Gissing and Sheffield (No 3)
[2015] FamCA 1019
•20 November 2015
FAMILY COURT OF AUSTRALIA
| GISSING & SHEFFIELD (NO 3) | [2015] FamCA 1019 |
| FAMILY LAW – DE FACTO RELATIONSHIP – property dispute – Federal Circuit Court makes declaration under s 90RD that the parties were in a de facto relationship for 15 years and whether the case guardian for the respondent had acted diligently and appropriately in relation to discovery – assessments as to contribution – where the Court found that the respondent’s contributions outweighed those of the applicant because of initial contributions – but that an adjustment was necessary by virtue of s 90SF(3)(r) for issues associated with unreasonable non-payment of mortgages, consequent mortgagee sales and unexplained income from a business partnership – absent some explanation, adjustment to achieve a fair outcome necessary – consideration of wastage arguments. |
Evidence Act 1995 (Cth)
| Family Law Act 1975 (Cth) |
| Browne BJ and Green NL (1999) FLC 92-873 |
| APPLICANT: | Mr Gissing |
| RESPONDENT: | Ms Sheffield |
| FILE NUMBER: | MLC | 2548 | of | 2012 |
| DATE DELIVERED: | 20 November 2015 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 28, 29, 30, 31 July; 24, 25, 28 September 2015 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Robinson |
| SOLICITOR FOR THE APPLICANT: | Mathews Family Law |
| COUNSEL FOR THE RESPONDENT: | Ms Stoikovska |
| SOLICITOR FOR THE RESPONDENT: | Carew Counsel Pty Ltd |
Orders
All existing orders for inspection, collection or sale of chattels are discharged.
Forthwith, the applicant and the case guardian do all things required to instruct Carew Counsel (the relevant stakeholder) to pay the remaining net proceeds of the sale of the Property H units to the applicant and who shall be entitled to any interest accrued thereon but also responsible for any tax as a consequence.
Unless agreed otherwise, by 4 pm on 19 February 2016, the respondent pay to the applicant $60,000.
The applicant forthwith provide to the respondent through her solicitors, the jewellery contained in the safe belonging to the respondent and to the extent that he has possession or control of the following items, the applicant make available to the case guardian for collection forthwith, the respondent’s handbags, sunglasses, personal clothing and any specific items of furniture that were in her possession prior to the commencement of the relationship.
The case guardian forthwith make available to the applicant all of his designated personal property:
(a) kept in Adelaide; and
(b) kept in the K Street shop,
and for that purpose, the applicant nominate the days upon which he will arrange for a person or carrier to collect the items at his expense before 19 February 2016. If the items are not collected by the agent of the applicant on the designated days, the items shall fall into the sale provisions of paragraph 6.
The stock at:
(a) “GG Business” at K Street, Suburb L;
(b) the various storage locations;
(c) the property quarantined in Adelaide;
(d) the property that had been agreed to be sold in Adelaide but not recorded as sold by I Pty Ltd,
be all sold by J Pty Ltd at a time, and on conditions, to be determined by the Melbourne Manager of J Pty Ltd including any stock in Adelaide and the net proceeds be divided equally between the parties.
To give effect to these orders (and the matters referred to below), each party shall, as soon as practicable, sign any necessary document.
Save as to issues of costs, all extant applications of the parties are otherwise dismissed.
Should any party seek costs arising out of these orders, such application be made by written submission and filed and served by no later than
15 January 2016 with such submission being endorsed with the fact that it has been so served on the other party and any recipient of such submission have until 29 January 2016 to file and serve any response and such response be endorsed with the fact that it has been so served on the other party and upon receipt of any such application for costs, it or they be determined in chambers.
THE PARTIES AGREE AS FOLLOWS:
A. the applicant shall retain, and the respondent shall relinquish any interest in:
(a)the monies received by him as a result of the orders made on 23 January 2015; and
(b) his superannuation interests.
B. the respondent shall retain and the applicant shall relinquish any interest in:
(a) The premises as N Street, O Town;
(b) the Green and yellow Prestige vehicles;
(c) the boat sheds at 1 and 2 P Street, Suburb Q;
(d) the shares in her name; and
(e)the monies received by her as a result of the orders made on 23 January 2015.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Gissing & Sheffield (No 3) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 2548 of 2012
| Mr Gissing |
Applicant
And
| Ms Sheffield |
Respondent
REASONS FOR JUDGMENT
After a four day hearing in the (then) Federal Magistrates Court in 2012, O’Sullivan FM made a declaration under s 90RD of the Family Law Act 1975 (Cth) (“the Act”) that Mr Gissing and Ms Sheffield had lived together in a de facto relationship for almost 15 years from 1995 to March 2010. His Honour’s decision has not been the subject of an appeal nor, during the proceedings before me, was there any suggestion that an application was to be made under s 90RH to set that declaration aside.
Section 90RH enables a court to set aside the earlier declaration if facts or circumstances arise which were not previously known to the person affected by the declaration at the time of the filing of the initial application. Absent such an application, the declaration stands.
The effect of the declaration is that it remains the judgment of the Court (s 90RE)and more importantly, founds the jurisdiction to make orders altering the property interests of the parties to that relationship (s 90SM) once the Court is satisfied that the de facto relationship is broken down.
Having regard to the nature and extent of the evidence in this Court, there can be no doubt that the de facto relationship declared by the earlier court, has broken down.
After making the declaration, the Federal Magistrates Court transferred the substantive proceedings to this Court.
In these proceedings, Mr Gissing was the applicant and Ms Sheffield the respondent. However, on 29 November 2013, Senior Registrar FitzGibbon made an order that Mr R be appointed as the case guardian for Ms Sheffield. The Senior Registrar relied upon evidence that was not opposed by Mr Gissing. The affidavit material included a report by a psychiatrist Dr S. The Senior Registrar found that Ms Sheffield was unable to think calmly and rationally about the court matters and that presented an almost insurmountable issue and difficulty for her legal representatives in being able to obtain instructions and act upon them. The Senior Registrar then noted the proposed case guardian had known Ms Sheffield for 25 years and that they were friends. The order was therefore justified.
Rule 6.09 of the Family Law Rules 2004 provides:
A person may be a case guardian if the person:
(a) is an adult;
(b)has no interest in the case that is adverse to the interest of the person needing the case guardian;
(c)can fairly and competently conduct the case for the person needing the case guardian; and
(d) has consented to act as the case guardian.
Rule 6.13 provides:
(1)A person appointed as the case guardian of a party:
(a)is bound by these Rules;
(b)must do anything required by these Rules to be done by the party;
(c)may, for the benefit of the party, do anything permitted by these Rules to be done by the party; and
(d)if seeking a consent order (other than an order relating to practice or procedure), must file an affidavit setting out the facts relied on to satisfy the court that the order is in the party’s best interests.
(2)The duty of disclosure applies to a case guardian for a child and a person with a disability.
