Fallins & Fallins
[2022] FedCFamC1F 495
•14 July 2022
Federal Circuit and Family Court of Australia
(DIVISION 1)
Fallins & Fallins [2022] FedCFamC1F 495
File number(s): NCC 2600 of 2019 Judgment of: CLEARY J Date of judgment: 14 July 2022 Supplementary reasons for judgment: 25 July 2022 Catchwords: FAMILY LAW – PROPERTY – Application for adjustment of interests in matrimonial property – Where s 79(4) factors slightly favour the husband due to the initial provision by him of a home for the parties from the outset of cohabitation – Where the parties made substantial contributions throughout the marriage both financial and to the welfare of the family – Where wife suffered incapacitating injury – Where s 75(2) factors favour the wife who now has no capacity for paid work and requires suitable accommodation – Where the husband requires accommodation and has a capacity for work – Where it is just and equitable to make an adjustment to reflect an overall division in favour of the wife of 60/40 Legislation: Family Law Act 1975 (Cth) s 79(4) and s 75(2) Cases cited: Bevan & Bevan [2013] FamCAFC 116
In the Marriage of Kowaliw [1981] FLC 91-092
Yeates [2013] FCWA 117
Division: Division 1 First Instance Number of paragraphs: 175 ; 8 (Supplementary Reasons) Date of hearing: 22-24 November 2021; 22 March 2022 Place: City G Counsel for the Applicant: Mr Levick Solicitor for the Applicant: Boyd Olsen Lawyers Counsel for the Respondent: Not applicable Solicitor for the Respondent: Litigant in Person ORDERS
NCC 2600 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS FALLINS
Applicant
AND: MR FALLINS
Respondent
order made by:
CLEARY J
DATE OF ORDER:
14 July 2022 (amended 25 July 2022)
THE COURT ORDERS THAT:
1.The parties do all acts and things and sign all documents necessary to cause the sum of $301,338 to be paid to the wife, and the sum of $191,123 to be paid to the husband, from the nett proceeds of sale of the property known as B Street, C Town [in the state of New South Wales being the land in Folio Identifier …].
2.
The wife transfer and assign to the husband all of her right, title and interest in her shareholder loan account in D Pty Limited (In Liquidation) ACN ….Omitted intentionally.3.Within 14 days of the date hereof the husband:
3.1Resign as a director of E Pty Limited ACN …; and
3.2Transfer his share in that company to the wife.
4.On or before one calendar month from the date of orders the wife and the husband in their respective capacities as directors of F Pty Limited ACN … in its capacity as trustee of F Super Fund ABN … (“the Trustee” and “the Fund” respectively) do all such acts and things and sign all such documents as may be necessary to:
4.1Cause to be prepared and executed by them the Financial Statements and Annual Returns for the Fund which are outstanding; and
4.2Allocate amounts held by the Trustee that have yet to be allocated to the wife’s member account and to the husband’s member account in the Fund.
5.The wife in her absolute discretion shall nominate the auditor and the accountant to undertake any work necessary for the Trustee to comply with Order 4.
6.Immediately following the Trustees’ compliance with Order 4, pursuant to paragraph 90XT(1)(b) of the Family Law Act 1975 (Cth) (“the Act”), whenever a splittable payment becomes payable to the husband from his interest in the Fund the wife is entitled to be paid the specific percentage, being 100%, out of the husband’s member account in the Fund (hereinafter “the wife’s entitlement”) and the husband’s, or the entitlement of such other person to whom a splittable payment may be made out of the husband’s interest in the Fund, correspondingly reduced.
7.Consequent on Order 6, the Trustee of the Fund shall do all such acts and things and sign all documents as may be necessary to pay the wife’s entitlement whenever the Trustee makes a splittable payment out of the husband’s interest in the Fund.
8.Order 7 shall have effect from the wife’s operative time and the wife’s operative time is one minute after compliance by the Trustee with Order 5.
9.Immediately following the wife’s operative time the wife and the husband in their capacities as directors of the Trustee shall cause a meeting to be held in accordance with the rules of the Fund Trust Deed and in that meeting shall:
9.1Calculate the amount of the transferable benefits;
9.2Authorise the transfer of the transferable benefits to the wife; and
9.3Authorise the consolidation of the wife’s interest in the Fund.
10.The parties being the only members of the Fund and the only directors of the Trustee Orders 4 to 9 inclusive bind the Trustee of the Fund.
11.The Trustee of the Fund shall do all such acts and things and sign all such documents as may be necessary to pay the wife’s entitlement whenever the Trustee makes a splittable payment out of the husband’s interest in the Fund.
12.Upon the parties in their respective capacities as directors of the Trustee causing it to comply with Order 9 the husband in order of priority:
12.1Execute those documents prepared by the Fund’s auditor and accountant necessary to prepare and finalise the Financial Statements and Statutory Returns of the Fund for the 2020 and 2021 financial years;
12.2Resign as director of the Trustee;
12.3Transfer his share in the Trustee to the wife or as he may direct; and
12.4Give discharge to the Trustee with respect to his member account in the Fund.
13.That except as otherwise provided in these orders, each party shall be solely entitled, to the exclusion of the other to all property and chattels of whatsoever nature and kind in the possession of such party as at the date of these Orders and that for this purpose:
13.1Bank, building society, credit union accounts and the like are deemed to be in the possession of the person whose name appears on the bank, building society or credit union’s records thereof;
13.2Insurance policies are deemed to be in the possession of the beneficiary thereof;
13.3Superannuation entitlements are deemed to be in the possession of the person who is named as the worker whose age or work in future provides the conditions for payment out of such entitlement; and
13.4Shares, debentures, units in unit trusts and the like are deemed to be in the possession of the person in whose name they are registered.
