Behrendt & Cadenet
[2022] FedCFamC1F 66
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Behrendt & Cadenet [2022] FedCFamC1F 66
File number(s): SYC 7807 of 2016 Judgment of: HARPER J Date of judgment: 17 February 2022 Catchwords: FAMILY LAW – PROPERTY SETTLEMENT – Final property orders – Where parenting dispute had settled by consent – Common ground that there should be no percentage adjustment in favour of either party under s 79(4)(e) of the Act – Husband seeking 55 percent of the pool – Wife seeks 57 percent of the pool on assessment of contributions – Where both parties earned significant salaries – Where husband ceased employment in 2017 – Interim property orders were made for husband to transfer property to the wife upon her making a payment of $1,100,000 in partial property settlement – Husband received $1,355,000 in partial property settlement – Where property in Suburb G was sold and proceeds used to fund purchase of property in Suburb L by the wife – Whether Suburb G property should be included as notional property – Where husband argues he has contributed to purchase costs of wife’s new home – Treated as a post-separation contribution by husband – Whether paid legal fees by both parties should be included on the balance sheet – Where most legal fees were expended on parenting dispute – Impossible to distinguish costs for parenting versus property dispute – Addback of legal fees would risk injustice – Costs should be determined after judgment delivered – Contributions assessed holistically as almost equal – Pool divided 48 percent to the husband and 52 percent to the wife. Legislation: Family Law Act 1975 (Cth) Pt VIII, ss 75(2), 79(2), 79(4), 80(1), 81, 117(2), 117(2A)
1 Federal Circuit and Family Court of Australia Act 2021 (Cth) s 43
Cases cited: Barnell & Barnell (2020) 60 Fam LR 377; [2020] FamCAFC 102
Benson & Drury (2020) 62 Fam LR 1; [2020] FamCAFC 303
Bevan & Bevan (2013) FLC 93-545; [2013] FamCAFC 116
Coghlan & Coghlan (2005) FLC 93-220; [2005] FamCA 429
Dickons v Dickons (2012) 50 Fam LR 244; [2012] FamCAFC 154
G & G (2000) FLC 93-043; [2000] FamCA 1075
Hickey & Hickey & Attorney General for the Commonwealth of Australia (2003) FLC 93-143; [2003] FamCA 395
Horrigan & Horrigan [2020] FamCAFC 25
In the Marriage of Burke (1981) FLC 91-055
In the Marriage of Crapp and Crapp (No 2) (1979) FLC 90-615; [1979] FamCA 17.
Jabour & Jabour (2019) 59 Fam LR 475; [2019] FamCAFC 78
JEL & DDF (2001) FLC 93-075; [2000] FamCA 1353
Kowalski and Kowalski (1993) FLC 92-342
Manolis & Manolis(No 2) [2011] FamCAFC 105
Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17
Norman & Norman [2010] FamCAFC 66
Pierce v Pierce (1999) FLC 92-844; [1998] FamCA 74
Sippel & Sippel [2004] FamCA 201
Stanford & Stanford (2012) 247 CLR 108; [2012] HCA 52
Trevi & Trevi (2018) FLC 93-858; [2018] FamCAFC 173
Vass v Vass (2015) 53 Fam LR 373; [2015] FamCAFC 51
Division: Division 1 First Instance Number of paragraphs: 94 Date of hearing: 6–8, 21 December 2021 Place: Sydney Counsel for the Applicant: Dr Ingleby Solicitor for the Applicant: Forte Family Lawyers Counsel for the Respondent: Mr Lloyd SC and Mr Wong Solicitor for the Respondent: Avondale Lawyers ORDERS
SYC 7807 of 2016 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR BEHRENDT
Applicant
AND: MS CADENET
Respondent
ORDER MADE BY:
HARPER J
DATE OF ORDER:
17 FEBRUARY 2022
THE COURT ORDERS THAT:
(1)Within 28 days, the Respondent Wife (“the wife”) pay to the Applicant Husband (“the husband”) or at his direction, the sum of $526,095 (“the payment”).
(2)For the purposes of Order 1, the wife is ordered to take all necessary steps and to execute all necessary documents and authorities to cause the payment to be made to the husband from the Offset Account ending …78 held at Commonwealth Bank of Australia in the wife’s name (“the Offset Account”).
(3)In the event the payment is not made by the due date, the wife shall pay interest on such balance as remains outstanding to the husband pursuant to Order 1, together with interest thereon, calculated in accordance with the Federal Circuit and Family Court of Australia Rules 2021 (Cth).
(4)Pending compliance with Order 1 in full, including the payment of any interest accrued pursuant to Order 3, the wife be restrained from causing the balance available in the Offset Account to fall below $550,000 for any reason.
(5)Unless otherwise specified and except for enforcing the payment of any money due:
(a)Each of the husband and wife be solely entitled to the exclusion of the other to all property (including choses-in-action) in the possession of such party as at this date;
(b)Each of the husband and wife hereby foregoes any claim they may have to any superannuation benefits belonging to or earned by the other;
(c)Each of the husband and the wife be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders; and
(d)Any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
(6)If any party seeks an order for costs, an application to the Court may be made by Application in a Proceeding within 28 days of the date of these orders, with an affidavit in support, to be filed and served within that time period and a copy forwarded to my chambers. If such application is made, the Court will make orders and directions for its determination.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Behrendt & Cadenet has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
INTRODUCTION
These are parenting and property proceedings between the Applicant Husband, Mr Behrendt (“the husband”) and the Respondent Wife, Ms Cadenet (“the wife”).
