Markoska & Markoska

[2011] FamCA 572

FAMILY COURT OF AUSTRALIA

MARKOSKA & MARKOSKA [2011] FamCA 572

FAMILY LAW – PROPERTY – where the respondent husband seeks a declaration pursuant to s 78 of the Family Law Act 1975 that his interest in his family’s farm is held on trust for his mother, the second respondent – whether the presumption of advancement is rebutted – whether the second respondent and her husband intended for the husband to retain beneficial ownership of his interest – a consideration of events subsequent to the transfer – where evidence of subsequent events strongly supports a rebuttal of the presumption of advancement – declaration that the husband holds his interest in the family farm on trust for his mother.

Evidence Act 1995 (Cth)
Family Law Act 1975 (Cth)
Family Law Rules 2004 (Cth)

Bennet v Bennet (1879) 10 Ch D 474
Brown v Brown (1993) 31 NSWLR 582
Calverley v Green (1984) 155 CLR 242
Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353
Cummins v Cummins (2006) 227 CLR 278
Damberg v Damberg & Ors [2001] NSWCA 87
Nelson v Nelson (1995) 184 CLR 538

APPLICANT: Ms Markoska

1^st RESPONDENT: Mr Markoska

2^nd RESPONDENT: M

FILE NUMBER: BRC 5680 of 2010

DATE DELIVERED: 19 July 2011

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Murphy J

HEARING DATE: 31 May 2011

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr R Cameron

SOLICITOR FOR THE APPLICANT: McDuff & Daniels Lawyers

COUNSEL FOR THE 1^ST RESPONDENT: Mr M Kent SC

SOLICITOR FOR THE 1^ST RESPONDENT: Simshoe Lawyers

COUNSEL FOR THE 2^ND RESPONDENT: Mr P Looney

SOLICITOR FOR THE 2^ND RESPONDENT: Power & Cartwright Solicitors

Orders

IT IS ORDERED THAT:

1. Pursuant to s 78 of the Family Law Act 1975 (Cth) as amended (“the Act”) it is declared that:

   (a)The respondent husband holds his one-third interest in the “[B Farm]”, specifically each of the following real property :

   (i)Lot … on RP …, County …, Parish of …, Title Reference …;

   (ii)Lot … on RP …, County of …, Parish of …, Title Reference …;

   (iii)Lot … on RP …, County of …, Parish of …, Title Reference …;

   (iv)Lot … on SP …, County of …, Parish of …, Title Reference …;

   (v)Lot … on RP …, County of …, Parish of …, Title Reference …

   on trust for the second respondent.

   (b)       The respondent husband holds no interest in any business:

   (i)Conducted on the B Farm;

   (ii)Carried out in the name of, or otherwise known as, “[Markoska] Family Farm”; or

   (iii)Carried on by the second respondent whether alone or with any other person or entity.

IT IS FURTHER ORDERED THAT:

1. The matter be listed for directions as to future progress before a Registrar at a date and time to be fixed.

2. Leave is given for the making of an oral application by Ms Lyons of Counsel appearing on behalf of Neilson, Stanton & Parkinson for that firm’s costs of and incidental to compliance with a subpoena to produce documents issued to that firm.

UPON APPLICATION FOR COSTS made by the Second Respondent and a firm pursuant to paragraph 3 of these Orders IT IS FURTHER ORDERED THAT:

1. Any application for costs, including the oral application made in accordance with paragraph 3 of these Orders, proceed by way of the filing of written submissions by an applicant for costs within 21 days of the date of this Order, sent via e-mail to the Associate to Murphy J at …@familycourt.gov.au and back-copied contemporaneously to all other parties.

2. Any submissions in response to any application for costs be filed in like manner within 21 days thereafter.

3. Unless any party to such application/s submits to the contrary, or the Court otherwise directs, submissions will be considered, and orders made, in chambers without the necessity for further appearance.

IT IS NOTED that publication of this judgment under the pseudonym Markoska & Markoska is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC 5680 of 2010

Ms Markoska

Applicant

And

Mr Markoska

1^st Respondent

And

M

2^nd Respondent

REASONS FOR JUDGMENT

1. The husband and wife in these competing applications for parenting and financial orders commenced cohabitation in 2001, and, it seems, separated early in 2010 when the wife relocated from the former matrimonial home.

2. In an Amended Response filed by the husband, he seeks a declaration pursuant to s 78 of the Family Law Act 1975 (Cth) (“the Act”) that he holds his one-third interest in a property on “constructive trust” for his mother. By orders made on 14 February 2011, the issue just described was directed to be heard as a discrete hearing so that all claims and counter-claims involving the husband’s mother (the second respondent to the proceedings, and hereafter “[M]”) could be heard and determined.

3. The Case Information document filed by the respondent husband on 25 May 2011 sets out with precision the orders sought:

   1.That the respondent holds any interest, to include his 1/3 legal interest in the [B] property [real property description] (“the [B] property”) on trust for the second respondent.

   2.        That the respondent holds no interest in any business:

   (a)      Conducted on the [B] property;

   (b)Carried on in the name of, or otherwise known as “[Markoska] Family Farm”; or

   (c)Carried on by the second respondent, whether alone or with any other person or entity.

   3.That within 7 days of the date of these orders, the respondent do all acts and sign all documents as may be necessary to transfer his one-third legal interest in the [B] property (as described in order 1 above) to the second respondent.

   …

4. M filed an Amended Case Outline on 30 May 2011 in which she, too, sets out with precision the orders sought by her. They are, in effect, a mirror copy of the orders sought by the husband.

5. The wife opposes the making of that declaration and asserts that the property owned by the husband, as reflected on the Title, should be included as part of “the property of the parties or either them” within the meaning of s 79 of the Act.

