MARTINELLI & DE LUCA
[2017] FamCA 830
•18 October 2017
FAMILY COURT OF AUSTRALIA
| MARTINELLI & DE LUCA | [2017] FamCA 830 |
| FAMILY LAW – JURISDICTION – De facto relationship – whether a de facto relationship existed between the parties – Where the wife seeks no division of property under s 90SM Family Law Act 1975 (Cth) – where neither party argued there was no de facto relationship – Where the Court made a declaration of a de facto relationship existed from January 2000 until 12 June 2013. FAMILY LAW – PROPERTY – Appropriateness of an alteration of property interests – Just and equitable – De facto relationship – Where the wife contends that the parties’ held their assets separately and did not intermingle their finances – Where the focus is on the contributions of the parties – Where the Court held that the parties did intermingle their finances – Where the wife was only able to repay loans because of the financial input of the husband and the income generated by his business – Where it is just and equitable to make an alteration of property interests of the parties. FAMILY LAW – PROPERTY – Alteration of property interests – Where the conduct of the parties created complexities – Where the Court determined a global approach would achieve a just and equitable alteration of property interest – Where notwithstanding the misappropriation of monies by the wife from the husband’s business the wife made the greater contribution to the conservation and improvement of the parties’ assets – Court ordered adjustment of property in favour of wife. | |
| Family Law Act 1975 (Cth) ss 4AA, 90RD, 90SF, 90SM | |
| Bevan & Bevan [2013] Fam CAFC 116 | ||
| APPLICANT: | Mr Martinelli | |
| RESPONDENT: | Ms De Luca | ||||
| FILE NUMBER: | ADC | 388 | of | 2014 | |
| DATE DELIVERED: | 18 October 2017 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Adelaide |
| JUDGMENT OF: | Berman J |
| HEARING DATE: | 4 – 8 July 2016, 8 – 9 August 2016, 18 August 2016, 6 – 7 September 2016, 12 October 2016, 13 September 2017, 25 September 2017 and 9 October 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Lindsay |
| SOLICITOR FOR THE APPLICANT: | Diane Myers Pty Ltd |
| COUNSEL FOR THE RESPONDENT: | Mr Richards |
| SOLICITOR FOR THE RESPONDENT: | Barnes Brinsley Shaw Lawyers |
IT IS ORDERED THAT:
Pursuant to section 90RD of the Family Law Act 1975 (Cth) it is declared that a de facto relationship existed between the applicant and the respondent in the period January 2000 until June 2013.
That pursuant to section 90SM of the Family Law Act 1975 (Cth) it is ordered by way of final orders for settlement of property between the parties that:-
(a)Within thirty (30) days of the date of these orders the wife do pay to the husband the sum of TWO HUNDRED AND NINETY ONE THOUSAND AND TWENTY TWO DOLLARS ($291,022) (“the settlement sum”);
(b)That to give effect to the payment of the said settlement sum the husband and wife do all things necessary to cause the net proceeds from the sale of C Street, Suburb D and such further sum as may be required to be paid to the trust account of Diane Myers Pty Ltd solicitors for and on behalf of the husband;
(c)That otherwise each party retain all other property, superannuation and financial resources in their separate name, possession or control;
(d)That the husband indemnify the wife and keep her indemnified in respect of any outstanding loan or other obligation in relation to the following:-
(i)CBA personal account …60;
(ii)CBA trading account …84;
(iii)CBA MasterCard …55;
(iv)CBA loan re E Town …03;
(v)CBA car loan …06;
(vi)CBA business loan …79;
(vii)CBA loan re C Street …26;
(viii)NAB Visa account …79;
(ix)The ATO debt owing by the husband;
(e)That the wife indemnify the husband and keep him indemnified in respect of the following:-
(i)Capital gains in relation to F Street;
(ii)BAS debt;
(iii)The wife’s CBA MasterCard.
(f)In default of the payment by the wife to the husband of the settlement sum as provided for in paragraph 2(a) herein and should the default continue for a period of twenty one (21) days THEN and in those circumstances the wife shall do all things necessary to forthwith place on the market for sale by auction or private contract the properties situated at 1 - 4 G Street, Suburb D, South Australia upon such terms and conditions as the parties may agree and from the net proceeds of sale the husband is to receive so much of the settlement sum as shall remain outstanding together with default interest at the rate of ten (10) per cent per annum with the balance (if any) to be paid to the wife;
(g)That to give effect to these orders a Registrar of this Honourable Court pursuant to section 106A of the Family Law Act 1975 (Cth) shall be empowered to sign all such documents on behalf of either or both parties upon proof by affidavit of the neglect or refusal by a party to do so;
(h)That the wife forthwith deliver up to the husband all documents and records that comprise the books of accounts and financial records of Martinelli Pty Ltd.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Martinelli & De Luca has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT ADELAIDE |
FILE NUMBER: ADC 388 of 2014
| Mr Martinelli |
Applicant
And
| Ms De Luca |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
The proceedings relate to the settlement of property arising from a de facto relationship spanning 13 years from 2000 until the date of final separation on 12 June 2013.
Mr Martinelli (“the husband”) commenced proceedings in the Federal Circuit Court by way of Initiating Application filed 5 February 2014. The orders for property settlement currently sought by the husband are those reflected in his Amended Initiating Application filed in the Family Court of Australia on 25 June 2016.
Ms De Luca (“the wife”) opposes the orders sought by the husband and seeks orders as set out in her Amended Response filed 27 June 2016. The wife seeks an equal division of the proceeds arising from the sale of the parties’ former home and that they otherwise retain all property in their possession or control.
The wife argues that there should be no division of property pursuant to section 90SM of the Family Law Act1975 (Cth) (“the Act”) contending that the parties kept their financial affairs separate save for their respective contributions to the purchase and improvement of C Street, Suburb D (“the former home”).
The matter is complicated by the allegation that the wife misappropriated money from the office account of the husband’s former business. The husband asserts that the wife would engage in non-business related discretionary spending and charge the accounts to her credit card. She would then draw a cheque from the business account directed to her in an equal amount. Further, that on various occasions the wife recorded the transaction in the business’ account ledger as a disbursement to a goods and services supplier and drew cheques on the account for amounts that exceeded the cheque stubs.
ORDERS SOUGHT
The husband seeks approximately 58 per cent of all property of the parties’. The orders sought by the husband are particularised in the summary submission prepared by the husband’s counsel. The husband seeks that:-
(1)The wife transfer to the husband her interest in property situated at 1 - 4 G Street, Suburb D (“The Shops”);
(2)The husband retain all interest in the property situated at N Street, E Town;
(3)The husband retain all interest in the property situated at 5 G Street, Suburb D;
(4)The husband retain his motor vehicles, savings and investments, furniture, jewellery and personalty;
(5)The wife retain the entire net proceeds of sale of F Street, Suburb H;
(6)The wife retain her Sports motor vehicle, savings and investments, furniture, jewellery and personalty including proceeds from the sale of the former home.
The wife seeks:-
(1)That the proceeds from the sale of the former home be divided equally between the parties;
(2)That the parties’ otherwise retain all real estate, shares, savings, investments, interest in any trust or other companies, superannuation entitlements, motor vehicles, furniture, jewellery and personal effects in their respective possessions and control.
DOCUMENTS RELIED UPON
The husband relies upon the following documents:-
(1)Amended Initiating Application filed 25 June 2016;
(2)Financial Statement filed 6 May 2016;
(3)The husband’s affidavit filed 28 January 2015;
(4)The husband’s affidavit filed 18 March 2015;
(5)The husband’s affidavit filed 6 May 2016;
(6)Affidavit of Ms B (“bookkeeper”) filed 28 January 2015;
(7)Affidavit of Ms B filed 20 March 2015;
(8)Affidavit of Ms B filed 27 January 2016;
(9)Affidavit of Mr J (“chartered accountant”) filed 28 January 2015;
(10)Affidavit of Ms K (“human resources consultant”) filed 22 January 2015.
The wife relies upon the following documents:-
(1)Amended Response filed 27 June 2016;
(2)Financial Statement filed 27 June 2016;
(3)The wife’s affidavit filed 28 January 2015;
(4)The wife’s affidavit filed 20 March 2015;
(5)The wife’s affidavit of documents filed 20 March 2015;
(6)The wife’s affidavit filed 27 June 2016;
(7)Affidavit of Dr L (“general practitioner”) filed 27 June 2016;
(8)Affidavit of Mr M (“psychologist”) filed 27 June 2016.
CHRONOLOGY
1945
Husband born
1951
Wife born
1974
The husband and his father purchase 1 - 4 G Street, Suburb D (“The Shops”) and 5 G Street, Suburb D
1979
The husband purchases N Street, E Town
1994
The wife purchases 2 F Street, Suburb H
1995
Husband diagnosed with Acoustic Neuroma
8 November 1996
Wife receives Superannuation Scheme Benefit in the amount of $156,719.30
January 2000
Parties commence cohabitation
May 2001
Wife studies to for a professional registration
July 2003
Wife purchased husband’s interest in The Shops
1 March 2004
Wife commenced employment with the husband’s business
2005
Husband experiencing cash flow problems with business
21 May 2005
Wife purchases Sports motor vehicle
2008
Husband diagnosed with cancer
2008
The parties become engaged to be married
June 2009
Parties purchase F Street, Suburb H
July 2009
Wife receives a compensation payout of $127,513
June 2010
Parties purchase C Street, Suburb D
3 September 2010
The wife sells 2 F Street, Suburb H
October 2010
The husband operates his business from 2 C Street, Suburb D
2011
Husband’s business acquires work from Ms O
December 2012
Husband undergoes aortic valve replacement
12 June 2013
Parties separate
28 March 2014
Husband merges his business with Business P and ceases operating from 2 C Street, Suburb D. Husband and wife are employed at Business P
15 August 2014
Wife ceases employment at Business P and commences employment with Business Q
November 2014
Sale of C Street, Suburb D
December 2014
Sale of F Street, Suburb D
2016
Wife retires from employment
SCHEDULE OF ASSETS AND LIABILITIES
The Court has the benefit of receiving a summary submissions document prepared by counsel for the husband. It identifies a balance sheet of assets and liabilities.
In the wife’s summary submissions in reply, she updates the values of some liabilities post-separation. Given the time that has elapsed since separation I required counsel to confer and produce a joint balance sheet. The document was tendered on 9 October 2017 with an opportunity given to counsel to speak to the document.
ASSETS
No
Description
Value
Current owner
1.
Proceeds from C Street, Suburb D (“the former home”)
$323,366
Joint
2.