In these proceedings, strident criticisms of the case guardian were made by counsel for the applicant. However, two important things must be said. First, the appointment was made without opposition but secondly, no application was made for removal. The stinging attack on the case guardian was about his objectivity. I find there is some justification for that assertion.
The role of a case guardian is difficult even in circumstances where that person is well acquainted with the litigant in need. The senior registrar was satisfied the appointment was appropriate based upon acquaintanceship of over 25 years. But so too, the applicant knew of that acquaintanceship; their dealings had gone back many years.
Both the case guardian and the applicant described each other as a liar. Nothing in the evidence of the applicant justifies a finding that he was untruthful.
There is a fine line between lying and sloppiness in the drafting of evidence in written form. The case guardian conceded that he had not been as careful as he should have been and indeed, observed on one occasion that his evidence in chief had been rushed and should have been altered. There were too many errors in the affidavit material for me to just describe his approach as sloppy. The combination of his unusual relationship with the respondent and his unjustified portrayal of the applicant in a very poor light meant that I could not rely upon the accuracy of much of his evidence.
THE IMPORTANCE OF RULE 6.09(b) AND (c) HERE
Historically, an appointment of a guardian was designed to ensure that someone was answerable to the court on behalf of a disabled litigant.
In addition, orders were made to enable crucial decisions affecting the litigant to be properly and responsibly made. Cost implications were always a serious consideration. It is troubling in this case that the case guardian conceded under cross-examination that the respondent was not reliable about information she gave him. He did not say that in his affidavit of evidence in chief but knowing that, the burden of continuing in the case guardian role increases.
The difficulty in presenting evidence adds an additional responsibility for a case guardian particularly about discovery. There were examples of an obsessive-like pursuit by the case guardian of items such as cars but in respect of other matters, little attention to detail. I have taken into account the duration of the relationship and the enormous discovery process encompassing 30,000 to 50,000 documents. The size of that problem does not obviate the obligation on the case guardian to protect the interests of the respondent and be candid with the Court. That is particularly so where the case guardian was challenging the truthfulness and the objectivity of the applicant.
In Kannis v Kannis (2003) FLC 93-135 a case under the old rules, the Full Court described the role of the case guardian (then Next Friend) as:
The role of the Next Friend is to conduct litigation and provide appropriate instructions to so do. The appointment of a Next Friend is also necessary to enable a decision to be given which will be binding on the person under a disability.
It is also relevant to observe that the case guardian must pursue the legal and equitable interests of the litigant, he must also ensure that costs are not unnecessarily incurred and that settlement options are properly pursued because of the financial interests of the litigant at stake (see Masling v Motor Hiring Company (Manchester) Limited [1919 2 KB 538 at 541 and Stevenson v State of Tasmania [2005] TASSC 33).
The objectivity of, and the role of, the case guardian here
The case guardian consistently denied there was a de facto relationship between the applicant and the respondent. He gave evidence for the respondent in the Federal Circuit Court (that is, prior to becoming the case guardian) and maintained before this Court that he had never seen a relationship other than a business one. He described the respondent as living alone and that he had never seen the applicant at her premises. He described conversations said to have been with the applicant indicating disdain for the respondent.
The case guardian’s relationship with the respondent went back many years but his language indicated it was platonic or business. In a letter written in January 1999 by a solicitor, on his instructions, to the respondent, he demanded a large sum of money. This was written not long after the applicant began the relationship with the respondent. The letter set out how the case guardian had provided money over a number of years. The solicitor’s letter said:
On my instructions, it is clear that this money is owed by you.
The letter ended by indicating that if the sum of $163,371 was not received within seven days, the solicitor had instructions to issue proceedings against the respondent.
It would be unusual to see a case guardian one minute suing the respondent and then later protecting her interests but that seems to have all been part of the unusual circumstances of this case. From a legal perspective, it was hard to see from the letter whether the large sums of money involved were said to be loans or gifts.
The case guardian confirmed that he had posted the letter to the respondent and he thought that was about one month after it was written. He was quick to point out that he had “written off” his claim and had not since pursued it. However, in April 1999, he personally wrote to the father of the respondent making reference to another arrangement that he had with the respondent (no doubt through her second-hand dealers business) to sell her father’s watch. He had been upset about the watch being sold for less than his view of its value.
In the letter to the respondent’s father, he spoke of having undertaken the “course” that he had until Christmas 1998 “whilst in a state of deceptive happiness based on the fostered illusion of a joint investment for the future”. He then concluded his sentiments by saying that he felt that he was no longer needed and had been “dismissed”.
The letter concluded that he had difficulty conducting a civil conversation with the respondent and that her father should “contact her current partner (the applicant)” and provided the relevant telephone numbers. When challenged about this letter, the case guardian indicated that this was all purely business. I do not agree. The case guardian’s affidavit in the earlier proceedings indicated that he spent a lot of time with the respondent even to the extent of naming dates and hotels. I am satisfied that there was an intimate relationship of some kind such as to cause the case guardian to provide substantial sums of money to the respondent and he had become upset when he was replaced by the applicant. I find that has contributed to his loss of objectivity.
A second peculiarity of the January 1999 letter was that the original was produced (as one might expect on the basis that it was posted to the respondent) but on it, the case guardian had written. Although he described the document as a photocopy, I find that it is the original. It has hole punch marks in the side to suggest that it has been taken from a two ring binder. The applicant had been given a copy of the letter in discovery but it contained no handwriting and no plausible explanation was given as to how that occurred. All the case guardian said was that it was “surprising”. A careful examination of the photocopy shows that there are horizontal lines which are consistent with the points at which the folds in the original document are obvious. It was put to the case guardian that he was a liar and his response was that this was “grasping at straws”.
The handwriting on the original makes it plain that it was written around the time that the case guardian wrote the letter to the respondent’s father. No other conclusion is open. This confusing picture suggests the case guardian fabricated the document but I do not have enough evidence to understand why that would occur.
The case guardian said he had reported the applicant to Centrelink and the police. He reported the applicant’s lawyer for some misdeed said to be associated with his perception of misconduct of the applicant. All of these seem to have come to nought. In relation to at least one incident associated with a motor vehicle, he said that he had reported the matter to the police but they had done nothing about investigating it. Absent some evidence to show impropriety on the part of the applicant (and I find there is none), this type of conduct confirms my view that the case guardian lacked objectivity. The applicant was cross-examined for three days yet nothing I heard, indicated an absence of honesty or integrity on his part.
Discovery by the case guardian was handled poorly. For example, when inquiries were made about whether the respondent had a superannuation interest, he simply dismissed the inquiry saying he had rung an Australian Tax Office superannuation telephone number to be told there was nothing recorded. That arose because an undated document on a MTAA Industry Superannuation Fund letterhead showed that the respondent had joined the superannuation fund and her “preferred beneficiary” was the case guardian.
The evidence of the case guardian was that he had pursued the information but I consider he knew more about it than that. The respondent had said he had not employed the respondent. It transpires that his company had and as such, he was the person responsible for paying the money into the fund. The case guardian’s response was obtuse and distracting.
