Baxter and Brown and Anor - [2012] FamCA 100

FAMILY COURT OF AUSTRALIA

BAXTER & BROWN AND ANOR

[2012] FamCA 100

FAMILY LAW - PROPERTY - Settlement in relation to marriage - Third party – Unconscionable conduct – Guarantee – Right to set aside – Wife in position of volunteer – Solicitor’s conduct – Superannuation splitting order

Family Law Act 1975 (Cth), s 75(2), s 79(1), s 79(2), s 79(4), s 90AE, s 90MT(1)(a), s 90MT(4)
Trade Practices Act 1974 (Cth)

Barclays Bank Pty Ltd v Thomson [1997] 4 All ER 816
Clauson and Clauson (1995) FLC 92-595; 18 Fam LR 693
Coghlan and Coghlan (2005) FLC 93-220; 32 Fam LR 414
Ferraro and Ferraro (1993) FLC 92-335
Garcia v National Australia Bank Ltd (1998) 194 CLR 395
Hickey and Hickey (2003) FLC 93-143; 30 Fam LR 355
McNamara v Commonwealth Trading Bank (1984) 37 SASR
Lee Steere and Lee Steere (1985) FLC 91-626
Ribchenkov and Suncorp-Metway Limited (2000) 175 ALR 650; [2000] FCA 835
State Bank v Sullivan [1997] NSWSC 596
Yerkey v Jones (1939) 63 CLR 649

APPLICANT:

Ms Baxter

1st RESPONDENT:

Mr Brown

2nd RESPONDENT:

Westpac Banking Corporation

FILE NUMBER:

HBC

1056

2009

DATE DELIVERED:

2 March 2012

PLACE DELIVERED:

Sydney

PLACE HEARD:

Launceston and Sydney

JUDGMENT OF:

Johnston J

HEARING DATE:

13 & 14 July (Launceston) and 11 August 2011 (Sydney)

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Ayliffe

SOLICITOR FOR THE APPLICANT:

Dobson Mitchell & Allport

FOR THE 1ST RESPONDENT:

Mr Brown in person

COUNSEL FOR THE 2ND RESPONDENT:

Mr Procter SC

SOLICITOR FOR THE 2ND RESPONDENT:

Murdoch Clarke

Orders

That the claim made by the Wife against Westpac Banking Corporation be dismissed.
The Court allocates as required by Section 90MT(4) of the Act a base amount of $220,000.00 to the Wife, Ms Baxter, out of the interest of the Husband, Mr Brown, in the R Superannuation Scheme Member No. … (“the R account”).
Pursuant to Section 90MT(1)(a) of the Act, whenever the Trustee of the R account makes a splittable payment under the Husband’s interest in the R account, the Trustee will:
(a)pay to the Wife or her legal personal representatives, the entitlement calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001; and
(b)make a corresponding reduction to the entitlement to the person to whom the splittable payment would have been made but for this Order.
Paragraph 2 of this Order has effect from the operative time and the operative time is the expiration of four (4) business days from the service of a certified copy of this Order on the Trustee of the R Account.
Unless otherwise specified in this Order:-
(a)each party will be solely entitled to the exclusion of the other to all property in the possession of that party as at this date;
(b)each party will be solely liable for and indemnify the other against any liability encumbering any form of property to which that party is entitled pursuant to this Order;
(c)each party will remain solely liable for their respective debts.
That all exhibits be released.

IT IS NOTED that publication of this judgment under the pseudonym Baxter & Brown and Anor is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: HBC 1056 of 2009

Ms Baxter

Applicant

And

Mr Brown

1^st Respondent

And

Westpac Banking Corporation

2^nd Respondent

REASONS FOR JUDGMENT

Introduction and Applications

These are final property proceedings between Ms Baxter and Mr Brown. For convenience I shall refer to them as “the wife” and “the husband” respectively. There is a second respondent in the proceedings namely the Westpac Banking Corporation. For convenience I shall refer to the Corporation as “Westpac”.
The wife seeks orders to the following effect in the proceedings between herself and the husband:
·A superannuation splitting order the effect of which would be to allocate to her a base amount of $264 000 out of the husband’s superannuation benefit in the R Superannuation Scheme and consequential orders;
·Each of the husband and wife would be solely entitled to the exclusion of the other to all property in the possession of that party;
·Each of the husband and wife would be solely liable for and indemnify the other against any liability encumbering any form of property to which that party is entitled pursuant to these Court orders;
·Each of the husband and wife will remain solely liable for their respective debts;
·Further, or in the alternative, the husband pay to the wife $1 000 per month in relation to any obligation the wife has to Westpac pursuant to the guarantee provided by her to the Bank to facilitate the husband’s business loan for as long as the Court considers it equitable to do so.
The wife seeks orders to the following effect against Westpac pursuant to her Statement of Claim filed on 12 April 2010:
·That the guarantee and mortgage given by her to Westpac be set aside;
·In the alternative the guarantee and the mortgage be set aside and a substitute mortgage in favour of Westpac be placed over such property as is awarded to the husband in these proceedings;
·That Westpac indemnify the wife and hold her harmless and her property harmless with respect to the guarantee and the mortgage;
·Such further and / or other orders including equitable compensation and / or damages as the Court considers appropriate.
On the other hand the husband seeks orders to the following effect:
·That he relinquish to the wife his interest in the household, furniture and contents in the wife’s home together with any money in banks, credit unions, savings accounts or investments in the sole name of the wife;
·That the wife pay and indemnify him with respect to the Westpac mortgage;
·That a superannuation splitting order be made splitting his interest in his superannuation fund to allocate to the wife a base amount of $123 000 and consequential machinery orders;
·That the wife pay his costs of these proceedings.
Westpac seeks orders to the effect:
·That the wife’s claim against it be dismissed; or
·In the alternative that Westpac mortgage number … and personal guarantees given by the wife and the husband in respect of that mortgage continue to have full force and effect;
·That the wife pay the costs of Westpac of and incidental to these proceedings.

Background

The wife, 48 years of age and the husband, 54 years of age commenced cohabiting in mid 2007 and married in August 2008. They separated on 30 June 2009.
There are no children of the marriage. The husband had five children from his previous marriage, but sadly one died. The wife has two children from her previous marriage, namely B born in January 1997 and L born in March 2000.
At the commencement of their cohabitation the wife was working in the design field. Her property consisted of her home at I Street, Suburb Y subject to a mortgage of approximately $97 000, 5 acres of land at Suburb X, a motor vehicle, her furniture and household contents, some jewellery and some savings. There were problems in terms of her health. She was being treated by her General Medical Practitioner, Dr G for severe depression and insomnia. She was also suffering from chronic neck and back pain, and diverticulitis. The wife said that she felt suicidal at times. I shall refer to these matters again below.
On the other hand, at the time the parties commenced cohabitation, the husband was working full time in his present position as a public servant with a government agency in Suburb L. He had been working with the government agency for many years. He also worked a second job in the security industry. The husband’s property consisted of a Ford motor vehicle, a television set, some modest furniture and an interest in superannuation. The husband had liabilities of approximately $50 000.
In July 2007, the husband’s approximately $50 000 debts were paid using funds from the wife’s savings.
In late 2007 the husband underwent a back operation which together with related expenses cost approximately $10 500. This was paid with money from the wife’s home loan account.
In November 2007 the wife ceased working. She was struggling with the management of her considerable health problems at the time.
At approximately this time, the wife’s jewellery was sold, the wife said at the instigation of the husband.
In late 2007 or early 2008 the wife sold her land at Suburb X although the amount of the net proceeds of S was not clear to me. In any event, a significant part of such S proceeds were spent on funding the purchase of a Mitsubishi motor vehicle, a boat, motor and trailer as well as some fishing equipment, for a total price of approximately $124 000. The wife also applied a part of these funds to pay out her mortgage.
In January 2008, the husband, the wife, the children and the husband’s son, C went on a holiday to New Zealand to visit the wife’s parents and family. Unfortunately there was a family argument and the wife became estranged from her parents for more than a year
The husband also purchased sports equipment for his son who was an accomplished competitor in the relevant sport for approximately $11 000. This purchase was funded initially by a loan taken out by the husband but subsequently this loan was repaid from the wife’s savings.
As indicated above, the parties married in August 2008. They went on a honeymoon to Europe which cost approximately $10 000, almost the entirety of which was funded by the wife. Unfortunately just before the wedding the wife was made redundant.
Shortly after their honeymoon, the parties started to discuss seriously the husband’s desire to go into business. The husband established a corporation called O Pty Ltd. The husband was the sole shareholder and director. The corporation borrowed in excess of $400 000 which it used to purchase a hospitality business in Suburb L called D Company. This loan was obtained from Westpac on the basis of a guarantee from the wife secured by a registered mortgage on her home. This loan, and the circumstances in which it was obtained, is a major issue in these proceedings. I shall refer to this in considerable detail below.
The parties undertook some minor renovation of the business premises and opened for business in approximately late November 2008. Although the wife asserted that the business was solely the husband’s business, it was clear that she had attended the accountants who advised the parties on the viability of the business. There was also no issue that it was the wife who became the person most involved with the financial operation of the business.
Initially it appeared to the parties that the business was trading successfully. There were lots of patrons and the parties had been able to arrange a significant increase in the capacity to serve patrons of the business. Unfortunately, by April 2009 it became clear that the revenue produced from trading was insufficient to cover the costs of the business and the business loan. The business was insolvent and had to stop trading, which it did in late April or May 2009.
The wife asserted that when the husband became aware that the business was failing, he diverted thousands of dollars to his own use. In my view, this assertion has not been made out with the exception that I accept that the husband purchased new sports equipment for himself for more than $6 000. He has retained this.
This all put a great deal of pressure on the marriage. As indicated above the parties separated on 30 June 2009.
The husband left the wife’s home taking the parties’ Mitsubishi motor vehicle with him. The husband commenced renting accommodation for himself and his son. He borrowed funds and used these to purchase furniture and household goods for his home.
The husband’s corporation subsequently sold the business to the landlord. The net proceeds of S were used to pay business debts and the balance was applied to reduce the outstanding balance on the business loan.
In September 2009 the husband endeavoured to refinance the business loan so that interest would be payable at residential loan rates. The wife sought legal advice. The wife declined to participate in the refinancing of the loan. The last loan payment was paid by the husband in November 2009.
In January 2010 the wife removed the Mitsubishi vehicle from outside the husband’s home. The wife has since sold the vehicle for approximately $33 000 and the boat, motor and trailer for approximately $56 000. The wife has kept the proceeds for her own use.
On 16 December 2010 the husband became bankrupt on his own petition.

