[R] and [R] & Anor

No judgment structure available for this case.

JURISDICTION:	FAMILY COURT OF WESTERN AUSTRALIA
ACT:	FAMILY LAW ACT 1975
LOCATION:	PERTH
CITATION:	[R] and [R] & ANOR [2007] FCWA 40
CORAM:	MARTIN J
HEARD:	1, 2, 3 MARCH, 12 JUNE 2006 & 2 MARCH 2007

CLOSING SUBMISSIONS IN WRITING

DELIVERED:	19 MARCH 2007
FILE NO/S:	PT 5553 of 2003
BETWEEN:

R
Applicant/Husband
AND
R
First Respondent/Wife
AND
[QNPL] NOMINEES PTY LTD
Second Respondent

Catchwords:

SETTLEMENT OF PROPERTY - third party - alleged contract or constructive trust - s 75(2) factors

Legislation:

Family Law Act 1975 - s 79

(Page 2)

Category: Not Reportable

Representation:

Counsel:

Applicant	:	Mr Walker
First Respondent	:	Mr Ward
Second Respondent	:	Mr Lloyd

Solicitors:

Applicant	:	Helen Marshall
First Respondent	:	Peter Ward
Second Respondent	:	A J Lloyd

Case(s) referred to in judgment(s):

Balfour v Balfour [1919] 2 KB 571
Baumgartner v Baumgartner (1987) 164 CLR 137
Giumelli v Giumelli (1999) 196 CLR 101

Hickey and Hickey and A-G for the Commonwealth of Australia (Intervener) (2003) FLC 93-

143

Jones v Padavatton [1969] 2 All ER 616
Roufos v Brewster (1971) 2 SASR 218
Wakeling v Ripley (1951) 51 SR (NSW) 183
(Page 3)

1 The proceedings to be determined were the applicant husband’s application, first
filed 4 October 2003, for property settlement. The wife in the proceedings is the first respondent. She filed a response on 24 October 2003. The second respondent is the corporate trustee of the Family Trust of the wife’s mother (formerly the wife’s parents, but her father is now deceased).
2 The principal issue to be decided was whether the husband and wife have any
entitlement to the proceeds of sale of a business known as [Smith’s Country Store] which was conducted by the second respondent, so there was a significant dispute as to the extent of the asset pool.
3 There was also a dispute as to the appropriate percentage division of the assets,

the husband seeking 55% of the total asset pool, including superannuation, and the
wife proposing that he receive 35%, and she, the balance.
4 The orders sought by the husband at trial were as follows:-
1. There be a declaration that the Second Respondent holds on trust for the Applicant and the First Respondent equally:

(a) The interest of the Second Respondent in the property known as [Angel Ave] [ town] more particularly described as Lot 111 on Deposited Plan 1111 being Certificate of Title Volume 11111 Folio 11;
(b) The proceeds of sale of the Nissan Patrol motor vehicle;
(c) 35% of the net value of the business known as [Smith’s Country Store] as at 17 December 2002.
2. The interest of the Applicant in each of the assets referred to in paragraph 1 of these Orders vest in the First Respondent.
3. Within 30 days the First Respondent pay to the Applicant a sum to be determined but so as to effect an overall division of the net matrimonial assets, including superannuation entitlements, as to 55% to the Applicant and 45% to the First Respondent.
4. Any right, title or interest the First Respondent may have in any superannuation entitlements belonging to or earned by the Applicant vest in the Applicant.
5. Any right, title or interest the Applicant may have in any superannuation entitlements belonging to or earned by the First Respondent vest in the First Respondent.

5 The husband and wife otherwise retain their respective assets.
6 The wife sought the following orders:

(a) Against the Second Respondent:
1. Upon payment by the Applicant and by the First Respondent to the Second Respondent (of) its costs of holding the former matrimonial home at [Angel Ave], [Town], and the amount due under the
(Page 4)
mortgage presently registered against that property, the Second Respondent do transfer to the First Respondent the land at [Angel Ave], [Town].

7

(b)

Against the Applicant:

1. The chattels and choses in action presently in the possession of or standing in the name of the applicant and of the First Respondent are as against the other the property of the respective party in possession (sic).
2. The matrimonial asset pool be divided between the parties on the basis that the First Respondent receives 65% of that pool and the Applicant receives 35%.

8 The second respondent sought that the applicant’s contractual and equitable
claims be dismissed. However, in the event there is a finding against the second respondent as to liability, in assessing the value of the business, the debts of the business should be taken into account. The second respondent had no objection to transferring the former matrimonial home at [Angel Ave], [Town], to the wife, on condition that its costs of holding the asset be met.
9 The proceedings have had an unfortunate history. Proceedings were initially
commenced by the applicant on 4 October 2003, naming [Peta Smith] as the second respondent, but on 19 January 2004, it was ordered, by consent, that [QNPL] Nominees Pty Ltd (“[QNPL]”) be named as the second respondent in place of the wife’s mother.
10 On 31 October 2003, the Court had noted an undertaking by the second

respondent not to encumber, charge or otherwise deal with $60,000, being part
proceeds of the sale of [the country store].
11 There was an issue between the parties as to whether this court had the
jurisdiction to determine the husband’s claim against the second respondent, but also, on 19 January 2004, the Honourable Justice Barlow, as he then was, determined that the court does have the power to determine the issues in dispute and, more likely than not, those issues may most conveniently be dealt with by the Family Court. However, he considered it desirable that each party state with precision what they said the alleged contract was, or was not, and so pleadings were required.
12 During 2004, an extraordinary number of conciliation conferences were held and
it was not until September 2005, that the matter was listed in a Callover. The trial proceeded before me over three days in early March 2006, then was part heard until 12 June 2006.
13 I then made directions for the filing of closing submissions but, unfortunately,
the solicitor for the first respondent then fell ill and his submissions were not filed until 2 November 2006. Final submissions on behalf of the applicant were not filed until 6 December 2006, shortly before I went on leave. I apologise to the parties for the delay since then.

(Page 5)
14	Unusually, this judgment is being delivered in two parts. As I indicated to the
parties on 2 March, I am not satisfied I am able to properly determine the property settlement application between the applicant and the first respondent on the evidence and submissions before me. I raised a number of queries with the parties and there will be a further hearing shortly. However, I was able to conclude the judgment in the claim by the applicant against the second respondent, and this is now published – including the history which also forms part of the judgment in the proceedings between the applicant and the first respondent.

Background

15 The husband is 45 years old and, at the time of trial, was working mainly as a
[driver]. The wife is 41 years old and a [technician]. The husband and wife met in 1987, and commenced living together in November 1989. They married on 7 April 1990. There are two children of the marriage, [John R], born in March 1991 (15 years), and [Harry R], born in January 1994 (13 years). The husband and wife separated in December 2002.
16 [QNPL] is the trustee of the [Smith Family Trust]. The wife’s parents, [Peta] and
[Kevin Smith], were its directors and conducted their business operations through the company in its capacity as trustee. Mr [Smith] was engaged in farming, but by 1999, the farm had been sold and [QNPL] was the operator of a business known as “[Smith's Country Store]” in [a country town].
17 The husband had been working as a [public servant] since 1981. The wife was
working as the manager of a [shop]. The husband and wife travelled together on the husband’s long service leave from late 1988 to about April 1989. The trip cost approximately $14,000 of which $10,000 was provided by the husband, and the rest by the wife. After they returned from holiday, the husband and wife did not commence living together until late 1989 to early 1990, as the husband was transferred to [the country] with his employment. The wife obtained employment at [the local] Roadhouse on a casual basis for about 20 to 25 hours per week. She left when she was about eight months pregnant with [John]. The wife did not work outside the home much after that time.
18 In mid 1989, the husband sold, for $32,000, a block of land in [suburban Perth]
which he had purchased prior to meeting the wife. In August 1990, the husband and wife purchased a unit [south of Perth], for $56,000 using the proceeds from the [suburban Perth] block. The unit was rented out and sold in 1996, for $51,500.
19 The husband was transferred to [the Goldfields] at the end of 1992 or early 1993. The husband and wife remained at [the Goldfields] for two years. The wife worked casually during the school holidays with the [local government], supervising young children undertaking [local government] sponsored holiday activities, and, for the last six months or so of the husband and wife’s time in [the Goldfields], was employed for a time for one day each week by the [local] College of TAFE, to teach sewing skills to Aboriginal women. In addition to his [work], the husband did some part-time jobs, for example, in [the Goldfields] he sold cleaning products door to door, mowed lawns, removed trees from power lines for the Council’s contractor and installed reticulation.
(Page 6)
He was an agent for removalists and would take bookings for them and assist with the furniture removal.
20 The husband was transferred to [the north of the state] late 1994/early 1995.
21 During their three years in [the north], the husband and wife purchased a [food
van] which they operated on weekends. The sum of $15,000 was borrowed from the husband’s mother to purchase the van and repaid when it was sold for the same amount when the husband and wife moved to [further north].
22 The husband was transferred from [the current position to another further north]

