Brumar (Vic) Pty Ltd v Norris; Brown v Maurice Blackburn Cashman

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2008 3783

PAUL SCHNEIDER	First Appellant
and
RIVERVIEW PROJECTS PTY LTD (ACN 069 234 000)	Second Appellant
v
MARA ELLERAY	Respondent

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JUDGES:	BUCHANAN and BONGIORNO JJA and WILLIAMS AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	12 November 2009
DATE OF JUDGMENT:	23 August 2010
MEDIUM NEUTRAL CITATION:	[2010] VSCA 205
JUDGMENT APPEALED FROM:	Elleray v Schneider & Anor (Unreported, County Court of Victoria, Judge Jenkins, 30 April 2008)

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REAL PROPERTY — Domestic relationship — Adjustment of property interests under Part IX of Property Law Act 1958 — Whether property held by third parties can be the subject of adjustment orders — Meaning of ‘property’ and ‘financial resources’ as defined in s 275 of Part IX — Cohabitation agreement — Effect of cohabitation agreement — Whether trust created in favour of respondent –- Whether trial judge’s assessment of value of first appellant’s assets supported by evidence — Appeal allowed.

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Appearances:	Counsel	Solicitors
For the Appellants	Ms M L Smallwood	Septimus, Jones & Lee
For the Respondent	Mr N P Jones	Schetzer Constantinou

BUCHANAN JA:

I would allow the appeal for the reasons stated by Bongiorno JA and make the orders which his Honour proposes.

BONGIORNO JA:

This appeal, from a decision of the County Court, is concerned with a property dispute which has arisen on the termination of a domestic relationship. The trial of the proceeding took eight days in the County Court and resulted in a judgment in favour of the respondent against her former male domestic partner (the first appellant) and a company of which he was a shareholder and a director (the second appellant). The trial judge’s reasons for judgment ran to some 85 pages. Her Honour entered judgment for $315,800, in favour of the respondent against both appellants who were also ordered to pay the respondent’s costs, taxed on an indemnity basis.

The respondent commenced the proceeding by filing a generally endorsed writ in the County Court on 5 February 2007. Eventually, the matter went to trial on a (further amended) statement of claim filed on 24 August 2007. By this somewhat prolix document the respondent pleaded a case for relief under Part IX of the Property Law Act 1958 (‘the Act’) against the first appellant and a number of additional or alternative claims against both appellants alleging breach of contract and the creation of a trust in respect of the dwelling in which the respondent and the first appellant resided during the period they cohabited (‘the Hillsyde property’) and some chattels. The appellants joined issue with many of the allegations of fact made by the respondent. The first appellant and the respondent also each pleaded the existence of a ‘cohabitation agreement’ signed by them with effect from the time at which they commenced to live together. However, as will be seen, they each sought to put a different light on that document – the first appellant that it acknowledged that the respondent had no interest in the Hillsyde property and the respondent that it should be given no effect because of the circumstances of its creation and the

actions of the first appellant.

The parties, each of whom had been previously married and had children, met when the respondent worked as a barmaid at the Riverview Golf and Tennis Centre in Ascot Vale in late 1993 or early 1994. At that time, she lived in rented accommodation in Strathmore Heights with her three children. The first appellant lived in a house which he had bought with his former wife in Greenvale.

The respondent and the first appellant commenced living together in December 1997 in the Hillsyde property which had been purchased by the second appellant, Riverview Projects Pty Ltd (‘Riverview’), in August of that year. They resided in that house for the whole of the period of their cohabitation, which ended in November 2006. Two of the most significant issues in this case concerned that property and the execution and effect of the cohabitation agreement. Although executed by the respondent some time after the parties commenced to live together, it purported to have effect from a date prior to its execution and to regulate a number of matters concerning their cohabitation in the Hillsyde property and, most importantly, its ownership.

The respondent’s case was that notwithstanding that the Hillsyde property was purchased by Riverview she had an effective half interest in it pursuant to an agreement between her and the first appellant. On the other hand, the first appellant denied that there was ever any such agreement and, indeed, argued that the cohabitation agreement precluded the respondent from asserting her claim. Additionally (perhaps alternatively) the respondent claimed a half interest in equity in the property of which Riverview was merely a trustee.

The respondent’s case was that the property was purchased in the name of Riverview because, the first appellant told her, the finance necessary to complete the purchase was available at a lower interest rate if the borrower were a company than if the borrowers were individuals. In her evidence she said that the first appellant assured her that notwithstanding Riverview’s involvement in its purchase she would be a co‑owner of the property with him. She said that he gave this assurance both before the house was purchased and after it was purchased. She said that during the period they lived together and after the cohabitation agreement was signed the first appellant often acknowledged that the house was a joint asset and referred to it as ‘our house’.

The respondent said that she and the first appellant first discussed buying a house jointly in about mid‑1997, in the context of her understanding that the lease on the property she was then occupying would terminate in August. She said that she sought and obtained her mother’s approval to use her (the mother’s) property at Dunolly as security for a loan and that the National Australia Bank had valued the property and agreed that she could borrow $70,000 using it as security. She said that, subsequently, she and the first appellant together applied to the ANZ Bank for a joint loan which, although approved, was never taken up. She said that she looked at a number of houses and that it was she who eventually found the house in Hillsyde Avenue. She said that she recalled giving a sales brochure in respect of the house to the first appellant which had an annotation upon it as to the selling agent’s estimate of its value.

