CROSS & HAGAN

[2016] FCCA 136

FEDERAL CIRCUIT COURT OF AUSTRALIA

CROSS & HAGAN [2016] FCCA 136

Catchwords:
FAMILY LAW – De facto property settlement – child born during the relationship but not biological child of the respondent – contributions – s.90SF factors.

Legislation:

Family Law Act 1975 (Cth)

Chang & Su (2002) FLC 93-117
C & C (2005) FLC 93-220
Giunti & Giunti (1986) FLC 91-759
Gould & Gould (2007) FLC 93-333
Hickey v Hickey and the Attorney General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143
Kowaliw & Kowaliw. (1981) FLC 91-092
Mezzacappa & Mezzacappa (1987) FLC 91-853
Robb & Robb (1995) FLC 92-555
Russell v Russell (1999) FLC92-877
Stanford v Stanford [2012] HCA 52
Weir & Weir (1992) 110 FLR 403

Applicant: MS CROSS

Respondent: MR HAGAN

File Number: MLC 7096 of 2011

Judgment of: Judge McGuire

Hearing date: 19 October 2015 and 17 November 2015

Date of Last Submission: 17 November 2015

Delivered at: Melbourne

Delivered on: 9 February 2016

REPRESENTATION

Solicitors for the Applicant: In Person

Counsel for the Respondent: Ms J Williams

Solicitors for the Respondent: G & M Lawyers

ORDERS

1. Within ninety (90) days of the date of these orders:

   (a)The respondent transfer to the applicant all his right title and interest in the property situate at Property E in Victoria;

   (b)Contemporaneously with the transfer referred to in order 1(a), the applicant pay to the respondent a lump sum of $120,193.00 provided that should the applicant be unwilling or unable to make such payment to the respondent by the due date then the respondent retain the property at Property E and pay to the applicant a lump sum of $1,129,807.00 within 180 days of the date of these orders or within 180 days of the applicant notifying the respondent in writing of her election not to assume title of the property situate at Property E whichever shall first occur.

2. The applicant have a continuing right of residence in the property at Property E until the execution of order 1 hereof provided that the applicant be responsible for the payment of utilities in respect of the property.

3. In all other aspects each of the parties retain all property including real estate, personalty, chattels, motor vehicles, bank account balances and superannuation entitlements in the possession of or in the control of that party as at the date of these orders.

4. Each of the parties be solely responsible for any and all liabilities attaching to any assets to be retained by that party pursuant to these orders.

5. Pursuant to Section 81 of the Family Law Act1975 the parties intend that these orders shall as far as practicable finally determine the financial relationship between them and avoid further proceedings between them.

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

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLC 7096 of 2011

MS CROSS

Applicant

And

MR HAGAN

Respondent

REASONS FOR JUDGMENT

1. Ms Cross is the applicant in these proceedings seeking orders for a property settlement following the breakdown of a de facto relationship with the respondent, Mr Hagan.

2. Ms Cross represents herself and has done so in an efficient and proper manner, albeit without the benefit of legal experience or expertise and, in particular, in a matter that has brought with it some complications and complexities. 

3. The proceedings began as long ago as August 2011 before Federal Magistrate Walters (as he then was).  The matter has had a number of false starts towards a trial due mainly to a lack of recent participation by Mr Hagan.  There then resulted an application by Mr Hagan’s mother, Ms S, to be appointed as litigation guardian for her son.  That application was problematic, given a lack of any medical or other evidence that would ordinarily ground such an appointment.  Mr Hagan simply refused to attend at Court.  His solicitors removed themselves from the record at one stage at or when the matter was due to proceed to trial although reappeared with Ms S in her application to be appointed as litigation guardian. 

4. Ms Cross, of course, had the option of urging an undefended hearing but was faced with significant practical difficulties, given that the property rested entirely in the hands of Mr Hagan and involved complexities such as some trust and company structures.  Without legal assistance or expertise Ms Cross was presented with a forensically daunting and practicably impossible task on an undefended hearing in even providing the make-up of the property pool.  Consequently, and despite reservations as to the basis for the appointment of the litigation guardian, that appointment was made. 

5. Ms S filed affidavits under her own name but much of the material was struck out as offending the rules of evidence.  Mr Hagan himself did not take part in the proceedings with his mother informing the Court that he “simply refused to attend at Court”, “suffered from depression” and “has a serious and ongoing illegal drug habit”.

6. Despite the appointment of a litigation guardian, the non-participation of Mr Hagan in such circumstances continued to present a quandary to the Court on an evidentiary basis and inferences are available to the Court accordingly.  Specifically, where Ms Cross does not have personal direct knowledge of the specific aspects of the property pool and Ms S only attempts to provide the evidence against the rules of evidence, together with there being no participation by Mr Hagan, then the Court may be less cautious than might normally be the requirement in respect of making findings.  As the Full Court said in Weir & Weir[1]:

   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.

   [1] (1992) 110 FLR 403

7. Whilst the factual background and circumstances in the matter now before me are slightly different than those confronting their Honours in Weir, the respondent’s non-participation has effectively resulted in non-disclosure being a situation that is not mitigated by the appointment of a litigation guardian, at least in respect of determining the property pool.  In this respect, the Full Court in Gould & Gould[2] commented on a party’s non-disclosure at [27-28]:

   Rather the appropriate approach for his Honour to have adopted in this case would have been to have increased the asset pool to take account of non-disclosure by the husband, and indeed his Honour had already done this to some extent in accepting the schedule of assets prepared by the wife’s counsel… Alternatively, or even in addition, had his Honour been persuaded that on the balance of probabilities there existed assets other than those contained in the asset pool contained in his reasons, his Honour could have made some adjustment in favour of the wife on account of the husband’s non-disclosure pursuant to the provisions of s 75(2)(o), as did Holden CJ in Kannis (2003) FLC 93-135.

