Bassi & K.D. Sales Force Specialists Pty Ltd & Maas

[1999] FamCA 1352

FAMILY LAW ACT 1975

IN THE FULL COURT OF THE
FAMILY COURT OF AUSTRALIA

AT SYDNEY Appeal No.EA92 OF 1998

File No. SY3109 OF 1996

IN THE MATTER OF: BASSI
KRISHNA DEVI

First Appellant/Third Respondent

AND: K.D. SALES FORCE
SPECIALISTS PTY LTD

Second Appellant/Fourth Respondent

AND: MAAS
JILL ELIZABETH

Respondent/Wife

CORAM: LINDENMAYER, FINN & HOLDEN JJ

DATE OF HEARING: 18 MARCH, 1999

DATE OF JUDGMENT: 13 OCTOBER, 1999

JUDGMENT OF THE COURT

Appearances: Mr T. Hodgson of Counsel for the First Appellant/Third Respondent and Second Appellant/Fourth Respondent

Mr G. McVay of Counsel (instructed by Farmer Campbell Edmunds, Solicitors, Level 8, 110 Sussex Street, Sydney, NSW, 2000) for the Respondent/Wife

INTRODUCTION

These are appeals by Krishna Bassi (“the first appellant”) and K.D. Sales Force Specialists Pty Ltd (“the second appellant”) from orders made by Rowlands J on 2 October, 1998, in property proceedings instituted by Jill Elizabeth Maas (“the wife”) against Nicholas Christopher Maas (“the husband”), in which the first appellant and the second appellant were joined as, respectively, the third respondent and the fourth respondent. The appellants were so joined because, in addition to and in aid of her application for orders against the husband, under s.79 of the Family Law Act 1975 (“the Act”), the wife sought orders under s.85 of the Act setting aside certain alleged dispositions of property by the husband in favour of each of the appellants. It is against the orders made by the trial Judge under s.85 that each of the appellants appeals. There is no appeal by the husband against the orders made by the trial Judge under s.79 of the Act, and a cross-appeal brought by the wife against aspects of the s.85 orders was abandoned by her counsel, Mr McVay at the hearing of the appeals.

The hearing of the proceedings before the trial Judge took place on 17 to 21 August and 4 September, 1998. Throughout that hearing the wife was represented by Mr McVay of counsel, as she was on the hearing of these appeals. The husband appeared before the trial Judge unrepresented, and did not appear at the hearing of the appeals. The first appellant and the second appellant were both represented throughout the proceedings before his Honour, as they were on the hearing of the appeals, by Mr Hodgson of counsel. His Honour delivered reasons for judgment in the matter (which appear at Appeal Book pp.17-35) on 1 October, 1998, following which he invited submissions from the parties as to the form of the orders to be made to give effect to his judgment. Those orders were then made by his Honour on 2 October, 1998. Those orders appear at Appeal Book pp.10-16, and are in the following form:-

“1.      That the husband within seven (7) days do all acts and things and sign and execute all documents necessary to transfer to the wife his right, title and interest in the property situated at 17 Bogan Avenue, Baulkham Hills, being the land comprised in Title Folio Identifier 1111/239307 (“the Baulkham Hills property”).
2.        That the wife be declared to be the owner in law and equity of all of the contents of the Baulkham Hills property.
3.        That the husband forthwith do all acts and things necessary to assign to the wife all his right, title and interest in all moneys received by way of insurance and refunds in relation to the Toyota Camry motor vehicle which was a total loss as the result of an accident by endorsing such cheques as are drawn in favour of the wife.
4. That pursuant to the provisions of Section 85 of the Act the following dispositions or payments be set aside:
(a)The gift of the Volvo motor vehicle by the husband to the third respondent, such vehicle having been purchased for $45,000.
(b)The payments by the husband in respect of the mortgage over the third respondent’s property situated at 11 Volmer Street, Oatlands (“the Oatlands property”) totalling $40,736.00.
(c)The provision by the husband of landscaping in relation to the Oatlands property at a cost of $2,500.00.
(d)The installation of air conditioning paid for by the husband in relation to the Oatlands property at a cost of $10,000.00.
(e)The balance of moneys not repaid by the third respondent to the husband in relation to those moneys contributed by her to the acquisition of the Oatlands property in the amount of $760.00.
(f)The loan made by the husband to the fourth respondent to enable the purchase of a motor cruiser which has a present value outstanding of $74,000.00.

5.        That the third respondent within two (2) months pay to the solicitors for the wife, Messrs Farmer Campbell Edmunds, the total amount of Order 4(a) to (e), namely the amount of $98,996.00 however, if payment is not made within 40 days of this date interest will run at the rate fixed by the Rules of Court.
6.        That the fourth respondent within two (2) months pay to the solicitors for the wife, Messrs Farmer Campbell Edmunds, the amount referred to in Order 4(f), namely $74,000 however, if payment is not made within 40 days of this date interest will run at the rate fixed by the Rules of Court.
7.        That the third respondent’s interest in the Oatlands property be and is hereby charged with the payment of money referred to in Order 5 herein.
8.        That the fourth respondent’s interest in the aforementioned motor cruiser be and is hereby charged with the payment of money referred to in Order 6 herein.
9.        That the husband be declared to be in law and equity solely entitled to all proceeds relating to the investment of moneys in Western Samoa, namely the amount of $US156,000.00.
10.      That upon receipt by Messrs Farmer Campbell Edmunds of the moneys referred to in Orders 5 and 6 herein that they thereupon attend the payment of the following:
(a)The amount outstanding to the Commonwealth Bank of Australia in relation to the mortgage over the Baulkham Hills property;
(b)The amount outstanding in relation to the private school fees for the children of the marriage;
(c)The amount of $20,000 to AGC Limited, subject to AGC Limited providing a Release to the wife from all claims;
(d)The balance to the wife.

11.      That the husband and wife each be declared to be solely responsible for payment of all other debts in their names, subject to these orders.
12.      That pending compliance with Order 6 herein, the husband, the third respondent and the fourth respondent be restrained from doing any act or thing or signing any document in relation to or causing or permitting any sale, transfer disposition encumbrance by mortgage charge or otherwise lease or otherwise dealing with the Mariner 3400 motor cruiser registered No.XP-818N other than with the prior consent in writing of the wife or any sale in accordance with the directions of the Court.
13.      That pending compliance with Order 6 herein the third respondent and the fourth respondent do all acts and things and sign all documents to keep the said motor cruiser insured in its full replacement value and that the third respondent and fourth respondent provide written evidence of such insurance cover to the wife’s solicitors, Farmer Campbell Edmunds, within two (2) business days of the date of these Orders.
14.      That until further order or pending compliance with Order 6 herein, except in cases of emergency, the husband, third respondent and fourth respondent be restrained from changing the mooring of the motor cruiser and from taking the said motor cruiser or permitting it to be taken outside Sydney Harbour.
15.      That the husband within 14 days do all acts and things and sign and execute all documents necessary to request the Upjohn Foreign Service Employees Pension Plan to provide to him particulars of all entitlements which he has to superannuation both as to lump sum and pension as at the present time and thereafter as at late 1999 and March 2000.
16.      That the husband do all acts and things and sign and execute all documents necessary to obtain particulars in relation to his superannuation entitlement for 1999 and 2000 as referred to in Order 15, in October 1999 and January 2000.
17.      That upon receipt of the particulars referred to in Orders 15 and 16, the husband within seven (7) days provide copies of the same and all communications to and from the husband to Upjohn Foreign Service Employees Pension Plan to the wife's solicitors.
18.      That the husband be restrained from dealing with the moneys in the said Pension Plan in any way other than to make application to the said Pension Plan for benefit payable thereunder to be made by way of lump sum only.
19.      That the husband be restrained from expending, disposing of or otherwise using any moneys paid or payable to him from the said Pension Plan by way of benefits therefrom.
20.      That these proceedings be adjourned to March or April 2000.
NOTATIONS:
(i)        That the Court requests that such appropriate courts in Hong Kong, United Kingdom and elsewhere (including courts with jurisdiction in the Channel Island of Guernsey) act in aid of the Family Court of Australia in relation to the enforcement and implementation of these orders.
(ii) That the property orders made are a partial settlement of property under Part VIII of the Act as matters relating to superannuation remain outstanding.
21.      That subject to these orders the husband and wife each be declared to be the owner in law and equity of all property in their possession or under their control.
22.      That liberty is granted to apply upon 48 hours notice in relation to the implementation and facilitation of these orders.
23.      That the wife not dispose of her interest in the Baulkham Hills property prior to 1 April 1999.
24.      That until further order or pending compliance with Orders 5 and 25 herein the third respondent is restrained from doing any act or thing to effect, cause or permit any sale, transfer, disposition, encumbrance by mortgage or charge or otherwise or any other dealing with any assets in her possession, custody, power or control or in which she has an interest save for in the normal course of business or to provide for her ordinary living expenses unless the prior written consent of the wife is given provided that the third respondent may notify the wife’s solicitors in writing of any dealing with any asset which she wishes to make and the wife’s solicitors shall notify the third respondent in writing within two business days of receipt of any such request whether the wife consents to such request.
25.      That the third respondent and fourth respondent pay and be jointly and severally liable for payment of the following costs of the wife, such costs to be taxed if not agreed:
(a)one quarter of the costs of the wife of the trial of the property application;
(b)one quarter of the costs of the wife of all mentions and interlocutory hearings before the Court relating to the property application at which the third and fourth respondents were represented in circumstances where such costs have been reserved (except where an order for costs has previously been made by the Court and except for the application referred to in paragraph (e) hereof);
(c)one quarter of the costs of the wife of and incidental to the preparation of any pleadings, affidavits and other documents filed or served in the property proceedings on her behalf (including engrossment, attendances to swear, filing and serving of such documents) where such documents relate at least in part to the claims against the third and fourth respondents, notwithstanding that they may also deal with the claim against the husband;
(d)one quarter of the costs of the wife of perusal of pleadings, affidavits and other documents filed or served in the property proceedings on behalf of the third and fourth respondents;
(e)one half of the costs of the wife of and incidental to the application for a stay of proceedings and vacation of the hearing dates heard on 10 August 1998.

26. That costs as between the husband and wife are reserved to the final determination of the proceedings.”

By their amended Notice of Appeal filed on 18 February, 1999, the first appellant challenges the following paragraphs of those orders: 4(a), 4(b), 4(c), 4(d), 4(e), 5, 7, 24, 25(a), 25(b), 25(c), 25(d) and 25(e), whilst the second appellant challenges the following paragraphs thereof: 4(f), 6, 8, 25(a), 25(b), 25(c), 25(d), and 25(e). In lieu of the orders so challenged, each appellant seeks an order dismissing the wife’s s.85 proceedings, the discharge of the relevant orders, and that the wife pay the appellants’ costs both of the proceedings before the trial Judge and of the appeal.

RELEVANT FACTUAL BACKGROUND

The husband was born on 23 March, 1945, and was therefore aged 53 at the date of the hearing and 54 at the date of this judgment. The wife was born on 11 April, 1949, and was therefore aged 49 at the date of the hearing and is aged 50 at the date of this judgment.

The husband and wife commenced cohabitation in 1974, married in 1976, and separated in 1993 after a period of cohabitation of some 19 years. Upon separation the wife continued to reside in the former matrimonial home of the parties situated at 17 Bogan Avenue, Baulkham Hills, where she was still residing at the date of the hearing. At the time of the hearing she was employed as a secretary, earning about $760 per week before tax. She had returned to the paid workforce in 1994, having left it in 1978, just before the birth of her first child.

There are two children of the marriage, namely Samantha, born on 27 December, 1978 (aged 19 at the date of hearing and now 20), and Timothy, born on 15 June, 1981 (aged 17 at the hearing and 18 now). Both children have resided with the wife ever since the separation of the parties, and were residing with her in the home at Baulkham Hills at the time of the hearing. At that time Timothy was in employment, whilst Samantha was still studying but working part-time.

