Kuzmenko & Aarne
[2024] FedCFamC1F 685
•15 October 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Kuzmenko & Aarne [2024] FedCFamC1F 685
File number: SYC 2267 of 2019 Judgment of: CHRISTIE J Date of judgment: 15 October 2024 Catchwords: FAMILY LAW – PROPERTY SETTLEMENT – Alteration of property interests – Where wife alleges waste by husband – Where wife asserts there should be an addback of husband’s gambling losses – Where husband asserts the gambling occurred with wife’s knowledge and agreement – Whether husband’s expenditure on gambling should be regarded as waste – Whether there should be an inclusion of property as an addback or adjustment based on s 75(2) – Where Kowaliw and Kowaliw (1981) FLC 91-092 applied – Where husband’s gambling losses found to constitute waste – Where husband failed to make full and frank financial disclosure – Net assets divided as to 72 per cent in the wife’s favour – Section 75(2) adjustments made. Legislation: Family Law Act 1975 (Cth) s 75(2)
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 6.01, 6.02, 6.03, 6.06, 6.17, 8.17
Cases cited: De Angelis & De Angelis (2003) FLC 93-133; [1999] FamCA 1609
DJM v JLM (1998) FLC 92-816; [1998] FamCA 97
Kowaliw and Kowaliw (1981) FLC 91-092; [1981] FamCA 70
Omacini & Omacini (2005) FLC 93-218; [2005] FamCA 195
Townsend & Townsend (1995) FLC 92-569; [1994] FamCA 144
Division: Division 1 First Instance Number of paragraphs: 105 Date of hearing: 24 – 25 September 2024 Counsel for the Applicant: Mr Mathews Solicitor for the Applicant: Lin Tang & Co Counsel for the Respondent: Ms Clarke Solicitor for the Respondent: Zhang Shijing Lawyers ORDERS
SYC 2267 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS KUZMENKO
Applicant
AND: MR AARNE
Respondent
ORDER MADE BY:
CHRISTIE J
DATE OF ORDER:
15 OCTOBER 2024
THE COURT ORDERS THAT:
1.Within 8 weeks of the date of the making of these Orders, and contemporaneously, the parties do all things and sign all documents necessary to:
(a)Discharge the mortgage currently registered on the title to the property known as B Street, Suburb D NSW (“the Suburb D property”) and the applicant is to be responsible for the payment of all monies to the mortgagee to discharge same; and
(b)Transfer to the applicant the respondent’s right, title and interest in the Suburb D property.
2.In the event the applicant is unable to pay the necessary funds to discharge the mortgage registered on the Suburb D property within 8 weeks of the date of these Orders, and unless otherwise agreed by the parties in writing, the parties shall do all acts and things necessary to cause the Suburb D property to be sold by private treaty at the earliest available date at a price to be nominated by the applicant, and the proceeds of the said sale be disbursed in the following order and priority:
(a)Payment of agent’s commission, advertising expenses and legal expenses of the sale;
(b)Payment necessary to adjust for any council and/or water rates;
(c)Payment necessary to discharge any mortgage registered against the Suburb D property; and
(d)Balance to the applicant.
3.In the event that the Suburb D property fails to be sold by private treaty within a period of 3 calendar months of being listed for sale, then the parties shall do all acts and things necessary and execute all necessary documents to cause the Suburb D property to be sold by auction at the earliest possible date at a reserve price to be nominated by the applicant and the proceeds of sale be disbursed in accordance with Order 2.
4.The applicant is appointed as the sole trustee of sale of the Suburb D property.
5.In exercising her powers as the trustee for sale, the applicant shall:
(a)Appoint real estate agents as the sale agents of the Suburb D property;
(b)Appoint conveyancers for the sale of the Suburb D property;
(c)Determine the sale prices of private treaty or set the reserve prices of any auction, as recommended by the real estate agents in writing; and
(d)Otherwise exercise all powers ordinarily given to the trustee for sale to sell the Suburb D property, including but not limited to:
(i)Advertising and marketing the Suburb D property, including undertaking styling as recommended by the real estate agents;
(ii)Making the Suburb D property available for inspections; and
(iii)Signing all documents, including but not limited to agency agreements, costs agreements, contracts for sale, discharge of mortgages, transfers and banks’ discharge authority documents, to effect the sale of the Suburb D property without the signatures of the respondent; and
(iv)Providing the parties in the proceedings with any contract for sale signed by the applicant for the sale of the Suburb D property, as well as the settlement sheets for the Suburb D property.
6.The applicant is at liberty to provide a copy of these Orders to:
(a)Real estate agents and conveyancers acting on the sale of the Suburb D property, settlement agents and land registry services; and
(b)C Bank and any other mortgagees of the Suburb D property.