Purchase of the hospitality business and its funding

There was an issue concerning the circumstances of purchasing the hospitality business. As matters have turned out, the differences between the parties about this do not have much significance in the proceedings. But for completeness, I shall make some observations about this matter
The parties have given quite different accounts of the circumstances surrounding the purchase of the business.
The husband said that soon after the parties returned from their honeymoon the wife said that she wanted him to return to her the money which had been spent on purchasing the Mitsubishi motor vehicle and the boat. The husband said that this was approximately $110 000. He said that he informed her that he did not have the money to return to her and she suggested that he borrow it. He suggested that she sell the boat and the car and he said that she insisted that they were his. He said that in these circumstances, the only way that they would be able to obtain the amount of money required was to go into a business. He said that he really did not want to do this. The husband said that he had been a manager/supervisor since he was 17 years of age and had the experience to manage the business. He said that they set about looking for a business and found a hospitality business for S at Suburb L called D Company.
The husband said that they both spent some weeks going to the business to see how it traded. They obtained the financial statements from the owners and other relevant documents. The husband said that he wanted Mr E of H Accountants to advise the parties about the viability of the business. He said that the wife did not agree. The wife denied this. The husband approached Y Accountants for advice. The husband said that Y Accountants advised that the business was a viable business and could generate a good return.
The husband then approached Westpac Bank for a loan initially of $390 000 which subsequently became $400 000. The asking price for purchasing the business was $400 000. Mr P was the business finance manager for Westpac at the time. During their initial meeting, Mr P asked the husband whether he had any assets and the husband said that he did not. The husband said that Mr P then said that the loan would be impossible. The husband said that Mr P asked him whether his wife had assets and that he said she owned a house. The husband said that Mr P said that Westpac would require a guarantor.
The husband and the wife subsequently attended a meeting with Mr P at the Westpac offices at Suburb L to attend to the formalities required by Westpac. This was on 7 November 2008. I shall refer to these matters again below.
On the other hand, the wife’s account is quite different. The wife said that before the parties were married the husband started talking about having his own hospitality business. The wife said that the husband often informed her that he had been a manager all his life and had had successful businesses that made a lot of money. She said that the idea of going into business was completely the husband’s and that the purchase of Company D was driven wholly by him. The wife said that the husband had said that he wanted something of his own and did not want her name associated with the business. The wife said that the husband had informed her that he had a substantial amount of money that he could have used for the purchase of the business and she felt she had no reason to disbelieve him.
The wife denied that the parties had spent some weeks going to the business premises to see how it traded. She said that they went twice and on one of those occasions the husband had a conversation with Mr I who was one of the owners of the Company D business.
In support of her version of events, the wife filed an affidavit by her friend Ms HH. Ms HH said that the husband had informed her, at approximately the time of purchase of the business, that he had purchased it and that he always referred to the business as being his.
Each party presented their particular perception of the events as they recalled them prior to the purchase of the business. Leaving aside their individual views and emphases about these matters and just concentrating on the objective facts, I consider it likely that the above encompasses the background to the acquisition of the business. In any event, in my view it is clear that the wife had considerable involvement in the purchase, setting up and operation of this business.

The wife’s claim against westpac

As indicated above, the relief which the wife seeks against Westpac is an order to the effect that the guarantee and the mortgage which she gave to Westpac be set aside.
The wife’s claim is made pursuant to the provisions of s 90AE of the Act. These provisions enable the Court to make orders in property proceedings which have the effect of binding a third party to the proceedings.
In order to determine the identification of the property of the parties available for division between them I propose to first determine the wife’s claim against Westpac.
There are three bases to this claim. The first is to the effect that as a consequence of the mental state of the wife at the time, she was not capable of understanding or consenting to the guarantee or the mortgage. The second is to the effect that as a consequence of the conduct and/or omissions of Westpac’s officer Mr P, Westpac acted unconscionably towards the wife. The third is to the effect that at all material times, including during the meeting with Mr P, the wife was acting under the undue influence of the husband and was not in a position to bring a free will to the execution of the guarantee and the mortgage.
I shall deal first with the first part of the wife’s claim namely, that she lacked capacity to give the guarantee and mortgage.

The medical evidence

An affidavit was filed in the wife’s case by Dr G, the wife’s general medical practitioner. Dr G said that over the past two years, but particularly in 2008, the wife had been seen on average every three weeks or so for consultations and management of a major depressive disorder, anxiety, post-traumatic stress disorder, musculoskeletal pain, headaches and diverticulitis. In mid 2008 Dr G referred the wife to attend upon Mr F, a clinical psychologist, for more intensive treatment. Dr G also continued the wife’s medications prescribed for the above illnesses.
Dr G said that as a consequence of her illnesses, it was his opinion that in 2008 the wife would not have been capable of making any appropriately informed major legal or financial decisions.
Dr G said that he had been attending to the wife in his professional capacity for approximately 20 years. He said that he did not see her during the week when she signed the guarantee and other documents. He said that he saw her in late August 2008, a couple of days before her wedding. He said that he thought that the wife was a lot more settled and happier and that she had been in a lot worse place before that. He said that earlier he had prescribed Cipramil which he said can help sufferers of depression but he stopped this medication in late August 2008 particularly because the wife was about to embark on her honeymoon and would not want the side effects including loss of libido.

Dr G said that he saw the wife again after she had returned from her honeymoon her appointment having been on 28 November 2008. On that occasion, the only reason he saw the wife was because of back pain. He referred her to a specialist in spinal disorders. Dr G also discussed the wife’s psychological condition with her on that occasion. Dr G said that in November 2008 the wife had major depression. He also said that at this time she had improved.
There was no evidence including that in Dr G’s notes in relation to that period of time which was shortly after the wife had signed the guarantee that her emotional and psychological condition was different from that which Dr G had described as at late August 2008 when the wife was about to embark on her marriage. He described her earlier state of depression as being at one point a 4 or 5 out of 10 and at another point a 3 or 4 out of 10. My understanding of his evidence was that the wife had improved from this and was a lot more settled as at late August 2008 although he said in effect that she was coming from a low base.
Dr G agreed that there was no suggestion that the wife was suffering from any cognitive impairment but rather, in his opinion, she had what he described as “impaired judgement”. Dr G explained that he did not think the wife was capable of making a good or informed decision when she got married nor when she gave her home as security for the guarantee. Dr G said that he did not observe any psychotic symptoms in the wife during 2008. Nor did he see “a disordered thought process as such”.
An affidavit was also filed in the wife’s case by her treating clinical psychologist, Mr F.
Mr F said that the wife first attended his practice on 11 June 2008. He undertook psychometric investigation using the depressive, anxiety and stress scales and by the Beck Depression Inventory on both of which he said the wife scored in the extreme range for depression, anxiety and stress. He made a further diagnosis of post-traumatic stress disorder. Mr F has been treating the wife with cognitive behavioural therapy and interpersonal therapy.
Mr F expressed the opinion that the wife was not capable of making decisions of a legal or financial nature throughout 2008. He clarified this saying that he did not think she was capable of making “complex” legal or financial decisions.
Mr F said that when he saw the wife on 25 September 2008 her level of forgetfulness and inattention was not consistent with her level of education. He said that she continued to be more emotionally occupied with the past than with the future and her non-assertiveness was at odds with her profession and her education. Mr F said that when he saw the wife on 13 November 2008 it would have been a continuation of the same.
Mr F said that in 2008 the wife had a diagnosis of depression, post-traumatic disorder reaction and he said that in the diagnostic and statistical manual, with that anxiety condition and depression the wife would be cognitively impaired.
Mr F was informed by learned senior counsel for the wife that one of the questions in the bank documents about the guarantee alerted the wife to the fact that upon signing the guarantee she risked losing her home. Senior counsel went on to say that she had written “yes” in her own hand writing beside this as an acknowledgement. He said that she did not recollect this but that the signature was hers. He said that she said it did not register at the time.
Mr F said that he thought that that was quite consistent with the wife going along with matters. He said that her awareness was very narrow. By this Mr F appeared to be saying that the wife was concentrating on her children and that this gave her a narrow awareness. It was suggested by learned senior counsel for the bank that that would not stop the wife from having concerns about putting her house up as security for a $400 000 loan and that a narrow awareness would not mean that she would not be concerned about that. In response to this, Mr F said that cognitively this was too complex a task for the wife. Mr F said that he thought that the wife might have been able to follow what was being explained to her but that it would have had the effect of not registering with her because the process happened very rapidly. He said that the wife had told him about difficulties she had had with concentration and inability to carry out all requirements of her job.
Mr F said that he thought that the wife would have been aware of the seriousness of offering her house as security for the guarantee but that he understood that she had received many assurances that she would not lose her home. Mr F was asked whether he noticed any inability on the part of the wife to make decisions and he said that he had not noticed this but had heard it from the wife’s account of making poor decisions and struggling with making decisions in life. Mr F said that he considered that the wife had made considerable improvement between the time when he first saw her in June 2008 and November 2008.
Mr F said that in reaching his opinion that the wife was incapable of making decisions about legal and financial matters in 2008 he considered various elements of the criteria for depression and post-traumatic stress disorder taking account of things which he had seen including that she was often emotionally absent, cognitively impaired and emotionally impaired. He said that the cognitive impairment was implied as a consequence of her illness.
Mr F said that the wife did not have a psychosis or any other mental disorder but thought she suffered more from her emotional arousal levels and stress levels.
Mr F said that the wife’s account of her involvement with the bank and the lawyer indicated to him that she had a great deal of clarity about certain things that happened but not about the overall narrative which he said rather says something like a traumatic effect. He said that he thought she had a “hyper-alert awareness of certain things but no sense of a continuous flow of experience”. Mr F agreed with learned senior counsel for the bank that the wife knew on the day of entering into the guarantee that she was putting her house up as security but that she referred to assurances that she had received (that her house would not be lost). Mr F also said that he thinks that the wife understood why entering into the guarantee was disadvantageous for her but did not appreciate the potential consequences and overvalued the assurances she received.
Mr F said that the wife spoke with him about the transaction 4 months after it occurred and that she was very distressed.
The bank filed an affidavit by Dr S, psychiatrist.
Dr S interviewed the wife on 15 June 2011. He had opportunity to read the statement of claim, affidavits by Dr G and Mr F, transcribed notes of Mr F and clinical notes of Dr G.
Dr S said that the wife appeared to have been subject to depressive and somatic symptoms for much of her adult life, first evident during her adolescence. He said there was also a theme of difficult relationships.
Dr S said that there was no indication that the wife was suffering from any significant cognitive difficulties. He said that the history the wife provided particularly the events at Westpac was extremely detailed and she had a clear memory of it. He said that she had been able to convey her concerns in detailed statements. In these circumstances he said that there would appear to be no cognitive impairment that would have deprived her of capacity to understand or retain information or to communicate.
Dr S said that there was no evidence of psychotic symptoms. He said that such phenomena could have an impact upon capacity because they might distort the ability to understand what was happening around the person. But that was not applicable in the wife’s case.
Dr S said that it is true that major depression can distort a person’s capacity to accurately grasp situations. But he said that it would have to be very profound, that is, virtually at a level of psychosis. Furthermore, Dr S said that major depression is usually diagnosed. He said that there was nothing that he observed about the wife and nothing in the notes of her other practitioners (which were of appointments closer to the time of her entering into the guarantee as referred to above) which indicated that the wife was suffering from major depression at the time.
He said that while the wife had experienced various symptoms including depression, insomnia and persistent pain, he would not regard those to be of a degree that would deprive her of capacity. He said that they might contribute to her making decisions that were ill-considered or unwise but that would appear to be a different issue.
Dr S also said that he was unable to see how the Westpac manager could reasonably have been able to perceive that the wife was incompetent to make financial decisions. He said it would be unlikely that the officer would have relevant training and therefore it would only be with some obvious impairment that is, the presence of a psychosis or dementia, that such an argument could be raised.
Initially during his cross-examination, Dr G said that in November 2008 the wife had major depression. But subsequently he said that she had suffered from major depression but after her marriage she had improved.
Mr F considered that the wife had made considerable improvement between June and November 2008. And Dr S said that nothing in the notes of practitioners assisting the wife in 2008, or anything from his own observations of the wife, indicated that she was suffering from major depression at the time.
In these circumstances, I find that it is more probable than not that the wife was not suffering from major depression at the time she signed the Guarantee and Mortgage.
Mr F said that cognitive impairment was implied as a consequence of the wife’s illness. But from what I make of all the medical evidence, such cognitive impairment as existed in November 2008 must be a matter of degree. I say this because Dr G said that he did not believe the wife had cognitive impairment. Dr S said that the wife had been able to give a detailed account of the occurrences at Westpac and that she was not cognitively impaired in a way which “would have deprived her capacity to understand or retain information or to communicate”.
In these circumstances I find that while the wife might have been suffering from some cognitive impairment at the relevant time, it is more probable than not that this was not at a level which prevented her from understanding the nature of the transaction she was entering into and the consequences thereof.
As indicated above, Mr F said that he thought that the wife would have understood the seriousness of offering her home as security for the guarantee. And we have the husband’s evidence that after he and the wife left the offices of the wife’s independent solicitor Ms SS, the wife informed the husband that there was a risk in what she had done and that she could lose her home.
I am not persuaded that there is any merit in this part of the wife’s claim.