after Christmas 1998. By then, difficulties were developing in the marriage. In South
Hedland, the wife did some casual work in an [office] and also for a [shop].
23 The husband became very stressed, developing depression, taking sick leave
from 24 February 1999. The husband’s evidence is that the wife had given him the ultimatum that he must leave the [public service] or she would leave him. He understood that the wife was missing her family and was tired of moving around with his job. The wife had been adamant about not living in Perth and the husband had tried to be transferred to [a country town], without success. The husband felt that he was being asked to give up the only way he knew to provide for his family as he thought he would have enormous trouble securing another job.
24 The wife’s evidence was that the husband complained of stress at work and when he took stress leave, did not return to work.
25 In his consultations with his psychiatrist around that time, the husband referred to both work and marital issues as contributing to his problems.
26 In April 1999, Mrs [Smith] came to [the north-west] for about two weeks, and
there were discussions about the husband and wife’s future together. It is apparent from the evidence that both the husband and the wife were at the end of their tether by that time.
27 Mrs [Smith] wanted to help, and it was eventually decided, possibly after Mrs
[Smith] returned to [her home], that the husband would leave the [public service] and the husband and wife would move to [the country town] to assist with the [country store]. There were mutual benefits in that Mrs [Smith], in particular, had been working very hard in the business and could do with some help, and the business had been having some difficulties as the wife’s sister, [Nita], had been caught taking substantial sums from the till.
28 The husband handed in his resignation from the [public service] on 3 June 1999, effective from 18 July 1999. The wife went down to [the country town] and purchased a home for the parties at [Angel Ave], [in the town]. The home was purchased by [QNPL] for the husband and wife, the husband and wife contributing $20,000 from their savings, including the proceeds from the sale of [equipment] they had previously owned. This was credited to their beneficiary loan accounts. The purchase price was $75,000, the balance being borrowed on mortgage.

(Page 7)
29	The husband and wife had both moved to [the country town] by mid June 1999. Both then started work at [Smith's Country Store], which paid them $300 per week each, together with providing their fuel and later some accounts relating to the property at [Angel Ave]. The husband, after a very gradual start because of his illness, and some initial training from the previous employee, was responsible for [deliveries]. After about two months, he also took on doing the returns of the unsold [goods]. He also helped out in the shop, usually going in after the deliveries were complete until the wife arrived. The wife initially worked from just before school until 6:00 pm Monday to Friday, 5:30 am until 1:00 pm on Saturdays, and also from 7:30 am until 12:30 pm on every second Sunday. The wife was unhappy about the division of labour and, from October 2000, the husband would go into the [store] and relieve the wife so she could go home at 3:30 pm and cook the evening meal. He would then stay and usually close the till. Mrs [Smith] initially continued to work in the business, but after a few months had little involvement.
30	In February 2001, the husband had a heart attack and had a stent inserted. The
husband had about four weeks off work and then reduced his working hours. While the husband was ill, [the business] engaged a casual worker to do the [deliveries] and the husband and wife continued to receive the agreed $600 per week. Mrs [Smith] also returned to work to help out.
31	In about April 2001, the husband and wife’s Pajero motor vehicle was having
mechanical problems and the parties, after discussions with [Peta] and [Kevin Smith], traded in the vehicle and a new Nissan Patroll was purchased by the trust. The Pajero was traded in for $6,500 and the Nissan Patrol cost approximately $34,000. It was leased through the business and all its costs were paid for by the business. Both the husband and wife had a fuel card.

32 [Kevin Smith] died in May 2002.
33 Since separation in December 2002, the husband and wife have had a number of
jobs. At the time of filing his principal trial affidavit in December 2004, the husband was employed as a cleaner at the [local college] where he had been working since July 2002. He had also undertaken some part-time work teaching [a subject] at the college. By February 2006, he was working in the mornings and afternoons driving a bus. During the day, he sometimes works on repairing [equipment] if he has any work. He estimated he earnt about $75 per week from this. Sometimes he was doing night shelf filling at [another business] and working as a contract cleaner.
34 After separation, the wife continued to reside in the former matrimonial home
with the children. She had a boyfriend, [Ken White], with whom she developed a friendship from September 2003, and then in March 2005, commenced a de facto relationship with [Tom Tyson], who has his own [business in the country town]. At the time of trial, [Tom] was contributing approximately $225 per week to the wife’s household. He does have some assets, including substantial savings, but at the time of trial, he and the wife maintained separate finances.
35 After separation, the wife continued to work in [the store] until it was sold in

September 2003. [QNPL] sold [the country store] business for $454,682, netting
$283,941. They retained the premises for a time, leasing them at $200,000 per year.
(Page 8)
She was then unemployed for a time, but found casual work at the beginning of February 2004, with the [various government agencies] in [local] office. As at the time of filing her principal trial affidavit in December 2004, the wife was working there on a permanent part-time basis for three days per week earning about $600 per fortnight after tax. By February 2006, the wife had been working full-time with [one particular agency], but was concerned that this meant she could not spend as much time with the children during school holidays. As a result, she took employment as a technician at a [nearby] High School, although this meant a reduction in income. At trial, she was earning $465 per week plus family assistance of $54 per week.
36 Since separation, the children have spent most of their time residing with their

mother, spending alternate weekends and holidays with the father. They also spent
some time with the father after school.
37 The husband did not pay child support for a time after separation. In October
2003, the wife registered with the Child Support Agency and the assessment for the first year was nil. From the year commencing 1 December 2004, the assessment was $242 per month until 28 February 2006, and then $336 per month from 1 February 2006 until 20 April 2007. It was said there was another assessment on 16 February 2006, at $140 per month. In any event, the husband’s position was that, pursuant to assessments to 3 March 2006, he had paid only $3,628 in total.
38 The husband has spent some money on medical and school fees for the children

and purchased some clothing, shoes and sporting equipment. Both parties have had
modest holidays with the children.

Assets, liabilities and resources

39 Pursuant to s 79 of the Family Law Act 1975, in proceedings with respect to the property of the parties to a marriage, the Court may make such order as it considers appropriate altering the interests of the parties in the property. The Court shall not make an order unless it is satisfied, in all the circumstances, it is just and equitable to do so.
40 In Hickey and Hickey and A-G for the Commonwealth of Australia (Intervener)
(2003) FLC 93-143:-
"The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s. 79. That approach involves four inter- related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss. 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss. 79(4)(d), (e), (f) and (g), (''the other factors'') including, because of s. 79(4)(e), the matters referred to in s. 75(2) so far as they are relevant and determine the adjustment (if any) that
(Page 9)
should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case: …"

41 To determine the extent of the asset pool, it is necessary to determine the extent,

if any, of any of the husband and wife’s interest in [QNPL], and therefore to determine
the husband’s claim against [QNPL].

