Franklin and Ennis (No.2)
[2018] FCCA 2351
•31 August 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FRANKLIN & ENNIS (No.2) | [2018] FCCA 2351 |
| Catchwords: FAMILY LAW – De facto property claim – de facto relationship of 18 years – where the parties had an agreement as to finances – where the agreement was not a Cohabitation Agreement under the Property (Relationships) Act 1984 (NSW) – where the vast majority of the assets are held by the de facto wife – where the de facto husband was declared bankrupt twice during the relationship – where the de facto wife asserts no adjustment should be made in favour of the de factor husband – role of comparable cases in assessing the just and equitable requirement - where an adjustment is determined to be just and equitable. |
| Legislation: Family Law Act 1975, ss.4AA, 74, 75, 79, 90G, 90SB, 90SF, 90SM Federal Circuit Court Rules 2001 (Cth) |
| Cases cited: Anson & Meek [2017] FamCAFC 257 Evans & Marmont (1997) NSWLR 70; Fenton & Marvel [2013] FamCAFC 132 Norbis v Norbis (1986) 161 CLR 513 Norman & Norman [2010] FamCAFC 66 Teal & Teal [2010] FamCAFC 120 Wallis & Manning [2017] FamCAFC 14; Waterman & Waterman [2017] FamCAFC 23 Williams & Williams [2007] FamCA 313 |
| Applicant: | MR FRANKLIN |
| Respondent: | MS ENNIS |
| File Number: | SYC 2160 of 2014 |
| Judgment of: | Judge Harper |
| Hearing dates: | 8 & 9 February 2018 |
| Date of Last Submission: | 5 March 2018 |
| Delivered at: | Sydney |
| Delivered on: | 31 August 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Givney |
| Solicitors for the Applicant: | Burt & Allen Lawyers |
| Counsel for the Respondent: | Mr Kearney SC |
| Solicitors for the Respondent: | Willis & Bowring Solicitors |
THE COURT ORDERS THAT:
By no later than 4.00 pm on the date 14 days from the date of these orders the parties are to submit to chambers an agreed minute of proposed orders in accordance with these reasons, and if appropriate such orders may be made in chambers.
Such orders are to deal with the question of costs.
In the event the parties are unable to agree on a minute of orders, the applicant is to contact chambers to seek to have the matter relisted, with notice to the respondent.
THE COURT NOTES THAT:
Any application as to costs will be dealt with by way of written submissions, unless the parties request to be heard orally.
IT IS NOTED that publication of this judgment under the pseudonym Franklin & Ennis (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYC 2160 of 2014
| MR FRANKLIN |
Applicant
And
| MS ENNIS |
Respondent
REASONS FOR JUDGMENT
Introduction
These are property proceedings between Mr Franklin (“the husband”) and Ms Ennis (“the wife”) whereby each party is seeking orders for property distribution after the break down of their de facto relationship.
It is common ground that the parties’ relationship commenced in 1995 and that they separated on a final basis in 2013, giving a relationship of some 18 years duration.
The wife has three children, Mr G (“Mr G”), Mr M (“Mr M”) and Mr S (“Mr S”). At the time the parties’ commenced cohabitation, Mr M and Mr S were living with their mother and were 13 and 8 years respectively. Mr G was living with his father, but would live with the parties sporadically for short periods.
This is a difficult matter. The relationship between the parties was some 18 years. The pool of assets, treated globally, is $4,154,823.00. There is no dispute that the wife brought all the significant assets to the relationship and owns almost 100% of the assets. The husband is 72 years of age. He has no superannuation. He seeks a property adjustment which would see him receive $779,195. The wife resists any order for adjustment of property interests, contending any such order would not be just and equitable. This is not a matter where the fact of separation, or the issues joined and not joined by the parties, lead to any ready satisfaction of the just and equitable requirement in s.90SM(3). The wife alleges significant non-disclosure by the husband.
Procedural history
The matter first came before the Court on 14 July 2018 in her Honour Judge Henderson’s duty list. On that occasion the matter was listed into a call-over on 17 October 2014.
On 17 October 2014, her Honour Judge Henderson listed the matter for a one day hearing on 10 July 2015 for the determination of the preliminary issue of the status of the Cohabitation Agreement.
On 6 August 2015, her Honour Judge Henderson made a declaration that the agreement entered into by the parties on 1997 was not a Cohabitation Agreement under the Property (Relationships) Act 1984 (NSW), and delivered her reasons for making such a declaration. It is important to note that on this occasion the parties were also ordered to comply with their obligations under Part 24 of the Federal Circuit Court Rules 2001 (Cth) for full and frank disclosure.
On 23 February 2016, the parties attended a Conciliation Conference conducted by Registrar Mordaunt. The matter did not settle and was next before her Honour Judge Sexton on 9 December 2016.
On 9 December 2016, her Honour Judge Sexton listed the matter for a two day final hearing before her Honour Judge Henderson on 22 February 2018.
However, prior to the final hearing dates the matter was transferred to my docket on 21 June 2017, with the intention that the matter be given some priority.
The matter was subsequently listed for final hearing before me on the 8 February 2018 with an estimate of two days.
Material relied upon
The applicant relied upon:
a)His Initiating Application filed 10 April 2014;
b)His Financial Statement sworn 23 January 2018 filed 1 February 2018; and
c)His Affidavit sworn 23 January 2018 and filed 1 February 2018.
The applicant was cross-examined.
The respondent relied upon:
a)Her Financial Statement sworn 21 December 2017 and filed 2 January 2018; and
b)Her Affidavit sworn and filed 3 January 2018; and
c)Her Affidavit sworn and filed 6 February 2018; and
d)Affidavit of Ms S sworn 21 December 2017 filed 2 January 2018; and
e)Affidavit of Mr S sworn and filed 2 January 2018; and
f)Affidavit of Mr L sworn and filed 6 February 2018.
The respondent was cross-examined.
The following documents were tendered and placed into evidence:
Exhibit Label
Document
Tendered by
A
Applicant’s exhibit folder
Applicant
B
Handwritten document containing additional evidence in chief for the applicant husband
Applicant
C
Bundle of photos regarding carport
Applicant
D
Bundle of photos regarding balcony
Applicant
E
Company A Pty Ltd Financial Statements year ended 30.6.2017
Applicant
1
Case outline of Respondent
Respondent
2
Objections to Affidavits – as marked to the respondent
Respondent
3
Letter from the husband’s solicitor to the wife’s solicitor dated 17 May 2017 and response dated 6 April 2017.
Respondent
4
Subpoena addressed to the husband’s company filed 2 January 2018.
Respondent
5
Bank statements from Bank 1 in the name of the husband.
Respondent
6
Letter from the solicitor to the wife to the solicitor for the husband dated 6.7.16 and response dated 18.7.18.
Respondent
7
Statutory Declaration dated 4.11.2010
Respondent
8
Letter from Centrelink to the husband dated 23.4.2010
Respondent
9
Bundle of photos 2008 Property A property
Respondent
10
Letter by Pamela Wood to Burt & Allen Lawyers dated 18.1.2018
Respondent
The parties
The husband was born on 1945 and at the time of the hearing was 72 years of age. When the parties’ met in 1991 he was conducting a business trading under the name “Business”. This was a building business owned by Company A Pty Ltd (“Company A”). It operated out of rented factory premises.
The husband suffered a heart attack in 1991. He closed the factory. After his bankruptcy in 1992 and the sale of the Property B property, the husband rented a four-bedroom property in Suburb D where he lived with his sons and mother until the parties began cohabitation in 1995. The husband gave evidence that he commenced his own business of (business omitted).
In about 1997 the husband became involved in the part-time (employment omitted) in Queensland. This lasted until 2008. In 1999 he commenced working for (employer omitted). He was paid on a retainer and commission basis. He obtained a (qualifications) licence in 2000. He worked for (employer omitted) until 2003. In 2003 the husband established his own business in Queensland. He received income from this business between 2003 and 2007. In 2008 he ceased this business as a result of the global financial crisis.
In 2009 the husband obtained a role as a subcontractor with (employer omitted) as a (occupation omitted). He received commissions which were paid to Company A, from which he was paid a salary. In September 2016 the husband began working with (employer omitted). Again he works as a subcontractor through Company A, from which he draws a salary.
The husband was not a satisfactory witness. A number of the problems with his evidence will be detailed later in these reasons. Here the following examples will indicate some of the ways in which his evidence was unsatisfactory. His interest in Company A was not properly disclosed, as detailed later in these reasons. The benefits, including income derived from that company by him, were not properly disclosed. He agreed in cross-examination that the financial statements of the company could not be relied upon as setting out accurately its expenses. He maintained that he had paid the wife $200 a week up to separation when there was evidence (Exhibit 7) that he had no source of income apart from Centrelink payments in 2010 and so could not have maintained such payments as he alleged. There was evidence that he provided misleading information to Centrelink and the Australian Taxation Office.
Accordingly, I approach the husband’s evidence with caution.
The wife was born on 1954 and is currently 63 years of age. At the time of cohabitation the wife was employed full-time as a (occupation omitted) with a (employer omitted). She was living in the Property C property with her two youngest sons Mr M and Mr S who were then aged 13 and 8 years respectively. In 2007 she ceased her employment with her existing (employer omitted) and commenced employment with a new (employer omitted) where she has been employed for approximately 10 years. She originally worked five days a week but currently works part-time three days per week prior to transition to retirement.
I found the wife to be a satisfactory witness. Unless stated otherwise, I generally prefer her evidence where it is in conflict with the evidence of the husband.
Further relevant facts
The parties commenced a relationship in about 1991. At that time the husband owned a property at Property B.
The husband has two adult children of a previous relationship. The wife had three children from a previous relationship. There are no children of the parties’ relationship.
The wife had purchased a property with her former husband at Property C (“Property C property”). The wife acquired her former husband’s interest in the Property C property pursuant to a property settlement on 1993.
The husband was declared bankrupt in 1992. His property at Property B was sold.
It was common ground that the parties commenced cohabitation in 1995. At that time the husband was an undischarged bankrupt. The husband gave evidence that at the time of cohabitation he had little in the way of savings, some miscellaneous personalty, a motor vehicle and $20,000 in superannuation. There was no documentary evidence supporting the existence of the superannuation policy. It was put to the husband in cross-examination that he did not have the superannuation as alleged at cohabitation. However, it also seemed common ground that he cashed the policy in at some point and received $11,414. On balance, I am satisfied the husband had superannuation of $20,000 at cohabitation, but cashed it in during the relationship and used the proceeds for business expenses.
