ACT CIVIL & ADMINISTRATIVE TRIBUNAL

IZZARD & ANOR v IZZARD & ANOR (Civil Dispute) [2017] ACAT 47

XD 974/2016

Catchwords: CIVIL DISPUTE – debt application – consent orders between the respondents in relation to financial matters in Family Court of Australia – applicants did not intervene in Family Court proceedings – unsecured interest free loan from applicants to respondents during marriage – whether family law property dispute - whether oral agreement between parties was to forgive or suspend repayments – factual dispute

Legislation cited: ACT Civil and Administrative Tribunal Act 2008 ss 16, 22, 36Family Law Act 1975 (Cth) ss 4, 79, 81, 90AA, 90AD, 90AE

Subordinate Legislation: Court Procedure Rules 2006 r 3740

Cases cited: AF Petersens & AF Petersens (1981) FLC 91-095Biltoft & Biltoft (1995) FamCA 45Birtcher & Bircher and Anor [2016] FamCAFC 123C and B [2005] FamCA 94Duff v Duff (1977) FLC 90-217Farmer v Bramley (2000) FLC 93-060Jones v Skinner (1835) 5 L.J. Ch. 87Maddock v Maddock & Anor (No.2) [2011] FMCAfam 1340Pelly v Nolan [2011] FMCAfam 530T & T (Pension Splitting) (2006) 35 Fam LR 181

Tribunal: Presidential Member E Symons

Date of Orders: 27 June 2017Date of Reasons for Decision: 27 June 2017

AUSTRALIAN CAPITAL TERRITORY )CIVIL & ADMINISTRATIVE TRIBUNAL ) XD 974/2016

BETWEEN:

MAXWELL IZZARD First Applicant

RHONDA IZZARDSecond Applicant

AND:

SACHA IZZARDFirst Respondent

BRETT IZZARDSecond Respondent

TRIBUNAL: Presidential Member E Symons

DATE: 27 June 2017

ORDER

The Tribunal orders that:

1. The application is dismissed.

………………………………..Presidential Member E Symons

REASONS FOR DECISION

1. Maxwell Izzard (the first applicant) and Rhonda Izzard (the second applicant)

are the parents of Brett Izzard (the second respondent). In December 2011,

when the second respondent was married to Sacha Izzard (the first

respondent), the first and second applicants (the applicants) entered into an

oral agreement to loan $24,965.40 (the loan) to the first and second respondents

to purchase a new car. The loan was unsecured, for a three year term and was

interest free. The first respondent repaid the loan by fortnightly instalments of

$320 until February 2013. The repayments totalled $9,600.00.

2. The first and second respondents, with the oral agreement of the applicants,

ceased the fortnightly instalment payments after 15 February 2013. The amount

outstanding under the loan at this time was $15,365.40.

3. The parties are in dispute as to the terms of the agreement which led to the first

and second respondents ceasing the fortnightly repayments.

4. The first and second respondents separated on 24 May 20131 and entered into

negotiations for a financial settlement. On 18 November 2013 the second

respondent executed terms of settlement under the Family Law Act 1975. The

first respondent executed the terms of settlement on 13 December 2013. An

application, signed by the first and second respondents, to the Family Court of

Australia for consent orders was lodged on 17 December 2013. On

20 December 2013 the Family Court of Australia made the following consent

orders in CAC 1982/2013:

That orders, declarations and notations made in terms of the attached document entitled “Terms of Settlement”, marked “Exhibit 1” as attached hereto and placed on the Court file.

That all outstanding applications be dismissed.

5. The first and second respondents divorced in April 2015.

6. On 18 July 2016 the applicants sent, by email, a letter of demand to the first

respondent for $7,500 being “half of this loan”.1 Application for consent orders filed in Family Court of Australia on

17 December 2013 at [8]

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7. Legal Aid ACT replied to this letter of demand on behalf of the first respondent

on 20 July 2016 and stated “Please be advised that Ms Izzard disputes the

existence of the Debt, on the basis that it was forgiven and discharged.”

8. The applicants sent a final letter of demand to the first respondent on 2 August

2016 in which they stated:

… We hereby demand that you pay us the outstanding amount of $7,682.70 each being half of the outstanding loan on or before 30th of August 2016. …(sic)

The Proceedings

9. The applicants filed a civil dispute application on 7 September 2016 against the

first respondent seeking $7,682.70; interest from 1 January 2014 in accordance

with the Court Procedures Rules 2006 and ACT Civil and Administrative

Tribunal Procedural Directions 2010 (No 1) and the filing fee of $145.00.

10. The first respondent filed her response on 4 October 2016 in which she disputed

the existence of the debt on the basis that it was forgiven and discharged.

11. In compliance with the directions made on 16 November 2016 the applicants filed

an amended application on 15 December 2016 in which they sought to include

Brett Izzard as a respondent and to claim $15,365.40 from both of the

respondents.

12. Orders were made in chambers joining Brett Izzard as second respondent on

16 December 2016.

13. The matter was heard on 3 March 2017. Mr Pasi, solicitor with Prudential Legal

Solutions, appeared for both applicants. The first respondent and the second

respondent represented themselves. All parties gave evidence and were cross

examined. The following documents were marked as Exhibits:

Exhibit A1 Maxwell John Izzard’s response to first respondent filed

6 February 2016

Exhibit A2 Rhonda Izzard’s response to first respondent filed 6 February

2016

Exhibit A3 The applicants’ Commonwealth Bank of Australia bank

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statements from 12 December 2011 to 11 June 2013

Exhibit A4 Six pages of correspondence between the applicants and the

first respondent dated 18 July 2016, between Legal Aid ACT

and the first applicant dated 20 July 2016; between the second

respondent and the first respondent dated 20 July 2016; from

the first applicant to Legal Aid ACT and the first respondent

dated 18 July 2016; and from the applicants to the first

respondent dated 2 August 2016

Exhibit R1 The first respondent’s response and attachments filed

4 October 2016

Exhibit R2 Letter from Legal Aid ACT to first applicant dated 20 July

2016

Exhibit R3 First respondent’s witness statement dated 19 January 2017

and attachments

Exhibit B1 Witness statement second respondent dated 4 February 2017

Exhibit B2 Two pages of second respondent’s Commonwealth Bank of

Australia bank statements from 5 November 2015 to

12 January 2017

14. At the conclusion of the hearing Mr Pasi requested the opportunity to file written

submissions in relation to the Tribunal’s jurisdiction. The Tribunal made the

following orders:

