Sledge and Pinder and Anor
[2017] FCCA 3051
•15 December 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SLEDGE & PINDER & ANOR | [2017] FCCA 3051 |
| Catchwords: FAMILY LAW – Property – just and equitable settlement – whether the Intervenor holds an equitable interest in the parties’ property and if so, in what quantum – where there are significant initial contributions on the part of the Applicant – where the Respondent has made no post-separation contributions. |
| Legislation: Family Law Act 1975(Cth), ss.90MT(1)(a), 90SF(3), 79(2), 90SM(3), 90SM(1), 90SM(4) |
| Cases cited: Goldstraw v Goldstraw [2002] VSC 491 Baumgartner v Baumgartner (1987) 164 CLR 137 |
| Applicant: | MS SLEDGE |
| First Respondent: | MR PINDER |
| Intervenor: | MS POTTS |
| File Number: | MLC 3002 of 2015 |
| Judgment of: | Judge Small |
| Hearing dates: | 27, 28 & 29 March 2017 |
| Date of Last Submission: | 1 May 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 15 December 2017 |
REPRESENTATION
| Counsel for the Applicant: | Ms Marshall |
| Solicitors for the Applicant: | Anthony's Solicitors |
| Counsel for the Respondent: | Mr Isles |
| Solicitors for the Respondent: Counsel for the Intervenor: | Callahans Lawyers Mr McIvor |
| Solicitors for the Intervenor: | Jim McCarthy Lawyers |
DECLARATION
THE COURT DECLARES THAT
The Applicant and the Respondent were engaged in de facto relationship between 1999 and 2014.
The Applicant and the Respondent hold 75.9% of the net proceeds of sale of the property known as and situate at Property A in the State of Victoria on a constructive trust for the Intervenor being in the sum of $260,098.
ORDERS
Within 60 days (“the due date”), the Applicant shall do all such acts and things and sign all such documents as may be necessary to pay to the Intervenor the sum of $140,098 (“the first payment”).
Within 60 days (that is, by the due date) the Applicant shall pay to the Respondent the sum of $45,054.80 (“the second payment”).
If the first and second payments are not made by the due date, then the Applicant and the Respondent shall do all such acts and things and sign all such documents as may be necessary to place the property situate at and known as Property B in the State of Victoria (“the real property”) on the market for sale (“the sale”), and the proceeds of the sale shall be distributed as follows:
(a)first to pay all costs and commissions of the sale;
(b)second to discharge any encumbrances over the real property;
(c)third to pay so much of the first and second payments as is outstanding to the Intervenor and Respondent respectively, plus interest from the due date to the date of each payment at the rate of 10% per annum; and
(d)fourth the remainder to be retained by the Applicant.
In the event that the real property is to be sold pursuant to the provisions of paragraph (5) hereof:
(a)the Applicant and the Respondent shall agree on a Real Estate Agent to conduct the sale, and failing agreement they shall ask the President of the Real Estate Institute of Victoria to provide the names of three Real Estate Agents operating in (omitted) and surrounding areas and each of the Applicant and the First Respondent shall have the right to reject one name provided; and
(b)pending settlement of the sale, the Applicant shall have the sole right of occupation of the real property and shall make all payments in relation to the mortgage and other outgoings as and when they fall due.
The Applicant shall retain for her own use and benefit absolutely the BMW motor vehicle registration number (omitted), or any proceeds from the sale of that vehicle.
The Respondent shall retain for his own use and benefit absolutely his Subaru motor vehicle or any proceeds from the sale of that vehicle.
The funds held in trust by the Applicant’s solicitors on behalf of the Applicant and the Respondent shall become the property of the Respondent and shall be released to him forthwith.
In accordance with s.90MT(1)(a) of the Family Law Act 1975 (Cth), whenever a splittable payment becomes payable in respect of the superannuation interest of the Applicant Ms Sledge in the (employer omitted) Superannuation Plan (“the Fund”), the Respondent Mr Pinder will be entitled to be paid an amount calculated in accordance with Part VI of the Family Law (Superannuation) Regulations 2001 (Cth) using the base amount of $33,681 (thirty three thousand six hundred and eighty one dollars) and there will be a corresponding reduction in the entitlement of the Applicant.
The trustee of the Fund must comply with the obligations imposed upon trustees of eligible superannuation plans under the Family Law Act 1975 (Cth) and the Family Law (Superannuation) Regulations 2001 (Cth).
The Applicant is hereby restrained by herself her servants and agents from making any binding death benefit nomination to the trustee of the Fund in favour of any person who is an eligible beneficiary within the meaning of reg.13 of the Family Law (Superannuation) Regulations 2001 (Cth) which would have the effect of diminishing the value to the Respondent of the splitting order made in paragraph 10 hereof.
Paragraphs 10 and 11 of these Orders bind the trustee of the Fund when these paragraphs take effect from the operative time, being the fourth business day after the date these Orders are served upon the trustee.
The Applicant and the Respondent shall do all such things and execute all such documents as are necessary to facilitate the rollover by the trustee of the Fund of the Applicant’s entitlements pursuant to paragraph 10 of these Orders to another regulated superannuation fund, an approved deposit fund, or a retirement savings account or other such applicable fund or account at the sole nomination of the Respondent as soon as that is practicably possible after the operative time.
IT IS NOTED that publication of this judgment under the pseudonym Sledge & Pinder & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 3002 of 2015
| MS SLEDGE |
Applicant
And
| MR PINDER |
Respondent
And
| MS POTTS |
Intervenor
REASONS FOR JUDGMENT
Introduction
These are property proceedings arising from the breakdown in the de facto relationship between Ms Sledge (“Ms Sledge” or “the Applicant”) and Mr Pinder (“Mr Pinder” or “the Respondent”) (collectively “the parties”).
Ms Potts is the mother of the Respondent and is the Intervenor in the proceedings, having been granted leave to intervene shortly before the trial began. For the sake of convenience, I shall refer to her as “Ms Potts” or “the Intervenor”.
Ms Potts seeks a share of the sale proceeds of the property at Property A (“the Property A property”) (“ the sale proceeds”), which was owned by the parties and her, she says, proportionate to the amount that they invested in that property, in which she lived for some 12 years.
The Intervenor has already received the sum of $120,000 from the sale proceeds, that being the actual amount that she says she invested. It is her case that she should receive 76% of the sale proceeds overall, based on what she says is a constructive trust whereby the Applicant and Respondent hold the total sale proceeds on trust for themselves and her in the proportions 24% to the parties and 76% to her.
Ms Sledge seeks a property settlement such that she receives 80% of the nett assets of the relationship between her and the Respondent, including an Order that she retain the property at Property B (“the Property B property”). She also seeks a superannuation splitting order which would see the sum of $36,505 of her entitlements being rolled into a superannuation account in the Respondent’s name.
She seeks a declaration that there is no constructive trust by which the Applicant and the Respondent hold the proceeds of sale of the Property A property on trust for the Intervenor.
However, if the Court were not to make such a declaration, and the Intervenor were successful in her claim that she is the beneficiary of such a constructive trust, Ms Sledge proposes that Ms Potts should retain only the $120,000 already paid to her from the sale proceeds pursuant to orders made 21 January 2016, “in acknowledgement of her gift of the Property C (sic) unit to the applicant and her son”[1] .
[1] Applicant's Closing Submission filed 1 May 2017 paragraph 2.
Mr Pinder seeks orders that two thirds of the total sale proceeds be paid to the Intervenor, and that he receive 40% of the balance of the net assets of the de facto relationship, and the Applicant 60%.
Therefore, the issues to be decided in this matter are, as agreed between the bar and the bench at the commencement of the trial:
A.Whether the sale proceeds from the Property A property are held by the Applicant and the Respondent on a constructive trust for the Intervenor, and if so, in what quantum?
B.Once Issue A has been decided, is it just and equitable to alter the property interests of the parties to the de facto relationship?
C.Once Issue A is decided, and if it is just and equitable to alter the parties’ property interests, what is the property to be distributed as between the Applicant and the Respondent, what are the interests held by the Applicant and the Respondent in that property, and what is the value of those interests?
D.What were the parties’ contributions to their property?
i.Who should be held responsible for the encumbrances placed over the Property B property as a result of credit card and other debts incurred by the Applicant and the Respondent?
E.Should there be an adjustment to the contribution-based entitlements of the parties after a consideration of the matters set out in s.90SF(3) of the Family Law Act 1975 (Cth) (“the Act”)?
F.In light of the above findings, what Orders should be made to effect a just and equitable division of property between the parties?
Background
The Applicant was born on (omitted) 1964 in (country omitted) and migrated to Australia in 1971 at the age of 7 years. She was 52 years old at the time of trial. She is employed by (employer omitted) in their (omitted department). She lives in the former family home with the parties’ son.
