Conrad and Conrad & Anor
[2019] FamCA 106
•1 March 2019
FAMILY COURT OF AUSTRALIA
| CONRAD & CONRAD AND ANOR | [2019] FamCA 106 |
| FAMILY LAW – PROPERTY – Where there are three discretionary trusts which are the source of dispute among the parties – Whether any or all of the trusts are financial resources of the husband which should be included in a consideration of appropriate property adjustment orders between the parties – Where there are also various amounts alleged to be owed by the parties to the trusts – Where there is also a dispute about the property purchased by the husband and his sister and the nature of the husband’s interest in it – Where there is a dispute as to the role of the husband and his sister in the running of the trusts and therefore their respective interests in the trusts – Where the credibility of the parties was very influential in determining this dispute – Where caution is to be exercised when considering the evidence of the husband and his sister even when there were contemporaneous written records – Where it is just and equitable in all the circumstances that the net property pool is to be divided 55 per cent to the Applicant wife and 45 per cent to the First Respondent husband – Where the amount owed by the wife to the Intervener is to be paid directly to the Intervener by the husband out of the wife’s share of the property. FAMILY LAW – SPOUSAL MAINTENANCE – Where spousal maintenance orders were previously made between the parties – Where the husband was required to pay spousal maintenance to the wife as well as a lump sum for arrears in spousal maintenance – Where the husband ceased making payments – Where the husband applied to have the Order discharged, suspended or varied – Where the application was dismissed by a Senior Registrar and the husband sought a review of the decision – Where the application for review was determined at trial – Where the husband was found to have had the capacity to make payments despite changes in his circumstances – Where the application for review of the decision is dismissed – Where ongoing spousal maintenance is also in dispute – Where it is not justified to order ongoing spousal maintenance – Where the husband will be required to pay the property settlement amount, the arrears of spousal maintenance and spousal maintenance on the same terms ordered previously only until these obligations are met. |
| Duties Act 2001 (Qld) Family Law Act 1975 (Cth) Limitation of Actions Act 1974 (Qld) Property Law Act 1974 (Qld) |
| 400 George Street (Qld) Pty Limited v BG International [2012] 2 Qd R 302 Calverly v Green (1984) 155 CLR 242 Commercial Bank of Australia Ltd v G H Dean & Co Pty Ltd [1983] 2 Qd R 204 In the Marriage of Biltoft (1995) FLC 92-614 In the Marriage of Davidson (No 2) (1991) FLC 92-197 In the Marriage of Robb (1995) FLC 92-555 Kennon v Spry (2008) 238 CLR 366 Noack v Noack [1959] VR 137 Nurisvan Investments Ltd & Anor v Anyoption Holdings [2017] VSCA 141 |
| APPLICANT: | Ms Conrad |
| FIRST RESPONDENT: | Mr Conrad |
| SECOND RESPONDENT: | Ms Stocks |
| INTERVENER: | P Lawyers |
| FILE NUMBER: | BRC | 5264 | of | 2013 |
| DATE DELIVERED: | 1 March 2019 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Forrest J |
| HEARING DATE: | 21, 22, 23, 24 and 25 January 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Murphy |
| SOLICITOR FOR THE APPLICANT: | Simonidis Steel Lawyers |
| COUNSEL FOR THE RESPONDENTS: | Mr Hackett |
| SOLICITOR FOR THE SECOND RESPONDENT: | Holloway Jenkins |
| INTERVENER: | Appearance excused |
Orders
Property Adjustment and Spousal Maintenance
That the First Respondent husband’s application to discharge, suspend or vary the interim spousal maintenance order of 5 June 2015, is dismissed.
That within forty-five (45) days of the date hereof, the First Respondent husband shall pay to the Applicant wife:
(a) The sum of $780,000 by way of property adjustment; and
(b)Such sum as will discharge all arrears of periodic spousal maintenance owed pursuant to the interim Order of 5 June 2015.
That until compliance by the First Respondent husband with the obligations imposed upon him by paragraph (2) hereof, he shall hold all of his right, title and interest in the real property situated at B Street, Suburb C, in the State of Queensland more particularly described as Lot … on RP … Title Reference number … (“the Suburb C property”), on trust for the Applicant wife and he is restrained from disposing of, or encumbering any of his interest in that property without the prior written consent of the Applicant wife.
That, other than pursuant to earlier written agreement between the First Respondent husband and the Applicant wife, upon payment in full of both amounts as required pursuant to paragraph (2) hereof (and any interest accrued pursuant to the Family Law Act 1975 (Cth) and the Family Law Rules 2004 (Cth) on any amount of the sum of $780,000 not paid within the said forty-five (45) days):
(a)The interim periodic spousal maintenance order of 5 June 2015 shall be discharged;
(b)Any caveat or caveats registered by the wife over any of the husband’s interests in real property shall be immediately and simultaneously released;
(c)The wife shall immediately and simultaneously deliver a transfer of all of her right, title and interest in the real property situated at 5 WW Street, Suburb F in the State of Queensland being all of land described as Lot … on RP … County Ward Parish Suburb F Title Reference number … (“the Suburb F property”);
(d)Any mortgage held by the Applicant wife’s solicitors, Simonidis Steel Lawyers, in respect of the Applicant wife’s interest in the Suburb F property shall be immediately and simultaneously released;
(e)The trust created by paragraph (3) of these Orders is immediately and simultaneously discharged; and
(f)All previous injunctive Orders of the Court directed at and binding the First and Second Respondents shall be discharged.
