G and G
[2008] FCWA 28
•6 MARCH 2008
[2008] FCWA 28
| JURISDICTION | : | FAMILY COURT OF WESTERN AUSTRALIA |
| ACT | : | FAMILY LAW ACT 1975 |
| LOCATION | : [REGIONAL CENTRE] | ||
| CITATION |
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| CORAM |
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| HEARD |
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| DELIVERED |
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| FILE NO/S |
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| BETWEEN |
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Applicant Wife
AND
G
Respondent Husband
Catchwords:
FAMILY LAW - settlement of property - addbacks
Legislation:
Family Law Act 1975 - s 79
Category: Not Reportable
Representation:
Counsel:
| Applicant Wife | : | Mr Berry |
| Respondent Husband | : | Mr Manning |
[2008] FCWA 28
Solicitors:
| Applicant Wife | : | Haynes Robinson |
| Respondent Husband | : | Frichot & Frichot |
Case(s) referred to in judgment(s):
Cerini and Cerini [1998] FamCA 143
Chorn and Hopkins (2004) FLC 93-204
Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener)
(2003) FLC 93-143
Kowaliw and Kowaliw (1981) FLC 91-092
Marker and Marker [1998] FamCA 42
Omacini and Omacini (2005) FLC 93-218
[2008] FCWA 28
1 The issues to be decided are the parties’ respective applications for property
settlement, the wife’s application being filed on 7 September 2005, and the husband’s
response being filed on 8 May 2006.2 The wife is essentially proposing an equal division of the parties’ property, with
an adjustment of $20,000 in her favour for mortgage repayments made by the wife
towards the parties’ [regional centre] property.3 The husband claims to be entitled to between 52.5% to 55% of the asset pool,
based on equal contributions overall, but with a 2.5% to 5% adjustment in his favour for s 79(4)(e) factors, mainly due to his incapacity to work, compared to the wife’s asserted ability to earn an income [through her business].
4 The most contentious issue was the amount of any sums to be added back into the asset pool. The wife’s position is there should be add backs totalling $162,822, being $103,702 attributed to the wife, and $59,120 to the husband. The husband seeks that $367,514 be added back, being $267,995 attributed to the wife, and $99,519 to him.
5 At the commencement of trial, the wife had sought the sale of the
[country town property] and that she retain the [regional centre] property. In
conclusion, she proposed the sale of both properties.6 The matter was initially heard in [the regional centre] on 25-26 July 2007. It
was subsequently adjourned at the end of the second day, as [Mr E], the proprietor of [MSP], a company in which the parties have a substantial amount of money invested, was not available to give evidence. [Mr E] gave evidence in Perth on 3 September 2007. On 28 November 2007, [Mr E] was declared bankrupt so the proceedings were again listed for hearing before me on 7 January 2008, and then, finally, on 25 January 2008. The husband did not appear at either hearing. Both parties live in the [same region]. He has since instructed new solicitors.
7 I was informed by the parties’ present solicitors on 4 March 2008, that both
properties had been sold and settlement was due to be effected on 10 and 18 March 2008. The parties had agreed the proceeds of sale should not be distributed pending judgment and consideration of any rights of appeal, and I made consent orders effecting this agreement. I was not informed of the amount of the net sale proceeds, which are to be held in a joint interest bearing account in the name of the solicitors for the wife as trustee for the parties.
Background
8 The husband and wife were born in [Europe]. The husband is 65 years old, and the wife is 64 years of age. They both describe themselves as retired.
9 The husband and wife commenced a relationship in [Europe] around the beginning of 1981, and were married [in] January 1982.
10 The parties separated on 1 April 2003 and were subsequently divorced on 12
February 2007.
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11 There are no children of the marriage. The wife has one son from a previous
marriage, [Andrew]. She claims that shortly after the marriage the respondent made
[Andrew] leave the home.12 Almost a year after their marriage, in December 1982, the parties decided to
migrate to Australia. After arriving in Western Australia, the parties purchased a property in [the Perth suburbs], which has since been sold. The wife worked as a cleaner and the husband, after attending technical college to improve his English, worked as a motor mechanic. During this time, the parties bought and sold a number of other properties in the Perth area.
13 In 1990 they purchased a property [in a country town]. The property comprised
a small cottage which the parties rented [seasonally] under [a business name] . The parties later constructed a new residence on the property, and subsequently began living there in 1995. They continued to lease the cottage [seasonally], in addition to renting out a guest room of the newly constructed house. The husband worked for [a government agency] for several years. The wife was engaged in [various crafts] and made some money from selling craft goods. The parties did some grape picking.
14 The parties then decided to purchase an investment property at [an address in the
regional centre], in 2000. The property was purchased for $260,000, with that sum
being borrowed from BankWest. The property was leased to tenants until 2006.15 After separation, the wife remained living in the [country town] property, while
the husband frequently spent time in [Europe], having many separate trips, and spending lengthy periods of time there, not only staying with his friend, [Ms J], in [Europe] but also visiting his elderly mother.
16 The [regional town] property fell vacant in July 2006.
17 In October 2006, the wife moved to the [regional town] property, and the
husband began living at the [country town] property, with his friend, [Ms J], a school friend whom he had met at a school reunion, in March 2003, in [Europe]. [Ms J] has [serious ailment].
18 The wife is involved in a friendship with [Mr S], a [farmer], but at the time of trial, was not living with him on a full-time basis.
19 An application seeking consent orders was initially signed by both parties and
filed on 31 October 2005. A minute had been signed by both parties on 21 October 2005. The parties then agreed that they would sell the [country town] property, and distribute the net proceeds equally between the parties. The wife was to pay the husband the sum of $50,000 for his interest in the [regional centre] property.
20 The husband later sought a stay of those proceedings as he believed the wife had
not made full and frank disclosure of her financial position, of which he says he was unaware because of his limited English. The wife said the husband had to have a good grasp of English for his employment. The orders were not made, and property settlement proceedings continued in the usual way.