The parenting issues concerned the child, X, born in 2011 (“the child”).
The matter was listed for final hearing commencing on 6 December 2021. At the commencement of the final hearing, orders were made by consent disposing of the parenting issues.
Accordingly, this judgment deals only with the financial issues between the parties.
In summary, the husband contends he should receive 55 percent of the net asset pool, which will require an adjustment in his favour, by way of a cash payment to him or a transfer of properties currently held by the wife to him for the purposes of sale. The wife argues that she should receive 57 percent of the net asset pool, and by reason of partial property distributions already made to the husband during the proceedings, no further orders should be made and both parties should retain their respective assets and liabilities.
It was common ground that there should be no percentage adjustment in favour of either party pursuant to s 79(4)(e) of the Family Law Act 1975 (Cth) (“the Act”) for s 75(2) factors. The parties hold superannuation interests, but it was also common ground that those interest should remain undisturbed, and neither party sought a splitting order. There was no dispute both parties will also become entitled to monthly social security payments in Country W, upon attaining the age of 67.
BACKGROUND
The husband was born in 1965 in Country W. He is a naturalised Australian citizen who has resided in Australia since January 2000. He describes his current occupation as a fulltime homemaker.
The wife was born in 1968 in Country W. She is also a naturalised Australian citizen and has resided in Australia since September 1996. The wife works full time as a Senior Manager in the transport industry.
The child is both an Australian and Country W citizen.
The parties commenced their relationship in May 2003, commenced cohabitation on 16 April 2004, and married in 2008.
At the commencement of cohabitation, the husband states at [384] of his affidavit of 1 November 2021 that he held the following assets:
·$192,640 in cash;
·$42,500 in shares held at M Company;
·$15,000 in furniture;
·$88,322 in superannuation, split between N Company in Australia and M Company in Country W; and
·No liabilities.
At the commencement of cohabitation, the wife states at [275] of her affidavit of 1 November 2021 that she had the following assets:
·A property situated at P Street, Suburb F NSW (“the Suburb F property”) purchased for approximately $512,000 in or about 25 November 2002. At the date of cohabitation, it had a mortgage of approximately $450,000;
·$26,881 in superannuation;
·Bank accounts with nominal balances; and
·Motor Vehicle 1, approximately valued at $20,000.
The parties lived in the Suburb F property from the commencement of their cohabitation in April 2004 until they moved into their former matrimonial home, Q Street Suburb G NSW (“the Suburb G property”) in September 2009. It is uncontested that the husband paid a deposit for the home of $164,000, as well as stamp duty. He borrowed $1.1 million from Westpac to complete the purchase and build the matrimonial home on the property.
The Suburb F property then became an investment property which covered the repayments of its mortgage. The wife states at [276] of her affidavit filed 1 November 2021 that the mortgage is currently approximately $939,800. The property was registered as jointly owned by the parties in 2011.
Throughout and prior to the relationship, the husband held employment in senior positions at N Company and H Company. His income from N Company increased from $150,020 as a manager to $260,000 as a senior manager, to an income of $540,000 when he commenced work at H Company. The wife was employed throughout the relationship and maintained an income of approximately $200,000 per annum, however this would vary based on bonus entitlements. The husband resigned from H Company in 2017 and remains unemployed.
At the end of 2012, the wife received a $400,000 termination payment from her former employer, R Company, which was then used to offset the account of the mortgage on the Suburb G property.
In around 2015, the wife states she undertook extensive renovations of the Suburb F property to which she paid approximately $80,000. Following this, the property was and remains tenanted, currently receiving rental income of approximately $2,800 per month.
On 29 September 2015, the wife transferred $270,000 from the mortgage account secured against the Suburb F property into an offset account. The husband also transferred $100,000 from an offset account.
The parties separated under one roof on 2 December 2015, with the husband moving out of the Suburb G property on 28 April 2016. The parties’ divorce was finalised on 31 August 2019.
The husband continued to pay the mortgage for the Suburb G property after separation until 8 February 2017. It was uncontested that he paid his salary into the mortgage account and then redrew amounts required to fund his tax liabilities. After separation, he paid rent and the child’s school fees.
After separation, the wife was solely responsible for paying the mortgage for the Suburb F property and its upkeep.
From 22 January 2018, the mortgage payment for the Suburb G property increased from about $1,300 per month to over $9,064 per month. It was sold at auction on 13 March 2021 for $4,150,000.
The husband has remarried. He and his current wife, Ms C (“Ms C”) commenced cohabitation in August 2018 and married in 2020. Ms C has four children from her previous relationship, two of whom remain living with the husband and Ms C on a week-about arrangement at T Street, Suburb S.
The wife subsequently purchased her current home at V Street, Suburb L for $2,925,000 (“the Suburb L Property”).
PROCEDURAL HISTORY
The matter first came before the Court in 2016 when the father commenced proceedings in the Federal Circuit Court of Australia (as it was then known) seeking both parenting and property orders. The proceedings were transferred to the Family Court of Australia (as it was then known) on 25 June 2018.
On 13 August 2018, Le Poer Trench J made consent orders which outlined a partial property settlement. The husband transferred all of his right, title, and interest in the Suburb G property to the wife, upon the wife assuming the sole liability for the mortgage and making payment of $1,100,000 to the husband. $1,060,000 of this sum came from the refinance of the Suburb G mortgage and $40,000 came from an increase in the mortgage secured against the Suburb F property.
