Stone and Elliott and Anor
[2014] FCCA 181
•26 February 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| STONE & ELLIOTT & ANOR | [2014] FCCA 181 |
| Catchwords: FAMILY LAW – Determination of preliminary question regarding the priority of debts where funds lent to de facto couple by third party – third party claims priority to payment out of property funds – contest is between Applicant de facto Husband and third party (who is the Mother of the de facto Wife) – no formal agreement regarding loan from third-party – de facto Husband (and de facto Wife) acknowledged debt to third party by history of re-payments – ‘but for’ loan from third party the primary [property] asset of the parties would not have been purchased – consideration of principle qui prior est tempore potior est iure (s/he who is first in time takes precedence) – actions of de facto Husband acknowledging earlier debt/loan to third party constituting estoppel – oral contract between Husband & Wife and third party regarding ‘earlier in time’ loan and its repayment. |
| Legislation: Family Law Act 1975, ss.79, 79(2), 90SM(3) |
| Australia & New Zealand Banking Group Limited v Widin (1990) 26 FCR 21; (1991) 102 ALR 289 Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 A. Dickey, Family Law (Fifth Edition) (Sydney: Lawbook Co., 2007) & (Sixth Edition) (Lawbook Co., 2014) R.P. Meagher, J.D. Heydon, M.J. Leeming, Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies (Fourth Edition) (Sydney: Butterworths – LexisNexis, 2002) D. Skapinker, “Equitable interests, mere equities, “personal” equities and “personal equities”, distinctions with a difference,” (1994) 68 ALJ 593 |
| Applicant: | MR STONE |
| First Respondent: | MS C ELLIOTT |
| Second Respondent: | MS A ELLIOTT |
| File Number: | CAC 270 of 2013 |
| Judgment of: | Judge Neville |
| Hearing date: | 10 September 2013 |
| Date of Last Submission: | 28 October 2013 |
| Delivered at: | Canberra |
| Delivered on: | 26 February 2014 |
REPRESENTATION
| Solicitors for the Applicant: | Farrar Gesini & Dunn |
| Solicitors for the First Respondent: | Nicholl & Co |
| Solicitors for the Second Respondent: | Campbell & Co |
THE COURT DECLARES THAT:
As between the Applicant and the Second Respondent, there is a recognisable and ascertainable debt that is owing to the Second Respondent that arises out of funds provided by her to the de facto Husband (“the Husband”) and de facto Wife (“the Wife”) in approximately March 2007 in relation to the purchase a residence in [P] (“the property”);
The amount owing to the Second Respondent by the Husband is $14,000 (being half the debt deposed to by the Second Respondent as at March 2011).
The balance of the debts claimed by the Second Respondent in relation to rates, mortgage payments, etc, shall rank equally with the other debts claimed by the parties.
THE COURT ORDERS THAT:
The sum of $14,000 is to be paid to the Second Respondent in priority to all other unsecured debts (including those claimed by the Husband) out of the net proceeds of sale of the property (after the mortgage and associated costs have been paid). In the absence of agreement in writing between the Husband and the Second Respondent, that sum is to be paid within 45 days of the date of these orders;
The Husband pay to the Second Respondent the costs of the Application in a Case, filed 18th July 2013, either as agreed or taxed.
IT IS NOTED that publication of this judgment under the pseudonym Stone & Elliott & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT CANBERRA |
CAC 270 of 2013
| MR STONE |
Applicant
And
| MS C ELLIOTT |
First Respondent
| MS A ELLIOTT |
Second Respondent
REASONS FOR JUDGMENT
Introduction
In the recent, important decision of Bevan & Bevan, the Full Court said, at [121]:[1]
Once it is accepted that a prior agreement or representation is relevant to the justice and equity of the outcome, we consider that the period of time a party has allowed to elapse before making a claim inconsistent with that agreement or representation must also be a material factor.
[1] Bevan v Bevan (2014) 49 Fam LR 387; (2013) FLC ¶93-545.
Just so here: the current contest is between the Applicant Husband and the Second Respondent, who lent the Husband (and his then de facto partner) funds to assist them to purchase a property. The Husband and his Wife, sometimes regularly, sometimes not, paid funds back the Second Respondent in accordance with the ‘informal’ agreement deposed to by the Second Respondent.
The Husband now (a) disputes the existence of such an agreement, and (b) seeks to have orders made that would give priority to the payment of unsecured debts he incurred either during the relationship with the Wife, as well as debts to the Australian Tax Office (“ATO”) which materialised later in time to the debt incurred to the Second Respondent.
For the reasons that follow, the Second Respondent must succeed in her claim, albeit not in the amount she claimed.
The de facto Husband’s (“the Husband”) Initiating Application (filed 26th February 2013) and Response (filed 8th April 2013) by the de facto Wife (“the Wife”) seek orders in relation to parenting and the adjustment of property interests. It seems to be the case that, following a conciliation conference held on 11th July 2013, the parties have negotiated settlement of their property interests (but perhaps, at this stage, only ‘in principle’), while the parenting matters still await resolution.
On 18th July 2013, Ms A Elliott filed an Application in a Case. It is unnecessary to detail the orders sought other than in general terms, namely that she be joined as a party to the proceeding and that she be paid a specified sum of money in priority to other debts incurred by the Husband and Wife. Orders were made by consent on 20th August pursuant to which she was joined as a party (the Second Respondent) to the proceeding.
For current purposes, as already indicated, there is one issue only for the Court to determine: namely, the priority of the payment of certain debts as between the Husband and the Second Respondent, Ms A Elliott, who is the Mother of the First Respondent Wife.
Although she filed material in the substantive parenting and property aspects of the matter (some of which refers to matters relevant to the current issue for determination), the Respondent Wife took no active part in the current, discrete issue before the Court regarding the determination of priority regarding a certain, claimed debt.
Ms Elliott claims, and seeks orders, that she be paid $56,328 out of the net proceeds of sale of the Property P property, and in priority to all other unsecured creditors. This is in circumstances where she claims to have borrowed, by way of a re-financing arrangement with her bank, $31,679, which she then made available to the Husband and Wife for their use in the purchase of the property in question.
According to her affidavit (filed on 18th July 2013), summarily stated, Ms A Elliott’s evidence is that (a) in March 2007, the Husband and Wife said to her that they did not have enough money for the deposit to enable them to purchase the property, (b) the Husband and Wife asked her to assist them in the purchase of the Property P property by lending them some money, (c) following this conversation, she re-financed and borrowed $31,679 (details of when/how she provided/transferred these funds to the Husband and Wife are not provided), and (d) the Husband and Wife agreed to repay Ms A Elliott $55.00 per week. Among other things, annexure B to this affidavit is a bank statement from 11th October 2008 until 9th January 2009 which shows the regular deposit of $55.00 into her account from the Husband, which obviously conforms to the lending arrangement asserted by the Second Respondent.
