Dorney and Dorney
[2007] FMCAfam 617
•12 September 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DORNEY & DORNEY | [2007] FMCAfam 617 |
| FAMILY LAW – Property settlement – gambling losses – where wife asserts that her losses did not exceed $10, 000, but where finding that losses amounted to approximately $170,000 – where no evidence that wife's gambling was pathological in nature – where wife simply denied of the quantum of the losses and that she had a serious gambling problem – where court required to determine quantum of wife's gambling losses – standard of proof regarding quantum of gambling losses – consideration of guidelines in Kowaliw (1981) FLC 91-092 – whether wife should bear the entirety or some other proportion of her gambling losses – whether husband acquiesced in wife's gambling losses – whether husband had a duty to protect wife from any weakness of character that might have predisposed her to financial irresponsibility. |
| Family Law Act 1975 (Cth) |
| Aleksovski (1996) 20 FamLR 894 Baxendale (2006) FamCA 883 Brandt (1997) 22 FamLR 97 Brice (2007) FamCA 170 Briginshaw (1938) 60 CLR 336 Browne v Green (1999) FLC 92 C & C (1998) 23 FamLR 291 Chorn & Hopkins (2004) FLC 93-204 Kennedy & Cahill (unreported – 1996) Appeal No NA44 of 1995. Judgment date: 8 August 1996 Clauson (1995) FLC 92 Collins (1990) 14 FamLR 563 Crampton (2006) FLC 93-269 D & D (2005) FamCA 35 De Angelis (1999) 30 FamLR 304 Dickson (1999) 24 FamLR 460 Donnelly (2000) FamCA 387 Farmer & Bramley (2000) 27 FamLR 316 Ferraro (1993) FLC 92-335 Gill (1984) 9 FamLR 969 Hickey (2003) FamCA 395 Kowaliw (1981) FLC 91-092 Lee-Steere (1985) FLC 91-626 Levinson (2003) FamCA 937 McMahon (1995) FLC 92-606 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 Norbis (1986) FLC 91-712 Omacini (2005) FLC 93-218 OSF & OJK (2004) FLC 93 Pastrikos (1980) FLC 91 Plummer & O’Connor (1998) FamCA 53 Prestwich (1984) 9 FamLR 1069 Russell (1999) FLC 92-877 Townsend (1994) FLC 92 VJ & CJ (1997) 22 FamLR 166 Waters & Jurek (1995) FLC 92 Whitely (1996) FLC 92 |
| Applicant: | MS DORNEY |
| Respondent: | MR DORNEY |
| File Number: | MLM 8254 of 2006 |
| Judgment of: | Walters FM |
| Hearing date: | 15 June 2007 |
| Date of Last Submission: | 15 June 2007 |
| Delivered at: | Melbourne |
| Delivered on: | 12 September 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr Scriva |
| Solicitors for the Applicant: | Gleeson & Co |
| Counsel for the Respondent: | Mr Houlihan |
| Solicitors for the Respondent: | Ballards Solicitors |
ORDERS
The husband pay to the wife’s solicitors, the sum of $148,313.00 (“the payment”) on or before the 12 day of November 2007 (“the date”).
Contemporaneously with the payment:
(a)the wife do all such acts and things and sign all such documents as may be required to transfer to the husband at the expense of the husband all of her right, title and interest in the real property situated at and known as W (“the real property”); and
(b)the husband indemnify the wife against all payments and liability pursuant to any mortgage and all apportionable rates, taxes and outgoings of or with respect to the real property of whatsoever nature and kind.
In the event that the whole of the payment has not been made by the date then the real property be forthwith sold altogether out of Court (“the sale”), and upon completion of the sale, the proceeds of the sale be applied:
(a)first to pay all costs, commissions and expenses of the sale;
(b)secondly, to discharge the mortgage and any other encumbrance affecting the real property;
(c)thirdly, so much of the payment as is then outstanding (together with interest thereon at the rate set out in the Family Law Rules, adjusted monthly from the date) to the wife; and
(d)fourthly, the balance to the husband
Pending the payment or completion of the sale:
(a)the husband have the sole right to occupy the real property and, during such right of occupation, the husband pay all instalments pursuant to the mortgage and all rates and taxes and like apportionable outgoings of the real property as they fall due;
(b)the parties hold their respective interests in the real property upon trust pursuant to these orders; and
(c)neither party encumber the real property without the consent in writing of the other party.
Each of the husband and the wife shall be entitled to recover 50% of the loan of $20,000.00 made by the parties to J and N.
Each of the husband and the wife shall be entitled to recover 50% of the loan of $60,000.00 made by the parties to C and C.
Unless otherwise specified in these orders, and save for the purposes of enforcing any monies due under these or any subsequent orders:
(a)each party be solely entitled to the exclusion of the other to all superannuation and other property (including choses-in-action) owned by or in the possession of such party as at the date of these orders;
(b)monies outstanding to the credit of the parties in any bank account are to become the property of the husband;
(c)insurance policies remain the sole property of the owner named therein;
(d)each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders; and
(e)any joint tenancy of the parties in any real or personal estate is hereby expressly severed.
Each party pay his/her own costs of and incidental to the within proceedings.
The application of the wife filed on 7 June 2005 otherwise be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLM 8254/2006
| MS DORNEY |
Applicant
And
| MR DORNEY |
Respondent
REASONS FOR JUDGMENT
Introduction
The only significant dispute in these property settlement proceedings concerns the wife's gambling activities. The parties are unable to agree upon the extent of the wife's gambling on poker machines, and the financial consequences of her actions in that regard. Nor are they able to agree upon the manner in which the Court should deal with the wife's gambling and its consequences in the context of the overall exercise that must be performed in determining what final property settlement orders are just and equitable.
The parties agree – in the broadest sense – that:
… but for the wife's alleged wastage by gambling, there ought to be an equal division of the matrimonial property.[1]
[1] See wife's closing submission, paragraph 1
Thus, the issues for determination are:
(a)to what extent were the parties' assets depleted by "waste" (that is, by the wife's gambling activities); and
(b)subject to the Court's finding in relation to (a) above, how should the parties' remaining assets be divided between them?[2]
[2] See husband's closing submission, page 1
Short history
The husband was born in 1941. He is now 66. The wife was born in 1945, and is now 61.
The parties commenced cohabitation shortly prior to their marriage in June 1964.
They separated in May 2004. There had been an earlier period of separation in 2001 or 2002 (after the wife made a “confession” to the husband regarding her gambling[3]), but the parties reconciled after a few weeks.
[3] See wife’s affidavit sworn 17 April 2007, paragraph 17
There are three children of the marriage, all of whom are now adults.
Having regard to the concessions made during the course of the trial, there is no need to dwell on the financial and other contributions made by the parties during the course of their relationship. Suffice it to say that neither party had any significant assets at the time of the commencement of the relationship, and that both worked hard (in paid employment and within the household) while they lived together.
After living in rented accommodation and with the husband's parents for a relatively short period, the parties purchased a house in B. Some 12 years later, they sold the B house and purchased another house in W. The family then lived in the W property until the parties separated in May 2004. The husband still lives there.
The wife is presently employed – on a casual basis – as a packer and machine operator. The husband works as a hospital porter on a part-time basis.
During the course of the relationship, the parties (or one or other of them) received "injections" of funds from various sources, including inheritances, a workers compensation payout and a retrenchment package. The fate of the funds received from such sources is disputed. In broad terms, the husband asserts that a significant proportion of these funds (and, no doubt, other funds as well) were squandered by the wife as a result of her gambling activities. The wife asserts that all relevant funds (save for an amount of approximately $10,000.00) were spent in a wholly unremarkable way – including on holidays, family functions, home renovations, furniture and the like.
