Lindsay and Lindsay & Ors
[2014] FamCA 401
•13 June 2014
FAMILY COURT OF AUSTRALIA
| LINDSAY & LINDSAY AND ORS | [2014] FamCA 401 |
Family Law Act 1975 (Cth) Baumgartner v Baumgartner (1987) 164 CLR 137 |
| APPLICANT: | Ms J Lindsay |
| 1st RESPONDENT: 2nd RESPONDENT: 3rd RESPONDENT: 4th RESPONDENT: | Mr C Lindsay Mr R Lindsay Ms A Lindsay Mr S Lindsay |
| FILE NUMBER: | ROC | 714 | of | 2009 |
| DATE DELIVERED: | 13 June 2014 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Tree J |
| HEARING DATE: | 25, 26, 27, 28 March and 12 June 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Anderson & Mr Moulder |
| SOLICITORS FOR THE APPLICANT: | Colin Fleming & Company |
| SOLICITORS FOR THE 1ST RESPONDENT: COUNSEL FOR THE 2ND AND 3RD RESPONDENTS SOLICITORS FOR THE 2ND AND 3RD RESPONDENTS THE 4TH RESPONDENT | Michael Stockall Ms Carew South & Geldard Solicitors In person |
Orders
The wife’s Application for a declaration that a partnership and/or joint venture existed between her and the respondents in relation to the family business “R & A Lindsay” and any associated family business operations from … July 1997, be dismissed.
The wife’s Application for a declaration that the respondents be estopped from denying the existence of a partnership and/or joint venture with the applicant, be dismissed.
The wife’s Application for a declaration that the properties “Property P” and “Property B” and proceeds of the sale of “Property G” and the interest in water allocation described as “Allocation No. …10 on Crown Plan … contained in Title Reference …” are held subject to a Constructive Trust in favour of the applicant wife and the first respondent husband in such proportions as the court deems fit, be dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Lindsay & Lindsay and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT |
FILE NUMBER: ROC 714 of 2009
| Ms J Lindsay |
Applicant
And
| Mr C Lindsay Mr R Lindsay Ms A Lindsay Mr S Lindsay |
Respondents
REASONS FOR JUDGMENT
INTRODUCTION
In these proceedings, the applicant wife seeks orders against the first respondent husband for a division of the property of the parties to the marriage. She contends that property includes a one-third interest in a partnership known as “R & A Lindsay” the assets of which she asserts include two substantial livestock grazing properties, together with plant, equipment and stock, which according to the second and third respondents, have a total net value of approximately $14,186,451.00.[1] The other respondents are the other asserted members of the partnership: the second and third respondents are the husband’s parents; the fourth respondent is the husband’s brother. All respondents deny any such interest is held by either the wife or the husband.
[1] Derived from the notice to admit served by the second and third respondents on the applicant, first respondent and fourth respondent dated 14 August 2012.
On 1 March 2012 a Registrar made consent orders requiring a regime of pleadings designed to articulate the bases upon which the applicant said that the asserted interest in the partnership arose. Subsequently, on 5 July 2012 a Registrar made orders, including a notation as follows:-
All parties in the interests of costs saving to the parties, request the Court to hear and determine the following aspects of the applicant’s claim as separate questions:-
A. A declaration that:-
1.A partnership and/or joint venture existed between the applicant and the respondents in relation to the family business “[R & A Lindsay]” and any associated family business operations from … July 1997;
2.The applicant and first respondent hold a one third interest in the partnership and/or joint venture;
3.The following assets, including improvements thereto, stock, plant and equipment, constitute property of the partnership and/or joint venture:-
(a)“[Property B]” at [Town E];
(b) “[Property P]” at [Town D];
(c)Water allocation No. …10 of Crown Plan … contained in title reference …;
(d)The proceeds of the sale of “[Property G]” at … [I Street], [Town F] in the State of Queensland.
4.The partnership and/or joint venture dissolved on 9 December 2008;
B.In the alternative, the court make a declaration that the properties “[Property P]” and “[Property B]” and the proceeds of the sale of “[Property G]” and the interest in Water Allocation described as allocation No. …10 on Crown Plan … contained in title reference … are held subject to a constructive trust in favour of the applicant wife and the first respondent husband in such proportions as the court deems fit.
These are my reasons for judgment arising from the trial of those separate questions.
THE ISSUES
Overview
The wife puts her case on several alternative bases. Firstly she asserts that she, the four respondents, and the fourth respondent’s former wife, Ms H Lindsay, on and from a date in July 1997 were partners in the R & A Lindsay partnership. Secondly, as an alternative to the first claim, she says that rather than it being a partnership, it was a joint venture, but otherwise on seemingly materially indistinguishable terms from the asserted partnership. Thirdly, she asserts in the alternative that the respondents are estopped from denying the existence of a partnership and/or joint venture with the applicant. The fourth basis upon which she puts her claim is that the second and third respondents holds what she contends are the assets of the partnership on trust for her and the husband pursuant to a constructive trust in unspecified proportions.[2]
[2] There is some divergence between para.G of the prayer for relief of the applicant’s Statement of Claim filed 22 March, and the Order of the Registrar made 5 July 2012, but nothing appears to turn upon that.
Although a claim for equitable compensation was pleaded in the wife’s Statement of Claim, that was not within the separate questions before me. Moreover, any claim for an equitable lien or charge over the assets of the partnership was expressly disavowed by counsel for the applicant during the course of the trial. Curiously, it was then sought to be re-asserted in the applicant’s written submissions. Even if not abandoned, it was in any event plainly not within the scope of the separate questions.
The pleaded case
The wife’s Statement of Claim filed 22 March 2012 pleads a number of representations (variously oral and/or written) said to have been made to the wife by one or more of the respondents. These are either wholly denied by the relevant parties, or alternatively, to the extent that they are admitted, said not to have the meaning for which the wife contends. She then pleads a number of asserted contributions to the R & A Lindsay partnership, together with their contended values. She further pleads that these contributions enriched the respondents in particularised ways. Because some of these matters are common to both the pleaded partnership / joint venture claim and the constructive trust claim, it is convenient to deal with the facts generally, and then proceed to a consideration of the individual pleaded claims, to determine whether or not they are made out.
THE FACTS
Background and uncontentious matters
The second respondent’s grandfather, the late Mr K Lindsay, purchased the property “Property B” near Rockhampton in or about 1911. Upon his death in 1945, the property was transferred to the second respondent’s father and uncle. In 1947, the second respondent’s father purchased the uncle’s interest and hence became the sole proprietor of the property. The second respondent commenced employment with his father in 1963. His brother Mr L Lindsay also worked for the second respondent’s father on “Property B”.
The second and third respondents married in 1969 following which they lived in a cottage on “Property B”. In 1971, the second respondent and his brother Mr L Lindsay each purchased a one third interest in “Property B” including the stock, plant and equipment. There was no up-front payment, but rather payment for the purchase of their respective interests was to be made by the two brothers assuming responsibility for payment of debt, and with a $3,000.00 annual payment until a certain figure was met. There was also a formal partnership agreement entered into between the three partners (“the three way partnership”).
It appears as though the final payment was made to the second respondent’s father in 1986. Then in 1991 the second respondent’s father retired and Mr L Lindsay and the second respondent purchased in equal shares his remaining one third share of “Property B” and its stock, plant and equipment. The purchase price was $278,000.00 each. There was to be an up-front payment of $80,000.00 with the balance being paid over ten years. The loan was secured by a mortgage over “Property B”.
At the same time as acquiring their father’s share, both the second respondent and Mr L Lindsay partitioned “Property B” so that each received a portion of the land, plant and equipment and livestock. The second respondent kept the name “Property B”.
On 1 July 1991 the second and third respondent commenced to operate (the reduced sized) “Property B” in partnership (“R & A Lindsay” or “the partnership”). By that time, they had raised their family of three children: their daughter Ms M had been born in 1972, their son Mr S Lindsay, the fourth respondent, in 1973 and the husband in July 1975. It follows that the husband would have been fifteen years old when his parents commenced to farm “Property B” in partnership. Up until then, the second and third respondent had been living on “Property B”, but in one of the lesser houses. It seems they then moved into the main house on “Property B” which house is commonly referred to as “the big house”. Prior to 1991 the third respondent had been primarily responsible looking after the family home and the three children.
The fourth respondent completed agricultural college in 1990, and then returned to live on “Property B”, where he was employed initially by the three way partnership. From 1 July 1991 he was employed by R & A Lindsay. Thereafter on occasion he worked off-farm doing livestock work and driving for various employers, including local graziers and farmers, as well as working in the local mining industry. When he was working off-farm, any work done by him for R & A Lindsay was remunerated on the basis of casual wages only.
The fourth respondent was not the only employee to come-across to R & A Lindsay from the three way partnership. Another two employees, Mr N O and Mr Q O, also transferred their employment. They were paid under the relevant award from time to time, as was the fourth respondent.
The husband left school in 1992 and although he briefly attended agricultural college, thereafter he returned to “Property B” to work for R & A Lindsay. When he first commenced working in 1992, he was paid a wage, although a little less than he would have been entitled to under the Station Hand’s Award, because he was still living at home, and being provided with full board, the use of a car for personal use, as well as having his washing and ironing done by the third respondent.
In July 1995 the wife and the husband commenced a relationship. They were engaged in December 1995 and married in July 1997. After their marriage they lived in a cottage on “Property B” known as “the first cottage”.
At the time of that marriage, the wife was working for Business KK and continued in that job after marriage.
It seems plain that after 1991, the second respondent wished to increase the size and profitability of the grazing business. He was supported in this ambition by the third respondent. It appears to have been their joint vision that the business should become large enough so that it could not only support the second and third respondents, but each of their sons if they chose to become a part of the business. Indeed both the second and third respondent had spoken informally to their sons as they were growing up to the effect that they hoped to be able to give them the opportunity to remain on the land. However whenever the topic was mentioned, it was stressed that both must firstly prove themselves to be able to manage the business, and that they must buy into the business.
