Latham and Dillon and Anor
[2015] FCCA 755
•2 April 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| LATHAM & DILLON & ANOR | [2015] FCCA 755 |
| Catchwords: FAMILY LAW – Property – loan from a family trust to one of the parties – contributions – justice and equity. |
| Legislation: Evidence Act 1995 (Cth), s.140 Family Law Act 1975, ss.75(2), 79 Limitation of Actions Act1974 (Qld), ss.10, 35(3) |
| Af Petersens and Af Petersens (1981) FLC 91-095 Biltoft and Biltoft (1995) FLC 92-614 Briginshaw v Briginshaw (1938) 60 CLR 336 Chidiac v Maatouk [2010] NSWSC 386 Clauson & Clauson (1995) FLC 92-595 Kennon v Spry [2008] HCA 56 Ogilvie and Adams [1981] VR 104 Stanford v Stanford [2012] 247 CLR 108 Sulo & Colpetti [2010] FamCA 493 Thornton & Thornton [2015] FamCA 92 Vadisanis & Vadisanis and Anor [2014] FamCAFC 97 Winston & Winston (No.2) [2013] FamCAFC 147 |
| Applicant: | MS LATHAM |
| First Respondent: | MR DILLON |
| Second Respondent: | DILLON PTY LTD |
| File Number: | BRC 8616 of 2012 |
| Judgment of: | Judge Howard |
| Hearing dates: | 16, 17 February and 17 March 2015 |
| Date of Last Submission: | 17 March 2015 |
| Delivered at: | Brisbane |
| Delivered on: | 2 April 2015 |
REPRESENTATION
| Solicitors for the Applicant: | Senior Legal |
| The First Respondent appeared in person |
| The Second Respondent appeared in person |
ORDERS
That each party shall provide a copy of a proposed Final Order to each other party by 4:00pm on 9 April 2015.
That the parties shall attempt to reach an agreed position in relation to the wording of the Final Order (reflecting the Reasons for Judgment) and shall send a copy of same to the Court by no later than 4:00pm on 16 April 2015.
That in the event the parties are unable to reach an agreed position in relation to the wording of the Final Order (and send a copy of same to the Court) within the time frame stated in paragraph (2) – the matter shall be listed for Mention and each party shall attend personally along with their legal representative (if any) on a date to be fixed by the Court.
IT IS NOTED that publication of this judgment under the pseudonym Latham & Dillon & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRC 8616 of 2012
| MS LATHAM |
Applicant
And
| MR DILLON |
First Respondent
| DILLON PTY LTD |
Second Respondent
REASONS FOR JUDGMENT
Background
The Applicant in this case is Ms Latham. The Applicant was born on (omitted) 1962.
The Respondent husband is Mr Dillon. The Respondent husband was born on (omitted) 1960.
The parties (unless otherwise indicated the term “parties” refers to the wife and the husband) began a relationship in about (omitted) 2001. The parties became engaged on (omitted) 2003. The parties commenced cohabitation during 2003.
The wife says that cohabitation commenced straight after the engagement. The husband maintained that it wasn’t until mid-2004. But evidence disclosed during the trial (in particular exhibit 2) shows that the husband, at an earlier point in time, made it clear that he had been living in the house at Property S (the wife’s property) from January 2004.
I have come to the conclusion that the wife’s memory in relation to when cohabitation commenced is more likely to be correct. I have come to that conclusion having had regard to the evidence of both parties in the witness box on that particular point.
The parties married on (omitted) 2004.
The parties separated on a final basis in 2010.
The parties have been unable to agree on how to divide their property. The second respondent was joined in the proceedings by the applicant because the second respondent is the trustee of the Dillon Family Trust.
The Property Pool
The Court must have regard to the well-known four step process in assessing the property pool. The four step process has to be read in the light of the decision of the High Court of Australia in Stanford v Stanford [2012] 247 CLR 108.
At the outset the Court has to consider whether or not it is “just and equitable to make an order?” The High Court noted that an Australian Court exercising jurisdiction under Section 79 of the Family Law Act1975 (“the Act”) must first of all consider that question. The High Court noted in the Stanford decision at paragraph 42 as follows:
“42. In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court makes a property settlement order. What order, if any, should then be made is determined by applying s 79(4).”
In the present case – I have no difficulty in concluding that the wife and the husband no longer live in a marital relationship. The parties separated on a final basis in 2010. In this case it will be just and equitable to make a property settlement order under s.79 of the Act. In the present case – “there is not and will not thereafter be the common use of property” – by the wife and the husband. The words in bold type in the last preceding sentence are precisely the words used by the High Court in the Stanford decision.
Having concluded that it is just and equitable – in the circumstances of the present case before the Court – to make a property settlement order under s.79 – the Court must then determine what that order should be having regard to s.79(4) of the Act. The terms of the property settlement order to be made must, of course, be just and equitable (s.79(2)). Once the Court has considered the matters in s.79(4) of the Act the Court must also be satisfied that it is appropriate to make the order contemplated.
The process (formerly known as the four step process) is still, by and large, applicable.
Further examination of the High Court’s comments in Stanford (supra) is appropriate at this point in time. In particular I note:
“36. The expression "just and equitable" is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition [see Mallet v Mallet [1984] HCA 21]. It is not possible to chart its metes and bounds. And while the power given by s 79 is not "to be exercised in accordance with fixed rules"[Mallet v Mallet [1984] HCA 21], nevertheless, three fundamental propositions must not be obscured.”
37. First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to "”altering the interests of the parties to the marriage in the property" (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
38. Second, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion. In Wirth v Wirth, Dixon CJ observed [1956] HCA 71] that a power to make such order with respect to property and costs "as [the judge] thinks fit", in any question between husband and wife as to the title to or possession of property, is a power which "rests upon the law and not upon judicial discretion". And as four members of this Court observed about proceedings for maintenance and property settlement orders in R v Watson; Ex parte Armstrong[1976] HCA 39:
"The judge called upon to decide proceedings of that kind is not entitled to do what has been described as 'palm tree justice'. No doubt he is given a wide discretion, but he must exercise it in accordance with legal principles, including the principles which the Act itself lays down".
39. Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is "just and equitable" to make the order is not to be answered by assuming that the parties' rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that "[c]ommunity of ownership arising from marriage has no place in the common law"[Hepworth v Hepworth (1963) 110 CLR 309]. Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be "decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses" [Hepworth v Hepworth (1963) 110 CLR 309]. The question presented by s 79 is whether those rights and interests should be altered.
40. Third, whether making a property settlement order is "just and equitable" is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised "in accordance with legal principles, including the principles which the Act itself lays down"[R v Watson; Ex parte Armstrong [1976] HCA 39]. To conclude that making an order is "just and equitable" only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.”
The pool of property must be ascertained. In particular, the Court must identify “according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property”.
The High Court particularly noted the word “existing” in paragraph 37 of the decision in Stanford (supra). If property no longer “exists” then it cannot be identified.
Most of the items in the pool of property are not in dispute between the parties. It is not argued on behalf of the applicant wife that the property held in the Dillon Family Trust is or should be brought to account in the pool of property to be divided between the applicant wife and the first respondent husband.
The main issue for consideration relates to whether or not a loan made to the husband by Dillon Pty Ltd as Trustee for the Dillon Family Trust has to be repaid. If the Court concludes that it must be repaid then the sum of $121,986 will have to be included as a liability in the pool of property – and the pool available for distribution between the parties in these property settlement proceedings under s.79 of the Act will be diminished accordingly.
