Gabor and Gore
[2018] FCCA 615
•16 March 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| GABOR & GORE | [2018] FCCA 615 |
| Catchwords: FAMILY LAW – Undefended property proceedings – adjournment application refused – respondent failed to meaningfully engage in proceedings despite numerous opportunities – need to sell property to pay outstanding debts which are accruing interest. |
| Legislation: Family Law Act 1975, ss.106A, 75(2), 75(2)(o), 79(2), 79(4),79, 117(2A) |
| Cases cited: Damjanovic v Maley [2002] NSWCA 230 Mckenzie v Mckenzie [1970] 3 All ER 1034 |
| Applicant: | MR GABOR |
| Respondent: | MS GORE |
| File Number: | MLC 4543 of 2014 |
| Judgment of: | Judge Harland |
| Hearing date: | 22 January 2018 |
| Date of Last Submission: | 22 January 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 16 March 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Hall |
| Solicitors for the Applicant: | Thompson Southern Law Practice |
| Solicitors for the Respondent: | No appearance |
ORDERS
Property A
That within 21 days each of the parties take all necessary steps and execute all necessary documents to cause Property A being the whole of the land in title reference (omitted) (“Property A”) Property A to be sold by private treaty at the earliest possible date at a price to be agreed on between the parties and failing such agreement within 30 days of these Orders to be determined by the proper officer of the Real Estate Institute of Victoria or their nominee.
The proceeds of the sale of Property A be disbursed as follows:
(a)Payment of agent’s commission and advertising expenses and legal expenses of the sale;
(b)Payment of any money due and owing to the mortgagee;
(c)The net proceeds be applied to payment of debts of the marriage including but not limited to:
(i)Taxation liability in respect of Company A including any interest and penalties thereon;
(ii)Outstanding Superannuation Guarantee Payments in respect Company A with any interest and penalties thereon;
(iii)Outstanding Taxation liabilities in respect of the parties individually with any interest and penalties thereon;
(iv)Outstanding Taxation liabilities in respect of the parties’ Self-Managed Superfund with any interest and penalties thereon;
(v)All Accountancy fees and expenses to complete all outstanding tax returns and documents required by the Australian Taxation Office to finalise the taxation liability of the parties and their related entities including Company A and (omitted) Superannuation Fund;
(vi)The amount owing to (omitted insurance company) and any interest thereon in relation to the property at Property A,;
(vii)The amount owing to (school omitted) for [X] and [Y]’s school fees.
(viii)The amount owing to (omitted tax service) outstanding account for previous accounting work carried out for the parties;
(ix)The amount owing to Mr B (accountant) for repayment of loan;
(x)The amount owing to (company omitted) debt in relation to the (omitted) Store;
(xi)The amount owing to (business omitted) debt in relation to the (omitted) Store;
(xii)The amount owing to (business omitted) debt in relation to the (omitted) Store;
(xiii)Accountants’ fees to bring all tax returns up to date for the parties and their related entities including Company A, Company B, Company C and the (omitted) Superannuation Fund.
(d)Payment of the balance then remaining as follows:
(i) 60% to the applicant; and
(ii) 40% to the respondent –
(i)less the amount due to Croxford Partners to remove their caveat from the property in respect of moneys owed to them by the wife being the wife’s legal fees;
(ii)less the amount owing in respect of the (city council omitted) in respect of rates, and interest and legal costs for recovery and the Judgment Debt owing in respect of the rates for the property at Property A (approximately $14,000);
(iii)less $1,925 to paid to the husband for the wife’s share of the valuation;
(iv)less $3,787 being the reimbursement to the husband for the school fees that were owed to (school omitted) and were solely paid for by the husband;
(v)less the costs of and incidental to the trial herein of the applicant fixed in the sum of $25,000.
Property B
That within 42 days the parties take all necessary steps and execute all necessary documents to remove the husband as guarantor and discharge the mortgage secured over Property B and being the whole of the land in title reference (omitted) (“Property B”) at the wife’s sole expense and simultaneously the wife shall pay to the husband 58% of the equity being $168,200 and thereafter the wife be declared the sole legal and beneficial owner.
In the event that the wife is unwilling or unable to comply with order 3 herein, within 56 days each of the parties take all necessary steps and execute all necessary documents to cause Property B to be sold by private treaty at the earliest possible date at a price to be agreed on between the parties and failing such agreement within 70 days of these Orders to be determined by the proper officer of the Real Estate Institute of Victoria or their nominee.
If Property B is sold pursuant to Order 4 herein, the proceeds of sales be disbursed as follows:
(a)Payment of agent’s commission and advertising expenses and legal expenses of the sale;
(b)Payment of any money due and owing to the mortgagee;
(c)Payment of the balance then remaining as follows;
(i) 58% to the applicant; and
(ii) 42% to the respondent
In the event that either or both of the properties fails to sell by private treaty pursuant to Order 1 and/or Order 4 herein, within a period of three months from the date of these Orders, then each party take all necessary steps and execute all necessary documents to cause the said properties (or property as the case may be) to be sold by public auction at the earliest possible date at a reserve to be agreed upon between the parties and failing such agreement within 14 days to be determined by the proper officer of the Real Estate Institute or their nominee and the proceeds of the said sale be disbursed in the same manner as, and in accordance with, Order 2 hereof.