The wife was the sole registered proprietor of the Property C property subject to a mortgage debt of $21,423. According to her evidence she had some money in bank accounts, car, superannuation entitlements and some miscellaneous personalty.
At the time the parties commenced cohabitation, the wife’s two sons MR M and Mr S lived with them. The wife’s oldest son Mr G lived with his father but came to live at the Property C property after his HSC to recover from wisdom teeth surgery. According to the wife, he stayed for about one year before moving out.
According to the evidence of Mr S , Mr M lived with the parties for about two years until the age of 15 and then went to live with his girlfriend and her family. Mr S lived with the parties.
On 1997 the husband signed a Cohabitation Agreement (“the Agreement”) at the request of the wife.
In 2003 the parties purchased the property at Property D (“Property D property”). The purchase price was $269,000. A total of $280,000 was borrowed from Bank 2 to fund the purchase price and associated costs of purchase. Thereafter the Property D property was tenanted, with the rent applied to meet mortgage payments.
In 2003 the wife’s aunt passed away and the wife receives total payments of inheritance of $955,151.78 in the period to August 2004.
In 2005 the wife purchased a property at Property A (“the Property A property”). The purchase price was $1.2 million. In order to fund the purchase the wife used her inheritance together with a mortgage secured over the Property C property. Later in 2005 the wife sold the Property C property for $625,000 and used the proceeds of sale to discharge the mortgage raised for the purchase of the Property A property.
On 2010 the husband transferred his interest in the Property D property to the wife. The wife arranged for the mortgage secured against the Property D property to be refinanced in her sole name. For that purpose she obtained a valuation of the property at the time. The valuation gave the property a value of $215,000. The debt secured against the Property D property as at 2010 was $282,014.
On 2010 the applicant was again made bankrupt and was not discharged until 2013.
Between 2011 the wife’s stepfather and mother both passed away. As a result the wife inherited $120,000 from her stepfather and from her mother a sum of $6000 together with the property at Property E (“the Property E property”). The wife commences renting out the Property E property in the first half of 2011.
The parties separated on 5 December 2013. On 11 April 2014 the husband commenced these proceedings.
Competing proposals
The husband sought orders as follows:
(1)The Respondent shall pay the Applicant on or before 4.00pm of eight weeks after the date of these Orders the sum of $960,433.00.
(2)Upon 14 days of the receipt of the payment referred to in Order 1 the Applicant shall vacate the premises at Property A.
(3)In the event the Respondent fails or neglects to pay the sum of $960,44.00 in accordance with Order 1 then the Respondent shall do all acts and things necessary to sell the property situated at and known as Property E and in respect of such sale the following shall apply:-
(a)The property shall be sold at the best price reasonably obtainable.
(b)The property shall be placed in the hands of a licensed auctioneer to sell the property by way of public auction within six weeks of the date of these Orders.
(c)In the event the parties dispute the name of the real estate agent and/or auctioneer to have carriage of the sale and/or auction then the parties or either of them shall request the President for the time being of the Australian Real Estate Institute [New South Wales Division] to appoint a real estate agent and/or auctioneer to conduct the sale of the property.
(d)In the event that the President for the time being of the Australian Institute of Valuers and/or his nominee assesses that the offer made to purchase the property is equal to or greater than the best price reasonably obtainable as determined in accordance with the previous paragraph then the parties shall do all acts and things necessary to sell the property to the purchaser and otherwise give effect to this Order.
(e)Upon sale the proceeds shall be paid as follows:-
(i)In payment of agent’s commission and legal fees occasioned by the sale.
(ii)In payment to the Applicant in the sum of $960,433.00 and interest from the due date.
(4)The Applicant be declared sole and beneficial owner of:-
(a)Bank 1 Account.
(b)Motor Vehicle 1.
(5)The Respondent be declared sole and beneficial owner of:-
(a)Property at Property A.
(b)Property at Property D.
(c)Bank 3 Account.
(d)Bank 2 Account.
(e)Motor Vehicle 2.
(f)Household contents.
(g)Personal possessions.
The wife sought orders as follows:
(1)That the Initiating Application filed on behalf of the Applicant be dismissed.
(2)That the Applicant forthwith vacate the premises at Property A, New South Wales [the Property A property] and remove from the same:
(a)The office furniture and filing cabinets in the home office;
(b)The television in the lounge room; and ,
(c)His personal effects.
(3)That save as otherwise herein provided, the respondent be and hereby is declared to be solely entitled at law and in equity to all property and financial resources in her name, possession or control, and to which she is or may become entitled, including but not limited to the fittings and contents of the Property A property save for those referred to in Order 2.
(4)That save as otherwise herein provided, the Respondent be and hereby is declared to be solely entitled at law and in equity to all property and financial resources in her name, possession or control, and to which she is or may become entitled.
(5)That the Applicant pay the Respondent’s costs of and incidental to these proceedings.
The Law
The Court’s jurisdiction to make property orders under the Family Law Act1975 (Cth) (“the Act”) in respect of a de facto relationship requires establishment of two jurisdictional facts specified in s.4AA and s.90SB of the Act.
It is common ground that the parties’ relationship broke down after 1 March 2009. The parties separated in December 2013, but remained living under one roof. It is also common ground, and I accept, that their relationship fell within the definition of a “de facto relationship’ within s.4AA of the Act and that it existed for at least 2 years. It is common ground that the parties commenced living together in 1995. Accordingly this Court’s jurisdiction is grounded.[1]
[1] See Fenton & Marvel [2013] FamCAFC 132, per Murphy J.
The approach to be taken
Prior to the High Court of Australia’s decision of Stanford & Stanford [2012] HCA 52; 247 CLR 108, parties generally relied upon the “4 step process” set forth in Hickey & Hickey & Attorney General for the Commonwealth of Australia (2003) FLC 93-143 in the determination of an application under s.79 (or s.90SM) of the Act. The four steps are as follows:
1. Identify and value, the parties’ property, liabilities and financial resources at the date of the hearing;
2. Identify and assess the contributions of the parties as referred to in s.79 of the Act and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties, whether examined on a global approach or an asset by asset approach;
3. Identify and assess the other factors relevant including, the matters referred to in s.75 of the Act and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
4. Consider the effect of the above and resolve what order is just and equitable in all the circumstances of the case.
The High Court in Stanford at [38]-[40] highlighted that satisfaction of the just and equitable requirement specified in s.79(2) [or s.90SM(3)] should not be conflated with an exercise of discretion under s.79(4) [or s.90SM(4)]. The Court articulated three fundamental propositions, which may be summarised as follows:
a)First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. The question posed by s.79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
b)Second, although s.79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion. A power to make such order with respect to property, is a power which "rests upon the law and not upon judicial discretion". Although the Court is given a wide discretion, it is not 'palm tree justice'. Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is "just and equitable" to make the order is not to be answered by assuming that the parties' rights to or interests in marital property are or should be different from those that then exist. The question presented by s.79 is whether those rights and interests should be altered.
c)Third, whether making a property settlement order is "just and equitable" is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s.79(4). The power to make a property settlement order must be exercised "in accordance with legal principles, including the principles which the Act itself lays down"[28]. To conclude that making an order is "just and equitable" only because of and by reference to various matters in s.79(4), without a separate consideration of s.79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.
The very fact of separation and the termination of the relationship affects assumptions about property during the existence of a marriage or de facto relationship and may lead to the ready satisfaction of just and equitable requirement. In Stanford at [41]- [42], the High Court said:
[41] Adherence to these fundamental propositions in exercising the power in s 79 gives due recognition to "the need to preserve and protect the institution of marriage" identified in s 43(1)(a) as a principle to be applied by courts in exercising jurisdiction under the Act. If the parties have made a financial agreement about the property of one or both of the parties that is binding under Pt VIIIA of the Act, then, subject to that Part, a court cannot make a property settlement order under s 79. But if the parties to a marriage have expressly considered, but not put in writing in a way that complies with Pt VIIIA, how their property interests should be arranged between them during the continuance of their marriage, the application of these principles accommodates that fact. And if the parties to a marriage have not expressly considered whether or to what extent there is or should be some different arrangement of their property interests in their individual or commonly held assets while the marriage continues, the application of these principles again accommodates that fact. These principles do so by recognising the force of the stated and unstated assumptions between the parties to a marriage that the arrangement of property interests, whatever they are, is sufficient for the purposes of that husband and wife during the continuance of their marriage. The fundamental propositions that have been identified require that a court have a principled reason for interfering with the existing legal and equitable interests of the parties to the marriage and whatever may have been their stated or unstated assumptions and agreements about property interests during the continuance of the marriage.
[42] In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).
In Chapman & Chapman (2014) FLC 93-592; 51 FamLR 176 the Full Court, when commenting on these passages in Stanford, observed at [21]-[22]:
[21] First, it is “…not possible to chart [the] metes and bounds” of the relevant discretion. Just as importantly, it was recognised specifically that the characteristics of individual marriage unions, in so far as they acquire, hold and deal with property, differ. In “many cases”, the union is underpinned by “…stated and unstated assumptions between the parties to a marriage that the arrangement of property interests, whatever they are, is sufficient for the purposes of the husband and wife during the continuance of their marriage” (Stanford, at [41]). And, in “many cases”, (but, not all) the “…just and equitable requirement is readily satisfied…” by the fact of separation: “[i]t will be just and equitable to make a property settlement order … because there is not and will not thereafter be the common use of property by the husband and wife” (Stanford at [42]).
[22] “Ready satisfaction” of the s 79(2) requirement “in many cases” by reference to separation and its consequences brings with it a necessary further consequence; in those “many cases” the parameters, breadth and depth of the s 79(2) inquiry will be curtailed accordingly. It is those who lived within the “stated and unstated assumptions” who understand them best. As a result, satisfaction of the s 79(2) requirement can be inferred, at least in part, from the issues joined and, importantly, not joined, between the parties.
These judicial statements and the approach they articulate apply with equal force to an application for determination under Part VIIIAB of the Act, particularly ss.90SM & 90SF in relation to a de facto relationship.