In his evidence the first appellant denied the respondent’s principal contention that although the property was bought in the name of Riverview it was to be owned jointly by her and him. He denied ever giving the assurances attributed to him by the respondent.

The respondent said that prior to the Hillsyde Avenue property being purchased the first appellant asked her to sign the cohabitation agreement. She said that he said that because they were not married ‘ … that is something that you do before you move in together … ‘. She said that she would have signed anything that he asked her to sign and that she took a draft of the agreement that he gave her to a solicitor in Sydney Road who suggested some changes. She conceded in cross-examination that that solicitor must have given her some advice but she could not remember what it was. She said that the first appellant was not happy with her solicitor’s suggested alterations to the agreement but, nevertheless, he arranged for those alterations to be made.

Two copies of the agreement were before this Court on the appeal, one executed and one unexecuted. The difference between them suggests that the alteration advised by the Sydney Road solicitor concerned the deletion of a clause which dealt with the effect of the agreement in the event that children were born to the parties. The clause is not in the executed copy before the Court. But even if this analysis is incorrect, it had no bearing on the trial judge’s determination, nor will it have any effect on the disposal of this appeal. Those parts of the agreement which are significant concerning the Hillsyde property appear in both copies. They are:

5(i) …
(ii)The parties intend to live in a property, the address being 46 Hillsyde Parade, Strathmore in the State of Victoria (“the Hillsyde Parade property”) purchased by Riverview Projects Pty. Ltd. ACN 069 234 000 (“the owner”). [The first appellant] is a Director and shareholder of the owner. [The first appellant] agrees to pay the rent to the owner whilst the parties cohabit in a defacto relationship in the Hillsyde Parade property.
(iii)[The respondent] agrees that she has no claim, right or entitlement of any kind, now or in the future, to the Hillsyde Parade property or any other property held by the owner now or in the future.

The respondent said that these events occurred before the parties commenced living together in the Hillsyde property but that she did not actually sign the agreement until some months later and then only after she had taken it to another solicitor in Moonee Ponds who signed a certificate on it to the effect that he had explained its legal effect to her before she signed it. She said that this certificate was in fact untrue and that the Moonee Ponds solicitor had not explained the effect of the agreement to her but had merely signed the certificate and witnessed her signature on the document. She said he gave her no advice about the agreement or its effect.

The respondent gave evidence that on many occasions the first appellant had assured her that the fact that the Hillsyde property was bought in the name of Riverview did not affect the intention that they both had at the time it was purchased that they should be co‑owners in their personal capacities. She said that the cohabitation agreement was never discussed whilst they lived together. It was put away and not mentioned again until she and the first appellant decided that she would leave the relationship. She said she then asked him for a copy. She said that the first appellant never said that the agreement meant that she no longer had any interest in the Hillsyde property. Whenever things came up in conversation about the house, such as renovations or the like, he always said ‘Whatever happens, the house is half yours’. It would appear that no evidence was led before the Court as to the respondent’s understanding of the cohabitation agreement or why she thought it was of no effect when she had signed it as a deed in a solicitor’s office. Nor did the respondent say why she wanted a copy of the document when the parties separated. However, in his submissions on this appeal her counsel conceded that there was no challenge to the validity of the cohabitation agreement on the basis that it was brought about by ‘a lack of understanding or otherwise’. Accordingly, it must be assumed that the respondent knew what the document said and what its legal effect would be absent the representations of the first appellant. Indeed her whole case implies that this must have been so.

The trial judge made a number of findings as to the credit of the principal witnesses, namely the respondent and the first appellant. Put simply, she accepted the respondent’s evidence on virtually every aspect of the case. She described the way in which she gave her evidence as ‘consistent, restrained and dignified’. She pointed to evidence which she thought supported the respondent’s account. In particular, she found that the respondent’s evidence in relation to three critical areas was credible and consistent with surrounding objective circumstances. These critical areas concerned the events and conversations leading up to the purchase of the Hillsyde property, the respondent’s account of the cohabitation agreement and her account of work which she performed and money which she expended during the period of cohabitation.

As far as the first appellant was concerned, her Honour considered that his evidence was ‘characterised by personal attacks upon the respondent extending to allegations of infidelity, credit card excess and disguising personal expenditure as mutual household expenditure’. She thought his evidence was often ‘confused, rambling and contradictory’ and she did not accept that he had given evidence in an ‘honest or reliable manner’. She considered that he had concocted a ‘sham’ arrangement with his sister, Helene Woods, with regard to her alleged involvement in the company which owned the Hillsyde property, the cohabitation agreement and the provision of funds for renovations to the Hillsyde property. She concluded that ‘…the [respondent] was induced to sign the Cohabitation Agreement under false pretences’.

The trial judge divided the issues she considered had to be determined into ‘preliminary issues’ and ‘further issues’. Her Honour said there were two preliminary issues: the terms of any agreement or understanding between the parties prior to cohabitation and the weight which should be given to the cohabitation agreement, and the effect of the property in which they cohabited being owned by a third party.

Her Honour identified three ‘further issues’: what real and personal property did each party have prior to and immediately subsequent to cohabitation, what financial and non-financial contributions were made by them during their relationship, and whether it is just and equitable to adjust the parties’ interests.

The trial judge found that the respondent had discovered the Hillsyde property and that she and the first appellant had agreed that it would be bought jointly and that each would have a one half interest. It was bought in the name of Riverview, because the first appellant said a company could obtain a loan on better terms than could an individual. Her Honour found that the respondent moved into the property in reliance upon a ‘representation and assurance’ by the first appellant that the house would be half hers. Her Honour accepted the respondent’s evidence that the first appellant said on many occasions both before and after the property was purchased that it was half hers and that these discussions continued even after the execution of the cohabitation agreement which was, of course, in directly contrary terms.