Annexure B to the Wife’s affidavit (filed 8th April 2013) is a Bankwest Lite Home Loan Statement (addressed to Ms Elliott) (account no.[omitted]; 11 April 2007 – 3 May 2007) which confirms a loan to Ms Elliott in the sum of $30,179.53.
I have already noted that the Wife took no active part in this part of the proceeding. It was agreed that the matter would be determined on the basis of the material filed and written submissions only.
The Husband resists the Second Respondent’s claim and asserts that two personal debts of his should be paid in priority to all other unsecured debts relevant to the wider or substantive property proceedings.
For the reasons that follow, in my view, the Second Respondent’s Application should succeed, albeit not for the full amount that she claims.
Background & Evidence
All three parties own as joint tenants, and are joint mortgagors of, a property in the Canberra suburb of [P] (“the property”). A copy of the mortgage is annexure A to Ms Elliott’s affidavit, filed 18th July 2013.
Subject to what is said later in these reasons, there is no written agreement (certainly there is none in evidence before the Court) as between the mortgagors regarding either (a) the payment of debts (e.g. mortgage repayments, rates, etc.) generally as between them regarding the property (or any other property that comprises the property pool for the purposes of s.79(2) of the Family Law Act 1975 (“the Act”) or the equivalent de facto provisions of the Act (s.90SM(3)), or (b) the priority (if any) as between the Husband and Wife (on the one hand) and Ms A Elliott (on the other) regarding funds borrowed by Ms A Elliott and then provided to the Husband and Wife to enable them to purchase what is now the former de facto marital residence, the [P] property.
Without referring to it specifically as a “contract”, the evidence of Ms A Elliott, is that the Husband and Wife approached her to seek her assistance, in the form of money, to aid them in the purchase of the property. She says that she agreed to this and borrowed funds from her own bank through an existing mortgage arrangement, and then provided those funds to the Husband and Wife. It is not in dispute, and is acknowledged by the Husband and Wife, that Ms A Elliott “was joined as a co-borrower so we could borrow the necessary amount from the bank. The mortgage is in our three names as well.”[2]
[2] See the Husband’s affidavit, filed 26th February 2013, pars.28 & 36. The text quoted is from para.28.
There is no suggestion that the Second Respondent became involved in the enterprise with the Husband and Wife as anything other than to assist them in the purchase of the property. This is also to say that there is no suggestion that she undertook the loan and the responsibilities of being a joint mortgagor as an investor. Her involvement was to aid the Husband and Wife in the purchase of their residence.
It is not in dispute that the principal asset of the parties is the [P] property. It is estimated that it is worth approximately $465,000. It is arguable (perhaps strongly so) that (a) but for Ms A Elliott borrowing and ‘on-lending’ those funds to the Husband and Wife, and (b) Ms A Elliott’s involvement as a joint mortgagor (and joint tenant with the Husband and Wife of the property), there would be no primary asset, as in the property, in the otherwise very modest property pool.
It was agreed between the parties, and subsequently confirmed by orders of the Court, dated 20th August 2013, among other things, that (a) the property be sold, (b) who would be the listing real estate agent, (c) how the conveyancing solicitor is/was to be appointed, and (d) how the proceeds of sale were to be applied, including the discharge of the mortgage over the property. No information has since been provided as to whether the property has in fact been sold pursuant to the orders made in August of last year.
As already noted, the Applicant Husband now says that, upon the sale of the property and payment of the mortgage and other relevant costs related to the sale (e.g. rate adjustments, etc), the net proceeds of sale should be applied, firstly to a personal loan that stands in the name of the Husband (which he says relates to certain personal loans and credit card debts that were incurred during the de facto relationship with the Wife), and secondly, to debts very recently identified as owing to the Australian Tax Office. Both of these debts, he contends, should be paid in priority to the debt claimed by Ms Elliott arising out of the funds she advanced to the parties.
I note that there is no mention of tax debts in either of his affidavits filed on 26th February and 19th August 2013.[3] The first and only mention of tax debts appeared in the affidavit filed on 17th October 2013.
[3] In his Financial Statement, filed 26th February 2013, there is a reference to an “unpaid and unassessed tax liability” that is estimated to total $14,000.
As something of an aside, curiously (other words are apt), in the Husband’s affidavit (filed 17th October 2013) at para.14, he states that the current outstanding balance on the personal loan with Credit Corporation Group is still (emphasis added) “$44,899.00 or very similar.” The imprecision is as remarkable as it is unfortunate.
And earlier, at para.40 of the Husband’s affidavit (filed 26th February 2013), he said: “I have paid off approximately half of the personal loan that existed at separation and related to consolidation of joint debts using my post-separation earnings.”
Rhetorically, one might ask: in the light of such a description given by the Husband in para.40 of his affidavit, how can anyone know precisely what the claimed debt is, how much has precisely been paid off (and the precise balance outstanding), and/or how much should be set aside to pay it out (and what might then be left over to pay out other debts)? Yet in para.6 of the Husband’s submissions (filed 28th October 2013), the complaint is made against Ms Elliott that “… it is not easy to tell how much was owing.” Something about pots and kettles and the colour black comes to mind in relation to the Husband’s submissions in this regard.
The Husband’s Affidavit Evidence: In his affidavit (filed 26th February 2013) the Husband said (para.28) (emphasis added):
The [P] property is owned by me, Ms C Elliott and Ms A Elliott (Ms C Elliott’s Mother, “Ms A Elliott”) as joint tenants. When we purchased the property Ms A Elliott did not give us any money but was joined as a co-borrower so we could borrow the necessary amount from the bank. The mortgage is in our three names as well. Ms A Elliott never contributed any money to the mortgage during our relationship.
Leaving aside the very poorly drafted text (the last sentence in particular), at para.36, the Husband further deposed (emphasis added):
Ms A Elliott did not contribute towards the purchase of the property nor did she make any financial contribution to the property during the relationship. Her name is on the title (and on the loan secured by the Mortgage) because is needed [sic] for us to enable to borrow the amount we needed. [sic]
Just on these characterisations or descriptions by the Husband, it would appear that Ms A Elliott acted as something akin to a guarantor or surety for the loan that was ultimately secured by the mortgage. Her centrality to the borrowing by the Husband and Wife and the purchase of the [P] property is further highlighted by the Husband deposing in his affidavit (para.33): “At the commencement of the relationship, neither Ms C Elliott nor I had any significant assets.”
He also said (para.34): “Neither Ms C Elliott nor I received any gifts, inheritances or compensation payments during our relationship.”
On the Husband’s evidence, the Court may properly or reasonably conclude that, but for Ms A Elliott becoming a joint mortgagor (and owner of the property as a joint tenant with the Husband and Wife), funds would not have been lent to the Husband and Wife to facilitate them purchasing the property. In short, and as previously noted, but for Ms A Elliott joining the Husband and Wife in the purchase of the property, there would, in fact, be little or no property pool now for distribution.
