BADAWI & OAKESON
[2020] FCCA 1410
•23 June 2020
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BADAWI & OAKESON | [2020] FCCA 1410 |
| Catchwords: FAMILY LAW – Property – parties separated 2007 and entered into informal settlement in 2011 – effect on informal property settlement – wife’s “negative contribution” – credit. |
| Legislation: Family Law Act 1975 (Cth) ss.75(2), 79 Evidence Act 1995 (Cth) s.140 |
| Cases cited: Stanford v Stanford (2012) 247 CLR 108 Woodland & Todd (2005) FLC 93-217 Jones v Dunkel (1959) 101 CLR 298 |
| Applicant: | MR BADAWI |
| Respondent: | MS OAKESON |
| File Number: | MLC 4101 of 2009 |
| Judgment of: | Judge McGuire |
| Hearing date: | 22 May 2020 |
| Date of Last Submission: | 22 May 2020 |
| Delivered at: | Launceston |
| Delivered on: | 23 June 2020 |
REPRESENTATION
| Counsel for the Applicant: | Ms S. Buchanan |
| Applicant in person litigant |
| Counsel for the Respondent: | Ms P. Byrnes |
| Respondent in person litigant |
ORDERS
That within fifty six (56) days of the date of these Orders the husband pay to the wife a lump sum of $52,657 provided that should the husband elect within fourteen (14) days of the date of these Orders and give notice in writing to the wife (or solicitors on the record for her) within that fourteen (14) day period then there be alternatively a splitting and flagging Order, as is appropriate in respect of the husband’s A Super Fund policy and entitlement with a base amount to the wife of $52,657 and provided that should the husband take the option to satisfy the wife’s entitlement by the ‘splitting’ or ‘flagging’ Order then the parties jointly bring in a settled Order accordingly together with approval from the fund or proper procedural fairness within forty two (42) days of the date of these Orders.
That in all other respects each of the parties be wholly entitled to and to the exclusion of the other, all property of whatsoever nature and kind currently in the possession of or under the control of that part as at the date of these Orders and that each party be solely responsible for and indemnify the other in respect of all liabilities incurred by that party since separation and any and all liabilities attaching to any asset retained by that party.
That pursuant to section 81 of the Family Law Act 1975 the parties intend that these Orders shall as far as practicable finally determine the financial relationship between them and avoid further proceedings between them.
IT IS NOTED that publication of this judgment under the pseudonym Badawi & Oakeson is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT HOBART |
MLC 4101 of 2009
| MR BADAWI |
Applicant
And
| MS OAKESON |
Respondent
REASONS FOR JUDGMENT
Applications
These are property proceedings on the husband's application. He proposes no operative orders for further distribution of the parties’ property in the sense that each party currently retains the property in his and her possession.
The wife asks for the following orders in her case summary document:
1.That the husband pay to the wife the sum of fifty (50) percent of the current estimated value of the husband’s 2007 superannuation amount of $422,330 as at 21 May 2020, being the sum of $211,165.
2.That each party otherwise retain the assets and liabilities presently in their respective names.
The wife originally argued for a spousal maintenance order but did not prosecute such at the hearing of the matter.
Background
The husband is 54 years of age. He is a public servant.
The wife is 53 years old. She is currently unemployed but has ambitions to return to the workforce in the fields of public service.
The evidence is that the wife has not re-partnered. The husband has re-partnered although I am unsure of the status of that relationship which, nevertheless, does not feature in the matter before me in the sense of either support or dependency.
The parties commenced cohabitation in 1991.
In 1997 the parties purchased a property at Suburb B for $133,500 with a mortgage of $100,000 after previously owning and selling a property at Town C.
In 2003 the property at Suburb B was sold for $313,200. The parties moved into the wife's mother's home at D Street, Suburb E. They paid $165,000 towards improvements for that property including extensions and effectively the building of a 'granny flat'. They did not achieve title to the property but entered into an agreement with the wife's mother protecting their investment and whereby they received a reduced rental. The written agreement between the parties and the wife's mother provided 'ownership' in the form of equity of 25.6% in the D Street, Suburb E property. That agreement is dated 2 April 2004.
In or about late 2003 the parties also purchased a property at F Street, Suburb E for $230,000 such that was subsequently sold in 2005 for $245,000 and without any net capital gain.
The parties separated in October 2007. The wife remained living in the property at D Street, Suburb E with her mother.
The parties agree (although the wife's evidence in Court was equivocal as to any such agreement) according to their affidavits to have entered into negotiations in about 2011 and reached an informal agreement as to a financial settlement. No Court orders or binding financial agreement evidenced their informal agreement. The husband says that the agreement was that the wife would retain the parties’ 25.6% interest in the wife's mother's property at D Street, Suburb E where he values that share, at that time, at $217,600 (gross). He says he paid out a lease on the wife's vehicle of $7,900 and she retained the vehicle. He says the wife retained all of the furniture and contents and her superannuation which she valued at $35,000 at that date. On the husband's side of the ledger he says that he retained his superannuation which was valued at $272,730 in 2010 and a motor vehicle valued at $3,000. The husband was to continue meeting instalment payments on the mortgage of E$170,000 apparently secured by the wife’s mother’s home. The inference is that the husband was to take responsibility for the mortgage but in the form of meeting the instalment payments.
