Friar and Friar & Anor
[2014] FamCA 689
FAMILY COURT OF AUSTRALIA
| FRIAR & FRIAR AND ANOR | [2014] FamCA 689 | |
| FAMILY LAW – PROPERTY – CONTRIBUTIONS – where the parties were in a relationship for 35 years – where at the commencement of the relationship, neither party had assets of any significant worth – where the respondent husband made significantly greater direct contributions during the relationship, primarily in the form of inheritances – where both parties worked during the relationship – where the applicant wife was the primary homemaker and parent – where the respondent husband engaged in a “course of violent conduct” against the applicant wife during the parties’ relationship – whether that violent conduct made the applicant wife’s contributions more arduous – where the respondent husband’s violent conduct was found to have had a significant adverse impact on the applicant wife’s contributions – where the parties’ contributions assessed in the proportion of 60:40 per cent in favour of the respondent husband – where no adjustment made pursuant to s 75(2) of the Family Law Act 1975 (Cth). FAMILY LAW – PROPERTY – THIRD PARTY – where the second respondent and the respondent husband obtained loans in each of their names and secured those loans over a property owned jointly by them – where the second respondent claims that the respondent husband should be solely responsible for those loans – whether the principle of “equity is equality” has been displaced – where neither party has sought to exercise their rights of exoneration against the person in whose favour the liability was obtained – where there is no evidence that the parties intended unequal sharing or that unequal sharing is necessary to do justice in the particular case – where no merit in the second respondent’s claim. FAMILY LAW – COSTS – where the applicant wife had sought declaratory relief against the respondent husband and the second respondent – where the wife was unsuccessful in that regard – where the second respondent seeks her costs of and incidental to the applicant wife’s initiating application – where the second respondent also claimed that the respondent husband ought bear sole responsibility for a liability in excess of $700,000 – where the second respondent has been wholly unsuccessful in that regard – where there are no circumstances justifying a departure from s 117(1) of the Family Law Act 1975 (Cth) – second respondent’s application for costs dismissed. | ||
| Family Law Act 1975 (Cth) |
| Af Petersens and Af Petersens (1981) FLC 91-095 |
| APPLICANT: | Ms R Friar |
| FIRST RESPONDENT: | Mr C Friar |
| SECOND RESPONDENT: | Ms W Friar |
| FILE NUMBER: | SYC | 6808 | of | 2007 |
| DATE DELIVERED: | 26 August 2014 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Murphy J |
| HEARING DATES: | Sydney: 1 March 2012 Sydney: 2–4 July 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Pentalow |
| SOLICITOR FOR THE APPLICANT: | Friend & Co Lawyers |
| THE FIRST RESPONDENT: | Self-Represented |
COUNSEL FOR THE SECOND RESPONDENT: | Mr Windsor SC |
| SOLICITOR FOR THE SECOND RESPONDENT: | Hamish Cumming Family Lawyers |
Orders
As and by way of settlement of property pursuant to s 79 of the Family Law Act 1975 (Cth) each of the husband and wife shall do all such things and execute all such authorities and other documents as might be required to:
(a)Pay, from the monies held in the Controlled Monies Account in the names of the applicant wife, respondent husband and second respondent:
(i)to the second respondent, Ms W Friar, or as she might otherwise direct in writing, the sum of $294,872;
(ii)to the applicant wife the sum of $286,947;
(iii)to the respondent husband the sum of $7,295;
(b)Have the applicant wife abandon any right, title, claim or interest she has or may have in respect of each of the real properties located at:
(i)103 H Street, Suburb B; and,
(ii)103 M Street, Town U
(c)Have the respondent husband indemnify the applicant wife in respect of any indebtedness of the respondent husband, including but not limited to any existing or future indebtedness, or asserted indebtedness of the respondent husband to the second respondent;
(d)Have each of the applicant wife and respondent husband otherwise indemnify the other in respect any current or future indebtedness of each of them;
(e)Save as is otherwise provided specifically in these orders, have each of the applicant wife and respondent husband abandon any right, title, claim or interest in and to any property, real or personal, of which the other is possessed or in which the other has an interest.
Each of the parties shall do all things necessary to facilitate the following distribution of any interest that has been earned on the sale proceeds currently held in the Controlled Monies Account in the names of the applicant wife, respondent husband and second respondent:
(a)Pay to the second respondent, Ms W Friar, or as she might otherwise direct in writing, an amount equivalent to 50 per cent; and,
(b)Of the remaining 50 per cent interest:
(i)Pay 60 per cent to the respondent husband; and,
(ii)Pay the remaining 40 per cent to the applicant wife.
The Application in a Case filed by the Second Respondent on 19 April 2013 be dismissed.
All extant applications be otherwise dismissed and removed from the list of cases awaiting finalisation.
All material produced pursuant to subpoenae issued for the production of documents be returned to their respective providers after the time for appeal has lapsed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Friar & Friar has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 6808 of 2007
| Ms R Friar |
Applicant
And
| Mr C Friar |
1st Respondent
And
| Ms W Friar |
2nd Respondent
REASONS FOR JUDGMENT
These reasons, and the orders to which they relate, pertain to Ms R Friar’s (“the wife”) claim for property adjustment pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”).
That relief is in addition to the wife’s claim for a declaration that the husband and the husband’s sister[1] hold real property subject to a trust interest in her favour. The wife’s claim for declaration was dismissed by me on 1 March 2013 for reasons given that day. It is important that these reasons be read together with those earlier reasons; findings made there are applicable to some issues to be discussed within these reasons.
[1]The husband’s sister (Ms W Friar) is the second respondent in these proceedings. She will be referred to in these reasons as “Ms W Friar”.
Overview of the Relevant Interests in Property
All parties contend that the property susceptible to s 79 orders comprises interests in two pieces of real property and a sum of money sitting in a trust account pending these orders. Consequent upon my 1 March 2013 orders, the interests in real property comprise the husband’s two interests as tenant-in-common with his sister: a one-quarter interest in a property at 103 H Street in suburb B (“103”) and a one-third interest in a property at Town U (“U”).
The evidence makes fleeting reference to other property. For example each of the parties has, I gather, furniture and other chattels. No party lists any such chattels or values them. The wife’s evidence is that, at trial, she owned some shares and had a very modest amount in a bank account. No party includes that property as property to which s 79 orders should apply and it seems abundantly clear that it is of very modest value. I will not include it among the property to which any s 79 orders might apply.
No valuation has been undertaken of U or 103. The value of the husband’s interests has been derived by agreeing a figure for the whole of the property and dividing it by each relevant proportion. The value of a proportional tenant-in-common interest is not necessarily its proportion of the value of the whole property. Yet, no valuation evidence is before the court; the parties have agreed and no argument has been addressed to that issue. I adopt the figures for the value of those interests agreed to as, respectively, $100,000 and $275,000.
The derivation of then-existing property interests of the wife and Ms W Friar was set out in my earlier reasons.[2] As referred to there, the real property at 102 H Street (“102”) (in which the husband had a one-half tenant-in-common interest with Ms W Friar) was sold in early 2012. It is the remaining net proceeds of that sale ($589,743.57) that sit in the trust account of Ms W Friar’s solicitors, in the names of the wife, husband and second respondent, pending the outcome of these proceedings.
[2] Reasons for judgment delivered on 1 March 2013 at [27]-[37].
The Husband
In my earlier reasons, at [9]-[13], I referred to the self-represented husband’s participation in that part of the proceedings. Those comments are equally applicable here.
The husband did not file an affidavit of evidence in chief, nor a case outline. It was not possible to glean the particulars of any case he sought to make in respect of the wife’s s 79 claim, save that, in broad terms, he saw her as being entitled to nothing (consistent with his Response filed more than four years before trial, and which sought that the wife’s application be dismissed). He cross-examined very briefly the wife (to which reference will later be made) and Ms W Friar (such cross-examination being confined to evidence already given by Ms W Friar, which will be considered in more detail later in these reasons).
Ms W Friar’s case turns on a claimed indemnity which she seeks in respect of joint debts with the husband. The husband did not oppose those orders. Although filing no document specifically addressing same, he effectively supported Ms W Friar’s case in that respect. So, too, in respect of her additional claim in respect of a separate debt which she claims he owes her.
In his Response (filed in March 2008) the husband asserted, in response to the document’s invitation to respond to facts in the wife’s Application:
I own a half share of the property with my sister.
There is significant debt and I have insufficient equity to pay out the mortgage and debt to my sister from my sister.
There is no money to divide.
For reasons given at [92]-[98] of my earlier reasons, it was necessary for further proceedings to follow the trial. That tortuous process eventually resulted in written submissions and, later, oral submissions in October last year. The husband did not respond to my directions inviting the filing of submissions in respect of the wife’s s 79 claim until, in July 2013, he filed a document called a “statement”. The document was unsworn. It was filed after evidence had closed. No application to re-open had been filed by him. He was not cross-examined on the “statement”. It was filed after he had heard all of the evidence in the trial including the cross-examination of the wife and Ms W Friar.
Notwithstanding all of these matters, and notwithstanding his earlier lack of participation in the proceedings, I determined that in order avoid further costs for the parties and further delay, the husband ought be permitted to file the statement and to rely upon it as some “evidence” in his case but, primarily, as an outline of submissions.
Section 79(2) – Should any Order be made?
The parties were in a relationship for approximately 35 years, including a marriage of approximately 23 years (I accept the wife’s evidence as to the period pre-marriage and accept, as she contends, that the parties lived in a de facto relationship during that approximate 12 years).
My earlier reasons for judgment refer to a number of different aspects of contributions of varying types made by the wife during the course of a lengthy relationship. The issue of family violence will be discussed in more detail later in these reasons; in my earlier reasons I found, and repeat in this context, that the wife was “…the victim of regular, serious acts of family violence at the husband’s hands.”[3] I found, in addition, and also repeat in this context, that “…the evidence is redolent of a pervasive disrespect for the wife and a disregard of her interests”.[4] Within that context, and despite making significant contributions over a 35 year period, the wife has no legal or equitable interests in real property.
[3] Id at [5].
[4] Id at [75].
Further, it can clearly be said here that, as a result of the choice “…made by one or both of the parties, the husband and wife are no longer living in a marital relationship.” [5] Consequent upon the separation of the parties, there was a change in the use of real property at 102 which served as the matrimonial home.
[5]Stanford v Stanford (2012) 247 CLR 108 at [42].
Those facts are, in my view, sufficient to render it just and equitable to make an order pursuant to s 79 of the Act.[6]
[6]Id, particularly at [35]-[42].
