Beatty and Beatty
[2017] FCCA 463
•13 April 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BEATTY & BEATTY | [2017] FCCA 463 |
| Catchwords: FAMILY LAW – Property settlement – constitution of the asset pool – assessment of contribution and future needs – where the Husband was a cocaine user – where issues about credibility of both parties. |
| Legislation: Family Law Act 1975, ss.75, 79 |
| Cases cited: Bevan & Bevan [2013] FamCAFC 116 Hickey & Hickey & Attorney General for the Commonwealth of Australia [2003] FamCA395 |
| Applicant: | MS BEATTY |
| Respondent: | MR BEATTY |
| File Number: | WOC 1073 of 2015 |
| Judgment of: | Judge Altobelli |
| Hearing dates: | 1 and 2 March 2017 |
| Date of Last Submission: | 2 March 2017 |
| Delivered at: | Wollongong |
| Delivered on: | 13 April 2017 |
REPRESENTATION
| Solicitors for the Applicant: | Hansons Lawyers |
| Solicitor Advocate for the Applicant: | Mr David |
| Counsel for the Respondent: | Mr S Schonnell |
| Solicitors for the Respondent: | Nikolovski Lawyers |
ORDERS
The wife shall pay to the Nikolovski Lawyers Trust Account BSB (omitted) Account Number (omitted) the sum of $112,491 within ten (10) weeks of the date of these Orders PROVIDED HOWEVER that if the wife shall fail to pay the said sum to the husband within ten (10) weeks of the date of these Orders she shall in addition thereto pay interest on such sum as may be outstanding at the rate specified in the Family Law Rules as varied from time to time and calculated on a daily basis from the due date for payment until the actual date of payment.
Immediately upon receipt of the said sum of $112,491 together with interest thereon, if applicable, the husband shall do all such things and sign all such deeds, documents and instruments as may be necessary to transfer to the wife all his right title and interest in the property situate at and known as Property B (“the Property B property”).
That simultaneously with the said transfer referred to in Order 2 above, the wife shall do all such acts and things and sign all such deed, documents and instruments as may be necessary to refinance the existing mortgage to the (omitted) Bank secured over the Property B property into her sole name PROVIDED HOWEVER that the husband shall sign the appropriate discharge authority within seven days of same being submitted to him.
In the event that the wife fails or neglects to pay to the Nikolovski Lawyers Trust Account BSB (omitted) Account Number (omitted) the said sum of $112,491 together with interest thereon as provided in Order 3 above within ten (10) weeks from the date of these Orders, then in that event, the parties shall forthwith thereafter join in the sale and do all such acts and things and shall execute all such deed, documents and instruments as may be necessary to list for sale and sell the said Property B property for a price and with an agent to be agreed upon between the parties.
For the purposes of Order 4 herein:-
(a)In the absence of agreement as to the agent retained to market and sell the Property B property for more than fourteen (14) days, the agent shall be appointed by the Real Estate Institute of New South Wales.
(b)In the absence of agreement as to the price at which to market the property for sale for more than fourteen (14) days, the price shall be that determined by an independent valuer agreed upon between the parties, and failing agreement as to a valuer for more than a further fourteen (14) days, the valuer shall be appointed by the Australian Property Institute, and the valuer’s determination shall be final and binding upon the parties.
(c)That in the event that the Real Estate Institute of New South Wales, the independent valuer or the Australian Property Institute requires payment of their fees prior to the settlement of the sale of the former matrimonial home, then in that event, the cost associated with the same shall be borne equally by the parties, and if one party bears the entire cost in the first instance, that party shall be reimbursed as to fifty percent (50%) of the amount paid by the first party by the other party from the latter’s share of the net proceeds of sale.
Upon the completion of the sale of the Property B property in accordance with Order 4 herein above the parties shall distribute the proceeds of sale, in the following order and priority:-
(a)In discharge of the mortgage presently encumbering the former matrimonial home with the (omitted) Bank;
(b)In discharge of any outstanding Council and Water Rates;
(c)In payment of Real Estate Agent’s proper commission arising from the sale;
(d)In payment of proper legal costs and expenses arising from the sale;
(e)In payment of any other expenses which may have been reasonably incurred in respect of such sale, including valuer’s fees if appropriate;
(f)In payment of $112,491 of the balance then remaining plus any interest in accordance with Order 1 to the Husband, with such payment to be paid into the Trust Account of Nikolovski Lawyers BSB (omitted) Account Number (omitted) on the husband’s behalf;
(g)In payment of the balance then remaining to the Wife.
In the event a purchaser for the Property B property is not found within twelve (12) months of the date the property is listed for sale or as otherwise agreed, the parties shall do all acts and things and execute all such deeds, documents and instruments as may be necessary to list the property for sale by public auction at an agreed price.
For the purpose of the sale by auction as referred to in Clause 7 herein, Nikolovski Lawyers shall be appointed the conveyancers acting in relation to the sale.
In the event that the parties are unable to agree upon an auctioneer, the auctioneer shall be nominated by the Real Estate Agent marketing the property.
Upon completion of the sale by auction the proceeds of sale are to be distributed in accordance with Order 6(a) – (g) above.