The trial judge extensively canvassed the provisions of the cohabitation agreement and the process by which it came to be executed by the respondent. She considered that its terms were not just and equitable for a number of reasons and noted that it was not signed until some time after the parties had commenced to cohabit. Her Honour referred in detail to the evidence surrounding the respondent’s execution of the agreement and the part played in that process by the two solicitors, particularly the second, the solicitor from Moonee Ponds. Her Honour found that the respondent was induced to sign the cohabitation agreement in the belief that it was never intended to operate to deprive her of an interest in the Hillsyde property. She accepted the evidence of the respondent that the parties never abided by the agreement in respect of its other terms in any event.

The trial judge found that the second appellant, Riverview, was established for the sole ultimate benefit of the first appellant and that he exercised effective control over it. She found that his sister, Helene Woods, who owned one of the ten issued shares in the company, was never intended to exercise any direct or indirect control in respect of that company and that it was never intended that she should benefit from it. Her Honour held that the applicable statutory provisions (Part IX of the Act) gave the Court a very wide discretion to make orders to adjust the interest of parties in property. She considered that this discretion extended to the property of third parties over which the first appellant had effective control. Her Honour said there was no impediment to the making of orders which operated in relation to property which was owned by third parties. Her Honour cited no authority for this proposition. It appears to ignore the carefully differentiated definitions of ‘property’ and ‘financial resources’ in s 275 of the Act and the terms of s 285 which only confer a jurisdiction to ‘adjust’ the property interests of domestic partners. It might also be noted that the respondent’s statement of claim did not appear to seek any relief against Riverview pursuant to Part IX of the Act.

In considering the effect of the cohabitation agreement the trial judge accepted an argument put by counsel for the respondent that the first appellant (and, it would seem, Riverview) were estopped from relying upon the cohabitation agreement by virtue of the first appellant’s representations that the respondent would have a one half interest in the Hillsyde property. Her Honour held that these representation were made on his own behalf and on behalf of Riverview.

The trial judge also considered a claim by the respondent that a half share in the Hillsyde property was held on trust for her by Riverview and/or the first appellant. Her Honour held that the respondent had relied upon representations and assurances made to her detriment and that accordingly a trust was created in her favour as she claimed. However, she said there was no need for such a finding in this case because:

… I am satisfied that the discretion available to the Court under the Act to make orders for the adjustment of interests in property of the parties, extends to third parties under the effective control of a party. Furthermore such orders, in giving effect to a just and equitable adjustment, may take account of equitable interests which might otherwise have been created.

Her Honour found that because the respondent’s application called for determination under Part IX of the Act and because the statutory provisions found in that part ‘ … now effectively cover the field and enable consideration to be given to issues which might previously had been only addressed in the context of a constructive trust claim’, there was no basis for considering any claim under the heading of ‘constructive trust’.

After making the findings referred to, her Honour considered the financial circumstances of the parties and reached a conclusion that the appellants should jointly pay the respondent the sum of $315,800 in order to effect an appropriate adjustment of property pursuant to s 285 of the Act.

Both appellants appealed the whole of the judgment of the trial judge. Their original notice of appeal contained 39 grounds. However, by an amended notice of appeal dated 14 November 2008 all of those grounds were deleted and replaced by 35 new grounds. Five further grounds were added, by leave, during the hearing of this appeal. They related to the costs orders made by the trial judge at the conclusion of the trial.

Although the grounds of appeal were not argued serially it is convenient to deal with those which need to be dealt with in their numerical order.

Grounds 1 and 2(a) and (b)

By these grounds the appellants challenge the determination by the trial judge that Part IX of the Act gives the Court:

… a very wide discretion to make orders to adjust the interest [sic] of the parties in property. In my view this discretion clearly extends to the property of third parties [in this case Riverview] over which the [first appellant] has effective direct control.

They assert that her Honour erred in holding that she could make orders against Riverview pursuant to Part IX and, in particular, pursuant to s 285, in the course of adjusting the property interests of the respondent and the first appellant.

In reaching the conclusion that she did on this question, her Honour appears to have misconstrued a passage in the judgment of Smith J in Davis v Tayles,[1] a Part IX case in which the male partner was a director and shareholder of a number of companies which had substantial assets. Smith J reached a conclusion that, on the facts in that case, it was just and equitable for the female partner to have her financial contributions recognised by sharing in the increase in value experienced by the assets held by the male partner and his companies. Thus, the assets of the male partner’s companies were treated as ‘financial resources’ available to him to which the female partner had contributed. His Honour gave those contributions recognition by increasing her interest in the home which she formerly shared with the male partner from 50 per cent to 75 per cent. He did not, nor could he have, made an order against the male first appellant’s companies, or any of them, in the exercise of jurisdiction under s 285 of the Act. The only order which the Court made against one of the male defendant’s companies was in the nature of an anti-suit injunction. His Honour justified the granting of that injunction by reference to s 284 of the Act which requires a court hearing a proceeding under Part IX to make orders which will end the financial relationships between the litigant domestic partners and avoid further proceedings between them. This is not an order adjusting the interests of the domestic partners in property.[2]
[1][2006] VSC 219.
[2]The decision of Smith J in Davis v Tayles [2006] VSC 219 has since been confirmed, with some variations, by this Court: Tayles v Davis [2009] VSCA 304. Jurisdiction to grant the anti-suit injunction was not challenged in this Court, nor could it have been. It could always have been granted in the auxiliary jurisdiction in equity of the Supreme Court. It was sought in the proceeding on that basis.

