Gairola & Lakmali

[2021] FamCA 174

FAMILY COURT OF AUSTRALIA

Gairola & Lakmali [2021] FamCA 174

File number(s):

DGC 774 of 2017

Judgment of:

HARTNETT J

Date of judgment:

14 April 2021

Catchwords:

FAMILY LAW – PROPERTY SETTLEMENT – Applications by Applicant and Respondent for apportionment of property interests – cohabitation period of approximately fifteen years – two children of the marriage – add-backs – where the Applicant sought division of the net asset pool – assessment of contributions – just and equitable distribution.

Legislation:

Evidence Act 1995 (Cth) s. 140;

Family Law Act 1975 (Cth) ss 75(2), 79, 90SM

Cases cited:

Bell & Nahos [2016] FamCAFC 244;

Bevan & Bevan [2013] FamCAFC 116;

Mallet v Mallet (1984) 156 CLR 605;

R v Watson; Ex parte Armstrong [1976] HCA 39;

Stanford v Stanford [2012] HCA 52;

Whisprun Pty Ltd v Dixon [2003] HCA 48;

Wirth v Wirth [1956] HCA 71.

Number of paragraphs:

67

Date of last submission/s:

1 March 2021

Date of hearing:

26 & 27 November 2020; and
21 December 2020

Place:

Melbourne

Solicitor for the Applicant:

Starnet Legal Pty Ltd (by video link)

Respondent:

In person (by video link)

ORDERS

DGC 774 of 2017

BETWEEN:

MR GAIROLA

Applicant

AND:

MS LAKMALI

Respondent

ORDER MADE BY:	HARTNETT J
DATE OF ORDER:	14 APRIL 2021

THE COURT ORDERS THAT:

1.The funds held on behalf of the parties in the Starnet Legal Trust Account be forthwith paid out as follows:

(a)the sum of $154,702.18 to the Applicant husband (‘the husband’); and

(b)the sum of $330,005.80 to the Respondent wife (‘the wife’).

Any additional interest sum that may have accrued since the trial and not required to meet the payments provided for shall be apportioned and paid out to each of the parties in a percentage adjustment of 37% to the Applicant husband and 63% to the Respondent wife.

2.The monies held in the joint account of the parties being NAB account no. …03 together with any interest that may have accrued in respect of such monies shall become the property of the wife and within 14 days hereof, the husband do all acts and things necessary to give effect to this order including the release of such funds to the wife.

3.Each party forego any claim they may have to any superannuation benefits belonging to or earned by the other.

4.Each of the Applicant and the Respondent is otherwise hereby declared to be solely entitled to all items of property which are presently in his and/or her respective possession and control and each party shall indemnify the other with respect to any and all liabilities that may attach to such property.

5.Otherwise all extant applications are dismissed.

Note:   The form of the order is subject to the entry in the Court’s records.

Note:   This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 of the Family Law Rules 2004 (Cth).

IT IS NOTED that publication of this judgment by this Court under the pseudonym Gairola & Lakmali has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

REASONS FOR JUDGMENT

HARTNETT J:

PRELIMINARY

1This proceeding concerned competing applications by the parties for both final parenting and property orders. The parenting orders sought were by the Applicant father (“Applicant”) and the Respondent mother (“Respondent”) with respect to their children, X born in 2004 and Y born in 2012 (collectively referred to as ‘the children’). On 10 May 2017, the Court made orders appointing an Independent Children’s Lawyer pursuant to s 68L of the Family Law Act 1975 (Cth) (‘the Act’).[1] On 26 November 2020, the Court made final parenting orders with the consent of each of the Applicant, the Respondent and the Independent Children’s Lawyer.[2] Those orders provide for the Respondent to have sole parental responsibility of the children and for the child, X, to spend time and communicate with the Applicant as agreed in writing between the parties and in accordance with X’s willingness.[3] It was ordered that the child, Y, spend time with the Applicant each alternate Saturday or Sunday for one hour and communicate with the Applicant for one hour each week via video call as agreed between the parties in writing.[4] The Independent Children’s Lawyer was discharged from all further hearings in the proceeding on 26 November 2020.[5]

[1] Order made by Jones J on 10 May 2017, order 5.

[2] Final (Parenting) Order made by Hartnett J on 26 November 2020, page 2.

[3] Final (Parenting) Order made by Hartnett J on 26 November 2020, order 4.

[4] Final (Parenting) Order made by Hartnett J on 26 November 2020, orders 5 and 7.

[5] Final (Parenting) Order made by Hartnett J on 26 November 2020, order 14.

2The balance of the final hearing as to the competing property order applications proceeded on 26 to 27 November 2020 and 21 December 2020. Orders were made for the filing of written submissions.[6] Written submissions were filed by the Applicant on 29 January 2021, by the Respondent on 21 February 2021, and the Applicant’s reply submissions were filed on 1 March 2021.

[6] Order made by Hartnett J on 21 December 2020.