7.Within 7 days of the date of these Orders, the parties shall do all acts and things and sign all documents necessary to:
(a)Transfer all balance in the parties’ C Bank joint offset account (Account Number: 39) to the applicant’s nominated account;
(b)Transfer all balance in the parties’ C Bank joint offset account (Account Number: 55) to the applicant’s nominated account;
and for this purpose, either party may provide a copy of these Orders to C Bank in order to effect the transfer and serve as sufficient authority for that purpose.
8.Pending the parties compliance with Order 7, the respondent be restrained from withdrawing any funds from the parties’ joint offset accounts.
9.It is requested that C Bank gives effect to the preceding Orders.
10.Other than as herein provided, the respondent be declared the sole legal and beneficial owner of all other items of property presently in his respective possession or control but not limited to:
(a)The real property known as E Street, City F, Country G;
(b)All other real and personal property now in his possession, custody or control including but not limited to money, shares, real property, motor vehicles, furniture, furnishings and personal effects;
(c)All shares, debentures, units in unit trusts, bank, building society or credit union accounts standing in his sole name respectively; and
(d)All interests in life insurance policies and superannuation funds standing in his sole name respectively.
11.Other than as herein provided, the applicant be declared the sole legal and beneficial owner of all other items of property presently in her respective possession or control but not limited to:
(a)All other real and personal property now in her possession, custody or control, including but not limited to money, shares, real property, motor vehicles, furniture, furnishings and personal effects;
(b)All shares, debentures, units in unit trusts, bank, building society or credit union accounts standing in her sole name respectively; and
(c)All interests in life insurance policies and superannuation funds standing in her sole name respectively.
12.In the event that either party should fail, neglect or refuse to sign or execute any deed, document or instrument required by or to give effect to these Orders then pursuant to Section 106A of the Family Law Act 1975 (Cth), the Registrar of the Federal Circuit and Family Court of Australia (Division 1) is authorised, empowered and directed to sign and execute such deed, document or instrument in the place and instead of such party and to thereafter do all things and acts as are necessary to give validity and operation to same, and an Order shall be made for the defaulting party to pay the other party’s costs of and arising from his or her default with any of these Orders.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Kuzmenko & Aarne has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CHRISTIE J:
These proceedings concern adjustment of interests in property following a marriage breakdown. The remaining parenting issue concerning international travel was resolved by agreement on the first day of the trial and consent orders were made.
The applicant wife, Ms Kuzmenko (“the wife”) and respondent husband, Mr Aarne (“the husband”) each seek an adjustment of their respective interests in property.
Final parenting orders about X born in 2013 (“the child” or “X”) dealing with all other parenting issues were made by consent on 12 December 2023 and provide, in broad terms, that the child lives with the mother and spends time with the father.
BACKGROUND
The parties married in 2007 and separated on 10 May 2018.
They lived separately under the one roof between 10 May 2018 and 21 August 2019.
In 2007, the property at H Street, Suburb J NSW (“the Suburb J property”) was purchased in the wife’s sole name. The purchase price was $580,000. The wife says her father gifted her $427,000 which she received in instalments between 2007 and 2008. The wife obtained a mortgage to fund the remainder of the purchase price. The husband says he contributed $150,000 towards the purchase.
In 2011, the parties purchased B Street, Suburb D (“the Suburb D property”) in joint names. The purchase price was $480,000 and was funded by redrawing on the Suburb J property mortgage and additional borrowings.
The parties sold the Suburb J property in 2020 and the net sale proceeds were $56,941.
The wife is employed and the husband is self-employed.
CONSIDERATION
This is a matter where the wife contends the husband has failed to make full and frank financial disclosure.
At the hearing before me, the husband had prepared a bundle of documents for tender which it was agreed were not documents which had previously been discovered. The documents related to two issues: a taxation debt for K Pty Ltd from the Australian Taxation Office (“ATO”) and an insurance claim (and related documents relating to the husband’s medical treatment) in respect of an accident the husband was involved in in 2023.
I permitted the husband to tender and rely on the ATO notice in respect of the company debt.
I declined to allow the husband to rely on three documents which counsel sought to tender relating to the husband’s claim with his insurer arising out of the accident. I did so having regard to the matters discussed below.
The Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) require disclosure of “all information relevant to the proceeding, in a timely manner”: r 6.01(1). Rule 6.03 refers specifically to the duty to disclose documents and provides that each relevant document which is in the possession or control of a party is caught by the duty. Rule 6.06 provides a non-exhaustive list of documents which may be relevant in a financial proceeding.
Further, r 6.02 prescribes that a party must file a written notice acknowledging the requirement in r 6.01, undertaking that, to the best of his or her knowledge, the party has complied and will comply with the requirement.
The husband filed such an undertaking on 24 November 2022 (exhibit 7).
When he was questioned about its contents, he seemed almost entirely unfamiliar with the content of the undertaking. The husband’s primary language is spoken in Country G. On the face of the document, he did not have the undertaking interpreted to him.
