Maybury and Maybury and Ors

[2011] FMCAfam 540

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MAYBURY & MAYBURY and ORS [2011] FMCAfam 540

FAMILY LAW – Property – alteration of interests – creditors seek payment from pool – husband claims lack of capacity to contract – husband seeks orders either affecting the creditors or for wife to pay creditors – no lack of capacity found.

Family Law Act 1975, ss.75, 79, 90AE, 90AF

Hickey & Hickey [2003] FamCA 395
Re F: Litigants in Person Guidelines (2001) FLC 93-072
Mallett v Mallett (1984) FLC 91-507
In the Marriage of Pierce (1998) FLC 92-844
Kowaliw  & Kowaliw (1981) FLC 91-092
Essex & Essex [2009] FamCAFC 236
Weir & Weir (1992) FLC 92-287
W & T (2006) FLC 93-266
K & K (2002) FamCA 1150
Louth v Diprose [1992] HCA 61(1992) 175 CLR 621
Commercial Bank of Australia Ltd v Amadio (5)(1983) 151 CLR
Rand & Ors v Rand & Ors [2008] FamCAFC 50
Crestin & Crestin and Ors [2007] FAMCA 1619
Allan v Allan [2009] FAMCA 553
H & T [2002] FMCAfam 209
Russell v Russell (1999) FamCA 1875
D & D [2006] FLC 93 256

Applicant: MS MAYBURY

First Respondent: MR MAYBURY

First Intervenor: [S] LTD

Second Intervenor: [K] PTY LTD

File Number: (P)BRC 9198 of 2009

Judgment of: Coates FM

Hearing dates: 21 July 2010 & 17 May 2011

Date of Last Submission: 17 May 2011

Delivered at: Brisbane

Delivered on: 2 June 2011

REPRESENTATION

Counsel for the Applicant: Mr B Thiele

Solicitors for the Applicant: Ferguson Cannon Lawyers

Solicitors for the Respondents: Self represented

Solicitors for the First Intervenor: Norton Rose Australia

Solicitors for the Second Intervenor: Shultz Toomey O’Brien Lawyers

ORDERS

1. That the parties within seven (7) days of the date of this Order submit to the Court draft orders to reflect the reasons for judgment.

IT IS NOTED that publication of this judgment under the pseudonym Maybury & Maybury and Ors is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT BRISBANE

(P)BRC 9198 of 2009

MS MAYBURY

Applicant

And

MR MAYBURY

First Respondent

[S] LTD

First Intervenor

[K] PTY LTD

Second Intervenor

REASONS FOR JUDGMENT

BACKGROUND

1. Pursuant to the Family Law Act 1975 (the Act) the applicant wife seeks by way of property settlement an equal division of the net marital property pool. In her share, she wants to retain her superannuation interests, personal items, some contents from the marital home being dining chairs, a rug, a timber cased mirror, wall vases, a religious picture, two works of art and her personal effects.

2. She seeks orders for the husband to retain three motor vehicles including a Ford [ omitted], an aluminium boat, his superannuation interests, the remainder of the home’s contents, three credit card debts and his personal effects.

3. Most of the trial was taken up with the possible effect of the wife’s orders which would result in two particular debts being characterised as marital debt, and be distributed equally. Those debts are:

   a)     $128,228.75 for unpaid rent for a [business] lease by the family company [H] Pty Ltd ([H]) from a company called [K] Pty Ltd ([K]), as particularised in a judgment of the Queensland District Court, and

   b)     $189,448.07 being the unpaid mortgage taken as a line of credit against the marital home from [S] Limited ([S]).

4. The specific wording of her orders is contained in her case outline filed 20 July 2010, folio 31 on the court file, as well as from submissions received at a mention on 17 May 2011.

5. The husband seeks orders whereby he receives 70 percent of the pool. As part of his share he wants the marital home so he can take over the mortgage, but with the wife to discharge the debts in relation to [K] and [S]. He also wants the wife to retain a Ford [omitted] motor vehicle, the lounge suite, fridge, dining chairs, rug, the timber framed mirror, king-size bed and her personal effects.

6. He would retain the rest of the marital property.

7. He said he and his partner, Ms S, were ready to refinance the marital home within 30 days of it being signed over by the wife on the basis that orders were made as he sought.

8. His full orders can be seen in his response filed 6 November 2009.

9. The husband based his case on a lack of capacity to make decision which resulted in the debt to [S] and [K].

10. The husband was not represented.

11. [S] appeared as a respondent to an Application in a Case filed by the husband on 9 June 2010, where he sought an order pursuant to s.90AF of the Act restraining [S] from exercising a power of sale over the marital property. Whether [S] appeared as a respondent or not, the company had a right to appear in my view because of the mortgage debt. [K] was in the same position because the dispute over the lease payments and the civil action was foreshadowed at the time of trial in July 2010, and in February 2011. Before I could deliver this decision, [K] received judgment in the District Court against the husband and wife. Both parties had envisaged orders taking into account the effects of any judgment in the District Court matter.