At para.35 of the same affidavit, the Husband also says that the property was purchased in April 1997. Given that earlier in his affidavit (para.2) he deposed to having commenced a relationship with the Wife in 2003, the purchase date of the property in 1997 cannot be correct. Unfortunately, as already observed, there are a number of inaccuracies in the Husband’s material. To state the obvious: it is important to ensure that all documents filed with the Court are accurate. The Wife deposed that the purchase of the property was in April 2007.
The Wife’s Affidavit Evidence (filed 8th April 2013): After noting the date of separation of the parties in 2009 but with them both living under the same roof until January 2010, by reference to a tax invoice from Independent Property Management dated 31 March 2010, the Wife confirmed that the property was rented from March 2010 until March 2011 – contrary to the Husband’s assertion (para.39 of his February 2013 affidavit) that he remained living in the property after separation. Unless he did so while there was a tenant resident in the property, his assertion, again, cannot be correct.
The Wife confirms (para.20) that the main asset of the relationship is the property, which then had a value (she said) of between $465,000 - $475,000. The mortgage balance was then $354,000.
Contrary to the Husband’s assertion, the Wife says (para.25) that
Ms Elliott has contributed substantial funds to the upkeep of the property, including mortgage and utility payments.
And, as earlier noted in these reasons, the Wife confirmed (by reference to annexure B to her affidavit) that her Mother had secured funds from Bankwest, which were used to make up the shortfall in the purchase price of the property.
Ms Elliott’s Affidavit Evidence (filed 18th July 2013): In addition to what has already been recorded in these reasons from this affidavit, I note the following.
I have already recorded that annexure B to Ms Elliott’s affidavit shows the regular payment of $55 to her by the Husband, in accordance with her description of the re-payment agreement between the Husband and Wife, on the one hand, and Ms Elliott, on the other. In my view, rather tellingly, each entry of such a transfer of funds to Ms Elliott records that it is from “Mr Stone.” Unless there is some other person of the same name, that is the name of the Applicant.
Further, it might reasonably be asked: why would the Husband regularly pay $55 to the Second Respondent if, as he claims, he owed her nothing, and that she “did not give us any money” and she “did not contribute towards the purchase of the property nor did she make any financial contribution to the property during the relationship”, as the Husband swears in his first affidavit? Generosity, or any other virtue, is not suggested as a motive for the regular payment of the funds by the Husband to the Second Respondent.
The Second Respondent’s account of there being the provision of funds from her to the Husband and Wife (strictly speaking an oral contract for a loan) is supported by the documents she annexes to her affidavit. The same documents regarding the loan and repayment undermine the Husband’s sworn account.
Moreover, contrary to the Husband’s narrative of events, the submissions filed on his behalf on 28th October 2013 (para.6), acknowledge that the parties “paid back modest weekly sums for periods of time.” The modesty of the repayments is neither here nor there. More significantly, it is not explained in those submissions (a) why the Husband denied (on oath) in his original affidavit that
Ms Elliott paid or contributed anything financially to the purchase of the property (or in relation to it more generally during the relationship), but the later submissions do acknowledge some kind of indebtedness, and (b) what the acknowledgment of repayment signifies, as a matter of law. The submissions are unfortunately and surprisingly silent on these important matters.
Further, the submissions refer specifically to and use the words “paid back.” If there was nothing owed to the Second Respondent, why was there any requirement to pay something “back”? This was never explained in the Husband’s submissions.
Annexure C to the Second Respondent’s affidavit is a copy of the loan document with ING addressed to the parties, dated 19th March 2007.
Ms Elliott deposed further (para.8) that, due to other financial commitments, she needed to re-finance in 2011. She borrowed further from St George Bank, and said that, at that time, the outstanding debt to her from the Husband and Wife stood at $28,000, presumably a figure that reflected the repayments made by the Husband (and the Wife) to the Second Respondent at that stage.
At para.9, she deposed that the repayments to her from her co-mortgagors continued, with those deposits being made to her St George Bank account. Annexure E to her affidavit is a copy of a statement of that account showing two payments, each of $55.00, in August and September 2011, styled on the statement as “Mr Stone [Ms A Elliot’s] Loan”
Ms Elliott said (paras.10-13) that from 2009 the payments by the Husband and Wife of her loan became erratic, and later (in 2011) that she started to get letters from ING regarding non-payment of the mortgage.[4] She confronted the Husband about these matters, in response to which he is alleged to have said that ‘things were a bit tight at the moment.’
[4] Copies of the letters referred to from ING are at annexure F to the Second Respondent’s affidavit.
Annexure G to this affidavit is a copy of the ING Direct Statement, dated December 2011, which shows regular and significant sums of money paid by the Second Respondent in relation to the mortgage over the property.[5]
[5] The annexure confirms that payments of $600 and $4200 were paid on 6 & 9 December 2011 respectively.
In para.14, she set out various other expenses she has paid (insurance, land tax, council rates, and water and sewerage rates). These sums total $5827.98. A number of notices with receipts attached constitute annexure H. These documents (and others earlier noted) (a) further support the Second Respondent’s account of events, and (b) correspondingly undermine the Husband’s contention (at para.36 of his first affidavit) that Ms Elliott did not make “any financial contribution to the property during the relationship.”
Ms Elliott says that from October 2012 she started to pay half of the mortgage, being $300.00 per week. Copies of her ING statement, which show payments each week from July 2012 until October 2012 of $544 each week, are at annexure I. These supporting documents further expose the hollowness of the Husband’s contentions.
The Husband’s Further Affidavit Evidence (filed 17th October 2013): Although the Husband filed an earlier affidavit on 19th August (in support of an Application in a Case filed on that date), because it related primarily to the logistics of the sale of the property, for current purposes I need only consider his October affidavit.
As just noted, it was filed on 17th October. This was after Ms Elliott filed her submissions regarding the issue now before the Court. The Husband’s affidavit, with annexures, runs to more than 150 pages. In submissions, his solicitor complained about the length of Ms Elliott’s submissions, in part because she annexed certain documents to those submissions. In the face of a third affidavit, in excess of 150 pages, post the Second Respondent’s submissions, it prompts [again] (and at least) reference to the adage in relation to pots and kettles and the colour black. In the circumstances, the Husband’s solicitor’s complaint should not have been made.
Paragraphs 2-10 detail the history of personal loans the Husband says were entered into in the course of the relationship with the Wife, and the various purposes for which they were obtained (e.g. credit card debt, car purchases, kitchen renovation and other house refurbishment, and appliances). Copies of statements are annexed in support of this history. It is not explained why this information (which had been sought by the Wife for some time) was not provided in either of his earlier (February or August) affidavits filed in the proceeding. Given that the Husband regularly refers to “we” (i.e. the Husband and Wife), it is also not explained how much of the debt is formally claimed as something for which the Husband alone now claims to be entitled to be paid out, as opposed to a joint debt of the Husband and Wife.