The wife admits that she spent approximately $10,000.00 on gambling between 1999 and 2001. She otherwise denies that she wasted large sums on gambling. As will become apparent during the course of these Reasons, I do not accept the wife's evidence in relation to her gambling. I have no doubt that her losses far exceeded $10,000.00.
Of importance in these proceedings is the fact that the wife does not assert that her gambling amounted to an addiction. In other words, there is no evidence that could support a finding to the effect that the wife's capacity to control her gambling was diminished by illness of any sort.[4] Relevantly, there is no medical or other expert evidence to suggest (for example) that:
a)the wife's gambling was pathological in nature;
b)she believed (whether rationally or irrationally) that she would recover the losses caused by her gambling; or
c)some significant (or even insignificant) physical, psychological or emotional factor caused her to gamble, made her more susceptible to it or otherwise served to excuse her from having to bear responsibility for her gambling losses.
Indeed, the wife's case was conducted on the basis that she did not have a serious gambling problem, and that her losses could not fairly be categorised as unreasonable.
[4] See Crampton (2006) FLC 93-269 at paragraph 46
I shall return to this subject later in these Reasons in the light of certain arguments raised in the wife’s closing submission.
Documents relied upon
The wife relies upon the following documents:
(a)her case outline (filed 18 April 2007);
(b)her application filed 7 June 2005;
(c)her affidavit (in answer to specific questions) filed 22 May 2006;
(d)her affidavits sworn 31 May 2006 and 17 April 2007; and
(e)her financial statement sworn 17 April 2007.
The husband relies upon the following documents:
(a)his outline of case document (filed 18 April 2007);
(b)his response filed 19 August 2005;
(c)his request to answer specific questions filed 9 November 2005;
(d)his "list of documents to be produced" filed 9 November 2005;
(e)his affidavit (in answer to specific questions) filed 7 July 2006;
(f)his affidavit sworn 3 April 2007;
(g)his financial statement sworn 13 June 2007; and
(h)an affidavit sworn by the parties' son-in-law, Craig Parsons on 18 April 2007.
A number of schedules were handed up during the course of the trial, and a number of exhibits were tendered.
Both parties provided the Court with written closing submissions.
I shall refer to the husband's closing submission as "CSH", and the wife's closing submission as "CSW".
Orders sought
In broad terms, the wife seeks orders to the effect that the parties' property be divided equally between them. She argues that there should be no "add backs" or adjustments made to reflect or otherwise take account of her gambling losses.
The husband seeks orders to the effect that, once the Court has determined the quantum of the wife's gambling losses, then that amount should be added back into the pool of property available for distribution between the parties and deemed to have already been distributed to the wife.[5] In other words, and by way of example, if the Court were to find that the wife's gambling losses amounted to approximately $100,000.00, then the husband's half share of the currently available property should be increased by $50,000.00 and the wife's half share of the currently available property should be decreased by the same amount.
[5] CSH page 5
The Law
The general approach that should be adopted by the court in relation to a property settlement application has been described in many cases[6]. The court must first identify the property of the parties. It must then attribute a value to each item of property – usually as at the date of the hearing. Thereafter, it must assess the extent of each party’s contributions under the various sub-headings described in section 79(4) of the Family Law Act. Finally, the court must consider the financial resources, means and needs of the parties, and the other matters set out in section 75(2) so far as they are relevant. An adjustment of the amount due to each party by way of contribution is then made by reference to the section 75(2) factors. It is not essential, however, that such an adjustment take place. Generally speaking, an adjustment is made because one party has greater needs and the other has stronger means.
[6] See, for example, Pastrikos (1980) FLC 91-987, Lee-Steere (1985) FLC 91-626, Ferraro (1993) FLC 92-335, Clauson (1995) FLC 92-595 and Whitely (1996) FLC 92-684
In relation to the
contributioncontributions of the parties under section 79(4) generally, it has been held that a “global” approach will usually be more convenient than an “asset by asset” approach – although the application of an asset by asset approach does not (of itself) amount to an error of law[7].[7] See Norbis (1986) FLC 91-712
The section 75(2) factors are related to the process of arriving at a just and equitable result. It follows that there may be circumstances in which the justice and equity of the case, and the specific provisions of section 75(2), support an adjustment in a party’s favour for matters which cannot comfortably be described as being of financial or economic significance[8].
[8] See McMahon (1995) FLC 92-606 at 82,043
Under section 79(2), the court is required to be satisfied that the property settlement orders that it proposes to make are just and equitable – and not simply that the underlying percentage division of the net value of the parties’ property is appropriate. In other words, in the consideration of whether the overall result of property settlement proceedings is just and equitable, it is the justice and equity of the actual orders, and not of the percentage distribution, which must be considered[9].
[9] See Russell (1999) FLC 92-877
The overall process to be applied in property settlement cases is summarised by the Full Court in Hickey (2003) FLC 93-143, where their Honours said:[10]
The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case…
[10] At paragraph 39
My view is that the testing of any proposed orders by reference to section 79(2) is not a fourth substantive step (properly so called) in the property settlement exercise.[11] In applying s.79(2), the Court has power to adjust the form, structure or balance (for want of a better description) of the orders that it is minded to make in order to give effect to its conclusion as to the parties’ respective entitlements after the application of the first three steps mentioned in Hickey. In other words, the determination of the proportional or other distribution or division of the parties’ property between them must necessarily be concluded before the court considers the justice and equity of the actual orders that are to be utilised to give effect to that distribution or division.
[11] See OSF & OJK [2004] FLC 93-191
In Brice (2007) FamCA 170, Kay J suggested – in a passage that is clearly obiter – that section 79(2) is itself a source of substantive power. His Honour continued[12];
If the sum of the parts created by section 79(4)(a), (b) and (c) contributions and section 79(4)(e) considerations adds up to too much or too little, then further adjustments may be made in order to meet the over-riding dictate that an order must not be made unless it is just and equitable.
[12] At paragraph 19
In Baxendale (2006) FamCA 883, however, Faulks DCJ said[13];
If the judge has properly carried out his or her functions in determining the factors under section 79(4) (including those applicable factors under section 75(2)), the result overall should be just and equitable within the terms of the Family Law Act 1975. Accordingly, if a judge on reviewing his or her deliberations in relation to the first three stages concludes that the result does not appear to accord with justice and equity, then it is likely that the earlier adjustments were wrong. This fourth stage is really a description of a judicial thought process rather than a third discretionary phase. I do not accept the proposition that there is a third discretionary phase un-associated with contributions and/or the financial circumstances of the parties (or the other matters under section 79(4)) which somehow permits a judge in accordance with his or her conception of justice and equity to vary determinations otherwise properly made in accordance with the first two discretionary assessments.
I accept that in some cases there may be a minor adjustment required, for example to enable a cash-poor litigant to retain some real estate when he or she has no capacity to make any payment to the other party. For
Frommy part, it seems to me that even that sort of adjustment is more appropriately incorporated into the first two discretionary phases.[13] In paragraphs 105 & 106
For the reasons that I set out in OSF & OJK (2004) FLC 93-191 (and, in particular, in paragraphs 26 to 28 thereof), I prefer the analysis of Faulks DCJ in Baxendale to that of Kay J in Brice.
At the end of the day, though, the precise nature of the final step or stage in the property settlement exercise is of no significance in the present case. It is enough to record that the process involves the Court metaphorically “stepping back” to consider whether the proposed orders (arrived at after the application of the first three steps described in Hickey) are just and equitable.
The parties’ credibility and approach to the proceedings
The husband
I paid careful attention to the husband as he gave his evidence.