12. I describe the company [H] as a family company on the basis that the wife was the director and both she and the husband held a share each.

13. At the beginning of the trial [S] indicated through its solicitor,

    
    

    Mr Schmidt, that it had exercised all its relevant and legal powers to take possession of the martial property under a second mortgage, the line of credit which was in arrears. He submitted that the bank would not exercise its powers until this property decision had been made and it remained ready to enter into an agreement with the parties either have the property refinanced or have it sold.

14. There was no objection from the parties that [S] had acted or was acting outside its powers, so the debt or [S]’s position did not have to be proved.

APPLICATION 17 MAY 2011

1. Circumstances beyond my control prevented delivery of judgment after the trial on 21 July 2010 and [S] and [K] sought a mention of the matter, set for 17 May 2011, [K] by way of filing an Application in a Case.

2. [K] placed before the Court evidence of the judgment it obtained in the District Court and sought payment from the husband and wife of $128,228.75 including interest to 14 February 2011, the amount payable under a judgment obtained in the District Court of Queensland, judgment number D107/09, on 14 February 2011.

3. Judge Robertson, in the District Court at Maroochydore, after trial, made an order that “the Second and Third Defendants pay to the Plaintiffs the amount of $128,228.75 including interest to this day plus costs on an indemnity basis”. The plaintiff was [K] Pty Ltd (ACN [omitted]), the first defendant was [H] Pty Ltd (ACN [omitted]), the second defendant was Mr Maybury, the respondent before me and the third defendant was Ms Maybury, the applicant before me. During the hearing of this matter the husband had confirmed that he was defending the [K] action and representing himself in the District Court.

4. [S] gave evidence that as at 30 April 2011, no payments had been received and the outstanding mortgage debt was $189,448.07. [S] wanted an order which would allow it to exercise its power of sale.

5. The wife instructed her counsel to consent to the payment of the unpaid [S] mortgage and the payment of the [K] judgment from the assets of the marriage, before the remainder was distributed to the parties, although that was on the basis that the property orders were made as she originally sought. Her position between trial and the mention on 17 May 2011 did not change.

6. The husband opposed both applications. His orders had not changed from trial either, and he wanted to buy the wife’s share of the marital home, leaving her to pay the unpaid mortgage and the judgment debt.

7. He said he was ready, willing and able to do so once the orders were made and that is why he sought orders under s.90AF and although that applied to [S], I take it he would apply the same orders to [K] if possible.

THE LAW

1. The usual method of determining property matters under the Family Law Act 1975 (“the Act”) was outlined in Hickey & Hickey [2003] FamCA 395 and there is no reason to depart from this formula the relevant passage stating:

   “The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79.  That approach involves four inter-related steps.  Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing.  Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties.  Thirdly, the Court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), (“the other factors”) including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two.  Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case: Lee Steere and Lee Steere (1985) FLC 91-626; Ferraro and Ferraro (1993) FLC 92-335; Davut and Raif (1994) FLC 92-503; Prpic and Prpic (1995) FLC 92-574; Clauson and Clauson (1995) FLC 92-595; Townsend and Townsend (1995) FLC 92-569; Biltoft and Biltoft (1995) FLC 92-614; McLay and McLay (1996) FLC 92-667; JEJ and DDF (2001) FLC 93-075 and Phillips and Phillips (2002) FLC 93-104.”

2. Following this four-step process will allow the consideration of the [S] and [K] applications pursuant to s.75(2)(ha).

THE POOL

1. The first inquiry is to determine the pool and resources and where the parties agree and disagree.

2. The husband did not comply with clear directions made on 24 June 2010 to file his final evidence and did not supply a schedule of assets, liabilities and resources.

3. Because he was not represented, my duty, enunciated in Re F: Litigants in Person Guidelines (2001) FLC 93-072, was to give him that assistance necessary for me to understand his case and for him to be given opportunity to put his case. I gave such assistance whereby I gave him a copy of the relevant statement in Hickey & Hickey as to the approach I would take. When questioning, I sought to clarify the purpose of some questions and I reminded him that I had to determine contributions and his case that he should not be responsible for payment of debts. When he referred the wife to documents, I reminded him to put the material to the wife to confirm she had seen it and I told him that he needed to be able to confirm his points with evidence rather than leave an answer by the wife merely contradicting his position.

4. In an affidavit from early in the proceedings, filed 6 November 2009, he disputed the wife’s then valuation of the house, preferring to rely on a 2008 [S] valuation, but in my view such was too old and was in response to earlier material filed by the wife, not her new material to which he was directed to respond.