That in discharging the obligations imposed upon him by paragraph (2) of these Orders, the First Respondent husband shall, in the first instance, pay the Interveners, P Lawyers, such sum as will discharge the Applicant wife’s liability to that firm as at the date of payment and payment to that firm shall be considered as partial discharge of his obligation to pay the Applicant wife pursuant to paragraph (2) to the extent of the sum paid to the Interveners, and the balance of the First Respondent’s obligation shall be discharged by payment of the balance owing to the trust account of the Applicant wife’s solicitors, Simonidis Steel Lawyers.
That should the First Respondent husband not comply with the obligations imposed upon him by paragraph (2) hereof, the Applicant Wife, and the First and Second Respondents shall all be at liberty to apply to relist the matter before his Honour Justice Forrest on the giving of written notice to the other parties for the making of enforcement Orders, if necessary, in respect of the sale of the Suburb F property and the First Respondent’s interest in the Suburb C property.
That the First Respondent husband shall retain as his own all his right, title and interest in his superannuation interest in Super 1, the motor car in his possession, all personal property in his possession, the money in his bank accounts, his interest in the business, Z Pty Ltd, and his shares in the companies, H Pty Ltd, Y Pty Ltd and N Pty Ltd.
That the Applicant wife shall retain as her own all her right, title and interest in all personal property in her possession and the money in her bank accounts.
That the First Respondent husband shall indemnify the Applicant wife and keep her indemnified against any and all liability asserted to be owing by him and/or the Applicant wife to the First Respondent’s sister, the Second Respondent, to N Pty Ltd, to H Pty Ltd as trustee for the Conrad Family Trust, to Mr QQ, to Ms SS, to the Australian Tax Office and also in respect of any debts the First Respondent husband owes to any banks or other financial institutions for credit cards or any other loan facility he may have taken out.
That the Applicant wife shall indemnify the First Respondent husband and keep him indemnified against any and all liability asserted to be owing by her to any member of her own family, to any banks or other financial institutions for credit cards or any other loan facility she may have taken out, and to any current or former legal representatives.
That should the Applicant wife seek any orders as to costs, an Application in a Case particularising the orders sought, and any affidavit of evidence relied on in support shall be filed and served on the other parties within fourteen (14) days of the date hereof.
That should either the First or Second Respondent oppose any costs application brought by the Applicant wife, or seek any orders as to costs of their own, then a Response to an Application in a Case particularising the orders sought, and any affidavit of evidence relied on in support shall be filed and served on the other parties within twenty-eight (28) days hereof.
That written submissions, if any, in respect of any costs application made by either party be filed and served within forty-two (42) days hereof and if any of the parties want to be heard, orally, in respect of any costs application, a request for the matter to be listed for hearing of oral submissions shall be made in writing to the Court within forty-nine (49) of the date hereof.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Conrad & Conrad and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 5264 of 2013
| Ms Conrad |
Applicant
And
| Mr Conrad |
First Respondent
And
| Ms Stocks |
Second Respondent
And
| P Lawyers |
Intervener
REASONS FOR JUDGMENT
These property adjustment and spousal maintenance proceedings arise out of the breakdown of the marriage between the Applicant wife and the First Respondent husband. The Second Respondent is the husband’s sister who was joined to the proceedings soon after they were commenced. The named Interveners are a firm of solicitors who previously represented the wife in the proceedings. They are still owed money by the wife and they joined the proceedings to protect their position as a creditor of hers. By prior arrangement that effectively recognised and protected their position, they took no part in the trial.
This dispute has been in the family law courts since it was commenced in the Federal Circuit Court in mid-2013. It is complicated and has been complicated by a number of factors. These include the wife’s health as well as some very serious disagreements about what constitutes “property of the parties to the marriage or either of them” that can be subject to property adjustment orders pursuant to s 79 of the Family Law Act 1975 (Cth) (“Family Law Act”). When the complexity of the dispute became clear, after proceedings had been commenced, the matter was transferred to the Family Court. It was eventually listed for trial in this Court in May last year, but was then adjourned for various reasons to January this year. The wife was also ordered to pay some of the husband’s and his sister’s costs thrown away by that adjournment. The trial was, on that adjournment, then listed for hearing over nine days.
Up until the commencement of the trial before me, the wife was contending that the property of three particular discretionary trusts should be treated as property of the husband. The husband was contending, in response, that the property of those trusts was truly the property of his sister, as she ultimately solely controlled those trusts. The husband’s sister has taken the same position since her joinder to the proceedings. Indeed, both the husband and his sister were represented at the adjourned trial last year and the trial that was completed before me in late January this year by the same barrister, instructed by the husband directly and by a firm of solicitors representing the husband’s sister. There was no apparent conflict in the interests being advanced for each of them.
At the commencement of the trial, the Court was told by counsel appearing for the wife that the wife’s position had changed somewhat. It was no longer being contended that the property of the trusts should be regarded as “property of the [the husband and the wife] or either of them”. It quickly emerged that the most significant issues remaining in dispute between the parties were as follows:
(i)Whether the same three discretionary trusts subject to the dispute are to be treated as a financial resource of the husband and taken into account as such when determining property adjustment orders between the husband and wife that are just and equitable;
(ii)When determining the property of the parties or either of them that is able to be subjected to any property adjustment orders, whether account is to be taken of any amount said to be owed by the wife and/or the husband to the company, N Pty Ltd (“N”), the directors and shareholders of which are the husband and his sister and, if so, then how much, or whether, alternatively, account is to be taken of any amount said to be owed by the wife and/or the husband to the husband’s sister;
(iii)Further, in determining the property of the parties or either of them that is able to be subject to any property adjustment orders, whether account is to be taken of any amount said to be owed by the husband to the Conrad Family Trust (one of the relevant three discretionary trusts) and, if so, then how much;
(iv)Further again, in determining the property of the parties or either of them that is able to be subject to any property adjustment orders, whether the husband’s interests in property include a half beneficial interest in a property consisting of three residential units situated in Region E, the legal title of which is registered in the names of him and his sister in equal shares; and
(v)Whether the husband should pay spousal maintenance to the wife and, as part of that particular issue, whether the existing interim spousal maintenance order should actually be discharged retrospectively to the date when the husband unilaterally stopped paying it, a few years ago.