He remained calm, his comments were balanced and he answered questions in a clear, direct and appropriate manner. There was a candour in his evidence that was often missing from the wife’s evidence. I am satisfied that he was endeavouring to assist the Court, and that his evidence reflected that desire.
The husband was neither vindictive nor prone to exaggeration. Significantly, he was prepared to give credit to the wife when it was due.
The husband is a relatively uncomplicated man (and I mean no disrespect to him by the use of that term). I find that he lacked the emotional strength and verbal acuity to confront the wife in an effective and constructive manner regarding her gambling activities.
I accept that the husband initially trusted the wife (or wanted to trust her) and that, when he realised that moneys were missing, he found himself unable to discuss the subject with her. He felt that he had no choice but “to keep the money tree going” (to use the husband’s words). In other words, he felt powerless to prevent the wife from dissipating the family’s available funds (or a substantial proportion of those funds).
Overall, I was impressed by the husband as a witness. I find that he is a witness of truth.
The wife
I also paid careful attention to the wife as she gave evidence. Although she remained relatively calm, she was not candid. She appeared wary throughout her evidence, and was guarded in her comments. Some of her answers were non-responsive, and much of her evidence was vague and difficult to follow.
Having seen and heard the wife, I accept that the husband would not have found it easy to confront her in relation to her gambling activities. The wife’s verbal skills are better than those of the husband, and she appears to have a strong and forceful personality.
Overall, I am not prepared to accept the wife’s evidence where it conflicts with that of the husband. Further, I find that she has not been open and frank with the Court in relation to the details of her spending for the purpose of gambling.
Some examples of the type of conduct or demeanour described in the previous three paragraphs are as follows:
a)The wife’s evidence regarding the venues at which she gambled was vague and unpersuasive. She seemed inexplicably hesitant to identify the venues that she had attended – notwithstanding her primary assertion that she had spent no more than a total of approximately $10,000.00 on gambling.
b)The wife had been asked to identify any other people who had accompanied her to gambling venues.[14] She refused to answer the question.[15] During her oral evidence, she said that she sometimes went to a gambling venue with “C” and that she had refused to identify her because C was “too frightened to come to court”. The wife gave no satisfactory explanation as to why C might have been too frightened to give evidence, or, indeed, as to why she could not have disclosed C’s details in her answers to specific questions.
[14] See husband’s request to answer specific questions, question 20.
[15] Wife’s answers to specific questions, answer 20.
c)It was impossible to understand the wife’s attempted explanation regarding the manner in which she spent an amount of nearly $31,000.00 during a relatively brief period in or about late 2000 (after she had returned from an overseas holiday and whilst the husband remained in I).
d)
The wife (who is clearly an intelligent and articulate person) simply made up some of her evidence as she went along (as it were). She seemed to have adopted an approach which involved being as vague as possible, and thereafter effectively challenging the husband to demonstrate that her vagaries could not be correct. A good example of the wife’s approach in this regard is contained in paragraphs 17 to 26 (inclusive) of the wife’s affidavit sworn
17 April 2007, and in her answers to specific questions numbered 2, 5, 7, 11, 15, 18 and 19. I find that the wife’s answers to these questions were inadequate and non-responsive.
e)The wife’s attempted explanations regarding the number and frequency of withdrawals from the joint bank account were tortured and unpersuasive. One of the passbooks relating to the joint account was tendered as exhibit H1. It reveals 21 cash withdrawals between 1 May 2001 and 22 May 2001. Most of the withdrawals were for amounts between $200.00 and $400.00. Thus:
i)On 2 May 2001, the wife made one withdrawal of $400.00 and another of $500.00.
ii)On 3 May 2001, the wife withdrew $7,400.00.
iii)
On 7 May 2001, the wife made four withdrawals –
of $300.00, $200.00, $500.00 and $200.00 respectively.
iv)
On 10 May 2001 the wife made three withdrawals –
of $300.00, $500.00 and $200.00 respectively.
v)
On 11 May 2001, the wife made three withdrawals –
of $500.00, $500.00 and $200.00 respectively.
vi)
On 21 May 2001, the wife made two withdrawals –
of $400.00 and $150.00 respectively.
The wife also conceded that she made a total of 27 cash withdrawals in May 2001, totalling $17,150.00. She said that she made the withdrawals personally from the Post Office, and that she did not use an ATM.
f)The schedule comprising Annexure SD11 to the husband’s affidavit sworn 3 April 2007 reveals that the wife’s pattern of making a large number of withdrawals of relatively significant amounts of money on a very frequent basis was not confined to 2001, and continued from at least August 2000 to late 2002. Beyond conceding that specific days when she made three separate cash withdrawals were “probably pokies days” and that (later in her evidence) days reflecting multiple cash withdrawals were “probably because of pokies”, the wife did not concede that her estimate of total gambling losses of approximately $10,000.00 was on the low side. I find, however, that the wife was well aware that she had spent very large sums on gambling, and I do not accept her explanations regarding the manner in which she spent the funds that were available to her. Indeed, at the most basic level the wife was unable to give any satisfactory explanation as to why she found it either necessary or convenient to make so many or such frequent cash withdrawals.
g)In paragraph 17 of her affidavit, the wife said:
The husband has alleged that I wasted large sums of money on gambling during the marriage. Save that between 1999 and 2001 I spent approximately $10,000.00 on gambling, I deny the husband’s allegations. In 2001, I confessed to the husband that I spent money on gambling. I made this confession to the husband at a time when I was overcoming my gambling problem. The husband and I separated for a few weeks in 2001 as a result of that issue. However, once we reconciled in 2001 I have refrained from any significant expenditure on gambling.
h)The wife was asked about the above paragraph in cross-examination. She said that she had been spending money on poker machines for 2 years leading up to her “confession” and that she “just wanted to get it over with”. When pressed about her own description of her activities as a “gambling problem”, the wife attempted to distance herself from the words that she had used, and variously said that her gambling was “getting to be a problem” or that it “could have become a problem”. I am satisfied, however, that the wife well knew she had a serious gambling problem at the time she made her “confession” to the husband, and that she has at all relevant times sought to minimise the extent or scale of that problem.
i)The wife’s attempt to respond to C’s affidavit (C is the parties’ son-in-law) was difficult to follow, and less than persuasive. She eventually said:
I agree with what C said because he doesn’t like to think that he wasn’t paying his way.
j)It is hard to understand what the wife meant by the above answer. The fact of the matter is, however, that C was not cross-examined and I therefore have no reason to reject any of the matters contained in his affidavit.
Property as at date of trial
The first step in the property settlement exercise relates to the identification and valuation of the parties’ property at trial.
This was not a matter in dispute. The parties agree that the total net value of their property is $520,266.00, comprising:
Former matrimonial home
$360,000.00
Husband’s superannuation
$18,546.00
Wife’s motor vehicle
$10,000.00
Loan to children
$80,000.00
Husband’s motor vehicle
$1,000.00
Husband’s cash savings
$33,000.00
Shares
$8,400.00
Wife’s superannuation
$9,320.00
Total
$520,266.00
As can be seen from the above schedule, the parties also agree that their respective superannuation entitlements should be included in the pool of property available for distribution between them.
