Vadisanis & Vadisanis & Anor
[2014] FamCAFC 97
•12 June 2014
FAMILY COURT OF AUSTRALIA
| VADISANIS & VADISANIS AND ANOR | [2014] FamCAFC 97 |
| FAMILY LAW – APPEAL – PROPERTY – TRUST – Whether the intervener had the benefit of a resulting, implied or constructive trust over money advanced by her to the appellant to assist with the buying of property – Where the land register recorded the parties’ interests as tenants in common in unequal shares that did not accurately reflect the money advanced – Where the presumption of advancement applies – Calverley v Green (1984) 155 CLR 242 – Where the intervener was unable to establish her intention to acquire a beneficial interest to the full extent of the advance – HELD – Presumption of advancement not rebutted – Appeal allowed. FAMILY LAW – APPEAL – PROPERTY – LIMITATION PERIOD – Whether the enforcement of the loan agreement was statute barred by virtue of the limitation period – Whether the cause of action on the contract commenced from the date of the contract or the date of demand - Where a contract is simply “payable on demand” the general rule is that the cause of action begins from the date of the contract - Ogilvie v Adams [1981] VR 1041 - Whether the effect of the words “three months’ notice” on the loan document evinced an intention that the cause of action would not accrue until three months after the demand had lapsed – HELD – Cause of action accrued from date of demand – Appeal allowed. FAMILY LAW – APPEAL – PROPERTY – Where intervener brought her action on time - Where points of claim was amended during the hearing to include an additional claim - Operation of r 11.10 Family Law Rules 2004 – Where the effect of adding a new cause of action arising out of the same or substantially the same facts as any claim brought within time, has the effect of adding a new cause of action, notwithstanding that if fresh proceedings had been commenced, the additional claim would be statute barred – Whether the additional claim arose out of substantially the same facts - HELD - Limitation period had expired – Appeal allowed. |
| Duties Act 1997 (NSW): s 304 Family Law Rules 2004 (Cth): rr 22.01; r 22.14, r 11.10 |
| Calverly v Green (1984) 155 CLR 242 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 |
| APPELLANT: | Ms I Vadisanis |
| RESPONDENT: | Mr Vadisanis |
| INTERVENER: | Ms J Vadisanis |
| FILE NUMBER: | SYC | 6377 | of | 2008 |
| APPEAL NUMBER: | EA | 20 | of | 2013 |
| DATE DELIVERED:: | 12 June 2014 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Ainslie-Wallace, Ryan & Johnston JJ |
| HEARING DATE: | 19 August 2013 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 22 January 2013 |
| LOWER COURT MNC: | [2013] FamCA 14 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Givney and Mr Alexander |
| SOLICITOR FOR THE APPELLANT: | Campbell Paton & Taylor |
| COUNSEL FOR THE RESPONDENT: | Mr Johnston |
| SOLICITOR FOR THE RESPONDENT: | Johnston Vaughan |
| COUNSEL FOR THE INTERVENER: | Mr Johnston |
| SOLICITOR FOR THE INTERVENER: | JSM Lawyers |
Orders
That the application to adduce further evidence in the appeal be dismissed.
The appeal be allowed.
The orders and declarations numbered 1(a), 1(b), 1(c), 2, 3, 4 and 5 made by Fowler J of 22 January 2013 be set aside.
The matter be remitted for rehearing before a judge.
That the Court grants to the appellant a costs certificate pursuant to the provisions of s 9 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by her in relation to the appeal.
That the Court grants to the respondent a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by him in relation to the appeal.
That the Court grants to the intervener a costs certificate pursuant to the provisions of s 6 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the intervener in respect of the costs incurred by her in relation to the appeal.
That the Court grants to all of the parties a costs certificate pursuant to the provisions of s 8 of the Federal Proceedings (Costs) Act1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to all of the parties in respect of the costs incurred by the appellant, the respondent and the intervener in relation to the rehearing of the application.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Vadisanis & Vadisanis and Anor has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 20 of 2013
File Number: SYC 6377 of 2008
| Ms I Vadisanis |
Appellant
And
| Mr Vadisanis |
Respondent
And
| Ms J Vadisanis |
Intervener
REASONS FOR JUDGMENT
Introduction
By Further Further Amended Notice of Appeal signed on 15 July 2013, Ms I Vadisanis (“the wife”) appeals against orders made by Fowler J on 22 January 2013 in determining proceedings for the alteration of property interests under s 79 of the Family Law Act 1975 (Cth) (“the Act”).
Ms J Vadisanis (“the intervener”), who is the mother of Mr Vadisanis (“the husband”), intervened to seek declarations that the husband and the wife were indebted to her as a consequence of various transactions which occurred prior to and during their marriage. It is common ground that the intervener advanced money to the husband before marriage and to the husband and the wife after their marriage, which was used in certain transactions. The intervener established three of five alleged advances which the trial judge ordered be repaid and which had the effect of reducing the value of the property available for distribution between the husband and the wife by $329,397.63. It is the characterisation of these advances and the legal and equitable effects of the resultant transactions that forms the crux of this appeal.
Of the remaining property, the wife is to receive property including superannuation of approximately $242,611 and the husband is to receive property including superannuation of approximately $183,022. Although the wife also challenges the manner in which the trial judge adjusted the remaining property between her and the husband, because it is agreed that if she secures a measure of success in relation to the orders concerning the intervener the property settlement proceedings must be remitted for re-hearing, the focus of the appeal concerned the orders made in favour of the intervener.
In this regard, the trial judge declared that the husband and the wife were indebted to the intervener in the amount of $329,397.63. Concerning the intervener, the order appealed against provides:
(1)The husband and the wife are hereby declared to be indebted to the intervener in the sum of $329,397.63 with such sum representing the aggregate of the following:
(a)a debt of $224,397.63 in respect of the Loan made on 6 June 1997 for a principal sum of $65,000 plus interest at 10 per centum per annum payable until 6 June 2010 plus
(b) a debt of $50,000 in respect of the “Award Monies” plus
(c)a debt of $100,000 in respect of the “[O] Street loan” less
(d)a credit of $45,000 in respect of monies repaid to the intervener by the husband post separation.
The appeal is resisted by the husband and the intervener who seek that it be dismissed.
Background
The background facts as found by the trial judge which are relevant to this appeal are as follows.
The husband, who was 41 years at the time of trial, and the wife, then 44 years, commenced cohabiting in November or December 1996. They married in 1997 and separated in September 2008. There are two children of the marriage born in 1998 and 1999.
At the time the parties commenced cohabitation, the wife’s property consisted of a motor vehicle and savings of $6,000. At that time the husband’s property consisted of his interest in Unit 1, Q Street, Suburb U (“the first Suburb U property”). The Suburb U property was purchased in April 1995 for $190,500. The intervener and the husband’s deceased father paid $50,000 (26 per cent) towards the purchase price. The husband contributed $140,000 (74 per cent) which he borrowed from the Bank. The husband’s and intervener’s (but not the intervener’s husband) interests in the property were registered as tenants in common as to 95 per cent and 5 per cent respectively. One of the pivotal issues in this case is whether the intervener’s 5 per cent legal interest reflected her beneficial interest, or whether, by virtue of a resulting trust, the husband’s legal interest was subject to an additional 21 per cent beneficial interest in her favour.
In early 1997 the husband and intervener sold the Suburb U property for $250,000. The net proceeds of sale after discharging the husband’s mortgage were $110,000. Relevantly, the husband and wife retained the proceeds of sale.
Shortly after they married, on 6 June 1997 the husband and the wife purchased Z Sreet, Suburb S for $282,000 (“the Suburb S property”). They used the net proceeds of sale of Suburb U to partly fund the purchase.
The same day the husband and wife executed a mortgage in favour of the intervener (but not the intervener’s husband) for the principal sum of $65,000 (plus interest at 10 per cent per annum). The mortgage was unregistered, unstamped and secured against Suburb S. The principal sum referred to in the mortgage is said to reflect the intervener’s interest in the Suburb U proceeds of sale which, according to her, “rolled” into Suburb S. An issue to this appeal is the extent to which the 1997 mortgage could be relied upon to establish the intervener’s intention when she acquired her interest in Suburb U, and whether any action that the intervener could take on the mortgage was statute barred.