14.That forthwith on the making of these Orders each of the parties shall indemnify and keep indemnified the other with respect to any liability in their name at the date of the making of Orders.
15.That each of the parties do all acts and things and sign all documents necessary to give effect to these Orders.
16.That pursuant to Section 106A of the Act, in the event that any party shall fail, neglect or refuse to sign any document required to give effect to these Orders within seven days of being requested in writing by another party who has an interest in the execution of such document, then upon the filing of an Affidavit evidencing such failure, neglect, or refusal, a Registrar of the City G Registry of the Federal Circuit and Family Court of Australia is appointed to execute such document in lieu of the defaulting party.
THE COURT NOTES THAT:
A.These orders have been amended pursuant to Rule 10.13(1)(e) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) on 25 July 2022.
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 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Fallins & Fallins has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
SUPPLEMENTARY REASONS FOR JUDGMENT
CLEARY J:
In this matter final orders were made and reasons delivered on 14 July 2022 (“the July orders”).
On 15 July 2022 an application was made on behalf of the wife for the Court to vary the July orders pursuant to Rule 10.13(1)(e) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 by setting aside Order 2.
Order 2 of the July orders states:
The wife transfer and assign to the husband all of her right, title and interest in her shareholder loan account in [D Pty Ltd (in liquidation) ACN …].
The slip rule applies where the proposed amendment is one upon which no real difference of opinion can exist between the parties. This is such a case.
The clear intention of the Court was for each party to retain their own respective interests in shareholder loan accounts in D Pty Ltd.
That is apparent in the Reasons for Judgment specifically the analysis of what constitutes the asset pool and what each party is to retain[1] and at paragraph 172 where each party retains nominated items; the husband in that case retaining his loan account.
[1] Fallins & Fallins [2022] FedCFamC1F 495, paras 34 & 164.
Order 2 does not reflect the intention of the Court.
The July orders are varied by the setting aside of Order 2.
I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cleary. Associate:
Dated: 25 July 2022
REASONS FOR JUDGMENT
CLEARY J:
INTRODUCTION
This is a dispute over the division of matrimonial property.
The parties began a relationship in 1995, and married in 1997. Two children were born of the marriage, now young adults in their early twenties, living independently.
In October 2018, the parties physically separated on a final basis and have not reconciled. At date of trial the parties were not divorced.
Proceedings were commenced in this Court by the wife in August 2019.
the parties
The Applicant Wife
The wife was aged 51 at date of trial. Her solicitors were instructed by a Case Guardian, the wife’s mother, on behalf of the wife.
The wife required a case guardian due to her having a brain injury.
In 2007, and again in 2008, aged in her late thirties, the wife suffered a heart attack, requiring heart surgery on the second occasion.
In 2011, the wife had the misfortune to suffer prolonged cardiac arrest resulting in hypoxic brain injury. The cause of her cardiac arrest was secondary to an underlying syndrome. Since that event the wife has required ongoing monitoring and management by a cardiologist.
The consequences for the wife have been manifold. She has a significant deterioration of her circulation and decreased function in both hands, impairment to her lower limb function, difficulty with speech and social anxiety secondary to her limitations. Her medical specialist reported as follows: [2]
Though [Ms Fallins] has made incredible strides with her sheer will and determination to reteach herself how to do things, she unfortunately still struggles to do daily independent tasks. This no doubt has had an incredible impact on [Ms Fallins’] mental state as well as her ability to lead an independent life.
[2] Affidavit of Dr H filed 3/11/2021, annexure B.
In 2014, the wife is reported to have been assessed as showing evidence of 67 per cent impairment as a result of her cardiac arrest which entitled her to a whole person impairment payment.
In October 2018, the wife moved out of the family home in C Town. She moved into a serviced apartment in City G. Days after the move, the wife moved to rented property in J Town in the K Region of NSW in close proximity to her mother’s home.
The wife plans to buy or rent a suitable property in that area. She depends on and values the support of her mother.
The wife is financially supported by a workers compensation pension paid by her insurer.
The Respondent Husband
The husband was aged 50 at date of trial.
He continued to live in the family home in C Town until its sale during the course of these proceedings. Settlement of the sale was anticipated within days of the final day of trial on 22 March 2022.
The husband described himself as “…both physically and mentally unable to work. This very likely to become a permanent condition”.[3] The opinion of the husband on that issue is no more than that, a personal opinion. There was no medical evidence to that effect. The husband annexed to his affidavit a report from his psychotherapist.[4] His psychotherapist diagnosed Persistent Depressive Disorder with moderate severe anxious distress. The psychotherapist did not provide an affidavit.
[3] Affidavit of the husband filed 8/11/2021, paragraph 55.
[4] Affidavit of the husband filed 8/11/2021, annexure Z, page 59.
There were also documents described as ‘Letters of Support’ from the husband’s doctor and psychologist. The latter attributed the husband’s depressed state to the actions of the wife as reported to him by the husband.[5] The Court attributes no weight to those opinions.
[5] Affidavit of the husband filed 8/11/2021, annexure Z, page 61.
the trial
The trial was listed for three days commencing on Monday 22 November 2021.
The applicant wife was represented by solicitor and counsel.
The husband represented himself.
The husband had not prepared for the trial. He did not have his own documents with him.
On the face of the parties’ documents there was consensus that the family home at C Town be sold.
The husband expressed a wish to retain the family home. The husband expressed disbelief that his own Response proposed the sale of the family home. The husband was given a copy of his document and saw that it was so.