6. It is common ground that the husband is registered as holding a one-third interest as tenants in common with his mother (who holds the remaining two-thirds interest) in five parcels of land which had been referred to within the proceedings as “the [B] property” or “the [B] farm”.

7. The circumstances in which the husband became so registered are also, it seems to me, uncontroversial. The first three of the five lots comprising the B property were acquired in 1991. (That is, they were acquired some eight years prior to the husband and wife meeting and some ten years prior to the commencement of a de facto relationship between the two). The parties subsequently married a few months later in 2002. The wife asserts that she worked on the “family farm” effectively from shortly after the time that she and the husband met.

8. The fourth lot in the B property was acquired in 1993 and the fifth pursuant to a contract signed in 1998 but which was not completed until 2002.

9. The first four lots were purchased in the names of M, her deceased husband (“[E]”) and the husband, each being recorded on the title as the registered owner of a one-third interest as tenants in common. The fifth lot was acquired in the husband’s name initially.

10. Title was subsequently transferred into the names of M, E and the husband as tenants in common – it is said, to achieve consistency in the ownership of the other lots. It is said that this lot was acquired initially in the husband’s name because it was acquired from the neighbour who requested it to be so.

11. E died in 2006. His one-third interest in the B property was transmitted to M pursuant to his will.

12. Although the husband and wife (and M) are at odds in respect of the nature, frequency and quantity of work performed by the wife in and about the farm, it appears to be common ground that the B property was used as a farming property during the course of the parties’ relationship (and before and since). The husband and M assert that the farming business was conducted by M and E until his death in 2006 and thereafter, the business was conducted by M alone.

13. Other properties can be seen as being part of the farming operation (whoever might be its proprietors). A property referred to in the proceedings as “the home farm” comprises 160 acres and, it is common ground, was owned initially by E and M and is now owned solely by M. The second property is a 1,600 acre property at Town 1 owned originally by E solely and which is now owned solely by M. This was referred to during the course of the proceedings as “the [Town 1] property”. In addition, M owns other property (approximately 30 acres) at [Town 2] where, apparently, cattle are grazed from time to time.

14. The wife asserts that the husband holds both a legal and beneficial interest in the B Farm and also has a proprietary interest in the farming business. 

15. It might be noted that no part of the wife’s claims suggests (for example, in the alternative) that a constructive or other trust arises in respect of work or other contributions made by her in and about property owned by the husband and/or M.

The Case for the Respondents

1. The husband, for his part, contends that M and E contributed all funds required to purchase all lots which today comprise the B Farm. It is asserted that M and E paid for incidental expenses in relation to the acquisition of the property, including all stamp duty and legal costs.

2. The husband was, on his case, not involved with the purchase of the properties, including not playing any part in discussions or negotiations with any real estate agent, inspection of property, negotiations or the like, save for the property bought from the neighbour earlier referred to. The negotiations in respect of that property, it is asserted, were conducted “under strict direction” from E. The husband was 17 years of age at the time of the purchase of the initial lots which make up the property.

3. Centrally it is asserted that the husband’s name was placed onto the title as a one-third interest holder because:

   (i)it was anticipated (at least by E and M) that the husband would pursue a career in farming;

   (ii)the husband would not own his one-third interest in the B property unless and until he paid to [E] and the second respondent a one-third share of the purchase price of all lots.

4. It is said that significant improvements were made to the property by the husband and that any work in and about the properties was done “under his employment with [E & M Markovska], for which he received an allowance/wage”. In that same respect it is asserted that the husband has not made “any direct or non-direct financial contribution to the acquisition, improvement or maintenance of the B property to date”.

5. The husband says that his actions in and about the property and any work conducted on the property have always been in accordance with “the understanding [that] he holds his one-third interest on trust for [his mother]”. In particular it is asserted in the written submissions on behalf of the husband that:

   (i)Since the purchase of the [B] property, he has made three applications for finance and he has not listed his one-third legal interest in the [B] property as property owned by him;

   (ii)The proceeds from the sale of [Company 1] shares that were in his name (purchased at the same time as the [B] property) were forwarded directly to the second respondent; and

   (iii)Soon after his marriage … [the wife] suggested that he sell his third interest in the [B] property. [The husband] says that he made it clear to [the wife] that he was not at liberty to sell the interest because it was not his and that if he did, any proceeds would belong to [his mother]. The husband also points to the fact that from about 2003 (as a result of a number of factors including an injury to this back, his attitude towards farming, and the acquisition of a mortgage) he pursued a career other than in farming, namely as a [public servant] at [Town 4]. He asserts that “as a result [the wife] understood and acknowledged that the B property would need to be transferred back to [E] and the second respondent.”

6. In respect of the assertion by the husband that he has no legal or equitable interest in the farming business conducted on the property, he asserts that he was an employee of his mother and father’s partnership; a business now run by his mother M as a sole trader consequent upon the death of E.

7. He says he was paid a wage/allowance which was declared in all relevant tax returns and that he “did not receive any income, distributions or benefits” other than “his wage/allowance, his right to live at his parents’ residence rent and utility free; being able to live at one of the abandoned houses on the home farm and having the use of spare farm utes if needed”.

8. The husband says he played no active role in any business decisions. Indeed, the effect of his evidence is that E was a somewhat tyrannical figure who ran the family, and the family business, in a dictatorial manner.

9. The husband says that he has not been employed by the partnership or, subsequently, M “for over seven years” and that after his employment with the partnership ceased his only involvement with the farms was attending at them to care for his father during his long illness, to visit his family, or to show his children “the farms and the farming experience”.

