FAMILY COURT OF AUSTRALIA
| ZUBCIC & ZUBCIC AND ORS | [2018] FamCA 129 |
| FAMILY LAW – CONTRACTS – Where a transfer document is rendered void ab initio on the basis of non est factum – Where the transferee speaks limited English and had no knowledge of what he was signing – Unconscionable conduct – Where the transferee was at a special disadvantage which was taken advantage of by the transferor – Where the transfer is set aside. FAMILY LAW – RESULTING TRUSTS – Where a property was purchased using funds to which the second respondent was beneficially entitled – Where the presumption of advancement is rebutted – Where the second respondent holds 12.5 per cent interest in the property by way of a resulting trust – Where the property was sold – Where a constructive trust may also be imposed because it would be otherwise unconscionable for the second respondent’s interest not to be recognised – Equitable accounting – Determination of what the entitlement of the second respondent is having regard to outgoings spent by the other parties in relation to the properties – Where a specified sum is ordered to be paid to the second respondent. FAMILY LAW – PARTNERSHIP – Partnership Act 1892 (NSW) – Determination of whether a partnership existed between the husband and wife – Consideration of the manner in which the husband and wife conducted their business affairs – Where the wife is found to have been in a partnership with the husband – Where the wife alleged that the husband committed waste by acting negligently in relation to the filing of tax returns – Where it was found that both the husband and wife neglected to comply with their obligations to file tax returns and pay tax as assessed – Where the wife is found liable to pay half of the partnership tax liability. FAMILY LAW – WASTE – GAMBLING – Where the wife asserts that the husband committed waste by gambling – Where it is not demonstrated that the husband’s gambling resulted in a net loss. FAMILY LAW – WASTE – DUTIES OF A TRUSTEE – Where the husband alleges the wife committed waste by failing to act in accordance with her duties as trustee for sale of a jointly owned property – Where the Court is satisfied that the wife’s conduct in not complying with her duties as trustee for sale amounted to waste – Consideration of waste under s 75(2)(o). FAMILY LAW – FAMILY VIOLENCE – Where the wife claims that she was subjected to family violence by the husband such that it made her contributions more onerous in accordance with Kennon & Kennon (1997) FLC 92-757 – Where the Court finds this case does not fall within the narrow band of cases to which Kennon applies. FAMILY LAW – ADULT CHILD MAINTENANCE – Where the adult child has been diagnosed with Autism Spectrum Disorder – Orders made for the husband to pay lump sum adult child maintenance to the wife. |
| Family Law Act 1975 (Cth) 72, 79(4), 75(2), 75(2)(e), 75(2)(o), 66G, 66K, 66L Partnership Act 1892 (NSW) s 1 |
| Allen & Snyder (1979) FLC 90-656 Dwyer v O’Mullen (1887) 13 VLR 933 Giumelli v Giumelli (1999) 196 CLR 101 Stanford v Stanford (2012) 247 CLR 108 Thorne v Kennedy (2017) 91 ALJR 1260 |
| APPLICANT WIFE: | Ms Zubcic |
| RESPONDENT HUSBAND: | Mr Zubcic |
| 2ND RESPONDENT: | Mr B Zubcic |
| 3RD AND 4TH RESPONDENTS: | Mr and Ms Gomes |
| 5TH RESPONDENT: | The Commissioner of Taxation |
| FILE NUMBER: | SYC | 6290 | of | 2013 |
| DATE DELIVERED: | 6 March 2018 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Rees J |
| HEARING DATES: | 20, 21, 22, 23, 24, 27 and 28 November 2017; 5 and 6 December 2017 |
| COUNSEL FOR THE APPLICANT: | Mr Connor |
| SOLICITOR FOR THE APPLICANT: | Argyle Legal |
| COUNSEL FOR THE RESPONDENT: | Mr Sansom SC |
| SOLICITOR FOR THE RESPONDENT: | Watts McCray Family Lawyers |
| 2ND RESPONDENT: | In Person |
| SOLICITORS FOR THE 2ND RESPONDENT: | Coleman Greig Lawyers on 5 and 6 December 2017 only |
| COUNSEL FOR THE 2ND RESPONDENT: | Mr Lawrence on 5 and 6 December 2017 only |
| SOLICITOR FOR THE 3RD AND 4TH RESPONDENTS: | Abrams Turner Whelan Family Lawyers |
| COUNSEL FOR THE 5TH RESPONDENT: | Mr Kasap of counsel on 20 November 2017 only |
| SOLICITOR FOR THE 5TH RESPONDENT: | Australian Government Solicitor |
Orders
IT IS ORDERED
That each of the husband and the wife do all acts to cause Abrams Turner Whelan, Solicitors, to pay to Mr B Zubcic (“the second respondent”), from the controlled monies account (“the ATW account”) held for the husband and the wife, the sum of $768,877.
That each of the husband and the wife and the second respondent do all acts and sign all documents necessary to cause T Solicitors, to pay to the second respondent the money held by them in the controlled monies account from the proceeds of sale of the property at Suburb L.
That each of the husband and the wife do all acts to cause Abrams Turner Whelan, Solicitors, to pay, from the ATW account held for the husband and the wife, such of the following amounts, in order of priority, as have not been paid:
HH Pty Limited $16,223
J Pty Ltd $45,333 plus any interest incurred to the date of payment
U School $12,000
The wife $3,365
The wife $76,000
V & Associates $27,995.67
The husband $48,004
That, in the event that any funds remain in the ATW account, after the payments in Order 3, the husband and the wife shall direct Abrams Turner Whelan to pay half of that amount to each of the husband and the wife. In the event that there are insufficient funds in the ATW account to make the payments to the husband and the wife referred to in Order 3, then the shortfall shall be borne by them equally.
That the sum of $1,910 held by V & Associates on behalf of the husband and the wife is declared to be the property of the husband and shall be applied towards the costs of the husband owed to V & Associates, in addition to the payment referred to in Order 3.
That the husband pay to the wife, by way of lump sum adult maintenance for G born … 1999, the sum of $65,000, such sum to be paid from the husband’s share of the proceeds of sale of the property at B Street, Suburb C.
That the application of the wife for spousal maintenance be dismissed.
That Mr W and Mr X of Y Chartered Accountants be appointed trustees for sale of the property at B Street, Suburb C (“B Street”) and the husband and the wife do all acts required to procure that appointment.
That upon the sale of B Street, the trustees of sale shall apply the proceeds in the following manner and priority:
9.1In payment of the costs of sale, including but not limited to the costs of the trustees for sale, agents’ commission, legal fees on the conveyance.
9.2In payment of any amount of Capital Gains Tax in relation to B Street assessed against either the husband or the wife.
9.3 In payment of half of the amount remaining to the wife.
9.4In payment to the wife of the sum of $294,494 less any sum she received pursuant to Order 3 from her share of the remainder of the ATW controlled monies account.
9.5In payment of the sum of $65,000 to the wife by way of maintenance for G in accordance with Order 6.
9.6In payment of the costs of Mr and Ms Gomes incurred in these proceedings in accordance with orders made on 1 March 2018.
9.7In payment of the sum of $100,000 to the husband’s solicitors, to be held by them until the determination of the dispute over the payment of costs of the proceedings in the Supreme Court of New South Wales Case Number … and distributed in accordance with that determination.
9.8 In payment of the balance remaining to the husband.
I grant liberty to the parties to apply on 7 days’ notice by arrangement with my Associate in relation to any issue with the implementation of these orders.
That if any party refuses or neglects to sign within fourteen (14) days of a written request to do so any documents necessary to effect the terms of these orders a Registrar of the Sydney Registry of the Family Court of Australia is hereby appointed pursuant to the provisions of section 106A of the Family Law Act 1975 (Cth), to execute such documents on behalf of that party.
In relation to the costs of the Supreme Court proceedings:
12.1 Within 14 days the wife shall file and serve an application and affidavit setting out the evidence upon which she seeks to rely.
12.2 The husband shall, within 14 days thereafter, file and serve a response and any affidavit material setting out the facts upon which he seeks to rely.
12.3 I note that a date for the hearing of submissions in relation to the issue of costs will be set once all material is filed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Zubcic & Zubcic and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 6290 of 2013
| Ms Zubcic |
Applicant
And
| Mr Zubcic |
Respondent
And
| Mr B Zubcic |
2nd Respondent
And
| Mr and Ms Gomes |
3rd and 4th Respondent
And
| Commissioner of Taxation |
5th Respondent
REASONS FOR JUDGMENT
Ms Zubcic (“the wife”) and Mr Zubcic (“the husband”) married and commenced co-habitation in 1991. They had three children, Ms E now aged 22 years, Mr F, now aged 20 years and Mr G now aged almost 19 years.
They separated in August 2013, after 22 years.
The wife remained living in the former matrimonial home with Mr G.
The husband lived in various premises including rented premises.
THE PARTIES
The parties to these proceedings are:
· The wife;
· The husband;
· The husband’s father, Mr B Zubcic (“the second respondent”), the husband’s mother has died;
· The wife’s father, Mr Gomes, (“the third respondent”);
· The wife’s mother, Ms Gomes (“the fourth respondent”);
· The Commissioner for Taxation (“the Commissioner”);
· V & Associates, Solicitors, who were previously the husband’s solicitors (and to whom the husband owes outstanding costs) were parties but withdrew on the basis that the amount owed to them would be paid from any entitlement of the husband.
HISTORY
The husband is 53 years of age and the wife is 48 years of age.
The husband commenced employment in 1983. In 1987 he joined the public service.
In October 1987 the husband and his brother, Mr II Zubcic, and both of their parents, Ms Z Zubcic and Mr B Zubcic (“the second respondent”) purchased a property at AA Street, Suburb O (“Suburb O”) for $100,000. They held the property as joint tenants. The husband and his brother borrowed $50,000 to complete the purchase. The parents contributed their share. The husband and his brother made the mortgage payments. After the husband’s brother married, the parents and the husband lived in the property.
In 1988 the wife and her parents purchased a property at BB Street, Suburb CC (“BB Street”) for $95,000. They borrowed $70,000 secured by mortgage. The wife contributed half of the balance of the purchase price and owned a half share of the property.
At some time before the parties married, the husband acquired his brother’s interest in Suburb O for no consideration. No transfer was registered in order to save stamp duty.
In 1990 the husband started importing, and breeding livestock. On 26 February 1990 the husband registered a business name “DD Pty Ltd”.
On 4 July 1990 the husband and his brother purchased a franchise (“the Franchise”). The husband says that the purchase price was $75,000. The Franchise was held by a company, EE Pty Ltd (“EEPL”). The husband and his brother were equal shareholders and directors of EEPL. The Franchise operated 24 hours each day.
In order to secure the loan required for the purchase of the Franchise, the husband’s parents and the husband’s brother transferred their interest in Suburb O to the husband and the wife. The husband asserts that his parents received no consideration for the purchase and that thereafter he held one half of Suburb O on trust for them. The husband’s father deposed that he did not know that his interest had been transferred and that he was no longer a legal owner of Suburb O.
The wife asserts that $60,000 was paid to the husband’s parents.
The husband’s father asserts that he received no consideration for the transfer of his and his wife’s interest in Suburb O.
The husband and the wife borrowed $99,000 which was used to purchase the Franchise and discharge the mortgage owed by the husband and his brother over Suburb O. The husband asserts that an amount of money was paid to his brother and the balance used to buy stock for the Franchise and start-up costs.
The husband and the wife married in 1991. They were both employed in the public service. They both worked in the Franchise when not at their full time jobs. The husband’s brother worked at the Franchise full time.
Until about 1993 or 1994 the husband continued to be employed by NSW Public Service.
At some time in 1993 or 1994 the husband’s brother ceased involvement in the Franchise although he remained a director of EEPL.
In 1994 or 1995 the Franchise was sold. The husband asserts that he ultimately received net $40,000.
The husband asserts, and the wife denies, that from 1994 the husband and the wife operated DD Pty Ltd (“the business”) in partnership.
On 4 November 1994, the husband and the wife purchased B Street, Suburb C (“B Street”) for $265,000. To fund the purchase, they borrowed $200,000 from FF Finance and the balance came from savings, including the funds from the sale of the Franchise.
Their child, Ms E, was born in 1994. The wife left her job.
