Mathers and Garver and Ors
[2019] FCCA 116
•25 January 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MATHERS & GARVER & ORS | [2019] FCCA 116 |
| Catchwords: FAMILY LAW – Alteration of property interests – whether it is just and equitable to make an order – assessment of contribution and future needs – credit issues – form of order to be finalised once expert evidence obtained. |
| Legislation: Family Law Act 1975 (Cth), ss.75(2), 79 |
| Cases cited: Bevan & Bevan [2013] FamCAFC 116 Vass & Vass [2015] FamCAFC 51 |
| Applicant: | MS MATHERS |
| First Respondent: | MR GARVER |
| Second Respondent: | OFFICIAL TRUSTEE IN BANKRUPTCY FOR THE ESTATE OF MR MATHERS |
| Third Respondent: | MATHERS HOLDINGS PTY LIMITED |
| File Number: | WOC 854 of 2014 |
| Judgment of: | Judge Altobelli |
| Hearing dates: | 3-4 May 2018 |
| Date of Last Submission: | 5 October 2018 |
| Delivered at: | Wollongong |
| Delivered on: | 25 January 2019 |
REPRESENTATION
| Senior Counsel for the Applicant: | Mr McInerney SC |
| Junior Counsel for the Applicant: | Mr Harper |
| Solicitors for the Applicant: | DGB Lawyers |
| Senior Counsel for the First and Third Respondents: | Ms Gillies SC |
| Junior Counsel for the First and Third Respondents: | Ms Sproston |
| Solicitors for the First and Third Respondents: Solicitors for the Second Respondent: | Turner Freeman Lawyers No appearance |
ORDERS
Leave be granted to the parties to file Orders in Chambers.
The parties have liberty to relist the matter on 7 days’ notice.
IT IS NOTED that publication of this judgment under the pseudonym Mathers & Garver & Ors is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT WOLLONGONG |
WOC 854 of 2014
| MS MATHERS |
Applicant
And
| MR GARVER |
First Respondent
| OFFICIAL TRUSTEE IN BANKRUPTCY FOR THE ESTATE OF MR MATHERS |
Second Respondent
| MATHERS HOLDINGS PTY LIMITED |
Third Respondent
REASONS FOR JUDGMENT
These Reasons for Judgment explain the Orders that the Court has made altering the property interests between the parties to these proceedings.
Background
Unless otherwise indicated, the matters set out below represent findings that the Court has made.
The Husband in this case, Mr Mathers, was born on …1935 and died …2015, after the commencement of the present proceedings. He was 80 years old at the time of his death. The Applicant in this case was his wife, Ms Mathers. She was born …1951 and is currently 67 years old. The other significant person in this case is Mr Garver. He was born on …1972 and will be nearly 47 years old by the time these Reasons for Judgment are published. He is the legal personal representative of the estate of the late Husband, and is the First Respondent in this case.
The Husband and the Wife married and commenced cohabitation on …1983. A significant issue in this case is what property was owned by either of them, at the time of their marriage. The Court finds that the Wife had a motor vehicle, cash not exceeding $2,000, and superannuation of an unspecified amount. In order to establish the Husband’s interest in properties, it is important to briefly reflect on the acquisition of various properties by him before the marriage.
In …1968, the Husband purchased Property A. In …1974, a property at Property B, was transferred to the Husband and his then Wife, Ms G. In 1974 or 1976 (nothing turns on the date), the Husband acquired his father’s interest in properties at C1 and C2. These properties remain in existence today and are represented at items 13 and 14 of the Balance Sheet. Whilst the registered proprietor of these properties is now Mathers Holdings Pty Limited, the Third Respondent in the present case, there is no dispute that for the purposes of this litigation, the property is the property of the parties to the marriage or either of them. The consideration stated in the transfers of these properties is $30,000. There appear to have been mortgages given by the Husband back in favour of his father, securing $30,000. The mortgage over Property C1, was discharged by 1978. It is unclear from the evidence what happened to the mortgage over Property C2. Indeed, it is not even clear that the Husband actually paid moneys to his father. According to his case, these properties were transferred to him by his father because he had paid off his father’s debt a number of times as a result of threatened bankruptcy proceedings against his father. The Husband’s own case, therefore, raises questions about the reality of the mortgage debt.
On …1976, the Husband caused to be established the Mr Mathers Family Trust. Mr H, who was the father of Mr Garver (the First Respondent in this case) was appointed as Trustee. The Husband was both the appointor and settlor of the trust. In …1976, Mathers Holdings Pty Limited was incorporated and registered. The original directors were Mr H and the Husband. The issued capital consisted of two shares, one held by Mr H and the other held by a company known as Company D Nominees Pty Limited. A few years later, Company D entered into a declaration of trust, stating that it held its share in Mathers Holdings Pty Limited on trust for Mr H.
Given the important concession made in relation to Trust assets, it is not necessary to set out the details of the Trust. The corporate structure of the Trust was designed with the specific purpose of the Husband divesting himself of ownership of assets whilst at the same time controlling the said assets. Based on all the evidence available to the Court, the Court finds that the Husband’s purpose was twofold: firstly, to so structure his assets so that he would be entitled to social security benefits on his retirement; secondly, to prevent his Wife claiming on what he considered to be his assets, should their marriage end.
In …1978, Property C1, was transferred to Mathers Holdings Pty Limited. In …1979, Property A was transferred to Mathers Holdings Pty Limited.
In …1978, the Husband acquired his ex-Wife’s share in the Property B property. This property was mortgaged in …1979.
In 1980, the Husband purchased land at Property D. The Property D property was eventually transferred to Mathers Holdings Pty Limited.
