Lad and Gittins
[2013] FamCA 877
•11 November 2013
FAMILY COURT OF AUSTRALIA
| LAD & GITTINS | [2013] FamCA 877 |
| FAMILY LAW – PROPERTY SETTLEMENT – Contributions and adjustment – short marriage – initial contributions of the wife were substantially greater – where the parties incurred losses in investment ventures and still have significant outstanding debts – where their assets now have a lower aggregate value than at the commencement of the marriage – post-separation contributions were influential because the parties’ financial circumstances remained intertwined – wife unable to prove her contributions were qualitatively greater pursuant to Kennon principles – division of the property in proportions of 16.5 per cent to the husband and 83.5 per cent to the wife |
| Family Law Act 1975 (Cth) ss 75, 79, 81 Family Law Rules 2004 (Cth) Family Provision Act 1982 (NSW) |
| Baranski & Baranski [2012] FamCAFC 18 Bevan & Bevan [2013] FamCAFC 116 Browne v Green (1999) FLC 92-873 Calverley v Green (1984) 155 CLR 242 Docters van Leeuwen & Docters van Leeuwen (1990) FLC 92-148 Jarrott & Jarrott [2012] FamCAFC 29 Marriage of Bell & Bell (1993) FLC 92-347 Marriage of Kennon (1997) 22 Fam LR 1 Marriage of Kowaliw (1981) FLC 91-092 Marriage of Nolan & Ingram (1984) FLC 91-585 Marriage of Waters & Waters (1981) FLC 91-019 Norbis v Norbis (1986) 161 CLR 513 ON v ON [2005] FamCA 1110 Pierce v Pierce (1999) FLC 92-844 Robb v Robb (1995) FLC 92-555 S & S [2003] FamCA 905 Smith & Smith (1991) FLC 92-261 Stanford v Stanford (2012) FLC 93-518 W & W [2000] FamCA 1302 |
| APPLICANT: | Mr Lad |
| RESPONDENT: | Ms Gittins |
| FILE NUMBER: | NCC | 729 | of | 2012 |
| DATE DELIVERED: | 11 November 2013 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Newcastle |
| JUDGMENT OF: | Austin J |
| HEARING DATE: | 8, 9, 10, & 11 October 2013 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr G Levick |
| SOLICITOR FOR THE APPLICANT: | Tonkin Drysdale Partners |
| COUNSEL FOR THE RESPONDENT: | Ms R Winfield |
| SOLICITOR FOR THE RESPONDENT: | Morris Corkill Solicitors |
Orders
The husband is declared the sole legal and beneficial owner (as between the parties) of the real property and improvements comprising Folio Identifier …, being the property more commonly known as B Street, Town C, NSW (“Town C”), and the wife shall forthwith do all such things and sign all such documents as may be necessary to transfer all her right, title, and interest in the property to the husband.
The husband shall indemnify and keep indemnified the wife against all rates, taxes, statutory charges, mortgage repayments, and other outgoings and liabilities affecting or relating to Town C, including the National Australia Bank loan account number …361.
The wife is declared the sole legal and beneficial owner (as between the parties) of the real property and improvements comprising Folio Identifier …, being the property more commonly known as D Street, Town E, NSW (“Town E”), and the husband shall forthwith do all such things and sign all such documents as may be necessary to transfer all his right, title, and interest in the property to the wife and to remove any caveat he caused to be registered on the title.
The wife shall indemnify and keep indemnified the husband against all rates, taxes, statutory charges, mortgage repayments, and other outgoings and liabilities affecting or relating to Town E, including the St George Bank loan account number …200.
The wife is declared the sole legal and beneficial owner (as between the parties) of the real property and improvements comprising Folio Identifier …, being the property more commonly known as I Street, Suburb A, NSW (“Suburb A”), and the husband shall forthwith do all such things and sign all such documents as may be necessary to transfer all his right, title, and interest in the property to the wife and to remove any caveat he caused to be registered on the title.
The wife shall indemnify and keep indemnified the husband against all rates, taxes, statutory charges, mortgage repayments, and other outgoings and liabilities affecting or relating to Suburb A.
The wife shall, within 28 days hereof:
(a)Pay to the National Australia Bank all monies necessary to discharge in full the following debts owed jointly or severally by the parties, F Pty Ltd, and G Pty Ltd:
(i)National Australia Bank account number …054;
(ii)National Australia Bank account number …617;
(iii)National Australia Bank account number …919;
(iv)National Australia Bank account number …432;
(v)National Australia Bank account number …741;
(vi)National Australia Bank account number …949; and
(vii)National Australia Bank account number …484.
(b)Pay to the husband the sum of $314,038.
Subject to compliance by the wife with Order 7 hereof:
(a)The wife is declared the sole legal and beneficial owner (as between the parties) of the real property and improvements comprising the property commonly known as Lots H and J, K Street, Suburb L, NSW (“Suburb L”), described in Auto Consol …, and the husband shall do all such things and sign all such documents as may be necessary to transfer all his right, title, and interest in the property to the wife and to remove any caveat he caused to be registered on the title; and
(b)The wife shall indemnify and keep indemnified the husband against all rates, taxes, statutory charges, mortgage repayments, and other outgoings and liabilities affecting or relating to Suburb L.
In default of compliance by the wife with Order 7 hereof, the husband is appointed as the trustee (on behalf of the parties) for the sale of Suburb L and he shall forthwith do all such acts and things and sign all such documents as may be necessary to list Suburb L for sale by public auction on the following terms.
For the purposes of implementation of Order 9 hereof:
(a)The solicitors acting on the sale shall be the solicitors appointed by the husband;
(b)The auctioneer and/or agent shall be the auctioneer and/or agent appointed by the husband;
(c)The property shall be listed for auction sale within 6 weeks of the date of the wife’s default in compliance with Order 7 hereof;
(d)The reserve price shall be as agreed between the parties, and in the event of disagreement between the parties, the reserve price nominated by the auctioneer;
(e)In the event the property is not sold by auction, or private negotiation within a further 7 days, then the property shall be submitted to successive auctions within further 6 weeks periods until sold, otherwise on the same terms and conditions as applied to the first auction;
(f)Other than for the purpose of enabling her compliance with Order 7 hereof, the wife is restrained from charging, mortgaging, or otherwise encumbering the property; and
(g)The wife shall meet all expenses incurred in respect of the property as and when those expenses fall due (including loan repayments, Council rates, water rates, and insurances), maintain the property in a reasonable state of repair, and facilitate inspection of the property by prospective purchasers.
Upon completion of the sale of Suburb L pursuant to Orders 9 and 10 hereof, the husband shall instruct the solicitors acting on the sale to disburse the proceeds of sale as follows:
(a)Firstly, to pay all costs, commissions, and expenses of the sale and to pay any Council and water rates outstanding in respect of the property;
(b)Secondly, to discharge in full the National Australia Bank debit accounts referred to in Order 7(a) hereof;
(c)Thirdly, to pay to the husband, in satisfaction of the amount otherwise due and payable to him pursuant to Order 7(b) hereof, the amount comprising:
(i)19.77 per cent of the net sale proceeds, calculated after payment of the expenses pursuant to Order 11(a) hereof, but before payment of the amounts pursuant to Order 11(b) hereof;
(ii)less the sum of $22,000; and
(d)Lastly, to pay to the wife the balance then remaining.
The husband is declared the sole legal and beneficial owner (as between the parties) of the parties’ shareholdings in F Pty Ltd (ACN …) and the wife shall forthwith do all such things and sign all such documents as may be necessary to transfer all her right, title, and interest in that corporation to the husband.
The husband is declared the sole legal and beneficial owner (as between the parties) of the parties’ shareholdings in G Pty Ltd (ACN …) and the wife shall forthwith do all such things and sign all such documents as may be necessary to transfer all her right, title, and interest in that corporation to the husband.
