Jamine and Jamine and Anor (No 2)
[2011] FamCA 843
•3 November 2011
FAMILY COURT OF AUSTRALIA
| JAMINE & JAMINE AND ANOR (NO 2) | [2011] FamCA 843 |
| FAMILY LAW – PROPERTY – Division of property – Creditor – Maintenance of adult disabled daughter |
| Evidence Act 1995 (Cth) Family Law Act 1975 (Cth) Trustee Act 1958 (Vic) |
| Ascot Investments Pty Ltd v Harper and Harper (1981) FLC 91-000 Biltoft and Biltoft (1995) FLC 92-614 Black and Kellner (1992) FLC 92-287 Chang and Su (2002) FLC 93-117 Davidson and Davidson (No 2)(1994) FLC 92-469 Gould and Gould (2007) FLC 93-333 Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 In the Marriage of Clausen (1995) 18 Fam LR 693 In the Marriage of Weir (1993) FLC 92-338 Kannis and Kannis [2002] FamCA 1150; (2003) FLC 93-135 Mallett and Mallett (1984) 156 CLR 605 Miller v Cameron (1936) 54 CLR 572 Norbis and Norbis (1986) 161 CLR 513 Prince (19840 FLC 91-501 Prpic and Prpic (1995) FLC 92-574 Quinton v Proctor [1998] 4 VR 469 Tuck and Tuck (1981) FLC 91-021 VAK and AK [2005] FamCA 803 |
| APPLICANT: | Ms Jamine |
| RESPONDENT: | Mr Jamine |
| INTERVENOR: | Mr S |
| FILE NUMBER: | MLC | 3286 | of | 2008 |
| DATE DELIVERED: | 3 November 2011 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 27 September 2011 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Davis |
| SOLICITOR FOR THE APPLICANT: | Slater & Gordon |
| COUNSEL FOR THE RESPONDENT: | Mr Laidlaw |
| SOLICITOR FOR THE RESPONDENT: | Bowlan Dunstan & Associates |
| COUNSEL FOR THE INTERVENOR: | Mr Ambikaipalan |
| SOLICITOR FOR THE INTERVENOR: | Ambi Associates Lawyers |
Orders
That forthwith, the husband transfer to the wife all of his interest in the property at … D Street, Suburb B.
That as and from the wife receiving the signed transfer of land in respect of the property at … D Street, Suburb B, she indemnify, pay and be responsible for the mortgage encumbering the said property and also the overdraft to the extent of $3,200.
That upon being requested to do so, the husband sign all such documents as may be required of him to resign as trustee of the trust pertaining to the one half interest in the property at … D Street, Suburb B in which the declared beneficiary is Ms E and further, to transfer the interest in the trust property to the wife as sole trustee.
That forthwith, the proceeds of the sale of the parties’ Suburb C property held on trust for them, be paid to the wife.
That the husband retain, and the wife relinquish any interest in, the real properties at Town F (and to the extent that the wife is required to sign any transfer or other document in relation to such properties, she do so upon receipt of those documents from the husband).
That save as to arrears as at this date, all extant spousal maintenance orders are discharged.
That the husband and the wife forthwith do all acts and things required to place the real properties at I Street, Suburb G and J Street, Suburb K on the market for sale on terms and conditions to be agreed and failing agreement as determined by the Court on application and upon the settlement of the sale of the first of those properties sold, the proceeds be applied as follows:
(a)First, to pay all costs, commissions and expenses of the sale;
(b)Secondly, to discharge any encumbrance affecting the first of the properties so sold;
(c)Thirdly, to set aside the sum of $50,000 into an interest bearing account in the joint names of the parties for the purposes of covering any capital gains tax liability arising from the sale of either of the properties so sold;
(d)Fourthly, to pay to the wife an amount that gives her 67.5% of the net pool of assets plus the arrears of spousal maintenance referred to in paragraph 6 of these orders less $73,500 being her one half share of the $147,000 capitalised maintenance for Ms E referred to hereafter; and
(e)Fifthly, to pay to the husband an amount to gives him 32.5% of the net pool of assets less the arrears of spousal maintenance referred to in paragraph 6 of these orders and less $73,500 being his one half share of the $147,000 capitalised maintenance for Ms E referred to hereafter.
That upon the settlement of the sale of the second of the two properties, the proceeds be applied as follows:
(a)first, to pay all costs, commissions and expenses of the sale;
(b)secondly, to discharge any encumbrance affecting the sale;
(c)thirdly, to pay any shortfall in respect of any of the matters referred to in paragraph 7 hereof and otherwise distribute the proceeds according to the method there set out.
That the husband retain and the wife relinquish any interest in:
(a)the shares referred to in the reasons for judgment delivered this day; and
(b)the husband’s superannuation;
That the wife retain and the husband relinquish any interest in the cash in her account.
That the husband and the wife pay for the maintenance of Ms E, the sum of $147,000 upon the terms and conditions set out hereafter.
That the wife forthwith open a bank account in her name as trustee for Ms E for which she alone shall be the signatory until further order, into which the sum of $147,000 from the proceeds of the sale of the properties above shall be deposited for the maintenance of Ms E to be used by the wife for that purpose and drawn at the rate of no more than $16,334 per annum until such time as the capital funds are expended in the daily support of Ms E.
Any interest earned by the said trust account shall be taxable in the hands of the wife but any such tax shall be paid from the corpus of the account.
That on the anniversary of these orders, the wife provide to the husband the details of the account for so long as the husband provides an address to which such details can be sent.
That should Ms E die at any time whilst there is a balance in the said account, the remaining balance shall be divided equally between the husband and the wife.
That the application of Mr S is dismissed.
That should any party seek costs arising out of these orders, such application shall be by way of written submissions and filed and served on all other parties by no later than 14 November 2011 with such submission being endorsed with the fact that it has been so served and any recipient of such an application shall have until 1 December 2011 to file and serve a reply such document also being endorsed with the fact that it has been so served and upon receipt of any such application for costs, it or they shall be determined in chambers.
Pursuant to s 106A of the Family Law Act 1975, a registrar is authorised to sign any document in the name of the husband to give effect to these orders and an affidavit signed by the solicitor for the wife shall be sufficient proof to satisfy the registrar of the necessity for the document to be so signed.
That save as to costs, all applications are otherwise dismissed.
IT IS CERTIFIED
That pursuant to Rule 19.50 of the Family Law Rules 2004, it was reasonable to engage counsel to attend.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Jamine & Jamine and Anor (No 2) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Act.
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 3286 of 2008
| Ms Jamine |
Applicant
And
| Mr Jamine |
Respondent
And
| Mr S |
Intervener
REASONS FOR JUDGMENT
The dispute between Mr Jamine (“the husband”) and Ms Jamine (“the wife”) concerns the division of their property after a long marriage. Both parties are 61 years of age.
A third party, Mr S who is a close acquaintance of the husband, intervened just prior to the matter being set down for final hearing. He joined the proceedings as a creditor of the husband alleging that with interest, he was owed over $400,000 from a loan made to the husband about 25 years ago. The husband appears to admit the debt but the wife’s position was that if it was owing, it had not been in the past and was not now being seriously pursued.
Another part of the dispute between the husband and wife involves consideration of a claim by the wife for the maintenance of the parties’ adult disabled daughter who is now 25 years of age. The wife sought that a periodic sum be capitalised for 12 years and the money be paid out of the pool of assets. The husband opposed that application.
There were otherwise three main contentious issues. First, had the husband made comprehensive and obligatory disclosure of his financial position? Secondly, how should the third party claim of Mr S be treated? Thirdly, what should be done about the adult daughter’s maintenance?
The determination of those issues must be undertaken as well as the question of the division of the property between the parties. Before determining the entitlements of the parties, the first two of the contentious issues has to be concluded.
There is also an extant spousal maintenance order under which there is a substantial sum of arrears outstanding. The wife sought that the arrears be paid from the husband’s entitlement to property division.
The proceedings were complicated by the way in which they were conducted. For reasons which I shall set out, the husband who lives in Country 1, Southeast Asia, did not make proper disclosure. The absence of Mr S who had filed affidavit material, meant that consideration had to be given to his untested evidence and what, if any, weight it should be accorded.
Documents relied upon
Attached to these reasons is a schedule of the documents that each party relied upon. When reading the affidavits of evidence, it will be apparent that they contain objectionable and inadmissible matters but all counsel requested that I use my discretion and give such weight as I thought appropriate to the material.
Background
The wife was born in Country 2, Central Europe and the husband in Country 1, Southeast Asia. The parties married and began living together in England in 1977 and immediately thereafter moved to live in Country 1. In 1980 and 1983 their first two children were born. On 24 December 1985 Ms E was born. Ms E is the daughter to whom the maintenance application applies.
The husband is a legal professional. For many years, he has been a senior legal professional in Country 1. For some years, he was a legal professional in Australia and also had corporate experience for at least 12 months.
The wife described herself as currently being engaged in caring for Ms E. Although she was questioned at some length about why she did not pursue other employment activities because of the time that Ms E spent in a special school, I am satisfied that she has not had employment for many years. She did commence a small commercial partnership subsequent to separation but I am also satisfied that that was unsuccessful. The wife is therefore otherwise reliant upon rental from the investment properties and a pension.
The intervener, Mr S is also a legal professional in Country 1. He is a senior legal professional and although I know little about his personal details, it was common ground that he is a very close friend of the husband. For reasons which I shall set out, he would appear to have been generous to the husband in respect of the claim earlier mentioned. That claim arose from a loan agreement in 1986 which seems to have been varied by a subsequent agreement in 1991.
In 1991, the wife and children moved to live in Australia where the home at Suburb B was purchased. The funding for that home was contentious in the proceedings but I do not have to make findings for the purposes of this decision.
