Herman and Herman - [2009] FMCAfam 1295

FEDERAL MAGISTRATES COURT OF AUSTRALIA

HERMAN & HERMAN

[2009] FMCAfam 1295

FAMILY LAW – Property – non-disclosure – add-backs – contribution – section 75(2) adjustment – just and equitable order.

Family Law Act 1975, ss.75(2), 79

Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143
Norbis v Norbis (1986) 161 CLR 513
AJO v GRO (2005) FLC 93-218
Pierce v Pierce (1998) FLC 92-844
Robb & Robb (1995) FLC 92-555
Townsend (1995) FLC 92-569
Weir (1993) FLC 92-338
Williams & Williams [2007] FamCA 313

Applicant:

MS HERMAN

Respondent:

MR HERMAN

File Number:

SYC 1535 of 2007

Judgment of:

Altobelli FM

Hearing dates:

17 & 18 & 20 February & 27 July 2009

Date of Last Submission:

27 July 2009

Delivered at:

Sydney

Delivered on:

11 December 2009

REPRESENTATION

Counsel for the Applicant:

Mr Richards

Solicitors for the Applicant:

Moira Ryan Lawyers

Counsel for the Respondent:

Mr Hodgson

Solicitors for the Respondent:

N/A

ORDERS

That the husband pay to the wife by way of property settlement the sum of $400,391 (“the capital sum”) within 14 days.
That in the event the husband shall fail, refuse or neglect to pay the whole or part of the capital sum within 42 days of these orders, the husband forthwith do all acts and things necessary to place the property known as and situate at Property P (“the home”) on the market for sale by public auction at a reserve price as agreed between the parties or failing such agreement within 7 days in the amount of $510,000 and he shall do all acts and things necessary including the execution of all documents necessary for the sale of the said property by public auction and in particular shall:
(a)
Appoint an agent for the sale of the property as agreed within

7 days or failing such agreement with an agent as is nominated by the President of the Real Estate Institute of New South Wales;
(b)Execute all documents requested by the Agent including but not limited to the appointment of an auctioneer for the sale of the said property;
(c)Pay the agent any sums requested for advertising expenses or other normal sale expenses in relation to the auction;
(d)Co-operate in every way with the Agent in relation to the auction of the said property;
(e)Attend at the auction sale and negotiate with the highest bidder in the event that the reserve price is not reached and accept the advice of the Auctioneers as to the acceptance of a price less than the reserve price;
(f)Execute Contracts for Sale;
(g)Execute all other documents necessary to complete the sale.
That the husband and wife do all acts and things necessary to procure that upon the sale of the property the proceeds of sale shall be paid in the following manner and priority:
(a)In payment of agent’s commission and auction expenses (if any) due on the sale;
(b)In payment of legal costs of sale;
(c)In discharge of the outstanding first registered mortgage balances;
(d)As to the net balance to be divided as follows:
(i)The capital sum, or the balance thereof outstanding, to the wife including any interest accrued in accordance with the rate prescribed under the Rules of Court;
(ii)The balance then remaining to the husband.
That pending the payment to the wife of the capital sum in accordance with order 1 hereof, the husband be and is hereby restrained from selling, transferring, disposing of, further encumbering or otherwise dealing with the home except for the purpose of making the payment of the whole of the capital sum to the wife in accordance with these orders.
That pending the payment to the wife of the capital sum, the husband be and is hereby restrained from withdrawing, receiving, disbursing, removing or otherwise dealing with the monies in his name in the St George Bank – Advance Mortgage Fund Account No [1] and Cyprus Bank Hurstville Account No [2] except for the purpose of the payment of the capital sum (or any part thereof) to the wife pursuant to these orders.
That the husband indemnify and keep indemnified the wife in respect of any action, claim or demand made against her by any person or corporation by reason or her having been a director, shareholder or officer or employee of [S] Pty Limited including but not limited to the payment of any taxes, penalties or other liability.
Except as otherwise provided in these Orders, the husband and the wife are entitled to be the sole legal and beneficial owners of all items of property including money, motor vehicles, insurances, equities, superannuation entitlements and personal effects currently in the possession or control of each of them respectively as at the date of these orders.
The husband to forthwith make application for refund of withholding tax paid on monies previously held in a bank account in his name and on receipt of the refund pay to the wife 37% of the said amount and provide her with copies of all documentation verifying such refund.
That if either party refuses or neglects to sign or execute any document, instrument or writing or comply with any order contained herein after seven days of being required to do so, pursuant to Section 106A of the Act that the Registrar of the Family Court of Australia at Sydney be empowered to sign and execute such document, instrument or writing on behalf of either party as may be necessary to give full force and effect to orders herein.