In October 2000, the husband and wife sold Suburb S for $455,000, following which they purchased Unit 2, Q Street, Suburb U (“the second Suburb U property”) for $400,000. This purchase was funded using part of the net proceeds of sale of Suburb S and $220,000 borrowed from a bank.
In September 2003, the husband’s father received a compensation award of $220,200 from the Compensation Tribunal. He passed away on 21 October 2003 with the intervener his sole beneficiary.
In April 2004, the intervener received a second compensation award of $182,000 from the Compensation Tribunal.
On 12 May 2004, $50,000 of the compensation money (“the Award monies”) was deposited into the joint account of the husband and the wife.
In October 2004 the intervener gave the husband $100,000 cash. This was put towards the purchase of a property at O Street, Town E (“O Street loan”) in the husband’s sole name. At issue in the appeal is whether the Award monies and O Street loan were loans or gifts. If they were loans, a question arises whether the six year limitation for recovery of the Award monies had expired before recovery was sought in these proceedings.
On 29 April 2010, well after the parties commenced proceedings in this court, the intervener wrote to the solicitors for the husband and the wife demanding payment of $451,397.63.
On 30 April 2010, the intervener was granted leave to intervene in the proceedings.
On 8 July 2010 the husband and the wife sold the second Suburb U property for $880,000. The mortgage of $548,893.10 was discharged with the balance of the proceeds of sale paid into a controlled monies account.
The trial judge’s reasons
The trial judge noted that it was asserted by the intervener that the husband and the wife were indebted to her in the amount of $451,397.63. This figure was calculated, according to his Honour [62] as:
…
a)$224,397.63 for the principal amount of the Loan plus interest calculated at 10 per centum per annum
b)$150,000 for the monies lent “on or about December 2004” and
c)$77,000 for the monies lent “on or about May/June”
Turning to the first Suburb U property, his Honour noted that the legal interests of the husband and the intervener were reflected on the title of the property as tenants in common with a 95 per cent share to the husband and a 5 per cent share to the intervener. He recorded the intervener’s contention that in addition to her 5 per cent legal (and beneficial) interest, she had an equitable interest in the property of an additional 21 per cent by reason of a resulting, implied or constructive trust arising from the advance of $50,000 towards the purchase price [102]-[103]. The wife’s submission that the intervener had not rebutted the presumption of advancement was rejected.
His Honour noted that when the first Suburb U property was sold, the wife was aware that the $50,000 advanced by the intervener was not repaid and that the intervener agreed to the husband and wife applying that money towards the Suburb S purchase [105].
His Honour recorded the intervener’s contention that on or about 6 June 1997 she loaned the husband and wife $65,000 which reflected her share of the Suburb U proceeds of sale. The intervener asserted that the husband and wife applied those monies towards the purchase of Suburb S [108].
His Honour noted that the intervener claimed that this money was secured by a mortgage over Suburb S, the intervener and her late husband being the mortgagees and the husband and wife the mortgagors [109].
The trial judge recorded the intervener’s contention that the terms and conditions of the loan were [111]-[112]:
·That the husband and the wife would pay to the intervener interest on the principal sum, or so much thereof as remained unpaid at the rate of 10 per cent per annum; and
·That the principal and interest due would be repaid to the intervener at the expiration of three months’ notice by the intervener to the husband and the wife.
The trial judge recorded the wife’s evidence that neither she nor the husband received $65,000 from the intervener and, in any event, the passage of time rendered the putative advance unrecoverable [119] and [129].
After setting out the parties’ competing positions, his Honour found:
133. The Court finds on the evidence that the version of events in relation to the Loan is as set out by the husband, the intervener and [a solicitor], and that the sum claimed to be due under the terms of the Mortgage is due.
134. The husband and wife therefore have a joint liability to the intervener of $224,397.63, that sum being the amount owing for the principal loan plus interest calculated as accruing until 6 June 2010.
Because the intervener had not demanded repayment of the amount due under the mortgage, the trial judge found that at the time the Suburb S property was sold, the amount due was not immediately payable [151].
As to the wife’s contention that, in any event, this aspect of the intervener’s claim was statute barred, the trial judge decided that the limitation period under the Limitation Act 1969 (NSW) applicable to a loan contract was six years [155]. In relation to the time when the relevant limitation period commenced, his Honour adopted the reasoning of Fullager J in Ogilvie v Adams [1981] VR 1041 at [1049] and [1052] and found that, having regard to the terms of the loan and, particularly, the requirement for the expiration of three months’ notice after a demand for repayment before liability for repayment arose, that the limitation period commenced from the date of the demand; namely
29 April 2010 [157].
The trial judge then addressed the intervener’s contentions that from the husband’s father’s 2003 compensation award she, in October 2004, loaned $100,000 to the husband which he used to buy a property at O Street (“the O Street loan”) [189] and that a further $50,000 awarded in May 2004, was paid directly to the parties [198].
At trial, it was common ground that the $50,000 was deposited into a joint account of the husband and the wife on 12 May 2004, which was then applied in reduction of their mortgage. The wife said this advance was a gift and not a loan [203].
Although the trial judge made no specific finding to this effect, it would appear that in relation to this $50,000, he preferred the evidence of the intervener and as a consequence found that the husband and wife owed the intervener $50,000.
In relation to the O Street loan, his Honour found that in October 2004 the intervener gave the husband a bag which contained $100,000 cash. As the trial judge observed at [190] the wife contended that the money was not a loan but a gift from the intervener to the husband which mirrored an identical gift which the intervener provided to the husband’s sister [191]-[192].
His Honour found that this money was a loan owed to the intervener by the parties [196] and [232(c)].
Grounds of appeal
The wife asserted 22 grounds of appeal. The grounds were grouped under headings which we set out and, for convenience, we will consider the grounds in these groups.
Grounds 6 – 9 - $50,000 advance for the first Suburb U property purchase in 1995
Grounds 6 - 9 challenge the trial judge’s findings about the $50,000 advanced to the husband in 1995 to assist in the purchase of the first Suburb U property. These grounds contend that the trial judge erred in finding that the intervener had the benefit of a resulting, implied or constructive trust in relation to 26 per cent of Suburb U. It is contended by the wife that in arriving at this conclusion, the trial judge erroneously found that the presumption of advancement was rebutted.
The grounds of appeal are set out below.
6.His Honour erred at [107] insofar as his Honour found that the $50,000.00 advanced to the Husband by the Intervener and her late husband on 9 March 1995 gave rise to a resulting or constructive trust in favour of the Intervener as to 26 per cent of the First [Suburb U] Home.
7.His Honour erred at [102]-[107] in failing to consider that the Intervener and her late husband stood in a relationship of parent and child with the husband, which gave rise to a presumption of advancement.
8.In concluding at [130] in relation to the 6 June 1997 loan that there was “clear evidence” that the presumption of advancement was rebutted, his Honour erred in that:
a.His Honour failed to have proper regard to the intentions of the Husband and Intervener as at 9 March 1995 to the exclusion of their intentions at subsequent times;
b.Insofar as his Honour considered at [130] the presumption of advancement in relation to the $50,000.00 advanced in 1995, his Honour relied on the documents created in 1997 and had regard to the subsequent events in 1997 as a basis for finding the intentions of the Husband and Intervener in 1995, and thereby erred as a matter of law; and
c.Insofar as his Honour found that the Husband and Intervener intended as at 9 March 1995 for the Intervener to take a 26 per cent interest in the First [Suburb U] Home, his Honour failed to give adequate reasons.
