pay the costs of the development from the proceeds of sale of one such lot and that the proceeds of the sale of the other would be paid to the husband.
The 25 acre lot was sold and the net proceeds were applied as hereinbefore set out.
The wife, in support of her assertion of a trust, gives evidence of statements made by the husband that the property was held for the benefit of both himself and the father. She also relies on statements made by the father and documents admitted to be documents of the husband and conduct of the husband inconsistent with his asserted bare trusteeship of the property for the father.
In addition, the wife and her mother give evidence of a certain conversations with the father which the wife says was consistent with the statements made by the husband that the husband had a beneficial share in the property. The husband’s father and his mother deny the conversations asserted by the wife although, as I have said, it is a conversation also witnessed by the wife’s mother, who gave evidence in relation to it.

Credit

The wife

The wife’s evidence was tinged with some ignorance of what had happened in the past. It relied for some of its accuracy on statements made to her by the husband. If those statements were made and were truthful then I would accept a view that there was an agreement between the husband and the father. I believe she told the truth as she saw it although I think that some of her perceptions might well have been based on partial or inadequate information.
Neither the husband’s counsel nor the father addressed on the subject of her credit.
I accept her evidence otherwise and prefer it where it conflicts with the husband’s and the father’s and where the information would have been within her own knowledge. I also prefer and accept her evidence as indicated in relation to the matters hereinafter set out.
Amongst her evidence was evidence of a conversation with the husband at or about the time of the purchase of the C property in which he said,

“Mum and Dad will live on one portion of the property.” The father said, “Another portion of the property will be sold and [the husband] and you will retain the monies to acquire your own home.” The husband said to her, “Dad and I will develop the other portion and share the proceeds.”
In April 1999 the husband said to the wife:
We are going to sell Lot [B] [a 25 Acre Lot] for $165,000. We’ll repay $30,000 towards the IMB mortgage loan and $5,000 to the Agent. From our $65,000 share of the proceeds, we’ll use $50,000 towards purchasing our own home and $15,000 towards our wedding costs and overseas holiday. From my parents’ $65,000 they will purchase a kit home and pay for subdivision costs.
He further said, she deposes:
My parents will live on one portion of the property. Another portion will be sold and you and I will use the proceeds to acquire our own home. From the third portion we’ll split the profits with my parents after the loan and the property related costs are paid off.
I accept this evidence as credible and generally accept her evidence where it conflicts with the evidence of the husband or the husband’s father and mother.

The husband

The husband did not impress as a witness of truth. He had either filed or created documents which were false and/or he had given oral evidence which was false.
His answers lacked credibility and were inconsistent with written material of which he was the admitted author.
The husband’s demeanour when giving evidence did not impress. He seemed to think that his interrogation was a matter of amusement or scorn; laughing or smirking from time to time.
He did not answer questions in a responsive fashion, he continually sought to either debate or avoid issues rather than provide information.
Whilst he said on a number of occasions that information given by him to others was false, this statement was not credible given the consistency in the documents of which he was the author and the statements made to the wife by him of which she made a contemporaneous note. His conversation with the wife corroborates the statements made by the father as to the arrangements between them concerning the properties. The documents of which he was the admitted author indicate also the likelihood of such an arrangement.
The husband gave evidence that he sought a change of financial accounts in respect of the Berge Family Trust, a trust of which he was but a beneficiary not a trustee and that request was complied with.

Following separation he assigned trailing commissions to which he was entitled as a mortgage broker to the same Trust. This had the effect, it seems, of diminishing his income and, as a consequence, his assessed child support.
He did not disclose the assignment in his written evidence and it was in response to a question of the Court that the disclosure in relation to that assignment was made. His financial disclosures were inconsistent and in my view he has not made a full and frank disclosure to the Court.
The husband’s instructions to the accountant, the advice sought from tax advisors to the end that the profits of the venture with the father might be maximised, his own notes and the statements made to the wife on more than one occasion and his active part in the making of investments allegedly for the father, renders more probable the relationship between them going beyond father and son to joint venturers.