The Central Issue: The Husband’s Debts
The derivation of the net amount of $589,743.57, insofar as it takes account of the repayment of a mortgage debt of about $846,000 upon settlement of the sale of 102, is the subject of significant controversy and is the primary issue in this case. Specifically, Ms W Friar claims that the husband ought be solely liable for the $846,000 mortgage debt, such that she is solely entitled to the $590,000 in sale proceeds.
Further, Ms W Friar says the husband is indebted to her in an additional sum of about $139,000. Those debts are said by Ms W Friar to be the subject of an indemnity by the husband. The husband supports her contention, albeit in the truncated manner earlier referred to, which will need to be discussed further below. Success by Ms W Friar in her claim will, in turn, have a dramatic impact on the property available for division between the husband and the wife.
The parties’ cases as “pleaded”
The wife’s Initiating Application filed almost seven years ago, was amended on 25 August 2011. It has not been amended since. The wife there sought a declaration as to trust interests as earlier referred to, and also sought orders pursuant to s 79 of the Act. Ms W Friar filed a Response on 17 March 2008, and an Amended Response on 15 May 2009. In each, Ms W Friar sought substantively that “…the application filed 27 September 2007 be dismissed.” However, Ms W Friar’s Amended Response went on to seek orders in the alternative that the husband “…shall indemnify [her] from all and any liability arising from the Mortgage to Westpac Bank secured over 102…” and consequential orders in the event that the husband’s “…interest in the property … is insufficient to afford [her] an indemnity as to the whole of the said Mortgage debt…”
In July 2008, Fowler J ordered the wife to deliver, in effect, a pleading (called “points of claim”) particularising her claim in trust. Significantly, the requirement to plead was specific to that claim. Ms W Friar was ordered to plead in response. No further order by Fowler J, nor any order since that time, has required Ms W Friar to plead any other aspect of her claim. Ms W Friar’s responsive pleading (filed 29 September 2008) was confined to responding to the claim in trust. A comprehensive case outline filed on behalf of Ms W Friar on 29 February 2012 and written submissions filed on 25 July 2012 addressed the wife’s trust claim. It did not at all refer to any claim by Ms W Friar in respect of indemnity in respect of the mortgage debt, any assertion as to any other alleged debt owing by the husband, or the basis for either such claim.
The result is that Ms W Friar’s central claim as to indemnity is not the subject of any pleading[7] and there is, consequently, a lack of particularity as to the basis of any such claim.
[7]As to the desirability of pleadings in cases involving, in particular, third parties see, for example, B Pty Ltd and Ors & K and Anor (2008) FLC 93-380.
Importantly, it also means that there is no pleading by Ms W Friar which addresses the question of how this court has jurisdiction to make an order of the type sought between a party to a marriage and a stranger to it. Nor do any submissions address that issue.[8] Although jurisdiction is, of course, fundamental, it is convenient to leave that question momentarily to one side.
[8]For example, it may have been open to Ms W Friar to plead and argue a case for relief pursuant to Part VIIIAA of the Act and s 90AE in particular or, perhaps, to call in aid the court’s accrued jurisdiction.
Comprehensive written submissions at the conclusion of the trial filed on behalf of Ms W Friar again refer predominantly to the wife’s trust claim. Those submissions will be referred to in more detail later in these reasons. Insofar as they refer to the issue of responsibility for debt, the submissions address at length the decision of the Full Court in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644 and posit the issue as being the wife’s desire to see what is best for her son in every respect, thus compelling a conclusion that “[t]he losses (in this instance the loan secured by the mortgage over 102) occurred in the course of the pursuit of the objectives of the marriage (being the support, encouragement, parental assistance, advancement of/for the children of the marriage)…”[9]
[9]Written outline filed on behalf of Ms W Friar on 25 July 2012 at [34].
The submissions do not address the basis for asserting that co-borrowers and co-sureties on, respectively, a loan and mortgage, should not share equally in the debt.
The wife’s central contention is that the husband and Ms W Friar should bear the mortgage debt equally. She contends that they are jointly liable at law by reason of being designated as joint borrowers and joint sureties on the relevant loan and mortgage documentation. She disputes, however, an amount which she calculates as $94,990. This amount formed part of the repayment to Westpac Bank on settlement of 102, but the wife asserts it is not attributable to the initial borrowing or by meeting loan expenses, repayments and the like. As to the additional loan of about $136,000 claimed by Ms W Friar, the wife asserts that any debt is a matter between the husband and Ms W Friar (and the parties’ son for whom the debts were incurred) and ought not be taken into account in assessing the property for division.
Aside from the debt issues, the wife sought orders in her Amended Initiating Application that 102 and 103 be sold and the net proceeds be divided in the proportion 60 per cent to her and 40 per cent to the husband. Since then, 102 has been sold. The Amended Initiating Application was not further amended before the trial. In her written submissions, produced, ultimately, after further skirmishes and orders subsequent to the conclusion of the trial, the wife seeks orders that the husband and Ms W Friar be ordered to direct the whole of the monies sitting in trust be paid to the wife; that the husband transfer his one-quarter interest in 103 to the wife; and, that the:
…husband … (1) in his capacity as executor of the estate of the late [Ms D Friar] … [transfer ] to himself and his two sisters, [named] as equal tenants in common the [U property] and (2) then in his personal capacity … transfer his one third (1/3) interest in the property to the wife.[10]
[10] Written submissions filed on behalf of the wife on 29 October 2013 at [58].
The sister other than Ms W Friar was not a party. It is not known if she had notice of that intended order. As will become clear, any issues which those circumstances might raise are not relevant in light of the orders I will ultimately make.
The Issues in respect of debt(s)
The following issues emerge as central to the determination of the parties’ respective contentions in respect of the alleged debts:
(a)How is the amount of the debt (or debts) in respect of which Ms W Friar seeks indemnity from the husband comprised?
(b)What principles govern responsibility for those debts as between the husband and Ms W Friar?
(c)How do those principles apply in the present case and what orders, if any, should be made as a result as between the husband and Ms W Friar?
(d)What jurisdiction does this court have to make any such orders as between the husband and Ms W Friar?
(e)Having determined the amount of the debt or debts owed by the husband, should that debt, or those debts, be taken into account as between the husband and the wife in the s 79 proceedings?
(a)How is the Asserted Debt Comprised?
The properties at 102 and 103 H Street had been owned by the parents of the husband and Ms W Friar. In the mid-1970s, the parents transferred their interests in 102 to the husband and Ms W Friar as tenants-in-common in equal shares. The parents moved to Town U, where they bought a property (U). The husband and Ms W Friar were joint mortgagors over 102 in respect of a borrowing for the benefit of their parents which funded the purchase of U.
In her pleadings the wife contends that “[o]n a date unknown in about 1980 or 1981…”, the father of the husband and Ms W Friar died. He predeceased their mother. The pleadings contend, and it was admitted by Ms W Friar in response, that on an unspecified date after the death of the father, 102 was unencumbered. At that time the husband and wife were living in 102 and Ms W Friar and her partner were living in 103 which is situated across the road.
At a time when the husband and Ms W Friar’s mother was still alive and held a share of the title to 103, Ms W Friar and her partner utilised money for their sole purposes gained through a joint borrowing by Ms W Friar, the husband and their mother, on the security of 103.
Ms W Friar and her partner borrowed sums of money in 1984, 2001 and 2002. The husband and, it seems, his mother (who retained a one-quarter interest in 103 until June 2002 when the mother’s interest was transferred to Ms W Friar) was a co-surety with Ms W Friar in respect of each of those borrowings, with 103 providing the security. It is not suggested that anyone other than Ms W Friar and/or her partner contributed to the repayment of any of those loans.
The Genesis of the Disputed Debts
The evidence in this case lacks clarity and precision.
The loans the subject of the current controversy commenced, it seems, with borrowings in 2001. It seems tolerably clear, on the evidence (including exhibits) before me that, initially, $100,000 was borrowed by the husband and Ms W Friar so as to permit the husband and wife’s son, Mr G Friar (“the son”), to carry out renovations/repairs to his then home. Later, in August 2002, about $365,000 was borrowed so as to permit the son to acquire a food business. The wife’s counsel put to the husband that the later borrowing paid out the former. He denied that.[11] Counsel’s proposition seems to me unlikely in light of the future borrowings about to be referred to, however I cannot see that anything substantive turns on that.
[11] Transcript of proceedings, 3 July 2012, p 72.
In any event, a later refinancing occurred. In 2004, the then lender commenced proceedings for possession and sale as a result of default in repayments. As a result of that action, and earlier defaults which preceded it, Ms W Friar asserts that she incurred expenses. These expenses are part of the debt which she asserts is owed to her by the husband separate from the indebtedness repaid from the proceeds of sale of 102 in 2012. In respect of this alleged debt, and the earlier intra-familial borrowings which preceded it, Ms W Friar deposes:
37.In September 2001 [my partner] and I borrowed $240,000 secured against 103 [H] Street so [my partner] and I could purchase a hotel business. Although [the husband] was a co borrower, it was agreed between us, that the loan was my debt with [my partner]. [My partner] and I met all repayments on that loan.
38.In 2001 [the husband] asked me to sign for a loan for $500,000, I recall it was over two separate loan amounts, so he could lend money to his [son]. From discussions with [the husband] and [the wife], I understood the loan, which was secured against 102 [H] Street, was to assist [the son] purchase a … business in [Suburb E].
39.Prior to signing the loan document, it was agreed between [the husband] and I, the $500,000 loan was his debt and he was solely responsible for paying it back.
40.My mother’s health at this time continued to deteriorate. She was diagnosed with dementia and in April 2002 was admitted to [a Nursing Home].
41.In September 2002 [my partner] and I borrowed a further $20,000 as an overdraft facility for the business also secured against 103 [H] Street. Again, we considered this to be our own loan and met all repayments.
42.In 2002 I purchased my mother’s interest in 103 [H] Street. I became owner as to 75% of 103 [H] Street. [The husband] retained the remaining 25% interest.
43.In 2002 [the son] moved [overseas] to play [a professional sport]. The payments on the $500,000 mortgage over 102 [H] Street fell into default. From that time I paid $7,263.77 from 2 April 2002 until 14 August 2002.
44.On 16 September 2004 I paid $5,000 rent on the [food business].
45.2 December 2004 I paid a mortgage instalment of $3,366.
46.On 11 January 2005 I paid a mortgage instalment of $3,366.00
47.On 4 November 2004 I paid arrears on the mortgage of $19,707.51.
48.On 20 January 2005 I paid a total of $20,434.84 the mortgage amount necessary to payout the loan fro [sic] the purpose of refinancing with Adelaide.
49.From 21 February 2005 until 22 February 2007 I paid $79,221.66 in mortgage payments.
50.I paid land rates and water rates from the time of default to date where they were unpaid.[12]
[12] Affidavit of Ms W Friar filed 20 October 2011.