5. Given the evidence and the manner in which the husband ran his case, and I should say as a former [occupation omitted] I could not take it that he was unfamiliar with requirement to produce evidence, I accepted the wife’s values as there was no evidence to make a comparative judgment on the assets, liabilities and resources.

6. The pool is:-.

ITEM	CURRENT VALUE	VALUE AS AT SEPARATION
ASSETS
Real Property –Property C	$600,000.00	$600,000.00
Household contents	$10,000.00	$10,000.00
Motor vehicle – Subaru [omitted] model	$17,000.00	$17,000.00
Motor vehicle – Ford [omitted]	$1,000.00	$1,000.00
Motor vehicle – Mazda [omitted]	$2,000.00	$2,000.00
Aluminium Boat	$1,500.00	$1,500.00
TOTAL	$631,500.00
WIFE’S SUPERANNUATION
[1]	$7,565.74	$9,532.35
[2]	$6,083.19	$7,032.35
[3]	$687.51	Unknown
[4]	$2,811.59	$3,600.09
[5]	$452.00	$0.00
Total of Wife’s Superannuation:	$17,600.03
HUSBAND’S SUPERANNUATION
[6]	$24,571.86	$23,741.51
[7]	$13.49	Unknown
[8]	Unknown	Unknown
[9]	$3,756.00	Unknown
[10]	$9,548.00	Unknown
Total of Husband’s Superannuation	$37,889.35
TOTAL SUPERANNUATION	$55,489.38
TOTAL ASSETS (INCLUDING SUPERANNUATION)	$686,989.38

1. The liabilities are as follows:-

ITEM	PERSON MEETING LIABILITY	CURRENT VALUE	VALUE AS AT SEPARATION
LIABILITIES
Mortgage ([S])	Husband	$136,462.88	E$135,000.00
Line of Credit	Nobody	$164,148.46	$158,409.26
Rates ([omitted] Regional Council)	Husband	$6,199.14	$4,696.93
Total	$306,810.48
CREDITORS – [H] PTY LTD
Australian Taxation Office	Wife ($115.00 per week)	$11,022.73	Unknown
[A] Pty Limited	Nobody	$9,634.82	$4,702.95
[M] Lawyers	Nobody	$3,129.88	$3,629.88
[P]	Nobody	$506.30	$506.30
[B] Pty Ltd	Nobody	$886.00	Unknown
Claim by [K] Pty Ltd (District Court – Maroochydore - $118,000.00)	$118,851.99	$118,851.99
Estimated interest at 10% from 03.04.09	$15,141.42
Estimated Costs Order	$25,000.00
Total of [H] Pty Ltd Liabilities	$184,173.14
TOTAL LIABILITIES	$490,983.62
NET PROPERTY	$196,005.76

CONTRIBUTIONS

1. The husband was born [in] 1966 and was aged 44 at the time of hearing.

2. The wife was born [in] 1969 and was aged 41 at the time of hearing.

3. They commenced a relationship in about 1985 when the husband owned a block of land and the wife had savings which she used to purchase land in 1989.

4. The husband sold his land in 1989 and the money used to begin building a house on the wife’s land.

5. The husband was a [occupation omitted] and the wife worked at various jobs.

6. They married [in] 1990.

7. Two children were born - on [in] 1991 and [in] 1993.

8. In 1993 the husband inherited $92,000 from his grandfather and it appears about $50,000 was paid into the mortgage.

9. In about 1999, the husband resigned from [NSW occupation omitted] to join [Qld occupation omitted] but he was rejected, according to the wife, because of some type of [omitted] investigation in NSW. I will say more on this later, but it was never explained properly by the husband.

10. At this time the parties moved to Queensland and brought a home at Property C on the Sunshine Coast.

11. He said he took his superannuation from [occupation omitted], about $35,000 and used most of it for the marital home and a small amount for the wife’s cosmetic surgery.

12. The wife looked after the children and returned to work in 2003.

13. The parties discussed the starting of a business and their evidence differs about agreement, the husband stating he did not have capacity to make decisions.

14. Despite the alleged disagreement, in 2006 the company name [H] was registered with the wife as the sole director and both parties as shareholders. [H] was to buy and conduct a [omitted] business but a contract collapsed.

15. The wife then began work in a [business omitted] in [N]. The owner opened another [business] in [M] and the wife worked in both [businesses].

16. In 2008 negotiations began to buy the [M] [business].

17. To raise money, both parties signed a loan application with [S] to extend the line of credit against the marital home for the purchase of the [business], on behalf of [H].