That pending the sale and settlement of Property A, the respondent cause to be paid as they fall due all instalments in respect of the mortgages, council rates and outgoings, and water rates or levies in respect of the properties and pay forthwith any arrears in respect of the said outgoings, rates and levies.
That pending compliance with order 3 or order 4 as applicable, the respondent cause to be paid as they fall due all instalments in respect of the mortgages, council rates and outgoings, and water rates or levies in respect of the properties and pay forthwith any arrears in respect of the said outgoings, rates and levies of Property B.
That Thompson & Southern Law Practice have the care and conduct of the sale of the at Property A, and Property B, if the property is to sold pursuant to Order 4 herein.
For the purpose of putting these orders into effect, the net proceeds of sale of the properties at Property A, and Property B, if the property is sold pursuant to Order 4 herein, be paid into the Thompson & Southern Law Practice Trust Account on trust for disbursement in accordance with these Orders and for them to attend to the payments of the debts of the marriage listed in paragraph 2(c) and disbursement of the balance in accordance with paragraph 2(d) above.
Property C Property
That the respondent do all such acts and things and sign all necessary documents forthwith so as to transfer to the applicant all her right title and interest in the property situated at Property C, (“Property C”) being the whole of the land comprised in title reference (omitted).
That contemporaneously with the transfer in paragraph 11 hereof the parties do all such acts and things and sign all necessary documents and remove the caveats so as to discharge the mortgage on the subject property.
Bank Accounts
That within 14 days of these orders the parties do all such acts and things and sign all necessary documents so as to close down any bank accounts held in joint names, including but not limited to the (bank omitted) Account number (omitted) and cause the balance of same to be paid into the Thompson & Southern Law Practice Trust Account to be distributed with the proceeds of sale of the properties in paragraph 2(c).
Superannuation
Each of the parties otherwise retain all their right title and interest in and to Superannuation Entitlements in their name or standing to their credit and neither shall have any further claim on such entitlements of the other.
That the husband resign as a Trustee of the (omitted) Superannuation Fund and contemporaneously with his resignation withdraw the amount standing to his credit in the said fund to be rolled into a complying superannuation fund of his choice as soon as possible after the said fund’s taxation and accounting obligations have been completed and brought up to date.
For the purpose of paragraph 14 hereof, the Court Orders that the amounts standing to the credit of the parties in their individual accounts in the said fund are to be retained solely by them.
General
That other than as set out in these Orders, the parties have the sole right title and interest in any other property which is at this date hereof in their possession, title, or name and they shall be solely liable for and indemnify the other against any personal liabilities.
That the respondent and applicant do all acts and things, give all consent, and execute all documents and writings necessary to give effect to the orders made herein.
That in the event that either party refuses or neglects to execute any deed or instrument or other document or any transfer or other thing directed or required of a party to put these orders into effect, the Registrar of the Federal Circuit Court of Australia be appointed pursuant to section 106A of the Family Law Act1975, to execute such deed or instrument in the name of such party and to do all acts and things necessary to give validity to the operation to the deed or instrument.
That unless otherwise specified in these orders and except for the purposes of enforcing the payment of any money under these or any subsequent orders:
(a)Each party be solely entitled to the exclusion of the other to all property, including choses-in-action, in the possession of such party as at the date of these orders;
(b)Any money standing to the credit of the parties in a bank account are to be retained by the party in whose name the account appears;
(c)Each party hereby foregoes any claim they may have to any superannuation benefit that is belonging to or owned by the other save as provided for in these orders;
(d)All insurance policies are to become the sole property of the owner named hereon;
(e)Each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to these orders; and
(f)Any joint tenancy of the husband and wife in any real or personal estate is hereby expressly severed.
The respondent pay the applicant’s costs fixed in the sum of $25,000, with such costs to be deducted from the amount payable to the wife pursuant to paragraph 2(d)(ii) and paid to the applicant.
In the event the wife’s share of the sale of the Property A property does not cover the costs owed to the husband, the amount be deducted from the wife’s share to the Property B property pursuant to 5(c)(ii) herein.
IT IS NOTED that publication of this judgment under the pseudonym Gabor & Gore is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 4543 of 2014
| MR GABOR |
Applicant
And
| MS GORE |
Respondent
REASONS FOR JUDGMENT
The husband seeks property orders finalising the financial relationship between the parties after the break down of their marriage. The matter proceeded as an undefended hearing.
The husband’s case is that he should receive 60% of the remaining net asset pool. He says that the wife mismanaged their financial affairs post separation and has wasted joint funds on gambling and has failed to provide financial disclosure. He has sole care of the parties’ child, [X] born (omitted) 2002 (“[X]”). His partner has the care of the wife’s baby grandson.
Procedural History and the wife’s non compliance
This matter commenced on 27 May 2014 when the Husband filed an application seeking property orders. The first return date for that application was before His Honour Judge Curtain on 2 July 2014. On that day, the parties consented to orders, which included that both parties be restrained from withdrawing from, disposing of, or encumbering any joint bank accounts or any accounts in their own name. There is a further Order that parties “make full financial disclosure of all bank accounts and financial records”. Both parties were legally represented.
The husband deposes that the wife failed to comply with any of the Orders made on 2 July 2014, but particularly in regards “to the non-spending of funds, the providing of funds for the husband, and making full financial disclosure”.
The matter came before Her Honour Judge Jones on 21 July 2014. Her Honour set the matter down for a one-day trial commencing on 3 December 2014. The parties jointly approached chambers seeking that the trial date be adjourned as they agreed that several properties needed to be sold to satisfy debts.