In a later affidavit filed on 29 June 2012, Ms W Friar deposes that she had “reread” the affidavit just referred to and wished “…to clarify and correct some of my statements…” Relevantly, the latter affidavit deposes:
Paragraph 42:
My Mothers [sic] share of 103 [H] Street was transferred to me in 2002. My Mother was suffering Dementia at that time.
Mum had previously given us all a copy of her Will dated I think in 1991. It provided that I would receive her share of 103 [H] Street upon her death I sought legal advice about the Transfer of her share to me. My solicitor prepared the Transfer document. I signed it under my Power of Attorney for Mum as Transferor. I took it to the Stamp Duties office and paid Stamp Duty on the valuation at the time.
Paragraph’s [sic] 43 to 50:
I paid the amount referable to paragraphs 43 and 50 from my own personal funds.
I paid the amounts referrable to paragraphs 44, 45, 46, 47, 48 and 49 from an account we referred to as the Trust Account. It is an account that held money in the names of [the husband], [the husband and second respondent’s sister] and I. The money came from an inheritance from Mums [sic] sister to Mum in about 2000 or 2001. The original amount was about $161,000. Each of her siblings received this amount and all the nieces and nephews including [the husband], [the husband and second respondent’s sister] and I received $10,000.
I paid these amounts toward the mortgage and outgoing as I didn’t think I had a choice. Debt collectors were coming to [the husband’s] door. I paid the monies from my account and the Trust account to stop any bank action to force the sale.
In addition to the amount attested I paid $20,000 to a solicitor on [the husband’s] request. I think this was in 2001. $10,000 was from my joint account with [Mr D] and $10,000 from my inheritance from my Aunt.
The parties separated in September 2004. Although not the subject of deposition by the husband, Ms W Friar deposes that the husband “…lived at 102 … from the date of his separation … in 2004 until 2011.”
The secured property (102) was not sold as a result of the 2004 default and actions by the lender; rather, the loan and outstanding indebtedness was refinanced through a $500,000 loan from the Adelaide Bank in January 2005. Although there is no specific evidence to this effect, that refinancing provides a foundation for concluding that the debt at the time of the parties’ separation was in the region of $500,000.
The Adelaide bank loan was, in turn, refinanced through Westpac Bank in January 2007 (over two years post-separation). Ms W Friar deposes:
52.In January 2007 [the husband] and I re-financed the mortgage with Westpac and borrowed a further $280,000 which became the re-draw facility to pay the mortgage. The mortgage on 102 … was then $780,000.
Ms W Friar’s affidavit is silent as to why additional borrowings were being made to repay borrowings. There is no evidence of the value of 102 at separation nor, as a result, any evidence of the increase in value, if any, between that time and February 2012 when the property was sold for $1.5 million.
In cross-examination, Ms W Friar said that 102 was not sold when the son went overseas despite earlier defaults in repayments because “[the husband] didn’t want to sell … I wasn’t going to take it from underneath and kick him out.”[13] When he was cross-examined, the husband accepted that 102 was not sold because he did not want it to be, despite the debt “…going up and up and up.”[14]
[13] Transcript of proceedings, 3 July 2012, p 123, lines 14-17.
[14] Transcript of proceedings, 3 July 2012, p 83, lines 42-43.
Much of the parties’ evidence, and the focus during the trial relating to the asserted debts, was directed to the wife’s asserted lack of agreement to the loan to acquire the food business. The wife contends, in essence, that the negotiations preceding the loan for the son were conducted without her participation and that she at no time agreed to the borrowings being made. In her trial affidavit, the wife deposes to a number of conversations in that respect:
44.I first learnt that money had been borrowed for [the son] in about 2002 when I was [temporarily separated from the husband living away from 102]…
…
47.In 2002, I had returned … to live at 102. [The husband], [the son] and myself and a man whom I understood to be the owner of the [food business] that [the son] wanted to buy were at 102. Words to the following effect were said:-
[The husband] to [the son]: “Whether you get the loan is up to your mother”.
[The wife]: “I want to see the books and receipts of how much the [food business] is bringing in before I make a decision”. “I want to see more proof”.
[The son]: “Yes, Yes, I’ll give them to you”. [“]I’ll have a solicitor come and look at it”.
48.The meeting ended with nothing being decided and [the son] leaving 102 in a huff. However, [the son] went behind my back. Without telling me he asked [Ms W Friar] to sign for the loan. About the next day [Ms W Friar] sent one of her daughters over to tell [the husband] that the loan person was over at her place to sign papers for the loan. [Ms W Friar’s] daughter came over to 102 and said words to the following effect:
“Mum said to tell [the husband] that the loan person is here to sign the papers”.
“[Ms W Friar] is signing papers for the loan”.
49.I went over to [Ms W Friar’s] and words to the following words [sic] were said: -
[The wife] (to [Ms W Friar]): “Do you know what you are doing?” “Why are you signing for the loan?”
[Ms W Friar]: “[The husband] has signed for my loan so I am doing the same for him”.
…
52.[The husband] and I argued a lot about [the son’s] [food business] and words to the following effect were said:-
[The wife]: “I don’t trust [the son]. There’s something going on. Why so much money for the [food business]?”
[The husband] was going up to the club saying words to the following effect:-
[The husband]: “I am a partner in the [food business]”.
[The wife]: “You are not a partner”.
[The husband]: “Mind your own business. You are nothing but a Lowes dummy” (Meaning Lowes being a cheap shop, indicating that I was cheap and dumb)
[The husband] did not want to hear a word against [the son]. He thought [the son] did no wrong because he was a [professional sportsman].
(Italics in original).
The husband’s “statement” contains only the following in respect of this borrowing:
In 200? I took out a mortgage on 102 …, for our son … to purchase a business/[food business].
[The wife] knew about the loan, [the wife] was with me when [the son] asked for the loan. We went to [the son’s food business] most Saturday nights and had all our family birthdays and celebrations there. She never said no to the loan, the first I knew of her objection to loan [sic] was in her Affidavits.
While [the son] was playing [professional sport] in [an overseas country] in 2002 the loan repayments defaulted as his partner in the business wasn’t banking the takings. I only knew when I received the notices from the bank. [Ms W Friar] paid the mortgage when the loan defaulted whilst [the son] was away in [the overseas country].
In 2004 [the son] lost the business. After [the wife] left at the end of 2004 I was very depressed.
Because I wanted to stay at 102 … my sisters [Ms W Friar] and [another sister] agreed to pay the mortgage from monies we held in trust until I could sort myself out, the agreement was that this monies [sic] would be repaid upon the sale of the house. The trust money was from our Mums [sic] Will.
I have never thought that [Ms W Friar] was responsible for this debt as it was a loan to my son.
I reiterate that this “statement” was provided after the trial had concluded and that the husband was not cross-examined on it. It is self-serving. It is made against the background of no earlier meaningful deposition as to the matters referred to being given. It was provided after the husband had heard lengthy cross-examination during the trial. Those matters render it of negligible weight insofar as it refers to disputed factual matters.
By the time 102 was sold in February 2012 (more than seven years after the parties separated), the redraw facility had been fully utilised; indeed overdrawn. The debt to Westpac had grown from about $500,000 in 2007 to about $846,000. In respect of that increase in indebtedness of about $345,000 in just over five years, it is contended in written submissions on behalf of the wife:
16.…within 5 years the debt secured against 102 had increased by $345,000, that is from the principal amount of $500,000 in 2007 to $845,863.32 in 2012 (or at the rate of about $9,607.00 a month)…
…
18.The [subpoenaed bank] statements [produced by Westpac] record that each month the interest payable in respect of the $500,000 loan was automatically withdrawn from the redraw account and paid into the loan account and that the interest payable in respect of the redraw facility was automatically debited to the redraw account. In September, 2007 the interest rate was 7.7% and the monthly interest payable in respect of the $500,000 loan was $3,078.75 and that payable in respect of the redraw facility was $198.08.
19.…The amounts withdrawn from the redraw account but not deposited into the loan account during the period February, 2007 to February, 2011 total $94,990.
Those contentions found a submission that “…it can be inferred that not all of the money withdrawn from the re-draw facility was used to pay loan expenses.” It is certainly true that Ms W Friar did not, through any evidence introduced by her, seek to account for how the debt owing upon the sale of the house was accumulated (save that she deposed, without qualification, to the fact that the redraw was used to meet repayments on the principal borrowing).
(b)The Relevant Principles Governing the Debts
In the absence of a particularised pleading, Ms W Friar’s case must be discerned from her Response and the submissions made on her behalf. As earlier referred to, the former seeks orders that the husband indemnify her in respect of the debt discharged from the sale of 102 and seeks that he pay her an amount in respect of expenditure allegedly incurred by her on behalf of them both. The terms of the latter order effect a priority for that amount over any entitlement of the wife pursuant to s 79.
As I have said, jurisdictional issues immediately arise in the absence of any specific pleading or deposition as to Part VIIIAA of the Act or this court’s accrued jurisdiction. Although, of course fundamental, that issue can be momentarily put to one side as the issue only arises if the order sought, or one like it, is in contemplation by the court.
As has been seen, senior counsel for Ms W Friar’s written submissions contend that, “[t]he losses (in this instance the loans secured by the mortgage over 102)…” should be seen as part of the “objectives of the marriage” and give instances of the wife’s evidence consistent, it is said, with her wanting “…to see all her children … successful, secure, comfortable, having comfortable accommodation, in work, having an income and improving themselves.” [15] In short, senior counsel’s submissions contend that the question of treatment of the loans should be decided in conformity with principles relating to “lost assets”, specifically those addressed in Kowaliw at 76,644. The husband and the wife are, it is argued, “…responsible for the economic consequences of the decision to advance funds to [the son]. Those losses should be shared by the parties to the marriage…”[16]
[15] Written submissions filed on behalf of Ms W Friar on 25 July 2012 at [32]-[37].
[16] Id at [36].
The principles emerging from Kowaliw[17] have potential application in assessing the justice and equity of orders pursuant to s 79. Axiomatically, then, the principles might be applicable as between parties to a marriage, including the parties to this marriage. However, any question of the application of those principles begs an initial question not addressed in the submissions on behalf of Ms W Friar; before considering the application of the principles emerging from Kowaliw or like cases, it is first necessary to determine the liability of the husband and Ms W Friar inter se in respect of borrowings for which they are jointly liable (and securities which they have jointly given).
[17]See, also, for example, Townsend and Townsend (1995) FLC 92-569; Omacini and Omacini (2005) FLC 93-218; C & C [1998] FamCA 143.
