Paulauskas & Bengochea
[2025] FedCFamC1F 238
•11 April 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Paulauskas & Bengochea [2025] FedCFamC1F 238
File number(s): ADC 4963 of 2023 Judgment of: KARI J Date of judgment: 11 April 2025 Catchwords: FAMILY LAW – PROPERTY – SUMMARY DISMISSAL - Where the de facto wife asserts that farming land owned by the third respondent as trustee of a discretionary trust is held on constructive trust for the spouse parties – Where the second and third respondents seek a summary dismissal of the de facto wife’s claim regarding the farming land – Where the second and third respondents assert that the de facto wife’s claim has no reasonable prospect of success – Where no particulars are pleaded in relation to the de facto wife’s claim against the third respondent – Where the de facto wife’s claim against the third respondent has no reasonable prospect of success –Where the second respondent has maintained ultimate control of the trust – Where the de facto wife’s claim has no reasonable prospects of success – Where the de facto wife’s claim in relation to the second and third respondents is summarily dismissed Legislation: Family Law Act 1975 (Cth) s 102QAB
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 12.06
Cases cited: Ebner & Pappas (2014) FLC 93-619
Gong & Zao [2021] FamCAFC 110
Khalif &Khalif and Anor [2020] FamCA 39
Lindon v The Commonwealth (No 2) (1996) 136 ALR 251
MT v SE [2025] SASCA 8
Division: Division 1 First Instance Number of paragraphs: 72 Date of hearing: 7 November 2024 Place: Adelaide Counsel for the Applicant: Ms Ross Solicitor for the Applicant: Mildwaters Lawyers Counsel for the First Respondent: Mr Dillon Solicitor for the First Respondent: Douglas Hoskins Legal Counsel for the Second and Third Respondents: Mr Bullock Solicitor for the Second and Third Respondents: Adelta Legal Solicitor for the Fourth Respondent: Did not participate ORDERS
ADC 4963 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS PAULAUSKAS
Applicant
AND: MR BENGOCHEA
First Respondent
MS CVETKOVA
Second Respondent
BENGOCHEA PTY LTD
Third Respondent
V PTY LTD
Fourth Respondent
ORDER MADE BY:
KARI J
DATE OF ORDER:
11 APRIL 2025
THE COURT ORDERS THAT:
1.The final orders sought at paragraphs 1, 2, 5, 6, 7, and 11 of the applicant de facto wife’s Amended Initiating Application filed 26 February 2024 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).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of 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 Paulauskas & Bengochea has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
KARI J:
INTRODUCTION
The substantive proceedings before the Court relate to a claim for financial relief filed by the applicant de facto wife, arising from the breakdown of a 22-23 year de facto relationship with the respondent de facto husband.
The parties to the proceedings are:
(a)The applicant, who shall be referred to as the “de facto wife” throughout these reasons;
(b)The respondent, who shall be referred to as the “de facto husband” throughout these reasons;
(c)The second respondent, who is the de facto husband’s mother, and shall be referred to as the “second respondent” throughout these reasons;
(d)The third respondent, a company known as Bengochea Pty Ltd, and shall be referred to as “Bengochea Pty Ltd” throughout these reasons; and
(e)The fourth respondent, a company known as V Pty Ltd and shall be referred to as “V Pty Ltd” throughout these reasons.
The substantive proceedings (as set out in the Amended Initiating Application filed 26 February 2024) concerns a claim by the de facto wife that certain farming land located in Region B of South Australia is held variously by the second respondent and Bengochea Pty Ltd on constructive trust for the de facto husband and the de facto wife, or in the alternative that all of the farming land be subject to an equitable charge in favour of the de facto wife and/or the de facto husband. Consequential on those declarations being made, the de facto wife seeks certain transfers, but importantly a division of assets between herself and the de facto husband on the basis that she receive 45 per cent of the matrimonial pool of assets and the de facto husband receive 55 percent.
The de facto wife asserts that the farming land the subject of dispute (and whilst not valued at this stage), have a combined value in excess of $10,000,000.
The de facto husband, the second respondent and Bengochea Pty Ltd each ask the Court to summarily dismiss the relief sought by the de facto wife in relation to the farming land.
The de facto husband asks the Court to make orders by way of property settlement between himself and the de facto wife to effect an equal division between them. In light of the fact that the de facto husband seeks a dismissal of the relief sought by the de facto wife in relation to the farming land, it is apparent that the property available for division between the parties, on his case, does not include any of the farming land.
These reasons relate to the Summary Dismissal application that has been made by the second respondent and Bengochea Pty Ltd in the Amended Response filed 22 May 2024, and by the husband in his Response filed 5 December 2023, in relation to the substantive relief sought by the de facto wife against the second and third respondents.
BACKGROUND
In relation to the de facto relationship parties:
(a)Both the de facto husband and the de facto wife were born in 1977, and they are both 48 years old.
(b)The de facto wife says that the de facto relationship commenced in 2000, whereas the de facto husband asserts that cohabitation began in late 2001.
(c)The de facto relationship ended on 28 May 2023.
(d)There are two children of the de facto relationship, Mr D, who is 19 years old and X, who is 14 years old.
Aside from the contentious farming land, the agreed matrimonial property that is legally and beneficially owned by the parties is relatively modest; comprising of a property in Town C which is subject to a mortgage, together with modest savings, motor vehicles, furniture and effects, and superannuation entitlements. As best can be understood from the parties’ respective financial statements (the de facto wife’s filed 23 October 2023 and the de facto husband’s filed 5 December 2023), the net assets of the parties (excluding the contentious farming land and inclusive of their superannuation entitlements) has a net value of approximately $100,000.
THE PROCEEDINGS
The proceedings were commenced by the de facto wife when she filed an Initiating Application on 23 October 2023. The de facto husband, the second respondent, Bengochea Pty Ltd and V Pty Ltd were all named as respondents to that application.
The de facto husband filed a Response on 5 December 2023.
The second respondent and Bengochea Pty Ltd filed a Response on 13 December 2023.
It would appear that the naming of V Pty Ltd as a respondent to the proceedings by the de facto wife was otiose; particularly as the parties are the Directors of that entity and no specific orders are sought by the de facto wife in relation to it.
DOCUMENTS RELIED UPON
Preparatory to the hearing of the summary dismissal application, the parties each filed an Outline of Case, setting out the documents that they relied upon, a Summary of Argument, and, in a separate document, a list of authorities upon.
Pursuant to her Outline of Case file 6 November 2024, the second respondent relies on the following documents:
(a)Her Amended Response to the Amended Initiating Application filed 22 May 2024;
(b)Her affidavit filed 13 December 2023; and
(c)Her further affidavit filed 4 November 2024.
Pursuant to her Outline of Case file 6 November 2024, the de facto wife relies on the following documents:
(a)Her Amended Initiating Application filed 26 February 2024;
(b)Her Statement of Claim filed 26 February 2024;
(c)Her initial affidavit filed 23 October 2023;
(d)Her Financial Statement filed 23 October 2023; and
(e)Her further affidavit filed 23 April 2024.