E Town property
$280,000
Husband
3.
2 C Street, Suburb D property
$625,000
Husband
4.
The proceeds remaining from F Street, Suburb H
$306,407
No remaining proceeds
5.
1 - 4 G Street, Suburb D (“The Shops”)
$930,000
Wife
6.
Husband’s motor vehicles
$10,000
Husband
7.
Husband’s furniture and effects
Nil
Husband
8.
Wife’s Sports motor vehicle
$20,000
Wife
9.
Commonwealth bank savings (account no. …94)
$3,529
No remaining proceeds
10.
R Bank savings (account no. …10)
$1,113
No remaining proceeds
11.
Wife’s furniture and effects
Nil
Wife
LIABILITIES
12.
CBA loan (account no. …60)
$4,775
Husband
13.
Business trading (account no. …84)
$55,078
Husband (figure has increased post-separation)
14.
MasterCard (account no. …68)
$4,384
Husband
15.
E Town loan (account no. …03)
$127,837
Husband
16.
Motor vehicle loan (account no. …06)
$11,761
Husband (debt discharged post separation)
17.
Husband’s business loan (account no. …79)
$389,060
Husband
18.
2 C Street renovation loan (account no. …26)
$140,000
Husband
19.
MasterCard
$2,000
Wife (debt discharged post separation)
20.
Visa (account no. …79)
$6,611
Husband
21.
Husband’s 2012 ATO tax liability
$45,183
Husband (debt discharged post separation)
22.
Husband’s 2013 ATO tax liability
$37,898
Husband (figure has increased post separation)
23.
Husband’s integrated client account
$4,456
Husband
24.
Capital gains on sale of F Street, Suburb H
$16,324
Wife (debt discharged post separation)
25.
Wife’s BAS liability
$7,000
Wife (debt discharged post separation)
26.
Husband’s accounting fees
$26, 175
Husband
SUPERANNUATION
27.
Wife’s Superannuation
$162,934
Total Superannuation
$162,934
The husband proposes that he receive 58 per cent of the property pool including the E Town property, 2 C Street, The Shops and his associated business loans. He proposes that the wife receive 42 per cent of the property pool including the proceeds from the sale of the former home and F Street, her motor vehicle and superannuation entitlements.
The wife seeks that there be no divisions of property and that she retain the following:-
(1)50 per cent of the balance of the net proceeds of the former home;
(2)100 per cent of the sale proceeds of F Street, Suburb H (noting the wife’s assertion that there are no remaining proceeds);
(3)Her interest in The Shops;
(4)Wife’s savings, motor vehicle, furniture, personal effects, her credit card and BAS liabilities, capital gains in respect of F Street and her superannuation.
In the event that her submission is rejected, she concedes that the jointly prepared balance sheet of 9 October 2017 is an accurate representation of the parties’ assets and liabilities. She does not concede that the full proceeds of sale of F Street, the business, ATO, accounting fees and credit card liabilities of the husband should be notionally added back and brought to account.
ISSUES IN DISPUTE
Apart from valuations of property undertaken at the joint instruction of the parties, there are few aspects of the matter which are agreed. The issues in dispute are as follows:-
(1)Whether there should be a division of property. The wife proposes that there be no division of property where it was never the intention of the parties to merge their financial affairs. The husband seeks that there be a division of the property under s 90SM of the Act.
(2)The manner in which the parties entered into commercial transactions in respect of the following properties:-
(i)The Shops;
(ii)F Street, Suburb H;
(iii)C Street, Suburb D.
(3)The broader issue of how to treat the wife’s drawings from the husband’s business account where it is argued that she used some of the money to reduce outstanding loans on her property.
BACKGROUND
The husband was born in 1945 and was 70 years of age at the date of trial. He is employed in a professional occupation. The wife was born in 1951 and was 64 at the date of trial. She is qualified in an aligned profession.
The parties commenced a causal relationship in or about 1999 and in 2000 the husband moved into the wife’s property at 2 F Street, Suburb H. At cohabitation the parties owned various assets including real property, motor vehicles and savings.
The E Town Property
In 1979 the husband purchased the E Town property. The registered proprietor is N Street Pty Ltd. The husband holds all shares in that company. The property has been used from time-to-time as security for loans.
The property was used as collateral for the purchase of the former home in the amount of $149,000. When the former home was sold in November 2014 the E Town mortgage remained outstanding and was $137,445.30 as at 30 June 2014.
The property was valued 2013 at $280,000.
As at May 2016 the value of that mortgage was $127,837. This was also the figure as at the date of trial.
The Shops & 2 C Street, Suburb D
In 1974 the husband and his father purchased a corner property on the intersecting roads of C Street and G Street. Following subdivision that property became the properties now known as The Shops and a residence at 2 C Street, Suburb D.
With respect to 2 C Street, Suburb D:-
(1)The husband’s mother occupied the residence until her death in 2006 and it was then used by the husband’s son. From October 2010 until March 2014 the husband operated his business from the residence.
(2)The husband is the sole registered proprietor.
(3)The property was valued in 2013 as $625,000.
(4)As at 1 December 2014, the property had an outstanding mortgage in the amount of $399,266.88.
(5)As at May 2016 (and as at the date of trial), the loan to renovate the property was $140,000.
In July 2003 The Shops were transferred to the wife for $425,000. The transfer occurred after the parties had received a valuation.
The wife says the husband used $300,000 of the purchase price towards the repayment of his Commonwealth Bank business loan account which was secured against the property at 2 C Street, Suburb D (“the business loan”). This reduced the balance to $259,189.84 on 26 June 2003. The balance of the business loan account as at the date of trial was $389,060.
The husband contends the purpose of the valuation was to satisfy the bank’s lending requirements, the wife considers it was done to ensure the transaction was at arm’s length. He says that the value did not represent its true value and he would not have sold it at that price to a third party.
The transfer was secured by a Commonwealth Bank mortgage is the sum of $445,000 and two mortgages were obtained against The Shops and 2 F Street, Suburb H.
The wife discharged The Shops mortgage on 23 October 2008. When 2 F Street, Suburb H was sold in September 2010 the mortgage was discharged and registered on F Street, Suburb H as alternative security.
Upon the sale and settlement of F Street on 22 December 2014, the remaining mortgage with respect to The Shops was discharged.
Since the property was transferred into the wife’s name, she has collected the annual rental. She has also paid all rates and taxes with respect to The Shops.
The Shops were valued upon joint instructions of the parties and a report prepared dated 30 September 2013 which valued The Shops at $930,000.
2 F Street, Suburb H
The wife purchased the property prior to cohabitation in September 1994 for the sum of $165,000. The purchased was funded by a Commonwealth Bank mortgage in the amount of $105,000 and $50,000 of the wife’s savings. The wife says that she met all the expenses of the property.
On 8 November 1996 the wife received a superannuation scheme benefit to the value of $156,719.30 which includes $56,719.30 of superannuation benefits. The wife says that $81,525 went to the repayment of the mortgage on the property.
The property was sold in September 2010 for a price of $475,000.
From the net proceeds of 2 F Street, Suburb H $145,216.79 was applied to the mortgage of F Street, Suburb H. From the proceeds retained, the wife contends that $300,000 was spent on renovations to the former home.
F Street, Suburb H
The parties jointly purchased the property in June 2009 for $440,000. Whilst the husband contends that 100 per cent of the purchase price was borrowed the wife contends that she alone paid the deposit.
The parties agree that the husband was unable to contribute to the maintenance and upkeep of the property and that the property was subsequently transferred into the sole name of the wife. This occurred on 12 February 2010.
The property was rented and the wife says there was a shortfall of $1,300 per month on the mortgage repayments. On 22 December 2014 the property was sold for $550,000.
Upon receipt of the settlement monies, the wife paid two loans: a sum of $181,256.44 in respect of the property’s mortgage and $41,918.98 towards the business loan held over The Shops (the remaining mortgage with respect to The Shops).
The wife received net proceeds of $306,407.35 and has incurred capital gains and associated expenses of $16,324. The wife contends that over time all of the net proceeds have been spent and the associated capital gains tax expense has been paid.
C Street, Suburb D
The wife says that the husband initiated the purchase of the former home and realised he could not afford it only after signing the contract at auction in June 2010. The home was then purchased by the parties as tenants in common. It was purchased for the amount of $871,000 plus registration and stamp duties totalling $915,150.
The parties agreed to contribute equally to the purchase of the former home. The parties funded the purchase by obtaining a loan over the husband’s E Town property in the amount of $149,000 and a joint mortgage over the former home in the amount of $766,150.
The parties agree that, although initially the intention, they did not contribute equally to the purchase and maintenance of the former home. The parties agreed that the husband would meet the wife’s half share of mortgage repayments. The husband ceased making the repayments in April 2014.
It is the wife’s position that $300,000 of proceeds from the sale of 2 F Street, Suburb H went towards renovations at the former home. The husband’s position is that approximately $240,000 went towards the former home.
The property was valued in 2013 at $1,100,000.
The former home was sold in November 2014 for $1,130,000. After the discharge of mortgage and associated costs there were net proceeds of $323,366
The wife says that in order to discharge the mortgage, she was required to repay one of the husband’s loans in the amount of $43,938. The funds secured against the E Town property remain outstanding.
The net proceeds of sale are held in a Conveyancer’s trust account.
Husband’s Business
The husband operated his business over the course of the party’s relationship. The wife was employed in 2004 in her professional capacity and she also undertook bookkeeping duties for the business.
In 2005 the husband commenced working for a client in relation to a large development. This caused the business severe cash flow problems for a number of years as the first sales did not occur until September 2012.
In 2011, the husband purchased the aligned business Ms O, for no consideration and 10 per cent of fees generated from the referral of clients. The husband attributes the acquisition to the significant growth in the business’s work.
In March 2014, the husband merged his business with Business P. He secured employment positions for both himself and the wife in the course of negotiations. The wife subsequently resigned.
Compensation payments received by the wife
In 1996 the wife was involved in a motor vehicle accidence and received a compensation payout on 28 April 2000 in the amount of $122,000. She says the monies were applies to various liabilities of the parties including a holiday, the husband’s credit card, mortgage repayments to The Shops and the purchase of a motor vehicle.
On 5 May 2000, the wife received a compensation payment of $1,560 with respect to an accident in 1999.
In 2005 the wife was involved in another motor vehicle accident and in July 2009 she received a compensation payment of $127,513.06. She says the monies went towards the acquisition of F Street, Suburb H.
