Alvey & Cheetham (No 2)
[2021] FedCFamC1F 358
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Alvey & Cheetham (No 2) [2021] FedCFamC1F 358
File number(s): MLC 9184 of 2020 Judgment of: STRUM J Date of judgment: 20 December 2021 Catchwords: FAMILY LAW – UNDEFENDED HEARING – PROPERTY – Settlement – Addbacks – Exception not the rule –Where an addback is sought due to a discrepancy in the sale price of the business disclosed to the wife by the husband and the actual sale price – Where such an addback is allowed. Legislation: Family Law Act 1975 (Cth) ss 90SF, 90SM, 90ST, 117 Cases cited: AJO & GRO [2005] FamCAFC 104; (2005) GLC 93-218
C & C [1998] FamCA 143
Penfold v Penfold (1980) 144 CLR 311; (1980) 5 Fam LR 579; (1980) FLC 90-800; [1980] HCA 4.
Prantage & Prantage [2014] FamCA 850
Trevi & Trevi [2018] FamCAFC 173
Division: Division 1 First Instance Number of paragraphs: 58 Date of hearing: 20 December 2021 Place: Melbourne Counsel for the Applicant: Mr Lethlean Solicitor for the Applicant: Aspire Lawyers Advocate for the Respondent: In person Solicitor for the Respondent: None ORDERS
MLC 9184 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS ALVEY
Applicant
AND: MR CHEETHAM
Respondent
ORDER MADE BY:
STRUM J
DATE OF ORDER:
20 DECEMBER 2021
THE COURT ORDERS THAT:
1.Within 60 days of the date of the orders the Applicant pay to the Respondent the sum of $176,000 (“the payment”), less the sum of $40,000 payable by him to her pursuant to paragraph 26.
2.Contemporaneously with the payment:
(a)The Respondent do all such acts and things and sign all such documents as may be required to transfer to the Applicant at the expense of the Applicant all of his right, title and interest in the real property situate at and known as E Street, Suburb J in the State of Victoria being the whole of the land more particularly described in Certificate of Title Volume … Folio … ("the Suburb J property") (“the transfer”).
(b)The Applicant do all such things to refinance and discharge the mortgage registered No. …9C to H Bank ("the mortgage").
3.That pending the transfer:
(a)The Applicant have the sole right to occupy the Suburb J property and that during such right of occupation the Applicant pay all instalments pursuant to the mortgage and all rates and taxes and like apportionable outgoings of the Suburb J property as they fall due;
(b)The parties hold their respective interest/s in the Suburb J property upon trust pursuant to these Orders; and
(c)That neither party encumber the Suburb J property except without the consent in writing of the other party, save for the Applicant to comply with order 1 herein.
4.That in the event the payment has not been made by the date, the Applicant have carriage of the sale and the parties do all things and sign all documents necessary to sell altogether out of Court ("the sale") the real property situate at and known as E Street, Suburb J in the State of Victoria being the whole of the land more particularly described in Certificate of Title Volume … Folio … ("the Suburb J property") and upon completion of the sale, the proceeds of the sale be applied with the Applicant to have the conduct of the sale.
(a)Firstly, to pay all costs, commissions and expenses of the sale;
(b)Secondly, to discharge the mortgage and any other encumbrance affecting the Suburb J property;
(c)Thirdly, to make the payment outstanding to the Respondent together with any interest pursuant to the Family Law Rules;
(d)Fourthly, the balance to the Applicant.
5.That the Applicant forthwith have carriage of the sale of the Queensland property and otherwise the parties do all things and sign such documents necessary to sell the real property situate at and known as K Street, L Town in the State of Queensland being the whole of the land more particularly described in Title Reference Number … ("the Queensland property") and upon completion of the sale (“the sale”), the proceeds of sale be applied:
(a)Firstly, to pay all costs, commissions and expenses of the sale;
(b)Secondly, to discharge the registered mortgage to ANZ (being as discharge of mortgage fee);
(c)Thirdly to payout H Bank Account Number …89 (“the unsecured business loan”);
(d)Fourthly in the event that the sale price of the Queensland property attracts Capital Gains Tax (“CGT”) then the Applicant will indemnify the Respondent in respect to same; and
(e)Fifthly balance to the Applicant.
6.Following the payout of the unsecured business loan at paragraph 5(c), the Applicant and Respondent do all things and sign such documents necessary to close the unsecured business loan.
7.Pending the discharge of Order 6 the parties be restrained by injunction from withdrawing any moneys from the unsecured business loan.
8.That within 30 days of the date of the Orders the Applicant sign all documents as may be necessary to relinquish all rights, entitlements, claim actions of demands whether by beneficiary loan accounts or otherwise howsoever arising in relation to any interest she may have had as the beneficiary of the Cheetham Family Trust ABN …, at the expense of the Respondent.
9.The Respondent shall be responsible for and indemnify the Applicant against all and any debts and arising from the operation of M Pty Ltd A.C.N … and N Company (“the business”) and the Cheetham Family Trust ABN …, including but not limited to any taxation liability with the Australian Taxation Office or any other asset or equipment and any business credit cards (if any).
10.The Respondent retain the following for his sole use and benefit:
(a)The proceeds of sale received by him from the sale of the business in of $180,000;
(b)The sale proceeds of sale in respect of the Motor Vehicle 1;
(c)The Motor Vehicle 2.