The Father

The father gave evidence orally and by affidavit. He was cross-examined. He answered questions mostly directly but some of his answers strained belief. For example, he gave evidence that he purchased in a new trust a property in Darwin. He says that he was referred to the investment by his son and that his son’s partner, E (the husband’s employer in the mortgage broking business), made all the arrangements for the purchase, its finance and the creation of the trust vehicle through which it was purchased.
The father who acquired the property with wholly borrowed money “off the plan”, did not see the property until after it was purchased. The funds for that purchase were borrowed in part under a mortgage secured on the C property.
He gave evidence in the form of a blank denial of a conversation said to have taken place at the hospital where the wife was staying at the time of the birth of the husband and wife’s child. In respect of that conversation, evidence was given by the wife and her mother and I accept that evidence. There was a dispute as to the day upon which the conversation took place but I accept that it did. The conversation was corroborated in part by the statements made by the husband to the wife whose evidence of them I accept.
The father’s evidence shows that he had done a lot of work on the C property and had built a kit home on one “lot” (the plan of subdivision at the time of its building and even now not having been registered). I accept his evidence that he was the one who did most of the work on the property assisted, as he put it, by the strong arm of his wife, a chainsaw, and a tractor originally provided with a backhoe and later a two-way bucket front-end loader.
Attached as Annexure “A” to the husband’s affidavit filed 27 June 2008 is a table which the husband says was prepared by the father and which sets out the expenses incurred in relation to the C property as at 1 December 2006. These amounts are said to total $349,348.78. At paragraph 36 of his affidavit the husband further says “[d]uring the entire time I was married, I did not contribute to any of the mortgage repayments or make any other payments in relation to the [C] property.” The husband goes on to say at paragraph 37, “I did not contribute any funds towards the improvements that my parents undertook on the [C] property, nor did I undertake any work on the property.” This appears not to be correct as the husband subsequently admitted that he made mortgage repayments and did some, perhaps minimal, work on the property. There is no doubt however that he equally with the father assumed liability for the mortgages charged on the property and also assisted in the arranging of finance. He had access to accounts which drew down on mortgage facilities charged on the property for his own use.

The Wife’s Mother

The wife’s mother gave evidence. She was sought to be challenged on the basis that her oral evidence was expressed differently to her written evidence. Given that English was not her first language and that she had legal help in the preparation of her affidavit I find that unremarkable. Her evidence was consistent in substance if not entirely in expression. She was responsive to questions asked and unshakable in her answers. I accept her evidence as truthful.
Importantly her evidence was in part as follows:
After the birth of their daughter [J] and during [the husband’s] parents’ second visit in hospital and in the presence of myself and my daughter I witnessed the following conversation take place: [the husband’s] father said to [the wife]: “We are in the process of subdividing the land into three lots. [The husband’s mother] and I will keep one of the Lots and build a house for us to live in, and the other two Lots will be sold. You and [the husband] will keep the monies from the sale of one of those Lots to purchase your own home; and the third Lot we’ll sell and used (sic) to cover mortgage liability and the remaining balance we’ll split and use for other investments.” [The wife] said: “Yes, that’s what [the husband] was saying. I can’t wait to move into our own home especially now with [J]. She’ll have a backyard to play and we’d entertain and have BBQs.