[2008] FCWA 28
21 I did not regard either party as very credible witnesses, the husband because his
attitude was quite aggressive and unreasonably argumentative to the extent it affected my view of the likely veracity of his complaints about the wife’s position on the issues, and the wife because, when challenged, she admitted mistakes in her evidence regarding her [European] bank accounts, and she did lie to Centrelink about monies given to her son.
22 There was significant documentary evidence on which I substantially relied, and I am indebted to counsel for their efforts in difficult circumstances.
Property Settlement
23 Pursuant to s 79 of the Family Law Act 1975, in property settlement proceedings between the parties to a marriage, the Court may make orders as it considers appropriate altering the interests of the parties in their property. The Court shall not make an order unless it is satisfied, in all circumstances, it is just equitable to do so.
24 In Hickey and Hickey and Attorney-General for the Commonwealth of Australia (Intervener) (2003) FLC 93-143:-
“The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s. 79. That approach involves four inter-related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss. 79(4)(a), (b) and (c) and determine the contributions based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss. 79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s, 79(4)(e), the matters referred to in s. 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case…”
Assets and Liabilities
25 The current assets of the parties to be included in the asset pool were largely
agreed. There was a dispute as to the value of the wife’s household contents, and the
amount of money held by the wife in her [European] bank accounts.26 The parties agreed that the only liability to be taken into account in consideration
of the asset pool is the mortgage over the property [in the regional centre]. The husband’s evidence was he owed his mother some money for airfares, and a credit card debt, but this was not included as a proposed liability in assessing the value of the asset pool.
[2008] FCWA 28
27 The parties also eventually agreed that their two properties, one being in
[the regional centre] and the other in [country town], should be sold. The wife had previously sought to retain the [regional centre] property. I have not been informed of the amount of the sale proceeds so have included the values and the mortgage liability at the agreed position at trial.
28 As previously mentioned, the main issue in dispute between the parties is which,
and to what extent, assets and funds disposed of by the parties since separation should be added back into the asset pool. The value of the add-backs is substantial and I will deal with each of them separately later in my judgment.
29 It was not in dispute that in relation to the various sums, these should be
considered as add-backs, or notional sums to be included in the pool, as compared to
taken into account, for example, in assessing the parties’ respective contributions.
[MSP] Investment
30 Between November 1999 and October 2000, the husband and wife invested a
total of $450,000 in a company called (“[MSP]”). The investments made by the parties were unsecured but returned an interest rate of 19% per annum on the invested amount.
31 Prior to separation, on 25 January 2003, the parties wrote to [Mr E], the
proprietor of [MSP] requesting that, as of 1 April 2003, their joint investment be divided equally between them and for the monthly interest payments for each investment to be paid into separate accounts. The investment was subsequently divided as to $225,000 to each party.
32 Although the husband acknowledges that each party received $225,000, he has disputed the extent of the wife’s investment with the company.
33 The wife claimed she had disclosed her total investments with [MSP] , however,
she has a slightly larger investment than the husband because, on 16 January 2001, the wife says she made an investment of $15,000. The investment comprised of $10,000 commission she received for referring another party to invest in [MSP] , $3,800 of compound interest on the commission fee and $1,200 of her own money.
34 For the husband, it was submitted that the $3,800 was not interest but rather
another referral fee she received from [MSP] . The husband’s position was supported by the fact that the $3,800 was originally detailed as a referral fee in a letter from [Mr E] to the wife which confirmed the $15,000 investment. However, [Mr E] subsequently sent another letter a couple of days later correcting this and stating that the amount was actually compound interest, not another referral fee. He also gave evidence of this being the true position at trial.
35 The husband is doubtful that the wife is being entirely honest about whether she
has been paid further referral fees than just the one she has claimed. The husband alleges that the wife had a close relationship with [MSP] , in particular [Mr E]. Both the wife and [Mr E] deny that they have any connection outside the wife’s investment
[2008] FCWA 28
with the company. The wife says that she has not received any further referral fees
and is being full and frank as to her current total investment in [MSP].36 There have been further issues with the husband recovering his original
investment from [MSP]. In February 2006, the husband requested the cancellation of his investments with [MSP] and sought to be repaid the principal sum of his investments. He has had difficulty in receiving this money and to date has received $104,900 of the principal sum, of which $50,000 was paid into four BankWest term deposits in October 2006. At trial, the outstanding balance owed to the husband by [MSP] is $120,100. The husband has continued to receive the 19% interest payable on the outstanding balance of the investment.
37 The wife had been repaid $100,000 of her original investment, which she
transferred to her son, on 29 October 2004, because she says he was having financially difficulties. It was agreed, this would be added back to the asset pool. Besides this amount the wife has not sought to obtain any further amount of her original investment as, according to [Mr E], her share of the investment did not mature until 2010. The wife has continued to receive the interest payable on the remaining amount of her loan.
38 At the main trial in [the Regional centre], there was an issue as to the
prospective recoverability by the parties of their investments from [MSP]. The husband said there was doubt as to whether [Mr E] would repay him the monies he is owed. He seemed to suggest that the wife would not have the same difficulty in recovering her investment because of the close relationship he alleges she has with [Mr E].
39 The husband also raised the issue of [Mr E]’s potential insolvency and the ability
for a liquidator to “claw back” the money he has already distributed to the husband, as an unfair preference, to enable the liquidator to distribute the money equally amongst other creditors.
40 In early September, [Mr E] gave evidence that he did not have any other clients
that have any money owed to them. He said that the company has had cash flow problems due to external difficulties caused by delays in receiving payments. He gave evidence that he intended to pay the husband instalments of $8,000 per month by way of repayment of the principal of the investment, in addition to continuing to pay interest on the outstanding balance of the investment. I do not know if this was done as the husband has not adduced evidence in this regard.
41 The wife’s evidence is she received the interest payments due to her until
November 2007.