The matter next came before Her Honour Judge Jones on 14 July 2015. Parties again agreed to consent Orders, including that the business being conducted by Company A (“the business”) be immediately placed on the open market, that the wife be restrained from selling the business privately, and that both parties make full disclosure of their financial records and transactions.
At the hearing before me on 22 January 2018, Counsel for the husband submitted that the wife did not comply with this Order and the business was not sold immediately due to the deliberate stalling of the wife as she wished to sell the business to her sister. Some of the significant debts that the parties still have relate to the business.
On 16 November 2015, the matter was adjourned with no appearance by the wife. There is a notation to the Order, which indicates that the parties were in the process of selling the last remaining rental property and determining all liabilities to enable an asset pool to be determined.
The matter returned on 8 February 2016. There was no appearance by the wife. The minutes of Order made were as follows:
1.That the Wife forthwith comply with:
a.Order 3 made on 2 July 2014 by maintaining funds of $2,500 per week in the (omitted) Access Account No. (omitted) and
b.Order 5 made on 14 July 2015 by making full disclosure of her financial records and transactions and producing all banking records from the date of separation on 5 May 2013 to the date of these Orders within 30 days hereof.
The husband deposes that the wife has failed to comply with both of those Orders.
On 7 July 2016 Her Honour Judge Jones again made Orders in the absence of the wife. Those Orders required the wife to provide various financial information. Her Honour further ordered the wife to provide sworn valuations of the properties. The matter was fixed for trial for 4 and 5 May 2017 before me and listed for mention in late 2016. Pursuant to order 5, if the mother did not attend on the next occasion a warrant would issue for her arrest.
The wife appeared in person on the next occasion before Her Honour Judge Jones on 6 October 2016. Despite the Orders made 7 July 2016 requiring the wife to provide sworn valuation of the properties, Her Honour made a further order on this day that the Husband was to pay for the valuations in the first instance.
The matter came before me on 4 May 2017. Yet again, the wife did not attend Court. The hearing could not proceed, as the husband had been unable to afford the valuation costs without the wife’s contribution. Orders were made for the husband to obtain the valuations and to be able to issue more than five subpoenas. Further orders were made for filing. Order 7 and 8 of the Orders made on this day were as follows:
7. That these Orders be served on the Wife on or before 2nd June 2017 and that the Wife have liberty to make any Application to allow her to be heard at any Hearing on or before 30th June 2017 after which the matter shall be heard undefended.
8. Such Application in accordance with Order 7 shall be an Application in a case supported by Affidavit setting out inter alia:
a. the Wife’s reasons for failure to comply with Orders 1,2 and 3 of Orders made 7th July 2016;
b. the Wife’s reason for failure to comply with Orders 1 and 3 of Orders made 6th October 2016;
c. the Wife’s reason for failing to appear on 4th May 2017; and
d. any other matter in support of her Application to be heard on the Final Hearing.
On 12 December 2017, the matter came before me for an undefended hearing. The husband had only filed his trial affidavit on 8 December 2017 and the affidavit of the valuer on 11 December 2017. The husband said the valuations were not completed on time and that this had delayed his trial affidavit. The husband says he borrowed $3,850 from his partner’s mother to pay the valuation fees.
The wife appeared in person on 12 December 2017. Her mother Ms L (“the wife’s mother”) also attended Court that day. The wife sought further indulgence from the Court to give her an opportunity to put on material. She also claimed that her mother had been making the mortgage repayments on the property she lived in and would be making an application to join the proceedings. The Court made it very clear to both the wife and her mother that this further adjournment would be the last adjournment granted and the adjournment period would be brief. The adjournment was granted given that the wife had just been served with the husband’s material. The Court adjourned the hearing to 22 January 2018.
The Court directed the wife to file and serve her evidence in chief by 15 January 2018 and to comply with the previous orders made for disclosure by 20 December 2017. Order 7 stated that should the wife fail to comply with the Orders for financial disclosure and filing a trial affidavit the matter would proceed on an undefended basis on the next occasion.
The wife’s mother was also given the opportunity to make any application alleging that she has an interest in the property at 17 Property B by filing an application and affidavit in support by 15 January 2018. The wife’s mother did not make any application and did not appear in Court on 22 January 2018.
Application for adjournment and the respondent’s advocate
The wife did not attend Court on 22 January 2018. She did not comply with the directions for filing a trial affidavit nor providing disclosure.
At 7.20am on 22 January 2018, Chambers received an email from Mr A, Account Manager, purporting to act on the wife’s behalf. The email said the following:
Dear Parties,
Please be informed that Ms Gore will not be attending the hearing scheduled for this morning (22 Jan 2018) due to medical and mental health issues. Her representative will be in attendance to provide her doctor's medical certificate and other documents in support of her absence.
You are also advised that her solicitor on record has withdrawn his services on the 18 January 2018. Copies of emails from her solicitor confirming this will also be provided to the court.
Ms Gore apologises for this late notice and any inconvenience to the parties and kindly seeks a new date from the court. Legal counsel has been sought by my office as well as financial facilities to support her legal costs.
Thank you
Mr A
Account Manager
On the morning of the hearing, although the wife did not attend, a Mr D sought to make submissions seeking an adjournment. He said he was the wife’s advocate and was appearing amicus curaie to assist the court. He confirmed that he was not a legal practitioner. Given this he had no right of appearance.[1] I did not allow him to speak for the wife. I did allow him to tender a medical certificate for the wife. I treated this as an application by her for an adjournment, which I refused.