1. Applicants to file and serve submission in relation to the Tribunal’s jurisdiction in this matter by close of business 15 March 2017;

2. Respondents to file any submissions in reply to the Applicants’ submissions, by close of business 24 March 2017.

3. Decision Reserved.

15. This is the Tribunal’s decision.

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Jurisdiction

16. The Tribunal is a statutory body established by the ACT Civil and Administrative

Tribunal Act 2008 (ACAT Act) and only has such jurisdiction and powers as

are conferred on it by the legislature. The Tribunal’s jurisdiction to hear civil

disputes is set out in Part 4 of the ACAT Act. A ‘civil dispute’ is defined in

section 16 of the ACAT Act, relevantly, as follows:

civil dispute means a dispute in relation to which a civil dispute application may be made.civil dispute application means an application that consists of 1 or more of the following applications:

...

(c)     a debt application;

…

17. Section 22 of the ACAT Act provides that the tribunal has, in relation to civil

dispute applications, the same jurisdiction and powers as the Magistrates Court

has under the Magistrates Court Act 1930, part 4.2 (Civil Jurisdiction).

18. Section 36 of the ACAT Act provides that the tribunal must hear each application

made to it.

19. The applicants allege that the respondents are indebted to them in the sum of

$15,365.40. While the tribunal generally has jurisdiction to hear civil disputes

up to $25,000 the facts of this matter concern an unsecured, interest free loan

made by the applicants to the respondents during their marriage and a dispute

between the parties as to what the terms of the agreement were in February

2013 which resulted in the loan repayments ceasing.

20. As stated in [4] above the respondents negotiated a financial settlement and orders

were made by the Family Court of Australia under the Family Law Act 1975

(FLA) giving effect to their agreement on 20 December 2013. The applicants

did not intervene in the family law proceedings; the alleged debt the subject of

this application was described in the application for consent orders as “a

$15,000 financial contribution made by the applicants” and not as a liability of

the respondents.

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21. A preliminary issue for determination is whether the application is a family law

property dispute which should have been determined pursuant to the FLA. If so,

then the tribunal would not have jurisdiction to determine the application.

Agreed Facts

22. The parties agreed that:

(a) the applicants loaned $24,965.40 to their son, the second respondent, and

his wife, the first respondent, in December 2011;

(b) the loan was for three years and was interest free;

(c) the loan was not secured;

(d) it was not recorded in writing;

(e) at the time of the loan the first and second respondents were married;

(f) the first respondent paid the fortnightly repayments of $320 from

9 January 2012 until 15 February 2013, totaling $9,600;

(g) the amount outstanding under the loan at 15 February 2013 was

$15,365.40;

(h) the applicants agreed to the respondents stopping the fortnightly

instalment payments after 15 February 2013. This agreement was not

recorded in writing and the terms of this agreement are in dispute;

(i) the first respondent and the second respondent separated on or about

24 May 2013 and divorced in April 2015;

(j) after separation and during 2013 the first respondent and the second

respondent negotiated a financial settlement and on 20 December 2013 the

Family Court of Australia made consent orders in proceedings

CAC 1982/2013;

(k) the applicants did not seek legal advice in relation to their loan to the

respondents and the financial proceedings between the respondents in the

Family Court of Australia; they did not seek to intervene in those

proceedings; and

(l) on 18 July 2016 the applicants sent a letter of demand to the first

respondent for $7,500 being “half of the loan”.

The preliminary issue

23. Property is defined in section 4(1) of the FLA, which states:

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property means:(a) in relation to the parties to a marriage or either of them—

means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion; or

24. The Full Court of the Family Court in Duff2 approved the definition of property

used in the 1835 English case of Jones v Skinner3 – “Property is the most

comprehensive of all terms which can be used in as much as it is indicative and

descriptive of every possible interest which the party can have.”

25. Pursuant to section 90AD of the FLA, a debt owed by a party to a marriage is to

be treated as property.

26. Section 79 of the FLA provides for the alteration of property interests between

parties to a marriage. Subsection (1) provides:

79 Alteration of property interests

(1) In property settlement proceedings, the court may make such order as it considers appropriate:(a) in the case of proceedings with respect to the property of the

parties to the marriage or either of them—altering the interests of the parties to the marriage in the property; or

(b) in the case of proceedings with respect to the vested bankruptcy property in relation to a bankrupt party to the marriage—altering the interests of the bankruptcy trustee in the vested bankruptcy property;

including:(c) an order for a settlement of property in substitution for any

interest in the property; and(d) an order requiring:

(i) either or both of the parties to the marriage; or(ii) the relevant bankruptcy trustee (if any);

to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.

27. Section 79(10), which provides for a creditor of a party to proceedings to become

a party to the proceedings, provides:

2 Duff v Duff ( 1977) FLC 90-217 3 Jones v Skinner (1835) 5 L.J. Ch. 87, 90

7

(10) The following are entitled to become a party to proceedings in which an application is made for an order under this section by a party to a marriage (the subject marriage):(a) a creditor of a party to the proceedings if the creditor may not

be able to recover his or her debt if the order were made;

28. The Court’s power under section 79(1) of the FLA is to alter the parties’ interests

in all of their property, regardless of when and how it was acquired and whose

name it is owned.4

29. Part VIIIAA of the FLA provides for orders and injunctions binding third parties.

It states:

90AA Object of this Part

The object of this Part is to allow the court, in relation to the property of a party to a marriage, to:(a) make an order under section 79 or 114; or(b) grant an injunction under section 114;

that is directed to, or alters the rights, liabilities or property interests of a third party.

30. Section 90AE of the FLA provides that the Court can make orders under section

79 binding on third parties. A copy of section 90AE is set out at the end of this

decision. If the Court makes an order binding on a third party, pursuant to

section 90AE(3)(c) of the FLA, that party must be afforded procedural fairness.