The husband commenced to reside in a de facto relationship with the first appellant in July, 1993. At the time of the hearing she was aged 43, and had two children from a previous marriage, then aged 17 and 10, respectively. She states her occupation as “managing director”. Her background appears to be primarily in catering and personnel recruitment, and she now carries on business in those (and perhaps other) areas through the second appellant.

The second appellant was incorporated in August, 1995, and is and was at all times controlled by the first appellant. There was an issue before the trial Judge as to the extent of the husband’s involvement in the affairs of that company.

In October, 1995, the first appellant purchased in her sole name a property situated at 11 Volmer Street, Oatlands. The trial Judge found that the husband contributed $13,460 towards the settlement of the purchase of this property. His Honour also found that the husband made mortgage repayments totalling $40,736 in respect of that property between November, 1995 and February, 1997.

At the time of the separation the husband was employed by Upjohn Limited (a large international corporation) as its general manager in Australia. He continued in that employment after separation until December, 1995, when he was retrenched. As a result of that retrenchment he received a redundancy package of $386,659, as well as significant share options and a right to superannuation benefits when he attains the age of 55 years.

In December, 1995, the husband lent the second appellant the sum of $126,000 (presumably from his redundancy package) in order for that company to purchase a motor cruiser. The trial Judge found that between January and September, 1996, the second appellant repaid to the husband an amount of $52,000 in respect of that loan, leaving a balance owing at the date of hearing of $74,000.

In January, 1996, the husband purchased a Volvo motor vehicle for $45,000, which he immediately gave to the first appellant as an engagement present.

In March, 1996, the husband travelled to Western Samoa where he invested a sum of US$156,297, being moneys which he received in respect of stock options to which he had become entitled as a consequence of the termination of his employment with Upjohn. That sum was invested in some speculative share venture in Western Samoa and, according to the husband’s evidence, was ultimately lost, save for the recovery of a token amount of US$156.

The wife instituted her proceedings in this Court for orders under s.79 of the Act, on 22 February, 1996. She immediately instituted interlocutory proceedings for interim injunctions to preserve the husband’s assets and in connection with those proceedings the first appellant gave an undertaking to the Court on 3 April, 1996, that she would not dispose of the Volvo motor vehicle given to her by the husband without first giving the wife’s solicitors 14 days notice in writing of her intention so to do. On 4 April, 1996, an order was made restraining the husband from dealing with a sum of $100,000 then contained in a Commonwealth Bank account, which sum appears to have been the only cash funds then left in the husband’s control from the redundancy package of $386,659 which he had received in December, 1995.

On 18 April, 1996, the wife’s proceedings for interlocutory injunctions came before the Court again. On that occasion, consent orders were made restraining the husband from dealing with the $100,000 contained in the Commonwealth Bank account until further order, and releasing the first appellant from her undertaking given to the Court on 3 April, 1996, not to dispose of the Volvo motor vehicle without giving the wife’s solicitors 14 days notice of her intention so to do.

On the same date (18 April, 1996) a formal deed, in the nature of a loan agreement, was entered into between the husband and the second appellant in relation to the advance of $126,000 made by the former to the latter in December, 1995. That deed, which has some rather unusual features to which it is not at this point necessary to refer, appears at Appeal Book pp.197-199.

In February, 1997, the first appellant sold the Volvo motor vehicle previously given to her by the husband, for an amount of $35,000. She said in paragraph 35 of her affidavit of 2 April, 1998 (at Appeal Book p.216) that $10,000 of that sum was applied immediately to the discharge of a debt “which had arisen from living expenses of our family which I was unable to meet with my salary alone” and that the balance of those proceeds “were used for living expenses for the Respondent Husband and myself and our family”. The latter statement appears somewhat inconsistent with her oral evidence under cross-examination at Appeal Book pp.502-509.

During the cohabitation of the husband and the first appellant, the husband made a number of payments for the benefit of the first appellant in addition to the mortgage repayments on the Oatlands property and the contribution towards the settlement of the purchase of that property to which we have already referred. Relevantly, the trial Judge found that he paid $10,000 for air-conditioning of that property and $2,500 for landscaping of the same property. Both those expenses were incurred in March, 1996.

In early 1997 the husband presented his own petition in bankruptcy, which became effective on 20 March, 1997. On 17 April, 1997, the wife applied to the Federal Court for an annulment of the bankruptcy, and for the transfer of those annulment proceedings to the Family Court under the cross-vesting legislation. The transfer order was made, and on 23 March, 1998, O’Ryan J. annulled the bankruptcy pursuant to s.153B of the Bankruptcy Act. The consequence of all this seems to have been that the $100,000 which was frozen in the husband’s Commonwealth Bank account by the order of 18 April, 1996, found its way into the hands of the husband’s trustee in bankruptcy, and has since been dissipated in the costs incurred by the trustee in relation to the bankruptcy and the proceedings in the Federal Court and this Court for its annulment.

On 14 August, 1998, the wife filed her amended application, in which she sought that certain specific transactions between the husband and the first and second appellants be set aside, pursuant to s.85 of the Act.

As against the first appellant, the wife sought that the following transactions be set aside, and that the first appellant pay the amounts referred to in each transaction to her, together with interest thereon at the rates prescribed by the Family Law Rules (O.40, r.1) from the date of the transaction:-

(a)a payment of $4,000 by the husband on 26 September, 1995 towards the stamp duty payable on the first appellant’s acquisition of the home at Oatlands;
(b)a payment of $13,460.09 by the husband on 9 October, 1995 towards the settlement of moneys for the purchase by the first appellant of that property;
(c)a payment of $10,000 by the husband on 22 March, 1996 for air-conditioning at the first appellant’s home at Oatlands;
(d)a payment of $2,500 by the husband on 26 March, 1996 for landscaping of the Oatlands property;
(e)payments totalling $40,748.23 by the husband between November, 1995 and February, 1997 being mortgage payments in respect of the mortgage over the Oatlands property; and
(f)the payment of $45,000 by the husband on or about 4 January, 1996 for the purchase of the Volvo motor vehicle for the first appellant.

As against the second appellant, the wife sought that the loan by the husband to the second appellant of $126,000 on or about 18 December, 1995, for the purpose of the purchase of a motor cruiser, and the deed between the husband and the second appellant dated 18 April, 1996 in relation to that loan, be set aside, and that the second appellant pay to the wife the sum of $126,000, or alternatively the balance of that sum owing to the husband (which was claimed in the application to be $83,000). She also sought an order for the payment to her by the second appellant of interest on either the $126,000 or alternatively, the balance of the loan, at the rate prescribed by the Family Law Rules (O.40, r.1), or alternatively at the rate of 7% per annum, from 18 December, 1995.

As against each appellant the wife also sought certain orders in the nature of orders securing moneys payable to her by them, in the case of the first appellant, against her property at Oatlands, and in the case of the second appellant, against the motor cruiser previously referred to.

As against the husband, pursuant to s.79 of the Act, the wife sought many orders, the effect of which, in broad terms, would have been to transfer to her the home at Baulkham Hills (subject to the existing mortgage), a Toyota Camry motor vehicle, and a Pro Hart painting allegedly removed by the husband from the home, and to secure the payment to her, in addition to the amounts to be paid by the first and second appellants, of the following amounts:-
(a) the US$156,000 invested by the husband in Western Samoa; and

(b)the sum of $520,000, together with interest thereon, plus any costs payable to her, from the husband’s superannuation entitlements under the Upjohn Superannuation scheme.

By that amended application, the wife also sought certain orders against the husband’s former trustee in bankruptcy, but those applications do not appear to have been pursued, and are not relevant to this appeal.

No amended response by the husband or by the first and second appellants to that amended application of the wife is included in the Appeal Books. The only response which is included (at Appeal Book p.52-57) is an amended response by the husband (filed in response to an earlier amended application of the wife which was filed on 18 May, 1998). By that amended response the husband opposed all orders sought by the wife and sought orders the effect of which would have been to transfer to the wife the Baulkham Hills home (subject to the existing mortgage), all the furniture and other contents of that home (with 4 specific exceptions), the Toyota Camry motor vehicle, and (ultimately) 50% of any funds obtained by the husband from the Upjohn superannuation plan (after deduction of any applicable fees including taxation), and to leave both parties otherwise with all assets and liabilities which they then had.

THE JUDGMENT OF THE TRIAL JUDGE

The trial Judge commenced his judgment with a brief summary of relevant background facts. In the course of so doing he made a finding (at Appeal Book p.20) that the husband “has not satisfactorily accounted for his substantial earnings following his association with [the first appellant] nor his retrenchment monies”. He then referred, in broad terms, to the relevant provisions of the Act and to the three step process, endorsed by the Full Court in a line of cases including Pastrikos (1980) FLC 90-897, Lee Steere (1985) FLC 91-626 and Ferraro (1993) FLC 92-335, as appropriate to be followed in the determination of proceedings under s.79. It is clear from the context that that was a process which his Honour intended to follow.

In conformity with that three step process, his Honour began by finding (at Appeal Book p.21) what the property of the parties consisted of, after indicating that he would outline later his bases for that finding. He set out this finding in the form of a table of assets and liabilities, as follows:-

“Property
Assets of Husband and Wife
1.        House at 17 Bogan Ave, Baulkham
           Hills  $240,000.00
2.        Contents of matrimonial home $15,000.00
3.        Toyota Camry motor vehicle                $10,400.00
           (proceeds of insurance claim)
4.        Monies from third respondent   $98,996.00
5.        Monies from fourth respondent $74,000.00
6.        Actual or notional asset, the
           investment in Western Samoa   $260,000.00    $698,396.00
Liabilities of Husband and Wife
Allowed Liabilities:
Mortgage on house  $100,495.00
School fees   $6,000.00
Australian Guarantee Corp.   $20,000.00     $126,495.00

Net Assets $571,901.00”

Most significant, for the purposes of this appeal, amongst that table of assets and liabilities, are items 4, 5 and 6 of the “Assets of Husband and Wife”. Item 4 identifies the sum of $98,996 which, in his subsequent reasons, his Honour concluded was the total of various amounts paid by the husband to or for the benefit of the first appellant in transactions which should be set aside under s.85, and which the first appellant should therefore put back into the pool of assets of the husband and wife. Item 5 identifies a sum of $74,000, which his Honour concluded, for reasons given later in his judgment, was the unpaid balance of the amount of $126,000 paid by the husband to the second appellant in a transaction which should also be set aside under s.85, and which the second appellant should therefore pay back into the pool of assets of the husband and wife. Item 6 represents, as his Honour later explained, the Australian dollar equivalent of the US$156,000 invested (and lost) by the husband in Western Samoa in March, 1996, which his Honour later concluded should be added back to the pool of assets of the husband and wife as a “notional asset” in the hands of the husband representing a premature distribution to him (in accordance with the principle enunciated in Townsend & Townsend (1995) FLC 92-569).

His Honour also found that the husband and wife had other specific liabilities, totalling $179,496.57 and $131,859, respectively. However, rather than including those liabilities in the overall calculation of the parties’ net property, his Honour considered that it was just and equitable to leave those liabilities with the party responsible for them, for reasons which he gave (at Appeal Book p.24) including that the amounts approximated the proportion in which he would ultimately have divided any liabilities between the parties, in any event. Amongst the liabilities of the husband which his Honour thus put to one side when calculating the parties’ net assets for the purpose of the proceedings, was a debt of $101,800 to the Australian Taxation Office. He gave his reasons for disregarding that liability in that exercise at pp.24-25 of the Appeal Book. His Honour also did not include in the calculation of the parties’ net assets an alleged personal debt of $19,855 of the husband to the first appellant, nor a sum of $22,927 owing by the husband under costs orders.