The wife's mother sold the D Street, Suburb E property in late 2011 for $900,000. This was an increase of approximately $50,000 from the husband's estimated value of that property as at the date of the parties’ informal agreement. Obviously the parties’ mortgage was to be satisfied from the proceeds of sale.
The wife claims that her mother did not pay to her 25.6% of the value of the property or any sum upon the sale of the D Street, Suburb E property.
The wife's mother has since passed away. The wife says that she received no benefit from her late mother's estate although apparently her siblings did. The wife’s late mother’s Will has not been produced in these proceedings. The wife says that her mother passed away in 2016 and that she is now statute barred from claiming any benefit from the estate.
Although he seeks no orders altering the property interests of the parties, the husband is the applicant in these proceedings by reason of previously filing an application for parenting orders and where the wife in her response activated financial issues. A parenting application was first filed on 5 March 2010 in respect of the parties’ two daughters, X and Y.
Final parenting orders were made by consent by her Honour Judge Bender on 23 June 2011. Those orders provided inter alia for the parents to have equal shared parental responsibility for X and Y with the children to live primarily with the wife and to spend time with the husband. The husband brought a Contravention application on 19 February 2014 alleging that the wife had not complied with orders for the children to spend time with him. Further interim orders were made on 9 September 2014 continuing residence for the children with the wife but altering time for X and Y with the husband.
On 8 October 2014 the Department of Health and Human Services issued a Protection Application in the state Courts in respect of X and Y. An interim Accommodation Order was made in favour of the husband based on asserted concerns in respect of the mother's mental health and the impact on the children, including X suffering anorexia. There followed a hearing of 29 days duration in the state Courts during 2015 culminating in orders for the children to remain in the care of the husband. The wife entered an Appeal to that decision in the County Court. That Appeal was dismissed on 13 October 2016. The husband then brought fresh parenting proceedings in this Court on an application filed 20 October 2016. Final orders were made by consent on 11 July 2019 continuing the children living with the husband and spending day time with the wife. X is now an adult. Y is 15 years of age. She lives with the husband and her relationship with the wife is tenuous.
The wife asserts that she continues to suffer from 'multiple medical complications' including having undergone surgery for a back condition. The evidence in Court now discloses that the wife received a compensation payment of a net $69,000 (gross $100,000) in 2019.
The Husband's Case
The husband argues that there should be no further distribution of the property of the parties or either of them on the following broad bases:
(a)Firstly, there were no unusual positive contributions during the course of the relationship. The husband worked throughout the marriage. The wife worked until the birth of the first child and later returned to work and still later worked part-time whilst assuming a parenting and homemaker role.
(b)Upon separation the children lived primarily with the wife but the husband paid the mortgage, half school fees and lease payments on the wife's car together with other sundry payments in lieu of child support. From 2011, and the discharge of the mortgage, the husband paid child support as assessed until the children came into his care in October 2014.
(c)He then says that he has made a superior post-separation contribution by reason of his sole financial support and actual care of the children from October 2014. He has met private school fees for the children.
Secondly, the husband says that the parties reached agreement as to an informal property settlement in 2011. At that time they owned 25.6% interest in the wife's mother's home at D Street, Suburb E. He estimates the property to be valued at that time at $850,000 with the 25.6% interest valued at $217,600. The agreement provided for the wife to retain her own superannuation entitlement ($35,000), a Motor Vehicle 1 ($7,900) and the majority of furniture and contents. The agreement provided for the husband to retain his superannuation entitlement at its 2011 valuation ($272,730) plus a motor vehicle ($3,000) but with him paying out the car debt ($7,900). The husband estimates that the division of property pursuant to the informal agreement saw him retaining property inclusive of superannuation at value of $267,830 and the wife retaining $260,500 of value inclusive of her superannuation plus the furniture and contents.
The husband says that the D Street, Suburb E property was sold post-separation by the wife's mother in 2011 for $900,000. The wife's share retained by her pursuant to the informal agreement at 25.6% would give her a gross $230,400. There was, however, a remaining mortgage on the relevant property in the names of the husband and the wife with a balance of some $170,000 thereby giving the wife's contingent interest a value of approximately $60,000. The husband says, however, that he had continued to meet the mortgage payments since the parties’ separation.
For reasons that remain unclear, the wife did not, at the relevant time, receive or claim her 25.6% interest in the property from the mother upon its sale. Further, it is the wife's evidence that she did not benefit from her late mother's Will. The husband argues, therefore, that the wife has voluntarily relinquished her entitlement to the proceeds of sale of the property (E$60,000 net) and/or an entitlement to her from her late mother's Will.
Consequently, and in all of these circumstances, the husband argues that the settlement reached by the parties in 2011 was just and equitable and should not be 'set aside'. In summary, he says that the parties received near equality by reason of the husband retaining his superannuation and minimal tangible assets whereas the wife retained the only valuable tangible asset of the parties being the 25.6% interest in the wife's mother's home but with the benefit of the husband agreeing to continue to meet the mortgage payments in respect of that interest. The husband says that his post-separation contributions to the children are relevant. Further, he says that the wife has made no contributions to her superannuation since separation.
