Crafter and Crafter & Ors
[2011] FamCA 122
•3 March 2011
FAMILY COURT OF AUSTRALIA
| CRAFTER & CRAFTER AND ORS | [2011] FamCA 122 |
| FAMILY LAW – PROPERTY – s 78 Declarations – Constructive Trust – Equitable Interests ‑ where husband and wife made contributions to family business and property throughout their marriage – where parties seek various declarations in relation to shareholding and ownership of property – where third to fifth respondents seek declaration that any interest held by the wife and husband in the business/s and/or property is held on trust for the benefit of the other parties – where third to fifth respondents claim there was a joint venture between the parties – whether there was a joint venture – consideration of the property of the husband and wife – settlement of property – whether the proposed split of 52/48 percent in favour of the wife is just and equitable |
| Evidence Act 1995 (Cth) Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) |
| ASIC v Karl Suleman Enterprises Pty Ltd (in Liq.) [2003] NSWSC 163 Bathurst City Council v PWC Properties [1998] 195 CLR 566 Baumgartner v Baumgartner (1987) 164 CLR 137 Carson v Wood (1994) 34 NSWLR 9 Coghlan v Coghlan [2005] FLC 93-220 Giumelli v Giumelli (1999) 196 CLR 101 Harris v Caladine [1991] HCA 9; [1991] FLC 92-217 Hayton & Bendle (2010) 43 FamLR 602 Henderson v Miles (No.2) [2005] NSWSC 867 Hickey & Hickey & Attorney-General for the Commonwealth of Australia (intervenor) [2003] FLC 93-143 In the Marriage of Clauson [1995] FLC 92-595 In the Marriage of Ferraro [1993] FLC 92-335 In the Marriage of Lee Steere [1985] FLC 91-626 JEL & DDF [2001] FLC 93-075 Muir & Royston [2010] FamCA 374 Muschinski v Dodds (1985) 160 CLR 583 Riches v Hogben [1986] 1 QD R 315 Russell v Russell [1999] FLC 92-877 Shepherd v Doolan and Ors [2005] NSWSC 42 Turner v Dunne [1996] QCA 272 Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 Voda v Voda [1997] FLC 92-75 Warby v Warby [2002] FLC 93-091 Waterhouse v Power [2003] QCA 155 West v Mead [2003] NSWSC 161 |
| APPLICANT: | Ms P Crafter |
| 1ST RESPONDENT: | Mr B Crafter |
| 2ND RESPONDENT: | M Crafter |
| 3RD RESPONDENT: | W Crafter |
| 4TH RESPONDENT: | D Pty Ltd |
| 5TH RESPONDENT: | P Crafter |
| 6TH RESPONDENT: | N Pty Ltd |
| FILE NUMBER: | ADC | 142 | of | 2007 |
| DATE DELIVERED: | 3 March 2011 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Murphy J |
| HEARING DATE: | 4, 5, 6, 9, 10, 11 August 2010 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Tredrea |
| SOLICITOR FOR THE APPLICANT: | Jo-Anne Milen & Associates |
| COUNSEL FOR THE 1ST RESPONDENT: | Mr McGinn |
| SOLICITOR FOR THE 1ST RESPONDENT: | Lindleys Solicitors |
| COUNSEL FOR THE 2ND, 3RD, 4TH, 5TH RESPONDENTS: | Mr Stevens |
| SOLICITOR FOR THE 2ND, 3RD, 4TH, 5TH RESPONDENTS: | Stokes Legal |
Orders
The application of the wife seeking a declaration in respect of the shareholding in D Pty Ltd is dismissed.
The applications by each and all of the Second, Third, Fourth and Fifth Respondents seeking a declaration in respect of:
(a) the shareholding of the husband and wife in N Pty Ltd;
(b)the title of the husband and wife in and to two blocks of land (“Property 1 at G”) and (“Property 2 at G”);
are each dismissed.
The applications of each of the husband and wife seeking declarations in respect of the two blocks of land (“Block 1 of land at B”) and (“Block 2 of land at B”) owned respectively by the Third Respondent and Fifth Respondent are each dismissed.
Pursuant to s 78 of the Family Law Act 1975 (Cth) as amended (“the Act”) it is declared that:
(a)The husband and wife hold the legal title to two blocks of land situated at G and respectively described as Property 1 at G and Property 2 at G to the exclusion of any right, title, claim or interest in or to the said properties by any or all of the Second to Fifth Respondents; and
(b)The husband and wife hold the legal title to their respective shareholding in N Pty Ltd to the exclusion of any right, title, claim or interest in or to the said properties by any or all of the Second to Fifth Respondents
As and by way of settlement of property pursuant to s 79 of the Act, the property of the husband and wife or either of them within the meaning of the said section together with their respective superannuation interests be divided in the proportion 52% to the wife and 48% to the husband in accordance with the succeeding paragraphs of these orders.
In order to give effect to paragraph 5 of these orders, and save as the parties might otherwise agree in writing and file by way of Amended Order by Consent within 21 days of the date of these Orders, the husband shall, by not later than 28 days from the date of these Orders:
(a)Do all such things and sign all such documents as shall be necessary as to transfer to the wife any right, title claim or interest he has or may have in respect of the following real and personal property:
(i)The two pieces of real property described at paragraph 4(a) of these orders;
(ii)The real property situated at Property 2 at V;
(iii)The personal property agreed to between the parties listed at paragraph 20 of the Reasons for Judgment delivered contemporaneously herewith;
(b)Forthwith abandon any right, title, claim or interest he has or may have in respect of all such property;
(c)Do all such things, sign all such documents and pay all such fees as shall be necessary so at to assume sole responsibility for, and indemnify and hold indemnified the wife, in respect of, the mortgages secured on each of the properties at Property 1 at V, Property 2 at V and Property 3 at V.
In order to give effect to paragraph 5 of these orders, and save as the parties might otherwise agree in writing and file by way of Amended Order by Consent within 21 days of the date of these Orders, the wife shall, by not later than 28 days from the date of these Orders:
(a)Raise the sum of $100,000 so as to pay that sum to the husband contemporaneously with the transfers of real property contemplated by paragraph 6(a) of these Orders;
(b)Do all such things, sign all such documents and pay all such fees as shall be necessary, to transfer to the husband her shareholding in N Pty Ltd and to resign as a director or other officeholder thereof in exchange for which the husband shall indemnify and keep indemnified the wife in respect of all liabilities of the said corporation;
(c)Transfer to the husband any right, title claim or interest she has or may have in respect of the personal property being items 4 to 6, 8, 9, 11 and 12 and 16 listed at paragraph 19 of the Reasons for Judgment delivered contemporaneously herewith.
Each of the husband and wife shall retain, to the exclusion of any present or future right, title claim or interest of the other, their respective superannuation interests.
Save as specifically provided for in these Orders, each of the parties shall retain, to the exclusion of any present or future right, title claim or interest of the other, any property of whatever type or description currently in their respective possession.
In default of the wife raising the sum specified in paragraph 7(a) of these Orders (or in the event that, prior to the time there specified, the wife advises the husband in writing of her inability to do so), then, save as the parties might otherwise agree in writing and file by way of Amended Order by Consent within 21 days of the date of these Orders:
(a)The parties shall do all such things and sign all such documents as may be necessary to list for sale by auction the two properties at G described at paragraph 4(a) of these Orders;
(b)After payment of all reasonable costs of sale and the setting aside of such amount as is agreed or assessed by an appropriately qualified accountant as representing an approximation of any capital gains tax payable in respect of the properties, the net proceeds shall be divided between the parties so as to achieve the division referred to at paragraph 5 of these Orders, using the values or amounts of property and superannuation interests respectively referred to in the Reasons for Judgment delivered contemporaneously herewith;
(c)After payment of any capital gains tax payable in respect of the properties, the balance of the fund set aside pursuant to the previous sub-paragraph of these Orders be divided between the parties so as to achieve a division referred to at paragraph 5 of these Orders, using the values or amounts of property and superannuation interests respectively referred to in the Reasons for Judgment delivered contemporaneously herewith.
All subpoenaed documents be returned to the persons or institutions from which they emanated and all exhibits be returned to the person or persons who tendered the same.
IT IS NOTED that publication of this judgment under the pseudonym Crafter & Crafter and Ors is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
FILE NUMBER: ADC142 of 2007
| Ms Crafter |
Applicant
AND
| Mr Crafter |
1st Respondent
AND
| M Crafter |
2nd Respondent
AND
| W Crafter |
3rd Respondent
AND
| D Pty Ltd |
4th Respondent
AND
| P Crafter |
5th Respondent
AND
| N Pty Ltd |
6th Respondent
REASONS FOR JUDGMENT
Members of the Crafter family have been involved with each other commercially for some considerable time. The beginnings of what became a business in which all members of the family have been involved, to varying degrees and from time to time, can be traced back to the 1970s (and perhaps before) when M Crafter, the mother of the husband in these s 79 proceedings (“M”), commenced a furnishings business in her own name.
Her husband (“J”), is the father of the husband in these proceedings. He was an accountant. He was also instrumental in seeking to expand the furnishings business and in pursuing other commercial interests including the acquisition and development of land at G and in establishing a business to sell farm equipment.
Adverse circumstances within the latter business, established via a corporate vehicle, Business 5 Pty Ltd (of which M and J were the directors and sole shareholders), culminated in the late 1980s. Those circumstances saw Business 5 Pty Ltd go into liquidation and receivers and managers appointed to what I will call for convenience “the furnishings business”. J became bankrupt as a result of separate indebtedness to the ANZ bank.
During the events just referred to, and their aftermath, a number of transactions were effected involving members of the family that are contended now to have differing legal – or equitable – consequences. The husband and wife each contend for differing effects of those arrangements and transactions as do (collectively) M, J, and the husband’s brothers “P” and “W”. M, P and W are respondents to these proceedings; J is not.
The differing contentions just referred to are said to result in different conclusions as to “the property of the parties or either of them” within the meaning of s 79 of the Family Law Act 1975 (Cth) (as amended) (“the Act”).