(d)$29,000 of cash retained by him.
11.That the parties do all such things and sign such documents to transfer the Motor Vehicle 3 motor vehicle registered under M Pty Ltd registration … to the Applicant.
12.Paragraphs 13 to 15 of these orders are binding on P Pty Limited (“the Trustee”) of P Super Fund (“the Fund”), in relation to member number …08.
13.Pursuant to section 90XT(4) of the Family Law Act 1975 (Cth) (“the Act”), a base amount of $111,000 (“the base amount”) be allocated to the Applicant out of the Respondent’s interest in the Fund.
14.Pursuant to section 90XT(1)(a) of the Act, whenever a splittable payment becomes payable from the superannuation interest held by the Respondent in the Fund, the Trustee of the Fund shall pay to the Applicant an amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001 (“the Regulations”) using the base amount referred to in paragraph 13 of these orders (“the calculated amount”) and there be a corresponding reduction in the entitlement of the Respondent.
15.Paragraphs 13 and 14 of these orders have effect from the operative time and the operative time is the beginning of the fourth business day after a certified copy of the sealed orders are served on the Trustee of the Fund.
16.The Respondent and Applicant shall forthwith do all such acts and things and sign all such documents required to effect a splittable payment and roll over referred to in paragraph 14 of these orders.
17.That until the happening of any of the following:
(a)The establishment of a separate account in the name of the Applicant in the Fund, or
(b)The transferring or rolling over into another superannuation fund of the payment split which was created by these orders, or
(c)The Applicant satisfying all the conditions of release and receiving the payment split which was created by these orders, or
(d)The Applicant’s execution of a waiver of rights within the meaning of section 90XZA of the Act in relation to the payment created by these orders,
(e)The Respondent by himself, his servants or agents be restrained from executing a Death Benefit Nomination in favour of another person or doing any other act or thing that would render any part of his interest in the Fund a non splittable payment within the meaning of regulations 12 or 13 of the Regulations.
18.Until such time as the superannuation split to the Applicant pursuant to these orders can be rolled over into a separate account of the Applicant:
(a)The Respondent provide to the Applicant no less than twenty-eight days’ notice before such time as he elects to retire from and/or take voluntary retirement and/or for any reason accept or become entitled to access in whole or part his entitlement in the Fund;
(b)The Respondent direct and authorise the Trustee to communicate with the Applicant and/or any person authorised in writing on her behalf:
(i)To answer any reasonable enquiries as may be made by her or on her behalf from time to time in relation to her entitlement in the Fund;
(ii)To provide to the Applicant and/or her authorised representative a copy of any notice or any application or request by the Respondent which seeks the release of his entitlements in the Fund in so far as that release may affect the Applicant’s entitlements in or to the Fund pursuant to these Orders; and
(iii)The Respondent, by himself, his servants and or agents be and are hereby restrained from doing any act or thing which would prevent the Applicant or her legal representative from receiving the benefit in the Fund to which she is entitled to pursuant to these Orders.
19.In the event that the superannuation split to the Applicant pursuant to these orders can be rolled over into a separate account to the Applicant, each of the parties do all such acts and things and execute all such documents as may be necessary to facilitate and implement that rollover.
20.That there be liberty to apply to each party and the Trustee in relation to the implementation of the Orders affecting the superannuation interest.
21.That a copy of these orders be served by the Applicant forthwith on the Trustee of the Fund.
22.That the Applicant will do all things necessary including but not limited to making a request pursuant to r.7A.06 of the Superannuation Industry (Supervision) Regulation 1994 for the roll over or transfer or payment of the transferable benefits out of the Respondent’s interest in the Fund to a superannuation fund nominated by the Applicant or into a bank account nominated by her if she satisfies a condition of release.
23.That if either party refuses to or neglects to execute a Deed or instrument ("the documents") necessary to give full force and effect to the terms of these Orders within five (5) days of notice in writing been given by the other party or his/her solicitor, then the Registrar of the Melbourne Registry of the Federal Circuit and Family Court of Australia is hereby appointed pursuant to the Provisions of Section 106A of the Act to execute such documents and do all acts and things necessary to give validity and operation to the documents.
24.Liberty to apply to the court on any matter to give efficacy to the Orders.
25.That unless otherwise specified in these Orders and save for the purposes of enforcing any monies due under these or any subsequent Orders:
(a)Each party be solely entitled to the exclusion of the other to all other property (including choses-in-action) in the possession of such party as at the date of these Orders (the furniture, personal possessions and like chattels in the Suburb J property being deemed to be in the possession of the Applicant)
(b)Each party forego any claims they may have to any superannuation benefits belonging to or earned by the other;
(c)Insurance policies remain the sole property of the owner/beneficiary named thereon/in;
(d)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;
(e)Any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
26.The Respondent pay the Applicant’s costs of and incidental to these proceedings, from their institution to date, fixed in the sum of $40,000, to be deducted from the payment by the Applicant to the Respondent specified in paragraph (1) hereof.
27.Pursuant to r.12.28 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021, the Court certifies that it was reasonable for the Applicant to engage Counsel.
28.All extant applications be otherwise dismissed, and the proceedings removed from the list of cases awaiting trial.
29.It is directed that all subpoenaed and exhibited documents be returned on the usual basis.
