Davalos & Davalos & Ors
[2015] FamCA 679
•18 August 2015
FAMILY COURT OF AUSTRALIA
| DAVALOS & DAVALOS AND ORS | [2015] FamCA 679 |
| FAMILY LAW – PROPERTY – Settlement in relation to marriage – Where the husband and wife were married for approximately 52 years and have raised four adult children – Where the parties accommodation during almost the entirety of the marriage was provided by the wife’s father – Where significant income has come to the wife from her father but the level of such income was unable to be quantified – Where the contributions overall were found to be 55 percent by the wife and 45 percent by the husband – Where the parties are aged 80 and 79 years and are retired – Where the wife has gifted approximately $800 000 to the parties’ children without the husband’s consent – Where the husband has had the benefit of various sums of money including a portion of his superannuation, proceeds of the sale of shares and a rental benefit – Where a $64 250 adjustment in favour of the husband is appropriate taking account of the relevant s 75(2) matters – Where an order is made for the wife to receive 55 percent less $64 250 and the husband to receive 45 percent plus $64 250 of the available property and superannuation. FAMILY LAW – PROPERTY – Where the husband sought a declaration pursuant to s 78 of the Act against the second respondent – Where the second respondent sought summary dismissal of the husband’s application – Where the orders sought by the husband were dismissed. |
| Family Law Act 1975 (Cth) – ss 75(2), 78, 79 Evidence Act 1995 (Cth) – s 128 |
| Calverley v Green (1984) 155 CLR 242 Kyriakos & Kyriakos & Anor (2013) 51 Fam LR 197 Kowaliw & Kowaliw (1981) FLC 91-092 Martin & Martin (1959) 110 CLR 297 Stanford v Stanford (2012) FLC 93-518 |
| APPLICANT: | Mr Davalos |
| 1st RESPONDENT: | Ms Davalos |
| 2nd RESPONDENT: | Mr A Davalos |
| 3rd RESPONDENT: | Ms B Davalos |
| FILE NUMBER: | SYC | 6919 | of | 2011 |
| DATE DELIVERED: | 18 August 2015 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Johnston J |
| HEARING DATE: | 5, 6 & 7 February 2014 and 4, 5 & 13 August 2014 and 17 December 2014 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Lloyd, SC |
| SOLICITOR FOR THE APPLICANT: | Blanchfield Nicholls Partners |
| COUNSEL FOR THE 1ST RESPONDENT: | Mr Batey |
| SOLICITOR FOR THE 1ST RESPONDENT: | Delaney Lawyers |
| SOLICITOR FOR THE 2ND RESPONDENT: | Mr Holmes of KD Holmes Solicitors |
| SOLICITOR FOR THE 3RD RESPONDENT: | Mr Holmes of KD Holmes Solicitors |
Orders
That the husband’s application for a declaration pursuant to s 78 of the Family Law Act 1975 with respect to shares in the company C Pty Ltd be dismissed.
That the application at paragraph 7 of the husband’s Application in a Case filed on 25 February 2014 be dismissed.
That the husband and the wife do all things and sign all documents necessary to cause the money in the joint controlled money account ($1 419 972) to be paid as follows:
- $1 410 110 to the husband; and
- $9862 to the wife.
That within 42 days the wife do all things and sign all documents necessary to transfer to the husband her right, title, shares and interest in the company Davalos Pty Limited.
That forthwith upon the transfer referred to above the wife shall sign all documents necessary to resign as a director of Davalos Pty Limited and relinquish any rights she might have as director.
That the husband shall indemnify and keep the wife indemnified from and against all liability arising from any assessment or amended assessment of income tax, fines, penalties and/or interest as may issue in respect of the wife’s receipt of any money or obligations or liability she has including any liability of the wife to the Australian Taxation Office however such liability arises in relation to her connection with and in respect of any tax, penalty and interest arising from the husband’s dealings with the Davalos Pty Limited Superannuation Fund and Davalos Pty Limited.
That the wife shall indemnify the husband from and against the liability of $534 000 owed to the wife by the husband for the purpose of reducing liabilities owed by Davalos Pty Limited.
That otherwise the parties are each declared the sole owner of all other property and superannuation in their possession and/or control respectively.
That if either party fails or neglects to sign any document pursuant to these orders the registrars of this Court at Sydney shall be appointed pursuant to s 106A of the Family Law Act 1975 to sign such document in the name of that party and to do all things necessary to give validity or operation to the document.
That the Court certifies for Mr Holmes as counsel.
That all exhibits be released.
That all parties have leave to relist these proceedings by arrangement with Johnston J’s associate […] in relation to the implementation of these orders.
That these orders not commence operation until 3 September 2015.
That all parties have leave to relist these proceedings by arrangement with Johnston J’s associate […] not later than 2 September 2015 for the purpose of further submissions in relation to the form of the orders only.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Davalos & Davalos and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 6919 of 2011
| Mr Davalos |
Applicant
And
| Ms Davalos |
1st Respondent
And
| Mr A Davalos |
2nd Respondent
And
| Ms B Davalos |
3rd Respondent
REASONS FOR JUDGMENT
Introduction and Applications
The previously married parties in these proceedings are Mr Davalos and Ms Davalos. For convenience I shall refer to them individually as “the husband” and “the wife”. Generally I shall refer to them as “the parties”. They have been unable to resolve their dispute about matrimonial property and have asked this Court to determine a property settlement for them.
Two of the parties’ children are also parties in these proceedings. Mr A Davalos and Ms B Davalos are the second and third respondents respectively.
The orders sought by the husband are to the following effect:
·That pursuant to s 78 of the Family Law Act 1975 (Cth) (“the Act”) the Court declares that the 10 000 ordinary shares held in the name of Mr A Davalos in the company known as C Pty Ltd are beneficially held in the names of the husband and the wife as tenants in common in equal shares;
·That upon the making of such declaration each of the parties forthwith do all things and sign all documents necessary to sell such shares for the best price reasonably obtainable and to retain the net proceeds of sale in equal shares; and
·That taking account of the above order, orders be made which would have the effect of dividing the pool of available property and superannuation between the parties in equal shares taking account as against the wife of all gifts made by her to the parties’ children.
The husband had also sought an order in his Application in a Case filed on 25 February 2014 at paragraph 7 as follows:
·That the following transactions entered into by the wife be set aside:
(a)Payment to Ms B Davalos in the amount of $200 000 on 17 May 2011; and
(b)Payment to Ms B Davalos in the amount of $200 000 on 24 June 2011.
Very late during the submissions by learned senior counsel for the husband, it appeared to me that paragraph 7 of the Application in a Case was no longer being pressed.
The wife seeks orders to the following effect:
·A superannuation splitting order so that the husband would be entitled to be paid 100 percent of the wife’s interest in the Davalos Pty Limited Superannuation Fund;
·That the wife transfer to the husband her interest in Davalos Pty Limited together with machinery orders to effect such transfer;
·That the husband indemnify the wife against all liability arising in relation to her connection with the husband’s dealings with the Davalos Pty Limited Superannuation Fund and Davalos Pty Limited;
·That the wife indemnify the husband against the liability for $534 000 owed to her by the husband for the purpose of reducing liabilities of Davalos Pty Limited;
·That the husband provide to the wife a full accounting of the sale of the 4WD motor vehicle in 2009 and pay to her an amount equal to the value of same;
·That the husband pay to the wife his half share of the fees invoiced by Mr D, Mr E and Mr F in respect of their reports prepared for the purpose of these proceedings;
·That each party be declared to be the sole owner to the exclusion of the other of all items of property within their possession and/or control including superannuation, bank accounts, real property, money at bank, shares and the like;
·That each of the parties indemnify the other in respect of any liability in their names respectively save as otherwise provided above;
·That an enforcement order be made; and
·That the husband pay the wife’s costs of these proceedings.
The orders sought by the second and third respondents were to the following effect:
·That the husband’s application for the declaration pursuant to s 78 of the Act be dismissed;
·That the application by the husband to set aside the payments made to Ms B Davalos (as sought at paragraph 7 of the husband’s Application in a Case filed 25 February 2014) be dismissed;
·That the husband pay the costs of the second and third respondents of these proceedings; and
·That the Court certify for Mr Holmes as counsel.
Delay
I very much regret the delay in publishing this judgment which has come about because of the need to hear other pressing cases in this very busy Court.
I appreciate that this delay has probably caused additional worry and uncertainty for the parties and apologise for not having delivered judgment sooner.
Background
The husband, 80 years, is a retired specialist health professional who practised until recently.
The wife, 79 years, is a retired company director.