After dealing, then, with some issues of admissibility of evidence (which are not relevant to this appeal) his Honour turned his attention (at Appeal Book pp.26-31) to the wife’s s.85 applications. After referring, in broad terms, to the provisions of s.85(1), his Honour identified five transactions in respect of which he said that it was “undisputed that the transactions took place”. Those five transactions were:
(a) loan for motor cruiser to second appellant : $126,000;
(b) Volvo motor car gift to first appellant : $45,000;

(c)mortgage payments relating to the first appellant’s house at Oatlands (November, 1995 to February, 1997) : $40,736.23;
(d)settlement moneys for Oatlands : $13,460;
(e)air-conditioning for Oatlands : $10,000;
(f)landscaping for Oatlands : $2,500.

His Honour then resolved some issues about aspects of some of those transactions, and made the findings to which we have already referred, namely that the second appellant had repaid $52,000 of the $126,000 advanced for the boat, leaving a balance of $74,000 still owing (as per item 5 of his Honour’s summary of assets and liabilities) and as to the quantum of the payments to the first appellant made by the husband for the Volvo, the mortgage payments, the settlement moneys, the air-conditioning and the landscaping. The total of those payments to the first appellant is $111,696, but his Honour found that the first appellant had repaid to the husband $12,700 of the settlement moneys, reducing the total of those payments to the $98,996 referred to at item 4 of his Honour’s summary of assets and liabilities.

His Honour then found (at Appeal Book p.28) that each of the transactions which he had identified was a disposition by the husband (within s.85(1) of the Act) and that each was “likely to defeat an anticipated order in the proceedings whether or not that was intended”. He also found (at the same page) that “[w]ithout the monies [the subject of the dispositions] the husband lacks the capacity to properly satisfy anticipated orders” and that none of the arrangements involved “innocent third parties”.

His Honour further found (at Appeal Book p.29) that the husband and the first appellant had a close emotional relationship and a close business relationship and that the first appellant “was aware of the husband’s circumstances and plans”. He rejected their evidence suggesting “that they did not share such confidences”, and “that they were not working together in business activities”. He concluded that, on the balance of probabilities, they both “well knew” that the transactions in question “would diminish the capacity of the husband to meet his obligations to the wife” which, he said, “must have been obvious to both of them”. He added that irrespective of the intention of the parties to the transactions they did “have the effect of defeating orders that would, on balance, have been reasonably anticipated by each of them or an informed observer in the circumstances”, and he identified the “character of the orders” reasonably anticipated as being “a variation in property interest of the husband and the wife of a kind which would result in the wife receiving a substantial proportion of the husband’s available assets”.

His Honour then dealt with some other issues raised by the first appellant about the purchase of the Volvo and the nature and purpose of some of the payments made by the husband with respect to the Oatlands property. As to the former, his Honour said (at Appeal Book p.30): “It is not to the point whether or not the gift was in cash or kind, or what the third respondent did thereafter with the proceeds of sale of the car”. As to the latter, he said (at the same page):-

“Suggestions from the husband and the third respondent [first appellant] that the air conditioning and the landscaping were for the husband’s benefit do not persuade me that they were not improvement to the third respondent’s [first appellant’s] property. She gained an advantage thereby and I do not accept that she was not involved in his decision to finance these additions.
These payments are not in the nature of ‘board’ or living expense contributions; they are of a more capital nature. As the husband was in well paid employment until December 1995 and received a redundancy package of $386,659 (not including share options and superannuation later discussed), he had ample funds with which to provide living expenses. His inadequate explanation of his expenditure of these monies allows me to conclude that he was well placed to make contributions to living expenses.”

Having thus concluded that the wife’s s.85 applications should be acceded to in respect of transactions totalling $98,996 between the husband and the first appellant and $74,000 between the husband and the second appellant, the effect of which, he noted, was “to return the sum of $172,996 to the pool of assets”, his Honour turned his attention to what he described as the husband’s “West Samoan transaction”. He explained his reasons for adding back to the asset pool, as a notional asset, the Australian dollar equivalent of the moneys allegedly lost by the husband in that transaction, as follows (at Appeal Book p.31):-

“He [the husband] acknowledges that the money for the investment came from the sale of shares he owned following the exercise of stock options he had arising out of his employment. Further he concedes that the money was moved away to keep it from becoming available to the wife.
The husband has not provided a satisfactory explanation of the way in which this money was lost and in the absence of this I have difficulty in accepting his story relating to it.
In any event, whether he still has access to the money or not it is money that he used in his own way for his own purposes and I will treat it as an asset notional or real which he has used or has the use of. It will form part of the property equation.”

His Honour next undertook the second step of the three step process previously identified, namely the assessment of the parties’ contributions to the net property pool which he had thus arrived at. He concluded that their contributions were equal, having noted that, during the marriage, the husband had been the primary bread-winner while the wife had been the primary homemaker and care-giver to the children. He also noted that after separation the husband had “made a substantial financial contribution toward [sic.] the upkeep of the wife and the children, including mortgage payments on the family home”.

His Honour then undertook the third step of the three step process, namely the consideration of the impact of the relevant s.75(2) factors which he identified as “the so called ‘needs’ factors”. After referring to such of those matters as he considered to be relevant, he concluded (at Appeal Book p.33) that, balancing those factors, “but excluding superannuation available [to the husband] when he is 55”, that there should be an adjustment of 5% of the “net assets in the pool” in favour of the wife from the position of equality which he would have arrived at on the basis of contributions only, leading to a determination that she should receive 55% of those net assets and the husband 45% thereof. Having previously assessed the net assets at $571,901, he noted that the effect of his determination was that the husband should receive $257,355 of that net total, and the wife $314,546.

His Honour then turned his attention to the question of the husband’s superannuation entitlements, in respect of which the wife made a substantial claim (as set out in paragraph 24 hereof). He found that on the evidence before him the husband was a member of a superannuation scheme which would provide a monthly annuity of approximately A$4,133 or a lump sum of approximately A$482,400. After noting that the husband will turn 55 and have access to his entitlements under that scheme in March, 2000, and that the wife sought an adjournment of the proceedings in so far as they concerned those entitlements until such time as the entitlements were available and “truly known”, his Honour stated that he considered this approach to be “sensible on its face and ... in accordance with authority”, citing the decision of the Full Court in Martin & Martin (1986) FLC 91-737. He then referred to the power of the Court, affirmed by the Full Court in Law-Smith & Seinor (1989) FLC 92-050, to order a superannuant to make elections available under the scheme, such as to take a lump sum in lieu of an annuity. He then went on to conclude that, in the circumstances of the case, the benefit being “important in the totality of the matter” it was “appropriate to adjourn this portion of the matter to a date to be fixed in or after March, 2000”.

Finally, his Honour stated that he considered it appropriate to restrain the husband from “doing anything to defeat the purpose of proceedings relating to the scheme under which he is a beneficiary” and also to direct the husband to do all things necessary to obtain information concerning his entitlements under the scheme promptly and to provide the wife with that information.

With an obvious eye to encouraging the parties towards a settlement of this remaining issue (the husband being unrepresented) his Honour then conjectured that if the husband were to become entitled to a lump sum of $482,400 in superannuation benefits, the wife’s entitlement, having regard to a formula sometimes adopted by the Court in such circumstances, might be of the order of $219,273.

THE APPEAL

The amended Notice of Appeal of the first appellant contains sixteen grounds of appeal, whilst that of the second appellant contains nine such grounds. The second appellant’s grounds 1 to 4 and 6 to 9 are identical with, respectively, the first appellant’s grounds 1 to 4 and 13 to 16, and the arguments advanced by counsel (Mr Hodgson), who appeared for both appellants, in support of the first appellant’s grounds were relied upon by him, without addition or variation, in support of the corresponding grounds of the second appellant. The same applies to the arguments relied upon by counsel for the wife, Mr McVay, in opposition to the common grounds of both appellants. It will therefore be convenient to deal with those common grounds together in this judgment, and in the same groups as were adopted by counsel in presenting their arguments. The remaining grounds of the first appellant (grounds 5 to 12) and the remaining ground of the second appellant (ground 5) lack commonality, as between the two appellants, and will therefore be dealt with separately, but with some grouping amongst the first appellant’s remaining grounds, as determined by counsel’s presentation.

Before turning to the specific grounds of appeal and the arguments addressed to us in relation to them, it is appropriate to note that, except to a very limited extent in the first appellant’s grounds 8, 9 and 16 and in the second appellant’s ground 9 (identical to the first appellant’s ground 16), neither appellant seeks to challenge any of the trial Judge’s findings of fact. Rather, with those limited exceptions, all grounds assert either error of discretion or error of law by his Honour, rather than error of fact. Demonstrated error of law in some material respect will certainly justify appellate interference. However, when error in the exercise of discretion is relied upon, as it is very heavily in this case, it is well to bear in mind the principles established by binding authority which define the limits of the power of this or any other appellate court to interfere with a trial Judge’s exercise of discretion. Those principles are well known, and need not be restated in the context of this case, save to note that the better known expositions of them are to be found in House v The King (1936) 55 CLR 499 at 504-5 (per Dixon, Evatt & McTiernan, JJ); Lovell v. Lovell (1950) 81 CLR 513 at 519 (per Latham CJ); Australian Coal and Shale Employees Federation v. The Commonwealth (1953) 94 CLR 621 at 627 (per Kitto J); and Gronow v Gronow (1979) 144 CLR 513 at 519-20 (per Stephen J).

Grounds 1 & 2 of the First Appellant and of the Second Appellant

1. That the Trial Judge was in error in the exercise of his discretion in that the result against the Third Respondent as embodied in his Orders was plainly unjust and unreasonable.
2. That the Trial Judge was in error in the exercise of his discretion in failing to give sufficient weight to the rights and interests of the Third Respondent.

The first submission made in support of these grounds was that as the source of the monies paid by the husband to the appellants was his redundancy package, which did not exist at separation and was primarily to compensate the husband for the loss of future income, the payment was from an asset “to which the wife made little if any contribution”. It was therefore submitted that as all the other property acquired by the parties during the marriage was in the wife’s possession and control, it was “plainly unjust and unreasonable” to the appellants to require them to refund these moneys to the matrimonial property pool of the parties for the purpose of the property proceedings between them.

In response to those submissions, counsel for the wife directed our attention to evidence (at Appeal Book p.187) that the husband’s redundancy payment was based on a factor of two times his base salary, plus a bonus. He submitted that, having regard to that fact and to his Honour’s finding (at Appeal Book p.32) that there was equality of contribution by the parties, it could not be said that she made little or no contribution to the husband’s redundancy package.

We agree with that submission of counsel for the wife. In addition, we point to the fact that at separation the two children, who remained with the wife, were aged only 14 and 12 years, and when the husband took his redundancy package in 1995 they were aged 16 and 14. The wife’s contribution as homemaker and parent therefore continued after separation right up to and indeed beyond the receipt by the husband of that package. Furthermore, the husband worked for Upjohn for a total of about 19 years, 17 of which corresponded with his cohabitation with the wife. In all of those circumstances it is quite artificial to suggest, as counsel for the appellants did, that the wife made little if any contribution to his redundancy package. In our view her contribution to that package was as real and substantial as her contribution to his earnings and to his accumulation of superannuation benefits during the marriage.

The balance of the submissions in support of these grounds really overlap with those in support of grounds 3 and 4. The same applies to the submissions in response. It is therefore convenient to first set out those additional grounds, and then to deal with the submissions which really address all those grounds in a global fashion.