In July 1998 the partnership purchased “Property G” a grazing property at Town F in Central Queensland for $1.2million. The fourth respondent and his then wife Ms H Lindsay commenced to live there at about that time. The husband, the wife and the second and third respondents all remained living at “Property B.”
In December 1999 the applicant and first respondent relocated to another cottage on “Property B” known as “the second cottage”.
In 2000 a property adjacent to “Property G” known as “Property T” was purchased for $500,000.00.
Notwithstanding those purchases, it is plain that the second and third respondents wished to continue to further grow their business. They were looking at a variety of options by 2001 including the purchase of a much larger property near Town U. They also wished to manage debt which they had acquired in the course of the purchase of “Property G” and “Property T”. For assistance with both of those they changed to a new Brisbane accountant, Mr V. Mr V advised that a farm business plan be developed as he foresaw it as useful in loan applications and in subsidy applications to QRAA for drought declared areas. I will return in greater detail at a later point to analyse the preparation of the business plan.
In May 2004 the applicant resigned her employment with Business KK.
Next in June or July 2004, the partnership purchased “Property P”, a grazing property in the Town D district, for $7.5 million. There then was something of a round-robin in the family’s housing arrangement. Firstly, in June or July 2004, the fourth respondent and his family relocated from “Property G” to “Property P”. Then in the latter half of 2004, the second and third respondents moved from the big house at “Property B” to “Property G”. Then in December 2004, the wife and husband relocated from the second cottage to the big house on “Property B”.
Because the purchase price for “Property P” was almost entirely borrowed, its acquisition saw a massive increase in the interest payments which the R & A Lindsay partnership was obliged to meet. Moreover, seasonal conditions at least in relation to some of the properties, appear to have worsened such that by November 2005 the second respondent had become “very nervous that the bank would force fire sales which would risk our being able to retain assets.”[3] This led to some formal, and even terse, correspondence between family members. On 5 November 2005 the second respondent wrote to the husband and wife, and to the fourth respondent and his then wife, as follows:[4]
[3] Second respondent’s trial affidavit para.49.
[4]Exhibit 2 to the third respondent’s affidavit filed 6 September 2012.
To [the fourth respondent] & [Ms H Lindsay], [the husband] & [the wife],
[Property P] [livestock] numbers must get to 3000 breeders and 500 replacement [young female livestock]. [Property G] must run 1500 backgrounding [male livestock]. [Property B] run 600 breeders and 1500 replacement / backgrounding [young female livestock]. If we do not run these numbers we cannot survive.
I am tired of making requests that these targets be achieved only to be met with negative response. We will get nowhere without thinking outside the square and making positive moves to achieve this objective.
I have written to my family before to explain myself and my views with very little response. I am not prepared to carry on any longer under these circumstances.
Failure to meet the above objectives in short order will finally prove to me that my boys do not have sufficient confidence in themselves to run a difficult and dynamic business. We are opportunity farmers and every opportunity must be capitalized upon. We are pouring feed into [livestock] to keep them in good order to take advantage of seasonal opportunity. This opportunity has arrived at [Property P] and the [male breeding livestock] are not in. Even if they are in with some [female livestock] / [young female livestock] can spread our cash flow.
Why are my polite requests ignored? Failure to act immediately upon my requests in writing as to why this can or cannot occur will result in the following:
(1) Sale of [Property G]
(2) Retirement of [the second respondent] and [the third respondent]
(3)Sale of any other property sufficient to meet realistic debt structure so that [the fourth respondent] and [the husband] can be independent.
I can cope with drought and all the other things that nature puts in front of me, even driving … to meet cash flow need when I really don’t want to but I can’t cope with people who will not take full economic advantage of opportunity put in front of them or look for advantage in positive light in any other area where advantage can be gained.
I place equal responsibility upon both [the fourth respondent] and [the husband] and respective family members, neither one being above the other. Complete and unbiased cooperation between both parties is to be uncompromised. Failure to give in writing to [the third respondent] and [the second respondent] within 7 days to this request will see the above plan put in place.
[the second respondent].
The wife and husband responded by letter dated 7 November 2005,[5] which in part read:
[5]Exhibit 4 to the third respondent’s affidavit filed 6 September 2012.
…
The first and most important issue we feel we should acknowledge and we have recently been reminded of by [Mr W], Commonwealth Bank representative at the last meeting, that you, [the second respondent] and [the third respondent], are the “owners” and “directors” of [R and A Lindsay]…
… Again we wish to point out that if [the second respondent] or [the third respondent] says to buy or sell, that is the final decision.
…
…
We congratulate you both on the success of your business thus far. We realise you successfully negotiated many different situation. However, if you endeavour to bring others into the business we believe you are going to have to learn to respect their suggestions as business associates. You speak of full economic advantages and opportunities put in front of [the fourth respondent] and [the husband], however you continue to make all decisions and continue to make threats of closing the business or shutting one party out….
…
[The husband] and [the wife] realise they have a responsibility and look forward to working together for the success of the business. In doing this we request that we both be given a detailed job description in writing (including the positions which we do not received wages for) complete with ALL individual particulars and individual targets so we know exactly what is expected of us for the success of a [R & A Lindsay].
…
As alluded to by Mr. [V], whilst we understand and respect the positions of [the second respondent] and [the third respondent] as owners and directors of this constantly expanding company, we believe that less complications would arise if one person was solely responsible for management/staff professional interaction. This system is consistent with all other businesses of this size.
…
To further reduce ambiguity, considering the tasks required at each property, a Position Statement be formulated by negotiation by all involved. Although this is a family business, it is recognised that a professional approach is required to make success possible.
…
This period of tension appears to have in some measure thereafter abated, but debt management remained a live issue however, and by 2006 the debt of the partnership was $9.5 million.[6] The second and third respondents had several meetings at “Property G” with the relevant Commonwealth Bank Manager to discuss debt management. The minutes of one of those meetings at which the wife and fourth respondent (but not Ms H Lindsay or the first respondent) were present was exhibit 10 to the trial affidavit of the second respondent. It appeared to be an anxious time for the parties as they struggled to deal with cash-flow issues and underperforming properties.
[6] Second respondent’s affidavit para.56.
On 15 February 2007 the fourth respondent and Ms H Lindsay separated. They did not reconcile, and the fourth respondent has subsequently re-partnered.
The financial struggle continued throughout 2007. In October of that year, there was a further meeting with the relevant Commonwealth Bank Officer to discuss a business plan aimed at debt reduction. A meeting was convened for 10:00am on Friday 5 October at the Commonwealth Bank centre in Rockhampton. Again I will return to discuss this important meeting in greater detail when dealing with contentious facts. However I should say that in anticipation of the meeting, and without consultation with the second and third respondents, the wife and husband had sought advice from the second and third respondents’ accountants (X Accountants) about tax implications of various scenarios. At the 5 October meeting a number of options were considered, including the sale of “Property G”. The fourth respondent wanted to keep all three properties and indeed continue to grow the size of the operation. A further meeting was arranged at the second and third respondents’ solicitors offices on Friday 9 November 2007. In anticipation of that meeting, the second and third respondents’ solicitor, a Mr Ian Haig, prepared a business and succession plan. The meeting proceeded on 9 November 2007 and ran for four and a half hours. I shall return to consider this meeting in greater detail a little later as well.
On 9 December 2008 the wife and husband finally separated.
In Sept 2010 the sale of “Property G” settled at a purchase price of a little less than $6.4 million. All of the net proceeds of sale were used to re-pay debt with the Commonwealth Bank.
In April 2011, the husband remarried. The wife has not re-partnered.
Contentious matters
As I have already identified, the principal contentious matters joined in the trial of the separate questions before me related to the asserted representations pleaded by the wife in her Statement of Claim, and her asserted contributions and their values therein pleaded as well. However before I address those matters directly, it is convenient to deal with questions of credibility of the relevant witnesses.
Credibility
Although to a greater or a lesser degree all of the parties urged me to make adverse credit findings against their “opponents”, in my view this matter is not substantially resolved by questions of credit. In Hampton & Farley and Ors [2013] FamCA 213, which was another case involving an asserted constructive trust arising within a farming family, Coleman J said at [57] “Not surprisingly, in the light of the breakup of the relationship between the husband and the wife, each of them and the son, asserts a version of events which favours his, her, or their financial interest. That is not said critically of anyone: it is the reality of life and human nature.”
In my view, that comment is equally applicable in this case.
Thus in my view there is some merit in the criticism made by the wife of the several respondents that they tended to minimise the extent of and importance of, the wife’s involvement in the grazing business.[7] On the other hand, at least in her evidence-in-chief, the wife seemed to attempt to overstate the extent of her contributions and their significance. However in making those observations, I do not think that they tell in relation to the honesty of any of the witnesses before me. Indeed I had the impression that each of them were honestly giving their evidence, but the polarisation of their positions brought about by this litigation coloured their recollections and the way in which they expressed those recollections.
[7]Also, the second and third respondents’ aversion at acknowledging that the husband or the fourth respondent “managed” the properties on which they lived was of a similar character.
However the same cannot be said for the several professional witnesses who gave evidence in the course of the respondents’ case. They were the second and third respondents’ one time accountant and business advisor, Mr V, Mr Ian Haig, the second and third respondents’ former solicitor, and Mr Z, a real estate and stock agent with a history of engagement with the second and third respondents. I reject the wife’s contention that their evidence was coloured by loyalty or financial inter-relationship. Particularly in relation to Mr V and Mr Haig, I formed the view that their evidence was impartial, honest, and reliable. Moreover insofar as Mr Haig kept notes of two meetings, in my view he was doing so as part of his professional role, and it would necessarily be important to him to keep faithful and accurate records of the meetings he was involved in. His role was to facilitate negotiation and discussion between the parties, and if agreement could be reached, to prepare appropriate documentation to record that agreement. There is no reason to think that in doing so, he was acting in a partisan way, or subsequently has assumed a partisan role.
However the areas upon which the professional witnesses’ evidence touches do not encompass all the factual disputes: in some instances, the only witnesses to relevant events were two or more of the parties. Where their evidence is in conflict, I propose to examine it on an issue by issue basis, and to particularly look for indications both within and surrounding the competing versions so as to determine which is the more probable in the circumstances.