[1] Judiciary Act 1903 (Cth), ss.55A, 55B.
It was concerning and unusual that a person who is not a legal practitioner purported to appear with some authority for an unrepresented litigant who was not even in Court.
There are sound reasons for not allowing persons who are not licensed legal practitioners to appear as advocates for unrepresented litigants. They are not bound by the legal profession rules, do not have insurance, and are unqualified.[2] They are not subjected to disciplinary codes and do not have duties to the Court as solicitors and barristers do as officers of the Court. Courts will only grant an application for an unqualified person to appear as an advocate in exceptional circumstances. Mr D did not identify himself as a Mckenzie friend.[3] He could not act in that role without the wife being in Court.
The Court has inherent power to control its own processes. An amicus curaie, or friend of the court, is quite a different position to a McKenzie friend. In family law matters leave to appear as amicus curaie is usually granted to a duty lawyer or a lawyer from a government department when the department does not want to intervene but has information that could assist the court.
I do not know what connection Mr D has with the wife. I do not know if he had charged a fee for his service. I would be most concerned if that were the case.
With respect to the wife’s application for an adjournment, I refer to the comments of the High Court in Aon Risk Services Australia Limited v Australian National University [2009] HCA 275. Her application must be seen with the background of the chronology of the proceedings where she has been given numerous chances to participate in the proceedings. The Court is not obliged to hear from a party at a time that suits them. The Court is obliged to give a litigant an opportunity to be heard. Whether a litigant takes up that opportunity or not is a matter for them.
It is apparent that the parties’ financial position is somewhat precarious and that any further delays would further prejudice the husband who is entitled to have his case heard. He has incurred considerable additional expense of needing to issue subpoenas for financial information and to obtain valuations without the respondent’s contribution. There are outstanding debts that are accruing interest that must be dealt with. This is not a matter where an order for costs in the husband’s favour could cure the prejudice of giving the respondent yet another opportunity to engage in the proceedings. It is significant that the respondent did not comply with the orders made on 11 December 2017. The wife did engage lawyers who corresponded but never went on the record. She did not file any documents. She has not filed an application in a case whilst this judgment has been reserved.
[2] See Damjanovic v Maley [2002] NSWCA 230.
[3] See Mckenzie v Mckenzie [1970] 3 All ER 1034.
The medical certificate handed up to the Court on 22 January 2018 is not sufficient to form the basis for an adjournment application in the circumstances of this case. The medical certificate refers to the wife suffering from severe mixed depression and anxiety, with panic attacks “secondary to the ongoing legal proceedings”. Her doctor refers to the condition worsening in the lead up to the hearing. Her doctor says he has been treating the wife for three years and does not think that she has the capacity to represent herself. The certificate does not provide any timeframe as to when she may be able to participate in the proceedings. The certificate does not go so far as to say the wife requires a litigation guardian.
The husband’s lawyer filed an affidavit on 9 January 2018 sworn on 18 January. In that affidavit she confirmed that she provided the wife with the documents the husband relied on and also wrote to her requesting the documents that she was required to provide pursuant to previous Court Orders. The husband’s lawyer deposes that she received a phone call from Mr Ward of Joseph and Associates in Melbourne who advised he had been approached by the wife and he was seeking clarification about what was required with respect to disclosure. She says she advised him of the deadlines for filing and that he had confirmed that the wife had told him about those dates. She says Mr Ward told her that he had some disclosure documents, which he said he would send shortly. She deposes that she heard nothing further and did not receive any documents. She says she contacted Joseph and Associates on 16 January 2018 and they advised that they were not acting because they had not received the retainer. She served a copy of the sealed orders on the wife and the wife’s mother by express post. It is confirmed that she has not received any documents from either the wife or the wife’s mother.
I am satisfied that the wife has been given multiple opportunities to participate in these hearings and has failed to take up those opportunities. She was well aware that the matter would proceed undefended if she did not comply with the orders made on 11 December 2017, and she has failed to comply with multiple previous Court Orders. It is significant that the delays in this matter are largely due to the wife not effectively engaging in these proceedings since 2014. It is also the significant that the wife has not made any real attempt to comply with the Orders. She has not filed an application seeking an adjournment, she has not provided any disclosure documents, and she has not filed any material since 2014.
It is necessary to consider issues of fairness and prejudice with respect to both parties. The prejudice to the husband of granting yet another adjournment to the wife is not one that can simply be ameliorated by a costs order. There is also the continuing stress of the proceedings which have been now been going on for the best part of four years and the debts which are continuing to accrue interest further diminishing in the pool. The most significant of these debts are those to the ATO, which is accruing penalty and interests, and to the (omitted) council for unpaid rates on the property that the wife has been living in since separation.
Considering all of these factors, I refuse the wife’s application for a further adjournment.
Undefended Hearings
Kirby J in the decision of Allesch & Maunz (2000) 203 CLR 172 refers to procedural fairness in a passage that is often quoted at [38]:
The facts and issues are set out in the reasons of Gaudron, McHugh, Gummow and Hayne JJ … Having regard to the circumstances in which the initial proceedings took place in the absence of Mr Allesch (the appellant), it is worth emphasising that the principle just described does not require that the decision-maker actually hear (or receive the submissions of) the party potentially liable to be adversely affected. Sometimes, through stubbornness, confusion, misunderstanding, fear or other emotions, a party may not take advantage of the opportunity to be heard, although such opportunity is provided. Affording the opportunity is all that the law and principle require.