The Loan to the husband from Dillon Pty Ltd as Trustee on behalf of the Dillon Family Trust
The argument put forward on behalf of the applicant wife is that the Court should disregard the loan made to the husband made by Dillon Pty Ltd as Trustee for the Dillon Family Trust. As noted, the amount in question is $121,986.
In the financial statements for the year ended 30 June 2014 prepared by Mr A, Chartered Accountants of (omitted), Queensland (exhibit 30). I note that there is included a “Detailed Balance Sheet”. That Detailed Balance Sheet includes under the heading, “Non-Current Assets” a further sub-heading, “Receivables”. Under the heading of “Receivables” the names of various members of the Dillon family are included and the amount of loans made to those family members by the family trust is also included. That part of the detailed balance sheet reads as follows:
Non-Current Assets
Receivables 2014
$2013
$Loan – Mr Dillon
121,986.00
121,986.00
Loan – Ms P
187,151.12
187,151.12
Loan – Ms J
53,000.00
53,000.00
Loan – Mr M
58,300.00
58,300.00
Loan – Mr S
149,500.00
149,500.00
Loan – Ms V
129,528.00
129,528.00
Loan – Ms D
140.00
140.00
699,605.12
699,605.12
Ms P is the mother of the first respondent husband. Ms P’s full name is Ms P. Ms P was born on (omitted) 1931. She attended the hearing by telephone link from her home in New South Wales (omitted) at (omitted). Ms P, recently, has not been keeping in particularly good health. Ms P controls Dillon Pty Ltd.
In an affidavit sworn by Mr A filed 2 February 2015, Mr A a certified practising accountant, has noted that he is Ms P’s personal accountant and, in addition, he is the accountant for Dillon Pty Ltd as Corporate Trustee for the Dillon Family Trust. Mr A is also the first respondent husband’s accountant.
Of particular note it is the fact that Mr A states in his affidavit, inter alia:
“3. I confirm that Ms P is the sole shareholder and director of the company known as Dillon Pty Ltd and the sole Trustee of the Dillon Family Trust.
4. I attached a document marked Annexure “1” which is an ASIC search dated 27 August 2013 which clearly shows that Ms P is the Current sole Director and the Current Secretary of Dillon Pty Ltd. It also shows that Ms P is the sole shareholder of the company.
5. This document proves that no other person has ever filled any role in Dillon Pty Ltd at any time in its existence, if there was such a person they would appear on this Historical Extract.
6. I have prepared all of the accountancy documentation, Tax Returns and Financial Statements for the Dillon Family Trust since its inception.
7. The Financial Statements for the Dillon Family Trust are not overly complicated and in my opinion straightforward and easy to read and understand. There is a clear and logical progression of happenings within the trust since inception and Ms P’s sole ownership and control of the trust is clear.”
The trust was created in 2002 (note paragraph 29 of Mr A’s affidavit). The funds lent to the trust by Ms P totalled $565,000. I note in particular annexure 5 to the affidavit of Mr A which contains the trial balance for Dillon Pty Ltd as at 30 June 2002. The funds that were lent to the trust by Ms P were the proceeds from the sale of Ms P’s home which she had owned jointly with her husband, the property was sold after Ms P’s husband died.
From the time of the creation of the Dillon Family Trust, the trust has lent various sums of money to various members of the Dillon family.
As at 30 June 2003 the loan to Mr Dillon was $11,000. At that time there was also a loan to (business omitted) in the sum of $9,100. A perusal of the Detailed Balance Sheet for the company as at 30 June 2004 shows that, in 2003 $9,100 was lent to (business omitted) but as at 30 June 2004 there was no money lent to (business omitted). That is because the money had been repaid. (business omitted) is a company/business that was run by the first respondent husband.
As at 30 June 2005 the money lent to the husband was $41,211.
One year later, at 30 June 2006, the amount lent to the husband is noted in the sum of $34,326. This means there was a net reduction in the amount of the loan during the course of that financial year. Clearly, the husband was repaying part of the loan. This accords with the husband’s testimony. I accept his testimony in relation to these issues. In particular, I note that the husband gave evidence that, over the years, from time to time, he has made various payments to Dillon Pty Ltd as repayments in respect of the loans made to him.
In the next 12 month period up to 30 June 2007 the loan amount increased to $36,676. By the end of 30 June 2008 the loan had increased to $41,486. Up to the 30 June 2009 there was quite a significant increase in the amount of moneys lent to Mr Dillon by Dillon Pty Ltd as Trustee for the Dillon Family Trust. The loan by the end of that financial year had increased to $97,986.
As at 30 June 2010 the amount of the loan to Mr Dillon (the first respondent husband) had increased to $116,986. In that same year the full list of loans under the heading “Non-Current Assets” to the various family members is as follows:
Non-Current Assets
Receivables 2010
$2009
$Loan – Mr Dillon
116,986.00
97,986.00
Loan – Ms P
185,151.12
102,281.12
Loan – Ms J
53,000.00
18,000.00
Loan – Mr M
58,300.00
23,300.00
Loan – Mr S
149,500.00
14,500.00
Loan – Ms V
129,528.00
94,528.00
Loan – Ms D
140.00
140.00
692,605.12
350,735.12
In the detailed balance as at 30 June 2011 it is noted that the loan to Mr Dillon had increased to $121,986. It has remained at that amount since that time.
As at 30 June 2014 Ms V has been lent $129,528 and Mr S $149,500. Two further siblings namely Ms J and Mr M have been lent significantly less.
I do note, however, Ms J (who gave oral evidence by telephone on 17 February 2015) confirmed that Dillon Pty Ltd as Trustee for the Dillon Family Trust had invested in a business which she and her brother Mr S had conducted. Unfortunately that business was unsuccessful and the trust lost a good deal of money as part of that investment. Mr A confirmed in evidence on 17 March 2015 that the trust lost $275,000 on that investment.
I also note that during the course of the marriage the trust lent money which the husband directed towards the applicant wife to assist with payment of medical bills.
The evidence of the husband is that, over the years, the trust has lent money and such funds were used by the husband – during the course of the marriage – to help fund the running of the family and the lifestyle enjoyed by the family members.
The family in question comprised of the husband, the wife, the wife’s two children A and B and the husband’s daughter C. A was born on (omitted) 1993 and B was born on (omitted) 1995.
For the majority of the duration of the parties’ relationship the family lived in the property situated at Property O.
None of the members of the Dillon family to whom loans have been made have had the loans forgiven by Dillon Pty Ltd. The loans are all documented in the “Detailed Balance Sheet” included in the financial statements of the trust each financial year. The husband has, on occasions, repaid moneys to Dillon Pty Ltd in reduction of the loan amount.
The transactions in relation to the Dillon Pty Ltd cheque account have been collated in a document which is exhibit 36. That document was prepared by the solicitor acting on behalf of the applicant wife (or by his office). The document was adopted by the husband in evidence and became exhibit 36. There is an account in the name of Dillon Pty Ltd entitled, “Business Premium Account” and the number of the account ends with the digits, “4411”. A perusal of that shows quite clearly that the first respondent husband, Mr Dillon, was repaying the loan that he had received from the trust in various amounts during the years 2007, 2008, 2009 and 2010. For practically all of that period of time the parties were still living together. That exhibit shows that the husband repaid to the trust more than $60,000 over that period of time. Of course, the exhibit also shows that other monies were lent to the husband by the trust during that period of time. So that the amount of the loan was fluctuating depending upon the amounts forwarded by the trust and the amounts repaid by the husband.