The asserted representations generally
Paragraphs 5 to 15 of the wife’s Statement of claim plead 11 representations. They are not pleaded in a strictly chronological order. Most of these were addressed in the applicant’s trial affidavit filed 13 September 2012. In her written submissions filed 22 April 2013, Ms Carew, who appeared as counsel for the second and third respondents, by reference to that trial affidavit rather than the pleadings, identified nine “promises” relied upon by the applicant. It seems to me convenient, given the terms of the orders of the Registrar, to deal with the pleaded representations, and to the extent that they are not dealt with in the evidence, to make findings accordingly. I will therefore deal with the 11 representations, save that the first two representations as pleaded may be dealt with as one single set of representations.
The first and second representations
The first and second representations are pleaded in an overlapping form. Firstly there is a specific representation by the husband to the wife in December 1995 pleaded at para 5 of the Statement of Claim, namely:
The applicant and the first respondent would be financially secure upon their engagement and subsequent marriage as “[Property B] was to be his”, meaning [the husband].
Secondly there are two further oral representations said to have been made “at various times on or about 1995” pleaded in para 6 in the Statement of Claim, again said to have been representations by the husband to the wife. Those representations were firstly that the husband and wife “were part of the family business” and secondly that they “would be gifted legal ownership of the “[Property B]” property.”
As to those latter representations, Ms Carew who appeared as counsel for the second and third respondents correctly identified that there does not appear to be any evidence led by the wife to directly support them. Rather the evidence was as contained in the wife’s trial affidavit as follows:
37. When our relationship became serious, we started to speak of a future of our own. He spoke of the Family Business in terms of “when this is ours” or word to that effect if not daily, then at least once a week. It was not raised in a bragging sense, but a statement. Examples of this varied from such mundane things as [the husband] saying “when we own this, I will put a fence up here.” I saw this as a wonderful opportunity as well. We both loved living at “[Property B].”
…
39. During [December 1995 the husband] told me that we would be financially secure upon our engagement and during our marriage as “[Property B]” was to be his.
It will be appreciated that these paragraphs do not support the second representations pleaded at para 6 of the Statement of Claim in that, rather than suggesting that the wife and husband were then part of a family business, the husband appeared to be looking forward to a time when “Property B” would be exclusively his, and further, there is no mention of “Property B” being gifted, or indeed any mechanism by which it was to be transferred to the husband.
In his affidavit filed 6 September 2012[8] the husband denied making the first and second representations.
[8]At paras 28 and 29.
Neither the wife nor the husband were cross-examined by reference to their evidence in relation to the first and second representations.
Although there is no evidence specifically dealing with it, it is obvious that there must have been a discussion some time prior to the husband and wife’s marriage as to where they were likely to live after marrying. Given that the husband was then residing on “Property B”, and it was within a reasonable commuting distance of Rockhampton where the wife was then working, probably their living on “Property B” after they married was an obvious solution, but nonetheless it is inconceivable that it was not discussed. It is also unlikely that there was not some, at least rudimentary, discussion about where their financial future might lie, and plainly the husband has at all times wished to obtain ownership of “Property B”, where indeed as at the date of the trial he continued to reside.
On the other hand, as at 1995, the family only had one rural property, and not only were the second and third respondents living on the property with the husband and the fourth respondent (and his wife), but there was Ms M, the daughter of the second and third respondents, to be considered as well, albeit that she was not living on the property. There could have been at that time no reasonable basis for the husband to have believed that “Property B” would be his one day, as distinct from, if it remained owned by his father at the time of his death, that some share in it may fall to him under his estate.
In 1995, the husband would have been either 19 or 20 years of age. His parents had only been operating the property in partnership for four years, given that the three way partnership had concluded in 1991, together with partitioning of the property. Against that background, there is no justifiable basis upon which the husband could have said to the wife that “[Property B] was to be his” as a statement of fact, as distinct from a wish.
Moreover the brevity of the wife’s evidence on this point is interesting. In 1995 she would have been either 17 or 18 years of age. If such a sweeping statement had been made to her by the husband that the property “Property B” – being the only rural property held by the family, and upon which the husband, his parents, his brother and his brother’s wife were then living – was to be his, one would have expected there to be some questioning as to how on earth such a seemingly preposterous statement could be justifiable. That would only have been natural curiosity on the part of a 17 or 18 year old contemplating marriage into the family.
There was unchallenged, and indeed unremarkable, evidence given by both the second and third respondents, about the expectation of both of their sons continuing on the land which they had engendered. At para 23 of his affidavit filed 6 September 2012, the second respondent said:
I had anticipated, as my father had afforded me the opportunity to purchase into the grazing and farming business as well as the lands, I had hoped when the time was right, [the third respondent] and I would also provide that same opportunity to each of our sons to acquire an interest in our business.
Likewise para 15 of her trial affidavit filed 6 September 2012, the third respondent said:
[The second respondent] and I had spoken informally to our sons as they were growing up that we hoped to give them an opportunity to remain on the land. [The second respondent] told me and each of our sons whenever the topic was mentioned that they must firstly prove themselves to be able to manage the business and that they must buy into the business.
However such evidence falls well short of any representation or assurance of a gift of “Property B” to the husband.
In all of those circumstances I am not satisfied that the first and second representations were made by the husband to the wife as pleaded.
That is not to say that I exclude the likelihood that his love of “Property B” would have been expressed to her, and indeed I am satisfied that his desire to one day take over the property would have probably been articulated, but such a statement by a 19 or 20 year old, in the circumstances, could have been nothing more than a wish.
The third representation
Para 7 of the wife’s Statement of Claim pleads that:
In or about 1995 (upon engagement) the Second Respondent at the big house, and “[Property B]”, orally represented to the Applicant that by virtue of her marriage to the First Respondent the Applicant had acquired an interest in the family business.
The evidence in support of this was in para 38 of the wife’s trial affidavit in which she said:
The [husband] announced our engagement to [the second and third respondents] in the living room of the “big house” on … December 1995 late in the afternoon. After the announcement I returned to the [husband’s] bedroom whilst [the husband] went downstairs to get the engagement ring. [The second respondent] came to see me in the bedroom. [The second respondent] said to me that day “you realise that if you marry into the family you are marrying into a Family Business.” [The second respondent] would thereafter say regularly to me or others in my presence that it was a “Family Business” in which “family” came second. It was his slogan.
The second respondent denied the conversation pleaded in para 7 of the Statement of Claim[9] however did not traverse the greater detail later contained in para 38 of the wife’s trial affidavit (in part because the directions did not permit response affidavits, but also because no evidence-in-chief was sought to be led from him traversing that evidence). By the same token, he was not cross-examined by reference to that evidence either.
[9] By para 93 of his trial affidavit filed 6 September 2012.
Common experience would suggest that many Australian rural families take great pride in the fact that properties and farming operations have been conducted across many generations, and no doubt entertain a hope that they will continue to be so operated in the future. It seems plain to me that such an ambition was also held by the second respondent, it being remembered that “Property B” had been in his family since 1911. At the time of the husband and wife’s engagement being announced, the second respondent had recently taken over the operation of “Property B” by virtue of the two way partnership, and both of his sons were working on the property. It would be an inevitable concern of a parent in those circumstances to emphasise to a then 18 year old girl likely to marry into the family, that the marriage necessarily was not devoid of significance from the rural operation’s perspective. The asserted conversation is precisely what one might expect a concerned father to say to the prospective bride of one of his two sons. Moreover, there is real specificity both in terms of context and content of the conversation as asserted by the wife.
I am therefore satisfied on the balance of probabilities that in 1995, the second respondent said to the applicant that “you realise that if you marry into the family you are marrying into a family business.”
However it does not follow that therefore the third representation was made, that representation being that the wife “had acquired an interest in the family business.” To my mind, there is a world of difference between “marrying into” a family business”, and “acquiring an interest” in it. It is too far a stretch to say that a conversation between the impending father-in-law and bride on the day of her engagement, to the effect that she would be “marrying into a family business,” was a representation that upon the day of their marriage, she would acquire ownership of some unspecified interest in that business. In my view, the meaning of the December conversation was nothing more than the father-in-law to be underlining that the son she was going to marry was involved in a family business, and accordingly she needed to understand that there were issues arising from his involvement in the business that needed to be appreciated and accommodated in the marriage.
I therefore am not persuaded that the third representation was made.
The fourth representation
Para 8 of the Statement of Claim pleads:
On or about 19 October 2001 [the respondents] represented to [the wife] in two documents headed “Business Plan Workbook” and “Our Plan” that:
(a)[the wife] and [the husband] would be formally brought into a partnership with the other respondents as a three family units;
(b)[the wife] and [all respondents] would together operate the family business, [the wife] and [the husband] managing the “[Property B]” property;
(c)[the wife] would perform office work for the family business when [the wife] ceased employment outside the family business;
(d)[the wife] and [the respondents] would each receive an equal share of the taxable income of the family business; and
(e)[the second respondent] would purchase for [the wife] and [the husband] a separate business if they so desired.
The evidence led in support of this asserted representation was contained within paras 40-47 of the wife’s trial affidavit. There she asserted:
·In 2000 a crisis arose in consequence of which the second respondent told the husband and the wife they had two weeks to decide whether they were “in or out” of the family farming business;
·During the course of this crisis, or because of it, the second respondent caused to be created what was commonly referred to during the trial as the “V Business Plan” which she says contained various representations;
·The V Business Plan was thereafter subject to discussion between the family members which led to a further document called the “Business Plan Workbook” which she again says contained various assertions or representations.
The reason for the V business plan is in dispute. No other witness supported the notion that there was a 2000 crisis, nor indeed that any crisis precipitated the V business plan. The second respondent says that he engaged Mr V “primarily to assist us in managing the debt which we had acquired in the acquisition of “[Property B]” and an adjoining property known as “[Property T]””.[10]
[10] Second respondent’s affidavit para.20.
The retainer for V Accountants services is in evidence.[11] In seven bullet points, it identified what the retainer was to do and concluded:-
In particular we will assist you to examine your financing options.