Some other matters also remain in dispute and require determination. They include whether other liabilities said to be owed by the husband do exist and, if they do, how they should be treated. They also include whether funds sourced from capital of the parties at around the time of and since separation that were spent by the wife should be notionally “added back” to a pool of property that is to be considered for division between the husband and the wife.
In the end, the trial went for four and a half days instead of nine and the Court was greatly assisted by written submissions provided by both counsel.
Some brief introductory background facts
The husband and the wife married in 1990 after courting for some years. The wife had twin six year old sons from a previous marriage. They were living with her and having some regular holiday time with their father. The husband had not been married before. Together, they had two children, a son and a daughter, in a few short years after they married. All four of those children are well into adulthood now.
At the time of their marriage, the husband and wife were living in a home owned by the wife, subject to a mortgage debt. They lived there until 1998 when they moved into the home they bought together, after the wife sold the property that she had owned. They remained living together in their jointly owned home until the wife finally left that home, though when that is exactly is the source of dispute which I will later turn to. The wife has not lived there since then. The husband has remained in occupation of the home.
For a short time after their marriage, the wife worked in her father’s business. She left that employment during her pregnancy with their first child, their son. She then remained engaged in home duties and parenting for many years, through until 2003, when she began to work in a business in Region E. She did that for several years, before the business was sold in or around 2008/2009. She did have some other casual employment after that, before final separation, but since sometime before final separation to now, the wife has not worked. She has suffered chronically and quite seriously from anxiety, depression and substance dependency. She has spent many a long period in clinics trying to contain, manage and overcome her health and substance dependency problems. In that same period, she has also suffered cancer and has had to have significant treatment for that. I am satisfied that she is still far from being in good health at this point in time.
When the husband and wife married, the husband was a young professional. He has continued to work as professional for most of the time ever since. In the years just prior to the final separation of the husband and the wife, the husband took up employment with the Queensland Public Service and remains employed with a Queensland government department at the time of the trial. At some time after the marriage, or around the time of marriage, the husband went into business with a partner. Some years after that, that partnership was dissolved and the husband began working on his own, after some shorter periods working for other businesses.
The husband has a new life partner. She is a Country Q woman with Country Q professional qualifications who came to Australia to study in November 2014 on a 12 month student visa. She gave birth to their baby daughter in 2015, making her studies very difficult. She has no family in Australia and has struggled with the English language. She has, with the husband’s support, applied for a partner visa, and has obtained permanent residency status in this country. She recently found some employment, part time. She retains little of her pay after child care and work related expenses and remains almost completely dependent upon the husband, just as their daughter is.
The credibility of the parties
Both counsel began their submissions by making submissions attacking the credibility of the party or parties they did not represent. As I acknowledged during oral submissions, findings about credibility loom as very influential in the process of determining this matter.
Unsurprisingly, Mr Hackett of Counsel referred to the wife’s state of health over recent years and, in particular, to the state of her health around the time she swore her trial affidavit on 24 April 2018. The wife had been admitted to a clinic three days after she had sworn that affidavit and remained there for three weeks. She told the Court that she was admitted for depression, anxiety and substance dependency issues. She agreed that she had been taking antidepressant medication when she visited her solicitor to sign the affidavit, though she said she had not had a drink for “a couple of weeks” at that time.
The wife told the Court that she had done her affidavit herself and had then gone through it with her solicitor, acknowledging that she and her solicitor had access to all the documents referred to in her affidavit and exhibited thereto. Whilst she initially rejected the proposition that she had been “prompted” by any document or any other source, it became clear during her cross-examination that many of the assertions of fact referencing dates and events were indeed sourced from the documents and were likely to have been included in the affidavit in the process of its drawing and settling by her solicitor. By signing the affidavit, the wife adopted those inclusions as hers.
Mr Hackett went on to submit that wherever the wife’s evidence conflicted with the evidence of the husband and the husband’s sister, the Court should reject the wife’s evidence to the extent it was not verified and supported by documents. He particularly emphasised the fact that in her very first affidavit filed in the Federal Circuit Court on 2 July 2013 the wife had deposed to final separation occurring in “January 2013” whereas in her trial affidavit filed 24 April 2018 she said that she and the husband separated “in approximately March or April 2013”. In contrast, he pointed out, the husband said in his trial affidavit filed 24 April 2018 that they separated under the one roof in or about December 2011 with “physical separation” occurring when the wife “moved out of the matrimonial home on 26 November 2012”.
Mr Hackett invited me to accept that the wife had changed her evidence about the separation in her trial affidavit in an attempt to somehow explain how she came to have possession of the bank statement that was exhibited as “MC01” to the affidavit filed 2 July 2013, as it was a statement for the period ending 21 February 2013. However, putting aside the question of how she came to actually have a copy of the statement, and bearing in mind it was not put to her that she took it from the post office box to which it was, on its face, sent, the wife’s possession of a copy of the document itself, as I am quite satisfied the husband would have been at some pains to keep from the wife, causes me to accept that it was likely the wife had actually returned to the matrimonial home after her stay in a clinic or clinics over December 2012 and January 2013 and that she finally left the home in around March 2013, never returning to live there again.
