Higgins and Higgins

[2018] FamCA 243

FAMILY COURT OF AUSTRALIA

HIGGINS & HIGGINS [2018] FamCA 243

FAMILY LAW – PROPERTY AND SPOUSAL MAINTENANCE – Where applicant bought respondent a home and later structured the drawing down of money from his company as a loan – where no such loan to the respondent occurred – where subsequently, the parties married giving rise to the property alteration jurisdiction – where the parties never lived together either as a de facto couple or as a married couple – Determination of the applicant’s claim for the sale of the home – where it would it not be just and equitable to require the wife to surrender the home – where interim orders for property settlement were made but it would not be just and equitable in the circumstances to allow the wife to keep that money as no contributions justify it – order for return of that money – where claim for spousal maintenance is made but no evidence supports the conclusion that the wife cannot adequately support herself.

Family Law Act 1975 (Cth)
Income Tax Assessment Act 1997 (Cth).

Ashton v Pratt [2015] NSWCA 12
Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20; (1954) 92 CLR 424
Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137
Beneke and Beneke (1996) 20 FamLR 841
Bevan and Bevan (2013) 48 FamLR 387; [2013] FamCAFC 116
Calverly v Green [1984] HCA 81; (1984) 155 CLR 252
CGU Insurance Limited v Lawless [2008] VSCA 38
Diprose and Louth (No 2) [1990] 54 SASR 450
Ermogenous v Greek Orthodox Community of SA Inc [2002] 2009 CLR 95
Gabel & Yardley (2008) 40 FamLR 66
Israel v Foreshore Properties Pty Ltd (in liq) (1980) 30 ALR 631
Issitch v Worrell and Ors [200] FCA 477
Kennon v Spry (2008) 251 ALR 257
King v Lynpete Australia Pty Ltd and Ors [2012] VSC 140
Lakis v Lardis [2017] NSWSC 321
Lozanov and Lozanov [1994] FamCA 60
Lyon v Tweddell [1881] 17 ChD 529
Markarian v R (2005) 228 CLR 357
Norbis and Norbis (1986) 65 ALR 12
Popiw v Popiw [1959] VR 197
Priestley v Priestley [2016] NSWSC 1096
Roscorla v Thomas (1882) 3 QB 234
Stanford and Stanford (2012) 247 CLR 208
Watson and Ling [2013] FamCA 57
West v Mead [2003] NSWSC 161

APPLICANT: Mr Higgins

RESPONDENT: Ms Higgins

FILE NUMBER: MLC 12095 of 2015

DATE DELIVERED: 15 February 2018

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Cronin J

HEARING DATE: 6, 7, 10, 11 July 2017

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Geddes QC With Ms Burt

SOLICITOR FOR THE APPLICANT: Kennedy Partners

COUNSEL FOR THE RESPONDENT: Mr Glick QC with Mr Matta

SOLICITOR FOR THE RESPONDENT: Kenna Teasdale Lawyers

Orders

1. That by 30 March 2018, the wife pay to the husband $180,000.

2. In default of payment of the $180,000, the wife place the property at B Street, Suburb C on the market for sale and upon the sale, after payment of all expenses associated with the sale, the payment to the husband of $180,000, and any interest accrued thereon calculated from 30 March 2018, the balance be paid to the wife.

3. That the wife’s application for spousal maintenance is dismissed.

4. The application by D Pty Ltd is dismissed.

5. The application of the husband filed on 23 December 2015 is dismissed.

6. The husband indemnify the wife arising out of any claim against her by D Pty Ltd as recorded in its books of account.

7. The response of the wife filed on 11 April 2016 is dismissed.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Higgins & Higgins has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 12095  of 2015

Mr Higgins

Applicant

And

Ms Higgins

Respondent

REASONS FOR JUDGMENT

1. Mr Higgins (“the applicant”) married Ms Higgins (“the respondent”).  They met in 2006 in a commercial arrangement.  Their association continued over the ensuing years but they agree they were not in a de facto relationship at any time.

2. In 2012, and no doubt after giving the matter some thought, they married.  Even then, they did not live together.  Their marriage came to an end on 28 June 2015 and in December 2015 the applicant began proceedings against the respondent for a property settlement in which he sought that the respondent’s home be transferred to him.

3. In April 2016, the respondent cross-applied for a declaration that her home was solely hers but she then sought and later discontinued a claim for one half of the applicant’s superannuation from his self-managed superannuation fund.

4. In March 2017, the applicant joined PPL (PPL) to the proceedings by filing an amended application and naming it as a party.  PPL is a company incorporated in 1980 and the applicant is the sole director.  Thus, the applicant was joining his own company to the action.  For a period of almost five years until 2015, the respondent was the company secretary.  That ended with the personal relationship between the parties.  PPL sought orders that the respondent pay it $1,184,941 based on a claim that the respondent owed it that sum as a result of a loan.

5. In this amended application, the applicant also sought a variety of other orders including that in the alternative to enforcing the loan by PPL, the court should declare that the respondent now holds her interest in the home of which she is the sole proprietor, upon trust for PPL.

6. PPL as a party to these proceedings in its own right then filed a statement of claim.

Is there an inconsistency in the claim by the applicant and ppl?

1. The Family Court of Australia is not a court of pleadings.  Its process relies upon an application calling upon the exercise of power within the jurisdiction granted to the court and the evidence that supports the exercise of the power is usually found in the affidavits of the relevant litigants.

2. Senior counsel for the respondent (but only in final address) submitted that the applicant’s case would be struck out if the action was brought in the courts of civil jurisdiction because of the inconsistency in the pleading.  That inconsistency was said to be that on the one hand, the applicant and PPL asserted the respondent had been lent money but on the other, it was asserted she held the real property bought with the lent money, on a trust for either PPL and/or the applicant.

3. The respondent relied upon a number of authorities which support the proposition that a party is prohibited from pleading an inconsistent set of facts in the alternative where one of those facts must be known to them to be obviously wrong.  Here relevantly, it is asserted by the respondent that the applicant’s claim that there was a loan and in the alternative, that a resulting trust arose, were factually inconsistent.  (see King v Lynpete Australia Pty Ltd and Ors [2012] VSC 140; Issitch v Worrell and Ors [200] FCA 477 and; CGU Insurance Limited v Lawless [2008] VSCA 38 at para [27]).

4. The authorities focus on the knowledge of the pleading party that one of the alternatives is false.  Obviously, a party can plead in the alternative if their view of the facts is rejected and the other party’s view of those facts is accepted.  The party whose account is rejected may in the alternative, rely on the other party’s account.  Here, that is not the case.

5. If the applicant lent money to the respondent, his claim lies in contract.  It is inconsistent with that contractual claim to argue that a resulting trust arises in respect of the purchase of a home in the respondent’s name on the basis of an assertion that in reality, as it was his money provided for the purchase, he was the intended owner.

6. There is an inconsistency in the alternative positions but on the basis of the findings below, it is unnecessary for me to deal with the issue further.  My reasoning is as follows.

Jurisdiction

1. The marriage between the applicant and the respondent in 2012, gives the court jurisdiction to hear the case and the power to alter the respective interests of the parties in whatever property they may have.

2. In the course of considering the exercise of those powers, the court is entitled to look at the totality of the relationship between the parties provided what occurred both before and after the marriage has a sufficient connection with the marriage to be treated as relevant to the issue to be determined.  Thus, although the marriage occurred in 2012, the events before that, albeit not occurring in a de facto relationship, may be relevant to what each needs to prove to justify an alteration of property interests.  That includes an examination of what their intentions and assumptions were in relation to how they would conduct themselves.  (see Lozanov and Lozanov [1994] FamCA 60).

3. The circumstances of this case are so unusual that in my view, it is unnecessary for me to look in detail at either the financial or non-financial contributions each party made whether during the marriage or before it.  However, the pre-marriage facts in this case set the foundation for what the parties assumed and did.

4. This case is about whether any alteration, and if so what, should be made to the ownership of the respondent’s property.  She does not now seek any alteration of the applicant’s property.  She seeks an order dismissing the applicant’s claim save that she desires that the applicant pay and indemnify her in respect of any taxation liability that may fall to her arising from the circumstances of the loan mentioned earlier.  Whether the loan was a contractual obligation, or indeed a loan at all, is the nub of this dispute.  In my view, no liability can arise for the respondent here but if some action was taken, the applicant must indemnify her because of how the “loan” arose. 

5. For his part, the applicant seeks orders for the alteration of the interests of the respondent in her house.  For the reasons that follow, I find it would not be just and equitable to make such an order.  However, because the respondent was advanced money by the applicant on the basis of an interim property settlement to which the respondent, in hindsight, was not entitled, she must return that money even though he consented to the order at the time.  I consider it would not be just and equitable for her to retain that money.  What occurred here highlights the complexity and difficulty in making interim property orders where the facts are controversial.

6. PPL sues the respondent by a statement of claim.  The relief sought is $1,184.940.73.  Suffice to say, the respondent seeks a dismissal of that claim as against her.  In my view, the claim that the respondent owes PPL money must fail as there never was a loan nor was there ever any form of trust intended nor could it have ever arisen at law or in equity.

7. The marriage ceremony also gave rise to the jurisdiction to award either party spousal maintenance by a lump sum or a periodic payment.  The respondent seeks an order for a lump sum of $341,978 or alternatively $8143 per month for a period of 3 and a half years.  That application for maintenance is resisted by the applicant.  In my view, the wife has not established any entitlement to maintenance.

8. The parties have been described in these reasons as “applicant” and “respondent” because my usual description of husband and wife would not be appropriate on the facts that governed their relationship.  That relationship must be seen as unusual, if not unique.

The nub of the disputed facts

1. The question which occupied the major amount of time and around which all of the issues mentioned above revolved was whether the respondent was lent in excess of $1 million by the applicant and/or PPL or whether the respondent was given that sum of money and/or a house.  All agree, the money ended up being used to buy the respondent’s present home at B Street, Suburb C, the title to which is unencumbered. 

2. It is trite to say the circumstances here are unusual but by their very nature, they give rise to difficult problems about what is, and how one assesses, justice and equity.

The parties as witnesses

1. In respect of the early part of the relationship, there is little if any, objective and corroborative evidence of what each party says.  The parties had to look back over a number of years and each had forgotten things.  Nothing about the evidence of either party indicated that I should prefer the accuracy of the evidence of one over the other.

The standard of proof

1. Findings of fact have been determined on the balance of probability and I shall set out the evidence of each of the parties over that period of time.  The findings of fact are based upon the plausibility of what each says.  There are some critical issues and when I indicate that I reject the evidence of a particular version, it is on the basis that when balancing up the two versions, I prefer one over the other rather than on the basis that a story has been embellished or that a party has lied. 

The background

1. The background to the relationship between the applicant and the respondent sets the context. 

2. In 2006, in Queensland where both parties then lived, the applicant answered an advertisement of the respondent for her to provide escort services.  He was then about 64 years of age and living in a de facto relationship and she was 31 years of age and also living (and still is) in a de facto relationship with the father of her child.  That child, E was then eight years of age. 

3. At the time of their first meeting, the respondent was charging $275 per hour or $1500 overnight for her services.  There is no doubt that the meeting was convenient for both and commercial in nature.

4. It is unnecessary to consider whether thereafter, any de facto relationship occurred between the applicant and the respondent, because all concede no such relationship ever arose. 

