Naillon & Naillon
[2022] FedCFamC1F 781
Federal Circuit and Family Court of Australia
(DIVISION 1)
Naillon & Naillon [2022] FedCFamC1F 781
File number(s): ADC 3408 of 2021 Judgment of: BERMAN J Date of judgment: 18 October 2022 Catchwords: FAMILY LAW – PROPERTY – PRACTICE AND PROCEDURE – Where the applicant seeks that the farming land owned by the 2nd to 4th respondents is held on constructive trust or that it be subject to an equitable charge – Where the 2nd to 4th respondents seek for the Application in respect of them, be dismissed – Where the respondent supports the 2nd to 4th respondent’s claim – Where the 2nd to 4th respondents seek a disjoinder on the basis that there is insufficient evidence to establish a constructive trust – Where the applicant contends that the nature of the orders sought by the 2nd, 3rd and 4th respondents is an application for summary dismissal – consideration s 45A(1) of the Act – consideration of summary dismissal – Orders made. Legislation: Family Law Act 1975 (Cth) s 45A(1)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 r 10.09
Cases cited: Baumgartner v Baumgartner (1987) 164 CLR 137
Bigg v Suzi (1998) FLC 92-799
Bretton & Bondai [2013] FamCAFC 168
Gitane & Velacruz (2007) FLC 93-309
Giumelli v Giumelli [1999] 196 CLR 101
Len Lindon v The Commonwealth of Australia(No 2) [1996] 136 ALR 251
Pelerman v Pelerman (2000) FLC 93-037
Shepherd v Doolan & Ors [2005] NSWSC 42
Sidhu v Van Dyk [2014] 251 CLR 505
Division: Division 1 First Instance Number of paragraphs: 43 Date of hearing: 2 September 2022 Place: Adelaide Counsel for the Applicant: Mr Heinrich Solicitor for the Applicant: Kelly Kelly Legal Counsel for the First Respondent: Ms Ross Solicitor for the First Respondent: Alex Mandry Legal Group Counsel for the Second, Third & Fourth Respondents: Mr Roberts Solicitor for the Second, Third & Fourth Respondents: KP Lawyers ORDERS
ADC 3408 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS NAILLON
Applicant
AND: MR NAILLON
First Respondent
MR B NAILLON
Second Respondent
MS C NAILLON (and another named in the Schedule)
Third Respondent
order made by:
BERMAN J
DATE OF ORDER:
18 October 2022
THE COURT ORDERS THAT:
1.The interim orders sought in the Amended Response filed 9 August 2022 be dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Naillon & Naillon has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
Berman J
introduction
Ms Naillon is the applicant former wife of Mr Naillon, the first respondent former husband.
Mr B Naillon and Ms C Naillon (“the second and third respondents”) are the parents of the first respondent and are the directors of D Pty Ltd, the fourth respondent company.
The applicant and the first respondent were married in 2010. There are two children of the relationship namely, X born 2011 and Y born 2013 (collectively “the children”).
The applicant and the first respondent separated on 31 August 2019 with a divorce order made in early 2021.
Following separation, the applicant and the first respondent were unable to settle their differences in respect of property settlement and division.
The fourth respondent company is the registered proprietor of rural farming property situate at G Street, Town E together with a further property situate at H Street, Town J registered to the second respondent. The properties held by the second and fourth respondents are referred to as “the properties”.
The applicant and the first respondent met in 2006. At that time, the first respondent worked in the farming business which had been historically operated by the second and third respondents on the properties held by the company and the fourth respondent.
The applicant and the first, second and third respondents operated the farming business via a partnership trading as K Partnership (“the four-way partnership”).
The dispute between the applicant and the first respondent is the extent to which the legal and equitable interests of the parties in property should include the equitable interest, if any, of the applicant and the first respondent in the farm properties.
By Amended Initiating Application filed 14 June 2022, the applicant seeks the following final orders:-
1. A declaration that all of the farming land owned by the Second Respondent and the Fourth Respondent is held on constructive trust for the Applicant and/or the First Respondent or in the alternative that all of the land is subject to an equitable charge in favour of the Applicant and/or the First Respondent.
2.That the Second Respondent and the Fourth Respondent transfer all of the farming land they own to the First Respondent within such time as the Court deems fit and within a further 60 days the First Respondent pay the Applicant such amount as is required to divide the matrimonial asset pool as to 60% to the Applicant and as to 40% to the First Respondent. Alternatively, that the Second Respondent and/or the Fourth Respondent pay equitable compensation to the Applicant and the First Respondent such that the matrimonial asset pool (including such equitable compensation) is divided as to 60% to the Applicant and as to 40% to the First Respondent.
