Tadgell and Hahn
[2012] FMCAfam 74
•31 January 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| TADGELL & HAHN | [2012] FMCAfam 74 |
| FAMILY LAW – Whether husband and wife have equitable interest in property – whether wife has reasonable prospect of establishing claim of equitable interest. |
| Family Law Act 1975 (Cth) Federal Magistrates Act 1999 (Cth), s.17A |
| Friar & Friar [2009] FamCA 295 Beck [2004] FamCA 92; (2004) FLC 93-181 Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 Grundlt (1937) 59 CLR at 675 Young v Lalic [2006] NSWSC 18 at 74 The Commonwealth v Verwayen (1990) 170 CLR 394 at 487 Grant v Edwards [1986] Ch 638 Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 |
| Applicant: | MS TADGELL |
| Respondent: | MR HAHN |
| File Number: | MLC 7358 of 2009 |
| Judgment of: | Phipps FM |
| Hearing date: | 15 July 2011 |
| Date of Last Submission: | 15 July 2011 |
| Delivered at: | Dandenong |
| Delivered on: | 31 January 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr Moisidis |
| Solicitors for the Applicant: | Meier Denison Guymer |
| Counsel for the Respondent: | Mr Crozier-Durham |
| Solicitors for the Respondent: | (omitted) |
ORDERS
The application to join Ms S as a respondent to the proceeding and amend the application is dismissed.
The question of costs be reserved to 15 March 2012 at 9.45am in the Federal Magistrates Court of Australia at Dandenong.
IT IS NOTED that publication of this judgment under the pseudonym Tadgell & Hahn is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT DANDENONG |
MLC 7358 of 2009
| MS TADGELL |
Applicant
And
| MR HAHN |
Respondent
REASONS FOR JUDGMENT
The applicant wife applies for property orders. The current parties are the wife and the husband. For many years prior to separation the parties’ matrimonial home was a property owned by the husband’s mother, Ms S, and registered in her name.
The wife alleges that she and her husband have an equitable interest in the former matrimonial home. The wife now applies to join Ms S as a party to these proceedings and to file an amended application to claim that she and her husband have an equitable interest in the property. Both the husband and his mother oppose the application. They oppose it because they say the applicant has no reasonable prospects of success in any claim against her husband's mother.
Both the husband and his mother filed and relied on affidavits and were represented at the hearing. The test to be applied is the same as the test in a summary judgment application. There was some discussion at the hearing whether Ms S should first be joined and then the application be treated as a summary judgment application by the husband and his mother or whether the substantive argument should be whether Ms S should be joined. The latter course was adopted. The test is the same, that is whether the applicant has a reasonable prospect of success in her claim against Ms S.
The summary judgment test is contained in s.17A of the Federal Magistrates Act 1999 (Cth). It provides:
(1) The Federal Magistrates Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is prosecuting the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.
(2) The Federal Magistrates Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.
(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
The parties married on (omitted) 1979 and separated on 22 November 2007. They were divorced on 2 November 2009.
There are three children of the marriage X born (omitted) 1979, Y born (omitted) 1991 and Z born (omitted) 1984.
The parties at first lived in the Property L in a property they owned. The husband had a (business omitted) and the wife owned and managed a (omitted). The husband then moved to a (business omitted) in Melbourne but that was dissolved after a short time and he has since (occupation omitted).
They sold the Property L property in 1984 and purchased a property in Property S. There was, according to the husband's affidavit, net proceeds of about $75,000 from the sale. The wife said she believed most of that money was used towards the purchase of the property in Property S but subsequently found that much went into the husband's new (business omitted).
The husband says that $10,000 was used towards the purchase of the Property S house and $65,000 was placed into an interest-bearing account. Subsequently it was lent to the (business omitted).
He resigned from the business on 30 June 1985. He says he received nothing other than repayment of the loan of $65,000, which was repaid in full on about 31 December 1985. He then commenced (omitted) on his own. The wife says he was unemployed for a time but the husband says he was not.
From the affidavits it is not clear whether the parties lived in the Property S property. The wife says that they had to rent it rather than default on the mortgage. It was subsequently sold.
The parties moved into the property at Property M in 1985. At that stage it was owned by the husband's grandmother. The husband says it was purchased by his grandparents in 1956. His grandparents lived in the house in retirement and after his grandfather died in 1978 his grandmother continued to live there until about 1983 when she went to live with Ms S.
The Property M property remained unoccupied until 1985. Both parties agree that the grandmother allowed them to live there with their family in 1985. The husband says he agreed to pay his grandmother a modest rent. The grandmother died in 1987 and the property passed to Ms S. The parties remained living in the property.
The parties lived in the Property M property with their children for 25 years until they separated.