As required by r 12.06 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) each the de facto wife and the de facto husband filed a Cost Notice prior to the hearing as follows:
(a)The de facto wife’s Cost Notice was filed on 5 November 2024;
(b)The de facto husband’s Cost Notice was filed 5 November 2024; and
(c)The second respondent did not file a Cost Notice.
I have had regard to all of the documents relied upon by each the second respondent and the de facto wife (whether specifically referred to or not in these reasons). I have also had regard to the various orders made throughout the litigation.
LEGAL PRINCIPLES
Section 102QAB of the Family Law Act 1975 (Cth) (“the Act”) (not the repealed s 45A as contended by the de facto wife in her Case Outline) deals with summary decrees. Relevantly, s 102QAB provides:
No reasonable prospect of successfully prosecuting proceedings
(2) The court may make a decree for one party (the first party) against another in relation to the whole or any part of a proceedings if:
(a)the first party is defending the proceedings or that part of the proceedings; and
(b)the court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceedings or that part of the proceedings.
When there is no reasonable prospect of success
(3)For the purposes of this section, a defence or proceedings or part of proceedings need not be:
(a) hopeless; or
(b) bound to fail;
to have no reasonable prospect of success.
Costs
(6)If the court makes a decree, or dismisses all or part of proceedings, under this section, the court may make such order as to costs as the court considers just.
Action by court on its own initiative or on application
(7)The court may take action under this section on its own initiative or on application by a party to the proceedings.
As can be seen from s 102QAB(2), the test to be applied is that there is “no reasonable prospect of success”. This test is a lower bar to the “hopeless” or “doomed to fail” test that has previously applied and continues to apply in other jurisdictions, discussed in a number of earlier authorities.
In Gong & Zao [2021] FamCAFC 110 (“Gong & Zao”), the Full Court of the Family Court said of the “no reasonable prospect of success” test (with reference to the then in force s 45A of the Family Law Act and r 10.12(d) of the Family Law Rules 2004 (Cth)):
14.… As was explained in Ebner & Pappas (2014) FLC 93-619 (“Ebner”), this rule replaced the earlier test for summary dismissal, which looked to see whether the proceedings were doomed to fail, with a less stringent test.
15.As the present test is a “different enquiry” to the earlier one, “it is dangerous to seek to elucidate the meaning of the statutory expression ‘no reasonable prospect of successfully prosecuting the proceeding’ by reference to what is said in those earlier cases” (Spencer v The Commonwealth (2010) 241 CLR 118 per Hayne, Crennan, Kiefel and Bell JJ at [56]).
16.Nonetheless, the cautions against the too ready inclination to summarily dispose of proceedings expressed by Kirby J in Lindon v The Commonwealth (No. 2) (1996) 136 ALR 251 at 255–256 remain relevant.
In Ebner & Pappas (2014) FLC 93-619, the Full Court identified:
62.The applicable test was considered by another intermediate court of appeal, the Victorian Court of Appeal in Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd [2013] VSCA 158. At that time the relevant legislative test in Victoria was “no real prospect of success”. There at [27] Warren CJ and Nettle JA said:
… whatever might be the practical effect of the new test, it is difficult to disagree with McMurdo J in Gray v Morris and McMurdo P in the Commissioner of Taxation v Salcedo that it should be applied by reference to its own language, without paraphrase or comparison with the previous rule, always bearing in mind the principle that the power to award summary judgment is only to be exercised with caution and, therefore, not unless it is clear that there is no real question to be tried.
(Footnotes omitted)
63. Their Honours continued at [35]:
Upon the present state of authority:
a)the test for summary judgment under s 63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a ‘real’ as opposed to a ‘fanciful’ chance of success;
b)the test is to be applied by reference to its own language and without paraphrase or comparison with the ‘hopeless’ or ‘bound to fail test’ essayed in General Steel;
c)it should be understood, however, that the test is to some degree a more liberal test than the ‘hopeless’ or ‘bound to fail’ test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent’s case is not hopeless or bound to fail, it does not have a real prospect of success;
d)at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.
The relevant passage in Lindon v The Commonwealth (No 2) (1996) 136 ALR 251 identified by the Full Court in Gong & Zao, can be found at 255–256, wherein Kirby J set out the “applicable principles” to be applied in applications for summary relief as follows:
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…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.
4.Summary relief of the kind provided for by O 26, r 18, for absence of a reasonable cause of action, is not a substitute for proceeding by way of demurrer. If there is a serious legal question to be determined, it should ordinarily be determined at a trial for the proof of facts may sometimes assist the judicial mind to understand and apply the law that is invoked and to do so in circumstances more conducive to deciding a real case involving actual litigants rather than one determined on imagined or assumed facts.
5.If, notwithstanding the defects of pleadings, it appears that a party may have a reasonable cause of action which it has failed to put in proper form, a court will ordinarily allow that party to reframe its pleading…
6.The guiding principle is, as stated in O 26, r 18(2), doing what is just. If it is clear that proceedings within the concept of the pleading under scrutiny are doomed to fail, the court should dismiss the action to protect the defendant from being further troubled, to save the plaintiff from further costs and disappointment and to relieve the court of the burden of further wasted time which could be devoted to the determination of claims which have legal merit.
(Footnotes omitted)
In MT v SE [2025] SASCA 8 (7 February 2025), the South Australian Supreme Court of Appeal helpfully summarised the applicable legal principles in applications for summary relief in circumstances where the same “no reasonable prospect of success”/ “no reasonable basis” test applies. The summary of the principles succinctly identified the relevant onus of proof, and the approach to be taken to the evidence before the court. Those principles are equally applicable here. There the Court said:
57.The general principles that apply to a defendant’s application for summary judgment are well-established. The power to order summary judgment is one that should be exercised with great care (sometimes expressed as ‘exceptional caution’). A party should not ordinarily be denied the opportunity to have its case determined following trial. It is only in the clearest of cases, where there exists a high degree of certainty about the ultimate outcomes of the proceedings if they were to go to trial, that summary judgment ought properly to be granted. Accordingly, summary judgment will be granted only where it is clear there is no reasonable basis for the claim.
58. At all times, the respondent retained the legal onus of demonstrating that the application for summary judgment ought to succeed. The respondent must establish that there is no reasonable basis for the claim made on any cause of action raised by the appellant.
59. Actions should not be disposed of summarily where there are material factual issues between the parties in dispute. Unless the evidence is inherently incredible, where there is a conflict in the affidavit evidence the court should approach the summary judgment application on the basis that the facts set out in the affidavits of the party resisting judgment will be accepted at trial. But the court is not bound to accept uncritically, as raising a factual dispute calling for further investigation, every statement in an affidavit however inherently improbable in itself or equivocal, lacking in precision or inconsistent with undisputed contemporary documents or other statements by the deponent.
60. Where a plaintiff’s claim depends on propositions of law apparently precluded by existing authority that may not always be the end of the matter. The courts should be careful not to risk stifling the development of the law by summarily rejecting a claim if there is a reasonable possibility that the law is developing. Summary processes must not be used to stultify the development of the law where existing authority may be overruled, qualified or further explained.
61. It is not the case that summary judgment will only be given where the action is so hopeless as to not require argument. Extensive argument may be necessary to demonstrate that the plaintiff’s case is so clearly untenable that it cannot possibly succeed.