The wife is declared the sole legal and beneficial owner (as between the parties) of her shareholding in W Pty Ltd and the husband shall forthwith do all such things and sign all such documents as may be necessary to transfer all his right, title, and interest in that shareholding to the wife.
The parties shall forthwith do all such things and sign all such documents as may be necessary to close National Australia Bank account number …366.
The parties shall forthwith do all such things and sign all such documents as may be necessary to cause F Pty Ltd to transfer all its right, title, and interest in the 2009 Toyota motor vehicle (“the Toyota”) to the husband.
The husband shall meet all expenses incurred in respect of the Toyota as and when those expenses fall due (including loan repayments, registration, and insurances) until National Australia Bank account number …919 is discharged in full in accordance with Orders 7-11 hereof.
Unless otherwise provided:
(a)Each party shall be the sole legal and beneficial owner (as between the parties) of all other assets in their respective possession as at the date of these orders, and for that purpose bank accounts are deemed to be in the possession of the person named as the account holder; and
(b)Each party shall be solely liable for and shall indemnify the other against any and all debts attaching or relating to the property in their respective possession and any debts in their respective sole names.
In the event of either party refusing or neglecting to sign within 7 days of a written request to do so any document necessary to implement the terms of these orders the Registrar of the Family Court of Australia at Newcastle is empowered to execute such documents on behalf of the parties pursuant to s 106A of the Family Law Act.
For the purpose of implementation of these orders, leave is granted to:
(a)The parties to provide a sealed copy of these orders to the National Australia Bank; and
(b)The husband to provide a sealed copy of these orders to the solicitors, auctioneers and agents he may appoint pursuant to Order 10 hereof.
Costs are reserved for 28 days.
Any and all outstanding applications are dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Lad & Gittins has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT NEWCASTLE |
FILE NUMBER: NCC 729 of 2012
| Mr Lad |
Applicant
And
| Ms Gittins |
Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings concern determination of the applications made by the applicant husband and respondent wife for the adjustment of their property interests following the breakdown of their short marriage. Notwithstanding the brevity of their relationship, the parties agreed an adjustment of their property interests was warranted.
The aggregate net value of the parties’ property was well over $2 million dollars, but the difference between their property settlement proposals at the commencement of the hearing exceeded the collective value of their property. Clearly, the polarity of the parties’ perceptions was incapable of reasonable explanation and it transpired the wife had misconceived their respective entitlements.
Background
The parties married and began cohabitation in October 2007.
Several days before their marriage the parties each executed a document entitled “Pre-Nuptial Agreement”. The parties acknowledged the document had no effect pursuant to Part VIIIA of the Family Law Act (“the Act”) and so the Court’s jurisdiction to entertain their respective applications for property settlement orders was not ousted.
The parties disagreed over the date of their separation, but acknowledged it was unnecessary to affirmatively resolve the discrepancy since their post-separation contributions were just as important as their pre-separation contributions for the purposes of application of s 79 of the Act. The wife alleged separation occurred in February 2009,[1] whereas the husband alleged they did not finally separate until June 2010.[2]
[1] Wife’s affidavit, paras 5, 14
[2] Husband’s first affidavit, paras 6-7
Irrespective of the actual date of separation, it is common ground the parties continued to live under the same roof until sometime between June and August 2010,[3] and they even thereafter continued to engage in a series of investment ventures together. Those ventures involved the conception of two corporations, of which the parties were joint directors and shareholders, as vehicles for the purchase, development and re-sale of real estate.
[3] Wife’s affidavit, paras 5, 14, 15 (second), 58, 166; Husband’s first affidavit, para 34
The investment ventures were largely unsuccessful and so the parties’ commercial relationship also disintegrated, leaving them both aggrieved about their respective financial entitlements.
These proceedings were commenced by the husband in March 2012 and shortly thereafter a suite of interim orders were made appointing the husband as trustee for the intended sale of three real properties and his use of the net proceeds of sale to diminish the bank debts owed by the corporations, since the corporations had borrowed money to fund the investment ventures. The bank loans were secured, in part, by mortgages registered over the properties and were also guaranteed jointly and severally by the parties. Those properties were sold and the net proceeds of sale applied in the manner envisaged.
Orders were also made in March 2012 restraining the wife from increasing the debt secured over two parcels of real property owned solely by her. Those orders were discharged in August 2012 and replaced with orders restraining the wife from increasing the debt secured over three parcels of real property owned solely by her beyond a stipulated level.
In August 2012 the wife was voluntarily admitted to hospital for psychological treatment[4] and so additional orders were made in August 2012 consensually appointing a case guardian for her. The wife was discharged from hospital in September 2012[5] but the case guardian was not discharged until July 2013.
[4] Wife’s affidavit, para 178
[5] Wife’s affidavit, para 180
Evidence
In support of his proposal for property settlement the husband relied upon:
a)His two affidavits filed on 20 September and 1 October 2013;
b)His financial statement filed on 20 September 2013;
c)The affidavit of Mr M filed on 3 October 2013; and
d)The affidavit of Ms N filed on 3 October 2013.
In support of her proposal for property settlement the wife relied upon:
a)Her affidavit filed on 27 September 2013;
b)Her financial statement filed on 8 October 2013;
c)The affidavit of Ms O filed on 11 September 2013;
d)The affidavit of Mr P filed on 8 October 2013; and
e)The affidavit of Mr Q filed on 18 September 2013.
None of the documents relied upon by the parties were filed in the timely fashion required by procedural orders, but neither party took exception, presumably because each of them were in default.
Large tranches of the affidavit evidence filed by both parties did not survive objection.
When the proceedings were initially listed for final hearing the wife foreshadowed her intention to file an affidavit by her treating psychiatrist, Dr R, whose evidence as an adversarial expert would necessarily be confined to that proscribed by Part 15.41 of the Family Law Rules (“the Rules).[6] No such affidavit was filed. The matter was not broached again, with either the Court or the husband, until the afternoon of the first day of the final hearing when the wife sought leave to serve upon Dr R, with short service, a subpoena to give evidence. Such leave was refused and ex tempore reasons were provided.
[6] Notation B made on 24 July 2013
Existing proprietary interests
Orders under s 79 of the Act altering the property interests of parties may only be made if the Court is first satisfied, pursuant to s 79(2), that it is just and equitable to make such orders. The Act then identifies in s 79(4) the matters the Court must take into account in considering what order, if any, should be made (see Stanford v Stanford (2012) FLC 93-518 at [22], [35]). While those two inquiries are not to be conflated (see Stanford at [35], [40], [51]), it is permissible for the factors within s 79(4) to inform the inquiry under s 79(2) (see Bevan & Bevan [2013] FamCAFC 116 at [83]-[89], [163], [169], [171]-[172]).
It is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying the existing legal and equitable property interests of the parties.
The parties tendered a joint balance sheet at the commencement of the hearing,[7] and later a revised joint balance sheet after the evidence was closed,[8] the latter of which is used as the template to make findings about their respective existing property interests. Ultimately, there was no dispute about either the nature or value of the parties’ existing property interests.