A lack of legal formality (to one degree or another) attends the arrangements just referred to. While intra-familial relationships that have commercial elements are (relatively) harmonious – or, at least, provide no catalyst for specific action by the constituent members – a lack of legal formality usually creates few practical difficulties. The corollary is that, when disharmony intrudes, the same lack of formality provokes complexities in ascertaining how such relationships and transactions should properly be viewed.
Frequently, the “matrimonial partnership” is an integral part of the familial commercial enterprise or context, even if its precise role, and the parameters of that involvement, are neither spelled out nor specifically addressed. The breakdown of the “matrimonial partnership”, and the consequent need for the examination of a just and equitable settlement of property between the parties to that relationship, can create many evidentiary and legal difficulties for this court. This is such a case.
Here, the financial crisis for J and M, and their company and business earlier referred to, is said to have also been a financial crisis “for the family”. Their position can be seen summarised by the husband’s brother, P:
Without the joint effort of all members of the family in providing security, continuing to operate businesses, obtaining finance and becoming directors of companies and repaying debt and other expenses, the asset pool of the family would not have been able to be retained and the individual assets owned by members of the family would not have been the same as they are today. It is only as family that we were strong enough to financially deal with [Fiancier 1] [and] the subsequent aftermath. Had it been left to individuals under their own personal guarantees the outcome today would have been significantly different. The outcome produced the best result in respect of asset retention for all parties concerned.
While, perhaps, convenient as a narrative, the passage can also be seen to be deficient as evidence; comments are not probative facts. As will emerge later in these Reasons, it is by no means the only example of that phenomena in these proceedings; something which exacerbates the difficulty of the task at hand.
The transactions which the financial crisis provoked are said by the husband and other respondents to these proceedings to have been undertaken by the family “for the family”, and are said to have consequential legal (or, more particularly, equitable) effects.
It will be plain from what has been said that a central issue in this case relates to the first, and fundamental, step in the task required by s 79 which has been referred to in a long line of authority as having four (or, perhaps, three) “steps”. (See, eg. In the Marriage of Lee Steere [1985] FLC 91-626; In the Marriage of Ferraro [1993] FLC 92-335; In the Marriage of Clauson [1995] FLC 92-595 and, more recently, Coghlan v Coghlan [2005] FLC 93-220).
First, though, it is necessary to examine whether this Court has jurisdiction and power in this case to make the orders sought by or against parties who are not parties to the marriage.
Jurisdiction and Power
The third party respondents to this application include a corporation, N Pty Ltd. It is a company plainly under the control of the parties to this marriage. It was submitted that, in light of the fact that it has never produced financial statements or otherwise conducted itself as might be expected of a corporation, that it is tantamount to a “sham”. Specific findings in that respect could not in my judgment be sustained on the evidence. They are, in any event, not required. The corporation indicates that it will abide the order of the Court and the evidence plainly reveals that it is under the complete control of a party or parties to the marriage. Its assets can be treated as property of the parties within the meaning of s 79 (see eg. Voda v Voda [1997] FLC 92-75).
The second, third and fifth respondents are third parties to this marriage (being the mother and brothers of the husband). They call in aid in respect of the orders sought by them, s 78 of the Act, or, alternatively, the accrued jurisdiction of this Court. All parties accept that the Court has jurisdiction to hear and determine their claims. Obviously, though, parties cannot consent to a jurisdiction which the Court does not in fact have. It is necessary, then, to state briefly the reasons for concluding that the Court has jurisdiction to hear and determine their claims.
As I understood his submissions, counsel for the third parties, whilst accepting that the Court has jurisdiction, nevertheless submitted that it first had to be determined whether property was “property of the parties” before declaratory relief could be given pursuant to s 78. Contrary to that submission, in Warby v Warby [2002] FLC 93-091, it was held (at [87]):
… The wife’s submissions conceded that orders may in limited circumstances affect the rights of third parties and that is clearly correct. Section 78 of the Family Law Act confers the power to make a declaration with respect to existing title or rights. Since the amendment of the Act in 1988, the provision is not expressly confined to the property of the parties to the marriage or either of them and there is no authority which says that such a declaration may not bind a third party. …
There is now no doubt, in my view, that the Family Court has accrued jurisdiction (see Warby above).
Here, as the earlier overview of this case demonstrates, the financial affairs of this marriage are intermingled, to one extent or another, with the interests of the respondents. On any view of the evidence, that has plainly been so for a considerable period of time. A determination of the respective property interests is crucial to a determination of the central issue in the matrimonial proceedings – namely the identification and value of the property of the parties or either of them. It clearly follows, then, in my view, that the claims are part of a “single justiciable controversy”. Claims are plainly “attached” and are not “disparate”. The substratum of facts central to a determination of the issues as between the husband and the wife are the same substratum of facts central to the determination of the equitable claims made by or on behalf of third parties.
I conclude that the Court has jurisdiction and power to make the Orders sought.
The Property of the Parties or Either of Them
Agreed Property
The husband and wife (and the other parties) are agreed as to the constitution and value of the property that is not subject to any claim by any or all of the third parties. It is convenient to set out that component of “the property pool”:
Item $
1. Property 1 at V 300,000.00
2. Property 3 at V 160,000.00
3. Property 2 at V 330,000.00
4. Husband’s Cleaning Business Assets 1,360.00
5. Boat 90,000.00
6. Fishing License 35,000.00
7. Wife’s furniture 2,805.00
8. Husband’s furniture 5,770.00
9. Toyota vehicle in husband’s possession 3,000.00
10. Holden vehicle in wife’s possession 6,500.00
11. Truck 4,500.00
12. Caravan 1,000.00
13. ING 2,852.00
14. PowerState Credit Union 1,482.00
15. Half proceeds TMO Shares 2,010.00
16. Other half TMO Shares 2,010.00
17. Environ shares 225.00
18. Telstra shares 4,665.00
19. CBA shares 24,451.00
20. CBA shares (2nd parcel) 15,000.00
21. Jewellery 3,865.00
22. Insurance policy 9,201.00
23. Mortgage Property 1 at V [103,487.00]
24. Mortgage Property 2 at V [268,000.00]
25. Mortgage Property 3 at V [ 37,651.00]
Total $ 596,038.00
From that agreed property, it is also agreed that the wife will receive:
The wife has retained / will receive: $
· Property 2 at V 330,000.00
· Furniture 2,805.00
· ING 2,852.00
· PowerState 1,482.00
· Half proceeds TMO 2,010.00
· Environ shares 225.00
· Telstra shares 4,665.00
· CBA shares 24,451.00
· CBA shares (#2) 15,000.00
· Jewellery 3,865.00
· Insurance policy 9,201.00
Total $ 396,556.00
Where superannuation interests form part of the interests sought to be divided by s 79 orders a “two pools approach” has been referred to as being appropriate in many cases. (See Coghlan & Coghlan [2005] FLC 93-220 at [63]). Here, Counsel for the husband contends that a “three pools approach” should be adopted and refers in that respect to a first instance decision of O’Reilly J in Muir & Royston [2010] FamCA 374. In that case, Her Honour, was concerned to distinguish between contributions to particular property that differed markedly from contributions made to other property. It was the contrast in the nature and extent of the contributions that persuaded her Honour to adopt the approach taken in that case.
The treatment of superannuation interests and references to whether there should be a “global approach” or a “one pool” or “two pools approach” has been the subject of Full Court consideration. In Hayton & Bendle (2010) 43 FamLR 602. I attempted to examine the difference in the approaches of the Full Court in Coghlan, above, and in Hickey & Hickey & Attorney-General for the Commonwealth of Australia (intervenor) [2003] FLC 93-143. I concluded:
109.It seems to me that if justice and equity is to be achieved within the meaning of the FLA, what is required is a consideration of all property and all superannuation interests, and their respective values (or, in the case of superannuation interests, the “amount” arrived at by a legislatively-mandated process).
110.Once that is done, it is necessary to identify, and be cognisant of, differences in the origin, nature, form and characteristics of that property and those superannuation interests. The “four (or three) step process” recognises this. More importantly, so does the FLA; s 79 plainly recognises these distinctions (for example in the reference to “acquisition” and “conservation” and to “direct” and “indirect” contributions).
Here, the issue is the difference in the nature and extent of differing contributions made to different property. The overall division of property is agreed. It is agreed that when the property of the parties or either of them is properly ascertained the agreed division will apply. The division of the assets mooted by counsel for the husband is, however, convenient in delineating those assets in respect of which the claims are made that would see, if successful, interests in that property being reflected otherwise than in the legal interests evident in respect of it.
Within that rubric, it is agreed that the respective superannuation interests of the parties be included with the agreed property and the interests otherwise determined in respect of the other property and the percentage division be applied globally to the total. I consider that appropriate in the circumstances. Those interests, then, are:
Superannuation
1. Wife’s superannuation 25,019.00
2. Husband’s superannuation 33,352.00
Property of the Parties – Agreed Adjustment and Distribution
Discussions between counsel for each of the husband and wife at the commencement of these proceedings produced an agreement that, upon a proper consideration of the matters required to be considered pursuant to s 79 of the Act, the property of the parties or either of them should be divided 52% to the wife and 48% to the husband.
The real impact of the orders, as distinct from “somewhat arbitrary” percentages, must be considered (see Russell v Russell [1999] FLC 92-877 @ 86,439; JEL & DDF [2001] FLC 93-075 @ 88,332.) Here it is also agreed that the agreement as to division pertains irrespective of the decision ultimately arrived at by the Court as to whether asserted interests form part of the divisible property, notwithstanding that, as a result, the dollar value of the result might, as a result, alter, and alter significantly. Those respective dollar values will be referred to below.