62. A litigant in person is under a significant disadvantage, and care must be exercised to ensure that this disadvantage does not deprive him or her of the opportunity to have his or her claim determined according to law. Courts should approach the peremptory termination of litigation with special care to ensure that, within a possibly poorly expressed and unstructured statement of claim, there is no viable cause of action which, with appropriate amendment, could be put into proper form.
(Footnotes omitted)
DISCUSSION
The Summary Dismissal Application
The summary dismissal application now pressed by the second respondent and Bengochea Pty Ltd rests on the foundation that there is no reasonable prospect of success regarding the de facto wife’s foundational claim for:
(a)Declaratory relief that the second respondent and Bengochea Pty Ltd hold their interests in the farming land on trust for the de facto husband and the de facto wife; or the alternative
(b)The equitable charge relief in relation to the farming land;
and thereafter, the balance of the orders sought by the de facto wife in her Amended Initiating Application filed 26 February 2024 affecting the third parties also be dismissed (paragraphs 2, 5, 6, 7 and 11).
The specific orders sought by the de facto wife in her Amended Initiating Application filed 26 February 2024 in that regard are:
1. A declaration that all of the farming land owned by the Second, Third and Fourth Respondents is held on constructive trust for the Applicant and 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 and/or the Third Respondent transfer all of the farming land they own in their own capacity and/or as Trustee for [Bengochea] Family Trust 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 required to divide the matrimonial asset pool as to 45% to the Applicant and 55% to the First Respondent. Alternately, that the Second Respondent and/or the Fourth Respondent and/or the Third Respondent pay equitable compensation to the Applicant and the First Respondent such that the non-superannuation matrimonial asset pool (including such equitable compensation) be divided as to 45% to the Applicant and 55% to the First Respondent.
…
5. That within 60 days of the date of these orders, the Applicant do all things necessary to:-
(a) retire as director of [V Pty Ltd];
(b) transfer her share in [V Pty Ltd] to the First Respondent;
(c) renounce her interest in The [Bengochea] Family Trust.
6. That within 60 days of the date of these orders the Respondents take all steps that are reasonably necessary to release the Applicant from all loan agreements, contracts, personal guarantees, business and other financial arrangements with any bank, financial institution or financier to which the Applicant is a party which relate to the Fourth Respondent and/or the farming operations conducted by the Respondents.
7. That the Respondents indemnify the Applicant and keep her indemnified in relation to any liability she may have pursuant to any loan agreements, contracts, personal guarantees and other financial arrangements with any bank, financial institution or financier to which the Applicant is a party which relate to the Fourth Respondent and/or the farming operations conducted by the Respondents.
…
11. That the First Respondent, Second Respondent, Third Respondent and Fourth Respondent pay the Applicant's costs of and incidental to these proceedings.
There is however inconsistency in the relief sought by the de facto wife in her Amended Initiating Application filed 26 February 2024, and the Statement of Claim filed (as a Case Summary Document) on 5 March 2024 setting out the relief sought (and the basis for it) against the third party strangers to the de facto relationship.
In the latter document, the de facto wife seeks the following relief:
98.1a declaration that the assets of the farming business owned by [Bengochea Pty Ltd] including but not limited to any farming plant and equipment, [products] income and farming supplies (“the farm trading assets”) are held on trust for the benefit of [the de facto husband and the de facto wife];
98.2a declaration that [Bengochea Pty Ltd] holds the Farm Land on trust for the benefit of [the de facto husband and the de facto wife];
98.3 an order that [the second respondent] do all things necessary to transfer the Farm Land and the farm trading assets to [the de facto husband and the de facto wife];
98.4 such further orders and relief as are deemed appropriate;
98.5 equitable compensation; and
98.6 costs.
As can be seen, by her Statement of Claim the de facto wife seeks relief in relation to the “farming business”, whereas no such relief is sought in her Amended Initiating Application.
The Farming Land
The following appear to be the uncontentious facts regarding the farming land with reference to the Affidavit of the second respondent filed 13 December 2023 and the Statement of Claim of the de facto wife filed 5 March 2024.
The contentious farming land is comprised of nine separate parcels of land in Region B of South Australia as follows (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 19):
(a)E Street, Region B, SA (Certificate of Title Volume … Folio …);
(b)1 F Street, Region B, SA (Certificate of Title Volume … Folio …);
(c)1 G Street, Region B, SA (Certificate of Title Volume … Folio …);
(d)2 G Street, Region B, SA (Certificate of Title Volume … Folio …);
(e)1 H Street, Region B, SA (Certificate of Title Volume … Folio …);
(f)2 H Street, Region B, SA (Certificate of Title Volume … Folio …);
(g)J Street, Region B, SA (Certificate of Title Volume … Folio …);
(h)2 F Street, Region B, SA (Certificate of Title Volume … Folio …);
(i)3 F Street, Region B, SA (Certificate of Title Volume … Folio …).
The farming land is an asset of the Bengochea Family Trust (“the Bengochea Trust”) and is held by the trustee; presently Bengochea Pty Ltd.
The relevant information regarding the Bengochea Family Trust (“the Bengochea Trust”) is as follows:
(a)The Trust was established by Deed dated 13 February 1997 and it is a discretionary trust.
(b)The appointor of the Trust has always been and remains the second respondent.
(c)The “Specified Beneficiaries” of the trust are:
(i)The second respondent;
(ii)The de facto husband;
(iii)Ms K (the sister of the de facto husband);
(iv)Ms L (the sister of the de facto husband); and
(v)Ms M (the sister of the de facto husband).
(d)The “Eligible Beneficiaries” of the Trust include the Specified Beneficiaries and their descendants, ancestors, siblings and spouses (including de facto spouses who have lived with a Specified Beneficiary for a minimum of five years).
(e)The original trustee of the Trust was the second respondent.
(f)The second respondent has exercised her power of appointment to change the trustee of the Trust on two occasions as follows:
(i)On 23 July 2015 to appoint V Pty Ltd the trustee; and
(ii)On 28 June 2023 to appoint Bengochea Pty Ltd the trustee.
(g)The directors of V Pty Ltd are the de facto husband and the de facto wife. It was created on 23 June 2015. There are two shares on issue and they are held by each the de facto husband and the de facto wife.
(h)The sole director and shareholder of Bengochea Pty Ltd is the second respondent.
(i)In addition to the farming land, the Trust also holds farming plant, stock and equipment.
The history of the farming lands is as follows:
(a)Farming land known as “the Bengochea property”, has been owned by the paternal ancestors of the de facto husband since 1897.
(b)The second respondent married the father of the de facto husband, “Mr O” in 1974.
(c)In 1988 Mr O and his brother inherited the Bengochea farm lands which at that stage had been held by their father.
(d)Mr O died in 1995. Upon his death the second respondent inherited Mr O’s interest in the farm lands. Those interests in the farm lands were thereafter held by the second respondent jointly with Mr O’s brother.
(e)In 1996, the second respondent reached an agreement with Mr O’s brother to divide the farm lands, with transfers effected to provide for them each to separately own their own portions of the Bengochea farm lands.