9.His Honour erred in law in failing to give adequate reasons for the finding at [107] that the Court accepted that the parties involved in the 9 March 1995 transaction agreed as was indicated by the Intervener and the Husband, in that:
a.His Honour necessarily accepted that the Husband and Intervener intended at the time that the intervener would be beneficially interested in the First [Suburb U] Home in the order of 26 per cent;
b.His Honour failed to consider that the Intervener was only registered in 1995 to have an interest of 5 per cent in the First [Suburb U] Home and not 26 per cent;
c.The Intervener failed to record in her evidence in chief her intention in 1995 in relation to the $50,000 advance; and
d.His Honour failed to explain how Intervener’s evidence on this issue could be accepted in light of the adverse findings of the Intervener’s credit (at [186]) in participating in an illegal transaction designed as it was to commit a fraud against the Commonwealth;
e.His Honour failed to consider at all or make any finding as to the wife’s evidence that the Intervener, by her words, actions and/or inactions had repeatedly advised the wife that no monies were owing or otherwise needed to be repaid to the intervener; and
f.His Honour failed to give adequate reasons as to how the presumption of advancement was thereby rebutted.
(original emphasis)
The trial judge accepted the evidence of the intervener that she and her late husband had contributed $50,000 to assist the husband to purchase this property as his first home in 1995. This $50,000 was approximately 26 per cent of the purchase price of $190,500. As we mentioned earlier, the land register recorded the parties’ interests as tenants in common in unequal shares of 95 per cent to the husband and 5 per cent to the intervener.
The question to be determined is whether the intervener’s beneficial interest in Suburb U was “at home” with her 5 per cent legal interest. The general rule being that where two people have contributed the purchase price in unequal shares, it is presumed that a resulting trust arises in the proportions in which they contributed the purchase money. This presumption is subject to the exception created by the presumption of advancement (Calverly v Green (1984) 155 CLR 242).
In relation to the presumption of advancement, in Calverly v Green, Gibbs CJ said at page 246:
Where a person purchases property in the name of another, or in the name of himself and another jointly, the question whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser. However, in such a case, unless there is such a relationship between the purchaser and the other person as gives rise to a presumption of advancement, i.e., a presumption that the purchaser intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take beneficially.
His Honour further said at page 250:
The presumption should be held to be raised when the relationship between the parties is such that it is more probable than not that a beneficial interest was intended to be conferred, whether or not the purchaser owed the other a legal or moral duty of support.
And at page 251:
However, both the presumption of advancement, and the presumption of a resulting trust, may be rebutted by evidence of the actual intention of the purchaser at the time of the purchase: see Charles Marshall Pty. Ltd. v. Grimsley (1956) 95 CLR 353 at 364-5 … Where there are two purchasers, who have contributed unequal proportions, but have taken the purchase in their joint names, the intentions of both are material. Even if the parties had no common intention, the intentions of each may be proved, for the purpose of proving or negating that one intended to make a gift to the other. (our emphasis)
It is well settled that the relationship between parent and child gives rise to the presumption of advancement. It follows that unless the presumption is rebutted, it is presumed that the intervener intended that the husband would have what would otherwise have been her additional 21 per cent beneficial interest in Suburb U. The presumption of advancement will be rebutted where there is evidence that the transferor (intervener) did not intend to gift the property or part of it. For example, if the intervener advanced the $50,000 or part of it as a loan, the loaned portion would evince an intention not to acquire a beneficial interest in the property. The money advanced must be provided in character such that the intention to acquire a beneficial interest is evident (Calverly v Green at page 246).
As a consequence, in order to rebut the presumption of advancement, the intervener bore the onus of establishing her intention to acquire a beneficial interest in Suburb U to the full extent of the advance.
The correct time to determine the beneficial interests in a property is at the time of acquisition. This is to be ascertained by evidence of the acts and declarations before or at the time of purchase or so immediately after it as to constitute a part of the transaction (Calverly v Green at 262). However, as was explained in Trustees of Property of Cummins (a bankrupt) v Cummins (2006) 227 CLR 278 at [65]:
… whilst evidence of subsequent statements of intention, not being admissions against interest, are inadmissible, evidence of facts as to subsequent dealings and of surrounding circumstances of the transaction may be received. [footnote omitted]
In order to rebut the presumption of advancement, therefore, the intervener would have had to satisfy the trial judge that her intention in 1995, when the property was acquired, was that she did not intend to confer on the husband the beneficial interest in the property represented by the difference between her 5 per cent legal interest and the total sum advanced. The intervener also would need to show that the husband shared her view or by her words and actions he ought to have understood that she did not intend to confer on him a beneficial interest represented by the difference between her 5 per cent legal interest and the total sum advanced.
Without reference to any evidence from the husband or intervener on the point and having done no more than summarise various contentions made by the wife and the intervener, at [107] the trial judge said:
The Court accepts that the parties involved in the transaction agreed as was indicated by the intervener and the husband.
We agree with the wife that there are a number of difficulties with this finding. However, before these are discussed, it is illustrative to set out the key elements of the evidence on this topic given by the intervener and the husband.
Turning first to the husband, in his affidavit sworn on 21 December 2011, he said:
8.In early 1995 shortly after the New Year I had a conversation with my parents, and words to the following effect were spoken, [the husband’s father] said to me “[the husband] you have saved up some and you have only spent some of it. Now its good time for you to look around and find a unit or apartment.” I said “Dad they won’t lend the money that I want, I need about $200,000.00, shopping price tag.” [The husband’s father] said to me “Son don’t worry your mother will go the bank and organise to get you a loan. I replied “okay.” I was grateful for the offer my parents made.
9.On the following day I had a conversation with [the intervener] and words to the following effect were spoken “[The husband] we must guarantee any loan for you if you a (sic) buy a unit. But you must live here with us and rent the unit out to pay it off quicker” I said “Okay I will do that.” My mother said “We must guarantee this house [intervener’s home] for your loan.” I said “thank you so much”
…
11.Shortly before exchanging on the contract for [Suburb U] My father approached me at home and words to the following effect were spoken “[The husband] I don’t want you working for the bank for the rest of your life. If you borrow all of the money to buy the unit then you are going to owe the bank more than $180,000.00. Your mum and I are going to lend you $50,000 to help you buy the unit. Your mortgage payments will be less and you can pay us back when you decide to sell it”. I said “okay dad I will do that.” The final arrangement in relation to the [Suburb U] unit was that my mother and I co-purchased the property in the amount of $190,500.00. I am aware that my parents’ home … was not provided as security. (our emphasis) (errors as in original)
If, as [107] of the trial judge’s reasons suggests, his Honour accepted this evidence, he was satisfied that the husband’s father loaned the husband the $50,000 to acquire Suburb U. This evidence compelled a finding that the intervener’s husband and the intervener intended to lend the husband $50,000 which he would repay. As we said earlier, the money advanced must be provided in character such that the intention to acquire a beneficial interest is evident. When the manner in which title to the property was recorded is taken into account, the appropriate finding would have been that the husband, his father and the intervener intended that her legal and beneficial interests in Suburb U were the same; namely 5 per cent and that by the time of purchase the balance of what was originally intended to be a loan was in fact given to the husband.
As to the evidence given by the intervener on this topic, this is best captured in her affidavit in chief, sworn 14 December 2011. She said:
10.I am not sure when but I think in 1995 [intervener’s husband] and I had a conversation with [the husband] upon his return from an overseas trip where words to the following effect were spoken:-
[Intervener’s husband]: You should buy an apartment. Rent it out and continue to live with us.
[Husband]:The bank will not give me a loan.
[Intervener’s husband]: Mum will go tomorrow and ask at the bank. We will organize that.
[Husband]:Okay mum. Go tomorrow and ask if they will give me a loan.
11.On the following day I attended the … Bank … and enquired regarding a loan in order for [the husband] to buy an apartment. I received advice to the effect that there needed to be a guarantor to the loan. The bank indicated that my property … was needed as collateral and that the loan would be otherwise approved as [the husband] had secure employment with [a company].
12.That same night I had a conversation with [the husband] where words to the following effect were spoken:-
[The intervener]: I went to the bank. They told me that if I put down this house as a guarantee and we buy the apartment together there will be no problem getting the loan.
[The husband]: Okay let’s do it.
He then stood up and kissed both me and my Husband who was also present.