It is clear that the wife is on notice of today’s proceedings. This is self-evident from her sending a representative to the hearing. She was in Court on the last occasion when it was very clearly explained to her that she needed to comply with the Orders for provision of disclosure documents and filing evidence. She does not provide an evidence of any attempts she has made to comply with those Orders.
She had received the husband’s trial material in December 2017. Since then she has been on notice of the orders the husband seeks and the case she has to meet.
Contributions
The parties commenced living together on 22 October 2001. The husband deposes that at that time he earned approximately $26,000 per annum after tax and the wife was on a single parent pension. He further states he had a small superannuation and had an old (vehicle omitted). The wife had approximately $5,000 in superannuation.
The wife’s two children from a previous relationship lived with them: [Z] born (omitted) 2000 (“[Z]”) and [Y] born (omitted) 1998 (“[Y]”). The wife was not working, as her two children were very young. There is one child of the relationship: [X] born (omitted) 2002 (“[X]”). The husband says his income supported the family including the wife’s two older children, as she did not receive any child support from their father.
In 2008, the parties won approximately $10 million. They received the funds in May 2009. The spent the winnings in a variety of ways.
The husband says the ticket was bought with joint funds. The wife says she bought the ticket with her own funds. Given that the parties were in an intact relationship at the time, and noting the comments of the Full Court of the Family Court of Australia (“Full Court”) in Eufrosin & Eurosin [2014] FamCAFC 191 where the Full Court referred to several earlier cases including Zyk & Zyk (1997) FLC 92-644 and Anastasio & Anastasio (1981) FLC 91-093 (“Anastasio”). Barker J’s comments in Anastasio in particular are relevant when he compared buying a lottery ticket to buying a piece of furniture or a block of land during the marriage with funds from either or both parties. As most marriages are economic unions, it makes no difference. There is no evidence to suggest that these principles should not apply to the circumstances of this case.
Gifts to the wife’s family
The parties purchased a property for the wife’s mother at Property D on 4 January 2010 for $280,000. This was registered in the wife’s name. A mortgage to the (bank omitted) was registered against the property. The husband states at [22] of his trial affidavit that the wife’s mother did not like the property at Property D so the parties sold the property on 8 February 2012 and the mortgage was discharged at settlement.
The parties purchased another property for the wife’s mother on 7 January 2012 at Property B. This was also registered in the wife’s name and subject to a mortgage from the (bank omitted). The husband is a guarantor for the mortgage on the property at Property B. The loan on this property is currently in arrears and there is approximately $190,691.87 remaining on the mortgage.
The wife’s mother lives in the property at Property B. The wife’s mother did not take up the opportunity to join the proceedings. The property is in the wife’s name, not the wife’s mother.
$150,000 was gifted to the wife’s mother in 2009.
The parties gifted the wife’s sister, Ms T, $150,000 and assisted her in the purchase of a property in Property E. The husband does not detail what the parties did to assist Ms T with the purchase of Property E. The husband says that this gift was after the lotto win but does not provide a time period in which this occurred.
The parties gifted the wife’s other sister, Ms M, $150,000 in 2009 and $100,000 in 2010. The husband states at [24] of his trial affidavit that he was not aware of the $100,000 until after separation. Nothing turns on this, as it is clear that the parties decided to generously share their winnings with both sides of the family.
Gifts to the husband’s family
The parties purchased a home for the husband’s father at Property F on 23 June 2009. It was subject to a mortgage to (bank omitted), which was registered in the father’s name.
$150,000 was gifted to each of the husband’s two brothers in 2009.
In 2010, the parties acted as guarantor for the loan to (bank omitted) for the husband’s brother, Mr W, to purchase Property G. The husband further states that he and the wife agreed to make the loan repayments for his brother of $1,591 per month. These payments continued until after separation, when the wife stopped the payments. The husband does not provide a date for when these payments ceased, but states that Mr W has since refinanced the loan and that the husband and wife have been removed as guarantors.
Properties purchased by the parties
On 18 May 2009, the parties purchased Property C for $648,000. The property was purchased outright but a mortgage to (bank omitted) was registered against the title on 23 June 2009. The parties originally lived in this property but moved out after a dispute with a neighbour. After being unable to sell Property C for their asking price, the parties rented the property out from 1 July 2012 at $420 per week. The husband has been residing in this property since shortly after separation. The mortgage has nothing owing but has not been discharged.
Property H was purchased on 9 April 2010 for $153,000. The husband states in his trial affidavit that the property was purchased as an investment property. The property was purchased outright, but the parties took out a loan against Property H on 4 October 2010 for the sum of $122,400. The parties rented this property out for $360 per fortnight from 9 April 2010 until 27 March 2015. The mortgage repayments on this property were $399 per fortnight, which meant the parties had a shortfall to pay. Property H was sold on 27 March 2015 for $132,000 but after discharging the mortgage and paying various agent and solicitor fees, the parties only received $17,048.25 from the sale.