Accordingly, as at the date of cohabitation, the Husband either owned, or effectively controlled, the properties at C1 and C2, land in Property A, land in Property D, the Property B property and a motor vehicle. It is not possible for the Court to make findings about the value of these properties at the time. Whilst it is clear from the evidence that there were mortgages on the above properties, it is once again not possible for the Court to find what was the Husband’s equity in these properties as at the date of marriage. The only matter that is clear to the Court is that the Husband brought into the marriage the properties at Property C1 and C2. These properties are very valuable: $1.8 and $1.65 million respectively. Nonetheless, in order to maintain perspective, the Court finds that the marriage had ended no later than December 2013 and had thus subsisted for 30 years.
After the Husband and Wife married, a house was constructed at the Property D property. In 1988, the Husband purchased in the name of Mathers Holdings Pty Limited, land at Property E for $16,500. By 1989, at least five years after the marriage, the mortgages over the Property D and Property B properties were discharged, probably from the sale proceeds of both the Property B and Property D properties. It is important to note the Court’s finding that from shortly after marriage, the Wife commenced employment and, indeed, the Court accepts her evidence that at least one of the Husband’s reasons for wanting her to go back to work was to assist in paying the mortgage over the Property B property. The clear inference is, and the Court so finds, that the Wife’s earnings was applied, directly or indirectly, towards mortgage payments. The Husband was also working during this period.
In …1990, the Wife purchased a property at Property F, for $48,000.
In …1994, the Husband purchased through Mathers Holdings Pty Limited a property at Property G. The purchase price was $67,000. The property was subdivided and then two separate semi-detached residents were built, and then subjected to a strata subdivision. The subdivision and construction appears to have been funded using company funds as well as a loan from Suncorp. The subdivided properties are now known as G1 and G2, and are represented on the Balance Sheet at items 15 and 16 as having values of $540,000 and $500,000 respectively. The Husband’s case is that the mortgage had been paid down but, as a result no doubt of his death, and the current proceedings, there remains a debt to Suncorp of $14,672, represented at item 20 in the Balance Sheet. It is important to note that this property development took place nine years after the Husband and Wife married and at a time when, the Court finds, and despite the Husband’s case to the contrary, that the Wife’s income was used either directly, or indirectly, to pay their debts.
In …1996, the Wife transferred her property at Property F, to Company E Holdings Pty Limited. The consideration as stated on the transfer was $137,000.
In 2003, the Husband semi-retired from work due to his poor health and age, noting that in 2003, he was 68 years old. Mr Garver that year was also appointed as the Director of Mathers Holding Pty Limited. Indeed, that company was appointed as corporate Trustee of the Trust pursuant to a Deed of Appointment of New Trustee.
In …1997, Company E purchased a property at Property H for $91,500.
In 1998, Mathers Holding Pty Limited sold the property at Property E for $161,000.
In …2007, Mathers Holding Pty Limited sold the Property A Property for $175,000.
In December 2013, the parties separated, with the Wife leaving the former matrimonial home. In 2014, the Husband transferred any shares that he held in his name to Mathers Holding Pty Limited.
On 19 June 2014, the Husband became bankrupt on his own petition. The Husband’s current Trustee in Bankruptcy, the Official Trustee in Bankruptcy, became the Second Respondent in this case. The Trustee played no role in these proceedings at any time. What is clear to the Court, from the totality of the evidence before it, is that the Husband was not insolvent at the time he went into bankruptcy. He had purported to divest himself of all assets in his name, but for all practical purposes, remained in control of the same. His own solicitor advised him against the bankruptcy.
The Wife commenced the present proceedings on 3 October 2014. It first came before the Court on 5 December 2014. The proceedings were commenced against the Husband as First Respondent, the Official Trustee in Bankruptcy as Second Respondent, and Mathers Holdings Pty Limited as Third Respondent. Counsel appeared on behalf of the Husband, even though he did not appear himself. Consent Orders were entered into restraining the said company from advancing or distributing any funds or altering any interest in properties the company had an interest in.
In January 2015, the firm known as Mills Oakley Lawyers indicated that they were instructed to act on behalf of Mathers Holdings Pty Limited. When the matter came before the Court on 28 January 2015, the solicitor for the Third Respondent raised issues about the form of the Wife’s pleadings, and sought clarity not only as to the Orders sought, but the jurisdictional basis for the same. Directions were made in this regard.
The Husband died on …2015. The assets in the Husband’s name at that time were minimal. Mr Garver, the First Respondent, was named as the Husband’s executor. The solicitor representing Mathers Holdings Pty Limited also represented Mr Garver. It should be noted that, at the hearing of this matter, Senior Counsel representing the First and Third Respondents conceded that s.79(8) of the Family Law Act 1975 (hereafter referred to as ‘the Act’) had been satisfied. Indeed, this Court records that it is satisfied about the matters set out in section 79(8) of the Act. An order was made on 9 December 2015 that Mr Garver, the Husband’s personal legal representative following his death, be substituted in the proceedings for the deceased Respondent Husband.
In July 2016, the Wife sold the property at Property F, for $585,000.
The matter came before me for hearing on 3 and 4 May 2018. The hearing had been twice adjourned before then due to concerns that the Respondents raised about the pleadings insofar as they related to the third party in particular. Notwithstanding that, when the matter came for hearing, Senior Counsel for the Respondents made a number of important concessions. The concession made on behalf of the Respondents was that, in effect, the assets of the trust held by Mathers Holdings Pty Limited as Trustee, constituted property of the marriage for the purposes of s.79(4) of the Act; that is, property of the parties to the marriage or either of them. On behalf of the First Respondent, Mr Garver, as legal personal representative of the Estate of the late Husband, a concession was formally made that the matters pleaded against him in the Amended Statement of Claim were correct.