The parties commenced their relationship as teenagers in approximately December 1954.
In 1955, the wife’s father gifted to the wife properties including; G Street, Suburb H (“G Street”), 1 J Street Suburb H (“1 J Street”) and 2 J Street Suburb H (“2 J Street”). One of these properties comprised 124 acres.
In 1958 the parties married at Suburb I and subsequently commenced to live together. The wedding was funded by the wife’s father.
In November 1958 the husband commenced working full time in a business at K Station. At this time, the parties were living, rent free in the apartment located at L Street, Suburb M owned by the wife’s father. The wife was working full time as a secretary.
In September 1959 the wife ceased work prior to the birth of the parties’ first child, Mr A Davalos who was born in 1959. Mr A is currently aged 55.
The husband commenced his own business in Suburb N in 1960, employing a registered health professional. The wife’s father paid for the fit out and the stock was provided by a large company. The business was opened on or about 20 October 1961.
In 1961 the husband commenced operating a business from O Street, Suburb P, a shopfront owned by the wife’s father.
In 1961 Ms Q Davalos was born. Ms Q is aged 53 years.
On 1 January 1964 the husband completed his professional course and commenced to work in his business on his own account.
From 1964 the parties retained household cleaners and subsequently used nannies for about five years while the children were young.
On 17 February 1965 Ms B Davalos was born. Ms B is now aged 50 years.
On 23 November 1965 the wife’s father purchased a property at R Street, Suburb P (“R Street”) in the wife’s name as a residence for the parties and the children. The property was unencumbered.
In 1966 Ms S Davalos was born. Ms S is now aged 49.
On 31 January 1967 the wife’s father purchased T Street, Suburb U (“T Street”) in the wife’s name as a residence for the parties and the children. The property consisted of three lots and was unencumbered. One of the lots comprised a tennis court. This was subdivided from the other lots and sold. The proceeds were paid to the company V Pty Ltd on 20 December 1968.
In February 1967 the husband commenced full-time study for a degree. He employed a manager for the business and listed it for sale. In mid-1967 the Suburb P business he had been operating was wound up but he did not receive any funds from its sale. In late 1967 the primary business was sold and the proceeds of sale were applied towards family expenses.
Between 1967 and 1972 when the husband was studying for his degree he worked part-time three nights a week (approximately 20 hours per week).
In December 1967 part of G Street was transferred to the RTA for $1.
In December 1968 the parties ceased residing at R Street and commenced to reside in T Street.
In November 1969 W Council paid the wife $900 for part of G Street.
In 1972 the husband inherited part of his father’s estate including a house at X Street, Y Town (“X Street”).
In February 1973 the husband completed his degree. The husband subsequently commenced working at the Z Hospital, working approximately 108 hours per week.
In June 1973 the wife borrowed $7000 from the ANZ Bank secured by mortgage to renovate T Street. Major renovation work was undertaken, including renovating the entire back quarter of the house.
In December 1974 the wife obtained a mortgage secured over T Street for $37 500 from NSW Permanent Building Society. The money was given to the husband.
In May 1975 the wife discharged the ANZ mortgage secured on T Street.
In June 1975 the balance of G Street was sold to the New South Wales Planning and Environment Commission for $301 600 with a $220 000 mortgage back to the wife. The wife received quarterly mortgage repayments with interest over three years.
In November 1975 the wife discharged the mortgage to NSW Permanent Building Society.
In approximately 1977 – 1978 the husband graduated with a Diploma.
On 21 July 1978 the husband sold X Street for $13 000.
In 1978 the parties and the children moved to Country AA to enable the husband to study for graduation as a specialist health professional. The wife and children returned to their home in 1980 and the husband returned in 1982.
In 1980 the wife’s father died. His estate included “The BB Entities”. These comprised the companies BB Pty Limited, BB Holdings Pty Limited and V Pty Limited. The wife became entitled to a portion of her late father’s estate comprising The BB Entities which included V Pty Ltd, BB Holdings Pty Ltd, a property at CC Street, Suburb DD (“CC Street”) and three blocks of land in EE Town. The wife commenced to manage The BB Entities.
In approximately 1980, a boat previously owned by the wife’s father named “FF” was salvaged from having sunk in Sydney Harbour and was subsequently rebuilt under the direction of the husband.
In approximately mid-1980, the husband incorporated Davalos Pty Limited (“Davalos”) with each of himself and the wife holding one share and as directors. This was the vehicle through which he subsequently conducted his practice. At the same time, he and the wife established the Davalos Pty Ltd Superannuation Fund with themselves as trustees and its only members. This was their self-managed superannuation fund.
On 11 June 1982 GG Street, EE Town was transferred to the wife’s mother in accordance with her father’s will.
By 1983 the mortgage on G Street was discharged.
In 1983 the husband graduated with a Diploma as a specialist health professional. The husband subsequently commenced working for other specialists as an assistant and at the end of 1983 he started his own practice.
On 9 May 1983 the wife and her sister Ms HH purchased as equal tenants in common II Street, Suburb JJ (“II Street”) for $159 000. Ms HH owned one third of the property and the wife owned two thirds of the property and received two-thirds of the rental monies.
In 1984 the husband obtained an Australian Diploma as a health specialist and rented rooms in Suburb KK for his consultations with patients. The wife commenced working as the husband’s secretary/practice manager.
On 22 October 1984 the wife’s mother transferred the EE Town property to the parties’ four children in equal shares.
In 1985 the wife inherited part of her mother’s estate including some of the managing shares in “The BB Entities”. A portion of the wife’s entitlement included a one third interest in her mother’s home at CC Street, Suburb DD.
On 30 April 1985 the husband owed the ANZ Bank $31 893.86. On 21 June 1985 a mortgage was secured against the J Street properties in favour of the ANZ Bank. The wife asserted that she obtained the mortgage on account of loans owed by the husband. I accept this. The mortgage was discharged on 18 September 1985.
On 16 October 1985 the parties purchased in their joint names rooms from which the husband could conduct his specialist practice at LL Street, Suburb JJ (“the practice suite”) for $230 000. They moved the files and equipment of the practice to the new rooms over Christmas 1985.
In May 1986 the wife and her sister gave a mortgage against II Street to secure advances made to Davalos from the Commonwealth Bank of Australia (“the CBA”).
In 1986 the husband employed a secretary to manage the patients and records at his practice. The wife’s assistance to the practice from this time was confined to the management of accounts.
In approximately 1986/1987, ownership of the practice suite was transferred to the Davalos Superannuation Fund. The practice took out a loan with the CBA secured by mortgage over T Street. The income from the practice was used to pay the loan repayments and the loan was subsequently transferred to the ANZ Bank.
In 1987 the husband acquired the moulded shell of a 28 foot yacht. He then fitted out the yacht with the assistance of his brother. The yacht was named “MM” and was used by the parties competitively most weekends until 1995.
In July 1987 the wife and her sister entered into guarantees to secure $60 000 for Davalos.
From the late 1980’s the husband was undertaking additional work for the defence forces, approximately one day per week, which he continued for approximately 17 years. He was appointed as a consultant to the NN Hospital at which he undertook emergency work. This work continued until approximately the early 2000’s when the NN Hospital closed. The husband then undertook work for OO Hospital.
In 1990, the husband ceased assisting other practitioners and employed his own assistants for his practice.
In February 1992 the wife sold the properties known as 1 and 2 J Street for $272 500. She received the proceeds of sale.
In 1995, the husband traded in the yacht MM for a larger yacht known as PP. The husband received $100 000 for the trade in, he had won $10 000 in a lottery and paid the balance of approximately $120 000 to finish PP. The parties raced PP until 2000.
In 1995 Mr A became a director and shareholder within The BB Entities. With the wife he established QQ Pty Ltd and the wife was a director.
On 21 March 1995 the wife obtained a mortgage secured on T Street from the CBA for $350 000 and an overdraft facility for $50 000 for the purposes of the practice company Davalos.
Between 1995 and 2000 the parties competed in a major yacht race, sailing PP, with the wife as navigator.
Between 1995 and 2008 the wife received income from The BB Entities which was then being managed by the parties’ eldest son Mr A.
In 1996 the wife retired as director of The BB Entities and subsequently appointed Mr A as the controlling director of the Entities.
On 27 January 1998 the wife’s mother’s house at CC Street, Suburb DD was sold for $655 000. The sale proceeds were invested on behalf of the wife and her sister. Subsequently they divided the proceeds, each receiving approximately $196 000.
In 2000 the parties undertook further renovations to T Street, changing the entire house. Renovations included installation of insulation, new bathrooms and kitchen as well as relocation of some rooms.