On 15 April 2021, following the sale of the Suburb G property, consent orders were made for the distribution of the proceeds of sale. After payment of selling costs and the discharge of mortgages, a further $255,000 was paid by way of partial property adjustment to the husband, $658,000 was paid into an offset account of the wife connected to the mortgage secured against the Suburb L property, and the balance was applied towards the wife’s acquisition of the Suburb L property, together with a mortgage of $1,000,000 to fund the acquisition.
The final hearing commenced on 6 December 2021. Despite the directions made by the Court for final hearing, there remained a dispute concerning the valuation of the Suburb F property. The matter was stood over to 21 December 2021 for closing submissions following an updated valuation of that property. The agreed value is $1,400,000.
MATERIAL RELIED UPON
The husband relied upon:
(a)His Case Outline filed on 29 November 2021;
(b)His Affidavit filed on 1 November 2021;
(c)His Financial Statement filed on 1 November 2021 and
(d)Affidavit of Ms C filed on 1 November 2021.
The wife relied upon:
(a)Her Case Outline filed on 4 December 2021;
(b)Her Affidavit filed on 1 November 2021; and
(c)Her Financial Statement filed on 18 November 2021.
Both parties were cross-examined.
The following documents were tendered and placed into evidence:
Exhibit Label Document Tendered by A Parenting Consent Minute of Order signed by the parties dated 6.12.2021 A/H B Minute of Order sought by ICL dated 6.12.2021 A/H C Schedule of agreed objections dated 7.12.2021 A/H D Pages 124–125 of the husband’s Tender Bundle A/H E Pages 148 and 151 of the husband’s Tender Bundle A/H F Pages 390–393 of the husband’s Tender Bundle A/H G Wife’s Costs Notice dated 13 August 2018. A/H H Bundle of Financial Statements of Wife filed on 7.2.2017, 22.6.2018, 6.1.2020, and 7.5.2021 (contained in A/H’s court book) A/H I Westpac Bank statement of the husband – statement period 31.7.2018–31.10.2018 A/H J Suburb F Property Valuation Minute of Order received on 8.12.2021 A/H K U Valuers Report of P Street, Suburb F NSW dated 7.12.2021 A/H L Table of Assets and Liabilities dated 21.12.2021 A/H 1 Pages 923–935 of the wife’s Tender Bundle R/W 2 Page 885 of the wife’s Tender Bundle R/W 3 Super Fund 1 Statement of the wife dated 1.7.2020–30.6.2021 R/W 4 Chronological list of contributions made to Super Fund 1 by the wife R/W 5 Avondale Lawyers Matter Trust Ledger dated 21.1.2019 R/W 6 Superannuation Statement of the wife as at 30.6.2016 R/W 7 Letter from Avondale Lawyers dated 6.4.2020 dealing with issue of disclosure R/W COMPETING PROPOSALS
The husband sought orders, as set out in his Case Outline filed 29 November 2021, as follows:
38. That the mother make such payment to the father so that he receives an overall 55% of the net asset pool, excluding superannuation as follows:
38.1. Within 7 days of the making of these orders, the Wife transfer to the Husband the sum of $658,000 held in the Commonwealth Bank Everyday Offset account (…78) per order 9 of 15 April 2021 Orders made (“the first instalment”).
38.2. Within 60 days, the balance then remaining (“the second instalment”) together with the sum of $75,000 approximately due to the father pursuant to paragraph 1 of the orders made 15 May 2020 (collectively “the Payment”).
39. That as part of his overall entitlements, the father retain absolutely without further claim by the mother:
39.1. His savings.
39.2. His M Company General Investment account.
39.3. His Motor Vehicle 2.
39.4. His household contents.
39.5. His Super Fund 2 entitlements.
39.6. His M Company Rollover Account.
40. That in the event that the whole of the Payment has not been made by the date then the mother do all acts and things and sign all such documents as may be required to transfer to the father all of her right, title and interest in the properties situate at:
(a) V Street, Suburb L in the State of New South Wales; and
(b) P Street, Suburb F in the State of New South Wales (collectively, “the Properties”) upon trust for sale and thereafter, the father cause the Properties to sold as soon as possible out of Court ("the Default Sale") and the proceeds of the Default Sale be applied in the following manner and priority:
40.1. Firstly, to pay all costs, commissions and expenses of the Default Sale;
40.2. Secondly, to discharge the mortgage and any other encumbrance affecting the Properties;
40.3. Thirdly, such amount as remains outstanding to the Father pursuant to the first instalment and/or second instalment together with interest thereon calculated in accordance with the Federal Circuit and Family Court of Australia Rules 2021;
40.4. Fourthly, such amount as remains due to the father pursuant to paragraph 1 of the orders made 15 May 2020; and
40.5. The balance to the mother.
41. That pending the Payment or the settlement of the Default Sale:
41.1. the mother continue to have sole use and occupation of the Properties;
41.2. the mother pay as and when same falls due for payment all payments to be made pursuant to the mortgages and all rates, taxes, insurances and other outgoings of or with respect to the properties, including but not limited to gas, water, electricity and internet; and
41.3. the mother be restrained from encumbering or further encumbering the Properties or increasing the balance of the mortgage without the father’s consent in writing.
