Daniels and Daniels

FAMILY COURT OF AUSTRALIA

DANIELS & DANIELS

[2009] FamCA 1152

FAMILY LAW – PROPERTY – Issue estoppel

Family Law Act 1975 (Cth)

Blair & Curren (1939) 62 CLR 464
Gosper & Gosper (1987) FLC 91-818

APPLICANT:

Mr Daniels

RESPONDENT:

Ms Daniels

FILE NUMBER:

MLC

7796

2000

DATE DELIVERED:

25 November 2009

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

DESSAU J

HEARING DATE:

14, 15, 16 May 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT:

MR NORTH SC

SOLICITOR FOR THE APPLICANT:

TOLLHURST DRUCE & EMMERSON

COUNSEL FOR THE RESPONDENT:

MR SPICER

SOLICITOR FOR THE RESPONDENT:

PEARCE WEBSTER DUGDALES

Orders

That the husband and wife shall forthwith do all acts and things necessary to distribute the monies standing to their joint credit in the Commonwealth Bank Account in equal shares between them.
That the wife shall forthwith transfer to the husband all her right, title, and interest in the Telstra shares in the joint names of the husband and wife.
That pursuant to paragraph 90MT(1)(a) of the Family Law Act 1975, whenever a splittable payment becomes payable from the superannuation interest of THE HUSBAND in the Emergency Services Superannuation Scheme – Beneficiary Account:
(a)THE WIFE shall be entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 using the base amount of $22,344 (provided that such base amount shall not exceed the value of the interest determined under s 90MT(2));
(b)There be a corresponding reduction in the superannuation interest of the member, THE HUSBAND to whom the splittable payment would have been made but for the Order.
That the operative time for these orders is four business days after service of the final sealed orders on the Emergency Services Superannuation Scheme – Beneficiary Account.
That there shall be liberty to apply to each party and the Trustee in relation to the implementation of the orders affecting the superannuation interest.
If, as a result of the termination of his employment, THE HUSBAND becomes entitled to a benefit prior to the Emergency Service Superannuation Board making a payment under s 22(f) of the Emergency Services Superannuation Act 1986, he shall provide to the Emergency Services Superannuation Board all such forms as shall be necessary to enable the Trustee to determine the nature and quantum of the superannuation entitlement and any other related information it may reasonably require, within seven days of that entitlement arising.
That the husband shall retain all other assets in his possession or under his control.
That the wife shall retain all other assets in her possession or under her control.
That otherwise all applications are dismissed and the case removed from the list of cases awaiting finalisation.
That pursuant to the Family Law Rules this matter reasonably required the attendance of counsel and Senior Counsel.
That if any party seeks a costs order they shall notify the other party and my Associate by 4.00pm on 2 December 2009.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 7796 of 2000

MR DANIELS

Applicant

And

MS DANIELS

Respondent

REASONS FOR JUDGMENT

After a relatively short marriage of three years, the husband started Family Court property proceedings in August 2000.
Those proceedings were held in abeyance for an equitable estoppel action in the Supreme Court of Victoria, started in July 2001 by the wife as plaintiff, against the husband and his parents as defendants.
After a ten-day hearing, the Supreme Court gave judgment in favour of the wife in 2005. His Honour found that the husband and his parents promised the wife that when she married the husband she would be made an owner with him of half of a 40 acre property at M (of which the parents were the registered owners), including the house block known as P Block. That is the house in which the husband and wife lived upon marriage. The Supreme Court found that the wife acted on the promise and suffered detriment when the promise was not honoured by the husband and his parents.
In December 2005, the Supreme Court heard argument as to the sum to be awarded to the wife in equity. He gave judgment in 2006, with an order that the husband’s parents pay to the wife the sum of $600,000.
The husband and his parents appealed the Supreme Court’s decision. The Court of Appeal dismissed the appeal in 2007. The husband and his parents then sought special leave from the High Court of Australia. Their application was dismissed in October 2007.
The property proceedings between the husband and the wife in this Court have now been resurrected. Although there are other small items of property, some superannuation, and several small issues at the margin, the award received by the wife, now largely in the form of equity in a flat in B, NSW, in which she lives with the parties’ 11-year-old son, lies at the heart of the outstanding issues. Although she also received an order for costs against the husband and his parents, once she paid the balance of costs owing to her own solicitors, the wife retained a total of $546,000.

RES JUDICATA

Mr Spicer for the wife initially sought to persuade me that the Supreme Court decision disentitled the husband from pursuing this present claim, as the matter was res judicata.
Recognising the importance of finality in litigation, the doctrine of res judicata provides that the same cause of action cannot be re-litigated. As the cause of action in this case is not the same as the cause of action previously determined in the Supreme Court, Mr Spicer had to concede that there was no lack of jurisdiction to hear the case. That still left open the question of issue-estoppel, which I will consider in detail below.

BACKGROUND

The husband is aged 37, and is a public servant. The wife is aged 36, and is a casual school teacher. They married in February 1997 and separated early in 2000. Their son lives with his mother in Sydney. It was not clear on the evidence if the child sees his father, although in 2002 there were consent orders for holiday contact.
The husband has remarried and has two young daughters.