31. As part of any property settlement, courts exercising jurisdiction under the FLA

need to determine, among other things, the assets, liabilities, financial resources

and all relevant contributions of the parties to the marriage in determining

whether it is just and equitable to alter the parties’ interests in their property.

The liabilities may include debts alleged to be owed to extended family

members. In such cases the court is required to assess the proper

characterisation of the advance, i.e. whether it is a loan or a contribution to one

of the parties.

32. It is apparent from an overview of cases under the FLA that, while there is no

clear legislation as to whether an advancement from a parent should be

considered a repayable loan or a financial contribution in the form of a gift, the 4 Farmer v Bramley (2000) FLC 93-060

8

law recognises the category of debts owed to relatives as contentious liabilities

when considering the asset pool available for distribution by the parties in

proceedings under the FLA. The Tribunal sets out examples of the Court’s

approach in cases which relate to this category of debts.

33. In AF Petersens & AF Petersens5 the father of the husband had advanced money

to the family company, which in turn purchased land and allegedly advanced

money to the husband and wife to reduce their liabilities under a farming

partnership.

34. In proceedings in the Family Court Justice Nygh considered whether he possessed

jurisdiction to determine the nature and extent of the alleged indebtedness of the

company to the husband’s father and of the partnership to the company. He

said:6

It is fairly common in this court to meet a situation where a parent has made a loan to a child which is in all respects legally enforceable, but which is not in fact enforced and would not really be expected to be enforced. It is no doubt an “obligation” but if the obligation is not likely to have to be met, it should not be taken into account.

35. In Biltoft & Biltoft7 (Biltoft) the Full Court of the Family Court discussed the

courts’ usual approach to assessing secured and unsecured liabilities. The case

concerned liability to an unsecured creditor where the quantum of liability was

uncertain and the creditor had been informed of the proceedings and given

evidence at the hearing before the trial judge but had made no attempt to

recover liability before the hearing and did not seek to intervene or to seek a

stay of the orders. The Full Court of the Family Court established the principle

that some debts may be disregarded in some cases when it stated:

[63]There is no requirement that the rights of an unsecured creditor or a claim by a third party must be considered and dealt with prior to the Court making an order under section 79, nor is there a rule of priority as between a creditor claimant and a spouse. Those rights, however, cannot be ignored. They must be recognized, taken into account and balanced as against the rights of the spouse. That was the approach adopted by the trial judge. In this case there are uncertainties surrounding the debt,

5 (1981) 7 Fam LR 4026 Ibid at 4137 Biltoft & Biltoft (1995) FamCA 45

9

including the reluctance of Mr Horrocks to negotiate as to an amount, to institute proceedings for its recovery or to seek a stay of the proceedings in this Court. These factors must form part of the balancing of equations.8

[64] There is an obligation on both parties to disclose any significant creditors or any significant claim against either of them by a third party. If, as a result of the order of the Court in the property proceedings, the ability of a creditor or claimant to recover his or her debt or claim is likely to be affected, notice of the Family Court proceedings must be given to that creditor or claimant. He/she may then intervene in the Family Court proceedings and either seek a stay of those proceedings or some appropriate order which recognises his/her rights.9

36. In the decision of the Family Court in T & T (Pension Splitting)10 Watts J had to

determine whether an amount $26,000 was owed by the parties to the husband’s

brother and, if so, how that liability should be treated. He applied Biltoft and

said:

[79] In that case the Full Court recognised that generally unsecured liabilities would be deducted from the value of assets when ascertaining the value of a property pursuant to the provisions of Section 79 Family Law Act. [80]The Court goes on to say that notwithstanding that general practice there is a discretion not to take into account or to discount the value of an unsecured liability in certain circumstances. Circumstances in which the liability would not be taken into account is if it was vague or uncertain, if it is unlikely to be enforced or if it was unreasonably incurred.Watts J accepted the evidence of a loan being repayable by the husband to his brother in light of their involvement together in a family concern. This evidence included a loan account, interest payments and evidence given by the creditor himself that the debt, which had been at call, was now being called in.

37. In the Family Court decision of C and B11, Bryant CJ considered whether money

advanced from a parent should be treated as a loan or gift and held:

77. The advance does not have the characteristics of a loan. In particular there is:-• No interest payable• No re-payments required• No time for capital re-payment

78. The husband has not made any payment of capital nor is there any evidence that he intended to do so in the foreseeable future. Furthermore,

8 (1995) FamCA 45 at [63]9 Ibid at [64]10 (2006) 35 Fam LR 18111 [2005] FamCA 94

10

the reference to taking it into account as a distribution from the estate of either parent on their death suggests their character of an early distribution of his share of the parents estate and I find that that is how it was intended by the husband and his mother and therefore should be treated as a contribution on behalf of the husband and not as a loan.

38. In Pelly v Nolan12, the Full Court of the Family Court dealt with the classification

and quantification of four payments of monies given to the husband by his

father. The husband claimed the monies were a loan; the wife contended they

were advanced by the father without any real intention of repayment and should

be classified as a gift. The payments were $250,000 recorded in a loan

agreement with specified times for repayment and interest rates and which the

husband had made payments towards and $70,000, which the Court recognised

as being an additional advance of the monies pursuant to the original loan

agreement. These two loans were registered in a trust loan account. The Court

found, on the balance of probabilities, it was likely that the husband would have

repaid the loan and would be in the position to do so.

39. Therefore, the sum of $320,000 ($250,000 + $70,000) was considered a liability

of the marriage and included in the property pool as a liability which the

husband was responsible to pay. The Court found that there was no intention for

interest on the loan to be repaid and did not include interest in the quantum of

liability. In relation to the third and fourth payments, $101,000 for living

expenses and $74,000 for other expenses, including purchase of a motor vehicle

and renovations to the properties purchased by the husband, the Court found

these amounts were not loans but gifts given there was no finding that the

advanced monies were intended to be repaid.