As at the date of separation in January 2010, the Husband says the debt for ‘his personal loan’ was $53,600.
At para.12 of this affidavit, there is another incompletely drafted sentence as follows: “After we separated, the personal [sic] was taken over by Credit Corp Group. I was not able to make repayments immediately after we separated.” He does not explain how or why this was so.
At para.13, the Husband deposed that he set up a “payment arrangement with Credit Corp and have been able to reduce the amount owing.” He does not detail what that arrangement is. Annexure H is a letter from Credit Corp Group, dated 22nd May 2013, which confirms that the current balance owing is $44,899.03.
The Husband confirmed that he has not been able to make any further payments to Credit Corp Group since May, but he does not explain why this is so. He says that he has arranged “to freeze the interest” on the debt “so the amount owing is still $44,899.03 or very similar.”
In paras.16-20 of this affidavit, the Husband sets out his (and his company’s) current tax liability, which he confirms relates to the 2012 financial year, as well as additional tax liability for his company ([M] Pty Ltd) in 2013. He says that his current, total [known] tax liability is $25,836.00, which sum he says is immediately due. He has not yet completed his tax return for 2013.
The Husband also says that he continued to pay the mortgage until December 2011, and asserts that half of his tax liability “relates to that period”, and that he continued to pay “the personal loan” after that time “using my income.” There is no suggestion that he was using, or had used, anyone else’s income.
Finally, he says that he has a tax bill for the first quarter of the 2013/2014 financial year “but have not submitted my BAS for that quarter as yet.”
Before turning to the submissions, two comments are apposite here. First, as an observation only, it is somewhat curious that there is such a liability claimed by the Husband in relation to his company, [M] Pty Ltd. This is so because in para.30 of his original (February 2013) affidavit, he stated that the company was set up on the advice of his accountant, that it has a bank account and no assets, and that it rents a van from Avis on a monthly basis. This suggests that its trading and tax utility to the Husband is marginal, at best. However, there is precious little detail about the trading operations of the company which, according to the Husband, now result in him (as sole director and share-holder) and his company owing a combined tax debt of $12,400. How the monthly rental of a van can now result in such a significant tax liability is not explained. Nor is it explained how that debt can or should rank higher in priority to an earlier debt (claimed by the Second Respondent, the third party).
Secondly, in Commissioner of Taxation v Worsnop (“Worsnop”), the Full Court considered generally the position of the Commissioner of Taxation. The Court said, at [86] (emphasis added):[6]
… In our view, the Commissioner of Taxation is in a position distinguishable from that of a commercial creditor. Commercial creditors have a choice about to whom they extend credit. On the other hand, the position of the Commissioner as a creditor of taxpayers is of a completely different origin. The onus is on taxpayers to make full and proper disclosure to the Commissioner of Taxation. The Commissioner does not extend credit at all, but becomes a creditor by virtue of the conduct of the affairs of the taxpayer. As seen, Rose J gave “…much weight to the fact that the outstanding tax indebtedness of the husband is a debt to the Crown and implicitly there is a public interest issue”, though he also recognised that the Commissioner had no priority over the wife’s claims.
[6] Commissioner of Taxation v Worsnop (2009) FLC ¶93-392; (2009) 40 Fam LR 552.
Respectfully, it seems to me that it follows from the Full Court’s reasoning that a debt incurred later in time by a tax payer (the Husband) to the Commissioner of Taxation not only cannot take priority over the claims of the Wife, but similarly it cannot take priority over a much earlier in time debt, for which the Wife is equally liable, and which has been acknowledged (by payment over a period of time) by the Husband, and also acknowledged in his lawyer’s submissions. The relevant debt here, of course, is that claimed by the Second Respondent.
Later in these reasons I return to the decision in Worsnop because of the Full Court’s acknowledgment that the Court can make orders, pursuant to s.79 of the Act (and presumably also s.90SM(3)), for payment of a debt to a third party, whether or not that third party has intervened in the proceedings or not.
Submissions
The Husband submitted as follows.
First, the Husband submitted that (a) there are competing claims regarding whether the Second Respondent contributed any funds at all to the purchase of the property (the Husband contends that Ms Elliott did not); and (b) the Second Respondent could have, but did not, provide any “statement … showing the application of the sum of $29,381.85 to the purchase of the [P] property.” This sum does not take account of mortgage insurance, legal and other sundry costs associated with the loan.[7]
[7] See Annexure B to the Wife’s affidavit, to which I have earlier referred.
Respectfully, it seems utterly petty to focus on the principal sum borrowed and to exclude the “costs” of that borrowing, such as search fees and the like that are part and parcel of everyday borrowing. Put another way: the Court may take judicial notice of the fact that lending institutions always require the payment of costs additional to the principal sum. The submission to exclude these everyday costs of borrowing should not have been made. It defies commercial reality, common-sense, and is triflingly lubricious. Further, had the Husband and Wife been required to take out a second mortgage (or borrow by some other means), presumably they would have been required to meet the costs of search fees and the like, but which instead were borne by the Second Respondent.
Secondly, after referring to the Second Respondent’s contentions (and documents annexed to her affidavit), the Applicant said: “The Second Respondent is not a secured creditor in any way, shape or form. She can not [sic] validly be so as there is no Mortgage in her favour and there is no loan agreement.” I do not understand the Second Respondent ever to have claimed to be a secured creditor, or to have a [legal or registered] mortgage or other security over the property.
Thirdly, by reference to the recent Full Court decision in Bevan v Bevan, the Husband contended that (a) the “pool” should be identified in the so-called ‘first step’ in property adjustment applications, and (b) the Husband’s debts (personal loan and ‘crystallised tax bill’) that relate to a period during the relationship, and after it ceased but when he was still making mortgage payments, should be given priority in payment from the net proceeds of sale. No legal (or any other) reason is given why priority should be given to these [unsecured] debts. He also claimed that his still to be identified tax bill (through to March 2013) should also be paid out in priority to the debt claimed by the Second Respondent. Again, no legal (or other) reason is given to support this contention.
Fourthly, the Husband contended that the funds owing to the Second Respondent are different because (a) there is no loan agreement (oral or written) between the joint mortgagors (although it was conceded, as I have already noted, that the Husband and Wife paid back “a modest weekly sum for periods of time”); (b) those repayments relate only to the initial “contribution” the Second Respondent made when she drew funds from BankWest; (c) it is unclear whether it is an admission but the Husband further submitted that the Second Respondent confirmed that in March 2011, the debt outstanding to her was $28,000, and that the current figure was unknown following the further re-financing by the Second Respondent.