IT IS NOTED that publication of this judgment under the pseudonym Herman & Herman is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYC 1535 of 2007

MS HERMAN

Applicant

And

MR HERMAN

Respondent

REASONS FOR JUDGMENT

Introduction

This is an application for alteration of property interests under s.79 Family Law Act 1975 commonly known as a property settlement. The Applicant Husband is 61 years, and the Respondent Wife 49 years old. They married in 1986 and separated in November 2004 after a marriage of 18 years. They have one son [X] who is 17 years old and was due to complete year 12 this year. His time is divided evenly between his parents.

Background

It seems clear from the evidence that at the time of cohabitation the husband had significantly greater assets than the wife. He had equity in a home in Property P, a real estate agency, a company that had been involved in property development work and a number of vehicles. The wife had some furniture, a motor vehicle and a fur coat. The wife concedes that as a result of this, as well as an inheritance the husband received during the marriage, contribution at the date of separation should be assessed as to 55% to the husband. The husband asserts that contribution should be assessed at 75% in his favour. The assessment of contribution is one of the major issues in this case. Apart from the facts asserted above, the case was conducted by both husband and wife on the basis that contribution during cohabitation would be assessed as equal.
The wife argues that contribution in the post-separation period results in a further adjustment to her of 5%. This is mainly because she had to support herself during this period, while the husband supported himself from the joint assets. The wife claims a minor s.75(2) adjustment in her favour. Thus she contends that the final division should be 50:50.
The husband opposes any post-separation adjustment in the wife’s favour. In relation to s.75(2) adjustments he asserts that if contribution is assessed in his favour at 75% he would not be entitled to a s.75(2) adjustment. If it is significantly lower, however, he asserts that the s.75(2) adjustment in his favour could be as high as 25%. Thus, according to the husband, whichever approach is adopted, he gets 75%.
There are some relatively minor issues about the asset pool – both as to add-backs and liabilities, in respect of which I will need to adjudicate.
The wife raises some serious issues about the husband’s credit, and about disclosure, that I will need to decide. Curiously she does not specifically submit that the pool of assets should be greater, or that there should be a s.75(2) adjustment in her favour because of non-disclosure. I will therefore treat these issues as part of her case to achieve a 50:50 property settlement, and to support her submission that her evidence is to be preferred where it conflicts with that of the husband.
There are significant issues in this case about the weight that I give to medical evidence adduced by the husband. When the husband opened his case it was submitted that no s.75(2) adjustment was sought. As the case progressed, however, it became apparent that the husband was, in fact, claiming a 75(2) adjustment in the following circumstances: (a) if the wife sought a s.75(2) adjustment in her favour, or (b) if his contribution was not assessed as he sought. The manner in which the husband’s claim was articulated was most unsatisfactory and potentially prejudicial to the wife. Despite significant and legitimate objection to the admissibility of the husband’s medical evidence, some of it was admitted subject to weight. I will need to deal with this in due course.
When the parties married in 1986 they were both working and remained that way for many years. When [X] was born in 1992 the wife had a few years off work but then returned to work as a [omitted], right up until separation and afterwards. The husband had a few periods of unemployment during the marriage, after he sold his [company omitted], and then after the cessation of his employment as Director and General Manager of a [company omitted]. He is currently unemployed for what he asserts to be health reasons.
When the parties married, the husband’s daughter from his first marriage, [Y] then aged 5 years, started spending time with the husband and the wife. There is a dispute about precisely how much time, and the extent to which the wife participated in her care, such as to warrant a s.75(2) adjustment in her favour pursuant to Robb & Robb (1995) FLC 92-555.
If the detailed history of the parties’ financial and other contributions becomes relevant, I will discuss the same by reference to the issues that I need to decide.

Issues

Having regard to that broad statement of introduction and background, the issues that I need to decide in this case are as follows:
a)the husband’s credit and whether there has been non-disclosure on his part;
b)the pool of assets and specifically whether there should be add-backs of a number of specific assets and liabilities;
c)assessing contribution as at the date of cohabitation, separation and the hearing;
d)assessing whether and, if so, to what extent an adjustment needs to be made under s.75(2);
e)determining what is the just and equitable order to make in this case.