3These reasons for judgment go to the respective property applications remaining before the Court.

4In opening, and in closing submissions, the Applicant sought a payment to him of $208,820. He included various “add-backs” (as calculated by him) in the net asset pool. He sought orders as follows:[7]

[7] Amended Initiating Application filed 23 November 2020, page 2.

1.An Order pursuant to which the matrimonial asset pool is divided as 40% to the Applicant and 60% to the Respondent.

2.An Order that in accordance with Order 1, the Applicant is paid the sum of $208,820.00 from the funds remaining for division.

3.An Order that each party otherwise retains any property in their respective possession, custody or control and further that each party indemnifies the other with respect to any liability, which may attach to any such property.

5In opening, the Respondent sought a division of the net asset pool such that she retain 100% of the available funds; the entirety of her superannuation; and all monies already received by her, howsoever received.

6The Respondent sought orders, relevantly, as follows:[8]

[8] Response to Initiating Application filed 13 November 2020, page 2.

1.According to family law act 13.2 dismiss the financial part of the application due to failure to make full and frank financial disclosures by applicant Mr Gairola

2.If necessary, an order for forensic audit report on the financial information of Mr Gairola.

3.According to family law act 46A dismiss the financial part of the application due to intentionally making proceedings to be frivolous or vexatious by applicant Mr Gairola. Any costs related to the proceedings to be allocated to Applicant Mr Gairola.

4.Release the sales money amount $484,707.92 of Suburb J house to Ms Lakmali.

5.Release the W project investment return balance amount $21,040 at joint NAB account number …03 to Ms Lakmali.

….

7.Any other pursuant orders which court may deem relevant to the matter.

7In her closing submissions, the Respondent sought, a division of the net asset pool (after add-backs as calculated by her) of 80% to the Respondent and 20% to the Applicant. Unlike the earlier orders as sought by her, which would have resulted in a total payment to her of $505,747.92, the Respondent sought an order, for a payment to her of $575,769.00 from the funds remaining. The Court notes that this payment sum as sought exceeds the available funds remaining.

MATERIAL RELIED UPON

8The Applicant relied upon the following material:[9]

[9] Outline of Submissions filed by the Applicant on 22 November 2020.

(a)Amended Initiating Application filed on 23 November 2020;

(b)Affidavits sworn by the Applicant and filed on 26 June 2020; 21 October 2020 and 24 November 2020;

(c)Financial Statement sworn by the Applicant and filed on 26 October 2020;

(d)Documents obtained under various subpoenas;

(e)Written Submissions dated 20 January 2021; and

(f)Reply Submissions dated 1 March 2021.

9The Respondent relied upon the following material:

(a)Response to Initiating Application filed on 13 November 2020;

(b)Affidavits sworn by the Respondent on 20 November 2018; 9 May 2020; 2 April 2020; 1 July 2020 and 12 November 2020;

(c)Financial Statement sworn and filed on 13 November 2020; and

(d)Written Submissions dated 21 February 2021.

10Further documents relied upon by the parties were tendered in evidence over the course of the trial.

11It is not necessary in this judgment to comment upon the entirety of evidence of each witness nor to comment on every exhibit tendered. Each piece of evidence relied upon by the parties has been read and carefully considered by me.[10] The standard of proof in the proceeding is the balance of probabilities.[11]

[10] Bell & Nahos [2016] FamCAFC 244, [28]; Whisprun Pty Ltd v Dixon (2003) 200 ALR 447, [62].

[11] Evidence Act 1995 (Cth), s. 140.

IS IT JUST AND EQUITABLE TO MAKE A PROPERTY SETTLEMENT ORDER

12Section 79(1) of the Act provides that the Court may make such orders as it considers appropriate altering the interests of the parties to the marriage in the property of the parties.

13Section 79(2) of the Act provides as follows:-

The 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.

14If the Court is so satisfied that it is just and equitable to make an order altering the interests of the parties in property, s. 79(4) of the Act sets out the matters which the Court must take into account when considering what order (if any) should be made.

15The High Court of Australia (‘High Court’) in Stanford v Stanford (2012) 247 CLR 108 (‘Stanford’) revisited the process for trial judges in altering property interests of parties pursuant to s 79 of the Act for married parties, and s 90SM of the Act for de facto couples. The High Court emphasised the requirement for the Court to establish firstly that it be just and equitable in the particular circumstances of the case to make any alteration of property interests. In this process, the question presented by s 79(2) of the Act, namely “whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order”[12], must not be merged with or supplanted by the inquiries under ss. 79(4)/90SM(4) of the Act.[13] In determining whether it is just and equitable to make an order, the matters which can be taken into account do “not admit of exhaustive definition.”[14] However, there must be a “principled reason for interfering with the existing legal and equitable interests of the parties to the marriage.”[15] In particular the High Court said at paragraphs [37]-[40] and [42] as follows:-

[12] Ibid [37].

[13] Ibid [51].