On 29 February 2024, the husband filed a Financial Statement which was adopted by him on oath or affirmation (it is not indicated which) on the same day. The Financial Statement contains a paragraph about disclosure and warrants that the husband had read and understood r 6.06 of the Rules and complied with its requirements. Again, there was no indication that the Financial Statement was interpreted to the witness. It was plain from the cross-examination of the husband that the statement, to the effect that he read and understood r 6.06 and the statement that he had complied with it, could not have been true.
In 2023, the solicitors acting for the wife wrote to the solicitors acting for the husband seeking updated disclosure and noting that disclosure had last occurred in late 2022 (exhibit 8). That letter sought taxation records, business activity statements and bank statements for the husband and the companies in which he was the sole shareholder. It is uncontroversial that the correspondence was not answered and the documents not provided since same is noted in the correspondence from 2024 (exhibit 9). Exhibit 9 repeated the request and, in addition, sought documents relating to the husband’s accident.
On the eve of the hearing, the husband’s lawyers served a bundle of documents on the wife’s lawyers which included, for the first time, documents relating to the accident.
Counsel for the wife objected to tender of the documents in reliance on the provisions of r 6.17 of the Rules.
Counsel for the husband submitted that the documents were relevant. I agree. However, it cannot be the case that a document may be tendered notwithstanding the effect of r 6.17 merely because it is relevant. This must be the position since documents which are not relevant would be inadmissible on that basis alone.
Counsel for the husband accepted that such documents could only be tendered with the consent of the wife or the permission of the Court. The wife did not consent. The wife’s counsel submitted, and I accept, that the failure to disclose the documents, as the Rules require, until the last minute creates a tangible prejudice to the wife who would be unable to test their content by calling evidence, seeking to issue subpoenas, or cross-examination of the authors. Against that, the husband provided no admissible evidence explaining his failure to disclose the documents – particularly in light of a specific written request.
It is also significant that the husband filed his trial affidavit on 12 August 2024, some 9-10 months after the accident and about a month after the specific written request for the documents relating to the accident.
To the extent that the husband’s affidavit made any mention of his health, it was contained in a single phrase, “my deteriorating health conditions” (at [48]) which was excluded on objection from the wife.
I was not satisfied that the prejudice to the wife of could be remedied – save by adjournment – which no party sought and accordingly the documents were rejected.
The issue of the husband’s disclosure remained a significant issue in the trial.
The husband’s affidavit of evidence in chief was, in a number of relevant respects, different from the evidence which he gave under oath at the trial. The situation was most unsatisfactory. The husband said his affidavit had been written by himself in “[Country G language]”. He said he was then provided with the affidavit in English which he swore or affirmed (the document does not indicate) on 6 August 2024. The document does not bear a jurat indicating that the content was translated or interpreted. The husband said his lawyer explained it. It is concerning that the husband’s lawyer has signed as witness to the husband’s oath/affirmation and attached a page to the end of the husband’s affidavit in which he struck through the alternative jurat for non-English speakers.
The Rules provides that where a witness does not have an adequate command of English, a translation of the affidavit and oath or affirmation must be read or given in writing to the deponent in a language that the deponent understands; and the translator must certify in or below the jurat that the translator has done so: r 8.17(1), (3). That did not occur. It undermines the process which depends upon the capacity of the Court to conclude that a person has read, understood and adopted the evidence on oath/affirmation to tell the truth.
This anomaly may explain why the husband’s evidence, particularly about ownership of the City F property, was materially different at trial. It certainly supported my reliance on objective documents to establish what had occurred where the husband and wife’s evidence was different or where the husband’s affidavit evidence differed from his oral evidence.
The applicant filed a Balance Sheet on 20 September 2024. At the commencement of the hearing, I inquired whether it might be regarded as a Joint Balance Sheet recording the parties’ respective positions in respect of the identity and value of assets, liabilities, financial resources and superannuation. The respondent agreed and it was marked as exhibit 1. It is set out below:
Ownership Description Applicants value Respondents value ASSETS 1. Joint Real Property – B Street, Suburb D NSW $ 915,000 $ 915,000 2. Husband Business under K Pty Ltd & K Group Pty Ltd as at 30 June 2022 $ 135,186 N/A 3. Husband E Street, City F, Country G $ 200,000 N/A 4. Wife Motor Vehicle 1 $ 1,500 $ 1,500 5. Joint Bank Account – C Bank Offset Account No. 55 as at 5.9.2024 $ 17,333 $ 17,333 6. Joint Bank Account – C Bank Offset Account No. 39 as at 5.9.2024 $ 150,870 $ 150,870 7. Wife Bank Account – Commonwealth Account No. 95 as at 5.9.2024 $ 1,177 $ 1,177 8. Wife Bank Account – Commonwealth Account No. 72 as at 5.9.2024 $ 11,290 $ 11,290 9. Wife Bank Account – Westpac 17 as at 5.9.2024 $ 1,003 $ 1,003 10. Wife Bank Account – Westpac 51 as at 5.9.2024 $ 4,007 $ 4,007 11. Wife Bank Account – L Bank 40 as at 5.9.2024 $ 1,360 $ 1,360 12. Wife Bank Account – L Bank 24 as at 5.9.2024 $ 10,000 $10,000 13. Husband Bank Account – M Bank Account No. 87 as at 19.09.2024 $ NK $ 35 14. Husband Bank Account – NAB Account No. 27 as at 19.09.2024 $ NK $ -41.11 15. Husband Bank Account – Westpac No. 72 as at 19.09.2024 $ NK $ 8.91 16. Husband Bank Account – N Bank Account No. 89 as at 19.09.2024 $ NK $ 95 17. Wife Other Personal Properties $ 5,000 $ 5,000 18. Husband Other Personal Properties $ 5,000 $ 5,000 Total $ 1,458,726 $ 1,123,637.80
ADDBACKS 19. Husband Money Wasted by husband in Gambling in 2016 $ 699,000 N/A 20. Joint Money Wasted by wife in Gambling in 2016 $ 0 $ 699,000 Total $ 699,000 $ 699,000
LIABILITIES 21. Joint Mortgage Loan – C Bank Account No. 30 (Suburb D Property) as at 5.9.2024 $ 527,380 $ 527,380 22. Husband Credit Card –as at 7.12.2022 $ NK N/A 23. Wife Personal Loan from Mr O $ 20,000 N/A 24. Husband Westpac Card 71 as at 19 Sep 2024 $ NK $ 14,575.76 25. Husband Personal Loan from Mr P $ 0 $ 45,000 26. Joint Shareholder Loan from K Pty Ltd $ 0 N/A 27. Husband Shareholder Loan from K Pty Ltd $ 0 $ 142,820 Total $ 547,380 $ 729,775.76
SUPERANNUATION Member Name of Fund Type of Interest Applicants value Respondents value 28. Wife Super Fund 1 Basic $ 52,743 $ 52,743 29. Husband Super Fund 2 Accumulation $ 30,744 $ 30,744 Total $ 83,487 $ 83,487 Total Net Assets + Super + Addback $ 1,693,833 $ 1,176,349.04 (As per original)
During the course of the trial, the parties made a series of concessions about the Joint Balance Sheet as follows:
(a)The parties agreed to insert a value of nil for the shares in K Pty Ltd.
(b)The wife accepted the husband’s current bank accounts balances but reserved her position about how they should be treated given the issues which she raised about the husband’s failure to disclose bank statements since 2022.
(c)The husband conceded that what is described at item 20 as a “joint” addback of “money wasted by wife in gambling” should be deleted from the Balance Sheet. His counsel submitted that money he expended on gambling should not be an addback at all because the gambling was undertaken with the wife’s knowledge and agreement.
(d)The parties agreed that item 27, being the shareholder loan from K Pty Ltd, should be nil.
Arising from the above the following matters require determination:
(a)What is the significance of the debt of K Pty Ltd to the ATO?
(b)Is the husband the owner of E Street, City F, Country G (“the City F property”)? And if so, what is the value of this property?
(c)Should the parties’ post separation bank accounts and liabilities (including loan to the wife from Mr O, loan to the husband from Mr P and credit cards) be considered when determining the net pool of assets?
(d)Should the Court regard as notional property or an “addback” funds said to have been expended on gambling? If not, should the expenditure be regarded as “waste”?
K Pty Ltd’s tax liability
The company, K Pty Ltd, was established in 2011. The parties were both shareholders initially with the wife holding four shares and the husband six shares. In 2017, the wife’s shareholding was transferred to the husband.
The company, K Group Pty Ltd, was incorporated after separation in 2022. The husband is the sole shareholder.
A single expert was engaged to value the husband’s shareholding in both entities. As I understand, the evidence of the most recent financial statements which the husband provided for the entities were for the financial year ended 2022. During the trial, the parties reached an agreement that the shares in the two companies would be given a nil value on the Joint Balance Sheet.
The husband’s counsel, somewhat faintly, argued that the issue of the ATO debt of the company remained relevant. I accept that the ATO has raised a debt against the company which, according to exhibit 6, was $119,267.47 in 2023. It is clear that this is a debt of the company (as opposed to the husband). It is not clear how the debt has arisen, including over what period and whether or not it includes penalties and interest. There was no evidence of a Director Penalty Notice.
Having included the company in the Balance Sheet with a nil value, it is not appropriate that I include a debt of the company as a debt of the husband. I accept that the existence of this debt supports the conclusion that the husband’s financial position is unlikely to be strong.
E Street, City F, Country G
The wife attached to her affidavit a document which was translated as “Certificate of Title of Real Property” for the City F property. The “rights holder” is listed as a different name to the husbands. The certificate of birth for that name lists the same date of birth as the husband. The husband conceded the certificate indicated that he was the registered owner of the property.
It is necessary to consider the evidence of the husband about ownership of this property since it is relevant to his contention that he, in effect, used the property as a source of security to procure funds which were contributed to the acquisition of the Suburb J property.