A trial direction had been made for any amended application or response to be filed. There was no amended response filed by the husband.
The Court drew the attention of the husband to the implications, in time and costs, of adjournment in order for him to amend his response and for the parties to obtain a joint valuation.
Ultimately the husband chose not to make an application for adjournment but to proceed on his Response, acknowledging that an order for sale of the family home would result.
At the conclusion of the trial both parties agreed that orders could be made for the former matrimonial home to be sold forthwith. Orders were made accordingly. The proceedings were adjourned to a date after the sale for any further submissions.
On 22 March 2022, the trial resumed. The property had been sold. Nett proceeds of sale were known. There were further short submissions. Judgment was thereafter reserved.
evidence
The documents relied on in respect of the application were as follows:
The Applicant Wife – Ms Fallins
(a)Initiating Application of the wife filed 20/08/2019;
(b)Affidavit of the wife filed 27/10/2021;
(c)Financial Statement of the wife filed 08/10/2021;
(d)Affidavit of Dr H, current treating medical practitioner for the wife filed 3/11/2021;
The Respondent Husband – Mr Fallins
(e)Response of the husband filed 8/10/2019;
(f)Affidavit of the husband filed 8/11/2021;
(g)Financial Statement of the husband filed 8/10/2021.
(h)Affidavit of the husband’s father, Mr L filed 8/11/2021;
approach to alteration of interests in propertY
In considering applications for alteration of property interests and transfer of property the Court must:
(1)Identify the existing legal and equitable interests of the parties in property;
(2)Consider whether it would be just and equitable in the particular circumstances to make an alteration;
(3)If an alteration should be made, to consider the matters contained in ss 79(4) and 75(2) of the Act in coming to an adjustment; and
(4)Analyse and consider whether the adjustment under consideration would be just and equitable.
(1) Identify the assets and liabilities of the parties
The parties’ assets are set out in the Amended Balance Sheet prepared by the wife.[6] The Amended Balance Sheet reflects the sale of the former matrimonial home during the period of adjournment with the nett proceeds of sale replacing the value of $535,000 formerly attributed to the family home and eliminating the loan of $314,872 secured on the property.[7]
[6] Exhibit 15.
[7] Exhibit 1, page 4, items 1 and 12.
Ownership Description Applicants value Respondents value ASSETS 1. J Nett proceeds of sale of M Street, C Town $492,461.83 2. J Time share $15,000.00 $15,000.00 3. W CBA Account #...03 $5,311.00 4. W CBA Account #...65 $11,483.00 5. W Funds held by the NSW Trustee & Guardian $129,304.78 6. W Furniture and effects in her possession $3,500.00 7. W Nett distribution from her director’s loan account in D Pty Ltd in liquidation $78,322 8. H Nett distribution from his director’s loan account in D Pty Ltd in liquidation $43,322 9. H Loan to Ms N $190,000 $0 10. H NAB acc #...56 $1,828.00 11. H P Bank Account #...55 $16,045.00 12. H Motor Vehicle 1 $1,000.00 13. H Motor Vehicle 2 $33,000.00 14. H Beneficial interest in one half Q Street, R Town being the land in Folio identifier … $322,500.00 15. H Household contents $3,000.00 Total $1,346,077.61 ADDBACKS 16. H Monies invested in Bitcoin [sic] $100,000.00 Total $100,000.00 LIABILITIES 17. NIL Total NIL SUPERANNUATION Member Name of Fund Type of Interest Applicants value Respondents value 18. H T Super Fund Accumulation $781,119.65 Total $781,119.65 FINANCIAL RESOURCES Ownership Description Applicants value Respondents value 19. H Motor Vehicle 2 estimated $33,000.00 Total $35,018.00 Notes
Item No 7 & 8 The dividend payable to the husband and the wife as unsecured creditors @ .25 cents in the dollar. 14 Wife alleges husband has a beneficial interest in this property it being held [sic] by the husband’s father for the husband on a resulting trust. 18 This represents the nett value of the superannuation fund following the payment of GST on the sale of real property, a taxation liability and tax invoices due to S Accountants who prepared the accounts for the accounts for the Fund. Revised Balance Sheet
NOTE For the purposes of these orders and reasons the Court has removed references to amounts less than $1 with respect to all items in the balance sheet.
The Balance Sheet is revised as follows:
(a)Items 1, 3-6, 15, 16, and 18 were orally agreed to by the husband.
(b)Items 7 and 8 the husband disputes figures for distribution from their respective loan accounts. The husband did not provide an alternate figure. The wife provided a revised figure for Item 7 of $78,920 based on figures updated by the liquidator.
(c)Item 9 the husband disputes the assertion of a loan to his mother. His assertion is that the sum of $190,000 was a gift by the parties. The documents tendered by the wife reveal a mortgage securing a loan to the husband’s mother. The wife has no memory of the transaction. The husband’s mother did not give evidence. The Court has concluded that the money was lent and the debt should be attributed to the husband as an asset.
(d)Item 10 the husband asserts a value of $12.70. There is no evidence to that effect.
(e)Item 11 the husband asserts a value of $8,127.82. There is no evidence to that effect. Despite the lack of evidence for the reduced figures for Items 10 and 11, counsel for the wife very fairly submitted that he was content for the Court to take the husband’s numbers in terms of current balances as to actual money held.
(f)Item 12 the husband asserts he sold the Motor Vehicle 1 last November. There is no evidence of sale. The asset remains in the pool.
(g)Items 13 and 19 refer to the same item, a vehicle included as both an asset and a resource. The wife no longer pressed for the inclusion of this item as an asset. There was a submission by the wife that the vehicle formerly in the possession of the husband should generally be considered a resource. Without more the item has been omitted entirely.