There is no doubt that Ms W Friar and the husband entered into the various loan agreements and mortgages, including, ultimately, the Westpac loan and redraw, for the benefit of the son. In those circumstances, each of the co-debtors is entitled to an indemnity from the son (see, for example, Israel v Foreshore Properties Pty Ltd (1980) 30 ALR 631 at 636). The son was not called as a witness in these proceedings by any of the parties. There is no evidence before me of the son’s current financial circumstances or of any attempt by either the husband or Ms W Friar to seek from him any of the amounts for which they were liable.
While the husband and Ms W Friar might seek from the son any amounts for which they are liable, as between the co-debtors, different considerations apply:
When persons fall under a common liability such as liability as joint debtors, or joint and several debtors, or as sureties of the debt of another person, the creditor may enforce the remedies available to him to his own advantage, but if a disproportionate burden falls on one of them, that one has an entitlement in equity to contribution by the others so that overall the burden is distributed fairly, and he has an entitlement to be subrogated to rights which the creditor has not exercised, such as securities over property of others who are under the common liability. This is an application of the equitable principle “equity is equality”.[18]
[18]Official Trustee in Bankruptcy v Citibank Savings Ltd and Others (1995) 38 NSWLR 116 (“Citibank”) at 119, per Bryson J.
While not pleaded or argued on her behalf, it might be thought that the evidence from Ms W Friar points to a contention by her that “a disproportionate burden” has fallen upon her – at least to the extent that she has incurred expenditure in and about the joint loan – to which the husband has not contributed. She cannot, however, contend that an unequal burden has fallen upon her in respect of the Westpac borrowing if she and the husband bear equal responsibility for it. Prima facie, an equal burden has fallen on her and the husband by reason of the Westpac indebtedness being paid from the sale proceeds of 102 to which, prima facie, each is entitled to half.
The legal obligations created by documents which establish joint liability for a debt (or joint responsibility under a security such as a mortgage) may be subject to collateral contractual arrangements entered into between the co-debtors. Equally, equity can intervene so as to ensure the legal obligations arising from co-borrowing do not wreak an injustice. The underlying basis of either is that “…the substance of transactions … is not established solely by the terms of [the relevant] documents”:
It is a commonplace of cases relating to contribution that, although persons appear on the face of a document to have entered into a liability as sureties on the same basis, agreements or understandings among them or the circumstances in which they acted may establish that their true relationship is otherwise. In particular it may be established that as between them, one has primary liability and another has a liability to be resorted to only if resort to the first is insufficient.[19]
[19]Citibank at 119-120.
Noting, again, the absence of a pleading or any specific submissions to this effect, the evidence of Ms W Friar can be seen to support a case for the application of either such principle. Her evidence alleges, in effect, that there was an agreement between her and the husband that the husband would be responsible for the debt.[20] Although, again, not alluded to specifically in either submissions or in the evidence, I consider that the justice of the case renders it appropriate to consider whether that same evidence might attract the intervention of equity in the manner just described.
[20] See, for example, [39] of the affidavit of Ms W Friar quoted above.
Bryson J referred in Citibank (at 125) with apparent approval, to an observation by Giles J in Morgan Equipment Co v Rogers[21] that:
…While equal sharing should not be lightly departed from, where the rationale for equal sharing is that the parties are taken to have intended to share equally then a contrary intention must suffice to displace the general rule.
[21]Morgan Equipment Co v Rogers (1993) 32 NSWLR 467 at 476-477.
Bryson J also referred (at 125) to the fact that Gibbs CJ in Muschinski v Dodds[22] assumed as correct (for the purpose of that judgment) that “…a right to contribution may be excluded by the intention of the parties as well as by agreement” and (at 124) to an earlier decision of the New South Wales Court of Appeal in Robinson v Campbell (No 2)[23]:
In our judgment Equity would not permit the appellants to enforce the contractual rights under cl 6 contrary to any such contract or common intention. This is self evident if the disputed conversation gave rise to a contract. However it is also well established that Equity will not permit legal rights of contribution or indemnity to be enforced where it would be inequitable to do so
(Authorities omitted).
[22]Muschinski v Dodds (1985) 160 CLR 583 at 596-597.
[23]Robinson v Campbell (No 2) (1992) 30 NSWLR 503 at 508.
In considering whether common intention is essential to rebut contribution, Bryson J said:
The position taken by the plaintiff's counsel before me was to the effect that the prima facie right of contribution can only be rebutted if a common intention to the contrary is clearly proved by evidence of some agreement or arrangement. No doubt it is very usual that rebuttal takes that form, but in my opinion it is not necessary that there should be a common intention or a bilateral arrangement, and it is not necessary that there should be any expression of an intention or arrangement, as circumstances can occur in which an intended outcome is so clear and obvious that it must be imputed to the parties that they intended it. Quite apart from any intention held by the parties or imputed to them, circumstances can occur in which, without there being any expression of intention or actual advertence to the subject of contribution, it is clear that equity does not require that an obligation to make contribution should be imposed on a party. The court should not lose sight of the origin of the right to contribution in the equitable principle that equity is equality, or forget that facts may exist in which it is not appropriate to treat parties under a common liability as in an equal position, or in which some other equitable principle ought to be given effect.
In substance the plaintiff’s counsel put before me an argument which was put to Tipping J in Trotter v Franklin ... Tipping J there said:
“[Counsel] was inclined to submit initially that this prima facie rule of equal sharing between co-sureties could only be displaced by express agreement to the contrary. However I do not consider that to be the law. As the right to contribution is founded in equity the ultimate question is what is a just apportionment between the co-sureties. Ordinarily the justice of the matter will require equality of sharing. Obviously if the parties have expressly provided to the contrary then justice will require such contrary arrangement to be enforced. It seems to me however that equity may well require unequal sharing if the Court can discern by clear implication either that this is what the parties must have intended or that such unequal sharing is necessary to do justice in the particular case.”[24]
[24]Citibank at 128-129.
I consider, then, that the justice of this case requires me to consider whether any agreement as between Ms W Friar and the husband is established on the balance of probabilities on the evidence before me or, in the alternative, contrary to the position that “ordinarily, the justice of the matter will require equality of sharing,” it should be determined that “unequal sharing is necessary to do justice” in this case. Put another way, does the evidence here establish that justice requires departure from the principle that equity is equality?
(c) The Application of the Relevant Principles to the Present Case
In my view, the arguments of each of the wife and Ms W Friar blur considerations potentially relevant to injustice in the attribution of debt as between the husband and wife with considerations potentially relevant to the possible injustice of equal sharing of a joint debt between the husband and Ms W Friar. It is true that, if Ms W Friar makes out a case that the husband should indemnify her, that result will have a dramatic impact upon the s 79 relief that the wife might receive. Yet, I am not persuaded that in determining any question of injustice between the co-borrowers, that consideration is relevant.
The evidence discloses and I find that, at the instigation of the son, Ms W Friar acquiesced, and bound herself legally, to a joint borrowing with the husband and a joint mortgage securing it over property jointly owned by her and the husband. I also find that she obtained no benefit from that loan. Nor, as I find, did the husband (save for the incidental benefit of assisting his son). The loan was solely for the son’s purposes.
However, I do not accept, as Ms W Friar deposes, that the loan “…was [the husband’s] debt and he was solely responsible for paying it back.” In my judgment, the evidence plainly discloses that what in fact was agreed to was that the debt was the son’s debt and the son was responsible for paying it back. As an example, the husband said in cross-examination by counsel for the wife:
MS PENTELOW: Mr [Friar], that’s a mortgage that you and [Ms W Friar] took out from .....; is that correct?---That’s correct.
For [Mr G Friar’s food business]?---[the son’s] food business.
Sorry, [the son’s food business]. And you had to pay that amount back by 29 August 2003; is that correct?---Correct.
And that wasn’t paid back; is that correct?---Well, [the son] was supposed to do that so I’m not quite sure.
Right. But when you say you’re not quite sure has it been paid back or not?---As I say, I’m not quite sure.
Well, you ?---As far as I know, it hasn’t.
…
MS PENTELOW: That document that you have in your hands now you said is headed Deed of Guarantee; you said it’s signed by your son?---It was not signed by me or Ms [W Friar].
It’s signed by your son?---It’s signed by [the son].
Yes. And what date is that document?---It hasn’t – it’s only got 2003.
2003. And did your son give that to you and Ms [W Friar] when you borrowed the $505,000 in November 2003?---That went to [the son]. That didn’t come to – it went straight to [the son] that money.
…
Were you a partner in the [food business]?---A silent partner more or less.
You were a silent partner. All right. Did you tell Ms [W Friar] that – [the wife] that, your wife?---Well, [the wife] used to know I – I used to go to the [food business] every Tuesday.
No. That you were a silent partner? You’re shaking your – shaking your shoulder?‑‑‑Yes. Well, I don’t know if – I can’t remember if I did say it or not.
When you say you were a silent partner what do you mean by that?---Well, for the money to be paid out because [Mr Q] was a mad – a bit – a bit of a gambler so
Who was [Mr Q]?---He was the person that [the son] bought half the [food business] off, him and his brother, [Mr K].
Did you get any profits from the business?---I didn’t, no.
You didn’t? Any weekly payments, anything at all?---No.
And you don’t know anything about the mortgage – the money that was borrowed via the mortgage going into default?---No.[25]
[25] Transcript of proceedings, 3 July 2012, pp 75-76 and 78-79.
During her cross-examination Ms W Friar referred to the debt being “[the husband’s] debt” and claimed to have no interest in the amount being borrowed because of that fact and because “…he said it was against his half of the house”.[26] She also said that the redraw facility was “…an extra loan that [the husband] wanted to take out so that he could pay the – like the equity was paying the mortgage off, so that gave him the opportunity not to be kicked out [of 102].”[27]
[26] For example, transcript of proceedings, 3 July 2012, p 121, lines 5-6.
[27] Transcript, transcript of proceedings, 3 July 2012, p 122, lines 5-7.
I do not accept Ms W Friar’s contentions. The husband is, plainly, a very unsophisticated man. On Ms W Friar’s own evidence in cross-examination he was “depressed” after the breakdown of the marriage and, on her evidence, it was her actions that sought to ensure that, as a result, he remained residing in 102. Ms W Friar had, again on her own evidence, organised earlier loans for her and her partner and they were used for commercial purposes. She is, in my judgment, plainly more sophisticated and knowledgeable in commercial matters than the husband. Ms W Friar was plainly (and understandably) anxious to ensure preservation of her interest in 102. I simply do not accept that she was as disinterested in the loan arrangements as what her evidence suggests or that she effectively allowed the husband (in conjunction with the son) to “make the running” in organising the relevant loan and the subsequent refinancing of it.