18. Both parties gave personal guarantees in a deed of guarantee securing the debt of [H].

19. The [business] premises was leased from [K] and on 8 September 2008 [H] entered into a deed of assignment of lease with [K] in relation to Property M, taking over the [business omitted]. No cash was exchanged and stock was taken on assignment and both husband and wife signed a guarantee and indemnity in respect of [H]’s obligations under the lease.

20. It is agreed the [business] did not make money, or rather, lost money.

21. In December 2008, the parties separated.

22. The husband remained in the marital home with the children and the wife moved to rented premises, before moving to NSW in April 2009.

23. Before she moved, in February 2009, she informed the husband she was struggling financially.

24. On 26 March 2009 the landlord [K] served a notice to remedy the breach in relation to lease/rent payments.

25. On 3 April 2009 the landlord [K] locked the parties out of the premises, taking possession.

26. [S] was also taking steps to recover its money.

27. The wife cancelled the business name of [omitted], which conducted the business of [H], in May 2009.

28. By then the wife’s de facto relationship, which began after separation,  had ceased.

29. Soon after separation the husband began a de facto relationship with Ms S. That continues.

30. In July 2009 the wife began working in a [omitted] business at [omitted] in NSW.

31. On 15 January 2010 [S] issued a notice of demand in relation to the loan under the mortgage.

ASSESSMENT OF EACH PARTY’S EVDIENCE

1. The wife’s evidence is that of a couple who married and pooled both their incomes and inheritances in order to acquire property and a reasonable standard of living.

2. Her evidence is that they also, together, decided to take the risk of entering a business, with the same goal, of bettering their financial position.

3. The husband’s evidence is very different. I will address his claimed psychological situation below, but he says he suffered depression and at the same time the wife threatened to end the marriage if he did not enter into the [H] business. He said the depression deprived him of capacity to make the financial decisions and understand the quality of his acts in signing financial documents.

4. Until the events surrounding the business venture arose, he said the non-financial contributions were equal, but the financial contributions were not.

5. There is no dispute about that but there is disagreement that the contributions overall, ought to be considered to be equal.

6. The legislation at s.79(4) directs the Court to consider financial and non-financial contributions to the property pool, non-financial contributions to the welfare of the family, the needs factors and other considerations if relevant and the effect of proposed orders, resulting in the four step process outlined in Hickey. The High Court gave an indication of how the range of contributions should be taken into account when determining the vexed question of contributions and reducing them to a percentage figure, in Mallett v Mallett (1984) FLC 91-507, where Wilson J at 7,126 stated: “However, equality will be the measure, other than it being equal, only if equality of the respective contributions of the husband and wife, each adjusted by reference to their sphere, are equal. The quality of the contribution made by a wife as a homemaker or parent may vary enormously, from the inadequate to the adequate to the exceptionally good. She may be an admirable housewife in everyway or may fulfil little more than the minimum requirements. Similarly, the contribution of the breadwinner may vary enormously and disserves to be evaluated in comparison with that of the other party. It follows that it cannot be said of every case where the parties reside together that equal value must be attributed to the contribution of each. That will be appropriate only to the extent that the respective contributions of the parties are each made to an equivalent degree…”

7. The wife carefully lists at paragraph 50 of her affidavit filed 14 July 2010 all of that housework she undertook over the years they were together, so important and sometimes undervalued, for the parties and this cannot be given mere token weight. Nor can the important role of childcare. I should say at paragraph 53 she lists the non-financial contributions made by the husband so it is not the case she is claiming all of the credit. She is being fair.

1. While the husband made the major financial contributions, it cannot be said on the evidence produced or attained in cross-examination that the wife’s contributions could be regarded as poor, inadequate or that they ought to be given a low value.

2. Very specifically, I include the inheritance and the use of superannuation here, because there is no doubt that taken on their own, they were large contributions.

3. But that does not mean that the contributor merely gets his or her money back, as identified In the Marriage of Pierce (1998) FLC 92-844, where the court stated: “…it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all of the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both…”. Putting the emphasis on initial contribution aside, the principle in my view is clear, the circumstances of the contribution must be considered in context of all contributions. That allows for a consideration of the use the parties made of any singular contribution made by one party.

4. In my view, the parties used the two extraordinary contributions in unison as they bought and sold properties in NSW, then bought a property in Queensland and then attempted to start a profitable business.

5. Further, the evidence is that the parties moved to Queensland so the husband could join [occupation omitted] ([Q]), but his application was rejected because, it appears, of questions relating to his integrity. He gave very little explanation of what actually occurred and without a thorough explanation, with admissible documentation, that is proper disclosure of what occurred, I would conclude that the husband took a step which prejudiced the couple’s ability to earn income. Whatever occurred, he had a good [omitted] income and I regard this as a lack of disclosure of relevant events relating to the financial history and capabilities of the parties.