(f)In 1997, the second respondent transferred the farm lands she retained pursuant to the agreement with Mr O’s brother into the Bengochea Family Trust, and the farm lands became an asset of the Bengochea Family Trust.
(g)Since that time, certain parcels of land have been sold by the Bengochea Trust and a new parcel of land known as “N property” has been purchased (with portions of N property since being subdivided and sold).
Of significance from the perspective of the de facto wife, is that second respondent exercised her power of appointment to remove V Pty Ltd as the trustee of the Bengochea Family Trust and appoint Bengochea Pty Ltd the trustee, following the separation of the parties. When she did so, the second respondent also attempted to register a transfer of the farm land from V Pty Ltd to Bengochea Pty Ltd, but was unable to do so as the de facto wife had registered a caveat on the title of each of the farm lands. The caveat was ultimately warned by the second respondent. Proceedings ensued in the Supreme Court of South Australia which ultimately resulted in an agreement being reached between the parties that the de facto wife would remove the caveats she had registered to enable the transfer of ownership to Bengochea Pty Ltd as the new trustee of the Bengochea Family Trust, on the basis that the second respondent agreed to preserve the farm land in the Bengochea Family Trust.
Significantly, between late December 2020 -2022 it is an agreed fact that the de facto wife sent the second respondent a series of communications by text message (Affidavit of the second respondent filed 13 December 2023, annexure “MC 22”). I observe that chronologically this communication was sent well prior to the separation of the parties in May 2023. In those communications the de facto wife variously:
(a)Pleaded for the second respondent to put in place “paperwork for the farm”;
(b)Identified that “Until we have it in writing we have nothing”;
(c)Observed “It’s not good. If you won’t give [the de facto husband] the farm now…”
(d)Commented:
We definitely need to do something. All our future plans revolve around the farm and it’s not even ours/[the de facto husband’s], it makes it hard for him to know what to do each day. He needs plans to work towards. He feels like he’s working to make things better for you [at the moment]…
It is the case of the second respondent that the de facto wife sent this correspondence in an attempt to pressure the second respondent to hand control of the Bengochea Family Trust to the de facto husband.
It is also an agreed fact that the second respondent sent the de facto wife an email on 10 February 2022 explaining the reasons why she remained in control of the Bengochea Family Trust. The contents of this letter are significant for present purposes and as such the letter is set out in full (see Affidavit of the second respondent filed 13 December 2023, annexure MC-22):
Hi [Mr Bengochea] & [Ms Paulauskas]
Congratulations on thinking about farm succession! It is without doubt the most difficult farming decision you'll make, but early planning will give you more & better choices.
In fact, as I've said many times, I DON’T own the land at all - none of us do! The [Bengochea] Family Trust is the legal owner of the land - & there are very good reasons for that. Almost all farms nowadays are legally owned through a trust.
But the farm trust actually isn’t the problem for you that you are assuming. In fact, it has been set up to your advantage!
It disappoints me greatly that you seem to think I'm doing something underhanded or dishonest towards you. Every decision I’ve ever made concerning the farm has always been with your best interests in mind. Naturally, I’ve also been concerned about the girls inheritance too, as they are also your father’s children & therefore equally deserving of consideration. If I’ve disadvantaged anyone, it’s been myself! It wasn’t your father’s intention for me to take nothing at all from the farm for myself (after all I worked there too) - but I knew that’s what needed to happen, to pass on a viable farm. I sincerely hope that won’t be the case for you!
I think it would be best for you discuss everything with [Ms P], as she is best qualified to advise you & I will ask her to email an electronic copy of the trust deed, for you to read (& keep).
I know I’ve explained how it all works to [Mr Bengochea] before, but he’s obviously forgotten the details (as most people do) because it’s not something you talk about every day. However, it is important that [Mr Bengochea] understand the details because it is as much his trust as mine! In fact probably more so, as it is his future & his decisions to be made. Of course, as his partner, [Ms Paulauskas] has an indirect interest too.
Anyway, I’ll try to explain (as best I can) how the trust works & the reasons the farm is owned that way.
When Dad/ [Mr O] died, the land was directly owned by him & he willed it all to me. He expressed the wish that if one of his children wanted to farm (& it was possible for that to happen) he would like that to happen, but he knew it would be difficult & he also stated that we shouldn’t hesitate to sell either, if that was the best decision.
I always felt that I was a custodian of the farm, rather than the “real” owner - after all, it has been a [Bengochea] family asset passed down through many generations. So I’ve worked hard to try to fulfil your Dad’s wishes, so it pleases me to see you farming successfully & he would be proud of your success, if only he were here to see it!
When Dad died, there were no costs involved to transfer the land to my name (as required by the will).
However, there had been a recent change to the law which meant that future changes of ownership would incur capital gains tax on the difference in value of the land since the last change of ownership. Land owned prior to 1985 is exempt from CGT, but it applies to any subsequent transfers.
When the land transferred to my name, the whole farm (ie Dad’s share of it, which at the time was approx 2,000 acres) was valued at $600,000. I don’t know what it’s worth now- I think [Mr Bengochea] mentioned about $4000/acre? If that’s correct & the land were to be transferred right now, that would be a capital gain of around $7.4 million! In that scenario, the resulting capital gains tax would be completely unaffordable & the farm would simply not be able to go onto the next generation.
I recognised this as a future hurdle to farm succession (as did many other landowners at the time, hence the popularity of farm trusts) & so made the decision to transfer the land from my own name, into a trust instead. Because I did this only a few months after Dad’s death, there wasn’t any change in land value during that time. Therefore, there was no tax payable.
Now that the land is owned by the trust, there will not need to be any change of ownership in the future, so with no change of ownership, no capital gain. Instead, with each change of generation, there will simply need to be a change in who controls the trust (which is the trustee - which is currently [V Pty Ltd], I believe).
My role in the trust, is as “appointor” only, which means I have authority to appoint the trustee - & I’ve appointed [V Pty Ltd], as [Mr Bengochea] (under advice from [Mr Q & Ms P]?) requested.
Of course, I also have authority to change the trustee too - but I have no intention of doing so, unless it were required due to an unforeseen dire emergency. The only circumstances that I can imagine that may cause this, would perhaps be [Mr Bengochea’s] early death or divorce, in which case I may need to change the trustee, if necessary & professionally advised, to safeguard the farm for your children. This is no different to what I’ve already done up to now. I expect to retain this role until I die (or I get dementia???) - as I believe Dad would have done & as I believe he would expect of me. I consider it my last remaining farm responsibility. In my will, [Mr Bengochea] is named as the next appointor of the trust.
So to summarise the trust:
Appointor - appoints the trustee ([Ms Cvetkova] for now, [Mr Bengochea] named in my will).
Trustee - controls the trust & makes all decisions (including sale of land, allocating income etc)
Note - it is a discretionary trust, which means all decisions are at the trustee’s discretion. Therefore, even though your sisters were also originally named as beneficiaries too (when the trust was first established it was necessary to name all the family) they are not now entitled to any assets or income UNLESS at the trustee’s discretion (& there is no reason for you to include them in any way, as I have made other provisions for them in my will anyway).