I do not accept, specifically, that the redraw arrangement came at the suggestion or insistence of the husband. I also do not accept that the decision not to sell 102 was as a result of the husband not wanting to sell; I consider that the evidence points strongly to Ms W Friar being the “driver” behind the decision not to sell, including the financial arrangements necessary to effect same. In saying that, I do not attribute any malign motive to her; but I simply do not accept that the decisions and actions she attributes to the husband were in fact his. Rather, her evidence is, in my view, an ex post facto reconstruction which serves the purpose of her current case.
The situation here should be distinguished from a situation where a joint borrowing (and joint surety) is used for the benefit of one of the co-borrowers. The latter situation applied to the borrowings by Ms W Friar in the early 2000s; they were for her purposes or the purposes of her and her partner. The argument for an adjustment to the prima facie equal responsibility for the debt by both borrowers in that situation becomes stronger (despite, it should be noted, the necessity for that result to nevertheless commend itself as “clear and obvious”); it might be seen to be more equitable for a party receiving a sole direct benefit to bear the burden solely, or disproportionately.
In the case of the earlier loans for the benefit of Ms W Friar and her partner, there was a joint borrower and joint surety (Ms W Friar) who not only benefited directly from the borrowing but, crucially, a joint borrower and surety who had herself agreed, despite joint liability under the loan, to assume sole responsibility for repayment of it. The evidence here points to no such agreement in the case of the Westpac loan or its antecedents. Here, an adult third party of full capacity received the benefit of the borrowings. It is his borrowing for his benefit and his obligation (albeit not, apparently, documented as such) that is facilitated by a joint borrowing and joint surety.
Importantly, this case should also be distinguished from a case where even an informal agreement attended responsibility for meeting the loan when it was taken out. That is not Ms W Friar’s case; nor is it the husband’s evidence. In each case their evidence is that there was no agreement as to any responsibility for one or other of them to meet the loan obligations. Despite the ex post facto claims of Ms W Friar (and, to an extent, the husband), the evidence points to them agreeing that it was the son who was to meet the whole of any loan obligations, not either of them either solely or disproportionately.
There is no evidence to suggest that, prior to the wife instituting her s 79 case, there was any attempt by Ms W Friar to establish or effect an accounting of any money allegedly owed by the husband by way of indemnity to her. On the evidence before me, that accounting (such as it was) occurred for the first time, when the property was sold some five years after the last of the refinancing arrangements with Westpac. By that time, the wife’s case in these proceedings had been articulated for some time.
Despite, for example, earlier court proceedings in 2004 in respect of default on an earlier loan and a refinancing (by way of joint borrowing and joint security) to avoid sale of the property, there is no evidence of any discussion, much less any agreement at that time, about any imbalance in the indebtedness of the joint borrowers and joint sureties. The absence of any evidence of any discussions or agreements also attends the arrangement whereby a significant further indebtedness of almost a quarter of a million dollars was incurred for the sole purpose, apparently, of meeting repayments on an existing significant borrowing of about half a million dollars.
Further in that respect, the evidence appears to point clearly to the intended recipient of the borrowed funds (the son) being unable to meet repayments and/or otherwise defaulting from very early in the life of the borrowings, including the significant action of one lender as early as 2004 just referred to. No evidence suggests that Ms W Friar – who had herself been involved in earlier borrowings and a commercial venture with her partner and whose interest in 102 was jeopardised by default – took any action, or, indeed, had any discussions, at any time prior to the wife commencing her claim for s 79 relief, as to any arrangement other than that liability for the debts should be as determined by the binding arrangements that each had entered.
Each of the husband and Ms W Friar have actively acquiesced in arrangements over a period of nearly ten years that have not only seen no evidence of accounting or demand made by Ms W Friar against the husband or the son but which have also seen the preservation of an asset owned by both of them that was ultimately realised for $1.5 million dollars.
It is important to emphasise that what is in issue is not whether Ms W Friar should meet more of the Westpac debt rather than the husband. That is, there is not, prima facie, what Bryson J calls a “disproportionate burden” falling upon one or other of the joint borrowers insofar as the Westpac loan is concerned. What is in issue is whether Ms W Friar can satisfy the court that the facts and circumstances point to the complete abrogation of her liability such that the husband bears sole responsibility for the debt.
I am not satisfied on the evidence before me that there was any agreement at the time of the execution of the Westpac loan, or any of its antecedent loans, that the husband would meet the entirety of the liability in the event that the person for whose benefit the loan was incurred did not meet the repayments. I am not satisfied on the evidence before me that any subsequent agreement to that effect was reached between the husband and Ms W Friar.
The same factors just referred to do not satisfy me that the circumstances here require, as a matter of justice, a displacement of the legal obligations freely undertaken by each party. Put, another way, I am not satisfied on the evidence before me that the circumstances here displace the principle that equality is equity.
No order should be made for the indemnity sought by Ms W Friar.
(d)The Court’s Jurisdiction to Make the Order for Indemnity
The discussion thus far assumes that the court has jurisdiction so as to decide what amount should be accorded to the husband in respect of the debt owed by both he and Ms W Friar to Westpac. While a question arises as to whether the court has jurisdiction to make, ultimately, the order sought by Ms W Friar, it is in my view clear that the court does have jurisdiction to consider whether, in any event, any such orders should be made:
On the other hand, this Court does have jurisdiction to define what constitutes “the property of the parties to a marriage”. If it is alleged that a particular item of property does not belong to either party to a marriage but to a third party, this Court has jurisdiction to resolve that question insofar as it is an issue between the parties to the marriage. As the Full Court said in Antmann and Antmann (1980) FLC ¶90-908 at p. 75,746 …, in relation to sec. 78:
“As a necessary preliminary to its jurisdiction, the Court has jurisdiction to determine the issue of whether certain assets belong to either of the parties or not and may in the course of this investigation come to the conclusion that they do not but belong to a third party.”
The same applies where the issue concerns the existence of a liability or obligation allegedly owed by a party to the marriage to a third party: Antonarkis v. Delly (1976) FLC ¶ 90-063... In each such case, of course, the Court can only determine whether as against the party seeking a share of such asset, the other party can or cannot deny the ownership of that asset or can or cannot assert the existence of a debt.[28]
[28]Af Petersens and Af Petersens (1981) FLC 91-095 at 79,664-65.
The question of the jurisdiction to make orders for indemnity of the type sought by Ms W Friar is a different issue, but the question only arises in circumstances where I consider that such an order should be made on the evidence before the court. For the reasons given earlier, my conclusion is that the evidence does not point to any such order being made. The issue of jurisdiction to make any such order accordingly becomes moot.
(e) How Should the Husband’s Debts be Treated for s 79 Purposes?
The result of the findings earlier outlined is that one-half of the debt discharged upon the sale of 102 is, prima facie, a debt of the husband for s 79 purposes. There is, as a component of that consequence, an issue as to whether one-half of a sum which the wife calculates as $94,990 should not be regarded as a debt of the husband for s 79 purposes. As earlier referred to, the wife contends that this amount cannot be explained by reference to mortgage or redraw repayments or other expenses deposed to by Ms W Friar and otherwise remains unexplained by her.
The husband contends for no such outcome but nor does he address any evidence or submissions to the question.
In respect of the separate debt of about $139,000 said to be owing by the husband to Ms W Friar, counsel for the wife’s written submissions turn on the equity of exoneration with the contended result that it is to the son that Ms W Friar should look for the repayment of any such sum. There seems little doubt that, on the facts of this case, what has been described as “the three requirements” necessary for the equity of exoneration to apply are met. [29] Yet, while it might be correct, consequentially, to contend that the borrowers (including Ms W Friar) should look to recover the relevant monies from the son, that conclusion says nothing of whether, as Ms W Friar contends, the husband should indemnify Ms W Friar for that debt.
[29] Parsons v McBain (2001) 192 ALR 772 at [20].
Further, whatever be the conclusions as to that issue, a separate issue arises as to whether any liability should attach to the wife for all or any of that sum for s 79 purposes. [30]
[30]See, for example: Prince and Prince and Ors (1984) FLC 91-501; Biltoft and Biltoft (1995) FLC 92-614; Af Petersens at 79,664.
The Full Court held in Prince & Prince[31]:
The assessment of debts and liabilities is not necessarily arrived at by a strictly mathematical or accountancy approach in all cases. While some liabilities are charges upon the property which can be accurately assessed at a certain date, others are at large, or have not been precisely determined, e.g. tax liabilities (Kelly and Kelly (No. 2) (1981) FLC ¶91-108 p. 76,801). In some cases the amount of the liability can only be estimated generally (Albany (supra), p. 75,717). The Court can make an allowance for a particular liability if appropriate to do so. In some cases there are sufficient uncertainties as to the alleged liability to lead the Court to disregard it entirely or partly (e.g. a loan from a parent of the party not likely to be enforced; Af Petersens (supra); Quirk (1983) unreported). In other cases, the Court may take the view that because of the circumstances surrounding the incurring of the liability it ought in justice and equity to be wholly or partly disregarded in determining the appropriate order to make under sec. 79 as between the parties to the marriage. Such a result could be reached where a spouse had incurred a liability in deliberate or reckless disregard of the other party’s potential entitlement under sec. 79 (Kimber and Kimber (1981) FLC ¶91-085; Kowaliw and Kowaliw (1981) FLC ¶91-092; Antmann and Antmann (1980) FLC ¶90-908; Af Petersens (supra)). Complex issues can arise in regard to liabilities to third parties (see, e.g. Pockran and Crewes; Pockran (1983) FLC ¶91-311).
Of course, the Court cannot ignore the fact that there is or may be a liability; the effect is simply that it does not consider that the other spouse should be called upon to in effect “contribute” to the liability by having that spouse’s fair share in the parties’ property reduced by virtue of its existence. The effect may be that the party who has incurred the liability will be left to meet it out of whatever funds remain to that party after satisfying the property order made under sec. 79 (Af Petersens (supra)).
[31]Prince at 79,076-77.
While reckless disregard for the interests of a spouse is an example of a situation where one spouse might not bear all or some responsibility for the other’s debt, the principle is, as the above passage makes clear, by no means confined to examples of that type. Ultimately, as is evident from what the Full Court said in Prince, and as s 79 itself makes clear, the determinant is justice and equity.
The findings in my earlier reasons have application. Actions were taken by the husband, and within his family more broadly, with little or no regard to the wife’s views or interests. I accept the wife’s evidence as to the circumstances leading up to the loan and, in particular, that it was arranged as between the son, the husband and Ms W Friar with no regard for the wife’s expressed concerns or, for example, her expressed desire to see the business’s financial records ahead of the loan.