The claim against [QNPL]

42 In his amended particulars of claim set out in a Minute of Proposed Amended Particulars of Claim by the applicant against the second respondent dated 5 May 2005, the husband makes two, and alternative, claims. The first is that in approximately June 1999, he and the wife of the one part, and [QNPL] of the other, entered into a contract. The express terms pleaded by him are to the following effect:

(a) the husband would resign from his then position as an officer with the [public service];
(b) [QNPL] thereupon would employ each of the husband and wife in [the country store];
(c) the husband and the wife would each be paid $300 per week gross ($600 in total) and in addition the net profits of the [country store] would be divided equally among them, [Peta Smith] and [Kevin Smith] (the husband of [Peta Smith], since deceased);
(d) the husband and wife would jointly acquire a 10 per cent share in [the country store] for each year that they worked in the business;
(e) the transfer of the legal ownership of the entire business to the husband and wife would occur at the conclusion of the tenth year of their employment;
(f) should they separate before the conclusion of the tenth year of their employment, the husband would be paid by [QNPL] half of the interest acquired by them to that time; and
(g) [QNPL] would purchase and provide for them a house in [the town] and a motor vehicle for their use;
(h) [QNPL] would hold on trust for the husband and wife its interest as registered proprietor of the property in [Town] occupied, or to be occupied, by the husband and wife.

43 It is then pleaded that, acting pursuant to the contract, the husband resigned from

the [public service], and he and the wife commenced work in [the country store] in or
about June 1999.

(Page 10)

44 The alternative claim is that, in approximately June 1999, the second respondent

(acting by its then directors – [Kevin Smith] and [Peta Smith]) made the following
representations to the husband and wife:

(a) [QNPL] would employ each of them in [the country store];

(b)

they would each be paid $300 per week gross ($600 in total) and in addition the net profits of the business would be divided equally among [Kevin] and [Peta Smith], the husband and wife;

(c)

the applicant and the first respondent would jointly acquire for each year during which they were so employed a 10% share in the business;

(d)

the transfer of the legal ownership of the entire business to the husband and wife would occur at the conclusion of the tenth year of their employment;

(e)

should the husband and wife separate prior to this, the husband would be paid by [QNPL] half of the value of the share in the business jointly acquired at that time by the husband and wife;

(f)

[QNPL] would purchase and provide for the husband and wife, a house in [the country town] and a motor vehicle for their use.

- In reliance upon these representations, the husband resigned from [the public service] and the husband and wife moved from [the north of the state] to [a country town] and commenced employment with [QNPL].
- The applicant acted to his detriment in reliance upon the representations in
that:

(a) he resigned from well-paid and permanent employment to take up poorly paid and insecure employment;
(b) he committed himself to residing in [a country town], a small town, with limited employment opportunities.
- By reason of him having acted to his detriment in reliance upon the said representations, [QNPL] holds a 30% share of the value of the business as at the date of separation, on a constructive trust jointly and severally, for the husband and wife who have jointly acquired a 30% share in the business, and in the circumstances are entitled to be paid by [QNPL] a sum equal to 30% of the net asset value of the business as at the date of separation.
- The husband and wife are severally entitled to be paid by [QNPL] half of the
sum referred to in relation to the first claim.
- [QNPL] is in breach of the contract, and despite request having been made, has failed and refused to pay to the husband half of the sum referred to in relation to the first claim.
- The husband claimed:

(a) a declaration that [QNPL] holds a 30% share of the value of the business as at the date of separation on a constructive trust jointly and severally for the husband and wife;
(Page 11)

(b) alternatively, an order that [QNPL] pay to the husband a sum equal to one half of such share;
(c) such further or other orders as the court may deem just.
45 At trial the husband’s position was that the appropriate share is 35% on the basis that the husband and wife worked in [the country store] for 3.5 years from June 1999 to separation in December 2002. It was submitted that the court can, and should, act on the latter figure.
46 For the husband, it was submitted that it is of importance that on the first and
second respondents’ cases, and versions of the relevant events, the relationship of trustee and beneficiary does exist between the second respondent and the husband and wife respectively in relation to the former matrimonial home, and apparently the proceeds of sale of the husband and wife’s motor vehicle. The concession by [QNPL] and the wife in this regard appears to be to the effect that the trust is a constructive trust, and that it would be unjust in all the circumstances not to require [QNPL] to pay to the husband and wife appropriate sums in respect of their contributions to (at least) the home. This admitted trust relationship makes it but a small step to then find in favour of the husband’s contention concerning [the country store].
47 It was also submitted that it was highly unlikely that the husband would have
resigned his secure and well paying position in the [public service] without a clear understanding on his part that by the husband and wife moving to [the country town] and working for modest remuneration in [the country store] they would acquire financial security by way of a progressive taking over of the business, including its net asset value as well as the concomitant opportunity to earn significant incomes from its continued operation. It is accepted that before the husband and wife left [the far north of the state], the husband was suffering from depression. Rather than, as suggested by the wife, this provided him with the motivation to resign and move to lowly paid work with a sympathetic employer and some flexibility of hours, in fact, his health problems, particularly when considered with his age and lack of other marketable skills gave the husband every reason not to leave the [public service].
48 [QNPL]’s defence was set out in a Minute of Second Respondent’s Amended
Defence to the applicant’s amended claim dated 28 February 2006. The second respondent, save for agreeing that the husband and wife, while they worked in [the country store], would be paid a total of $600 per week by way of drawings from the [Smith Family Trust] and/or salary to be shared between the husband and wife, the second respondent denies that the entered into the contract in the terms as pleaded or at all and says:

(a)

the arrangement between the parties was a family agreement and at no time was there an intention to create binding legal relations in the terms claimed by the Applicant or at all;

(b)

the husband had been on extended sick leave for work related stress prior to resigning his position in the [public service];

(c)

the wife’s mother and father proposed to the husband and the wife that they work in the business so that the husband could limit
(Page 12)

working hours and stress until such time as his health enabled him
to take on a heavier work load;
(d) after the husband and the wife commenced work in the business:

(i) [QNPL] paid certain expenses of the husband and the wife and certain educational expenses of their children, such payments being partly accounted for in the books of [QNPL] as expenses of the business and partly accounted for as drawings by the husband and the wife;
(ii) on the husband and the wife advancing to the second respondent the sum of $20,000, [QNPL] purchased a dwelling at [Angel Ave], [in town] ("the FMH"), and permitted the husband (to December 2002) and the wife (to the present) to reside in the FMH, in consideration of which the husband and the wife agreed to pay and paid the sum of $70.00 per week by way of rent.
(iii) on the husband and wife advancing [QNPL] $6,000, the second respondent purchased a motor vehicle which the husband (to December 2002) and the wife have been permitted to use.

49 [QNPL] denies that the applicant in resigning from [the public service] acted in pursuance of the contract.
8. As to paragraph 7, save that the husband, the wife and [QNPL] agreed that while the husband and the wife worked in the business they would be paid a total of $600.00 per week by way of drawings from the [Smith Family Trust] and/or salary to be shared between the husband and the wife, [QNPL] denies making the representations or at all and repeated its assertions as to the terms on which the husband and wife were to work in the business.

50 [QNPL] denies the husband acted to his detriment in reliance on the representations as referred to in subparagraphs (a) and (d) above.
51 In fact, [QNPL] denies the claim that it holds the home in trust for the husband

and wife, but says that if it does so, such trust is subject to the home being charged
with payment to [QNPL] of its net costs of acquiring and holding the home.
52 The second respondent points out the husband’s claim in relation to the house is
different in respect to the contractual and equitable claims. In the contractual claim, the husband asserts it was a term of the contract as pleaded, that [QNPL] would hold on trust for the husband and wife its interest in the former matrimonial home, where the equitable claim refers only to them being provided with a house for their use. The second respondent has maintained its position that it would transfer the former matrimonial home free of encumbrances to the husband and wife on payment of a sum equal to the second respondent’s net costs of acquiring, and holding, the former
(Page 13)

matrimonial home, and that it always intended to do so. This should be regarded as
being to Mrs [Smith]’s credit.
53 [QNPL] denied that the husband and wife were entitled to 30% of the business and thus entitled to payment of any sum.
54 The first respondent supports the contentions of the second respondent.