[7] Exhibit A
[8] Exhibit B
The husband’s existing property interests are as follows:
Item
Assets
Value
1
[Town C] realty
550,000
5
St George Acc #...170
675
7
Contents
14,000
9
[Make S] boat
12,000
17
Shareholding in [G] Pty Ltd (50%)
nil
18
Shareholding in [F] Pty Ltd (50%)
nil
19
NAB Acc #...366 (50%)
nil
Sub-total
576,675
Liabilities
25
NAB Acc #...949 (50%)
84,670
26
NAB Acc #...484 (50%)
46,431
27
NAB Acc #...361
488,530
29
Citibank credit card
17,569
30
NAB credit card
26,480
Sub-total
663,680
Net deficit
(-87,005)
The wife’s existing property interests are as follows:
Item
Assets
Value
2
[Town E] realty
675,000
3
[Suburb A] realty
860,000
4
[Suburb L] realty
1,700,000
8
Contents
500
10
St George Acc #...593
1,400
11
Deceased estate acc #...317
500
12
NAB Acc #...358
nil
13
NAB Acc #...947
nil
14
Mitsubishi car
9,000
15
Shareholding in [W] Pty Ltd
800
16
Interest in grave sites
15,000
17
Shareholding in [G] Pty Ltd (50%)
nil
18
Shareholding in [F] Pty Ltd (50%)
nil
19
NAB Acc #...366 (50%)
nil
Sub-total
3,262,200
Liabilities
25
NAB Acc #...949 (50%)
84,671
26
NAB Acc #...484 (50%)
46,430
28
St George Acc #...200
23,000
31
St George credit card
7,559
32
CBA Amex
12,869
33
ANZ Acc #...527
15,202
34
NAB credit card
22,000
Sub-total
211,731
Net assets
3,050,469
The above findings intentionally omit significant liabilities due and owing to the National Australia Bank (“NAB”), which are presently the liabilities of F Pty Ltd and G Pty Ltd, but not the parties personally. However, the corporate liabilities will soon crystallise as personal liabilities of the parties. That is because both F Pty Ltd and G Pty Ltd are insolvent, the corporate assets which partially secured the bank debts are exhausted, and the parties jointly and severally guaranteed the corporate debts using their own assets as additional security.
The NAB is therefore at liberty to enforce the debts against the parties personally, in any proportion it pleases. The only reason that has not already occurred is the pendency of the wife’s complaint about the NAB to the Financial Ombudsman Service, about which little evidence was adduced. The wife’s complaint was lodged in December 2011,[9] but the specific nature of the complaint is unknown and it is also unknown when the complaint will be determined. Apparently, the wife alleged some form of unconscionable conduct on the part of the NAB, which she hopes will result in the extinguishment or amelioration of her personal liability to the NAB.
[9] Wife’s affidavit, para 155
As was submitted by the husband, even if the wife’s complaint against the NAB is wholly or partially successful, the NAB will still be able to enforce the totality of the residual debt against him because of his undisputed individual liability.
The NAB debts for which the parties presently bear amorphous derivative liability are:
Item
Loan
Value
20
NAB Acc #...054
199,452
21
NAB Acc #...617
291,428
22
NAB Acc #...919
26,074
23
NAB Acc #...432
129,939
24
NAB Acc #...741
12,731
Total
659,624
F Pty Ltd is in possession of a Toyota vehicle,[10] for which it is indebted to the NAB (item 22). Neither party has a proprietary interest in the vehicle, which is why it is omitted from the schedules above, but it is used exclusively by the husband and so he presently makes loan/lease repayments related to the vehicle on behalf of F Pty Ltd.
[10] Exhibit B (item 6)
As the High Court recently explained, it must not be assumed that the parties’ rights to or interests in marital property are or should be different from those that currently exist or that a party has the right to have the parties’ property divided by reference to considerations set out in s 79(4) of the Act (see Stanford at [37]-[40], [50]). Commonly, however, it will be just and equitable for the parties’ property rights to be altered because the breakdown in their relationship will end their fiscal unity and deprive them of common use of their property (see Stanford at [42]; Bevan & Bevan at [68]-[70], [82], [164]-[165]).
In respect of the initial inquiry postulated by s 79(2) of the Act, the parties agreed it was just and equitable for their property interests to be adjusted. Such a concession was expressly made at the commencement of the hearing, although it was already implicit from their proposals contained within the Amended Application filed on 25 June 2013 and the Response filed on 22 August 2013.
Indeed, an adjustment of the parties’ property interests is warranted, notwithstanding the shortness of their relationship, because they inter-mingled their financial affairs by embarking upon a course of commercial ventures which eventually implicated them in liabilities that still bind their individual assets. They are unable to extricate themselves from one another’s affairs unless orders are made adjusting their proprietary interests. It is also incongruous that, in isolation from the corporate debts, the husband brought assets of significant net value into the relationship but he is now insolvent, while the wife’s current financial position is not too dissimilar from that which she enjoyed at the commencement of the parties’ relationship.
Contributions
Once determined it is just and equitable for the property interests of the parties to be altered, the process of evaluating the proper orders to make is dictated by the factors enumerated within s 79(4) of the Act. Initially, the court must necessarily identify and assess the parties’ contributions within the meaning of ss 79(4)(a)-(c) of the Act.
Husband’s contributions at cohabitation
Several days prior to their marriage the parties executed a document entitled “Pre-Nuptial Agreement”[11] in which they each set out their existing assets and their belief about the value of their assets and liabilities. Each simply accepted the veracity of the other’s valuation opinions.
[11] Husband’s affidavit, para 13; Wife’s affidavit, para 24
The husband deposed to the identity of his assets and liabilities and their net value of $786,500 at the time cohabitation commenced.[12] In respect of such evidence, I accept those parts about which he was not challenged. In respect of those parts about which he was challenged, only some is accepted.
[12] Husband’s affidavit, para 17
The husband was the sole legal proprietor of real property at Town C, which was encumbered. He believed it was then worth $825,000 and the mortgage balance was $455,000. Despite the passage of years, it is agreed the property is now worth only $550,000 and the mortgage balance is $488,530. The reason for diminution in value of the property over the last six years is not revealed by the evidence. The wife was highly critical of the husband, suggesting he deceitfully inflated the stated value of the property at the time of cohabitation, but I reject that criticism for two reasons.
Firstly, the husband contemporaneously and consistently represented to the NAB that his property was worth in excess of $800,000 when it was offered as security for loans.[13] Deceit was improbable in circumstances where he would reasonably have expected the bank to not simply accept his uncorroborated opinion but to take steps to verify the value of the property prior to accepting it as security.
[13] Wife’s affidavit, paras 81-82
Secondly, the wife’s criticism of the husband was highly hypocritical, since her property at Town E suffered an even greater diminution in value. She alleged its value at $1,500,000 at the commencement of cohabitation, but it is now worth only $675,000. The diminution in value of that property is not explained by the evidence either.
In the absence of probative contradictory evidence, I accept the values attributed by the parties to their respective properties at the commencement of their relationship as admissions made by them.
Although the husband deposed to having accumulated superannuation benefits of approximately $160,000 at the time of cohabitation, he also conceded receiving the lesser sum of only $53,467.73 when his employment was terminated less than two years later.[14] The husband acknowledged his efforts to locate and recover the residue amount have been unsuccessful and he abandons any hope of future recovery. Consequently, only the lesser sum is taken into account as an initial contribution.
[14] Husband’s affidavit, paras 17, 19
The husband deposed to accumulated emoluments of approximately $146,000 at the commencement of cohabitation, but admitted little more than half that amount was paid to him upon the termination of his employment. Of the money he did receive, some was spent in the Middle East before his return to Australia and the balance of $65,722.65 was deposited into his Australian bank account and used following his return.[15] Only the sum of $65,723 is therefore taken into account as an initial contribution.
[15] Husband’s affidavit, paras 17, 23; Exhibit H1, page 397
The husband deposed to his personal effects being worth some $90,000 at the time of cohabitation. However, it is an agreed fact they are currently worth only $14,000. Since there was little, if any, change in the identity of the husband’s personal effects, the latter rather than the former value is adopted as the value of those assets at the time of cohabitation.
The husband deposed to ownership of one Prado vehicle, but in fact he had two. The second was registered in his name but used by his former partner. She abandoned the vehicle when she returned to the USA and the husband recovered possession of it. The vehicle was then sold and the wife retained most of the net proceeds of sale, which she assessed to be worth some $11,500 in March 2008.[16] That asset is therefore also taken into account at that value.