The four step process remains current. The Full Court of the Family Court of Australia in Bevan & Bevan [2013] FamCAFC 116; 49 FamLR 387 at [71]-[72] has held that the decision in Stanford has not overruled the 4 step approach. Rather Stanford serves as a reminder that the 4 step process “merely illuminates the path to the ultimate result” being “no more than a shorthand distillation of the words of a statute which has but one ultimate requirement, namely not to make an order unless it is just and equitable to do so.”
The requirement for separate consideration of s.79(2) (s.90SM(3)) and s.79(4) (s.90SM(4)) of the Act does raise the question of how this should be approached, in light of the four step process. In Bevan at [62] Bryant CJ and Thackray J adopted what they said in Martin & Newton (2011) FLC 93-490 at [306]:
“But in our view, there is no requirement that the justice and equity of the order, as prescribed by s 79(2), must only be considered at the fourth (and last) stage. In our view, the requirement to make an order that is just and equitable permeates the entire decision making process, and it is not impermissible to consider it at an earlier point if the particular case requires it.”
and said further at [89]:
“In our view, it will be less likely that the separate issues arising under s 79(2) and s 79(4) will be conflated if judges refrain from evaluating contributions and other relevant factors in percentage or monetary terms until they have first determined that it would be just and equitable to make an order.”
There is some authority to the effect that ascertaining whether it is just and equitable within the meaning and contemplation of s.79(2) or s.90SM(3) of the Act to make an order altering the interests of the parties in their property should take place as part of the second step: Fitzgerald-Stevens & Leslighter [2015] FCWA 25 per Walters J, particularly where the fact of separation means the assumptions concerning property during the relationship are no longer operative by reason of separation, as described by the High Court in Stanford at [41] (above).
However, satisfaction of the just and equitable requirement does not have to form an express part of any one step. It can be inferred, as pointed out in Chapman (supra) at [22], above. In Hearne & Hearne [2018] FamCAFC 178; 53 FamLR 454, the Full Court made clear that a positive finding that alteration of property interests is just and equitable is not necessary as a threshold issue nor be the subject of an express finding, but can be ascertained “by necessary implication from the totality of the trial judge’s reasons for judgment” (Per Strickland J, at [71], Ryan & Austin JJ agreeing).
Although they impose separate statutory requirements, s.79(2) and s.79(4) [or ss.90SM(3) and (4)] are related. In Chapman at [9], [25] the Full Court held that a consideration of s.79(4) matters is not mandatory in answering the s.79(2) question, but, on the other hand, it would not be appropriate to limit the wide discretion conferred by s.79(2) by requiring the Court to ignore the matters referred to in s.79(4); at [5] per Bryant CJ interpreting Bevan at [84]; Zagoreos v Zagoreos [2018] FamCA 4; 57 FamLR 4 at [51]-[52].
Thackray CJ, said in Fielding and Nichol [2014] FCWA 77 at [43]:
“While I accept that a finding that it is just and equitable to make an order will always be required, in most cases the court will not need to discuss the s 79(2) issue, because the cases will be conducted on the basis of acceptance by the parties that it is just and equitable to make some form of adjustment. In those cases, matters arising under s 79(4) will require discussion only when determining the way the adjustment is to be effected. However, in cases such as the present where the s 79(2) point is taken, were it not for Chapman & Chapman, I would have maintained the view that s 79(4) mandates taking into account any relevant matters arising under that subsection, provided it is understood that they will not be in any way determinative.”
Here, the s.90SM(3) [s.79(2)] point is taken. The present case is not one where the parties, by the issues joined, accept that an adjustment to property interests would be just and equitable. The wife argued that it would not be just and equitable for any order to be made. She denied the fact of separation leads to the ready satisfaction of the just and equitable requirement.
The principal basis for these contentions lay in the existence of the Agreement and the manner in which the parties conducted their affairs during their relationship.
The assessment of the wife’s contentions will inevitably require not only a consideration of the terms of the Agreement, but also an identification of the assets and liabilities of the parties at the date of hearing as well as some consideration of the same factual matrix which will also underlie the parties’ contentions about contributions.
These factors weigh in favour of some consideration of contributions before forming a final view about satisfaction of the just and equitable requirement. The Full Court in Manolis & Manolis (No 2) [2011] FamCAFC 105 at paragraphs [65] and [66] drew specific attention to the connection between the factual findings relating to s.79(4), and the just and equitable requirement:
The exercise of power pursuant to s 79 of the Act remains subject to the overarching requirement of justice and equity imposed by s 79(2) until it is exhausted…The section does however oblige the court to “stand back” from its preliminary determination, and consider its impact. So doing may inform the terms of the orders appropriate to produce a just and equitable outcome in those terms. It may result in a re-consideration of s 79(4) and or s 75(2) factors, and a different outcome. Whatever the scope of s 79(2), the court’s determination with respect to it cannot be dependent upon findings or conclusions which are irreconcilable with those recorded in the context of a consideration of s 79(4) or s 75(2).
This approach is consistent with earlier authority such as Bonacci & Bonacci [2012] FamCAFC 15, at [61] where the Full Court said: “the so-called fourth step is not an opportunity to make a further adjustment; it is an opportunity for the judicial officer to determine finally how, in reality, a just and equitable order might be achieved based on the circumstances of the case before him or her (see in this regard Norman & Norman [2010] FamCAFC 66 and Teal & Teal [2010] FamCAFC 120.”
I will approach the determination of this matter by first identifying the assets and liabilities of the parties, then proceed to deal with the evidence concerning s.90SM(4) factors, including s.90SF(3), before returning to the separate consideration of s.90SM(3) (see Bevan at [166]-[170] per Finn J).
Property, liabilities and financial resources at the date of the hearing
The asset pool at final hearing can be summarised in the table set out below. This table is taken from the agreed balance sheet position set out in the parties’ written submissions.
The only superannuation is held by the wife. The Full Court of the Family Court of Australia’s decision in Coghlan & Coghlan (2005) FLC 93-220 requires the Court, in the majority of cases, to consider the parties superannuation interest as a separate species of property, unless the parties consent to it not being treated separately. It is open to the Court to decide whether to treat superannuation interests as a separate list of assets, or as part of one asset list. The majority of the Full Court in C & C (2000) FLC 93-220 said there is no binding principle as to the exercise of the Court’s discretion in deciding whether a one list or a two list approach should be adopted. Neither party sought a splitting order. The husband contended that the wife could draw now upon her superannuation. There was no specific evidence to support this submission. I am unable to make a finding to that effect.
All the liabilities lie with the respondent. They are undisputed by the applicant.
Two matters require specific comment, the husband’s interest in Company A and the treatment of Capital Gains Tax on the Property E property.
Company A Pty Ltd
The wife annexed a company search of Company A dated 3 January 2018 to her Trial Affidavit. This showed the husband’s son was sole director and shareholder. It also showed that the husband had previously been director and shareholder. In cross-examination, the husband gave evidence that he had been sole employee for 25 years, operated the business of the company on a day to day basis, and was the only person who derived income and benefits from the company. The husband transferred his shares in Company A to his son Mr J on 2010, shortly before he was made bankrupt for the second time. He gave evidence that his son holds the shares on his behalf. The husband agreed he derives a salary from the company. The husband made very little disclosure about his interest in this company. A copy of the financial statements of the company for the June 2017 became Exhibit “E”. The profit and loss statement recorded income of $39,286.18 and expenses of $31,556.50 including “salaries –associated persons” of $7,900. The profit before tax was $7,729.68.
I am satisfied on the basis of this evidence that the applicant is likely to own the shares beneficially in Company A, that the company trades at a small profit and that the husband derives income and other benefits form the company which he did not adequately disclose.
The parties were unable to attribute a value to the applicant’s interest in Company A. I am in no better position to determine a value. I accept that the shares in Company A should be treated as an asset of the applicant with an undisclosed value. The husband must accept responsibility for the non-disclosure.
In his oral evidence the husband conceded that he received income from Company A. This was not adequately disclosed. I return to this later in these reasons.
Capital Gains Tax Liability
The Property E property has at all times been held by the wife as an investment property. It was common ground that if the Property E property had to be sold by reason of any orders the Court makes in these proceedings, there would accrue to the wife a liability for Capital Gains Tax in the amount of $303,450. The parties treated this liability as contingent on the balance sheet because it would only arise if the Property E property was sold.
However, the husband submitted that if he is successful and the respondent does not sell the Property E property to satisfy any court order, $303,450 should be added back into the asset pool and the applicant’s entitlement reassessed on that adjusted asset pool value.[2]
[2] In his written submissions at [10] the applicant submitted the figure of $312,000 should be added back into the pool. It is not clear where this figure comes from, and it is inconsistent with the figure of $303,450 in the balance sheet at Schedule . I will assume it is an error.
The wife disagreed with this approach. As the wife submitted, any GST liability will only arise if she is required to make a payment to the husband, and would only arise in the event any entitlement of the husband is formulated by reference to a percentage of the identified property interests.
The general principles for the treatment of a capital gains tax liability was considered in Rosati & Rosati (1998) FLC 92-804 at page 85,043 and as follows general:
(1) Whether the incidence of capital gains tax should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.
(2) If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any capital gains tax payable upon such a sale in determining the value of that asset for the purpose of the proceedings.
(3) If none of the circumstances referred to in (2) applies to a particular asset, but the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to mid-term, then the Court, whilst not making allowance for the capital gains tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s 75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
I will return to the question of how to deal with the capital gains tax liability later in these reasons.
Therefore, the assets and liabilities of the parties at the date of hearing are, as follows:
Assets | A/J/R | Value $ |
| Non-superannuation | ||
| Property A | R | $1,800,000.00 |
| Property E | R | $2,100,000.00 |
| Property D | R | $395,000.00 |
| Bank 3 | R | $1,000.00 |
| Bank 2 | R | $15.00 |
| Bank 2 | R | $21.00 |
| Motor Vehicle 2 | R | $1,000.00 |
| Household Contents | R | $5,000.00 |
| Personal Possessions | R | $5,000.00 |
| Bank 1 | A | $900.00 |
| Motor Vehicle 1 | A | $8,500.00 |
| Company A | A | unknown |
| Jewellery | A | $1,000.00 |
| Household Contents | A | $10,000.00 |
| Superannuation | ||
| Super Fund A | R | $121,848.00 |
| Total Assets | $4,449,284.00 | |
| Liabilities | ||
| Property D | R | 280,000 |
| Land tax | R | 14,461 |
| Total Liabilities | 294,461 | |
| Total Net Property | $4,154,823.00 | |
Percentages of net assets at hearing
Consequently, if there was no property adjustment, the applicant would hold 0.5% of the parties’ net assets and the respondent 99.5%.