The parties moved to B Street. They invested $100,000 to extend the business premises and to renovate the home. The husband asserts that he was primarily responsible for running the business.
In June 1995, the wife’s parents discharged the mortgage over BB Street from their own funds. In May 1996, the wife transferred her interest in BB Street to her parents for $65,000 which was deposited into the joint account of the husband and the wife.
Mr F was born in 1997.
Mr G was born in 1999.
On 1 June 1999 the wife’s parents gave her $175,000 which was used to discharge the mortgage over Suburb O in the sum of $73,896.65 and to pay a further $100,000 to FF Finance.
On 11 May 2000, the husband and the wife, together with the third and fourth respondents Mr and Ms Gomes (the wife’s parents), purchased a property at H Street, Suburb C (“H Street”) for $1.2 million. The circumstances of this purchase were the subject of contested proceedings which were determined by judgment and orders delivered on 2 November 2016. In those proceedings, as between the husband and the wife and Mr and Ms Gomes, a declaration was made that Mr and Ms Gomes were entitled to half of the proceeds of sale of H Street.
The husband and the wife initially borrowed $600,000, being their share of the purchase price of H Street, from Mr and Ms Gomes. In order to repay part of that loan, Suburb O was sold on 15 June 2000 for $300,000 and some or all of the money was paid to Mr and Ms Gomes. The balance was subsequently repaid from funds borrowed by the husband and the wife from the Commonwealth Bank.
After the purchase of H Street, the husband’s parents lived there.
In 2001, then aged two, G was provisionally diagnosed with an autism spectrum disorder.
In April 2002 the husband and the wife purchased GG Street, Suburb Q (“Suburb Q”) for $675,000, of which $540,000 was borrowed from the Commonwealth Bank. The husband asserts that he and the wife used Suburb Q for their livestock breeding business and rented the facilities there from time to time.
In 2004, the business was expanded into online sales.
In mid-2006, the husband’s mother died. The husband’s father (the second respondent) did not want to continue to live at H Street and the husband asserts that he and the wife had a conversation with the second respondent whereby they agreed to repay some money to the second respondent.
In April 2007, the husband’s father negotiated the purchase of a property at HH Street, Suburb L (“Suburb L”) for $285,000. The husband and the wife borrowed the purchase price, secured against their own property (B Street), and the husband asserts that they gave the second respondent an additional $10,000.
After the second respondent left H Street, it remained vacant. The husband asserted that he wanted to rent the property out but the wife would not agree.
In 2008, premises at Suburb GG were rented as a warehouse for the business.
In 2010 the husband moved from B Street to live at H Street with Mr F and Ms E. The wife remained at B Street with G. The parties did not consider themselves to be separated.
In 2011 Suburb Q was sold for $1,150,000. A sum of $466,000 (according to the husband) or $467,000 (according to the wife) was repaid to the Commonwealth Bank and the balance deposited in bank accounts.
In August 2011 the husband commenced playing poker and participating in professional poker tournaments. The wife asserts that the husband wasted funds, both in playing poker and losing, and in other ways.
On 27 August 2012, the husband, the wife and the third and fourth respondents entered into an irrevocable agreement to sell H Street for approximately $10 million.
The husband and the wife agree that the marriage finally ended in August 2013.
In November 2013, without notice to the husband, the wife froze the bank accounts of the business and on 21 March 2014 she terminated the partnership. The husband asserts that, as a result of the wife’s actions, the business ultimately failed.
On 28 October 2013, the wife commenced these proceedings.
In June 2014 the husband sold the domain names and data base of the business for $10,000.
The husband asserts that since June 2014 he has not been in paid work and has, from time to time, received Centrelink benefits and an allowance as his father’s carer.
In about July 2014, Suburb L was sold and the proceeds of sale are held by T Solicitors, pending the determination of these proceedings.
In July 2014, the Commonwealth Bank obtained judgment against the husband and the wife and an order for possession of B Street. A complaint was lodged with the Ombudsman, I assume by the wife.
On 11 November 2014, the husband and the wife were divorced.
In about February 2015, a dispute arose in relation to the sale of H Street. The purchasers wished to proceed with the sale. The vendors could not agree. In circumstances which will be the subject of detailed consideration later in separate reasons, the purchasers commenced proceedings in the Supreme Court of New South Wales (“the Supreme Court”). Those proceedings resulted in orders in favour of the purchasers including orders for costs. How those costs are to be paid, and by whom, is an issue in these proceedings and will be determined after further submissions.
On 17 September 2015, orders were made appointing the wife trustee for sale of B Street.
In January 2016, the Commissioner sought to intervene in the proceedings, claiming unpaid income tax and penalties from the partnership and both the husband and the wife. The personal tax remained outstanding until the first day of the hearing. The wife asserts that the husband should bear the whole of the liability for tax, both the partnership tax and the personal tax.
On 18 August 2016, orders were made for the disposition of half of the proceeds of sale of H Street to the third and fourth respondents, the balance being held in trust by Abrams Turner Whelan, Solicitors (“the ATW controlled monies account”), pending the determination of these proceedings.
Also in 2016, the wife’s parents lent her $1,500,000 to purchase a property in Suburb R for $1,300,000.
After the sale of H Street, the husband lived in rented accommodation for a time. Since February 2017, he has lived in Asia.
On 16 September 2016, the Commonwealth bank advised the wife that the complaint to the Ombudsman had been dismissed and that the bank intended to enforce its judgment against B Street.
On 28 November 2016, the mortgage over B Street was discharged by payment of $996,179 from the controlled monies account.
On 27 March 2017, orders were made in the Supreme Court for the payment of the costs of the purchasers of H Street in the sum of $90,257.54.
On 19 July 2017, having received garnishee notices from the Commissioner, Abrams Turner Whelan paid to the Commissioner $961,632.29 in payment of partnership taxation liability.
On 15 August 2017, B Street was passed in at auction with a highest bid of $2,750,000.
On 20 November 2017, by consent, orders were made for payment to the Commissioner, from the controlled monies account, of $667,782.61 on account of tax owed by the husband and $627,121.09 on account of tax owed by the wife. The amount owed by the wife included $293,520.75 for capital gains tax assessed on the sale of H Street.
ISSUES
As can be derived from the historical narrative, the following issues must be determined:
· What was the beneficial ownership of Suburb O at the time of sale?
· How were the proceeds of the sale of Suburb O applied?
· Did Mr Zubcic Snr (the second respondent) acquire a beneficial interest in H Street?
· Who were the beneficial owners of Suburb L?
· What is the entitlement of the second respondent?
· Was the wife a partner in DD Pty Ltd (“the business”)?
· How should the tax liabilities arising from the operation of the business be treated?
· Did the husband dispose of assets of the business and, if so, did he receive any benefit?
· Did the husband commit waste (as the wife asserts) or make a contribution to the finances of the family (as the husband asserts) from his gambling activities?
· Did the wife, as trustee for sale of B Street, act in accordance with her obligations and, if not, was there a loss?
· Family violence and the wife’s Kennon claim;
· What debts should be included in the balance sheet?
· Who should bear the costs of the Supreme Court proceedings?
· Should an order be made for adult child maintenance for G?
THE COMPETING APPLICATIONS
The wife sought:
· the sale of B Street;
· payment of the whole of the net proceeds of sale of B Street to her;
· payment of the whole of the controlled monies account to her;
· payment of the proceeds of sale of Suburb L to her;
· payment of any funds held by the husband’s former solicitors, V & Associates, to her;
· addback of the entire taxation debt of the parties against the husband with the effect that he would be solely responsible for the amount of tax paid by them both, a total of $2,256,536;
· spousal maintenance, backdated to 3 February 2014, in the sum of $1,500 per week in perpetuity;
· lump sum adult child maintenance for G in the sum of $769,080 or, in the alternate, adult child maintenance for G in the sum of $1,479 per week (indexed).
The wife’s application would have the effect, if successful, that she would receive net assets of some $6,367,000. The husband would receive nothing and be left with a liability for the tax of $2,256,536 and for adult maintenance of $769,080, a net liability of $3,025,616 together with a liability to pay spousal maintenance.
The wife’s case needs only to be stated for its flaws to be exposed.
In her application, the wife sought a declaration that the partnership between her and the husband either never existed or, in the alternate, was dissolved in 2001 or, in the alternate, was dissolved not later than 1 August 2013. At the commencement of the hearing, Counsel for the wife indicated that this application was abandoned. However, her application for an order that the husband bear the whole of the tax liabilities of the partnership appears to be based on that contention.
She also, implicitly, seeks to have the application of the second respondent dismissed.
The husband seeks:
· payment of the proceeds of sale of Suburb L to the second respondent;
· payment from the controlled monies account of all amounts outstanding in relation to B Street; $15,000 to him; payment of all money owed to the Commissioner; payment of various debts of the parties and the business and an equal division of the remainder;
· allocation of various liabilities to him and other liabilities to the wife;
· transfer of B Street to him upon payment to the wife of $1,400,000;
· in default of the transfer of B Street, the appointment of a trustee for sale other than the wife.
The second respondent, at the commencement of the proceedings, sought:
· payment to him of the proceeds of sale of Suburb L;
· indemnity costs as against the wife.
As will be seen from these reasons, the position of the second respondent changed at the conclusion of the evidence. He then sought the equivalent of 12.5 per cent of the net proceeds of sale of H Street.
The Commissioner sought payment of all outstanding amounts owed by way of tax and penalties.
V & Associates sought payment of outstanding costs which they have quantified in a document. The amount outstanding at 1 March 2018, the date of delivery of judgment, is $29,905.67.
Mr and Ms Gomes sought an order that the husband be solely responsible for the payment of the costs of the purchaser of H Street incurred in the Supreme Court proceedings.
THE AFFIDAVIT EVIDENCE
The wife relied on an affidavit sworn by her on 3 October 2017, a Financial Statement and supporting affidavits of Ms Gomes, Mr Gomes, Ms JJ Gomes, Dr KK (general practitioner), Dr LL (general practitioner), Ms MM (treating psychologist), Dr NN (psychiatrist), Dr OO (paediatric cardiologist) and Dr PP (psychiatrist).
Dr KK was not available for cross-examination. Of the remainder of the wife’s witnesses, only Ms Gomes and Ms MM were required for cross‑examination.
The husband relied on an affidavit sworn by him on 29 September 2017 and a Financial Statement.
The second respondent relied on two affidavits sworn by him on 22 September 2014 and 7 November 2017. At the commencement of the hearing, the second respondent also sought to rely on an affidavit of Mr II Zubcic but when it was explained to him that Mr II Zubcic could not simultaneously be a witness and assist him as a McKenzie friend, the second respondent withdrew that affidavit.
In the course of the proceedings, on a number of occasions, Counsel for the wife raised, as a defect in the case of the second respondent, the fact that Mr II Zubcic was not a witness in his case. It is not suggested that Mr II Zubcic was present for the significant conversations relating to the transfer of Suburb O to the husband and the wife, nor that he was present during the conversations between the second respondent the husband about the acquisition of H Street. Therefore it is difficult to envisage what admissible and relevant evidence could have been given by him.
The Commissioner relied on an affidavit of Mr QQ sworn on 3 October 2017.
THE HEARING
The wife appeared by Counsel.
The husband appeared by Senior Counsel.
The second respondent appeared unrepresented with the assistance of an interpreter and a McKenzie friend.
The Commissioner appeared by Counsel. At the commencement of the trial, the Commissioner reached an agreement with the husband and the wife and consent orders were made for the payment to the Commissioner of $1,294,903.70 from the controlled monies account.
V & Associates appeared by Counsel who was excused further attendance, it being agreed that the amount sought by them, which had been quantified, would be paid from the entitlements of the husband.
At the conclusion of the evidence, I posed a series of questions to the parties as to the findings which might flow from the evidence and asked that those questions be addressed in submissions.
When the matter came before the Court on the following day, orders were made for the payment of $50,000 to the second respondent by way of interim property settlement, to be used by him only for the purpose of obtaining legal advice in relation to the orders he should seek, and the matter was adjourned until Tuesday 5 December 2017 for the completion of submissions.
I indicated that I would provide reasons for making an interim distribution in favour of the second respondent and those reasons follow.
INTERIM ORDERS IN FAVOUR OF THE SECOND RESPONDENT
The order for an interim distribution to the second respondent was made after all the evidence had been heard.