[16] Exhibit H7
As a consequence of those findings, the husband’s assets and liabilities at the time of cohabitation were as follows:
Asset
Value
Town C realty
825,000
Toyota vehicle
26,000
Prado vehicle
75,000
Prado vehicle
11,500
Make S boat
32,000
CBA account
15,000
NAB account
10,500
Superannuation
53,468
Leave entitlements
65,723
Personal effects
14,000
Rental bond, etc
8,000
Sub-total
1,136,191
Liabilities
Town C mortgage
455,000
Credit cards
69,000
United Arab Emirates housing
35,000
Prado vehicle loan
42,000
Sub-total
601,000
Net
535,191
Wife’s contributions at cohabitation
The parties each deposed to the assets introduced to the marriage by the wife.[17] There was no dispute about the identity of the assets contributed by the wife, but each party successfully objected to the other’s estimates of value. The value of the wife’s assets must therefore be drawn from other parts of the evidence, about which there was no contest.
[17] Husband’s affidavit, para 24; Wife’s affidavit, para 22
The wife’s assets and liabilities at the time of cohabitation were therefore as follows:
Assets
Value
Town E realty
1,500,000
Suburb A realty
650,000
Interest in mother’s deceased estate
NK
Union Bank of California (USD, but assumed AUD)
1,000
Motor vehicle
5,000
Furniture and jewellery
60,000
Sub-total
2,216,000+
Liabilities
Town E mortgage
50,000
Caveat over Suburb A
20,000
Credit cards
17,300
Sub-total
87,300
Net
2,128,700+
All values, with the exception of that pertaining to the wife’s interest in her deceased mother’s estate, are drawn from the Pre-Nuptial Agreement as admissions by the wife. That is the only evidence of value.
The value of the wife’s interest in the deceased estate is impossible to calculate accurately. The deceased estate was valued at $2,111,800, but the wife’s sister successfully claimed $600,000 from the estate under the Family Provision Act (NSW) and the costs of defending that claim were paid from the estate on an indemnity basis, thereby diminishing the value of the wife’s interest in the residue.
The amount of the costs borne by the estate was not revealed by the evidence. The wife deposed to finally receiving $1,100,000 from the deceased estate,[18] implying the legal costs amounted to about $400,000, but the husband successfully objected to the admissibility of that evidence and the issue was not explored during cross-examination. In the absence of probative evidence it is impermissible to speculate, although it is difficult to conceive that the costs would have exceeded several hundred thousand dollars. All that can safely be inferred is that the wife received an amount of less than $1,500,000, but not likely less than $1,000,000. While the wife’s interest in the deceased estate existed at the time cohabitation commenced, she did not receive the inheritance until after the Supreme Court litigation was concluded in early 2009.[19]
[18] Wife’s affidavit, para 22
[19] Husband’s affidavit, paras 53-58; Wife’s affidavit, paras 23, 66-69
Once the wife’s interest in the deceased estate is quantified in that manner, the net value of her assets at the time of cohabitation therefore probably comfortably exceeded $3,000,000.
Other contributions of the parties
The parties’ evidence about their financial and non-financial contributions following their marriage was incompatible in some respects. In circumstances where the absence of corroborative evidence necessitates acceptance of one party’s evidence in preference to the other’s I prefer the evidence of the husband. Generally, he was a forthright and convincing witness, whereas the wife dissembled and obfuscated.
Some simple examples of the wife’s inconsistency serve to illustrate the point:
a)At the conclusion of the first day of the hearing, and for the first time, the wife instructed her counsel to inform the Court of her contention that she only embarked upon investment ventures with the husband under his duress. However, when later cross-examined, the wife admitted she willingly agreed to participation in the ventures. She agreed to the incorporation of the companies and considered the two real estate development projects undertaken by those companies were good ideas. Although she was less enthusiastic about the third development project undertaken by the parties, she did not assert her participation in it was coerced. Her evidence was therefore flatly contradictory to the instructions she earlier provided to her counsel.
b)In relation to the second Prado motor vehicle, the wife firstly alleged in cross-examination that the husband sold it for “a couple of thousand dollars” and that he kept the sale proceeds, but she was later confronted with contradictory documents proving she sold the vehicle while the husband was in the Middle East and that she retained the sale proceeds, which she estimated at $11,500, that were used by her to pay her credit card account.[20] The wife could not explain the inconsistency and claimed her recollection was unclear, which explanation was itself inconsistent with the asserted clarity of her earlier evidence.
c)The husband paid amounts of money to the wife at her request over a period of months before their marriage in 2007.[21] The wife did not deny such payments were made to her, or that the payments totalled some $5,915. The wife initially said she could not remember whether she asked the husband to make those payments to her, but she then later inconsistently denied asking for the payments. It was not explained how the wife’s professed lack of recollection could credibly transform into a clear recollection and a denial. The husband was not challenged about the veracity of his assertion the wife asked him for the money.
d)The husband alleged he rendered improvements to the wife’s property at Suburb L.[22] The wife asserted minimal improvement work was done to the Suburb L property and minimised the nature of any such work done by the husband. However, her evidence was contradicted in some respects by the contents of an email she sent to the managing agent of the property in December 2010, in which she recounted improvements made to the property in order to rebuff complaints made by tenants.[23]
e)The wife denied she had appointed the husband as her representative in the negotiations concerning her sibling’s claim against the deceased estate under the Family Provision Act (NSW), but she was contradicted by her own email to the co-executor in August 2007 in which she proposed the husband be her representative.[24]
f)The wife maintained she finally separated from the husband in February 2009. However, she curiously appeared to complain in her affidavit that, when the husband returned to live in Australia months afterwards in July 2009, he “did not kiss or hug [her] and he was cold towards [her]”,[25] inconsistently suggesting she expected reciprocal affection at a time well after their alleged separation.
[20] Exhibit H7
[21] Husband’s affidavit, para 32
[22] Husband’s affidavit, para 63
[23] Exhibit H6
[24] Exhibit H5
[25] Wife’s affidavit, para 77
The wife and her daughter began occupation of the husband’s home at Town C following the parties’ marriage in October 2007 and lived there primarily until she and her daughter vacated that property in August 2010.[26]
[26] Wife’s affidavit, paras 14-15
The wife alleged she paid the husband $160 per week for the duration of her occupation of Town C.[27] She also alleged that she paid $180 per week to the husband after she moved to their jointly owned property at Town T, where she remained until she moved into her own property in Town E in about March 2012.[28] I reject the wife’s evidence about such payments.
[27] Wife’s affidavit, para 15
[28] Wife’s affidavit, paras 17, 58; Husband’s affidavit, para 37
The wife admitted in cross-examination she did not actually make any of those rent payments to the husband. Instead, she asserted she kept a tally book in which she tabulated other payments she allegedly made on behalf of the husband, which she contended entirely off-set the rent she would otherwise have paid to the husband. The admission of not making any rent payments was consistent with the husband’s denial of their receipt. It is almost inconceivable the wife made other off-setting payments for the husband when he was living in the Middle East and by the time he returned to live in Australia the wife alleged they had already separated so the prospect she would then voluntarily make personal payments on his behalf is just as remote.
Consequently, the husband provided the wife and her daughter with cost-free accommodation for the three years they lived at his home at Town C and subsidised accommodation for the further 18 months they lived at the jointly owned property at Town T.
As already noted, the husband made payments to the wife in the months preceding their marriage.[29] His assertion those payments amounted to some $5,915 was not challenged, either in evidence or submissions.
[29] Husband’s affidavit, para 32
The husband also paid some legal costs on the wife’s behalf in respect of unrelated litigation just before their marriage.[30] The wife admitted receiving the benefit of such payment during her cross-examination, but she disputed the husband’s estimate of $7,000 and instead asserted the husband paid only about $3,000 for her. The difference is relatively immaterial.
