Liakos and Zervos & Anor
[2011] FamCA 547
•15 July 2011
FAMILY COURT OF AUSTRALIA
| LIAKOS & ZERVOS AND ANOR | [2011] FamCA 547 |
| FAMILY LAW - PROPERTY SETTLEMENT – Assets and Liabilities – Where the husband’s father seeks declarations as to advances made by him to the husband – Whether advances made by the husband’s father create a resulting trust – Whether the husband’s liability to his father should be deducted from the net fund to be divided between the parties; Contributions – Where the husband made far greater contributions than the wife; Adjustments; Just and Equitable – Superannuation |
| Family Law Act 1975 (Cth) ss 75, 78, 79, 90AA, 90AD, 90AE & 90AK, 114. Australian Constitution s 51. |
| In the Marriage of Omacini (2005) 33 Fam LR 134; |
| APPLICANT: | Ms Liakos |
| FIRST RESPONDENT: | Mr G Zervos |
| SECOND RESPONDENT: | Mr C Zervos |
| FILE NUMBER: | PAC | 5917 | Of | 2008 |
| DATE DELIVERED: | 15 July 2011 |
| PLACE DELIVERED: | Parramatta |
| JUDGMENT OF: | Loughnan J |
PLACE HEARD: Parramatta
| HEARING DATE: | 3 & 4 May 2011 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT WIFE: | Mr B. Rosic |
SOLICITOR FOR THE APPLICANT: | Grech Partners |
| COUNSEL FOR THE FIRST RESPONDENT HUSBAND: | Ms J. Veloskey | |
SOLICITOR FOR THE FIRST RESPONDENT | Astoria Lawyers | |
COUNSEL FOR THE SECOND RESPONDENT: | Mr R. Brender | |
SOLICITOR FOR THE SECOND RESPONDENT | Sam Hegney Solicitors | |
Orders
1.Within 21 days from the date of these orders the husband shall pay $220,000 to the wife.
2.Forthwith upon that payment the wife shall do all things and sign all such deeds, documents, instruments and writings as are necessary to cause any caveats registered on the title of the properties known as and situate at M Street, Suburb 1 and C Street in N, each in the State of New South Wales at her application, to be removed from the titles.
3.In the event that the husband does not comply with Order 1, the parties shall forthwith do all things and sign all such deeds, documents, instruments and writings and give all such instructions as are necessary to list the sale and sell the property known as and situate at M Street, Suburb 1 with a Real Estate Agent or Agents as agreed between the parties or, in default of agreement as to the identity of such Agent for more than seven days, with an Agent or Agents nominated by the President for the time being at the New South Wales Real Estate Institute before his nominee, whose decision shall be binding upon the parties, and at a price agreed between the parties or in default of agreement as to a selling price for more than seven days at a price nominated and determined to be a fair market price by the President for the time being of the Australian Property Institute or that person’s nominee, whose decision shall be binding upon the parties and who shall act as an Expert and not an Arbitrator, and upon completion of the said sale, after payment of the amount required to discharge any mortgage registered on the title of the subject property and after adjustment for municipal and water rates, the balance of proceeds of same sale shall be applied in the following priority:
(a)In payment of fees of due to Agents, being Real Estate Agents;
(b)In payment of any legal costs and disbursements incurred in relation to the sale;
(c)In payment of the fees due for the nomination of the valuer and valuation fees, if any;
(d)In payment to the wife of $220,000 together with interest on that sum at the prescribed rate, calculated from the date of default of Order 1 to the date of payment; and
(e)In payment of the balance to the husband.
4.In the event of default of Order 1, and in addition to their obligations under Order 3, the wife and the second respondent are forthwith upon that default, to do all things and sign all such deeds, documents, instruments and writings as are necessary to cause any caveats registered on the title of the property known as and situate at M Street, Suburb 1, at their application, to be removed from the title.
5.In the event of default of Order 1, forthwith upon receipt of a payment in accordance with Order 3(d) the wife shall to do all things and sign all such deeds, documents, instruments and writings as are necessary to cause any caveat registered on the title of the property known as and situate at C Street in N, at her application, to be removed from the title.
6.The wife shall vacate the Suburb 1 property within 14 days after the payment pursuant to Order 1 or in the event of default of that order, within 14 days or such other period as is agreed between the parties and the purchaser, after contracts exchange on the sale of the property pursuant to Order 2.
7.The husband and wife are declared to be the sole owners at law and in equity to the exclusion of the other, of all other property and chattels of whatsoever nature and kind in their respective possession at the date of the making of these Orders and that for this purpose bank accounts are deemed to be in the possession of the person whose name appears upon the bank record thereof, insurance policies are deemed to be in the possession of the beneficiary thereof, superannuation entitlements are deemed to be in the possession of the person who is named as the worker whose age or working future provides the conditions for the payment of such entitlements.
IT IS NOTED that publication of this judgment under the pseudonym Liakos & Zervos and Anor is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: PAC 5917 of 2008
| Ms Liakos |
Applicant
And
| Mr G Zervos |
First Respondent
And
| Mr C Zervos |
Second Respondent
REASONS FOR JUDGMENT
Ms Liakos and Mr G Zervos were married for more than 13 years. They cannot agree about a settlement of their property following the breakdown of their marriage. They are divorced but for the sake of convenience, I will refer to them as the wife and the husband. The husband and his father say that very substantial sums are owed by the husband to his father. The husband’s father seeks a declaration of the amount of the debt and he seeks the net proceeds of sale of two pieces of real estate because of his equitable interest in those properties or in part payment of the debt.
Applications
The wife seeks orders in terms of her Amended Application filed 30 September 2009. She seeks:
1.That the parties forthwith do all things and sign all such deeds, documents, instruments and writings and with all such instructions as a necessary to list the sale and sell the property known as and situate at [M Street, Suburb 1] and the property known as a situate at [C Street in N] with a Real Estate Agent or Agents between the parties or in default as to the identity of such Agent for more than seven days with an Agent or Agents nominated by the President for the time being at the New South Wales Real Estate Institute before his nominee, whose decision shall be binding upon the parties, and at a price agreed between the parties or in default of agreement as to a selling price for more than seven days at a price nominated and determined to be a fair market price by the President for the time being of the Australian Property Institute or that persons nominee, whose decision shall be binding upon the parties and shall act as an Expert and not an Arbitrator, and upon completion of the said sale, after payment of the amount required to discharge any mortgage registered or unregistered on the title of the subject properties and after adjustment for municipal and water rates, the balance of proceeds of same sale shall be applied in the following priority
(a)In payment of fees of due to Agents, being Real Estate Agents
(b)In payment of any legal costs and disbursements incurred in relation to the sales
(c)In payment of the fees due for the nomination of the certified practising valuer and valuation fees, if any
(d)In payment to the Wife of 75% of the balance
2.That the Applicant have transferred into her name an amount equivalent to 75% of the Respondent's interest in any superannuation policy in his name.
3.That the Respondent retain the balance of his interest in his superannuation policies.
4.That the Applicant have transferred to her an amount equivalent to 75% of the Respondent's interest in any business or businesses in which he has an interest whether as an owner or operator of that business or businesses.
5.That the Respondent retain the balance of his interests in any such business or businesses.
6.That the parties be declared holders of all right title and interest in the respective motor vehicles in their possession or control.
7.That the parties be declared to be the sole owners at law and in equity of any other items like furniture and furnishings in their possession and control
8.That unless otherwise provided in these orders and so for the purposes of enforcing any monies due under these or any subsequent order;-
(a) Each party shall be solely entitled to the exclusion of the other to all other property and chapels of whatsoever nature and kind in the possession of such parties at the date of the making of these orders and that for this purpose bank accounts are deemed to be in the possession of the person whose name appears upon the bank record thereof, insurance policies are deemed to be in the possession of the beneficiary thereof, superannuation entitlements are deemed to be in the possession of the person who is named as the worker whose age or working future provides the conditions for the payment out of such entitlements.
When asked about the orders sought by his client during the final submissions, the refreshingly candid statement by the wife’s counsel was to the effect that his current instructions were to seek orders, the terms of which had yet to be included in his Case Outline Document (a document with which I was never provided) whereby the wife would receive 75% of the net asset pool – which pool is to include the husband’s superannuation. It was submitted that the “logistics” of the resultant payment “were another matter”. Perhaps that should more accurately have been expressed “a matter for the Court”. I took counsel to concede that the order sought at paragraph 2 was meaningless and it was not pressed. I understood from the course of submissions that the order sought in paragraph 4 is also no longer pressed. In any event I do not understand the meaning of that paragraph.
The husband seeks orders in terms incorporated in the Case Summary document provided in his case as follows:
1. The 1st Respondent pay to the Applicant $80,000 as full and final settlement.
2. The Applicant vacate the [Suburb 1] property immediately upon settlement.
3. The Applicant withdraws immediately upon settlement any Caveats lodges over [Suburb 1] and [N] properties.
4. The Applicant retain ownership and possession of the [Mitsubishi] motor vehicle.
5. The Applicant to retain ownership and possession of the furniture in the home only at [M Street, Suburb 1].
6. The 1st Respondent to resume ownership of all the chattels in the garage.
In his Response filed 9 November 2009 the husband’s father sought the following orders:
1. That pursuant to sections 90AE and 79 of the Family Law Act 1975, the Applicant and the Respondent do all thing necessary to pay the Second Respondent within 2 months as a first priority from the date of Final Property orders, from available matrimonial property, the amount of $587,000, such an amount reflecting:
a.A payment from the Second Respondent to the First Respondent in 1986 $34,000.00 to purchase [M Street, Suburb 1] (Lot […]/ DP […]).
b.A payment from the Second Respondent to the First Respondent in 1988 of $70,000 used to build a residential home on the block of land held at [M Street, Suburb 1] (Lot […]/ DP […]).
c.A payment from the Second Respondent to the First Respondent in 1987 — of $21,000 used to purchase a property located at [C Street in N], New South Wales also known as Lot […]/ DP […].
d.A payment from the Second Respondent to the First Respondent in 2003 or 2004, of approximately $54,000, used to pay out an ANZ loan over [transport] business.
e.A payment from the Second Respondent to the First Respondent in 1996 - of $20,000, relied upon the First Respondent to purchase machinery for the business, "[Business 1]".
f.The consideration of $120,000 representing the sale of business "[Business 1] from the Second Respondent to the First Respondent in October, 2009.
