Bauer & Nolan (No 4)
[2023] FedCFamC1F 598
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Bauer & Nolan (No 4) [2023] FedCFamC1F 598
File number(s): WOC 1022 of 2019 Judgment of: CHRISTIE J Date of judgment: 20 July 2023 Catchwords: FAMILY LAW – PROPERTY – Where final property orders were made – Where the parties were in a de facto relationship – Where the date of separation is in dispute – Where the respondent made greater initial contributions to the property pool – Value of property – Consideration of expert evidence – Where non-financial contributions of the parties are equal – Where both parties have suffered ill health – Where both parties are no longer in the workforce – Where both parties have monies unaccounted for – Whether the parties have access to inheritances – Whether superannuation pension should be treated as property – Whether sale proceeds of a property should be included as an addback – Whether paid legal fees should be included as an addback – Where the respondent to pay to the applicant a lump sum by way of final property settlement. Legislation: Family Law Act 1975 (Cth) ss 4AA, 90SF, 90SM Cases cited: Carron & Laninga (2019) FLC 93-909
Hall and Hall (2016) FLC 93-709
Kowaliw and Kowaliw [1981] FLC 91-092
NHC & RCH (2004) FLC 93-204
Trevi & Trevi (2018) FLC 93-858
Division: Division 1 First Instance Number of paragraphs: 153 Date of hearing: 7 November 2022 – 11 November 2022, 13 February 2023 and 3 April 2023 – 4 April 2023 Place: Sydney and Wollongong Counsel for the Applicant: Ms Gillies Solicitor for the Applicant: Hansons Lawyers on 7-11 November 2022; Access Law Group on 13 February 2023 and 3-4 April 2023 Counsel for the Respondent: Mr Wong Solicitor for the Respondent: Heard McEwan Legal ORDERS
WOC 1022 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS BAUER
Applicant
AND: MS NOLAN
Respondent
order made by:
CHRISTIE J
DATE OF ORDER:
20 JULY 2023
THE COURT ORDERS THAT:
Property Settlement
1.Within six (6) weeks of these Orders the respondent shall pay to the applicant the sum of $512,480 by way of full and final property settlement.
2.Each party shall be entitled to retain her interest in any superannuation entitlements including any pensions and any other property in her sole name.
Enforcement and default sale
3.If the respondent fails to pay the sum in Order 1 within 14 days thereafter, the respondent is to take all necessary steps and execute all necessary documents to cause the property situated at P Street, Suburb Q to be sold by auction at the earliest possible date with the reserve price to be agreed to between the parties and failing such agreement the reserve price shall be set by the agent and upon sale the proceeds shall be disbursed as follows:
(a)Payment of agent’s commission and advertising expenses and legal expenses of the sale;
(b)Payment of any adjustment of council rates or utilities or any outstanding amounts owing on rates or utilities;
(c)The net balance, if any, thereafter, shall be divided between the parties as follows:
(i)The sum of $512,480 to the applicant, plus interest in accordance with the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) calculated from the due date for the payment in Order 1 to the settlement date;
(ii)The balance thereafter, if any, to the respondent.
4.Within seven (7) days of non-compliance with order 1 the parties will agree and execute all necessary documents to instruct a listing agent and conveyancer to act on the sale of the property in Order 3, in the event of there being any dispute as to the nomination of the agent or conveyancer after the seven (7) days the applicant shall nominate the listing agent and conveyancer and advise the respondent in writing, the respondent must sign all necessary documents to instruct them to act within a further seven (7) days.
5.In the event that the property in Order 3 fails to be sold at an auction then each party shall take all necessary steps and execute all necessary documents to cause the said property to be sold by private treaty at a price to be fixed by the listing agent and the sale proceeds shall be divided as follows:
(a)Payment of agent’s commission and advertising expenses and legal expenses of the sale;
(b)Payment of any adjustment of council rates or utilities or any outstanding amounts owing on rates or utilities;
(c)The net balance, if any, shall be divided between the parties as follows:
(i)The sum of $512,480 to the applicant plus interest in accordance with the Rules calculated from the due date for the payment in Order 1 to the settlement date;
(ii)The balance, if any, to the respondent.
6.Pending completion of the sale of the property in the above Orders, the respondent is to continue to meet and pay as and when they fall due all charges, costs and outgoings on the property including rates and insurances.
7.In the event the Respondent fails to execute the required documents to cause sale of the home in the above orders within seven (7) days thereafter, pursuant to section 106A of the Family Law Act 1975 (Cth) the Registrar of the Federal Circuit and Family Court of Australia is authorised to sign any such document if that document has been provided to the respondent in writing and the respondent has failed to execute and provide that executed document to the applicant or agent, or conveyancer, within 14 days thereafter.
Restraint
8.Pending compliance with the above orders, the respondent is restrained by injunction from selling, giving away, dealing with, alienating or disposing of any assets, subject to the respondent meeting reasonable living expenses and legal expenses.
COSTS
9.If either party wishes to file an application for costs then she do so within 28 days of the date of these orders, accompanied by an affidavit.
10.Any response to an application for costs and accompanying affidavit is to be filed within 14 days of service of the application.
11.Within 7 days of the filing of the response the parties are to notify my associate as to whether the costs application should be listed for hearing or determined in chambers.
12.In the event that the application for costs is to be determined in chambers the parties are to file costs submissions as follows:
(a)The applicant for costs within 7 days of notification to consent for the matter to be dealt with in chambers;
(b)The respondent within a further 7 days;
(c)Any brief response within a further 7 days.
(d)The submissions are to be limited to 5 pages in the case of the primary submission and 1 page in respect of the submission in reply.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Bauer & Nolan has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CHRISTIE J:
This is an application for adjustment of property interests following the breakdown of a de facto relationship.
The applicant, Ms Bauer and the respondent, Ms Nolan commenced a relationship in 2000. From 2000 the parties shared a common residence although it is accepted that there were periods where they lived separately.
The parties do not agree as to when the de facto relationship ended. The respondent contends that the relationship ended no later than December 2016 when she commenced residing at P Street, Suburb Q (“the Suburb Q property”). The applicant says that the relationship ended in July 2018.
BACKGROUND
At the commencement of the parties’ de facto relationship the applicant was the registered owner of R Street, Suburb S (“the Suburb S property”) subject to a mortgage.
The respondent owned a property at T Street, Suburb U (“the Suburb U property”) subject to a mortgage and an unencumbered property at V Street, Town W (“the Town W property”).
The applicant received a number of inheritances during the parties’ relationship including:
(a)$10,000 from her mother;
(b)Monies from Ms X; and
(c)Monies from Ms Y.
During the relationship the parties worked and established a partnership which provided accommodation. When the partnership was dissolved part of the proceeds were applied to purchase of a property at P Street, Suburb Q (“the Suburb Q property”) in the name of the respondent.
During the relationship the respondent became entitled to an inheritance from her mother.
Before this matter could be listed for final hearing it was necessary to resolve a dispute between the parties as to whether or not their relationship was a relationship within the meaning of s 4AA of the Family Law Act 1975 (Cth) (“the Act”). On 14 February 2022 the parties resolved that dispute by agreement although they remain at odds about when the relationship ended.
The notations to the orders of 14 February 2022 set out the parties’ competing contentions about the date of separation: the applicant says that the parties separated in June 2018 while the respondent says they separated no later than December 2016.
LAW
Before the Court can embark on an analysis of whether it would be just and equitable to adjust the interests of the parties in the property of either or both of them it is necessary to ascertain the assets, liabilities and superannuation of the parties and to have an understanding of any financial resources which one or other of them may hold.
