Krupin & Krupin (No 2)
[2022] FedCFamC2F 230
•4 March 2022
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Krupin & Krupin (No 2) [2022] FedCFamC2F 230
File number: BRC 5459 of 2014 Judgment of: JUDGE YOUNG Date of judgment: 4 March 2022 Catchwords: FAMILY LAW – property - claim for alteration of property interest - identification of the property pool - where there are competing interests - where credibility of parties is in issue - where there has been considerable time since the parties separated - where there are issues of capital gains tax evidence - court is not satisfied there should be s75(2) adjustments - where property should be distributed relatively equally Legislation: Family Law Act 1975 (Cth)
Property Law Act 1974 (Qld)
Cases cited: Baumgartner v Baumgartner (1987) 164 CLR 137
Muschinski v Dodd (1985) 160 CLR 583
Nelson & Nelson (1995) 184 CLR 538
Walton's Stores (Interstate) v Maher (1988) 164 CLR 387
Division: Division 2 Family Law Number of paragraphs: 102 Date of hearing: 24 and 25 November 2021 and 1, 2 and 3 December 2021 Place: Darwin Counsel for the Applicant: Mr Baston Solicitor for the Applicant: Hofstee Lawyers Counsel for the First Respondent: Mr Jones Solicitor for the First Respondent: Robert Bax & Associates Counsel for the Second Respondent: Mr Berghofer Solicitor for the Second Respondent: Genuine Legal Counsel for the Third Respondent: Mr McGregor Solicitor for the Third Respondent: Guy Sara & Associates ORDERS
BRC 5459 of 2014 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR KRUPIN
Applicant
AND: MS KRUPIN
First Respondent
MS ANGELOFF
Second Respondent
MS PETROV
Third Respondent
B PTY LTD
Fourth Respondent
ORDER MADE BY:
JUDGE YOUNG
DATE OF ORDER:
4 MARCH 2022
THE COURT ORDERS THAT:
C Street, Suburb D
1.The real property at C Street, Suburb D, Queensland registered in the name of Ms Angeloff (“the Second Respondent”) is to remain the sole property of the Second Respondent and is not matrimonial property available for distribution between Mr Krupin (“the Applicant”) and Ms Krupin (“the First Respondent”).
Claim by the Third Respondent to interests in the properties at E Street, Suburb F and G Street, Suburb H
2.The claim of Ms Petrov (“the Third Respondent”) to an interest or interests in the real properties at E Street, Suburb F, Queensland and G Street, Suburb H, Queensland, in so far as it affects the interests of the First Respondent, is dismissed but without prejudice to any claim the Third Respondent may make against the Applicant.
Alteration of interests between the Applicant and the First Respondent
3.The Applicant is to make an election and notify the First Respondent within 60 days as follows:
(a)If the Applicant elects to retain the property at E Street, Suburb F, and the property at G Street, Suburb H he is to pay the First Respondent the sum of $372,112 (which may include the amount held in the trust account of McNamara Law) and obtain a discharge of the First Respondent as mortgagee in respect of both properties within 90 days.
(b)If the Applicant elects to retain the property at E Street, Suburb F, and to sell the property at G Street, Suburb H he is to pay the First Respondent the amount which represents 48.5% of the sum of $408,120 (the equity in E Street, Suburb F), the net proceeds of sale of G Street, Suburb H and the amount held in the McNamara Law trust account and obtain a discharge of the First Respondent as mortgagee in respect of E Street, Suburb F.
(c)If the Applicant elects to sell both E Street, Suburb F, and G Street, Suburb H, the Applicant is to have 51.5% and the First Respondent is to have 48.5% of the sum of the net proceeds of sale and the amount held in the McNamara Law trust account.
4.If one or both of E Street, Suburb F and G Street, Suburb H are to be sold pursuant to the preceding orders the following orders are to apply.
E Street, Suburb F
5.The Applicant and First Respondent shall forthwith do all acts and things and sign all necessary documents to effect the sale of the E Street, Suburb F property otherwise known as Lot … on RP … having the title reference …, and for that purpose the following shall apply:
(a)The E Street, Suburb F property shall be listed for sale by private treaty with such real estate agent as is agreed between the Applicant and the First Respondent and failing agreement the real estate agent will be as nominated by the CEO of the Real Estate Institute of Queensland at the request of the parties or either of them.
(b)The list price of the E Street, Suburb F property shall be such amount as is nominated by the Applicant and First Respondent and failing agreement the list price will be as nominated by the real estate agent.
(c)The sale price of the E Street, Suburb F property shall be such amount as is agreed by the Applicant and the First Respondent and failing agreement, any offer to buy the E Street, Suburb F property that is at least 90% of the list price shall be accepted as the sale price.
(d)The Applicant and the First Respondent shall co-operate in every way with the real estate agent in relation to the marketing of the E Street, Suburb F property for sale including but not limited to making the keys readily available, allowing inspection of the property at all times reasonably requested by the real estate agent and ensuring the E Street, Suburb F property is kept clean, neat and in good order at the time of the inspection of any prospective buyer.
(e)Upon agreement being reached for sale of the E Street, Suburb F property, the Applicant and the First Respondent shall execute the contract for sale and all other documents necessary to complete the sale of the E Street, Suburb F property including all transfer documentation forthwith upon its submission to them by the agent or their solicitor.
(f)The contract of sale shall provide for completion within 30 days after the date of the contract.
(g)The proceeds of sale of the E Street, Suburb F property shall be paid in the following manner and priority:
(i)To discharge mortgage number …26 to ANZ Bank;
(ii)Payment of the agent’s commission and advertising or other expenses, if any, payable on the sale;
(iii)Payment of legal costs and outlays relating to the sale;
(iv)Payment of any expenses to be reimbursed under Order 8(b);
(v)The balance thereof be paid as to 51.5% to the Applicant, less any sum incurred to give effect to Order 5(d) and less any sum owing on account of unpaid rates, water or home loan arrears as at the date of settlement; and the balance to the First Respondent.
6.In the event that the E Street, Suburb F property is not sold by private treaty pursuant to Order 5 within 90 days of being listed for sale, the Applicant and the First Respondent shall do all acts and sign all documents as are necessary to sell the E Street, Suburb F property by auction and the following shall apply:
(a)The E Street, Suburb F property shall be listed with the agent appointed under Order 5(a) (“the Auctioneer”) for sale by auction forthwith.
(b)The Applicant and the First Respondent shall execute all documents requested by the auctioneer for sale of the E Street, Suburb F property by auction.
(c)The reserve price of the E Street, Suburb F property shall be such amount as is agreed by the Applicant and the First Respondent and failing agreement being reached 21 days prior to auction, the reserve price shall be nominated by the Auctioneer.
(d)The Applicant and the First Respondent shall each pay to the Auctioneer one half of any sums requested for advertising or auction expenses and if one of the parties pays all of the expenses, that party shall be reimbursed from the proceeds of the sale in respect of one half of any payments, before any division between the Applicant and the First Respondent.
(e)The Applicant and the First Respondent shall give such instructions as are necessary to a solicitor to prepare a contract of sale and provide it to the Auctioneer prior to the auction no later than the date sought by the Auctioneer.
(f)The Applicant and the First Respondent agree to co-operate in every way with the Auctioneer in relation to the sale by auction but not limited to, allowing inspection of the E Street, Suburb F property at all times reasonably requested by the real estate agent and ensuring the E Street, Suburb F property is kept clean, neat and in good order at the time of any inspection and on the date of auction.
(g)The sale price of E Street, Suburb F property shall be any amount in excess of the reserve price but in the event of the reserve price not being reach the sale price shall be such amount as is agreed by the Applicant and the First Respondent or failing agreement any offer received after the auction to buy the E Street, Suburb F property at a price that is at least 90% of the reserve price shall be accepted.
