Dunstable & Idanov
[2021] FamCA 40
•17 February 2021
FAMILY COURT OF AUSTRALIA
Dunstable & Idanov [2021] FamCA 40
File number(s): MLC 7400 of 2014 Judgment of: HARTNETT J Date of judgment: 17 February 2021 Catchwords: FAMILY LAW – PROPERTY SETTLEMENT – application by the Applicant wife for alteration of property interests – marriage of approximately six years and eight months – three children of the marriage – assessment of contributions – consideration of s 75(2) of the Family Law Act 1975 (Cth) factors – whether orders for property adjustment are just and equitable – where the wife alleges she owned three real properties at the commencement of cohabitation – where the husband had nominal assets and liabilities at commencement of cohabitation – where both parties maintained employment throughout cohabitation with the wife taking brief maternity leave – where the husband accrued considerable debt in part due to gambling – where the wife is a discharged bankrupt – where both parties in good health and with capacity to earn an income – where wife seeks equal division of the parties assets – where asset pool is negative when considering the husband’s credit card debt – where the husband seeks each party be solely liable for assets and liabilities in their possession and ownership including superannuation. Legislation: Evidence Act 1995 (Cth), s 140
Family Law Act 1975 (Cth) ss 75(2),79(1), 79(2), 79(4), 90SM
Cases cited: Bell & Nahos [2016] FamCAFC 244
Bevan & Bevan (2013) FLC 93-545
Dickons & Dickons [2012] FamCAFC 154
Stanford v Stanford (2012) 247 CLR 108
Whisprun Pty Ltd v Dixon (2003) 200 ALR 447
Number of paragraphs: 52 Date of last submission/s: 2 August 2020 Date of hearing: 26 November 2019;
2 - 3 June 2020Place: Melbourne Applicant: In person by video link Counsel for the Respondent: Mr Thomas by video link Solicitor for the Respondent: Verduci Lawyers ORDERS
MLC 7400 of 2014 BETWEEN: MS DUNSTABLE
ApplicantAND: MR IDANOV
Respondent
ORDER MADE BY:
HARTNETT J
DATE OF ORDER:
17 FEBRUARY 2021
THE COURT ORDERS THAT:
1.The Respondent husband (‘the husband’) pay to the Applicant wife (‘the wife’) the sum of $90,000 (‘the payment’) within 90 days of the date of these orders (‘the due date’).
2.In the event that the whole of the payment has not been made by the due date, then the husband shall sign all documents and do all things necessary to forthwith place the real property situate at and known as T Street Suburb M in the State of Victoria (‘the Suburb M property’) on the market for sale (‘the Suburb M property sale’) with a real estate agent as agreed between the parties in writing, or failing such agreement, as determined by the President of the Real Estate Institute of Victoria on application of the wife (‘the selling agent’).
3.With respect to the Suburb M property sale:-
(a)the reserve sale price shall be as agreed by the parties in writing, or failing such agreement, then at a price nominated by the selling agent;
(b)the parties are to follow all reasonable recommendations of the selling agent including any recommended repairs and/or improvements with the costs of same to be borne by the husband;
(c)the husband facilitate access to the Suburb M property to the selling agent and for the purposes of all inspection times, private inspections, auctions and any and all other attendances at the Suburb M property including for photography of the Suburb M property by the selling agent or anyone appointed by the selling agent, for advertising or for other purposes as recommended by the selling agent;
(d)upon completion of the Suburb M property sale, the proceeds of sale shall be applied as follows:-
(i)first, to pay all costs, commissions and expenses of the Suburb M property sale;
(ii)second, to discharge the mortgage and any other encumbrances affecting the Suburb M property; and
(iii)third, to pay to the wife the payment or any part thereof remaining outstanding as provided for in order 1 herein together with penalty interest as prescribed in the Family Law Rules 2004 (Cth); and
(iv)the balance, if any, to the husband.
4.In the event that there is a shortfall in the payment to the wife pursuant to orders 1 and 3(d)(iii) herein, then the husband forthwith shall sign all documents and do all things necessary to place the real property situate at and known as V Street Suburb W in the State of Victoria on the market for sale (‘the Suburb W sale’) by a real estate agent as agreed between the parties in writing, or failing such agreement, as determined by the President of the Real Estate Institute of Victoria upon the application of the wife (‘the selling agent’).
5.With respect to the Suburb W sale:-
(a)the reserve sale price shall be as agreed by the parties in writing, or failing such agreement, then at a price nominated by the selling agent;
(b)the parties are to follow all reasonable recommendations of the selling agent including any recommended repairs and/or improvements with the husband to pay for the costs of same;
(c)the husband facilitate access to the Suburb W property to the selling agent and for the purposes of all inspection times, private inspections, auctions and any and all other attendances at the Suburb W property including for photography of the Suburb W property by the selling agent or anyone appointed by the selling agent, for advertising or for other purposes as recommended by the selling agent;
(d)upon completion of the Suburb W sale, the proceeds of sale shall be applied as follows:-
(i)first, to pay all costs, commissions and expenses of the X Town sale;
(ii)second, to discharge the mortgage and any other encumbrances affecting the Suburb W property;
(iii)third, to pay to the wife the payment or part thereof remaining outstanding as provided for in order 1 herein together with penalty interest as prescribed in the Family Law Rules2004 (Cth); and
(iv)the balance, if any, to the husband.
