Kouper & Kouper (No 3)
[2009] FamCA 1080
•17 November 2009
FAMILY COURT OF AUSTRALIA
| KOUPER & KOUPER (NO. 3) | [2009] FamCA 1080 |
| FAMILY LAW – PROPERTY – s 79 property orders – Financial contributions of the parties – Add-back considerations – Where the wife alleges waste – Whether legal fees ought be added back – s 75(2) considerations |
| Child Support Assessment Act 1989 (Cth) Family Law Act 1975 (Cth) |
| Aleksovski v Aleksovski (1996) FLC 92-705 Antmann & Antmann (1980) FLC 90-908 Biltoft (1995) 19 FamLR 82 Browne & Green (1999) FLC 92-873 C v C [1998] FamCA 143 Chorn & Hopkins (2004) FLC 93-204 Coghlan & Coghlan (2005) FLC 93-220 G and G (1984) FLC 91-582 In the Marriage of Biltoft (1995) 19 FamLR 82 In the Marriage of Clauson (1995) FLC 92-595 In the Marriage of Coghlan (2005) 33 FamLR 414 In the Marriage of Ferguson (1978) FLC 90-500 In the Marriage of Ferraro (1993) FLC 92-335 In the Marriage of Lee Steere (1985) FLC 91-626 In the Marriage of Soblusky (1976) FLC 90-124 Kowaliw & Kowaliw (1981) FLC 91-092 Malpass & Mayson (2000) FLC 93-061 Neil v Nott (1984) 68 ALJR 509 Norbis v Norbis (1983) 9 FamLR 385 Norbis v Norbis (1986) 161 CLR 513 Omacini & Omacini (2005) FLC 93-218 Pierce & Pierce (1999) FLC 92-844 Prince & Prince (1984) FLC 91-501 Townsend & Townsend (1995) FLC 92-569 Williams & Williams (2007) FamCA 313 |
| APPLICANT: | Ms Kouper |
| RESPONDENT: | Mr Kouper |
| FILE NUMBER: | SYF | 2332 | of | 2006 |
| DATE DELIVERED: | 17 November 2009 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Murphy J |
| HEARING DATE: | 7 – 9 September 2009 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Batey |
| SOLICITOR FOR THE APPLICANT: | Humphreys & Feather Solicitors |
| THE RESPONDENT: | Appeared on his own behalf |
Orders
As and by way of settlement of property pursuant to s 79 of the Family Law Act 1975 (as amended) it is ordered as follows:
The parties do any or all such things, sign any or all such documents and pay any or all such reasonable fees and charges as are necessary so as to, not later than 42 days from the date of these Orders:
(a)Transfer to the wife’s sole name the real property situated at K;
(b)Contemporaneously with the transfer of the said property at K, to discharge the current mortgage over the property and to substitute a fresh mortgage in the sole name of the wife;
(c)Cause the solicitors for the wife to pay, from the controlled money account held by them in the names of both parties, the sum of $16,434 owing to E Chartered Accountants and, thereafter, the balance thereof to the husband;
(d)Abandon any right, title, claim or interest by either of them in or to any superannuation interests held by the other of them to the intent that any and all such interests vest absolutely in the person in whose name they are held;
(e)Save as is otherwise specifically provided for in these orders, abandon any right, title, claim or interest by either of them in or to any chattels, bank accounts, furniture or other property of any description currently in the name of, or possession of, the other of them to the intent that any and all such property shall vest absolutely in the person in whose name or possession they are respectively held.
The husband shall forthwith abandon any right, title, claim or interest he has, or may have, in S Pty Ltd.
The parties shall each be solely responsible for, and shall indemnify the other in respect of, any and all liabilities in each of their respective names.
In the event that the wife is unable, or unwilling, to obtain the fresh mortgage contemplated at paragraph 1(b) of these orders, she shall forthwith notify the husband in writing of same and, thereafter, each of the parties shall, without delay, submit to the associate to Justice Murphy via e-mail minutes of proposed order (whether by consent or otherwise) giving effect to the findings and overall assessment contained in the reasons of judgment delivered contemporaneously with these Orders.
In the event that the parties are not in agreement about the orders that ought be made in the circumstances contemplated by paragraph 4 of these Orders, the matter shall be heard by Justice Murphy at a date and time to be advised and, if necessary, by video link.
IT IS NOTED that publication of this judgment under the pseudonym Kouper & Kouper is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYF2332 of 2006
| MS KOUPER |
Applicant
And
| MR KOUPER |
Respondent
REASONS FOR JUDGMENT
Although the parties’ approximate 11 year co-habitation ended over 11 years ago, their financial affairs remain unresolved. They have, also, during the latter period, remained, to one extent or another, intermingled.
Some three and half years post-separation, in 2001, the husband sold his interest in a successful business (“T Business”). In addition, the husband was paid a lump sum in respect of consultancy given by him to that business after the sale of those shares. Together the sale and consultancy produced about $4.5 million.
Thereafter, those funds found their way into business ventures or investments conducted or made by the parties. The wife contends that all such investments were made by the husband, although an investment in a business (“L Business”) was made for her, and the business was intended to be run by her. The husband made some real estate investments, and invested in a book shop and café business and into companies that might be described as speculative ventures.
The wife contends that the overwhelming bulk of the net proceeds of sale and the consultancy fees were “wasted” in the sense referred to in Kowaliw & Kowaliw (1981) FLC 91-092.
The “property of the parties or either of them” within the meaning of s 79 of the Family Law Act 1975 (“the Act”) as at the date of the trial, consists, otherwise, of valuable real estate at K (about $1.6 million); cash of about $445,000, a car, and some chattels.
Evidence and Credit
An assessment of the evidence and the “credit” of the parties' needs to be made against the background of a number of considerations.
First, the husband represented himself in these proceedings. He had, shortly prior to the trial, made an application for the trial to be adjourned so that he could attempt to obtain legal representation. For reasons given at the time, Watts J rejected that application.
Part of the foundation for that application can be seen in a report from Ms F, who describes herself as a “clinical hypnotherapist, psychotherapist, Counsellor, sex-therapist, life coach and aesthetician”. Ms F was cross-examined before me. Her evidence essentially relates to problems experienced by the husband as a result of “suffering from sex and gender dysphoria” and as a result of him identifying “as a transsexual who is presently transitioning to live as a female, having been born a natal male”.
The husband’s application to adjourn the trial before Watts J was founded in his concerns about his psychological and emotional capacity. He said he would be unable to conduct the trial.
In the proceedings before me, with the consent of Counsel for the wife, the husband was given permission to enlist the assistance of his sister. Initially that took the form of his sister asking questions and making statements for him. However, as the trial progressed, the husband commenced doing so for himself. Ultimately, as I said to him during the course of the hearing, he represented himself perfectly adequately.
I am conscious that the husband’s self-representation has the potential to create for him some disadvantages, not only in respect of the presentation of his case, but also in respect of his presentation generally. I have that potential for disadvantage acutely in mind when assessing his evidence (and submissions), noting, for example, what the High Court said in Neil v Nott (1984) 68 ALJR 509 at 510 that “… a frequent consequence of self-representation, obviously, is that the Court must assume the burden of endeavouring to ascertain the rights of the parties which are obfuscated by their own advocacy”.
A corollary of the concern about self-representation just expressed is that it can also bring with it the opportunity for a trial court to see and hear things from a party that otherwise might be shrouded in the expertise of their representation.