The superannuation issue was not pursued and it may be that the evidence of the case guardian is correct. However the MTAA document contains a membership number and the name of the underwriter yet no evidence was led about inquiries beyond the telephone call to the Tax Office.
Other examples of concern about the evidence of the case guardian can be seen in the following:
·In his affidavit, he described a particular vehicle as a “blue” ute but he acknowledged that the details were wrong and that the vehicle described was red;
·he conceded he gave wrong dates in respect of the “steady income” from a property known as Property T in South Australia in paragraph 27 of his affidavit (notwithstanding that it was argument rather than evidence);
·He argued (again inappropriately) that there should be an adjustment in the respondent’s favour reflecting the applicant’s “wastage/negative contributions” because the mortgage on one of the real properties fell into arrears causing penalties and interest but then said “value not known”. What he did not say was that the respondent had drawn down the mortgage to about $65,000 and in early 2013, that is, after the conclusion of the relationship, had spent $27,000 on shares with his advice in a company in which he was a shareholder;
·A financial statement failed to disclose money that the respondent had listed as having been lent to Mr U. Whilst I accept the case guardian was unaware of the respondent lending Mr U the money, Mr U was his witness. Had attention been paid to the respondent’s documents and in particular, her banking records, it presumably would have been found;
·He accused the applicant of failing to maintain records and not being diligent with the provision of information to the respondent’s accountant Mr V. He said that such lack of attention resulted in “penalties and interests (sic) incurred by (the respondent) with the Australian Taxation Office – E$67,000”. That was incorrect and misleading. He had access to documents which should have and would have enabled him to know that they were not incurred;
·He referred to the applicant retaining profits from the sale of “stock post-separation” the details of which, he described as “not known” but he did not mention the respondent retaining the income from Property T nor what happened to assets that the respondent had sold. That inquiry should have been made and information provided to the Court as to what has happened subsequent to the conclusion of the relationship;
·In respect of the Chevrolet and a prestige motor vehicle, the case guardian claimed these vehicles had been dismantled without the respondent’s knowledge or consent and that loss had been incurred as a result of the applicant’s actions. In cross-examination, he conceded that that was incorrect and that there was no evidence of the applicant’s having dismantled those vehicles;
·He deposed to the fact that the respondent had a vintage motor vehicle in 1995 which he had gifted to her before she moved to Melbourne and he set the price of that at $6000. He conceded that the dates were wrong. Errors such as that can occur but this was a positive statement of fact about which he had personal knowledge as he was the one who gave the respondent the car;
·He claimed he filed an application seeking orders for the sale of two units which he described as having been opposed by the applicant yet when cross-examined, he conceded that that was not accurate and indeed, it was a drafting error; it was the other way around;
·Orders for the sale of various items (made in 2014) had not been complied with because he was trying to get the best possible price some other unstated way;
·He accused the applicant of having “provided insufficient financial records to support” assertions in respect of contributions towards the purchase or expenses associated with one of the units, yet, he conceded that the relevant information was provided through discovery in March 2015. The dilemma was that he had filed his affidavit after discovery;
·At paragraph 234 of his affidavit, the case guardian said he had returned all documents that he had removed from the unit in which the applicant had been living but then conceded that he still had some. When asked to confirm that he had refused to return them to the applicant, he agreed.
One very contentious issue in the proceedings related to the sale of Unit 1 and Unit 1 Property H by mortgagees. The mortgage was in arrears because the respondent stopped making payments. The applicant obtained valuations and suggested that he take those properties as part of any entitlement he may have in the proceedings. The case guardian did not agree.
In cross-examination of the applicant, it was put to him that when sold, Property H returned substantially higher values than had been indicated in the valuation he obtained. An inference from the cross-examination was that the applicant had seen a bargain and was taking advantage of the situation whereas the case guardian had taken a responsible view to decline the transfer. Exactly why that happened remains uncertain but it transpired that the case guardian too had a valuation which was very close to that obtained by the applicant. In circumstances where the case guardian thought the mortgages should be paid by the applicant,
I conclude he refused to transfer the properties because he did not want the applicant to have them.
The case guardian’s evidence was that the respondent ceased paying the mortgage because she did not have the funds. That was not true.
The respondent also stopped payment of the fees for storage facilities based on his assertion of her impecuniosity. Records showed that there was money coming into the respondent’s shop business.
When questioned as to why if there was such a regular deposit, the mortgage could not have been paid, the case guardian claimed the financial matters were for the accountant. He said he had nothing to do with the accounts. That was an irresponsible answer because even if he had no knowledge of the respondent’s daily activities and her true financial position, he neither inquired of her nor of the accountant to undertake any such task.
The arrears of mortgage and storage fees began to accrue because of the respondent’s refusal to pay. But the timing of that was most concerning.
It began almost immediately after the Federal Circuit Court pronounced the declaration that the applicant and the respondent had been in a de facto relationship. In addition, the case guardian assisted in borrowing money to buy shares so he must have discussed her financial position.
He conceded he had advised her to make the investment.
Based on the stream of revenue, the capacity to borrow, the reality of the Federal Circuit Court judgment and the fact that the respondent was continuing to conduct a business whilst the applicant was unemployed, the action taken by the case guardian leads me to conclude that he was not objective nor properly carrying out the task required of him by the law.
The standard of proof
This Court’s determinations about those matters and what follows are made on the balance of probabilities (Evidence Act 1995 (Cth) s 140).
The applicant as a witness
I had three days to watch the demeanour and responsiveness of the applicant in the witness box. He was appropriately challenged by counsel for the respondent and many documents were put to him. Taking into account the amount of material amassed over 15 years, I found the applicant a truthful witness.
O’Sullivan FM in the declaration proceedings preferred the evidence of the applicant over the respondent. In that proceeding, the respondent had given evidence personally. That Court’s finding has not affected my view. The applicant was able to rationally and calmly explain why things had occurred and where he did not know the answer, he said he would search documents and, it would seem he did so. I found nothing of significance about which to criticise the applicant.
I find that wherever there was a conflict in the evidence between that of the applicant and the case guardian, I prefer that of the applicant.
The case guardian’s affidavit
To compound matters, a substantial portion of the case guardian’s trial affidavit was struck out as inadmissible. Hearsay creates a problem for case guardians but not an insurmountable one. Here, the case guardian chose not to oppose the striking out of much of his evidence.
The background of the business
The applicant and the respondent had, for the entirety of their relationship, conducted businesses. Generally their main activities concerned retail sales which necessitated them sourcing and acquiring large amounts of goods but there were also personal acquisitions such as cars and jewellery.
The respondent continues to conduct the parties’ retail business from a shop in an inner Melbourne suburb yet, despite her business acumen, she was not available to give evidence leaving the provision of the evidence to the case guardian. The applicant on the other hand, became a social security recipient after the separation but currently is not so.
His unchallenged evidence is that he is supported by his mother.