In forming a conclusion about the assets available for division as between the parties it may be necessary to take into consideration notional assets, that is assets which were previously available for division but are no longer in the possession or control of a party due to sale, transfer, payment of legal fees or the like. The principles which are applied in determining whether it would be appropriate to include such assets are set out in cases such as NHC & RCH (2004) FLC 93-204 and Trevi & Trevi (2018) FLC 93-858.
Once the Court is able to make findings about the composition and value of the pool of assets available for adjustment, s 90SM of the Act requires an assessment of contributions, financial (direct and indirect) to the acquisition, conservation and improvement of the assets of the parties. It also requires an assessment of any non-financial contributions made by the parties.
Neither the assessment of financial contributions nor the assessment of non-financial contributions is to be undertaken in a pernickety manner. The authorities entreat a trial judge to adopt a holistic approach.
Finally, having considered any matters which are relevant pursuant to s 90SF(3) of the Act, it is necessary to reach a conclusion about what, if any, adjustment is appropriate having regard to the findings in the case and application of the law to those findings.
PRELIMINARY ISSUES
The hearing of this matter commenced on 7 November 2022 and became part heard on 11 November 2022.
The matter was due to resume in February 2023 but the respondent was hospitalised.
When the matter resumed on 3 April 2023 the applicant sought leave to rely on a report of Dr Z, general practitioner attached to an affidavit of 31 March 2023. That application was opposed.
Ultimately, a letter from Dr Z was accepted as an exhibit in the proceedings by way of update from a treating medical practitioner.
CONSIDERATION
Notwithstanding the fact that the parties had reached agreement about there being jurisdiction to hear the applications for final property adjustment, the hearing was dominated by the recurring theme of the nature and characteristics of the parties’ relationship. Jurisdiction having been established (by consent) it was necessary to consider those facts which went to the statutory considerations underpinning determination of what (if any) property adjustment would be just and equitable: s 90SM(3) of the Act.
There were a number of issues which required determination of the Court to arrive at a balance sheet of assets, notional assets, liabilities, superannuation and financial resources.
The “Final Joint Balance Sheet For Closing Submissions”, which was the subject of final submissions by the parties, included the following assets, notional assets, liabilities, superannuation and financial resources:
Balance Sheet
Property Ownership Applicant’s Value Respondent’s Value ASSETS 1 P Street, Suburb Q Respondent $1,450,000 $1,450,000 2 R Street, Suburb S Applicant $2,250,000 $2,630,000 3 V Street, Town W Respondent $50,000 $50,000 4 ANZ account ending #...74 Respondent NK $78,735 5 ANZ account ending #...89 Respondent NK NK 6 AA Company shares Respondent $12,907 $12,907 7 BB Company shares Respondent $138,567 $138,567 8 CC Company shares Respondent $12,096 $12,096 9 DD Company shares Respondent $45,288 $45,288 10 EE Company shares Respondent $6,730 $6,730 11 FF Company shares Respondent $17,901 $17,901 12 Motor Vehicle 1 Applicant $19,000 $19,000 13 Motor Vehicle 2 Applicant $15,000 $15,000 14 GG Bank accounting ending #...15 (line of credit) Applicant NIL NIL 15 H Insurance shares Applicant $5,456 $5,456 16 HH Company shares (CHESS sponsored) Applicant $19,608 $19,608 17 HH Company shares (ISSUER sponsored) Applicant $1,429 $1,429 18 GG Bank Portfolio Loan ending #...36 Joint NIL NIL 19 GG Bank Portfolio Loan ending #...08 Joint NIL NIL 20 Motor Vehicle 3 Respondent $49,700 $49,700 21 Household contents Respondent $5,000 $5,000 22 Funds in Heard McEwan trust account Respondent $52,526 $52,526 23 Cash Respondent $32,250 $1,000 23a Cash Applicant $950 NK 24 Proceeds from the Estate of Ms JJ Respondent $170,988 NIL (should be treated as a financial resource) 25 Funds held in Access Law Group trust account Applicant $49,500.54 $49,500.54 26 Proceeds from the sale of the Suburb U property Respondent $1,780,078 NIL Total: $6,184,975 $4,660,444 ADDBACKS 27 Legal fees (paid from the proceeds of the sale of the Suburb U property) – included in item 26 and can be removed as an addback if item 26 forms part of the pool Respondent $709,591 $653,000 28 Legal fees Applicant NIL $144,246 29 Retained rental income from the R Street property Applicant NIL $291,200 30 Expenditure from business account #1 less deposit and stamp duty for the purchase of the Suburb Q property Applicant NIL $281,241 Total: $709,591 $1,078,487 LIABILITIES 31 AMEX Applicant NIL NIL 32 Line of credit account ending #...15 Applicant $224,000 NIL 33 Outstanding repair fees for house Respondent NIL $16,000 Total: $224,000 $16,000 SUPERANNUATION 34 Superannuation Fund 1 Respondent $854,297 $854,297 35 Superannuation Fund 2 Respondent $107,066 $107,066 36 Superannuation Fund 3 Respondent $10,287 $10,287 37 Superannuation Fund 4 Defined benefit Applicant NIL (should be treated as a financial resource) $939,775 Total: $971,650 $1,911,425 FINANCIAL RESOURCES 39 Superannuation Fund 4 Defined benefit Applicant $939,775 NIL (should be treated as superannuation) 40 Inheritance from the estate of Ms Y Applicant $30,000 $80,000 41 Proceeds from the estate of Ms JJ Respondent NIL (should be treated as an asset) $170,988 Total: $969,774 $250,988
As is apparent from the above schedule the issues relating to the balance sheet which required determination fell into the following categories:
(a)Should the Court accept the single expert conclusions as to value of Suburb Q, Suburb S and Town W?
(b)Does the respondent have a present entitlement to funds from the estate of her late mother and if so should they be included as an asset?
(c)How has the respondent applied the proceeds of sale of the Suburb U property and what are the consequences for the exercise of the court’s discretion?
(d)How should the court treat the superannuation pension of the applicant?
(e)What is the correct quantum of bank accounts, superannuation interests and paid legal fees?
(f)How should paid legal fees be treated?
(g)Should any other funds be treated as notional assets for the purpose of adjusting the parties’ assets (or otherwise taken into account?)
(h)How should monies from Ms Y be treated and what is the appropriate quantum?
Value of Suburb Q
A single expert was appointed to value the Suburb Q property. While the parties had been at odds about the value to be ascribed to the Suburb Q property at the commencement of the trial, by the conclusion of the trial each asked me to include it in the balance sheet at the value provided by the single expert $1,450,000.
Value of Suburb S
The Suburb S property consists of three dwellings on one title. This property was valued by the single expert, Ms KK, on two alternate bases: $2,250,000 as is and on the basis that there was a subdivision and each of the townhouses had its own title: $2,630,000. Ms Bauer was asked in cross-examination about whether she intended to subdivide the property and she said she did not. She did not provide any cogent reason why she did not intend to achieve the highest and best use for the property, and I find that it is appropriate that the Suburb S property be valued at its highest and best use.
Value of Town W
This property was valued by the single expert Ms LL at $50,000. Neither the applicant nor the respondent initially accepted that the value was accurate.
The gravamen of the dispute between the parties was that the title has no street access and accordingly in order to obtain access (and theoretically develop) on the block it would be necessary to acquire access through purchase of land or establishment of easement or right of way. The applicant says the respondent has failed over many years to take the necessary steps. The respondent says she has not taken those steps and does not intend to do so.
I accept that had the respondent taken steps to secure access the Town W property would almost inevitably be more valuable. The difficulty which now arises is that it is not possible to find with any certainty that access can be secured and at what cost.