Extent of the wife’s gambling
The vast majority of the time at trial, and most of CSH and CSW, focused on the extent of the wife’s gambling. Mr Scriva (for the wife) argues that the husband has exaggerated the extent of the wife’s gambling losses, and that those losses should be properly characterised as “recreational expenses”.[16] Indeed, Mr Scriva raises a number of arguments in CSW which are designed to minimise the impact of the wife’s gambling activities on the outcome of the property settlement proceedings. It is clear, however that those arguments are not necessarily consistent with each other. Mr Scriva’s submissions include:
[16] CSW, paragraph 18
a)that the husband’s calculation of the approximate amount lost by the wife as a result of her gambling activities is flawed, and inconsistent with previous calculations;
b)that the husband “makes impermissible inferences from figures obtained from extrapolation and speculation”[17];
c)that the husband has failed to discharge the evidentiary burden of proving the quantum of the wife’s alleged wastage;
d)that both parties are able to give “plausible explanations as to the extent of joint savings and whether there has been a dissipation of joint savings”[18];
e)that the husband’s case is based on “inexact proofs”[19];
f)that, even if the wife did waste money on gambling, the husband “acquiesced to any wastage that may have resulted from the wife’s conduct”[20];
g)that the husband was himself reckless or negligent in allowing the wife to “dissipate matrimonial property” by gambling[21], and that the husband thereby “contributed equally or otherwise to any quantum of gambling loss perpetrated by the wife”[22];
h)that, “if there was loss of joint savings, the husband was contributorily (sic) negligent towards that loss”[23];
i)that the husband’s “description of his failure to deal with the alleged depletion of financial resources is tantamount to wilful blindness and reckless indifference as to the wife’s alleged unauthorised spending”[24];
j)that the husband had a duty of care to the wife to do “all things reasonable to prevent her from undermining her capacity to meet her future needs”, and that he failed to discharge this duty of care[25]; and
k)that the husband abdicated his duty during the marriage “to do all things reasonable to protect the wife, to the best of his ability, from any weakness of character that might have predisposed her to any degree of financial irresponsibility”[26].
[17] CSW, paragraph 9
[18] CSW, paragraph 13
[19] CSW, paragraph 17
[20] CSW, paragraph 18
[21] CSW, paragraph 22
[22] CSW, paragraph 22
[23] CSW, paragraph 23
[24] CSW, paragraph 23
[25] CSW, paragraph 23
[26] CSW, paragraph 26
One problem confronted by Mr Scriva in relation to many of the above submissions, however, is that they were never put to the husband during cross-examination (or at any other time), and they were certainly not raised in the wife’s affidavit material. For example, Mr Scriva concedes that it was never the wife’s case that the husband acquiesced in her gambling losses at the time those losses were incurred (but he argues that the husband’s evidence opens the door to a finding to the effect that the husband did, in fact, “acquiesce to any wastage that may have resulted from the wife’s conduct”[27]). But the wife’s own case is that the husband did not know that she had been spending money on gambling until she confessed that fact to him in 2001. Further, the wife’s case is that the parties separated for a period of time in 2001 as a direct result of her confession in that regard. Another problem arises from the fact that the wife refused to concede that she had lost any significant amounts of money as a result of her gambling (beyond the admitted sum of $10,000.00).
[27] CSW, paragraph 18.
I shall deal with Mr Scriva’s submissions in a little more detail later in these Reasons.
It is not reasonable to expect either party to be able to quantify with precision the exact amount that the wife spent on her gambling activities. The very nature of such activities is such that people indulging in them are unlikely to keep accurate records of their expenditure.
The wife herself recognised that her gambling pursuits were becoming a problem (or had already become a problem) when she made her confession to the husband in 2001, and she was aware from the very earliest stages of these proceedings – which were commenced in June 2005 – that the extent of her gambling losses would be a significant issue in the case. As early as July 2005, the parties were required to exchange written explanations as to the disposition of funds from 2000 to the date of separation. Those explanations were exchanged in September 2005.[28] In November 2005, the wife was served with a request to answer specific questions.[29] The wife did not respond to that request until May 2006 – 3 days before the hearing of the husband’s application that the wife be dealt with for failing to comply with the request to answer specific questions. I have already found that the wife’s answers to many of the specific questions were inadequate, and I accept Mr Houlihan’s submission to the effect that the wife’s written explanation and answers to specific questions were both inadequate and “seriously offend against the rules … requiring good faith disclosure”.[30]
[28] See annexures SD1 and SD2 to the husband’s affidavit sworn 3 April 2007
[29] See Annexure SD4 to the husband’s affidavit sworn 3 April 2007
[30] CSH, page 3
The wife had not less than 12 months to prepare and present a sensible and reasoned analysis of her actual gambling activities and losses. She made no attempt (or no reasonable attempt) to do so. It is disingenuous for her to now criticise the husband’s reasonable attempts to analyse the true position. The very fact that Mr Scriva is prepared to accept that the husband’s analysis of the likely extent of the wife’s gambling losses can be regarded as plausible begs the question as to why the wife was not prepared to put forward an alternative, equally plausible explanation well before CSW was eventually filed. I find that the wife’s attitude to this issue is (and has at all relevant times been), to use a colloquialism: “Catch me if you can.”
Subject to comments that I shall make below, I accept that the calculations made by the husband in exhibit W1 comprise a fair approximation of the shortfall between the total of the funds that were available to the parties for the 12 years between 1992 and 2004 and a reasonable, comprehensive allowance for the overall expenditure of those funds.
It is not to the point that the husband may have made a different calculation in his initial explanation provided to the Court.[31] In that document, the husband said no more than he was “unable to account for the difference between paragraphs A and B … and believes that the wife has wasted monies totally approximately $286,000.00 being the difference between the two, less $80,000.00 which has been loaned to his daughters”. Paragraph A comprises a total of lump sum amounts that were received by the parties between 1992 and 2004. Paragraph B comprises the total of lump sum amounts spent by the parties during the same period. The document could never have been intended to be more than a rough approximation.
[31] See Annexure SD2 to the husband’s affidavit
The fact of the matter is, however, that Mr Scriva cross-examined the husband in detail regarding his estimate of the wife’s gambling losses. It was as a direct result of Mr Scriva’s cross-examination that the husband produced the document which became exhibit W1. Mr Scriva did not object to the document, and he tendered it as part of the wife’s case.
Mr Scriva’s submissions in CSW do not effectively erode the accuracy of the figures in exhibit W1 – save as I shall discuss below. Indeed, Mr Scriva accepts that the overall shortfall (amounting to $534,000.00) reflected in exhibit W1 is plausible in itself, and certainly plausible enough to be used as a starting point for what the wife would assert are appropriate adjustments in her favour.[32]
[32] CSW, paragraph 11
Mr Scriva argues that significant adjustments to the amount of $534,000.00 arrived at in exhibit W1 should be made to take account of (amongst other things):
a)tax on the husband’s gross income during the relevant period; and
b)an alleged over-estimate of the amount earned by the wife.
Given that the evidence presented at trial was not and could not be precise and that approximations are necessary and appropriate, and doing the best that I can with the totality of the evidence, I find that the following adjustments should be made to the figure of $534,000.00 appearing in exhibit W1:
Husband’s tax paid
a)An allowance for the tax paid in respect of the husband’s gross income from 1992 to 2004 should be made.
b)Mr Scriva suggests that an appropriate allowance is $162,000.00.[33] A perusal of the husband’s income tax returns tendered during the course of the trial (being exhibit H2), however, reveals that the actual amount paid by the husband in tax is likely to be higher than this figure.
c)Notices of assessment are available for the years 1999 to 2004 (inclusive), but not for the earlier years. The total amount of tax paid by the husband in respect of his income for the financial years from 1999 to 2004 (inclusive), including the Medicare levy, was $111,915.00.[34]
d)In relation to the years from 1992 to 1998 (inclusive) the total amount of PAYG and similar deductions paid by the husband was $118,896.00. I have no doubt, however, that the husband would have received significant tax refunds in those years (as he did in the years after 1998).
e)Doing the best that I can with the figures available to me, I find that a reasonable allowance for the income tax (including Medicare levy) paid by the husband for the financial years from 1992 to 1998 is approximately $90,000.00.
f)It follows that a reasonable and fair allowance for the tax and Medicare levy paid by the husband for the whole of the relevant period is $201,915.00 – which I shall round up to $202,000.00.