It has been submitted on behalf of the applicant wife (by her solicitor, Mr Senior who appeared on her behalf at the hearing) that approximately $40,000 of the total amount of the loan from the trust to the husband (total amount $121,986) cannot be recovered by the trust because it is statue barred. That submission needs to be considered carefully. Reference was made to various cases including Ogilvie and Adams [1981] VR 1041 per Fullagar J and Sulo & Colpetti [2010] FamCA 493. In Ogilvie and Adams (supra) Fullagar J stated at page 1049, inter alia:
“There is a long-settled rule of construction that, where there is a present debt between the parties to a contract to repay money, and the only terms as to repayment of the debt are to be spelled out of a promise to repay on demand, or out of a statement that the money is to be repaid or repayable on demand (or on request), an instantaneous cause of action, upon the very creation of the contract, arises in the lender. Whether one calls it a rule of law or not does not seem to me to matter. The only reason why I have chosen the expression “rule of construction” is because other words or terms may appear in the contract which may be in the circumstances sufficient to show an intention that the cause of action is not to arise until some actual demand or some form of demand is made or until some period after demand has elapsed: see for example Murphy v. Lawrence [1960] N.Z.L.R. 772. But it is equally correct to say that, where such “other words” or terms do not appear, it is settled law that a loan (for example) which is simply described as being repayable on demand or on request or at call creates a cause of action in the lender enabling him to recover the money instantaneously upon the loan being made, and without any demand being made at all. What the critical words mean, generally, is a rule of construction, and therefore presumptive only; what the words mean in a written document recording the terms of a loan, when standing alone, is a clear rule of law.”
In a decision of the Supreme Court of New South Wales (Ward J) entitled Chidiac v Maatouk [2010] NSWSC 386 at paragraph 182 the Court considered this issue and highlighted the following passage from Ogilvie and Adams (supra at 1043) :
“The common law has always regarded the fact of indebtedness as a continuing detention by the debtor of the creditor's money, and this whether the creditor brought an action of debt or an action in indebitatus assumpsit. Therefore if A lends money to B, then instantly B is detaining A's money. In order to prevent a cause of action for recovery arising in A instantaneously on paying the money, the parties must expressly contract out of that situation by words clearly inconsistent with that situation. The courts have long since settled it that a mere statement or agreement that the money is repayable on demand (or request or at call) is not sufficient to contract out of that situation where all else that is known of the terms of the contract is that A has paid money to B by way of loan. The lender's cause of action still arises instanter on the receipt of the money by the borrower, so that the lender's cause of action becomes statute barred at the expiry of six years after the receipt of the money.”
I also note the decision of the Full Court of the Family Court of Australia in Vadisanis & Vadisanis and Anor [2014] FamCAFC 97. The decision in Vadisanis & Vadisanis (supra) follows the decision of Fullagar J in Ogilvie and Adams (supra) and the other cases mentioned.
The husband was, at all times, a resident in Queensland and the monies that were lent to him by the trust were lent to him in Queensland. In the absence of any other provision it seems to me that the Court should have regard to the Limitation of Actions Act1974 (Qld) (“the Act”) in determining whether or not the trust would be statute barred from pursuing the husband to recover the money lent to him.
Section 10 of the Limitation of Actions Act 1974 (Qld) provides a six year limitation period. However I do note Part 3 of the Act is headed “Extension of Periods of Limitation”. Section 35(3) of the Act states:
“35. Fresh accrual of action on acknowledgment or part payment
…
(3) Where a right of action has accrued to recover a debt or other liquidated pecuniary claim, or a claim to the personal estate of a deceased person or to a share or interest therein and the person liable or accountable therefor acknowledges the claim or makes a payment in respect thereof, the right shall be deemed to have accrued on and not before the date of the acknowledgment or the last payment.”
The husband, of course, made significant repayments to the trust on various dates. Exhibit 36 discloses that the husband repaid $1,000 to the trust on 30 October 2009. He may also have made a repayment on 25 may 2010 but the document is somewhat unclear in relation to that date. Even if one looks at the payment made on 30 October 2009 (in the amount of $1,000) it would seem that – by reason of s.35(3) of the Limitation of Actions Act 1975(Qld) that there has been a fresh accrual of the cause of action from 30 October 2009. This means that the debt owed by the husband to the trust remains repayable by the husband to the trust and the cause of action is not yet statute barred.
It was also submitted that, by reason of the fact that the husband had written the word “gift” on the cheque butt of the trust’s cheque book (on a number of occasions) that certain amounts were forwarded as gifts and should be deducted from the total of $121,986. But the evidence from the husband, Mr A and Ms P is clear. On occasions the trust lent money to the husband (and his siblings) and on other occasions the trust forwarded monies to the husband (and his other siblings and other beneficiaries) as “gifts”. I was very impressed with Ms P as a witness and I was also very impressed with Mr A as a witness. Ms P, because of her advanced age, did, on occasions, have some memory lapses. That is understandable. But I do not doubt the veracity of her evidence.
For that matter I do not doubt the veracity of the husband’s evidence either – or the truthfulness of the wife. This case very much has involved the disentanglement of various pieces of evidence in order to ascertain the true position of the property pool.
The loans to the various family members – including the first respondent husband Mr Dillon, are legally enforceable obligations.
If it was intended that the moneys would never have to be repaid – one would have to ask the question why then has the husband, on occasions, repaid moneys to Dillon Pty Ltd? The answer clearly is that there is an obligation upon the various family members (including the husband) to repay the loans.
I have come to the conclusion that the money lent by the trust to the husband is not yet statue barred. That, of course, is not the end of that issue. That is to say, it does not necessarily follow that the entire amount of that loan should be bought to account as a liability in the matrimonial pool of property. That is a matter for further consideration.
It was also argued on behalf of the applicant wife that the loan in the sum of $121,986 should not be included as a matrimonial debt in the property pool because the husband, Mr Dillon, in fact had control of the Dillon Family Trust. I have no hesitation in rejecting that submission. Mr Dillon, Ms P and Ms J all gave clear and unequivocal evidence to the effect that the husband (Mr Dillon) does not control the family trust. All of those witnesses were credible. I accept their evidence. In addition, I accept the evidence of Mr A. Mr A made it clear that, as the accountant for the trust, he took instructions from Ms P. There is no doubt that, on occasions, the husband would act on behalf of and at the behest of his mother. Ms P explained the situation to the Court in clear terms during her oral testimony on 17 February 2015. On occasions her son Mr Dillon would sign contracts for the purchase and sale of land on her behalf and on behalf of the trust. On other occasions two of her other children (one son and one daughter) would also sign contracts on her behalf or on behalf of the trust. This was done for the sake of convenience. Ms P is advanced in years and lives on the (omitted) of New South Wales. The properties that had been purchased and sold by the trust were situated at various places including the (omitted) and (omitted). Ms P would delegate to Mr Dillon and also (it seems) to his brother and his sister the task of, on occasions, locating properties, inspecting properties and negotiating purchase and sale prices. The bank account for the trust was also held at (omitted) and the accountant for the trust is situated on the (omitted) also. It was more convenient for Mr Dillon to do the leg work and the paper work for the trust. I note that the applicant wife assisted with the bookwork and paper work for the trust when the parties were living together.
I therefore reject the submission that the husband had control of the Dillon Family Trust. I also reject the submission that the husband held himself out as a director of the Dillon Family Trust. On one occasion the husband signed a letter with the letters “CEO” after his name. The husband explained to the Court that this letter had been sent to a real estate agent who was a friend of his and it was done in jest. I accept the husband’s explanation. As noted, the husband did a lot of the “leg work” on behalf of his elderly mother in respect of the trust. But, at all times, the husband was only assisting his mother.