The Husband’s Mother

Mrs Berge Senior gave some short evidence.
On the evidence of the father it was she who could have shed light on all the financial transactions involving the father and the son. Time and again in his evidence the father referred to her and inferred that she would know the answer to the question asked and that he did not.
Since he was appearing in person, I advised him that comment might be made in the event that he did not call her.
During the course of the hearing, he filed a short affidavit by her and she gave some short evidence.
She was not much cross-examined.
The result of her appearance was that no light was cast upon much of what had been obscured in relation to the financial transactions. The giving of light upon and clarity to those transactions was clearly the obligation of the father and the husband; an obligation that they could on the evidence fulfil but which they failed to discharge.
I note that the husband, who, because of the orders he sought, was in the same cause as his father and who was unable therefore to cross-examine his mother, did not seek leave to reopen his case to call his mother in-chief.
What ultimately might have been revealed if either of them had called the husband’s mother to give evidence of what she did and what she knew I cannot say. I can only assume that the evidence which she might have given (beyond what is contained in her short affidavit and the answers she gave in cross-examination) would not have assisted either the father or the husband.
I find on the evidence that the property was acquired by the husband and his father for the purpose of a joint venture between them.
I find that the terms of that joint venture were that the costs and profits of the development and the subdivision were to be shared by the husband and his father equally, but in accordance with the scheme set out above with the father being responsible for the costs of the building of his home.
What then is the value of the husband’s interest in the joint venture? The property was valued as if in subdivided form and the father’s evidence is that the approval of the subdivision is proximate. That valuation was $1,608,000. The costs of development are said to be $400,000. The net value on this basis is $1,208,000. On its present unsubdivided form its value is $950,000 which I propose to adopt since it is not speculative.
There are mortgages outstanding on the property. Those which do not relate to the personal borrowings of the husband or his father amount to $484,000.The mortgage was refinanced for $689,000 and $205,000 of which is referrable to Darwin and $126,600 of which is the husband’s debt (that being an additional portfolio loan borrowed on security of the property).
A portion of those advances relate to the purchase of the C property and the adjacent block and the purchase price being in the sum of $250,000 and subject to a mortgage of $200,000. The balance are utilised to defray development costs and expenses. The proceeds of the sale of a small portion of the property to adjoining neighbours, Mr and Mrs O, are property of the joint venture.
Doing the best I can I estimate the net value of the husband’s share in the joint venture to be $296,300 and I will include that sum in the balance sheet:

Asset	($)	($)
· C property	950,000	950,000
Liabilities
· Mortgage liability	689,000
· Husband’s personal loan	- 126,600
· Loan referrable to Darwin	- 205,000	357,400
Net equity in C property	$592,600
Husband’s half interest	$296,300

The Balance Sheet

The husband and wife produced a balance sheet in the following terms which were agreed save for the controversial issue of the C property. I have excised the liability the husband has for a mortgage registered on the C property for an advance for which he says he was liable. Whilst I have done so because of the circumstances of the acquisition of that loan for a post separation business venture and legal costs and the timing of it and the application of the funds borrowed, I will however take it into account in making a determination under section 75(2).
The non-controversial part of the balance sheet was as follows:

Asset	($)
1	N Credit Union Account (w)	69,800
2	Telstra Shares (w)	6,000
3	TABcorp Shares (w)	300
4	Volvo car (w)	4,500
5	PSS Public Sector Superannuation (w)	90,000
Total for the wife	$170,600
6	N Credit Union Account (h)	89
7	NIB shares (h)	1,520
8	Colonial Savings Plan (h)	1,155
9	Honda car (h)	500
11	MLC Masterkey Superannuation (h)	60,000
Total for the husband	$63,264