AND THE COURT NOTES THAT:
A.As far as it is practicable to do so that the Orders are made having regard to the provisions of section 90ST of the Family Law Act 1975 with a view to determining for all time the financial relationship between the parties and avoiding further proceedings between them.
Note: The form of the order is subject to the entry in the Court’s records.
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).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Alvey & Cheetham is approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
STRUM J:
These are relatively straightforward proceedings which, with a modicum of common sense, should have had a reasonable if not high chance of resolving. Unfortunately that has not been the case and it falls to me to determine the Applicant de facto wife’s application for property settlement pursuant to section 90SM of the Family Law Act 1975 (Cth) (“the Act”).
By way of brief background, the Applicant, Ms Alvey, was born in 1971 and she is 50 years of age. She is employed in administration and discloses an income in the order of $1064 per week. She deposes that she is in good health.
The Respondent de facto husband is Mr Cheetham. He was born in 1968 and is 53 years of age. Unfortunately, I know little about him other than through the Applicant because, whether by omission or by commission, he has not participated in these proceedings.
The parties commenced cohabitation in 1988 and they separated in May of 2019. This is, therefore, a de facto relationship which spans in excess of three decades and is, on any view, a long one.
There are two adult children of the marriage: Mr O, who was born in 1991, is 30 years of age and lives with the Applicant; and Mr R, who was born in 1996 and is 25 years of age.
The proceedings were instituted by the Applicant on 24 August 2020, in circumstances where she sought (and continues to seek) an alteration of interests in property. It is implicit in her application that she considers it just and equitable for the court to embark upon the adjustive process. In the absence of any response by the Respondent, that is unchallenged. In any event, the former matrimonial home, to which I shall refer later, is registered in the parties’ joint names and I have a duty under section 90STof the Act, insofar as practicable, to finalise the financial relationship between the parties and avoid further proceedings between them.
In the circumstances, where there is that concession by the Applicant and the Respondent is silent in relation thereto, and for the reasons which follow hereafter, I find that it is just and equitable for the court to embark upon an adjustment of interests in property pursuant to section 90SMof the Act. As I have indicated earlier, no material has been filed by the Respondent throughout the course of these proceedings, which now span some 16 months. The only exception to that is a Notice of Address for Service, filed by solicitors on his behalf on 9 December 2021 and, shortly thereafter, a Notice of Ceasing to Act filed by them on 13 December 2021.
These proceedings came before the Federal Circuit Court (as it then was) on 3 December 2020 and again on 27 January 2021. On neither occasion did the Respondent see fit to appear. On 27 January 2021, Judge Mercuri (as her Honour then was), granted leave to the Applicant to proceed undefended. In more recent times, the matter was transferred from Division 2 of this Court to Division 1, because of her Honour’s temporary unavailability. It was listed for trial on 1 December 2021 and came before me on that date. In the preceding day or two, the Respondent first showed a faint sign of life.
He appeared by video link before me on 1 December and, in reasons for judgment I delivered that day, I described his very belated appearance as being at the eleventh hour and fifty ninth minute. I do not resile from that description. Because the Respondent was in person that day, I was acutely aware of the need to ensure that procedural fairness be accorded to him. He told me that he wished to participate, notwithstanding that he faced an order made in January of this year for the matter to proceed undefended and that he wished to secure legal representation. Orders previously made in the proceeding, as well as again that day, alerted him to the effect of section 102NA, in circumstances where there was an intervention order against him in favour of the Applicant.
In my exchanges with the Respondent, he acknowledged that he was aware of these proceedings since at least late 2020 and that he was aware of the orders made in December 2020 and in January of 2021 to which I have referred. He further acknowledged that he had hitherto deliberately failed to participate in the proceedings. In those circumstances, I adjourned the trial from 1 December to today. Whilst I understood the Applicant was disappointed the matter could not proceed that day, considerations of natural justice to a litigant in person, in my mind, prevailed and, given my recent appointment, I was able to re-fix this matter for trial some three weeks thereafter.
In so doing, I made orders for the Respondent to file any application if he wished to seek – and, I stress, seek – to set aside the order that the matter proceed undefended, together with any supporting affidavit material, as well as a response to the Applicant’s Initiating Application for property settlement, supported by affidavit material and a Financial Statement by, 13 December 2021. I explained to him that, if he wished to participate, he needed to make application seeking to discharge the order for the matter to proceed undefended, supported by relevant evidence. I made it abundantly clear to him that, if he did bring such an application, he should not think it was a given that the matter would proceed on a defended basis and that the onus rested upon him.
He appears today, again unrepresented, with no material either in relation to the undefended hearing or in relation to the application for alteration of interests in property. I am informed by my associate, because I have not seen it and deliberately so, that he attempted to file some handwritten documents on Friday and again today. Those documents manifestly did not comply with the Rules of this court, either in form or in substance, and therefore have not been filed and are not before me. The Respondent has been amply afforded natural justice and procedural fairness. In the circumstances, the matter proceeds before me today on an undefended basis. I say again, as I did on the last occasion, that if there is any misfortune to the Respondent, he is the sole author thereof.
I turn now to a more detailed consideration of these section 90SM proceedings. Any statements of fact that I make are, and are to be taken be, findings of fact. The only evidence before me is that of the Applicant. The Respondent, by his own doing, did not challenge that evidence and, having read the Applicant’s trial evidence and heard brief evidence in chief from her, I can see no reason not to accept it.