[14] Ibid [36] referring to Mallet v Mallet (1984) 156 CLR 605, 608 per Gibbs CJ.

[15] Ibid [41].

37. First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to “altering the interests of the parties to the marriage in the property” (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.

38. Second, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion. In Wirth v Wirth, Dixon CJ observed that a power to make such order with respect to property and costs “as [the judge] thinks fit”, in any question between Applicant and First Respondent as to the title to or possession of property, is a power which “rests upon the law and not upon judicial discretion”. And as four members of this Court observed about proceedings for maintenance and property settlement orders in R v Watson; Ex parte Armstrong:

“The judge called upon to decide proceedings of that kind is not entitled to do what has been described as 'palm tree justice'. No doubt he is given a wide discretion, but he must exercise it in accordance with legal principles, including the principles which the Act itself lays down”.

39. Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is “just and equitable” to make the order is not to be answered by assuming that the parties' rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that “[c]ommunity of ownership arising from marriage has no place in the common law”. Questions between Applicant and First Respondent about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be “decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses”. The question presented by s 79 is whether those rights and interests should be altered.

40. Third, whether making a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised “in accordance with legal principles, including the principles which the Act itself lays down”. To conclude that making an order is “just and equitable” only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.

…

42. In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the Applicant and First Respondent are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the Applicant and First Respondent. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).

ASSETS AND LIABILITIES OF THE APPLICANT AND RESPONDENT

16The existing legal and equitable interests of the Applicant and Respondent in property is set out in the below table:-[16]

[16] Outline of Case by the Applicant filed 22 November 2020, pages 1 to 2.

ASSET POOL (NON-SUPERANNUATION)
PROPERTY	OWNERSHIP	VALUE
Funds held in Starnet Legal Trust Account	Applicant and Respondent	$484,707.90
Funds held in Joint Bank Account	Applicant and Respondent	$21,040.58
Capital gains tax potential liability	Applicant and Respondent	Unknown
SUB-TOTAL		E $505,748.48

NOTIONAL ADD-BACKS
PROPERTY	OWNERSHIP	VALUE
Partial Property Settlement pursuant to orders made on 12 February 2020	Applicant	$134,368.00 (the Applicant paid legal fees with these monies)
Partial Property Settlement pursuant to orders made on 21 November 2018	Applicant	$25,901.00 (the Applicant paid child support arrears with these monies)
Sale of Shares (post separation with monies received by the Respondent on 29 November 2019)	Respondent	$15,273.81 (the parties agreed on this inclusion)
Partial Property Settlement pursuant to orders made on 7 April 2020.	Respondent	$150,000.00
Partial Property Settlement pursuant to orders made on 21 November 2018.	Respondent	$19,982.00
SUB-TOTAL		$345,524.81
TOTAL		$851,273.29

SUPERANNUATION
OWNERSHIP	VALUE
Husband	$nil
Wife	$62,000

Matters going to the asset table

17Other relevant matters which relate to the property of the parties to the marriage as described in the table above are:-

(a)Neither of the parties have received a capital gains tax (‘CGT’) assessment and nor was there any evidence as to any liability or quantified liability in respect of either party before the Court. The Respondent claimed a CGT liability totalling $120,000 without any evidentiary basis. The property situate at Q Street, Suburb S (“the Suburb S property”), in respect of which this claim was made, was sold by the parties on 4 December 2017. It had been purchased by them in 2008. At the point of sale, the Respondent was the sole registered proprietor. Prior to 2013, the property was owned jointly by the parties. As any claim was not supported by any evidence, it is disregarded.

(b)The Respondent transferred monies, being joint funds, from the Applicant’s NAB bank account to that of the Respondent, just prior to separation. She transferred $21,505 on 8 September 2016; and $19,135 on 10 October 2016. The Respondent had in her control, when including these funds, bank account savings of the parties, totalling approximately $41,449.00. Additionally, the Respondent retained a taxation refund in respect of income earnt by her whilst the parties were cohabitating, that refund being in the sum of $16,700. Following separation, the Respondent resigned from her employment of approximately 11 years with LL Organisation. She received, on 14 November 2016 or thereabouts, a further sum in respect of her past employment, which employment occurred almost exclusively during the marriage. That sum was $16,916.82. The Respondent also retained those funds. These additional monies total $33,616.82. The total funds of $75,065.82 have been expended by the Respondent in daily and other related expenses of herself and the children. The Respondent applied the $41,449 funds as to $10,000 spent by her on travelling to, and staying in, Queensland, following the separation, with the remaining approximately $30,000 being spent by her upon her return to Victoria and resumption of care of the children. She paid for new furniture for herself and the children; the living expenses of the children; paid credit card debt accrued by her; and additionally, she claimed to have paid for maintenance jobs to be performed on the parties’ rental properties. The Court can make no finding as to this last particular expenditure as the Respondent provided no documentary evidence to support her claim in the face of challenge by the Applicant. The Court concluded the Respondent had the benefit of $75,065.82 of matrimonial funds post separation.

