Grefeld & Grefeld
[2010] FamCA 504
•22 June 2010
FAMILY COURT OF AUSTRALIA
| GREFELD & GREFELD AND ANOR | [2010] FamCA 504 | ||
| FAMILY LAW – PROPERTY – Civil claim between Applicant and Second Respondent for the transfer of property – Where Second Respondent not aware her monies were used to acquire property by First Respondent pursuant to a power of attorney – Breach of fiduciary relationship due to non-disclosure – Onus of proof on First Respondent to prove monies have been repaid – Plea of accord and satisfaction – Numerous inconsistencies with First Respondent’s evidence – Declaration that the property is held on trust for Second Respondent – Whether constructive or resulting trust | |||
| APPLICANT: | Mrs Grefeld | ||
| FIRST RESPONDENT: | Mr Grefeld |
| SECOND RESPONDENT: | Ms J Grefeld |
| FILE NUMBER: | BRF | 2504 | of | 2005 |
| DATE DELIVERED: | 22 June 2010 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Barry J |
| HEARING DATE: | 1 June 2010 – 3 June 2010 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Hamwood of Counsel appearing for the Applicant Wife |
| SOLICITORS FOR THE APPLICANT: | Peter Sheehy Solicitor |
| COUNSEL FOR THE FIRST RESPONDENT: | The First Respondent Husband appearing by telephone not legally represented |
COUNSEL FOR THE SECOND RESPONDENT: | Mr McGregor of Counsel appearing for the Second Respondent |
| SOLICITORS FOR THE SECOND RESPONDENT: | Jones McCarthy Lawyers |
Orders
IT IS ORDERED THAT:
As Between the Applicant and the Second Respondent
A declaration that the Applicant Wife holds all her right, title and interest in and to the property situated at E Road in the State of Queensland more particularly known as Lot … on RP …, situated in the County of …, Parish of … on Certificate of Title Reference … on trust for the Second Respondent.
The Applicant Wife do all acts and things and forthwith sign all documents reasonably necessary to transfer to the Second Respondent all her right, title and interest in the B property.
Pursuant to s106A of the Family Law Act 1975, in the event the Applicant Wife refuses or neglects to do any act or thing or sign any document reasonably necessary to transfer to the Second Respondent all her right, title and interest in the E Road property to the Second Respondent, then a Registrar or a Deputy Registrar of the Family Court of Australia at Brisbane be appointed to do such act or thing or to sign such document in the name of the Applicant to give validity and operation to these Orders.
As Between the Applicant and the First Respondent
The Applicant retain without further claim from the First Respondent the land at C in the State of Queensland.
IT IS NOTED that publication of this judgment under the pseudonym Grefeld and Grefeld and Anor is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRF2504/2005
| MRS GREFELD |
Applicant
And
| MR GREFELD |
First Respondent
And
MS J GREFELD
Second Respondent
REASONS FOR JUDGMENT
The Parties
Applicant – Mrs Grefeld
Resides at the E Road property in the Gold Coast region. Born May 1960. Married Mr Grefeld in April 1980 in London and separated in July 2002. Title of E Road property registered in her name.
First Respondent – Mr Grefeld
Aged 61. Born in Iran. He is residing in Hamburg – eldest of five children. He held power of attorney for his mother and four sisters – unable to travel to Australia for health reasons – appeared at trial by phone link from Germany.
Second Respondent – Ms J Grefeld
Youngest sister of the husband. Resides at A. Originally joined in proceedings as the wife asserted the A home was matrimonial property – claim no longer pursued – J Grefeld claims title to E Road property as her funds were used for its acquisition in early 1996.
The husband became the registered owner of the property at A on 16 November 1984. It is common ground that the funds used to acquire this property emanated from accounts in his mother’s name. The husband says as his mother did not have permanent residence status in Australia at that point in time the property was registered in his name.
The Issues
According to the wife separation occurred in July 2002 whilst the husband says it was in March 2003. In February 2003 the husband signed transfer documents transferring the title to the A property from his name to J’s name.
The transfer was not registered until about December 2004. The most likely explanation for the delay was the unavailability of funds to pay the stamp duty and other outgoings associated with the transfer.
There had been ongoing discussions about the transfer between J and her mother. A further reason for the delay was that it had not been resolved whether the property would be transferred solely into J’s name or to J’s name and one or more of her siblings.
There is a conflict in the evidence whether the wife was aware that the A property had been acquired with monies supplied by the Husband’s mother.
In her affidavit filed 15 February 2007 at paragraph 42 the husband’s mother says:
“42.[The wife] reassured me after the separation that she would not lay any claim to [the A property] even though she said she was “technically” able to do so because the property was in [the husband’s] name. [The wife] told me that she would not consider making such a claim because she knew that [the husband] held the property for me.”
In J’s affidavit of evidence in chief filed 2 June 2009 at paragraphs 37 and 39 she deposes:
“37. . . .
[The wife] repeatedly stated that I need not worry about [the A property] being considered part of the matrimonial property and that it would not be challenged by her. [The wife] told us that she understood [the A property was “Mummy’s” which was how she always referred to my mother.
39.[The wife] was aware of the transfer of the property into my name, both at the time of the discussion and at the time of execution. [The wife] repeatedly offered, without any invitation or demands on my part, reassurances that she would make no claim on [the A property], because she fully understood that [the A property] was “Mummy’s”. During a specific conversation about the transfer, she reassured me by saying, “Of course it is Mummy’s house” and, “Mummy can do with it as she pleases.” These reassurances were presented to both my mother and I over a period of months, after the transfer was completed in 2004.”
The husband’s sister R filed an affidavit on 1 June 2009. This was relied on by the husband as part of the material in his case. She was not required for cross examination. At paragraph 25 of her affidavit she states:
“25.When I would visit my brother and his family in Australia I heard [the wife] on many occasions speak of the [A] property as, “Mummy’s home”. She would say this when my brother would talk about living in the [A] property and [the wife] would say words to the effect that she did not want to live in [the A property] and referred to the property as “Mummy’s home”.
It is difficult to understand why the wife would pursue a claim for the transfer of the A property to J to be set aside unless she was of the view that it had been inappropriately transferred and was genuinely the property of the husband. I found J to be a consistently honest witness. Her mother was not required for cross examination but neither was the wife or R. A determination of the conflict in this evidence would only be relevant as a credibility issue.
The claim by the wife for the A property is, as noted above, not pressed.
The proceedings under the Family Law Act as between Husband and Wife have been resolved.
In summary form they have been resolved by the Husband agreeing that the Wife will retain the E Road property (if J’s claim is not successful), the vacant land at C, together with chattels, bank accounts and a small superannuation fund located in Australia. The Husband will retain all property interests of all descriptions in Germany.
It was not asserted by the Husband or Counsel for the Wife that the settlement as between Husband and Wife was in any way dependent on the outcome of J’s claim that a resulting trust or constructive trust arose from the fact that the E Road property had been purchased in early 1996 with her funds though the First Respondent adverts to it in paragraph 12 of his proposed orders as set out in his Case Outline Document.