The wife says that when they first moved into the Property M property it was in a very bad state. She said she was upset living there and wanted to move to another property because the state of the Property M property made her depressed. She says she started to look at other properties in the area and placed the Property S property on the market.
The wife says that Ms S found out she was looking for another house and Ms S became distressed. The wife says Ms S did not want the family to lose the property. The wife says that Ms S told them “do what you like to the house; I am leaving it to you and Mr Hahn in the will”. The wife says she was still dissatisfied because Ms S was in good health and she says the husband and she did not want to stay in the property and repair it and maintain it without it belonging to them.
Ms S owns and lives in a property in (omitted). She has two other children A and B. The wife says that she and the husband had a further conversation with Ms S. She says Ms S stated “I am leaving the back house (omitted) to A (her daughter) and I am leaving the front one to B (her son), and (omitted) (the Property M property) is yours.
The wife says that from then on she and the husband believed the property was theirs and would be an investment in the future and would secure their superannuation.
The wife says that she and her husband carried out various renovations and improvements including:
a)Painting the house twice;
b)Renovation of bathroom on two occasions;
c)Construction of walk in robes to bedrooms;
d)Putting in windows and doors;
e)Plumbing and electrical work;
f)Polished floorboards;
g)Re- carpeting twice;
h)Putting in curtains and blinds;
i)Installation of light fittings;
j)Creation and maintenance of driveway;
k)Concreting of paths;
l)Creating and maintaining gardens;
m)Erection and maintenance of fencing;
n)Installation of two air-conditioners.
The wife says that they made periodic payments to Ms S, at the time of separation the payments were $850 a month. She says that they made the payments gratuitously to help Ms S and they were not rent. She says she and her husband made all payments for the property. She says they paid land tax (the last time it was approximately $10,000), insurance, rates, bills and all maintenance in relation to the property. She says they did so relying on the husband’s mother’s statement that the property was theirs.
The wife says that in 1990 the husband, she and their children visited Queensland to see her parents. The husband’s brother and sister and their friends used the Property M property. When they returned the property was a mess and the cleaner refused to clean because of the mess. The wife said she told Ms S about the mess and she responded “Well dear its yours, don't let them come, I wouldn't, I saw what they did and I was shocked”.
The wife says that the husband was very close to his aunt, Ms D. The wife says that not long after Ms D’s death she had a conversation with Ms S who was very upset. Ms S said that Ms D told her she was going to leave her entire estate to the husband but she, Ms S, talked Ms D out of it. The wife asked how much it was and was told in excess of $1 million. The wife says she asked why Ms S did this and she replied that the husband would have lost it. The wife says she asked Ms S why she did this, because her husband lost his inheritance. She says Ms S replied “I am sorry for what I have done but you know you have (omitted)”.
Ms S says that in 1987 her mother passed away and bequeathed the Property M property to her. The property was unencumbered and her son and his family were renting the property from her mother and they continued to rent the property from her after that date. She says the property was in reasonable and liveable condition. A kitchen had been installed by her mother at a cost of approximately $15,000. She says the property had a newly installed watering and sprinkler system.
Ms S says she allowed her son and his family to continue to reside in the property on condition that the rent was paid together with outgoings on the property including council and water rates and to maintain the house and garden. She says she did not want him to stay there as she could rent the property to another tenant for substantially more rent or sell the property and live comfortably. She allowed the husband to stay in the property for a reduced rent out of compassion as he had three young children.
Ms S says that shortly after she had taken ownership of the property her son suggested that some works would need to be done to the property to improve its liveability to a standard to which his family aspired. She says she informed her son that any works done to the house would be at his and his family’s expense and would not affect any rent paid. She was not requested to pay for any renovations or works to the property.
Ms S says that at all times the property has been rented to her son for a modest amount. The current rent is $850 per month. She says that as for as she can recall she paid the land tax from her own funds or out of the rent received from her son. She says the land tax was almost equal to the amount she received as rent. There was no written lease as she did not believe it was necessary to have a lease with her son.
Ms S denies making statements to either the husband or the wife that the Property M property was theirs. She says she intended to leave the block on which the house stands at Property M to the husband and divide the rest of her estate amongst her three children. This may change depending on her circumstances.
The husband describes the history of occupation of the property and the circumstances leading up to he and his family moving to the Property M property with the agreement of his grandmother. The agreement was that they would rent and because the house was fairly basic the rent was modest. He describes the maintenance and renovations that he and the wife carried out on the property. His description is largely consistent with the wife’s description. He lists the approximate costs which total a little less than $30,000.
He says that when they moved their intention and Ms S’s intention was that their occupation was temporary. He says their occupation of the house caused some disharmony in the family because the property had been used as a family holiday house since his grandmother moved out to live with Ms S.