The husband’s affidavit says that the City F property was registered in his name even though the money for its purchase came from compensation money paid to his mother. The husband says it was placed in his name as he is her only son and his mother’s intention was that it be divided equally amongst her children after her death. Somewhat inconsistently, the husband says he transferred his share to two of his sisters in exchange for $150,000 which he applied to the deposit for the Suburb J property. The evidence does not support any change in the legal ownership at this date.
The valuation evidence places a current value of about $200,000 on the whole of the City F property so it does not make much sense that one sixth would have had a value of $150,000 when the Suburb J property was purchased in 2007. The title being held in the husband’s name is also inconsistent with this transaction having occurred. The husband did not file evidence from either sister.
The husband’s oral evidence at trial departed from that given in his affidavit in material respects. The husband said the property had been acquired in his name in 1994. This is contrary to evidence contained in the expert report which reads: “[m]ode of acquisition of property ownership – [p]urchased from [Q Ltd] in 2021 through transaction supervision”.
The husband said that the $150,000 which he contended was contributed to the acquisition of the Suburb J property was paid by him in cash to the wife’s uncle in City R and formed part of the $427,000 which was transferred to Australia.
It is difficult to understand why, if the husband had cash in City R, he could not have undertaken the transfer to himself in Australia and his evidence did not address this anomaly.
The transactions whereby the sum of $427,000 total was transferred by the wife’s uncle in City R to the wife in Australia do not include any individual transfer of $150,000 – which would be consistent with the husband having given the uncle $150,000 to transfer, nor do they include individual transactions which together total $150,000.
I have concluded that the evidence does not support the husband’s contention that he paid $150,000 towards the acquisition of the Suburb J property. That does not dispose of the issue, however, since the wife contends that the husband remains the legal and beneficial owner of the City F property and the husband says he is not.
The husband said that the agreement with his mother was that he could “sell” the property at a time of his choosing. He later said his mother indicated he should choose the “best” time to sell it and that 2021 was the best time.
The husband said that he had “sold” the property to his sister in 2021. He did not indicate that any money had changed hands. He did not include disposal of a property in his Financial Statement filed 29 February 2024 at Part M which requires inclusion of property disposed of by a party in the 12 months before separation or after separation. The valuation on which the wife relies was prepared in 2023 and refers to ownership of the property by the husband at that date.
The husband indicated in oral evidence that his mother had died (some time ago). He did not explain how he had implemented what he said was the arrangement with his mother. His evidence of what he says has occurred was contrary to the agreement he said he had with his mother.
The husband has failed to demonstrate that it would be appropriate to conclude, contrary to the land registration, that someone else is the legal or beneficial owner of the City F property. I propose to include the City F property as an asset of the husband consistent with the certificate of registration. There was no challenge to the evidence as to value and I accept that a figure of approximately $200,000 (having regard to exchange rates) is the correct value to ascribe to the husband’s interest.
Husband’s bank accounts
The husband’s Financial Statement in these proceedings was sworn or affirmed on 29 February 2024. As at that date the husband listed an NAB account ending 07 with a balance of $105, a Westpac account ending 72 with a balance of $242, an N Bank account ending 89 with a balance of $342 and a joint account with the parties’ son with M Bank with a balance of $2,500. The husband provided balances for his bank accounts more proximate to the hearing and while the wife accepted that they may be accurate, she contended that the paucity of disclosure of the bank statements between late 2022 and the trial raised a serious question about what monies may have been deposited and withdrawn in the meantime.
I raised with the parties whether it was open to me to exclude both parties’ bank accounts and post-separation liabilities from the Balance Sheet in order to address this issue and no submissions were made contrary to this course of action.
So, while each of the parties sought to include in the Joint Balance Sheet liabilities which they have incurred since separation, and as a general rule the approach to determination of what orders (if any) will be just and equitable, involves making a determination about the net assets of the parties available for adjustment between them. In the ordinary course, the time for consideration of which assets and liabilities are taken into account in reaching this conclusion is the time of hearing. However, in some cases it will not be just and equitable to take into account liabilities which have been incurred after separation. If it is clear that a liability post‑separation has furnished a benefit to both parties (for example by enabling purchase of assets which are on the Balance Sheet) then it may be entirely appropriate to bring that liability to account when calculating the net pool. Where one party has acquired debt after separation without knowledge of the other party or benefit to the other party then the court has a discretion to determine whether it is appropriate to bring it to account.
Loan to the wife from Mr O
The wife includes the amount of $20,000 as a personal loan from Mr O to herself. She says those funds were borrowed by her after separation for car repairs. The wife included her car in the Balance Sheet at a value of $1,500. I propose to remove the car and the loan consistent with the approach discussed above.
Personal Loans to the husband
The husband included in the Joint Balance Sheet (exhibit 1) a loan to the husband from Mr P in the sum of $45,000. This loan did not appear in the husband’s Financial Statement nor was there any other evidence about it.
The husband’s Financial Statement refers to a loan from Mr S and Ms T in the sum of $25,000.