5. The respondent’s evidence was that early in this commercial arrangement, she and the applicant agreed to cease the hourly rate payment.  The respondent then said:

   We agreed that it was inappropriate given the intimate nature of our relationship and we discussed him purchasing a house for me in the future if things kept going well between us.

6. On the respondent’s version, the house discussion arose as early as 2007.  Having regard to the nature and duration of the relationship at that time and the view that the respondent held of the applicant (as discussed next), that suggestion is implausible.  She agreed in cross-examination that the commercial arrangement became a friendship about the end of 2007.  This was a curious friendship however because she described the situation this way:

   [37]He repulsed me in every way, but the life I led supported my family and I endured what the applicant did to me for the benefit of my (family)…I needed the money to support my family.

The move to Brisbane

1. In 2008, the respondent and her family went to Brisbane for schooling reasons associated with her daughter.  At that time, such was the nature of her relationship with the applicant that she agreed to continue the relationship by alternate weekend visits.  It matters not, but some weekends the respondent went to F Town and on others, the applicant went to Brisbane.  The respondent maintained she did most of the travelling because the applicant was unhappy about her move.  Whatever transpired, all of the travel and accommodation costs were paid by the applicant.

2. Before and after the Brisbane phase of this relationship, the applicant feted the respondent by buying her clothes and shoes, paid for her “Botox” expenses on a “semi-regular” basis, contributed towards her breast enlargement procedures, her lip injections and clothing for her daughter.  The respondent conceded that the applicant paid her Brisbane rent and on occasions, her daughter’s school fees.

3. The respondent complained that she would have earned more as an escort than that which the applicant paid her but little turns on that because she made the conscious choice to continue.  On any view, the amounts of money paid to the respondent were significant.

4. The applicant asserted by his affidavit [26.5] that from 2007 until mid-2010, the respondent continued to tell him that she was working as an escort and seeing other clients.  The respondent did not deny that was so.  Her position however was that she was to provide to the applicant “companionship” and “entertain” him in return for which, he said he would provide financial support for her and her family.  Indeed that is what he did. 

5. Sometimes, the applicant and the respondent ate at restaurants, and other times they ate at his home where occasionally, the respondent cooked.  He described the respondent’s company as “charming” and “good”.  This evidence was only for the purpose of setting the scene for what happened in 2010.

6. In the respondent’s trial affidavit of evidence, one particular salacious paragraph was struck out on the basis of relevance but admitted back in again on the basis of cross-examination of her.  For whatever reason the evidence was led in the first place, it only established that whilst the applicant pursued an intimate friendship from the respondent, and her companionship, the respondent still considered somethings (but not all) about the applicant, “repulsive”.  Despite that, during their time apart, the applicant and the respondent exchanged written communications some of which were humorous or flippant but even those only subjectively showed there was no real depth in the relationship from the perspective of the respondent.  Indeed, each party could be said to have wanted something from the relationship.  Throughout this period until the end of their relationship, the applicant always knew that the respondent was living in a de facto relationship with her partner and there was a daughter to that relationship. 

7. It was not long into this commercial arrangement that both agree things changed.  The applicant referred to the parties becoming “more intimate” and discussing backgrounds.  The respondent talked of no longer being paid as an escort by the hour because there was an agreement that it was “inappropriate given the intimate nature” of their relationship.  Having said that however, the respondent later complained that taking on that type of relationship meant that she suffered financially.

8. In 2009, the applicant fell ill with a collapsed lung and was hospitalised.  The respondent flew to F Town and stayed some days in the applicant’s home after he was released.  But even there, the applicant was also assisted by his employed staff.  That assistance was disputed by the respondent but as the evidence of Ms G was not challenged, I accept that other assistance was provided to the applicant beyond that provided by the respondent.  Even so, I accept the respondent put herself out in her care of the applicant for that limited period because of her friendship towards him rather than for commercial reward.  It was the respondent’s evidence that she continued to provide what the applicant wanted from her because of his statement said to have been made in 2009 that he would “buy” a house for her.  The respondent would have the court accept that by 2009 the earlier house-buying suggestion in about 2006 had moved to a definite commitment.  Nothing in the evidence corroborates that and I reject it as implausible. 

9. The applicant’s evidence on the other hand was that he formed a deep relationship of love and affection for the respondent and he was content to be generous but it was not until “later in the relationship” that he said the respondent raised the issue of wanting a house.  I accept his evidence about that because until then, nothing suggests that he baulked at paying periodic amounts to the respondent.

1. In this same 2009 period when the parties were living in two different cities, the respondent claimed she was asked to assist the applicant with his business because of her interest in design and marketing.  She set out the “work” she did in relation to his business.  Whilst some of these specific details were not challenged, the applicant’s evidence was that the respondent had difficulties in the sense of not being satisfied with the various tasks she was given.  His sale advertisements, as an example, were undertaken by the respondent for some time but they were not successful and the applicant had to either re-do them or he organised alternatives.  The respondent was paid for her work and she did not deny that she made “mistakes”.  The arrangement might have arisen from their friendship but it was still commercial in nature. 

2. The respondent claimed that she was spending time with the applicant and as a consequence, made “sacrifices” and “endured” his behaviour because of his earlier statement that he would buy her a house.  That endurance included talking with him each night that she was away from him and reassuring him of her interest in him by replying to his text or email messages.  She bought him gifts but with his credit card.  Throughout these periods apart, the respondent continued to live with her partner and daughter and that relationship was always known to the applicant.  As such, it defies logic to say that this was anything other than a commercial arrangement except with friendship considerations thrown in.

3. The respondent claimed that as a result of being with the applicant, she lost the opportunity not just to work as an escort but also to be with her own family.  I accept that to a point but do not know how that can be quantified.  The only relevance of this evidence lies in its context.  The applicant was besotted with the respondent and generous because she fulfilled his needs.  His attachment to the respondent becomes relevant in the next phase of the relationship when he sold his business in F Town and decided to move to Melbourne.

4. Whilst it appears on the evidence that the respondent was dependent upon the applicant’s largesse, I am unable to determine (and do not need to) whether the respondent could have, or did, seek other work or other support.  Her dependence was a choice with which both parties were content.  For so long as she kept him content, she benefitted through the payment of her rent, various sums of money and gifts but I again do not accept that the suggestion of a house purchase was made from the earliest part of the relationship as maintained by the respondent.  Nothing corroborates the respondent’s statement that the applicant offered to buy her a house in circumstances where it could have been corroborated.  At no time did the respondent put that request or confirmation in writing.  They wrote about other things.

5. The parties not only exchanged emails but each was not above writing humorous and touching notes to the other about the nature of their relationship.  In one example, on an occasion when they were dining together, the applicant passed the respondent a note saying that he had concerns about whether or not she was serious about their relationship having regard to his age.  Despite being opposite him, she responded by writing that she could be bought by him if he bought her a luxury car.  There was other correspondence in which he indicated that having regard to the amount of money that he had paid towards her breast enlargement, he considered he “owned” them.  This sort of correspondence might be construed as humorous but it also had a material flavour about it and nothing in that period of time indicates that the offer of a house was made. 

6. At best, the evidence of the respondent was vague and imprecise as to the timing of the statements she said the applicant made to her about a house.  All of this is only relevant to the extent that it is the respondent’s case that she felt trapped and only continued the relationship because she was still endeavouring to get what she wanted.  Thus, I do not accept that the offer of a house was made up until this point in the chronology.  If indeed it had been, one wonders why the applicant would have continued to pay rent for the property in which the respondent lived. 

The move to Melbourne

1. It was most probably in early 2010 that the applicant decided to sell his F Town business and move to Melbourne.  He asked the respondent to move to Melbourne too.  From their discussions, an agreement was reached that the applicant would buy the respondent a house in Melbourne.

2. The respondent had reservations about such a move because she and her partner had no connections with Melbourne and her daughter was settled in school in Brisbane.  From the respondent’s perspective, the compensation for the move was to own a home.

3. At [87], the respondent described a conversation with the applicant in which she said she told him she “required” the anticipated property to be registered in her name so that if something happened to him, she could not lose it.  Rather than reject the respondent’s request, the applicant agreed and then said he would also buy a home for himself near the respondent so that they could “see each other regularly”. That is exactly what happened.

4. In his affidavit at [56], the applicant set out discussions about paying the respondent a monthly allowance as well as her house expenses and school fees for her daughter.  Thus, this was not just a case of the respondent getting the house.  To enable her to live there, and not work, (and apparently not be supported by her de facto partner) she considered, and he agreed, she needed to be financially supported.  The benefit to him was companionship.

5. The impression the respondent gave by her evidence was that this was tough bargaining but I accept the applicant was proactive in his offers because he well knew there was no prospect of the respondent moving to Melbourne without his considerable financial assistance.  He knew of her partner’s lack of employment, her limited resources and her dependence upon his largesse.  In addition, the respondent had her obligations towards her daughter.

6. The move to Melbourne was therefore always going to be on the basis of her care for the applicant.  For him to be so entertained, the applicant had to provide her with the long term security of an unencumbered home.  I find as part of this security, he was also content to pay for the respondent’s living arrangements.  At no time did he require the respondent to be self-sufficient.

7. In July 2010, both the applicant and the respondent separately moved to Melbourne having already considered the acquisition of B Street which each had seen on the internet. 

8. Obtaining occupation of B Street, even if successful in buying it, would have taken some time, so the applicant rented an apartment for himself and another apartment for the respondent and her family.  The physical contact between the applicant and the respondent occurred at his apartment not hers.

9. During these same months, the applicant sold, and settled his F Town business.  The business was owned by PPL.  The bulk of the applicant’s wealth was tied up in PPL. 

10. Two days prior to the auction (15 July 2010) the applicant had a conversation with his solicitor Mr H of the firm J Lawyers.  This was by telephone and Mr H noted that the applicant was looking for a property for the respondent and that he wanted to make a gift to her.  He told Mr H that he would be placing funds into a joint account for the respondent to access in the event that he died before settlement.  Each of those statements to the solicitor became a reality.

11. Mr H kept file notes and made reference to the gift but then added the words in his notes “not a loan”.  The statements of the applicant were sufficiently descriptive that the solicitor noted that the applicant believed he would be looked after as he had been in the past.  So confident about the longevity of this arrangement was the applicant that he told the solicitor that no documentation was required.  Mr H said he raised the necessity for the purchase to be documented.  It was the applicant who told him it was unnecessary.

12. No reference was made in the solicitor’s notes about how this gift was to be funded. 

Mr K’s evidence

1. Mr K has been the accountant for the applicant and his business for many years.  His affidavit of evidence in chief was vague as to detail.  He confirmed that between June 2010 and 15 July 2010, he had seven telephone conversations with the applicant.  In summarising a number of those discussions, Mr K relevantly said that it was the applicant who told him of discussions between the parties.  Mr K said that in the course of the discussions he suggested to the applicant it would most likely be best to use the funds from PPL to complete the purchase of the properties.  Common sense dictates that that was so because Mr K knew the applicant had no other resource of that nature and there was no suggestion about borrowing for this purchase.  Mr K knew the applicant’s money was tied up in PPL.  In his evidence, he added:

   But that the payments from ([PPL]) to each of (the applicant and the respondent) would be best structured as loans.