The parties purchased Property A, on 27 July 2010 for $56,500. The parties obtained a loan for $42,200 to purchase this property. As Property A was a vacant block of land when it was purchased, the parties later extended the loan to $247,930 to build a unit. The unit was rented from 3 January 2012 to 9 April 2013 for $250 per week, from 12 April 2013 to 19 June 2013 for $240 per week, and from 24 June 2013 to 17 November 2013 for $230 per week. The husband states in his trial affidavit that there was a considerable shortfall on the loan repayments as the fortnightly payments were $795. This equates to $397.50 a week so the weekly shortfall would have been $147.50 a week.
From 30 January 2014, Property A was leased to the wife’s niece, Ms K, for the sum of $240 per week. The husband states that the wife’s niece frequently missed payments and that only $6,032.92 was received in rental between July 2014 and June 2015. This is less than half of the rental income that should have been received for the 12-month period. The husband states that once property management fees had been deducted they received a net amount of $2,943.05 of rental from July 2014 to June 2015.
The bank seized Property A and sold the property. It was sold for $31,911.95 less than amount owed to (bank omitted). The lender’s mortgage insurer, (omitted insurance company), paid the shortfall to (bank omitted) and the parties owe that money to (omitted insurance company).
Property B was purchased on 26 August 2010 for $270,000 with a mortgage of $215,000. This property was rented for $560 per fortnight until 1 January 2012, $580 per fortnight until 12 December 2013, and then $590 per fortnight until the property was sold on 27 March 2015. There was a shortfall between the rental amount received and the mortgage repayments. The property sold for $275,000 on 27 March 2015, and after discharging the mortgage and paying the various agent and solicitors fees, there was a balance of $66,099.95 for the parties.
The vacant block at Property I was purchased on 5 November 2010 for $250,000 subject to a mortgage of $200,000 to (bank omitted). The vacant block was sold on 17 March 2014 for $174,000. The father states that he believes the wife arranged for the shortfall in the mortgage to be taken out from one of their other loans or accounts.
Property J was purchased on 12 November 2010 for $275,000 with a mortgage of $220,000. The property was rented out at $560 per fortnight from 12 December 2010 until 24 June 2015. There was a shortfall between the rental income and the mortgage repayments. The property was sold on 24 June 2015 for $268,000 and after discharging the mortgage and paying the agent and solicitor fees, the parties received a net balance of $48,516.38.
The parties purchased Property A on 21 April 2011 and moved in after settlement. This property was purchased outright but a mortgage was registered against the property on 3 November 2011. The husband states in his trial affidavit that he believes the mortgage was taken out on Property A in relation to the purchase of the (omitted) Store (“the business”). The (council omitted) issued proceedings in the (court omitted) due to a failure to pay the rates on this property. The husband believes that Judgment will be entered against him and the wife, as he is still a registered proprietor of the property, and that the debt is approximately $14,600.
The vacant block at Property K was purchased on 22 December 2010 for $230,000. This property is registered in the name of the company Company B (“Company B”). The husband and the wife were directors and equal shareholders of Company B. This property was sold on 30 April 2015 for $180,000 and after paying agent and solicitor fees, the parties were left with a net balance of $172,104.42.
The business
On 30 September 2011 the parties purchased the (omitted) Store (“the business”) at Property L for $255,000 including stock. This purchase was financed by a mortgage to (bank omitted) and was made in the name of the company Company A (“Company A”). The husband and wife are the directors and shareholders of Company A.
The husband states in his trial affidavit that parties were unable to sell the business due to the landlord taking possession of the business.
In 2015, Court orders were made for the sale of the business. The husband says that the wife deliberately stalled the sale due to her desire to sell to her sister. There are several outstanding debts associated with the business that could not be cleared from the sale proceeds including a debt to the ATO and other creditors, which are referred to at [70].
Other property
The parties also purchased $250,000 of shares in the (omitted property trust) on an undetermined date. The husband states in his trial affidavit that the income generated from these shares was approximately $10,000 per annum.
The husband states at [29] of his trial affidavit that he believes that after the parties had bought the properties, made gifts to their family members, purchased the business, and bought shares the remaining funds were invested in secured Joint Term Deposits and other accounts with (bank omitted), including their self-managed superannuation fund.
Husband’s financial position
Counsel for the husband submits that the husband has superannuation in an accumulation fund of approximately $40,000, which relates to a period during the marriage and also the period that he has been working since 2015.
In the husband’s financial statement sworn 7 December 2017 filed 8 December 2017 and discloses a gross weekly income of $1,045. He has minimal amounts into his bank accounts. He does not have a motor vehicle.
With regards to the finances, the husband’s case is that he left the financial management to the wife. Post-separation he says they agreed that she would continue to manage their finances and would run the business and he would stop working in the business. The husband says he only found out about the financial troubles and the ATO debt from his solicitor.
Wife’s financial position
The husband says that the wife withdrew a total $1,055.604.94 from the Standard Term Deposit Account No. (omitted) between 14 February 2014 and 12 March 2014. On 12 March 2014, she withdrew $916,604.94 and closed the account.
In her brief affidavit sworn on 30 June 2014, the wife says she has a number of bank accounts with small balances. She says the only substantial balance was in the (omitted) Savings account, which at 30 June 2014 had $239,379.07. She complains that the husband received $30,000 by way of part settlement but withdrew sums totalling $3,300 over the next few days. The husband did not address the issue of the partial payment he received at the hearing. I will address this further when discussing the issue of addbacks.