That a party’s interest in a corporate entity could be property subject to a Part IX claim is undoubted. In this case it appears that the first appellant held 90 per cent of the shares in Riverview – although the trial judge expressed the view that he beneficially owned 100 per cent. Shares are choses in action (or things in action) and fall within the definition of property in s 275 of the Act. Those shares were property of the first appellant available for consideration in the respondent’s claim under s 285. But that did not mean that the company’s property was, in any sense, liable to be apportioned to meet the respondent’s entitlement to an adjustment of property under Part IX. The trial judge did not include the value of the first appellant’s shares in Riverview in his assets for the purpose of defining his property for the purposes of s 285, but did not explain why.[3]
[3]Although they are mentioned in para. 14A of the Second Further Amended Statement of Claim where they are alleged to be his assets.

The trial judge approached the determination of the issues which fell for decision in this case as if the property of Riverview was, in fact, the property of the first appellant. Her Honour did not appear to consider whether that property was a financial resource available to the first appellant within the meaning of s 275 of the Act and accordingly relevant for consideration as such when having regard to questions of contribution. That is what Smith J did in Davis v Tayles.

The form of the judgment entered by the Court in this case against both appellants in favour of the respondent implies a joint liability in the appellants to pay money to the respondent. But Part IX of the Act, pursuant to which the trial judge said she was acting, does not recognise such a liability. The jurisdiction conferred on the Court by Part IX, so far as is relevant to this case, is confined to the adjustment of property interests between domestic partners. Although such an adjustment may result, in some cases, in one domestic partner being ordered to pay money to the other, there is no justification found in s. 285, or elsewhere in Part IX, for an order for payment of money against Riverview in the respondent’s favour.

In this Court counsel for the respondent did not contest these grounds of appeal. He conceded that the Court had no jurisdiction to enter the judgment it did, as it had no jurisdiction to make orders affecting property of a third party in a proceeding pursuant to Part IX of the Act. He conceded that such jurisdiction is confined to adjusting property rights between domestic partners.

It follows from the above, that these grounds of appeal are made out.

Ground 2(c)

This ground contends that the trial judge made an error in making an order that a caveat, previously lodged by the respondent in respect of the title to the Hillsyde property, should remain as ‘security’ for payment of the judgment sum and costs.

On 8 December 2006 the respondent had lodged a caveat in respect of the title to the Hillsyde property, the registered proprietor of which was Riverview. The caveat claimed an interest ‘pursuant to a constructive or implied trust’. An application by Riverview to remove the caveat had been dismissed by the trial division of the Supreme Court on 18 May 2007 after a contested hearing so that at the time of the County Court trial the caveat was still in place.

The transcript of the County Court proceedings shows that after the trial judge gave judgment there was a discussion between her Honour and counsel in the course of a costs application which raised the issue of the caveat. In that discussion the judge said that ‘the caveat should be available to secure payment of the costs as well’. Earlier, she had said:

In relation to the caveat and the costs, in the context of this case the adjustment arising as it does inextricably out of an interest in the property, the adjustment is certainly being made under the Property Law Act, but as I said, the interest in the property can arise by way of a direct resulting or constructive trust outside of the Property Law Act whilst the adjustment is being made within the terms of the provisions of the Property Law Act.

It seems that the trial judge in making these comments intended to convey that the caveat should remain in respect of the Hillsyde property to secure payment of the judgment sum and costs. In fact, of course, the caveat remains because no order has been made which affects the title to the Hillsyde property or ‘adjusts’ any interest in that property. Nor could any such order have been made, having regard to the way her Honour decided this proceeding – by the awarding of a monetary sum. A judgment debt simpliciter does not give a judgment creditor a caveatable interest in land. The caveat is currently in place because it has not been removed by any order of a Court or otherwise in accordance with the provisions of the Transfer of Land Act 1958.

The authenticated order issued by the County Court in respect of which this appeal is brought does not refer to the caveat. As the County Court made no order as to it, this ground of appeal need not be considered further.

Grounds 3 to 10

These grounds all concern the cohabitation agreement. Although some of them allege errors of law, they generally assert that the trial judge made errors of fact. It is appropriate to consider these grounds although, if, as is proposed, there is to be a new trial of this proceeding, those determinations will be no longer of any relevance. Their ultimate resolution will depend upon the evidence put before the court on that trial.

Whatever might be the effect of the cohabitation agreement absent s 285 of the Act,[4] it is clear that in an application pursuant to that section for an order adjusting the interests of domestic partners in the property of one or both of them, the Court must have regard to three specific matters. One such matter is ‘any written agreement entered into by the domestic partners’ (emphasis added). The others are the financial and non-financial contributions made by each of the partners to each other’s and their joint property and financial resources and the contributions made in the capacity of a homemaker or parent by either of the partners to the welfare of the family or relevant children.
[4]See Seidler v Schallhofer [1982] 2 NSWLR 80 for an interesting discussion of the effect at common law of contracts for extra-marital cohabitation.