Whilst I accept that there was probably little if any emotional commitment by the husband to the wife in the last year or so of their cohabitation, the evidence actually satisfied me that the marriage really ended when the wife finally left the home. I am satisfied, on the balance of probabilities, that did not happen until around March 2013.
That said, it should be clear now that I reject Mr Hackett’s submission that I would reject the wife’s evidence whenever it conflicted with the husband’s and his sister’s evidence unless verified and supported by documents. Generally, whilst I accepted that the wife’s evidence could not always be treated as reliable because of the likely impact of her chronic mental health and substance dependency issues, I did not consider the wife to be consciously lying to the Court. Many times during her cross-examination she readily accepted mistakes in her recollection when the obvious mistakes were pointed out to her by counsel for the husband. She also readily answered many questions with answers against interest. I also got no sense that the wife was deliberately trying to be evasive or dishonest when answering the questions put to her. Clearly, care had to be taken when assessing the reliability of her affidavits and oral evidence, but I did not consider her evidence to be dishonestly given.
Counsel for the wife, on the other hand, submitted that the Court would be significantly troubled by the evidence given by the husband and his sister, whether that be in writing or orally. She submitted that the Court would not accept the evidence of either the husband or his sister unless it was supported by independent contemporaneous records, and that even then, the Court would exercise some caution in respect of the evidence given by the parties as to the context of the documents.
I am quite satisfied that there is a lot of merit in that submission.
Given their professional backgrounds both the husband and his sister each understands the importance of telling the truth to a Court under oath or affirmation and how critical it is to the fact finding process in the administration of justice according to law for witnesses to tell their own version of events from honest recall. Indeed, the husband confidently confirmed his understanding of those matters in his cross-examination before going on to give evidence that was quite incredible. That evidence convinced me that the husband was consciously prepared not to tell the truth to this Court, without that fact troubling him, at least perceivably. I was as equally unconvinced by the husband’s sister’s evidence, though I did get a sense that she was struggling with the fact that, out of love for and loyalty to her brother, she was not being entirely truthful to the Court.
There were many parts of the husband’s evidence that I just did not believe and do not accept as truthful. However, as Ms Murphy of Counsel for the wife has done in her submissions, the most telling reference to commence with is the evidence the husband gave about his and his sister’s affidavit evidence about the terms of an alleged agreement they have with respect to their dealings with the Conrad Family Trust, the main subject discretionary family trust established back in 1990. Each of the husband and his sister filed an affidavit on 12 September 2014 in which they deposed to evidence about the trust and their alleged agreement. Each of them filed another affidavit on 17 December 2014 in which they deposed to further evidence about the same matter and each deposed in their respective trial affidavits filed 24 April 2018 to further evidence about these matters. Exhibits 25, 26 and 27 in the trial are relevant extracts from each of their affidavits filed on those dates.
A comparison of those affidavits, even to the untrained eye, reveals a remarkable similarity in language, subject content, style, punctuation and formatting, even down to the point of the same errors occurring in the same passages in each affidavit. I have no doubt that the husband and his sister have conferred, repeatedly, in the preparation of their respective affidavits and that passages of one party’s affidavit have even been cut and pasted to the other party’s affidavit before finalising. In this rather obvious way the husband and his sister have ensured, I am satisfied, that each gave the exact same version of evidence about a matter of importance in this case. Nevertheless, as obvious as that is, the husband brazenly denied collaboration with his sister in a very disturbing passage of evidence under cross-examination.
After he had confirmed his understanding of the need to give an accurate version of one’s own recollection of matters, the husband confirmed, categorically, that he had not conferred with his sister in respect of the evidence each gave on these matters. He could give, when initially asked, no explanation for the remarkable similarity in the evidence. Indeed, rather incredibly, the husband even struggled to concede the obvious similarities when he was taken through them. After some intervention by me from the bench, the husband reluctantly accepted that there may have been some copying and pasting that went on but quickly denied that it was him who had copied and pasted from his sister’s affidavits, again confirming that he did not have an explanation for the similarities before offering the suggestion that the similarities arise by virtue of the fact that he and his sister are recounting the same events and, therefore, their versions would be expected to be similar. He agreed with counsel when she asked him had his sister’s solicitors prepared his sister’s affidavits and he again denied that they had conferred about their evidence. Ultimately, completely unconvinced by this evidence, I asked the husband whether it was true that he did not have an explanation for the striking similarities or rather whether it was the case that he was just not wanting to have to give the explanation. After some contemplation, he almost shamefully said “the latter”.
The husband’s sister, who had what I consider to be the obvious advantage of sitting through the husband’s cross-examination and watching and hearing his evidence about this matter, was seemingly prepared for the questions about the remarkable similarity of their evidence. Nevertheless, her answers did not convince me of her honesty. When asked about the similarities, though denying that they had drafted their affidavits together, she stated that she had discussed with her brother “the events of the last thirty odd years”. She said that she had wanted to make sure that she did not “overlook anything” and “to check what [she] needed to include that might be relevant to… these court proceedings”. She said that she drafted her own affidavits and that her brother had drafted his. She said that she did see his affidavits and that he saw her affidavits. She then said that there were some things (presumably from reading his affidavits) that jogged her memory and that she thought there were some things that jogged his memory (presumably from reading her affidavits). She then said:
We may… I certainly did use some paragraphs of his where I believed… where I recollected that that was correct. But that was from my recollection. Things that I didn’t know or didn’t recall… I didn’t use.
She then denied that such conduct amounted to “conferencing” with her brother and she also said that they had only seen “some of” each other’s affidavits in this way, though she could not say which ones.
