Prosser and Prosser and Anor
[2018] FamCA 1077
•9 November 2018
FAMILY COURT OF AUSTRALIA
| PROSSER & PROSSER AND ANOR | [2018] FamCA 1077 |
| FAMILY LAW – PROPERTY – Declaration of rights – Constructive trust alleged – Application summarily dismissed. |
| Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) Civil Procedure Act 2010 (Vic) Federal Circuit Court Act 1999 (Cth) |
| Ebner & Pappas (2014) FLC 93-619 Lysaght Building Solutions Pty Ltd (t/as Highline Commercial Construction) v Blanalko Pty Ltd [2013] VSCA 158 Eames & Eames [2018] FamCAFC 204 Lindon v The Commonwealth (No 2) (1996) 136 ALR 251 General Steel Industries Inc v Commissioner of Railways (NSW) (1964) 112 CLR 25 Custodio & Pinto [2006] FamCA 941 |
| APPLICANT: | Ms Prosser |
| 1st RESPONDENT: | Mr A Prosser |
| 2nd RESPONDENT: | Mr B Prosser |
| FILE NUMBER: | BRC | 1320 | of | 2015 |
| DATE DELIVERED: | 9 November 2018 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Baumann J |
| HEARING DATE: | 20 April 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Chekirova |
| SOLICITOR FOR THE APPLICANT: | Aylward Game Solicitors |
| COUNSEL FOR THE RESPONDENTS: | Mr Priestley |
| SOLICITOR FOR THE RESPONDENTS: | Parker & Kissane |
Orders
The Wife’s Application filed 8 August 2016 against the Second Respondent Mr B Prosser seeking declarations, is summarily dismissed.
On an interim basis pending further order that:
The Second Respondent will not deal with his interest in the property at F Street, E Town including selling, further encumbering or otherwise dealing with interest, pending further order of the Court.
The substantive proceedings be listed for Case Management Hearing at 9.30am on 27 November 2018 before Justice Baumann.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Prosser & Prosser and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC1320 of 2015
| Ms Prosser |
Applicant
And
| Mr A Prosser Mr B Prosser |
REASONS FOR JUDGMENT
In the midst of substantive property alteration proceedings between Ms Prosser (the “wife”) and Mr A Prosser (the “husband”), the wife caused Mr B Prosser (in these proceedings called “Mr B”) to be joined as a party by order of Judge Turner made 15 April 2015. Although not relevant to the current proceedings being determined, the son of the wife, Mr J, has also been joined as a party in the substantive proceedings.
Arising from an Application in a Case filed 12 February 2018 seeking orders that Mr B be restrained from “selling, encumbering or disposing of his interest” in the property situated at F Street, E Town, the solicitor advocate for Mr B raised whether the application against Mr B by the wife should be summarily dismissed. Subsequently, in an amended Response to an Application in a Case filed 28 March 2018, Mr B sought an order that the “Application filed 8 August 2016 be summarily dismissed insofar as it relates to the Second Respondent” (Mr B).
I regret that these Reasons, arising from the hearing conducted on 23 March 2018 were not delivered more quickly. It is apparent however, that this issue now having been determined, this property application dealing with a reasonably modest pool of assets, should be progressed to a final hearing early in the New Year.
The background to the dispute is that the husband (aged 61 years) and wife (aged 57 years) commenced cohabitation in April 1996 and married in 1996. Final separation occurred in October 2014. The wife commenced proceedings in the Federal Circuit Court of Australia for property relief on 16 February 2015, however, in her amended Application filed 8 August 2016, sought the following specific orders, namely:
4. A declaration that the Second Respondent [Mr B Prosser] holds the commercial property situated at [F Street, E Town], NSW (‘the property’) pursuant to a constructive/resulting trust with the beneficiary of the trust being the First Respondent, [Mr A Prosser].
5. In the alternative, a declaration that the Second Respondent [Mr B Prosser] holds a proportion of the property, pursuant to a constructive/resulting trust with the beneficiary of the trust being the First Respondent, [Mr A Prosser]
together with other ancillary orders and with the net sale proceeds to be distributed $25,000 to Mr B, with the residue to be divided as to 80 per cent to the wife and 20 per cent to the husband.
PRINCIPLES RELATING TO APPLICATION FOR SUMMARY DISMISSAL
Rule 10.12(d) of the Family Law Rules 2004 (“the Rules”) provides that:
10.12 (d) 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;
(b) the other party has no legal capacity to apply for the orders sought;
(c) it is frivolous, vexatious or an abuse of process; or
(d) there is no reasonable likelihood of success.
On any such application, the Court has the power to dismiss the claim against the Second Respondent Mr B (r.10.14(a) of the Rules).
In relation to r.10.12(d), the Full Court in Ebner & Pappas (2014) FLC 93-619 said:
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.