For the purposes of Order 7 herein, the parties shall do all act and things necessary to cause the property to be sold by way of public auction on the following terms:
(a)That such an auction take place within six weeks from the date of placing the property for sale by public auction or as soon as practicable thereafter;
(b)That the agent be as agreed between the parties or failing agreement for more than seven (7) days, as appointed by the President for the time being of the Real Estate Institute – New South Wales Branch, whose decision shall be final and binding upon both parties.
(c)That the reserve price for such auction be as agreed between the parties or failing agreement for more than seven (7) days, as determined by the selling agent;
(d)That the parties pay all auction expenses as requested by the selling agent as and when they fall due;
(e)That the Wife shall do all such acts and things as may be necessary or recommended by the selling agent to properly present the property for sale and to make the property available for inspection by prospective purchasers;
(f)That the parties shall attend the auction and, if necessary, negotiate with the highest bidder at auction if the reserve price is not reached.
In the event that the property does not reach the reserve price and the parties are unable to negotiate an agreed sale price with the highest bidder at the auction referred to in clause 7 herein, then the parties shall do all acts and things and sign all such deeds, documents and instruments as may be necessary to cause the property to be sold by way of subsequent auction on the following terms:
(a)That the auction take place within six (6) weeks of the date of the last auction;
(b)That the agent be as agreed between the parties or failing agreement for more than seven (7) days, as appointed by the President for the time being of the Real Estate Institute – New South Wales Branch, whose decision shall be final and binding upon both parties.
(c)That the reserve price for such subsequent auction be an amount that is five percent (5%) lower than the previous reserve price;
(d)That the parties pay all auction expenses as requested by the selling agent as and when they fall due;
(e)That the Wife shall do all such acts and things as may be necessary or recommended by the selling agent to properly present the property for sale and to make the property available for inspection by prospective purchasers;
(f)That the parties shall attend the auction and, if necessary, negotiate with the highest bidder at auction if the reserve price is not reached.
In the event that the auction referred to at Clause 12 herein is unsuccessful, the property is thereafter to be listed for subsequent auctions in accordance with the provisions of Clause 12 herein.
Upon completion of the sale by auction the proceeds of sale are to be distributed in accordance with Order 6(a) – (g) above.
The wife do all acts and sign all documents necessary to ensure that the agent nominated to act in relation to the sale is instructed to liaise at all times and in all respects pertaining to the sale with both the husband and the wife, and that this instruction include but not be limited to relaying offers to purchase the property to both the husband and to the wife.
Within fifty-six (56) days of the date hereof, the wife shall do all acts and sign all documents necessary to refinance or transfer the Personal Loan with the (omitted) Bank in the joint names of the parties into her sole name, and that pending the same the wife indemnify the husband in relation to any contribution toward the payment of the same.
Within fifty-six (56) days of the date hereof, the wife shall do all acts and sign all documents necessary to refinance or transfer the Business Loan with the (omitted) Bank in the joint names of the parties into her sole name, and that pending the same the wife indemnify the husband in relation to any contribution toward the payment of the same.
Within fifty-six (56) days of the date hereof, the wife shall do all acts and sign all documents necessary to refinance or transfer any joint Personal Loan or Loans with the (omitted) Bank into her sole name, and that pending the same the wife indemnify the husband in relation to any contribution toward the payment of the same.
As between the Applicant Wife and the Respondent Husband and subject to the above Orders, the Applicant Wife and the Respondent Husband are to each respectively retain all interests and entitlements to:
(a)all personal property now in his/her respective possession or control;
(b)all shares, debentures, units in unit trust, bank, building society, credit union accounts in his/her sole name respectively; and
(c)all interest in life insurance policies, superannuation funds in his/her sole name respectively.
Unless otherwise expressly stated in these Orders each party is liable for the payment of any debt incurred in their sole name or jointly with another person or encumbering any property retained by the party in accordance with these Orders and is to indemnify and keep indemnified the other party in relation thereto.
Each party is to do all things necessary to give effect to these Orders in the time periods prescribed herein.
If either party refuses or neglects to execute any deed, document or instrument necessary to give effect to these Orders, the Registrar of the Court be appointed pursuant to section 106A of the Act to execute such deed, document or instrument in the name of the said party and to do all acts and things necessary to give validity and operation to the deed, document or instrument upon the Registrar being provided with verification of such refusal or failure by way of Affdavit.
IT IS NOTED that publication of this judgment under the pseudonym Beatty & Beatty is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT WOLLONGONG |
WOC 1073 of 2015
| MS BEATTY |
Applicant
And
| MR BEATTY |
Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for judgment explain the Orders made in a dispute between and a husband and wife about alteration about property interests, commonly known as a property settlement.
Background
The Applicant Wife is 44 years old and works in a number of positions involving largely unskilled work. The Respondent Husband is 43 years old and considers himself to be an unemployed (occupation omitted). They married in (country omitted) in 1993 at a time when, it is agreed, the Wife had about $10,000 in savings. In 1994 they came to Australia with the financial assistance of the Wife’s family. They both found work within a relatively short timeframe. They had 2 children, Mr A, who is now 19 years old, and Mr T who is 22 years old. Whilst both boys continue to live with their mother in what is the former matrimonial home, it is not suggested that they are dependent on her.