The husband and his sister are, as I have observed already, each professional of many years standing. The husband’s sister has had her own solicitors acting for her since she was joined in the proceedings. Despite her evidence that she drafted her own affidavits, her trial affidavit is said to have been “prepared” by her solicitor. It was, however, witnessed by the husband, as was his trial affidavit witnessed by her. Each of the affidavits containing the strikingly similar content was filed on the same date as the other party’s affidavits.
I was left with no confidence that I knew the truth of what had happened in respect of the preparation of those affidavits and the critical evidence of the husband and his sister about the alleged agreement of how they would deal with the Conrad Family Trust. The evidence about this and the husband’s evidence, in particular, gave me cause to carefully scrutinize all of the evidence of the husband and his sister where their case entirely depends on me accepting their honesty.
There were some other particular points of evidence where I simply did not accept that the husband was telling the truth of the matter. One of those related to the issue of ownership of the real property at Suburb C.
On 2 July 2013, when the wife commenced these proceedings in the Federal Circuit Court, she asserted her belief that the husband owned a 50 per cent interest in a house at Suburb R in Region E, with his sister owning the other half. At the same time, she asserted that the husband owned the real property at B Street, Suburb C. Those assertions contained the error that the Suburb R property was in fact the Suburb C property and the parties had simply always referred to it as the Suburb R property.
Unsurprisingly, perhaps, the wife and the solicitors who acted for her at that time (she has changed solicitors a number of times) had apparently taken the Suburb R reference from a letter the husband had sent to those solicitors on 2 June 2013. In that letter, the husband had confirmed that he wanted to negotiate an amicable settlement with the wife. He had said the following under the heading “Property pool”:
I now provide a simplified table setting out the matrimonial property pool, subject to disclosure of both parties and any requisite valuation. The assets, liabilities and financial resources in relation to the parties appear to include, or be in relation to, as follows…
He then set out a table in which he headed the first column “Table of Simplified Asset Pool” followed below by “Assets/Liabilities/Financial Resource”. In that column, the second item appearing is described as “50 per cent interest of husband in the house at [Suburb R]”. In the second column, under the heading “Owner”, appear the words “Husband and sister of husband”. In the fifth column, under the heading “Net Value”, appear the words “$400,000 (being half of $800,000 estimate)”.
Having regard to that, not even considering the knowledge and experience of her 25 years of marriage to the husband, it was, as I have observed, unsurprising that the wife deposed in her affidavit filed just a month after the date on that letter that the husband owned a half interest in a property at Suburb R.
The wife’s Federal Circuit Court proceedings sought property adjustment and spousal maintenance orders, the latter on an immediate, interim basis. The husband, who was represented by an experienced family law solicitor at the time, filed his affidavit in response to the wife’s Initiating Application and affidavit on 10 July 2013. In paragraph 30.3 of that affidavit he said:
Outside of the trust, [my sister] and I are the joint owners of rented apartments at [B Street, Suburb C] (near [Suburb R]) that we jointly owned since 1986. The gross rental of the apartments is about $830 per week.
In paragraphs 88-89 of that affidavit he said:
[My sister] and I are the joint owners of rented apartments at [B Street, Suburb C] ([near Suburb R]) that we have jointly owned since 1986, being before the marriage to [the wife]. The gross rental of the apartments is about $830 per week.
As pre-payment on the property settlement of the wife, if any, the payments of say $830 per week may be made (noting rates and outgoings are at minimum $6000 per year) being that:
a. I may seek to pay the sum of $415 being half of the rental income from the [Suburb C] apartments;
b. [My sister] may seek to lend to me the sum of $415 being half of the rental income from the [Suburb C] apartments, so I may make an additional payment to the wife.
In paragraph 132 of that affidavit he also said:
As at the date of marriage [in] 1990, I owned a half share in the real property (3 units) situated at [B Street, Suburb C], with my share being in the sum of E$300,000 (My sister…is the other half owner)…
The husband also filed a Financial Statement on 10 July 2013. In Part I, under the heading “Property owned by you” the husband listed a 50 per cent interest in the property at B Street, Suburb C, listing the registered owners as himself and his sister. In Part D, under the heading “Your income” he listed “Half of the Rent from the real properties (3 units) at [B Street, Suburb C], QLD (E$220, E$330, and E$280 per week respectively)”.
None of that would be particularly remarkable but for the fact that later in the proceedings the husband then advanced the position that whilst he had always held a registered half interest in the Suburb C property from its purchase in or around 1986, he actually did not hold the beneficial interest in that half share and that he held the half interest on trust for his sister.
In his trial affidavit filed 24 April 2018, the husband asserted that his sister had provided all of the funds for the purchase of the property “on or about 1 July 1986”. He said that at the request of their mother, his sister agreed to register him on the title. He said this was done on the basis that he would pay for half the purchase price when he could and that he “would be given a generous leeway in terms of time to do so”. The husband went on to say that “[b]y about 1989” he and his sister agreed that he “would relinquish any right to that property”. He said that they “saw no need for formal paperwork to reflect this agreement.” He said his sister trusted him and he “simply agreed at the time to hold [his] share for her”.
Clearly then, if that is true, he would have been in absolutely no doubt, from that time on, that he did not have a beneficial interest in the property. As a lawyer, he would have no doubt that meant he did not “own” the property, despite being listed on the title as registered proprietor of a half interest. Despite that, when he began negotiations with his then estranged wife in 2013 he included the half interest in the property in a list of assets he called the “matrimonial property pool”.
When the husband was shown his June 2013 letter in cross-examination and asked whether he was contending that this was the property that this Court would consider in adjustment proceedings, he said “No, it was a simplified table”. He said:
I set it out on the basis that what on a first blush would be the legal position, and I did it on a without prejudice basis specifically to encourage settlement negotiations. In that table I presented a best case scenario in relation …
A little later he nevertheless agreed that he was aware that “candour” was required even in correspondence aimed at settling a matter.
