Coluzzi v Coluzzi

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1 HIS HONOUR: By her summons, the plaintiff seeks a declaration that her husband, the first defendant, holds his interest in the matrimonial home at 148 Newland Street Queens Park in trust for the plaintiff, or alternatively, subject to her equitable interests. 2 By consent, a second defendant was added to the proceedings. To explain how this happened, it is necessary to go into a little detail. 3 The plaintiff says, and it appears to be the fact, that the first defendant suffered a psychiatric breakdown in 1993. Since then, the first defendant has been substantially unable to contribute to family income and the plaintiff herself has made all necessary payments. 4 In January 1998, the first defendant allegedly assaulted the second defendant as a result of which the second defendant suffered severe injury. In Common Law proceedings 20292/98 the second defendant in the present proceedings was the plaintiff, and the first defendant and the plaintiff were the defendants. Barr J in those proceedings made orders limiting the ability of the then defendants from dealing with 148 Newland Street Queens Park, with the intent that the plaintiff in those proceedings should not be deprived of any verdict he might obtain from what appeared to his Honour to be one of the first defendant's few assets. When he became acquainted with the present proceedings, the second defendant sought to be joined, and with the consent of the plaintiff, was joined as a defendant in these proceedings. As might have been anticipated, he was the only true contradictor. 5 The relevant facts have been put forward by the plaintiff and can hardly be disproved. However, the plaintiff did not put before the Court the material that one would have expected in a case like this. There are very few documents before the Court, where documents might have been very helpful to ascertain what really did happen when various properties were purchased. Particularly in a case where all the evidence is in the plaintiff's camp and the first defendant is not actively contradicting the plaintiff, the Court becomes very suspicious when it does not have all the relevant material and must very strictly apply the rule that if the material is not supplied it must be because it cannot assist the plaintiff's case. 6 The plaintiff in her affidavit and during cross examination, indicated that the first home that she and her husband purchased, which they purchased as joint tenants, was at 14 Jellicoe Avenue Kingsford. The property was bought in their joint names for $285,000. The deposit was made up of joint savings of $10,000 and a gift from the first defendant's mother to the plaintiff of $20,000. The balance of $255,000 was borrowed on joint mortgage from the National Australia Bank. The parties moved into the property in about May 1991 and stayed for about two years. 7 The Kingsford property was sold for $332,000. The parties then purchased, jointly, 88 Dover Road Rose Bay, in 1993. The purchase price was $595,000. The mortgage was "rolled over" to account for the balance. It was a joint mortgage. 8 The plaintiff's father died in May 1990 leaving the plaintiff $702,120.88. However, this sum was invested in property and was only realized in about 1994, that is, after the purchase of the Rose Bay property. A large proportion of the sum was utilised in (a) renovations to Rose Bay; (b) reducing the mortgage so that at the time of sale of the property it was only $89,000; and (c) paying for the parties' living expenses at a time when they were both not working. Precisely what sums were devoted to categories (a), (b) or (c) was not told to me. 9 The current property at Queens Park was purchased for $647,000. Of this, $362,000 came from the sale of Rose Bay. The balance was made up with the aid of a joint mortgage from the National Australia Bank, which seems to be in the sum of $285,000. How it came about that a more expensive property was sold and yet the mortgage over the new property had to be increased, is not clear, but it would seem that it was because of the first defendant's gambling debts and the buying and selling of certain businesses by the plaintiff and first defendant. However, I am not given substantial information about this. Nor am I given the transfer of the property to the parties, or a copy of the mortgage. Other material shows that the transfer was T2635277 and that the current edition of the Folio Identifier was issued in November 1996 rather than 1997, which causes me to doubt some of the plaintiff's detailed evidence. 10 The plaintiff makes the broad statement in her affidavit that the first defendant "has made no capital contribution to the acquisition of the matrimonial property nor has he made any financial contribution to the conservation, maintenance or improvement of the said property." However, we do know that the first defendant at least made part contribution to the deposit of the Kingsford property and he was jointly liable with the plaintiff for the mortgage. 11 The plaintiff and the first defendant jointly appear as the registered proprietors of the subject property. Mr Atkin for the plaintiff, says that this case is governed by Calverley v Green (1984) 155 CLR 242. The rule is there stated that when two or more persons contribute to the purchase of property which is conveyed to them in their joint names, the equitable presumption is that they hold the legal estate in trust for themselves as tenants in common in shares proportionate to their contributions, unless the contributions are equal. 