Esselbrugge and Esselbrugge & Ors
[2019] FamCA 431
•5 July 2019
FAMILY COURT OF AUSTRALIA
| ESSELBRUGGE & ESSELBRUGGE AND ORS | [2019] FamCA 431 |
| FAMILY LAW – SPOUSAL MAINTENANCE – Where the wife seeks interim relief for spousal maintenance against the husband – Whether the husband has the capacity to fund ongoing interim spouse maintenance – Where the parties were not in dispute as to the wife’s need for maintenance – Whether the husband has financial resources from his parents – Where the husband has the income and financial resources to pay to the wife the sum of $700 per week in the form of spousal maintenance. FAMILY LAW – SUMMARY DISMISSAL – Where the husband and second respondents sought summary dismissal of the wife’s interim application for declaratory relief – Where the wife sought orders that the second respondents’ transfer fifty percent of their business to the wife and husband as part of the property pool – Where the wife claims her and the husband hold a fifty percent beneficial interest – Where the test for summary dismissal is where there is no reasonable likelihood of success of the wife’s application – Unconscionability – Promissory estoppel – Common intention - Where the Court is not satisfied there is no reasonable likelihood of success of the wife’s claim – Application dismissed. |
| Family Law Act 1975 (Cth) ss 72, 74, 75 Family Law Rules 2004 (Cth) r 10.12 |
| Baumgartner and Baumgartner (1987) 164 CLR 137 Bigg v Suzi (1998) FLC 92-799 Bretton & Bondai [2013] FamCAFC 168 Giumelli v Guimelli (1999) 196 CLR 101 John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 Pelerman (2000) FLC 93-037 Redman and Redman (1987) FLC 91-805 Shaw & Shaw [2016] FamCAFC 159 Walton Stores (Interstate) Pty Ltd v Maher (1988) 164 CLR 387 Williamson and Williamson (1978) FLC 90-505 |
| APPLICANT: | Ms Esselbrugge |
| FIRST RESPONDENT: | Mr Esselbrugge |
| SECOND RESONDENTS: | Mr B Esselbrugge and Ms D Esselbrugge |
| FILE NUMBER: | CSC | 619 | of | 2018 |
| DATE DELIVERED: | 5 July 2019 |
| PLACE DELIVERED: | Townsville |
| PLACE HEARD: | Cairns |
| JUDGMENT OF: | Tree J |
| HEARING DATE: | 13 June 2019 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Wilson QC |
| SOLICITORS FOR THE APPLICANT: | Reaston Drummond Law |
| COUNSEL FOR THE RESPONDENT: | Mr Hackett |
| SOLICITORS FOR THE RESPONDENT: | Hirst & Co |
| COUNSEL FOR THE SECOND RESPONDENTS: | Mr Bunning |
| SOLICITORS FOR THE SECOND RESPONDENTS: | Simonidis Steel Lawyers |
Orders
That until further order, the husband pay the wife interim spouse maintenance in the sum of $700.00 per week.
That the second respondents’ application for summary dismissal for the wife’s claim against them be dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Esselbrugge & Esselbrugge has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT CAIRNS |
FILE NUMBER: CSC619/2018
| Ms Esselbrugge |
Applicant
And
| Mr Esselbrugge |
First Respondent
And
Mr B Esselbrugge and Ms D Esselbrugge
Second Respondents
REASONS FOR JUDGMENT
Introduction
In her Further Amended Initiating Application filed 22 February 2019, Ms Esselbrugge (“the wife”) sought final orders effecting a division of the parties’ matrimonial property, such that she would receive 60 per cent of the net assets, and Mr Esselbrugge (“the husband”) would receive 40 per cent. However as is plain from that application, she contends that the pool of assets available for division includes a 50 per cent interest in a business conducted by Mr B Esselbrugge and Ms D Esselbrugge (“the second respondents”) who are the husband’s parents. Particularly, she seeks a variety of declaratory relief, which would compel the second respondents to transfer to her and the husband a 50 per cent interest in that business, on a variety of bases I shall discuss later.
Also in that Further Amended Initiating Application, the wife sought interim relief, including that the husband pay her interim spouse maintenance in the sum of $700.00 per week.
By his Amended Response to Initiating Application filed 8 April 2019, the husband sought that, amongst other things, the wife’s application for interim spouse maintenance be dismissed. For their part, in their Amended Response to Initiating Application filed 25 March 2019, the second respondents sought orders for summary dismissal of the claims against them. Although as I read the husband’s Amended Response, he did not then join the second respondents in their application for summary dismissal, ultimately he did so in the hearing before me, and no objection was taken to that course by Queens Counsel for the wife.