The controversial issues
The issues for determination were set out succinctly in the applicant’s outline of case document. They were:
·The nature and extent of the various contributions of each party and in the case of the applicant, those his parents made;
·Whether the applicant’s parents received stock and money (of the parties) without the respondent’s permission;
·Whether the respondent wasted property by:
o Allowing mortgages to remain unpaid resulting in mortgagee sales;
o Allowing a real property to remain either vacant and/or unrenovated thereby causing loss;
o Not paying storage fees causing a sale by the storage proprietor;
o Failing to maintain a boat shed;
o Not expeditiously selling stored goods resulting in unnecessary storage fees; and
o Continuing to rent the retail shop whilst making no profit.
· Whether a property adjustment should be made in favour of the applicant because of the disparate futures of the parties.
Brief background
The applicant is 51 years of age and unemployed. The respondent is 68 years of age and still conducts the business. She lives at the back of the shop in what appears to be very basic conditions. One witness, Mr U, gave evidence that he made a shower facility for the respondent there because she had been washing in a bucket. Why that is so remains a mystery because an examination of the bank account statements for the period between May 2012 and April 2014 showed that, whilst the balances fluctuated, there was always a credit balance.
In the latter months of 2012, the balances in the respondent’s account were between $10,000 and $22,000. In 2013 and into 2014, for most months, the balances were around $6000. I have already mentioned the argument about the capacity of the respondent to pay mortgages and storage fees. This financial evidence must put that argument to rest. I am satisfied that the respondent chose not to pay the mortgages and storage fees.
What is the respondent’s financial position?
In a financial statement of the respondent but sworn by the case guardian in April 2015, it was said her only income was rental from Property T in South Australia. It was asserted by the financial document that all of that income was spent by the respondent on rent (for her shop), utilities, insurances and other expenses. No income was declared for the Melbourne business. Her tax returns for 2012 and 2013 showed a loss. That was because of the rent she pays but she was able to buy stock to sell. Thus, the financial position of the respondent remains, at best, mysterious. I conclude in the circumstances that she is able to support herself.
Whilst the case guardian acknowledged responsibility for investigation and inquiry in respect of the conduct of the case, he distanced himself from any evidence about financial and accounting issues saying that all of that was the province of the respondent’s accountant. It was not.
The accountant Mr V
Mr V is the respondent’s accountant. He swore an affidavit as far back as 6 July 2012. Whilst well out of date, that was relied upon by the case guardian about financial matters. Mr V was not required for cross-examination.
Mr V’s evidence was only directed to criticism of the applicant for not efficiently and expeditiously providing documents for the preparation of tax returns for the period of the relationship. This was said to be about the applicant’s wastage of money.
The applicant had been in control of the finances yet tax returns were not completed for many years until Mr V prepared them in 2012.
Whilst the applicant may have been the person who undertook those responsibilities, that did not obviate the obligation on the respondent to do the returns over those same years. Both applicant and respondent were partners and responsible for their own tax returns regardless of the partnership return. The responsibility for the partnership accounts fell to the applicant.
In a badly worded paragraph in his trial affidavit filed in April 2015 (paragraph 27(g)(xi)), the case guardian said the applicant’s failure to “maintain” books and records for the businesses and his failure to provide the information to the accountant in a timely manner “resulted in” accounting fees (which turned out to be about $13,000) “as well as penalties and interests (sic) incurred by (the respondent) with the Australian Taxation Office”. He then added “E$67,000”. I have found that to be untrue. No doubt fees were incurred but that was because of the many years of returns.
Other witnesses
In about November 2011, a solicitor acting for the respondent (but under the guiding hand of Mr V) wrote to the applicant to hurry him along with assisting in finalising the returns.
Apart from the applicant and the case guardian, there were only a handful of other witnesses.
Dr W is a psychiatrist whose evidence was not challenged.
He examined the respondent in March 2015 and opined that she had a Generalised Anxiety Disorder, a Major Depressive Disorder and an Alcohol Abuse Disorder. He described her psychiatric ill health as of a chronic, moderately severe degree and that she needed psychiatric help.
The case guardian also relied upon the evidence of Mr U. It is important that I deal with the evidence of Mr U separately because he is a creditor of the respondent (but it would appear not the applicant) having undertaken a variety of works that might be described as “clean up” of Property H. I found Mr U evasive and unreliable. He too appears to have had some form of relationship with the respondent other than just his professional one. At the conclusion of his evidence, he broke down in tears inexplicably.
There was also an affidavit filed by Mr X, a solicitor who provided evidence about his dealings with the respondent over the question of unpaid rental by a tenant. That witness was not required for cross-examination but his evidence did not advance the issue of the claim of wastage.
Similarly, the case guardian relied on the evidence of Ms Y. She was not required for cross-examination. Her evidence was of her observations as to the state of the Property H units. Because I find that the units were used for storage as much as for occasional occupation, it is hard to see how this evidence is relevant to my determination.
The applicant’s mother was his witness and she was required for cross-examination. This evidence related to monies said to have been provided and lent to the parties as well as contributions of a physical nature that were made.
The applicant’s mother presented as a forthright and honest witness.
The mother was responsive and appeared not to be partisan. I thought she did the best she could bearing in mind her age, the time that had elapsed over the period of the relationship and that she was required to recall events that had involved her late husband. I have accepted her evidence.
The issues
The positions of the parties
The applicant sought orders that there be an overall division of the non-superannuation assets so that he received 65 per cent including that he retain the lump sum he received as a part property settlement on 23 January 2015. In addition, he sought to retain the funds currently held on trust which were said to be about $583,000. Those came from the proceeds of sale of one of the Property H properties.
The case guardian filed an amended response on 24 April 2015 and his outline of case document indicated that was still the position he adopted on behalf of the respondent. She sought an overall division of 70 per cent of the assets (including superannuation) in her favour and then a variety of orders in relation to the distribution of assets in specie along with provision for various liabilities.
The one significant difficulty pervading this case which has handicapped each party concerns chattels and stock. Orders have been made previously for the disposal of items but they have been less than successful. Each party now seeks fresh orders.
The applicant sought an order that the remainder of the stock:
i.At the shop in K Street;
ii.Stored at various locations in Melbourne;
iii.Set aside as quarantined in Adelaide; and
iv.Agreed to have been sold but not so,
be sold by auction forthwith and the net proceeds divided on the percentages set out above.
The respondent sought an order that the stock at K Street and other items also be sold by J Pty Ltd (and in respect of the Adelaide stock, by I Pty Ltd) and that the net proceeds of that be divided on the percentage that she sought of the overall assets.
Both parties have had orders about the disposal of chattels and both seek much the same sorts of orders albeit there is a dispute about how the net proceeds should be divided.
The material relied upon
Each of the parties read into evidence the list of affidavits set out in their respective case outline documents. All of those have been taken into account for the purposes of these reasons.
What do these proposed divisions mean?