2. On the day prior to the auction (16 July 2010) the applicant had a conversation with Mr K.  Unfortunately, Mr K had no independent memory of some of these discussions and in particular, the conversation on 16 July 2010.  His notes, such as they were, appeared either in his diary or he made them on a piece of paper that was ultimately translated into an even more cryptic form of note on a time costing sheet.

3. The conversation between Mr K and the applicant on the day prior to the auction was in a face to face meeting.  The applicant said that Mr K said that his initial view was that the funds from PPL could be used “but most likely would need to be in the form of loans from (PPL) to (the respondent) and myself”.  All that Mr K noted was that he discussed “financials to be prepared” because it was just after the end of the financial year.  The financials were required for PPL.

4. Nothing in the notes of Mr K indicates a conversation on 16 July about how the money to acquire a house was to be taken from PPL.  This was the same day that the applicant withdrew $125,000 from PPL’s bank account to be used for any required deposit.  The action of the applicant does not sit comfortably with any suggestion that Mr K was troubled (if he was) about drawing money out of PPL.  It is conceivable that Mr K may have worked on the assumption that whatever was done by the applicant would be fixed up subsequently by various book entries.  That concept can be seen from the fact that as early as 6 July, the Division 7A loan consequences of what the applicant had done were contemplated.

5. The time recording sheets of the accountant showed that on 6 July, a tax partner of his firm looked at the consequences of a Division 7A loan.  Admitted into evidence was a document (Exhibit 3) which makes reference to the applicant giving the money to the respondent. That document looks at such a gift prospectively because it anticipated the applicant buying a home for the respondent.  The evidence remains unclear but it is conceivable, and probable, that the advice about the consequences of the applicant drawing on PPL’s money was considered on 6 July.

6. Mr K’s evidence from his memory and the vague references in the time sheets was about both the applicant and the respondent each having a home and as best he could recall, the way to get the money out of PPL was by structuring it as “loans” because otherwise there would be significant tax consequences.  I do not accept that there was a specific discussion about the structuring of a loan to the respondent prior to the auction.  Even if there was some vague discussion, Mr K had not met the respondent.

7. Thus, I accept the applicant was not lending his money (as drawn from PPL) to the respondent and Mr K’s focus was how best he could avoid the applicant having to pay tax.  This whole case looks through that prism.  There was nothing illegal about the actions that followed in relation to tax.

The auction

1. The applicant and the respondent attended an auction on 17 July 2010 and he was successful in bidding at $1.12 million.  There was some controversy about what happened next.

2. In his affidavit at [67], the applicant said he wished to show his commitment to the relationship.  He said:

   (The respondent) and I discussed this issue (the commitment to the relationship) immediately after the auction concluded and agreed that the property would go into her name.

3. The applicant then said that it was not his intention that the purchase of the home be a gift to the respondent but he then went on to agree that within a day or two after the auction, a discussion took place about him having to borrow money from PPL and that he had been speaking to Mr K about the best way to use the funds in PPL.  By this time, the auction contract had already been signed.  It named the respondent as the sole purchaser and she signed the contract. 

4. The applicant added that in this conversation some day or two after the auction, he raised the subject of a loan and that it might “well end up being in the form of a repayable loan from (PPL) to (the respondent)”.  That evidence is implausible because I do not accept that Mr K had given any advice at that time to the applicant about structuring a loan from PPL in the name of the respondent.  That was to come later. 

5. I find that at all times until the moment of the execution of the contract at the auction, the house was to be in the name of the respondent to achieve the agreed outcome.  Immediately after the auction, the parties celebrated.  Neither party suggested that any discussion there took place about restrictions on the respondent’s ownership or about any loan to the respondent by PPL or the applicant.  By this point, the respondent had her house; now the next step was for the applicant to buy his.

The sourcing of the money

1. The deposit for the purchase was provided by the applicant from the money that he had drawn the previous day from the bank account of PPL.  As to the balance of the purchase price, the applicant’s evidence is vague in relation to when he discussed the issue with the respondent.  He said in his affidavit [68] it was either at the time of the purchase or within a day or so thereafter that he had to borrow from PPL to pay the deposit and that he had to get advice from his accountant about how to obtain the money to conclude the purchase. 

2. I do not accept that the applicant told the respondent he was borrowing from PPL to pay the deposit.  No reference was made to it on the day that he withdrew the money from PPL’s bank account even though that was the day that he spoke to the accountant.  On the basis that he was the sole director of the company and the business it conducted had been sold, there was, or was to be, significant cash in the bank.  The applicant saw that money as his own even if the accountant had to work out how he was to get it.  I find he had not contemplated any significant consequences for simply drawing down the company’s money.

The evidence of the solicitor and the accountant about the source of the money

1. No evidence from the solicitor Mr H refers to the source of either the deposit or indeed, the balance of the purchase price.  The accountant Mr K corroborates the applicant’s evidence that time was needed to work out how the money was to come out of PPL for the balance of the purchase price but I find that was a reference to the most tax-effective way of the applicant getting his money.  In my view, none of that is relevant from the respondent’s position because she simply understood the applicant was buying her a house. 

2. Before and after the auction, the applicant well knew that the respondent had no money and it had never been suggested that she was to borrow any for the purchase nor could it be so suggested as she had no income.  It was never suggested that the applicant was to have some charge, mortgage or control over the title which was to be in the respondent’s name alone.

3. The applicant’s evidence that he had to get advice from Mr K is an unequivocal indication that he was providing the money from within his own resources.  Both Mr K and Mr H said the loan out of PPL was to be “structured”.  I find that the applicant was giving the respondent the house rather than the money to buy one.

4. In his evidence [68.3], the applicant said:

   I added that the initial indications of [Mr K] were that ([PPL]) would loan the funds to (the respondent) and myself so that the properties could be purchased.

5. The respondent denied any such conversation occurred and while her evidence was also often vague about their discussions before the move to Melbourne, I find the applicant’s version of any discussion about a loan to the respondent at this time, implausible.  I have no doubt such a discussion did occur much later. 

6. At [68.4], the applicant said:

   I added words to the effect that the money and the property could not be gifted to (the respondent) but, based on what I had said, there would be a loan…

7. The notes of the solicitor make clear that from his professional perspective, he understood from his instructions that the house was to be a gift.  No reference was made to any loan or anything consistent with an encumbrance.

8. The applicant had also said [68.3] that he had told the respondent he would need his accountant’s advice “as to the best way to structure the arrangement”.  Albeit the respondent denied any conversation occurred on the day of the auction or within days of it, that too is implausible.  Nothing in the evidence suggests that the respondent was intimately aware of the financial structure of the applicant’s resources and nothing suggests she was inquisitive either.  She knew of the sale of the business because she had been involved in the winding up of the applicant’s activities but nothing suggests she knew more than that the applicant had the financial wherewithal to buy the house.  She knew he had the money for a purchase in excess of $1 million because he told her that she could look for houses in that range. 

9. Thus, at the point of the auction and in the days preceding it, I find the respondent was not interested in the question of any “structuring” arrangement.

10. It goes without saying therefore that I reject the applicant’s evidence at [68.4] where he said:

    I said it might well end up being in the form of a repayable loan from ([PPL]) to her.

11. I also reject the applicant’s evidence:

    [68.5]I recall that (the respondent) replied by saying words to the effect of “That all makes sense”, “I am happy with that”, and that she would be happy to abide by (the accountant’s) recommendations.

12. There was no basis for the respondent to say such things because the decision to move to Melbourne was on the condition of her being given a house.  To suggest that her house would somehow be encumbered was never part of the arrangement to the point at which it became hers.

13. The applicant had also engaged J Lawyers on 19 July (two days after the auction) to act for him on that sale but Mr H had no involvement of any significance over the ensuing weeks because the preparation of the documents was undertaken by a conveyancing clerk.

14. On 29 July 2010, the applicant opened a joint bank account with the respondent.  Although settlement was still some weeks away, the $1.1 million was deposited in that joint account to ensure that if anything happened to him, such as him dying, the respondent’s position of being able to complete the purchase, was protected. 

15. From the joint account on 25 August 2010 (still two weeks out from the settlement) the necessary funds were transferred to J Lawyers.  Nothing in the evidence indicates that on 29 July, 25 August or 6 September anyone expressed any concern about the structuring arrangement such that a loan was to be raised in which the respondent was to be the debtor. 

The accountancy meeting 8 September 2010

1. The respondent was not present on 8 September 2010 when the applicant met Mr K.  The discussion on this occasion was about the purchase of the respondent’s house and that the money was to come from PPL.  The accountant advised he was conscious of the tax implications and would then give “thought” to how they were to be handled.  The implication is that by this date, there was still some uncertainty about what was to become of the loan.  The timesheet references of the tax partner addressing Division 7A are all subsequent to the 8 September meeting.

2. The unchallenged evidence of Mr K is that at the meeting, the applicant said he anticipated shortly buying another house but this time for himself.  Thus, the accountant was tasked on 8 September with finding a tax effective way of getting all of this money out of PPL.  It is significant that no decision had been made about how to do that bearing in mind the respondent’s house had already been purchased and the applicant was about to spend more money.

The applicant purchases a house

1. Twelve days after settling the purchase of the respondent’s home and ten days after the meeting with the accountant, the applicant purchased his own house by auction at a price of $1 million.  The day before that auction, he transferred $115,000 from PPL to his personal account.  It is significant that he did not transfer that money to the joint account; there was no need because this was to be his home.

The loan arrangements

1. The issue of how to get the money out of PPL was crystallised on 1 November 2010 by a letter dated that day relating to the best way to structure the withdrawals of PPL funds.  On 4 November 2010, the applicant met Mr K to discuss the letter of advice received.  At [76], the applicant said he then told the respondent that the money from PPL was “being loaned to us” and was to be repaid over many years.  Although the respondent was absent from that meeting, the applicant told Mr K that the respondent said she was “happy” with that arrangement and she would sign a written agreement confirming it.  The respondent denied any such conversation occurred with the applicant.  My finding about that follows below.

The meeting on 16 November 2010

1. A meeting then took place with Mr K on 16 November 2010.  This time, the respondent was present.  The evidence of the applicant about this meeting was that both he and the respondent told Mr K that they accepted his advice and were happy to sign an agreement confirming the loan.  He said that “we” told Mr K that “we” thought, as a matter of prudence, the respondent should sign an acknowledgement or agreement confirming her loan from PPL.  He said the accountant agreed it was prudent because he would then have something to produce to the Tax Office if a query was raised about the commercial nature of the advance having regard to his relationship with the respondent.

The applicant’s evidence about the loan

1. The applicant’s evidence about the loan remains confusing. One thing which contributed to that confusion is the distinction between the “loan” that enabled the purchase of his house and the drawing to buy the house for the respondent.

2. At paragraph [55] of his evidence, the applicant said that in discussions in early 2010, he told the respondent that they would have two houses; one for each of them. Having regard to the respondent’s position at that time about living in Brisbane, having a daughter in school and knowing no-one in Melbourne, I find the applicant was offering her a house without strings attached. Indeed, at [56], he said that the discussion descended into detail about giving the respondent a weekly sum as expenses for “her” house.

3. The issue of any “strings” being attached only appears in the applicant’s evidence by reference to the events after the auction. This was a “day or two” after the auction and after their celebration at being successful at it.

4. When cross-examined, the applicant said that the money he lent was to be repaid as part of a “program” over 20 years. This detail was not consistent with the evidence of the advice of Mr K.