(h)The Applicant and the First Respondent will attend the auction and negotiate with the highest bidder in the event of the reserve price not being reached, for the purpose of reaching agreement under Order 6(g).
(i)That upon agreement being reached for sale of the E Street, Suburb F, Orders 5(e), 5(f), and 5(g) shall apply.
7.If the E Street, Suburb F Property is not sold at auction pursuant to Order 6 or within 14 days after the date of the auction by further negotiation, the Applicant and the First Respondent shall cause a further auction of the property to be held within 60 days after the date of the first auction and for that purpose the provisions in Order 6 shall apply. This process shall continue until such time as the property is sold.
8.For the purposes of Order 5 and Order 6:
(a)That no later than seven (7) days prior to settlement of the sale of the E Street, Suburb F property, the Applicant shall vacate the E Street, Suburb F property, ensuring he removes all chattels and personal effects, leaving the premises and grounds clean and free from mess or debris.
(b)In the event the Applicant fails to comply with Order 8(a):
(i)Any and all costs incurred and claimed by the buyer shall be deducted in full from the sum payable to the Applicant pursuant to Order 5(g)(v).
(ii)Any and all costs incurred by the First Respondent in engaging cleaners, rubbish removal or the like necessary to enable completion of the contract for sale shall be deducted in full from the sum payable to the Applicant pursuant to Order 5(g)(v). In the event there are insufficient funds to meet these costs, they shall be paid from the sale proceeds of the G Street, Suburb H property.
G Street, Suburb H
9.The Applicant, the First Respondent, Third Respondent (personally and in her capacity as sole Director and shareholder of B Pty Ltd and the Fourth Respondent shall forthwith do all acts and things and sign all necessary documents to effect the sale of the G Street, Suburb H property otherwise known as Lot … on RP … having the title reference …, and for that purpose the following shall apply:
(a)The G Street, Suburb H property shall be listed for sale by private treaty with such real estate agent as is agreed between the Applicant and the First Respondent and failing agreement the real estate agent will be as nominated by the CEO of the Real Estate Institute of Queensland at the request of the parties or either of them.
(b)The list price of the G Street, Suburb H property shall be such amount as is nominated by the Applicant and First Respondent and failing agreement the list price will be as nominated by the real estate agent.
(c)The sale price of the G Street, Suburb H property shall be such amount as is agreed by the Applicant and the First Respondent and failing agreement, any offer to buy the G Street, Suburb H property that is at least 90% of the list price shall be accepted as the sale price.
(d)The Applicant, the First Respondent, the Third Respondent and the Fourth Respondent shall co-operate in every way with the real estate agent in relation to the marketing of the G Street, Suburb H property for sale including but not limited to making the keys readily available, allowing inspection of the property at all times reasonably requested by the real estate agent and ensuring the G Street, Suburb H property is kept clean, neat and in good order at the time of the inspection of any prospective buyer.
(e)That upon agreement being reached between the Applicant and the First Respondent for sale of the G Street, Suburb H property, or receipt of any offer to buy the property that is at least 90% of the list price, the Third Respondent shall, in her capacity as Director of the B Pty Ltd (the Fourth Respondent) as trustee for the Krupin Family Trust execute the contract of sale and all other documents necessary to complete the sale of the G Street, Suburb H property including all transfer documentation forthwith upon its submission to her by the agent or solicitor.
(f)The contract shall provide for completion within 30 days after the date of the contract.
(g)The proceeds of sale of the G Street, Suburb H property shall be paid in the following manner and priority:
(i)To discharge mortgage number … to ANZ Bank;
(ii)Payment of the agent’s commission and advertising or other expenses, if any, payable on the sale;
(iii)Payment of legal costs and outlays relating to the sale;
(iv)Payment of any expenses to be reimbursed under Order 10(d);
(v)The balance thereof be paid as follows:
A.51.5% to the Applicant
a.less any sum incurred to give effect to Order 9(d);
b.less any sum owing on account of unpaid rates, water or home loan arrears as at the date of settlement; and
c.any expense to be reimbursed pursuant to Order 8(b)(ii). In the event the E Street, Suburb F property has not sold at the time of settlement of the G Street, Suburb H property, the sum of $10,000 shall be held in the trust account of Robert Bax & Associates on behalf of the Applicant on account of this expense. Those funds are to be used to meet expenses incurred in compliance with Order 8(b). should there be any surplus funds held after payment of the expenses to be reimbursed, those surplus funds shall be paid in full to the Applicant.
B.The balance to the First Respondent.
10.In the event that the G Street, Suburb H property is not sold by private treaty pursuant to Order 9, within 90 days of being listed for sale, the Applicant, First Respondent, the Third Respondent and the Fourth Respondent shall forthwith do all acts and sign all documents as are necessary to sell the G Street, Suburb H property by auction and the following shall apply:
(a)The G Street, Suburb H Street property shall be listed with the agent appointed under Order 9(a) (“the Auctioneer”) for sale by auction.
(b)The Third Respondent shall execute all documents requested by the auctioneer for sale of the G Street, Suburb H property by auction.
(c)The reserve price of the G Street, Suburb H property shall be such amount as is agreed by the Applicant and the First Respondent and failing agreement being reached 21 days prior to auction, the reserve price shall be nominated by the Auctioneer.
(d)The Applicant and the First Respondent shall each pay to the Auctioneer one half of any sums requested for advertising or auction expenses and if one of the parties pays all of the expenses, that party shall be reimbursed from the proceeds of the sale in respect of one half of any payments, before any division between the Applicant and the First Respondent.
(e)The Applicant, the First Respondent and the Third Respondent shall give such instructions as are necessary to a solicitor to prepare a contract of sale and provide it to the Auctioneer prior to the auction no later than the date sought by the Auctioneer.
(f)The Applicant, the First Respondent and the Third Respondent shall co-operate in every way with the Auctioneer in relation to the sale by auction but not limited to, allowing inspection of the G Street, Suburb H property at all times reasonably requested by the real estate agent and ensuring the G Street, Suburb H property is kept clean, neat and in good order at the time of any inspection and on the date of auction.
(g)The sale price of G Street, Suburb H property shall be any amount in excess of the reserve price but in the event of the reserve price not being reached the sale price shall be such amount as is agreed by the Applicant and the First Respondent or failing agreement any offer received after the auction to buy the G Street, Suburb H property at a price that is at least 90% of the reserve price shall be accepted.
(h)The Applicant and the First Respondent will attend the auction and negotiate with the highest bidder in the event of the reserve price not being reached, for the purpose of reaching agreement under Order 10(g).
(i)That upon agreement being reached for sale of the E Street, Suburb F property, Orders 9(e), 9(f), and 9(g) shall apply.
11.If the G Street, Suburb H property is not sold at auction pursuant to Order 10 or within 14 days after the date of the auction by further negotiation, the Applicant, the First Respondent and the Third Respondent shall cause a further auction of the property to be held within 60 days after the date of the first auction and for that purpose the provisions in Order 10 shall apply. This process shall continue until such time as the property is sold.
E Street, Suburb F and G Street, Suburb H Income pending sale
12.Pending sale, the Applicant be entitled to any and all income derived from the E Street, Suburb F and the G Street, Suburb H properties to the exclusion of the First Respondent.
13.The Applicant be solely responsible for payment of all outgoings and expenses of the E Street, Suburb F and G Street, Suburb H properties, including home loan repayments, rates, water, insurance, maintenance and the like.
Miscellaneous Property
14.Unless otherwise provided for these Orders, the Applicant shall indemnify the First Respondent and keep the Respondent indemnified in relation to the following:
(a)any and all credit cards held in the Applicant’s name; and
(b)any and all personal loans owed by the Applicant to any person, bank, or financial institution.
