Peterson & Davis (No 3)

Case [2022] FedCFamC1F 650

Federal Circuit and Family Court of Australia

(DIVISION 1)

Peterson & Davis (No 3) [2022] FedCFamC1F 650

File number(s): PAC 1208 of 2016
Judgment of: CAMPTON J
Date of judgment: 31 August 2022
Catchwords: FAMILY LAW – PROPERTY – TRUSTS – Part VIIIAB property adjustment proceedings – Jurisdiction and s 90RD of the Family Law Act 1975 (Cth) considerations – Leave to commence out of time required – Where the applicant was a discharged bankrupt at the time of commencing proceedings in this Court, and named the trustee in bankruptcy as a respondent to her Initiating Application – Where the respondent’s parents joined to the proceedings assert an interest in two real properties held by the applicant and respondent during their relationship – Where the interests of the applicant in those real properties vested in the trustee in bankruptcy – Where the respondent’s parents seek a finding of an express bare oral trust or the imposition by equity of a constructive trust – Existence of express and constructive trusts – Examination of facts concerning whether intention to create a trust existed – Where the fourth respondent did not give evidence in her case – Inferences drawn arising from failure to give evidence – Intention to create a trust not established – Consideration of maxims of equity concerning unconscionability – Evidence insufficient to establish that it would be unconscionable for the trustee and respondent to retain their interests in the real properties – Unclean hands – Circumstances in which equitable relief (if established) would have been denied because of unclean hands – Remedy by way of equitable charge – Adjustment of property interests pursuant to s 90SM of the Family Law Act 1975 (Cth) – Sale of real properties.
Legislation:

Bankruptcy Act 1966 (Cth) ss 58, 73, 74, 77A, 109, 116, 115, 153, 153A, 153B

Conveyancing Act 1919 (NSW) ss 23C, 23D, 66G

Crimes (Administration of Sentences) Act 1999 (NSW) s 77

Family Law Act 1975 (Cth) Pt VIIIAB, ss 44, 117B, 90RD, 90SF, 90SK, 90SM

Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2009 (Cth), Item 86A

Federal Court Act 1976 (Cth) s 51A

Real Property Act 1900 (NSW) s 42

Federal Circuit and. Family Court of Australia (Family Law) Rules 2021 (Cth) ch 6, Pt 7.2, 13.01, 13.02, rr 7.34, 6.06, 7.36, 12.06

Cases cited:

Bahr v Nicolay (No 2) (1988) 164 CLR 604; [1988] HCA 16

Barry v Heider (1914) 19 CLR 197; [1914] HCA 79

Black Uhlans Inc v NSW Crime Commission (2002) NSWSC 1060

Briginshaw v Briginshaw (1938) 69 CLR 336; [1938] ALR 334

Carantinos v Magafas [2008] NSWCA304

Commissioner of Stamp Duties (QLD) v Jolliffe (1920) 28 CLR 178; [1990] HCA 45

Corin v Patton (1990) 169 CLR 540; [1990] HCA 12

Trustees of the Property of Cummins (A Bankrupt) v Cummins (2006) 227 CLR 278; [2006] HCA 6

Currie v Hamilton (1984) 1 NSWLR 687

Gascoigne v Gascoigne [1918] 1 K.B. 223

Hohol v Hohol

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AGLC
Peterson & Davis (No 3) [2022] FedCFamC1F 650
Case
[2022] FedCFamC1F 650
Decision Date

CaseChat Overview and Summary

In the case of Peterson & Davis (No 3), the Family Court of Australia was called upon to resolve a complex dispute concerning the division of property acquired during a marriage and the subsequent bankruptcy of one of the parties. The applicant, born in 1982, and the respondent, born in 1976, were married and had children together. The applicant was employed and received a salary and family tax benefits, while the respondent had been out of the workforce since 2009 due to a work-related injury. They had acquired several properties during their marriage, including two properties in Suburb B and D Town. The third and fourth respondents, the parents of the respondent, had financially supported the couple in acquiring these properties and had an equitable charge on the D Town properties.

The central legal issue before the court was the division of the proceeds from the sale of the Suburb B properties and the D Town properties in light of the respondent's bankruptcy and the equitable interests held by the third and fourth respondents. The court had to determine the respective entitlements of the applicant, the respondent, the trustee in bankruptcy, and the third and fourth respondents. The court also needed to consider whether the D Town properties should be sold immediately to realise the applicant's entitlement under section 90SM of the Family Law Act.

