Mandel and Palumbo
[2018] FCCA 2704
•21 September 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MANDEL & PALUMBO | [2018] FCCA 2704 |
| Catchwords: FAMILY LAW – Property proceeding – application for adjustment of property interests – relationship of ~20 years – three children of the marriage – children lived with respondent after separation – applicant continued to provide financial and emotional support to children – respondent’s new partner moved into matrimonial home – children moved out to live with applicant at his father’s home – applicant primary care giver for children since late 2013 – applicant suffered significant back injury after separation – applicant received payment for total and permanent disablement – orders made for respondent to vacate matrimonial home – enforcement proceedings necessary to secure vacant possession – respondent failed to make full and frank disclosure – uncertainty as to asset pool – cost and length of proceeding unduly prolonged by respondent’s attitude towards preparation, hearing, and determination of matter – whether applicant’s father made a loan to parties – respondent unilaterally appropriated monies from children’s bank accounts in breach of trust – respondent made a drawdown on mortgage account – modest shareholdings – assets valued as at the date of trial – wasted costs and expenditure a liability of respondent – just and equitable for a property adjustment – financial and non-financial contributions given weighting as to 60% in favour of the applicant and 40% in favour of the respondent – applicant in poor health and now has no capacity to work– respondent has support of new partner – respondent in substantial arrears of liability to pay child support – issue as to respondent’s earning activities before and since separation – inferences more easily to be drawn from lack of evidence – respondent’s earning capacity limited by birth of recent child – children will remain predominantly in the care of the applicant – property interests adjusted so as to divide property 70% to applicant and 30% to respondent. |
| Legislation: Evidence Act 1995 (Cth), s.140 Family Law Act 1975, ss.75, 79 Federal Circuit Court Rules 2001 (Cth), r.24.03 |
| Cases cited: Berghan v Berghan [2017] QCA 236 Bevan & Bevan [2014] FamCAFC 19 Black & Kellner (1992) FLC 92-287 Briginshaw v Briginshaw (1938) 60 CLR 336 Bulleen & Bulleen [2010] FamCA 187 In Re Hallett’s Estate (1879) 13 Ch D 69 In the marriage of Briese & Briese (1986) FLC 91-713 In the marriage of Rolfe (1979) FLC 90-629 Jacks & Parker [2011] FamCAFC 34 Johnson v Page (2007) FLC 93-344 Kannis and Kannis (2003) FLC 93-135 |
| Other texts cited: Jacobs Law of Trusts, 8th Ed (2016) |
| Applicant: | MR MANDEL |
| Respondent: | MS PALUMBO |
| File Number: | MLC 8028 of 2014 |
| Judgment of: | Judge A Kelly |
| Hearing dates: | 31 May, 1 June and 21 June 2018 |
| Date of Last Submission: | 21 June 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 21 September 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Williams |
| Solicitors for the Applicant: | Pearsons Lawyers Pty Ltd |
| Counsel for the Respondent: | Mr Robinson |
| Solicitors for the Respondent: | Randles Cooper |
THE COURT ORDERS THAT:
By 4.00pm on Wednesday, 3 October 2018, the applicant serve (in electronic Word format) a minute of proposed orders that will give effect to these Reasons for Judgment.
By 4.00pm on Wednesday, 10 October 2018, the respondent serve a response (in electronic Word format) addressing each of the applicant’s proposed orders indicating where she agrees or disagrees with each of those orders and why.
By 4.00pm on Tuesday, 16 October 2018, the applicant file and serve (in electronic Word format) the minute of proposed orders containing each of the respondent’s annotations pursuant to paragraph 2 of this Order (if any).
The proceeding be listed for directions for the making of final orders at 10.00am on Thursday, 18 October 2018.
IT IS NOTED that publication of this judgment under the pseudonym Mandel & Palumbo is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 8028 of 2014
| MR MANDEL |
Applicant
And
| MS PALUMBO |
Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for judgment explain my conclusions respecting the parties’ claims for an adjustment of property interests pursuant to s 79 of the Family Law Act 1975 (Cth) (Act).
In summary, I have concluded that the parties’ asset pool should be adjusted so as to reflect an allocation of 70% in favour of the applicant husband and 30% in favour of the respondent wife. In the circumstances disclosed by my findings below, the parties will be afforded an opportunity to consider these reasons for judgment and to make submissions as to the precise form of Order that should be made. It is desirable that this should be so given the need to adjust liabilities and assets in a manner that reflects the parties’ present financial position and then to take account of particular assets and liabilities.
Evidence at trial
Evidence was given only by the applicant and respondent. Although an affidavit sworn by the applicant’s father had been filed, the case was opened on the basis that the father, now aged 84 years, was too frail to attend to give evidence and in the event, he was not called.
The applicant presented as an honest man of humble origins who had met, faced up to and dealt with his share of challenges including in relation to his employment, his health, and the care of his children and of his father. I found him to be an impressive witness.
The respondent was an unimpressive witness who frequently gave non-responsive, argumentative or circular answers to the questions that were asked of her. I have given serious consideration to whether, and have concluded that, in many respects I should not accept her evidence without corroboration by contemporaneous documentary evidence.
The following background is based upon an analysis of the parties’ affidavits, viva voce and documentary evidence and the inferences which I consider are properly made. The matters set out below include both matters that were common ground and my findings of fact upon particular issues. Where issues of dispute arose, I have addressed them separately in a later section of these reasons. In deciding disputed issues of fact I have applied the civil standard of proof to the resolution of that issue. The more serious the allegation, the more I took into account the gravity of the allegation in deciding whether it was made out: cf sub-s 140(2) Evidence Act 1995 (Cth); Johnson v Page (2007) FLC 93-344, [72]; Briginshaw v Briginshaw (1938) 60 CLR 336. Where the evidence does not permit the court to make an affirmative finding either way on a particular issue, the court is not bound to do so and may find that the party which bears the onus of proof has failed to discharge it: Kuglioski v Metrobus (2004) 220 CLR 363.
Background
On 1996, the parties married at (religion omitted) Church.
The applicant husband is now aged 48 years. The applicant has been unemployed since July 2014 and was in receipt of workers compensation payments for a considerable time. Those payments ceased in February 2017. He has recently received a payment for total and permanent disability. I accept that he now has no earning capacity. The applicant is presently in receipt of a weekly NewStart allowance of $292 and is under consideration by Centrelink for a disability pension. I find that he will not work again and infer that he will be granted that pension.
The respondent wife is aged 44 years. The respondent was a (occupation omitted) for (employer omitted) for a period of 18 years from 1996 until she resigned voluntarily from that employ in 2014. At the point of her resignation, the respondent was earning ~$86,000 per annum. The respondent claimed to have suffered a work related illness including post-traumatic stress disorder. She has made no work related claim.
There are three children of the marriage now aged 14, 16 and 18 years.
The parties lived at Property A in the State of Victoria being the whole of the land more particularly described in certificate of tile, Volume, Folio (“matrimonial home”).
They also purchased an investment property situate at Property B in the State of Victoria being the whole of the land more particularly described in certificate of tile, Volume, Folio (“investment unit”).
The marriage was beset by difficulty and a number of separations. The applicant initially moved out of the matrimonial home in 2007. The parties were separated for about 12 months until they reconciled in 2008. They remained together until 2010, and then separated permanently in 2010 following the confirmation service of their daughter. Before separation, the parties had taken a holiday to (country omitted) with their children.
From November 2010, the applicant lived at his father’s home in Suburb N. The applicant’s father is now aged 84 years. At that stage, the children spent time with their father by agreement. Although the parties separated in late 2010, the applicant spent significant time with his children until, in late 2013, they came to live with him.
The applicant continued to provide financial and emotional support to the children with whom he maintained frequent contact. The applicant’s evidence was convincing that he would pick up the children each day after school and either take them overnight on a couple of occasions during the school week or return them to the respondent’s home. I accept the applicant’s evidence that he paid child maintenance of $140 per week to the respondent each Friday after being paid for his week’s work.
