Hien & Waldron (No 3)
[2023] FedCFamC2F 1293
•10 October 2023
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Hien & Waldron (No 3) [2023] FedCFamC2F 1293
File number(s): ADC 1763 of 2021 Judgment of: JUDGE MCGINN Date of judgment: 10 October 2023 Catchwords: FAMILY LAW – Interim Property Application – Third respondent company – Applicant’s claim of “equitable interest” in property held by Third Respondent company – resulting trust – constructive trust – security for costs – summary dismissal application dismissed – alternative disclosure application – sale of property order made Legislation: Family Law Act 1975 (Cth)
Federal Circuit and Family Court of Australia Act 2021 (Cth)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)
Cases cited: Banham & Banham [2021] FamCAFC 132
Calverley v Green [1984] 155 CLR 242
D & D [2006] FamCA 339; (2006) FLC 93-260
Ebner & Pappas [2014] FamCAFC 229; (2014) FLC 93-619
Gong & Zao [2021] FamCAFC 110
Karlsson & Karlsson [2020] FamCAFC 207
Lysaght Building Solutions Pty Ltd (trading as Highline Commercial Construction) v Blanalko Pty Ltd [2013] VSCA 158
Ritter & Ritter & Anor [2020] FamCAFC 86
Tobias John Tucker v Victoria [2020] VSC 121
Division: Division 2 Family Law Number of paragraphs: 179 Date of hearing: 28 August 2023 Place: Adelaide Solicitor for the Applicant: Doconade Adelaide Lawyers Counsel for the First Respondent: Ms Read Solicitor for the First Respondent: Starkie Family Law Counsel for the Second and Third Respondents: Ms Miller Solicitor for the Second and Third Respondents: Stanley & Co Lawyers Solicitor for the Independent Children's Lawyer: Denise M Rieniets & Associates Pty Ltd ORDERS
ADC 1763 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MS HIEN
Applicant
AND: MR WALDRON
First Respondent
MS WALDRON AND MR B WALDRON
Second and Third Respondents
AND: INDEPENDENT CHILDREN'S LAWYER
ORDER MADE BY:
JUDGE MCGINN
DATE OF ORDER:
10 OCTOBER 2023
IT IS ORDERED:
1.That pursuant to s 192(4) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) that the de facto wife’s claim of seeking a declaration in respect of C Street, Suburb D be limited to a claim on the basis of the existence of a constructive trust.
2.That paragraphs 2 and 3 of the third respondent’s Application in a Proceeding dated 29 May 2023 and sealed 14 June 2023 do stand dismissed.
3.That paragraph 5 of the said Application be adjourned to 9:30am on 30 November 2023 (20 minutes allowed) for directions, including trial directions and receive submissions from the parties in respect of the order referred to in paragraph 171 of the judgment delivered this day.
4.That order 2 of the orders of 18 November 2022 be discharged and the third respondent be at liberty to offer the property at C Street, Suburb D, for public sale.
5.That the third respondent do all things and execute all documents necessary to cause the proceeds of sale of Suburb D to be applied:
(a)Firstly, in payment of the outstanding mortgage, sales costs and any other expenses attached to Suburb D;
(b)Secondly, in the sum of $135,000 to the third respondent’s solicitor’s trust account;
(c)Thirdly, the balance then remaining be held in the third respondent’s solicitor’s trust account to abide further order of this Court.
6.That the question of compensation and/or damages payable pursuant to the applicant de facto wife’s undertaking given to this Court on 18 November 2022 be reserved to trial.
7.That the third respondent’s costs in respect of its Application in a Proceeding sealed 14 June 2023 and the de facto wife’s costs of her Response to an Application in a Proceeding sealed 16 July 2023 be reserved to trial.
8.That the said Application in a Proceeding and the said Response to an Application in a Proceeding do otherwise stand dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE McGINN:
Before the Court are competing applications arising out of the applicant de facto wife’s claims in respect of a property which is registered in the name of the third respondent company located at Suburb D, South Australia .
The applicant de facto wife claims that the third respondent holds its legal interest in that property on trust for the benefit of the de facto wife and the de facto husband as a consequence of a resulting trust arising out of the circumstances of the purchase of that property or a constructive trust in favour of the applicant de facto wife and the respondent de facto husband.
Suburb D was paid for in mid-2018 in the sum of $710,000. The total sum that was required to complete purchase including adjustments for rates and taxes, conveyancing and stamp duty was $749,353.
The third respondent company was the purchaser of Suburb D under the contract for the sale and purchase of the property.
To purchase Suburb D the third respondent company obtained approval for a loan in the amount of $568,000 which as at mid-2018 required mortgage instalment payments on the 20th of each month of some $3,308. That loan was secured by way of mortgage over Suburb D.
To settle upon the sale of Suburb D that loan was drawn to the extent of $558,413 to meet part of the purchase price and associated costs.
According to the settlement statement, the balance required to settle beyond the funds provided under the mortgage loan was $190,781.
Five thousand dollars of that balance amount had been paid by way of deposit. A further part of the balance to settle was also met by a credit for mortgage discharge fees in the sum of $160.
Upon settlement of the purchase of Suburb D, the third respondent company became the registered proprietor.
The balance of the purchase price appears to be something in the vicinity of $185,621.
There is contention between the de facto wife and the third respondent company as to the source of that balance.
The applicant de facto wife and the respondent de facto husband and their two children resided in Suburb D with their two children until about June 2020 at which time the de facto parties separated.
Proceedings with respect to the question of property settlement were initiated by the de facto wife by way of an Amended Initiating Application filed 9 June 2022. That application was cast in general terms seeking “a just and equitable division of the assets of the parties inclusive of superannuation pursuant to section 79 [sic] of the Family Law Act 1975 (Cth)” (“the Act”). By way of interlocutory orders an order was sought for the valuation of, amongst other things, Suburb D then described as being a “property situated at C Street, Suburb D (“the former matrimonial home”)” despite the parties not being married.