(h)Item 14 the husband asserts a value of $0. This is a contentious issue. The Court has concluded that the property is held on trust for the husband and should be included as an asset and attributed to the husband. The Court accepts that the husband is able to reclaim his interest in the property from his father.
(i)Item 18 is the Super Fund including the net proceeds of sale of the Suburb U property.
(j)Item 19 is omitted (See Item 13).
Asset Pool – Revised Balance Sheet
The revised pool is as follows:
1 J Nett proceeds of sale of B Street, C Town $492,461 2 J Time share $15,000 3 W CBA Account #...03 $5,311 4 W CBA Account #...65 $11,483 5 W Funds held by the NSW Trustee & Guardian $129,304 6 W Furniture and effects in her possession $3,500 7 W Nett distribution from her director’s loan account in D Pty Ltd in liquidation $78,920 8 H Nett distribution from his director’s loan account in D Pty Ltd in liquidation $43,322 9 H Loan to Ms N $190,000 10 H NAB Account #...56 $12 11 H P Bank Account #...55 $8,027 12 H Motor Vehicle 1 $1,000 14 H Beneficial interest in one half Q Street, R Town being the loan in Folio identifier … $322,500 15 H Household contents $3,000 16 H Monies said to be invested and lost in cryptocurrency (Bitcoin) $100,000 18 J T Super Fund $781,119 TOTAL $2,184,959 (2) Would it be just and equitable to make an adjustment to interests in property?
The parties have, over the four years since physical separation wound down and sold joint assets. They both wish to sever their remaining financial ties and to live independently of each other. It is just and equitable to make adjustments to interests in property.
(3) Consideration of ss 79(4) and 75(2) of the Act in order to come to a just and equitable adjustment
Contributions under section 79(4)
The first consideration is what each of the parties brought to the relationship when they began living together. What were the initial contributions?
In about 1989, aged 17 years, the husband was injured in a road accident. In 1992, the husband received a workers compensation payment for those injuries of $37,000.
In or around 1994, the parties met when both were employed in a business in J Town, the wife as a manager, the husband in hospitality.
Purchase of W Street, Suburb V (“W Street”) – 1994
In 1994, the husband purchased a home unit in Suburb V, located in outer Sydney (“W Street”) for $93,000. He borrowed $88,350. The balance of funds and costs of purchase were funded from his compensation monies, as was the cost of upgrading the bathroom and kitchen.
The husband initially lived in the unit with two rent paying flat mates.
In either March 1995 or 1996, the wife moved in to live in the unit which was by then fully furnished. One flat mate moved out, one remained.
At that time the wife had a car with a finance debt, a superannuation account with an unknown balance and otherwise minimal assets.
The husband had about $5,000 equity in W Street, the balance of his compensation payment, a motor vehicle and furniture.
The husband asserted that the wife did not contribute financially or to the domestic work on the household. The wife was silent on that topic. The Court concludes that the parties as a young couple sharing a room in a shared household both did what was needed. The parties lived there for the next five years, both working.
Conclusion
The husband made a somewhat greater initial financial contribution due to his provision of a home for the parties from the outset of cohabitation.
The second consideration is what contributions were made by each of the parties during the course of the marriage including the period after separation to date of trial?
Both parties were in paid employment with several different employers. Sometimes they worked for the same employer.
In 1997, the parties were married.
Birth of parties children 1998 and 2000
The wife ceased paid work when she was six months pregnant. In 1998, the parties’ first child was born and the wife remained at home with the baby. The husband contributed to the work of the household including shopping and cooking.
In 1999, when the first child was three months old, the husband slipped at work and sustained an injury. There is no information from either party about how they managed in those circumstances financially or practically.
Towards the end of 1999, the wife learned she was again pregnant. The parties’ second child was born in 2000.
In 2000, the husband received a workers compensation payout of $29,800 for his injury.
Purchase of Z Street, Suburb V (“Z Street”) – 2001
In 2001, the husband purchased in his sole name a house in Z Street, Suburb V (“Z Street”), a suburb about 50 kilometres from central Sydney. The purchase price was $173,000. The husband borrowed $265,000 secured on Z Street and also W Street. At least some of those funds must have been applied to renovations and rectification undertaken on the new property.
The husband asserts he did “95 per cent of the work [renovations]” himself.[8] If that is so, it seems inconsistent with the husband doing paid work and household work as well. There were two infant children. It is likely that both parties were stretched to capacity at this time.
[8] Affidavit of the husband filed 18/11/2021, paragraph 13.1.
The parties decided to open their own business together. There is minimal evidence about how that business and the many related entities were set up. The parties set out on a course of working very long hours, for many years.
Operation of business (“D Company”) begins
In December 2002, the two parties became directors and shareholders of a company, D Pty Ltd (D Company).[9] D Company initially operated from a leased premises at Suburb U, a suburb of City AA in the BB Region of NSW.
[9] Exhibit 12, page 4.
In January 2003, the parties opened a business in C Town, a town about 100 kilometres from Sydney.
The husband worked in the business, the wife in administration. The children attended full time day care. The wife was responsible for more of the care of the children. She did not usually work on Sundays. The husband worked every day, long hours, generally starting early in the morning. He took a break to pick up the children from day care.
In late 2005, the husband’s parents became involved in the parties’ business and managed one of the businesses. They lived with the parties, for the most part in Z Street, the parties’ family home.
First heart attack for wife – 2007
In 2007, the wife experienced a heart attack at work in the C Town business and fell unconscious to the floor. She was hospitalised and took four to five months to recover.