The proceedings I am required to determine are a civil claim between J as Plaintiff and the wife as Defendant for the transfer of the E Road property.
Witnesses In The Case
Applicant
The Wife relied on the following affidavits in her case:
·Wife. Affidavit filed 3 June 2009 – not required for cross examination.
·H – Parties’ daughter. Affidavit filed 11 June 2009 - not required for cross examination.
·K – Parties’ son. Affidavit filed 15 June 2009 – not required for cross examination.
First Respondent
The First Respondent relied on affidavits from:
·The Husband. Affidavits filed 5 June 2007, 25 June 2007, 4 September 2007, 2 July 2008, 1 June 2009, 15 June 2009, 19 June 2009, 4 May 2010 and 22 May 2010.
·The Husband’s mother. Affidavits filed 15 February 2007, 2 June 2009 and 8 July 2009 - not required for cross examination.
·Ms B (bookkeeper in Husband’s office in Hamburg). Affidavit sworn 24 May 2010 – not required for cross examination.
·Dr Utz Meyer-Reim, lawyer. Affidavit filed 1 June 2009 – not required for cross examination.
·Mr O, tax accountant. Affidavit filed 12 June 2009 – not required for cross examination.
·Mr L, property valuer. Affidavit filed 1 June 2009 – not required for cross examination.
·Magnus Mackenroth, lawyer. Affidavit filed 1 June 2009 – not required for cross examination.
·K – Affidavit filed 15 June 2009 – not required for cross examination.
·H – Affidavit filed 15 June 2009 – not required for cross examination.
·The wife – Affidavit filed 15 June 2009 – not required for cross examination.
·
J Grefeld – Affidavits filed 27 May 2009, 2 June 2009 and
8 July 2009.
Second Respondent
The Second Respondent relied on affidavits from:
·The Second Respondent. Affidavits filed 2 June 2009 and 8 July 2009.
·The Husband’s mother. Affidavits filed 15 February 2007, 2 June 2009 and 8 July 2009 – not required for cross examination.
·Affidavit of Mr D, professional translator (translation of German documents to English) filed 2 June 2009.
The Pleadings
A Statement of Claim by the Second Respondent was delivered in accordance with the usual practice in this jurisdiction. That Statement of Claim is in the following terms:
“1.The Applicant is the registered proprietor of a property situated at and known as [E Road] in the State of Queensland more particularly known as Lot […] on RP […]Title Reference […] (hereinafter called ‘the [E Road] property’).
2.The [E Road] property was purchased by the first respondent and registered in the name of the applicant by a purchase from one […] for a consideration of $500,000 on or about 20 February 1996 utilising the services of solicitors, Messrs McDonald Balanda & Arcuri.
3.The funds used for the purchase of the [E Road] property were provided by the second respondent to the first respondent utilizing a power of attorney held by him and given by the second respondent on or about 8 July 1983
Particulars of the money provided by the Second Respondent
·On or about 21 February 1996 the sum of $AUD 552,349.03 was drawn from the account of the second respondent number […]101 held at the Vereins-und Westbank (Hamburg) (commonly known as ‘Vereinsbank’) in order to transfer the sum of $AUD 551,500 was paid into the account of Messrs McDonald Balanda Acuri, Commonwealth Bank, […], Queensland, Australia for the purpose of ‘the purchise (sic) of [E Road].
4.Neither the applicant nor the first respondent applied their own funds or any part thereof to the purchase of the [E Road] property.
5.In the premises the applicant holds all her right title and interest in and to the [E Road] property on either a resulting trust or alternatively on a constructive trust in favour of the second respondent.
6.The second respondent claims:
·A declaration that the applicant wife holds all her right title and interest in and to the property situated at [E Road] on Certificate of Title Reference […], on trust for the second respondent
·Orders that the applicant wife do all acts and things and sign all documents reasonably necessary to transfer to the second respondent all her right title and interest in the [E Road] property to the Second Respondent
·Pursuant to section 106A of the Family Law Act 1975 in the event the applicant refuses or neglects to do any act or thing or sign any document reasonably necessary to transfer to the second respondent all her right title and interest in the [E Road] property to the Second Respondent then the Registrar or a Deputy Registrar of the Family Court of Australia at Brisbane be appointed to do such act or thing or to sign such document in the name of the applicant to give validity and operation to these Orders
·The applicant pay the second respondent’s costs of and incidental to this application to be assessed.”
A Defence was originally filed on behalf of the Applicant wife on 12 June 2009.
On 1 June 2010, the first day of the trial, an Amended Defence by the Applicant to the Statement of Claim of the Second Respondent was delivered. That Amended Defence is in the following terms:
“1.The Applicant admits the allegation in paragraphs 1 of the Statement of Claim.
2.In relation to paragraph 2 of the Statement of Claim, the Applicant:
a. denies that the property was purchased by the First Respondent and registered in the name of the Applicant because the property was purchased by the Applicant as buyer on the Contract of Sale and the Applicant was subsequently shown as Transferee on the Form 1 transfer;
b. otherwise admits the balance of the allegations in paragraph 2 of the Statement of Claim.
3.In relation to paragraph 3 of the Statement of Claim, the Applicant admits that funds were applied by the First Respondent to purchase the property using Power of Attorney of the Second Respondent in a manner that the (sic) entitled the First Respondent to use those funds namely under a power granted by the Second Respondent to the First Respondent.
4.The Applicant does not admit that the First Respondent did not apply funds of his or of the Applicant towards the purchase of [E Road].
5.In the premises the Applicant says
a.the use by the First Respondent of funds using the Power of Attorney granted by the Second Respondent to him was within the power granted to him by the Second Respondent; and
b.the use of funds by the First Respondent as pleaded herein does not give rise to a resulting or constructive trust as alleged by the Second Respondent.
FURTHER AND IN THE ALTERNATIVE
6.If there is a debt owing by the First Respondent to the Second Respondent in respect to monies applied toward the purchase of [E Road], the Applicant says that the Second Respondent owes to the First Respondent the amount of $1,037,463 after taking into account the monies said to be owed by the First Respondent to the Second Respondent.”
I was informed at the commencement of the hearing the Wife did not press her counterclaim as adverted to in paragraph 6 of the Defence. In a strict sense the husband was not a party to this litigation other than in his Case Outline Document he sought an order at paragraph 6:
“6.that the Wife retain and the Husband and Second Respondent relinquish any right, title and interest in and to the following:
a. The property at [E Road] …”
He also sought in the proceedings under the Family Law Act and the proceedings relating to the civil claim, a claim at paragraph 10 of his Case Outline Document as follows:
“10.That the Second Respondent, [J Grefeld], pay the applicant wife’s and respondent husband’s costs of and incidental to these proceding (sic) as far (sic) she has caused costs due to not fully disclosing the payments she received in 1999 to 2007 from the responding husband in Germany. That each party pay their own costs not covered by above sentence.”