Grounds 3 & 4 of the First Appellant and of the Second Appellant

3. That the Trial Judge was in error in invoking the provisions of Section 85 of the Act in circumstances having regard to the existence of other assets and financial resources, which were sufficient to meet the Wife’s entitlement to property settlement, having regard to his finding that the Husband was in well paid employment until December 1995 and received a redundancy package of $385,659.00, not including share options and superannuation.
4. That the Trial Judge was in error in making orders for partial property settlement, in part through the application of the provisions of Section 85 of the Act, which significantly disadvantaged the Third Respondent in circumstances whereby he adjourned the proceedings to March or April 2000, at which time the Husband would become entitled to a substantial amount of superannuation.

It was submitted for the appellants that the orders made by the trial Judge against the appellants were made “as a matter of expediency” against “a target of opportunity”, and without proper regard to or application of the provisions of s.85 of the Act. It is therefore appropriate and convenient at this point to set out the relevant provisions of that section, which are as follows:-

“(1)     In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
(2)        The court may order that any money or real or personal property dealt with by any such instrument or disposition may be taken in execution or charged with the payment of such sums for costs or maintenance as the court directs, or that the proceeds of a sale shall be paid into court to abide its order.
(3)       The court shall have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested.
..........................................................................................................................
(5)       In this section, ‘disposition’ includes a sale and a gift.”

Of possible relevance also to the Court’s power to make orders in the form of orders 5, 6, 7, 8, and 24 of his Honour’s orders of 2 October, 1998, are the following paragraphs of s.80(1) of the Act:-

“(1) The court, in exercising its powers under this Part, may do any or all of the following:
(a) order payment of a lump sum, whether in one amount or by instalments;
(c)order that payment of any sum ordered to be paid be wholly or partly secured in such manner as the court directs;

(f)order that payments be made direct to a party to the marriage, to a trustee to be appointed or into court or to a public authority for the benefit of a party to the marriage;

(j) make an order by consent;
(l)subject to this Act, make an order under this Part at any time before or after the making of a decree under another Part.”

The essential submission of counsel for the appellants, as we understand his arguments in support of these grounds, was that the trial Judge’s purported exercise of power under s.85 was flawed because none of the husband’s dispositions in favour of the appellants (the bulk of which occurred in the period December, 1995 to March, 1996) could be said, objectively speaking, to be likely to defeat an anticipated order in proceedings between the husband and wife under s.79, whether that likelihood was considered as at the date of the dispositions (in accordance with Pflugradt & Pflugradt (1981) FLC 91-052, and D & D (1984) FLC 91-593) or even as at the date of the hearing.

As at the date of the dispositions, it was submitted, the property and financial resources of the parties available to meet any anticipated order in favour of the wife, consisted, essentially, of the home, car and furniture, the moneys the subject of the dispositions, the $100,000 subsequently expended in the course of the husband’s bankruptcy, the amount of US$156,000 (A$260,000) received by the husband from the exercise of his stock options, and the husband’s superannuation entitlements. It was submitted that after the dispositions, the remaining property and resources (which included the proceeds of the stock options worth $260,000 and the $100,000 subsequently spent in the bankruptcy proceedings) would have been seen, objectively, as more than sufficient to meet any reasonably anticipated order in the wife’s favour. It was submitted that if there were any dispositions which were likely to defeat an anticipated order in the wife’s favour, they were the husband’s subsequent investment (and loss) of the $260,000 arising from his stock options and the expenditure of $100,000 in the bankruptcy proceedings. This, it was submitted, was clear from the fact that the net cash amount payable to the wife under his Honour’s apportionment is “$175,621” (more accurately, $175,641), calculated as follows:-

Wife’s total entitlement as fixed by trial Judge
(Appeal Book p.33):  $314,546
Less amounts to be retained by wife:
Baulkham Hills home (order 1) :           $240,000
Contents of Home (order 2):                 $15,000
Proceeds of car (order 3):   $10,400
           Total               :  $265,400

Minus Liabilities (order 10):  $126,495
Net                 :  $138,905
Balance of entitlement therefore:  $175,641

In fact, his Honour’s orders provide for a cash payment to the wife of only $172,996 ($98,996 by the first appellant and $74,000 by the second appellant). The balance of $2,645 should theoretically have come from the Samoan investment retained by the husband, but it was accepted that it no longer existed at the date of the hearing.

It was further submitted that merely because the $260,000 invested in Western Samoa and the $100,000 spent in the bankruptcy proceedings were irrecoverable did not mean that the earlier dispositions to the appellants could be recouped under s.85, since those dispositions were not, at the time they were made, likely to defeat, and had not in fact defeated, any anticipated order in the proceedings. Hence the submission previously referred to that the appellants were “a target of opportunity” in place of the proper target, namely the Western Samoan investment, or the bankruptcy expenditure, which were out of range at the time of the hearing.

It was further submitted that even at the date of the hearing the husband’s dispositions in favour of the appellants were not likely to defeat any reasonably anticipated order in the proceedings. It was submitted that s.85 considerations apply only to final orders, not interim orders, and that having regard to the husband’s anticipated superannuation entitlements, and his Honour’s adjournment of the proceedings until March or April of 2000, the wife’s entitlement (as adjudged by his Honour) to a net cash payment of $175,641, could be met from the husband’s expectant share of his superannuation entitlements (on his Honour’s figures, some $263,000) and in the meantime secured by being charged against that entitlement. Alternatively, it was submitted, if his Honour thought it necessary and appropriate that the wife receive that sum earlier than March/April, 2000, it would have been more appropriate simply to order the husband to pay it, and resort to s.85 and the dispositions made to the appellants only if he failed to pay that sum within any time fixed by the Court’s order.

Dealing first with the submissions referred to in paragraph 53, they contain a number of fallacies. The first is that it is not correct to categorise his Honour’s orders of 2 October, 1998 under s.79 as interim orders, in the sense in which that term is generally understood. Rather, they are partial final orders. There is nothing in his Honour’s judgment to suggest that they are intended as interim orders, in the sense mentioned above. On the contrary, it is clear from several passages that his Honour’s intention was to make final orders in respect of everything except the husband’s superannuation entitlement, and to adjourn only so much of the proceedings as related to the wife’s claim to receive some further provision out of that entitlement. That intention is confirmed by the notation on the formal orders appearing immediately after order 20, in the following terms:-

“(ii) That the property orders made are a partial settlement of property under Part VIII of the Act as matters relating to superannuation remain outstanding.”

The Court’s power, under s.79(6), to make property orders where it makes an order under s.79(5) adjourning proceedings to await the occurrence of a significant financial event such as the receipt of superannuation, is not confined to making “interim” orders. By that sub-section it may make “such interim order or orders or such other order or orders (if any) as it considers appropriate with respect to any of the property of the parties to the marriage or either of them” (emphasis added). Whilst the Full Court in Harris & Harris (1993) FLC 92-378 at 79,929 considered it unnecessary to draw the distinction which Nygh J. drew between “interim” and “partial” orders in Burridge & Burridge (1980) FLC 90-902, it did not decide that there is no such distinction, or that it is inappropriate to draw it in a proper case.

Further, and in any event, there is nothing in s.85 to indicate that the “anticipated order” which a disposition must be likely to defeat in order to attract the operation of the section, must be a final order, although that would most commonly be the case. All that is required by the section is that it be “an anticipated order in those proceedings” (i.e. “the proceedings under this Act” referred to at the start of the section, to which the s.85 proceedings must clearly be ancillary).

A further fallacy in the submissions outlined in paragraph 53 hereof is the implied assertion that the figure of $175,641 represents the extent of the wife’s entitlement under his Honour’s orders which would need to be covered by the husband’s expectant share of his superannuation entitlements. As the calculation in paragraph 51 demonstrates, that figure is arrived at on the basis that the wife remains liable for debts totalling $126,495, of which $100,495 relates to the mortgage on the Baulkham Hills home. She has no present means of paying off that mortgage, and the evidence discloses that at the time of the hearing there had been substantial default under it, the mortgagee had given notice of its intention to exercise its power of sale, and had only agreed to hold off doing so on a “without prejudice” basis until August, 1998 on certain conditions (see Appeal Book pp.112-116).

Leaving aside the s.85 proceedings, on any view it was open to his Honour to determine the wife’s entitlement under s.79 on the basis that the husband’s dispositions to the appellants, as well as his ill-fated investment in Western Samoa, were notional property of which the husband had had the sole use and benefit (in accordance with Townsend & Townsend (supra)) and it was always reasonably foreseeable that the Court would do so. It was also always reasonably foreseeable that the wife would be adjudged entitled to between 50% and 60% of the net pool of assets determined on that basis (and considerably more if the husband’s superannuation entitlement were to be taken into account at that stage as a resource, rather than the proceedings being adjourned, under s.79(5), for subsequent disposition of it between the parties as property).

It was therefore always reasonably foreseeable that the wife’s entitlement in respect of the present property of the parties, actual and notional, (but excluding future property arising from the husband’s superannuation) would be of the order of the $314,000 at which his Honour arrived, and that the Court would want to ensure that included in that entitlement was the Baulkham Hills home free of encumbrance. For that to happen, the wife would have to receive an immediate cash payment of at least $100,000. Clearly, therefore, if the husband, by dispositions of property, precluded himself from being able to make any such cash payment to the wife, an anticipated order would be defeated, notwithstanding that it might also be anticipated that 18 months later a fund might come into existence from which that sum and any further balance of the wife’s entitlement might be met.

Finally (in relation to the submissions referred to in paragraph 53 hereof), as pointed out in paragraphs 4 and 5 of the Summary of Argument presented by the wife’s counsel, it is really a fallacy to regard the husband’s superannuation entitlement as if it were a certain capital sum waiting to be picked up by him in March/April, 2000, against which the balance of the wife’s present property entitlement might be secured. It is a mere contingency until he reaches the age of 55, and the evidence did not allow his Honour to reach a conclusion as to whether his entitlement would ultimately be to a lump sum or only a pension (see Appeal Book p.34). Moreover, the superannuation scheme is controlled by a company incorporated in Guernsey (Channel Islands) and any attempts to enforce payment from it to the wife would possibly require the co-operation of courts in Hong Kong, United Kingdom and Guernsey (see Appeal Book p.178 and his Honour’s judgment at Appeal Book p.35).

As part of the argument in support of this submission, counsel for the appellants contended that his Honour “for reasons, which are not altogether clear” did not deduct from the asset pool the husband’s taxation liability of $101,800. He argued that if that liability had been deducted (as he contended it ought to have been) the net asset figure would have been reduced to $470,101, and the wife's net cash entitlement reduced to $119,650 from $175,641 (c.f. para. 51 above).

Apart from the fallacies of the argument which we have previously identified, which remain notwithstanding the reduction of the figures, we do not accept that his Honour’s reasons for not deducting the taxation liability “are not altogether clear”.

His Honour stated his reasons for that decision in his judgment at Appeal Book p.24. Firstly, he said that there were other off-setting liabilities of the wife (which totalled $131,859 as against the husband’s total, including the tax debt, of $179,496) which, he said, “nearly approximates in amount the proportion each would bear given my ultimate finding in this case”. Secondly, he said that he considered that “the prospect of a clean financial break between the couple is enhanced” by the course which he adopted. Thirdly, with specific reference to the taxation liability, he said (at Appeal Book pp.24-25):-
“... the husband’s difficulties with the taxation office which flows [sic.] from the way he dealt with his affairs despite receiving a high retrenchment payout remains his to handle.
It appears that he had a capacity to meet debts but spent, lost or hid money which would have met or assisted to meet obligations. The West Samoan matter is in this category as is the loss of $30,000 he alleges occurred at a casino. His failure to account for the expenditure of his retrenchment ‘payout’ is in harmony with this finding.”
His Honour’s finding at this point (and again, at Appeal Book p.30, in a passage already quoted) that the husband failed adequately to explain the expenditure of his redundancy payout was one which was well open to him on the evidence, particularly when regard is paid to the evidence of the husband under cross-examination by Mr McVay at Appeal Book pp.361-400. On the hearing of the appeal, counsel for the appellant conceded that there was about $100,000 of the husband’s redundancy moneys which he was unable to account for. That is almost exactly the amount of his taxation liability.