The husband’s evidence about that was very much focused on the additional tasks he was obliged to take on as a result of the wife’s illness. It is likely that he did have to take on more tasks at work and at home. His sense of grievance about being burdened and financially disadvantaged by the ill health of the wife was maintained throughout the trial and was no doubt a contributor to the parties being unable to finalise their financial affairs by negotiation.
By way of oblique criticism of the wife, the husband gave evidence as follows:[10]
Both of my parents who were living with us made many numerous remarks about the lack of [Ms Fallins’] contribution whilst off work.
[10] Affidavit of the husband filed 8/11/2021, paragraph 18.3.
The Court infers that the husband, who had already been working to capacity, began to buckle under the strain of the wife’s absence both from their business and family life.
After about five months the wife returned to work.
Second heart attack for wife – 2008
In 2008, the wife suffered a second heart attack. She was taken to hospital and required heart surgery. Thereafter she stayed in her mother’s home for three months then recuperated in the family home for three to four months.
The husband’s comment was “[Ms Fallins] returned to work with a further reduced capacity”.[11]
[11] Affidavit of the husband filed 8/11/2021, paragraph 19.4.
There is no evidence to suggest that at this time the parties considered selling the business or taking any other step to reduce pressure on themselves.
In 2010, there was a fire at the parties’ business premises in C Town. The parties were under insured and could not afford to rectify the premises.
In October 2010, the parties and their children moved back to Suburb U. The husband’s parents remained in the family home, at Z Street.
The parties established a wholesale business, “The new business model enabled [Ms Fallins] to work in an office environment and was less physically demanding for her health”.[12]
[12] Affidavit of the husband filed 8/11/2021, paragraph 21.1.
The family lived in a caravan next to the Suburb U premises. It was a difficult situation forced on them by the loss of the C Town premises.
In the first half of 2011, the husband asserts that the parties discussed working for 12 months to build up the new business then selling it and dividing everything equally. At that point, if what the husbands says is correct, the parties were resolved to separate from each other thereafter.
Whether or not that is the case the parties did not get that opportunity.
Third heart attack for wife – 2011
In 2011, the wife collapsed at work due to a third heart attack. She was taken to hospital in a coma and put on life support. She was in hospital for many months. On release she required intensive therapy for about 18 months and ongoing therapy thereafter.
Sale of W Street – April /May 2013
In April 2013, the husband sold W Street for $236,500. His intention was to deposit the nett proceeds of sale into the T Super Fund in order to acquire the freehold of the Suburb U premises. The husband refers to this step being “in line with our 3 year business plan”.[13]
[13] Affidavit of the husband filed 8/11/2021, paragraph 33.1.
It seems likely that the husband planned to go on with running the business as if the wife had not been incapacitated.
The third heart attack was the most damaging episode of illness for the wife. It was an event which had profound adverse consequences for the wife herself, for the husband in terms of their marriage and jointly owned business, and for the two children by then aged 13 and 11 years. The elder child, who witnessed her mother’s collapse, suffered nervous shock for which she was later compensated.
November 2013
In 2013, E Pty Ltd was appointed as the trustee of the DD Unit Trust which acquired the Suburb U premises for $460,000 funded by the parties’ Superannuation Fund.
Purchase of B Street, C Town (“B Street”) – November 2014
In November 2014, the parties jointly acquired B Street, C Town (“B Street”) for $460,000, borrowing $380,000 from the National Australia Bank (NAB) to do so.
When the parties and children moved into the property to live the husband’s father moved in to live with them. Mr L remained living there after the wife moved out in 2018.
Compensation for the wife
Initially the wife had pursued a medical negligence claim. Subsequently in 2019, she discontinued that claim.
The wife pursued life coverage with Work Cover as an alternative. Since September 2016, the wife has been receiving a regular fortnightly payment from Work Cover of $1,365 which she will receive for life.
The husband would very much have preferred the wife to pursue a damages claim through the Company, a positive outcome from which would have delivered an income stream representing the work of the wife, into the business. He refers to both himself and the Company being “greatly disadvantaged” by the wife opting effectively for retirement with guaranteed income.[14]
[14] Affidavit of the husband filed 8/11/2021, paragraph 30.4.
In 2016/2017 the wife began to receive various Workers Compensation TPD payments in lump sums and back payments: $170,280 on 3 June 2016,[15] $21,816.34 on 5 September 2016,[16] $2,641.65 on 13 September 2016,[17] $431.18 on 8 December 2016,[18] $66,168.88 on 9 December 2016,[19] and $188,920 on 1 June 2017.[20] The Court accepts that that those total and permanent disability payments were a substantial contribution.[21] The wife could not generate income through work. Rather the financial recognition of her totally impaired capacity to work was made available to the parties through the wife, at least at the level of what she would have earned if not slightly more.
[15] Affidavit of the wife filed 27/10/2021, paragraph 20.1.
[16] Affidavit of the wife filed 27/10/2021, paragraphs 21-21.4.
[17] Affidavit of the wife filed 27/10/2021, paragraph 20.2.1.
[18] Affidavit of the wife filed 27/10/2021, paragraph 22.
[19] Affidavit of the wife filed 27/10/2021, paragraph 22.
[20] Affidavit of the wife filed 27/10/2021, paragraph 20.2.2.
[21] Yeates [2013] FCWA 117
During that period between 6 and 12 September 2016, the wife transferred $85,000 to an account in the husband’s name.[22] The wife has no recollection of doing so.
[22] Affidavit of the wife filed 27/10/2021, annexures D1 and D2.
Commencing in 2015 and during 2016, the husband made decisions and took steps to protect his own position with respect to the parties’ assets. The husband involved each of his parents in order to achieve what he considered to be a secure outcome. His actions have been contentious issues in this case.