42 [Mr E] gave evidence he had every confidence that he would be able to repay the
husband the amount outstanding on his investment, although he admitted that he has minimal assets and estimated the assets of [MSP] to be less than $5,000. He said that he has no other unpaid clients besides the husband. He also said that he was taking no further investments because of the company’s current financial problems.
[2008] FCWA 28
43 The husband’s counsel, in closing, said that [Mr E] was not a credible witness
because he had not honoured his undertaking to pay certain instalments to the husband
and is technically bankrupt because he could not pay his debts when they fall due.44 Whether or not [Mr E] was being frank when he gave his evidence or was just
over optimistic is academic, as he was declared bankrupt on 28 November 2007. As at
4 December 2007, he had an estimated deficiency of $2,140,992.45 The position of the wife’s counsel on reopening was there was really no
alternative, other than to not include any funds invested with [MSP] as an asset of
either party.46 The husband made no submissions, but, clearly, it would be unjust if any of his
funds were “clawed back” for them to be included as an asset in the husband’s hands,
and if they are, there will have to be subsequent adjustments in the husband’s favour.
Household furniture
47 The wife has valued her household contents at $3,000. This includes furniture
from both properties owned by the parties, which is really three homes as the property [in the country town] comprises a cottage and separate house. The husband does not consider the $3,000 to be a fair reflection of the value. He argued that the wife has had the benefit of furniture for a long period of time and it would cost him around $30,000 to replace his share. Neither party had obtained a valuation of the household contents.
48 The wife accepted during the trial that she has had the benefit of the furniture
from all the properties. The husband provided, as an annexure to his affidavit filed on 4 July 2007, a list of the items taken by the wife from the property [in the country town]. The wife gave evidence that some of the pieces were not in working condition and that she did not take all items that the husband alleges. In a letter, dated 29 January 2007, the wife’s solicitors informed the husband’s solicitors that the wife had sold some of the furniture at a garage sale in September 2006, and she made $170. The husband does not accept that the wife only received this amount based on the quantity of furniture.
49 During the trial, the wife agreed that the husband could have certain items of
furniture. In his closing submissions, the husband’s counsel said that the husband was not interested in having furniture retained by the wife, but was seeking a monetary compensation. The amount the husband sought was not stated, nor did the husband place a figure on what he considered to be the correct valuation of the wife’s household contents. Rather, the husband’s counsel submitted that he relied on the principle that where one party has control of an asset, and could have obtained a valuation, and has not done so, an inference favourable to the other party should be drawn.
50 Since the furniture was from the parties’ three properties, the [regional centre]
property, and the house and cottage on the [country town] property, and there were some substantial items, the value of the furniture would surely be expected to exceed
[2008] FCWA 28
an “average” single household. The wife does have some [craft] equipment which she
says the husband overvalued, but it does have some resale value.51 As any independent evidence as to the present value of the household contents is
unavailable and both parties bear responsibility for this, having considered the nature and extent of the list of items, I have decided to use a broad brush approach, and include the furniture at $5,000.
52 The wife gave evidence at the trial that many of the household items were not in
working condition, and she offered a number of the duplicated items to the husband. If the husband has taken up the offer, then I have referred subsequently to a possible adjustment.
Wife’s [European] bank accounts
53 The husband claimed that the wife had not made proper disclosure of the monies
currently held in her [European] bank accounts. The husband says there is at least $7,500 held in two of her accounts, with the details of a third account not known. He argued that as the amount cannot be determined due to non-disclosure by the wife, an inference favourable to the husband should be made.
54 The wife said that the figures provided by the husband were incorrect, as they
were based on her Form 13 financial statement filed on 11 July 2007, which she says contained a mistake, and which she attempted to correct during her evidence in chief. At item 38 on her financial statement, the wife stated she had $4,500 in a term deposit in [Europe] and an estimated $3,000 in a Post account in [Europe], being $7,500 in total. The wife says that this was a mistake because on 30 May 2007, prior to completing her financial statement, she had transferred the money from the Post account to the term deposit account. A bank statement of the term deposit account handed up during trial evidences a transaction, on 30 May 2007, of €3,121.46 from account No xxxxxxxx, being the Post account.
55 Effectively, it appears that the wife amalgamated the two accounts. On that
same statement, as at 11 July 2007, the balance of the term deposit account was €3,360.95. This equates to approximately $5,600. In the updated schedule of assets and liabilities provided by the wife to the court, the current value of the wife’s [European] accounts is listed at $5,347.
56 On the evidence, with the further explanation, I accept that this amount was the current value of the wife’s funds in [European] accounts.
57 In relation to the third account, the husband claims that the wife has another [European] account that she has failed to disclose, being account number 1166388. This account relates to the circumstances in which the wife transferred €15,649.38 to her son, which by the husband’s calculations equates to approximately $27,000. I am not satisfied that this third account is held by the wife, for the reasons referred to subsequently in relation to the husband’s claim to add back the $27,000 transferred to the wife’s son.
[2008] FCWA 28
Add-backs
58 At the conclusion of the trial the husband and wife agreed the following items should be added back into the pool:
• the wife’s gift to her son, [Andrew], of $100,000 from her [MSP] investment, • the husband’s paid legal fees, • the receipt by the wife of the husband’s income tax refund being $3,702, • the sale proceeds of various vehicles and a boat received by the husband. 59 There was an agreement that the funds the husband has already received from
[MSP] should be added-back, however the amount proposed varied slightly between
the parties.60 The husband also sought to add back the following amounts disposed of, or expended, by the wife:
• her paid legal fees; • an amount of $10,000 from the wife’s superannuation which was expended post separation; • an amount of $27,000 the husband says the wife transferred to her son from a [European] bank account; • two amounts totalling $30,000 that the husband says were unauthorised gifts to the wife’s son; • amounts totalling $65,498 spent by the wife from the parties’ joint account post separation; and • various amounts totalling $16,805 of rental income allegedly received from the parties’ properties. 61 The wife disputes that these amounts should be added back.