42. That in the event of the Default Sale, the choice of real estate agent and conveyancer to be appointed be as nominated by the father.
43. That for the purposes of the Default Sale:
43.1. the Properties be sold by public auction;
43.2. the reserve price at the public auction will be such sum as may be agreed upon by the parties in writing and in the absence of agreement, shall be the price nominated as the fair market value by the real estate agent;
43.3. the mother shall each co-operate in every way with the real estate agent including, but not limited to:
43.3.1. allowing inspection of the Properties at all reasonable times requested by the real estate agent; and
43.3.2. signing all documents requested by the real estate agent in relation to the listing for sale of the Properties for Default Sale.
44. That unless otherwise specified in these orders and except for the purposes of enforcing the payment of any money due under these or any subsequent orders:
44.1. each of the mother and the father be solely entitled to the exclusion of the other to all property (including choses-in-action) in the possession of such party as at this date.
44.2. each of the mother and the father hereby foregoes any claim they may have to any superannuation benefits belonging to or earned by the other.
44.3. all insurance policies to become the sole property of the beneficiary named therein.
44.4. each of the mother and the father be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders; and
44.5. any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
The wife sought orders as set out in her Case Outline filed 4 December 2021, as follows:
1.That the husband’s application be dismissed.
2.That:
a) Each party shall be solely entitled, to the exclusion of the other, to all other property and chattels of whatsoever nature and kind in the possession of such party at the date of the making of these orders and that for this purpose bank accounts are deemed to be in the possession of the person whose name appears on the bank’s record therefore, insurance policies are deemed to be in the possession of the beneficiary thereof, superannuation entitlements are deemed to be in the possession of the person who is named as the worker, whose age or working future provides the conditions for payment out of such entitlement
b) Each party shall be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these Orders.
3.Costs.
I record here that the husband put the credit of the wife generally in issue. The wife made no general submissions about credit. I observed both parties giving evidence. I am satisfied that both generally tried to give evidence to the best of their recollection. Most of their affidavit evidence was directed to the parenting issues, which were resolved. By comparison, the evidence going to the financial issues was sparse and uncomplicated. I accept the wife’s evidence going to financial issues was generally less detailed than that of the husband. I do not consider it necessary to make general findings about credit. If I find it necessary to prefer the evidence of one party to the other on any factual matter, I will make this clear in the reasons.
THE LAW
Part VIII of the Act sets out the legislative provisions relating to property orders that may be sought when parties are or were married. The central provision is s 79 of the Act, which gives the Court power to make such orders for alteration of property interests as it considers appropriate.
Section 79(2) of the Act provides that
The court must 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.
Section 79(4) of the Act set outs the factors to be taken into account in considering what order, if any, should be made. These will be discussed in detail below.
Section 80(1) grants broad, specific powers to the Court to adjust property interests. Section 81, although neither a “head of power” nor an absolute requirement, reflects a policy of making orders which finally determine the financial relationship between the parties and avoid further proceedings, as far as is practicable: In the Marriage of Crapp and Crapp (No 2) (1979) FLC 90-615. An express statutory duty to achieve finality is now also imposed on the Court by s 43 of the Federal Circuit and Family Court of Australia Act 2021 (Cth).
The approach to be taken
Prior to the High Court of Australia’s decision of Stanford & Stanford (2012) 247 CLR 108 (“Stanford”), parties generally relied upon the “four step process” set forth in Hickey & Hickey & Attorney General for the Commonwealth of Australia (2003) FLC 93-143 (“Hickey”) in the determination of an application under s 79. This is as follows:
1. Identify and value, the parties’ property, liabilities and financial resources at the date of the hearing;
2. Identify and assess the contributions of the parties as referred to in s.79 of the Act and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties, whether examined on a global approach or an asset by asset approach;
3. Identify and assess the other factors relevant including, the matters referred to in s.75 of the Act and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
4. Consider the effect of the above and resolve what order is just and equitable in all the circumstances of the case.
In Stanford the High Court made clear at [37] that
it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property.
The Full Court of the Family Court of Australia in Bevan & Bevan (2013) FLC 93-545 at [72]–[73] has held that the decision in Stanford has not overruled the four step approach.
Stanford also made clear that the requirement pursuant to s 79(2) that it would be just and equitable to make orders altering property should not be conflated with the requirements of s 79(4). The High Court further held at [39] that the question whether it is just and equitable to make an order “is not to be answered by assuming that the parties’ rights or interests in marital property are or should be different from those that then exist”, that is, at the time when the discretion may be exercised.
The High Court has held that the very fact of separation and the termination of the relationship may lead to the ready satisfaction of the just and equitable requirement: Stanford at [41]–[42]. It is clear that during the proceedings, the parties accepted that an adjustment of property of interests would be just and equitable, and that some adjustment has already taken place. But by the time of final hearing, the wife puts in issue whether it would be just and equitable to make any further order altering the property interests of the parties. The husband contends that it would.
ASSETS, LIABILITIES AND FINANCIAL RESOURCES AT THE DATE OF THE HEARING
The first step requires identification of the parties’ property, liabilities and financial resources at the date of the hearing.
Subject to the areas of dispute to which I will shortly come, the asset pool at final hearing was not complex and will be summarised in the table set out below (as taken from Exhibit L, the joint balance sheet handed up at the final hearing).
