EUFROSIN & EUFROSIN
[2013] FamCA 311
•3 May 2013
FAMILY COURT OF AUSTRALIA
| EUFROSIN & EUFROSIN | [2013] FamCA 311 |
FAMILY LAW – PROPERTY – adjustment of property interests between the parties – gambling win after separation
| Family Law Act 1975 (Cth) ss 75(2), 79 |
| Stanford v Stanford C20127 HCA SZ In the Marriage of Norbis (1986) 10 FamLR 819 In the Marriage of Zyk (1995) 19 FamLR 797 Anastasio & Anastasio [1981] FLC 91-093 In the Marriage of Farmer & Bramley (2000) 27 FamLR 316 Townsend & Townsend (1995) FLC 92-569 Chorn & Hopkins (2004) FLC 93-204 Mayne & Mayne (2011) FamCAFC 192 S v AG & MR [2011] EWHC 2637 Kowaliw & Kowaliw (1981) FLC 91-092 |
| APPLICANT: | Ms Eufrosin |
| RESPONDENT: | Mr Eufrosin |
| FILE NUMBER: | SYC | 2559 | of | 2009 |
| DATE DELIVERED: | 3 May 2013 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Stevenson J |
| HEARING DATE: | 26, 27 & 28 November 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Grieve QC, Ms Messner |
| SOLICITOR FOR THE APPLICANT: | Athena Touriki Solicitors |
| COUNSEL FOR THE RESPONDENT: | Mr Lethbridge SC, Mr Todd |
| SOLICITOR FOR THE RESPONDENT: | B Hayward & Co |
Orders
That both parties do all things and execute all documents necessary to effect the transfer to the wife free from encumbrances all of the husband’s right, title and interest in the property situate at and known as … B Street, Suburb C in the State of New South Wales.
That both parties do all things and execute all documents necessary to effect the transfer to the wife free from encumbrances all of the husband’s right, title to and interest in the property situation at and known as … D Street, Suburb E in the State of New South Wales.
That both parties do all things and execute all documents necessary to:
3.1transfer all of the wife’s right, title and interest as a shareholder in Eufrosin Pty Limited to the husband
3.2effect the wife’s resignation as a director of Eufrosin Pty Limited
3.3close all bank accounts, operating accounts or other financial arrangements between the parties, in which they have been associated, either individually or as a business or as a company.
That both parties do all things and execute all documents required to effect the transfer to the husband of the whole of the wife’s right, title to and interest in the debt owed by Eufrosin Pty Limited to the husband and wife jointly.
That contemporaneously with compliance with orders 1, 2, 3 and 4 the husband do all things necessary to discharge the loans owed to the National Australia Bank so as to release the securities which the bank holds over the properties at Suburb C and Suburb E and to pay out the debts of the parties’ business, including the following liabilities:
5.1the debt of Eufrosin Pty Limited – NAB business loan account …75
5.2the debt of Eufrosin Pty Limited – NAB business option combination account No …78
5.3the debt of the NAB Flexi Account …64
5.4the debt owed on NAB cheque account …29.
That, contemporaneously with compliance with the balance of these orders, the wife pay to the husband the sum of $334,709.
That each of the parties is declared to be the sole legal and beneficial owners of all other property not otherwise dealt with in these orders which is presently in his and her respective possession or control.
That each party is solely liable for and will indemnify the other against any liability encumbering any item of property which that party takes pursuant to these orders, including but not limited to company tax or capital gains tax.
That all material produced on subpoena be returned.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Eufrosin & Eufrosin has been approved by the Chief Justice pursuant to s 121(9)(g) of the Act.
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 2559 of 2009
| Ms Eufrosin |
Applicant
And
| Mr Eufrosin |
Respondent
REASONS FOR JUDGMENT
the proceedings
Mr Eufrosin, (“the husband”) and Ms Eufrosin (“the wife”) are in dispute as to settlement of matrimonial property. Their marriage subsisted for some twenty years and was dissolved in September 2009. The parties have two children; Ms F who was born in 1989 and Mr G who was born in 1991.
Background
The husband was born in Greece in 1950 and migrated to Australia in 1964 with his parents and brother Mr N. He is now 62 years of age. The wife was born in Sydney in 1958 and is now aged 55 years.
The husband left high school at the age of 16, having passed the School Certificate examination. The wife graduated with a degree in 1980.
In 1966 the husband’s parents purchased a retail business at Suburb H. The husband commenced working in this business when he left school. He was not paid a wage but received “pocket money spending money” from his parents.
In 1969 the husband’s parents sold the retail business and purchased another retail business at Suburb A. The husband and Mr N worked with their parents in this business and they all lived in an upstairs flat. The husband and Mr N worked in the business seven days per week. He received a small amount of “pocket money” but no wages.
In 1969 the husband, his parents and Mr N incorporated a company known as Eufrosin Pty Limited. The current directors are the husband and wife. The husband’s father died in 1982 and his mother and Mr N resigned as directors in 1998.
In 1972 the husband, his parents and Mr N purchased three blocks of home units, each in the names of a corporate entity. J No.1 Pty Limited purchased a block of nine units at I Street, Suburb K for $112,000. J No.2 Pty Limited purchased a block of twelve units at L Street, Suburb M for $122,000. J No.3 Pty Limited purchased a block of nine units at O Street, Suburb H for $138,500. The purchase money came from savings of approximately $100,000 and mortgage advances from the then Bank of New South Wales.
In 1975 the husband’s parents sold the retail business for approximately $50,000. Between September 1975 and October 1976 the husband, his parents and Mr N holidayed in Greece. They did not engage in paid employment during this period.
On his return to Australia in October 1976, the husband began employment in a retail business owned by a friend at Suburb P. He worked from 10:00am until 8:00pm seven days per week. The husband lived with his parents in a rented home unit at Suburb Q.
In 1977 Eufrosin Pty Limited purchased a retail business known as R Business for $80,000. At this time the shareholders in the company were the husband, his parents and Mr N. The purchase money was borrowed from the Westpac Bank, on security of the three investment properties.
The retail business was located in a shopping centre in Suburb S. The husband’s mother did not work in the family businesses after her return from Greece in 1977.
In 1978 the wife commenced employment in a relevant position while completing her degree. On graduation in 1980 she gained a relevant position with a government agency.
In 1978 the husband, his parents and Mr N purchased in their names a family home at T Street, Suburb U for $140,000. They borrowed most of the purchase money, using one of the investment properties as security.
The husband and Mr N operated R Business after the death of their father in 1982. In 1983 they acquired another business, known as V Business, in the same shopping centre. They used approximately $40,000 from their savings for the fitout of the new business premises.
In 1983 or 1984 the wife and her sister, Ms W jointly purchased a factory property at Suburb K for $95,900. Their mother paid the deposit of $11,000 and they borrowed the balance of the purchase money.
In April 1983 the husband, his mother and Mr N purchased a block of nine home units at X Street, Suburb Y for $830,000. They borrowed $500,000 from a Swiss franc loan facility brokered by the Westpac Bank. The husband claimed that they had an equity of approximately $330,000 in this property which, to his recollection, was “residual from the sale of three properties when we purchased [Suburb Y]”.
The husband did not identify these three properties, which could not have been the blocks of home units in Suburb K, Suburb M and Suburb H. The husband’s own evidence was that these three properties were sold during the 1990’s. The husband also said in his oral evidence “at the time of my father’s death we had a significant term deposit”. The financing of the purchase of the Suburb Y property thus remained unclear on the available evidence.