Applicable Law

This is an application that is governed by s.79 of the Family Law Act. Pursuant to s.79(1) the Court is required to make an order as it considers appropriate altering the interests of the parties to the marriage in property. Section 79(2) requires such an order to be just and equitable. The matters that need to be taken into account are set out in s.79(4):
(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 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.
Thus it can be seen that s.79(4) is both retrospective and prospective in its scope and operation. Paragraphs (a), (b) and (c) are retrospective in the sense that a historical assessment of contribution is required. Paragraphs (d), (e), (f) and (g) are prospective in the sense of requiring a consideration of how an order takes into account the future.
Section 79(4) requires the court to consider contribution in the broadest sense: financial, non-financial, made to the welfare of the family, direct, indirect, and directed to acquisition, conservation and improvement of property.
The preferred approach to the determination of an application under s.79 of the Family Law Act is set out in a passage found in the Full Court’s decision in Hickey & Hickey & Attorney-General of the Commonwealth of Australia (Intervener) (2003) FLC 93-143 at 39.
The Full Court states that there are four inter-related steps:
a)Identify and value the property, liabilities and financial resources of the parties; and
b)Identify and assess the contributions of the parties and express them as a percentage of the net value of the property; and
c)Identify and assess the other facts relevant under s.79(4)(d)-(g) including s.75(2) and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
d)Consider the effect of the above and resolve what order is just and equitable in all the circumstances.
One of the legal issues that arises is whether I should adopt a global or asset-by-asset approach to contribution. The authority in this regard is, the High Court’s decision in Norbis v Norbis (1986) 161 CLR 513 per Wilson and Dawson JJ at 534-5. It is clear from this statement of the law that either approach is available to me, in part or in whole. My discretion in this regard should be exercised having regard to the facts of this case.
Another issue in this case is how, precisely, I should weigh and assess the initial contribution of the parties in bringing property into the marriage. In this regard, I need to consider the decision of the Full Court in Pierce v Pierce (1998) FLC 92-844. A useful recent decision of the Full Court examines its earlier decision in Pierce v Pierce together with a later case. In Williams & Williams [2007] FamCA 313 the Full Court states as follows at paragraphs 26, 27, 28, 29 and 32:
26. We think there is force in the proposition that a reference to the value of an item as at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution between the parties Thus where the pool of assets available for distribution between the parties consists of say an investment portfolio or a block of land or a painting that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing of the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in doing so it is equally as important to give recognition to the myriad of other contributions that each of the parties has made during the course of their relationship.
27. In Pierce v Pierce when speaking of the relevance to be paid to initial contributions the Full Court (Ellis, Baker and O’Ryan JJ) referred to Fogarty J in Money v Money (1994) FLC 92-485 at 81,054; (1994) 17 Fam LR 814 at 816:
…respective contributions of the parties over a long period of marriage “offset” the significance which might otherwise be attached to a greater initial contribution by one party…ultimately, when it comes to the trial such a contribution is one of a number of factors to be considered. The longer the marriage the more likely it is that there will be latter factors of significance and in the ultimate the exercise is to weigh the original contribution with all other, later, factors and those later factors, whether equal or not, may in the circumstances of the individual case reduce the significance of the original contribution.
28. The Full Court (Ellis, Baker and O’Ryan JJ) then said at [28]:
In our opinion it is … a question of what weight is to be attached, in all the circumstances, to the initial contributions. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband, regard must be had to the use made by the parties of that contribution.
29. Pierce v Pierce was a case in which the husband brought in $200,000 cash into the relationship. He applied that money towards the purchase of a matrimonial home. He was employed throughout the marriage and supported the wife who, whilst in some paid employment primarily attended to domestic tasks and taking care of the children. The Full Court assessed the parties’ respective contributions to a pool of $320,000 as 70 per cent in favour of the husband and 30 per cent in favour of the wife at the end of a 10 year relationship.
32. In Hunt v Zuryn (2005) FLC 93-226; (2005) 34 Fam LR 169 the Full Court (Kay, May and Boland JJ) allowed an appeal in a property case where a pool of assets of $1.12million had been assessed for contribution purposes as 75 per cent in favour of the husband and 25 per cent in favour of the wife. The Court in allowing the appeal indicated that an assessment of 75:25 fell outside the realms of an acceptable range saying at 79,730; 170:
Such an assessment ought adequately recognise that much of the parties’ wealth can be attributed to the capital growth in the assets introduced by the husband at the commencement of the marriage but at the same time bringing into consideration a myriad of other contributions each made in the course of their relationship.
Accordingly, I must not only identify the contributions of each party, but also assess the weight to be attributed to these contributions having regard to many factors including what has occurred afterwards.
A significant issue in this matter was the alleged non-disclosure of the husband. Attempting to deal with non-disclosure often puts the other spouse to considerable difficulty with regards to investigating their financial affairs. The Full Court in Weir (1993) FLC 92-338 at 79,593–4 made the following statement regarding the duty to disclose and the Court’s powers where non-disclosure has been found:
This Court has pointed out in a line of cases leading up to the recent decision of the Full Court in Black and Kellner (1992) FLC 92-287, that it is the duty of a party involved in property proceedings in this jurisdiction to make a full disclosure of their financial affairs. See also Giunti and Giunti (1986) FLC 91-759, and Mezzacappa and Mezzacappa (1987) 11 Fam LR 957; (1987) FLC 91-853. It is clear enough from his Honour's findings in the present case that the husband had not done so and had in fact pocketed the proceeds of a substantial number of cash sales. It is obvious that in most cases of this nature it is difficult enough for the other party to establish that fact let alone establish the quantum of what has been taken.
It seems to us that once it has been established that there has been a deliberate non-disclosure, which follows from his Honour's findings in this case, then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature…
We appreciate that this is something of a broad brush approach, but, as we have said, where there is clear evidence of non-disclosure as there was here, the Court should not be unduly cautious about making findings in favour of the other party. It has been said by one commentator (O'Ryan and Broadfoot, 5th National Family Law Conference Handbook, p 249) the failure to disclose undermines the whole process of adjudication of proceedings for a settlement of property in that the court is unable to identify the property of the parties, to properly assess contribution, or to properly assess s 75(2) factors.