I do not propose to include in the final Balance Sheet representing the net assets available for adjustment any personal loans of the parties acquired after separation, since, as discussed above, their inclusion would not produce a result which was just and equitable as between the parties.
Monies expended on gambling
The wife contends that the husband made a series of withdrawals from the parties’ funds and applied them to gambling. She calculates the amount which should be added to the pool in the sum of $699,000 being the sum total of the withdrawals from the parties’ redraw facility in 2016.
The husband accepts that $699,000 was withdrawn. He contends these withdrawals were undertaken with the knowledge and consent of the wife. The husband’s affidavit evidence is silent as to how the funds were applied specifically. His affidavit refers to using the funds for the “common purpose of family expenses, entertainment and travelling” (at [76]). In cross‑examination, he said that it was spent on gambling and travel, and that he provided some money to the wife. The wife agreed that while the parties were in Melbourne together the husband had given her some cash (less than $1000).
The wife annexes bank statements to her affidavit for the period 2016 to 2017. The withdrawals in 2016 total $699,000. All the withdrawals were made in cash. Apart from $100,000 which was withdrawn in Sydney, the remaining funds were withdrawn in Melbourne.
The dispute between the parties related to how I should treat the gambling losses. The wife submitted that I would add them to the pool of assets as an “addback” or notional property received by the husband. The husband resisted that approach on the basis that he contended that the withdrawals had been made with the knowledge and consent of the wife.
The inclusion of property as an “addback” has been the subject of significant consideration. In Omacini & Omacini (2005) FLC 93-218, the Full Court identified a non-exhaustive list of categories in which it may be appropriate to treat property which is no longer in existence as though it were available for adjustment as between the parties. Those categories were:
(1)Where the property in question had been “wasted” – including the destruction, diminution or dissipation of property (Kowaliw and Kowaliw (1981) FLC 91-092 at 76,644 (“Kowaliw”));
(2)Where there had been a premature distribution of property to one of the parties (Townsend & Townsend (1995) FLC 92-569 at 81,654); and
(3)Where money has been spent on legal fees (DJM v JLM (1998) FLC 92-816 at [11.6]).
The wife submitted that the husband’s conduct in this case fell into the first of those categories namely – waste, as that expression was defined in Kowaliw at 76,644:
As a statement of general principle, I am firmly of the view that financial losses incurred by the parties or either of them in the course of the marriage whether such losses result from a joint and several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a)where one of the parties has embarked upon a course of action designed to reduce or minimise the effective value or worth of matrimonial assets; or
(b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
The husband resisted that definition of his conduct on the basis that he contended that the withdrawals were undertaken with the knowledge and consent of the wife.
I do not accept his evidence in that regard. The husband said in his affidavit that his wife was with him when he made some of the withdrawals and had access to the accounts – hence she was aware of his actions.
The husband’s evidence was challenged in cross-examination, in particular, his contention that the wife had been present when he made the withdrawals. The husband indicated the wife had been present in Melbourne. The wife did not dispute that on at least two occasions she had travelled to Melbourne and stayed with the husband at a hotel at a casino. She also indicated in her evidence that she was aware that the husband tended to gamble when under stress. The husband says it can be inferred that she was aware of the nature and extent of his expenditure.
During cross-examination, it was put to the husband that the wife had not been present when he had withdrawn the funds. Three sets of documents which became exhibits demonstrate that the Court would prefer the evidence of the wife to the evidence of the husband in respect of this issue: the bank statements from the parties’ redraw facility (exhibit 11), bank statements for a bank account in the wife’s sole name (exhibit 11) and documents produced on subpoena by a casino relating to the husband’s account (exhibit 10).
The bank statements for the parties’ redraw facility demonstrate withdrawals of $699,000 from that facility in 2016. The first two withdrawals occurred on a day in early 2016 in Melbourne. On that day, the amounts of $70,000 and $80,000 were withdrawn from the Westpac account and on the same day, identical amounts of $70,000 and $80,000 were deposited to the husband’s account at a casino. It was put to the husband that the wife could not have been present when the withdrawals were made as she was in Sydney (as was plain from her bank statements which showed transactions near the parties’ home). The records suggested this was the case on multiple occasions. The husband said the wife would have agreed to the withdrawals on the phone or by message. He indicated that he had advised her of the withdrawal and of its intended purpose (gambling) and she had agreed and remarked with words to the effect “if you win we will have lobster”. I reject the husband’s evidence where it is contradicted by the wife on this issue. There are a number of factors which make the husband’s account inherently implausible. The most significant factor is the inherent unlikelihood that one party would agree to expenditure of about $700,000 in a seven-month period on gambling given the modest income and assets of the parties. I also take into account the fact that the husband originally conducted his case on the basis that the funds were applied to a number of different expenses. At the conclusion on the evidence, having regard to the documents returned on subpoena, it is plain that the whole of the monies which were withdrawn by the husband were applied to his gambling account at the casino. I also take into account in reaching my conclusion the fact that the parties were plainly in two different states when many of the large withdrawals were made by the husband.