   We do not say that there will never be a case in which it might not be appropriate to take into account in the contribution assessment, a party’s non-disclosure in a manner unfavourable to that party.  But it would need to be established that the non-disclosure related in some way to the matters concerning the parties’ contributions which are referred to in ss 79(4)(a), (b) and (c).

   [2] (2007) FLC 93-333

8. The non-disclosure here arises by reason of non-participation rather than perhaps more sinister motives.  Nevertheless, I am comfortable on the above authorities in taking a robust approach in determining the content of the property pool and issues of contributions.  In doing so, I glean support from other authorities, including Mezzacappa & Mezzacappa,[3]  Chang & Su[4] and, in particular, the Full Court in Giunti & Giunti[5]  where their Honours under the heading “Unspecified and Unquantified Assets” opined at p 75,555:

   It is obviously desirable as a general principle that the Court should first of all identify the pool of assets available and evaluate it.  If each party complies with his or her obligation to make a full and substantive disclosure of their financial affairs:  see Briese & Briese (1986) FLC 91-713, affirmed by the Full Court in Oriolo & Oriolo (1985) FLC 91-653, there is no problem although there may be disputes as to valuation.

   However, if, as here, one party fails to fulfil that obligation, is it open to that party then to rely on the absence of satisfactory evidence to prevent the making of an order against him or her which otherwise justice and equity would require?  It would be simple, if that were the case, to evade the jurisdiction in this Court, not by outright refusal which would attract sanctions, but by obfuscation and evasion.  Indeed, their Honours in Monte answered that dilemma in the following terms:

   “To find jurisdiction under sec 79 in relation to property, other than the fund, her Honour was obliged to make a finding as to the existence and value of that other property even though the unsatisfactory nature of the evidence made it necessary to express that finding in the most general terms both as to identity and value.”

[3] (1987) FLC 91-853

[4] (2002) FLC 93-117

[5] (1986) FLC 91-759

Background Facts

1. The applicant is 40 years of age.  The respondent is 50 years of age.

2. The applicant is employed on a casual basis in (occupation omitted).  Her sworn financial statement deposes to an average income of $628 per week from the employment.

3. The respondent is now apparently unemployed.  He previously operated a business with his brother known as “(business omitted)”.

4. The parties lived together in a de facto relationship from 2004 until June 2009.  The duration of the relationship was conceded by Counsel at the final trial of this matter having previously been the subject of prima facie dispute by the respondent.

5. The applicant commenced these proceedings by an application filed 9 August 2011.  The applicant was given leave to prosecute her application out of time by a consent order made by Federal Magistrate Walters (as he then was) on 13 March 2012.

6. A child was born during the course of the relationship, being X born (omitted) 2007.  Subsequent to a paternity testing procedure it was found that the respondent is not the biological father of the child.  X does, however, carry his surname and it is not disputed that the respondent treated X as a part of the family unit and continued significant financial support for X even after the results of the paternity testing procedure became known, including but not limited to the payment of private school fees.

7. In respect of X’s conception, the applicant deposes in her trial affidavit of 31 August 2015 at [5-7]:

   5.  As to paragraph 5, I admit the contents, save that I did not ever consider that Mr Hagan and I had an open relationship.  I deny that we attended sex parties together and slept with various partners.  Approximately 1 year into the relationship I learned that Mr Hagan had in the past (prior to our relationship) frequently attended sex parties.  Other people told me that they had seen him at parties and he admitted that he had “always” gone to sex parties.  I do not know whether Mr Hagan continued to attend such parties without my knowledge after our relationship had commenced, but it was not an activity we participated in together, and I did not attend sex parties.

   6. At Mr Hagan’s request, during our relationship on 3 occasions, I participated with Mr Hagan in sex with another couple at our home.  There were two occasions with A and B late in 2005, and one occasion on (omitted) 2006 with C and his then girlfriend whose name I cannot recall.

   7. There were no other occasions during our relationship when I had sex with anyone else.

8. In the same affidavit at [50-52] the applicant deposes:

   50. When I found out I was pregnant I telephoned Mr Hagan at work to tell him.  I was worried about who the father was and did not know if I could go through with the pregnancy in light of this issue, and I expressed my concerns to Mr Hagan.  I wanted to discuss this with him in detail, but he insisted that we have the baby and said (regarding her parentage) words to the effect of “We will never know”.  He immediately told everyone that we were having a baby.  I recall him proudly announcing my pregnancy at our annual (omitted) party a short time later.

   51. I felt that I had no input in the decision about whether or not to continue with the pregnancy, and Mr Hagan assured me that he would always consider this child to be our child, and that he would support the child regardless.

   52. As to paragraph 39, I admit the matter contained therein.  Given that Mr Hagan has always known the possibility that X is not his biological child, and that he continues to express the desire to maintain a father/daughter relationship with X, the only motivation for him to confirm her parentage is to minimise any property settlement or financial support which he might otherwise be ordered to pay to me.

9. The uncontested evidence is that the respondent voluntarily paid to the applicant a sum of $2,000 per month from separation until 30 January 2013. The respondent thereafter made three further payments in March, April and June 2013 totalling $5,500.