The original borrowing was refinanced on a number of occasions, including where the son’s default had been such as to provoke (in 2004) an earlier lender into commencing proceedings for possession and sale. The refinancing which occurred after those actions occurred after separation. Those actions also occurred in circumstances where if the wife “…had got what [she] wanted, [102] would have been sold.”[32] Further refinancing occurred over a period of eight years after separation. The actions taken in that respect, including the action of the husband and Ms W Friar in not selling 102, occurred without reference to the wife. The husband had the benefit of living in the property; the wife needed to rehouse.
[32] Transcript of proceedings, 3 July 2012, p 42, lines 26-27.
Senior counsel for Ms W Friar submits in written submissions filed on her behalf:
34. The losses (in this instance the loans secured by the mortgage over 102) occurred in the course of the pursuit of the objectives of the marriage (being the support, encouragement, parental assistance, advancement of/for the children of the marriage). The [wife] gave money and gifts to [the parties’ son], had assisted to pay off a loan (for [the wife’s daughter]). She wanted to see all her children (while young, adolescent and adult) successful, secure, comfortable, having comfortable accommodation, in work, having an income and improving themselves.
35. Funds were made available to [the son] to take an interest in the [food business]. It was located on a busy strip in an inner … suburb of Sydney. It was close to transport. The [wife] supported [the son] in his endeavour. The applicant went there regularly with her family. [The son], [the wife’s daughter] and [the parties’ other son] all worked there. The applicant knew [the son] was wanting to take a part-interest in a [food business], needed finance, needed security for that finance and she was hopeful that with interest in the [food business] [the son] would be successful. Her desire for [the son] at that time was to see [the son] comfortable. She wanted him and his family to do well, live in comfortable accommodation, in work and outside his [professional sporting] career. She knew at the time that [the son] could not play [professional sport] forever. She was hopeful that it would be a successful venture. She saw it as an opportunity for [the son] and his family to improve themselves. She sought to encourage [the son] in the venture. She knew that to get the funding using the security of 102, a mortgage would need to be signed in the event that bank or financial institution was to lend the money and she knew at the time that a loan was being granted so that [the son] could buy into the [food business]. The applicant did not tell the second respondent that she should not or must not sign the loan documentation. The [wife] did not say anything regarding the subject matter of loans to Ms [W Friar] after Ms [W Friar] said, “[The husband] has signed for my loan so I am doing the same for him.”
36. In the circumstances, the [wife] and [the husband] are responsible for the economic consequences of the decision to advance funds to [the son]. Those losses should be shared by the parties to the marriage... This being the case, the assets available for distribution (being the proceeds from the sale of 102) do not form part of the assets for distribution between the [wife] and [the husband].
37. There was no deliberate act of economic recklessness reducing the value of what might otherwise have been a matrimonial asset (or otherwise and misconduct) which would cause this Court to adopt an approach different to the approach adopted in Kowaliw.
(Emphasis in original. Footnote references omitted).
I accept that the loan to assist the son was not an act of economic recklessness in the sense in which that expression is used in, for example, Kowaliw. I am also not prepared to find that it was reckless to continue refinancing (or, specifically, refinancing and later using further borrowings by way of a redraw to pay borrowings) in the absence of evidence of the value of 102 at separation or other times (and, thus, for example, any potential set off of the costs associated with refinancing against potential capital gain).
However, the other factors earlier identified including, importantly, the total lack of involvement in any such decisions by the wife over a period of some seven and a half years after separation are, in my view, persuasive of justice and equity determining that the husband and wife should not bear the whole of the debt created accordingly.
That said, however, account must also be taken of the fact that the wife, in sharing the net proceeds of 102 now, receives a benefit from 102 being retained during the post-separation period. That is equally true in answering an argument (seemingly central to much of the cross-examination by counsel on her behalf) that 102 might have been sold earlier rather than loans being refinanced in respect of it.
In the absence of evidence of value during the seven and a half years that 102 was retained post-separation, it is not possible to compare potential advantage of capital gain with the burden of the loan growing by about $345,000 or so during that period. I decline to find, as was suggested by some of the cross-examination by counsel for the wife, that evidence of value can be inferred from the amounts that financial institutions were prepared to lend at various times.
In my view, the evidence does not permit of a safe finding either the significant increase in expenditure, or the possible increase in value of the property, should predominate in deciding what is a just and equitable attribution of the husband’s portion of the mortgage debt as between the parties. I consider that, ultimately, such factors as might point to ignoring or discounting the Westpac borrowings attributable to maintaining the security, are balanced by the fact that the wife benefits by sharing in the realisation of the asset that provided the security many years after separation.
The “Additional Component” of the Indebtedness
The finding just made points to it being just and equitable for the husband and wife to share equally in half of the Westpac debt repaid upon sale of 102. However, a separate issue in that respect remains: the sum of $94,990 contained within that total borrowing. The wife submits that this sum is not accounted for in the mortgage payments or other payments made in respect of the loans.
I accept that the evidence does not disclose the purpose of that expenditure and I accept that it is generously over and above the amounts otherwise disclosed, by either Ms W Friar or the subpoenaed material, as being necessary to meet the loan obligations or other expenses associated with the property.
Whatever might have been the undisclosed purpose of that expenditure and whatever issues it might raise as between the husband and Ms W Friar inter se, I do not consider it just and equitable that the wife should “contribute” to that component of the indebtedness. She was unaware of it, played no part in it, its purpose remains undisclosed and it reduced the net amount payable to the trust account upon sale of 102 and, thus, the husband’s share of that sum.
The result of including the sum of $94,990 in the amount repaid to Westpac is that each of the husband and Ms W Friar has contributed, in effect, half of that sum. If the wife is not to be charged with any of it, half of that sum should be added back to the pool as against the husband. It should be appreciated that this is not to treat it as “notional property”. Rather, it is the mathematical expression of the findings just made as to justice and equity.
The “Pre-Westpac Expenses”
It will be recalled that, at [43]-[49] of Ms W Friar’s affidavit, she deposes to a number of expenses said to have been incurred on behalf of the husband in the time prior to the Westpac refinance. She claims the husband owes her approximately $138,000 as a result.
All of the considerations just discussed apply equally to this alleged loan insofar as the wife is concerned. She was unaware of any of the expenses; they were incurred without reference to her. They were incurred without her knowledge in respect of loans to which she was not a party. I accept, however, that they are expenses incurred in respect of the maintenance of an asset from the ultimate sale of which she benefits.
I am unable to ascertain, either by reference to the submissions made on behalf of Ms W Friar, or as might be gleaned from the evidence, how it is contended by Ms W Friar that the husband should indemnify her for the whole of the expenses incurred save as the argument might proceed similarly to that outlined above in respect of the Westpac debt. In any event, for the reasons earlier discussed, and in the absence of the parties establishing that the court has jurisdiction to so order, it is not for this court to rule upon any indemnity which Ms W Friar says the husband owes to her in respect of the debt.
However, in determining the net property available for distribution, the court has jurisdiction (and has a duty) to determine the extent to which any liability of the husband should count as against the wife.[33]
[33] See, for example, Prince and Antonarkis v Delly (1979) FLC 90-063 there cited at 79,087.
For the reasons outlined above, I am of the view that, whatever might be the rights and remedies of Ms W Friar and the husband inter se, justice and equity demands that not more than half of the amount claimed should be taken into account for s 79 purposes as a debt of the husband. That is, Ms W Friar does not establish a basis for concluding that the husband should bear a disproportionate share of that debt.
That leaves the separate question of whether the husband’s indebtedness for one half of that amount should be taken into account as against the wife. The same considerations outlined earlier apply to this debt. The claimed expenses constituting the sum claimed by Ms W Friar can all be seen to be ultimately, in one form or another, associated with preservation of the security provided by 102. That property was preserved and sold many years later. The wife benefits from that ultimate sale, although it is the husband who had the benefit of the use of the property until its sale. Those factors point to the same conclusion as to justice and equity in respect of this liability being brought to account as against the wife for s 79 purposes as that discussed above in respect of the Westpac debt.
Yet, in respect of this asserted debt, there are features significant to s 79 issues that mark it as distinguishable from the mortgage debt. Primary among those is that there is no evidence of any accounting of those monies or demand for them being made in the lead up to the sale. There is no evidence of any agreement between the husband and his sister that he would pay those sums at the time they were incurred nor subsequently, save for assertions made in, and for the purposes of, this case.
There is no evidence before me to suggest that any such sum as Ms W Friar alleges the husband owes cannot be met at some time by means of an accounting in the property interests which they share. Conversely, there is no evidence to suggest that if not met from property otherwise distributable between the husband and the wife, that future demand will be made for repayment of the debt.
Further, the evidence was decidedly unclear as to whether Ms W Friar accessed money to which only she was entitled or accessed money to which she and others were entitled pursuant to her mother’s estate. For instance, at [2] of Ms W Friar’s subsequent affidavit, referred to in [36] of these reasons, Ms W Friar deposes to using money from a “trust account” which, on one view of the very unclear evidence, can be seen as a “trust account” to which Ms W Friar, the husband and their sister were each entitled.
In those circumstances, I consider it unjust and inequitable for the husband’s liability of one-half of the alleged loan to be taken into account as a liability of the husband for s 79 purposes.[34]
Orders for Settlement of Property
[34]See, for example, Biltoft.
The Relevant Legal and Equitable Interests in Property
The net effect of the findings earlier made is that:
·One-half of the trust account proceeds should be credited to the husband.
·Doing so takes account of the debt repaid to Westpac in which the wife should share.
·Of that sum, one-half of the sum of $94,990 not accounted should be “added back” as against the husband.
·No account should be taken of the alleged additional debt owed to Ms W Friar.
·The tenants-in-common interests in 103 and U properties should each be taken at their agreed values.
That is represented as:
One-half of the proceeds of sale of 102 $294,872
Adjustment to husband for
one-half of the unaccounted for Westpac debt $47,495
One-third interest in U property $100,000
One-quarter interest in 103 $275,000
Total net property $717,367
The Contributions of the Parties
The findings to be made in respect of contributions are hampered by the paucity of evidence from the husband and by the significant primary attention paid to the trust issue (and the consequent relative inattention paid to the s 79 issues).[35]
[35]Noting that Ms W Friar was a stranger to those proceedings. Senior counsel’s alternative submissions made to assist the court are acknowledged.
On the evidence before me, each of the parties commenced their 35-year relationship with negligible property.
The legal and equitable interests comprising the property to be divided derives from significant direct financial contributions made by (or, principally, on behalf of) the husband. The interest in the U property (noting its modest value) derived from an inheritance from his mother in 2007. So, too, the one-quarter interest in 103 (also, apparently, of modest value when compared to 102) derived from an inheritance from the husband’s father in 1979.