The wife’s access to money from the business
The wife was employed in the husband’s business on 1 March 2004. She was also responsible for assisting with the business’s bookkeeping and office management.
Until January 2008, the husband was the sole signatory of the office and trust accounts and was required to sign all cheques. Around this time the wife was appointed as signatory of the business and trust account.
Throughout the proceedings it remained the wife’s position that she only ever made withdrawals from the business’s bank account upon the instructions of the husband or as necessary for the operation of the business.
The wife says that the husband requested to see her credit card statements so he could reimburse her for personal expenses paid on his behalf and any business expenses paid on her credit card. She said this arrangement was beneficial to the husband for tax purposes. These personal payments were allocated to the husband’s drawings. The wife admits that she cannot recall if she entered all the reimbursements into the business’s accounting and reporting software program.
The husband acknowledges that he agreed to pay the wife’s credit card expenses where the expenses were shared personal expenses such as dining out. He rejects that he agreed to pay for the wife’s personal expenses such as shopping and gifts.
In preparation for these proceedings the husband became aware that the wife was drawing monies from the business for her personal expenses by attributing the drawings without authority to the husband or third party contractors.
Where the wife had attributed an amount to a third party contractor, she had also created a GST expense such that the combined total equalled the amount paid to her credit card.
The wife denies misappropriating business funds. She further denies it is her handwriting on the cheques stubs as evidenced by Ms B. On 18 August 2016 the Court appointed an expert forensic scientist to analyse the handwriting of the cheque stubs and present findings as to whether on the balance of probabilities it was the handwriting of the wife.
DE FACTO RELATIONSHIP – THE LAW
Part VIIIAB of the Act deals with financial issues arising from or in respect of a de facto relationship.
If a de facto relationship existed then s 90RD of the Act requires a declaration to that effect.
Section 4AA of the Act provides assistance in defining the meaning of a de facto relationship:-
Meaning of de facto relationship
(1)A person is in a de facto relationship with another person if:
(a)the persons are not legally married to each other; and
(b)the persons are not related by family (see subsection (6)); and
(c)having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.
Paragraph (c) has effect subject to subsection (5).
The factors which might support the finding of a de facto relationship are as follows:-
(2)Those circumstances may include any or all of the following:
(a)the duration of the relationship;
(b)the nature and extent of their common residence;
(c)whether a sexual relationship exists;
(d)the degree of financial dependence or interdependence, and any arrangements for financial support, between them;
(e)the ownership, use and acquisition of their property;
(f)the degree of mutual commitment to a shared life;
(g)whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;
(h)the care and support of children;
(i)the reputation and public aspects of the relationship.
(3)No particular finding in relation to any circumstance is to be regarded as necessary in deciding whether the persons have a de facto relationship.
(4)A court determining whether a de facto relationship exists is entitled to have regard to such matters, and to attach such weight to any matter, as may seem appropriate to the court in the circumstances of the case.
(5)For the purposes of this Act:
(a)a de facto relationship can exist between 2 persons of different sexes and between 2 persons of the same sex; and
(b)a de facto relationship can exist even if one of the persons is legally married to someone else or in another de facto relationship.
The application of s 4AA of the Act was considered by Fitzgerald J in Lynam v Director-General of Social Security (1984) FLC 91-577 as follows:-
[51]In coming to the view that a couple had a relationship as a couple living together on a genuine domestic basis the court is to have regard to all of the circumstances of their relationship. Those circumstances may include those specified in sections 4AA(2).
[52]Subsection 4AA(3) highlights that no particular finding in relation to any circumstance is to be regarded as necessary in deciding whether the subject persons have a de facto relationship.
[53]Subsection 4AA(4) provides:-
A court determining whether a de facto relationship exists is entitled to have regard to such matters, and to attach such weight to any matter, as may seem appropriate to the court in the circumstances of the case.
[54]Thus, whether or not a de facto relationship, as defined, exists will depend upon an assessment of all of the circumstances of the relationship, each to be given the weight the court thinks appropriate.
[55] In Lynam v Director-General of Social Security (1983) 52 ALR 128 at 131 said:-
Each element of a relationship draws its colour and its significance from the other elements, some of which may point at one direction and some in the other. What must be looked at is the composite picture. Any attempt to isolate individual factors and to attribute to them relative degrees of materiality or importance involves the denial of common experience and will almost inevitably be productive of error. The endless scope for differences in human attitudes and activities means that there will be an almost infinite variety of combinations of circumstances which may fall for consideration. In any particular case, it will be a question of fact and degree, a jury question, whether a relationship between two unrelated persons of the opposite sex meet the statutory test.
[56]Many of the submissions put by the appellant in the appeal sought to place significant, if not determinative weight, on particular circumstances. Dent the identification of an error on the part of the Trial Judge it is difficult for such submissions to succeed. Merely because another Judge may have weighed the circumstances differently does not, of itself, demonstrate error.
It is the applicant who must establish on the balance of probabilities that a de facto relationship existed between parties.
The parties commenced cohabitation in January 2000 when the husband took up residence with the wife in the property at 2 F Street, Suburb H.
In July 2003, the wife purchased the husband’s interest in The Shops located at 1 - 4 G Street, Suburb D and in March 2004 commenced employment in the husband’s business. In 2008, the husband alleges that the parties became engaged to be married. They purchased a property at F Street, Suburb H in June 2009 and then the former matrimonial home at C Street, Suburb D in June 2010 where the parties remained until their separation in June 2013.
Whilst it is argued by the wife that at the commencement of cohabitation she was financially secure and did not want to intermingle her financial affairs with the husband, save and except for her contention that there was an agreement that the parties would keep their finances separate, she does not dispute that the parties were in a de facto relationship.
In the circumstances of this case it is proper that a declaration be made confirming the existence of a de facto relationship between the parties from January 2000 to 12 June 2013.
Given that determination, I have jurisdiction to consider an alteration of the interests of the parties in property by reference to s 90SM of the Act:-
(1)In property settlement proceedings after the breakdown of a de facto relationship, the court may make such order as it considers appropriate:
(a)in the case of proceedings with respect to the property of the parties to the de facto relationship or either of them – altering the interests of the parties to the de facto relationship in the property; or
(b)in the case of proceedings with respect to the vested bankruptcy property in relation to a bankrupt party to the de facto relationship – altering the interests of the bankruptcy trustee in the vested bankruptcy property;
including:
(c)an order for a settlement of property in substitution for any interest in the property; and
(d)an order requiring:
(i)either or both of the parties to the de facto relationship; or
(ii)the relevant bankruptcy trustee (if any);
…
(3) The court must not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
IS IT JUST AND EQUITABLE TO ALTER THE PROPERTY INTERESTS OF THE PARTIES?
The wife argues that to the extent that her interest in property accumulated prior to the commencement of the relationship this confirms her position that the parties agreed they would keep their financial affairs separate.
Each of the parties held property in their own right prior to cohabitation. The wife argues that other than some minor contribution by the husband, the wife funded his accommodation in her property at 2 F Street, Suburb H.
Whilst it is uncontroversial that the wife purchased the husband’s interest in The Shops in July 2003 for an agreed sum of $425,000 (determined following a valuation), she asserts that the purchase price was obtained by her from borrowings and savings without contribution or assistance from the husband.
Any maintenance and improvements to The Shops by way of capital works and the management of the tenancies was at the wife’s instigation without assistance or involvement of the husband.
The husband signed a contract for the purchase of a luxury Sports motor vehicle in May 2005 but was unable to finalise the transaction and the wife took over the obligation to the exoneration of the husband. In June 2009 the parties purchased the property at F Street, Suburb H as tenants in common by way of a minimal deposit and a bank mortgage for an amount in excess of the purchase sum. The wife alleges that she was entirely responsible for all outgoings in respect of the property and it is her position that the husband made no contribution to the loan repayments or other fixed outgoings.
In June 2010 the parties jointly purchased the former home at C Street, Suburb D and whilst it was agreed that each would contribute towards the purchase price, the wife says that she contributed $300,000 towards the renovation of the property whereas the husband contributed $149,000 by obtaining a loan over his property at E Town.
The husband does not agree with the wife’s contention that the parties were diligent and deliberate in keeping their finances separate and refers to the matters raised in his trial affidavit as accurately setting out the extent of the financial interrelationship between them.
In relation to the property at C Street, Suburb D whilst he concedes that the respondent contributed a substantial amount to the improvements, he does not concede the sum of $300,000 but argues there is evidence to support a lesser figure of $240,238. In relation to the mortgage, the applicant contends that he paid the full repayments on an ongoing basis after the wife reneged on her agreement to contribute.
A significant argument by the wife focusses on the transfer of The Shops to her.
Whilst the husband accepts that the catalyst for the transfer of his interest in The Shops was a reaction to poor cash flow and pressing financial need, it was not intended to be a separation of their finances but rather, to protect the properties and to further the financial security of their relationship.
The husband concedes that whilst it might be open to the wife to argue that her motivation for purchasing the husband’s interest in The Shops was different to his, that proposition crumbles when considered against the wife’s alleged dishonesty and misappropriation of a significant sum of money from the husband’s business assisting the wife in her lifestyle expenses, fixed and other expenditure including mortgage repayments and accelerated reduction in the loan principal.
The wife argues that s 90SM(2) of the Act provides that a Court must not make an order for settlement of property unless it is satisfied that in all the circumstances it is just and equitable to do so.
Prior to the consideration of s 79(2) (s 90SM(3)) by the High Court in Stanford v Stanford (2012) 247 CLR 108. The “preferred approach” is best encapsulated in the approach adopted and endorsed by the Full Court in Hickey & Hickey and Attorney General for the Commonwealth of Australia (2003) FLC 93-143 where the courts supported what had been commonly referred to as the “four step approach”.
The husband applies for an order under s 90SM for an adjustment of the interests of each of the parties in property under the Act. It is the husband’s contention that it would be just and equitable that orders for settlement of property be made, in particular in circumstances that would likely result in a transfer of property to him from the wife. The wife contends that the Court should not make an order because it could not be satisfied that it would be just and equitable to do so.
In Stanford (supra) the majority held:-
[35]It will be recalled that section 79(2) provides that “the court shall not make an order under this section unless it is satisfied that, in all the circumstances it is just and equitable to make the order.” Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the Court that, in all the circumstances, it is just and equitable to make the order.
[36]The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds.
Importantly the Court found:-
Whether it is just and equitable to make the order is not to be answered by assuming that the party’s rights to all interest in marital property are or should be different from those that then exist.