The de facto wife has been legally represented throughout the proceedings and has sworn and executed documents on her own behalf without the assistance of a translator or interpreter.
The de facto wife’s present legal representatives have been representing her since at least 2 December 2022.
Subsequent to the filing of the Amended Initiating Application in June 2022, the de facto wife filed an Application in a Proceeding on 21 July 2022 seeking orders that the third respondent be joined to the proceedings and an order that Suburb D not be sold without the consent of the parties to the proceedings or an order of the Court.
A specific claim against Suburb D was made by the applicant de facto wife in her Amended Initiating Application filed 23 November 2022. The relevant claim is found at paragraph one (1) under the heading “Property/Financial Matters” and states:
That there be a declaration by the Court that the Applicant and First Respondent have a beneficial interest amounting to 100% of the equity in the property situated at [Suburb D] by way of constructive or resulting trust or in the alternative that there be a declaration by the Court that [Suburb D] proprietary limited hold the property situated at [Suburb D] the benefit of the Applicant and First Respondent by way of constructive or resulting trust.
On 18 November 2022 the Court upon noting the wife’s undertaking as to damages, ordered that the third respondent be joined to the proceedings as a party to the proceedings and made orders until further or other order as follows:
2. That the company [Suburb D] Pty Ltd be restrained and an injunction be granted restraining that company from selling, encumbering or disposing of its interest in the property known as and situate at [Suburb D] in the State of South Australia being the whole of the land comprised and described in Certificate of Title […] save and except:
(a)for the purposes of refinancing any existing liability secured by way of mortgage over the said property upon such terms that do not increase the liability as at the date of this order that is so secured; or
(b)without the written consent of the applicant de facto wife first had and obtained; or
(c) without order of this Honourable Court first had and obtained.
In granting that order the Court said at paragraph 84 of its judgment of 18 November 2022 that the Court found the wife’s then claim in respect of the third respondent holding Suburb D on a resulting trust and, as an alternative case, on a constructive trust basis to be arguable. In making that determination the Court was then satisfied that the wife had established that there was a serious question to be tried although the manner in which the de facto wife brought evidence forward and presented a case had not been done simply, efficiently or with clarity.
Various orders and directions have been made since the making of those orders for the applicant de facto wife to particularise her claims in respect of Suburb D.
Since the making of that order, the applicant de facto wife has now filed an Amended Initiating Application on 23 November 2022 and provided particulars of her claims in respect of Suburb D. The filing of the Amended Initiating application and additional material by way of particulars has put the wife’s case in a different and more particular light.
A financial conciliation conference was ordered to take place on 2 February 2023 but did not proceed given the de facto husband’s absence.
Particulars of the de facto wife’s claim in respect of Suburb D were filed on 14 April 2023 in a document entitled “Applicant’s Cause of Action”.
THE APPLICANT DE FACTO WIFE’S CLAIM AS TO THE EXISTENCE OF A RESULTING TRUST.
In respect of the claim by way of a resulting trust it was said that if it came to be established on the evidence that the applicant de facto wife and the de facto husband had “procured, advanced, borrowed and provided the funds necessary to complete the settlement of the property” then a resulting trust should be found to exist in their favour.[1]
[1] Applicants Cause of Action sealed 14 April 2023 at [25].
The amounts that were said to be “procured, advanced, borrowed and provided”[2] dated from 19 March 2018 to 22 June 2018 totalling some $183,358 to pay for what were referred to as “closing costs” understood to mean those moneys other than that which were provided by way of mortgage loan by the third respondents to complete settlement upon purchase of Suburb D.
[2] Applicants Cause of Action sealed 14 April 2023 at [25].
The amounts were said to be variously paid to accounts in the name of the second respondents in these proceedings (being the de facto husband’s parents) and to the third respondent.
The amount paid to the third respondent is alleged by de facto wife’s written submission to be $183,250. This appears to be an arithmetical error. The correct total of payments claimed in that document to have been made is $197,358.
All payments are claimed by the de facto wife to have come from “matrimonial savings”.
All payments are said to have been applied towards the purchase of Suburb D.
Apart from $14,000 constituted by three payments which were made to the third respondent, all other payments are said to have been paid to the second respondents not the third respondent.
THE APPLICANT DE FACTO WIFE’S CLAIM FOR A CONSTRUCTIVE TRUST
In respect of the claim by way of a constructive trust the applicant de facto wife says:
(a)the applicant de facto wife and de facto husband were “involved” in the selection of Suburb D;
(b)that in late 2018, following the purchase of Suburb D in mid-2018, the applicant de facto wife deposited $3,400 into the third respondent’s account for the payment of a mortgage instalment;
(c)that there was an “indirect financial contribution” following on from a subdivision of a property at F Street, Suburb G in 2016 and the sale of part of the subdivided property in late 2017 (known as H Street, Suburb G) to the second (or third) respondent(s) and that credits and payments arising from that sale were used by the third respondents, presumably, to purchase C Street, Suburb D;
(d)in late 2017 the de facto husband and his parents entered into a contract whereby a company (said to be directed by the de facto husband) to build a home on the subdivided property (H Street Suburb G) for $170,000;
(e)in early 2018 the applicant de facto wife transferred to the de facto husband her half share in the F Street property for $50,000 which the de facto wife says she never received but which she asserts was “held” by the third respondent;
(f)the applicant de facto wife and the de facto husband separated on around June 2020;
(g)the second respondents personally[3] at the time of the de facto parties’ separation stated that the de facto wife would not be disadvantaged upon the sale of Suburb D; and
(h)in early 2021 the de facto husband ceased to be a director of the company.