From time to time during a parties’ intact relationship one or other of the parties will make a decision which has negative financial consequences. The authorities provide that where that conduct is reckless, negligent or wanton then the court may consider that conduct when assessing the parties’ contributions: Kowaliw and Kowaliw [1981] FLC 91-092 (“Kowaliw”). I find that the respondent’s conduct was not designed to maximise the value of the land but the respondent has failed to satisfy me that it was reckless negligent or wanton. It is appropriate (as both parties ultimately sensibly acknowledged) that the Town W land be valued in accordance with the single expert evidence as to its present value.
The Suburb U proceeds
On behalf of the applicant I was asked to include as an addback or notional asset the whole of the proceeds of sale of the Suburb U property less any amounts which could be seen to have come from those proceeds but were included as an asset in the balance sheet (to avoid double counting). The respondent acknowledged the appropriateness of including paid legal fees and assets purchased with the proceeds but otherwise took the position that the money had been spent and should not be added back.
As will be discussed below the evidence permits two choices in this case:
(1)Include the whole of the proceeds less any amounts spent on assets in the balance sheet and reasonable living expenses; or
(2)Do not add back anything other than paid legal fees but take into account the monies which are not accounted for pursuant to s 90SF(3)(r) of the Act.
It is useful to have regard to the Full Court’s guidelines in Trevi & Trevi (2018) FLC 93-858, per Murphy J in approaching this issue:
Guidelines for adding back to the property available at trial
(a) Dissipation of property and expenditure other than on legal fees
27.The Full Court held in Omacini and Omacini that addbacks fall into “three clear categories”: where the parties have expended money on legal fees; where there has been a premature distribution of matrimonial assets; and “waste” or wanton, negligent, or reckless dissipation of assets.
28. However, the Full Court also made it clear that an addback does not necessarily occur whenever “a party has expended money realised from the disposition of assets that existed as at the date of separation”, the Full Court describing such a proposition as “unduly simplistic”. An earlier Full Court made the same point, saying that adding back is “the exception rather than the rule”.
29. The fundamental precept that addbacks are exceptional, reflected in the decisions just referred to, also mirrors what has been said in earlier decisions of the Full Court that, for example, “the Family Court must take the property of a party to the marriage as it finds it” at trial. An important parallel proposition is that the parties do not “go into a state of suspended economic animation” after separation. Thus, reasonably incurred expenditure does not usually come within accepted categories of addback.
30. Two fundamental premises emerge from Omacini and the authorities preceding it. First, “adding back” is a discretionary exercise. When the discretion is exercised in favour of adding back, it reflects a decision that, exceptionally, in the particular circumstances of a case, justice and equity requires it. The second premise is its corollary: in cases that are not “exceptional” justice and equity can be achieved, not by adding back, but by the exercise of a different discretion – usually by taking up the same as a relevant s 75(2) factor. Indeed, it has been said that the latter is “a course which is, perhaps, technically more correct” than adding back to the list of existing interests in property.
(Footnotes omitted)
As discussed above, the respondent owned the Suburb U property at the commencement of the parties’ relationship. In 2018, the respondent sold the Suburb U property. In her affidavit she says she received $1.6 million as net sale proceeds. In cross-examination it emerged that the amount she actually received was $1.78 million. An issue in this case was where those sale proceeds went once deposited into the respondent’s bank account.
The manner in which those funds were then applied occupied considerable hearing time in large part due to the opaque nature of the evidence in chief. The explanation in the respondent’s affidavit was as follows:
Since that time, I have applied those funds to groceries, bills, legal fees, living expenses, internet and communication expenses, furniture, home and contents insurance, maintenance, gardening, home repairs and renovations to the [Suburb Q] property, medical, physical therapies and health related expenses, private health insurance, the purchase of [Motor Vehicle 3] in […] 2018, adding to my [Superannuation Fund 1], some gifts and holidays.
Asked about this evidence in cross-examination the respondent was able to identify about $8,000 spent on Christmas presents as well as general living expenses.
The respondent endeavoured to convey to the court that the difficulties with her financial disclosure may have their genesis in a diagnosis of dyscalculia. There was no direct expert evidence confirming that diagnosis. The applicant said that contrary to the assertion that the respondent struggled with numbers she was a person who was engaged in planning the parties' finances and to that end the applicant tendered correspondence between the respondent and their accountants. In some sense whether the respondent suffered from a diagnosable condition or not was a distraction from the fact that there was no explanation for the expenditure of sums of money which having regard to the evidence as a whole should have been able to be accounted for. The evidence demonstrated that the respondent paid attention to obtaining and following accounting and financial advice and in this context her inability to account for hundreds of thousands of dollars is notable.
The property of the respondent was sold for over $1,800,000. The net proceeds of sale were deposited into a bank account in the respondent’s name with the ANZ in two separate deposits of $1,626,587.27 and $153,491.50 received in 2018 and then term deposits were established for $1 million and $500,000. $280,078.77 remained with the respondent.
From the $280,000, $25,000 was placed into the respondent’s superannuation account and $40,000 was repaid to her friend Ms MM for monies borrowed by the respondent for the clean‑up of the Suburb U property. Around $2,000 was paid to her friend Ms NN who lent her money for the conveyancing fees associated with the sale. $213,000 remained with the respondent.
$1 million term deposit
The $1 million term deposit matured after 12 months. In 2019, the ANZ bank made out two bank cheques and gave them to the respondent each in the sum of $200,000. The respondent’s evidence that she had the bank draw these cheques to pay builders was nonsensical and incredible and I reject it. The respondent had deliberately chosen to invest the money in term deposit to earn interest. She had previously corresponded with her accountant about financial decisions. There is no logical reason why she would obtain (and hold) bank cheques totalling $400,000 to fund building works for which she had yet to obtain a quotation.
Those monies were subject to an injunction made by his Honour Justice Altobelli on 10 November 2021 which required the respondent to deposit $400,000 into a bank account but she was restrained from “selling, giving away and dealing with, alienating or disposing of those funds, subject to the Respondent meeting reasonable living expenses and legal expenses”.
The remaining monies from the $1 million term deposit totalling $626,000 were returned to the respondent’s bank account.
$500,000 term deposit
The term deposit for $509,000 matured in 2019. The respondent withdrew those funds in cash in two withdrawals in 2019 which totalled $509,453.21.
This means the respondent had access to:
(a)$213,000 from the original funds not placed in term deposit:
(b)$626,000 from the $1 million term deposit plus two bank cheques ($400,000)
(c)$509,000 from the $500,000 term deposit.
In a letter from the respondent’s lawyers to the applicant’s lawyers dated 17 November 2021 responding to a request for particularisation of the expenditure the applicant’s instructions are recorded as:
Home renovations and computer $65,000
Medical treatment and Allied Care needs approx. $50,000 p.a.
Legal costs and disbursements $220,000
In her affidavit the respondent says she applied those funds to living expenses, home renovations and repairs, insurances, furniture, maintenance, gardening, health expenses, gifts, holidays and superannuation. She says she would take out $1,000 per week.
Assuming the accuracy of that evidence (that is, that the respondent spent $1,000 each week between mid-2018 and the hearing) it would be about 6 years or 312 weeks of $1,000 or a total on living expenses of $312,000.
It is necessary for me to make a finding about the respondent’s paid legal fees as it is plain that they have been paid from the proceeds of sale of the Suburb U property.
The costs notice (Exhibits 2 and 66) for the respondent contained the following:
Paid solicitor’s fees $369,746.83
Paid barristers’ fees $188,292.44
Paid expert fees $33,470.37
Monies in Trust $52,526.08
Those total: $644,035.72
The respondent accepted that $653,000 (referrable to legal fees) should be included as an addback.