40. In Maddock & Anor13, the husband’s father gave the parties $240,000 towards the

cost of buying and building a house. The husband’s father intervened in

proceedings between the husband and the wife. The father sought repayment of

the $240,000. The wife denied there was a loan and asserted the $240,000 was a

gift. In assessing the proper characterisation of the advance the Federal

Magistrates Court found that there had been no formality for the advancement

of the funds, no term of repayment, no demand for repayment until separation

12 [2011] FMCAfam 53013 (No 2) [2011] FMCAfam 1340

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and no capacity to pay. On the evidence given to the Court it was decided that if

the parties had not separated, the father would never have asked for repayment

of the funds. Therefore, the sum of $240,000 was considered a gift and was not

required to be repaid.

41. In the recent decision of Bircher and Anor14 the Full Court of the Family Court

considered an appeal from a decision of the Federal Circuit Court of Australia in

a matter where the wife had alleged that the loans and the mortgages said to

secure them were shams. The Full Court determined that there was an absence

of findings by the trial judge on the evidence in relation to the primary issues –

including centrally, the bona fides of the loans and mortgages, and if bona fide,

their terms and how any such liabilities should be shared by the husband and the

wife. The Full Court allowed the wife’s appeal and remitted the matter to the

Federal Circuit Court of Australia for rehearing.

42. While the applicants, as third parties, do not have a right under the FLA to initiate

proceedings, once proceedings are commenced, third parties are entitled to

become parties in those proceedings.

43. I have considered Mr Pasi’s submissions and the applicants’ evidence as to why

they did not take appropriate action when the respondents’ were negotiating

their financial settlement in 2013.

44. Mr Pasi submitted that the applicants could not initiate proceedings in the Family

Court to recover the debt:

…mainly because the divorce proceedings between the two respondents was acrimonious and my clients did their best to stay clear of from the proceedings… My clients had no way of knowing and they had no control over whether or not the parties declared the debt owing to them in the course of those property proceedings.15

45. The second applicant said that she did not consider being part of the respondents’

property settlement; she did not think it was their place to intervene and did not

think about getting legal advice stating “I don’t know why we would need legal

advice.”

14 [2016] FamCAFC 12315 Applicant’s submissions filed 16 March 2017 pages 3, 4

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46. The first applicant said he had verbally discussed the repayment of the monies

many times with his son, the second respondent, during his and the first

respondent’s settlement negotiations. He said that the second respondent had

told him every time he raised the loan with the first respondent, their

negotiations ceased. The second respondent said his parents had discussed the

alleged loan with him on a number of occasions during the financial settlement

discussions.

47. I do not accept Mr Pasi’s submission (in [44] above). The first applicant’s

evidence in the previous paragraph satisfies me that he knew from discussions

with his son that the alleged loan was in dispute. He could have sought legal

advice rather than continuing the discussions with his son.

48. I do not accept the applicants’ evidence that they had no way of knowing nor did

they have control over whether or not the respondents declared the debt owing

to them in the property proceedings. While the fact that the second applicant

witnessed the second respondent’s signature on the terms of settlement annexed

to the consent orders does not, of itself, mean that the second applicant read the

terms of settlement, given the fact that the second respondent said his parents

had discussed the alleged loan with him on a number of occasions I am satisfied

and find, on the balance of probabilities, that they also were aware that it was

not being included in the consent orders.

49. I am satisfied that there was no legal impediment to the applicants obtaining their

own legal advice if they genuinely believed that the respondents were indebted

to them. A solicitor engaged by them could have written to the respondents and

raised the loan during the financial settlement discussions. These discussions

continued for approximately six months. While the formal involvement of the

applicants in the property negotiations may have further contributed to what

they saw as acrimonious proceedings between the respondents, section 90AD of

the FLA provides for their alleged debt to be treated as ‘property’ in family law

property proceedings. Their failure to take legal advice does not excuse them for

not pursuing the alleged debt through proper legal channels. Civil proceedings

in the tribunal are not a back stop for parties who, for whatever reason, do not

pursue, in this case, their ‘property’ claim under the FLA.

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50. Having considered all of the evidence and submissions and for the reasons set out

above, I find that the application brought in the tribunal concerned family law

property.

51. Accordingly, the tribunal does not have jurisdiction.

52. While this decision will result in the tribunal dismissing the application for lack of

jurisdiction, should I have erred in reaching this decision, I will consider the

evidence before me and determine the main issue – what were the terms of the

agreement on 15 February 2013 in relation to the respondents stopping the

repayments?

What were the terms of the agreement on 15 February 2013?

53. There is a factual dispute between the parties as to whether the loan was

suspended in February 2013, as claimed by the applicants and the second

respondent, or was forgiven as claimed by the first respondent. This requires me

to consider the evidence of the parties at the hearing in relation to these

discussions as well as the documentary evidence. If I find that the loan was

forgiven, then the application will be dismissed.

Contentions

The applicants

54. The applicants contend that they agreed to the respondents suspending the

repayments after 15 February 2013 and assert that at no time did they forgive or

gift the debt to the respondents.

55. As the loan has not been repaid in full, the applicants submit that the respondents’

property settlement pursuant to the FLA does not extinguish the applicants’

rights, as creditors, to recover the money owed to them in these proceedings. In

support, the applicants assert that, while there is provision in the FLA for third

parties to register their interest, there is no provision that extinguishes that right

if it is not exercised during the property settlement proceedings.

The first respondent

56. The first respondent contends that in February 2013 the second respondent told

her his parents had said that they did not have to repay the loan. She understood

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that the applicants had forgiven the loan repayments and discharged the loan.

She seeks that the application be dismissed.

57. The first respondent contends that a few days after being informed by the second

respondent that his parents had forgiven the loan, she personally thanked both of

the applicants. At this time the applicants spoke of helping the second

respondent’s sister and wanting to do the same thing for the first and second

respondents.

58. The first respondent further contends (see [81] below) that the second respondent

was behind the applicants seeking to recover the loan in July 2016 as a result of

the first and second respondents having an acrimonious disagreement in July

2016 over payment of $32.00 phone credit for their daughter.

59. The first respondent denies the applicants’ claim that they suspended the loan

payments in February 2013 with the proviso that if and when they needed the

money the remainder of the loan would be repaid and further denies that the

alleged conversation to this effect occurred.

60. The first respondent refers to and relies on the joint application to the Family

Court of Australia for consent orders.