In 2000 the small house on the EE Town property was demolished and a new home constructed. The husband and the wife were at issue about their respective contributions to this project. I accept that the wife spent approximately $500 000 on it.
In approximately 2000 the husband purchased a new “PP” racing yacht. The wife had decided to retire from sailing. The new yacht cost approximately $300 000. The husband received $200 000 as a trade in on the original yacht and withdrew an investment from the company V Pty Limited to fund the balance.
In July 2002 the wife discharged the CBA mortgage.
In April 2003, the wife refinanced T Street with a mortgage from the ANZ Bank in an amount of $350 000.
In August 2003 the wife obtained further borrowings secured against T Street by way of an Equity Manager facility of $500 000 which she loaned to RR Pty Ltd. This loan was repaid in full and in addition the wife received $60 000. The wife also borrowed a home loan of $100 000 to assist funding further renovations to T Street.
In May 2004 the wife and her sister Ms HH sold II Street for $690 000 with the wife receiving $370 897.45 from the proceeds of sale.
In August 2005 the ANZ Bank increased the overdraft limit for Davalos from $50 000 to $100 000 for a period of three months.
In January 2006 the ANZ Bank increased the overdraft limit for Davalos from $50 000 to $100 000 for a period of three months.
In October 2006 the ANZ Bank again increased the overdraft limit for Davalos from $100 000 to $150 000 for a period of eight months.
In approximately 2007 – 2008 The BB Entities suffered severe financial loss.
In May 2007 the wife obtained a loan of $500 000 secured by mortgage over T Street and invested the funds into the V Superannuation Fund.
In May 2007 ANZ again increased the overdraft limit for Davalos to $150 000 to 30 June 2009.
In May 2007 the wife entered into a further Bank Equity Manager Facility with ANZ to borrow a further $500 000. The wife used the funds for payment of $400 000 to V Superannuation Pty Ltd and $60 000 towards renovations of T Street.
In November 2007 the wife entered into a guarantee with Westpac Banking Corporation secured over T Street in respect of $435 000 advanced to Mr A as part of a loan of $1 815 000 to enable him to acquire SS Street, Suburb U (“SS Street”). The property was registered in the name of C Pty Ltd, of which Mr A is the sole shareholder and a director.
In December 2007, during the global financial crisis, many of the husband’s patients who had booked appointments cancelled their appointments. The husband completed only three procedures between January and Easter 2008. On 31 June 2008 the ANZ Bank increased the husband’s overdraft limit from $100 000 to $230 000. At this time the husband had a $292 000 bill facility.
The husband’s practice picked up late in 2008.
In 2008 the wife informed the husband that they were going to have to sell T Street because “[Mr A] had lost everything” and that Mr A would vacate SS Street allowing the parties to “take over” the property. Apparently as the controlling director of The BB Entities, Mr A had sold the properties owned by the Entities and invested the funds in units in Perth which were tenanted by government. The units were highly leveraged. The government subsequently vacated, replacement tenants could not be found, revenue to pay the large mortgage became non-existent so the bank took possession and sold the property at a heavily reduced price. Sadly, the BB fortune which had been worth approximately $15 000 000 was lost.
In 2009 the husband received a settlement of approximately $98 000 from a claim he had against a solicitor. The husband used part of the funds to acquire a German motor vehicle.
On 17 April 2009 the wife sold T Street for the sum of $6 450 000.
A net sum of $4 266 316.64 remained after discharge of secured loans including the ANZ Bank debt of $1 099 403.36. A substantial part of this was for money borrowed by the wife on the advice of her financial adviser and deposited to her superannuation fund in 2007. Approximately $447 623 was owed by Davalos for the husband’s overdraft facility. On completion of the sale, monies raised by mortgage to advance to Mr A (approximately $435 000) were discharged. The wife received approximately $4 900 000 from the proceeds.
Upon completing the sale of T Street in April 2009 the parties moved into SS Street.
In approximately 2010 the parties’ daughter Ms Q requested that she be paid her quarter share of the EE Town property. The other three children were unable to raise enough money to pay out Ms Q. The wife therefore gave Ms Q $500 000 and on 10 February 2011 Ms Q’s name was removed from the title of the property.
On 29 June 2010 the wife gifted $200 000 to the parties’ daughter Ms S, without notice to the husband.
On 3 July 2010 the parties separated, living separately and apart at SS Street until the husband moved out in January 2011.
In December 2010 an accident with another boat caused damage to PP. A claim on the insurance resulted in QBE paying to the husband approximately $12 000 to have PP repaired. The husband engaged repairers to complete the repair. The husband was dissatisfied with the repairs. Litigation followed in relation to the repair. This has now been resolved.
On 20 January 2011 the husband moved out of SS Street and commenced to live at his rooms in Suburb JJ. The wife disputes that the husband moved to his rooms and asserts that he commenced cohabiting with Ms VV at her home.
The wife continued to live at SS Street and paid $7500 rent per month to Mr A.
On 21 January 2011 the wife gifted $200 000 to the parties’ daughter Ms B without notice to the husband.
On 17 May 2011 the wife gifted $200 000 to the parties’ daughter Ms B without notice to the husband.
A further amount of $200 000 was given by the wife to Ms B on 24 June 2011 without notice to the husband.
On 10 January 2012 consent orders were made appointing single experts and requiring discovery.
On 18 January 2012 the wife changed the locks to SS Street.
In approximately September 2012 the FF was sold by V Pty Limited for approximately $30 000 net.
On 17 December 2012 consent orders were made providing for partial property settlement of $200 000 to be paid to the husband, sale of the yacht PP, the husband’s prestige motor vehicle and the practice suite.
On 26 February 2013 further directions were made about valuations and sale of boat and car.
On 30 September 2013 consent orders were made fixing the proceedings for final hearing commencing on 5 February 2014 and providing for a further amount of $150 000 to be paid to or on behalf of the husband as partial property settlement (this being a direct payment to the husband of $50 000 and a payment to his solicitors of $100 000).
On 11 October 2013 a divorce decree nisi was granted.
In approximately May 2014 the wife purchased a property at WW Street, Suburb YY as tenant in common with Ms S Davalos and her husband. The wife’s interest as tenant in common is 62.19 percent. It is common ground that the wife’s interest in this property has a value of $1 777 206 and that she borrowed $465 838 from Mr A, Ms S and Ms B Davalos to complete the purchase.
Credit
The husband
The husband was very responsive and articulate in his answers to questions. He was very ready with information which in respect of most matters he gave in a concise manner. He readily conceded that in a couple of instances he had made errors in his affidavit and went on to explain why he had fallen into error.
Unfortunately his initially impressive performance was marred when it became clear that he had told untruths.
The husband was untruthful about the nature of his relationship with Ms VV. He was asked whether Ms VV was his girlfriend and he said she was “a friend”. When asked whether he and Ms VV were going on a ski holiday as partners he said that they were going as “friends” and that there was quite a difference in age between them. He was also asked whether he resided with her and he said that he resided in his professional rooms at Suburb JJ. Yet when the QBE Insurance investigator asked him for his address without hesitation he gave the same address as that at which Ms VV resides. The husband said subsequently that he had only resided at Ms VV’s address for two months.
Even more troubling was the husband’s evidence about the prestige motor vehicle. An interim order made on 26 February 2013 provided for the sale of the prestige motor vehicle registration number ... The husband said in his affidavit as follows at paragraph 187:
As at the date of swearing this affidavit the [prestige motor vehicle] has been sold and the proceeds of sale has been distributed to me in accordance with orders made by this honourable court on 30 September 2013.
There were various paragraphs to the effect that valuations had been obtained, the motor vehicle had been listed for sale and there were mechanical issues which became the subject of correspondence between solicitors. The wife’s solicitors indicated that the wife would agree to selling the prestige motor vehicle for $15 000. Paragraph 197 of the husband’s affidavit was as follows:
When I approached the only remaining purchaser some three months after he made an offer to buy the vehicle he was reluctant to purchase this vehicle and indicated that he was only then prepared to pay $13,750 for the [prestige motor vehicle]. My solicitors wrote to [Ms Davalos’] solicitors requesting [Ms Davalos’] consent to sell the [prestige motor vehicle] for this amount on 30 July 2013.
Paragraph 199 of the affidavit is as follows:
Since initially obtaining an offer to purchase the [prestige motor vehicle] in March 2013 of $15,000, there have been numerous communications and requests received from [Ms Davalos’] solicitors resulting in the acceptance of an offer of $1,250 less than the original offer, despite the legal costs incurred in relation to correspondence about the sale of the [prestige motor vehicle].