I would envisage the plan will be used as a working document, and be suitable for presentation to bankers, QRAA and other interested parties at your direction.
…
[11] Exhibit 6 to the second respondent’s affidavit.
To my mind that is far more consistent with the plan being prepared for the purposes identified by the second respondent. His evidence was supported by the third respondent, who said “I understood the purpose of putting a business plan in place was to assist us with debt management including interest subsidy applications…”[12]
[12] Third respondent’s affidavit para 37.
Moreover a consideration of the business plan does not appear to advert to, or be responsive to, any crisis. I therefore do not accept that the business plan was brought into existence by virtue of some crisis, nor that its primary purpose was a response to any crisis. It was intended to be a plan of a sufficient kind to satisfy the likely requirements for financiers and QRAA.
The plan contains a number of matters relied upon by the wife as either statements of fact evidencing a partnership then existing, or alternatively promises of future ownership of property by her and the husband. For instance on the first page of the plan[13] it commenced:
[13] Exhibit 1 to the third respondent’s affidavit.
OUR PLAN
PURPOSE OF OUR PLAN
The Purpose of Our Plan is to:
Develop a plan for the gradual winding back of input and work by [the second and third respondent], and the formal entry of our two sons [the husband and the fourth respondent] into the business.
The wife relies upon this as an acknowledgment that there was at the time an informal partnership in existence, which only needed to be formalised. Likewise at p.11 the wife relies upon the following passage:-
“6. Bring [the fourth respondent] and [the husband] and respective partners into the partnership.
For sometime, we have been intending to bring [the fourth respondent] and [the husband] into our business.
Various structures have been considered, but we prefer the simple family farm partnership. Reasons for this selection include simplicity, cost effectiveness and current relative flexibility for entry and exit of Partners.
From a taxation point of view introduction of our sons or our sons and their spouses would have had the following effect on the initial 2001 taxation result…”
The wife says that the purpose of this aspect of the plan was to effect the introduction of the husband and the fourth respondent into the business. However there are some factors which militate against such a conclusion. Particularly:
·The reference to “our sons or our sons and their spouses” is inconsistent with there being a definite conclusion;
·At point 4 on p.2 it provides “at this point, all land ownership will remain in [the second and third respondents’] names,” which is quite contrary to the suggestion that ownership of the land had already been acquired by others;
·On p15 of the plan under the heading “our immediate actions” there does not appear to be any reference to the formalisation of a partnership;
·At worksheet H in the workbook which accompanied the plan, there appears the following:-
…
Our sons have been working in our rural and contracting business for many years. They manage their respective properties.
Now that they have their own families, we wish to formalize their places in our business.
We envisage a cost effective simple structure. We are happy for our daughters-in-law to a part also, provided they are happy to do so.
We envisage retaining the land, but gifting a portion of our partnership holdings to our sons and daughters-in-law.
At this point, we feel an enlarged partnership is the way to go. We will, in discussions with them, determine the individual partnership holdings.
…
None of this appears to be an acknowledgment of a then existing partnership. Its language was aspirational and did not speak in terms of a concluded agreement, but rather an intention to continue to negotiate. Particularly I note the reference to daughters-in-law being a part of the business structure if they are “happy to do so,” which is quite inconsistent with them then in fact being members of a partnership. The reference to retaining land is quite inconsistent with there then being a partnership involving the wife and the husband owning the land. The reference to “determining the individual partnership holdings” in discussions with the sons and daughters in law is likewise quite inconsistent with a concluded agreement.
·At worksheet I/3, which deals with the individual goals of the first respondent and his family under the “one year” goals, there is reference to “start working on a partnership arrangement.” This seems quite inconsistent with there then being an existing arrangement, but rather again an intention to negotiate towards concluding one.
This view is supported by the evidence of the second respondent that “this document was not a concluded plan but a draft prepared by [Mr V] for discussion purposes.”[14]
[14] Second respondent’s affidavit para.34.
At paras.35 and 36 of the second respondent’s affidavit he said in part as follows:-
35. I did not agree to the plan nor did I ever consider it would be construed by family members (as [the wife] now contends) that the document evidences my agreement to matters contained in it.
36. In some respect, I was a bit incredulous at the idea of having to write down plans to run my grazing and farming business which I had been doing for many years without the need for such formalization of written plans…
The third respondent’s evidence is inconsistent with this plan being some momentous family negotiation. In her affidavit she deposed as follows:-
…I did not have much involvement with the discussions with [Mr V] as my attention was drawn to the new [Phoenix] software. I spent most of my time during [Mr V’s] visit in the office with his assistant who was showing me how to use the new software.
…
I understood the purpose of putting a business plan in place was to assist us with debt management including interest subsidy applications. I regarded the business plan as a generic document for discussion purposes and something that was not binding upon me.[15]
[15] Third respondent’s affidavit paras.34 and 37.
An important witness in this context is Mr V, who of course drew up the plan and the later revised plan. An affidavit of his was filed and read, and he was cross-examined. In his affidavit filed 6 September 2012, he relevantly said:
…
2. I recall that around 2000/2001 [the second and third respondents] were referred to me by [Y] Livestock Agents and their banker [Mr W] to assist them .. to create a business plan, specifically to better manage financial recording and debt. It was my recall that [the second and third respondents] were contemplating property expansion and taking on considerable bank borrowings to bring this about.
…
6. My engagement involved working with [the second and third respondents] to review, develop and record their business plan considering in detail various matters including history, revenues and expenses, cash and herd projections and analysis of net worth, and other various matters including personal goals, strengths / opportunities / weaknesses and threats (SWOT) analysis, natural resources and property use, management, succession planning and other, and training as detailed in the grant application.
..
14. References to succession planning and [the second and third respondents’] business plan remain at the notional or exploratory stage only, and to comply with the structure and acceptable business plan under the terms of the QRAA Grant and the guidelines QRAA set out for the business planning at that time.
…
16. A business plan such as that prepared by [the second and third respondents] under my guidance is not intended to be a binding document but rather a strategic document able to change and not a substitute for more extensive and special planning or structuring that is necessary to progress or turn general or specific goals into eventual reality or otherwise.
…
18. Had I understood from [the second and third respondents] that there was an intention to progress the area of succession, I would have expected that within their business plan or more appropriately as a special exercise, at the very least they would have considered amongst other things the following:
18.1In what entity would the combined family trade – eg a family partnership trust, company, joint venture etc?
18.2What contributions would [the second and third respondents] make to the new combined entity such as livestock and plant, and how would [the second and third respondents] receive market value for these contributions? The loan structures and repayment terms arising from such transfers would have to be considered, and how they would be reflected in the financial statements by way of loan account.
18.3What would be the legal and stamp duty implications of such a transfer or sale?
18.4What contributions would [the fourth respondent] and [the husband] make, and how would they raise the funds or deal with any loans arising?
18.5How would the bank react to the proposal and what information would it require to assess such an application such as detailed cash projections, position statements, short and long term funding requirements?
18.6What security would be made available to the bank?
18.7What would be [the second and third respondents’] exit strategy and how would they fund their retirement?
18.8In the unlikely event that properties were to be transferred in part or whole to the sons, how would they finance these and what would be the potential capital gains tax and stamp duty implications, and how would the sons finance such purchases or part purchases?
18.9How would these developments impact on [the second and third respondents’] estate plan and how they might fairly consider all prospective beneficiaries including their daughter?
19. [The second and third respondents’] planning did not extend to the detailed planning stages as questioned in the preceding paragraph nor did I at any time receive any indication from [the second and third respondents] that they indeed progress in this area, nor do I believe they sought any legal direction on the possibility of progressing in this regard.
20. To the contrary, [the second and third respondent] went on to purchase a significant and additional property in their own names involving considerable borrowings while continuing to trade in their own right, and continuing in a employer / employee relationship with their sons.
…
Mr V was cross-examined by counsel for the wife. A feature of the cross-examination was the suggestion that because the plan was to be sent to QRAA, it somehow represented a positive representation that that which was in it would be undertaken. Mr V disagreed with that and said “QRAA was not looking to rely on that document in any way.”[16] Later[17] he was cross-examined as follows:
I suggest to you that the very purpose of this document, contrary to your assertions, was to formalise a partnership between [the fourth respondent, the husband] and their spouses, which saw them brought into the business … I absolutely reject that claim.
[16]Transcript 28 March 2013 p12 line 27.
[17]At p16 of 28 March 2013 transcript.
I accept his evidence. Particularly in light of the then circumstances confronting the second and third respondents, and the language of the plan, both in its initial and revised form, there can be little doubt that it was drawn up as a tool to assist the parties in focusing their minds upon the way forward for the business, by identifying a range of options for discussion. Within that, there were identified likely to be agreed aspirations, and the purpose of the plan was to try and fit the facts then prevailing with those aspirations.
There is nothing in the document which comprises positive representations of the kind pleaded in para 8 of the Statement of Claim. I therefore am not persuaded that the document did made the representations as pleaded, and therefore the fourth representation is not made out, either in total, or in any of its subsidiary particularised components.
The fifth representation
The fifth representation is pleaded at para 10 of the Statement of Claim, and relates to a date in September 2001. Perhaps a little curiously, the fifth representation is pleaded in the preceding paragraph of the Statement of Claim, albeit it relates to a date of April 2004. It is therefore convenient to deal with the allegation in para 10 prior to the allegation in para 9.
Para 10 of the Statement of Claim provides as follows:
In or about September 2001 [the second respondent] orally represented to [the wife] that [the wife] could effect any repairs or improvements to the house in which [the wife] and [the husband] were then living on the “[Property B]” property (“the first cottage”) because that house belonged to [the wife and the husband].
No evidence was led by the wife to support this alleged representation, although there is mention of the first cottage in para 76 of her affidavit in a different context.
Therefore it is not possible to make a finding that the fifth representation was made.
The sixth representation
Para 9 of the wife’s Statement of Claim pleads:
In about April 2004 [the second respondent] spoke to [the applicant] at the “[Property B]” property, during which conversation [the second respondent] stated that if [the wife] worked hard for the family business and lessened the debt it owed, the “[Property B]” property would be gifted to her and [the husband].