[3] The reference to the “Third Respondents in their capacities as individuals” in the applicant de facto wife’s “Applicant’s Cause of Action” sealed 14 April 2023 says at [44] “…The Third Respondents in their capacities as individuals stated…”
There was also a claim that a statement made by the second respondent upon a subsequent enquiry of a mortgage or loan broker, that the second respondent could be resigning from the third respondent as a director and the de facto wife should be taking over that role and a refinancing of the third respondent’s liability, some months after the purchase of Suburb D was relevant to the constructive trust claim.
Consequently, the applicant de facto wife asserts seeking relief in respect of Suburb D as a consequence of a constructive trust because, on her case:
(a)the “true intention” was that Suburb D was purchased for the benefit of the applicant de facto wife and the respondent de facto husband;
(b)all actions pre-settlement, during settlement, and post settlement of payments (understood to be a reference to settlement upon the purchase of Suburb D), maintenance and paying for the upkeep of Suburb D “amounts” to a constructive trust;
(c)it was the common intention of the parties that Suburb D was held on trust for the applicant de facto wife and the de facto husband;
(d)the applicant de facto wife has acted to her detriment in reliance upon such an intention by paying for the mortgage; and
(e)there needed to be recognition of applicant de facto wife’s equitable ownership given the combination of her financial contributions, her risk and reputation in borrowing money from family and friends, her seeking out Suburb D, her subsequent residence in Suburb D, evidence of mortgage payment (singular) and improvements to the property through the purchase of curtains and carpeting.
THE THIRD RESPONDENT’S CLAIMS AND THE RESPONDENT DE FACTO HUSBAND’S POSITION
The third respondent submitted that of its present applications, the primary application was what was termed a summary dismissal of the applicant de facto wife’s claims for a beneficial interest in Suburb D.
In the event that that application was not successful then the third respondent sought security for costs for its legal fees and to be relieved from the injunction of November 2022 so as to permit it to sell Suburb D and retain $200,000 from the proceeds of such sale to apply to legal fees.
The application for summary dismissal was agitated, firstly, on the basis of the power of the Court to make orders in default of compliance with its orders and directions pursuant to Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”), rule 10.27 and, secondly, pursuant to subsection 45A(2) of the Act.
The third respondent also sought a determination as to damages to be paid under the de facto wife’s undertaking given to the Court on 18 November 2022 and costs generally of the present application.
The respondent de facto husband did not make a submission other than to support the third respondent’s applications.
The applicant de facto wife opposed the third respondent’s present claims save and except as to the discharge of the injunction of November 2022 to permit the sale of Suburb D.
THE SUMMARY DISMISSAL APPLICATION PURSUANT TO RULE 10.27.
In relation to the application for dismissal on the basis of the de facto wife’s defaults, the third respondent firstly claimed and the applicant de facto wife had conceded that there had been defaults on the applicant de facto wife’s behalf in not complying with past orders of the Court. However, it was properly conceded on behalf of the third respondent that such defaults had been made good and as at the date of the hearing of the present applications that the de facto wife had no outstanding matters required to be performed by her under Court orders.
The third respondent, however, characterised these past defaults as a failure to prosecute the proceeding with due diligence justifying dismissal.
The applicant de facto wife argued that no further action should be taken in respect of the admitted defaults as defaults had been made good and, secondly, that orders as to costs or the reservation of the question of costs had been made in relation to such defaults.
Under Rule 10.27 the possible consequences for being in default are set out. Those consequences can, but need not be:
(a)a stay or dismissal of the whole or any part of proceeding in respect of the relief claimed;
(b)the fixing of a time limit for a step to be taken in the proceedings; and,
(c)then in default of that step being performed, for the proceedings in which relief is then claimed to be stayed or dismissed in whole or part including by way of a self-executing order.
Generally, the nature of the relief to be regarded where there is default is a matter for the Court.
The dismissal of proceedings on account of default should be seen as a last resort and where the default appears deliberate with the effect of prejudicing a claim or unduly displacing the effect of case management principles located within legislation or the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”).
Where the fault has been made good and the other parties to the litigation and the Court have had to suffer inconvenience on account of delay but no more, then the use of a dismissal power should, in my view, only be used in exceptional circumstances.
The third respondent identifies that there has been failure in the past to comply with 4 orders being:
(a)Orders 1, 2, 3, 4 and 19 of 16 March 2023 relating to disclosure and the provision of particulars and a joint schedule of assets and liabilities;
(b)Order 10 of 23 February 2023 relating to the filing of a response to an application for particulars and/or disclosure;
(c)Order 18 of orders of 15 December 2022 relating to the provision of financial conciliation conference particulars; and
(d)Order 11 of 18 November 2022 as to the provision of lists of documents.
As was submitted, orders in respect of the applicant’s various defaults have been made including orders for costs in favour of or for the reservation of the third respondent’s costs and the defaults made good. I am not persuaded in those circumstances that the Court should at this time exercise its power under the Rules to dismiss or stay proceedings for or part of the relief sought by the applicant de facto wife as against Suburb D.
In so ruling it should not be taken that any future application to invoke the powers under rule 10.27 will not have regard to the defaults that are recorded in this judgment to have occurred.
Insofar as the third respondent seeks that the applicant de facto wife’s claim for relief in respect of Suburb D be dismissed pursuant to Rule 10.27, I would dismiss that application.
THE SUMMARY DISMISSAL APPLICATION PURSUANT TO S 45A OF THE ACT
In considering the application made pursuant to s 45A of the Act it is convenient to consider separately the two “causes of action” that are identified in the applicant de facto wife’s “Applicant’s Cause of Action” document filed 14 April 2023. That document was filed and served pursuant to orders of 16 March 2023.
The applicant de facto wife seeks relief by way of a declaration that the third respondent holds it interest in Suburb D on trust for the applicant de facto wife and the respondent de facto husband on account of a resulting trust or a constructive trust.
The applicant de facto wife referred the Court to the appellate decision of Karlsson & Karlsson [2020] FamCAFC 207 at [38] to [42] in which the Court there gave emphasis to the fact that a summary dismissal of proceedings serves the interests of justice in that defendants are spared being further trouble, plaintiffs spared from further costs and disappointments and courts the burden of wasted time that could otherwise be applied to the hearing of legally meritorious matters.