The discretion conferred upon a court under s 285 is to adjust the property interests of domestic partners in a way that seems just and equitable. The governing principle which controls the exercise of the discretion is what ‘… seems just and equitable’. But the exercise of the discretion is not at large. The Court must have regard to the three matters referred to in s 285(1).[5] It is by having regard to those matters, in the context of the actual domestic relationship being examined, that a Court may adjust property interests in a just and equitable manner.[6]
[5]Evans v Marmont (1997) 42 NSWLR 70, 79 – 80 (Gleeson CJ and McLelland CJ in Equity)
[6]Conn v Martusevicius (1991) 14 Fam LR 751; (1991) V Conv R 54-413.

The requirement to have regard to something is, in the context of this enactment, a requirement that it be taken into account and be given weight in determining the justice and equity of the particular case.[7] This requirement does not mean that the agreement must be given any particular weight. The Court’s function is to have regard to the agreement. It must consider it in the particular context of the relevant domestic relationship and give it such effect as will contribute to a just and equitable adjustment of property interests between the parties. The weight to be given to the written agreement and, as a consequence, the effect to be given to it is a matter for the Court. Provided such regard has been had to the agreement in reaching its decision, the Court has fulfilled its function under s 285(1)(c).
[7]R v Toohey Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327, 333 (Gibbs CJ); R v Hunt; Ex parteSean Investments Pty Ltd (1979) 180 CLR 322, 329 (Mason J).

The existence of the cohabitation agreement was pleaded by the respondent in her further amended statement of claim and the circumstances in which she executed it were described in her evidence at trial. There was much debate between the parties as to whether the respondent had legal advice before she signed it or whether the solicitor she consulted signed a false certificate on the agreement to the effect that he had given her such advice. The trial judge accepted the respondent’s evidence that the Moonee Ponds solicitor had given her no advice but had signed a certificate to the effect that he had. Her Honour did not advert to the fact that such a finding necessarily involved an incidental finding that the solicitor, who had not been called as a witness, had committed the criminal offence of creating a false document, not to mention being seriously in dereliction of his professional obligations.

As already noted, a considerable part of the trial was concerned with the circumstances surrounding the execution of the cohabitation agreement by the respondent. The purpose of much of this evidence is not immediately apparent. There was no argument that there was a written agreement between the parties – the respondent pleaded that it existed; the first appellant relied on it. There was no argument that the respondent knew what she was signing. Her case was that the first appellant represented on more than one occasion that he would not enforce the agreement against her – at least insofar as it operated to deny her any interest in the Hillsyde property. It is an inescapable inference that she knew that the agreement would deprive her of that interest if it operated according to its terms. Those terms could not have been clearer. On her own case she was well aware of the effect of the agreement if it were not rendered ineffective as she claimed.

In light of the above, whether the respondent received legal advice or not before she signed the agreement was irrelevant. Consequently, arguments as to who should or might have called the Moonee Ponds solicitor and the judge’s findings as to what that solicitor did or did not do were also irrelevant. The first appellant’s evidence as to discussions with his sister concerning the agreement and her Honour’s findings as to those conversations were likewise irrelevant. They were inadmissible and most of them were also hearsay. It seems they were admitted because counsel for the appellants had indicated in his opening that he was going to call the first appellant’s sister, Helene Woods. How this indication rendered inadmissible evidence admissible was never explained, although the trial judge must have thought it did. Her Honour was very critical of counsel when he subsequently announced that Ms Woods would not be called.

Notwithstanding the confusion that seems to have surrounded the cases made by each of the parties with respect to the cohabitation agreement, her Honour did consider it. She had regard to it. She did so in the context of evidence which she accepted as to the actions of both parties before and after the agreement was executed. Her Honour accepted the respondent’s evidence that the behaviour of the parties was ‘entirely inconsistent with any intention or expectation as expressed in the agreement’. She found that the respondent was persuaded by the first appellant that Riverview should purchase the Hillsyde property because it was financially advantageous to both of them for it to do so. She accepted the respondent’s evidence that she was induced to sign the cohabitation agreement by representations by the first appellant that it was never intended to operate according to its terms, and, in particular, was never intended to deny the respondent a half share in the Hillsyde property.

The trial judge rejected the first appellant’s evidence whenever it was contradicted by that of the respondent. She determined that the first appellant was an unreliable witness, that he had induced the respondent to sign the cohabitation agreement by false pretences and that it was a ‘sham’.

Her Honour made a specific finding to the effect that she accepted the respondent’s evidence as to the signing of the cohabitation agreement and went on to find that it was ‘…inconceivable that the [respondent] did not reasonably believe (and act in reliance accordingly) that the Hillsyde property was held for the joint benefit of both parties’.

It is clear from the attention her Honour gave to the circumstances in which the respondent executed the cohabitation agreement that she thought those circumstances were relevant to the weight she should give the agreement. This is notwithstanding that there was no challenge to the document or to the respondent’s knowledge of its terms. Whether she was given advice before she signed it or not could not be a relevant consideration in the circumstances.

The grounds relating to the cohabitation agreement can now be examined in light of the above matters, although it should be noted that many of these grounds were not mentioned either in the appellants’ written outline or in their oral submissions.

Grounds 3 and 4

These grounds relate to the finding by the trial judge that the respondent was induced to sign the cohabitation agreement by ‘false pretences’. It is argued that that finding was not open on the pleadings or the evidence.

Whilst the use of the term ‘false pretences’ may have been inapt to describe the representations by the first appellant to the respondent before the agreement was signed the judge’s finding on the issue is clear enough. Her Honour found that the respondent only signed the cohabitation agreement because she accepted the first appellant’s assurances that whatever the agreement said she still had a half interest in the Hillsyde property. Her Honour was entitled to make this finding. There is nothing in either of these grounds.