[V Pty Ltd] is the trustee of the [Bengochea Family Trust], but because [V Pty Ltd] is a company, the ultimate control is actually with the director/s of [V Pty Ltd] (I don’t know those details – [Ms P] or [Mr Q] could tell you), if you’re not sure - but you have complete control of those decisions.
Beneficiaries - the original trust deed names myself & all my children - & all the spouses & their children, & their spouses & children…….ongoing etc. so it is very broad to include everyone it may ever need to include - but as I’ve already said, all entirely at the trustees discretion ( which is essentially YOU).
Hope this info clarifies & allays your concerns
Love
Mum
(As per the original)
It is an agreed fact that the de facto wife responded to the communication sent to her by the second respondent on the same day in the following terms: (see Affidavit of the second respondent filed 13 December 2023, annexure MC-22):
Hi [Ms Cvetkova],
Thank you for the explanation. At the time this was all set up, we didn’t have a very good understanding of it all. Now we have had to take charge of meetings with [Mr Q] etc, getting to hear more of terms-used, we are starting to slowly get the idea about what means what. Which has prompted my email. Like I said, we obviously had no understanding at the time. This clears most of what we weren’t sure about up, and appreciate you taking the time to explain it all.
In no way do we think you have done or are doing anything underhand or dishonest, we obviously just have never understood it properly. Maybe getting older triggers a switch where you start to want to understand, so I guess that is where we are at.
Totally appreciate what you have done to ensure [Mr O’s] wishes were met and [Mr Bengochea] could be given the opportunity to succeed and take over the farm and to then pass onto to his own children to have the opportunity to do the same.
From this explanation you will be the appointer until your passing, or do you plan to pass this position onto [Mr Bengochea] at some stage?
Anyway, thanks again, Hope you had a nice visit with Nanna today. Curious how it was
[Ms Paulauskas]
(As per the original)
The Dispute
At its core, the case of the de facto wife is that she and the de facto husband were promised and, by conduct, led to believe by the second respondent that the farm land would be theirs in the future.
The second respondent denies this was ever her intention nor that she made these promises to the de facto couple.
It is the de facto wife’s case, that:
(a)The de facto husband has done “the majority of the farm work on the farmland” (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 34), and that he worked “long hours” in doing so (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 40).
(b)She assisted the de facto husband in various farming tasks on an “as-needs basis” (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 53).
(c)When N property was purchased by the Bengochea Family Trust in late 2001/early 2002, she assets that:
(i)the second respondent told the de facto husband (in the presence of the de facto wife) that the N property hand been purchased to ultimately give to the de facto husband for the benefit of his family; and
(ii)the second respondent told the de facto husband that N property had been purchased as there was a house on it in which she and the de facto wife could reside prior to moving into the main farmhouse situate on the existing farm lands “the Homestead” held by the Bengochea Family Trust.
(d)She and the de facto husband moved into the house at N property in 2003 at the invitation of the second respondent.
(e)In about 2005-2007 the de facto husband and the de facto wife moved into the Homestead, which had been vacated by the second respondent and her husband “Mr R”.
(f)The second respondent taught the de facto wife bookkeeping and banking for the farming business, together with teaching her about how and when to sell goods.
(g)She and the de facto husband were not directly renumerated for the work that they undertook on the farm lands, but they received a “drawing to cover living expenses” (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 49), initially of $1,200 per fortnight, together with rent free accommodation and fuel for their motor vehicles whilst also having a range of others costs covered from the “farm working overdraft account” including, their motor vehicle service costs and repairs, mobile phone expenses, internet connection, house content and vehicle insurances (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 52).
(h)On numerous occasions when the second respondent was teaching the de facto wife how to do the bookkeeping, she told the de facto wife that the de facto husband would have the farm one day, and that the de facto wife would need to know how to do the bookkeeping (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 51).
(i)On an occasion between 2005 and 2010, the second respondent visited the de facto couple and variously told them that she had fought with Mr O’s brother “to ensure that [Mr Bengochea] had his own farm” (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 54.7).
(j)In March 2009, the de facto couple established the Bengochea and Paulauskas Partnership (“the partnership”), which “took over the farm trading operations” from 1 July 2009. At and/or from that time:
(i)A bank account was opened for the Partnership with no credit limit;
(ii)The “farm working overdraft” continued to be operated by the Bengochea Family Trust;
(iii)The Partnership took out a loan with S Bank;
(iv)The Partnership paid rent to the Bengochea Family Trust for the use of the farm land;
(v)The de facto couple took drawings from the Partnership by way of income;
(vi)The de facto wife almost exclusively undertook the banking for the “farming operations”;
(vii)The de facto wife asserts that the second respondent told her that the establishment of the Partnership was the “next step” in the de facto couple “owning the farm” and began involving the de facto couple in the “decision-making and business aspects of the farming operations” (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 63); and
(viii)The de facto couple attended “all appointments with the farm accountant” and S Bank (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 67.2).
(k)Shortly after the birth of the de facto couple’s child X, the de facto wife asserts that the second respondent encouraged the de facto couple to have wills drawn to ensure the children would “take over the farm one day” (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 65).
(l)V Pty Ltd was created on 23 June 2015, and in relation to its creation:
(i)The de facto couple and the second respondent had attended a meeting with the accountant in June 2015 at which the second respondent indicated that she wished to retire from the farm and make changes to the Bengochea Family Trust so that the de facto couple could take over the “running of the farm” (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 70.2).
(ii)The second respondent told the de facto couple to “pick a name because it’s going to be your farm” (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 70.4), which resulted in the de facto couple ultimately choosing the name V Pty Ltd to reflect the names of their children.
(m)Following the creation of V Pty Ltd and on 29 January 2016, V Pty Ltd, as trustee of the Bengochea Family Trust, became the registered proprietor of the farm land. The de facto wife asserts that thereafter the second respondent repeatedly told the de facto couple that “one day [the farm] will all be yours [Mr Bengochea]” (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 80).
(n)In December 2015, V Pty Ltd refinanced the loan with S Bank held by the Bengochea Family Trust so that it became the borrower of monies originally borrowed to purchase N property and the “farming operations overdraft” (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 73).
(o)Thereafter the de facto couple made personal drawings from the “farming operations working overdraft account” held by V Pty Ltd (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 74).
(p)From about 2016, the second respondent stopped attending meetings with the Accountant and S Bank, she rarely attended the farm lands and she “allowed” the de facto couple to be “entirely responsible for the farm trading operations and the Trust”.
The de facto wife contends:
(a)That the de facto couple relied upon the representations made by the second respondent, and that the conduct of the second respondent “encouraged an expectation” in the de facto couple that the farm land would be theirs in the future (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 84). She specifically asserts that in reliance the de facto wife, amongst other things, resigned from “off-farm employment”, spent time learning the bookkeeping and farming operations, provided physical assistance on the farm, allowed funds to be invested which improved the value of the farm lands, carried out improvements to each the house at N property and the Homestead, made homemaking and parenting contributions to enable the de facto husband to work long hours on the farm land, established the Partnership and took out borrowings to purchase plant and equipment, did not seek market remuneration for the work that she did on the farm and book keeping, and did not take steps to accumulate “off-farm” assets.