In that case the Court provided a summary of principles to be considered in seeking a summary dismissal[4] as being:
•it is a serious matter to deprive a party of access to the courts and the power to do so should be rarely and sparingly used;
•the party seeking summary dismissal must show that it is clear on the face of the other party’s documents that the other party lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious;
•that a case appears weak and unlikely to succeed is of itself not sufficient to satisfy summary dismissal;
•if there is a serious legal question to be tried, then it should ordinarily be determined at a trial of the issues;
•where, notwithstanding a defect in the pleadings, if it appears that a party may have a reasonable cause of action which has not been put in proper form, a court will ordinarily allow that party to reframe the pleadings; and
•the “guiding principle” is doing what is “just”.
[4] Karlsson & Karlsson [2020] FamCAFC 207 at [38].
That summary was provided by reference to decisions decided before the introduction of s 45A of the Act. Section 45A introduced a test that permitted a court to end proceedings in favour of a party where proceedings have no reasonable prospect of success. Such a determination does not require the proceedings in question to be hopeless or bound to fail.
Whilst the test under s 45A is less stringent and involves a different enquiry from that which existed previously, the cautious approach remains relevant.[5]
[5] Gong & Zao [2021] FamCAFC 110 [14] – [15].
In Ebner & Pappas [2014] FamCAFC 229; (2014) FLC 93-619 the Full Court of the Family Court of Australia cited at [62] and [63] with apparent approval the judgment of the majority in Lysaght Building Solutions Pty Ltd (trading as Highline Commercial Construction) v Blanalko Pty Ltd [2013] VSCA 158 at [27] and [35]. The Full Court in doing so gave emphasis in my respectful view that the power to summarily dismiss should be exercised with caution and where there is no real, as opposed to a fanciful, question to be tried.
It was properly submitted by the third respondent that in considering its application pursuant to s 45A the applicant de facto wife’s evidence in support of the applications under challenge is to be taken at its highest.[6]
[6] Banham & Banham [2021] FamCAFC 132 at [46 – 47].
In this regard it is also to be noted that only the de facto wife’s evidence is to be considered unless it is inherently incredible or unreliable.[7]
[7] Ritter & Ritter & Anor [2020] FamCAFC 86 at [66].
The question in the third respondent’s application is whether the applicant de facto wife’s claims for a resulting trust and/or a constructive trust enjoy a reasonable likelihood of success or not.
In doing so, I shall consider separately the two bases upon which the wife’s claim for an interest in Suburb D has been brought forward.
THE RESULTING TRUST BASIS
Order 4(a) of 16 March 2023 required that:
(a).On or before 4.00pm on 14 April 2023 the Applicant wife do file and serve particulars of:
i. the type(s) of cause(s) of action, and in respect of each cause of action, the elements of that cause are asserted to be required to be established by the wife to claim the relief she seeks; and
ii. in relation to each element referred to in the preceding paragraphs:-
1. By separate paragraphs, the material facts in chronological order which will be asserted to establish each element; and
2. The documents that support each such assertion.
This resulted in the “Applicant’s Cause of Action” document of 14 April 2023.
In considering each of the claims it needs to be borne in mind that they are put forward in support of a claim by the wife that the third respondent holds the “equity”[8] (and not Suburb D itself) in Suburb D for the benefit of the de facto wife and de facto husband.
[8] Amended Initiating Application sealed 23.11.2022.
Given the length of time that the de facto wife’s application for equitable relief has been before the Court and the provision of at least two opportunities to the de facto wife to provide particulars of her claim against Suburb D, I regard the reference to “equity” rather than Suburb D to be deliberate.
The submissions of the third respondent gave emphasis to the changing state of the applicant de facto wife’s evidence as to the contributions alleged by her on oath to have been made by her and the de facto husband in respect of the purchase of the property, a subsequent mortgage payment and improvements to the property as well as having used the property as a family home for the de facto wife and the de facto husband and their two children.
It was said by the third respondent that the applicant de facto wife’s Cause of Action document sealed 14 April 2023:
(a)did not disclose any evidence and no records to support assertions that monies said in that document to have been advanced to the third respondent or the husband’s parents (the second respondents) had come from “matrimonial” savings and were used for the purchase of Suburb D;
(b)relied upon annexures to the affidavit of the director of the third respondent sealed and sworn 25 August 2022 for all but two alleged payments to the second respondent or the third respondent;
(c)was inconsistent with earlier evidence given on oath by the de facto wife as to an amount of $300,000 so contributed by her and the de facto husband;
(d)had claimed contributions to Suburb D of $5,000 and $4,000 that had been in repayment of a loan (acknowledged on oath by the wife[9]) of $21,000; and
(e)the de facto wife on oath had identified three lenders of funds of $35,000 said to have been contributed to accounts for the purchase of Suburb D and has since filed evidence that discloses that there was but one lender.
[9] Applicant de facto wife’s affidavit 7 October 2022, [7]
The third respondent took the Court to the affidavit evidence and documents filed on its behalf explaining the receipt of the monies claimed by the de facto wife to have been paid from “matrimonial savings”. However, I have no regard to that material nor attach any weight to that submission given that an application under s 45A is to be determined by reference only to the evidence of the party seeking to resist the summary dismissal claim – that is, in this case, the evidence of the de facto wife.
The de facto wife’s submissions were to the effect that the matters she put forward were arguable and a matter for trial. In making those submissions the de facto wife’s counsel could not articulate how such matters being arguable and for trial could be understood to demonstrate a “reasonable prospect of success” or the lack of an absence of “a reasonable prospect of success”. I took those submissions to mean that the de facto wife’s claims were not to be regarded as frivolous, vexatious or fanciful.