The respondent formed a new relationship with Mr G who moved into the matrimonial home with the respondent in about 2013. In November 2013, the three children of the marriage ceased living at the matrimonial home with their mother and Mr G. They chose instead to move out and live with their father. As a result, they too lived in straightened circumstances in the grandfather’s home.
The applicant has been the primary care giver to the children since late 2013. The eldest child spends little significant time with the respondent. The younger two children see their mother for one day per fortnight. They rarely spend time staying overnight with the respondent.
The children have continued to live with their father since 2013. Before they came to live with him, the applicant paid child support to the respondent for their care. From the date that the children have lived with their father, the respondent has not paid any child support. She explained the non-payment of such support on account of her having ceased work.
In 2014, the applicant suffered a significant back injury for which he underwent surgery in September 2014. The applicant has been significantly incapacitated since that date. He has made a claim for total and permanent disablement, which claim has recently been accepted.
As appears below, orders were made for the respondent to vacate the matrimonial home in order that the applicant and children could resume occupation. It became necessary for enforcement proceedings to be brought to secure vacant possession of the former matrimonial home.
Resolution of the matter has been complicated by reason of the respondent’s constant failure to make proper financial disclosure of her position or that of her new partner.
Procedural history
On 9 September 2014, the parties filed an application for divorce.
On 20 April 2016, the applicant initiated this proceeding seeking an adjustment of property interests. At that time, the applicant also filed an affidavit and financial statement which provided disclosure on issues arising in relation to the application. On 22 April 2016, service of those materials was effected on the respondent.
On 14 June 2016, the matter was listed for its first return in a ‘duty list’ before another Judge of this court. The respondent failed to appear and the court adjourned the matter to 8 August 2016, granting leave to proceed on an undefended basis. Orders for disclosure were made.
On 4 August 2016, the respondent filed a response, answering affidavit and financial statement.
On 8 August 2016, the matter returned for directions and although the respondent appeared on that occasion, the matter was adjourned for further mention on 17 October 2016. On 8 August 2016, the time for compliance with disclosure orders was extended in favour of the respondent. The respondent still did not comply with the orders as extended.
Consent orders referring the matter for private mediation were frustrated.
A mediation scheduled to occur on 12 September 2016 was cancelled on 9 September 2016, being the last business day beforehand. Cancellation of the mediation was the result of a unilateral decision by the respondent, who contended that she was unable to attend by reason of health issues. No medical certificate was provided.
On 10 October 2016, an application in a case was filed by the applicant seeking orders that the respondent:
a)vacate the matrimonial home by 8 January 2017;
b)be permitted to occupy the investment property;
c)until further order, bear the liability for outgoings associated with the investment property.
The application in a case was listed in a duty list on 23 November 2016.
On 17 October 2016, the court listed the matter for trial on 11 September 2017, making trial directions and providing a timetable for the filing of documents. In the course of that hearing, the court confirmed the listing of the application in a case on 23 November 2016.
On 1 November 2016, the respondent filed a response in answer to the application in a case seeking dismissal with costs. A series of affidavits were then exchanged respecting the determination of the application.
On 23 November 2016, an order was made that the respondent vacate the matrimonial home by midday on 18 January 2017. The parties were represented by counsel upon the hearing of that application.
Despite repeated request, the respondent did not comply with the order to vacate the property. On 24 January 2017, the applicant filed an enforcement application which was listed for hearing on 30 January 2017. The applicant deposed to the urgency of the matter as the children were due to recommence their schooling and needed to be settled.
The parties were represented by counsel upon the hearing of this application (and were represented by those same counsel thereafter). The court ordered the respondent to vacate the matrimonial home by 3:30pm on 1 February 2017.
By that date, the respondent had not complied with the order such that the applicant sought a warrant of possession. On 2 February 2017:
(a)the respondent vacated the matrimonial home after which the applicant and three children were able to move back in;
(b)an application for an intervention order was then made by the respondent against the applicant, doing so on the basis of an incident alleged to have occurred on that day.
The application for an intervention order was heard by the Broadmeadows Magistrates’ Court on 9 February 2017 which granted an order protecting the respondent as an affected family member against the applicant. The order was made by consent, without admissions. This was followed by a further proceeding in the same court on 16 March 2017, where an application for an intervention order made by the applicant against the respondent. On 15 February 2017, an intervention order was made in favour of the applicant in the respondent’s absence.
On 5 August 2017, the respondent filed a financial statement. The statement, as filed, failed to make disclosure of the financial position of her partner, Mr G. Nor did that financial statement make disclosure of the various assets which the respondent had purchased at various (locations omitted). Nor did that financial statement contain disclosure of the supposed liabilities which, according to the respondent’s evidence, she had incurred in purchasing (business items). On one view, the respondent’s financial statement could be seen as laying a false trail in relation to her true financial position.
On 22 August 2017, the respondent filed an application in a case requesting an adjournment of the final hearing sine die due to the advanced state of her pregnancy, other health reasons and the allegations of family violence noted above. It will be recalled that in October 2016, the proceeding had been listed for trial on 11 September 2017. The applicant deposed that the fact of the respondent’s pregnancy had not been disclosed to him or his solicitors at any time until August 2017.
On 30 August 2017, the court granted the application, vacated the final hearing and relisted it for trial on 31 May and 1 June 2018. Consent orders were also made making trial directions. On 30 August 2017 a further order for disclosure was made. The respondent did not comply with that order.
Having regard to the lack of financial disclosure that had been given by the respondent, it became necessary for the applicant to seek to prove his case in reliance upon documents that were produced on subpoena.
On 14 March 2018, the matter was listed for call-over by Judge Hartnett. The court ordered the parties to attend a conciliation conference and made orders facilitating that conference, including a direction that the parties file a balance sheet which identified those assets and liabilities which were agreed and disputed. This did not occur.
On 7 May 2018, the parties attended a conciliation conference before a Registrar of the court. The conference did not proceed as the solicitor for the respondent, who had been acting since 18 July 2016, had filed a notice ceasing to act. The respondent claimed that she had only known of her lawyer’s decision to cease to act for her upon looking at the Commonwealth Courts Portal on the previous evening.
On 31 May 2018, the matter was listed for final hearing before me. At the commencement of the hearing, the respondent made application, without notice, for an adjournment of the final hearing. The respondent had not filed any application in a case. Nor had she filed any affidavit or other evidence in support of such an application. As noted above, the respondent had retained the same counsel for some time.
The application was granted. The matter was adjourned until 10:00am on 1 June 2018. The adjournment was granted on terms that the respondent file and serve a document in which she identified the assets comprised in the asset pool and indicated those with respect to which she agreed or disagreed.
On 1 June 2018, orders were made by consent that the parties have leave to proceed with their respective property applications.
The hearing proceeded on 1 June 2018 but could not be concluded within the allotted two day period by reason that it had only commenced on the second day of the hearing. The hearing was adjourned to 21 June 2018.
The cost and length of the proceeding has been unduly prolonged by the respondent’s attitude towards the preparation, hearing and determination of the matter. The adoption of such a stance is particularly regrettable in the circumstance that this is a modest estate.
Applicable principles
The settled approach to be taken to the determination of a claim for adjustment of property interests under s 79 entails a four-stage process as articulated by the Full Court in Hickey & Hickey; the Attorney General for the Commonwealth of Australia (2003) FLC 93-143. There, Nicholson CJ, Ellis and O’Ryan JJ at [39] held the four-stage process under s 79, although interrelated, was as follows:
(a)first, identify the parties’ assets, liabilities and financial resources at the date of hearing; calculating the net value of their property;
(b)secondly, ascertain the parties’ contributions (both financial and non-financial), within the meaning of paras 79(4)(a)-(c) inclusive and then “determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property”;
(c)thirdly, give consideration to the other factors prescribed by paras 79(4)(d)-(g), including the matters, so far as relevant, as referred to in sub-s 75(2) to decide if any further adjustment to the percentage assessment of contributions is warranted;
(d)fourthly, consider the overall effect of those findings and determinations and resolve what order by way of adjustment of property, if any, is just and equitable in all the circumstances.