The husband was cross-examined about this sale. On 5 February 2014 learned counsel for the wife asked the husband the following question:
Tell me the mistake you may have made in respect of the [prestige motor vehicle]?
The husband replied that he had not made a mistake. It was suggested to the husband that he had sold it to a person with a name like “Hal something”. The husband said he could not remember. The husband was asked “How did he pay you?” The husband replied, “By bank cheque as I – as demanded. A bank cheque was demanded so I got a bank cheque from him.”. Learned counsel asked “Had you ever met this gentleman before?” and the husband said “No”. The husband was also asked “and you’ve still got the car in your garage?” and the husband replied “Yes he hasn’t taken it away which is not what he said he would do.”. The husband was asked whether a Mr XX had given him money for the car and the husband said he had not. The husband was shown the bank cheque and asked whether he knew that the cheque had come from Mr XX’s account. The husband said “No”.
When the matter was again before the Court on 4 August 2014 learned senior counsel for the husband informed the Court that his client wished to change the above evidence. Learned senior counsel sought a certificate pursuant to s 128 of the Evidence Act 1995 (Cth) (“the Evidence Act”) in relation to the further evidence which the husband proposed to give in relation to this matter. A single page, nine paragraph proof of evidence was tendered to the effect that the only interested purchaser was endeavouring to have the price reduced from $13 750 to $12 000. The proof continued to the effect that the husband saw that as an opportunity to keep the car for his grandson and he decided to ring around his friends to raise the agreed sale amount of $13 750. Notwithstanding the husband’s earlier answers to questions concerning a Mr XX he said in the proof that he approached his friend Mr XX to issue a bank cheque to his solicitors to pay out the obligation under the order for sale. The husband said he arranged subsequently to store the prestige motor vehicle for several years at a friend’s barn on a property near YY Town. He said that on the way driving to YY Town he had a car accident and the vehicle was completely destroyed. The husband said further that following the accident the wife called the insurance company and informed them that he was trying to defraud the insurance company with the consequence that they were now resisting payment of the claim.
The husband was cross-examined about the material included in his proof of evidence. It was suggested to him that he had indicated to Mr ZZ that the reason that he was taking the prestige vehicle to YY Town was to hide it from his wife. The husband said on more than one occasion that he did not use those words and that he “told [Mr ZZ] things to that effect but I did not say hide” he said further that Mr ZZ “may have assumed that is what I said, but I don’t remember saying those words”.
Learned counsel for the wife subsequently had played in court an audio recording of an interview between the husband and the insurance company’s investigator, a Mr ZZ. Mr ZZ asked the husband what the reason was for driving the car and storing it at his friend’s property. The husband replied “to hide it from my wife – it’s a red rag to a bull to her”, he said “I just told her I’d sold it, she hates me having anything”. The husband went on to say that the wife did not want him to buy the vehicle and that she had been nagging him for 23 years so he thought he’d just put the thing away for a year. The husband also said during the interview that the car had been insured for $37 000. He said that when he purchased it the list price was approximately $170 000 - $180 000 but that he had a trade-in for between $20 000 and $30 000. The husband also said that he advertised the vehicle for sale but then cancelled the advertisement. He informed Mr ZZ that he had never had any intention of selling the vehicle, that he was trying to play it down a bit, that he had told prospective buyers all sorts of things and just (advertised) it “for sale”. The husband told Mr ZZ that he did not want the wife to know that he still had the motor vehicle because she wanted him to get rid of his boat and his car. The husband also asked Mr ZZ where the information contained in the interview would go and asked whether his wife would be able to find it. Mr ZZ answered no. The husband also said “I’m not a devious person but I’m a little bit devious, I just don’t want my wife to get back as it will complicate my life.”
On a different subject during the husband’s cross-examination on 4 August the husband said he proposed to take a few days holiday at AB Town but would not be undertaking any ski races because he had difficulty with his legs. It was suggested to him that he had registered for races. He replied that that was an automatic entry which flowed through from year to year. On 13 August it was suggested to the husband that in fact during his AB Town holiday he had undertaken skiing races. He said that he had no intention of racing. He confirmed that he had been automatically entered for races and said he undertook one race which involved two runs only because the organisers had asked him to bring up the numbers for the race. He confirmed that he had an injury and that the race involved two runs only.
These matters cause me to have reservations about the reliability of the husband’s evidence.
The wife
The wife was not always responsive to questions during cross-examination. Unfortunately, I had the sense that such is the high level of her antipathy, frustration and bitterness towards the husband that, at times, the wife allowed this to stand in the way of a responsive answer. On such occasions the wife often gave information not relevant to the question asked but which reflected in one way or another some negative information against the husband which presumably she perceived might serve her own case.
The wife also demonstrated far less precision in her recollection of details than did the husband.
Unfortunately, notwithstanding the serious reservations I have about accepting the reliability of the husband’s evidence I really do not have any higher level of confidence about the reliability of that of the wife.
Mr A Davalos
Mr A Davalos gave his evidence in a forthright manner and was responsive in his answers to questions. He has been brought into the contest between his parents because his father is seeking an order against his interests. His interests therefore are adverse to those of his father and supportive of those of his mother.
I regard him as lacking objectivity. He found it difficult to say anything supportive of his father and gave his father close to no credit in terms of having made any contribution as his parent.
Unfortunately, I find myself unable to accept that Mr A Davalos’ evidence is reliable in all respects.
Ms B and Ms S Davalos
These two daughters of the parties filed affidavits and were not cross-examined. Therefore their evidence comes in unchallenged.
Having said this, their mother has gifted to them substantial sums of money. This would appear to be at least part of the explanation for their evidence being somewhat partisan towards their mother.
Ms B Davalos had very little of a positive nature to say about her father. But she said numerous things critical of him. She has an estranged relationship with him. Ms B Davalos said it was her mother who gave her money when she was growing up. She also said that her mother attended to all the domestic duties and that she never observed her father undertake domestic duties.
Ms S Davalos also had little to say in her affidavit that was positive about her father. She was critical of him and highly complimentary about her mother’s contributions to her.
Mr BC
Mr BC was the parties’ accountant between 1983 and 1996 and the accountant for The BB Entities from 1983 until after 1997. He became a director of QQ Pty Ltd.
His evidence came in unchallenged.
Evidence
Counsel for the wife, near the end of his client’s case, sought to tender into the evidence a large box containing what appeared to be a very considerable number of the wife’s cheque book stubs going well back in time. The thrust of this tender was that this was important evidence to demonstrate that the wife had signed cheques for a vast number of items of household expenditure which supported her assertions that she paid virtually the entirety of the family’s living expenses over all the years of marriage.
I rejected this tender because the state of the evidence at that point was that the husband agreed that the usual practice during their marriage was that it was the wife who signed the cheques for household expenditure. The husband also said that during the time when the wife assisted him with administrative work in his practice, she was the person who on almost every occasion signed cheques drawn on the practice account. The husband said that he almost never signed cheques. But he also said that the wife drew cheques on the practice account regularly payable to her own account from which household bills were paid.
I could see no point in accepting such an enormous amount of material which would no doubt simply demonstrate what the husband had conceded, namely that it was the wife who drew the cheques. Accordingly I rejected the tender.
The Husband’s Applications Against Third Parties
As indicated above, the husband seeks a declaration pursuant to s 78 of the Act against the second respondent, Mr A Davalos as follows:
2.That pursuant to s 78 of the Act, the Court declares that the 10 000 ordinary shares held in the name of [Mr A Davalos] in the company known as [C Pty Ltd] being ACN number … and ABN number …, are beneficially held in the names of [Mr Davalos] and [Ms Davalos] as tenants in common in equal shares:
2.1.That upon the declaration sought in Order 2 herein being made, each of the parties forthwith do all things and acts as are necessary to sell the shares in [C Pty Ltd] for the best price reasonably obtainable and to retain the net proceeds of sale in equal shares.
Section 78 of the Act provides that:
(1)In proceedings between the parties to a marriage with respect to existing title or rights in respect of property, the court may declare the title or rights, if any, that a party has in respect of the property.
(2)Where a court makes a declaration under subsection (1), it may make consequential orders to give effect to the declaration, including orders as to sale or partition and interim or permanent orders as to possession.
The basis asserted for the declaration was an advancement of $435 000 by the wife to Mr A.
Background
The relevant background facts relating to this transaction are as follows.
In 2007 Mr A purchased 10 000 ordinary shares in C Pty Ltd, which is the corporate holding for SS Street, Suburb U NSW. Mr A is the director of C Pty Ltd.