The Applicant deposes that, at the commencement of the parties’ relationship over three decades ago, neither of them owned any assets of significance. Over the course of the parties’ relationship, they acquired various properties using what she terms colloquially as “joint funds.” She refers to properties purchased initially in Suburb Q, subsequently in Suburb S and most recently, in 2009, at E Street, Suburb J, which became the former family home. In the case of each of those properties, they were also acquired with funds borrowed by the parties and secured by mortgage over the relevant properties.
In or about early 2008, the Applicant deposes that “Mr Cheetham and I” purchased an investment property at L Town, in Queensland, for the sum of $132,000. However, I am informed by her counsel that the Respondent is and at all material times has been the sole registered proprietor of that property. Nothing material turns upon it. This property was purchased entirely with borrowed funds, which were secured ultimately by mortgage over the former family home in Suburb J. It has been rented out on short-term, daily or weekly holiday arrangements through a holiday rental management company. Since separation, the Applicant has attended to the Queensland property as necessary, without any contribution, financial or otherwise, by the Respondent.
The Applicant deposes that she was largely employed over the course of the relationship, including in the parties’ business. She was also the primary homemaker and parent to the parties’ two children. The Respondent also worked over the course of the relationship, including in transport. They pooled their incomes to pay for mortgage repayments, rates, utility bills, groceries and other living expenses.
I turn now to the area upon which the greatest focus has been placed in the case and, for reasons which follow, understandably so. In or about mid-2011, the Respondent and the Applicant purchased a business known as T Company in partnership with the Respondent’s brother, Mr U, for $79,000. The parties obtained a loan from the ANZ Bank to fund part of the purchase price contributed by them.
The Applicant deposes that she worked in the business between three to five days per week in an administration role. The business had five employees. It supplied products for domestic renovations, which were manufactured by the business. In 2011, one Mr V purchased Mr U’s share of the partnership. Subsequently, in 2015, the Respondent and the Applicant purchased Mr V’s share of the partnership, for the sum of $70,000. Upon that occurring, the parties conducted the business, trading as N Company. The business was owned by the Cheetham Family Trust, of which the trustee is or was M Pty Ltd. The Respondent is or was the sole director of the trustee company. He is or was also the appointor of the Cheetham Family Trust. It is not clear whether the trust and / or the company have been wound up but nothing material is said to turn upon that.
On or about 16 May 2019, which I note is the month in which the parties separated, and without the Applicant’s knowledge or consent, the Respondent privately negotiated the sale of the business to one Mr C for the sum of $250,000. Mr C has sworn an affidavit filed by the Applicant in these proceedings. The Applicant exhibits, as annexure W-5 to her trial affidavit, a copy of the sale “agreement”. I say “agreement” because its validity and / or enforceability, in whole or in part, may have been open to challenge by the vendor or the purchaser. It is a two-page handwritten document and it makes it abundantly clear that the sale price for the business was $250,000, which was to be comprised of $80,000 payable in cash and $170,000 to be paid by electronic funds transfer to a specified account. The Applicant was not told by the Respondent of the sale, either before it occurred or in the ensuing days. On 23 May 2019, the purchaser, Mr C, informed her that he was purchasing the business for the sum of $250,000, having negotiated with the Respondent. However, when the Applicant questioned the Respondent about this, she deposes that he continually told her the sale price was $170,000.
The following month, on or about 20 June 2019, the Respondent became physically aggressive towards her and he threatened her, including by telling her that she would be lucky to get a car or even half of the former matrimonial home from their asset pool. Fearful for her safety, she attended the Suburb Q Police Station giving rise to an Intervention Order. Such an order is still in existence, giving rise to the most recent section 102NA notation that was made by me in the Orders made on 1 December this year.
On 20 June 2019, about a month after the first sale agreement, the Respondent and Mr C redrafted a new agreement which specified the purchase price to be $170,000 (Annexure W-7 to the Applicant’s trial affidavit). It did not make reference to the earlier agreement. It is an even pithier document, comprising only one page and again is handwritten. There is no direction as to how the purchase price was to be paid, unlike the earlier version which provided for payment by electronic funds transfer. I note that there was no specific provision for a cash payment.
Funds of $170,000 eventually found their way into the business’s bank account, although there is some suggestion by the Applicant that, in the first instance, the bank account details provided by the Respondent to Mr C were, in fact, those of his sister, Ms W.
Notwithstanding the payment of $170,000, Mr C in fact did make two further payments, in cash, totalling $80,000, equivalent to the cash sum contemplated by the first sale agreement. On 20 June 2019, Mr C paid the Respondent the sum of $40,000 and the following day he paid the Respondent a further sum of $40,000. The Applicant was made aware of this by Mr C. In the circumstances, I accept that total sum of $80,000 paid in cash was, on the balance of probabilities, received by the Respondent as part of the consideration for the sale of the business. The Applicant deposes that those monies were never deposited into the N Company business account, ending in the numbers ..34, nor were they deposited into any of the party’s other bank accounts of which she had knowledge.