The former matrimonial home was, in fact, purchased in 1997 with the deposit coming from the Wife’s savings and the balance borrowed from a bank. The following year the Husband commenced fulltime employment as a (occupation omitted) in a (employer omitted) in a neighbouring suburb. In about 2003 he established his own (business omitted) in which he worked fulltime. The Wife often also worked in the business attending to the office work. In addition, the Husband earned extra income playing in a band.
In about 2005 the parties bought a block of land in the (omitted) and a few years later another property. As regards the latter property the Wife’s father provided funds which were eventually repaid.
There were a number of what turns out to be controversial financial transactions in the ensuing years, and, where relevant, these will be discussed in detail below. Another contentious issue between the parties was when, precisely, the Husband’s agreed addiction to cocaine commenced. He certainly concedes it commenced in 2011, but the Wife believes it started much earlier. He was charged and convicted of various drug offences and initially placed on a bond and ordered to undertake community service. He apparently breached his community service order and was then imprisoned for a period. The (omitted) business operated by the Husband closed in 2013 and the investment property acquired by the parties, other than the former matrimonial home, was sold. There is an issue about the application of the sale proceeds.
The parties separated in June 2015. Initially, the Husband remained in the home but eventually he left. The Wife continues to reside in the home, and has taken on responsibility for payment of all of the outgoings relating to the property.
The present proceedings were commenced in 2015. When the matter first came before the Court in January 2016 the Husband did not appear. Eventually, the matter was set down for an undefended hearing on 7 April 2016. The Husband then appeared in person. He was directed to file and serve his evidence, and the matter stood over to 2 August 2016. However, there was no appearance by the Respondent on that date, and he had not complied with the directions made earlier. The matter was adjourned to 28 September 2016 for undefended hearing. By this date the Husband had complied with directions, and the matter was referred to a conciliation conference which, regrettably, did not result in a settlement.
The orders proposed by each party both contemplated that the Wife would be able to retain the former matrimonial home subject to payment of an amount to the Husband. She proposed that this amount be just under $60,000. He proposed that the amount should be about $208,000. The polarisation of these proposals merely reflected the parties’ extremely polarised views about their case.
The issues
By the time of closing submissions on day 2 of the hearing the following issues were identified as requiring adjudication by the Court:
a)The constitution of the asset pool and, in particular, whether, and to what extent, funds should be added back into the pool to reflect moneys that the Wife, in fact, controlled, even if not disclosed by her.
b)The Wife contended that contributions should be assessed in her favour in the range of 70-75 per cent. The Husband contended it should be equal.
c)Whether there should be an adjustment under s.75(2) of the Act? The Wife contended that if she received the contribution as she submitted there would be no adjustment under s.75(2) in favour of either party. The Husband contended that there should be a s.75(2) adjustment in his favour, perhaps of about 2 per cent.
Another major issue became apparent as soon as both parties stepped into the witness box to give their evidence. Credit issues loom large in this case. Neither party was an impressive witness. Both were poor historians about financial matters. Neither made concessions about the contribution that the other clearly made during their relationship. Both parties seemed fixated on aspects of the other’s conduct during the relationship that clearly distorted any sensible, or reasonable, thinking about the case.
Thus, for example, the Husband seemed fixated in his belief that the Wife had an affair and was actively hiding money from him, and the Wife was fixated on the Husband’s alleged drug abuse which was draining their financial resources. As it turns out, and only after much forensic examination, the Court will conclude that there is indeed substance in the Husband’s concern that the Wife was dissipating assets, and there is substance in the Wife’s concerns that the Husband’s drug addiction was being funded from matrimonial funds.
The parties’ mutual obfuscation made it much harder for the Court to determine their property settlement. This should have been a simple case, but the parties made it unnecessarily complex as a result of their poor behaviour. On any objective overview of the evidence they both worked hard during their relationship, successfully raising a family, at least until the Husband’s drug addiction began to overtake his life. There is a sense in which the Wife may well have seen the downward trajectory of the Husband’s life and, thus, the family life, and took matters into her own hands seeking to manipulate the finances with the intention of protecting what little funds were left from what she perceived as the Husband’s illicit waste.
Both were thoroughly unimpressive witnesses during cross-examination. Both were unresponsive. Both were evasive at times. The Wife changed her evidence about financial matters several times. It was simply not possible to “pin her down” on important aspects of the financial history of the parties. Regrettably, the situation goes beyond merely allowing for memory lapses during the course of what, no doubt, was a stressful case. Her unreliability as regards financial matters leads the Court to conclude that, unless a relevant assertion is supported by independent corroborative evidence, the Wife’s assertion cannot be accepted.
The situation was no better for the Husband. He was plainly disingenuous about when his drug addiction commenced, its nature and extent, as well as its financial impacts. Other than forming the impression that the Husband’s drug use was a significant drain on the parties’ financial circumstances over a number of years, it is simply not possible for the Court to quantify the impact of this. A clear theme of the Wife’s evidence, indeed of her case, was that she lost trust in her husband. This was advanced almost as justification for her manipulation of the parties’ financial affairs. Regrettably, she allowed this to descend to non-disclosure during the course of the present proceedings.