10. The applicant and his brother operated a business through a company known as (business omitted).  To the best of my understanding, (business omitted).  It is clearly a “family business” and these proceedings have previously included other parties including Mr Hagan, “(business omitted)”, “(business omitted)” and “(business omitted)”.

11. “(business omitted)” also featured in the evidence in the matter before me but had never been joined as a party.  The respondents, with the exception of the first respondent, were eventually removed as parties.  Suffice to note, for the matter before me, Supreme Court proceedings were conducted between the first respondent and his brother, Mr Hagan, in respect of (business omitted).  Those proceedings were settled by way of a confidential Deed of Arrangement in December 2014 whereby the first respondent received a cash payment of $500,000 but relinquished his entitlement and interest in (business omitted).

12. On 18 December 2014, the first respondent granted his mother, Ms S, an enduring power of attorney in respect of both financial and medical matters.

13. In addition to the payment of $2,000 per month, the respondent provided the applicant with a fully maintained motor vehicle (registered in the name of (business omitted)) and use of an apartment at Property E with all outgoings met by the respondent.  The motor vehicle was withdrawn in November 2014.  The applicant and X remain residing in the Property E apartment.  That property has an agreed value of $1,250,000.

Applicant’s case – Orders Sought

1. The applicant seeks an order whereby she receive the property at Property E unencumbered.

2. The applicant argues her entitlement on the basis of contributions, including direct financial, indirect financial and non-financial during the course of the relationship.  She also argues that she was induced to leave her employment by the respondent who offered her financial support and that her employment prospects are now consequently limited and in a situation where she has the responsibility for the actual and financial support of X.

3. The applicant’s case is based on her understanding and assessment of the property pool in circumstances where she is unrepresented and the respondent has not participated in the proceedings.

4. The applicant did not adduce evidence.  She relied on her trial affidavit of 31 August 2015 together with her initial affidavit of 9 August 2011 and a sworn financial statement of 23 July 2015.

5. The tenor of the applicant’s material together with comments by her in cross-examination suggests that she challenges the bona fide need for the respondent to have a litigation guardian vis-à-vis the respondent’s own more generous position and with the implication being that he has succumbed to pressure from his family, including the litigation guardian, to end what they perceive to be his financial generosity towards the applicant and X.  In her trial affidavit at [64-69] the applicant deposes:

   64.  Prior to Mr Hagan appointing his Power of Attorney, it had always been agreed that X and I remain in the Property E property, where we currently reside, until we had reached a settlement or until after our final hearing.  He had also provided a car as he had three in his possession.

   65.  Once he had appointed his mother as Power of Attorney, circumstances changed immensely. 

   66.  On the 16 November 2014 I was pulled over by the police and told that I was driving an unregistered car, the car being a (vehicle omitted), which came as a complete surprise as I had paid the registration on the due date which was the 5^th October.  After ringing VicRoads, I was told that a written request had been received on 10^th November 2014 to cancel the registration.  I was never informed of this.

   67.  On the 2 December 2014 I received an email from Ms S informing me that a rental contract had been but (sic) in place for the Property E property I currently reside (sic) and I was to vacate the premises.  She referred to me as being a “squatter” and a “freeloader” and that “things have changed”.  Annexed hereto and marked with the letter “B”

   68.  On the 15^th December 2014 emails then started again from Ms S, this time regarding the car.  This was now sitting in the garage as the registration had been cancelled.  Her emails were demanding I hand over the car.  She threatened to call the police and stated “police have an effect on children” Annexed hereto and marked with the letter “C” When I spoke to Mr Hagan regarding this he just kept repeating, it was not him doing any of this but his mother.

   69. Mr Hagan eventually came to get the car.  I was informed by both Mr Hagan and Ms S that the car would be getting fixed and returned to me however this still has not happened.  I have been left without a car, I currently am driving a relatives (sic) car, which they lent to me.  It is my understanding that Ms S currently drives one of the cars, which were in Mr Hagan’s possession, and this is a (vehicle omitted).  Mr Hagan recently told me Ms S gave her car to a family member.

6. At [71-72] of the affidavit the applicant deposes:

   71. On the 4^th December 2014, I was copied in on an email sent by Mr Hagan to X’s school informing them she would no longer be attending due to Mr Hagan’s financial situation.  This was a private school that Mr Hagan had previously insisted X attends and agreed to pay for.  This was a very difficult time and X did not understand why she had to leave a school she had been at for four years.

   72.  Soon after the email was sent, Ms S rang and informed me that it was her who sent the email to the school to remove X and said words to the effect of “I’m knocking you off your pedestal”.

7. At [74] the applicant says:

   74. The emails from Ms S continued and on the 4 February 2015 I received one email advising me that she would be at the property to change the locks and that I was to have all my belongings removed from the premises. Annexed hereto and marked with the letter “D”.  I rang Mr Hagan after receiving this and he advised me he could do nothing about it.  This was not a decision he wanted and it was up to his mother. 

Respondent’s Case – Orders Sought

1. The respondent argues that the application be dismissed and that there be no alteration of property interests between the parties.  More particularly, he argues that the applicant should not be entitled to any further adjustment of assets. 

2. The respondent argues a significantly greater financial contribution by him, both initially and during the course of the relationship.  Further, he argues to significant post-separation contributions to the applicant and X. 

1. The applicant says that he has significantly greater future needs than does the applicant.  He says that he has an inability to work and earn an income to support himself.  He says that he is 10 years older than the applicant who can more readily re‑establish herself financially than he can. 

The Relevant Law

1. Section 90SM of the Family Law Act 1975 (Cth) (“the Act”) (as amended) provides for the alteration of property interests following the breakdown of a de facto relationship.