Grounds 5 and 6

These grounds assert errors by the trial judge as to findings concerning the date upon which cohabitation between the parties commenced and the date of the cohabitation agreement.

Having regard to the findings which the trial judge made with respect to the respondent’s signing of the cohabitation agreement, it could not be said that any findings concerning dates were in any way materially relevant to the task her Honour performed. She considered the cohabitation agreement and its surrounding context and in doing so had regard to it within the meaning of s 285 of the Act. The date upon which cohabitation commenced and the date the agreement was signed by either party were no more than incidental matters relating to the context in which the agreement came into existence. Even if her Honour’s findings as to those matters were incorrect or contrary to the case pleaded by the respondent, there was no consequential effect upon the outcome of the case. These grounds must be rejected.

Ground 7

This ground asserts, in the alternative to grounds 5 and 6, that if it were proper for the Court to find that cohabitation commenced before the cohabitation agreement was signed, the Court erred in law by concluding that that was relevant in determining whether the cohabitation agreement should have effect according to its terms.

For the reasons given in respect of grounds 5 and 6, there is nothing in this ground. The findings to which it relates were merely findings concerning the context in which the cohabitation agreement was signed.

Ground 8

This ground complains that notwithstanding the terms of the cohabitation agreement the Court’s finding that a trust was created in favour of the respondent as to a one-half interest in the Hillsyde property was against the evidence and against the weight of the evidence.

In her consideration of this case, the trial judge decided that Part IX of the Act now effectively ‘covers the field’ and she declined to determine the alternative claim made by the respondent in her statement of claim, holding that the ‘subject application is clearly a matter which does fall for determination under Part IX of the Act’.

It is difficult to ascertain from her judgment what her Honour meant by ‘covers the field’. Part IX of the Act is concerned with the alteration of proprietary interests which one or other or both of two domestic partners or former partners may have in real or personal property, as defined in s 275. It uses the term ‘adjusting’ those interests to describe the Court’s jurisdiction to make orders, pursuant to s 285, which alter those proprietary interests. In conferring this jurisdiction, the Act assumes the existence of interests in property enjoyed by one or both parties. Those property interests exist by virtue of the general law. The Act is concerned with altering them, not with their existence.

Section 278 confers a specific jurisdiction upon the Court to make declarations as to existing title or rights in respect of property as between domestic partners and to make orders as to consequential relief.[8] Any title or right to property, both real and personal, is conferred by the general law – a situation not altered by Part IX. Indeed, Part IX itself specifically preserves the rights of domestic partners to such legal or equitable remedies as they might have outside its provisions.[9]
[8]This jurisdiction has been, at least since the Judicature Acts, a part of the general jurisdiction of the superior courts. It had its origins in the Court of Chancery. See now s 36 of the Supreme Court Act 1986, and, relevantly, s 37(1)(a) of the County Court Act1958.
[9]Section 277.

The question of whether the respondent had an equitable interest in the Hillsyde property by virtue of being a beneficiary of a trust of which Riverview was trustee was a question which needed to be determined, in accordance with the general law, before the judge embarked upon the adjustment exercise permitted by s 285 of the Act. Although her Honour recognised, by referring to the judgment of Vincent J in Conn v Martusevicius,[10] that a judge should approach a Part IX claim by first identifying and valuing the assets of the parties, she did not consider it necessary to determine whether the assets of the respondent included an equitable interest in the Hillsyde property. In fact, she treated the Hillsyde property as an asset of the first appellant even though the legal title to it was held by Riverview and an equitable interest was claimed by the respondent.
[10](1991) 14 Fam LR 751; (1991) V Conv R 54-413.

It is clear from her Honour’s finding as to the trust issue that she was not exercising the jurisdiction conferred by s 278 of the Act. Further, in reaching her conclusion as to the trust she did not consider the effect of the cohabitation agreement in the context of that claim where s 285(c) was not relevant. Nor did she give anything other than very general reasons as to why the respondent would have succeeded on it, if it had been appropriate to consider it.

Finally, her Honour’s findings with respect to the trust appear to be inextricably bound-up with her view, expressed in the same paragraph, that the discretion available to the Court under the Act to make orders for the adjustment of interest in property of domestic partners extended to the property of third parties under the effective control of a party. As already noted with respect to grounds 1 and 2, this determination is also unfortunately erroneous.

The findings of fact made by the trial judge may well have justified a determination that the respondent should have succeeded on her claim as to an equitable interest in the Hillsyde property, but the way the trial judge dealt with the matter precludes a proper determination of it by this Court. In the circumstances, as there should be a retrial, the matter can be considered then, on the facts proved at that trial.

Ground 9

This ground complains that the trial judge erred in finding that the first appellant was estopped from relying on the terms of the cohabitation agreement because it constituted a representation by the respondent that she would make no claim on the property.

This ground is misconceived.

The cohabitation agreement is not a representation by the respondent at all. The trial judge was entitled to find that it was an act of the respondent induced by the representation of the first appellant. Her Honour made no error of law in reaching this conclusion of fact on the evidence which she accepted.

Ground 10

By this ground the appellants raised questions as to the correctness of the trial judge’s determinations on questions of legal professional privilege attaching to advice received by the respondent and the failure of the respondent to call her solicitor as a witness. For reasons already expressed, there is no need to determine this ground. Although the trial judge may well have been incorrect in all or some of the conclusions she reached on these matters, those conclusions should have had no bearing on the proper determination of this proceeding. The solicitor’s evidence would have been irrelevant to any issue properly between the parties. There was no challenge to the validity of the cohabitation agreement on the basis that it was brought about by any lack of understanding on the respondent’s part.