On 13 June 2019, I heard the application for spouse maintenance and the application for summary dismissal. At the conclusion of that hearing I reserved my decision. This is that decision and the reasons for it.
THE FACTS
The wife was born in Country G in 1983, and hence is presently 36 years of age. It appears that she met the husband when they were both young and living in Country G, however they did not form a relationship at that time.
The husband was born in Country G in 1983, and hence is also presently 36 years of age. I know little of his early life, save that at some stage, presumably as a young adult, he left Country G to work in Country E, and later, Country C.
The parties commenced their relationship in about December 2005, when they were both 22 years of age. At the time, the husband was back in Country G on holidays.
In about 2006, the second respondents migrated to Australia, to operate a business which did not ultimately prove successful. It appears as though other members of the father’s family also migrated, including the husband’s paternal uncle.
The husband and wife became engaged, and moved to Brisbane in 2007, and were married there in 2008. It seems as though the husband may have travelled to Australia first, because the wife says that by the time she had arrived, the husband had recently started working for his paternal uncle’s company. That uncle is a qualified technician. She says, and it appears uncontroversial, that the husband’s father was also working in the business. Apparently he is a qualified professional and has a Masters degree.
At the time of her arrival in Australia, the wife was studying a Bachelor degree in Country G that she had started in 2004. She was undertaking that part time. Previously she had worked in Country G in an administrative position.
Upon arriving in Australia, the wife did some part time work. However, because the husband’s employment required him to travel a lot, according to the wife, between 2007 and 2012 “we basically lived out of suit cases and travelled around to where [the husband’s] work required. We usually stayed with other workers and often had to keep our personal belongings in our car.”
It is apparently not controversial that, since arriving in Australia, the wife has done some work for businesses associated with the father’s family generally. Particularly, she worked both for businesses associated with the husband’s uncle, and the second respondents.
In 2010 the parties moved to Town H, or perhaps more accurately, based themselves there, as the wife says that the husband’s work “still required us to continue to move around on a regular basis.”
It does not seem controversial that, in about 2011, the husband and wife agreed that they should start to settle down and start a family. At around this time it appears as though some tension had surfaced between the husband’s father and uncle. Because there were two limbs to the business which they were jointly operating, it seems as though in about 2012, those businesses were split, so that the uncle took one, and the second respondents took the other. . By then it appears as though they husband had been working in that business for over three years, and that it was essential that he continued that employment in order for the business to operative profitably.
Inevitably there must have been conversations between all four parties in around 2011 about the future. The content of those conversations appears to be, however, rather controversial. I will discuss them in detail later, but suffice to say that the wife contends that the effect of those conversations, and the parties’ conduct thereafter, was to create in her and the husband a beneficial interest in the business, although it remains legally owned by the second respondents. The husband and the second respondents deny that there was any such agreement or conduct, although, of course, in assessing the wife’s claim, in the context of the husband and second respondents’ application for summary dismissal, it is only the wife’s material that I may have regard to.
From about 2012 to 2013, the wife received a wage for undertaking some administrative work with the business. She contends that thereafter she worked many hours for that business, but was not remunerated.
In 2014, the husband and wife’s first child, Mr X, was born; he is presently five years of age. Later their second son, Y, was born in 2017; he is therefore presently two years of age.
Unfortunately the parties’ relationship fell into difficulty in 2018, and they finally separated on 8 July of that year. By then, they had been in a relationship for 12 years, and married for 11.
It does not seem controversial that since separation, the mother has not obtained employment. She remains living in Town H in rented accommodation. On the other hand, the husband remains employed in the industrial supply business, legally owned by the second respondents, and presently resides with them in Brisbane. The parties still have a jointly owned home in Town H, although the wife does not live in it.
On 7 December 2018, Judge Spelleken made consent orders requiring the husband to pay spouse maintenance to the wife for 6 months in the sum of $350.00 per week, together with rental assistance of $350.00 per week.
THE SPOUSE MAINTENANCE APPLICATION
Relevant statutory provisions and legal principles
Section 72(1) of the FLA requires a party to a marriage to maintain the other party, to the extent that they are reasonably able to do so, but if, and only if, that other party is unable to support herself or himself adequately because of certain reasons, and having regard to factors set out in s 75(2) of the FLA. If the applicant establishes a need, and it is shown that the respondent has a capacity to pay, then the court may make such order as it considers proper for the provision of maintenance (s 74(1)).
In interim proceedings, the Full Court in Redman and Redman (1987) FLC 91-805 endorsed a statement made by Fogarty J in Williamson and Williamson (1978) FLC 90-505 as follows:
Another consequence is that on an application for interim maintenance, the court conducts ‘not as final or exhaustive a hearing as would be the case if one were hearing the matter finally’ ... the evidence need not be so extensive and the findings not so precise.