In all of the circumstances, we consider that his Honour’s treatment of the parties’ liabilities, and specifically of the husband’s taxation liability, was open to him as a proper exercise of discretion, and therefore provides no support for the submissions with which we are now dealing.

That brings us back to the submissions outlined in paragraphs 50 to 52 above. It is undoubtedly the case that the husband’s dispositions to the appellants, alone, do not entirely account for his current incapacity to meet the wife’s just property entitlement as determined by his Honour’s judgment. Obviously, his loss of the $260,000 invested in Western Samoa and the loss of $100,000 arising from the bankruptcy proceedings have contributed to that position. Of those two losses, the latter may be put to one side, at least for the moment, since the size of the loss indicates that it alone is not the factor which ultimately led to the current incapacity and thus defeated the anticipated order in the wife’s favour. The loss incurred in the Samoan investment, on the other hand, is of such a magnitude that it alone could be said to be the ultimate “defeating” mechanism, and since it is said to have occurred after the dispositions to the appellants it is at least not illogical to submit, as Mr Hodgson did, that it was that supervening event which effectively defeated the anticipated order in the wife’s favour, rather than the dispositions to the appellants. Thus it is clearly arguable that, objectively speaking, at the time of those dispositions, they were not likely to defeat any anticipated order in the proceedings, because of the existence of the $260,000 from the stock options as an available source of funds to meet such an order.

Before attempting to deal with that argument, we think it instructive to look more closely at the chronology of relevant events, as disclosed by the evidence and his Honour’s findings.

That chronology is as follows:

The parties separated in 1993.
By late 1994 there was correspondence passing between them in relation to the negotiation of a property settlement, and the husband was aware that if a settlement were not negotiated the matter would fall to be determined in the Family Court (husband’s evidence at Appeal Book pp.374-5).
On 9 October, 1995 the husband contributed $13,460 towards the purchase, by the first appellant, of the Oatlands property. She subsequently repaid him $12,700 of that sum (trial Judge’s findings at Appeal Book p.28).
From November, 1995, the husband began making the mortgage repayments of $2,546 per month in respect of that property, and between then and February, 1997 he made payments in that respect totalling $40,736 (trial Judge’s findings at Appeal Book p.27).
In December, 1995, the husband received the first instalment of his redundancy payment, in the sum of about $359,000 (husband’s evidence at Appeal Book p.361).
On 18 and 21 December, 1995, the husband paid sums totalling $126,000 on behalf of the second appellant for the purchase of the boat previously referred to (husband’s evidence at Appeal Book p.361).
On 11 January, 1996, the husband received a further sum of $27,629 from his employer, being the balance of his redundancy payout (husband’s evidence at Appeal Book p.363).
Towards the end of January, 1996, the husband received a cheque or bank draft for US$156,297.95 in respect of the conversion of his stock options (husband’s evidence at Appeal Book pp.364-367). For reasons which the husband attempted to explain (at Appeal Book pp.366-372) he did not bank or otherwise seek to negotiate that cheque. The cheque arrived in the mail at the post office box shared by the husband and the first appellant (husband’s evidence at Appeal Book p.366) and at a time when he was contemplating having a final property settlement with the wife (husband’s evidence at Appeal Book p.369 line 30 to p.370 line 18).
In January, 1996 the husband purchased a Volvo motor vehicle for $45,000, which he gave to the first appellant “as an engagement gift” (husband’s affidavit paragraph 93 at Appeal Book p.164).
Between 21 January, 1996 and 17 April, 1996, the husband drew cheques to “cash” totalling $26,279 from his account, the purpose and expenditure of most of which he could not explain, other than for a cash withdrawal of $20,000 on 1 April, 1996, in respect of which he said that he had gambled away “[p]retty much all of it” at the Sydney Casino (the husband’s evidence at Appeal Book pp.396-7).
In late February, 1996, the husband received through the mail, at the same post office box shared with the first appellant, a replacement cheque for about US$156,000 (the previous one having become “stale” in the meantime). Again, he did not bank or otherwise negotiate the cheque at that time (husband’s evidence at Appeal Book pp.372-373).
On 22 February, 1996 the wife instituted the proceedings in this Court against the husband for orders for property settlement under s.79 of the Act.
On 22 March, 1996, the husband paid $10,000 for the upgrading of the air-conditioning at the first appellant’s property at Oatlands (husband’s evidence at Appeal Book pp.406 and 471).
On 26 March, 1996 the husband paid $2,500 for landscaping to the first appellant’s property at Oatlands (husband’s evidence at Appeal Book p.406).
On 26 March, 1996, the husband travelled to Western Samoa, returning on 29 March, 1996 (husband’s evidence at Appeal Book p.385), and on 26 March, 1996 a share certificate issued in his name from DDD Management Limited in respect of 156 redeemable preference shares at a nominal value of US$1 per share (husband’s evidence at Appeal Book p.356 and exhibit H13 at Appeal Book p.565). The husband applied the US$156,000 he had received for his share options to this investment which, according to the husband’s evidence, has been lost except for US$156 which he received back.

We think it also instructive to consider the overall effect of that chronology in the context of the following findings by his Honour, to some of which we have already referred in other contexts, but which, for completeness, we consider it appropriate to refer to again at this point.

“In substance he [the husband] says that he has not really worked since his retrenchment apart from providing some help to his de facto [the first appellant] in her business. I am satisfied that he attempted to minimise the assistance he has provided to her and the involvement he has in her financial activities. I conclude from the evidence that he is an active assistant to her which is obviously of mutual value in their circumstances.” [At Appeal Book pp.18-19.]

“The husband has not satisfactorily accounted for his substantial earnings following his association with [the first appellant] nor his retrenchment monies.” [At Appeal Book p.20.]

“It appears that he [the husband] had a capacity to meet debts but spent, lost or hid money which would have met or assisted to meet obligations. The West Samoan matter is in this category as is the loss of $30,000 he alleges occurred at a casino. His failure to account for the expenditure of his retrenchment ‘payout’ is in harmony with this finding.” [At Appeal Book pp.24-25.]
“None of the arrangements [i.e. the relevant dispositions by the husband] involve ‘innocent third parties’. The [first appellant] is a successful and intelligent business woman who was at all material times, and remains, in a close emotional attachment with the husband. She controls the [second appellant].
Given their close emotional relationship, mutual interest in financial arrangements and, as I find, their close business relationship, I infer that the [first appellant] was aware of the husband’s circumstances and plans. I do not accept evidence from them suggesting that they did not share such confidences and I reject the suggestion that they were not working together in business activities. The husband was and remains active in the business activities of [the first appellant].
I accept, on the balance of probabilities, that she and he, well knew that these transactions would diminish the capacity of the husband to meet his obligations to the wife, which must have been obvious to both of them.” [At Appeal Book pp.28-29.]
“What has been called the West Samoan transaction involves funds of some US$156,297 (accepted as approximately Australian $260,000) which the husband invested in that country which he says has been lost, apart from the token recovery of some US$156. He acknowledges that the money for the investment came from the sale of shares he owned following the exercise of stock options he had arising out of his employment. Further he concedes that the money was moved away to keep it from becoming available to the wife.

The husband has not provided a satisfactory explanation of the way in which this money was lost and in the absence of this I have difficulty in accepting his story relating to it.” [At Appeal Book p.31.]

Of those findings, the only one partially challenged by the Notice of Appeal is that which we have numbered (iv), in that the first appellant’s ground 8 challenges the finding that the first appellant knew the dispositions by the husband would diminish his capacity to meet his obligation to the wife, and the first appellant’s ground 16 and the second appellant’s ground 9 both challenge the inference said to be drawn by his Honour in that passage that the husband and the first appellant “acted in collusion”. In our view, both of those elements of that finding were reasonably open to the trial Judge on the evidence before him, particularly having regard to the evidence given by both the husband and the first appellant under cross-examination by the wife’s counsel.

Given those findings and the chronology of events set out in paragraph 68, we think that it is artificial, and potentially misleading, to look at all of the dispositions and the West Samoan transaction as if they were each a separate and isolated transaction. Although the trial Judge did not make a specific finding that all of those events formed part of a single transaction, or chain of transactions, with a common purpose, we think that it is clearly implied that that was the case. In any event, given the chronology and his Honour’s findings, we think the inevitable inference to be drawn is that all of those events (including the Samoan venture) were part of a chain of connected transactions intended, by the husband at least, to significantly diminish the pool of assets available for division in the property proceedings between him and the wife, and thus to defeat (at least in part) an anticipated order in her favour in those proceedings. His Honour certainly found that the husband and the first appellant “well knew” that those transactions would diminish the husband’s capacity to meet his obligations to the wife, and if they knew that would be the effect, and proceeded nevertheless, an intention to produce that effect must be inferred against them.

In those circumstances, we consider that it is wrong and artificial to look at the Samoan transaction as a separate event and, merely because it fortuitously followed the bulk of the dispositions to the appellants, and because of its quantum, to conclude that it was that transaction, rather than the dispositions to the appellants, which defeated or (at the time) was likely to defeat the anticipated order in the wife’s favour. Rather we think that it was the combination of those dispositions and the Samoan transaction, which constituted a single chain of connected transactions, which had that effect. In those circumstances we consider it is open to the wife to seek to attack, through s.85, either the whole chain of transactions or any link or group of links in it which are amenable to such attack. It cannot be a defence to such an attack on some links of the chain for the parties to those links to point to other links which, in purely temporal terms, occurred later, and say that but for those later links the effect, which is a condition precedent to the operation of s.85, would not have occurred. Just as each link of a chain contributes to the chain’s ability to hold a load, so each transaction in this chain of transactions contributed to the overall effect, namely the likely defeat of an anticipated order in the wife’s favour in the proceedings.

For those reasons we reject the submissions referred to in paragraphs 50 to 52 hereof.

In further support of these grounds (to the extent that they challenge the trial Judge’s exercise of discretion in setting aside all of the husband’s dispositions to the appellants and ordering each of them to repay the amount received to the wife) counsel for the appellants submitted that his Honour “had little regard to the rights” and “little if any regard to the bona fides” of the first appellant. In particular, it was submitted that his Honour placed “little if any weight upon the financial support the [first appellant] has been providing for the Husband since his assets were frozen by Court order or the impact which his orders will have upon [her] financial circumstances”.

As to the impact of the orders, it was submitted that to comply with them the first appellant would have to sell her home at Oatlands and the second appellant would have to sell the boat, which is the only income producing asset of the company. Counsel pointed to the first appellant’s financial statement (at Appeal Book p.207) which shows total assets of $391,700 and total liabilities of $305,000, and submitted that she was not seriously challenged on that evidence, and that it was certainly never established that her position was otherwise than as she had stated.

In reply to those submissions, counsel for the wife relied upon the trial Judge’s finding (at Appeal Book p.28) that “[n]one of the arrangements involve ‘innocent third parties’” and upon the fact that s.85(3) requires the Court to have regard to and make orders proper for the protection of only “a bona fide purchaser or other person interested”. It was submitted that neither appellant could claim the benefit of that sub-section, given his Honour’s finding, and his other findings adverse to the credit of both the husband and the first appellant (at Appeal Book p.29) to which we have previously referred.