10. Once again, M’s case can be seen to mirror in large measure that of the husband. It is specifically contended in the Amended Case Outline filed on her behalf, that the husband contributed no funds to the purchase of any property; that there was an agreement as to the acquisition of an interest in the three lots consistent with that contended by the husband; that all costs associated with maintenance and improvement of the properties were met by the farming business and that, although the husband worked in the farming business “until late 2003, he has never been an owner or part-owner of the farming business and has only received remuneration for his labour. At no time has he received a distribution of profits from the farming business”.

11. It is also asserted by M that:

    Around the time [the husband] ceased to work in the farming business a consensus was reached between [E], [M] and [the husband] that [the husband] would never acquire an interest in the [B] property.

12. The Case Outline specifically contends that any presumption of advancement in relation to the interests in the B Farm registered in the husband’s name is rebutted by evidence of contrary intention (citing Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 @ 364-5; Calverley v Green (1984) 155 CLR 242 @ 251 and Nelson v Nelson (1995) 184 CLR 538).

Veracity of Evidence

1. Whilst not directly relevant to these proceedings it should be noted that within the context of parenting proceedings which remain live between the parties, the mother asserts that the father has engaged in inappropriate behaviour towards the children of the marriage, an assertion which he implacably denies. It might be thought that an allegation of that type would tend to colour the perceptions and evidence of each of the parties. I emphasise that this might be true, whether not any, all or some of the allegations are true, either as specifically alleged or to like effect. If true, it might be thought that the wife might have a very adverse view of the father (and perhaps his family). If untrue, the making of the allegation might be seen to provoke similar attitudes in the father.

2. I consider this background important in assessing the veracity of each of the husband and wife. Equally, I consider that all of the parties’ evidence is now likely to be coloured by the fact that each is aware that legal consequences may flow from past actions.

The Farming Business

1. The husband and M each seek a determination, that the husband has no property in the farming business.

2. At the outset of the trial, the wife contended that the husband was the sole owner of the business. However, during cross-examination by Counsel for the husband, the wife conceded that, the evidence she relies upon must on the best case for her, produce a result that the husband holds a fifty per cent share in the business with M. Ultimately, that was the submission made on her behalf.

3. The basis for the wife’s contention that the husband was the sole owner of the business emerged during cross-examination. It, it is said, was an alleged statement by the husband, which was first deposed to in the wife’s affidavit filed 10 May 2011. The wife alleges “[w]hen I met [the husband] in 1999 he told me he was a farmer, that he was in a business partnership with his father and managed all the family farms.” The husband denies making that statement.

4. Given that the statement is asserted to be the sole basis for the wife’s assertion that the husband owns the farming business, it is perplexing that it is not contained in an affidavit of the wife filed on 21 June 2010 in support of her application seeking, (amongst other things), a declaration that the husband owned the farming business.

5. The wife’s explanation for the absence of the statement is she had told her solicitors her “life story” (which, presumably, included the quoted statement) but is nevertheless left out of the affidavit filed on 21 June 2010. Given that the statement is the sole basis for the assertion, I find this difficult to accept.

6. However, even if the statement was made, it was made in 1999, when the parties had just begun their relationship. It is said it can be seen as an exaggerated statement desired to impress the husband’s future wife. Be that as it may, even if it was said (and I doubt that it was – or, at least in the alleged form) its evidentiary value is, in light of other evidence to which I will now refer, extremely limited.

7. Mr C has performed various accounting services for the second respondent and her late husband since 1987. His evidence is unchallenged. The wife suggests that such a lengthy professional relationship may impact on the veracity of a witness’s evidence. But, no such suggestion was made in cross-examination. Indeed, he was not cross-examined at all. His evidence is unchallenged.

8. On the unchallenged evidence of Mr C:

   a)In relation to all matters pertaining to the business, Mr C dealt with E and M, and, after E’s death in 2006, M alone,;

   b)The business traded as a partnership which was, at all times, between M and her late husband.

   c)Taxation returns reflect each such position;

   d)Following the death of E, M has operated the business as a sole trader;

   e)All expenses related to the business have been met by M and E;

   f)The husband has never owned any plant or equipment in relation to the business;

   g)No property of the husband was ever listed on the Depreciation Schedules prepared for M and E;

   h)M and E alone prepared the material for the tax returns for the partnership;

   i)M and E each declared their respective fifty percent shares in the partnership when lodging their individual tax returns and no such interest was ever recorded for the husband;

   j)Mr C has never discussed the structure or operation of the business with the husband. His only discussions regarding the business were with M and/or E;

   k)Tax returns completed by Mr C on behalf of the husband were also consistent with the husband only ever being an employee of the business, and then only until 2003;

   l)The husband received wages/allowances that were paid by the business based on the number of hours the husband worked, as opposed to the financial results of the business.

9. The husband also relies on the evidence of his sister, Ms O. She is a chartered accountant. She deposed to having given her parents advice on “various aspects of their business and tax”. I considered that Ms O was, understandably enough, a witness whose evidence was partial to her brother and mother. Nevertheless, I observe that her evidence is corroborative of both the husband and M (and at least to some extent, the evidence of Mr C).

1. Beyond the alleged statement by the husband that he “was in business” with his father, the wife contends that the husband continued working on the farm after he commenced working as a public servant in 2003 and that this evidence supports her claim that the husband owns at least fifty percent of the business.

2. The husband denies working on the farm after 2003. Similarly, M was adamant that the husband did not work on the farm after 2003. During cross-examination by Counsel for the wife, M said that between 2003 and E’s death, it was only her, E and their younger son, Mr D, working on the farm. M also stated that after E’s death, she began employing people outside of the family to work on the farm.

3. The husband suffered a back injury in 1995 and was eventually diagnosed with a “crushed/herniated disc” and “pressure on [his] spinal cord”. The husband says that it was largely due to the recurring pain suffered as a result of this back injury – which, he says, was aggravated by his work on the farm – that he began looking for “alternative career paths” in 2000. In 2003, he commenced employment as a public servant. The husband states that after commencing work as a public servant his “employment with [his] parents ceased…”.