The issue of property being notionally added back into the property pool also arose as an issue in this matter. The applicable law can be found in the decision in AJO v GRO (2005) FLC 93-218 where the Full Court described the situations in which add-backs are appropriate.
30.    To date, three clear categories of cases have emerged where the Court has determined that it is appropriate to notionally add back to the pool of assets, that is, assets that no longer exist. They are:
(a)     Where the parties have expended money on legal fees. In DJM and JLM (1998) FLC 92-816 the Full Court said at 85,262:
“11.6 For reasons set out in Farnell, s 117 provides that each party to proceedings under the Family Law Act shall bear their own costs unless the Court otherwise orders. Failing to add back monies expended by parties on costs frequently has the effect of defeating the policy of s 117 by permitting the pool of available assets for distribution between the parties to be diminished by any monies that either of the parties have managed to spend on their costs up to the date of trial. We are of the view that the normal approach ought be to add costs already paid back into the pool. Whilst there may be cases where that approach is inappropriate, the reasons why it is not taken ought normally be spelt out.”
(b)     Where there has been a premature distribution of matrimonial assets. In Townsend and Townsend (1995) FLC 92-569 Nicholson CJ as he then was with whom Fogarty and Jordan JJ agreed, said at 81,654:
“In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was to distribute to himself an asset in which the wife had a legitimate interest. In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under section 75(2). It seems to me that the husband has had the benefit of that money. Had he retained, for example, the taxi licence instead of selling it, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case. Accordingly, I am of the view that the correct way in which to deal with the husband’s receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly.”
(c) In the circumstances outlined by Baker J in Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644:
“As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a)     where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b)     where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec.75(2)(o) to applications for settlement of property instituted under the provisions of sec.79.”
31.    As the Full Court said in Browne and Green (1999) FLC 92-873 at 86,360:
“44. We agree with her Honour that the principles stated by Baker J in Kowaliw certainly do not constitute any form of fixed code. They are no more than guidelines for use in the exercise of the discretionary jurisdiction conferred by s 79 of the Family Law Act 1975. Nevertheless, they have over the considerable period of time since they were enunciated, become a well accepted guideline in this jurisdiction – a guideline the use of which assists in the achievement of the important goal of consistency within the jurisdiction.”

Issues about husband’s credit and non-disclosure

The husband was extensively cross-examined by the wife’s counsel. As a result of this I find that he made numerous often significant omissions and errors in his affidavit and financial statements. He minimised his knowledge about his brother’s fraud conviction and was ambiguous and misleading about the nature and financial aspects of his relationship to his present wife, Ms M. He was unresponsive at times in cross-examination, and often demonstrated a cavalier attitude about the need for accuracy in his evidence, and the need for timeliness of disclosure. The totality of the evidence of the husband and the wife leads me to conclude that where their evidence conflicts, the wife’s evidence should be preferred unless the husband’s evidence is independently corroborated. The husband’s counsel submitted that before making such findings I should have regard to the husband’s medical evidence which tends to suggest that his current condition includes lapses of memory. I accept that this is a reasonable inference to be drawn from the medical evidence but it does not explain the deficiencies in the husband’s evidence referred to above. Moreover it does not explain his unresponsiveness and cavalier attitude. Even allowing for memory lapses, I find the husband not to be a reliable witness.
But where does this take the wife in terms of non-disclosure? Apart from add-back issues, the wife’s counsel did not submit that, for example, the husband’s company [S] Pty Ltd had a value that was not disclosed. The case proceeded on the basis that it had no value, and this is quite consistent with the other evidence. It was not submitted, for example, that identifiable assets had been dissipated and should be added back. It was not submitted, for example, there should be a s.75(2) adjustment in favour of the wife because of the husband’s non-disclosure. Thus, despite the finding that the husband is an unreliable historian with a cavalier attitude about disclosure, this is not a case where there is any cause to feel disquiet about the pool of assets, or that the husband has not fully disclosed his income.