The legal position

The contractual claim – family arrangements
55 For [QNPL], it was submitted:
“The intention to create legal relations is an essential element in the formation of a contract. There is a well established rebuttable presumption of fact, going back to Balfour v Balfour [1919] 2 KB 571, that close relatives do not intend their agreements to be contracts (ie legally binding).
It is accepted that rebuttal of the presumption is more readily accepted where it can be shown that “the setting of the arrangement is commercial rather than social or domestic (Roufos v Brewster (1971) 2 SASR 218).
On the other hand, uncertainty in the arrangements tend towards a finding upholding the presumption (Jones v Padavatton [1969] 2 All ER 616).”

56 No citations or list of authorities were provided and these have been included by

me. This summary was not challenged by the applicant, who did not refer to the legal
background.
57 I would also mention Wakeling v Ripley (1951) 51 SR (NSW) 183, where the plaintiffs were the sister, and her husband, of the defendant, who had promised them a home and his property on his death, if they sold their home in England and moved to live with him in Australia. The relationship between the parties broke down and the defendant denied there was an intention to create legal relations. In that case, there had been correspondence between the parties about the agreement, and it was held, on appeal, that certainly there was evidence that could be put to a jury that the parties had entered into a binding and enforceable contract, partly because the consequences for the plaintiffs were so serious.
The constructive trust
58 The second respondent’s submission in this regard was:
“The court may, as a remedial response to a claim for equitable intervention, to impute a trust or trust obligation where it is necessary to do so “in good faith and conscience”.
It would seem from the pleadings (paragraphs 7 to 10) that the Court is being invited to hold that, by reasons of representations made by [QNPL]
(Page 14)

and relied upon by [Nigel] and [Sara] to their detriment, [QNPL] holds a
thirty per centum share of the business on trust for [Nigel] and [Sara].
As pleaded in this manner, the claim does depend on the return of contributions made in a joint endeavour (such as in Baumgartner v Baumgartner (1987) 164 CLR 137), but rather in terms of a failed agreement (such as in Giumelli v Giumelli (1999) 196 CLR 101). No allegation of contribution is made in the pleadings. Although much evidence was adduced during the hearing in relation to [Nigel]’ contributions (or lack of them) during the period or the arrangements, such evidence was in the context of the relative contributions by [Nigel] and [Sara] to the “matrimonial pool”.
The “failed agreement” cases tend to deal with agreements which fail for a technical reason such as the Statute of Frauds or the expiry of a limitation period.
It is not at all clear that a trust or trust obligation should be imputed where the only reason remedies under the law of contract are unavailable is a finding that there was not an intention to create legal relations and no other basis for such an imputation (eg contribution) exists.
The remedy sought by [Nigel] requires, as a matter of law and as pleaded, an element of “detrimental reliance”. The representation must have induced the representee to alter his behaviour, and that alteration must have been “detrimental”, ie something more than what might be “consideration” for the purposes of contract formation.”

59 The applicant’s counsel again did not challenge the legal background, addressing the factual position insofar as it related to the accepted legal background.
60 In general terms, I accept counsel for the second respondent’s summary of the
legal position.
The factual position
61 The husband’s evidence in his trial affidavit filed 8 December 2004, was:

“13. In about May 1999 [Peta] came to see us in [the north of the state] for a two week holiday (“[Peta]’s holiday”). At that stage I had been off work for a couple of weeks. During [Peta]’s holiday I talked with her and [Sara] on many occasions about [Sara]’s and my future together.
14. During [Peta]’s holiday I heard [Sara] tell [Peta] words to the following effect “I thought it was all over between me and [Nigel] but now I can see myself spending the rest of my life with him”. I remember feeling relieved that we were going to sort out our relationship. Also during [Peta]’s holiday she told [Sara] and me that she was having health problems and couldn’t keep up with the demands of running the shop. She said words to the following
(Page 15)
effect “My health is affecting my ability to run the shop. I’m exhausted”. She also said to us words to the following effect “I have found out that [Nita] has been stealing from the shop. I can’t let her work there anymore”. When I asked her how much had [Nita] stolen she replied “A considerable amount”. …
17. I was very surprised about what [Peta] told us about [Nita] stealing from the business. [Peta] told us that she had a proposal for us. She said words to the following effect “The best solution I can see for all of us is if you and [Sara] come down and run the business for us”.
18. [Peta], [Sara] and I had many conversations about how the proposal referred to above would work (“the initial discussions”). On one particular occasion [Peta] and [Sara] and I had a conversation. At that time [Peta] said that she had discussed the proposal with [Kevin] before she came [north] and said words to the following effect:
“You and [Sara] would come and run the business. The Trust would buy you a family home so that the costs could be put through the business but it would always be your home. The business would pay both families a set amount each week say $500 and you will gradually take over ownership of the business”.
19. Further discussion took place between me and [Peta] and [Sara] in the initial discussions. Finally [Peta], [Sara] and I agreed to the following:

(a)

I would resign from the [public service] and we would move down to [a country town] to run the business. [Peta] and [Kevin] would take a back seat role and leave all the day to day business dealings and operating decisions to me and [Sara].

(b)

The Trust would buy a house for us and we would provide a deposit to the Trust for this purpose. We would then pay the Trust ‘rent’ which would be calculated to be the same as the mortgage payments.

(c)

The business would pay [Sara] and I and [Peta] and [Kevin] both $500 a week out of the profits.

(d)

The ownership of the business would pass to [Sara] and me over time. At first we discussed attaining 5% of the business each year we operated it but we all considered that 20 years was too long to wait for the business to be wholly owned by [Sara] and me. We therefore agreed that [Sara] and I would gain 10% ownership of the business each year until we owned it outright.
(Page 16)

(e) The business would not be legally transferred straight away because the business could not afford the costs that would be payable associated with such transfer. We agreed that the business and the house to be purchased for me and [Sara] would both be transferred into the joint names of [Sara] and me at a later date. We would then keep paying [Peta] and [Kevin] the weekly profit amount as agreed until the ten years had elapsed and [Sara] and I owned the business outright.
(f) The business would support [Peta] and [Kevin] in their retirement. At the time [Peta] was about 59 years old and [Kevin] was 69 years old.
(g) Initially I would be responsible for learning the [delivery] side of the business until I got back on my feet. This included the deliveries and ordering which would be six days a week but only a few hours each day. [Sara] would look after the receivables which was basically the shop itself. [Sara] had previously worked in the business relieving for [Peta] or [Nita] and so knew basically how it operated. She did the book work and Business Activity Statements. [Peta] and [Kevin] had someone called [Rachel Sun] (she is now called [Rachel Robbins]) (“[Rachel]”) working for them who did the early mornings and the stock receiving. [Rachel] would stay on to continue doing this job.”
20. At one stage during the abovementioned discussions I said to [Peta] words to the following effect “Will the agreement be put in writing?” [Peta] said words to the following effect “This is a family matter. You will just have to trust us”.”

62 The wife’s evidence in this regard, in her trial affidavit filed 14 December 2004,
was:

“47. [Nigel] took stress leave from work and didn’t want to return. I became distant from him and depressed. My mother travelled from [her home in the country] to [the north-west] after I telephoned her about the state of my marriage and amongst other things she suggested that we return to [the country town].
48. We discussed the idea of return to [the country town] and made the decision to do so, I don’t specifically recall discussing employment in my parents’ business of [Smith’s Country Store] then but believe that it would have been because the offer was intended to assist [Nigel] and me deal with our outlook on life and we would need to have an income because [Nigel] decided to resign from the [public service].
(Page 17)
49. It was decided that I would fly down to Perth and travel to [the country town] to look for a house for sale in [a country town]. I don't now recall when my parents offered to assist us with the purchase of a house in [a the town] but I did select the house at [Angel Ave], [Town] and it was purchased by [QNPL] Nominees Pty Ltd for [Nigel] and me and we contributed $20,000.00 from savings (including the proceeds from the sale of [equipment] we had previously owned). After selecting the house I returned to [to the north-west] to prepare for the family move back to [the country town]. …
74 I am aware that [Nigel] claims that there was an agreement between him and me on the one hand and [QNPL] Nominees Pty Ltd on the other hand to the effect that we would acquire a 10% interest in [Smith's Country Store] for each year that we were employed there. There was no such agreement but that concept was discussed as a possibility.”