6. The evidence is that both parties used money which came to the husband and they continued their quest to achieve a comfortable lifestyle, together. In the words of Pierce, the court is to look at what the parties did with all contributions and it is clear that they decided to use most monies received on joint property or resources and over time to use the matrimonial equity to invest in a joint future, keeping in mind that contributions is the measure not time.

7. The wife’s case is that they were so entrenched in this joint enterprise that they both signed personal guarantees for a business venture to benefit both parties.

8. It follows that the wife disputes the husband’s claims of depression and lack of capacity.

9. The husband’s brief explanation of what occurred was in his affidavit filed 6 November 2009, where he stated he had a mental breakdown shortly after the proposed purchase of the [business] fell through and he consulted a psychiatrist, Dr H, at [omitted].

10. That he said he had a breakdown after the proposed purchase of the [business] fell through, to my mind, means that he did plan a joint enterprise with the wife to that point. That takes into account all contributions to that point, indicating that the couple did indeed use all monies jointly.

11. He then said, after the breakdown, that he was treated for reactive depression.

12. He said at paragraph 38 of his affidavit filed 6 November 2009 that “the condition is on-going and I experience inconsistencies in decision making”.

13. At paragraph 30 he stated: “In June 1999 I resigned from [omitted] and the family moved to the home we had purchased in Property S. On the last day of my [employment] I discovered that someone had made a complaint about me being [omitted] and this essentially ruined my [omitted] Career. This complaint was unfounded and ultimately led to me suffering depression”.

14. This is where he refers to threats by the wife to divorce him and considering the possible loss of his marriage and children he signed his name to all of those documents relevant to the business and resulting in the current debts.

15. He said he otherwise objected to going into the business.

16. He said the mental breakdown occurred in mid-2009 which I take was part and parcel of the claimed reactive depression.

17. He said he was unaware that he had personally guaranteed the lease of the [business] and he would not have done so otherwise.

18. He said he believes the wife failed in her fiduciary duties to the company.

19. He said that he wants the property for his children.

20. As can be seen, the Court is faced with numerous allegations which if proven, must bear on the outcome of the property proceeding.

21. But the husband’s leaves his case dangling by merely making statements without particulars and more importantly, without supporting evidence.

22. Any [omitted] allegation against a [occupation omitted] is very serious and would usually result in a criminal investigation. Such allegations are based on evidence and there must be witnesses to give the evidence. If the evidence was false, then I was not given details of what has actually occurred and it cannot be the case that such allegations were made orally. There must be records in New South Wales of what occurred, as there would be a record of these allegations being shown to be false. Queensland [omitted] records were subpoenaed, but all they reveal is correspondence from the husband’s solicitor and replies to the effect that the [Q] has taken into account everything. Some allegations are mentioned, but the correspondence has three issues which cannot be ignored.

23. Firstly, the husband could give evidence of what he instructed his solicitors to state in correspondence to [Q] officials.

24. Secondly, he cannot rely on correspondence from [Q] officials as evidence of the truth of matters asserted, because the documents are hearsay documents.

25. Thirdly, even if proven, a trail of correspondence is far from the state of affairs where the husband, unfairly and unjustly named and involved in events which ended his [omitted] career, did not take his case to the relevant authorities or court to clear his name.

26. I am not suggesting that the husband was [omitted], but he raised an issue he says is crucial to the property settlement, which I agree with, but then does not produce necessary supporting evidence of what has occurred and its effect on him. He gave no reason why he did not take the legal action required to clear his name, at least after the [Q] rejected his employment application because this, in my view, would not only be relevant to his claims that he suffered depression, but would be a relevant need, related to his training and employment future, under s.75(2).

27. That such a complaint or allegations could lead to depression is not out of the question, but there was no admissible medical evidence of how the events affected him or what the prognosis for the future would be.

    
    

    I cannot rely on his mere assertions given that the wife rejects them. Such evidence is of prime importance when determining:

    a)     The claim that he lacked capacity at crucial times that documents binding him to debt were signed by him;

    b)     Whether his contributions could be affected because of his condition, and

    c)     Whether the percentage figure arrived at for his contributions should be adjusted because of a future medical need.

28. This is what I am referring to when I say he has left his evidence dangling, or in an incomplete state.

29. If he was and is in such a fragile state of mind, then I do not have evidence reflective of that, other than assertions. Nor was it the case that his submissions were so disjointed that I would form the view that he did suffer some sort of on-going inconsistencies in decision making, as he put it.

30. The next consideration then must be in relation to the business and what the parties did.

31. The husband’s claim specifically is that the wife wasted the joint monies.

32. He took me to the accepted and quoted case of in Kowaliw  & Kowaliw (1981) FLC 91-092, where it was stated:

    “Marriage is for most couples an economic partnership. Married couples live together and work together with the ultimate object of purchasing a home, paying it off, acquiring other assets with the overall object of attaining a higher standard of living. The reported decisions in respect of applications for settlement of property under sec. 79 of the Act are unanimous that both parties should share the economic fruits of a marriage, having regard to the provisions of sec. 79(4) and sec. 75(2), although not necessarily equally.