4. The wife relied on the evidence of her mother, Ms B, and her mother’s current partner, Mr S, in addition to her own evidence, to suggest that it was the husband, as opposed to M and/or Mr D, who ran the business from 2003.

5. I reiterate my previous comments regarding the potential for evidence of past events to be coloured by factors such as its potential to now have legal consequences; familial loyalty; a desire to keep “family farming property” within the family and the like. So, too, as I have said, allegations of sexual abuse produce strong feelings that might influence evidence. .

6. Mr S deposes to having met the husband and wife in 2004. According to Mr S, the husband:

   …invited me to accompany him from time to time to the family farm.

   Initially…to observe and keep [the husband] company, but from time to time I helped and assisted [the husband] with his various tasks.

7. Mr S also states:

   Over the months and years of our association I was present at [the husband and wife’s] home on numerous occasions when [the husband] arrived home from having been at work on the farm...He would arrive home dirty and often smelling of pesticides, a smell that I am well familiar with from my own farming work. [The husband] would often talk to me about the farming activities he was involved in during that day…

8. Mr Looney, Counsel for M, submits that I ought reject Mr S’s evidence and that the evidence of the husband’s younger brother Mr D ought be preferred.

9. Mr D, who has worked full-time on the B farm since 2000, filed an affidavit which directly addressed several of the contentions made by Mr S and, in many respects, completely contradicts the evidence of Mr S. For instance, Mr S deposes to having seen the husband operate a forklift in a cool room on the B farm. According to Mr D the forklift Mr S refers to “cannot fit into the cold room or anywhere near it”. As a further example, Mr S stated that he had accompanied the husband “when he went out to water cattle in the cattle yards”. According to Mr D “if there are cattle in the cattle yards at [B] nobody has to water them. The yards are equipped with automatic watering troughs”.

10. The wife also relies on the evidence of her stepmother, Ms B, to support her claim that the husband continued to work on the farm after 2003.

11. In her affidavit filed 10 May 2011 Ms B states that, after both the wife and the husband had commenced working in the public service, she would, on days when the wife was working, go to the parties’ house “at about 8am. That was the time when [the husband] usually left the house to go and work on the farm”. Ms B also states that “[w]henever [the husband] was working on the farm (which was frequent) he would tell me that if I needed him I should, ‘ring [him] at the farm’, or he ‘was going to Mum’s’ which I took to mean the farm…”.Ms B annexed to her affidavit copies of various diary entries recording when she babysat the parties’ daughter, several of which refer to “[The husband] farm” or words to that effect. These are suggested to be evidence that on the corresponding days to those entries, the husband worked on the farm.

12. Mr Kent SC, Counsel for the husband, put to both the wife and Ms B, a document produced by the husband detailing his shifts in the public service from 2003 onwards. By reference to that document, there are times when Ms B alleges the husband was at the farm when in fact, he was working in the public service.

13. The wife did not directly dispute this, but rather disputed the reliability of the document, contending that the husband could “have typed that up last week”. During cross-examination of Ms B, Counsel for the husband suggested to Ms B that on the days she had written “[the husband] farm”, or words to that effect, the husband may have been visiting his father; 29 out of the 30 entries occurred prior to the death of his father. Ms B rejected this, stating that “a lot of the time…[the husband] told me … what he would be doing.” Ms B also said “[the husband] never told me he was going to visit his sick father”.

14. Counsel for the husband also queried Ms B’s motives for recording that the husband was at the farm. As Ms B admitted, the husband was either working in the public service or was working at the farm and as such, there was no real need for Ms B to record that the husband was working at the farm. Whilst both the wife and Ms B repeatedly rejected the suggestion that the entries were later added to the diaries for the purpose of the trial, I find the entries odd.

15. That said, I find it difficult to accept that the father did not work on the farm after 2003. On the father’s case, he is a man plainly devoted to his father. E is painted as a dictatorial and firm man. At the time he was suffering from a chronic illness and his health was deteriorating. The husband is the eldest of five children and had worked on the family farm for most of his life. He clearly had a close relationship with both of his parents. It is hardly surprising then, that he would assist his mother both in providing care for his dying father and by working on the farm. His mother was principally responsible for the running of the farm (on both her case and the husband’s case). She needed help. True, she hired help (as I accept). But, I find it very difficult to accept that the husband (and his brother) would not have “pitched in” at this time of family difficulty, back problems notwithstanding. I find that he did so – doing what work he could to assist from time to time as well as working in the public service.

16. The same is true – arguably more than true – in respect of the wife’s amended case which asserts a partnership or 50 per cent interest.

17. I am satisfied that the husband has no beneficial interest in the farming business and I so find.

18. In light of those findings, the case for the wife would be: because the husband said what she alleges (or something like it) in 1999 and because he has worked on the farm at a time when his father was increasingly ill and increasingly incapacitated and because (contrary to his assertion) he has been paid (although, it seems, no such payment has, surprisingly, been claimed as any expense of the partnership for taxation purposes), I should infer that the husband has, contrary to the assertions by him, his mother, his brother, his sister and Mr C and the taxation documents for the partnership, a proprietary interest in the business.

19. Even if the husband was remunerated (and remunerated significantly) for work which, I find, he has performed regularly on and about the farm, it by no means follows, in my view, that the husband is a partner or has a proprietary interest in the business. The evidence of Mr C points tellingly against any such conclusion. There may (or may not) be other ramifications of such a finding but none are alleged as relevant to the issue under consideration here.