15.Unless otherwise provided for in these Orders, the First Respondent shall indemnify the Applicant and keep the Applicant indemnified in relation to the following:
(a)any and all credit cards held in the First Respondent’s name; and
(b)any and all personal loans owed by the First Respondent to any person, bank, or financial institution.
16.Within 14 days of the payment to the First Respondent pursuant to these orders or settlement of the sale of the G Street, Suburb H property, the First Respondent shall do all such acts and things and sign all necessary documents to relinquish any right, title and interest in the Krupin Family Trust in favour of the Applicant, with the Applicant to provide to the First Respondent all necessary documents to achieve this.
17.From the date of these Orders, the Applicant shall forever indemnify the First Respondent in respect of the Krupin Family Trust and B Pty Ltd.
Procedural Orders
18.That from the date of settlement unless otherwise specified in these Orders except for the purposes of enforcing payment of any money due under these or any subsequent Orders:
(a)Each party will be entitled to the exclusion of the other to all property in their respective possession as at the date of this Order including any jewellery, furniture, furnishings, shares and motor vehicles.
(b)Monies standing to the credit of each party in any bank account is to be the property of the party in whose name such bank account is held.
(c)Each party will forgo any claims they may have made to any superannuation benefit to or owned by the other. The party in whose name any such policy of superannuation or insurance stand shall be deemed to be the owner and the beneficiary of such policy to the exclusion of the other.
(d)Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to this Order.
19.Each party shall do all acts and things reasonably required by the other including the signing or all necessary documents to give effect to the provisions of these Orders within 14 days of being requested to do so.
20.If any party refuses or neglects to sign or execute a document within seven (7) days of written request to do so then the Registrar of the Brisbane Registry of the Federal Circuit and Family Court of Australia is hereby appointed under s 106A of the Family Law Act 1975 (Cth) to sign or execute such document on behalf of that party upon lodgement of such document and the filing of an affidavit of a solicitor on behalf of the requesting party addressing the said neglect or refusal.
21.The Applicant, the First Respondent, and the Third Respondent (personally and in her capacity as Director and trustee), comply promptly with any requisitions issued by the Office of State Revenue, Land Titles Office, Main Roads Department and any other Government Department in relation to any document executed or transacted pursuant to or to put into effect the terms and conditions of these Orders.
22.Any joint tenancy of the Applicant and the First Respondent in any real or personal estate is hereby expressly severed.
23.In the event that any party defaults with respect to carrying out any obligations pursuant to these orders, the non-defaulting party shall be entitled to recover their costs of, and incidental to, enforcing these Orders against the defaulting party with such costs to be calculated on an indemnity basis.
Costs Certificate
24.Pursuant to ss 10(2) and 10(3) of the Federal Proceedings (Costs) Act 1981, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under the Act to the Applicant, the First Respondent, and the Second Respondent in respect of such part as the Attorney-General considers appropriate of any costs incurred by the Applicant, the First respondent, and the Second Respondent because the original proceeding was rendered abortive or the original hearing was discontinued and a new hearing ordered and that is not attributable to the neglect, default, or improper act of any party.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Krupin & Krupin has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE YOUNG:
This is a property matter with a regrettable history. A trial was held over three days in August 2016 before a Judge of the then Federal Circuit Court but, it appears, final orders were never made. I say “appears” because one of the parties, the third respondent, who was not a party in 2016, contends that final orders were in fact made on 13 October 2017 and delivered orally over the telephone.
In her submission the third respondent relied on the trial affidavit of the first respondent filed 19 March 2021. The first respondent described the delivery of an oral judgement and the subsequent efforts to obtain a sealed copy of the orders. She deposed that her solicitors (who are her current solicitors), aided by the Queensland Law Society, approached the Chief Judge and requested a sealed copy of the supposed orders. She deposed that, after initial indications that orders were to be issued, none were.
No orders of 13 October 2017 appear in the records of the Court and no party was able to present a sealed copy of those orders.
The first respondent deposed that the parties appeared before Judge Middleton (who was not the judge who heard the trial in 2016) on 12 March 2020. She deposed that Judge Middleton informed the parties that no authenticated or sealed final orders would be forthcoming. She deposed that Judge Middleton said that in those circumstances it was appropriate to discharge the orders of 13 October 2017. Consistently with that, Judge Middleton made orders on 12 March 2020 “That the orders made on 13 October 2017 be discharged”.
I do not know the reason for this confusing and unsatisfactory state of affairs.
Eventually, the matter was listed before another Judge and the matter was set down for trial in April 2021. The court then vacated those trial dates to permit the joinder of the third respondent. The case was later transferred to my docket and I heard a trial over five days in November and December 2021 and received final submissions on 31 January 2022.
At no point before me did any party produce an authenticated or sealed copy of final orders made on 13 October 2017 or any other date. At no point did any party make an application before trial alleging that the matter was subject to prior adjudication. Each party commenced the trial before me without objection and on the basis that I was to hear and adjudicate their respective claims.
These claims are as follows:
·as between the applicant and the first respondent, claims for alteration of property interests under the Family Law Act;
·by the second respondent that she was the legal and beneficial owner of a property at C Street, Suburb D, claimed by the applicant to be matrimonial property; and
·by the third respondent a claim to an equitable interest in a property at E Street, Suburb F, owned by the applicant and first respondent, and a property at G Street, Suburb H, owned by the fourth respondent as trustee of the Krupin Family Trust.
I have heard the matter on the basis that there are no prior final orders and there has been no prior adjudication of the claims.
It should be noted that procedural orders were made in 2015 and 2016. In 2016 orders were made by consent providing for the sale of a property at J Street, Suburb K owned by the applicant and the first respondent. Twenty-five percent of the net proceeds was to be distributed to each of the applicant and the first respondent and the remaining 50% was to be held in a solicitor’s trust account pending agreement or further order. The funds have been distributed according to the order and $41,666 remains in a solicitor’s trust account.
An order, not by consent, was also made on 23 March 2016:
That the [applicant] be solely liable for the costs associated with the following properties including mortgages, rates and outgoings:
(a)G Street, Suburb H; and
(b)E Street, Suburb F.
The parties
The applicant husband is 58 years old. He migrated from Country L about 25 years ago. In Australia, he worked as a tradesman and, along with his then wife, the first respondent, he began to develop a residential property portfolio. He and the first respondent bought and sold about 19 properties. The applicant husband eventually gave up trades work to devote himself full-time to management of the property portfolio. He is presently in receipt of Centrelink benefits.
The applicant and the first respondent ceased their relationship in late 2013 and the first respondent left the former matrimonial home in early 2014. Around that time the husband began living with the woman who became his second wife, the third respondent.
The applicant and the first respondent have four children aged 20, 18, 16 and 14 years. The adult children are largely independent. X, the 16-year-old, has lived with the first respondent since January 2021. Y, the 14-year-old, lives in a shared care arrangement between the applicant and the first respondent.
The applicant and his current wife, the third respondent, have two children together aged five and one year.
The first respondent is 42 years old. She is of Country M background. She currently works as an allied health worker. When she left the former matrimonial home in early 2014 she left with her mother, the second respondent, who had lived with her and the applicant since about 2005. When the first respondent and the second respondent left the former matrimonial home they went to live in a property owned by the second respondent. The applicant husband claims that property is, in reality, owned by him and the first respondent and he asserts it should be included in the matrimonial property pool.
The second respondent is, as noted, the mother of the first respondent. She came to Australia in 2005. She lived with her daughter and son-in-law until they separated. It appears she was engaged in helping them with domestic tasks and caring for her grandchildren. It appears that with the encouragement, at least, of her daughter and son-in-law she purchased real estate in her sole name with borrowed funds and placed tenants in the properties. In 2007 she purchased the property at C Street, Suburb D, using borrowed funds. The second respondent is the legal owner of C Street, Suburb D and, on the face of it, contributed the whole purchase price, using borrowed funds. The applicant husband joined her to the proceeding, claiming that the second respondent’s ownership is a sham and he and the wife are the equitable owners of the property. He seeks an order for the sale of the property and the distribution of the proceeds between him and the wife. The second respondent resists that application and seeks a finding that the property is not part of the property pool and a declaration that she is the legal and equitable owner of the property.