As I have indicated above, the balance of $170,000 did eventually find its way into the business’ bank account, albeit that it was first deposited into an X Bank account opened by the Respondent on 21 June 2019, after separation, of which the Applicant had no knowledge at the time. She only learned of that account from documents produced to the Court upon subpoena. The Respondent has not made any disclosure of or in relation to that account. On or about 26 June 2019, the Respondent transferred the sum of $170,000 from that new X Bank account to where it should have gone in the first place, being the N Company business account, ending in the numbers …34. The Applicant put the relevant bank statement of N Company into evidence as annexure W-8. The description of the deposit in the statement is:
From X Bank – Mr C.
I am satisfied from the evidence of the Applicant, which is entirely unchallenged by the Respondent, that, in fact, the total sum of $250,000 contemplated by the first sale agreement was received by the Respondent. That gives rise to an add-back argument against him, which I will address shortly. Of the sum of $250,000, the Applicant concedes that $20,000 was repaid to her father to discharge a liability of the parties to him and that $32,000 was repaid to the Respondent’s mother, totalling $52,000. That then takes the sum down to $198,000 in respect of which she seeks that $180,000 be added back. The difference between those two sums is explicable as follows: amounts of $8,300 and $5,000 were applied by the Respondent to reduce the finance in respect of his Motor Vehicle 2 and a further sum of $5,000 was applied to repay the finance in respect of the Motor Vehicle 3 owned by the family trust and registered in the name of the trustee company. That vehicle was driven by the Applicant and was retained by her upon separation. She seeks to retain it as part of her property settlement. When those sums, which total $18,000 are deducted from the sum of $198,000, one is left with the sum of $180,000, which is entirely unexplained by the Respondent but which was within his control and that is the sum that the Applicant seeks to have added back.
The Applicant further deposes that, in addition to those moneys, there were cash payments from customers totalling $29,724 which were collected by the Respondent following the sale of the business and retained by him. There is no suggestion that they were paid or liable to be paid to Mr C. She deposes that whilst the parties operated the business, when they received cash payments, they were initially held in a safe at the former matrimonial home to which the Respondent, but not she, had the combination number. She deposes that, as they were received, the cash amounts in the safe were recorded in the business ledger kept at the business premises and the cash was then deposited into the business account.
Returning to the cash monies totalling $29,724, the Applicant deposes that she has examined the business account bank statements and has not found any record of those funds having been deposited into the business account. She put into evidence, as annexure W-10 to her trial affidavit, the ledger from which she has calculated that amount and I accept that evidence. In her trial affidavit, both in the list of assets and liabilities that she set out therein, as well as at paragraph 77, she specified that the add-back she sought was in the order of $144,000. However, in the witness box, with my leave, her counsel took her carefully through the figures and corrected mathematical errors. I am satisfied that the initial sum of $144,000 was clearly an arithmetical error and, therefore, the proverbial “goalposts” which I was concerned might have been moved insofar as the Respondent was concerned, in fact have not moved. There is no reason to suggest that Mr Cheetham is not capable of adding and subtracting, given that he ran a business modestly successfully, it would appear, for a number of years. If he took issue with the calculation of the proposed add-back, he could have applied to be, and might have been heard, but that has not been the case. The Applicant has examined bank statements of the Respondent and the business that she has obtained by a subpoena, as the Respondent has not made any financial disclosure in the proceedings. So not only has he not engaged in the proceedings by filing any documents whatsoever, or appearing prior to 1 December, he has not engaged in his obligation under the Rules of this Court to make full and frank financial disclosure. Rather, the Applicant has been left to obtain such financial documents as she has been able.
The Applicant speculates, on the basis of her examination of bank statements produced upon subpoena, that it appears the Respondent has engaged in the purchase and possible sale of some shares. I cannot take that matter any further because I simply do not have evidence to the requisite standard and, importantly, she does not seek to take the matter further. She points to this matter more as a proverbial shield rather than a sword. I note again that, had the Respondent seen fit to participate and, indeed, had he been represented by lawyers as he said on 1 December 2021 would be that case, it may well be that he would have taken objection, possibly successfully, to some of the matters in the Applicant’s evidence as being inadmissible, on the grounds of hearsay or comment or argument or the like. He has not done so. As I indicated in my exchanges with Mr Lethlean of Counsel for the Applicant, the fact that the matter proceeded undefended did not, in and of itself, require me to accept her evidence without challenge. Mr Lethlean conceded if there were matters that were, for example, inherently not credible, I did not need to accept them as a matter of necessity; however, that is not the case in the present proceedings.
The Applicant, by way of what I take to be an admission against interests but properly so, and in discharge of her obligation to make full and frank financial disclosure, deposes that at or about the time of separation, she too retained a cash sum of $10,000 which she had been able remove from the safe and that she has since used it for living expenses. She concedes in her list of assets and liabilities tendered today that those funds should be added back and I will do so.
On the previous occasion this matter was before me and again today, I observed that there are “known unknowns” in this case but, unfortunately they are the circumstances in which I find myself, as does the Applicant. She deposes to inquiries she has made regarding whether there are any taxation implications, in particular, capital gains taxation implications, arising from the sale of the business. She deposes to having been informed that the trustee of the trust has been wound up. I have no evidence as to whether the trust (as distinct from its trustee) is still in existence or not. I simply do not know. She deposes – albeit hearsay, but without challenge – that there are no tax implications for her, as the Respondent was the sole director of the trustee company. He has had the Applicant’s affidavit, which was sworn on 3 November this year, for over a month. If he wished to adduce evidence of any taxation liabilities – whether they be income tax liabilities or capital gains tax liabilities or the like – again, he could have sought to have done so. But there has been no such attempt on his part and certainly not in any admissible fashion. The Applicant also deposes that, similarly, in relation to the Queensland property, given the purchase price was $132,000 and the sworn valuation of the property is $95,000, it is unlikely that there will be any capital gains taxation implications and, if there are, she has provided for same in her minute of orders tendered today.