Throughout the proceedings to that point, it was clear that the second respondent, although he had an interpreter and a Mackenzie Friend to assist him, quite understandably struggled with the complex legal issues which confronted the parties.
By this stage of the proceedings it was clear on the evidence that the second respondent had a substantial interest in H Street and would be entitled to the payment of a sum of money which, on any view, would exceed $50,000. The reasons for that conclusion are fully explored later in these reasons.
It was not in issue that the same considerations should apply to an interim distribution to the second respondent as would apply to an interim distribution to either the husband or the wife.
The payment to the second respondent of $50,000 represented a sum considerably less than his share of the proceeds of sale of Suburb O and, on any view of the evidence, an amount less than that he would receive in the final determination. Further, the money was available in cash in a controlled monies account which had been preserved by order of the Court.
Finally, the provision of funds to the second respondent facilitated his obtaining legal advice which was essential to ensure that his case was prosecuted in accordance with principles of law and equity.
THE SECOND RESPONDENT’S APPLICATION TO AMEND
On 5 December 2017, the second respondent was represented by solicitors and Counsel. Counsel for the second respondent sought to amend the claim of the second respondent to include, in the alternate, a declaration that the husband and the wife held their interest in Suburb O on trust for the second respondent and his late wife; a claim that, as a consequence, the second respondent and his late wife were each beneficially entitled to one eighth of H Street (or one quarter of the interest of the husband and the wife); or, in the alternate, that the second respondent is entitled to the proceeds of sale of Suburb L.
Leave to amend was opposed by the wife. After hearing submissions, leave to amend was granted. The reasons for that decision follow.
In Stanford v Stanford (2012) 247 CLR 108, French CJ, Hayne, Kiefel and Bell JJ stated, at 120:
First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to "altering the interests of the parties to the marriage in the property" (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order. [Original emphasis]
Thus the first step in the present proceedings is to identify the legal and equitable interests of all of the parties, including the second respondent, in the property.
In reasons delivered on 24 August 2016 , I summarised the claim of the second respondent, as I then understood it to be, in the following terms:
7.The second respondent is Mr B Zubcic (“Mr Zubcic”), the father of the husband. He is unrepresented and does not speak English. His claim was articulated, with the assistance of an interpreter, for the first time in court on 18 August 2016. Broadly, he claims that when the husband and the wife purchased [H Street], he advanced $150,000 to them which was applied towards the purchase. The $150,000 came from the sale of a property in Suburb O owned by Mr Zubcic, his wife, and the husband. Mr Zubcic claims that there was an agreement between himself and the husband and the wife that, in consequence of the advance, he would become entitled to three acres of [H Street].
8. Mr Zubcic claims that he negotiated to sell his three acres to the husband, or the husband and the wife, for $300,000, which money was used to buy a house at Suburb L where he then lived. Suburb L has been sold and the money is held pending determination of these proceedings. Mr Zubcic will be required to file and serve an application setting out the orders he seeks and his evidence, including supporting documents, by 4 pm on 6 November 2016.
9.In relation to the claim of Mr Zubcic, the wife denies that $150,000 was advanced by him towards the purchase of [H Street]. She asserts that the husband was a part owner of the property at Suburb O and any money received by him from the sale of that property was his money. She asserts that Suburb L was purchased by the husband, using a line of credit for the whole of the purchase price, and that the proceeds of the sale of Suburb L are the property of the husband and the wife.
10.In relation to the claim of Mr Zubcic, the husband agrees that there was an advance from Mr Zubcic of $150,000, but I have not been told what his attitude is to the balance of the claim.
The claim by the second respondent that he was entitled to three acres of H Street has been constantly iterated by him throughout the proceedings and remained his evidence in cross-examination before me in the substantive proceedings. That claim was also put by the second respondent to the wife in his cross-examination of her.
At the commencement of the hearing, on 20 November 2017, I settled, with the assistance of the parties, the questions which required to be answered in order to determine the proceedings.
The transcript of the proceedings on 20 November 2017 records the following exchange:
HER HONOUR: I just wanted to make sure I had correctly understood. The next thing I would like to go through is a list of the issues that have to be determined. It seems to me that they’re these, and I would be grateful if you would tell me if any of them are not in issue, or indeed if I’ve missed any. The first one, it seems to me, that I have to determine is the beneficial ownership of the [Suburb O] property.
MR SANSOM: Yes, your Honour.
HER HONOUR: The second one is how were the proceeds of [Suburb O] disbursed? I don’t think there’s a dispute about that.
MR SANSOM: I think that’s right.
HER HONOUR: I think it is common ground that they were entirely paid to the husband and the wife and used by them to repay [Mr and Ms Gomes].
MR SANSOM: As I understand the evidence.
HER HONOUR: All right. Do you agree with that, Mr Connor?
MR CONNOR: Yes. Thank you, your Honour.
HER HONOUR: Right. The next issue that I need to determine then is what moneys did [Mr B Zubcic] advance towards the purchase of [Suburb C] – of [H Street] or otherwise, in other words, to the husband the wife, which is a subset of the first issue.
MR SANSOM: Yes. Another perhaps subset of that is what, if anything, was [Mr B Zubcic] paid for his interest in that property?
HER HONOUR: Indeed. Just wait a moment. The interpreter is ‑ ‑ ‑
MR SANSOM: Sorry, your Honour.
HER HONOUR: So the next issue would seem to me is, did [Mr B Zubcic] acquire a beneficial interest in either [H Street] or – no, firstly, did [Mr B Zubcic] acquire a beneficial interest in [H Street]?
THE INTERPRETER: No. If you could please repeat that, but it is ..... ‑ ‑ ‑
HER HONOUR: Did [Mr B Zubcic] acquire a beneficial interest in [H Street]?
THE INTERPRETER: No, the judge just wants to know whether you actually got the money somewhere ‑ ‑ ‑
HER HONOUR: No. No, I don’t. I’m afraid this is a legal question and it is a complicated legal question.
THE INTERPRETER: I did get the proceeds from – the money – yes, on ‑ ‑ ‑
HER HONOUR: I’m not asking what [Mr Zubcic] wants to tell me at this stage. I’m just trying to work out what questions I have to answer. Then the next question is, how was the purchase of [Suburb L] funded and who were the beneficial owners of [Suburb L]?
[MR ZUBCIC]: Yes. Yes.
HER HONOUR: The next question then is, does [Mr B Zubcic] have an interest in the proceeds of sale of [Suburb L]? The next question is, was the wife a partner in the business? How should the tax liabilities arising from the operation of the business be treated? And did the husband dispose of assets of the business and, if so, did he receive any benefit?
MR CONNOR: Could I just – I’m sorry, that it was a side-event going on, your Honour.
HER HONOUR: That’s all right.
MR CONNOR: We had agreed with the Commissioner of Taxation, some time ago, that we were not pursuing the declaration of partnership that’s in our application, your Honour, and that was part of what we were trying to just resolve this morning. So we’re not pursuing the declaration, but we are pursuing questions as to the structure of the business.
HER HONOUR: I don’t understand, Mr Connor.
MR CONNOR: Well, simply this: that in our application we’ve sought an order that – a declaration as against the husband that there was no partnership.
HER HONOUR: Yes.
MR CONNOR: Formal partnership. The wife still will be – she abandons that, but she – it was on the understanding, as I understand it – and my friend can confirm this – that we would not be, as it were, estopped from asking questions that went to the structure of that business – how it was put together – and the wife challenging that she wasn’t in fact what the husband says she was to that business. Now, that said, the tax office documents – some of them go to the fact that the taxation finding is based on law which they say themselves is peculiar to the tax office; that is, broader than the definition at law as to whether or not there’s a partnership. So there are going to be some questions, your Honour, about the wife’s involvement. We don’t want to be prevented from that, but we’re not going to try and formally prove or disprove the existence of a formal partnership, your Honour.
HER HONOUR: All right.
MR CONNOR: Thank you.
HER HONOUR: Thank you for that. The next question is the wife’s allegation of waste. I take it that’s being pursued, Mr Connor.
MR CONNOR: Yes, it is. Thank you, your Honour.
HER HONOUR: All right. And the wife’s [Kennon] claim, I take it, also being pursued.
MR CONNOR: Yes, it is, your Honour.
HER HONOUR: The next question is who should bear the costs of the Supreme Court proceedings, and the issue of adult child maintenance, insofar as it has any legal implications. And one that immediately for me springs to mind is whether or not there is any agreement about whether the NDIS benefit which accrues to [G] is means-tested, and therefore to be ignored for the purpose of the legislation.
MR CONNOR: I perceive that, your Honour, and I thank you for that indication. I think we have got to resolve that, and it seems that one of the difficulties we have is that the – is that assessment is done each year. I understand the problems associated with a lump sum order, your Honour, so ‑ ‑ ‑
HER HONOUR: But Mr Connor, what I’m interested in is – is it means tested or not means tested?
MR CONNOR: No. As I understand it, it’s not means tested, your Honour.
HER HONOUR: Not means tested. So that’s a concession. Is that agreed, Mr Sansom?
MR SANSOM: We will take that, thank you, your Honour. And whilst your Honour has raised it, the evidence filed by the wife in relation to it, including her annexures, shows the NDIS are corresponding with [G], so the – in one sense, the ownership of that benefit is an issue, I suppose, as well.
HER HONOUR: Well, it’s [G’s] benefit. There can’t be any doubt about that.
MR SANSOM: No.
HER HONOUR: But I can’t see how that changes things. But not (sic) doubt we will come to that in due course. Have I covered the whole of the actual issues that I have to determine?
MR SANSOM: No.
HER HONOUR: Tell me what else there is.
MR SANSOM: Through the case outline I have raised this issue. The question of whether the wife has properly carried out the terms of her trusteeship for sale. And, if she hasn’t, what, if any, damages arose, in an equitable sense, as a result?
HER HONOUR: Just on that topic, Mr Connor, does your client oppose the husband’s application for the appointment of an independent trustee?
MR CONNOR: Well, no, your Honour, but we – could I just say that the – I think the issue is that it’s really a matter for your Honour. Your Honour has indicated very clearly you’re going to sell the property.
HER HONOUR: Both parties want me to sell it.
MR CONNOR: That’s right. Well, you see, the husband – no, I think the husband has got an application on that he retain it and pay the wife 1.4 million.
HER HONOUR: No, he has got an application on that she retain it and pay him 1.4 million.
MR CONNOR: No, no. I thought it was – no, no. I think it has got – I must have been reading it too late at night, your Honour, but I thought the husband was seeking the property and that he pay the wife ‑ ‑ ‑
HER HONOUR: No. No. The husband wants an independent trustee for sale.
MR CONNOR: Yes.
HER HONOUR: All right. Any other issues?
MR CONNOR: But he does want the property.
MR SANSOM: And we pay. Just excuse me, your Honour. Our application is that we pay the wife 1.4 for that property.
HER HONOUR: I’m sorry, I must have misunderstood it. I apologise, Mr Connor.
MR SANSOM: Paragraph 6, page 4 of the case outline, I think, your Honour.
HER HONOUR: Then I’ve misread that, and I apologise, Mr Connor.
MR CONNOR: No, it’s not necessary, your Honour.
HER HONOUR: All right. Thank you for that. Any other issues?
MR SANSOM: Yes, your Honour.
HER HONOUR: Yes.
MR SANSOM: The wife has raised, as I flagged earlier, the issue of spouse maintenance.
HER HONOUR: Yes.
MR SANSOM: There’s the issue, too, of what debts form part of the balance sheet and what their – what they are and how they should be paid, relative, on the husband’s case to the partnership.
HER HONOUR: Yes. All of which would be made easier if I actually had a balance sheet.
MR SANSOM: Yes. Yes.
HER HONOUR: Yes.
MR SANSOM: Yes. Thank you, your Honour.
HER HONOUR: Is that all, Mr Sansom, from your point of view?
MR SANSOM: I’m just thinking that through, your Honour. There’s a factual issue, your Honour, in relation to the – I suppose I will put it in these terms – the husband’s contributions to the parties’ marriage by virtue of his poker playing. As I understood it, the wife is complaining that to be part of a waste argument.
HER HONOUR: Yes.
MR SANSOM: So it might be wrapped up in that, factually, but there’s the other side of it.