6.The husband be and is hereby restrained by injunction from assigning, further encumbering, transferring or otherwise dealing with in any way whatsoever the husband’s interest in the Suburb W property and the Suburb M property save as provided for in these orders or without the prior written consent of the wife.
7.In the event either of the parties refuse or neglect to execute a deed and/or instrument in compliance with the provisions of these orders, a Registrar of the Family Court of Australia at Melbourne is hereby appointed pursuant to s 106A of the Act to execute all deeds and/or instruments in the name of either of the parties and do all acts and things to give validity and operation to the deeds and/or instruments.
8.There is liberty to the parties to make application to the Court in respect of the operation of orders 2 to 6 herein, including the obtaining of any ancillary orders.
9.Any money standing to the credit of either the husband or the wife in any bank, building society or investment account shall be the property of the account holder.
10.Each party hereby foregoes any claim they may have to any superannuation benefits belonging to or earned by the other.
11.All insurance policies shall be the sole property of the owner named thereunder.
12.Each party shall be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders.
13.Each party shall be solely liable for and indemnify the other in respect of their individual debts.
14.Any joint tenancy of the parties in any property real or personal is hereby severed.
15.Otherwise all extant property applications are dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Dunstable & Idanov has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARTNETT J:
PRELIMINARY
The parties commenced their cohabitation in or around December 2004. They married in 2005. The parties’ separated on 7 August 2012. Their cohabitation period was thus approaching 8 years. Following that cohabitation period, and in May 2014, the wife became a bankrupt. At the time of trial in June 2020, she was a discharged bankrupt, the discharge having occurred in May 2017.
The parties have three children namely B born in 2007, now aged 13 years; C born in 2009, now aged 11 years; and D born in 2011, now aged 9 years. The children live with their mother pursuant to final orders made by Justice Thornton on 7 July 2016. They spend supervised time with their father. There is now a parenting application by the father in respect of that time spent.
The husband was born in 1971. He is aged 49 years. He is a manager by occupation. His evidence is that he is in receipt of gross income of $6,813 per week by way of rental payments received by him from the tenants occupying his various properties. His further evidence is that his weekly expenditure in respect of his ownership of those properties, in particular his mortgage repayments, exceeds that weekly income earned by him by approximately $1,657. Added to that expenditure sum is the husband’s motor vehicle and other living expenses, much of which he claims has been funded by the incurring of significant credit card debt during and following cohabitation, totalling $292,100 as at 22 November 2019, being the date of swearing of the husband’s Financial Statement. The husband resides at T Street Suburb M in the State of Victoria, a home owned by him.
The wife was born in 1976. She is aged 44 years. She is engaged in home duties and at trial was in receipt of Centrelink benefits. The wife and children live in rental accommodation. Prior to the COVID-19 pandemic, the wife was employed however she lost that employment, and from March 2020, she has been in receipt of Centrelink payments.
These reasons deal with the parties’ competing property applications. The wife sought at the commencement of the proceeding and until 2020, a payment from the husband in the sum, variously, of $70,000; $100,000; and $200,000. At trial, the wife, relying on a Further Amended Application filed 3 May 2020, sought orders for the sale of all real properties owned by the husband, they being some 21 in number. She sought further that “proceeds from the sale of the asset pool, minus secured debt, be distributed to the applicant wife and respondent husband by order of the court”.
The husband sought, in his Amended Response to Initiating Application that there be no property orders made which would have the effect of altering the parties’ interests in property. That is, his position was that it is not just and equitable to make an order pursuant to s 79 of the Family Law Act 1975 (Cth) (‘the Act’) adjusting the parties existing property interests. He sought retention by each party of their interests in property; that each party be solely responsible for and pay and indemnify the other in respect of all liabilities in their sole name; and that each party forego any claims they may have to any superannuation benefits belonging to or earned by the other. I note that prior to trial five additional real properties owned by the husband were sold by mortgagee sale upon the husband’s default in meeting his mortgage repayment obligations. The relevant bank/s applied the net proceeds of all foreclosure sales in repayment of monies owing to the bank/s.
The wife relied upon the following material:-
(a)Amended Initiating Application filed 3 May 2020 insofar as it concerns the property order proceeding;
(b)a Financial Statement affirmed 23 September 2019;
(c)affidavits filed on 20 August 2015; 28 November 2016; 18 May 2017; 19 May 2017; 18 May 2020 (paragraphs [25]-[28]); and 1 June 2020 and exhibits two, three, four, five to that affidavit sent to the Court on 1 and 2 June 2020 (with exhibit one to that affidavit not being accepted by the Court);
(d)Outline of Case document filed 1 June 2020;
(e)a screenshot of an ‘Account summary’ for the wife’s interest in an unknown superannuation fund sent to the Court on 2 June 2020;
(f)her Statement of Affairs and Proof of Debts in her bankruptcy documents filed 9 June 2020;
(g)Written Submissions filed 22 June 2020; and
(h)Written Submissions in Reply filed 2 August 2020.