Thirdly, and perhaps connected to the second argument, the husband further argues that during the course of the marriage the wife unilaterally incurred significant debts through credit cards. Specifically, he says one group of card debt amounted to $50,000 and a later group of card debt in the sum of $120,000. He says the parties increased their mortgage so as to satisfy these debts with the implication being that the $170,000 mortgage can be equated to the debt incurred by the wife. He says that he had no prior knowledge of and did not consent to the expenditures which did not benefit either himself or the family generally. He cites examples of the wife spending money to preserve their daughter's umbilical cord. He gives examples of the wife's unilateral payment of legal debts in respect of a medical product invented by her father. In summary, the husband impliedly argues that 'inequality' in the informal settlement of 2011, if any, is set off against the wife's ‘wastage’ in respect of the accruing of credit card debt. In addition to the credit card debts, the husband says that the wife unilaterally removed $30,000 from a joint account being from the proceeds of sale of a jointly owned property and paid legal bills in respect of the wife’s pursuit of legitimising a medical invention of her late father, apparently being a herbal remedy, the evidence of which before never achieved anything more than ‘vague and uncertain’ status.
The Wife's Case
Although her evidence in Court as to the fact of an informal agreement reached in 2011 was equivocal and unsatisfactory, the wife’s affidavit sworn 28 June 2019 at [95]–[96] seems to concede the existence of the agreement and the factual basis of that agreement put by the husband. In any event, the wife correctly says that she was entitled to only a net $60,000 from the 25.6% gross interest in her mother's home at its sale when the mortgage ($170,000) is taken into account and that this represents substantially less than the ‘equality’ claimed by the husband.
The wife says that the informal agreement of 2011 should hold little or no weight and it does not comprise a full and final property settlement with the imprimatur of the Family Court. She argues that relevant s.75(2) factors favour her and should properly be taken into account including the discrepancy in the earning capacity of the parties. Hence, the wife argues that she should be entitled to 50% of the current value of the husband's 2007 superannuation entitlement now valued at $422,330 being an entitlement of $211,165.
It is important to note that a valuation of the husband’s A Super Fund has now been obtained as of 2007. Whereas the husband apparently understood it to be an entitlement perhaps represented by a ‘withdrawal benefit’ of $272,730, there has now been a valuation obtained in respect of an entitlement to what is undoubtedly not a simple accumulation fund. No dispute was taken at the trial of the valuation in 2007 being $422,330. It is also agreed that the policy has a current valuation of $680,406.
The Relevant Law
Matters of property settlement are provided for in s.79 of the Family Law Act 1975 (“the Act”).
The first task for the Court is to establish the legal and equitable interests of the parties in property. ‘Property’ includes assets, liabilities and financial resources of the parties or either of them. Amendments to the Act provide that superannuation is to be 'treated as property' for the purposes of the exercise although superannuation is not an 'asset' in that it usually cannot be immediately crystallised.
It is generally accepted that the relevant date for the establishment of the contents of the property pool and the attribution of value to those elements of the pool is at the date of the hearing. Importantly, neither party in the matter now before me urges me to work from the current financial positions of the parties. Nevertheless, Counsel for the wife does provide evidence as to the current value of the property of the parties which would remain relevant to a later consideration of any adjustments under s.75(2) of the Act. However, the orders sought by the wife reference the interests of the parties as at the date of separation in 2007 and, in particular, the value of the husband's superannuation entitlement then. This is an argument and position taken by the wife which I understand given the lengthy period since separation and the husband's contributions to his superannuation following the parties’ separation.
The well-known decision of the High Court in Stanford v Stanford[1] emphasises that pursuant to s.79(2) of the Act the Court is firstly to determine whether it is just and equitable to make any orders altering the property of the parties. This is a determination to be made on the circumstances of the parties and not one simply conflated with the later considerations of contributions.
[1] (2012) 247 CLR 108
In the matter now before me, the husband argues that there should be no orders altering the interests of the parties but not necessarily on the basis of the considerations in Stanford but rather, he argues, that justice and equity have already been obtained by reason of the informal settlement in 2011 including considerations of contributions and, in particular, the husband's argument that the wife ‘wasted’ the parties’ wealth by reason of her unilateral incurring of substantial debt.
Ordinarily, and after the establishment and value of the property pool, the Court would consider any alteration or distribution of the parties’ net property on the basis of contributions including direct and indirect financial contributions and non-financial contributions including as homemaker and parent. The Court would then consider whether any further adjustment is proper, just and equitable to either party on a consideration of the factors set out in s.79(4)(d)-(g) including any relevant matters in s.75(2) of the Act.
It is generally accepted that the Court should then 'stand back' and consider whether the proposed orders in themselves provide justice and equity and not simply the mathematical process of consideration of contributions and s.75(2) factors.