2. In the alternative to paragraph 1 above, that the Court invoke its accrued jurisdiction and thereafter:
2.1 Pursuant to the declarations of Respondent Trust involving the First and Second Respondent, and or
2.2 The enforcement of contracts of loan agreements Respondent Trust involving the First and Second Respondent, the Applicant and the Respondent do all thing necessary to pay the Second Respondent within 2 months as a first priority from the date of Final Property orders, from available matrimonial property, the amount of $587,000, such an amount reflecting:
a.A payment from the Second Respondent to the First Respondent in 1986 $34,000.00 to purchase [M Street, Suburb 1] (Lot […]/ DP […]).
b.A payment from the Second Respondent to the First Respondent in 1988 of $70,000 used to build a residential home on the block of land held at [M Street, Suburb 1] (Lot […]/ DP […]).
c.A payment from the Second Respondent to the First Respondent in 1987 — of $21,000 used to purchase a property located at [C Street in N], New South Wales also known as Lot […]/ DP […].
d.A payment from the Second Respondent to the First Respondent in 2003 or 2004, of approximately $54,000, used to pay out an ANZ loan over [transport] business.
e.A payment from the Second Respondent to the First Respondent in 1996 - of $20,000, relied upon the First Respondent to purchase machinery for the business, "[Business 1]".
f.The consideration of $120,000 representing the sale of business "[Business 1] from the Second Respondent to the First Respondent in October, 2009.
3. Costs
However, by orders sought in a pleading provided by his learned counsel on the second day of the trial, the husband’s father seeks:
1.First, a declaration as to the current balances of the loans made by him
2.Second a declaration as to the equitable interests held by him in the [Suburb 1] and [N] properties
3.Third, orders that the [Suburb 1] and [N] properties be sold and he be repaid the outstanding balances of the loans from the sale proceeds thereof, such payment to be made prior to any adjustment of the interests of the First Respondent in the properties
4.Paragraph 4 of the Applicant’s Amended Application be dismissed
Casualties of the truncation of the hearing have included clarity as to the orders sought by the parties and a lack of attention by way of evidence or submissions to other apparent issues. The orders sought by the husband’s father in the Points of Claim are different in outcome and effect to those sought in his Response. Doing the best I can, I take it that the second respondent seeks a declaration of debt of not only of $587,000 as is specified in his Response but of that amount plus the alleged interest on the various advances made over time, which he calculates at something in excess of $1.5M. That makes sense of the aide memoir provided to me by his counsel which tabulates the advances, compound interest at 10% and, in the alternative, simple interest. However, as to payment out of the property of the marriage, he seeks only the equity in the Suburb 1 and N properties. I take it then that the orders sought in the Points of Claim represent the claim of the second respondent.
Documents read
The wife relied on the following documents:
Document
Sworn
Filed
1
Amended Initiating Application
30 September 2009
2.
Affidavit of Wife
30 July 2009
4 June 2009
3.
Affidavit of Wife
2 May 2011
3 May 2011
4.
Financial Statement
30 September 2009
30 September 2009
5.
Financial Statement
3 May 2011
3 May 2011
6.
Financial questionnaire
11 February 2009
7.
Financial questionnaire
2 May 2011
The husband relied on the following documents:
Document
Sworn
Filed
1
Response
18 May 2009
2.
Affidavit of Husband
6 November 2009
November 2009
2.
Affidavit of Husband
1 May 2011
2 May 2011
3.
Financial Statement
6 November 2009
9 November 2009
3.
Financial Statement
2 May 2011
3 May 2011
10.The second respondent relied on the following documents:
Document
Sworn
Filed
1
Response
9 November 2009
2.
Affidavit of second respondent
6 October 2010
8 October 2010
3.
Points of Claim
3 May 2011
11.The joint expert evidence is:
1.
Valuation of [Suburb 1]
2 May 2011
2.
Valuation of [N]
20 April 2011
The Hearing
12.Notwithstanding many interlocutory events before a Registrar, the case was not ready for hearing. The parties did not comply with most of the directions made for the preparation of the case. For example, several affidavits were filed out of time, there was no agreed balance sheet and the parties did not join issue on objections. Notwithstanding those problems no application was made to list the matter prior to the hearing to address compliance with those directions. As a consequence the trial could not commence at 10:00 am on the first day of the hearing. Further, counsel for the wife and husband initially said that the hearing could not be contained within the time allocated. Nevertheless, counsel for the wife and the second respondent, in particular, were keen for the hearing to at least, start. The pros and cons of starting with the risk of the matter going over part heard, against the trial being abandoned, were canvassed. Sadly, but perhaps correctly, learned counsel for the wife suggested that the matter might not be in any greater degree of readiness on a subsequent occasion. Ultimately, I stood the matter in the list and asked that the advocates prepare a joint trial plan and that they identify the issues to be determined. A joint trial plan was submitted to me. It apportioned the available time between the parties until 4:15 pm on the second day. Formal objections were not taken, save for several specific objections taken on behalf of the First and Second Respondents. I ruled on those and on being asked on behalf of the applicant to make my own assessment of the weight the evidence should have, asked the parties’ counsel to address on any important issue of admissibility about the written evidence, during the oral trial or submissions. The oral evidenced commenced when the wife was sworn in just before lunch. The trial plan was substantially adhered to. At about 4:15pm on 4 May 2011 submissions concluded and judgment was reserved. No application was made to extend the time allocated for any part of the trial. I note however that many issues were not addressed in any meaningful way in cross-examination or submissions.
Disputed facts
13.Learned counsel for the parties provided the following (somewhat cryptic) list of issues to be determined in the matter:
1.Duration of marriage
a) date of separation
2.Financial contribution
3.Applicant (’s) contribution to
a)Business
b)Domestic
4.Single mothers pension
5.RTA Transfer [Mitsubishi]
6.Transfer of liability of [Business 2] (in) 2010
$120,000 - payback
7.Custody issues
Short history
14.The wife was born in 1971 and she is therefore 40 years of age. The husband was born in 1969 and he is therefore 42 years of age. They started their relationship in 1991 and married in 1996. They separated on several occasions. They last lived at the same premises on 29 January 2006. Their divorce became final on 4 September 2009.
Children
15.There is one child of the marriage:
T, who was born in March 1999 is currently 12 years of age.
Background facts
16.There are countless issues about which the evidence of parties differs and in respect of which there was no cross-examination. In the narrative that follows or later in these reasons, where possible I make findings of fact. Where that is not possible I have recorded the versions pressed on the Court.
17.In 1986, M Street, Suburb 1 was bought by the husband’s father in the husband’s name. In his first affidavit, the husband says he borrowed the purchase price of $45,000 from a bank. In his affidavit the husband’s father says:
10. On or about 1986, I purchased a vacant block of land held at [M Street, Suburb 1] (Lot […]/ DP […]) for approximately $34,000. I purchased this land on behalf of my son, [Mr G Zervos], under the agreement that he would repay the full $34,000 plus interest at a rate of 10% to me.
11. This loan agreement was made orally. To the best of my recollection I said words to the effect of:
“Would you like me to buy the land for you?”
To which my son replied:
“Yes.”
I replied:
“OK, I will buy it for you and you can pay me back later on with interest.”
To which he replied:
“OK, I will pay you back.”
12. I then purchased the land held at [M Street, Suburb 1] on behalf of my son with cash.
13. This loan has not yet been repaid to me by my son.
18.In his second affidavit, the husband says that he bought the Suburb 1 property by borrowing $34,000. He says that he agrees with his father’s evidence in paragraphs 10-13 of his affidavit (set out above). The husband included the following in relation to paragraph 11 of his father’s affidavit, in his own affidavit:
“11. ….
I refer to the above mentioned affidavit and in particular paragraph 11 and say that I understood “pay me back later on” to mean within ten (10) years.”
19.The husband and his father say that the loan has not been repaid. Neither of them says that there have been any repayments.
20.In 1987, vacant land at C Street in N was bought in the husband’s name. The husband’s father says that the husband borrowed the $21,000 from a Building Society and that he (the husband’s father) paid off the bank loan. The husband agrees. The husband and his father say that the loan has not been repaid. Neither of them says that there have been any repayments.
21.In 1987 the husband borrowed $70,000 from the State Bank to erect a house on the Suburb 1 property. That loan was later converted into an ANZ Bank loan and was paid out. The husband needed further funds for the construction. The husband and his father say that the husband borrowed money from his father to build a house at M Street, Suburb 1. In his first affidavit the husband said he borrowed $75,000 in 1986. His father says that he borrowed $70,000 in 1988. In his second affidavit the husband agrees with his father’s evidence. In his affidavit the husband’s father says the term was 10 years. A copy of an agreement dated 2 May 1988 is attached to the husband’s father’s affidavit. The only available copies of the agreement are indistinct photocopies but I think the document reads:
LOAN AGREEMENT
DATE: 2ND OF MAY, 1988
BORROWER: [MR G ZERVOS] OF [S STREET, SUBURB 2].
LENDER: [MR C ZERVOS] OF [S STREET, SUBURB 2].
LOAN AMOUNT: SEVENTY THOUSAND DOLLARS ($70,000).
INTEREST: TEN PERCENT PER ANNUM COMPOUNDED YEARLY.
TERM: FIFTEEN YEARS.
CONDITIONS: 1. THIS LOAN AGREEMENT SUPERSEDES ANY OTHER LOAN AGREEMENT MADE BETWEEN THE BORROWER AND THE LENDER.
2.THE LOAN IS PAYABLE IN FULL WITH INTEREST TO THE LENDER BY THE BORROWER.