Unconscionability

I turn now to consider the second and third aspects to the wife’s claim against Westpac.
The wife makes various criticisms of Mr P, the Westpac business financial manager who arranged the business loan for the husband’s corporation.
The wife said that she had never dealt with Westpac and had never met Mr P before their meeting on 7 November 2008. She said that upon her first meeting Mr P, his mood was very business-like and perfunctory. She said that when the husband mentioned that she had a freehold house worth several hundred thousand dollars to use as security for the loan Mr P’s mood changed remarkably. He mentioned that “It looked great” and he was extremely positive about the purchase.
It is common ground that the first time the wife met Mr P was at the meeting at Westpac on 7 November 2008 attended by the husband, the wife and Mr P. Following receipt of the Business Finance Request which I note included the wife’s signature as a proposed guarantor and which was dated 20 October 2008, Westpac prepared a Business Finance Agreement for the company O Pty Ltd to borrow $400 000. This was to be secured by guarantees by the husband and the wife, the wife’s Guarantee to be secured by mortgage over her home at I Street, Suburb Z, Tasmania. Westpac also prepared guarantees and indemnities from each of the husband and the wife. It is clear that the purpose of the meeting on 7 November 2008 was for Mr P to explain the loan documents including the guarantee and to present these documents to the husband and the wife for their consideration and signature if they accepted the terms of what the Bank required from them in order to make the $400 000 available to the corporation to enable it to purchase the hospitality business.
Mr P rejected the above assertions by the wife. In particular, he said that it was no surprise to him that the wife’s home was being offered as security and that it was unencumbered. He said that this was because he had been aware of this from 20 October 2008 when he had the first meeting with the husband.
Mr P denied that he had said that the deal “looks great”. But he conceded that he thought it was a good deal and that he had recommended it to his superiors.
The husband was cross-examined about this matter. It was suggested to him by learned senior counsel for the wife that when he met with Mr P on 20 October 2011 Mr P said to him that the deal looks great and that the deal was the hospitality business purchase not the loan application. The husband denied this. He said that Mr P said that the loan application looked “good” not “great”. Despite being pressed about this matter the husband did not waver in this evidence.
I prefer Mr P’s evidence about these matters to that of the wife for reasons which I shall refer to below.
The second of the wife’s criticisms of Mr P was as follows. The wife said that Mr P read the “Bank’s script relating to the obligations of the guarantee loan” as if by rote. The wife said that Mr P did not look at her during this reading until immediately after he concluded the reading when he mentioned flippantly “We have to say that – we say that to everyone who takes a loan out – it’s only a formality.” The wife said that this immediately had the effect of rendering the script unimportant. The wife said that Mr P then said flippantly “Oh, you won’t lose your house” and followed this with a small laugh. The wife said that Mr P repeated this to her in a more serious tone to emphasise this while looking directly at her and then repeated it again later in the conversation.
In his affidavit Mr P denied this. During cross-examination he agreed with learned counsel for the wife that he was required to read this out every time and that he had read it out on a very considerable number of occasions. He said that he was unable to comment on the tone of his reading. But he denied that he informed the wife that he was required to do it for every customer and he denied that he told her it was a formality. He denied that he said that the wife would not lose her house.
These assertions were also raised by Mr Ayliffe with the husband in cross-examination. The husband recalled Mr P reading out the documents but said that he was not sure about the tone of voice used by Mr P. The husband was asked whether Mr P was reading by rote and he replied that he could not recall. The husband was asked whether Mr P said to the wife after he finished reading “It’s only a formality, we have to do it”. The husband said he did not recall. Then learned senior counsel suggested that Mr P said “You won’t lose the house” flippantly then said seriously “You won’t lose your house.” The husband replied that that was incorrect because that was the whole reason they were in the office at all – Mr P was informing them of what would occur in the event the business would fail.
In denying the wife’s assertions Mr P said that the Guarantee and Indemnity warning was a very important document and he did not make light of it.
I note at this point that this document was in the following form:
Business version
The relevant provisions of the Code of Banking Practice apply to this Guarantee & Indemnity
GUARANTEE AND INDEMNITY
BANK COPY

WARNING: THIS IS A VERY IMPORTANT DOCUMENT

You take a financial risk if you sign it. You may have to pay money owed by the Customer referred to on the next page.

You can refuse to sign it.

It can cover future Guaranteed Obligations as well as present ones.

You have a right to limit your liability in accordance with the Code of Banking Practice and as allowed by law. However, once you sign this document, this right is restricted. In many cases you will not be able to limit your liability any further, or you will still have significant liability. Ask your lawyer about this.

BEFORE YOU SIGN IT:

You should read it carefully.
You should check for yourself whether the Customer can and will pay its debts.
You can ask for information about the Guaranteed Obligations (including any facility with us to be refinanced by the Guaranteed Obligations).
You should see your own lawyer and financial adviser for advice on it and give them the information we give you. If you don’t, you should wait a day before signing it.

Mr P denied that he had suggested to the wife that she would not lose her home.
The wife also said that the husband said in front of Mr P that he would use his superannuation to pay any debt incurred from the business to save her house and that Mr P never corrected the husband about this.
Mr P also denied this. He said that this matter was not discussed during the meeting on 7 November 2008 but that there was a similar conversation when he met the husband and wife in 2009 after the business had failed and he was endeavouring to assist them to re-structure the loan arrangements. Again, there was vigorous cross-examination about this matter but Mr P was unshaken. I accept Mr P’s evidence about this.
It was suggested to Mr P during cross-examination that he did not explain the power of foreclosure to the wife. In response Mr P said that the Guarantee and Indemnity contained a number of questions which the proposed guarantor was required to answer (in the Form of Acknowledgment before signing the guarantee) and one of the questions was about selling the house. Mr P said that he read these questions to the wife. I note that the relevant question in the Form of Acknowledgement was as follows:
5. Do you understand that among other things:
…
(c)If you do not pay that money to the Lender, then among other things:
-the Lender can sue you; and/or
-if you give a mortgage or other security which secures the Guarantee, the Lender can enforce it (for example, if that security includes a mortgage over your home, the Lender may sell your home)?
The Lender can do either or both of these things at the same time or different times. It can do them whether or not it takes action against the Customer, or makes a demand on any other person who signs the Guarantee or gives another guarantee and whether or not it enforces other security.
The husband asked the wife during his cross-examination of her whether she recalled Mr P telling her during the meeting what the consequences of the guarantee would be if the business did not work out. The wife said that she did not recall.
The wife also said that on the same day as this meeting, and immediately after the meeting, Mr P suggested Firm GC as independent lawyers to advise her on the guarantee.
Mr P denied this, saying that he had no connection with those solicitors, that he had never met the particular solicitor who advised the wife about the guarantee and that it was not his practice to recommend solicitors to clients.
I note that the husband said that Firm GC had been suggested by Mr DM, the solicitor who was acting for the company O Pty Ltd on the purchase of the business. The wife said that she had never met Mr DM.