63 The wife’s evidence overall supports that of her mother, which in some respects
is hardly surprising, but is contrary to her own financial interest. However, she did say, contrary to her mother, that the issue of employment in the [store] arose in [the north-west]. In her oral evidence, she denied that decisions, however, were made during the visit, since “we couldn’t even decide what to cook for tea”.
64 The second respondent’s evidence about her visit to [the north-west] was:

“11. I travelled to [the north of the state] to see what I could do to help and stayed with them for a week or two. [Nigel] was on sick leave from the [public service], was constantly crying and was obviously depressed. He moped around while [Sara] was at her wits end as to what to do with him. [Nigel] wasn’t helping with the housework or the children and was constantly tired. [Sara] wasn’t coping very well and was very tired. She told me she wanted to leave [Nigel]. The whole situation was obviously affecting the children.
12. I took over the house work including cooking and cleaning. I told [Sara] that she shouldn’t leave [Nigel] because of the children. I encouraged them both to go to marriage counselling and try to stay together.
13. I couldn’t stay in [the north -west] very long because I needed to get back to the [store] in [the country town]. When I returned to [the home town] I discussed the situation with [Kevin] and we decided we should suggest they return to [our town] where we could offer ongoing support and assistance by way of employment in the [store]. [Kevin] and I worked out that if we terminated two full-time employees and both families took drawings of only $600 per week, we could all manage. …
(Page 18)

17. I have read the affidavits of [Nigel] sworn on 30 September 2003 and 12 December 2003, together with the Particulars of Claim filed on 30 April 2004 and say:

(a)

When I visited [Sara] and [Nigel] in April 1999, [Nigel] was not able or willing to return to work in the [public service]. The whole proposal arose out of [Nigel]'s depression and our wish to provide some alternative whereby together [Nigel] and [Sara] could earn a living in a supportive family environment.

(b)

I agree that the arrangement [Kevin] and I entered into with [Nigel] and [Sara] was for them to take combined "drawings" of $600 per week in return for them working in the business.

(c)

I do not recall any discussion with [Nigel] and [Sara] about "profit share" over and above the $600 per week. The notional distribution of profits was something which was decided after the accounts were prepared. [Arthur Anderson] would prepare the papers (including the tax returns) and [Kevin] and/or I would sign them. I understood the notional distribution of profit was all to do with minimising tax, and otherwise didn't have a real effect. In any case that was a matter for [Kevin] and me.
[Kevin] and I tended to adopt the approach suggested by [Arthur Anderson] that profits be distributed equally between those working in the business but it was always our decision. We adopted that approach but in the year ending June 2002 profits were distributed equally between [Sara], [Kevin] and me because [Nigel] had contributed so little.

(d)

Prior to [Sara] and [Nigel] moving to [a country town], it was agreed between the two families that the [Smith Family Trust] would purchase the [Angel Ave] property for [Nigel], [Sara] and their children to live in. [Nigel] and [Sara] contributed $20,000 to the [Smith Family Trust] which was recorded in the books as an advance to the Trust. It would have been more desirable for [Nigel] and [Sara] to purchase the house themselves. I believe the reason the [Smith Family Trust] purchased the property was because at the time [Nigel] and [Sara] could not obtain a loan, not for any reason of tax minimisation.

(e)

It was always understood between the families that the [Smith Family Trust] would transfer the [Angel Ave] property to [Sara] and [Nigel] if they could pay the trust
(Page 19)

what it had spent in the purchase price, maintaining the
property and interest, less rent received.
(e) [Nigel], [Sara], [Kevin] and I discussed the possibility of [Sara] and [Nigel] taking over the [country store] in the future, but it was a general discussion and no agreement was reached. [Kevin] and I could not have contemplated a situation where over a period of ten years the [country store] was transferred in its entirety to [Nigel] and [Sara]. In 1999 [Kevin] and I were in reasonable health and contemplated many years of life ahead of us. The [country store] represented our major asset and when we were no longer in a position to actively participate we would require an income from it or it would be sold so that we could have an investment income in our retirement.
(f) The discussions we had about the future of the [country store] did not touch on what might happen if [Kevin] and I were to die. That was not a matter I would have discussed with [Nigel]. Nor did we discuss what would happen if [Nigel] and [Sara] would separate. I would not have contemplated any arrangement which would have seen [Nigel] leave the marriage with part of the [country store]. The purpose of the whole arrangement was to help [Nigel] and [Sara] with the object of keeping their family together.
(g) [Kevin] and I did not agree in 1999 that the [Smith Family Trust] would provide [Nigel] and [Sara] a motor vehicle for their use although we agreed to pay the fuel and (I think) other costs of their vehicle because it was used (in part) for [business] purposes. Later [Kevin] and I agreed that they could trade in their vehicle and the [Smith Family Trust] would purchase a replacement on hire purchase for their use. As I understand the accounts, the trade-in value of the vehicle was credited to the [Nigel] and [Sara]'s beneficiary accounts.
(h) [Kevin] and I regarded the arrangement between [Nigel], [Sara], [Kevin]and myself as a family arrangement based on assistance given to family members. I did not contemplate that the arrangement might end up in court.”

65 There was an issue at the trial as to the date of Mrs [Smith]’s visit to [the north -
west]. Her evidence was that she was pretty sure the visit was at the time of the husband and wife’s wedding anniversary on 7 April. The husband eventually conceded by the time of the visit he had been on sick leave for a number of weeks, saying his sick leave initially commencing in January 1999. There is a record that it commenced on 24 February 1999.

(Page 20)
66	The husband was cross-examined in relation to his affidavit filed 15 December
2003. In this affidavit, the husband said the agreement followed initial discussions which took place during Mrs [Smith]’s visit:

“During that visit, lengthy discussions took place between [Peta], [Sara] and myself in terms of the agreement later reached. My decision to resign from the [public service] was made on the basis of these discussions and in anticipartion of the agreement later reached”.

67 In her trial affidavit, Mrs [Smith] says she is sure she did not have any
discussions with the husband and wife of any proposal for them to come to [her country town] to work in the business prior to her returning to [her home town]. In this regard, I consider it unlikely her recollection was correct and that the issue was probably broached. Her evidence was, in fact, that it was [Kevin Smith] who telephoned the husband and wife in [the north-west] to make them an offer.
68 I accept her evidence that the trip was far from a holiday, and the husband and

wife were, in effect, in a poor state, and that, as said by the wife, no firm decisions
were made at that stage.
69 I am satisfied, on the evidence, that any arrangements discussed in [the north -
west] were in general terms and that, as Mrs [Smith] said, she would not have entered into any firm arrangement without consulting properly with her husband, although she had talked to him by telephone during the visit.
70 I accept that by the time the husband and wife returned to [the country town]
there was an arrangement for them to work in the business for combined “drawings” of $600 per week, and arrangements made for a residence for them. This was not in dispute.
71 I also accept that, in general terms, it had been agreed that, if things went well, the intention was that the husband and wife could take over the business over time.
72 The husband’s evidence is that shortly after he and the wife and children arrived
in [Town] they had a meeting with [Peta] and [Kevin Smith] to discuss the agreement, Mrs [Smith] inviting [Arthur Anderson], the [Smith]’s accountant, to the second meeting and:
“… told her she had done this so that we could all seek his advice as to
how [Sara] and I would obtain ownership of the business …
24. The meeting took place in about mid June 1999. I’m unsure of the exact date but I know it was before I started work in the business and I did that on 18 June 1999. [Peta] suggested that she invite [Arthur] to dinner and then we would discuss the issues after the meal. Robert came over to [Peta] and [Kevin]’s house and we all had an evening meal together. After the meal the second meeting took place. [Peta], [Kevin], [Sara], [Arthur] and I were present. We were sitting around the dining table.