5. Mr K wrote to the applicant on 1 November 2010 (Annexure GDH 9) and said that dividends would be paid to him each year sufficient to cover any debit loan issues and not to cause him any tax payments. Mr K suggested splitting the “loans” into three loans. A careful examination of that concept shows that Mr K was not just referring to the options open to the applicant but rather, distinguishing between the money drawn down from PPL to buy the house of the respondent and that used for the applicant’s house. Of the three loans, only the first can reasonably be seen as applying to the money provided to buy the respondent’s house as the other two refer to “MrH”.

6. There is confusion about these “loans”.  By 1 November 2010, the respondent’s house settlement had taken place.  She was the owner of an unencumbered home.  The applicant referred to the loan to the respondent as being for 20 years.  Mr K wrote about it (or one of the loans) being for 25 years.  The third loan contemplated by Mr K was to cover the “balance of the [MrH] loan” and this needed some “fine tuning” but for tax purposes, it would have to be for seven years because it was not secured.

7. Mr K’s 1 November letter went on to say:

   The big issue at some point in the future is dealing with these loans. There may be some remaining undistributed profits that will have to be paid out as dividends (with franking credits) and (the respondent’s) ‘loan’ would be paid out tax free upon liquidation of the company.

8. A number of things stand out in that last statement. The first is the reference to ‘loan’ and why it was in quotation marks. Mr K could not explain why he did that but as a professional, it must have meant something to him at the time. Having regard to the timing of the advice and the uncertainty around how the applicant’s problem was to be resolved, I find that it was most likely considered by Mr K that the most tax-effective structure was a loan. Secondly, the distinction between the three loans, two of which had specific terms for repayment, also had to satisfy the Australian Taxation Office. The specific “loan” to the respondent was to be paid out on the liquidation of PPL which suggests there was nothing pressing albeit that the accountant had to deal with whether or not the “loan” was to an “associate” of the applicant which may have attracted the attention of the Tax Office.

9. After receipt of that 4 November advice, the applicant said he spoke to the respondent and told her that the loans would be repaid over many years. That discussion is disputed by the respondent and her version is likely to be correct. That is so because the advice of Mr K as to how to deal with the money taken from PPL was still unresolved. I accept that at least by this time, nothing of a contractual nature had been discussed albeit it seems clear that some structuring was being contemplated to avoid “tax payments”.

10. The respondent’s view of the meeting at which she was present was that there was a “fake” loan discussed.  No other witness used the word “fake”.  The respondent referred to the word “fake” in quotation marks to convey the message that that word was used in the meeting.

11. Mr K said that he had the meeting on 16 November 2010 for the purposes of talking to the applicant and the respondent about the loans from PPL referred to in his 1 November letter.

12. At the meeting on 16 November 2010, there was discussion that this “loan” arrangement had to be acknowledged by the respondent.  For some reason, the solicitor, rather than Mr K, was to be responsible for the necessary documentation. 

13. A meeting was set up with Mr H on 23 November 2010.  In addition to the applicant and the respondent, Mr K was also to be present. 

14. At [78] the applicant said that the respondent instructed J Lawyers to prepare an acknowledgement of the loan.  Apart from denying that she gave those instructions, it would be inconsistent with the lawyer acting that way bearing in mind the applicant had been his client for many years and he only knew about the respondent from what he had been told.  He knew of the nature of the unusual relationship.  Nothing in the notes indicates “instructions” were given by the respondent and Mr H makes no such reference. 

Mr H’s evidence

1. At a meeting on 15 November 2010 which did not include the respondent, there was discussion between Mr H, Mr K and the applicant about the taxation implications that would be likely to arise as a result of what the applicant had done and that documents were required to confirm the “loans” between PPL and the applicant as well as the respondent.

2. In his evidence, Mr H said there had been discussion between the applicant and Mr K before this meeting which included matters of tax. That statement did not appear in his notes and I consider his evidence was not accurate as to what occurred. He did not set out in his affidavit the details of discussions with the respondent but he said of his understanding of his discussions with Mr K and the applicant:

   (I)t was not possible for (the applicant) to give a property to (the respondent) as he did not have the resources to do so. Instead, it was necessary for funds to be borrowed from ([PPL]).

3. Mr H said that he understood the applicant and respondent had agreed upon the structuring of loans to deal with the tax problem. He knew that the respondent’s house had already settled in her name alone because his legal firm had undertaken the conveyancing. From his perspective, it was after that settlement that the question of how to deal with the source and consequences of the money arose. In cross-examination, Mr H said he was working from memory but I note his concession that, despite being a lawyer, he did not draw the trial affidavit. He signed what was given to him by the applicant’s solicitors but it was only in cross-examination that he acknowledged that he could not specifically remember conversations with the respondent about her agreeing to this loan documentation. That was unfortunate because Mr H had generally made detailed notes of other things. It seems he accepted what he was told by Mr K and the applicant that the respondent had agreed to the arrangement that Mr K had in mind yet, he made no note about it when he actually met her. Bearing in mind the potential for a conflict of interest here, the absence of notes, and specifically not having sent the respondent off to get alternate legal advice, seems very odd.

4. There is also significance in this vagueness because the proposed arrangement was to involve PPL and while it might be understandable that the respondent and the applicant were entering into an arrangement about a loan, nothing in Mr H’s evidence indicates how the respondent understood that what was being suggested was a contractual arrangement with PPL. In any event, this proposed arrangement required his attendance upon the respondent. Apart from the enforceability at law of the proposed arrangement, the lack of concern by Mr H about getting independent advice and making notes about what was actually said, in my view supports the respondent’s view that she was not being asked to commit to any legally binding arrangement. That becomes an important consideration when I consider below the authorities about what are legal relations. As already mentioned, it must be remembered that the respondent described this arrangement as a fake loan.

5. My concern is heightened by the fact that it would seem that the respondent’s first meeting with Mr H was when she gave instructions for a will. Her will was signed on 23 November which, on my understanding, is when the applicant returned to Mr H with Mr K present and the respondent as well.

6. Despite signing her will on 23 November, the respondent along with the applicant had to again return to Mr H to execute the documents he was to prepare. The concepts that had already been discussed with the applicant and, as the plan had been agreed, Mr H had to draw the documents. Those were to include PPL.

7. At this 23 November meeting, Mr H led the discussion to the effect that by accepting the loan arrangement, the problem of the deemed dividend issue would be overcome but he also thought it would be prudent to have the arrangement documented because the Tax Office might otherwise treat the drawn funds as a taxable dividend in the hands of the applicant. In his affidavit, having said the deemed dividend was a problem for tax purposes, Mr H added (as to the dividend) “which it was not”. There is nothing in his notes to that effect. Having regard to what he wrote in his notes in July about the absence of any strings attached to the money, I consider the detail in the affidavit unhelpful. The steps taken by Mr K and Mr H to enable the applicant to avoid the tax consequences were not illegal but I find the whole arrangement was structured purely for the purpose of tax avoidance. That finding leads inexorably to the question to which I shall come, about whether the respondent was correct that all of this discussion and paperwork was about a “fake” loan as she called it; or, whether she was entering into some binding contractual relationship. I am concerned that it was only when Mr H’s evidence was tested by cross-examination that a clear picture emerged about the latter. His affidavit, albeit not prepared by him, did not comprehensively cover all of the issues to establish just what the respondent knew, understood and agreed upon.  I have no understanding of what discussions took place between Mr H and the respondent about the contractual obligations, if any, involved.

8. The applicant and respondent had to return to Mr H on 30 November to sign documents. Curiously, whilst the respondent signed documents that day presumably to give effect to Mr H’s concern that the Tax Office would want proof, the deed relating to the applicant’s loan was not executed until about a year later.

9. On 30 November, the respondent signed the acknowledgment document given to her by Mr H and it would seem that the applicant signed his will.

The acknowledgment

1. The document that the respondent was asked to sign was headed “Acknowledgment and confirmation of loan” and dated 30 November 2010. The relevant sentence in this document is:

   ([PPL]) has loaned to (the respondent)…. and (the respondent) hereby acknowledges that is (sic) has borrowed from ([PPL]) ……which ….shall be repaid by (the respondent) at the expiration of seven years from the date hereof.

2. The money had already been provided which gives rise to how a contractual obligation could arise. Notwithstanding the written advice to the applicant from Mr K only a few weeks before about the loan otherwise being repaid through the liquidation of PPL, this part of the document seems to have arisen out of the discussion led by Mr H on 23 November. Why the change to specify seven years is unclear.

3. The respondent said she was told by the applicant that she needed to attend the solicitors to sign “a document”. She thought this was in early December 2010 for the sole purpose of the applicant signing his will. She was obviously wrong about the date but she recalled attending the offices of Mr K earlier where “there were discussions” about the need for what was called a “fake loan to minimise tax”. I find that she was confused and wrong about those matters but none of what she said changed the dynamics of what happened.

4. She said that there was no discussion when she was with Mr K about her entering “into any legitimate loan” and the first time she was required to sign a document was at the December meeting. Incorrect though that may be, the sequence of events is largely right. The respondent’s evidence differs from that of Mr H about the meeting at his offices on 23 November but it is correct that, apart from her will, the first time she was required to sign any document about a loan was thereafter.

5. The respondent explained her logic in signing the document. She said that she was told that the applicant would receive a tax bill unless she signed an acknowledgment of a loan stating that the funds he had given her were borrowed from PPL. She said this distressed her because she thought she owned the house.  She said she had not seen the acknowledgment document before she signed it and that is consistent with the evidence of Mr H.  She said that both Mr H and Mr K assured her that the acknowledgment was purely for taxation purposes to avoid an anticipated tax debt of $250,000. She said she was reassured the loan would not have to be repaid.

6. I accept the respondent’s evidence because the applicant agreed that this loan idea was something conceived by his lawyer or his accountant. As to the “7 years” concept in the document, the applicant could only say that it was a matter for the accountant. It was put to him that repayment of this loan was never his serious intention but he answered that it was to be repaid “little by little each year”. That was not consistent with the advice of Mr K nor with that of Mr H. When he was asked how the respondent would repay it, the applicant directed the cross-examiner to speak to the accountant. Indeed, he conceded that he had left it to “the experts” to “work it out”.  The applicant volunteered that the respondent wanted the loan paid earlier than the 20 years.   I reject that for the reasons that follow.

7. The duration of the loan by PPL and the respondent’s responsibility for paying it was also the subject of the applicant’s will executed on 30 November. There were some drafting errors in the will which add to the confusion but if what was written was intended as a reflection of whether or not the loan was repayable, it does not assist the applicant.

8. Paragraph 5 of the will provided that if the respondent predeceased the applicant, her loan was to be paid out of the residue of his estate. One could infer that on her death, any debt due to PPL that the respondent still owed was not to be called up. She had at least one asset that could have satisfied the debt.

9. On the other hand, if the respondent did not die before the applicant, his residuary estate was to pay out any loan owed by the respondent to PPL. That is significant because the respondent was not to benefit from the residuary estate; she was to receive the specific bequest of his house subject to any debt to PPL and his shares in the company provided she took on responsibility for any loan he owed PPL.

10. The fair reading of the applicant’s will is that he considered the loan by PPL to the respondent was not seriously intended to be repaid by her.  