It is therefore not a matter of assumption that a party to a marriage has a right to an interest in property by reference to matters arising under s [90SM(4)]. A party cannot pull themselves up by their own bootstraps by asserting a contribution under s [90SM(4)] and therefore using the position to satisfy the obligation imposed by s [90SM(3)].
It was further held by the High Court that:-
To conclude that making an order is just and equitable only because and by reference to various matters in s 79(4) without a separate consideration of s 79(2) would be to conflate the statutory requirements and ignore the principles laid down by the Act.
Whilst clearly the Court has a significant obligation to consider the justice and equity of making any order that adjusts the property rights of parties, I do not consider that Stanford (supra) goes so far as to suggest that there can be no regard to the matters that might fall for consideration under s 90SM(4) of the Act. It is the very nature of the suite of contributions made by parties to a de facto relationship which in and of themselves have the ability to create equitable interests in the property of each of them.
The High Court in Stanford (supra) sought to define its likely application to cases in the following manner:-
[42]In many cases where an application is made for property settlement order, the just and equitable requirement is readily satisfied by observing that, as a result of the choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there will not and will not thereafter be common use of property by the husband and the wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired, is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should be determined by applying section 79(4).
In Bevan & Bevan [2013] FamCAFC 116 the majority of the Full Court said (in relation to the previously quoted paragraph in Stanford):-
[70]In our experience the circumstances described in the paragraph above encapsulates the vast majority of cases. Hence the reminder in Stanford of the pivotal role of section 79(2) is unlikely to have any impact in most cases, although it will serve as a reminder to Trial Judges that the precondition to making any order is a finding that it is just and equitable to do so.
In paragraph 73 the Full Court in Bevan (supra) stated that the decision of Stanford (supra) can be reduced to three fundamental propositions:-
(1)The court needs to consider the existing property interests of the parties and to identify those interests (by reference to common law and equity);
(2)The direction must be exercised in accordance with legal principles and not in respect of any assumption that the parties interests should be different from those determined by common law equity; and
(3)Section 79(2) cannot be conflated by reference to matters in section 79(4) (or by reference to section 90SM(3) by reference to section 90SM(4).
In Zaruba & Zaruba [2017] FamCAFC 91 at [38] – [39]:-
In the vast majority of cases, it will be appropriate to address the section 79(2) question by ascertaining the legal and equitable interests in property without making distinctions between individual assets. That is because [referring to Stanford] the quote express and implicit assumptions that underpin the existing property arrangements, can be seen to apply (to the extent and degree to which they do apply) to all of the property of the parties or either of them, including property in which the legal interests vary.
However, the position is likely to be different in circumstances where, as here, the characteristics of the property and the circumstances of its acquisition, improvement and the like can be seen to differ significantly and where, as here, the parties’ relationship has taken on a quite different characteristic during the period to which the section 79 enquiry is directed.
And then at [31]:-
The nature of a particular interest or interests in property and when and how it was acquired, utilised, improved or preserved may be very relevant to each of all of the three central questions:-
(1)Should a section 79 order be made at all;
(2)Whether contributions should be assessed “globally” or “asset by asset”, or by reference to two or more “pools”; and
(3)What is the nature and extent of each parties’ contributions.
However, there is no basis for excluding from consideration any property in which the parties have an existing legal or equitable interest.
Before a determination can be made that it is just and equitable for the Court to consider an order pursuant to s 90SM of the Act, careful consideration needs to be given to the evidence adduced in the proceedings.
THE EVIDENCE
The husband
The husband relies upon his affidavits filed 28 January 2015, 18 March 2015 and 6 May 2016.
Leave was given to the husband to adduce further evidence.
The husband gave evidence that he does not have hearing in his right ear and by reference to his financial statement said that it was likely that his income would be reduced from $250,000 per annum to about $226,000 following an adverse performance review.
The husband now works as a registered professional for an established business.
The parties met in the early 1990’s, commenced a relationship in 1992 and commenced a de facto relationship in early 2000 when he moved into the wife’s home at 2 F Street, Suburb H.
There are no children of the relationship, although the wife has a daughter now aged 40 and the husband has three sons aged 41, 39 and 29. The children live independently of the parties.
Whilst there was scant valuation evidence presented, the husband considers that he had property and personal effects at the commencement of cohabitation to the value of $350,000 comprising the following:-
(1)Property at N Street, E Town;
(2)Residence and office at 5 G Street;
(3)The Shops at 1 - 4 G Street;
(4)Husband’s business;
(5)Motor vehicles and personal effects.
He considered that the wife had property to the value of about $135,000.
Whilst recognising that he lived in the respondent’s home at Suburb H, his evidence is that he contributed to household expenses, entertainment of the parties, holiday expenses and contributed to the wife’s personal expenses.
He states that he supported the wife in undertaking and completing a course of study to become a registered professional and assisted her generally in pursuing her career.
The husband holds an interest in the property at N Street, E Town by reference to him holding all of the issued shares in the company that is the sole registered proprietor namely, N Street Pty Ltd.
Whilst acknowledging the wife’s ownership of the 2 F Street property, the husband challenges how the wife was able to discharge the initial mortgage of $105,000 by the time the property was sold for $475,000 on 3 September 2010.
As discussed, there was significant focus on The Shops situated at G Street and comprising shops 1 to 4.
The husband transferred The Shops to the respondent in July 2003 for $425,000. The husband acknowledges that the sale was made necessary by a difficult financial period in the operation of his business. They were transferred to the wife for $425,000 by borrowings of $445,000 which included the purchase price, stamp duty and all transfer costs and disbursements. Collateral security was taken over the wife’s property at 2 F Street, Suburb H and The Shops.
The husband asserts that the purchase price was determined by reference to a bank valuation which he says both he and the wife agreed was likely to be below market value. It is the husband’s evidence that the parties carefully considered the extent of rental to be received and notwithstanding that the finance commitment exceeded the value of The Shops, the rental would be cash flow positive and the finance commitment would be discharged at an early time.
Any suggestion by the wife that the transaction was at arms-length is denied by the husband and he considers that the parties recognised the benefit to their financial wellbeing of The Shops not being sold to a third party in circumstances where the wife had a borrowing capacity.
The mortgage was discharged on or about 28 October 2008 being five years after the transfer.
Whilst not admitted by the wife, the husband contends that in March 2008 the parties became engaged to be married. Certain cards and expressions of congratulation were tendered by the husband, but were not admitted to by the wife in any way to corroborate the husband’s assertion that the parties were engaged.
It is the husband’s position that following the engagement a decision was made to purchase a property at F Street, Suburb H in June 2009, with the intention of demolition and to thereafter build a home suitable for the parties.
It is the husband’s evidence that neither party contributed any actual deposit and the property together with stamp duty and costs of purchase were obtained by bank finance.
Within a short period of time the husband’s financial position was such that he was not able to contribute to one half of the mortgage as agreed with the wife. The wife’s position was that if she was going to be responsible for the mortgage repayments then she would only do so if the property was transferred into her name for no consideration.
The parties did not take up residence in the home and the wife received rental income and was responsible for the outgoings on the property including the mortgage. The property was sold in November 2014.
In April 2010 the parties purchased the former matrimonial home which had the advantage of proximity to the husband’s office at 5 G Street. Whilst it was his intention to purchase the property in his own right, he agreed following the execution of the contract for sale but before settlement, that the parties would hold the property as tenants in common in equal shares.
The husband does not recollect that the parties utilised any cash resources to assist in the purchase. The husband’s position is that he obtained a loan of $149,000 secured against his E Town property and a joint mortgage in respect of the property in the sum of $766,150.
The parties agreed that the property needed substantial renovation which was ultimately undertaken by the wife from money she received from the sale of the property at 2 F Street.
There is some contention between the parties as to the extent of the monies paid by the wife towards the renovations, but even on the husband’s case the amount was close to $250,000 (noting the wife asserts $300,000).
The extent to which the parties contributed to the property at C Street, Suburb D is a matter of some dispute.
The husband refutes any suggestion that the wife contributed to the property. He states that he met all mortgage payments, outgoings and maintenance from August 2010 until the date of sale in the total sum of $475,735.
The wife commenced employment in the husband’s business in 2004. It was intended that she undertake work and as a result had access to the books, accounts and financial records of the business. She became the business manager and had the ability to transact both trust and business banking accounts.
There is some dispute between the parties as to the extent and value that the conduct of the business brought by the wife brought to the business as a whole. A substantial amount of work was derived from the purchase of a aligned business in 2011.
I accept that there were notable instances where clients of the business became a source of significant work for the wife.
The husband acknowledges that the wife received three damages awards for personal injuries sustained in the following motor vehicle accidents:-
(1)$122,000 paid on 28 April 2000 (1996 accident);
(2)$1,500 paid on 5 May 2000 (1999 accident); and
(3)$127,513 paid in July 2009 (July 2005 accident).
The husband sets out the income paid to the wife as an employee of his business for the following periods:-
(1)2007/2008 – gross amount received $36,480 – tax withheld $6,803;
(2)2008/2009 – gross amount received $31,160 – tax withheld $3,892;
(3)2009/2010 – gross amount received $57,621 – tax withheld $11,543;
(4)2010/2011 – gross amount received $63,585 – tax withheld $13,921;
(5)2011/2012 – gross amount received $63,000 – tax withheld $16,400;
(6)2012/2013 – gross amount received $78,705 – tax withheld $24,355.
But for a modest amount received in 2003, 2004 and 2005 it appears that the husband’s taxable income whilst fluctuating has been substantial.
A convenient summary of the husband’s allegation that the wife misappropriated funds from his business is by reference to paragraph 3 and 4 of his affidavit of 18 March 2015:-
[3]From records provided I have been able to ascertain that the respondent withdrew funds from the Commonwealth Bank, Overdraft Cheque Account No. …84 in the name of [S Pty Ltd] in Trust for The [Martinelli] Family Trust (hereinafter referred to as “[Martinelli] Pty Ltd Account”) to meet her personal Commonwealth Bank MasterCard credit card number …53 (hereinafter referred to as “the respondent’s credit card”) expenditure.
[4]I have also ascertained that the respondent entered the amounts taken from the Martinelli Pty Ltd Account in the Martinelli Pty Ltd MYOB bookkeeping system and attributed the amounts to my drawings or third party contractors. Further, where the respondent has fraudulently attributed an amount to a third party contractor, such as [Mr T] or [Mr U] she has apportioned an amount to the third party and also created a GST expenses such that the two sums combined total the amount paid to her credit card.
The husband alleges that for the period 15 June 2007 to 12 June 2013 the wife spent $202,048 on her credit card and made 84 withdrawals from Martinelli Pty Ltd in the sum of $145,431.