62 I will deal with each add-back separately.
63 The parties have agreed to use the term “add-backs” in relation to the matters in
dispute. In doing this, they were really claiming that certain funds already received by each party, but not necessarily now retained by them, should appropriately be included as an asset in determining the division of property between them.
64 The Full Court has considered the position in relation to add-backs in a number
of cases.
65 The Full Court, in Marker and Marker [1998] FamCA 42, acknowledged the caution that should be taken in adding back assets expended post-separation:
“It is well settled that save in exceptional circumstances a trial Judge should deal with the property as at the date of the hearing and make adjustments taking into account the various matters set out under s. 79 (Wells v Wells (1977) FLC 90-285; Wardman v Hudson (1978) FLC 90-
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466; In the Marriage of Geyl 7 Fam LR 219) However, the particular justice of the case may make it appropriate to notionally add back assets which have been demonstrated to have been dissipated either during the marriage or post-separation. Normally it is necessary to demonstrate an appropriate basis for doing so, for example by wastage such as gambling or extravagant living. (Kowaliw v Kowaliw (1981) FLC 91-092; Fane- Thompson v Fane-Thompson (1981) FLC 91-053; Winnel v Winnel (1984) FLC 91-580; Townsend v Townsend (1995) FLC 92-569; Doherty v Doherty (1996) FLC 92-652)……
There seems to be no appropriate basis for notionally adding back moneys that existed at separation but which have been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law requires that parties of into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to continue to provide for their own support. Whether any expenditure so incurred is reasonable or extravagant is a matter that can be determined by the trial Judge.”
66 The Full Court, in Cerini and Cerini [1998] FamCA 143, similarly said:
“In a case involving the magnitude of the assets of this case, in our view it is unreasonable to conduct a microscopic examination of each of the parties’ items of post-separation expenditure with a view to determining whether or not it is appropriate that they be bought into account in dividing up the asset pool between them. The cases which deal with notional add- backs are generally examples of circumstances in which it would be clearly unjust and inequitable not to take those matters into account. (see Kowaliw (1981) 7 Fam LR 13; [1981] FLC 91-092, esp at FLC 76,645; Townsend (1994) 18 Fam LR 505; [1995] FLC 92-569; Farnell, (1995) 20 Fam LR 513 (expenditure on legal costs notionally added back because of s 117).
Whilst not seeking to place a fetter upon the discretion of a trial judge in individual cases, it seems to use that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives.”
67 In Omacini and Omacini (2005) FLC 93-218, the Full Court identified three clear categories of cases where it was appropriate to notionally add back to the pool, assets which no longer exist – where the parties have expended money on legal fees, where there has been a premature distribution of matrimonial assets, or in the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092, that is, where:
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(a) where one of the parties has embarked upon a course designed to reduce or minimise the effective value or worth of matrimonial assets, or (b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.”
68 Despite the principles put forward in these cases, the Court retains the discretion whether or not to notionally add back assets into the parties’ asset pool.
Repayment of capital received by husband from [MSP]
69 The husband and wife agreed that the repayment of capital the husband has
received from [MSP] should be added back into the asset pool. There was a slight discrepancy on their schedule of assets and liabilities as to how much this should be, and how it should be calculated.
70 The husband gave evidence that he has received a total of $104,900 in
repayments from [MSP], of which $50,000 was transferred into four BankWest term deposits. The wife accepts this evidence of the husband. In relation to the balance, and the interest he has continued to receive, the husband said in his affidavit filed on 20 August 2007 that some of funds were used in payment of legal fees and disbursements.
71 In the husband’s updated schedule of assets and liabilities, the add-back of the
capital return received by the husband from [MSP] is $52,947, being $104,900 minus the current total of the BankWest term deposits of $51,853. The husband has also included in his schedule a separate add-back of $42,352 for his legal fees.
72 The wife has structured the inclusion of these add-backs slightly differently.
The wife originally stated that the husband had paid legal fees of $41,822. However, she now accepts the husband’s legal fees to be $42,352. On the wife’s updated schedule of assets and liabilities, the husband’s paid legal fees are included as a part of the amount the husband has received from [MSP] as it was the husband’s evidence that he used the [MSP] money to pay legal fees. Therefore on the wife’s updated schedule of assets and liabilities, the balance of the funds the husband has received from [MSP] is listed at $13,078, which when added to $41,822 for legal fees (which was the original figure stated by the wife but she has now been accepted it to be $42,352) and $50,000 for the monies placed in the BankWest term deposits equates to $104,900.
73 I accept the calculation used by the wife is correct. If the legal fees were not
included as a part of the amount the husband received from [MSP], then the amount would effectively be double counted as the husband used the [MSP] money to pay legal fees. However, the figure of $13,078 included by the wife needs to be slightly altered due to the variation in the amount of the husband’s paid legal fees now accepted by the wife. Further the husband deducted from the total amount received, being $104,900, the amount of $51,853 which is the current balance of the BankWest term deposits. The amount deducted should not be the current balance of the term
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deposit, but rather only $50,000, the amount the husband says he received from [MSP]
and transferred to the term deposits.74 Therefore the amount to be included as the balance of the capital return received
by the husband from [MSP] is $12,548, being $104,900 minus $50,000 in the
BankWest term deposits and $42,352 the husband has paid in legal fees.
Legal fees
75 It was accepted the husband’s paid legal fees should be added back to the asset
pool. The husband argues that some of the legal fees paid by the wife should also be
added back.76 After considering a number of authorities, the Full Court, in Chorn and Hopkins (2004) FLC 93-204, said in relation to adding back legal fees:
“In summary, we consider that the above mentioned decisions of the Full Court establish that, while the treatment of funds used to pay legal costs remains ultimately a matter for the discretion of the trial Judge, in determining how to exercise that discretion, regard should be had to the source of the funds.
If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions), then such funds should be added back as a notional asset of the party, who has had the benefit of them.