The four-stage process articulated in Hickey need not be followed rigidly: Bevan & Bevan [2014] FamCAFC 19, [18]-[19] (Bryant CJ and Thackeray J), [97] (Finn J agreeing). The Full Court has affirmed that a holistic approach should also be made when deciding an application under s 79: Wallis & Manning [2017] FamCAFC 14, [23]; citing Dickons & Dickons (2012) 50 Fam LR 244, [24]. Where it is said that a holistic approach should be made, this is to be understood as permitting that a global re-assessment of the matter is appropriate. It is also to be understood as reinforcing the need to move beyond an assessment that is expressed purely in percentage terms and to consider the real impact, in money terms, as the critical issue in the case. In particular, where an additional allowance is to be made in favour of one party by reason of sub-s 75(2) factors, regard may be had to the disparity in money terms of the effect of that additional allowance: Clauson & Clauson (1995) FLC 92-595, 81,911 (Barblett DCJ, Fogarty and Mushin JJ).
In short, the evaluation requires consideration of contributions both tangible (i.e. financial) and intangible (i.e. non-financial): Bulleen & Bulleen [2010] FamCA 187 at [19]-[20], [26], [40] (Cronin J).
These principles are applicable in the present case.
Financial disclosure
By rule 24.03 of the Federal Circuit Court Rules 2001 (Cth), a party who is required to file a financial statement is obliged to make full and frank disclosure of their financial position as detailed in that rule.
In proceedings for an adjustment of property interests, parties do not stand in the same relation as those conducting inter partes litigation. Parties to a marriage or a de facto relationship are not strangers who owe no duties to the other respecting disclosure of information relating to property which was acquired, improved or augmented in the course of their relationship. For this reason, each party is obliged to make financial disclosure. The need for each party to have an accurate understanding of their true financial positions lies at the heart of a property settlement application: Oriolo v Oriolo (1985) FLC 91-653, at 80,256 (Emery, Fogarty and Murray JJ), approving In the marriage of Briese & Briese (1986) FLC 91-713 (Smithers J).
Where there has been a failure to comply with the obligation to make full and frank financial disclosure, the court may nonetheless make a finding as to the existence and value of the parties’ property, even though it will be necessary to do so in the most general terms: Giunti & Giunti (1986) FLC 91-759 (Giunti) at 75,555 (Fogarty, Murray and Nygh JJ) citing Monte & Monte (1986) FLC 91-757 (Simpson, Murray and Frederico JJ). Thus, a parties’ design of obfuscation and evasion with respect to their disclosure obligation is not an insuperable barrier to the determination of what orders are just and equitable in the adjustment of property interests: see also Black & Kellner (1992) FLC 92-287.
As a result, where there has been financial non-disclosure, “the Court need not shy away from a robust exercise of discretion . . .”: McDermott & McDermott [2017] FamCA 376 (McDermott), [301] (Foster J) citing Kannis and Kannis (2003) FLC 93-135; see also Jacks & Parker [2011] FamCAFC 34, [62], [122]; Weir & Weir (1993) FLC 92-338. More recently, in Elkhouri & Amatullah [2017] FamCA 688 (Elkhouri & Amatullah) at [121], Gill J reasoned that where non-disclosure impeded the identification of what property comprised an asset pool or the determination of the true value of such assets, the court was entitled to anchor property orders by reference to what it considered to be just and equitable. I agree.
Asset pool
The parties were in dispute as to several items of property said to be comprised in the asset pool. By way of preamble, I am mindful that it is not the court’s function to conduct an audit of the parties’ relationship or of their finances: Pates & Pates [2018] FamCAFC 171 (Pates), [18] (Ryan, Aldridge and Austin JJ).
The trial and determination of this application has been impeded by the respondent’s failure to make full and frank disclosure of her financial affairs or to cooperate in the valuation of what are their most valuable assets, being the matrimonial home and the investment unit.
Further, as appears below, the uncertainty concerning the precise extent of the respondent’s interest in her business and her income introduces additional considerations as to how the matter ought to be resolved and what orders are appropriate to secure a result that is just and equitable. Those matters notwithstanding, the court must make findings as to the property in which the parties have an interest even if it is able to do so only in the most general terms: Giunti at 75,555. The respondent’s continuing failure to cooperate in the making of financial disclosure does entitle the court to be more confident when drawing inferences as to underlying primary facts relevant to the adjustment of property interests and to be more robust in the exercise of the discretion conferred by s 79 in the making of orders respecting the adjustment of property interests: McDermott, [301].
It is convenient to address each asset and liability and, where required, to give my findings upon the items of property which were in dispute. Having regard to the manner in which the proceeding was conducted, my primary analysis of the position mirrored the applicant’s asset pool. However, following that analysis, the pool of assets and liabilities as I have found it, is presented in a somewhat different manner.
Matrimonial home & Investment unit
The parties agreed on the value of both properties. They jointly own each property as tenants in common.
However, it should be recognised that the matrimonial home is unencumbered while the investment unit remains subject to a mortgage.
As I find, the investment unit was purchased with the assistance of the applicant’s father. The proper characterisation of that assistance is considered below. The balance of the monies required for the purchase of the investment unit was obtained by way of bank loan and savings.
The bank finance was secured by mortgage and was provided by way of a mortgage loan account with a capacity to draw on further monies.
The investment unit has been tenanted and the proceeds of that rental applied in reduction of the mortgage balance. Following separation, the respondent unilaterally drew down on that account thereby increasing the parties’ mortgage liability (see below).
In addition, the application that the respondent should vacate the matrimonial home was coupled with an application that she be at liberty to occupy the investment unit. The respondent declined to do so. Instead, she and Mr G have chosen to rent other accommodation.
Purchase of Investment property & loan - $98,000
In 2001, the parties purchased the investment property for $98,000. The applicant’s case was that his father had made a loan of $20,000 and that, apart from minor savings, the balance of the purchase price had been obtained by way of loan from Bank 1 secured by mortgage over the property. There was little equity.
The respondent denied that any such loan was made. The respondent’s denial rested upon a premise, which I reject, that the parties had contributed the $20,000 themselves or that the bank had loaned them the entire sum necessary to purchase the property. No evidence was adduced and no suggestion was made at any stage that the parties had the means of contributing the sum of $20,000 from their own savings. Further, I reject as inherently improbable that a lender would agree to advance these parties the total purchase price for the property.
As concerns the claim that the applicant’s father had agreed to lend the money on interest free terms repayable in second priority after that of the first mortgagee, I cannot accept that claim. Although the applicant gave some evidence of it, the ‘loan’ was not evidenced in writing in even the most rudimentary form. The father was unable to give evidence.
The applicant gave evidence of a conversation at the kitchen table which took place between the father, the applicant and the respondent at which the topic of the purchase of the investment property had taken place. While the details of the 2001 conversation were sketchy, I accept that it took place. Contextually, the conversation occurred after the parties had discharged the mortgage over the matrimonial home so that they were, by then, in a position to consider servicing borrowings on a modest investment. The applicant’s evidence of the conversation at the kitchen table was given in a candid and forthright way which struck me as wholly credible. The respondent’s denials of the ‘kitchen table’ discussion were hollow and I reject them.
The question whether parties have made an agreement, whether by way of loan or otherwise, is to be determined objectively. So too, an objective determination is required as to the terms of any agreement they have made: cf Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, [35]. Those principles are no less applicable in the determination of whether an enforceable agreement was made during, or as part of, a family arrangement: Berghan v Berghan [2017] QCA 236, [26]-[34]. As the Full Court of Appeal of the Queensland Supreme Court observed in the latter case, it was inherently unlikely in the circumstances of that claim that the appellants would have made a gift to their son’s company knowing that it was in financial distress where he had only 50% of the equity in that company. The decision is useful as indicating that consideration of the facts and circumstances of each claim will be important in deciding such issues.
