Federal Circuit and Family Court of Australia
(DIVISION 1) APPELLATE JURISDICTION
Davis & Peterson [2023] FedCFamC1A 13
Appeal from: Peterson & Davis (No 3) [2022] FedCFamC1F 650 Appeal number(s): NAA 214 of 2022 File number(s): PAC 1208 of 2016 Judgment of: TREE, CHRISTIE & SCHONELL JJ Date of judgment: 17 February 2023 Catchwords: FAMILY LAW – APPEAL – PROPERTY – Where the appellants contended error by the primary judge in finding that the appellants did not discharge the onus of proof to establish a trust – Where the appellants submitted that there were a series of incontrovertible facts which could only point to the fact that the properties were held on trust by the first and second respondents – Where the primary judge made credit findings against the appellants and various witnesses in the appellants’ case – Where the primary judge did not consider these incontrovertible facts in his reasons – Whether the primary judge erred in his findings that the appellants were dishonest or complicit in deceiving the Commonwealth Bank of Australia and/or the Australian Taxation Office – Where these findings were not available to the primary judge and consequently the primary judge erred in refusing to grant equitable relief – Appeal allowed – Re-exercise of decision – Where it was found that a trust arrangement was the only logical and plausible conclusion consistent with the incontrovertible facts – Costs ordered in favour of the appellants in a fixed sum. Legislation: Environmental Planning and Assessment Act 1979 (NSW) s 10.7
Family Law Act1975 (Cth) s 117
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 35
Real Property Act 1900 (NSW)
Cases cited: Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49
CDJ v VAJ (1998) 197 CLR 172; [1998] HCA 67
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22
Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186; [2006] NSWCA 187
Khalif & Khalif [2021] FamCAFC 123
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11
Number of paragraphs: 76 Date of hearing: 31 January 2023 Place: Heard in Sydney, delivered in Cairns Counsel for the Appellants: Mr Cook SC with Mr Ng Solicitor for the Appellants: McEvoy Legal Counsel for the First Respondent: Mr Mathews Solicitor for the First Respondent: Williamson & Learmouth The Second Respondent: Litigant in Person Counsel for the Third Respondent: Mr Marshall SC with Mr Eardley and Ms Blake Solicitor for the Third Respondent: Mercantile Legal Pty Ltd ORDERS
NAA 214 of 2022
PAC 1208 of 2016FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MR B DAVIS
First Appellant
MS DAVIS
Second Appellant
AND: MS PETERSON
First Respondent
MR DAVIS
Second Respondent
MR CUSSON
Third Respondent
order made by:
TREE, CHRISTIE & SCHONELL JJ
DATE OF ORDER:
17 FEBRUARY 2023
THE COURT ORDERS…
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CaseChat Overview and Summary
In the case of Davis & Peterson, the appellants sought to appeal the decision of the primary judge, who found that they had not established the existence of a trust over two properties, or any other equitable interest. The dispute arose from the appellants' financial difficulties and their subsequent agreement with the first and second respondents to transfer the properties in exchange for the respondents borrowing funds to pay off the appellants' loan. The case was heard in the Federal Circuit and Family Court of Australia.
The legal issues before the court were whether the primary judge erred in finding against the weight of the evidence that there was not an express trust or alternatively, a common intention constructive trust or in the further alternative, a remedial constructive trust. The court was also required to consider whether the primary judge erred in applying the equitable defence of unclean hands as a basis for refusing to recognise a remedial constructive trust.
The court found that the primary judge had erred in their findings, as there was evidence that established the existence of a trust over the properties. The court held that the primary judge's findings were against the weight of the evidence and that the appellants had discharged the onus of proof. Additionally, the court found that the primary judge had erred in applying the defence of unclean hands as it did not outweigh the appellants' entitlement to equitable relief. As a result, the appeal was allowed.
In light of the findings, the court decided not to remit the matter for a rehearing, as the parties had been litigating for over six years, and the legal costs incurred were substantial. Instead, the court decided to make orders substantially as sought by the appellants. Additionally, the court ordered that costs be borne by the respondents in the proportion of 25% by the first respondent and 75% by the third respondent, as the appeal was successful and the respondents had unsuccessfully opposed the appeal.
The legal issues before the court were whether the primary judge erred in finding against the weight of the evidence that there was not an express trust or alternatively, a common intention constructive trust or in the further alternative, a remedial constructive trust. The court was also required to consider whether the primary judge erred in applying the equitable defence of unclean hands as a basis for refusing to recognise a remedial constructive trust.