In relation to the impact of his Honour’s orders on the appellants, counsel for the wife pointed out that nowhere in her evidence did the first appellant assert that if she or her company were obliged to pay back the funds advanced to them by the husband, the consequences would be those now contended for by their counsel, nor was that submission put to his Honour by their counsel at trial. Our attention was also drawn to the evidence of the first appellant about her financial interests in the United Kingdom through the Lime Street Trust. In particular, we were referred to paragraphs 50 and 51 of her affidavit (at Appeal Book p.219), and her oral evidence under cross-examination at Appeal Book pp.541-2. To that reference we would add a reference to the first appellant’s evidence, under cross-examination, at Appeal Book pp.502-509, about the disposal of the proceeds of sale of the Volvo motor vehicle.

On the question of the bona fides of the appellants, it is appropriate to note that the first appellant’s ground 16 and the second appellant’s ground 9 challenge his Honour inferential finding that the husband and the first appellant “acted in collusion”. Although his Honour did not make such a finding expressly, that is probably a reasonable inference from the findings he did make (at Appeal Book pp.28-29) to which we have already referred. Having read the transcript of the evidence of both the husband and the first appellant, and having regard also to the chronology of events set out in paragraph 68 hereof, we are of the view that those findings were reasonably open to his Honour, and cannot be upset on this appeal.

In order to claim the protection of s.85(3), a disponee from a party to proceedings under the Act must be “a bona fide purchaser or other person interested”. In this case, the first appellant could not properly be described as a “purchaser”, whether bona fide or otherwise. Rather, she was purely a volunteer, being the beneficiary of the husband’s generosity. However, in Balnaves v. Balnaves (1988) 12 FamLR 488 at 501, the Full Court (Nicholson CJ, Fogarty & McCall JJ) held that the expression bona fide qualifies only the expression “purchaser” and not “other person interested”, so that a disponee may still qualify for protection under s.85(3) as a “person interested” whether or not he or she acted bona fides. The Court, however, added this rider to that statement:-

“... although of course the presence or absence of bona fides (or negligence or other conduct of a like kind) no doubt will have an impact upon the extent to which, if at all, a court will extend to that person the protection which subs(3) allows: see Heath v. Westpac Banking Corporation (1983) 9 FamLR 97; (1983) FLC 91-362.” [Emphasis added.]

As for the second appellant, whilst it might be arguable that it is not a volunteer in respect of the loan of $126,000 (with a balance of $74,000 at trial) because of its agreement to repay the loan and interest, we think its bona fides is inextricably tied to that of the first appellant, whose creature the second appellant really is. Accordingly, as she has been found to lack bona fides in all these transactions, the second appellant must be found similarly lacking in relation to the loan. It therefore was not, on his Honour’s findings, a “bona fide purchaser”.

Thus, although his Honour was obliged, by s.85(3), to “have regard to and make any order proper for the protection of” the appellants on the basis that each was an “other person interested”, his conclusion that neither acted bona fide in the relevant transactions clearly limits the power of this Court to conclude that his Honour failed to meet that obligation. One has to ask: what order would it have been “proper” to make for the protection of either appellant in circumstances where, lacking bona fides, they participated with the husband in transactions which, his Honour found, both the husband and the first appellant “well knew ... would diminish the husband’s capacity to meet his obligations to the wife” and which in fact had the effect of defeating orders which “would ... have been reasonably anticipated by each of them ... in the circumstances of the case”? Our answer to that question, like his Honour’s, is “none”. Rhetorically, we ask, why should the innocent wife’s position be subjugated to that of the appellants in the circumstances of this case?

It is probably correct to say that, even if a third party in the position of these appellants is found not to be properly entitled to the protection of s.85(3), there remains a residual discretion in the Court to decline to exercise the power given by s.85(1) to set aside a disposition in favour of that party. However, without attempting to delineate the precise circumstances in which it would be appropriate to exercise that discretion, we consider that those circumstances would be very limited. In our view, none of the matters raised on behalf of the appellants, as outlined in paragraphs 74 and 75 hereof, would enliven that discretion in this case, particularly having regard to the matters raised by counsel for the wife and summarised in paragraph 77 hereof.

Finally, within the purview of these grounds, counsel for the appellants submitted that the loan from the husband to the second appellant did not deplete the husband’s assets one iota, merely converting an asset in one form (cash) into an asset in another form (a chose in action, namely the debt). Although he did not put the submission in these terms, we take that to be a submission that there was no “disposition”, within s.85(1), in this transaction.

Some support for such a submission might be found in s.85(4), which provides that for the purposes of the section “‘disposition’ includes a sale and a gift”. There is no reference in that definition to a loan, even one on very favourable terms such as this one was (namely 10 years for repayment with no interest payable until repayment of the principal – see: loan agreement at Appeal Book pp.197-8). However, that definition is inclusive, and not exclusive, and the inclusion of “a sale”, in which property in one form is exchanged for property in a different form (usually cash) indicates that there may be a “disposition” without any actual depletion of the property of the disponor. However, such a disposition would not ordinarily be set aside under s.85(1) unless it led to and facilitated a depletion of the disponor’s property to the disadvantage of his or her spouse in proceedings under the Act, and unless the purchaser of the relevant property was not bona fide or (if he were) some order could be made protecting that purchaser from the consequences of the setting aside.

In Bassola & Bassola: The Official Trustee in Bankruptcy (Intervener) (No.1) (1985) FLC 91-623; 10 FamLR 413, Connor J., after considering a number of authorities in various contexts, concluded (at FLC 80,043) that “the word ‘disposition’ in sec. 85(1) should be given its ordinary meaning namely any form of alienation and is not limited to mere assignments, sales or gifts of property”. He continued (at 80,043-4):-

“Its meaning is not to be restricted unless there is some limitation in the section itself. Here there is such a restriction namely that the disposition must be made ‘by or on behalf of, or by direction or in the interest of a party, which is made or proposed to be made to defeat an existing or anticipated order or which, irrespective of intention, is likely to defeat any such order’. In other respects there is no restriction on its meaning.”

Although, on appeal (Official Trustee in Bankruptcy v Bassola (No.3) (1986) FLC 91-760) the Full Court overturned Connor J’s. conclusion in that case that the bankruptcy of a husband, arising from the acceptance by the Bankruptcy Registrar of a debtor’s petition filed by him, constituted a “disposition” within s.85(1), the Full Court did not disagree with his Honour’s general statement about the interpretation of the term as expressed in the quoted passage. In her judgment in that case, Murray J. said (at 75,560):-

“The only assistance given by sec. 85 as to the meaning of ‘disposition’ is sec. 85(5) which says: ‘In this section, “disposition” includes a sale and a gift.’ The significance of this subsection is that these two forms of alienation are voluntary although it does not necessarily follow that all involuntary alienations are excluded. Certainly in my view, in the context of this subsection, the disposition must have a disponer [sic.], namely one of the parties to the marriage, and a disponee. (Re Mal Bower’s Macquarie Electrical Centre Pty. Ltd. and the Companies Act (1974) 1 N.S.W.L.R. 254 at p. 257.) That in itself implies that the property must pass from the one to the other, and moreover to come within sec. 85(1) that it passes to the disponee by virtue of some action taken ‘by or on behalf of, or by direction or in the interest of’ the disponer [sic.]. (The emphasis is mine.) The subsection does not use the passive tense. To me, this connotes some control, management or arrangement on the part of the disponer which vests the property in the disponee."

Our researches have not revealed any case in which it has previously been held that a loan by a spouse to a third party constitutes a “disposition” within s.85(1). However, we are of the opinion that in the circumstances of this case it did. By the loan the husband effectively put $126,000 (originally) out of his reach and beyond his power of control (including further disposition) for a period of 10 years. By the date of the trial, by repayments voluntarily made to him by the second appellant, that amount had been reduced to $74,000. However, those repayments did not alter the nature of the loan agreement. As to the remaining $74,000, the position subsisted that the husband had exchanged that amount in cash for a right to be repaid that sum (albeit, with interest) only at the expiration of 10 years. That sum was therefore put effectively (were it not for the jurisdiction granted by s.85) beyond the reach of the wife, and, indeed of the Court, in the property proceedings instituted by the wife. For all practical purposes, as regards such proceedings (again, absent resort to s.85) that sum was disposed of by the husband as effectively as if he made a gift of it to the second appellant. Accordingly, subject only to its being “likely to defeat an anticipated order” in the proceedings (which his Honour found and we have confirmed that it did) it was a “disposition” within s.85(1).

Counsel for the appellants further submitted that the debt from the second appellant to the husband created by this transaction was capable of being the subject of an order by the Court for assignment to the wife, and that therefore (as we understand the submission) no anticipated order in the wife’s favour has been defeated by the transaction. We reject that submission, for reasons which we think we have already sufficiently set out above, particularly in paragraph 58 and 59 hereof. It would be of little benefit to the wife to receive an assignment of a debt which she could demand payment of only at the end of 10 years.

For all of those reasons, we conclude that these grounds of appeal are not made out.

Grounds 5, 6 and 7 of the First Appellant

5. That the Trial Judge was in error in law in applying Section 85 of the Act to set aside the disposition whereby the Husband gifted a Volvo motor vehicle to the Third Respondent and his subsequent order requiring the Third Respondent to repay the total purchase price of such vehicle to the Wife’s Solicitors, notwithstanding that such vehicle had been sold at a reduced price.
6. That the Trial Judge was in error in the exercise of his discretion in applying Section 85 of the Act in failing to place sufficient weight upon the release by the Wife of the Third Respondent from an undertaking not to dispose of the Volvo motor vehicle in circumstances where the Wife acknowledged that the proceeds of sale of such vehicle would be used by the Husband to meet living expenses in circumstances where the Wife had obtained injunctions freezing the Husband’s then other available assets.
7. That His Honour was in error in law in determining that it is not to the point whether or not the gift of the Volvo motor vehicle was in cash or kind or what the Third Respondent did thereafter with the proceeds of the sale of the motor vehicle.

These three grounds all challenge his Honour’s determination that the first appellant should repay $45,000 to the wife in respect of the Volvo motor vehicle given to her by the husband in January, 1996. Grounds 5 and 7 challenge, on the basis of error of law, his Honour’s determination that the figure to be repaid by the first appellant in respect of this transaction should be $45,000 (the cost of the car) rather than (at most) $35,000, which was the amount for which the first appellant sold the vehicle in February, 1997. Ground 6 challenges, on specific grounds distinct from the general ones raised by grounds 1 to 4, the exercise of discretion by the trial Judge in deciding to set aside the gift of the vehicle under s.85. It is convenient to deal with the broader issue raised by ground 6 before turning to the narrower issue raised by the other two grounds.

In support of ground 6, counsel for the appellants referred to the undisputed fact that on 18 April, 1996 the wife consented to the release of the first appellant from the undertaking she had given to the Court by her affidavit of 3 April, 1996 not to dispose of the Volvo without giving the wife 14 days notice of her intention so to do. He further referred to the wife’s concession under cross-examination (at Appeal Book p.322) to the effect that she consented to that release knowing that, if the car were sold, its proceeds could be used to meet the husband’s day-to-day expenses (the $100,000 in his bank account having been frozen indefinitely by the consent orders of the same date). It was submitted that in the light of that concession the wife had tacitly agreed to the expenditure of the sale proceeds to meet the husband’s living expenses (which the husband and the first appellant said they had been used for). It was submitted that the trial Judge ought to have placed weight on those facts in deciding whether, in the exercise of his discretion, to set aside the Volvo transaction under s.85.

In advancing this ground, counsel for the appellants did not seek to invoke the principles of estoppel, waiver or election in support of it, and it is therefore inappropriate for us to delve into those principles in dealing with the ground.

In terms of the weight (if any) which ought to have been given by the trial Judge to the matters relied upon, we think it relevant to note that at the time she consented to the release of the first appellant from her undertaking the wife had not invoked s.85 in the property proceedings (her first application under that section not having been filed until 17 April, 1997), and she was ignorant of some important facts.