The Respondent was born in Australia on (omitted) 1965 and is therefore 52 years old. When he was about 5 years old, his family returned to (country omitted), remaining there for some 7 years before again migrating to Australia in 1977 when Mr Pinder was 12.
He lives with his mother and is currently in receipt of a Carer’s Pension, although he has previously been employed as a (occupation omitted).
The Intervenor was born in (country omitted) on (omitted) 1944 and, at 73 years old, is a retired pensioner. She lives with her son, the Respondent in these proceedings.
The Applicant and the Respondent commenced a relationship in 1998 and began living together in 1999. Both had previously been married and Ms Sledge has two now adult children, who lived with the parties during the relationship.
They initially separated in January 2014 when police were called to their home after the Respondent allegedly became violent and began destroying property. The Applicant obtained an Intervention Order against him at that time, that Intervention Order being varied to allow him to return to the family home in April 2014 when the parties reconciled.
The parties separated on final basis in mid-2014.
There is one child of the relationship, X born (omitted) 2001 (“X”), who resides with the Applicant. X spends no time with his father.
Court History
This matter first came before the Court on 11 June 2015 in the Duty List after an Initiating Application was filed by Ms Sledge on 13 April 2015.
In that Initiating Application, the Applicant sought orders that she retain and refinance the family home at Property B (“the Property B property”), that she retain her BMW motor vehicle, and that the Property A property be sold with the proceeds being divided such that the Intervenor receive the sum of $120,000 and the balance divided 70% to the Applicant and 30% to the Respondent.
On 11 June 2015, orders were made for Mr Pinder to file a Response, Financial Statement and Affidavit by 26 June 2015, and for the parties to attend a Conciliation Conference on 11 September 2015. The matter was otherwise adjourned for Mention to 16 November 2015.
The Respondent filed his Response, Affidavit and Financial Statement on 2 July 2015 seeking only that “there be a fair and equitable distribution of the property/assets of the relationship”.
The parties attended the Conciliation Conference on 11 September 2015 before Registrar Rose.
The Conciliation Conference did not proceed because there was uncertainty about Ms Potts’ position in relation to the Property A property and there was a dispute about discovery. Interim Orders were made by Registrar Rose for the Application and Response to be served on the Intervenor, that order being made by consent. Both parties’ costs of that day were reserved to the next court event.
The matter then came before me again on 18 November 2015 where I made procedural orders setting the matter down for trial on 30 November 2016 with the usual trial directions.
On 21 January 2016 the Applicant filed an Application in a Case seeking orders that the Property A property be sold to pay down debt (specifically a mortgage loan in relation to the Property B property owed to (omitted) Bank), or alternatively, that the Respondent pay rent to the Applicant to cover the mortgage payments on the Property A property.
The Respondent filed only an affidavit in response to the Application in a Case on 8 April 2016.
On 23 May 2016, with both parties being represented, I heard the Application in a Case and made orders by consent for the Property A property to be sold.
From the sale proceeds, sale costs and commissions of the sale were to be paid, the Intervenor was to be paid the sum of $120,000 and the balance was to be applied to reduce the mortgage held over the Property B property. The Wife’s costs of the day were reserved to trial.
On 30 November 2016 the matter came before me for trial. It did not proceed on that day and was adjourned to 27 March 2017 in order for the Intervenor to file an Application in a Case to join the proceedings. Further Orders were made for the parties to file any further Affidavits or Financial Statements upon which they sought to rely and for a sworn valuation of the Property B property to be filed with the Court.
On 13 January 2017 the Intervenor filed an Application in a Case in which she sought that the parties pay to her a sum equal to the whole of the net sale proceeds from the sale of the Property A property.
On 9 March 2017 the Applicant filed a response to the Application in a Case and a supporting Affidavit.
The matter came before me again on 9 March 2017 for a Mention where I granted leave for the Intervenor to be joined to the proceedings with the consent of the other parties. I also made further Orders for the Intervenor to file and serve a further Affidavit and for the parties to file further Affidavit material.
The Applicant filed further Affidavits on 14 March 2017 and 21 March 2017, and yet another on 24 March 2017.
She filed her Outline of Case Document on 27 March 2017, which I note was the first morning of trial, while the Respondent appears to have relied on his Outline of Case Document filed 29 November 2016, and it would seem that the Intervenor’s Outline of Case Document was handed up on the first day of trial.
The final hearing of matter then proceeded before me on 27 March 2017 for 3 days.
Witnesses were the Applicant, the Respondent and the Intervenor, all of whom underwent cross-examination.
At the completion of the evidence, counsel for the Intervenor handed up written submissions and also made oral submissions.
Counsel for the Respondent made oral submissions during the trial.
I ordered the Applicant to file written submissions by 30 April 2017 and the Respondent and the Intervenor to file any submissions in reply by 7 May 2017. I otherwise reserved my judgment.
The Applicant filed her written submissions on 1 May 2017. Neither the Respondent nor the Intervenor filed any further submissions in reply.
Issues, Evidence and Findings
A. Whether the sale proceeds from the Property A property are held by the Applicant and the Respondent on a constructive trust for the Intervenor and if so, in what quantum?
The Evidence
It is the Intervenor’s unchallenged evidence that on (omitted) 1991 she became the sole proprietor of the property at Property C as a result of her husband’s death on (omitted) 1991.
On (omitted) 1993 the Intervenor sold that property for $85,000, and on (omitted) 1993 she purchased the property at Property C (“the Property C property”) for $65,000. The Property C property was unencumbered after the purchase and remained so for the remainder of the time it was owned and occupied by the Intervenor.
In 2000, Ms Potts was living in the Property C property with her partner, Mr E (“Mr E”), living with her for some of the time. According to her evidence, in that year the parties approached her with the suggestion that she transfer the Property C property to them so that they might sell it and purchase a property for her closer to where they lived.
On (omitted) 2000, a Transfer of Land for the Property C property was signed by the Intervenor as transferor and the Applicant and Respondent as transferees. The consideration for the transfer was said to be “natural love and affection”. The signatures on that document were witnessed by the Applicant’s solicitor[2], and it is the Intervenor’s evidence that she neither sought nor received independent legal or financial advice before signing it.
[2] I note that the solicitor who acted for the parties in that transaction is the same solicitor who represented the Applicant in these proceedings.
On (omitted) 2001 the Property C property was sold by the parties for the sum of $124,500. It is the Intervenor’s evidence that they retained $120,000 from those sale proceeds so that they could purchase a property for her.
Unknown to the Intervenor (she says), the $120,000 received from the sale of the Property C property was not put directly towards the purchase of such a property, but placed either in the joint account of the Applicant and the Respondent (according to the Applicant) or in a home safe in the form of cash (according to the Respondent).
On (omitted) 2001 the parties signed a Contract of Sale to purchase the Property A property for $150,000, the settlement of that sale occurring on (omitted) 2002 with the Applicant and Respondent being registered as joint proprietors.
The Applicant says that her property at Property D (“the Property D property”), owned by her prior to the parties commencing their de facto relationship, and which was at the time of the purchase of the Property A property the place of residence of her and the Respondent, was used as security for the Property A property purchase[3].
[3] Outline of Case Document of the Applicant filed 27 March 2017 page 4.
Shortly after settlement of the Property A purchase, the Intervenor and Mr E moved into the Property A property, and it is her evidence that the parties assured her that the Property A property was her own.
It would appear therefore that there was about a year between the settlement of the Property C property sale, which meant that the Intervenor had to vacate that property, and the settlement of the Property A property purchase, after which she moved into that property[4].
[4] It is clear from the overall evidence that the relationship between Ms Potts and Mr E began sometime in the 1990s and that during the parties’ relationship they lived together at various times, sometimes at the Property C or Property A properties, and sometimes at Mr E’s property at (omitted). It is the evidence of both Ms Potts and Mr Pinder that she lived with Mr E in (omitted) while the Property A property was being built. Mr E makes no claim on the Property A property.
Ms Potts lived in the Property A property from about (omitted) 2002 until the property was sold in December 2016.
On 23 May 2016, after the Applicant and Respondent had separated and the Applicant had instituted proceedings in this court, Orders were made by consent between the parties for the Property A property to be sold and, after the sales costs had been paid, for $120,000 to be paid to the Intervenor, with the balance to be paid to reduce the mortgage on the Property B property. It is the evidence of the Intervenor that she was not privy to any negotiations involved in the making of those Orders.
On 2 December 2016, the Property A property was sold for $355,000. On that day the sum of $120,000 was paid to the Intervenor pursuant to the orders of 23 May 2016.
On the same day, the sum of $202,687 was dispersed to the home loan secured by the mortgage over the Property B property, and the sum of $6069 was retained in the trust account of the Applicant’s lawyers.