(c)The Respondent admitted that post separation, she also received approximately $114,000 in rental payments in respect of properties owned by the parties and/or either of them. She applied approximately $83,838.67 of those funds toward the relevant mortgage repayments. She retained, unaccounted for, the balance of approximately $30,000. The Applicant argued these monies should be notionally added back to the asset pool. The Respondent argued that there should be no inclusion of these funds into the asset pool. The Respondent’s evidence before the Court was that these monies had been expended by her in the support of herself and the children, and the payment of necessary expenses, including maintenance associated with the rental properties. The Court was satisfied as to those matters on the Respondent’s evidence save any claim by the Respondent as to maintenance costs. The Court did not include, notionally, such funds in the asset pool. However both these funds and the $75,000 approximately (as referred to in (b) above) represent a contribution made by the Applicant of approximately $105,000 to the Respondent and the parties’ children post separation.

(d)The Applicant has in his ownership and possession motor vehicles acquired since separation.  In part, to try and establish a business. On the limited evidence before the Court, but being evidence not challenged by the Respondent, those vehicles have a combined value of approximately $100,000. The debt secured over the three vehicles as at 13 March 2020 was $228,515.72. There is thus a considerable negative equity in these vehicles. It is a significant liability of the Applicant. Such debt is not attributable to the Respondent and nor did the Applicant seek it should be. He did not argue for its inclusion in the asset pool to be divided between the parties. That is entirely appropriate and a just and equitable outcome in respect of this category of property.

(e)The Applicant received an advance on property settlement in the sum of $25,901 which was applied toward his child support arrears. There remains owing by way of child support arrears $41,000 approximately. The Applicant is challenging the quantum of those arrears and the income on which such arrears were calculated. His contributions as set out above, are also noted by the Court in this context and were provisions of support for his children in the manner described.

STANFORD ARGUMENT

18The Applicant and the Respondent’s property interests are identified above. I am satisfied that in all of the circumstances of this case it is just and equitable to make orders adjusting the Applicant and Respondent’s property interests. There is no common use of the parties’ property post separation. The parties themselves urge the Court to make an alteration of their property interests and can reach no agreement as to how that should occur. The implicit and express assumptions the parties may have had as to the arrangements made by them concerning their property interests, were brought to an end at separation and thereafter.

PROPERTY ORDERS

19The Court being satisfied that it is just and equitable to make orders adjusting the property interests of the parties, exercises that power by reference to s. 79(4) of the Act which is as follows:-

(4) In considering what order (if any) should be made under this section in property settlement proceedings, 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; and

(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; and

(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; and

(d)the effect of any proposed order upon the earning capacity of either party to the marriage; and

(e)the matters referred to in subsection 75(2) so far as they are relevant; and

(f)any other order made under this Act affecting a party to the marriage or a child of the marriage; and

(g)any child support under the Child Support (Assessment) Act 1989 (Cth) 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.

20Whilst the Court has considered as a precondition to making an order for property settlement whether it is just and equitable in all the circumstances of the particular case to make such an order, the Full Court of the Family Court in Bevan & Bevan (2013) FLC 93-545 at [86] made clear that the just and equitable consideration is one that “permeat[es] the entire process”.

BACKGROUND

21The Applicant migrated to Australia in 1995. He arrived on a student visa. He obtained a Bachelor degree at T University. He obtained permanent residency in Australia around 1998. In that same year, he met the Respondent in Country V.

22In 2001, the parties were married in Country V. The parties separated on or about 16 October 2016. Thus, the period of their cohabitation was approximately 15 years.

CONTRIBUTIONS

23In January 2002, the Respondent arrived in Australia on a spousal visa. The Applicant paid for all costs associated with the Respondent’s travel to Australia, together with all costs in respect of her obtaining the necessary visa to enter and remain in Australia. Otherwise, the Applicant’s evidence was that he had savings remaining of approximately $45,000. That claim was challenged by the Respondent. The Applicant produced no documentary or other supporting evidence. The Court nevertheless accepts the evidence of the Applicant and, in particular, by reference to paragraph 27 below.

24The parties commenced cohabitation in Australia in a rental property in Suburb FF.

25The Applicant was at the time of cohabitation, employed as a professional on a salary of approximately $45,000 per annum. In 2003, he commenced employment as a consultant earning a salary of approximately $55,000 per annum.

26The Respondent had no savings nor assets upon her arrival in Australia. She commenced employment in Australia in or around 2003. Her salary was approximately $20,000 to $30,000.

27In 2003, the parties purchased their first property being that at HH Street Suburb FF (“the Suburb FF property”). The purchase price was approximately $265,000. The deposit monies, paid by the Applicant, were approximately $26,500 and the balance of the purchase price was funded by a mortgage advance from the Commonwealth Bank of Australia, in the sum of $220,000. The associated costs of purchase were paid by the Applicant.