Mr K’s evidence

1. The role of Mr K has already been mentioned and in particular, the absence of any contemporaneous notes.  He had no independent memory of a number of things.  His view was that events were “fairly clear” but I doubt that.

2. Mr K’s concern about a gift was that the receiver would pay tax but if the person who received it was a “non-associate” of the company, there would be no tax.  That makes sense because a person unconnected with the company would be receiving an arms-length loan but of course that raises the question of whether or not the relevant contractual principles were met such that in the event that the loan was called up and had to be repaid (such as in the case of a receiver being appointed) the loan could be seen to be enforceable according to law.

3. Like Mr H, Mr K only met the respondent well after the purchase of B Street had settled.  Understandably, as an accountant, he was troubled about the money being drawn from PPL because of those tax implications.  It was not until the meeting in Mr H’s office that he spoke to the respondent about the problem.  Even there, he could not remember any specifics of the conversation.

4. Drawing all of that together, a number of things satisfy me that there was no real intention to create a loan. First, there is what I consider to be the conflicting versions about the duration of any loan. Secondly, there is the respondent’s view, which I accept even though the words may not necessarily be accurately reported by her, that this was a “fake” loan. Thirdly, there is the fact that the respondent had no means to repay the loan and the applicant knew that. Fourthly, there is the applicant’s will. Finally, there is the fact that Mr H knew the house was to be a gift when he first spoke to the applicant and thereafter, the focus of both he and Mr K was about protecting the applicant against the tax liability.

1. I turn again below to the legal concepts that must be contemplated before any such relationship can be binding at law but it must now be obvious that I reject the applicant’s suggestion that the various discussions were about a legally binding and repayable loan.

Did the acknowledgment create a contractual obligation?

1. The applicant and PPL urge the Court to find that the respondent’s conduct in agreeing to and acknowledging the debt to PPL must mean that she has a legal obligation to pay it.

2. The applicant submitted that whether there was an intention to create legal relations requires “an objective assessment of the state of affairs between the parties…distinct from the identification of any subjective reservation or intention” (Lakis v Lardis [2017] NSWSC 321 citing Ermogenous v Greek Orthodox Community of SA Inc [2002] 2009 CLR 95). Here, the applicant asserted there was an oral contract later confirmed in writing. He submits:

   (a)When the relevant conversations took place there was an agreement that the funds provided by a loan from PPL was discussed on or about 17 July 2010, on or about 8 September 2010 and on or about 4 November 2010;

   (b)There was formality and precision in the language used because the applicant told the respondent the funds could only be provided through a repayable loan from PPL and the respondent accepted that offer including in the language of contract;

   (c)The nature of the purported obligation was by loan agreement, the type of which was frequently the subject of legal relations;

   (d)The obligations were capable of sufficient definition (citing Ashton v Pratt [2015] NSWCA 12 to which I turn below) and the terms of the loan were capable of definition and sufficiently defined;

   (e)The obligations were capable of enforcement; and

   (f)The agreement was documented.

3. The respondent’s position was that the objective circumstances were inconsistent with any bona fide loan including the fact that the applicant knew the respondent had no way of repaying the money involved, there was no interest accruing on the loan and there was no intention to create legal relations.

4. In deciding whether the conduct, statement and documents gave rise to an intention to a legal relationship, it is timely to recall that the payment of the total sum of money was not one payment but at least two and possibly more. The first payment was the deposit. That payment came from the applicant’s personal bank account as he had drawn the anticipated funds from PPL just before the auction. The second payment was the balance of the purchase price at the settlement and here, the applicant had again drawn on PPL.  This time, he placed the money in a joint account opened for the specific purpose of enabling the settlement to proceed in case of his involuntary absence. I have made reference to possibly more payments because there were no doubt conveyancing fees, stamp duty and the like.

5. Whether a contractual relationship arises depends “upon all the circumstances” (Israel v Foreshore Properties Pty Ltd (in liq) (1980) 30 ALR 631) so all of what occurred is relevant.

6. The applicant referred to Ashton v Pratt [2015] NSWCA 12. There, in 2003, Pratt had promised Ashton significant financial benefits on the basis that she would be his “mistress” rather than continuing her work in the escort business. In early 2005, Pratt’s company offered her $100,000, and the transfer of a motor car, in full satisfaction of her claims against Pratt. For reasons that are not relevant here, Ashton later signed a document entitling her to $50,000 in full settlement of her claims against Pratt although she ultimately said she did not receive it.

7. The trial judge found the 2003 terms were sufficiently certain but they were not intended to create legal relations. On appeal, an issue was whether the conversations gave rise to a binding contract. Bathurst CJ, with whom McColl JA agreed, observed that a contract that constitutes a family arrangement does not raise any presumption regarding an intention to contract but is part of the surrounding circumstances mentioned in Ermogenous (supra). After examining the evidence, the Court of Appeal held that the parties had not intended to create legal relations and even if they had, the contract was void for uncertainty.

8. An objective examination of the facts of that case would see what might reasonably be described as wild and unrestrained offers of financial help by Pratt in return for Ashton being available to him when he wanted her. In deciding the intention to create legal relations, Bathurst CJ interpreted the conversation not as an agreement to provide financial benefits if Ashton did not go back into the escort business but rather, as the Chief Justice described it, (at [76]) Pratt saying :

   I’ll help you by establishing the trust so you do not have to go back into the escort business.

9. The Chief Justice said:

   Even ignoring the informality, this does not seem to me to be the language of a legal binding contract.

10. The Chief Justice referred to other conversations which he thought were not in the language of offer and acceptance in a legal sense because this was simply Pratt helping Ashton. McColl AJ agreed with the reasons of the Chief Justice. Meagher J observed (at [225]) that at no stage in the conversation was anything said by either party that conveyed to the other that the promise was to be legally enforceable.  His Honour’s approach was this (at [227]):

    The subject matter of the conversation....was the satisfaction of Mr Pratt’s ‘needs and wants’ which he described as including Ms Ashton providing him with ‘love and affection’. At the same time Mr Pratt sought to emphasise that in offering to make somewhat extravagant payments to Ms Ashton he was not ‘just there to use (her)’ but wanted to help her financially.

11. Pratt’s case revolves very much around its own particular facts but it highlights the importance of focusing on intention as objectively assessed.  The applicant knew that just providing the respondent with a house to enable his “wants and needs” to be fulfilled would not be sufficient because he agreed to contribute towards the respondent’s living costs.  Until at least the auction, his promises would not have been legally enforceable using the Pratt approach which I accept.  There was no de facto relationship and marriage was not then in contemplation. As Mr Glick QC observed during the hearing, what each of these parties was thinking “was only known to them and to their God”.

12. The applicant wanted the respondent close by to continue an arrangement which suited them both and, as I have found, the conversations until at least after settlement were a gift because otherwise, the respondent would not have come to Melbourne.

13. In Pratt, reference was also made to Popiw v Popiw [1959] VR 197. There, the parties were a married couple living in a home owned by the husband. They separated and two days later, the husband asked the wife to return on the basis that if she did, he would transfer the house into joint names. The wife agreed and instructions to the husband’s solicitor were so given. Shortly thereafter, the wife again separated from the husband. Hudson J held that what the husband got in exchange for his promise was “something which must be regarded as far more advantageous to him than the right of cohabiting with his wife which he had no means of enforcing and the wife in returning was submitting to a detriment by placing herself in a position which she could not have been completed to occupy”. The contract was upheld.

14. Popiw is distinguishable based on a number of considerations. The report notes there was evidence that the husband had “beat” the wife although his Honour did not think that was enough to satisfy the test of “constructive desertion”. His Honour also considered the “duty” of the wife to cohabit with the man she married. Despite the duty to live with the husband, the wife could not be compelled to stay with him because of the beatings (or presumably, the risk).

15. Almost 60 years later and with the passing of the Family Law Act 1975 (Cth) (“the Act”), most reasonable people in the community would regard that sort of approach to be wrong. Indeed, the passing of the Family Law Act would have given the husband and the wife their rights to claim interests in property based on entirely different considerations. It is also not clear from the judgment when and how the “matrimonial home” was acquired and whether the wife had an equitable interest anyway. The decision is not relevant in the current millennium nor is it of any assistance here.

16. Counsel for the applicant referred me to Priestley v Priestley [2016] NSWSC 1096 as an indication that the court could look at “subsequent conduct” to determine whether there was a contract. This was a reference to the events leading up to, and including, the respondent signing the acknowledgment. In Priestley, a son had provided farming services to his father believing he would inherit his father’s estate by his will. It would seem he had good grounds for that belief but the father changed his will without telling the son. The question for the court was inter alia whether there was a contractual relationship between father and son. Counsel for the applicant drew my attention to para [103]-[104] of the judgment of White J. At [103], his Honour said:

    Subsequent conduct is always admissible to determine whether there was an intention to contract (reference to authorities then followed)

17. In this case, a retrospective view of what occurred does not assist because I accept that the respondent had no intention of committing herself to a legal obligation to repay the applicant or PPL, anything.

18. The conversations between the applicant and the respondent did not refer to a loan until after the settlement of the purchase had taken place. I find that the applicant’s language when raised with the respondent, was that the funds of

    
    

    PPL that he took needed to be documented for tax effective purposes. Thus, the only formality and precision of legal language arose when Mr H and Mr K planned the tax structure for PPL.

19. I consider it is also important to record that, to the extent there were any discussions between the applicant and the respondent, at no time did he indicate that he was discussing, negotiating or offering to make a loan in his capacity as the director of PPL. It is to be remembered that the “loan” was recorded in the books of account. That record does not assist the applicant if he cannot establish that there was an intention to create legal relations. I do not accept that the language used indicates that the respondent was contracting with PPL. I am satisfied she thought the arrangement was just to help out the applicant because of the tax problem. That helping out is, in my view, the same sort of concept considered in Pratt.

20. The final issue is the acknowledgment document.  This focuses on whether the document amounts to a binding contract with PPL. In Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20; (1954) 92 CLR 424, the High Court (Dixon CJ, Williams, Webb, Fullagar and Kitto JJ) said:

    [32](I)t is necessary, in order that a contract may be established, that it should be made to appear that the statement or announcement which is relied on as a promise was really offered as consideration for the doing of the act, and that the act was really done in consideration of a potential promise inherent in the statement or announcement. Between the statement or announcement, which is put forward as an offer capable of acceptance by the doing of an act, and the act which is put forward as the executed consideration for the alleged promise, there must subsist, so to speak, the relation of a quid pro quo.

    [33]The position has been stated above in terms of the technical doctrine of consideration, and this is, in our opinion, the correct way of stating it. But it may be referred to a principle which is fundamental to any conception of contract. It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty...(I)n order that a contract may be created by offer and acceptance, it is necessary that what is alleged to be an offer should have been intended to give rise, on the doing of the act, to an obligation. The intention must, of course, be judged in the light of the principle laid down in Freeman v. Cooke [1848] EngR 687; (1848) 2 Ex 654, at p 663 [1848] EngR 687; (154 ER 652, at p 656) , but, in the absence of such an intention, actual or imputed, the alleged "offer" cannot lead to a contract: there is, indeed, in such a case no true "offer".