I have already posed the [unanswered/unaddressed] issue, namely that the Husband’s solicitor does not explain why or how the Husband regularly “paid back” money to the Second Respondent in circumstances where he had previously sworn that Ms Elliott had paid nothing towards the purchase of the property, or otherwise had expended nothing on it during the relationship of the Husband and Wife. It is a remarkable and unfortunate lacuna in the submissions.
Fifthly, while seemingly acknowledging that the further sums claimed by the Second Respondent (such as mortgage payments, various rates, etc) were in fact paid, the Husband submitted that there is “no evidence anywhere that there is an agreement those sums would be repaid.” Further, he submitted that the Second Respondent is a “one third owner of the property and had a legal and financial interest in making, and was obliged to make, payments to the debt secured over the property.”
Again I record that the Husband had earlier sworn that the Second Respondent had paid nothing toward the property. The inconsistency between the Husband’s sworn evidence and his submissions is not addressed.
Sixthly, the Husband submitted that there was no evidence before the Court to support the amount claimed by the Second Respondent of $56,328.00.
Finally, the Husband submitted that the proper course (the ‘just and equitable outcome’) is to order that the Husband’s personal debts (tax and personal loan) be paid out of the proceeds of sale of the property, and the balance distributed between the Husband and Wife and the Second Respondent. Intriguingly (or much worse), in the Minute of Order provided by the Husband, there is no order sought for the payment of anything to the Second Respondent.
The Second Respondent submitted as follows.
Apart from a chronology, annexures (about which the Husband complained, but which are, in any event and in large part, copies of correspondence between the various lawyers, which respectfully do not take the matters before the Court very far at all for current purposes), and a copy of the ‘draft terms of settlement’ between the parties from the conciliation conference, there was little in terms of substantive submissions.
The only “submission” of moment was one relating to “fact”, which confirmed that Ms Elliott does not have a “registered interest in the property secured by way of mortgage”, however it is clear, she submitted, that the funds provided were not a gift and were to assist the Husband and Wife to purchase the property.
Discussion & Resolution
Clearly, because of the agreement to determine the matter ‘on the papers’, absent clear, undisputed facts, the Court cannot (or must be very cautious about) making any findings.
I should also note that, accepting that there was a formal limit on the length of the written submissions, unfortunately, but for one passing reference to Bevan v Bevan, the submissions were quite devoid of reference to principle and relevant authority. The art or object of submissions (oral and written), and whatever the constraints on length, should be to refer to both principle and authority in support of the arguments advanced. Submissions should always seek to persuade and to assist the Court. Here, the focus in submissions was solely on the facts, but without reference, as I have said, to relevant principle that follows from or relates to them.
This said, I note the following, which are either not challenged or otherwise disputed, or conceded.
First, in none of the Husband’s material does he challenge the Second Respondent’s account of the discussion in March 2007 (set out in para.3 of her July 2013 affidavit) between the parties and their request to the Second Respondent for financial assistance in the purchase of the Property P property. Because it is unchallenged, I accept the account there set out.
Secondly, the Husband conceded, in both his affidavit material and in his lawyer’s submissions, that there were re-payments to the Second Respondent in relation to the funds advanced by her to the Husband and Wife. Further, there is independent evidence, namely the documents annexed to the Second Respondent’s, to support the payments made.
I have already remarked (more than once) that, given the Husband’s lawyer’s acknowledgment in submissions that there were payments made to the Second Respondent, it is never explained (a) why/how the Husband expressly denied in his first affidavit that Ms Elliott ever paid anything in relation to the property (purchase or later expenditure) and the later acknowledgment in submissions of repayment, and (b) why the Husband would make such payments if, as he swore, no funds changed hands between the Second Respondent and the Husband and Wife.
In the circumstances outlined by the Second Respondent, supported by the documents she annexes, none of which are challenged by the Husband, and in the light of the submissions filed on the Husband’s behalf, there is a formal acknowledgement of the debt owing to the Second Respondent. The Husband (and the Wife) has had the benefit of the funds advanced (or, strictly speaking, the benefit of the use of the property purchased with the funds advanced, and now its sale value) by the Second Respondent for many years.
The Husband now seeks to disavow that benefit, at least to the extent of ensuring that his later-incurred personal debts are paid in priority to the much earlier in time funds provided to the Husband and Wife by the Second Respondent. In my view, such a position borders on the unconscionable. In vernacular terms, it is tantamount to saying: ‘I’ll take the benefit of, but not the responsibility for, the money advanced, and if you want the money you lent, stand later in line after me.’
Formally, as a matter of fact, I find that the Second Respondent has made out her entitlement to relief, and that the Husband (and Wife) is financially indebted to Ms Elliott. The amount of that indebtedness is treated later in these reasons.
It is apposite to note comments from the recent Full Court decision in Bevan, to which I have earlier referred. In that case, firstly at [75], the Court (Bryant CJ & Thackray J; Finn J generally agreeing, at [152]) said (emphasis added):[8]
[75] The High Court in Stanford has laid down three “fundamental propositions” which will provide useful guidance to trial judges in approaching the task under s 79. These were recited above, and could be summarised thus:
1. Determination of a just and equitable outcome of an application for property settlement begins with the identification of existing property interests (as determined by common law and equity);
2. The discretion conferred by the statute must be exercised in accordance with legal principles and must not proceed on an assumption that the parties’ interests in the property are or should be different from those determined by common law and equity;
3. A determination that a party has a right to a division of property fixed by reference only to the matters in s 79(4), and without separate consideration of s 79(2), would erroneously conflate what are distinct statutory requirements.
[8] Bevan v Bevan (2014) 49 Fam LR 387; (2013) FLC ¶93-545. In Bevan, Finn J observed, at [160], but did not need to decide, that there may be questions about the treatment of unsecured liabilities of one or both parties, and that such matters might more properly be considered, among other things, under s.79(4)(e).
In accordance with this direction by the Full Court to determine the requisite property interests of the parties, according to law and equity, I turn to the legal and equitable foundation(s) for the Second Respondent’s entitlement to succeed in her Application.
In turn, and again in the absence of any relevant submission by either of the parties to this aspect of the proceedings, I consider relief in relation to principles relating to (a) contract, (b) estoppel, (c) equitable interests and (d) family law jurisprudence.
Contract
The unchallenged evidence, noted earlier in these reasons, confirms that the Husband and Wife invited/requested the Second Respondent to assist them with funds in the purchase of the property. Ms Elliott acceded to this request. Funds were provided to the Husband and Wife, and in due course, all three parties became owners as joint tenants of the property, and joint mortgagors. Accordingly, as a matter of property law, they each had (and possibly still have) a joint legal interest in the property.
As a matter of contract law, the facts support the following analysis. First, the approach for assistance by the Husband and Wife to
Ms Elliott was an invitation to enter into an oral contract for the provision of funds. Secondly, Ms Elliott provided those funds to the Husband and Wife. Thus her side of the ‘bargain’ (or contract) was fulfilled. By the Husband’s repayment (of $55 per week) he (and the Wife) partially performed his side of the contract. In law, by her Application in a Case, Ms Elliott (in effect) seeks to have the contract completed and the balance of the funds paid out.