It is important to recognise that, between 3 October 2014 and 3 May 2018, a period of in excess of three and a half years, the Wife’s case had consistently been that the Husband effectively controlled all of the assets held by Mathers Holdings Pty Limited, whether as Trustee or otherwise. There can be no criticism for the making of the concession. The totality of the evidence before the Court made the concession inevitable. Where there may well be scope for criticism, however, is the length of time it took the Respondents to make the concession that was made. Once the Husband died on …2015, Mr Garver continued this litigation in his role as Trustee. These are issues that may well need to be revisited in a subsequent costs application. The delay in making the concession in the face of strong evidence indicating the Husband’s effective control of all of the relevant assets is also a matter that will need to be discussed in the context of assessing the Wife’s credibility, an issue advanced as an important one on behalf of the Respondents.
On 3 May, Senior Counsel for the Wife sought to proceed against the Respondents on an undefended basis. The basis for this application is set out comprehensively in the “Applicant’s Case Outline in Reply for Final Hearing 3 May 2018”, filed 2 May 2018. It is not necessary to deal with these submissions in detail. The Court declined to proceed on an undefended basis and indicated that it would provide short reasons for doing so in these written Reasons for Judgment. Whilst it is true that the First Respondent at no point defended the Wife’s s.79 claim against the now-deceased Husband, this was on the basis that, up until 3 May 2018, the First Respondent’s contention was that the deceased Husband had negligible assets in his name. Once the concession was made that the assets of Mathers Holdings Pty Limited and the Trust were assets of the parties to the marriage, the Applicant Wife contended that the Trustee had no further interest in the proceedings, and no right to be further heard in respect of it.
From the Court’s perspective, however, it has a statutory obligation to make a just and equitable order under s.79(2) of the Act. The concession that the Respondents quite properly made may well have resolved most (but not all) of the issues relating to the Balance Sheet, but the Court nonetheless was obliged to independently consider a number of other issues, including the threshold issue of whether it should make an order under s.79 and if so, how contribution should be assessed, should there be a further adjustment under s.75(2), and moreover what would be the just and equitable order to make in those circumstances? From the Court’s perspective, therefore, and in the circumstances of this particular case, the testing of the Wife’s evidence was an important prerequisite to making the findings that it needed to make, in exercising the discretion it had to make a just and equitable order.
The issues at the hearing
There were a number of issues relating to the joint Balance Sheet that required adjudication. This will be discussed below.
There was a significant issue for the Court to determine about whether, indeed, it should proceed to undertake an alteration of property interests under s.79 of the Act. This will be discussed below.
If the Court decided that it should proceed to exercise its discretion under s.79, as it has in fact done, then contribution would need to be assessed, as well as any future needs adjustment under s.75(2). The Court would then need to make a just and equitable order.
As foreshadowed, the Respondents put in contention the credibility of the Wife’s evidence, particularly in relation to contribution matters.
It should also be noted that, as a result of the evidence of Mr F, the forensic accountant engaged by the Respondents, it was acknowledged that there would be significant complexity in formulating Orders to implement any adjustment the Court makes under s.79, because of taxation issues. The consensus amongst the parties appeared to be that, once the Court has made an assessment under s.79 and published its Reasons for Judgment, the parties should be given the opportunity to obtain further expert advice about how to implement the adjustment contemplated by the Court, but in a tax-effective manner. The Court believes this is a sensible way to proceed, and will do so.
The evidence
The Applicant relied on the following documents:
·Further Amended Initiating Application with Statement of Claim, filed 24 April 2017;
·Financial Statement, filed 21 March 2018;
·Affidavit of Ms Mathers, sworn and filed 21 March 2018;
·Affidavit of Ms Mathers, sworn and filed 20 April 2018; and
·Affidavit of Mr J, affirmed and filed 22 March 2018.
The First and Third Respondents relied on the following documents:
·Amended Response, filed 10 November 2017;
·Notice of Grounds of Defence, filed 3 July 2017;
·Affidavit of Mr Garver, sworn and filed 13 April 2018;
·Affidavit of Ms K, sworn and filed 13 April 2018;
·Affidavit of Mr F, affirmed 13 April and filed 16 April 2018;
·Affidavit of Ms L, sworn and filed 18 June 2018; and
·Affidavit of Mr Mathers sworn 18 November and filed 19 November 2014.
The following documents were tendered during the Hearing and at subsequent listings:
·Bundle of tax returns for Applicant Wife;
·Tax documents for Applicant Wife;
·Last Will and Testament of Applicant Wife;
·Last Will & Testament of Mr Mathers;
·Correspondence from DGB Lawyers to Turner Freeman Lawyers dated 19 October 2017;
·Correspondence from Turner Freeman Lawyers to DGB Lawyers dated 30 January 2018;
·Correspondence from Turner Freeman Lawyers to DGB Lawyers dated 26 March 2018;
·Chronology of Disclosure;
·Company E Holdings Pty Limited Financial Accounts for the year ended 2001;
·Applicant Wife’s costs notice;
·Respondents’ costs notice;
·Documents produced under subpoena to Westpac; and
·Affidavit of Ms M, affirmed 18 May and filed 28 June 2018.
The applicable law
This is an application under s.79 of the Act, which relevantly provides:
Alteration of property interests
(1) In property settlement proceedings, 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 marriage or either of them--altering the interests of the parties to the marriage 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 marriage--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 marriage; or
(ii) the relevant bankruptcy trustee (if any);
to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines.
(2) 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.