The applicant submits she has calculated the respondent’s paid legal fees from Exhibit 25. Those documents demonstrate the respondent paid the following amounts:
[PP Lawyers] $11,700
Heard McEwen $641,751.50
This takes into account the payment of $2,000 from PP Lawyers to Heard McEwen and does not include refunds from the property valuer. This explains the respondent’s concession of $653,000. The trust account statement which is Exhibit 25 ends 18 October 2022. That may explain the discrepancy. Exhibit 57 has all of the transactions to March 2023 and supports the figure the applicant submits namely $709,591. I accept this figure as consistent with the exhibit.
The applicant says that the whole of the $1,780,078 should be included less any amount which can be identified in the balance sheet.
I find that the following balance sheet items contain some part of the Suburb U proceeds:
(a)Motor Vehicle 3 $49,700 (but purchased for $85,000);
(b)Superannuation $25,000 (as part of the larger total);
(c)Cash $32,250;
(d)Paid legal fees $709,591;
(e)Monies in solicitor’s trust account $52,526;
(f)There is an amount of $78,735 in ANZ bank account ending #...34. It is likely that these funds came from the proceeds of the Suburb U property albeit I accept that the orders of Altobelli J compelled the respondent to deposit the funds into the ANZ account ending #...89.
The respondent used “Not Known” to describe the balance of her ANZ bank account ending #...89. This is not acceptable given the duty which each party owes to make full and frank financial disclosure. I will refer to this when I consider how to treat the funds from the Suburb U property.
The respondent acknowledged that she had cash in her possession. In the final balance sheet the applicant asked that the court find the cash in the respondent’s possession had a value of $32,250 while the respondent said (via the joint balance sheet) the figure of $1,000 should be included. The respondent had accepted $32,500 during cross-examination and accordingly that is the figure I will include.
Having regard to the evidence about paid legal fees, Motor Vehicle 3, superannuation contribution, cash and current bank balance there is still about $1 million which the respondent describes as having been spent on living expenses. Allowing that it was appropriate for her to repay Ms MM and apply funds to her living expenses, her failure to be able to account for such a large amount of money must be acknowledged in the resulting orders otherwise it will not be possible to make an order which is just and equitable as regards both parties.
I will set out the relevant figures which flow from the above findings:
Proceeds of Suburb U $1,780,078
Paid legals ($709,591)
Monies in solicitor’s trust ($52,526)
Motor Vehicle 3 ($85,000)
Superannuation ($25,000)
Bank account ($78,735)
Cash ($32,250)
Repay loan ($40,000)
Repay loan ($2,000)
Subtotal $754,976
Living expenses ($312,000)
Monies not accounted for: $442,976
While the above analysis produces a precise figure, I accept that absent a forensic analysis this is an inexact method. However, in circumstances where the respondent has not provided the Court with the tools to understand what happened to the money it is difficult to be critical of an approach which endeavours to use the available evidence to make sense of the present circumstances.
It still remains for consideration as to whether it is more appropriate to add back funds or otherwise take them into account.
I accept that the case law entreats a trial judge to add back property which no longer exists only if the circumstances of the case require such an approach.
I am unable to reach an informed conclusion about the precise funds either expended or retained by the respondent. In the absence of a precise figure, I am cautious about merely adding back an approximation (albeit grounded in the evidence). As discussed below, there have also been some premature distributions of funds to the applicant in sums which are equally unclear. I am satisfied that the amounts which are unexplained in the respondent’s evidence are significantly greater than those in the case of the applicant and that the respondent has been on notice for a lengthy period about the need to provide some evidence about the treatment of the proceeds of the Suburb U sale and has largely failed to do so. There are sufficient assets which can be quantified in this case and accordingly I propose, pursuant to s 90SF(3)(r) of the Act, to take into account monies which have been prematurely distributed when I assess all of the relevant s 90SF(3) factors.
Applicant’s Cash (and monies received as rent from the Suburb S property)
In the period since separation some of the rent in respect of the Suburb S property has been collected by the applicant and retained in cash. The applicant had as a cash figure in the joint balance sheet $950 while the respondent (fairly understandably) said the amount was unknown.
During the hearing counsel for the Respondent raised with the applicant her failure to include any cash in her financial statement. He did so in the context that the Financial Statement requires a party to answer a specific question about any cash they may hold and requires them to adopt on oath that they have declared all property. Further, he indicated that the respondent had provided detail of her own cash holdings – which the applicant had plainly approved as an estimate on the Joint Balance Sheet. At no time, notwithstanding these prompts, did the applicant identify the cash held by her. An attempt was made to provide that evidence in re‑examination. This was opposed and I did not allow the question – it being clearly a matter for evidence in chief and importantly noting that the evidence which the applicant gave when cross examined was:
You were receiving rent at that point in time in 2019?
Yes
And you were receiving part of that rental income by way of cash?
Yes
And did you use some of that cash income to pay for your travel expenses?
Yes
Have you accounted for how much of that cash income you have received?
No.
…
In terms of the cash where do you keep it?
In the […] house
That cash you keep it in a safe and then you use those funds as and when you need it is that correct?
Yes, I do use that cash.
And in relation to the usage of that cash do you maintain any record as to how you use that cash?
No, I don’t.
…
Do you know how much cash is sitting in the safe today?
No
No? When was the last time you counted the cash that was sitting in the safe?
I don’t regularly count it.
Right so you can’t recall when the last time you counted the cash in the safe is that accurate to say?
Yes.
But you concede that as of today there is cash in the safe?
Yes
…
In this joint balance sheet there is no reference to you having any cash do you accept that? Yes.
Would you concede that you have deliberately withheld from the court the fact that you have cash in your safe?
No. Can I explain?
The applicant said quite clearly in answer to the question “do you know how much cash is sitting in the safe today?” “No”. There was nothing to clarify in that answer.
This is particularly the case since she had separately given evidence that she did not intend to return to the home overnight (and would not have been in a position to have updated her evidence).
The Court is left with unsatisfactory evidence. This is not an unusual situation.
I find that the applicant has some cash in her possession the exact value of which is unknown because she elected not to inform the court and the other party.
The respondent submits that the court would treat rental income from the Suburb S property retained by the applicant as an addback.
It is not plain how the figure was reached. The Suburb S dwellings are rented. It is uncontroversial that those rents have been received by the applicant post separation. In her financial statement the applicant lists the weekly rental as $800.
The rental income declared in the applicant’s taxation returns in the relevant years was as follows:
(a) 2019 tax return was $11,777 net;
(b) 2020 tax return was $26,000 net;
(c) 2021 tax return $22,687 net;
(d) 2022 tax return $31,633 net.
Assuming those taxation returns to be an accurate reflection of the income received (albeit I accept the depreciation deduction may mean the actual amount received was slightly larger) the applicant has not had access to the amount sought to be added back. In the same way that I made an allowance to take into account the appropriateness of the respondent applying funds to her living expenses it is appropriate to do so in respect of the applicant. I note the applicant gave evidence of having taken vacations as she was entitled to do. I do not find that there are any exceptional circumstances such as would warrant my adding back rental income from Suburb S and I do not propose to do so.
While it is important to make full and frank financial disclosure the effect of failure to do so is a matter of discretion. Given the source of the funds which were accumulated (rents) and the (legitimate) use to which some of those monies have been applied, namely travel, it would be wrong to assume that there is a significant amount of undisclosed funds (relative to the size of the overall pool). The evidence does not allow me to make a finding about the likely amount and in light of the much more significant failure to make full and frank financial disclosure by the respondent I propose to include in the balance sheet the amount of $950.
It follows that I do not propose to include as an addback monies described by the respondent in the balance sheet as “retained rental income from [R Street]”. There was no evidence capable of supporting that figure and the respondent gave evidence about applying those funds to travel expenses. I will however, return to this issue when I come to consider what weight to place on the respondent’s failure to disclose how she has expended funds post-separation.