The husband relies upon the evidence of Ms B who is a bookkeeper and a self-employed BAS agent.
The husband was challenged as to the extent to which Ms B was involved in the day to day financial management of the business. Whilst the husband agrees that the accounting system utilised in the business was to be upgraded to MYOB, he denied that Ms B was ever in the position of a bookkeeper but rather, that she was employed to do the BAS. She attended the business premises on a regular but not frequent basis for the purpose of assisting the staff, but in particular the wife to have the books of account prepared to send to the accountant.
The wife’s affidavit filed 27 June 2016 alleges that the parties argued about the husband’s expenditure in circumstances where the wife considered it to be “high and unsustainable”.
The wife asserts that from 2004 she continued to assist Ms B with the bookkeeping but as her workload increased she was less able to do so.
She says that she would help Ms B on an almost daily basis by attending at the bank and complains that there was no set procedures or policies in place as to who would be responsible for arranging payments of account. She seeks to elevate Ms B’s involvement in the business to a high level of responsibility.
The thrust of the cross examination was to seek a concession from the husband that either he was responsible generally for writing cheques or that where there was an inconsistency between the amount claimed on the cheque stub and the amount displayed on the cheque, it was at his direction.
The husband denied that on any occasion he had instructed the wife to change, amend or alter a cheque. He confirmed that the wife was a signatory to both the business and trust accounts from 2008 and did not agree with the proposition that as the wife’s business increased in volume and workload she expressed to him that she did not wish to be responsible for signing cheques.
Whilst the husband states that he never saw the wife’s credit card statement, he does acknowledge that if the wife paid a business expense from her credit card then she was always reimbursed.
At the time that the parties commenced their cohabitation in early 2000 the husband was running the business as a sole professional, initially with premises in the Adelaide CBD, Suburb V and then Suburb W. The business remained at Suburb W until it moved to the Suburb D premises. The wife first started to assist the husband at the CBD business. She came in from time to time and undertook secretarial duties. The husband concedes that she was not paid for her work and he did not formally employ her until 2004.
In agreeing to the proposition that the wife volunteered her services, the husband agreed that she did so but did not concede that her efforts were other than minimal. Generally, the husband employed full-time secretarial staff to assist in the day to day operation of the business.
His evidence is that it was from 2004 that the wife was employed as a bookkeeper utilising the MYOB accounting software system. Her bookkeeping duties were in addition to her professional activities.
He was emphatic that the wife did all of the bookkeeping and the accounts for the business except for the BAS and tax returns which were undertaken by an accountant. She maintained this role until separation and the bookkeeping duties increased as the business workload and the associated activities developed.
The work that the wife did was valuable and necessary.
It was put to the husband that he asked the wife to purchase The Shops at a time when he needed money to maintain both his business and his lifestyle. The husband’s response was that he did not need to do anything but did acknowledge that there were cash flow difficulties in the business. He could not recall the extent of the financial problem, but remembers taking advice from his accountant and considered the potential advantage of transferring his interest in the properties to the wife given that he considered they were in a long-term relationship.
The money received by the husband was used to pay down the business loan debt, but the proceeds were not solely utilised for this purpose.
The wife borrowed the entire purchase price of $425,000 for The Shops. The husband applied $300,000 in reduction of a CBA business loan secured over the 2 C Street property. This reduced the outstanding sum from $559,000 to $259,000.
The husband was challenged as to the initial arrangements leading up to the sale and purchase of his interest and it was his evidence that the wife was not initially involved in the discussions with the accountant, but before the transfer there were discussions with the accountant.
Paragraph 17 of the affidavit of Mr J filed 28 January 2015 sets out the extent of the financial position of the business at the time:-
The 2003 financial year gross income was $218,667. While the 2004 gross income was $153,756 this reduction was attributed to reduce profit on rental operation (from $48,892 in 2003 to $4,195 in 2004) because of the sale of the shops to [the wife] and reduced client debtor collections from $161,993 in 2003 to $148,946 in 2004.
The husband agreed that the gross income from the business was modest and not enough to pay expenses.
In 2004 the husband had no taxable income and noting that in 2005 his taxable income was $2,711, he conceded that his living expenses had been funded by borrowings during the years 2003 to 2005 inclusive.
He confirmed that notwithstanding the monies paid by the wife in the sum of $425,000 were used to reduce the business loan, by 2005 the liability was almost up to the same level. Accordingly, even though the husband received money from the wife it was spent.
There was significant focus by the husband to minimise the extent of the financial impact of her business. It operated from the Suburb W premises and the husband’s evidence is that it was a normal office with the wife having the use of the business facilities such as reception, kitchen and other amenities. He denied that the wife operated a business from the photocopying room, but conceded that she did not require half of the premises to conduct her business. He did not give instructions to the accountant in terms of attributing a proportion of overheads.
It was his evidence that the wife’s business was not part of the core business of the business as a whole.
The intention of the husband was to adopt the schedule being annexure “RB1” to Mr J’s affidavit which attempted to compare the wife’s business income as a proportion of total income of the business. The summary is that this business produced a loss in all years other than 2012 and 2013. If the work that could be attributed to two ongoing clients of the business was excluded, then the loss was significant being $89,698 in 2013 and $141,035 in 2014.
I am not satisfied that the exercise undertaken by the accountant and adopted by the husband has validity. The apportionment of some of the items of expenditure are questionable and there is no suggestion that the wife did other than apply herself appropriately to her aspects of the business including servicing the two important clients introduced by the husband.
The husband was challenged as to the extent of his contribution when living in the wife’s premises. He did not pay rent and at no time did he pay a single utility account. He asserts that he was making some contribution to the personal expenses of the parties, but concedes little or no expenditure in relation to the costs of accommodation.
He also agreed that the wife assisted him in the business and when he was diagnosed with poor health and required hospitalisation, the wife assisted in the continued operation of the business. The husband makes a proper concession in considering that the wife “did a really terrific job” during the husband’s absence.
At paragraphs 55 to 60 of the wife’s trial affidavit filed 28 January 2015 she considers the acquisition and history of F Street, Suburb H. The property was purchased jointly by the parties in June 2009 for $440,000, but alleges that the applicant did not contribute any funds towards the purchase price. The wife states that she paid the deposit, all costs of maintenance, painting and other renovations and improvements together with outgoings in terms of rates, taxes and fixed expenses.
The husband transferred his interest to the wife in February 2010 conditional upon the stamp duty and costs of transfer being paid by the wife.
Since the transfer, I find that the wife paid all expenses, carried out renovations and undertook all improvements as may be required. Whilst she did not account to the husband, she did retain the income.
The husband also agreed that he made no contribution to maintenance and payment of outgoings in respect of the property at F Street, Suburb H purchased in the joint names of the parties. There is no such concession by the husband in respect of the circumstances surrounding the acquisition of the former home. The husband asserts that he signed a contract to purchase the property in the sum of $871,000. Whilst he considers that he could have purchased the property in his own right, he was prepared to acknowledge that the wife wanted to be a part of the purchase of the property and accordingly agreed that the mortgage would be shared equally.
After settlement of the former home the wife sold her property at 2 F Street and she received about $300,000. Whilst he was not prepared to acknowledge that the entirety of the proceeds of the sale of 2 F Street was utilised by the wife, I am able to find that the sum contributed by her was significant and at least equal to or in excess of $242,000. He borrowed $149,000 secured over the E Town property, but the parties were unable to agree how their separate interests should be reflected.
The husband was prepared to accept that the wife had received various damages awards and did not challenge the wife’s assertion that at least some of the money was used by the parties for lifestyle expenses including a ski holiday and a substantial payment to assist the husband in his credit card liabilities.
There appears much contention between the parties as to the extent of the husband’s expenditure, in particular on motor vehicles. The wife considers that the husband had a penchant for motor vehicles and the husband agreed that he had purchased cars for his children and paid for some or all of the ongoing associated costs. A motor vehicle was purchased for his son with a contribution by his former wife, for his sister, a Sports motor vehicle which was ultimately taken over by the wife and a motor vehicle for himself.
The principal assertion of the wife is to be found in paragraph 87 of her trial affidavit in the following terms:-
…The applicant and I always kept our finances separate. The applicant never enquired about my finances. I managed my own funds without reference to the applicant. I did not ever seek to manage the applicant’s finances and I made that known to him and his bookkeeper on several occasions.
The husband did not disagree with the broad position adopted by the wife, but considered that there were degrees of separation and intermingling of financial affairs. The husband paid for a range of expenses such as lunches, coffees and some of the wife’s personal expenditure. He acknowledged that she looked after her car payments and the properties. The husband’s expenditure (other than his current claim of misappropriation by the wife of business funds) was generally restricted to lifestyle expenditure. The parties often dined out and they travelled nationally and internationally.
He agreed however that other than two mortgages, they never operated a joint bank account. For the whole of the period of cohabitation he did not pay for any outgoings or liabilities in respect of the properties except for the former home.
The husband acknowledged that no issue has been raised with the Australian Taxation Office in relation to the potential taxation consequences of expenditure that has been recorded as a deductable business expense, but now considered to be money misappropriated by the wife.
As discussed, the husband denied any assertion that Ms B was the day to day bookkeeper and that she gave any specific accounting advice. Her task was to ensure that the books of account were in a fit and proper state to prepare taxation returns and financial statements.
Given the wife’s denial of any culpability in respect of her unauthorised use of money from the business, the husband was cross examined at length to determine the business’s system and management for the writing of cheques and the withdrawal and transfer of funds.
The husband denied that he had ever authorised or instructed the wife (or anyone else) to prepare a cheque that did not accord with the cheque stubs or for invoices to be prepared in respect of a non-existent expenses.
The husband’s evidence is that the full consequence of the wife’s actions only became apparent as a result of the discovery process following the parties’ separation and the commencement of litigation and by his ability to consider the wife’s credit card statements.
Ms B was asked to consider the personal expenses allocated to the husband’s drawings account or to his individual children. Ms B was not involved in the original preparation of documents, record keeping or recording of the transactions at the time that they occurred. By reference to the MYOB reports, Ms B records the expenses paid by the husband or reimbursements made to the wife and allocated to the husband’s drawings account for the period 1 July 2004 to 11 June 2013 in the total sum of $201,693. A convenient summary of the expenditure during the relevant period is considered by the husband to be shared living expenses of the parties.
Under cross examination the husband could not be certain about individual transaction details, nor necessarily the basis upon which the schedule was prepared. He was prepared to concede that there may be a degree of inaccuracy but by reference to some of the recurring items of expenditure which clearly pertain to the wife and the parties travel, I find that on the balance of probabilities the husband incurred significant and ongoing expenditure pertaining to the parties’ lifestyle.