There are two broad aspects of the law which lay at the crux of the dispute now before the Court. Firstly, the husband argues that justice and equity is achieved by reason of the informal agreement between the parties made in 2011 and that effectively the Court should now give its imprimatur to the intent and force of that agreement. Secondly, the husband argues that the 2011 agreement was just and equitable inter alia by reason of the wife's wastage of the parties’ wealth and, in particular, by reason of the accruing of two different credit card liabilities in the sums of $50,000 and $120,000 together with the unilateral disbursement of another $30,000.
Informal Agreements
It is not uncommon for parties to come to Court seeking orders under s.79 of the Act where there have been prior informal agreements between them. It is well established that parties cannot obtain finality in respect of the alteration of property interests unless and until they have the imprimatur of the Court by either a Binding Financial Agreement or a Court Order. The question, therefore, is as to the relevance, if any, of the informal agreement between these parties in 2011.
In Woodland & Todd[2] the Full Court stated:
38.Where parties enter into an agreement concerning property, other than agreement approved under the provisions of the Act or embodied in consent orders, and one party subsequently commences proceedings under s79 for alteration of property interests, the Court must determine the application on its merits having regard to the factors as set out in s79(4) as they exist at the time of the hearing of the application under s79 and according to the law in force at that time and not, as to either of those two matters, at the time the agreement was made. There is no threshold test, before embarking upon the s79 exercise, to determine whether the earlier agreement was just and equitable at the time it was made according to the facts as they then existed and the law then in force. The earlier agreement should be considered (as an indication of what the parties may have regarded as just and equitable at the time), but its provisions only give effect if they coincide with an order which is just and equitable according to s79 of the time of the hearing.
39.In determining s79 applications in circumstances where there has been an earlier agreement, it will often be necessary to consider what was the value of the parties’ assets at the time of the agreement, what their various contributions were to that time, and what might have been an appropriate s75(2) adjustment. A consideration of these matters might well be necessary in order to provide a background to the parties’ understanding of what was a just and equitable settlement at the time. However, and perhaps more significantly, it would generally be necessary for the Court to acquaint itself with changes in the composition and value of the property pool, so that post-separation contributions can be assessed.
[2] (2005) FLC 93-217
Consequently, the informal agreement between these parties in 2011 is not binding nor determinative now of their rights and interests in property. The terms of the agreement, however, and the parties’ understanding of that agreement and its provisions at the time may well be relevant. Nevertheless, the Court should usually consider the content and value of the property pool as it now stands but also to take into account post-separation contributions including contributions post any informal agreement.
Alleged Wife's credit card debts – 'wastage'
The husband says that the wife in 2003 had unilaterally accrued liabilities of $50,000 through five separate credit cards. He says that the debt was satisfied by increasing the mortgage on their home at Suburb B. The husband says that at the time wife was not employed and once the mortgage was increased she, in front of him, destroyed the five credit cards.
The husband says, secondly, that in 2007 the wife admitted to him that she had accrued further credit card debts of approximately $120,000. The husband says that again monies were borrowed against their interest in the D Street, Suburb E property and subject to mortgage so as to satisfy the $120,000. Significantly, the husband says that the debts were accrued unilaterally by the wife and that he and the children did not receive any tangible benefit from the expenditure.
In Kowali & Kowali[3] Baker J said:
As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
b)when one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised of their value.
Conduct of the kind referred to in para (a) and (b) above having economic consequences is clearly in my view relevant under sec 75(2)(o) to applications for settlement of property instituted under the provisions of sec 79.
[3] (1981) FLC 91-092 @ p.76,644
The husband in the matter now before me is by implication asking me to 'add back' the sum of $170,000 being the alleged unilateral debts accrued by the wife and so as to give justice and equity to the terms of the parties agreement in 2011 and, more relevantly, in the sense of current justice and equity pursuant to s.79 of the Family Law Act 1975.
Whilst issues of credit remain alive between the parties as to the alleged unilateral nature of the expenditure, it is well established that 'add backs' are a discretionary exercise but one where the authorities suggest to do so is 'the exception rather than the rule'.[4]
[4] Trevi & Trevi [2018] Fam CAFC 173
The Full Court in Omacini &Omacini[5] held that 'add backs' fall into three clear categories being:
(a)where the parties have expended money on legal fees;
(b)where there has been a premature distribution of matrimonial assets; and
(c)‘Waste’ or wanton, negligent or reckless distribution of assets.
[5] Omacini & Omacini (2005) FLC 93-218
Credit
It is an unfortunate aspect of this matter that each of the parties was self-represented during much of the forensic preparation stage of the application. My understanding is that both Counsel were instructed on a direct brief and, at least in the case of the Counsel for the wife, only instructed on the evening prior to the trial although the wife had previously directly instructed Counsel who became unwell shortly before the trial. As such, the preparation of the cases on the parts of both parties was entirely unsatisfactory. Whilst each was keen to make assertions of fact, both in their own favour and critical of the other, there was little or no supporting evidence and little corroborative evidence in the form of documents. Neither of the parties adduced evidence from witnesses who might have reasonably been expected to provide corroboration thereby frequently bringing to the fore considerations under Jones v Dunkel[6]. The result, of course, was that the prosecution of each case by their barristers was incredibly difficult and I should say that each Counsel, suffering these difficulties, provided admirable representation and advocacy for their respective clients. Documents that might also be reasonably expected to be available to support assertions of fact or to resolve disputes have not been disclosed and/or were not available for tender to this Court.