So much is agreed between the parties, and it is the Applicant’s evidence that the sum of $13,930 was paid to a debt collection agency for the removal of a caveat over the property at the settlement of the Property A property sale. I infer from those figures that the sale costs of the Property A property were about $12,314.
I note that on 23 May 2016, when Orders were made for that distribution, and on 2 December 2016, when the sale proceeds were distributed, Ms Potts had not yet been joined to these proceedings.
She filed her Application in a Case to intervene on 13 January 2017, that Application being granted on 9 March 2017.
In her affidavit sworn and filed on 13 January 2017, Ms Potts deposes that Ms Sledge and her son had told her that while she would be the owner of the Property A property, it would have to be registered in their names so they could use it as security for their borrowings. It is her evidence that she accepted that situation because “this did not affect my ownership of Property A but merely assisted them to buy a property in which they could live”.
Ms Potts deposes that “I don’t read, or write English and have limited understanding of it”, and that she relied on her son and his partner to explain the documents to her when she signed the Transfer of Land on (omitted) 2000. I note that her affidavit was sworn through an interpreter, and that her oral evidence at trial was also given through a (language omitted) interpreter.
Ms Potts then deposes:
11. I always simply accepted what I was told in relation to what the transactions were and what was occurring in relation to the properties. I accepted the representation made to me by the Applicant and/or my son that I “would own Property A”. In accepting that I was prepared to sell Property C. I did not have independent legal advice or financial advice at any stage of these transactions. After the purchase of Property A, in accordance with what I understood to be our agreement I took up residence there with my partner Mr E
12. Again in accordance with the agreement reached between us, my partner and I paid the rates, all the utilities (sic). I was aware that the Applicant and the Respondent had borrowed against the property as part of their borrowing for their own home and other financial activities in which they were involved. I was content for this to occur as long as they maintained those borrowing (sic) as I had accepted when the purchase was made.
Ms Potts deposes that she and Mr E had made improvements to the property by constructing fences and a verandah, by planting fruit trees and by occupying and maintaining the property.
She is clear in her evidence that it was her understanding that monies gained from the sale of the Property C property would be invested in a property which she would own and live in, despite it being registered in the joint names of the Applicant and the Respondent. Ms Potts says that “at no time during the years we occupied Property A did the parties or either of them make any suggestion to me that the property was other than mine”.
When she was told that the Property A property would have to be sold after the Applicant and her son separated, Ms Potts deposes that “I was not agreeable to this but not being on the title of the property, I did not have any power to do anything about it”.
That statement, of course, indicates a misunderstanding of the law, as Ms Potts could have sought to place a caveat over the title to the Property A property to protect her interest in the property.
It is her case that, as she invested almost the whole of the proceeds of sale from the Property C property indirectly into the Property A property, and the Applicant and Respondent made representations to her that she would and did own the Property A property, the Applicant and the Respondent hold the beneficial interest in the proceeds of sale from the Property A property on trust for her by way of a constructive trust.
Initially, she claimed the whole of the sale proceeds from the Property A property, but at trial that position had changed, so that she claimed that the beneficial interest in the Property A sale proceeds was held on trust by the parties for her and them in the proportions in which they had contributed to its purchase, they being 75.9% contributed by her and 24.1% contributed by the parties.
In her Trial Affidavit sworn and filed on 16 March 2017, Ms Potts deposes that she was “comfortable in my property at Property C” but that nevertheless she had been “agreeable to moving closer to the Applicant and Respondent to spend more time with them, and my grandson X”.
She is adamant in rejecting Ms Sledge’s denial that the parties asked her to transfer the Property C property, saying:
7.(d) […] I transferred the Property C as the Respondent and Applicant (sic) as they had asked me to and promised me that they would sell the Unit and use the proceeds to buy property for me close to them. I trusted the applicant and respondent…..
7(e) I do not agree that I “wanted to gift” my Property C to the parties….. but did so as the parties promised that I would receive a property closer to them. I accepted what the Respondent and Applicant told me and did as they asked.
and
(e)[…] I disagree with the Applicant’s comments where she says that there was “never any discussion that the Property A property” would belong to me. This is not true. The Applicant and Respondent promised that they would buy a property for me and told me that I “owned Property A”, and that “Property A was mine”, but that it needed to be registered in their names as they needed to borrow to buy their own home (or words to that effect). Again, I accepted what I was told and trusted the Applicant and Respondent.
Ms Potts repeats that she and her partner had paid the rates and utilities on the property, either by attending at the Council offices, or at the local post office, or occasionally by giving money to her son, the Respondent, who would then pay the rates and for utilities on her behalf.
It is her further evidence that the parties “suggested that I should apply for rental assistance from Centrelink to increase my pension. I applied and began receiving rental assistance from Centrelink in about 2008”.
She states that while she has not retained receipts for work completed on the Property A property during her 14½ years or so of residence, she “did arrange for repairs and improvements to the property, including the construction of a fence, construction of the verandas, installation of an air conditioning system, and planting of many fruit trees and sprinling system (sic). I treated the property as my own and believed it was mine as this is what the Applicant and Respondent had told me”.
It is Ms Potts’ evidence that while her son had told her after the commencement of these proceedings that the Property A property would need to be sold to pay the parties’ debt to the bank, she was not aware of the details of the sale, nor of the encumbrances over the Property A property, until she consulted lawyers in January 2017. She deposes that she was not aware of the extent of the borrowings secured by the Property A property until she read the parties’ earlier affidavits at that time through an interpreter arranged by her lawyers.
She acknowledges receipt of $120,000 from the sale proceeds, and states she does not know what has happened to the remainder of the sale proceeds save for the monies held in trust by the Applicant’s solicitor which at the time of trial amounted to a little over $6000.
Ms Potts deposes that:
11. I would have been far better off had I remained living in my Property C as I have not received any benefit from the uplift in value of the Property A property, which I understand was sold for $355,000 last year. This is despite the fact that I contributed the sum of $120,000 towards the property, which represents 4/5ths of the purchase price. Neither the Applicant nor the Respondent have (sic) ever paid me any interest for my contribution.
In her initial Affidavit sworn 27 March and filed 13 April 2015[5], the Applicant states the following:
20. In or about 2005 the Respondent and I purchased in our joint names a residential property being Property A. The property was purchased for the Respondent’s mother to live in. The said property was purchased under a house and land package for the total sum of $180,000.
21. The Respondent’s mother contributed $120,000 towards the purchase of the property whilst we contributed the sum of $60,000 towards the purchase of the property which we borrowed from the (omitted) Bank. The loan is secured over Property A and the Property B property.
22. The Respondent has made no financial contribution towards the property. I have paid all of the mortgage payments on the loan whilst the Respondent and his mother live in the property rent free.
[5] I set out the Applicant’s evidence contained in her affidavits filed 13 April 2015, 21 January 2016, and 20 May 2016 simply to make the point that these affidavits contain material in conflict with her later affidavits and with some of her evidence given at trial. I am aware that the Applicant relies only on her Affidavits sworn 7, 14 and 24 March 2017 in these proceedings, but she has been represented throughout, and the discrepancies between her affidavits, and between her affidavits and her oral evidence go to the issue of credit.
On 21 January 2016 the Applicant filed an Application in a Case for orders for the sale of the Property A property or, alternatively, for the Respondent to pay rent to the Applicant to cover the mortgage payments on that property.
In her affidavit sworn on 22 December 2015 and filed on 21 January 2016 in support of her Application in a Case, the Applicant makes no mention whatsoever of the Intervenor or her contributions to the purchase of the Property A property.
Ms Sledge states the following in an affidavit sworn and filed on 20 May 2016:
7.The respondent’s mother has been living in the Property A property since its purchase in 2002. This is one of the properties that the (omitted) Bank home loan is secured against. Monies were borrowed in order to purchase this property with a contribution from the respondent’s mother of approximately $113,000.
8.The respondent’s mother has never made any Loan (sic) payments or paid other expenses associated with the property. Council rates are currently in arrears and to prevent the council from proceeding with debt recovery, I had negotiated a payment plan with them to pay outstanding rates on both the family home and this property.
9. Consent Orders were made on 11 September 2015 at the Conciliation conference, to address the issue of the Respondent’s Mother (sic) alleged equitable interest and provide her with an opportunity to be joined to these proceedings, which include the following:
1. That the respondent’s mother MS POTTS be served within 7 days, with a copy of the applicant wife’s (sic) initiating application filed on 13.4 .2015 and the Respondent husband’s response filed on 2.7 .2015, by the Respondent together with a copy of the Interim Orders of Judge Small made on 11.6 .2015
2. That the Respondent’s mother be advised that this matter is next listed in the Federal circuit court of Australia at 16.11 .2015 at 9:30 AM for mention
16. (sic) The mother to date has not joined these proceedings, despite being provided with the opportunity to do so.