2. S90SM(3) stipulates that a Court must not make an order altering property interests unless it is satisfied that, in all the circumstances, it is just and equitable to do so.

3. S90SM(4) provides:

   In considering what order (if any) should be made under this section in property settlement proceedings, the court must take into account:  

   (a)  the financial contribution made directly or indirectly by or on behalf of a party to the de facto relationship, or a child of the de facto relationship:

   (i)  to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them;  or

   (ii)  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 de facto relationship 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 de facto relationship, or a child of the de facto relationship:

   (i)  to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them;  or

   (ii)  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 de facto relationship or either of them;  and

   (c)  the contribution made by a party to the de facto relationship to the welfare of the family constituted by the parties to the de facto relationship and any children of the de facto relationship, 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 de facto relationship;  and

   (e)  the matters referred to in section 90SF(3) so far as they are relevant;  and

   (f)  any other order made under this Act affecting a party to the de facto relationship or a child of the de facto relationship;  and

   (g) any child support under the Child Support (Assessment) Act 1989 that a party to the de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the de facto relationship.

4. The matters that are to be considered pursuant to s90SF(3) of the Act are:

   (a)  the age and state of health of each of the parties to the de facto relationship (the subject de facto relationship ); 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 de facto relationship 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

   a)(e)  the responsibilities of either party to support any other person; and

   (f)  subject to subsection (4), 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)  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

   (i)  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 de facto relationship 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 90SM in relation to:

   (i)  the property of the parties; or

   (ii)  vested bankruptcy property in relation to a bankrupt party; and

   (o)  the terms of any order or declaration made, or proposed to be made, under this Part in relation to:

   (i)  a party to the subject de facto relationship (in relation to another de facto relationship); or

   (ii)  a person who is a party to another de facto relationship with a party to the subject de facto relationship; 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

   (p)  the terms of any order or declaration made, or proposed to be made, under Part VIII in relation to:

   (i)  a party to the subject de facto relationship; or

   (ii)  a person who is a party to a marriage with a party to the subject de facto relationship; 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

   (q)  any child support under the Child Support (Assessment) Act 1989 that a party to the subject de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the subject de facto relationship; and

   (r)  any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and

   (s)  the terms of any Part VIIIAB financial agreement that is binding on either or both of the parties to the subject de facto relationship; and

   (t)  the terms of any financial agreement that is binding on a party to the subject de facto relationship.

5. The process for Trial Judges in property settlement matters has been clarified by the recent High Court decision in Stanford v Stanford.[6]  It had previously been generally accepted that the Court was to follow a four (or perhaps three) distinct step process as indicated in a long line of Full Court cases including Hickey v Hickey and the Attorney General for the Commonwealth of Australia (Intervener).[7] That stilted approach saw the Court firstly, determining the pool of property including assets, liabilities and financial resources and then attributing value to each. The Court would then consider the contribution factors under s.79(4)/90SM(4) of the Act to make a preliminary finding on the alteration of the parties’ property interests. The third step comprised of a consideration of the relevant factors under s.75(2)/90SF(3) of the Act to determine whether any further adjustment should be made in favour of either of the parties accordingly. Fourthly, as evident in decisions such as Russell v Russell[8], the Trial Judge would “stand back” and consider whether the proposed orders, following the consideration of contributions and s.75(2)/s90SF(3) factors, were “just and equitable” as required by s79(2) / 90SM(3) of the Act.

   [6] [2012] HCA 52

   [7] (2003) FLC 93-143

   [8] (1999) FLC92-877

6. Following Stanford (supra) the approach for the Court is more holistic, with the requirement of justice and equity pursuant to s.79(2)/90SM(3) permeating the entire intellectual and statutory process. The High Court noted and emphasised that s.79(1)/90SM(1) provides that the Court may make such order as it considers appropriate.  And it is therefore proper to commence any such consideration by addressing whether it is just and equitable to make any property settlement or alteration of property interest between the parties.  This consideration is not to be “conflated” by reason of the abovementioned “staged process” by simply addressing the contribution and the s.75(2)/90SF(3) factors.

7. The Court identified three fundamental propositions which provide the framework for the power to make orders under s.79/90SM.  Firstly:

   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 property.

8. Secondly, and whilst observing that s.79 of the Act and s.90SM confers a broad power in a Court:

   Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is “just and equitable” to make the order is not to be answered by assuming that the parties’ rights to or interests in marital property are or should be different from those than then exist. All the more is that so when it is recognised that section 79 of the Act must be applied, keeping in mind that “community of ownership arising from marriage, has no place in the common law”. Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common, are to be “decided according to the same scheme of legal titles, at equitable principles as govern the rights of any two persons who are not spouses.”

9. The question presented by s.79 is whether those rights and interests should be altered.

10. Thirdly, the Court in determining whether the making of an order for property settlement is “just and equitable” must not begin from the assumption that one or other party has the right to have the property of the parties’ divided between them, or has the right to an interest in marital property, which is fixed by reference to the various matters (including financial and other contributions) set out in section 79(4). The majority of the High Court said:

    To conclude that making an order is “just and equitable” only because of and by reference to various matters in section 79(4) without a separate consideration of section 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.

11. Final submissions of Counsel for the respondent in this matter referenced Stanford (supra) in arguing that there be no orders for the alteration of the parties’ property interests. My understanding, however, is that the argument is based more on the arguable assertion that the applicant should simply retain the benefits already received by her rather than any argument that justice and equity demand that there be no alteration of the property interests of these parties per se.  In any event, and if I am incorrect in this assumption, I am satisfied that justice and equity is readily and easily satisfied in the factual platform now before me and consideration should properly be given to altering such property interests.  This is a de facto relationship that commenced in 2004.  There was a child born during that relationship.  Property was accrued during the relationship.  The applicant alleges contributions by her throughout the relationship.