The Evidence
The Applicant relied on the following material:
a)Affidavit of Ms Beatty sworn 20 February 2017
b)Financial Statement of Ms Beatty sworn 20 February 2017
c)Amended Initiating application filed 20 February 2017
The Respondent relied on the following material:
a)Amended Response to Initiating Application filed 20 February 2017
b)Affidavit of Mr Beatty filed 20 February 2017.
c)Updated Financial Statement of Mr Beatty filed 20 February 2017.
The Applicable Law
This is an application under s.79 of the Family Law Act 1975 which relevantly provides:
Alteration of property interests
(1) In property settlement proceedings, the court may make such order as it considers appropriate:
(a) in the case of proceedings with respect to the property of the parties to the marriage or either of them--altering the interests of the parties to the marriage in the property; or
(b) in the case of proceedings with respect to the vested bankruptcy property in relation to a bankrupt party to the marriage--altering the interests of the bankruptcy trustee in the vested bankruptcy property;
including:
(c) an order for a settlement of property in substitution for any interest in the property; and
(d) an order requiring:
(i) either or both of the parties to the marriage; or
(ii) the relevant bankruptcy trustee (if any);
to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.
(2) The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d) the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
Section 79(4) incorporates the provisions contained in s.75(2) of the Act, which states:
(2) The matters to be so taken into account are:
(a) the age and state of health of each of the parties; and
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain; and
(e) the responsibilities of either party to support any other person; and
(f) subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(ha) the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant; and
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
(k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l) the need to protect a party who wishes to continue that party's role as a parent; and
(m) if either party is cohabiting with another person--the financial circumstances relating to the cohabitation; and
(n) the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party; and
(naa) the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:
(i) a party to the marriage; or
(ii) a person who is a party to a de facto relationship with a party to the marriage; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p) the terms of any financial agreement that is binding on the parties to the marriage; and
(q) the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage.
In Bevan & Bevan [2013] FamCAFC 116, the Full Court of the Family Court of Australia considered the High Court’s decision in Stanford & Stanford [2012] HCA 52, which provided guidance on how s.79 was to be interpreted and implemented. Bevan endorsed the continuing application of the four-step approach articulated by the Full Court in Hickey & Hickey & Attorney General for the Commonwealth of Australia [2003] FamCA395, but on the basis that it is a shorthand distillation of the words of s.79, as opposed to being a statutory edict. The four steps articulated in Hickey at paragraph 39 are:
a)Identify and value the property, liabilities and financial resources of the parties; and
b)Identify and assess the contributions of the parties and express them as a percentage of the net value of the property; and
c)Identify and assess the other facts relevant under s.79(4)(d)-(g) including s.75(2) and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
d)Consider the effect of the above and resolve what order is just and equitable in all the circumstances.
The decisions in Stanford and Bevan also emphasise the importance of making findings that any order is just and equitable for the purposes of s.79(2), independent of the s.79(4) process. In most cases, such as the present one, it makes no difference to the outcome of the alteration of property interests exercise. Even if the just and equitable consideration were treated as a threshold issue in this case the parties have, by their actions (separation, and re-ordering of their financial lives since then), and claims (divergent claims about their property under s.79 of the Act), indicated that they themselves consider it just and equitable that some order be made under s.79 adjusting their property interests as presently held. It is clearly just and equitable in this case to make an order.
Both decisions also emphasise the importance of identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. This is not inconsistent with step one in Hickey.
A problem that commonly arises, and indeed does arise in this case, relates to property that once existed but no longer does. This disposed of property may still be significant, however. As the Full Court said in Bevan, such disposals must be dealt with carefully. In practical terms this means carefully assessing the evidence about the disposal, attempting to quantify it if this is at all possible, and then assessing its weight whilst neither placing too much, or too little, weight on it. It would seem that notionally adding back such property may still be appropriate in some cases. In Vass & Vass [2015] FamCAFC 51, the Full Court said at [138]:
There is no error committed per se in adjusting the parties’ actual property interests by a calculation involving notionally adding back into the pool sums which have been dissipated by the parties. We reject any suggestion that the decision of Bevan & Bevan [2013] FamCAFC 116; (2013) FLC 93-545 – or, more particularly, the decision of the High Court in Stanford & Stanford [2012] HCA 52; (2012) 247 CLR 108 – is authority for any necessary contrary solution.
The Full Court in Weir (1993) FLC 92-338 at 79,593–4 made the following statement regarding the duty to disclose and the Court’s powers where non-disclosure has been found:
This Court has pointed out in a line of cases leading up to the recent decision of the Full Court in Black & Kellner (1992) FLC 92-287, that it is the duty of a party involved in property proceedings in this jurisdiction to make a full disclosure of their financial affairs. See also Giunti & Giunti (1986) FLC 91-759, and Mezzacappa & Mezzacappa (1987) 11 Fam LR 957; (1987) FLC 91-853. It is clear enough from his Honour's findings in the present case that the husband had not done so and had in fact pocketed the proceeds of a substantial number of cash sales. It is obvious that in most cases of this nature it is difficult enough for the other party to establish that fact let alone establish the quantum of what has been taken.