The husband cross-examined the wife about this matter and suggested to her that Mr DM had previously organised for her to meet with Firm GC. The wife responded that she was not saying that Mr DM did not do this but she could not recall this, whereas she remembered that Mr P suggested Firm GC.
The husband said during his cross-examination by Mr Procter for Westpac that the wife’s appointment with Firm GC had been arranged for 7 November 2008 either by Mr DM or his secretary after Mr DM had indicated that the wife would require an independent lawyer.
I accept Mr P’s evidence about this matter and do not attribute to Mr P any inappropriateness in respect of the advice he gave to the wife about her need to obtain independent legal advice about her entering into the guarantee.
In my view, none of the above assertions by the wife, where they have come into conflict with the evidence of Mr P, have been established. This is because I have a clear preference for the evidence of Mr P over that of the wife.
In my view, Mr P was a good witness who answered questions in a responsive manner. I had no sense that any part of his evidence was fabricated or embellished. I regard Mr P as a witness of the truth notwithstanding that he had a personal interest in achieving approval of the loan by Westpac. This was because the loan approval was included as part of a target set by Westpac, which if achieved could result in a monetary bonus being paid to Mr P. As it turned out, Mr P did not receive a bonus but this does not affect my view about the matter.
On the other hand I regard the wife as an unconvincing and unreliable witness. On many occasions she did not give a responsive answer to the question and gave me the impression that she preferred to use the occasion provided by the question as an opportunity to say something which she perceived might support her case. Time and again during her cross-examination I found myself thinking her responses in particular areas simply defied credulity. She was unable to recall many matters which might not have served her case. Yet she was remarkable in her recollection of things that would tend to serve her case such as the demeanour of Mr P and her sense that he appeared to be flippant. And that three persons had told her that she would not lose her house.
What explanation did Mr P give to the wife about the loan documents and her guarantee?
Mr P described in his affidavit the meeting which he had with the husband and the wife on 7 November 2008, in considerable detail. He said that they discussed the Business Finance Agreement between Westpac and the corporation O Pty Ltd, the Guarantee and Indemnity from the husband and the Guarantee and Indemnity from the wife.
Mr P said that, in the presence of the wife, he first took the husband through the Business Finance Agreement, not word by word but pointing out the essential facts including the interest rate. He said that he gave the husband the opportunity to read the fine print before the husband signed the Agreement.
Mr P said that he then handed the husband a Guarantee pack which included the Guarantee, the Business Finance Agreement, a copy of the memorandum of common provisions and a copy of the information used to approve the loan (husband’s income tax return, the business financials and credit checks). He said that he then pointed out various warnings, provision about limiting liability, the type of security, he read the “Form of Acknowledgement – Business Guarantor” and noted the husband’s answers thereon, he read the other warnings on the signature page and then the husband signed the Guarantee.
Mr P said that he then took the wife through a similar, although not identical, process. This was as follows. He took her through the Business Finance Agreement, not word by word but pointing out the essential facts, including the interest rate. Mr P said that he then handed the wife a Guarantee pack which, as in the case of the husband, included the Guarantee, the Business Finance Agreement, a copy of the memorandum of common provisions and a copy of the information used to approve the loan (husband’s income tax return, the business financials and credit checks).
Mr P said that he then pointed out and read the warning in the Guarantee And Indemnity, which I have set out in full above. He then read out the next page which contained the details of the Guarantor (the wife), the Lender (Westpac) and the Customer (O Pty Ltd) together with the Guaranteed Obligations as set out therein. He pointed out the essential parts of the next page including the limit on the Guarantor’s liability, how the Guarantor can limit their liability and specifically drew the wife’s attention to the type of security involved.
Mr P said that he then read to the wife the “Form of Acknowledgement-Business Guarantor” which was to be attached to the back cover of the Guarantee and Indemnity given. Omitting the formal details of the wife and the company, this Acknowledgement is as follows:

BEFORE YOU SIGN IT please answer the following questions and sign this form.

Answer
Yes or No

1.   Have you read the Guarantee and Indemnity (the Guarantee) and the Memorandum of Common Provisions booklet carefully?

    If you answered “no”, did you have the document read out OR translated for you?

2.   Have you thought hard about whether to sign the Guarantee? Have you made your own decision to sign (not just because someone asked you to)?

3.   Within the “Warning” box on the front cover of the Guarantee and Indemnity we have stated that before you sign the Guarantee and Indemnity you should get advice from your own lawyer and from your own financial adviser (such as an accountant).

    Answer “yes alongside one of the following that is true:

    A – You got that advice or

    B – You got advice from your own lawyer but not from your financial adviser

4.   You will only need to answer this question if you answered “yes” to Q3 B

    Do you understand that is your risk? (You are not looking to the Lender to advise you whether or not you should be signing. You do not expect the Lender to protect your interests or tell you the risk you run by signing the Guarantee. It is for you to make sure your interests are protected.)

5.   Do you understand that among other things:

(a)   If you sign the Guarantee you may have to pay the Lender a lot of money to repay the debts of the Customer?

(b)   If the Customer does not pay on time money he or she owes to the Lender, the Lender can demand that you pay the money in place of the Customer or as well as the Customer?

(c)   If you do not pay that money to the Lender, then among other things:

-   the Lender can sue you; and/or

-   if you give a mortgage or other security which secures the Guarantee, the Lender can enforce it (for example, if that security includes a mortgage over your home, the Lender may sell your home)?

    The Lender can do either or both of these things at the same time or different times. It can do them whether or not it takes action against the Customer, or makes a demand on any other person who signs the Guarantee or gives another guarantee and whether or not it enforces other security.

(d)   The Lender can demand that you pay money to the Lender if for some reason it cannot recover the money from the Customer? (For example, this might happen because the Customer might not have properly signed a document or might not have full legal capacity (if he or she is under 18)).

(e)   You should check for yourself whether the Customer will be able to pay his, her or its debts. Even if the Lender tells you something you should still check it for yourself and get an accountant to check it for you.

6.   Do you understand that the Guarantee covers all money which the Customer owes the Lender in relation to Business Finance Agreement dated 05/11/2008 with a limit of $400,000.00 including the further amount to cover Excesses, plus amounts like government duties and charges, fees, costs, expenses and interest. It may cover future Guaranteed Obligations.

7.   Have you received:

(a)   a letter from us which attaches copies of the Business Finance Agreement and other documents/statements?

(b)   all other information you have asked for concerning the Business Finance Agreement (including any facility from us to be refinanced by them) and other documents/ statements that you have requested?

    If the answer to (b) is “no”, list what you have asked for and have not received.

Guarantor’s Signature  Date

……………………..  …………………

________

________

________

________

________

________

________

________

________

________

________

________

________

________

Mr P indicated that the questions were not answered and the Acknowledgement was not signed in his presence because of Westpac’s requirement that the wife was to obtain independent legal advice and the Guarantee would be signed and the Acknowledgement completed in the presence of the independent solicitor.
Mr P said that he then read over to the wife the Guarantee And Indemnity set out in full above. He said that he then completed the Interview Checklist – Guarantor which is as follows (omitting instructions):

INTERVIEW CHECKLIST – GUARANTOR

BORROWER                   [O PTY LTD]

  ACN […]

GUARANTOR       [THE WIFE]

Note: You must not give the Guarantor any prediction or comfort that the borrower will be able to pay the guaranteed amount. It is the Guarantor’s responsibility to check for themself the borrower’s ability to repay the guaranteed amount.

Please answer the following questions in the space provided

Have You

Answer
Yes or No (or N/A for Q5-7, as required)

1.   met the guarantor and given him or her the guarantee pack personally, which includes a *copy of the guaranteed transaction (T&C)?

2.   during the interview, pointed out or read out to the guarantor the warning on the front cover?

3.   recommended the guarantor get legal advice and financial advice?

4.   given the guarantor the chance to take the guarantee pack away to read the guarantee and other documentation?

5.   *told the guarantor fully and frankly of the financial problems affecting the borrower (if any), that is only your understanding of the position and he or she should check the position?

6.   *told the guarantor to get an accountant to check the position of the borrower?

7.   ⁺informed the guarantor of the Bank’s requirement that it will require a legal certificate from a solicitor who does not act for the Bank, the borrower or other interested party, in this transaction, before the facility can be made available?

Date 7/11/08

Name of Interviewing Officer: [Mr P]

(Signature) [signed]

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Again, I accept Mr P’s evidence about these matters.
During the course of the wife’s cross-examination learned senior counsel for Westpac asked quite detailed questions about this procedure and about various parts of the documents which Mr P said he took the wife through on the day. The wife said that she really did not know what the loan application was, nor that she was there because she was going to be providing security for a loan. She said that she thought the purpose of her attendance was to give the husband credibility because he had a bad reputation and not a good credit rating. The wife said that the husband told her all day that he was going to use his superannuation and that there was no suggestion that he was going to use her home as security.
I am afraid that this was one of the times during the wife’s cross-examination that I did not believe she was being truthful. To have said that she was attending the meeting at the bank to give the husband credibility because he had a bad reputation and a not good credit rating in circumstances in which she knew he was applying for a substantial sum of money and there being no suggestion that her home was going to be offered as security because he was going to use his superannuation in my view defies credulity. And this is particularly so because it became clear during the cross-examination of the wife by the husband, that the wife knew that the husband was unable to use his superannuation. The husband was in the process of asking the wife about her statement to the effect that the husband had told her when he moved into her home that he had approximately $700 000 to $800 000 in superannuation. The husband asked the wife during cross-examination why if he had this money was some of it not used to pay his approximately $50 000 in debts at the time they commenced cohabitation. The wife replied “Because you said you couldn’t touch it.” In my view, it is clear that the wife knew that the husband could not use his superannuation towards the costs of the purchase of the business and this was the reason that he was applying to Westpac for a substantial loan.
Learned senior counsel for Westpac directed further questions to the wife about Mr P going through the documents firstly with the husband and then with the wife. When he showed various pages of the documents to the wife and asked whether she remembered them her replies were variously “I don’t remember the document” or “I don’t know what he read” or “It wasn’t registering because he read it so flippantly”. The wife did concede that she knew that what Mr P was reading to her, or showing her, was about the Guarantee and that the Guarantee concerned her.
Then learned senior counsel drew the wife’s attention to the warning in the document set out in detail above, under the heading GUARANTEE AND INDEMNITY and particularly to the words “You take a financial risk if you sign it. You may have to pay money owed by the Customer …” The wife said that it did not register with her.
At this point I observed the wife to be very nervous. She was tapping her hands nervously. My strong sense was that she was being untruthful.
It was also suggested on behalf of the wife that during the meeting with Mr P on 7 November 2008, the husband gave assurances to the wife to the effect that if the business was to fail she would not lose her home because he would use his superannuation and other money to meet any liabilities. Furthermore, it was suggested on behalf of the wife that when this occurred, Mr P failed to intervene to challenge the husband about his capacity to be able to meet any such liabilities by using his superannuation. It was submitted that this gave further support to Westpac having acted unconscionably towards the wife.
I must say I am unable to accept this.
There was some detailed cross-examination of the husband by Mr Ayliffe about his superannuation. There were questions directed to the husband on 14 July 2011 about this matter and also on 11 August 2011. On the earlier occasion the husband said that he had a discussion with Mr P about the value of his superannuation and the husband said that he had mentioned it more than once to Mr P.
On the later occasion Mr Ayliffe asked the husband whether when he had met with Mr P on 20 October 2009 they discussed his superannuation in terms of it being $700 000 to $800 000. The husband responded that he did not recall discussing his superannuation in relation to any guarantee. This suggests to me that the husband did not recall discussing his superannuation at the 7 November 2008 meeting.
I have checked my notes of 14 July 2011 and also listened to the recorded cross-examination during 11 August 2011 about this matter. I am unable to find any reference to any concession by the husband that there was a discussion between him and Mr P on 7 November 2008 about the husband’s superannuation. Learned counsel asked the husband whether Mr P could have inserted on the relevant documents on 7 November 2008, references to his superannuation including figures of $45000, $500 000 and $700 000-$800 000. The husband agreed.
Mr P denied that the husband’s superannuation was discussed during the meeting on 7 November 2008. He said that he could recall the husband’s superannuation having been discussed at the meeting in September 2009. The husband gave similar evidence, that is, that he recalled superannuation being discussed at the September 2009 meeting.
It was submitted on behalf of the wife that a letter dated 8 November 2008 signed by the husband gave some weight to the wife’s assertions that the husband had reassured her during the 7 November 2008 meeting that he would use his superannuation and other monies to cover any loss from the business. This letter was as follows:
8^TH NOVEMBER 2008
IN RELATION TO THE PROPERTY KNOWN AS:- [O Pty Ltd]
SHOULD THE NEED ARISE FOR THE WESTPAC BANK TO USE THE PROPERTY [I Street, Suburb Z], TASMANIA (HELD AS EQUITY FOR THE LOAN FOR [O Pty Ltd]) I, [the husband] AGREE TO PAY [O Pty Ltd’s] OUTSTANDING LOAN ACCOUNT BALANCE WITH EITHER SALE PROCEEDS (FROM [O Pty Ltd’s]) OR FROM [the husband’s] SUPERANNUATION ACCOUNT.
[The husband’s name]
The husband said that this letter was prepared by the wife and that he signed it.
I accept the submission by learned counsel for the wife that this letter tends to make it more likely that the husband was giving assurances to the wife. But Mr P denied that the husband gave any such assurance during the meeting on 7 November 2008 and, despite valiant attempts by Mr Ayliffe to obtain a concession by the husband that he discussed his superannuation with Mr P on 7 November 2008, the most favourable thing the husband said in terms of the wife’s case, was that he did recall that he had a discussion with Mr P about the value of his superannuation and that he had mentioned it more than once to Mr P.
As I have said, I am not prepared to make the finding against the husband and Mr P sought on behalf of the wife about this matter.
The remaining submission about this part of the wife’s case is to the effect that Mr P did not inform the wife that Westpac would be holding joint and several guarantees from the husband and the wife and could proceed to exercise its rights under her guarantee before exhausting its rights against the husband. It was submitted that this was a very serious omission on the part of Westpac and that it amounted to deceptive and misleading conduct.
It was submitted on behalf of Westpac that the provisions of the Guarantees (the husband’s at page 66 and the wife’s at page 75) made it clear that their obligations were joint and several. I accept this as a matter of interpretation and reject the submissions about this on behalf of the wife.
In relation to the second part of this submission, it was submitted on behalf of Westpac that the words on the signature pages of the Guarantees made it clear that the wife may “become personally responsible instead of … the Customer …”. Learned counsel for the wife said that the reference here to “Customer” should be taken to mean the company O Pty Ltd because it was the company not the husband who was the customer. With respect to Mr Ayliffe, in my view, this is too fine a distinction. In my view the wife regarded the company and the husband as one and the same. She knew that if the company was unable to pay, the bank would be looking to her for any shortfall on its loan. The wife knew that the husband had a poor track record with money and that he had none to speak of. He had told her this when she asked to be repaid for the Mitsubishi and the boat. Moreover, she knew that whatever his superannuation was worth, he was unable to touch it as referred to above.
I am not persuaded that the above submissions lend any weight to the wife’s assertion that she did not receive a full and proper explanation about the transaction.
But even if I am wrong about this, Westpac made it clear that it would not be accepting a Guarantee from the wife unless the wife had received independent legal advice about entering into the Guarantee. Westpac was subsequently satisfied that the wife had received such advice from Ms SS of Firm GC, Lawyers.