In Regent v Millett, the High Court said (Gibbs J; Stephen, Mason, Jacobs & Murphy JJ concurring):[9]
It is enough that the acts are unequivocally and in their own nature referable to some contract of the general nature alleged.
[9] Regent v Millett (1976) 133 CLR 679 at p.683.
Here, the Second Respondent alleges, albeit not directly in the following terms, an oral contract between her and the Husband and Wife. The conduct of all the parties, in my view, confirms the existence of such a ‘contractual arrangement’ that must be recognised and now be enforced by the Court. Indeed, the conduct of the Husband in regularly making payments to the Second Respondent confirms the existence of the provision of funds by the Second Respondent to the Husband and conforms with her account of events and the legal [contractual] relationship between the parties.
Further, as a matter of principle, it is accepted that the combination of payment of money together with some other act will be cogent evidence of the existence of a contract.[10]
[10] See the Full Court of the Federal Court decision in Australia & New Zealand Banking Group Limited v Widin (1990) 26 FCR 21 21 at p.37 (Hill J, Wilcox & Foster JJ agreeing); (1991) 102 ALR 289.
Here, there was the initial provision of funds (by the Second Respondent) and repayment (by the Husband), as well as the later payment of other moneys (rates, etc) by the Second Respondent. All such matters are, in my view, referable to the existence of (a) an intention by the [all] parties to be legally bound to provide, and that the Husband (and Wife) repay, the initial funds to the Second Respondent, and (b) in turn, an oral contract between the parties regarding the provision and repayment of funds as between the parties. Accordingly, subject to what is said later in these reasons, on this [contractual] basis the Second Respondent is entitled to succeed in her claim.
Estoppel
In the famous and much lauded judgment of Dixon J in Grundt v Great Boulder Pty Gold Mines Ltd, his Honour said (emphasis added):[11]
… The principle upon which estoppel in pais is founded is that the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations. This is, of course, a very general statement. But it is the basis of the rules governing estoppel. Those rules work out the more precise grounds upon which the law holds a party disentitled to depart from an assumption in the assertion of rights against another. One condition appears always to be indispensable. That other must have so acted or abstained from acting upon the footing of the state of affairs assumed that he would suffer a detriment if the opposite party were afterwards allowed to set up rights against him inconsistent with the assumption. In stating this essential condition, particularly where the estoppel flows from representation, it is often said simply that the party asserting the estoppel must have been induced to act to his detriment. Although substantially such a statement is correct and leads to no misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the faith of it cannot complain. His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own original change of position will operate as a detriment. His action or inaction must be such that, if the assumption upon which he proceeded were shown to be wrong and an inconsistent state of affairs were accepted as the foundation of the rights and duties of himself and the opposite party, the consequence would be to make his original act or failure to act a source of prejudice.
[11] Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at pp.674-675.
And further, Dixon J said (a little later in the same place; internal citations omitted; emphasis added):
The justice of an estoppel is not established by the fact in itself that a state of affairs has been assumed as the basis of action or inaction and that a departure from the assumption would turn the action or inaction into a detrimental change of position. It depends also on the manner in which the assumption has been occasioned or induced. Before anyone can be estopped, he must have played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it. But the law does not leave such a question of fairness or justice at large. It defines with more or less completeness the kinds of participation in the making or acceptance of the assumption that will suffice to preclude the party if the other requirements for an estoppel are satisfied. A brief statement of the recognized grounds of preclusion is contained in the reasons I gave in Thompson v. Palmer, and it is convenient to repeat it:—"Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party. He may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual or other mutual relations, such as bailment; or because he has exercised against the other party rights which would exist only if the assumption were correct …
Just so here: the Husband cannot now disavow the debt he acknowledged (a) by regular re-payment over some time, (b) by not challenging the Second Respondent’s account of the initial conversation between the parties in March 2007 in which the Husband and Wife sought financial assistance from the Second Respondent and her later assertion (supported by documents) that the funds were in fact provided and the property purchased [with them], and (c) the Husband’s solicitor’s concession, in written submissions, that some funds were paid back weekly “for periods of time.”
His conduct during the relationship represented to the Second Respondent a certain set of facts and action regarding the advancement of funds to the Husband and Wife by the Second Respondent and the repayment of them. He cannot now walk away from those facts, or from the legal and financial benefit he (and the Wife) thereby obtained.
At the beginning of these reasons I referred to the Full Court’s comment in Bevan, at [121], which I need not repeat here, other than to note that it applies, in my view, with complete force to the circumstances of the current matter.
Accordingly, in addition, or in the alternative, to relief based on principles of contract law, the Second Respondent is entitled to relief as sought on the basis of the Husband’s conduct which gives rise to an estoppel by conduct as described by Dixon J in Grundt v Great Boulder Pty Gold Mines Ltd. In accordance with those principles, it would be unjust to permit the Husband to depart from the assumption, also embodied in the oral contract between the parties, that (a) there existed a debt owed by the Husband (and Wife) to the Second Respondent, and (b) the debt to the Second Respondent would be repaid.
Moreover, on the facts of the matter and the conduct of the parties, it would be unconscionable if the debt to the Second Respondent was deferred to allow the Husband’s later-incurred debts to be paid out in priority to it.
Equitable Interest?
There is no question that all parties to the proceedings have a legal interest in the property as joint tenants.
The issue to consider here (again noting that there are no submissions on this, or any other, point before the Court) is whether the Second Respondent has a further interest in the property by virtue of her, “earlier in time”, provision of funds to the Husband and Wife? If so, what is the nature of that interest?
In the old case of Plimmer v Mayor of Wellington, the Privy Council said: “… the Court must look at the circumstances in each case to decide in what way the equity can be satisfied.”[12]
[12] Plimmer v Mayor of Wellington (1884) 9 App Cas 699 at p.714.
More recently, in Burns Philp Trustee Co Ltd v Viney, Kearney J said:[13]
The administration of equity has always paid regard to the infinite variety of interests and has refrained from formulating or adhering to fixed universal and exhaustive criteria with which to deal with such varying situations. The approach traditionally adopted by equity has been to retain flexibility so as to accommodate the multitudinous instances in which fundamental equitable rules fall to be applied.
[13] Burns Philp Trustee Co Ltd v Viney [1981] 2 NSWLR 216 at pp.223-224.
In my view, because of the view I have reached on the basis of principles from contract and estoppel, it is not strictly necessary to decide the matter on any further ground. However, on the principles articulated in classic cases, such as by the High Court in Latec Investments, and the House of Lords in National Provincial Bank Ltd v Ainsworth,[14] the Second Respondent’s “loan” to the Husband and Wife, which took place earlier in time compared to the secured loan to them that resulted in the mortgage over the property, a court of equity would more likely than not find that the Second Respondent had an equitable interest in the property.