Turning then to the asset pool I accept, given the unchallenged nature of the valuations, that the Suburb J property is valued at $595,000, and the L Town, Queensland property is valued at $95,000. For the reasons that I have advanced earlier, I accept that the quantum of the add-back in respect of the sale of the business is correctly stated at $180,000. I expressed the view in my exchanges with Mr Lethlean that add-backs are “the exception, rather than the rule”. See AJO & GRO [2005] FamCAFC 104; (2005) FLC 93-218 at 79,617 – 79,618 [30] and 79, 619 [39] and Trevi & Trevi [2018] FamCAFC 173; (2018) FLC 93-858 at 78,454 [27]-[30]. Be that as it may, the amounts sought to be added back in this case are relatively confined and I accept it is appropriate to do so in the circumstances as I have found them to be, rather than to make an adjustment pursuant to sections 90SM(4)(e) and 90SF(3) in favour of the Applicant in that regard. The Respondent held the key to the explanation of how that $180,000 had been applied, but he withheld it, in the first instance from his former de facto wife and now from the Court. In circumstances where there is a total absence of any explanation by him as to how he has applied those moneys, I find that it is appropriate to add them back, and to do so in the sum of $180,000, taking into account the manifest corrections that have been made by the Applicant.
The Applicant sought, through her counsel, to include amongst the assets available for division the sum of $13,400, on account of the Respondent’s bank account with some $12,236 as at 9 December 2020 and an ANZ bank account with a balance of $1,155 as at April of this year. However, in the exercise of my broad and unfettered discretion, save as statutorily confined, I decline to do so. I am concerned that such an add-back might be a double-counting and that the whole or part of those funds might comprise some of the $180,000 or $29,700 that I propose to add back.
Returning to some of the other assets in the pool, the Applicant’s evidence at paragraph 91 of her trial affidavit, where she sets out the assets and liabilities as contended by her, is that the Respondent sold the Motor Vehicle 1 and retained sale proceeds of $20,000. She has included – albeit in inadmissible fashion, if it had been challenged by the Respondent – Redbook “guesstimates” of the Respondent’s Motor Vehicle 2 at $20,000 and her Motor Vehicle 3 motor vehicle at $13,000. In the circumstances, I am not critical of her for doing so. Given the modest amounts involved, it would not have been economical, in my opinion, to obtain formal valuations unless the Respondent sought same. Again, he could have sought to be and might have been heard on it. He has not. Accordingly, I find it appropriates accept those relatively modest figures.
In respect of the further sum of $29,700, being the business cash retained by the Respondent, I am satisfied, for the reasons explained by the Applicant in evidence in chief in the witness box, that there is no double counting in this regard. Further, I accept her concession that the funds retained by her of $10,000 should similarly be added back. So, whilst at the foot of the first page of Exhibit A, being the Applicant’s list of assets and liabilities, she lists assets totalling $976,100, I deduct the sum of $13,400 (being the balance in the past of the Respondent’s bank accounts), and I find that the gross value of the assets is $962,700.
In respect of the liabilities, they are not the subject of challenge. They were confirmed by the Applicant in the witness box and they comprise the following: $90,200 in respect of the L Town, Queensland property, which are secured over the former matrimonial home which the Applicant seeks to retain, and the sum of $20,800, being an unsecured business loan.
Therefore, rounding figures to the nearest thousand, I find that the net non-superannuation pool is in the sum of $852,000, being $963,000 in assets and $111,000 in liabilities, as follows:
Assets Estimated Value E Street, Suburb J (sworn valuation) $595,000 K Street, L Town QLD (sworn valuation) $95,000 Proceeds of the sale of the business retained by Mr Cheetham $180,000 Sale proceeds of Motor Vehicle 1 retained by Mr Cheetham $20,000 Mr Cheetham’s Motor Vehicle 2 $20,000 Motor Vehicle 3 $13,000 Business Cash retained by Mr Cheetham $30,000 Funds retained by Ms Alvey $10,000 TOTAL ASSETS E$963,000
Liabilities Estimated Value Joint H Bank debts
Account Number …90 (Obtained to purchase the Queensland property)
Account Number …89 -Unsecured Business Loan$90,200
$20,800TOTAL LIABILITIES
TOTAL NET ASSETS$111,000
$852,000
Mr Lethlean, on behalf of the Applicant, submitted that, given the length and other facts of the parties’ de facto relationship, there was no reason to differentiate between their contribution-based entitlements, either in relation to superannuation or other assets. However, he also submitted, in my view consistent with authority and appropriately, that given the ages of the parties and the fact that their retirement is probably over a decade away, it was appropriate to proceed upon a two-pool approach. I clarified with Counsel the amount of the superannuation split sought by the Applicant if I were to accede to an equal division. He agreed that, in circumstances where the parties have superannuation entitlements totalling $242,000, of which the Applicant has $10,223, the adjusting amount of the superannuation split is $110,788 in order to achieve equality.