Upon the acquisition of the Suburb B home, the husband and wife executed a declaration of trust as to a one half interest in the property in favour of Ms E. The deed was stamped in or about 1993. The terms of the trust were that the trustees were to vest the trust property in Ms E “for such time or times and in such manner as may be in the best interest of” Ms E. Ultimately it was therefore conceded that for the purposes of the division of property, I was only dealing with one half of the value of the home in Suburb B.
Presupposing that the trust had not vested when Ms E turned 18 years of age, the decision by the parties to agree she “owned one half” gave rise to the question of whether the one half interest held on the trust, was effectively some form of asset or property in Ms E’s hands that may have affected her entitlements to be supported by way of maintenance. Ultimately, the evidence was clear. The husband conceded that he did not want the house sold nor for Ms E to move away from it. Ms E has Downes Syndrome.
In 1992, the parties purchased a property at I Street, Suburb A and in 1993, a property at J Street, Suburb K. Both properties were purchased in joint names.
In 1994 or thereabouts, the husband moved to Melbourne for three years for employment. Whilst he was in Australia, the parties purchased vacant land at Town F.
In 1997, the husband returned to Country 1 but thereafter, travelled to and from Australia at various times and financially supported the family from his earnings.
In 2000, another investment property was acquired jointly by the parties in Suburb C. In earlier interlocutory orders, I ordered that the Suburb C property be sold to satisfy outstanding liabilities of the parties. There is now a small amount of cash sitting in a trust account.
In December 2006, the wife brought the marriage to an end. That was a decision never accepted by the husband. I accept he still does not accept it. So strong was his view that there was no basis to end his marriage that he opposed the granting of a divorce in the Federal Magistrates Court of Australia. Having lost that argument, he appealed and lost again. He then sought special leave of the High Court of Australia to appeal but was refused.
The divorce proceedings have not been the only litigation between the parties. It was common ground that there had been proceedings relating to family violence orders in the Magistrates’ Court of Victoria. Those proceedings culminated in orders being made for a duration of two years. The husband appealed to the County Court of Victoria where he was again unsuccessful and the judge extended the expiry time of the order to 21 January 2012. Other proceedings included an application relating to spousal maintenance which were conducted in the Federal Magistrates Court and ultimately in this Court. A defended spousal maintenance hearing was conducted before Senior Registrar FitzGibbon.
Strong findings about the husband’s lack of financial disclosure were made by the Senior Registrar. Those findings became prominent in the proceedings before me and to which I shall return. The husband did not accept the decision of the Senior Registrar but on a review hearing, the husband was again unsuccessful.
The litigation will therefore be seen to have been comprehensive and no doubt draining.
Problems arose on the very first day when the matter was listed to commence as a final hearing because the husband was unable to travel because of a medical complaint. The third party Mr S was also not present and sought an adjournment on the basis that as a legal professional, he was committed to a “[court matter]” in Country 1 and had not been given permission to be released to attend to his own personal proceedings. I adjourned the proceedings for two days and rejected further applications to delay these proceedings.
Contentious issues
Disclosure
Counsel for the wife opened and closed his case with the flourishing statement that this was not just a case about lack of financial disclosure by the husband but one of active concealment. Perplexingly, I find his statement to be correct.
Whilst not conceding concealment, counsel for the husband conceded in final address that disclosure had not been comprehensive.
Whilst lack of disclosure has been a consistent concern of this Court, it is hard to imagine a more blatant avoidance of obligations than where the litigant is a legal professional. There is a more concerning aspect in this case in that in an earlier proceedings relating to interim spousal maintenance in 2009, Senior Registrar FitzGibbon said of the husband:
There has been no comprehensive disclosure by the husband. There can be no certainty as to the accuracy or completeness of his evidence because of his expressed views about clearly relevant information being “irrelevant” in his view.
His evidence as to his Financial Statement does not draw the court conclude that his income and fixed and discretionary expenditure have markedly changed. His liabilities have increased but principally with respect to monies claimed to have been borrowed over a decade to purchase assets.
…
His affront at being required to disclose details of bank accounts or other sources from which he draws funds from time to time left the court with serious disquiet as to whether there are other such accounts or sources of funds. There is no doubt that he would not have voluntarily disclosed them to the wife or the court.
I find his evidence was not substantiated by any primary source documentation which would allow the court to conclude his circumstances have changed in accord with section 83(2)(a)(ii).
Strong though the words of the Senior Registrar may be, the husband appealed against his orders. Having heard the Senior Registrar’s criticisms about disclosure, one would have expected the litigant, particularly a legal professional, to adopt the principle that “once bitten, twice shy”. The husband did not. Indeed, counsel for the wife suggested the husband might have been “hyper-vigilant” after the Senior Registrar’s determination. He submitted that the husband was not. I agree.
The husband provided very few documents. He said little in evidence about his financial position in Country 1. What scant evidence there is, shows that the husband is in partnership in a legal profession business in Country 1 which has a number of employees including legal professionals and administrative staff. His one partner seems to conduct a second office. Each partner draws a salary leaving undrawn profits within the business. Consistently, the expenses of the husband’s partner appear in the books of accounts as exceeding the revenue he collects for the business yet the profits are divided equally at the end of the financial year.
When pressed about why there was no disclosure, the husband maintained that he had provided what he was asked to give but otherwise, documents were not relevant to the proceedings. I do not accept those assertions either as to their veracity or indeed, as an explanation for the appalling lack of disclosure.
There can be no doubt about the obligation of disclosure in this Court and its underlying significance in the determination of cases. That principle has been espoused numerous times. The duty of disclosure is broad and clearly set out in Chapter 13 of the Family Law Rules 2004. It is an ongoing obligation and one which requires litigants to be proactive and not just reactive. Information is as important as documents and it must be provided in a timely manner. The husband failed dismally.
Of serious concern is that the husband relied upon and adopted a financial statement as his evidence. He said it was true and correct. Intriguingly, his statement was qualified because he said it was subject to “errors and omissions”. He added that the omission included the fact that he owed “quite a bit of legal fees”. The “errors and omissions” was clearly indicated by the endorsement on each page of the document with the letters “E. O. E.”. That was a cautious approach by the husband but one that was totally unjustified. He said in evidence that he lived frugally and owned no furniture. It is hard to imagine how there could be errors and omissions in such frugality. Indeed however, there was an “oversight” in that the husband conceded in cross-examination that he held a bank account in the United Kingdom which had an amount containing £130. His apology for the error had a hollow ring about it.
As a legal professional, albeit one who worked predominately in Country 1 but who had also held professional registration in Australia, the evasion of his obligation of disclosure is hard to understand. In his financial statement, he swore:
(a)I have read Rule 13.04 and I am aware that by law I have an obligation to make a full and frank disclosure of my financial circumstances to the Court and each other party. In particular, I have disclosed in this document or in an affidavit filed by me or on my behalf under Rule 13.05(2), all matters I am required to disclose under Rule 13.04.
(b)The information in the financial statement and any attachments to it which are within my personal knowledge are true. Where I have given an estimate in this financial statement, it is based on my knowledge and is given in good faith. All other information given in this financial statement and any attachments is true to the best of my knowledge, information and belief.
(c)I have no income, property or financial resources other than as set out in this document or any affidavit filed by me under Rule 13.05(2).
I find that the husband adopted the approach that he would tell the Court what he thought was relevant. That was totally unsatisfactory leading me to find that his disclosure was inadequate.
That then gives rise to the question of whether, despite the inadequacy, I am able to find that there is a picture of the financial circumstances of the husband of which I could be confident. The alternative must be that I have no idea what his true financial position is.
The consequences of a failure to disclose all relevant information was stated by the Full Court of this Court in Chang and Su (2002) FLC 93-117 at 89,195 where in paragraph 59, their Honours referred to those cases where the Court could not be satisfied as to the extent of the property. Their Honours said the Court could be less cautious than might otherwise be the position when coming to make orders. The Full Court went on to say that once there had been a finding of a non-deliberate non-disclosure, the Court should not be unduly cautious about making findings of fact in favour of the other party. That statement reiterated the views set out in previous authorities (see Black and Kellner (1992) FLC 92-287 and In the Marriage of Weir (1993) FLC 92-338).
In Kannis and Kannis (2002) FamCA 1150 the Full Court said that the basis of the non-disclosure was irrelevant. It said the duty to disclose was absolute. The Court went on to say:
Where the Court is satisfied the whole truth has not come out it might readily conclude the asset pool is greater than demonstrated. In those circumstances, it may be appropriate to err on the side of generosity to the party who might otherwise be seen to be disadvantaged by the lack of complete candour.
The difficulty in this case is that I am satisfied that the pool of assets is greater than the evidence has demonstrated but I have no clear understanding of its extent. I am satisfied that the husband’s financial circumstances relating to his earning capacity and income is not as he would have the Court accept but rather significantly greater. The difficulty is in quantifying the extent of that. Similarly, the extent of the disadvantage to the wife is hard to quantify but I propose to err in her favour because I reject the husband’s evidence as to his capacity to work in the future. I also find that he has the ability to make himself financially comfortable despite not having access to a significant portion of the known pool of assets.
Credibility
The husband was an entirely unsatisfactory witness. He was evasive and obfuscatory. As an experienced legal professional, he ought to have known the way in which witnesses were required to be responsive. As a senior legal professional with many years experience, I found his attitude troubling. I have no similar reservations about the wife.
In her evidence, the wife was measured and candid. There was a question about her own disclosure relating to company documents of a business that she had endeavoured to commence. Even if I was to take the view that she had not been entirely forthcoming, at her age, stage of life and business background, I comfortably consider that there would not be anything in that material that would have altered my perception about her as a witness.