The wife filed one financial statement in these proceedings in June 2014. In that statement she refers to investment income coming from various properties, which the parties have now sold, and payments through various mortgages, again with respect properties that have been sold since that time. She also refers to having five motor vehicles with the total value of $216,000. The husband’s Counsel did not refer to those during submissions nor did he seek that any motor vehicle be included in the pool of assets available for division. The wife also disclosed that she was living with her fiancé in her financial statement. The wife applied for a divorce and in her supporting affidavit to that application sought that the time of the divorce to become final be abridged as she had made arrangements to remarry on 24 October 2014.
The wife deposited $916,604.94 in her sole account Smart Access (bank omitted) Account number 06 3534 1016 8088 on 12 March 2014. She took these funds without the husband’s knowledge and consent and has failed to account for it despite Court orders requiring her to do so. Annexure (omitted) 10 to the husband’s shows that as at 30 April 2014 the account balance was $23,083.16. That annexure also shows several withdrawals of $1,000 at the (omitted casino) with multiple withdrawals occurring on the same day.
Annexure (omitted) 11 is a letter from the wife’s then lawyers, Croxford Partners, which is dated 2 May 2014. The letter states that the wife had approximately $600,000 in a term deposit account. The husband alleges that as at 24 June 2014 the balance of that account was $300,000.
Debts and money spent by the wife
The husband identified the various outstanding debts the parties have, some of which relate to the convenience store business including a significant debt to the ATO. Interest is accruing on at least some of the debts.
The husband annexures to his trial affidavit evidence of the various debts owing and money spent by the wife as follows:
a)$1,724.08 owing to (company omitted) as at 13 April 2015;
b)$3,671.58 owing to (business omitted) as at 3 August 2015 plus interest accruing;
c)$4,549.49 owing to (omitted) as at 30 August 2015;
d)Annexure (omitted)16 is a series of emails between (bank omitted) and the parties’ accountant with respect to liabilities for the convenience store and a garnishee order issued by the ATO;
e)Included at (omitted) 17 is a letter from the ATO dated 1 December 2016 referring to debts for pay as you go withholding penalties and super guarantee charge and penalty due to an audit of their employer obligations totalling $152,493.25;
f)$4,180 owing to (omitted tax service) as at 17 April 2015;
g)$12,878.53 plus interest owing to (omitted) for arrears of rates as at 24 August 2017. The husband believes this debt is now approximately $14,600 with costs and interest as the council took court proceedings against them;
h)$7,574 owing to (school omitted) as at 1 January 2015. These school fees include fees for [Y]. The husband has paid that debt down to $314.00 by paying $50 a week.
Annexure (omitted) 15 is a player activity statement for the wife showing that as at 24 June 2014 the net amount she had lost was $288,402.32 over a one-year period.
The wife also withdrew a total of $227,547.46 from Complete Access Account No. (omitted) between 3 August 2013 and 8 May 2014.
Post-Separation
The husband says that after he moved into separate accommodation [X] and [Y] lived with the parties in a week about arrangement. [Z] moved between households as she wished.
[Y] left school at the end of 2014 and lived with the wife, visiting the husband occasionally.
From early 2015, [X] has lived in the husband’s primary care. [Z] gave birth to her son [A] on (omitted) 2017 (“[A]”). The Department of Health and Human Services removed [A] from her care and since 22 May 2017 [A] has been in the care of the husband’s partner, Ms A (“the husband’s partner”), living in their household. The husband’s partner has ceased work to look after [A]. Her two older children are [C], aged 12 and [D], aged 13.
Addbacks
The husband identifies that the total amount that wife took was $900,000 and he seeks that the sum or a portion of that sum be added back to the pool on the basis of it being a premature distribution to the wife, which the wife has had the benefit of and has failed to disclose what she did with those funds. She has gambled away a significant portion. It is not known if she has any of those funds left. The husband’s Counsel acknowledged that the Court may take the approach that some of those funds would have been used for reasonable living expenses.
There are several well-known authorities on this point. In considering addbacks it is also appropriate to consider the $30,000 partial property settlement that the husband received. The Court has a discretion as to whether or not addback notional property which no longer exists to the pool or to take it into account pursuant to s79(4) and 75(2)(o) as may be appropriate in the circumstances of the case.[4] I also refer to Omacini & Omacini (2005) FLC 93-216.
[4] See the comments of the Full Court of the Family Court in Bevan and Bevan [2013] FamCAFC 116 at [79]; Masoud and Masoud [2016] famCAFC 2 at [90] to [94] and Vass and Vass [2015] FamCAFC 51 and [138] and [139.
The wife’s failure to provide disclosure is also important. In this regard I refer to Black and Kellner (1992) FLC 92-287 and Weir v Weir (1993) FLC 92-3. This case is a case where the wife prematurely distributed funds to herself, which the husband had an interest in; she wasted a significant portion of those funds on gambling and has failed to provide disclosure. See Townsend & Townsend (1995) FLC 92-569.
The husband also proposed other lesser amounts be added back if the Court determined there should be an allowance for reasonable living expenses.
It would be unjust to the husband not to either addback a significant portion of the funds of which the wife has had the exclusive use. I have allowed a discount for living expenses. I will add back $650,000.
Section 75(2) factors
The husband has the primary carer of [X]. His partner also has the care of [Z]’s baby [A]. He is working and receives a gross income of approximately $54,000.
The wife’s current financial position is unknown. The financial position of her husband is unknown. There is no evidence before the Court as to whether or not the wife found employment after the closure of the convenience store. The husband is not receiving child support for [X] and he has no financial support, other than government benefits, for [A].