I accept that the applicant’s father did advance $20,000 to the parties for the purposes of enabling them to purchase an investment property and that that sum was applied towards that purchase. The circumstance that the property, the subject of the purchase, was not to be the parties’ matrimonial home, but rather an investment, would tend in favour of a conclusion that it was more probable the father would have made a loan. However, in the absence of more cogent evidence I am unprepared to make that finding. Nonetheless, being satisfied that the sum was advanced, I treat it as a financial contribution of the applicant.
In the result, I find that the applicant made a contribution of $20,000 toward the purchase of the investment property. The incremental value of that contribution toward such purchase is a matter for consideration.
Childrens’ bank accounts - $39,548
The parties opened bank accounts which were held for their children.
The applicant gave evidence that the monies deposited to these accounts represented christening and confirmation gifts made by family and friends to be held for the children until they attained aged 18 years. By contrast, the respondent maintained that these payments represented what she variously described as eligibility payments, maternity allowance, baby bonus, parenting payments, family payments and personal gifts. On the whole of the evidence, I accept the applicant’s account of these events and find that the sums standing to the credit of the accounts which were opened in the children’s names were intended to be held by them for the purposes so described by the applicant.
Much time was spent examining various bank statements in an attempt to discern what had been done with the sums standing to the credit of those accounts. The trial was unnecessarily prolonged on this account. I find that following separation, the respondent unilaterally withdrew monies from those accounts. The respondent withdrew a total sum of $39,548 from the bank accounts which were opened for the children. No proper or adequate explanation was given by the respondent for the removal of those funds from accounts which she did not own.
The applicant submitted that the amounts so withdrawn should be treated as a premature distribution to the respondent. The respondent submitted that monies that had been withdrawn from accounts since separation should not be included as they had been applied to living expenses. For the reasons which follow, I must reject those submissions.
Perhaps anticipating that the respondent’s submission might be accepted, the applicant emphasised that at the time the respondent had withdrawn those monies, she had been working, was in another relationship (with her partner who was working) and was living in the matrimonial home (which was unencumbered). Those were forceful considerations which might have otherwise negated a finding that the respondent had any reasonable basis upon which to apply such funds towards the ordinary living expenses of the family. However, on the findings I have made, it was not open to treat the respondent’s appropriation of those monies as a premature distribution of property because they were not her property.
It was common ground that the monies held in these accounts were held on trust. It follows that those monies were not assets in which the parties had any beneficial interest. Consideration is required as to the nature of the monies in those accounts and the legal consequences of those monies being trust property. I conclude that neither party held any legal or equitable interest in the debt owed by the bank in a sum represented by the balance standing to the credit of those accounts from time to time.
Being trust property, is not open to conclude that those monies constituted an asset of either party: cf Pates & Pates, [30]-[32]. However, that conclusion is not dispositive of the issue. In my view, the proper characterisation of the parties as trustees is fundamental to the proper treatment of these funds. On the findings I have made, those sums were to be held on trust until the children attained their majority. Those monies were beneficially owned by the children not the parties.
Where a trustee destroys a trust fund by dissipating it altogether, there remains nothing to be the subject of the trust: In Re Hallett’s Estate (1879) 13 Ch D 69, 719 (Jessel MR); Commissioner of Taxation v Macquarie Health Corp Ltd [1998] FCA 1365 (Emmett J). The separate questions whether trust property may be traced or recovered do not arise.
Again, the circumstance that the trust fund has been completely dissipated by the respondent does not dispose of the issue. In my view, it is then necessary to recognise that the beneficial interest formerly held by each of the children has been replaced by a valid and enforceable cause of action against their parents as trustees for breach of trust. As beneficiaries, the children would be entitled to an order that the trustees restore their respective trust estates. The applicant and respondent, as trustees, would be jointly and severally liable for that relief.
But for the respondent’s conduct, the monies standing to the credit of the children’s accounts would otherwise have been preserved.
As I have found, the respondent, in breach of trust, appropriated the sum of $39,548 from the childrens’ accounts. Contrastingly, the applicant was wholly innocent of any misconduct. Although he would be liable for breach of trust in any claim by the children, in dealings with his co-trustee, the applicant would be entitled to an indemnity in respect of that trust liability: Jacobs Law of Trusts, 8th Ed (2016) at [21.17]-[21.18].
In my view it is not merely necessary – but just and equitable – that the parties’ joint liability to restore the children’s trust accounts be recognised as a liability in their asset pool so that orders may be made.
Mortgage draw down - $12,000
On 9 September 2016, the respondent made a drawdown of $12,000 from the mortgage account over the investment property, thereby increasing the liability on that account.
The respondent accepted that she had withdrawn $12,000 on the mortgage account held in relation to the investment unit. No adequate explanation was given by the respondent for doing so.
However, her counsel contended that an allowance of $6,000 should be made on account of the legal fees which she had incurred. This submission was wholly inconsistent with the submission that the parties’ legal fees were of the same magnitude and should be treated as neutral.
The respondent’s withdrawal of $12,000 occurred without notice and should be treated as a premature distribution of property which was taken by her for her benefit. The respondent now says those monies were taken for living expenses. I do not accept this, particularly in light of the respondent’s failure to make financial disclosure in this proceeding. At the time of the draw down, the respondent was working, living in an unencumbered property with her new partner (who was also working), and the applicant had the care of the children.
Insurance payout - $6,812
The applicant accepted that he had received $6,812 on account of an insurance claim relating to a motor vehicle.
The respondent contested the notional add back of this sum, submitting that the insurance payout should not be included. It is clear that the court should, in general, avoid the resolution of property applications by the adoption of adding back notional assets to the pool.
Motor Vehicle 1 - $12,050
The respondent is the owner of a Motor Vehicle 1 to which the applicant assigned a value of $12,050. The parties were in dispute whether the vehicle was written off as a result of sustaining hail damage and whether the insurance payout on a claim for that damage was paid to both parties. There was some evidence that the vehicle had been allowed to decay in the street and had been taken away.
I accept the applicant’s evidence that, as the vehicle was insured in the respondent’s name, she would have received any insurance payment.
The applicant’s closing submission expressly conceded that no great weight should be given to adjustments respecting the motor vehicles.
As there was a paucity of evidence concerning the actual current value of the vehicle, I accept the submission that it is appropriate to remove both the motor vehicle and the insurance payment from the asset pool.
Shareholding A - $1,124
The parties were agreed that they had a minimal joint shareholding in this listed corporation and were agreed upon the value of that holding.
This is a joint asset of the parties.
Shareholding B - $6,360
The parties were also agreed that the respondent held a modest shareholding in this corporation and were agreed upon its value.
The respondent conceded that it would be appropriate for her to retain each of the shareholdings in Shares 1 and Shares 2.
Bank account at separation – applicant – $6,360
The applicant contended that the balance standing to the credit of his bank account at separation was $6,360. I accept the respondent’s submission that the parties’ assets are to be valued as at the date of trial.
For that reason, I decline to include this sum in the asset pool.
Bank account at separation – respondent – $21,000
The applicant contended that the balance standing to the credit of the respondent’s bank account at separation was $21,000. I accept that this was so. It was suggested to the respondent that the credit balance in the account represented long service leave. The respondent’s final answer was: “the $21,000 was the final payment after I left from my employer… however, the $21,000 was after I ceased work due to illness”. I accept that the most likely source of the $21,000 credit balance represented a termination payment of some kind.
For the reason given at [99], I decline to include this sum also.
However, I do accept that the respondent retained $21,000 from this account at the time of separation and, as the applicant submits, that this sum should be taken into account, particularly in circumstances where the parties had relatively modest assets.
Funds withdrawn by respondent - $1,005
The applicant further contended that the respondent had withdrawn a sum of $1,005 from bank account on 2 November 2016.
I accept that this account was a joint account held by the parties but I decline to include it as an asset in the pool as that pool is to be determined at the date of trial and not at separation.
Again, I am prepared to take the appropriation of that sum into account in my overall evaluation of the matter.