I turn now to consider the factors in s.90SM(4) and s.90SF(3) for the purposes of making factual findings.
Contributions under section s.90SM
I will deal first with s.90SM of the Act. Section 90SM(4) of the Act sets out the considerations to be taken into account by the Court in determining what order (if any) should be made under s.90SM of the Act in property settlement proceedings.
The husband summarised his contributions over a period of cohabitation of 18 years as follows:
a)Planning and building works to Property C and Property A where the parties lived during the course of cohabitation;
b)The carrying out of, and supervision of, substantial building works, repairs and renovations during the course of cohabitation;
c)Contributions of income through the course of cohabitation although at a lesser level than that of the wife;
d)Contributions to the welfare of the family.
S.90SM(4)(a) the financial contribution made directly or indirectly by or on behalf of a party to the de facto relationship or a child of the de facto relationship.
The husband accepted the financial contributions of the wife as follows:-
a)The property at Property C, subject to a mortgage of $21,423.22 at the commencement of cohabitation.
b)The inheritance she received in 1996 in the sum of $45,000.00
c)The inheritance she received in 2005. In his written submissions the husband valued this inheritance at $850,000. The evidentiary basis for this figure was not given. I am satisfied the correct value is $955,151.78, based on the evidence of the wife.
d)The 2011 inheritance of the Property E property and $6,000.
e)The 2011 inheritance of $120,000.00
I will consider the evidence of contributions in more detail.
At the commencement of cohabitation, the husband was an undischarged bankrupt. As discussed earlier in these reasons, it was undisputed that he had assets of minimal value.
The wife owned the Property C property subject to a mortgage of $21,423. She had some cash in her bank card, miscellaneous personalty and some superannuation entitlements following 20 years of employment at that time.
The wife gave evidence that the parties agreed at the point of cohabitation to keep their finances separate. The conduct of the parties during the relationship, discussed below, was consistent with a consensual position to keep their finances separate.
In his evidence the husband stated that he agreed to pay the wife $800 per month, or $200 per week, when he moved into the Property C property, and paid this amount up to separation. The husband’s evidence in this regard was disputed. The wife in her Affidavit denied receiving any payments after about two years from the date of cohabitation. The evidence cast doubt upon his assertion that he paid $200 a week until separation. For example, Exhibit 7 is a statutory declaration sworn by the husband on 4 November 2010 in which he swears that he confirms on 10 October 2010 when he received a superannuation payout of $11,414, he had no other source of income. Furthermore it was put to the husband directly in cross-examination that “After the first couple of years of the payment of the monies by cheque – that is $200 a week – that you ceased making payments to Ms Ennis?” The husband answered “Yes”.
I do not accept that the husband paid $200 a week up to separation. I accept the wife’s evidence as more accurate in this regard. I accept he paid that amount in the first two years of cohabitation.
Property C Property
The Property C property provided accommodation for the parties, and the wife’s three children. It was undisputed that the wife serviced the mortgage secured against this property. She also solely paid all usual outgoings for the property, such as rates and utilities, from her income and resources. The wife permitted the husband to use an area of the garage at the Property C property as office space from which to conduct his business.
The husband asserted that he made contributions to the Property C property in the form of plans for renovations, work such as steel fixing, pool plumbing, spraying concrete, the construction of a pool filter box supervision of tradespeople in connection with the construction of a swimming pool in the second half of 1995.
The husband also gave evidence that he was closely involved in causing renovation of the kitchen at the Property C property. He gave evidence that he measured the kitchen and prepared plans and specifications for kitchen cupboards gave evidence that he installed the newcomers together with a friend who was a kitchen manufacturer and that he carried out ordering planning organising of delivery and removal from the premises of the old kitchen cupboards and otherwise supervised all works related to the kitchen including the employment of trade persons.
The husband also gave evidence that apart from his exertions associated with the installation of the pool and the new kitchen he caused to be carried out:
a)The construction of the boundary retaining wall and three internal retaining walls using treated pine posts;
b)The construction of a carport for two cars;
c)Removal of skirting boards and architraves from the home which was situated in every room;
d)Installation of a new bathroom; and
e)Various other associated works including ordering a colour bond fence.
In support of his contentions about the exertions towards the Property C property, the husband annexed copies of plans and photographs of the back retaining wall colour bond fence which he claims to have built.
In submissions the husband pointed to concessions made by the wife during oral evidence that both parties worked hard in relation to the works carried out during the renovation of the Property C property and other properties.
Further renovations were undertaken to the Property C property according to the wife in about mid-2003 this included re-tiling, recarpeting and installation of new downlights. The wife paid for these renovations.
In her affidavit sworn 6 February 2018, the wife gave detailed evidence of the actual work undertaken by her on the Property C property, including painting and sanding ceilings, walls, cornices and skirtings throughout the house and stripping walls. She gave evidence that she did planting and gardening work on the property, and cleaning up after tradespeople.
I am satisfied that the husband made contributions of the general nature outlined by him to the Property C property. His perception of his overall contribution to those renovations may have been exaggerated. The evidence of the wife’s son suggests this is the case. Mr S recalls observations of various tradesmen and subcontractors undertaking work to the property. However, I am satisfied that the work carried out by the husband to the Property C property, as described by him, involved heavy physical toil, experience in building as well as the utilisation of an expertise in design possessed by the husband. The documents comprising the bundle marked as Exhibit “A”, particularly documents “B”-“J”, are supportive of the husband’s evidence in relation to his contributions to the Property C property.
I am satisfied that the renovations to the Property C property in 1996 were paid for by the wife using the inheritance of $45,000 received from her aunt.
I am satisfied on the evidence that both parties contributed to the renovation of the Property C property. It is not possible on the evidence to form a view that the husband’s contribution to a property in this regard was any greater than the wife’s. The husband’s contributions were through design and actual construction activities, the wife’s contributions were through the payment of subcontractors and the physical works described in paragraph 142.
The evidence does not permit a conclusion as to whether any of the contributions enhanced the value of Property C property. This comment must apply to the contributions of both husband and wife. However, the description of the work undertaken on the Property C property leaves little room for doubt that the property was improved and made more comfortable.
The Property C property was sold in 2005. I observe here that whatever impact on value the contributions of the parties had to the Property C property, this impact would have been reflected in the sale price. The entirety of the sale proceeds of $625,000 was applied to the purchase of the Property A property.
Property A Property
It was undisputed that the respondent purchased the Property A property using an inheritance from another aunt totalling $955,151.78 together with bridging finance. The bridging finance was repaid by the sale of the Property C property.
The wife also permitted the husband to use an area of this property as a study from which to conduct his business.
The husband gave evidence that he also contributed to this property by carrying out renovation works on it. Document “L” in Exhibit “A” shows the husband drew some plans in relation to this renovation. According to his evidence he worked with the plasterer to cover explosive exposed brick walls with plasterboard, installing new windows and doors by himself over a two-year period, cutting a large opening into a double brick wall, replacing internal stud walls, constructing a deep perimeter drain, demolishing and rebuilding the front balcony lowering the ceilings and two bathrooms and laying footings for external cement block retaining walls.
The wife gives evidence that the renovations were carried out by subcontractors employed by her. Paragraph 39 of her Trial Affidavit sets out in detail works that were paid for solely by her from the balance of funds she received from her inheritance and from her employment income. In paragraph 41 of her Trial Affidavit she accepts the husband carried out some renovation work, but also argues that much of the work carried out by him requires rectification. She also gave evidence of the physical work carried out by her on the Property A property of a similar type and scope to the work undertaken on the Property C property.
On the evidence, I am satisfied that the husband contributed time and construction activities to the Property A property. Again it is not possible on the evidence to form a view that the husband’s contribution to a property in this regard was any greater than the wife’s. I am unable to form a view about the extent of any need for rectification.
Property D Property
It was undisputed that the parties purchased the Property D Property together as an investment. They owned it jointly from 2003 until August 2010. It was common ground that the property was tenanted throughout that period and that the rent received was applied to service the mortgage. There was a shortfall between the rent received and the mortgage payments. The wife gives evidence that the shortfall was approximately $742 per month and that the shortfall was met from her income and from monies “earned sporadically by Mr Franklin”. In her written submissions the wife conceded the parties contributed equally to meeting the shortfall while they were co-owners, but this was the parties “only joint endeavour”.
Accordingly it seems to be common ground that the husband contributed financially towards the Property D property during the period in which he was a co-owner. On the evidence it is not possible to form a view about the extent of the husband’s financial contribution to this property. The evidence of his sporadic employment between 2003 and 2010 together with the fact of his bankruptcy in 2010 suggests that his contribution to the shortfall would have been considerably less than that of the wife.
Be that as it may, when the husband transferred his interest in the Property D property to the wife, it had fallen in value to $215,000 from the original purchase price. Accordingly, the wife received no financial benefit from the husband by reason of the transfer. Moreover, after the transfer she became solely liable for servicing the mortgage secured against the property, and meeting the shortfall between rent income and outgoings.
Other Financial Contributions
The various inheritances received by the wife have been detailed above. These are accepted by the husband.
A table of the parties income received between 2005 and 2013 is as follows (see wife’s Affidavit, paragraph 37, E-3):
Husband
Wife
2005
$9,926
$52,721
2006
$13,280
$56,761
2007
$13,500
$50,221
2008
$18,818
$60,293
2009
$4,911
$55,149
2010
$18,308
$46,488
2011
$19,401
$50,850
2012
$17,820
$56,327
2013
$23,721
$62,497
After separation, the parties’ taxable income was as follows:
Husband
Wife
2014
$19,921
$60,809
2015
Unknown
$55,036
2016
Unknown
$48,136
2017
Unknown
$48,136
The evidence did not disclose the parties’ respective income prior to 2005.
The evidence shows that the wife contributed income at a much higher level than the husband during the relationship.
I am satisfied the wife used her income for the purposes of the relationship, or to service debts and expenses associated with the properties.
After separation, the parties remained living under one roof.