As will be seen below, leaving aside the unknown value of the stock and chattels, there is an amount of known value (excluding superannuation) of something in the vicinity of $2.4 million. By the orders he sought, the applicant wanted something in the vicinity of $1.56 million which means that he would retain what he has, be given the trust proceeds and the respondent would have to sell something to satisfy the balance of his entitlement. There are items which have been valued that could satisfy such an order.
The respondent sought that the applicant retain the partial property settlement he received early in 2015 and be given a small amount such as about $120,000 out of the trust proceeds.
For reasons to which I shall turn, neither of those outcomes is a just and equitable result for both parties.
The chattels
An order can only be made if the Court is satisfied that it is just and equitable. It is impossible to know how much is likely to result from chattels and stock sales.
Throughout the duration of their relationship, the applicant and the respondent conducted their retail business in a formal partnership (albeit not for the entire time). Even after the relationship came to an end, albeit the respondent appears to have continued to run the shop and has retained the revenue, there were occasions when she requested the applicant to provide her items for sale in the shop.
I find there were times when the applicant was paid for things and others where he was not. The significance of this evidence however lies in the nature and fact that they were equal partners and until recently, behaved that way.
Whilst I shall turn to the first step in a property determination which is to identify the property of the parties, (see Stanford & Stanford (2012) 247 CLR 108) that does not mean that the property has to be taken as a “pool”. Various approaches to the division of assets including an asset by asset approach or a global approach can be used.
The assessment of parties’ contributions was considered in Norbis v Norbis (1986) 161 CLR 513 where Mason and Deane JJ said at 523 that :
For ease of comparison and calculation it will be convenient in assessing the overall contributions of the parties at some stage to place the two types of contribution on the same basis, ie on a global or, alternatively, on an “asset-by-asset” basis. Which of the two approaches is the more convenient will depend on the circumstances of the particular case. However, there is much to be said for the view that in most cases the global approach is the more convenient.
Here, because the parties conducted this business as a partnership for many years and I have no real understanding of what will be the outcome of any sale or disposal of what I think is probably all or mostly partnership property, nor any indication of any tax consequences such as goods and services tax and possibly capital gains tax on such sales, I consider the fairest way is to separate chattels and stock out from the other divisible property. I intend to treat it separately. The same assessment process of considering contributions and the statutory factors in s 90SF has to be applied but as the parties set up their partnership this way and were content to conduct it as equal partners, I think it is just and equitable not to depart from that equality. The net result should therefore be that partnership property to be sold should be divided equally.
Jewellery
The exception to that relates to jewellery. The evidence supports a conclusion that it was acquired predominantly prior to the relationship by the respondent from her mother. The applicant’s position has always been that when it suited the respondent (and him) those items were sold by the partnership. However, the applicant’s evidence supports the conclusion that it was never intended to be partnership property even if those sales did occur. I find that it is just and equitable for the jewellery to be returned to the respondent.
The respondent also sought the return of her personal clothing, shoes, handbags, sunglasses and furniture. In respect to the furniture, it was said that these were items owned prior to cohabitation. Those items should be returned to the respondent for the same reasons as just set out.
In her proposed orders, the respondent said she wanted an order to return to the applicant at his expense, his items stored at the K Street shop. That seems logical for the same reasons.
The disputed evidentiary issues
Over a number of days, many issues were canvassed in cross-examination. Most of the issues were relevant to the question of contribution or what assets there were for division. Accordingly, these matters need individual consideration.
Property E
The applicant asserted that at the commencement of cohabitation, he owned the Property E. He had purchased it for $105,000 about six years before and he explained that he could not recall the precise detail but remembered that it was sold in 1999 for $135,000. He asserted, and I accept, the property was subject to a mortgage but he did have equity in it. The equity was modest.
County Court proceedings
Prior to this relationship, the applicant had been in a relationship with another person. That relationship ended in a dispute that went before the County Court of Victoria. Documents established that a settlement was reached and he paid his former partner $15,000. That was paid over a period of time by four tranches.
The thrust of the respondent’s argument was that the money came from joint resources and the documentary evidence establishes that receipts were written for cheques that were drawn in both the name of the applicant and the respondent. On any view, the amount was modest.
The fact that the cheques were drawn on a joint account does not necessarily mean that there was a joint contribution. I have no evidence that the payments were treated as a drawing or loans by the respondent from the partnership nor any evidence from the respondent to indicate that her consent was not given to the use of what, on its face, might be joint funds.
The applicant asserted that he paid his debt and because I have no reliable evidence from the respondent, I would not presume the payment was made by both. I conclude that the applicant took responsibility for the payments albeit that they came out of the joint account. To the extent that the respondent argued that there should be an offsetting of any contribution that the applicant made, I do not draw that conclusion on the evidence.
Another part of the dispute related to the questions of the costs that the applicant incurred in those County Court proceedings. The applicant conceded that he paid his legal fees out of the joint account but I have to draw the same conclusion as I have just done. No evidence was produced about how accounting within the partnership was undertaken. That is odd bearing in mind Mr V completed the financials and returns very recently. No doubt, if there was a partnership advance to the applicant, Mr V would have addressed it because he told the applicant he had what he needed to complete returns and it was too late to provide further documents.
Nothing turns on the issue of the County Court proceedings.
The wine collection
The applicant said that he brought into the relationship a wine collection worth approximately $20,000 from the period where he had worked prior to the relationship on Z Resort between 1987 and 1988.
Counsel for the case guardian put to the applicant that there was no such wine collection when the relationship commenced because he had sold it and given the money to his parents. He conceded that some of it had been sold but claimed the “cellar” had been worth about $100,000. Again, nothing turns on this issue but I am satisfied on the evidence of the applicant and my general view about his credibility, there was equity in the wine collection. It was his evidence that most of his money prior to the relationship had been spent purchasing wine on a wholesale basis and it was then on-sold. When he was challenged about that statement, he was asked whether he had any evidence and he said that he had and the question was taken no further.
I am unable to find what the exact wine contributed but I find that it was part of the applicant’s initial contribution.
Antiques
The applicant also said that he had antiques valued at approximately $30,000. Normally such a statement would be deemed inadmissible on the basis of an unqualified opinion but in this case, I accept that the applicant has now had 15 years’ experience in that trade. This too should be added to his initial contribution.
The Chevrolet
Significant time was spent during this trial on the respondent’s motor car described as a Chevrolet. The costs associated with these proceedings would not have justified that pursuit. There were questions about whether the car had been driven from Adelaide, whether it was drivable, whether it was dismantled by the applicant or by other parties, whether it was repaired and indeed, where it had been.
I accept the applicant’s evidence that in 1995 when the relationship commenced, the vehicle was not operational. Indeed, it was not driveable. I accept the evidence of the applicant that he met the respondent in 1993 in Melbourne so he would be able to say that prior to their relationship, the vehicle was already in Melbourne. I accept the evidence of the applicant that when he saw the vehicle in 1995 it was in the care of a smash repairer and had been disassembled. In the smash repairer’s business, parts went to other contractors and between the applicant and the respondent, the intention had been to rebuild it.