It follows then, that in an application for interim maintenance, a somewhat broad brush approach can be taken.
Section 75(2) factors
Although the parties were agreed that the determinative issue in the wife’s spouse maintenance application was the husband’s capacity to meet the payment of spouse maintenance, nonetheless it is incumbent upon me to address the balance of the relevant s 75(2) matters as well.
Both parties are presently 36 years of age. I have no evidence that either of them suffers any ill health.
By virtue of the orders of Judge Spelleken made 7 December 2018, up until 6 June 2019 the wife had the benefit of a payment of spouse maintenance in the total sum of $700.00 per week by the husband. That order has now expired.
In her financial statement filed 12 June 2019, the wife deposes that now her income comprises a Centrelink New Start allowance of $285.35 per week. She asserts that she owns property to the value of $293,071.46, which is principally represented in a 50 per cent interest in the home in Town H, said to be worth $275,000.00. However her 50 per cent of the mortgage secured over that home is $117, 500.00. The only other assets of any significance are her motor vehicle and some household contents.
By his financial statement filed 13 June 2019, the husband discloses an average weekly income of $3,076.00, comprising salary of $2,886.00 per week, and other employment benefits of a further $190.00 per week. He discloses property owned by him of $319,520.00, again principally represented in the former matrimonial home, but also including monies in bank (said at the time of the hearing before me to be a little over $6,000.00). Like the wife, he discloses household contents of $10,000.00, but interestingly, and importantly, also identifies a “Boat” which he notes he omitted to refer to in his two previous financial statements. He says that was a mistake. The value of the boat is said to be $40,000.00.
As to the husband’s income, there are notes to his financial statement that “… Due to a recent downturn in the business, I have agreed to receive a reduced salary in the short term, under the agreement that I will be paid the remaining amounts owning to me and return to my usual salary as soon as the business is in a position to do so.” As I understand it, the reduced salary is less than $2,886.00 gross per week.
As to the father’s financial resources, he discloses in his financial statement that both he and his father are beneficiaries and trustees of a trust which owns a property in Town H. In the notes to his financial statement, he discloses that the property is rented, and the rent goes to meeting the outgoings for the property, including the mortgage. He says he does not receive any income from that trust. He further says that he has an interest as a “member of a class of second beneficiary” in a particular trust which was set up by his parents, who are the primary beneficiaries and trustees. Interestingly, he does not attribute no value to those financial resources, but simply indicates that the value is “NK.”
Further financial resources are potentially identified by the husband in his affidavit filed 13 June 2018, where he discloses that he has a loan owing to a company owned by his parents in the sum of $170,000.00. He says “that loan has been provided to me by my parents since separation to assist me to meet all of my financial obligations as I have been unable to do so from my income.” He then goes on to list his additional expenses, including legal costs in the sum of $127,905.09, a further sum of $16,350.00 for other costs associated with these proceedings, costs associated with the wife’s solicitors for attending mediation, costs associated with supervision of the wife’s time with the children, and meeting his maintenance obligations to the wife in the amount of $350.00 per week, and then later $700.00 per week pursuant to the consent orders of 7 December 2018.
The husband goes on to say at paragraph 12 of his affidavit: “I am required to repay the loan owing by me to [the company associated with his parents]. I have been unable to do so over the last six months due to my significant expenses, but am endeavouring to make repayments to reduce the loan from my income where possible and have estimated the amount of $100.00 per week in my financial statement towards those repayments.”
Interestingly, the husband does not depose in his affidavit to an inability to continue to increase the loan to his parents. Rather, what he does instead, is to annexe correspondence from his solicitors to the wife’s solicitors, in which it was said:
In these circumstances we are instructed that our client is unable to continue to pay your client the amount of $700.00 per week beyond 7 June 2019 (being the expiration of his obligations under the order of 7 December 2018), and we provide notice that he is unable to do so…”
The husband filed no material from his parents deposing to their inability, or unwillingness, to continue to provide him with further financial support. I am satisfied on the evidence that there is likely a further financial resource available to the husband, being funds from his parents by way of further loan, however it is impossible to quantify the value of that resource.
I do not overlook the fact that the wife also discloses in her financial statement a loan from her parents for legal expenses, in the sum of $60,000.00.
Turning to the commitments of the parties to support themselves and others, the wife contends total weekly expenditure of $664.00, of which $444.00 is attributable to her and $220.00 to the children. To this she adds her rent of $350.00 per week, some insurance premiums and registration costs, to come to a total expenditure per week of $1,075.29. It was not suggested that there was an unreasonable component to those expenditures.