(b)That as a result of relying on the conduct and representations of the second respondent, she has suffered loss including the loss of opportunity to pursue her own career, earning off-farm income, purchasing off-farm property and loss of monies.
It is the case of the second respondent that:
(a)She always intended and indeed has always remained in control of the Bengochea Family Trust in circumstances where she has, from the inception of the Bengochea Family Trust and ongoing, remained the appointor of the Bengochea Family Trust. In that regard, she says that there are no present plans on her part to alter this situation.
(b)She has always considered the farming lands as ones to be preserved for all of her children.
(c)The second respondent, her husband Mr R, the de facto husband, and later, following the relationship between the de facto couple, the de facto wife, and various third parties pursuant to commercial lease arrangements have at various times been engaged in farming the farm lands.
(d)When she exercised her power of appointment to appoint V Pty Ltd the trustee of the Bengochea Family Trust, the second respondent intended:
(i)That the de facto couple would have “greater day to day responsibility” for the Bengochea Family Trust, but that she did not ever suggest that the appointment of V Pty Ltd was intended to alter the terms of the Bengochea Family Trust. Importantly, she had an expectation that the de facto couple would operate the Bengochea Family Trust for the benefit of all of the beneficiaries of the Bengochea Family Trust, including herself.
(ii)To effectively make the de facto husband the “farm manager” as she and Mr R wished to retire.
(iii)The second respondent asserts that she made it clear to the de facto couple that she would remain in control of the Bengochea Family Trust.
(iv)Following the appointment of V Pty Ltd as trustee of the Bengochea Family Trust the relationship between the second respondent and the de facto couple deteriorated.
(e)So far as the financial arrangements of the Bengochea Family Trust regarding the de facto husband:
(i)Prior to 2009 the de facto husband was paid for his contributions to the farming operations.
(ii)Once the de facto couple established the Partnership and between 2009-2015 the second respondent and Mr R provided “operating funds” for the Partnership as the de facto couple/Partnership were not able to borrow funds. The operating funds were used to purchase items, with funds advanced repaid at a later date.
(iii)When V Pty Ltd became the trustee of the Bengochea Family Trust, funds were able to be borrowed by V Pty Ltd to fund the farming operations. These borrowings were, with the agreement of the second respondent secured against the assets of the Bengochea Family Trust.
(iv)The V Pty Ltd borrowings were used to pay an income to the de facto couple, initially at the rate of $1,300 per fortnight, increasing to $1,600 per fortnight and after the de facto couple purchased the Town C property, they drew $3,600 per fortnight to cover their regular income drawings together with the loan repayments for funds borrowed to purchase the Town C property.
(f)So far as the bookkeeping of the Bengochea Family Trust is concerned:
(i)Until 2016 the second respondent was responsible for the bookwork.
(ii)From approximately 2005 the second respondent began teaching the de facto wife how to undertake and manage the bookwork and finances of the Bengochea Family Trust and the Partnership.
(iii)In 2016 the de facto wife became solely responsible for the bookwork of V Pty Ltd.
(iv)Following the separation of the parties in May 2023, the second respondent resumed control of the bookwork of the Bengochea Family Trust. In doing so she identified a number of anomalies, including but not limited to $30,000 transferred out of the S Bank loan account to the de facto wife and expenditure on gambling and wastage of funds.
(g)The second respondent exercised her power of appointment to change the trustee to Bengochea Pty Ltd to re-instate her day-to-day control of the Bengochea Family Trust, as she became increasingly concerned in the post separation period over the drawings made by the de facto wife from the Bengochea Family Trust accounts, in addition to wastage (on gambling, unidentified bank withdrawals, unexplained transfers and the like) from the de facto couple’s personal accounts, which included the wastage of funds inherited by the de facto husband.
The second respondent additionally asserts that:
(a)She, as the original trustee of the Bengochea Family Trust, and in due course the de facto husband, and then the de facto couple, have always treated the two separate assets of the Trust very differently.
(b)On the one hand in relation to the farm land she asserts:
(i)When she initially established the Bengochea Family Trust she leased out the farm land.
(ii)From about 1999 she began to farm the farm lands, and since that time the farm land has been farmed variously by each herself and Mr R, the de facto husband together with herself and Mr R, and more latterly the de facto husband.
(iii)Between 2009 and 2012 a significant portion of the farming land was leased to neighbouring farmers to increase revenue and decrease the financial risk and the farming burden of both the second respondent and Mr R.
(iv)Save as described in the 2009 year, there has always been in place a rent agreement in relation to the de facto husband’s farming of the farm land, albeit at less than “commercial rates”.
(v)When N property was purchased by the Bengochea Family Trust, the de facto couple resided there until approximately 2007.
(vi)N property was purchased, with funds derived from the sale of a parcel of existing farm land held by the Bengochea Family Trust, together with borrowings taken out by the Bengochea Family Trust with T Bank and ultimately refinanced with S Bank in 2009 (with the second respondent as the mortgagor in her capacity as trustee of the Bengochea Family Trust).
(vii)Significant funds were contributed by the second respondent, Mr R and the business, U Company (a business operated by Mr R), to keep the Bengochea enterprise operated through the Bengochea Family Trust afloat.
(viii)The de facto couple moved into the homestead on the farm land in 2007 as a result of both the second respondent and Mr R moving to a property they owned, but also because N property was to be subdivided and a portion sold off to reduce farm debt.
(ix)Between 2009-2015 the de facto husband leased all of the farm land and this resulted in the de facto couple (under the guidance of the second respondent) establishing the Bengochea & Paulauskas partnership.
(x)Following the creation of the partnership, and other than the first year, rent was paid by the Partnership for the farm land owned by the Bengochea Family Trust.
(c)On the other hand the farming plant, equipment, stock, about which she asserts:
(i)These assets were not ever the subject of any lease arrangement between the Bengochea Family Trust and the de facto husband.
(ii)That in addition to the farming plant, equipment and stock, the second respondent additionally allowed the de facto couple and the Partnership the use of farming equipment separately owned by her/Mr R/U Company without charge.
(iii)When the second respondent appointed Bengochea Pty Ltd the trustee of the Bengochea Family Trust, transfers of plant, equipment and stock were effected from the Bengochea Family Trust to the de facto husband in recognition of contributions that the de facto husband had made to those assets and also on the basis that “commercial rent” would be paid by the de facto husband for the farm land.
(d)In addition, she asserts:
(i)Between 1999-2007, she re-established the farming operations together with her husband Mr R, which included Mr R’s separate business “U Company”.
(ii)In 1999, the de facto husband returned to the farm to undertake farm work. At that time he was not clear whether he wanted to continue with farming.
(iii)Until 2007, when the second respondent and Mr R moved out of the homestead, they both made significant contributions to the accumulation of assets held by the Bengochea Family Trust.
(iv)Between approximately 1999 and 2002, the second respondent and Mr R paid rent (with drawings made from the Bengochea Family Trust in their respective names) to enable the de facto husband to live in rental accommodation owned by Mr R.
(v)The de facto has always been remunerated for the work he has undertaken in relation to the farm land and the farming operations.