The B Farm

1. The unchallenged evidence of the husband and the second respondent with regards to the purchase of the five lots comprising the B Farm, can be summarised as follows:

   a)The first three lots were purchased in 1991 for $227,500;

   b)As part of the purchase of the first three lots, M and E also purchased approximately 36,630 shares in Company 1. Those shares were equally divided between the husband, M and E and were registered in their respective names;

   c)The husband was 17 years old at the time of the first three lots were purchased;

   d)The fourth lot was purchased in December 1992 for $21,000;

   e)The husband, M and E were listed as tenants in common for the first four lots;

   f)The fifth lot was purchased in 1998 for $10,000;

   g)This lot was registered in the husband’s sole name;

   h)The fifth lot was registered in the names of the husband, M and E, as tenants in common, approximately 2 years after it was purchased;

   i)M and E were solely responsible for the purchase price and have been solely responsible for all outgoings in respect of the properties. There is no evidence that the husband has ever contributed to these expenses.

2. The wife relies upon that registered title and says that the husband holding the whole of the one-third interest is supported by the presumption of advancement.

3. In situations where a parent (including mothers: Brown v Brown (1993) 31 NSWLR 582; Nelson) transfers a property, or part of a property, to their child, it is presumed to be by way of advancement (Bennet v Bennet (1879) 10 Ch D 474; Calverley) with the equitable or beneficial interest in the property aligning with the legal title (Cummins v Cummins (2006) 227 CLR 278).

4. It might be seen as an exception to a resulting trust which may otherwise arise when one party is registered as proprietor of a property where the purchase price is paid by another.

5. Where the presumption of advancement arises, an onus rests on the person seeking to rebut it: here, the husband and M (Calverley).

6. The presumption will be rebutted where there is admissible evidence that the transferor (here M and E), did not intend to gift the property (Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353). In Cummins the High Court held at 279:

   evidence of subsequent statements of intention, not being admissions against interest, [are] inadmissible to rebut the resumption of an intention of advancement in family relations cases, but evidence of facts as to subsequent dealings and of surrounding circumstances of the transaction may be received in determining whether any presumption of resulting trust or advancement might be rebutted by evidence manifesting a contrary intention.

7. The evidence by which that intention might be established will, of course, vary from case to case. But, as the High Court held in Calverley at 18:

   The correct time to determine the beneficial interests in the property was the time of acquisition of the property, to be ascertained by drawing upon evidence of the acts and declarations before and at the time of purchase or so immediately after it as to constitute a part of the transaction. Subsequent declarations could be received in evidence only if against interest.

8. Although, as I have said, it is the husband (and M) who bear the onus of rebutting the presumption of advancement. It is convenient, however, to deal with the arguments by the wife and the evidence which, she contends, support the presumption.

9. According to the wife, there are four events subsequent to the transfer which support the presumption of advancement:

   a)The absence of conduct on E’s part compelling the reconveyance of the B Farm between (at least) 2003 and his death in July 2006;

   b)The conduct of M in administering E’s estate is inconsistent with the claim that the husband holds his interest in the B Farm on trust for M;

   c)The terms of E’s will are “inconsistent with a resulting trust in favour of him and his wife”; and

   d)The conduct of the husband and M in respect of the conveyance of the fifth lot in 2004.

The Failure to Reconvey B Farm

1. The wife asserts that the husband’s employment in the public service marked the point where farming was no longer his future. If that is so, she argues, it does not make sense that the husband would not convey his legal interest to his parents (or his father to not compel it).

2. When the husband was asked why he had not reconveyed his interest in the B Farm at that time, he said that, given his father’s ailing health and the fact that, in the husband’s mind at least, it was agreed that he would either pay for his interest or reconvey it, the issue was not at the “forefront of my mind”. In his affidavit filed on 23 August 2010, the husband deposes, “once I started with Queensland [public service], it was discussed with my father to return the ownership of the property to him. However this never eventuated due to his deteriorating health and death.” In his later affidavit filed 5 May 2011, the husband deposes:

   my legal interest has not been transferred back to my mother due to my father’s deteriorating health. Quite simply, my father became my families’ (sic) priority…

   …

   …Around 2003, my father’s health deteriorated further and he needed constant supervisions. This was a hard time for our family and during this period we were focused on caring for my father.

3. When asked whether she was aware of any demands made by her late husband of the husband to reconvey his interest, M stated she was present when, in either 2000 or 2001, E told their son that if he could not pay for his one-third interest, he was to transfer that interest back to his mother and father. M also stated that neither she nor E were overly concerned about the husband purchasing his interest or reconveying it due to the severity of E’s illness.

4. I have already described my impression of E as the tyrannical patriarch of the Markovska family. It is readily apparent that the other members of the Markovska family deferred to their father/husband who exercised control over the family’s business and financial affairs. I accept the submission by Counsel for the husband that, where E was in the throes of an illness which would eventually take his life, it is highly unlikely that the reconveyance of the husband’s interest in B Farm was at the forefront of E’s, or M’s, mind.

5. In that respect, it is not irrelevant that the interest in land was part of intra-familial commercial arrangements. Frequently, less formality attends such arrangements as does less urgency about attending to any such formalities. I am not surprised that this matter was not attended to, particularly given E’s illness. I am not persuaded of the urgency of the factor in seeking to ascertain the relevant intention.

The Late Father’s Will and Estate

1. It is convenient to deal with these two arguments together.

2. E’s will was tendered by the wife (exhibit “W2”). It provides that, should M survive E, she will receive E’s entire “real and personal estate”.

   As to my two thirds share of the farming property situate at [B] (which I hold as tenant in common with [the husband] who presently holds a one third share thereof) together with all fixed improvements thereon…to such of the following as shall be living at my death namely [the husband] and the said [E] in such shares so that … [the husband] and [E] will hold the whole of the said property (including the one third share already held by [the husband]) as tenants in common in equal shares.