[6] (1959) 101 CLR 298
From the Court's perspective therefore, determinations which I am required to make ultimately rest on issues of disputed fact and credit between the two parties themselves. It remains the case, however, that a party making an assertion of fact has an onus to prove that fact on the balance of probabilities. It is not for another party to 'disprove' any assertion or allegation or to attempt the impossible in proving a negative.
The standard of proof in matters before this Court is one of 'on the balance of probabilities'. Section 140 of the Evidence Act 1995 (Cth) provides:
140(1)In a civil proceeding, the Court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.
(2)Without limiting the matters that the Court may take into account in deciding whether it is so satisfied, it is to take into account:
(a)nature of the cause of action or defence; and
(b)the nature of the subject matter of the proceeding; and
(c)the gravity of the matters alleged.
As such, issues of credit between these parties assume greater importance in the makings of necessary findings of fact. I did, of course, have the distinct advantage of being able to see and hear each of the parties give their evidence. In Galea v Galea[7] Kirby ACJ considered the advantages available to trial judges including the following:
[7] (1990) 19 NSWLR 263
(a) hearing the evidence in its entirety;
(b)hearing and seeing all evidence in context, chronologically and logically advanced;
(c)having time during adjournments and during the running of the case to reflect upon the evidence and to weigh it against all other evidence while fresh;
(d)hearing and seeing interruptions, hesitations and delays in the giving of testimony; and
(e)observing body language, sometimes important for interpreting communication.
It is, of course, a crucial function of the judicial officer to assess the veracity of parties and witnesses in trials and in this sense, in these Courts, assume a role of juror as determiners of fact. In addition to the factors set out above, the Court has the benefit of directly hearing and considering any inconsistencies or contradictions in the evidence of a party/witness generally and in respect of any disputed facts.
I am, however, cognisant of the pitfalls of the giving too much credence solely to demeanour when considering the evidence of a witness[8]. The Court must always take into account circumstance and context and, not the least, that witnesses are likely to be nervous and restrained lest they fall into error or accidental disclosure. As such, it might be considered dangerous to arrive at findings of credit and undisputed fact simply on the observation of demeanour. Further, I am cognisant that the veracity of a witness’ evidence, particularly an interested party, may vary in respect of different factual circumstances and for a plethora of reasons and, as such, care must be taken in respect of generalised findings of credit although such appears to be permissible.
[8] Fox v Percy (2003) 214 CLR 118
Helpfully perhaps, and in such difficult evidentiary circumstances, I can rely on the decision of the Full Court in Weir & Weir[9] that where there has been less than full and candid disclosure then the Court may be ‘less cautious’ in making findings of fact.
[9] (1993) FLC 92-338
The husband was a good witness. He had excellent and realistic historical recall. He gave his evidence in a considered, informed and straightforward manner. He did not retreat from his basic propositions in cross-examination.
Unlike the husband, the wife was a poor witness. She prevaricated in her evidence. She showed a propensity to avoid the question or to deflect blame in circumstances to the husband. She was on a number of occasions inconsistent and contradictory in her evidence as for example, when cross-examined in respect of the alleged accruing of substantial credit card debts, the wife suggested that the husband left her to meet the costs of the family and the children and without reasonable financial support. Yet soon after she was keen to assert that the husband had been the person who had taken control of all finances in the relationship, paid the bills and left her without any knowledge. Her evidence in Court was that she may be required to spend $20,000 on potential surgery. Her evidence in her affidavit was that the surgery might cost $100,000. She was unable to give any or any reasonable explanation as to why she should not have benefited from her late mother's will whilst also volunteering to the Court that she and her mother had an excellent and mutually supportive and beneficial relationship. Similarly, she was unable to give any or any reasonable explanation as to why she should not have taken her entitlement of 25.6% of the net value of her mother's home upon the sale of that property. She claimed significant expenditure on legal costs in pursuing her father's herbal remedy invention. Yet she was unable to produce any accounts or corroborating evidence. She bluntly denied the husband's assertion that she accrued credit card debts of approximately $120,000 (separate from a previous assertion of $50,000 in credit card debts). Yet when asked the reason for the parties obtaining a mortgage, her response was 'I can't recall'.
The wife's evidence suffered significantly from a failure to provide corroborating documents or available corroborating evidence from witnesses as for example her failure to adduce evidence from her siblings as to why the wife herself may not have benefited from their late mother's Will. The wife's evidence in respect of this issue in itself was unsatisfactory. The late mother’s Will was not provided. Similarly, she was unconvincing in her evidence as to why she had not pursued her entitlement of an interest in this proceeds of sale of her mother's home.
In matters of credit I prefer the evidence of the husband in that I did not generally, or in a number of specifics, find the wife to be a witness of the truth.