In addition and unrelated to the expenses of the parties, the husband was generous to his adult children and the MYOB accounting system records that during the relevant period the husband spent a total of $128,183 on them.
Ms B’s affidavit filed 28 January 2015 records expenditure paid by the husband in respect of the acquisition, ownership and maintenance of the property at C Street, Suburb D. By reference to the MYOB records, but in particular as set out in annexure “SLT5”, Ms B records that from 29 June 2010 to 29 April 2014 the husband paid loan repayments totalling $226,242. In relation to expenses between the period 1 July 2011 to 16 September 2014 the husband paid a total sum of $58,439.97 as recorded in “SLT6”. The husband was not challenged as to the extent of the expenditure determined by Ms B and adopted by him.
Ms X
Ms X is a forensic scientist and her evidence was as a result of an order being made at the instigation of the Court for her to examine certain documents in order to ascertain whether on the balance of probabilities the handwriting as appears on both cheque stubs and copies of the corresponding cheques is that of the wife.
The background to the evidence arises from an affidavit of Ms B filed 27 January 2016.
Ms B was asked to analyse cheques that had been made out to cash during the period 17 November 2005 to 10 May 2013 which correspond with the period of employment of the wife by the husband’s business.
Her evidence was that there were a total of 122 discrepancies in respect of the details found on the cheque stubs and on the corresponding cheques. The discrepancies comprised two apparent separate courses of conduct.
The first course involved the wife allegedly writing out the cheque stub to cash drawings and in her own handwriting making out the corresponding cheque to cash for an amount that exceeded the cheque stub but accorded with the corresponding bank statement.
The second course of conduct involved the wife writing out the cheque stub for an amount payable to a nominated supplier, but in her own handwriting making out the corresponding cheque to cash instead of the nominated supplier.
Annexure “SLT1” to the affidavit of Ms B records that there were 95 separate transactions that constituted the first course of conduct totalling $18,940. “SLT4” comprises 27 transactions in respect of the second course of conduct totalling $17,546.
Whilst the wife was equivocal in her evidence both in affidavit and at trial as to whether handwriting on the cheque stubs and the corresponding cheques was hers, the effect of her evidence was to fundamentally challenge the foundation of the evidence of Ms B that it was the wife’s handwriting on the cheque stubs and cheques.
It was in those circumstances that the Court considered it would be further assisted by expert evidence directed to the likely identity of the author of the cheque stubs and cheques considered by Ms B.
Ms X relies upon her affidavit of 10 October 2016 which sets out her considerable expertise in the area of handwriting identification. Her qualifications and credentials were not the subject of challenge, but given the unusual circumstances in which the evidence was called, it is necessary to record that the qualifications of the witness are extensive and that she can be considered as an expert in the area of the examination of handwriting, signatures, document verification and ink analysis.
Her report records that she was provided with 20 examples of cheque stubs and the corresponding cheques from a range of documents brought to account by Ms B. The witness also had the advantage of 15 A4 pages of handwriting samples of the wife.
The witness brief was to determine whether or not the handwriting on the 20 Commonwealth Bank cheque stubs as described and presented to her were written by the author of the 15 handwriting samples of the wife.
Her evidence is that the consideration of handwriting authorship is a matter of complexity and brings to account the “degree of variability in the writing, the complexity of the writing and the relative timing of the questioned and comparison material”. There are five levels ranging from the evidence providing very strong support for the proposition that the questioned handwriting sample was written by the writer of a comparison handwriting sample to very strong support that the questioned handwriting sample was not written by the writer of the comparison handwriting sample. The 20 cheque stubs fell into different categories.
The summary was that of the 20 cheque stubs, 17 of them were given qualified support that they were written by the writer of the comparison handwriting samples (level two finding), whereas no opinion was able to be expressed in relation to three cheque stubs (level three finding).
In evidence, the witness considered that she had been provided with a good comparison basis, whilst the witness did not attribute a level one finding to the handwriting comparison, the attribution of “qualified support…that the questioned handwriting sample was written by the writer of the comparison handwriting sample” was considered appropriate.
I consider that in respect of the 17 samples about which the witness was prepared to make a finding, on the balance of probabilities the cheque stubs were written by the wife.
Ms B
Ms B relies upon her affidavits filed 28 January 2015, 20 March 2015, 27 January 2016 and 8 July 2016.
Her evidence is that she met the wife in 2000 when she was undertaking bookwork for a different organisation. She was engaged by the husband’s business as a bookkeeper and she is a self-employed BAS agent.
Her involvement with the husband’s business was as a result of a referral by the wife. She has some expertise in the MYOB accounting system and she was asked to set up the program to enable the wife to input data and utilise the system.
It is her evidence that she trained the wife in all aspects of the MYOB system as it related to the husband’s business and personal affairs and that she showed the wife how to reconcile office and personal expenditure.
Ms B does not accept the proposition that she was the day to day bookkeeper or had anything other than an involvement with the business that extended to the training of the wife initially and then to the attendance on a quarterly basis to undertake BAS and other activity statements leading to information being provided to the accountant for the preparation of taxation returns and financial statements.
Her first affidavit sets out the history of her engagement and involvement with the parties and the husband’s business and her calculations in respect of monies reimbursed to the wife, or expenses paid by the husband and recorded as a debit to the husband’s loan account.
Following the discovery of the wife’s credit card statements, Ms B reviewed the documents for the relevant period and determined that the total amount of credit card expenditure for a six year period from 15 June 2007 to 12 June 2013 was $202,048.59 and of this the sum of $145,430.53 was paid from Martinelli Pty Ltd Office Account in 84 payments.
The summary of the expenditure highlighted that the majority of the charges related to the wife’s personal expenditure in terms of personal adornment and grooming.
The summary of her evidence is that the wife used funds from the business to meet her personal expenditure and that they were hidden by attributing them to the husband’s drawings account, fictitious legal expenses and GST expense items for falsely claimed expenses.
The background to the evidence of Ms X was a summary of Ms B’s third affidavit which showed $18,940 in cash/cheque variances and a further $17,546 in respect of transactions where a nominated supplier was paid in cash.
A summary of Ms B’s evidence is contained in her fourth affidavit of 8 July 2016.
Extensive examination in chief was adduced and her denials were categorical in respect of the wife’s assertion that she had a day to day hands-on involvement with the financial management of the business.
Her attention to detail was impressive and her recollection lent significant weight to her evidence.
She was not significantly challenged in cross examination and I find her to be an impressive witness.
The witness was not called as a single expert, but rather as a person who has undertaken significant investigation and enquiry. The weight to be placed on her evidence is determined by the confidence that the Court has in the accuracy of her recording and counting. There was no suggestion in cross examination that Ms B was anything other than a witness of truth. It was not suggested that she had an ulterior motive or that there was any advantage to be gained by her from the evidence she gave purportedly in support of the husband’s case.
Whilst there was some consideration of a document that may have set out an initial consideration of a job description for Ms B, I consider that no weight should be attached to the evidence.
I find that Ms B’s involvement in the day to day affairs of the business was restricted to assisting the wife in her operation of the MYOB accounting system and her attendance on a quarterly basis to update the system and to obtain the necessary information to prepare BAS and other taxation records.
Mr J
Mr J is a chartered accountant and has been involved in the preparation of income tax returns and associated documents for the husband and the business since 2002. His evidence was of assistance to the Court in that it corroborated the husband’s evidence that he communicated directly with the wife as opposed to Ms B. He confirmed that the wife was a signatory on both the business and trust banking accounts and to his knowledge and observation she controlled the record keeping for the business, some management issues and the operation of the MYOB accounting system.
He was challenged in respect of the accuracy of the schedules he had prepared which attempted to allocate income (and expenses) derived from the wife’s business in comparison to the income (and expenses) derived from the business as a whole. For reasons as discussed, I was not assisted by the evidence of Mr J on this topic.
The wife
The wife relies upon her trial affidavits filed 28 January 2015, 20 March 2015 and 27 June 2016. It is her evidence that the parties commenced a relationship in early 2000 when the husband moved into her home at 2 F Street, Suburb H. Consistent with the concessions made by the husband, the wife maintains that she met the expenses of their accommodation without contribution from him.
She denies, contrary to the husband’s assertion, that there was any proposal of marriage and she goes further in asserting that she told the husband she did not wish to marry.
She considered that there was an agreement that the financial affairs of the parties would remain entirely separate.
Exhibit “13” annexes the statement of legal costs for the parties. As at 8 July 2016 the husband was indebted to his solicitors in the sum of $135,109.
Further costs were likely to be incurred in respect of the trial and final submissions.
As at 8 July 2016 the wife had incurred costs of $130,355 with anticipated future costs of $65,000.
The wife has however paid $103,145.
In Chorn & Hopkins (2004) FLC 93-204 the Full Court considered the approach to legal fees incurred (and paid) by parties in the following paragraphs:-
[55]This decision appears to confirm the principle that where the payment of legal costs can be regarded as a premature distribution of funds (in which both parties have an interest), it is appropriate to addback those costs as a notional asset. It also confirms the principle that where funds have been borrowed to pay legal fees, and such liability is still outstanding, neither the payment of the fees nor the liability should be taken into account. The decision also supports the proposition that where it is determined that a payment of legal fees should be taken into account as a notional asset, any outstanding liability in respect of those fees should also be taken into account.
[56]In summary, we consider that the abovementioned decision of the Full Court established that, while the treatment of funds used to pay legal costs remain ultimately a matter for discretion of the Trial Judge, in determining how to exercise that discretion, regard should be had to the source of the funds.
[57]If the funds used existed at separation, and are such that both parties can be seen as having an interest in them (on account, for example, of contributions), then such funds should be added back as a notional asset of the parties, who has had the benefit of them.
[58]If funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be added back as a notional asset; nor would any borrowing undertaken by a party post-separation to pay legal fees be taken into account as a liability in the calculation of the net property of the party. Funds generated from assets or businesses to which the other party has made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.
[59]Outstanding legal fees themselves are generally not taken into account as a liability.
[60]If in the exercise of the discretion, it is determined that legal fees already paid should be taken into account as a notional asset, then normally any liability associated with the acquisition of the monies used to pay the legal fees should also be taken into account.
There is no evidence that assists in determining how the wife has paid her legal fees to date. Although it is likely the payment of legal fees explains in part the diminution of the proceeds of sale of F Street.