The first area of dispute involved the husband’s submission that the Suburb G property should be included in the balance sheet as an asset of the wife with a value of $4,150,000, while the value for Suburb L should be ignored. As part of this approach, the husband also included $1,315,000 (being $1,060,000 plus $255,000) in the balance sheet as a liability of the wife. This, in any event, is how it was presented in Exhibit L. The wife, on the other hand, argued that the Suburb L property should be included in the balance sheet with a value of $2,925,000, plus the wife’s offset account credit balance of $658,600, with the existing mortgage of $938,605 included as a liability on her part.
The reasons for his approach were given by the husband as follows. If the sums of $1,060,000 and $255,000 were deducted from the Suburb G property’s sale price of $4,150,000, a balance of $2,835,000 would remain. For the purpose of this calculation, the husband leaves out of account the $40,000 borrowed by the wife by increasing the mortgage secured against the Suburb F property to reach the payment of $1,100,000 required by the orders of 13 August 2018. On the wife’s approach, the purchase price of Suburb L was $2,925,000, plus the offset account of $658,600 less the mortgage of $983,605, being three figures specified in the orders of 15 April 2021, which gave a balance of $2,599,995. The husband submitted that the difference between $2,835,000 and $2,599,995 is $185,005. However, this figure seems wrong. The difference is actually $235,005. But in the view I take below this is not material. The husband’s point, in short, was that the difference reflected the wife’s costs of purchase of Suburb L, such as stamp duty. The wife did not dispute this. If this difference in amount was ignored, in effect, so the argument went, the husband would be contributing to the cost of the wife’s purchase of Suburb L.
To include the Suburb G property in the balance would therefore be to include notional property which no longer existed at the date of final hearing. There is settled authority in this Court that notional property can exceptionally be included as an “add back” in connection with the determination of the parties’ existing interests in property. In Vass v Vass (2015) 53 Fam LR 373 the Full Court said:
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 – or, more particularly, the decision of the High Court in Stanford & Stanford – is authority for any necessary contrary solution. Some statements made by the High Court may lead to the conclusion that references to “notional property” as have been referred to in decisions of this court and at first instance may need to be reconsidered.
139. The decisions referred to seek to remind the Court that, however the exercise of discretion might seek to deal with property that is said to be the subject of “add back”, proper consideration must be given to existing interests in property, and the question posed by s 79(2) as a separate inquiry from any adjustment to property interests by reference to s 79(4) if a consideration of s 79(2) reveals that it is just and equitable to alter existing interests in property.
(Citations omitted)
In Trevi & Trevi (2018) FLC 93-858 (“Trevi”) at [27]–[42], the Full Court endorsed the guidelines relating to addbacks or the treatment of notional property as follows:
Guidelines for adding back to the property available at trial
(a) Dissipation of property and expenditure other than on legal fees
27. The Full Court held in Omacini and Omacini that addbacks fall into "three clear categories": where the parties have expended money on legal fees; where there has been a premature distribution of matrimonial assets; and "waste" or wanton, negligent, or reckless dissipation of assets.
28. However, the Full Court also made it clear that an addback does not necessarily occur whenever "a party has expended money realised from the disposition of assets that existed as at the date of separation", the Full Court describing such a proposition as "unduly simplistic". An earlier Full Court made the same point, saying that adding back is "the exception rather than the rule".
29. The fundamental precept that addbacks are exceptional, reflected in the decisions just referred to, also mirrors what has been said in earlier decisions of the Full Court that, for example, "the Family Court must take the property of a party to the marriage as it finds it" at trial. An important parallel proposition is that the parties do not "go into a state of suspended economic animation" after separation. Thus, reasonably incurred expenditure does not usually come within accepted categories of addback.
30. Two fundamental premises emerge from Omacini and the authorities preceding it. First, "adding back" is a discretionary exercise. When the discretion is exercised in favour of adding back, it reflects a decision that, exceptionally, in the particular circumstances of a case, justice and equity requires it. The second premise is its corollary: in cases that are not "exceptional" justice and equity can be achieved, not by adding back, but by the exercise of a different discretion - usually by taking up the same as a relevant s 75(2) factor. Indeed, it has been said that the latter is "a course which is, perhaps, technically more correct" than adding back to the list of existing interests in property.
…
(Footnotes omitted)
The Full Court also pointed out that the decision in Stanford concerning identification of the parties’ assets is not offended by the proper approach to add backs. At [47], the Full Court said:
The essence of a claim for addbacks is that the asserted sum/s should be added to the value of the existing property interests of the parties and, subsequent to the assessment of contributions, credited to the spending party as part of the value of their assessed entitlements. Doing so does not offend what was emphasised by the High Court. Adding back does not seek to create property interests that do not exist. Rather, doing so emphasises that satisfying the respective requirements of ss 79(2) and (4) of the Act to do justice and equity can require an "accounting" or "balance sheet" exercise for the purposes of s 79(2) and (4), so as to include the value of the dissipated property or expended sums within the total value of the parties' existing interests in property, and to credit the value of same against the assessed entitlement of the dissipating or spending party.
(Footnotes omitted)
The husband did not argue the amount of $235,005 (or $185,005) should be included as an addback. Rather, the argument was that it would be just and equitable to include the Suburb G property as an asset at a value the same as its sale price, less the mortgage, in the divisible property of the parties in preference to the Suburb L property, so that the husband did not contribute to the purchase of the Suburb L property.