THE WIFE’S CASE

The wife’s case is that the monies awarded to her in the Supreme Court proceedings, now largely invested in the property owned by her, should be fully retained by her. Mr Spicer submitted that the husband made no contribution to what was an award to the wife to satisfy equity, and in any event he has an equitable interest of not less than the amount recovered by her but, at least so far, he has chosen not to pursue it. He submitted that, in addition, the husband’s parents will make arrangements for benefits in the husband’s favour of not less than those received by the wife.
Otherwise, Mr Spicer argued that I should deal with the small balance of assets by equally dividing the parties’ bank savings of $33,592, and splitting the husband’s ESS superannuation of $111,722 as to 20% ($22,344) in the wife’s favour.

THE HUSBAND’S CASE

The husband’s case is that not all issues essential to these proceedings have been determined in the Supreme Court. Mr North SC submitted that the parties’ contributions to the monies now in the B property should be regarded as equal, a major consideration in the husband’s favour being that it was sourced from the generosity of his parents. Taking into account the s 75(2) and other factors it should be divided so the wife’s share “would not exceed 60% overall”.
Although in the course of the case the husband had agreed that the parties’ savings otherwise should be divided equally, and there should be the superannuation split described above, in final submissions, Mr North submitted that if his client did not succeed on the B property issue, that is, if it is to be fully retained by the wife, he should at least retain the savings and superannuation.

PRINCIPLES TO BE APPLIED IN A PROPERTY CASE

There are four steps for me in a property case. I must define the asset pool, determine the parties’ respective contributions, consider the s 75(2) and other s 79(4) Family Law Act matters, and arrive at a just and equitable conclusion.
Each step in this case is over-shadowed by the question of what has previously been decided in the Supreme Court proceedings, its impact, and the extent of any issue-estoppel. It is convenient to deal with that question first.

ISSUE-ESTOPPEL

Unlike res judicata, issue-estoppel may arise even though the causes of action in the two cases are different. For the doctrine of issue-estoppel to apply in a second set of proceedings, the earlier proceedings must have decided the same issue in a final decision between the same parties.
The principle is set out in Halsbury’s Laws of Australia at paragraph 190-100 as follows:
A final judgment by a competent tribunal creates an issue-estoppel in that it forever binds the parties and all those who claim through them in respect of any issue of fact or law which was legally indispensible to that decision.
Halsbury’s describes the parties being bound in the sense that:
… they are precluded in subsequent proceedings from asserting, as against other parties to the judgment, to the contrary of any issue fundamental to the judgment.
The issue in the subsequent proceedings must be precisely the same as that decided in the earlier proceedings. But the doctrine of issue-estoppel will only apply:
… where an issue ruled upon by a court in earlier proceedings was indispensible or fundamental to the ultimate decision in the case. A practical test of whether a finding is fundamental is to ask whether it is possible to appeal against the finding.
Issue-estoppel is confined to those ultimate facts that:
…form the ingredients in the cause of action; there is no estoppel as to evidentiary facts found in the course of determining the …issue…
The High Court considered the application of issue-estoppel in Blair & Curren (1939) 62 CLR 464. Dixon J stated (at 532):
Nothing but what is legally indispensible to the conclusion is thus finally closed or precluded. In matters of fact the issue-estoppel is confined to those ultimate facts which form the ingredients in the cause of action…
Dixon J cited Coleridge J in R v Inhabitants of the Township of Hartington Middle Quarter (1855) 119 E.R. 288 at 293:
…the judicial determination concludes, not merely as to the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not then directly the point at issue.
Dixon J continued:
In the phraseology of Lord Shaw, ‘a fact fundamental to the decision arrived at’ in the former proceedings and ‘the legal quality of the fact’ must be taken as finally and conclusively established (Hoystead v Commissioner of Taxation). But matters of law or fact which are subsidiary or collateral are not covered by the estoppel. Findings, however deliberate and formal, which concern only evidentiary facts and not ultimate facts forming the very title to rights give rise to no preclusion. Decisions upon matters of law which amount to no more than steps in a process of reasoning tending to establish or support the proposition upon which the rights depend do not estop the parties if the matters of law arise in subsequent litigation.
The difficulty in the application of the principle was then highlighted by Dixon J (at 533):
The difficulty in the actual application of these conceptions is to distinguish the matters fundamental or cardinal to the prior decision or judgment, decree or order or necessarily involved in it as its legal justification or foundation from matters which even though actually raised and decided as being in the circumstances of the case the determining considerations, yet are not in point of law the essential foundation or ground-work of the judgment, decree or order…
In this case there is no dispute as to the finality of the previous decision, nor that the husband and wife in the current proceedings were parties in the previous proceedings. The question that arises is as to which matters were “fundamental or cardinal” to the previous decision, whereby the parties in this case are bound. That requires some consideration of the Supreme Court proceedings.
The wife’s cause of action was founded on the principles in Giumelli & Giumelli (1998) 196 CLR 101 and Flinn & Flinn (1999) 3VR 712. In summary, the Supreme Court had to decide whether or not promises, and if so what promises, were made to the wife by the husband and his parents. Secondly, he had to decide whether the wife acted in reliance upon such promises, and thereby suffered detriment. Thirdly, he had to arrive at appropriate relief to satisfy the equity that had arisen, such an enquiry obliging the court to consider, as he emphasised, “all the circumstances of the case”.
The first two fundamental issues were set out by the Supreme Court in paragraph 1 of his first judgment as follows:
…The question in this case is whether, as in essence [the wife] alleges, [the husband’s father], [the husband’s mother] and [the husband] promised her that when she married [the husband] she would be made an owner with him of one half of the property, a promise which was repeated following the marriage, and that in reliance thereon she (and [the husband]) made financial and non-financial contributions to the house and its surrounds…
The promises pleaded by the wife were denied by the husband and by his parents. The Supreme Court rejected “the central plank” of the defendants’ case that they made no such statements or promises. He accepted that the evidence of the wife and her witnesses reflected the substance of the statements made by the defendants. He found that statements to the effect pleaded by the wife were made to her.
The relevant part of the wife’s pleadings was set out by his Honour at paragraph 31 of the judgment. In summary, the wife had pleaded that the husband and his parents promised her that the husband had purchased half the property and that the parents owned the other half. Further, that he was paying the mortgage on his half, and that it included the house in which they would be residing, and that he and she would have equal half-shares in that half of the property. Subsequently she was promised by the husband and his parents that her name was on title as a registered proprietor equally with her husband in that half of the property.
As to whether or not the wife relied upon the promises to her detriment, the Supreme Court found that she did (see paras 380-391). I will deal with those findings in detail below, particularly as relevant to issues of contributions in this case.
The Supreme Court then made findings as to the award that would satisfy her equity. Again I shall return to the relevant findings.