13.After this time [the intervener’s husband], [the husband] and I began looking for apartments. A real estate agent … was selling an apartment known as [Suburb U]. We contacted him and were shown the apartment. We liked the apartment and agreed to purchase it for $190,500…
This evidence, and the manner in which the intervener’s interest in Suburb U was registered, indicates that other than as to 5 per cent, she formed no intention at all as to the remaining beneficial ownership of the property. In other words, the evidence does not reveal that the intervener had an actual intention that she should be beneficially entitled to 26 per cent of the property.
We are unable to discern a factual or legal basis for how his Honour rejected the wife’s contention that the intervener failed to rebut the presumption of advancement. His Honour’s analysis and findings are stated at [130]:
The wife also states that the intervener has not rebutted the presumption of advancement with respect to the husband’s interest in the first [Suburb U] property. The Court finds that contrary to this assertion there was clear evidence presented by the husband and the intervener which rebutted that presumption.
His Honour did not disclose the nature of this “clear evidence”. In our view, not only did his Honour fail to provide sufficient reasons for this important finding, but on the evidence, the finding was not available. Nonetheless, that his Honour considered this issue means that ground 7 cannot succeed.
We observe that at [103], the trial judge noted that the intervener contended that she had an equitable interest of an additional 21 per cent by reason of a resulting, implied or constructive trust. Otherwise his Honour’s reasons are silent about the elements required to establish trusts of the types mentioned, or state which of the various types of trusts under consideration the intervener established. If his Honour’s noting of that contention amounted to a finding, which is far from clear, it would tend to suggest that his Honour accepted that there was some agreement between the intervener and the husband that he was holding the 21 per cent in trust for her. Any such finding would have been in conflict with the evidence referred to above.
Ground 8 raises errors said to arise from the trial judge’s finding about the provision by the intervener of $50,000 to the purchase of Suburb U, including a failure to give reasons. The ground refers either to evidence to which the trial judge failed to give any adequate weight or evidence to which his Honour gave weight in coming to the finding but which, in fact, could not support the finding. For example, it was argued that if the trial judge relied on statements by the intervener other than against interest, made in 1997 as to what her intention was in 1995, that evidence was not admissible evidence to rebut the presumption of advancement. We agree.
The respondent’s submissions on these grounds does not advance the argument, submitting that the mortgage entered into in 1997 between the intervener, husband and wife provides evidence sufficient to rebut the presumption of advancement. This submission cannot be accepted. However, we accept the submission that in this regard (and in relation to other findings to which the appeal grounds refer) his Honour gave no reasons for his finding. It is an arid exercise to wonder what weight or what advertence he gave to the evidence in the absence of any exposure of his reasoning process.
Similarly, ground 9 asserts error in his Honour failing to make necessary findings to support the impugned conclusion. We agree.
In these circumstances, we find that his Honour’s conclusion that the presumption of advancement had been rebutted cannot stand. The effect of this is that the intervener’s beneficial interest in Suburb U was no greater than her legal interest and the balance of the $50,000 constituted a gift to the husband.
Grounds 6, 8 and 9 have been established.
Grounds 10, 11 and 12 - $65,000 loan in 1997
The challenges raised by these grounds are set out below:
10.His Honour erred in finding that the Husband and Wife had borrowed from, or were otherwise indebted to, the Intervener and her late husband in the order of $65,000.00 on 6 June 1997, in that:
a.It was common ground that no monies were transferred between the parties in relation to the 6 June 1997 purported loan; and
b.Any obligation by the Husband and Wife to pay the Intervener upon the sale of [Suburb U] for $250,000.00 was, at its highest, no greater than the value of the intervener’s interest in [Suburb U].
11.His Honour ought to have found that, at most, the Husband and Wife were indebted to the intervener and her late husband in the order of $12,500.00 (being 5 per cent of the proceeds of sale of [Suburb U] on 6 June 1997.
12.In the event that $65,000.00 loan is not statute-barred, His Honour ought to have declared at Order 1(a) that the Husband and Wife are indebted to the Intervener in the order of $12,500.00 plus interest at 10 per cent per annum.
These grounds are to the following effect:
·The trial judge erred in finding that the husband and the wife had borrowed from, or were indebted to, the intervener and her late husband for $65,000 on 6 June 1997;
·The trial judge ought to have found that, at most, the husband and the wife were indebted to the intervener and her late husband for approximately $12,500, being 5 per cent of the proceeds of sale of the Suburb U property;
·If the $65,000 loan is not statute barred, his Honour’s declaration at order (1)(a) ought to have been to the effect that the husband and wife were indebted to the intervener for $12,500 plus interest at 10 per cent per annum;
·The trial judge ought to have declined to enforce the loan agreement beyond the consideration furnished of $12 500 or declined to allow interest on the basis of promissory estoppel;
·The trial judge failed to deal with the wife’s defence of equitable estoppel.
On 6 June 1997, the husband and wife signed a mortgage which purported to secure a loan of the sum of $65,000 against Suburb S in favour of the intervener.
The mortgage provided:
The Mortgagor will pay to the Mortgagee the principal sum, or so much thereof as shall remain unpaid, at the expiration of three (3) months’ notice by the Mortgagees to the Mortgagors.
The mortgage and the circumstances surrounding its signing were somewhat curious. There was no evidence to the effect that $65,000 had been advanced to the husband and the wife at or about the time the mortgage was signed by them or at all. Although the intervener contended that she had loaned $65,000 to the parties, it was uncontentious that no money had in fact been provided. Rather, the intervener said that $65,000 represented her contribution to Suburb U “rolled over” to Suburb S. As we observed earlier, the intervener’s interest in Suburb U was no greater than her legal interest and was thus $12,500. The document was neither stamped nor registered. The intervener’s late husband, who had contributed with the intervener to the advance of $50,000 in 1995, was not named as a mortgagee. The intervener never signed the mortgage. Although the wife attended upon the office of the solicitor to sign the document and the trial judge found that she had been advised by him as her solicitor (he previously acted for the intervener and the husband), his Honour correctly observed that the solicitor also appeared to have received instructions from the intervener to act on her behalf on the conveyance and mortgage.
In any event, when Suburb S, which purportedly was the security for the loan, was sold in 2000, the intervener did not seek to substitute another security, no money was paid to the intervener and no demand was made on the loan until April 2010, well after the family law proceedings were under way.
After setting out the wife’s contentions in relation to the document and her and the husband’s liability to the intervener, his Honour said:
133. The Court finds on the evidence that the version of events in relation to the Loan is as set out by the husband, the intervener and [a solicitor], and that the sum claimed to be due under the terms of the Mortgage is due.
134. The husband and wife therefore have a joint liability to the intervener of $224,397.63, that sum being the amount owing for the principal loan plus interest calculated as accruing until 6 June 2010.
As a dutiable instrument, in order for the mortgage to be admitted into evidence, the intervener needed to persuade the trial judge to exercise his discretion pursuant to s 304(2) of the Duties Act 1997 (NSW). His Honour was persuaded and, on the application of the intervener, the unstamped mortgage was admitted into evidence. However, as a consequence of the difficulties referred to at [153], with the concurrence of all parties, his Honour determined “…the debt cannot therefore be said to arise under a deed.” Thus the mortgage provided evidence of the terms of a contract between the parties. It follows that it is necessary to determine whether there was consideration, and if so, in what amount, to support a contractual bargain which required the husband and wife to repay the principal sum (or part of it). Although a finding of contract by deed can be made notwithstanding the absence of consideration necessary to support the finding of a simple contract (Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 at page 556), because this mortgage lacked the solemnity of a deed, this became an issue about a simple contract of loan and the issue of consideration was critical.
Because in our view the balance of the initial advance above 5 per cent represented a gift to the husband by the intervener, the only consideration for the contract and which was received by the husband and the wife was the sum of $12,500 which, subject to limitation issues and estoppel which we will discuss shortly, is the amount the trial judge should have found the husband and wife owed to the intervener.