In light of all of these matters, the second respondent contends:
(a)The farming operations are distinct to the farm land held by the Bengochea Family Trust.
(b)The entire reason that she created the Bengochea Family Trust was to hold the farm land for successive generations of the family, with the farming operations to be undertaken by way of a commercial arrangement between the Bengochea Family Trust, and the family member/entity at any time who was farming the farm land.
(c)Her intention continues to be that she will permit the de facto husband to have the benefit of farming the farm land in a lease arrangement with the Bengochea Family Trust, as has always been the case to date; accepting the inherent benefit derived from the fact that rent has been paid for less than commercial rent.
(d)The communication between the second respondent and the de facto wife (well before the de facto couple separated), makes it clear that the second respondent retained control of the Bengochea Family Trust for the benefit of all of the beneficiaries of the Bengochea Family Trust, and the de facto couple, and in particular the de facto wife, were under no misapprehension about this fact.
DISCUSSION
The starting point to considering whether the de facto wife’s case against the second respondent and/or Bengochea Pty Ltd is one that has “no reasonable prospect of success” to satisfy the test for summary dismissal of the claim requires consideration of the legal principles that ground the de facto wife’s claim against the second respondent and Bengochea Pty Ltd.
The de facto wife’s Amended Outline of Case filed 6 November 2024 boldly asserts that the de facto wife’s claim has merit, but does not otherwise address the substance of her claim and the facts deposed by the de facto wife that she asserts make out her claim. Rather, under the heading “Equitable claim of Applicant”, the de facto wife sets out the following:
19.The Statement of Claim of the Applicant sets out a reasonably arguable case for equitable relief against the Second, Third and Fourth Respondents based upon the application of well-established legal principles.
20.The decision in Q (a pseudonym) v E Co (a pseudonym) [2020] NSWCA 220 is a recent appellate decision that sets out in detail the relevant legal principles that the Applicant says should be applied to the claim set out in her Statement of Claim. Donis & Ors v Donis [2007] VSCA 89 is an earlier appellate decision that is relied upon.
21.There have been numerous decisions given by the Family Court of Australia since 1975 that have applied the same principles and resulted in orders being made against non-marital parties who were joined as parties in the proceedings. Examples are Cierpiatka & Cierpiatka [1999] FamCA 1286 (Full Court) Khalif & Khalif and Anor [2020] FamCA 39, Skourta & Skourta and Ors [2018] FamCA 897.
22.If the Applicant proves the facts set out in her Statement of Claim at trial it is submitted that the application of principle should mean that relief in her favour is granted against the Second, Third and Fourth Respondents.
(As per the original)
When regard is had to the authorities referred to by the de facto wife, it is apparent that the de facto wife’s principal claim rests on the foundation of a “common intention constructive trust”.
In Khalif &Khalif and Anor [2020] FamCA 39 (relied upon by the de facto wife), Watts J helpfully summarised the applicable legal principles in that regard in the following terms:
22.In Hohol v Hohol (1980) FLC 90-824 at 225, O’Bryan J described the essential elements of a common intention constructive trust as follows:
… first, that the parties formed a common intention as to the ownership of the beneficial interest. This will usually be formed at the time of the transaction and may be inferred as a matter of fact from the words or conduct of the parties. Secondly, that the party claiming a beneficial interest must show that he, or she, has acted to his, or her, detriment. Thirdly, that it would be a fraud on the claimant for the other party to assert that the claimant had no beneficial interest in the property…
See also Higgins v Wingfield [1987] VR 689.
23.As mentioned above, the wife more generally relies upon Muschinski v Dodds and Baumgartner.
24.The notion of a constructive trust, as espoused by Deane J in Muschinski v Dodds at 613-616, is primarily remedial. His Honour pointed out, however, that a constructive trust shares some of the institutionalised features of express and resulting trusts, namely, the “staple ingredients” of subject matter, trustee, beneficiary and personal obligation attached to the property and said at 614:
… the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle.
25.Deane J again makes it clear at page 620 that a constructive trust can be imposed in the absence of intention stating:
… where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do…
26.In Baumgartner, Mason CJ, Wilson and Deane JJ endorsed that proposition, stating at 147:
… the foundation for the imposition of a constructive trust in situations of the kind mentioned is that a refusal to recognize the existence of the equitable interest amounts to unconscionable conduct and that the trust is imposed as a remedy to circumvent that unconscionable conduct.
27.Finally, it is appropriate to observe that Deane J in Muschinski v Dodds emphasised at 615:
The fact that the constructive trust remains predominantly remedial does not, however, mean that it represents a medium for the indulgence of idiosyncratic notions of fairness and justice. As an equitable remedy, it is available only when warranted by established equitable principles or by the legitimate processes of legal reasoning, by analogy, induction and deduction, from the starting point of a proper understanding of the conceptual foundation of such principles.
The outline filed on behalf of the de facto wife does not address the alternate claim made by the de facto wife that the farm lands be subject to an equitable charge.
The second respondent, doing the best that they can, considers that the alternate claim made by the de facto wife (second respondent’s Outline of Case filed 6 November 2024):
6. … appears to reflect the principle that:
… before the court imposes a constructive trust as a remedy, it should first decide whether, having regard to the issues in the litigation, there are other means available to quell the controversy. An equitable remedy which falls short of the imposition of a trust may assist in avoiding a result whereby the plaintiff gains a beneficial proprietary interest which gives an unfair priority over the equally deserving creditors of the defendant. (Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566 at [42].
The second respondent submits that the claim made by the de facto wife has no reasonable prospect of success for the following reasons:
(a)The claim against Bengochea Pty Ltd is misconstrued as it conflates the actions of the Bengochea Pty Ltd as trustee of the Bengochea Family Trust with the actions of the second respondent both in her personal capacity and separately as the appointor of the Bengochea Family Trust.
(b)The claim against the second respondent is flawed for two reasons:
(i)Firstly, because the Court would be required to “endorse wholesale breaches of trust by [V Pty Ltd] in its capacity as trustee of the [Bengochea Family Trust] which, in turn, were induced and permitted by [the de facto wife] in breach of her duties as director of [V Pty Ltd]” (second respondent’s Outline of Case field 6 November 2024, paragraph 22.1); and
(ii)Secondly, because the de facto wife has “expressly disclaimed the position she seeks to advance in her claim in relation to the ownership of the land, both in her pleading and in the evidence before the Court.” (second respondent’s Outline of Case field 6 November 2024, paragraph 22.2).
These submissions have significant merit.
So far as the claim against Bengochea Pty Ltd is concerned, I am satisfied that the de facto wife’s claim has no reasonable prospect of success in circumstances where no claim is pleaded whatsoever in relation to the de facto wife’s claim against Bengochea Pty Ltd, and as the second respondent properly submits (at second respondent’s Outline of Case field 6 November 2024, paragraph 20):
(a)the second respondent “is not [Bengochea Pty Ltd]” and “[Bengochea Pty Ltd] is not” the second respondent; and
(b)The de facto wife has not pleaded her case whatsoever on the basis that any dealings that she had with the second respondent were on behalf of Bengochea Pty Ltd.