It seems to us that once it has been established that there has been a deliberate non-disclosure, which follows from his Honour's findings in this case, then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature…
We appreciate that this is something of a broad brush approach, but, as we have said, where there is clear evidence of non-disclosure as there was here, the Court should not be unduly cautious about making findings in favour of the other party. It has been said by one commentator (O'Ryan and Broadfoot, 5th National Family Law Conference Handbook, p 249) the failure to disclose undermines the whole process of adjudication of proceedings for a settlement of property in that the court is unable to identify the property of the parties, to properly assess contribution, or to properly assess s 75(2) factors.
A succinct statement of the law in this regard is the statement by Baker J in Kowaliw & Kowaliw (1981) FLC 91-092 at 76 644:
As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
The Balance Sheet
During closing submissions those representing the parties provided the Court with the following balance sheet:
| Ownership | Description | Wife / de facto partner’s value | Husband / de facto partner’s value | |
| ASSETS | ||||
| 1. | J | Property B | $ 435,000 | $ 435,000 |
| 2. | W | (omitted) Bank (omitted) | $ 391.91 | $ 391.91 |
| 3. | W | (omitted) Bank (omitted) | $ 0.00 | $ 0.00 |
| 4. | W | (omitted) Bank (omitted) | $ 0.00 | $ 0.00 |
| 5. | W | Mitsubishi (omitted) | $ 2,200 | $ 2,200 |
| 6. | J | Furniture | $ 1,500 | $ 1,500 |
| 7. | H | (omitted) Bank Account (omitted) | $ 4.09 | $ 4.09 |
| Total | $ 439,096 | $ 439,096 |
| ADDBACKS | ||||
| 8. | W | Addback | $ 0.00 | $ 125,675 |
| Total | $ 0 | $ 125,675 |
| LIABILITIES | ||||
| 9. | J | (omitted) Bank Home Loan (omitted) | $ 75,994.67 | $ 75,994.67 |
| 10. | H | (omitted) Mastercard | $ 5,430.74 | $ 5,430.74 |
| 11. | J | (omitted) Bank (omitted) | $ 71,623.55 | $ 71,623.55 |
| 12. | J | (omitted) Bank (omitted) | $ 44,734.99 | $ 44,734.99 |
| 13. | H | Costs Order outstanding | $ 834.00 | $ 834.00 |
| 14. | W | Tax Liability | $ 7958.91 | $ 0.00 |
| Total | $ 206,577 | $ 198,618 |
| SUPERANNUATION | |||||
| Member | Name of Fund | Type of Interest | Wife / de facto partner’s value | Husband / de facto partner’s value | |
| 15. | H | (omitted) | Accumulated | $ 33,965 | $ 33,965 |
| 16. | W | (omitted) | Accumulated | $ 49,881 | $ 49,881 |
| Total | $ 83,846 | $ 83,846 |
There are two contentious issues. The add-back issue, at item 8, which is contended for on behalf of the Husband. This will be discussed below. The second issue is item 14, a tax liability that the Wife contended should be included as a liability on the balance sheet. The Wife’s only evidence about this tax liability is what appears to be a photocopy, or perhaps a print out from her ATO tax portal. The impression created from this document is that it is incomplete. In any event, there is no evidence about the nature of this tax debt. If the Wife’s evidence about financial matters had been more reliable overall, the Court would have been prepared to find in her favour and at least infer that the debt was joint in character. However, given the extensive concerns the Court has about the Wife’s credit, it is not prepared to do so. The onus of proof was on her to establish that this debt should be included in the balance sheet, in the manner she contended. She has not discharged that onus. Item 14 should read nil.
The contended add-back at item 8 is quite complex to understand and quantify. This should not be interpreted as a criticism of the Husband’s case. Indeed, his Counsel conducted what appears to have been a thorough forensic examination of many transactions that were undertaken by the Wife and which manifestly lacked transparency. It was the Wife’s responsibility to provide this transparency and she failed to do so. Regrettably, it falls to the Court to do the best it can to identify whether there should be an add-back, and if so in what amount.
The starting point appears to be to examine the evidence given by the Wife at paragraph 38 of her trial affidavit sworn 20 February 2017 where she attempts to explain how the sale proceeds of their investment property were applied. Counsel for the Husband contended that the following items, purportedly explained by the Wife, should in fact be added back.
At paragraph 38(c) the Wife contended that $3000 was paid to the bank account of their son, Mr T, on the basis that this is money that the Husband had taken off Mr T. She has not established that assertion to the Court’s satisfaction. Even if, however, the Husband had taken money from Mr T’s bank account, there would need to be evidence putting this transaction in context. For example, did the parents treat the moneys in their sons’ bank accounts as, in fact, being their money though nominally held in the boys’ accounts? The flexibility of the financial arrangements of this family would make that possible. What the Wife sought to do in her evidence was to insinuate that the husband took the money from Mr T’s account to fund his drug habit. The Court will find that, in reality, the most likely source of funds to feed the husband’s drug habit was the cash takings of his (business omitted). In these circumstances, it is, the Court finds, more likely than not that the $3,000 paid into Mr T’s account referred to at paragraph 38(c) of the Wife’s affidavit is money that she sought to be put beyond the reach of her husband, and therefore the Court in the present proceedings. This money should be added back.