(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:
(a) the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(b) the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last-mentioned property, whether or not that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
(c) the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
(d) the effect of any proposed order upon the earning capacity of either party to the marriage; and
(e) the matters referred to in subsection 75(2) so far as they are relevant; and
(f) any other order made under this Act affecting a party to the marriage or a child of the marriage; and
(g) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
Section 79(4) incorporates the provisions contained in s.75(2) of the Act, which states:
(2) The matters to be so taken into account are:
(a) the age and state of health of each of the parties; and
(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and
(d) commitments of each of the parties that are necessary to enable the party to support:
(i) himself or herself; and
(ii) a child or another person that the party has a duty to maintain; and
(e) the responsibilities of either party to support any other person; and
(f) subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
(i) any law of the Commonwealth, of a State or Territory or of another country; or
(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates, within or outside Australia;
and the rate of any such pension, allowance or benefit being paid to either party; and
(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and
(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income; and
(ha) the effect of any proposed order on the ability of a creditor of a party to recover the creditor's debt, so far as that effect is relevant; and
(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party; and
(k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration; and
(l) the need to protect a party who wishes to continue that party's role as a parent; and
(m) if either party is cohabiting with another person--the financial circumstances relating to the cohabitation; and
(n) the terms of any order made or proposed to be made under section 79 in relation to:
(i) the property of the parties; or
(ii) vested bankruptcy property in relation to a bankrupt party; and
(naa) the terms of any order or declaration made, or proposed to be made, under Part VIIIAB in relation to:
(i) a party to the marriage; or
(ii) a person who is a party to a de facto relationship with a party to the marriage; or
(iii) the property of a person covered by subparagraph (i) and of a person covered by subparagraph (ii), or of either of them; or
(iv) vested bankruptcy property in relation to a person covered by subparagraph (i) or (ii); and
(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and
(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and
(p) the terms of any financial agreement that is binding on the parties to the marriage; and
(q) the terms of any Part VIIIAB financial agreement that is binding on a party to the marriage.
In Bevan & Bevan [2013] FamCAFC 116, the Full Court of the Family Court of Australia considered the High Court’s decision in Stanford & Stanford [2012] HCA 52, which provided guidance on how s.79 was to be interpreted and implemented. Bevan endorsed the continuing application of the four-step approach articulated by the Full Court in Hickey & Hickey & Attorney General for the Commonwealth of Australia [2003] FamCA395, but on the basis that it is a shorthand distillation of the words of s.79, as opposed to being a statutory edict. The four steps articulated in Hickey at paragraph 39 are:
a)Identify and value the property, liabilities and financial resources of the parties; and
b)Identify and assess the contributions of the parties and express them as a percentage of the net value of the property; and
c)Identify and assess the other facts relevant under s.79(4)(d)-(g) including s.75(2) and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
d)Consider the effect of the above and resolve what order is just and equitable in all the circumstances.
The decisions in Stanford and Bevan also emphasise the importance of making findings that any order is just and equitable for the purposes of s.79(2), independent of the s.79(4) process. In many cases, it makes no difference to the outcome of the alteration of property interests exercise. Even if the just and equitable consideration were treated as a threshold issue in this case the parties have, by their actions (separation, and re-ordering of their financial lives since then), and claims (divergent claims about their property under s.79 of the Act), indicated that they themselves consider it just and equitable that some order be made under s.79 adjusting their property interests as presently held. This is an issue in this case. For reasons that will become apparent below, it is clearly just and equitable in this case to make an order.
Both decisions also emphasise the importance of identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. This is not inconsistent with step one in Hickey.
A problem that commonly arises, and indeed does arise in this case, relates to property that once existed but no longer does. This disposed of property may still be significant, however. As the Full Court said in Bevan, such disposals must be dealt with carefully. In practical terms this means carefully assessing the evidence about the disposal, attempting to quantify it if this is at all possible, and then assessing its weight whilst neither placing too much, or too little, weight on it. It would seem that notionally adding back such property may still be appropriate in some cases. In Vass & Vass [2015] FamCAFC 51, the Full Court said at [138]:
There is no error committed per se in adjusting the parties’ actual property interests by a calculation involving notionally adding back into the pool sums which have been dissipated by the parties. We reject any suggestion that the decision of Bevan & Bevan [2013] FamCAFC 116; (2013) FLC 93-545 – or, more particularly, the decision of the High Court in Stanford & Stanford [2012] HCA 52; (2012) 247 CLR 108 – is authority for any necessary contrary solution.
Balance Sheet issues
The Court was provided with the following joint balance sheet:
| Ownership | Description | Wife / de facto partner's value | 3rd Respondent's value |
| ASSETS | ||||
| 1. | Wife | Property J | 306,000.00 | 720,000.00 |
| 2. | Wife | Property H | 385,000.00 | 385,000.00 |
| 3. | Wife | Property K | 465,000.00 | 465,000.00 |
| 4. | Wife | Motor vehicle | 12,500.00 | 14,500.00 |
| 5. | Wife | Bank Account no. … | 0.00 | 0.00 |
| 6. | Wife | St George Account no. … | 75.00 | 75.00 |
| 7. | Wife | St George Account no. … | 0.00 | 0.00 |
| 8. | Wife | St George Account no. … | 0.00 | 0.00 |
| 9. | Wife | St George Account no. … | 0.00 | 0.00 |
| 10. | Wife | Bank business card account Account no. … | 32.00 | 0.00 |
| 11. | Husband | St George Account no. … | 0.00 | 0.00 |
| 12. | Husband | Bank Account no. … | 4,508.00 | 4,508.00 |