Turning then to the issue of contribution-based entitlements and any section 90SF(3) adjustments, the Applicant sought – until this morning – 62.5 per cent of a net asset pool that included add-backs. Today, she has sensibly revised her aspirations and her case downwards to a position where she seeks somewhere between 50 and 55 per cent of the net asset pool to her and somewhere between 45 and 50 per cent of the net asset pool to the Respondent. She contends that the parties’ respect contributions – financial, non-financial and homemaker and parent - were equal during the relationship. Further, she seeks up to another five per cent on account of post-separation contributions and section 90SF(3) factors.
Earlier in these Reasons for Judgment, I have outlined the evidence and what I find to be the contributions of the parties within the factual matrix of this case. In circumstances where I have acceded to the majority of the add-backs sought by the Applicant, I do not find that the parties’ overall contributions were anything other than equal, notwithstanding some modest post-separation contributions by her after a relationship spanning more than three decades. I say that noting, of course, that there is no presumption of equality of contribution. Judges of this Court start with a tabula rasa upon which they identify and assess the parties’ respective contributions. Similarly, however, there is no presumption that any of the categories of contribution set out in section 90SM(4)(a)-(c) are of greater or lesser weight than any other of those contributions. I have a broad, unfettered jurisdiction to make such orders as I consider just and equitable, taking into account the matters in section 90SM(4), including contributions of the kinds specified in paragraph (a), (b) and (c) thereof, as well as the matters set out in section 90SF(3), which are imported by section 90SM(4)(e).
This is, on any view, a long de facto relationship which exceeded 30 years in duration. There are two adult children. There were no initial contributions at the commencement of the parties’ de facto relationship, nor is there any evidence of any external contributions by any third parties such as gifts, inheritances, trust distributions from family members or the like.
In the circumstances, on the evidence, I find that during the marriage, each of the parties made differing but equal contributions; the Respondent, primarily, as the bread winner and the Applicant, primarily as the homemaker and parent, albeit that she also made some financial contributions, by way of her income. In the circumstances of this case, it is not for the Court to unscramble the mix of contributions comprising the parties’ lengthy de facto relationship. In the exercise of my discretion, and adopting a broad overview open to me, I find the parties’ contributions were and should be assessed as being equal.
Turning then to sections 90SM(4)(e), which imports the matters set out in section 90SF(3). As I have noted above, the Respondent seeks an adjustment of up to five per cent. I decline to make a further adjustment for the following reasons. The Applicant is in receipt of income in excess of $1000 a week and she deposes that she is in good health. I do not have any evidence from the Respondent regarding any section 90SF(3) factors applicable to him, just that which the Applicant deposes in that regard. Again, I am not in any way critical of her. If the Respondent saw fit, he could have applied to adduce such material before me today. I am not penalising her for his failure. However, I am acutely conscious that, as part of her assessed 50 per cent contribution-based entitlement on the basis of contribution, she is receiving hard assets. A substantial proportion of his 50 per cent share will be comprised of add-backs, in excess of $200,000. Again, that is a matter of his own doing. He could have applied to participate and, if successful he could have adduced evidence regarding the amounts sought to be added back. He did not do so. Had he continued to retain lawyers, he could have applied to defend the proceedings and challenge the Applicant’s evidence. He is the author of his own misfortune, if any, and has no one to blame other than himself.
I therefore find the overall outcome of this case to be one of equality, which I calculate to be as follows in monetary terms. Of a net asset pool of $851,700, which I have rounded up to $852,000, each party is entitled to $426,000. The Respondent’s $426,000 will be comprised as follows. There is the $180,000 add-back from the sale of the business. There is the rounded up $30,000 add-back in respect of the cash he retained. There is the sum of $20,000, being the sale proceeds of the Motor Vehicle 1 which the Respondent retained and for which he has not accounted. There is the Motor Vehicle 2 motor cycle valued, without challenge, at $20,000. Those four amounts total $250,000, such that the payment to be made by the Applicant to the Respondent is $176,000.
By reason of the earlier finding of equality that I have made, there is no reason in this case to differentiate between the parties’ contributions in respect of superannuation. Further, for the reasons above, I accept Mr Lethlean’s submission that superannuation should be treated as a separate category and that the amount of the superannuation to be split from the Respondent to the Applicant is $111,000.
In circumstances where I have been provided with a detailed minute of orders sought by the Applicant, I will make orders in accordance with that minute, with the amendments that I have indicated, which are to insert $176,000 in paragraph 1 as the amount of the payment to be received by the Respondent, the insertion at paragraph 10 of the add-back of $180,000 and the correction in paragraph 13 of $111,000 by way of the superannuation split.
I also have before me an application for costs made by the Applicant de facto wife. It was an application that was foreshadowed on the last occasion, on 1 December 2021, in circumstances where the Respondent was unrepresented. When I asked him then whether he understood what was involved in the making of a costs order, he told me that he did not. Again, I was concerned to ensure that he be afforded natural justice and the opportunity to seek legal representation, at least to have those matters explained to him. For reasons best known to him, that has not occurred.