28The parties’ elder child, X, was born in 2004. The Respondent was the primary care giver to the child and otherwise engaged in home duties for approximately 7 months following X’s birth.

29In 2005, the Applicant was promoted to a managerial position in his employment with an accompanying increase in salary to $70,000 per annum. In 2005, the Applicant also became an Australian citizen, as did the Respondent, subsequently in 2010.

30In 2005, the Respondent obtained employment with LL Organisation. Her income was approximately $38,000. She later became a manager. Her income increased but its quantum, over the years, was not in evidence before the Court.

31In January 2007, the Applicant commenced to work as an independent contractor. To facilitate this employment, the parties set up a company structure as referred to in paragraph 39 hereafter. The Applicant continued in this employment until November 2019. His income was between $700 and $1,000 per day, over 5 days, each week (a maximum of $260,000). This income became more variable and decreased in quantum in the period before and following separation with no precise details before the Court in evidence.

32Each of the parties contributed their income for the benefit of the household. Each of the parties contributed to the running of their household and care of the children.

33In 2007, the parties sold the Suburb FF property for approximately $370,000. They made a net profit of $70,000 approximately. 

1. In 2007, the parties purchased, as joint proprietors, a property situate at H Street, Suburb J (“the Suburb J property”). The purchase price was approximately $815,000. Savings of the parties were applied to payment of the deposit, and thereafter, the net profit of the Suburb FF property was applied to the purchase, together with borrowed funds from the NAB.

   35The parties lived in the Suburb J property as their matrimonial home from 2007 until 2015. Their second child, Y, was born during this time, in 2012. The Respondent took maternity leave to care for Y for approximately 7 months before returning to her employment. In the period that followed, until the sale of the property by Court order made the 9 April 2020, the property was tenanted until May 2018, when the wife and children commenced to reside in it until May 2020, being the time of settlement of the sale.

   36The Suburb J property was sold for $1,435,000. The mortgage encumbrance at the time was $738,937 approximately. The equity thus approximately $696,063. The net monies received from the sale were placed in a trust account on behalf of the parties. The funds now remaining are $434,707.90.

   37In 2008, the parties purchased, as joint proprietors, an investment property situate at Q Street, Suburb S (“the Suburb S property”). The purchase price was approximately $972,000. The 10% deposit was paid from the parties’ savings, and the remainder of the necessary acquisition funds were advanced by the NAB in the sum of approximately $933,000. This property was tenanted with all rental receipts going to pay the mortgage and other outgoings with respect to the property. There was a monthly shortfall of approximately $1,000 which the parties met by application of the Applicant’s income. When this property was sold during the proceeding, and on 4 December 2017, for the sum of $1,712,000 approximately, there were no net proceeds of sale as the property had been used as security by the parties to acquire further borrowings, including a business loan as referred to in paragraph 41 hereafter.

   38In 2010, the parties borrowed a sum of $200,000 from the NAB using both the Suburb J and Suburb S properties as security. The parties applied these funds to a joint venture property development, the W project. In 2018, the parties received a profit distribution of approximately $327,974. That money was expended by the parties and otherwise has been dispersed in accordance with Court orders made 7 April 2020 as to:-

   (a)$134,368 to the Applicant’s previous lawyer;

   (b)$72,000 in respect of a L Pty Ltd loan;

   (c)$54,683 in payment of outstanding credit card and personal loan debt: and

   (d)$21,040 approximately into a joint bank account in the name of the parties.

   39On 24 April 2007, the parties had incorporated M Pty Ltd (ACN …) (“the company”). The parties were both directors and were equal shareholders of the company at inception. On 1 April 2012, the Respondent chose to resign as a director. Further, as part of the parties consideration of their financial structure at that time, the parties agreed, on advice from their accountant, that the Applicant should transfer his interest as a joint proprietor of the parties’ Suburb J and Suburb S properties, to the Respondent such that the Respondent became the sole proprietor of the properties, for asset protection reasons. The Applicant did so as he trusted the Respondent.

   40Whilst the parties were already working hard in their respective employments, they wished to find some further means of earning income, in particular, because they intended for their two children to attend private schools. In 2013, through a business broker, they were introduced to the operators of JJ Business, an independent outlet, at EE Street, Suburb FF. The operators were Mr Z and Ms Z. The business was owned through a company set up by Mr and Ms Z in which only Ms Z was a director. An agreement for the sale of the business to the parties was entered into by Ms Z as sole director of P Pty Ltd and the Applicant and the Respondent as directors of the company (albeit the Respondent was not a director). The agreement for the sale of the business was a fairly basic document. The purchase price was stated as the sum of $900,000 and subject to stock in hand valuation at the time of settlement. The agreement was dated 2 December 2013. The agreement provided that the parties would pay an initial sum of $420,000 to secure a 50% share in the business, with the balance to be payable by them at the expiration of 12 months from the payment. This period of 12 months was later requested to be extended by the parties. Ms Z extended the term to an 18 month period. The agreement also provided for a weekly payment to the company in the sum of $2,000. These payments were made by Ms Z on behalf of P Pty Ltd to the Respondent on behalf of the company for a period of approximately 18 months, commencing in July 2014, that being the time of the initial payment. The Respondent received such funds in cash as requested by her.