THE POOL OF ASSETS

As noted, once she met her party/solicitor costs, the wife retained a net balance of $546,000 from the award of $600,000 plus costs. She spent at least $60,000 on parenting proceedings in this court. The evidence is slight as to how she applied the full balance, but it is agreed that it was mostly put into the B property. The agreed value of the flat is $610,000. It has a mortgage of $197,693, leaving an equity of $412,307.
The wife claimed a HECS debt of $11,417. It seems it arose a long time ago. There was little evidence about it, as to when it arose, or as to when or how it may become payable. The evidence was not sufficiently clear for me to include it in the pool as a liability. I can take it into account in a broad sense when I consider factors under s 75(2) of the Act.
The wife also sought to include her credit card debt of $39,934 as a liability. It was conceded that it related to debt she built up after separation. There is no suggestion that the husband contributed, nor that the debt should be visited upon him. Rather than including it in the pool in those circumstances, I can take it into account in considering all the factors below.
There was a sum of $122,000 claimed by the wife as monies owing to her sisters for “legal fees, disbursements and miscellaneous expenses”. All such expenses arose after separation. It was impossible to divide sums used for legal fees in these proceedings from other sums. In the absence of substantial and clear evidence, I do not propose including that amount in the pool. Again I can take its existence into account in terms of the wife’s future commitments.
Similarly, on the husband’s part, there was such scant evidence about the nature of a purported loan of $30,00 from his parents, and monies owing to Holding Redlich in the sum of $13,000, that I propose leaving them out of the pool of assets and taking them into account more broadly.
Accordingly, the pool of non-superannuation assets is as follows:
·The equity in the wife’s home at B, NSW        $412,307
·The joint Commonwealth Bank account   $ 33,592
·Joint Telstra shares        $      591
·The wife’s Toyota Paseo coupe   $     2000
·The wife’s home contents   $    3,650
·The husband’s home contents   $    5,000
·The husband’s bank account   $      955
·Total   $458,095
Otherwise, the wife has superannuation of $14,298. The husband has $52,083 in the Public Sector Superannuation Scheme and $111,722 in the Emergency Services Scheme.

CONTRIBUTIONS

The Supreme Court made findings as to respective contributions made by the husband and wife. I am satisfied they were fundamental to his determination of detriment suffered by the wife, and to the appropriate award to her in equity. However, although some considerations overlapped with those required under s 79(4) of the Family Law Act, his Honour did not specifically address every aspect of “contributions” relevant to my decision, in particular contributions via the husband’s parents, or at least not in the manner or depth required in this Court.
There was a substantial difference between the parties when it came to the issue of contributions.
As noted, Mr Spicer for the wife submitted that the husband could not claim any contribution to the award received by the wife or to the B property bought from the proceeds. It was argued that he had his own equitable interest of not less than the amount recovered by the wife that, as Mr Spicer put it, “he chose not to claim for”, and in any event, his parents will ensure that he receives their benefaction to an extent not less than the sum received by the wife.
On the husband’s behalf, Mr North submitted that the husband had no interest at all in the M property, and no claim against his parents as to promise and detriment in line with the wife’s claim. Nor was there evidence that he would instead receive substantial benefaction from his parents. The B property is the only substantial fruit of the marriage. Each party’s respective contributions to it must be considered under s 79(4) of the Act. It cannot be that the wife retains the full benefit, given the husband’s undisputed contributions to its source, the M property, and most importantly that its provenance lies with his parents.
I accept Mr North’s submission that the Supreme Court found that the husband had no interest in his parents’ land that could be brought to account in the wife’s claim for a property settlement in this Court. That was set out in paragraph 14(d) of the second judgment. Mr Spicer, who acted for the wife in the Supreme Court as well as in these proceedings, submitted to me that his Honour was there simply referring to Mr Spicer’s summary of the first judgment. I find to the contrary. The Supreme Court referred to it as one of “the findings” to which counsel referred him in addressing “the respects in which I had found the plaintiff suffered detriment”, but his Honour did not question or depart from that description. I accept it was the finding, and it was fundamental to the “circumstances” taken into account by the Supreme Court.