The Asset Pool

In the comprehensive joint balance sheet that I was provided by counsel for both parties there are only a handful of items that need a determination.
The husband is entitled to a refund on withholding tax paid on monies previously held in a bank account in his name. The wife asserts that this amount to $8280. I prefer to accept the suggestion of the husband’s counsel that he be ordered to do all things necessary to obtain a refund of this tax, and that it then be divided in accordance with the percentage that I determine in this case. This item may thus be removed from the joint balance sheet.
The wife asserts that there should be an add-back into the asset pool of $14,000 representing a boat insurance claim. The husband agreed in cross-examination that the boat was damaged as a result of his negligence, and that he did pay this out of an account that he agrees should be treated as joint monies. The accident in question happened after separation. I find that the monies should be added back and that the use of these funds to pay the husband’s personal post-separation liability was a premature distribution of matrimonial assets for the purposes of Townsend (1995) FLC 92-569.
The wife asserts that $6100 paid by the husband out of joint funds to pay his Mastercard after separation should be added back. The husband agrees that he used joint funds for the stated purpose, but resists the add-back as the funds were used for his reasonable living expenses, and in particular medical expenses. I do not accept the husband’s argument in this regard. The evidence indicates that he was drawing on joint funds to meet his living expenses over a considerable period of time. Many of these drawings are not in contention. There was a long period of separation. Given the other drawings and the use by the husband of other joint assets in the post-separation period, I do not accept that this drawing was for a reasonable purpose. Accordingly this use of joint funds was also a premature distribution and should be added back to the pool.
I reach the same conclusion for the same reasons about the husband’s Mastercard debt of 9 February 2009.
There are four personal liabilities in the joint balance sheet, two of the wife and two of the husband. These are clearly post-separation debts and used for personal purposes, even though some relate to the proceedings. I note that the parties have already agreed to the inclusion in the asset pool of certain funds they have each paid for legal costs. With regards to all of the liabilities, except for the Mr L debt owed by the wife in the sum of $62,733, I have no hesitation in concluding that they should be excluded from the joint balance sheet, though taken into account in a general sense and under s.75(2). The Mr L debt is more problematic. The evidence indicates that some of this sum was used for post-separation living expenses, and some of it for legal fees. The husband’s counsel concedes that $25,000 should legitimately be added back for her legal fees in circumstances where the husband had access to joint funds for the same purpose. I agree with this. In relation to the balance I prefer not to add this back but rather to consider how the wife supported herself in the post-separation period as a post-separation contribution argument.
Having regard to the matters discussed above I find the asset pool to be:

Asset	Ownership	Value
Asset	Ownership	Value	1.	Property P	Husband	$ 510,000.00
2.	Partial Property Settlement	Husband	$ 104,437.00
3.	Partial Property Settlement	Wife	$ 104,437.00
4.	Advance Asset Management	Husband	$ 293,047.00
5.	Shares Syndicate	Husband	$ 14,446.00
6.	Telstra shares – 4,000 @ $3.68	Husband	$ 14,720.00
7.	Mercedes Silver 2003	Husband	$ 42,000.00
8.	Mercedes Black 2000	Husband	$ 28,500.00
9.	Toyota 1996 – White Landcruiser	Husband	$ 4,500.00
10.	Toyota 1994 Burgundy Landcruiser	Husband	$ 5,000.00
11.	Alfa Romeo 1975 White	Husband	$ 750.00
12.	Peugeot 1998 Gold	Husband	$ 1,250.00
13.	Harley Davidson 1997 Black	Husband	$ 13,500.00
14.	Proceeds of Holden Barina motor vehicle	Husband	$ 4,550.00
15.	Cruise Craft boat 1987	Husband	$ 6,500.00
16.	Rinker Shares 100 - estimated	Wife	$ 1,400.00
17.	Metabolic Pharm Shares – 18,000 @ $0.023	Husband	$ 414.00
18.	IAG Shares - 254 @$3.43	Husband	$ 871.22
19.	St George Portfolio Cash Management Acc	Husband	$ 4,049.00
20.	Contents and Musical Equipment	Wife	$ 8,700.00
21.	Husband's Contents	Husband	$ 3,000.00
22.	St George Cheque Account	Wife	$ 3,500.00
23.	3 Gold Coins	Husband	$ 600.00
24.	Husband's Legal Costs Paid	Husband	$ 19,868.75
25.	Deferred Annuity ING	Husband	$ 40,912.00
26.	St George Bank Superannuation	Husband	$ 192,432.00
27.	Advance Super	Wife	$ 14,041.00
28.	Wife's Legal Costs Paid	Wife	$ 25,806.48
29.	Add Back - Boat Insurance Claim	Husband	$ 14,000.00
30.	Add Back - Commonwealth M'Card 27.11.08	Husband	$ 6,100.00
31.	Add Back - Cash Withdrawal 12.12.09	Husband	$ 2,500.00
32.	Add Back - Commonwealth M'Card 9.2.09	Husband	$ 10,412.67
33.	[S] Pty Ltd	Joint
34.	TOTAL	$ 1,496,244.12
35.	Liabilities	Ownership
36.	Mortgage – Commonwealth Bank	Husband	$ 29,959.00
37.	Mr L	Wife	$ 25,000.00
38.	TOTAL	$ 54,959.00
39.	FINANCIAL SUMMARY
40.	Property	$ 1,496,244.12
41.	Liabilities	$ 54,959.00
42.	Total Net Pool	$ 1,441,285.12

Assessment of contribution

(a) Assets at cohabitation

In her evidence even the wife concedes that at cohabitation the husband had an interest in the former matrimonial home at Property P and owned a real estate agency. There is an issue about what equity there was in this property at the time. She also agrees that the husband had [S] Pty Ltd which was used as the company structure for various businesses during the marriage. In cross-examination she agreed that the husband had three vehicles, a Ghia, Datsun and a Mazda.
Counsel for the husband submitted that the husband’s equity in the former matrimonial home shortly after cohabitation was about $20,000 and I agree that this is a finding available in the evidence, particularly the s.86 Maintenance Agreement between the husband and his previous wife. It was also submitted that the husband’s real estate agency was sold for $145,000 in 1987 less than two years after cohabitation. Again I agree that the documentary evidence support this. The husband deposes to using the profits from a property development conducted through [S] Pty Ltd to both fund the property settlement to his first wife and to discharge the mortgage over the home. The evidence establishes that [S] Pty Ltd did make a gross profit on the sale of a property at Property Y of $165,000 in 1984. Other documents in evidence also tend to establish that most if not all of the profit would have gone to the husband. The husband’s asserted contribution in the very early years of the marriage, based on the assets he held at cohabitation, appear to be correct. The husband’s cross-examination did cast doubt on the specific amounts of money realised from

[S] Pty Ltd, but not on the fact that profits were derived. Also some doubt was introduced about when, precisely, the mortgage over the Property P property was discharged, but this is explained by reference to the subsequent mortgages over that property to finance renovations and later business ventures, all of which were joint in nature. When the focus is kept firmly on trying to establish what assets the husband had at cohabitation and marriage and how they were applied in the early years of the marriage, I conclude that within a matter of two or three years the parties had an almost 100% equity in the former matrimonial home as a result of the initial contributions made by the husband.
Counsel for the wife asserts that this results in an assessment of contribution as to 55% in favour of the husband, or in other words 10% more that the wife. Counsel for the husband asserts it results in an assessment as to 75% in favour of the husband, or 50% more that the wife. The s.86 deed between the husband and his first wife includes a recital to the effect that they agreed the Property P property was worth $110,000 at the time of the Deed in March 1987. The single joint expert appointed to value this property as at February 1984 states that it was $77,000 at that time. I am somewhat sceptical about this because it is plainly inconsistent with the s.86 deed and I doubt whether the husband, who was a [occupation omitted] and seems to have been quite commercially astute in his time, would have paid so much to his first wife if the home were only worth $77000. In any event the actual value at the time of cohabitation is merely one factor I take into account in assessing contribution in the present context. I must also take into account the value to the parties of the Property P property, its current value, and the myriad transactions and contributions made by both the husband and the wife since then. The property in question represents about 34% of the current pool. This is a significant percentage, even taking into account all of the matters referred to above. In my opinion the 5% adjustment proposed by the wife is plainly too low, and the 25% proposed by the husband is plainly too high. The process of assessing contribution cannot be described as a scientific one. I believe a just and adjustment between the parties is 15%. This produces a 30% differential in contribution. Thus I would assess contribution arising out of assets held at cohabitation to be 65:35 in favour of the husband, taking into account of course subsequent events.