| 13. | 3rd Respondent | Property C1 | 1,800,000.00 | 1,800,000.00 |
| 14. | 3rd Respondent | Property C2 | 1,650,000.00 | 1,650,000.00 |
| 15. | 3rd Respondent | Property G1 | 540,000.00 | 540,000.00 |
| 16. | 3rd Respondent | Property G2 | 500,000.00 | 500,000.00 |
| Total | 5,663,115.00 | 6,079,083.00 | ||
| ADDBACKS | ||||
| 17. | Wife | Proceeds of sale from Property F property. | 585,000.00 | |
| 18. | Wife | Paid legal fees | 545,903.00 | |
| 19. | 3rd Respondent | Paid legal fees | 300,274.00 | 300,274.00 |
| Total | 300,274.00 | 1,431,177.00 | ||
| LIABILITIES | ||||
| 20. | 3rd Respondent | Suncorp Metway Business Account no. … | 14,672.00 | 14,672.00 |
| 21. | 3rd Respondent | Estimated costs of sale and CGT implications of sale of Property C1 | NIL | E37,500.00 |
| 22. | 3rd Respondent | Estimated costs of sale and CGT implications of sale of Property C2 | NIL | E322,655.00 |
| 23. | 3rd Respondent | Estimated costs of sale and CGT implications of sale of Property G1 & G2 | NIL | E271,642.00 |
| 24. | 3rd Respondent | Land tax payable on Property C1 & C2 | 100,150.00 | 100,150.00 |
| 25. | Wife | Capital gains tax payable for sale of Property F property | 133,650.00 | NIL |
| 26. | Wife | Bank West Reverse Mortgage Account no. … | 194,706.00 | 194,706.00 |
| 27. | Wife | HELP debt | 18,569.00 | 0.00 |
| 28. | Wife | Accountancy fees | 2,450.00 | 0.00 |
| Total | $449,525.00 | $941,325.00 | ||
| SUPERANNUATION | ||||
| Member | Name of Fund | Type of Interest | Wife / de facto partner's value | 3rd Respondent's value |
| Total | $ 0.00 | $0.00 | ||
| FINANCIAL RESOURCES | ||||
| Ownership | Description | Wife / de facto partner's value | 3rd Respondent's value | |
| 29. | Wife | Property J | 355,000.00 | |
| 30. | Wife | Legal fees owed to end of hearing | -545,903.00 | |
| Total | $-190,903.00 | $0.00 | ||
| TOTAL NETT ASSETS (including superannuation): | $5,168,015.00 | $6,568,935.00 |
The first issue raised in the Balance Sheet relates to the value of the Wife’s property at Property J. The Wife puts the value at $306,000, the Respondents at $720,000. There is no doubt that $720,000 represents the valuation established by the single joint expert. The Wife contends for the lower figure because the difference between the current market value and $306,000 represents an inheritance that she received after the date of separation that was applied towards the purchase of the Property J property. She contends that the balance ought to be treated as a financial resource available to her.
Both sets of written submissions refer to Calvin & McTier [2017] FamCAFC 125, and Guzniczak & Rogala [2017] FamCA 758. The Court clearly has considerable discretion here. The Property J property should be listed in the Balance Sheet as having its current market value of $720,000. There can be no doubt that the Husband made no direct, or financial contribution towards the acquisition of the property to the extent that it was funded by an inheritance received after the date of separation. The post-separation contribution can be taken into account in assessing contribution, rather than either treating part of it as a financial resource, or even creating a separate pool of assets in respect of the Property J property.
The Court notes that there was, initially, a difference of valuation in relation to the Wife’s motor vehicle (item 4) and the Wife’s Bank business card account (item 10). Agreement was reached that these values should be $12,500, and $32, respectively.
There is an issue about addbacks at items 17 and 18 of the Balance Sheet. The Court notes that, quite correctly, both parties agreed that legal fees paid on behalf of the Third Respondent totalling $300,274 should be added back and appears at item 19.
Consistent with the Full Court’s decision in Chorn & Hopkins [2004] FLC 93-204, whether legal fees should be added back is a matter for the discretion of the trial judge. The Wife’s evidence in this regard was that the Wife’s legal fees had been paid from the proceeds of sale of her property at Property F. This amount appears at item 17 of the Balance Sheet. It is clear that this property was purchased during the marriage in 1990, and sold after separation, in 2016. The Court believes that the Wife’s legal fees paid from the proceeds of sale of Property F should, in fact, be added-back, and thus should remain at item 17 of the balance sheet. This is an approach that is consistent with the inclusion of item 19, which represents legal fees paid to the depletion of trust assets available for distribution in the present proceedings. The Court notes that, in any event, item 17 is an agreed entry into the Balance Sheet.
The Court has had regard to the extensive written submissions made on behalf of the Applicant as to why her legal fees paid should not be added back. The Court does not accept these submissions. With respect, the submissions do precisely what the original submissions warned against, i.e. to traverse or impermissibly intermingle with matters which should be left to s.117 of the Act. The issue of the Trustee’s conduct is a matter that is best left for what, the Court suspects, may be a costs application following the conclusion of these proceedings.
In relation to item 18, a further contended addback submitted on behalf of the Respondents, the Court declines to make this addback. It is clearly duplication. The Court has had regard to the learned submissions of Senior Counsel dated 7 September 2018. With respect, nothing contained in those written submissions explain, let alone convince the Court, why it should add back a figure of $545,903. The submission seeks to take advantage of what was, in reality, irrelevant ambiguity about how the sale proceeds of Property J were actually applied. Once item 17 of the Balance Sheet was agreed to, how the funds were spent is irrelevant. Item 18 of the Balance Sheet should read nil.
There is a dispute, or at least some uncertainty, as to the treatment of liabilities referred to at items 21, 22, and 23 of the Balance Sheet. The figures referred to therein are based on the expert evidence of Mr F, the expert forensic accountant retained on behalf of the Respondent to provide evidence to the Court about the costs of sale and CGT implications if certain properties held by the company as Trustee were to be sold, in order to fund any payment to the Wife by way of alteration of property interests.
The common ground between the parties is that one or more parcels of real estate will need to be realised in order to pay the Wife her entitlement. It is common ground, and consistent with the expert evidence of Mr F, that the manner in which the Husband maintained the records of the Trustee company means that there is a degree of uncertainty in the consequences for the company and Trust if properties had to be realised. What was clear from the evidence that Mr F gave in cross-examination was that the figures referred to in items 21, 22 and 23 were mere estimates. Indeed, the profound impression formed after hearing Mr F’s evidence is that there was some considerable complexity attached to quantifying these liabilities.