I am satisfied that Mr P took a careful and proper approach in explaining and ensuring that the wife understood the effect of the Guarantee which she was giving.
But it is further submitted on behalf of the wife that the dealings with Westpac were unconscionable because the explanation by the independent lawyer, Ms SS about the transaction was inadequate.
I shall first examine the evidence about Ms SS’s involvement in the matter.
It is clear that Westpac were not prepared to have the wife enter into the guarantee and the mortgage without her having the benefit of independent legal advice. This is clear from the evidence of Mr P and from the Business Finance Agreement which provided the following as a specific condition which applied to the facility:
Proposed Surety, [the wife] is to seek independent legal advice as to the nature and effect of the security being provided. Written evidence of this advice is to be provided in a format acceptable to the Bank prior to execution.
As indicated above, Mr DM, who was acting for the company on the purchase of the business, arranged for an appointment for the wife to consult Firm GC, Lawyers.
It is clear that such a meeting took place at the offices of Firm GC on 7 November 2008 commencing at approximately 2:30 pm which continued for approximately one hour. This was later on the day that the husband and wife met with Mr P.
The lawyer at Firm GC who advised the wife on 7 November 2008 was Ms SS, who at the time practised using the name Ms SR. Ms SS had been admitted to legal practice in August 2005. She had been working with Firm GC since January 2007 mainly in the areas of property, commercial law, estate planning and estate administration. While employed at Firm GC, from time to time she advised clients about bank guarantees.
The circumstances of the meeting at the offices of Firm GC on 7 November 2008 are not entirely clear. Ms SS said that she had no memory of seeing or speaking with the wife so that she was relying on her usual practice in relation to advising clients about bank guarantees, and on her notes. Such notes consisted of a brief entry in her Microsoft Outlook calendar and a File Note.
Because of the importance of this file note to the evidence given by Ms SS I shall set it out in full and it is as follows:
File Note
Date: 7^th November 2008
Re: [The wife]

Guarantee Documents

Attg: [The wife and the husband] – 5 units
NOTE: During the course of client interview it came to the attention of [Ms SR] that [the husband] was involved with the Borrower company [O Pty Ltd]. [The wife] indicated that she was content for [the husband] to remain in the interview. Following a general discussion regarding the loan, guarantee obligations of [the wife] and the WBC documents [Ms SR] requested [the husband] to wait in reception in order that she could speak with [the wife] regarding her obligations under the Guarantee independently of the Borrower.
-[Ms SR] gave general legal advice in relation to the WBC mortgage and guarantee documents.
-[Ms SR] went through [Firm GC] Understanding and Acknowledgement in detail.
-You signed the WBC documents including [Firm GC] Understanding and Acknowledgement.
-You took the WBC guarantee papers away with you – you will provide them directly to WBC.
-[Ms SR] did not take copies.
-[Ms SR] will post account to you.
-You say your address for post is:
· [I Street, Suburb Z]
· Phone: […]

......................
[Ms SR]