12. I must therefore make the following considerations:

    (a) to identify the pool of property being the existing legal and equitable interests of the parties in that property.  For these purposes, superannuation entitlements are to be treated as property;

    (b) to consider, pursuant to s.79(2)/90SM(3), whether it be just and equitable to make any order altering the interests of the parties in their property;

    (c) if the answer to (b) is in the affirmative, then the Court must attribute value to the constituents of the property pool;

    (d) to identify and attribute weight to the various contributions of the parties within the meaning of ss.90SM(4)(a)–(c) and make an assessment as to the entitlements of the parties based on their contributions.

    (e) to identify any relevant matters under ss.90SM(4)(d)-(g) including the matters referred to in s.90SF(3) and then determine whether any further adjustment is appropriate following the contribution based entitlements of the parties; and then

    (f) the Court should still reference s.90SM(2) in considering whether the proposed orders be “just and equitable” per se.

13. The respondent asserts the property pool inclusive of superannuation to comprise the following:

ASSETS
Property E	$1,250,000.00
Property S	$1,450,000.00
Respondent's (omitted) Bank account	$131,000.00
Respondent’s second (omitted) bank account	$626.00
Total Assets	$2,831,626.00
LIABILITIES
Mortgage – Property S	$295,000.00
Taxation liabilities 2012, 2013 and 2014	$25,269.00
Net Tangible Assets	$2,511,357.00
SUPERANNUATION ENTITLEMENTS
Respondent – self managed fund	$1,500,000.00
Applicant – (omitted) Super	$34,202.00
NET PROPERTY INCLUSIVE OF SUPERANNUATION	$4,045,559.00

1. The applicant does not take issue with the above although she asserts there to be other assets of the respondent.  Valuations in respect of the real property were provided by experts on affidavits read into evidence.

2. There are two remaining issues in respect of the components of the property pool.  Firstly, the applicant claimed in her evidence that the respondent has a half-interest in a property at Property P.  She says that she and X lived there for a number of months and that the respondent would visit for three or four days per week.  She has no knowledge of the value.  She did not produce any evidence as to the respondent’s title to or interest in the property.  The litigation guardian simply denied any knowledge of any such interest by the respondent.  She does, of course, hold his power of attorney and was able to identify and provide valuations in respect of the other assets.  We do not operate in an inquisitorial system.  To the contrary, the Court makes findings of fact and attributes weight to controversial evidence in doing so.  Put simply, a party who makes an assertion of fact has an onus of proof, albeit only on the balance of probabilities.  Whilst being sympathetic to Ms Cross’ predicament in conducting a trial of some complexity and having a lack of experience and expertise in the forensic requirements of preparing a trial, it is not for the Court to speculate on the evidence.  As such, I am not satisfied that Ms Cross has proven her assertion on the balance of probabilities and in the face of the blanket denial by the litigation guardian.

3. Secondly, Ms S, the litigation guardian, volunteered in evidence that her son, the respondent, held an interest in a property known as “Property R” which I understand to be the premises occupied by (business omitted).  She volunteered a value of $9 million to that real estate.  Nevertheless, her affidavits do not refer to that property in any way as an asset of the respondent.  In later evidence, the litigation guardian volunteered that the bank held a mortgage to roughly the same value as the property and hence, I assume, she leaving it out of the list of valuable assets because she says it has no equity.  Frankly, the evidence in respect of this property is less than satisfactory.  The applicant mentions “Mr Hagan’s interest in (business omitted), property and related entity” in her case outline filed 11 September 2015 although again the applicant herself adduces no evidence to prove her assertion.  Nevertheless, the respondent himself swore a financial statement on 22 February 2012 where he attributes a value of $4,050,000.00 to his 45% interest in the property which accords with the evidence of Ms S as to value.  The respondent then deposes to a mortgage liability for him of $3,862,800.  There is therefore an equity of $187,200 for the respondent in the property.  This is the best evidence before me and I will include this sum in the property pool.

4. Consequently, I am prepared to accept the property pool as set out above and inclusive of superannuation but with an additional sum of $187,200 as the respondent’s equity in the Property R property giving total net tangible assets of $2,698,557 and a net pool inclusive of superannuation of $4,232,759.

Contributions

1. It is clear that the respondent made a superior initial contribution to the property pool. The respondent’s unchallenged evidence is that he brought the following into the relationship: 

   ·Property E, with an estimated equity of $700,000;

   ·Block of land at Property K unencumbered with a sale price in 2008 of $800,000; 

   ·Interest in the company (business omitted) (comprising 10 per cent interest in the business entity and 45 per cent in the property at Property R1), estimated at $500,000, being respondent’s entitlement upon his resignation and relinquishing of his interest in the business entity but retaining his interest in the real estate. 

   ·Interest in Property R2 (commercial property), with an estimated value of $1 million (property sold and proceeds paid into the respondent’s superannuation fund during the relationship).

   ·Share portfolio, $600,000. 

   ·Superannuation, $140,000. 

2. The agreed evidence of the parties now appears to be that the applicant was possessed of the following assets and liabilities as at the date of commencement of cohabitation: 

   ·motor vehicle, $4000E. 

   ·Lump sum payment from cessation of employment, $10,000. 

   ·Credit card liability ($3000). 

   ·superannuation, estimated at $30,000. 