The third respondent is the second wife of the applicant. She began living with the applicant soon after he and the first respondent separated. They subsequently married. As noted, they have two children aged five-years and one-year old. The third respondent was joined to the proceeding in May 2021 because she is the sole director and shareholder of B Pty Ltd, which is the trustee of the Krupin Family Trust. Ordinarily, it would have been enough to join the corporate trustee of the family trust but the third respondent also seeks to advance personal claims to an interest in one or more of the relevant properties, including the property held in the name of the trust.
The fourth respondent, the corporate trustee, was joined during the trial so it is subject to orders of the court.
The only asset held by the family trust is a residential property at G Street, Suburb H.
The third respondent asserts that she contributed to the E Street, Suburb F and G Street, Suburb H properties and those properties should be transferred to her. Curiously, although she claims no interest in the C Street, Suburb D property, she seeks orders that it be sold and the proceeds distributed according to the orders of the court. The orders she seeks in respect of C Street, Suburb D are the same as those sought by the husband.
The husband and the third respondent claim to have separated in 2018 but are living under the one roof. The first and second respondents do not accept that the husband and the third respondent have separated.
Credibility
The credibility of the parties was an important issue. I formed the view that significant parts of the evidence given by each of the parties was implausible and none of them were reliable witnesses. I have preferred to give more weight to documents, where available, and the likely course of events where credibility is relevant, rather than the evidence of the parties.
The property pool
Who owns C Street, Suburb D?
The applicant asserted that he and the first respondent own C Street, Suburb D and that it is matrimonial property to be included in the property pool for division between them. The first and second respondents asserted that the second respondent owns the property. The property is registered in the second respondent’s name alone.
The claim of the applicant must overcome s11 of the Property Law Act 1974 (Qld) which provides:
11 Instruments required to be in writing
1Subject to this Act with respect to the creation of interests in land by parol—
a)no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person’s agent lawfully authorised in writing, or by will, or by operation of law; and
b)a declaration of trust respecting any land must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person’s will; and
c)a disposition of an equitable interest or trust subsisting at the time of the disposition, must be manifested and proved by some writing signed by the person disposing of the same, or by the person’s agent lawfully authorised in writing, or by will.
2This section does not affect the creation or operation of resulting, implied, or constructive trusts.
There is no writing signed by the second respondent or a lawful agent creating an interest in the land, a declaration of trust or an equitable interest in favour of the applicant.
The applicant asserted that the C Street, Suburb D property should be subject to a constructive trust in favour of him and the second respondent. He asserted, in substance, that the legal ownership of the property held by the second respondent did not reflect the intention of him, the first respondent and the second respondent when the second respondent purchased the property in June 2007. He asserted that the second respondent’s ownership was a sham. He asserted that the purchase in the second respondent’s name was an exercise in what he described as “asset protection”. What the applicant meant by this phrase is discussed below.
It is not in question that the second respondent is the legal owner of this property and that she took out, in her sole name, the loan secured by mortgage against the property. The loan of $247,200 constituted almost 100% of the purchase price of $249,451. This level of borrowings was possible because she had substantial equity in another property, N Street, which she had owned in her own name. There was no evidence of contributions to the acquisition of that property by the applicant or the first respondent.
The C Street, Suburb D loan was serviced and continues to be serviced by rents paid to the second respondent.
In addition, the second respondent provided a sum of $2,590 by deposit made to the solicitor’s trust account before settlement. Prima facie, having contributed the entirety of the purchase price, she is the equitable as well as the legal owner of the property.
Notwithstanding this, the applicant asserts (as, curiously, does the third respondent in her trial affidavit, even though she did not arrive in Australia until 2014) that the second respondent purchased the C Street, Suburb D property on behalf of him and the first respondent. The applicant does not assert that he contributed to the purchase price of the C Street, Suburb D property, although he does say he transferred $2,590 from the joint account of held by him and the first respondent to the second respondent to pay into the solicitor’s trust account before settlement. He does not provide any evidence of conversations or express agreements with the second respondent that she would hold C Street, Suburb D for him or him and the first respondent. However, he asserts that he assisted the second respondent in finding the property, assisted her in purchasing the N Street property, and that he generally facilitated the purchase and provided the “know-how” for the second respondent’s purchase.
The applicant also asserts that he maintained the property and did various renovation works on it. The second respondent agreed that the applicant helped maintain the property and that he did work on the property. She said that she did work as well, as did the first respondent and the first respondent's brother, her son, Mr O. The applicant did not produce any invoices or other independent evidence of purchase of materials and the like. The work he claims to have done is substantial, including building three additional bedrooms, building a second kitchen, building an additional bathroom, tiling and painting. Although he is not an electrician, he also claims to have repaired the “switch board and wiring”. He claims the value of this work is $144,700. He did not adduce any independent evidence to support that claim. Having regard to the absence of independent or expert evidence and my finding that the applicant’s evidence is unreliable I do not accept that the applicant performed work of this value. However, I accept that he, the first respondent, the second respondent and the second respondent’s son, performed substantial renovation work on the property.
The husband says that there is an inference from the second respondent’s actions that she acknowledged his and the first respondent’s ownership of C Street, Suburb D. The second respondent transferred significant amounts of money, received, at least in part, from the rents of C Street, Suburb D, into the joint account of the husband and the first respondent. The relevant bank records begin in 2009. In that year the second respondent transferred $23,200 to the joint account of the applicant and the first respondent in lump sums ranging from $1,500 to $5,000. Also in 2009 the second respondent sold the N Street house and received net proceeds of about $160,000. As the rents from C Street, Suburb D were about $24,000 a year and the mortgage payments (interest only it seems) were about $13,000 a year, a gross surplus of about $11,000 a year, the transfer effectively included some of the proceeds of sale of N Street. The proceeds of sale of N Street were almost entirely disbursed from the second respondent’s account by August 2009, to whom and for what purpose is unclear. In 2010 the second respondent transferred $5,636 in multiple sums ranging from $286 to $1,500. In 2011 she transferred $2,346 in sums ranging from $286 to $1,050. In 2012 she transferred $6,650 in sums ranging from $60 to $1,200. In 2013 she transferred $3,140 in sums ranging from $50 to $950. In addition, in that year she transferred two amounts of $5,000, each of which was described in her bank statement as “loan to Mr Krupin” (presumably the applicant). It may be noted that the payments, apart from those in 2009, are substantially less than the surplus of rents over mortgage payments. On the other hand, occasionally the transfers were for exactly the amount of the rent received. For example, on 9 January 2013 rent of $720 was received and on 10 January 2013 the same amount was transferred to the joint account of the applicant and first respondent, leaving $1.93 in the account. The total amount of the transfers was $74,172, including the “loan to Mr Krupin”.
There was some dispute about whether the second respondent or the first respondent operated the second respondent’s online bank account. I suspect it may often have been the first respondent but I am unable to make a finding about that.
The transfers ceased in May 2013. The applicant and the first respondent separated sometime later in 2013.
The second respondent said the transfers were a surplus after payment of the mortgage and were simply a contribution to expenses of the household she shared with her daughter and the applicant. She said this also repaid the applicant and the first respondent the $2,590 paid into the solicitor’s trust account and which she said was advanced by them to her as a loan. Her evidence did not address the significant amounts transferred in 2009.
The applicant also asserted that the tenancy agreements for C Street, Suburb D were in his and the first respondent’s names, rather than the second respondent’s. The first respondent agreed but said that this was simply a matter of convenience because the second respondent’s English was not fluent and she was not able to deal with the tenants herself. The first respondent said, which was unchallenged, that she dealt with the tenants at all times and it was simply more convenient that the tenancy agreements were in the names of the applicant and her. In any event, the rent received was paid, initially at least, into the second respondent’s bank account.