The husband began paying the wife $300 every three weeks in cash from December 2013. In February 2014 the wife requested the payments be made electronically by funds to be transferred into her account. It was undisputed that between February 2014 and 3 January 2018 the husband had transferred a total of $16,600 into the wife’s account.
Non-disclosure by the Husband
The wife made detailed written submissions highlighting areas where the husband had not provided full and frank disclosure. I generally accept these submissions. Intending no disrespect, it is not necessary to address them in detail.
The evidence of the husband’s financial affairs, income and expenditure during the relationship is not clear or consistent. The husband submitted that there is “no suggestion the husband was using monies for purposes outside the relationship.” However, the evidence is largely silent about how the husband utilised any income earned by him after he ceased paying $200 per week. The husband refers to the hire of a boat for holiday purposes which the family enjoyed. It is not clear how his evidence of conducting various businesses and receipt of income are to be reconciled particularly with his second period of bankruptcy. The husband gave evidence to the effect that some of his income was used for business purposes. There is no evidence that he saved any money during the relationship, or spent his income on purely activities such as gambling. The evidence of his income between 2005 and 2013 is set out above. His income was clearly much lower than the wife’s. On balance, I accept the husband used whatever income he retained after business expenses for the purposes of the relationship, for social events, food and general living expenses. It is not possible to make any attempt at quantifying this contribution.
I have already dealt with the shareholding in Company A above. I accepted that the husband is likely to beneficially own the shares in that company, but their value cannot be determined.
The wife also pointed to the husband’s oral evidence in which he conceded he continued to receive income and benefits from Company A. The wife submitted that the oral evidence of the husband, unsatisfactory as it was, supported a conclusion that in the financial years 2017 and 2018 the husband had and would receive about $85,000 per annum. The husband also has the use of a motor vehicle which was owned either by Company A or his son.
The wife submitted that in accordance with principle set forth in In the marriage of Briese (1985) 10 Fam LR 642 and followed many times, the non-disclosure of the husband here did not allow me to ascertain his income and expenditure accurately and this is a factor which weighs against him: In the marriage of Black and Kellner (1992) 15 Fam LR 343; FLC 92-28. Even a modest asset pool does not truncate the duty of disclosure: Waterman & Waterman [2017] FamCAFC 23 at [23].
I accept these submissions. I am satisfied that the husband has and will likely continue to derive income from Company A for his own benefit in an inadequately disclosed manner. Where it would be appropriate to make an order for property adjustment this could be taken into account by some adjustment in favour of the wife pursuant to the provisions of s.75(2)(o) of the Act: Kannis & Kannis (2003) FLC 93-135; Gould and Gould [2007] FamCA 609; (2007) FLC 93-333 at [23].
The wife argues further that the husband’s non-disclosure is a matter to take into account in determining whether it would be just and equitable to make any property adjustment order. I will return to this question later in these reasons.
S.90SM(4)(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the de facto relationship, or a child of the de facto relationship:
(i) to the acquisition, conservation or improvement of any of the property of the parties to the de facto relationship or either of them; or
(ii) otherwise in relation to any of that last-mentioned property;
whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the de facto relationship or either of them
I make no separate comment under s.90SM(4)(b).
S.90SM(4)(c) the contribution made by a party to the de facto relationship to the welfare of the family constituted by the parties to the de facto relationship and any children of the de facto relationship, including any contribution made in the capacity of homemaker or parent; and
The husband conceded that the wife made contributions as a homemaker and to the welfare of the family. She did this while also working full time.
The husband also submitted that he made contributions as a homemaker and to the welfare of the family. The wife disputed that the husband was anything more than a marginal member of the family.
The wife’s son Mr S gave evidence in her case. His evidence portrays the husband as a much more marginal figure in the family than the husband asserts. He agreed the husband enjoyed attending (sports) matches and socialising, but could not recall the husband took him to (sports) training. For example, he gave evidence that extended family such as grandparents, uncles and aunts cared for him as a child and he looked to them for advice and direction, rather than the husband (paragraphs 11 and 12).
The wife’s other son Mr M did not give evidence. The husband submitted that an adverse inference should be drawn from this absence. However, the husband did not identify what the inference was said to be. As the wife submitted, on the evidence Mr M was only a member of the household constituted by the parties for some 2 or 3 years until about 1998.
The husband is submitted that the evidence in Exhibits “A”, “M” and “N” showed that the husband made more than a marginal contribution to family life and he was an integral part of the raising of her children including providing meals, attending sporting events, parent teacher nights, assisting with homework, and driving the children to and from events. There were also photographs of the husband, the wife and her children carrying buckets of concrete during one period of renovation.
The wife submitted this evidence did no more than show the husband was a member of the family and did not demonstrate contribution.
In Exhibit “A” the documents forming “N” are a number of cards for various occasions such as Father’s Day and the husband’s birthday. They range in date from 1996 to 2011. They show a depth of affection for, and involvement by, the husband in the lives of the wife’s children. A Father’s Day card from Mr S in 1996 described the husband as “wonderful”, “laughing”, “caring”, and “loving” in a child’s handwriting. Others state the husband was “like a father”. A birthday card from “Mr M & Ms Ennis” to the husband in 2011 includes the statement: “thank you for all the help and support you’ve given us over the years.”
I am satisfied the husband was more than a marginal member of the family. I am satisfied he made some contribution to the welfare of the wife’s children, but largely to Mr S: Robb & Robb (1995) FLC 92555. The evidence supports a conclusion that Mr M and Mr S formed an emotional attachment to the husband and he provided some care and support over 18 years. Such a contribution is not excluded by the fact that others, such as grandparents, made contributions of a similar nature to the welfare of the children.
S.90SM(4)(d) the effect of any proposed order upon the earning capacity of either party to the de facto relationship; and
I propose to order the parties to bring in short minutes to reflect these reasons. I do not anticipate any orders in this matter will affect the earning capacity of either party.
Section 90SF factors
In my view, the matters relevant to contributions and the just and equitable requirement under s.90SF(3) on these facts are as follows:
(a)the age and state of health of each of the parties to the de facto relationship (thesubject de facto relationship ); and
The age and state of health of the parties has been described already. The husband is 72 and the wife is 63.
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
The income property and financial resources of the parties has already been set out. The husband clearly has very little by way of income property or financial resources. At the age of 72, and having been twice bankrupt, I accept that the husband is moving towards the end of his working life. However, my findings about his non-disclosure, set out earlier in these reasons, means that I cannot be satisfied he is without financial resources, and a clear picture of his situation and future needs cannot be ascertained.
The wife is younger at age 63 and is currently employed part-time. According to her evidence she is considering retiring from the workforce. However I accept that she has the capacity for gainful employment until at least age 67, and perhaps beyond that age.
During the relationship and after separation, the evidence is clear that the wife has consistently earned more than the husband and demonstrated a greater earning capacity.
The husband will require accommodation to rehouse himself once these proceedings are concluded.
As pointed out in Hurst at [57] this sub‑paragraphs of s.90SF(3), as well as s.90SF(3)(n), recognise a symbiosis between the s.90SM(4)(a), (b) and (c) assessments and the s.90SM(4)(e) assessment. In the vast majority of cases this is an important consideration.
(d) commitments of each of the parties that are necessary to enable the party to support: (i) himself or herself; and (ii) a child or another person that the party has a duty to maintain;
The only liability on the balance sheet is the mortgage secured against the Property D property. The wife is solely responsible for this liability.
(g) a standard of living that in all the circumstances is reasonable;
The evidence of the parties supports a finding that during the relationship they enjoyed a reasonably affluent standard of living. After separation they remained living under the same roof, and it appears the standard of living did not materially alter.
The proposed outcome will result in the husband being compelled to leave the Property A property. Despite my findings about non-disclosure, I accept that it is likely he will suffer some diminishment in his standard of living. The wife’s standard of living is likely to remain broadly the same.
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
The parties’ respective contributions have been discussed above. The wife contributed to the husband’s earning capacity by providing him with accommodation, and office areas in the Property C and Property A properties from which he could conduct his business.
(k) the duration of the de facto relationship and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
The parties were in a relationship for some 18 years. Both parties earned income during the relationship. On the evidence, I am satisfied the relationship supported the earning capacity of each party.
(r) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account
Consistently with authority cited above, I take account of the husband’s non-disclosure under this sub-paragraph.
Just and Equitable Outcome
I return to the separate question of whether I am satisfied that it would be just and equitable to make any order for property adjustment. Section 90SM(3) of the Act provides that:
The court must 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.
The expression “just and equitable” in s.79(2) (or s.90SM(3)) is inherently broad. The High Court in Stanford (supra) commented at [36] on the meaning of “just and equitable” as follows:
The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds.
The Agreement
As already mentioned, the parties entered into the Agreement in 1997. The husband signed the Agreement on 1997. The Agreement became Exhibit 5. The wife placed considerable emphasis on the terms of the Agreement as constituting a powerful reason for concluding that making no orders by way of property adjustment would be a just and equitable outcome in these proceedings. I turn to consider the Agreement in more detail.
In order to assess these arguments and that the importance of the agreement is first necessary to set out some of its terms.
The agreement included a number of recitals which in summary set out the assets owned by the parties as at the date of the agreement, including ownership of the Property C property by the wife.
Clause 7 set out the purpose of the agreement as follows:
“In order to avoid unpleasantness and dispute should, despite their best intentions the relationship in any circumstances not work out, they wish to set down in writing what they are agreeing to as to how their financial relationship with each other should be regulated. Each of the parties have children. Ms Ennis’ children might reasonably be expected to be the principal beneficiaries of her estate and Mr Franklin’s children might reasonably expect to be the principal beneficiaries of his estate
The purpose of this agreement is to clarify such obligations.”
Clause 8 of the cohabitation agreement is the operative part in the following terms:
“8.1 Should the cohabitation cease, despite the best intentions of both of them whatever the cause of the separation, then neither party will claim against the other nor make any claim for division of property in respect of assets owned by the other party.
8.2 should there be any jointly owned items, Mr Franklin and Ms Ennis agree these will be divided between them on the same basis that they contributed to the purchase price of those assets.
8.3 Ms Ennis and Mr Franklin respect the right of each other to make provision in their wills for their own children and will not make any claim upon the estate of the other or any greater provision in respect of assets they each shown as at the date of their death.”