In his Atkin Lecture in 2002 “The Misnomer of Family Law” Mr Justice Wilson (UK) made the following observations (albeit it in the context of a parenting case):
I have reluctantly to admit that there are benefits for the judge in the appearance in person of a parent, let us say for convenience, a father. One sees him in action throughout the case, not just when produced by the advocate for his performance in the witness box. One sees him when he is tired and under stress, and whether he fails with good humour to cope with minor irritants, such as the mislaying of a document. Furthermore, one sees him cross-examine the mother. … Judges have to guard against barbarity which sometimes affects the exercise. But, even if he is mis-using the cross-examination in order to harass the mother, the father provides the judge with a valuable insight. There is no better way to discern the quality of their dealings outside Court, for example, … [than] in that unenviable situation..
I hasten to point out that the behaviour and demeanour of the husband, both when cross-examining the wife and otherwise, was at all times respectful and appropriate. Nevertheless, the husband’s self-representation did provide an opportunity for insight into assessing his evidence.
There are a number of factual disputes between the parties, many of them significant. Nevertheless, I was left with the overwhelming impression that each of the parties was attempting to give the best honest answers they could to the questions they were asked.
Having accepted the essential honesty of their evidence, it is, nevertheless, necessary to remark that I have little doubt that evidence was given by each cognisant that aspects of it might lead to certain legal consequences. Here, the task of assessing evidence and the veracity and reliability of evidence – a task which is, in any event, difficult – is made more difficult by the fact that present assertions are being made as to conduct which occurred, in some cases, many years in the past, and in the context of there being the potential for legal consequences to flow from that evidence.
Moreover, there is no doubt, (on any view of the evidence) that a very considerable sum of money was present at one time in the post-separation lives of these parties and is no longer present. The loss of those monies, commencing from a point approximately seven years ago, also embraced the husband’s announcement of, and pursuit of, a different gender identity and all of the social and psychological ramifications that this implies.
I do not, by any means, suggest that emotional difficulties were confined to the husband. The parties lost a child not long prior to separation and the wife gives evidence of a depression consequent upon that tragic event. Moreover, both the parties (and their daughter who was aged about seven when the parties separated) needed to deal with not only the separation, but the other issues just described.
In the midst of those complex and difficult emotional issues, the parties maintained a financial relationship.
The wife contends, and I accept, that she did not press initially for a settlement of property, because she did not wish to force upon the husband a sale of his interest in T Business during that post-separation period. Also, during that time, the funds emanating from T Business were used to maintain the K property in which the wife and the child resided, and to meet other expenses of the wife and the child.
The Disputed Property Of The Parties Or Either of Them
The Contested Balance Sheet
At the conclusion of the hearing, Counsel for the wife produced a Joint Balance Sheet that identified differences in the parties’ positions and, thereby, the central issues relevant to the “pool” of property that need to be determined in this case.
For the purposes of the record, that document was marked as Exhibit C. Altered by the removal of a column entitled “comments”, that document is reproduced as follows:
| No. | Ownership | Description | Wife's value | Husband's value | |
| ASSETS | |||||
| REAL ESTATE | |||||
| 1 | Joint | [K] Property | $1,350,000 | $1,350,000 | |
| INVESTMENTS | |||||
| 2 | Joint | Controlled Money account | $123,315 | $123,315 | |
| 3 | Wife | [S] Pty Ltd | $60,000 | $60,000 | |
| 3A | Husband | Loan to [X] Ventures | $200,000 | $0 | |
| BANK ACCOUNTS | |||||
| 4 | Wife | Bank Account | $250 | $250 | |
| 5 | Husband | Bank accounts | $10,428 | $2,914 | |
| 6 | Husband | Term Deposit | $320,000 | $320,000 | |
| 7 | Husband | Goldman Sachs Deposit notes | $222 | $222 | |
| 8 | Husband | Rental Bond | $2,600 | $2,600 | |
| 9 | Husband | Winning's refund | $1,761 | $0 | |
| FURNITURE CHATTELS ETC | |||||
| 10 | Wife | Wife's personalty & contents | $10,000 | $10,000 | |
| 11 | Wife | Jewellery | $2,500 | $2,500 | |
| 12 | Wife | Motor vehicle | included in 3 above | ||
| 13 | Husband | Motor vehicle | $20,000 | $20,000 | |
| 14 | Husband | Goods on consignment at Hospitality warehouse | $5,000 | $2,000 | |
| 15 | Husband | Husband's personalty & contents | $15,000 | $10,000 | |
| ADD BACKS | |||||
| 16 | Wife | Wife's paid legal costs | $90,403 | $70,000 | |
| 17 | Husband | Husband's paid legal costs | $286,000 | $286,000 | |
| 18 | Husband | Money's held in solicitors trust account | $0 | $0 | |
| 19 | Husband | Total of addbacks retained or wasted by husband since separation | $1,000,000 | $0 | |
| 20 | Husband | Money's released to Husband for rent | $23,000 | $0 | |
| TOTAL | $3,520,479 | $2,259,801 | |||
| LIABILITIES | |||||
| No. | Ownership | Description | Wife's value | Husband's value | |
| 21 | Wife | [K] Mortgage | $260,000 | $260,000 | |
| 22 | Wife | Loan from [BH] | $20,000 | $20,000 | |
| 23 | Wife | David Jones Credit card | $2,400 | $2,400 | |
| 24 | Husband | Husband's term Deposit loan | $320,000 | $320,000 | |
| 25 | Husband | St George finance-car loan | $0 | $22,000 | |
| 26 | Husband | Husband's MasterCard | NIL | $18,314 | |
| 27 | Husband | Loan from [TS] | NIL | $233,000 | |
| 28 | Husband | Loan from [LM] | NIL | $103,000 | |
| 29 | Husband | Outstanding amount on loan from [B Kouper] | NIL | $152,900 | |
| 30 | Husband | Money's owed to Rachael | NIL | $13,109 | |
| 31 | Husband | Money owed to [G] Accountants | NIL | $8,436 | |
| 32 | Husband | [E] Accountants | $16,434 | $16,434 | |
| 33 | Husband | [N] Pty Ltd (Unpaid Rent) | NIL | $74,183 | |
| 34 | Husband | Jeff Osbourne outstanding fees | NIL | $3,863 | |
| TOTAL | $602,400 | $1,247,639 | |||
| NET | $2,918,079 | $1,012,162 | |||
| SUPERANNUATION | |||||
| No. | Ownership | Description | |||
| 35 | Wife | Superannuation | $7,600 | $7,600 | |
| 36 | Husband | Superannuation | $42,003 | $42,003 | |
| TOTAL | $49,603 | $49,603 | |||
| GRAND TOTAL | $2,967,682 | $1,061,765 | |||
No distinction is drawn by either party between superannuation interests (items 35 and 36 in the Balance Sheet) and the property contained within the Balance Sheet. No splitting order is sought in respect of either superannuation interest.
I accordingly propose to include it as part of the overall assessment of the net property of the parties, or either of them, within the meaning of s 79 (as to which, see In the Marriage of Coghlan (2005) 33 FamLR 414 at [61]). I will also, then, make an order that each party retain their respective superannuation interests.
Reference to items 4 through 15 in the Balance Sheet reveals a number of miscellaneous items comprising cash and chattels. It will be observed that there are a number of differences in the values.
No evidence is produced by either party sufficient to allow any findings to be made with respect to those varying values. I will make an order that each party retain their respective bank account, chattels, and the other items referred to in that list. That will see the wife retaining about $12,750 in property, the value of which is agreed. It will see the husband retaining property to which the wife attributes a value of $55,000 and the husband a value of $37,725.
The difference between the two is, in the scheme of things, minimal and, for the purposes of calculations to be later performed, I will adopt a middle figure, say $46,000.