I do not accept this argument. While there is clearly a discretion, the approach promoted by the husband, in my view, does not accord with authority. These circumstances are not exceptional. To include notional property (the Suburb G property) on the balance sheet in substitution for an existing asset (the Suburb L property), creates artificiality and potential distortion. Rather, in my view it accords with authority, and it is far simpler, to treat the amount of $235,005 (or $185,005) as being a financial contribution of the husband post-separation.
The second issue is the treatment of paid legal fees. In Trevi at [36]–[39] the Full Court said:
36. Paid legal fees occupy a particular position in the consideration of addbacks by reason of s 117(1) of the Act; a matter not relevant to any other form of expenditure or dissipation of property the subject of an addback claim.
37. An order failing to addback legal costs is a pre-emptive decision about one party paying the other’s legal costs. The statutorily prescribed default position is that neither party pays all or some of the other party’s costs.
38. If, contrary to the demands of that section, there is to be a payment of costs, the award is dependent upon a finding of justifying circumstances which, in turn, is dependent upon (non-exhaustive) considerations all of which are informed by antecedent events - for example, whether one party has been “wholly unsuccessful” and “the conduct of the parties to the proceedings”. An award of the costs of trial, if any, is in the usual run of events made after the respective entitlements of the parties to a settlement of property have been assessed and, importantly, any awarded costs are paid from the assessed entitlement to property received by the paying party.
39. … The decision to addback or not addback paid legal fees remains a matter of discretion. But, a finding that it is just and equitable to not addback an amount of legal fees so paid is a finding that it is just and equitable for the other party to contribute to the costs of the first party in that proportion as part of an overall assessment of the justice and equity governing their property division.
(Footnotes omitted)
The husband argued that the paid legal fees of both husband and wife should be included on the balance sheet, in accordance with authority, because otherwise he will be contributing to the legal fees of the wife. The corollary, of course, is that the wife would be contributing to the husband’s legal fees. He bolstered his submissions by pointing out that the financial disclosure of the wife has been inadequate. For example, her affidavit evidence did not disclose any meaningful detail of the sale of the Suburb G property or the purchase of the Suburb L property.
On the other hand, the wife argues that it would be contrary to authority to add back paid legal fees in this matter because these are parenting and property proceedings, and the parenting issues were the main area of debate. The bulk of the parties’ evidence was clearly directed to parenting issues. The parenting case was ultimately settled by consent, without any determination of the merits. However, in his submissions, the husband spent some time rehearsing aspects of the wife’s conduct during the proceedings, such as making unsustainable allegations about the husband’s parenting, which he argued caused delay. But, as the wife pointed out, there is no evidence which would allow the Court to dissect the legal fees paid so as to form a view about what legal fees or costs are properly attributable to parenting issues, and which may be attributable to financial issues.
I prefer the submissions of the wife regarding paid legal fees. In my view, in the circumstances of this case and in the exercise of discretion, I consider it would not be just and equitable for either party to contribute to the paid legal fees of the other party through treating those paid legal fees as notional property. To do so would risk causing injustice to one or both parties.
I consider it is preferable for the question of costs to be determined after judgment is delivered. There is a distinct possibility that, taking account of the matters in s 117(2) and (2A) of the Act, if either party applies for costs, there may be orders for costs which depart from the statutorily prescribed default position that neither party pays all or some of the other party’s costs. Including the paid legal fees as notional property for the purposes of s 79(4) risks pre-empting any exercise of discretion about costs pursuant to s 117. An application for costs may result in costs orders which would reflect a result materially different to what the parties’ respective proportional contributions to each other’s costs would be if the paid legal fees were treated as notional property divisible on the balance sheet. I have no concluded view about costs, and while neither party may ultimately make any application for costs after the delivery of judgment, the risk of injustice leads me to conclude it is just and equitable to exclude paid legal fees from the pool of assets. After delivery of judgment, either party may apply for a costs order in their favour. I consider the treatment of costs is better left to the process of assessment or ultimate agreement.
The third issue concerned the inclusion of a tax debt of $94,174 already paid by the husband. The husband argued this should be included as a liability because he paid it using part of the money received by him from the partial property settlement, and pursuant to Order 3.2 of 13 August 2018, the obligation to make the payment was one of the reasons for applying for a partial property settlement. However, these factors do not persuade me that a paid tax liability should now be included in the pool of assets and liabilities
Superannuation.
It is open to the Court to decide whether to treat superannuation interests as separate, or as part of one asset pool: Coghlan & Coghlan (2005) FLC 93-220. The parties agreed superannuation should be included in the one asset pool. Neither party sought a splitting order. I will include the superannuation entitlements of both parties in the one pool of assets.
The assets and liabilities of the parties at the date of hearing are therefore as follows:
Ownership Description Agreed value ASSETS 1. W Suburb L property $2,925,000 2. W Suburb F property $1,400,000 3. W Commonwealth Bank of Australia Offset Account ending …78 $658,600 4. H M Company General Investment as at 31 October 2021 $131,432 5. H Westpac account ending …59 as at 4 November 2021 $26,859 Total $5,141,891 ADDBACKS 6. H Interim partial property settlement $1,355,000 Total $1,355,000 LIABILITIES 7. W Mortgage – Suburb L property $983,605 8. W Mortgage – Suburb F property $939,800 Total $1,923,405 SUPERANNUATION Member Name of Fund Agreed value 9. H Super Fund 2 $464,323 10. H M Company Personal Retirement $435,276 11. W Super Fund 1 $649,801 Total $1,549,400 NET POOL (INCLUDING SUPERANNUATION): $6,122,886
Percentages of net assets at hearing
Consequently, if there was no property adjustment, the husband would hold 39.4 percent of the parties’ net assets, and the wife 60.6 percent. Having regard to my assessment of contributions below, I am not satisfied such a result would be just and equitable.