That part of the wife’s affidavit material that related strictly to parenting orders matters was irrelevant in this proceeding and consequently no weight was given to those matters.
The husband relied upon the following material:-
(a)Amended Response to Initiating Application filed 28 May 2020 insofar as it concerns the property order proceeding;
(b)Financial Statement affirmed 22 November 2019;
(c)affidavits affirmed 21 February 2017; 22 November 2019 and the exhibits to that affidavit sent to the Court on 28 May 2020; and 27 May 2020;
(d)an affidavit of Mr Y, certified practicing valuer, affirmed 27 May 2020;
(e)an Amended Outline of Case document filed 28 May 2020; and
(f)Written Submissions filed 28 July 2020.
Further documents relied upon by the parties were tendered in evidence during the course of the trial.
Mr Y was the only expert witness in the proceeding. His evidence was challenged by the wife in cross-examination in respect of all of the real properties save T Street Suburb M and Z Street Suburb L in the State of Victoria. Mr Y assessed the market value of each property as follows:-
PROPERTY
VALUE
1 AA STREET X TOWN
$260,000
2 AA STREET X TOWN
$255,000
3 AA STREET X TOWN
$265,000
4 AA STREET X TOWN
$265,000
5 AA STREET X TOWN
$265,000
6 AA STREET X TOWN
$260,000
7 AA STREET X TOWN
$265,000
1 BB STREET X TOWN
$250,000
2 BB STREET X TOWN
$300,000
3 BB STREET X TOWN
$260,000
CC STREET X TOWN
$310,000
1 DD STREET SUBURB W
$520,000
2 DD STREET SUBURB W
$530,000
3 DD STREET SUBURB W
$500,000
3 DD STREET SUBURB W
$450,000
4 DD STREET SUBURB W
$460,000
1 FF STREET SUBURB M
$350,000
2 FF STREET SUBURB M
$450,000
3 FF STREET SUBURB M
$510,000
T STREET SUBURB M
$800,000
Z STREET SUBURB L
$315,000
TOTAL VALUE $7,840,000
Each of the wife and husband challenged the affidavit evidence relied upon by the other and other evidence given orally.
It is not necessary in these reasons for judgment to comment upon the entirety of the evidence of each witness nor to comment on every exhibit tendered. However every piece of evidence relied upon by the parties has been read and carefully considered by me.[1] The standard of proof in the proceeding is the balance of probabilities.[2]
[1] Bell & Nahos [2016] FamCAFC 244, [28]; Whisprun Pty Ltd v Dixon (2003) 200 ALR 447, [62].
[2] Evidence Act 1995 (Cth), s 140.
IS IT JUST AND EQUITABLE TO MAKE A PROPERTY SETTLEMENT ORDER
Section 79(1) of the Act provides that the Court may make such orders as it considers appropriate altering the interests of the parties in property.
Section 79(2) of the Act provides as follows:-
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.
If the Court is so satisfied that it is just and equitable to make an order altering the interests of the parties in property, s 79(4) of the Act sets out the matters which the Court must take into account when considering what order (if any) should be made.
The High Court of Australia (‘High Court’) in Stanford v Stanford (2012) 247 CLR 108 (‘Stanford’) revisited the process for trial judges in altering property interests of parties pursuant to s 79 of the Act for married parties, and s 90SM of the Act for de facto couples. The High Court emphasised the requirement for the Court to establish firstly that it be just and equitable in the particular circumstances of the case to make any alteration of property interests. The High Court said at paragraphs [37]-[40] and [42] as follows:-
37. First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to “altering the interests of the parties to the marriage in the property” (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
38. Second, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion. In Wirth v Wirth, Dixon CJ observed that a power to make such order with respect to property and costs “as [the judge] thinks fit”, in any question between husband and wife as to the title to or possession of property, is a power which “rests upon the law and not upon judicial discretion”. And as four members of this Court observed about proceedings for maintenance and property settlement orders in R v Watson; Ex parte Armstrong:
“The judge called upon to decide proceedings of that kind is not entitled to do what has been described as 'palm tree justice'. No doubt he is given a wide discretion, but he must exercise it in accordance with legal principles, including the principles which the Act itself lays down”.
39. Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is “just and equitable” to make the order is not to be answered by assuming that the parties' rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that “[c]ommunity of ownership arising from marriage has no place in the common law”. Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be “decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses”. The question presented by s 79 is whether those rights and interests should be altered.
40. Third, whether making a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised “in accordance with legal principles, including the principles which the Act itself lays down”. 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.
…
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. What order, if any, should then be made is determined by applying s 79(4).