In September 1983, the husband, his mother and Mr N purchased a block of sixteen home units at Z Street, Suburb S for $1.15million. They borrowed $1million from a Swiss bank loan facility and the balance of $150,000 by way of vendor finance. In his affidavit the husband deposed that the vendor finance was used to meet “the balance of the purchase price, stamp duty and other outgoings”. In his oral evidence, however, the husband conceded that this contention must be incorrect.
In 1985 the husband and Mr N leased a third shop in the Suburb S Shopping Centre and commenced a retail business. The fitout cost $80,000, which they met by an equipment lease facility with the Westpac Bank. The husband and Mr N worked in all three businesses and, at times, they employed ten people.
In 1987 the husband and Mr N sold the retail shop for $150,000. They used part of these funds to discharge the Westpac equipment lease facility and deposited the balance into the account of the Eufrosin Pty Limited.
The parties married in October 1987, at which time the husband held the following assets:
· one third share in the home unit blocks at Suburb K, Suburb M, Suburb H, Suburb Y and Suburb S
· one third interest in the company Eufrosin Pty Limited
· one third share in the residential property T Street, Suburb U.
His liabilities were as follows:
· one third of the Swiss franc loan facility. This debt was refinanced with the Westpac Bank in 1998 in an amount of $2.5million, making the husband’s share approximately $830,000
· one third of the mortgage debt secured on the Suburb U property. It was unclear whether there was any encumbrance on the title to the Suburb K, Suburb M and Suburb H unit blocks.
At the date of the marriage the wife had the following assets:
· half share in the commercial property at Suburb K
· superannuation to the value of $43,000
· jewellery to an unknown value.
The wife asserted that she had savings of $6,000 but adduced no corroborating evidence. She conceded that the husband may have paid her credit card debt of approximately $5,000, suggesting that it was unlikely that she had savings in a similar amount.
The wife’s liabilities were unclear on the available evidence. She deposed that the factory premises were purchased in 1983 or 1984 for $95,500 and that she and her sister borrowed all but the deposit of $11,000. The wife’s evidence was that the rental income covered mortgage repayments and outgoings. It thus seems unlikely that a mortgage liability of some $84,000 would have been discharged by the date of the marriage in October 1987.
As noted, the husband, his mother and Mr N re-financed the Swiss franc loan in 1988. His evidence was that the floating of the Australian dollar and comparative exchange rates combined to increase the original debt by approximately $1million.
In late 1988 the wife took maternity leave from her employment with the government agency. From that point she took on the role of primary carer for the children and principal homemaker. The wife began to work in the parties’ retail business in 1998, with her hours arranged to accommodate her responsibilities as homemaker and parent.
In 1989 Eufrosin Pty Limited purchased a property B Street, Suburb C for $450,000. The whole of the purchase money was borrowed and secured against the unit blocks at Suburb K, Suburb M and Suburb H. This property became the matrimonial home of the parties.
In 1989 Eufrosin Pty Limited purchased a property at BB Street, Suburb CC for $450,000. All of this money was borrowed and secured on the title to the unit blocks at Suburb K, Suburb M and Suburb H. This property became the matrimonial home of Mr N and his wife.
In 1992 J No. 1 Pty Limited sold the unit block at Suburb K for approximately $810,000. All of the net proceeds of sale were applied to reduce the Westpac Bank debt.
In 1993 J No. 2 Pty Limited sold the unit block at Suburb M for $880,000. All of the net sale proceeds were applied to reduce the Westpac Bank debt.
In 1993/1994 J No. 3 Pty Limited sold the unit block at Suburb H for $1.2million. Again, the whole of the net sale proceeds were applied to reduce the Westpac Bank debt.
In 1994 the wife and her sister each received $80,000 when they sold their commercial property at Suburb K. The wife deposited her share of the sale proceeds into a joint account of the parties.
In 1997 the husband, his mother and Mr N sold the unit block at Suburb Y for $2.54million. According to the husband, they each received approximately $600,000. The wife maintained that the husband’s share of the sale proceeds amounted to about $800,000. It was common ground that these funds were lodged into a term deposit.
As noted, the husband’s mother and Mr N resigned as directors of Eufrosin Pty Limited in 1998. The wife was appointed a director and the husband purchased Mr N’s interest in the company for $80,000. The husband’s mother surrendered her interest in the company for no consideration. The wife became the holder of half of her shares and the whole of those previously owned by Mr N.
Between 1997 and 2008 the Westpac borrowings in the names of the husband, his mother and Mr N gradually increased from approximately $200,000 to about $1.2million. The husband estimated that he received around one third of the additional $1million and the balance went into the hands of his brother.
In 1998 Eufrosin Pty Limited transferred the Suburb C property to the parties as joint tenants. According to the wife, the property was unencumbered at the time of this transfer. The parties then took out a joint loan of $400,000, secured on this property, to finance an expansion of their business. They amalgamated R Business and V Business and added a hospitality section. The new business was known as DD Business.
By 1998 both of the parties’ children were at school and the wife began to work in the hospitality section. Between about 2000 and 2007 she worked from approximately 9:00am until 4:00pm on weekdays. At times she did not work for periods of up to several weeks, when the children required her support and assistance. From 1999 until 2007 the wife was the bookkeeper for DD Business.
In 2001 or 2003 the parties purchased jointly a holiday unit at D Street, Suburb E for $230,000. According to the wife they funded the purchase by borrowings of $160,000 from the Westpac Bank and $70,000 from the term deposit. The husband maintained that they borrowed $130,000 and the balance of the purchase price and the acquisition costs came from funds in the term deposit.
In 2002 or 2003 the parties purchased jointly a block of four units at EE Street, Suburb FF for $1.23million. They borrowed approximately $1million from the Westpac Bank, with the balance of the purchase price and acquisition costs coming from the term deposit.
In 2007 the Suburb S Shopping Centre underwent a major redevelopment. The parties relocated their business to another site within the shopping centre. According to the wife they took out a business loan of $250,000 from the Westpac Bank to meet the cost of the fit out of the new premises. At this time they had an existing joint loan of $343,000, secured on the title to the Suburb C, Suburb FF and Suburb E properties.
The parties’ business was closed during the refurbishment between April 2007 and April 2008. Both parties worked in the new business, which was known as GG Business, from its opening in April 2008 until June 2008. At that time the wife went on a holiday to the United States and never returned to the business. The parties separated on 19 July 2008.
According to the wife, the parties had the following liabilities when GG Business began operation in April 2008:
· joint loan of $443,000
· business loan of $250,000 in the name of Eufrosin Pty Limited
· joint loan of $1.3million.
They had a term deposit of $400,000 in the husband’s sole name.
According to the husband, he and Mr N borrowed $700,000 between April 2007 and April 2008 and an additional $500,000 in 2009. He maintained that these borrowings were necessary because he had no income during the refurbishment of the shopping centre and Mr N’s retail business was experiencing difficult trading conditions. These advances were secured on the title to the Suburb S property.
The term deposit in the husband’s name was closed on 19 September 2008. Between March 2008 and 19 September 2008 he withdrew the entire balance of $450,000 and seems to have deposited this money into the account of Eufrosin Pty Limited.
After the separation the husband arranged for the company to pay to the wife the sum of $2,000 per month. These payments were added to the wife’s loan account with Eufrosin Pty Limited.
The husband caused these payments to be stopped when he became aware that the wife won $6million in a gambling venture in early 2009. The fate of these funds was a significant issue in the proceedings. I will consider the evidence relevant to that matter below in these reasons.
In January and February 2009 the parties sold the Suburb FF home units. The sale proceeds of three units were applied to reduce the Westpac Bank debt from $1.3million to $285,751. The proceeds of sale of the fourth unit were used to discharge the remaining debt and the balance of about $40,000 was deposited into a NAB account.