The Court will leave the liabilities at items 21, 22 and 23 of the Balance Sheet as stated, but noting that they are mere estimates. Once the Court has determined whether a property adjustment should be made, and if so, the percentage split, the precise consequences may be explored further by the parties, with the assistance of an expert. The Court notes that the Wife’s approach seemed to be that these figures should be included in the Balance Sheet, but not as estimates. If this is what the Wife was contending for, the Court does not agree. The Court must make an order that is just and equitable from the perspective of both parties, not just one. Once an order has been made under s.79, the Respondents should be given the opportunity to take advice about the most tax effective way of implementing the Court’s order.
There is an issue about the capital gains tax liability that the Wife expects to incur as a result of a sale of the Property F property. This is referred to at item 25 of the Balance Sheet. The Respondents object to the inclusion of this liability on the Balance Sheet. They point out that the Wife sold the Property F property in July 2016, well after the proceedings had been commenced (and indeed listed for a final hearing that was then adjourned). They contend she has had more than ample opportunity to lead evidence about her capital gains tax liability arising from this sale. The Respondents contend that the liability was not referred to in the Wife’s Financial Statement filed 21 March 2018.
The liability was not referred to in the Balance Sheet that was included in the Wife’s case outline document dated 27 April 2018. In short, no attempt was made, as at the time of the hearing, to calculate this liability. By contrast, the Respondents point out, they went to considerable effort and expense in obtaining the expert evidence of Mr F. They point out, moreover, that he could have been cross-examined on this issue, or questions formally asked in advance of the hearing, but was not.
The Applicant rather ingeniously attempted to deal with this issue through the written submissions of Counsel dated 17 July 2018. It was an attempt to cure a problem that the Wife had herself created, with respect to her, and those who advised her. The submission calculates $134,000, but makes a number of assumptions which are clearly untested, and, in any event, the quantification of the capital gains tax liability does not come from a relevant expert.
The Court has had regard to the written submissions made by both the Applicant and the Respondents on the present issue. There is no basis for including item 25, the capital gains tax anticipated on the sale of the Property F property, in the Balance Sheet. It is a liability of the Wife that the Court will take into account under s.75(2), if necessary, but it is by no means clear that her CGT liability will be $133,650. This is a matter that could have, and should have, been addressed in the proper form before the hearing.
The Court has given consideration to whether the quantification of this liability should be addressed once the Court has adjudicated on substantive issues of percentages. One can understand the Wife thinking, for example, that if the Respondents are to be given the opportunity to clarify the quantification of costs of sale and CGT implications in order to implement Orders made by this Court, then surely she should likewise have the opportunity to quantify her capital gains tax liability in respect of the Property F sale. If that is the Wife’s perception, it is regrettably misconceived. The Respondents did all that they were supposed to do, i.e. engage expert evidence and adduce that evidence in proper form, even if the figures produced at items 21-23 were mere estimates. The Wife did not do all she could do. Indeed, it would be to reward suboptimal behaviour to now give her the chance to do that which she should have done at the appropriate time. Item 25 of the Balance Sheet should appear at nil.
There was a dispute about the Wife’s HELP debt at item 27. She contends that it should be included in the Balance Sheet at $18,569. She says that the HELP debt will be payable at some future time. The Respondents accept that the debt was incurred in relation to the Wife’s undergraduate studies which concluded in 2012. However, the Respondents say that as she has not paid anything off the debt since then, it is unlikely that the debt will ever be paid, and there is no evidence to suggest that the Wife will be required to pay it in circumstances where her future income may not exceed the relevant threshold. Thus, the Respondents contend, the debt is speculative at best. The Court does not accept this contention. The HELP debt is a debt to the Commonwealth. The Court does not accept that it is speculative. It is by no means impossible that the Wife’s taxable income will increase, possibly even above the repayment threshold, as a result of the Orders that the Court makes. In the circumstances, item 27 should remain on the Balance Sheet.
There was a dispute about item 28, the Wife’s accountancy fees in the sum of $2,450. Whether the Wife was cross-examined about this, or not, the fact is that she bore the onus of proof to establish that, somehow, this was a debt that existed at the date of separation, or was otherwise some form of liability that the Respondents should share as a result of its inclusion in the Balance Sheet. She has failed to do so. Item 28 should read nil.
Having regard to the Court’s earlier findings, items 29 and 30 have no place on the Balance Sheet.
The Balance Sheet will therefore be as follows:
| Ownership | Description | Court’s value |
| ASSETS | |||
| 1 | Wife | Property J | 720,000.00 |
| 2 | Wife | Property H | 385,000.00 |
| 3 | Wife | Property K | 465,000.00 |
| 4 | Wife | Motor vehicle | 12,500.00 |
| 5 | Wife | Bank Account no. … | 0.00 |
| 6 | Wife | St George Account no. … | 75.00 |
| 7 | Wife | St George Account no. … | 0.00 |
| 8 | Wife | St George Account no. … | 0.00 |
| 9 | Wife | St George Account no. … | 0.00 |
| 10 | Wife | Bank business card account Account no. … | 32.00 |
| 11 | Husband | St George Account no. … | 0.00 |
| 12 | Husband | Bank Account no. … | 4,508.00 |
| 13 | 3rd Respondent | Property C1 | 1,800,000.00 |
| 14 | 3rd Respondent | Property C2 | 1,650,000.00 |
| 15 | 3rd Respondent | Property G1 | 540,000.00 |
| 16 | 3rd Respondent | Property G2 | 500,000.00 |
| Total | $6,077,115 | ||
| ADDBACKS | |||
| 17 | Wife | Proceeds of sale from Property F property. | 585,000.00 |
| 18 | Wife | Paid legal fees | NIL |
| 19 | 3rd Respondent | Paid legal fees | 300,274.00 |
| Total | $885,274 | ||
| LIABILITIES | |||
| 20 | 3rd Respondent | Suncorp Metway Business Account no. … | 14,672.00 |
| 21 | 3rd Respondent | Estimated costs of sale and CGT implications of sale of Property C1 | E37,500.00 |
| 22 | 3rd Respondent | Estimated costs of sale and CGT implications of sale of Property C2 | E322,655.00 |
| 23 | 3rd Respondent | Estimated costs of sale and CGT implications of sale of Property G1 & G2 properties | E271,642.00 |
| 24 | 3rd Respondent | Land tax payable on Property G1 & G2 | 100,150.00 |
| 25 | Wife | Capital gains tax payable for sale of Property F property | NIL |
| 26 | Wife | Bank Reverse Mortgage Account no. … | 194,706.00 |
| 27 | Wife | HELP debt | 18,569.00 |
| 28 | Wife | Accountancy fees | NIL |
| Total | $959,894 | ||
| SUPERANNUATION | ||||
| Member | Name of Fund | Type of Interest | Wife / de facto partner's value | 3rd Respondent's value |
| Total | $ 0.00 | $ 0.00 | ||
| FINANCIAL RESOURCES | |||
| Ownership | Description | Court’s value | |
| 29 | Wife | Property J | NIL |
| 30 | Wife | Legal fees owed to end of hearing | NIL |
| Total | $0 | ||
| TOTAL NETT ASSETS (including superannuation): | $6,002,495 |
The threshold issue: should there be an adjustment of property?