Having concluded that the husband does indeed owe the amount of $121,986 to the trust and that it is a legally enforceable debt – the question now for determination is whether or not that debt should be included in that total sum as a liability in the property pool.
I note the decision of Nygh J in Af Petersens and Af Petersens (1981) FLC 91-095. In that case His Honour concluded that a loan that had been made to one of the parties (the husband) by his father was legally enforceable. But, His Honour also concluded that the evidence in that particular case was such that there should be some discounting in the amount of the loan brought to account in the property pool. That was because the husband did not treat the obligation to his father as an immediately pressing need. I note that on pages 76,669 and on 76,670 His Honour stated, inter alia:
“The first question is whether I should, in the exercise of my discretion, adjourn the present proceedings until the debt to the company has been determined in a Court of appropriate jurisdiction. I have no hesitation in rejecting that option. The proceedings to enforce the alleged debt at common law were instituted on 25 May 1981 and then only after I made a comment during the proceedings on that day that I could not take into account a probability of legal action if no proceedings had in fact been instituted. Both the lateness of the institution of the proceedings and a reasonable doubt as to their seriousness leads me to reject the application for a stay of proceedings at this stage.
The next question is to what extent I should discount the assets of the parties having regard to their indebtedness. I do not for these purposes for any moment doubt the existence and enforceability of the debts that I have listed above. But in taking account of the “obligations” of the parties, I must consider how pressing such an obligation is. It is fairly common in this Court to meet a situation where a parent has made a loan to a child which is in all respects legally enforceable, but which is not in fact enforced and would not really be expected to be enforced. It is no doubt an “obligation” but if the obligation is not likely to have to be met, it should not be taken into account.
The evidence in this case suggests that until July 1980 the husband did not treat the obligation to this father as an immediately pressing need. There is no record of any payment of, or demand for, interest on the loan. The security offered to the father in the form of Property B was at all times insufficient in value and an offer made on behalf of the husband to provide additional security over Property L was not acted upon. In early 1979, the company was allowed to sell off part of Property B and the proceeds were used to reduce the indebtedness of the parties to persons other than the father.
Again as late as March 1979 the husband felt free to suggest the possibility of settlement to this wife. No actual offer was made, but in his letter of 24 May 1979 admitted in evidence he states: “I am quite willing and able to put up some money to get you going”. Some evidence was given that he came over to (country omitted) and considered houses up to the value of $40,000 without admittedly at any stage committing himself to paying for them. He admitted in evidence that at the end of 1979 he had taken steps to sell part of Property B to provide a settlement for his wife to the point where a prospective purchaser had been found. The sale, however, fell through. Throughout this period, the son was in constant contact with his father and did in fact visit him in (country omitted) in the course of 1979. All this has bearing on the issue, not whether the father has forgone his claim, but whether I should accept the husband’s claim that the obligation to his father is such that I should not make any division out of the undoubted assets of the parties until the extent of that obligation has been determined.
Action taken by or on behalf of the father since July 1980 shows a remarkable coincidence with the progress of the wife’s application. Two days after she instituted proceedings and on the same day as the husband instituted his counter-claim, the father made a claim for repayment of the mortgage debt on the company. A few days before the hearing resumed on 10 December 1980, the father instituted proceedings in Equity to have the company wound up and the partnership placed in receivership. As I mentioned earlier, on the day of the final hearing, the liquidator instituted proceedings at common law to recover the alleged debt owed by the parties to the company.
As I have remarked earlier, none of this deprives the claim made by the father or the company of their legal validity and enforceability. But the above evidence suggests that the obligations to the father directly or indirectly are not such that I should deduct the full amount from the appropriate figure for property settlement. What I should take into account, however, is the fact that almost all of the fund with which the properties of the parties were purchased came originally from the husband’s father and that the husband, under the order I propose to make, will be left with a residual obligation towards his father which he may be in a position to renegotiate with him.”
In a decision entitled Winston & Winston (No 2) [2013] FamCAFC 147 the Full Court of the Family Court of Australia again considered this type of situation. In that decision the Court gave a helpful synopsis of the decision in Af Petersens (supra). At paragraph 51 the Full Court stated:
“51. In Af Petersens, Nygh J considered a similar debt to the mortgage in this case in which the husband had received a loan from his father which was secured over a property of the husband by a registered mortgage subject to the accrual of interest. Nygh J found that the husband’s father, although legally entitled to enforce repayment of that loan plus interest, had elected not to do so for a period of five years until the commencement of property proceedings between the husband and the wife. Nygh J noted that this was a, “... remarkable coincidence ...” albeit not one amounting to, “... a transparent sham or device ...” given that the capital had fallen due for repayment at approximately the same time as the wife had commenced property proceedings. His Honour found that all that could be said regarding that loan was that the father had lent money to his son and was prepared to wait for its repayment and, had the husband not separated from the wife, may have been prepared to wait indefinitely. In that situation, Nygh J found that the debt was a liability of the husband, but that, in calculating the divisible pool, it should not be simply deducted from the assets of the parties as the husband was in a position in which he could negotiate repayment of that debt with his father. His Honour found (at 76,670) that an inclusion of a discounted amount was more appropriate in those circumstances.”
I do note, of course, that in the present case the loan is unsecured whereas in the Af Petersens case and in the Winston case the loans were secured.
In the decision of Biltoft and Biltoft (1995) FLC 92-614 the Full Court of the Family Court of Australia considered a situation where the rights of an unsecured creditor were involved. At page 82,128 the Court noted, inter alia:
“There is no requirement that the rights of an unsecured creditor or a claim by a third party must be considered and dealt with prior to the Court making an order under s.79, nor is there a rule of priority as between a creditor claimant and a spouse. Those rights, however, cannot be ignored. They must be recognised, taken into account and balanced against the rights of the spouse. That was the approach adopted by the trial Judge. In this case, there are uncertainties surrounding the debt, including the reluctance of Mr H to negotiate as to an amount, to institute proceedings for its recovery or to seek a stay of the proceedings in this Court. These factors must form part of the balancing equation.”
I note the affidavit of Ms P filed 30 January 2015. In paragraphs 56 and 57 Ms P stated:
“56. My children understand that the loan amounts made through my Trust are to be repaid to the Trust if and when I call these loans in. I feel very insecure being part of these proceedings and I have a mind to call in the loan monies owed to my Trust, which was lent to Mr Dillon for the benefit of both he and Ms Latham when they were together and for the benefit of Ms Latham children.
57. All loans made to my children and their spouses were verbal agreements as I trust my children and have never felt the need to enter into written contracts with them.”
I accept this evidence of Ms P. As noted, I found her to be a credible and truthful witness.
Ms P also gave evidence on 17 February 2015 from page 257 of the transcript as follows:
“HIS HONOUR: Do they normally contact you and say, “Mum, I need a bit of a loan for such and such.”
MS P: No, no. I just thought when I had money – for the first time in my life I had some money that I could help the children with.
HIS HONOUR: Yes.
MS P: I thought I would give them all – lend them all some money to get them on their feet.
HIS HONOUR: Right.
MS P: And then when they were on their feet then they can pay me back later but at the moment they’re all still struggling.
HIS HONOUR: Right, right, right.
MS P: And I had to struggle very hard. My husband and I struggled on one wage to pay off the house of – that started all this off. That was the property that we sold to start this and I look back on it know and I think, “I wish we never did it,” because all it has done is bring me sadness and unhappiness and worry.”
Ms P gave further evidence on 17 March 2015 on the third day of the hearing. I note the following series of questions and answers from page 348 of the transcript:
“MR SENIOR: Now, the trustee property then distributed money to the beneficiaries. You understand that?