Further, as the Full Court said recently in Eames & Eames [2018] FamCAFC 204, when considering the power of summary dismissal available under a differently worded section 17A of the Federal Circuit Court Act 1999:
20. Of course, it is also necessary to bear in mind the caution to be taken with summary dismissal as discussed in Lindon v The Commonwealth (No 2) (1996) 136 ALR 251 at 255 – 256.
Both Counsel for the Applicant Mr B (Mr Priestley) and Counsel for the Respondent wife (Ms Chekirova) referred to the authority of Lindon (supra) and other subsequent family law decisions. The Applicant accepts that “exceptional caution” must be used in applications for summary dismissal and that the power should be “sparingly employed” as stated by Barwick CJ over 50 years ago in General Steel Industries Inc v Commissioner of Railways (NSW) (1964) 112 CLR 25 at 129.
I also accept, at this stage of the proceedings, where the evidence of the parties and witnesses have not been tested in the usual way, Mr B must show it is clear on the face of the opponent’s evidence taken at its highest that no reasonable likelihood of success exists. In so doing, as Finn J observed in Custodio & Pinto [2006] FamCA 941, [citing BA P Associations LLC & Ors & K and Ors [2006] FamCA 518 at 21] that apart from material in the case of the Respondent to an Application for summary dismissal, the Court may have regard to relevant non-contentious facts, even if raised by the Applicant for the summary dismissal.
THE FACTS RELATING TO THE TRANSACTION
The parties, in their respective Outline of Submissions set out the material relied upon, which have been read and considered.
I make the following findings:
a)In June 2007, the husband and Mr B purchased the property at F Street, E Town as joint tenants for $200,000 from Mr B’s grandmother, Ms Q Prosser;
b)On 29 June 2007, Mr B made a contribution of $25,000 withdrawing the funds from his building society account;
c)On 28 June 2007, the husband and Ms Q Prosser entered into a Deed whereby Ms Q loaned to her son the husband, the sum of $25,000. It is not clear whether the funds were actually paid by Ms Q to her son and then paid back to Ms Q;
d)The husband and Mr B then borrowed $150,000 from the Commonwealth Bank of Australia, on or about 2 July 2007;
e)Mr B says that on 28 June 2007, he paid the full stamp duty on the purchase in the sum of $5,594 – with the husband’s half share adjusted in 2014;
f)A business operated by the husband and in which the wife says, during the marriage she made a contribution as bookkeeper and other duties, continued to rent the F Street property for $400 per week. The business R Pty Ltd, paid the rent into a joint account held by Mr B and the husband from which the mortgage payments and Council rates were withdrawn. I am satisfied that the acquisition by Mr B of the half share of F Street in 2007, was for valuable consideration and a genuine transaction;
g)The wife’s son Mr J, in his affidavit affirmed on 29 March 2018 says he was present when the husband discussed purchasing the F Street property from his mother jointly with his son “specifically to avoid my mother having any interest in the shed if my mother was ever to divorce him in the future.” Mr J says his mother was present during this discussion. On this evidence, the wife knew of the purchase transaction;
h)At times it appears the husband’s business was both profitable and at times struggled, and the marriage relationship was also deteriorating from at least 2012. As much seems apparent from the allegations made by the wife at paragraphs 89 to 92 of her affidavit filed 16 February where in summary the wife asserts that:
- on 14 February 2012 the husband created a new registered business name into which, she claims he diverted $180,000 of business income over the next 2 years;
- he billed work for clients under the new name and the scheme worked well “until I discovered his scam by accident”;
- the husband paid funds from this account to Mr B “under the façade of wages”; and
- this was the basis for seeking to join Mr B as a party “due to his close involvement in [Mr A’s] business affairs and because [Mr A] has partially completed a transfer of the industrial shed to [Mr B].”
i)Whilst the conduct of the husband in paying funds to the son (if this actually occurred) might be relevant to the extent of the husband’s contributions, in circumstances where I accept the business was paying rent to the joint owners of the shed, this evidence does not assist the wife in establishing the “constructive trust” she says was in existence;
j)In any event at the time the wife swore her Affidavit on 13 February 2015, transactions relating to the property at F Street had taken place without her prior knowledge;
k)Much of the following history from August 2014 is the subject of unchallenged evidence of Mr B, the husband and Ms S Prosser, Mr B’s 65 year old mother (and former wife of the husband). Also, findings were made by Slattery J in a judgment delivered 30 March 2015 (see Prosser v Prosser & Anor (No 2) (2015) NSWSC 339, particularly at paragraphs 14 to 21);
l)On 2 August 2014 Mr B received a letter from the Commonwealth Bank of Australia dated 16 July 2014, calling up the loan due to default in payments. Rent payable by the Husband’s business was then in arrears;
m)Mr B says at paragraph 13 of his Affidavit filed 15 March 2018 he discussed the situation with his father in early August 2014, (which was shortly before separation between the husband and wife), and it was agreed that Mr B would buy the husband’s 50 per cent interest in the property with a loan from his mother Ms S Prosser “but the transaction could not be finalised until after 23 October 2014, when [Ms S] turned 65 years [of age] as she needed to access superannuation funds”. The loan made of $200,000 attracts interest, and is secured by a Registered Mortgage in Ms S Prosser’s favour;
n)The purchase of the Husband’s share in F Street, E Town was recorded in a formal contract of sale (see exhibit “JSP-16”) and settlement took place on 5 November 2014, after standard pre-settlement searches were conducted;
o)On 7 November 2014, the wife caused a caveat to be lodged over the title, but as the reasons of Slattery J make clear, she was too late as by that time Mr B had secured his legal interest and was entitled to the benefit of indefeasibility of title. For those reasons, the Supreme Court application for leave to file a further caveat was dismissed; and
p)I am satisfied that the husband has provided to the wife details of how the funds received by him for his half interest in the property were used, although of course, in the family law hearing the husband will be examined as to his evidence on these matters.