Among the documents discovered was the insurance details and from that, the case guardian had concluded that the vehicle was operational. An examination of the document refers to it being “laid up cover” which the applicant thought was for the vehicle in a disassembled form.
That was the applicant’s hypothesis and I accept it is probably right.
At the end of the relationship, the Chevrolet was still in storage. The case guardian knew about the Chevrolet and was keen to pursue its whereabouts. When the case guardian asked for details, the applicant drove him to the storage facility. The applicant declined to assist in removing a cover on the Chevrolet and that led to telephone calls to police and lawyers. The case guardian seems to have concluded that the applicant was deliberately hiding the vehicle. He called the applicant a thief. I do not understand why the assertion was made but it brought the relatively cooperative relationship between the two men to an end.
It is hard to understand how there could be any foundation for an assertion that the applicant was hiding the Chevrolet. Documents about its existence were available and the case guardian knew about it. There were numerous items in a variety of storage facilities around Melbourne. Nothing I heard from the applicant indicated that he was trying to gain some advantage by hiding the Chevrolet.
But most importantly, in his amended initiating application filed on
27 March 2015, the applicant proposed that an order be made that the respondent retain the Chevrolet. Accordingly, I do not understand the obsession of the case guardian but it caused significant time loss in the hearing.
The respondent’s antiques
In his affidavit, the applicant conceded that the respondent had antiques at the commencement of their relationship. He was able to identify from photographs that some of them were still in existence. He was asked what had been sold during the relationship and unsurprisingly, with a relationship of 15 years, he said it was difficult to be precise but he was able to identify a valuable print and a plate.
The case guardian had sufficient knowledge to enable instructions to be given to counsel to put to the applicant that one of the prints had been taken to a repairer for the frame to be fixed. The applicant was able to tell the Court that a repairer came to the shop but was abused by the respondent. This was sometime late in the year 2000 and ultimately, a deal was done by which the repairs were paid for by the handing over of a Swiss watch.
As to the whereabouts of the picture now, the applicant had no idea but presumed that it was still with the repairer because it had never been collected by the respondent. To the extent that the respondent (and indeed the applicant) wishes that this painting be part of the chattels sale, she should make the necessary inquiries.
Property T
It was common ground between the parties that when the relationship began, the respondent owned commercial premises in South Australia that had been given to her by her parents about two years prior to the relationship commencing. The disputed issue was about the encumbrance. According to the applicant, there was a fully drawn advance loan with the ANZ Bank in the amount of $100,000 which would mean that the equity was about $230,000. Again, documents were of assistance. In November 1993, the ANZ Bank wrote to the respondent about refinancing options over Property T by way of a fully drawn advance. There is a specific reference to the payment out of an existing loan of $155,000. The date of that letter coincides with the timing of the gift by the respondent’s parents.
In April 1994, still prior to the relationship commencing, further options were suggested by the ANZ Bank but there is a clear reference to a debt level of $149,000. The conclusion that I have drawn is notwithstanding the offer in 1993 by the ANZ Bank, the respondent did not take up any of the options.
In May 1994, the Bank approved a fully drawn advance to “restructure” existing loans.
There is no specific documentary evidence to establish the level of debt at the time cohabitation began but on any view, there was indebtedness and I am satisfied that it was somewhere around $100,000. I accept that records no longer exist or are impossible to acquire.
Both the case guardian and the applicant otherwise agreed that the value of the property was $330,000 at the time the relationship commenced and is now valued at $820,000 with an encumbrance of $17,000.
The case guardian’s position was that the nearest date he could ascertain was 1999 when the debt level was $64,000. I accept the evidence of the applicant. In my view, at the time the relationship commenced, there was an equity of approximately $200,000 in that property.
The rent from Property T and the income from the shop
Property T had been rented for most of the relationship and had been a source of income. I do not know whether the rent was partnership income or declared by the respondent as hers. The applicant’s evidence, which I accept, was that he was involved in the management of the rental arrangements. Importantly, that income continued and was retained by the respondent after the cessation of the relationship. The case guardian’s evidence was that from the income, the respondent has paid tax, utilities, insurance and the mortgage.
In a financial statement filed on 24 April 2015 and sworn by the case guardian, he said the respondent’s income was only from Property T rental which he said was $1300 per week. But, he did not know what the income was from the second hand dealing business in K Street.
The respondent’s tax returns for 2012 and 2013 were put in evidence by the applicant. Each showed income but not from a partnership.
The respondent disclosed rent from Property T consistent with the case guardian’s evidence. The former partnership business “GG Business” appears as her other source of income. In 2012, it showed sales of $20,488 but purchases at cost of $6255. Once expenses were taken out, there was a net loss of $22,000. In 2013, a similar picture emerged. It is apparent that Property T revenue is supporting the unviable second business. The stock on hand was shown at a book value of $8000. That synopsis shows the respondent gaining about $400 per week on stock purchased at $120 per week but with rent alone on the shop of $600 per week. None of that makes economic sense but any loss must be borne by the respondent.
As against that synopsis, the rental from Property T was said to be covering the respondent’s expenses but the mortgage was only $127 per week. There was no justification for the lack of evidence about the shop because, as was established in cross-examination, in 2012, for a period of eight months, the respondent banked $95,000. On the basis that Property T income was $1300 per week, I conclude that if it was deposited into those same accounts, it would have amounted to about $45,000. $50,000 therefore of revenue (as distinct from income) remained unexplained even taking into account the tax returns.
The same financial statement showed no tax, limited insurances, no loan repayments other than the mortgage and otherwise $200 per week for the respondent to live on.
Thus, whilst accepting that Property T income stream was significant throughout most of the relationship, the comprehensive financial position of the respondent remained unsatisfactory and unclear.
The partnership
As earlier indicated, there was no dispute between the parties that from the commencement of the relationship, they conducted their business affairs as a partnership and contributed equally. That came from the evidence of the applicant in response to a question put by counsel for the respondent. On the assumption that the question was put that way on instructions, I have presumed that there has never been a dispute about that.
Non-financial contributions
In his evidence, the applicant referred to non-financial contributions including those of his parents. Some of these were disputed.
Based on the evidence of the applicant and also his 77 year old mother who was subjected to cross-examination, I find that she assisted in the partnership and the applicant’s father undertook various handyman tasks. Those activities varied from shop management through to gardening and repair-type activities.
It was put to the applicant that his mother had been compensated for her work in the shop. In part, she had because it was conceded at times that particular items were taken by the applicant’s mother as some form of “contract” but he maintained that they were properly paid for. In my view, nothing turns on this issue.
These are all matters that have to be assessed and given weight in assessing the various contributions of the parties.
The parties were conducting a commercial partnership for gain and each was happy that these various contributions were being made to further their interests. For example, the applicant’s mother was happy to do as she did because she liked to keep active. Nevertheless, the applicant and his parents did assist in a variety of ways.