In September 2011 the husband, his mother and Mr N sold the Suburb S unit block for $5.16million. They applied $1.9million to discharge a bank mortgage and deposited $2,499,462 into their joint account.
The Evidence and Witnesses
The applicant wife relied upon the following written evidence:
1. affidavit of Ms Eufrosin (the wife) sworn on 8 August 2012
2. affidavit of Ms Eufrosin sworn on 23 November 2012
3. affidavit of Ms W sworn on 26 July 2012
4.Financial Statement of the wife – verified by affidavit sworn on 1 May 2009
5.Financial Statement of the wife verified by affidavit sworn on 23 November 2012
The wife and her sister gave oral evidence in her case.
The respondent husband relied on the following written evidence:
1. affidavit of Mr Eufrosin (the husband) sworn on 27June 2012
2. affidavit of Mr Eufrosin sworn on 25 July 2012
3.affidavit of Bernard Hayward (the husband’s solicitor) sworn on 23 November 2012
4.Financial Statement of Mr Eufrosin verified by affidavit sworn on 24 July 2009
5.Financial Statement of the husband verified by affidavit sworn on 23 November 2012.
Approach To These Proceedings
In Stanford v Stanford [2012] HCA52 the majority of the High Court of Australia held as follows:(paragraph 35)
It will be recalled that s 79(2) provides that “[t]he 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”. Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under this section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
Their Honours further observed as follows:
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 apply s 79(4).
The husband and wife have lived apart for almost five years and there has been no intermingling of their finances for most of that period. They divorced over four years ago and both wish to put an end to their financial relationship, by way of a distribution between them of their property. In these circumstances, I have no hesitation in finding that it is just and equitable to make orders for adjustment of property interests between the parties. The application of section 79(4) will determine what orders should be made for adjustment of property interests.
It is first necessary to determine the assets, liabilities and financial resources of the parties. All relevant contributions of each of the parties, within the meaning of paragraphs (a) to (c) of section 79(4) must be identified and weighed against each other. The matters set out in paragraphs (d) to (g) of section 79(4), particularly paragraph (e) which takes up by reference the provisions of section 75(2), must be considered and a determination made as to what if any altercation should be made to the entitlements of the parties as earlier assessed on account of contribution.
The Wife’s Gambling Venture Win
The wife’s uncontradicted evidence was that she began to buy gambling tickets before the marriage in the early 1980s. She usually purchased tickets each week, using a player’s card in her name. Following the parties’ separation the wife met with her sister Ms W once or twice per week for coffee or lunch. They frequently discussed the wife’s financial position and her worries about the future. They both gave uncontradicted evidence that Ms W regularly provided the wife with amounts of $20 to $50 per week to assist her financially.
The wife deposed:
In a conversation in about September 2008, I said to [Ms W] words to the effect ‘I am having difficulties. I don’t know where I am going to go after this. I am still buying [gambling] tickets hoping it will bring us luck.’ There was some discussion between us about our father who had regularly bought a [gambling] ticket which he always named ‘Tihi’. My sister said that she had the players card and that was its name. She then said to me words to the effect: ‘You can use my card, it might bring us some luck.’ She then gave me the card and at the same time gave me $20 and said words to the effect: ‘This is for you. You can use some for the ticket. I will give you some money every week.’ I put the ticket and the money in a small wallet which I had in my handbag. My sister said ‘if we win anything I expect to get something to help me pay off my mortgage’.
Ms W deposed:
“8. Following the separation between [the wife] and her husband, my sister was visiting me at my home. In the course of our discussion she said ‘I am struggling. I don’t know where I am going to go from here. I have no career to fall back on. I am buying [gambling tickets] every week hoping it will bring us luck’. I took the reference to ‘us’ to be herself, her children, our mother and me. She continued to say, ‘Remember how Dad used to say we don’t have any ‘tihi’. Tihi is Greek for luck. I said ‘I have a card that says tihi. I don’t buy tickets as regularly as you. Why don’t you use it. It might bring us luck’. I took the players card out of my purse and handed it to my sister with some cash which as best I recall about $20. I said ‘put it towards the ticket. I will give you some money every week and you can use some for tickets.’ My sister said ‘I will put it here’. As she said that she took a small wallet out of her handbag and put the money and the players card in the wallet. I then said ‘if we win anything I will get something to help me pay off my mortgage’. I said ‘something’ because from what my sister said I believe she was buying more than one ticket, and my contribution to the cost of purchasing tickets was only part of the total.”
According to the wife, after this discussion she purchased gambling tickets every week. She used money given to her by Ms W, payments from the company which were debited to her loan account, a $6,000 tax refund and returned school fees paid years earlier for Mr G.
The wife purchased the winning ticket in early 2009, while on holiday at Suburb E. On that morning she drove to the holiday unit of a friend, Ms HH, with the intention of going to the beach with her and her sister. The wife said that she asked Ms HH to remind her to purchase gambling tickets that afternoon but she suggested that they do so immediately. They went to a newsagency and the wife spent $59.45 on ten tickets in various gambling ventures.
The wife deposed that she had about $20 in her wallet after she purchased these tickets. She claimed that she then walked across the road from the newsagency to an ATM and withdrew $500. It was put to the wife in cross-examination that she withdrew $500 at an ATM on the day before and not on the following day. The basis of this suggestion was this entry in bank statements annexed to her affidavit:
[Date of the gambling ticket purchases] Withdrawal At Handybank [Suburb E] […51]
[Date of the day before the gambling ticket purchases] 500
The meaning of this entry was not clear to me. The wife said:
I have a clear recollection of leaving the newsagency and going to the ATM across the road.
No, I clearly remember going across the road, I did not already have $500 when I purchased the ticket.
Withdrawing money on the day before the purchase, is not what I remember.
I accept the wife’s evidence as to the timing of her withdrawal of $500 in preference to the ambiguous entry in the bank statement. I am thus satisfied that she was not in possession of $500 in cash when she purchased the winning gambling ticket. In any event, it does not necessarily follow that she used funds withdrawn from her bank account when she purchased the tickets on that day.
In her affidavit the wife recounted a conversation with Ms W in early 2009, concerning the division between them of the $6million dollar prize money. She deposed:
82. Later that same day I spoke to my sister. I said to her ‘what if you keep $1million to pay off your mortgage and leave something to fix up your home or do whatever you want. I will look after Mum. You can keep Mum’s house when she goes, that can be your super. I want to make an offer to [the husband] and this can help me do it. I need enough to give me some income and I will always be there if you need anything.
Ms W deposed that she and the wife had the following conversation after the gambling win:
12. I recall saying to [the wife] ‘I had been praying to Dad and asking him to help us’. [The wife] said to me, ‘I went to the cemetery and visited our father’s grave and also asked him to help us.’ It was in one of the conversations with [the wife] [in early] 2009 that [the wife] said to me words to the effect, ‘What if we split it up where you take $1million and I will take the rest. I will look after Mum and when Mum goes you can keep the house. At least this way I can buy a house for me and the kids and look after and help Mum with her needs. If you need anything more I will be there for you. I said ‘that’s fine that will be enough for me to pay off my mortgage and have some money left over’.
In her affidavit the wife deposed to a conversation which she had with Ms HH in early 2009. She said:
86. About two weeks after [the gambling win] I said to [Ms HH] ‘I want to help you, I feel that if it wasn’t for you I wouldn’t have been in the right place at the right time. I would like to give you a gift to help you with your financial situation’. [Ms HH] had told me from previous conversations that she wanted to purchase a [retail] business [in the Sydney CBD] which she and her husband were operating on a sub-lease, was for sale for $250,000. She had said to me ‘I can’t borrow any more funds.’