It will be seen that, included at item 6, is a term deposit in the significant sum of $320,000. However, as is made plain by item 24, that term deposit is matched by a loan in the same sum. This was the subject of puzzling evidence at the hearing. The husband swore that, in a move which, I gather, he considered would maintain his capacity to borrow in order to fund a future home, he borrowed the sum of $320,000, but at the same time was required by the bank to place it in a term deposit from which he could not draw. A second purpose of this was said by the husband to be the avoidance of establishment fees for a new loan.
In any event, both term deposit and loan are included in the Balance Sheet.
Loan to X Ventures
An amount of $200,000 is attributed by the wife as an asset of the husband, being a loan owing by X Ventures to the husband (Item 3A). The husband says that the loan has no value.
X Ventures is a corporation, an investment in which is said to form part of reckless or wanton conduct on the part of the husband with part of the proceeds of sale of his shares in T Business. In very broad terms, the corporation intended to develop and market innovative products, of which an example from the evidence is a child safety device for use in a motor vehicle.
It is said by the wife that the investment of a significant sum into this business was reckless and wanton conduct on the part of the husband, by reason of insufficient investigation being undertaken by him in respect of the business, including appropriate investigations into its budget, business plan, and potential for success. In broad terms, the wife alleges that the husband engaged in a risk that was significantly more speculative than that which might be expected of a businessman – albeit a businessman engaged in speculative entrepreneurial activities.
It seems to be accepted that the investment in the company is of no value. The husband gave evidence that the company is in receivership. He also gave evidence, in response to questions in cross-examination suggesting recklessness in the making of the investment, that there were “hopes” that the “company would be resuscitated”. The evidence before me, including the overall tenor of the evidence, discloses no basis for optimism about that eventuality. Whilst, again, the evidence is sparse, I am sufficiently confident in concluding that the prospects of the husband receiving the loan monies, or any significant portion of them, are extremely low.
I consider it unjust and inequitable to take into account the whole, or any part, of that sum as an asset on his side of the ledger.
I consider the prospect of the receipt of that sum to be so low that I also do not propose to take it into account as a factor relevant pursuant to s 79(4)(e) of the Act.
Liabilities
(a) Generally
A number of liabilities are agreed (totalling about $282,000) and, as earlier referred to, the term deposit loan referred to at item 24 nets off the term deposit held in the same amount.
It is submitted by Counsel for the wife that no evidence is produced in respect of the St George finance for the car loan claimed by the husband in the sum of $22,000. The husband’s Financial Statement filed on 3 February 2009, swears to a Holden motor vehicle with an estimated value of $20,000 as an asset (agreed in that sum at item 13 of the Balance Sheet). The sworn Financial Statement refers to lease payments in respect of that same vehicle with “St George Finance Ltd” in the sum of $112 and a liability to that same institution in respect of that same motor vehicle in the sum of $22,000.
I accept the evidence of the husband. I will include the debt as a liability.
The wife’s credit card with David Jones in the sum of $2,400 is taken up as an agreed liability. The husband’s MasterCard debt of $18,314 is not accepted by the wife. The husband is currently working three twelve-hour shifts a week in his profession. I consider the credit card debt is likely to have been incurred in respect of necessary post-separation living expenses. I propose to include the husband’s MasterCard debt as a liability.
The loan from the husband’s former employee and friend, Ms LM, who was a deponent to an affidavit and gave oral evidence in the proceedings, is in respect of legal fees. I will take that debt in as a liability for reasons discussed shortly.
So, too, an amount described as “Money owed to Rachael” (item 30) is a reference to monies apparently owed by the husband to his former solicitor Ms Wallbank. That too, will be discussed below when addressing the issue of legal fees generally.
The fees said to be owing to an accountant and lawyer respectively (items 31 and 34) are not the subject of evidence, save for a bald assertion of an alleged amount owing to “[G] Accountants” being deposed to in the husband’s Financial Statement. I agree with the submissions made on behalf of the wife that there is insufficient evidence before me from which I could conclude that they are liabilities that should be shared by the wife by deducting them from the gross pool of assets.
(b) The Loans Allegedly owed to Mr TS and N Pty Ltd
Monies are allegedly owed to Mr TS (item 27); and a company controlled by him, N Pty Ltd (item 33). The total amount said to be owing exceeds $307,000. The husband deposes to these liabilities at paragraphs 113 and following of his affidavit of evidence in chief filed on 3 February 2009.
In respect of the amount of $233,000 said to be owing to Mr TS personally, the husband deposes to the loan being made in 1994 and exhibits an “acknowledgement”, the acknowledgment being his affidavit dated 12 September 1994.
That document acknowledges receipt of that sum “and such other future sums as may be advanced”. It indicates that “the borrowers” (the husband and wife) “shall pay interest on the principle sum or so much as for the time being remains unpaid at the rate of ten (10) percent per annum or at such rate as is agreed between the parties”.
At paragraph 116 of his affidavit (21:21) the husband deposes:
While I am advised that the agreement that [the wife] and I entered into to repay [TS] $233,000 he lent us plus interest to help us purchase the [K] property may not be now legally enforceable because he has chosen not to take legal proceedings in time to compel the repayment of that debt, I remain morally obliged to repay him.
In respect of the money owed to Mr TS’s company, (N Pty Ltd) it appears that the debt accrued between 1989 and 2001. It consists, it seems, of arrears of rental due to the company in respect of an apartment owned by it and occupied by the husband at some time after April 1989.
Mr TS was a business partner of the husband in T Business. It will be recalled that the husband sold his shares in T Business and received a very significant sum. Mr TS (or some entity controlled by him) was one of the purchasers of those shares. Despite this commercial transaction (that saw the husband receiving some millions of dollars) in which Mr TS was a significant participant, the debts just referred to were not discharged at that time.
The husband deposes (at least in respect of the latter debt):
Unfortunately, I was again unable to pay [Mr TS] after I got the [T Business] sale proceeds in 2002 as I had been obliged to so quickly put so much into [business ventures commenced by the husband]. I was always expecting to receive returns from these investments, and did not anticipate being in a position of not being able to repay [Mr and Ms TS] for all these years.
The husband alleges that, at the end of 2008 or early 2009, a conversation occurred with Mr TS in which he asserted that he wanted “the money repaid”. It seems to me remarkable that, in the context of the commercial transaction earlier described, in which Mr TS was a significant participant, that an accounting was not done of the monies allegedly owing to him. That is all the more so when the asserted alternative use of the money was for speculative – indeed, highly speculative – investments.
I do not consider that the evidence allows me to find that there is no such debt. However, it seems to me plain that, whatever might be the husband’s prior attitude toward the debts, it has not extended to repaying Mr TS significant sums of money which have been allegedly owed for a very lengthy period of time, and, in one case at least, a debt which is, in all likelihood, statute barred.
There is no evidence before me from Mr TS himself, or any document evidencing any demand having been made, for either debt by Mr TS. The only evidence in respect of same, is the alleged conversation deposed to by the husband.
Moreover, there is no evidence before me which indicates that any calculation of interest has been performed. The document signed by the parties in 1994 refers to interest. Even if a simple (as distinct from compounding) interest calculation was performed, there would be not less than $322,000 in interest owing in respect of the loan, giving a total sum due of well over half a million dollars. Although the husband’s affidavit deposes, at para 15, to an alleged conversation with Mr TS (at some unspecified time subsequent to 1994) and, at para 116, deposes to the agreement to “repay [Mr TS] the $233,000… plus interest…”, the amount claimed by the husband to be owing to Mr TS is the principal sum only (of $233,000). No explanation at all is offered for this anomaly.