The high point of the husband's case appears to be a letter written by the first respondent’s solicitors that contains the following sentence. "We have also been advised that you hold an interest in a property registered in the name of Ms Angeloff, our client’s mother". It was not disputed by the first respondent that this was a reference to C Street, Suburb D. The applicant said this constituted an admission of his interest in the property. The obvious difficulty with that assertion is that the letter was not written by the second respondent or her solicitors, but by the first respondent’s solicitors and, at most, would appear to constitute an “admission” by the first respondent rather than the second respondent.
A similar exchange took place by SMS between the applicant and the first respondent in 2014 (curiously, copies of which were annexed to the third respondent's affidavit rather than the applicant’s). The applicant and the first respondent discussed some small arrears of mortgage for C Street, Suburb D and overdue rates. She also mentioned that the property urgently required a new stove. The first respondent asked the applicant to contribute to these costs and he agreed. She also said, "Mr Krupin, due to current financial difficulties in our divorce and asset splitting problems, I believe, to put our properties for sale would be the right decision. I agree to put mum’s house at C Street, Suburb D for sale first, as you always wanted. Could you please do your research and let me know ASAP for which price you thinking we should put it for sale.” The applicant replied "it is not mum’s house. Who do you want to appoint as a selling agent? What would be your reserve price?”
I have little doubt that there was an understanding between the applicant and the first respondent that they would control C Street, Suburb D, on the assumption that the second respondent would do their bidding. As noted, there is no writing as required by s11 of the Property Law Act so any claim by the applicant must rest on equitable principles. The second respondent provided the whole of the purchase price through borrowings in her name and assumed the liability for repayment of the loan. The loan or mortgage repayments were funded from rents paid to the second respondent by tenants. In the circumstances, it is impossible for the applicant to advance a claim to a resulting trust on the basis of the provision of the purchase price. The applicant does not provide evidence that the second respondent agreed to hold the property for him or for him and the first respondent or made a relevant representation and that he acted to his detriment relying on that representation, although that is implicit in his claim to have carried out substantial renovations. The applicant’s case most obviously reflects the concept of the joint enterprise of the kind described in Muschinski v Dodd [1985] 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137 where the High Court found it was inequitable for one party to assert a legal title where that would result in the loss of the other party’s contributions made pursuant to a joint enterprise that has come to an end without attributable fault. The difficulty for the applicant with either the detrimental reliance or contributions approach is that more than $74,000 was paid to him and the first respondent by the second respondent. There is no evidence that the $74,000 was not adequate compensation for the renovations. Having regard to the lack of evidence of the value of the contributions by the applicant or the first respondent to renovations and maintenance of C Street, Suburb D, there is no basis for concluding that it is inequitable for the second respondent to rely on her legal title.
I accept that in the circumstances of an extended family living in the one house: the applicant and his wife, the first respondent, and the second respondent, along with children, that the arrangements were cooperative and informal but I am not satisfied there was any clear understanding or common intention between the parties. Further, I formed the impression that the second respondent, as a person in a relatively dependent position in the household of her daughter and son-in-law, felt obliged to do their bidding. I am satisfied that there was no conduct by the applicant, the first respondent or the second respondent, either by way of significant financial or other contribution, detrimental reliance or understanding about a joint enterprise that makes it inequitable for the second respondent to now rely on her legal title. The applicant's claim to an equitable interest is not made out.
I have found that there is no basis, whether because of financial contribution or otherwise, for the applicant or the first respondent to advance a claim to an equitable interest in C Street, Suburb D. If I were satisfied that there was such a basis, then it would be necessary to consider whether the transaction whereby the second respondent acquired the property in her name was in pursuance of an illegal purpose. The applicant’s counsel submitted that the second respondent’s legal ownership of C Street, Suburb D was a sham pursued as a strategy of “asset protection” by the applicant and the first respondent. When asked what he meant by this phrase, the applicant explained that he had attended a presentation on “asset protection” and had applied the lessons learnt there. As an example, he said that if he were to “run over someone’s cat” he could be sued by the cat’s owner. He wanted to place his assets beyond the reach of such a claim. The applicant apparently intended this remark seriously. When asked if he understood capital gains tax, the applicant professed ignorance and said that the first respondent dealt with tax issues. It is implausible that the applicant, who described himself as a real estate “investor”, who had bought and sold many properties, presumably seeking a capital gain, did not have at least a basic understanding of capital gains tax. The first respondent said she was familiar with capital gains tax. I find the applicant’s evidence that he is ignorant about capital gains tax is deliberately untrue.
The applicant did not give evidence of his motive to undertake a sham of the kind he alleged, beyond the risible suggestion that he sought “asset protection” from potentially aggrieved cat owners. The applicant feigned ignorance of capital gains tax because, I am satisfied, the motivation of the applicant and the first respondent in the second respondent’s purchase of the property was to use the income from this property, and to take advantage of any capital gain, for their own benefit, while evading liability for tax, including capital gains tax. Although both the legal and equitable title in C Street, Suburb D were held by the second respondent I am satisfied that they were confident the second respondent would do their bidding in furtherance of this purpose.
There is other evidence suggestive of this motivation. The applicant and the first respondent paid the second respondent a wage for, ostensibly, her assistance with the children and domestic tasks. The payment of this wage ceased in 2009, the year the second respondent received the proceeds of sale of N Street, although there does not appear to have been any significant change in the second respondent’s role in the household. The explanation of the applicant and the first respondent about these events was unsatisfactory but I suspect it was to reduce the incidence of any tax falling ostensibly on the second respondent.
In Nelson v Nelson (1995) 184 CLR 538 the High Court dealt with a case where a mother paid the purchase price of a house which was transferred to the names of her son and daughter. The purpose was to permit her dishonestly to obtain a subsidy under the Defence Service Homes Act for a later purchase of another house. The High Court recognised a resulting trust in her favour but subject to her repaying the Commonwealth the amount of her dishonest gain. In that case there was no difficulty in calculating that amount. McHugh J at p 167 observed that:
Where the court cannot evaluate the benefit that the claimant has derived from his or her unlawful conduct, the sound exercise of discretion may sometimes require the court to refuse any relief to the claimant.
In this case, were I satisfied that the applicant and the first respondent had some equitable interest in C Street, Suburb D, and I am not, it may be necessary to consider the approach adopted in Nelson. The applicant has carefully avoided any frank explanation of his motive, assuming his claim had a basis, in engaging in the arrangement in respect of C Street, Suburb D. It is not possible to calculate his benefit, if any, from the arrangement. In these circumstances, where I have concluded he was motivated by an illegal purpose, I would refuse the applicant any equitable relief or recognition in respect of C Street, Suburb D.
The C Street, Suburb D property does not form part of the matrimonial property pool.
The third respondent’s claim to an equitable interest in the E Street, Suburb F and G Street, Suburb H properties
In 2014 the applicant began living with the third respondent at E Street, Suburb F and they later married. The husband's trial affidavit asserts that he and the third respondent separated in 2018 and now live separately under one roof. The second child of the applicant and the third respondent was born in 2020, which appears inconsistent with separation in 2018. The affidavits of the applicant and the third respondent do not deal with this issue although both asserted in cross-examination that the conception was an unintended consequence of, in effect, a brief reconciliation. Having regard to this unusual circumstance and my adverse assessment of the credibility of the applicant and the third respondent on this and other issues, I am not satisfied that they have in fact separated. However, this finding is not determinative of the outcome of this case.