3. The wife argues in a contention similar to that just discussed in respect of the B Farm that, first, M’s asserted tardiness in having the husband’s interest conveyed to her is indicative of the husband being the legal and beneficial owner of the one-third interest. Doing so would have been the formalisation of all intra-familiar transactions that occurred some 15 years previously. Consistent with the views earlier expressed I do not consider the asserted inaction persuasive of that for which it is contended.

4. As I understand the argument on behalf of the wife, it is said that the will plainly acknowledges the husband’s one-third interest and would not do so unless the husband owned the interest both legally and beneficially. I confess to some difficulty in following the argument. In fact, the relevant provision of the will is, in my view, a strong pointer to E believing (whether rightly or wrongly) that, despite legal ownership plainly vesting in the husband, he nevertheless had an interest which he could deal with in his will. In my view, that provision in the will points against the contention for which it is cited.

5. If E believed that the husband was the legal and beneficial owner of his one-third interest, one would have expected the will to deal with the remaining two-thirds interest in the property and not the one-third interest at all.

The Husband’s Transfer of Lot 5 in 2004

1. On 18 December 1998, the second respondent and her husband purchased the fifth lot comprising B Farm for $10,000 from a Ms K. Unlike the previous four lots, the fifth lot was purchased in the husband’s sole name. The husband provides an explanation for this, which was not challenged by the wife.

2. According to the husband, his parents had been interested in buying the fifth lot for some time but there was acrimony between the owner of the lot and M and E. As a result, the owner would not agree to sell the lot to the husband’s parents. The husband deposes to having “established a good relationship with [Ms K]” as a result of helping her around her property and listening to her “olden day stories of hardship and struggle”. The husband states that his parents “eventually convinced [Ms K] to sell the Lot to me, but only on the basis that I dealt with her.”  

3. Whilst the contract was signed on 18 December 1998 in the husband’s sole name, the husband states that, pursuant to a clause in the contract allowing Ms K to dictate the date of settlement, the purchase was settled in 2002. Again, this evidence was not challenged.

4. On 23 March 2004, the lot was transferred into the names of the husband, M and E, as tenants in common. Both the husband and M depose to this being done to ensure consistency with the other lots. In his affidavit filed 5 May 2011, the husband states that the delay between settlement and the transfer, was due to the husband being preoccupied with his wedding and building the former matrimonial home.

5. When it was put to the husband by Counsel for the wife that he could have transferred his interest in the rest of the B Farm to his parents at the same time the fifth lot was transferred into their names as tenants in common, the husband stated that he didn’t “believe it would have been a simple procedure” and he was also preoccupied with his father’s illness.

6. The issue of stamp duty was also raised as an explanation for why the husband did not transfer all of his interest in the B Farm at once. In written submissions, Counsel for the husband states “transfer of all real property would have attracted the substantial burden of stamp duty. That was an unnecessary expense given the relevant parties’ common understanding.”

What Evidence Supports Contrary Intention?

1. I turn now to consider the evidence by which the husband (and M) suggest that they establish the requisite contrary intention. It should be recalled that the central common position of each is that the one-third interest was transferred on the understanding that the husband would farm. In that case, it is said that a purchase price would subsequently be paid. Should that event not come to pass, it is said that the interest was to be transferred.

Admissions

1. The High Court in Calverley held, it will be recalled, that statements made “…before and at the time of purchase or so immediately thereafter as to constitute a part of the transaction” are admissible as evidence of “intention” but that “…subsequent declarations are admissible only against the party who made them”.

1. In the present case, there is evidence from the husband, M and Mr C of statements made by E at the time the lots comprising the B Farm were purchased.

2. Mr C deposes to the following:

   27. When [E] and [M] bought the [B] Property around 1991, [E] and [M] told me that they were going to put [the husband] on the title.

   28. From what [E] and [M] told me, [the husband], at that time, showed some interest in farming and that is why they decided to include him.

   29. I was told by [E] and [M] that [the husband] had to pay for his one-third share and was not going to take ownership of it until he did.

   30. The placing of [the husband’s] name on the title did not change the way [E] and [M] operated their business or the way I prepared their tax returns every year.

3. M deposes, in her affidavit filed 29 December 2010:

   3. In May, 1991 my husband and I decided to purchase a property at [B] and at that time [the husband] was just 17 years old. My husband and I talked about including [the husband] in the property as at that time he showed a lot of interest in farming. When my husband I purchased the property, we purchased it debt free. We included [the husband’s] name in the title. [The husband] was told by both me and my husband that he had to repay his share of the price with interest accruing. It was acknowledged between the three of us as a family that [the husband] would not own his interest in the property until the loan was paid back in full. We didn’t formalise this arrangement in writing as we were family. We trusted each other and our word was our bond…

4. The husband also gave both written and oral evidence consistent with the evidence of Mr C and M. In his affidavit filed 5 May 2011, the husband states:

   60. My father told me that on the basis that I wanted to pursue farming as a career he would put my name together with his name and my mother’s name on the title on the understanding that I would have to pay for my interest when I was able to do so. Whilst I cannot now recall the actual words my father used, the plain effect of those words was that if I wanted the interests to be mine, I would have to pay for it when I was able to. I agreed with this and it was on that understanding with my parents that my name was included.

   …

   62.Whilst I don’t remember the actual words used by my parents or I in the conversation that I had with my parents about putting my name on the property, I recall clearly that my parents told me, and I accepted, that I would have to pay for my share of the property. My parents told me to the effect that until I paid them, the property would not be mine. I was happy with that arrangement and said so.

5. I accept, in this respect, the evidence of all three witnesses. Mr C was not cross-examined at all and I did not take Counsel for the wife as directly challenging the accounts of the husband or M in this respect.