Doing the best that I can, it would appear that the de facto wife and/or her legal advisors considered that Bengochea Pty Ltd was a necessary party to the proceedings because Bengochea Pty Ltd is presently the trustee of the Bengochea Family Trust.
Having done so, however, it is confounding that the de facto wife did not consider it necessary to provide notice of these proceedings to all of the beneficiaries of the Bengochea Family Trust; in particular the de facto husband’s three sisters, who are in the class of specified beneficiaries, and whom the second respondent specifically drew the de facto wife’s attention to in her material filed with the Court as persons who remained beneficiaries of the Bengochea Family Trust and whom, on any view, are affected by any orders of the Court.
Whatever the case may be in that regard however, I do not consider that the claim against Bengochea Pty Ltd has even been formulated by the de facto wife. As such it is impossible to consider that it is anything other than bound to fail, thus resoundingly satisfying the lesser “no reasonable prospect of success” test.
In relation to the claim against the second respondent, it would appear that the second respondent is a necessary party to the proceedings as, firstly, she is the person by whom the de facto wife alleges certain representations (verbal and through conduct) were made. Secondly, the second respondent is the appointor of the Bengochea Family Trust and as such, on any view, she is the person in control of the Bengochea Family Trust; including because she is also the sole director of the trustee company Bengochea Pty Ltd.
Importantly in her role as appointor of the Bengochea Family Trust, the second respondent has exercised her power of appointment to put in place the trustee she considered would best serve the interests of the beneficiaries of the Bengochea Family Trust from time to time; including predominately her own interests. This is consistent with the manner in which it is agreed that the second respondent inherited the farm lands and then placed them into the Bengochea Family Trust.
Importantly, where the mutual case of the parties is that the second respondent has been and always intended to remain the appointor of the Bengochea Family Trust during her lifetime, the de facto wife’s case as to a common intention constructive trust is difficult to comprehend; particularly as it is not the de facto wife’s case that the Bengochea Family Trust arrangement is a sham, and/or that the second respondent is acting as the puppet of the de facto husband.
Important in my considerations is the series of communications between the de facto wife and the second respondent in late 2020 and early 2022, which started by text message and then culminated in email exchanges.
In relation to the text exchanges in late 2020, what is of significance regardless of the de facto wife’s assertions as to the representations made by the second respondent, and taking her case more broadly at its highest, her texts to the second respondent make it clear that she (and seemingly the de facto husband) were under no misapprehension that the “farm” was not theirs, and might not ever be theirs.
The email communication sent by the second respondent to the de facto wife on 10 February 2022, is significant in this regard because in it:
(a)The de facto wife expressly identifies her understanding that the spouse parties did not own the farm land; and
(b)The second respondent expressly sets out the now agreed facts that:
(i)The farm lands were held by the Bengochea Family Trust;
(ii)The Bengochea Family Trust was established to hold the farm lands to ensure succession of the farm lands for future generations of the Bengochea family that wished to engage in farming the farm lands; herself and her successors, including the de facto husband, but also importantly generations beyond the de facto husband;
(iii)The second respondent would remain the appointor of the Bengochea Family Trust, and that she intended to remain so until her death (when the de facto husband would become the new appointor), so that she retained the power to appoint and/or terminate the appointment of any trustee, expressly to ensure the farm lands were “safeguarded” for the spouse parties’ children, particularly in the case of the de facto husband’s “early death or divorce”; and
(iv)There was a distinction between passing day-to-day control of the Bengochea Family Trust to the spouse parties (by appointing V Pty Ltd as trustee of the Bengochea Family Trust), to passing control of the Bengochea Family Trust to the de facto husband by making him the appointor of the Bengochea Family Trust.
Accordingly, it is difficult to reconcile the de facto wife’s assertions that the farm lands would pass to the parties personally, as distinct from the ultimate control of the Bengochea Family Trust passing to the de facto husband if he survived the second respondent and/or the marriage of the parties endured.
Moreover, I accept the submissions made on behalf of the second respondent that the de facto wife has “disclaimed” her reliance on any promise as to the future ownership of the farm lands by the de facto husband and de facto wife (taking the de facto wife’s claim at its highest), in circumstances where:
(a)It is an agreed fact that the spouse parties have throughout their relationship (and continued by the de facto husband in the post separation period), paid rent to the Bengochea Family Trust to farm the farm lands (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 59);
(b)The de facto wife expressly understood that once V Pty Ltd became the trustee of the Bengochea Family Trust, she and the de facto husband were responsible for running the Bengochea Family Trust, and V Pty Ltd became the registered owner of the farm lands as trustee of the Bengochea Family Trust (de facto wife’s Statement of Claim filed 5 March 2024, paragraphs 72 and 75.4); and
(c)The de facto wife expressly understood that she and the de facto husband would “one day have full control of the Trust” (de facto wife’s Statement of Claim filed 5 March 2024, paragraph 85.1).
In addition to all of these considerations, regard has also been had to the submissions made by the second respondent that to make out the de facto wife’s claim that the farm lands are held on some form of trust for the spouse parties, the Court would have to accept that the de facto wife and the de facto husband have acted in breach of their duties as the directors of V Pty Ltd in its capacity as Trustee of the Bengochea Family Trust.
To that end, the second respondent asserts that:
(a)As the directors of V Pty Ltd, the de facto husband and the de facto wife had “onerous duties” including duties of “care and diligence”, to “discharge their duties in good faith in the best interests of [V Pty Ltd] and for a proper purpose”, and not to “improperly use their position to gain an advantage for themselves or someone else” (see second respondent’s Outline of Case filed 6 November 2024, paragraph 25); and
(b)V Pty Ltd, as trustee of the Bengochea Family Trust, had a “duty to adhere to and carry out the terms of the trust deed”, had a “duty not to impeach the validity of the deed of trust” and, finally, had a “duty not to use its position to derive profit or benefit for itself or another person” (see second respondent’s Outline of Case field 6 November 2024, paragraph 24).
The second respondent submits that if the Court was to accept the de facto wife’s claims that certain representations were made and/or that the conduct of the second respondent gave rise to a constructive trust in favour of the de facto husband and the de facto wife during the period prior to V Pty Ltd becoming the trustee of the Bengochea Family Trust (in 2015) and thereafter, the Court would also have to accept that upon becoming the trustee of the Bengochea Family Trust and whilst holding that position, the de facto husband and the de facto wife as the directors of V Pty Ltd did so understanding that they would not comply with the terms of the Deed of Trust, for the benefit of all of the beneficiaries of the Bengochea Family Trust.
The submissions made on behalf of the de facto wife at the hearing did not engage with these submissions made by the second respondent. Whilst this lack of engagement does not mandate the Court acceding to the submission, the submissions are nonetheless compelling.
For all of these reasons, I am satisfied that the claim against the second respondent has no reasonable prospect of success; either as to the common intention constructive trust and/or the less clear but alternate equitable charge claim.
For all of the foregoing reasons, orders shall be made summarily dismissing the proceedings against the second respondent and Bengochea Pty Ltd, save as to any application for costs.
I certify that the preceding seventy-two (72) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Kari. Associate:
Dated: 11 April 2025
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