[33] CSW, paragraphs 8 and 11
[34] I note that the husband’s tax was much higher in the 1999 financial year, due to the receipt of his redundancy payment.
Wife’s income
g)Mr Scriva argues that a further deduction should be allowed for the amount that the husband “wrongly assumes was earned by the wife” during the relevant period.
h)The husband’s estimate in exhibit W1 of the party’s “combined wages” from 1992 to 2004 is calculated on the basis of $70,000.00 per annum. The estimate involves an allowance of a gross income for himself of $45,000.00 to $50,000.00 per annum. The difference between this figure and $70,000.00 per annum constitutes the husband’s allowance for the wife’s gross income.
i)According to Mr Scriva,[35] the wife alleged that she did not work at all from 1987 until 1996 due to a neck injury for which she received a TAC payment. Further, according to Mr Scriva the wife’s evidence was that she had only minor income in 1997 and 1998.
[35] CSW, paragraph 7
j)The husband did not concede that his estimate of the wife’s average annual income was inaccurate. He also said (and I accept) that the wife worked on a casual basis in spite of her neck injury.
k)I note that the wife’s case was that “throughout the marriage the husband and wife remained employed to the best of their capacity and worked for a wage whenever the opportunity was afforded to them”.[36] As well, the wife says nothing in her trial affidavit regarding any period during which she was unable to work. Her affidavit asserts that she made a significant financial contribution to the acquisition, conservation and improvement of the party’s property, and to the welfare of the family, by virtue of the income that she earned.
l)I have already indicated that the husband’s evidence is to be preferred to that of the wife. Still, given the relative elasticity of the overall figures contained in exhibit W1, I am prepared to accept that the wife received little or no income for the financial years from 1992 to 1996, and that she had only minor income in 1997 and 1998. To that extent, an allowance representing 6 years of income (at the rate of, say, $22,500.00 per year) should be made.
m)Further, I accept that the wife would have had to pay income tax and a Medicare levy on her earnings during the remaining 6 years of the 12 year period. I am prepared to accept Mr Scriva’s estimate of the relevant tax in this regard as contained in paragraph 11 of CSW – namely $27,000.00.
n)Thus, the total allowance to be made in order to take account of:
i)the years during which the wife was not engaged in paid employment; and
ii)the tax on her income during the years that she was,
is $162,000.00.[37]
[36] See the wife’s case outline dated 18 April 2007, page 6
[37] Being 6 years at $22,500.00 per year, plus $27,000.00 in respect of income tax paid by the wife during the years that she was working.
It is apparent from the above that the total of $202,000.00 and $162,000.00 should be deducted from the figure of $534,000.00 appearing in exhibit W1. I am not prepared to make any further adjustment to the total in exhibit W1 as I am not persuaded that any such adjustment is warranted. Relevantly, there was no evidence (or no sufficient evidence) to warrant the making of the further adjustments suggested by Mr Scriva in paragraph 11 of CSW.
Thus, doing the best that I can with the evidence available to me, and making as generous allowances in the wife’s favour as I feel satisfied are both appropriate and consistent with the evidence before me, it is clear that the total of the amount which remains unaccounted for – and which can only be attributed to the wife’s gambling losses – is $170,000.00.[38]
[38] Being $534,000.00 minus $202,000.00 minus $162,000.00.
I find that the husband’s estimates contained in exhibit W1 (save for the adjustments that I have made) are fair and reasonable. As indicated above, and subject to the amendments that I have made, I accept exhibit W1 as being a wholly accurate – but general and approximate – estimate of the moneys received and spent by the family during the period from 1992 to 2004. To avoid any doubt regarding my finding in relation to this subject, I will also record that I am satisfied that the husband has “proved the quantum of alleged wastage”[39] – being the amount of $170,000.00 – to my satisfaction. The wife, for her part, has done nothing to disprove the accuracy of the amount that I have found to be appropriate.
[39] See CSW, paragraph 10
Standard of proof regarding losses
I recognise the gravity and significance of the finding that I have made, but I am wholly satisfied (on the balance of probabilities, but recognising the seriousness of the finding) that the correct figure is in the order of $170,000.00. I reject any suggestion that the husband’s case is based on “inexact proofs” or any other form of unacceptable testimony. Clearly, the figure is based on inferences and estimates, but they are fair and reasonable inferences and estimates, which are supported by the evidence before the Court (including findings regarding the respective credibility of the parties).
In Briginshaw (1938) 60 CLR 336[40], it was held that the standard of proof in civil cases is on the balance of probabilities, but with due regard being had to the nature of the issue involved – so that the “…seriousness of an allegation made, the inherent unlikelihood of an occurrence of the given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal”.
[40] At pp. 362-363
I am fully aware of the nature of the issue involved in the present case, and the seriousness of the allegation made by the husband. I do not regard an occurrence of the given description (namely, a spouse losing approximately $170,000.00 through gambling on poker machines over a period of 12 years) as being inherently unlikely in the circumstances of this case.
The gravity of the consequences flowing from a finding that the wife has in fact gambled and lost a total of $170,000.00 over 12 years is not such as could fairly deflect me from reaching the conclusion that I have. After all, the wife is not facing any form of criminal or civil sanction. The consequences flowing from the finding that I have made will become clear during the course of these Reasons, but to the extent that the finding may affect my ultimate conclusion as to the issue of property settlement, that consequence is not so grave or serious as to cause me to shrink from recording that the matter has been proved to my reasonable satisfaction.
My finding regarding the wife’s gambling losses is unrelated to any form of punishment of the wife in any commonly accepted sense. It is no more and no less than an integral part of the factual matrix within which the case has developed and been presented; it is embedded within the exercise upon which the Court must embark when determining the issue of property settlement.
In the end, though, it is fair to say that what counts is not the finding itself, but what the Court does with it.
How should the wife’s gambling losses be dealt with?
The question of how liabilities “unreasonably incurred”, or the loss of assets by a party in circumstances which can be regarded as reckless or unreasonable usually leads to a consideration of cases such as Kowaliw (1981) FLC 91-092 and Townsend (1994) FLC 92-569.
Townsend
In Chorn & Hopkins (2004) FLC 93-204, the Full Court said:[41]
It is important to bear in mind, and indeed it should be emphasised, that in Townsend the Full Court was concerned only with the situation where between separation and the hearing of property settlement proceedings, one party has disposed of an asset which could be described as “a matrimonial asset” in the sense that it was an asset which was owned by one or both of the parties at separation and in which the other party would have an legitimate interest…(emphasis added)
[41] At paragraph 21
Although the Full Court in Chorn & Hopkins later said that it would refer to “the principle which emerges from Townsend”[42], it does not appear to have done so in a clear and an ambiguous fashion. Still, it did observe that Townsend “…was concerned only with the distribution of ‘matrimonial’ property in existence at separation”[43].
[42] See paragraph 21
[43] See paragraph 31.
I conclude from the discussion of Townsend in Chorn & Hopkins that Townsend is of little assistance in the present case, because the wife’s gambling losses were incurred well before the parties separated in 2004.
Kowaliw
In Kowaliw, Baker J said (at page 76,643-4):
Marriage is for most couples an economic partnership. Married couples live together and work together with the ultimate object of purchasing a home, paying it off, acquiring other assets with the overall object of attaining a higher standard of living. The reported decisions in respect of applications for settlement of property under sec.79 of the Act are unanimous that both parties should share the economic fruits of a marriage, having regard to the provisions of sec. 79(4) and sec. 75(2), although not necessarily equally.
Is not, however, the converse equally sustainable? In other words, should not financial losses incurred by parties to a marriage or either of them, whether incurred jointly or severally, be shared by them in the same manner as the financial gains?