At paragraph 12 of the orders sought as set out in the Case Outline Document, he sought an order:
“12.That if the Agreement between the Applicant Wife and the Respondent Husband mentioned later under E. is not possible due to the [E Road] Property issue with the Second Respondent, the Honourable Judge can find a fair solution considering the present and future liabilities in Germany and the asset pool of the marriage.”
There was no attachment E to the Husband’s Case Outline Document. I allowed the First Respondent to appear as a party in the proceedings. He appeared by way of telephone link from Germany as he was unable to afford a video link. For previous hearings he produced medical certificates evidencing his health was such that he was unable to travel to Australia.
The Husband asserted, although he had not delivered any pleadings, he had more than repaid J for the monies used to acquire E Road. He countered he had claims for monies due and owing by J to the extent of $AUD 798,000.
Counsel for the Second Respondent submitted this claim should be struck out on the basis it had not been supported by any pleadings, had not been raised at any earlier stage of the proceedings and was more properly to be dealt with in the German jurisdiction as all transactions appeared to emanate from there, other than the use of funds to acquire the E Road property. I acceded to this application.
There is a considerable body of evidence in affidavit form relied on although the oral evidence at the hearing consisted of cross examination of only two witnesses, namely the Second Respondent and the First Respondent.
Background Facts
The husband migrated to Germany from Iran with his parents and siblings. J in about 1983 after she reached adult status, executed a power of attorney in Germany in favour of the husband. That document together with its translation is Exhibit 1 in the proceedings. The document is in the following terms:
“ No. […] of the register of deeds for 1983
negotiated
In the Free and Hanseatic City of Hamburg on Friday, 8 (eighth) July 1983 (nineteen-hundred and eighty-three)
In the presence of the Hamburg notary
[…]
appeared today in my office at […],
Ms [J Grefeld], student,
born […]1965,
residing at […],
personally known to me.
and declared on official record the following
General Power of Attorney
I, the person appearing, here name as my general power of attorney
1.[The husband’s mother], housewife, residing at […],
2. [The husband], businessman,
residing at […],
-and each independently of each other –
and accord them the authority of representing me in all matters concerning entities and sole proprietors, concerning the justice system, official government agencies and banks. In particular, they are authorised to submit taxation returns on my behalf.
This representative power is intended to extend to all transactions without exception, which may be undertaken by me and with me, as far as representation is permitted under law.
The powers of attorney are authorised to negotiate transactions in my name with themselves in their own name or as a representative of others.
The powers of attorney are authorised to appoint sub-powers of attorney.
This authority remains valid even in the case of my death, until it is revoked by my heirs.
The power of attorney are authorised to make as many copies of this protocol as they wish.
As such, this protocol, the original coy of which is to remain with me, has been recorded, read out, authorised by the party concerned and personally signed, and as follows, it has also been signed by me, the notary, and has been sealed.
[J Grefeld]
(Notary) […]”
[underlining not in original]
There were three properties in Germany to which J and her siblings were entitled. Those properties were:
· F Strasse was sold in 1992 for $DM 730,000. J was entitled to a one quarter share amounting to $DM 182,500.
· M Strasse – sold in 1992. J’s share was one fifth amounting to $DM 230,000.
· L Strasse – sold in 1995. J’s share was $DM 1.22 M.
The husband had asserted in his affidavit material and in various calculations he provided that J’s entitlement from each transaction was at a lesser figure. For example, he asserted her entitlement from the sale of M Strasse was $DM 220,000 not $DM 230,000, for F Strasse he asserted $DM 680,000 not $DM 730,000.
In early 1996 the husband contracted to purchase the property at E Road and had the title registered in the wife’s name. It is beyond argument that the funds used to acquire this property at a cost of $550,000 came from accounts in J’s name.
There is agreement between the parties that the property at the present time is valued at $AUD 1.35 M.
As noted above the husband’s case in response to the claim by J is that he acted pursuant to the power of attorney document signed by his sister, he lent money to himself from his sister’s bank accounts and he did so intending to repay the money with interest and he in fact did so. He goes further to say that not only did he repay it in full, he repaid his sister more than was outstanding such that she now owes him money.
J says she has sought proper accounting from the husband over a period of many years to explain the transactions said to have been made on her behalf but that such accounting was only forthcoming in 2008 when she was handed a schedule of calculations (Exhibit 3). Notwithstanding the delivery of this document she says she still has not received a proper accounting.
The Husband also produced calculations which were attached to a letter from the Wife’s solicitor of 21 May 2010 (Exhibit 2).
Events Prior to Joinder of Second Respondent
A divorce was granted in September 2004. The wife filed her application for final orders for property settlement on 1 September 2005.
The husband filed his response to the application for final orders on 22 September 2005.
The response to the application for final orders was signed by the First Respondent on 29 August 2005. Why it was signed prior to the date of filing of the application for property settlement must remain a matter of conjecture other than to note that presumably an unsealed copy of the application for final orders had been forwarded to the First Respondent’s solicitors prior to the filing.
On 25 September 2006 an amended application for final orders was filed joining the Second Respondent and seeking orders that she transfer the A property to the Applicant. A response to the amended application for final orders by the Second Respondent was filed on 1 February 2007. In her response the Second Respondent sought the transfer of E Road to her. The amended response of the First Respondent was not filed until 25 June 2007.
It was the Applicant’s claim as at September 2006 the matrimonial property in real estate form, in Australia consisted of:
·the property of E Road in which she resided with her children;
·the C vacant land; and
·the A property for which she was seeking orders that it be transferred from J’s name to her name.
In the course of cross examination by Counsel for the Second Respondent the husband was referred to a financial statement he had sworn on 30 August 2005 (again prior to the filing of the application for final orders). The document was filed on 22 September 2005. At page 10 of that document (question 59 under the heading “About Disposal of Property”) the following entry appears:
“Part M About disposal of property
Specify property falling within Rule 13.04(1)(g) disposed of by you or on your behalf in the 12 months before separation and since your separation
Item
German property – not relevant
How disposed of
Value/amount received
[A] property
Transferred to sister, [J] by way of repayment of loan
Nil
At page 12 by way of additional information under the heading for Q59 the Husband noted:
·“Husband purchased real property at [A], in approximately 1984. Upon the wife’s return from Germany to live in Australia, the wife refused to return to live in the property at that address.
·Husband purchased vacant land at [C] in wife’s name, and subsequently purchased real property at [E Road], in 1996, also in the wife’s name and partly financed by monies loaned from husband’s family. Since 1996, Husband held [A] property on trust for husband’s sister, [J Grefeld]. Husband intended to sell vacant land at [C] to repay his family.
·Husband subsequently transferred [A] property to husband’s sister, [J Grefeld], in approximately 2002 by way of part repayment of loan.”