3.THE LOAN IS FOR THE PURPOSE OF BUILDING A HOUSE ON THE PROPERTY AT [M STREET, SUBURB 1].
4.SHOULD THE PROPERTY IN CONDITION 3 BE SOLD PRIOR TO THE END OF THE TERM OF THE LOAN, THEN THE LOAN AMOUNT MUST BE PAID IN FULL BY THE BORROWER TO THE LENDER WITH ANY INTEREST INCURRED UNTIL SUCH A DATE
5.SHOULD THE BORROWER WANT TO REPAY THE LOAN PRIOR TO THE END OF THE TERM OF THE LOAN, THEN NO PENALTY SHALL APPLY TO HIM AND WILL PAY INTEREST ONLY ON THE TIME THE LOAN HAS BEEN GOING.
SIGNED:
SignatureSignature Signature Signature
[Mr C Zervos]
[S Street, Suburb 2]
(Lender)
[Mr G Zervos]
[S Street, Suburb 2]
(Borrower)
[Mr D]
[F Street, Suburb 1]
(Witness)
[Mr S](?)
L Street, Suburb 3
(Witness)
22.I note that the term was 15 years, not 10 years as deposed to. I note that the terms of the agreement exclude the possibility that, at that date, the husband also owed his father $34,000 for the Suburb 1 purchase or $21,000 for the N mortgage.
23.In 1988, the husband commenced employment at a tradesman.
24.The wife and husband met in 1989 and commenced a relationship in 1990.
25.In 1992, the husband purchased a transport business. He borrowed $70,000 from a bank for the purchase. From 1992 to 1993, the husband carried out the transport business, while also working as a tradesman. The wife assisted with the transport business. In particular there was a period of 6 months when the husband did not have a drivers’ licence and the wife did the driving.
26.In January 1996, the husband and wife were married. The husband’s father says he paid about $30,000 towards the wedding costs. He was not challenged on that issue. Similarly, the husband’s father probably paid $12,000 for jewellery for the wife and about $10,000 towards the honeymoon.
27.In March 1996, the husband and wife lived at a property at D Street, Suburb 1 for approximately 3 months. The husband paid the rent for this property. In around June 1996, they moved into the home at M Street, Suburb 1.
28.It is the husband’s evidence that in August 1996, he bought a construction business. It is his oral evidence that he paid $40,000. That sum is not mentioned in either of his affidavits. The husband and his father say that the husband borrowed $20,000 from his father to purchase machinery for the business. They say that the agreement was that the loan would be repaid over 10 years with an annual interest rate of 10%. The husband and his father say that the loan has not been repaid. Neither of them says that there have been any repayments.
29.From around November 1996, the wife worked at a retail shop for approximately 2 years. The husband renovated the garage at the Suburb 1 property and converted it into a bedroom and bathroom. The husband says that the wife left the matrimonial home at this time and did not return until early 1998.
30.In late 1997, the wife was admitted to Hospital 1. She returned to the matrimonial home after her being discharged from hospital.
31.In December 1997, the wife’s mother came to live with the husband and wife in the matrimonial home. She left the home in February 1998.
32.In March 1998, the husband’s uncle arrived from Europe and lived with the husband and wife in the matrimonial home. The husband says that his uncle contributed to the renovations, and returned to Europe in June 1998.
33.The child of the marriage, T was born in March 1999.
34.In June 1999, an Apprehended Violence Order was taken out against the husband for the protection of the wife. The husband moved out of the matrimonial home, but says that he continued to pay utility costs.
35.The transport business failed in 1999 with the husband still owing money to the bank.
36.The husband contends that he and the wife finally separated on 3 November 1999. The wife says that she and the husband lived together for periods thereafter. In any event they lived under the same roof for periods thereafter.
37.On 22 November 1999, the husband’s father lodged a caveat over the property at M Street, Suburb 1. Around this time, the husband sought and obtained an Apprehended Violence Order against the wife.
38.In late 1999, the husband says that T lived with him and his parents, while the wife continued to live at M Street, Suburb 1. The wife says that T was taken by the husband. I take it that T lived with the husband for up to one year. The husband says that the wife stopped attending family events with him at this time.
39.In late 2000, the wife was admitted into Hospital 2 suffering mental health issues. T continued to live with the husband. The wife continued to live at M Street, Suburb 1. The husband says that the wife did not pay rent after separation. I take it that he means that she did not pay him for the right to live in the property. The wife says that the husband insisted that she obtain rental assistance from Centrelink. She says that she received money from Centrelink and that she paid it to the husband.
40.In January 2001, the husband returned to the matrimonial home at the request of the wife. After one week, he moved out of the main bedroom and into the renovated garage.
41.The husband says that he continued to pay for living expenses, including groceries for the wife throughout 2001. The husband says that intimate relations between him and the wife continued intermittently.
42.In 2002, the husband’s father purchased the construction company, Business 1, from the husband for $10,000. The husband then became an employee of his father. The husband says that the machinery was worn out although the $60,000 lease on a construction machine, purchased in 1999, had been paid out.
43.The husband’s father says that he changed the name of the business to Business 3.
44.Throughout 2002 and 2003, the husband says that the wife progressively carried out fewer domestic duties for him.
45.In late 2003, the husband moved out of the matrimonial home.
46.The husband and his father say that in 2003 the husband’s father advanced $54,000 to pay out the bank for the transport business debt. The husband and his father say that that advance was a loan and has not been repaid. Neither of them says that there have been any repayments.
47.The husband’s father says that from early 2004, Business 3 started trading as Business 2.
48.In November 2004, the wife purchased a Mitsubishi motor vehicle for $42,000 or $44,000. In his affidavits the husband variously says he contributed about half or $24,000 toward the purchase price. He says that he paid all the running costs of the car. The wife says that she borrowed $21,000 from her mother for the purchase and that her mother has not been repaid. However, there is no mention of such a debt in the wife’s Financial Statement.
49.The husband says that the wife moved out of the Suburb 1 home in November 2004 for 4 months.
50.The husband says that in late 2004 he refurbished the house at M Street, Suburb 1. This included changing the blinds, installing air conditioning, changing the stove and hot water system to gas and purchasing a new television and stereo, at a total cost of approximately $60,000. At this time the husband and wife again lived separately under the same roof.
51.The husband says that he and the wife continued to live at the same address but did not socialise or entertain together. He says that the wife performed fewer domestic duties.
52.On 26 January 2006, the husband left the matrimonial home. He has lived with his parents since that time. The husband says the wife continues to reside in the matrimonial home without his permission. The husband ceased paying the living expenses of the wife at this time.
53.In 2007, the husband stopped paying the utilities for the matrimonial home.
54.In 2007, the husband and his father executed a deed in the following terms:
DEED OF AGREEMENT
THIS DEED OF AGREEMENT made this 18th day of June 2007
BETWEEN [Mr C Zervos] of [G Street, Suburb 4] […] in the State of New South Wales (“The Father”) AND
[Mr G Zervos] of
(“The Son”)
WHEREAS:
A.The son entered into Loan Agreements with the father stated in the
letter dated 9 May 2007 attached hereto.
NOW THIS DEED WITNESSES:
1.The son hereby acknowledges and affirms that he is still bound by the agreements and terms referring to in the attached letter dated 9 May 2007 to [J & Associates].
SIGNED SEALED AND DELIVERED )
By the said [Mr C Zervos] )………SIGNATURE………
in the presence of:
……SIGNATURE……
Witness
SIGNED SEALED AND DELIVERED )
by the said [Mr G Zervos] )………SIGNAURE………
in the presence of:
……SIGNATURE……
Witness
55.The copy of the deed does not attach the letter in question. The husband’s father identified a copy of a letter[1] as the letter referred to in the deed. The text of the letter, according to the copy, is:
[1] Exhibit 2.
Our Ref: …
Your Ref:
9 May 2007
Messrs. [J & Associates],
Solicitors,
P.O. Box […],
[Suburb 5] […]
Dear Sirs: WITHOUT PREJUDICE
RE: [Mr C Zervos] & [Mr G Zervos]
We act for the abovenamed and refer to your letter of 16/1/04 (copy enclosed, including your letter of 15/1/04 to [W Conveyancing]).
We confirm we act for [Mr C Zervos].
We reply to your request for particulars as follows:-
a.Approximately $220,000.00
b.Approximately $360,000.00
c.d.i. In 1986 our client lent his son, [Mr G Zervos], $34,000.00 to buy a block of land in [Suburb 1] for $34,000.00 and Mr G Zervos] agreed to repay this, together with all water rates, council rates and land tax paid by our client and interest was agreed to be paid on all outstanding amounts at 10% p.a. compounding yearly.
ii.In 1987 our client lent his hon, [Mr G Zervos], $21,000.00 to buy a block of land at [N] NSW for $21,000.00 and [Mr G Zervos] agreed to repay this together with all water rates, council rates and land tax paid by our client and interest was agreed to be paid on all outstanding amounts at 10% p.a. compounding yearly.
iii.In 1988 our client lent his son $70,000.00 for a house to be built on the block of land at [Suburb 1] and his con [Mr G Zervos] agreed to pay our client $70,000.00 plus interest at 10% per annum compounding yearly.
iv.In 1996 our client lent his son, [Mr G Zervos], $20,000.00 for machinery and this was to be repaid together with 10% per annum interest compounding yearly.
e.The only transaction evidenced in writing is c.d. iii above and we enclose a copy of same.
f.See above.
g.All transactions except (iv) above were before [Mr G Zervos] married your client in 1996.
We await your response.
Yours faithfully,
[…]
[…]
56.The copy of the letter bears handwriting, obviously added after the letter was written, which is indistinct. The writer apparently sought to convey that the paragraph at c.d. ii was incorrect and that an advance of $54,000 was omitted. The copy does not annex the document referred to in paragraph e.
57.On 14 November 2007 final parenting orders were made by the Federal Magistrates Court at Parramatta. Pursuant to those orders, T was to live with the wife and after some months of supervised time, spend periods of increasing duration with the husband leading to alternate weekends and half the school holidays.