It goes without saying therefore that wherever there was a conflict in the evidence, I accept the wife’s version.
In respect of the husband’s obfuscation, the matters that follow are relevant.
There was considerable discussion about whether or not the husband had a credit card and he maintained that he only had one for use in Country 1. That card however showed negligible transactions. When asked why he did not use credit cards, he said he did not like them because of dangers. He did however concede that he used a credit card in England when he was there when he had no “ready cash”. He was challenged in the witness box to produce his wallet to show whether he held a credit card but he declined the opportunity on the basis that it was insulting to him. The husband had travelled extensively internationally (albeit at times not terribly far from Country 1) over the last few years as was seen in his passport. It was consistently put by counsel for the wife that it beggared belief that the husband would not have a credit card in those circumstances. The husband maintained his position. I do not accept his evidence.
The husband produced bank statements on a Country 1 bank account. On any view, those records could not be seen as primary source documents enabling the reader to discern where money had come from or where it was going. When asked about other primary source documents, the husband said that they were with his accountant but he did not seem to understand that there was an obligation to produce records of meaningful value. When pushed as to why he was not forthcoming, he maintained that his solicitors had informed him only to bring bank statements and credit card statements and he had complied. Having regard to what I earlier said about obligations, that explanation has a very hollow ring about it. More importantly, as a legal professional, the husband knew that his financial position was under challenge and therefore would have had to have established what he was asserting. He failed to do so.
In his evidence, the husband maintained that his income was that set out in his tax return. There was a clear inconsistency between his tax return and the financial statement of the partnership. When asked what happened to the undrawn profit, he said that it was kept in the business. Whilst that may very well have been so, his financial statement showed that he had earnings of $360 per week and that simply reflected the exchange rate translation of the Country 1 currency into Australian dollars. It clearly did not reflect his true entitlement to the profits drawn from the partnership.
The husband was asked whether there were annual fees associated with a club to which he belonged in Country 1 and he denied that there were such annual fees. However the following day, he conceded that there were monthly fees. When asked about why he had not proffered the monthly fees explanation earlier, he said that he had only been asked about annual fees. Coming from an experienced legal professional, the answer was inappropriate. I find he was clearly being obtuse and misleading on the previous day.
In further cross-examination, it became apparent that the husband had made no disclosure of documents about his position as a director of a company in Australia. Significant cross-examination followed and the information about it had to be dragged from the husband. His explanation was that the company belonged to his friend Mr S in Country 1 and that to register the company in Australia, a resident was needed and he fulfilled that requirement. He insisted that he had no equitable interest in the business but details about the involvement in the company and its financial position were clouded in mystery. It became apparent too that the husband had guaranteed the performance of a liability to a bank for the company. He maintained there was no reason to disclose those details because there was realistically no liability for him. His position was that this guarantee was simply a contingent one. Again, the Family Law Rules are explicit about the requirement to disclose the involvement in corporate entities. I do not accept the husband’s view about the contingent liability.
His view was that it was not relevant to his personal situation and that he was not exposed because the guarantee had not been “recalled”. For a senior legal professional, I found that an implausible explanation.
In cross-examination, counsel for the wife asked the husband to explain the absence of details about bank accounts. In his taxation returns, the husband disclosed to the Country 1 tax authorities a specific bank account number but when challenged about it, the husband said that the account had been closed for three years. He said that the error was made by his accountant and it did not matter because he had not personally signed the tax return. The named bank account was referred to as the office bank account but it was different to the one that had been disclosed. When asked what he had been telling the taxation authorities, he simply said that the details of the bank account number were put in the tax return in case there was an excess amount of tax paid and it had to be returned and credited to the account. Because the account had been closed for three years, his explanation for what would happen in those circumstances was that the refunded tax money would have been sent back by the bank to the Tax Office because the account had been closed. I stress again the unusual nature of this evidence coming from not only a legal professional but from a legal professional whose records were said to be in the hands of his accountant. No evidence was called from the accountant as to the inconsistency.
In his evidence, the husband said that he was not working as a legal professional in the partnership in Country 1 but he conceded that he had not closed it down. He maintained that his state of health prevented him from working yet he conceded that he continued to draw the same amount as he had for previous years. His explanation for the capacity to continue to draw was that the money had been earned over a number of years. In other words, the work in progress had been converted to income or revenue of the partnership and he was drawing against it. No records were shown as to the extent of the work in progress such that I could work out whether there was an asset and how long it would continue into the future.
The husband did disclose financial records that showed between 2005 and 2010 the receipts of the partnership hovered between 466,000 Country 1 currency and 567,000. Those figures would tend to suggest that there was not a significant change in the revenue during the period of 2005 to 2010 bearing in mind that in the middle of that period, the relationship between the parties came to a permanent end. Despite what the husband would have the Court believe was a reduction in his capacity to work, around the time of separation, he increased his drawings from 45,000 Country 1 currency to 60,000 Country 1 currency and he was still drawing that today.
The wife asserted that the husband was paying her a sum of money that was at least equivalent to, if not in excess of, what he was drawing. She pointed to that as an indication that the husband’s financial portrayed position was not accurate. Counsel for the husband in final address suggested that the plausible explanation for the inconsistency was that the wife had not included the rental from the investment property in Australia. A careful analysis of the wife’s evidence showed that she was referring specifically to the money sent by the husband and she had not included the rental property. Thus, how the husband managed to pay what he did over the years remains a mystery. When challenged about it, the husband said that he lived frugally. I do not accept that.
All of these matters could easily have been overcome by the husband providing primary source documents that must have been in his possession, power or control. In a partnership that had a number of employees, there must have been records which would explain the drawings, the revenue, the retained profits and the work in progress.
In his evidence, explaining the fact that he was no longer working as a legal professional, the husband said that he was intending to come to Australia permanently. I reject that. It was clear from the day upon which the final hearing commenced that the husband had no intention of attending without the threat of the matter proceeding in his absence on an undefended basis. No clear picture had been given about his intentions to travel otherwise.
In summary, the husband’s evidence was entirely unsatisfactory and deliberately misleading at times. I have no doubt that he concealed documents for purposes which are not at all clear. The only inference I can draw is that his financial position is much better than that which he portrays.
The Mr S debt
A contentious issue was the claim by Mr S against the husband. The husband accepts the debt but maintains it should be adjusted in the pool of assets.
It is necessary to first set out the evidence and then secondly, to look at the procedural history of the claim. Thereafter, it is a question of whether the claim (if proved) should be included as a liability of the parties.
The husband’s evidence was that Mr S lent him $135,135.13 on 26 March 1986 and it was confirmed in a loan agreement on 30 April 1986. The agreement was handwritten and executed in Country 1. Its terms were that the sum together with interest at the rate of 8 per cent per annum was to be repaid within a period of five years from 26 March 1986. The following then appears in the document:
The loan sum has been loaned by [Mr S] to [the husband] in Australian dollars. Therefore the repayment of the loan sum together with interest will be in Australian dollars. Such repayments will be made from the profits of [the husband’s] investments in Australia.
The husband then said that there was a further agreement made on 20 January 1991. The various copies of the 1991 agreement do not disclose the date. The copies provided as documents have been cut off at the critical point. The husband provided a letter dated 20 February 1991 which was only a month after the 1991 variation agreement. In the letter, he said that he could neither pay the interest for 1989 or 1990 nor could he repay the loan “as yet”. No explanation was given as to why the letter was so quickly written given the nature of the terms of the variation agreement if it was executed on 20 January 1991. The variation terms were as follows:
1.[The husband] hereby acknowledges that he owes the said sum to [Mr S]. This acknowledgement of debt shall subsist so long as the said sum plus interest is not fully repaid.
2.It is further agreed that the said sum plus interest will be capitalised every five years at the rate of 8 per cent per annum.
3.This Second Loan Agreement shall be read in conjunction with the loan agreement dated 30.4.1986.
The husband’s evidence was that he had repaid Mr S $105,900. He then said that he relied upon correspondence which he annexed (despite the fact that the numbering was wrong). The 1991 letter to which I have referred makes mention of the fact that the “past years” had not been very good for him and that he had lost his investments with L Pty Ltd. He then sought from Mr S an extension of time to pay the loan and interest. Why that would be necessary when only a month before a further agreement had been executed which is not referred to in the letter, is perplexing. He also said that he was prepared to agree to capitalising the outstanding interest. Why that statement was necessary is also unclear because the agreement referred to the capitalisation of interest.
In addition to the 1991 letter, the husband referred to letters in 1996, 2001 and 2006. The 1996 letter confirmed that the second agreement had been executed on 20 January 1991 and that the husband had not been able to repay the loan from the profits from his partnership in Country 1. Mr S appears to have agreed to the request for an extension of time because there is a signature on the letter which bears remarkable resemblance to the signature on the Mr S affidavit.
In 2001, the husband wrote to Mr S again asking for an extension of time to repay but also confirming his intention to repay the full amount of the debt. No reference was made in 2001 to the quantum. Again, Mr S appears to have endorsed his agreement on the letter.
By letter dated 30 January 2006, the husband said that he was embarrassed that he had not been able to repay the outstanding loan but he then said:
As requested by you, I confirm that the loan of A$135,135 was applied to the purchase of the following investments:
1. [… D Street, Suburb B] Vic $85,000
2. [… J Street, Suburb K] Vic $30,000
3. [… I Street, Suburb A], Vic $20,000
Total $135,000
The husband would have me draw the inference that the money provided in 1986 went towards those investments. Curiously however, all three properties were acquired some years after the initial loan. The Suburb B property was purchased in 1991, the Suburb A property in 1992 and the Suburb K property in 1993. Therein lies the dilemma. This was the evidence that I was asked to rely upon to determine the claim of Mr S.