The Court was assisted by the extensive written submissions provided on behalf of the Applicant and the Respondents. Those submissions correctly focused on the High Court’s decision in Stanford [2012] HCA 52, and the Full Court’s decision in Chancellor & McCoy [2016] FamCAFC 256. The Court found it of interest, however, that the Respondents’ submissions in relation to Stanford, did not extract paragraph 42 of the Full Court’s judgement which, this Court believes, governs the present case.
Paragraph 42 of the High Court’s judgment states:
In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).
This Court concludes that on the facts of the present case, the just and equitable requirement is readily satisfied on the evidence. In short, the Court accepts the Applicants’ submissions, and rejects those of the Respondents.
The Court does not accept that there was no intermingling of the Husband and Wife’s respective finances. That is not what the evidence states. There were many matters that were put to the Wife in cross-examination that are inconsistent with this assertion. Right from the beginning of the marriage, the Husband turned to the Wife to assist with payment of one of his mortgages. The family Trust, which was controlled exclusively by the Husband, was used as the source for meeting various matrimonial expenses, using the mechanism of the loan account. Both the Husband and Wife were beneficiaries in the Trust. The Trust properties are included in the Balance Sheet. For the entire period of the marriage, the Husband and Wife lived in one of the Trust properties at Property C2. The Wife’s income was used to meet expenses relating to the former matrimonial home. The Wife’s income paid various utilities, and for a house cleaner. The proceeds of sale of one of the Trust properties was used to pay a substantial Centrelink debt that had been incurred by both the Husband and the Wife, as a result of his attempts to so structure his assets as to retain a social security benefit.
Whilst it is true that the evidence indicates that the Husband and the Wife maintained separate bank accounts, did not jointly own real estate, and the Wife had her own real estate, the evidence of the Wife, which the Court accepts, was that the Husband controlled their financial affairs. Indeed, the extensive correspondence between the Husband and those advising him, most of which the Court accepts had been typed up by the Wife, does create a strong impression of a man who had very strong views about his financial affairs indeed, dogmatic views.
Moreover, even the Husband’s evidence refers to the advice and assistance he gave to his Wife about the purchase of property. They thus shared information, and he was involved in her financial decisions, even though, the Court accepts, she was excluded from his financial decisions.
All of these matters both convince the Court paragraph 42 of the High Court’s decision in Stanford clearly applies to the facts of this case, and also establishes important points of difference between the present case, and the Full Court’s decision in Chancellor.
Having regard to the totality of the evidence, it is just and equitable to make an order adjusting the interests in the property of the Husband and the Wife.
Attack on the Wife’s credibility
The Respondents assert that the Court would treat the evidence of the Wife with real caution. The submissions in this regard are found at paragraphs 16-28 of the written submissions dated 7 September 2018. The Applicant replies to this at paragraphs 118-136.
There is no doubt that the Wife was a feisty witness. Sometimes she displayed behaviour that might be described as defensive, combative and argumentative. This sort of behaviour in witnesses is usually counterproductive and sometimes leads the Court to have some reservations about the credibility of the evidence the witness is giving.
The evidence of all witnesses needs to be seen, and understood, in context. It is the context that will help the Court to understand whether, as the Respondents assert, the Wife was defensive, combative and argumentative or, as the Applicant asserts, she was frustrated and occasionally confused. The single most important point in this regard is to appreciate the fact that between 3 October 2014 and 3 May 2018, the Wife was forced to contend with what she perceived to be obstruction and obfuscation in relation to the critical issue of the litigation, which was whether the Husband controlled the assets of the Trust, the value of which represents approximately two thirds of the assets available for distribution. The Wife was put in a position where she had to spend a substantial component of $585,000 in legal fees attempting to “bust a Trust”, which was only conceded during the opening moments of the final hearing. When that context is understood, the Wife’s feisty behaviour in cross-examination is seen in a different light. She may well have been indignant at the thought that a total stranger, who had made no contribution to the pool of assets, and whom she may have perceived as having no moral entitlement to those assets, so robustly defending her claim, whilst spending over $300,000 of that Trust money in so doing.
In short, this Court finds that when context is considered, any anger, defensiveness or combativeness can be interpreted as not necessarily undermining her credibility.
Even if the Respondents’ contention was correct, and the Wife had extended and embellished the scope of the financial and non-financial contributions that she made, that does not mean that her evidence, which was rigorously tested in cross-examination, should not be preferred to the completely untested evidence of the Husband. The harsh reality in a trial Court is that witnesses embellish. That does not make them liars; more often than not it confirms their humanity.