It should be observed that 103 was, and is, used for the benefit of Ms W Friar; it has served, and continues to serve, as the home for her and her family. There is no evidence of benefit having been received from the property by the husband and wife save that, many years after its acquisition, it is included in the property to be divided as an interest valued at $275,000.
So, too, the U property. Although submissions are made as to contributions made by the wife in respect of that property[36] I am not persuaded that, in the scheme of things, they carry any greater weight than the indirect contributions of the husband. There is similarly no evidence of any benefit received from it save its inclusion in the “property pool”. While the presence in the property pool of the interests in both properties can be seen as a direct contribution on behalf of the husband, neither the husband nor wife can be seen to have made significant contributions to either property save indirectly to their preservation.
[36] Written submissions filed on behalf of the wife on 29 October 2013 at [34].
Each of the parties worked remuneratively during the marriage. There is sparse evidence of the parties’ respective incomes during the marriage, but the tenor of the evidence is that each earned modest income. By separation, the wife was earning $800 per fortnight as a child care worker.
The wife asserts, and I accept, that she was the primary homemaker and parent to the parties’ two children. Additionally, she was the primary carer for a child of an earlier relationship who lived with the parties and their children from a young age. The wife asserts, and I accept, that she contributed most of her modest income to food and household expenses for the family. The husband contributed his modest income similarly.
In about 1989, the wife won over $70,000 on a “pokie machine”. It is generally accepted that such “windfalls” ought be treated as joint contributions of both the parties. This position is “…predicated upon the basis of each contributing their income towards the joint partnership constituted by their marriage, [in which case] the purchase of the [lottery] ticket would be regarded as a purchase from joint funds…”[37] However, it might be concluded otherwise “…where the parties have so conducted their affairs and/or so expressed their intentions that this would not be the appropriate conclusion…”[38]
[37]Zyk and Zyk (1995) FLC 92-644 at 82,515.
[38]Ibid.
The wife gave evidence under cross-examination that the money used to play the “pokie machines” was drawn from the parties’ joint account, itself the product of direct and indirect contributions by each of the parties. I consider the gambling win should be seen as a joint contribution of the parties.
I accept the wife’s evidence as to how these winnings were expended (a new kitchen, and other minor renovations to 102, including painting, retiling bathrooms and installing new blinds). Other parts of the wife’s winnings were expended as contributions to the children: contributing funds for the son to buy a car, a series of gifts to the parties’ other son, a cash gift to, and repaying a debt accrued by, the wife’s daughter. In addition, money was contributed, I accept, towards general household expenses, and discharging credit card debts accrued in household management.
The parties each made significant non-financial contributions to the maintenance and improvement of the their property. I accept the evidence of the wife that (contrary to the husband’s assertion) she contributed in that respect in a number of forms, including physical labour in assisting the husband with improvements to 102, for example, building a retaining wall in preparation of the installation of a garage and painting and tiling throughout the house.
I accept the wife’s evidence to the effect that she made the greater contribution as a homemaker and as a parent to the parties’ children. That said, both the husband and wife accept that, for a number of years, the husband’s employment required him to work 12 hour shifts which, in turn, reduced his capacity to make homemaker contributions.
Shortly after the parties separated on a final basis, the wife received a victim’s compensation payment of approximately $20,000. The wife asserts that these funds were put towards repaying a debt owed by her (as distinct by the parties) to her father, which in turn, was used in assisting two of her adult children who prior to separation had been living at home but who consequently “…had to find somewhere else to live…”, and to general household expenses. I accept her evidence, but in the scheme of things do not attach significant weight to it.
The husband had the benefit of living at 102 after separation until shortly prior to its sale (some seven and a half years). Some contribution by way of preservation of the home should be accorded to him, but there is no evidence of any specific contributions in that respect.
I do not accept that the refinancing and continued payment of the mortgage constitutes a post-separation contribution on behalf of the husband by Ms W Friar. As she herself said in evidence, she did so to preserve her asset.[39] Further, and crucially, as I have earlier said, there is no evidence to suggest that the 2012 sale price less the cost of maintaining the property (mortgage interest, expenses associated with the 2004 foreclosure, refinancing etcetera) constitutes a greater return than a sale at, or shortly after, separation.
[39] See, transcript of proceedings, 4 July 2012, p 27.
Counsel for the wife relies on the decision of the Full Court in Kennon & Kennon[40] so as to contend that family violence perpetrated by the husband is relevant to the court’s assessment of contributions. In Kennon the Full Court held (at 84,294):
…where there is a course of violent conduct by one party towards the other during the marriage which is demonstrated to have had a significant adverse impact upon that party’s contribution to the marriage, or put the other way, to have made his or her contributions significantly more arduous than they ought to have been, that is a fact which a trial judge is entitled to take into account in assessing the parties’ respective contributions within s 79.
[40]Kennon & Kennon (1997) FLC 92-757.
I repeat the finding made in my earlier reasons; I found the wife to be an essentially truthful witness. Her evidence in respect of violence perpetrated by the husband is detailed and, I think, compelling. There is additional, corroborative, evidence to which reference will shortly be made.
The husband’s admission (of sorts) and denial (of sorts) under cross-examination is an example of his evidence, which, both generally and specifically in respect of this issue, I found markedly unconvincing and unreliable:
MS PENTELOW: Now, Mr [Friar], you’ve said previously that you did assault your wife?---Yes.
And did you assault your wife all throughout the 35-year relationship that you had with her?---Not really.
Not really? Well, you’ve read her affidavit and she lists a lot of the times when she says
HIS HONOUR: What does “not really” mean, Mr [Friar]? What are you trying to convey by that? What, that you did it once or twice, that you did it every second year? What – what’s ?---Well, it wasn’t – it wasn’t – wasn’t every second day or anything like that.
Well ?---It was
I wasn’t there?---Yes.
Give me an impression or a picture of the frequency with which this occurred?‑‑‑Well, it wasn’t a frequent thing. It was just that on some days when she would come home cranky and that she would say things to me that I didn’t like so once I started this she just kept on going on with more and more. So, you know, I
Give her a bit of whack; is that right?---Not all the time, no.
Yes. All right. Just some of the time; is that right, just some of the time?---Not very often.
MS PENTELOW: Mr [Friar], were you convicted of assaulting your wife?---I pleaded guilty to that, yes.
When was that?---An AVO charge.
No.But you pleaded guilty to assaulting her?---I think I read it was ’92, ’93.[41]
[41] Transcript of proceedings, 3 July 2012, pp 102-3.
The evidence otherwise reveals violent assaults while the wife was heavily pregnant with the parties’ children; threatening the wife with both a knife and gun at different points of the relationship; multiple allegations by the wife of rape; forcing the wife to strip naked in public under threat of violence to her extended family; dragging the wife by the hair, and ripping out her hair.
The wife’s affidavit dated 18 December 2008 exhibits an array of medical records relating to attendances at the Emergency Department at a hospital in Sydney between 1981 and 2002. The records detail regular instances of “facial injuries,” “concussion after head injury”, “healed fractures” to multiple ribs, and facial injuries “requiring sutures”.
The records also reveal the hospital’s requests for the police to attend consequent upon noting and treating the injuries. At one stage in the early 1990s, the husband was charged with offences emanating from the family violence perpetrated by him and was, apparently, ordered to undertake a court-mandated domestic violence course. There is no evidence of whether he undertook the course. If he did, it was plainly ineffective.
Further hospital documents record the psychological and emotional effect the abuse had on the wife. Attending doctors indicate the wife suffered significant emotional and psychological effects; other records document that the wife was at various stages “potentially suicidal”, had “previously attempted suicide”, or had “considered self-harm”.
As Kennon (and other authorities) make clear, an assessment of contributions that takes account of family violence is not a de facto form of awarding damages or otherwise giving monetary compensation to the victim. Rather, its relevance is in the extent to which the conduct has made the contributions made by the victim more arduous. Axiomatically, as it seems to me, the seriousness of the violent conduct and its manifest physical and mental consequences must, in turn, have an impact on the degree of arduousness added to the victim’s contributions and all the more so, where, as here, the contributions and conduct have occurred in the course of a very lengthy relationship.
It should not be thought that the relevant impact on contributions is confined to contributions as an income earner or in the role of homemaker. There can be, and there is here, a direct impact on the nature and extent of contributions as a parent – contributions which, in this case, were made primarily, as I find, by the wife. A hospital report dated 16 December 1998 records a telephone conversation with the parties’ child, Mr N Friar, in the absence of the mother. The note records Mr N Friar indicating that he was “…upset [with] the home situation, stating that the [domestic violence] has had a significant effect on him & his siblings…”
I have no difficulty in finding, first that there was family violence as defined in the Act,[42] and secondly that there was a “course of violent conduct” by the husband in this case. I find that the wife’s contributions as the primary homemaker, the primary parent and her direct financial contributions as a wage earner were all made very significantly more arduous as a result of that family violence.
[42] Family Law Act 1975 (Cth), ss 4 and 4AB.
Just as that finding does not sound in these proceedings as damages or compensation, I consider I need to guard against my repugnance at the heinous conduct perpetrated by the husband (which I openly record in these reasons) sounding in a distortion of my assessment of contributions seen as a whole.
In his “statement” – unsworn and untested in cross-examination – the husband seeks to paint a picture of the wife as “…a very heavy gambler on poker machines and hotel (pub) machines” and says that “...the main reason for [the final] separation was brought about by [the wife] continually requesting money from me so she could play poker machines.” I reject that evidence, which in light of earlier separations linked to the husband’s repugnant violence toward the wife, might appear ironic in the extreme.
The husband goes on to contend that the wife “…would gamble her fortnightly wages then ask me as well as other family members for money until her next pay packet.” He says, with, again, no apparent irony or disingenuousness, that “[t]his caused great angst between us.” He makes no mention in his statement of any “angst” being caused by his violence, much less the physical or psychological injuries it caused.
The self-represented husband’s very limited cross-examination of the wife also addressed the issue of gambling. The wife conceded that she spent, at one point, about $500 per week or perhaps more on poker machines and “over a period of time” had spent about $20,000 and that in the main, the money was sourced from the parties’ joint account.[43] Later, during re-examination, the wife indicated that the $20,000 figure referred to in her cross-examination was based on “…the report I got back off [the husband].”[44]
[43] Transcript of proceedings, 3.7.12, pp 53-54.
[44] Transcript of proceedings, 3.7.12, p 59, lines 16-17.
The (implicit) suggestion by the husband is that some account should be taken of the wife’s gambling. There is no evidence of any amount that the “pool” of property has been diminished as a result of that gambling. The gambling produced a “win” of over $70,000 which was contributed to the marriage (including to the children) in differing ways.