For his part, in his financial statement the husband claims weekly personal expenditure of $3,337.00, of which it is said $300.00 is towards superannuation, $577.00 to mortgage repayments, $58.00 in rates or unit levies, an estimate of $80.00 per week on insurance premiums, a loan repayment of $100.00 to his parents, credit card payments of $106.00 per week, and personal expenditure of $1,230.00 per week, of which $241.00 is said to be attributable to him, $919.00 said to be attributable to the children, and $7.00 said to be attributable to another adult, presumably his girlfriend Ms F, who although living in his household, earns no money.
Some criticism was made of the husband’s expenditure. For instance, it was said that superannuation contributions are an employer liability, not an employee liability, and therefore it was conjectured that the $300.00 was a voluntary payment. Further, even on the husband’s own evidence, plainly the loan to his parents is somewhat flexible. However the point was made that, even if both of those were excluded from the husband’s expenditures, there is still only, at best, a slender surplus.
The husband has the primary care of the parties’ children. That said, the mother does spend time with them.
The wife is in receipt of Newstart benefits, but I am obliged to ignore those under s 75(3).
It is not said that the payment of any maintenance would increase the earning capacity of the wife.
Other than the husband’s parents, there is no creditor whose debt is likely to be impacted upon by an order for spouse maintenance.
The wife did not particularly advance any claim that she had contributed to the income or earning capacity, property or financial resources of the husband, other than in the context of her constructive trust claim.
The marriage was of 11 years duration and, as I understand it, during it, the wife only worked for the husband’s family businesses, other than some brief periods of employment as an au pair and the like early in the marriage. That said, she does not claim that it has affected her earning capacity.
Both parties appear to wish to continue a role as a parent of the children.
The husband is cohabiting with a girl friend who earns no income. The evidence does not disclose any detail in relation to her.
I do not propose to make any orders under s 79 at this point in time.
The material is silent as to child support; presumably that is because the wife would not be liable to assessment.
I cannot identify any other fact or circumstance which is relevant in this case.
Evaluation
As I have indicated, the principal question here is the capacity of the husband to fund ongoing interim spouse maintenance. The wife’s need is not in dispute, although there was some suggestion made by the husband’s counsel that perhaps the wife should go out and get a job. To that, Queens Counsel for the wife said that she is obliged to look for employment by virtue of a Newstart allowance, and therefore I should infer that she is doing so. I accept that submission.
There are two issues which substantially impact upon the capacity of the husband to fund any spouse maintenance payment. The first is the unclear financial resource which his parents represent. I have already identified the existing loan, to the extent of $170,000.00 which he has from them. Particularly, there is no evidence that the loan is incapable of increase.
However, far more important to my mind is his boat. The only real point which his counsel was able to make in opposition to that being an asset available for sale, and hence to achieve capacity for the husband to pay spouse maintenance, was that, factoring the boat into the net pool of assets, on the husband’s calculations, there was only a net equity of $29,000.00. However this case is a long way away from being able to confidently assess the net equity of the parties’ assets. In any event, the boat is there, unencumbered, and presumably readily saleable.
I am satisfied that the husband has capacity to meet the wife’s claimed spouse maintenance in the sum of $700.00 per week, and will so order.
THE SUMMARY DISMISSAL APPLICATION
Relevant statutory provisions and legal principles
Family Law Rule 10.12 provides as follows:
A party may apply for summary orders after a response has been filed if the party claims, in relation to the application or response, that;
a)The Court has no jurisdiction;
b)The other party has no legal capacity to apply for the orders sought;
c)It is frivolous, vexatious or an abuse of process; or
d)There is no reasonable likelihood of success.
In Pelerman [2000] FamCA 881, (2000) FLC 93-037 at [46], the Full Court said in relation to the test for summary dismissal as follows:
The gravamen of the Appeal is that the trial Judge erred in the exercise of the discretionary power to summarily dismiss the Application. It is well established that the following principles apply as were recently reviewed and stated in Bigg v Suzi[1]:
(a) The power for summary dismissal is a discretionary one.
(b) Relief “is rarely and sparingly provided”.
(c)The parties seeking summary dismissal must show that the application is “doomed to fail” or as has been otherwise described “that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious”.
(d)A weak case or one that is unlikely to succeed is not “sufficient to warrant termination”.
(e)“If there is a serious legal question to be determined, it should ordinarily be determined at a trial.”
(f)“If notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a Court will ordinarily allow that party to reframe its pleadings.”
[1] (1998) FLC 92-799 at 84,974-84,975.