The Husband filed an affidavit on 4 September 2007. Annexure F to that affidavit is a letter written by the Husband’s then solicitors, Nicol Robinson Halletts of 26 September 2006 to the Wife’s solicitor. At pages 4 and 5 of that letter under the heading, “Property at [A]” his solicitors wrote:
“Our client instructs us that his sister [J Grefeld] was a one fifth co-owner of land and of a house in Germany which was sold in the years 1991 and 1992 resulting in our client’s sister receiving approximately $AUD 1.3M as her share of the proceeds of those sales.
. . .
Our client instructs us that when he returned to Australia to arrange for a house to be built on the land at [C] he located the house property at [E Road] which was available for purchase at a very reasonable price. We are instructed that our client telephoned your client in Germany and advised her of the house property he had located and indicated to her that in order to be able to purchase the house property the other parcel of land would have to be sold.
Our client instructs us that he used funds provided by his sister, [J], being part of the proceeds received by her from the sale of land and the house in Germany in 1991 and 1992 to purchase the property at [E Road] outright. We refer to the documents provided to your office under cover of our correspondence of 13 October 2005 evidencing monies transferred from [J Grefeld] to the conveyancing solicitors for the purchase of the property at [E Road].
Our client instructs us that the parties agreed that the land at [C] was to be sold to partly repay the monies provided by our client’s sister for the purchase of the [E Road] property however our client instructs us that your client was unhelpful with respect to making arrangements to sell the property and she was unwilling to provide to our client a power of attorney to sell the land.
As the land at [C] remained unsold the parties continued to owe our client’s sister, [J], the monies supplied by her for the purchase of the property at [E Road], together with interest for the financing of same and which resulted in our client’s sister being hindered in investing in other property in Queensland and making gains in the rapidly rising real estate market.
We are instructed that instead, significant gains in the value of real estate held in your client’s name have been made despite the fact that funds for the purchase of the whole of the [E Road] property, totalling approximately $550,000, were supplied by our client’s sister.
By way of part-payment to [J], our client arranged for the transfer of the property at [A] from our client’s name to his sister. Our client instructs us that the delay in transferring the [A] property to his sister was due to the direction by his sister at the time that she was unsure what she wished to do with the [A] property, resulting in it remaining in our client’s name for a significant period of time.
. . .
We are instructed that in the event your client chooses to join our client’s sister as a party to the proceedings, our client’s sister will obtain her own representation and will vigorously defend her ownership of the [A] property for the reasons detailed above, and this may ultimately be contrary to the interests of the parties.”
This last sentence was to prove a prescient observation made by the Husband’s then solicitors.
On 25 June 2007 the Husband filed an affidavit sworn on 19 June that year. At paragraphs 17 to 21 and 25 of that affidavit he deposed:
“17.In order to obtain the funds for the purchase of the [E Road] property quickly enough not to miss out on the opportunity to purchase the house, I arranged to transfer funds from a German bank account of my youngest sister, [J Grefeld], for whom I held a power of attorney, to Australia.
18.The [E Road] property was also placed in the sole name of the First Respondent following the purchase.
19.It was my intention that if the funds of my sister [J] were utilised to purchase the house property at [E Road] it would be necessary to sell the [C] land as quickly as possible to repay the monies to my sister’s account.
20.I advised the First Respondent of the need for us to sell the [C] land, because of the purchase of the [E Road] property. However the First Respondent was not agreeable to selling the [C] property at that time, and refused to agree to provide to me a power of attorney to enable me to sell the property on her behalf.
21.The money transferred from my sister [J’s] German account remains unpaid as at the current date and is also the subject of the current proceedings for property settlement.
…
25.Although the First Respondent was not directly involved in my business activities she was at all times aware of the type of business in which I was involved and we discussed in general terms the nature of the ventures which I was pursuing from time to time.”
[underlining not in original]
The contents of this affidavit were confirmed in a further affidavit of the Husband sworn 7 June 2008. At paragraph 16 of this affidavit he deposes:
“16.In relation to the property at [E Road] I repeat and rely upon the contents of my affidavit dated 25 June 2007.”
In a further financial statement filed on 21 July 2008 sworn on 7 June 2008 at question 29:
“My mother and sister [J] are claiming that I might have misused their trust in the many years since 1983 in the power of attorney I had from them. In this issue I have also counterclaims against them from the past, many years before the divorce case started. I didn’t inform them regularly in detail in the past, as there was a trustful relation (sic) and they were not really interested in those days.”
Under question 59 about disposal of property he notes:
“Part M About disposal of property
Specify property falling within Rule 13.04(1)(g) disposed of by you or on your behalf in the 12 months before separation and since your separation
Item
[A] property
How disposed of
Transferred to my sister, [J] by order of my mother, [Mrs Grefeld Snr], – I expected this to reduce my debt with [J], that it should be calculated against her money used by myself to purchase [E Road] property in the name of [the wife]. I didn’t want the German mortgage bank I owe much to have a reach against that property to secure the property from them.
Value/amount received
Nil
A number of observations can be made about the two financial statements, the affidavit of 25 June 2007 and the Husband’s solicitors’ letter Annexure F quoted above:
·The Husband knew that the A property was purchased in 1984 with his mother’s funds and he held it on trust for her to be disposed of at her direction.
·The Husband had signed transfer documents in February 2003 transferring the A property to J at his mother’s direction for nil consideration. It is curious that the Husband asserts that separation from the wife was not until March 2003, a date after the signing of the transfer documents. Whether there is any connection between the Husband’s assertion of the date of separation and the signing of the transfer documents I am unable to say.
·I am more than satisfied that the wife’s account of the date of separation is the correct one. For reasons soon to be given I am sceptical of much of the husband’s evidence primarily due to significant inconsistencies in his sworn testimony relating to important issues.
On three separate occasions, over a period of three years, on oath, the Husband has deposed:
· He still owed money to J for the purchase of the E Road property.
· The transfer of the A property was in part-repayment of that debt.
This claim of part-repayment by the Husband is a complete distortion of the reality of the situation in that he knew the A property was held on his mother’s behalf. The transfer of the A property to J could not be seen as a part-repayment of the debt to her as it was never the property of the Husband to dispose of.
After the Second Respondent filed her claim that E Road should be transferred to her, the First Respondent resiled from his evidence that monies were still due and owing to J and claimed the monies had been repaid by pointing to a number of bank statements dating back to the year 2000 where credit entries are shown in accounts in J’s name.
Having regard to the Husband’s evidence that the monies used for the acquisition of E Road were repaid to J as at August 2000, it is difficult to understand why he would be representing in the years 2005, 2006, 2007 and 2008 that the transfer of the A property in 2003 was in “part payment” of such debt.
Events Subsequent to Joinder of Second Respondent
There was a notable change in the approach taken by the First Respondent once the Applicant had joined the Second Respondent in these proceedings. Prior to that time he was at pains to reduce the asset pool. He was prepared to disclose the existence of the monies outstanding to J. He transferred the A property in accordance with the directions given by his mother.