HER HONOUR: Well, I think everybody can assume that I will want documents, and any argument that is not supported by documents won’t get a lot of traction. Anything else, Mr Sansom?
MR SANSOM: Not that I can think of immediately, your Honour.
HER HONOUR: All right. And from your point of view, Mr Connor, any issues that I’ve missed?
MR CONNOR: Well, your Honour, I think there’s disclosure issue by both parties. I think if I – and just the usual – I agree, your Honour, in relation to – if I can call them “usual” – dealing with contributions in 75(2). But specifically, your Honour, I’ve set out what I understood to be the issues in our outline of case, and I think your Honour has pretty well covered them, with respect.
HER HONOUR: Good.
MR CONNOR: And if – I’m hoping I’m not wrong, but I think they are pretty well covered there, your Honour. Thank you.
HER HONOUR: Thank you.
Thus it was clear, and agreed, that the issue of the beneficial interest of the second respondent in Suburb O and thus in H Street was an issue that needed to be determined. It was within that framework that the parties, particularly the wife and the husband, conducted their respective cases.
On 27 November 2017, after the evidence had closed, and before the commencement of submissions, I put a series of questions and propositions to the parties for their consideration. The transcript records the following exchange:
HER HONOUR: I want to raise with the parties, and that, of course, includes [Mr Zubcic], some legal questions, because these are matters that are troubling me about this case, and in relation to which I will be asking for your submissions tomorrow. So I suggest, [Mr Zubcic], that you ask your McKenzie friend to take notes, because these are matters in relation to which you should seek legal advice.
THE INTERPRETER: Your Honour, I never complained about anyone in my whole – my whole life. I’ve never sued anyone. For me, the hardest is when I’m in dispute with someone. That’s something I can’t tolerate. That’s something I try to avoid. But sometimes, you know, it just turns out that way.
HER HONOUR: I understand that. I need you to listen now, [Mr Zubcic]. The first transaction which concerns me is the transfer by [Mr and Ms Zubcic Senior] of the half share of [Suburb O] to the husband and the wife.
THE INTERPRETER: If you could please – if you could please accurately explain that.
HER HONOUR: I’m sorry, [Mr Zubcic], but I’m not here to explain. As I’ve said to you before, I can’t give you legal advice; I can only urge that you seek legal advice.
THE INTERPRETER: I feel that if I can’t prove something, then I just – I have to give up.
HER HONOUR: Well, [Mr Zubcic], perhaps if you listened, and I’m sure your McKenzie friend is listening and he will, with the assistance of the interpreter, if necessary, explain to you what it is that I have to say.
THE INTERPRETER: ..... I can’t really go to an advisor or a solicitor now because I don’t have any money to pay them with. I can’t get it for free.
HER HONOUR: All right. Just listen, if you would, to the questions that I’m going to ask and which I will ask everybody to answer tomorrow. So the first question is, has it been established that the purported transfer of the [Suburb O] property was effective to transfer the interest of [Mr and Ms Zubcic Senior] to the husband and the wife. If that transaction did not effectively transfer their interest, did [Mr and Ms Zubcic Senior] retain the beneficial ownership of 50 per cent of [Suburb O]? [Mr Zubcic], please sit down and just listen. I’m not asking you to answer any of these questions now. I just want you to listen.
THE INTERPRETER: Yes. Forgive me, your Honour.
HER HONOUR: If the transfer was not effective, what was the interest of [Mr and Ms Zubcic Senior] in the proceeds of sale of [Suburb O]? Given that it is an agreed fact that the proceeds of sale of [Suburb O] were used for the purpose of the purchase of [H Street], did an equity arise in [H Street] in favour of [Mr and Ms Zubcic Senior]? If such an equity arose, what was the nature of the equitable interest? And it follows from that question, did [Mr and Ms Zubcic Senior] have an interest in the proceeds of sale of [H Street]? If they had such an interest, how should it be quantified? The next series of questions relates to the purchase of [Suburb L].
Given that it seems to be an agreed fact that the money for the purchase of [Suburb L] came entirely from the husband and the wife, did the husband and the wife acquire an equitable interest in [Suburb L]? And what was the nature of that interest? It seems to me that those were the questions that I have to answer in order to resolve what is, in fact, the property of the husband and the wife on the one hand and the property of [Mr B Zubcic] on the other hand. If the evidence leads me to the conclusion that the – that [Mr Zubcic] and [Ms Zubcic] retain their interest in [Suburb O] – [Mr and Ms Zubcic] senior retain their interest in [Suburb O], does that have the effect that, having contributed 25 per cent of the purchase price of the interest of the husband and the wife, they were entitled to 25 per cent of the proceeds of sale of [H Street] and in what circumstances should [Mr Zubcic] be permitted to amend his claim to take into account any finding that I might make.
And I suppose the ultimate question is to what extent am I obliged to allow [Mr Zubcic] to amend his claim to take into account whatever findings I might make, but how can I do so with – but also at the same time extending procedural fairness to the husband and the wife. I might – I would like to say this, though, that the questions I have raised – I assume – have been questions in the minds of counsel for quite a long time and I do not in any way criticise [Mr Zubcic Senior] for not understanding that the circumstances of this transaction might give rise to consequences that a person who is not a lawyer might not understand. So I think, having posed those questions, all I can say is that I will look forward to your answers tomorrow.
On 28 November 2017, the matter was adjourned for a week to enable the second respondent to obtain legal advice. The matter came back before me on 5 December 2017.
On 5 December 2017, when Counsel for the wife indicated that he was instructed to oppose leave being granted to the second respondent to amend his application, he also told the Court that, if leave were granted, he sought an adjournment for 21 days. He was asked what further evidence he would wish to call if leave were granted.
Counsel for the wife told the Court that he would need to call evidence about the following matters:
· The effect of a declaration that the second respondent had an interest in [H Street] on the assessment of the wife’s liability for capital gains tax;
· The financial position of the second respondent and his wife at the time of the purchase of Suburb O;
· Who paid the outgoings on Suburb O (it was unclear at what time); and
· Who paid the outgoings on H Street.
In relation to the first matter, it is assumed that, in the event that the second respondent is declared to have an interest in H Street, then the wife will amend her tax return for the relevant year and ask for a refund.
In relation to the second matter, the wife’s affidavit contained such evidence as was available to her.
The relevance of the third matter was unclear.
It was clear on the evidence that the husband and the wife had paid the outgoings of their share of H Street. The second respondent did not claim to have paid any outgoings.
Thus, Counsel for the wife was not able to articulate what further evidence needed to be called in the wife’s case to meet the amended application and, as a consequence, why the matter should be adjourned.
This matter has been on foot since 2013. Judgments have been delivered on 3 May 2017, 2 November 2016, 24 August 2016, and 17 September 2015. Once the substantive proceedings have been determined, there are two further matters to be determined being the costs of the Supreme Court proceedings as between the husband and Mr and Ms Gomes, and the costs of the proceedings determined on 2 November 2016, also as between the husband and Mr and Ms Gomes. In all, seven judgments will have been delivered.
The interests of the administration of justice require that the matter be finally determined.
I am unable to determine any prejudice to the wife in allowing the amendment to the claim of the second respondent. Whether or not the application of the second respondent reflected his claim is not the relevant issue. The Court was required to determine the legal and equitable interests of all of the parties, including the second respondent, no matter how his application was framed.
The basis of the claim in equity that leads to the claim of the second respondent, as framed in his amended application, was clear in the reasons for judgment delivered on 24 August 2016. It was clear in the questions framed by me on 20 November 2017 at the commencement of the trial. It was clear in the propositions posed by me on 27 November 2017.
The wife was not caught by surprise by the second respondent’s amended application.
At all relevant times, the second respondent was unrepresented. At all relevant times both the wife and the husband knew that he claimed an entitlement to three acres of H Street. As was stated by Higginbotham CJ in the Supreme Court of Victoria in Dwyer v O’Mullen (1887) 13 VLR 933, 939:
The judge is under the obligation of making an amendment, but only for a certain purpose and in certain cases – for the purpose of determining the real question in controversy between the parties – that being expressed in many cases to be the question which the parties had agitated between themselves, and had come to trial upon.
In these proceedings, the real questions for trial were, relevantly here, “what was the beneficial ownership of Suburb O” and “what was the interest of the second respondent and his late wife in H Street”?
Accordingly, it was appropriate to allow the second respondent to amend his application to reflect the real questions before the Court.
WHAT WAS THE BENEFICIAL OWNERSHIP OF SUBURB O AT THE TIME OF SALE?
Suburb O was purchased in 1987 by the husband, his brother and the husband’s parents. A mortgage was secured over Suburb O to secure an advance of $50,000 to the husband and his brother.
In the course of submissions in relation to the second respondent’s application for leave to amend his application, Counsel for the wife adverted to evidence that may or may not establish that the second respondent and his late wife had net equity in Suburb O. In cross-examination of the second respondent, it was alleged, but not demonstrated, that the second respondent and his wife did not have approximately $50,000 to contribute to the purchase of Suburb O.
The second respondent and his late wife purchased a property at Suburb RR for $25,795 in 1974. It was the unchallenged evidence of the second respondent that the purchase was funded from a compensation payout of about $12,000 and a “government loan” of about $15,000. The second respondent deposed that the mortgage balance was about $10,000 at the time of the sale.
Suburb RR was sold in December 1987 for $69,900. Settlement took place on 21 December 1987. The settlement statement was annexed to the wife’s affidavit. It was addressed to the second respondent and his late wife at Suburb O. I infer that the purchase of Suburb O had settled before the sale of Suburb RR was completed.
In order to settle the purchase of Suburb O, it is likely that bridging finance was obtained. The settlement statement records three separate disbursements:
Commonwealth Bank $40,944.11
Building Society $10,388.41
Cheque $10,108.03
There is no explanation given in the settlement statement for the disbursements but it is consistent with the discharge of a mortgage of about $10,000 and the repayment of bridging finance.
There is no evidence that there was any other mortgage over Suburb O, other than the mortgage for $50,000 raised by the husband and Mr II Zubcic to purchase their share. If the second respondent and his wife had to borrow to purchase their share, then that borrowing must have been secured against the title and there is no evidence of such a borrowing, which would be clear on a title search.
I accept the evidence of the second respondent that his share, and that of his late wife, came from the sale of Suburb RR.
The wife deposed:
In 1990 [the husband] and I became the sole registered owners of [Suburb O]. Up to this date, [Suburb O] was owned by [the husband] as to a 50% interest (as a result of having acquired an initial twenty-five percent (25%) on its original purchase by the family, and after having acquired [the husband’s brother’s] twenty five percent (25%)). We became the sole registered proprietors as a result of then purchasing [the husband’s parents’] 50% share in 1990.
The wife deposed that she and the husband paid the husband’s parents $60,000 for their half share of Suburb O in August 1990. As to that assertion, the wife in cross-examination conceded that she had no personal knowledge of a payment of $60,000 to the husband’s parents but was relying on what she asserted the husband had told her.
The husband deposed:
To facilitate the loan required to purchase the Franchise, on 17 August 1990, my parents and brother … transferred their interest in [Suburb O] to [the wife] and me as joint tenants. The purpose of this transfer was so we could obtain a loan to purchase the Franchise.
…
[The wife] and I paid no consideration to my parents in respect of the transfer of their interest in [Suburb O]. I recall that I said to my father in the presence of [the wife] and my mother words to the effect of: “Its ok, I will deal with the paperwork, you just sign it. Don’t worry, when the house gets sold you get half, and then you can re-invest it again if you like. We already made some money here and we can do it again later”.
The second respondent deposed:
… I recall that [the husband] approached my late wife and I …, and presented us with the Transfer and said, “sign this.” I asked him, “What for, what is this?” and he replied “Don’t worry about it, just sign it”. I trusted him and although I did not know what the document was, I signed it as did my wife. I say further that no part of the $120,000 referred to on that Transfer was ever paid to me or to my wife. I remember [the wife] was present in this conversation, and when the Transfer was signed by myself and my wife, the person who witnessed our signatures on the Transfer was not present.