The evidence of the father was that after a slow and somewhat tortuous history the subdivision was nearing completion particularly with work done by the father on the property since his retirement this year. He said that he was but a few weeks away from being able to lodge a linen plan of subdivision.
It was pointed out that whilst the plan of subdivision might be able to be registered there were significant other works which were required to be done before the blocks complied with the requirements imposed by the council as necessary to enable them to be sold at the value ascribed to them in subdivided form.
Those works included, inter alia, the reticulation of electricity and water and compliance with all conditions of the development application including appropriate site clearance and remediation. The valuer estimated a figure of $400,000 to the cost of such works (some of which have been done).
The total value of the subdivision was estimated at $1,608,000 less the estimated development costs of $400,000, giving a net value of $1,208,000.
If the subdivision did not proceed the value ascribed to the land was $950,000. I accept this value.
It is not possible to say, having regard to the fact that the valuation was dated 21 November 2008, how much of the work to which the valuer ascribed at a cost of $400,000 has been done. On the evidence of the father there has been significant clearing which he describes as almost complete.
The process of procuring an approval for the subdivision required a redrawing of the boundaries and the sale of certain of the property to adjoining neighbours, Mr and Mrs O.
Indeed it appears that Mr and Mrs O have entered into an instalment contract of sorts which apparently is shortly likely to be one where the whole of the purchase price for the portion of the property they are to acquire will have been paid but they will not have acquired title.
Mr and Mrs O have been informed that the delay in the vendor completing has been due to the pendency of these proceedings and the requirement of the council that clearing cannot be effected by burning.
The proposed purchasers wrote through their solicitors and the owners’ solicitors were instructed by the husband as to the reply. In May 2009, the vendors’ solicitors advised the solicitors for the purchasers in the following terms:
I am instructed that my client’s family law matter is to be heard on 29th June, 2009, after which time they will be in a position to completing (sic) the outstanding works.
The same solicitor notes in a letter a response from the solicitors for the purchaser in the following terms:
The purchaser has requested that you advise him once the Family Court matter has been resolved in order that this matter may be finally completed.
I find on the evidence that the husband represented to the wife that he was a joint venturer with his father in the venture of subdividing and developing the property at C. I accept the evidence comprised in the contemporaneous note made by the wife of a conversation she had with the husband, which was received into evidence as an annexure to one of her affidavits filed in the proceedings, and the evidence of the wife as to that conversation as being more probable than the denials of the husband. Not only that, but the documents produced as authored by the husband indicate that at relevant times he considered himself to be a joint venturer in the enterprise. The question remains was he? I find that he was.
In making that finding I have had regard to the whole of the evidence and in particular the following.
The property is registered in the joint names of the husband and the father, albeit as tenants in common in unequal shares.
The evidence of the father and the husband is that the husband’s inclusion on the title was to assist the father to procure finance for what was his venture. The husband it is said by them, without hope of personal reward, agreed to assist the father that way, but in order to provide the necessary security for the mortgagee had to be on the title to the property. He said in evidence that he was advised that he could not just offer a guarantee but that he had to be registered on the title, albeit for a minority interest.
The father and the husband made financial contributions to the acquisition of the property and the husband assumed an equal liability with the father initially under the terms of the mortgages charged on the property. That is, each of them undertook the responsibility for the repayment of an amount of $200,000 subject to their rights against each other as joint debtors for the same amount.
The husband made the contributions hereinbefore set out.
The father says that he contributed in the order of $37,000 to the purchase.
In his evidence on hearing the husband said he regarded the amount paid for the mortgage payments as a gift to his father, not an amount requiring repayment. It was suggested that even if it were a loan, it was now a loan which was statute barred from recovery. Even if that be true, it does not prevent me taking it into account as a contribution to the acquisition of that property in these proceedings.
The amounts paid for the borrowings on the property initially and subsequently were repaid from various sources. They were repaid by the father from his own funds, by the husband from his own funds or from monies which they jointly borrowed and which were deposited to a joint account of the father and the husband, and called an Offset account.
It appears that both the father and the husband operated the account on a basis that indicated ownership of the amounts in it but after the husband was advised that the wife intended to commence proceedings for an order for property settlement the sum withdrawn from that account by the husband was “repaid” by him refinancing by borrowing against the C property so as to secure an amount of $126,600 being “loans” of about $50,000 and $56,000 and $20,000 “provided to him by the father” but appearing in fact to be sums borrowed and secured on the title to the property. That amount is credited to the joint debt of the husband and father with the St George Bank.
The funds the husband said were procured in this way were, he said, lost by him in failed business ventures or were used for living expenses and legal costs of these proceedings.
On the sale of the smaller lot, after repayment of part of the mortgage secured on the property and certain advances made to the parties to acquire it, the husband received a sum of $15,000. The husband says that this was the repayment of the “loan” that he made to his father at the time of the purchase. I find it was a distribution in part of the husband’s entitlement under the terms of the joint venture with the father.
On the sale the balance of the proceeds were used in part to reduce the outstanding mortgage on the property and the father received the sum of $65,000. A further $50,000 which the wife claims, and I accept, was the husband’s entitlement as an equal joint venture partner in relation to the property was banked by him to the credit of an account under the father’s control.
The wife gave evidence of a conversation which occurred on 28 April 1999 with the husband at the time of the sale in which he said:
“We are going to sell lot [B] for $165000.00. We’ll repay $30,000.00 towards the IMB mortgage loan and $5000.00 to the Agent. From our $65,000.00 share of the proceeds, we’ll use $50,000.00 toward the purchasing our own home and $15,000.00 toward our wedding costs and overseas holiday. From my parents’ $65,000.00 they will purchase a kit home and pay for subdivision costs”.
“My parents will live on one portion of the property. Another portion will be sold and you and I will use the proceeds to acquire our own home. From the third portion we’ll split the profits with my parents after the loan and property related costs are paid off.”
The wife gave evidence that she made a contemporaneous note of the conversation. I find that the wife’s evidence is credible and that the conversation took place.The note says that at the time the remaining three lots after subdivision would be worth greater than $400,000.
Removed from the husband’s computer drive left at his home were a number of documents which were produced by the wife in evidence and identified by the husband as his documents. They comprised spreadsheets, notes and letters.
One of the notes on a document proposes that the husband would, on the acquisition of the property, claim his residence on a lot on the property so that it could be sold without the payment of taxation. He in that same note calculates the subdivision costs and says that his father will reside on one lot. He calculates the sales of the other two proposed subdivided lots and the smaller, already separate, parcel of land and determines a profit after allowing for expenses in the sum of $243,000.
Other spreadsheets prepared by him are prepared on the basis of an equal share with the father in the subject property.
On the settlement of the sale of Lot B, the husband and his father wrote to IMB and asked that the sum of $65,000, a portion of the proceeds, be released to the father to cover the further development of Lot 1 and specifying that the remainder of the advance was to be prepayment of the approved loan.
In a subsequent refinancing, an Offset account was established which the husband used as his own account and drew on without the need for the father to approve such drawings. In due course he assumed liability for the amount specified above. It is remarkable, however, that the husband describes this as a series of withdrawals each constituting a loan from the father which included sums of money as low as nine cents. The evidence in that regard I find lacking in credibility.
In relation to the company L Pty Limited it seems that although the father claimed that it was his alter ego, as was the trust, the evidence was that the husband instructed accountants to vary figures in already prepared financial records and assigned income which he had in the form of trailing commissions as a mortgage broker to that trust. This was at a time when his income was relevant to the determination of the quantum of child support.