(b) Assets at separation

The parties conceded through their counsel that, putting aside the matters referred to above, contribution would otherwise be assessed equally at separation. The husband asserts, and the wife does not dispute, that in 1995 he received an inheritance of $60,000 from his mother’s estate. There is no evidence about how this was used. Under the circumstances it is impossible to assess the weight I would give to this contribution.
I also record here that much was made on behalf of the wife about the husband’s failed business ventures in the later years of the marriage. This does not effect the assessment of contribution. There was no submission that there was waste and indeed no evidence to support such a submission in any event. At the date of separation, therefore, I assess contribution at 65:35 in favour of the husband, taking into account my earlier findings of contribution.

(c) Post-separation contribution

The parties separated in November 2004, over five years ago. In October 2005 the wife moved into rental accommodation together with [X]. In August 2006 the husband sold his interests in the [omitted] company that he was managing, and together with termination benefits received from all sources the benefit of about $634,000. He remarried in November 2007. For the wife the post-separation period was clearly financially difficult with limited support from the husband, the obligation to support [X], and depending on the generosity of her friends Mr L and Ms L to whom she now owes $65,000. By contrast even though the husband was unemployed since November 2006, he supported himself financially from investments derived during the marriage. He seems to have enjoyed the benefits of dining out frequently, and holidays to Fiji, Hamilton Island and Gold Coast with his new wife and her two children. I do not accept his evidence that they ran their households separately in a financial sense and indeed was left with a strong impression that the husband supported his new family in a financially generous manner compared to his old family, but of course using capital generated during the relevant marriage.
I wish to make it clear that the husband is not being punished here for poor judgement or bad luck in business dealings during the later years of the marriage and after separation. The fact is, however, that he had the benefit of almost all the assets for almost five years after separation, to the exclusion of the wife. Moreover his accounting for the use of these funds leaves much to be desired. In these circumstances the 5% adjustment sought by the wife in her favour for the post-separation period is entirely appropriate.

(d) Conclusion about contributions

Having regard to the matters set out above, my final conclusion about contributions is that it should be assessed as to 60:40 in favour of the husband.

A section 75(2) adjustment?

The only s.75(2) adjustment sought by the wife is a Robb & Robb type adjustment arising out of her contribution to the care of the husband’s daughter [Y] over a period of ten years. The husband says [Y] was part of their household “usually on a weekly basis” (para.40) and that the wife “assisted me in relation to her care”. The wife says [Y] stayed with them for half of every week. Her evidence about her involvement in [Y]’s life is set out at paragraphs 31-34. Again listening to and observing the cross-examination of both parties about this issue there is no doubt that the general conclusion I made about credit applies to this issue as well. I prefer the evidence of the wife in this regard. For a period of ten years, therefore, [Y] was a part of the household and the wife was, during this period, substantially involved in her care and upbringing. During this period the husband was working full time in several demanding business positions. I consider an appropriate s.75(2) adjustment in the wife’s favour on these circumstances to be 2%.