We pause to note that while it does not appear to have been a matter raised with the trial judge during submissions, the intervener’s claim to interest was calculated as compound interest rather than simple interest. Whether interest is to be calculated on a simple or compound basis depends on the construction of the contract, read in the light of surrounding circumstances (Morton v Elgin-Stuczynski(2008) 19 VR 294). Although no findings on this topic were made by the trial judge, the intervener’s unchallenged evidence is that she instructed her solicitor (who also acted for the husband and wife) that “I want interest at 10%” (Intervener’s affidavit, sworn 20 April 2010, at [27]). She did not specify whether she wanted simple or compound interest and left it to her solicitor to negotiate this issue with the husband and wife. In relation to the payment of interest, the totality of the solicitor’s evidence is that he explained to the husband and wife “...the interest rate charged.” (Affidavit of [solicitor] sworn 17 February 2012, at [6]). What he understood the interest rate to be and what he said to the husband and wife remains a mystery. The only other evidence on this point is the mortgage, which as we mentioned earlier, is silent on the point. In circumstances where the intervener and the husband both say the loan was in effect given to minimise the long term indebtedness of the husband and the wife, we can see no basis upon which the trial judge could properly construe this agreement as constituting agreement for the payment of such a punishing rate of interest. Rather the evidence points to a private family agreement in which the lender would receive a reasonable but not punitive rate of interest on the amount outstanding. Properly construed, the mortgage contract made provision for the payment of simple and not compound interest.
Accordingly, we accept that grounds 10 and 11 have been established and
his Honour erred in finding that the parties or either of them were indebted to the intervener in the amount of $65,000. We will need to address the limitation argument before ground 12.
Grounds 1 - 5 - Limitation period of the $65,000 loan
These grounds assert that the trial judge erred in finding that the intervener’s enforcement of the $65,000 loan agreement was not statute barred and that the limitation period commenced from the date of demand, namely 29 April 2010. The grounds are set out below:
1.His Honour erred in holding that the limitation period of six years in relation to the purported loan dated 6 June 1997 ran from the date of demand.
2.His Honour ought to have construed the 6 June 1997 loan agreement as analogous to being payable on demand.
3.In the alternative, his Honour ought to have held that the loan agreement was ambiguous and admitted evidence of extrinsic circumstances, namely:
a.The Intervener and Husband intended that the loan would be payable upon the sale of the [Suburb S] Property;
b.The [Suburb S] Property was sold on or about 27 October 2000; and
c.Pursuant to the Husband's submission at [152], the limitation period ought to have run from 27 October 2000, albeit for a six year period.
4.His Honour ought to have held that the limitation period had expired and accordingly the Intervener's claim in relation to the purported loan of $65,000.00 on 6 June 1997 was statute-barred.
5.His Honour ought to have declined to make the declaration in Order 1(a), namely that the Husband and Wife are indebted to the Intervener in the order of $224,397.63, being for a principal sum of $65,000.00 plus interest.
Having determined that the deed of mortgage was in fact no deed, it would seem that the trial judge agreed [154] with the wife’s contention that the limitation issue related to a cause of action in contract. As his Honour said, a cause of action to recover a contractual debt is governed by ss 14(1) and 63 of the Limitation Act1969 (NSW) (“the Limitation Act”), the effect of which is that the applicable limitation period is six years from the date on which the cause of action on the contract first accrued.
Thus the question which the trial judge needed to consider was at what point did the cause of action on the contract first accrue? This in turn required consideration of whether the loan was payable on demand, in which case the cause of action would run from the date of the contract (6 June 1997), or whether the provision for three months’ notice evinced an intention that the cause of action would not accrue until three months after the demand (made on 29 April 2010) had elapsed or, as his Honour found, the date of demand.
It is useful at this point to again set out the provision in the mortgage concerning repayment of the sum advanced:
The Mortgagor will pay to the Mortgagee the principal sum, or so much thereof as shall remain unpaid, at the expiration of three (3) months’ notice by the Mortgagees to the Mortgagors.
The trial judge found at [150] that when Suburb S was purchased, money to which the intervener was entitled ($65,000) was “rolled over”. He further found at [151]:
The Court finds that there was a debt which was unsecured at that time, but not repayable at that time, since notice had not been given.
His Honour then referred to the competing contentions as to when the limitation period commenced and said:
156. There was a discussion as to when the relevant limitation period was to start. It was submitted that, having regard to the terms of the Loan and, particularly, the requirement for the expiration of three months’ notice after a demand for repayment before a liability for repayment arose, that the period must commence from the date of the demand.
157. The Court finds that this is so and respectfully adopts the reasoning of Fullagar J in the case of Ogilvie and Adams [1981] VR 1041 at [1049] and [1052], as submitted by Counsel for the intervener. Earlier conclusions brought to the attention of the Court by Counsel for the wife are not accepted.
The date of demand was 29 April 2010 when the intervener sent letters to the solicitors for the husband and the wife demanding repayment of amounts including $224,397.63 for the principal amount of the loan plus interest calculated at 10 per cent per annum.
The trial judge found that the limitation period commenced from the date of demand and concluded on this basis that the enforcement action was brought well within the limitation period.
In Ogilviev Adams [1981] VR 1041, Fullagar J considered the construction of a loan document to determine whether recovery of the loan was barred by the Limitations of Actions Act 1958 (Vic). The acknowledgement of the loan included the words that it would be “repayable on demand”.
At page 1049, Fullagar J said:
There is a long-settled rule of construction that, where there is a present debt between the parties to a contract to repay money, and the only terms as to repayment of the debt are to be spelled out of a promise to repay on demand, or out of a statement that the money is to be repaid or repayable on demand (or on request), an instantaneous cause of action, upon the very creation of the contract, arises in the lender. Whether one calls it a rule of law or not does not seem to me to matter. The only reason why I have chosen the expression “rule of construction” is because other words or terms may appear in the contract which may be in the circumstances sufficient to show an intention that the cause of action is not to arise until some actual demand or some form of demand is made or until some period after demand has elapsed: see for example Murphy v. Lawrence [1960] N.Z.L.R. 772. But it is equally correct to say that, where such “other words” or terms do not appear, it is settled law that a loan (for example) which is simply described as being repayable on demand or on request or at call creates a cause of action in the lender enabling him to recover the money instantaneously upon the loan being made, and without any demand being made at all. What the critical words mean, generally, is a rule of construction, and therefore presumptive only; what the words mean in a written document recording the terms of a loan, when standing alone, is a clear rule of law.
At page 1051 he said:
In truth, a loan repayable on request (or on demand, or on call) is “a loan simpliciter”. It is quite different if the parties choose to say “being a loan upon terms that the money shall be repayable on three days’ notice” or (which is the same thing) “upon terms that the money shall be repayable three days after demand made”.
He continued on at page 1052:
Dr. Pannam is of course unquestionably right when he says that “the parties must be able to insist by contract that the cause of action to recover the loan shall not arise until after a demand for payment has been made”. But in my opinion they cannot do it by simply describing the loan as being “repayable on demand”. They certainly can do it by describing the loan as “repayable two days after demand made”. The essential difference is, in my opinion, not hard to find. An acknowledgement of a loan creates, or rather constitutes, inter alia, an implied contract to repay the money at once; or, as some learned judges have put it, the borrower is in breach of contract every moment of every day from the commencement of the loan or from the commencement of the acknowledgement. It is of course possible, by clear words, to make an express contract which is inconsistent with what would otherwise be the implied contract. If the parties describe the loan as “repayable on demand”, is that clearly inconsistent with what would otherwise be the mere relationship of debtor and creditor or what would otherwise be the implied contract? That might perhaps have been a question many years ago, but it is not a question arguable now. If the implied contract has full effect, how does the lender recover the money? The answer is, simply by asking for it, and it cannot make any difference to the borrower whether he asks for it by a writ of summons or by an oral request five seconds before serving a writ. To put the same thing in other words, a debt enforceable instanter is a debt enforceable on demand. When time is imported into the description, or form, or other attributes of the demand, of course the description (and thus the contract) is then clearly inconsistent with the original implied contract which is implied from the existence of the debt.