MS P: Yes. I have given all the family gifts over the years and loans over the years to help them out.
MR SENIOR: And how did you differentiate between what was going to be a gift and what was going to be loan?
MS P: Well, I just did. Sometimes I wanted to give them a gift and other times I realised that I needed to get this amount of money back, or it would be too much to give as a gift because I have – I have five children and I don’t want one to get more than the other four, so I try to make it even and if – if I think that the amount was too much – like a small amount would be fine as a gift – but a big amount needed to come back into the trust.
…
MR SENIOR: My apologies. Now, have you, at any time, made any demand on any of your children for the repayment of any moneys provided by the trust to them?
MS P: No. I make no demands. I – I trust them to pay me back when they can.
MR SENIOR: Is that if they want to?
MS P: Of course they want to when they can. They're my children.
…
MR SENIOR: Then Ms P, the issue of moneys that have been advanced to your children, is it your evidence that if they wish to return moneys, they can?
MS P: Yes. They will return it when they can.
MR SENIOR: But that's a matter for them?
MS P: That's a matter for them.”
I accept this evidence of Ms P.
It is also clear that Ms P has prepared a codicil for her own will. This is to take into account the fact that the trust had lost $275,000 in investing in a failed venture by Ms J and Mr S. Apparently there will be a reckoning after the demise of Ms P in that regard. Indeed the evidence from Ms P is that her understanding of her own will is that upon her demise the amounts that each of the siblings have been lent will be taken into account in the division of the estate of Ms P. Unfortunately the will of Ms P is not in evidence. She was unable to find a copy at her residence. The codicil is also not in evidence.
Ms P gave evidence that she intended making arrangements for her two daughters to become involved in the trust. I presume that means that her two daughters will become directors of the trustee company. If that does not occur there is a relevant provision in the trust deed (which is annexed to the affidavit of Ms Latham filed 11 June 2013 and referred to during the trial). I note the schedule to the trust deed provides that Mr Dillon, Mr M, Mr S, Ms J and Ms V are to vote by simple majority to appoint a trustee in the event of the demise of Ms P. I note that Ms J is referred to by a different surname in that document.
It is apparent that for so long as Ms P controls the trustee company – the trustee company is not likely to commence legal proceedings against Mr Dillon to enforce the loan in question. The same would have to be said in relation to the loans that have been made by the trust to each of the other Dillon siblings. But Ms P makes it clear that she still expects the loans to be repaid and I note that the husband has repaid substantial amounts to the trustee company at various points in time. Further, there is no certainty of the approach that could be taken by the trustee company in relation to the loan to Mr Dillon upon the demise of Ms P. Upon the demise of Ms P the trustee company will be controlled by others. Indeed Ms P’s own evidence indicates that it is highly likely that the trustee company will be controlled by her two daughters.
I am particularly mindful of the approach adopted by Nygh J in the Af Petersens decision and the principles outlined by the Full Court in the Biltoft decision (involving as it does a situation involving an unsecured creditor). So that the rights of Dillon Pty Ltd must be balanced, “against the rights of the spouse” – in this case the applicant wife.
Whilst the loan is legally enforceable and well documented – the husband has not made a repayment on the loan for approximately five and a half years. It is apparent that the husband has not seen it as a pressing need to repay the loan. I do note that he had, in the past, made some quite some substantial repayments. But, as noted, over the course of the last approximately five and a half years he has not prioritised the repayment of the loan to the trust in any way. Further, I have come to the conclusion that Ms P will not institute proceedings against the husband in respect of the loan. Further, upon the demise of Ms P it is highly likely that one or more of the husband’s siblings (probably his two sisters) will control the trust. Mr Dillon and each of his siblings has been the beneficiary of loans from the trust. Some have received loans in greater amounts than others. On balance, I think it is unlikely that the trust will pursue the loans against the siblings. One or more of the siblings will control the trust and each have benefited (in varying degrees) from the loans that have been made.
Further, the pool would be diminished to a significant extent if the loan is taken into account in its full amount. Even if the loan is discounted – this will still have a significant impact upon the pool because of the relatively small size of the remaining pool. In balancing all of these various considerations in the circumstances of this particular case I have come to the conclusion that the loan should not be brought into account in this pool of property. The loan will, however, be seen as a significant contribution made by the husband to the family.
Evidence was also led in relation to distributions made to various minors by the Dillon Trust. The individuals concerned were C, B, Mr J, Mr Z, Ms A, Mr F, A and B. Exhibits 31, 32, 33 and 34 relate to this issue. Cheques were drawn from the Dillon Trust cheque account. The husband was a signatory to the cheque account in accordance with the authorisation granted to him by Ms P. This was done for the sake of convenience as explained by Ms P in that regard. I accept her evidence. Exhibits 31 and 33 are very similar. They represent photocopies of cheque butt numbers 361 and 362 from the Dillon Trust cheque book. Each cheque is dated 22 June 2010. For instance each of the relevant cheque butts relate to distributions for the financial years ending 2005 and 2007.
It was submitted to the Court by Mr Senior, solicitor on behalf of the applicant wife, that the husband made those cheques out to cash and misappropriated the funds. The allegation appears to be that eight cheques were made out to cash and each cheque was in the amount of $2,000. In essence, it was alleged that the husband had stolen the money – a total of $16,000 from the trust. Even though the allegation, as put, related to eight cheques – only two cheques are in evidence. Obviously, whether or not the allegation was that the husband had stolen $16,000 from the trust or whether the allegation was that he had stolen $4,000 – it is a very serious allegation. I note the provisions of s.140 of the Evidence Act 1995 (Cth). That section states:
“140. Civil proceedings: standard of proof
(1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.
(2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account:
(a) the nature of the cause of action or defence; and
(b) the nature of the subject-matter of the proceeding; and
(c) the gravity of the matters alleged.”
As noted, the gravity of the matters alleged by Mr Senior are extremely serious. Ms P has placed a significant amount of trust in her son Mr Dillon. For many years he has been a signatory to the Dillon Trust’s cheque account. He has conducted much business on behalf of the trust at the request of his mother. I note what Dixon J had to say in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362 where His Honour stated:
“When the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality. No doubt an opinion that a state of facts exists may be held according to indefinite gradations of certainty; and this has led to attempts to define exactly the certainty required by the law for various purposes. Fortunately, however, at common law no third standard of persuasion was definitely developed. Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal.”
I note what Murphy J (of the Family Court of Australia) recently had to say in a decision entitled Thornton & Thornton [2015] FamCA 92 at paragraph 11 concerning s.140 of the Evidence Act 1995 (Cth). At paragraph 11 His Honour stated:
“11. Section 140 of the Evidence Act 1995 (Cth) recognises that “the strength of the evidence necessary to establish a fact in issue on the balance of probabilities will vary according to the nature of what is sought to be proved”. The gravity of findings bear upon the decision as to whether the evidence as a whole persuades me to the requisite standard that they should be made. Grave findings should not be made by reference to “inexact proofs, indefinite testimony or indirect inferences”. Nor, as Dixon J observed “... circumstantial evidence cannot satisfy a sound judgment of a state of facts if it is susceptible of some other not improbable explanation.”