12 The authority of Calverley v Green is not to be doubted. However, it must be remembered that essentially the result of each case of this type depends on the intention of the parties. There is no presumption of advancement where a wife provides money for her husband's share in the matrimonial home (see Calverley v Green at p 247), so the position is not complicated in that respect. What one has to do is to find out the intention of the parties, who have made unequal contributions, as to what would be their equitable interest (Calverley v Green at p 251). 13 It seems to me that on the evidence before me the only likely intention of a husband and wife, who are happily living together and were subject to a joint mortgage and were involved in joint businesses, who had provided part of the deposit from their joint savings, is that they would hold equally. 14 That view is reinforced from the fact that ordinarily the Court looks to the intention of the parties at the time when they make the purchase. As the Privy Council said in Austin v Keele (1987) 10 NSWLR 283, 290, one can have the situation where a trust occurs at some time after the initial purchase of the property, but "It may be more difficult to prove the requisite intention in relation to property already held beneficially by the trustee." There is just no evidence at all on any event which occurred after the initial purchase of Kingsford to indicate that the intentions of the parties changed. 15 The high point of the plaintiff's case was the $702,120.88 that she inherited from her father. However, not only is there no evidence as to any conversation with the first defendant about the application of any part of this money to increase the plaintiff's beneficial interest in the property, there is the lack of detailed evidence generally as to how the money was applied and what evidence there is suggests that it was spent on renovations and living expenses, at least to a great degree. 16 The plaintiff's case seems to be that she in fact paid all the moneys due on the mortgage over the matrimonial home from 1993. However no evidence, other than the broad statement referred to in 10 above has been tendered. It is thus virtually impossible for the Court to find the facts which the plaintiff requires to support her proposition. 17 I should note that this case is distinguishable from cases such as Banks v Permanent Custodians Ltd [2001] NSWSC 61. In that case, parties purchased property as joint tenants to be used as their matrimonial home when they married. The couple never married; one party could show that it had put more into the property than the other party and the Chief Judge in Equity held that there was a resulting trust in accordance with their contributions. In the instant case the parties are husband and wife, there is no evidence that they intended other than to hold their matrimonial home equally and no evidence, of any substantial nature, was placed before the Court as to what in fact were the contributions made by the parties. Further, there was no evidence of any intention of the parties when the plaintiff paid more than her fair share of the current mortgage payments, that the payments were to alter the parties' equitable interests in the property. As I said at the close of the oral hearing, really this is a case that fails on the facts because of the paucity of evidence tendered by the plaintiff. 18 If the true method of approaching the problem is (not that counsel submitted that this was so), that there must be evidence to rebut the resulting trust, it would seem to me that the whole of the circumstances are sufficient in the present case so to rebut it. 19 The present case, accordingly, fails on its merits. 20 At the commencement of the hearing, Mr Atkin applied for the matter to be transferred to the Family Court of Australia because he submitted it is a matrimonial cause. Indeed he submitted that this Court had no jurisdiction to hear it. Mr Conomos, who appeared with Mr Kostapoulos for the second defendant, objected to this on a number of grounds, one being the very late making of the application, and secondly, because of the fact that his client had no wish to be involved in any matrimonial proceedings between the plaintiff and the first defendant. It turned out in cross examination that the plaintiff had no wish at all to divorce her husband and was merely intending to invoke the jurisdiction of the Family Court to hear and determine a matter of property arising out of the matrimonial relationship. 21 I put to Mr Atkin that it really would not matter whether I dismissed the present proceedings on the grounds that the Court had no jurisdiction, or dismissed them on the merits, because each would give rise to the same res judicata: see Pollnow v Armstrong [2000] NSWCA 245. In such a case one merely looks at the pleadings and the decision of the Court, not its reasoning. Mr Atkin did not concede this point, but he said that even if it was correct, that was an additional reason for transferring the matter to the Family Court. 22 In the light of the fact that the plaintiff can apply to the Family Court for an appropriate order under s 79 of the Family Law Act 1975 (or perhaps s 78) whenever she is advised to do so, and in view of the late application and the possible prejudice to the second defendant, it does not appear to me that it would be in the interests of justice to make such an order for transfer. 23 Mr Conomos makes no submission at all about lack of jurisdiction in this Court. He wishes the matter to be dealt with on the merits by this Court forthwith. 24 It is clear that Mr Atkin came into the matter very shortly before its hearing and that the present point occurred to him when he was preparing the case and it had probably not occurred to any previous lawyer involved in the case on behalf of the plaintiff. The matter having been drawn to the attention of the Court, the Court needs to deal with the point. 