Unfortunately the file note is not a contemporaneous document. It was typed recently by Ms SS after Firm GC were served with a subpoena to produce their file. Ms SS said that upon looking at the file she noticed that her file note was written in a form of short hand notes. She said that she decided that anyone reading the file would be better served with a typed file note that fully set out her form of short hand notes. Ms SS said that the typed file note accurately recorded all of what was in the hand written file note. Ms SS said that she did not retain a copy of the hand written file note. She was unable to explain why she did not keep the hand written note.
Doing the best I can in these rather difficult circumstances it is clear that the husband and wife arrived together at the offices of Firm GC. Ms SS said that from her Microsoft Outlook calendar note it appeared that the husband and wife were joint owners of the property which was being proposed as security for the guarantee. She commenced her discussions with both parties. According to the husband this was in the foyer and subsequently Ms SS took the wife away and he remained in the foyer.
Ms SS said, relying on her typed note, that she had a general discussion about the loan, the wife’s guarantee obligations and the Westpac documents. Then she asked the husband to wait in the reception area so that she could speak to the wife independently of him. This appears to be consistent with the husband’s suggestion that he remained in the foyer although one cannot be certain about this. In any event, according to the typed note it would appear that Ms SS took the wife somewhere away from the husband and then she and the wife had some discussion and the wife signed the Guarantee and relevant documents.
The wife said (in her affidavit) about this meeting that immediately prior to the meeting she felt pressured by the husband and I shall refer again to this below. The wife said that she had never previously dealt with Firm GC and had not met Ms SS before. She said that she remembered Ms SS talking to her about the guarantee. She said that the husband was with her. She said that Ms SS later took her aside and into another room away from the husband. She said that Ms SS asked her whether she was okay. The wife said that Ms SS also repeated to her in a reassuring tone “You won’t lose your house”. The wife said that she remembered feeling overwhelmed and sick as she signed the paper.
Pausing here for a moment, in response to this allegation Ms SS said that she has never said to anyone who was a client in these circumstances that they would not lose their house or any words which would have the same import.
Ms SS said that because of the Microsoft Outlook calendar entry she would not have been aware that the wife was the sole owner of the property and until she saw the Westpac documents she would have discussed the matter with both parties. Presumably, that was the time when she asked the wife whether she was content for the husband to remain in the interview.
In any event, Ms SS said that her usual practice was as follows:
-firstly to ensure that all relevant documents had been provided by the bank. She said that there was no mention in her file of any lack of documentation.
-review with the client (and independently of the borrower) the guarantee documents and advise the client about their obligations
-take the client (independently of the borrower) through the Understanding and Acknowledgement and give advice about this.
I note that this document is as follows:
UNDERSTANDING AND ACKNOWLEDGEMENT
I, the undersigned hereby acknowledge the following:
1.That I have this day received independent legal advice in respect of the Guarantee of banking facilities (“the Guarantee”) for [O Pty Ltd] ACN […] (“the Borrower”).
2.That I have been advised:
a.regarding the general nature of, obligations and liabilities under the Guarantee;
b.that the giving of a guarantee requires careful thought and involves risk, including the risk of losing my security, property and other assets;
c.that if the Borrower defaults in payment or in other obligations to Westpac then I would be liable to make good that default which could involve all amounts owed by the Borrower to Westpac together with interest and other charges;
d.that if I was in any doubt as to the viability of the transaction that the Borrower was undertaking; the Borrowers ability to make the required payments to Westpac; or my own ability to make payment to Westpac, then I should obtain Independent Financial Advice before signing the Guarantee.
3.That I have entered into the Guarantee freely, voluntarily and without pressure from the Borrower or any other person and with full knowledge and understanding of the contents, consequences of signing and of the circumstances under which I am undertaking the liabilities contained in the Guarantee.
Notwithstanding this advice, I have decided to enter into the Guarantee because …
Dated this seventh day of November 2008.
SIGNED:       [signature]
[The wife]
-take the client (independently of the borrower) through the guarantee in detail, informing the client about:
(i)the guarantor’s obligations if the borrower defaulted under the loan from the bank, that is:
A.if the borrower failed to make the required payments under the loan, then the guarantor would have to assume all responsibility for repayment of the loan, interest, costs and related expenses; and
B.if the guarantor could not meet the required repayments for the loan, the bank would have the ability to sell the security property offered by the guarantor in order to recover the debt and other charges and interest owed. This may involve the guarantor losing their security property (i.e. their house or other secured property). She would also carefully explain that the risk extended beyond the security property to all of the client’s other assets.
(ii)the value in monetary terms of their liability noting that there are additional interest and other charges included in the guarantee in addition to the principal sum;
(iii)the fact that the guarantor must be entering into the guarantee freely and voluntarily and without any undue influence from any other person;
(iv)the fact that she and the firm were unable to give financial advice about the borrower or the guarantor’s ability to meet the payments under the guarantee. As a consequence she would advise that the guarantor should obtain independent financial advice prior to signing the guarantee.
-read to the client what is usually an additional document which is required to be completed before signing the guarantee. (In the present case this would appear to be the Form of Acknowledgement – Business Guarantor set out in full above). Ms SS would then ask the client one final time whether they were content to enter into the guarantee based on the terms relevant to their particular guarantee. At this time, it was her practice to reiterate to them in very direct terms that by entering into the Guarantee they risked losing their security property and other assets. Further, that entering into a Guarantee is not something that she or the firm would recommend, however, that the client may wish to enter into the Guarantee after assessing all the risks involved and making their own commercial decision.
-finally, if the client wished to proceed and showed no indication of being unwilling to proceed the client would sign in the relevant places, she would ask them to sign the Understanding and Acknowledgement set out in full above and Ms SS would proceed to sign the Solicitors Certificate which I note is as follows:
SOLICITORS OR BARRISTERS CERTIFICATE
PART A
To:     WESTPAC BANKING CORPORATION
ABN […] (the “Bank”)
THIS CERTIFICATE IS PROVIDED BY:
[Ms SR] (Solicitor)
[Firm GC] [Firm GC’s address] in Tasmania
A solicitor currently entitled to practice in the jurisdiction of the governing law of the guarantee and indemnity referred to below and not acting for you or the Customer referred to below:
I HAVE BEEN ASKED TO INTERVIEW:
[The wife]
(the “Guarantor”)
I HAVE BEEN PROVIDED WITH THE FOLLOWING DOCUMENTS:
(1)Guarantee and Indemnity to the Bank in respect of money owed by [O Pty Ltd] ACN […] (the “Customer”)
(2)Offer of Loan between the Bank and Customer
(3)Mortgage over property situated at: [ … I Street, Suburb Z], Tasmania […]
(4)Memorandum registered number: […]
PART B
EXPLANATIONS GIVEN BY THE CERTIFYING SOLICITOR OR BARRISTER
I CERTIFY that in the absence of the Customer and before the Guarantor signed the documents
I EXPLAINED to the Guarantor:
·the general nature and effects of the documents required to be signed by the Guarantor;
·that if the Customer defaults in payment or in other obligations to you the Guarantor would be liable to make good that default which could involve all amounts owed by the Customer to you and substantial arrears of interest.
·that the giving of a guarantee involves considerable risk, including the risk of losing any security property and other assets and requires very careful thought.
PART C
EXCLUDED EXPLANATIONS
I INFORMED the Guarantor in very clear terms that I was not expressing any opinion nor advising on:
·the viability of the transaction which the Customer was undertaking; and
·the Guarantor’s ability to make the required payments to you.
I FURTHER INFORMED the Guarantor that if in any doubt on those aspects the Guarantor should obtain independent financial advice before signing the documents.
PART D
STATEMENTS BY THE PERSONS SIGNING DOCUMENTS
FOLLOWING THE ABOVE EXPLANATIONS, the Guarantor stated to me:
·that he/she/they understood the general nature and effect of the documents and the obligations and risks involved in signing those documents. It appeared to me that they did have such understanding; and
·that he/she/they were signing these documents freely, voluntarily and without pressure from the Customer or any other person.
PART E
IDENTIFICATION OF PERSONS SIGNING DOCUMENTS
The following evidence of identification was produced to me by the Guarantor viz.
(1)[…]: Drivers Licence of [the wife] expiry […] .2009
PART F
TRANSLATION/INTERPRETATION
An independent interpreter, Mr/Mrs/Ms
was present at this interview with the Guarantor and interpreted the statements made by all persons present. A certificate by the interpreter is held by me.
SOLICITOR’S OR BARRISTER’S CERTIFICATE
I CERTIFY the above information. The Customer was not present during my interview with the Guarantor.
SIGNED [signature]   (FIRM) [Firm GC]
DATED 7.11.08
Ms SS also said that there has been one occasion during her time in legal practice when she was engaged to give advice about a guarantee, when she declined to sign a Solicitor’s Certificate about guarantee advice. She said that this occurred when it was brought to her attention during a client interview that the client was not entering into the guarantee freely and voluntarily and did not fully understand the risks involved in giving a guarantee. Ms SS said that she was raising this incident because had there been any indication at all that the wife was not acting voluntarily, did not have full understanding of the guarantee or did not understand the risks involved in giving the guarantee she would not have proceeded to sign the Solicitor’s Certificate in this case.
Ms SS said that she was confident that she adopted her usual practice when she advised the wife on 7 November 2008, including giving her advice independently of the husband and the fact of the risk that she may lose her house offered as security and her other assets.
She said that she was confident of this because her notes were in the form in which she expected them to be when following that practice and the Understanding and Acknowledgement signed by the wife is the document she consistently used when giving guarantee advice.
I accept Ms SS’s evidence because I regard her as a witness of the truth, notwithstanding the following observations which I feel compelled to make about her conduct in relation to these proceedings.
Solicitors are officers of the Court. Their first and overriding duty is to the Court. When a subpoena to produce documents is properly served on a person, including a solicitor, the duty of that person is to act in accordance with the direction in the subpoena. There was no issue that the documents to be produced by the solicitors included Ms SS’s file notes in relation to the wife’s appointment for advice about the guarantee.
The original file note made in Ms SS’s handwriting would have been the best evidence of what transpired when Ms SS gave the wife advice on 7 November 2008. Yet Ms SS destroyed it after interpreting the note and preparing a typed version thereof. Accordingly, neither the Court nor the parties were able to have the benefit of this important evidence.
This was certainly not consistent with appropriate conduct by a solicitor and it must not happen again.
There was no suggestion that Ms SS acted in this manner for any improper purpose and I do not regard her conduct in such a manner.
For this reason, and because I regard her as a truthful witness, I do not propose to take this matter any further.

The law about unconscionability in this context

In Garcia v National Australia Bank Ltd (1998) 194 CLR 395 the High Court (Gaudron, McHugh, Gummow and Hayne JJ, Callinan J agreeing) confirmed the equitable principles set out in Yerkey v Jones (1939) 63 CLR 649. At page 403 the majority said:
[W]e consider that the principles spoken of by Dixon J in Yerkey v Jones are simply particular applications of accepted equitable principles which have as much application today as they did then.
And at pages 404 and 405 as follows:
[23] In his reasons for decision in Yerkey v Jones, Dixon J dealt with at least two kinds of circumstances: the first in which there is actual undue influence by a husband over a wife and the second, that dealt with in Mueller, in which there is no undue influence but there is a failure to explain adequately and accurately the suretyship transaction which the husband seeks to have the wife enter for the immediate economic benefit not of the wife but of the husband, or the circumstances in which her liability may arise. The former kind of case is one concerning what today is seen as an imbalance of power. In point of legal principle, however, it is actual undue influence in that the wife, lacking economic or other power, is overborne by her husband and goes surety for her husband's debts when she does not bring a free mind and will to that decision. The latter case is not so much concerned with imbalances of power as with lack of proper information about the purport and effect of the transaction. The present appeal concerns circumstances of the latter kind rather than the former.
[24] In Yerkey v Jones Dixon J said:
“But it is clearly necessary to distinguish between, on the one hand, cases in which a wife, alive to the nature and effect of the obligation she is undertaking, is procured to become her husband's surety by the exertion by him upon her of undue influence, affirmatively established, and on the other hand, cases where she does not understand the effect of the document or the nature of the transaction of suretyship. In the former case the fact that the creditor, on the occasion, for example, of the actual execution of the instrument, deals directly with the wife and explains the effect of the document to her will not protect him. Nothing but independent advice or relief from the ascendancy of her husband over her judgment and will would suffice. If the creditor has left it to the husband to obtain his wife's consent to become surety and no more is done independently of the husband than to ascertain that she understands what she is doing, then, if it turns out that she is in fact acting under the undue influence of her husband, it seems that the transaction will be voidable at her instance as against the creditor.”
Of the second of the two cases that we have referred to earlier, Dixon J said:
“In the second case, that where the wife agrees to become surety at the instance of her husband though she does not understand the effect of the document or the nature of the transaction, her failure to do so may be the result of the husband's actually misleading her, but in any case it could hardly occur without some impropriety on his part even if that impropriety consisted only in his neglect to inform her of the exact nature of that to which she is willing blindly, ignorantly or mistakenly to assent. But, where the substantial or only ground for impeaching the instrument is misunderstanding or want of understanding of its contents or effect, the amount of reliance placed by the creditor upon the husband for the purpose of informing his wife of what she was about must be of great importance.
If the creditor takes adequate steps to inform her and reasonably supposes that she has an adequate comprehension of the obligations she is undertaking and an understanding of the effect of the transaction, the fact that she has failed to grasp some material part of the document, or, indeed, the significance of what she is doing, cannot, I think, in itself give her an equity to set it aside, notwithstanding that at an earlier stage the creditor relied upon her husband to obtain her consent to enter into the obligation of surety. The creditor may have done enough by superintending himself the execution of the document and by attempting to assure himself by means of questions or explanation that she knows to what she is committing herself. The sufficiency of this must depend on circumstances, as, for example, the ramifications and complexities of the transaction, the amount of deception practised by the husband upon his wife and the intelligence and business understanding of the woman. But, if the wife has been in receipt of the advice of a stranger whom the creditor believes on reasonable grounds to be competent, independent and disinterested, then the circumstances would need to be very exceptional before the creditor could be held bound by any equity which otherwise might arise from the husband's conduct and his wife's actual failure to understand the transaction: Cf per Cussen J. If undue influence in the full sense is not made out but the elements of pressure, surprise, misrepresentation or some or one of them combine with or cause a misunderstanding or failure to understand the document or transaction, the final question must be whether the grounds upon which the creditor believed that the document was fairly obtained and executed by a woman sufficiently understanding its purport and effect were such that it would be inequitable to fix the creditor with the consequences of the husband's improper or unfair dealing with his wife.
[25] Thus, Dixon J was dealing with two kinds of case. In the former, the case of actual undue influence, as Dixon J says, explaining the effect of the document to the surety will not protect the creditor and “[n]othing but independent advice or relief from the ascendancy of her husband over her judgment and will would suffice”.^{- 03-01782fn025#03-01782fn025} In the latter, “[i]f the creditor takes adequate steps to inform [the wife] and reasonably supposes that she has an adequate comprehension of the obligations she is undertaking and an understanding of the effect of the transaction, the fact that she has failed to grasp some material part of the document, or, indeed, the significance of what she is doing” cannot give her an equity to set the instrument aside.