I reject Mr Spicer’s submission that the husband has his own equitable interest of not less than the amount received by the wife but he has simply chosen not to claim it. To support his submission, Mr Spicer referred to paragraphs 61 to 63 of the Supreme Court’s first judgment, the husband’s and parents’ counterclaim, and paragraph 33 of the judgment in the Court of Appeal.
Paragraphs 61 to 63 of the Supreme Court’s judgment relate to various assertions by the wife of promises that both she and the husband were on title as the joint owners of the house and 20 acres. The Supreme Court accepted that the promises were made by both the husband and his parents. He did not make a finding as to the truth of the promises. There could not be a finding as to the truth of the promises. It was self-evident that the wife was not put on title. The Supreme Court’s findings could not support the husband having the same cause of action open to him, when he denied that any promises were in fact made. It follows that there could not be a finding that he relied upon any promises to his detriment.
In their Supreme Court counterclaim, the parents and husband had pleaded that if it were found that either of the husband or the wife held any interest in the property, it was held by the husband alone, or alternatively that any interest held by the wife was “not enjoyed solely by her” but rather held jointly by her and the husband. However, the counterclaim was withdrawn in the course of the hearing. Apart from noting the claim was at odds with what is now said by the husband, I cannot attach more weight to this aspect. In light of its withdrawal, there was very little reference to it by the Supreme Court, and he did not make findings in respect of it.
There is nothing in the Court of Appeal judgment to support Mr Spicer’s assertion that the husband had an equitable interest not less than the wife’s. The Court of Appeal’s observations at paragraph 33 are simply a reiteration of the trial Judge’s findings as to the terms of the promises and assurances to the wife.
In light of findings of the Supreme Court as to the husband’s contributions to the M property, the husband may have a claim, for example by way of a constructive trust. In the absence of any argument about that, I cannot speculate. What was argued for the wife was that he does have at the very least the benefaction of his parents as a financial resource. I will return to that as relevant below.
When I turn to consider the evidence of contributions, I cannot overlook that the Supreme Court made various fundamental findings about contributions in determining the detriment suffered by the wife, and as part of the circumstances in deciding her award in equity. Whilst emphasising that the wife’s detriment was not confined to contributions, his Honour made findings about her various financial contributions and improvements to the M property, as well as more broadly, as to her role in the family, and by way of her lost opportunities.
As to her financial contributions, the Supreme Court found (at para 373) that:
… overall, taking a conservative approach and being reasonable to both parties,… a total amount of approximately $40,000 was spent on the items referred to by the plaintiff.
He described the amount of the wife’s funds expended on the improvements as “relatively small” (see para 366). He noted that at the time of the marriage she had modest savings and a half share of the cash given to her and the husband on their engagement and wedding. (As to the latter, the gifts totalling $22,000 were set aside in an account where the money remains.)
The Supreme Court detailed parts of the evidence as to the wife’s contribution to improvements. Without specific findings on every aspect, he concluded (at para 376):
…It is sufficient to say, as I have already, that [the wife] and [the husband] worked hard to clean up and improve the house and its surrounds. I accept that [the wife] worked very hard indeed and that she received assistance from her family although in the case of her parents, having regard to their evidence, not to the full extent described.
His Honour then found that the wife as well as the husband did work on the property and found (at para 387):
…that in carrying out improvements to the property [the husband] and [the wife] spent money of their own. It is not possible to find the actual amount but I find that it was substantial and the greater part of the cost of the improvements, and was sourced from gifts of money, [the husband’s] wage and [the wife’s] more modest savings and earnings…
The wife’s role and her lost career opportunities were also factors dealt with by the Supreme Court (at para 386):
…I find that the combined effect of all this was that [the wife], believing in and relying on the truth of the promises, fell in with [the husband] as to living at the new house on the [M] property, they married earlier than they might otherwise have done and [the wife] became pregnant as early as on their honeymoon. The result was that [the wife] did not set out on and establish herself in her chosen career, being able to do only a little amount of teaching before having to stop when about six months into her pregnancy. She did not thereafter work prior to the parties separating and she said in evidence she had found it difficult to get back into her career.
The Supreme Court also found that the wife was “upset” by “a problem with mice and rats” in the home, which she had to deal with, and he referred to further detriment with a finding that shortly after separation the house was “stripped”. He accepted the wife’s account that little was left in it (para 390).
He summarised the detriment to the wife as follows (at para 389):
The net result to the plaintiff may be summarised thus. She was led by the promises, which she reasonably believed to be true and would be acted upon, to marry earlier than she would have, to accept living at the [M] property rather than purchase a home of their own in the closer in suburbs which was her preference, to spend their money on their [M] house, and to have a child and stay at home rather than pursue her career. On the collapse of the marriage and the separation of the parties it could be seen that these decisions had disadvantaged the plaintiff. If she and [the husband] had taken the course of buying their own home and had applied their money on that home, or even saved it, she would have had an asset. And if she had delayed children and pursued her career she would have been in a much better position financially and generally. But those opportunities were lost when induced thereby she acted on the faith of the defendants’ statements and promises. I do not overlook that in the statement of claim the only detriment pleaded was the making of the contributions but all these other factors to which I have referred were realised in evidence and were readily apparent. It is clear, when the facts and circumstances are regarded overall, that the plaintiff’s detriment is not confined to the contributions.