The relevant evidence-in-chief came from the wife in para 48 of her trial affidavit which, after inadmissible parts have been excised, reads:
I resigned from my employment at [Business KK] in May 2004 to finish in June 2004. I was concerned about the future of my family as I was giving up an income in the $30,000.00 range. [The third respondent] had always kept [the husband’s] drawings at just a fraction higher than I was earning. My resignation from paid work meant that we were taking a 50% reduction in our family income and I was concerned about this. I said to [the second respondent] in about April 2004, “I need something from you as I am giving up my career.” [The second respondent] replied to me “work hard now and lessen the debt from the purchase of “[Property P]” and when “[Property B]” is given to you, the debt will be less, if there is debt at all.” This conversation occurred between [the second respondent] and I standing outside the second cottage late one afternoon after [the second respondent] had returned from “[Property AA]” (a paddock across the highway from the cottage). It was at the time when the decision had been made to purchase “[Property P]” but settlement of the property had not occurred.
As I have commented upon before, although the pleaded representation was denied by the second respondent in his affidavit filed 6 September 2012[18] there was no evidence-in-chief otherwise led from him as to the contents of the wife’s affidavit.
[18]Para 99.
The asserted conversation is premised upon the wife linking her resignation from employment with an obligation on the second respondent to financially compensate her for that. There is no other basis upon which a conversation which commenced “I need something from you as I am giving up my career” could otherwise make sense.
A number of things were happening at about that time. Firstly, the husband and wife’s youngest child, BB, had been born in November 2003. The husband and wife by then had three children. Secondly in June or July 2004, the second and third respondent had purchased “Property P,” in later consequence of which the fourth respondent and his former wife moved there, the second and third respondent moved to “Property G,” and the husband and wife moved from the second cottage into the big house at “Property B.”
The husband was cross-examined by the counsel for the wife in relation to his recollection of events surrounding the wife’s giving up fulltime work as follows:[19]
[19]Transcript 28 March 2013 pp27-8.
So in – in a relatively short period of time from [BB’s] birth to you taking over the reins at [Property B], she had decided to cease fulltime work? --- She – Yes. Yes.
Someone that, from your perspective, enjoyed her job with [Business KK]? --- Yes.
So if I can cast your attention to that period of time. Surely her employment status at [Business KK] was a significant topic of conversation around the time that your parents moved from [Property B]? --- It wasn’t a big topic.
It wasn’t a big topic? --- No.
Well, at the time you – at that time, that your parents moved from [Property B] in 2004, what was your income? --- I really couldn’t tell you, off the top of my head, what my income was. I think it was – might have been probably in the mid - $20,000 per year or something.
It was less than [the wife’s], wasn’t it? --- Yes, significantly less.
So the issue arose where she was going to give up fulltime employment in a circumstance where she was earning more money than you? --- Yes.
So in effect, hardening of the household budget? --- Pretty much, yes.
And are you suggesting that there was no significant discussion about her giving up fulltime work? --- As far as I can recall, the only discussion was that she wanted to spend more time with the children, and the price – cost of day care and that was becoming pretty significant with the three children.
Well, I suggest with incomes of you in the mid – 20s and [the wife] – what was she about 20 – what do you say she was earning? --- Well, it was more than me anyway.
More than you? --- Yes.
You would have been getting significant government benefits for childcare, wouldn’t you? --- I can’t remember what we were getting.
You can’t remember? --- No.
Yes? --- I didn’t deal much on the side of the childcare.
Well, I suggest to you that the – [the wife] certainly had a conversation with you about the issue of your parents moving from [Property B], and you taking a management on [Property B] ---? --- Yes.
--- In accordance with your role as a business partner? --- I had never been a partner.
Well, I suggest to you that the reason [the wife] ceased work fulltime and her evidence is one of the reasons was to spend more time with the children? --- Yes.
The primary reason was she had been informed and you had conveyed this to her, that she was to cease fulltime work when you took over the management of [Property B]? --- That’s not correct.
And that she would in fact contribute to the operations of [Property B]? --- That’s not correct.
Whilst there is some specific detail in the conversation which the wife asserts she had with the second respondent (for instance its location, timing and context) which persuades me that there was some sort of conversation between the two at that time, the asserted content, and particularly the words “when [Property B] is given to you” is troubling. I think it most unlikely at that time that in casual conversation the second respondent would be indicating a specific disposition in the future of one of the three properties that was then owned by him. As shall be seen, when later negotiations between the parties took place in 2007, it was not the second respondent’s position that “Property b” should be given in the future to the husband and/or wife. Moreover, the husband and wife’s assertions in the course of the 2007 negotiations did not have any reference to this asserted promise on the part of the second respondent. Had that promise been made in 2004 to the wife, it would have legitimately been raised by them in 2007 to remind the second respondent of the basis upon which they had been operating for the last three years.
I am not persuaded that in the conversation which I find occurred in or about May or June 2004 between the wife and the second respondent, there was an intimation or promise that “Property B” would be gifted to her and/or the husband.
Notwithstanding the relevant pleading only referring to a representation made by the second respondent, further evidence-in-chief was led by the wife at the commencement of her oral evidence about a conversation with the third respondent in 2004. That evidence was to the effect that in March, April or May 2004, the third respondent and the wife had a conversation in which the third respondent said that the wife needed to resign from her employment and move into the big house to manage “Property B”. The evidence of the wife was that she thereafter spoke to the husband and resigned from her employment. Although in cross-examination she was challenged as to this conversation, and particularly it was asserted that nothing was said by the third respondent to the effect that the wife had to give up her work, the wife maintained her evidence.
However she was also cross-examined by reference to other motivations that underpinned her decision to resign. In cross-examination she conceded that one of the reasons why she ceased employment was because she wanted to spend more quality time with her three children. Another was that the cost of childcare for three children (the two previous children had been in childcare in Rockhampton whilst the mother was at work) was an issue, and she conceded that childcare costs would be larger, and that was one of the reasons why she ceased work.
Moreover the oldest child was due to commence school in 2005. It appears as though the parties wished that child, CC, to go to a local school. Whilst perhaps not squarely suggested to her, it appears as though a further reason why the wife may have wished to cease work was so as she could be available to take the oldest child to school and pick her up again, and provide care to her outside of school hours. That would not have possible had she continued in employment, because that saw her leaving for work at 7:30 in the morning, and arriving home at 6:00pm.
As I have said, the asserted conversation with the third respondent is strictly speaking not relevant to the issues in dispute in the pleadings, however nonetheless I am not persuaded that the conversation occurred in the terms asserted by the wife. There were many and good reasons why it would be more attractive and make both common sense and economic sense for her to cease work in 2004. I am not persuaded that the third respondent told her that she needed to leave work, or that even if such a conversation occurred, that was the reason why she left work.
The seventh representation
Para 11 of the Statement of Claim pleads as follows:
In or about December 2004 the [second respondent] orally advised [the wife] that [the wife] could effect any repairs or improvements to the house in which [the wife and husband] were then living, the “big house,” because that house belonged to [the wife and husband].
In para 49 of her trial affidavit, the wife said as follows:
In or about December 2004 while [the husband] and I were moving into the “big house,” I asked [the second respondent] permission to make some changes to it, just as I had done to the previous houses. I wanted to effect repairs and renovations. He replied “it is yours and you can do what you like with it.” My mother [Ms DD] and grandmother [Ms EE] were present during this conversation.
This allegation is denied in the second and third respondent’s defence, and denied by para 101 of the second respondent’s trial affidavit. Further, paras 102 and 103 of that affidavit are quite inconsistent with the conversation said to have occurred between the wife and the second respondent in that:
·The second respondent says that there was no seeking of permission in relation to changes to the big house; and
·In fact the second respondent says he and the third respondent arranged for the interior of the big house to be painted, and paid that account.
Ultimately it is unnecessary to find as to the specific content of any conversation as at December 2004, because even if the conversation were as contended for by the wife in para 49 of her trial affidavit, I am not satisfied that that conversation contained the pleaded representation. Particularly, saying that a house “is yours and you can do what you like with it” does not thereby mean that the ownership of the property had passed; it is equally consistent with the second respondent having indicated that they should make themselves at home in the property and treat it as if it was theirs. That would be a perfectly normal arrangement in a situation such as this, where there were multiple properties containing multiple homes, with family members living in them.
I am not persuaded that the seventh representation as pleaded was made.
The eighth representation
Para 12 of the wife’s Statement of Claim pleads as follows:
On or about 5 October 2007 in a meeting involving [the wife] and [the respondents] at the Commonwealth Bank of Australia in Rockhampton, the [second respondent] orally represented to [the wife] that:
(a)there was an equal partnership between the applicant and the respondents such that each of the three family units would have a one-third split of the family business; and
(b)[the wife] and [the husband] would be gifted title to the “[Property B]” property.
This allegation is dealt with by the wife at para 55 of her trial affidavit. It is common ground that at the relevant meeting on 5 October 2007, the wife, all of the respondents, together with Mr W (a Commonwealth Bank Manager) Mr Z (a livestock agent) and Ian Haig (the second and third respondents’ solicitor) were in attendance. Minutes of that meeting were kept by the wife. Also the solicitor, Mr Haig, took notes of the meeting.
The minutes kept by the wife[20] do not support her case. Firstly, there is no record of the husband raising any asserted previous promise by the second and third respondents to gift or otherwise transfer “Property B,” to them. The closest appears to be the following:
.. [The wife] spoke about the need for [the fourth respondent and the husband] to be involved in decisions as debt that [the second and third respondents] took on places would one day be their own.
[20]Exhibit 24 to her trial affidavit.
However far from the minutes recording the second respondent’s intention to gift “Property B” to the husband and wife, in fact there appears:
[The second respondent] again spoke about increasing the cash flow and selling “[Property B]” to purchase “[Property FF]” and “[Property GG].
This is completely inconsistent with there being a promise to gift title to “Property B” to the husband and wife.
As for the suggestion that in the course of the meeting the second respondent indicated that there was then an equal partnership between the three “family units,” the relevant entry in the wife’s minutes are as follows:
Ian confirmed some of the details of the meeting:
[The fourth respondent and the husband] were to run the properties and [the second respondent] was to run the [heavy machinery] business.