If the funds used to pay legal fees have been generated by a party post- separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be added back as a notional asset; not would any borrowing undertaken by a party post-separation to pay legal fees be taken into account as a liability in the calculation of the net property of the parties. Funds generated from assets or business to which the other party has made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.”
77 I do not consider it appropriate to add back the wife’s legal fees in this case.
The wife provided evidence that she received the money to pay for her legal fees from the money she transferred to her son. Since transferring the $100,000 to her son in 2004 she has received numerous amounts back from her son to pay for legal fees. The wife’s counsel submitted that to include the legal fees paid by the wife would in effect be “double counting” as the $100,000 has been included as an agreed add-back.
78 I agree with this submission. To include the wife’s legal fees would be to include monies already accounted for by the inclusion of the $100,000 gift to her son.
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Superannuation
79 On 28 August 2006 the wife transferred $10,000 of her superannuation
entitlement into her personal bank account. She says she needed this money to pay for living expenses and therefore it should not be added back. The husband says the whole amount should be added back into the asset pool.
80 Of the $10,000, the wife’s position was that $6,000 was paid on 22 September
2006 towards a lump sum mortgage repayment of the [country] property. She says the parties’ were behind on their repayments as the husband had stopped contributing his share. The payment is shown on her bank statement. The wife says that a further amount of between $1,000 and $2,000 was used to make a rates payment. It can be seen on the wife’s bank statement that around the same time, on 12 September 2006 a payment was made to the [regional centre authorities] of $1,184.88.
81 The wife’s counsel, in his closing submissions, submitted that, if any amount at
all was to be added back, it should be $3,000. It appears that this amount is unaccounted for. I accept that the wife used approximately $7,000 of her superannuation entitlement as a direct financial contribution to the maintenance of the property [in the regional centre], but that the remaining balance of $3,000 should be added back into the asset pool.
Bank account transferred by wife to son
82 The husband says in his affidavit filed 6 April 2006, that the wife has an undisclosed account with [a certain European bank], being account number xxxx1. The husband annexed to his affidavit a facsimile from that Bank which indicates that there is an account in the wife’s name, being account number xxxx1 with a balance as at 23 August 2005 of €15,649.38 (which he says is equivalent to $27,000). The husband also annexed a letter to his affidavit dated 9 August 2005 from the wife to the Bank requesting that the funds in that account be transferred to account number xxxx8.
83 For the husband it was submitted that the money in account xxxx1, being
approximately $27,000, should either be included as an asset or an add-back, and also that account number xxxx8 is another undisclosed account the wife has in [Europe] which could potentially have further undisclosed funds.
84 In relation to account number xxxxx1, in her responding affidavit filed on 29 May 2006 the wife does not deny the existence of the account, but says that the account was opened for an elderly aunt in the wife’s name and that the funds have never been available to her. She says that she was instructed by her aunt to transfer the residual funds to her mother after her aunt’s death. According to the wife, her aunt died in April 2005 and a few months later her mother received the account book for the account. As per the instructions, she advised the bank to transfer the money to her son so that he could provide the money to her mother. She says her mother is elderly and frail and required her son’s assistance to access the money. The wife attests that she never had access to the money nor was she in possession of the savings book associated with the account.
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85 In relation to account number xxxx8, the wife says that she originally intended
to open an account with that account number in [Europe] but she decided against this. She says that she did not return the form to the Bank and it is still in her possession. The form was not disclosed by the wife.
86 It does not appear that the wife has used the funds in account number xxxx8, or
those in account xxxx1. Whether or not the wife did actually intend to set up the account number xxxx8, there is no further evidence to suggest that she ever operated this account. Further, although it is clear is that the wife transferred the €15,649.38 in account xxxx1 to her son, and she admits this, there is no further evidence to suggest that she has utilised these funds prior to or after transferring them to her son.
87 Although the wife did not provide any evidence that there was an agreement or
arrangement between herself and her aunt in relation to the funds, I am prepared to accept that the account was set up for the reasons she has given. There is no evidence to that the wife has had access to this account or the monies previously. It appears that there is only two bank statements relating to this account and the statements are in [Europe], without a translation being provided, so it is difficult to ascertain the exact information being conveyed.
Gifts by wife to son
88 The wife acknowledges that, on about 1 November 2004, she gave her son,
[Andrew] $100,000 of the money she received from [MSP] . This amount has been added back into the asset pool. The husband says that the wife actually gave a total of $130,000 to her son. He says that there were three separate transactions of $10,000, $20,000 and $100,000. The husband annexed to his affidavit a letter which was addressed to the wife from Centrelink dated 5 September 2006 detailing two cash gifts made by the wife, $20,000 on 1 January 2001 and $10,000 on 1 January 2003. The wife says that this was a “mistake” which she corrected. Clearly, the mistake was in the hope of obtaining the financial advantage of a pension, but no benefit was received apparently because of the parties’ asset position. This incident obviously affected my view of the wife’s credibility.
89 In a signed statement to Centrelink dated 19 March 2007 the wife advises Centrelink that in early 2005 she gave to her son $100,000 instead of $20,000 in 2001 and $10,000 in 2003 as she had previously stated. There is no evidence beside the letter from Centrelink produced to the Court that the wife transferred a further $30,000 to her son.
90 I am not prepared to add-back a further $30,000 as sought by the husband, as I accept the wife has given an adequate explanation of what actually occurred.
Monies spent by wife since separation from joint assets and rental income
91 The husband says that since separation the wife has spent amounts totalling
$65,498 from the parties’ joint BankWest account. The husband seeks that this amount be added back into the asset pool. The funds allegedly expended by the wife can be broken down into three separate amounts, $47,386, $8,003 and $10,109.