The husband says that in 1988 the wife and he purchased a block of land in Property M for $112,000 intending to build a house on it. The land was purchased in the name of the wife. The land was also used as security for his (business omitted) overdraft of $20,000. He says he made the payments on the mortgage. The land was sold by the bank in 1991.
The husband says that in 1989 they purchased a house in the name of the applicant in Property G for $270,000. A deposit of $27,000 was paid under the contract. They were unable to settle the contract and the deposit was forfeited to the vendor.
In one of her affidavits the wife says that she has found out that around the time the aunt died the husband entered into a Part 10 arrangement with his creditors. The husband says that did not happen. He says that the parties separated for a time in 1991 and 1992. In 1990 he found himself personally liable to pay (omitted) fees to a number of (omitted) together with (omitted) and other expenses by reason of what he describes as misconduct of another (omitted). At the time he shared office premises with that (omitted). He says that without his knowledge or consent that (omitted) used the husband's name as the (omitted) he was handling. (omitted) for whom he was acting failed to pay and went bankrupt. The other (omitted) ceased (omitted) and went into hiding and left Australia in 1992. In 1992 a number of (omitted) issued proceedings against him.
In 1991, in the midst of the economic recession, he was unable to continue making payments under the mortgage on the land and to maintain the overdraft in its specified limit. Following the rejection of his proposed Part 10 arrangement in 1991 he negotiated payment arrangements individually with various (omitted) to avoid having to go bankrupt. That placed a substantial financial burden upon him. Notwithstanding the financial burden he was able to continue paying private school fees for his children.
The State Bank sold the block of land in 1992. It realised a price less than the amount required to discharge the mortgage. The residual liability was approximately $25,000. The husband says he negotiated to repay the State Bank at the rate of $500 per month.
In Friar & Friar [2009] FamCA 295 Fowler J summarily dismissed a claim by a wife against a third party. The third party was the husband’s sister and so the wife's sister-in-law. The wife sought a declaration that the husband and wife be declared the sole owners of a property registered in the name of the husband and the third party. The husband and wife had lived in the property with their children so they share some similarity to the current one.
The case was decided prior to the enactment of s.17A of the Federal Magistrates Act 1999 (Cth) and a similar provision in the Family Law Act 1975 (Cth). Fowler J accepted the submission by counsel for the husband’s sister that the application had to be decided on the wife's material alone and that the test was whether it was doomed to fail. The submission referred to the Full Court decision in Beck [2004] FamCA 92; (2004) FLC 93-181.
Section 17A makes it clear that for a summary judgment application to succeed the claim need not be doomed to fail. I consider that I need to consider the material in other parties’ affidavits, but with considerable caution.
Fowler J considered the law relating to constructive trusts and other possible remedies in Friar at paragraphs [17] – [25]. His Honour said:
17. The High Court in Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 (per Deane J at 614-615) said:
...the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle.
...
The fact that the constructive trust remains predominantly remedial does not, however, mean that it represents a medium for the indulgence of idiosyncratic notions of fairness and justice.
18. His Honour goes on to say at 616 (footnotes omitted):
The mere fact that it would be unjust or unfair in a situation of discord for the owner of a legal estate to assert his ownership against another provides, of itself, no mandate for a judicial declaration that the ownership in whole or in part lies, in equity, in that other.
And, at 620 :
Those circumstances can be more precisely defined by saying that the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do.
19. Justice Brennan in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 said at 423:
The unconscionable conduct which it is the object of equity to prevent is the failure of a party, who has induced the adoption of the assumption or expectation and who knew or intended that it would be relied on, to fulfil the assumption or expectation or otherwise to avoid the detriment which that failure would occasion. The object of the equity is not to compel the party bound to fulfil the assumption or expectation; it is to avoid the detriment which, if the assumption or expectation goes unfilled, will be suffered by the party who has been induced to act or abstain from acting thereon.
Their Honours Mason CJ and Wilson J said at 404:
One may therefore discern in the cases a common thread which links them together, namely, the principle that equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has “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 per Dixon J in Grundlt (1937) 59 CLR at 675.... Equity comes to the relief of such a plaintiff on the footing that it would be unconscionable conduct on the part of the other party to ignore the assumption.