58.On 2 July 2009, parenting contravention proceedings came before the Federal Magistrates Court at Parramatta. The contravention application was dismissed and the existing parenting orders were amended to limit the husband to day-only time for a period, followed by a return to alternate weekends about one month later. The husband was restrained in relation to the level of his alcohol consumption and accessing certain printed materials while the child is in his care.
59.On 30 July 2009, an Initiating Application was filed by the wife. That application commenced these proceedings.
60.The husband says that in late 2009 he bought Business 2 back from his father for $120,000. He says that was a fair price for the business he sold to his father in 2002 for only $10,000, as his father had subsequently paid $70,000 to refurbish construction machinery and had bought further construction machinery. The husband has not paid his father the $120,000. The husband’s father says that no repayments have been made.
61.The husband says that in June 2010 he transferred the business and the debt to his brother, Mr V Zervos for no consideration. Since then the husband has worked as a Construction Machine Operator for his brother. By his May 2011 Financial Statement, the husband asserts that he works for his father. I gather that the husband would say that statement is incorrect.
62.The wife is undertaking a service industry course at TAFE. She has no expectation of being able to secure paid employment in that field because of carpel tunnel syndrome but would like to obtain work if her hands improve.
63.On 28 April 2011, a valuation report was released for the property at N, putting the property at $125,000.
64.The wife continues to live in the Suburb 1 property with T and her uncle, Mr Y.
The evidence of the witnesses
65.The only witnesses called for cross-examination were the parties. There are some issues that fall to be determined solely by reference to the testimony of the parties. To that extent credit remains relevant:
66.The wife, was not a good witness. She was argumentative and opted to make speeches in aid of her case on several occasions, rather than answering the questions asked. It is likely that there were inconsistencies between the representations she made to Centrelink and her case before this Court as to the fact and extent of her cohabitation with the husband after 1999 and as to her payment of rent. However, the husband initiated the representations about rent (he completed the Centrelink form) and so was also complicit. The wife was not successfully challenged in cross-examination on any significant issue.
67.The husband’s credibility is damaged by the fact that he relied on two affidavits, one repudiating aspects of the other. For example:
· Paragraph 9 of the later affidavit reads:
“9.
During the year 2000 I formed [a construction] business trading as [Business 1]. I worked in the business alone. The Applicant contributed $15,000 towards the business during the year 2000.At the time I made this statement I was confused about dates and terminology and thought the “Applicant” meant my father. I refer to paragraph 16.68.One of the problems with the revised evidence is that neither the husband at paragraph 16, nor his father, mention a contribution of $15,000 from father to son at that time or at any time.
69.Paragraph 26 of the later affidavit reads:
“ 26.
In or about 1993 we lived at [D Street, Suburb 1] until we got married in 1996. Her mother paid rent at the property during the time we were not married.This is not correct. When I made this statement I was in a state of confusion and anxiety. I would occasionally sleep with the applicant at [D Street, Suburb 1].
70.In his oral evidence, the husband gave answers inconsistent with his written evidence. Thus the evidence of transferring the construction business to his brother in 2010 became evidence about his brother starting up his own business.
71.In his favour, albeit not volunteered in his affidavits, when asked, the husband readily conceded that the wife made substantial parenting contributions and some homemaker contributions.
72.For whatever reason, the husband was not a reliable witness.
73.English is not the first language of the husband’s father. Nevertheless he gave his evidence without the assistance of an interpreter. He was an assertive witness. In cross-examination he gave versions of the conversations that are said to constitute the oral loan agreements between himself and the husband. The versions were inconsistent with each other and with the written testimony of the husband and his own affidavits. For example his evidence in the first of the paragraphs 14 on the 4th page of his affidavit does not include the words he reported in cross-examination - “you pay me when you grow up”. The husband’s father gave his oral evidence confidently and subject to the fact of differences between his written and oral evidence, was not successfully challenged on any important issue. That is not to say that the legal import of transactions to which he was a party, is as he opines.
The approach in proceedings under section 79
74.The case law reveals that there is a permissible approach to the determination of an application brought pursuant to the provisions of s 79, involving four inter-related steps. First, I make findings as to the identity and value of the property, liabilities and financial resources of the husband and wife at the date of the hearing. Second, I identify and assess their contributions within the meaning of s 79(4)(a), (b) and (c) and determine the contribution based entitlements of the husband and wife expressed as a percentage of the net value of the matrimonial property. Third, I identify and assess the relevant matters referred to in s 79(4)(d), (e), (f) and (g), (the other factors) including, because of s 79(4)(e), the matters referred to in s 75(2) so far as they are relevant; and determine the adjustment (if any) that should be made to the contribution based entitlements established at step two. Fourth, I should consider the effect of those findings and determinations and identify orders that are just and equitable in all the circumstances of the case.[2]
[2] This summary of the effect of the authorities is paraphrased from the comments of the Full Court in In the Marriage of Hickey (2003) 30 Fam LR 355 at 370.
75.There is no mention of steps in s 79 but it is convenient to approach the exercise of discretion in a structured way. The Full Court has supported such an approach.[3]
[3] In the Marriage of Hickey above.
The property of the husband and wife at the date of the hearing
76.The Court is required to make a finding as to the property of the husband and wife. That involves identifying assets, liabilities and financial resources and their values.
77.There are circumstances whereby assets can be included in the list for division although they no longer exist. The same logic would apply to the exclusion from the relevant list of liabilities, debts that do exist at the date of the hearing. In the Marriage of Omacini (2005) 33 Fam LR 134 the Full Court noted:
[30] To date, three clear categories of cases have emerged where the court has determined that it is appropriate to notionally add back to the pool of assets, that is, assets that no longer exist. They are:
(a)Where the parties have expended money on legal fees. In In the Marriage of DJM and JLM (1998) 23 Fam LR 396; (1998) FLC 92-816; [1998] FamCA 97 the Full Court said at [11.6]:
[11.6] For reasons set out in Farnell, s 117 provides that each party to proceedings under the Family Law Act shall bear their own costs unless the Court otherwise orders. Failing to add back monies expended by parties on costs frequently has the effect of defeating the policy of s 117 by permitting the pool of available assets for distribution between the parties to be diminished by any monies that either of the parties have managed to spend on their costs up to the date of trial. We are of the view that the normal approach ought be to add costs already paid back into the pool. Whilst there may be cases where that approach is inappropriate, the reasons why it is not taken ought normally be spelt out.
(b)Where there has been a premature distribution of matrimonial assets. In In the Marriage of Townsend (1994) 18 Fam LR 505; (1995) FLC 92-569 Nicholson CJ as he then was with whom Fogarty and Jordan JJ agreed, said at Fam LR 509; FLC 81,654:
In my view, what occurred in this case, as I said during the course of argument was, in fact, a premature distribution of a proportion of the matrimonial assets. What the husband did was to distribute to himself an asset in which the wife had a legitimate interest. In such circumstances I consider that it would be unjust in the extreme to simply treat such conduct by the husband as a matter to which regard should be had under section 75(2). It seems to me that the husband has had the benefit of that money. Had he retained, for example, the taxi licence instead of selling it, that would have been brought into account as an item of property which would have been dealt with in the same way as the remaining items of property in this case. Accordingly, I am of the view that the correct way in which to deal with the husband’s receipt of those moneys is to bring them into the pool of assets on a notional basis and make a distribution accordingly.
(c)In the circumstances outlined by Baker J in In the Marriage of Kowaliw (1981) 7 Fam LN N13; (1981) FLC 91-092
at FLC 76,644:
As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para (a) and (b) above having economic consequences is clearly in my view relevant under s 75(2)(o) to applications for settlement of property instituted under the provisions of s 79.
78.The parties settled an agreed balance sheet and there are many items about which there is no dispute as to inclusion or the value of the asset or liability. As to the disputed issues:
The Claims of the Husband’s Father
79.This is a very important issue in the case, in the sense that if the second respondent is successful then little is left of the pool of assets to be divided between the husband and wife.
80.The husband’s father seeks:
· a declaration as to the current balances of the loans made by him
· a declaration as to the equitable interests held by him in the Suburb 1 and N properties
· orders that the Suburb 1 and N properties be sold and he be repaid the outstanding balances of the loans from the sale proceeds thereof, such payment to be made prior to any adjustment of the interests of the First Respondent in the properties; and
· that paragraph 4 of the Applicant’s Amended Application be dismissed
81.The submissions and the aide memoir table of interest, mean that the husband’s father seeks a declaration that the husband owes him about $1,512,377.09. That sum represents the principal and compound interest (calculated to the time of the trial) on the advances made in 1986, 1987, 1988, 1996 and 2003 ($1,392,377.09) together with $120,000 owed to him for the sale of the construction business. Unlike the orders sought in his Response, he does not seek a payment of the entire debt. He seeks (only) the net proceeds of sale of the Suburb 1 and N properties.
82.His Points of Claim are as follows:
Points of Claim of Second Respondent
First three loans
1. In or about 1986 the Second Respondent purchased a property at [M Street, Suburb 1] for $34,000 and caused it to be transferred from the vendor to the First Respondent.
2. At the time of the said transaction the First and Second Respondents orally agreed that the First Respondent would repay the purchase price of $34,000 to the Second Respondent, on terms that interest would be payable compounding annually at 10% per annum (“the 1986 loan”).
3. In the circumstances the [Suburb 1] property is held by the First Respondent on a resulting trust for the Second Respondent to secure the repayment of the 1986 loan.
4. In or about 1987 the Second Respondent orally agreed to and did lend to the First Respondent the sum of $21,000 for the purposes of the acquisition by the First Respondent of a property at [C Street in N], on terms that the First Respondent would repay the purchase price with interest compounding annually at 10% per annum (“the 1987 loan”).
5. In or about 1988 the Second Respondent agreed in writing to and did lend the First Respondent the sum of $70,000 for the purposes of assisting in the building of a home on the [Suburb 1] property, on terms that the loan be for 15 years and would accrue interest compounding annually at 10% per annum (“the 1988 loan”).