The allegation made by Mr Senior was not confined to the $4,000 distributed by the trust to A and B. Both of those individuals gave evidence on 17 March 2015. They both confirmed that they did not receive any such sums of money. That is not surprising. I will explain my finding in that regard shortly. But, as noted, Mr Senior essentially alleged that Mr Dillon had stolen $16,000 from the trust. Each of the distributions referred to in the cheque butts which are exhibits 31 and 33 are included with all of the other distributions of the six other people referred to by Mr Senior namely C, B, Mr J, Mr Z, Ms A, Mr F, A and B. In exhibit 30 I note in particular the financial statements for the year ended 30 June 2008 in respect of the Dillon Family Trust. Under the heading, Current Liabilities there is a list in respect of “unpaid entitlements”. Each of the children referred to has an amount of $2,000 ascribed against their name in respect of the financial years ended 2007 and 2008. In the previous year’s accounts it was noted that each of those children had received $2,000 as a “beneficiary loan”. In any event the point is (for present purposes) that each of the amounts which Mr Senior alleges have been stolen by Mr Dillon (totalling $16,000) are clearly referred to in exhibit 30. The financial statements were prepared by Mr A. The financial statements were prepared on behalf of the trust. The trustee company is controlled by Ms P. Ms P, at all times, retained access to all of these documents. She clearly would have been able to see that amounts had been forwarded by the trust to the eight children referred to. Those children are her grandchildren or her step-grandchildren. Clearly, the trust appears to have lent money either to the eight children referred to – or for their benefit.
Further, Mr Dillon gave evidence that, for example, he had paid for the orthodontic work for B. That orthodontic work and other health costs totalled $3,480. I note exhibit 37 in that regard. In addition, I note exhibit 10 which is the Dillon Family Budget as at March 2010. The monthly costs in respect of the family totalled $9,614. The two Latham children (as they then were, A and B) were living in the family home at Property O. Mr Dillon gave evidence, which I accept, that it was costing approximately $10,000 per month for that family to function. That evidence is supported by exhibit 10. The point being that the distributions (whether they be by way of loans or gifts) from the Dillon Family Trust to A and B were, I infer, used by Mr Dillon to pay for various necessities of life on behalf of B and A. There is evidence (to which I have referred) which leads me to conclude that there are highly likely to be innocent explanations in relation to the money in question. It is not unusual to see a situation arise where the books of account for a family trust indicate a distribution to a minor – and the funds in question are in fact utilised by the parent of the minor (or, as in this case, a step-parent) for the benefit of the minor. I have come to the conclusion that it is highly likely that this has occurred here. I had the opportunity to listen to and observe Mr Dillon in the witness box across two days of the hearing. I came to the conclusion that he was a credible witness. His particular method of drawing down on the equity in his own properties (and drawing down on the capital provided to the relationship by Ms Latham) in order to fund the family’s living expenses and lifestyle perhaps indicates a lack of prudence in money management. But that does not mean that he is dishonest. It could not be said that anything was hidden by Mr Dillon. It is all disclosed in the financial statements of the trust. To the extent that Mr Dillon drew upon capital that had been provided by Ms Latham to the relationship (in order to fund the family’s living expenses), I note that Ms Latham acquiesced in this approach to funding the family’s lifestyle by completely handing over all financial matters to her husband, Mr Dillon.
My findings in relation to this issue are supported by further evidence – this time contained in the affidavit of Ms P filed 30 January 2015 (whose evidence I accept). I note in paragraph 36 of that affidavit Ms P states:
“36. My son Mr Dillon has dreadful health issues which have arisen due to years of hard manual work. At times over the last decade or so, when his health issues became so bad that they interfered with his ability to work and earn money, I made numerous loans to him for sums ranging from a few hundred dollars to $25,000. I know that Mr Dillon needed and used these monies to help support Ms Latham and her two children and to run a household and to provide for Ms Latham all of the things that she demanded including a large, luxurious home and expensive luxury car for her to drive.
…
38. When I would make these loans, I would ask Mr Dillon to make the transfer on the computer as this was easier for me. Mr Dillon has always told me when he had done that. He tells me that he sometimes transferred the money into Ms Latham’s account rather than his own for no reason other than that was from where their mortgage repayment was being dawn.”
A perusal of the evidence of Ms P (contained in her affidavit filed 30 January 2015) – in particular paragraphs 36 and 38 should have been enough for prudence to dictate that there was likely to be an innocent explanation in relation to the matters in question. I accept the evidence of Mr Dillon and Ms P. I find that there was no theft or misappropriation as alleged on behalf of the wife.
I have come to the conclusion that superannuation should be included in the same pool as non-superannuation property.
The husband has sought to have council rates for his property situated at Property F included. That property is registered in his own name. He has not reduced the mortgage on that property. The property is worth $560,000 and the mortgage is more than $520,000. There is no reasonable explanation from the husband as to why he has not paid the council rates. Whilst he might not be able to do physical work there is no reasonable explanation as to why he hasn’t sought or obtained other forms of employment. He does possess skill in relation to (occupation omitted). He does hold a qualification as a (occupation omitted). There doesn’t appear to be any clear evidence from the husband as to precisely which periods of time are included in the “council rates”. Noting that there is no clear evidence as to what period of time the rates notices relate to – I infer that they relate to the period of time since final separation. In those circumstances – and also noting that there is only a relatively minor pool for distribution, I have come to the conclusion that the sum in question should not be brought to account in the property pool. It would not be just and equitable.
I do not accept the husband’s contention that the wife fraudulently accessed his personal account and stole money. I am not persuaded that there is sufficient evidence to make such a finding. In that regard I also note, once again, the provisions of s.140 of the Evidence Act 1995.
I note that both the husband and the wife have included in the property pool credit card debts in similar amounts. The wife’s amount is $9,500 and the husband’s amount is $11,000. It seems to me that there is some equity then in relation to the credit card debts of both parties.
Further, I do not consider that it is equitable or appropriate for the husband’s apparent tax debt in the sum of approximately $4,500 to be bought to account in the property pool as a matrimonial debt. There is no reasonable explanation from the husband as to why he has not paid his own tax.
I note that the wife has worked continually for many years. Whilst she did work part time during the marriage she now works full time as a (occupation omitted). It is apparent that the husband, for many years, has not worked. I do acknowledge that he has certain health issues which prevent him from pursuing his former occupation as a (occupation omitted). But he certainly does have other skills, as noted earlier. He has not really exercised his earning capacity to the full extent that he could in the years following separation.
The various other items in the property pool are not in contention. I therefore find the property pool as follows:
ASSET PROPERTY OWNERSHIP VALUE
$Property F
Husband
560,000
Bank Accounts
Wife
Bank Accounts
Husband
351
Motor Vehicle
Wife
4,800
Motor Vehicle
Husband
1,250
Camper Trailer
800
Monies held in Reaburn solicitors trust account being the net proceeds of sale of the property situated at Property O,
109,961
Long Service Leave
Wife
2,500
Superannuation
Husband
1,618
Superannuation
Wife
72,000
Total Assets
753,280
LIABILITIES PROPERTY OWNERSHIP VALUE
$Mortgage
Husband
527,304
Credit Cards
Husband
11,000
Credit Cards
Wife
9,500
Total Liabilities
547,804
NET POOL
205,476
Contributions
I note that the wife’s superannuation has increased quite significantly since final separation. I note that the husband has a very small amount of superannuation. I note that the wife has not included any amount in a current bank account.
When the parties met the wife was the registered owner of a property situated at Property S, Queensland. The wife had paid out her former husband in about 2003 after their separation and divorce. The wife maintains that the property was valued at approximately $300,000 when it was refinanced in December 2003 and there was a mortgage on the property worth $150,000.
When the parties commenced cohabitation the husband moved into that property to live with the wife. As noted earlier, the wife’s two children, A (born (omitted) 1993) and B (born (omitted) 1995) lived in that residence. The husband’s daughter, C, also lived in that house approximately fifty percent of the time.