The second respondent

61. The second respondent contends that his parents, the applicants, did agree to the

repayments ceasing in February 2013 but did not forgive repayment of the loan.

He said they said “that the loan would have to be repaid if and when it was

required.”16

62. He also contended that the loan was discussed on a number of occasions during

the financial settlement between he and the first respondent and that he and his

parents had raised the loan with the first respondent on numerous occasions

“over the past few years.”17

63. The second respondent said in his witness statement:

16 Second respondent’s witness statement dated 4 February 2017 at [6]17 Ibid at [10]

15

15. The consent orders place the $15,000 as a contribution. It is not attributed to either myself or Sacha nor is the money received from an inheritance. We have both signed that we had no debts even though we were both aware of the outstanding debt to my parents. We equally shared in that contribution during the financial settlement and should now equally share in the repayment of that debt.

16. If the debt was to a banking institution rather than my parents we would be equally responsible to repay that debt.

64. The second respondent seeks that the debt be attributed equally between himself

and the second respondent and that if orders are made for the payment of the

filing fee and legal costs that they be payable by the first respondent as he “has

accepted the debt and have already repaid $6,600.”18

The evidence

The applicants’ evidence

65. The first applicant was unable to remember the date of the conversation he had

had with the second respondent in relation to the loan repayments ceasing or the

exact wording. He variously described the words he said to the second

respondent at that time as “they (the respondents) could put a stop to the

repayments because of the things they were talking about doing in their yard to

make life easier for them” and that “the respondents could put a halt to the

repayments.” He said that he had also said if he (and the second applicant)

needed or required the money it was to be repaid.

66. Notwithstanding that the respondents separated a few months after this

conversation the first applicant said he did not send them any letters of demand

seeking the repayment of the loan. Nor did he seek legal advice at this time

about the loan or for a number of years afterwards.

67. He conceded he had not spoken to the first respondent about the loan repayment at

any time after she and the second respondent had separated in May 2013 prior

to sending the letter of demand in July 2016. He said the second applicant had

attempted to speak with the first respondent.

18 Ibid at [19] and [20]

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68. The first applicant said he did not financially need the money when he asked his

son about the loan; his concern at that time was that the respondents’ marriage

had broken up and the impact of that on his loan.

69. The second applicant told the Tribunal that the first applicant had given out the

loan so she had left recovery of it to him. However, while unable to recall the

exact words she had used, the second applicant said shortly after the

respondents had split up she had asked the first respondent to think about

repaying the loan and that the first respondent had got angry and shouted words

to the effect that the applicants had no right to it as it was a gift. She said she did

not otherwise raise the loan with either of the respondents.

70. In examination in chief Mr Pasi asked the second applicant:

Q. The first respondent says that the debt was forgiven – what do you say?A. I say the money should have been given back to us as they did not do the work.

The first respondent’s evidence

71. The first respondent told the Tribunal that while she could no longer remember

the exact words said to her by the second respondent in February 2013 that they

were to the following effect – “Mum and Dad said we don’t have to pay that

money back.”

72. Either that same week or the following week, the first respondent said that the

applicants had come over for one of the children’s birthdays and she thanked

them for not having to pay the money back. She said:

I said - Brett tells me you said we don’t have to repay the loan.The second applicant said – That’s alright. We have been helping Michelle (the second respondent’s sister) out. We want to help you guys out as well.

73. She said she truly believed that the loan had been forgiven by the applicants.

74. The first respondent said that from the day she thanked the applicants for

forgiving the loan, the only two times the applicants contacted her in relation to

financial matters were when the first applicant telephoned her in August 2013 in

relation to the Barlings Beach property (which had been purchased by the

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applicants and placed in the name of the second respondent and his sister), at

which time the first applicant made no mention of the alleged loan, and in July

2016 when she received their letter of demand dated 18 July 2016 by email. She

had then sought advice from Legal Aid ACT who wrote to the applicants on her

behalf.

75. The first respondent said the second respondent raised the alleged loan debt during

their financial settlement negotiations in retaliation for her seeking to include

the Barlings Beach holiday cabin in the draft application for consent orders

which had been sent to the second respondent on 26 August 2013. On

11 November 2013, with the assistance of her lawyer, the first respondent said

the respondents concluded the financial settlement negotiations. The Barlings

Beach cabin was removed and there was no further discussion regarding the

alleged debt to the applicants.

76. The first respondent relied on the joint application by herself and the second

respondent to the Family Court of Australia for consent orders in which the

second respondent agreed:

(a) that his parents had made a contribution of $15,000 (which is now the

subject of this application) in February 2013 and an earlier amount to their

relationship;

(b) that the proposed percentage division of the property including

superannuation was 48.56% to the first respondent and 51.44% to the

second respondent, which equated to the second respondent receiving an

additional $16,967.45;

(c) that they had no liabilities aside from the mortgage for the house;

(d) the terms of settlement stated:

9. That’s unless otherwise provided for in these Orders:

(a) The Wife and the Husband each be entitled to be the sole and legal beneficial owners of all items of property including money, motor vehicles, insurances, equities, superannuation entitlements and personal effects currently in the possession or control of each of them respectively;

(b) Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.

and …

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(e) that the Consent Orders were intended to be in full and final settlement of any financial claims each may have against the other for property settlement or spousal maintenance and each party undertook to make no further claim against the other by way of property settlement or spousal maintenance.

77. Order 1 of the terms of settlement attached to the consent orders stated:

1. Within 60 days of the date of these Orders (“the Due Date”) that the Wife pay to the Husband the sum of $150,000 (“the Payment”).

78. The orders included orders requiring the husband (second respondent) to transfer

to the wife (first respondent) at the time of the payment all of his interest in the

former matrimonial home and the wife to do all things necessary to repay the

mortgage and to discharge the mortgage.

79. The first respondent said that in order to comply with the consent orders she took

a mortgage for the family home based on a budget that did not require her to

service any additional debts.

80. The first respondent also contends that when she and the second respondent were

negotiating their financial settlement in 2013 the first applicant called her

around 26 August 2013 and said if she pursued the inclusion of the Barlings

Beach holiday cabin in the negotiations he would seek legal action against her.