6. It was an implied term of the said loans, necessary to give business efficacy to them, that they would be repayable, if not before, out of the proceeds of any sale of the property in respect of which they were advanced.
7. The First Respondent agreed with the Second Respondent, by Deed dated 18 June 2007 to honour his obligations under the 1986, 1987 and 1988 loans (“the Deed”).
8. The Applicant has sought orders that the [Suburb 1] property and the [N] property be sold.
9. If, which is not admitted, the 1988 loan contained a term by which the First Respondent was no longer required to repay the 1986 and 1987 loans, the Deed superseded that term and constituted an agreement pursuant to which the First Respondent is now obliged to repay the 1986, 1987 and 1988 loans.
10. None of the loans have been repaid.
11. In the circumstances, the First Respondent is now indebted to the Second Respondent in the amounts of $34,000, $21,000 and/or $70,000 together with interest compounding annually at 10% per annum, pursuant to the Deed, which sums are payable upon any sale ordered by the Court or otherwise.
Particulars
The interest on the 1986 loan from 1.7.86 to 1.5.11 (or $84,432 if simple interest being $34,000 @10% for 24.833 years ); the interest on the 1987 loan from 1.7.87 to 1.5.11 is $ (or $50,049 if simple interest being $21,000 @10% for 23.833 years); and the interest on the 1988 loan from 2.5.88 to 2.5.11 is (or $161,000 if simple interest being $70,000 @10% for 23 years).
12. Further and alternatively, the [Suburb 1] property is held in equity by the First Respondent:
(a)subject to a resulting trust which secures the repayment of the purchase price of $34,000, or purchase price and interest;
(b)subject to an equitable charge securing repayment of the sum of $70,000, or $70,000 plus interest, on the basis that the said sum was used by the First Respondent to improve the property and it would be unconscionable for the First Respondent to retain the land and improvements or the sale price thereof, without repaying the loan which paid for the improvements.
13. Any order in favour of the Applicant that was not made subject to repayment of the 1986. 1987 and or 1988 loans or which was not subject to satisfaction of the equitable interests referred to in the preceding paragraph, would be contrary to Section 90AK of the Family Law Act.
Two more loans
14. In 1996 the Second Respondent orally agreed to and did lend the First Respondent $20,000 for the acquisition of machinery on terms that the loan would be repaid with interest compounded annually at 10% per annum (“the 1996 loan”).
15. In 2007 pursuant to the Deed the First Respondent confirmed his obligation to repay the 1996 loan.
16. The 1996 loan has not been repaid.
17. In the circumstances the First Respondent is indebted to the Second Respondent in the sum of $20,000 and/or $20,000 plus interest, which sum ought to be paid out of the proceeds of any sale of the First Respondents assets ordered by the Court.
Particulars
The interest on the 1996 loan is $ (or $ 29,666 if simple interest being $20,000 @10% for 14.833 years)
18. In or about 2003 the Second Respondent orally agreed to and did lend the First Respondent the sum of $54,000 on terms that the loan would be repaid with interest compounded annually at 10% per annum (“the 2003 loan”).
19. The 2003 loan has not been repaid.
20. In the circumstances the First Respondent is indebted to the Second Respondent in the sum of $54,000 and or $54,000 plus interest, which sum ought to be paid out of the proceeds of any sale of the First Respondents assets ordered by the Court
Particulars
Interest on the 2003 loan is $ (or $42,298 if simple interest being $54,000 @10% for 7.833).
21. Any order in favour of the Applicant that was not made subject to repayment of the 1996 or 2003 loans would be contrary to Section 90AK of the Family Law Act.
The business
22. In or about 2009 the Second Respondent by oral agreement sold the business then known as [Business 2] to the First Respondent for $120,000 and the Second Respondent advanced the whole of the purchase price by way of a vendor loan (“the vendor finance loan”).
23. The Second Respondent is an unpaid vendor and has an unpaid vendor’s lien in equity over the business sold to secure payment of the purchase price.
24. The vendor finance loan is a debt and is, by s90AD, property within the meaning of the Family Law Act.
25. Further and alternatively, the said equitable interest is also property
26. In the circumstances the Court ought not transfer any part of the business to the Applicant because to do so would breach Section 90AK of the Family Law Act.
27. Further and alternatively, if, which is not admitted, the First Respondent has transferred the business to another person that transfer cannot operate to extinguish the 2009 loan.
Remedies
28. The 1986, 1987, 1988, 1996 and 2003 Loans are debts and are, by s90AD, property within the meaning of the Family Law Act.
29. In the circumstances it is appropriate that the court makes declarations and orders pursuant to s78, 80(k) and Part VIIIAA in respect of the interests of the property of the First Respondent and orders as to sale and the proceeds thereof and repayment of loans by the First Respondent in favour of the Second Respondent
30. In the circumstances it is appropriate that the court makes an order that the Second Respondent be paid the current amount of the loans together with interest, prior to the Applicant receiving any adjustment or transfer of real property or any business, or receiving the proceeds of sale of the [Suburb 1] or [N] properties.
31. Further and alternatively the Applicant is not entitled to any orders pursuant to s79, and the Second Respondent relies upon s79(2) in that it would not be just and equitable to make any order that would have an adverse effect on him, and relies upon 79(4)(e) (including by incorporation s75(2)(ha)) in that any order in the Applicant’s favour would have an adverse effect on his ability to recover his debts
AND the Second Respondent seek orders
32. First, a declaration as to the current balances of the loans made by him
33. Second a declaration as to the equitable interests held by him in the Suburb 1 and N properties
34. Third, orders that the [Suburb 1] and [N] properties be sold and he be repaid the outstanding balances of the loans from the sale proceeds thereof, such payment to be made prior to any adjustment of the interests of the First Respondent in the properties
35. Paragraph 4 of the Applicant’s Amended Application be dismissed
83.There are a number of blanks in that document in relation to the loan totals. As I was asked to do, I have extracted information from an aide memoir handed up by learned counsel for the second respondent as to the current state of the alleged loans and have totalled the amounts as follows:
Date of the alleged advance
Alleged advance
Claimed total interest to the date of hearing
Claimed total debt to the date of hearing
1986 – [M St] purchase
$34,000
$328,783.20
$362,783.20
1987 – [N] purchase
$21,000
$183,109.58
$204,109.58
1988 – [M St] renovation
$70,000
$557,738.44
$627,738.44
1996 – machinery for [construction] business
$20,000
$63,607.40
$83,607.40
2003 – payout of [transport business] loan
$54,000
$60,138.47
$114,138.47
Total
$199,000.00
$1,193,377.09
$1,392,377.09
84.In addition, the second respondent seeks a finding, if not a judgment debt, against the husband for the unpaid purchase price associated with his transfer of the construction company to the husband in June 2009 for $120,000.
85.The husband concedes all of the alleged debt, save for the $120,000 for the construction business. After his cross-examination I am left in some doubt as to whether the husband now disputes or concedes that he owes the debt for the construction business. It was his original position that he had effectively passed responsibility for the debt to his brother, when he transferred the construction business to him. During the course of cross-examination he seemed in some doubt about that.
86.At the commencement of the hearing I was told by learned counsel for the wife that she did not dispute (because she was not in a position to challenge) the fact of three loans to the husband by his father: They were:
$34,000 for the Suburb 1 purchase;
$21,000 for the N purchase; and
$70,000 for the Suburb 1 renovations.
87.However, in each case the wife does not concede that interest is owed and it is her case that the loans were subsequently forgiven.
88.As to three other alleged advances, the wife does not concede that they were made. They are:
$54,000 for the transport business debt;
$20,000 for construction equipment; and
$120,000 being the unpaid price for the construction business.
89.Although they involve a number of s 79 issues, it is convenient to first deal with the Second Respondent’s claims here.
Discussion
90.The first thing to say is that there is no dispute between the husband and his father about 5 loans (made in 1986, 1987, 1988, 1996 and 2003) or about the terms of the loans or that they carry interest. Thus, as I understand it, the husband concedes that as at the date of the hearing he owes his father $1,392,377.09. Although it is not entirely clear to me, despite an initial challenge about the husband’s liability to his father for $120,000 for the construction business, it may be that it too has been conceded.
91.The key question is as to how the claims stand as against the interests of the wife.
92.For the reasons I have given above, I understand the claim of the husband’s father to be that contained in his Points of Claim.
93.Oral submissions were made on behalf of the second respondent. The argument is to be understood by reference to the Points of Claim, amplified by the aide memoir table which calculates interest, in the alternative, on a simple basis or a compound basis. It is submitted that the total claim is over $1M but the second respondent only seeks a payment of the net value of the two pieces of real property. The second respondent was joined to the proceedings by being named as a respondent to the wife’s Application in a Case. In the Minute of Orders sought by her, the wife seeks 75% of the balance of the proceeds of sale of the Suburb 1 and N properties. Whether he seeks orders himself or not, it is submitted that the second respondent is a person affected by the orders sought by the wife. That is because he claims to have an equitable interest in the properties and because he is a creditor of the husband. However, the second respondent himself seeks orders (now expressed in his Points of Claim document). It is submitted that the Court can make an order that binds the second respondent either in aid of a declaration under s 78 or under s 79. Section 79(2) requires a just and equitable order. By virtue of Section 79(4)(e), s 75(2)(ha) requires the Court to take into account the capacity of a creditor to recover his or her debt. Part VIIIAA includes s 90AA, which allows the Court to affect rights of a third party; s 90AD which provides that a debt owed by a party to the marriage is “property”; and s 90AE, which deals with orders a Court can make under s 79 that bind a third party. Those orders are only to be made if reasonably appropriate. Therefore the submission goes, the second respondent is a party and my orders can bind him.
94.It is submitted that the $34,000 advance is capable of founding a resulting trust for the benefit of the second respondent in the Suburb 1 property because the husband’s father paid the money for the purchase of the property in the name of the husband. It is conceded that a presumption of advancement arises in these circumstances, which would negate the resulting trust. It is submitted that the presumption of advancement is in turn rebutted by the evidence of both father and son, saying that the advance was by way of loan and by them acknowledging that fact in a 2007 deed.