In looking at the husband’s evidence overall I have expressed my view as to its credibility but I have particular regard to that evidence given his conduct when matters between the husband and the wife were not in contention. I find that the conversations and correspondence and notes all point to the existence of a joint enterprise with the father in the development of the property which found, I think, its best description as to entitlement in the conversation he had with the wife and set forth above. I find that the husband has since acted in a manner which is consistent with that arrangement. Although much of this evidence is clearly indicative of an intention in the husband to be a joint venturer with his father and a belief that he was, only part of the evidence described above points to a sharing of that intention and belief with the father.
Is there evidence which would demonstrate a joint intention to be involved in a joint development of part or all of the land? I find that there is such evidence, including the following.
The father:
a)concedes that the initial deposit of $15,000 was paid by him;
b)concedes that he was unable with his wife to raise funds to complete the purchase and in particular to gain finance;
c)concedes that he received from the husband a further $15,000 to go to the purchase price (he says by way of loan);
d)asserts that the purchase price was otherwise funded as to $200,000 by advance from the IMB Society, and as to $5,000 by advance from the real estate agent and by funds derived by him from the sale of his former home in the sum of $37,226;
e)concedes the husband paid mortgage payments as set out herein;
f)estimates that he has spent up to $350,000 on the development of the property and says that this sum is related to mortgage repayments, council rates, connection of power throughout the property and costs associated with applications for sub-division and road construction and other expenses. It must be said that certainly some of those funds were provided, inter alia, from capital borrowed by the husband and the father and applied to those expenses. In that sense the husband assumed the liability to the same extent as his father for the repayment of the sum with the father. In relation to the borrowings applied for those purposes they were contributions made by each of them to those expenses. The amount which he says he has spent and referred to above also, importantly, includes money spent on the purchase of a kit home and improvements to the land including the lot on which the home was established; and
g)concedes that he made a proposal to the husband that he and the wife join with the father and his wife in the long term development of the property. It is asserted by the father that the proposal did not proceed because of the wife’s reluctance. The wife says that it proceeded in any event and points to a conversation which took place at a hospital on the occasion of the birth of the husband’s and wife’s child. In that conversation the wife says (and she is corroborated in this regard substantially by her mother’s evidence who was present at the time of the conversation) that the father said:
“[w]e are [sic] the process of subdividing the land into three lots. [The husband’s mother] and I will keep one of the Lot’s [sic] and build a house for us to live in, and the other two Lots will be sold. You and [the husband] will keep the monies from the sale of one of those Lot’s [sic] to purchase your own home; and the third Lot we will sell and used [sic] to cover mortgage liability and the remaining balance we’ll split and use for other investments.”
Letters sent by the husband do not at any time indicate other than a beneficial ownership of the property. Indeed the husband seeks taxation advice in relation to the taxation imposts on various re-arrangements of the title to the property and in particular a proposal that the husband become the owner of one of the lots. In the advice the advisor speaks of an arguable case to support the contention that the taxable income arising from the sale of individual lots will be shared between four parties (being the husband and the father and their respective spouses). Nowhere in that document is there any assertion made that the husband’s interest is other than beneficial.
The husband did some, although he asserts little, work on the property including mowing and assisting the father roof his home. He, however, did much in relation to the organisation of finance and refinancing of the property either directly or indirectly. He prepared instructions for surveyors in letters to be signed by himself and his father. None of the applications for finance or refinance or letters of offer ever asserted that his interest in the property was other than beneficial.
The husband drew monies on the Offset account which was established adjunctively with the mortgage and this became part of a debt which the husband says was due to the father. This debt has been repaid by the operation of an agreement between the father and the husband, being that on the refinancing of the property the husband would accept sole responsibility for a portion of the mortgage which was in the same sum as the amount due to the father. The father by the same token fully accepted that the property would be used as security for that advance.
The property was refinanced multiple times and in respect of such refinancing there was scant evidence available as to the precise application of the additional funds borrowed. It does however appear that the surplus was either applied to the costs of developing the property or building the father’s home on it in part.
The husband says that the father bought an apartment in Darwin which was financed with the St George Bank and the finance was arranged through the brokerage which is operated by a company owned by the husband’s new partner, E, and in which the husband works as a mortgage broker. On settlement of the purchase, part of the advance was secured to a related bank of the St George Bank in South Australia and the balance was borrowed from the