Of course, the Court retains an obligation to ensure that any such agreement effects a settlement of property that is just and equitable (see, in particular, Brennan J in Harris v Caladine [1991] HCA 9; [1991] FLC 92-217 at 78,474). Equally, though, as Brennan J points out, relevantly, (ibid):
It does not follow that, when a consent order is sought in a s 79 application, it is necessary to conduct an inquiry into each of those [s 79(4)] factors. The Court may be satisfied that a provision is proper by reference not only to the material before the Court relating to the factors mentioned in s 79(4) but by reference to the advice available to the respective parties and the consent which they respectively give to the making of the order. In the majority of cases, once it appears that the parties are conscious of the factors mentioned in pars (a) to (f) and have taken them into account before consenting, the provisions “with respect to financial matters” proposed for incorporation in the consent order will be seen to be “proper”. …
Here, it is to be noted that each of the husband and wife is represented by solicitors and counsel, and the agreement arrived at between them occurs at a time when substantial affidavit material has been filed by each of them (and by the third parties) so as to allow a proper examination of all of the factors enumerated in s 79(4) of the Act. Those matters would plainly have been evident to the experienced counsel providing advice to each of the husband and wife in the facilitation of the agreement reached.
Those factors, together with the affidavit evidence filed by the parties in these proceedings pertaining to contribution and the matters relevant to s 79(4)(e) readily permits of a conclusion that such a result falls properly within “the generous ambit of discretion” inherent in the section.
However, that must remain subject to an ultimate analysis of the justice and equity of that result consequent upon the findings in respect of the central issues in this case as to the contentious property. I will return to that issue at the conclusion of these reasons.
The “Contentious Property”
The convenient expression, “contentious property (or assets)”, was adopted by Mr McGinn, counsel for the husband, to describe collectively property to which competing claims are made by the husband, the wife and the second to fifth respondents. I will respectfully adopt that description in these Reasons.
The contentious property, and its value, comprises:
W’s block at B
96,000.00
90,000.00[1]
P’s block at B 120,000.00
D Pty Ltd 270,000.00
Property 1 at G 295,000.00
Property 2 at G 275,000.00
Property at MM 485,000.00
$1,541,000.00Amended total $1,535,000.00[2]
[1] The amount of $96,000 was altered from that contained in written submissions on behalf of the husband during oral addresses to reflect an agreed total of the values of the two properties at B of $210,000.
[2] The total has been consequentially amended.
The Contentious Property - Background
It is important at the outset to give a chronological overview in respect of the contentious property. As will be seen, it will be necessary to revisit aspects of this chronology when components of the contentious property, and the steps and transactions associated with it, are examined in more detail later in these Reasons.
The husband is aged 48, born in 1962. The wife is aged 46, born in 1964. They married in 1986, having met about three years earlier. They separated finally in June 2006. There are four children of the relationship – E and F are both now adults (aged 20 and 19 respectively) and the twins H and O are 16½ (born in 1994).
In 1975, Business 1 Pty Ltd was incorporated. J and M were its only directors and shareholders. It ran the furnishings business.
In 1978 (i.e. some five years before the parties met) J and M established three corporations: Business 2 Pty Ltd; Business 3 Pty Ltd and Business 4 Pty Ltd. They purchased, through Business 2 Pty Ltd, the two blocks of land at G now owned by the husband and wife. In that year, they also established the Crafter Family Trust (with Business 6 Pty Ltd as its trustee).
Within the first three years of the parties’ marriage, a number of financial events significant to the claims in this case occurred.
In 1987, through a corporation, Business 5 Pty Ltd, J and M purchased a farm equipment business. (It seems that P essentially ran this business – although, as will be seen, in at least some of the documents produced as exhibits, it appears that J had, at that time, very little regard for P’s acumen or commitment).
The following year, 1988, saw a number of significant events:
§ By the beginning of that year, Business 5 Pty Ltd (the farm equipment business) was in significant financial difficulties;
§ On 11 February, J, M, the husband and wife, P and his wife and the corporations earlier referred, entered into a loan and guarantee arrangement with Fiancier 1. The sum of $525,000 was borrowed. Relevant to present issues, each of the individuals, including the husband and wife, provided personal guarantees for the borrowing. Notably, J and M also gave personal guarantees as did Business 1 Pty Ltd and Business 3 Pty Ltd (each under the control of J and M);
§ On 9 November, receivers and managers were appointed to Business 1 Pty Ltd (and, thus, the furnishings business). The same receivers and managers were also appointed to the corporate entities conducting the subdivisions at G earlier referred to;
§ On 25 November, a receiver and manager was appointed to Business 5 Pty Ltd.
When the agreement with Financier 1 was signed by each of the husband and the wife, they owned two (I gather, adjoining) properties (Property 1 at V). The properties were each, it seems, either mortgage free or had minimal borrowings secured on them. The husband and wife had also purchased land at (Property 2 at V).
It is difficult to develop a picture of the pre-1988 situation for P. His trial affidavit relies, by way of admission, upon matters deposed to by his father. Counsel for the husband put to J that in the lead up to the “Financier 1 crisis” P and his wife owned a house and “had some borrowing capacity” and P was working in the business. That position does not seem to be contradicted by any other evidence before the Court.
W was a relatively young man (it would appear from his affidavit that he commenced working with Business 5 Pty Ltd in about 1987 or 1988 when he was about 19 or 20). He had no assets at the time. He deposes:
I have no direct knowledge as to the arrangements made between the various companies and [Financier 1] and have only learned details of the transactions from others and principally from my father [J], my mother [M] and my brother [P].
That passage, directed toward knowledge of the arrangements with Financier 1, is, in my judgment, entirely consistent with what the evidence reveals of W’s level of knowledge about arrangements surrounding the transactions to which reference will shortly be made. When asked in the witness box why he claimed to have a beneficial interest (with others) in the property at G, his response was that “in 1988 or 1989 or 1990” his father came and spoke of a plan “to get everyone out of trouble” with respect to monies owed to Financier 1. He said that the last time he had a conversation with the husband with a commercial or business theme was when he signed the “loan document” (i.e. 12 April 1990).
Prior to the establishment of Business 5 Pty Ltd, and its borrowing from Fiancier 1, the husband and wife had a cleaning business that provided for them a source of income.
M was, it seems plain, the driving labour behind the furnishings business. P was ostensibly working in the furnishings business but portions of the evidence can be seen as throwing some doubt on his interest and commitment. It was put to M by counsel for the wife to the effect that “[the husband] saved the family” and that P was “a bit of an idler – a bit of a taker”. M responded that “P was not an early morning person” but that he “put in his fair share until about 1992”. A letter from J to the husband later to be referred to paints a less favourable picture of P’s commitment and work ethic.
During 1990, J arranged the purchase of a shelf company, N Pty Ltd.
Liquidators and receivers and managers initially determined to continue to run the furnishings business as a going concern. It also appears to be common ground that a number of unsuccessful attempts were made to sell the two properties at G and the property at MM.
Within a three month period from April to June 1990, the plant and equipment of the furnishings business was sold to W; a new business name (“Business 1”) was registered in respect of the business; J and M sold properties at MM to N Pty Ltd; Business 2 Pty Ltd sold the two properties at G to the husband and wife. W and P each became registered as proprietors of a block of land at B. No dates for the acquisitions of those properties are provided in the evidence but, inferentially, it would appear they were acquired during this timeframe, or at about this time.
That timeframe also coincides with a number of other significant events. First, the husband and wife’s first child, F, was born at that time (1990). Secondly, a sequestration order was made in respect of J’s estate in January 1991. J was unable to provide a date when the judgment founding that sequestration order (obtained as a result of actions taken by the ANZ Bank) had been made but, of course, it must have been earlier than that time.
On 20 September 1991, J was convicted of fraudulent conversion and imprisoned. The complainants in respect of this charge were the wife’s aunt and uncle. Again, there is no evidence as to when J was charged. Nor is there evidence as to when the complaint was made or when the police investigations leading up to the charge had begun. Obviously enough, each was well prior to 20 September 1991. The aunt and uncle did not recover any monies from J.
There is no evidence as to the amount of the misappropriation or how the non-recovered funds were used by J, including whether any such funds found their way into attempts to retrieve the situation with Financier 1.
The Parties’ Claims
The Wife
In respect of the contentious property, the wife in her Outline of Case seeks declarations that, in effect, the husband and wife are the beneficial owners of the furnishings business or alternatively that she and the husband are the beneficial owners of W’s three shares in D Pty Ltd and, otherwise, that “the husband and the wife are the beneficial owners absolutely of all property the subject of these proceedings”.
The Husband
The husband’s position is summarised in his Outline of Case:
The husband says that the pool of assets and resources should be adjusted by there being a deduction of 80% of [the contentious property] … $1,172,000 … as representing the entitlement of his mother, his father and his two brothers [P] and [W] in those properties.
As the final orders sought make clear, that result involves declarations that P and W hold their interest in their respective properties at B on trust for the benefit of each of the family members in equal shares (the husband and wife having as a result, a one-fifth interest). So, too, declarations would be made to similar effect as against the registered proprietors of land, or the holders of shares as the case may be.
The Other Respondents
The “third parties” (that is, the Second to Fifth Respondents) position “is that subject to accounting adjustments the [contentious property is] beneficially owned by M, [the husband], P and W in equal shares”.
It will be observed that, inherent in that position, is a contention that J holds no such beneficial interest. The basis of that submission is, I gather, that because (as is clear) J says that he relinquishes any interest he might have, no declaration should be made of any beneficial interest in his favour.
But, it seems to me that, if J has an interest of the type under discussion, it arises by operation of law and he derives his entitlement accordingly. Having such an interest, he is, of course, then free to do as he might choose with it. But, I cannot see how it can be asserted that a beneficial interest can arise by operation of equitable principle whilst at the same time asserting that the interest thus created should not be declared but is somehow “absorbed by”, or passed on to, other beneficial interest holders.
Overview of the Basis for the Claims
The husband argues that interests in property acquired by he and the wife (either in their own names or through the company, N Pty Ltd) in exchange for money provided by he and the wife were part of an overall plan in which other family members were also involved.
The purpose, or terms, of the “overall plan or arrangement” need to be examined more carefully below, but for present purposes it can be said that such an alleged plan was to provide sufficient funds to satisfy a major creditor, Financier 1, thereby discharging not only a loan agreement with Financier 1 but, more importantly, also discharging personal guarantees given by the husband and P and their respective wives. The effect of satisfying that creditor was, then, it is said, to save the family business from failure (thereby preserving M’s long-held business and, also, employment for family members) and to prevent foreclosure on the husband and wife’s property (and the property of P and his wife) pursuant to the personal guarantees.