[30] Husband’s affidavit, para 31
I accept the husband also negotiated the payment of several thousand dollars for the wife’s benefit as consideration for the permission she gave to a third party in 2007 to use her property for advertising purposes.[31]
[31] Husband’s affidavit, para 51; Exhibit H4
The husband asserted he paid all costs associated with the parties’ wedding in October 2007, which amounted to some $10,000.[32] He was not challenged about that evidence either.
[32] Husband’s affidavit, para 33
While the husband worked in the Middle East he paid for the wife, her children, and friends to travel to the Middle East to see him. He was not challenged about the accuracy of his estimate of such expenditure at $40,000.[33]
[33] Husband’s affidavit, para 43
The wife was not gainfully employed. Her income comprised rental income derived from her properties and child support payments she received from the father of her children. Once the parties were married, the husband took steps to cover the wife and her daughter with private health insurance and enable the wife’s unrestricted access to his income. He made the wife a signatory to his Australian banking account into which he banked the majority of his earnings from his Middle East employment.[34] In cross-examination the wife admitted she had unfettered access to his bank account.
[34] Husband’s affidavit, paras 35-36, 44
However, contrary to the husband’s assertion that his income paid for most of the living expenses of the wife and her daughter, the wife alleged her own income covered such living expenses.[35] The wife’s evidence was most unlikely. Both of her properties at Town E and Suburb A were encumbered to some extent so any rental income produced by those properties must have firstly been applied to meet the encumbrances, thereby reducing the amount available to the wife for discretionary expenditure. The Suburb L property was still at that stage part of the deceased estate and any income it produced was paid into the coffers of the estate rather than to the wife.
[35] Wife’s affidavit, para 23
By comparison, it is uncontroversial the husband’s income was then not less than several hundred thousand dollars per annum, even though there was some dispute about the precise amount. It is much more likely the husband’s income met the bulk of the living expenses incurred by the wife and her daughter.
When the husband’s Middle East employment was terminated and he returned to live in Australia in July 2009 he brought a substantial capital sum with him. He deposed to an estimate of $70,000,[36] but he in fact repatriated $65,722.65 to Australia some months before.[37] Those funds sustained the expenses of the parties’ joint household at Town C until August 2010, when the wife and her daughter departed to live in the property at Town T.[38]
[36] Husband’s affidavit, para 39
[37] Exhibit H1, page 397
[38] Husband’s affidavit, paras 27.3, 39, 45
As already mentioned, the end of the marital relationship and their occupation of separate households was not the end of the parties’ commercial association. Even though the wife professed no experience in property development,[39] she proposed to him that they jointly undertake precisely that type of investment venture. From as early as 2008, the wife made proposals to the husband about ventures such as their joint development of her Suburb L property, buying a business, or building centres or sheds.[40] The parties acted on their joint desire to engage in business ventures together when the husband returned to Australia, even though the wife contended they were then separated.
[39] Wife’s affidavit, para 79
[40] Exhibit H2
In May 2009, shortly before the husband’s return to Australia, the parties incorporated F Pty Ltd. The parties were directors and equal shareholders in the corporation.[41] The parties caused the corporation to borrow funds and purchase a parcel of real estate at Town X to develop and sell. As part of the security for the borrowed funds the parties each mortgaged their own properties and gave guarantees.[42] The Town X property was developed and sold.[43]
[41] Husband’s affidavit, para 68; Wife’s affidavit, para 83
[42] Husband’s affidavit, paras 70-71; Wife’s affidavit, para 85
[43] Husband’s affidavit, para 71, 130-131; Wife’s affidavit, paras 87, 147
In October 2009 the parties incorporated G Pty Ltd. The parties were also directors and equal shareholders in that corporation.[44] The parties caused that corporation to borrow funds and purchase a parcel of real estate at Town U to develop and sell. Similarly, as part of the security for the borrowed funds the parties each mortgaged their own properties and gave guarantees.[45] The Town U property was also developed and sold.[46]
[44] Husband’s affidavit, para 76; Wife’s affidavit, para 93
[45] Husband’s affidavit, paras 77-78; Wife’s affidavit, paras 94-95
[46] Husband’s affidavit, para 132; Wife’s affidavit, paras 97, 141, 157
In early 2010 the parties purchased another parcel of property at Town T in their joint names, in which they had been interested for some months. The purchase was funded by a loan secured by mortgages over the purchased property and the parties’ own properties.[47] That property was later re-sold.[48]
[47] Husband’s affidavit, para 84; Wife’s affidavit, paras 92, 100-103, 166
[48] Husband’s affidavit, para 129; Wife’s affidavit, para 104
Each party made financial and non-financial contributions to the three real estate ventures at Town X, Town U, and Town T.
They each committed their own properties as security for the borrowed funds and gave guarantees of the corporations’ performance of the loan contracts.
They each also contributed money to the corporations and loan repayments. The wife adduced evidence about some payments made by her to one corporation and in payment of building expenses and loan repayments.[49] The husband also deposed to his exhaustion of savings on the payment of living expenses and mortgage payments.[50] However, that evidence was adduced in isolation and was not an accurate reflection of the overall situation. As both parties conceded during cross-examination, they both made payments towards the loans and expenses and they both took money back out of the corporations, since they each had access to the corporate accounts. The parties’ inability to accurately account for all of the fund movements is understandable, as the wife implied when she said “money was coming and going” and “there was so much money going back and forth”.
[49] Wife’s affidavit, paras 89, 90, 105; Exhibit W3
[50] Husband’s affidavit, para 39
The wife was not challenged about the validity of her impression that the parties made equal financial contributions to the loans up until mid 2010, when they fell into financial difficulties.[51] The loans were in default by late 2010.[52]
[51] Wife’s affidavit, para 142
[52] Husband’s affidavit, para 89
By about August 2010 the husband had exhausted his savings and the parties ceased living under the same roof. Their co-operation then deteriorated,[53] but it did not dissolve completely because the wife later loaned the husband $12,000 in February 2011.[54] The wife continued to make some loan repayments in the latter part of 2010, but then stopped.[55] The husband had no capital left and ceased making any further financial contributions towards the parties’ debts until he obtained fresh remunerative employment in December 2011, when he resumed making some payments.[56]
[53] Wife’s affidavit, paras 106-107
[54] Wife’s affidavit, para 91
[55] Wife’s affidavit, para 142
[56] Husband’s affidavit, paras 27.5, 28, 40-41
Apart from their respective financial commitment to the projects, the parties also devoted much time and effort to the projects. The wife acknowledged the broad division of responsibility was for the husband to oversee the re-development approvals and the construction work and for her to attend to the sales and marketing. Her admission correlated with the husband’s evidence.[57]
[57] Husband’s affidavit, paras 72, 81, 85
In March 2012, interim orders were made appointing the husband as trustee for sale of the properties at Town X, Town U, and Town T. The husband thereafter expended considerable effort and incurred significant personal expense in selling the properties and realising the best price possible for them.[58] The net proceeds of sale were paid in diminution of the outstanding NAB debts.
[58] Husband’s affidavit, paras 117-119, 126-128
I accept the parties each performed duties in and around the Town C property for the benefit of each other whilst they both lived in that property.[59]
[59] Husband’s affidavit, para 50
I accept the husband rendered some non-financial contributions to the wife’s properties at Suburb L and Town E,[60] but in all probability the work had minimal influence upon the value of the properties because it was relatively minor cosmetic work. That explains why Mr Q saw little difference in the properties’ appearance[61] and why Mr P referred to only minor maintenance undertaken at the Suburb L property.[62] However, I reject any suggestion the husband made no contributions to the properties at all. Even the wife conceded to her property manager that numerous internal improvements were made to the Suburb L property[63] and she admitted in cross-examination the husband did small items of work at Town E.
[60] Husband’s affidavit, paras 63-65
[61] Affidavit of Mr Q, paras 8-10
[62] Affidavit of Mr P, para 3
[63] Exhibit H6
I accept the husband afforded the wife with comfort and support during her defence of the Family Provision Act claim, which was not finally resolved until early 2009. That was more than a trifling contribution because the Supreme Court litigation was a heavy personal emotional burden the wife expressly sought to share with the husband.