(Page 21)

25.

I recall that [Peta] did most of the talking for her and Kevin. We discussed the same things that had been discussed at the initial discussions between [Sara], [Peta] and me. I do not recall who said which words at the meeting other than once when again I asked if the agreement could be put in writing and [Peta] again said to me words to the following effect “We are a family. You will just have to trust us”. I assumed from the discussions that had taken place at the meeting that in order to reduce the agreement to writing a Deed would need to be properly drawn up by a solicitor and that would mean extra costs that the business could not afford. I also recall that I said words to the following effect “What will happen if [Sara] and I go our separate ways”. Again [Peta] answered me. She said words to the following effect “We will do the right thing by you”. [Kevin] then nodded and said to me words to the following effect “You will be paid what is owed to you”.

26.

At the time I felt a bit concerned about the fact that the agreement would not be put in writing straight away. However, once I began to be involved in the day to day running of the business I realised that the way [Peta] had always operated was on her and people’s words. I mean that she appeared to make verbal agreements with people commonly. An example of this was all of the employees of the business. None of them had signed any written agreement at all.

27.

I also recall much later a conversation between me and [Peta] when again [Sara] and I were having relationship troubles and I was driving [Peta] to Perth for a medical appointment. I recall this was in or about mid 2002. I was asking [Peta]’s advice about [Sara] and our relationship and I said to her words to the following effect “Financially what would happen if we separated”. [Peta] then said to me words to the following effect “You would have to take the car or something”. I understood this to mean that this would be a way of me getting my share of the value of the business owned at the time. At the time, the car to which [Peta] was referring was worth about $30,000.

28.

At the meeting the following agreement was reached which was in the most part what had been previously agreed during the initial discussions:

(a)

[Sara] and I would take full responsibility for running the business and receive 10% ownership of the business for each year we operated it;

(b)

The business would pay $500 per week to both [Sara] and me and to [Peta] and [Kevin] from its profits;

(c)

The business would pay for the [Angel Ave] rates and mortgage and [Sara] and I would pay the Trust rent
(Page 22)
calculated at the same amount of the mortgage which was
$70 per week;

(d) Once the whole business had been transferred [Sara] and I would continue to pay [Peta] and [Kevin] rent for the property from which the business operated which was owned by them (“the business property”);
(e) [Peta] and [Kevin] would leave the business property to their three children equally in their Wills with a first option to [Sara] and I to purchase it at market value and pay it off over a reasonable time. They would then leave their home to the other two children equally as [Sara] and I would have the business;
(f) The transfer of the ownership of the business would occur at a later date when the business was in a better position financially.”

73 The wife did not refer to this meeting in her trial affidavit. Her oral evidence at
trial was that there was some discussion of her and the husband taking over the business “if we worked our arses off”. 10% per year was discussed as a possibility if “[Nigel] and I got our shit together”. It was only “banter”. She said “why would [my parents] sign over the business when [Nigel] and I didn’t have a relationship”.
74 Mrs [Smith]’s evidence about this dinner was that she did not remember one

particular dinner, but at one point it was agreed the husband and wife would work in
the business and their remuneration would be $600 per week, rather than $500.
75 Of significance, is the evidence of [Arthur Anderson] in his trial affidavit filed

12 January 2005. He recalled attending an informal meal at Mr and Mrs [Smith]’s
residence at which the husband and wife were present:

“9. The occasion referred to in the previous paragraph was an informal meal at which the [Smith]s' daughter [Sara R] ("[Sara]") and son in law [NigelR] ("[Nigel]") were present. There was general discussion about [Sara] and [Nigel] moving from [the north-west] to [the country town] and participating in the Business. A number of matters were raised and discussed in an informal and general way, as follows:

(a) that [Sara] and [Nigel] would both work in the business and their drawings would be kept to an amount of $300 per week each plus expenses;
(b) the services of some of the existing employees were terminated;
(c) the Trust was to buy or was buying a house for the [R]s to rent as they were not eligible for a bank mortgage;
(Page 23)

(d) the possibility of the [R]s gaining a share in the business and/or the profits of the business.
I do not recall any discussion with respect to:

(e) the disposition of trust assets on the deaths of [Kevin] and/or [Peta Smith].
(f) the disposition of assets if [Nigel] and [Sara] were to separate.
10. The occasion I refer to in the preceding two paragraphs was the only occasion I was present when [Nigel] and [Sara] and [Kevin] and [Peta Smith] were present and the arrangements for the participation of [Nigel] and [Sara] in the Business were discussed.
11. I have read the affidavit of [Nigel] dated 12 December 2003 and the Particulars of Claim dated 30 April 2004. At the dinner I refer to I do not recall any conversation which indicated to me that [Kevin] and [Peta Smith] had agreed or proposed to agree to:

(a) the transfer of 10% per annum of the Business to [Nigel] and [Sara] for each year that they worked in the business.
(b) the transfer of the legal ownership of the business to [Nigel] and [Sara] at the conclusion of the tenth year of their employment.
(c) a fixed division of the business profits as between the [Nigel R], [Sara], [Kevin Smith] and [Peta Smith].
12. If I had received any indication from the conversation referred to that such an agreement referred to in the previous paragraph had been reached or was proposed, I would have:

(a) counselled [Kevin] and [Peta Smith] as to whether they had properly considered whether, on the transfer of the business, they would have sufficient income to meet their needs in retirement;
(b) enquired of [Kevin] and [Peta Smith] as to whether such arrangements affected their decision as to the division between their children of their respective estates on their death and whether they should consider making a new will;
(c) advised them that any such arrangement should be properly documented at the time if only to avoid difficulties in accessing Centrelink entitlements in circumstances where the legal ownership of the business
(Page 24)
was transferred to relatives for no effective consideration
immediately prior to attempting to access such benefits;

(d) given consideration to the appropriateness of the current structure by which the business was held (a discretionary trust) and recommended a structure such as a company or unit trust which would permit transfers of ownership from the [Smiths] to [Nigel] and [Sara];
(e) given consideration to stamp duty and capital gains tax is[Sara’s];
(f) given consideration to the most appropriate structure for [Nigel] and [Sara] to hold their interest in the business (for example the establishment of a discretionary family trust of which [Nigel],[Sara] and their children were beneficiaries);
(g) recommended to [Kevin] and [Peta Smith] that they have their arrangements properly documented by a firm of solicitors; and
(h) given consideration in preparing tax returns for 1999-2000 and subsequent years for [Nigel] and [Sara] [R] as to whether the value of 10% of the business being transferred to them should be declared as income in each year.
13. I did not take any of the actions I refer to in the previous paragraph, in consequence of which I conclude that my lack of recollection as to the matters referred in in paragraph 11 above is not simply a failure of my memory.”

76 His evidence, under cross-examination, did not significantly vary from his affidavit evidence.
77 For the second respondent, it was submitted that particular attention should be
given to paragraph (h) of the actions [Arthur Anderson] says he would have undertaken, because it relates not to the period immediately after the dinner, but on each occasion annual tax returns were subsequently prepared. While [Arthur Anderson] has known Mr and Mrs [Smith] for many years, I accept his evidence as to what occurred at that meeting as far as it goes.
78 As to the evidence of the other witnesses said to support the husband’s claim:

• [Donald Kay] – swore an affidavit filed 2 December 2003, and was not cross- examined. I therefore have no reason to doubt the statement was made. He said he had had a conversation with Mr [Smith] during which Mr [Smith] said words to the following effect:
(Page 25)
“[Nigel] and [Sara] are working in the shop for wages. As long as they do this we’ll give them 10% of the shop each year and they’ll own the whole lot in 5 or 10 years.”
For the second respondent, it was submitted:
“… that Mr [Kay]’s evidence has no probative value as to the existence of
any agreement inducement or promise as pleaded, by reason of:

(a) the evidence being hearsay evidence of a statement of a person who died before the commencement of the proceedings;
(b) the form of the statement alleged is of an intention to make a gift conditional on certain things happening;
(c) the statement is said to have been made after the date on which agreement is alleged to have been made so might (if it were made) refer to an intention formed after the date of the alleged agreement;
(d) the statement “they’ll own the whole lot in five or ten years” indicates a level of uncertainty inconsistent with the certainty of the alleged agreement and internally inconsistent with the statement “we’ll give them 10% of the shop each year.”