Everyone was to follow up on available off-farming investments.
The business would propose at 10 year timeline with nothing starting until [the fourth respondent’s] circumstances were known.
The partnership would be a 1/3 split, everyone with an equal partnership.
The outlook was that [the fourth respondent] was to end up with “[Property P]” and “[Property G]” and [the husband] with “[Property B].”
This will be a two-step process and work so that no stamp duty on the ownership of [livestock].
It is plain even from the wife’s own notes, that the fourth respondent’s recent separation from his former wife was a serious concern to all people at the meeting, such that nothing would start until that situation became clarified. Far from there being an acknowledgment of a then existing partnership, even the wife’s notes suggest that any partnership would be in the future, and was not then existing.
Quite a different picture emerges from the evidence of Mr Haig.
At paras 9 and 10 of his affidavit filed 6 September 2012, he said as follows:
At the meeting that was chaired by [Mr W], he invited each person present to express their views about the roles each family member played in the business and the problems as they each perceived in running the business as well as their future aspirations.
I clearly recall also at the outset [the second respondent] saying that his preparedness to participate in the meeting was on the basis that all discussions would be “without prejudice.” The reason I recall his comment was that, in my experience, it seemed to me to be unusual for a family member at a family meeting to be so guarded.
Relevant parts of his diary note are as follows:
[The second respondent]
…
·Kids to achieve within the framework we have – they could put a succession plan in place within that framework;
…
[The second respondent]
…
·Think it is time the kids took over what they want to do;
·Work within bounds for the next 10 years;
·Kids should be involved and financially;
…
…Succession Plan
·Timeline: 10 year time
·Wills – [R&A] Review
·EPA – check
·Land – by way of gift: 1/3rd each;
·Livestock – partnership with the two boys
·P/EQ partnership with the two boys
·“[B]” – [C]
·“[P]” – [S]
·“[G]” – [S]
·Debt – shared proportionately between them
·Gift to (them) within 10 years.
Subsequent to the 5 October meeting, Ian Haig drew up and circulated “for information purposes a draft Business and Succession Plan structural document.” Part 2 of the plan dealt with succession. Nothing in that contained any direct intimation as to an agreement as to the transfer of any properties to either the husband or the fourth respondent. Indeed it very much reads as a document intended to provoke further discussion. For instance under the heading “principles” the first bullet point reads “does equity and fairness mean equality?” Likewise under the heading “pathways and timing for transition” there appears as the second bullet point “how and when to effect transition – land – livestock / plant and equipment – business.”
In my view, the meeting of 5 October, and what was said during the course of it, was intended to be a frank discussion with a view to planning for the future. I accept Mr Haig’s evidence that the second respondent commenced by saying that the meeting was “without prejudice”, and in doing so, I find that the whole meeting was intended to be an opportunity for honest discussion without any party being bound by what was said therein. To the extent that there were expressions of future intention, that was only in the context of it being a non-binding discussion. Therefore, whilst I am satisfied that there was, during the course of that meeting, a discussion about the prospect of, in the future there being an equal partnership – and indeed perhaps even an expression of a preference for that by the second respondent – and further, that there was the possibility discussed that “Property B” would go to the husband in due course, they were never in the context of firm assurances, and the entire negotiation was subject to further discussion and agreement.
I am not persuaded that the eighth representation was made.
The ninth representation
Para 15 of the wife’s Statement of Claim pleads:
In or about November 2007 [the second respondent] represented to [the wife] in a document headed “Business and Succession Plan” that [the wife] and [the husband] were joint owners of the family business.
This relates to the draft business and succession plan circulated by Mr Haig on 7 November 2007.
In his affidavit of 6 September 2012, Mr Haig said the following in relation to that plan:
17. Annexed hereto and marked “IEH06” is a copy of an email dated 7th November 2007 circulating the draft Business and Succession Plan to family members.
18. The document was intended by me to be used as an aid (sic) memoir (sic) so that [the second respondent] and [the third respondent] together with family members could direct their minds to the various issues that might be relevant. The document was not designed or intended to be a reflection of any agreement already reached between the parties nor to be binding upon the parties without their instructions and their execution of a final document which would reflect any agreement.
19. I noted at the foot of the document (Annexure “IEH06”) the words “Work in Progress”, “Commercial-in-Confidence” and “Privileged Communique”.
20. The background set out in the Business and Succession Plan (Annexure “IEH06”) was intended to be an option as a goal following the notes I had made at the CBA meeting. The option was for discussion purposes following my hearing the following respective views:
20.1[The second respondent] and [the third respondent] – has not achieved his objectives, keep assets under control and to grow the business. No wish to retire, may consider in ten years time possibly.
20.2 [The fourth respondent] – keep expanding the business until it is sustainable.
20.3[The husband] and [the wife] – looking to their future, one day out on their own while still young enough to work, within the next ten years.
21. All members of the [Lindsay] family were referred to in the background of that document as “Business Owners”. This reference was as I understood to be a possible goal. I included all family members as a means of preparing an “inclusive” document rather than denoting legal ownership.
22. From my experience, I consider it is important for all participants to be involved in the ownership of a proposed plan rather than the older generation imposing a plan upon the younger generation which is often unworkable unless all parties take ownership.
23. The document had been drawn by me not on specific instructions from [the second respondent] or [the third respondent] or any other family member but drawn from the various ideas put forward at the CBA meeting and drawn upon my own experience. The document was designed for discussion purposes and as a work in progress which would perhaps require several versions.
I accept Mr Haig’s evidence. Acting on that evidence, it cannot be reasonably said that the contents of that document were a representation to the wife by the second respondent. The document was for discussion, and plainly not a statement of fact or intention by the second respondent.
In fairness to the wife, in cross-examination she conceded that there was no promise contained in the document, nor did it say that she would be given a third share or contained a promise of transfer of “Property B” to her or the husband.
The tenth representation
This relates to the subsequent meeting on 9 November 2007 at the offices of Grant and Simpson Lawyers, of which firm Mr Haig was a partner.
Para 13 of the wife’s Statement of Claim pleads:
On or about 9 November 2007 at a meeting held at the offices of Grant and Simpson Lawyers in Rockhampton the [second respondent] orally represented to [the wife] that the properties of the family business would all be distributed evenly to each family unit of the partnership and/or joint venture with in ten (10) years, and the livestock of the family business within five (5) years.
Paras 60 and 61 of the wife’s trial affidavit contain her relevant evidence in chief in relation to this issues as follows:
60. [The husband] indicated that he wanted to break away from the rest of the Family Business in the future. Accordingly, a meeting was held at Grant & Simpson’s boardroom, Quay Street, Rockhampton on 9 November 2007. [The second respondent], [the third respondent] [the fourth respondent], [the husband] and I were present. [The second respondent] was advised by Ian Haig to “keep the land and [livestock] in the [R & A Lindsay] to reduce the price on the transfer”. Later during that meeting, [the second respondent] was asked what his timeframe was for the transfer of fixed assets. [The second respondent] said to us all “there was a ten year timeline as a maximum.” [The second respondent] was questioned about his intention to transfer assets in the meantime and responded with a “five year timeframe for transfer of livestock and the [heavy machinery] equipment was to be transferred at a different time”. At this meeting [the third respondent] advised the meeting “we should aim for the property to be passed on debt free”. Our Wills and Enduring Power of Attorney were also discussed and requested at this meeting. [The second respondent] appeared concerned when [the husband] and I advised that my sister, [Ms JJ] and brother-in-law [Mr JJ] were nominated as guardian of [CC], [HH] and [BB]. [The second respondent] said “if [the fourth respondent], [the husband] or [the wife] died the business would run without selling part of the business off”. [The second respondent] again spoke of a ten year time line maximum for the transfer of fixed assets. It was unconditional. Copies of the following documents have been disclosed to the parties and is contained in the book of annexures and marked with the letter “JKL27”.
a. A true copy of my hand written notes; and
b. Ian Haig’s hand written notes of 9 November 2007.
61. Immediately following that meeting I contacted Ian Haig directly with ideas that I had raised at the meeting regarding risk management. A true copy of correspondence sent by email to Ian Haig has been disclosed to the parties and is contained in the book of annexures and marked with the letter “JKL28”.
Mr Haig’s affidavit filed 6 September 2012 also deals with the meeting. At para 26 he says:
While there was much discussion at the meeting, there was no firm commitment from [the second and third respondents] other than the family would continue to work through a process to see if a suitable business and succession plan could be achieved. It was anticipated at the conclusion of the November 2007 meeting that the parties would meet again in my office in mid-March 2008. This did not eventuate.
Mr Haig’s notes record that the meeting of 9 November took four and a half hours. It dealt with a whole range of matters, including grazing strategies, market research, the heavy equipment business, and suggestions for better communications. Part 2 of the notes is headed “succession” and relevantly reads as follows:
…
Preference
Business continuity with provision for the family of the deceased.
(a)Now
(b)After implementation of transfer.
Transition
·[Ms M]
·Livestock
· 5 year time line
·Land/improvements
· 10 years
·P/EQ - ? Recommendation
[Heavy machinery]
·3 or 4 equal shareholdings
I am not persuaded that the wife’s contributions have enriched the respondents, whether by generating profit, reducing debt or improving the value of the assets of the family business.
THE PARTNERSHIP AND JOINT VENTURE CLAIMS
The law
By s 5 of the Partnership Act 1891 (Qld), a partnership is the relation which subsists between persons carrying on a business in common with a view to profit. However at its heart, a partnership relationship is founded in contract.[21] The existence of the contract and its terms may be established not only by what the parties said to each other in the course of forming or altering the relationship, but also their conduct towards one another.
[21]Pooley v Driver (1876) 5CH D 458 at 472 per Jessell MR.
In deciding whether or not a partnership exists, s 6 of the Partnership Act sets out rules to which regard must be had including the rule articulated by s6(1)(c), namely that the receipt by a person of a share of the profits of a business is prima facie evidence that the person is a partner in the business.