In Prince & Prince (1984) FLC91-501 the Full Court (at 79,076-77) said, (per Evatt CJ)
The assessment of debts and liabilities is not necessarily arrived at by a strictly mathematical or accountancy approach in all cases. While some liabilities are charges upon the property which can be accurately assessed at a certain date, others are at large or have not been precisely determined, eg tax liabilities (Kelly & Kelly (No. 2) (1981) FLC91-108 at 76,801)). In some cases, the amount of the liability can only be estimated generally (Albany [1980] FLC90-905 at page 75,717). The Court can make an allowance for a particular if appropriate to do so. In some cases, there are sufficient uncertainties as to the alleged liability to lead the Court to disregard entirely or partly (eg a loan from a parent or a party not likely to be enforced; Af Petersens (1981) FLC91-095; Quirk (1983) (unreported)). In other cases the Court may take the view, that because of the circumstances surrounding the incurring of the liability, it ought in justice and equity to be wholly or partly disregarded in determining the appropriate order to make under s 79 as between the parties to the marriage. Such a result could be reached where a spouse had incurred a liability in deliberate or reckless disregard of the other party’s potential entitlement under s 79…
The principles there enunciated have subsequently been approved in later decisions of the Full Court (see eg Biltoft (1995) 19FamLR 82; Malpass and Mayson (2000) FLC 93-061).
In my judgment, the liabilities referred to, allegedly owing to Mr TS and to N Pty Ltd fall within the category just described. Circumstances surrounding the debt are vague and uncertain. Such evidence as exists with respect to any alleged enforcement of the debt is not only uncertain, but is strongly redolent of the inference that the debt is unlikely to be enforced against the husband in either case.
In my view it would be unjust in the extreme for the wife to bear the burden of sharing either such debt in those circumstances.
I do not propose to include either debt as a liability of the parties for the purposes of ascertaining the net property “pool”. I consider the evidence about the debt so vague, and the prospects of repayment so low, that I also do not propose to take it into account pursuant to s.79(4)(e).
(c) Loan to the Husband’s Father
Similar considerations apply, in my view, with respect to the loan in the alleged amount of $152,900 said to be owing by the husband to his father.
The circumstances and alleged terms of any such loan remain uncertain. Such evidence as exists is contained in the husband’s affidavit at paras 109 and following.
It seems that the husband asserts that a debt was incurred by him to his parents in the ten years prior to the parties’ marriage – that is between about 1978 and 1988. It would appear from that which is deposed at paragraph 110 of the affidavit, that this money was allegedly still owing “in about 2000”.
There, the husband deposes to what might, on a “best case scenario” for him, amount to a new loan between he and his parents. He deposes that, in 2000, he said to the wife:-
My parents are willing to let us continue to use the $200,000 plus, that’s owed to them, without our having to repay them now, provided that when we divorce and have a property settlement, we make sure that they are repaid.
The husband alleges that the wife agreed to this. He deposes to a further conversation “in mid-2003” at a time when he was setting up businesses consequent upon the receipt of the proceeds of sale of T Business.
The wife’s evidence was to the effect that she thought that any loan to the husband’s parents had been repaid.
Again, there is no evidence of any demand having been made by his parents for any sum said to be owing. Whatever might have been the total sum said to be owing initially (which, in any event, cannot be ascertained with precision on the evidence before me), it is plain that an amount of about $70,000 was repaid to them from monies received from T Business. There is now said to be owing (to, on one assertion, “his parents”, and on another assertion, “his father”) the sum of $152,900. It is by no means clear, on the evidence before me, how that precise figure has been arrived at, or is said to be owing, or to whom it is allegedly owing.
Moreover, it seems plain that at least $70,000 was repaid from monies to which the wife could legitimately be seen to have had an entitlement, and, thereby, the wife has contributed to the repayment of at least part of any sum allegedly owing to one or both parents.
It seems to me plainly unjust and inequitable, in the circumstances just described, to attribute to the wife responsibility for the repayment of any more of that debt. I very much doubt that any alleged debt will be enforced in whole or in part.
To the extent that any such debt exists, or will be enforced by the husband’s father (or parents), it seems to me just and equitable that it is a debt that ought be payable by the husband alone.
I consider the terms of any such debt (including the lender and amount) to be so vague, and the likelihood of a requirement to repay so low that I also do not propose to take it into account pursuant to s 79(4)(e) of the Act.
Add-backs of Legal Fees?
A disparity in the asserted amounts of the wife’s legal fees, is evident at item 16 on the Balance Sheet. It seems to me that the best evidence in respect of that amount is that of the wife and I adopt her figure.
The amount of the husband’s paid legal fees is agreed at $286,000.
Earlier authorities with respect of the treatment of legal fees within the context of a s 79 application, are conveniently collected in the decision of the Full Court in Chorn & Hopkins (2004) FLC 93-204.
The treatment of funds used to pay legal fees is, ultimately, a matter for the trial judge’s discretion. Suggesting principles that might guide the exercise of that discretion, the Full Court held:
57If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions) then such funds should be added back as a notional asset of the party, who has had the benefit of them.
58If funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours, or received in his or her own right (for example, by way of gift or inheritance), they would generally not be added back as a notional asset; … funds generated from assets or businesses to which the other party had made a significant contribution, or as an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.
59Outstanding legal fees themselves are generally not taken into account as a liability.
60If, in the exercise of discretion, it is determined that legal fees already paid should be taken into account as a notional asset, then normally any liability associated with the acquisition of the monies used to pay the legal fees, should also be taken into account.
It seems to me clear that those of the sums paid in respect of legal fees by each of the parties, paid from non-borrowed sources, came from funds in which each of the parties had an interest by reason of the contributions of varying kinds made by each of them during the course of their relationship.
I will add back each of the sums paid by the parties and credit those respective funds as assets of each.
Part, at least, of the funds used by the husband have come from moneys supplied to him by way of a loan from Ms LM.
It was suggested to Ms LM in cross-examination that her funds were, in effect, a “round robin transaction” with the husband. That is, it was suggested that the husband supplied the funds to Ms LM, who in turn, purported to loan the funds to him.
Ms LM denied that assertion, as did the husband. I accept their denials. I do not consider that there is a sufficient evidentiary foundation for any such finding. I find that the funds claimed were supplied to the husband from Ms LM’s own resources, and were used by the husband to meet legal fees.
Accordingly, I propose to take the liability to Ms LM in as against the added-back legal fees of the husband.
Add-backs other than legal fees ?
(a) Background
Reference to items 19 and 20 on the Balance Sheet reveals that a total sum of $1,023,000 is claimed by way of add-back to the pool of assets.
Of that sum, a smaller amount of $23,000 is in respect of monies released from a cash account managed by the wife’s solicitor, which was used by the husband for rent in respect of a place where he was residing.
When it was suggested to Counsel for the wife that this sum would, in the circumstances of the parties then pertaining, come under the heading of “necessary living expenses”, Counsel effectively conceded that this was the case (albeit that his instructions did not extend to formally making that concession). It seems to me appropriate to regard those funds as necessary living expenses on the part of the husband, and I decline to add-back to the pool that sum.
The amount of $1,000,000 claimed at item 19 of the Balance Sheet remains to be considered.
Ultimately, the case for the wife was put on a very simple basis: the one million dollars is an attempt to capture, via a single “global amount” in that amount, a claim that has a number of constituent parts.
It is asserted, again put in simple terms, that there was available to the parties after the sale of T Business, and a consultancy payment to the husband, about $4,500,000. That sum is, it is asserted, a sum to which the parties have each made significant contributions within the meaning of s 79 of the Act, and to which, as a result, each had an entitlement. None of those funds remain.
There is a strong case, it is argued, for a sum very significantly greater than the $1,000,000 claimed to be added back to the pool and that this global sum, although not calculated in a precise or mathematical way, represents, as it were, a “best case scenario” for the husband on that issue.
The “add back” issue, or “notional pool” issue, occupied the parties in very significant exchanges of documents, as well as assertions and counter-assertions. Ultimately, two lever-arch folders of documents were filed (although those documents ultimately did not form part of the evidence).