The wife relies upon the Agreement as an explicit articulation of assumptions of the parties during the continuance of their relationship, to the effect that the existing arrangements of property interests were sufficient or appropriate. As pointed out, the reasoning in Stanford shows the fact of separation will often bring those assumptions to an end. The wife therefore argues that the assumptions should continue to hold sufficient force to preclude a “ready satisfaction” of the s.79(2) requirement by reference to separation itself and lead to a curtailment of the parameters, breadth and depth of the s.79(2) inquiry.
The agreement was the subject of a judgment by Her Honour Judge Henderson handed down on 6 August 2015 (Franklin & Ennis [2015] FCCA 2099). Her Honour found that the agreement did not constitute a Cohabitation Agreement for the purpose of the Property (Relationships) Act 1984 (NSW) on the basis that the Court was not satisfied that the wife had received the necessary advice[3].
[3] Reasons for judgment of 6 August 2015 at [129], found at annexure B to the applicant’s affidavit sworn 23 January 2018.
The wife argued that the Agreement, even if not a Cohabitation Agreement for the purposes of the Property (Relationships) Act 1984 (NSW), still operated as an agreement between the parties or as embodying representations or assumptions, upon which the wife relied, about the treatment of assets on termination of the relationship. Consequently, the agreement was a significant factor in assessing whether any order for property adjustment would be just and equitable. Senior counsel for the wife referred to the well-known decision of Woodcock & Woodcock (1997) FLC 92-740 at 83,968-9 the Full Court said that:
… the facts relied upon to establish the existence of circumstances where the doctrine of equitable estoppel might otherwise operate (i.e. an agreement reached or a representation made and acted upon) may well be relevant to determine:
(a) whether it is proper to make an order for the provision of maintenance pursuant to s 74 of the Family Law Act
(b) whether it is appropriate to make an order for alteration of property interests pursuant to s 79(1) of the Family Law Act
(c) whether it isjust and equitable to make an order for alteration of property interests within the meaning of s 79(2) of the Family Law Act
(d) whether it is necessary to make an order to do justice within the meaning of s 80(1)(k) of the Family Law Act(e) whether it is just and equitable to make an order with respect to the application for the benefit of all or any of the parties to, and the children of a marriage of the whole or part of any property dealt with by anti-nuptial or post-nuptial settlements made in relation to the marriage within the meaning of s 85A of the Family Law Act.
The Full Court in Bevan (Supra) at [120-1] confirmed the authority of Woodcock (Supra) and relevance of agreements or understandings between spouses about property both before and after separation:
[120] This is not to suggest that any understanding between spouses would be conclusive of any later dispute, since an agreement can only be conclusive when the s.90G(1) formalities are satisfied or when a s.90G(1B) declaration is made. Long experience in this jurisdiction teaches that there will be cases in which other factors will be present that would make it just and equitable to make an order inconsistent with a previous understanding, even one reached after separation. But the reasoning in Stanford makes clear that such an understanding would have to be a factor to be taken into account in deciding whether it would be just and equitable to make orders altering existing interests. This reasoning is entirely consistent with what was said by the Full Court in Woodcock v Woodcock (1997) FLC 92-739 at 83,968 to 83,969.
[121] Once it is accepted that a prior agreement or representation is relevant to the justice and equity of the outcome, we consider that the period of time a party has allowed to elapse before making a claim inconsistent with that agreement or representation must also be a material factor.
The wife pointed to a number of findings in the judgment of 6 August 2015 as follows:
[117] I accept Mr Givney’s submissions that [the respondent] believed, as she had said in her affidavit and oral evidence, once the applicant had signed the document, [the respondent] was protected
[118] I accept the submission by Mr Kearney that the parties entered into an agreement, which is a contract under section 46 of the Property Relationships Act
[119] I accept his submission that the agreement was for her benefit and if in reading the section strictly I deprive her of this benefit then there is an injustice
[122] I am satisfied that … there is a cohabitation agreement between these parties.
[123] I am satisfied that … the agreement is in writing.
[124] I am satisfied that … the agreement is signed by the partner against whom it sought to be enforced. It is signed by the applicant and it is sought to be enforced against him.
The wife submitted that the findings in the judgment were consistent with the undisputed evidence about the manner in which the parties conducted their relationship, namely:
a)The wife asked the husband to enter into the Agreement. The husband agreed in cross-examination that he knew at the commencement of cohabitation that the wife wanted to protect her assets and that was the reason it was entered into;
b)The husband signed the Agreement after completion of the work undertaken to the Property C property;
c)The husband saw the agreement and received legal advice about it at the time it was signed; I infer the husband was aware that the Agreement provided that he would not have any claim against the property of the Respondent;
d)The wife remained throughout the relationship concerned to preserve her assets for her children and protect her interests in accordance with the terms of the Agreement. She resisted pressure from the husband to be included as a co-owner of, or to obtain an interest in, either the Property C or Property A properties (paragraphs 20, 25, 34, 36, of the wife’s Trial Affidavit). The husband conceded this in cross-examination; and
e)Apart from the purchase of the Property D property, the parties maintained, by agreement, separate financial interests and separate financial affairs throughout the relationship.
On the basis of this evidence the wife submitted that the parties conducted their relationship consistently with the terms of the Agreement. She relied upon the representation of the husband at the point of cohabitation that he would enter into an agreement not to make any claim on her assets and upon the terms of the Agreement, when signed, in making financial decisions thereafter, including the investment of substantial moneys in the renovation of the Property C property and the subsequent purchase and renovation of the Property A property. In cross-examination, the wife agreed she felt she was protected once the agreement was signed.
The husband gave evidence of conversations in late 1993 and again in late 1997 about obtaining ‘equity’ in the Property C property. In cross-examination the husband maintained that some agreement or consensus was reached that he would have “some sort of equity” in the Property C property once the renovations were complete. He conceded he was aware of the agreement when he alleges the conversations took place but said “I was just trying to make the point to Ms Ennis that there was-there should be some discussion about me sharing equity because of the effort I had put in to doing the renovation work.”
The husband gave further evidence of conversations between 1997 and 2003 in which he repeatedly asked the wife to use the Property C property to acquire an investment property in joint names. The wife gave evidence broadly consistent with this, and as already mentioned above, the parties acquired the Property D property in joint names.
The wife denied any conversations ever took place in which she agreed to transfer any part of her assets to the husband. I accept this evidence. I am satisfied the wife was resolute in maintaining her assets in her sole name. Any foray into joint ownership was limited to the Property D property. On the evidence, this was the limit of her concession to the husband’s request for her assets to be used for his benefit. I am satisfied that he was unable to retain his interest in the Property D property because of his personal insolvency.
The wife did not contend that the Agreement precludes an order being made in favour of the husband, but argued it provided “a compelling basis for a finding that it is not just and equitable to do so” in light of the findings above at paragraph [206].
The wife also relied upon the following factors:
a)In circumstances where there is no suggestion that either party was overborne by the other or at any relevant disadvantage;
b)Neither party was accountable to the other for that which they each earned and the manner in which they each applied such earnings and other income available to each of them;
c)At least the wife maintained her testamentary affairs consistently with the Agreement, making no provision for the husband in her will; in the absence of evidence that there was any assumption that there would be some redistribution of wealth upon termination of the relationship by means other than death, this was significant and was consistent with the Agreement;
d)There is no suggestion that the husband refrained from accumulating assets or otherwise altered his position in any way to his detriment. On the contrary, the husband’s financial position meant he did not have the capacity to contribute to or accumulate other assets. Moreover, without the support provided by the respondent, he would not have had the benefit of accommodation, financial support for his living expenses and financial support for some of his business activities by allowing him to establish home offices in both the Property C and Property A properties;
e)There was no evidence that any work undertaken by the husband had any impact upon the value of any of the properties;
f)Whatever contributions the husband made to the Property C and Property A properties, those contributions did not, at least on the part of the husband, give rise to any disproportionate benefit being received by the wife: Evans & Marmont (1997) NSWLR 70;
In her written submissions (paragraph 29, footnote 8) the wife made reference to several decisions for comparative purposes, namely, Bevan & Bevan (2014) FamCAFC 19, the separate decision concerning the re-exercise of discretion (18 year relationship, 22 years following separation), Fielding and Nichol, above, (12 year relationship), and Chancellor and McCoy [2016] FamCAFC 256 (27 year relationship). The Court in those decisions made reference to factual matters similar to those relied upon by the wife, and set out in paragraph 211 above, in addressing the just and equitable requirement.
The role of comparable cases in assessing contributions has been the subject of recent and conflicting Full Court authority. In Wallis & Manning [2017] FamCAFC 14; (2017) FLC ¶93-759 the Full Court (Thackray, Ainslie-Wallace & Murphy JJ) confirmed the role of comparable cases even where a wide judicial discretion is being exercised, as in the application of s.79 of the Act. The Full Court made several relevant statements concerning the use of comparable cases:
[45] “Reference to comparable cases serves a principle central to the exercise of a wide discretion, namely, that like cases should be treated alike. That end seeks to avoid “arbitrary and capricious decision-making” which is the antithesis of “consistency in judicial adjudication.”
…
[57] It is axiomatic that, in a guided but otherwise unfettered discretion the result in another case, or indeed in many other cases, cannot determine the result in the case under consideration. If it did, the discretion would be improperly fettered.
[58] However, it is one thing to say that an earlier-decided case, or a combination of earlier-decided cases, cannot determine the result of the instant case, but quite another thing to say,…, that any comparison with those cases is “unhelpful”. The latter suggestion is, in our respectful view, inconsistent with both High Court authority and the Full Court authority to which we have referred.
…
[67] While recognising the fact that no two cases are precisely the same, we are of the view that comparable cases can, and perhaps should far more often, be used so as to inform, relevantly, the assessment of contributions within s 79.
[68] The word “comparable” is used advisedly. The search is not for “some sort of tariff let alone an appropriate upper and lower end of the range of orders which may be made”. Nor is it a search for the “right” or “correct” result: the very wide discretion inherent in s 79 is antithetical to both. The search is for comparability – for “what has been done in other (more or less) comparable cases – with consistency as its aim.”