95.It is conceded that the fact of the property settlement proceedings between the husband and wife is not irrelevant to the claim of the second respondent. The argument is that the second respondent thought that he had security for his debt because of the caveat placed on the title in 1999 and the wife’s claims threatened that security. It is submitted that 90AK prevents the husband and wife acquiring the equitable interest of the second respondent in the Suburb 1 property, other than on just terms.
96.The third advance was the $70,000 advanced in 1988 for the Suburb 1 renovations, which was evidenced by the 1988 deed. It is submitted that an advance made for improvements to real property gives rise to an equitable security over the land.
97.As to the $120,000 debt for the transfer of the construction business, the case of the husband’s father is that he did not give permission for the debt to be transferred with the business, to Mr V Zerbos. Therefore the debt is still owed by the husband. When asked about the utility or futility of pursuing the husband who on his father’s case owes him $1.3M, rather than Mr V Zerbos, learned counsel for the second respondent said if the second respondent recovered $525,000 (the value of the Suburb 1 and N properties) then he would not be pursuing the $120,000 (against the husband). The effect of the submission is that from these proceedings the husband’s father wants only the value of the Suburb 1 and N properties. The submission was to the effect: “My client wants his money back, because he is a pensioner, he has given a lot of his assets to his son over the years, the security is about to go and he wants his money back; I (learned counsel for the second respondent) can’t get blood out of a stone; I can’t get more than those assets; we don’t ask for judgment for more, as it would be a waste of time.”
98.It is submitted that if the Court were to find that the 1986 and 1987 advances were forgiven as a result of the 1988 agreement, so be it. In that case the husband’s father still presses for a finding about the later debts, plus interest and an order for the net proceeds of the Suburb 1 and N properties. It is submitted that there is no basis for finding that the advances do not represent loans and that if the court finds that they were loans, then the second respondent is entitled to have the loans repaid.
99.It is submitted that it was not put to the husband’s father that the later advances were fabrications and therefore, notwithstanding a submission on behalf of the wife to that effect, such a finding is not available.
Learned counsel for the second respondent invited me to imply terms into the agreements in order to give them efficacy and referred me to Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 41 ALR 367; 149 CLR 337.
Counsel referred me to 3 other cases:
Ibbott & Ibbott & Anor [2008] FMCAfam 38 and RLD & CBD & Ors [2006] FMCAfam 226 are not purported to represent authority. I gather that they are offered broadly as similar facts cases before the Federal Magistrates Court. I accept that the Court has the power to make the orders sought.
The decision of the High Court in Hewitt v Court [1983] HCA 7; (1983) 149 CLR 639 is said to support the creation of an equitable interest of the second respondent as a result of the $70,000 advanced to renovate the Suburb 1 property.
Going then to the evidence about each advance.
$34,000 advanced in 1986
As I understand the case of the husband and his father, the husband now owes his father $34,000 plus interest at 10% per annum which is said to total more than $362,000. It is their case that that debt must be repaid before the wife’s claim under section 79 can be assessed. As I understand the argument, a resulting trust was established whereby the husband holds his interest in the Suburb 1 property on trust for his father to the extent of that and other debts or another debt.
The uncontested facts seem to be that in about 1986, M Street, Suburb 1 was bought by the husband’s father in the husband’s name. The husband’s father says he paid about $34,000.
Notwithstanding the current agreement between the husband and his father and the particulars of the claim of the second respondent, the words which are said to comprise the oral agreement do not include any reference to the period within which the loan had to be repaid or as to the payment of interest, let alone as to a rate of interest..
Having said that, there is a concession on behalf of the wife that there was a loan made in 1986.
As is set out earlier in these reasons, the husband says that on reflection he later felt that the loan was for a term of 10 years. I note that there is no evidence from the second respondent to the effect that the loan was for 10 years.
Although it first came to light in his amending affidavit filed on 2 May 2011, the day before the hearing, it is the evidence of the husband that in about 1988 he had the following conversation with his father:
“I said:
‘I’m finding it a hard to move forward if I have to pay you back this loan instalments.’
He said:
‘Well, when you ‘get big’ I expect you to honour your loan. You understand that nothing is for nothing. You will pay me back with interest when you can.’ ”
There was no challenge on behalf of the husband’s father to the husband’s evidence about that conversation – no cross-examination or evidence in support of a case in response to the late filed evidence.
It is the husband’s evidence that because of that conversation he has not repaid his father for any of the advances made over the years. Importantly, that leaves open the possibility that the husband and his father contemplated that the loans would never be repaid – the husband might never “get big”.
The written agreement dated 2 May 1988 between the husband and his father expressly superseded any other loan agreements between them. Therefore, on the face of the document it superseded any 1986 agreement. It is the wife’s case that the 1986 loan has been forgiven. That is the effect of the 1988 agreement. This was put to the husband and his father and the gist of their evidence seems to be that, despite the wording of the later agreement, they did not intend it to supersede the earlier agreements.
In 1999, at about the time the husband says that he and the wife separated for the last time, the husband’s father caused a caveat to be registered on the title of the Suburb 1 property.
On 18 June 2007 the husband and his father executed a deed so as to evidence certain debts owed by the son to the father for the purpose of anticipated proceedings between husband and wife. Unfortunately, the deed incorporates terms into the various loans that are not referred to in any of the evidence about events before 2007. For example in relation to the loan for the purchase of the Suburb 1 property, the quantum of the loan is not $34,000 plus interest, as is now claimed by the husband’s father and the husband. The terms of the deed are:
In 1986 our client lent his son, [Mr G Zervos], $34,000.00 to buy a block of land in Suburb 1 for $34,000.00 and [Mr G Zervos] agreed to repay this, together with all water rates, council rates and land tax paid by our client and interest was agreed to be paid on all outstanding amounts at 10% p.a. compounding yearly.
The underlining is mine.
Given that the deed was made many years after the event it would seem strange that the underlined words would be used if no such payments had been made by the second respondent. According to the husband and his father, the deed is flawed in any event, in that the attached letter omits any reference to the advance of $54,000 made in 2003 to discharge the transport business bank loan.
Notwithstanding that the husband and his father now assert that the 1986 loan was for a term of 10 years, not only has the loan not been discharged, not one dollar has been repaid and the loan has not been enforced.
Conclusion
The uncontested fact is that there was a loan to the husband by his father of the order of $34,000 in about 1986 for the purchase of the Suburb 1 property. The oral agreement was superseded by a written agreement which had the effect of forgiving the loan. No effort has ever been made to comply with or to enforce the terms of the oral or subsequent written agreements, save at times which give rise to the concern that this claim is only pressed against the interests of the wife.
$21,000 advance in 1987
In 1987, vacant land at C Street in N was bought in the husband’s name. The husband’s father says that the husband borrowed the $21,000 from a Building Society and that he (the husband’s father) paid off the bank loan. The husband agrees. The husband and his father say that the loan has not been repaid. Neither of them says that there have been any repayments. It is the evidence of the husband’s father that at the same time as the purchase of that land he bought an adjoining block for another son, Mr X Zervos and that Mr X Zervos had subsequently repaid that loan.
Notwithstanding the current agreement between the husband and his father and the particulars of the claim of the husband’s father, the words which are said to comprise the oral agreement[4] included no reference to the period within which the loan had to be repaid or as to a rate of interest. The husband now recalls[5] that “the terms of the loan were for a period of ten (10) years calculated at 10% compound interest.” In cross-examination the husband’s father said that he used words to the effect “you pay me when you grow up”. That does not appear in either affidavit.
[4] Paragraph 14 of the affidavit of the second respondent filed 8 October 2010.
[5] Paragraph 15 on page 10 of his amending affidavit filed 2 May 2011.
Having said that, there is a concession on behalf of the wife that there was a loan made in 1987.
The written agreement dated 2 May 1988 between the husband and his father, expressly superseded any other loan agreements between them. Therefore, on the face of the document it superseded any 1987 agreement. It is the wife’s case that the 1987 loan has been forgiven. That is the effect of the 1988 agreement. This was put to the husband and his father and the gist of their evidence seems to be that, despite the wording of the later agreement, they did not intend it to supersede the earlier agreements.
Again, on 18 June 2007 the husband and his father executed a deed so as to evidence certain debts owed by the son to the father for the purpose of anticipated proceedings between husband and wife. The deed incorporates terms into the loan that are not referred to in any of the evidence about the 1987 loan. The loan claimed by the second respondent for paying out the N mortgage is $21,000 plus interest. However, the relevant provision of the deed is:
In 1987 our client lent his son, [Mr G Zervos], $21,000.00 to buy a block of land at [N] NSW for $21,000.00 and [Mr G Zervos] agreed to repay this together with all water rates, council rates and land tax paid by our client and interest was agreed to be paid on all outstanding amounts at 10% p.a. compounding yearly..
Given that the deed was made many years after the event it would seem strange that the underlined words would be used if no such payments had been made by the second respondent. According to the husband and his father, the deed is flawed in any event, in that the attached letter omits any reference to the advance of $54,000 made in 2003 to discharge the transport business bank loan.
Notwithstanding that the husband and his father now assert that the loan was for a term of 10 years, not only has the loan not been discharged, not one dollar has been repaid and the loan has not been enforced.
Conclusion
The uncontested fact is that there was a loan to the husband by his father of the order of $21,000 in about 1987 for the purchase of the N property. The oral agreement was superseded by a written agreement which had the effect of forgiving the loan. No effort has ever been made to comply with or to enforce the terms of the oral or written agreement save at times which give rise to the concern that this claim is only pressed against the interests of the wife.
$70,000 advance in 1988
It is agreed that the husband’s father lent the husband $70,000 in 1988 for the purpose of completing the construction of a home on the Suburb 1 property. According to the agreement, the term of the loan was 15 years and the interest rate was 10% per annum, compounded yearly.