Beyond the assertion of the de facto wife that various payments were made to accounts of the second respondent and the third respondent to enable the Suburb D purchase to proceed, she also claimed in her Cause of Action document of 14 April 2023 that the de facto husband, second respondents and/or third respondent had not provided an explanation as to the sums of money said to have been sourced from “matrimonial savings”. Such a claim was made as though the alleged lack of explanation verified the claim that the source of money was “matrimonial savings”.
In fact, explanations had been provided in the affidavit of the third respondent’s director (a second respondent) of 12 December 2022. From that affidavit those explanations appear verified in a great majority of cases by bank and other third-party records.
However, beyond noting that this particular submission of a lack of explanation should be given no weight. I otherwise attach no significance to and have no regard to the evidence of the third respondent’s director’s affidavit of 12 December 2022 as to this aspect of the matter.
A consideration of the de facto wife’s evidence in relation to the provision of the purchase price of Suburb D in amounts varying in value across time to persons other than the third respondent, that the total of those payments does not correspond with the amount required for settlement, the inconsistencies in her own evidence; that the claim for a resulting trust remains in respect of the “equity” and not Suburb D itself; and the unjustifiable claim of a lack of explanation from the third or second respondents lead me to the view that the applicant de facto wife’s claim of a resulting trust of either the “equity” in favour of her and the de facto husband is in its present form to be regarded as very weak but arguable.
However, that is not the only consideration to be undertaken in respect this aspect of the matter.
Paragraph 25 of the de facto wife’s “Applicant’s Cause of Action” document of 14 April 2023 says:
if the Court accepts the evidence of the Applicant that she and the First Respondent procured, advanced, borrowed and provided the funds necessary to complete the settlement of the property, then a resulting trust should be found to be an appropriate remedy for this matter.
[Emphasis added].
Although the applicant de facto wife does not say so in as many words, she relies on the presumption of a resulting trust.
Such a presumption, in the absence of a countervailing presumption or actual intention, leads to the result of the third respondent’s interest in Suburb D (subject to an accounting for things such as mortgage instalment payments and occupation rent) being held beneficially in proportion in which the purchase price has been contributed to.
Such contributions would necessarily include the contribution made by the third respondent with the proceeds of the mortgage loan it provided for the purchase.[10]
[10] Calverley v Green [1984] 155 CLR 242 per Gibbs CJ
However, the de facto wife’s position is that there is to be no apportioning of the equity in Suburb D in favour of anyone but the applicant de facto wife and de facto husband. To claim all of the equity the de facto wife must be relying upon some other form of equitable relief of all of the equity in Suburb D being determined as belonging in equity to the de facto wife and the de facto husband. Such claim is at odds with the third respondent having provided a significant portion of the purchase price by the mortgage loan proceeds.
In her submissions the applicant de facto wife ultimately came to state that the rationale for her claims for all of the equity in Suburb D was based upon a notion of there being present extended family arrangements which carried with them necessary notions of intention and design or common endeavour as to the provision of Suburb D for the de facto wife and husband and their children.
These submissions in my view betray the true nature of the equitable claim of the de facto wife entitling her to the relief that she seeks in respect of Suburb D:
(a)that as a result of intention or arrangement being made known and represented by the third respondent to the applicant de facto wife and/or the de facto husband to provide the applicant de facto wife;
(b)that the de facto husband and their children used the property as family home; and
(c)that the de facto wife and the de facto husband acted to their detriment and that it would be inequitable to deny them the beneficial interest to all of the equity in Suburb D.
The de facto wife’s case is about “intention” and not presumptions.
This leads me to the view that relief by way of a declaration of a resulting trust giving rise to the equity in Suburb D being held by the third respondent on trust for the applicant de facto will not be made out and has no reasonable prospect of success.
Had the de facto wife’s claim against the third respondent in respect of Suburb D been confined to a resulting trust I would have regarded that the de facto wife’s claim in respect of Suburb D proceed no further.
However, this is not the only basis upon which the de facto wife seeks the orders that she does in respect of the equity in Suburb D.
THE CONSTRUCTIVE TRUST BASIS
The applicant de facto wife’s claim for orders in respect of the equity in Suburb D also goes forward on the basis that a remedial constructive trust might be found to exist.
The third respondent advances its claim under s 45A in respect of this aspect of the applicant de facto wife’s claim on the basis that the factual propositions put forward by the applicant de facto wife in support of her position are either changed (and hence unreliable) and answered (with answers supported by documentation) in such a way that there is no reasonable prospect of success of the de facto wife’s claim for the equity in Suburb D.
To permit orders to be made pursuant to s 45A would be to weigh the evidence of the applicant de facto wife either against or in the light of the third respondent’s evidence. For the reasons set out above this is not permissible.
The wife’s case in respect of a constructive trust giving rise to the relief the de facto wife seeks is based on those matters of intention and/or agreement set out above and although this case might also be regarded as weak, it is not so weak to justify the summary dismissal of paragraph 1 of de facto wife’s Amended Initiating Application as to Property/Financial Matters sealed 23 November 2022.
Although I have by reason of the applications that have been advanced at this time had to determine that one of the de facto wife’s bases for the equitable relief she seeks in respect of Suburb D can be regarded as being without reasonable prospects of success, the other - in light of the caution that must be exercised with respect to summary dismissal applications – cannot be so regarded. As such, I will not dismiss the de facto wife’s claim for relief sought at paragraphs 1, 2, and /or 3 of the Amended Initiating Application pursuant to s 45A of the Act as it can go forward on the basis of the constructive trust claim.
For those reasons I would dismiss the third respondent’s application for orders subject to s 45A subject to an order that I would make pursuant to s 192(4) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) to confine the claim for beneficial interest to that of the constructive trust.
The views I have formed in considering the questions of the effect of default and the applications under s 45A are matters which are to be borne in mind in considering the further applications of the third respondent.