For the avoidance of doubt, I accept the applicant’s submission that the respondent’s progressive withdrawal of monies from the children’s accounts, the mortgage facility, and each of the bank accounts identified above lent strong support for a conclusion that the respondent had taken pre-emptive measures to shore up her financial position at and after separation. Her conduct was calculated to advantage her position to the corresponding detriment of the applicant. To have done so was the antithesis of a just or equitable adjustment of property interests.
Total & permanent disablement payment - $185,965
The applicant received a payment for total and permanent disablement (TPD) on the day before trial. The respondent accepted that the receipt of this payment was “long distant” from the date of separation. It was also conceded that the entirety of the TPD payment should be recognised as a late contribution by the applicant over and above contributions made during the relationship and that the payment, being for permanent disability, was distinct, for example, from an inheritance.
In the consideration of this item, the context is important. The parties’ separation occurred in 2010. The applicant’s injury was sustained in 2014 and he underwent surgery at that time. Thereafter, he was in receipt of weekly payments of workers compensation, albeit at a reduced rate. In all those circumstances, the applicant’s TPD claim arose from an accident which occurred some four years post-separation. The amount now credited to the applicant’s account in respect of this TPD payment must be further reduced on account of the legal costs of $18,000 incurred in retaining Slater and Gordon to pursue the claim on his behalf.
As concerns the TPD payment, the present case stands in stark contrast with a situation where a spouse has cared for the injured party and undertaken the care of the children of the marriage following an incident or accident. In this case, the respondent has provided no care to the applicant following his injury. While the TPD payment must be identified as an item of property in which the applicant has a legal and equitable interest, this is only the first step. The treatment of that asset in any adjustment of property interest, falls for separate consideration.
In the overall evaluation of the case, I consider that there is merit in the submission of counsel for the respondent that it is preferable for the TPD payment to be excluded from the asset pool and instead included in the consideration of future needs under s 75(2) (see below at [157]).
Liabilities
Only two items were put forward as potential liabilities.
The parties were agreed that the mortgage liability to Bank 1 was $50,267. As noted above, part of that liability arises by reason that the respondent has drawn down on the account by a sum of $12,000.
In addition, the applicant contended that his father’s advance respecting the purchase of the investment unit was by way of loan. I have rejected that claim but found that the advance of $20,000 properly represents a contribution made by the applicant.
Apart from those liabilities, I have also characterised what had been put forward in the applicant’s pool as proposed assets – being the sums comprised in the children’s trust accounts – as properly representing joint liabilities of the parties in their capacities as trustees of those separate accounts. However, I have concluded that, since the applicant was wholly innocent of any wrongdoing in relation to the unilateral appropriation of those monies, the respondent should indemnify the applicant for those sums. In those circumstances, the amount represented by those liabilities should be included in the asset pool as personal liabilities of the respondent and which she should retain.
Costs & wasted expenditure
A number of costs orders have been made in the proceeding. Counsel for the respondent conceded that the applicant’s claim for costs as quantified by those orders should be factored into the determination of the final relief that was given by way of adjustment of property interests.
The applicant secured a number of orders for costs in his favour during the conduct of interlocutory applications. The parties were agreed that the total amount of costs ordered against the respondent was $7,332.
Further, the process of securing a valuation of each property was made problematic by the respondent’s failure to sign a joint instruction to a valuer. The respondent’s counsel quite properly agreed that 50% of the costs of such valuations should be taken into account as a liability to be borne by his client. A sum equal to 50% of the valuation costs is $687.50.
The total of those costs of $7,332 together with her share of the valuation costs of $687.50 amounts in aggregate to $8,019.50.
In addition, I accept that the applicant incurred significant costs in the proof of matters that should have been disclosed by the respondent. Numerous subpoenas and notices to produce were issued and served. The notices were not complied with.
The respondent was shown a letter dated 9 May 2018 said to comprise the most recent (of many) lists that had been served on her solicitors and which identified each category of document which, it was said, she had failed to produce. The respondent contended that to her knowledge she had produced all of those documents. As her evidence developed, this explanation was clarified on the basis that she insisted she had provided all of the documents to her solicitor and indeed that she had collected the solicitor’s file and now had that file in her possession. She maintained that she had provided all documents from about August 2017 to the present date. Asked to explain the whereabouts of the documents, the respondent stated “they’re currently sitting at home”. The documents, the subject of the notice, were not produced.
The applicant claimed that $5,099 had been incurred in relation to the issue and service of subpoenas. He also claimed that a sum of $5,609 had been incurred. The respondent submitted that this was a reasonable allowance in respect of wasted costs.
Each of these sums should be treated as post-separation liabilities for which the respondent must accept liability. The total of all those sums at [119] and [122] reflecting wasted costs and expenditure is $18,727.50.
Legal fees
A further adjustment was raised in relation to legal costs.
Each of the parties gave evidence and made submissions as to the sums that had been expended on legal fees. Having regard to those matters, I conclude that those sums effectively cancel one another out and may be disregarded. It was accepted that the treatment of legal fees was a discretionary matter and that in this case, they became a neutral factor. Nonetheless, the respondent’s evidence was somewhat imprecise as to the exact amount for which she had paid in respect of legal costs.
I am prepared to accept that the parties’ legal costs should be left aside.
Superannuation
The parties agreed on the value of their superannuation entitlements. However, it was necessary to press for proof of the respondent’s accrued entitlements and this was only dealt with by closing addresses.
It will be apparent that the respondent has accrued superannuation of nearly three times the amount that was accrued by the applicant.
The parties were also agreed on the need to include superannuation in the adjustment of property interests.
The evidence established that the trustees’ of the parties’ respective superannuation funds have been afforded procedural fairness.
Asset pool – Existing property interests
Based upon the foregoing, I find that the property pool is comprised of:
| ASSETS | OWNERSHIP | VALUE | |
| 1. | Property A | Joint | $850,000 |
| 2. | Property B | Joint | $280,000 |
| 3. | Funds drawn down by the Respondent from joint mortgage over the unit on 23 September 2016 by the Respondent | Respondent | $12,000 |
| 4. | Shareholding 1 - 400 shares at $2.81 as at 29/05/18 | Joint | $1,124 |
| 5. | Shareholding 2 – 1,200 shares held as at 29/5/18 | Respondent | $6,360 |
| TOTAL: $1,149,485 | |||
| LIABILITIES | OWNERSHIP | VALUE | |
| 1. | Bank 1 mortgage over the investment unit | Joint | $50,267 |
| 2. | Indemnity by respondent as co-trustee for appropriation of monies taken from childrens’ bank accounts | Respondent | $39,548 |
| 3. | Wasted costs and expenditure | Respondent | $18,727 |
| TOTAL: $108,542 | |||
| SUPERANNUATION | OWNERSHIP | VALUE | |
| 1. | Super Fund P Superannuation as at 14 August 2017 | Applicant | $ 81,804 |
| 2. | Super Fund Q Superannuation as at 30 June 2017 | Respondent | $277,779 |
| TOTAL $359,583 | |||
An adjustment is warranted
The parties were agreed that there should be an adjustment of their property interests. Having identified the parties’ existing property interests, I also consider that it is just and equitable that there should be a property adjustment: Stanford and Stanford (2012) 247 CLR 108 (Stanford), [31], [44].
It is just and equitable because one or both of the parties have chosen that they should no longer continue to live in their relationship. For that reason the parties no longer have the common use of their property, towards the acquisition of which they have each made contributions over the period of their relationship. The express or implicit assumptions which underpinned their relationship, including that they would be able to consensually adjust their interests in such property, are at an end: Stanford, [41]-[42]. A just and equitable adjustment of their interests is therefore appropriate.
The ambit of the disputed property adjustment was as follows: the applicant sought an adjustment of 75/25 in his favour, while the respondent sought a 50/50 adjustment.
Contributions
It is necessary to consider the parties’ contributions, both financial and non-financial, which were brought to their relationship, made during the course of their relationship and those which were made post separation.
Contributions – financial & non-financial
The parties were in a relationship of some 20 years.