Assessment of contributions
The husband contended the parties’ contributions should be assessed globally, whereas the wife asserted their contributions should be assessed on an asset-by-asset basis. It is common practice to assess parties’ contributions globally, but it is not obligatory to do so (see Norbis v Norbis (1986) 161 CLR 513 at 523, 532-533, 541).
The wife contended the contents of the Pre-Nuptial Agreement “may” influence the decision about the manner in which the parties’ contributions are assessed, but did not elaborate upon the submission. Certainly no express submission was made about the parties’ respective contribution-based entitlements to the various individual assets, as would be expected when a submission for asset-by-asset assessment was maintained.
The parties did indeed express a mutual intention in the Pre-Nuptial Agreement not to make any claim upon the assets they respectively introduced to the marriage in the event of breakdown of the marriage, but they each thereafter acted in a manner inconsistent with segregation of their assets. They each made financial and non-financial contributions for the benefit of the other and they combined their assets in the advancement of numerous ventures designed to increase their mutual wealth. The parties also remain inextricably bound by the corporate debts they have secured and guaranteed. In such circumstances it is appropriate to adopt the orthodox approach of assessing contributions globally.
By adopting an approach of global assessment it is important not to overlook the significant disparity between the assets introduced by the parties to their relationship. Although precise arithmetical comparison is impossible, the wife introduced assets to the relationship which exceeded the husband’s in value by a factor of about six. The husband brought in assets worth over $500,000 and the wife brought in assets worth over $3,000,000. The wife’s much greater initial contribution weighs heavily against the parties’ subsequent contributions (see Pierce v Pierce (1999) FLC 92-844 at [23]-[30], [40]).
Although their assets now have less aggregate net value, that does not render nugatory the contributions they each made with the intent of improving their wealth following their marriage. Contributions are not measured merely by the resultant effect, because very great effort may produce little result while very little effort may produce a great result. Unproductive effort may still be recognised as contribution within s 79(4) of the Act (see Browne v Green (1999) FLC 92-873 at [39]; W & W [2000] FamCA 1302 at [119]-[125]).
However, the Full Court has recognised that a “practical difficulty” arises in the recognition of contributions made to either projects which have failed or to property that no longer exists when the property available for distribution between the parties has been reduced by the failed project or the absence of the item of property to which the subject contributions were made. In such cases the issue to be confronted is whether one or both parties should bear the financial loss in question, and to answer that question one must turn to the principles discussed in Marriage of Kowaliw (1981) FLC 91-092 (see Browne v Green at [40]-[41]).
It was faintly submitted for the wife at one point during the hearing that the husband should bear sole responsibility for the residual liabilities connected to the failed investment ventures, but the evidence fell far short of demonstrating any reckless, negligent or wanton conduct on the part of the husband that would trigger application of Kowaliw considerations. The wife and husband were both willing and enthusiastic participants in the investment ventures, which unfortunately did not realise the profits for which they hoped and strived. Even if, as the wife sought to impress, the husband initiated and controlled their ventures, that would not of itself warrant departure from the guideline that economic losses and gains should ordinarily be shared (see Browne v Green at [52]-[53]).
The wife’s abandonment of the potential Kowaliw submission was implicit from her final proposal under which the parties would bear equal liability for the residual NAB liabilities, although she proposed her one-half share of the liabilities would still be contingent upon the success of her pending complaint against the NAB to the Financial Ombudsman.
Both parties made substantial contributions to the investment ventures they pursued by offering their own properties as security for, and guaranteeing payment of, the corporate loans incurred in the course of their investment ventures (see Calverley v Green (1984) 155 CLR 242 at 267-268).
In the process of assessment of the parties’ overall contributions, the most salient consideration is the disparity between the aggregate values of the assets they each contributed at the commencement of their relationship. In view of the brevity of their relationship, that is a consideration of substantial importance. However, the parties’ financial and non-financial contributions to the investment ventures they conducted remain influential. Those contributions continued beyond their separation and even after they began occupation of separate households. The parties’ miscellaneous financial and non-financial contributions, of which the husband’s were greater, are much less significant.
The synthesis of those considerations warrants an entitlement of the husband to 16.5 per cent of the parties’ property and the entitlement of the wife to 83.5 per cent thereof.
The wife attempted to mount an argument, in reliance upon the principles discussed in Marriage of Kennon (1997) 22 Fam LR 1, that her contributions should attract more weight as a consequence of the adverse conditions under which they were rendered. The argument is rejected.
At the outset it was necessary to contemplate the prospective validity of the Kennon argument and the evidence adduced to support it in order to determine the admissibility of the wife’s evidence about abusive conduct by the husband, which was otherwise inadmissible by reason of its irrelevance (see S & S [2003] FamCA 905 at [37]-[40]). Although the wife deposed to her frequent hostile and disrespectful treatment by the husband, in isolation, that evidence fell far short of sustaining any Kennon submission and was therefore rejected as inadmissible.
The husband’s alleged adverse treatment of the wife largely, if not exclusively, occurred during a period of time after the wife contended the parties had already separated. Even though the situation of one party rendering the other party’s post-separation contributions more arduous may still fall within the rubric of Kennon principles (see Baranski & Baranski [2012] FamCAFC 18 at [257]-[259]), such an instance could not be reasonably demonstrated in the specific circumstances of this case.
The wife maintained she separated from the husband in February 2009 and it is common ground the husband worked in the Middle East from before the parties’ marriage in October 2007 until his permanent return to Australia in July 2009. Between October 2007 and July 2009 they spent relatively little time together, which only occurred when the wife travelled to the Middle East or the husband travelled to Australia. In that period the husband only spent a total of about 70 days in Australia.[64] It is difficult to imagine how the husband’s conduct could have been regarded as so troublesome when they generally lived so far apart for so long.
[64] Exhibit W1
When the husband returned to live in Australia in July 2009 the wife chose to continue living in the husband’s home. She was not compelled to do so because she owned several other properties into which she was free to move if she wished. Ultimately she did so, but not until a year later in mid 2010, which is when the husband alleged they separated. Even afterwards, when the wife lived separately in her own home, she still voluntarily engaged in various business ventures with the husband.
Such uncontentious facts do not readily lend themselves to the exceptional Kennon situation in which violent conduct by one spouse causes the other spouse’s contributions to be “significantly more arduous” (see Kennon at 24).
Aside from the relative physical remoteness of the parties and the wife’s subsequent willingness to engage with the husband when she need not have, the scope for application of the Kennon principle was quite limited on the facts of this case anyway since the principle is directed to inquiry about how and why a spouse’s non-financial contributions are rendered more onerous. The Court’s attention was not drawn to any authority that expressly extends application of the Kennon principle to financial contributions – perhaps for good reason, since a spouse either chooses to make or refrain from making a financial contribution. A spouse may hesitate, or even agonise, over the decision about whether to make a financial contribution because of a vexed relationship with his or her spouse. However, once the decision is made, the voluntary act of making a financial contribution in the form of a payment to or for the benefit of the other spouse is not rendered more or less onerous by the other spouse’s conduct.
Presently, any asserted non-financial contribution made by the parties within the purview of s 79(4) of the Act could not have included any contribution in respect of a child, as they had no children together. The Kennon principle could therefore only apply to the wife’s non-financial contributions for the benefit of herself and the husband, but the evidence pertaining to such non-financial contributions was sparse. On the wife’s version of events, such contributions must have been mostly confined to the intermittent occasions they spent together in the period between October 2007 and February 2009.