25 The problem arises because of paragraph (ca) of the definition of "matrimonial cause" in s 4 of the Family Law Act 1975. That definition reads: "Matrimonial cause means - (ca) proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings - (i) arising out of a marital relationship …". 26 Section 39 of the Family Law Act permits a matrimonial cause to be instituted in this Court. However, s 40(3) provides that the Governor General may by proclamation fix a date as the date on and after which matrimonial causes may not be instituted in or transferred to the Supreme Court of a State. A proclamation made by the Governor General on 27 May 1976 excluded jurisdiction in matrimonial causes within paragraphs (a), (b), (c), (d), (e) or (f) of the definition of "matrimonial cause" from State Supreme Courts other than as specified. This proclamation does not affect the present proceedings. However, by a further proclamation of 23 November 1983, no matrimonial cause within s 39(5)(a) of the Family Law Act may be instituted in the Supreme Court of NSW. 27 No argument has been addressed on the validity of this second proclamation. It is, of course, clearly arguable that it is just not open to the Governor General to completely deprive a Supreme Court of jurisdiction which has been invested by an Act of Parliament and that s 40(3) must be read down accordingly. I will, however, assume that the proclamation is valid. 28 The question then arises as to whether these proceedings are in fact a matrimonial cause within paragraph (ca) and if they are, what is the effect of the plaintiff instituting such proceedings in breach of the Family Law Act. 29 The proceedings are obviously proceedings with respect to the property of the parties to the marriage because the plaintiff and the first defendant are marriage partners. The vital question is whether the proceedings are proceedings "arising out of the marital relationship". 30 In Re Aldred (1984) 9 Fam LR 539, 542, Nygh J said of this phrase: "That is one of those magnificent terms which the draftsman has invented and which has plagued us ever since. It is not a term in respect of which a ready definition occurs." 31 In Re Farr (1976) 2 Fam LR 11,300, Murray J said that she agreed that events which raise issues of criminal law, industrial law or fiscal law cannot be brought within the marital relationship simply because the circumstances involve a husband and wife and their children. But she then said: "But as I read the Family Law Act, its linchpin is marital breakdown or marital difficulties. The Act is designed to provide remedies as between husband and wife in relation to any disputes that arise as a result of marital difficulties, and this in many cases regardless of whether or not proceedings for dissolution can be or, for that matter, should be commenced. It appears to me that the moment that the marital difficulty or breakdown occurs, events thereafter involving disputes between husband and wife arising because of that difficulty or breakdown must be circumstances which arise out of the marital relationship whether or not fiscal, property, criminal or some other area of law is involved; but the spouses must be able to find their remedies within the boundaries of the Family Law Act, eg on these criteria a road negligence claim as between an estranged husband and wife could not be dealt with under the Family Law Act." 32 In Re Aldred Nygh J took the reasoning in that decision to mean that there was a dichotomy between claims which could only arise out of the Family Law Act because of a marital relationship, as opposed to where a claim may arise between parties who have been husband and wife, but the claim arose out of the general law. 33 Mr Atkin put to me that it was irrelevant that the parties had not separated and that it was quite in order for the Family Court to make orders with respect to the parties' property before separation. He cited Jennings v Jennings (1977) 22 Fam LR 510 and Landerer v Abeles (Moore J, 8 December 2000). In the former case jurisdiction appears to have been conceded. In the latter case, all the learned Judge said was "I think there is jurisdiction to hear proceedings between parties to a marriage with respect to their property though they have not separated. It derives not from their separation, but from their marriage". I do not consider that either of these cases affects the result of the present one. 34 One might think that in the instant case the marital relationship was irrelevant to the claim being made by the plaintiff because what she is saying is that this case must be treated in the same way as a case between strangers, where the contributions are in fact made in unequal proportions. The claim thus did not arise out of the marital relationship in the light of the above tests. 35 However, there are some dicta which tend in the other direction. Thus, in Re Savage and Hodgson (1982) 46 ALR 198, 205, the Full Family Court seemed to think that where there were proceedings which related to the jointly owned former matrimonial home of parties, acquired by them during the course of the marriage and which one of the parties to that former marriage continues to occupy, then the relevant proceeding arises out of the relationship and not simply out of the circumstance that the parties are co-owners of the real estate. 36 In McNeill v McNeill's Transport Pty Ltd (1985) 81 FLR 26, I said at p 27: "If the proceedings relate to the matrimonial home then one may infer that they arise out of the marital relationship, but if the property being dealt with is some other species of property, such as property which is being used in trade or commerce, then I do not believe that one can infer merely from the facts of marriage or from the fact that one party says but for the marriage he would not have entered into a commercial relationship with the other party is sufficient to establish the fact that the property dispute arises out of the matrimonial relationship."