Section 117 (1) of the Act sets out the general rule that, with certain exceptions, each party to proceedings under the Act shall bear his or her own costs. That, of course, is not the end of the matter. Notwithstanding that general rule, subsection (2) provides that if the Court is of the opinion that there are circumstances that justify it in doing so, the Court may make such order as to costs as the Court considers just.
It is trite to say that the discretion reposed in judges under section 117 is of the broadest possible nature, confined only by the matters set out in subsection (2A) and that is reinforced, insofar as it needed to be reinforced, by the decision of the High Court in Penfold v Penfold (1980) 144 CLR 311; (1980) 5 Fam LR 579; (1980) FLC 90-800; [1980] HCA 4.
Mr Lethlean has properly taken me to several of the paragraphs in subsection 117(2A) which he submits would jointly and severally justify an order for costs being made in his client’s favour, in departure from the general rule. He has pointed out to me that, whilst there is no information about the Respondent’s financial circumstances, nevertheless, by reason of my orders, he is to receive a property settlement which, on the figures, including add-backs, is in excess of $400,000, including a payment of $176,000 from the Applicant. So, if he presently be in straitened financial circumstances, which is unknown, they will be somewhat relieved by the payment he is to receive from the Applicant. He may also still retain all or part of the moneys added back, including those retained by him upon separation and not explained by him.
Mr Lethlean has made the point that, effectively, the Applicant’s legal costs on an indemnity basis approximate approximately one year of her pre-tax salary. He has also referred to the conduct of the Respondent, although it might also be described as his lack of conduct. I have said earlier in these Reasons for Judgment, as well as those delivered on 1 December 2021, that he did absolutely nothing until the proverbial 11th hour and 59th minute and thereafter, he has done very little. He was given a chance to get his proverbial house in order and to seek to participate, if he could persuade me that I should discharge or vary the order made by Judge Mercuri (as her Honour then was) and he has not done so.
He has not only failed to participate in the proceedings but he has also failed to discharge his obligations of full and frank disclosure. That which the Applicant has been able to ascertain of his financial circumstances, in part, has had to be ascertained through the issuance of subpoenas, in the absence of any financial disclosure by him.
I disagree with and do not accept the submission by Mr Lethlean that paragraph (d) of subsection (2A) is properly engaged in these circumstances. I do not think it can properly be said that the proceedings were necessitated by a failure of the Respondent to comply with previous orders of the court. Even if he had complied with the requirements cast upon by the Orders made in December 2020 and January 2021, the matter may well have proceeded to trial.
In my opinion, paragraph (e) is engaged. The Respondent has been wholly unsuccessful in the proceedings, because the Applicant has, essentially, received that which she sought.
With the exception of one add-back and some minor mathematical corrections, I have found the asset pool to be as the Applicant submitted it to be. Further, in respect of the percentage outcome, the Applicant sought a property settlement in the order of 55 to 50 per cent to her and 45 to 50 per cent to the Respondent. In the particular circumstances of this undefended case, I find that, in respect of section 117(2A)(e), it is really two sides of the one coin; the Applicant has been wholly successful and, accordingly, the Respondent has been wholly unsuccessful.
I have had regard to an exchange of email correspondence between the parties that was tendered to me. On 17 June 2019, there was what might be described almost as a cri de coeur by the Applicant to the Respondent, prior to the institution of these proceedings, seeking that he engage with her and proposing that there be an equal division of property between them, and that is what I have ultimately ordered. Whilst the sum she offered to pay him was less than that which I have ultimately ordered, I am nevertheless prepared to take into account the terms of the offer. However, in circumstances where there were, at that time, no “proceedings”, I take the correspondence into account under section 117(2A)(g) as a matter I consider relevant.
I am satisfied that in circumstances where the Applicant sensibly proposed (and ultimately achieved, as she sought) an equal division of the assets, albeit at a time when there had not been valuations obtained, the correspondence tendered is relevant to the question of costs. The Respondent, consistent with his conduct (or his lack of conduct) in the proceedings, took over two months to respond to the Applicant, only responding on the 24 August 2019. There is no suggestion that there was any correspondence in between those two dates. When the Respondent ultimately saw fit to respond to the Applicant, he wrote:
Ms Alvey, for your information, I intend to return rightfully to my home after the AVO. My request is that, perhaps, you could move on for two years while I renovate the house. Sound fair? All the best. Mr Cheetham.
That, at best, was non-responsive and, at worst, was a contemptuous response by him to the Applicant.
In the circumstances, I am satisfied that circumstances do exist that justify me in making an order for costs in favour of the Applicant. Mr Lethlean, on her behalf, has sensibly and properly, in accordance with legal authority, not pursued his application for indemnity costs: Prantage & Prantage [2014] FamCA 850. He informs me that, on a party-party basis on scale, the Applicant’s costs are in the order of $50,000. Whilst I have no reason to doubt that, nevertheless, without seeing a breakdown of the costs, I would be reluctant to order a lump sum of that magnitude. I have been urged by Mr Lethlean, on behalf of his client to fix a sum certain, as opposed to ordering that the Applicant’s costs be taxed. In the circumstances, I propose to order that the Respondent pay the Applicant’s costs of an incidental to these proceedings, since their inception, fixed in the sum of four-fifths thereof, being $40,000, which is to be deducted from the payment to be made by her to him.
I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Strum. Associate:
Dated: 20 December 2021
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