To the extent that the husband told Mr S in 2006 that the invested money went towards the Suburb B home, no mention was made of the fact that a declaration of trust was made by the husband and wife on 14 July 1991 as to a half interest in that property in favour of the daughter Ms E. All of this without the evidence being tested, makes it difficult to understand exactly what the terms were.
In his evidence, the husband said on 14 July 2001 Mr S filed Application (sic) to intervene in these proceedings and as at that time claims that the sum of $430,707.04 is owed by me to him. (emphasis added)
On 4 May 2011, I made orders as between the husband and wife that as the husband was claiming a debt should be included in the property proceedings, he had to send Mr S a letter indicating that a Notice of Intention to Intervene had to be filed by 1 July 2011 along with a statement of his claim and if Mr S did not so intervene, the wife could draw the inference that no claim was to be made about the repayment. Notwithstanding the deadline, on 14 July 2011, Mr S filed an application in a case which the Court made returnable on 27 July 2011. On 4 May 2011, I listed the proceeding for a mention on 27 July 2011 to ascertain its readiness to proceed. In his application, Mr S sought an order that he have leave to intervene and that there be paid by the husband to him, all monies owing pursuant to the two agreements earlier mentioned.
In support of the application, Mr S filed an affidavit. He said that he lent the sum of $135,135 to the husband and that the husband had paid to him $105,900 and that there was $430,707.04 owing to him at the time that he swore the affidavit on 1 July 2011. Nothing further was filed by Mr S.
On 27 July 2011, Mr S did not appear nor was he represented. Because I perceived he was making a claim as a creditor, I made an order based on s 79(10) of the Family Law Act 1975 (Cth) (“the Act”) granting him leave to intervene. However, I also made orders that both the husband and wife have leave to approach the Registrar concerning issues of discovery and interrogatories concerning the claim by Mr S and that otherwise, the claim of Mr S be treated as set out in his affidavit and that it be consolidated with the proceedings between the parties. Nothing further was filed by Mr S.
The final hearing was listed to commence on 19 September 2011. All parties including Mr S would have been aware of that by virtue of the orders of 5 May 2011 notwithstanding Mr S was not joined as a party until July. Indeed, Mr S attached a copy of the May order to his affidavit in July.
On 19 September 2011, Mr S was represented by solicitor Mr Ambikaipalam and he applied for an adjournment because he said that he was involved as a legal professional in a “[specified charge court matter in Country 1]” and the High Court in Country 1 would not release him to attend these proceedings. For reasons then given, I refused the application but adjourned the proceedings for two days.
On Wednesday 21 September 2011, Mr Ambikaipalam again appeared and renewed his application to adjourn the proceedings but he was without material to support the application and no new submissions were made.
Mr Ambikaipalam participated in the proceedings on behalf of Mr S throughout and when final submissions began on 27 September 2011, he filed with leave and without objection from the parties, an affidavit by Mr S. That affidavit attached some unprofessional letters but that did not affect the issue in dispute. Mr S said that he was involved in a court matter in respect of a “[different charge]” rather than the previously stated charge in Country 1. No details were given as to when the obligation had been undertaken and no mention was made of why nothing had been done after 27 July 2011. Mr Ambikaipalam requested that the trial be delayed so that his client could give evidence by telephone but the suggested timeframe was not until December. This application was made after the closure of the case of the husband and the wife. Because of the state of the evidence in the case, the lack of particularity relating to the claim and the inconvenience that such a delay would cause, I declined the request.
I turn then to the question of whether there is any cogent evidence that would support Mr S’s claim.
Evidence is relevant if it could rationally affect the assessment of the probability of a fact in issue (see s 55 of the Evidence Act 1995 (Cth)). It will be noted that it was the husband’s evidence that, as at July 2011, Mr S “claimed the monies were owing”. Nothing in the affidavit of Mr S showed how the quantum of the claim was assessed other than by reference to the loan documents. It would be impossible to work out the asserted quantum from either the evidence of the husband or Mr S. In his evidence in chief, the husband said nothing else about the claim. In final submission, counsel for the husband said the husband admitted the debt in the sum of $430,707.04. In her evidence, the wife said she had not received the annexures to the affidavit of Mr S. It is puzzling that if the annexures were not received by the wife, she did not pursue them. She asked the Court to infer that no claim was being made by Mr S against the husband. I would not be prepared to draw the inference suggested by the wife. However, it is noticeable that the wife’s affidavit evidence was filed in July. Even though Mr S’s claim was only against the husband, all parties were aware of the wife’s position about the debt.
The wife challenged the evidence of Mr S whereas the husband simply acknowledged the existence of a claim. The requirement of a witness, particularly a claimant, to attend for cross-examination is obvious and common in all civil jurisdictions. The Mr S claims were not accepted by the wife and without cross-examination, the disputed facts must carry little weight. The wife’s denial amounted to a demand that Mr S prove his debt even though the husband admitted it. The significance of the claim is the impact, if any, it has on the pool of property to be divided between the husband and wife.
It is troubling here that no discovery was undertaken as would presumably establish what payments were made by the husband and from what source. It had been a contentious issue between the parties as to what had happened to the husband’s income over the years of the marriage. I have already mentioned the concern I have about the husband’s evidence of his modest drawings which seemed less than the sums he was sending to Australia to support the family. Where the Mr S debt repayments came from also remains a mystery.
The onus of proving the debt fell on Mr S. He knew at least by 29 July 2011 when the wife filed her trial affidavit that she did not accept his claim. In the husband’s counsel’s final submission, it was said that it was “not known” when the payments of $105,900 were paid by the husband.
Thus, without the clarity of what was claimed and the evidence being in such a paltry state, I could not be satisfied on the balance of probabilities that the debt is still outstanding or that the quantum is correct.
Even if I was wrong about that, I could not be satisfied that the claim is seriously likely to be pursued by Mr S despite the filing of the application. The 1986 document seemed to expect a return of money within five years. The 1991 document should be read as a loan repayable at call. That inference can be drawn from the statement that the “said sum plus interest will be capitalised every five years”. It must be remembered that the document was drawn by debtor and creditor who were both legal professionals. When it came to the point of final addresses, Mr Ambikaipalam told me that he had approached counsel over the preceding days and had obtained a submission which he handed to me without objection from counsel for the husband or the wife. That submission said that a negative inference should not be drawn against Mr S by virtue of his absence because he had explained his engagement and that he had done all things reasonable to facilitate his personal participation. I reject that. It ignores the fact that Mr S took on a professional responsibility at a time when he knew or ought to have known of the position of these proceedings. No evidence was produced other than the scanty affidavit material to which I have referred.
Mr S’s submission said that it did not appear to be the case that the wife disputed the money was advanced to the husband. I reject that on the basis of the evidence.
The submission then turned to the question of the principles in Biltoft and Biltoft (1995) FLC 92-614 and referred specifically to the terms of the agreement. For the reasons I have outlined above, and those to which I shall turn in a moment, I reject the submission that on the evidence, it is likely that the agreement will be enforced.
The submission then turned to the question of an argument about the limitation of actions. Substantial authorities were mentioned which I will not repeat. The issue of the limitation of actions was probably a subject that I raised in early discussion but on any view, the agreement was executed in Country 1 and the law presumably of that country applies. No evidence was put before the Court as to what that law was. In any event, for the reasons to which I have referred and will now refer, any statutory limitation is irrelevant.
Finally, the submission said:
It would be unconscionable for the husband or wife to now resile from the representation contained in Clause 1 of the novation.
That submission has no merit. At no stage was the wife involved in the lending of the money nor was there any evidence about her involvement either from the husband or Mr S.
I turn then to the question of whether it is likely that Mr S will pursue his claim.
This Court has always taken liabilities of whatever nature into account (see Prince (19840 FLC 91-501). It is the normal practice but not necessarily the law, that liabilities should be taken from the top of the pool. In Ascot Investments Pty Ltd v Harper and Harper (1981) FLC 91-000, Gibbs J (as he then was) said that there was nothing in relevant sections of the Family Law Act that showed an intention for the Court to have power to defeat or prejudice third parties. Having said that, the Court expects litigants to properly pursue their claims.
Thus, liabilities may be ignored in the proceedings including in situations in which a third party has made a claim where they are vague, not proved or as I now find, unlikely to be repaid.
The salient features here are that the initial debt is 25 years old. There were a number of requests for extension of time apparently made by the husband to repay the debt and also pay interest. No claim appears to have been made on the evidence by Mr S until July 2011. The capitalisation of the interest every five years indicates no real concern about the repayment or the burgeoning debt. Every time the husband sought an indulgence from Mr S, it was granted. There is no evidence of any demand by Mr S until well after separation and well after the litigation was advanced to the point of a final hearing.
A significant feature of this indulgent behaviour of Mr S is that he is a legal professional who should well know the importance of proving the debt.
The relationship between the husband and Mr S is clearly close. Mr S and the husband are directors of an Australian company in which Mr S family interests are apparently involved. That could not occur except for the indulgence of the husband in taking on the responsibilities of directorship of an Australian company. Further, the husband has personally guaranteed the company’s debt in circumstances where he has not a beneficial interest in those family’s investments.
The vagueness of the indebtedness and any repayment has been exacerbated by the husband’s recalcitrance about disclosure to which I have already referred.
I am very conscious that by making property orders which ignore the debt and which give the wife the bulk of the assets as a result of the husband’s inadequate disclosure, may mean that if proceedings were taken by Mr S in Country 1, he may have difficulties recovering against the husband. That is not a problem about which I should be concerned in this case having regard to all of the matters to which I have just referred including the close business and personal relationship between Mr S and the husband.