The equitable claim by the third parties is more expansive. First, it is said that:
The foundation of the claim in this action is that there was an express intention on behalf of the transferor/settler (i.e. [J] and [M]), that by transferring property owned or controlled by them that the transferees would become a trustee of the property. The intention is to also be inferred from the mutual benefit and obligations arising from the restructure and refinance in 1990.
Secondly, it is argued that:
This action is concerned with [the fact that] the transferors of the [properties at G and MM] did not intend to transfer the beneficial interest to the transferee. In default [of] the Court making a finding that there was an express trust the facts give rise to a resulting trust ….
The third, and it seems alternative, basis for the Respondents’ claims is that:
The foundation for the claim by the Third Parties is that by reason of the facts and circumstances and the common intention of the parties in 1990 and ongoing financial contribution by the Third Parties that it is equitable that the Court should “construct” a trust of the properties for the common benefit of all the parties.
The fourth, and further alternative basis for such a trust is that:
… it would be “unjust, inequitable and unconscionable to retain the benefit of the [properties at G and MM] including accrued capital value in circumstances were (sic) the Third Parties have contributed to the discharge of liabilities to [Financier 1], and have paid and continued to pay the costs of ownership”.
The written submissions go on to articulate, again as an alternative, a claim for equitable charge which is said to be “…a fall back position in the event that the principal equitable relief is not granted”.
The wife contends that property was acquired, in effect, pursuant to ordinary commercial transactions, albeit that they were intra-familial and notwithstanding that they were poorly or informally documented, or not documented at all. For example, she argues that the purchase of the property at MM (where the furnishings business’s workshop was, and is, situated) occurred at its commercial value (as assessed by a valuer) and was acquired because no other purchaser could be found.
In addition, however, a claim is made in respect of the fourth respondent, D Pty Ltd, which was incorporated in 2000 and is the current trading vehicle for “the furnishings business”. W has three shares in that company which, in effect, it is said, represent a former incarnation of the furnishings business, Business 1, which, it is said by the wife, was acquired by her and the husband for valuable consideration.
The Recognition of Equitable Interests – Relevant Principles
The equitable claim by the husband and one of the alternative claims by the third party respondents rely upon what might be described as a “Muschinski v Dodds constructive trust”. In Muschinski v Dodds (1985) 160 CLR 583, Deane J (with whom Mason J agreed) held, @ 620:
… the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do … [cases and citations omitted].
Subsequent to Muschinski v Dodds, the High Court held, in Baumgartner v Baumgartner (1987) 164 CLR 137, that a constructive trust can be imposed as an equitable remedy in accordance with a “general equitable principle which restores to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances which it was not intended that the other party should enjoy them” (at 148).
It has been said that “[t]he principle has been described as “the windfall equity” since the focus of equitable intervention is on the benefit obtained by the defendant by virtue of the claimant’s contributions” (Principles of the Law of Trusts, Ford and Lee, at [22.4620]). In Henderson v Miles (No.2) [2005] NSWSC 867, it was held (at 895) that a trial Judge:
…looks not to the detriment that might be suffered because the arrangement did not continue, but merely to the detriment of losing a fund to the other party to the arrangement through unexpected circumstances, where such loss would result in the other having an unconscionable gain.
It is not sufficient (at least in Australia) to simply allege that A has been unjustly enriched at the expense of B. Constructive trusts are not imposed by a court by reference to abstract notions of fairness, justice or equity but, rather, by reference to established legal or equitable principle. (Muschinski v Dodds and Baumgartner v Baumgartner, above, noting that, in the former case Deane J refers to “distinct categories of case” in which such a trust is imposed).
This reference to “distinct categories of case” is important and has been referred to as such in both decided cases and texts. Thus, for example:
A pleader must still refer to some established category of case in quasi-contract or equity, or be prepared to persuade an appellate court that some new category should be recognised by analogy, induction or deduction from an existing category in light of the principle of awarding restitution for unjust enrichments. Unjust enrichment is not a cause of action (Principles of the Law of Trusts, Ford and Lee, above, [22.120] citing Coshott v Linen [2007] NSWCA 153.)
A good example from the case law is Shepherd v Doolan and Ors [2005] NSWSC 42 where White J said, relevantly:
[31] One class of case where equity will intervene to prevent the unconscientious denial by the legal owner of another party’s rights, is where the parties agreed, or it was their common intention, that the claimant should have an interest in property owned by the other, and the claimant acted to his or her detriment on the basis of that agreement or common intention.
[32] Another class of case where equity will intervene is to [citing Baumgartner at CLR 148] “…[restore] to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them”. [citations omitted]
Because the intervention that might construe a trust is equitable and is founded on remedying unconscionability, a constructive trust is not necessarily the remedy that will apply consequentially to a finding of the requisite unconscionability:
…before the Court imposes a constructive trust as a remedy, it should first decide whether, having regard to the issues in the litigation, there are other means available to quell the controversy. (Bathurst City Council v PWC Properties [1998] 195 CLR 566 at 585).
The remedy is, then, what is sometimes referred to as “the minimum equity”; the circumstances might permit of equity offering an alternative remedy. (See generally, Riches v Hogben [1986] 1 QD R 315; Giumelli v Giumelli (1999) 196 CLR 101). Similarly, it has been held, for example, that equity does “what is practically just” (Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102).
A cautionary note – important, in my view, in the circumstances of this case - is sounded in respect of the required unconscionability by Macrossan CJ in Turner v Dunne [1996] QCA 272:
While it is true that “general notions of fairness and justice are relevant to the traditional concept of unconscionable conduct” (Baumgartner at 148), “unconscionability” is not a description automatically attracted whenever there is detected by a judge some departure from what he sees as a broad principle of fairness: cf the dismissive reference to “idiosyncratic notions of what is just and fair” in Baumgartner (supra) at 148. If it were otherwise, it might have to be concluded that ordinary categories of legal ownership could be not much more than provisional in all domestic relationships … The relevant unconscionability which has been referred to must always be found as a basis for the Court’s intervention if the parties' separate legal titles are to be modified.
Further, it is also important to not give to the constructive trust, attributes, or a role, which it does not possess and to bear in mind that “any presumption that equity makes about a person’s intention can be rebutted by evidence of actual intention”. (Principles of Australian Equity and Trusts, Radan & Stewart, LexisNexis 2010 at [19.4] citing Calverly v Green (1984) 155 CLR 244 at 270 and Muschinski v Dodds, above).
It is frequently said that a constructive trust is imposed “irrespective of the intention” of the relevant parties. For example, the learned authors of Jacobs’ Law of Trusts in Australia (4th ed), RP Meagher QC and WMC Gummow say:
A constructive trust differs from an express trust in that it is raised by operation of law without reference to the intentions of the parties concerned and, certainly, in the cases which come before the Courts, contrary to the intentions and desires of one of the parties; ... in the case of a constructive trust, the intention of the parties is irrelevant. Constructive trusts arise where no trust has directly or indirectly been declared, but where, according to the principles of equity, it would be a fraud for the person on whom the Court imposes the trust to assert a beneficial ownership.
However, it has also been said that:
This proposition is an oversimplification. What is common to all constructive trusts is that they derive their authority from the order of the Court, and not from the objectively ascertained intention of a settlor (as in the case of an express trust), or the absence of intention to confer a beneficial interest (as in the case of a resulting trust). But the intention of the defendant, or expectations of the plaintiff created by the conduct of the defendant, may be relevant to the imposition of some constructive trusts … (Principles of the Law of Trusts, Ford and Lee, para [22.100])
The two statements are not, in my view, necessarily contradictory; the point is, it seems to me, that intention is to be put in its proper place. That is, as I understand the law, evidence of intention sits with other evidence which may lead to the imposition of a trust (as distinct from being determinative of it).
In Waterhouse v Power [2003] QCA 155, Williams JA held:
[23] In the passage from Muschinski at 620 quoted in Baumgartner at 148 the principle is said to operate “where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specifically provided that the other party should so enjoy it.” That clearly suggests that though the Court may impose a constructive trust regardless of the actual intention of the parties, the intention of the parties is not an irrelevant consideration. On my reading of the passages in Muschinski and Baumgartner referred to, the Court should, in the first instance, consider the position in law and equity given the actual intention of the parties. The conclusion so derived may then be set aside to the extent that enforcing ownership of the property in that way “would be contrary to equitable principle.” That must mean that the position as to ownership reached by considering the relevant conduct, including the agreement between the parties, was a result evidencing “unconscionable conduct” according to general principles of equity. The High Court in the passages referred to was also at pains to point out that the imposition of a constructive trust did not involve applying “idiosyncratic notions of what is just and fair” but rather traditional principles of equity.
It is not insignificant that the recognition of equitable interests of the type explained in Baumgartner and Muschinski has predominantly occurred within the context of the breakdown of domestic or “de facto” relationships (although it is not confined to those circumstances – see, eg, Carson v Wood (1994) 34 NSWLR 9).
In a domestic situation, the “common intention” or “joint endeavour” can exist without necessarily having found specific expression; it is based on, or derives from, a commitment to, and hopes for, a joint future. In “non-domestic” – and particularly in purely commercial – circumstances, the joint plan or endeavour can be expected to be less nebulous; greater clarity of intention can generally be expected.
If legal interests or title are to be “defeated by”, or made subject to, the demands of equity, the asserted foundation for equitable intervention should be clearly evident from evidence before the Court. That is all the more so, in my view, when it is said that the relevant interest should be construed from commonality of intention, or purpose or endeavour, and even more so when the relationship/s at its heart are of a type that, in the usual course of events, may not be potentially redolent of it.