The court found that the primary judge had erred in their findings, as there was evidence that established the existence of a trust over the properties. The court held that the primary judge's findings were against the weight of the evidence and that the appellants had discharged the onus of proof. Additionally, the court found that the primary judge had erred in applying the defence of unclean hands as it did not outweigh the appellants' entitlement to equitable relief. As a result, the appeal was allowed.
In light of the findings, the court decided not to remit the matter for a rehearing, as the parties had been litigating for over six years, and the legal costs incurred were substantial. Instead, the court decided to make orders substantially as sought by the appellants. Additionally, the court ordered that costs be borne by the respondents in the proportion of 25% by the first respondent and 75% by the third respondent, as the appeal was successful and the respondents had unsuccessfully opposed the appeal.
Orders
Orders of the court
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Background
Background to the litigation
For reasons that will become apparent, we are persuaded that error has been established, and hence the appeal will be allowed.Background The first and second respondents commenced a de facto relationship in or about March 1999. In 2001 and 2003, the appellants purchased the properties. It was not controversial that until November 2008, the appellants were the legal and beneficial owners of the properties. Prior to November 2008, the properties were rented out by the appellants and at times one was used by the appellants as a holiday home. In 2006, the appellants found themselves in financial difficulties. In January 2007, the appellants refinanced a loan over the properties with a financier for a period of twelve months repayable on 17 January 2008. The appellants subsequently failed to repay the loan on the due date which triggered default interest of 14.25 per cent. In April 2008, the financier commenced proceedings in the Supreme Court of New South Wales for possession of the properties. In April 2008, the appellants submitted through a broker, who became a witness in the appellants’ case, an application for refinance with another financier. The appellants received a conditional approval at an interest rate of 11.19 per cent. The appellants did not pursue the conditional approval any further. The appellants contended (supported by the second respondent) that an agreement was then reached at their solicitor’s office where they would transfer the properties to the first and second respondents who would borrow funds to pay out their loan. At some future point in time, when requested, they would then transfer the properties back to the appellants. Pending that event, the appellants would receive the rent on the properties and pay the mortgage instalments on the loan and all other expenses in relation to the properties. The first and second respondents subsequently obtained a loan from the Commonwealth Bank of Australia (“the CBA”) at an interest rate of around 8.5 per cent. The properties were transferred to them on 31 October 2008 with the CBA loan discharging the appellants’ loan. The following were not controversial:(1)Valuations of the properties undertaken in 2008 valued the properties at $825,000.(2)The transfers recorded the consideration for the properties to be $830,000.(3)The first and second respondents only borrowed approximately $686,000 from the CBA. This amount was applied in discharge of the appellants’ loan as to approximately $671,000 and the balance to part pay stamp duty on the transfer.(4)The difference between the consideration on the transfer and the amount borrowed was not paid to the appellants.(5)The appellants paid the balance of the stamp duty. (6)Following the transfer, the appellants continued to use the properties as they had before the transfer, namely receiving the rent and meeting the shortfall between the rent and the loan payments to the CBA as well as meeting all of the maintenance and other outgoings on the properties.(7)The outgoings on the properties exceeded any rent received.(8)The appellants continued to use the properties as a holiday home.(9)The first and second respondents made no loan payments nor met any of the outgoings on the properties.