All of the factors therefore strongly point to a finding that to the extent that Mr S has any rights to recover money from the husband, he is unlikely to do anything about it in the foreseeable future. In those circumstances I propose to ignore Mr S’s claim and dismiss his application filed on 14 July 2011. Clearly, that is not a finding that the debt is not owed but rather that it has not been proved to my satisfaction on the balance of probabilities.
Uncontroversial evidence
The wife’s evidence was largely unchallenged.
The parties did not live together before they married in 1977. The husband was studying to become a legal professional in England and immediately after the marriage, they moved to Country 1 and lived there for 13 years. The wife was occupied in home duties and the husband was a legal professional.
The husband was the financial supporter of the family and the wife was occupied in the care of the children and the home.
Over a period of time, the husband built up a successful partnership in Country 1 which still exists today. There are two offices in Country 1.
In 1991, the wife and the children moved to live in Melbourne whilst the husband continued the partnership in Country 1. The husband was providing finance and visited a few times a year. This enabled him to maintain a permanent resident status in Australia. It was the wife’s evidence undisputed by the husband, that he rented a room in a home owned by a friend of his in Country 1 whilst the family remained in Australia.
The parties used the husband’s finances to purchase property in Australia and when the husband’s father died, a modest amount was used towards the purchase of the matrimonial home in Australia. The home was purchased within a budget fixed by the husband.
In addition to travelling to Australia, the husband travelled to England periodically to maintain his status as a permanent resident of that country. The husband had a sister there.
Whilst in England, the husband purchased an apartment selling one that he had apparently previously owned and borrowing money in order to complete that acquisition.
The acquisitions of the properties referred to were financed with the assistance of mortgage loans. The mortgages were paid by the collected rents. The wife periodically assisted in relation to repairs, cleaning and renovations of those properties.
Capital gains tax
The wife relied upon, and no challenge was made by the husband to, the affidavit of an accountant Ms W as to capital gains tax that would be payable on the investment properties. As those properties will be sold because of the orders I propose to make, it is appropriate to allow that tax upon the sales. It will occur anyway. It is expected to be about $50,000. Because the tax is not payable until the relevant income tax return is lodged, allowance will need to be made for that sum to be set aside from the proceeds of the sale.
The approach to the division of property
Orders sought by the wife
The orders sought by the wife were set out in her amended outline of case document. The wife sought that both husband and wife transfer to their daughter their one-half interest in the home at Suburb B. Having regard to the findings I shall make about the entitlement of Ms E to maintenance, it is not a house that she needs but rather money. It is not appropriate therefore to make the order sought by the wife.
The wife sought an order that the interest in the home not affected by the declaration of trust, be transferred to her. The husband did not dispute that.
The wife sought an order that properties at Suburb A and Suburb K be sold and after the discharge of various mortgages, the balance be paid to the wife. The husband disputed those orders indicating that he wished to retain the two properties. For the reasons that follow, that is impracticable on any view of the husband’s financial position.
The wife also sought orders that two vacant parcels of land at Town F be sold and the proceeds be transferred to her. Subsequently however, the wife agreed that the husband could retain those properties which are in effect only worth $30,000 in total.
In her outline, the wife sought that some shares held by the husband in Telstra be transferred to the parties’ adult son. There is no evidence that I could find to justify that and therefore it is inappropriate to make such an order.
A property at Suburb C was sold by orders of the Court previously and there is approximately $23,000 sitting in a trust account. The wife sought an order that she have those funds. The husband’s position was that after the discharge of the home liability and a payment of $3000 to Ms Z Jamine, the balance be divided equally between the husband and wife. There was no evidence provided by anybody and in particular the husband, about Ms Z Jamine. I propose to ignore that issue.
Furthermore, the wife sought an order that each party retain the relevant assets in their possession and the husband did not oppose that occurring.
Finally, the wife sought an order pursuant to s 106A of the Act enabling a registrar to sign documents should the husband fail to do so. Having regard to my findings about the husband’s approach to issues, I have some concerns about his cooperation despite the fact that he is a legal professional. I think it is appropriate in the circumstances to make that order.
Orders sought by the husband
Other than the matters to which I have just referred to, the husband sought orders that he have the properties at Suburb K, Suburb A and Town F.
The husband sought an order in which he be liable for the debt to his acquaintance Mr S.
The husband sought orders that jointly owned shares be sold and the proceeds be divided equally but otherwise the parties retain the assets in their respective possession.
Section 79 of the Act
The legislative framework is set out in s 79 of the Family Law Act. Under s 79(1), the Court is directed that it may make such order as it considers appropriate. Having said that however, s 79(2) provides that a court shall not make an order unless it is satisfied that, in all the circumstances, it is just and equitable to make it. Section 79(4) provides that in considering what (if any) order should be made, the Court must take into account (so far as they are relevant to this case):
(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;
The legislative provisions were all reiterated by the Full Court in Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 at 78,386 where the Full Court said:
Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case.
In Norbis and Norbis (1986) 161 CLR 513, the High Court of Australia cautioned about an over-zealous attention to the ascertainment of the parties’ contributions. What I am examining is the assessment of the contributions and then the weighting of them. The weighting process is not a simple mathematical calculation based upon financial contributions. It is the disparity in contributions which is important. The disparity is traditionally expressed in percentage terms. (See VAK and AK [2005] FamCA 803; Mallett and Mallett (1984) 156 CLR 605; and In the Marriage of Clausen (1995) 18 Fam LR 693).
The pool
There was no serious dispute about the tangible assets. They are:
50 per cent interest in Suburb B property $500,000
Suburb A property 370,000
Suburb K property 400,000
Proceeds of sale of Suburb C 23,803
Town F properties 30,000
Shares 3,332
Wife’s cash 2,838
Husbands MLC superannuation 8,842
$1,338,815
Liabilities
Mortgage on Suburb B $46,000
Bank overdraft 3,200
Net $49,200
Total $1,289,615
The parties agreed that the husband’s superannuation be included in the pool of assets and having regard to the fact that he is 61 years of age, I see no reason why that should not occur. I shall treat it as any other asset.
In her counsel’s opening outline, the wife sought to add-back two sums. The first was the costs orders in her favour which had been paid out of the proceeds of the sale of the Suburb C property. That was $13,148. The second related to unpaid spousal maintenance which had also been met from the Suburb C sale. That was $13,578. In addition, the husband is again in arrears. That currently stands at $17,000. All of these sums should have been paid by the husband or from his entitlements. They were his personal obligations. Had it not been for the money paid from the sale of Suburb C, there would have been a further $26,726 in the pool for division. Because those sums were the husband’s obligations, they should be added back into the pool and then deducted from the husband’s entitlement. There is the necessity to set aside a sum of approximately $50,000 for capital gains tax. The pool is therefore $1,266,341.
What is missing however is the full extent of the husband’s financial resources and property. I refer to my earlier remarks about the husband’s disclosure. He having failed to comprehensively disclose such details as his partnership in Country 1, I propose only to divide the pool of assets shown above. That does not mean however that the non-disclosure should be ignored.
Contributions
An overview of the contributions can be gleaned from the opening submissions of both parties. The wife’s counsel said that her contribution should be assessed as “not less than 50 per cent”. It was argued on her behalf that subsequent to separation a further five to ten percent should be attributed to the wife because of the husband’s failure to comply with his maintenance obligations but also the significant task undertaken by the wife in caring for Ms E.
The husband’s counsel submitted that the contributions should be found to be equal and in respect of the period subsequent to separation, the Court had to take into account that the husband had struggled to comply with the court orders. It was submitted that the husband had been inflicted with the orders because he did not comply with procedural obligations. I do not accept that.
The husband’s evidence in relation to contribution was expanded in evidence in chief to include some details about property that he had as a result of the death of his father in 1981 and a number of modest transactions thereafter. Having regard to the concession by counsel that the contributions were otherwise equal, I do not need to consider that matter further.
The husband was given leave to lead some extra evidence and his counsel helpfully prepared an aide memoir which is now Exhibit “H2”. The husband swore that the contents of that document were true. In substance, that evidence insofar as it is relevant because of his counsel’s concession was that the property he owned in Country 1 inherited from this father was sold and the funds were applied to the acquisition of properties in Australia. He said that in or around 1983, he purchased a studio apartment in the United Kingdom borrowing funds from a Country 1 bank and ultimately, when it was sold, a profit was made. He also made reference to a property in Country 1which was bought and sold in the 1980s and a terrace house purchased and sold around the same time. There were other acquisitions including some land purchased from a liquidator which was purchased in the late 1980s and later sold in the 1990s.
In respect of the purchase of the Suburb B property, the husband said, and this was not denied by the wife, the purchase was funded partly by the sale of the various properties to which I have just referred, partly by funds borrowed from Mr S (as to $85,000) and the balance of about $35,000 which was secured by a mortgage to the National Australia Bank. As I have earlier mentioned, there is an inconsistency in terms of time as to the use of the funds provided by Mr S but having regard to the concession by the husband’s counsel about contribution, it does not matter.
The only other evidence that the husband gave was that in 2010, his income was 60,000 Country 1 currency and there was profit of 21,618 Country 1 currency.
This is a long marriage. Each party fulfilled their initially-intended roles. However, the wife continued after separation to care for Ms E. That is a significant contribution which was undertaken in difficult circumstances. The wife could not rely upon the husband for financial support. He did not comply with orders. Subsequent adjustment by the payment of arrears does not ameliorate the difficulty endured. In a modest pool of known assets, the wife’s contribution has to be cautiously quantified because of the dollar disparity any unequal distribution in percentage terms makes. This is not about punishment or compensation but rather recognising in a qualitative way, the difference between the parties’ contributions and then quantifying that assessment. In this case, the lack of physical support by the husband in respect of the care of Ms E and the unreliability of the husband’s financial support, continued for a period of between three and four years. In a marriage relationship of almost 30 years, that post-separation period is significant. In my view it should be recognised as 2.5 per cent of the total pool in favour of the wife which creates a 5 per cent gap between the parties.