[2008] FCWA 28
92 The husband alleges that an amount of $47,386 was taken by the wife from the
parties’ joint account and paid to her personal Westpac credit card. He also says the wife transferred the following amounts, totalling $8,003, from the joint account for her own use and benefit:
Date Amount 1 May 2003 $3,000 14 May 2003 $1,000 11 April 2005 $2,850 12 May 2005 $993 19 May 2005 $160 $8,003
93 The husband said that the wife also drew cheques on the joint account totalling
$10,109 without his authorisation, which he said appears to have been used by the
wife in her business or in payment of personal expenses.94 The wife denies these monies were used for her personal expenses but says that
she used the money to pay bills and other joint expenses. She later conceded during
cross-examination that up to 20% of the money was used for her personal expenses.95 It appears from the parties’ evidence, that the joint account was created so that
the rent from the property [in the regional centre] could be paid into it and the husband and wife could equally share the money. The account was also used to pay joint expenses such as the parties’ income tax assessments and the parties’ mortgage over the [regional centre] property. The account was closed by the wife in February 2006, and until that time the rents went into the account.
96 The husband said that the wife has withdrawn money from the account since
separation without his knowledge, and that the explanations provided by the wife as to the use of the money was either inadequate or unable to be further investigated due to the wife’s inadequate disclosure of her financial records.
97 The wife said she used the monies from the joint account to run the properties
and for living expenses as the husband spent a large amount of time overseas since separation. There was some unfinished work on the property [in the country town]. The wife said the initial arrangement between the parties, was that the wife would remain at the [country town] property and continue to meet all expenses relating to the [country town] and [regional centre] properties. She said the mortgage over the property [in the regional centre] was to be met equally by both parties.
98 She states the husband stopped contributing his half of the mortgage repayments
in February 2006. The only income going into the account was the rental income from the [regional centre] property, being $1,000 per month. She closed the joint account in February 2006 because the tenant of the [the regional centre] property was instructed to pay half the rent into the parties’ separate bank accounts. The husband stopped contributing his half of the mortgage and there was no money in the account. She then
[2008] FCWA 28
made a lump sum payment of $6,000 from her superannuation towards the mortgage
and continued to pay $1,000 per month.99 The husband said the wife received $1,000 in February 2006.
100 The wife says that she also used the money in the joint account to pay the
husband’s vehicle registration, tax instalments and a speeding infringement. Further, she says there were a number of jobs that needed to be completed on the properties that the husband used to do that she was not capable of carrying out. Therefore she had to employ contractors to complete the work. She said also paid for counselling from the joint account because she became very depressed after the separation.
101 It is almost impossible to account for all the funds expended by the wife. In
relation to the monies transferred to the wife’s credit card, it is accepted that some of the transactions are personal, for example, her travel expenses. The wife also sometimes put “joint expenses” on the Westpac Card, and then transferred money from the joint account, to obtain credit for frequent flyer points. However, there are also a large number of joint expenses paid by the wife and general expenses which would clearly account for payments towards general living expenses and maintenance of the parties’ properties.
102 The husband was overseas for a significant amount of time from March 2003 to
trial. Although the specific times were unclear, he did indicate that he was in [Europe] around September or November 2006, but, at the trial in July 2007, said that he had not been overseas since February 2007. Since separation, the husband has made little contribution towards the parties’ joint expenses and the maintenance of their properties, other than through his share of the rentals received. Since February 2006, it appears he has only made one payment of $4,060 towards the mortgage repayments in October of that same year.
103 Although the monies expended from the joint account are a substantial amount,
the parties effectively ran three properties which did require maintenance and incurred expense. The wife received little assistance from the husband since separation to maintain these properties, or with meeting the parties’ joint liabilities. The parties had been separated for 3½ years before the husband recommenced long term occupation of the property [in the country town]. The wife conceded that if any amount should be added back, it should be in the vicinity of 20% of the funds expended, which comes to about $13,000.
104 The husband asserts that rental income received post-separation from the parties’
[regional centre] and [country town] properties allegedly retained by the wife should
be added back into the asset pool.105 At the time of separation, the [country] property was leased to a [Mrs S] for
$1,000 per month - it had previously been rented to [Mr E] for a slightly higher amount. The rent was paid into the parties’ joint BankWest account until it was closed by the wife in February 2006. The tenant was subsequently instructed to pay each party their share into their separate bank accounts.
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106 The husband says that from June to October 2006 the wife retained the total
amount of the rent, being $5,000. He concedes he received his share of the rent for the first three months after the joint account was closed, being March to May 2006. The husband says that the wife also received the bond of $1,000. In his updated schedule of assets and liabilities the husband seeks to add back to the wife’s assets the $5,000 in rent he alleges the wife received from the [country] property.
107 The wife denies she received the husband’s share of the rent. She says that since
February 2006, when the joint account was closed, she only received $500 from the tenant of the [regional centre] property, being her share of the rent. She says the tenant then moved out of the property in July. The husband acknowledges in his affidavit filed on 4 July 2007, that he was unaware of when the tenancy at the [regional centre] property ended. From the wife’s bank accounts put into evidence it can be seen that she received $500 from [Mrs S] from March to July 2006. This is consistent with the wife’s evidence that she only received her share of the rent and that the tenancy of the [regional centre] property ended in July 2006.
108 For the husband, it was submitted that, from April 2003, the wife received at
least $11,805 of rental income from the [rental cottage] on their property [in the country town]. He says that since separation the wife did not share this amount with him as they had agreed to do. The wife says that she stopped letting out the rooms in the [country] property in 2004/2005. It appears that any rental income received from the [rental cottage] went into the parties’ joint account. The wife says that she managed these funds and shared them with the husband 60% to her and 40% to him as agreed.
109 The husband provided a schedule to the Court of monies allegedly received by
the wife from the [rental cottage]. The schedule does not provide any supporting documentation and is largely undated. The wife’s counsel stated that the evidence is unsatisfactory and caution must be taken when taking into account a schedule that states amounts allegedly received by the wife with no reference to exact dates.