Grounds 11 to 18

Grounds 11 and 12 were not argued before the Court. They and the remainder of these grounds concern questions of fact which will be the subject of evidence and determination on a retrial. They need not be considered further.

Grounds 19 and 20

These grounds allege error in the trial judge’s determination and treatment of various contributions made by the parties to the renovation and upkeep of the Hillsyde property, to expenditure on the family and, in the case of the respondent, the retention of a car and other benefits. They raise questions of fact which will be decided on a retrial.

Ground 21

Ground 21 concerns the trial judge’s treatment of the first appellant’s superannuation entitlements. Her Honour found that when cohabitation between the parties ceased the first appellant’s superannuation entitlements totalled about $126,401. Her Honour determined that 50 per cent of this amount had accumulated during the period of the parties’ relationship. She thus brought to account $63,000 when determining the respondent’s entitlement to an adjustment of property pursuant to Part IX of the Act.

The first appellant complains that her Honour’s determination was arbitrary. He argues that there was no basis for her finding that $63,000 was the amount by which his superannuation entitlement increased over the period of his relationship with the respondent.

Although the companies with which the first appellant had superannuation policies were identified in the evidence and the value of those policies at various dates was specified, there was no evidence before the Court either as to the value of those policies at the date cohabitation ceased or, more importantly, their value or the value of any other relevant policies at the date the relationship commenced. Thus there was no basis for her Honour’s finding that the increase during cohabitation was $63,000.

The respondent’s submission as to this complaint was that the first appellant could have placed appropriate evidence before the Court to enable the judge to make a correct assessment. But the onus of establishing the relevant property and financial resources of a party to a domestic relationship against whom a claim is made under Part IX of the Act rests on the claimant. There was no evidence upon which the judge could have reached the figure she did for the increase in value of the first appellant’s superannuation entitlement other than by speculation. The respondent had the obligation of placing before the Court the value of the first appellant’s superannuation at the date the relationship was alleged to have commenced and its value at its end. Ample processes, coercive if necessary, exist for her to have done so. It is only in this way that the question of the respondent’s contribution to that financial resource of the first appellant can begin to be addressed. In this regard it might also be noted that in determining the value of the first appellant’s superannuation (and any increase in that value whilst the parties cohabited), regard would have had to be had to the terms of the superannuation policies of which he was a beneficiary. There is no evidence of those terms before the Court which would enable a proper valuation of his superannuation entitlements, or their increase during cohabitation, to be undertaken. Not only was there no evidence before the Court to enable a valuation to be undertaken, there was insufficient evidence to determine whether the first appellant’s superannuation entitlements constituted property (as they might if they had vested) or merely financial resources within the meaning of paragraph (a) of the definition in s 275 of the Act. This ground of appeal must be upheld.

Grounds 22 and 23

These grounds allege similar errors to those alleged in grounds 19 and 20. They should be determined in the same way.

Grounds 24 and 25

Ground 24 is concerned with the value of shares owned by the first appellant in Sunbury Wallframes and Trusses Pty Ltd (‘SWFT’). The trial judge acknowledged that an allowance needed to be made for the increase in the first appellant’s interest in that company over the period of cohabitation. She referred to evidence of the first appellant which provided ‘two widely diverse valuations given: $120,000 ostensibly based upon capitalisation of future maintainable earnings and $750,000 which he gives as the true value of his shares’. At one point her Honour criticised the first appellant for treating the exercise of valuing his interest in this company ‘in a cavalier manner’. At another she dismissed his evidence concerning the value of his shares in SWFT as ‘contemptible’. She finally assessed the value of his interest in that company at $150,000, describing this figure as a ‘conservative notional value’. But her Honour did not proceed to determine the value of the first appellant’s interest in SWFT at the time that the relevant domestic relationship commenced so as to enable an assessment of the increase in value over the period that the relationship subsisted. Instead, without explanation, she proceeded to use the figure of $150,000, which she had nominated as being the total value of the first appellant’s SWFT shareholding, as the amount by which the value of his shareholding increased over the cohabitation period. These findings are logically incompatible. It is not in issue that the first appellant had a shareholding in SWFT before cohabitation commenced.

The sum which the trial judge eventually awarded to the respondent was $315,800. She described this sum as a ‘total adjustment in favour of the [respondent]’. It was derived from a calculation involving four items, one of which was the $150,000 her Honour erroneously attributed to the increase in the value of the first appellant’s shares in SWFT over the period of his domestic relationship with the respondent. She awarded the respondent 30 per cent of this amount instead of the 50 per cent she awarded her in respect of what she said was the first appellant’s interest in the Hillsyde property, because (she said) a further discount was appropriate to take account of some degree of estimation in the values being used. Her Honour did not explain why she considered 50% as the starting point for this exercise.

Her Honour gave no reasons for selecting 30 per cent, as distinct from any other percentage, as the appropriate proportion of the increase in value of these shares to which the respondent should be entitled. No reference was made to any direct or indirect contribution by the respondent to the increased value of these shares. Nor did her Honour refer to any evidence from which the reason for the increase in value of $150,000 could be inferred. Having regard to the nature of the business carried on by SWFT it is unlikely that the respondent made any direct contribution to that increase, although she may have made some indirect contribution. If so, that contribution was never specifically identified.