Once J made a claim for the E Road property the husband’s position totally changed. For the first time he pleaded that the monies had been repaid but the only way he could do this was to point to isolated individual transactions which, absent a reliable overall accounting, would prove quite meaningless. It appears from the husband’s own evidence that from about April 2003 he was in some considerable financial difficulty. Evidence for this is to be found in Annexure B to the Wife’s affidavit sworn 3 July 2007 being a letter the husband wrote on 22 October 2003. It is unlikely that the husband would have overpaid his sister in the manner claimed in the year 2000 and it is even more unlikely that he would have allowed such a situation to continue without remedy after his financial position deteriorated so markedly. He continued to hold the right to reimburse himself from any funds in J’s name up until the time of revocation of the power of attorney by J in 2008. In view of his precarious financial situation the only plausible explanation why he did not do so was that there was no such money outstanding.
Onus of Proof
Counsel for the Second Respondent referred to the decision of the Court of Appeal in the United Kingdom in the matter of Seldon v Davidson 1968 1W.L.R. 1083. The Court of Appeal Willmer and Edmund Davies L. JJ. was asked to deal with a claim for monies due and owing where the defence pleaded was the monies were a gift. The Court held the payment of money prima facie imported an obligation to repay it and that the trial Judge was correct in placing the onus on the Defendant to prove the facts which he alleged showed that it was not repayable.
In the course of his reasons Willmer L.J. observed (at 1088):
“No such considerations arise in the present case; indeed they are clearly ruled out because we have from the Defendant in this case a clear admission of the payment of the money, and no suggestion that it was paid in settlement of an existing debt, or that it was given in return for cash, or anything of that sort. In the absence of any such circumstances money paid by the Plaintiff in circumstances such as these is prima facie repayable on demand. If the Defendant seeks to evade repayment of the money which was paid to him, it seems to me that the Judge was right in placing the onus upon him to prove the facts which he alleges show that the money was not repayable.”
This case is but a particular example of the well known axiom that in litigation the normal rule is that he or she who asserts must prove.
It is not sufficient for the First Respondent to say the monies have been repaid and point to certain bank entries, in circumstances where the First Respondent engaged in multiple transactions on behalf of the Second Respondent. If this calls for an accounting to be done of all such transactions in order to verify what monies have been paid and what, if any, are still owing, then it is an obligation that rests fairly and squarely on the First Respondent.
Plea Of Accord and Satisfaction
Counsel for the Second Respondent argued there was no scope for the wife, or by the husband on her behalf, to rely on a plea of “accord and satisfaction”.
“Accord and satisfaction; compromise and settlement”, is defined in the Dictionary of Modern Legal Use, Second Edition, Oxford University Press 1995 in the following terms:
“accord and satisfaction; compromise and settlement. The former appears usually in contractual contexts. Though the two phrases may overlap to some extent, compromise and settlement is used in the context of a dispute more probably giving rise to litigation. It applies to all disputes, not just to those arising from contracts. The two substantive words in compromise and settlement are broader than those in accord and satisfaction, but compromise is roughly analogous to accord, and settlement to satisfaction.
An accord is an agreement to substitute for an existing debt or obligation some alternative form of discharging that debt; a satisfaction is the actual discharge of the debt by the substituted means. Stated otherwise, an accord is the agreement to perform (in an alternative way), and the satisfaction is the actual performance. Any claim (if disputed, unliquidated, or undisputed and liquidated) may be discharged by an accord and satisfaction.
But only a disputed or unliquidated claim may be the basis for a compromise and settlement. Though the two words in this phrase have been used with a variety of meanings and even synonymously, at base compromise means “an agreement between two or more persons to settle matters in dispute between them”; settlement means “the performance of promises made in a compromise agreement.””
I accept the force of the submission in these terms by Counsel for the Second Respondent.
It is difficult to conceive of a situation where the First Respondent in his personal capacity could negotiate with himself in his capacity as the Attorney for the donor of a power to somehow vary the terms of the Second Respondent’s claim. There is no evidence of any negotiations between the First Respondent and the Second Respondent other than the First Respondent’s answer to the claim by his assertion that the monies have been paid in full.
As earlier noted, notwithstanding the First Respondent’s Amended Defence (paragraph 4) I am prepared to find the Second Respondent advanced all of the monies for the acquisition of the E Road property. The evidence to support such a finding is overwhelming.
As also noted above the onus of proving the monies have been repaid is on the First Respondent. I find he has failed to do so.
In the present case the Second Respondent was not aware her monies had been used to acquire the E Road property for a period of ten years. When she did find out she promptly instituted proceedings seeking a declaration of resulting trust or in the alternative a declaration of constructive trust.
There is no possible scope for a plea of accord and satisfaction as this of necessity involves a plea that there has been some negotiations between the parties and they have agreed to compromise the claim.
In the present case there is simply a bald assertion by the First Respondent he has repaid the monies. This assertion has to be measured against his earlier sworn testimony up until the time the power of attorney was revoked, that all of the monies were still due and owing. The assertion has to be measured against the failure on the part of the First Respondent over the course of three and half years of litigation to provide proper accounting to the Second Respondent or the Court balancing the various transactions which have taken place using the Second Respondent’s funds. If it requires a full audit to reveal what monies, if any, are said to be owing, then the onus is on the First Respondent to see that this is done. The cost of such an accounting exercise would I expect be but a small proportion of the funds expended on legal fees in the present litigation.
Both Counsel conceded it was not possible for the Court on the evidence before it to make a finding whether the First Respondent still owes the Second Respondent funds or whether the reverse is the case. I accept that this is so.
In the light of these observations I turn to a consideration of Exhibits 2 and 3. These are calculations the First Respondent has produced albeit two years apart with Exhibit 3 being the calculations first in time.
It is quite unnecessary for me to examine this evidence in light of the acceptance by both Counsel that the Court is unable to make a finding on the available evidence as to what monies, if any, are owing, as between the First and Second Respondents. However, I propose to make some comments and observations primarily insofar as it reflects on the credibility of the First Respondent.
Exhibit 2
On 21 May 2010 Mr Sheehy as the legal representative for the Wife wrote to the Second Respondent’s legal representative in the following terms:
“I have received from the Husband some calculations (a recalculation) of the amount said to be owing by your client to the Husband (and therefore to the marriage of [the husband and the wife]).
He has also sent an official Bank Interest Rate Sheet, the basis of the interest charges being made in the calculation.
As I understand it, there are (sic) number of interest rates in the sheet, however the interest rate being applied is that in the second column under the reference “BGB 288” being the 4% rate which is the personal loan rate rather than a commercial rate. My client intends amending the order sought at the trial to seek the amount currently set out on the sheets, namely that your client owes to the First Respondent and/or the Applicant an amount of $1,037,463.00.”
The calculations attached to this letter cover the period from early 1996 with the settlement of the purchase of E Road until 31 May 2010, the day prior to the commencement of the hearing.
The difficulty in relying on the First Respondent’s calculations is that they commence with a zero balance as at early 1996 though he had the power to utilise the Second Respondent’s funds since 1983 and in the period 1983 to 1996 there had been the sale of the three German properties.