Sale of Z Street - 2015
In 2015, the husband sold the property at Z Street for $585,000 and discharged the mortgage to NAB. This was the property which the parties, their children and the husband’s parents had lived in at various times since its purchase in 2001.
The wife now knows that the sale took place although she denies any consultation with her at the time and of any knowledge of the sale until these proceedings commenced.
The undated transfer was registered with Land Services on 10 February 2016.
There is no accounting by the husband of the nett proceeds of sale of Z Street.
Funds directed to husbands Mother – February 2016
On 2 February 2016, the husband’s mother purchased a unit at EE Street, Suburb FF (“EE Street”) for $380,000. She moved out of Z Street and into the EE Street unit.
The husband asserts that he and the wife had decided that they would give a gift of up to $200,000 to the husband’s mother to enable her to purchase a unit in Suburb FF.
The wife denies any contemporaneous knowledge of the sale of Z Street and of any contemplation of a gift to the husband’s mother.
The wife asserts she was unaware of the mortgage granted to the husband of $190,000 by his mother. The wife is not named as a joint mortgagee on the mortgage secured on EE Street.
There is no evidence from the husband’s mother. The solicitors for the wife obtained the relevant documents. The husband annexed an email from his accountant dated 25 August 2020, which included this statement, “[Ms Fallins] was aware of this gift occurring in and consented to it at the time”.[23] It is too great an issue to be resolved by such unsworn statements.
[23] Affidavit of the husband filed 8/11/2021, annexure G.
In the absence of any evidence from the husband’s mother written or oral, the Court concludes that the wife did not consent to either a gift of $190,000 to the husband’s mother nor to a loan secured by a mortgage without repayment terms being accepted by the husband.
The sum of $190,000 should be included into the asset pool and attributed to the husband such that any gift from him to his mother is made from his interests alone.
Transfer of interests in Q Street, R Town (“Property GG”) – 14 October 2016
Property GG was a property which had been owned by the husband’s parents in equal shares.
In October 2016, the husband’s parents transferred their interest in the property to the husband and his father as tenants in common in equal shares for consideration of $1.
Again the evidence of the wife was that she had no knowledge of any such transfer. Certainly she was not named in the transfer.
There is no logical explanation for why the husband would give or lend $190,000 to his mother only for her to soon after give to the husband as a gift her half share in the Property GG property.
One explanation for the transfer is that the husband had transferred all or part of the proceeds of sale of Z Street to one or both of his parents. That may not be the case. It is undisclosed and unclear.
The evidence supports a finding that the business was struggling and the husband’s parents were sympathetic to their son’s situation and decided to help him in the manner outlined.
Wife moves out of the family home – 14 October 2018
The husband wanted the parties to separate and had encouraged the wife to leave by packing up her possessions while she was away at her brother’s wedding early in October 2018.
The wife was distressed. The parties’ two daughters aged 19 and 18 at that time were still living at home. The wife made arrangements to leave.
Withdrawal of funds by wife – 15 October 2018
On 15 October 2018, the wife withdrew $115,000 from the offset account to the parties’ home loan.
Ultimately she applied $88,780 to payment of her legal costs, leaving a balance of $26,220.
Some money was spent, on rental accommodation in City G, later J Town, and other living and set up expenses. The wife had chosen premises big enough to accommodate the parties’ daughters staying with her.
Three things were submitted about these funds which the Court accepts:
First, the significance of the sum is reduced by the fact of the husband having withdrawn Company funds of $29,000 for his legal costs for the period when he was represented.
Next (and most significant in the view of the Court), is that the wife by her lawyers has carried the very substantial burden of redressing the failure of the husband to make full and timely disclosure, has moved the Court for orders to appoint a liquidator and to sell the Suburb U premises, and has assisted the wife to deal with claims directed to her about unpaid employee superannuation.
Thirdly, the wife disclosed the balance of those funds in her CBA Accounts from the outset of the trial.[24] The Court concludes that there should not be an adding back in this respect for those reasons.
[24] Exhibit 1, page 4, items 5, 6, and 8.
Sale of husband’s interest in Property GG – 15 October 2018
The husband asserts that on 15 October 2018, he asked his father to lend money to the Company, “so it could continue to trade”[25], probably in response to the wife having withdrawn $115,000 from the offset account. In an angry text to the wife on that day[26], the husband asserted that it had been his practice to pay company money into the offset account and draw it out as needed. He demanded repayment.
[25] Affidavit of the husband filed 8/11/2021, paragraph 46.
[26] Affidavit of the wife filed 27/10/2021, annexure A.
Letter from Wife’s solicitors to engage in Property Settlement – 17 October 2018
Solicitors for the wife wrote to the husband, confirmed recent separation and asked for disclosure to commence with a view to settlement.[27]
[27] Affidavit of the wife filed 27/10/2021, annexure J.
The solicitor also asked for proof of the assertion of the husband that working capital of the Company had been held in the mortgage offset account.
Response to Husband from Husband’s father – letter dated 19 October 2018
The written response of the husband’s father opens as a “to whom it may concern” style confirmation of what the husband was asserting to the wife and what the wife’s solicitor had already challenged :[28]
Re: your request that I loan you urgently a minimum of $20,000 to help you with your current cash flow crises [sic], caused by [Ms Fallins] removing all the working capital from yours and [Ms Fallins’] home mortgage account where I know, you both as Company Directors from day one, loaned short term surplus Company loans funds to offset the home loan interest, I fully understand this un-agreed removal of Company working capital will put the Company in extreme stress and the potential disastrous position of trading insolvent.