Expenditure from business account number one
The respondent sought to include as an addback as against the applicant the sum of $281,241 said to represent funds from the parties’ joint GG Bank sub account #1 said to have been withdrawn by the applicant. The parties operated a facility with GG Bank which consisted of accounts and subaccounts and a credit facility secured over the QQ Street and Suburb S properties. Subaccount #1 was an account ending #...08.
The account ending #...08 held the proceeds of sale of the jointly owned partnership property at QQ Street, City N. In 2016, $1,000,000 was withdrawn from that account and ultimately used to purchase the Suburb Q property. A further $100,000 was transferred to the respondent’s superannuation in 2016. The account was a joint account, so it is not possible to determine who conducted what day to day transactions on the account, although the case was conducted on the unchallenged assumption that in practice this account was operated by the applicant. The last statement in evidence gave the balance as $508,602.80 (before the $100,000 payment into superannuation). The balance as at 22 June 2020 according to the applicant’s financial statement of that date was $15,787.
The respondent’s position is that the applicant has had the benefit of the remaining funds at least to the extent that the court would addback $281,241.
The respondent submitted:
22. [In] 2016, the sum of $53,514 (TB) to Business Account was withdrawn by internet transfer as “partial sale proceeds”. Leaving a balance of $1,545,353.96 CR. On account of the transfer [in] 2015 and […] 2016 the overdraft on Business Account #2 was zeroed out.
23. [Two days later], the parties caused the sum of $1,000,000 to be transferred to a [GG Bank] Term Deposit in the sole name of the Respondent. Leaving a balance of $545,241.39 CR. The balance continued to be operated to meet outgoings.
24. [Later in] 2016, the sum of $100,000 was paid from Business Account #1 into the [Superannuation Fund 1] account of the Respondent. Leaving a balance of $379, 415.37 CR.
25. [Later in] 2016, the sum of $113, 500 (141) was paid from Business Account #1 in making a deposit towards the acquisition of the property at [P Street, Suburb Q]. Leaving a balance of $205, 089.10 CR.
26.[Three days later], the sum of $47, 935 was paid from the Business Account #1 towards the stamp duty for [Suburb Q]. Leaving a balance of $156, 469.97. The Applicant has continued to operate the Business Accounts, reside in [R Street] and receive [other income].”
According to the joint balance sheet the amount which the respondent says is a premature distribution to the applicant is $281,241 less the deposit and stamp duty for Suburb Q. Those withdrawals were $113,000 and $47,935 respectively. The sum which then remained would have been $120,306. The sum of $200,000, including those funds, were loaned by the applicant to her sister Ms RR who says they were returned in 2020. At the time of the loan it would have caused the loan facility to go into debit. There is no evidence in the applicant’s case about how those funds have been applied save for a reference to expenditure for the dwellings, the evidence does not otherwise permit a conclusion. I do not propose to add back $281,241 or $120,306 but return to consider the issue pursuant to s 90SF(3)(r) of the Act.
Proceeds from the estate of Ms JJ
Ms JJ is the mother of the respondent. On 19 August 2022, the lawyers acting for the applicant wrote to the lawyers acting for the respondent inquiring about “…information as to what inheritance your client received from her mother’s estate”. The respondent instructed her lawyers to respond “our client did not receive anything from her mother’s estate”.
The issue which arises is whether or not that adequately disclosed the financial circumstances relevant to the court’s determination of property adjustment proceedings as between these parties.
The question had been asked in correspondence because, in 2007, the parties had prepared a “Statement of Advice” for the purpose of obtaining financial advice and in that document the respondent had indicated to the financial adviser in writing that she anticipated receipt of an inherited property in Town SS.
Ultimately a subpoena was caused to be issued to a firm of solicitors who acted in respect of the grant of probate. The parties ultimately agreed that the respondent had an entitlement to $170,988 which the applicant said should be characterised as an asset and the respondent said should be characterised as a financial resource.
The High Court in Hall and Hall (2016) FLC 93-709 set out the position as regards financial resources as follows:
The reference to "financial resources" in the context of s 75(2)(b) has long been correctly interpreted by the Family Court to refer to "a source of financial support which a party can reasonably expect will be available to him or her to supply a financial need or deficiency". The requirement that the financial resource be that "of" a party no doubt implies that the source of financial support be one on which the party is capable of drawing. It must involve something more than an expectation of benevolence on the part of another. But it goes too far to suggest that the party must control the source of financial support. Thus, it has long correctly been recognised that a nominated beneficiary of a discretionary trust, who has no control over the trustee but who has a reasonable expectation that the trustee's discretion will be exercised in his or her favour, has a financial resource to the extent of that expectation.
(Footnotes omitted)
Here the issue seems to be whether or not the monies are within the respondent’s control. If so, then they will properly be regarded as property. As the evidence emerged in cross-examination it may be safely concluded that the respondent not having relinquished her interest in the estate of her late mother is entitled to claim the amount of $170,988 being held in TT Bank account on behalf of the executor of the estate. These funds are properly characterised as being in the control of the respondent albeit she has chosen not to exercise that control. I accept that they are consequently property and not a financial resource and should be included in the balance sheet as such.
Inheritance from Ms Y
In 2022 one of the applicant’s friends, Ms Y, died leaving a bequest to the applicant in the sum of $30,000. The applicant initially included this amount as a financial resource, seemingly on the basis that the estate was still being administered. At the conclusion of the trial the applicant accepted that those funds had been received and they will be included in the balance sheet as an asset.
The respondent asserted that the correct figure for inclusion was $80,000 (and not $30,000). This submission was premised on the fact that the total amounts received into the line of credit operated by the applicant and labelled “[Ms Y]” was $80,000. In cross-examination the applicant clarified that the inheritance was in the sum of $30,000 (which is consistent with the terms of the will which is in evidence) and that the other deposits were return of funds that the applicant had lent to Ms Y.
Personal Items
The applicant sought return of specific items of sentimental value. The respondent denies possession of same. The evidence did not permit a finding about where those items are presently located. Accordingly, I cannot make an order requiring their return. This should not prevent their voluntary return if they are subsequently located. I do not propose to include any value for personalty in the balance sheet.
Applicant’s paid legal fees
The applicant’s costs notices (Exhibit 1 and page 13 of Exhibit 58) indicate paid legal fees of the applicant as follows:
Paid solicitor’s fees (Hansons) $153,176
Paid counsel fees $30,965
Paid expert fees $6,114
Monies in trust $104,609.26
That costs notice did not indicate how those payments had been funded.
On 12 February 2023 the applicant’s paid legal fees were:
$319,272.51 paid to Hansons inclusive of counsel and expert fees
$15,473 in trust
Being a total of $334,745.51
The applicant resists inclusion of these funds (or any part of them) in the pool of assets for adjustment between the parties on the basis that it is submitted on her behalf that the source of funds was her income and borrowings. To the extent that she drew on a line of credit which she says is $224,000 to pay legal fees I propose to exclude paid legal fees, the monies in trust and the line of credit. Doing the best I can without specific evidence as to the precise manner in which the legal fees are funded I am comfortably satisfied that they were paid from a combination of income and borrowings and so ought not appear in the balance sheet.
The respondent sought to include as a liability in the balance sheet an amount identified as “outstanding repair fees for house - $16,000”. That evidence was not challenged in cross examination and while I am not obliged by reason only of that fact to accept the evidence it is not inherently implausible and I accept it as unchallenged.
Treatment of the applicant’s superannuation interest
The applicant has an interest in Superannuation Fund 4. This will be discussed later in these reasons when I consider what value (if any) can be attributed to her interest at the commencement of the parties’ relationship.
However, it is important to identify at the outset how that current interest will be treated by the Court.