I turn now to consider the application of Pt VIII of the Act and the factors set forth in s 79, bearing in mind the parties agreed there should be no adjustment under s 79(4) for s 75(2) factors.
CONTRIBUTIONS UNDER SECTION 79
Section 79(4) of the Act sets out the considerations to be taken into account by the Court in considering what order (if any) should be made under s 79 of the Act in property settlement proceedings.
In accordance with s 79(4) of the Act, the Court must consider all the contributions, both financial and non-financial to the acquisition, conservation and improvement of the parties’ assets as well as to the welfare of the family during cohabitation and after separation. The Court must consider the contributions in an overall sense: Norman & Norman [2010] FamCAFC 66; Hickey; Kowalski and Kowalski (1993) FLC 92-342; G & G (2000) FLC 93-043. A broad approach is preferred, rather than reference to precise mathematical calculations: In the Marriage of Burke (1981) FLC 91-055, although an evaluation of each party’s respective contributions is necessary: JEL & DDF (2001) FLC 93-075. Assumptions about equality of contributions should not be made. Separate assessment of matters occurring after separation is not necessary in arriving at an assessment of contributions: Sippel & Sippel [2004] FamCA 201. Although the husband made submissions to the effect that an asset by asset approach was inappropriate, the wife did not submit that such an approach should be taken in this case. I take a global approach to the assessing the financial contributions of the parties: Norbis v Norbis (1986) 161 CLR 513.
The requirements of s 79 are met by approaching the assessment of contributions holistically and by analysing the nature, form, characteristics, and origin of the property currently comprising that to which s 79 applies, and, in turn, analysing the nature, form and extent of the contributions (of all types) contemplated by s 79: Dickons v Dickons (2012) 50 Fam LR 244. More recent authority has emphasised the necessity for a holistic approach: Jabour & Jabour (2019) 59 Fam LR 475 at [31]–[87]; Horrigan & Horrigan [2020] FamCAFC 25 at [35]–[49]; Barnell & Barnell (2020) 60 Fam LR 377 at [30]–[43]; Benson & Drury (2020) 62 Fam LR 1 at [35].
Below is a discussion of the evidence and my findings in relation to the relevant contributions under s 79(4) of the Act. Here, I note that ss 79(4)(f) and (g) of the Act are not relevant to the facts of this case.
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage
Initial contributions
The husband gave evidence, which I accept, that at cohabitation he had net assets of approximately $345,922, which included some cash shares and superannuation. The wife owned the Suburb F property. The evidence did not disclose its value at cohabitation, although it was purchased in 2002 for $512,000 with a mortgage of $450,000. The wife also had some superannuation.
Initial contributions are to be weighed against all the other relevant contributions of the parties: Pierce v Pierce (1999) FLC 92-844 at [28].
I have set out more details of the parties financial contributions above at [11]–[24]. Up to a point, the husband’s initial contributions, and especially his contribution to the purchase of the Suburb G property, was partially a springboard to the parties’ future wealth, as was the Suburb F property which the wife brought to the relationship.
Financial contributions during the relationship
It was the evidence of both parties that they contributed their respective incomes, which were substantial, to family expenses and servicing liabilities such as mortgages on the Suburb F and Suburb G properties, and the costs of child care. The husband agreed that the joint day to day costs for “the Suburb G Property and the Suburb F Property were shared by Ms Cadenet and I on a 70/30 split”.
I take account of the compensation payout received by the wife of $400,000.
I accept the wife paid up to $80,000 to renovate the Suburb F property. I am unable to determine on the evidence whether the husband made any contribution to these renovations. He claimed a contribution of $12,000. This was disputed. I do not consider it possible to resolve the dispute. I also take account of the husband’s contribution to the purchase and development of the Suburb G property through savings and mortgage finance. Otherwise, on the evidence I am unable to find that either party made greater contributions than the other.
The husband gave evidence, which was not disputed, that he bought a boat which the parties used for recreation while they were together.
Financial contributions post-separation
I have already set out some of the contributions after separation above. I accept that both parties were entitled to get on with their lives after separation. I have already stated that the contribution of the husband to the wife’s costs of purchasing the Suburb L property should be taken into account as a post-separation contribution by the husband, since the proceeds of sale of the Suburb G property were the source of the funds to pay those costs of purchase by the wife.
The wife has received the rental income from the Suburb F property after separation.
I take account of the fact that the husband already received a substantial part of his entitlement through a partial property adjustment. The wife has continued to contribute through servicing the mortgages on the Suburb L and Suburb F properties.
The husband argued, and I accept, that the increase in the value of the Suburb G and Suburb L properties after separation as a result of general market forces should not be treated as a contribution by either party. The wife did not argue otherwise.
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage; 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
These factors can be addressed together. I accept that both parties made non-financial contributions during the relationship to parenting and homemaking. The wife claimed that she paid the lion’s share of domestic expenses such as shopping, she planned and prepared meals, and did the washing and cleaning. She agreed the husband looked after the pool. On the evidence, I accept the contributions of the mother as carer and homemaker were greater than those of the husband. I accept the husband made a contribution as carer of the child before separation. It was undisputed that she has been the child’s primary carer in the period after separation. I take account of the fact that the parties also employed a nanny and housekeeper.