Further, there was evidence in the first appellant’s affidavit of 28 November 2007 (which was agreed in this appeal was before the County Court) that he worked in the business himself until he was dismissed in March 2004. Whether this event had any and if so what effect on the value of his shares in the company appears not to have been a matter considered in the course of the trial or in her Honour’s judgment.

It was incumbent upon the trial judge to determine the increase in value of the first appellant’s share in SWFT as a starting point to considering the respondent’s contribution, if any, to such increase. If she were unable to reach a conclusion on this issue for lack of evidence the consequence would, again, fall on the party bearing the onus of proof, namely the respondent. To award the respondent $45,000 in respect of the increase in the value of the first appellant’s shares in SWFT was, in the circumstances, no more than speculation. Ground 24 is made out in the terms discussed above.

Ground 25 also relates to the value of the SWFT shares. In light of the success of ground 24 it need not be considered further.

Grounds 26 and 27

These grounds concern findings of fact which will be addressed again on a retrial. They need not be considered further now.

Ground 28

In listing the assets of the first appellant the trial judge included an amount of $30,272 being the balance of a loan account in his favour in the books of Riverview. The appellants argue that to have done so was an error because her Honour treated Riverview as the alter ego of the first appellant. There is force in this argument. In the same list of assets her Honour includes the Hillsyde property as an asset of the first appellant when it is, in fact, the only asset of Riverview.

Further, even if it were legitimate to count as an asset of the first appellant his loan account with Riverview, there was no finding as to the balance of that loan account at the beginning of the parties’ relationship. Her Honour appears to have assumed that the whole amount accrued during the period of the relationship. There is no basis for this assumption. Her Honour’s treatment of this item was erroneous.

The respondent’s response to this ground was that as the trial judge applied only 30 per cent of the value of that loan account to calculating the adjustment of property in the respondent’s favour it should be inferred that she made an allowance for the liability aspect of that account. This response is inadequate to dispose of the appellants’ argument.

Grounds 29 and 30

These grounds, which raise a large number of factual issues, were not addressed by the appellants before this Court. They need not now be addressed further on this appeal. They will be the subject of evidence, argument and determination on a retrial.

Grounds 31 and 32

The appellants were given leave to add these grounds, which concerned the trial judge’s order that the respondent’s costs of the trial be paid by the appellants on an indemnity basis. Such leave was given subject to the requirement for any further leave to appeal if such was required.

Having reached the conclusion that this appeal should be allowed and a new trial ordered there is no need to consider this ground or any question of leave to appeal further at this time. The costs orders made by the County Court will fall with the judgment. The question of costs of the new trial will be in the discretion of the trial judge. This Court will determine the question of the costs of the first trial with the costs of this appeal.

Notice of Contentions

By a Notice of Contentions filed 22 May 2009 the respondent contended that the trial judge’s finding as to a trust in her favour in respect of the Hillsyde property should result in an order in her favour on this appeal that, in effect, gave her a 50% interest in that property even if the appeal is otherwise successful. In the alternative, by the same notice she raised a ground of cross-appeal in the event that she is not entitled to a judgment pursuant to Part IX of the Act concerning the same matter.

As there must be a retrial of this whole proceeding, in which the question of the existence of the trust of the Hillsyde property contended for will be considered, together with the justice and equity of an adjustment of property rights between her and the first appellant, the respondent’s contention and her cross-appeal should not be considered further. The issues raised by them will, of necessity be determined in a new trial.

Conclusion

Unfortunately the trial of this proceeding has resulted in a judgment which must now be set aside. The errors in the trial judge’s judgment cannot be cured satisfactorily by recalculation or adjustment by this Court. Nor can there be a new trial confined to particular issues. An adjustment of property rights pursuant to s 285 of the Act must, of its nature, be effected in a way which considers all the relevant issues at the same time. The ownership of individual items of property cannot be adjusted in the absence of a consideration of all relevant property. The value of three out of the four items which together totalled the sum her Honour considered should be divided between the first appellant and the respondent were erroneously arrived at. They must be reconsidered in a new trial. Having regard to her Honour’s findings as to a number of credit issues (particularly with respect to the first appellant) that trial must be before a different judge.

The total amount in dispute between the parties in this proceeding is certainly not large. The costs each of them have incurred may well already exceed the amount

in dispute. If they do not, they soon will. Although the appellants’ appeal should be upheld, the judgment of the County Court set aside and a new trial ordered before another judge, before that order is put into effect there should be another attempt made to settle the dispute. The parties should be ordered, pursuant to r. 50.07 RSC, to attend mediation before an Associate Justice of the Supreme Court in an attempt to effect that result before further costs are expended and the parties are subjected to the emotional and financial stress of another trial. Every effort should be made at that mediation to prevent the necessity for a new trial to be conducted.

There should be a new trial of this proceeding. However, the parties should be ordered to proceed to mediation before that trial is embarked upon.

WILLIAMS AJA:

I too agree with Bongiorno JA.

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Citations

Brumar (Vic) Pty Ltd v Norris; Brown v Maurice Blackburn Cashman [2010] VSCA 205

Cases Citing This Decision

0

Cases Cited

5

Statutory Material Cited

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Davis v Tayles [2006] VSC 219

Tayles v Davis [2009] VSCA 304

R v Hunt; Ex Parte Sean Investments Pty Ltd [1979] HCA 32

[2010] VSCA 205

23 August 2010