In short, the Court does not accept the contentions made on behalf of the Respondents as regards the Wife’s credibility, and prefers the submissions made on behalf of the Applicant in this regard.
Assessing contribution
In closing submissions, the Wife contended that contributions should be assessed in her favour at slightly more than 50 per cent. The written submissions in the Respondents’ case contended that her position was untenable, but does not otherwise submit what the percentage adjustment in her favour should be.
Apart from the case outline documents, the Wife’s written submissions deal with contribution at paragraph 210-253 of her written submissions dated 5 October 2018. The Respondents’ written submissions are found at paragraphs 94-137 of their written submissions dated 7 September 2018.
The main limb of the Respondents’ case seems to be that at the commencement of the relationship, the Husband brought in the vast majority of the assets. Indeed, as has already been noted, at the commencement of the relationship, he had properties at Properties C1 & C2, and properties in Property D and Property B. But, as has also been previously noted, the Husband has not discharged the onus which was clearly on him to show to the Court that he not only owned these properties, but that he had equity in them. The strong impression created by the evidence is that, at the very least, the properties at Property C1 and the Property B property, were both mortgaged. Moreover, the Husband’s own evidence is that he took on a credit card debt incurred by his father. The Wife’s evidence in this regard was that it was a debt of $100,000. She was not, indeed could not be challenged on this evidence.
Even if the Court gives the Husband the benefit of the doubt and accepts that he had equity in properties, it was a 30 year relationship, and thus the Court must take into account the myriad contributions that both the Husband and the Wife made after that date. The Court must also not lose sight of the fact that the properties at Property C1 & C2 are still in existence and comprise the largest assets on the Balance Sheet.
The Court concludes, therefore, that even with the uncertainties created about the lack of evidence as to the Husband’s equity in the properties he held at cohabitation, it is more likely than not that he held some equity, probably in the former matrimonial home at Property C2, and thus he made greater initial financial contribution compared to that of the Wife.
Whilst there were relatively short periods during the marriage when the Wife was unemployed, she was otherwise working, as was the Husband. The Husband probably earned more than she did. It is difficult to be precise about income disparity during the relationship because of the Trust structure put in place by the Husband.
There were periods when both received Centrelink benefits which, ultimately, had to be repaid. This was because of the attempts by the Husband to so structure his financial affairs so that they both received Centrelink benefits. The source of the funds used to repay Centrelink was, in substance, Trust money that was controlled by the Husband.
During the course of the marriage, the Trust contributed towards the parties’ joint living expenses. This does not necessarily mean that the Husband made a greater contribution financially than the Wife did. It simply reflects that the Trust permitted a flexibility as to how income and resources were used for the personal benefit of the parties.
The financial arrangements put in place during cohabitation not only enabled the Husband to purchase properties using the Trust structure, but also for the Wife to do so.
The evidence does not lead the Court to conclude, however, that whatever income the Wife derived, she kept for herself. Indeed, a strong impression to the contrary is created from the totality of the evidence, even that of the Husband in his affidavit.
Even according to the Husband’s evidence, the Wife made substantial non-financial contributions. This included housework, home maintenance, home decoration, and supporting the Husband with his medical appointments. She clearly supported him through his illnesses. She assisted the Husband with the care of his elderly parents. She acted in a secretarial capacity to support the Husband in some of his development activities.
It is clear that over the course of a long relationship, the Husband and the Wife made diverse, and different contributions viewed from each other’s perspective. The Husband brought in real estate, probably with some equity in it. An inheritance the Wife received is reflected in the value of the Property J property, and the Husband made no contribution to this. It is easier to quantify the value of the Wife’s contribution aforesaid than it is to value the Husband’s. Nonetheless, the Husband’s initial contribution must be recognised and given appropriate weight.
The Court assesses the contribution that the Husband has made as at the date of the trial to be 52.5 per cent.
An adjustment under section 75(2)?
There are no s.75(2) factors operating in favour of the Husband. The focus turns to the Wife. She contends there should be an adjustment of 10 per cent in her favour. I am mindful of the comments made by Moore J in Nimett & Estate of Nimett [2007] FamCA 1189 at [81].
The Wife is 67 years old. While she asserts she is in ill health, the Court does not accept that she has produced adequate medical evidence in support of her assertions. She contends, however, that she is incapable of working. The Court accepts her evidence in this regard. The Court accepts that it would be extremely difficult for a 67 year old woman who is undertaking studies to find work which would pay her a meaningful salary. Her last paid work was in 2001. After then, she ran a small business, and engaged in other part-time work. Her historical taxable income has been modest. This was a very long marriage.
The Court believes that it is appropriate for there to be an adjustment in favour of the Wife under s.75(2). Nonetheless, the pool of assets is substantial, and thus a 10 per cent adjustment provides a 20 per cent difference. In all the circumstances, and based on the evidence, the Court assesses the Wife’s future needs at 7.5 per cent, producing a 15 per cent difference in outcome.
Conclusion and just and equitable
Having regard to the Court’s assessment of contribution in the Husband’s favour as to 52.5 per cent, and future needs in the Wife’s favour as to 7.5 per cent, this means there should be an alteration of property interests in the Wife’s favour in the sum of 55 per cent. Having regard to the assets available for distribution, and even taking into account liabilities known and known, the Court believes this to be a just and equitable outcome.
Just and equitable order
It is appropriate in this case for the parties to consider the Court’s findings and to obtain such further expert evidence as they consider appropriate as to how to implement the same. The Court recognises that this may take time. In the circumstances, the only order will be that:
a)Parties have leave to file Orders in Chambers;
b)Parties have leave to relist on 7 days’ notice.
I certify that the preceding ninety-five (95) paragraphs are a true copy of the reasons for judgment of Judge Altobelli
Date: 25 January 2019
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