87. [About 2 weeks later] I drew a bank cheque in the names of [Ms and Mr HH]. [Ms HH] and her husband [Mr HH] and I went to dinner. I gave them an envelope containing the bank cheque. I said ‘this is a gift and thank you for being there for me’. The cheque was for $250,000. [Ms HH] said to me ‘It’s too much, it’s a lot, when I can I will pay you back $150,000’.
The Assets, Liabilities and Financial Resources
On behalf of the wife, it was submitted that a “two pool approach” should be adopted in the circumstances of this case. Pool 1 would consist of the assets, liabilities and financial resources which existed at the time of the parties’ separation, although not necessarily at that value or quantum. Pool 2 would comprise the assets, liabilities and financial resources which represent the present balance of the wife’s share of the gambling prizemoney.
In the Outline of Case submitted on behalf of the wife, her counsel wrote:
14. However, what distinguishes this case from the great majority of matters which come before the court is the fact that [in early] 2009, the wife and her sister purchased a winning [gambling] ticket and soon after received the prize money of $6 million, which they agreed to share as to $5 million to the wife and as to $1 million to the sister. Given the fact that the [gambling] ticket was purchased six months after the date of separation, the wife submits that her share of the [gambling] win could not properly be characterised as “property” within the purview of section 79 of the Family Law Act. To suggest that the money paid for the ticket (some of which was clearly provided by [Ms W]) was derived from joint matrimonial funds it is, to adopt Mr Justice Mostyn’s observation in S v AG and MR [2011] EWHC 2637 (Fam), “pure sophistry” because, as his Lordship put it, “the money could just as easily have been found on the pavement”. Hence, on no view, could it be said that the husband made any contribution to that windfall.
15. In anticipation that the husband may respond to the submissions just put by placing reliance on the majority decision in In the Marriage of Farmer and Bramley 27 Fam LR 316, the wife submits that that case is distinguishable from this for the following essential reasons:
·there, there was simply no assets (apart from the proceeds of the lottery win) which could have been the subject of any order under section 79 – here, in contrast, the assets which the parties had accumulated during the course of their marriage had, at the time of their separation, a net value in excess of $2.5 million, a sum sufficient to accommodate their legitimate entitlements under section 79;
·there, in the opinion of Finn J, the wife’s contributions as a homemaker and parent during the 12 years in which the parties were together, which had been rendered the more burdensome by the husband’s drug dependency, coupled with the disparity between their financial circumstances (following the husband’s lottery win), justified an allowance of 15% in her favour – here, the husband cannot demonstrate any “unsatisfied” entitlement based upon his contributions;
·Kay J justified his decision for somewhat similar reasons to those applied by Finn J; and
·Moreover, in Farmer, unlike the position which obtains in this case, the wife continued to make contribution, post separation, by caring for the child of the marriage.
16. Furthermore, it is respectfully submitted that the approach taken by Guest J in Farmer, although in dissent, has much to commend it; see, in particular, paragraphs [187], [188], [193]-[195], [202]-[205] and [217]-[220].
17. Given the differences between this case and Farmer and, particularly, the fact that there is simply no basis upon which the husband can contend that he made any contribution to the acquisition of the wife’s [gambling] winnings, it is appropriate that the court should deal with the matter on the basis that the parties’ assets and liabilities should be divided into two “pools”, the first being those which existed on the date of separation and, subject to events which have occurred since, still exist and the second being the assets acquired with the proceeds of the wife’s share of the [gambling] prize. To adapt the observations made by Guest J in Farmer in paragraph [193]: “…although the property (the wife’s share of the lottery prize) was available for distribution, it should not be treated as part of the pool of assets in an undifferentiated way of using a global approach as it was not property to which the (husband) had made a contribution. That is, it did not form part of the assets to which a ‘global’ percentage could be applied, but may otherwise have been utilised to meet relevant section 75(2) factors on a reasoned basis.
Counsel for the husband contended that a single pool approach is appropriate, on the basis that the money used to purchase the winning gambling ticket came from “joint funds”. In their Outline of Submissions counsel for the husband wrote:
2.4 It is submitted that the Court will find that the funds used to acquire the [gambling] tickets were in fact joint funds. They were provided to the Wife by the Husband through [Eufrosin] Pty Ltd following the separation or were part of the refund for the children’s school fees received by the Wife in late 2008. To the extent that the funds were provided through [Eufrosin], they were either as a consequence of the Husband’s ongoing work in the business owned by that company or from funds provided to that company either by [Ms Eufrosin Snr] or from the parties’ jointly held term deposit which at the date of separation comprised two amounts totalling $300,000.
2.5 The Husband contends that it is open to the Court on the basis of authority to take one of two positions in relation to the [gambling] win. First, the position for which the Husband contends, consideration at Stage 2 where the Court would find that the contributions to that win should be treated as equal. Alternatively, if the Court is not receptive to that submission then the [gambling] win should be considered as a s.75(2) matter where it is contended that there should be an adjustment of the amount found to be the Wife’s entitlement from the [gambling] winnings of 33.3% to the Husband.
2.6 In support of the Husband’s principal position, it is submitted that the ticket which won [the gamble] was an application by the Wife of funds forming part of the parties’ divisible pool of assets. This was a divisible pool to which, leaving aside introduced assets, they had each since marriage contributed equally.
2.7 The purchase of [the gambling] tickets by the Wife post-separation was no more than the continuation of a longstanding process of which the Husband was aware and, on the evidence, took no issue. WA at [70], where the Wife says she first bough [gambling] tickets in the early 1980s, usually weekly. The Wife contended that the investment over the course of the marriage was $25 to $30 a week. The Husband would contend that it was a larger amount than this and more likely to be in the range of the investment she made which included the winning ticket, of approximately $60. Nothing turns on the difference of the investment, accepting the mid-point of the Wife’s evidence was about $1,400 per annum and may have been as high as $3,000 per annum.
2.8 The investment in [gambling] tickets is a high-risk investment but the amount invested, it is submitted, was in the context of this marriage, not significant enough if lost entirely to sustain a claim of waste.
2.9 The fact that the Wife over the period of the parties’ lengthy marriage continued to engage in [gambling] investments heightened, it is submitted, her chances of succeeding in winning a major prize. In cross-examination, the Wife said that where winnings had occurred in the past, they had, if not all, then generally been used by way of re-investment. By analogy, it is submitted that the position is no different to, for example, a share trader who amongst his portfolio maintains throughout a marriage investments in high-risk ventures. If in continuing to trade post-separation, such an investor made good on a high-risk investment acquired wholly post-separation, then there would be no issue that it would be treated no differently from any investment made during the course of the parties’ marriage. This is in part because any such investment during the marriage would be held to be a contribution by the parties from their joint funds. In the present case, that is demonstrably so. However, if the Court finds that there was some element of obligation to the Wife’s sister then the argument pertains to the amount retained by the Wife.
It is well settled that the court may adopt either a “global” or “asset by asset” approach: In the Marriage of Norbis (1986) 10 FamLR 819 (High Court of Australia). Wilson and Dawson JJ said (at page 831):
Of course, it may be possible and appropriate in many cases to determine the proportions in which the property is to be divided without treating any of the assets separately, but where the interests of the parties differ, a different approach will be open. Section 79, in particular s.79(4), refers to “any property of the parties to a marriage or either of them” and that expression is sufficient to encompass both the entirety of their property and their individual interests. If the parties’ interests in specific items of property differ or they have made differing contributions, it may be desirable to proceed upon an item by item basis in the division of the property between them. In such a case, justice and equity may best be served by treating the items separately for the purpose of determining the proportions in which they are to be divided, particularly if the overall division is to be effected by the transfer or retention of interests in individual assets, as was convenient in this case. It is true, as Nygh J pointed out, that where this is done, at the end of the exercise a calculation of the overall proportions in which the total property has been divided may serve as a useful check to ensure that the result is not disproportionate as a whole.