21. To create legal relations here, the applicant has to show that there was consideration. The applicant offered the unencumbered house to enable his relationship with the respondent to continue.  There was no permanency discussed in any reciprocal commitment of the respondent.  Being a gift, by the conclusion of the settlement, the respondent had her house.  The document signed by the respondent concerning PPL does not reflect any consideration.  Based on the rule expressed by the High Court, past consideration cannot be deemed sufficient consideration. That is, something given (the purchase of the house) before a promise is made (PPL lending money to the respondent after the gift) cannot constitute good consideration for the promise (see Roscorla v Thomas (1882) 3 QB 234).

22. Thus I find the acknowledgment document did no more than reflect that the respondent was agreeing to be used as part of the structure to assist the applicant to avoid the inevitable consequences of his drawing down of the funds of PPL before his advisers had decided what to do.

The action of PPL against the respondent

1. Although the argument about a loan or a gift centred on the applicant and the respondent, and the applicant had sought that his money be repaid, it was PPL which brought the claim against the respondent.  The pleading asserted that on or shortly after 17 July 2010, the applicant told the respondent that “the structure of the purchase” (referring to the house) was subject to the advice of his accountant and that the respondent agreed she “would abide by” the accountant’s recommendation. 

2. In the particulars to [12] of the statement of claim, PPL asserted:

   (The applicant) said to (the respondent) words to the effect that the money and the (house) could not be gifted to (the respondent) but were being loaned.   

3. By her defence, the respondent denied [12].

4. Having already found that the house was a gift by the applicant to the respondent I reject the assertion pleaded by PPL.  I find and that never changed.

5. At [17] of the statement of claim it was asserted that on or about 8 September 2010, the applicant met Mr K to obtain advice.  I find the applicant had already taken the money out of PPL on the basis that he would later have the accountant work out how best to deal with tax issues.

6. At [19] of the statement of claim, the assertion was made that, after a discussion between the applicant and the respondent, the respondent agreed to accept the recommendation of the accountant.  The respondent denied such an assertion.  Insofar as the allegation is that the funding of the purchase was to be by way of a contractual and/or enforceable loan by PPL, I find no such discussion occurred around 8 September 2010.

7. At [22] it was asserted that after 4 November 2010, the applicant spoke to the respondent about the funds that he had already spent and that the respondent “agreed to such a loan arrangement”.  To the extent that this was an assertion that the agreement was a contract, I reject it.  I reject that such a conversation took place in that way at all on or about 4 November 2010.

8. At [23], it was asserted that on 16 November 2010, both the applicant and the respondent accepted the accountant’s advice that they were happy to sign an agreement confirming the loans.  Although the respondent denied the allegation by her defence, I accept the discussion did occur but that it was about structuring the payment to the applicant in the books of account.  I repeat what I have already said about the agreement being of a contractual nature.

9. In the alternative, PPL pleaded a “monies paid” claim asserting that the respondent required PPL to pay for the purchase of the house.  The evidence does not support such an allegation. 

10. Finally, PPL claimed the purchase was not a gift and that (at [35]), it would be unconscionable for the respondent to retain it. I find the evidence does not support such an assertion. As such, [36] and [37] equally must fail because no trust could arise in the circumstances of a gift.

The tax issue

1. Ms L is a forensic accountant whose advice was tendered about the tax implications of “a payment, extinction or alteration of” the terms of the loans made by PPL to either the applicant or the respondent.  This evidence is relevant to the question of the ultimate property that each party has because if there was no loan and the applicant alone is responsible for the tax, that affects what assets (or equity in them) he has.

2. The initial advice assumed that PPL “loaned” the applicant $640,000 and the respondent $1,184,941.

3. It seems uncontroversial that the applicant’s loan as at 30 June 2016 was $586,719.  In relation to the respondent, Ms L understood she was not an associate of PPL as that term is understood in the Income Tax Assessment Act 1997 (Cth).

4. Ms L opined that as at 30 June 2016, the distributable surplus in PPL was more than the value of the loans (that is, both loans) but only marginally so.  PPL could pay out franked dividends at the corporate tax rate of 30 per cent.

5. Ms L considered a number of options but they revolved around the status of the respondent and whether the “loan” was “forgiven”.  Other considerations such as the assignment of the loan, the liquidation of PPL, the repayment of the loan by the respondent and the “setting aside” of the loan were all contemplated but none of them is an issue here (save that which immediately follows) because I consider that the respondent’s “loan” was not a loan at all.

6. The only other possibility whereby the advice of Ms L becomes relevant is if the court found it was just and equitable to order the respondent to pay out either the tax or an amount to the applicant equivalent to the tax (as distinct from the loan) causing the sale of B Street on the assumption that the respondent could not otherwise raise the money.

7. The tax however would only be assessed on one of a number of bases.  For example, if the Australian Taxation Office determined that the loan in PPL was not a loan at all but a distribution to the applicant who bought the house by way of a gift, which is what I find occurred, the tax would be payable by the applicant.  Alternatively, if the applicant took responsibility for the loan, he would face the same, or similar, situation to that which he currently faces in relation to his own loan.  In relation to that, Ms L opined:

   (The applicant’s) loan was structured so that it was an excluded loan for the purpose of Division 7A; this avoided triggering the operation of s 109D (of the Income Tax Assessment Act).  (The applicant) has been complying with the terms of the loan as:

   -    Interest has been paid at the ATO benchmark interest rate each year;

   -    Minimum annual repayments have been made.

8. If the applicant took responsibility for the respondent’s “loan”, it is possible that no capital sum would have to be paid but the loan would remain outstanding.  No lump sum tax would arise but interest payments would have to be made.  That situation was contemplated by Ms L.  He said:

   To avoid triggering the deemed unfranked dividend (the applicant’s) new loan could be structured so that it is an excluded loan for the purpose of Division 7A.  Under this scenario, the applicant would be required to pay interest at the ATO benchmark rate and could receive as one approach, annual dividends of at least the minimum repayment amount to repay the loan.  The dividends will be able to be franked up to the franking account balance.

   The dividends paid (grossed up to include franking credits) will be treated as taxable income to the individual.  (The applicant) will receive a credit for franking credits attached to the dividend.

1. The parties sought further advice thereafter which Ms L provided by letter dated 10 July 2017.  Here, the question was asked what would occur if the court determined, as I have, there was no such loan. 

2. Ms L opined that if the Commissioner considered a payment had been made to the applicant, then a deemed unfranked dividend would arise in the 2011 financial year.  However, he said that, as that was not what occurred, the likely outcome would be a deemed unfranked dividend in the 2011 financial year unless the Commissioner applied discretion to disregard the dividend or allow PPL to frank a deemed dividend.  He thought the approach of the Commissioner depended on whether the failure to satisfy Division 7A was the result of an honest mistake or an inadvertent omission.  That is hard to conceive here having regard to the nature of the trouble to which the applicant went with his accountant and solicitor.  Ms L considered that the Commissioner may also impose general interest charges and shortfall interest charges that would arise out of an amended assessment.  He then considered that penalties could be imposed ranging from 25 per cent for failure to take reasonable care through to 75 per cent for intentional disregard of the law.

3. There can therefore be seen to be a number of unknowns but on any of the most likely scenarios, the applicant is going to be paying a significant sum of money unless the Taxation Commissioner permits him to take over the respondent’s “loan” retrospectively as there is no suggestion here that the applicant intends to forgive that loan.

How to approach the matter?

1. Mr Glick of Her Majesty’s Counsel who appeared with Mr Matta of counsel for the respondent submitted that the critical question revolved around a finding of whether or not there was a gift. 

2. Mr Glick submitted the court ought to accept this was not a loan but a gift.  He submitted that on the objective circumstances, one should conclude that the applicant had never raised with the respondent anything about any loan or encumbrance prior to the auction and that therefore it was improbable that he did so at the time he alleged it arose.  It was submitted that the solicitor’s file note shows the improbability of the applicant’s position.  I accept that.

3. Insofar as the applicant and/or PPL assert some form of trust, Mr Glick submitted that the evidence established that the respondent moved to Melbourne thereby displacing her family and there was little dispute about the way the purchase of the house in B Street was effected.  He submitted that subsequent changes could not alter the gift and that therefore, no form of constructive trust could arise.  I accept that too.

4. The only way the loan could become the responsibility of the respondent was by novation but then, how did that occur such that she became the debtor and PPL became the creditor.  No novation was alleged in the pleading.

5. I accept the respondent’s position that the applicant treated the money of PPL as his own.  Only after the event did he ask his professional advisors to find a way to avoid the taxation consequences.

6. In relation to a possible trust, Mr Glick referred to West v Mead [2003] NSWSC 161 which arose out of the termination of a de facto relationship. One of the partners there had owned a property prior to the commencement of the relationship and that property increased in value during the relationship. The other party sought a declaration for the imposition of a constructive trust over the property because she provided money that went towards it from a joint bank account into which she had contributed. As Campbell J observed at [58]:

   Before any particular asset can become subject to a constructive trust in accordance with the Baumgartner principle, one needs to have a joint relationship or endeavour, and an asset acquired in the course of, and for the purposes of, that joint relationship or endeavour.  

7. The reference by Campbell J to Baumgartner is to the decision of the High Court [1987] HCA 59; (1987) 164 CLR 137. The significance in both Baumgartner and West v Mead (supra) lies in the fact that equity intervenes where it is unconscionable for someone to claim an interest in a property.  Unconscionability was said by Jessel MR in Lyon v Tweddell [1881] 17 ChD 529 at 531 (quoted by Deane J in Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583) and explained by the High Court in Baumgartner, to be determined by a court guided by equitable principles, not by any idiosyncratic, unstructured or untutored concepts of unconscionability.  Having found that the applicant made the respondent a gift, unconscionability cannot arise.  The applicant always intended the respondent to have the home and it was at least his intention that, at various times, she would look after him.

8. The applicant knew the respondent had no money and was living with her partner and child.  In my view, unconscionability therefore cannot arise because the applicant got what he bargained for.

9. Mr Glick submitted that the accounting entry was not evidence of anything.  I accept it was deliberately created for the purposes of ameliorating the applicant’s taxation position.  As I have earlier said, that was not illegal nor improper for his advisors to so advise him.  However, to the extent that the applicant points to the potential financial position if he has to take on the responsibility for the tax debt, it is hard to see how that is relevant as a justice and equity issue when he had at all times, the benefit of the corporate entity for tax purposes and professional advisors.  In my view, he cannot point to any injustice in having to pay the tax having done what he wanted to do with his money.

10. Mr Geddes, one of Her Majesty’s Counsel appeared with Ms Burt of counsel on behalf of the applicant and submitted that there was a resulting trust here and relied upon the decision of the High Court of Australia in Calverly v Green [1984] HCA 81; (1984) 155 CLR 252. The words of Gibbs CJ in that decision indicate why that authority is distinguishable from the facts here. The Chief Justice said:

    [3]Where a person purchases property in the name of another, or in the name of himself and another jointly, the question whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser.  However, in such a case, unless there is such a relationship between the purchaser and the other person as gives rise to a presumption of advancement, ie, a presumption that the purchaser intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take beneficially.  In the absence of evidence to rebut that presumption, there arises a resulting trust in favour of the purchaser.

11. On the findings I have made, the intention of the applicant in providing the money, was that the house was intended to be beneficially owned by the respondent.  There could be no suggestion of a presumption of advancement here because the parties had never lived in a de facto relationship.  Even if one might contemplate that a loan arose subsequently, it was never suggested that the house was encumbered by that loan.