When he was asked about the paragraphs in his affidavit and Financial Statement filed 10 July 2013, set out above, and it was suggested to him that he was telling the truth then about his ownership and that he is lying now, he asserted the following:
·That he had only two days to prepare the affidavit and Financial Statement and had to drag stuff out of memory and had qualified his assertions in his affidavit;
·That he was trying to present a result that was most detrimental to him;
·That he was completely conscious of his obligation to reflect his legal ownership of property;
·That it was all said in the context of wanting to settle the matter, but not wanting to get into “all the intricacies of trying to establish who owns what and where the trusts are and what the beneficial ownership was”; and
·That he was embarrassed to drag his sister into the proceedings.
The husband took the Court to the paragraphs of his affidavit filed 10 July 2013 that he asserted contained his qualifications. Those qualifications did not help persuade me that he did not intend to convey the fact that he considered he owned a half interest in the Suburb C property in 2013.
This evidence further undermined the credibility of the husband that I considered had already been quite seriously brought into question.
Another example springs to mind. One of the assets of the Conrad Family Trust has for a long time been the business, Property S, acquired in or around 2006 or 2007. A number of units are located on the property and are rented out to visitors for short term stays. The wife exhibited to her trial affidavit an extract from a website that reviews such places for public information. It referenced a date in December 2017 and included a rather negative review of the units. It also had a response on it which was said to come from “[Mr Conrad], Owner at [Property S], responded to this review”. Relevantly, it said the following:
I am really sorry that you had this reaction, however, this is the first time in the ten years I have owned this property that I have ever had anyone with this problem…
When asked about this internet entry during his cross-examination, the husband denied that he had authored it and attributed responsibility for it to the people who were managing the units. He accepted positively that he was suggesting that the managers had apparently held themselves out to be him. That did not appear to trouble him at all. I did not accept the honesty of that evidence.
There were many other occasions when I did not believe the husband’s evidence. I will deal with more of those in the context of determining the specific matters required to be determined in finalising this dispute. Suffice it to say, at this point, I simply do not accept the evidence of the husband and his sister as accurately reflecting the history and the truth of the matter.
The legal principles applicable to this application for property adjustment orders pursuant to s 79 of the Family Law Act
The husband and the wife each seeks orders which would adjust their property interests as between them. Though there is, plainly, a difference in the orders each seeks, implicit in asking the Court to adjust their property interests is an acceptance that it would be “just and equitable” for the Court to do so. Neither the husband nor the wife contends that it would not be. Acceptance of that fact, permits the Court to go on to determine, by referencing s 79(4), what Orders will, in all the circumstances, be just and equitable to make.[1]
[1]Stanford v Stanford (2012) 247 CLR 108.
Though not mandatory,[2] the preferred approach to the determination of an application brought pursuant to s 79 involves four inter-related steps. The Court is to make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Then, the Court should identify and assess the contributions of the parties within the meaning of ss 79(4), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Then, the Court should identify and assess the relevant matters referred to in ss 79(4)(d), (e), (f) and (g) including, because of s 79(4)(e), the matters referred to in s 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at the second step. Finally, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances.[3]
[2] See Bevan & Bevan (2013) FLC 93-545 in which the Full Court pointed out that the “four step process” is not statutorily prescribed.
[3] See Hickey & Hickey & Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143 and all of the cases referred to therein at [39].
The most significant issues
As has already been observed, the most significant issues in the property adjustment part of these proceedings emerge in the first part of the just described “four step process”. I have listed the four most significant issues in paragraph [4] of these reasons. As I have already discussed some of the evidence about the issue pertaining to the Suburb C property, I will, for convenience, turn to my further consideration of that issue first.
Does the husband own half of the Suburb C property?
As I have already noted, the husband has been registered on the title to the Suburb C property as a joint owner with his sister since its purchase in 1986. They both say that when it was purchased the sister contributed all of the funds to the purchase price of the property. The sister asserted that she had purchased the property for about $95,000. She said that she did not have enough money to pay the full purchase price, so she borrowed $30,000 from the ANZ Bank to complete the purchase, giving the bank a mortgage securing the property.
Though nothing is said of it by either the husband or his sister, it is difficult to accept that a bank loaned money just to the husband’s sister and took a mortgage over the property without the husband, whose name was on the title as a registered joint owner, also being involved in taking out or, at least, guaranteeing the loan that was secured by the mortgage. The lack of anything being said about this troubles me.
The acquisition of this property, I consider, must be viewed in the context of certain other matters of asserted fact. The husband’s sister says she purchased a property in T Town in 1980, when she already owned two other properties, one at U Town and one at Suburb V. The one at U Town though was registered in the joint names of the sister and their mother, and the sister also asserts their mother held her half interest in that property on trust for her. The sister says she purchased another property that adjoined hers in T Town in 1984. She says, without giving any explanation for it, that she “decided to purchase it in [the husband’s] name” and that he agreed to hold it in trust for her as well. The husband said nothing about this property in any of his evidence. This also troubles me.
The husband had moved to Region E where he obtained employment in 1984. Both the husband and his sister assert that their mother requested that the sister “register” the husband on the title deed for the Suburb C property. There is no dispute that she did. Both say this was done on agreement that the husband would pay the sister half the purchase price when he could. Neither asserts that this agreement was documented or evidenced in writing. The husband says, without any more particularity, that it was agreed that he “would be given a generous leeway in terms of time to do so.” His sister says she was “prepared to be flexible with the timeline for payment and wanted to give him a focus worth saving for”.