3. The parties agree that the respondent was the primary and perhaps sole financial provider during the course of the relationship and that he did so in a generous fashion which endured post separation.  The respondent achieved a considerable income from his business interests during the relationship, at least until the severance of his business relationship with his brother.  Further, the Property K property was sold for $800,000 in 2008 with the proceeds being put towards the purchase of another property at Property S in April 2008 and for a purchase price of $1,200,000.  That property now has an agreed value of $1,450,000.

4. The nature of the respondent’s business enterprises and activities was that the parties enjoyed benefits such as company motor vehicles and the payment of domestic expenses. 

5. The respondent has also been generous in support of the child X. That financial support continued after the parties’ separation. Nevertheless, the evidence of the applicant is that the respondent accepted and treated X as his own and continued to do so post separation.  She was, therefore, for all intents and purposes, a child of the relationship, albeit not the respondent’s biological child.  The applicant’s evidence suggests that the respondent, in fact, has been desirous of continuing his relationship with X, both actually and financially, but has succumbed to family pressure to sever the relationship.  Significantly, he continued to spend regular time with X until only shortly before this matter coming on for trial.  I accept the applicant’s evidence in this respect given the absence and reluctance of the respondent to appear in Court.  It follows that the “generosity” of the respondent in respect of X is, in my view, voluntary and gratuitous, and his contributions in this sense, when claimed in respect of a property settlement, must be seen in such a context.

1. Counsel for the respondent, in her helpful written final submissions, purports to argue the respondent’s post-separation support on a mathematical basis.  I am not persuaded by such an approach and it is flawed on a number of bases.  In particular, in allocating dollar values to items such as accommodation, council/water rates/insurances, applicant’s living expenses, telephone bills, motor vehicle, etcetera, the respondent is simply, in my view, giving an estimate as to the applicant’s ongoing living expenses post separation (given no evidence as to any accrued savings by the applicant) in circumstances where this applicant might reasonably have had a confident expectation of an interim spousal maintenance entitlement if such voluntary payment had not continued. 

2. The applicant here has the responsibility for the care of a young child.  Her unchallenged evidence is that she relinquished her own employment at the commencement of her relationship with the respondent at the respondent’s request and instigation.  Notably, the applicant did not make an application for interim spousal maintenance and clearly was not so inclined given the voluntary support afforded her and X by the respondent following separation until relatively recently and, indeed, continuing in the form of use of the Property E apartment (despite evidence that the respondent’s mother/litigation guardian has endeavoured to remove the applicant and X from that accommodation).

3. The respondent’s “mathematical argument” is further flawed in that it proceeds to the point where the respondent says that the applicant has achieved any “entitlement” by way of the financial benefits provided to her since separation.  Such an argument does, of course, neglect any expectation that the applicant may have had ongoing support in the period following separation.

4. In this sense, the respondent argues that the Court should make no further alteration of the parties’ property interests on the basis that the applicant has no further entitlement.  Counsel for the respondent refers to the well-known decision of the High Court in Stanford[9] (supra) where their Honours observe:

   Where the making of property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them, or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in S79(4). 

   [9] [2012] HCA 52 at [40]

5. Nevertheless, and despite the tenor of the respondent’s argument, the applicant was effectively unchallenged, or at least not successfully challenged, on her assertions as to her own contributions during the relationship.  Specifically, the property at Property S was registered in the sole name of the applicant upon its purchase. This was done for advantageous tax benefits to the respondent.  In my view, this represents a contribution by the applicant.

6. At [13] of her trial affidavit, the applicant deposes that she “used my money to pay for some of my personal expenses because I felt bad that Mr Hagan was paying for everything for us.”  I accept this as evidence of the applicant contributing to the household expenses generally from her pre-cohabitation assets rather than the proposition put in cross-examination and submissions by Counsel for the respondent that the applicant retained her pre-cohabitation assets for her own benefit.

7. The unchallenged evidence of the applicant in her trial affidavit at [10] is: 

   As to paragraph 10 I say that I was working as a (occupation omitted) at (employer omitted) we had a new manager who was horrible and I was not enjoying work.  Mr Hagan and I discussed this in great detail, and he kept insisting that I resign as I had just received my long service leave (which was approximately 3 months pay at $60,000 gross per annum) and in his view there was nothing to keep me there.  Mr Hagan kept saying words to the effect of, “Why are you staying there?  You don’t have to work.  I will support you.”  I felt uncomfortable with the idea of being supported by someone else as I had always been financially independent, and this caused arguments between us.

8. I am satisfied that the relatively minimal direct financial contribution by the applicant during the course of the relationship should be seen within the context of the above paragraph.  Mr Hagan was not at Court to challenge that evidence.  I accept, therefore, that he was, at the very least, complicit in the applicant leaving her employment and relinquishing her financial self-sufficiency.  It then becomes disingenuous to criticise the applicant for not making direct financial contributions.  Whilst it is true that the respondent’s own financial contribution was substantial and generous, justice is not afforded the applicant in such a situation by criticism of her.  In fact, there is further evidence which is unchallenged as to the applicant’s contributions during the relationship.  Specifically at [14] of her affidavit.  She says:

   I did not consider myself “out of work” as it was a joint decision made by Mr Hagan and I that I cease working on the basis that he earning (sic) a significant income and wanted to support me.  I also performed various tasks for the (business omitted) business during this period, including participating in employee interviews with Mr Hagan and his brother Mr J, drafting the staff handbook (a process which took approximately six months), reviewing systems for staff and introducing new HR policies to the staff.  I was regularly in attendance in the business and the staff knew me well and would often consult with me, and I also accompanied Mr Hagan on business trips until early in my pregnancy.  I was not paid for this work but Mr Hagan continued to support me.