(our emphasis)As Bryson J said in Gleeson v Gleeson [2002] NSWSC 418 at [44], the effect of the case law (including Ogilvie) is that generally, a simple contract of loan which does not provide for the time of repayment is understood to create an obligation to repay immediately, and reference in the contract to repayment on request or on demand does not alter this. However in more complex contracts references to a demand for payment are usually construed as meaning what they say, so that the need for a demand has substance. As an example of the latter and its effect on when the cause of action arises, at [47] Bryson J explained:
In Romain v. Scuba TV Limited[1997] QB 887 Evans LJ with the concurrence of Waite LJ and Sir John May said at 895: “The general rule that when the clause provides for a demand to be made then the cause of action arises only when the demand is made is well established: In Re J Browns Estate; Brown v. Brown[1893] 2 Ch 300.” Clause 6 is a clause of the kind to which his Lordship referred; that is, it provides for a demand to be made; and this is clearly so notwithstanding the shadow of ambiguity between the words in cl.6 “then the principal sum shall immediately become due” and the following words “and the mortgagor will thereafter pay the same on demand.” The general rule stated by Evans LJ appropriately attributes significance to the reference to a demand, which the parties would hardly take trouble to use if it were not intended to have effect.
It is useful to recall that in the present loan agreement, it is the inclusion of the words “expiration of three months’ notice” which needs to be considered in relation to whether or not those words are enough to make the contract more than a loan payable on demand.
Counsel for the wife argued that the proper construction of the loan agreement is that it is a loan payable on demand and although the right to sue on the debt did not accrue until three months had passed from notice being given, any demand must be made within the limitation period. He further argued that to construe the agreement as not giving rise to a cause of action until notice was given would require clear and unambiguous words to that effect. Reliance was placed on Young v Queensland Trustees Ltd. (1956) 99 CLR 560 to support the proposition that the limitation period ran from the date of contract. However, that case concerned a loan payable on request but where no demand was required to be made before bringing action for recovery of the debt. It is thus distinguishable from the present case.
Although there is no doubt that the husband and wife were indebted to the intervener from the time of the loan, the words in the agreement “The Mortgagor will pay to the Mortgagee the principal sum, or so much thereof as shall remain unpaid, at the expiration of three (3) months’ notice by the Mortgagees to the Mortgagors” demonstrate an express agreement between the parties and thus a term of the contract, inconsistent with what would otherwise be the implied contract, that is that the money would be payable as from the moment that it had been made available. It follows that the cause of action arose three months after the time the intervener gave notice that she required the money to be repaid on 29 April 2010. Enforcement would therefore not be statute barred.
Further, it was argued for the wife that if his Honour‘s characterisation of the loan was one in which payment was due three months after the giving of notice, and thus the cause of action did not accrue until the demand made was correct, then it would enable the intervener to wait many, many years before making any demand for payment. It was thus argued that the terms of the agreement were ambiguous and his Honour was required to construe “reasonableness” into the period in which the demand could be made. It was submitted that the “reasonable” time at which notice should have been given was when Suburb S was sold (October 2000) and when no repayment was offered or sought.
In Olgilvie (op cit), at page 1049, Fullager J said in the course of discussing loan agreements in which it is specified that repayment will be required on the happening of a nominated event:
…the arising of the cause of action may be postponed until an actual demand is made. And those circumstances are themselves of the kind which may provide the law with criteria on which to imply if necessary into the requirement of the demand some requirement of reasonableness in the nature of notice.
In our view, the instant agreement was no different in nature and effect. The intention of the parties as derived from the words used was to postpone the arising of a cause of action for recovery of the debt until three months had passed from a demand being made. We do not accept the argument that the terms used were ambiguous and his Honour was thus not required to import a “reasonable” time in which demand was to be made into the agreement. Accordingly, there is no substance in these grounds.
Ground 12
This is as follows:
12.In the event that $65,000.00 loan is not statute-barred, His Honour ought to have declared at Order 1(a) that the Husband and Wife are indebted to the Intervener in the order of $12,500.00 plus interest at 10 per cent per annum.
Given our findings on the issue of the money advanced by the intervener to the parties and subject to consideration of grounds 12A and 12B, we accept that
his Honour ought to have so found and this ground is made out.
Grounds 12A and 12B – equitable estoppel
Grounds 12A and 12B assert that by reason either of promissory or equitable estoppel, his Honour ought to have declined to require the parties to repay any amount above $12,500 to the intervener. The grounds further assert that
his Honour erred in failing to give reasons to support his findings.
The grounds are set out below:
12A.His Honour ought to have declined to enforce the loan agreement beyond the consideration furnished of $12,500 or further or in the alternative declined to allow interest, on the basis of promissory estoppel.
12B.His Honour failed to consider or give sufficient reasons or make any finding as to the Wife’s defence of equitable estoppel.
Before the trial judge, the wife claimed that the intervener was estopped from enforcing the loan agreement by reason of her actions which, it was said, gave rise to promissory estoppel.
The trial judge made no mention of that argument nor did he deal with it in the reasons.
It was asserted that the estoppel arose in several ways – first, by the intervener’s conduct. The wife gave evidence that on several occasions the intervener said that any money from the purchase of Suburb U was not to be repaid. The trial judge referred to this evidence in his reasons and, while he made no findings in relation to it, it is a reasonable inference from the conclusions he reached in relation to the intervener’s asserted loan to the parties, that he did not accept the wife’s evidence. In those circumstances, where the implied rejection of this evidence is not sought to be impugned on appeal, it is not a particularly persuasive argument.
Secondly, it was said that the intervener, in continuing to advance money to the parties and in not seeking repayment of the loan on the sale of Suburb S or at all until the relationship between the husband and wife had broken down, had conducted herself in a way that led the wife to understand that no money was owing or, at least, she was not liable to the intervener for a loan on which was accruing compound interest.
The equitable doctrine of estoppel will operate where, after a contract is made, the parties conduct themselves in a way so as to treat the contract as varied or the rights under the agreement in some way suspended, in which case equity will intervene to prevent a party from seeking to rely on their strict legal rights where such reliance would be inequitable.
In Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at pages 428-9 Brennan J said:
In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant’s property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff’s reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.
It was not argued, nor could it have been, that the equitable estoppel point was so lacking in merit that it was unworthy of his Honour’s consideration.
The thrust of this ground, in common with other grounds, is that his Honour failed to give reasons for or make findings in relation to the wife’s arguments. His Honour made no reference at all in his reasons to the wife’s argument on equitable estoppel, made no findings relevant to the issue nor did he make a finding rejecting the argument. This failure is an error of law.
We are satisfied that ground 12B has been established. Given our findings on that ground and others, it is unnecessary for us to consider ground 12A further.
Grounds 13 - 15 - Award Monies - $50,000
These grounds relate to the intervener’s claim against the husband and wife for repayment of $50,000 and his Honour’s finding that the claim was not statute barred.
The grounds are as follows:
13.His Honour erred at [210] insofar as his Honour held that the intervener’s claim for $50,000.00 in Award Monies was commenced within the limitation period, in that:
a.The claim was in monies had and received;
b.The Intervener claimed she discovered that the monies had been used by the Husband and Wife upon her return from [Europe], in or about June 2004;
c.The Intervener amended her application on day 3 of the hearing, being 22 February 2012, to include a claim for the Award Monies; and
d.In the premises, the claim was statute-barred.
14.His Honour ought to have held that the intervener’s claim for $50,000.00 in Award Monies was statute-barred.
15.His Honour ought to have declined to make the declaration in Order 1(b), namely that the Husband and Wife are indebted to the intervener in the order of $50,000.00 in respect to the Award Monies.
As his Honour’s reasons indicated at [197], on the third day of the hearing, 22 February 2012, the intervener amended her points of claim to include an “additional claim” that on or around 12 May 2004, $50,000 (“Award monies”) from money paid to her by the Compensation Tribunal and deposited into her account was transferred into the bank account of the parties without her knowledge or permission.
The intervener contended before the trial judge that the money transferred was used by the parties to purchase and renovate properties purchased by them in country NSW.
The wife asserted in the hearing before the trial judge that while the money was transferred into the joint account of her and the husband, she denied transferring the money from the intervener’s account. The wife maintained in the trial that the money was a gift from the intervener.