DISCUSSION AS TO THE EXISTENCE OF A CONSTRUCTIVE TRUST
Despite being ordered to do so (see Order [2] made 11 August 2016), the wife has failed to particularise the basis for her claim that Mr B holds the property at F St, E Town on a constructive trust for the benefit in whole or part for the husband.
The evidence relied upon by the wife is generally that the husband did not advise her of his dealings and has used his son to hold the asset from her, as part of the pool of assets. However, there is no evidence that the transaction was to the detriment of the husband. The transaction perfected by Mr B, was for valuable consideration and the mortgage held by his mother Ms S has been called up for repayment. No actions can conceivably be taken against the husband from either Mr B or the current registered mortgagee for the completed transaction.
Whilst the wife may contemplate a claim to set aside the transaction under s.106B of the Family Law Act 1975 (“the Act”), such a claim is a triable issue, if actually made. This Application in a Case was limited to whether the wife has a reasonable likelihood of success in pursuing her claim that Mr B holds the legal interest in the said property under a constructive trust.
CONCLUSION
The terms of the Contract reveal that although Mr B held a 50 per cent interest in the property, as the sale price of $200,000 represented $50,000 more than the valuation of the half interest ($300,000 ÷ 2), the vendor (being the husband) is “liable for one hundred percent (100 per cent) of the balance owing to CBA secured by mortgage AD286456”.
This is what occurred, namely the husband’s entitlement of $200,000 was used to pay the entire debt of $117,706.36, where his liability to the Commonwealth Bank of Australia was only half of that sum ($58,858). He reserved the adjusted balance.
I accept that whilst this arrangement might be open to further examination, in my view, it does not relate to the existence of a trust, as asserted by the wife, in view of the evidence set out above.
The submissions of the wife at paragraphs 54 to 68, with due respect to Counsel, confuse the relief sought. For example, at paragraph 56 the wife contends that the evidence reveals the husband has “embarked upon a course of conduct designed to reduce the worth of the matrimonial assets”; at paragraph 61/62, the wife contends she made indirect contributions as “wife and-home maker” as well as to the business.
Whilst these arguments might, if proved, support an adjustment in respect of other available assets, they do not support the wife’s claim that Mr B holds the property as Trustee in part or the whole for the husband.
I am satisfied that the claim by the wife that a constructive trust exists has no reasonable likelihood of success, within the meaning of r.10.12(d) of the Rules.
ORDERS
The Court proposes to summarily dismiss the wife’s claim for a declaration against the Second Respondent.
The Second Respondent provided an undertaking to the Court on 23 March 2018, in the following terms:
I, [Mr B Prosser], of [T Street, E Town], hereby give an undertaking to this Court that in respect of property at [F Street, E Town], that I will not deal with the property including selling the property, further encumbering the property, or otherwise dealing with the property until Judgment is delivered by his Honour Justice Baumann in the Application for Summary Dismissal of the Applicant’s claim against the Second Respondent in respect to her equitable claim in the property at [F Street, E Town], as matrimonial property, which is to be heard on 20 April 2018.”
I am aware that the registered first mortgagee Ms S Prosser has given notice to Mr B that the mortgage debt was to be repaid by April 2018.
Because of the uncertainty of the status of the Applicant’s claim against Mr B pursuant to s.106B of the Act, I am not prepared to release the Second Respondent from his undertaking given, and on its terms, coming to an end once this judgment “is delivered”.
Accordingly, to preserve the asset pending further submissions as to the matter proceeding to a final basis (including any s.106B application against Mr B), I pronounce the orders set out at the commencement of these Reasons and will allow a short period for the parties to reflect on the Reasons before the matter next comes before me for further case management on 27 November 2018.
I certify that the preceding twenty-seven (26) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Baumann delivered on 9 November 2018.
Associate:
Date: 9 November 2018
2
5
4