I accept this submission principally because of the uncertainty of the statement. Even if this did support the contention there was a contract along these lines, the fact is the husband and wife did not work in the business for five or 10 years.

• [Brendan Soames]
relationship with the wife. He alleged the wife had said to him:
– is a very “rough diamond” who at one stage had a time. We will own it outright in ten years.”
It was asserted on behalf of the second respondent that his evidence should be disregarded as demonstrating prejudice against the wife and Mrs [Smith], but I have no reason to doubt that he heard such a statement made.
While this statement supports the contention the husband and wife were to acquire the business over 10 years, it does not really assist the husband in his claim to be entitled to a percentage of the business after 3½ years in the event he and the wife separated.

• [Rachel Robbins] – was a longstanding employee of the business from 1997 until it was sold in 2003. In her evidence she had said in about June 1999, she had a conversation with Mrs [Smith] who told her that the husband and wife were coming into the [store] and were going to take over part of the business year by year. It had not been said how long it would take for the changeover to be completed.
Under cross-examination, she referred to regarding Mrs [Smith], and then the wife, as the boss – the husband was just a worker.
(Page 26)
It was submitted by the second respondent that, under cross-examination, it was clear that any conclusion that the husband and wife held a proprietary interest in the business was based on her knowledge of the family connections. Again, I do not accept that this evidence supports the husband’s contention that there was an agreement that, if the husband and wife separated, he would receive a percentage share in the business.

Conclusion

79 For the applicant, it was strongly submitted that it is highly significant that
statements made in affidavits of evidence in chief supported the contention that there were discussions about the husband and wife obtaining a share of the [ business] – that is:

• Mrs [Smith] said, at paragraph 18(e) of her trial affidavit, that Mr and Mrs [Smith] and the husband and wife discussed the possibility of them taking over the [country store] in the future, but it was a general discussion and no agreement was reached.
• [Mr Anderson] said it was discussed at the meeting “the possibility [of them] gaining a share in the business and/or the profits of the business” at paragraph 9 of his trial affidavit.
• The wife said at paragraph 74 of her trial affidavit that there had not been any agreement as claimed by the husband to the effect that they would acquire a 10% interest in the [country store] for each year that they were employed there, but added that “that concept was discussed as a possibility”.
80 It was further submitted that the qualifications and limitations placed on the wife
and Mrs [Smith]’s statements must be assessed in the context of their interests in the outcome of this litigation. [Mr Anderson] “may genuinely be unable to recall the detail and extent of the discussions, and further his loyalty to his clients may unconsciously have coloured his memory”.
81 As to [QNPL]’s case, it was denied there was any contractual agreement, and
even if there was, it was clearly intended that the view was it was limited to working in the business for payment, and provision of the home. Counsel for [QNPL] pointed to the fact that while the husband’s trial affidavit extensively refers to the terms of the agreement reached in [the north-west], his affidavit of 12 December 2003, at paragraph 6, says “during that visit lengthy discussions took place between [Peta], [Sara] and myself in terms of the agreement later reached. My decision to resign from the [public service] was made on the basis of those discussions and in anticipation of the agreement later reached”.
82 This affects the husband’s credibility when compared to his trial affidavit, but his pleadings do specify the agreement was reached in approximately June 1999, which was after Mrs [Smith]’s visit to [the north – west], the claim in contract relating only to the agreement alleged to have been made in [ the home town] in June 1999.
83 For the second respondent, it was submitted that the applicant’s evidence relating to the meeting in June 1999, both insofar as it alleges an agreement at that
(Page 27)
meeting and its significance for the allegation of a prior agreement in [the north -west] should be rejected, and the evidence of others present, most notably [Mr Anderson], should be preferred. Alternatively, if there was an agreement in the terms claimed, it was an agreement between family members and the applicant has not rebutted the presumption that there was no intention to create legal relations.
84 For the wife, it was submitted that it was most unlikely that family succession as
claimed by the applicant was agreed, having regard to Mr and Mrs [Smith]’s knowledge of the problems of the husband and wife’s marriage, and the other options available to them, for example, putting the business under management or selling it, as eventually occurred.
85 As to the contractual claim, I am satisfied that there was no contract with terms
as alleged by the husband, entered into between the husband and wife and [QNPL] in [the north-west] before the husband and wife moved to [the country town], or subsequently.
86 However, I am satisfied there was an agreement reached between the parties that
the husband and wife would work in the [store] for $600 per week, they would be provided with a home, there would be flexible working hours for the husband until he got on his feet, and that, if things went well, the husband and wife would take over, and probably acquire, the business over a period of years, which may well be 10 years.
87 I have concluded this was an agreement between family members and the
applicant has not rebutted the presumption there was no intention to create legal relations, having regard to the circumstances surrounding the agreement, which was uncertain in its terms.
88 If I am wrong, and there was any contract between the parties, I do not accept the husband’s claim that there was a contract with the terms claimed as to:

• the husband and wife would jointly acquire 10% of the business each year;
• the business would be transferred to them at the conclusion of the tenth year of their employment;
although it is possible that this was the case.
89 However, I certainly am not satisfied that there was a term that, if the husband
and wife separated prior to the conclusion of the tenth year of their employment, the husband would be paid by [QNPL] half of the value of the share in the business jointly acquired to that time by the husband and wife.
90 I do not accept the [Smith’s] would have agreed to this, in principle, or without

more defined terms being negotiated, for example, liability for the debts of the
business.
91 Had there been such a term, it is difficult to understand why the husband would
have needed to ask what he would receive on separation when travelling in the car with Mrs [Smith], when the issue of the provision of a vehicle was said to have been referred to.

(Page 28)
92	The benefits received subsequently through division of profits, use of the
vehicle, etc, arose subsequently as a result of decisions made by [QNPL] and, in reality, Mr and Mrs [Smith] at the time.
93	As to the claim that there was a constructive trust, I accept that [QNPL] (really
Mr and Mrs [Smith]) may have made the representations to the husband referred to immediately above (and set out in subparagraphs 7(c) (d) and (e) of his claim), but not in such specific terms – particularly in relation to what would happen if the husband and wife did not stay in the business and eventually take it over from the [Smith’s]. In particular, I do not accept that they represented that, if the husband and wife separated in less than 10 years, the husband would receive half the value of the husband and wife’s share in the business.
94	If I am wrong in this, I accept the submissions on behalf of the second
respondent that the husband did not act to his detriment in relying on the representations, as in any event, it was very likely he had no real choice at the time as he was going to leave the [public service] anyway because of his mental health and marriage problems.
95	In any event, if any such definite representations were made, these were not made until after he resigned from the [public service]. claim was not unconscionable since:

96 I further accept the second respondent’s submissions that [QNPL]’s denial of the

• the husband had no real future in the [public service];
• he probably would have continued to live in [the town] anyway to be near his children;
• the husband and wife received other benefits from the business.
97 Had the husband and wife received only $600 per week from the business, the

position may have been different. However, they also received other benefits from the
business and later, a share of the profits.
98 I am therefore satisfied that the husband’s claim against the second respondent should be dismissed.