Section 79 and what is just and equitable?

1. Section 79 provides that in property settlement proceedings, the court may make such orders as it considers appropriate altering the interests of parties in their property. Significantly, s 79(2) provides that it shall not make an order unless satisfied that, in all the circumstances, it is just and equitable to make the order.

2. The reference in s 79 is not to “matrimonial” property, joint property or property accrued to the parties or either of them, during their relationship. The simple reference is to the property of the parties.

3. The first step is to determine what interests the parties have whether legal or equitable in various properties.

4. In Stanford and Stanford (2012) 247 CLR 208, the High Court of Australia determined (at paragraph 39) that it should not be assumed that the parties’ interests in the property “are or should be different from those that then exist”. That is, just because the marriage has ended, or indeed because the parties were married at all, it does not follow that there will automatically be some form of adjustment of property interest.

5. Relevantly here, in Stanford (supra), the High Court said (at paragraph 41) that the court must adhere to the “fundamental propositions” when exercising its power under s 79 which included “the need to preserve and protect the institution of marriage identified in s 43(1)(a) as a principle to be applied by courts”. That is, for parties seeking orders, unlike those for whom a financial agreement as defined in the Act applies, the parties may have “expressly considered but not put in writing” how they want their property interests arranged and the principles in s 43(1)(a) serve to “accommodate that fact”.

6. Evidence must be provided about these “stated or unstated” assumptions and the court must recognise their importance and act in accordance with the principle to protect the institution of marriage.  Thus, the court must have a “principled reason for interfering” with the property interests of the parties as they have defined them or how they were seen by the parties, during their marriage.  If it were otherwise, there would be some peremptory right to a property alteration simply by virtue of the marriage relationship.

7. In Stanford (supra), the court (at paragraph 41) made clear that the court cannot reach a conclusion that the making of an order is just and equitable “only because of, and by reference to various matters in s 79(4), without a separate consideration of s 79(2)”. To do otherwise would conflate the statutory requirements and as the High Court said, that would ignore the principles laid down by the Act.

8. There is no doubt that this court (Bevan and Bevan (2013) 48 FamLR 387) has confirmed that the s 79(2) requirement will be readily satisfied where the parties are no longer living in a marital relationship, following which, there will not be the common use of property. That does not arise here as the parties never lived together.

9. Thus, the respective interests of the parties in property are simple.  The respondent has a house which is unencumbered.  The applicant has his house and interest in his superannuation fund.  However, there are differing liabilities to contemplate as well.

10. In deciding whether it is just and equitable to alter those interests, one must take into account the assumptions of the parties.  From July 2010 onwards, there were no assumptions that the applicant would have the entitlement to the respondent’s house.  But what does the term “just and equitable” mean in the context of whether it is proper to alter the interests of the parties or more importantly, in this case, the interests of the respondent in her house?  In Stanford (supra), the court explained (at paragraph 36) that:

    The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations.  It does not admit of exhaustive definition.  It is not possible to chart its meets and bounds.

11. In Kennon v Spry (2008) 251 ALR 257 (at [95]) Gummow and Hayne JJ observed that the phrase in s 79(2):

    Appears to have its origins in the principles of equity which were developed with respect to the dissolution of partnerships, where they remained general words which were not to be reduced to the sum of particular instances.

12. The applicant’s position was that the house of the respondent should be sold (or alternatively returned to him) because she had made no contribution towards it. If that view was adopted, the court would be conflating the various parts of s 79.

13. Brennan J in Norbis and Norbis (1986) 65 ALR 12 referred to this vague notation of justice and equity and observed at page 28:

    An unfettered discretion is a versatile means of doing justice in particular cases, but unevenness in its exercise diminishes confidence in the legal process.

14. Mason and Deane JJ in Norbis acknowledged the broad width of the discretion but noted that parliament intended that approach to maximise the possibility of doing justice in every case.  However, it cannot be an arbitrary or capricious decision.

15. In my view, whilst the discretion remains broad, it is informed and constrained by what is contained in the Act itself. That is, legal principles and guidelines set down by authorities. If the discretion is to be exercised in accordance with legal principles, it is not unfettered at all.

16. In Bevan (supra) the court suggested (at [82]) that a determination of what is just and equitable can be shown by “clear implication”. 

17. This is similar to the logic used by the High Court in criminal or sentencing case of Markarian v R (2005) 228 CLR 357 where Gleeson CJ, Gummow, Hayne and Callinan JJ stated (at [39]):

    An invitation to a sentencing judge to engage in a process of “instinctive synthesis” as useful as shorthand terminology may on occasions be, is not desirable if no more is said or understood about what that means.  The expression “instinctive synthesis” may then be understood to suggest an arcane process into the mysteries of which only judges can be initiated.  The law strongly favours transparency.  Accessible reasoning is necessary in the interests of victims, the parties, appeal courts, and the public.  There may be occasions when some indulgence in an arithmetical process will better serve these ends.

18. Murphy J in Watson and Ling [2013] FamCA 57 citing Stanford, stated (at [12]):

    Provided the discretion is exercised judicially, it is at large; it is neither possible or desirable to specify its “metes and bounds”. Recognition is given to the fact that the circumstances of individual marriages (their nature, form and characteristics) can and do differ and those differences – the way in which the parties have organised and live their marriage/relationship may be relevant to the exercise of (the s 79(2)) discretion. Equally, provided that the questions required by (s 79(2) and s 79(4)) are seen as separate and applied as such, and not conflated, the enumerated factors within (s 79(4)) can inform the (s 79(2)) discretion together with any such other considerations as are properly relevant.

19. One of the “metes and bounds” is to recognise that albeit one might question whether this was a marriage at all in any sense of the legislative description, this is what both parties desired.  Its assumptions were indeed stated rather than unstated. 

20. Whilst the respondent maintained that she was “trapped” because of the commitments that she had made, she made no serious attempt to be self-supporting and whilst she did sacrifice her family’s lifestyle and moved from Queensland to Victoria, it is only now after seven years before that she has begun to pursue a career.

21. Bearing in mind the age of the applicant, logic dictates that the sort of relationship he anticipated might have been limited in time.  He knew of the respondent’s partner and her daughter and was content to provide money knowing that she was effectively relying upon him to support her family.  All of those facts indicate that I should not be too concerned about any assumptions underpinning this marriage from the perspective of either the applicant or the respondent.

22. Having regard to the way in which the parties conducted their financial lives, it is unnecessary for me to look at s 79(4) and the relevant factors there even if I could conflate those matters with s 79(2).

23. The nature, form and characteristics of this marriage were such that the parties ended up with the property that they wanted.  There are difficulties with issues such as the tax obligation of the applicant but also how the respondent was going to live absent the stream of financial support from the applicant.  But the nature, form and characteristics expose of this marriage were the following:

    ·    This was inherently a commercial type of relationship;

    ·    The move by the respondent to Melbourne was contractual in nature in that she was promised an unencumbered home;

    ·    There was no common use of property by either party;

    ·    The parties maintained very separate lives and although at times the respondent fluctuated in her views of the applicant, she unashamedly saw him as a way of supporting herself but was prepared to say in evidence that she had found him repulsive; and

    ·    There was no de facto relationship prior to the marriage and on any view, the marriage itself was short.

24. With those factors in mind, questions of contributions are not much help.  As Kay J indicated in Beneke and Beneke (1996) 20 FamLR 841, a case of a similar short relationship but with significant gifts (at page 860):

    In my view while the fact of marriage may open a door to an exercise of discretion which would otherwise not exist, it does not axiomatically follow that the discretion should be exercised merely because there has been an imbalance of contributions between the parties.  Where property passes by way of unconditional gift, then absent any other factor, it may be a proper exercise of discretion not to order the return of all or any part of the property to the donor should the marriage between the parties fail after a short time.

    Having regard to the nature of the unconditional gift here having found the loan was not an obligation of the respondent, I respectfully adopt the words of Kay J.

25. In Beneke, Kay J rhetorically asked (at page 859) what factors ought lead an appellant court to conclude that it was just and equitable and otherwise inappropriate that a wife should return generous gifts.  His Honour adopted the observations of Jacobs ACJ in Diprose and Louth (No 2) [1990] 54 SASR 450 where (at 451) his Honour said:

    In some respects this is but one more case in the annals of human relationships in which an infatuated but unrequited suitor has lavished gifts upon the subject of his infatuation, well knowing what he was doing and intending to do it, but in a sense allowing his heart to rule his head.

26. In Diprose, the High Court examined the doctrine of unconscionable conduct and decided that the infatuated giver should get his gifts back but that was on the basis that he was under a special disability in dealing with the recipient of the gifts.  Deane J at [638] observed:

    That special disability arose not merely from the respondent’s infatuation.  It extended to the extraordinary vulnerability of the respondent in the false “atmosphere of crisis” in which he believed that the woman with whom he was “completely in love” and upon whom he was emotionally dependent was facing eviction from her home and suicide unless he provided her money for the purchase of a house.  The appellant was aware of that special disability.

27. If unconscionable conduct is a stand-alone concept, it cannot assist the applicant because of what I earlier said but it can guide and influence the exercise of discretion.  I find there was no special disability here; this was a commercial arrangement.  The humorous banter between the parties in Brisbane might have indicated some form of dependency on the part of the applicant but he was prepared to buy the necessary affection he craved.  It was later that he saw his needs being acquired in the same way by the gift of a house because without it, he would not have had the person to whom he had become attached, nearby.  That arrangement was therefore a commercial one for his convenience.  I do not find there is any basis to presume any disability here at all.  There was no manipulation or unconscionability on the part of the respondent as there was in Diprose.  Here, the marriage did not change anything. 

28. In Stanford (supra), the High Court whilst contemplating s 79 made reference to the principles in s 43(1) including that the court had a role designed to protect the institution of marriage. Here, the parties never intended their marriage to be for the purposes of the protection of a relationship in the sense of a marriage. Their relationship had a distinct commerciality about it.

1. In my view, it would not be just and equitable to alter the respondent’s interest in her house on the basis of the contribution made by the applicant and that he somehow did not get what he bargained for.

The tax debt

1. I have already set out those details.  I find that the use by the applicant of the tax structure enabled him to create the wealth that he had which in turn enabled him to purchase the house as a gift.  Thus, in contemplating whether it would be just and equitable to have the respondent bear some portion of the tax, I find that it is impossible to quantify what his position would have been had he not had the structure available to him in the first place and at all times up until the accountant and lawyer became involved, the applicant’s position was that it was his own money and he could do what he liked with it.  To impose some burden upon the respondent for paying a portion of the tax would run counter to the very intention of the parties in July 2010 that the applicant would purchase the respondent a house without strings attached. 

The orders for partial distribution of property

1. Orders were made by consent of the parties on two occasions. The first was on 8 September 2016 for $80,000. The applicant could not have been under any pressure to agree to such a payment because the case was listed before registrar who would not have had the power to determine the matter. Both parties were then represented.

2. The parties added a notation to the order which reads:

   The husband’s position is that the said payment is being made by the husband to the wife in circumstances where the husband can no longer afford to pay and will no longer be paying the monthly payments to the wife of the kind referred to item 13 of her financial statement filed on 11 April 2016 in these proceedings and in item 31 of the husband’s financial statement filed on 23 December 2015 in these proceedings.