[14] Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; National Provincial Bank Ltd v Ainsworth [1965] AC 1175. Generally, see also the detailed discussion in Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies (R.P. Meagher, J.D. Heydon, M.J. Leeming) (Fourth Edition) (Sydney: Buterworths – LexisNexis, 2002) “Chapter Four – Equitable Estates and Interests” and “Chapter Eight – Priorities.”
Further, in the light of the authority noted below, in my view, that equitable interest gave her (if it be needed) priority over the Husband’s later personal debts.
For example, in the joint judgment of Mason and Deane JJ in Heid v Reliance Finance Corporation Pty Ltd, their Honours observed (emphasis added):[15]
… in Abigail v. Lapin, (1934) 51 CLR, at p 68 , the Judicial Committee, after quoting the judgment of Kindersley V.-C. in Rice v. Rice with approval, said: "Apart from priority in time, the test for ascertaining which encumbrancer has the better equity must be whether either has been guilty of some act or default which prejudices his claim. . . ."
[15] (1983) 154 CLR 326 at p.340.
Their Honours further commented in the same place: “It is difficult, if not impossible, to accommodate all the cases of postponement of an equity under the umbrella of estoppel.”
And a little later in the same judgment, Mason and Deane JJ said:[16]
To say that the question involves general considerations of fairness and justice acknowledges that, in whatever form the relevant test be stated, the overriding question is ". . . whose is the better equity, bearing in mind the conduct of both parties, the question of any negligence on the part of the prior claimant, the effect of any representation as possibly raising an estoppel and whether it can be said that the conduct of the first or prior owner has enabled such a representation to be made. . . .": Sykes, Law of Securities, 3rd ed. (1978), p. 336; see also Dixon v. Muckleston (1872) LR 8 Ch App, at p 160 ; Latec Investments (1965) 113 CLR, at p 276 . Thus elements of both negligence and estoppel will often be found in the statements of general principle: see, for example, Lapin v. Abigail (1930) 44 CLR, at p 204 , per Dixon J. (at p342)
It may be that an equitable interest will not be postponed to an equitable interest created later in time merely because there is a causal nexus between an act or omission on the part of the prior equitable owner and an assumption on the part of the later equitable owner as to the non-existence of the prior equity. Fairness and justice demand that we be primarily concerned with acts of a certain kind - those acts during the carrying out of which it is reasonably foreseeable that a later equitable interest will be created and that the holder of that later interest will assume the non-existence of the earlier interest.
[16] 154 CLR at pp.341-42.
In the current matter, on any view, the Husband’s “interests”, vis-à-vis the Second Respondent, are purely personal debts which do not involve the Second Respondent, other than by his assertion to set them up to be paid in priority to all other debts (other than to the mortgagee). On the other hand, the Second Respondent’s claim is directly related to the purchase of the property, as well as the formal contractual relationship between the parties which I have earlier found. Her loan to the Husband and Wife for the purchase of the property does, in my view, create an equitable interest in that property. That interest is significantly earlier in time to the debts now claimed by the Husband. And further, the Husband’s conduct to which I have referred in making regular repayments estops him from denying the existence of the earlier debt owed to the Second Respondent and that it related directly to the purchase of the property.
Family Law Jurisprudence
It remains to consider the facts of the matter in terms of family law jurisprudence.
In Biltoft & Biltoft, the Full Court said, at [52] (internal citations omitted; emphasis added):[17]
A general practice has developed over the years that, in relation to applications pursuant to the provisions of s. 79, the Court ascertains the value of the property of the parties to a marriage by deducting from the value of their assets the value of their total liabilities. In the case of encumbered assets, the value thereof is ascertained by deducting the amount of the secured liability from the gross value of the asset. … “The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it''. Where the assets are not encumbered and moneys are owed by the parties or one of them to unsecured creditors, the court ascertains the value of their property by deducting from the value of their assets the value of their total liabilities, including the unsecured liabilities.
[17] Biltoft & Biltoft (1995) 126 FLR 385; (1995) FLC ¶92-614; (1995) 19 Fam LR 82.
The Court further stated in Biltoft, at [57]:
Notwithstanding the general practice which has developed, the Court has indicated that it may properly determine not to take into account or to discount the value of an unsecured liability in certain circumstances. Such liabilities would include but are not limited to a liability which is vague or uncertain, if it is unlikely to be enforced or if it was unreasonably incurred.
None of the qualifications to which the Full Court referred is evident on the facts here. Indeed, the contrary is true: the liability is not vague or uncertain; and the Second Respondent has taken formal steps (in these proceedings) to recover it. There is no suggestion that the Second Respondent’s conduct was or is unreasonable. Again, the facts are to the contrary: even on the Husband’s evidence, the Second Respondent joined in the enterprise to purchase the property at the Husband’s (and Wife’s) behest, to assist them. Her engagement, on the Husband’s evidence alone, was essential to ensure that their mortgage [and mortgage funds] would be granted.
In relation to tax liabilities, in Campbell & Kuskey the Full Court said (emphasis added):[18]
… Suffice to say at this point, that the tenor of his Honour's reasons for judgment clearly was that he intended to recognise any liability which the husband may suffer at any time in the future, as a consequence of the application by the Deputy Commissioner for Taxation of the provisions of s 108 of ITAA to the parties' loan accounts, as a relevant s 75(2) factor.
In our opinion, in most cases it would not be appropriate for trial judges to treat a contingent taxation liability in this fashion. As a general rule trial Judges should make a finding, on the balance of probabilities, as to whether or not such a liability exists, and if so in what amount. If it be found that such a liability exists, the Court should take it into account when calculating the net amount available for distribution between the parties, but in an appropriate case discounting the amount of such liability if circumstances warrant, for example, through uncertainty as to the time for payment.
[18] Campbell & Kuskey (1998) FLC ¶92-795 at p.84,917.
And further, should it be relevant, here, while the Husband asserts that there are certain sums owing to the ATO, there remains quite some uncertainty over other sums he claimed.
And to return to Worsnop, the Full Court said, at [78] (emphasis added):
While it is well-established that under s 79 the Court may make orders within a s 79 order, for payment by a spouse, or by both spouses, of a debt to a third party, whether that third party has intervened or not, in our view the s 79(2) requirement that an order under the section not be made unless it is just and equitable to do so, relates to the order made pursuant to s 79(1). Altering the interests of the parties to the marriage in the property does not mean that an intervening third party creditor acquires by intervention some rights based on s 79(2) for a just and equitable remedy, that are additional to the creditor’s other rights at law.
Also in Worsnop, the Full Court further said, at [80] – [81] (emphasis added):
[80] …the creditor who becomes a party does not step up in status to become entitled to greater “justice and equity” than the non-party creditor.