ASSETS AND LIABILITIES OF THE PARTIES
The existing legal and equitable interests of the parties are set out in the below table:-
REAL PROPERTIES
ASSET
LEGAL OWNERSHIP
ESTIMATED VALUE
DEBT
EQUITY
5 AA Street, X Town
Husband
$1,310,000
$1,531,712
GG Bank
-$221,712
6 and 7 AA Street, X Town
Husband
$525,000
$439,712
Westpac
$85,288
1 FF Street, Suburb M
Husband
$350,000
$594,084
GG Bank
-$244,084
2 and 3 FF Street, Suburb M
Husband
$960,000
$826,559
ZZ Bank
$133,441
1BB Street X Town; 2 BB Street X Town; and 3 BB Street X Town
Husband
$810,000
$702,975
NAB
$107,052
YY Street, Suburb L
Husband
$315,000
$435,752
Westpac
-$120,752
T Street, Suburb M
Husband
$800,000
$671,227
Westpac
$128,773
1 DD Street Suburb W
Husband
$520,000
$478,536
HH Super Fund
$41,464
2 DD Street Suburb W
Husband
$530,000
$478,637
HH Super Fund
$51,363
3 DD Street Suburb W
Husband
$500,000
$453,339
HH Super Fund
$46,661
CC Street, X Town
Husband
$310,000
$306,823
GG Bank
$3,177
3 DD Street Suburb W and 4 DD Street Suburb W
Husband
$910,000
$818,276
JJ Bank
$91,724
SUBTOTAL
greater than $102,395
(see paragraph 23)
NON-REAL ASSETS
Cash at bank
Wife
$1,500
-
$1,500
Cash at bank
Husband
NIL
-
NIL
motor vehicle 1
Husband
$8,000
-
E$8,000
motor vehicle 2
Husband
$1,000
-
$1,000
motor vehicle 3 Outback
Note: the wife’s valuation is more likely to be correct as the vehicle has damage from hitting a kangaroo
Wife
$9,800 (husband)
$4,000 or less (wife)
-
E$4,000
SUB TOTAL
$14,500
LIABILITIES
LEGAL OWNERSHIP
DEBT
Credit card debt:
a) at date of separation
b) at date of trial
Husband
a) -$259,659.82
b) -$290,000 approximately
Land tax:
a) at date of separation;
b) at date of trial
Husband
a) -$71,527.53
b) -$115,000
Alleged loans from friends and family at date of trial
-$260,000 at least
Husband
Not known
Alleged debt to builder, plumber, surveyor and Telstra -$109,300
Husband
Not known
SUBTOTAL
-$405,000
SUPERANNUATION
LEGAL OWNERSHIP
ESTIMATED VALUE
The wife provided a ‘screenshot’ of her account balance to the Court however the image provided did not specify the superannuation fund.
Wife
$111,584.28
ANZ
Husband
$2,875
TOTAL SUPERANNUATION
$114,459.28
MATTERS GOING TO THE ASSET POOL
The husband’s loans from family and friends include (on his evidence) an alleged loan from his father of $260,000. This loan is said to remain outstanding. The husband’s father resides in Melbourne, but he is not on affidavit. There are no documents before the Court going to the establishment of this loan and/or its terms. The husband’s evidence as to the existence of the loan could easily have been corroborated by his father and such evidence is challenged by the wife. The Court draws an adverse inference as to the failure of the husband to place evidence from his father before the Court and does not accept the existence of this loan. Additionally, the Court does not accept the existence of any loans as claimed, there being insufficient evidence before the Court to make any finding. The husband’s evidence alone is not accepted by the Court in circumstances where there was a lack of evidentiary material, which would have been readily available, placed before the Court by the husband. The husband’s borrowings from family and friends are not transparent. The same reasoning applies to the debt asserted by the husband of $109,300.
Not included in the asset pool above is a property situate KK Street Suburb LL in the State of Victoria. The wife alleges the husband transferred this property out of his ownership in 2013, but that the transfer “has never been accounted for…” and it is her belief that “this property is still in [the husband’s] grasp and would be profited from once he has settled this case”. The husband denies there was anything other than a sale to a third party at arm’s length and asserts he has no interest in the real property. Neither of the parties are the registered proprietor of the property; the registered proprietor has not been joined to the proceeding nor notified of same; and there is no corroborating evidence or evidence other than the wife’s unsupported allegation to allow the Court to make the necessary finding. In these circumstances the Court does not consider the property an asset or liability of either party.
The husband may incur Capital Gains Tax (‘CGT’) liabilities in respect of a sale of some or all of his investment properties at some time in the future. That future liability is unquantified and uncertain.
It is the husband’s case that there is a “negative value” to “the asset pool available for distribution” before any CGT assessment is calculated.