I am not able to determine that she was able to do so from property of the parties or indeed property acquired during the course of the relationship.
It may be the case that rental income from The Shops and other resources of the wife enabled her fees to be paid.
In the absence of evidence that would crystalize the necessary consideration, I propose as requested to ignore the legal fees of the husband and of the wife whether paid in part or outstanding.
The parties are not agreed as to the extent of liabilities that are to be brought to account.
The parties do not agree the following liabilities:-
(1)CBA personal account …60 (husband) $ 4,775
(2)CBA business trading account …84 (husband) $55,078
(3)CBA Master Card …68 (husband) $ 4,384
(4)Wife’s Master Card $ 2,000
(5)Wife’s capital gains tax $ 16,324
(6)Motor vehicle loan (husband) $ 11,761
(7)NAB Visa account …79 (husband) $ 6,611
(8)ATO 2012 tax debt (husband) $45,183
(9)ATO 2013 tax debt (husband) $37,898
(10)ATO integrated client account (husband) $ 4,456
(11)Wife’s BAS debt $ 7,000
(12)Accounting fees Mr J (husband) $26,175
The wife proposes that the E Town loan and business account loan no …79 and loan to renovate 2 C Street no…26 should reflect the value as set out in the husband’s financial statement. There seems a good basis to agree with that approach.
Whilst the wife does not necessarily disagree with the accuracy of the figures as set out in respect to the disputed liabilities, it is not conceded that the extent of these liabilities should be brought to account in circumstances where the liability has been reduced to a nil balance post-separation.
I propose to exclude the husband’s personal overdraft account, his Master Card …68, the wife’s Master Card, the husband’s Visa Card no…79, the wife’s BAS debt, the husband’s 2012 tax debt, the wife’s capital gains tax payment, the husband’s motor vehicle loan and the accounting fee in the absence of any evidence as to the current value.
The balance sheet has in part been based on the husband’s case outline document filed at the commencement of the proceedings with the liabilities in dispute listed as at the date of separation.
The husband has relied upon the evidence of his accountant Mr J. His evidence records that the husband’s income in 2012, 2013 and 2014 was $252,442, $290,423 and $252,177.
As at the date of the accountant’s affidavit, the 2012 income tax liability was outstanding in the sum of $18,305.58 but has now been discharged and for 2013 in the sum of $37,898 as at separation but now stands at $50,256. The husband is on a payment plan with the ATO.
The husband’s financial statement filed 6 May 2016 records his income tax for the last financial year being the 2015 year as $84,968, and that there is outstanding income tax for previous years of $80,110. The husband is on a repayment plan with the ATO.
I do not propose to bring to account any tax liability of the husband in respect of any period post-separation.
There is a paucity of evidence in respect of the husband’s taxation and whether it can be said that it should have been paid from his substantial income. In the circumstances of this case I do not consider that there is sufficient evidence that would enable me to determine that the husband’s outstanding taxation liability should be brought to account as a liability to be borne by the parties.
Whilst I have considered the affidavit of Mr J, there is nothing in the document that indicates the manner in which the accounting fees of $26,175 have occurred. It is likely that some of the accounting fees relate to the litigation. There is no evidence however that assists me in that regard and I propose to exclude the accounting fees.
There is no issue in relation to the superannuation entitlement of the wife. The parties agree the current figure is $162,934.
I have had regard to the methodology that should be adopted in respect of the treatment of the wife’s superannuation entitlement.
There is scant evidence as to the manner in which it has accrued.
At the commencement of cohabitation, the wife asserts that she was financially independent and had no debt.
At paragraph 12 of her trial affidavit the following is said:-
The applicant was aware of the superannuation payment which I had received upon the termination of my employment with the Australian Archives and my car accident compensation, and was aware of the fact that I had no debt.
At paragraph 15 of her trial affidavit the wife states that on 8 November 1996 she received a separation package including a superannuation payout of $156,719. She attributes the payment to a gross lump sum of $100,000 and the superannuation entitlement of $56,719.
Following the cessation of her employment, she then obtained part-time employment and commenced a course of study to become a registered professional.
It is likely that the wife had a minimal superannuation entitlement from her employment as at the date that the parties commenced cohabitation and it is reasonable to consider that the superannuation entitlement that she now has with Australian Super and AMP has accumulated during the course of cohabitation.
The wife’s entitlement appears to be an accumulation fund as opposed to a defined benefit.
The wife turned 66 years of age on 14 September 2017. The medical evidence is that she is not fit for employment and is unlikely to return to the workforce. Moreover, her future income will be contingent upon a successful application for a disability pension entitlement.
I consider that the wife has satisfied a condition of release and that her superannuation is available to her at her election. There is no evidence or suggestion that her entitlement will be subject to any exit tax, liability or other impost.
Given that her entitlement is now able to be accessed by the wife, I do not consider that it would be appropriate for the wife’s superannuation entitlement to be treated by considerations that are separate or different to the treatment of the assets that comprise the non-superannuation pool.
F Street Business Overdraft
Following the sale of the wife’s interest in the property at F Street she received net proceeds in the sum of $306,407. There was significant focus on the manner in which the wife used the proceeds of sale. As at the date of trial and as appears in the amended Case Outline of the respondent filed 4 July 2016, the proceeds of sale had been reduced to $101,855. There is scant evidence as to the manner in which the proceeds were utilised. There is some evidence that the wife’s adult daughter gained benefit from the purchase of a motor vehicle and the payment of her HECS debt. It is also likely that a significant sum was expended on her legal fees. The parties have agreed to exclude the extent of their separate legal fees incurred and the manner (and source) of payment.
The wife now argues that whatever amount may have been outstanding as at the date of the hearing there are now no remaining funds.
For his part, the husband seeks to bring to account the business overdraft as at 30 June 2013 in the sum of $55,078. The initial figure is not in dispute but the wife argues that notionally the current balance should be considered as nil. The figure as provided is historical only. There appears to be a concession however that the current level of the business overdraft is significantly in excess as to the extent of the original liability.
The husband’s submission is that whilst he accepts no monies remain in respect of the net proceeds of sale of the property at F Street, nonetheless it should be notionally added back. The wife argues that the husband should not be permitted to include the current level of the business overdraft and that in the ordinary course it should be expected that the husband would have discharged the overdraft and if not, in the absence of any evidence as to conduct by the husband, the business overdraft should be excluded.
In Woodland & Todd (2005) FLC 93-217 the Court considered that the starting point for the determination of the assets and liabilities of the parties should be the trial date and unless supported by appropriate explanation, not an earlier date such as the date of separation.
The Full Court in Omacini & Omacini (2005) FLC 93-218 considered that the correct approach was to consider the valuation of property at the date of trial with a separate consideration as to any issues of contribution to that value between the date of separation and the trial.
Their Honours considered that there were three clear categories of cases when the Court may consider to notionally add back to the parties’ property pool. An add back may well be appropriate considered if it relates to money spent by the parties on legal fees, a premature distribution of matrimonial assets and where a party has undertaken a course of reckless wanton or deliberate conduct which has the effect of diminishing the value of matrimonial property.
A consideration of the last of the three categories clearly requires evidence of how proceeds were utilised or in the converse, how a liability was maintained.
There is no evidence that suggests the wife’s use of net proceeds of the F Street property to have been wanton, reckless or deliberate in the sense of an attempt to diminish the property for the purposes of the proceedings. Whilst there may be some contention by the husband as to money that apparently found its way to the wife’s daughter, in the circumstances of the case it could not be said that the wife’s conduct was motivated by an attempt to exclude or remove property from the pool for the purposes of denying any entitlement of the husband.
I do not consider that there should be any notional add back of proceeds in respect of the money spent prior to trial. The consideration therefore is as to the status of the proceeds that did remain at trial, namely $101,855. There is no evidence as to how that money was spent. The fact that it no longer exists is not a matter of evidence but rather an acceptance by the husband of a position put by the wife.
Whilst specifically highlighted, it is likely that the capital gains tax payable on the sale of F Street in the sum of $16,324 was paid from the balance remaining at trial.
The business overdraft loan is in a different category. Whilst it is suggested that the current overdraft is significantly greater than the figure used at trial, I am satisfied that it would be appropriate to bring to account the liability of $55,078 as being the underlying liability.
In La Costa & La Costa [2007] FamCA 1176, following a consideration of Chorn & Hopkins (2004) FLC 93-204, the following is said at paragraph [42]:-
It is well settled that save in exceptional circumstances a Trial Judge should deal with the property as at the date of the hearing and make adjustments taking into account the various matters set out under s 79 (Wells v Wells (1977) FLC 90-285); Wardman & Hudson (1978) FLC 90-466; In the Marriage of Geyl 7 FamLR 219). However, the particular Justice of the case may make it appropriate to notionally add back assets which have been demonstrated to have been dissipated either during the marriage or post-separation. Normally it is necessary to demonstrate an appropriate basis for doing so, for example by wastage such as gambling or extravagant living…
The schedule of assets and liabilities as contained in the joint balance sheet tendered on 9 October 2017 considers that the overdraft is as to treatment only. I am influenced by the agreed position that the business overdraft still exists and is at a higher level. I do not bring to account the current level but consider the amount as agreed existed at trial is the best that can be supported by the evidence.
Based on these considerations, I set out the existing legal and equitable interests of the parties as follows:-
Husband
Assets
Half proceeds of C Street
161,683
N Street, E Town
280,000
2 C Street (5 G Street)
625,000
European motor vehicle
10,000
Total
$1,076,683
Liabilities
E Town loan
127,837
Business loan
389,060
Loan to renovate 2 C Street
140,000
Business Overdraft
55,078
Total
$711,975
Net Balance
$364,708
Wife
Assets
Half proceeds C Street
161,683
Net proceeds of F Street, Suburb H
Nil
1 - 4 G Street
930,000
Sports motor vehicle
20,000
Total
$1,111,683
Superannuation – Australian Super/AMP
162,934
Net Balance
$1,274,617
CONTRIBUTIONS OF PARTIES
Each of the parties had significant assets at the commencement of cohabitation.
Whilst there were no retrospective valuation evidence presented, the husband’s position is that he had the following assets:-
N Street, E Town
150,000
Residence and office at 2 C Street
300,000
Shop 1 - 4 G Street
300,000
Business work in progress and debtors
30,000
Motor vehicle and personal effects
20,000
Superannuation entitlement
49,000
He had a substantial liability however of $450,000 and even on the husband’s case he places a net value of $399,000 on his assets.