The Property Pool
This is not a matter in which the contents or value of the property pool are in dispute. I borrow from the wife's case summary prepared by her Counsel which sets out the parties’ property pool as at the date of separation in 2007 and again currently: –
Property Pool – 2007
| Parties 25.6% interest in the wife’s mother’s home - equity | E $50,000 - $60,000 |
| Husband’s motor vehicle | $ 3,000 |
| Wife’s Motor Vehicle 2 | $ 7,900 |
| TOTAL | E $60,000 - $70,000 |
| A Super Fund valued at today’s dollar value (husband) | $422,330 |
| G Super Fund Account (wife) | $ 35,774 |
| TOTAL | $458,104 |
Current Asset Pool
| Husband’s 50% interest in H Street, Town J | E $ 125,000 |
| Husband’s savings | $ 4,000 |
| Husband’s Motor Vehicle 3 | $ 30,000 |
| Wife’s Motor Vehicle 2 | $ 2,000 |
| TOTAL | $ 161,000 |
| Liabilities | |
| Mortgage (husband) 50% | $ 103,503 |
| K Vehicles – husband’s motor vehicle | $ 30,000 |
| TOTAL | $ 133,503 |
| TOTAL NET ASSET POOL | $ 27,497 |
| Superannuation | |
| A Super Fund (husband) | $ 680,406 |
| G Super Fund Account (wife) | $ 348 |
| TOTAL | $ 680,754 |
The Court has been provided with valuations in respect of the husband's superannuation entitlement suggesting that it be categorised as a defined benefit.
Contributions
Neither party came into this relationship with any significant wealth. Both worked during the marriage with the wife taking time off to care for the children after their births.
The parties purchased a property at L Street, Suburb B in 1997 for $133,000. They obtained a mortgage then of approximately $100,000. That mortgage was later increased by a further $50,000.
In 2003 the parties moved into the wife's mother's home at D Street, Suburb E and jointly making contributions in 2002 and 2003 totalling $152,000 towards that property.
Following separation in 2007 the two children of the marriage remained living primarily with the wife until 2014. The husband says, and I accept, that he continued to meet the mortgage payments on a loan of $170,000 secured by the D Street, Suburb E home owned by the wife's mother. He made these payments in lieu of formal child support and in a quantum of $1,200 per month.
From 2014 the children lived with the husband. He was totally responsible for their support and financial support. The evidence suggests that the wife paid no child support over and above any statutory minimum.
The husband has continued to contribute to his superannuation entitlement following the parties’ separation in 2007.
There is evidence that the wife has received a damages compensation payment in about 2019 with a net entitlement to her of $69,000. She says that she retains only $8,000 of those monies. Again, the wife's evidence was unsatisfactory as to how she has spent a sum of $61,000 in a period of less than five months. Nevertheless, it is not argued that the husband has made any contribution towards that damages settlement.
In circumstances where the post-separation contributions of the husband in respect of his care for the children and to his superannuation entitlement are the major considerations in respect of the current property pool with the parties generally contributing by way of their employment and homemaker and parenting roles, the husband's argument that the wife has 'wasted' $170,000 in credit card debts and also a unilateral transfer of $30,000 from the proceeds of sale of a home by her towards legal costs in respect of her father's invention remains a crucial consideration. As mentioned above, the Court is not assisted by any corroborative documents or evidence from witnesses in respect of this important dispute. I repeat that I observed and heard the husband to be a far more impressive witness than was the wife. There are factors other than my simple observations of the demeanour of the parties which assist me in finding, on the balance of probabilities, that the husband’s version of history is both truthful and accurate.
Firstly, the husband was (properly in my view) cross-examined as to whether or not he passively acquiesced in the wife's expenditure over such a significant period of time. He denied pre-existing knowledge of the wife's propensity to spend on credit cards. He said that he did react to her expenditure by satisfying her accrued debts in a sum of $50,000 in about 2003. His evidence is supported by the increase in the parties’ mortgage liability by $50,000. His unchallenged evidence is that the wife admitted to him in 2007 that she had then accrued a further $120,000 in debts. Again, an extension of mortgages to a total of $170,000 provides some mathematical corroboration of the husband's evidence. The husband was not challenged in respect of his assertion that the wife openly admitted to him that she had accrued the debts. He was able to give examples of the wife’s unilateral expenditure, such as large and frequent payments for telephone psychics. He gave examples of unnecessary furniture purchases.
The wife in this Court was unable to give any explanation as to the parties seemingly increasing their mortgage liability.
The wife's evidence was inconsistent and contradictory in respect of the nature of financial responsibility and transactions during the course of the marriage. Firstly, she said that the husband left her and the children without support with the implication that she had to meet all household and children’s expenses and hence fell into debt with the implication of credit card usage. Later, she accused the husband of taking sole responsibility for the household finances.
The husband was able to give evidence of specific purchases made by the wife without his consent.
The husband was not challenged, or successfully challenged, as to his evidence as to the unilateral transfer of $30,000 from the sale of a property by the wife to satisfy legal debts and without the consent of the husband. The wife herself agreed that large amounts were spent on legal fees for the pursuit of her late father’s ‘cure’ for medical disorders.