At paragraph 38(d) the Wife deposed to using $10,000 to pay into the boys’ bank account to “kick-start” their savings. This is clearly joint money and it is more likely than not that the wife was seeking to put these funds beyond the Husband’s reach. The money should be added back and, with all of the add-backs under consideration, be treated as moneys controlled by the Wife.
At paragraph 38(e) the Wife contended that $15,000 was given to the Husband in order to set up a new (business omitted) in Melbourne. But the Wife herself agreed in cross-examination that $9000 of this came back into the account so that the Husband had the benefit of, at most, $6000. She retained control of the $9000. The $9,000 that went back into the account was then transferred into Mr T’s account. Even if the Husband did use the $6,000 to fund his drug habit (a finding the Court does not find necessary to make) this is best treated in assessing contribution. The sum of $9,000 was, in effect, controlled by the Wife and the Court is not satisfied as to the disclosure she has granted in this regard.
At 38(k) the Wife deposes to paying to her brother $10,000 in repayment of a loan that her father had provided to the Husband and herself when they purchased the investment property. Counsel for the Husband submitted that there was so little transparency about this transaction, and that the Wife’s evidence changed so much in relation to aspects of it, that the Court cannot be reasonably satisfied either that the money was in fact paid to her brother or that it was genuinely owed to him. The Court accepts this submission. Even if the Court were prepared to accept that this family, indeed the extended family, adopted collectivist practices in relation to money, the Wife’s evidence in this regard was, to use the words of her own solicitor in closing submissions, “a bit all over the shop in certain things”. The Court has no idea whether the loans were genuine, whether they were intended to be repaid and, if so, whether they were in fact repaid. The Wife agreed that she was the financial manager in this relationship and the onus of proof was on her to provide a transparent and plausible explanation for the transaction. She has failed to do so. The amount of $10,000 should be added back and treated as money that should be notionally added back and treated as money that she is able to control.
Counsel for the Husband submitted that the Wife’s alleged expenditure at 38(l), ie, $1,800 to purchase a bed for their son, Mr T, was suspect. Whilst on the one hand expenditure of that amount for a bed for a child does appear excessive, it is not for this Court to make a value judgment about such matters. What did not appear to be in contention is that the bed was in fact purchased for Mr T. In these circumstances the add back will not be allowed.
At 38(m) the Wife contends that $10,000 was retained “for my unpaid tax”. Counsel for the Husband submits that this is an obvious add back, and the Court agrees. The inherent inconsistencies in the Wife’s evidence, indeed in the Wife’s case, is apparent from this item. A reasonable inference may be drawn that the tax liability referred to in item 14 of the balance sheet is the tax liability referred to at 38(m). If it had been a separate tax liability which, for example, had been paid, the Wife no doubt could have produced evidence to that effect. She has not done so. Indeed at 38(m) she characterises the liability as being for “unpaid” tax. The inference is strong that item 14 in the balance sheet reflects the unpaid tax at 38(m). Of course, however, the Wife can’t have it both ways. She cannot say that $10,000 was set aside for unpaid tax when, firstly, it appears as a liability in the balance sheet and, secondly, the $10,000 is not reflected as an asset in the balance sheet. The $10,000 should be added back and notionally treated as the Wife’s property.
At paragraph 38(o) the Wife contends that $9,000 was given to the Husband for an overseas trip which he did not go on. There is no evidence to suggest that this is incorrect.
At 39(q) the Wife deposes that $20,000 was paid to her brother in repayment of the loan. It transpires that the $20,000 was in fact paid into one of the son’s accounts, and, according to the Wife, her brother was not actually repaid until December 2016. The Wife’s account is inherently implausible. Her affidavit does not disclose that the moneys were in fact paid to her son where they stayed for a considerable period of time. She does not adduce any evidence from her brother. The concerns that the court has about the nebulous nature of the alleged loan has been articulated above. The Court accepts the Husband’s counsel’s submission that this amount should also be added back.
At 38(r), the Wife contended that $5,260 was set aside to repair a fence. However, her own evidence is that the fence was never repaired, and in fact the payment was made into her son Mr A’s account, with the Wife herself conceding that the payment was made so that the Husband could not waste the same. The money should be added back
At 38(t) she refers to a transfer of $12,900 into her son Mr A’s account “so I could protect these funds”. Clearly, this too should be added back.
Whilst the Court has not accepted all of the Husband’s contentions about add backs, it is prepared to accept that at item 8 the sum of $80,160 should be added back and treated as notional property in the control of the wife but the Court records that it is far from satisfied that this is the full extent of funds that the Wife manipulated in one way or another away from purported joint ownership or control.