The husband submitted that the money was received into their joint account, as noted by his Honour at [210]; “[The husband] submits that the wife’s own evidence is that these monies were received by the parties, and she cannot deny the monies were loaned.” The husband further argued that the intervener’s claim to be repaid that money was brought within the limitation period.
His Honour found, at [232(c)], that this money was a debt owed by the husband and the wife to the intervener and repayable by them.
It was submitted on behalf of the wife in the appeal, that although there were no express findings by the trial judge on this point, his Honour must have accepted the intervener’s evidence that this money had been removed from her account without her knowledge. We accept this submission. It is tolerably clear that at no time did the intervener assert that she had made a loan of this sum to the parties, maintaining that it was removed from her account without her consent.
It was submitted on behalf of the wife that the correct characterisation of the claim of the intervener was not as to repayment of a loan but a claim for money had and received. Counsel for the wife submitted that if this characterisation be accepted, the limitation period is six years and that the cause of action accrued in May 2004 when the $50,000 was transferred from the intervener’s account into that of the parties, or at the latest in late June 2004 when the intervener returned from Europe and discovered that the money had been transferred.
For the husband and the intervener, it was submitted that the intervener’s claim was not statute barred because although this claim was added to her points of claim outside the limitation period, the Notice of Intervention was filed within time. It would seem that at [195] his Honour accepted this submission.
When the intervener sought to participate in the proceedings, on 30 April 2010, an order was made that within 28 days, the intervener file and serve:
a. A response, noting that the orders intended to be sought are as set out in Annexure “A” to the affidavit of [a solicitor] filed in court today;
and
b. Points of claim that particularise the facts relied upon in support of the orders sought by the Intervener.
It was submitted on behalf of the wife that the filing of the notice of intervention did not amount to the bringing of an action on the cause of the action as described in s 63(2) of the Limitation Act, the argument being that this would only occur once a response and points of claim had been filed.
A similar situation was considered in Fernance v Nominal Defendant (1989) 17 NSWLR 710. In that case, within the limitation period, an order was made that a person be joined as a defendant. However, the statement of claim was not filed before the limitation period expired. Gleeson CJ rejected the submission that an order joining a party constituted an action on a cause of action, concluding that to constitute an action on a cause of action, more than joinder was required and it was necessary that a statement of claim be filed.
The present case is analogous to Fernance.
We do not accept that either the mere filing of the notice of intention to intervene or the order giving leave to intervene amounted to the bringing of an action on the cause of the action. In our view, this did not occur until the intervener filed her response and points of claim, which occurred on 13 September 2010 and her action in relation to the Award monies was thus out of time.
However, as we said earlier, the intervener’s claim in relation to the 1997 loan was commenced within the limitation period. In these circumstances, the question arises whether the subsequent filing on 22 February 2012 of the intervener’s amended points of claim, which added her claim for the Award monies, extended the limitation period such that the Award monies claim was no longer statute barred.
It was argued for the husband and intervener that the amendment by the intervener of her points of claim was brought within the limitation period because of the operation of r 11.10 of the Family Law Rules 2004 (“the rules”) which provides for amendment of claims by parties to proceedings. Thus, when the trial judge gave permission to the intervener during the hearing to amend her points of claim, the new cause of action was no longer affected by the statute of limitations. In submissions for the respondents, counsel sought support for the argument in the commentary of the authors M. Jenkins, P. Koroknay and A. Lo Surdo, Limitation of Actions, New South Wales: A Practical Guide (Prospect Media, 1998), in which it was said at page 73 that:
Under the relevant provision of the rules, where a claim has been made for relief on a cause of action arising out of any facts, the court may order that the person making the claim be given leave to make an amendment having the effect of adding or substituting a new cause of action arising out of the same or substantially the same facts and any claim for relief on that new cause of action notwithstanding that a limitation period has expired. In other words, so long as the proceedings were initially brought within time, an amendment which has the effect of adding a new cause of action, which if fresh proceedings had been commenced would be statute barred will not itself be affected by the statute of limitations. (our emphasis)
The High Court considered a similar scenario in Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514. In that case the State of Western Australia sued Wardley for deceptive and misleading conduct in the form of representations made by him. Under the relevant legislation, the State had three years to bring any action. The State brought an action within the prescribed time, however later sought to amend their statement of claim by relying on an additional representation. The Court held that the new amendments could not stand as they pleaded a new cause of action which was outside the prescribed time limit.
In State of New South Wales v Steven Charles Radford (2010) 79 NSWLR 327 Sackville AJA with whom Beazley and Macfarlan JJA agreed said:
67. Brickfield Properties Ltd v Newton [1971] 1 WLR 862; [ 1871] 3 All ER, perhaps takes the matter a little further. In that case, which is frequently cited in texts on the subject of limitation of actions, the question was whether the plaintiff should be granted leave in proceedings against an architect to add a cause of action alleging negligent design of a building, as well as faulty execution of work under the architect’s supervision. The Court held that the allegation of negligence in the design of a building raised a cause of action different from that alleging negligence in supervision. However the Court also held that the design and supervision claims arose out of substantially the same facts and thus the plaintiff could be given leave to amend pursuant to RSC Ord 20, r 5(5).
…
69 Cross LJ also agreed with Sachs LJ. However, he observed (at 880; 342) that:
“It is no objection to amendment under Ord 20, r 5(5) that some of the facts out of which the new cause of action arises are peculiar to it and that some of the facts out of which the old cause of action arise are peculiar to it. It is enough if the overlap is so great that the new cause of action can fairly be said to arise out of substantially the same facts as the old cause of action.”
(original emphasis)
The claim by the intervener that the parties were liable to her for $50,000 ostensibly taken from her account without her knowledge was of an entirely different character from the other claims being advanced in the matter which related to loans made to the husband or husband and wife. That the same parties were involved in the cause of action does not enable us to find that it “can fairly be said to arise out of substantially the same facts as the old cause of action”.
Nor are we persuaded that merely by allowing the intervener to amend her points of claim the trial judge determined that the new cause of action was not statute barred. All that occurred was that the intervener was provided with an opportunity to present her additional claim with the limitation issue to be considered following a hearing.
The limitation period in relation to the claim for $50,000 thus ran from either 12 May 2004 when the intervener said the money was transferred from her account or perhaps when she said she found the money to have been transferred when she returned from overseas in late June 2004.
In either case, the limitation period had expired when the points of claim were amended on 22 February 2012, and his Honour fell into error in not finding that the intervener’s claim was statute barred and in finding that the parties were indebted to the intervener for that sum.
Accordingly, these grounds have been established.
Grounds 16 - 19 – O Street Loan: $100,000 cash
These grounds assert that the trial judge erred in finding that an advance of $100,000 by the intervener to the husband in approximately October 2004 was a loan rather than a gift, failed to consider the intention of the husband and intervener at the time the money was given to the husband and failed to take into account the presumption of advancement.
The grounds are:
16.His Honour erred in finding that the transfer by the intervener to the husband of $100,000.00 cash in or about October 2004 was a loan.
17.In finding at [196] that the $100,000.00 cash transfer was a loan, his Honour erred at law in that:
a.His Honour failed to have regard to the presumption of advancement;
b.His Honour failed to consider the intentions of the husband and intervener as at October 2004 when the $100,000.00 cash was handed over to the husband; and
c.His Honour failed to give adequate reasons in finding at [196] that the sum of $100,000.00 is owed to the intervener in respect to this loan.
18.His Honour ought to have found that the $100,000.00 cash transferred from the intervener to the husband in or about October 2004 was a gift.
19.His Honour ought to have declined to make the declaration in Order 1(c), namely that the husband and wife are indebted to the intervener in the order of $100,000.00 in respect to the [O] Street Loan.
His Honour noted the intervener’s evidence that between October 2003 and December 2003 she withdrew $33,759 and $112,319 respectively from her bank account and took the money to her home where she kept it in a drawer [188]. The intervener contended that in October 2004 she gave the husband $100,000 in cash in a bag. She further contended that she did this because the husband and wife asked her for money [189]. The trial judge set out the wife’s denial that she sought a loan from the intervener or that a loan was given, arguing in support of there being no loan and that the husband’s sister received the same amount from the intervener as a gift.