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 Browne v Green (1999) FLC 92-873, the Full Court said:
While care should probably be taken … not to elevate Baker J's statement (in Kowaliw) to "a principle", we are nonetheless satisfied that it is certainly is a well-accepted guideline within the jurisdiction which has received the endorsement of successive Full Courts.
I refer, as well, to the discussion of Kowaliw in Omacini (2005) FLC 93-218.
Was there wastage?
In Crampton (2006) FLC 93-269, the Full Court considered the manner in which a trial judge had dealt with a party’s gambling losses. The “essential question” was held to be “whether overall the evidence about gambling losses, including the wife’s secretiveness, demonstrated conduct which should result in her bearing the entirety or some other proportion of the losses.”[44] (Emphasis added).
[44] At paragraph 52.
Crampton is not the only Full Court decision dealing with gambling losses. In De Angelis, for example, the Full Court (by a majority) said[45]:
We agree that gambling is for some people a form of entertainment and that a party can be no more criticised for spending money on it than the other party can be criticised for spending money on sporting or other forms of entertainment. However every case most depend on its own particular circumstances.” (Emphasis added)
[45] (1999) 30 FamLR 304, at paragraph 76
In D & D (2005) FamCA 35[46], Carmody J said:
The point at which the party who recklessly or wantonly incurs debts or increases unsecured liabilities may be penalised for economic fault under the Kowaliw principle is not always easy to define as a concept or identify in practice.
[46] Referred to with approval by the trial judge in Crampton (Coleman J). The Full Court in Crampton did not specifically approve or reject the dicta referred to from D & D.
In relation to the standard of proof required to demonstrate that allegations of wastage in the Kowaliw sense have been proved, and after referring to the well known passage from Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 449-450, Carmody J said that “…what this means in a practical sense is the more serious the allegation, the more cogent the evidence required to overcome the unlikelihood of what is alleged and thus to prove it”.[47]
[47] D & D at paragraph 146
Carmody J continued as follows:[48]
… civil proof is not a simple matter of belief and persuasion but of “reasonable satisfaction” following a real search for the truth and evaluation the evidence adduced with regard to the matters mentioned in section 140 (2) of the Evidence Act (Cth) and other relevant variable factors, including those referred to in Briginshaw and in the light of the party’s respective power or capacity to produce or contradict it.
The balance of probability standard takes account of the instinctive judicial feeling that even in civil proceedings a Court should be surer before finding serious allegations proved than when deciding less serious or trivial matters. However, the law looks for probability not certainty. There are degrees of probability but, when the law talks about “the balance of probabilities”, it envisages a degree of probability to the point that a Court can be satisfied that the alleged fact in issue is more likely than not.
Where … proof of a fact in issue hinges on rational inferences based on circumstantial, as distinct from direct, evidence, the conclusion contended for must be rational and reasonably open. There has to be something more than mere conjecture or suspicion. A proposition is proved on the balance of probabilities in a circumstantial sense when the combined weight or preponderance of the totality of the available evidence favours it as the most likely explanation. The more information consistent with one of a number competing hypothesis, the more probable that explanation becomes. (Emphasis added)
[48] D & D, paragraphs 147-149
In relation to the case now before the Court, I record the following:
a)I have already found that I am satisfied – in the Briginshaw sense – that the wife incurred gambling losses of something in the order of $170,000.00 during the 12 year period between 1992 and 2004.
b)I have already found that the potential or notional unlikelihood of the wife having incurred such losses is not such as to overcome the probability that those losses were in fact incurred. Put another way, the evidence before me is cogent and overcomes any perceived unlikelihood that may be associated with a conclusion that the wife lost that amount of money in the relevant period.
c)I am satisfied that the wife did incur the gambling losses to which I have referred after doing my best to evaluate all the evidence available to me, which evidence is dealt with earlier in these Reasons. Further, I have taken into account the “respective power or capacity to produce or contradict” the evidence relating to those losses. There was little that the husband could do beyond taking the Court step by step through his analysis of the funds available to the parties and their known application. On the other hand, there was much that the wife could have done to contradict the inferences drawn from the evidence led by the husband. Given that the wife effectively controlled the party’s finances, she could have given far more credible explanations for her use of the party’s funds than she did. As Mr Houlihan commented in CSH,[49] the wife did not “produce one document to verify a single item of alleged expenditure”. And she did not do so knowing full well – for a period of at least 12 months – that the manner in which she had spent the parties’ funds would be a seminal issue at trial. I also accept Mr Houlihan’s submission[50] that the wife’s attempt to explain her expenditure in her written “explanation” and her answer to specific questions was riddled with inconsistencies, and was wholly unbelievable.
d)I accept that the law looks for probability and not certainty when considering issues such as these. I am satisfied that it is highly probable that the wife incurred gambling losses to the extent of approximately $170,000.00 over the relevant period.
e)The “combined weight or preponderance of the totality of the available evidence” favours the findings that I have made as the most likely explanation for the total amount of approximately $170,000.00 that is not otherwise accounted for. Indeed, no other competing hypotheses were presented to the Court. For example, the wife did not suggest that the husband had himself wasted moneys. Nor did she effectively (or even enthusiastically) attack or impeach the husband’s broad mathematical analysis presented at trial. The wife’s approach was no more and no less than to attempt to “tough it out”[51].
[49] At page 3
[50] CSH, pages 3 and 4
[51] See paragraph 48 above
The following observations are also relevant:
a)Unlike the situation in Crampton, there was no psychological, psychiatric or general medical evidence regarding the causes or effects of the wife’s gambling problem. Indeed, the wife did not concede that she had a gambling problem, and she received no counselling or treatment directly or indirectly related to her gambling activities. In other words, there is no evidence that the wife’s gambling was pathological.
b)There was no explanation at all as to why the wife’s gambling losses were so significant. The wife simply denied that she lost more than $10,000.00 over the relevant period. Her denial is unsustainable.
c)There was also no evidence:
i)that the wife believed (whether rationally or irrationally) that she would recover the losses; or
ii)that she was estranged from the husband during the relevant period (apart from the short separation in or about 2001).[52]
[52] See Crampton, at paragraph 52
Taking into account all the above matters, I am satisfied that the wife wasted (in the Kowaliw sense) an amount of approximately $170,000.00 over the 12 years from 1992 to 2004. Put another way, the present value of the property available to the parties has been reduced by no less than that amount as a result of the wife’s deliberate or, alternatively, reckless, negligent or wanton misconduct. I shall deal with the question of whether she should bear the entirety (or some other proportion) of the loss[53] later in these Reasons.
[53] See Crampton, at paragraph 52.
Did the husband acquiesce in the wife’s gambling losses?
Mr Scriva argues that the husband acquiesced in the wife’s gambling losses at the time that they were incurred. He concedes, however, that it was never the wife’s case that there was such acquiescence.
There is no direct evidence that the husband knew of the extent of the wife’s gambling until she “confessed” to him in 2001.
Bearing in mind that the wife did not raise acquiescence as a form of defence or excuse at any time prior to or during the trial (indeed, the wife’s case was that her gambling losses were limited to $10,000.00), there was no real opportunity for the husband to deal directly (by means of cross-examination or otherwise) with an allegation of this nature. It was raised ex post facto in CSW.