In her Outline of Case Document filed on 28 November 2016 for the original final hearing date of 30 November 2016, the Applicant does not mention the Intervenor when she sets out the details of the purchase of the Property A property, merely saying that at separation “(t)he respondent move(d) out of family home into Property A with his mother and refuse(d) to make any mortgage or rate payments”. The only other mention of the Intervenor in that document is that the Respondent’s mother was paid $120,000 upon the sale of the Property A property.
Under the heading “Orders Sought” the Applicant seeks an order “(t)hat the funds held in the Applicant’s Solicitor’s trust account be paid to the Applicant”.
In her affidavit sworn and filed on 7 March 2017, Ms Sledge deposes that neither she nor the Respondent ever asked Ms Potts to transfer the Property C property to them. She further denies that either she or the Respondent ever promised the Intervenor that she would “receive the property at Property A”.
She then states:
9. […] I believe that the Respondent and I asked if she would like to live closer to us. She said that she did support the idea and we told her then that if she ever decided to sell her Property C unit that we would assist her by making up any shortfall in the purchase price.
10. Ms. Potts thought about the idea of moving closer to us primarily because she was alone for long periods of time and she wanted to spend more time with us and my son. At times she also complained that her Unit which had only one bedroom and was very small was too small especially when she had visitors over.
11. That after some time, Ms. Potts told the Respondent and I (sic) that she was in favour of selling her Property C and moving closer to us. Ms. Potts told the Respondent and I (sic) that she wanted to gift her Unit to us so that we could sell it when we had found a suitable place for her to live in. There was never any discussion that the Property A property would be registered in her name or that it belonged to her. Ms. Potts was very well aware of the fact that whilst she would be contributing towards this purchase of the property, the Respondent and I needed to borrow money to purchase the property as there would be a shortfall. Ms. Potts was also aware that as we needed to borrow the money to purchase Property A that our names needed to be on the Title in order to obtain a loan. Ms. Potts is well aware of the fact that there were insufficient funds from the sale of the Property C to purchase the Property A property.
12. That I further do not agree with the comments made by Ms. Potts that the Respondent and I had to register the Property A property in our name so that we could purchase “their home in Property B”. This is not true. Ms. Potts had been living at the Property A property for about 7 to 8 years before we decided to purchase the property at Property B[6].
[6] I note that the evidence as a whole indicates that the Property C property was transferred to the parties on (omitted) 2000 and was sold in (omitted) 2001. The Property A property was purchased in (omitted) 2001, that purchase settling in (omitted) 2002. The Property B property was purchased in 2004. That is, the Intervenor can have been living at the Property A property for only two years at most when the Property B property was purchased.
[…]
15. […] Ms Potts wanted to gift her Property C to us so that we could sell it and use the proceeds of sale to purchase a unit closer to us. In fact this is what we did. Our Lawyer prepared the Transfer for this to occur. I cannot say whether Ms. Potts obtained independent advice or not, however it was her decision to gift Property C unit to us. At no stage did the Respondent or I force or coerce her into making this decision. Ms Potts could have obtained legal and financial advice if she wanted to.
Ms Sledge concedes that “Ms Potts and her partner paid some of the rates on the property”. However, she states that Ms Potts had offered to do so as she was appreciative of “what we had done for her”. She states further that Ms Potts only paid the rates for a short time, after which she and Mr Pinder had been responsible for those payments.
She further denies the Intervenor’s claim to having made improvements to the property, and complains that the Intervenor had provided no evidence of any monies spent on the property after its purchase.
The Applicant then alleges that the Intervenor received rent assistance from Centrelink, telling Centrelink that she was renting the Property A property.
In her affidavit sworn and filed on 14 March 2017, Ms Sledge repeats her claim that the Property C property was “gifted” to the parties, and refers to the consideration on the Transfer of Land being stated as “by way of natural love and affection”.
In this affidavit it is the Applicant’s evidence that she and the Respondent purchased the Property A property in (omitted) 2002 for $150,000 plus stamp duty and purchase costs. She says that they paid a deposit of $15,000 and “at settlement we paid the remaining balance owed of $135,828.42 by way of a mortgage loan of $113,125.50 and a contribution by the respondent and I, of $22,702.92. Stamp duty of approximately $4000 was also paid by us”.
In other words, she makes no mention of the $120,000 provided to the parties by the Intervenor after the sale of the Property C property, although she does say that upon the sale of the Property A property $120,000 was paid to the Intervenor.
Later in that affidavit Ms Sledge claims that she and Mr Pinder claimed the Property A property as a rental property in their tax returns implying that the Intervenor was merely renting the property.
In his initial affidavit sworn 30 June and filed 2 July 2015, Mr Pinder says only this in relation to the purchase of the Property A property:
7(e) In 2004/2005 (?)(sic) we jointly purchased Property A, both as a place for my mother to live in and in part as an investment property. It cost $180,000. My mother in fact sold her previous home from which she provided the sum of $120,000 towards the purchase. The balance of $60,000 was to have been provided from common funds. This property is registered in both my name and that of the applicant. My mother resides there and is aged 70 years.
On 8 April 2016 Mr Pinder filed an affidavit sworn 29 March 2016 in response to the Applicant’s affidavit of 22 December 2015 and filed 21 January 2016.
In relation to this issue, he says only that the Applicant’s affidavit “ignores the equitable interest of my mother, she having contributed the sum of $120,000 towards a total purchase price of $180,000, with respect to Property A, where I continue to reside with my mother”.
In his trial affidavit sworn 10 March and filed 14 March 2017, the Respondent makes the following rather startling claim in relation to the events surrounding the sale of the Property C property and the purchase of the Property A property:
4.In (the) context (of the Applicant managing all the parties’ financial affairs throughout the relationship), I provide a composite recollection of events as follows:
a. My mother’s Property C unit was sold for $124,500. The net proceeds was (sic) placed in a home safe. This amount was added to subsequently via family activity.
[b.]
c. A (omitted) licence was bought on (omitted) 1999, with a total outlay of $324,000.00 (including (omitted)). A (omitted) Bank loan of $193,000.00 was used to facilitate payment. The balance of the purchase price namely $131,000.00 was paid from cash funds held in our family safe, which amount included in part proceeds of my mothers (sic) money of the sale (Property C property) (sic). It is my recollection that my mother’s money was retained in the family safe for a period of approximately 18 months.
d. Property A, was bought in 1999/2000, for $150,000. Again, this was purchased by way of a cash deposit of $70,000 approximately retained in the family safe. The balance of $90,000 was provided by way of a (omitted) Bank (sic) loan.
Mr Pinder confirms that the Property A property was used as security to borrow monies for the purchase of the Property B property.
Later in that affidavit, the Respondent deposes thus:
9. The property at Property A was purchased with the deliberate purpose of providing accommodation for my mother. I refer to the Affidavit of my mother sworn the 13th January 2017 in support of her Application in a Case, joined to these proceedings (sic). It is now clear to me from the exhibits attached thereto, that my mother sold her Property C home for the sum of $124,500. Further that the property known and situate at Property A was purchased for the sum of $150,000 and not the sum of $180,000 as stated in previous affidavits. This property was purchased in the joint names of the Applicant and the Respondent but it was done so (sic) with the specific intention of providing my mother with ongoing accommodation during her lifetime. It was always intended between the Applicant and myself, as a result of conversations, that my mother would, in her lifetime, have an interest in the property proportionate to the monies advanced. My mother made available from the sale of her Property C property the sum of $120,000 with respect to the future purchase of a property to facilitate her accommodation during her lifetime. I believe that her contribution necessitates apportionment of the matrimonial assets (sic) in her favour to reflect that contribution.
At trial, all parties underwent cross-examination on this issue.
In relation to where the money from the sale of the Property C property was placed, in stark contrast to the affidavit evidence of the Respondent, the Applicant denied that there had ever been a home safe in the parties’ homes at all.
When asked specifically by counsel for the Respondent whether “any money from the Intervenor in this matter (had gone) into the purchase of (the Property A) property” Ms Sledge said “No”, but when pressed she stated that none of that money had gone into the Property A property purchase “at that time”.
When asked where the money for the Property A property purchase had come from, she stated that she had refinanced her property at Property D, which she had owned prior to the relationship, and that the parties had obtained a loan to complete the purchase of the Property A property “as an investment property”.
However, when she was asked where the sale proceeds from the Property C property had gone, Ms Sledge said:
Yes, we did use the money for a deposit for purchasing Property A because it was house and land package. We had asked the mother – we asked the mother because at times we used to go and pick her up when she was not well, so for – she wanted to be closer to us so her idea was to sell the property and come closer to us. At the time she knew that we were purchasing an investment property so she wanted to move closer to us.