The Court accepts the expert evidence of Mr Y which has been adopted to determine the real property equity in the asset pool. Mr Y was a reliable and candid witness. Mr Y also made appropriate concessions in the giving of his evidence. In particular, in respect of the properties at AA Street X Town in the State of Victoria. Mr Y was instructed by the husband’s solicitors to value each individual proeprty at AA Street X Town, and was not instructed to value the land as a whole. The property is in a residential growth zone and should have been valued for its highest and best use, namely as a total land parcel available for development. When cross-examined by the wife as to whether the land offered for sale as a development site would have achieved a higher sale value, Mr Y responded “it probably could have.”[3] He also agreed that in the immediate surrounds, development was prominent in terms of large blocks of land, as the subject property evidently is. The method of valuation was flawed by virtue of the instruction provided by the husband. On the basis of this evidence, the Court is satisfied that the market value attributed by Mr Y to the individual unit properties is less than the value that would be attributed if the land parcel at AA Street X Town was to be valued by an expert valuer as an entire landholding of interest to a developer. The market value of the total land holding is therefore unknown save that it would probably exceed $1,835,000.
STANFORD ARGUMENT
[3] Transcript of the proceeding on 3 June 2020, page 156, line 28.
The parties’ property interests are identified above. Is it, as submitted by the wife, just and equitable to make orders pursuant to s 79 of the Act adjusting those property interests, or is it, as submitted by the husband, not just and equitable to do so? I am satisfied that in all of the circumstances of this case it is just and equitable to make orders adjusting some of the parties’ property interests.
The assumptions, both stated and unstated by the parties, upon which the marriage and arrangement of the parties’ financial affairs proceeded, clearly came to an end upon their separation in 2012. The end of the marriage necessitated a restructure of the parties’ affairs. That included the wife’s subsequent bankruptcy and her need to support the children of the marriage for the most part without contribution from the husband. There ceased to be a common use of the parties’ joint assets. During the marriage the wife had little knowledge of the complicated financial affairs of the family. Following separation she was required to, and did, become acutely aware of the parties financial position. The debt left in her sole name was approximately $1,000,000. These monies were expended in large part by the husband. The wife was encouraged by the husband to enter voluntary bankruptcy and did so. The husband avoided that fate. He remains the sole registered proprietor of the properties acquired during the cohabitation period and otherwise.
PROPERTY ORDERS
The Court being satisfied that it is just and equitable to make orders adjusting the property interests of the parties, exercises that power by reference to s 79(4) of the Act which is as follows:-
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d) the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
Whilst the Court has considered as a precondition to making an order for property settlement whether it is just and equitable in all the circumstances of the particular case to make such an order, the Full Court of the Family Court in Bevan & Bevan (2013) FLC 93-545 at [62] made clear that the just and equitable consideration is one that “permeates the entire decision making process”.
CONTRIBUTIONS
An assessment of contributions is “holistic” in nature.[4] It is nevertheless of assistance to consider that evidence of contributions in the manner as set out below to provide coherence to the task.
[4] Dickons & Dickons [2012] FamCAFC 154, [24].
Commencement of Cohabitation
At commencement of cohabitation the wife earned a salary of $90,000. The wife’s evidence, not disputed by the husband, was that at the commencement of cohabitation she solely owned three real properties, all encumbered, namely:-
(a)MM Street Suburb NN in the State of Victoria (‘the MM Street property’);
(b)PP Street Suburb QQ in the State of Victoria (‘the PP Street property’); and
(c)RR Street Suburb QQ in the State of Victoria (‘the RR Street property’).
The wife purchased the PP Street and MM Street properties in 2002, approximately two years prior to cohabitation. To make those purchases, the wife used a deposit bond against the security of her mother’s then home. That is, on her own evidence, none of the wife’s monies were applied to the purchase of the real properties. The wife otherwise obtained funds via mortgage advances. The two properties were then rented out by the wife, with the rental receipts being applied to the mortgage repayments. In January 2013, and following separation, the MM Street property was sold by the wife. In October 2013, the PP Street was sold by the wife. Both these sales preceded the wife’s bankruptcy. Although the wife previously deposed in an affidavit sworn by her on 20 August 2015, at paragraph 129, that the equity from the sale of the MM Street property and PP Street property “would eventually be transferred to my [m]other’s home to pay her house off sooner”, her evidence at trial was that “there was never any equity going into RR Street”.[5] In fact, the MM Street and PP Street properties had been further encumbered during the period the wife held them, and upon sale, and despite that being many years later, there were no or minimal net sale proceeds.
[5] Transcript of the proceeding on 3 June 2020, page 101, lines 38-39.
As to the RR Street property, the wife’s mother lived in the RR Street property throughout the parties’ relationship. The husband applied a part of his income to the mortgage repayments, rates and other property outgoings that were due in respect of that property as occupied by the wife’s mother until December 2013, some 16 months after separation. In 2014, the property was transferred to the wife’s brother. This transfer occurred following the wife’s bankruptcy and with the approval of the wife’s Trustee in bankruptcy. The property remains registered in the name of the wife’s brother. The wife’s mother, a disabled elderly pensioner, now rents the RR Street property from her son. The wife’s evidence was that her equity in the RR Street property at the commencement of cohabitation was in the sum of $150,000, as provided to her by her mother. The wife’s mother had sold her home in SS Town and the net sale proceeds were deposited toward the purchase of the RR Street property. The balance of the purchase price was obtained from mortgage monies obtained by the sole registered proprietor, the wife.