   41In or about July 2014, the parties borrowed further sums from the NAB being $429,000, with $420,000 of these funds were paid to Ms Z. Upon that payment being made, the Respondent commenced to receive the $2,000 weekly payment referred to above. Following the expiration of 18 months, the parties were still not in a position to complete the purchase of the business. Ms Z was consistent in her request of the parties that they complete the contract entered into between them. The parties did not have the necessary funds. The Respondent continued to collect, on behalf of the company, a weekly payment from Ms Z. That amount was decreased by Ms Z to $1,500 weekly and payments continued for another approximately 12 months. The Respondent collected such monies from July 2014 until 17 November 2016. In total, she collected $156,000 approximately of $2,000 payments and $64,000 approximately of $1,500 payments. The Respondent and Applicant had agreed between them that the Respondent would apply these funds to the mortgage liabilities, and any other liabilities, including taxation liabilities of the company, which were owing. The Applicant was happy to leave the responsibility for running the company with the Respondent as she was, in his words, “financially more savvy due to her professional experience as a manager.”[17] This was despite the fact that the Respondent was no longer a director of the company, a fact unknown to Mr and Ms Z, before 17 November 2016. The evidence of Ms Z was that the Respondent had represented herself as a director of the company at the time of the signing of the agreement to purchase the business, and thereafter. The Court accepts the evidence of Ms Z as to this matter and indeed as to the totality of her evidence. The Court found Ms Z to be a reliable and credible witness.

   [17] Applicant’s affidavit filed and sworn on 21 October 2020 at paragraph 34.

   42In October 2015, the company was placed in liquidation due to its outstanding taxation liabilities not met from the monies received by the Respondent. Contrary to her assertions and evidence, the Respondent was extensively involved with the liquidator in respect of the liquidation of the company. During the course of that involvement she advised the liquidator that the company took a business loan from the NAB in the sum of $420,000 for a failed project. The Respondent further advised the liquidator that the parties’ personal assets secured the NAB business loan as both the Applicant and Respondent were guarantors of the company’s debt. Despite the liquidation, the Respondent continued to collect the cash amount of $1,500 each week from Ms Z. The Respondent collected such monies until 17 November 2016. It is clear that such monies as collected by the Respondent were monies belonging to the company, but not paid to the company. They were expended by the Respondent.

   43In her discussions with the liquidator from 2015, the Respondent claimed that the company had lent a sum of $388,500 to a Mr AA. This loan did not exist, but rather, was a fabrication of the Respondent. In her affidavit evidence, the Respondent asserted the Applicant created this loan. The Respondent’s evidence was unreliable and not credible in that regard. When Mr BB, in the course of the liquidation, and on 6 November 2015, queried the Respondent about the loan to Mr AA, the Respondent claimed that Mr AA was from Country V, and that he had “big connections” there. Following the company borrowing the business funds from the NAB, the company allegedly (as claimed by the Respondent) issued two cheques to Mr AA totalling $388,000. Thereafter, the Respondent forwarded to the liquidator a claimed (by her) contract between Mr AA and the company. The signature of the husband which appears on that document is not the signature of the Applicant. The Court concludes that the investment agreement with Mr AA was prepared by the Respondent, and was a fake document. The Court accepts the evidence of the Applicant as to these matters. He was throughout, a reliable and truthful witness.

   44In December 2015, the parties and their children moved into rental accommodation in Suburb D to be closer to their children’s schools. In June 2016, the parties separated for approximately one month after the Respondent obtained an IVO against the Applicant. Thereafter, the family remained living in the Suburb D property until separation on 16 October 2016, when the Applicant left the Suburb D property and took up rental elsewhere. He resumed occupation of the Suburb D property on 2 December 2016 until 3 March 2017, in the Respondent’s absence. He cared for the parties’ children. The Respondent travelled to Queensland with a companion. She subsequently returned and resumed her care of the children which continues to the present time.

   45Mr and Ms Z were evicted from the JJ Business premises in about mid 2018 following alleged unpaid rent and outgoings by them. They are in the midst of litigation at VCAT. They have a counter-claim against the landlord. The parties were unable to complete their purchase of the business pursuant to the contract of sale and the $420,000 is lost to them. No weekly payments or any other payment in respect of the business has been made by Ms Z to either of the parties since November 2016. Nor will any payment be made in respect of the failed business sale. The Applicant and the Respondent have lost their investment in the JJ Business save that they received a considerable sum as set out above by way of ongoing, weekly, payments of cash between 2014 and 2016.