3. That the [K Partnership] be wound up pursuant to the provisions of the Partnership Act (South Australia).
…
There is broad agreement that the four way partnership should be wound up in circumstances where the first, second and third respondents have formed a new partnership that has utilised the plant, equipment and other property that had been previously used and held by the four way partnership.
By the order of a Registrar made 7 December 2021, the applicant was required to file and serve an affidavit with further and better particulars of the applicant’s claim for equitable relief.
The applicant set out her claim in a document titled “Statement of Claim” filed 4 April 2022. The applicant claims that from 2011 to 2018, representations were made by the second and third respondents to the applicant and the first respondent, that the farm properties would be transferred to them as a result of the relationship between the applicant and the first respondent and the work undertaken by them in respect of the operation and management of the farming enterprise.
At paragraph 41 of the Statement of Claim, the applicant contends that she relied upon the representations made by the second and third respondent in that she:-
a. entered into the 4-way partnership;
b. helped out on the farm whenever possible;
c.took on responsibility for the running of the farming partnership accounts including by investing her time in learning how to do so;
d. completing studies in a relevant field;
e. made improvements to the farmhouse/matrimonial home using her own personal efforts, including but not limited to:-
i.assisting a stone mason cut rocks out of the wall inside the home to facilitate the removal of a wall to open up the home;
ii. filling in the cracks in the walls in the home;
iii. solely painting the inside of the entire home;
iv.providing assistance to tradesmen during other renovations to the home;
v.establishing and maintaining gardens in and around the home including painting and establishing fruit trees and a vegetable garden and other various garden beds;
f.spent her own funds and those of her and [the first respondent] on improving the matrimonial home, including but not limited to:-
i.$20,000 of her savings that she held prior to the marriage on replacing the kitchen in the home;
ii.$11,000 from the sale of her car previously owned by her, to install air-conditioning in the home;
iii.$50,000 of the funds accumulated during the marriage were contributed by [the first respondent] and [the applicant] to pay costs associated with replacing the kitchen, the bathroom and laundry, and other renovation works including having a stone mason conduct renovation works to the home.
g.by agreeing to spend farming partnership funds on improvements to the family farming land including replacing fences and a building at a cost around $300,000, when those funds could otherwise have been used for wages/superannuation for her and [the first respondent] thus allowing them to build up off-farm assets;
h.by taking on the care of her daughters and performing homemaking duties so as to allow [the first respondent] to work long hours on the farm thereby investing in their financial future;
i.by receiving no financial compensation including wages and superannuation for the work she performed on and for the farm;
j.by agreeing to [the first respondent] receiving reduced wages and no superannuation for the long hours he spent working on the farm;
k.by permitting [the second, third and first respondents] to run the farm and make decisions based on what was “best for the farm”, including by agreeing to increase the partnership debt, rather than what was in the best financial interests for her and her daughters; and
l.by not taking steps to accumulate off-farm assets for [the first respondent] and herself.
At paragraph 46 of the Statement of Claim, the applicant seeks the following relief:-
a. A declaration that the second and third respondents share of the assets of the farming business trading as [K Partnership] are held in trust for the benefit of the applicant and the first respondent;
b.A declaration that the properties are held in trust by the second respondent and the fourth respondent for the benefit of the applicant and the first respondent;
c.An order that the second respondent and fourth respondent transfer the properties to the applicant and the first respondent;
d. Such further orders and relief as are deemed appropriate;
e. Equitable compensation; and
f. Costs.
By Amended Response to Initiating Application filed 9 August 2022 the second, third and fourth respondents seek that the Amended Initiating Application filed by the applicant on 16 June 2022 against them be dismissed and that the applicant pay their costs on an indemnity basis.
The first respondent supports the order for the dismissal of the claim and orders sought as against the second, third and fourth respondents.
The application seeking to dismiss the Statement of Claim and the orders sought for equitable relief by the applicant, was listed for hearing on 2 September 2022. Orders were made that judgment be reserved.
documents relied upon
The applicant relies upon the following documents:-
(1)Affidavit of third respondent filed 7 July 2022.
(2)Affidavit of applicant filed 14 June 2022.
(3)Amended Initiating Application filed 14 June 2022.
(4)Affidavit of applicant filed 23 December 2021.
(5)Affidavit of applicant filed 14 June 2022.
(6)Affidavit of fourth respondent filed 30 May 2022.
(7)Affidavit of second respondent filed 30 May 2022.
(8)Affidavit of third respondent filed 30 May 2022.
(9)Affidavit of first respondent filed 18 May 2022.
(10)Statement of Claim of applicant filed 4 April 2022.
(11)Affidavit of second, third and fourth respondents filed 12 August 2021.
(12)Outline of Case document filed 30 August 2022.