Subsequent events

1. There are three primary “subsequent events” which, in my judgment, cast significant doubt on the presumption and strongly support a rebuttal thereof. They are:

   a)The sale of the Company 1 shares and the distribution of the proceeds therefrom;

   b)The location of the land purchased by the husband and wife for their former matrimonial home; and

   c)Three declarations of assets made by the husband to various lending institutions. 

2. I propose to consider each in time, but, before doing so, it is first convenient to address the issue of the binding financial agreement allegedly procured by the husband, at the behest of his father.

Binding financial agreement

1. In his affidavit filed 5 May 2011, the husband deposes to his father taking him “to see his solicitors” to have a “Financial Agreement drawn and signed before [the wife] and [the husband] were married to protect his assets”. The husband annexes a copy of a document, dated 23 April 2002, said on its face to be an “Agreement”, to his affidavit. The document lists as a liability of the husband, a debt owing to his father in the sum of $80,000 being a debt “in relation to the farm (plus interest)”. The husband contends that this reflects the agreement that the husband would either pay for his one-third interest in the B Farm or would reconvey it.

2. The document is not signed. The husband deposes that “[t]he document was never signed because [the wife] told me that her step-mother had told her not to sign anything before getting married.” A file note from the solicitors who prepared the agreement notes that the husband had contacted them and informed them that the agreement would not be signed. The husband accepted during cross-examination that he also instructed the solicitors to “not discuss the matter with [his father]” should his father contact them.

3. The wife denies ever seeing the agreement. She said in oral evidence that “[the husband] never asked me to sign anything.  I never saw it.” The wife also stated that, to her knowledge, her stepmother had never seen the document.

4. I accept the evidence of the wife in this respect. The evidence is redolent of a document prepared at the behest of a dictatorial father and a concomitant reluctance for it on the part of the husband. I think it very likely that the document was not shown to the wife.

5. That, however, does not eliminate its potential evidentiary value for the issues under discussion. It adds weight, in my view, to a conclusion that, at least in April 2002, something was done in a formal sense to acknowledge that the title of the one-third interest might be, at least, different to that which would ordinarily follow from legal ownership.

The Company 1 Shares

1. When M and E purchased the first three lots comprising the B Farm in 1991, they contemporaneously purchased 36,630 shares in Company 1. Those shares were equally divided between the husband, M and E and were registered in their respective names. The shares were purchased, according to the husband, because “at the time, a grower was required to have shares in the [Company 1] cannery to supply [fruit] to it.”

2. The unchallenged evidence of both the husband and M is that, as with the purchase of the lots constituting the B Farm, the husband did not contribute to the purchase of the shares.

3. The husband and M (who acquired E’s shares upon his death) sold their shares in 2008 for $1.65 per share. Because the shares were in the husband’s name, the husband subsequently incurred a capital gains tax liability of approximately $2000.

4. Importantly, in the current context, although ostensibly the owner of the shares, the husband directed that the $20,146.50 received from the sale of his shares be deposited into his mother’s account. Further, and also significant for the current issues, M subsequently paid the husband’s capital gains tax liability incurred as a result of the sale of the shares.

5. The husband states in his affidavit filed 5 May 2011 that his view was that the shares “were effectively linked to the property”. That he did not consider the shares to be his property is, in my view, plainly evident from his direction that the sale proceeds be deposited into his mother’s bank account.

6. It should also be noted in that regard that, the sale occurred in 2008, some two years before the wife filed her application claiming the husband’s interest in the B Farm ought to be included in the property pool.

Location of former matrimonial home

1. The parties built the former matrimonial home on approximately 12 acres of land which the wife states was “gifted” to the husband by his parents. According to the husband, his parents offered the land to him “on the agreement that [he and the wife] would pay them for the land when we were able…”.The husband also deposes to borrowing $20,000 from his parents to complete the house and to his parents paying in excess of $26,000 for various fixtures, fittings and fees.  The property is located close to Town 3, some distance from the B Farm.

2. The husband relies on these circumstances, including, in particular, its geographic separation from the B farm. He says that, if he had a beneficial interest in the B Farm “I would not have bought land and built a house close to the township of [Town 3]. I would have lived on the farm”.

3. There is logic in the proposition, but I do not consider it particularly persuasive in ascertaining the relevant intention.

Declaration of Assets

1. The husband gives evidence of three “applications wherein I was required to declare my assets”. On all three applications, the husband omits any interest in the B Farm.

2. The first application is he and the wife’s “joint mortgage application”. According to the husband “I didn’t include my interest in the [B] property as an asset that I owned because I did not regard myself as the owner”. The husband was unable to obtain a copy of this application from the Commonwealth Bank.

3. In her affidavit filed 10 May 2011 (after the husband had filed his affidavit on 5 May 2011 which includes the evidence just referred to) the wife asserts (for the first time) that the husband “gave details of assets including his one-third share in the [B] farm”. When Counsel for the husband asked in cross-examination of her that the husband “didn’t offer…his third interest as [B], as being his when you were discussing the loan with the bank?  That wasn’t treated by him as his asset, was it?” the wife replied “Well, I can’t even remember, so I can’t answer that, sorry”.

4. I accept the husband’s evidence.

5. The second application was made to the Commonwealth Bank in 2003, by the husband and wife, to increase their mortgage. The husband deposes to having obtained “several pages” from the Commonwealth Bank which reveal that he and the wife “did not declare [the husband’s] interest in the [B] property as being a property that [he] owned”. Again, I accept his evidence.  

6. The final application referred to by the husband was made by him alone in February 2009 for finance to facilitate his purchase of a motor vehicle. The husband does not provide evidence of that application but deposes to not declaring any interest in the B property. I accept his evidence.