Not all gambling expenditure will meet the definition of waste. Each case will turn on its own facts: see De Angelis & De Angelis (2003) FLC 93-133 at 78,239. Here, the factors which persuade me that it is appropriate to regard the husband’s gambling as waste include: the quantum of the expenditure having regard to the otherwise modest assets and income of the parties and the fact that the documents establish not just that the monies were expended on gambling, but having regard to the movement in the husband’s casino account it is possible to conclude that the husband sustained significant losses. The documents record (exhibit 10) that in 2016 the husband deposited a total of $772,000 in his account with the casino and withdrew $80,972 resulting in a net loss that year of $691,0028. When attention is paid to the whole of the period for which documents were produced the loss is $804,028. Given the parties’ financial circumstances, I am comfortably satisfied that such a significant loss meets the definition of waste.
Having concluded that the husband has engaged in financially wasteful conduct it is necessary to determine whether the appropriate course is to addback those losses as money which the husband has effectively had the benefit of in the years immediately preceding separation. The husband’s counsel submitted that it would not be appropriate to addback the funds since the quantum of those funds would, if added back, significantly distort the Balance Sheet of assets available for adjustment as between the parties. I accept that adding the funds back would have that effect. I do not propose to treat the money which the husband spent on gambling as an addback.
Having accepted that the conduct plainly meets the definition of waste and given the sum involved, it is necessary to return to this subject matter when I consider the parties’ respective contributions and s 75(2) considerations.
Husband’s credit card debt
The husband includes a Westpac debt in the sum of $14,576. Consistent with the approach discussed above, I will not be including this debt in the pool of assets.
As a consequence of the above findings, I conclude that the assets, liabilities, financial resources and superannuation available for adjustment between the parties are as follows:
Ownership Description Value ASSETS 1. Joint Real Property – B Street, Suburb D NSW $915,000 2. Husband Business –K Pty Ltd & K Group Pty Ltd as at 30 June 2022 NIL 3. Husband E Street, City F, Country G $200,000 5. Joint Bank Account – C Bank Offset Account No. 55 as at 5.9.2024 $17,333 6. Joint Bank Account – C Bank Offset Account No. 39 as at 5.9.2024 $150,870 17. Wife Other Personal Properties $5,000 18. Husband Other Personal Properties $5,000 Total $1,293,203 LIABILITIES 21. Joint Mortgage Loan – C Bank Account No. 30 (Suburb D property) as at 5.9.2024 $527,380 Total $527,380 SUPERANNUATION Member Name of Fund Type of Interest Value 28. Wife Super Fund 1 Basic $52,743 29. Husband Super Fund 2 Accumulation $30,744 Total $83,487 Total Net Assets + Super + Addback $849,310
Contributions
The husband and wife started to live together in 2007. The husband’s evidence indicated that the parties had no major assets or liabilities. It is not clear how that sits with his assertion that he contributed $150,000 to the acquisition of the Suburb J property that same year. In cross‑examination, he indicated that he was referring to not having had any assets in Australia. The husband’s evidence accepts that the wife’s father gifted money to the wife which was applied to the purchase of the Suburb J property.
In August 2007, the sum of $50,000 was transferred to the wife. In September 2007 the sum of $170,000 was transferred to the wife. Again in September 2007, the sum of $40,000 was transferred to the wife. In January 2008, the sum of $167,000 was transferred to the wife. Those amounts total $427,000. They were sent from the wife’s uncle in City R to Australia.
The wife says they were applied to the Suburb J property and that she also obtained a mortgage. The husband provides no documentary evidence in support of the contention that he says the wife received $150,000 which was applied to the Suburb J property purchase. As against this, the wife has established her receipt of $427,000. As discussed above, I accept the wife’s evidence that her father was the sole source of the $427,000.
Having reached the conclusion which I have, above, about the husband’s ownership of the City F property, it follows that I accept that the husband owned this property at the commencement of the parties’ cohabitation such that it should be regarded as an initial contribution by him. There is no evidence of its value at that time but there is evidence of its present value.
I accept that both parties worked during the marriage for income which was applied to family expenses. I accept that both parties undertook unpaid work within the home by way of homemaking and parenting (predominantly the wife) and by way of repairs and maintenance (predominantly the husband). I reject the husband’s contention that he undertook the majority of the homemaking tasks during the relationship as the contention was not put to the wife and it would have been inconsistent with his other evidence about his extensive work outside the home.
Following separation, there was a period of time where the parties both lived under the one roof in the Suburb J property. At the conclusion of the case, the parties indicated that it was an agreed position that in 2018 and 2019, both parties’ contributions to the offset account were approximately equivalent. The parties agree that the last time the husband made a deposit to the Suburb J mortgage offset account was in 2018. In 2019, the wife deposited money into the offset account in an amount similar to that of the husband. Otherwise, the Suburb J mortgage was paid from the offset facility.