This point was emphasised in West v Mead [2003] NSWSC 161 per Campbell J (again, it should be noted, in a “de facto relationship” case) quoted in Shepherd, above:
[59] …a plaintiff needs to establish that there is indeed a joint endeavour between the parties, in which expenditure is shared for the common benefit. It is also necessary to identify what the scope of that joint endeavour is … Further, for any couple, the scope of the joint endeavour they are engaged in might change from time to time. If, within the scope of a joint endeavour … an asset is acquired, as a result of contributions both parties have made, and for a purpose of the ongoing joint endeavour of the parties, this gives rise to the presumption that the beneficial interest ought be shared equally. That presumption can be displaced if one party is able to show that the contributions, both financial and non-financial, to that asset should be regarded as unequal.
Similarly, the need for evidence about each of the matters central to the imposition of a constructive trust has been emphasised. In Shepherd, above, for example, it was said:
[33] The plaintiff says that the acquisition of the … property was a joint endeavour between her and the deceased to which each made financial and non-financial contributions. However, more is required to impose a constructive trust on these principles. The joint endeavour must fail, or there must be a premature termination of the parties’ joint relationship …[citations omitted]
I consider it important in the present case, then, to “consider the position in law and equity given the actual intention of the parties” and to identify precisely what the joint plan or endeavour is said to be and the evidence which is said to support a finding to that effect. I consider it crucial to consider, in particular, how it is said that any established joint endeavour has failed or been terminated and how it is said that the required unconscionability arises.
In the latter respect, it seems to me vital in this case to seek to identify how it is said that the current situation (and, specifically, current legal title) is said to differ from the situation which would have pertained had the asserted joint endeavour not been terminated and how, as a result, unconscionability is said to arise.
As will emerge, reference to the affidavit and oral evidence, and the documents in evidence before the Court, does not permit of ready findings in respect of intention. Further, crucial to the tasks just described is an assessment of the parties’ evidence and its credibility.
Veracity, Credibility and the Evidence Generally
Veracity and Credibility
Assessing the evidence of each of the parties (and J) is crucial in arriving at conclusions about the matters just referred to.
Assertions as to intention, joint endeavour and the like are being made, I have no doubt, by all parties in the knowledge that consequences relevant to the s 79 proceedings (or, as they might see it, or phrase it, “the family assets”) might follow from findings about those matters. The task of arriving at conclusions about those matters is made all the harder, as I find, by needing to unravel the extent to which present assertions as to past intentions and conduct are influenced by what is now perceived by the parties to be (as they see it) the potential legal or other consequences of findings about those intentions.
I consider the evidence of all of the parties (and J) was influenced by this factor. An example is the nature and extent of discussions said to have been had by J with family members, and, particularly, the wife, about the “overall plan” hatched, it is said, by Mr K to which reference will later be made.
The evidence of the respondents and J is also, I find, influenced by what I perceive to be an animosity toward the wife by other members of the family by her seeking (as they would see it) to claim for herself property which they assert to be “the family’s” property. There is undisputed evidence that the wife, pre-separation, sought to claim money which she considers was hers (or, more accurately, hers and the husband’s). I consider that the wife’s evidence is influenced by a similar animosity, provoked by an opposite assertion as to entitlement.
Further, I consider the evidence of the members of the Crafter family is coloured by a number of factors: the desire to keep “the family business” and “the family assets” together; familial, or blood loyalties; intra-familial and sibling jealousies and idiosyncratic notions of “fairness” not necessarily connected with section 79’s central mandate of justice and equity, or equity’s concept of “unconscionability”.
I think it entirely likely that the parties’ acquiescence in arrangements which now occurred in the region of 20 years ago, including arrangements attended by legal informality, is likely to have been productive in each of the parties (and J) of assumptions that were not necessarily shared by fellow family members.
I consider that the evidence of all parties (and J) was tainted, in some cases very significantly, by the factors just referred to.
The evidence reveals J as a domineering and autocratic presence in the family; the evidence of M hinted strongly at that and a letter from the solicitors for the Respondents to Mr C states: “you should note in so far as the parties to the proceedings are concerned that [J] is integral to events”. The evidence is that he was the instigator, planner and director of events. The wife said, and I accept, that the husband’s inability to “stand up to his father” was a source of considerable stress and friction within the marriage. Although M was the joint owner of some property, and, with J, a director and shareholder of a company owning other property, when asked whether, looking back now, there was enough money to pay out Financier 1 she replied, “I don’t think so. But I’m not the one to ask”.
I perceived the husband to have been in the past very much prone to competing compulsions directed by, on the one hand, the wife and, on the other, his father, J. I think he is still subject to the latter. He agreed in the witness box with my suggestion that he was “between a rock and a hard place” – his wife urging him to recover monies advanced to the family and “the family” – and J in particular – requiring loyalty to their asserted joint purposes.
I also have the very distinct impression that the Court has not been told “the full story” surrounding the 1990 transactions at the centre of these proceedings, and that significant later “reconstruction” has occurred. Each of those impressions was reinforced, not least, by rather startling evidence wholly omitted from J’s affidavits and which emerged in the witness box. Detailed reference will be made to this evidence below.
The Affidavit Evidence
Whether the “class of constructive trust” sought to be established is a “common intention” trust as the third parties assert (indeed, an express intention is also relied upon by them) or whether it is said to be of a “class” in which contributions to a joint endeavour which fails” its existence is, in this case, dependant upon the express statements used by the relevant parties, their actions, what was intended by informal and sometimes confusing or contradictory documents and what contributions were made by whom to what.
It should, then, be expected that the affidavit material relied upon would deal with those matters (and perhaps others) with as much precision as possible. If precision was not possible (whether because of the failure of memory by reason of the passing of the years, the absence, loss or misplacement of documents or records or otherwise) those omissions and their reasons might also be expected to be explained. The affidavit evidence here is in sharp contrast to those expectations.
If “joint endeavour” or “common intention” is said to be based, at least in part, on the interactions between the parties, their conversations and actions and what is said to have been agreed or not agreed, those affidavits (by people who allege a “common intention” or a joint endeavour or common purpose) provide little probative assistance; they are notable more for what they do not say than what they do.
In large part, M and P, in their affidavits, simply agree with what J has deposed. But, a more remarkable example can be seen at par (ii) on page 5 of the husband’s trial affidavit. There, without deposing to any fact, the husband makes the unparticularised assertion that he and the wife “have been involved in holding [property] on [his parents’] behalf and continue to do so”. First, such an assertion is not evidence. But, more than that, it does not on its face seem to me to be an assertion consistent with holding property as a constructive trustee for five individuals (or, as J would have it, four).
Later, at [27]ff ,the subject is raised again. Again, the husband does not depose to, for example, the contents of any conversations alleged to have occurred but, instead, deposes [30] that his “… parents … sought our assistance in providing security and subsequently in holding assets” and goes on to assert [33] that “as a result of discussions between my parents and the wife and me, we agreed… that the properties at G and MM would be held for my parents’ benefit” and then deposes to an arrangement in respect of the payment of outgoings and repayment of borrowings. Again, any trust (of whatever description) would appear, on the face of this “evidence” to have J and M as its beneficiaries.
The affidavit evidence of the husband relating to this issue consists of about nine paragraphs. The affidavit “leaps” from unparticularised conversations said to lead to the parents seeking “assistance”, to unparticularised “discussions” purporting to record what might be an interest in land different to that evidenced by its Certificate of Title. No documents are exhibited or referred to.
The State of the Evidence Generally
It is first to be noted that the respective cases of the parties are not “pleaded” nor the affidavits structured in a manner that permits of ready identification of either the elements of the “cause of action” or the facts said to support each such element.
As but one (important) example, the nature and scope of the asserted joint plan or endeavour is by no means identified with particularity; rather broad assertions are made about transactions being “for the family” or “for family purposes” and the like.
Further, and again importantly in my view, it needs to be observed that this is not a case in which legal title is asserted to be held unconscionably as against one other person who, it is asserted is the sole other contributor to the joint endeavour. So, too, this is not a case (such as, for example, a partnership, joint venture or joint investment scheme), where the interrelationship of the parties is, otherwise, clearly defined and where the unconscionability is said to arise out of events outside of its scope – see Muschinski Per Deane J at 619-620; and, eg. Carson v Wood (1994) 34 NSWLR 9; ASIC v Karl Suleman Enterprises Pty Ltd (in Liq.) [2003] NSWSC 163).
It is in my view notorious (s 140 Evidence Act 1995 (Cth)) that families can be involved with each other in a number of different ways that have commercial elements but where the overt manifestations of that will include documentation of varying degrees of formality and efficacy. Of course, families (particularly if relatively harmonious at the time) also frequently eschew completely legal formality. A lack of legal formality can, of course, make the forensic task much more difficult but its absence or extent can also of itself be forensically significant. The law provides for the means of effecting intentions and arrangements (both inter vivos and upon death) and affords protections which flow accordingly. A failure to take advantage of either does not necessarily mean the law will provide a remedy – at least not of the type sought here. The words of Macrossan CJ earlier cited are apposite: if it were otherwise “…ordinary categories of legal ownership could not be more than provisional”.
Where, as here, (even lay) attempts have been made, at least in part, to record transactions and/or intentions, the absence of any (lay) document signed or acknowledged by all parties to the joint endeavour from which an overall joint plan or endeavour – or commonality of intention – might be discerned is, of itself, significant. That is all the more so where, as here, the respective positions of each of the asserted joint endeavourers can be seen to be quite different in terms of their age, the degree of involvement in family activities and their income and asset bases. Further, as will be seen, the sole document that might, of itself, be seen to record (in part) the alleged joint endeavour (Exhibit JDC11) arises in circumstances which I regard as highly unusual.
The intentions of the parties surrounding the transactions at the centre of these proceedings, and the events preceding and succeeding those transactions, as revealed by the affidavit or oral evidence of the parties and such documents as are in evidence, remain clouded and uncertain. Assertions of “understandings” between the parties abound but factual depositions about who said what to whom and who did what and when are much more difficult to discern.