It was Ms Sledge’s evidence that the parties intended “to accommodate her until her natural life” and “not for her to own the property. There was no agreement on that”.
She confirmed her counsel’s statement made earlier that her primary position was that the Intervener should repay the whole of the $120,000 that she had received and that those funds should become part of the property pool to be divided between the parties.
Ms Sledge was then cross-examined by Mr McIvor, counsel for the Intervenor, and she confirmed her evidence about the process whereby the Property C property had been transferred to the names of her and Mr Pinder in (omitted) 2000, and then sold on (omitted) 2001 for $124,500.
She further confirmed that the parties had purchased the Property A property by signing a contract of sale on 19 September 2001 for a purchase price of $150,000. When it was suggested that the Property C property had been transferred to the parties on the basis that they would sell it, the following exchange took place:
Counsel: Is that right?
The Applicant: It was gifted to us.
Counsel: On the basis you would sell it?
The Applicant: Yes.
Counsel: And the agreement was that you would then use the proceeds of sale to buy another property closer to you?
The Applicant: No.
Mr McIvor then took Ms Sledge to her affidavit sworn and filed on 7 March 2017 where she had sworn, at paragraph 11, that Ms Potts had gifted the Property C property to the parties “so that we could sell it when we had found a suitable place for her to live in”.
Mr McIvor asked again:
So she has only given you the property on the basis that you would use the proceeds of sale towards another property for her to live in?
The Applicant: Yes…but to give her accommodation for her, not to own the property
Counsel: For her life?
The Applicant: Yes.
Ms Sledge denied that she had understood at the time she instituted these proceedings that if Ms Potts’ claim to the sale proceeds were successful, that would affect how much property would be available for distribution between her and Mr Pinder, saying that she had decided to give Ms Potts $120,000 from the sale proceeds because “being an old woman…. I felt sorry for her”.
Counsel then took Ms Sledge to several inconsistencies in her affidavit evidence which can be seen above, and after being pressed about those inconsistencies, and on the question of whether there was an agreement between her, Mr Pinder and Ms Potts to buy a property for Ms Potts using the proceeds of sale from the Property C property, she stated:
That was 16 years ago. I can’t remember everything. A lot of things have happened in my life. You know, I – I’ve been through a lot of stress, losing my father…. And I can’t – I can’t remember everything, but as I discovered paperwork, things just – you know, I – I remember things, but 16 years ago, I – it was just a lot of things to remember.
Nevertheless, she agreed that she had changed her evidence over time and said that she had done so as she discovered new information.
I am not convinced by that evidence. As Mr McIvor put to the Applicant at trial:
Your evidence didn’t change after you discovered those documents. Your evidence changes after my client becomes a party in these proceedings.
Ms Sledge’s response to that was to again claim that she had been stressed and that a lot of things had changed, while nevertheless accepting that Mr McIvor’s statement was true.
When it was put to her that she had received income from Ms Potts and claimed that as rent on the Property A property, she adamantly denied having done so, even in the face of being presented with copies of her tax returns from 2011 and 2012 which indicate that she had indeed claimed an amount of $2700 in rental income.
When the matter was pressed, Ms Sledge blamed her accountant, who had prepared the tax returns.
She resorted to a similar answer when asked about her position as put to the Court at the commencement of the trial, that is that Ms Potts should repay the $120,000, initially denying that she had effectively said that Ms Potts should “walk away with nothing” and then refusing to respond to a further question pressing that point.
When I asked her directly what had happened to the sale proceeds from the Property C property, Ms Sledge said that Mr Pinder had “dispersed” by them taking his mother on trips and “other things that they’ve bought”. She flatly denied that she had ever seen any of that money.
In re-examination, Ms Sledge denied that there had been any “conversation about the purchase of a property” in the year or so after the transfer of the Property C property to the parties in late 2000. That evidence conflicts directly with her previous evidence.
When asked about evidence she had given in response to cross-examination by counsel for the Respondent the previous day, Ms Sledge stated repeatedly that she could not remember that evidence.
I found her evidence in relation to this issue overall to be inconsistent, self-serving and entirely unconvincing, and where her evidence contradicts or conflicts with the evidence of the Respondent and the Intervenor on this issue, I prefer the evidence of the Respondent and the Intervenor.
The Respondent’s evidence at trial was that he was in receipt of a Carer’s Pension and was his mother’s full-time carer. They were renting a property in the (omitted) suburbs of Melbourne.
He was asked in Evidence-in-Chief what had happened to the proceeds of sale from the Property C property, and he gave the following evidence:
I can’t remember how it got transferred into cash, but it should have gone into an account since that unpaid cash from the – the real estate, and then we took the money and put it in a safe, and ---
Her Honour: Sorry. Say that again?
The Respondent: We took the money. I put it in a safe at home.
Her Honour: In cash?
The Respondent: In cash, because we were just ready to look for a property for mum.
When I asked him if he had actually received the sale proceeds in cash, Mr Pinder said that the parties “must have received the cheque and somehow – I cannot recall how we transferred it into cash.”
He then said that the proceeds “must have been in an account, and then we took it out”. His evidence was that he thought the account was a joint account with Ms Sledge. He could not remember when the money had been withdrawn in cash and placed in the safe.
When it was put to him that the Applicant’s evidence was that there was no safe, Mr Pinder said:
I’ve still got the safe. I’ve still got the safe key on my keys.
He said that the safe had been at the Applicant's Property D property, and when that was sold, it had moved with them to another property where they lived until the Property B property was ready for them to move in. He had removed the safe and taken it to the Property A property “about four, five year ago (sic)” because the parties no longer had cash to keep. He was sure the safe had never been at the Property B property[7].
[7] I note that this evidence cannot be correct because of the timeframes within which the Property B property was built.
He said that the $120,000 was taken out of the safe and paid as a deposit on the purchase of the Property A property. He said that “Ms Sledge did most of the paperwork with her solicitor”. He also said, however, that only $15,000 was paid towards the deposit.
Under cross-examination by counsel for the Applicant, Mr Pinder said that the last time the parties had used the safe was before they moved into the Property B property. He said that he had taken it to his mother’s home “in storage”.
I found his evidence about what happened to the actual cash sale proceeds from the Property C property confusing and conflicting. He was adamant about the existence of the safe, saying that cash money from his (omitted) business was also kept there, but the rest of his evidence about the deposits and withdrawals from the safe after the sale proceeds had been deposited was almost incoherent.
The only really coherent evidence he gave was that Ms Sledge had controlled the parties’ finances and he did not actually know what she had done with the money in the safe. He did say, however, that he believed the money from the sale of the Property C property had been deposited in it and used for the purchase of the Property A property.
When it was put to him that the Property C property had been gifted to him and Ms Sledge, he said:
No. She never gifted. She – she put it to our names so we can buy a property so she can live near us. I’ve got another brother that will have interest in that, so how can she just gift everything to one person?
And
So why would my mother look only one – after one son and not the other?
Mr Pinder clarified when asked that his brother’s interest was not a current interest, but an interest in his mother’s estate via her will.
When asked about his statement that the Property A property had been purchased “both as a place for my mother to live in, and in part as an investment property”, Mr Pinder said:
Because my mum’s money wasn’t our money, and the extra money we put in – that would have been the extra investment for us.
I note, in that regard, that at trial, Ms Potts was claiming an equitable interest in only 75.9% of the sale proceeds.
When asked why his mother had not sold the Property C property herself, it was Mr Pinder’s evidence that “my mother’s a beginner, seeing she doesn’t understand the language, whatever have you, so we thought we will do it for her”.
Mr Pinder’s evidence, as I have said, was at times almost incoherent and I did not find him to be a particularly impressive witness in relation to details. However, he never faltered in his evidence that in 2000, there was an agreement between him, Ms Sledge and his mother that the proceeds of sale from the Property C property would be applied by the parties towards the purchase of a property for his mother, and that the parties and his mother would own that property in the proportions of the purchase price each provided. On balance, I found that evidence to be credible.
In giving her evidence-in-chief at trial, Ms Potts was adamant that she had received none of the sale proceeds from the Property C property until the sale of the Property A property in December 2016 when she had received the $120,000 she had invested in what she believed at all times to have been her own home.
Under cross-examination by Ms Marshall for the Applicant, Ms Potts was clear and convincing in her evidence that she had personally paid the council rates as the owner of the property, as well as paying the water rates and utilities as the occupier.
She confirmed that documents provided by her counsel and tendered to the Court were council and water rates notices for the Property A property which she had paid in 2013 and 2014. It was her evidence that she had not kept the notices for previous years. That evidence contradicts the Applicant’s evidence that Ms Potts only paid the Property A property’s outgoings for a short time at the beginning of her occupation of the property, and I accept the Intervenor’s evidence on that matter.