(d) the effect of any proposed order upon the earning capacity of either party to the marriage
This is not relevant. The earning capacity of the parties will not be affected by the proposed orders of the Court.
ASSESSMENT OF CONTRIBUTIONS
Taking account of all the above considerations, I assess the contributions as slightly favouring the wife. Since there will be no adjustment for s 75(2) factors, the assets of the parties should be divided as to 48 percent to the husband and 52 percent to the wife.
The net value of the property owned by the parties is $6,122,886, inclusive of superannuation. On the basis of a 48/52 percent division, the husband is entitled to assets of $2,938,985 and the wife is entitled to $3,183,900. This will require a payment by the wife to the husband of $526,095.
ARE THE ORDERS JUST AND EQUITABLE?
Section 79(2) of the Act provides that “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.”
The Full Court in Manolis & Manolis(No 2) [2011] FamCAFC 105, in relation to the fourth step, made the following observations, which I adopt and follow:
65. It can be seen that power to make orders in regard to property is not exhausted after the third step. It is not until orders are made that the power is exhausted. The exercise of power pursuant to s 79 of the Act remains subject to the overarching requirement of justice and equity imposed by s 79(2) until it is exhausted. …
66. … The section does however oblige the court to "stand back" from its preliminary determination, and consider its impact. So doing may inform the terms of the orders appropriate to produce a just and equitable outcome in those terms. It may result in a re-consideration of s 79(4) and or s 75(2) factors, and a different outcome. Whatever the scope of s 79(2), the court's determination with respect to it cannot be dependent upon findings or conclusions which are irreconcilable with those recorded in the context of a consideration of s 79(4) or s 75(2). …
The High Court of Australia in Stanford commented at [36] on the meaning of “just and equitable” as follows:
The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds.
(Footnotes omitted)
I also take account of the caution expressed in Stanford at [40] that to conclude that making an order is
… “just and equitable” only “because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.
The husband argued that he should obtain a greater entitlement on an assessment of contributions because of a failure by the wife to make proper disclosure. However, the financial information of both parties was not very detailed. It was not suggested there was any evidence of hidden assets. Rather, the husband’s argument did not go much further than contending that the wife failed to disclose how she expended various amounts of money after separation. I do not accept this submission. As the wife argued, and I accept, the parties were entitled to get on with their lives after separation. The husband also argued that the wife had caused the proceedings to be extended and more costly than necessary. That may or may not be true. An interim costs order was made against the wife. Issues of costs can be agitated in an application for costs, if any party decides to make one. I am not inviting such an application, but I do point out I have already dealt with the question of paid costs as notional property.
Although the parties did not make any submissions about s 75(2) factors, s 79(4)(e) directs the Court to take account of those factors “so far as they are relevant”. Under s 75(2)(o) the Court should take account of “any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account.” The wife will bear the ongoing burden of servicing the mortgages secured against the Suburb F and Suburb L properties. However, according to the wife’s approach in this matter, the parties should simply be taken to have got on with their lives, and her future obligations to service mortgages are not relevant.
I am also satisfied the result is just and equitable taking account of the entitlements of both parties to a social security monthly payment from the age of 67 in Country W.
I have also considered the wife’s contention that no further orders for property adjustment should be made. But, on my assessment of contributions, such an outcome would not be just and equitable. Even according to her argument, the husband would not receive 43 percent of the divisible pool of assets without some further payment. Simply dismissing the husband’s application would therefore not provide him with his entitlement.
The wife is in a position to pay the husband the amount of $526,095 from her offset account. I do not accept the husband’s proposal that payment to him should be protected by a default order giving him the opportunity to sell either the Suburb F or Suburb L properties if the wife defaults. His position can be protected by an order that the wife pay him directly from her offset account, together with a liability for interest in the event of non-payment or late payment, and an injunction restraining the wife from allowing the balance of her offset account to fall below $550,000 pending payment. The figure of $550,000 makes allowance for any interest which may become payable by the wife.
Accordingly, the assets and liabilities of the parties will be divided, as set out in the below table (figures are rounded).
Assets and liabilities to be retained by the husband Value ($) Interim partial property settlement $1,355,000 M Company General Investment as at 31 October 2021 $131,432 Westpac account ending …59 as at 4 November 2021 $26,859 Super Fund 2 $464,323 M Company Superannuation $435,276.00 Payment from the Wife $526,095 Total: $2,938,985 Assets and liabilities to be retained by the wife Value ($) Suburb L property $2,925,000 Suburb F property $1,400,000 Commonwealth Bank of Australia Offset Account ending …78 $658,600 Super Fund 1 $649,801 Liabilities Suburb L property mortgage -$983,605.00 Suburb F property mortgage -$939,800.00 Payment to the husband -$526,095 Total: $3,183,901 COSTS
I have already referred to the issue of costs above. Section 117 of the Act sets out that each party shall bear his or her own costs, subject to the considerations in s 117(2) of the Act.
As mentioned, in my view any order for costs is most appropriately determined in light of these reasons for judgment, the relative success or failure of the parties, and the other statutory considerations set out in s 117(2A).
The Court proposes to make the orders and directions in relation to any application for costs that might be made as set forth in the orders at the commencement of these reasons.
I certify that the preceding ninety-four (94) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 17 February 2022
0
6
0