9. At [55] the applicant deposes:

   I deny the contents of paragraph 43 and refer to paragraph 14 herein.  Mr Hagan had business cards made for me.  Even after we separated in June 2009, Mr Hagan and his brother Mr J continued to contact me for advice regarding HR issues.

10. The circumstances of the care of X by the applicant and the acceptance of X into the household, noting that she carries the surname of the respondent, also constitutes a contribution by the applicant.  In summary, the applicant asserts that the respondent wanted the child as a part of the family unit.  He agreed for X to carry the surname “Hagan”.  The respondent was supportive of the applicant during her pregnancy and following.  The applicant’s unchallenged evidence at [50] is:

    When I found out I was pregnant, I telephoned Mr Hagan at work to tell him.  I was worried about who the father was and did not know if I could go through with the pregnancy in light of this issue, and I expressed my concerns to Mr Hagan.  I wanted to discuss this with him in detail, but he insisted that we have the baby and said (regarding her parentage) words to the effect of “we will never know”.  He immediately told everyone that we were having a baby.  I recall him proudly announcing my pregnancy at our annual (omitted) party a short time later.

11. And at [51]:

    I felt that I had no input in the decision about whether or not to continue with the pregnancy and Mr Hagan assured me that he would always consider this child to be our child, and that he would support the child regardless.

12. I am also of the view that it is disingenuous of the respondent, accepting the unchallenged evidence of the applicant above that he insisted on the continuation of the pregnancy and to offer and afford the applicant financial and emotional support, but then to claim this as a contribution.  I am of the view that the respondent did, in fact, make such contributions but was complicit (if not the sole instigator) in placing the applicant in the situation where she could not financially support herself and the child without such assistance.

13. I note at this point an obvious diminishing of the asset pool from those assets held by the respondent at the date of commencement of cohabitation and, in particular, the apparent removal of his share portfolio of $600,000 but, also significantly, the fact that the respondent received a lump sum payment from his brother in December 2014 of $500,000.  The only inference available to me is that these funds were retained by the respondent.  His bank account balance, however, as at the date of the trial some 11 months later is $131,626 or a diminishing balance of approximately $370,000.  The respondent has, of course, continued to be generous towards the applicant in the form of support.  But in my view, this does not explain the expenditure of some $370,000 in a period of 11 months.  An explanation was, in fact, volunteered by the litigation guardian, Ms S, who is the respondent’s mother, where she offered evidence that the respondent spends approximately $23,000 per month on his drug habit.  When challenged as to the source of these funds, the litigation guardian volunteered that “the respondent has his own money”. 

14. These circumstances cause some concern for the Court and in respect of the property pool given that the litigation guardian also holds Powers of Attorney for the respondent in respect of both financial and medical matters.  Indeed, she purports to act as his litigation guardian here in order to support and maintain his financial entitlements.  I can only comment that it seems unusual for a person to hold powers of attorney in respect of both financial and medical issues and to allow the expenditure of $23,000 per month on illegal drugs that apparently debilitate the respondent to the stage that he is unable to attend at a Court hearing and to put argument and/or challenge the evidence and argument of the other party.

Conclusion - Contributions

1. The respondent made the overwhelming initial contribution in what was not a lengthy relationship but noting that it is now some eleven years since its commencement.  He was also the sole direct financial contributor during the course of the relationship.  The respondent has contributed to the needs of applicant and the child post separation, albeit in circumstances where the applicant prima facie had an arguable case for interim financial support.  Consequently, I place some considerable weight on the contributions by the respondent to the property pool as it now sits and to the support of the applicant and X, although I am able to find that his acceptances of responsibilities towards both the applicant and X were voluntary and at his instigation and insistence as, for example, I accept the unchallenged evidence of the applicant that it was the respondent who urged her to give up her own employment.

2. Contrary to the argument of Counsel for the respondent, I am of the view that there were considerable contributions by the applicant to this relationship, although clearly not in the same dollar terms as that of the respondent.  The applicant made a relatively small initial financial contribution but which I am satisfied was generally put towards the expenses of the family unit.  As such, I reject the submission of the respondent’s Counsel that the applicant’s funds at the commencement of cohabitation were used for selfish purposes only.  Further, the applicant contributed indirectly by allowing her name to be registered on the title as sole proprietor of a property of substantial value which in turn provided the taxation advantages to the respondent or his umbrella of companies.  Notably, that property has increased in value by more than $200,000 since purchase.  I am also satisfied that the applicant contributed directly and indirectly to the respondent’s businesses during the course of the relationship in the terms of her unchallenged evidence.  She provided direct bookkeeping and administrative services.  She provided support for the respondent in his endeavours.  I am satisfied on the evidence that she was primarily responsible for the homemaker and parenting roles with X.

3. Nevertheless, the respondent’s contributions remain overwhelmingly substantial and, taking all of these matters into account, I am satisfied that it is just and equitable to alter the property pool by 85 per cent of value to the respondent and 15 per cent to the applicant on the basis of contributions. 

Section 90SF(3) Factors

1. The applicant is employed casually from which she derives an income of approximately $32,600 per year.  I am satisfied that the applicant was persuaded and induced by the respondent to leave the full time employment she enjoyed at the commencement of cohabitation.  The applicant has the responsibility for the care of X and the respondent appears to have voluntarily ceased spending time with the child over the last couple of months and immediately before the commencement of this trial.  This, therefore, places a more onerous responsibility on the applicant.