Nowhere in the multitude of bank documents or other documents disclosed can I find a clear statement of monies entering and leaving an account in the Second Respondent’s name, even if it be a notional account commonly prepared by a bookkeeper/accountant.
In Exhibit 2 the First Respondent claims he is owed $1.037 M as at the present time. Nowhere in these calculations do I find an outgoing by J or the husband to fund the acquisition of the Berlin property notwithstanding the fact this property was said to be purchased on 4 August 1999 (refer Husband’s affidavit sworn 31 May 2009 paragraph 146).
At paragraphs 146 to 156 under the heading “[J’s] [R Strasse], Berlin property and payments made to [J]” the Husband gives his account of this transaction.
In essence he says the property was acquired for $DM 2.4 M. He contributed $DM 130,000 by way of interest owing on the E Road transaction. In paragraph 153 he says that on 10 August 2000 it came to his attention that
$DM 1.2 M of his money had been taken without his knowledge by the bank to pay the mortgage on the Berlin property. Paragraphs 155 and 156 purport to evidence a withdrawal of $DM 1.2 M from his account and a deposit of a similar amount to J’s account. This evidence would appear to indicate that this amount was paid from there as payments due under the mortgage for the Berlin property. The Husband’s oral evidence was that he had received $DM 5M in compensation from the City of Plauen and that the $DM 1.2M had been deposited to J’s account from these funds in repayment of the funds used in February 1996.
There is no description identifying the basis for any of the payments to J. The only withdrawals identified are for the acquisition of E Road in 1996 and the charging of commission. The Husband asserted the charging of commission was for the acquisition of the Berlin property which he had located and was responsible for the negotiations.
Exhibit 3
Exhibit 3 is a document delivered by R on behalf of her brother the husband to J in June 2008 (just over two years ago). These calculations cover the period 4 August 1999 to the date they were delivered namely June 2008. This document is in German and no translation was provided.
These calculations reveal a debit of $DM 2.4M to the Second Respondent’s account followed by a transfer of funds seemingly from an account in Luxemborg. It may be that the transactions were in fact in the reverse order.
Unfortunately the Court has not been provided with details of the interest earned on the funds in Luxemborg nor how the monies were repatriated to the Second Respondent’s account or some other account for her benefit.
When examining the two sets of calculations I am puzzled why the balance as at the opening dates should be zero.
Exhibit 2 is headed “[J’s] contribution to the purchase of [E Road] Property – Husbands (sic) contribution to the purchase of [J’s] Berlin Property until August 2000 (without construction and renovation)”. It is difficult to understand how on the one hand the payment of the $DM 1.2M could be a reimbursement by the Husband for the funds used for the acquisition of E Road whilst at the same time being monies advanced by the Husband under a bank guarantee.
Fundamentally this case is about credibility and who bears the onus of proof.
When I reflect on the First Respondent’s evidence I see numerous inconsistencies, the most telling of which are the sworn assertions that the monies were still owing up until the time J made a claim for the E Road property and his complete about face thereafter. The Husband gave me the impression of someone who has trawled through bank statements in his possession and has sought to attribute certain credit entries as repayment of the loan or payment of interest when there has been no designation of the credit entry to that effect. The Husband’s claim that he transferred the A property in part extinguishment of the debt again reflects poorly on his credibility. His failure to provide a proper accounting and give full disclosure of relevant documents again adversely impacts on the reliability this Court can place on his testimony generally.
I found no reason to doubt the testimony of the Second Respondent. I note that in various ways the credibility of the First Respondent is challenged by his mother, his former wife, his sister, his son K and his daughter H.
I do not propose to traverse the evidence of each of these witnesses to the extent it reveals conflict with the First Respondent’s evidence.
A perusal of the evidence overall reveals the First Respondent is an individual who used monies he received pursuant to the power of attorney document as if the money was his own and with no record of proper accounting to the donor. There has been no proper disclosure and there has been no proper accounting.
Submissions By Counsel For The Wife
Counsel for the Wife submitted the Husband was entitled to use J’s funds as he did, pursuant to the terms of the power of attorney document. He argued there was no pleading in the Statement of Claim of a breach of a fiduciary relationship and accordingly no relief is available at law or in equity based on a finding of such a breach.
He submitted the terms of the power of attorney document permitted a loan to the husband and the mere fact money has been lent does not create property rights in the lender nor a presumption of some form of trust. He further submitted as no property rights were created by the loan it was irrelevant whether the monies have been repaid or not. He submitted it was the husband’s intention at the time in February 1996 which determined the character of the transaction and J was not privy to his intentions at any stage. Finally it was submitted to find for the Second Respondent would involve a rejection of the First Respondent’s evidence that it was a transaction by way of a loan.
I cannot find the characteristics of a loan in the present case. In a normal loan situation one would expect:
·The real lender to know about the borrowing.
·Some definition of the period of the loan. Is it to be for five, ten or one hundred years, or when the borrower chooses to repay it?
·Some definition of the interest payable with evidence supporting such agreement by regular deposits to bank accounts.
·Some form of documentation to validate or authenticate a loan for such a significant sum of money.
I accept many inter-family loans are interest free but not in the situation where the donee of the power is to invest the funds on behalf of his sibling.
In view of the findings I have made (paragraph 72) it is unnecessary for me to consider what J’s legal position would be in the event a finding had been made that the monies had been repaid, albeit after a considerable number of years.
I expect the Wife would never have joined J if she had appreciated the consequences would be the reverse of what she was seeking – not only would she not obtain the A property, she would lose E Road.
Findings
I am prepared to make the following positive findings:
·The husband was requested by J on numerous occasions to provide proper accounting of all transactions carried out by him while exercising control over her funds pursuant to the power of attorney document.
·In 2008 the husband promised he would provide an accounting of J’s financial affairs.
·The husband has failed to provide such an accounting.
·The husband has failed to make proper disclosure of relevant documents. Constantly in the course of cross examination he was proposing to fax what he claimed were relevant documents which had not been previously produced.
·There is no evidence the husband has repaid J for monies used for the purchase of E Road.
·There is no document evidencing any loan as claimed by the husband.
·There is no evidence of regular interest payments to a designated account.
·There is no evidence of the terms of any such loan as alleged.
·There is no evidence of a description in a bank document indicating repayment of outstanding monies.
·The husband failed to inform J of the borrowing for a period of about ten years.
Effect In Queensland Of the Power of Attorney Document
At the time the E Road property was acquired J was residing in Australia (refer paragraph 16 of J’s affidavit of evidence in chief). She remained in Australia from 1985 until her return to Germany in February 2007.
The husband relied on the power of attorney document to transfer J’s funds to the trust account of Queensland solicitors in early 1996.
The power of attorney document creates a relationship between donor and donee. The effect of the power of attorney document is not confined to the boundaries of the country in which the document is executed. The effect of executing a power of attorney document is to create a fiduciary relationship between the parties.