She also confirmed that she does not read English, saying that she had not “even been to (language omitted) school, let alone English”.
Ms Potts was also clear in confirming her evidence that both parties had approached her together in 2000 and suggested that she transfer the Property C property to them so that they could sell it and buy a home for her closer to where they lived. It was her evidence that she was not promised the Property A property specifically because it was not yet in existence, but that she had been promised that she would have a house of her own to live in.
She said that when the Property A property was purchased, she was unaware that there was a mortgage over it but she did know that the parties had used it as security for their borrowings on the Property B property. However, she then said that she was aware that the sale proceeds from the Property C property had not been enough to purchase the Property A property outright and that the parties had had to borrow the remainder. She was nevertheless of the belief at the time of its purchase that the whole of the Property A property was hers.
When asked why she herself had not sold the Property C property and bought another property closer to the parties, Ms Potts said that she had not thought of moving as she had been happy in Property C with her friends and services nearby. The suggestion for her to move had come from her son and Ms Sledge.
When it was put to her directly that she had gifted the property to the parties, she said:
No, it wasn’t a gift. No. It was to help them get money from the bank, but I’m not – I didn’t give it as a gift. Not a gift.
Ms Potts said that she had not questioned her son and Ms Sledge about the house they were to buy for her during 2001 because the house was being built and she trusted them. She agreed that she spent time at Mr E’s farm during that time and also after she moved to the Property A property.
Ms Potts was then cross-examined on the matter of her application for rent assistance from Centrelink in 2008.
It was her evidence that the parties had approached her together and suggested that she could get more money from Centrelink. Ms Sledge had taken her to the Centrelink office to collect the application forms, and the parties had jointly filled in the forms which Ms Potts had then returned to Centrelink. Ms Potts was clear that she could not read the forms and had not completed them herself. She said under further cross-examination that she did not know the forms were for rent assistance, only that they would mean she could get more money from Centrelink. Given her English language difficulties, that statement has the ring of truth about it.
Further, Ms Potts said that she had given the rent assistance monies to the parties “to be used for the house in Property B, for their house”. She said there had been a conversation to the effect that if she obtained the extra money from Centrelink and gave it to the parties, it would help the parties with their mortgage payments on the Property B property.
Ms Potts said that she received about $400 extra per month and that she gave that money to the parties. When asked whether that money was rent, she said:
It was my house. I wasn’t paying rent for my house. I was giving it to them for assistance.
Later, when it was again put to her directly that there had been no promise by the parties to buy her a house, Ms Potts said:
No, that’s wrong. They told me, “We’ll sell this one. We’ll buy you another one.” Where I was had one bedroom. Where I ended up had two bedrooms.
Ms Marshall: So in the conversation, was – they mentioned “accommodation” when they said – when they talked to you for Property C, they mentioned they would provide accommodation for you.
Ms Potts: No, a house. A house – a place with two bedrooms, it ended up being. I was by myself. It was enough for me.
And later:
Ms Marshall: […] I’m asking about what was said […].
Ms Potts: They told me that the place that they will build will be mine.
At no time during cross-examination was Ms Potts shaken on her evidence about the arrangement she made with the parties in relation to the sale of the Property C property and what the sale proceeds were to be used for.
It was Ms Potts’ further evidence that she had not understood or known that the Property A property was not registered in her name until about a month before it was sold in December 2016.
Counsel for the Respondent did not seek to cross-examine the Intervenor.
On the central issue of whether she transferred the Property C property to the parties on the promise of them buying a house that she would own, her evidence was clear and consistent and was unable to be shaken.
There were times when she became confused about particular details and the meanings of words, but overall I found her evidence to be credible.
The Law: Issue A
The law in relation to constructive trusts is well established. A constructive trust may arise in several ways: one of which is in a situation where “there is a common intention that a person will acquire an interest in a particular property to which another party holds legal title, and the person acts on that the belief to his or her detriment, such that it would constitute a fraud to deny the interest intended to be acquired”[8]
[8] Goldstraw v Goldstraw [2002] VSC 491 per Dodds-Streeton J at paragraph 26.
In the matter of Baumgartner v Baumgartner (1987) 164 CLR 137, the High Court, approving comments made by Mahoney JA in Allen v Snyder,[9] said:
… the foundation for the imposition of a constructive trust in situations of the kind mentioned is that a refusal to recognise the existence of the equitable interest amounts to unconscionable conduct and that the trust is imposed as a remedy to circumvent that unconscionable conduct. [10]
[9] (1977) 1 NSWLR 685.
[10] Baumgartner v Baumgartner (1987) 164 CLR 137 at paragraph 30.
Findings: Issue A
It is not in dispute that in (omitted) 2000, the legal interest in the Property C property, which was owned entirely unencumbered by the Intervenor, was transferred to the parties. From that time, I find that the parties held the Property C property on trust for Ms Potts. That property was sold and Ms Potts received none of the sale proceeds. Therefore, I find that the sale proceeds from the Property C property sale were held by the parties on trust for the Intervenor from the time of settlement of that sale.
The evidence is so contradictory and convoluted that I am unable to say with any certainty what happened to those sale proceeds as an entity after the settlement of the Property C sale. However, I find that the more probable facts lead to the conclusion that the sale proceeds, or sums or property equalling them, continued to be held by the parties until the purchase of the Property A property, at which time any interest the Intervenor held in the Property C sale proceeds was transferred to the Property A property.
Upon considering the evidence as a whole, and after having the opportunity to see the Respondent, the Applicant and the Intervenor in the witness box under cross-examination on this issue, I find that at the time the Intervenor transferred the Property C property to the parties on 17 November 2000, it was the understanding and intention of all parties that the Property C property would be sold by the Applicant and Respondent, and another property purchased for the Intervenor to own and live in.
I find that it was the understanding and intention of all parties that the Intervenor would own the Property A property in proportion to the amount of the purchase price she contributed by way of her interest in the sale proceeds of the Property C property.
I find further that the Intervenor contributed $120,000 of the $158,000[11] cost of the Property A property, or 75.9%.
[11] Including purchase costs.
The Intervener effectively sold her home, her only asset, and gave the overwhelming majority of the sale proceeds to the parties. It tests credibility to think that she would have done so had she not expected to receive a major asset, or an interest in such an asset, in return.
Her evidence was compelling on this issue, as it has been entirely consistent since her intervention in the proceedings, and that evidence was not shaken at trial. Overall I found Ms Potts to be a truthful and credible witness.
As I have already stated, where the evidence of the Intervenor and the Applicant conflict, I prefer the evidence of the Intervenor.
Therefore, I find that a constructive trust exists such that the parties hold the beneficial interest in the entire net sale proceeds from the Property A property upon trust for themselves and the Intervenor.
I find the quantum of the interest in the total sale proceeds held on behalf of the Intervenor to be seventy five point nine per cent (75.9%).
That means that upon the sale of the Property A property, Ms Potts was entitled to receive 75.9% of the entire net proceeds of sale and not merely the $120,000 that she received at that time.
The gross proceeds of sale were $355,000. The net costs of the sale appear to have been $12,314. Ms Potts is entitled to receive 75.9% of the remainder of the sale proceeds, that is, 75.9% of $342,686, or $260,098. She has already received $120,000 from that sale and is therefore now owed the sum of $140,098 by the parties jointly.
That sum is therefore a debt of the parties, and will be so considered when their property pool for distribution is assessed later in these Reasons. The manner in which that debt is to be satisfied will also be discussed later in these Reasons.
Issue B. Is it just and equitable to alter the parties’ property interests?
This question is mandated by s.90SM(3) of the Act which states that a court must not alter the property interests of parties to a de facto relationship unless it is just and equitable to do so.
In Stanford v Stanford[12], the High Court addressed the meaning of the words “just and equitable” in s.79(2) of the Act, which deals with the Court’s power to alter the property interests of parties to a marriage in identical terms to s.90SM(3). The Court said the following at paragraph 42:
In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and the wife.
[12] Stanford v Stanford (2012) FLC 93-518.
In Bevan & Bevan the Full Court said that the circumstances described in the above passage of the Stanford judgment “encapsulate the vast majority of cases”[13] .
[13] Bevan &Bevan [2013]FamCAFC 116 paragraph 70.
In this case the parties were in a de facto relationship for a total of about 15 years. They acquired property together and are now separated. Therefore there is not and will not be common use of their property in the future.
As there is nothing in this case to distinguish it from “the vast majority of cases”, I find that it is just and equitable in all the circumstances under s.90SM(3) to consider altering the parties’ property interests in this case.
Issue C. If it is just and equitable, what are the property interests of the parties and what is their value?