…
I feel I must be totally pragmatic, if I loan you $ 20,000 [sic] there is a high risk I will not get it back.
…
I want your share of [Property GG] in return for the cash you want. So it will be a sale, you to me.
[28] Affidavit of the husband filed 8/11/2021, annexure 46.1.
The husband says he agreed to sell his half share in the Property GG property to his father for $20,000, “I had previously asked for a greater sum of money but this was the entire amount of money he had left so I agreed”.[29]
[29] Affidavit of the husband filed 8/11/2021, paragraph 46.2.
The Court concludes that this was not a genuine transaction. The husband transferred this asset to his father at a price equivalent to 6 per cent of its value.
The loss of $115,000 could hardly be rectified by $20,000 in cash. The cost of this transaction to the husband was $300,000 plus.
The Court concludes that the husband was attempting to protect himself financially by this transfer of an asset in his sole name and that his father was assisting him to do so.
That Mr L chose to write a letter in response to his son, although they lived in the same house, strongly suggests that the intention was to generate evidence.
Two propositions were put to Mr L, one that he was part of a scheme to “keep an asset away from [Ms Fallins]”, two that he would return the Property GG property interest to his son on request. He disagreed with both propositions but the facts speak louder than his words.
If that is not the case and the husband sold his interest in Property GG for $20,000 then the husband chose to transfer an asset at huge and inexplicable undervalue which decision should not be visited on the wife. The transfer could be categorised as the wasting of an asset.
Another reason was proffered by the husband for the sale of Property GG to his father, namely as compensation for unpaid wages.
The letter from Mr L referred to extensive wages. Those claims were entirely inconsistent with his oral evidence in response to cross-examination.
He conceded in the witness box that after his retirement in 1997 he had at first helped the parties unpaid. After 2011, he had taken on some office work in the parties business and had been paid the maximum amount under the threshold allowed for pension recipients, $124.50 either per week or per fortnight, he could not recall.
Bitcoin
The husband conceded during cross examination that he had post separation spent $100,000 on buying cryptocurrency (Bitcoin) and had lost the whole of the funds. His assertion was that he had been caught by a scam. Whether or not the seller was genuine, the husband had the benefit of not less than $100,000 of joint funds which he wasted. The husband had not disclosed his conduct in his affidavit.
He conceded that the wife would not have known about money spent on Bitcoin in this way:[30]
Q. The first time that [Ms Fallins] has heard about your speculation in Bitcoin was when you gave that evidence a few minutes ago; that would be right, wouldn’t it?
A. I guess so. I don’t talk to the lady.
…
Q. So all we know is that you have put more than $100,000 – or certainly around $100,000 in your Bitcoin, and you just say to her Honour, sorry, it has gone; is that right?
A. That’s correct.
[30] Transcript 23 November 2021, p.236 line 5 and line 35.
The attitude of the husband to disclosure by him was most clearly revealed during cross examination on this topic. He agreed he had used company money to “speculate” and denied he knew he should have told the wife “Might have misunderstood, didn’t know I had to tell her”. He also referred to the funds as “his own money”.
D Company Insolvent – 2020
In the opinion of the liquidator, Mr HH, ultimately appointed to wind up D Company, the company may have become insolvent between June and December of 2020.
Husband’s father – further claim for unpaid wages – March 2021
On 11 March 2021, the husband’s father instructed solicitors to write to D Company[31] claiming unpaid wages (schedules attached) for the previous nine years. The claim was for $616,439 to March 2020, and accumulating.
[31] Exhibit 9.
The letter advised that in the absence of payment, legal proceedings would commence.
There was no payment made and no legal proceedings instituted.
Mr L was closely cross examined about his claim for unpaid wages. He became quite uncomfortable about his claim to have been earning $600 plus per week, payment deferred, for nine years.[32] Section 128 of the Evidence Act 1995 (NSW) had been raised.
Q. Did you tell Centrelink you had a job where [you] were potentially earning in excess of $600 per week?
A. Potentially. I don’t want to answer that.
[32] Transcript 24 November 2021, p.236 line 5.
He stoutly agreed that if and when he got the money he would have tax to pay and all of the pension payments received, to repay.
The most telling proposition was this question:[33]
Q. So the bottom line of this is this was just a scheme with your son to try and put a bit more pressure on but get a little bit more out of the asset pool, wasn’t it?
A. If that’s your view that’s your view. It’s not mine.
[33] Transcript 24 November 2021, p.238 line 20.
The Court concludes that the proposition was accurate and is the complete explanation for why such a claim was not pursued.
Appointment of Administrator – 19 May 2021
On 30 March 2021, D Company ceased to trade.
By orders made in this Court in May 2021, an Administrator, Mr HH, was appointed for the purposes of a voluntary administration and liquidation of the company.
The orders also provided for the property at JJ Street, Suburb U to be sold.
The wife complied with the orders and nominated one of the agents named by the husband to be the agent for sale. The husband did not sign the agency agreement or the retainer for the independent solicitor appointed to conduct the conveyancing.
It took an application by the wife under Section 106A of the Act for the registrar of this Court to sign those documents.
Mr HH had the premises at Suburb U cleared out ready for auction. The wife paid $3,800 to have the premises cleaned.
The husband failed to authorise the agent to list the property for sale. Solicitors for the wife foreshadowed an Application to the Court for appointment of the wife as trustee for sale.[34]
[34] Affidavit of the wife file 27/10/2021, annexure Q.
On 9 October 2021, the property was listed for sale, was sold and the proceeds paid into the parties Superannuation Fund.[35]
[35] Exhibit 15, item 18.