Whether or not persons are carrying on a business in common is a matter of fact. It does not require each partner to be actively engaged in the day-to-day operations of the business, nor does it preclude one or more partners from adopting greater managerial responsibilities than others.
It has been said that “the test of whether a business is being carried on in common can be reduced to the proposition: is the person who carries on that business doing so as agent for all the persons who are alleged to be partners?”[22]
[22]Fletcher, The Law of Partnership in Australia 9th ed, LBC 2007 at [2.15].
A joint venture on the other hand does not have a settled common law meaning.[23] The borderline between what can properly described as a “joint venture” and what should more properly be seen as no more than a simple contractual arrangement may on occasion be blurred.[24] It has been said that:[25]
·Where the term is used purposively, parties are usually attempting to achieve an arrangement that entitles them to share the benefits of joint participation in a venture without incurring the liabilities of partnership; and
·The critical test of the joint venture concept arises where the participants intend to be involved in the supervision of an integrated business activity.
[23]United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 10 per Mason, Brennan and Deane JJ.
[24]ibid.
[25]Fletcher (supra) at [2.95].
Again however, the foundation of the joint venture must be in agreement.
Discussion of the facts
By para 3 of her Statement of Claim, the wife asserts that on or about a date in July 1997, the wife, all the respondents, and the fourth respondent’s former wife Ms H Lindsay, were in a partnership or joint venture under the name or style of “R & A Lindsay”. No alternative date for the commencement of the partnership is pleaded. The only pleaded events that predated the marriage in July 1997 were the first, second and third representations. In other words it appears as though the wife says those conversations, coupled with the fact of her marriage, brought about a new partnership on the date of the marriage.
The wife identified the following points as supporting her contention:
·That from 2004, the husband had a managerial role in relation to “Property B”;
·That on occasions, both the husband’s and the fourth respondent’s (and their spouses’) input was sought in relation to “family” decisions;
·That on occasions the husband presented himself in the press as speaking on behalf of the family business;
·That after 2004, the wife was responsible for sorting through mail which was received at “Property B”;
·That from about 2004 on, both the husband and the fourth respondent had the capacity to bind the partnership in relation to some matters, eg., purchase of livestock and contract mustering;
·That from time to time the wife and the husband were permitted to undertake repairs, modifications and improvements to the homes that they lived in from time to time on “Property B;”
·That at some stage, the third respondent created letterhead for business use which listed the wife and all respondents on it.
All respondents rely upon the following as refuting the existence of a partnership from a date in July 1997:
·That the business name “R & A Lindsay” has at all times been a registered business name of the second and third respondents, and has never been identified as being owned by anyone else;
·That the ownership of “Property B” at all times has been with the second respondent solely;
·That the property, “Property B” is not an asset of the partnership R & A Lindsay;[26]
·That the purchase of both “Property G” and “Property P” was made in the second and third respondents names, and not in the names of the purported partners;
·That the liability for the debt associated with borrowings for the purchase of those two properties was borne solely by the second and third respondents;
·That at no time has there been a distribution of profit of the R & A Lindsay Partnership to anyone other than the second and third respondents, albeit that in 2001 Mr V identified that, from a tax perspective, it would be advantageous to split income between other parties;
·That at all times the husband and the fourth respondent have been paid wages rather than drawings, which wages have been set according to the relevant award, and further, in conformity with the award, they were paid leave loading and superannuation contributions;
·That the wife remained in fulltime employment until 2004;
·That the husband was permitted to agist privately owned livestock on “Property B” at no cost, and further that they were drenched along with the partnership livestock at no cost.
[26]This was expressly sworn to in para 8.12 of the second respondent’s trial affidavit and was not challenged.
In substance therefore the respondents say:
·There was never any discussion, much less agreement, about the formation of a partnership (or joint venture) attendant upon the marriage;
·That thereafter the parties have conducted themselves in a manner inconsistent with there being an extant farming partnership (or joint venture) as asserted by the wife.
To these may also be added the further consideration that, even if there were a partnership as contended by the wife, it could only have extended to the grazing operations, the assets of which were the plant, livestock and equipment, and not the land as it was not a partnership asset.
Leaving aside the absence of any agreement in relation to a partnership, or conduct consistent with the existence of one, to my mind a critical feature which tells against there being a partnership or joint venture is the complete absence of any liability on the part of the asserted partners, other than the second and third respondents, for the considerable debts of the partnership from time to time.[27] Moreover, the correspondence sent by the wife and the husband to the second and third respondents dated 7 November 2005[28] is quite inconsistent with there being a partnership or joint venture in relation to assets. Particularly that correspondence:
·Concedes that the second and third respondents are the “owners” and “directors” of the partnership;
·Refers to “the success of your business thus far”;
·Refers to the prospect of the second and third respondents endeavouring “to bring others into the business”;
·Requests “a detailed job description” which is consistent with the husband being an employee rather than a principal.
[27]cf Partnership Act s12.
[28]Recited at para 25 hereof.
If there had been, by that time, a partnership which had been running for in excess of eight years, such correspondence, and the terms used in it, are wholly inexplicable. On the other hand, it is perfectly consistent with there being no partnership or joint venture then existing between the parties.
In my view for the reasons advanced by the respondents, there was no partnership or joint venture which commenced on a date in July 1997. The wife does not advance alternative dates for the commencement of a partnership or joint venture, and therefore it is unnecessary to consider that potential argument.
THE ESTOPPEL CLAIM
Para 25 of the wife’s Statement of Claim pleads:
In the premises, the respondents are estopped from denying the existence of a partnership and/or joint venture between the applicant and the respondents.
This is mirrored in para B of the Prayer for Relief which reads “that the respondents be estopped from denying the existence of a partnership and/or joint venture with the applicant.”
At para 46 of her written submissions, Ms Carew noted correctly that the plea is not of an estoppel from denying a beneficial interest in “Property B” and/or “Property P”, but rather from denying the existence of a partnership and/or joint venture between the wife and/or respondents. The wife’s submissions did not really seem to grapple with this distinction. However all parties agreed that there are three pre-conditions necessary to establish an estoppel: firstly that there was a promise made; secondly, that there was reasonable reliance by the promisee on that promise, and thirdly, that detriment was suffered by the promisee in consequence of their reliance upon the promise.
The estoppel claim is to be found at several points throughout the Statement of Claim, which I identify as being para17 (which pleads the applicant’s contributions to the business), para18 (which pleads an asserted value of those contributions) and para19 (which pleads, amongst other things, that those contributions were made in reasonable reliance upon the ten representations discussed above). There is also in para19(a)(4) an allegation that those contributions were made with the encouragement and inducement of the respondents.
Paragraph 23 then pleads that the applicant would have obtained gainful employment, expertise or further education elsewhere, and would not have effected her contributions, but for the representations. Paragraph 25 then pleads that in the premises, the respondents are estopped from denying the existence of a partnership and/or joint venture between the respondents, and relief in like terms is sought by para B of the prayer.
I have determined that none of the representations pleaded were in fact made. The existence of those representations is critical to any plea of estoppel. This claim must therefore fail.
If, contrary to my findings, one or more of the representations were made, then in my view, real issues would nonetheless arise as to whether any reliance upon them was reasonable. Particularly:
·The earlier representations were made at a point where it could not reasonably have been assumed by the wife that broad and vague statements, made by either her intended husband or intended father-in-law, were of a kind that should be relied upon by her without some formal confirmation;
·The balance of the representations, if made, were not made in circumstances where concluded arrangements were struck, but rather in the context of ongoing family negotiations, which patently had not then reached a conclusion.
Finally there is the question of detriment. The wife says the detriment was of three kinds: firstly her unremunerated contributions pleaded in para 17; secondly the improvements (etc) to the three homes in which she resided on “Property B”, and thirdly, the giving up of her employment. I have already made findings relevant to the first two of these matters, and particularly the occasional and minor nature of her contributions and improvements. Further, there would be a difficultly in, if contrary to my findings, one or more of the representations were made, identifying what detriments were incurred after the relevant representation. For instance, if it were found that the eleventh representation were made, then plainly that post-dated most of the wife’s unremunerated work, and probably all of the asserted improvements to the three homes, and nor could it be said that she gave up her employment in 2004 in reliance upon a representation in June 2008.
Although, given my findings in relation to the asserted representations, it is strictly unnecessary to consider further the alleged detriment of the wife giving up her employment, it is nonetheless appropriate that I should record that in my view, the reasons for the wife leaving her employment in 2004 were because she wanted to spend more time with her young family, the eldest of whom was about to start education at the local school, and that otherwise the costs of childcare of three children would become prohibitive.
That is not the end of the matter however. Even if the wife did give up her employment in reliance upon the representations, it does not appear to have in fact occasioned her detriment. In 2004, her income was $26,810.00. Five years later, after separation, she commenced employment with Business LL, in a not dissimilar role to that which she had previously been working in with Business KK. She continued this employment until the end of 2011, when she then commenced employment with a professional business in an administrative role. In that employment she was initially in receipt of an income of $55,000.00 gross per annum (together with superannuation contributions) but at the time of trial estimated that her current income was in the order of $58,000.00 per annum.
This case is therefore remarkably different to that genre of cases where children are persuaded to give up lucrative careers off the farm, in order to pursue poorly rewarded employment on the farm, with some inducement of ownership in the future. Here in fact after five years being out of the workplace, the wife was able to return to employment at a salary more than twice what she had been earning only a little less than five years earlier.
For these reasons the estoppel claim must fail.
THE CONSTRUCTIVE TRUST CLAIM
Overview
The wife contends two, or perhaps three, bases for the imposition of a constructive trust: firstly on the basis of common intention; secondly on the basis of an unconscionable denial of interest; and perhaps thirdly as an incident of, or remedy consequent upon, the asserted estoppel. Given my conclusion in relation to the estoppel claim, it is unnecessary to consider the third basis.
Common intention
The law
The notion of a common intention based constructive trust has not been without its critics. For instance in Jacobs Law of Trusts in Australia[29] the learned authors say:[30]
However, if there is an express agreement as to the sharing of beneficial ownership it is difficult to see why the consequence is not the creation of an express trust, including one of the Bannister v Bannister variety if the necessary writing be absent.