When the husband and the wife met in or around 1988, the husband and his other sister, Ms W, were both living at the flats in the building on the property. Two of the flats were leased for a peppercorn rent to “H Pty Ltd as trustee” for a term of three years said to have commenced on 1 July 1988 with a three year option term open to be exercised at the end of that term. The husband and his sister had acquired H Pty Ltd (“HPL”) as a shelf company in February 1988. They each owned one share and each were directors. They apparently agreed that the sister could be the Chairman of the two directors. This gave her a deciding vote in the event of disagreement in respect of company direction. Though the lease, on its face, was entered into in late June of 1988, with HPL as trustee, the Conrad Family Trust, of which HPL was, by the trust deed, appointed as trustee, was not actually established until August 1988. That apparent anomaly went unexplained.
The husband moved out of the flat and in with the wife at her home at Suburb X sometime after they had been going out together for a while. His sister, Ms W, continued to live in one of the flats for a couple more years before she, too, moved elsewhere.
The wife asserts that the husband originally told her that he owned the property that they both referred to as the Suburb R property and only told her that the Second Respondent also had an interest in it at a later time, after they were married. The husband denied that, saying he always told the wife that the Second Respondent owned it.
In his trial affidavit, the husband said that “by about 1989” he realised that he “had no hope of paying for [his] share of the property”. He said that although his sister was prepared to give him more time, they agreed that he “would relinquish any right to that property”. The husband said that again they “saw no need for formal paperwork to reflect this agreement.” He said that his sister trusted him and that he “simply agreed at the time to hold [his] share for her”.
The husband’s sister said in her trial affidavit that in 1988 or 1989 there was a “family discussion” which, by implication, included her and the husband. She said their mother was present and she thinks their sister, Ms W, was also present. Their mother has since passed away but their sister, Ms W, is still alive. Neither the husband nor his sister adduced any evidence from Ms W in support of this evidence. No explanation was given by either of them for not adducing such evidence.
The husband’s sister said that in that “family discussion” the husband said that he was not going to be able to pay for half the purchase price ($47,500 or, if the borrowings were not included, $32,500). The sister said:
It was agreed he would be relieved of any further expectation to do so and I would retain full beneficial ownership.
The sister said that they agreed to leave the title registration unchanged as they did not want to incur stamp duty and “other legal costs”. She said that she did not have any “doubts or reservations” that the husband would do whatever was required to give effect to their agreement when the time came. She went on to say that after his children were born she even renewed her offer to him to “buy the half share” in the property but he declined on the basis of financial incapacity. She said that “[a]lmost every year” they discussed how to effect the transfer of the half share of the property without “either of [them] having to incur expenses but no solution presented itself”. The husband also said that they “reviewed the situation each year” but left things as they were.
The wife said in her trial affidavit that “from approximately 1988 until approximately 2008” she, the husband and, “usually”, their children stayed in one of the Suburb R flats for weekends “about every third weekend”. She said that they also spent a large amount of time in that flat during the Christmas school holidays. She said that they never, “to the best of [her] knowledge”, paid rent or “made any other payment to [the husband’s sister] or any other person during the times that we stayed in the unit”.
Profit and Loss Statements of the Conrad Family Trust were adduced into evidence. The earliest of those was for the 2005 financial year. It records income received in the form of rent for two units. It is safe, I consider, to accept that is for the two flats at Suburb C that were leased to HPL as trustee in 1988, still being sub-let by the trust (by way of holding over provisions pertaining to the original three year lease) many years later. There is no income recorded as received for the third flat in 2005. A relatively small amount of income, as rent received, is recorded for the third flat in 2006 ($1,448.58). Even less rental income ($640) is recorded for that third flat in 2007 before relatively significant amounts of rental income for that flat began to be recorded from 2008 onwards (e.g. $9,855, $17,358, $16,950). That is, in my view at least, consistent with the wife’s evidence that their family used to use that third flat, that she agreed in oral evidence was the upstairs flat called “flat 1”, rent free until “approximately 2008”.
The wife said that the husband told her early in the relationship that he managed the flats rather than engaging an agent to do that. She said that he would advertise the flats in the newspaper, show prospective tenants through the flats and make all the lease arrangements. She said that she saw him do minor maintenance work whilst they were staying there on weekends and that he would engage tradespeople for bigger jobs. She said that he arranged for the three flats to be renovated between 1990 and 1995. He arranged for a fence to be built around the whole property in or around 1994-1996. She said that “soon after” they were married, the husband asked her to collect rent from the tenants. She said she did that for a while. She would collect the money and go to the bank and deposit it into a bank account in HPL’s name. The husband denied that in his oral evidence, but I believed the wife and not his denial. She said that in “approximately 1997” her nephew rented one of the flats for about six months at a reduced rate “as he was going through some difficult times”. She said that she and the husband had discussed this and the husband had not said anything about having to speak with his sister about this or having to get her approval for the arrangement. She said that she never saw the husband’s sister at the flats and she never heard her talk about the flats.
The husband’s sister also asserted in her affidavit evidence that in around July 1995 she “directed” the husband to transfer the T Town property then registered in his name that she also said he held on trust for her, to their sister, Ms W, who “had 3 young children, was on welfare and had no home”. The sister said that Ms W then also held the property on trust for her. The husband said nothing about this in his evidence.
Another piece of relevant evidence relates to an agreement reached between the husband and his sister in 2002. Suffice it at this point to observe that it was said to restructure a pre-existing debt and security arrangement whereby the husband agreed he owed his sister money in respect of the original purchase of the husband and wife’s jointly owned former family home. That document records the husband offering security to his sister over his interest in the Suburb C property as well as the former family home. As counsel for the wife pointed out in her cross-examination of the husband and his sister, that is quite inconsistent with the factual assertion that he had already expressly agreed with that he only held his legal interest in the Suburb C property on trust for his sister. Neither the husband nor his sister gave very convincing evidence in their efforts to explain that clear inconsistency.