Not the least of the matters of which she was then ignorant was the fact that the husband had already effectively put US$156,000 (the proceeds of his stock options arising from his retrenchment) beyond the reach of her property proceedings by investing it, in highly suspicious circumstances, in a company in Western Samoa. As the trial Judge noted, he conceded that he did that for just that purpose. Furthermore, the wife was then unaware of the fact, as found by the trial Judge (at Appeal Book p.29) that both the husband and the first appellant knew that the chain of transactions entered into by them would diminish the husband’s capacity to meet his obligations to the wife in the property proceedings. As we have already noted, the proper inference to be drawn from that finding of knowledge, coupled with the conduct of carrying out the transactions, is that the husband and the first appellant intended the result which they knew would flow from that conduct.

In addition, the wife did not know and could not reasonably foresee at that time that, by the subsequent conduct of the husband in presenting his own petition in bankruptcy, the $100,000 frozen in his bank account by the same consent orders would be dissipated in costs incurred by or on behalf of his trustee in bankruptcy despite the subsequent annulment of the bankruptcy by order of this Court.

Further to all of the above, we think it an error to equate the wife’s consent, given in the context of a settlement of interlocutory court proceedings, to the release of the first appellant from the undertaking which she had previously given, with a consent to the sale of the vehicle and the dissipation of the proceeds. All that the wife’s consent signified was that she was prepared to consent, at that time and in those circumstances, to the removal of any court imposed impediment to the first appellant’s dealing with the vehicle as she might see fit. It remained a matter for the first appellant as to how she chose to deal with the vehicle, but at her own risk if the Court should ultimately find that, as against the wife, her title to it was voidable in the context of the proceedings under the Act.

Having regard to all of those matters, we are of the view that, in deciding whether or not, in the exercise of his discretion, to set aside the disposition of the Volvo by the husband to the first appellant, little weight if any ought to have been given by his Honour to the fact that the wife consented to the release of the first appellant from her undertaking of 18 April, 1996, even if at that time she expected that any funds arising from a sale of the Volvo (if the first appellant chose to sell it) might be applied to meet the day to day expenses of the husband and/or the first appellant. This ground is therefore rejected.

Turning to grounds 5 and 7, it was submitted for the first appellant that the relevant disposition, for the purposes of s.85, was the gift of the Volvo to the first appellant, not the purchase of the vehicle by the husband. We agree with that submission. It was therefore submitted that, upon the setting aside of the disposition under s.85, what should be brought back into the asset pool of the parties is the vehicle, not its original cost.

If the vehicle had not been sold, the order would undoubtedly have been for its reconveyance to the husband, and it would then have been brought to account in the s.79 proceedings at its current value, but with the possibility that the trial Judge might give some recognition, in his consideration of the impact of the relevant s.75(2) factors, to the fact that the husband had had the benefit of the use and enjoyment of this depreciating asset from the date of its acquisition to the date of trial. It was therefore submitted that, having set aside the husband’s disposition of the vehicle to the first appellant, and having decided to make an order against the first appellant effectively requiring her to refund the benefit she received from that disposition to the matrimonial asset pool, his Honour should have ordered her to repay the $35,000 she received from the sale of the vehicle rather than the $45,000 which the husband paid for it.

Counsel for the wife submitted that the relevant disposition is “the gift of a $45,000 Volvo to the [first appellant]” and that “it is irrelevant what happened after that”. He further submitted that as she had the benefit of the vehicle for the year that she owned and drove it, there is no injustice in requiring the first appellant to refund its original purchase price.

In this instance we prefer the submissions of counsel for the first appellant to those of counsel for the wife. We also think that the former submissions derive some support from the fact that the wife consented to the release of the first appellant from her undertaking not to dispose of the vehicle. Although we have said that that consent ought not to be equated with consent to the sale of the vehicle, by so consenting she allowed the removal of any legal impediment to that course, and the sale by the first appellant then became at least a foreseeable event from the wife’s perspective. As the first appellant did then sell the vehicle, and is therefore unable to restore it to the matrimonial asset pool in specie, we think it is unjust to her to require that she now refund the original cost of the vehicle rather than the amount which she received on its sale. We therefore conclude that these grounds of appeal have been made out, and that his Honour’s orders against the first appellant should be varied to reflect that conclusion. In the absence of our upholding any of the other grounds of appeal that conclusion would be reflected by reducing the amount to be paid by the first appellant by $10,000 (the difference between the cost of the vehicle to the husband and the price for which it was sold by the first appellant).

Grounds 8 and 9 of the First Appellant

8. That the Trial Judge was in error on the evidence in finding that the Third Respondent knew that those transactions which he subsequently set aside pursuant to the provisions of Section 85 of the Act, would diminish the capacity of the Husband to meet his obligations to the Wife and which must have been obvious to the Third Respondent.
9. That the Trial Judge was in error on the evidence in finding that at the time the transactions or dispositions were made, that the Third Respondent or an informed observer would have reasonably anticipated such transactions or dispositions would have the effect of defeating orders.

We think that these grounds are adequately covered by what we have already said in dealing with grounds 1 to 4. Suffice, at this point, to say that we consider the findings challenged by these grounds were open to the trial Judge on the evidence. He was not obliged to accept, and did not accept, the evidence of the husband and the first appellant that they did not share confidences about their respective financial affairs, which would include the husband’s purpose in making the Samoan investment. It was therefore open to his Honour to find that they both knew that the transactions involving the dispositions in favour of the first appellant (as part of a chain of connected transactions, including the Samoan investment) would diminish the husband’s capacity to meet his obligations to the wife, and that they were therefore likely to defeat an anticipated order in the proceedings. These grounds are therefore rejected.

Grounds 10 and 11 of the First Appellant

10. That the Trial Judge was in error in setting aside periodic payments made by the Husband in relation to the Third Respondent’s mortgage repayments in circumstances in which he was obtaining the benefit of residing in the Third Respondent’s home and being otherwise financially supported by the Third Respondent.
11. That the Trial Judge was in error in the exercise of his discretion in failing to place sufficient weight upon the financial support provided by the Third Respondent to the Husband since the time of his retrenchment to off-set the transactions or dispositions made by the Husband to the Third Respondent.

These grounds challenge his Honour’s setting aside of a series of dispositions by the husband in favour of the first appellant which were constituted by his making the mortgage payments on her property at Oatlands between November, 1995 and February, 1997, in a total sum as found by his Honour of $40,736.

The submissions in support of these grounds were brief and did little more than restate the grounds themselves. The point was made that, prior to the purchase of this property, the husband and the first appellant had been living in rented accommodation paying $350 per week, and the husband’s payment of the mortgage instalments was said to be akin to rent and a contribution by him to their joint living expenses at a time when, in addition to living in the premises, the husband was being “otherwise financially supported” by the first appellant.

Counsel for the wife responded to these submissions by referring to the trial Judge’s finding (at Appeal Book p.30) that the husband’s inadequate explanation of his expenditure of his redundancy package, which provided “ample funds” for his living expenses, allowed his Honour “to conclude that he was well placed to make contributions to living expenses”. To that reference we would add a reference to his Honour’s finding (at Appeal Book p.20) that “[t]he husband has not satisfactorily accounted for his substantial earnings following his association with [the first appellant] nor his retrenchment monies”.

The evidence of the husband under cross-examination (at Appeal Book pp.422-426) was that his earnings between separation, in 1993, and his retrenchment, in November, 1995, were of the order of $210,000 net, in addition to which he had expended during the period from mid 1993 to mid 1998, $30,000 from a savings account plus the $386,000 from his retrenchment monies. He said he had paid $127,000 to or on behalf of the wife and children during that period, leaving a sum of the order of $502,000 expended by him during that period. Even if allowance is then made for the net $172,000 (approximately) paid out to or on behalf of the appellants, some $330,000 would appear to have been available to the husband to cover his own living and other expenses (including legal expenses) during that period of about 5 years. That equates to about $66,000 per year, or $1,270 per week. On those figures, his Honour’s findings about the husband’s capacity to provide his own living expenses were fully justified.

Although the husband certainly enjoyed the benefit of living in the Oatlands home with the first appellant following its acquisition, the mortgage repayments which he made were contributions of a capital nature to an asset of the first appellant, and in our opinion it was open to the trial Judge to regard them as dispositions by the husband, within s.85, and it was also within the proper exercise of his discretion under that section to set them aside. In passing, we would note that most of these particular dispositions occurred after the husband had disposed of the US$156,000 in the Samoan investment, and the arguments which we have previously rejected about the likelihood, at the relevant time, of the impugned dispositions defeating an anticipated order in the property proceedings, are even weaker in the case of these payments.

For those reasons, these grounds too are rejected.

Ground 12 of the First Appellant

12. That the Trial Judge was in error in the exercise of his discretion in setting aside transactions which the Husband made for the benefit of the Third Respondent in circumstances where such transactions involved third parties being paid for carrying out improvements to the Third Respondent’s property when such improvements were carried out at the instigation of the Husband and not the Third Respondent.

This ground relates to his Honour’s setting aside of the dispositions which he said were constituted by the husband’s payments of $10,000 towards the air-conditioning and $2,500 towards the landscaping of the first appellant’s property.

In support of this ground, counsel for the appellants made two submissions. The first was that those expenditures were “another off-setting situation” (which we take to be an adoption of the submissions previously made in relation to the mortgage repayments made by the husband). We reject that submission again, in this instance, for the same reasons as we rejected it in relation to the mortgage repayments.

The second submission made for the first appellant in relation to this ground was that these dispositions involved payments, not to the first appellant, but to third party tradesmen, and that her evidence (at Appeal Book p.540) was that the husband instigated the performance of the work, and it was not done at her request. The thrust of that submission appears to be that any disposition by the husband arising from those payments was not one to which the first appellant was a party, and that therefore she could not properly be ordered to refund the amount paid out by the husband.

We reject that submission. Whether the payments were made to the first appellant or to third party tradesmen, they were made in respect of improvements to the first appellant’s property, of which she undoubtedly accepted the benefit. In our view, the effect is no different from the money being paid directly to the first appellant and then applied by her to the acquisition of the improvements to her property. Perhaps the only real difference is that in the latter event the benefit received by the first appellant would be unarguably the cash amount provided by the husband, whereas in the former it could be said to be the value of the improvement to her property. However, in the absence of evidence to the contrary, we think the Court would be entitled in this circumstance to infer that the value of the improvement equalled the cost of the work done.

For those reasons, this ground too is rejected.

Grounds 13 to 16 of the First Appellant and Grounds 6 to 9 of the Second Appellant

13.[6.] That the Trial Judge was in error in the exercise of his discretion in failing to have proper regard to the rights of the Third Respondent [Fourth Respondent], in the light of the Husband’s conduct whereby he invested approximately $260,000.00 in Western Samoa which was subsequently lost, apart from the token recovery of $US156.00 in circumstances where the Third Respondent [Fourth Respondent] had no involvement in such conduct and such conduct occurred primarily after the time of the dispositions to and for the benefit of the Third Respondent [Fourth Respondent].
14.[7.] That the Trial Judge was in error in invoking the provisions of Section 85 of the Act whereby he included in the net asset pool of the parties the investment of $260,000.00 in Western Samoa as a notional asset in circumstances where the Husband’s ultimately determined entitlement was approximately this amount.
15.[8.] That the Trial Judge was in error in the exercise of his discretion in applying the provisions of Section 85 of the Act, essentially because the Third Respondent [Fourth Respondent] owned an asset which was available and was within the jurisdiction of the Court, in circumstances where the Husband had been able to ostensibly put other assets outside the reach of the Court.
16.[9.] That the Trial Judge was in error on the evidence in essentially inferring that the Third Respondent [Fourth Respondent] and Husband acted in collusion.