The boat shed’s maintenance
One disputed issue about non-financial contributions concerned maintenance of two items of property known as boat sheds. The applicant had asserted that he had undertaken maintenance when it was needed because of their deterioration. Counsel for the respondent put to the applicant that any money spent came out of joint funds and, by inference, the work was modest.
The applicant indicated that he had paid cash to labourers. Counsel put to him that he was making it all up. He then obtained an affidavit from the labourer and she was not required for cross-examination.
Importantly as it assists my determination as to the strength of the credibility of the applicant, the labourer, Ms AA, attached to her affidavit, photographs she took including of the applicant on a ladder painting the side of the boat shed. Further, when challenged about spending money on the boat shed repairs, the applicant produced Bunnings receipts. This whole exercise therefore was an enormous waste of not only the costs of the parties but of the Court’s time.
Property M
In 1996, only some months after the relationship began, the parties purchased a property at Property M. The property was registered in the name of the respondent. The purchase price was $95,000, ten percent of which came from the partnership account and the balance was borrowed in the name of the respondent alone by providing security over the property to the National Australia Bank.
Very little turns on this issue but it was still disputed. The major concern seemed to be who provided the deposit. It was put to the applicant that the respondent had sold an antique plate for $8500 which was deposited into the business account and the deposit was then paid. Bearing in mind in a pool of in excess of $2 million worth of assets, $8000 spent in 1996 is not significant but it again showed the depths to which the parties would each go to attack the credibility of the other.
When it was put to the applicant that the plate provided the source of funds, he said it was not but rather that it came from the business account. He was uncertain (unsurprisingly) where the plate money had been deposited.
The respondent would have the Court draw the inference that because money was taken from a joint or business account, it was a joint contribution. The sale of a plate may or may not have been deposited into a business account. The money could also be seen to have been directly attributable to an asset owned by the respondent prior to the relationship commencing. There were no details provided to the Court about how the accounting arrangements were set up when the partnership was commenced. The Court was not provided with information about whether loan accounts were created or how stock owned by each of the parties was introduced into the various balance sheets of the partnership. No details were provided as to how drawings were accounted for notwithstanding there was a clear understanding between the parties that they were equal partners.
It would therefore be unsafe for a court to draw a conclusion that the sale of a plate was the source of the funds for the deposit on Property M. If the property was purchased personally rather than in the partnership, there would have been tax implications but none of that evidence was provided.
Accordingly, I am satisfied that the only inference I should draw from the applicant’s evidence is that the parties contributed jointly to the purchase and their joint resources contributed to the mortgage. No explanation was given nor was the applicant challenged as to why the property was purchased in the respondent’s name alone. His evidence on the question of the joint equitable ownership was unchallenged.
I find accordingly that Property M was part of the joint venture.
Unit 1 and Unit 1
The question of what happened with Units 1 and 2 in Property H was hotly contested and each unit was the basis for an argument about wastage and inappropriate use of funds notwithstanding that at the end of the day, sales albeit by the mortgagee resulted in the parties having half of their assets reflected in cash.
In 1997, the parties purchased Unit 1. The purchase price was $275,000 but the acquisition was in the sole name of the respondent. The unchallenged evidence of the applicant was that he signed the contract and the deposit was paid from the partnership account. The receipt appears to also have been in the parties’ joint names. Virtually all but $55,000 of the purchase price was borrowed and the mortgage payments were thereafter made from the business account.
The unchallenged evidence of the applicant is that significant work was then done on Unit 2 including removal of part of the ceiling, taking up terracotta tiles in the rear courtyard, gutting the bathroom and kitchen and various other works. The applicant’s father assisted. The parties then moved into live on what was described as a mezzanine level.
An issue that became a significant dispute was what was stored at the unit. The unchallenged evidence was that a lot of the shop stock was kept there and even used for display purposes so that customers could see what was described as a 1950s furniture.
In the middle of 2003, Unit 1 came up for sale and the parties decided to purchase it so that they could demolish the dividing wall with Unit 2 to make one big unit.
$300,000 was the purchase price of Unit 1 and again moneys were borrowed by way of mortgage and a redraw facility was arranged using the Property M property. Again the property was purchased in the respondent’s name alone.
Tenants were then put into Unit 1 and as they changed from time to time, the unchallenged evidence of the applicant is that he cleaned, maintained and painted the unit sometimes with assistance of his parents. He said that his parents paid for regular cleaning and maintenance of the swimming pool.
In 2008, a commercial firm of real estate agents managed the tenancy arrangements.
The lock out at Property H
It is common ground that the relationship between the parties came to an end in about April 2010. Around that time, the respondent locked out the applicant from access to Unit 2. There is no dispute that at the time the parties’ relationship came to an end, the applicant was living in Unit 2. At times prior to that, both parties lived there. At other times, both parties lived in the K Street shop premises.
A number of photos have been tendered in evidence as to the condition of Unit 2. The photos depict cardboard boxes, plastic bags, bicycle wheels, furniture pieces and paintings. To the untrained eye, it looks a complete mess but I am cautious about being critical bearing in mind that the parties in a business that required storage facilities. I accept the particular evidence of the applicant that they used the premises for the purposes of display.
The case guardian’s argument that Unit 2 was in a mess was said to be all the responsibility of the applicant. There is no dispute that there were clean-up costs. The ending of the relationship also brought about the end of the source of financial support for the applicant. Being locked out of the unit did not assist the applicant. The respondent demanded that the applicant remove his items from the unit so that it could be tenanted. That obviously ignored the applicant’s equitable rights.
I am satisfied that the respondent’s contribution is still greater than that of the applicant. In making that finding, I have taken into account the initial contributions, the efforts of the partnership, the assistance of the applicant’s parents and the significant value in Property T income stream. Notwithstanding my earlier assessment that the initial contributions by the respondent were double that of the applicant, taking into account the amount of money that was then involved and the duration since then, my view is that the assessment in percentage terms should be 55 per cent to the respondent and 45 per cent to the applicant.
Section 90SF(3)
The Court is obliged to consider the matters set out in s 90SF(3). I propose to do those matters sequentially.
There is a significant age difference between the parties but there is no suggestion in the evidence from either party that age affects their earning capacity. Age can only be relevant to the question of earning capacity or the cost of the parties in the future bearing in mind their health and how they would be likely to live by comparison to the lifestyle of the past. Age in this case therefore is of little relevance.
The health of the parties is uncertain. I have the evidence of Dr W to indicate the precarious health of the respondent but I accept that simply means that the respondent will have to find a new way of life and will only have limited resources upon which to live. She will however have Property T income and failing her retention of that asset, its proceeds.
The applicant is unemployed and receives a low income health care card but does not receive Centrelink benefits. He was challenged about his capacity for employment having regard to his previous occupations. He confirmed that he had worked in hospitality and quality restaurants sometimes as a manager and sometimes as a waiter but beyond that, I know little about his prospects or his health. It seems to me that both parties are in a similar positon.