Neither the first applicant nor the second applicant raised with her the alleged

outstanding loan at that time or in the almost three years since.

81. The first respondent alleges that the first time the alleged debt was raised with her

following the financial settlement in 2013 was in an email dated 8 July 2016

from the second respondent to her which stated:

… And you owe my parents $7,500 you fucking parasite. … 19

82. During a telephone conversation between the first and second respondents around

20 July 2016 when the second respondent raised the matter of the alleged debt

the first respondent commented on the similar words and tone of the applicants’

letter of demand to her on 18 July 2016 and in the second respondent’s email

19 First respondent’s witness statement dated 19 January 2017 at attachment ‘P’

19

and the second respondent said “Yeah, I wrote both, I’m allowed to help my

parents.”20

83. The first respondent said that in the application for consent orders lodged with the

Family Court of Australia paragraph 68 asked “Were the financial contributions

of the parties the same?” Her solicitor had written “Husband’s parents

contributed $20,000 to the relationship in 2007 towards the purchase of the

matrimonial property and $15,000 in 2013 used towards the purchase of the

Mazda.” Where ‘Liabilities’ were listed at paragraph 73 the respondents had

each stated ‘NIL’ loans. She told the Tribunal that this application accurately set

out their financial affairs. In his column the second respondent agreed with the

contents of paragraphs 68 and 73.

84. The first respondent strenuously denied that there was an alleged loan debt to the

applicants following on from her discussion with the second respondent in

February 2013 and her subsequent discussion with the applicants thanking them.

Why, otherwise, she said would she thank them for not having to repay the loan.

85. The first respondent said she could not recall the alleged request by the second

applicant in her evidence that shortly after separation she asked the first

respondent to think about repaying the loan. She described as ‘absurd’ the

second applicant’s allegations that she was denying them access to their

grandchildren or that there was an issue of her allegedly missing out on the

applicants’ inheritance when they died.

86. The first respondent told the Tribunal that she strongly believed that the second

respondent was behind this application. She and the second respondent were in

a bitter financial dispute in July 2016 over a $32 phone credit he had purchased

for their daughter and which he believed the first respondent owed him. The

bundle of emails dated 8 and 14 July 2016 between the first and second

respondents which the first respondent tendered21 corroborated this evidence.

The emails from the second respondent contain verbal abuse directed to the first

respondent. The first respondent told the Tribunal that she understood the

20 First respondent’s witness statement dated 19 January 2017 at attachment ‘P’ page 6 at [39]

21 Exhibit R3 at ‘P’ ‘Q’

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statement in the second respondent’s email to her dated 14 July 2016 “Oh you

forgot the $32 for (daughter’s name)’s phone. That’s unfortunate.” was a threat

that she would now be sued by him or his parents (these proceedings).

87. The first respondent said that the reference in the 8 July 2016 email from the

second respondent to her to $7,500 she allegedly owed to his parents (see [81]

above) was the first time the debt had been raised with her since their settlement

negotiations in 2013, a period of two and a half years.

88. The first respondent reiterated that the applicants had loaned her and the second

respondent the money in 2011 and that she had made each of the fortnightly

repayments until the second respondent had told her in February 2013 that they

did not have to repay the loan. She had thanked the applicants accordingly.

89. She was also skeptical that the second respondent was actually ‘repaying’ the loan

from November 2015. She said that this date did not tally up with the date the

letter of demand was sent to her. She disputed that the payments of $220

allegedly made by the second respondent for his share of the loan repayments

were made for that purpose. She questioned why the information accompanying

the payments was blacked out in the second respondent’s bank statements which

were Exhibit B2, and said that throughout their marriage he had contributed to a

Christmas Club and Punters Club by paying money into his parents’ Punters

Club account and it appeared to her that he was continuing to make these

payments into the account. She said during the marriage she had also

contributed money to that account for about 12 months.

The second respondent’s evidence

90. The second respondent told the Tribunal that in February 2013 he had been

discussing with his father the work he and the first respondent had done and

would like to do to their home and his father had said if it would help they could

stop paying back the loan until a time if and when they needed it to be repaid.

He said he never told the first respondent that his parents had gifted them the

money and they would not have to pay it back.

91. He said when he and the first respondent were discussing their financial settlement

shortly after their separation his father raised the alleged loan with him saying if

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he did not get it now he would never get it and he, the second respondent, then

tried to include it in the negotiations with the first respondent. Each time he

raised it, the first respondent said they did not owe the money. He said the first

respondent introduced the Barlings Beach property (the lease for which was in

his and his sister’s names) to the settlement discussions which then stalled. He

told the Tribunal that he did not know what he could do about the loan. He said

he did not get legal advice.

92. In response to questions from the Tribunal about not including the loan as a

liability in the family law settlement he said “Even though I maintain it was

always a loan, my parents were not included in the discussions. It did not make

a lot of difference to me at the time if we paid my parents back.”

93. In cross examination by the first respondent, he was asked:

Q. Did you talk with my lawyers about the alleged debt?A. I don’t recall.Q. Did you talk to my lawyers about the Barlings Beach property?A. I don’t recall.

94. He said that he had been making fortnightly payment of $220 to his parents’

Punters Club account since 5 November 2015 until January 2017. He conceded

that he had been paying $10 a week Christmas Club contributions into that

account over many years prior to November 2015; he simply upped that

payment to $220 a fortnight, which included the $20 a fortnight to the

Christmas Club, and said he did not see the need to change the name of the

account.

Consideration

95. I should make it clear at this stage that I do not intend, here, to go through the

evidence in minute detail. I have considered all of the evidence of the parties

including the documentary evidence before me and set out the evidence which I

found persuasive. I observed the parties giving their evidence. I have formed

clear conclusions as to the credit of the parties. I set out my findings below.

96. I noted that the first applicant had stated in his response filed on 6 February 2016

at [24] that after he raised the debt with his son (the second respondent), he (the

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second respondent) began making payments to the outstanding loan of $200 per

fortnight. He then said – “However, the payments stopped some time ago hence

our decision to seek legal intervention.” The bank statements tendered by the

applicants did not include their CBA Punters Club account22 into which the

second respondent said he was making these payments.