So, too, while there are assertions and counter-assertions about who paid (or repaid) what amounts to whom, the task of discerning who paid, or didn’t pay what, or of ascertaining what contributions were made by whom, and who did, or did not, receive benefits, is almost impossible to discern with any degree of accuracy or reliability. Those comments are reflected in a part of the evidence from Mr C, an accountant instructed by the respondents. Mr C agreed in the witness box that the purpose of his report was to identify that payments had been made and, when asked by Mr McGinn whether the purpose of the report was to identify the sources of payments, Mr C replied that he had “tried to work it out” but that generally he was “given that information”.
But, a more compelling example emerged during J’s cross-examination. At issue was the assertion by M that she made mortgage repayments, including in respect of mortgages that the husband and P had taken out as part of the transactions necessary to repay Financier 1. At that time, it will be remembered, J was facing bankruptcy and prospective criminal proceedings. It was suggested to J that M’s ability to satisfy the mortgages was largely as a result of her maintaining an involvement in the furnishings business. J gave the intriguing answer, “M was actually the banker”.
Questions were then directed to the fact that M’s affidavit included evidence of the source of funds said to have been used to make those payments. That affidavit, sworn 15 January 2009 (that is some seven months prior to the commencement of the trial), detailed payments said to have been made by her “following the receivership of the companies in 1988”. A number of separate categories of payment are listed, including mortgage payments said to have been in respect of property owned by the husband and wife (Property 1 at V) and mortgage payments made in respect of the properties at G. The payments are said to total over $200,000. The affidavit then exhibits a series of receipts said to support those payments.
M’s affidavit then goes on to nominate a number of different sources of funds used to make the payments (including wages from the business, the sale of a motor vehicle and antiques and jewellery, her “pensions money”; and, bizarrely, “an anonymous gift of $1000”). M also there deposes to borrowings from her mother of about $20,000 as an additional source of the monies used to make those payments. The time frame for those various payments can only be gleaned from the exhibits to the affidavit, one of which purports to list all payments said to have been made by M. That reveals payments of various types spanning a 19-year period from 1989 to 2008.
No mention, it should be noted, is made in M’s affidavit (or oral evidence) of the receipt of money from J, whether directly or indirectly, and whether by way of loan or otherwise. No other affidavit evidence, including, importantly, from J himself, makes any such reference.
Yet, intriguing evidence was to emerge in the witness box from J about this. It had not emerged before that.
In the witness box, J said (for the first time in these proceedings) that money was given to M by him. The monies were, he said, “loans”. The total amount should not be thought trifling – it was, apparently, nearly a quarter of a million dollars. J said the money was given to M by him as a result of two loans: “finance arranged through [Mr X]” and through a “Malaysian-Chinese man [Mr Y]”. Mr X is neither a deponent nor a witness. Mr Y is neither a deponent nor a witness. No mention is made of either in any affidavit before the Court from any party or witness. The two “loans” were, it transpired, allegedly received in 1995 (the reference to 1990 revealed in the transcript to follow is, it seems, a “slip of the tongue”) and in 2000.
This surprising evidence, and the manner in which it emerged, is, I think, important to quote at length:
HIS HONOUR: Who was the finance arranged from?‑‑‑Well, it was from – your Honour, there was two – there was two parts. One was a Malaysian Chinese man who was in Australia. He came to Australia when he was about seven years of age. His name is [Mr Y], but he was only virtually a catalyst because he had other people helping him, and they were helping me, and that was all part of the show. So $10,000 was from him, and $90,000 from elsewhere.
Sorry, just a moment. Ten thousand from [Mr Y]?‑‑‑[Mr Y].
And?‑‑‑And 90,000 still added on to [Mr Y] because that’s 100,000.
I’m sorry, I missed that. 90K ‑ ‑ ‑?‑‑‑$90,000.
From?‑‑‑[Mr Y] - [Mr Y’s] people.
I see. These are these other people that he arranged money through?‑‑‑They’re Malaysian Chinese people.
Righto. Yes, I see. So the $100,000 all together?‑‑‑Yes.
… So let me understand. $100,000 was provided what, from about what, early nineties?‑‑‑No, no, no.
When?‑‑‑$100,000 would be ’95.
Okay, 95. So that’s 15 years ago. No documents evidence those loans. Is that right?‑‑‑No. Yes, yes, your Honour, yes.
So no documents at all evidence those loans?‑‑‑No.
They were arranged by you?‑‑‑Yes.
Is there an interest rate applicable to those loans?‑‑‑No.
Were there repayments organised in respect of those loans?‑‑‑No.
Have any repayments been made in respect of those loans?‑‑‑No.
So somebody who is a Malaysian Chinese gentleman and other Malaysian Chinese people known by him provided $100,000 to you without documentation by way of loan. No call has been made in respect of those loans and no repayments have been in respect of those loans in a period of 15 years?‑‑‑Correct.
Right. Are they ever going to be repaid?‑‑‑Well, that’s what the whole idea is. They are, your Honour.
Been waiting a fair while?‑‑‑They’ll be waiting a little bit longer, your Honour.
Yes, $100,000 and they haven’t - $100,000 advanced to you without any documentation or any repayments and they haven’t received a zac in 15 years?‑‑‑That's right, your Honour.
Yes. Yes, Mr McGinn?‑‑‑There’s more, your Honour.
I beg your pardon?‑‑‑There’s more.
What, more loans you mean?‑‑‑More loans, yes.
All right. Well, that’s the 100,000. What are the other loans?‑‑‑Well, in total 140,000.
An additional 140?‑‑‑Additional 140,000.
So 240 all together?‑‑‑All told over a period from 1990 on.
All right. Well, we’ve just been discussing the 100. The additional 140, when were those sums advanced approximately?‑‑‑Well, that’s what I’m saying, from the 1995 on.
Righto?‑‑‑2000 thereabouts.
Sorry, I missed that?‑‑‑The year 2000 and about.
Righto. Same source, [Mr Y] and his ‑ ‑ ‑?‑‑‑No, no, no.
Different source?‑‑‑Different source.
Who were those loans from?‑‑‑Well, it was a number of loans come from – and they were organised through [Mr X] who was in Melbourne.
Yes. So loans totalling 140,000 were arranged through [Mr X]. Is that right?‑‑‑Correct, your Honour.
Yes. From whom were they arranged?‑‑‑From whom?
Who provided the money for those loans?‑‑‑Well, [Mr X] and his people. There was [Mr Y] looking ‑ ‑ ‑
Are the monies owed to [Mr X] or are the monies owed to other people?‑‑‑Well, I pay – I would pay [Mr X] and [Mr X] would pay them.
I see. So you don’t know who these other people are who have actually provided the money?‑‑‑No. No, I don’t know entirely, your Honour, no.
Right. Is [Mr X] connected with [Mr Y]?‑‑‑No.
Right. So he’s a completely separate person?‑‑‑Entirely different. One’s – one, Malaysian side, he has a representative overseas, and the other one is Australian.
I see. So in respect of the loans provided by [Mr X] or “his people” are there any documents evidencing those loans?‑‑‑No, same thing.
Is there any interest rate applicable to those loans?‑‑‑No.
Have there been any repayments made in respect of those loans?‑‑‑No, your Honour, no.
And those loans were taken out from about ’95 onwards or from about 2000 onwards?‑‑‑I would say about 2000 onwards, sir.
Right. So for about the last 10 years [Mr Y] and these other various people – all these other various people have been owed about $140,000 and haven’t received a zac?‑‑‑That's right, your Honour.
Right. Why?‑‑‑Well, they – they are including in a trading program that hasn’t generated any funds.
A trading program, what’s that?‑‑‑Well, it’s a friend of mine called [Mr Z], who currently is in [a mental home], having been admitted under the Mental Health Act, which has caused problems in getting this series three. However, that’s not a matter that’s going to stop the process happening.
Right?‑‑‑So I have – I’ve virtually taken over his role, and I have contacts in New South Wales, and they have contacts overseas.
Yes?‑‑‑It’s a program that involves the United States Federal Reserve, the United States Security Exchange Commission.
The task confronting the Court in this case is also made particularly difficult by the nature of documentation said to evidence at least some of the assertions with respect to the property and the parties’ intentions in respect of it. Relevant documents will be considered in some detail below.
Joint Endeavour – Changes in Title
It has been said that “where the plaintiff’s claim is based on the payment of financial contributions or the transfer of property to the defendant, the starting point for quantifying contributions to the asserted constructive trust will be the value of the contributions of property received prior to the failure of the joint venture or endeavour”. (Principles of the Law of Trusts, Ford and Lee, above, [22.4620] citing McKay v McKay [2008] NSWSC 177 per Brereton J).
It is, then, as well to set out the property prior and subsequent to the transactions at the heart of the claims and counter-claims.
Generally described, J and M owned a property at S which was their matrimonial home. They were the shareholders and directors of Business 1 Pty Ltd which ran the furnishings business; they controlled a company, Business 2 Pty Ltd, which owned two properties at G. They owned in their own names adjoining properties at MM and in one of those properties the furnishings business was conducted.
The husband and the wife owned a matrimonial home and investment property. As best as can be gleaned from the evidence, P and his wife owned a property subject to mortgage. W was a relatively young man and had no assets of worth.
In respect of the “contentious property”, prior to the transactions by which title in it was subsequently acquired, ownership of it was as follows:
§ Two blocks of land at B, owned now by each of W and P: Owned by a third party from outside of, and apparently unconnected with, the Crafter family members;
§ Two blocks of land at G: Owned by Business 2 Pty Ltd, a company of which J and M were directors and shareholders and which they (and, in all practical respects, J) controlled;
§ Property 1 at MM (land upon which the furnishings business was situated and run): owned by J and M. The neighbouring block, Property 2 at MM, was also owned by J and M but later sold.
§ Shares in D Pty Ltd (the entity through which the furnishings businesses are now conducted): this company was incorporated some nine years after the transactions at the centre of these proceedings. It is, in effect, the successor to Business 1 Pty Ltd which ran the furnishings business and which owned plant stock and equipment of it. J and M were directors and shareholders of Business 1 Pty Ltd.