The husband deposes to preparing a document which is referred to in his affidavit (and was referred to at the trial) as “the husband’s memorandum”, which was prepared “in order to answer the queries about post-separation expenditure and borrowings raised by [the wife]”. The lever arch folders referred to contain documents said to substantiate the matters listed in the husband’s memorandum.
Watts J made procedural orders with respect to the parties providing particulars of the claim in respect of add-backs. A document entitled “Particulars as to claim for add-backs pursuant to orders made by Justice Watts” was filed on 3 October 2008, to which the husband replied with a document entitled “Husband’s response to the wife’s particulars as to claim for add-backs pursuant to the orders made by Justice Watts”, filed on 12 December 2008.
(b) Relevant Principles and the Arguments in this Case
The decision whether to add back to the pool of assets, property disposed of or money spent, occurs against a legal framework where the general principle is that the Court takes the property of the parties or either of them as it finds it at the date of trial.
Financial losses incurred by the parties or either of them during the course of the marriage should generally be shared by them, although not necessarily equally (Kowaliw & Kowaliw (1981) FLC91-092 at 76,643-4 per Baker J).
Adding back to the pool is the exception, not the rule. An exception can exist where one party has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets; or where one of the parties has acted recklessly, negligently, or wantonly, with matrimonial assets, the effect of which has reduced or minimised their value or the pool assets (as to which see Kowaliw above).
Baker J’s comments in Kowaliw are widely known. It is important to observe that his Honour also there said:
If, on the other hand, losses of a financial kind have been suffered by the parties to a marriage in the course of the pursuit of matrimonial objects, such as the gaining of income or the acquisition of assets, whether the liability for such losses be joint or several, then, in my view, such losses should be shared by the parties (although not necessarily equally) and taken into account when altering property interests.
The Full Court has rejected the notion that add-backs only arise where “waste” can be established. The issue of “add-backs” is but part of the s 79 exercise, and, accordingly, it is governed by the principles of justice and equity:
Although [the statement of Baker J just referred to] correctly crystallised the legal position so far as the case that his Honour was dealing with was concerned, it should not, in my view, be taken as meaning that in a case such as the present one, it is not appropriate to take the fact that a party has received funds into account, simply because they have been expended in a way which does not fit within the categories described by His Honour.
In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was to distribute to himself an asset in which the wife had a legitimate interest. In such circumstances, I consider that it would be unjust in the extreme, to simply treat such conduct by the husband as a matter to which regard should be had under s 75(2). It seems to me that the husband has had the benefit of that money. Had he retained, for example, the taxi-licence instead of selling it, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case. Accordingly, I am of the view that the correct way in which to deal with the husband’s receipt of those monies, is to bring them into the pool of assets on a notional basis, and make a distribution accordingly.
Townsend and Townsend [1995] FLC 92-569 per Nicholson CJ at 81,654.
Specifically, the matters referred to by Baker J in Kowaliw have been held not to constitute any form of fixed code and are no more than a guideline for use in the exercise of the s 79 discretion.
In Browne v Green (1999) FLC 92-873 the Full Court considered an appeal in which a trial judge had held a husband solely responsible for losses from investment by the husband in a particular project, which investment was lost. In allowing the appeal, the Full Court held that it was manifestly unjust to the husband to attribute the losses solely to him on the basis that he had initiated the investment and had control over it.
The Full Court in Omacini & Omacini (2005) FLC 93-218 noted that circumstances in which it is appropriate to notionally add-back to the pool of assets, fall into “three clear categories”: where the parties have expended money on legal fees; where there has been a premature distribution of matrimonial assets; and in the circumstances outlined in Kowaliw referred to above.
That Full Court rejected the notion that “the mere fact that a party has expended money realised from the disposition of assets that existed as at the date of separation, will result in that expenditure being added back…” as being unduly simplistic (at para 39).
That add-backs are exceptional has also been emphasised in the Full Court in C v C ([1998] FamCA 143) where, (at para 46) the Full court held:
Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool, ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives.
Moreover, in my view, it needs to be borne in mind that the adding back of a specific sum is a mathematical or accounting exercise that seeks to attribute against one party, in this case in 2009 dollars, expenditure incurred in a different, earlier context and in dollars with an earlier value. Difficulties arise immediately upon the contemplation of such an exercise.
An example of the difficulties was provided in this case. The wife’s attention was drawn to a number of specific items contained in her calculations, and she was asked to specify how those items constituted “waste”. The wife conceded during the course of the exercise, that a number of those specific items did not, on reflection, come within the heading of “waste”.
I accept the contention of Counsel for the wife that this evidence should not be determinative of what, it was submitted, is a question of law (perhaps, more accurately, a mixed question of fact and law). However, the evidence does serve to illustrate the potential for injustice when a mathematical or accounting exercise is attempted in respect of dollars spent long-ago.
In the decision of the Full Court in Norbis v Norbis (1983) 9 FamLR 385 (unaffected in this respect, by the subsequent High Court Appeal), Strauss J held (at 395):
The orders which have to be made must be such as will bring about a just and equitable adjustment of the parties’ rights in all their property, having regard to the fact that their marriage has been terminated. The task in hand is not akin, and cannot sensibly be akin, to the taking of partnership accounts, nor can it be a tracing exercise in the course of which such matters as contribution and capacity of a home-maker or parent for the duration of the marriage, or other matters in s 75 are traced into separate items the property in order to establish “interest” therein, which differ from the legal or equitable interests of the parties.
Although said in a different context, his Honour’s words, in my view serve to appropriately underscore that which has been emphasised by other Full Courts, namely that the entire s 79 exercise is not a mathematical or an accounting exercise.
In Browne & Green (1999) FLC92-873, the Full Court held, in re-exercising the discretion that:
76… The somewhat difficult question arises as to the manner in which the extensive losses suffered by the husband in the [investment] should be treated. We have earlier concluded that there is no justification in this case for departing from the general principle in Kowaliw that losses (like gains) should be shared except in the circumstances referred to by Baker J in that decision, none of which had been found to exist in this case. If in a case where economic losses have been sustained during a marriage, the Court concludes that one party should be solely responsible for those losses, than the preferred course would be to make an adjustment in favour of the other party pursuant to paragraph 75(2)(o) (as seems to be suggested by Baker J in Kowaliw).
77However, where, as in this case, the losses are to be shared, that outcome is simply achieved through the existence of a smaller pool of assets available for distribution (than there would otherwise have been) between the parties accordingly to the contributions of the parties under s 79(2) matters. It may then be necessary when the Court comes finally to assess the overall justice of the award which it processes to make to have regard to the proportions in which losses will be borne by the parties.
The expression “add backs” is, of course, convenient enough and is in wide use. Indeed, it might be observed that, increasingly, (and despite the Full Court seeking to emphasise that they are the exception and not the rule) there seem to be few cases in which it is not said that “add backs” of some significance should form part of the divisible assets.
In the case of paid legal fees, that might, on the authorities, be understandable enough, particularly where, for example, it is clear that paid legal fees have come from funds or property otherwise potentially divisible between the parties. Leaving aside paid legal fees, however, it seems to me that, consistent with the authorities just referred to, an approach which starts with a proposition that the property of the parties should include add backs runs the risk of, jurisprudentially, putting the cart before the horse: add backs are the exception, not the rule.