The respondent does not seek a superannuation splitting order in respect of the interest.
The interest is in the payment phase and has been since 2005. The applicant receives $1,558 per week.
The authorities have emphasised that where no orders are sought the method of valuation prescribed by the Regulations is not mandatory. In Carron & Laninga (2019) FLC 93-909:
36.In property settlement proceedings, there is no need to ascertain the capitalised value of a superannuation interest, much less one in the payment phase being paid in the form of a non-commutable pension, unless a superannuation-splitting order is sought in relation to the interest (Welch & Abney (2016) FLC 93-756 (“Welch & Abney”) at [33]–[34], [61]; Surridge & Surridge (2017) FLC 93-757 (“Surridge”) at [30]). At trial, neither party sought a superannuation-splitting order in respect of the wife’s MSBS pension.
37.The Act only provides that a superannuation interest must be valued before it is amenable to a splitting order (s 90XT(2)), for which purpose the Family Law (Superannuation) Regulations 2001 (Cth) (“the Regulations”) make provision for the manner in which different superannuation interests are valued. …
(Emphasis added)
And further:
38.Although any valuation correctly ascribed to the wife’s MSBS pension pursuant to the methodology dictated by the Approval would be unimpeachable, as no superannuation-splitting order was sought by either party in respect of the pension, its “nature, form and characteristics” needed to be considered when both evaluating the parties’ contributions to its existence and how it would be taken into account when determining the nature of the final property settlement orders that should be made between the parties (see Semperton v Semperton (2012) 47 Fam LR 626 at [154]-[197], [203]-[208]; Welch & Abney at [58]-[60], [63], [70]-[71]; Surridge at [29]-[34], [103]-[106]; Pates and Pates [2018] FamCAFC 171 (“Pates”) at [94]-[96]).
39.Relevantly, the wife’s entitlement to the MSBS pension crystallised in 2000 following her redundancy from employment in the armed services, shortly after the parties’ marriage in 1998. She is entitled to receive the pension for life, during which time it cannot be commuted or alienated. While it will continue to be a modest income stream for her, it will not be enough alone to sustain her and she will always need to supplement it with other income from paid work. Such features of the pension made it readily identifiable as a financial resource rather than an asset. Despite the trial judge’s apparent conflation of the wife’s two MSBS superannuation interests, it was certainly open to find that the second superannuation interest should not be taken into account as an asset. The fact the husband did not seek any order to split the wife’s MSBS pension at any point prior to the publication of the trial judge’s reasons made it unnecessary to value the pension under the Approval. That being so, the opinion evidence of Mr T about the notional capitalised value of the pension, calculated pursuant to the Approval, together with the wife’s admission of the capitalised value in reliance upon his opinion, became irrelevant. It was properly taken into account as a continuing income stream (at [33]).
(Emphasis added)
I accept that the Superannuation Fund 4 Defined Benefit is valuable to the applicant as an income stream and I will take that into account when I consider the relevant factors under s 90SF(3) of the Act but I accept that it would not be consistent with authority in the circumstances of this case to treat it as though it were property. It has been given an agreed value in the balance sheet.
It follows that the assets, liabilities and superannuation to which I will have regard in making any adjustment and the financial resources which I will take into consideration in that process are as follows:
BALANCE SHEET
Property Ownership Value ASSETS 1 P Street, Suburb Q Respondent $1,450,000 2 R Street, Suburb S Applicant $2,630,000 3 V Street, Suburb W Respondent $50,000 4 ANZ account ending #...74 Respondent $78,735 5 ANZ account ending #...89 Respondent NK 6 AA Company shares Respondent $12,907 7 BB Company shares Respondent $138,567 8 CC Company shares Respondent $12,096 9 DD Company shares Respondent $45,288 10 EE Company shares Respondent $6,730 11 FF Company shares Respondent $17,901 12 Motor Vehicle 1 Applicant $19,000 13 Motor Vehicle 2 Applicant $15,000 15 H Insurance shares Applicant $5,456 16 HH Company shares (CHESS sponsored) Applicant $19,608 17 HH Company shares (ISSUER sponsored) Applicant $1,429 20 Motor Vehicle 3 Respondent $49,700 22 Funds in Heard McEwan trust account Respondent $52,526 23 Cash Respondent $32,250 23a Cash Applicant $950 24 Proceeds from the Estate of Ms JJ Respondent $170,988 Total: 4,809,131 ADDBACKS 27 Legal fees (paid from the proceeds of the sale of the Suburb U property) – included in item 26 and can be removed as an addback if item 26 forms part of the pool Respondent $709,591 Total: $709,591 LIABILITIES 33 Outstanding repair fees for house Respondent $16,000 Total: $16,000 SUPERANNUATION 34 Superannuation Fund 1 Respondent $854,297 35 Superannuation Fund 2 Respondent $107,066 36 Superannuation Fund 3 Respondent $10,287 Total: $971,650 FINANCIAL RESOURCES 39 Superannuation Fund 4 Defined benefit Applicant $939,775 CONTRIBUTIONS
Initial contributions
The applicant had the following assets and financial resources at the commencement of the parties’ relationship:
(a)Suburb S property (subject to mortgage);
(b)Superannuation Fund 4 Defined Benefit Interest;
(c)Savings;
(d)Shares; and
(e)Motor Vehicle 1.
The Suburb S property represents a significant asset of value in the balance sheet. The applicant purchased the Suburb S property in 1992. The purchase price was over $140,000 and the mortgage $112,000. There was a mortgage statement in evidence with a balance reasonably proximate to the commencement of the relationship. That statement indicated a debit balance on the mortgage account of $67,546.99 (Exhibit 6). The single expert valuer gave a value to the property at the commencement of the relationship which was unchallenged. Accordingly, the evidence establishes that the equity of $195,000 less the mortgage of $67,547 namely $127,453.
The original structure was demolished during the parties’ relationship and three dwellings were built.
While I have not included the Superannuation Fund 4 Defined Benefit Interest as an asset it must be observed that this financial resource has been a source of income since 2005 and hence a valuable contribution by the applicant. Mr UU undertook an expert valuation of the applicant’s superannuation interest as at the commencement of the parties’ relationship concluding that it was valued at $557,361. It is not a valuation in accordance with the Regulations but he was able to explain how the figure was reached. As it is not a valuation for the purpose of a superannuation split the fact that it is not in accordance with the Regulations is of little moment. If I am to exclude it as property in the final analysis because of its current nature and characteristics then it would not be appropriate to attribute that value to it at the commencement. But, it is plain that it had value to the parties in the payment phase and continues to have value to the applicant post-separation.
As outlined above, the respondent purchased the Town W property prior to the commencement of the parties’ relationship. The parties jointly instructed the single expert real property valuer, Ms LL, to value the property as at the commencement of the relationship. Ms LL acknowledged the challenging nature of the exercise given the effluxion of time, lack of comparables and particularly planning challenges posed by the subject property. She expressed the opinion that it was worth $20,000. Counsel for the applicant challenged that opinion in cross-examination, in particular by reference to the comparable sale of a property on the same street which sold in 1997 for $15,000. Ms LL weighed in the balance the superior access of the other property and the larger land size of the subject property in reaching her conclusion. I am not satisfied that her analysis of the relevant comparables was in error. I accept her opinion and consider that the value of the property at the commencement of the relationship was $20,000.
That property remained vacant and the respondent attended to its outgoings over the years. It has increased in value. It has not been income producing.
The Suburb U property was the subject of a retrospective valuation by the single expert. The single expert report gave a value to the property at the commencement of the parties’ relationship of $450,000. The respondent received rental income from this property during the relationship. Had the entirety of the proceeds of sale been represented in the balance sheet then this would be a substantial financial contribution. As discussed above I proposed to include amounts referrable to the proceeds of sale and they are not insubstantial. The assessment of the value of this initial contribution is diminished by the lack of evidence as to the remainder of the proceeds.