In the course of determining the contributions made by the wife, the Supreme Court also made findings as to contributions made by the husband. Such findings were arguably fundamental to and part of the ground-work of establishing the nature and extent of the wife’s contribution and consequent detriment. At the very least, the findings can be seen through the reasoning in the second judgment to be amongst the broad category of “circumstances” (referred to in paragraph 74) relied upon by the Supreme Court in considering the “prejudice on each side” and concluding that the wife’s equity is “appropriately and justly” assessed at $600,000.
As to financial contributions, although the Supreme Court found that the wife’s financial contributions to improvements were “relatively small”, and very much less than the overall total, he also rejected the husband’s and parents’ evidence that the parents reimbursed the couple for half the sum expended. Otherwise, the Supreme Court found that the husband contributed earnings to the mortgage payments, but he was not able to find the amount of that contribution. As to non-financial contributions, his Honour found that the husband, as well as the wife, “worked hard to clean up and improve the house and its surrounds.”
As I have noted above, I am not precluded from deciding broader issues of contributions that go beyond the issues fundamental to the Supreme Court cause of action.
Mr North submitted that I should take into account that as a result of promises made to the wife by the husband’s parents (importantly, the Supreme Court’s finding was that the promise was also made by the husband), and the wife acting upon those promises, she acquired an equitable chose-in-action, being her right to obtain equitable compensation. The promise was made and the detriment was incurred by reason of and in relation to the marriage. The asset acquired by the wife was acquired due to events occurring before and in contemplation of the marriage and during the marriage. The wife would have had no entitlement to the property but for the promises to give her an interest upon marrying the husband. Mr North emphasised her contributions to that chose-in-action, rather than to the M property itself.
Although Mr North acknowledged that the wife clearly contributed to her entitlement by relying upon the promises and suffering a detriment, he emphasised the other factors which contributed to the wife’s receipt of the money. This was a very short marriage. Neither party had substantial assets when the marriage commenced. By far the most substantial asset is now the wife’s flat in Sydney acquired by her with the proceeds of the Supreme Court judgment. The M property was acquired and provided by the husband’s parents. The property itself became land of substantial value when sold. A windfall in the increase in the value of the land was imbedded in and inherent in the promise of the gift. Those factors, he argued, ought to be regarded as contributions made on behalf of the husband, following the line of authorities in this court, commencing with Gosper and Gosper (1987) FLC 91-818. Further, the fact that the promise was not voluntarily fulfilled and that the wife was required to seek equitable relief, could not expunge all trace of the contribution to the asset on behalf of the husband.
Otherwise, Mr North acknowledged that the homemaker and parent contributions favoured the wife post separation. He submitted that the appropriate assessment is 50% of the non-superannuation assets.
I do not find the Gosper line of cases to be directly on point. In this case I am not determining the question of a gift to a son and/or a son and daughter-in-law. The property at the heart of this dispute is the property acquired from the wife’s award. That award was made in equity, on the basis of a finding of promise on the part of the husband and his parents of a property interest specific to the wife, and a finding of the detriment she suffered by acting upon the promise that was not fulfilled.
Although I am satisfied that an award of damages personal to a party may still be the subject of the matrimonial asset pool and the other party’s indirect contributions, I am not satisfied in this case that the husband has contributed in any positive sense to the award received by the wife. Moreover, if I accept Mr North’s submission that the wife’s contributions, as found by the Supreme Court, were contributions to an equitable chose-in-action rather than to the M property itself, I note that the chose-in-action is represented by the $600,000 award, and although the parents and the husband clearly made contributions to the land, it cannot be argued that they contributed to the wife’s chose-in-action, except in a negative way.
Moreover, in determining the sum of compensation, the Supreme Court determined a sum that in no way reflected the entire value of the property or even the lesser “share” that the wife was promised. In deciding that the wife should receive $600,000, he relied on Giumelli and Flinn, and Commonwealth of Australia v Verwayen (1990) 170 CLR 394, and noted that “regard must be had to the circumstances of the case” (see para 50 of the second judgment).
He referred to Deane J’s judgment in Verwayen (at 442) that:
…equitable relief must be moulded to do justice between the parties and to prevent a doctrine based on good conscience from being made an instrument of injustice or oppression. That being so, it should be accepted that the prima facie entitlement to relief based on the assumed state of affairs must, under a doctrine which is of general application in a system where equity prevails, be qualified it if appears that that relief would exceed what could be justified by the requirements of conscientious conduct and would be unjust to the estopped party.