The Court notes that item 13 of the balance sheet is the costs order made against the Husband in favour of the Wife. This should not appear on the balance sheet, and will be treated separately. Item 13 should read nil.
Having regard to the Court’s findings, therefore, the balance sheet will be as follows:
| ASSETS | |||
| 1. | J | Property B | $ 435,000 |
| 2. | W | (omitted) Bank (omitted) | $ 391.91 |
| 3. | W | (omitted) Bank (omitted) | $ 0.00 |
| 4. | W | (omitted) Bank (omitted) | $ 0.00 |
| 5. | W | Mitsubishi (omitted) | $ 2,200 |
| 6. | J | Furniture | $ 1,500 |
| 7. | H | (omitted) Bank Account (omitted) | $ 4.09 |
| Total | $ 439,096 |
| ADDBACKS | |||
| 8. | W | Addback | $ 80,160 |
| Total | $ 80,160 |
| LIABILITIES | |||
| 9. | J | (omitted) Bank Home Loan (omitted) | $ 75,994.67 |
| 10. | H | (omitted) Mastercard | $ 5,430.74 |
| 11. | J | (omitted) Bank (omitted) | $ 71,623.55 |
| 12. | J | (omitted) Bank (omitted) | $ 44,734.99 |
| 13. | H | Costs Order outstanding | $ Nil |
| 14. | W | Tax Liability | $ Nil |
| Total | (rounded off) | $ 197,784 |
| SUPERANNUATION | ||||
| 15. | H | (omitted) | Accumulated | $ 33,965 |
| 16. | W | (omitted) | Accumulated | $ 49,881 |
| Total | $ 83,846 |
Assessing Contribution
Mr David, representing the Wife, submitted in closing that contributions should be assessed with regard to three separate and distinct periods. He conceded, for example, that up until about 2009 the Court would assess contribution as being equal, having regard to the diverse contributions made by each of the parties since they married in 1993, 16 years earlier. The Court agrees. To this extent, Counsel for the Husband’s submission was ad idem.
Mr David then submitted that from about 2009 to the end of 2013 the Husband’s drug addiction was such that not only was he not making a financial contribution, but he, in effect, made a negative contribution as his drug-related activities were a drain on the parties’ finances. The Wife’s case is that the period of the Husband’s drug addiction was between 2009 and the end of 2013. The Husband appears to concede that it was from 2011 to the end of 2013. The problems with the Husband’s evidence have already been discussed earlier in these reasons. His evidence about his own drug addiction is questionable. The Court does not accept his contention in cross-examination that his first use of drugs was in 2011 when he travelled to Melbourne. Mr David for the Wife submitted that such a contention was “fanciful” when considered together with all the other evidence. The Court agrees. The evidence indicates that on his way back from Melbourne he was found to have in his possession 21 grams of cocaine, a trafficable amount. He was evasive in the extreme when challenged about the circumstances of the acquisition, cost, and purpose of acquiring such a volume of cocaine. His contention about the frequency of his drug use lacks plausibility. The more independent evidence in the form of police records creates a strong impression of a habit the frequency of which was at least weekly, if not more. The fact that he could not even comply with the terms of his intensive correction order indeed provides an insight into the husband’s chaotic life at the time. During this period the Husband’s business was, in effect, abandoned. Whilst the Husband does not concede this, the Court finds that it was the inevitable result of his drug-induced decline in functioning, as well as his incarceration.
Assessing contribution in this period must, inevitably, take into account not only the unspecified expenditure on drugs during this period, and the costs incurred by the Husband as a consequence of his drug use including, for example, defending serious criminal charges. A reasonable inference to draw is that his ability to earn an income declined in this period. The most likely cause of the eventual closure of the business was, at least significantly, the Husband’s drug use. Throughout this period the Wife assumed the role of managing the household, including the children and their financial affairs. There is no doubt, the Court finds, that her contribution was rendered more arduous as a result. In trying to understand the Husband’s evidence about this period, quite apart from the minimisation of the consequences of his drug addiction in financial terms, the Court understood the Husband to be saying that it was the cash takings of the (business omitted) that funded his drug habit. Of course, the cash takings were unspecified, as was the expenditure on drugs, thus leaving the court in a position where it would have to accept the Husband’s evidence at face value – which it does not.
Mr David contended that the third period in respect of which contribution should be assessed was from the end of 2013 onwards, when the business had closed. It was submitted that, thereafter, the Husband made no financial contribution, and this was left exclusively to the Wife. It was only when the investment property was sold that this financial pressure was removed from her. There is substance in this submission. The Court does not ignore the fact that the Wife and children remained in the former matrimonial home throughout this period and thus enjoyed that benefit.
Counsel for the Husband submitted that given the long relationship contribution should be assessed as being even. This submission minimises the significance of the period of the Husband’s drug addiction and the inevitable financial consequences that followed.
Mr David for the Wife urged the Court to take into account that the pool of assets was a modest one. Indeed as it is.
Doing the best the Court can in these circumstances, and acknowledging that the Court has found there to be a substantial add back so that the Wife is treated as having notional property, the Court assesses contribution in the Wife’s favour at 65 per cent. On the net asset pool as found by the Court, this would produce a 30 per cent differential, which is significant on a small pool. The Court nonetheless believes that this assessment is as just and equitable as the circumstances allow.