    Is not, however, the converse equally sustainable?  In other words, should not financial losses incurred by parties to a marriage or either of them, whether incurred jointly or severally, be shared by them in the same manner as the financial gains? 

    As a statement of general principle.  I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances: 

    (a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or 

    (b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value. 

    Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec. 75(2)(o) to applications for settlement of property instituted under the provisions of sec. 79.”

33. His case is that the wife conducted herself in relation to the marital pool so as to reduce the assets or their value by acting recklessly, negligently and wantonly.

34. But, following from what I have stated, there was no evidence to support these assertions that he lacked capacity whereby he did not understand the quality of his acts in signing far reaching financial documents and on that basis I need to deal with the claims robustly, as was stated in Essex & Essex [2009] FamCAFC 236 when referring to a situation where one party allegedly has taken control of joint assets.

35. I will say more on the issue of supporting evidence when addressing the issues of the creditors, but since there is no evidence of his state of mind at the time the documents were signed or now, it follows that I do not have evidence to suggest the wife acted on her own, recklessly, negligently and wantonly.

36. Signing a personal guarantee is no mere or meaningless act. It is a business decision which binds the signatories legally to the lender or [business] owner and binds, in this case, the parties to debt of their failed business venture.

37. The wife carefully lists at paragraph 73 of her affidavit filed 14 July 2010 all of the work relating to the business they did together. This went unanswered by the husband.

38. These were two people, together, trying to make a go of the business to achieve and enjoy together a well funded lifestyle.

39. Unfortunately, the business failed.

40. Even though the wife gave evidence that staff did not want to work with the husband because of aggressiveness, that is not the reason for the business failure. It failed because goods were not selling. I am not asked by the wife to channel blame in that sense so that the husband would pay more than an equal share of the debt.

41. Post-separation, the wife paid some of the mortgage and the husband some, but all payments stopped at some stage.

42. Post-separation, the husband had care and control of the daughter but there was no evidence of what non-financial contribution was made to the welfare of the family or a quantification of the costs in his evidence. Mere reference to having the teenage child in his care is not to be confused with the consideration of determining the type of and magnitude of the contribution involved, as was indicated by the decision in Mallett. The Act does not allow me to guess what the contribution was, nor was there evidence to allow an inference to be drawn. That is a problem when a party concentrates on one or two issues in evidence, as the husband did, and not address what are very important considerations. I can only work with the material put before me and again I will state, the husband is not a neophyte when dealing with evidence and legal issues as he was a [occupation omitted] used to dealing with evidence for legal proceedings. He has also studied at least some law, either in [occupation omitted] or at university as he stated, so he must realise that any strand of law takes into account and must take into account an array of legal considerations. While evidence in a family law proceeding is different from a criminal proceeding in that evidence-in-chief is given by affidavit, there is still the requirement for relevance in both evidence-in-chief and in cross-examination and for a party to put their case.

43. The husband claimed on 17 May 2011 at the mention of the matter that he was always prepared to take the mortgage over but that is a failure to understand the financial issues under the Family Law Act and the debt he is liable for under loans and lease arrangements. He had a duty to pay the mortgage and the lease, as did the wife and had each done so, such would have been counted as extremely important post-separation contributions, ones which could be considered in light of the orders each party sought and ones which could be balanced against pre-separation contributions If the husband did not otherwise have the ability to pay, and did not have the ability to produce the evidence which is so crucial but now missing from his case, then he ought to have considered the position of the debt and sought the wife’s cooperation to sell the house and repay what was owed in their names, putting any left over into trust for determination under the Family Law Act. The wife’s case was that she wanted these issues resolved.

44. It is on that basis, that I find I should hold that all contributions to be equal over time.

SECTION 75(2) FACTORS

1. At the ages of 44 and 41, both husband and wife can work and do work. There was no particular evidence of what the parties may work at in the future, with the husband studying [omitted] at the time of the trial but later stating he was not going to finish that study.

2. The wife does not have specific health issues to consider.

3. The husband does not have specific physical health issues to consider.

4. I have already addressed above the husband’s psychological state. That was also a consideration of his position under s.75(2)(2)(b), keeping in mind the statement in the case of Hickey that these steps are interrelated. I have more to say about is psychological state below.

5. Both parties are engaged in what appears to be low paid employment, the wife in a [business omitted] and the husband as a [omitted] but there is no specific issue in relation to their employment. Their resources are what is left in the property pool. The wife earns $450 a week. The husband earns $700 a week.