The purchase price was $1 725 000 plus the costs of acquisition. To finance the loan, Mr A borrowed $1 815 000 from Westpac Banking Corporation (“Westpac”). To enable Mr A to obtain the loan, the wife provided a bank guarantee for the borrowings which was limited to $435 000, secured over T Street.
In 2009 the wife sold T Street. The guarantee for Mr A’s borrowings was subsequently due for payment and the wife discharged the guarantee with a payment from the proceeds of sale of T Street to Westpac of $435 000.
Mr A gave evidence that he told his mother that he would borrow the money from her; however the wife told him the payment was a gift.
The husband gave evidence that he was aware of the advancement by the wife to Westpac to the credit of Mr A’s home loan. He was also aware that the wife would pay all of the outgoings for the SS Street Property during their occupation.
On 5 February 2014 Mr A filed an Application in a Case seeking summary dismissal of the application for the s 78 declaration.
Mr Holmes appeared for Mr A on 5 February 2014, being the first day of the trial and presented Mr A Davalos’ case for summary dismissal.
The husband opposed the application for summary dismissal and the Court subsequently declined to summarily dismiss the application. Mr Holmes therefore remained appearing for Mr A throughout the trial.
The proceedings did not conclude on 7 February 2014 and were adjourned part heard to 4 August 2014. On 25 February 2014 the husband filed an Application in a Case seeking among other things that:
5. Ms B Davalos be joined as a party to these proceedings.
…
7. That the following transactions entered into by the wife be set aside:
(a)payment to Ms B Davalos in the amount of $200,000 on 17 May 2011; and
(b)payment to Ms B Davalos in the amount of $200,000 on 24 June 2011.
On 5 August 2014, Mr A and Ms B filed a Response to the husband’s Amended Initiating Application seeking:
1.That the Amended Initiating Application of [Mr Davalos] filed 7 November 2013, in so far as it seeks relief set out in Order 2 therein, be and is hereby dismissed.
2.That Order 7 as sought by the Applicant Husband in his Application in a Case filed herein on 25 February 2014 against [Ms B Davalos] be and is hereby dismissed.
3.That the Applicant Husband do pay the Second Respondent’s costs of these proceedings and also the Third Respondent’s costs of these proceedings, such sums to be as agreed between the parties within 14 days of the making of this Order or as assessed.
4.That the Court certify for Mr Holmes as counsel.
Submissions
The following submissions were made on behalf of Mr A Davalos.
With respect to the s 78 declaration sought against Mr A, the transaction was clearly a gift from the wife to Mr A and therefore falls under the law of the presumption of advancement.
It was submitted that where a donor purchases a property in the name of another, or transfers property to another, equity will apply a presumption of a resulting trust with the recipient holding on trust for the donor. However, where the donor and the recipient stand in particular relationships then the presumption is one of advancement rather than of a resulting trust. It was submitted that transfers from parents to their children raise presumptions of advancement. (See Kyriakos & Kyriakos & Anor (2013) 51 Fam LR 197 citing Charles Marshall Proprietary Limited, the Grimsley (1956) 95 CLR 3535.)
It was submitted that the intention of the donor at the date of transfer or advancement is crucial to both the presumption of a trust and its rebuttal. A “definite intention” of the parent to retain beneficial title must be proved. (See Gibbs CJ & Mason, Murphy, Brennan & Deane JJ in Calverly v Green (1984) 155 CLR 242). The underlining presumption of advancement therefore is full legal title and unconditional. The onus rests with the donor to show that another arrangement was intended, namely, a resulting trust. As held in Martin & Martin (1959) 110 CLR 297, it is called a presumption of advancement but it is rather the absence of any reason for assuming that a trust arose or in other words that the equitable right is not at home with the legal title.
In Calverley v Green (1984) 155 CLR 242 it was held that the presumption should be held to be raised when the relationship between the parties is such that it is more probable than not that a beneficial interest was intended to be conferred, whether or not the purchaser owed the other a legal or moral duty of support.
It was submitted that the husband cannot be a “donor” in this situation. The trust alleged by the husband was denied by both the alleged donor and the alleged donee and as such the husband cannot establish the trust.
The wife gave evidence that the provision of $435,000 to Mr A was a gift. She has never claimed any interest in the SS Street Property. The husband conceded that he was aware of the wife’s intention to advance the funds and made no attempts to prevent the wife from doing so.
The evidence shows that the wife had the intention to confer a beneficial interest on her son and that the husband was unable to offer any evidence to rebut the applicable presumption of advancement.
Learned senior counsel for the husband submitted the following.
The evidence adduced through cross examination of Mr A and the wife provides substance to the declaration sought. The husband contended that the evidence would lead the Court to conclude that the true ownership of the property vests in the wife because of her contributions to the property and the lack of evidence supporting the proposition that Mr A has anything other than a legal interest in the property. The husband referred to the way the property was acquired and maintained from the outset.
It was submitted that the relationship that the wife has with Mr A is highlighted by the manner in which he has advanced to her funds set against the background of his inability to maintain himself without employment.
Conclusion
In my view, the evidence before the Court makes it clear that the wife had the intention to confer a beneficial interest on Mr A. The husband failed to put any evidence before the Court which could persuade the Court that there was a resulting trust. The husband has not rebutted the presumption of advancement. Accordingly, in my view, there is no question that Mr A holds the legal and the beneficial interests in SS Street and that his mother gifted him $435 000.
The orders sought by the husband at Orders 2 and 2.1 of his Amended Initiating Application filed 7 November 2013 will therefore be dismissed.
With respect to the husband’s application against the third respondent, being that the two payments of $200,000 to Ms B be set aside, the husband did not press his application for that order. He submitted that the issue could be considered pursuant to s 75(2)(o) in the proceedings between Ms B’s parents.
Gifts by the Wife to Mr A, Ms S and Ms B Davalos
As indicated above the wife has given a total of $1 235 000 to these children ($435 000 to Mr A, $200 000 to Ms S and $600 000 to Ms B).
It was submitted on behalf of the husband that the Court would include these amounts as “add-backs” in the balance street. I indicated at the time that the current state of the law concerning add-backs is not clear to me and that in all the circumstances I would probably prefer to take them into account pursuant to s 75(2)(o) of the Act.
I have decided to take these gifts into account pursuant to s 75(2)(o) of the Act and to make an adjustment pursuant to that provision in favour of the husband of part of the money given to Ms S and Ms B. This is because the wife made these gifts of what in my view was matrimonial property without consulting the husband.
I have a different view in relation to the $435 000 which the wife gave to Mr A. This guarantee was provided by the wife before the parties separated as was the gift constituted by the wife paying to Westpac the $435 000 the subject of the guarantee on Mr A’s behalf. The husband was well aware of these matters. In my view, at the very least he has acquiesced in the advancement of these funds to Mr A which is quite a different situation from that involving the gifts to Ms S and Ms B.
The Applicable Law
Sub-section 79(1) of the Family Law Act 1975 (Cth) provides to the effect that in property settlement proceedings the Court may make such order as it considers appropriate altering the interests of the parties to the marriage in the property.
Sub-section 79(2) 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.
Sub-section 79(4) sets out various matters which must be taken into account in considering what order (if any) should be made under the section. These matters include direct and indirect contributions, financial and otherwise by or on behalf of a party or a child to the acquisition, conservation or improvement of any property of the parties, contributions by a party to the welfare of their family including as a homemaker or parent, relevant matters referred to in s 75(2) and the other matters referred to in s 79(4).
The operation of s 79 was the subject of consideration by the High Court in the case of Stanford v Stanford (2012) FLC 93-518.
In Stanford the majority said (at page 86,640) in referring to ss 79(2) and 79(4) as follows:
35.… the requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
36.The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. … while the power given by s 79 is not “to be exercised in accordance with fixed rules”, nevertheless, three fundamental propositions must not be obscured.
The High Court said that the first of these propositions is for the court to identify, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property.
The second is that although s 79 confers a broad power on the court, it is not a power that is to be exercised according to an unguided judicial discretion. It must be exercised in accordance with legal principles, including the principles which the Act itself lays down.
The High Court said that the third fundamental proposition is that the question of whether the 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 set out in s 79(4). 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.
And the High Court majority went on to say (at page 86,642) as follows:
41.… The fundamental propositions that have been identified require that a court have a principled reason for interfering with the existing legal and equitable interests of the parties to the marriage and whatever may have been their stated or unstated assumptions and agreements about property interests during the continuance of the marriage.