Both the husband and his sister adduce into evidence a copy of a “letter of demand” that the husband’s sister sent to the husband bearing the date of 7 April 2014, nearly a year after these proceedings were commenced by the wife. With respect, its contents read as if it was an exercise in evidence creation as opposed to a simple request for him to transfer his half legal interest in the property to her to effect a prior agreement or understanding. Significantly, in my consideration of its contents, the husband’s sister says:
… because we had a clear understanding and agreement that you would ultimately account for and make proper arrangements to compensate me for my legal and financial entitlements.
As previously discussed, I maintain and assert that you hold your share in the above property in trust for me. I think the correct term is constructive trust.
I refer to this as significant because it does not include any assertion that there had been an agreement reached in or around 1989 that varied the original asserted agreement that the husband owned a half interest in the property that he would have to pay his sister for at some future date. There is no assertion that they had agreed in or around 1989 that he would from then on actually only hold his half share of the registered legal interest in the property on trust for his sister.
The evidence adduced by the husband and his sister is that since 2016 the husband’s sister has collected all of the rent personally and paid all outgoings related to the property.
For the husband and his sister, it was submitted that the husband “has no beneficial interest in the property and never has”. Counsel submitted:
[The husband’s] legal interest is held by him upon trust for the Second Respondent either pursuant to an express trust [pursuant to the discussions between the First and Second Respondents when it was appreciated the First Respondent could not pay his half share of the purchase price of the property], or alternatively, a resulting trust or a constructive trust.
Though this asserted express declaration of trust was never evidenced by a contemporaneous written instrument or document signed by him,[4] the statutory requirement for the trust, if it was so declared by the husband, to be proved by some writing signed by him could be said, if he was denying his sister’s assertions, to be met by the husband’s written deposition in his affidavit evidence in these proceedings.[5] Further, if he was denying his sister’s assertions and there was no written proof or acknowledgment signed by him, a finding of fact that he did orally agree to hold his legal interest on trust for his sister and that it was unconscionable for him to deny otherwise would most probably give rise to a constructive trust. The creation of a constructive trust in this way is not affected at all by the statutory requirement for written proof of the declaration of trust signed by the trustee.[6] I do not consider though that written acknowledgment by the husband in his affidavit evidence in these proceedings of an alleged express declaration of trust said to have been made in 1989 that I have found did not actually happen, actually creates that trust. To do so would be permitting fraudulent disposition of any beneficial interest he is otherwise found to have had.
[4]Property Law Act 1974 (Qld) s 11(2) (“Property Law Act”).
[5] See Rochefoucauld v Boustead [1897] 1 Ch 196, 206 (Lindley LJ) as cited in Malcolm Cope, Constructive Trusts (The Law Book Company Ltd, 1992) 571.
[6]Property Law Act s 11(2).
Counsel for the Respondents, perhaps cautiously apprehending that the evidence of the express declaration of trust could be rejected, made the alternative submission that the husband never held the beneficial interest in the property because the circumstances of the property’s acquisition already gave rise to a resulting trust or a constructive trust. If he is correct, s 11(2) of the Property Law Act 1974 (Qld) permits the same even in the absence of writing signed by the husband.
Counsel for the Respondents submitted that there was no challenge to the Respondents’ evidence that the funds to purchase the Suburb C property were advanced entirely by the Second Respondent. He submitted that those facts alone establish a resulting trust.
As for the first part of that submission, whilst I acknowledge that counsel for the wife did not, in her cross-examination, challenge the Respondents’ evidence that the husband had contributed nothing to the purchase price of the Suburb C property, I do not accept that requires me to necessarily find that as a matter of fact. As I have already observed, the Respondents’ assertions as to that fact are not corroborated or supported by any other piece of evidence. There is no explanation for why there is not one piece of corroborative evidence, particularly in documentary form, adduced. Indeed, the sister’s evidence that a mortgage was registered on the title of the property securing borrowings of $30,000 that helped fund the purchase price raises serious doubts in my mind about the truth of the assertion that the husband contributed no funds. There has to be an inference that he was a joint borrower or, at the very least, a guarantor. Of course, as a guarantor alone he would not necessarily be held to have contributed to the purchase price in the same way he would have as a joint borrower, but a bank taking a mortgage over a property registered in joint names is most likely, I am satisfied, to require both the registered proprietors to be borrowers. None of that is referred to or explained in either of the Respondents’ evidence. Having regard to these matters and to my dissatisfaction with the credibility of the husband and his sister, generally, I am not prepared to make a finding that the husband’s sister did contribute all of the purchase money to the purchase of the Suburb C property notwithstanding the fact that there was no specific challenge in cross-examination to that evidence.
As to the second part of Counsel’s submission referred to in paragraph 69 above, a resulting trust arises in favour of a person who purchases property in the name of another, or in the name of themselves and another jointly, where the other person provides none of the purchase money and there is an absence of a relationship that gives rise to the presumption of advancement and there is an absence of evidence that the purchaser intended the other person to take their registered interest beneficially.[7] There is no presumption of advancement in the relationship between siblings.[8]
[7] See Calverly v Green (1984) 155 CLR 242, 246, 251 (Gibbs CJ).
[8] See McGregor v Nicol [2003] NSWSC 332 at [4] and also Noack v Noack [1959] VR 137, 140.
Associate:
Date: 1 March 2019
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Costs
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