In In The Marriage of Zyk (1995) 19 FamLR 797 the Full Court (Nicholson CJ, Fogarty and Baker JJ) said (at page 801 pp 801-802):
Either approach is permissible, depending on the circumstances, but generally the global approach is to be preferred: see generally the discussion in In the Marriage of Norbis (1986) 10 Fam LR 819; [1986] FLC 91-712 and In the Marriage of Lenehan (1987) 11 Fam LR 615; [1987] FLC 91-814.
The global approach enables the court to assess the contributions aspect of the s79 exercise in an overall way by considering the parties’ contributions to their property as a whole although factoring into that exercise the circumstances, if it be so, that they may have made varying contributions to the total property at trial or which formed part of the history of their property during the marriage. It is the generally preferred and the generally adopted approach. It enables a broad approach to be taken to the varying contributions of the arties over the years of their marriage and in particular it usually has the advantage of more easily dealing with and giving proper recognition to paras (b) and (c) contribution. However, where the contributions to the components of the total property are disparate, caution needs to be exercised in this approach and the overall conclusion tested against the requirement that the orders be “just and equitable”. Lenehan is an example of a case where difficulties arose for that reason.
The asset by asset approach enables the court to assess separately the parties’ contributions to particular assets or groups of assets. It is the less preferred approach largely because it can at times be an artificial exercise and also because it can create difficulties in the proper evaluation of paras (b) and (c) contributions. But there are a number of circumstances where it may be appropriate to do so, for example an inheritance received post separation, or where the financial relationship of the parties during the marriage was such that they treated some property as exclusively the property of one party to which the other party made no, at least no para (a),contributions to it. It may be convenient in cases like that to treat that property separately rather than assess the overall contributions of the parties to the totality of their property.
However, the trial judge has a discretion as to which course to adopt and does so having regard to what appears more suitable to the circumstances of the particular case.
The Full Court considered a global approach appropriate in the factual circumstances which pertained in In the Marriage of Zyk. There, the husband and wife married in February 1985 and separated under the same roof in July 1993. The husband had purchased Lotto tickets as a member of a syndicate which did not include the wife since the early 1970s.
The syndicate purchased a winning ticket in 1987 while the parties were living together as a married couple. The husband handed his share of the prize money to the wife, who had general control of the parties’ finances. Their Honours cited with approval the following passage in the judgment of Baker J in Anastasio and Anastasio [1981] FLC 91-093:
The sum of $60,000 which came into the husband’s hands did so at a time when the parties were married and still living together. The moneys for the purchase of the ticket came from the husband’s earnings. I am of the view that a win in the lottery is in no different position to the acquisition of a piece of furniture, a block of land or other asset purchased or acquired by parties during a marriage with funds provided by either or both of them.
In In the Marriage of Farmer & Bramley (2000) 27 FamLR 316 the essential facts were that the parties commenced a de facto relationship in 1983 and married in 1984. They separated in January 1985 and the wife remarried in September 1997. There was one child of the marriage, who was born in March 1985. The child lived with the wife after the separation, apart from a period of two years with the husband between 1996 and 1998. In September 1996 the husband won $5million in a lottery. Otherwise, the parties had very few assets.
Finn J said:
First an issue has arisen in this appeal as to whether an entitlement based on contributions made to the welfare of the family can only be satisfied out of property available to the parties at the time the contribution was made. In my view, there is nothing in s79(4)(c) or indeed else in the Act, or in the authorities to date, which would justify such a limitation. Again in my view, if such a limitation were to be applied in any particular case, its justification would have to be found in the generally worded limitation in s 79(2) that a court shall not make an order under s 79 “unless it is satisfied that in all the circumstances it is just and equitable to make the order.
Kay J said:
This is not to say that the Court should be blind to the circumstances in which any assets were acquired post separation. Clearly contributions made towards the acquisition of such an asset by one party and the lack of contributions made towards its acquisition by the other party may weigh heavily in the exercise of discretion. However it is quite wrong to say that contributions made under s 79(4)(a), (b) or (c) before an existing asset was acquired could have no bearing on the outcome of the proceedings.
As appears below, the present configuration of the parties’ assets and liabilities as at the date of separation have a net value of $2,437,990. There is thus no necessity to look to assets acquired by the wife after the separation to recognise contributions made by the husband prior to the date of the gambling win in 2009.
It seems to me that the assets and liabilities of the parties to these proceedings fall into two distinctly distinguishable categories. Firstly, there are the assets and liabilities which they accrued during their twenty years of cohabitation, during which they each made contributions of the various kinds which are recognised in the Act. Secondly, there are the assets and liabilities which came into existence after separation as a direct consequence of the wife’s gambling win.
In the circumstances of this case, I am persuaded that it is appropriate to adopt a two pool approach as contended on behalf of the wife. Pool 1 will comprise the assets, liabilities and financial resources which existed as at the parties’ separation, although not necessarily at the values or quantum of that date. Pool 2 will consist of the assets, liabilities and financial resources which were derived from the wife’s gambling win.
Pool 1
Agreed Assets
The parties were agreed as to the identity and value of the following assets:
1.
B Street, Suburb C (J)
$750,000
2.
D Street, Suburb E (J)
$265,000
3.
Household contents at Suburb C property (J)
$6,250
4.
Household contents at Suburb E property (J)
$1,910
5.
Jewellery (H)
$5,100
6.
Jewellery (W)
$29,130
7.
Eufrosin Pty Limited
$250,000
8.
One third share in T Street, Suburb U (H)
$366,667
9.
Term deposits (H)
$50,000
10.
Mercedes motor vehicle (H)
$30,000
11.
AMP shares (W)
$1,413
12.
IAG shares (H)
$655
13.
Funds in solicitor’s trust account (H)
$125,000
14.
Paid legal fees (H)
$95,919
15.
Half share in NAB Business cheque account (H)
$6,276
The disputed items in the list of assets were as follows:
· money which the husband received from the proceeds of sale of Z Street, Suburb S
· NAB term deposit in the name of husband
· “outstanding distribution to the husband from [Ms Eufrosin Snr]”.
The husband maintained that he received $1,300,000 from the proceeds of sale of the Suburb S property, from which the National Australia Bank deducted $33,000 to secure the overdraft of Eufrosin Pty Limited. He thus sought to include this item in the list of assets at a figure of $1,267,000. The husband also included a term deposit in the sum of $25,000 as an asset. His counsel informed me that the National Australia Bank took $8,000 from these funds on account of its fees.
There was no evidence in support of these submissions but counsel for the wife did not seem to take issue with this logical proposition. I will include as assets a distribution to the husband of $1,267,000 from the sale proceeds of the Suburb S property and the term deposit of $25,000.
The husband disputed that his mother has a debt to him of $370,000 or any other amount. In my view the wife failed to establish the existence of any such liability. The only evidence in support of this proposition came from the wife in her affidavit, where she deposed:
“102. At various times during the period 1999 to 2007 my husband said to me “[Mr N] needs more money so we’re drawing down on the mortgage and I will get my share”. He also said “[Mr N] needs more money for his business and mum is giving him the money and I will get my share from the sale of [Z Street]”. My husband said to me around the time prior to our separation “I am owed $350,000.00 to $370,000.00 from my mother’s share. In the course of disclosure following the commencement of these proceedings, my husband has stated in correspondence between the lawyers that his mother [Ms Eufrosin Snr] was holding the amount of $400,000.00 on his behalf. The correspondence states that the amount had been reduced to $270,000.00 by early 2010. Annexed and marked “L” is a copy of a letter from my solicitor together with the annexures to the husband’s solicitor dated 19 January 2010 in which I sought details of the movement of funds. Paragraph 6 of that letter refers to the funds held by [Ms Eufrosin Snr] on behalf of my husband. The husband’s solicitor replied by letter dated 5 February 2010. A copy of this letter (not including the annexures) is attached and marked “M”.”