The Parties’ Existing Legal and Equitable Interests in Property
There was issue between the parties in respect of a number of items of property. These were included in the joint balance sheet final version handed up at the time of final submissions.
There was a dispute about items 9 to 13 on the balance sheet. These were as follows:
9.Husband Boat equipment
10.Husband cameras (20)
11.Husband binoculars
12.Husband watches and glasses
13.Wife crystal
There was no evidence in proper form about the value of these items. Learned counsel for the wife submitted that at an early stage of proceedings the wife had endeavoured to have the husband provide values of all these items but notwithstanding her endeavours he never did so.
In relation to the boat equipment, it was submitted on behalf of the husband that this forms part of the value of the yacht ($180 000). I accept this. In relation to binoculars, the husband said he does not have possession of any binoculars. I also accept that the husband has a couple of watches that have not been valued. The husband has a camera which is used for business purposes.
In relation to the crystal, it appears that the items have been unable to be located.
It was submitted that the Court in all the circumstances is entitled to take account of these matters, that is the fact that the husband has items in his possession, although he disputes this, as relevant matters pursuant to s 75(2)(o) of the Act. I shall do so although I have no idea what value these watches and the camera might have.
Item 23 on the balance sheet was what was described as the wife’s interest in SS Street. As indicated above, in my view the wife has no interest in this property, it being registered in the name of C Pty Ltd owned by Mr A Davalos. As also indicated above, I am not persuaded that either the wife or the husband has any equitable interest in SS Street.
Item 24 on the balance sheet were the funds paid by the wife to the parties’ children to a total of $1 235 000. I have referred to this matter above. As indicated, I shall not include the gifts in the balance sheet. But I shall take them into account pursuant to s 75(2)(o) of the Act and make an adjustment in favour of the husband of part of the $800 000 gifted to Ms S and Ms B.
Item 25 of the balance sheet was a loan by the wife to Davalos Pty Limited of $537 000. It was submitted by learned counsel for the wife that at the time of sale of the T Street property the Davalos Pty Limited overdraft was secured on the property in the amount of $447 000. The wife said that the overdraft comprised significant personal expenditure for the benefit of the husband only. She said that in addition she paid a total of $90 000 to the husband which was used for his own personal use with no benefit to her. Upon the settlement of T Street the overdraft had to be cleared. It is submitted on behalf of the wife that $537 000 therefore should be added back into the pool to take account of this loan. I must say that I am far from persuaded that this would be appropriate. There is no evidence that the husband wasted this money. The husband’s evidence was that the business required an overdraft account and this has been a feature of operation of his business over a long period.
Item 31 was the husband’s prestige motor vehicle. It was submitted on behalf of the wife that the Court should attribute the value of $55 000 to this item of property. This was said to be on the basis that the husband said that he had insured the vehicle with QBE for this amount. I have referred in part to the evidence concerning this matter above. There is no evidence in proper form about the value of the vehicle. It is clear that the husband endeavoured to deceive both the wife and the Court about this motor vehicle. The husband has been endeavouring to ascertain from QBE their response to his outstanding claim. So far, QBE have not finalised the claim. The husband also alleges that the wife telephoned an officer of QBE and suggested that the husband’s claim was a sham. This has made the husband pessimistic about his prospects of being able to receive something from QBE for the loss of this vehicle. Doing the best I can in these difficult circumstances and keeping in mind the husband’s deliberate deception in relation to this matter I shall take this matter into account pursuant to s 75(2)(o) of the Act.
The next item in dispute was item 33 withdrawal of superannuation entitlements $112 692. It is clear that in 2011 the husband cashed in $111 000 of his superannuation without consulting or informing the wife. He was unclear about what happened to the funds but said that he followed his accountant’s advice. I shall take this matter into account pursuant to s 75(2)(o) of the Act and make an adjustment in favour of the wife.
The next item is item 34, proceeds of sale of shares sold by the husband from the Ord Minette portfolio – value $38 000. I accept that the husband had the use of these funds and I shall take this into account pursuant to s 75(2)(o) of the Act.
Item 36 was legal fees paid by the husband over and above money received by him as partial property settlement - $121 000. It was submitted on behalf of the wife that these monies should be brought back into the pool of property or else taken into account pursuant to s 75(2)(o). I do not propose to do so in circumstances where the wife has also been able to pay a substantial part of her legal costs from her income and/or savings. It was not suggested that such monies should be treated in the same way. I do not propose to take this into account as submitted.
Item 36A of the balance sheet was the suggestion on behalf of the wife that the husband received a rental benefit because $57 000 has been attributed in the profit and loss statement for Davalos Pty Limited on account of rent which was supposed to be paid by the company to the Davalos Superannuation Fund. It is clear that the rent has not been paid and accordingly it was submitted on behalf of the wife that $109 860 should be added back to the pool of property. I do not propose to do so but I accept that the husband has had a benefit because the rent has not been paid to the superannuation fund. I propose to take this into account pursuant to s 75(2)(o) of the Act.
There are also a number of issues in relation to liabilities.
Item 39 was the wife’s CBA credit card liability of $12 182. It was submitted on behalf of the husband that the Court would not allow this. But I propose to do so on the basis that it is a current liability and in view of the way I propose to treat other liabilities including those of the husband.
Item 41 is one of the most contentious items. It is said that there is a debt owing to the parties’ children for the purchase of the WW Street property, the alleged debt being $465 838. I have not included the total of $1 235 000 in gifts by the wife to the children in the balance sheet and similarly I shall not include this liability. However, in taking account of the gifts pursuant to s 75(2)(o) of the Act, I shall also note this amount of $465 838 as owing to the children.
In my view it is appropriate to include as a liability of the husband the $30 000 which he anticipates will be his solicitor’s costs involved in his District Court proceedings concerning the yacht.
The parties’ interests in property and superannuation are as follows:
$
1. Joint controlled money account
1,419,972
2. Joint furniture and furnishings
10,390
3. Husband’s St George Bank Account 7985 $13 182 (held on trust for his brother)
04. Husband’s St George Bank Account 2388
6,805
5. Husband’s St George Bank Account
12,778
6. Husband’s Sailing Boat “PP”
180,000
7. Husband’s interest in Davalos Pty Limited
0
8. Husband’s household contents
5,000
9. Husband’s trade-in of wife’s Japanese motor vehicle
10,000
10. Husband’s partial property settlement 17 December 2012
200,00011. Husband’s partial property settlement 30 September 2013
100,00012. Husband’s partial property settlement 30 September 2013
50,00013. Husband’s partial property settlement 8 April 2014
180,000
14. Husband’s 50 percent of valuation fees
13,530
15. Wife’s interest in Davalos Pty Limited
0
16. Wife’s household contents
5,000
17. Wife’s funds at bank
7,000
18. Wife’s German motor vehicle
10,000
19. Wife’s 62.19 percent interest in WW Street, Suburb YY property
1,777,206_________
Total
$3,987,681
Liabilities
$
1. Husband’s credit cards
71
2. Husband’s tax implication
23,232
3. Husband’s external liability in excess of assets of Davalos Pty Limited
78,3714. Husband’s District Court solicitors’ costs
30,000
5. Wife’s CBA credit card
12,182
6. Wife’s Capital Gains Tax
20,081
____________
Total
$163,937
Superannuation
$
1. Husband’s Davalos Pty Limited
6,707
2. Wife’s Davalos Pty Limited
578,884
Total
$585,591
This is total property and superannuation with a value of $4 573 272 ($3 987 681 + $585 591 = $4 573 272).
Subtracting total liabilities of $163 937 gives property and superannuation with a net value of $4 409 335 ($4 573 272 – $163 937 = $4 409 335).
Sub-Section 79(2)
In Stanford the High Court majority also said the following (at page 86,642):
42.In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order.
In my view, it will be just and equitable to make s 79 orders in this case. If orders were not made, not only would the many issues between the parties remain unresolved but a considerable injustice would be done to the husband because one of the major assets of the parties, the funds in the controlled money account, would remain joint property and therefore capable of equal division between the husband and the wife.
Contributions
At the date of marriage the husband’s property consisted of some savings. He had no liabilities. Immediately after the honeymoon the husband commenced employment as a pharmacist.
The husband said income from the pharmacy and the laundry went towards family living expenses. I accept this.
At this time the wife owned several properties at Suburb H which her father had given to her of which two were cottages in CD Street and approximately 124 acres of land. The wife’s parents gave the husband and the wife a used motor vehicle as a wedding gift. The wife was working full time as a secretary for a small business.