The wife held the following assets:-
Residence at 2 F Street, Suburb H
NK
Household personal effects
NK
Motor vehicle
$25,000
Superannuation entitlement
56,719.30
Whilst the husband alleges that the wife still had a mortgage in respect of the F Street property, I prefer the wife’s evidence that from her payout with her former employer she discharged the mortgage by payment of a lump sum of $81,525.
The principles that assist in determining the weight that is to be given to the contribution of parties is informed by the decision of Pearce & Pearce (1999) FLC 92-844 at paragraph 28:-
In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution, in this case of the husband regard must be had to the use made by the parties of that contribution. In the present case that use was a substantial contribution to the purchase price of the matrimonial home…
The husband’s interest in the E Town property and the residence and office at 2 C Street remain as a part of the present pool. The interest that the husband had in The Shops is more complex. In the early years of the relationship the husband found himself in a difficult financial position. He determined that rather than dispose of the properties to a third party, they would be offered to the wife for a purchase price of $425,000. It is not controversial that the entire purchase price was met by way of a loan obtained by the wife in the sum of $445,000.
The husband applied about $300,000 of the monies received from the wife to the reduction of his business loan which reduced the loan to $259,189.
The evidence suggests that the diminution in the business loan was relatively short lived and soon returned to levels above the pre-sale level.
The wife makes the point that at 1 December 2014 the balance remained at about $340,000.
The Shops now have a value of $930,000.
The wife’s property at 2 F Street, Suburb H was sold in September 2010 for $475,000.
Whilst I have found that the parties financial affairs were intermingled both in respect of direct financial provision by the husband towards the expenditure of the parties incurred both jointly and severally and by reference to the monies misappropriated by the wife from the husband’s business, nonetheless in terms of the separate conduct of the parties, the wife energetically applied herself to the maintenance of the properties and the accelerated discharge of outstanding liabilities.
The husband made no direct contribution towards The Shops and there is no evidence that he was involved in the ongoing management of the tenancies.
Notwithstanding that the wife was keen to assert monies she received from her mother in July 2007 were by way of a loan, nonetheless she did receive $49,482 which was applied in direct reduction of the outstanding mortgage.
She also received significant compensation awards in April 2000 of $122,000 and in July 2009 for $127,500. It is not suggested that all the monies were used in respect of loan reductions. Some monies were utilised by the wife to assist her daughter and in payment of some of the wife’s personal expenses. A significant proportion of the compensation awards can be traced to a likely reduction in loans.
The husband made no direct contribution to the acquisition and ongoing costs in respect of 2 F Street notwithstanding that he occupied those premises for nearly 10 years. From the sale of 2 F Street, $142,216 was applied to the mortgage of the property at F Street, Suburb H and the balance of $300,000 was retained and then applied to the renovations of the jointly owned property at C Street.
The contributions by the husband are in relation to the acquisition of the former home by him borrowing $149,000 secured over the E Town property.
Each of the parties made a valuable contribution by utilising their income. The wife’s income had been primarily used to assist in loan reduction, whereas the husband’s income was in part utilised to assist in the day to day living expenses of the parties, thereby enabling the wife to devote more of her income to loan reduction.
Whilst rejected by the wife, the monies misappropriated by her from the business assisted either directly in terms of the payment of shortfall in respect of loan repayments exceeding rental income, or indirectly by the payment of the wife’s personal expenses thereby freeing up other financial resources to assist in loan reduction.
The wife argues that the husband was reckless in his expenditure, in particular in the purchase of various motor vehicles for himself and his family members.
The liabilities in respect of property that he maintained were not significantly reduced even though the husband’s income was substantial. The explanation is not provided by the misappropriation of monies by the wife, nor her concession that the husband contributed $201,693 in relation to her credit card liabilities between 1 July 2004 and 11 June 2013.
It is more likely to be explained by a difference in approach, namely the wife adopted a higher level of financial responsibility which resulted in dramatically reduced liabilities notwithstanding her dishonest conduct.
The husband has to some extent had the benefit of the wife’s poor behaviour.
It is likely that the compensation monies received by the wife and monies received from her mother have had a significant effect on the accumulation of the parties’ property.
Given the unusual nature of the relationship that existed between the parties which was made more complex by the husband’s limited or lack of direct contribution to the acquisition and ongoing maintenance of the properties, consideration was given to whether an asset by asset approach should be considered in preference to a global approach.
It was not argued that an asset by asset approach should be adopted if I found that it was just and equitable to alter the property interests of the parties. I find that a global approach is more likely to produce a just and equitable outcome and given the complexities arising from the conduct of each of the parties and monies received by the wife from compensation awards and her mother, the contributions of the parties in respect of their property interests including superannuation should be apportioned 55 per cent/45 per cent in favour of the wife.
SECTION 90SF(3) FACTORS
The husband is 72 years of age and the wife is 66 years of age.
The husband is currently employed and as at the date of trial had gross income in the sum of $250,000. That is consistent with his income in 2014 of $252,177 and 2013 of $290,423.
He suffers from serious health problems. Following surgery in 1995 he now has no hearing in his right ear and suffers from poor balance.
He was diagnosed with cancer in 2008 and in March of that year underwent surgery for the removal of part of his bowel and left kidney. He experiences periods of lethargy but a recent procedure suggests that he remains cancer free. He has sustained a knee injury with a resultant disability following a skiing accident in 2009.
He was diagnosed with a leaky heart valve and following surgery the prognosis is generally positive.
He experiences depression and some anxiety.
Notwithstanding his health difficulties the husband continues to be employed, but there is no evidence that suggests when the husband’s employment is likely to cease. It is reasonable to assume that the husband’s working life is relatively limited.
The evidence presented on behalf of the wife is a poor prognosis for her re-entering the workforce. She holds the qualification of a skilled professional, but little comfort can be gleaned from the evidence of her doctor and psychologist that her income will be anything other than by way of a benefit or allowance subject to any investment income that she may receive.
I find that the wife is unlikely to re-enter the workforce, whereas the husband may remain employed for the present, but his prospects are limited.
The property available to the parties is relatively limited. The wife will derive ongoing income from The Shops following the conclusion of the proceedings. Neither party has any obligation to any third person. The wife is kindly disposed to supporting her adult daughter, but there is no suggestion that any monies provided will be repaid or that either of the parties are likely to be supported by any other person.
I accept the evidence of the wife’s doctor that she may qualify for a disability pension and that it is likely to represent her only source of income.
The current standard of living of the parties is modest and it is unlikely that the proposed orders will substantially affect their lifestyles.
I have given careful consideration to s 90SF(3)(r) and in particular in relation to any consideration that should arise from my finding that the wife acted dishonestly in the misappropriation of money from the husband’s business.
Whilst it is open on the evidence to find that the wife gained personal benefit and advantage by the payment of personal expenses incurred on her credit card, generally the wife’s conduct may well have benefited the husband by reducing the debt level thereby increasing the net asset of the pool available for division.
The husband was asked to consider what action, if any, he proposed to take in relation to possible taxation consequences of the money that was misappropriated by the wife which could otherwise have been treated as extra income to the business and may have translated as income available to the husband.
No evidence was presented as to the possible parameters of any tax considerations.
In T & T (1984) FLC 91-588 the Court considered that in an appropriate case the Court should bring breaches of Commonwealth Laws to the notice of the Attorney General.
Lindenmayer J in P & P [Tax Evasion] (1985) FLC 91-605 identified the relevant questions in cases involving suspected tax evasion in the following terms:-
(1)Whether the Judge has a duty to refer the papers to the Commonwealth Attorney General or whether the Judge should take any other steps to ensure the recovery of unpaid tax;
(2)What effect, if any, should the fact that one or both of the parties may be liable for income tax evasion have upon the determination of the proceedings.
His Honour found that there was a positive duty to refer the matter for investigation.
In Radwan & Radwan (1986) FLC 91 -755 Frederico J held the duty should be balanced with matters of public policy, namely that parties to litigation should be encouraged to be frank and open in their evidence without fear of automatic referral.
In Malpas & Mayson [2000] FamCA 1253 at 31:-
…questions of degree must be relevant. There are many cases where minor irregularities are revealed in relation to taxation, social security and other issues. We think it unreasonable for the court to burden itself with a duty to report all of these matters. Different considerations may apply in relation to more blatant and substantial irregularities. We leave the determination of this issue to be determined in a case where the point arises directly.
The taxation returns of the parties have not been introduced into evidence and there has been no separate accounting evidence as to the potential consequences arising from the evidence of Ms B and dealing directly with the wife’s conduct and misappropriation of funds.
In the circumstances of this case I do not propose to either refer the papers to the Commonwealth Attorney General, nor do I propose to bring to account the potential for taxation liability to arise in circumstances where the husband has taken no action in relation to possible taxation consequences, nor has presented evidence as to the potential taxation liability.
I have taken care not to double count factors relevant to contributions under the s 90SM(4) and s 90SF(3) factors.
The most significant factor pursuant to s 90SF(3) is a consideration of the current income and future employment opportunities for the parties.
Whilst the husband currently receives a significant income, I find that it is likely to be relatively short lived taking into account his age and conditions of health.
The husband argues that there should be an adjustment of 5 per cent in his favour to take into account matters arising from the wife’s dishonest conduct. The husband argues that the conduct of the wife amounts to “waste or premature distribution”.
It is also argued that little weight should be placed on the wife’s assertion that she will have difficulty in returning to employment. The husband’s contention is that the Court is entitled to assume some confidence in her financial future.
For her part, the wife recognises the poor health considerations that affect each of the parties and whilst the husband currently receives an income of about $250,000 in his position as a non-partner in a business, she does not seek an adjustment.
Accordingly, I propose to make an adjustment of 5 per cent in favour of the wife and in doing so specifically reject the husband’s argument for a 5 per cent adjustment.
40 per cent of the total net value of the pool including superannuation is $655,730.
The husband holds net property to the value of $364,708 and accordingly he should receive an adjustment in the amount of $291,022.
Given the financial circumstances of the wife, I consider that it reasonable that she have 30 days to pay the settlement sum and in default of payment either in whole or in part, I propose to order the sale of The Shops for sale by public auction or private treaty and from the net proceeds of sale the husband shall be paid such sum as shall remain outstanding pursuant to these orders together with default interest at the rate of 10 per cent per annum to be calculated from the date of default.
I certify that the preceding four hundred and forty-one (441) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Berman delivered on 18 October 2017.
Legal Associate:
Date: 18 October 2017
Key Legal Topics
Areas of Law
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Family Law
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Property Law
Legal Concepts
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Jurisdiction
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Remedies
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Statutory Construction
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Reliance
0
7
4