By a series of transactions in 1990, the details of which will be addressed below, the following occurred:
§ W became registered as proprietor of Block 1 of land at B and P became registered as proprietor Block 2 of land at B;
§ The husband and wife became the registered proprietors of both blocks of land at G;
§ N Pty Ltd became registered as proprietor of Properties 1 and 2 at MM. N Pty Ltd is a company incorporated by J in 1989 and in which, in the middle of that year, the husband and J became directors and, the following year, the husband, J and a Mr T became directors. Late in 1991 J and Mr T ceased as directors and the wife becomes a director (thereafter, the husband and wife became sole directors and shareholders). N Pty Ltd sold Property 2 at MM early in 1991. N Pty Ltd has never traded. It has produced no accounts.
§ The furnishings business’s plant and equipment was “sold” to W (the details of the document evidencing this transaction need to be referred to below) and the business name “Business 1” registered to him. Subsequently, in 1991, a business name “Business 6” was registered to P. In 1999, nine years after the original transaction involving W, D Pty Ltd was incorporated. W has three of the ten issued shares and P has seven. Each of the business names “Business 6” and “Business 1” were transferred to D Pty Ltd and that company operates each business.
If there is to be found a joint plan or endeavour, it must be possible to make findings about its beginning, its scope and its purpose (see West v Mead at [59], above). It is to that issue that I now turn.
Is There a Joint Plan or Endeavour – February 1988?
A formal document (loan and guarantee) is in evidence in respect of the arrangement between the parties, J, and the wife of P. It relates to the need to borrow funds from Financier 1 because of what J deposes about financial difficulties experienced by Business 5 Pty Ltd.
It is submitted on behalf of the husband that, “each of the parties entered into [the Financier 1] agreement on the basis that there was to be the acquisition of a [farm equipment] business which was to broaden the base of the [Crafter] family’s economic activities”. That assertion is, in my view, not supported by the evidence in so far as it asserts that commercial enterprises were activities of the Crafter family as a collective.
First, J swears that it was only when Business 5 Pty Ltd ran into financial difficulties that the company approached Financier 1 in respect of the loan. On J’s evidence (which the husband adopts) it was only at that time that the other family members and corporations referred to in the agreement became involved with Financier 1 (par 29). And that occurred, on J’s evidence (adopted by other parties in the manner earlier indicated), only when Business 5 Pty Ltd, a company owned and controlled by J and M in which no other family member had shares or was a director, approached Financier 1 for a loan.
Secondly, the assumption that there was a “family” enterprise or “family economic activities” is not justified on the evidence. J asserts that he “not only wanted our business to be a family concern but also any other assets or business that we established or acquired in the future”. Yet, on his evidence:
§It was he who made the decision to expand beyond the furnishings manufacturing business (par 9);
§It was M and he who made the decision to diversify into the farm equipment business (par 10);
§It was he who arranged the purchase of the shelf company to run the farm equipment business (par 23);
§It was he who had preliminary discussions about the farm equipment business with U (par 21) (and no mention is made of the involvement in those discussions with any other person, including M or other members of the family);
§It was he who looked at the books and records of that business to be purchased to assess its viability (par 22);
§It was he and M who “decided that we would purchase the business” (par 22);
§He and M were the only shareholders and directors of Business 5 Pty Ltd (par 23);
§Of some significance, finance was obtained from Citibank and security was taken over the matrimonial home owned by J and M with no other security provided by any other member of the family (par 24); and
§Also of some significance, although P is alleged to have overseen “the day to day management of the business” he “was not employed by [Business 5 Pty Ltd]” (par 25).
It might also be noted that the husband and wife had earlier been involved in investing in J’s business ventures. (The wife instances “Business 7” and “an investment scheme proposed by the husband’s father” as well as an investment of $65,000 in the acquisition of the farm equipment business). No assertion is evident in the affidavits or submissions that these investments were part of any overall plan or joint venture or endeavour. This is of some significance given what will emerge of an attempted reckoning by J of what amount/s might be owing to the wife or the husband and the wife.
Later, when the business began experiencing difficulties, family members have used means at their disposal to assist in a business which was owned (in effect) by their mother and father. They assisted by offering security and, by reason of their joint and several liability under personal guarantees, put their assets in jeopardy to the extent that Business 5 Pty Ltd (a) defaulted and (b) was unable from its own resources to meet the debt. So much is the stuff of ordinary family life; it is not, of itself, indicative of any joint endeavour or any common intention as those expressions are understood in the relevant legal sense.
W swears: “On the 12th April 1990 I became the proprietor of a business name [Business 1]” and thereafter deposes to agreeing to register a new business name (“[Business 1]”) so as to enable the furnishings business “to continue using the assets which I had purchased pursuant to the agreement with the receivers and managers”. In that same affidavit W has J and M discussing “the need to establish a retail outlet for soft furnishings and a subsequent opportunity” arising to purchase “a former soft furnishing business …”. He deposes that P “established the business of Business 6 Pty Ltd in July 1997”. He goes on to say: “The two businesses Business 1 Pty Ltd and Business 6 Pty Ltd continued to trade as separate entities, registered in the name of myself and P … respectively until the 30th June 2000”.
In his affidavit W says nothing of JDC8. Nor does he depose to any understanding that the business was subject to any trust or like interest. Nor does he depose to, or make any suggestion that, the business or any part of it was being held on behalf of the husband (or anyone else). Indeed, a perusal of his affidavit reveals him referring to himself as “the purchaser” of the business with no other interest in the business acknowledged. He does not explain how a young man with no assets and little income effected the purchase; certainly no loan is mentioned.
As a result, it is said, of the proposed introduction of the GST, “it was agreed a new company [D Pty Ltd] would be incorporated for the purpose of operating both businesses and thereby bringing the ownership of both businesses into one entity to provide for ease of GST calculations and payments”. Upon incorporation of D Pty Ltd there were ten shares issued, three owned by W and seven by P.
Apparently, for W’s part, he saw no impediment to the sale of a business which at least one document referred to as being held by him in trust for the husband (or, perhaps, on trust for the husband who held it on trust in turn for “others”) to a corporate vehicle and thereafter the shareholding in that corporate vehicle not reflecting any interest of any person other than himself and P (who was a stranger to the initial transaction).
J said in oral evidence that the allocation of shares in D Pty Ltd “was on the basis of future profitability” and that he himself did the calculation. He says he discussed this with W and P but did not discuss it with other members of the family. W received shares in D Pty Ltd, he said, because “[W] was [Business 1]”.
I find it difficult to rationalise this evidence with W’s own evidence (and P’s evidence) about W’s lack of involvement in the business. W deposes to having “ceased employment altogether in the [furnishings] manufacturing business” in 1997 and to ceasing “providing my own personal labour” for that business thereafter and not receiving any income from the business. P swears: “In real fact [W] was not particularly concerned about the amalgamation of the businesses [in 1999] as he was not actively involved with the management or operation of [Business 1]”.
Despite the fact that J was the author of JDC8 and it purportedly records the husband having a beneficial interest (of some sort), he considered the allocation of shares in D Pty Ltd was “fair” because “[the husband] didn’t want to have anything to do with the [furnishings] business at the time”.
When M was asked about the shareholding in cross-examination she said that she thought that W’s three shares were “representative of his, mine and the husband’s interests to the best of my knowledge”, although caveated those comments by saying that she was being asked things which “technically, I don’t understand”. When asked why P got seven shares she replied that she thought it was because “he took on the responsibilities” and that “someone had to go forward” for the benefit of the family and “someone has to take the whole responsibility”.
In oral evidence P said that he wasn’t aware of JDC8, or the reference to W holding the assets of the business on trust. He said that he was briefed on how it was done after it had been done. If briefed with “how it was done” it does not seem to have occurred to him that any trust interest in the business needed to be recognised.
Joint Endeavour – Discussion and Findings
I very much have in mind what was said by Campbell J in West v Mead and Williams JA in Waterhouse v Power cited above. First, it is important to consider the position in law and equity and what was intended. If legal title is to be displaced by reference to a recognised class of equitable relief – relevantly, “failure of joint endeavour” – what must first be established is that there was, indeed, a joint endeavour and, importantly, its scope. It must also be established that any such joint endeavour has been terminated without attributable blame – see Shepherd, above at [33].
As I have earlier said, I do not consider there was any joint endeavour at the time that P and his wife and the husband and wife made investments of, respectively, approximately $60,000 and $100,000 in Business 5 Pty Ltd (i.e. the farm equipment business). Family members providing funds to other family members for business or investment purposes is not uncommon and, as the wife makes clear and I accept, the husband and wife had invested in J’s business schemes in the past. The same applies to the provision of security when financial difficulties were encountered.
The hint of a broader asserted joint endeavour is given in the submission (given as a purported deposition) from P earlier quoted:
Without the joint effort of all members of the family in providing security, continuing to operate businesses, obtaining finance and becoming directors of companies and repaying debt and other expenses, the asset pool of the family would not have been able to be retained and the individual assets owned by members of the family would not have been the same as they are today. It is only as family that we were strong enough to financially deal with [Financier 1] [and] the subsequent aftermath. Had it been left to individuals under their own personal guarantees the outcome today would have been significantly different. The outcome produced the best result in respect of asset retention for all parties concerned.
The opening part of the statement refers, (or might potentially refer), to a joint endeavour with multiple components that, inferentially, contains at least some retrospective and prospective elements – that is, elements of a joint endeavour that would have continued but for its termination as a result of the need for a property settlement between the husband and wife.
But, inherent in the statement is a problem for it as a foundation for equitable relief of the type sought; the joint endeavour has not failed. As the statement makes clear, any such joint endeavour as existed has achieved its purpose. It hasn’t failed, it has succeeded. The “outcome” has been, it is said, markedly better than if the joint endeavour had not succeeded and the “outcome” (reflected, it might be said, in a number of different legal interests) was, to use the words used in the “submission” “the best result in respect of asset retention for all concerned”.
Put another way, the joint endeavour was to band together to eliminate the Financier 1 debt; to remove assets from J and M, in circumstances where their corporation was the principal debtor and where J had his own looming personal financial issues and to eliminate as a result, the potential for guarantees to be called. The aims of that joint endeavour were all achieved.
But, in truth, and in any event, I do not consider that there was a “joint endeavour” in the sense used in the authorities to which reference has been made.