At that time the husband also owned a property situated at Property F. This was a duplex style property and it was apparently rented to tenants at that time.
During the time that the parties lived together at Property S the husband supplied materials and labour and performed renovations on the property situated at Property S.
I accept that the husband organised and paid for landscaping and concrete works. In addition he organised and coordinated the project at Property S.
I also accept that the husband supplied timber floating flooring and underlay for the premises. It seems that the applicant wife and the respondent husband installed the flooring together. I also note and accept the evidence of the husband that he paid for the installation of an air conditioning unit.
The husband accepts that the wife had a net position of approximately $180,000 when the relationship commenced. The husband also accepts that the wife paid $180,000 – from the sale of Property S – into the husband’s line of credit with the (omitted) Bank.
The husband’s evidence is that he had net assets of approximately $840,000 at the commencement of the relationship. The husband owned two properties in his own name (situated at (omitted) and (omitted) respectively). In addition, the husband had invested in other real estate through a company which he controlled ((omitted) Pty Ltd). All of the properties in which the husband had invested were subject to registered mortgages. The husband owned various other motor vehicles and chattels etc. During the course of the trial there was no real attack upon that evidence of the husband. It was put to the husband that he had hidden money during the course of the relationship. There was no cogent evidence to support such a line of questioning by Mr Senior. There was mere suspicion. For instance, the husband could not recall what he had done with a particular cheque in the amount of $180,000. That is to say he could not recall into which account the money had been banked. The question related to an incident that had occurred approximately five/ten years prior to the date of the hearing. It is not surprising that the husband was not aware of precisely what he had done with the money in question. I have come to that conclusion because money was flowing into this family and out of it at a very fast rate. They continually appeared to draw down on equity and eroded their own net worth through expenditure on raising a family over a period of seven years.
During the course of the marriage the husband earned significantly more income. This is evidenced by the summary contained in annexure “D4” to the husband’s trial affidavit. The taxable incomes for the parties during the marriage as evidenced in that table are as follows:
Year Ending
Applicant Wife
Respondent Husband
2005
$ 17,383
$108,718
2006
$ 11,925
$ 80,766
2007
$ 14,347
$ 48,875
2008
$ 14,558
$ 58,290
2009
$ 15,921
$ 40,493
2010
$ 22,004
$ 45,845
In mid-2004 the parties jointly purchased a property at Property O. The purchase price for that property was $620,500. The property was subject to a mortgage.
The wife concedes that during the course of the relationship, she did not have any idea as to how much it costs to run the family. She left it entirely to the husband. The income that she earned was contributed to the family.
The husband also contributed his income (which was mainly income protection payments) to the family.
The husband gave evidence that it cost approximately $10,000 per month to run the family – including mortgage repayments, groceries, costs for children and other costs for the family including entertainment costs. This evidence was not challenged and I accept the evidence.
Indeed I note exhibit 10 states with some precision that it was costing a total sum of $9,810 per month to run the family.
This family was living well beyond its means. It was spending approximately $120,000 per year. The combined income of the husband and the wife (as evidenced in annexure “D4” to the husband’s trial affidavit) in most years, comes nowhere close to $120,000 (notably 2005 is an exception in that regard).
The husband was, very often in receipt of income protection payments because of arthritis issues.
The parties continually relied upon “lines of credit” and mortgage redraw facilities (or similar facilities). It seems, on the evidence that the parties essentially, seem to have worked their way through the equity that they began the relationship with. As noted earlier, it has to be said that the wife acquiesced in this approach. The wife completely handed over all responsibility for the finances of the family to the husband.
The parties also embarked on a number of failed business ventures including a business known as “(omitted)”. The husband and the wife invested $44,000 into a “(omitted)” business which was apparently based in (country omitted). This investment was a complete write off.
The husband also explained that because of the global financial crisis the parties suffered a drop in value in respect of real estate holdings. For instance, at the commencement of the relationship the husband has included the estimated value of his properties at Property F at $650,000. The current value of that property is $540,000. Further, the husband explained that the parties had expected to fetch more than $900,000 for the property at Property O but only achieved a result of approximately $300,000 short of that mark.
I also note and accept the evidence of the wife (from paragraph 49 of her trial affidavit filed 2 February 2015) that the husband spent substantial amounts of money on (omitted) products and (omitted) investments during 2005, 2006 and 2007. No details have been provided in relation to those investments. I infer from the husband’s testimony that those investments were not successful.
In late 2008 the husband also invested approximately $15,000 in a business venture called, “(omitted)”. Apparently this was a (business omitted). The investment was another failure.
In 2009 the husband spent approximately $8,000 during a three and half week trip to (country omitted) in an attempt to research a possible (omitted) business. The business did not get off the ground.
Both the husband and the wife (respectively) appeared to have paid for one overseas holiday for the family to (country omitted).
During the husband’s testimony I asked him about the level of debt. In a candid reply, the husband commented that, “he did not like to keep too much equity in any one property”.
I also note that the $120,000 advanced to Mr Dillon by way of a loan from the Dillon Family Trust is of course a contribution on his behalf towards the pool.
In relation to non-financial contributions – I note that in the wife’s trial affidavit (filed 2 February 2015) – there is no evidence whatsoever in relation to home-making contributions. The husband, on the other hand, has included evidence of such contributions. I note the following evidence from the husband’s trial affidavit:
“55. Apart from meeting the material costs of the projects listed above, the Respondent husband also expended much time and effort to undertake and complete the above listed, and other, works projects.
56. The property at Property M was located on a one acre block with expansive gardens and lawns. It also had a 45,000 litre salt water swimming pool.
57. Apart from very occasional assistance from the Applicant or her children, all lawn mowing, gardening and garden maintenance, household maintenance and swimming pool maintenance and care plus garbage duties (including weekly bins as well as regular trips to the dump with garden and general waste) were carried out by the Respondent.
58. The Respondent, throughout the relationship, lent regular assistance in regard to grocery shopping, cooking, laundry and housekeeping as well as assisting all children with homework projects etc.
59. The Respondent actively encouraged, assisted (financial and moral support) and attended all children’s sporting pursuits such as Rugby League, touch football and netball.
60. The Respondent understood the importance of family holidays and as such made sure that the family unit engaged in at least one mid-year family holiday per year and enjoyed a family Christmas holiday, usually a visit to a caravan park facility in places such as (omitted) or (omitted), NSW. The average annual cost of these family holidays was $5,000.
…
70. The Applicant, along with the Respondent, carried out many of the household duties for the family including, but not limited to, household cleaning, laundry, cooking and household shopping as well as occasionally helping out in the yard.
71. The Applicant actively encouraged, assisted and attended all children’s sporting pursuits such as Rugby League, touch football and netball.”
I infer from the husband’s own evidence in paragraph 58 that he “lent regular assistance” in relation home-making duties. I therefore conclude from the evidence and from the inferences drawn that it was indeed the applicant wife who performed the lions’ share of home-making duties.
It is the case that the husband made the greater financial contribution to this relationship. But I do note that the wife also made quite significant financial contributions. I also note that the wife worked two and half days per week as a (occupation omitted) throughout the relationship and that the wife provided most of the homemaking duties. Balancing all of those matters together I have come to the conclusion that the contributions based entitlements of the parties are equal.
Section 75(2) factors
The husband has access to a financial resource – being a beneficiary of the Dillon Family Trust. The evidence of Ms P is that she set the trust up to assist her children. All of her children have taken advantage of this by borrowing from the trust. For many years the amount of the loan accounts for each of the beneficiaries (the Dillon siblings) has remained steady. It seems they are not charged interest from one year to the next. On the available evidence there is every likelihood that the husband may be able to seek further loans from the trust.