We think that these grounds are adequately covered by our consideration and determination of the various issues advanced under grounds 1 to 4. Nothing will be gained by our canvassing those issues again. Accordingly, we conclude that these grounds too must fail.

Ground 5 of the Second Appellant

5. The Trial Judge was in error in law in invoking the provisions of Section 85 in circumstances where the liability to the Husband of the Fourth Respondent was admitted and the principal issue was one as to when such liability should be repaid.

Again, this ground has been largely covered in our consideration of previous grounds. Counsel for the second appellant submitted that, as the debt of the second appellant to the husband was conceded, any anticipated order in the wife’s favour had, at worst, been “deferred to delayed”, rather than defeated, by the loan, because an order could have been made assigning the benefit of the loan to the wife as part of her entitlement.

We reject that submission. We have earlier indicated that it was reasonably foreseeable, at the time of all these transactions, that the wife would receive the benefit of orders for the provision to her of property in the vicinity of $314,000, including the former matrimonial home free of encumbrance. A transaction which would preclude her from receiving some $74,000 of that likely entitlement for a period of 10 years, in our view, would “defeat” those orders, within the meaning of s.85(1).

Summary of Conclusions

In summary, we are of the view that only grounds 5 and 7 of the first appellant’s appeal are made out, and that all other grounds of both appellants’ should be rejected. Pursuant to those grounds 5 and 7, the amount to be repaid by the first appellant in respect of the Volvo should be $35,000 instead of $45,000. That reduces the total amount payable by the first appellant under order 5 of his Honour’s orders from $98,996 to $88,996. We propose to make orders appropriate to produce that result.

COSTS

Although the amended Notice of Appeal of each appellant challenged his Honour’s orders as to costs (paragraphs 25(a) to (e) of the orders) no grounds were directed to those orders, and no submissions (written or oral) were made in relation to them. Having regard to those matters, and to the outcome of the substantive appeals, that aspect of the appeals must fail.

At the conclusion of the appeal hearing we invited and received submissions by counsel as to the costs of the appeals. Counsel for the appellants sought an order for costs against the wife in the event that either appeal should succeed, or alternatively a costs certificate under s.9 of the Federal Proceedings (Costs) Act 1981 if the appeal should succeed on a question of law. He contended that if the appeal should fail there should be no order as to costs, considering the financial circumstances of the relevant parties and that the appeal was one of substance, and also considering the fact that the wife’s cross-appeal was abandoned.

Counsel for the wife sought an order for costs against the appellants if the appeals should fail, and in the event that the appeal should succeed on a question of law he sought a costs certificate under s.6 of the Federal Proceedings (Costs) Act, including a certificate in respect of any costs of the appellants, payable by the respondent wife.

Whilst the appeal has not been wholly unsuccessful, it has been successful only to a very limited degree. In financial terms, it succeeded only to the extent of just under 6% ($10,000 out of the $172,996 challenged). In our view, that very limited success does not justify any order for costs in favour of the appellants, but at the same time it also weighs against an order in favour of the respondent wife. In addition, we think some of the issues raised by the appeal were issues of some substance, and certainly neither frivolous nor plainly without merit. Having regard to those matters, and to the fact that the wife’s cross-appeal was abandoned, we conclude that the circumstances do not justify an order for costs against or in favour of any party, and that there should therefore be no order as to costs of the appeals or the cross-appeal.

We do not consider it appropriate to grant any party a costs certificate in respect of these appeals.

ORDERS

For the foregoing reasons, the orders of the Court are:-

That the appeal of the third respondent, Krishna Devi Bassi be allowed in part.
That order 4(a) of the orders made on 2 October, 1998, be varied by deleting the words and figures “such vehicle having been purchased for $45,000” and substituting the words and figures “such vehicle having provided a benefit to the third respondent of $35,000”.
That order 5 of the said orders be varied by deleting the figures “$98,996” and substituting the figures “$88,996”.
That otherwise the said appeal, and the appeal (instituted by Notice of Cross-Appeal) of the fourth respondent, K.D. Sales Force Specialists Pty Ltd, and the Cross-Appeal of the wife, be dismissed.

PROPERTY SETLEMENT – Transactions likely to defeat claim – s.85 – Series of transactions – Dispositions by husband in collusion with defacto – Whether wife contributed to husband’s superannuation – Whether dispositions correctly returned to asset pool – Whether property settlement just and equitable

Official Trustee in Bankruptcy v Bassola (No.3) (1986) FLC 91-760 cited.

These were appeals by the first and second appellants from orders made by Rowlands J in property proceedings between the husband and wife.

The husband is aged 54 while the wife is aged 50. The parties commenced cohabitation in 1974, were married in 1976 and separated in 1993. The two children of the marriage, aged 20 and 18, reside with the wife in the former matrimonial home.

In July 1993 the husband commenced a defacto relationship with Ms Bassi, the first appellant, who, along with the second appellant (a company of which Ms Bassi is the director), was joined as a respondent to the original proceedings because of dealings with the husband which the wife sought to have set aside pursuant to s.85 of the Family Law Act.

At the time of separation the husband was employed by a large international corporation as its Australian general manager. He was retrenched in December 1995 and received a redundancy package of $386,659 in addition to valuable stock options and a right to significant superannuation benefits when he turned 55.

In October 1995 the husband paid $13,460 towards the settlement price of a property at Oatlands which had been purchased in the sole name of the first appellant. $12,700 of that sum was subsequently repaid. Between November 1995 and February 1997 the husband made mortgage repayments totalling $40,736 in respect of that property. He also paid $12,500 for airconditioning and landscaping for the property.

In December 1995 the husband lent the second appellant $126,000 to enable the company to purchase a motor cruiser. At trial, some $74,000 was still to be repaid. In January 1996 the husband purchased a Volvo motor vehicle valued at $45,000 which he gave to the first appellant as an engagement present.

In March 1996 the husband invested the US$156,197 ($A260,000) he received by way of stock options upon termination of his employment in a speculative share venture in Western Samoa. Those funds were, according to the husband’s evidence, subsequently lost.

The wife commenced proceedings for property settlement on 22 February, 1996 and sought, and subsequently obtained, interim injunctions preserving the husband’s assets, including $100,000 in a Commonwealth Bank account. On 3 April, 1996 the first appellant gave an undertaking not to dispose of the Volvo without first giving the wife 14 days notice. On 18 April, 1996 the wife consented to the release of the first appellant form that undertaking. The first appellant sold the Volvo for $35,000 in February 1997 and applied $10,000 of that amount to a debt and the remainder to her and the husband’s living expenses.

On 20 March, 1997 the husband’s petition seeking his own bankruptcy became effective and on 17 April, 1997 the wife applied to the Federal Court for an annulment of the bankruptcy and the transfer of the proceedings to the Family Court. The matter was cross-vested to the Family Court and on 23 March, 1998 O’Ryan J annulled the husband’s bankruptcy pursuant to s.153B of the Bankruptcy Act. As a result of those proceedings, the $100,000 held in the Commonwealth Bank Account was dissipated by the trustee in bankruptcy.

On 14 August, 1998 the wife filed an amended application seeking that specified transactions between the husband and the first and second appellants be set aside pursuant to s.85.

When the matter came before Rowlands J, his Honour found the parties had net assets of $571,901 including amounts of $98,996 representing money paid by the husband to or on behalf of the first appellant, $74,000 representing the outstanding balance of the $126,000 loaned to the second appellant (which transactions he held should be set aside under s.85) and $260,000 being the money invested and lost by the husband in Western Samoa without adequate explanation. The trial Judge did not include the parties’ respective liabilities in the net asset pool but rather regarded it as just and equitable to leave those liabilites with the party responsible for them as the amounts approximated the proportions in which the trial Judge would have ultimately divided any liabilities.

In upholding the wife’s application under s.85, the trial Judge was satisfied that, at the time of each disposition by the husband to the appellants it was likely to defeat an anticipated order in the proceedings which the husband would not otherwise have been able to satisfy. His Honour further found the husband and his defacto had a close emotional and business relationship and that both knew the transactions would diminish the husband’s ability to meet his obligations to the wife.

The trial Judge found the parties’ contributions to the asset pool to have been equal but, having regard to the relevant s.75(2) factors, made an adjustment of 5% in favour of the wife. The result was that the wife was to receive the former matrimonial home (subject to the existing mortgage) the contents of the home and a car plus $98,996 to be paid to her by the first appellant and $74,000 by the second appellant. His Honour further adjourned the portion of the property settlement relating to the husband’s superannuation until March 2000 when the husband would become entitled to a lump sum payment of $482,400 or alternatively to a substantial pension. In the meantime, his Honour restrained the husband from doing anything to defeat the purpose of those proceedings.

On Appeal, the first and second appellants submitted that, in ordering the specified transactions be set aside, the trial Judge erred in law and in the exercise of his discretion.

Held, allowing the appeal in part:

The wife’s contribution to the husband’s redundancy package was as real and substantial as her contribution to his earnings and accumulation of superannuation benefits during the marriage and the trial Judge was therefore correct in including property and notional property acquired from it as property available for distribution.
The trial Judge’s orders of 2 October, 1998 were not intended to be interim orders and were in fact partial final orders (per s.79(6)) and, in any event, there is nothing in s.85 to indicate that the “anticipated order” which a disposition must be likely to defeat must be a final order.
It was open to the trial Judge to determine the wife’s entitlement under s.79 on the basis that the husband’s dispositions to the appellants, as well as his ill-fated investment in Western Samoa, were notional property of which the husband had had the sole benefit. Further, it was reasonably foreseeable that the wife’s entitlement to property would include an immediate cash payment of at least $100,000 which the husband, by dispositions of property, precluded himself from being able to pay, and thereby defeated an anticipated order.
In the circumstances, the trial Judge’s treatment of the parties’ liabilities, specifically the husband’s tax liability, was open to him as a proper exercise of discretion.
While it is clearly arguable that the dispositions to the appellants were not likely to defeat any anticipated order because of the existence of the $260,000 in the form of stock options, and the husband’s loss of money in the Western Samoan venture was a supervening event which effectively defeated the anticipated order in the wife’s favour. It is wrong and artificial to look at the dispositions and the Western Samoan transaction as isolated events when, in reality, the combination of events constituted a single chain of connected transactions which had the effect of defeating the anticipated order. Accordingly, it was open for the wife to attack, through s.85, either the whole or any part of those transactions so open to attack.
The trial Judge was correct in finding that, as the first appellant, who essentially controls the second appellant, effectively acted in collusion with the husband in relation to the dispositions, the appellants lack bona fides and are therefore not entitled to protection under s.85(3).
In the circumstances of the case, the husband’s loan to the second appellant constitutes a disposition, within s.85(1), because the husband effectively put the $74,000 beyond his, the wife’s or the Court’s control for 10 years: Official Trustee in Bankruptcy v Bassola (No.3) (1986) FLC 91-760 cited. For all practical purposes, that sum was disposed of as effectively as if he had made a gift of it to the second appellant.
The trial Judge was correct in giving little weight to the fact the wife consented to the release of the first appellant’s undertaking in deciding whether or not to set aside the disposition of the Volvo. However, as the relevant disposition was the gift of the Volvo to the first appellant, not its purchase by the husband, it is unjust to require the first appellant to return the original cost of the vehicle to the asset pool. Rather, the amount to be returned to the asset pool by the first appellant ought be reduced by $10,000, being the difference between the cost of the vehicle and its subsequent sale price.
It was open to the trial Judge to regard the husband’s contributions to the mortgage over the first appellant’s property as dispositions and it was within his Honour’s discretion to set them aside. Further, whether or not the money spent on improvements to that property was paid to the first appellant or third party tradesmen is irrelevant; those payments amount to a disposition for the purposes of s.85.

NO ORDER FOR COSTS

REPORTABLE

[1999] FamCA 1352

13 October 1999