Accordingly, I find that the contributions of the parties should be assessed as to 52.5 per cent to the wife and 47.5 per cent to the husband.
Section 75(2)
Section 75(2) which is referred to as a mandatory consideration in s 79(4) requires the Court to examine a number of factors.
The purpose of s 75(2) is to enable a court to make adjustments to achieve a just and equitable outcome. All of the factors are directed to redressing any economic imbalance so that fairness is achieved. In a case such as this, the Court has to be careful not to place greater emphasis on s 75(2) than on s 79 when both sections are considered. In this case, a division based on s 79 creates an economic disparity but it is the underlying value of that disparity that points to the question of whether the outcome is just and equitable.
Both parties are 61 years of age and are therefore in the twilight years of their possible working lives. However, the husband has a profession, a skill and a successful business with staff. The wife does not work and is reliant on taxpayer-funded benefits and spousal maintenance when it has been paid. The husband is a partner in a two-partner legal profession business which turns over the equivalent of A$150,000 per annum. I do not know how that compares with other Country 1 legal profession businesses or the general living standards in Country 1. On any view however, I find that the husband’s financial capacity to earn is much greater than that of the wife.
There is a vexed issue in relation to the health of the husband which clearly may affect his earning capacity.
It was the husband’s evidence that he was “struggling very hard to work” and that he could not undertake that work in the “manner” that he had prior to the “family law difficulties”. He said that he could not focus and he had lost ambition. To some degree but not entirely, that evidence is consistent with the evidence of the husband’s psychiatrist. Before turning to the psychiatrist’s evidence, the following statement of the husband’s evidence encapsulates a significant part of the problem. He said:
Previously, I had the zest to support the family, which with the exception of my daughter, have unjustifiably and wrongly gone against me, and this has depressed me further…
As I need to survive, I will defend the property proceedings, wherein the wife seeks all. What about me?
In his oral evidence, the husband said that his health was not very good both as to physical and mental issues. He said he was exhausted, suffering lots of stress and noticed that he had lost mobility in his legs. He said that the last time that happened was around August 2007 when he had a similar attack. He said of late there had been tragedies in the family and that he was not the person that he used to be and could not cope and could not work. He said he had taken a lot of medication. This medication related specifically to his immobility.
The husband’s presentation might be seen as indicating a serious long term health problem save for two things. First, the husband’s psychiatrist proffered some advice which I find the husband is not following. Secondly, the husband’s lifestyle after 2007 seems inconsistent with his portrayal.
As late as August 2011, the husband went to Singapore for the cremation of a relative. In June 2011, along with a group of 60 other people, he attended a fun run in China. There were two different events in different parts of China and he was there five days. In June 2011, he came to Melbourne to visit a family friend whose child was getting married and to assist in some driving arrangements. He also visited his family.
In March 2011, he went to Thailand for work purposes and his client drove him. This was simply a border crossing.
In January 2011 he went to Jordan on behalf of a client and some advisors to look at a shareholders’ problem concerning a matter that he had been intricately involved in. It was a joint venture agreement. In January he was in Australia. In December 2010, he went on a fun run in Sri Lanka and was there for five or six days. In October 2010 he went to Mumbai to visit a friend and participated in a fun run in South India. In the same year, he attended a fun run in The Philippines and there was other overseas travel to conduct legal profession business. In September 2009 he had an expensive trip with a client from Penang and another from Taipei. In 2008, he went to New York City at the request of a nephew who worked there and then made a visit to another nephew in Indianapolis. At the conclusion of the Indianapolis trip, he visited another nephew in Canada. These visits were interspersed with the various proceedings in Australia at which the husband attended.
The fun runs were conducted under the auspices of an organisation called M Sport. These trips emanated out of groups of acquaintances in Country 1 and bulk bookings of airfares and hotels undoubtedly curtailed the expenditure. Whilst all of these activities were being undertaken, the legal profession business continued as will be seen from the gross revenues.
In the proceedings, the wife set out a significant portion of evidence about her views of the husband’s infidelity and the requirement to obtain state intervention by way of family violence orders. The husband set out the written complaint of the wife and then said that he denied that there were any “disserving instances” as she had claimed.
The relevance of the evidence of both parties in respect of these matters lies in an explanation for the husband’s mental health problems as outlined by his psychiatrist. Those matters are clearly in his hands. I am satisfied that the husband’s health difficulties are not long term problems.
Dr N
Dr N is a consultant psychiatrist. He had not provided an affidavit but by consent of all parties, his reports were read into the evidence and he attended for cross-examination by telephone. His evidence was forthright and helpful.
Dr N saw the husband in Melbourne every few months. He diagnosed depression and anxiety which was largely a reaction to what had happened to the husband but he also made clear recommendations and prescribed medication. One of the recommendations was that the husband had to reduce his excessive alcohol consumption and another was that he take anti-depressant medication. It is clear on the evidence that the husband has not followed the doctor’s advice.
The husband conceded that there were times when he resorted to alcohol because he felt he had to.
Dr N conceded that the husband had expressed concern about the stigma in Country 1 of taking medication and being known to have a depressive illness. It was the husband’s evidence and I accept, he thought it might affect his professional reputation. Even accepting that, the alcohol consumption was of a concern to Dr N and the husband had not followed advice.
Dr N thought there was a moderate risk of suicide but that the husband’s disability was unlikely to be permanent if he followed advice. The difficulty according to Dr N was that the husband had not acknowledged how serious his depression was because he was too consumed with the legal process. Now that all but these proceedings are concluded, the end is nigh.
I accept Dr N’s evidence. It points to the fact that the conclusion of these proceedings is beneficial for both parties as well as Ms E and it will enable the husband to get on with his life without litigation.
The wife’s capacity to work
The wife has fulfilled a parenting role for the last seven years since her daughter’s 18th birthday and will continue to do so for an indefinite period into the future, participating to a significant level in simple daily tasks. To date, that contribution has been very important particularly in the absence of the husband in Country 1. I propose to recognise that contribution in a real and not a token way.
I also find that despite the husband’s view to the contrary, the prospect of the wife taking on employment or indeed non-caring activities is remote.
I find the wife’s capacity to work is negligible. It was suggested to the wife that she could get a job in a shop but she pointed out the impossible hours that would require her attendance. I accept that. Her capacity to run a business is similarly limited.
The husband’s evidence was that the wife was a director of a company. The wife conceded that she had not referred to the company in her financial statement nor had she produced bank statements. She had hoped to not only set up a business but also to have Ms E do some small things in it. The company and business had been set up with government training scheme assistance during which the wife received government benefits. The wife’s accountant had been involved and formal documents were filed with ASIC. Over two years, the business operated but it had ceased because the wife could not physically continue with the work and her partner fell ill. That evidence was not seriously challenged and I accept what she said.
Unfortunately, that evidence had not been obvious from the wife’s affidavit and to some degree it had to be teased out of her. It was ironical that she should have taken that position having regard to her own complaint about the husband’s lack of disclosure. During the trial, the wife offered to bring all of the documents she had access to that I would have considered should have been accessed by the husband and his lawyers in any discovery process. No effort had been made to make any inquiries of the wife’s accountants. Although counsel for the husband said he was not satisfied about what was ultimately produced, the issue of the wife’s capacity to do something constructive is something I find unlikely. Having regard to the evidence of the wife’s role in Ms E’s life, the likelihood of any business activity is, I find, remote and irrelevant to these proceedings. I find the wife will be dependent upon government benefits.
Dealing with the non-disclosure
Section 75(2)(O) provides that a court may take into account any fact or circumstances which the justice of the case requires.
In the husband’s counsel’s written submissions, it was submitted that any adjustment for non-disclosure albeit denied by the husband, should be considered under s 75(2)(O). In Gould and Gould (2007) FLC 93-333, the Full Court was critical of the trial judge for having reduced the recalcitrant party’s contribution because of non-disclosure. The Court said that the more appropriate course of action was to make an adjustment under s 75(2). It will be remembered that in Chang and Su (supra) in an unsuccessful special leave application to the High Court, Callinan J observed:
It does not matter what the principle might be said to be, a court has to do the best it can. It does the best it can, having regard to the evidence that is adduced and if the parties are not frank then naturally there is going to be a measure of imprecision about any findings that the court can make.
It is also instructive to recall the observation of the Full Court in Kannis and Kannis (supra) (but more fully set out in Gould) that this robust approach is not confined to deliberate non-disclosure. Where a court is satisfied that the pool may be greater than is clearly demonstrated, the court can “err on the side of generosity” to the party who might otherwise have been seen to be disadvantaged by that disclosure. Here, the issue is all the more perplexing because the husband is a legal professional. I reject the suggestion that his non-disclosure is as a result of some health issue.
In the husband’s submissions, his counsel argued that the difficulty arose in determining what order to make. It was submitted that on any view, the evidence about what the wife thought existed pointed to the relevant sums being modest to the point of insignificance by comparison to the Australian assets. The difficulty with that submission is that I have no idea of just what assets the husband has elsewhere. There are three reasons for that. First, the husband was evasive about the financial records that would have possibly established his point about the modesty of such extra resources. He has made arrangements in the partnership to share the profits with a partner whose revenue does not meet all of his dedicated expenses. Albeit modest, the husband conceded that there was a bank account in England that he had forgotten about. Secondly, the husband has continued his lifestyle including the various travels earlier mentioned. Thirdly, the husband is a legal professional and does, or should, understand the litigation process and in particular, the disclosure obligation.