An interesting issue arose in the course of the parties’ submissions, as to the continued currency of Pelermen and Bugg & Suzi. That arises from the subsequent Full Court decision of Bretton & Bondai [2013] FamCAFC 168. That case involved an appeal from the dismissal of an application for summary termination of a parenting proceeding which, on any view, was a most unusual application. The court comprised in the majority, Finn and Strickland JJ, and in the minority, May J. However it does not seem to me that in the articulation of the relevant test for summary dismissal, their Honours were in conflict.
At [59]-[60] in the majority judgment, it is said as follows:
59. Assuming, that a summary dismissal application was available to the mother in this case, the appropriate test would have been “no reasonable likelihood of success”. It must be acknowledged that his Honour did not, at least expressly, apply this test. Rather, he apparently applied the “doomed to fail” test referred to by Kirby J in Lindon. The tests are, of course, conceptually different.
60. However, we are not persuaded that this court would be justified in interfering with his Honour’s order because of his apparent use of the “doomed to fail” test. This is because in [12] and [13] of his reasons his Honour made findings that are more akin to the “no reasonable likelihood of success” test. It cannot, in our view, be said that his Honour would have concluded that the father’s application “had no reasonable likelihood of success” given that his Honour said (at [12]) that he did not consider that he could find that the father’s application “cannot succeed”, and (at [13]) that he was not persuaded that he was wrong when he had decided in his first decision that there is a likelihood of the existing orders being varied in a significant way as a result of a new hearing.
On the other hand, May J was more expansive at [119]-[124] as follows:
119. In my view, the test for summary dismissal of a case once instituted, compared to the test for the recommencement or reopening of proceedings following the making of final orders is different.
120. The principles guiding the exercise of discretion under a court’s inherent power to dismiss proceedings were explained by Kirby J in Lindon v The Commonwealth (No 2) and referred to by the Full Court in Bigg & Suzi (1998) FLC 92-799 (at 84,974). Kirby J said (at 256):
1.It is a serious matter to deprive a person of access to the courts of law for it is there that the rule of law is upheld, including against government and other powerful interests. This is why relief, whether under O 26, r 18 or in the inherent jurisdiction of the Court, is rarely and sparingly provided;
2. To secure such relief, the party seeking it must show that it is clear, on the face of the opponent's documents, that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious;
3. An opinion of the court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant summary termination. Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment;
4.Summary relief of the kind provided for by O 26, r 18, for absence of a reasonable cause of action, is not a substitute for proceeding by way of demurrer. If there is a serious legal question to be determined, it should ordinarily be determined at a trial for the proof of facts may sometimes assist the judicial mind to understand and apply the law that is invoked and to do so in circumstances more conducive to deciding a real case involving actual litigants rather than one determined on imagined or assumed facts;
5.If, notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a court will ordinarily allow that party to reframe its pleading…
6.The guiding principle is, as stated in O 26, r 18(2), doing what is just. If it is clear that proceedings within the concept of the pleading under scrutiny are doomed to fail, the Court should dismiss the action to protect the defendant from being further troubled, to save the plaintiff from further costs and disappointment and to relieve the court of the burden of further wasted time which could be devoted to the determination of claims which have legal merit.
(footnotes omitted.)
121. Although Forrest J did not directly refer to the Family Law Rules 2004 (Cth) (“the Rules”), and while there is no doubt there is inherent power to summarily dismiss an application, it is appropriate to set out r 10.12:
A party may apply for summary orders after a response has been filed if the party claims, in relation to the application or response, that:
…
(c) it is frivolous, vexatious or an abuse of process; or
(d) there is no reasonable likelihood of success.
122. His Honour applied the test of “doomed to fail” which is no longer the correct test, see Spencer v The Commonwealth (2010) 241 CLR 118 particularly at p. 139 and 140. At paragraph 56 referring to similar Federal Court Rules, Hayne, Crennan, Kiefel and Bell JJ said:
Because s 31A(3) provides that certainty of failure (“hopeless” or “bound to fail”) need not be demonstrated in order to show that a plaintiff has no reasonable prospect of prosecuting an action, it is evidence that s 31A is to be understood as requiring a different inquiry from that which had to be made under earlier procedural regimes. It follows, of course, that it is dangerous to seek to elucidate the meaning of the statutory expression “no reasonable prospect of successfully prosecuting the proceeding” by reference to what is said in those earlier cases.
123. The applicable test for summary judgment was recently considered by another intermediate court of appeal in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158. The applicable legislation in Victoria is provided in the Civil Procedure Act2010 (Vic) the words being where there is “no real prospect of success”. Warren CJ & Nettle JA said:
35 Upon the present state of authority:
a)the test for summary judgment under s 63 of the Civil Procedure Act2010 is whether the respondent to the application for summary judgment has a ‘real’ as opposed to a ‘fanciful’ chance of success;
b)the test is to be applied by reference to its own language and without paraphrase or comparison with the ‘hopeless’ or ‘bound to fail test’ essayed in General Steel;
c)it should be understood, however, that the test is to some degree a more liberal test than the ‘hopeless’ or ‘bound to fail’ test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
d)at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.