Collectively the respondent’s initial contributions include:
(a)Suburb U $450,000
(b)Subject to a mortgage ($95,000)
(c)Town W $20,000
(d)Savings $12,500
(e)VV Company shares NK
(f)Superannuation Fund 1 NK
Because I have not included the applicant’s defined benefit scheme pension as “property” it follows that the respondent’s initial contributions are greater than those of the applicant.
Contributions during the relationship
The parties were both in employment at the commencement of cohabitation.
From the establishment of the partnership, which ran accommodation, the parties’ finances were intermingled.
Between 2003 and 2005 the applicant remained in paid employment and the work of the partnership was undertaken predominantly by the respondent although the evidence supports the conclusion that the applicant also assisted during this period. From 2005 the applicant assumed responsibility for the financial management of the partnership while the respondent remained involved in helping residents and cooking of some of the meals for residents.
The evidence supports the conclusion that the contributions from income of the applicant (including in the latter period superannuation income) were significantly greater than those of the respondent.
It is relevant to note that it was the parties’ joint line of credit which discharged the loan secured over the Suburb U property and the parties’ funds which were applied to clean up costs prior to the sale of the property.
The partnership was dissolved and the proceeds of sale of the jointly owned property were invested until such time as the respondent applied funds to purchase of the Suburb Q property and a contribution to her superannuation.
I have included the funds from the estate of the respondent’s mother in the balance sheet. This is not an asset to which it might be said that the applicant has made any contribution direct or indirect. The same is true of the inheritance from Ms Y which I will treat as a contribution on behalf of the applicant.
There was not a significant amount of evidence about the parties’ non-financial contributions in either parties’ affidavit nor was it the subject of cross-examination and I have concluded as a consequence that neither party is asserting that his or her non-financial contributions were material to the court’s determination. As earlier stated there remained a focus on evidence pertaining to the nature and characteristics of the parties’ relationship when the threshold issue had been resolved. It must be acknowledged that ascribing legal status to a relationship is a significant matter for the parties. If parties marry then they voluntarily assume a legal status. If parties do not marry then on application of one of them this Court may determine the relationship status of the couple having regard to the matters in the Act. This will result in this Court attaching a label to the relationship which one of the parties may reject. It is well to remember that the legislation is remedial in nature. It is designed to ensure that at the end of a relationship (which satisfies the criteria for being considered a de facto relationship) one or other of the parties is not disadvantaged in a financial sense as a consequence of the length of the relationship or the manner in which property has been acquired or utilised.
Date of separation
In 2016 the parties settled the sale of a property which they owned at QQ Street, City N. The parties discharged the mortgage and deposited the balance in a joint line of credit. The joint line of credit had a balance after the deposit of $2,042,699.80.
The parties initially lived in a friend’s one bedroom apartment and work was undertaken on a dwelling at the Suburb S property. In 2016 the applicant moved into that dwelling and the respondent stayed at the friend’s property. I accept that the parties did not occupy the same residence after that time.
It would appear that the respondent had confided in her friend Ms NN that she was unhappy with the applicant and I accept it is likely that, at this stage, the respondent was interested in bringing to an end the cohabitation with the applicant but this must be seen in the context of the other available evidence.
The applicant’s evidence was that they saw one another almost every day and the respondent spent time at the Suburb S property and that they looked for another property to purchase together.
Mr WW, a builder, gave evidence about his interactions with the parties during this period as they related to renovation work he was undertaking. While his evidence could not speak to the parties’ intentions it was supportive of the public character of their relationship at this stage being as a couple. I accept this was inconsistent with Ms NN’s evidence. The difference in the evidence is likely to arise from Ms NN’s close friendship with the respondent and her greater awareness of the way in which the relationship was changing in this period.
The financial arrangements during this period were uncontroversially as follows: the applicant’s pension was deposited into the joint account as were share dividends in the respondent’s name and the rental the respondent received from the tenants in the Suburb U property. Each of the applicant and the respondent had access to the joint accounts and accessed them to meet their living expenses. The applicant and respondent continued to pay for their health insurance policy as a couple.
In mid-2016 both parties attended at the bank to transfer money from the line of credit to a term deposit in the respondent’s name.
Two months later the respondent transferred $100,000 of the joint funds to her superannuation account.
The respondent characterised the transactions in mid-2016 as an informal property settlement between herself and the applicant. The applicant challenged that characterisation.
The applicant was diagnosed with an illness in 2016. When she was admitted to hospital the applicant recorded her next of kin as the respondent and described her relationship as “partner”.
The parties attended the auction for the purchase of the property at Suburb Q together and the cheque to pay the stamp duty was drawn on their joint account. Initially, the Suburb Q property was tenanted and the rent was deposited to the parties’ joint account. Expenses in respect of that property, such as plumbing, were also paid from joint accounts.
In 2017 Ms Nolan sent an email to Mr XX from YY Accountants. The email was predominantly concerned with a potential redevelopment of the Suburb U property. In the email the respondent said:
[Ms Bauer] my life partner also has some CGT credits from the sale of our joint former business. In the event my CGT credits fall short, could I apply her CGT credits against my CGT liability if she consented or is that not allowed?
This inquiry is inconsistent with the respondent’s asserted date of separation.
In early 2018 both the applicant and the respondent attended at the Suburb U property and undertook some limited work with a view to the proposed sale of that property. Further gardening work was undertaken by a gardener whose account was paid from the parties’ joint funds.
In mid-2018 the applicant went on a holiday with a friend and prior to leaving the respondent, at the applicant’s request, filled in an advanced care directive listing herself as the applicant’s “companion/next of kin”. While the applicant was away the respondent moved her possessions from Suburb S.
Up to and including the tax return for year ended 30 June 2018 both parties’ income taxation returns referred to having a spouse. The format of the recording changed from year to year but in the taxation return for the respondent for year ended 30 June 2017 the whole name of the applicant appears.
In July 2018 after the respondent received the proceeds of Suburb U property the applicant inquired why they had not been deposited in the parties’ joint bank account. This is the date the applicant says signified the end of the parties’ de facto relationship.
I find that the parties’ relationship changed in the period 2016 to June 2018 such that it lost some of the characteristics which it previously exhibited such as a common residence but retained others such as financial dependence and interdependence. It is not wholly clear whether or not after 2016 the parties had a mutual commitment to a shared life but evidence such as the next of kin notifications, shared finances (including health insurance) and advanced care directive as public acts speak to the continued existence of a de facto relationship and I find that the relationship no longer bore sufficient of the indicia in s 4AA of the Act by June 2018. Ultimately, because of the continued financial dependence and interdependence I am not satisfied that the dispute about the end of the relationship is material to the assessment of contributions.
I must continue to have regard to the manner in which the parties had the use and enjoyment of property in the period up until trial because it is only by the making of final orders that the financial relationship between the parties will come to an end. The applicant has continued to have the use and enjoyment of the Suburb S property to which the respondent made direct and indirect contributions. The respondent has had the use and enjoyment of the Suburb Q property to which the applicant has made direct and indirect contributions. The respondent has had the use of the proceeds of sale from the Suburb U property in circumstances where the parties’ funds were applied to discharge of the loan secured on the title.
The applicant submitted that I would find that the contribution based entitlements were 60/40 in favour of the applicant (if I treated the applicant’s pension as a financial resource). The respondent submitted that the court would find the contributions to favour the respondent as to 52.5 per cent. As discussed above the respondent’s initial financial contributions were greater but as the relationship continued the financial contributions of the applicant year on year were more significant. The parties otherwise performed equivalent roles in their joint enterprise such that, at the time of trial, weighing the multiplicity of ways in which they had contributed, I concluded that over time the contributions had reached a position where they may be regarded as having contributed equally in their own ways.