I certify that the preceding [98] paragraphs are a true copy of the reasons for

judgment delivered by this Honourable Court

Associate

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Citations

[R] and [R] & Anor [2007] FCWA 40

Cases Citing This Decision

0

Cases Cited

3

Statutory Material Cited

1

Bathurst City Council v PWC Properties Pty Ltd [1998] HCA 59

Giumelli v Giumelli [1999] HCA 10

Baumgartner v Baumgartner [1987] HCA 59

(a)	the husband would resign from his then position as an officer with the [public service];
(b)	[QNPL] thereupon would employ each of the husband and wife in [the country store];
(c)	the husband and the wife would each be paid $300 per week gross ($600 in total) and in addition the net profits of the [country store] would be divided equally among them, [Peta Smith] and [Kevin Smith] (the husband of [Peta Smith], since deceased);
(d)	the husband and wife would jointly acquire a 10 per cent share in [the country store] for each year that they worked in the business;
(e)	the transfer of the legal ownership of the entire business to the husband and wife would occur at the conclusion of the tenth year of their employment;
(f)	should they separate before the conclusion of the tenth year of their employment, the husband would be paid by [QNPL] half of the interest acquired by them to that time; and
(g)	[QNPL] would purchase and provide for them a house in [the town] and a motor vehicle for their use;
(h)	[QNPL] would hold on trust for the husband and wife its interest as registered proprietor of the property in [Town] occupied, or to be occupied, by the husband and wife.

(a)	[QNPL] would employ each of them in [the country store];
(b)	they would each be paid $300 per week gross ($600 in total) and in addition the net profits of the business would be divided equally among [Kevin] and [Peta Smith], the husband and wife;
(c)	the applicant and the first respondent would jointly acquire for each year during which they were so employed a 10% share in the business;
(d)	the transfer of the legal ownership of the entire business to the husband and wife would occur at the conclusion of the tenth year of their employment;
(e)	should the husband and wife separate prior to this, the husband would be paid by [QNPL] half of the value of the share in the business jointly acquired at that time by the husband and wife;
(f)	[QNPL] would purchase and provide for the husband and wife, a house in [the country town] and a motor vehicle for their use.

(a)	the arrangement between the parties was a family agreement and at no time was there an intention to create binding legal relations in the terms claimed by the Applicant or at all;
(b)	the husband had been on extended sick leave for work related stress prior to resigning his position in the [public service];
(c)	the wife’s mother and father proposed to the husband and the wife that they work in the business so that the husband could limit

“47.	[Nigel] took stress leave from work and didn’t want to return. I became distant from him and depressed. My mother travelled from [her home in the country] to [the north-west] after I telephoned her about the state of my marriage and amongst other things she suggested that we return to [the country town].
48.	We discussed the idea of return to [the country town] and made the decision to do so, I don’t specifically recall discussing employment in my parents’ business of [Smith’s Country Store] then but believe that it would have been because the offer was intended to assist [Nigel] and me deal with our outlook on life and we would need to have an income because [Nigel] decided to resign from the [public service].
(Page 17)
49.	It was decided that I would fly down to Perth and travel to [the country town] to look for a house for sale in [a country town]. I don't now recall when my parents offered to assist us with the purchase of a house in [a the town] but I did select the house at [Angel Ave], [Town] and it was purchased by [QNPL] Nominees Pty Ltd for [Nigel] and me and we contributed $20,000.00 from savings (including the proceeds from the sale of [equipment] we had previously owned). After selecting the house I returned to [to the north-west] to prepare for the family move back to [the country town]. …
74	I am aware that [Nigel] claims that there was an agreement between him and me on the one hand and [QNPL] Nominees Pty Ltd on the other hand to the effect that we would acquire a 10% interest in [Smith's Country Store] for each year that we were employed there. There was no such agreement but that concept was discussed as a possibility.”

(a)	When I visited [Sara] and [Nigel] in April 1999, [Nigel] was not able or willing to return to work in the [public service]. The whole proposal arose out of [Nigel]'s depression and our wish to provide some alternative whereby together [Nigel] and [Sara] could earn a living in a supportive family environment.
(b)	I agree that the arrangement [Kevin] and I entered into with [Nigel] and [Sara] was for them to take combined "drawings" of $600 per week in return for them working in the business.
(c)	I do not recall any discussion with [Nigel] and [Sara] about "profit share" over and above the $600 per week. The notional distribution of profits was something which was decided after the accounts were prepared. [Arthur Anderson] would prepare the papers (including the tax returns) and [Kevin] and/or I would sign them. I understood the notional distribution of profit was all to do with minimising tax, and otherwise didn't have a real effect. In any case that was a matter for [Kevin] and me.

what it had spent in the purchase price, maintaining the property and interest, less rent received.
(e)	[Nigel], [Sara], [Kevin] and I discussed the possibility of [Sara] and [Nigel] taking over the [country store] in the future, but it was a general discussion and no agreement was reached. [Kevin] and I could not have contemplated a situation where over a period of ten years the [country store] was transferred in its entirety to [Nigel] and [Sara]. In 1999 [Kevin] and I were in reasonable health and contemplated many years of life ahead of us. The [country store] represented our major asset and when we were no longer in a position to actively participate we would require an income from it or it would be sold so that we could have an investment income in our retirement.
(f)	The discussions we had about the future of the [country store] did not touch on what might happen if [Kevin] and I were to die. That was not a matter I would have discussed with [Nigel]. Nor did we discuss what would happen if [Nigel] and [Sara] would separate. I would not have contemplated any arrangement which would have seen [Nigel] leave the marriage with part of the [country store]. The purpose of the whole arrangement was to help [Nigel] and [Sara] with the object of keeping their family together.
(g)	[Kevin] and I did not agree in 1999 that the [Smith Family Trust] would provide [Nigel] and [Sara] a motor vehicle for their use although we agreed to pay the fuel and (I think) other costs of their vehicle because it was used (in part) for [business] purposes. Later [Kevin] and I agreed that they could trade in their vehicle and the [Smith Family Trust] would purchase a replacement on hire purchase for their use. As I understand the accounts, the trade-in value of the vehicle was credited to the [Nigel] and [Sara]'s beneficiary accounts.
(h)	[Kevin] and I regarded the arrangement between [Nigel], [Sara], [Kevin]and myself as a family arrangement based on assistance given to family members. I did not contemplate that the arrangement might end up in court.”

(d)	Once the whole business had been transferred [Sara] and I would continue to pay [Peta] and [Kevin] rent for the property from which the business operated which was owned by them (“the business property”);
(e)	[Peta] and [Kevin] would leave the business property to their three children equally in their Wills with a first option to [Sara] and I to purchase it at market value and pay it off over a reasonable time. They would then leave their home to the other two children equally as [Sara] and I would have the business;
(f)	The transfer of the ownership of the business would occur at a later date when the business was in a better position financially.”

(d)	given consideration to the appropriateness of the current structure by which the business was held (a discretionary trust) and recommended a structure such as a company or unit trust which would permit transfers of ownership from the [Smiths] to [Nigel] and [Sara];
(e)	given consideration to stamp duty and capital gains tax is[Sara’s];
(f)	given consideration to the most appropriate structure for [Nigel] and [Sara] to hold their interest in the business (for example the establishment of a discretionary family trust of which [Nigel],[Sara] and their children were beneficiaries);
(g)	recommended to [Kevin] and [Peta Smith] that they have their arrangements properly documented by a firm of solicitors; and
(h)	given consideration in preparing tax returns for 1999-2000 and subsequent years for [Nigel] and [Sara] [R] as to whether the value of 10% of the business being transferred to them should be declared as income in each year.

(a)	the evidence being hearsay evidence of a statement of a person who died before the commencement of the proceedings;
(b)	the form of the statement alleged is of an intention to make a gift conditional on certain things happening;
(c)	the statement is said to have been made after the date on which agreement is alleged to have been made so might (if it were made) refer to an intention formed after the date of the alleged agreement;
(d)	the statement “they’ll own the whole lot in five or ten years” indicates a level of uncertainty inconsistent with the certainty of the alleged agreement and internally inconsistent with the statement “we’ll give them 10% of the shop each year.”

•	the husband had no real future in the [public service];
•	he probably would have continued to live in [the town] anyway to be near his children;
•	the husband and wife received other benefits from the business.

[2007] FCWA 40

19 MARCH 2007