A copy of the transfer is annexed to the second respondent’s affidavit. The purported witness to all four signatures (of the husband, the second respondent, the husband’s mother and the husband’s brother) is Mr SS whose address is given as AA Street, Suburb O, the subject property. The occupation of the witness is “Plasterer”. I infer that the witness was not legally qualified. Mr SS was not called to give evidence. It is not suggested that Mr SS was present when the second respondent and his late wife signed the transfer.
In his affidavit sworn 7 November 2017, the second respondent deposed:
… I did not receive any funds from this settlement for my share of the [Suburb O] property.
…
I say again that that I did not know that the title to the [Suburb O] property had been transferred to [the husband and the wife], it was only at the commencement of these proceedings that I found out. We [he and his late wife] were told to ‘sign this’ (transfer form) by [the husband] and we did so, without being told what we were signing.
The second respondent denied that he was paid $60,000 for his interest in Suburb O.
The second respondent does not speak English. I infer that he does not read English. The wife does not assert that the nature and effect of the document was explained to the second respondent before he signed it.
The husband’s late mother was also a transferee. There is no assertion that the nature and effect of the document she signed was explained to her. There is no evidence that she could read English. The only evidence about her capacity to understand the document was given by the second respondent in cross‑examination where he said that her ability in English was even worse than his.
Annexed to the affidavit of the wife is a document dated 27 August 1990 entitled “Settlement Statement” which evidences an amount borrowed by the husband and the wife from the TT Building Society of $99,975. That amount was disbursed as to $49,193.84 to the Commonwealth Savings Bank (I assume to discharge the existing mortgage) and $50,781.16 to EEPL (which I assume was to purchase, or otherwise fund, the Franchise).
The wife relies upon a document under the heading of the TT Building Society dated 11 July 1990 which refers to an advance of $100,000. Under the heading “Loan to be allocated as follows”, the document records:
DISCH EXIST MORT $44,000
PAYOUT $56,000
HLIC PREMIUM $ 100
Having regard to the record of the settlement statement as to the actual payments from the advance, I do not accept that the 11 July 1990 document evidences payment to the husband’s parents of $60,000 or any sum.
There is no evidence that any money was paid in the course of that transaction to the husband’s parents.
The wife does not depose to having any savings in the amount of $60,000 or any other significant amount. Neither does she suggest that the husband had any funds available to him from which the payment of $60,000 could have been made.
To the contrary, if the husband and the wife had $60,000, they would not have needed to borrow any money to purchase the Franchise.
The High Court in Petelin v Cullen (1975) 132 CLR 355 considered a similar fact situation. In that case the appellant had argued non est factum after having signed a document which he said he did not understand due to his limited English. The document was an extension of an option to purchase land. In a unanimous judgment, their Honours Barwick CJ, McTiernan, Gibbs, Stephen and Mason JJ stated the following in relation to the defence:
The principle which underlies the extension of the plea to cases in which a defendant has actually signed the instrument on which he is sued has not proved easy of precise formulation. The problem is that the principle must accommodate two policy considerations which pull in opposite directions: first, the injustice of holding a person to a bargain to which he has not brought a consenting mind; and, secondly, the necessity of holding a person who signs a document to that document, more particularly so as to protect innocent persons who rely on that signature when there is no reason to doubt its validity. The importance which the law assigns to the act of signing and to the protection of innocent persons who rely upon a signature is readily discerned in the statement that the plea is one “which must necessarily be kept within narrow limits” (Muskham Finance Ltd. v Howard) and in the qualifications attaching to the defence which are designed to achieve this objective.
The class of persons who can avail themselves of the defence is limited. It is available to those who are unable to read owing to blindness or illiteracy and who must rely on others for advice as to what they are signing; it is also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document. To make out the defence a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part. Finally, it is accepted that there is a heavy onus on a defendant who seeks to establish the defence. All this is made clear by the recent decision of the House of Lords in Saunders v Anglia Building Society (Gallie v Lee)
It is now settled beyond any shadow of doubt that when we speak of negligence or carelessness in connexion with non est factum we are not referring to the tort of negligence but to a mere failure to take reasonable precautions in ascertaining the character of a document before signing it. The insistence that such precautions should be taken as a condition of making out the defence is of fundamental importance when the defence is asserted against an innocent person, whether a third party to the transaction or not, who relies on the document and the signature which it bears and who is unaware of the circumstances in which it came to be executed. It is otherwise when the defence is asserted against the other party to the transaction who is aware of the circumstances in which it came to be executed and who knows (because the document was signed on his representation) or has reason to suspect that it was executed under some misapprehension as to its character. In such a case the law must give effect to the policy which requires that a person should not be held to a bargain to which he has not brought a consenting mind for there is no conflicting or countervailing consideration to be accommodated — no innocent person has placed reliance on the signature without reason to doubt its validity. … [Citations omitted]
In applying the law to the facts of the case, their Honours found that the appellant had not acted carelessly as he had limited knowledge of the English language and capacity to read English and he had relied on what the agent had said to him. Moreover, their Honours considered that the agent was not an “innocent party” as he had knowledge of the appellant’s limitation. Their Honours said, at 360 – 361:
On this analysis the element of carelessness has no relevance for the present case. As the learned judge found, the appellant's belief that the document was a receipt was inspired by the agent's representation that the document acknowledged the payment of the sum of $50. It is scarcely to be conceived that the respondent was unaware of what his agent said and did; but even if he was not informed by the agent he must take responsibility for his action. Consequently as against the appellant, the respondent is not to be considered as an innocent person without knowledge or reason to doubt the validity of the appellant's signature.
There are other reasons why it would be inappropriate to treat the respondent as an innocent party. It became apparent to Mr. Clements when the original option was negotiated that the appellant had little appreciation of English and no capacity to understand the option agreement. Indeed, Mr. Clements advised him to consult a solicitor. The appellant's difficulties in reading and understanding must have been present to Mr. Clements' mind when the extension was signed; yet he contented himself with a demand that the document be signed and omitted to give an explanation of its character.
The matters to which we have referred would in any event support the independent conclusion that there was no carelessness on the part of the appellant. He could not read English; it was beyond his capacity to understand what the document provided. He was therefore faced with the choice of relying on what Mr. Clements said or of incurring the expense and inconvenience of taking it to a solicitor for advice. Vis-à-vis Mr. Clements and the respondent, he was justified in relying on what he was told by Mr. Clements. After all, Mr. Clements had previously advised him to consult a solicitor when that was necessary; on this occasion no such advice was given; nor did he give any indication that the document granted rights additional to those previously conferred.
The second respondent cannot speak English or read English. There is no evidence that his late wife could speak or read English.
They did not receive legal advice.
There is no evidence that the effect of the document that they signed was ever explained to the second respondent or to his late wife. No such assertion has been made by the wife or the husband.
The wife is not an “innocent person” in relation to this transaction. She was aware that the second respondent did not speak English. It is her evidence that she could only have limited conversation with him as she did not speak his language. She intended to receive a benefit from the transaction. She understood that by acquiring the interest of the husband’s parents in Suburb O, she and the husband would be able to borrow money to acquire a business, the Franchise. She was a party to the transaction.
I accept that the second respondent did not know what he was signing; that he trusted the husband and that he signed the document without knowing its effect. There is no evidence that his late wife knew what she was signing or understood the effect of the document.
In those circumstances, the document is of no effect to transfer the interest of the husband’s parents to the husband and the wife and therefore they held the legal title of Suburb O on trust for the husband’s parents as beneficial owners as to 50 per cent.
The second respondent and his wife held their interest in Suburb O as joint tenants. Their beneficial ownership of Suburb O was as joint tenants.
Accordingly, the share of the second respondent and his wife in the proceeds of sale was $150,000.
I also consider that the conduct of the husband and the wife in relation to the interest of the second respondent in Suburb O was unconscionable within the definition stated by the High Court in Thorne v Kennedy (2017) 91 ALJR 1260, 1272 in the following terms:
[38] A conclusion of unconscionable conduct requires the innocent party to be subject to a special disadvantage “which seriously affects the ability of the innocent party to make a judgment as to [the innocent party’s] own best interests”. The other party must also unconscientiously take advantage of that special disadvantage. This has been variously described as requiring “victimisation”, “unconscientious conduct”, or “exploitation”. Before there can be a finding of unconscientious taking of advantage, it is also generally necessary that the other party knew or ought to have known of the existence and effect of the special disadvantage. [Footnotes omitted]
The second respondent was subject to a special disadvantage – he could not read and did not understand the document he was asked to sign. The husband, or the husband and the wife, took advantage of that special disability – they persuaded the second respondent to transfer his interest in Suburb O to them without payment. Further, the second respondent relied upon the general financial advice of the husband whom he regarded as having superior knowledge and experience in such matters. The husband and/or the husband and the wife knew that the second respondent did not speak English and that he trusted the husband.
The transaction could also be set aside on those grounds.
HOW WERE THE PROCEEDS OF THE SALE OF SUBURB O APPLIED?
Suburb O was sold for $300,000. The whole of the amount was used by the husband and the wife. As a result of my findings above, the second respondent was beneficially entitled to 50 per cent of the proceeds of sale, namely $150,000.
The second respondent in an affidavit sworn 30 March 2015 deposed that:
… in 2000 we agreed to invest our half share of $300,000, being $150,000, in [Suburb O] into a purchase that [the husband] had arranged at [Suburb C] for about $1.2 million.
The wife disputes the version of events to which the husband’s father deposed but she does not dispute that the whole of the money received from the sale was paid to her and the husband. She deposed that, from the sale proceeds, $250,000 was paid to her parents in partial repayment of the loan and a further $26,000 was paid to reimburse her parents for half of the stamp duty. The husband and the wife retained the balance of $23,831.
In reasons for judgment delivered on 2 November 2016, it was found that from the proceeds of Suburb O, the husband and wife paid the sum of $277,387 to Mr and Ms Gomes representing $250,000 in payment of the loan and a further $27,387 for their share of stamp duty and legal costs. I am satisfied that the husband and wife retained the whole of the proceeds of sale of Suburb O and applied the proceeds towards the purchase of their 50 per cent interest in H Street.
DID MR ZUBCIC SNR (THE SECOND RESPONDENT) ACQUIRE A BENEFICIAL INTEREST IN H STREET?
Where, in this portion of the judgment, reference is made to H Street, it is intended to refer only to that portion of H Street which is the 50 percent share which was held by the husband and the wife as joint tenants, unless otherwise stated.
The findings as to the beneficial ownership of Suburb O give rise to a consideration of whether the second respondent acquired an interest in H Street, either by operation of the law in relation to a resulting trust or, in the alternate, by way of constructive trust.
Dealing firstly with the law in relation to resulting trusts, in Calverley & Green (1984) 155 CLR 242, Gibbs CJ said:
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. In the absence of evidence to rebut that presumption, there arises a resulting trust in favour of the purchaser. Similarly, if the purchase money is provided by two or more persons jointly, and the property is put into the name of one only, there is, in the absence of any such relationship, presumed to be a resulting trust in favour of the other or others. For the presumption to apply the money must have been provided by the purchaser in his character as such - not, for example, as a loan. Consistently with these principles it has been held that if two persons have contributed the purchase money in unequal shares, and the property is purchased in their joint names, there is, again in the absence of a relationship that gives rise to a presumption of advancement, a presumption that the property is held by the purchasers in trust for themselves as tenants in common in the proportions in which they contributed the purchase money: Robinson v. Preston [(1858) 4 K & J 505; 70 ER 211 at p 213]; Ingram v. Ingram [(1941) VLR 95] and Crisp v. Mullings [(1976) E.G. 730] (a decision of the English Court of Appeal).
Thus a resulting trust arises in circumstances where it would be unconscionable for the registered proprietor to enjoy the beneficial ownership of the property.
The presumption that a resulting trust was created cannot prevail over evidence of the actual intention of the parties.
Here, the relevant parties are the husband and the second respondent as the wife is adamant that she was not involved in any discussions with the second respondent about the purchase of H Street. It follows, in those circumstances, that the wife is not in a position to challenge the evidence of the husband and the second respondent about the conversations that took place between them immediately before and at the time of the purchase and, properly, she did not.
It is necessary to consider the evidence of the three interested parties as to the circumstances at the time of the acquisition of H Street.
The second respondent deposed:
I agree that my wife & I did not pay any rent at the [H Street] property because that was the arrangement that was made; for our half share of the [Suburb O] property we would get the value of 3 acres when the property was sold plus we could live at the property, rent free, until it was sold.