[81] This does not mean that the principles of fairness, justice and equity to a creditor ought not be addressed, where there is in prospect a reduction in the property of the debtor spouse, for the purpose of satisfying the s 79 claim of the other spouse, which reduction might adversely effect the prospects of recovery of the creditor, but this position does not arise because of the application of s 79(2).
Finally, it is apposite to note some further comments from the decision in Bevan, in addition to those to which I have earlier referred.
Thus, at [78], the Court continued [in Bevan] (emphasis added):
Nevertheless, there will be cases, of which Stanford may have been one, where the assertion (or lack thereof) of an existing equitable interest in property held by the other party may be of critical importance in deciding whether it would be just and equitable to interfere with the existing legal ownership. And of course it will always be important to determine whether one party has an equitable interest in property owned by a third party.
As I have already remarked, it is not asserted by anyone in this case that, in addition to her legal interest as a joint tenant of the property and equally as a joint mortgagor, the Second Respondent has a yet further, equitable interest in the property, by virtue of her loan to the Husband and Wife to enable them to purchase the property. Although it is unnecessary to decide, it might be reasonably argued that, as between the interests or “equities” of the joint mortgagors, the loan to the Husband and Wife, which was advanced to assist in the purchase of the property, constitutes an equitable interest in favour of the Second Respondent. Further, that interest was created earlier in time (qui prior est tempore potior est iure (s/he who is first in time takes precedence)) than both the legal interest (as joint tenants and mortgagors of the property), and the Husband’s much more recent personal debts to the Australian Tax Office (which are still to be completely quantified) and the St George Bank.[19]
[19] Among other places, see the general discussion in relation to priorities in Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326, and by D. Skapinker, “Equitable interests, mere equities, “personal” equities and “personal equities”, distinctions with a difference,” (1994) 68 ALJ 593.
All of the above authorities, in my view, confirm further the Court’s view that the Husband’s submissions have no legal or other merit, save for one matter. That is, the degree of particularity in support of the amount claimed by the Second Respondent is not made out.
Further, although not raised by the Husband, in the light of the conclusion the Court has reached regarding the Second Respondent’s claim, the loan advanced was to the Husband and Wife, in which case that amount should be borne jointly/equally as between those parties.
Summary & Conclusion
Factually and legally, the Second Respondent has satisfied the Court that her account of events establishes that she advanced funds to the Husband and Wife, and that, according to principles of contract and estoppel, she is entitled to succeed in her claim to be repaid.
Further, the Husband’s claim to have personal, unsecured debts paid out in priority to that of the Second Respondent would be unconscionable, where he (and the Wife) have had the benefit of the use of the property during the relationship, and will also benefit financially from it once it is sold. None of this would have occurred without the assistance of the Second Respondent.
The facts also support a further finding (if it be needed) that the Second Respondent has an earlier equitable interest in the property by virtue of her initial loan to the Husband and Wife that enabled them to purchase the property.
Each and all of these bases establish that the Second Respondent’s entitlement to the relief sought and payment of the outstanding debt should and must take priority over the personal, and much later incurred in time, debts of the Husband.
The only difficulty for the Second Respondent is that she has failed to establish her entitlement to the full amount she claims. I accept the Husband’s contention that she confirms that in 2011 the amount outstanding to her was $28,000.
The further difficulty for her is that there is no evidence regarding any agreement as to interest on the sum she provided to the Husband and Wife, or that the Husband alone would be responsible for the debt. In such circumstances, it seems to me that the Second Respondent can claim only half of the debt (of $28,000) from the Husband; for the other half of the debt, as a matter of law, she must look to her daughter (the Wife).
The other amounts expended by the Second Respondent (e.g. in relation to rates, insurance, mortgage payments and the like), must rate equally along with other unsecured debts, including those of the Husband.
It follows from what has been said that the Husband has not established that the debts that he claims (tax and personal loan) should be paid in priority to any other debts. This is also to say that, apart from the debt to be paid in priority to the Second Respondent, the Husband’s debts (and the Wife’s similarly) should be taken into account in the usual way in determining the property pool as the first step in the process of the adjustment of property interests, pursuant to s.90SM(3) of the Act.
In conclusion, it is apposite to note the following comment by an eminent family law commentator and practitioner. After a thorough examination of “liabilities of the parties”, the learned author of Family Law (Fifth Edition), Dr Dickey, simply states (internal citations omitted, emphasis added):[20] “The Full Court of the Family Court has nonetheless made it clear that in determining the value of a spouse’s property, the court should ordinarily deduct the value of the spouse’s liabilities, whether secured or unsecured.”
[20] A. Dickey, Family Law (Fifth Edition) (Sydney: Lawbook Co., 2007) pp.530-531. Dr Dickey maintained the same conclusion in the most recent edition of his tome – Family Law (Sixth Edition) (2014) p.564 [41.220].
For the above reasons, and as earlier noted, the Court finds that the Second Respondent’s case has been established (factually and legally), albeit with a reduced sum awarded.
The Court also finds that the Husband’s claims are (a) refuted by the documentary evidence provided by the Second Respondent, (b) untenable by virtue of his conduct in the regular payment to the Second Respondent (as well as by the concession in his submissions), and (c) not supported by legal principle.
Accordingly, the Court makes the following declarations and orders:
(i)as between the Applicant and the Second Respondent, the Court declares that there is a recognisable and ascertainable debt that is owing to the Second Respondent that arises out of funds provided by her to the de facto Husband (“the Husband”) and de facto Wife (“the Wife”) in approximately March 2007 in relation to the purchase a residence in Property P (“the property”);
(ii)the amount owing by the Husband, the Court declares, is $14,000 (being half the debt deposed to by the Second Respondent as at March 2011).
(iii)the Court declares that the balance of the debt(s) claimed by the Second Respondent in relation to rates, mortgage payments, etc, shall rank equally with the other debts claimed by the parties.
(iv)the Court orders that this amount is to paid to the Second Respondent in priority to all other unsecured debts (including those claimed by the Husband) out of the net proceeds of sale of the property (after the mortgage and associated costs have been paid). In the absence of agreement in writing between the Husband and the Second Respondent, that sum is to be paid within 45 days of the date of these orders; absent agreement in writing, this sum is to be paid within 45 days of the date of these orders;
The Second Respondent also sought an order for costs in the Application in a Case filed on 18th July 2013.
Having regard to her success in the Application, save only as to the extent of the quantum awarded, an order for costs in the Second Respondent’s favour should follow the event, either as agreed or as taxed.
I certify that the preceding one hundred and thirty-eight (138) paragraphs are a true copy of the reasons for judgment of Judge Neville
Associate:
Date: 26 February 2014
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
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Contract Law
Legal Concepts
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Estoppel
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Contract Formation
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Remedies
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Costs
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Fiduciary Duty
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