Despite the solicitors’ correspondence, I am not persuaded that the wife established that the husband’s mother owes him $370,000 or any other amount. On the evidence available to me, there is no legal obligation on Ms Eufrosin Snr to hand any such money over to the husband. She is entirely at liberty to dispose of or retain any such money as she chooses from time to time. I will include no amount in the list of assets on this account.
Liabilities
The only disputed Pool 1 liability was the husband’s credit card debt of $21,085. Notes to a balance sheet submitted to me indicated that this debt was incurred by the husband after the parties’ separation. In these circumstances I see no reason effectively to sheet home any part of this liability to the wife. I will exclude this debt from the list of Pool 1 liabilities.
Financial Resources
The balance sheet contained no reference to a financial resource available to either party. Nothing in the evidence suggested that either party holds a financial resource.
Pool 2
Agreed Assets
The parties were agreed as to the identity and value of the following Pool 2 assets:
1.
ANZ Shares (W)
$300,000
2.
JJ Super fund (W)
$1,174,000
3.
Westpac E-Saver Account (W)
$140,000
4.
Rewards Saver Account (W)
$1,000,000
5.
Westpac Choice Account (W)
$5,000
6.
JJ Super Fund Westpac Account (W)
$50,000
7.
Land at KK Street, Suburb LL (W)
$1,100,000
8.
Mercedes Motor Vehicle (W)
$90,000
9.
Half share in MM Business (W)
$240,000
10.
BT Portfolio Wrap (W)
$47,530
For convenience and to simplify mathematics, I will exclude from the list of assets set out in the balance sheet JJ Super Fund Westpac accounts with balances of $121.23 or $432.24 and $4.98 or $2.46.
The disputed items in the list of Pool 2 assets were the following add-backs alleged by the husband:
· wife’s gift to Ms W: $1million
· debt of Mr and Ms HH to the wife: $250,000
· gifts to friends of the wife: $60,000
· gifts to the wife’s family excluding children: $100,000
· wife’s legal fees: $60,000.
A series of authorities establish that the adding back of notional assets is the exception rather than the rule, for example Townsend and Townsend (1995) FLC 92-569 and Chorn and Hopkins (2004) FLC 93-204. In Mayne and Mayne [2011] FamCAFC 192 the Full Court (Faulks DCJ, May and Strickland JJ) summarised the principles in relation to “add backs” in the following terms:
72 Parties to proceedings about the division of property before the Family Court (and the Federal Magistrates Court) frequently urge the Court to add-back assets or funds that have been applied by one party or another for allegedly his or her own purposes after separation. The rationale is that one party should not benefit from a premature distribution of the assets. An obvious example is withdrawing and using money from a bank account either joint or owned by one of the parties. It is also the case that the parties may decrease the pool by increasing liabilities. The issue in such cases is whether the liability should be a joint liability or a liability only of the party who created it.
73. The application of the funds removed (or the debt incurred) may have been for a personal purpose (for example, to pay legal fees) or it may have been applied in the sustenance of a party or the children of the parties.
74. If the former is the case this has generally found to be a pre-emptive unilateral division of property. If the latter is the case then the principles enunciated in Marker v Marker AND Chorn NH & Hopkins RC apply. If the money was, or part of the money, was used to meet reasonable living expenses then that money, or that part of the money, is not “added-back” or regarded as a pre-emptive distribution.
The husband conceded that his paid legal fees should be added back to the list of assets and contended that these costs of the wife should be treated similarly. I agree with this submission and will add back the sum of $60,000 on account of the wife’s legal fees. I see no reason to treat the paid legal costs of the parties differently.
I do not accept that the wife made a gift of $1million to her sister Ms W. It seems to me that it could rather be argued that Ms W gifted $5million to the wife. The winning gambling ticket was purchased in Ms W’s name, possibly with money provided wholly or in part by her, and the prize money was deposited into her account. She then transferred $5million into an account of the wife.
I am satisfied and I find that the wife and Ms W jointly formed an intention to purchase gambling tickets on a weekly basis, using pooled funds, and to share any winnings as they deemed appropriate from time to time. I will not add back to the list of assets the $1million which Ms W received from the gambling prize money.
I will not add back to the list of assets the alleged debt owed to the wife by Mr and Ms HH. This advance has since become complicated by the joint purchase of a retail business by the wife and Mr and Ms HH. They operate this business as a partnership between the wife on the one hand and Mr and Ms HH on the other part. Each partner contributed one half of the purchase price and acquisition costs.
It is impossible to quantify the amount which the wife advanced to friends and family on the available evidence. I was not informed as to the source of the figures of $60,000 and $100,000 which the husband included in the balance sheet. I will not add these amounts back to the list of assets.
Liabilities
The parties agreed on the following Pool 2 liabilities:
1.
Westpac Mastercard (W)
$38,215
2.
Westpac Overdraft Account in respect of MM Business (W)
$20,000
3.
Westpac Investment Property Redraw Loan (W)
$393,000
4.
JJ Super Fund Pty Limited Westpac Business Loan (W)
$425,000
Consistently with the approach which I adopted in respect of the husband’s credit card debt, it seems to me that I should exclude the wife’s Mastercard from the list of liabilities. Given that the marriage broke down in July 2008, it seems almost inevitable that the wife incurred her credit card debt after the separation.
The only disputed Pool 2 liability was an amount of $135,063, being legal costs which the wife would incur to finalise these proceedings. I see no reason why the husband should effectively bear any part of this liability.
I thus find that the assets, liabilities and financial resources of the parties are as follows:
Pool 1
Assets
1.
B Street, Suburb C (J)
$750,000
2.
D Street, Suburb E (J)
$265,000
3.
Household contents at Suburb C Property (J)
$6,250
4.
Household contents at Suburb E Property (J)
$1,910
5.
Jewellery (H)
$5,100
6.
Jewellery (W)
$29,130
7.
Eufrosin Pty Limited
$250,000
8.
1/3 Share in T Street, Suburb U (H)
$366,667
9.
Term Deposits (H)
$50,000
10.
Mercedes Motor Vehicle (H)
$30,000
11.
AMP Shares (W)
$1,413
12.
IAG shares (H)
$655
13.
Funds in Solicitor’s Trust Account (H)
$125,000
14.
Paid Legal Fees (H)
$95,919
15.
½ Share in NAB Business cheque account (H)
$6,276
16.
Share in Proceeds of Sale of Z Street, Suburb S (H)
$1,267,000
$3,250,320
Liabilities
1.
Eufrosin Pty Ltd Home Loan Account
$340,000
2.
Eufrosin Pty Ltd Business Option Account
$157,000
3.
NAB Flexi-Account (J)
$37,000
4.
NAB Business Cheque Account
$50,000
5.
1/3 Mortgage over Suburb U Property (H)
$228,333
$812,333
Pool 2
Assets
1.
ANZ Shares (W)
$300,000
2.
JJ Super Fund (W)
$1,174,000
3.
Westpac E-Saver Account (W)
$140,000
4.
Rewards Saver Account (W)
$1,000,000
5.
JJ Super Fund Westpac Account (W)
$50,000
6.