Evidence
Evidence Before The Court
The Notice of Appeal broadly contends error by the primary judge in finding against the weight of the evidence that there was not an express trust or alternatively, a common intention constructive trust or in the further alternative, a remedial constructive trust (Grounds 1, 2 and 3). It also contended error in the primary judge’s factual findings and application of “unclean hands” as a basis for a refusal to recognise a remedial constructive trust (Grounds 4 and 5).Application to adduce further evidence The second respondent sought leave to rely upon an affidavit annexing various documents including Centrelink income statements. He contended that these documents were relevant to aspects of the findings by the primary judge in so far as they related to aspects of his evidence. The affidavit stated:3. This evidence is extracted from the subpoenaed documents from … already before the court. (As per the original) Section 35(b) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“the FCFCOA Act”) provides that this Court may in its discretion receive further evidence. The High Court in CDJ v VAJ (1998) 197 CLR 172 (“CDJ v VAJ”) laid down clear guidelines that are to apply to the reception of further evidence on appeal, particularly at [104], [108], [109], [111] and [113]–[116]. In particular, the plurality said: 108.When regard is had to Pt X and its place in the scheme established by the Act, it is apparent that the common law rules which govern the admission of fresh evidence in the common law courts cannot exhaustively define the scope of the discretion. The discretion is more ample than the principles applicable in common law proceedings and applied in Wollongong Corporation. That, of course, does not mean that the discretion reposed in the Full Court by s 93A(2) is unfettered, a point recognised by the Full Court in In the Marriage of Abdo. Although the discretion to admit further evidence is not attended by any express words of limitation, the subject-matter, scope and purpose of the appeal provisions in Pt X of the Act and the issues involved in each appeal will point to the considerations which are or are not extraneous to the exercise of the power.109. One consideration in construing s 93A(2) is its remedial nature. Its principal purpose is to give to the Full Court a discretionary power to admit further evidence where that evidence, if accepted, would demonstrate that the order under appeal is erroneous. The power exists to facilitate the avoidance of errors which cannot be otherwise remedied by the application of the conventional appellate procedures. A further, but in practice subsidiary, purpose is to give the Full Court a discretion to admit further evidence to buttress the findings already made.…111.… Nevertheless, it is highly unlikely that Parliament in conferring jurisdiction on the Full Court to hear appeals intended that s 93A(2) should be construed in a way that would have the practical effect of obliterating the distinction between original and appellate jurisdiction. Nor can the availability of further evidence relevant to the issues in the appeal be treated as equivalent to a ground of appeal, proof of which prima facie entitles the appellant to a new trial. The power to admit the further evidence exists to serve the demands of justice. Ordinarily, where it is alleged that the admission of new evidence requires a new trial, justice will not be served unless the Full Court is satisfied that the further evidence would have produced a different result if it had been available at the trial. Without that condition being satisfied, it could seldom, if ever, be in the interests of justice to deprive the respondent of the benefit of the orders made by the trial judge and put that person to the expense, inconvenience and worry of a new trial. …113. In any event, we cannot accept that the discretion to receive further evidence is so wide that the Full Court can admit further evidence merely because it is useful. Such a criterion is inconsistent both with the nature of the appellate jurisdiction exercised by that Court and with the perceived purposes of s 93A(2). (Footnotes omitted) (Emphasis in original)
Decision
Reasons for decision
In view of this finding, it is unnecessary for us to consider those parts of Grounds 4 and 5 that assert error by the primary judge in application of the equitable defence of unclean hands.Conclusion For the above reasons, we are satisfied that the appellants have established error on the part of the primary judge in finding that the appellants had not discharged the onus of proof. We are also satisfied that the primary judge erred in his finding that the appellants’ conduct was such as to disentitle them to equitable relief. For those reasons the appeal must be allowed. Remitter or re-determination A question that arises is whether the matter be remitted for a further hearing or whether this Court makes such order as in all the circumstances it thinks fit. The appellants and the first and second respondents invited the Court to not remit the matter for rehearing. The third respondent asked that the Court remit the matter but advanced no submissions as to why in all the circumstances it was appropriate to do so, other than they might get an opportunity to cross-examine the witnesses who were not called before the primary judge. We are cognisant that these parties have been litigating in this Court for over six years. The legal costs of all parties were recorded by the primary judge at in excess of $1.5 million. The costs incurred in the appeal are in addition to that extraordinary sum. In circumstances where the primary judge found the net equity in the properties to be approximately $2 million, it is readily apparent that any sense of proportionality was lost a long time ago. Given the incontrovertible facts and for the reasons given above, we are satisfied that consistent with the objects of the FCFCOA Act, it is proper that, to the extent that we can, we bring the litigation to an end. Accordingly, for the reasons referred to earlier, we will make orders substantially as sought by the appellants in the Notice of Appeal. No submission was put by any of the respondents as to the inappropriateness of the orders sought by the appellants in the event that we re-determined the matter.Costs In circumstances where the appeal was successful, the appellants sought that costs be borne in the proportions as to 25 per cent by the first respondent and 75 per cent by the third respondent. The third respondent did not oppose a costs order in that proportion nor did they challenge the reasonableness of the claimed quantum. The first respondent opposed the costs order, contending impecuniosity, but did not challenge the percentage contribution or quantum. Impecuniosity is not a basis for the refusal to make a costs order. In circumstances where the appeal has succeeded and the first and third respondents unsuccessfully opposed the appeal, we are satisfied that consistent with s 117 of the Family Law Act1975 (Cth) these are circumstances that justify the making of a costs order in the quantum and the proportions proposed. We will make orders accordingly.
Ratio Decidendi
Legal Principle Established
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