Apart from the shortcomings in the wife’s own evidence, there was a lack of expert evidence. Although the wife received some form of psychological therapy in 2012,[65] there was no admissible expert evidence to prove her diagnosis with a recognisable psychological or psychiatric condition. Nor was there any admissible expert evidence to connect the existence of any such condition with the nature of her alleged treatment by the husband. The absence of such a causal link is critical, if not fatal (see Kennon at 18; S & S at [41]-[48]). I reject the wife’s submission to the effect that expert evidence is unnecessary and the Court could safely rely upon her evidence alone. For all that is known, the wife’s psychological condition may have had little or nothing to do with the husband’s conduct. There were a series of other contemporaneous misfortunes and stressors in her life, such as the death of her mother, the need for her defence of her sibling’s claim against her deceased mother’s estate under the Family Provision Act (NSW), her dispute with the NAB, and her involvement in this litigation with the husband.
[65] Wife’s affidavit, para 178
The wife tendered as exhibits a series of medical reports referred to in, but mistakenly omitted from, her affidavit.[66] Objection was taken and the reports were rejected as inadmissible. The wife knew from the procedural orders made on 24 July 2013 that if she relied upon evidence from her treating psychiatrist then she was required to file an affidavit by the psychiatrist and make the psychiatrist available for cross-examination, which she did not do. Her tender of medical reports authored by Dr R was therefore merely an attempt to circumvent that obligation. Moreover, because the medical reports were clearly written for, or in contemplation of, use in this litigation and were not therefore business records they did not survive application of the hearsay rule.
[66] Wife’s affidavit, para 179
Lastly, even if there had been admissible expert evidence as to the wife’s sufferance of some form of psychological condition which was at least partially caused by the husband’s ill treatment of her, there was no evidence as to how the husband’s conduct and the wife’s consequential condition had any “discernible impact” upon the wife’s contributions, thereby rendering them qualitatively greater (see Kennon at 24).
In fact, the wife’s case was conducted on a completely contrary basis. Relevantly, she contended that she failed to make contributions; not that she actually made contributions which should be accorded greater weight because of the arduous conditions under which they were made. She contended the husband unilaterally took principal control of the business ventures they conducted through the medium of the corporations F Pty Ltd and G Pty Ltd and, inferentially, had she been allowed by the husband, she would have contributed much more to those ventures than she actually did. Accordingly, it was not her psychological condition that precluded her from making greater contributions; it was the husband’s frustration of her willingness and ability to do so. This was not therefore an archetypal Kennon situation in which one spouse was compelled to continue making non-financial or homemaking contributions in circumstances of personal adversity caused by the other spouse.
Adjustment
Having determined the parties’ respective contribution-based entitlements it is then necessary to take account of the relevant considerations referred to in ss 79(4)(d)-(g) and 75(2) of the Act.
The husband is 63 years of age.[67] He has no dependents.
[67] Husband’s affidavit, para 1
The husband is contracted to provide his services as a manager,[68] which contract will likely last until late 2014. The husband’s income is currently about $2,340 gross per week, and will likely stay at that level until the completion of the contract next year.[69]
[68] Husband’s second affidavit, paras 2-3
[69] Husband’s affidavit, paras 27.6, 135
It is possible but unlikely the husband will continue to work thereafter, since he will then be 64 years of age and he does not keep vigorous physical or psychological health. The husband recently had surgery on both knees and his stomach, he suffers severe arthritis, he is obese, and he can only walk short distances. He takes prescriptive medication for depression.[70] He planned to retire at around age 65 in any event.[71]
[70] Husband’s affidavit, para 134
[71] Husband’s affidavit, para 136
The wife is 58 years of age.[72] Her youngest child is still a minor and will probably remain dependent upon her until she attains her majority in March 2015.[73] The wife has no other dependents.
[72] Wife’s affidavit, para 2
[73] Wife’s affidavit, para 18
The wife has not been gainfully employed for many years. Inferentially, she maintains fragile psychological health. She was admitted to hospital for some form of treatment for more than a month in late 2012 and she required the appointment of a case guardian in these proceedings for nearly a year. Understandably, no suggestion was made that the wife has the capacity to find and retain employment.
The wife is only ever likely to derive income from commercial assets under her control. Presently she receives rent approximating $1,500 gross per week from her tenants in the Suburb A and Suburb L properties. However, as will become obvious, one of those properties needs to be sold to meet the parties’ liabilities to the NAB and to fulfil the husband’s proprietary entitlement. Her income will therefore decrease.
No other fact or circumstance was submitted to be relevant for consideration.
The husband abandoned his foreshadowed reliance upon s 75(2)(o) of the Act in respect of contributions he allegedly made for the benefit of the wife’s child (see Robb v Robb (1995) FLC 92-555 at 81,542, 81,546, 81,547).
The husband contended for an adjustment in his favour of 5 per cent, whereas the wife contended no adjustment either way was justified. The wife is correct.
The husband will have a superior income for another year or so, after which he will probably be reliant upon social security for income. The wife’s income will probably be inferior whilst ever the husband is gainfully employed and she bears the additional financial burden of her dependent child. Although the wife will have assets of significantly greater value, one of her income-producing assets needs to be liquidated, which will substantially diminish her future income. Neither party has any superannuation interest.
Conclusions and orders
As a result of those conclusions, the husband has an entitlement to 16.5 per cent of the property and the wife has an entitlement to 83.5 per cent. The husband’s submission of his overall entitlement to 25 per cent of the property is rejected. The wife avoided engagement of the debate about percentage entitlements and simply made submissions about her retention of certain assets.
As earlier mentioned, the parties had grossly disparate views about the manner in which their property should be justly and equitably divided between them.
The husband adhered to the orders proposed in his Amended Application filed on 25 June 2013. His proposal broadly entailed sale of the wife’s properties at Suburb A and Suburb L and use of the sale proceeds to discharge the parties’ personal and corporate debts to the NAB (items 20-26), to pay him $300,000, and to pay the balance to the wife. Otherwise, he proposed the parties retain the assets in their possession and any debts attaching to them.
The wife belatedly abandoned the orders proposed in her Response filed on 22 August 2013 and instead proposed the orders in the minute of orders she tendered upon closure of the evidence,[74] although those proposed orders were substantially amended during final submissions. Her proposal entailed the parties’ individual retention of their own assets and the debts attached to those assets, but their equal liability for most but not all of the corporate liabilities (items 20-21, 23-26, but not 22).
[74] Exhibit W2
The aggregate value of the parties’ proprietary interests is $2,303,840.
That figure is calculated by the addition of the current value of the husband’s proprietary interests (-$87,005) and the wife’s proprietary interests ($3,050,469) and subtraction of the corporate liabilities they will shortly owe jointly and severally to the NAB ($659,624).
However, it is only the NAB corporate debts that amount to $659,624 (items 20-24). The parties bear joint and several personal liability to the NAB in respect of the Town T venture for $262,202 (items 25-26). Consequently, leaving aside the husband’s personal debt to the NAB secured by mortgage over his home at Town C (item 27), which property and debt he will retain, the liabilities to the NAB actually total $921,826 (= 659,624 + 262,202). That amount needs to be paid in order to untangle the parties’ financial affairs.
The discharge of all secured debts to the NAB (items 20-26), excluding the husband’s personal debt secured over his home (item 27), means:
a)The husband could retain assets (items 1, 5, 7, 9, 17, 18) and liabilities (items 27, 29, 30) with a net value of $44,096; and
b)The wife could retain assets (items 2, 3, 4, 8, 10, 11, 12, 13, 14, 15, 16) and liabilities (items 28, 31, 32, 33, 34), subject to her payment out of the identified NAB debts (items 20-26), the resultant net value of which is $2,259,744.
Given the net value of the available property at $2,303,840 (= 44,096 + 2,259,744), the husband’s 16.5 per cent share equates to $380,134 and the wife’s 83.5 per cent share equates to $1,923,706.
For the husband to receive his full entitlement he needs to receive from the wife the sum of $336,038 (= 380,134 – 44,096). The wife’s payment of that sum to him would leave her with the correct entitlement of $1,923,706 (= 2,259,744 – 336,038).