124. Although the test applied by his Honour was incorrect, the judge was correct in refusing the applications for summary dismissal. The second appeal should be dismissed.
The question then arises as to how those statements affect the earlier Full Court decisions.
The starting point must be that, insofar as the application for summary dismissal is brought pursuant to the Rules, the language of that Rule will determine the relevant test. Under Rule 10.12, the test is that there is “no reasonable likelihood of success.” (I leave to one side whether there is any residual inherent jurisdiction to dismiss, notwithstanding there being a Rule).
Sometimes it is helpful, and sometimes not, to try and evaluate the satisfaction of a particular test by reference to other wording; the notion of “reasonable doubt” in criminal proceedings is the par excellence example of where it is not appropriate.
Ultimately, I have formed the view that although the other articulations are helpful as providing sounding boards as to whether the test under Rule 10.12 has been met, ultimately, the standard that must be demonstrated is that there is “no reasonable likelihood of success.” That is the test which I will apply here.
The wife’s contentions of fact
A considerable amount of time was spent in the interim hearing, disposing of objections to material relied upon by the wife. However, ultimately the following significant representations or conversations remained in evidence before me, accepting that, in paragraph 54 of the wife’s affidavit filed 22 February 2019, she says “due to the passage of time, I do not now recall specific dates of conversations and who was involved in each conversation.”
·“I recall however, that in 2011 [Mr B Esselbrugge] was 66 years of age and was planning for his retirement. My conversations with [Mr B Esselbrugge] centred around the fact that he did not want to start a new business unless he was sure [Mr Esselbrugge] would also be involved. He wanted [Mr Esselbrugge] to agree to be the operations director as well as run and own the company with him”: wife’s affidavit 22 February 2019 at [55];
·“Whenever [Mr B Esselbrugge] spoke to myself or [Mr Esselbrugge] or myself, about the business he used words such as “our business” or say things like “this is for your future;” or “this business is for you and your children.” I have always understood from things [Mr B Esselbrugge] said that [Mr Esselbrugge] was considered an owner of the business. He made it clear that the business was to provide for mine and [Mr Esselbrugge]’s future:” ibid [56];
·“[Mr B Esselbrugge] also said things like “this will all be yours one day. You have an interest in this business too.” From early days, [Mr B Esselbrugge] talked about [Mr Esselbrugge] buying out his half share when he retired.” (emphasis added): ibid [62];
·That based on those various representations, the husband and wife did not seek to be fully paid for the work for which they did in the business, allowed the relevant business to operate from their home for over six years, the wife did not receive superannuation entitlements, and did not obtain work outside the home, because she believed that the interests in the business would ultimately benefit them: ibid [67];
·The wife’s duties “in the business included many tasks including:
(a)Working with tenders and applying for new tenders from Council;
(b)Preparing various reports including accounting, profit and loss, expenses, liaising with accountants, balance sheets and payrolls;
(c)General administration including booking plane tickets, liaising with engineers, office management, filing, creating new documents, letter to residences and spreadsheets containing information about the business;
(d)Quotes – creating quotes for all jobs or jobs completed;
(e)Claims, data capturing, paying and invoicing businesses and sub-contractors;
(f)Information technology – [the wife] was in the process of writing [her] own data capture program. [The wife] also did a lot of other IT related work until separation.”: wife’s affidavit filed 19 November 2018 at [26], and filed 22 February 2019 at [74];
·After 2013 the work which the wife undertook as described above was unpaid;
·The wife’s case is that, but for those representations, she would not have undertaken that work on an unpaid basis, but would have obtained work outside the home.
I am obliged to accept all of this evidence at its highest in evaluating the prospects of the wife’s claim. That said, the wife does concede that the husband was paid a salary from the business during the course of the relationship. I do not read her material as suggesting that it was not a commercial salary.
Unconscionability
Relevant legal principles
At its heart, a remedial constructive trust based upon unconscionable conduct is “premised on proof of unconscionable conduct in the form of an assertion to, or denial of, an equitable interest in property.”[2] Ordinarily, cases asserting an unconscionable denial of interest rely upon a level of contribution which, if not recognised, would lead to a windfall on the part of the party denying the interest. Whilst contributions do not need to necessarily be made directly to the acquisition or improvement of the property in question, such that indirect contributions, even by way of domestic assistance, may be taken into account, nonetheless there must be something unconscionable about the retention of the “windfall”. Further, a court is entitled to take into account any benefit which the claimant has derived from the property in question in determining whether or not, viewed in totality, there is unconscionable conduct.