THE THIRD RESPONDENT’S CLAIM FOR DAMAGES PURSUANT TO THE UNDERTAKING GIVEN TO THE COURT ON 18 NOVEMBER 2022
The third respondent sought damages pursuant to the wife’s undertaking given in the usual form and accepted and noted by the Court in its orders of 18 November 2022. Those orders provided that until further or other order the third respondent was to be restrained with injunction from selling encumbering or disposing of its interest in Suburb D save and except for the purposes of refinancing any existing liability over Suburb D or with the written consent of the de facto wife or with order of the Court.
The third respondent was not able to identify at the time of the hearing of this particular application the amount of damages which were sought or consequently the period or periods of time under which the claims for damages are said to arise. Consequently, it is not possible to make any assessment as to the basis upon which an amount of damages, if any, should be assessed.
It is not simply a matter of the undertaking having been given that damages automatically follow as a consequence of any loss that might be experienced by a person restrained by an injunction in respect of which the undertaking has been proffered.
The third respondent’s position is that since 18 November 2022 they have been unable to refinance the loan over Suburb D because the property is the subject to legal proceedings.
The compensation that may be paid is as a consequence of being affected by the operation of the orders of 18 November 2022.
The third respondent by the affidavit of its director of 29 May 2023 identifies that that the monthly mortgage repayments on Suburb D in the months from November 2022 to May 2023 were $4,222, $4,315, $4,408, $4,536, and $4,631 respectively. The third respondent deposes that it if it had not been for proceedings in this Court their monthly payments would have been about $2853 per month.
On the hearing of the application the third respondent was seeking leave to file further material identifying the amount and presumably the basis for the amount of compensation sought. The third respondent did not seek to press the application further than that.
The applicant de facto wife made no submissions in relation to the third respondent’s application in that regard.
To be successful in the claim for damages at this stage of the proceedings the third respondent will have to address at least three questions[11]:
(a)what is the loss that is now alleged?
(b)did the loss flow directly from the orders of 18 November 2022? and
(c)if so, could the loss of the kind sustained be foreseen at the time of the November 2022 orders?
[11] Tobias John Tucker v Victoria [2020] VSC 121 at [13] – [21]
In terms of the management of this aspect of the parties’ dispute the question as to whether damages should be paid, if any, pursuant to the undertaking of 18 November 2022 is a matter which in my view should be properly canvassed at a hearing directed specifically to that particular issue as it is likely to require further evidence and, going by the level of dispute in this matter to date, the testing of evidence.
In addition, the third respondent will need to persuade the Court why the application for damages should be entertained at this time rather than upon the conclusion of the proceedings which will see a determination of the de facto wife’s claims as against the third respondent in respect of the Suburb D property.
The determination of the question as to what, if any, damages or compensation should be paid pursuant to the undertaking given by the de facto wife will be a matter that should be determined at trial when the relevant evidence can be presented and, where necessary, tested.
In the circumstances I shall adjourn the question of what, if any, damages or compensation should be paid pursuant to the undertaking of 18 November 2022 for directions in anticipation of trial.
THE DISCHARGE OF THE ORDERS OF 18 NOVEMBER 2022 AND THE APPLICATION FOR SECURITY FOR COSTS.
By its Application in a Proceeding sealed 14 June 2023 the third respondent sought a discharge of order 2 of the orders of 18 November 2023 and that the third respondent be at liberty to offer Suburb D for sale with the proceeds of sale after the payment of outstanding mortgage sale costs and other expenses to be applied as to $200,000 to the Third Respondent for its “free use and benefit” and for the balance to then be held in the third respondent’s solicitors’ trust account pending further order of Court.
The de facto wife by her Response to that application formally sought dismissal of the application. However, in her affidavit filed in support of that Response the de facto wife said that there could be orders as sought in paragraph 6(a) and 6(c) of the third party’s Application that the sale of Suburb D should proceed to be undertaken by the third respondent and for the payment of the outstanding mortgage sale costs and other expenses attached to Suburb D and otherwise for the proceeds of sale to be held in the third respondent’s solicitor’s trust account pending further orders of the Court.
The applicant de facto wife only joined issue with the third respondent being permitted to have the use of the sum of $200,000 as sought by its application. The applicant de facto wife claimed, as has been set out above, the equity in Suburb D as belonging in equity to herself and the de facto husband.
At the time of the hearing of this matter it became apparent that this application by the third respondent was closely associated with the third respondent’s application for the applicant de facto wife to provide security for costs of the third respondent.
A great number of the matters raised in respect of the application for security to be provided by the de facto wife for the third respondent’s costs were relied upon and have to be considered in respect of the application for the release of part of the proceeds from the sale of Suburb D.
The third respondent by reference to Rule 12.02 and s 117(2A)(a), (b) and (c) said that an order for security for costs should be made as:
(a)the applicant’s prospects of success were limited;
(b)the de facto wife’s evidence in her affidavit sealed 16 July 2023 that she has sufficient equity in the property in her own name at N Street, Suburb O to meet any anticipated costs order is not, without more evidence, sufficient to satisfy the Court that she would be in a position to meet any order for costs that might ultimately come to be made in this matter;
(c)the second and third respondents had a costs order made in their favour of 18 July 2023 which was unsatisfied (but at the same time it was conceded that the quantum had not been agreed or assessed and remained to be formulated);
(d)the costs of the proceedings disclosed by costs notices provided at the commencement of the hearing disclosed significant legal expenses; and
(e)other than the de facto husband being in receipt of legal aid funding in respect of parenting proceedings none of the de facto wife, the second respondent or third respondents were in receipt of legal aid.
The third respondent relied upon its and the second respondent’s combined cost notice sealed 27 August 2023 which disclosed as at that date that the second and third respondent:
(a)had incurred billed legal costs of about $76,000 (of which it had paid about $49,000);
(b)had unbilled of costs of about $23,000;
(c)paid disbursements of about $7,000;
(d)would incur costs associated with the present interim application of up to $13,200;
(e)would incur costs associated with taking the matter to trial of between $60,000 and $80,000; and
(f)had $10,000 currently held in the relevant solicitor’s trust account.