The parties, legal and equitable interests available for division
I am satisfied that the parties have the following legal and equitable interests.
ASSET
OWNERSHIP
VALUE
Property C
Joint
$650,000.00
Property A
Joint
$750,000.00
Property B
Wife
$290,000.00
Addback of Portion of funds taken by the wife
Wife
$650,000.00
Addback of the partial property settlement to the husband
Husband
$30,000
Total Asset Pool
$2,370,000.00
LIABILITIES
OWNERSHIP
VALUE
Property B Loan
Wife
$190,691.87
ATO debt from business
Joint
$152,493.25
(omitted insurance company) (Shortfall on the mortgagee sale on Property A)
Joint
$31,911.56
(omitted) (Property A rates)
Joint
$14,582.93
(school omitted) School fees
Joint
$314.00
Mr B accountant fees
Joint
$5,466.00
(omitted tax service) convenience store credits
Joint
$4,180.00
(company omitted) convenience store credits
Joint
$1,724.08
(business omitted) store credits
Joint
$4,548.50
(business omitted) store credits
Joint
$3,700
Total Liabilities
$409,622.26
NET ASSETS
$1,960,377.74
SUPERANNUATION
OWNERSHIP
VALUE
Self-managed Superfund
Wife
$131,163.00
Self-managed Superfund
Husband
$139,951.00
(omitted) Superfund
Husband
$43,974.90
Total Superannuation
$315,088.90
Legal principles
Until the High Court of Australia (“High Court”) decision in Stanford & Stanford (2012) 247 CLR 108 (“Stanford”), the position in respect of the process to be applied to the resolution of matrimonial property cases was said to be well settled with a preferred approach as set out by the Full Court in Hickey & Hickey & Attorney-General (Intervener) (2003) FLC 93-143 at 78,386 [39].
The High Court considered the operation of s.79 of the Act in the matter of Stanford. In this case, the majority stated at [35]-[36] that:
It will be recalled that s 79(2) provides that "[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order. Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.”
The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds.
[Footnotes omitted]
The High Court found three fundamental propositions with respect to the application of s.79, which can be summarised as follows:
1. Firstly, in order to ascertain whether it is just and equitable to make a property settlement order, it is necessary to identify the existing legal and equitable interests of the parties in the property. The High Court emphasised the word ‘existing’.
2. Secondly, although s.79 gives the court a broad power to make property settlement orders it may not be exercised in an unprincipled fashion. There must be no assumption that the parties’ interests are or should be different to their existing interests.
3. Thirdly, when considering whether making a property settlement order is just and equitable the court must not assume that one or the other party has the right to a property adjustment order. The court must give separate consideration to s.79(2) in addition to the matters referred to in s.79(4).
In Stanford the High Court indicated that, in the vast majority of matrimonial property cases, the requirements of s.79(2) will be readily satisfied, largely as a result of a consideration of the circumstances of the parties concerned, particularly the nature of their separation.
The High Court also pointed out that what is just and equitable is different in every case.
I am satisfied that in this case it is just and equitable to make property adjustment orders.
Conclusion
The husband presented the Court with various proposals. He contended that there should be a significant addback of the funds the wife has had the sole benefit of post separation without accounting for their use. He conceded that some allowance could be made for living expenses such that a lesser amount could be added back. If the whole of the approximately $900,000 is added back the wife will receive more than her entitlement.
The husband will keep the Property C property, which has been valued at $650,000. The wife has received $650,000 in funds of which she has had the sole benefit.
I am satisfied that there should be an adjustment of 8% in favour of the husband as for 75(2) factors which means he will receive an additional $156,830.20 of the pool. It is likely, the wife will receive a cash payment from the sale of the properties even after allowing for the $650,000 of which she has had the benefit.
It seems unlikely that the wife will be able to retain the Property B property her mother lives in but I will give her the opportunity to refinance the mortgage and pay the husband 58% of the equity. This is the simplest way to expressing it for the implementation of the orders. Given the actual figures of the debts are uncertain she may not receive enough from the sale of the Property A property to refinance the Property B property and pay the husband out.
I am also satisfied that it is just and equitable to the parties to retain their respective superannuation interests. The husband has more superannuation than the wife based on the evidence before the Court, some of which relates to the husband’s post separation employment.
Application for Costs
The husband seeks an order for costs. His legal representatives did not come to court with a breakdown of his costs in accordance with the Federal Circuit Court scale of costs or on a solicitor/client basis. The husband was directed to provide that breakdown together with a Word version of the orders he sought.
It is somewhat concerning that some of the costs include multiple charges of $30 for messages being left asking for a return phone call.
The principles applying to costs applications are well known. The usual rule is that each party pay their own costs. There must be justifying circumstances to depart from this rule. Section 117(2A) sets out the relevant considerations. Of most significance is the wife’s failure to properly engage in these proceedings which have increased the husband’s costs due to delays and adjournments to give the wife further opportunity to participate.
The husband has provided a breakdown of his costs on a solicitor client basis and on scale. I am satisfied that there should be a costs order in the husband’s favour. I am not satisfied that there are exceptional circumstances justifying indemnity costs.
I am satisfied that the wife should pay the husband’s costs fixed in the sum of $25,000. This sum will be deducted from her share of the sale proceeds of the Property A property.
I certify that the preceding one hundred (100) paragraphs are a true copy of the reasons for judgment of Judge Harland
Date: 16 March 2018
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