The husband and wife commenced their married life living in an apartment rent-free at L Street, Suburb M owned by the wife’s father. They continued living in this apartment for several years. As indicated above, after a short time the wife’s father funded the purchase of a home for them at Suburb P. This was subsequently sold and he funded the purchase of T Street, a substantial residence on three blocks of land at Suburb M which became the matrimonial home.
The wife’s case about contributions is that most of the contributions have been made by her or on her behalf. This is on the basis that her father provided the family’s homes and she funded the entirety of the family’s living expenses from monies provided by her parents, particularly her father through The BB Entities.
As I have said, it is clear that at the commencement of marriage the wife owned several properties gifted to her before marriage by her father. There is no issue that subsequently the wife’s father gave homes to the parties culminating in T Street. It is also clear that the wife was in receipt of funds from her father during the marriage. But the quantum of these advances was unclear. There was a real issue in the case about this matter.
Counsel for the wife was able to demonstrate that various bills were paid by the wife from an account in her sole name over a long period. But the husband said that for many years the wife managed his practice and wrote the cheques. He said that she was in the habit of writing cheques to her account from the practice account and that she would pay living costs from her account. He said that he very rarely wrote any cheques.
The husband also conceded that the wife was in receipt of some funds from her father during the course of the marriage and that there was an account in his name into which the wife’s father deposited funds. But he said that this money was not his money but rather that of the wife’s father. He said that the wife’s father operated similar accounts in the names of various family members as a tax minimisation scheme and that to his knowledge the money involved in such accounts was that of the wife’s father not of the person in whose name the account was held. Notwithstanding reservations about the reliability of the husband’s evidence I accept this.
Counsel for the wife challenged the husband to produce documents to support his assertion that the wife drew cheques from the practice account in favour of her own account. The husband said that such activity occurred a very long time ago and that he had been unable to locate any such documents.
The wife managed The BB Entities for 16 years from approximately 1980 until her retirement in 1996.
The rental income from the wife’s Suburb H properties provided the family with some income during the marriage.
In relation to boating, it was also suggested to the husband that boating activity was in the main limited to the husband’s own involvement rather than this being something that the family participated in. The husband denied this and said that the family enjoyed much social activity around his sailing activities particularly at various sailing clubs. He said that the family went on sailing holidays. He said that he built a sailing dinghy for Mr A to sail in and that this dinghy was taken by the family to South Australia for Mr A to compete in a regatta. The husband also said that over many years the wife sailed in his yachts with him as the navigator, including as contestants in three major yacht races. As indicated above, the family also had a motor yacht, the FF, which had been in the wife’s family for many years. This gave the husband, the wife and the children pleasure over quite some years.
In all the circumstances, I am not persuaded that sailing for the Davalos family was an activity limited to providing only the husband with pleasure. But I accept that he was its driving force, major proponent and the family member who has derived the most pleasure from this recreational activity, by considerable measure.
There is no question that the wife has been in receipt of very significant contributions made on her behalf by her father. There were the properties at the outset of the marriage and the two homes in which the parties lived subsequently. Accordingly, apart from money spent by the parties in renovating their T Street home and in maintaining the homes in which they lived over the years, their accommodation during almost the entirety of the marriage was provided by the wife’s father.
I also accept that over most of the marriage and up to the point where the investment of what had been the BB fortune was lost, income came to the wife through the investments initially made by her father. As I have said, a difficulty is that it is impossible to be able to make a finding about the quantification of such income. Some money was received as rents from the properties which the wife owned. A difficulty was that only some of the wife’s income tax returns were before the Court.
There was evidence from Mr A Davalos (in his new affidavit) that when he was in effect the managing director of The BB Entities an income was paid to his mother.
In my view, on the available evidence, what the Court has before it is a situation in which significant income has come in to the wife but the level of this was unable to be quantified.
The wife appeared to be quite resentful towards the husband in a number of respects. Firstly, she described his efforts of earning income as a specialist medical practitioner as “too little too late”. By this I understood her to be expressing her frustration that the husband took some years to qualify as a pharmacist, six years to qualify as a doctor and then a few years for specialist training in Country AA. I interpreted a part of the wife’s frustration about this as being that these were formative years for the children and the sacrifices which had to be made by the family in supporting the husband in his objective were greater than could be justified in all the circumstances. The wife gave me the impression that when the family moved to Country AA to support the husband in his specialist studies this was very disruptive for the family, the children could not settle down, that two of the children really had no alternative than having to return to Australia early and that, all in all, this venture was just too difficult and somewhat counter-productive.
From the husband’s point of view, he had become frustrated early in his career and was desirous of pursuing a significant career change. So he decided to study to become a health practitioner.
Looking at this whole matter objectively, the position was that the husband pursued study and training for his chosen profession over something like twelve years. During that period he was only able to earn income from part time, or limited, employment. He said that he worked both in Australia during his six years of study and in Country AA during the period of his fellowship. I accept this.
In my view, what cannot be denied is that the husband established his specialist practice in 1983 or 1984 and worked in this practice with a great deal of success. There appears to be no issue that over most of the years of its operation, apart from the first couple of years and until recently, the practice was profitable. This was for a period of more than half of the duration of the parties’ marriage.
It was asserted by the wife that notwithstanding the fact that the practice was profitable, the monies earned by the husband from his practice after paying the expenses of the practice were directed by the husband almost entirely to funding his own pursuits particularly his passion about sailing and ocean yacht racing. The husband denied this and said that most of the income from his practice had been spent on family living costs. In my view the wife has not come anywhere near establishing her assertion.
It is clear that this family led a very privileged lifestyle which included education of the children at prestigious private schools, considerable extra-curricular activities, regular holidays involving skiing both in Australia and overseas, a considerable amount of boating and regular holidays at the EE Town property owned by the wife’s father.
I do not accept that the wife funded this lifestyle in its entirety. But, as the wife said, by the time the husband established his specialist practice in 1983 the parties’ youngest child was 17 years of age. And I do accept that for many of the children’s formative and very costly school years the husband was only working part time and income received by the wife was essential in paying the difference between the income earned by the husband and the actual household and educational costs of the family.
Upon the husband establishing his specialist practice there was considerably more money available for the family and as the years went on the practice became successful and profitable.
In any event, even if it was the case that the husband did not earn any income over the period of his specialist training, which I do not accept, this would account for something like, at the most, twelve years out of the parties’ 52 year marriage.
It was also asserted that the husband had very little to do with the children so that, in effect, he has made close to no contribution as a parent. As indicated above, the wife filed affidavits from the parties’ daughters Ms S and Ms B Davalos. Ms S’s affidavit was to the effect that her father’s contribution to domestic duties was minimal, that he did not attend or participate in any of her schooling or extra-curricular events, assist her with homework or assignments and that he was very much an absent figure in her life. She said that her father would only have taken her sailing on ten occasions in her life. On the other hand she said that her mother was extremely involved in her life and undertook all the household duties with the assistance of a cleaner and gardener at times.
Ms B’s evidence was to the effect that she could not recollect her father ever attending a school event, a sporting event or any other activity that she participated in, nor did he assist her with her school work or university studies. She said that he was not a prominent adult figure in her life. She said that on the other hand her mother attended to all the domestic duties, sometimes with assistance of a paid cleaner and gardener.
As was my observation of Ms S, Ms B was ready to describe her father about being passionate about sailing and being extensively involved in sailing.
Mr A was also dismissive in his evidence of any significant contribution by his father as a parent or otherwise.
In relation to the criticism by the wife and the adult children witnesses about the husband’s involvement in sailing, the husband said that while he acknowledged that he has been very involved in sailing and clearly this has involved considerable expenditure over the years, for something like 20 years he was not involved in sailing. He said that these were the years between approximately 1967 and 1987. He said that these years covered that period when he was undertaking study for his degree and specialist qualifications. These were obviously also formative years for the children.
The wife has endeavoured to argue a case to the effect that notwithstanding the fact that during most years of the marriage the husband was employed and earning income, her financial contributions and contributions to the welfare of the family so far exceeded his that the Court should find that his contributions overall were 25 percent.
In my view the wife has failed to establish such a case. True it is that very substantial financial contributions have been made on her behalf through the purchase of properties by her father and the unquantifiable but significant monies that came to her during the course of the marriage. But this was a marriage of approximately 52 years during which for more than three-quarters of those years the husband was engaged in full time employment and he worked at least part time for the balance.
In my view, the law is clear, in that the Court has a duty to consider all the contributions by the parties over the duration of their marriage. True it is that the wife owned significant assets at the outset of the marriage and the properties to which I have referred were provided by her father. But many years have passed since those gifts were received. The Suburb U home has been renovated twice. It is the case that monies for the renovations were also provided from The BB Entities. But the husband was also involved in those renovations.