For the reasons set out above concerning non-disclosure, a robust approach should be taken but it still must be just and equitable. To be so, there must be some quantifiable benchmark rather than just intuitive synthesis. The husband has at least the interest in his legal profession business and failed to provide any indication as to its value. That was contrary to a court order. The wife at least gave some explanation about her inability to provide that valuation. In this case, 5 per cent of the known pool of assets is about $60,000. If 5 per cent was adjusted in favour of the wife, it amounts to a 10 per cent variation between the parties. Whilst that may be a significant difference in dollar terms, it is conceivable that that sort of figure might represent what the husband has and has failed to disclose. Whilst there is a measure of imprecision about this exercise, it is the only benchmark that I can see assists. Accordingly, I propose to make a further adjustment in favour of the wife of 15 per cent having regard to the disparity of earning capacity, the commitments of the wife other than of a financial nature to support Ms E and the responsibilities that go with that, her reliance upon taxpayer funded benefits, the terms of what is otherwise a modest pool of assets in the orders that I propose to make and ultimately my uncertainty about what financial circumstances the husband has.
Accordingly, of the known assets, there should be an adjustment of the net pool as to 67½ per cent to the wife and 32½ per cent to the husband.
It is important to see how the percentages convert into dollars even where the true financial position of the husband is unknown. The percentages, after adjustments for the add-backs, payment of outstanding orders by the husband and a distribution of assets in specie means that the two investment properties have to be sold to meet the entitlements of the parties and the capital payment I propose to order for Ms E’s maintenance. The real value of the percentages means that the wife will retain half of the home and receive the Suburb C proceeds, her cash and an amount from the sales of about $290,000. The husband retains his superannuation, the modest shares, the Town F property and receives about $280,000 in cash. Having regard to his undisclosed interests, that is a just and equitable outcome.
Spousal maintenance
The wife sought a continuation of the existing spousal maintenance order on the basis that the husband had not shown any change of circumstances. The husband said that not only were the orders interim in nature but there had since been a change of circumstances.
In the written submissions in closing address provided by counsel for the husband, it was submitted that the husband’s earning capacity has continued to decrease and by reason of his continued health problems, that earning capacity is affected.
Counsel for the wife simply said that the husband had not discharged the onus upon him having regard to the records between 2005 and 2011 which were in evidence indicating that the husband’s receipts of money in his legal profession business had not altered.
It was common ground between the parties that virtually for the entire marriage, the wife and the family were dependent financially upon the husband. In his affidavit, the husband proudly referred to his philosophical views about what he had done to support his family by working hard. The wife did not disagree with that proposition. She did say that the support was of a basis level but having regard to the assets that have been acquired, the parties obviously enjoyed a reasonable level of affluence.
In interim proceedings in this Court, the wife sought and obtained a spousal maintenance order. Initially the order was made by Riethmuller FM in the sum of $1200 per fortnight and the parties consented to a variation of that subsequently to reduce it to $900 per fortnight.
Section 72(1) of the Act provides that, insofar as it is relevant, the husband is only liable to maintain the wife to the extent that the wife is unable to support herself adequately for one of the reasons set out in the provision and even then, only on the basis that the husband is reasonably able to do so. All of those criteria were met in the interim proceedings.
The reason put forward by the wife as to why she is unable to adequately support herself is her obligation towards Ms E. In addition, she is 61 years of age. Having regard to what I have earlier said about Ms E and the wife’s role, I am satisfied that that is an adequate reason to find that the wife is unable to adequately support herself. The majority of the income of the wife is government funded and that must be disregarded when contemplating what order should be made (s 75(3) of the Act).
There has been a change of circumstances here. As a result of the property orders that I propose to make, the wife has a significantly greater property entitlement than she had. Of the entitlement, a portion will be in cash which will enable her to obtain a modest income. Having regard to the provisions of s 81(1)(c), there is a just cause for discharging the order.
Ms E
Significantly, no challenge was made by the husband to the evidence of Ms O who is the Manager of Training and Support Services of the centre where Ms E attends. Her evidence was that Ms E attends for 30 hours per week.
Ms E’s condition was noted as life-long. She participates in a variety of activities which require support. This evidence was important because the wife detailed the daily activities which required her involvement in Ms E’s life. That evidence was forthright and its acknowledgement of the simple tasks that required her involvement in Ms E’s activities.
Counsel for the husband probed whether the wife could pursue employment or business opportunities but the wife detailed the impracticability of that. The husband in evidence tended to play down the extent of Ms E’s disability presumably to show that the wife’s role was not all that significant. The evidence of Ms O was therefore telling.
Ms O said that Ms E will need care, significant support and assistance to maintain a level of independence in the community. She said that without adequate support and resources, Ms E would find herself unable to participate in the economic, social, cultural and political life of our community. Added to that was the concession by the husband that he did not want to see the home sold for the sake of Ms E. It is hard therefore to imagine the wife’s role being any less than it currently is despite the husband’s apparent confidence about Ms E’s future. Ms O said that Ms E will require significant levels of assistance in virtually every activity that adults without disabilities accept as the norm.
A final unchallenged witness was Dr P who is the general medical practitioner for Ms E. He described the Downes Syndrome condition and particularly the degree to which it affects Ms E. The evidence showed that the wife is required to be available frequently during the night. Ms E is insecure and dependent. That position is consistent with the evidence of the wife and Ms O.
Dr P referred to the future problems which are likely to occur including early Alzheimer’s Disease, cataracts, haematological malignancies and spinal cord compression. He said that it was unlikely that Ms E would acquire any more skills than she presently has.
The Victorian Civil and Administrative Tribunal has appointed the wife as the guardian and administrator for Ms E. That is a sufficient recognition of her role. That too puts the wife in a position where she has responsibilities to protect Ms E’s financials interests not only in respect of her daily activities but also in the interest that she has in the home. The order of VCAT does not affect that beneficial ownership. The wife’s frugality in caring for Ms E over the last seven years and in particular her management of Ms E’s pension has meant that a fund of about $20,000 has accrued in Ms E’s banking account. That becomes relevant on the question of maintenance.
All of this evidence points to two things. First, Ms E is a person who has a mental and physical disability. Second, the wife is her primary carer and will continue to be so for a long time thereby creating a situation in which she is unable to better her own economic position in terms of a business or employment.
Maintenance for Ms E aged 25
The jurisdiction and power to make a maintenance order for the support of Ms E was not disputed. It was conceded by both parties that Ms E has a mental or physical disability. It was not conceded by the husband that there was a basis to make such an order because of Ms E’s resources and because of the husband’s capacity to pay.
The wife had sought lump sum orders concerning the husband and in final submission, her counsel submitted that both parties had the obligation and that a sum could be ordered to be set aside from which periodic deductions could be made.
Section 66G provides the power for a court to make a maintenance order.
Notwithstanding Ms E is not a child, the provisions of the Act relating to the maintenance of children apply.
Division 7 of Part VII of the Act sets out a principal object that children receive a proper level of financial support from their parents (s66B(1)).
Parents have a primary duty to maintain their children (s 66C).
The proper needs of a child are to be met from a reasonable and adequate share of the income, earning capacity, property and financial resources of parents. In this case, Ms E’s proper needs require contemplation.
Financial obligations of parents concerning their children are to be shared equitably between parents (s66B(2)). This is not simply about the husband supporting Ms E.
However, S 66L(1)(b) limits the circumstances under which those parental obligations arise, relevantly in this case, to a situation where maintenance is necessary. Whilst the word “necessary” has been discussed in a number of cases (see Gamble and Gamble (1978) FLC 90-452, Tuck and Tuck (1981) FLC 91-021), the phrase in s 66L must be interpreted to mean that the child cannot support themselves to some measurable standard because of their physical or mental disability without maintenance. For example, there will be adults in the community with a mental or physical disability who are employed in industry or commerce where they are paid. That income must be considered in the context of what is necessary. So too must property and financial resources be considered. What must not be considered is any entitlement to an income-tested pension or benefit (s 66J(3)(b)(ii)).
Thus, the approach to determining the need for maintenance in Ms E’s case is otherwise no different from working out whether a child under 18 years of age requires maintenance.
Section 66H provides that in maintenance proceedings, the court must consider the financial support necessary and determine the financial contribution to be made by the parents. Although it is not simply stated, that requires a mathematical evaluation of any shortfall or excess depending upon the findings to each of the two questions.
The mandatory matters that are to be taken into account in what is necessary are set out in s 66J. That provision repeats the object of the legislation that children share in the financial circumstances of their parents. The nub of the question however is twofold; what income, earning capacity, property and financial resources does the child have and, what are the “proper needs” of the child? The latter requires a court to mandatorily have regard to:
(a) the age of the child;
(b) the manner in which the child was “educated or trained”; and
(c) any special needs of the child.
There is then a discretionary question of whether the court should have regard to published research about maintenance.
The only evidence I have of the proper needs of Ms E are those provided by the wife. The husband’s view was that the disability is not as significant as portrayed by the wife. “Proper needs” must mean more than just expenditure currently being incurred. It must include questions about what is required to be done to ensure that the “special needs” (referred to in s 66J) of a child are met taking into account the manner in which, in this case Ms E, has been raised and cared for by her parents.
It was the wife who set out the breakup of the expenditure in her household and that was not challenged by the husband. The evidence of the wife disclosed what she does for Ms E; no expense appeared in the wife’s financial statement (nor could it be quantified) for things such as the security that the wife provides and the sitting with Ms E during the night. Those matters are however covered by adjustments in the wife’s favour under section 75(2) of the Act. I find therefore that the measure of the proper needs is what it costs to enable Ms E to enjoy the benefits that she currently enjoys. On the wife’s evidence, that is $16,334 per year.