The property of the parties to be divided can be set out thus:
Assets
Owner
Value
Property B
Applicant
$725,000
Remainder of the proceeds of sale of Property A property
Joint
$6069
BMW motor vehicle
Applicant
$25,000[14]
Subaru motor vehicle
Respondent
10,000[15]
(employer omitted) shares
Applicant
8,052[16]
Total assets
$774,121
Superannuation
Applicant
$71,263
Respondent
$4000
Total superannuation
75,263
Liabilities
Mortgage loan over the Property B property
Joint
$390,000
(omitted) – seizure/sale placed against Property B property February 2012
Joint
$6573.43
(omitted) - seizure/sale placed against Property B property June 2012
Joint
$6255.14
(omitted) - seizure/sale placed against Property B property June 2012
Joint
$19,385.11
(omitted) council – unpaid rates secured by caveat
Joint
$8000
Debt to the Intervenor
Joint
$140,098
Total Liabilities
$570,312
Total non-superannuation assets
$203,809
Total Property including superannuation
$279,072
[14] I accept the Respondent’s valuation of this vehicle based on the evidence of the parties at trial
[15] Taken from the Respondents Outline of Case Document filed on 29 November 2016 and challenged at trial but I found the evidence of the Respondent was more cogent on this issue.
[16] Taken from the Applicant’s Outline of Case Document filed 27 March 2017 and not challenged at trial.
Issue D. What were the parties’ contributions to the property?
Section 90SM(1) of the Act gives the Court the power to adjust the interest in property of parties to a de facto relationship.
The matters to be taken into account when deciding what orders ought to be made under s.90SM(1) are set out in s.90SM(4).
Section 90SM(4) states that the Court must consider:
·the financial and non-financial contributions made by each party to the acquisition, conservation or improvement of any of the property of the parties, to the relationship itself, and to any child of the relationship;
·the effect of any proposed order on the earning capacity of either party to the de facto relationship; and
·the matters set out in sub-s.90SF(3) so far as they are relevant.
Initial contributions
At the date of cohabitation in 1999, the Applicant was the registered proprietor of the Property D property, having taken that property as sole proprietor upon the death of her husband some years earlier. When the parties began living together in 1999, the Applicant was living in the Property D property with her son A, who was then 15 years old, and her daughter B who was 11.
The Applicant also deposes to owning an investment property in (omitted) and two motor vehicles at the time of cohabitation.
It is her evidence, unchallenged by the Respondent, that the Property D property was unencumbered at that time, and it was into that property that the Respondent moved when the cohabitation relationship began.
It is accepted by the Respondent that at the date of cohabitation he had only his personal belongings and a car.
As the Applicant’s assets at the date of cohabitation were used to secure borrowings in relation to the parties’ later properties, it is clear that the Applicant’s initial contributions in this case were very significantly higher than those of the Respondent. That is the case despite the fact that there is no evidence as to the value of either the Property D or (omitted) properties in 1999.
I assess those contributions at 90%.
Contributions during the relationship
The Applicant’s evidence is that she and the Respondent lived in the Property D property and “equally shared payment of household bills”[17].
[17] Affidavit of the Applicant sworn 27 March and filed 13 April 2015 paragraph 11.
Ms Sledge worked throughout the relationship, first for an unnamed employer, and then at (employer omitted) in the (omitted) department where she is currently employed.
It is her evidence that she received a redundancy payment of $20,000 in 2004, but she does not say whether those monies were applied to the parties’ property.
Mr Pinder worked as a (occupation omitted) until 2013, after which, he says, he has been unemployed, save for some (omitted) work in 2014 to 2015.
As has already been stated, the parties became the registered proprietors of the Property C property in (omitted) 2000. They sold that property in (omitted) 2001 and purchased the Property A property in (omitted) 2001.
I have already found that they held the Property A property on trust for themselves and the Intervenor, so that their share of it amounted to 24.1%, at the time of purchase, or about $38,078.
The acquisition of the Property A property can be seen as an indirect contribution on behalf of the Respondent, as the parties were able to use that property as security for their borrowings.
The parties obtained a home loan of $445,000 in (omitted) 2003, that loan being secured by mortgages over both the Property D property and the Property A property. There does not seem to be any direct evidence about exactly what the parties did with that money, but it would seem that it was ultimately subsumed into the mortgage loan of $640,000 obtained to purchase and build on the Property B property.[18]
[18] Applicant’s Outline of Case Document filed 27 March 2017, page 4.
The Applicant and Respondent purchased the Property B property in (omitted) 2004, at which time it was a vacant block of land. Over the next 20 months or so, they built the former family home at a cost of approximately $354,000, the entire cost of the house and land, the Applicant says, being about $502,000 “plus duties/landscaping etc.” That property is registered in the sole name of the Applicant.
In 2004 or 2005 the Applicant says she purchased a (omitted) license for $193,000 plus a (omitted) for $30,000[19], both of which were registered in her sole name. It is her evidence that she financed that purchase by obtaining a loan secured by the Property D property. I can only infer that that mortgage loan was extinguished at the sale of that property only a matter of months later.
[19] Affidavit of the Applicant sworn 27 March and filed 13 April 2015 paragraph 14.
Because the (omitted) license and original (business omitted) were paid for from the sale of Ms Sledge’s pre-cohabitation assets, and the (omitted) business was a very significant factor in the parties’ ability to maintain themselves and Ms Sledge’s children for about the next 10 years or so, I consider the purchase of the license and (business omitted) to have been a considerable contribution by the Applicant to the parties’ property and to the welfare of the family.
The Applicant’s evidence, unchallenged by the Respondent, is that she sold the Property D and (omitted) properties, and the Property B property was financed with the proceeds of those sales in the sum of $340,000, and a joint loan of $640,000 which was secured over the Property A and Property B properties.
Again, that is a significant contribution to the parties’ property.
As already stated, the $445,000 loan obtained in (omitted) 2003 against the Property A and Property D properties appear to have been “transferred” so that it was subsumed by the $640,000 loan secured over the Property A and Property B properties.
The parties moved into the Property B property in (omitted) 2005.
The husband’s evidence is that the (business omitted) license was purchased on (omitted) 1999 for $324,000 including the (business omitted) and that both parties contributed to those purchases, but in circumstances where the (business omitted) license are no longer in the parties’ possession, I do not think anything hangs on that discrepancy, especially as it is the Respondent’s evidence that he came into the relationship in 1999 with no assets.
In any event, it is the evidence of both parties that Mr Pinder then (business omitted) and earned income from that endeavour until 2013 when he decided he no longer wished to do so.
There is a dispute between the parties about whether Mr Pinder worked hard for 10 to 12 hours shifts almost every day and gave all his earnings, whether in cash or in EFTPOS receipts, to Ms Sledge (the Respondent’s evidence), or whether the (business omitted) a year but because of an addiction to the drug Ice, he brought home and contributed to the family coffers very little in the way of income (the Applicant’s evidence).
No evidence adduced at trial left me any the wiser about those matters, but what is clear is that the parties’ joint incomes serviced their loans and paid for their daily expenses over the period of the relationship, although they did accumulate considerable credit card debt in that time.
It is the Applicant’s evidence that in January 2006, she and the Respondent obtained two loans from (omitted) Mortgage, one for $376,000 and the other for $172,000, a total of $548,000, those loans being secured by mortgages over the Property B and Property A properties. There does not appear to be any specific evidence as to whether those loans paid out what remained of the $640,000 loan obtained in 2004-2005, but that is certainly an inference that can be drawn from the Applicant’s Outline of Case filed 27 March 2017.
The Applicant says that in July 2008, she and the Respondent “refinanced and consolidated all existing loans, hire purchase loans and credit card debts”[20]. They had wished to borrow $800,000, but were only able to borrow $640,000 secured by way of mortgage over the Property B and Property A properties.
[20] Outline of Case Document of the Applicant filed 27 March 2017 page 4.
There is no dispute that the sum of $150,000 was then borrowed by the Applicant’s children against a property they had inherited from their father and loaned to the Applicant and the Respondent, bringing the parties’ total borrowings at that time to just under $800,000. The debt to Ms Sledge’s children was paid out when the (business omitted) license and (omitted) were sold in 2014. The parties had serviced their home loan and that of the children until the (business omitted) license was sold.
It is Ms Sledge’s evidence that she withdrew the sum of $23,284.35 from her superannuation entitlements in November 2012 in order to pay credit card debts and that does not seem to have been challenged by the Respondent.
Mr Pinder ceased to (business omitted) in 2013 and, as far as the Court is aware, worked as a (occupation omitted) in 2014 to 2015 but has not worked since that time.
The (business omitted) (or the third iteration of the original, as the Applicant says a new one was purchased every few years) was sold in 2013 for $10,000, and the license was sold in 2014 for $285,000.