Westpac Choice Account (W)
$5,000
7.
Land at KK Street, Suburb LL (W)
$1,100,000
8.
Mercedes Motor Vehicle (W)
$90,000
9.
½ Share in MM Business (W)
$240,000
10.
BT Portfolio Wrap (W)
$47,530
11.
Paid Legal Costs (W)
$60,000
$4,206,530
Liabilities
1.
Westpac MM Business Overdraft Account (W)
$20,000
2.
Westpac Investment Property Redraw Loan (W)
$393,000
3.
JJ Super Fund Pty Limited Westpac Business Loan (W)
$425,000
$838,000
The Contributions of the Parties
At the date of marriage the husband owned a one-third share in the Suburb H, Suburb K, Suburb M, Suburb Y and Suburb S properties. The Suburb Y and Suburb S properties were encumbered by Swiss-franc loans brokered by the Westpac Bank. It was unclear whether the other three properties were subject to any mortgage encumbrance. The husband also owned a one-third interest in the Suburb U property and held one-third of the issued shares in Eufrosin Pty Limited.
There was no evidence as to the value of these parcels of real estate or the husband’s shareholding in Eufrosin Pty Limited. There was no evidence as to the quantum of the Swiss-franc loans which were taken out for the purchase of the Suburb Y and Suburb S properties.
There was no issue however that the husband, his mother and Mr N applied borrowings of approximately $2.5million from the Westpac Bank to discharge the offshore loans less than one year after the marriage. It is thus reasonable to infer that the husband’s share in this debt as at October 1987 was approximately $830,000. The extent of any other liabilities of the husband as at the date of marriage was unclear on the available evidence.
Sales of the Suburb K, Suburb M and Suburb H properties between 1992 and 1994 and the Suburb Y apartment block in 1997 yielded sufficient funds to discharge the Westpac debt. It would thus appear that the husband, his mother and Mr N had very little equity in these properties as at the date of marriage.
The parties agreed that the husband received a distribution from the proceeds of sale of the Suburb Y property in 1997. The husband said that his share was $600,000 and the wife deposed that he received $800,000. In any event, this money was lodged into a term deposit and was available to the parties.
At the date of marriage the wife owned a half-share in a commercial property at Suburb K and had a superannuation benefit to the value of $43,000. As I observed above, it seems likely that the Suburb K property was encumbered as at the date of the marriage. The wife received $80,000 when this property was sold in 1994. She withdrew $43,000 from her superannuation fund in 2007.
During the marriage the parties assumed the traditional roles of major breadwinner and primary homemaker and carer for the children. There seems to be no doubt that the husband worked hard and devoted long hours to the various retail businesses which he operated alone, with Mr N and later in conjunction with the wife. For her part, the wife prioritised homemaking and the care of the children but assisted where she could in the businesses conducted by Eufrosin Pty Limited.
The closure of the Suburb S Shopping Centre in 2007 and the fitting out of new business premises left the parties without income for approximately twelve months. Their level of debt increased when they borrowed $250,000 from the Westpac Bank to meet the cost of the fitout of their new business premises. The husband withdrew $200,000 from term deposits between April 2007 and April 2008, while the retail business was closed.
At the date of separation the parties’ two term deposits held a total balance of about $300,000 (annexure I to the wife’s affidavit). Bank statements annexed to the wife’s affidavit showed that the husband withdrew $250,000 from one of these term deposits in August/September 2008. This account was then closed and the remaining term deposit held a balance of $50,000. It seems that the husband injected these funds into the business conducted by Eufrosin Pty Limited.
A significant issue in the proceedings was whether the husband made any contribution to the $5million which the wife received from the gambling win. As noted, the wife had available funds from four sources when she purchased the winning ticket. The money could have come from funds provided by Ms W, money paid to her by Eufrosin Pty Limited and debited to her loan account, her own tax refund of $6,000 or an unquantified sum being the return of Mr G’s school fees. The money used by the wife to purchase the winning ticket could have come from any one of these sources or multiple combinations thereof. It is thus impossible to identify the precise source of the funds used by the wife to purchase the winning ticket. In my view, the husband cannot simply assert that the purchase money came from “joint funds”.
On behalf of the wife it was submitted that “at the date of separation [Eufrosin] Pty Limited was heavily indebted to both parties and it was arranged that the wife would be repaid at the rate of $2,000 per month. The money paid to the wife was hers as a creditor of the company, as was money paid to the husband.” It is correct that the company owed money to each of the parties during the short period when the wife was paid $2,000 per month. Notionally, therefore, it seems to me that the company was repaying to the wife money which it owed to her.
In these circumstances it seems to me that there is substance in the submission on behalf of the wife that it would be “pure sophistry” to credit the husband with any contribution to the funds used by her for the purchase of the winning ticket. Counsel for the wife referred to the English decision of S v AG & MR [2011] EWHC 2637 where Justice Mostyn remarked:
The price of the ticket, one pound or two pound, is so inconsequential as can be safely disregarded. Arguments that the one pound or two pound derives from the joint matrimonial economy are, it can be said, pure sophistry. The money could just as easily have been found on the pavement.
For these reasons I find that the husband made no contribution to the money which the wife applied to purchase the winning gambling ticket in early 2009. I am also mindful of the fact that the wife purchased the winning ticket six months after the parties’ separation.
The husband had the sole benefit of $250,000 which he withdrew from the term deposits after the separation. Additionally, a proportion of borrowings totalling $1.2million came into the hands of the husband between April 2007 and 2009. In his oral evidence the husband said that these borrowings were divided equally between himself and Mr N and that he injected his portion of $600,000 into the business conducted by Eufrosin Pty Limited. These loans were secured on the title to the Suburb S property, which was sold in 2011. These borrowings thus had the effect of reducing the net value of the Pool 1 assets.
In my view, there was no clear evidence as to the husband’s use of these funds, which amounted to some $850,000. Certainly he paid legal costs of $90,000 and deposited $125,000 into his solicitor’s trust account but it is practically impossible to trace the fate of the balance of about $635,000 with any clarity.
I accept that some of this money was injected into GG Business by the husband. Even with this financial assistance, however, Eufrosin Pty Limited incurred losses totalling $486,606 in the 2009, 2010, 2011 and 2012 years (annexures to the affidavit of Bernard Hayward sworn on 23 November 2012).
In my view, there are also gaps in the wife’s evidence as to her application of the gambling winnings, post-separation borrowings and income from interest on investments and MM Business. Counsel for the husband stated in their written submissions:
2.14 The Wife’s expenditure post-separation from her [gambling] winnings, including the nature of the assets she has acquired was the subject of some cross-examination. It was contended that taking the Wife’s [gambling] winnings at a gross amount of $5,000,000, in addition to that sum, she had available to her to 30 June 2011, the following amounts (see WA at [90] and [95], and the Tax Returns annexed at WA pp.134, 149 and 161):
[Gambling] winnings
5,000,000
[MM Business] borrowings
300,000
[NN Street], Newcastle borrowings
550,000
Additional borrowing for son’s motor vehicle
95,000
2009 net income
35,882
2010 net income, discounting the deduction gained for the superannuation contribution of $50,000
159,641
2011 net income, after tax payable in the sum calculated in the return
88,196
Total:
$6,228,719
2.15 She had purchased assets and made gifts to the value of $4,989,530. There was at least $1,239,189 unexplained. When challenged, the Wife said that she had not acquired any further assets of consequence that were undisclosed and had, it followed, spent the money on lifestyle. It is submitted that that is an extraordinary amount which must sound in the waiting of the Wife’s contributions reflected by the gambling winnings.