[2]Dal Pont, Equity and Trusts in Australia 7th ed LBC 2019 at [38.175] quoting Baumgartner and Baumgartner (1987) 164 CLR 137 at 148 – 150 per Mason CJ, Wilson and Deane JJ, at 155 – 156 per Gaudron J.
However, equitable proprietary relief will be declined if there is “an appropriate equitable remedy which falls short of the imposition of a trust.”[3]
[3]Giumelli v Guimelli (1999) 196 CLR 101 at 113 per Gleeson CJ, McHugh, Gummow and Callinan JJ and John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 at [128] – [129].
Evaluation
The wife’s case is that the industrial supply business has significantly increased since 2012, and inferentially says that there is likely to have been an increase in its value. Her case is that she and the husband have made a contribution to that business, which it would not be equitable for the second respondents to retain without the recognition of the unpaid contributions which the husband and wife have made to any increase in value. Of course, the question of the value of the business is yet to be determined, but the wife certainly lays a factual foundation from which an inference could be drawn that the business has increased, and therefore arguably increased in value.
Nonetheless, a great deal more would need to be established in order for the wife to succeed in a constructive trust claim. Particularly, the value of her contribution and the unpaid (or any underpaid) contribution of the husband would need to be assessed, the value of the business at 2011 would need to be determined, and its value at the point of separation would need to be ascertained as well. As to whether or not a remedial constructive trust would be imposed, would largely depend upon whether the recognition of a beneficial interest was necessary in order to achieve justice, or whether some lesser equity, for example equitable compensation or damages, or a lien over the business to the extent of the unpaid contributions, would be adequate.
However, plainly there is a case that is available to the wife to be argued in this respect. Although I cannot be satisfied that it is more likely than not that she would succeed, given the complete infancy of these proceedings, nonetheless I could not presently conclude that there is no reasonable likelihood of success.
Promissory estoppel
Relevant legal principles
In Walton Stores (Interstate) Pty Ltd v Maher (1988) 164 CLR 387 at [34] Brennan J (as his Honour then was) said:
In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.
I accept that this statement still reflects the present law.
Evaluation
The wife’s evidence is that she assumed that she and the husband were co-owners of the business with the second respondents, and it appears that she says that was a present ownership, albeit it was anticipated that the second respondents would sell their interest in the business to them when they retired. She says she formed that view based on the husband’s father’s statements. If the wife’s evidence that the representations were made to her as she contends is ultimately accepted at trial, (which may prove problematic for her given, as counsel for the husband and second respondents correctly identified, it lacks context, particularity and the like) and if she is accepted that she thereafter acted in a way which is a species of legally recognised detriment (again subject to all the vagaries of her evidence) then the claim for a promissory estoppel may be established.
However, as with the claim for unconscionable conduct, it is by no means clear that the appropriate equity would therefore necessarily be a recognition of a beneficial interest in the business, as that likely would depend upon the value of the detriment suffered. However at the moment I am satisfied that, taking the wife’s evidence at its highest, there is arguably a legally recognised detriment that has been suffered, and taking her case at its highest, there is at least a viable argument for promissory estoppel. Certainly I could not presently conclude that there is no reasonable likelihood of success of this claim.
Agreement or common intention
Relevant legal principles
The notion of a common intention based constructive trust has not been without its critics. For instance in Jacobs Law of Trusts in Australia[4] the learned authors say:[5]
“However, if there is an express agreement as to the sharing of beneficial ownership it is difficult to see why the consequence is not the creation of an express trust, including one of the Bannister v Bannister variety if the necessary writing be absent.”
[4]Lexis Nexis Butterworths 7th Ed.
[5]At [1354].
Likewise in Equity and Trusts in Australia[6] at [38-230] the author opines:
“The juridical incorrectness of the common intention constructive trust and its explanation by some as a form of proprietary estoppel, coupled with the breadth of relief available pursuant to the Baumgartner doctrine and the artificiality of inferring a common intention relating to mostly undocumented events that are likely to have occurred many years earlier, should undermine a role for the common intention constructive trusts in Australian law. Yet Australian (principally New South Wales) case law continues to recognise the availability of the common intention constructive trust as an alternative to the true remedial constructive trust. Efforts by some judges to bring the common intention constructive trust under the unconscionable conduct umbrella are perhaps implicit recognition that the prevailing test is the latter. Yet the common intention trust has secured something of a new lease of life as a vehicle through which to confer priority on a person who has contributed to property over a period of time which, due to a lack of unconscionable conduct as required for a Baumgartner – type trust, would otherwise lose priority to another interest…” (Footnotes omitted).