It is necessary to approach the assessment of contributions in a holistic manner. In the circumstances of this case it requires that I take into consideration the contributions of each party. This includes initial contributions, financial contributions and non-financial contributions during the relationship and the impact of post-separation conduct on the assessment of contributions. The effect of this is to balance different contributions in different periods to ensure that the resulting assessment is just and equitable. I find that the respondent’s greater initial contributions and the inclusion of the inheritance from her mother need to be seen in light of the overwhelming financial contributions of the applicant. I am satisfied that the parties’ contributions over a long relationship, albeit different in character should be treated as equivalent.
SECTION 90SF(3) CONSIDERATIONS
The factors which present as relevant at the conclusion of the evidence are as follows:
(a)How to treat the premature distribution of funds after separation by each party;
(b)What weight should be given to the valuable income stream which arises from the applicant’s superannuation entitlements; and
(c)Does the evidence establish that the health issues of one or other of the parties require adjustment?
Taking into account the funds from the sale of the Suburb U property - the respondent is not expected to go into suspended animation post separation and spend no money. Payment of ordinary living expenses over and above those which could be funded from her dividend income was entirely appropriate, as was the purchase of a car, repaying loans from friends and undertaking work on her home. The difficulty in this case is that even accounting for all of these perfectly innocuous expenditures the respondent at trial remained either unwilling or incapable of explaining where the remainder of the funds had gone. The respondent’s inability to put forward a cogent narrative leaves the court with no choice but to determine that either the respondent has had the benefit of these funds or that she retains them. Earlier in these reasons I identified that the sum which does not appear to be accounted for is approximately $443,000. As against this, the applicant has also had use of the rents from the dwellings and the balance of the monies in business account #1. She too is entitled to use her funds to make purchases, attend to ordinary day to day expenses, travel and undertake work on her home. Doing the best I can with the available evidence I find that the amounts to which the applicant has had access (without any evidence provided to explain the expenditure) are less than those of the respondent. To the extent that I have found it is appropriate to take these premature distributions into account I will do so as against the respondent but not to the extent that would have been the case had the applicant not also had access to funds.
Having determined to treat the applicant’s pension as a financial resource it is important to acknowledge that it is a significant and valuable income stream available to the applicant. At the time of hearing, it provided her with an annual income of $81,016 free from taxation impost.
The applicant also has the rental income for the Suburb S dwellings.
The respondent’s income from interest and dividends recorded in her income taxation return for year ended 30 June 2022 was $46,516 after deductions. No income tax was payable and franking credits entitled her to a refund in the sum of $13,733.16. In 2021 the respondent’s income taxation return recorded income after deductions of $15,473 and $19,277in 2020. In 2019 the respondent had income of $53,191 but applied losses and hence returned a NIL income. Tax losses were applied to income in the years ended 2018, 2017 and 2016 as well.
The applicant is in a significantly stronger position as regards income and I must take that into consideration. I have not ignored the superannuation entitlements of the respondent, but having included them as an asset in the balance sheet it would not be appropriate to have further regard to them as s 90SF(3) factor – particularly in circumstances where the applicant’s superannuation entitlements are to be (appropriately) treated as an income stream and not property.
The applicant is 74 years of age. The respondent is 64 years of age. Each of them has faced health challenges but it is important to note that neither of them is engaged in the paid workforce. Accordingly, their ill health is not relevant to income and earning capacity. If it has a relevance, having regard to the operation of s 90SF(3) of the Act, it could only be as regards the financial consequences of ill health or age – that is – what expenses might one or other of them incur outside the usual living expenses having regard to her health.
Dr K, a single expert, was appointed to prepare a report in relation to the health of each of the parties.
The evidence about the applicant’s health was that she had no serious active medical diseases but provided the single expert with a fulsome medical history noting various issues with mobility, and likely a Major Depressive disorder. The single expert noted that the applicant is presently well-managed by her General Practitioner and current specialists and that the conditions with which she suffers are reversible and curable with appropriate support and intervention. Other conditions were said to be degenerative and likely to worsen, especially without adequate treatment.
The evidence about the respondent’s health was largely uncontroversial. The single expert described from both review of medical records, patient history and observation “significant multimorbidity” in respect of conditions that “require lifelong medical treatment, medication, equipment, support and other therapies”. The single expert said that providing expert evidence about the cost of treatment was not his area of expertise and so I have approached those estimates with caution. I accept the respondent is likely to incur costs which a person who enjoys good health would not have to bear. In that regard PBS records for 2022 included the information about “patient contribution” to costs of pharmaceuticals supplied. For the period 1 January 2022 to 30 September 2022 the “patient contribution” totalled $875.02.
While the evidence in this case about health was extensive it was not focused or persuasive. I formed the view that each of the applicant and the respondent would legitimately have future expenses related to their health which may include the desire to expend funds on modifying their house. However, the Act provides a framework within which to consider what property adjustment orders (if any) would be just and equitable having regard to prescribed statutory criteria. The Act itself provides no imprimatur for an analysis of what reasonable (or unreasonable) expenditure might be approved to make an individual residence appropriate accommodation. This is all the more so in this case where either party will as a consequence of the orders I make have sufficient funds to accommodate themselves even if that requires a different home from the one they presently occupy.
I accept that a party may desire to remain living in a particular residence but my role is not to facilitate the parties’ desires (however understandable) but to determine what division of their assets best satisfies the requirements of s 90SM(3) of the Act.
I note that the parties agree that the following assets or financial resources will remain with the applicant:
(a)The Suburb S property $2,630,000;
(b)Motor Vehicle 1 $19,000
(c)Motor Vehicle 2 $15,000
(d)Shares in H Insurance and HH Company $26,493
(e)Cash $950
(f)Inheritance from Ms Y $30,000
(g)Entitlement to pension in the present sum of $1,558 per week
The assets total: $2,721,443.
I note that the parties agree that the following assets will remain with the Respondent:
(a)The Suburb Q property $1,450,000
(b)The Town W property $50,000
(c)An ANZ Bank account ending #...74 $78,735
(d)Shares $233, 489
(e)Motor Vehicle 3 $49,700
(f)Cash $32,250
(g)TT Bank account (interest in Estate of Ms JJ) $170,988
(h)Paid legal fees $709,591
(i)Superannuation with Superannuation Fund 1,
Superannuation Fund 2 & Superannuation Fund 3 $971,650
The assets and superannuation total $3,746,403
The total net pool of assets and superannuation is $6,467,846.
Having determined that the contribution based entitlements of the parties were equal it is necessary, having regard to the various factors in s 90SF(3) of the Act and findings set out above to weigh whether a further adjustment is appropriate. In the circumstances of this case I find that the factors which favour the applicant (in particular the unexplained Suburb U proceeds) are offset by those which are relevant to the respondent (specifically, the applicant’s significant superannuation income and better health) and determine that no further adjustment is appropriate in this case.
Having determined that the net pool should be divided equally it follows that in order to do justice and equity as between the parties the respondent will make a payment to the applicant in the sum of $512,480.
COSTS
In these proceedings each party sought that the opposing party pay their costs of and incidental to these proceedings. The applicant sought that her costs be paid by the respondent on an indemnity basis. In the proceedings the parties asked me to defer a determination on the question of costs until after judgment is handed down. I intend to do so and will make orders accordingly. I will make provision for determination of the costs issue in chambers if the parties consent.
I certify that the preceding one hundred and fifty-three (153) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Christie. Associate:
Dated: 20 July 2023
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