As that costs notice discloses, there has been an intertwining of the financial circumstances of the second respondents and the third respondent as the second respondents are the directors and shareholders in either the third respondent or associated entities. Nothing was developed in the course of any parties’ submissions as to whether anything should be made of that intertwining.
That costs notice recorded that the payment of the legal fees referred in that combined notice of costs had been coming from income, savings, borrowings secured against real property, personal loans and credit cards.
The costs notice covered the proceedings to date which also includes parenting proceedings in respect of which the second respondents were involved. The third respondent’s director estimates that of the fees to the date of his 29 May 2023 affidavit that 75% of those fees relate to the financial proceedings before the Court. This would mean that of the costs sustained to date about $89,000 has been spent by the second and/or third respondents on the financial proceedings.
I am aware that final orders have now been made in respect of the second respondent’s parenting applications on 26 July 2023 requiring no or little further involvement of the second respondents in that aspect of the de facto parties’ proceedings after that time. It can therefore be taken that the costs as to the further conduct of proceedings identified in the costs notice relates to meeting costs associated with the applicant de facto wife’s application in relation to Suburb D.
The de facto wife’s costs notice of 28 August 2023 discloses:
(a)billed costs of nearly $96,000;
(b)paid costs of about $8,000 sourced from income savings and borrowings;
(c)unbilled costs of about $10,000;
(d)disbursements of about $1,600;
(e)costs associated with the present interim application hearing of between $3,000 and $4,000;
(f)costs of taking the parenting proceedings to a final hearing of an upper limit of about $65,000;
(g)the costs of taking the financial matters to a final hearing of a range of between $75,000 and $95,000; and
(h)$3,000 currently held in trust.
The costs expended and to be expended by each of the de facto wife and the third respondent are substantial.
The third respondent took the Court to the Financial Statements of the de facto wife and the de facto husband filed in these proceedings.
The wife’s only Financial Statement was filed in June 2022. There appears to have been no cause for an updating Statement to be filed since then.
In the de facto wife’s Financial Statement she claims as property an interest in Suburb D of some $650,000 and life insurance of some $750,000.
The entitlement to the equity in Suburb D is yet to be established and that claim I have identified as weak.
I do not accept at this stage of the proceedings the life insurance identified in the Financial Statement as having a surrender value presently obtainable by the de facto wife of $750,000.
Putting to one side the life insurance and the claimed equity in Suburb D, the de facto wife holds property of all types less liabilities of about $118,000, none of which other than for $500 in a Commonwealth Bank account can be regarded as liquid.
This reckoning excludes the de facto wife’s legal fees as disclosed in her Costs Notice.
Taking into account her unpaid legal liabilities disclosed in her costs notice the wife’s net asset position would fall to about $20,000.
The submission of the de facto wife was that she held sufficient net assets that could meet any anticipated claim for costs on behalf of the third respondent. Whilst no figure was mentioned as to what the anticipated costs might actually be, I understood the submission to be directed in addressing the projected figures to trial set out in the respondent’s current costs advice.
The submission of the de facto wife that she would have sufficient resources to be able to meet an order for costs in the amount of the costs the third respondent is anticipated to incur in taking the matter to trial is not borne out by the analysis set out above.
The de facto wife’s submission in that regard is not accepted.
The wife’s weekly income is according to her Financial Statement all but fully accounted for by her weekly expenses.
There is no restraint in place in respect of the de facto wife’s ability to deal with assets in her control.
The de facto wife expects by her affidavit for Suburb D to sell for about $1,300,000.
The third respondent’s director references an internet site indicating $1,000,000 and the Valuer-General for South Australia’s figure of $840,000.
The mortgage secured over the property is just over $545,338 as at May 2023.
There is no evidence of any capital gains tax liability or other liabilities arising upon the sale.
The equity in the property is anticipated on behalf of the third respondent to be about $450,000 inferring a sale at about $1,000,000.
It can be but speculated that the de facto wife claims by her Amended Initiating Application 70% of the equity in Suburb D. This means on net proceeds of $450,000 the de facto wife would receive $315,000 and on net proceeds of $755,000 the wife might receive $528,000 leaving for the de facto husband’s share either about $135,000 or $227,000 respectively.
The husband supports the position of the third respondent.
The second respondents cannot borrow any further funds against their residential home so as to contribute to the legal expenses of the third respondent.
The purpose of the order of 18 November 2022 was, subject to the de facto wife giving an undertaking as to damages in the usual form, to preserve Suburb D.
That undertaking has not been proffered in respect of the present application.
The third respondent should continue to be involved in this litigation and to be represented in respect of that involvement.
In seeking the release of $200,000 of the proceeds from Suburb D, the second respondents have equity in their residential property of an unspecified amount that they are willing to offer as “security for any adverse ruling”. No evidence is given as to the value of that residential property, the extent to which it is encumbered and whether it is otherwise to be dealt with pending the resolution of the present dispute. There were no specific order or undertaking promoted as to the form that such security was to take or as to how it might be created.
The second respondents cannot borrow any further funds against their residential home so as to contribute to the legal expenses of the third respondent.
Acting cautiously in light of the anticipated proceeds from sale of Suburb D and weighing all of the matters, I propose an order be made that of the net proceeds of sale of Suburb D the sum of $135,000 be made available to the third respondent in respect of its claim.
The release of such an amount will not, given the de facto husband’s position in respect of the third respondent’s application, prejudice the de facto wife’s claim.
THIRD RESPONDENT’S APPLICATION FOR SECURITY FOR COSTS
I now turn to consider the question of the third respondent’s application for security for costs to be paid by the wife in respect of her application for orders in relation to Suburb D.