An adjustment under section 75(2)?
The Husband sought an adjustment under s.75(2) of 5 per cent to recognise the fact that he was currently unemployed and according to him unemployable as a result of a back injury. By contrast it was contended the Wife was both in good health and enjoyed a reasonable earning capacity. The Wife, by contrast, urged the Court to reject the Husband’s assertion that he could not work, though conceded that the evidence was that he was not working.
Perhaps the strongest aspect of the Husband’s case for a s.75(2) adjustment in his favour was his back injury. His evidence was that in 2006 he injured his back causing two prolapsed discs in his spine. The medical evidence that he advanced in his case was, perhaps surprisingly, very scant. He adduced two Centrelink medical certificates dated 2 February 2017 and 20 December 2016 certified by a person who appears to be a General Practitioner. The primary condition is described as chronic low back pain. It was described as permanent, meaning likely to persist two years or more. The treatment regime was described as being physiotherapy and analgesics. The Husband also attached a radiologist’s report dated 8 December 2016 which concluded that he suffers from disc degeneration with mild disc bulges as well as moderate neural foraminal stenosis, and developmental changes at lower thoracic region.
Quite apart from the paucity of the medical evidence in the Husband’s case, a surprising omission given its potential importance, the medical evidence is inconsistent with the Husband’s own evidence. His evidence was clear; despite a back injury in 2006 he says he continued to work full time in the (business omitted) until it closed at the end of 2013. He offered the lay opinion in his evidence that his injury “got progressively worse” (paragraph 15, trial affidavit of 20 February 2017) because he continued to work. It would have been useful to have expert evidence in this regard. At paragraph 16 of the trial affidavit he sets out his conviction that the Wife was having an affair in or around late 2012, at which point the relationship began to deteriorate. At paragraph 17 he deposes that once the Wife left, he found it difficult to manage the office work for the business and was not coping with his back pain. He says that he “started to become depressed and disinterested”. He makes no reference, of course, to his drug addiction during this period. He blames the closure of the (business omitted) on the Wife. He contends that he has not been able to work since then because of his back injury.
From the Court’s perspective it seems that the Husband continued to work for almost eight years following a back injury, and he only ceased work when the (business omitted) closed, which seems as much attributable to the Husband’s drug addiction as it does to the end of the marriage. His contention that he cannot work again is very poorly supported by the medical evidence and the grave reservations the Court has about his credibility make it difficult to rely on his assertions alone that he cannot work. No finding can be made in the Husband’s favour about a s.75(2) adjustment attributable to his back injury. Moreover, no adjustment can be made in his favour attributable to his drug use because the evidence suggests that it ceased several years ago. In the circumstances no s.75(2) adjustment can be made in the Husband’s favour.
Just and Equitable
The Court therefore concludes that the adjustment in the Wife’s favour remains at 65 per cent. The Husband did seek a small splitting order in his favour out of the Wife’s superannuation fund. The Court believes, however, that the orders for alteration of property interests will be less complex and thus easier to implement, without any splitting order. Indeed there is no reason to even create two pools of assets for adjustment purposes. A global approach will thus be adopted.
The balance sheet may be summarised as follows:
Assets 439,096
Add-backs 80,160
Liabilities (197,784)
Superannuation 83,846
Total net assets $405,318
The Wife, therefore, would be entitled to 65 per cent of this, ie $263,456 and the Husband the balance ie $141,862.
On the basis that the Wife retains the family home and the joint liabilities she would receive:
a)Home 435,000
b)(omitted) Bank account 391
c)Mitsubishi motor vehicle 2,200
d)Furniture 1,500
e)Addback 80,160
f)Home loan (75,994)
g)(omitted) bank account ending in (omitted) (71,623)
h)(omitted) bank account ending in (omitted) (44,734)
i)(omitted) super 49,881
Total $376,781
As her entitlement is only $263,456, she would need to pay to the Husband $113,325.
Conversely, the Husband would receive:
a)Payment from wife 113,325
b)(omitted) bank account ending in (omitted) 4
c)Mastercard (5,430)
d)(omitted) super 33,965
Total $141,864
Both parties proposed broadly consistent orders, though the Wife’s were descriptive. The Court prefers the Husband’s prescriptive approach to the orders and will adapt those orders to reflect its intentions. Out of the Husband’s settlement, however, he must first pay to the Wife the costs order which is outstanding. The easiest way to reflect this in the orders is to say that she is to pay him $834 less ie $113,325.00 minus $834.00 which equals $112,491.00.
The Husband sought orders in relation to various items of personal property. No evidence was led in this regard.
I certify that the preceding sixty (60) paragraphs are a true copy of the reasons for judgment of Judge Altobelli
Date: 13 April 2017
Key Legal Topics
Areas of Law
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Family Law
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Property Law
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Civil Procedure
Legal Concepts
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Remedies
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Costs
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Injunction
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Jurisdiction
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Procedural Fairness
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Statutory Construction
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