Here, the husband accepted there would have been equity as described by the wife in the RR Street property at commencement of cohabitation, the property being acquired by the wife in 2002, for the sum of $260,000 inclusive of costs.
The wife claimed that the RR Street property was the home and the property of the wife’s mother. It was the wife’s evidence that the husband “syphoned the money out of [the RR Street property]” and applied such funds to his own benefit. The Court can make no finding on the evidence as to the wife’s allegation, which is denied by the husband. What is clear on the evidence is that further borrowings were obtained, subsequent to the initial borrowings of the wife after the application of her mother’s funds, such that any equity in the property had, by the time of separation, disappeared. The application of those further borrowings together with the initial deposit monies belonging to the wife’s mother, and by whom, cannot be established on the evidence before the Court. The wife was the sole registered proprietor of the property and thus the only person able to make application for the borrowings and/or to withdraw the equity in the property as provided by her mother at first instance. The wife subsequently became a bankrupt on the lodging of a Debtor’s Petition at a time of her choosing, after receiving relevant advice. What occurred between the parties in their application of the equity and debt acquired by them in the period that the wife owned the RR Street property, cannot be ascertained, given the absence of evidence before the Court. When the wife’s Trustee in bankruptcy sought to obtain some part or the whole of the equity in the property, to apply toward repayment of a part of the wife’s debt, on the wife’s evidence, “there was no equity in it”. Accordingly, the Trustee allowed a transfer of the RR Street property to the wife’s brother, who took the property subject to its then mortgage debt of $474,417. These monies had been expended by the parties in all likelihood on the acquisition of further real property as known or unknown to the wife. The wife’s brother was required to pay a further sum of $15,000 to the wife’s Trustee in bankruptcy to obtain the transfer of the RR Street property.
At the commencement of cohabitation the husband had an undisclosed number of real properties with associated undisclosed liabilities. He claimed to have no significant equity or deficit in any of his real properties. His income was undisclosed. His financial position was not transparent. In particular, the quantum of his then credit card debt, which has always been a means of funding his living expenses and which has assisted in the acquisition and retention of his various properties.
During Cohabitation
Each of the parties made both direct and indirect financial contributions during the course of their cohabitation. They both made contributions to the welfare of their family. They were both engaged in employment until the wife ceased working in 2007 following the birth of B. Thereafter the wife took 12 months of unpaid maternity leave. The wife then resumed her employment in September 2008 until April 2009 when she again ceased work for the birth of C. Thereafter the wife returned to work on a part-time basis from August 2009 until early 2010 when she ceased working and became engaged in home duties and the primary care of the children who from 2011 also included D. This primary caregiving role was one undertaken by her from the time of B’s birth. The husband remained in gainful employment throughout. He applied his income to the support of his family, and on occasion to a gambling habit.
The wife claimed the husband consistently gambled throughout the parties’ cohabitation and following separation. The husband admitted he gambled, but not consistently. The wife asserted the husband opened a TT Company account in the wife’s name. The husband denied this allegation. His evidence was that his TT Company manager approached the wife to get her to open an account in her name, in the period between 2010 and 2013, to participate in the then scheme of the husband to obtain bonus credit card points on each of the husband and wife’s credit cards via high betting turnover. Over the period considered in evidence, namely 19 January 2011 to 27 July 2013, the husband made a loss from his gambling of -$316,579. To what extent the husband otherwise lost or made money cannot be determined on the paucity of evidence before the Court. The wife’s evidence was that her bankruptcy arose as a result of the husband fraudulently incurring debts in her name,[6] and that such debts included the husband using a betting account in her name of which she had no knowledge. It is not possible, on solely the evidence of each of the parties to determine precisely what occurred at this time. What is clear on the evidence is that the parties’ financial position during the later stages of the marriage was largely determined by the husband. The wife obtained some credit cards in her name, and personal and other loans, including mortgage loans in respect of properties registered in her name during the cohabitation of the parties. The parties disagree as to the extent of the wife’s knowledge and participation in the acquisition of her debt. She did make personal application for some of that debt. I accept, however, that other of the debt may have been applied for by the husband, in particular the credit card debt. The control of the monies obtained from credit cards in the name of both parties; from mortgage advances; and from other loans, was largely exercised by the husband. The husband applied the funds obtained to gambling; building up the parties’ property portfolio; and the payment of the parties living expenses. The wife’s determination to eliminate her debt via a debtor’s petition occurred some significant time after separation. She was nevertheless assisted in the process by the husband who was not adverse to the wife’s adoption of that course. The husband does not view credit card debt as something which necessarily must be repaid. As was said by Justice Thornton in Her Honour’s Reasons for Judgment dated 7 July 2016, relevantly:-
354… I accept that the mother ultimately had debts totalling approximately $1 million, including approximately $337,000 in credit card debt, six mortgages and additional personal loans. I accept that the mother entered into her bankruptcy due to circumstances largely caused by the father and that she had little control over the process as he retained the relevant financial documents. ...