110 Further, the husband acknowledges receipt of his share of the rental income from
both the [regional centre] and [country town] properties in his tax returns for the years ending 30 June 2003 and 30 June 2004. He also acknowledges receipt of his share in [regional centre] property in his tax return for the year ending 30 June 2005. The husband says that although receipt of the rental income from both properties is indicated on his tax return, he did not actually receive the money, but these were offset by expenses anyway, which explains the position.
111 The wife, on her part, sought repayment to her of the sum of $20,000 she said she had paid once the husband largely ceased to pay mortgage instalments.
112 I do not think it is appropriate to add back the income received from the [country town] property on the basis it was probably offset by expenses.
113 Having regard to the fairly complex, and extensive evidence overall, I have
concluded that, since the wife has conceded up to $13,000 of the sums spent by her were personal expenditure, and this could well be an under-estimate, and the wife should receive some recompense for meeting the mortgage payments, despite the fact
[2008] FCWA 28
that she had occupation of the [regional centre] property, the husband having occupation of the unencumbered [country town] property, that it would be fair to make no allowance to the wife for the mortgage payments made, being balanced against the at least, $13,000 the wife “owes” the husband for the funds expended by her. There should be no additional add-backs for this issue.
114 I have concluded the assets and liabilities of the parties should be regarded as
being as follows:
| Asset | Husband | Wife |
| [Property at the address in the country town] | 462,500 | 462,500 |
| [Property at the address in the regional centre] | 230,000 | 230,000 |
| [MSP] Investment | NK | NK |
| BankWest Account | 1,982 | ||
| NAB Account | 748 | ||
| [European] Bank Accounts | 5,347 | ||
| BankWest Account | 9,156 | ||
| BankWest Term Deposits | 51,853 | ||
| CBA Account | 23,839 | ||
| Superannuation |
| ||
| [Motor vehicle] | 10,000 | ||
| [Motor vehicle] | 1,200 |
| Household contents | Nominal | (E)5,000 |
| Ride-on Mower | 200 |
| Tools of Trade | 200 |
| Total Assets | 800,110 | 716,577 |
| Other add-backs | ||
| Superannuation | 3,000 100,000 | |
| Gift to [Andrew] |
| Husband’s Income Tax Refund | 3,702 | ||
| Portion of monies spent after separation (20%) | 13,099 | ||
| Legal fees paid | 42,352 | ||
| Sale proceeds of [motor vehicles] | 2,920 | ||
| Sale proceeds of caravan and boat | 1,300 | ||
| Balance of refund of [MSP] | 12,548 | ||
| Sub total |
|
| Total: | 859,230 | 836,378 |
| Liabilities | ||
| Mortgage [regional centre property] | 77,483 | 77,483 |
| Net Assets | 781,747 | 758,895 |
115 The total net assets are $1,540,642.
116 This was, of course, a “snapshot” of the position at trial, and it is appreciated the position has changed since.
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Contributions – Section 79(4)(a), (b) and (c) of the Family Law Act 1975
117 In considering what order (if any) should be made under this section in
proceedings with respect to any property of the parties to a marriage or either of them,
the court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; (b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; (c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent;
118 The Court must also take into account, pursuant to subsection (d), (f) and (g), the
effect of any proposed order upon the earning capacity of either party to the marriage, any other order make under the Act affecting the parties to the marriage or a child of the marriage, any child support that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
119 The parties have agreed that their contributions should be regarded as being
equal. Neither party had a great deal of assets when they began living together. When they arrived in Australia the parties pooled their savings together. The wife says that they initially each had approximately $20,000 in savings and she had a vehicle and furniture. Both had some personal effects. The husband says they both had minimal assets. The husband’s evidence was that they had savings of approximately $81,000 when they came to Australia.
120 After migrating to Australia, both parties worked hard during their relationship to accumulate the assets they now have.
121 The wife says that she undertook the majority of the household duties and that
the husband did not generally assist. The husband says that he significantly contributed to the maintenance of the parties’ properties and was also substantially involved in building and renovating the properties.
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122 The parties did not have any children together. The wife has a son from a
previous relationship who seems to have only lived with the parties for a short period
of time in [Europe]. The wife says that she undertook all care for the child.123 I accept it is appropriate for the parties’ contributions to be regarded as being
equal.
Section 79(4)(e) and Section 75(2) factors
124 Pursuant to s 79(4)(e) of the Family Law Act 1975, in making an order under s 79 of the Family Law Act, I must take into account the matters referred to in s 75(2) of the Act so far as they are relevant, and adjust any distribution based on contribution to ensure that the division of property between the parties is just and equitable. The wife proposed there should be no adjustment and the husband sought 2.5 to 5% in his favour on the basis of the wife’s greater earning capacity and his obligations towards [Ms J] and his mother.
125 The husband and wife are 65 and 64 years of age respectively and are retired.
The wife says the parties are both in good health. The husband disagrees and says that the wife’s health is good but that his is not. He says that he suffered a heart attack around September 2006, he has a skin disease that prevents him from being able to be exposed to the sun, he has widespread degenerative disc disease in his cervical spine with osteoarthritis, left sided back pain radiating to the arm which is getting worse, a high level of anxiety and hearing loss.
126 The husband said that because of his health problems he has no earning capacity.
He argues that the wife does have the capacity to continue to earn an income. He says that she currently earns an income and will continue to do so from producing craft items, through her [various craft activities] and selling them under [her business name]. He alleges that the wife also acts an agent for a company called [A] selling [craft equipment]. She has done this, to some degree, in the past.
127 The husband introduced into evidence several handwritten invoices for
[her business name] dated between 10 March 2005 and 4 October 2006 totalling $1,876. The husband says that while the parties were still together they purchased a large amount of equipment for the wife to conduct her business, [under her business name]. The husband seeks an adjustment in his favour due to the wife’s capacity to earn an income and his incapacity to do so.