To the extent that it is possible to ascertain precisely what relevance the wife’s gambling is said by the husband to have, I indicate for the sake of completeness that I decline to consider it a relevant factor in the assessment of contributions or, for example, to add back any amount in respect of it.
Assessment of Contributions
Cases sometimes speak of contributions by reference to “adjustments” being made for one type of contribution or another or, for example, speak of contributions of a particular type adding a specified percentage to an assessment based on the totality of contributions other than that type. In that respect, the Full Court said in Dickons & Dickons [2012] FamCAFC 154:
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) 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.
26.The necessarily imprecise “wide discretion” inherent in what is required by the section is made no more precise or coherent by attributing percentage figures to arbitrary time frames or categorisations of contributions within the relationship. Indeed, we consider that doing so is contrary to the holistic analysis required by the section and, in the usual course of events, should be avoided.
To similar effect, the Full Court held in Lovine & Connor and Anor (2012) FLC 93-515:
42.As part of the process of ultimately determining just and equitable orders under s 79 there is included a complex of discretionary assessments and judgments of many components of contribution, only some of which are capable of measurement in money terms and then often only in historical, rather than present, money terms. Any dictate to the effect that in the course of assessment each disparate component part or kind of contribution must be assigned a discrete and identifiable value or percentage is antithetical to the nature of the discretion involved.
Looking at all of the contributions of all types made by each of the parties across a 35 year relationship and an approximate eight year period between separation and trial sees each of the parties performing their roles and making contributions within them – each as a wage earner and homemaker with the husband’s contributions in the former role greater than the wife’s and the wife’s contributions in the latter role greater than the husband. The wife’s contributions as the primary homemaker and parent and, indeed, as a wage earner were made, as I have found, very significantly more arduous by reason of the course of serious family violence perpetrated upon her by the husband and the resultant physical and psychological effects upon her.
The direct contributions made by the husband (or on his behalf) are significant; they brought about the existence of the interests in 103, U property and 102. The latter is now represented by a sum that comprises a significant proportion of the total “property pool”. The property at 102 provided a home for the wife and her then young child from a previous relationship and, later, the parties’ children. The interest in the U property was received by way of inheritance. The wife made little in the way of direct contributions to the U property or 103. While it is not necessary to “tie” or “link” contributions to any particular property[45], it is relevant that the interests in the U property and 103 were effectively kept separate from 102[46] – the former geographically separate, used by the husband’s parents and part of transactions that saw the creation of the current tenant-in-common interests of the husband, Ms W Friar (and, in the case of the U property, another sister) and the latter as a home for Ms W Friar and her family.
[45] Dickons at [14]-[22].
[46]No submissions addressed whether the contributions assessment should be conducted globally or “asset by asset”. I consider that, despite differences in the derivation of interests and the use of property, the global approach is preferable – see Norbis v Norbis (1986) 161 CLR 513.
Taking all of the preceding matters into account, I assess contributions in the proportion 60 per cent to the husband and 40 per cent to the wife.
Section 79(4)(e) – the “s 75(2) Factors”
The husband’s “statement” is remarkably unhelpful in providing any “evidence” relevant to a consideration of s 79(4)(e). Such as it does provide is, in essence, denied by the wife and, of course, the husband has not been cross-examined on it. The last Financial Statement filed by the husband was in March 2008 and the wife in May 2008.
Both the husband and wife have, post-separation, suffered from health problems and ceased working. Both parties are in receipt of government allowances. The wife has had a number of small strokes and has suffered depression and shingles. The husband suffered a stroke in 2011. Both parties are currently 63 years of age. The children of the relationship are adults.
The wife resides in housing commission bedsit accommodation. She currently has full time care of her granddaughter who was 12 years old at the time of the hearing. The granddaughter is the daughter of Ms K Friar, the wife’s child of a previous relationship. Ms K Friar is suffering from a drug addiction and is consequently unable to adequately care for her child. There are indications that the granddaughter will require ongoing care; she has started to self-harm because of bullying at school. The wife expects to retain care of the child until she reaches the age of 18 (in about four years’ time).
The wife’s regular expenditure totals about $760 per fortnight. The husband is, it seems, living with his son and the son’s family, and apparently makes a contribution to the household expenses.
Both the husband and wife receive income by way of government allowance. The U property is, according to Ms W Friar’s evidence, generating rental income, from which she pays outgoings. Although the husband has a one-third interest in that property, there is no evidence as to whether he receives any of the rental income.
I have not taken account of the asserted indebtedness by the husband to Ms W Friar in ascertaining the property to be divided. I cannot entirely discount the prospect that there may be some future accounting for it, given the history of intra-familial transactions, and I consider I should take account of that prospect (s 75(2)(o)). That said, the vagaries surrounding that possibility against the history of no demand being made for any sum and other contingencies and the necessitude of life render it of little weight.
The dollar result of the mooted percentage division of property by reference to my contributions assessment, will provide each of the parties with a modest amount upon which to fashion their future lives. I do not see one party as being in a markedly better or worse situation than the other in that respect.
The Full Court in Robb & Robb (1995) FLC 92-555 held that the care and support of a child not of the marriage might, in relevant circumstances, be taken into account pursuant to s 75(2)(o) in favour of the non-parent. Here, the mother was the primary caregiver to the children. There is no evidence before me which suggests that the husband made any non-financial contributions to Ms K Friar. His wages were modest and contributed to the whole of the family which included Ms K Friar. She was tiny when the relationship started. She lived within the violence earlier found. I give this factor negligible weight.
Although the evidence does not permit of findings that the husband perpetrated violence directly against the children, the Act makes it abundantly clear that evidence that they were indirectly affected by that violence cannot be ignored. Hospital records indicate that the wife had made allusions to the husband “taking it out on the kids”. Similar allusions are made in the wife’s letter to the husband post-separation, in which she detailed the children’s close proximity to the regular acts of violence. The hospital records in relation to a conversation with Mr N Friar have already been referred to.
Assessment Pursuant to s 79(4)(e)
Again, the assessment of relevant s 75(2) factors is a holistic assessment based on the attribution of weight to the whole of the relevant factors. Balancing all of the matters which I consider relevant does not, in my judgment, call for any adjustment pursuant to s 79(4)(e) to be made to my contributions assessment.
What Orders Are Just and Equitable?
Expressed in dollar terms, the result sees the wife receiving $286,947 and the husband $430,420.
The mooted division pursuant to s 79 can be achieved by the wife retaining the husband’s half interest in the funds currently held in the trust account, minus a payment to the husband of about $8,000.[47] Of course, Ms W Friar must receive the remaining half of the trust account proceeds.
[47]Total of $717,367 x 60% = $430,420. Husband retains $375,000 in real property but is credited with $47,495 = $422,495. $430,420 - $422,495 = $7,925. Thus, the wife would need to pay the husband about $8,000.
A significant proportion of the legal and equitable interests in property susceptible to the mooted s 79 division is in the form of cash. Each of the husband and wife might be seen to have a need for cash. A result that sees one party retaining all or a substantial proportion of the cash causes pause for consideration as to whether such a result is just and equitable. Yet, if cash is to be divided between the husband and the wife, there will need to be sale or transfer of tenant-in-common interests in property. Issues of the value of those interests upon transfer or realisation intrude. In any event, those interests in real property derive from intra-familial transactions stretching back many years. They are interests shared with a stranger to the marriage. In addition, the wife is significantly in debt to her lawyers while the husband has no such obligations.
On balance, taking into account the matters just referred to and all of the findings earlier expressed, I consider it just and equitable that the husband retain his interests in 103 and the U property and the wife receive the whole of the husband’s half interest in the funds currently held in the trust account (minus approximately $8,000, which the husband should receive).
An order will be made requiring each of the husband and wife to do all things necessary to facilitate payment to Ms W Friar of the remaining 50 per cent share in the sale proceeds.
No evidence was led of any interest having accrued on the funds being held in the trust account. Nonetheless, orders should be made the effect of which is that the any interest earned on the money shall be distributed in the proportion of 50 per cent to Ms W Friar, and, of the remaining 50 per cent: 40 per cent to the wife and 60 per cent to the husband.
I will order accordingly.
Ms W Friar’s Application for Costs
On 13 April 2013 Ms W Friar filed an Application in a Case seeking as against the wife her costs “…of, and incidental to, the Applicant Wife’s application for relief against Ms [W Friar] filed 18 September 2007 as agreed or assessed.” No application by her seeks costs as against the husband.
The affidavit accompanying the application deposes to having “…been involved in these proceedings for over five years at significant cost” and to the proceedings against her as being “totally unsuccessful” as the circumstances justifying a departure from s 117(1) of the Act.
Ms W Friar is a third party, but the family interrelationships and the sharing of real property interests with the husband marks her as in a different position to a third party who is a stranger to the marriage.
No doubt she has incurred significant costs in defending the wife’s “trust claim”.
However, that claim, while unsuccessful, could not in my view be said to be wholly without merit. Indeed, some, at least, of the comments made by the wife’s counsel suggest that she (and perhaps the practitioners advising her) may have gained an impression of the apparent strength of her case from the fact of her successful appeal to the Full Court against orders of Fowler J summarily dismissing her s 78 claim. While, ultimately, they may have been wrong to do so, it nevertheless renders more understandable pursuit of the trust issue.
Further, Ms W Friar did not merely seek dismissal of the wife’s application; a significant portion of these reasons has been devoted to dealing with Ms W Friar’s claim that the husband ought indemnify her in respect of certain liabilities. Ms W Friar has been wholly unsuccessful in respect of that claim, which, given its potential impact on the property amenable to division and the nature of the husband’s participation in the proceedings, necessitated a response from the wife.
Further, while the wife’s parlous financial circumstances are not of themselves determinative of the failure of the application for costs,[48] I consider it a very powerful factor in the exercise of discretion here. The “costs advice” which I sought indicates that, tragically as in so many other cases which this court sees, the wife will, it seems, herself receive very little from her property settlement.
[48]Because “…if it were, a party would always be able to plead impecuniosity as a means of avoiding a costs order…” (see, Lenova & Lenova (Costs) [2011] FamCAFC 141).
The husband represented himself in these proceedings and incurred no legal costs. Ms W Friar’s defence of the trust claim also benefitted him as it preserved property in which he has an interest from the wife’s claim in trust.
In all the circumstances of this case, I am not persuaded that a costs order should be made as sought by Ms W Friar.
The Application in a Case filed by Ms W Friar on 19 April 2013 will be dismissed.
I certify that the preceding one hundred and seventy-one (171) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Murphy delivered on 26 August 2014.
Associate:
Date: 26 August 2014
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
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Property Law
Legal Concepts
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Costs
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Remedies
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Duty of Care
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Fiduciary Duty
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Constructive Trust
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