97. It was not clear to me when the applicants allege that the second respondent’s

repayments stopped. In their final letter of demand to the first respondent dated

2 August 2016 and in their application the applicants state that $15,365.40 was

outstanding. This was the amount of the alleged loan after the first respondent

ceased repayments in February 2013. It conflicts with the second respondent’s

own evidence that he was making the repayments of $200 per fortnight from

5 November 2015 which totalled $4,200 by the time the applicants filed their

application. On his evidence the amount of the loan should have been reduced

by $4,200, to $11,165.40 even if the $4,200 was credited to the second

respondent’s share of the alleged loan.

98. I noted the second respondent’s answer to my question (see [92] above) of why he

had not included the loan as a liability in the family law proceedings. It was not

helpful to the position he had adopted in the tribunal proceedings. When I asked

him why he had ceased the repayments in January 2017 he said he might have

been naïve but he was waiting to see what happened. This answer was also

unhelpful. I find that the second respondent’s position has been closely aligned

to that of his parents, the applicants, throughout this matter.

99. The second respondent, and to a significant extent the applicants, relied on the fact

that the second respondent had commenced paying what they described as his

share of the loan repayments on 15 November 2015 as evidence that the loan

had not been forgiven. However, I find that the second respondent’s decision to

delete the description of each of his payments to the applicants’ Punters Club

account on his bank statements which he tendered and to stop making these

payments in January 2017 significantly diminished any weight that I could

attach to these payments being evidence of the existence of the debt to his

parents. The second respondent was not a credible witness. I am unable to be

22 See Exhibit B2 – ‘to account’ description – Punters club

23

satisfied, from the matters before me, that the amounts the second respondent

paid to the applicants’ Punters Club account were loan repayments.

100. I found that the first applicant was doing his best to answer questions honestly.

While his recall of dates was sometimes vague I was satisfied from his evidence

that he did tell his son, the second respondent, that the respondents could ‘stop’

or ‘halt’ the loan payments in February 2013. I am satisfied that this was what

the second respondent told the first respondent and this is what led her to thank

the applicants for their generosity soon afterwards.

101. On the balance of probabilities, I am not satisfied from the evidence that the

first applicant told the second respondent that the loan payments could be

‘suspended’. I am also not satisfied that the second respondent told the first

respondent that the loan payments were suspended.

102. I am in no doubt that if the respondents had not separated, the applicants would

never have asked for the balance of the loan to be repaid.

103. The first respondent’s evidence was that she paid the second respondent

$150,000 within 60 days of the Family Court orders as required by order 1. If

the applicants really believed that the respondents were indebted to them for the

balance of the loan, then it is hard to understand why they did not, at the time

the second respondent received the $150,000, ask the second respondent to

repay them his half share of the outstanding loan. The fact that they did not take

such action in 2014 adds weight to the first respondent’s evidence, from which

she has never deviated, that the loan was forgiven in February 2013. Her

evidence was consistent and clear. I particularly noted her evidence that she had

thanked the applicants shortly after she was told that the respondents no longer

had to repay the loan. While this evidence was challenged by the applicants her

evidence was not shaken. She was an impressive witness.

104. The Tribunal now turns to the family law application for consent orders (FL

Application) referred to above. Paragraph 19 of the FL Application asked the

following question:

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Is there any person who may be entitled to become a party to the case under subsection 79(1) or subsection 90SM(10) of the Act?X No□ Yes Has written notice been given to that person?□ Yes□ No

105. The Box for ‘No’ for the first question has been marked with an ‘X’ and both

respondents have signed the application and each page of the application. The

respondents have not disclosed the alleged loan debt the subject of the tribunal

application under Liabilities in the FL Application.

106. Paragraph 67 of the FL Application required the respondents to set out the

proposed percentage division of the property (including superannuation). The

first respondent stated that she was receiving 48.56% and that the second

respondent was receiving 51.44%. The second respondent marked the box in his

column agreeing to these percentages. The first respondent’s evidence that this

equated to the second respondent receiving an additional $16,967.4523 was not

challenged. I accept this evidence.

107. Further I noted in the email from the second respondent to the first respondent

dated 3 September 2013 at 18.05 in Annexure G to the first respondent’s

response, the second respondent stated “You had said that you were happy with

a 50/50 split of assets and money. Is this still the case and I think it is only fair

that I recoup some of the money that was given by my parents.” This statement

corroborates the first respondent’s evidence that the balance of the loan was

gifted or forgiven by the applicants. I find that the second respondent recouped

some of the money given by his parents by receiving the additional $16,967.45

in the respondents’ financial settlement.

108. Paragraph 68 of the FL Application under ‘Proposed Division of Property’

asked “Were the financial contributions of the parties the same?” The applicant

wife ticked the box stating “No” and set out the following details of who made

the greater contribution, which included the balance of the loan the subject of

the tribunal proceedings, -“Husband’s parents contributed $20,000 to the

relationship in 2007 used towards the purchase of the matrimonial property and

23 Exhibit R1 first respondent’s witness statement at [28]

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$15,000 in 2013 used towards the purchase of the Mazda.” The respondent

husband ticked the box agreeing to this statement. I am satisfied and find that

both respondents regarded the $15,000 forgiven in February 2013 as a financial

contribution on behalf of the second respondent.

109. There is no reference to a loan to the husband’s parents under ‘Liabilities’ in

paragraph 53 of the FL Application – ‘Amounts owing on any other loans’ or in

paragraph 56 – ‘Any other liabilities’. The husband and the wife have each

stated ‘NIL’ in both paragraphs. I am satisfied and find that both respondents

agreed that they did not have any other liabilities when they completed the FL

Application.

110. Paragraph 19 of the FL Application states:

Is there any person who may be entitled to become a party to the case under subsection 79(10)) or subsection 90SM(10) of the Act?

An “X” has been placed in the “No” box. This page and the other pages of the Application have been signed by the first and second respondents. Subsections 79(4) and 79(10) of the FLA state:

(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account: (a) the financial contribution made directly or indirectly by or on

behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them,

…(10) The following are entitled to become a party to proceedings in which an application is made for an order under this section by a party to a marriage (the subject marriage):

(a) a creditor of a party to the proceedings if the creditor may not be able to recover his or her debt if the order were made;

(b) any other person whose interests would be affected by the making of the order.