I consider that while there was indeed a plan to place assets beyond the reach of a significant creditor and liquidator and, subsequently, J’s trustee in bankruptcy and while, indeed, part of that plan would also prevent a call on the guarantees, it was a plan conceived, orchestrated and carried into effect by J or on his instructions. I consider that J expected to receive, and did in fact receive, complete compliance with his wishes, and acquiescence in his plan, from his wife and three sons.
But, crucially, it was also part of J’s plan that he would plan, conceive, orchestrate and carry into effect what was to become of those very same assets once “the danger had passed” and, again, in respect of that plan, he would receive precisely the same compliance and acquiescence from his wife and sons in carrying that into effect.
The evidence generally, including J’s own evidence, points, in my view, directly to that conclusion.
What I regard as the “shifting sands” of the nature and scope of any asserted joint endeavour as revealed by the evidence can be seen by reference to the differences in the evidence of J and the husband centred around paragraph 44 of J’s affidavit and JDC8. J construced a document (JDC8) purporting to create a beneficial interest in a business in favour of the husband only to, subsequently, suggest an alternative interest which the document does not refer to, only to, subsequently, orchestrate the amalgamation of that business into a shareholding in a company that completely eliminates, purportedly, the very same beneficial interest.
I do not accept J’s evidence that the wife was kept abreast of discussions and the original “plan”; I think that is highly likely to be true of his sons as well. Indeed, P and W each hint at that in giving evidence of their knowledge of particular parts of the “plan”.
In paragraph 44 of his affidavit earlier quoted, J refers to the “understanding”, which apparently came about as a result of “discussions”, that, despite the transfer of legal title in land at MM and G (transactions approved by the liquidator or receiver and manager), he nevertheless retained – in a manner, or via a method, not explained – the ability to dictate to the husband (a legal title holder but who did not own the property at G solely and who was but one director and shareholder of the company that owned the property at MM) to whom the husband would, at an unspecified future time, transfer the properties.
In eschewing the use of legal formality in recording what was, or was not, agreed, J nevertheless produced documents which purport to have some form of legal effect (JDC8) or which purport to record (at least part of) an overall plan and proposed transactions (JDC11). Yet, no document to which all joint venturers were party purports to record (even if informally) precisely what was the joint endeavour or plan, or its scope. Such documents as do exist in respect of the intra-familial activities were conceived and created by J and, on his evidence can, at least in respect of JDC8, be disregarded at will.
I consider that the wife’s attempts, from as early as July 1990, to establish an amount owing to her and the husband is likely to be indicative of a perception on her part entirely consistent with my finding – i.e. that the husband (and his brothers) would acquiesce in whatever J might decide (or dictate) in respect of assets.
I should say for the sake of completeness that, even if I concluded that there was a joint endeavour, I would not in any event be persuaded that the beneficial interests should be equal as among the asserted beneficiaries. Equity’s intervention should be to the extent that unconscionability is eliminated. If that is to be the construction of a trust, a result of equality can be displaced “if one party is able to show that the contributions, both financial and non-financial, to that asset should not be regarded as equal” (West v Mead, above, per Campbell J).
I have already indicated that the evidence here is, in my view, a long way short of establishing what contributions (direct and indirect) were made by any of the parties (or others, for example, P’s wife) to the various properties. The best, I think, that can be said is that it appears that unequal contributions of various sorts were made to the acquisition, maintenance and improvement of property said to be the subject of equitable interests.
As counsel for the husband said in his written submissions:
There were attempts as to try to identify the contributions made by the husband and/or wife towards this rescue in respect to both contributions made at the time of the rescue and following in relation to the servicing of various liabilities. These attempts appear to have taken place since 1990 and remain unresolved as at the date of hearing.
Mr McGinn goes on to submit that “The evidence of [the accountant] [Mr C] does not assist the Court to make a finding that there had been disproportionate contributions made by each of the parties to the joint venture or endeavour”. I agree with the submissions made earlier in respect of the assumptions made by Mr C and also agree that his evidence is, with respect, of little utility in this case. It amounts, in effect, to an attempt at an “ex post facto audit” based on self-serving data and assumptions.
The wife admits that “the business”, in one form or another, made payments of benefit to the husband and wife. It is also clear that the business has derived benefit (non-payment of commercial rent) for its occupation of the property at MM since its acquisition by N Pty Ltd. It is true, as submitted, that no evidence before the Court permits of a calculation of the worth of that. That, though, is but an instance of the wider problem just referred to.
Payments or other arrangements (such as no, or non-commercial, rent) are made within a family in a variety of different contexts and governed by a variety of different considerations. At one end of the scale, natural love and affection may explain an amount or a benefit; at the other end, an arrangement may be the subject of complex formal documentation. So, too, the timing of the payments may reflect the harmony or otherwise within a family and how a payment is treated. Present feelings may give to past events a different flavour or connotation. I am not assisted by what is now said to be amounts claimed or claimable in circumstances where little or no regard was had to that in the past.
The furnishings business, represented for current purposes by shares in D Pty Ltd, might be seen to be somewhat distinguishable from other components of the contentious property in that there is documentation referring to its post-1990 genesis and contributions to the 1990 acquisition.
Similarly, it might be thought easier to identify unconscionability where a beneficial interest in favour of a person who contributes most of the acquisition cost is referred to in a document only to subsequently “disappear”.
Yet, here, too, the picture is incapable, in my view, of precise definition. Although it is plain that W paid no monies toward acquisition, it is by no means clear what indirect contributions (which may be recognised – see Baumgartner) were made by him or anyone else, how any such contributions might compare to those made by the husband or P; how they compare to indirect contributions made by others; to what extent Business 6 PtyLtd reflects in the asset base or profitability of D Pty Ltd and the like.
In short, I am not persuaded of the existence of a joint endeavour. If I am wrong in that conclusion I am not convinced that any such joint endeavour as is sought to be made out has failed or “been terminated without attributable blame”. Nor, in any event, in the circumstances of this case am I persuaded of contributions having been made in respect of any joint endeavour so as to make it unconscionable for owners of property to retain their legal title.
Other Asserted Equitable Interests - Findings
It will be recalled that the second through fifth respondents seek to make out alternative claims in equity.
It will, I think, be plain from what I have already said that I consider the evidence reveals no basis for concluding that the requisite intention to create a trust (actual or inferred) exists in this case.
Such intention as is apparent from the evidence of J, who, plainly I find, was the driving force behind the disposition of the assets owned by him, M and the entities they controlled, does not point to any express intention as submitted that “transferees would become a trustee of the property”. The findings pertaining to JDC8 are a good example, but only one such example.
So, too, the findings earlier made do not support a conclusion that there was a “common intention” that, to borrow from Shepherd v Doolan, above (at [31]) “… the claimant should have an interest in property owned by the other and the claimant acted to his or her detriment on the basis of that agreement or common intention”.
The evidence of the parties themselves is, in my view, contrary to their being a common intention; indeed it is redolent of many different intentions.
The “fallback position” of the second to fifth respondents (equitable charge) is in my view dependant upon findings as to amounts contributed but not reflected otherwise in legal interests and depends upon the capacity to make findings as to the relevant specific amount/s applicable to specific property. Again, it will be clear that I consider I am unable to make any such findings with any sense of confidence.
Equitable Interests - Conclusions
For the reasons given above:
§The claim by the wife for declaration in respect of D Pty Ltd or its shares fails;
§The claim by the husband for declarations recognising interests in property owned by others fail;
§The claim by the 2nd to 5th respondents for declarations recognising interests in the four respondents fails;
§The alternative claims by the 2nd to 5th respondents fail.
Just and Equitable Distribution of Property – Conclusions
The result of the findings just made is that three components of the contentious property – two blocks of land at G valued at $295,000 and $275,000 respectively, and Property 1 at MM, valued at $485,000 – will form part of the property of the parties or either of them. The net value of that property will, then, increase from the agreed $596,038 to $1,651,038. To that needs be added agreed superannuation interests of $25,019 (wife) and $33,352 (husband). The total, then, of the property and superannuation interests is $1,709,409.
The parties are agreed that there should be a division of the property in the proportion 52% to the wife and 48% to the husband. Significantly, the parties are agreed as to that division irrespective of the results of the findings of the Court in respect of the contentious property.
However, as earlier referred to, the Court retains a duty to ensure that the result arrived at is just and equitable. That should be done by reference to what a result means in practical terms, including its dollar value.
The parties will receive property and superannuation interests totalling $888,892 (the wife) and $820, 516 (the husband). The parties are agreed that the wife will receive the items listed earlier in these reasons. That agreement will see her retain a valuable property at V mortgage free, shares, chattels and superannuation.
She will receive an additional $467,317 pursuant to the mooted division consequent upon my findings of the property of the parties. If she was to receive the two blocks at G she would need to raise and pay to the husband $102,683, say, $100,000. The husband would have that sum to do with as he chose (including to pay down debt). He would also have the valuable property 1 at MM (from which the furnishings business continues to run) and he would be free to make (or not make) such commercial arrangements with the proprietors of that business as he might wish. He would also have the former matrimonial home, an investment property at V, a valuable boat and fishing licence, and chattels.
Notwithstanding that the property of the parties has increased significantly as a result of the findings made in respect of the contentious property, I regard that result as just and equitable on the evidence before me, noting the agreement otherwise arrived at between the parties and what was said by Brennan J in Harris v Caladine, referred to above.
There is insufficient evidence before me to indicate whether the wife has the capacity to raise the sum of $100,000. The terms of the orders will give her an opportunity to do so, with the parties to agree on the mechanics of the orders otherwise. In default, the orders will provide for that sale of the two properties at G with a division so as to effect the overall result ordered.
I order accordingly.
Delay
I very much regret the delay in delivery of these Reasons and Orders, the completion of which occurred much later than I anticipated. Some, but by no means all, of that delay is by reason of matters beyond my control. For the balance, I apologise.
I certify that the preceding two hundred and eighty-eight (288) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Murphy delivered on 3 March 2011.
Associate:
Date: 3 March 2011
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