Ultimately, the agreed valuation of the M property was $370,000 at the time of the marriage, $1.1 million at separation, and $3.183 million as at 10 October 2002, when the parents contracted to sell the property to a developer (although the actual sale price was $3.797 million). The sale price was to be paid to the parents by instalments. The last two instalments, being 50% of the sale price, were due to the parents after the Supreme Court’s second judgment.
In determining the circumstances of the case, his Honour considered wide-ranging factors including the appropriate treatment of reliance on valuations (see para 38ff), the parties’ respective expectations as to the length or lasting nature of the marriage (see para 43), the “windfall” increase in the value of the property (see paras 44-45), that the parents carried the investment risk of the purchase of the property (para 46), and the effect of an order on the expectation of the parents’ younger son (para 48).
In deciding that the wife should receive a sum of $600,000, his Honour calculated that a one-quarter interest in the land, based on the 2002 sale price, equated to $949,277.50. He noted that the wife’s detriment was financial and non-financial. He said that which could be ascertained in dollar terms was “modest” relative to one-quarter of the 2002 sale price, but the components of the detriment “not assessed or assessable with a dollar value” were of a “substantial and lasting nature” (para 53).
He found it would be “a substantial injustice” and “clearly inappropriate” for the wife’s equity to be satisfied by payment of just one-quarter of the value of the improvements to the property – as suggested by the defendants – as it would deny any allowance for the greater part of her detriment considered overall.
He also rejected the defendants’ alternate submission that the wife should receive one-quarter of $350,000, claimed by them as the value of the property at the time of making the promise. He rejected that approach on the basis that there was no evidence it was the actual price at the time of the promise. In any event, it was not the making of the promise alone that was the relevant event, but its dishonour, which occurred later (see para 54).
The Supreme Court noted that the first intimation to the wife that she had not been placed on the title was given by the husband in an argument on 18 January 2000. It was only during the subsequent Family Court proceedings, commenced on 29 August 2000, that the wife understood there was a denial that the husband had any interest in the property. The wife was then “driven to” the Supreme Court proceeding by the husband’s and his parents’ “continued dishonour of their promise” which had the consequence of “continuing aggravation of the plaintiff’s detriment” (see para 60).
Monies received that far under the contract of sale had been retained by the husband’s parents to their advantage “while at the same time wrongly denying the plaintiff any entitlement.” The Supreme Court noted (at para 63):
…Thus the plaintiff has not received a cent and in her parlous financial circumstances has had to undergo the cost and vexation of litigation.
His Honour went on to consider the various submissions as to the calculation of a sum to satisfy the wife’s equity, and overall rejected a calculation based on the 1995 purchase price, or the value at marriage, or the value at separation. His Honour also considered the manner in which the costs of sale, and any interest should be calculated. He concluded that the “present problem” could not be satisfactorily resolved on an “attempted simple arithmetical basis”.
He concluded (at para 74):
…Taking all relevant matters into account I consider that the amount required to satisfy the plaintiff’s equity is not appropriately assessed through or by the channel of the value at separation or on the sale in 2002 as discussed above. In other words, it is not one or the other. Whereas in my assessment the former carries with it injustice to the plaintiff the latter carries with it injustice to the first and second defendants to a degree in each case that is disproportionate and unjust. The true and just position is between those positions at a point that cannot be calculated with precision as to the amount for reasons discussed. Regarding all the relevant circumstances, in my view the plaintiff’s equity is appropriately and justly, considering the prejudice on each side, assessed at $600,000.
The Supreme Court continued (at para 75):
…The result … appropriately satisfies the equity while, stopping well short of enforcing the promise according to its terms, contains no element of undue prejudice to the first and second defendants.
It is apparent from the judgment of the Court of Appeal that the only grounds of appeal that proceeded were as follows:
(a)The sum of $600,000 bore no apparent relationship to the detriment suffered by the respondent;
(b)The sum of $600,000 was ‘grossly in excess’ of the amount required to satisfy the equity because:
(i)The first and second appellants made the promise on the basis of an assumption which was not fulfilled;
(ii)The promise was gratuitous;
(iii)The obligation to pay the sum of $600,000 would have a significant effect on the appellants; and
(iv)The sum of $600,000 was disproportionate to the detriment suffered; and
(c)The judge had erred by taking into account elements of detriment which were not pleaded.
Each aspect of the appeal was dismissed.
I am satisfied that the husband made no positive contribution directly or indirectly to the award obtained by the wife or the property acquired by her as a result. It would be perverse logic if the sum awarded to the wife to compensate her in equity, as a result of the unconscionable conduct of the husband and his parents, were now to be considered as a sum to which the husband made a positive contribution.
Otherwise, money received by the parties by way of wedding gifts are still held for them in a bank account. There had been a concession throughout the trial that they should be regarded as equal in terms of contributions and ultimate division. Similarly, there was an agreement that there should be a splitting order of the husband’s superannuation so that the wife would receive 20%. In final submissions, Mr North submitted that if the wife fully retained the monies in the B property, the husband should retain his superannuation and the wedding gift monies. I shall deal with this below.