The court held that the trustee would retain his vested interest in the Suburb B properties and the D Town properties, subject to the equitable charge in favour of the third and fourth respondents. The applicant was entitled to 7.5% of the proceeds from the sale of the D Town properties, while the respondent would receive 42.5%. The court ordered the immediate sale of the D Town properties to ensure a just and equitable outcome, considering the respondent's lack of income and the ongoing dysfunctional relationship between him and the trustee. The proceeds from the sale would be distributed according to the court's determination, taking into account the equitable charge and other liabilities.

In conclusion, the court made orders for the sale of the D Town properties and the distribution of the proceeds, ensuring that the applicant's entitlement under section 90SM was realized as soon as possible. The court also made provisions for the adjustment of property in the balance sheet to account for uncertainties regarding the value of the equitable charge, selling costs, and capital gains tax.

Orders

Orders of the court

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Background

Background to the litigation

At the commencement of the trial, the applicant made an oral application pursuant to s 90SM(15) and (16) of the Act. That application was refused. These reasons assume familiarity with the extempore judgment delivered on that day, Peterson & Davis [2022] FedCFamC1F 402.Background The applicant was born in 1982. She was 40 years old as at the date of the trial. She currently lives in City R with the children. She works in sales and earns a gross salary of $102,300 per year. She is in receipt of a Family Tax benefit in the sum of $7,717 per year. The respondent was born in 1976. He was 45 years old as at the date of the trial. He has not engaged in paid employment since his work injury in 2009. He currently lives with the third and fourth respondents at their home in Suburb S. He has not received any income or Centrelink benefits since 2017. At trial he gave evidence of being financially supported by his parents and by his brother, Mr P Davis. The third respondent was born in 1949. He was 73 as at the date of the trial. He said during his oral evidence that he does not live with any significant health issues save for high blood pressure. He retired from employment in 2004. He said that he has not received an income since that time. He is financially supported by the fourth respondent, and by his son, Mr P Davis. The fourth respondent was born in 1953. She was 68 at the date of the trial. She is employed in sales by T Company. Her taxation returns for the financial years ending 30 June 2010 to 30 June 2019 became Exhibit 16 at trial. Her income from her employment in 2010 was $54,068 and her reported taxable income in the latest disclosed financial year, being 2019, was $90,393. Between 1998 and 2001, the applicant and respondent lived between each of their parents’ homes, initially with the applicant’s parents and later with the third and fourth respondent in Suburb U. The respondent gave evidence that he and the applicant moved into a rental property with the financial support of the third and fourth respondent in around 2001. During the first few years of their relationship the applicant and respondent each worked for V Company. The applicant suffered an injury in 1999 and was thereafter unable to work for a period of time. She received workers compensation. She returned later to work. She gave no evidence of experiencing any sustained injury or health issues mitigating her capacity to work. On the 13 August 2001 the third and fourth respondents acquired 1 N Street for $217,000. They obtained funding by way of a loan secured by mortgage to W Bank to assist in the completion of the acquisition. The property comprised two dwellings, each with separate bedrooms, bathrooms and living and kitchen areas. The respondent and applicant agreed that during their relationship one of the dwellings on the property was tenanted, and the other was used by them and their family as a holiday home from time to time. On 16 May 2002 the third and fourth respondents refinanced the W Bank mortgage secured on 1 N Street and obtained a further loan and mortgage security from the National Australia Bank (“NAB”).