More recently in Anson & Meek [2017] FamCAFC 257, the appeal was unanimously allowed, but there was no unanimity of approach to comparable cases. Murphy J agreed with the approach articulated in Wallis & Manning (supra). The plurality (Aldridge and Cleary JJ) however took a sharply divergent view about comparable cases. They said:
[128] It is important to note at this stage that the Court [in Wallis] did not suggest that comparable cases could or should be used to set a range or a norm by which cases should be determined. However, if the aim in the use of comparable cases is “to promote consistency in results” or for similar cases to be treated similarly, then we respectfully suggest that is, in fact, the identification of a norm of some kind.
At [130] the plurality pointed out that the Full Court in Wallis (supra) relied upon recent sentencing decisions of the High Court for analogous use of comparable cases, but did not refer to a number of High Court decisions eschewing the use of comparable verdicts in civil personal injuries.
The plurality went on to point out that in Planet Fisheries Pty Ltd v La Rosa (1968) 119 CLR 118 (“Planet Fisheries”), at 124–125 the High Court expressly rejected an attempt to derive a norm or a standard from a group of its judgments in the context of reviewing awards of damages on appeal. From this the plurality in Anson (supra) concluded at [128]:
[32] In addition to rejecting the concept of establishing a norm or a range, the passages emphasised seem to us to speak directly against the express consideration of comparable judgments at all.
Their Honours pointed out at [133]-[141] that Planet Fisheries has been consistently applied by both the High Court and the state courts, despite occasional criticism, and “must still be regarded as applicable and bars the use of comparable verdicts in the assessment of damages for personal injury.”
After discussing, at [142]-[148], the sentencing decisions of Barbaro v The Queen (2014) 253 CLR 58 and Hili v The Queen [2010] HCA 45; (2010) 242 CLR 520, the plurality in Anson concluded at [149]-[150]:
“[149] These passages indicate that the point of looking at comparable sentencing cases is to seek consistency in the proper application of principle and not to achieve some kind of numerical or mathematical equivalence.”
[150] Thus, if the point of Wallis was that comparable cases could be looked at so as to derive a consistency in the application of principle then we would agree. However, their Honours did not say so or identify how the use of comparable cases would lead to consistency. As we have already observed, if the aim of consistency is consistency of results, then we would suggest that this aim focuses on mathematical equivalence – in reality to set some kind of norm or range, which, of course, was expressly eschewed in Wallis and the authorities upon which it relies.
and at [151]-[154] pointed out that Director of Public Prosecutions v Dalgliesh (a pseudonym) [2017] HCA 41 supports a conclusion to similar effect.
Aldridge and Cleary JJ finished their consideration of the use of comparable cases by observing at [162]:
It also needs to be asked why a decision already made in a similar case has a greater value than the decision of the judge hearing the current matter, unless it is said that consistency in outcome is of such importance that it fetters the exercise of discretion in subsequent matters.
and at [165]:
The Court [in Wallis] does not say how it is that having regard to the facts and results of earlier cases leads to consistency in approach. Presumably it will do so when the trial judge considers that the facts of the earlier case are sufficiently similar so that regard should be had to how the discretion was exercised – that is, to the result. We do not see how this is other than the court’s judgment being influenced or “overborne by what other minds have judged right and proper for other situations” or other than the setting of a norm, range or expected outcome for cases involving similar facts.
Where does this difference of appellate decisions leave the trial judge at first instance? Although I find the reasoning of the plurality in Anson persuasive in many respects, the use of comparable cases is a practice long entrenched in the exercise of the s.79 discretion. Moreover, Wallis is a unanimous decision of the Full Court, while Anson is decision by a majority. The weight of authority appears to support the use of comparable cases in the assessment of contributions.
The assessment of contributions is one thing. Many of the reasons identified in the differing approaches in Wallis and Anson arguably have applicability to both assessment of contributions and the just and equitable requirement. However, the formation of a view about satisfaction of the just an equitable requirement is a different and separate exercise to the assessment of contributions. If each case must be dealt with on its own facts and the “metes and bounds” of the just and equitable expression as a “qualitative description of a conclusion” cannot be charted, it appears inherently less susceptible to meaningful comparison with other cases than the assessment of contributions. It is, for example, unclear how far the concept of consistency, as discussed in Wallis, is applicable when considering what is a just and equitable outcome in a particular case. In Chancellor & McCoy (supra) itself the Full Court at [48] cast some doubt on the utility of analysing the differences and similarities between the case before them and, in particular, Fielding & Nichol (Supra):
On the other hand, there is at least some basis for the contention that Fielding was treated as a “reference point”, because her Honour carried out an analysis of the similarities and differences between the present case and that case. We accept that her Honour was dealing with a detailed submission made on behalf of the respondent, but we nevertheless have reservations about the utility of such an analysis, given that Fielding was nothing more than a first instance decision. In saying this, we do not seek to cast any doubt on the propriety of the decision, but wish only to emphasise that no single case is ever the same as another, and each must be dealt with on its own facts and merits.
I am satisfied that the authorities confirm that each case must be dealt with on its own facts and merits for the purpose of considering the just and equitable requirement. The role of comparable cases will be limited, but not excluded.
The submissions of the wife make a powerful argument against a conclusion that it would be just and equitable to make any order adjusting property interest. I accept the submissions of the wife generally have force.
However, there are factors supporting a contrary conclusion, as follows:
a)The wife is 63 and in reasonable health and expects to continue in her employment;
b)The husband is 72 and is moving towards the end of his working life;
c)The husband has no assets;
d)There is an enormous disparity in the wealth of each party;
e)If no order adjusting the property interests is made the husband, at age 72, will have almost nothing (cf Fielding Thackray CJ at [52]);
f)The husband will need to rehouse himself;
g)The contributions of the husband to the Property C and Property A properties were not negligible;
h)The husband made some contribution as a homemaker.
i)The husband made a contribution in helping to raise the wife’s children.
These factors support a conclusion that it would not be just and equitable to leave the property interests where they presently lie.
Having said that, the husband’s lack of full and frank disclosure is highlighted at this point. As already observed, the question of the husband’s financial resources and future needs cannot be properly answered by reason of his own unsatisfactory evidence. I accept that the adverse inferences I have drawn in relation to the husband’s evidence weaken the force of the matters set out in paragraph [225] above.
However, on balance, in the exercise of my discretion I have decided that it would be just and equitable to make a property adjustment order in this matter, but not of the magnitude contended for by the husband.
Accordingly, I turn to an assessment of the contributions and s.90SF(3) factors
Assessment of contributions
In accordance with s.90SM(4), the Court must consider all the contributions, both financial and non-financial to the acquisition, conservation and improvement of the parties’ assets as well as to the welfare of the family during cohabitation and after separation. The Court must consider the contributions in an overall sense: Norman & Norman [2010] FamCAFC 66; Hickey (supra); Kowalski and Kowalski (1993) FLC 92-342; G & G [2000] FamCA 1075. A broad approach is preferred, rather than reference to precise mathematical calculations: In the Marriage of Burke (1981) FLC 91-055 although an evaluation of each party’s respective contributions is necessary: JEL & DDF (2001) FLC 93,075. Assumptions about equality of contributions should not be made. Although the parties have been separated for nearly two years, separate assessment of matters occurring after separation is not necessary in arriving at an assessment of contributions: Sippel & Sippel [2004] FamCA 201.
Sections 90SM(4)(f) & (g) are not relevant to the facts of this case.
The High Court has confirmed an asset by asset approach or global approach may be taken in the exercise of discretion given in s.79 (or s.90SM): Norbis v Norbis (1986) 161 CLR 513.
The wife submitted that in the circumstances of the present case a global approach would be entirely inappropriate.
As I understood his submissions, the husband argued that there should be two pools. The husband accepted the Property E property should be specifically excluded from the wider pool for the purposes of assessing contributions because he made no contribution either to its acquisition or its retention by the wife. However he submitted that its value should be reintroduced in assessing the appropriate adjustment for s.90SF(3) factors.
Although the relationship lasted some 18 years, there are some reasons to take an asset by asset approach in this case. As the wife submitted the parties kept their financial affairs largely separate throughout their 18 year relationship. The husband accepts the Property E property should be excluded for the purpose of assessing contribution entitlements, because he made no contribution to that property.
The Full Court in Dickons & Dickons, (2014) 50 Fam LR 244 at [15] pointed out that a search for a causal link between contributions and particular property “might be seen to come instinctively to the necessary inquiry” in assessing contributions. However, at [16], the Court also emphasised the distinct role of s.79(4)(c): “While that apparent “causal connection” might be seen in s 79(4)(a) (and (b)), no such connection is apparent from the terms of s 79(4)(c); contributions of that latter type are not linked by the words of the subparagraph to the “acquisition, conservation or improvement of any of the property” or, indeed, to “property” at all.”
The Full Court then continued at [17] – [26], describing the assessment of contributions in the following way:
[17] Within that context, then, it is self-evident that financial contributions (whether direct or indirect) can be made to a relationship that have an effect on the property of the parties without those financial contributions finding their way directly into, or being directly linked to, specific property or, indeed, directly to the totality of the property available for distribution at the time of trial. Financial contributions can be made to the “acquisition, conservation or improvement” of property “directly or indirectly” (s 79(4)(a), emphasis added). A financial contribution can be made indirectly by, for example, the use by parties of income or assets for purpose A freeing up the use of other income or assets for purpose B. Moreover, a particular financial contribution might have been used wholly in discretionary expenditure which, but for that contribution, would not have been available to the parties or would have required borrowings or a diminution of capital. Such a contribution can also, in that way, be seen, for example, as an indirect contribution to the conservation of property. Indeed, the principles discussed for example in In the Marriage of Kowaliw (1981) FLC 91-092 and In the Marriage of Townsend … (1995) FLC 92-569, can be seen as an exception to that general proposition.
[18] Any and all such contributions, whether or not they sound in, or are directly linked to, the property available for distribution, should be considered and assessed together with the nature, form and extent of all other contributions of all types contemplated otherwise by s 79(4).
…
[20] Put another way, consistent with authority, the s 79 discretion involves as a necessary requirement that “... trial Judges weigh and assess the contributions of all kinds and from all sources made by each of the parties throughout the period of their cohabitation and then translate such an assessment into a percentage of the overall property of the parties or provide for a transfer of property in specie in accordance with that assessment.” (In the Marriage of Aleksovski (1996) FLC 92-705 at 83,437). In Aleksovski, Kay J outlined the well-known “gold bar” analogy and said “[w]hat is important is to somehow give a reasonable value to all of the elements that go to making up the entirety of the marriage relationship” (at 83,443).