I then went on to say that it is for the person who wishes to allege that the Supreme Court has no jurisdiction to establish that fact by evidence (at p 28). 37 I should note that in R v Dovey; Ex parte Ross (1979) 141 CLR 526, 532-3, the High Court declined to give a comprehensive statement as to the meaning of the words "circumstances arising out of the marital relationship", but noted that they were wide words and approved what Demack J said in Re Mills (1976) 25 FLR 433, 435 that the mere fact that something happens between a husband and wife is insufficient. 38 The words I used in McNeill's case should not be read as meaning that the inference must be made that something arises out of a marital relationship if the dispute is over the matrimonial home. The thrust of the passage is that where the dispute is not over the matrimonial home the inference is harder to draw. Circumstances may mean that the inference should not even be drawn in the case of a matrimonial home. I do not read the passage in the Full Family Court's judgment in Re Savage and Hodgson (supra) as saying anything else. 39 One must always look at the circumstances of each particular case. In the instant case there is absolutely nothing with respect to the breakdown of the matrimonial relationship (indeed it has not broken down), or the material upon which the plaintiff relies, to say that there is a trust. Her claim would be exactly the same if the other co-owner of the property was a complete stranger. Accordingly, in my view the proceedings do not arise out of the marital relationship and are not a matrimonial cause. 40 I should note that the tendency has been, in respect of disputes involving a third party with property which is co-owned by husband and wife, to say that the dispute does not come within paragraph (ca) of the definition. It is true that the third party may intervene in the Family Court proceedings, but forensically that may not be a wise move to make. A third party is entitled to have his, her or its rights to property tried in the ordinary courts of the land, notwithstanding that one of the opponents may be a married person. Examples are Re Garmonsway [1986] FLC 91-746 and Powell J's decision in Official Trustee in Bankruptcy v Ritchie (1988) 12 NSWLR 162. 41 One of the reasons why those cases were decided the way they were has to do with the definition of the word "property" in s 4 of the Family Law Act. This definition, which, of course, governs paragraph (ca) is that property means "property to which those parties are, or that party is …. entitled, whether in possession or reversion." 42 There has been considerable debate in the Family Court and elsewhere as to just what is covered by this definition. In Re Duff (1977) 29 FLR 46, the Full Family Court took the view that the term included choses in action and should be considered comprehensively to deal with all possible interests in property. However, property must be existing property and not a mere right to claim property: Kuckucka v Kuckucka [1980] 2 NSWLR 655, 659. Thus property which is now vested in the Official Receiver is not the existing property of the parties to the marriage: Official Trustee in Bankruptcy v Ritchie (supra). 43 There is a lot to be said for the proposition that no equitable interest in property, except perhaps a bare equitable fee simple, is "property" within the Family Law Act. However, there are some dicta against this proposition. For instance, Kearney J, in this Court in Kuckucka's case considered that a mere equity might be property (see para (15) on p 658) and in Mullane v Mullane (1983) 158 CLR 436, 445 the High Court said that, at least within s 79, property means legal or equitable interests in the property of the parties or either of them. 44 However, until an equitable interest arises, there is no "property" within the Family Law Act definition; see Re Komaromi (1976) 27 FLR 513. Although this decision was later overruled by the Full Family Court in Re Duff, it seems to me that it remains authority for this proposition. 45 Accordingly, when one gets a situation where the plaintiff is seeking a declaration not that an equitable interest exists, but rather that the Court should, by way of remedial constructive, or remedial resulting trust constitute such an interest, the suit does not involve the property of a party to a marriage, at least in so far as the property to be the subject of the remedial constructive, or remedial resulting trust is concerned. 46 Because of my decision on other aspects of the case, it is not necessary in the present case to work out whether the Court is in this matter asked to declare the existence of a trust or alternatively to constitute a trust by way of remedy. It is clear, however, from cases such as Re Garmonsway, that for the purpose of s 78 of the Family Law Act it is only rarely where there is an existing piece of property actually vested in one of the parties that the Court could make a declaration. In any event, the power under s 78 to make a declaration when third parties are involved is limited; see Re W (1982) 8 Fam LR 323. 47 Accordingly, in my view the jurisdictional point taken by counsel for the plaintiff, at the last moment, that the Court should not listen to the plaintiff's case but rather transfer it to the Family Court has no merit. 48 Accordingly the proper order is that the proceedings be dismissed. The time for an appeal is extended for 28 days from the delivery of these reasons. 49 As to costs, Mr Atkin submitted that there should be no costs payable by his client to the second defendant. Mr Atkin says the second defendant came into this case at his own volition; the plaintiff was quite content just to sue her husband. The answer to this is twofold. First, the Court would not countenance a "dummy suit" against a husband who would not be likely to wish to resist the plaintiff, and secondly, that the only real issue was with the second defendant, who would be bound by the suit, and the second defendant was joined with the consent of the plaintiff and has been the only contradictor in the suit. Accordingly the plaintiff should pay the second defendant's costs of the suit. 50 It is of course, open for the plaintiff now to approach the Family Court. However, she must be aware that any "sweetheart deal" done to vest the husband's interest or part thereof in her will be liable to be set aside by this Court under s 37A of the Conveyancing Act 1919 or otherwise. She will also have the problem, a problem that I have also taken into account when considering whether to transfer this suit, that the authority of the Family Court, a Commonwealth Court, to command a State official, the Registrar General, to make an alteration in the Register Book is questionable.

Last Modified: 03/02/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.