Whilst, clearly enough, the authorities make it plain that the manner in which any dissipation of funds should be dealt with is a matter for the trial judge’s discretion, and accepting that the discretion ought not, of course, be fettered, it nevertheless seems to me that (leaving aside the issue of paid legal fees) the authorities indicate that the issue can, conveniently, be approached by reference to five questions:
(a)Is it contended that property (including money), that would otherwise be available for distribution between the parties if a s 79 order is made, has been dissipated with a consequential loss to the property otherwise potentially divisible between the parties at the date of trial?;
(b)If so, is it alleged that the dissipation of property was in respect of things other than what, in the particular circumstances of this particular marriage, can be classified as “reasonable living expenses”?;
(c)If it is asserted that any loss to the divisible property results from dissipation of property other than in respect of such expenses, why is it asserted that the result should be a sharing of that loss by the parties other than equally?
(d)If it is contended that this be the result, why should there be an add back (which brings to account, dollar for dollar, such past expenditure in current dollars) as distinct, for example, from there being an adjustment being made pursuant to s 75(2)(o)?; and
(e)How should either any “add back”, or adjustment pursuant to s 75(2)(o), be quantified?
It will be seen that, excluded from that dissection, is a reference to any such losses being taken up in the assessment of contributions. The concept of “negative contributions” has effectively been eschewed by an early Full Court (and, generally, by the court since):-
In our view, there is no room for such a consideration in para (a), (b) or (c) of section 79(4). It would be relevant in this context for the Court to take into account that the burden of contribution of one party was increased because the other party failed to made (sic) such contribution as was reasonably expected of him or her…
(Antmann and Antmann (1980) FLC 90-908 at 75,744)
Despite the reference to “contributions” in the passage just quoted, the same Full Court went on to say (ibid), “The fact that a party has committed “waste” of the matrimonial assets may be a relevant fact or circumstance under para. (o) of s 75(2) in an appropriate case”. As has been seen, that statement finds reflection, nearly twenty years later, in the judgment of a different Full Court in Browne v Green.
Reference to those earlier authorities reveals that the answer to the third of the questions just outlined might be, “because the party’s expenditure was ‘reckless’ or ‘wanton’ or ‘negligent’ or ‘wasteful’”.
Those categories are, of course, convenient descriptors of circumstances in which justice and equity might demand an “add back”, but the consistent theme of the authorities is to the effect that it is the subsequent question to which attention must be directed – by reference to the particular circumstances of the particular marriage - rather than an examination of whether particular conduct might be classified in one manner or another.
Put another way, the task is not to examine conduct for the purposes of fitting it within a particular description, or to reward the prudent and punish the imprudent. Rather, the task is to examine and make findings about the particular circumstances surrounding expenditure and to determine, within that context, the manner in which overall justice and equity indicates the diminution in the pool ought be treated.
(c) The Claim for Add-Backs in this Case
In my view, the “global” approach taken to the quantification of the claim for add backs by Counsel for the wife, is, with respect, sensible and recognises (perhaps implicitly) the importance of the limitations of the exercise just described.
Nevertheless, the potential for significant injustice remains where a sum, particularly a large sum (here, if accepted, representing in the region of 40% of the resulting “pool”) is added back in the manner contended for.
A number of propositions were put to the husband by Counsel for the wife suggesting that he had the effective sole control over the proceeds of the T Business sale and consultancy fees. Those suggestions were, ultimately, largely accepted by the husband. In any event, I accept that this was the case. In a similar vein, it was suggested that decisions about potential investments were his alone. Again, I accept this was the case, noting that the L Business investment was made in consultation with the wife.
The husband contends that, from the proceeds, a business (“L Business”) was purchased for the wife. The husband suggested that the business was run unprofitably by the wife. The wife accepted that, subsequent to its commencement, there were losses explicable by the necessity for any business to “get on its feet”. Cross-examination of the husband suggested that expenditure of a trust, which held the L Business and through which other (unsuccessful) business ventures of the husband were held, attributed to L Business expenses which, in fact, belonged to the husband’s investments.
I found the husband’s evidence and explanations in this respect confusing and unconvincing. I think he was asserting that, in an accounting sense, expenses were those of the trust and not of the businesses within it. Whilst that might be right in respect of a trading trust operating a number of business entities, it seems very clear that the L business run by the wife was the only real head of expense contained within the trust, and no real allocation of expenses to businesses run by the husband took place. In any event, the husband’s businesses, and, ultimately, L Business, were unsuccessful.
The wife subsequently purchased L Business from receivers. It has a value in the current “pool” of property. It provides the wife with a modest, but apparently consistent, income. I accept that the wife has run L Business profitably since she acquired it.
Thus, it was suggested that it was the husband’s effective control of the L business, through control of its finances, that led to its initial failure and that the success of the business, since it has been in the sole hands of the wife, is testament to that. It can be seen that, again, the issue of control (or lack of control on the part of the wife) is central to the arguments in respect of add backs.
A distinction can, in my view, be drawn readily between, on the one hand, cases where a party has, through control of monies or assets to which the party has an entitlement, derived for him or herself a benefit (even a temporary “benefit” – for example where monies are wasted on gambling) which results in a diminution in the divisible pool and, on the other hand, a case where that sole control has led to investments which have proved to be unsuccessful and to the benefit of neither party.
The latter situation admits, in my view, of more circumspection about a finding that a party has, to use the words of the former Chief Justice in Townsend, “distribute[d] to himself an asset in which the wife had a legitimate interest”. In that respect, the Full Court in Browne v Green observed:
52…[the trial judge’s] reasons for this conclusion [that the husband should bear solely the losses in the investment] were that the husband was the initiator of, and had control of, the project. However, we do not consider that these facts of initiation and control of a particular venture could, at least on their own, warrant a departure from the guideline that economic losses, as well as economic gains, incurred in a marriage should, as a general rule, be shared…
53…There can be little doubt that, had the [investment] succeeded, the wife would have sought to share in the fruits of that success and there would seem to be no reason why she would not have been entitled to do so. It is this last-mentioned consideration, being that the parties generally expect to share the economic profits of a marriage, which, in our view, requires that there should be good and substantial reason for departing from the principle that where there are economic losses incurred in a marriage, those losses should be shared, absent any negligence, recklessness or deliberate dissipation of assets by one party….
Here, as distinct from the situation that pertained in that case, the wife argued (in effect) that she was not “a willing participant” (as the Full Court referred to the wife in that case). It is argued that the degree of negligence (or recklessness or wantonness) exhibited by the husband in this case is such as to justify the loss not being shared. In effect, it is argued that, in so far as the wife should share in any such losses, she has done so by reason of her adopting a figure of less than a quarter of T Business monies received by the husband.
The investment in T Business was, like many business ventures, speculative. It involved risk. There is no evidence before me of any business plans, budgetary predictions, assessment of the market and the like at the commencement of that, ultimately very successful, enterprise. The husband seeks, in effect, to make precisely this point by urging that the monies emanating from the sale of his interest in T Business was spent in pursuit of other entrepreneurial activities, and otherwise expended legitimately by him, in pursuit of economic advantage from which, ultimately, he contends, it was intended the wife (and their child) would benefit and in which they would ultimately share.
The wife counters with assertions that his conduct can be properly described as “reckless” or “wanton” or “negligent” by reason of the failure to take the sorts of steps that a reasonably prudent person would take in seeking to properly assess the risks associated with the expenditure of any monies. The wife was, it is said, effectively at his economic mercy.
The husband asserts that the wife was effectively complicit in the dissipation of funds, in that she sought and obtained with those funds the L business. As has been seen, the wife asserts that the husband attributes to that business, losses which were in fact not losses of that business (or not entirely, not even predominantly, losses of that business), but, rather, losses associated with, in particular, (an admittedly unsuccessful) bookshop and café and a business venture in a shop.