SECTION 75(2) AND OTHER FACTORS

Mr North for the husband conceded that as the wife has the on-going sole day-to-day care for the parties’ child, overall there should be a s 75(2) adjustment in her favour that “would not exceed 10%”.
From the wife’s perspective, there should be no adjustment in the husband’s favour. Mr Spicer argued I should find that the husband does and can rely on his parents’ benefaction as an important financial resource. He referred to the fact that the parties were permitted to live in the M property, that the husband remained there for a time after separation, and that since 2007 the husband and his current wife have lived in a property owned by the parents. Although the husband said he pays rent to his parents of $270 per week, Mr Spicer submitted that the husband would not be required to pay it. He asked me to find that the parents have purchased a home in the name of the husband’s brother, have provided a car for the use of the husband and family, have provided other sums of money, and met hundreds of thousands of dollars of the husband’s costs in the Supreme Court proceedings.

Given my finding that the husband made no contributions to the main asset in dispute, it is not necessary to consider an additional adjustment in the wife’s favour. However, if I am wrong on the question of contributions, and for the sake of completeness, I shall deal with the arguments put to me about these matters.
The parties are still both young, in their mid- to late-thirties. The husband earns a gross salary of $1,534 per week. He supports his young family. The wife earns approximately $836 gross per week (it varies as she works casually) and receives about $160 in government benefits and child support of $113 per week, although she swore that she usually receives less child support as the husband is often in arrears. She of course has the substantial responsibility for the parties’ 11-year-old son.
These parties have litigated for so many years on so many fronts (as to parenting and financial issues) in this court, the Magistrates’ Court, the Supreme Court, the Victorian Court of Appeal, and the High Court of Australia. The Supreme Court referred to a “cavalcade of litigation” between them. In the circumstances, I accept it as probable that each party has suffered the consequences of very substantial legal expenses and although I cannot make definitive findings, it is likely that both parties have outstanding debts in that regard as they claim. I note too the wife’s HECS debt, although it is very old and there was little evidence as to whether and when there will be a call to repay it.
Dealing first with the issue of the husband’s financial resource, I note there was little direct evidence before me about it.
The Supreme Court referred to the husband’s family as being “a close knit loving family” and that the parents “provided their sons with rent-free accommodation and motor cars” (see para 382) and he considered the impact of an award to the wife on the expectations of the husband’s brother, his only sibling (see para 48 in the second judgment). But these were not findings fundamental to the foundation of the wife’s cause of action. They are not binding in this case.
I did not hear evidence from any of the husband’s family members. There was only the cross-examination of the husband on the topic, and although many questions were directed to the generosity of his parents and his expectations, in his answers the husband either did not accept the premise of the questions, or he was vague. He would only admit that his parents were “very loving”.
Mr Spicer cross-examined the husband about various cars. His wife drives a Mercedes which he says she purchased herself several years’ ago. He has recently taken out a loan to buy a Subaru. He did concede that during the marriage and for a period thereafter he had the use of a vehicle provided by his parents. But there was nothing in the evidence about the current vehicles for me to conclude that the husband’s parents had contributed to them.
The husband agreed he lives in a property owned by his parents, but professed to know very little about their purchase of the property. He insisted he pays rent to his parents. Mr Spicer referred to the fact that although the husband claimed he pays rent, in his financial statement he referred to paying $12.00 per week “rates, unit levies”. Mr Spicer made the point that such sum would not be payable by a tenant on a residential property. However, the husband was not cross-examined about that. The evidence is insufficient for me to make a finding.
The husband’s brother became the registered owner of a residential property on 9 August 2007, around the time the husband moved into his parents’ property referred to above. On 15 August 2007, a company called D Pty Ltd lodged a caveat over the brother’s property. Company records show D Pty Ltd was registered in June 2007. The registered office was at an address in E. The husband agreed that was his parents’ address. The company records show the husband’s parents as the directors and shareholders of the caveator company.
As with the property in which he is living, the husband professed little knowledge about the property in which his brother lives. He had “heard of” his father’s involvement in the company “D Pty Ltd”, but said he had no discussion with his parents or his brother as to whether that company had made a loan to his brother to purchase the home. In one instance when asked a question about his parents’ role in relation to the properties, he said something to the effect that “you would have to ask them”. He knew that he was not calling them as witnesses, and the wife was unlikely to do so.
As the husband moved into premises owned by his parents at around the same time as his brother purchased a property over which a company owned and controlled by his parents lodged a caveat, there is a suspicion that the parents have and will continue to extend generosity to their two sons. I cannot make a definitive finding based on suspicion. However, I was struck by the husband’s lack of candour about his parents’ assistance. That was particularly evident when it came to his evidence about the very substantial Supreme Court costs, ordered against him as well as his parents, but mostly met by his parents. He was especially vague about them. It was inconceivable that he would not have a firmer grasp as to how costs ordered against him had been met. I could not be satisfied that he was being forthright as to the extent of financial assistance he is receiving and is likely to receive from his parents. I cannot put it higher than that.
Otherwise, Mr North conceded that this is a case in which s 75(2)(o) of the Act is likely to play a role, by reason of the “unusual route” by which the wife received the $600,000 reward in her favour.
Section 75(2)(o) provides that the court shall consider:
any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account;
There was an early and consistent line of authorities from Soblusky & Soblusky (1976) FLC 90-124 to the effect that s 75(2)(o) did not include “facts and circumstances” relating to the marital history of the parties as such, only matters of a “broadly financial nature”.
I note however Fogarty J’s observations in Waters & Jurek (1995) FLC 92-635, that the Full Court in Soblusky used the term “of a financial nature” in a very broad sense. He noted that the court had emphasised that s 75(2)(o) was “couched widely and should maintain its flexibility of interpretation within proper limits”, and that although the court referred to circumstances specifically of a “broadly financial nature”, there was no limitation or qualification to the wording of the section. Fogarty J emphasised that s 75(2)(o) provided a wide discretion restricted only by the requirement that an order be “just and equitable”.
In this case, if I am wrong on the question of contributions, then in light of s 75(2)(o) of the Act, I could not overlook that the relevant asset was purchased by the wife with monies awarded to her to recognise detriment suffered, including financial detriment, as a result of conduct by the husband and his parents. On that basis I would not make an adjustment in his favour.
In all the circumstances, I see no basis for any adjustment.