The effect of the power of attorney document is that the donee of the power is obliged to act in any given jurisdiction in accordance with the legal requirements applicable to such a relationship as prescribed by that jurisdiction.
In the text Equity and Trusts in Australia (GE Dal Pont and DRC Chalmers, Fourth Edition) at page 91 the learned authors note: [footnotes not included]
“Proscriptive nature of fiduciary duties
[4.15] In an attempt to distinguish fiduciary from other duties, the High Court in Breen v Williams ((1996) 186 CLR 71) emphasised that fiduciary duties are proscriptive (that is, prohibitive) as opposed to prescriptive in nature. Its concern was that, were the law to impose “fiduciary” duties of a prescriptive nature – such as a positive duty to act in the interests of the person to whom the duty is owed – fiduciary law would encroach upon the legitimate domain of contract and tort. So in Australian law fiduciary duties prohibit a person owing those duties (the “fiduciary”) from acting inconsistently with the interests of the person to whom the duties are owed (the “principal” or “beneficiary”). Though a similar notion may be reflected in some other duties recognised by both law and equity, such as a duty not to act unconscionably, a duty to deal fairly, or a duty to act in good faith, these fall short of the fiduciary standard of loyalty.
The fiduciary standard is encapsulated in two principal duties: the “no conflict” and the “no profit” duties. The former prohibits a fiduciary, except with the informed consent of the principal, from placing herself or himself in a position involving a real and sensible possibility of a conflict between the duty as a fiduciary and her or his own interest (a “duty-interest conflict”). The “no-profit” duty prohibits a fiduciary from making a profit out of a fiduciary position except with the informed consent of the principal. On most occasions in which this latter rule is breached, there will also be a concurrent breach of the no-conflict rule. A person who contravenes either duty cannot, it is reasoned, be characterised as exhibiting loyalty.” [underlining not in original]
Case Law
In Consul Development Pty Ltd v DPC Estates Pty Limited (1975) 132 CLR 373 at 377 Gibbs J (as he then was) succinctly summarised the obligations of fiduciaries in the following terms:
“…
However the rule that a person in a fiduciary position is not entitled to make profit without the knowledge and assent of the person to whom the fiduciary duty is owed is not limited to cases where the profit arises from the use of the fiduciary position or of the opportunity or knowledge gained from it. The basis of the rule is that a person in a fiduciary position may not place himself in a situation where his duty and his interest conflict.
… ”
At 394 he added:
“…
Where the rule applies, the liability of the person in a fiduciary position does not depend on the fact that the person to whom the duty is owed has suffered injury or loss. In Birtchnell v. Equity Trustees, Executors & Agency Co. Ltd ((1929) 42 CLR 384, at pp 408-409), Dixon J. said:
‘Moreover, in considering such a matter it is important to remember that, in the language of James L.J., ‘the general principle that … no agent in the course of his agency, in the matter of his agency, can be allowed to make any profit without the knowledge and consent of his principal … is an inflexible rule, and must be applied inexorably by the Court, which is not entitled … to receive evidence, or suggestion, or argument as whether the principal did or did not suffer any injury in fact by reason of the dealing of the agent; for the safety of mankind requires that no agent shall be able to put his principal to the danger of such an inquiry as that’ (Parker v. McKenna (1874) CLR 10 Ch App 96, at pp 124-125).’” [underlining not in original]
…”
The husband relies on the terms of the power of attorney document which provided:
“…
The powers of attorney are authorised to negotiate transactions in my name with themselves in their own name
…”
Whilst I am not required to consider what interpretation would be placed on this term in the document under German law, under Queensland law in the event the husband wished to borrow monies from the donor it was a fundamental principle that he was required to inform J what he had done.
The fact that he failed to do so is a breach of the fiduciary relationship and to my mind requires no express pleading.
Measure of Remedy
In Australian Postal Corporation v Lutak & Ors 1991 21 NSWLR 584 the Court was faced with the following factual situation:
“A house property was purchased by using $20,000, the proceeds of sale of postage stamps stolen from the Australian Postal Corporation and $70,000 which was borrowed on security of an unregistered bank mortgage, was sold for $110,000. In proceedings to determine the proper distributions of the proceeds of sale held:
1.the purchasers of the house property were constructive trustees of the money derived from the stolen stamps so that the Australian Postal Corporation was entitled to a charge on the house property for the $20,000 which it could trace into it;
2.the monies borrowed from the bank and contributed towards acquisition by the constructive trustees were repayable to them and hence to the bank out of the proceeds of sale before the amount of divisible profits was ascertained;
3.the profits of the unauthorised investment were divisible between the Australian Postal Corporation and the purchasers as constructive trustees in the same proportion as their contributions to acquisition;
4.because the contribution towards acquisition of the property by the constructive trustees was raised by mortgaging the property acquired, the constructive trustees had no right to a share in the profits based on their contribution and the profit of $20,000 should go to the Australian Postal Corporation.”
It is not suggested the monies in the present case were stolen but the case confirms the principle that the profits of the investment were divisible between the parties in the same proportions as their contribution to the property’s acquisition.
This is the same principle as was enunciated in 1987 by the High Court in Baumgartner v Baumgartner 164 CLR 137. The head note to that case is in the following terms:
“The parties to a defacto relationship pool their incomes for living expenses and fixed commitments. They lived at first in a unit owned by the man, which they sold when they acquired a house in his name. The house was purchased with the aid of a mortgage in the name of the man who also contributed the nett proceeds of sale of the unit. The parties’ aggregate earnings were pooled in proportions roughly at 55 per cent by the man and 45 per cent by the woman. They later separated and the man asserted that the land was his sole property.
Held: that the man held the house on trust for the parties in the proportions to which they have contributed their earnings to its acquisition, subject to a charge in the man’s favour for the nett proceeds of the unit.
Per Curiam. The man’s assertion after the relationship had failed that the property that had been financed in part through the pooled funds was his to the exclusion of any interest of the woman was unconscionable conduct which attracted the intervention of equity and the imposition of a constructive trust.”
The well known decisions of Calverley v Green 1984 154 CLR 242 and Muschinski v Dodds 1984 – 1985 160 CLR 583 involve parties in defacto relationships engaging in a joint endeavour. They were decisions given prior to the various state legislatures introducing laws to protect the rights of parties in defacto relationships. However the principles of the circumstances in which a resulting or constructive trust may be found to exist are still applicable.
As noted earlier it was pleaded on behalf of the Husband that a breach of fiduciary duty had not been pleaded in the Statement of Claim.
The Statement of Claim has to be read in conjunction with the affidavit material which had been filed. The Statement of Claim adverts to the fact that the First Respondent provided the funds for the acquisition of the property relying on the power of attorney document. The only basis upon which the First Respondent was able to fund the purchase of E Road using the Second Respondent’s monies was relying on the powers given in the power of attorney document. The First Respondent was by virtue of the power of attorney document in a fiduciary relationship with the Second Respondent.