The husband argues there should be a s.75(2) adjustment in his favour because he is much older than the wife, suffers from poor health, and has a significantly reduced earning capacity compared to her. He asserts that the wife has been able to support herself, and that [X]’s care is substantially shared. Whereas she can continue to work, he will be left in a position where he must live off his share of the property settlement, as well as provide for his new family.
In this case whether and to what extent there should be a s.75(2) adjustment in favour of the husband depends on the medical evidence and what weight I should put on it. In this regard I ignore any medical evidence that was prepared in contemplation of these proceedings by one of the husband’s treating doctors. In this regard it is clear that some of his medical reports were prepared to address issues arising out of the forced adjournment of these proceedings in December 2008. However it is equally clear that after the husband was admitted to the Sydney Clinic in December 2008 he received treatment from his doctors for legitimate reasons based on his health and having nothing to do with the pending proceedings. These records are admissible as business records, subject only to the observation that the lack of clarity surrounding the articulation of the husband’s s.75(2) claim disadvantaged the wife in that she was, for all practical purposes, precluded from obtaining her own evidence about the husband’s health, and greatly limited in her ability to test the husband’s evidence in this regard. This is a factor that must of necessity warrant a conservative approach to the assessment of s.75(2) factors insofar as they arise from this evidence.
The husband’s medical evidence in question consisted of letters comprising Exhibits H1, H2, H7, H8 and H9. This evidence indicates that the Husband suffers from or has suffered from major depression, diabetes mellitus, coronary artery disease and hypertension. It is interesting to note that over the period covered by these reports (December 2008 – February 2009) his treating doctors and psychologists record an improvement in memory functioning. Indeed perhaps the most revealing useful report in the present context is that of Dr R a Clinical Neuropsychologist to whom the husband was referred by his treating psychiatrist, Dr F. This report reveals:
a)impaired but significantly improved attention and information processing skills;
b)superior range of intellectual functioning;
c)improved memory functioning, now within the average range;
d)unimpaired verbal and nonverbal reasoning, verbal fluency, conceptual skills and adaptive abilities, but impaired planning and organisational skills;
e)depression in the severe range.
Dr R reported that the husband could return to work gradually though not at his present high level, subject only to the ongoing effects of his depression and other defects referred to above. Rehabilitation was recommended.
Even on a very conservative scrutiny of this medical evidence it is clear that the husband’s capacity for employment is reduced, and that he has ongoing health issues. His age is clearly a relevant factor as well. An adjustment is called for, but given the issues about how the evidence was presented as well as the assessment of contribution I have made a conservative approach to assessment is warranted. I assess a s.75(2) adjustment in his favour at 5%.
Having regard to the above, this results in a net s.75(2) adjustment of 3% in favour of the husband.

Conclusion of just and equitable order?

The final conclusion derived from the discussion above is that the husband receives 63% of the pool of assets, and the wife 37% of the pool of assets as I have found it. This means that the husband gets $908,009 net and the wife $533,275 net. The husband wishes to retain the Property P property, and the wife wants a cash payment. On this scenario the respective assets the parties receive are as follows:
a)For the husband:

Property P	$ 510,000.00
Partial Property Settlement	$ 104,437.00
Advance Asset Management	$ 293,047.00
Shares Syndicate	$ 14,446.00
Telstra shares – 4,000 @ $3.68	$ 14,720.00
Mercedes Silver 2003	$ 42,000.00
Mercedes Black 2000	$ 28,500.00
Toyota 1996 – White Landcruiser	$ 4,500.00
Toyota 1994 Burgundy Landcruiser	$ 5,000.00
Alfa Romeo 1975 White	$ 750.00
Peugeot 1998 Gold	$ 1,250.00
Harley Davidson 1997 Black	$ 13,500.00
Proceeds of Holden Barina motor vehicle	$ 4,550.00
Cruise Craft boat 1987	$ 6,500.00
Metabolic Pharm Shares – 18,000 @ $0.023	$ 414.00
IAG Shares - 254 @$3.43	$ 871.22
St George Portfolio Cash Management Acc	$ 4,049.00
Husband's Contents	$ 3,000.00
3 Gold Coins	$ 600.00
Husband's Legal Costs Paid	$ 19,868.75
Deferred Annuity ING	$ 40,912.00
St George Bank Superannuation	$ 192,432.00
Add Back - Boat Insurance Claim	$ 14,000.00
Add Back - Commonwealth M'Card 27.11.08	$ 6,100.00
Add Back - Cash Withdrawal 12.12.09	$ 2,500.00
Add Back - Commonwealth M'Card 9.2.09	$ 10,412.67
Mortgage – Commonwealth Bank	($ 29,959.00)
Payment to the wife	($ 400,391)
Total	$ 908,009

b)For the wife:

Partial Property Settlement	$ 104,437.00
Rinker Shares 100 - estimated	$ 1,400.00
Contents and Musical Equipment	$ 8,700.00
St George Cheque Account	$ 3,500.00
Advance Super	$ 14,041.00
Wife's Legal Costs Paid	$ 25,806.48
Mr L	($ 25,000.00)
Payment from the husband	$ 400,391
Total	$ 533,815

In order for the husband to retain the home in Property P he would need to make a payment to the wife of $400,391. I am satisfied that orders reflecting the above would be just and equitable under the circumstances. Both the short-term and long-term needs of the parties are met. The husband has sufficient liquid assets that he can make a substantial part of the payment immediately, and sufficient other assets that might be realised expeditiously, so that he need not necessarily sell the Property P property.

I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of Altobelli FM

Associate: Anthony Thompson

Date: 11 December 2009

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Citations

Herman and Herman [2009] FMCAfam 1295

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Statutory Material Cited

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Norbis v Norbis [1986] HCA 17

Williams & Williams [2007] FamCA 313