The first respondent relies upon his affidavit filed 18 May 2022, but given that he supports the position of the second, third and fourth respondents that neither he, nor the applicant have any legal or equitable interest in the properties, he supports their application seeking to dismiss the applicant’s claim against them. The first respondent did not wish to be heard other than to confirm his support for the orders sought by the second, third and fourth respondents.
The second, third and fourth respondents rely upon the following documents:-
(1)Affidavit of the third respondent filed 7 July 2022.
(2)Statement of Claim of applicant filed 4 April 2022.
(3)Affidavit of the third respondent filed 11 January 2022.
(4)Affidavit of the fourth respondent filed 12 May 2022.
(5)Affidavit of the second respondent filed 12 May 2022.
(6)Affidavit of the third respondent filed 12 May 2022.
(7)Affidavit of the third respondent filed 1 December 2022.
(8)Outline of Case document filed 31 August 2022.
contentions of the second, third and fourth respondents
The second, third and fourth respondents contend that neither the applicant, nor the first respondent, have any equitable interest in the properties.
The argument, as progressed by the second and third respondents, is that whilst there has been a valid joinder of the second to fourth respondents to the proceedings, an order for disjoinder should be made on the basis that the burden of proof lies with the applicant to establish the asserted equitable interest by reason of a constructive trust or some other equitable remedy. What is sought to be argued is that there must be more than the mere assertion of an equitable interest namely, an arguable case.
The argument pressed on behalf of the second to fourth respondents was that based upon the assertions of the applicant, there was likely to be insufficient evidence to establish the existence of a constructive trust.
Whilst the second to fourth respondents were steadfast in their denial of the applicant’s claim and in particular, that representation had been made to the effect that the second and third respondents would cause the transfer of the farm business and the properties to the applicant and the first respondent, it was not submitted that if the applicant were to establish, on the balance of probabilities, that certain representations were made and that consequent upon reliance by the applicant and the first respondent with the detriment as claimed, that the applicant did not have an arguable case.
contention of the applicant
The applicant contends that the nature of the orders sought by the second to fourth respondents is in reality, an application for summary dismissal.
legal principles
Summary orders are provided for in Part 10(3) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (“the Rules”) and in particular r 10.09 provides as follows:-
(1) A party may apply for summary orders after a response has been filed if the party claims, in relation to the application or response, that:
(a) the court has no jurisdiction; or
(b) the other party has no legal capacity to apply for the orders sought; or
(c) it is frivolous, vexatious or an abuse of process; or
(d) there is no reasonable likelihood of success.
…
It is not asserted by the second to fourth respondents that the Court is without jurisdiction, that the applicant has no legal capacity to apply of the orders or that the application is frivolous, vexatious or an abuse of process. The gravamen of the application to dismiss must be that there is no reasonable likelihood of success.
In Gitane & Velacruz (2007) FLC 93-309, the Full Court considered the determination of a trial Judge in dismissing the husband’s s 79A application. The Full Court allowed the husband’s appeal against the decision of the trial Judge and by reference to the earlier decision of Bigg v Suzi (1998) FLC 92-799 (“Bigg v Suzi”), considered that it could not be said that the husband’s case was “doomed to fail”.
The principles in respect of an application for summary dismissal was set out in Bigg v Suzi (supra) and were further restated in Pelerman v Pelerman (2000) FLC 93-037:-
46.The gravamen of the Appeal is that the trial Judge erred in the exercise of the discretionary power to summarily dismiss the Application. It is well established that the following principles apply as were recently reviewed and stated in Bigg v Suzi:
(a) The power for summary dismissal is a discretionary one.
(b) Relief is “rarely and sparingly provided”.
(c)The parties seeking summary dismissal must show that the application is “doomed to fail” or has been otherwise described “that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious”.
(d) A weak case or one that is unlikely to succeed is not “sufficient to warrant termination”.
(e)“If there is a serious legal question to be determined, it should ordinarily be determined at a trial”.
(f) “If notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which has failed to put in proper form, a Court will ordinarily allow the party to reframe its pleadings”.
In Bretton & Bondai [2013] FamCAFC 168, Finn & Strickland JJ held:-
59. Assuming, that a summary dismissal application was available to the mother in this case, the appropriate test would have been “no reasonable likelihood of success”. It must be acknowledged that his Honour did not, at least expressly, apply this test. Rather, he apparently applied the “doomed to fail” test referred to by Kirby J in Lindon. The tests are, of course, conceptually different.