St George Bank and secured on the C property.
The home unit in Darwin was purchased by a company which was the trustee of a discretionary trust of which the husband was a potential beneficiary. The trustee was a company of which the husband was one of the directors, the father not originally being such a director. It was sought to be asserted that the fact that the father had not inspected the property prior to acquisition was in some way indicative of a lack of interest in the property but the husband also said that he did not inspect the property. It was the husband whom the father said recommended the investment in it to him. He also had not seen it but had heard about it from someone associated with the sale of the Darwin development and was impressed by what they said. He recommended the proposal to the father as a good investment.
The funding for the purchase, which was at a cost of some $544,000 was procured by refinancing the C property and the borrowing of monies secured against the Darwin unit. There is no evidence of the husband making any payments with respect to that loan but it appears there is a rent-paying tenant of the Darwin property and the husband’s evidence is that his father applies those monies to the payment of the mortgage.
The borrowing of those funds at the time that they were borrowed relied on the continuing liability being assumed by the husband for what he asserts is his father’s debt. His father since that borrowing is said to have retired and become a pensioner. The father’s only income is the pension and the rents received from the Darwin property. The asset/liability ratios may change significantly if the proposed subdivision of the C property goes ahead but the husband asserts that his father has taken no further steps in that regard since the claim of the wife that the property is partly in the husband’s ownership.
I find that the balance sheet of the parties is as follows:

Asset	($)
· N Credit Union Account (w)	69,800
· Telstra Shares (w)	6,000
· TABcorp Shares (w)	300
· Volvo car (w)	4,500
· PSS Public Sector Superannuation (w)	90,000
Total (wife)	$170,600
· N Credit Union Account (h)	89
· NIB shares (h)	1,520
· Colonial Savings Plan (h)	1,155
· Honda car (h)	500
· MLC Masterkey Superannuation (h)	60,000
· Husband’s share in the joint venture	296,300
Total (husband)	$359,564
Total Assets (husband and wife)	$530,164

Section 79(4) contributions to date of separation

Initial Contributions

In her affidavit filed 12 August 2008 the wife says that at the date of cohabitation she had no liabilities and had assets in the form of some savings; personal effects; furniture of minimal value; and superannuation of approximately $5,000.
In the husband’s affidavit filed 26 June 2008 at paragraph 15 he sets out a list of assets which he had at the commencement of cohabitation, namely, savings of about $5,000; the sum of $14,103 owing to him by his parents (and later repaid in the amount of $15,000); a motor vehicle valued at approximately $15,000; an entitlement in a superannuation fund; and some furniture and household effects.

Contributions to date of separation

The husband made a significant contribution by undertaking a liability for the mortgage debt and an equitable contribution being the use of the income that might otherwise have been applied to the family.
The wife made a significant contribution to the welfare of the family, including caring for the parties’ child on a full-time basis for 16 months after her birth.
The wife also asserts that during the marriage her mother regularly cared for the parties’ child. In May 2002 the wife commenced training on a scholarship award with a regional Academy. The wife’s evidence is that during this time she drove to and from the Academy late Sunday night or early Monday morning, and returned on Friday afternoons. In this period the child was in day care for three days per week and was otherwise cared for by the husband and the wife’s mother. The husband says that during this time he was solely responsible for caring for the child.
The husband asserts that prior to the child’s birth the parties shared equally in the homemaker tasks. Following their daughter’s birth the husband says the wife took 12 months off work to care for the child and that he stayed home from work on Wednesdays to care for their daughter, in addition to doing so on weekends. The husband says he undertook the majority of the housework during this period and also assisted with the child’s care, including when she woke at night. When the wife returned to work the husband says he maintained flexible working hours and often stayed home on Wednesdays to care for their daughter. He says he was also primarily responsible for her care for periods of several months between contract work between 2002 and 2004. To the extent that the evidence of the husband and wife conflict I prefer the evidence of the wife.

Section 79(4) contributions post separation

Parenting Orders were made on 4 May 2007 that the child spend every alternate weekend from 6.00 pm Friday to 6.00 pm Sunday and half school holidays with the husband, in addition to other dates and occasions as specified in the Orders. In his affidavit filed 26 June 2008 the husband asserts there have been difficulties in having contact.

Conclusion based on contribution

I find that the parties’ contributions to the acquisition conservation and improvement of the above assets and to the welfare of the family to the date of the hearing are 52.5% to the wife and 47.5% to the husband.