111. The FL Application was the culmination of discussions between the respondents

from shortly after their separation until it was signed towards the end of 2013. It

was negotiated during the same year as the agreement in February 2013. It was

relevant, contemporaneous and compelling evidence as to the true nature of the

agreement between the applicants and the respondents in February 2013 – that

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the loan had been forgiven. The terms of settlement attached to the consent

orders included the following notation:

That pursuant to section 81 of the Family Law Act the parties intend these orders to be in full and final settlement of any financial claims each may have against the other for property settlement or spousal maintenance and each party undertakes to make no further claim against the other by way of property settlement or spousal maintenance.

112. It was the only documentary evidence before the Tribunal that was prepared and

signed after the February 2013 agreement. It corroborated the first respondent’s

evidence.

113. I have already noted in [48] that the second respondent’s signature on each page

of the terms of settlement, which was marked as ‘Exhibit 1” and attached to the

Family Court orders dated 20 December 2013, was witnessed by the second

applicant.

114. In contrast, the only documentation that the applicants were able to rely on were

their letters of demand sent to the first respondent in 2016, some three years

after the respondents separated. Given the length of time that had elapsed from

the agreement of February 2013, the fact that the respondents had been

separated since around May 2013 and the second respondent’s concession that

he had helped his parents write these letters I am satisfied that no weight can be

given to these letters of demand as evidence of the terms of the agreement

reached in February 2013.

115. Having considering all of the evidence I find that the second respondent was the

instigator of his parents attempting to recover the alleged loan from the first

respondent in July 2016. The relationship between the respondents had clearly

reached a nadir as evidenced in the email from the second respondent to the first

respondent dated 8 July 2016 (see [81] above).

116. The second respondent alleged in his witness statement that his parents had

raised the alleged loan with the first respondent on numerous occasions over the

past few years. Neither he nor the applicants produced any evidence to

corroborate this claim. It was vehemently denied by the first respondent. I am

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not satisfied, having considered all of the evidence, that the applicants had

raised the loan with the first respondent on numerous occasions.

117. After considering all of the evidence, I find, on the balance of probabilities, that

the applicants had not raised the ‘alleged loan’ with the first respondent after

separation until their emailed letter of demand to the first respondent dated

18 July 2016 and their email dated 20 July 2016 replying to the letter from

Legal Aid ACT. This was some three years after the respondents separated and

some two and a half years after the respondents’ financial matters were

finalised.

118. For the reasons set out above I find that the terms of the agreement in February

2013 were that the applicants agreed to the respondents stopping the

repayments, or in other words they gifted the balance of the loan to the

respondents. I am satisfied and find that in February 2013 the parties no longer

had in mind the creation of legal relations over the loan going forward. I am not

satisfied that the applicants suspended the repayments as claimed by them.

119. If the tribunal had jurisdiction, for the above reasons, the Tribunal’s decision

would be to dismiss the application.

120. The applicants’ application is dismissed.

………………………………..Presidential Member E Symons

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90AE Court may make an order under section 79 binding a third party

(1) In proceedings under section 79, the court may make any of the following orders:

(a) an order directed to a creditor of the parties to the marriage to substitute one party for both parties in relation to the debt owed to the creditor;

(b) an order directed to a creditor of one party to a marriage to substitute the other party, or both parties, to the marriage for that party in relation to the debt owed to the creditor;

(c) an order directed to a creditor of the parties to the marriage that the parties be liable for a different proportion of the debt owed to the creditor than the proportion the parties are liable to before the order is made;

(d) an order directed to a director of a company or to a company to register a transfer of shares from one party to the marriage to the other party.

(2) In proceedings under section 79, the court may make any other order that:(a) directs a third party to do a thing in relation to the property of a party to the

marriage; or(b) alters the rights, liabilities or property interests of a third party in relation to

the marriage.

(3) The court may only make an order under subsection (1) or (2) if:(a) the making of the order is reasonably necessary, or reasonably appropriate

and adapted, to effect a division of property between the parties to the marriage; and

(b) if the order concerns a debt of a party to the marriage—it is not foreseeable at the time that the order is made that to make the order would result in the debt not being paid in full; and

(c) the third party has been accorded procedural fairness in relation to the making of the order; and

(d) the court is satisfied that, in all the circumstances, it is just and equitable to make the order; and

(e) the court is satisfied that the order takes into account the matters mentioned in subsection (4).

(4) The matters are as follows:(a) the taxation effect (if any) of the order on the parties to the marriage;(b) the taxation effect (if any) of the order on the third party;(c) the social security effect (if any) of the order on the parties to the marriage;(d) the third party’s administrative costs in relation to the order;(e) if the order concerns a debt of a party to the marriage—the capacity of a

party to the marriage to repay the debt after the order is made;Note: See paragraph (3)(b) for requirements for making the order in these

circumstances.

Example:The capacity of a party to the marriage to repay the debt would be affected by that party’s ability to repay the debt without undue hardship.

(f) the economic, legal or other capacity of the third party to comply with the order;Example:The legal capacity of the third party to comply with the order could be affected by

the terms of a trust deed. However, after taking the third party’s legal capacity into account, the court may make the order despite the terms of the trust deed. If

29

the court does so, the order will have effect despite those terms (see section 90AC).

(g) if, as a result of the third party being accorded procedural fairness in relation to the making of the order, the third party raises any other matters—those matters;Note: See paragraph (3)(c) for the requirement to accord procedural fairness to the third

party.(h) any other matter that the court considers relevant.

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HEARING DETAILS

FILE NUMBER: XD 974/2016

PARTIES, APPLICANT: Matthew Izzard & Rhonda Izzard

PARTIES, RESPONDENT: Sacha Izzard & Brett Izzard

COUNSEL APPEARING, APPLICANT N/A

COUNSEL APPEARING, RESPONDENT N/A

SOLICITORS FOR APPLICANT Prudential Legal Solutions

SOLICITORS FOR RESPONDENT N/A

TRIBUNAL MEMBERS: Presidential Member E Symons

DATES OF HEARING: 3 March 2017

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