The parties held and brought the following assets to the marriage:
a)Applicant: a motor vehicle; savings of ~$45,000; superannuation.
b)Respondent: a motor vehicle; savings of ~$20,000; superannuation.
The parties’ respective superannuation accumulations were modest.
During their relationship, the parties contributed their incomes toward mortgage liabilities, outgoings and living expenses.
The parties purchased the matrimonial home in 1995 for the sum of $101,000, by applying savings of $65,000 and a loan secured by mortgage. The mortgage was discharged in 1999 and the matrimonial home has been unencumbered since that date.
The parties also purchased the investment unit in the manner described above. The value of that investment is agreed, as is the mortgage liability. I have also held that the respondent is liable to account for the sum which she drew down on the mortgage account.
Post-separation contributions
The court is not confined on the issue of contributions to assets in existence as at the date of separation, or to assume that the role of homemaker and parent ceased at separation: Tyson & Tyson (1993) FLC 92-368, 79,847; Trask & Westlake (2015) FLC 93,662, [13].
The respondent remained in the matrimonial home following the parties’ initial separation in 2010. By that date, the property was unencumbered.
Contrastingly, the applicant lived with his father. I find that for the period that the children remained in the matrimonial home, the father was a constant in their lives and maintained frequent daily and weekly contact with them including attending to them after school.
I have referred above to the amounts which were drawn down by the respondent from the various accounts. At the time that the respondent drew upon those accounts and facilities, the respondent was in active employment and living in the unencumbered matrimonial home.
The applicant claimed a further adjustment of $20,000 in his favour by reason of the amounts paid in reduction of the mortgage. This was opposed by the respondent as not being ‘appropriate’. I do not agree. However, having regard to the nature of the evidence, I have treated this as a post-separation contribution by the applicant.
It is clear that the respondent lived in the former matrimonial home from 2010 until 2017. I find that during this period, she made no financial contribution whether to the unencumbered matrimonial property or the investment property. Although the investment unit was tenanted, I accept that the shortfall between that rent and the mortgage liability was borne by the applicant. The weekly rental income was $200. Since separation, the respondent has made no contributions in reduction of the amount secured by the mortgage over the investment property.
I accept the applicant’s evidence that he contributed towards the mortgage loan so as to prevent the mortgagee from repossessing the property. While the applicant’s solicitors had produced calculations of all contributions made by husband toward mortgage on the rental property, they were not the subject of challenge.
When the children moved out of the matrimonial home, they lived with their father who cared for them financially and emotionally. I accept that the applicant has paid for their day to day living expenses.
In about August 2016, the applicant applied to the child support agency for an administrative assessment of child support. Such assessment was made and, to the date of trial, the respondent was in arrears of child support of ~$6,800. I hold no expectation that the respondent will meet these arrears, or make any future payments, of child support.
As to post-separation non-financial contributions, I find that the applicant has predominantly undertaken the care of the children. I find that the respondent has made very little by way of contributions as concerns the care of the children of their marriage.
I act upon the well-settled principle that a party’s non-financial contributions are no less valuable than are the financial contributions: Ferraro & Ferraro (1993) FLC 92-335 (Fogarty, Murray and Baker JJ); In the marriage of Rolfe (1979) FLC 90-629 (Evatt CJ).
As the applicant has had the care of the children for the substantial part of the post-separation period, I find that his non-financial contributions post-separation exceeded those of the respondent. The respondent’s counsel properly conceded that the applicant has expended monies on the children’s living expenses since separation. I find that he will continue to do so with minimal support from the respondent, if any.
I do not ignore that the respondent had lived rent-free in the former matrimonial home from 2010 until February 2017. During that period, the applicant lived with his father and, for a significant part of that period, the children also lived there. I attach weight to the manner in which the applicant and children had lived during much of this period.
I reject the submission that the parties’ pre and post separation contributions were ‘roughly equal.’ In my view, it is clear that the applicant made significantly greater contributions than the respondent.
I consider that the parties’ financial and non-financial contribution based entitlements to their existing property should be given a weighting as to 60% in favour of the applicant and 40% in favour of the respondent.
Section 75(2) factors
The applicant is in poor health and is now aged 48 years. He had worked as a (occupation omitted) but has been unemployed since 2014 and was in receipt of workers compensation payments until they payments ceased in February 2017. He has recently received the TPD payment and for that reason, I accept that he now has no earning capacity.
The respondent submitted that the TPD payment should be recognised as being compensation for the applicant’s inability to work in future and that, because the applicant had received the TPD payment, his future needs were commensurately reduced. I accept that submission and attach some weight to this consideration.
The applicant is presently in receipt of a weekly NewStart allowance of $292 and is under consideration by Centrelink for a disability pension. I infer it is probable that he will be granted that pension.
The respondent was a (occupation omitted) for (employer omitted) for a period of 18 years from 1996 until she resigned voluntarily from that employ in 2014. At the point of her retirement, the respondent was earning ~$86,000 per annum.
The respondent has not made a claim for compensation in respect of post-traumatic stress against her employer. The respondent’s counsel also submitted that “she has got her own issues with employment”, had taken her redundancy and that she was “affected” as a result of her long-term employment with the (employer omitted). If that submission was intended to convey that she had a post-traumatic stress disorder, I reject that submission. It was not supported by cogent evidence. Insofar as the respondent exhibited certain medical reports to her affidavits, those reports were of an historical nature. They gave no indication of her present condition, prognosis or the effect on her overall health. Those health practitioners who had prepared the exhibited reports were not made available for cross-examination.
While the evidence of a witness who is not called at trial may, in limited circumstances, be admitted, the weight to be attached to it in such cases will be diminished. Critically, the applicant’s counsel was denied any opportunity to procure or test the veracity of those reports and for that reason, I reject them: R v Reid [1999] 2 VR 605 (Winneke P, Buchanan and Chernov JJA); Chang & Su (2002) 29 Fam LR 406 (Chang & Su) at [51].
For completeness, I note that this is not a parenting case where other considerations may arise in relation to the admission of medical evidence. I distinguish the principles which it might otherwise be appropriate to apply in such circumstances: cf Merla & Merla [2018] FamCAFC 101, [30].
In addition, the respondent has the support of her new partner, Mr G, with whom she has been in a relationship for some years. The respondent is not a single person who is fending for herself. To the contrary she is in an established relationship which is of relatively long duration. The respondent and her new partner now have a child. The respondent does not have the burden of meeting the daily needs of the children. She does not support the children financially as she claims that she cannot do so. The respondent also has a new child of her own.
The respondent only began to pay child support as a result of being compelled to complete her tax returns (which she had, to that point, declined to do). The respondent is in substantial arrears of her liability to pay child support but contends that she is unable to meet those liabilities as she is unemployed. By reason that the respondent has not complied with her obligations to pay child support in the past, I am fortified in the conclusion that she will likewise not do so in the future.
Financial resources – income
A highly contentious issue in the present case concerns the respondent’s income earning activities both before and since separation.
The respondent flatly denied any such income earning activity. I reject her denial. The respondent was shown a Bank 1 bank account statement held in 2013. Contextually, the account was relevant to the respondent’s claim that she had no money at this time. The statement had a credit balance on 1 June 2013 of $22,598. The respondent said that that sum was derived from her employment “together with the monies that I had accumulated from family payments from the children, and possibly the baby bonus.”
It was pointed out that on 27 June 2013, a deposit of $57,545 had been made to the Bank 1 bank account. Asked to explain the origin of that sum, the respondent said that the money represented an accumulation of her employment income and money from family payments including sums drawn from the children’s trust accounts. The respondent said that the deposit represented the total of monies which she had taken from the children’s trust accounts. When it was pointed out that the total of the sums taken from the children’s trust accounts was ~$39,000 and not ~$57,000, the respondent was again asked to explain what the $57,545 represented and where it had come from. The respondent replied “Yes. That money, your honour, represents a culmination of my employment income and the monies that was paid to my family – for family payments whilst the children were in my care, as well as parenting payment single, and – which was a part payment based on my income, your honour, from the children”.