I am satisfied that the third respondent is the applicant’s cat’s-paw in the proceedings and her participation in the proceedings is calculated to pursue the applicant’s interests rather than her own separate interests. Both the applicant and the third respondent say they do not seek to press any claims as against each other under the Family Law Act 1975 (Cth). They said they wish to reserve their rights to commence proceedings between themselves at a later time. However, in practical terms the third respondent does make a claim against the applicant. She claims an equitable interest in the E Street, Suburb F and the G Street, Suburb H properties resulting from her alleged financial contributions to the mortgages and other matters. She seeks a transfer of both properties to her. In other words, she seeks the extinguishment of the interest of both the applicant and the first respondent in those properties and transfer to her. The first respondent, unsurprisingly, opposed the application but the applicant did not take any position against it. His self-drafted affidavit did not question her claim and, indeed, agreed with it. He did not seek to cross-examine her. The third respondent’s affidavit had textual similarities with the applicant’s and there were other indications that he had drafted it. For example, as noted, the third respondent’s affidavit made assertions about the purchase of C Street, Suburb D in 2007, although the third respondent did not arrive in Australia until 2014. Another example is the SMS messages between the applicant and the first respondent annexed to the third respondent’s affidavit. I am satisfied the third respondent’s affidavit was drafted by the applicant or in close cooperation with him.
It is not disputed that the applicant and the first respondent were jointly responsible for the mortgage on E Street, Suburb F until 23 March 2016, when the applicant was ordered to pay it. The first respondent’s affidavit appears to concede that she stopped contributing to the mortgage on E Street, Suburb F when she left the property in 2014 (contrary to her submissions which state that she continued to pay until 2017).
The third respondent asserts that she made contributions to the E Street, Suburb F and G Street, Suburb H properties by making mortgage repayments on those properties and other contributions. She argues that these alleged contributions should be treated separately to the contributions of the applicant and give rise to an equitable interest in those properties, entitling her to have the properties transferred to her. The basis of her claim of equitable interest is unclear. In her trial affidavit she asserts that in return for payment of the mortgages and outgoings on E Street, Suburb F the applicant promised to transfer “all his right and title” in the property to her after this proceeding was concluded.
In relation to G Street, Suburb H she claims that her payment of the mortgage and payment for renovations and improvements gives rise to an equitable interest.
I do not accept these claims for the following reasons.
The third respondent filed two financial statements, the first on 2 June 2021 and the second on 23 November 2021. The first stated that her current occupation was “Director”. She said she was self-employed and the name of the relevant business, company, partnership or trust was B Pty Ltd, the corporate trustee of the Krupin Family Trust. She said her total average weekly income was $1,070. She said this was made up of rent of about $670 a week from an unspecified source and rent of $210 a week from another unspecified source. The $210 is the same as the figure the applicant claims to pay the third respondent for rent at E Street, Suburb F (and for which he received rent assistance), so it may be a reference to this. As the G Street, Suburb H property contains two separate tenancies it is also possible this amount is from a second tenancy. The third respondent’s evidence shed no light on this issue. She also deposed to “sales” to “clients” of $190 a week. The third respondent said she was an artist so the last item may refer to that activity.
She said her personal expenditure included an amount of $801 a week in mortgage payments for the G Street, Suburb H property.
In this financial statement the third respondent treated the rents from G Street, Suburb H as her personal income and the mortgage repayments as personal expenditure.
It is clear enough that at the time she completed the financial statement the primary source of the third respondent’s income, according to her at least, was rent from the property at G Street, Suburb H, owned by the trustee company of which she was the only director. She did not appear to have any other significant source of income apart from a limited income from, possibly, a small home business.
The second financial statement did not disclose any income or expenditure. Under the heading “Property owned by you” she claimed 100% ownership of both the E Street, Suburb F and G Street, Suburb H properties.
I am satisfied the source of most, if not all, of the mortgage repayments on the G Street, Suburb H is the rents from that property. No substantial income is disclosed by the third respondent that would permit her to pay the mortgages at E Street, Suburb F or G Street, Suburb H other than from rent from G Street, Suburb H. As noted, I am not satisfied the third respondent is a reliable witness. I am not satisfied she has made adequate disclosure. However, I am satisfied that the most likely source of the payment of the mortgages on E Street, Suburb F and G Street, Suburb H is the combined income of the applicant and the third respondent, from whatever sources, and the rents received from G Street, Suburb H.
At no point has the third respondent, as sole director of the trustee company, ever provided an account or information about the receipts and expenditure in relation to the G Street, Suburb H property.
During cross-examination the third respondent was asked about the source of some of her income. She asserted that her mother, who lives in Country M, gave her a number of large cash amounts during visits to Australia. There were no records of such receipts and I do not accept the third respondent’s evidence in relation to that.
The applicant and the third respondent signed two documents on 22 November 2021, that is, two days before the trial before me began. The documents purported to record a financial agreement between them. Notwithstanding that both were legally represented at that time the documents do not show any indication of being drafted with the benefit of professional legal advice and the third respondent confirmed that she did not seek legal advice about them. They read identically, apart from the address of the property and the dollar figure at the end:
To whom it might concern
I, Ms Petrov of E Street, Suburb F, Queensland have been lending money with no interest since 2014 to Mr Krupin E Street, Suburb F, Queensland, in order to repay mortgage, rates, all outgoings as well as develop, renovate, maintain conserve and retain property at
E Street, Suburb F, , Queensland,.
On 22 November 2021 the total amount of the loan against the property at E Street, Suburb F Queensland, is:
Two Hundreds (sic) and Twenty-Eight Thousands (sic) dollars ($228,000).
Signed: Ms Petrov
Date: 22/11/21
Signed: Mr Krupin
Date: 22/11/21
The applicant and the third respondent signed another document on the same date with the same wording but referring to the property held by the Krupin Family Trust at G Street, Suburb H. The amount allegedly lent by the third respondent in respect of that property was $304,000.
Some things may be noted about these documents. They profess to acknowledge a loan or loans to the applicant by the third respondent. No express language creating a charge against the properties or any other proprietary interest is used. In any event, no proprietary interest could be created in E Street, Suburb F against the first respondent because there is no writing signed by her as required by s. 11 of the Property Law Act 1974 (Qld). Similarly, no proprietary interest in G Street, Suburb H could be created without writing signed by the trustee, B Pty Ltd.
Accordingly, the documents acknowledge a loan or loans from the third respondent to the applicant. Indebtedness, without more, does not create a proprietary interest. There is no reason to find a constructive trust or any other equitable interest arising from this transaction or transactions. Curiously, the third respondent said in cross-examination that she had worked as a professional for some years in Country M. She said she was familiar with the distinction between debt and proprietary interest. She said the applicant had drafted both documents. I find that these documents evidencing a debt or debts are inconsistent with the existence of the any equitable or other proprietary interest arising in E Street, Suburb F or G Street, Suburb H in favour of the third respondent.
It is not in question that the first respondent did not contribute to the mortgage repayments at E Street, Suburb F after she left the property in June 2014, nor did she contribute to the mortgage payments in respect of G Street, Suburb H. However, it is to be remembered that an order was made on 23 March 2016 by the original judge that the applicant was to be responsible for the payment of the mortgages and other outgoings on both properties.
The applicant and the first respondent own the E Street, Suburb F property jointly. I am satisfied that, while the third respondent and the applicant lived in the property, then any contribution she made to the mortgage payments should be seen as having been made on behalf of the husband and is simply the price of his occupation of the property to the exclusion of the first respondent. The third respondent asserts that over the period she contributed to the mortgage repayments for E Street, Suburb F she reduced the principal debt by some $26,000. I will treat this as the contribution of the applicant or a contribution made on his behalf.
G Street, Suburb H is held in the name of B Pty Ltd as trustee of the Krupin Family Trust. It was purchased with funds jointly borrowed by the applicant and the first respondent who provided the entirety of the purchase price. The present mortgage loan account is in the name of the husband and the first respondent.