A significant attack was made on the imprudence of those investments. For example, the shop lay vacant because the council failed to grant development approvals. Whilst that might be said to be a matter falling outside the control of the husband, it is said that the contract to purchase was entered into without a condition that made it subject to the obtaining of the developmental approval. I emphasise that this is but one example of a number explored with the husband in cross-examination. Others include an assertion that properties acquired by the husband were significantly overcapitalised and, subsequently, sold at a loss.
In my view, many of the investments (eg X Ventures and the U Group) might be seen as markedly imprudent, particularly where prudence could have seen a very significant capital sum cautiously invested for the benefit of the (admittedly separated) parties and, in particular, their child.
But, given that the task is to assess justice and equity – as distinct from performing a tracing or accounting or mathematical exercise – it is important, in my view, to place the investments and expenditure into a context.
The cessation of the business relationship with the husband’s former partners that netted him the capital sum (noting that it was a capital sum to which, in s 79 terms, the wife plainly had an entitlement) occurred in circumstances where the marriage had broken down, but the parties continued to maintain a financial inter-relationship. The receipt of the funds occurred also in circumstances where, I accept, the husband was flushed with the success of T Business and determined to repeat it in other ventures.
They also occur in a context where he asserts (and I accept) that, from about 2003 onwards, he was taking steps to transition from a man to a woman. The husband asserts that this was attended with significant emotional and psychological issues. I don’t find that surprising and I accept it. The wife asserts, equally, that this was attended with significant issues for her and for the parties’ child. Again, I don’t find this surprising and I also accept that evidence.
Counsel for the wife makes the point that, overwhelmingly, investments had been made, and money spent, by 2003. Whilst that might be true, I cannot accept that the emotional and psychological issues in “changing” gender start (or, indeed finish) at a particular time. All the more so, in my view, where an 11 year relationship had broken down.
(d) Add backs - Conclusions
Whilst the dissipation of a significant amount of money that would – all else being equal – form part of the s 79 property is, with hindsight’s wisdom, troubling, I am not persuaded that justice and equity requires it to be added back to the pool, dollar for dollar (and in 2009 dollars), and put on the husband’s side of the ledger.
Attributing those losses solely to the husband in that manner is, in my view, unjust and inequitable, even allowing for the “global methodology” used by Counsel for the wife which, of itself, allows for a reduction in an amount that might otherwise be arrived at via an “accounting exercise” or a “tracing exercise”.
The Property of the Parties or Either of Them
Consequent upon the findings just outlined, the property to which any orders pursuant to s 79 of the Act might apply is as follows
ASSETS JOINT HUSBAND WIFE K Property 1,350,000 Controlled Money Account 123,300 S Pty Ltd 60,000 Cash, Furniture, Chattels Cash, furniture, Chattels Say 46,000 13,000 Term Deposit 320,000 Legals Added Back 286,000 90,400 SUPERANNUATION JOINT HUSBAND WIFE 42,000 7,600 LIABILITIES JOINT HUSBAND WIFE Mortgage (260,000) Loan BH (20,000) Loan LM (103,000) Credit Card (DJs) (2,400) Credit Card (M/Card) (18,300) Term Deposit Loan (320,000) Car Loan (22,000) Single Expert (16,434) JOINT HUSBAND WIFE NETT (Rounded) TOTAL 1,196,900 230,700 148,600
TOTAL NETT (rounded) 1,576,200
The statutory mandate is to not make an order pursuant to s 79 of the Act unless satisfied, in all of the circumstances of this particular relationship, that it is just and equitable to do so.
Whether to make an order, and, if so, the terms of that order, depends on a consideration of the matters outlined in s 79 of the Act: the respective contributions of the parties as described in paragraphs (a), (b) and (c) of s 79(4); the effect of any proposed order upon the earning capacity of the parties; the matters referred to in s 75(2) insofar as they are relevant; any other order made under the Act effecting the party or the child; and any child support payable under the Child Support Assessment Act 1989 (Cth).
The path to compliance with that statutory regime has been described as either a three-step or four-step approach. It is well established by authority. (See eg: In the Marriage of Lee Steere (1985) FLC 91-626; In the Marriage of Ferraro (1993) FLC 92-335; In the Marriage of Clauson (1995) FLC 92-595 and Coghlan and Coghlan (2005) FLC 93-220.)
Contributions
Attention was focussed upon what the husband asserted were significant capital contributions made by him, or on his behalf, at the commencement of the relationship.
The Full Court in Williams and Williams (2007) FamCA 313 discussed a line of authority dealing with what can conveniently be called “initial contributions”, including a line of authority in the New South Wales Court of Appeal dealing with that issue in the context of de facto relationships. The Full Court said in Williams (at para. 26):
We think there is force in the proposition that a reference to the value of an item at the date of the commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution towards the parties. Thus, where the pool of assets available for distribution between the parties consists of say an investment portfolio or a block of land or a painting that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing or the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But in so doing, it is equally important to give recognition to myriad other contributions that each of the parties has made during the course of their relationship.
That said, the crucial task is to assess and weigh all contributions of all types: “What is important is somehow to give a reasonable value to all of the elements that go to making up the entirety of the marriage relationship”. (Aleksovski v Aleksovski (1996) FLC 92-705 per Kay J).
In a similar vein, the Full Court said in Pierce and Pierce (1999) FLC 92 – 844 at 85,881 that:
It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution … regard must be had to the use made by the parties of that contribution.
As Nygh J held in G and G (1984) FLC 91-582 at 79,697 :
In my view, despite what was said [by the Full Court] in Norbis, both approaches are legitimate unless the High Court rules otherwise provided that those who take the global approach heed the warning that the origin and nature of the different assets ought be considered and that those who favour the more precise approach do not mistake the trees for the forest, i.e. add up their individual items without standing back at the end of the overall result in the light of the needs of the parties.
His Honour’s sentiments were specifically approved by the High Court in Norbis v Norbis (1986) 161 CLR 513 (at 523 per Mason and Deane JJ). Their Honours went on to say (at 524):
The Family Court has rightly criticized the practice of giving over-zealous attention to the ascertainment of the parties’ contributions, and we take this opportunity of expressing our unqualified agreement with that criticism, noting at the same time that the ascertainment of the parties’ financial contributions necessarily entails reference to particular assets in the manner already indicated.
There is a significant difference in the accounts of the parties of their initial financial positions. The wife alleges that the parties’ positions were essentially the same and each had little of significance. The husband asserts he was “already independently wealthy”.
Whilst the wife concedes that the husband had (with his parents) an interest in a business (also called T Business, and which can be seen as a predecessor to the subsequently successful business of the same name), she asserts that the initial business had floundered by the time the co-habitation commenced. The wife contends that, at that time, the husband owed $200,000 to his parents “due to losses” in respect of the initial, allegedly loss making T Business. She contends that “shortly after [the parties] began to live together, the husband purchased a townhouse which was effectively fully financed from bank borrowings”.
The husband contends that, at the commencement of co-habitation, T Business was vibrant and successful and the then business provided the springboard for the future success of it. Specifically, he swears that, by July/ August 1987, T Business had seven franchised stores. The husband also contends that he owned real property at D (having bought it about 8 years prior to co-habitation). He asserts that this property had, at the time of its sale in June 1987 – i.e. at (on the husband’s version), or a few months after (on the wife’s version), the commencement of co-habitation – equity of about $125,000. He says this was contributed by him to the T business.
The husband was cross-examined about each issue. I consider that the husband’s evidence was precise, detailed and redolent of accuracy. I prefer his account to the assertions of the wife. I accept that about $125,000 was put by him into the T business.
The position during co-habitation is marked by the growth and success of T Business (run in a partnership between the husband and others – or their trading entities). Clearly the husband worked hard. Equally clearly, the wife worked hard in her sphere and she was, I find, primarily responsible for the day to day care of the parties’ daughter, and the home, and indirectly contributed to the efforts of the husband in building the T business.