The husband deposed:
I discussed with my parents a plan to sell [Suburb O] and apply the sale proceeds to purchase the [H Street] property jointly with [the wife’s] parents … My parents agreed and we then sold [Suburb O].
The husband also deposed to a conversation with the wife where the wife acknowledged that the second respondent had money “tied up” in H Street and said that if the second respondent needed money “we will pay him some back … or we can pay him out and he can go to [Country UU] …”
The wife denied that any conversations took place as alleged by the husband or the second respondent.
The precise circumstances of the purchase of H Street were examined in reasons delivered on 2 November 2016 where the following findings were made:
· The purchase of H Street was completed on 11 May 2000.
· The whole of the funds required to complete the purchase were provided by Mr and Ms Gomes.
· The husband and the wife borrowed $600,000 from Mr and Ms Gomes to complete the purchase.
· Contracts for the sale of Suburb O were exchanged on 26 April 2000 and settlement of the sale took place on 15 June 2000.
· From the proceeds of sale of Suburb O, $277,387 was paid to Mr and Ms Gomes representing repayment of $250,000 on the loan and a further payment of $27,387 towards the stamp duty and legal fees which had also been paid by Mr and Ms Gomes.
No challenge has been made to those findings.
In the present instance, the purchase money for the interest of the husband and the wife in H Street was provided by the second respondent as to 25 per cent and the husband and the wife as to 75 per cent. The registered proprietors were the husband and the wife. Prima facie, a resulting trust arises in favour of the second respondent as to a 12.5 per cent interest in H Street (that being, 25 per cent of the husband and wife’s share).
The next issue to be determined is whether a presumption of advancement applies in relation to the use of the money of the second respondent and his wife by the husband and the wife.
In the New South Wales Supreme Court decision of Buffrey v Buffrey (2006) 12 BPR 23,619, Palmer J summarised the relevant principles for rebutting both the presumption of a resulting trust and the presumption of advancement. His Honour said, at [14]:
... (4) if a presumption of resulting trust or a presumption of advancement arises where one party has contributed the whole of the acquisition cost of the property but the title to the property is placed in the name of another party:
a) whether either presumption is rebutted depends upon the intention solely of the party who provided the money because the question is whether that person intended to make a gift of an interest in the property to the person who did not contribute to its acquisition;
b) evidence by the person making the payment as to his or her intentions at the time of the transaction is admissible but the Court will treat that evidence with caution as the evidence of an interested party;
c) the Court is more assisted in determining the subjective intention of the person making the payment by evidence of that person’s contemporaneous statements of intention, subsequent admissions against interest, subsequent dealings with the property, and by evidence of other relevant surrounding circumstances; …
In Damberg v Damberg & Ors [2001] NSWCA 87, Heydon JA considered that the relevant standard of proof for the rebuttal of the presumption of advancement is the balance of probabilities. His Honour said:
42. There is a presumption that where one or more parents convey property to a child, the parent or parents intended to give the child the beneficial interest in the property, not merely the legal title. That presumption can be rebutted by showing, on the balance of probabilities, that the parent or parents did not have that intention. In the present circumstances, where the husband alone transferred the property, it is his actual intention alone which is to be ascertained: Calverley v Green (1984) 155 CLR 242 at 246-251 per Gibbs CJ.
In seeking to rebut the presumption of advancement, the burden of proof lies with the party who seeks to have the resulting trust recognised (Vadisanis & Vadisanis (2014) 53 Fam LR 345, 534).
In so far as there is any evidence of the subjective intention of the person making the payment, in this instance the second respondent, it was his evidence that he understood that he and his late wife would be owners of three acres of H Street and live there rent free.
There is some factual corroboration of that position. The whole of H Street was purchased for $1,200,000. It is agreed that the property comprised approximately 25 acres. Therefore the purchase price was the equivalent of $48,000 per acre. Three acres would have cost $144,000.
The wife’s case was that she was not present during any discussion with the second respondent about the acquisition of H Street.
The only evidence in relation to the intention of the second respondent is his own evidence. The husband did not challenge the second respondent’s evidence that he and his late wife were to receive an interest in H Street as a result of their contribution from their interest in Suburb O. The husband deposed that sometime after mid-2006 the second respondent asked the husband and wife to “pay him back some of the money for his equity that came from Suburb O and then had been invested in the H Street property.” In submissions, Counsel for the husband conceded that the second respondent and his late wife received an interest of 12.5 per cent in H Street, by way of a trust.
The second respondent intended that he and his wife would have an interest in H Street. I do not accept that, as the wife asserts, the second respondent and his late wife intended to benefit only the husband and the wife.
I am satisfied that the presumption of advancement has been rebutted.
There was no direct, contemporaneous payment of funds from the sale of Suburb O towards the purchase of H Street, but rather the funds were applied in partial repayment of monies lent to the husband and the wife.
However, that was not a matter in the control of the second respondent. The husband and the wife simply took the whole of the proceeds of sale of Suburb O, including that portion to which the second respondent was entitled, and applied those funds as they saw fit.
The husband and the wife beneficially held 25 per cent of their interest in H Street for the second respondent and his late wife. As they had held their interest in Suburb O as joint tenants, so their beneficial interest in H Street was as joint tenants. On her death, Ms Z Zubcic’s interest passed to the second respondent.
It is also possible that the interest of the second respondent in H Street arose by operation of a constructive trust.
A constructive trust is referred to in the jurisprudence as a remedial institution. It is a trust that is imposed by the operation of law, independently of the intention of the parties involved, where it would otherwise be unconscionable for a person’s interest in a property not to be recognised.
In Muschinski v Dodds (1985) 160 CLR 583 (“Muschinski v Dodds”), Deane J stated, at 614:
Viewed in its modern context, 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. (Emphasis added)
His Honour continued:
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 … Such equitable relief by way of constructive trust will only properly be available if applicable principles of the law of equity require that the person in whom the ownership of property is vested should hold it to the use or for the benefit of another. That is not to say that general notions of fairness and justice have become irrelevant to the content and application of equity. They remain relevant to the traditional equitable notion of unconscionable conduct which persists as an operative component of some fundamental rules or principles of modern equity …
… Once its predominantly remedial character is accepted, there is no reason to deny the availability of the constructive trust in any case where some principle of the law of equity calls for the imposition upon the legal owner of property, regardless of actual or presumed agreement or intention, of the obligation to hold or apply the property for the benefit of another.
The High Court subsequently revisited constructive trusts in Baumgartner v Baumgartner (1987) 164 CLR 137 (“Baumgartner”). Their Honours Mason CJ, Wilson and Deanne JJ summarised the decision in Muschinski v Dodds and stated, at 147 to 148:
Deane J. (with whom Mason J. agreed) reached this result by applying the general equitable principle which restores to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them …
… His Honour pointed out that the constructive trust serves as a remedy which equity imposes regardless of actual or presumed agreement or intention "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" … In rejecting the notion that a constructive trust will be imposed in accordance with idiosyncratic notions of what is just and fair his Honour acknowledged that general notions of fairness and justice are relevant to the traditional concept of unconscionable conduct, this being a concept which underlies fundamental equitable concepts and doctrines, including the constructive trust.
The wife asserted, but did not prove, that the husband had money from the business after separation. This item will be removed from the balance sheet.
Item 22 - tax
I have dealt with the allocation of the liability for tax earlier in these reasons.
To include the respective personal liabilities of the husband and the wife in the balance sheet would distort the picture. I have added back the personal tax of the parties in coming to the figure used to represent the amount in the controlled monies account. I will deal with the tax liabilities by deducting the liability of each of the parties from their share of the controlled monies.
Item 23 – waste by the wife as Trustee for Sale
This will be dealt with when considering the s 75(2) adjustment. It will be removed from the balance sheet.
Item 24 – husband’s gambling losses
For the reasons explained earlier, this item will be removed from the balance sheet.
Item 25 - money had by the wife
The parties agree that the amount of $121,613 should be added back.
Item 26 – anticipated costs of sale of B Street
There is no evidence of the likely costs of sale. I propose to order that the net proceeds of B Street be distributed after payment of the costs of the trustee. This item will be removed from the balance sheet.
Items 27 and 28 – money borrowed by the wife for costs and costs unpaid
The wife, according to the costs letter tendered on her behalf, has paid $1,141,128 in legal costs. That sum does not accord with the evidence. The wife deposed in October 2017 that she had paid $1,022,000. The wife’s mother, in cross examination, said that she had advanced, in the past week or so before the hearing commenced, in addition to the $1,022,000, three further amounts. She could not remember the amount advanced on 14 October 2017. In the week before the hearing, she advanced $350,000. I infer, therefore, that the wife has paid in excess of $1,372,000 in costs.
The parties are entitled to retain lawyers and to spend whatever they want to spend on their legal costs but they are not entitled to visit the consequences of their choices on the other party.
To include in the balance sheet the amounts held by the respective solicitors in their trust accounts would be a double counting and those items will also be removed from the balance sheet.
For the reasons I have given in relation to items 18 and 19, this item will be removed from the balance sheet.
Item 29 – money borrowed from the wife’s parents for Suburb R
Both the asset and the liability will be removed from the balance sheet.
Items 30 to 35 inclusive – husband’s personal debts
As I have excluded the wife’s personal debts, I propose to exclude those of the husband.
Item 36 – debt for partnership rent unpaid
This is a debt of the partnership. It should be paid from joint assets. The husband and the wife are jointly and severally liable. A document tendered in the husband’s case confirmed the amount owing.
Item 37 – debt to J Pty Ltd
This is a debt of the partnership. It should be paid from joint assets. The husband and the wife are jointly and severally liable.
Item 38 – debt to XX Pty Ltd
This is a debt of the partnership. It should be paid from joint assets. The husband and the wife are jointly and severally liable. Both the husband and the wife have given authorities for the amount to be paid from the controlled monies account and it has been paid. This item will be removed from the balance sheet.
Item 39 – school fees outstanding for Mr F
There is no dispute that the amount is owed. There is no evidence which establishes that the parties should not be jointly responsible to pay their son’s school fees. It will be paid from the ATW controlled monies account.
Item 40 – Credit Union debt
This is the husband’s debt. There is no evidence that the funds were used for joint or family purposes. It will be removed from the balance sheet.
Items 41, 42 and 43 – taxation liabilities
I propose to deal with the tax liabilities by treating the amounts outstanding by the partnership as a joint debt, payable from the ATW controlled monies account, as has already occurred, and by deducting the amounts for which the parties are personally liable from their respective entitlements to the money in the ATW controlled monies account. The liability will be removed from the balance sheet.
Item 44 – Centrelink debt
There is no evidence about this alleged debt. It will be removed from the balance sheet. The husband and the wife will each be liable according to the law if the debt is pursued.
Items 45 and 46 – capital gains tax
There is no evidence to establish how much will have to be paid by the husband and the wife on the sale of B Street. Presumably, since neither has any income from employment, they will each pay approximately the same amount.
In relation to the capital gains tax on H Street, the wife has already been assessed, in the year ended 30 June 2016, to pay $293,520. That amount is included in her personal debt owed to the Commissioner in relation to which consent orders were made on the first day of the hearing.
The wife may be entitled, as a result of the order which will be made in favour of the second respondent, to have her assessment reviewed.
The husband has not submitted a return for the relevant year and has not been assessed. Therefore, the husband still owes capital gains tax, in an amount not yet assessed, in relation to H Street. It is reasonable to assume that the husband’s liability will be similar to that of the wife.
Each party will be liable to pay capital gains tax when it is assessed from his or her own assets.
The item will be removed from the balance sheet.
Items 47 and 48 – legal fees unpaid
For the reasons I have already given, these amounts will not be included as liabilities on the balance sheet.
Item 49 – costs associated with sale of B Street by wife as trustee for sale
In cross-examination, the wife agreed that the amount actually outstanding is $3,365. That amount will be included as a liability.
Item 50 – the husband’s superannuation
The husband obtained release of his superannuation entitlements on compassionate grounds. He received $72,135 net of tax. This premature distribution will be taken into account when considering s 75(2).
Item 51 – the wife’s superannuation
Since the husband has already received his entitlements and spent them, it would not be appropriate to include the wife’s entitlements in the balance sheet. This item will be removed.