7. A declaration of the interest in the B farm to the bank, particularly on the first two occasions when mortgage finance was sought, can be seen as being potentially beneficial to both parties. In my view, it is strongly persuasive of the husband (at least) considering the he did not have beneficial ownership of his one-third interest.

8. I consider it is highly likely that the arrangement in respect of the land is as contended by the husband and M. It was considered by E likely (I would venture assumed) at the time of transfer that the husband would follow his father’s footsteps and farm the land (with the result that the land, and farm, would stay “in the family”). The transfer of the interest reflected that assumption. But if that was to occur, the husband would not receive it for nothing; he would pay for it with interest. If it did not occur, the land would stay under the father’s control and, in due course, the legal title would reflect that.

9. Conclusions about intention are not to be gleaned however, from suspicions or what is assumed to be true; such a conclusion must be based on the evidence to a satisfaction on the balance of probabilities.

10. Heydon JA held in Damberg v Damberg & Ors [2001] NSWCA 87:

    [42] There is a presumption that where one or more parents convey property to a child, the parent or parents intended to give the child the beneficial interest in the property, not merely the legal title. That presumption can be rebutted by showing, on the balance of probabilities, that the parent or parents did not have that intention. In the present circumstances, where the husband alone transferred the property, it is his actual intention alone which is to be ascertained: Calverley v Green (1984) 155 CLR 242 at 246-251 per Gibbs CJ.

    [43] It has been said that although the presumption is rebuttable, it does "not ... give way to slight circumstances": Shephard v Cartwright [1955] AC 431 at 445 per Viscount Simonds, quoted in Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 365 by Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ. According to Viscount Simonds, the quoted words were uttered by Lord Eldon LC in Finch v Finch (1808) 15 Ves Jun 43; 33 ER 671; in fact they were not, though they appear in the headnote, though the expression "slight circumstances" was used by the losing counsel, Sir Samuel Romilly, in argument (at 48 and 673), and though Lord Eldon LC said that the "presumption is not to be frittered away by nice refinements" (at 50 and 674). There are other authorities suggesting that the standard of proof is higher than the normal civil standard. In Grey v Grey (1677) 2 Swans 594 at 598; 36 ER 742 at 743, Lord Nottingham LC said:

    "the natural consideration of blood and affection is so apparently predominant, that those acts which would imply a trust in a stranger, will not do so in a son; and, ergo, the father who would check and control the appearance of nature, ought to provide for himself by some instrument, or some clear proof of a declaration of trust, and not depend upon any implication of law; for there is no necessity to give way to constructive trusts, but great justice and conscience in restraining such constructions."

    (By "constructive trusts" he meant "resulting trusts".) In In Re Kerrigan; ex p Jones (1946) 47 SR (NSW) 76 at 87 the presumption was said by Davidson J to be "a strong one".

    [44] However, A W Scott and W L Fratcher, The Law of Trusts (4th ed) vol V para 443 p 194-p196 said:

    "It has been said in a number of cases that the presumption of a gift where property is purchased in the name of a relative can be rebutted only by evidence that is strong and clear, or as it is said in some cases by conclusive or indubitable evidence. There is no reason, however, why the payor should be required to produce evidence of this character. The better view is that it is necessary to produce such evidence as is required to establish any other fact. As the court said in one case: 'It is the intention of the parties in such cases that must control, and what that intention was may be proved by the same quantum or degree of evidence required to establish any other fact upon which a judicial tribunal is authorised to act'."

    The quotation was from Hartley v Hartley 117 NE 69 at 73 (1917, SC Ill). See, to the same effect, R P Meagher and W M C Gummow (eds), Jacobs' Law of Trusts in Australia (6th ed, 1997) para 1216 p 300. Hence the standard of proof to be met in order to rebut the presumption does not call for application of the principles discussed in Briginshaw v Briginshaw (1938) 60 CLR 336, or rest on any analogy with the high standard of proof in rectification. But it does call for proof of a "definite intention" to retain beneficial title, not a "nebulous intention to rely upon the ... relationship as a source of control over the property": Drever v Drever [1936] ALR 446 at 450 per Dixon J (dissenting, but not on this point).

11. Here, one of the alleged donor’s is deceased. There is evidence, which I accept, of conversations had at or about the time of the transfer to the husband, which are inconsistent with the husband enjoying both the legal title and beneficial interest in the property.

12. I consider that the evidence of actions subsequent to the transfer (the first of which, it should be recalled, occurred when the husband was 17) is entirely consistent with the intention just described. I consider the evidence in relation to E’s will, the Company 1 shares and the list of assets given to the Bank are, each and together, powerful evidence persuasive of an intention by E and M that the interest was not intended to be enjoyed beneficially by the husband as legal owner.

13. By way of corollary, I do not find the matters referred to by the wife persuasive of the husband (and M) failing to satisfy the onus upon them.

14. I will therefore make orders in terms of paragraphs 1 and 2 of the husband’s Case Information document filed 25 May 2011.

15. As earlier seen, in paragraph 3 of that Case Information document (which is identical to paragraph 2 of M’s Amended Application in a Case filed 30 May 2011), both the husband and M each seek an order that the husband transfer his one-third interest in the B Farm to M. These proceedings involve the hearing of a discrete issue, which is but one issue relevant to the wife’s s 79 property settlement application. As such, I decline to make an order in the terms set out in paragraph 3 of the husband’s Case Information document.

16. Any such orders can await any other orders to be made upon finalisation of the matter.

17. To facilitate such finalisation, I will order that the matter be listed for directions before a Registrar.

I certify that the preceding one hundred and twenty-two (122) paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Murphy delivered on 19 July 2011.

Associate: 

Date:  19 July 2011