6. I have already addressed above the issue of the husband’s care of the daughter aged 17 and his position under s.75(2)(c). While he stated that he took the children upon separation, there was no particularised or relevant evidence to determine any adjustment which ought to be made under this section of the Act.

7. The parties are committed to supporting themselves and the husband has stated he has the 17-year-old daughter in his care. He also lives with his partner, Ms S.

8. There was no disclosure in relation to Ms S. No evidence was received from her.

9. At this stage I will address the issue of disclosure more fully.

10. In her affidavit filed 14 July 2010, the trial affidavit, the wife stated at paragraph 34 that the husband had not filed a schedule of assets and liabilities. The schedule is required in order to determine with precision what the parties own and what they owe and when one party simply ignores the disclosure requirements it is at their peril, as was stated in a line of cases.

11. In Weir & Weir (1992) FLC 92-287 the Full Court of the Family Court stated:

    “32 “This Court has pointed out in a line of cases…that it is the duty of a party involved in property proceedings…to make full disclosure of their financial affairs…

    33 It seems to us that once it has been established that there has been deliberate non-disclosure…the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature”.

12. In W & T (2006) FLC 93-266, paragraph 42, it was said:

    “the Court can be generous in drawing adverse conclusions  as to the size of the pool of assets available…where there has been less than full and frank disclosure”.

13. In K & K (2002) FamCA 1150 there was lengthy discussion about the duty to disclose in property proceedings, and the often quoted passage was developed that:

    “Whether the non-disclosure is wilful or accidental, is a result of misfeasance, or malfeasance or nonfeasance, is beside the point.  The duty to disclose is absolute.  Where the Court is satisfied the whole truth has not come out it might readily conclude the asset pool is greater than demonstrated.  In those circumstances it may be appropriate to err on the side of generosity to the party who might be otherwise be seen to be disadvantaged by the lack of complete candour.  This is the course the trial Judge adopted.  It was a course clearly open to him and one that does not merit appellate interference”.

14. The husband admitted he did not disclose everything but said words to the effect that the case was very narrow, referring I think to his claims of lacking capacity. I can only deal with the evidence as I find it and the cases as I find them. The husband has failed to disclose everything, but the wife does not ask for anything other than an equal division despite the lack of disclosure. As to contributions I have found that the pool and liabilities ought to be divided equally and I am now examining the s.75(2) factors to determine whether any party should get an uplift because of a relevant consideration.

15. Like other parts of his case, including that related to medical evidence, the husband has not produced anything in relation to his partner, so I cannot determine his real position in relation to questions of support especially when he said he and his partner were ready to borrow to buy out the wife’s share of the marital home. It is as simple as that.

16. In determining the alteration of interests, I cannot change the standard of living the parties now have compared with their position when together. The pool will not go that far.

17. The creditors’ position is tied up with the husband’s claim that he lacked capacity at the time he signed documents regarding the extension of the line of credit against the marital property and the lease commitments he and the wife signed.

18. At the beginning of the trial, [S] filed evidence and made submissions that it was content to stand back to allow the parties to argue their property cases before seeking to exercise its power to sell the marital home to recover its unpaid lendings.

19. There was nothing in the respective cases which indicated that the bank could not adopt that position.

20. The husband did not require an authorised bank officer to give evidence.

21. On 17 May 2011 the bank supplied evidence through the affidavit of a Mr Y that the outstanding balance at 30 April 2011 was $189,448.07.

22. The evidence was that this amount rises month by month.

23. The bank wants its money pursuant to the agreement, the contract with both parties.

24. There was no case run by the husband against the bank that the loans, or how the amount owed was in breach of a stated or principle of law. There was no case that the husband had been denied natural justice in relation to the bank’s position. He did not run his case, that he lacked capacity against the bank, he ran it against the wife in the form that she unduly influenced him, taking advantage of his depressed state.

1. Between the hearing on 21 July 2010 and 18 May 2011 [K] obtained a judgment against the parties and their company in the District Court of Queensland in the sum of $128,228.75 including interest to

   
   

   14 February 2011.

2. The action was foreshadowed by both parties during the trial, so it was not unexpected.

3. [K] now wants its money.

4. The husband said he had filed an appeal against the decision, but [K]’s lawyer submitted that no stay of judgment had been sought.

5. I of course do not have a direct jurisdiction in relation to the issues which have properly arisen in the state courts under state jurisdiction, unless it can be shown that such can be connected to matters justiciable under the Family Law Act.

6. The husband asks me to act under s.90AF of the Act, which states:

   “s.90AF Court may make an order or injunction under section 114 binding a third party

   (1)  In proceedings under section 114, the court may:

   (a)  make an order restraining a person from repossessing property of a party to a marriage; or

   (b)  grant an injunction restraining a person from commencing legal proceedings against a party to a marriage.