[6] Affidavit of Ms Dunstable sworn 20 August 2015.
Post Cohabitation
Following separation, the wife and children remained living in the former matrimonial home at VV Street XX Town in the State of Victoria (‘the former matrimonial home’) and were supported by the husband. In May 2013, the wife and children were required to find other accommodation, being rental accommodation, as a result of financial necessity, with the former matrimonial home being sold in February 2013. The wife has continued in her role as primary carer of the children since separation, and in particular since the orders of 2016 of Justice Thornton. She has carried out the role for the most part in the absence of the husband.
The husband has incurred ongoing credit card and land tax and other debt which remains outstanding. That debt includes child support arrears. He has retained most of his properties. He collects the rental receipts. The burden of supporting the children financially has fallen solely to the wife save the husband has incurred considerable weekly fees in paying a supervisor to enable the children and he to spend time together.
The husband has had orders made against him in respect of his defaulting on loan repayments and/or non-payment of monies due in respect of his ownership of the real properties. In 2018, Suburb WW Council obtained a judgment against the husband in the sum of $92,787.38. In August 2019, the Commonwealth Bank of Australia assigned absolutely all of its legal and beneficial rights, title and interest in a debt owned by the husband of $48,097 to AD Company. It is not clear on the evidence as to the payment and/or enforcement or otherwise of this part of the husband’s debt, in that there appears no ongoing action by Suburb WW Council nor AD Company. Since separation, the husband’s credit card debt has increased by approximately $30,000. Such further monies were obtained to enable him to hold his property portfolio and to meet his living and other expenses. No enforcement in respect of repayment of his credit card debt was in evidence before the Court.
In all of the circumstances I am satisfied that the parties contributions were both equal and not. The husband’s gambling losses; the non-disclosure of the totality of his financial position at commencement of cohabitation - given he was at that time building up a property portfolio - and the greater burden that has fallen to the wife since separation in caring for, and supporting the children result in greater contributions overall from the wife.
SECTION 75(2) MATTERS
Section 75(2) of the Act is as follows:-
(2) The matters to be so taken into account are:
(a) the age and state of health of each of the parties; and
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain; and
(e) the responsibilities of either party to support any other person; and
(f) subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(ha) the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant; and
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
(k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l) the need to protect a party who wishes to continue that party's role as a parent; and
(m) if either party is cohabiting with another person--the financial circumstances relating to the cohabitation; and
(n) the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party; and
(naa) the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:
(i) a party to the marriage; or
(ii) a person who is a party to a de facto relationship with a party to the marriage; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p) the terms of any financial agreement that is binding on the parties to the marriage; and
(q) the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage.
The husband is 49 and the wife is 44 years. Each of them is in good health. At trial, neither party had re-partnered.
The wife has a capacity to earn some part-time income given the ages of the children. She earns no income currently. In 2010, the wife was in receipt of income in the sum of approximately $90,000. She was then not in receipt of income for many years during the marriage, her earning capacity being adversely affected by her primary carer responsibility until March 2020 when the wife again became gainfully employed. That employment was lost as a result of the COVID-19 pandemic. She is in receipt of Centrelink benefits.
The husband has both income and earning capacity. He is able to obtain monies as his needs and commitments warrant, from credit cards and other unknown sources.
The wife has superannuation entitlements that were unaffected by her bankruptcy. They are considerable in excess of those held by the husband. This is a financial resource that will benefit the wife in the future and one which she sorely needs. The husband will be able to provide for his future in his working years to come, not restricted by the necessary care that the wife will be required to provide to the children.
The wife has the sole care and support of the parties’ children. As at 21 March 2018, the husband was in arrears in the sum of $18,887.06 in respect of his registered maintenance liabilities. Such monies were not paid to the wife at that time. On 29 May 2019 the Federal Circuit Court of Australia (‘FCC’), in a proceeding between the Child Support Registrar and the husband, ordered by consent:-
1. The Respondent pay to the Applicant the sum of $34,230.34 (the child support debt), being a registered maintenance liability of $29,596.55 in arrears of child support and $4,633.79 in late payment penalties.
2. The Respondent pay the Applicant costs fixed in the sum of $2,944.30 (the costs).
3. The Respondent pay to the Applicant in two instalments the sum of $32,450.85 (the total debt), consisting of the child support debt and the costs, within 120 days of the date of these orders, with the first payment of $16,270.45 due and payable within 60 days and the balance due within 120 days.
4. Pending full payment of the total debt:
4.1 The Respondent is restrained from assigning, transferring, further encumbering or dealing in any way with the Respondent’s interest in the following real property without the prior written consent of the Applicant:
(a) 1 FF Street, Suburb M, Victoria, more particularly described in the Certificate of Title Volume … Folio … as Lot 2 on Plan of Subdivision …; and
(b) 3 FF Street, Suburb M, Victoria, more particularly described in the Certificate of Title Volume … Folio … as Lot 3 on Plan of Subdivision ….