   46In weighing up the contributions of the parties, including those of the Applicant as set out in paragraphs 17  (b) and (c) above, I find that the Applicant’s financial contributions exceeded those of the Respondent. Notwithstanding that, the Respondent’s contributions both financial and to the welfare of the family during the marriage and post separation were significant and recognition of the nature, and extent of each of the parties contributions lead the Court to be satisfied that there has been an equality of contributions by each of the parties.

   SECTION 75(2) MATTERS

   47The Applicant was born in 1974 in Country V. He is now aged 46 years. The Respondent was born in 1978. She is now aged 42 years. Both parties are in good health.

   48The Applicant is a professional by occupation. The Respondent was a manager with the LL Organisation until her determination to cease such employment. Neither party has worked in their usual occupations, since ceasing same, the Applicant in November 2019 and the Respondent in October 2016. Since that time, respectively, each of the parties has been in receipt of Centrelink Benefits. The Applicant received a job seeker benefit of initially $943.00 and then $913.16, each fortnight from March 2020, and the Respondent received a benefit of $628 each fortnight as a full time student. She has remained as a student in receipt of government benefits for 4 years. Those benefits have included parenting payments. Both parties have a capacity to earn income. The Applicant’s capacity is greater by virtue of his qualifications and not having the primary care of the children.

   49The Applicant has endeavoured to establish other businesses albeit not successfully. N Holding Pty Ltd (A.C.N. …) was incorporated by him on the 29 April 2019. The Applicant is the sole director of the company. The sole shareholder of this company is his family trust KK Family Pty Ltd. This company operates one bank account with Commonwealth Bank of Australia (‘CBA’) (BSB: …, account number: …85) which was opened on or about May 2019. The account remains open and had a balance of $17.72 as at 30 March 2020.[18]

   [18] The Applicant’s affidavit sworn on 26 June 2020 at page 3.

   50N1 Pty Ltd (A.C.N. …) was incorporated by the Applicant on the 29 April 2019. The Applicant is the sole director of this company. The sole shareholder of this company is N Holding Pty Ltd. The company opened a bank account with CBA on 22 May 2019 (BSB: …, account number: …74). This bank account was closed on 6 August 2019 and was never operated by the Applicant. Bank fees were deducted and the Applicant had to pay $22.12 in order to close the account. The company never traded.

   51N2 Pty Ltd (A.C.N. …) was incorporated by the Applicant on the 29 April 2019. The Applicant is the sole director of this company, the sole shareholder of the company is N Holding Pty Ltd. The company opened a bank account with CBA on 22 May 2019 (BSB: …, account number: …66). This bank account was closed on 6 August 2019. The bank account was never operated by the Applicant. Bank fees were deducted and he had to pay $22.12 in order to close the account. This company never traded.

   52N Services Pty Ltd (A.C.N. …) was incorporated by the Applicant on the 29 April 2019. The Applicant is the sole director of the company. The sole shareholder of the company is N Holding Pty Ltd. The company opened a bank account with CBA on 22 May 2019 (BSB: …, account number …58). This bank account remains open and the last balance on 30 March 2020 was $19.42.

   53KK Family Pty Ltd (A.C.N. …) was incorporated by the Applicant on 29 April 2019. He is the sole director and the sole shareholder of this company. The company opened a bank account with CBA on 22 May 2019 (BSB: …, account number: …82). This bank account was closed on 6 August 2019. The bank account was never operated by the Applicant. Bank fees were being deducted and he had to pay $22.12 in order to close the account. This company never traded.

   54GG Pty Ltd (A.C.N. …) was incorporated by the Applicant on 23 August 2017. He is the sole director and sole shareholder of this company. The company opened a bank account with Westpac Banking Corporation (‘Westpac’) (BSB …, account number: …41) in about 2017. The Applicant operated this account as an everyday transaction account. Since becoming unemployed in about November 2019, the Applicant has transferred monies paid to him by Centrelink into his NAB Account to this company account. The Applicant uses this account for his everyday expenses and transactions. The balance in this account as at 11 May 2020 was $12,867.17.

   55The companies owned and controlled by the husband do not provide to him any ongoing income. N Services Pty Ltd had an outstanding taxation debt of $90,802.14 as at 26 October 2020.

   56The Respondent’s complaint about the failure of the Applicant to make full and frank disclosure is not substantiated. Her demand at the end of the trial for a forensic audit report to be prepared was met with an adjournment being made available to her and a further opportunity to put what evidence she wished before the Court. She did not wish to proceed down that path and withdrew from her application. The Applicant had, in good faith, transferred his ownership of the Suburb J property to the wife for asset protection reasons. Following separation, the wife ultimately returned to reside in the property with the children of the marriage. She then determined to sell the property and sought to retain the proceeds. She did not inform the Applicant of the sale. It was purely fortuitous that he discovered its sale prior to settlement. Monies could be kept from the Respondent’s total control and preserved to enable a property adjustment as between the parties contrary to the Respondent’s intent.