A “JUST AND EQUITABLE” PROPERTY SETTLEMENT

Finally, in making a determination as to property settlement, s 79(2) of the Act provides:
The court shall not make an order…unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
The authorities have distilled this provision into the “fourth step” in property proceedings, whereby the court must consider the “real-life effect” of the financial orders under consideration (see Russell & Russell (1999) FLC 92-877). It is clear that the court has wide powers in property proceedings, and a wide discretion, with the specific instruction that it shall not make an order unless satisfied that “in all the circumstances, it is just and equitable to make the order”.
Mr North acknowledged that this is an unusual case. The major asset was brought into existence using monies received personally by the wife in the previous court proceedings. The fact that they were received in that personal sense does not remove them from consideration in this court when it comes to an adjustment of property between the parties to the marriage. What sets this case apart from a less uncommon case, whereby for example a party has received compensatory damages arising from a personal injuries claim against a third party, is that the equitable remedy that the wife received in the Supreme Court was awarded to her specifically because of the detriment suffered by her as a result of the husband’s and his parents’ conduct. To overlook that would be inconsistent with the concept of justice and equity.
I am not satisfied that it would be just and equitable in the circumstances of this case to make any order altering the wife’s interest in the Sydney unit, or for the husband to receive any part of the monies awarded to the wife in the Supreme Court proceedings.
That leaves the question of the wedding gift money still standing to the parties’ credit in a joint bank account, and the husband’s ESS superannuation. As noted, the case proceeded on the basis that the bank account monies should be evenly split between the parties, and there should be a superannuation splitting order so that the wife would receive the equivalent of 20% of the husband’s ESS superannuation monies.
In final submissions, Mr North submitted that in the event that the wife were to retain the B flat without any adjustment to the husband, then the husband should retain the other monies and his full superannuation. That alternative was never put in the course of the case. It would be unfair to allow it. The wife’s case was always run on the basis of a firm agreement about those other small assets. I am satisfied too that it is a just and equitable result for a division of wedding presents on an equal basis and for the modest superannuation split in the wife’s favour.

THE ORDERS

The orders I propose, subject to submissions as to form, are as follows:
1.That the husband and wife shall forthwith do all acts and things necessary to distribute the monies standing to their joint credit in the Commonwealth Bank Account in equal shares between them.
2.That the wife shall forthwith transfer to the husband all her right, title, and interest in the Telstra shares in the joint names of the husband and wife.
3.That pursuant to paragraph 90MT(1)(a) of the Family Law Act 1975, whenever a splittable payment becomes payable from the superannuation interest of THE HUSBAND in the Emergency Services Superannuation Scheme – Beneficiary Account:
(a)THE WIFE shall be entitled to be paid an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 using the base amount of $22,344 (provided that such base amount shall not exceed the value of the interest determined under s 90MT(2));
(b)There be a corresponding reduction in the superannuation interest of the member, THE HUSBAND to whom the splittable payment would have been made but for the Order.
4.That the operative time for these orders is four business days after service of the final sealed orders on the Emergency Services Superannuation Scheme – Beneficiary Account.
5.That there shall be liberty to apply to each party and the Trustee in relation to the implementation of the orders affecting the superannuation interest.
6.If, as a result of the termination of his employment, THE HUSBAND becomes entitled to a benefit prior to the Emergency Service Superannuation Board making a payment under s 22(f) of the Emergency Services Superannuation Act 1986, he shall provide to the Emergency Services Superannuation Board all such forms as shall be necessary to enable the Trustee to determine the nature and quantum of the superannuation entitlement and any other related information it may reasonably require, within seven days of that entitlement arising.
7.That the husband shall retain all other assets in his possession or under his control.
8.That the wife shall retain all other assets in her possession or under her control.
9.That otherwise all applications are dismissed and the case removed from the list of cases awaiting finalisation.
10.That pursuant to the Family Law Rules this matter reasonably required the attendance of counsel and Senior Counsel.

I certify that the preceding one hundred & seven (107) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Dessau

Associate:

Date: 25 November 2009

[2009] FamCA 1152

25 November 2009

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Family Law

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