The trial judge further set out the husband’s contention that the transaction was a loan to which the wife was not privy.
The issue before the trial judge was whether the advance was a loan or gift and whether the intervener’s claim to these funds was statute barred.
In concluding this issue, his Honour said:
195. The intervener did not file a Notice of Intervention until 3 March 2010. This, however, is still within the six-year limitation period.
196. The Court finds that the sum of $100,000 is owed to the intervener with respect to this loan.
There was no issue that the husband received these funds from the intervener. Although, as we have set out, the grounds challenge his Honour’s failure to take into account various issues, in fact, the thrust of these grounds of appeal lies in a failure to give reasons.
For the husband and intervener, it was argued that his Honour’s reasons demonstrate that he accepted the evidence of the husband and intervener that the money was a loan and not a gift.
It was further submitted that “there was no basis or evidence upon which a finding could be made that the advance was a gift, to the contrary the only evidence was that it was a loan.” (Respondent’s written submissions, filed 31 July 2013, at [16/19.4])
It is apparent that the trial judge accepted the intervener’s and the husband’s evidence that the money was provided as a loan because he found both the husband and wife to be liable to the intervener for the money. However, it is not his Honour’s finding per se that is the subject of challenge but the reasons for that finding. Regrettably, his Honour gave no reasons for his finding.
It is not correct to submit, as did counsel for the husband and intervener, that the “only evidence” before his Honour was that the money was advanced as a loan. Indeed in his reasons, the trial judge set out the wife’s evidence that she had no knowledge that the money was a loan, and her assertion that the intervener had given the same sum to the husband’s sister and, further that there was no document evincing the loan or terms of its repayment.
That is not to say that his Honour was obliged to accept that evidence, however, he was obliged to reveal a path of reasoning from the evidence to the findings ultimately made. He did not do so. For this reason, his Honour fell into error.
We have referred to the presumption of advancement previously and to the fact that the intervener stands in loco parentis with the husband as a consequence of which the presumption of advancement required consideration. However, as we have said, as his Honour gave no reasons for the conclusion he reached, it is impossible to say whether he considered the presumption of advancement in determining this issue. In the present case, we accept the submission on behalf of the wife that the trial judge has failed to demonstrate a process of reasoning which led to his conclusion that the advance of the $100,000 was a loan and that it remains owing to the intervener. We accept that in the context of gifts having been made by the intervener of $60,000 to the children of the husband and the wife and $100,000 for the husband’s sister, his Honour ought to have explained why the presumption of advancement was rebutted in relation to the $100,000 advanced to the husband. In the absence of even limited reasons, we are unable to understand the reasoning which his Honour brought to his conclusion that the advance was a loan, as asserted by the intervener and the husband, rather than as a gift as asserted by the wife.
The grounds have been established.
General grounds of appeal
The general grounds of appeal assert:
20.His Honour erred in failing to consider the question of credit with regard to the parties’ evidence of each of the transactions involving the payment of monies by the Intervener to the Husband and/or both of the parties particularly having regard to his Honour’s findings with respect to:
a.the [Europe] monies [184 – 187];
b.the $45,000.00 payment in 2005 [252-258].
21.His Honour erred in concluding [after finding substantial repayments and interest are to be repaid to the intervener] that the contributions favour the husband as to 58 percent and to the wife 42 percent. His Honour simply failed to give adequate weight to the wife’s post separation contributions.
22.The section 75(2) adjustment in favour of the wife made by his Honour is manifestly inadequate in that:-
(a)His Honour failed to give proper consideration or consideration at all to the paucity of the pool after the repayment of the monies to the intervener.
(b)His Honour failed to give proper consideration to the husband’s waste of approximately $100,000.00 and indeed made no finding.
(c)His Honour fails to make a finding as to whether or not the husband “wasted” the sum of approximately $100,000.00.
(d)His Honour failed to give consideration or reflect on the husband’s abject failure to provide the wife with any meaningful financial support post separation and/or emotional support with respect to the care of the children post separation.
(e)His Honour failed to give reasons as to his assessment of the adjustment so found.
Ground 20
This ground of appeal asserts that the trial judge erred in failing to take account of certain matters when determining the issue of the credit of the intervener and husband.
The trial judge referred in a general way to the parties’ credit at [75]-[79]. At [75] his Honour said:
75.The wife was cautioned to not argue and debate with Counsel during her cross-examination and was non-responsive in the giving of some of her evidence.
At [76]-[78] his Honour set out submissions about credit. At [79], his Honour said:
79.The Court finds that, as between the husband and the wife, neither was a perfect witness. The decisions of the Court will demonstrate whose evidence is accepted on particular issues.
Counsel for the wife submitted that in this case where much of the contentious evidence rested on the acceptance of the credit, that is the reliability and accuracy of the evidence of the parties, his Honour was obliged when considering issues to make credit findings. Indeed, his Honour’s statement in the last sentence of [79] foreshadows that he will do that. Unfortunately he did not do so. It was further submitted, and we accept, that while the trial judge made findings of a type about the credibility of the husband and wife, he made no such findings about the intervener.
In particular, it was submitted that the trial judge failed to take two issues into account in considering the issue of credibility of the intervener.
At [158] and [159] his Honour refers to the intervener’s evidence that in mid-2004 she sold a property in Europe and sent the money to the husband and wife to hold on condition that they would return the funds to her. His Honour found that the intervener’s purpose in transferring the funds was to “protect her pension” and said at [186]:
186. As to the transfer of the remaining funds, the Court finds that the transaction is vitiated by the illegality of the agreement, designed as it was to commit a fraud against the Commonwealth…
His Honour commented, at [187], that “…it is the Court’s intention to refer the matter to the appropriate authorities for further investigation.”
The second issue which the wife submits his Honour ought to have taken into account in considering the reliability of the intervener, relates to an amount of $45,000 that the intervener asserted she gave to the husband and wife in 2005 by way of a deposit for the purchase of a property.
His Honour found, at [257], that:
The Court finds that the $45,000 supposedly paid by the intervener to the husband and to the wife in 2005 is not part of the intervener’s claim. Even if it were, the evidence before the Court does not establish that this payment did in fact occur.
We accept the submission of the wife that in this case, where the trial judge was called upon to make determinations about discrete financial transactions which were in the main unsupported by documents, he was obliged to consider the creditworthiness of each party.
Although his Honour indicated an intention, at [79], of making those determinations, he did not do so nor did he attempt to assess the credibility of the intervener. His Honour fell into error.
The balance of the grounds of appeal asserts error in his Honour’s assessment of the parties’ contributions pursuant to s 79 and s 75(2) of the Act. As the preponderance of the grounds have been made out and that the errors established directly affect his Honour’s formulation of the asset pool of the parties, thus, there is little point in considering these grounds.
Conclusion
It follows that the appeal must succeed and the orders and declarations subject to challenge set aside.
Although the wife in her Notice of Appeal, sought that we re-exercise the trial judge’s discretion, we understood counsel to acknowledge that if she succeeded on, inter alia, insufficiency of reasons grounds (including in relation to credit), it was necessary for the matter to be remitted for rehearing. We agree.
As a consequence, the wife’s application to adduce further evidence in the appeal relevant to a possible re-exercise will also be dismissed.
Costs
It was submitted on behalf of all parties that in the event that the Court was to find that the appeal succeeded on the basis of an error of law, each party would seek a costs certificate pursuant to the provisions of the Federal Proceedings (Costs) Act 1981 (Cth) both for the appeal and any re-hearing.
The appeal has succeeded on an error of law and it is not a matter in which we otherwise make an order for costs against any party. We will thus order certificates for the parties as sought.
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I certify that the preceding one hundred & fifty eight (158) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court delivered on 12 June 2014.
Associate:
Date:12 June 2014
Key Legal Topics
Areas of Law
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Family Law
Legal Concepts
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Appeal
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Presumption of Advancement
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Limitation Periods
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Statute Barred
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Res Judicata
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