Section 75(2) considerations

The husband was the beneficiary of the trust and appeared to receive some benefit from it, although ill-defined.
Issues were raised in respect of the adequacy of the husband’s financial support for the child, both current and historical. In her affidavit filed 12 August 2008 the wife’s evidence was that the husband was currently paying $3,257 per annum child support based on the husband’s CSA Adjusted Taxable Income for the financial year ending 2007. The wife says that the husband has been assessed as having to pay $1,122 per annum in child support from 1 January 2009.
The wife’s evidence in her affidavit of 12 August 2008 is that with the exception of the payment of the assessment and meeting the cost of language lessons, the husband does not otherwise contribute towards the child’s expenses.
During cross-examination it was the wife’s evidence that the latest Child Support Assessment was for $368 per month (Transcript 29 June 2009, page 37, line 14), and in cross-examination the husband stated he is currently paying $85 per week (Transcript 30 June 2009 page 134, line 26).
During cross-examination (Transcript 1 July 2009 page 155, line 20), the husband denied deliberately minimising his income for the purposes of diminishing his child support obligations. Even if this be correct it must certainly be the case that so far the mother has shouldered almost completely the burden of the cost of support of the child both physically and financially.
I am not convinced on the evidence thus far that there is any reasonable likelihood of a shift in that burden in the near future.
I accept that the wife made no direct financial contribution to the costs of the C property subdivision nor that she made any significant direct non-financial contribution to it. It is noted however that the wife although advised by the husband that she would be able to use the $50,000 profit from the sale of the smaller block was subsequently told that that would be applied to development costs and would not be available until a later time. In that regard the wife was deprived of the opportunity to acquire a home for herself and the family in contemplation apparently of future benefit falling to the husband. The wife has clearly made significant contributions aliunde to the marriage.
The husband has on his own account a significant earning capacity as a mortgage broker. He describes himself as the best broker in the business owned by his partner. He does have as previously indicated an outstanding liability to the bank on mortgage with respect to legal costs and expenses in relation to a failed business started after separation. He has the potential to earn income from the subdivision and property investment as well as from being a mortgage broker.
The husband has a liability for $126,600 from post separation business ventures.
The wife will have the major burden of caring for the parties’ child.

Conclusion on section 75(2)

Based upon an assessment of 75(2) considerations, I will make an adjustment of 2.5% in the favour of the wife.
Based on my findings above I propose to make orders to effect the following division of the assets of the husband and wife:

Asset	($)
· N Credit Union Account (w)	69,800
· Telstra Shares (w)	6,000
· TABcorp Shares (w)	300
· Volvo car (w)	4,500
· PSS Public Sector Superannuation (w)	90,000
· An amount payable by the husband to the wife	120,990
Total (wife)	$291,590
· N Credit Union Account (h)	89
· NIB shares (h)	1,520
· Colonial Savings Plan (h)	1,155
· Honda car (h)	500
· MLC Masterkey Superannuation (h)	60,000
· Husband’s share in the joint venture	296,300
Total (husband)	$359,564
Liabilities
· Cash to be paid by the husband to the wife to effect a division of the assets as to 55% in favour of the wife	120,990
Total Net Assets (husband)	$238,574

Overall division of assets

The above determination will see the wife receive 55% of the parties’ assets and the husband receive 45%.

Just and equitable

The division of assets would see the wife receive $291,590 worth of net assets and the husband receive $238,574 worth of assets.
In the circumstances of this case I determine that result to be just and equitable.

Orders which should be made

It is proposed that the wife retain those assets she has and that she receive the sum of $120,990, representing a payment which will effect a division of the assets in the proportion of 55% to the wife and 45% to the husband. The husband is to pay that sum to the wife within one month from the date of this order. The husband and the father are to charge the whole of their right, title and interest in and to the property at C in favour of the wife to secure the due payment of this order. The husband and the father are restrained from mortgaging, encumbering or disposing of his interest in the C property pending payment of the sum.
It was agreed during the course of the hearing that the wife held on trust money for the child’s tertiary education. There is no indication she will not apply the funds properly for that purpose, and I accept that she will. Therefore, I decline to make any order in relation to certain monies held by the wife on trust for the benefit of the child of the husband and wife.

I certify that the preceding one-hundred and fifty-three (153) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Fowler.

Associate:

Date: 9 October 2009

[2009] FamCA 968

9 October 2009

Key Legal Topics

Areas of Law

Family Law

Equity & Trusts

Commercial Law

Legal Concepts

Contract Formation

Costs

Constructive Trust

Fiduciary Duty

Remedies