The husband and his father say that no part of this debt has been repaid.
It is the wife’s case that the loan has been forgiven.
The husband and his father have left this obligation running for 8 years past the term of the loan and have done nothing to settle the debt.
$20,000 advance in 1996
The husband and his father say that in about 1996 the husband borrowed $20,000 from his father to purchase machinery for the construction business. They say that the agreement was that the loan would be repaid over 10 years with an annual interest rate of 10%.
Notwithstanding the current agreement between the husband and his father, it is not asserted that the words which are said to comprise the oral agreement[6] included any reference to the period within which the loan had to be repaid or as to a rate of interest. The husband agrees[7] with his father’s recollections. Thus there is no evidence as to how or when a term and a rate of interest were included in the oral agreement.
[6] Paragraph 16 on page 5 of the affidavit of the second respondent filed 8 October 2010.
[7] Paragraph 16 on page 11 of his amending affidavit filed 2 May 2011.
There is no concession on behalf of the wife as to this advance occurring or in any event, being by way of loan.
The husband and his father have left this obligation running for 5 years past what they now say was the term of the loan and have done nothing to settle the debt.
$54,000 advance in 2003
In 1992, the husband purchased a transport business. He borrowed $70,000 from a bank for the purchase. The husband and his father say that in 2003 the husband’s father advanced $54,000 to pay out the bank loan. The husband and his father say that that advance was a loan and has not been repaid. Neither of them says that there have been any repayments.
Notwithstanding the current agreement between the husband and his father, it is not asserted by either of them that the words which are said to comprise the oral agreement[8] included any reference to the period within which the loan had to be repaid or as to a rate of interest. The husband now recalls[9] that the oral agreement was that “I would pay him at a rate of 10% compounded interest over ten (10) years.”
[8] Paragraph 15 on page 5 of the affidavit of the second respondent filed 8 October 2010.
[9] Paragraph 16 on page 11 of his amending affidavit filed 2 May 2011.
There is no reference to this loan at all in the letter incorporated into the 2007 deed. There is no concession on behalf of the wife as to this advance being made or in any event that it was by way of loan.
Conclusions
The wife concedes that the first three advances were made but argues that they were forgiven. She does not concede that the latter three advances were made.
The only parties to these advances (the husband and his father) agree that they were made, that they were by way of loan and that the loans are still outstanding. It is a fact agreed between the husband and his father, that the husband owes his father in excess of $1.3M as a result of various advances made over the years.
The husband and his father were not challenged about the fact of the advances. The wife is not in a position to give contrary evidence. Things were done with the advances. There is no evidence of any other likely source of funds. The wife does not say that she provided them. I find that the advances were made.
Save as to $120,000, there is no need for this Court to make a declaration the quantum of the debt. Except to the extent of that sum, there is no controversy between the parties to the asserted agreements – the husband and his father. I doubt that any proof will be required but should it be, the husband is on record in these proceedings as conceding the debts.
I must deal with the disputed $120,000 debt and make findings about the place of the loans in the proceedings under s 79, including in identifying the net pool of marital assets for division between husband and wife. There is the question of the priority the loans should have.
In Af Petersens and Af Petersens (1981) FLC 91-095, Nygh J found that there was a net liability of the parties to a company or to the husband’s father of $245,920 which was likely to leave the net assets of the parties at only about $50,000. He said:
Normally this Court will distribute amongst the parties the net value of their assets after deduction of all debts. But this is not invariably the case: the Court will not normally take account of debts incurred after the separation and on some occasions has ignored debts, although incurred during the marriage, for which it felt one of the parties should bear exclusive responsibility: Antmann and Antmann (1980) FLC ¶ 90-908 . Needless to say, a debt due does not diminish the property of the parties until it is paid or execution is levied. Nor, as has been pointed out earlier, is there anything in the decision of the High Court in Ascot Investments Pty. Ltd. v. Harper and Harper to suggest that this Court cannot make an order dividing the assets of the parties because such a division might hamper a third party in his or her chances of recovery of a debt.
That last proposition remains true today although because of subsequent amendments to the Act (ss 79(4)(e), 75(2)(ha) and s 90AK), particular attention is drawn to the interests of third party creditors.
Nygh J went on to consider the extent to which he “should discount the assets of the parties having regard to their indebtedness.” He said:
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.
Nygh J noted that the husband in that case did not treat the obligation to this father as an immediately pressing need; that there was no record of any payment of, or demand for, interest on the loan; the husband felt free to offer settlement to the wife (inconsistent with the debt); that father and son were in constant contact; that action taken by the father (to enforce the debt) showed a remarkable coincidence with the progress of the wife's application.
Nygh J said:
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.
It is worth noting that although he did not volunteer any concessions about the wife’s homemaker contributions. Although he was critical that she did not provide proper homemaker services to him (e.g. he had to go to work without lunch because she did not make it for him; and that when he returned home she had not made dinner for him), there is no explanation as to why the husband did not make his own lunch and dinner. In any event, whatever the criticisms are, at no point does the husband contend more broadly that he provided those services or undertook those roles.
The husband had paid employment for a greater period than the wife and was therefore less available than her to perform homemaker and parenting duties. T continues to live with the wife as at the date of the hearing. Therefore her parenting contribution extended long after cohabitation ceased.
I am satisfied that the wife made the overwhelming parenting and homemaker contribution.
The Husband’s Violent and Destructive Conduct
There is deal of evidence in the wife’s case about violent and destructive conduct by the husband during the periods spanning the relationship of the husband and wife. Only some of it is admissible and, taken together, it is not what would be required to attract the authorities on this issue.[21] This was not raised as an issue in the list provided to me by the advocates. There was no oral submission in aid of an argument that the conduct is relevant to the contribution findings. I will not further address that issue.
Waste
[21] In the Marriage of Kennon (1997) 22 Fam LR 1.
It can be relevant to the assessment of contributions that a party has been reckless or otherwise committed waste.[22] It is the unchallenged (and unsolicited) evidence of the husband’s father that the husband gambled and that his gambling had significant financial consequences. It is his evidence that in 2002 he paid the husband $10,000 because the husband had been gambling.
[22] Kowaliw and Kowaliw (1981) FLC 91‑092.
No submissions were made about this issue.
Beyond noting the evidence of the second respondent, this is not a matter that warrants further attention.
Conclusion on Contribution
It is submitted for the wife that the contributions were 40% by her and on her behalf and 60% by the husband and on his behalf. It is submitted for the husband that there is virtually no asset pool because of the debts owed to his father. If that argument is not successful, it is the husband’s case that his contributions far exceeded those of the wife. Through his counsel, it is submitted that his contributions were 70% by or on behalf of the husband and 30% by or on behalf of the wife.
Through her counsel, the wife would have the Court recognise that this was a marriage of substantial duration. The husband argues that the marriage was distinguished by several separations and concluded in 1999. Neither of them was successfully challenged on their evidence going to this issue and therefore it is not possible to make findings about it. However, there is no doubt that the contributions of the husband and wife spanned more than 20 years.
The husband brought the Suburb 1 and N properties into the marriage. He brought in those properties, not the dollar value of the advances from his father - $125,000 ($34,000 + $70,000 + $21,000) and of the amount he borrowed from the State Bank. The husband owed an unidentified sum to the State Bank or the ANZ Bank for the Suburb 1 mortgage. There is no evidence as to the value of the properties at the commencement of the marriage. They had been purchased several years before the husband and wife met. Because the debt to the husband’s father is not taken into account in the net pool of assets, and because those two properties have remained intact and are the main assets of the husband and wife, they represent a very significant contribution from the husband. Another $74,000 subsequently came in from the husband’s father.
The non-financial contributions by and on behalf of the husband probably exceeded those by and on behalf of the wife. The wife made greater contributions as parent and homemaker, including over the period since 2000 when T has largely been her sole responsibility.
The wife has had the use, if not the quiet enjoyment, of the Suburb 1 property over that period. I find that the various contributions of the husband and wife would properly be acknowledged by a finding that they were made in the proportions 70% by and on behalf of the husband 30% by and on behalf of the wife. Of course, minds will differ about the precise apportionment of contributions but in my view and in the context of a modest pool of assets, that apportionment respects the important initial and continuing injections of funds on the husband’s side of the ledger and yet acknowledges the efforts of the wife over many years.
The other matters in Section 79
Once contributions have been assessed, the other factors in section 79(4) need to be considered. They are:
Section 79(4) (d)
Pursuant to s 79(4)(d) I am required to take into account the effect of any proposed orders on the earning capacities of the husband and wife.
Neither the husband nor the wife lives on income from a business or from another matrimonial asset. Therefore the likely orders will not impact on the earning capacities of the husband and wife.
Section 79(4)(e) - Section 75(2) Factors
The relevant matters in Section 75(2) would seem to be paragraphs (a), (b), (c), (f), (ha), (j), (k) and (na).
(a) the age and state of health of each of the parties;
First, as to the age and state of health of each of the wife and husband. The wife and husband are 40 and 42 years of age, respectively.
They each complain of poor health.
The wife says that in or about 1993 she developed Carpel Tunnel Syndrome affecting the tendons in her wrists and hands. In 2004 she underwent surgery on the tendons in both forearms and wrists. The wife says that she is not able to use her hands for any significant period of time or for any heavy work. She experiences more pain in the winter months. She has been in receipt of a Disability Pension since about 2007.
The husband’s malady is less well defined and there is no medical evidence. The husband says that he has been unable to cope. He says that he is emotionally exhausted and finds it difficult to concentrate on one task at a time. He thinks that those problems affect his ability to work and function (presumably adversely). I gather that the husband hopes that his problems will be reduced once these proceedings are completed.
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;
The wife’s income is $440 per week by way of disability support pension and Family Tax Benefit. She should receive $70 by way of Child Support Assessment from the husband but that is not paid. She lives with her uncle, Mr Y. He earns $1,150 per week. According to her Financial Statement the wife does not benefit from any expenditure by anyone (including Mr Y) and no one else benefits from her expenditure. Her Financial Statement goes on to make it plain that T does benefit from her expenses.