I note from the evidence that both parties have some health issues.
I note that the wife is currently working and earning $37,000 per annum a full time (omitted) job.
The husband does have expertise in relation to (occupation omitted). But because of his history of arthritis and his history of having to rely upon income protection it is unclear what his work future will be. He does receive a sickness allowance from Centrelink. He says that he is unable to work in his trade.
Because of the husband’s access to the financial resource represented by the trust I consider there should be an uplift under s.75(2) in favour of the wife of 15%. I am, of course, aware of the decision of the Full Court in Clauson & Clauson (1995) FLC 92-595. I am aware the Court must take into account the “real impact in money terms”.
Even taking the decision of Clauson (supra) into account in the circumstances of this case it is not possible to justify an uplift in favour of the wife of more than 15%. The pool in this case is quite minor and both parties have significant competing interests.
I also note that the husband must pay council rates of approximately $20,000 and he also has a tax debt. He also needs to address the question of the loan from the Dillon Family Trust. They are amounts the husband will have to account for independently of the property pool.
I am particularly mindful of the fact that the wife had $180,000 in equity in her former home – and I am equally mindful of the fact that the parties in this case had the benefit of $120,000 contributed to the family by way of a loan for the family’s benefit from the Dillon Family Trust. I am also mindful of the fact that the husband must attempt to renegotiate the terms of that loan with the Dillon Family Trust.
I know that the husband also had equity in other properties but the husband seems to have operated for some considerable time with significant amounts of debt. That was not the case with the wife. The husband does appear to have expertise in relation to property investment and property advising and has a qualification in relation to (omitted). The wife already has $72,000 in superannuation but should also be entitled to an amount of the available cash resources. That is why I have concluded that the uplift factor should be 15% under s.75(2) in the circumstances of this case.
Justice and Equity
In this case there was extensive and exhaustive disclosure. The wife has, essentially, run an argument that the husband has siphoned off money. Initially it was suggested or implied that the husband was hiding assets inside the Dillon Family Trust. This is clearly not true. The trust was established before the parties’ commenced cohabitation. Each of the Dillon siblings has been lent money by the trust.
This is not a case that comes within the principles enunciated in the High Court of Australia in Kennon v Spry [2008] HCA 56. I note what French CJ stated in Kennon v Spry (supra):
“64. The word “property” in s 79 is to be read as part of the collocation “property of the parties to the marriage”. It is to be read widely and conformably with the purposes of the Family Law Act. In the case of a non-exhaustive discretionary trust with an open class of beneficiaries, there is no obligation to apply the assets or income of the trust to anyone. Their application may serve a wide range of purposes. In the present case, prior to the 1998 Instrument those purposes could have included the maintenance or enrichment of Mrs Spry.
65. Where property is held under such a trust by a party to a marriage and the property has been acquired by or through the efforts of that party or his or her spouse, whether before or during the marriage, it does not, in my opinion, necessarily lose its character as “property of the parties to the marriage” because the party has declared a trust of which he or she is trustee and can, under the terms of that trust, give the property away to other family or extended family members at his or her discretion.”
66. For so long as Dr Spry retained the legal title to the Trust fund coupled with the power to appoint the whole of the fund to his wife and her equitable right, it remained, in my opinion, property of the parties to the marriage for the purposes of the power conferred on the Family Court by s 79. The assets would have been unarguably property of the marriage absent subjection to the Trust.
…
70. The characterisation of the assets of the Trust, coupled with Dr Spry’s power to appoint them to his wife and her equitable right to due consideration, as property of the parties to the marriage is supported by particular factors. It is supported by his legal title to the assets, the origins of their greater part as property acquired during the marriage, the absence of any equitable interest in them in any other party, the absence of any obligation on his part to apply all or any of the assets to any beneficiary and the contingent character of the interest of those who might be entitled to take upon a default distribution at the distribution date.”
In the current case all of the original capital of the trust was conferred upon the trust by Ms P when she sold her family home.
Neither the husband nor the wife in these current proceedings in any way contributed financially towards the acquisition of any of the property owned by the Dillon Family Trust.
I also note that Ms J gave evidence by telephone on 17 February 2015. I accept her evidence. She confirmed that, if she wanted to borrow money from the trust – she sought the permission of her mother. She did not seek the permission of her brother, Mr Dillon.
Quite clearly, it is Ms P who controls the trust in question.
The wife (by her solicitor) did not argue at the final hearing that the assets of the trust should be brought to account as matrimonial assets as between the wife and the husband.
The main argument at the final hearing was that the loan from the trust to Mr Dillon ought not to be brought to account as a liability in the property pool.
Despite the exhaustive and extensive disclosure made by the husband and made by Dillon Pty Ltd as Trustee for the Dillon Family Trust – the wife has not been able to uncover any evidence whatsoever of the husband siphoning away assets from the property pool. The wife has not been able to uncover any evidence of the husband hiding assets inside the Dillon Family Trust or elsewhere.
The husband and the wife in this case, when they were together, spent a significant amount of money. Their expenditure far exceeded their income. The couple made poor investment decisions. Whilst it is the case that the husband appears to have made those decisions primarily by himself – the wife clearly knew that she was leaving the finances of the family to the husband. She candidly gave evidence during the trial that she was not aware of the financial situation. She did not know how the money was being spent.
I have come to the conclusion that, in the circumstances of this case a final property order whereby the wife receives 65% of the net available pool of property and the husband receives 35% of the available pool is just and equitable. The net pool of property is $205,476. Sixty-five percent of that pool totals $135,559.40. The wife currently has:
a)motor vehicle – $4,800;
b)long service leave – $2,500; and
c)superannuation – $72,000.
In addition, the wife has a credit card debt of $9,500. Her current net position is therefore $69,800. This means that the wife should receive the sum of $63,759.40.
The husband will receive 35% of the net pool. This figure totals $71,916.60. The husband currently has:
a)Property F with equity totalling – $33,000;
b)motor vehicle – $1,250;
c)camper trailer – $800;
d)bank account – $351;
e)superannuation – $1,618;
Total: $37,019.
The husband has a credit card debt of $11,000 so that his current net position is $26,019. I do, of course, note that I have not brought to account in this pool the fact that the husband does still have to pay council rates of $20,000 and a tax debt of more than $4,000. But they are matters to which the husband will have to attend. He also needs to renegotiate the loan from the trust.
If the husband is entitled to $71,916.60 and he currently has a net positon of $26,019 (within the terms of this property pool) then he is entitled to a further $45,897.60.
It seems straightforward enough for the husband and the wife to receive their further entitlements in the proportions determined from the money currently situated in the trust account of Reaburn Solicitors.
Serious allegations were made against the husband in this case. Further, serious allegations were, in effect, made against the second respondent and, by inference, Ms P. The wife has not been able to prove to the satisfaction of the Court any of those allegations. Primarily, the allegations were based upon suspicion.
The second respondent was only joined in the first place because the wife brought an application essentially alleging that the husband had hidden assets in the Dillon Family Trust and that the husband essentially controlled the trust. None of those allegations were proved and the wife abandoned (at the commencement of the trial) any case based upon an allegation that the assets of the trust should be brought to account in the matrimonial pool of property.
I will give the parties some time to agree on the wording of the final orders to reflect the reasons for judgment.
I certify that the preceding one hundred and forty (140) paragraphs are a true copy of the reasons for judgment of Judge Howard
Date: 2 April 2015
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