3. While that notation sounds remarkably like a concession that maintenance obligations would have to cease, the respondent did nothing about it.

4. On 27 January 2017 when the case was set down for trial and again both parties had legal representation, they agreed:

   That the applicant husband pay the respondent wife the sum of $100,000 by way of interim property settlement within 30 days of the date of these orders to the solicitors for the respondent wife.

5. Again, there could be no misunderstanding of the purpose behind the payment and indeed, to the extent that it might be argued that it was not just and equitable to make any order altering property interests, the parties seemed to agree amongst themselves twice that there was a justification.  In addition, it is not suggested the costs’ power was exercised. 

6. In the final orders sought by the applicant, he pursued the payment of $1,184,941 which was the same as the PPL loan. Whilst his orders were somewhat confusing, I understood him to be seeking that if that payment was not made, B Street was to be sold and all of the money was to go to him. A similar approach was then struck in the alternative which would see PPL have the same result. Significantly, the applicant sought an order in the following terms:

   [5]That the (respondent) retain for her sole use and benefit and without claim from the applicant:

   [5.1]the sums totalling $180,000 paid to her by the applicant pursuant to the orders made in these proceedings on 8 September 2016 and 27 January 2017;

   [5.2]the (respondent’s) … motor vehicle..;

   [5.3]the furniture and chattels…; and

   [5.4]Any other assets in the (respondent’s) name, possession and control.

7. The applicant sought other orders in the alternative depending upon how the assessment was made about the loan or gift but the order relating to the $180,000 was repeated.

8. Although the applicant intended the respondent to keep the $180,000, that could only be read to be so on the basis that he either received a transfer of the house, received the cash from the respondent or received the cash on a default basis.

9. For the reasons that ought now be apparent, I consider the applicant is not entitled to a return of the house or anything associated with the amount that he paid for it. That creates the dilemma of what to do about the interim payments of $180,000 because in my view, the respondent was not, and is now not, entitled to that sum if she retains the house.

10. As was said in Bevan (supra) at paragraph [86] on the issue of what was just and equitable:

    …although s 79(2) is cast in the negative and amounts to a prohibition against making any order unless it is just and equitable to do so, the corollary is that if the court does make an order, such order itself must be just and equitable: Woollams & Woollams [2004] FCWA 32; (2004) FLC 93-195 per Thackray J at [53] and Teal v Teal [2010] FamCAFC 120 per Finn, Boland and Dawe JJ at [70].

11. The just and equitable requirement is therefore not a threshold issue, but rather one permeating the entire process.  I consider that I am entitled to order a return of those payments on the basis that I do not consider it just and equitable for the respondent to have had them in circumstances where she is retaining the house.

12. In Gabel & Yardley [2008] 40 Fam LR 66, Bryant CJ and Coleman J at paragraph [69] said:

    In our view the focus of our attention should be whether or not the power to make orders pursuant to section 79 has been exhausted. Unless it has, we see no basis in law or logic for concluding that further orders may not be made with respect to property the subject of earlier orders. There can be little doubt that the exercise of power under section 79 involves the exercise of discretion by reference to the provisions of Part VIII of the Act. It would be surprising if, in circumstances clearly involving less than such an exercise of discretion, orders made pursuant to the power conferred by section 79(6) of the Act could not be revisited and altered. Indeed, there may be cases where the Court could only exhaust the power conferred by section 79 in a “just and equitable” manner as required by section 79(2) of the Act by altering an earlier order with respect to the property of the parties or either of them as learned senior counsel for the wife submitted. If the Court could not do so, there may be cases where the Court was precluded by section 79(2) from making orders which exhausted the power conferred by section 79 of the Act. To so construe section 79 of the Act would in our view be to prefer a construction “that would not promote” the “purpose or object underlying” that provision of the Act to one that would promote that purpose or object, contrary to the principle of statutory construction expressed in section 15AA of the Acts Interpretation Act 1901 (Cth).

13. At paragraph [72], the Full Court said:

    …when the Court finally determined the proceedings which had been adjourned, whether categorised as “partial”, “interim”, or otherwise, earlier orders altering property interests could be varied or reversed without resort to section 79A of the Act or an appeal, the power to make such orders not having been “spent” or “exhausted”.

14. Whilst it might be seen here that I am ordering a reversal or variation of partial or interim property payments, I do not consider that it matters what the order is called because I am satisfied that it is not just and equitable for the respondent to retain those payments and there is clearly property in her possession which could satisfy such an order.

15. It is therefore not just and equitable for the respondent to seek a dismissal of the applicant’s claim on the basis of the gift and keep the $180,000. It was not said at the time that these payments were for spousal maintenance albeit the first order could have been interpreted that way. I intend to reject the applicant’s entitlement to spousal maintenance for the reasons that follow and in that case, she is not entitled to have the $180,000.

Spousal maintenance

1. The respondent sought final orders that “pursuant to section 77A of the Act, the applicant pay her:

   (a)The sum of 341,978 by way of lump sum spousal maintenance; or

   (b)The sum of $8,143 per month by way of periodic spousal maintenance for a period of three and a half years.

2. Section 77A of the Act which was asserted by the respondent to be the provision founding her claim, provides that where a court makes an order which has the effect of requiring the payment of a lump sum, whether in one amount or by instalments, the court shall express the order to be an order under the section and specify the portion of the payment, or the value of the portion of the property, attributable to the provision of maintenance for the party.

3. The significance of the provision can be seen to be in its reference to a lump sum. It is designed to give parties the opportunity to include a portion of a property as spousal maintenance but it has to be so designated. The alternative lump sum would be to enable a person to obtain the benefits of capital perhaps to purchase something needed or to protect them against not receiving periodic payments where the payer is anticipated to be recalcitrant. It cannot be the intention of the section that someone receives a lump sum by way of a transfer of property yet not be able to adequately support themselves. It cannot be the intention of the legislation (specifically here) that the respondent would continue to live on Centrelink benefits while living in a property such as that in which she is the sole proprietor. There must be some connection between a need for spousal maintenance on the basis that the respondent cannot support herself adequately and for that need to be ameliorated by the order. The respondent did not address how that would occur.

4. No specific evidence was led by the respondent about spousal maintenance but I have examined her evidence about her difficulties in maintaining work. It does not assist me because it tells me little about what she can do.

5. In her outline of argument, the respondent said that she had:

   attempted to engage in full time meaningful employment, however, had been unsuccessful. She currently receives periodic payments from Centrelink in the amount of $294 per week.

6. The outline of argument then referred to the applicant’s financial position indicating that he received $2,108 per week from his various sources. It was then submitted that:

   in light of (his) income and expenditure and Section 81 of the Act, the (respondent) contends that it would be more appropriate to make an order for lump sum spousal maintenance.

   This submission proceeds on an assumption that as the applicant has a steady income stream and the respondent needs one, he can pay. If that was intended, I reject it.

7. The respondent said she did not have qualifications or skills in order to engage in employment and it was her intention to study and the course she had in mind was of three years duration. That was the basis of the three and a half year proposed order.

8. The starting point is to look at the requirements of the Act. To the extent that the respondent considered that by virtue of the marriage, her Centrelink entitlement or her desire to study was a basis to entitle her to spousal maintenance, I reject that idea too.

9. Although the application was said to be founded in s 77A, that provision only applies where the respondent pursues a lump sum; here she seeks in the alternative, a periodic payment.

10. Section 72 of the Act provides that to establish an entitlement to spousal maintenance the applicant must show an inability “to support herself adequately”, by reason of one or more of the factors identified in the section.

11. The first of those factors relates to having the care and control of a child of the marriage who has not attained the age of 18 years; that no longer applies. The second relates to “age or physical or mental incapacity for appropriate gainful employment”. That too could not be said to apply here.

12. The respondent argued that she did not have the qualifications or skills in order to engage in employment; but what employment? Her evidence was that she had left the escort business and when she endeavoured to return to it, she had not been successful. Thankfully, the logic behind that assertion was not explored. However, there was a curious silence by the respondent about what she could do. There was nothing said about endeavours to obtain positions that might have been entirely within her skills and capacity, whatever they might be.

13. Nothing was said about the respondent’s capacity for employment which is different from willingness, qualifications and skills. She lives in a de facto relationship and the Court was denied the opportunity to understand what the nature of that relationship is. I know nothing of why the respondent’s apparent long term partner is not providing some form of support for her. The court was tantalised with suggestions of businesses and the sale of artworks but who fulfilled what role was not clear.

14. I am sure many people in the community would prefer to be doing something enjoyable as distinct from something which simply provides the necessary financial remuneration to support themselves adequately. Here, I find the respondent has not established that she cannot support herself adequately by reason of lack of skills or qualifications.

15. A third basis in the section is “any other adequate reason”. I have searched the respondent’s evidence and have accepted that some years ago she supported herself and it would seem her de facto partner and child from her escort work when she first met the respondent. There can be little doubt that for a number of years, the applicant provided an extraordinary level of support enabling her to continue that lifestyle. But the respondent also claimed (and he refuted) that she had helped him in the F Town business. Even if it is accepted (as I do) that the respondent was not good at what she did in his business, there is no evidence of her attempts to do that sort of work now that she is in Melbourne.

16. If, as seemed to be the assertion of the applicant, she has endeavoured to sell art works she produced no evidence to show who was the owner or what endeavours were being made to undertake that as a form of financial support. In cross-examination, the respondent dismissed these endeavours on the internet as being unsuccessful. It is not apparent what else she tried to do with that genre.

17. There is no evidence of other endeavours and I am left with no clear understanding of what could be said to be “any other adequate reason”.

18. There may obviously be an overlap between the three categories of factors, the last of which is very vague and general but the onus is still upon the respondent to show that whatever she has endeavoured to do, she could not adequately support herself from it.

19. It is also not appropriate to simply look at this application from the narrow perspective of income. When people in the community who live in expensive houses cannot support themselves adequately, they presumably rationalise their capital positions and live within their means. The respondent lives in inner Melbourne in a house the value of which exceeds $1 million. There is no evidence of any necessity to live in that area. There is no evidence of her pursuing employment opportunities that are beyond her physical grasp as a result of transport difficulties to outer Melbourne areas. There is no evidence to show that she could not sell the house and live more cheaply or even rent a property. I know nothing about her present obligations to support her daughter who is now 18 years of age other than in her financial statement, she said she was paying for her.

20. In her financial statement filed 28 April 2017, the respondent said that the other two occupants of her household had “nil” income. She deposed to having personal expenditure of $2,625 per week which was largely made up of expenses of food $850 per week, utilities of $200 per week, holidays of $290 per week, gardening and cleaning expenses of $70 per week and dry cleaning of $30 per week. Logic dictates that if the cash is not there, such expenditure must be accruing in debt. She has a credit card with a balance of $31,682 but no other debt. She was servicing that credit card at the rate of $200 per week. The respondent had virtually nothing in the bank.

21. Accepting that she is receiving Centrelink benefits of $470 per week, none of this makes any sense having regard to the duration of time that the case has been in the court system.

22. Thus, even if I could fathom how the respondent could be said to have established an entitlement to spousal maintenance, it would be difficult to understand how she has managed to meet these commitments at least for 2017 and as such, her demand for maintenance would have to be questionable.

23. I find the application for spousal maintenance fails.

I certify that the preceding two hundred and fifty-one (251) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 15 February 2018.

Associate: 

Date:  15 February 2018