2. There is no evidence that the applicant has re-partnered. 

3. The respondent claims to suffer ill health.  Nevertheless, no evidence was adduced to allow me to make positive findings accordingly.  I am satisfied that he is not currently in the workforce, but cannot be satisfied that he is disabled for employment.  I accept that he suffers a drug use problem to the extent of spending some $23,000 per month on illicit substances.  I note that, in this respect, his mother holds Powers of Attorney separately in respect of both the respondent’s financial and health issues.  Some may question the adequacy of her attendance to those responsibilities given the respondent’s excessive spending on illicit drugs which was evidence volunteered by the litigation guardian herself.  The respondent has a lengthy and successful work history and I am not convinced on the evidence that he does not have the capacity as a 50 year old to return to productive employment.  Notably, no medical evidence was adduced as to any disability for employment.

4. Further, the respondent has some considerable wealth.  He has superannuation entitlements of $1,500,000 and a 45 per cent interest in the property on which his former business operates.  That property has a value of $9 million although the best evidence before me is that it is heavily mortgaged and I can only assume that any rental received is put directly to the mortgage.

5. In summary, I am not satisfied that the respondent does not have the capacity to be employed at least to a reasonable remuneration level.  Ms Cross has the responsibility for the care of a young child. She does not have the superannuation resources of the respondent.

6. I must further consider whether there is any other fact or circumstance which, in the opinion of the Court, justice requires to be taken into account in altering the parties property interests.  The litigation guardian’s own evidence suggests a wanton or reckless wastage of the asset pool on the part of the respondent by reason of his expenditure on illegal drugs.  He claims to no longer derive an income although, as mentioned above, no evidence of sufficient probity was adduced to show a lack of capacity.  Nevertheless, he has an apparently longstanding and continuing drug habit on which he spends $23,000 per month.  In December 2014 he received $500,000 from the business settlement with his brother.  The best evidence is that those funds now sit at $131,000 or a diminishing of some $369,000 in a period of some 12 months.  Simple mathematics would total the expenditure on drugs during that period at $276,000.  This represents some 11 per cent of the tangible net asset pool or almost 7 per cent of the total property pool inclusive of superannuation.  I am satisfied that this is “wastage” of the property pool of the type contemplated in Kowaliw & Kowaliw[10] and where the applicant bears no responsibility. 

   [10] (1981) FLC 91-092

7. I have also considered the principles in Robb & Robb[11] in respect of the generous support afforded X during the course of the relationship and following.  The distinction is, of course, between legal obligations (as per the applicant) and voluntary support (as per the respondent).  The factual platform here, however, is blurred to a large degree by my findings that it was the respondent himself who, according to the applicant, “insisted” on the pregnancy continuing and X being accepted as the child of the family unit by the respondent.  The distinction between the facts here and those in more normal circumstances such as Robb is a fine but important one.  This was not a situation imposed on the respondent simply by reason of him entering a relationship with a woman who had a child.  This child was born during the relationship and carries the surname of the respondent.  He was, at least, proactive and probably “insistent” on the creation of this circumstance. I am of the view that for the respondent to (but according to the applicant, more likely his family) now claim a contributory benefit within the considerations under s.90SM(4) of the Act to be disingenuous and does not result in justice and equity in all of the circumstances.

   [11] (1995) FLC 92-555

8. Given the relative financial circumstances of the parties (even after my orders) and my findings as to their capacity for employment, together with the responsibility of the applicant to care for X, and with the findings as to the respondent’s “wastage” cause me to conclude that there should be a further adjustment to the applicant pursuant to section 90SF(3) of the Act of 12.5 per cent of the property pool.

9. In this respect, I do not see it necessary to differentiate between the tangible assets and the superannuation entitlements. The respondent’s superannuation entitlements are considerable and certainly so relative to the minimal superannuation entitlements of the applicant. The evidence suggests the large increase in the respondent’s superannuation entitlement, which has occurred since the commencement of the relationship with the applicant, to have been the result of the sale of capital assets. Although the respondent is some years from being able to crystallise his superannuation, it remains a significant “resource” for his future support.  The authorities make it clear that it is proper for the Court to “treat superannuation as if it were property” for the purpose of exercising s.90SM of the Act.[12] Neither of the parties in this matter seeks a splitting order in respect of the respondent’s superannuation entitlement.  It is clearly a form of a self-managed fund.  Given the respondent’s tangible asset wealth, I am content to treat his superannuation entitlements accordingly.

   [12] C & C (2005) FLC 93-220

Conclusion

1. Consequently, on the consideration of contributions and s.90SF factors, the applicant would receive 27.5 per cent of the property pool.  I have found the pool to have a value, inclusive of superannuation, to have a value of $4,232,759.00. An entitlement of 27.5 per cent gives the applicant value of $1,164,009.00.

2. I am mindful that the applicant seeks an order that she retain the Property E property which has a value of $1,250,000.00. She will retain her own superannuation of $34,202.00. Consequently, I will order that this property transfer to the applicant upon her paying the respondent a sum of $120,193.00 and I will allow her a reasonable period of 90 days in order to obtain finances accordingly.  In the meantime I consider it proper that the applicant and X have a continuing right of residence in that property provided that the applicant meets the payments of the utilities. If, however, the applicant is unable or unwilling to make the cash adjustment on the respondent then the orders will make provision for the respondent to settle the sum of $1,129,807 on the applicant.

I certify that the preceding eighty-one (81) paragraphs are a true copy of the reasons for judgment of Judge McGuire

Date: 9 February 2016