At pages 408 and 409 the majority said:
[31] The principles applied in Yerkey v Jones do not depend upon the creditor having, at the time the guarantee is taken, notice of some unconscionable dealing between the husband as borrower and the wife as surety. Yerkey v Jones begins with the recognition that the surety is a volunteer: a person who obtained no financial benefit from the transaction, performance of the obligations of which she agreed to guarantee. It holds, in what we have called the first kind of case, that to enforce that voluntary transaction against her when in fact she did not bring a free will to its execution would be unconscionable. It holds further, in the second kind of case, that to enforce it against her if it later emerges that she did not understand the purport and effect of the transaction of suretyship would be unconscionable (even though she is a willing party to it) if the lender took no steps itself to explain its purport and effect to her or did not reasonably believe that its purport and effect had been explained to her by a competent, independent and disinterested stranger. And what makes it unconscionable to enforce it in the second kind of case is the combination of circumstances that:
(a) in fact the surety did not understand the purport and effect of the transaction;
(b) the transaction was voluntary (in the sense that the surety obtained no gain from the contract the performance of which was guaranteed);
(c) the lender is to be taken to have understood that, as a wife, the surety may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and yet
(d) the lender did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her.
[32] To hold, as Yerkey v Jones did, that in those circumstances the enforcement of the guarantee would be unconscionable represents no departure from accepted principle. Rather, it “conforms to the fundamental principle according to which equity acts, namely that a party having a legal right shall not be permitted to exercise it in such a way that the exercise amounts to unconscionable conduct”.
[33] It will be seen that the analysis of the second kind of case identified in Yerkey v Jones is not one which depends upon any presumption of undue influence by the husband over the wife. As we have said, undue influence is dealt with separately and differently. Nor does the analysis depend upon identifying the husband as acting as agent for the creditor in procuring the wife's agreement to the transaction. Rather, it depends upon the surety being a volunteer and mistaken about the purport and effect of the transaction, and the creditor being taken to have appreciated that because of the trust and confidence between surety and debtor the surety may well receive from the debtor no sufficient explanation of the transaction's purport and effect. To enforce the transaction against a mistaken volunteer when the creditor, the party that seeks to take the benefit of the transaction, has not itself explained the transaction, and does not know that a third party has done so, would be unconscionable.
[34] We acknowledge that the statement that enforcement of the transaction would be “unconscionable” is to characterise the result rather than to identify the reasoning that leads to the application of that description. But that the description of “unconscionable” can and should be applied in these circumstances is supported by reference to other circumstances in which that description has been applied.
…
[36] In addition, some comparison can be drawn between the refusal to permit enforcement of the guarantee in the circumstances identified in Yerkey v Jones and the equally well recognised and long established principles which would preclude enforcement of a guarantee in some cases where the creditor has not disclosed to the intending surety some features of the transaction.
[37] We do not pause to attempt to specify what features of such a transaction should be identified by the creditor to the surety and we are not to be taken as suggesting that the principles dealt with in Yerkey v Jones are to be seen as no more than some particular application of these rules. Nevertheless, the intervention of equity in cases of that kind may also be seen as rooted in the conclusion that to permit enforcement of the guarantee against a mistaken surety (mistaken in that kind of case because the creditor should have, but did not, inform the surety of some particular fact) would be unconscionable.
[38] No doubt these cases are no more than analogies. They are not to be treated as defining what is meant by “unconscionable” or as, in some way, governing the present circumstances. They are, however, useful illustrations of why the enforcement of the guarantee in this case would be unconscionable.
And then at page 411 the majority said as follows:
[41] As is apparent from what was said in Yerkey v Jones the creditor may readily avoid the possibility that the surety will later claim not to have understood the purport and effect of the transaction that is proposed. If the creditor itself explains the transaction sufficiently, or knows that the surety has received “competent, independent and disinterested” advice from a third party, it would not be unconscionable for the creditor to enforce it against the surety even though the surety is a volunteer and it later emerges that the surety claims to have been mistaken.

The present case

In applying these principles to the present case, I accept the submission by learned counsel for the wife that the wife was a volunteer in this transaction. That is, she was offering her home as security for the guarantee without any real benefit from her entering into the transaction.
So Westpac had an obligation to explain sufficiently to the wife, or to satisfy itself on reasonable grounds that the wife had received competent, independent and disinterested advice sufficient for the wife to understand the transaction and its possible impact on her, in order to be able to enforce its guarantee from her. In the event that Westpac failed in this regard then the equitable principles confirmed in Garcia would enable the guarantee to be set aside.
At this point I pause to note some of the circumstances in which courts have set aside the relevant transaction in accordance with these equitable principles.
In Garcia itself, the guarantor wife did not understand the purport or effect of the transaction. She understood it was a guarantee but thought it was a guarantee of limited overdraft accommodation to be applied only for the purchase of gold. She was also mistaken because she failed to understand that her obligations under the guarantee were secured by the mortgage she had given over her home.
She signed the guarantee documents at places to which the bank officer pointed in a process which took less than a minute and included no explanation of the transaction. There was no independent advice to the wife.
The High Court held that enforcement of the guarantee would be unconscionable.
In State Bank v Sullivan [1997] NSWSC 596 James J found that the Bank knew, or ought to have known, that the entity in respect of whose indebtedness the guarantor, Mr Sullivan, was giving a guarantee and mortgage was in a very serious state of indebtedness and that accordingly, he was taking a serious risk in doing so. Also, Mr Sullivan was mistaken in thinking that he was giving a mortgage only for six months whereas it was for an indefinite period. James J found that the transaction had not been shown to be fair, just and reasonable.
In Ribchenkov and Suncorp-Metway Limited (2000) 175 ALR 650; [2000] FCA 835 Spender J found that a woman who had offered her home as security for a loan to her daughter and son-in-law was under a special disability in relation to the creditor bank because of her age, lack of English and general ignorance of legal matters. This disability was known to the bank yet when extensions to the original loan were made, she was not advised by the bank to obtain independent legal advice in respect of the new transactions which she would not have understood. It was held that in those circumstances it would be unconscionable to permit the bank to enforce remedies in relation to those transactions.
In the present case, it was submitted on behalf of Westpac that the wife could only make out her case if she satisfied the Court that Mr P conducted himself in the manner alleged by her. That is, that he explained the guarantee and related documents in a flippant manner, without due regard to the seriousness of the transaction and possible consequences for the wife and by informing her that she would not lose her home.
As indicated above, I prefer the evidence of Mr P in respect of these matters over that of the wife. Accordingly, in my view, the wife has failed to make out this aspect of her case.
But, in my view, Westpac would also have to be able to demonstrate that it was satisfied on a proper basis that the wife had received the “competent, independent and disinterested” advice from a third party as referred to in Garcia.
Despite some criticism by learned counsel for the wife of Ms SS’s advice, I am satisfied that she gave appropriate legal advice to the wife and that she took appropriate steps by removing the wife from the presence of the husband to provide this independently from the husband, and to take the wife through the relevant documents at a place removed from the presence of the husband.
Even if I am wrong about this, I note that in Ribchenkov Spender J referred to the following statement by Simon Brown LJ in Barclays Bank Pty Ltd v Thomson [1997] 4 All ER 816 at p 821:
The starting point for consideration of these rival arguments must be the trilogy of recent Court of Appeal decisions which clearly establish a bank’s entitlement to rely upon a solicitor’s certificate that proper advice has been given to the signatory of a relevant instrument even though that solicitor acts principally for the very person against whose undue influence the signatory must be guarded …
“… Was it reasonable to expect a solicitor, in explaining the nature and effect of the document, to give appropriate advice? In my view it was. It is an ordinary incident of a solicitor's duty to explain the obvious potential pitfalls of legal transactions to those about to take part in them …
Spender J went on to say:
Second, this from Hoffman LJ's judgment in [Bank of Barodda vRayarel [1995] 2 FLR 376] at 386:
“If a prospective surety deals with a bank through a solicitor, the bank is entitled to assume that the solicitor has given her appropriate advice. If there is a possibility of a conflict of interest between the surety and the other parties whom the solicitor is also advising, the bank is entitled to assume that the solicitor will have told her that she was entitled to take independent advice. The bank's legal department is not obliged to commit the professional discourtesy of communicating directly with the solicitor's client and tendering such advice itself. Nor is it obliged to inform the solicitor of his professional duties. This will be a fortiori the case when the documents submitted by the bank to the surety's solicitor contain a certificate that she has been advised of the effect of the document and her right to have independent legal advice. The bank was therefore not in the circumstances fixed with constructive notice of the undue influence which the judge found to have been exerted by the husband.”
It is true that Spender J went on to consider certain observations made by King CJ in McNamara v Commonwealth Trading Bank (1984) 37 SASR about the duty of a solicitor to a client who consults the solicitor for advice about signing a guarantee. These include the prudence of entering into the guarantee from a practical point of view and numerous other matters. I must say these matters appear to me to relate more to the question of the solicitor’s duty to the client than the context of what is required in order for a bank in the position of Westpac in the present proceedings being able to be properly satisfied that a guarantor has received appropriate independent advice.
There was a further submission about unconscionability. This was to the effect that when Westpac increased the loan to $433 000 in January 2009 it simply wrote to the wife seeking her agreement to increasing the loan and advised her to seek independent legal and financial advice before signing the relevant document.
It was submitted that Westpac should have been satisfied that the wife had received independent legal advice about this matter.
I am not persuaded by this submission. In my view, on the basis of all the relevant evidence in this case, including the fact that the wife was intimately involved in the financial management of the business and also the earlier advice she had received from Ms SS, the wife could not have been mistaken about the effect of the transaction.
In all the circumstances, I am not persuaded that there is any basis for this Court to find that it would be unconscionable for Westpac to be permitted to exercise its rights under the guarantee and the mortgage.
Finally, there was a submission on behalf of the wife that Westpac through Mr P had engaged in misleading conduct pursuant to the provisions of the Trade Practices Act 1974 (Cth). But this submission relied on the Court finding some impropriety in the conduct of Mr P. For the reasons set out above, I do not regard Mr P’s conduct as being other than appropriate.
Accordingly, in my view, the wife’s claim against Westpac must fail.
I now turn to consider the proceedings pursuant to s 79 of the Act.

The Applicable Law

Sub-section 79(1) of the Act provides that in property settlement proceedings, the Court may make such order as it considers appropriate.
Sub-section 79(2) provides that the Court shall not make an order under the above sub-section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
There is a long-standing preferred approach to the determination of property applications. This involves four inter-related steps. Firstly, the Court should make findings about the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of s 79(4) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should consider the effect of any proposed order upon the earning capacity of either party, the relevant matters in s 75(2), any other order made under the Act affecting a party or child and any child support that a party has provided or for which a party might be liable. The Court is to determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of its findings and determination and resolve what order is just and equitable in all the circumstances of the case.
This approach has been confirmed in numerous cases in this Court including for example Lee Steere and Lee Steere (1985) FLC 91-626; Ferraro and Ferraro (1993) FLC 92-335; Hickey and Hickey (2003) FLC 93-143; 30 Fam LR 355; Coghlan and Coghlan (2005) FLC 93-220; 32 Fam LR 414 and Clauson and Clauson (1995) FLC 92-595; 18 Fam LR 693.