The trust is a discretionary trust. The appointer under the trust deed is the applicant. He has power to appoint and remove the trustee. The primary beneficiaries under the trust are the applicant and the first respondent. The secondary beneficiaries are their children, grandchildren, parents or grandparents. The definition of secondary beneficiary also includes any person who is a director of the trustee. This would include the third respondent. The first respondent and the applicant were previously the directors of the trustee company. In circumstances that are obscure the applicant procured the removal of the first respondent as director of the trustee and installed the third respondent as sole director.
G Street, Suburb H is rented to tenants. The third respondent, as the sole director of the trustee, received the rents, and presumably applied them to pay the mortgage. I am satisfied that she has acted at all material times at the direction of or in cooperation with the applicant. There is no evidence that the third respondent, as director of the trustee, has accounted to the beneficiaries of the family trust or that the first respondent or her children have received distributions since separation.
The third respondent as director of the trustee asserts that she has made significant capital expenditure on the G Street, Suburb H property but she has not given details of that expenditure. If the claim is true, this is an instance of grossly inadequate disclosure. For the reasons discussed above I am not satisfied that the third respondent has had sufficient income at any point to make significant capital expenditure on G Street, Suburb H. If such expenditure has been made its source is undisclosed.
The third respondent as director of the trustee makes the unchallenged assertion the principal owing on the loan account has been reduced by $23,000 since 2014. In the absence of disclosure about how the rents have been applied that should not result in any adjustment and should not result in the recognition of any equitable interest in the property held by the third respondent.
The submissions of the third respondent raise other arguments[1].
[1] Counsel for the third respondent informed chambers that he disavowed these submissions because unauthorised alterations were made to them by or on behalf of the third respondent after they had left his hands.
It was submitted that a valuation of G Street, Suburb H at $375,000 in October 2015 and a subsequent valuation at $490,000 in 2021 showed the value of the improvements on the property. If there has been capital appreciation the flaw in this reasoning is obvious. However, the two valuations show that renovations in 2015 were “incomplete” and the later valuation showed it was complete. No attempt was made by the valuer to put a value on the work done between 2015 and 2021. It may have been relatively minor.
It was submitted that the third respondent’s alleged contributions to payment of the mortgage and renovations combined with the agreement alleged by the applicant and the third respondent that the applicant would transfer his interest in the E Street, Suburb F and G Street, Suburb H properties to the third respondent after the conclusion of these proceedings gave rise to an equitable interest. Assuming for the moment that such contributions were made and such an agreement was made, the terms of the agreement relate only to the applicant’s interest in the properties. Such an agreement and such contributions cannot impinge upon the interests of the first respondent in the properties. In any event, I do not accept that the third respondent’s contributions are independent of the rents she received from the G Street, Suburb H property and her combined income with the applicant.
Another submission made by the third respondent relied on the so-called “orders” of 13 October 2017. These orders are said to have provided, in summary terms, for the applicant to pay the first respondent $145,000 and, within 90 days, to refinance E Street, Suburb F and G Street, Suburb H whereupon the first respondent was to transfer her interest in the properties to the applicant. If the applicant failed to do so the properties were to be sold and the proceeds divided 40% as to the applicant and 60% as the first respondent. The orders were not authenticated or sealed. Ultimately they were discharged. Further, there is no evidence that the applicant ever paid, or ever was in a position to pay, the first respondent $145,000.
It was submitted that on the making of these “orders” the first applicant “obtained an equity in what was formerly the First Respondent’s interest in the properties”. Leaving aside the fact that no orders were published or authenticated by the Court, no equity could possibly arise unless the applicant paid the first respondent the $145,000 allegedly required under the “orders”. This argument does not merit further consideration.
The third respondent submitted that her “contributions”, coupled with the applicant’s promise to transfer his interest in the properties to her, required the imposition of a constructive trust of the kind in Muschinski v Dodd. This misses the point. This case is not about claims as between the applicant and the third respondent – which the Court was told at the opening of the case would not be pursued – but the third respondent’s claim against the first respondent’s interest in the properties. The applicant’s alleged promise to the third respondent has no bearing on that issue. Conduct by the applicant cannot require the imposition of a constructive trust in favour of the third respondent over the first respondent’s interests in the properties. That would offend good conscience rather than give effect to it. The same reasoning applies to the submission that a proprietary estoppel arose against the first respondent in favour of the third respondent of the kind described in Walton’s Stores (Interstate) v Maher (1988) 164 CLR 387. The first respondent made no representation nor did she engage in any conduct towards the third respondent that could create a proprietary estoppel.
The third respondent’s claim will be dismissed.
Other property pool issues
The value of most other small items in the balance sheet were agreed. The first respondent alleged that a business operated by the third respondent at E Street, Suburb F had some value that should be included in the property pool but no valuation was offered and I am not satisfied this should be listed in the balance sheet as an asset. The applicant alleged that the first respondent had taken a some exotic birds at the time of separation and had not accounted to him. He said they were worth $30,000 and should be “added back”. The first respondent said she had purchased the birds with $4,000 borrowed from her mother. She said the birds flew away in 2014, one of the birds died and she sold the other for $3,000, with which she repaid her mother. The subject was not pursued in cross-examination and there is no evidence of the value of the birds. I propose to ignore the birds. The first respondent alleged that the applicant’s paragliding equipment had some value but no value was offered. I will ignore this. The applicant also alleged that some other items should be added back because they were taken by the wife, including 30 folding tables and a high-pressure petrol cleaner. There are no valuations and these matters were not pursued in the trial. I am not satisfied they need to be included in the balance sheet.
Both the applicant and the first respondent claim to have significant debts. There is little or no independent evidence about these claimed debts and I am not satisfied they are genuine. The applicant alleged that he owed a person named P $73,500, a person named Q $48,000 and the third respondent $532,000. There was no evidence about the first two debts. I am not satisfied they exist and I propose to ignore them. The applicant claims to owe $101,341 for credit card debt. There is no evidence about this debt or whether it accrued post separation or otherwise and I do not propose to include in the balance sheet. The applicant’s claim that he is indebted to the third respondent has been discussed. I am not satisfied for the reasons given that such a debt genuinely exists. In any event, it is a debt accrued after separation and should be ignored in any alteration of interests as between the applicant and the first respondent.
The first respondent claims to owe a person named R $10,550, a person named S $18,000, a person named T $12,000 and a person named U $8,000. She also claims to owe $41,150 to her mother. There is no evidence about the circumstances in which these alleged debts arose and I do not propose to take them into account. The first respondent also asserts that there ought to be add backs for paid legal costs but there is no evidence about the source of the funds, whether in post separation earnings or otherwise, and I do not propose to add them back.
Capital gains tax issues
There was no evidence of the likely incidence of CGT in relation to the prospective sale of G Street, Suburb H or of any of the properties sold by the parties since separation. The first respondent’s trial affidavit made some reference to potential CGT but did not quantify her liability, if any. However, in her memorandum of orders sought in her final submissions the first respondent sought the appointment of a single expert to assess the CGT liabilities of the parties, including in relation to five properties disposed of some years ago which had not been the subject of specific evidence. She proposed that those liabilities be deducted from the proceeds of sale of the existing properties.
I was concerned about the failure of the applicant and the first respondent to address CGT issues. I called the matter on again and informed the parties that, in the absence of evidence or submissions about the issue, I did not consider that was an appropriate order. Counsel for the first respondent told me that the CGT liability of the applicant and the first respondent accrued in the 2016 and 2017 tax years when a number of properties owned by them had been sold. I understood from the submissions that the first respondent that she had not completed tax returns for those years so her tax, including CGT, had not been assessed.
It is regrettable this issue was not considered at an earlier point. The trial was set down in April 2021 and the Judge hearing the matter was told, presumably, that it was ready for trial. It was also set down for hearing before me by the same Judge and, presumably, he was not told that CGT issues needed to be addressed by calling evidence. In my view, the parties must be taken to have made a deliberate decision to conduct the trial in this way.