The fund has two member accounts, the husband and the wife only.
Analysis
Both parties worked in their business and at the home to capacity until 2011. Their contributions were both substantial and equal. Thereafter the wife was incapacitated and was fully engaged in restoring her health to the greatest extent possible. The compensation money she received balanced her inability to work in terms of contribution.
The husband’s father initiated but did not pursue an action against the Company for unpaid wages. The husband misrepresented the loan to his mother as a gift to her. The husband and his father together misrepresented the grossly undervalued Property GG transfer from son to father. This conduct together with his failure to make full and frank disclosure, undermined the Court’s acceptance of the husband as a truthful party.
The husband continued to work in the business with the assistance of his father. Between 2011 and 2016, the husband made a greater financial contribution than the wife. Thereafter the wife had the support of Work Cover payments. The business struggled.
Conclusion
Overall and including his initial contribution of the provision of a home for the parties to live in, the contributions favour the husband in a ratio of 52.5/47.5.
The third consideration is which factors, if any, under Section 75(2) are relevant to an adjustment based on future needs of the parties?
The relevant matters to be taken into account are as follows:
The age and state of health of each of the parties
The wife was aged almost 52 years at date of trial. Her health continues to be adversely affected by the heart attacks she has suffered and the consequences of the underlying syndrome she has. The wife is unable to drive a motor vehicle, she cannot complete domestic tasks such as changing light globes, using kitchen tools and sewing. She is unable to attend to aspects of her own personal grooming. She relies on help from her mother but also pays for some personal grooming services.[36]
[36] Affidavit of the wife filed 27/10/2021, paragraph 72.
The husband was aged 50 years at date of trial. The Court accepts that the husband saw a psychotherapist to whom he spoke of his stress and frustration over events. Probably he experienced stress and depression as stated. There is no medical evidence to suggest that he is unable to engage in paid work or play a role in a business.
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
The wife has a Work Cover income of $765 per week which will likely be supplemented by an Age Pension when she reaches her pensionable age in 15 years.
The husband has been receiving an Income Protection Payment of $1,287 per week with CPI increases since 2018. He has the capacity to work and contribute to super in the future.
Whether either party has the care or control of a child of the marriage who has not attained the age of 18 years
The parties’ children are young adults living independently.
Subject to s 75(2)(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
The parties have a substantial superannuation fund of $781,119 to which both have contributed.
The fund was used to purchase the Suburb U premises and the nett proceeds of sale of that property were repaid into the fund.
Where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable
The parties lived apart in the family home and physically separated when the wife moved out in 2018.
The husband remained living in the family home until 2022, when it was sold by consent of both parties. The nett proceeds of sale are held in trust.
The duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration
The relationship and marriage of the parties endured for 23 years. Both parties worked extremely hard for long hours every day in the early years.
The wife’s debilitating cardiac arrest in 2011 put both parties under terrible pressure. The wife could not continue to do all that she had done in the business and at home. The husband attempted to carry on the business as if the wife was still his business partner as well as his life partner. In 2011 their children were primary school age. There was a failure or inability to contend with and acknowledge the impact of the wife’s illness on every aspect of their lives.
The Court concludes that the husband took the course of preserving his position at the expense of the wife from at least 2016. He represented the sum of $190,000 as a gift to his mother. He “sold” his interest in Property GG at an undervalue to his father. He wasted Company funds “gambling on Bitcoin”.
Any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account
At the conclusion of the trial, and again after the period of adjournment, the husband submitted that he had represented himself and did not have the money to do otherwise.
That submission has little force. On his own evidence the husband chose to spend $100,000 investing in, or to use his own word “gambling” on Bitcoin. Those funds could have been applied to legal advice, preparation of affidavits and representation at trial.
Analysis
The total asset pool including superannuation is $2,184,959.
The future needs of the wife are for accommodation and contingency funds. She is unable to work due to her health.
For the past four years she has lived in rented accommodation.
The husband has a capacity to work in future. He has had some mental health issues to contend with rising from the loss of his business and his marriage.
For the past four years he has had the benefit of living in the family home until its sale in March 2022.
An adjustment should be made in favour of the wife by 12.5% to address her future needs outlined above.
Ultimately that gives rise to a division of interest in matrimonial property of 60% to the wife 40% to the husband.
A division in that ratio delivers:
·to the Wife $1,310,975; and
·to the Husband $873,984.
(4) Analysis of whether the adjustment contemplated is just and equitable
The parties will retain the following assets:
The Applicant Wife
(1)Share of proceeds of sale of B Street $301,338
(2)CBA Account $ 5,311
(3)CBA Account $11,483
(4)Funds held by NSW Trustee and Guardian $129,304
(5)Furniture and effects in Wife’s possession $ 3,500
(6)Nett distribution from Directors loan Account $ 78,920
(7)T Super Fund $781,119
TOTAL $1,310,975
The husband
(1)Share of net proceeds of sale B Street $191,123
(2)Time share $15,000
(3)Nett distribution from Directors loan Account $43,322
(4)Loan to Ms N $190,000
(5)NAB Account $ 12
(6)P Bank Account $ 8,027
(7)Motor Vehicle 1 $ 1,000
(8)Property GG property interest $322,500
(9)Household contents $ 3,000
(10)Funds invested and lost in cryptocurrency $100,000
TOTAL $873,984
Conclusion
The adjustment of interests fairly reflects the contributions over a relationship of 23 years and the disparate future needs of each of the parties.
The outcome is just and equitable in the circumstances.
Orders are made accordingly.
I certify that the preceding one hundred and seventy-five (175) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cleary. Associate:
Dated: 14 July 2022
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