[6]GE Dal Pont, Equity and Trusts in Australia, Law Book Company, 7th ed 2019.
Other commentators have been less critical, and it appears that the preponderance of Australian authority does indeed support the availability of common intention as a sufficient foundation to impute a trust. From Ford and Lee, Principles of the Law of Trusts[7] the following may be drawn as relevant principles relating to the common intention constructive trust:
·Something more than mere considerations of general fairness are required;
·A real common intention must be proved, and may be found in a written or oral agreement, or inferred from conduct;
·The party who claims a beneficial interest against the title-holder must show the she sustained detriment in the reasonable belief that by so doing, a beneficial interest would be acquired, such detriment being of a kind contemplated in the common intention;
·The detriment in question must amount to a material disadvantage, but may consist in a party acting in a way that she would not have otherwise acted, or foregoing an opportunity. However the party must demonstrate that the act or forbearance was induced by the common intention.
[7]Thomson Reuters – loose leaf.
Evaluation
There must have been some agreement in relation to the parties’ 2011 engagement in the industrial supply business. I say that because the husband plainly was employed, and indeed remains employed in it, and the wife undertook some works for it too, accepting that the scope and value of it is likely to be controversial. The real question is whether or not there was ever an agreement or common intention beyond mere employment. The wife says that there was. Particularly she says that the male second respondent said:
This will all be yours one day you have an interest in this business too.
This is for your future.
This business is for you and your children.
There is some equivocation, however, as to how it is that the business was ultimately to become theirs. Particularly it is not altogether clear whether the parties then had a vested interest in the business, or whether it would only vest at some time in the future. If it was in the future, then the basis upon which there would be transfer of ownership seems unclear, although there is a hovering suggestion that the second respondents’ interest in the business would be purchased by the husband and wife at less than market value.
Moreover there must inevitably be the question, if there was, from the outset in 2011 or 2012, an agreement that there was common ownership between the husband and wife of the one hand, and the second respondents on the other, why that was not regularised at that time, or indeed not regularised thereafter.
That said, there plainly appears to have been some common intention, but precisely what it was is not altogether clear. Certainly the present evidence would likely fall far short of establishing an agreement susceptible to specific performance, because the terms of the agreement are probably insufficiently clear.
However, taking the wife’s admittedly vague and imprecise evidence at its highest, I am not presently persuaded that she does not have a reasonable likelihood of success in relation to this aspect of her claim.
Assessment
I am not presently satisfied that the wife has no reasonable likelihood of success in her claims.
The application for summary dismissal therefore fails.
OTHER MATTERS
Paragraph 2 of the Further Amended Initiating Application
By reference to the decision of Shaw & Shaw [2016] FamCAFC 159, counsel for the husband correctly identifies that the articulation of the relief which is presently sought by paragraph 2 of the wife’s Further Amended Application, namely a 60/40 split of the parties’ property, if made the subject of an order, would not be competent to effect an alteration of the property interests of the parties. That is because it does not descend to any specificity as to how that division is to be effected. Rather, it is only by paragraphs 3 and 4 of that application that some – probably still inadequate – specificity is introduced.
However I am not presently persuaded that, for the purposes of articulation of the parties’ claim, the identification of the percentage division which is sought means that the application should be struck out. True it is that an order, if ultimately made in those terms, would not be competent, but it is convenient, it seems to me, if from an early stage, the parties identify the overall division of property which they seek in a global sense, and then descend to specificity as the wife has done here. I am not persuaded that paragraph 2 of the Further Amended Initiating Application should be struck out.
The path forward
As I understand it, the parties are agreed that, in the event that the summary dismissal application did not succeed, then the next step should be for there to be a pleadings regime embarked upon, in relation to the wife’s claims against the second respondents. Such a regime should enable the present lack in specificity to either be cured, or if it is not, then the weaknesses of the wife’s case will be more starkly exposed. In the latter event, the second respondents foreshadowed a further application to summarily dismiss the wife’s claim. If the parties are unable to agree a pleading regime, then I propose that any party has liberty to bring the matter back on before me, in order that the timetable may be imposed.
Otherwise the balance of the wife’s interim relief relates to obtaining disclosure (which I understand to have now occurred) and for valuation of the second respondents’ interests in the industrial supply business to be undertaken. Logically, it seems to me, that valuation process should await the conclusion of the pleadings regime, and any further application for summary relief. If that does not appeal to the parties, then they again may seek to have the matter brought back on, in order that the valuation issue can be determined.
CONCLUSION
For these reasons there will be orders as set out at the commencement of this judgment.
I certify that the preceding eighty-eight (88) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Tree delivered on 5 July 2019.
Associate:
Date: 5 July 2019
2
8
2