The post-separation situation is marked by the unusual features and emotional difficulties of each party earlier referred to. No doubt those considerations made the contribution of each party more onerous.
The wife has, in relatively recent times, worked hard to establish (or re-establish) the L business, which has a value in the current “pool of assets” and provides her with an income.
The wife and the parties’ child lived in the former matrimonial home after separation. The husband paid the mortgage, although there were, apparently, some arrears. Lump sum payments were made in June 2001 and November 2004, the latter discharging the then mortgage. That mortgage was replaced by a new one of about $250,000 and $260,000 is now owing. Regular payments, from about September 2008, have been met from a controlled monies account in the names of both parties run by the wife’s solicitors.
As has been seen, much of the preoccupation of the parties, in an evidentiary sense, has concerned the use of, and absence of, moneys in this post separation period. The contributions of the parties have been attended by significant difficulties. Each has tolerated a difficult (and longstanding) situation for, perhaps, differing, but understandable, reasons.
I consider it appropriate to look globally at all of the contributions made by each of the parties. Those contributions are in respect of property with a total value less than it might otherwise have been had the T Business proceeds been preserved. The consequent “dollar result” of a contribution assessment is affected accordingly.
On balance, over the whole of the approximately 22 years from the commencement of co-habitation to trial, I consider that the use made of what I found to be the initial contributions of the husband and the role they played in relation to the parties’ property calls for an adjustment in favour of the husband, but it is an adjustment ameliorated by a miscellany of contributions otherwise made by each of the parties in each of their respective roles during those 22 years.
A disparity in contributions of 5% represents about $80,000. It seems to me that is about right in reflecting what I have assessed as the disparity in contributions across the whole of the relationship.
I assess contributions, then, as being in the proportion 52.5% to the husband and 47.5% to the wife.
section 75(2) Factors
The parties are each aged in their late 50’s. The wife’s earlier depression appears to have resolved itself. The husband suffers from emotional/ psychological issues associated with his sexual identity. He also refers to “cellulitis in [his] legs” and “lymphoedema”.
The wife works remuneratively in the L business and draws a modest income. The husband works in a profession. He completed his basic training in February 2009. He says he “may not be able to continue in [this profession] as I find that my legs may not be able to cope with the physical demands” but hopes to “find a sedentary […] position”. If suitable employment is found, the husband expects a salary plus penalties of about $970.00 per week.
The husband refers to significant potential surgical and other costs associated with his transition to become a woman. His plans in that respect are vague (perhaps necessarily so as they depend on a number of variables) as are the potential costs. I don’t propose to take these costs in as a specific matter.
The parties’ child turned 18 in April of this year. The husband deposes to arrangements between the parents and the child changing towards the end of last year and early this year. In December 2008, the husband says that he and the child found a suitable unit within walking distance of her school (where she is in her last year) situated in inner Sydney.
He deposes to the child having told him on a number of occasions “I will spend at least 4 or 5 nights a week with you”. The husband goes on to depose that “[the child] has been sharing her time between [the wife] and me”. No doubt expenses are incurred in respect of the parties’ now adult child which her parents continue to meet. It is anticipated the child will undertake tertiary education.
In her written outline of case, the wife contends, in making specific submissions with respect to s 75(2)(o), that:-
In the event that the wife is unsuccessful in notionally adding back property to the pool, in accordance with her particulars, she contends that the husband has engaged in gross waste consistent with her particulars. In this situation the s.75(2) adjustments will fall substantially in her favour.
Section 75(2)(o) provides:-
Any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account.
The sub-paragraph’s wide terms can be seen as consistent with the broad discretion granted to the court to make orders in respect of settlement of property which are just and equitable. The measure of whether the sub-paragraph applies and, if so, its impact on the overall assessment of the factors relevant under s 75(2), is “the justice of the case”.
The expression “any fact or circumstance” is of wide import and, specifically, is not confined to examples or amplifications of the matters otherwise specifically remunerated in s 75(2). (See e.g. In the Marriage of Ferguson (1978) FLC 90-500; In the Marriage of Soblusky (1976) FLC 90-124).
A finding as earlier made by me that one party alone ought not be responsible for losses to the property pool necessarily involves a conclusion that the losses are to be shared. Partly, of course, they are shared by the diminution of the property available for distribution between the parties. Otherwise, it does not follow that losses should be shared equally as, for example, the Full Court made clear in Brown v Greene, above, at [86,370].
Equally, however, any such issue can be taken up pursuant to s 75(2)(o) as part of the broader assessment of the relevant factors under that section. (See Baker J in Kowaliw & Kowaliw (1981) FLC 91-092).
The argument advanced by the wife is that the size of the sums and the manner of their dissipation (over which the husband had sole control) is such that the effect of the s 75(2) adjustment is that she should receive the whole of the existing property.
Is such a result just and equitable?
The husband had control of, and used, moneys to which each party had a s 79 entitlement. He did so, predominantly, in high risk business ventures. They failed. He also invested in business ventures in respect of which he can be regarded as being imprudent or careless (overcapitalising real property and failing to ensure contracts were conditional, and other such examples). He has retained no benefit for himself as a result of any of those uses of the money. He obtained no real benefits for himself while the ventures were live. To the extent that the wife has suffered a loss, he, too, has suffered a loss.
Adjusting my assessment of contributions, the wife’s argument is that there should be an adjustment (in circumstances where, otherwise, the picture is essentially unremarkable) of 57.5% of the “pool” or, in dollar terms (as to which see In the Marriage of Clauson (1995) FLC 92-595) about $900,000.
If accepted, the ultimate finding must be that, after a 22 year financial relationship, the husband should receive nothing of real value.
I am not persuaded that such a result is just and equitable.
Yet, I remain troubled by what I regard as a manifest injustice occasioned to the wife from having no say over how a very significant sum was spent and the loss of, at least, a component of those funds which prudence could have quarantined from the entrepreneurial activities (however well meaning or optimistic the latter were thought to be in producing future wealth for all).
The amount of any adjustment to reflect that injustice (whether expressed in percentage terms, or dollar terms) is, of course, not capable of precise calculation.
In my judgment, an adjustment in favour of the wife of about 30% (or about $470,000) represents an appropriate amount. That produces an overall result in her favour of 77.5% of the net pool of property.
I arrive at that conclusion conscious of, and guided by, the result thereby produced for each of the parties in terms of the property division that results. The mooted adjustment will see the property of the parties or either of them divided as appears in the following table (assuming that I will order that the amount payable by the parties to the single expert shown in the balance sheet to be paid from the controlled money account held in their joint names):
Wife $000 Husband $000 K property 1,350 Money Account 106.8 (Mortgage) (260) Term Deposit 320 Money Account nil (Term Deposit Loan) (320) S Pty Ltd 60 Legals Add back 286 Chattels, bank a/cs and furniture 13 Cash bank a/cs and furniture 46 Legals Add back 90.4 (Credit Card) (18.3) Superannuation 7.6 Superannuation 42 (Loan BHg) (20) (LM Loan) (103) (Credit Card) (2.4) (Car Loan) (22) Totals 1238.6 337.5 Percentage of total nett 78.5%
21.5%
The s 79 exercise is neither mathematical nor capable of precise calculation. I do not propose to alter the adjustment there set out by the payment to the wife of around $15,000 to equal the result of 77.5% otherwise arrived at.
I consider that orders reflecting the distribution of property indicated in the above table represent a just and equitable settlement of property between the parties in the somewhat unusual circumstances of this relationship.
I order, accordingly, in the terms set forth at the outset of these reasons.
I certify that the preceding one hundred and eighty-one (181) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Murphy
Associate:
Date: 17 November 2009
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