It is inevitable that the residual NAB liabilities need to be discharged in order to finally determine the financial relationships between the parties and avoid further litigation between them, to which result the Court is duty-bound by s 81 of the Act to aspire. The wife failed to join the NAB to these proceedings, or to at least afford the NAB with procedural fairness, when it was open to her to do so. It is therefore impossible to make orders that bind the NAB pursuant to the provisions of Part VIIIAA of the Act, such as orders of the type she desired which apportioned the parties’ liability for the NAB debts in fixed amounts.
The discharge of the residual NAB liabilities may tend to weaken the force of the wife’s pending complaint against the NAB before the Financial Ombudsman, since the debt/s for which the wife contends her liability should be extinguished or minimised will have been paid in full, but it will not preclude successful determination of her complaint nor deprive her of any legal rights. If her complaint is sustained, the Financial Ombudsman may direct the re-imbursement of some amount to her by the NAB. If her complaint fails, she may still resort to litigation against the NAB for the recovery of damages in respect of any cause of action she sees fit to pursue, notwithstanding prior repayment of the debts.
The NAB liabilities cannot remain unresolved in these proceedings since it is an agreed fact the NAB is at liberty to enforce the full amount of the residual liabilities against the husband individually. Hence, even if the wife enjoys eventual success with her complaint against the NAB, the husband will not be absolved of his liability. If the wife ultimately succeeds in recovering monies from the NAB through her pending complaint or subsequent litigation then it will benefit her but not the husband.
The only way in which the residual NAB liabilities may be discharged and the husband paid out is by sale of a parcel of real estate owned by the wife. Funds of $1,257,864 (= 921,826 + 336,038) are required for that purpose, although the NAB debts (presently $921,826) will continue to increase incrementally with the accrual of interest while they remain outstanding.
The wife now lives in the Town E property with her daughter.[75] She leases her other properties at Suburb A and Suburb L.
[75] Wife’s affidavit, para 61
It is preferable not to force the sale of the home in which the wife and her daughter live, so the sale of either or both of the Suburb A and Suburb L properties seems unavoidable.
The agreed value of the Suburb A property is $860,000 and the agreed value of the Suburb L property is $1,700,000.
It is both less invasive and less complicated to sell only one instead of two properties, so the only course reasonably open is to order the sale of the Suburb L property. As a consequence, the wife will be deprived of the income generated by that asset. The sale proceeds will enable both discharge of the NAB debts and payment to the husband of his entitlement. The wife will retain the balance of the sale proceeds. Payment of the NAB debts will result in the discharge of the NAB mortgage secured over the Suburb A property.[76]
[76] Wife’s affidavit, paras 95, 103
The orders allow the wife a short period of time within which to marshal her affairs to pay the necessary monies in any manner she desires, but it is unlikely she will be able to do so other than by sale or encumbrance of the Suburb L property. The orders therefore provide for default sale of the Suburb L property.
In order to obviate disadvantage to either party through market movement, the orders require the wife to pay a percentage of the Suburb L property sale proceeds to the husband in lieu of a fixed amount. That is the preferred course (see Marriage of Waters & Waters (1981) FLC 91-019 at 76,207-76,209; Marriage of Nolan & Ingram (1984) FLC 91-585 at 79,724; Docters van Leeuwen & Docters van Leeuwen (1990) FLC 92-148 at 78,024; Smith & Smith (1991) FLC 92-261 at 78,759; Marriage of Bell & Bell (1993) FLC 92-347 at 79,683; ON v ON [2005] FamCA 1110 at [48]; Jarrott & Jarrott [2012] FamCAFC 29 at [21]). Expressed as a percentage of the agreed value of the Suburb L property, the sum of $336,038 is 19.77 per cent.
The wife resigned her directorships of F Pty Ltd and G Pty Ltd in March 2012.[77] She wants to transfer her interests in the corporations to the husband and he is willing to accept them. The orders so provide.
[77] Wife’s affidavit, paras 99, 162
The wife has an undefined shareholding in W Pty Ltd in which the husband has no interest. The wife will retain that shareholding.
The outcome of such transactions will lead to the wife’s retention of assets (items 2, 3, 8, 10, 11, 12, 13, 14, 15, 16) and liabilities (items 28, 31, 32, 33, 34), which have a net value of $1,481,570. In addition, she would receive the notional residue value of the Suburb L property (item 4) after payment of the NAB debts (items 20-26) and the payment to the husband, which computes to $442,136 (= 1,700,000 – 921,826 – 336,038).
The ultimate result for the wife is therefore retention of assets with a net value of $1,923,706 (= 1,481,570 + 442,136).
The orders require the husband to remove any existing caveats that he caused to be registered over the wife’s properties at Town E and Suburb A. Any existing caveat over the wife’s property at Suburb L will need to be removed by the husband upon the wife’s voluntary payment of the required amounts to him and the NAB or upon the default sale of the Suburb L property.
The husband wants to retain the Toyota vehicle, which is leased by F Pty Ltd and in which neither party has a proprietary interest. In order to do so he needs to pay $22,000 in satisfaction of its agreed value,[78] which will partially discharge the NAB debt attached to it (item 22). Since that NAB debt will be discharged simultaneously with all of the other NAB debts by money paid by the wife or by money realised on the sale of the wife’s Suburb L property, the husband must account to the wife for the sum of $22,000 in order to defray the liability. In order to achieve that outcome, the wife will only need to pay to the husband $314,038 (= 336,038 – 22,000), or if the Suburb L property must be sold, 19.77 per cent of the sale price less the fixed sum of $22,000.
[78] Exhibit B (item 6)
The parties hold a joint account with the National Australia Bank (item 19), although it contains no funds. An order is made compelling the parties to close the account.
The wife sought an order compelling the husband to “forthwith account to her for the sale proceeds” of the properties at Town X, Town U, and Town T.[79] The wife’s counsel explained such an order was intended only to compel the husband to furnish to the wife particulars of the manner in which the sale proceeds of those properties were expended; not for the husband to make any payment to the wife in respect of those properties. Nevertheless, I decline to make such an order.
[79] Exhibit W2, Order 3A(a)
Interim orders were made on 26 March 2012 appointing the husband as trustee for sale of those three properties. Those orders still subsist but were fulfilled by the husband’s sale of the properties. Since the husband acted as the parties’ trustee on those transactions, the wife is entitled to inspect any documents pertaining to the transactions the husband still retains. However, there is no reason to compel the husband to construct documents that do not already exist in order to explain the transactions to the wife’s satisfaction. It is futile now making an order for the husband to construct any explanatory documents for the wife since the proceedings are concluded and the financial arrangements between the parties are at an end. Final orders have been made in accordance with the evidence the parties saw fit to adduce.
Had the wife really wanted comprehensive details about the sale transactions she had plenty of time before the final hearing to investigate them by many different means, including by interrogation of the husband pursuant to Part 13.3 of the Rules, the issue of a notice to produce to the husband, or the issue of subpoenas to the NAB and the solicitors who acted on the sales.
It is unlikely the wife really misunderstands the intricacies of the transactions because the husband was not challenged about his evidence that all net proceeds of the sales were applied in partial discharge of the outstanding NAB liabilities.[80] The wife admitted she knew the prices for which the properties were sold and was aware of the amounts remitted to the NAB. Her only uncertainty related to the deposits paid by the purchasers.[81]
[80] Husband’s affidavit, paras 129-132
[81] Wife’s affidavit, paras 87, 97, 104, 141, 147, 157
The wife pressed a claim for costs against the husband.[82] The husband also pressed a claim for costs against the wife.[83] The issue of costs was not addressed during the hearing so costs are reserved for 28 days.
[82] Exhibit W2, Order 11
[83] Amended Application, Order 10
I certify that the preceding one hundred and forty one (141) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered on 11 November 2013.
Associate:
Date: 11 November 2013
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