In paragraph 3 of the Amended Defence the First Respondent puts in issue that he was acting at all times in a way that he was entitled so to do. The Court is required to adjudicate on this claim by the First Respondent and is entitled to have regard to the whole of the evidence and make findings that:
· He failed to inform the Second Respondent of the borrowing for a period of ten years.
· There was no documentation to support or evidence the loan.
· He failed to properly account to the Second Respondent for monies he had received and expended on her behalf.
· There was no acceptable evidence that any interest payments had been made on the loan.
I accept the submission by Counsel for the Wife the mere fact borrowed funds are used to acquire a property does not normally create an interest in the property in favour of the lender. The lender would normally take a mortgage over the property or some other form of charge over the borrower’s assets.
However, this is not a case of an arm’s length borrowing. As noted previously, the use of the Second Respondent’s funds bear none of the hallmarks of a loan in the traditional sense. In circumstances where there was a fiduciary relationship between the parties, I find the First Respondent’s conduct was unconscionable in acting as he has done.
The orders sought by the parties adopt an “all or nothing” approach. The Second Respondent seeks a declaration that the E Road property is held on trust for her with a consequent order that the Applicant Wife be required to transfer title in the property to her. The First Respondent pleads that he was authorised by the terms of the power of attorney document to do what he has done and the loan does not create interests in property in the lender. The Wife’s plea is in similar terms to that of the First Respondent namely, the transaction was a legitimate, authorised borrowing and as such did not create property interests in the lender.
As noted earlier paragraph (6) of the Amended Defence is not pressed.
This is not a situation such as was considered by the High Court in Giumelli v Giumelli (1999) 196 CLR 101 where in lieu of ordering specific performance, requiring a subdivision, the Court ordered payment of an amount by way of financial compensation.
On the authorities to which I have been referred by Counsel for the Second Respondent where the subject property has been acquired entirely with funds of his client, the only appropriate remedy is a declaration that the property is held on trust for her.
Nature Of The Trust – Resulting Or Constructive
At pages 660-661 in Chapter 26 of Equity and Trusts in Australia the following passage appears:
“…
Lord Browne-Wilkinson, who identified the following as the two main circumstances in which a resulting trust will arise, has questioned a distinction of this kind:
(A) Where A makes a voluntary payment to B or pays (wholly or in part) for the purchase of property which is vested either in B alone or in the joint names of A and B, there is a presumption that A did not intend to make a gift to B: the money or property is held on trust for A (if he is the sole provider of the money) or in the case of a joint purchase by A and B in shares proportionate to their contributions. It is important to stress that this is only a presumption, which presumption is easily rebutted either by the counter presumption of advancement or by direct evidence of A’s intention to make an outright transfer … (B) where A transfers property to B on express trusts, but the trusts declared do not exhaust the whole benefit interest … Both types of resulting trust are traditionally regarded as examples of trusts giving effect to the common intention of the parties. A resulting trust is not imposed by law against the intentions of the trustee (as is a constructive trust) but gives effect to his presumed intention.”
At Chapter 38 dealing with constructive trusts the learned authors observe:
“[38.05] The constructive trust is a means adopted by courts of equity to make persons accountable in certain circumstances where to do so is consistent with equitable principle. In line with equitable principle generally, what drives equitable intervention here is a departure from conscionable dealing, a point captured in the remark that “[t]he basis of a constructive trust is that there is some factor in the circumstances which ought to act on the conscience of the person holding the funds or property the subject of the action”. That the notion of good conscience “is an infinitely variable concept upon which reasonable men and women, and therefore, reasonable judges, may have widely divergent opinions” does not, it is said, mean that intervention via a cosntructive trust is grounded simply on judicial whim of what is fair in any given case. Courts have recognised circumstances that raise the prospect of constructive trusteeship and, outside of those circumstances, have searched for an equitable principle that aims to circumscribe unbridled judicial discretion without unduly impinging flexibility.
Institutional constructive trusts
[38.10] A distinction is often made between “institutional” and “remedial” constructive trusts. The so-called “institutional” constructive trust, it has been said, “arises by operation of law as from the date of the circumstances which give rise to it: the function of the court is merely to declare that such trust has arisen in the past”. Those circumstances are often premised on a breach of a pre-existing trust or fiduciary duty; the constructive trust is used to make a person accountable for breach of fiduciary duty see [38.25]-[38.40].
…
Constructive trusts distinguished from other trusts
[38.20] The main distinction between constructive trusts, whether institutional or remedial, and express and resulting trusts is that the constructive trust is imposed by the court on grounds ostensibly independent of the parties’ actual, inferred or presumed intention (except regarding the anomalous line of authority recognising a constructive trust pursuant to the common intention of contributors to property: (see [38.205]-[38.220]).
…
Accountability as principal for breach of fiduciary duty
Accounting for gains in breach of fiduciary duty
[38.25] A fiduciary who gains by reason of her or his position may be liable to account for that gain through the imposition of constructive trusteeship regarding the moneys or property the subject of the gain. As explained by Deane J in Chan v Zacharia ((1984) 154 CLR 178 at 199):
“[A] person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it. Any such benefit or gain is held by the fiduciary as constructive trustee.”
… ”
It would be readily apparent from the reasons already given I propose to find for the Second Respondent and make a declaration as sought in the Statement of Claim.
The matter is somewhat academic whether the relief relied on stems from the finding of a resulting trust or a constructive trust.
On balance, I propose to make a finding that the Applicant holds the E Road property on a constructive trust for the Second Respondent.
I would be prepared if necessary to make a finding in the alternative declaring the existence of a resulting trust but in view of the existence of the constructive trust I do not find it necessary to do so.
Conclusion And Orders
The issue of jurisdiction was not raised by any of the parties. The primary issue for determination was whether the E Road property was or was not matrimonial property. The facts in the matter do not differ greatly from those set out in “In the marriage of Warby” (2001) 28 FAM. L.R. 443. That decision was later described as a “classic example” of the use of the accrued jurisdiction (refer “In the marriage of Bishop” (2003) 30 FAM. L.R. 108).
I accordingly exercise my discretion to adopt jurisdiction in this matter.
In seeking the relief she does, it is irrelevant to the Second Respondent whether the property is held in the husband’s name or the wife’s name. The real issue is that it is property acquired with her money and was acquired in circumstances involving breaches of a fiduciary relationship being the failure to inform her and the failure to account.
I am far from satisfied that the First Respondent has given an accurate account of his true financial position in Germany.
I will hear further submissions on this aspect before issuing final orders but I am not minded to make orders vesting the assets and liabilities in Germany in the First Respondent assuming I have the jurisdiction to do so.
I appreciate that as between themselves the Applicant and the First Respondent are agreeable to the orders being made. Before doing so, I have to be satisfied that such orders are just and equitable and I am yet to be convinced that that is the case.
I certify that the preceding 133 (one hundred and thirty-three) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Barry.
Associate:
Date: 22 June 2010
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Constructive Trust
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Remedies
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Fiduciary Duty
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