The wife’s expenses are:
| Expense | Amount | |
| Motor vehicle registration – Mitsubishi […] | $9.00 | |
| Other expenses. | $435.00 | |
| Food and household supplies | $180.00 | |
| House repairs | $5.00 | |
| Gas | $20.00 | |
| Electricity | $28.00 | |
| Telephone | $30.00 | |
| Petrol | $70.00 | |
| Car maintenance | $15.00 | |
| Clothing and shoes | $30.00 | |
| Child activities | $10.00 | |
| Medical dental and optical | $5.00 | |
| Entertainment & hobbies | $5.00 | |
| Chemist pharmaceuticals | $2.00 | |
| Repairs furnishings and appliances | $2.00 | |
| Books and magazines | $2.00 | |
| Gifts | $15.00 | |
| Hairdressing, toiletries | $16.00 | |
| Sub-total | $435.00 | |
| Total | $444.00 | |
In the wife’s Financial Statement the living expenses are apportioned as to $171 to the wife and $264 to T. Subject to that observation, the wife has a weekly deficit.
The evidence about the wife’s assets and liabilities is set out earlier in these reasons.
I gather that there is an issue about the wife’s earning capacity but the matter was not significantly taken up in cross-examination or submissions.
The husband receives $160 per week by way of wages from employment in the construction industry. Interestingly in his Financial Statement he nominates his father as his employer, notwithstanding that he and his father both say that the construction business is owned by the husband’s brother. Perhaps that is a typographical error. According to his Financial Statement the husband lives alone. That is not true. I understood his case to be that he lives with his parents and brother/s. The address he gives at F Street, Suburb 6 is the same as that given as his father’s home address. According to his Financial Statement the husband does not benefit from any expenditure by anyone and no one else benefits from his expenditure. That is plainly wrong on his own case, at least insofar as T is concerned. Further, in the absence of another explanation he must be receiving support from someone as to his accommodation and other living expenses.
The husband deposes to the following expenses:
Expense
Amount
Rates and unit levies
$90.00
Child support
$100.00
Total
$190.00
There is no evidence about his living expenses nor of T’s expenses when she lives with him. Subject to that observation, the husband has a weekly deficit of $30.00.
I do not know if the husband is exercising his earning capacity.
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
T lives primarily with the wife and spends time with the husband in accordance with the current orders. They have equal shared parental responsibility.
(d) commitments of each of the parties that are necessary to enable the party to support:
himself or herself; and
a child or another person that the party has a duty to maintain;
(e) the responsibilities of either party to support any other person;
I have set out the evidence in relation to the expenses of the husband and wife.
(f) subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
any law of the Commonwealth, of a State or Territory or of another country; or
any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia, and the rate of any such pension, allowance or benefit being paid to either party;
The husband has a superannuation interest. The wife receives a Centrelink benefit.
(g) where the parties have separated or the marriage has been dissolved, a standard of living that in all the circumstances is reasonable;
There is no evidence to suggest that the husband and wife enjoyed more than a modest standard of living during the marriage. Apart from an overseas honeymoon, and a reference to the husband’s gambling, there is little evidence of discretionary spending.
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income;
The wife is studying a service industry course at TAFE. She has no expectation of being able to hold down paid employment in that field because of Carpel Tunnel Syndrome but would like to obtain work if her hands improve.
(ha) the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant;
It is likely that the orders I propose will affect the ability of the husband’s father to recover his debt. Not that the situation would otherwise be much better. The husband’s father has allowed the husband to be massively over committed. The fact is that any award to the wife will reduce the funds available to the husband, from which he could repay his father. Even the $80,000 that the husband proposes that I order he pay the wife would have that effect, not that the husband has disclosed the proposed source of those funds.
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;
There were no relevant submissions on this issue.
The wife undertook the lion’s share of the parenting and homemaker contribution. That is likely to have assisted the husband maintain full-time employment for the periods he did.
(k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;
The marriage may have affected the wife’s earning capacity. The wife was largely out of the paid workforce during the marriage. There were periods of hospitalisation. She thereby lost the opportunity to acquire skills and the other benefits of a consistent period in the paid workforce.
The husband contends that the marriage had an adverse impact on his earning capacity. There is no medical corroboration of that assertion.
(l) the need to protect a party who wishes to continue that party's role as a parent;
This provision has no relevance to these proceedings.
(m) if either party is cohabiting with another person — the financial circumstances relating to the cohabitation;
The husband and wife have failed to provide evidence about the financial incidents of their cohabitation with family members.
(n) the terms of any order made or proposed to be made under section 79 in relation to the property of the parties;
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
There is a child support assessment. I was not provided with a copy of it. The husband says he pays $100 per week for T’s benefit. The wife says she should receive $70 per week but that she receives nothing. I cannot reconcile those statements.
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account;
Nothing comes to attention here.
(p) the terms of any financial agreement that is binding on the parties.
There was no binding agreement made between the husband and wife.
Section 79(4)(f)
I have referred to the parenting orders made in the Federal Magistrates Court. Otherwise there are no relevant orders made under the Family Law Act 1975.
Section 79(4)(g)
I have referred to child support above.
Conclusion
The wife seeks an adjustment under s 75(2) of 10% to 20% in her favour. The husband argues that there should be no adjustment.
The relevant matters arising from the remaining elements of s 79, which include the s 75(2) factors referred to above are:
The wife has had medical intervention for Carpel Tunnel Syndrome and her inability to work has been recognised with a Disability Pension;
In light of the history of the marriage, the wife’s earning capacity is likely to be less than that of the husband, if only because he has at various times been employed by members of his family;
The distribution of net assets on the basis of contribution alone will favour the husband in the proportion 70% compared to 30% to the wife. Although having modest values, the husband’s financial resources exceed those of the wife;
The husband and his father agree that the husband owes his father at least $1,392,377.09. After discussion between the husband, his father and his brother Mr V Zerbos, it may be that the husband also owes his father some part of $120,000 for his purchase of the construction company. However, except in the context or expectation of these proceedings, there has been no history of the husband’s father pursuing his debt;
T lives predominantly with the wife but has weekend and holiday time with the husband; and
There is a child support assessment in place and whether payments are made or not, that assessment is capable of being the subject of enforcement action.
In my view an adjustment in favour of the wife is warranted. The husband and wife are of a similar age and have similar needs but T lives mainly with the wife. An adjustment of 10% is warranted.
Insofar as the second respondent is concerned, the orders proposed will adversely impact on his capacity (albeit heretofore unexercised) to recover the debt that he and the husband agrees is owed, one to the other.
Just and Equitable
The net assets have a value of $663,598.59. Of that, $550,100 is in the form of non-superannuation assets and $113,498.59 is in the form of superannuation.
A division in the proportions 60% to the husband and 40% to the wife would leave the husband with about $398,150 and the wife with about $265,440.
Because neither of them seeks a splitting order in relation to the husband’s superannuation interest, the only possible adjustment is out of non-superannuation assets. In that regard I take it that the name of the husband’s fund is just that and does not represent the status of his interest.
Given the ages of the husband and wife, the negative aspects of holding funds in the form of superannuation are relevant here. I have not been provided with any information about the particular fund or the conditions under which the husband’s interest is held. It is notoriously the fact that there are often restrictions in accessing superannuation based on the age and employment status of the owner of the interest. It is also notoriously the fact that the value of superannuation interests can change. Over the last few years for example, they dramatically changed for the worse. On the other hand there can be taxation advantages to superannuation interests. Whether the advantages outweigh the disadvantages or not, it can be unfair to leave one party with a disproportionate superannuation interest and the other with a disproportionate part of the non-superannuation assets. However the husband and wife have left me with no choice in that respect.
Of the assets and liabilities that make up the net matrimonial pool, the wife has or has had the benefit of, the following assets :
Assets | Value |
| … Mitsubishi … motor vehicle – wife | $20,000 |
| Household furniture – wife | $5,000 |
| Total Gross Assets | $25,000.00 |
Absent the question about the form of the assets, the wife would have approximately 40% of the pool of assets if she received a further $240,440. Because of the different characteristics of superannuation interests, in particular the restrictions on access and the risk of reduction in value, I will discount the adjustment to allow for those matters. No submissions were made about this matter. There can be no science to that task. I will order that the wife receive $220,000 from the remaining assets.
I acknowledge that another possible approach would have been to omit the husband’s superannuation from the pool and simply take it into account. I do not believe that a significantly different outcome would have resulted from that approach.
I have not found and the husband has not identified a ready source of funds to pay the wife. Nevertheless, it is his application that he pay her $80,000. Perhaps he will be able to find $220,000 from that same source. I will give the husband 21 days to make the payment and in default will order that he sell the only asset which can provide the necessary equity, the Suburb 1 property, and pay the wife the required sum from the net proceeds.
I will order that, if necessary because of that default, the wife and the husband’s father cause caveats lodged by them on the title of that property to be lifted to facilitate the sale. In any event I will order that, on property settlement the wife remove the caveats on both properties.
That will leave the husband with the Suburb 1 property or the balance of the net proceeds of the Suburb 1 property after payment of the required amount to the wife and:
Assets | Value |
| C Street in N - | $125,000 |
| Mazda … motor vehicle - husband | $100 |
| accrued AMP superannuation – husband | $113,498.59 |
| Total Gross Assets | $238,598.59 |
The husband and wife will retain their financial resources.
Conclusion under Section 79
Significant contributions were made by each of the husband and wife. In a turbulent relationship they acquired assets, supported each other and provided a home for their daughter. In the course of about 13 years of marriage and since, the husband and wife shared the work of the marriage in different ways. The husband made a far greater contribution than the wife. The orders I propose will effect a just and equitable settlement of their property.
I certify that the preceding three hundred and two (302) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan.
Associate:
Date: 15 July 2011
Key Legal Topics
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Family Law
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Equity & Trusts
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Property Law
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Constructive Trust
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Costs
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Standing
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