Neither party has commitments to support other persons so each will have sole responsibility for their own future financial support. Neither party is eligible for a pension and the superannuation of the applicant is small. A small amount in this case means that it is unlikely even with ten or so years more of working life, it would dramatically increase in value to give him security for the future. I know little about the respondent’s superannuation entitlements (if any) are but I think I can fairly conclude that they would be minimal even if such a policy did exist.
The Court is obliged to take into account the standard of living of the parties but to make allowances for such as are reasonable in the circumstances. These parties have lived a frugal life. Nothing would seem to me to suggest that the situation will change for either of them in the future.
Neither party has sought maintenance that would enable them to commence a business or re-establish themselves.
I have already addressed the issue of Mr U and his claim as against the respondent and it is not suggested in this case that on the amount of money that will be available for division that Mr U will not be paid.
Although s 90SF(3)(j) refers to maintenance, it is also relevant to the question of what contribution each party has made to the earning capacity, income, property and financial resources of the other.
Neither party seems to have established a relationship with any other person upon whom they could rely for assistance by virtue of the cohabitation.
Each of the parties in this case will have some cash arising out of the orders I propose. In the case of the respondent, she will not have accommodation but she will have the income stream. She still has the capacity to dispose of other assets such as boat sheds which seem to be surplus to her needs but no doubt she will take advice.
Both counsel in final address agreed that these various factors cancelled each other out. Save as to the issue to which I shall now turn, I agree.
Section 90SF(3)(r)
Section 90SF(3)(r) requires the Court to take into account any fact or circumstance which, in the opinion of the Court, the justice of the case requires to be taken into account. This is the point at which all of the various arguments about wastage and conduct become relevant.
I propose to give a loading in favour of the applicant because of:
· The use to which the respondent has had from the income from Property T offset against which, is her living expenses;
· The use that the respondent has had in respect of the stock and the proceeds of its sale in the shop albeit the tax returns show it was modest;
· The unexplained drawings by the respondent;
· The loss associated with the items disposed of in the storage facilities;
· The expenses incurred in relation to the repossession of the Property H units and the unpaid mortgage payments even taking into account the higher than anticipated sale outcome; and
· The loss on the shares on the assumption that the actions were unilateral by the respondent and most likely drawn from funds to which the applicant had at least an equitable entitlement.
The mortgagee costs for the repossession are quantifiable. Storage fees were said to have amounted to $80,000 but stock had to be stored.
The respondent drew $66,154 from the Rescom Account. The lost property from the sale of the stored items is unquantifiable but it can be included in the storage fees paid from the proceeds. I conclude that at least $100,000 and probably higher is unaccounted for.
How to approach the adjustment
The ultimate adjustment cannot be determined until it is clear what assets the Court is dividing between the parties. It is dangerous to apply a percentage method without considering the underlying value of what each party is receiving.
The assets and liabilities
The parties were in agreement about valuations. For my convenience, I have rounded down various figures. The list is:
Cash in trust $582,700
Stock proceeds 5,100
The advance to the applicant 600,000
The advance to the respondent 200,000
Property T820,000
Less mortgage 17,000 803,000
The three significant motor cars 160,500
The two boat sheds 125,000
The shares 6,800
Sub-total$2,483,100
The applicant claimed a tax liability of $13,800. It is not clear to me how that is referrable to the years of the relationship but I shall take into account that he has that obligation to meet. I do not propose to add it into the table set out above. In the same way, there may be further expenses for the respondent associated with taxes from the sale of the units but I understand from the outline of argument provided by the respondent that $48,000 has already been paid for that purpose. It was not suggested that there would be any further costs.
What is missing from the table is the stock in the business. For the reasons already set out, I do not propose to endeavour to quantify those in some way. They will be divided as I have indicated on an equal basis.
I have also excluded from the table of assets the applicant’s superannuation of $25,999. He is a long way from retirement and I am unsure how he could access it now. It ought not be simply added into the pool of assets as it does not fit into the same category as the other assets. The approach to superannuation was set out in Coghlan and Coghlan [2005] FamCA 429, (2005) FLC 93-220, (2005) 33 Fam LR 414 and the Court there indicated that if it was treated separately, superannuation had to be assessed in the same way as other assets under s 90SM. I do not know where the funds came from. To the extent that the superannuation was contributed to by the applicant from resources within the partnership as distinct from his own personal entitlement from the partnership, the evidence did not assist. The respondent had the opportunity to continue with her superannuation fund and chose not to pursue the existence of that member account. As the parties had set up their lifestyle in that way, I see no reason to depart from what they have set up.
The final submissions
Each counsel made final submissions ranging across the evidence that the Court had heard. As I have indicated, there was a concession that the factors for the purposes of s 90SF(3) cancelled each other out save as to the one mentioned.
The respondent submitted that because of what the respondent had at the commencement of the relationship, the ratio of contribution could be seen as to be 75 per cent to the respondent and 25 per cent to the applicant but then there were the contributions by the respondent towards the payments to resolve the applicant’s earlier de facto relationship dispute. I have already made findings in respect of those matters and I shall not repeat them.
The other observation made by counsel for the respondent in final address was that the task in respect of the disposal of the numerous items of stock was “impossible”. I agree but the Court cannot leave the issue and accordingly, orders will be made as best the Court can resolve the issue.
What does each party finally seek?
The applicant seeks 65 per cent as an overall outcome. If he was to achieve that, he would have to receive just over $1.6 million in circumstances where he currently has simply $600,000 from the money so far advanced. In other words, he would have to receive $1 million or thereabouts further.
The respondent seeks that the applicant only receive 30 per cent in rough terms which is $745,000 and again, he already has $600,000 meaning that he would have to be paid a further $150,000 or thereabouts but not have the trust money.
Each of those mathematical equations does not provide a just result for both parties. I have already found that the contributions of the respondent exceed those of the applicant. I find that the adjustment for the purposes of s 90SF(3) should not be just a nominal one. There is every likelihood that the list of assets has been depleted over the four years by in excess of $100,000 when taking into account Property T income, the costs on the mortgagee sale, the losses of storage fees and sold property. A 5 per cent adjustment of the list of assets above is about $124,000.
In my view the appropriate outcome in this case is for the applicant to retain what he has, receive the proceeds of the sale of the remaining Property H unit and a further $60,000. He will retain his superannuation but he also has his obligation to pay tax. In my view, that amounts to nearly 50 per cent of the known assets. He will have a home and much of his legal fees should have been paid by the advance that he received in January. He will therefore have a significant amount of cash from such a settlement but he will also have some further money from the sale of all of the bits and pieces that are still to come.
For her part, the respondent should also have paid her legal fees because she received an advance of $200,000 in January and she will have Property T with its strong income stream and various assets that she could convert if they are surplus to her needs together with what is not known. Some of those assets will be needed to be applied to pay the amount due to the applicant. The respondent also has to deal with Mr U.
In my view, these orders as set out at the commencement of these reasons are a just and equitable outcome for both parties.
I certify that the preceding Two Hundred and Sixty Six (266) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 20 November 2015.
Associate:
Date: 20 November 2015
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