The husband’s evidence during the trial included the following:
a)By 1998, the husband was aware that significant lump sums received by the parties (including, for example, the wife’s TAC payout and inheritances from the wife’s father and the husband’s mother) had been dissipated.
b)The husband was also aware that the parties’ combined income had not been retained in the form of any significant savings.
c)The husband was aware of these things because the parties borrowed money from the Commonwealth Bank in 1998, and would not have done so if significant funds were available to them in the form of savings.
d)The husband’s attitude at all relevant times until 2001 was:
If the wife wanted money, then she got money.
e)The husband was unable to discuss the fate of the parties’ savings and other accumulated funds with the wife, but he trusted her. He felt that he had no choice but “to keep the money tree going”.
f)The husband said that he did not think about the significant outflow of funds. He also said:
It was going like water – but what could I do?
g)The husband did not have access to the wife’s bankbooks during the relevant period.
As Mr Scriva records in CSW, the husband admitted that he was “motivated to continuously hand large sums of money over to the wife due to his fear, rational or otherwise, that if the money stopped the marriage would end”[54].
[54] CSW, paragraph 19
But the husband was giving evidence in relation to these subjects in a vacuum, as it were. He had not been alerted – by any document filed by the wife or submission made by her Counsel up to that point – that his acquiescence in the wife’s conduct might be in issue. Still, nothing in his evidence leads me to conclude that he was “indifferent as to whether the wife’s spending was excessive provided the marriage continued”[55]. I find that the husband was far from indifferent, but that he felt powerless to confront the wife and chose, instead, to trust her assurances that her spending was not untoward.
[55] CSW, paragraph 19
In paragraph 19 of CSW, Mr Scriva argues that “it was only upon the breakdown of the marriage that the husband changed his position and objected to the wife’s expenditure”. That submission clearly misstates the position. The marriage initially broke down (in 2001, at least) precisely because the wife “confessed” to the husband that her gambling activities were either a problem or were becoming a problem. The wife was well aware that the husband would react negatively to her disclosure. Having regard to the husband’s evidence in relation to this subject (which I accept), the wife’s disclosure amounted to what the husband regarded as a profound breach of trust.
I have found that the wife is more intelligent and articulate than the husband. I have no doubt that she was the dominant partner in their financial relationship (at least until 2001).
I reject Mr Scriva’s submission to the effect that the husband acquiesced in the wife’s gambling losses. Further, I reject any suggestion that the husband was reckless or negligent in allowing the wife to dissipate funds through her gambling activities. The evidence does not support such a finding – which, to be consistent, would have to be proved to the same standard as the allegation regarding wastage on the part of the wife generally.
I accept that the husband could have and should have been less trusting of the wife (in a financial sense) after the parties resumed cohabitation in or about 2001. Such an observation is, however, of limited relevance. The husband was not directly cross-examined (or cross-examined in any detail) regarding recklessness or negligence in allowing the wife to have access to the family’s funds after 2001. Given the manner in which the wife ran her case, I find that she is simply being disingenuous in suggesting (through her Counsel) that the husband should have taken action to curb her expenditure, or that he was “contributorily” (sic) negligent, wilfully blind or recklessly indifferent to her unauthorised spending[56]. The reality is that the wife’s case was never run in the alternative. In other words (and to paraphrase) the wife never said: “I did not gamble excessively, but if I did then the husband should have stopped me”.
[56] CSW, paragraph 23
I am not persuaded on the evidence before me that the husband should be held responsible, or even partly responsible, for the wife’s actions. She misled him (directly or indirectly) regarding the extent of her gambling activities, and quite frankly, it is clearly arguable that she attempted to mislead this Court about them as well.
Should the husband have protected the wife from herself?
Mr Scriva argues[57] that “the attitude of the husband reflects his abdication of his duty during marriage to do all things reasonable to protect the wife, to the best of his ability, from any weakness of character that might have predisposed her to any degree of financial irresponsibility”. Mr Scriva also argues[58] that the husband “has failed to live up to his duty to act for the financial protection and the joint benefit of the wife”. I reject these submissions. I am not aware of any law (or case law) which might support the propositions inherent within them. They appear to impose on the husband some form of paternalistic, strict liability for the misfeasance of his wife. More importantly, the evidence simply does not support such submissions. The wife refused to accept that she had a gambling problem (or a significant gambling problem) and admitted to losing no more than approximately 6% of the amount that I have found that she probably lost. For the wife to float such submissions is, I find, the forensic equivalent of approbating and reprobating.
[57] CSW, paragraph 26
[58] CSW, paragraph 26
In any event, Mr Scriva’s submission in this regard is akin to a submission made before Coleman J (at first instance) in Crampton – to the effect that marriage requires parties “to take and to hold for richer or poorer and for better or worse”. Unlike the situation in Crampton, however, there is no evidence before this Court that the wife’s capacity to control her gambling was diminished by illness, or by some other factor beyond her control. Indeed, there is no evidence that she was “ill” in any relevant sense. Further, I have already found that there was no evidence of any internal or external factor that may have served to deprive the wife’s actions of the degree of wantonness, negligence or recklessness which is required for a Kowaliw claim to succeed. And, in any event, the Full Court in Crampton[59] recognised “the difficulty in identifying just what obligations the marriage contract might include”.
[59] See paragraph 61
How should the wife’s gambling losses be dealt with?
Having regard to the findings that I have made in this matter, it is open to the Court to add back into the property pool the wife’s gambling losses, or part thereof.[60]. In De Angelis, the Trial Judge concluded that the wife’s actions in losing “the gambled funds of the parties” were “reckless, negligent and wanton”, and that the funds “should be regarded as wasted by her”. The trial judge continued:[61]
…however, on division of property, she would have, if they had not been wasted, received the proportion appropriate to her contribution to them. I think that the parties’ respective contribution to these moneys was in the same proportion as their contribution to their property. The husband should not be disadvantaged by the wife’s waste of his share … It should be paid to him from what would otherwise be the wife’s share of the parties’ property.
[60] See, for example, Omacini (2005) FLC 93-218
[61] See De Angelis at paragraph 72
The majority of the Full Court approved this approach, saying that it “…has a certain validity or attraction in the circumstances of this case”.[62]
[62] See De Angelis at paragraph 80
In this case, the parties have agreed that, but for the wife’s gambling losses, the property pool should be divided equally between them. There is no practical difference between:
a)adding back the amount of the wife’s gambling losses and then dividing the resulting figure equally between the parties; and
b)dividing the extant pool equally between the parties and then ordering the wife to pay, from her share, one half of the gambling losses.
In both circumstances, the husband’s share of the available property will be increased by one half of the quantum of the wife’s gambling losses.
In Crampton, the Full Court seemed to recognise that the question of the wife’s gambling losses could be dealt with in the context of an add back or as part of the evaluation of the wife’s contributions. The Full Court also seemed to accept that gambling losses might be reflected as a s.75(2) factor.[63] In Kennedy & Cahill (unreported – 1996)[64], the Full Court (by a majority) concluded that moneys spent on gambling should be added back into the property pool. In Plummer & O’Connor (1998) FamCA 53, the Full Court (again by a majority) held that the trial judge was justified in taking into account the husband’s gambling as a factor affecting the parties’ contributions. A similar approach was adopted by the Full Court in Donnelly (2000) FamCA 387 and (in a more indirect manner) in Levinson (2003) FamCA 937[65].
[63] See Crampton paragraphs 62-66
[64] Appeal No NA44 of 1995. Judgment date: 8 August 1996
[65] See paragraphs 56 and 57
In my opinion, it is more logical and consistent with the structure of the overall property settlement exercise (and the findings that I have made regarding wastage in the Kowaliw sense) to add the relevant funds back into the pool of property.
Should the full amount of the wife's gambling losses be added back?
I am aware of the approach adopted by the Full Court (and by the trial judge) in De Angelis. In that case, it was concluded that the wife should pay to the husband, from her share of the net property then available, one half of the funds that she had lost through her gambling. In reality, this created a differential between the parties equivalent to the whole of the funds lost by the wife through her gambling.