I am also satisfied that the wife was much more involved in parenting the children than was the husband. But for the Court to find that he did almost nothing in this regard, which was the thrust of the evidence by the wife and also that of three of the children, in my view defies credulity. After all, there was no suggestion that he was not living in the former matrimonial home apart from the period when he was living in Country AA, during part of which the family accompanied him there.
To the extent that the wife appears to hold a strong view that the husband spent most of his income on what she apparently regards as the frivolous pursuit of sailing and yacht racing, the law about such matters is clear in my view. The relevant principles for waste or reckless spending were addressed by this Court in the decision of Kowaliw & Kowaliw (1981) FLC 91-092 where Baker J said as follows at page 76,644:
As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
In my view, in the circumstances of this case, it cannot be said that the husband has wasted family money in the sense recognised by the law.
I accept that the contributions by the wife’s father have been very significant. Firstly, the family has been accommodated by the generosity of the wife’s father initially permitting the parties to live rent free at his apartment at L Street, Suburb U, then giving them the home at R Street, Suburb P and ultimately the very valuable T Street property which not only provided them with accommodation but existed as a valuable asset available for division between the parties.
The contribution of this accommodation and ongoing provision of income to the wife from The BB Entities enabled the husband to pursue his studies. It is noted, as indicated above, that at the time the husband established his specialist medical practice, the youngest child of the marriage was 17 years. So much of the expenditure involved in child rearing including the cost of expensive private schools occurred during the years before the husband really reached his earning potential as a specialist practitioner. It is clear that he earned income during his periods of study. But it is also clear that, particularly during the years prior to 1983 when he established his practice, the family was only able to achieve its privileged standard of living because their accommodation was provided by the wife’s parents and because The BB Entities, really the wife’s parents, provided ongoing significant financial support to the family.
In all these circumstances, in my view, notwithstanding all the financial contributions which have been made, particularly by way of the substantial income earned and benefits provided by the husband’s medical practice, over this very long marriage in excess of 52 years, in my view, it would be unjust for the Court not to make a finding about contributions overall in favour of the wife.
In my view, the wife’s contributions overall have been 55 percent compared with the husband’s at 45 percent what is obviously a differential of 10 percent.
s 75(2) matters
The husband is 80 years of age. He has been suffering from chronic pain in his shoulder for which he receives injections of cortisone to assist with pain management. He requires rotator cuff surgery to his left shoulder. His orthopaedic surgeon informed him that he would be unable to work for six to nine months following such surgery. In any event the husband had formed the view that in all the circumstances he would retire from practising as a plastic surgeon at the end of 2014. The last surgery the husband completed was at the beginning of November 2014. He said the income received from his work does not cover the current expenses and those he expects to incur. He had no further surgeries scheduled for his practice. Accordingly, he will be no longer earning income from his practice and would appear to have to rely on whatever interest he can achieve on money made available to him from these proceedings.
On the other hand the wife is 79 years of age. She suffers from degenerative osteoarthritis. She has had a shoulder reconstruction and knee and hip replacements. During the course of these proceedings she has sustained two falls and undergone surgery to her hip. As indicated above she retired from her position managing the family investment properties involved in The BB Entities almost 20 years ago. She ceased working in the husband’s practice many years ago.
The wife has been receiving income from dividends and interest on the money in the controlled money account. But upon the making of orders this position will become quite different.
There was a somewhat extraordinary submission by counsel for the wife that the husband has a superior capacity to earn income than does the wife. This was on the basis that it was submitted that an examination of the accounts for Davalos Pty Limited demonstrates that the husband’s business doubled its profit in the last two financial years. Although this appears to be true, the profit returned by the practice for the financial year ended 30 June 2014 was $38 711. This compared with a loss of $101 005 for the previous financial year. I say the submission is extraordinary because the husband is 80 years of age and made it clear that he proposed to retire at the end of calendar year 2014. In all the circumstances I do not regard the income earning capacities of the parties as other than the same. That is, they are both retired from income producing endeavour.
I have referred above to the property and superannuation of the parties.
It would appear that the husband is living with Ms VV. The financial circumstances of this are unclear. It also appears that Ms VV owns her own home.
The wife is living at the duplex property at WW Street, Suburb YY which she purchased with Ms S and Ms S’s husband.
I take account of the gifts by the wife to the children. But I also note that the wife owes the children, apparently including Mr A, $435 000 in respect of her purchase of her interest in the Suburb YY property. I shall subtract this from the $800 000 which the wife gave to Ms S and Ms B and regard the wife to have had the benefit of $365 000 ($800 000 - $435 000 = $365 000) of property which would otherwise have been available for division between the parties. Accordingly, I shall make an adjustment in favour of the husband of 45 percent of this which is $164 250.
I take account of the husband having had the benefit of the rent (item 36A above), the proceeds of sale of the shares (item 34), his use of the superannuation (item 33), the fact that he might well recover some money from QBE Insurance for loss of the prestige car motor vehicle and his possession of the watches and camera.
Doing the best I can in difficult circumstances I propose to make an adjustment against the husband of $100 000 to take account of these matters.
Accordingly, the net adjustment in favour of the husband to take account of these relevant matters comes to $64 250 ($164 250 - $100 000 = $64 250).
I also take into account the legal fees paid by the parties. But these are not substantially different and therefore I do not propose to make any adjustment in respect of these.
I also note that the wife has been paying Ms B and Ms S $500 per month to assist payment of their children’s extra-curricular activities and I have taken this into account.
Accordingly, the position of the parties based on contributions will be adjusted by $64 250 in favour of the husband in taking account of the relevant s 75(2) matters.
Conclusion and fourth step
The husband is to have 45 percent of the net property and superannuation which is 45 percent of $4 409 335, namely $1 984 201 plus an adjustment in his favour pursuant to s 75(2) of $64 250. This is $2 048 451.
The husband has the following:
$
1. 50 percent joint furniture and furnishings
5,195
2. St George Bank Account … $13 182 (held on trust for his brother)
03. St George Bank Account …
6,805
4. St George Bank Account
12,778
5. Sailing Boat “PP”
180,000
6. Household contents
5,000
7. Trade-in of wife’s Japanese motor vehicle
10,000
8. Partial property settlements
530,000
9. 50 percent of valuation fees
13,530
10. Superannuation
6,707
Total
$770,015
He also has the following liabilities:
Liabilities
$
1. Credit cards
71
2. Tax implication
23,232
3. External liability
78,371
4. District Court solicitors’ costs
30,000
_____________
Total
$131,674
Therefore the husband has net property and superannuation with a value of $638 341 ($770 015 - $131 674 = $638 341).
To achieve property and superannuation with a value of $2 048 451 the husband would require a payment of $1 410 110 ($2 048 451 - $638 341 = $1 410 110). This would be paid to him from the controlled money account.
On the other hand, the wife is to have 55 percent of the net property and superannuation which is 55 percent of $4 409 335, namely $2 425 134 minus the $64 250 adjustment in the husband’s favour to take account of s 75(2) matters. This is $2 360 884.
The wife has the following property and superannuation:
$
1. 50 percent joint furniture and furnishings
5,195
2. Interest in Davalos Pty Limited
0
3. Household contents
5,000
4. Funds at bank
7,000
5. German motor vehicle
10,000
6. 62.19 percent interest in WW Street, Suburb YY property
1,777,2067. Superannuation
578,884
_________
Total
$2,383,285
Liabilities
$
1. CBA credit card
12,182
2. Capital Gains Tax
20,081
____________
Total
$32,263
Therefore the wife has net property and superannuation with a value of $2 351 022 ($2 383 285 - $32 263 = $2 351 022).
To achieve property and superannuation with a value of $2 360 884 the wife requires a payment of $9862 ($2 360 884 - $2 351 022 = $9862). This would be paid from the controlled money account.
On this basis the husband would have the property and superannuation referred to above and a payment from the controlled money account. He could purchase a modest home from this money or use it for rent or in whatever manner he might desire.
On the other hand, the wife would have her property and superannuation as referred to above. She has her home at WW Street, Suburb YY. My understanding is that she would be able to withdraw her superannuation which would provide funds for payment of her living costs. There was no evidence that the children would press the wife for repayment of the $435 000 owing to them.
In all the circumstances, in my view, the orders I propose will be just and equitable.
I certify that the preceding two hundred and sixty-four (264) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Johnston delivered on 18 August 2015.
Associate:
Date: 18 August 2015
Key Legal Topics
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Family Law
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Civil Procedure
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Appeal
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