I am generally satisfied that the parties increased their mortgage substantially during the course of the relationship. I am satisfied that that increase correlates to the husband's assertions in respect of the wife accruing credit card debts totalling $170,000 over a number of years. The wife has been unable to give any alternate explanation as to why the parties increased their mortgage liability.
The question remains, therefore, whether the wife’s expenditure, which was obviously not an aberration, was such that I could find it to be unilateral and then 'wanton, reckless, or negligent'? Again, the wife's evidence in respect of management of the household finances was unsatisfactory and at times contradictory. She was unable to give any persuasive evidence as to the reasons for her expenditure. She did not deny outright the fact that she had incurred credit card debt. She was unable to provide a quantum for her indebtedness. She was unable to give evidence as to any particular benefits received by the husband or the family in respect of her expenditure save and accept a suggestion by her that the husband was involved in and had some knowledge of the legal expenses incurred in respect of pursuing her husband's medical disorders. I accept the husband’s evidence that he was not a party to or acquiesced in the wife’s credit card expenditure.
In summary, I am of the view that the wife acted unilaterally in the accruing of credit card debt. I am satisfied generally that the husband and the family did not benefit in the sense of their wealth situation by the wife's expenditure. I am satisfied that the expenditure was reckless and consistent with the wife's propensity to incur debt without real benefit and to do so without consultation or consent of the husband. In practical terms the wife's expenditure has impacted significantly on the wealth of these parties and manifested in an otherwise unjustifiable mortgage loan of $170,000. I do not necessarily reach this conclusion on a strict ‘dollar-for-dollar’ approach generally and accept that some of the wife’s expenditure and excesses must reasonably have been visible in the parties’ lives but I am not required to follow a strict mathematical audit approach. Rather, it is the evidence of the wife’s unilateral actions, propensity, and the impact on the parties’ wealth evidenced in their mortgage liability at separation that leads me to this conclusion. I am at a loss to understand why the wife did not adduce evidence, as for example from her siblings, to contradict the husband’s assertions and to explain why the wife did not benefit from what seems to be an estate of some value left by their mother.
Consequently, and whilst each party contributed significantly through a myriad of contributions during what was a relationship of some sixteen years duration, the wife’s actions or inactions operate as a ‘negative contribution’ through her unilateral credit card expenditure and the unilateral payment by her from home sale proceeds towards legal bills for her father’s medical invention. The quantum of her negative contributions must be seen within the context of the value of the parties’ property pool which, of course, sits both then and now, essentially with only the husband’s superannuation entitlement. I therefore find it ‘just and equitable’ to divide the relevant property pool as to 70% to the husband and 30% to the wife (noting that the wife’s Counsel includes the sum of $50,000 - $60,000 in the pool as the net entitlement of the wife or the parties from the sale of the mother’s home albeit not claimed by the wife from her mother.
The husband's unchallenged evidence is that the parties received $40,000 from the proceeds of sale of a property and that the wife unilaterally removed $30,000 of those monies to pay for legal fees in respect of the medical invention. I accept the husband's evidence.
Finally for the purposes of the property pool, as it now sits, the wife's evidence is unsatisfactory as to how she has dispersed the sum of $61,000 from her damages payment received as recently as 2019. Nevertheless, these monies were received by her some twelve years after separation and it is difficult to see how there could have been any contribution by the husband.
Section 75(2) Factors
The husband has the ongoing responsibility for the support of the 15 year old child Y. The child spends no time with the wife and the wife provides minimal, at best, financial contribution towards Y’s support which otherwise falls on the husband.
The husband is in full-time employment as a public servant. He discloses a gross income of approximately $135,200 per annum. He receives a proportion of rental income from investment property at $110 per week and has outgoings of $165 per week in respect of that property.
The wife is currently unemployed. Her evidence in Court, however, and given voluntarily, was that she holds ambitions for an early return to the workforce. She named a number of possible occupations including as a professional or public servant. She appeared confident in this evidence. This part of her evidence was not challenged and I accept it accordingly. Nevertheless, realistically, and despite the wife's confidence, it is unlikely that she will soon achieve the earning capacity of the husband.
Whilst the husband might have a current and potentially higher earning capacity than the wife, he also has the financial responsibility for the support of Y. The husband does have a superannuation entitlement although it has been considered as value in the pool and by reason of the husband’s post-separation contributions. The wife gives no explanation for her diminishing her own superannuation fund. She gives no evidence in proper expert form of a previous incapacity to work and I note, in any event, that any incapacity since, as it might have been, would be considered in her damages settlement. These factors together with the wife's confidence in returning to the workforce, lead me to conclude that there should be no adjustment by reason of the matters under s.75(2) of the Act.
Findings and Conclusions
I find that the parties were in a relationship for some 16 years between 1991 in 2007.
The children of the parties lived primarily with the wife from separation in 2007 until 2014 being a period of some seven years and in the following six years have lived primarily with the husband.
I find that the husband contributed reasonably towards the financial support of the children during the time that they live with the wife but that the wife has only minimally contributed towards the children's financial support since they have been with the husband thereby leaving the children's financial support to the husband.