Having regard to the concessions made by the parties during the course of these proceedings, and to the other evidence before the Court, I am not prepared to add back into the pool the whole of the $170,000.00 lost by the wife as a result of her gambling activities. The reasons why I am not prepared to do so are as follows:
a)The wife's gambling activities took place between 1992 and 2004. For the virtually the whole of that time (apart from a very short period in 2001 or 2002), the parties were living together.
b)There is no evidence that the wife lost significant sums of money after the parties separated in 2004.
c)In De Angelis, the Full Court (by a majority) recognised[66] that gambling is, for some people, “a form of entertainment” and that “a party can be no more criticised for spending money on it than the other party can be criticised for spending money on sporting or other forms of entertainment”. The Full Court also said that “every case must depend on its own particular circumstances”.
d)I recognise that the asset pool might have been significantly larger than it is now is if the parties had wisely invested the moneys that were otherwise lost to them through the wife’s gambling. On the other hand, they might have spent the money on other things apart from appreciating assets, and may have had little or nothing to show (in a financial sense) for such expenditure.
e)In De Angelis, the amount that the wife was ultimately ordered to repay the husband (being one half of her gambling losses) represented 7.9 percent of the parties’ property. In the present case, $85,000.00 (being half of the total amount of $170,000.00 wasted by the wife) represents approximately 16.3 percent of the parties’ property. It follows that the differential that was created between the parties’ respective shares of the actual property in De Angelis was 15.8 percent, as compared with a potential differential of 32.6 percent in the present case.
[66] At paragraph 76
In all the circumstances, and doing the best that I can with the evidence available to me, it seems to me that a reasonable allowance for gambling “as a form or entertainment” would be an amount of, say, $100.00 per week – averaged over the relevant 12 year period. In making such an “allowance”, I recognise that, for part of that period, the wife could not work and must have been suffering pain and discomfort as a result of her neck injury.
$100.00 per week for 12 years amounts to $62,400.00 (which is, I accept, far more than the amount of $10,000.00 that the wife said that she had gambled). Given that such a figure is necessarily a rough approximation, and given that no adjustment has been or can properly be made for inflationary factors and the like, I propose to round the sum up to $65,000.00. Thus, I propose to add the amount of $105,000.00 (being $170,000.00 less $65,000.00) back into the property pool.
It follows that the total net value of the parties property (including the notional add back of $105,000.00 representing a reasonable proportion[67] of the wife's gambling losses) is $625,266.00.
[67] See Crampton at paragraph 52
What is the preliminary “split” on the basis of contribution alone?
There was no suggestion that the parties’ contributions (in all their various guises) from the date of commencement of cohabitation to the date of trial should be regarded as anything other than approximately equal – subject, of course, to the adding back of the wife’s gambling losses.
Having regard to the manner in which the case was conducted before me, there is no need to analyse the financial and non-financial contributions made by the parties to the acquisition, conservation and improvement of their property. Nor is there a need to analyse the parties’ respective contributions to the welfare of the family.
I conclude that an appropriate division of the parties’ property – on the basis of contribution alone – is 50% to the wife and 50% to the husband. In other words, each party should receive property (or notional property) to the value of $312,633.00.
Is an adjustment required to take account of Section 75(2) factors?
So far, in considering the question of property settlement, I have dealt with the identification of the parties’ property and the question of contribution. The Court has power to make an adjustment to a party’s property settlement entitlement on the basis, amongst other things, of both parties’ respective means and needs. The Family Court has been critical of shorthand terms being used to describe this step in the property settlement exercise, preferring to refer to it simply as “the section 75(2) factors”[68] In essence, s.75(2) is concerned with the process of arriving at a just and equitable result.[69]
[68] See Clauson (1995) FLC 92-595.
[69] See, in that regard, Waters & Jurek (1995) FLC 92-635.
The concession made by the parties at the commencement of the trial is that, taking into account both contributions and s.75(2) factors, and but for the wife’s alleged wastage by gambling, there ought to be an equal division of the available property.
Neither party suggests that there should be any adjustment to take account of the s.75(2) factors, and no submissions dealing with the subject were presented to the Court.
The effect of the findings that I have made is that the husband will receive property (including superannuation) to the value of $312,633.00 and the wife will receive property (including superannuation) to the value of $207,633.00. The difference between the two figures is, of course, $105,000.00 – being the notional add back reflecting a reasonable proportion of the wife’s gambling losses. In percentage terms, the husband is to receive approximately 60% of the property pool and the wife is to receive approximately 40%.
Conclusion in relation to section 75(2) factors
In my opinion, and having regard to the concessions made by the parties and the manner in which their case was run, there are no significant s.75(2) factors.
I am well aware of the disparity in the parties’ capital position which will occur as a result of the property distribution that I propose. I am also very conscious of concepts such as those described by Nygh J, in earlier cases, as “palm tree justice” or “a soup kitchen approach” (in relation to subjects such as the s.75(2) adjustment). Nevertheless, there have been many cases over the years in which the Family Court has seen fit to make an adjustment to a party’s entitlement on the basis of contribution alone in order to take account of a relevant capital disparity[70].
[70] See, for example, Gill (1984) 9 FamLR 969 at 981, Prestwich (1984) 9 FamLR 1069 at 1072, Aleksovski (1996) 20 FamLR 894 at 904 and 909, Brandt (1997) 22 FamLR 97 at 110, VJ & CJ (1997) 22 FamLR 166 at 201, C & C (1998) 23 FamLR 291 at 518, Dickson (1999) 24 FamLR 460 at 473-4, and Collins (1990) 14 FamLR 563 at 565-70. See also the judgment of Kay J in Farmer & Bramley (2000) 27 FamLR 316 at 330 ff & 341.
If I had decided to add back into the property pool the whole of the wife’s gambling losses (totalling $170,000.00) – as opposed to a reasonable portion of those losses (being $105,000.00) – then I might have concluded that it would be appropriate to give weight to the consequent capital disparity between the parties. In such a scenario, I would probably have varied the overall “split” from approximately two thirds to the husband and one third to the wife to a split which would enable the husband to receive approximately $100,000.00 more than the wife is to receive.
In other words, it is my view that a result whereby the wife is to receive approximately 40% of the currently available property (including superannuation), and the husband is to receive approximately 60%, is just and equitable. The orders that I propose to make achieve that result[71].
[71] See paragraph 109 above
Just and equitable?
Although I am of the view that the testing of any proposed orders by reference to section 79(2) is not a fourth substantive step (properly so-called) in the property settlement exercise, and although I have considered the justice and equity of the overall "split" in paragraphs 106 to 113 above, I propose to (metaphorically) step back and consider whether the outcome achieved by my consideration of the parties’ contributions and the section 75(2) factors has brought about a just and equitable result.
The Full Court has cautioned against assessing the section 75(2) factors in percentage terms, without considering the real impact of any proposed adjustment. In other words, the real impact in money terms is "the critical issue".[72]
[72] See Clauson (1995) FLC 92-596
In the present case, and because of the concessions made and the manner in which the case was run, there is no identifiable section 75(2) adjustment. I have made detailed findings regarding the wife’s gambling losses and how they should be treated. For the reasons that I have set out above, I am satisfied that the final split (being 60% to the husband and 40% to the wife) is fair and proper – and remains so even when regard is had to the differential between the parties respective overall entitlements (which differential equates to $105,000.00).
I am very conscious that justice and equity must be done to both parties, and I am satisfied that the split I have proposed achieves that result.
Orders
I shall now hear Counsel as to the precise orders necessary to give effect to these Reasons.
I certify that the preceding one hundred and eighteen (118) paragraphs are a true copy of the reasons for judgment of Walters FM
Associate: Rachel Peattie
Date: 12 September 2007
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