With respect to the Suburb D property, the parties agreed that from the period ranging 2018 to 2021, the property was neutrally geared and the husband was responsible for managing and paying income into the offset account to meet the cost of the property. After 2021, the wife met any shortfall on the Suburb D outgoings.
The husband continued to live in the Suburb J property between 2019 when the wife and X moved out and the settlement of the property which occurred in 2020. During that period, the wife paid rent.
The wife has had predominant care of X in the post-separation period and continued to make financial and non-financial contributions to his welfare.
In weighing the parties’ economic and non-economic contributions during the relationship, I accept they both worked hard and their contributions while different were equivalent. The factors which otherwise impact on my assessment of their contributions taken holistically are their differing contributions at the outset and after separation. As a consequence of those contributions, the wife would be regarded to have made a significantly greater contribution.
Section 75(2) considerations
The wife is employed part-time as an educator and part-time as a health professional. She estimates her combined annual pre-tax income at about $65,000.
The husband says in his Financial Statement that his average weekly salary or wage is $1,100 or $57,200 annually before tax. This is different from the affidavit which states a taxable income of $45,000 or about $865.40 per week.
The husband was involved in an accident in 2023. In his oral evidence, he indicated that he received payments from his insurer for 13 weeks after his accident. He indicated that he attends to administrative work within his company and subcontracts the services it provides.
The husband’s failure to make full and frank disclosure of his current position (and his financial position in the last two years) hampers my ability to reach a safe conclusion about his present and future financial position. His counsel contended that the only practical consequence of this may be that the husband himself has been disadvantaged by his inability to seek an adjustment in his favour. I accept this is possible, but the absence of documentation means I cannot safely conclude this is the case.
The evidence (such as it is) does allow the conclusion that both parties have the capacity to generate income which is approximately equivalent. The husband’s failure to disclose bank statements in his personal name or that of his company make it difficult to assess his actual earnings.
Both parties filed costs notices. The husband’s costs letter (exhibit 5) indicated that he had paid his lawyers more than $104,000. The same notice indicated that that “the source of your paid costs is from your business income and savings in past years…”. If there had been up-to-date financial statements for the company, it may have been possible to determine whether those funds had been paid as salary, dividends or a loan.
The parties’ final consent parenting orders provide that X lives with the mother and during school terms spends time with the father on four weekend days per month (day only). In school holidays from 2025, X will spend time with the father for 6 nights in the short holidays and approximately half the time in the long holidays. This regime sees X in the care of the mother for the majority of each year.
The mother’s evidence says the father is in arrears of child support in the sum of $5,286. The father says he has been assessed to pay $400 per month. His affidavit was silent about the arrears situation but his oral evidence indicated that he is presently attending to arrears such that he anticipates they will be discharged by 2024. I am able to find that the past payment of child support suggests that the amount which is likely to be received by the wife will be modest and potentially unreliable.
All of the factors explored above warrant a further adjustment of the parties’ net assets in favour of the wife.
However, the most significant issue is the treatment of the monies expended on gambling. As discussed above the husband resisted inclusion of the monies expended on gambling as an addback because of distortion of the pool. The reality is that if those funds were notionally added to the pool and then allocated to the husband as notional property then the figure in his column referable to this “addback” would be between $691,028 (being the total net losses for 2016) and $804,028 (being the total net losses for the period covered by the subpoena to the casino). Whether I add the money back or otherwise adjust it, it is necessary to pay significant attention to the effect of the husband’s actions on the property available for adjustment.
The wife has in her possession superannuation and personal property which total $57,743.
The husband has in his possession the City F property, personal property and superannuation which total $235,744.
The joint assets are the Suburb D property (with net equity of $387,620) and the two joint bank accounts which total $168,203.
The total net pool of assets and superannuation is $849,310.
It is in light of this pool that the question of the weight to be attached to the husband’s waste must be considered. On one view, his waste was almost equivalent to the net value of the parties’ current pool.
If the husband retains assets in his name, he will have about 28% of the net assets. Having regard to my contribution findings and to the s 75(2) factors which favour the wife, I am confident that, if anything, 28% is a generous approach to evaluation of the husband’s entitlements. Accordingly, I propose to make Orders in accordance with the wife’s application.
Form of orders
Neither party seeks a superannuation splitting order.
The wife seeks an order that the Suburb J property be transferred to her. Her application sought a period of twelve months to discharge the mortgage. In cross-examination it became clear that she was able to attend to discharge in an eight-week period. If she is, contrary to her expectation, unable to do so, then the property will have to be sold.
The wife will retain the following:
(a)Car
(b)Personal property
(c)Superannuation
The husband will retain the following:
(a)City F property
(b)Personal property
(c)Superannuation
It will be necessary to make an adjustment of the parties’ interests in the joint funds and Suburb J property. They will be transferred to the wife.
I certify that the preceding one hundred and five (105) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Christie. Associate:
Dated: 15 October 2024
0
2