4.2 The Respondent’s interest in the real property be charged in favour of the Applicant for the total debt.
4.3 The Applicant is at liberty to serve a copy of these orders on the mortgagee of the properties mentioned in [4.1.a] and [4.1.b], ZZ Bank, and any other person who claims an interest in the land.
5. If the Respondent defaults in making any of the payments ordered to be paid under these orders or deals with any of his real or personal property in breach of these orders, the amount of the total debt then outstanding shall be immediately due and payable.
6. The Application in a Case filed on 20 February 2019 is otherwise dismissed.
Such monies as ordered by the Court for the husband to pay to the Child Support Registrar have not been paid by the husband. He pays no ongoing child support. By virtue of this, and the position in which the wife found herself following separation which resulted in her bankruptcy, the wife has lived a subsistence existence and not had a standard of living that in all the circumstances is reasonable. To achieve that position, a sum of money is required to be paid to her by the husband.
On 19 July 2017 the husband was ordered by the Full Court to pay the wife the costs incurred by the wife in respect of the husband’s unsuccessful appeal against parenting orders made by Justice Thornton on 7 July 2016. The wife’s then solicitors sought a payment from the husband of $25,000. The husband failed to engage in any discussion as to any costs quantum. That costs order remains unsatisfied. There has been no application for taxation of any costs.
EFFECT OF ORDERS
The parties’ retention of their respective motor vehicles and bank account monies was not an issue in the proceeding. Nor was each party’s retention of their own superannuation entitlements. Neither party sought a splitting order, nor that the disparity between them be bought into account save it should be acknowledged. That was a sensible approach. A just and equitable outcome.
Whilst the wife’s application is for a sale of all properties held by the husband, and a division of any proceeds after payment out of only secured debt, the acceding to such an application would not result in orders that the Court could be satisfied would meet the requirements set out in s 79(2) of the Act. A type of ‘fire sale’ might occur, leaving the wife with no funds and the husband without any income and/or earning capacity.
Whilst there is a net equity of $102,395 and probably more if AA Street X Town was sold as a development site, in respect of the real properties, held by the husband, upon the sale of some of those properties, there will be required to be paid the selling costs; the monies owing to the State Revenue Office (Victoria) in the sum of approximately $115,000 in respect of land tax; and any CGT. Additionally, as disclosed by the husband’s evidence, supported by documentary evidence, there remains his credit card debt. The husband submits that a division of assets is not possible or practical in circumstances where the wife cannot absorb a share of his debt and, where the husband is willing to assume the entirety of his debt. The husband however does not anticipate selling his real properties to eradicate his debt and is intent on holding them until the market improves whereupon he will make profits that will exceed his debts. He has managed to organise his retention of debt, and incurring of further debt for many years without the need to sell the entirety of his property portfolio.
The value ascribed to the properties situate at AA Street X Town is a total value of $1,835,000. The Court has determined however that the value is in a higher sum given the higher value that should have been attributed to those units. This land holding provides commercial opportunity to the husband.
The value ascribed to the home in which the husband lives at T Street Suburb M being a value agreed between the parties is $800,000. The mortgage encumbrance to the Westpac bank is $671,227. The net equity before any outstanding rates payment, if any, is $128,773. There was no evidence before the Court that there would be land tax nor CGT in respect of this property. This is the home of the husband. It is this property which should be sold to enable a payment to be made from the husband to the wife. The husband has other accommodation options in the properties held by him. Or, like the wife, he can reside in rental accommodation. The s 75(2) of the Act matters significantly favour the wife. She is in need of immediate funds. There is equity of just over $100,000 in the real properties. This is a relatively small sum, and should be paid in almost its totality to the wife given that if a percentage adjustment were appropriate to determine in this case, the wife would receive, on the basis of contributions and s 75(2) of the Act matters almost the totality of such a small asset pool. The husband wishes to retain his portfolio of properties to the exclusion of the wife. The husband remains optimistic that such retention shall financially benefit him in the longer term. He shall be given that option, given his need to earn income and repay considerable debt as accrued by him, including that which relates to his gambling habit. He cannot retain his entire property holding however. He must sell that part of his real property that enables monies to be paid to the wife in a sum which in all the circumstances satisfies considerations of justice and equity as set out in s 79(2) of the Act. The offsetting of his debt to render no payment to the wife is not just and equitable. The husband accumulates and manages debt as he sees fit. He does not seek to eradicate it by a sale of his real properties. He obtained significant funds from the wife in respect of liabilities in her name. He has had the benefit of the creditors’ monies. He has left the wife in an impoverished position and claims now that the existence of his debt should deny her any entitlement. There is not justice and equity in the orders he seeks and his application cannot succeed.
I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Hartnett. Associate:
Dated: 17 February 2021
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