   57Although the Respondent sought the Court take into account her claim that the Applicant had failed to make full and frank disclosure and had engaged in inappropriate conduct, and penalize the Applicant in respect thereto, in her closing submissions the Respondent did not seek to proceed with that part of her application. That was an appropriate concession on her part. The Applicant did in fact make full disclosure of his financial affairs and complied with rule 13.07 of the Family Law Rules 2004 (Cth) which provides relevantly as follows:

   Duty of disclosure--documents

   The duty of disclosure applies to each document that:

   (a)is or has been in the possession, or under the control, of the party disclosing the document; and

   (b)is relevant to an issue in the case.

   58The parties’ children reside in the primary care of the Respondent. The final parenting orders are such that the Respondent mother’s obligation in respect of providing for the daily care and physical and emotional support of the children, far exceeds that of the Applicant father.

   59The Applicant both paid child support payments to the Respondent for the benefit of the children, and fell into arrears. He has reduced by $25,901 those arrears. He has made an application to the Child Support Agency to alter his assessed amount payable to take into account his unemployment and payment of approximately $44,000 in private school fees for the children. Following the parties’ separation, the Applicant received a $10,422 refund from DD School. The Respondent told the Applicant to use such funds “for the children’s other school necessaries.”[19] The Applicant did as instructed and applied those funds to the payment of school fees owing to CC School. This payment forms part of the $44,000 as claimed by him.

   [19] Email from wife to husband and his then lawyer dated 16 December 2016.

   60Additional to the payment of school fees, the Applicant very clearly contributed to the funds retained by the Respondent at around the time of separation and shortly thereafter totalling approximately $75,056 (as referred to in paragraph 17(b) above) together with the subsequent unaccounted for rental receipts of approximately $30,000. He had none of those monies available to him. Such funds were expended by the Respondent on the family and in circumstances where the Respondent was then not in employment. The Applicant continued to be employed. The Applicant also received the Suburb R rental bond monies of $3,358 and withdrew $1,650 from a joint account of the parties around the time of separation. The Applicant also applied such funds as he had obtained for the benefit of the family.

   61Each of the parties should have a standard of living that is reasonable in all the circumstances. That can be achieved by a distribution of the remaining funds between them in an apportionment that allows each of them to obtain comfortable accommodation, albeit, it may be rental, the Respondent for herself and the children, and the Applicant for himself.

   CONCLUSION

   62What orders satisfy s. 79(2) of the Act when taking into account the factual findings set out above.

   63It is the Applicant’s case but not that of the Respondent that the parties’ contributions were equal. The Applicant concedes that there should be a 10% adjustment of the net asset pool in favour of the Respondent having regard to s. 75(2) matters and, in particular, the Respondent’s ongoing care of the children of the parties. He seeks an order for a payment to him of 40% of the net asset pool of the parties and submits to the Court that such alteration of the property interests of the parties is a just and equitable outcome in the circumstances of the case. The Applicant seeks otherwise that the parties each retain any other property in their respective possession, custody or control, and further, that each party indemnify the other with respect to any liability which may attach to such property. He does not seek a splitting order of the Respondent’s superannuation entitlements in circumstances where he has no superannuation benefits but clearly that inequality is a matter the Court has taken into account.

   64I am satisfied that the justice of the case requires an adjustment in the Respondent’s favour having regard to the various factual matters set out above, indeed as conceded by the Applicant in his proposed orders. The Court is of the view however that that an adjustment beyond that proposed by the Applicant is just and equitable in the circumstances of this case.

   65The orders which the Court shall make will provide a 37% distribution of the Trust funds remaining to the Applicant and a 63% distribution of the funds remaining to the Respondent. Additionally, the Respondent shall retain her superannuation entitlements and the monies in the jointly held NAB account. Otherwise each party shall retain those payments already received by them.

   66The effect of the orders which the Court shall make is as follows. The asset pool as calculated is $851,273.29. A percentage adjustment of 63% to the Respondent is $536,302.17. The Respondent has already received $185,255.81 and will receive pursuant to the orders of the Court the further sum of $21,040.58 a total of $206,296.40. The monies to be paid out of the Starnet Legal Trust Account to her are thus $536,302.17 less $206,296.40 = $330,005.80 approximately. The percentage adjustment to the Applicant of 37% is $314,971.18. The Applicant has already received $160,269. The monies to be paid out of the Stranet Legal Trust Account to him are thus $314,971.18 less $160,269 = $154,702.18 approximately.

   67The funds available to each of the parties shall enable each to be housed (the Respondent with the children) comfortably. The Applicant should additionally be able to pay his debts including any child support assessed amount. Both parties have an earning capacity previously exercised whilst they had young children to care for. The children are now more independent, but the Respondent will have some restriction in respect of her income earning ability which the Applicant shall not have. The percentage adjustment as provided for has taken that matter into account.

I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Hartnett.

Associate:       

Dated:            14 April 2021