I therefore find the assets and liabilities of the parties (subject to the entitlement of the second respondent which I have included as a liability) to be:
| Ownership | Description | Value | ||||
| 1 | Joint | B Street, Suburb C | 2,800,000 | |||
| 2 | Joint | Controlled monies account held by Messrs Abrams Turner Whelan ("ATW") | 2,293,680 | |||
| 3 | Wife | Various bank accounts (CBA Wife …96) | 1,209 | |||
| 4 | Husband | Utility (scrap value) | 300 | |||
| 5 | Wife | Motor vehicle | 10,000 | |||
| 6 | Wife | Life Insurance Policy | 12,675 | |||
| 7 | Wife | Household Contents | 8,000 | |||
| 8 | Husband | V & Associates Trust Account | 1,910 | |||
| Total | $ 5,127,774 | |||||
| Add back | ||||||
| Ownership | Description | Value | ||||
| 9 | Husband | Monies paid by the husband for costs from interim property settlement. | 550,000 | |||
| 10 | Wife | Monies received by wife | 121,613 | |||
| Total | $ 5,799,387 | |||||
| Liabilities | ||||||
| Mr B Zubcic | 768,877 | |||||
| HH Pty Ltd | 16,223 | |||||
| 11 | Joint | J Pty Ltd (plus interest) | 45,333 | |||
| 12 | Joint | U School – school fees | 12,000 | |||
| 13 | Wife | Costs associated with selling B Street Suburb C | 3,365 | |||
| Total | $ 845,798 | |||||
| Total of net assets | $ 4,953,589 | |||||
From the ATW controlled monies account, before distribution, the following sums will be paid:
Mr B Zubcic $768,877
HH Pty Ltd $16,223
J Pty Ltd $45,333 plus interest
U School $12,000
Wife $3,365
Total $845,798
After payment of those liabilities, the amount notionally left for distribution in the controlled monies account is $1,447,882.
Of the assets, the wife has in her possession assets totalling $153,497 (excluding superannuation) and will receive a further $3,365 being reimbursement of costs paid by her for B Street, a total of $156,862. The husband has, or has received, $552,210.
CONTRIBUTIONS
The wife, at the commencement of co-habitation, had a half interest in BB Street, unspecified superannuation, a motor vehicle, a life insurance policy and unspecified savings. She was receiving a share of the rent on BB Street, but was also paying the mortgage and half of the outgoings. While it is not possible to value the wife’s initial contributions, I note that she transferred her interest in BB Street to her parents in 1995 for $65,000.
The husband contributed a half interest in Suburb O, subject to mortgage; a half interest with his brother in the Franchise; a motor vehicle and superannuation entitlements which he estimated to be about $10,000. I note that in 1991 the mortgage over Suburb O was approximately $100,000. I note that the husband had a one-third interest in two units at Suburb CC but it is not suggested that the interest was of any significance.
Having regard to the time that has elapsed since the commencement of their marriage and the significant contributions they have each made since that time, there is no adjustment required in relation to initial contributions.
In June 1999, the wife’s parents gave her $175,000.
The husband and the wife each contributed their efforts during the period of their marriage for the benefit of their family.
The wife contributed primarily as home maker and parent. The husband contributed primarily as bread winner. However they each made other contributions, the wife to the running of the business, and the husband to the parenting of the children.
I do not accept the evidence of the wife that she was solely responsible for the parenting of the children. She conceded in cross-examination that the husband also made contributions. From the time the husband ceased to work in his employment as a public servant, he was mostly self-employed and spent considerable periods working from home. A significant part of the business was carried on at B Street. The wife conceded that the husband was involved with the children’s medical appointments, their sport and their day to day activities.
I have set out earlier in these reasons the evidence in relation to G’s diagnosis and his behaviour. Up to the date of separation in mid-2013, there is no evidence that the wife’s contribution in caring for G was significantly more arduous than was the husband’s. His involvement with G was also significant. There is no doubt that the wife spent more time caring for G than did the husband but she was able to do that because he undertook the primary responsibility for running the business.
I accept that the husband’s management of the taxation affairs of the partnership was inept. He made that concession in his oral evidence. However, they were both partners and if the wife, as she stated in cross-examination, found it easier to leave such matters to the husband, she cannot then rely on his poor handling of them.
I find that, up to the time of separation, the wife’s contributions exceeded those of the husband, primarily because of the gift from her parents of $175,000.
After separation, the wife was the sole carer for G. As his behaviour worsened, she bore the brunt of it.
From mid-2013 onwards, it is the wife who has been responsible for G’s every need, emotional, physical and financial. There is no evidence of any respite for her from her responsibility, however lovingly it has been undertaken.
I consider that the wife’s care of G after separation needs to be recognised as a contribution but I am conscious that the period of her sole care was three and a half years and the period of their co-habitation was 22 years.
There should be an adjustment of five per cent, or a differential of 10 per cent, to recognize the wife’s greater contributions. Thus contributions should be adjusted 55 per cent to the wife and 45 per cent to the husband. This is a significant adjustment having regard to the net asset pool.
SECTION 75(2)
The wife is 48 years of age. She has not been in the paid work force since 1994. She has no real qualifications for employment. Her caring responsibilities for G will, in any event, preclude her from full time employment as she is required to be on hand if G has any difficulties.
The husband is 53 years of age. He has not worked in gainful employment since the collapse of the business in 2014. He has been in receipt of a Centrelink pension.
Neither the husband nor the wife has realistic expectations of paid employment.
The husband has health problems and will likely require medical treatment but there is no evidence of the likely cost of that treatment.
The wife has a residence provided by her parents. Although she has signed a loan agreement in relation to their provision of the purchase price of the home, and evinced an intention to repay them, she will not be required to repay the loan to her parents if this would cause her hardship.
The husband presently has no accommodation.
It is necessary to take into account the fact that the husband has already received and spent his superannuation entitlement in the sum of $72,135, but the wife’s entitlement is preserved. Neither party asks for a splitting order in relation to the wife’s superannuation. It is a small sum in the overall asset pool and I do not propose to take it further into account.
The wife will continue to provide a home for G, although he is an adult.
Two notable decisions of this Court have held that the responsibility of a party to support another person, referred to in s 75(2)(e) can extend to a moral obligation (See In the Marriage of Lutzke (1979) FLC 90-714, at 78,836 (Lindenmayer J); In the Marriage of Aroney (1979) FLC 90-709, at 78-784 (Nygh J)).
Further, I am of the view that, given G’s disabilities and needs, the wife’s ongoing care for him could, in the alternate, be considered under s 75(2)(o). However, it is the financial responsibility of caring for G that can be taken into account, whether pursuant to s 75(2)(e) or s 75(2)(o).
Since I propose to make an order for adult maintenance for G, in an amount that represents half of his reasonable expenses after the proportion paid by the NDIS, no further adjustment is required in relation to this aspect.
The most significant adjustment to be considered is the adjustment in relation to the wife’s waste as a trustee for sale.
Doing the best I can on the available evidence, I propose to make an adjustment of 5 per cent in favour of the husband.
The result is that the net assets of the husband and the wife will be divided equally between them.
MACHINERY PROVISIONS
The husband seeks an order that he be entitled to purchase the interest of the wife in B Street for $1,400,000. In evidence, he said that he has an interested investor who will provide funds for the purchase. The husband has extensive personal debts. He will receive some $48,000 from the ATW controlled monies account. He will have to pay a significant amount of capital gains tax in relation to H Street. He gave no explanation of how his liabilities can be met if he receives no money from the sale of B Street. The husband’s proposal has no practical utility.
The husband and the wife agree to the appointment of Mr W and Mr X of Y Chartered Accountants as the trustees for the sale of B Street. The orders will provide for the sale of B Street and the division of the proceeds after the payment of any liability for capital gains tax assessed against both the husband and the wife.
The funds held in the controlled monies account must be distributed on the basis that each of the husband and the wife pays his or her tax liability out of his or her own fund.
It should be remembered that the funds actually held in the controlled monies account, after payment of the joint debts will be approximately $152,000. It is not possible to be more accurate because further interest will have been paid and the interest owed to J Pty Ltd will have to be paid. This calculation deals with the fund as if the personal tax of the husband and the wife had not been paid and then provides for payment out of the entitlement of each party.
Excluding B Street, the assets of the husband and the wife, for the purpose of this calculation are:
Controlled monies account (tax added back
and after payment of joint debts) $1,447,882
Wife’s assets $156,862
Husband’s assets $552,210
Total $2,156,954
The wife is entitled to half that amount or $1,078,477. She has $156,862 leaving a balance of $921,615 from which her personal tax of $627,121 is deducted leaving a notional entitlement of $294,494.
The husband is also entitled to $1,078,477. He has received or retained $552,210 leaving a balance of $526,267. There are insufficient funds remaining to pay the husband’s tax of $667,783 leaving the husband with a shortfall to the fund of $141,516.
At the conclusion of the trial, an application was made for the release of funds to the husband from the controlled monies account on the basis that he had no available funds. Because it was not clear what the husband’s entitlement was, I declined to make that order.
I now propose to divide the actual balance of the controlled monies account, after the payment of the specified joint debts (some $152,000) equally between the husband and the wife, whist providing for V & Associates to be paid from the husband’s share.
The wife will receive $76,000. V & Assoc will receive $27,995.67 (their entitlement of $29,905.67 less $1,910) and the husband will receive $48,004. Any balance should be divided equally between the husband and the wife. Any shortfall should be borne equally by them.
The net proceeds of the sale of B Street, after payment of the costs of sale including the costs of the trustees for sale, will be paid as follows:
Half to the wife;
A further sum to the wife of $294,494 less any amount she received from the ATW controlled monies account;
The sum of $65,000 to the wife on account of maintenance for G;
An amount as assessed for costs to the third and fourth respondents, Mr and Ms Gomes, in accordance with the judgment delivered on 1 March 2018;
The balance to the husband from which the sum of $100,000 will be held in trust by his solicitors pending the determination of the Supreme Court costs dispute with Mr and Ms Gomes.
SPOUSAL MAINTENANCE
Section 72 of the Act provides:
(1) A party to a marriage is liable to maintain the other party, to the extent that the first‑mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:
(a) by reason of having the care and control of a child of the marriage who has not attained the age of 18 years;
(b) by reason of age or physical or mental incapacity for appropriate gainful employment; or
(c) for any other adequate reason;
having regard to any relevant matter referred to in subsection 75(2).
The wife will receive approximately $1,500,000, depending on the net sale price of B Street. She has a house provided for her by her parents. Whether or not they will seek the repayment of the money they have lent to her remains to be seen but I am confident that they will not do so if she would suffer financial hardship.
She is able to support herself from her own funds.
The wife’s application for spousal maintenance will be dismissed.
ADULT CHILD MAINTENANCE
Earlier in these reasons I have set out the evidence in relation to G’s having been diagnosed with an Autism Spectrum Disorder.
The matters to be considered in making a determination about adult maintenance are found at sections 66G, 66K and 66L of the Act in the following terms:
66G Court’s power to make child maintenance order
In proceedings for a child maintenance order, the court may, subject to this Division and to section 111AA, make such child maintenance order as it thinks proper.
66K Matters to be taken into account in determining contribution that should be made by party etc.
(1) In determining the financial contribution, or respective financial contributions, towards the financial support necessary for the maintenance of a child that should be made by a party, or by parties, to the proceedings, the court must take into account these (and no other) matters:
(a) the matters mentioned in sections 66B, 66C and 66D; and
(b) the income, earning capacity, property and financial resources of the party or each of those parties (this is expanded on in subsection (2)); and
(c) the commitments of the party, or each of those parties, that are necessary to enable the party to support:
(i) himself or herself; or
(ii) any other child or another person that the person has a duty to maintain; and
(d) the direct and indirect costs incurred by the parent or other person with whom the child lives in providing care for the child (this is expanded on in subsection (3)); and
(e) any special circumstances which, if not taken into account in the particular case, would result in injustice or undue hardship to any person.
(2) In taking into account the income, earning capacity, property and financial resources of a party to the proceedings, the court must have regard to the capacity of the party to earn and derive income, including any assets of, under the control of or held for the benefit of the party that do not produce, but are capable of producing, income.