When it was pointed out that the payment was a single lump sum deposit and again asked to explain the source of the deposit, the respondent replied that it had come from a term deposit derived from all the stated sources including employment income and children’s accounts. The respondent said that she had given the term deposit to her solicitor and that it was in the file which was at home.
Pressed again to explain the source of the ~$57,000 deposit, the respondent’s evidence became increasingly vague.
The respondent claimed not to be working due to illness. Questioned about her tax returns, she sought to attribute blame to the applicant on the basis that he had “refused to give me the necessary documents that I needed in order to complete my tax returns”. This was never put to the applicant in cross-examination.
Astonishingly, the respondent contested the veracity of the employment records produced by the (employer omitted), denying that the records contained an accurate statement of her annual income. Ultimately, she conceded that the information recorded “could be true”. Asked to explain why there was not accurate information as to her income for the years 2013 and 2014, the respondent stated “well, I would encourage you to contact my employer if that’s the case, because I’m not going to . . .” When given copies of her tax returns for the three financial years 2014/15, 2015/16 and 2016/17 and asked to confirm that they were her tax returns, the respondent was given time to consider them and then, on the last day of the hearing, agreed that they were indeed her tax returns.
Financial resources – rental application
The respondent agreed that when she and Mr G had rented their accommodation after vacating the matrimonial home, a bond of $2,000 had been payable for that property. She was equivocal as to the source of monies for that bond when she maintained she was unemployed.
The respondent accepted that it would have been a lot cheaper for her to have moved into the unit, rather than rent alternate accommodation.
The respondent prevaricated when asked whether her partner had been working at the time the property was rented. When shown the tenancy application which stated her partner’s income of $100,000 to $120,000 per annum she responded that “that was never earnt”.
The respondent agreed that the tenancy application contained different handwriting and accepted that part of that handwriting referred to her involvement in a company. She responded “that was a company that I opened as a start-up business that never eventuated”.
Financial resources – trading activities
The respondent acquired a shelf company, Company O Pty Ltd, which as she intended was to be involved in (business omitted). The respondent, who is the sole director and shareholder of the company, agreed that this enterprise was to involve her partner, Mr G, but maintained that the business venture did not eventuate. The respondent said, that although this was her anticipated project, she had become sick and said it did not proceed. I reject that evidence. Insofar as the respondent has deposed that she incurred expenditure of $10,000 in establishing that business at a time when she was ill and became bedridden, she has not explained the source of funds for that $10,000 expenditure.
The respondent was taken to her affidavit sworn 1 June 2018 in which she deposed that Company O had been set up following separation, and was to be involved in (business omitted) with her new partner, stating: “Mr G, was to assist me in relation to this business. Apart from setting up the business structure, I have not earned any income whatsoever from this business, as I became ill and effectively bedridden in early 2014.” The affidavit reiterated that “I did not earn an income whatsoever from this business.” The respondent was asked to, and did, affirm the truth of those statements. I do not accept that evidence.
The applicant’s lawyers had issued a subpoena to (company omitted). The respondent was shown a statement for an account held in the respondent’s name, together with a bundle of tax invoices. Confronted with the entries in those documents, the respondent maintained that the company did not trade. On the most beneficial view of the respondent’s evidence, I accept those documents would support a conclusion that she, and not her company, had traded. Nonetheless, the respondent was insistent: “you didn’t trade? – – – That’s correct.”
Shown that the total of the tax invoices exceeded $86,000, her answer was that these had been personal, not business, transactions. The answer was inherently unbelievable if her evidence of being unemployed was to be accepted. The respondent, however, then conceded that she had tried pursuing the business of selling collectables. The respondent had not discovered any documents relating to this business endeavour, and maintained that discovery of such documents “was not required”. In cross-examination, the respondent adhered to the position that she had not earned any income whatsoever from this business venture. The implicit distinction drawn by the respondent was that she had attempted to trade but had not been successful.
The tax invoices demonstrated that the respondent had engaged in over 50 transactions in the period from 22 June 2015 until 8 September 2017. Many of the entries are recorded as having been for ‘Cash’ while others were described as being ‘Offset’ and yet others were assigned the description ‘EFTPOS’. The sheer number of transactions stands in contrast with her claim to having been too sick to do anything.
The respondent confirmed she was familiar with the account statements and tax invoices. She confirmed that on one invoice, a cash entry for a payment of $17,000 appeared. Asked to explain this cash payment, the respondent replied “it was not my money, however. It was – yes.”
The respondent then said that each transaction in the tax invoices had been made on behalf of “someone else”. Moreover, the respondent conceded that her bank statements did not reflect the transactions shown in the tax invoices. I am left in no doubt that the respondent had not disclosed all of her financial records and that accordingly, her true financial position is not known.
The respondent then conceded that she had purchased items from other dealers. The respondent could initially only recall purchasing from a dealer, (name omitted).
When the applicant’s counsel produced a distinctive Blue Notebook, the respondent confirmed and identified it as being hers. It was stated that the respondent had left the Blue Notebook in the matrimonial home when she had vacated that property. Counsel identified a page in which the respondent had made entries recording details as to each:
a)(details omitted)
When pressed as to the handwritten entries in her Blue Notebook, the respondent confirmed she had accounts with each of the following:
a)(account names omitted)
Each of those entries in the Blue Notebook were in the respondent’s hand. Each of them had a distinct Username and Password.
In the face of those various accounts, the respondent maintained she had never run a business. She then stated that the money to purchase (business items) had been borrowed from family and friends. Asked whether there were other bank accounts, the respondent said: “I am not at liberty to say, Mr Williams, because I don’t know where the funds exactly came from. Only that they were borrowed monies from family and friends”. The answer was implausible.
At one point, it was faintly suggested that monies withdrawn from the childrens’ bank accounts may have formed the monies used to purchase (business items). If that was the respondent’s case, she did not lead it directly and counsel accepted there was no evidence to that effect.
When asked whether her partner, Mr G, had subsidised her business, the respondent stated that he had tried to assist her, including by lending financial assistance. Reminded that the tenancy application had recorded that the business was generating $100,000 to $120,000, the respondent said “you would have to ask him”. Mr G had not filed any evidence and although he was apparently in the body of the court, was not called to give evidence. The respondent then stated that she had not disclosed these matters because she thought these proceedings related only to marital financial affairs.
The respondent confirmed that she and Mr G had been living together since November 2013. Taken to her financial statement sworn on 4 August 2016 and asked to explain why the financial statement did not disclose the financial position of her partner, she initially stated that she wasn’t required to do so because, at that time, she and Mr G had been separated due to her ill-health. Shortly afterwards, she agreed she was in fact living with Mr G when she swore that financial statement, but maintained that disclosing her partner’s financial position was “not required”. The respondent then stated that she had not included details of Mr G’s income because she did not know it was required at that time, adding that she had not made enquiries of him as “that wasn’t required.”
The respondent was directed to an entry in her financial statement from August 2016 stating she had $500 funds in the bank. Asked to explain the purchase of items from (name omitted) for sums in excess of $10,000, the respondent responded that the purchases had been made using borrowed monies. Taken then to the liabilities section of the financial statement, the respondent stated that there was no reference to borrowings for the purchase of such items, again, because “it wasn’t required”. Asked to explain the quantum of those liabilities, being supposed borrowings from family and third parties, the respondent then said that the (business items) had been purchased for personal use and not as part of any trading activity. She stated that the liabilities were for a sum in excess of $120,000. The respondent said those liabilities were outstanding. Responding to a statement that her evidence on this topic was totally and utterly untrue and not supported by any other witnesses or documents, the respondent responded “I rest it with the judge”. Neither those assets nor liabilities were disclosed by the respondent.
The respondent was then shown a further bank statement, being a personal account, and was directed to an entry on the same date as the respondent had withdrawn monies from the children’s trust accounts. The respondent, when asked to explain why she had withdrawn money from the personal accounts on that date, responded that the withdrawal on that date was simply “coincidental.”