I find on the balance of probabilities that the wife incurred credit card debts of approximately $50,000 in a period up until 2003 and that these debts were satisfied by an increase on the parties joint mortgage on their L Street, Suburb B home.
I find on the balance of probabilities that by 2007 the wife had accrued further and additional credit card debt of approximately $120,000 and admitted same to the husband and that this debt was satisfied by further increase of mortgage.
I am satisfied that the parties entered into an agreement with the wife's mother in 2004 giving them an interest of 25.6% in the property at D Street, Suburb E with the parties contributing $152,000 from the net proceeds of sale of their property at L Street, Suburb B.
Following separation the wife resided with her mother at the D Street, Suburb E property. The husband continued to pay the mortgage liability in the sum of the $1,200 per month but did not otherwise contribute formal child support.
I find on the balance of probabilities in early 2011 the parties reached an informal agreement as to property settlement providing inter alia that the wife would be the sole 'owner' of the 25.6% interest in the D Street, Suburb E property which then had a value of $850,000 giving the wife's share a value of $217,600. I find that the husband thereupon paid out a sum of $7,900 in satisfaction of the lease on the wife's Motor Vehicle 2 and that she retained that motor vehicle. The wife retained her superannuation policy and entitlement then valued at $35,000 and the husband retained his superannuation entitlement which he estimated for the purposes of the informal agreement at $272,730. It was a term of the agreement that the husband would continue meeting the mortgage payments for the parties then secured by their interest in the wife's mother's property in a quantum of $170,000. The informal agreement does not provide finality of the parties’ financial affairs.
The wife's mother sold the D Street, Suburb E property in late 2011 for $900,000. The wife's gross entitlement of 25.6% amounted to approximately $230,400. The parties’ mortgage in a sum of approximately $170,000 was satisfied at that time.
I find that the wife did not claim her entitlement from the proceeds of sale of her mother's home in a sum of approximately $60,000 but that she has not satisfactorily explained why she did not claim these monies.
The wife's mother died in 2016. The wife says that she did not benefit from her mother's Will. She has not explained to the satisfaction of the Court as to why she did not benefit from the Will given her evidence that she and her mother were on good, friendly and mutually beneficial terms and that they continued to live together from 2007 until the mother’s death some 9 years later. No copy of her mother's Will has been produced to the Court. Her siblings who were beneficiaries were not called to explain what the wife could not explain – why she did not benefit from the Will. I am not satisfied, therefore, with the wife's evidence that she did not have an entitlement from her mother's Will or did not otherwise receive a benefit from her mother following the sale of her mother’s home and I harbour suspicions that the wife did benefit financially via her mother albeit perhaps not from the Will but cannot, on the evidence, make such a finding.
Neither party acted further after the informal agreement in 2011 in respect of any formal property settlement until the husband filed an application for parenting orders and the wife, in her response, then raised issues under s.79 of the Act including an application to bring property proceedings out of time.
I accept the submissions of Counsel for the wife that the husband's superannuation should be taken at its 2007 valuation of $422,330. Otherwise, and if the entitlement was to be considered at its current valuation then I would, of course, be required to give the husband, in any event, significant loadings for a post-separation contributions. On the assumption, therefore, that both parties asked me to attend to this matter with reference to the asset pool at 2007 and where, in any event, there are little in the way of other assets save and except the husband's post-separation interest and investment property but without equity, I find the property pool to be as follows: –
25.6% nett interest in the wife’s mother’s home
E $60,000
Husband’s motor vehicle
E $ 3,000
Wife’s Motor Vehicle 2
E $ 7,900
Total
E $ 70,900
LIABILITIES
Wife’s Motor Vehicle 2 lease (paid by husband)
$ 7,900
Net Tangible Assets
$63,000
Husband’s A Super Fund – pursuant to valuation
$422,330
Wife’s superannuation (2007)
$ 35,774
Total superannuation
$458,104
TOTAL PROPERTY
$521,104
The wife is entitled to 30% or $156,331. The wife has retained the entitlement to 26.5% of her late mother's home – ($60,000), Motor Vehicle 2 ($7,900), her superannuation entitlements – ($35,774) being $103,674. It seems to me that the only sensible way to deal with this matter is by a ‘one-pool’ approach. I calculate, therefore, that the husband should make a cash adjustment to the wife of $52,657. If the husband cannot or chooses not to make a cash adjustment on the wife and in circumstances where his only real ‘asset’ remains his superannuation entitlement, then he will have the option to elect a ‘split’ from his superannuation entitlement with a base amount of $52,657. If the husband choses this option then the parties or their lawyers will need to provide me with an Order with appropriate procedural fairness to the superannuation fund in circumstances where the evidence remains unclear as to the status of the fund and whether a ‘splitting’ or ‘flagging’ Order is appropriate.
I certify that the preceding ninety five (95) paragraphs are a true copy of the reasons for judgment of Judge McGuire
Associate:
Date: 1 July 2020
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Remedies
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Procedural Fairness
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Res Judicata
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Contract Formation
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