[29]Lexis Nexis Butterworths 7th Ed.
[30]At [1354].
Likewise in Equity and Trusts in Australia[31] at [38-220] the author opines:
The juridical incorrectness of the common intention constructive trust and its explanation by some as a form of proprietary estoppel, coupled with the breadth of relief available pursuant to the Baumgartner Doctrine and the artificiality of inferring a common intention relating to mostly undocumented events that are likely to have occurred many years earlier, should undermine a role for the common intention constructive trusts in Australian law. Yet Australian (principally New South Wales) case law continues to recognise the availability of the common intention constructive trust as an alternative to the true remedial constructive trust. Efforts by some judges to bring the common intention constructive trust under the unconscionable conduct umbrella are perhaps implicit recognition that the prevailing test is the latter. Yet the common intention trust has secured something of a new lease of life as a vehicle through which to confer priority on a person who has contributed to property over a period of time which, due to a lack of unconscionable conduct as required for a Baumgartner – typed trust, would otherwise lose priority to another interest… (Footnotes omitted).
[31]GE Dal Pont, Equity and Trusts in Australia, Law Book Company, 5th ed 2011.
Other commentators have been less critical, and it appears that the preponderance of Australian authority does indeed support the availability of common intention as a sufficient foundation to impute a trust. From Ford and Lee, Principles of the Law of Trusts[32] the following may be drawn as relevant principles relating to the common intention constructive trust:
·Something more than mere considerations of general fairness are required;
·A real common intention must be proved, and may be found in a written or oral agreement, or inferred from conduct;
·The party who claims a beneficial interest against the title-holder must show the she sustained detriment in the reasonable belief that by so doing, a beneficial interest would be acquired, such detriment being of a kind contemplated in the common intention;
·The detriment in question must amount to a material disadvantage, but may consist in a party acting in a way that she would not have otherwise acted, or foregoing an opportunity. However the party must demonstrate that the act or forbearance was induced by the common intention.
Applying the law to the facts
[32]Law Book Co – loose leaf.
In her Outline of Submissions filed 6 May 2013, the wife submitted as follows:
It is submitted that the common intention of the parties in this case was to continue their joint endeavour of each family operating the business in partnership from their respective property to reduce the debts of the business and generate profit such that in ten years’ time the assets of the business would legally be registered per stirpes amongst the parties…
It seems likely that the word “partnership” in that submission is not intended to be referring to a formal legal partnership, but rather to denote a co-operative joint endeavour.
There can be little doubt that, at all relevant times, the operations of the business were intended to complement each other, and no doubt this informed the purchase of the various properties from time to time. Particularly, it seems as though “Property B” and “Property P” were seen as breeding properties, whereas “Property G” was seen as a fattening block. Amongst the assets of the business were trucks which enabled the parties to move livestock between the properties to achieve desired objectives. To that extent there was a co-operative joint endeavour, however the applicant says that that was a joint endeavour which saw all of the three families as principals, whereas all respondents say that the joint endeavour was one in which the second and third respondents were the sole principals, and the husband and fourth respondent were family employees.
I have already indicated that, in my view, the common expectation amongst many rural families, namely that the business would pass on to the next generation in due course, is that which prevailed in this family. However it is quite another thing to say that planning towards that outcome, to the knowledge of the next generation of family members, in the circumstances of this case therefore means that, at the time that the plan was still being discussed and formulated, equity would impose an obligation on the conscience of the legal owners of the relevant properties to hold them on trust in some proportion for the next generation family members.
Leaving to one side for the moment the wife’s asserted contributions, it cannot be said that the efforts of the husband and the fourth respondent were otherwise unrewarded; they were receiving the usual emoluments associated with such employment, and indeed were receiving, it seems, more remuneration than flowed to the second and third respondents by drawings. Whilst they were, in a sense, a privileged pair of employees, in that they were given access to documents, information and records which other employees did not have access to, and were given an opportunity for input in relation to decision making as well, I accept that was in the context of the second and third respondents wishing to educate and train their sons with a view to them being equipped to take over the operation of the business in due course.
This brings into focus a curious aspect of the wife’s claim, in that she does not seek to assert for herself a one-sixth interest in the partnership, but rather that she and the husband jointly hold a one-third interest in the partnership. There is no pleaded basis in respect of the husband as to how it is that he obtained the asserted interest in the partnership. Perhaps it is asserted that he obtained that interest solely by virtue of the representations made to, and contributions made by, the wife. Certainly there is no pleading of representations being made to him, or of him sustaining a material disadvantage induced by any common intention.
To the extent that there was a common intention, I find that it was:
·That the husband and fourth respondent would work on the properties for usual reward, with a view to them being trained and educated, in turn with a view to, in due course, them taking over the operation of the business;
·That the precise terms upon which they would take over the operation of the business, and the ownership of the underlying business assets, was a matter that needed to be discussed and negotiated in due course;
·That their role in management and input into decision making would increase over time, commensurate with their training and experience;
·That it was in everyone’s best interests to minimise debt, and hence a frugal spending discipline was important, and maximisation of income was also important.
I therefore am not persuaded that there was a common intention, at any point in time relevant to these proceedings, to effect the giving of a beneficial interest in any of the assets of the partnership to either the husband, the fourth respondent, or their spouses.
If I am wrong as to that, then nonetheless I am not persuaded that the asserted detriment was sustained in a reasonable belief that by incurring or submitting to it, a beneficial interest would be acquired. Particularly in my view: the occasional unremunerated work by the wife was an adjunct to, and associated with, her being married to the husband, and was not undertaken in reliance of any common intention for beneficial ownership of properties; and further, that the improvements (etc) undertaken to the three houses were merely incidents of her residing in them; and finally that her giving up her employment was not induced by the asserted mutual intention that she had a beneficial interest in the properties.
Finally, if I am wrong as to all of that, then there is to my mind a strong argument that the proper response of a court of equity to such facts would not be to impose a constructive trust over the assets of the partnership, but rather would be to impose some form of equitable lien or charge over those assets, to the extent that the partnership has been enriched by them. However as I have already observed, here there is no evidence from which the value of the asserted contributions to the partnership could be gauged; there is merely an assertion as to the expenditure incurred, or some basic mathematical calculation as to a hourly rate applied to the asserted number of hours worked. There is simply no evidence as to the matters pleaded in para 19(b) of the Statement of Claim.
In any event, the calculation of the value of any lien or charge is not one of the matters within the scope of the separate questions. Finally, any assertion for relief by way of lien or charge was expressly disavowed by counsel for the wife, albeit seemingly sought to be resurrected in written submissions.
The claim for a mutual intention based constructive trust must fail.
Unconscionable retention of benefit
The law
At its heart, a remedial constructive trust based upon unconscionable conduct is “premised on proof of unconscionable conduct in the form of an assertion to, or denial of, an equitable interest in property.”[33] Ordinarily, cases asserting an unconscionable denial of interest rely upon a level of contribution which, if not recognised, would lead to a windfall on the part of the party denying the interest. Whilst contributions do not need to necessarily be made directly to the acquisition or improvement of the property in question, such that indirect contributions, even by way of domestic assistance, may be taken into account, nonetheless there must be something unconscionable about the retention of the “windfall”. Further, a court is entitled to take into account any benefit which the claimant has derived from the property in question in determining whether or not, viewed in totality, there is unconscionable conduct.
[33]Dal Pont, Equity and Trusts in Australia 5th ed LBC 2011 quoting Baumgartner and Baumgartner (1987) 164 CLR 137 at 148 – 150 per Mason CJ, Wilson and Deane JJ, at 155 – 156 per Gaudron J.
However, equitable proprietary relief will be declined if there is “an appropriate equitable remedy which falls short of the imposition of a trust.”[34]
Applying the law to the facts
[34]Giumelli v Guimelli (1999) 196 CLR 101 at 113 per Gleeson CJ, McHugh, Gummow and Callinan JJ and John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 at [128] – [129].
The focus of the enquiry relevant to this claim is the allegedly inequitable retention of a benefit conferred upon the second and third respondents by, amongst others, the husband and wife. That therefore involves two inquiries. The first is to ascertain what, if any, benefit has been conferred. The second is to ascertain whether, to the extent that any benefit has been conferred, its retention by the second and third respondents is unconscionable. A third matter then needing to be considered is whether, to the extent that there has been an unconscionable retention of benefit, the appropriate equitable response is to impose a remedial constructive trust.
It is difficult in the extreme to identify a presently “retained” benefit associated with the wife’s unremunerated endeavours or efforts. To the extent that it currently exists, it might be in some garden plantings on “Property B”, or the presence of some paint or other renovations on one or more of the houses of “Property B.” However both of these were more in the nature of incidents associated with the residence of the wife on “Property B”, and her desire to make them as homely as possible for herself and her family. In no sense are those matters of a kind which can be seen as having improved the business assets of the partnership between the second and third respondents.
Given their minor – even insignificant – nature, I am unpersuaded that the retention of such benefits that have been conferred by the wife upon the second and third respondents is unconscionable. Further, the husband and the wife have from the moment of their marriage until separation, enjoyed free accommodation on “Property B”, and also had valuable benefits by way of their electricity and telephone costs being met by the partnership. In addition, there was the occasional provision to them of meat when livestock was killed, the kill seemingly being shared between all family members. When weighed against the alleged benefits conferred upon the partnership by the wife, such matters assume some real significance.
If, contrary to my findings, the benefits which the wife conferred upon the second and third respondents have been unconscionably retained by them, then it does not follow that the appropriate equitable response is one of a constructive trust. Whilst it is unnecessary to express any concluded view on the matter, given the findings that I have made, it is likely that before the imposition of a constructive trust would be ordered, that it would be necessary to consider whether some lesser equity – perhaps a lien or charge to the value of the benefit – would be a more appropriate equitable response.
CONCLUSION
For the foregoing reasons, the application for declaratory relief in relation to the partnership, joint venture, and constructive trust claims in the wife’s Statement of Claim will be dismissed.
I certify that the preceding two hundred and fifteen (215) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Tree delivered on 13 June 2014.
Associate:
Date: 13 June 2014
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