In her affidavit the wife deposed that she has met the following expenses since she received money from the gambling winnings:
· return tickets to Greece and accommodation for the parties’ daughter Ms F, a friend and her mother
· $50,000 to $60,000 living expenses for herself and the children
· interest on a business loan of Eufrosin Pty Limited of $340,000, her share being $1,300 per month.
· interest on the Westpac Investment Loan of $393,000, her share being $2,750 per month
These expenses obviously would have amounted to a significant sum of money.
It thus seems to me that neither party acted with any particular financial responsibility following their separation. I would note, however, that senior counsel for the husband specifically informed me that he did not make a submission of “waste” in the manner of Kowaliw and Kowaliw (1981) FLC 91-092 where Baker J said:
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.
Conduct of the kind referred to in para.(a) and (b) above having economic consequences is clearly in my view relevant under sec. 75(2)(o) to applications for settlement of property instituted under the provisions of sec.79.
I did not understand any such submission to be put on behalf of the wife in respect of the husband’s financial conduct following the separation.
The parties cohabited for approximately twenty years and adopted traditional roles of principal breadwinner and primary homemaker and child carer. I am satisfied that the husband had little or no equity in his interest in the five apartment blocks at the date of the marriage. The wife, too, had comparatively little equity in the assets which she introduced into the relationship.
The husband received $600,000 or $800,000 from the proceeds of sale of the Suburb Y property in 1998. He alone had the benefit of approximately $250,000 from these funds, which he withdrew from the term deposit in August/September 2008. His share of the borrowings of $1.2million had the effect of reducing by approximately $500,000 or $600,000 the value of the Pool 1 assets. It seems to me that these factors offset the contribution by the husband of his share of the proceeds of sale of the Suburb Y property.
Leaving aside that issue, it seems to me that the complementary roles adopted by the parties and their resulting contributions weigh equally against each other. I thus find that the parties contributed equally to the net Pool 1 assets.
I have found that the husband made no contribution to the purchase price of the winning gambling ticket. Nothing in the evidence suggested that he made a contribution of any other kind to the assets which comprise Pool 2. I thus find that the husband made no contribution to the net Pool 2 assets.
Section 75(2) Factors
The husband is aged 62 and he made no suggestion that he suffers from ill-health. The wife is aged 55 and deposed that she has experienced pain in her back and right leg since about November 2008. There was no expert evidence that the wife suffers from ill-health.
The husband has a School Certificate and the wife a Bachelor’s Degree. She last used that qualification for employment purposes some 25 years ago. I very much doubt that this degree now would be of any real assistance to the wife in obtaining gainful employment.
Both of the parties appear to be operating unprofitable businesses at the present time. The returns for Eufrosin Pty Limited annexed to the affidavit of Mr Hayward indicate that the company has traded at losses of approximately $182,400, $160,000 and $85,800 for the 2010, 2011, 2012 years respectively.
The wife and Mr and Ms HH operate MM Business as a partnership. In June 2010 the wife purchased a 50% share of this business for $270,000 and paid half of the acquisition and stock costs. She borrowed $300,000 and, for reasons which were unexplained, the current balance of this loan is $393,000. The 2010 partnership tax return (exhibit 10) recorded that the business operated at a loss of $363 in that year, with gross weekly takings of approximately $7,300.
In terms of section 75(2) factors, the principal issue is the extent of any adjustment in favour of the husband from the net Pool 2 assets. The submissions on behalf of the husband nominated 33.3 per cent as an appropriate adjustment. Counsel for the wife submitted that a proper adjustment in favour of the husband is 5% of the net Pool 2 assets.
It seems to me that the large disparity in the parties’ financial circumstances warrants an adjustment in favour of the husband from the net Pool 2 assets. He is 62 years old and must have a limited future working life.
Assessment of the quantum of a section 75(2) adjustment in favour of the husband contains elements of arbitrariness. The adjustment of 5% of the net Pool 2 assets, for which the wife contended, would be a sum of $168,426. That amount seems to me to be inadequate as a recognition of the husband’s future needs. On the other hand, 33.3%, or a sum of $1,111,615 seems excessive and in my view could only be justified if the husband had made some contribution to the Pool 2 assets.
In the circumstances of this case, I will make an adjustment in favour of the husband of $500,000 on account of section 75(2) factors. That amount, in my view, will constitute a real recognition of his future needs but also take into account my finding that he made no contribution to the net Pool 2 assets.
Conclusion and Form of Orders
Each of the parties will thus receive 50% of the net Pool 1 assets. On behalf of the husband it was submitted that he and the wife should join in the sale of the retail business operated by Eufrosin Pty Limited because “it is apparent that it cannot last and the only option is to get rid of it”. In fact, the business has been under the sole control of the husband for almost the past five years.
I will accede to the wife’s proposal that the husband become solely entitled to the assets of the company Eufrosin Pty Limited and that he rearrange security for its loans, so as to remove all encumbrances on the titles to the Suburb C and Suburb E properties. The wife has had no involvement with the company or its business for almost five years and it seems appropriate to me that the husband continue with the sole responsibility and decision-making which he has exercised for the period. He is free to dispose of the retail business, if he so chooses, after the necessary transfers have taken place.
The parties agreed that the wife will take the Suburb C and Suburb E properties, presumably together with their contents. Otherwise, it is convenient that they each retain the assets which are presently in their respective possession or control. The net assets in Pool 1 have a value of $2,437,987 of which 50% thereof equals $1,218,994.
The husband would thus take the following Pool 1 assets:
1.
Jewellery (H)
$5,100
2.
Eufrosin Pty Limited
$250,000
3.
One third share in T Street, Suburb U (H)
$366,667
4.
Term deposits (H)
$50,000
5.
Mercedes Motor Vehicle (H)
$30,000
6.
IAG shares (H)
$655
7.
Funds in solicitor’s trust account (H)
$125,000
8.
Paid legal fees (H)
$95,919
9.
Half share in NAB Business cheque account (H)
$6,276
10.
Share in Proceeds of Sale of Z Street, Suburb S (H)
$1,267,000
$2,196,617
He would assume the following liabilities.
1.
Eufrosin Pty Ltd Home Loan Account
$340,000
2.
Eufrosin Pty Ltd Business Option Account
$157,000
3.
NAB Flexi-Account (J)
$37,000
4.
NAB Business Cheque Account
$50,000
5.
1/3 Mortgage over Suburb U property (H)
$228,333
$812,333
The husband would thus hold net Pool 1 assets to the value of $1,384,284, which exceeds his entitlement of $1,218,994 by $165,290.
The wife would take the following assets:
1.
B Street, Suburb C (J)
$750,000
2.
D Street, Suburb E (J)
$265,000
3.
Household contents at Suburb C property (J)
$6,250
4.
Household contents at Suburb E property (J)
$1,910
5.
Jewellery (W)
$29,130
6.
AMP Shares (W)
$1,413
$1,053,703
and she would assume none of the Pool 1 liabilities. The wife would thus hold net Pool 1 assets to the value of $1,053,703, which falls short of her entitlement of $1,218,994 by $165,291.
The most convenient way to achieve this distribution of the Pool 1 assets and liabilities is to deduct $165,291 from the sum of $500,000 which the wife will pay to the husband as an adjustment pursuant to section 75(2) from the Pool 2 net assets. Accordingly, I will order that the wife pay to the husband a sum of $334,709.
I certify that the preceding one hundred and thirty three (133) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson delivered on 3 May 2013.
Associate:
Date: 3 May 2013
Key Legal Topics
Areas of Law
-
Family Law
-
Property Law
-
Equity & Trusts
Legal Concepts
-
Remedies
-
Costs
-
Fiduciary Duty
-
Constructive Trust
0
0
10