(3) In taking into account the direct and indirect costs incurred by the parent or other person with whom the child lives in providing care for the child, the court must have regard to the income and earning capacity forgone by the parent or other person in providing that care.
(4) In determining the financial contribution, or respective financial contributions, that should be made by a party, or by parties, to the proceedings, the court must disregard:
(a) any entitlement of the child, or the person with whom the child lives, to an income tested pension, allowance or benefit; and
(b) the income, earning capacity, property and financial resources of any person who does not have a duty to maintain the child, or has such a duty but is not a party to the proceedings, unless, in the special circumstances of the case, the court considers it appropriate to have regard to them.
(5) In determining the financial contribution, or respective financial contributions, that should be made by a party, or by parties, to the proceedings, the court must consider the capacity of the party, or each of those parties, to provide maintenance by way of periodic payments before considering the capacity of the party, or each of those parties, to provide maintenance:
(a) by way of lump sum payment; or
(b) by way of transfer or settlement of property; or
(c) in any other way.
(6) Subsections (2) to (5) do not limit, by implication, the matters to which the court may have regard in taking into account the matters referred to in subsection (1).
66L Children who are 18 or over
(1) A court must not make a child maintenance order in relation to a child who is 18 or over unless the court is satisfied that the provision of the maintenance is necessary:
(a) to enable the child to complete his or her education; or
(b) because of a mental or physical disability of the child.
The court may make such a child maintenance order, in relation to a child who is 17, to take effect when or after the child turns 18.
(2) A court must not make a child maintenance order in relation to a child that extends beyond the day on which the child will turn 18 unless the court is satisfied that the provision of the maintenance beyond that day is necessary:
(a) to enable the child to complete his or her education; or
(b) because of a mental or physical disability of the child.
(3) A child maintenance order in relation to a child stops being in force when the child turns 18 unless the order is expressed to continue in force after then.
In Everett & Everett (2014) FLC 93-604, the Full Court, considering adult maintenance said, at 79,484:
47. We consider that the following propositions can be drawn from an analysis of the cases and the present legislation:
(a) it is not a necessary element, before adult child maintenance can be ordered, that there be a warm relationship between the parent and the child; and
(b)there should not be a practice in adult child maintenance applications of conducting a detailed examination of the relationship between the child and the Respondent; however
(c)it cannot be said that the attitude or behaviour of the child to the Respondent could, to use the language of s 66K(1)(e), never be a special circumstance which, if not taken into account in the particular case, would result in an injustice or undue hardship to any person.
48. However so stated, it is apparent that the task confronting a parent, who wishes to rely upon the filial relationship in determining what contribution should be made by them to the maintenance of the child, is a particularly difficult one. They would need to show that, if the filial relationship is not taken into account, it would result in an injustice or undue hardship to either them or someone else.
Further, their Honours said, at 79,485:
56. At [33] of these reasons, we have already set out the terms of s 66L(1). Importantly that section does not provide for a temporal limitation to be imposed on an order for adult child maintenance, but plainly, the court needs to be satisfied on the evidence before it that the maintenance ordered is necessary to enable the child to complete his or her education, or because of a mental or physical disability of the child.
It is agreed that G’s NDIS entitlement is not means tested.
The wife deposed that prior to the introduction of the NDIS, G was receiving a disability support pension which was paid fortnightly. The disability support pension is a means tested pension and is to be ignored for the purposes of the application for maintenance.
The National Disability Insurance Scheme (“NDIS”) benefits are not means tested.
In April 2017, the NDIS approved a plan for G which provides for the payment of expenses to service providers. G is approved to receive approximately $58,388.51 per annum for support services for the year ended 15 December 2017. As at the date of swearing the wife’s affidavit, G had used about $6,000 of this entitlement. The wife has not been told what the amount of the NDIS payment will be for the year ended 15 December 2018 but I am prepared to assume it will a similar amount to the current year.
The allowance is expected to be applied to:
· Assistive technology ($750) – identified technology needs;
· Improving daily living ($6,000) – allied health professionals including therapy and personalised training;
· Improved relationships ($2,633.55) – behavioural intervention;
· Support coordination ($2,100) – finding and co-ordinating service providers;
· Core supports ($43,404.96) – funding for daily personal care needs and domestic activities;
· Transport ($3,500) – paid fortnightly.
The wife deposed that G will finish school in December 2017 and that she proposes he attend an adult five day program from 9 am to 3 pm each week day (excluding travelling time). One of the possible providers is UV Group. The charges made by this organisation are $1,851 per week which includes transport, a one-on-one support worker and activity fees.
The wife proposes to be available to care for G outside the times he attends at the program.
The husband has not been consulted about this proposal.
In cross-examination, the wife said that she has investigated supported workplaces for G but that he would not be able to function in such an environment without one-on-one supervision and thus such a placement was unlikely.
I accept that G meets the criteria for adult maintenance.
As to G’s needs, the wife in her Financial Statement deposed to expenses totalling $2,958 per week. However, I accept that some of those expenses will be covered by the NDIS payment although no attempt was made on behalf of the wife to indicate which of those expenses would be covered.
I also accept that there was no evidence to establish that the activities and programs in which the wife has enrolled G are necessary for his welfare. The wife conceded in cross-examination that she alone had decided to enrol G in those activities. She did not give evidence of any specific benefit to G from those activities.
In relation to the proposed enrolment of G in the Day Program, there was no cross-examination of the wife in relation to the suitability of the program and it was clear from all of the evidence that some such supported program is necessary. However, the wife, in her Financial Statement, deposed at Note 60 that:
[G] may receive a reimbursement from the NDIS for fees incurred in relation to [G’s] Day Program, subject to an assessment and a review during sometime in December 2017.
I am also unable to determine whether some of the activities and programs in which G currently engages will be provided by the Day Program.
The wife’s estimate of G’s domestic expenses, such as food, utilities, clothing and the like, is $422 per week.
The state of the evidence does not enable me to find that G’s expenses will exceed that amount, once all of the NDIS payments have been taken into account.
The evidence in relation to G’s behaviour and the effects on his carers is plain. He is a large, strong young man who is becoming increasingly violent, particularly towards his mother, and increasingly difficult to manage. I have no doubt that the wife, with all her heart, wants G to live with her into the future, but I can have no confidence that this will be a practicable possibility. Other care arrangements may have to be instituted.
For those reasons, I propose to make an order that the husband pay lump sum maintenance for G which will represent a payment of maintenance for five years. I propose to set the weekly amount at $250 which will provide a small contribution to his non-domestic care.
The husband will pay a lump sum of $65,000.
COSTS OF THE SUPREME COURT PROCEEDINGS
This issue cannot be determined on the available evidence and no submissions were directed to it by the husband or the wife.
I propose to make directions for the filing of further material in relation to this issue only and to reserve my decision.
The amount which was paid to the purchasers by virtue of the proceedings in the Supreme Court was $90,258.
I propose to order that, from the entitlements of the husband pursuant to these orders, that $100,000 be held by his solicitors until that issue is determined.
I certify that the preceding five hundred and eighty-two (582) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 6 March 2018.
Associate:
Date: 6 March 2018
- AGLC
- Zubcic & Zubcic [2018] FamCA 129
- Case
- [2018] FamCA 129
- Decision Date
CaseChat Overview and Summary
The legal issues before the court included whether a transfer document should be set aside due to non est factum and unconscionable conduct, the existence and extent of a partnership between the husband and wife, whether either party had committed waste in their dealings with jointly owned property or partnership assets, the applicability of the presumption of advancement and the imposition of resulting or constructive trusts, the impact of family violence on contributions, and the entitlement to adult child maintenance. The court was required to determine the beneficial interests in various properties and the equitable accounting between the parties, considering outgoings and contributions.
Rees J found that the transfer document was void ab initio on the basis of non est factum and unconscionable conduct, setting aside the transfer. The court determined that a partnership existed between the husband and wife and that both had neglected their tax obligations, finding the wife liable for half the partnership tax. While the wife's claim of waste due to the husband's gambling was not substantiated, the court found the wife had committed waste in her duties as a trustee for sale. The presumption of advancement was rebutted, and the second respondent was found to hold a 12.5 per cent interest in a property by way of a resulting trust, with a constructive trust also being imposed. The court also ordered the husband to pay a lump sum for adult child maintenance. The wife's claim for spousal maintenance was dismissed.
The court made detailed orders regarding the distribution of funds from controlled monies accounts and the proceeds of sale of a property, including payments to the second respondent, various creditors, the husband, and the wife. Trustees for sale were appointed for another property, with specific directions for the application of sale proceeds. The court also addressed the costs of separate Supreme Court proceedings.
Orders
Orders of the court
IT IS ORDERED
1.
That each of the husband and the wife do all acts to cause Abrams Turner Whelan, Solicitors, to pay to Mr B Zubcic (“the second respondent”), from the controlled monies account (“the ATW account”) held for the husband and the wife, the sum of $768,877.
2.
That each of the husband and the wife and the second respondent do all acts and sign all documents necessary to cause T Solicitors, to pay to the second respondent the money held by them in the controlled monies account from the proceeds of sale of the property at Suburb L.
3.
That each of the husband and the wife do all acts to cause Abrams Turner Whelan, Solicitors, to pay, from the ATW account held for the husband and the wife, such of the following amounts, in order of priority, as have not been paid:
HH Pty Limited $16,223
J Pty Ltd $45,333 plus any interest incurred to the date of payment
U School $12,000
The wife $3,365
The wife $76,000
V & Associates $27,995.67
The husband $48,004
4.
That, in the event that any funds remain in the ATW account, after the payments in Order 3, the husband and the wife shall direct Abrams Turner Whelan to pay half of that amount to each of the husband and the wife. In the event that there are insufficient funds in the ATW account to make the payments to the husband and the wife referred to in Order 3, then the shortfall shall be borne by them equally.
5.
That the sum of $1,910 held by V & Associates on behalf of the husband and the wife is declared to be the property of the husband and shall be applied towards the costs of the husband owed to V & Associates, in addition to the payment referred to in Order 3.
6.
That the husband pay to the wife, by way of lump sum adult maintenance for G born … 1999, the sum of $65,000, such sum to be paid from the husband’s share of the proceeds of sale of the property at B Street, Suburb C.
7.
That the application of the wife for spousal maintenance be dismissed.
8.
That Mr W and Mr X of Y Chartered Accountants be appointed trustees for sale of the property at B Street, Suburb C (“B Street”) and the husband and the wife do all acts required to procure that appointment.
9.
That upon the sale of B Street, the trustees of sale shall apply the proceeds in the following manner and priority:
9.1 In payment of the costs of sale, including but not limited to the costs of the trustees for sale, agents’ commission, legal fees on the conveyance.
9.2 In payment of any amount of Capital Gains Tax in relation to B Street assessed against either the husband or the wife.
9.3 In payment of half of the amount remaining to the wife.
9.4 In payment to the wife of the sum of $294,494 less any sum she received pursuant to Order 3 from her share of the remainder of the ATW controlled monies account.
9.5 In payment of the sum of $65,000 to the wife by way of maintenance for G in accordance with Order 6.
9.6 In payment of the costs of Mr and Ms Gomes incurred in these proceedings in accordance with orders made on 1 March 2018.
9.7 In payment of the sum of $100,000 to the husband’s solicitors, to be held by them until the determination of the dispute over the payment of costs of the proceedings in the Supreme Court of New South Wales Case Number … and distributed in accordance with that determination.
9.8 In payment of the balance remaining to the husband.
10.
I grant liberty to the parties to apply on 7 days’ notice by arrangement with my Associate in relation to any issue with the implementation of these orders.
11.
That if any party refuses or neglects to sign within fourteen (14) days of a written request to do so any documents necessary to effect the terms of these orders a Registrar of the Sydney Registry of the Family Court of Australia is hereby appointed pursuant to the provisions of section 106A of the Family Law Act 1975 (Cth), to execute such documents on behalf of that party.
12.
In relation to the costs of the Supreme Court proceedings:
12.1 Within 14 days the wife shall file and serve an application and affidavit setting out the evidence upon which she seeks to rely.
12.2 The husband shall, within 14 days thereafter, file and serve a response and any affidavit material setting out the facts upon which he seeks to rely.
12.3 I note that a date for the hearing of submissions in relation to the issue of costs will be set once all material is filed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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