128 The wife denies that [her business name] is a business and says it is simply a
hobby. She says that it is not classified as a business for tax purposes. She is also unsure as to how long she will be able to do continue to make the [items] because she is having problems with her hands. Regardless, she says that the products take her a very long time to make for the amount returned and she receives little profit when she sell them. The wife considers the parties’ capacity to find appropriate employment to be equal. Both parties are at retirement age, and I accept their earning capacities are now minimal.
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129 The parties do not have substantial superannuation entitlements, with the wife’s
being significantly less than the husband’s, as she has utilised $10,000 of it. It appears
that neither party is entitled to a pension.130 The husband says that he largely supports his friend, [Ms J] to the extent that her
former husband does not provide for all her expenses. [Ms J] receives $230 per week from her former husband. At trial, the husband denied that the couple live in a de facto relationship, but they generally share accommodation, although the husband has spent some time at his mother’s home in [Europe]. The couple provide some care for each other. The couple are clearly in a relationship.
131 The husband believes the wife receives financial support from [Mr S]. The wife
denies this, but, at trial, she was spending quite a lot of time at [Mr S]’s property.
[Mr S] has a [farm in the region].132 The parties’ main source of income was the interest repayments on their [MSP]
investments. The ability for the company to continue such a high interest return and the likelihood of the parties recovering their total investment, at trial, was uncertain due to the company’s recent cashflow problems. Both parties made submissions that they were then at risk to lose more than the other, the wife says she currently has more money invested in [MSP] and the husband says that, not only was his remaining investment at risk, but also all the repayments he had already received if the company becomes insolvent and he is forced to return the money he has received to the liquidator.
133 As it turns out, it appears likely that both parties have lost all their [MSP]
investments, and it is possible that some monies already received may have to be returned. The parties have paid a heavy price for having a return of 19% on their investment for some time. Both parties will be in a significantly worse financial position as they have both not only lost significant investments, but also their income stream. Both have spent significant sums for legal fees and no doubt, the fees have increased since trial.
134 On consideration of the relevant factors, I do not accept that it is just and equitable for an adjustment for s 79(4)(e) factors to be made in favour of either party.
Conclusion – the fourth step
135 I have concluded it is just and equitable that the property of the parties, as
determined by me, be divided equally. On the evidence as to the value of the real properties at trial, the parties would each be entitled to $770,321. On this basis, the wife would be entitled to receive $11,426 from the sale proceeds over the husband’s share. Obviously, the parties may need to factor in for themselves the amount for which the properties sold, the amount of the mortgage discharged and the costs of sale and settlement.
136 The husband may then retain a debt to his mother, and a credit card debt.
137 I do not know if there has been any distribution of the furniture being held in
storage by the wife at [the regional centre], the wife offering the husband several
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items, some of which were duplicated. The husband’s position was that the wife’s
estimated value at $3,000 was an understatement.138 On the assumption the husband took little as he had foreshadowed, I have increased the value of the furniture retained in the wife’s hands.
139 If the husband is prepared to accept half the items in storage, they can be divided
on a pick one item each basis, and the parties otherwise retain the items in their respective possessions. The wife is then to receive an additional $1,000 from the pool.
140 In the event the husband is required to pay back any funds received as a
preference payment, then I consider it would be unjust for him to bear more than half
the loss. I will hear further submissions on what should occur in this instance.141 The position would be as follows:
| Asset | Husband | Wife |
| [Property at the address in the country town] | 462,500 | 462,500 |
| [Property at the address in the regional centre] | 230,000 | 230,000 |
| [[MSP] ] Investment | NK | NK |
| BankWest Account | 1,982 | ||
| NAB Account | 748 | ||
| [European] Bank Accounts | 5,347 | ||
| BankWest Account | 9,156 | ||
| BankWest Term Deposits | 51,853 | ||
| CBA Account | 23,839 | ||
| Superannuation |
| ||
| [Motor vehicle] | 10,000 | ||
| [Motor vehicle] | 1,200 |
| Household contents | Nominal | (E)5,000 |
| Ride-on Mower | 200 |
| Tools of Trade | 200 |
| Total Assets | 800,110 | 716,577 |
| Other add-backs |
| Superannuation | 3,000 |
| Gift to [Andrew] | 100,000 |
| Husband’s Income Tax Refund | 3,702 |
| Portion of monies spent after separation (20%) | 13,099 |
| Legal fees paid | 42,352 |
| Sale proceeds of [Motor vehicles] | 2,920 |
| Sale proceeds of caravan and boat | 1,300 |
| Balance of refund of [[MSP] ] | 12,548 |
[2008] FCWA 28
| Sub total | 59,120 | 119,801 |
| Total | 859,230 | 836,378 |
| Liabilities | ||
| Mortgage on [property at regional centre] | 77,483 | 77,483 |
| Net Assets | 781,747 | 758,895 |
| To be paid to the wife | -11,426 | +11,426 |
$770,321 $770,321
Proposed Orders
1. The net proceeds of sale of the properties at [the regional centre], and [the address in the country town], be distributed between the parties as to effect an equal division of the parties’ property, with the wife to receive an additional $11,426.
2. The husband retain all items of personal and real property in his possession or of which he is registered proprietor as at the date of the making of these orders including but not limited to:
(a) the [motor vehicle]; (b) the husband’s ride-on mower and tools of trade; (b) the furniture and home contents in the husband's possession; (c) any savings and/or cash in the husband's possession; (d) the husband's superannuation entitlements. 3. The wife retain all items of personal and real property in his possession or of which he is registered proprietor as at the date of the making of these orders including but not limited to:
(a) the [motor vehicle]; (b) the furniture and home contents in the wife's possession; (c) any savings and/or cash in the wife's possession; (d) the wife's superannuation entitlements. 4. In the event the husband is required to refund monies as a result of the bankruptcy of [Mr E], the wife contribute one half of the sum due.
5. There be liberty to apply in relation to implementation of these orders.
6. The applications otherwise be dismissed.
I certify that the preceding [141] paragraphs are a true copy of the reasons for
judgment delivered by this Honourable Court
Associate
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