[21] Those same principles can be expressed as saying that the requirements of the section are met by approaching the assessment of contributions holistically and by analysing the nature, form, characteristics and origin of the property currently comprising that to which s 79 applies, and, in turn, analysing the nature, form and extent of the contributions (of all types) contemplated by s 79. That task is also undertaken by reference to the nature and form of the particular marriage partnership manifested by the particular circumstances of this particular marriage. Is it, for example, a relationship, as Deane J put it in Mallett at 640-641 “...where the parties have adopted the attitude that their marriage constituted a practical union of both lives and property...” or is it, for example, a union where parties lived very separate domestic and financial lives?
[22] The analysis just referred to might, obviously enough, also involve an examination of when contributions were made and the use made of contributions. But that is quite different to attributing to, or searching for, a necessary causal connection between contributions and the available property as a requirement for a particular contribution having significance in the overall assessment of what is just and equitable.
[23] We wish also to refer to the approach of the Federal Magistrate in attributing percentages to differing periods within the relationship, or types of contribution made. There is in our view little to be gained, and much to be said against, approaching the task of assessing contributions by attaching percentages to components of it. (The same, it might be said, applies to attributing a percentage to each of the relevant s 75(2) factors).
[24] There can be little doubt that the classification of contributions by reference to terms such as “initial contributions”, “contributions during the relationship”, and “post-separation contributions”, can be helpful as a convenient means of giving coherent expression to the evidence in a s.79 case and to giving coherence to the nature, form and extent of the parties’ respective contributions. However, the task of assessing contributions is holistic and but part of a yet further holistic determination of what orders, if any, represent justice and equity in the particular circumstances of this particular relationship. So much is clear from the terms of s.79 itself and, in particular, s.79(2). The essential task is to assess the nature, form and extent of the contributions of all types made by each of the parties within the context of an analysis of their particular relationship.
[25] Doing so is also consistent with the demands of authority that the ultimate assessment of contributions should be made without “...giving over-zealous attention to the ascertainment of the parties’ contributions...” (Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513 at 524) and the well-established recognition in the authorities (acknowledged specifically by her Honour in this case) that the process required of the Court by s.79 is the exercise of a wide discretion, not the performance of a mathematical or accounting exercise.
In my view it would better satisfy the holistic assessment of contributions to take a global approach to the assets in this matter, subject to accepting the husband submission that for the purposes of assessing contributions, the inherited Property E property should be excluded. This approach is consistent with authorities such as Bishop & Bishop [2013] FamCAFC 138; (2013) FLC 553 at [29].
It is true that in the history of the relationship the Property D property was a jointly owned asset, however as already noted, the husband transferred his interest in the Property D property to the wife a few months before his second bankruptcy in 2010, and at a capital loss. After the transfer he made no further contribution to that property. The wife paid the mortgage and met any shortfall from her income. However, it here that account should be taken of the husband’s financial contributions, even though clearly on the evidence they had no nexus with the Property D property after the transfer of his interest. I am satisfied on the evidence that the contributions by the husband to the general household expenses freed up income of the wife to meet the shortfall on the Property D property. This is consistent with the approach of the Full Court to a parcel of land inherited by a husband and held for 14 years, to which the wife made no direct financial contribution, in Hurst & Hurst [2018] FamCAFC 146. The Court held it was an error not to take account of the indirect contributions of both parties, including the wife, which enabled the husband to maintain the property.
There was no dispute that the financial contributions by the wife far outweighed those of the husband.
The initial contribution of the Property C property was significant. The use made of an initial contribution is relevant although it has to be weighed against all the other relevant contributions of the parties: Pierce & Pierce (1999) FLC 92-844 at [28]; Kardos & Sarbutt [2006] NSWCA 11, (2006) 34 FamLR 550 at [66], [67]; Williams & Williams [2007] FamCA 313 at [26]. The parties lived in the property until 2005. It provided family accommodation. It provided an office location for the husband to pursue his business.
The husband submitted that the wife conceded during cross examination that both parties worked hard on the renovations to the Property A property and that she encouraged the children to have a close and loving relationship with the husband.
The husband submitted that the wife made no allegations that he committed waste or that his contributions were affected by the concept of waste.
The husband pointed out that the wife’s son Mr M did not give evidence in the wife’s case. Exhibits “A” and “I” indicate that there was a close relationship with the husband at least in about 2011.
I am satisfied on the evidence that the husband was more integral to family life than the wife alleges and up until separation it is more probable than not that he was a respected and well regarded member of the family. However, I cannot find his contribution in that regard was any greater than that of the wife.
Here, to adapt the phraseology of Deane J in Mallet (supra), the parties adopted the attitude that their marriage constituted a practical union of the domestic lives but very separate financial lives. In assessing the contributions, I take account of the assumptions about separate finances and assets reflected in the Agreement and the conduct of the parties during the relationship consistent with those assumptions, discussed earlier.
The husband submitted that his contribution should be assessed at 22.5% to the wife’s 77.5%.
The wife submitted that there was no basis for concluding that the husband made any greater contribution than her in any sphere.
Taking account of all the above considerations, including my findings about non-disclosure, I am satisfied the husband has established an entitlement to an adjustment on an assessment of the parties’ contributions of a small percentage. His claim of 22.5% is excessive in the circumstances. Weighing all of the matters and considerations discussed above, a 4% adjustment is appropriate. This should be calculated on the net asset pool excluding the Property E property, as the husband submitted.
I now turn to the s.90SF(3) factors.
S.90SM(4)(e) - Assessment of section 90SF factors
Having determined that it is just and equitable to make an order adjusting the property interests in this matter, s.90SM(4)(e) of the Act requires account to be taken of the matters referred to in s.90SF(3) of the Act, so far as they are relevant, when considering what orders should be made.
In Polonius & York [2010] FamCAFC 228, the Full Court concluded it was erroneous, when considering a s.75(2) or s.90SF(3) adjustment, to take account of only those assets in respect of which some contribution had been made: see the discussion at [114]-[117]. At [118], the Full Court said:
The matters in s 79(4)(a), (b) and (c) of the Act deal with the past contributions of the parties to a marriage and the matters in s 79(4)(d), (e), (f) and (g) are concerned with the economic position of the parties. In Sieling & Sieling (1979) FLC 90-627, Evatt CJ and Marshall SJ at 78,264 observed that s.79(4) has “both a retrospective and a prospective element”. The matters in s 75(2) of the Act are part of the ‘prospective element’ and are concerned with the economic consequences of the breakdown of a marriage and also any ongoing commitments subsequent to an order pursuant to s 79. For example, it often occurs that an adjustment is made to the contribution based entitlement of a party to reflect an ongoing responsibility to care for children and a disparity in earning capacity and financial resources of the parties: see DJM v JLM (1998) FLC 92-816; Georgeson & Georgeson (1995) FLC 92-618 and Doherty and Doherty (1996) FLC 92-652.
I accept, as the wife submitted, that a disparity in earnings and earning capacity does not of itself justify any adjustment, but it is a factor to be taken into account: Marsh & Marsh (2014) FLC¶93-576 at [60], [64] and [75] (Ainslie-Wallace J), and at [99], [104], [106] – [107], and [120] (Murphy J); Le Poer Trench J at [169] – [171]).
The husband seeks an order for a 10% adjustment in his favour for s.90SF(3) factors. The husband pointed specifically to the disparity in wealth between the parties, his contribution to the welfare of the wife’s children, his age, being 72, the need for funds to house himself, and that neither party’s health disqualifies them from employment.
The wife, as noted, contends no order should be made, because the just and equitable requirement cannot be satisfied. Regarding s.90SF(3), and for the same reasons, she submitted no adjustment should be made in favour of the husband.
I have weighed all the factors discussed above, including contribution to the welfare of the wife’s children, the enormous disparity in wealth between the parties, the husband’s age and his future needs. The assessment of the husband’s wealth and his future needs is affected by the issues of his non-disclosure and the likelihood that he will receive substantial benefits from Company A.
In the exercise of my discretion, I am satisfied the husband should receive an adjustment of 2% in his favour for s.90SF(3) factors.
In my view this is appropriately calculated on the net asset pool, but including the Property E property. As pointed out in Hurst at [57] sub‑paragraphs of s.90SF(3)(b), as well as s.90SF(3)(n), recognise a symbiosis between the s.90SM(4)(a), (b) and (c) assessments and the s.90SM(4)(e) assessment. But bearing in mind the role of s.90SF(3) factors as a prospective element in the s.90SM(4) assessment of contributions, it follows that the question of any nexus between the assessment of s.90SF(3) factors and any particular item of property, discussed above, has even less relevance.
The orders I propose may result in the wife selling the Property E property. I have taken this possibility into account.
Conclusion
In order for the husband to receive his entitlement, the wife will be ordered to pay him a specified amount. However, it is possible that sale of the Property E property may be necessary to effect payment. If so, the contingent liability for GST should be deducted from the net asset pool in accordance with the decision of Rosati (supra), referred to above, before calculating the dollar value of the husband’s entitlement.
The net asset pool, including superannuation is $4,154,823.00. When the value of the Property E property is deducted the value of the net pool is $2,054,823. If the Property E property is to be sold to satisfy the husband’s entitlement, a further amount of $303,450 should be deducted for Capital Gains Tax, giving a net pool of $1,751,373.
In all other respects the property interests of the parties should fall where they presently lie. It follows from my reasons and conclusions that there must also be orders resulting in exclusive possession of the Property A property in favour of the wife.
I should “stand back” from this preliminary determination, and consider its impact: Manolis & Manolis, above. Having done so, I am satisfied the proposed outcome is just and equitable.
I will give the parties the opportunity to consider these reasons and bring in agreed short minutes of order to reflect them. It will give the parties an opportunity to reach agreement on the best method to facilitate the implementation of the orders. Accordingly, I will make no final orders at this stage and the parties will be directed to submit a minute of a proposed form of agreed orders to reflect these reasons within 14 days. The proposed form of orders should specify the manner in which costs should be dealt with.
I certify that the preceding two hundred and sixteen (216) paragraphs are a true copy of the reasons for judgment of Judge Harper
Date: 31 August 2018
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