I find, contrary to the respondent’s evidence, that her business venture has operated and I infer that she has employed each of the many accounts with the various (businesses) she has dealt with so as to acquire (business items) for the purpose of conducting her business venture.
Insofar as the respondent has deposed that she did not earn any income whatsoever from the conduct of that business, I reject that evidence. The court is left in a position where it cannot know what income was derived from the conduct of this business. The court’s inability to know the precise details of the respondent’s business dealings in her business is a direct result of her failure to make full and proper financial disclosure.
The applicant was able to establish that the respondent had opened accounts with not one, but a large number of businesses around Melbourne. Constrained by financial considerations, the applicant had quite reasonably directed one subpoena which was targeted upon an examination of the respondent’s financial dealings with (business omitted).
I accept the applicant’s submission that although it might have been done, it was not necessary that the applicant serve a subpoena upon each of the (businesses omitted) with respect to whom the respondent had established a trading account. It lay within the power of the respondent to make full and frank financial disclosure in relation to each of these accounts but she has not done so. On the material which was produced on subpoena from (business omitted) it is evident that the respondent has engaged in extensive trading over a significant period with that single (business).
The respondent’s evidence that she had engaged in the multiple transactions with that (business) for personal acquisition, or on behalf of friends or family, was entirely unpersuasive.
Mr Williams of counsel made the poignant submission that the respondent was, at one of the same time, apparently able to purchase a Rolex watch from (business omitted) whilst owing, but not paying, outstanding child support of ~$11,000. I accept his submission that this behaviour was redolent of a deliberate and conscious pattern of behaviour focussed on the pursuit of self-interest in preference to discharging her responsibilities for the care of her children.
There was, in addition, considerable force in the submission that, had the respondent’s trading account with (business omitted) and other (businesses) been not established by the evidence adduced on subpoena, the respondent would simply have persisted in the stance that she was unwell, unemployed and that her business was not trading.
Whilst the Full Court observed in Chang & Su that a deliberate and blatant pattern of conduct in not complying with disclosure obligations would make the court’s task more difficult, it also entitles the court to more easily draw inferences that such evidence would not have assisted the respondent’s case. This conclusion is reinforced by the complete absence of any evidence by the respondent’s partner, Mr G, as to his present financial circumstances. Mr G was not called as a witness. Contrastingly, for the purposes of making an application for rental accommodation, the financial disclosure made to the real estate agent indicated that Mr G estimated his current financial income to be in the order of $100,000 per annum. When giving evidence, the respondent confirmed that this handwriting on that part of the rental application was the handwriting of Mr G.
The same submission as made and recorded at [198] above was made in relation to the failure to call the respondent’s partner, Mr G.
The respondent’s lack of candour in making financial disclosure was unexplained in the witness box.
I have addressed the respondent’s business activities in trading in (business omitted). The court has been significantly hampered by the respondent’s lack of disclosure concerning those activities. I am prepared to infer that the respondent has been actively involved in that business for a significant period. The applicant proved the respondent’s account details with many (businesses) and proved the extent of the trading in relation to one of them. I am prepared to infer that the respondent was also trading actively on her accounts with the other (businesses). By reason of the respondent’s lack of candour in her disclosure in relation to her financial affairs and those of her partner, Mr G, the court can more easily infer that the respondent’s financial position is far more buoyant than the respondent would have the court believe.
In addition, I infer that the respondent’s new partner, Mr G, also has such capacity. The respondent’s failure to call Mr G to give evidence entitles the court to more readily infer that the respondent has him as an available financial resource to address her future needs. However, I accept that the respondent’s future earning capacity has, at least in the short term, been limited by the recent birth of her child.
Children
The respondent submitted there was no doubt that the children would continue to live with their father and that while the eldest child has now attained her majority, the two younger children were still under 18 years of age. The respondent conceded that her contribution to their costs through child-support post separation was minimal and accepted that some adjustment in the applicant’s favour of 3-5% may be appropriate to reflect that the children would remain in his care until they were 18 years of age. To my mind, it is more appropriate to recognise that the applicant is likely to have some measure of responsibility for their care well beyond their attaining the age of 18 years.
By reason that the respondent has not complied with her obligations to pay child support in the past, I am fortified in the conclusion that she will likewise not do so in the future.
In many cases, it may be expected that the non-residential parent will spend some time with their children and, indirectly, that this will afford the primary care giver some respite and indirect financial support inasmuch as the children will be looked after whilst they are in the care of the non-residential parent. This is a relevant consideration because here the children spend little if any time in the company of the respondent. At no stage has the respondent made any application for orders that she be permitted to spend time with the children. I infer that the status quo will remain and accordingly that the children will remain in the care of the applicant predominantly, if not exclusively.
Other matters
I have set out the procedural history of the matter above. In the course of this proceeding, orders for costs have been made against the respondent. In addition, recognition should be given to the impact which the respondent’s conduct has had upon the applicant. The cost to the applicant has been significant both in financial terms and in terms of the burden which this litigation has placed upon him. The respondent had failed or refused repeatedly to vacate the matrimonial home. On the date that she did so, the respondent applied for an intervention order against the applicant. The litigation has been unduly prolonged and made more complex by the respondent’s refusal to provide financial disclosure. The costs of the first day of the trial were rendered abortive by reason of the respondent’s application for a further adjournment of the proceeding.
Overall effect of findings
On account of s 75(2) factors, I consider that it is appropriate to make an adjustment of 10% in favour of the applicant.
The respondent’s counsel urged me to step back and consider the matter holistically, particularly after a long period of cohabitation, submitting that there should be equality and justice overall and for that reason the applicant’s claim for an adjustment of 75/25 was not just or equitable. In addressing the evaluation of the parties’ contributions and future needs, I have considered and attached some weight to that submission.
I have reflected upon my findings and remain satisfied that it is just and equitable for the parties’ existing property interests to be adjusted so as to divide that property 70% to the applicant and 30% to the respondent.
I have done so for the purpose of reflecting in the manner sought by the respondent on what order is just and equitable in all of the circumstances.
Accordingly, I conclude that the final alteration of the parties’ interests in their net asset pool should be adjusted so as to reflect their interests as to 70% to the applicant and 30% to the respondent respectively.
Relief
As the authorities make clear, the question posed by s 79(2) whether it is just and equitable for there to be an adjustment of property interests is not to be conflated with the separate question of what relief should go: see, s 79(4), Whent & Marbrand [2018] FamCAFC 95, [21].
The circumstance that the respondent has not made full or frank disclosure in relation to her financial affairs and that she has not co-operated in relation to the valuation of the properties has impeded the court in its ability to make a present finding of fact as to the value of the properties and the precise quantum of the asset pool. Neither of those matters should operate to deny the determination of what orders are just and equitable in the adjustment of their property interests: Elkhouri & Amatullah, [121]; cf Chang & Su (Kaye and Dawe JJ, Finn J agreeing).
Conclusion
It is necessary to frame orders to give effect to my findings.
In the making of final property orders, it is well recognised that it is desirable to make orders that avoid the sharing of particular assets: Norbis v Norbis (1986) 161 CLR 513, 521 (Mason and Deane JJ). To some extent, each of the parties has identified particular assets which, they contended or agreed, should be retained by them respectively.
Counsel for the applicant submitted a detailed set of proposed orders that were submitted to be appropriate having regard to the findings that were pressed in closing address. While many of those orders were of particular assistance, they were presented in some cases, by way of alternatives. In my view, it is preferable in the circumstances of the case to make directions by which the applicant will reformulate proposed final orders to be sought, consistently with the findings in this judgment, and then to afford the respondent an opportunity to serve a reply to that set of proposed final orders indicating where she agrees or disagrees and why. The matter will then be brought back for directions at which time any remaining issues in dispute will be determined by the court.
I express my gratitude to counsel for their assistance.
I certify that the preceding two hundred and eighteen (218) paragraphs are a true copy of the reasons for judgment of Judge A Kelly
Date: 21 September 2018
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