Nevertheless, I made an order that if any of the parties wished to adduce further evidence in relation to CGT an application to reopen the case was to be made within seven days. The applicant indicated he would not do so. In discussion with counsel I said that CGT issues would be of most significance if the CGT in relation to their investment properties fell on the parties in an unequal way. There is no indication this is the case. No application was made to adduce further evidence. I am satisfied that the parties have deliberately chosen not to adduce evidence and I am satisfied that the absence of evidence is not productive of injustice. I consider the most probable reason for this is that the burden of CGT on the applicant and the first respondent has been approximately equal.
The balance sheet is as follows:
Description App Husband Resp Wife Total Assets 1 E Street, Suburb F $475,000 $475,000 $950,000 2 G Street, Suburb H
(held by B Pty Ltd as trustee)$245,000
$245,000
$490,000
3 Household Contents
E Street, Suburb F $7,585
G Street, Suburb H $755$8,340
4 Household contents $1,160 5 Motor Vehicle 1 $14,500 6 Bobcat $3,200 7 McNamara Trust Account $20,833 $20,833 $41,666 8 Bank accounts $50 9 Bank accounts $73 Total assets $752,433 $756,566 $1,508,999 Liabilities 1 E Street, Suburb F mortgage $270,940 $270,940 $541,880 2 G Street, Suburb H mortgage $86,722 $86,723 $173,445 3 Applicant’s child support debt $6,146 3 Prospective GGT Not known Not known Total Liabilities $363,808 $357,663 $937,792 Net assets $388,625 $398,903 $787,528 Superannuation 1 Husband $2,000 ? 2 Wife $4,143 Total Superannuation $2,000 $4,143 Total assets and superannuation $390,625 $403,046 $793,671 Contributions
The applicant and the first respondent married in Australia in about 2000. Although the husband worked as a tradesman he became a property investor and eventually devoted all this time to this. As noted, the applicant and first respondent purchased numerous properties which they renovated, if necessary, and sold. The applicant said that the first respondent was primarily a homemaker and mother and did not participate significantly in the handling and management of the property portfolio. The first respondent denied this and said that she had done a number of courses directed towards property portfolio management and played a significant role, collecting rents, doing paperwork and so on. The applicant’s evidence that first respondent was responsible for taxation issues suggests her role was important. I accept that the second respondent was significantly involved in the management of the property portfolio in addition to her role as homemaker and mother. In any event, whether or not roles were demarcated as the applicant claimed I am satisfied that each made significant and equal contributions in their respective spheres.
I am satisfied that the financial and non-financial contributions of the applicant and the first respondent were equal up until the time the first respondent left the former matrimonial home in mid-2014. The applicant and the third respondent, according to her, paid the mortgage on E Street, Suburb F thereafter. The applicant and the third respondent lived in the E Street, Suburb F property. In circumstances where the first respondent was kept out of her entitlement to the property and the applicant and the third respondent lived in the property rent free it is appropriate that the applicant, or the applicant on his behalf, paid the mortgage. The principal owing on the mortgage was reduced by about $26,000 in addition to payment of the interest component. I accept there ought to be some adjustment to reflect that contribution. The capital appreciation of the property should be seen as an equal contribution by the applicant and the first respondent.
The husband has continued to receive the rents from G Street, Suburb H. There has been no account or distribution by the trustee, or evidence of distribution, over that period. I am satisfied that the mortgage repayments have been met from the rent receipts. While there was some evidence that some renovations were completed between 2015 and 2021 there is no evidence about the extent of those, the expenditure on them or the source of any funds used.
Section 75(2) factors
The applicant is 58 years old. He said his income is $871 from social security payments. It is unclear when he last worked but a Centrelink statement dated 29 November 2017 is in evidence. He said that his back prevented from working as a tradesman but there was no evidence of this. A letter from an employer dated 28 July 2017 said the applicant had begun work as a tradesman on 24 July 2017 earning $90,000 a year. The applicant said that he was unable to do the job because of his back. I suspect the letter is not genuine and was created to support a loan application to a bank but the evidence does not permit a finding about that. This evidence is of a piece with the applicant’s other unreliable evidence. I am not able to make a finding about the applicant’s capacity for gainful employment.
The applicant lives with the third respondent. They claim to be separated but I am not satisfied that is genuine. The third respondent’s conduct in this case indicates cooperation with the applicant. The financial relationship between them is opaque. The third respondent’s income is unclear.
The 12-year-old son of the applicant and the first respondent lives in an equal time arrangement with them. Their 16-year-old daughter lives with the first respondent.
The applicant is subject to a child support assessment, according to the first respondent, of $25 a week but he is in substantial arrears. The matter seems to be the subject of dispute in the AAT.
The first respondent is 42 years old. She works as an allied health worker earning about $1,500 a week and with rent assistance and family tax benefit she receives about $1,800 a week. She says the applicant is in substantial arrears with child support.
Having regard to these factors, in particular the lack of frankness and unreliability of the applicant’s evidence, I am not satisfied any adjustment is required for s 75(2) factors.
Conclusion
I am satisfied that the equity in the E Street, Suburb F and G Street, Suburb H properties, and the amount held in the solicitors’ trust should be distributed about equally between the applicant and the first respondent. The net figure is $767,242. There should be an adjustment in the applicant’s favour to recognise the reduction in the mortgage on E Street, Suburb F by $26,000 since separation, which is about 3% of the net figure, requiring an adjustment of 1.5%. This results in a split of 51.5% to the applicant and 48.5% or $395,130 to the applicant and $372,112 to the respondent.
The result is as follows:
Assets App Husband Resp Wife Total E Street, Suburb F $475,000 $475,000 $950,000 G Street, Suburb H
(held by B Pty Ltd as trustee)$245,000 $245,000 $490,000 McNamara Trust Account $20,833 $20,833 $41,666 Total assets $740,833 $740,833 $1,481,666 Liabilities E Street, Suburb F mortgage $270,940 $270,940 $541,880 G Street, Suburb H mortgage $86,722 $86,723 $173,445 CGT liability Not known Not known Total liabilities $357,212 $357,212 $714,424 Net assets $383,621 $383,621 $767,242 Husband 51.5% and Wife 48.5% $395,130 $372,112 $767,242
Because it is more than eight years since the parties separated it is not just and equitable to take into account the other relatively insignificant assets in the overall division, including the small amounts of superannuation of the parties.
I propose to give the applicant the opportunity to obtain approval to refinance the E Street, Suburb F and/or G Street, Suburb H properties within 60 days and pay the first respondent her entitlement. This may include the applicant’s share, $20,833, of the amount held in the solicitor’s trust account. If this requires the sale of the G Street, Suburb H property this is likely to produce a different net figure to that used in the balance sheet. If the applicant wishes to retain E Street, Suburb F and sell G Street, Suburb H then he is to pay the wife the amount which represents 48.5% of the sum of $408,120 (the equity in E Street, Suburb F), the net proceeds of sale of G Street, Suburb H and the amount held in the solicitor’s trust account.
If the applicant is unable to obtain unconditional approval to refinance E Street, Suburb F or G Street, Suburb H or both within 60 days then both E Street, Suburb F and G Street, Suburb H are to be sold, initially by private sale but if that is unsuccessful by auction, and, after deduction of liabilities, the proceeds divided 51.5% to the applicant and 48.5% to the first respondent.
I will also grant a certificate to the applicant, first respondent and second respondent pursuant to s 10(2) or (3) of the Federal Proceedings (Costs) Act 1981 because the original proceeding was rendered abortive or the original hearing was discontinued and a new hearing ordered and that is not attributable to the neglect, default, or improper act of any party.
I certify that the preceding one hundred and two (102) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Young. Associate:
Dated: 4 March 2022
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