20. Justice Brereton in Young v Lalic [2006] NSWSC 18 at 74 usefully summarises the elements required to establish an entitlement to relief by application of the equitable estoppel which attracts the intervention of equity. That analysis, which I respectfully adopt, is as follows:
First, as to the conduct of the plaintiff: that the plaintiff acted (or abstained from acting) in reliance upon an assumption or expectation that a particular legal relationship existed or would exist between the plaintiff and the defendant, or that the plaintiff had or would acquire some interest in the defendant’s property;
Secondly, as to the conduct of the defendant: that the defendant induced the plaintiff to adopt the assumption or expectation and encouraged the reliant activities of the plaintiff or at least failed to deny the assumption or expectation with knowledge that the plaintiff was relying on it to the plaintiff’s potential detriment and that it could be fulfilled only by transfer of the defendant’s property, a diminution of the defendant’s rights or an increase in the defendants obligations;
Thirdly, as to the subject matter: that the assumption or expectation in respect of it was one that the defendant could lawfully satisfy.
21. In The Commonwealth v Verwayen (1990) 170 CLR 394 at 487 Gaudron J says that “...the substantive doctrine of estoppel permits a court to do what is required to avoid detriment and does not, in every case, require the making good of the assumption.”
22. Thus, the Court should consider whether there is an appropriate equitable remedy falling short of a constructive trust.
23. It seems, for example, that the Court could consider such remedies as a licence to reside or a charge over property in lieu of construing a trust as to ownership if the inequity or detriment could be thus remedied.
24. In considering the detriment which flowed to the party referred to above, counsel for the husband’s sister submits that the conduct must be referable to the promise or intention and this will ultimately depend upon the nature of the conduct and of the promise or intention. I am referred to Grant v Edwards [1986] Ch 638 and the comments at p 648 where Nourse LJ held that it must be conduct on which the claimant could not reasonably be expected to to embark unless he or she was to have an interest in the house.
25. It seems clear that the imposition of remedial constructive trusts is to be done carefully and sparingly. In Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 the High Court said, at 112:
In these cases, the equity which founded the relief obtained was found in an assumption as to the future acquisition of ownership of property which had been induced by representations upon which there had been detrimental reliance by the plaintiff. This is a well recognised variety of estoppel as understood in equity and may found relief which requires the taking of active steps by the defendant.
The Court also said at 113 (footnotes omitted):
The present case fell within the category identified by the Privy Council in Primer v Mayor, &c, of Wellington where “the Court must look at the circumstances in each case to decide in what way the equity can be satisfied”. Before a constructive trust is imposed, the court should first decide whether, having regard to the issues in the litigation, there is an appropriate equitable remedy which falls short of the imposition of a trust.
The husband's evidence in his affidavits of purchase of a block of land for $112,000 in the name of the wife and its subsequent sale by the bank and the failed attempt to purchase another house in Property G for $270,000 is uncontested. His financial position in the early 1990s is uncontested. I consider that for the purpose of this summary dismissal application I must take these facts as established and take them into account.
This means that there is common ground between the parties that when they moved into the house they did not intend to remain permanently but intended to purchase their own property, and that intention continued after the death of the husband's grandmother and the passing of ownership and title to Ms S.
To establish a constructive trust or equitable remedy the wife must show detriment. I assume for the purposes of this application that the wife's evidence of the statements by Ms S is correct and that they are more than a statement of intention to leave the property to the husband and wife in her will, but are statements of intention to transfer the property at sometime in the future. They are representations not on their own enforceable. To succeed the wife must show that she and the husband suffered detriment relying on the representations.
The detriment the wife says she suffered is that she says she and the husband ceased looking for another property. That is not correct because the husband's undisputed evidence shows that the parties made two attempts to secure their own home. Both were unsuccessful and resulted in financial loss.
The wife puts forward no evidence of the parties’ ability to purchase their own home after 1991. In the face of the husband's undisputed evidence about the attempts and financial loss and his own undisputed financial difficulties, in order to show that she has a reasonable prospect of success in a claim against Ms S the wife needs to show that the parties had a reasonable prospect of establishing that they could have purchased another home. The detriment the wife relies upon is that she says the parties ceased looking for their own home. But if they had no ability to obtain their own home then there is no detriment.
In the absence of the two failed attempts to purchase another home it may have been sufficient for the wife to assert that she and the husband did not attempt to do so. Given that there were two failed attempts and the obvious financial difficulty, to show a reasonable prospect of success the wife does need to put forward some evidence of an ability to purchase another home. She says she carried out some part-time work but says she was principally engaged in caring for the children and the home. She does not say she was capable of obtaining sufficient funds to purchase a home herself. The objective evidence of two failed attempts to obtain a home and each party’s finances leads to the conclusion that while both husband and wife state they wished to obtain their own home, financially they could not do so.
The payment of amounts of money to Ms S, the payment of rates and taxes, assuming the parties paid the land tax, and the carrying out of renovations and repairs does not lead to the conclusion that the wife has a reasonable prospect of successfully establishing that those matters alone caused detriment to the husband and wife such that equity should intervene.
I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of Phipps FM
Date: 31 January 2012
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