In considering this application the Court was quite properly taken by the third respondent to those matters listed in Rule 12.02(2) as well as the matters referred to in s 117(2A) of the Act referred to above.
I first turn to the matters to which consideration may be given pursuant to Rule 12.02.
In considering this aspect of the matter I note that the de facto wife has limited assets and resources and appears to have been unable to pay her legal costs in any substantial way to the date of the present hearing.
In contrast, and relatively speaking, the second and third respondents have been able to meet a significant proportion of their legal fees and will be able to utilise a portion of the proceeds from the sale of Suburb D to that end should they choose to do so.
On the evidence available to me it is not possible to gauge the relative financial circumstances of the de facto wife and the third, or for that matter, the second respondents’.
There is no question in this case on the evidence available to me that the de facto wife’s lack of means has been caused by the second or third respondents’ conduct.
I note that the de facto wife’s claim in respect of Suburb D is presently to be regarded as weak.
In the event that the de facto wife’s application in respect of Suburb D is unsuccessful the third respondent by its Response to Amended Initiating Application of 12 December 2022 has applied to seek costs on an indemnity basis.
In an application of the type that the de facto wife has made the prospect of success of such a costs application is not out of the question although an award of indemnity costs is, of course, an exceptional order.
There are some costs due by the applicant de facto wife to the second and third respondents pursuant to earlier orders which are yet to be paid but the entitlement does not appear to have been quantified.
The likely costs of the proceedings being concluded for each of the third respondent and the applicant de facto wife are substantial.
In the event that the third respondent is successful in resisting the applicant de facto wife’s claim there is little prospect of the third respondent being able to recover anything like its anticipated costs in having taken the matter to trial should an order for costs be made in its favour.
An order for security for costs should not have the effect of stifling the de facto wife’s application or otherwise be oppressive.
The third respondent’s application simply seeks that the Court make a security for costs order in an unspecified amount to be paid to the third respondent’s solicitors’ trust account within 28 days. No other form of security for costs was sought including by way of charge or other security against an interest in property owned by the de facto wife.[12] As such an order was not agitated before me there has not been an opportunity for the de facto wife to make submissions in respect of that type of order as to the impediments such as a court imposed charge triggering the ability of a mortgagor to foreclose on property that might arise if such an order of that type were made.
[12] For example, as in Derek and Derek [2006] FamCA 339; (2006) FLC 93-260 at [15] and [60].
No submission was made as to what the source might be from which security might be paid.
If security for costs were ordered to be paid in the sum of a few thousand dollars, the source or sources from which an order for security for costs in the form agitated by the third respondent would appear to require the applicant de facto wife to either sell or encumber her home or motor vehicle which she and the children of the de facto relationship reside in or borrow funds to do so.
The de facto wife in her affidavit sealed 16 July 2023 at paragraph 33 recorded that she had “sufficient equity” in her home at Suburb O to meet the third respondent’s costs set out in the third respondent’s costs notice of 12 May 2023 as to the estimated costs of the third respondents taking matters to trial even at the upper limit of the estimates of costs contained in the notice.
That costs notice of 12 May 2023 disclosed that the second and third respondents anticipated the costs for solicitors and counsel of taking financial matters to a final hearing of between $60,000 and $80,000.
What portion of those costs would be allowed as party/party costs or solicitor client costs is an unknown.
Doing the best I can in the light of the costs incurred by all the parties to date as disclosed in costs notices and in the light of the conduct of the de facto wife’s case to date, I consider that costs of at least $35,000 may be awarded to the respondents in taking the matter to trial.
It is this amount that I would be minded to make the object of any order for security for costs.
The wife’s Financial Statement of 9 June 2022 estimates the value of the Suburb O property at $450,000 subject to a mortgage of $295,000. This indicates in equity of $155,000.
There is no evidence that the de facto wife’s property at Suburb O is encumbered other than by the mortgage.
In all of the circumstances and taking into account the matters to which I have referred I consider that there exist circumstances that justify that an order by way of security for costs should be made pursuant to s117(2) of the Act in the form of the de facto wife providing a charge over the Suburb O property in the sum of $35,000. The order might take the form of:
“That the de facto wife’s interest in property at [N Street, Suburb O] be charged in the sum of $35,000 as security for the payment of any costs which the de facto wife may be ordered to pay to the third respondent in respect of costs incurred by the third respondent in relation to the determination of paragraph 1 of the de facto wife’s Amended Initiating Application of 23 November 2022.”
Given that the de facto wife has not had an opportunity to address me on the form of such an order I will provide the de facto wife and other parties an opportunity to consider the proposed order for security for costs and to address the Court in relation to the form of the order.
DISCLOSURE APPLICATION
An alternative application was made by the third respondent with respect to the question of disclosure by the de facto wife. The alternative application was not pressed and no orders with respect to disclosure will be made upon the application.
With respect to the question of disclosure the Court notes that it has already made several orders with pertaining to the question of disclosure and that any failure to have complied with those orders or with respect to the duty of disclosure is generally considered by the Court to now be a matter for trial.
COSTS OF THE PRESENT APPLICATIONS
Each of the de facto wife and the third respondent has sought costs in relation the applications which are presently before the Court.
The determination of any application for costs in respect of the present applications should in my view be undertaken once there has been a consideration and determination of the substantive application with respect to equitable relief. This can only occur after there is either a resolution of that application by agreement between the parties or determinations made at trial.
I will accordingly reserve the question of the costs of each party in relation to the present applications to trial.
FUTURE MANAGEMENT
This matter is now ready to be taken to trial. When this matter is next before the Court submissions will be heard and directions made so as to progress this matter towards trial. On that occasion I shall also hear from the parties as to the proposed order set out at paragraph 171.
For the reasons set out above there are to be orders as appearing at the outset of these reasons.
I certify that the preceding one hundred and seventy-nine (179) numbered paragraphs are a true copy of the Reasons for Judgment of Judge McGinn. Associate:
Dated: 10 October 2023
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