In Len Lindon v The Commonwealth of Australia(No 2) [1996] 136 ALR 251 at 255-256, Kirby J said:-
14.The approach to be taken by the Court to the Commonwealth’s application for summary relief is not in doubt:
1.It is a serious matter to deprive a person of access to the courts of law for it is there that the rule of law is upheld, including against Government and other powerful interests. This is why relief, whether under O 26 r 18 or the inherent jurisdiction of the Court, is rarely and sparingly provided;
2.To secure such relief, the party seeking it must show that it is clear, on the face of the opponent’s documents, that the opponent lacks a reasonable cause of action or is advancing a claim that is clearly frivolous or vexatious;
3.An opinion of the Court that a case appears weak and such that it is unlikely to succeed is not, alone, sufficient to warrant summary termination. Even a weak case is entitled to the time of a court. Experience teaches that the concentration of attention, elaborated evidence and argument and extended time for reflection will sometimes turn an apparently unpromising cause into a successful judgment;
…
(Citations Omitted)
relevant principles-equitable interests
In Baumgartner v Baumgartner (1987) 164 CLR 137, the High Court considered that a constructive trust can be imposed as an equitable remedy in accordance with:-
32.…general equitable principle which restores to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them. …
A constructive trust is not a remedy available simply because a party has been unjustly enriched to the detriment of another party.
In Shepherd v Doolan & Ors [2005] NSWSC 42, White J said:-
31.One class of case where equity will intervene to prevent the unconscientious denial by the legal owner of another party’s rights, is where the parties agreed, or it was their common intention, that the claimant should have an interest in property owned by the other, and the claimant acted to his or her detriment on the basis of that agreement or common intention.
(Citations omitted)
32.Another class of case where equity will intervene is to “… [restore] to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which was not intended that the other party should enjoy them”. (Baumgartner v Baumgartner (1987) 164 CLR 137 at 148). …
(Emphasis in original)
In Giumelli v Giumelli [1999] 196 CLR 101, the facts involved a claim by a son against his parents. The parents had promised him that he would receive a part of land by way of compensation for working without wages. This was considered by the Court to be the first promise. The second promise was made when upon his marriage, his parents allowed him to build a house on the subject land. The son separated from his first wife and when his parents did not support his subsequent relationship he left the land and commenced proceedings seeking a declaration that his parents held the subject property on trust for him and that they conveyed the promised land to him. On appeal to the High Court, the decision of the Full Court that the son had acted to his detriment in reliance on the third promise was upheld, but the Court determined that rather than an order of subdivision and transfer of the property to the son a monetary sum representing an appropriate level of compensation should be the appropriate order.
The intention of parties is a relevant consideration. A constructive trust can be conferred in the absence of an intention to create or transfer a beneficial interest, but intention always has the potential to be of assistance.
In Sidhu v Van Dyk [2014] 251 CLR 505, the High Court considered the situation where a party had been induced to make small quantifiable outlays of money. The following appears:-
84.If the respondent had been induced to make a relatively small, readily quantifiable monitory outlay on the faith of the appellant’s assurances, then it might not be unconscionable for the appellant to resile from his promises to the respondent on condition that he reimburse her for her outlay. But this case is one to which the observations of Nettle JA in Donis v Donis are apposite:
“[H]ere, the detriment suffered is of a kind and extent that involves life-changing decisions with irreversible consequences of a profoundly personal nature… beyond the measure of money and such that the equity raised by the promisor’s conduct can only be accounted for by substantial fulfilment of the assumption upon which the respondent’s actions were based.”
(Citations omitted)
conclusion
Section 45A(1) of the Family Law Act 1975 (Cth) (“the Act ”) provides for the following in respect of summary decrees:-
(1) The court may make a decree for one party against another in relation to the whole or any part of the proceedings if:
(a) the first party is prosecuting the proceedings or that part of the proceedings; and
(b) the court is satisfied that the other party has no reasonable prospect of successfully defending the proceedings or that part of the proceedings.
The test is not that the defence or proceedings are either hopeless or bound to fail.
The applicant sets out the representations made by the second and third respondents, the purported reliance by the applicant and the first respondent on those representations and the detriment sustained as a result of their reliance. Whilst it may be considered that the relief sought is ambitious, given that it seeks that a declaration be made that the entirety of the properties are held on trust by the second and fourth respondents for the benefit of the applicant and the first respondent, it could not be said that if the Court accepted an evidentiary basis for the representations, the reliance and the detriment, that the applicant’s claim has no reasonable likelihood of success.
Accordingly, the interim orders sought by the second to fourth respondents, that the claim by the applicant seeking a declaration that the applicant and the first respondent have an equitable interest in the farming properties, should be dismissed.
I make the order as appears at the commencement of these reasons.
I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 18 October 2022
SCHEDULE OF PARTIES
ADC 3408 of 2021 Respondent
Fourth Respondent:
D PTY LTD
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