What income, earning capacity, property and financial resources does Ms E then have and how is it relevant to considering what is necessary?
Ms E has no income and is unlikely to have any in the future other than the disability pension. Her astute mother has managed to save $20,000 by putting aside some of that pension for a number of years. The wife however disclosed no savings of substance of her own. The wife has managed to provide for Ms E’s financial needs from her own resources but some if not most of that seems to have come from a pension as well. The $20,000 is a capitalisation of Ms E’s pension. The pension is required to be ignored but as this capital sum has accrued over a number of years, to simply pretend it is still a pension and does not exist would do an injustice to the husband. I will take it into account.
Ms E has what was portrayed by the husband as a beneficial entitlement in one half of the home in Suburb B. The declaration of trust in 1991 does not make clear when the trust vests. It seems clear that the intention of the settlement of the trust was to protect Ms E by providing her with accommodation. Both parties agreed that Ms E’s interest in Suburb B is worth $500,000.
In final address, counsel for the husband said that I should take the interest into account to refute that maintenance was necessary. However, in evidence, the husband acknowledged that not only would it be in his daughter’s best interests to remain living in the home but that is what he would prefer.
A sale of the property would only require the purchase of another whether by the wife or from using some of Ms E’s entitlement. The latter must be subject to the question of the wife’s legal obligations under the VCAT orders to protect Ms E’s interests. Even if I could conclude that the wife might be able to use her own funds to provide accommodation for Ms E, I see no reason why I ought not take into account that any investment of $500,000 would, at possible current market interest rates, after allowance for tax, probably cover Ms E’s existing living expenses but it would not cover her accommodation costs.
It was the husband’s own evidence however that convinces me to ignore the half share interest.
In the circumstances, I find that maintenance is necessary.
Section 66K requires a court to consider a variety of matters in determining the contribution to be made by the parent or parents. They include the objects of the legislation. They include the income, earning capacity, property and financial resources of the parties. A court must consider the commitments of those parents necessary for their own support. It must take into account the direct and indirect costs of the caring parent including any income and earning capacity foregone by virtue of the caring role. Having found that the wife has the caring responsibility, the wife’s lost opportunity becomes relevant in deciding whether to divide the financial obligation equally but so too does any property settlement division in which there is disparity between the parents. It would be inappropriate to “double dip”.
Another mandatory consideration is any “special circumstances” which, if not taken into account would result in injustice or undue hardship to “any person”. This particular provision does not allow a court to reconsider and take into account Ms E’s pension. No argument was put by the husband that any special circumstances applied. What was submitted on his behalf was that the Court had to take into account the husband’s ability to support himself. That is somewhat difficult having regard to his attitude to financial disclosure. He deposed to the fact that he earned $360 per week. That was clearly not right. He allowed for rent, tax, travel insurance and other such fixed expenses and then $525 per week for living expenses. He included “maintenance” for the wife of $200 per week but it was common ground that that was not always paid. I am not satisfied that the husband has been truthful nor am I satisfied that he has portrayed an accurate picture of how he lives. For example, there was little or no reference to his travel (albeit frugal) with his M Sport nor of his monthly expenditure on his club. I do not know what he spends.
In the circumstances, I find that the husband’s income is at least as set out in the financial statements of his business. I am not prepared to find that his expenses are not adequately met from his income. Because of the uncertainty, I propose to take a robust approach which includes that he has some entitlement to property.
There will be a disparity favouring the wife arising from the property orders. There is however a disparity favouring the husband in respect of income and earning capacity. Those concepts balance out.
Notwithstanding the wife has a much greater role in the care of Ms E, it is impossible to quantify that in money terms.
I find Ms E’s necessary maintenance should be shared equally.
The wife sought to capitalise the maintenance. The husband’s submission was that it was not appropriate to do so because:
(a)the ability of the husband to produce income would “curtail” with age and he was already 61;
(b)an order would give the wife a present benefit which was “undiscounted”; and
(c)facts could materially change and a capitalised lengthy period could cause injustice.
Counsel for the husband referred me to Prpic and Prpic (1995) FLC 92-574 where the Full Court cautioned against capitalising sums where there was a lack of certainty about the future. The distinguishing feature here is that it is unlikely that Ms E’s financial circumstances will change although those of the parties might. After a division of property, the wife’s position will be clearly evident but I am not at all convinced about the circumstances of the husband particularly if he heeds the advice of his psychiatrist.
Enforcement of periodic payment orders is a consideration where the history shows unreliability. The husband has not a good record of late. He is clearly unhappy about the breakdown of the marriage and has maintained that that has affected his approach to his work. With the evidence of his unadmitted depression and lack of attention to solving his medical problem, it is conceivable that his lack of attention to payment will continue. His approach to financial transparency has left a lot to be desired. Enforcement would be cumbersome if he stayed in Country 1. I find that the wife cannot rely upon the payments being made. It must be remembered that maintenance is also not just to be paid from income. I do not accept that the husband has been candid about his full financial circumstances.
What must ultimately be the test is what is appropriate having regard to all of the financial circumstances of the husband and wife. As I indicated in discussion, it is conceivable that Ms E will be a responsibility of the parties for a long time and the financial obligation is only likely to alter in an income sense if the parties or in this case, the husband, cease working. Although the husband maintained that his working life was effectively over, I do not accept that. On that basis, I see no reason to conclude that he cannot continue to prosper financially and be gainfully occupied in his profession for years to come. Age does bring things to an end and I would have thought that the obligation to financially support Ms E should cease around about 70 years of age when it is probable that the asset and income position of both parties will have stopped increasing.
Arbitrary though it may be, I consider another 9 years is the appropriate period for the capitalization calculation but not necessarily the payment obligation which will be ongoing until the fund is exhausted. I do not intend to consider a discounted figure. I propose to order that a sum be set aside from which a regular maintenance payment can be drawn. The husband can have annual details of the drawing. It is probable that expenses will rise in the future and this is not a matter that warrants further litigation. Rather than fix a “sundown” clause, I propose to fix the sum to be left in the account from which funds up to an annual amount can be drawn. I do not intend to fix an annual increase despite what I have said about increasing expenses. The wife will have responsibility for management including investment of the funds and interest (which will be taxable in the hands of the wife as trustee) can be used as a buffer against increased living expenses over the years ahead. If something unforseen happens to Ms E, the trust will come to an end and the money can be distributed between the husband and the wife.
I propose therefore to order that the sum of $147,000 be held on trust for the maintenance of Ms E to be drawn at the annual rate of $16,334. That money is to be found from the proceeds of the sale of the two investments properties but is to come out of the parties’ respective entitlements not off the top of the pool of assets.
Removal of the husband as a trustee
As has already been mentioned, the wife sought that the husband “resign” as trustee of the trust established by virtue of the parties’ declaration of trust on 14 July 1991. The husband remained silent about the matter in his evidence but in final address, his counsel addressed the question of the setting aside of the trust. I do not need to address that issue. However, acknowledging the power in s 80(1)(e) (to which I shall turn below) counsel submitted that the exercise of that power is ancillary to a claim under Part VIII of the Act.
It was submitted that the property to which the trust related was not property referable to the parties and therefore not property to which Part VIII and therefore s 80 could be applied.
Section 80 (so far as it is relevant) reads as follows:
The Court, in exercising its powers under this part, may do any or all of the following:
(a)…
…
(e)appoint or remove trustees. (emphasis mine)
In Davidson and Davidson (No 2)(1994) FLC 92-469, the Full Court in different circumstances, observed that s 80(1) was limited by its introductory words meaning that it was activated by the exercise of some other of the powers in Part VIII.
The husband and the wife are not only the trustees pursuant to the declaration of trust, they are also the legal title holders of the property to which the declaration applies. They are currently the persons entitled in possession to the land. They are obliged by the terms of the trust to vest the property in Ms E when it is in her best interests to do so. The definition of property in s 4 of the Act means that the “half interest” of Ms E (as it has consistently been described by the husband and wife) is property to which Part VIII of the Act applies.
Thus, the Court is exercising its powers under Part VIII and s80(1)(e) can be used to remove a trustee. The question is whether it should be so exercised.
There are statutory powers available in all states to enable the removal of a trustee (see s 48 Trustee Act 1958 (Vic)).It is also traditionally said that the power of courts to remove a trustee is one to be exercised cautiously and only in exceptional circumstances (see Quinton v Proctor [1998] 4 VR 469). The issue is about what best protects the interests of the trust beneficiaries but also the efficient and satisfactory execution of the trust (see Miller v Cameron (1936) 54 CLR 572 at 580 per Dixon J).
As between the husband and the wife, there is a family violence order until January 2012. Contact is limited between them. The parties are now divorced. The property proceedings will conclude with a division of their property. The wife has consistently complained about the husband’s disclosure of his financial circumstances and these reasons indicate my concerns about that lack of transparency on his part. The wife is entitled to be cynical about his co-operation.
There may be future decisions required about the property and the administration of the trust. The wife is already the person recognised by VCAT as Ms E’s administrator.
The husband seems to have the interests of Ms E at heart but it is the obligation between husband and wife to act in her best interests that raises concerns.
I find it is likely that the administration of the trust will be difficult in the future because of the relationship between the husband and the wife. I consider that decisions that may have to be made for Ms E about housing and renovations are likely to be problematic between the parties. Because the VCAT has sufficient confidence in the wife to appoint her in respect of Ms E and no criticism of the wife was made by the husband in that regard, I consider it appropriate to remove the husband from position as trustee. Consequential orders are therefore necessary.
Costs
I will make provision for any costs applications to be determined on written submissions.
I certify that the preceding Two Hundred and Twenty One (221) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 3 November 2011.
Associate:
Date: 3 November 2011
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