It is the Applicant’s case[21] that those monies were used to discharge the mortgage over the Property A property in the amount of $150,000[22]; to pay off an existing car loan of $17,000; and to purchase a BMW motor vehicle for the Applicant for $40,000; with the remainder (about $88,000 it would seem) being applied to reduce the mortgage loan over the Property B property (in an undisclosed amount), for a holiday, and to pay off credit card debts.
[21] Affidavit of the Applicant sworn 27 March and filed 13 April 2015 paragraph 19.
[22] I am assuming that the Applicant means that her children were paid back the $150,000 owed to them.
Both parties worked during the relationship, and both contributed in various ways to the acquisition and maintenance of property and to the welfare of the family. In general, those are considered equal contributions, no matter that Ms Sledge does not consider Mr Pinder to have been a particularly productive member of the family.
However, Ms Sledge used property she owned prior to the relationship as security for joint borrowings and the (business omitted) license purchase, and then, in order to acquire the parties’ major real property, the Property B property, she sold that prior-owned property and applied the net proceeds of the sale to the Property B property’s acquisition.
She also withdrew money from her superannuation entitlements to pay joint debt.[23]
[23] While Ms Sledge considers the parties’ credit card debt to be the responsibility of Mr Pinder, it was acquired during the relationship and is therefore to be considered as joint debt.
Those are significant contributions.
Mr Pinder contributed to the acquisition of the Property A property indirectly through his mother’s interest in it.
I consider therefore, on balance, that the Applicant’s contributions to the parties’ property during the relationship were about 70% and the Respondent’s 30%.
Post-separation contributions
It is not in dispute that since the parties’ initial separation in January 2014, the Applicant has been solely responsible for meeting the mortgage payments on the Property B property, and that she also paid the Property A mortgage loan until its sale in December 2016, although it would appear that that loan had fallen into arrears.
Mr Pinder was clear in his evidence at trial that, as Ms Sledge had forced him to leave by obtaining an Intervention Order against him, he did not hold himself responsible for the parties’ debts after that day. He has also not paid child support since that day, saying that as he does not see his son, he did not see why he should have to pay for his support. The Court disabused him of that notion in no uncertain terms.
In fact, I find that Mr Pinder has made no post-separation contributions to the parties’ property or to the welfare of the family, with the Applicant bearing 100% of that burden.
Overall then, I find that the parties’ contributions to their property have been 75% on the part of the Applicant and 25% on the part of the Respondent.
Who should be held responsible for the encumbrances placed over the property at Property B (“the Property B property”) as a result of credit card debts incurred by the Applicant and the Respondent?
It is clear that all the debts which have caused the parties (and particularly the Applicant) such grief were incurred during the relationship. In those circumstances, it is appropriate that responsibility for discharging the encumbrances securing those debts should be borne equally.
I will therefore craft orders that reflect that decision.
Issue E. Should there be an adjustment to the contribution-based entitlements of the parties after a consideration of the matters set out in s.90SF(3) of the Family Law Act 1975 (Cth) (“the Act”)?
Section 90SF(3) of the Act sets out the matters the Court must consider when deciding whether to make maintenance orders as between separated de facto couples, and they are fall to be considered here by operation of s.90SM(4).
Section 90SF(3) states as follows:
The matters to be so taken into account are:
(a)the age and state of health of each of the parties to the de facto relationship (the subject de facto relationship); and
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
(c) whether either party has the care or control of a child of the de facto relationship who has not attained the age of 18 years; and
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain; and
(e) the responsibilities of either party to support any other person; and
(f) subject to subsection (4), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g) a standard of living that in all the circumstances is reasonable; and
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(i) the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant; and
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
(k) the duration of the de facto relationship and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l) the need to protect a party who wishes to continue that party’s role as a parent; and
(m) if either party is cohabiting with another person—the financial circumstances relating to the cohabitation; and
(n) the terms of any order made or proposed to be made under section 90SM in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party; and
(o) the terms of any order or declaration made, or proposed to be made, under this Part in relation to:
(i) a party to the subject de facto relationship (in relation to another de facto relationship); or
(ii) a person who is a party to another de facto relationship with a party to the subject de facto relationship; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(p) the terms of any order or declaration made, or proposed to be made, under Part VIII in relation to:
(i) a party to the subject de facto relationship; or
(ii) a person who is a party to a marriage with a party to the subject de facto relationship; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(q) any child support under the Child Support (Assessment) Act 1989 that a party to the subject de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the subject de facto relationship; and
(r) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(s) the terms of any Part VIIIAB financial agreement that is binding on either or both of the parties to the subject de facto relationship; and
(t) the terms of any financial agreement that is binding on a party to the subject de facto relationship.
In this case, the Applicant is 53 years old and is in good health. She works full-time and, according to her Financial Statement sworn 14 March 2017, she earns about $61,000 per year.
She owns the Property B property which is worth $725,000 and is subject to a mortgage of $390,000.
She has the care of the parties’ 16 year-old son with no assistance from the Respondent either financial or otherwise.
The Respondent is 52 years old and is also in good health. His evidence is that he is the full-time carer for his mother and he deposes that he receives a Carer’s Pension of $22,620 per year.
He has an earning capacity of unknown specific quantum, but until at least 2013 was working full-time.
He owns no property.
In light of all of those issues, and especially the issues of income and property ownership, and the Applicant’s care of the child of the relationship with little or no assistance from the Respondent, I find that it is appropriate to adjust the contribution-based entitlements of the parties to their property by 5% to the Respondent.
Issue F. In light of the above findings, what Orders should be made to effect a just and equitable division of property between the parties?
I have found that the parties’ contribution-based entitlements to their property were 75% to the Applicant and 25% to the Respondent. The adjustment of 5% to the Respondent pursuant to the matters set out in s.90SF(3) means that the overall entitlements of the parties to their non-superannuation property are such that 70% of that property will be retained by the Applicant and 30% by the Respondent.
As most of the parties’ superannuation entitlements were acquired during the relationship, and it is clear that the Respondent did not contribute very much to his superannuation while he was a self-employed (business omitted) earning money for the family, I will make orders to equalise those entitlements.
I have found that the debts secured by the caveat or “caveat-like” instruments over the property (“the joint debts”) are to be borne equally.
It is clear therefore that in order to retain the Property B property, the Applicant will need to refinance the current mortgage over that property in order to:
· pay the Intervenor the monies she is owed as a result of my finding that she has an equitable interest in the sale proceeds of the Property A property;
· pay the joint debts; and
· pay the Respondent a sum equalling 30% of the net non-superannuation assets of the parties when all the above debts have been paid.
An order to that effect will relieve the Respondent of any responsibility for paying his share of the joint debts and the debt to his mother directly, and will ensure that all those debts are appropriately paid.
The settlement may be set out as follows:
Assets - Applicant
Value
Assets - Respondent
Value
Property B property
$725,000
Car
$10,000
BMW motor vehicle
$ 25,000
Payment from Applicant
$45,054.80
(employer omitted) shares
$ 8,052
Funds in trust
$6,096
Total assets
$758,052
$61,150.80
Liabilities - Applicant
Value
Liabilities – Respondent
Value
Mortgage over Property B property
$390,000
Nil
Nil
Payment to the Intervenor
$140,098
(omitted) bank debts
$32,214
(council omitted) debt
$8,000
Payment to the Respondent
$45,054.80
Total liabilities
$615,366.80
Total liabilities
Nil
Net asset settlement
$142,685.20
$61,150.80
The total value of the property pool, exclusive of superannuation interests is $203,836. 70% of $203,836 = $142,685.20.
The Respondent’s share of $61,150.80 is exactly 30% of $203,836.
If the Applicant is unable to refinance to the extent necessary to retain the Property B property, then that property will need to be sold to effect the 70/30 division of all the net assets, and I will make contingent orders in that regard.
I will also make orders for a superannuation split that equalises the parties’ entitlements.
Conclusion
This has been a particularly frustrating case.
The state of the evidence of the parties to the relationship was quite chaotic, with evidence about contributions and amounts and dates appearing to change with each affidavit filed, only to be contradicted again in Outline of Case Documents and in oral evidence.
Neither the Applicant nor the Respondent was a particularly impressive witness and both presented as “having an eye on the main chance”.
Most of the trial was taken up with the Intervenor’s claim, which took the hearing well over its two day allotment of time, although that is not the fault of any party.
Neither of the parties to the relationship will leave these proceedings with riches. Indeed, Ms Sledge will receive property with a net value less than the value of the property she brought into the relationship, while Mr Pinder will leave with no real property and a fairly meagre payment from the Applicant.
Nevertheless, I am satisfied that the settlement reached is just and equitable in all the circumstances, albeit that much of the salient evidence was extremely convoluted.
I certify that the preceding two hundred and forty seven (247) paragraphs are a true copy of the reasons for judgment of Judge Small
Date: 15 December 2017
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