Property available for division

There are three matters which require comment in relation to the property which is available for division between the parties.
Firstly, it is common ground that in November 2009 there was a balance of $71 950 in the wife’s Commonwealth Bank Account. It is not clear to me what the source of those funds was. I presume that at least part of this was produced by the sale by the wife of the boat, motor and trailer for approximately $56 000. If I am not correct about this, it must still be the case that the source of the major part of these funds was the wife’s property in some shape or form because there was no other source from which the funds could have emanated.
The wife said that she has disbursed these funds, mainly in the repayment of loans made to her by her former husband and in meeting living expenses. The wife has not put material before the Court to support her assertions in this regard. And, as indicated above, I have reservations concerning the reliability of much of the wife’s evidence. But even if the real position is that the wife still has access to much of this money, in my view, this would make little or no difference to the overall result in the case. This is because the source of most of the money was almost certainly the wife’s property and the period of cohabitation of the parties is so short.
Another matter for comment is that I am not sure what happened to the proceeds of sale of the Mitsubishi motor vehicle. But presumably either they have been disbursed or are reflected in the wife’s property.
The last matter for comment is that it was submitted on behalf of the wife that there should be included in the pool of available property $18 000 to take account of money spent on sports equipment for the husband and his son. I do not accept this submission. I accept that approximately this amount was spent in this manner. But the major part of this money was to fund a gift to the husband’s son. And there is no evidence what the current value of any such equipment in the possession or control of the husband might be. In any event inclusion of some value for such property would be unlikely to make much difference to the result of these proceedings. Having said this, I do propose to take account of this expenditure pursuant to s 75(2)(o) below.
The property and superannuation available for division between the parties consists of the following:-

$

1.         Wife’s home at I Street, Suburb Z

        630 000

2.         Mitsubishi motor vehicle in wife’s possession

          30 000

3.         Wife’s Wellington Capital investment

          11 000

4.         Wife’s household contents and personal property

          10 000

5.         Wife’s IOOF Superannuation

          31 400

6.         Husband’s household contents and personal property

            5 000

7.         Husband’s R superannuation benefit

        223 728

8.         Husband’s R Investment Account (superannuation)

          41 085

^{_____________}

      $982 213

The liabilities are as follows:-

$

1.         Westpac Banking Corporation mortgage

         350 000

2.         Wife’s Commonwealth Bank Mastercard

           21 000

3.         Wife’s Coles Group Mastercard

             3 150

4.         Husband’s liabilities

           22 000

^{_____________}

       $396 150

  Surplus

       $586 063

Contributions

As indicated above, at the time the parties commenced cohabitation, there was a substantial disparity in their ownership of property. The wife owned the overwhelming amount of the available property and superannuation.
Her property consisted of her home subject to a mortgage, her land at Suburb X, a motor vehicle, significant savings, her household contents, her personal property and a superannuation interest.
On the other hand, the husband had a significant interest in his superannuation fund but he also had liabilities in excess of $50 000.
The husband continued working in his full time employment in the public service throughout the period of cohabitation and marriage. He directed his salary to be deposited into the wife’s Commonwealth Bank cash management account which both he and the wife operated. The parties used this account to pay their household and other expenses.

The wife continued working until just before the parties’ marriage.
Both parties worked hard in their hospitality business.
Both the husband and the wife made significant contributions to the welfare of their family comprising themselves, the wife’s two boys and the husband’s son C. Despite the wife being somewhat critical of the husband for not assisting her sons as much as she might have liked, I am satisfied that he did assist in their care. For example during the September 2007 school holidays the husband took leave from work and cared for the boys while the wife worked. And it was common ground that the husband did a lot of cooking for the family.
As indicated above, these parties had a short period of cohabitation and marriage up to their separation, of less than two years. The wife brought into the marriage substantial assets. The husband had his superannuation but he also had liabilities which the wife paid on his behalf, as I have said.
There can be no doubt that the wife has made the overwhelming financial contributions and she has made at least as significant contributions as the husband in the other relevant areas.
In all the circumstances I assess the parties’ contributions overall as having been 85% by the wife and 15% by the husband.

Section 75(2) matters

The wife is 48 years of age and there are some serious problems in terms of her health as indicated above.
The wife is working part time in a design field, usually between 15 and 25 hours per week. I am not sure about the current level of her income. But it consists of her wages from her part time employment, the Family Tax benefit and child support received from her former husband Mr MM for the two boys. She has income protection insurance which pays approximately 75% of her normal wage if she is ill and unable to work. In her financial statement the wife estimated that she had a modest surplus of income compared with her expenditure of a few hundred dollars per week.
I must say I have some reservations about the extent of the income-earning capacity of the wife into the future because of what, in my view, must be regarded as some vulnerability in her health.
On the other hand, the husband is 54 years of age. He had a serious operation a few years ago for an aneurism. But he appears to have made a good recovery and there was no evidence before the Court to indicate that he is in other than good health.
The husband’s income is $1 583 per week from his full time employment with the public service. I am satisfied that the husband is able to live within his means. He would appear to have the capacity to earn income at his present level for many years. In my view, the husband must be regarded as having a far stronger capacity for earning income than the wife.
The wife has the major responsibility for parenting her two sons. This is an especially onerous responsibility because they have special needs. B has been diagnosed as having Attention Deficit Hyper-activity Disorder and high-functioning Autism. He engages in extremely anti-social behaviour including acts of violence against his mother. Both boys have congenital hearing loss and wear bi-lateral hearing aids.
The wife receives child support of approximately $425 per week from the boys’ father.
The husband’s son C lives with him. C is apparently in receipt of a low income and relies on his father for support, to some extent.
The most significant matter under s 75(2) of the Act, is the fact of the outstanding loan from Westpac and the quantum of this. As indicated above, the husband is bankrupt. A practical consequence of this is that Westpac would not be likely to pursue its rights under the guarantee the husband gave to it for the amount owing to Westpac on the loan. So one would expect Westpac would be likely to exercise its rights against the wife pursuant to the guarantee she has given and under the mortgage secured against her home. This is because Westpac would be able to take possession of the wife’s home, sell it and recover the entirety of what it is owed by the husband’s corporation under the loan agreement. This is relevant pursuant to s 75(2)(o) of the Act because the justice of the case requires this matter to be taken into account.
In my view, it would be most unfair for the wife to have to bear the totality of the indebtedness to Westpac. And it would be most unfair for the husband to escape his reasonable responsibility for sharing the consequences of the failure of the business.
There is another matter which is also relevant pursuant to s 75(2)(o) of the Act, in my view. This is the very high level of expenditure of the wife’s capital in the short time that the parties lived together. There was a very strong submission to the effect that the Court should take this into account. I accept this submission. As indicated above, at the outset of the parties’ cohabitation the wife paid off the husband’s liabilities of approximately $50 000. Then she funded his operation which cost her approximately $10 500. Against this background, and bearing in mind the level of income coming into the household, in my view, to have spent the amount of money expended on high-technology sports equipment, an overseas honeymoon, an expensive motor vehicle and an expensive boat, motor and trailer must be regarded as luxurious, extravagant and quite out of proportion with a reasonable standard of living commensurate with the level of income available to sustain the household.
This is not to suggest that the wife ought to be absolved from all financial responsibility for such spending. But in my view, it would be unjust for the wife to have to bear the entire financial cost of such extravagance. In my view the husband should also be required to accept his fair share of the financial responsibility for this.
In my view, this is a case in which it would be somewhat artificial to make an adjustment of property in a particular percentage amount taking account of s 75(2) matters. I propose to make an adjustment in order to achieve what I regard as an appropriate result and one which in my view will achieve a just and equitable order.
There is an amount of approximately $350 000 (probably more) owing to Westpac. In my view both parties should bear this loss. And as indicated above, not only the wife should bear the cost of their extravagant spending. Some of this should be sheeted home to the husband in a real manner.
But the only asset which the husband has from which his share of the liability could ultimately be satisfied, is his interest in his superannuation. The wife seeks an order which would split his interest in his superannuation almost entirely in her favour. In my view, in the circumstances of this case, an order to split the husband’s superannuation interest largely in favour of the wife would be just and equitable.
In reaching this view I have not overlooked the very strong submission by the husband that he has been building his superannuation for 26 years and he is most desirous of retaining as much of this as possible to provide for his retirement. He is concerned that at his age of 54 years he will have fewer working years in front of him during which to contribute to superannuation than he has had to this point in his working life.
I understand the husband’s concern. But it is one of many matters which the Court has to take into account in arriving at what will be just and equitable.
As also indicated above, the wife also asked the Court to consider the possibility of making an order to the effect that the husband be required to pay to the wife a periodic amount which she could use to assist her in repaying the business loan. The amount sought was $1 000 per month.
I have decided not to make such an order but rather to make an order against the husband’s superannuation. The husband was strongly opposed to the making of any periodic order. He said that he was having difficulty in paying his living costs as well as ongoing payments to the Official Receiver in Bankruptcy. It appears to me also that such an order might complicate matters relating to the husband’s bankruptcy. In any event, s81 of the Act requires the Court as far as practicable to make such orders as will finally determine the financial relationships between the parties and avoid further proceedings between them. In my view, it would not assist the parties to leave them in a situation where their financial relationship was not finalised and there remained a possibility for some enforcement or other proceedings related to a periodic order.

Conclusion and fourth step

I propose to make an order which will have the effect of splitting the husband’s interest in his Superannuation Fund so that the wife will be allocated a base amount of $220 000 in the Fund. This would leave approximately $44 000 in the Fund for the husband. I appreciate that there are limited circumstances for early distributions under the rules of the Fund and that the wife might well be unlikely to be able to access this money until she attains 60 years of age, still approximately 12 years into the future. I am also only too aware that the wife will almost certainly have to bear the loss of her home, possibly being left with only a modest amount of what would remain of the proceeds of sale thereof after Westpac has taken its share.
On the other hand, the husband will be virtually without any assets apart from what will be a modest interest in his superannuation. But he has secure employment which offers regular, continuing income and opportunity to build his superannuation.
Both parties will be likely to be facing difficult years ahead for some time in relation to their financial circumstances.

I certify that the preceding two hundred and twenty six (226) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johnston delivered on 2 March 2012.

Associate:

Date: 2 March 2012

$
1. Wife’s home at I Street, Suburb Z	630 000
2. Mitsubishi motor vehicle in wife’s possession	30 000
3. Wife’s Wellington Capital investment	11 000
4. Wife’s household contents and personal property	10 000
5. Wife’s IOOF Superannuation	31 400
6. Husband’s household contents and personal property	5 000
7. Husband’s R superannuation benefit	223 728
8. Husband’s R Investment Account (superannuation)	41 085
^{_____________}
$982 213

$
1. Westpac Banking Corporation mortgage	350 000
2. Wife’s Commonwealth Bank Mastercard	21 000
3. Wife’s Coles Group Mastercard	3 150
4. Husband’s liabilities	22 000
^{_____________}
$396 150
Surplus	$586 063