Evidence

Evidence Before The Court

For the reasons that follow on the s 90SM dispute, the trustee will retain his interests at law vested by way of the bankruptcy in the Suburb B proceeds and the D Town properties (subject to the equitable charge in favour of the third and fourth respondents). The D Town properties will be sold. The trustee will receive 50 per cent of the proceeds, the applicant will receive 7.5 per cent of the proceeds, and the respondent the remaining 42.5 per cent of the proceeds. The evidence The applicant relied upon the following documents:(a)Her Third Amended Initiating Application, filed on 12 May 2022; (b)Her affidavit, sworn on 15 August 2018 and filed 17 August 2018 (“the applicant’s affidavit”); (c)Her affidavit, sworn on 11 May 2022 and filed 19 May 2022 (“the applicant’s updating affidavit”); (d)Her Financial Statement, filed on 12 May 2022; (e)An affidavit of Mr E, sworn on 25 May 2022 and filed 26 May 2022, being the single real property valuation expert; (f)Points of Defence filed on 12 May 2022; and (g)A Case Outline filed on 27 May 2022 marked as Exhibit 2. The respondent relied upon the following documents:(a)His Further Amended Response to Initiating Application filed 18 May 2022;(b)His affidavit, sworn on 11 June 2021 and filed 16 June 2021; (c)His affidavit 18 May 2022;(d)His Financial Statement filed 13 May 2022; (e)A Case Outline document filed on 27 May 2022 marked as Exhibit 3; and (f)An Amended Minute of Orders Sought, marked as Exhibit 4. The trustee relied on the following documents:(a)His Amended Response, filed on 20 May 2022; (b)His affidavit, sworn and filed on 5 September 2018;(c)His affidavit, sworn on 7 August 2020 and filed 8 August 2020;(d)His affidavit, sworn and filed on 1 October 2020;(e)His affidavit, sworn and filed on 5 March 2021; (f)His affidavit, sworn and filed on 27 May 2022; (g)Points of Defence filed on 13 May 2022; (h)A Case Outline containing the orders sought by the trustee, filed on 28 May 2022 marked as Exhibit 5; and(i)A further Case Outline produced during the course of submissions on the last day of the trial, 3 June 2022.The trustee was not required for cross examination. The third and fourth respondents relied on the following documents:(a)Further Amended Response to Initiating Application filed on 6 May 2022;(b)Affidavit of Mr B Davis filed on 19 September 2016;(c)Affidavit of Mr B Davis filed on 20 May 2022;(d)Affidavits of Ms K filed on 26 July 2017 and 9 November 2018;(e)Affidavit of Mr M filed on 26 July 2017; (f)Affidavit of Ms Q (now Ms O) filed on 17 August 2017;(g)Affidavit of Mr L filed on 9 November 2018; (h)Further Amended Points of Claim filed on 6 May 2022 (“the Points of Claim”); and (i)A Case Outline document filed on 26 May 2022 incorporating written submissions, marked as Exhibit 6. At the start of the trial, the third and fourth respondents said that they relied on affidavits of the fourth respondent filed on 19 September 2016, and Mr P Davis filed on 26 July 2017. After the completion of the oral evidence of the applicant, the respondent, the third respondent, Mr M, Ms K, Ms O and Mr L, during the afternoon of the fourth day of the five day trial, senior counsel for the third and fourth respondents advised that the affidavits of the fourth respondent (Ms Davis) filed on 19 September 2016 and Mr P Davis (being the respondent’s brother) filed on 16 July 2017 would no longer be relied upon or read. Neither were made available for cross examination.

Decision

Reasons for decision

Accordingly subject to the deduction of the as yet undetermined liabilities as set out earlier in these reasons: (a)The trustee will retain his 50 per cent vested interest at law in the Suburb B proceeds and in the D Town properties subject to 50 per cent of the equitable charge;(b)The applicant has an overall entitlement of 57.5 per cent of that pool and subsequent to the trustee’s retention of 50 per cent, she will receive the benefit of 7.5 per cent the Suburb B proceeds and in the D Town properties subject to 50 per cent of the equitable charge; and (c)The respondent will retain 42.5 per cent of the Suburb B proceeds and in the D Town properties subject to 50 per cent of the equitable charge. Conclusion – justice and equityThe respondent’s relief to acquire trustee’s interests in D Town properties On his own evidence the applicant has no source of income and no savings. He is excluded from Centrelink benefits until 2023. He did not put into evidence any document to support a finding as to he being remotely able to access funds to acquire the trustee’s interests in the properties or to satisfy the equitable charge on the properties in favour of his parents. I find he has no such capacities. He made no submissions contrary to the primary relief sought by the trustee as to the immediate sale of the D Town properties. The trustee has no capacity to pay the value of the sum charged in the third and fourth respondents’ favour secured on the D Town properties unless they are sold. The history of the combative and dysfunctional relationship between the trustee and the respondent does not ground a positive forecast as to their future dealings should they remain financially co-dependant as the registered proprietors of the D Town properties. The s90SM adjustment in favour of the applicant from the D Town properties ought to be realized as soon as is possible. This litigation has been on foot for more than six years. So as to progress the s 90SM(3) mandate, orders for the forthwith sale of the D Town properties so as to ensure achieve just and equitable outcome.Implementation of the adjustment of property Doing the best as I can in all the circumstances of this matter, with the evidence available, and in the absence of evidence to ground findings as to the value of some liabilities (such as the value of the sum expected to be paid to the third and fourth respondents secured by the equitable charge, the value of selling costs of the D Town properties and the value of any capital gains tax payable on the sale), orders will be made as to any adjustments of the primary property in the balance sheet (being the balance of the proceeds of sale of the Suburb B property and the equity in the D Town properties), using a percentage so that each of the applicant, respondent and trustee equitably share in the inevitable “rise and fall” dependent on the determination by the assessor of the value of the equitable charge on the D Town properties in favour of the third and fourth respondents and the vagaries as to the sale price achieved on the disposal of the D Town properties and the unknown value as to selling costs and capital gains tax.

Ratio Decidendi

Legal Principle Established

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