   (2)  In proceedings under section 114, the court may make any other order, or grant any other injunction that:

   (a)  directs a third party to do a thing in relation to the property of a party to the marriage; or

   (b)  alters the rights, liabilities or property interests of a third party in relation to the marriage.

   (3)  The court may only make an order or grant an injunction under subsection (1) or (2) if:

   (a)  the making of the order, or the granting of the injunction, is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and

   (b)  if the order or injunction concerns a debt of a party to the marriage --it is not foreseeable at the time that the order is made, or the injunction granted, that to make the order or grant the injunction would result in the debt not being paid in full; and

   (c)  the third party has been accorded procedural fairness in relation to the making of the order or injunction; and

   (d)  for an injunction or order under subsection 114(1)--the court is satisfied that, in all the circumstances, it is proper to make the order or grant the injunction; and

   (e)  for an injunction under subsection 114(3)--the court is satisfied that, in all the circumstances, it is just or convenient to grant the injunction; and

   (f)  the court is satisfied that the order or injunction takes into account the matters mentioned in subsection (4).

   (4)  The matters are as follows:

   (a)  the taxation effect (if any) of the order or injunction on the parties to the marriage;

   (b)  the taxation effect (if any) of the order or injunction on the third party;

   (c)  the social security effect (if any) of the order or injunction on the parties to the marriage;

   (d)  the third party’s administrative costs in relation to the order or injunction;

   (e)  if the order or injunction concerns a debt of a party to the marriage --the capacity of a party to the marriage to repay the debt after the order is made or the injunction is granted;

   Note:       See paragraph (3)(b) for requirements for making the order or granting the injunction in these circumstances.

   Example: The capacity of a party to the marriage to repay the debt would be affected by that party's ability to repay the debt without undue hardship.

   (f)  the economic, legal or other capacity of the third party to comply with the order or injunction;

   Example: The legal capacity of the third party to comply with the order or injunction could be affected by the terms of a trust deed. However, after taking the third party's legal capacity into account, the court may make the order or grant the injunction despite the terms of the trust deed. If the court does so, the order or injunction will have effect despite those terms (see section 90AC).

   (g)  if, as a result of the third party being accorded procedural fairness in relation to the making of the order or the granting of the injunction, the third party raises any other matters--those matters;

   Note:       See paragraph (3)(c) for the requirement to accord procedural fairness to the third party.

   (h)  any other matter that the court considers relevant.”

7. The wife’s counsel submitted at one stage he appeared to be making an application under s.90AE, which is true. The section states:

   “s.90AE Court may make an order under section 79 binding a third party

   (1)  In proceedings under section 79, the court may make any of the following orders:

   (a)  an order directed to a creditor of the parties to the marriage to substitute one party for both parties in relation to the debt owed to the creditor;

   (b)  an order directed to a creditor of one party to a marriage to substitute the other party, or both parties, to the marriage for that party in relation to the debt owed to the creditor;

   (c)  an order directed to a creditor of the parties to the marriage that the parties be liable for a different proportion of the debt owed to the creditor than the proportion the parties are liable to before the order is made;

   (d)  an order directed to a director of a company or to a company to register a transfer of shares from one party to the marriage to the other party.

   (2)  In proceedings under section 79, the court may make any other order that:

   (a)  directs a third party to do a thing in relation to the property of a party to the marriage; or

   (b)  alters the rights, liabilities or property interests of a third party in relation to the marriage.

   (3)  The court may only make an order under subsection (1) or (2) if:

   (a)  the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and

   (b)  if the order concerns a debt of a party to the marriage --it is not foreseeable at the time that the order is made that to make the order would result in the debt not being paid in full; and

   (c)  the third party has been accorded procedural fairness in relation to the making of the order; and

   (d)  the court is satisfied that, in all the circumstances, it is just and equitable to make the order; and

   (e)  the court is satisfied that the order takes into account the matters mentioned in subsection (4).

   (4)  The matters are as follows:

   (a)  the taxation effect (if any) of the order on the parties to the marriage;

   (b)  the taxation effect (if any) of the order on the third partyhttp:// - third_party;

   (c)  the social security effect (if any) of the order on the parties to the marriage;

   (d)  the third party's administrative costs in relation to the order;

   (e)  if the order concerns a debt of a party to the marriage --the capacity of a party to the marriage to repay the debt after the order is made;

   Note:       See paragraph (3)(b) for requirements for making the order in these circumstances.

   Example: The capacity of a party to the marriage to repay the debt would be affected by that party's ability to repay the debt without undue hardship.

   (f)  the economic, legal or other capacity of the third party to comply with the order;

   Example: The legal capacity of the third party to comply with the order could be affected by the terms of a trust deed. However, after taking the third party's legal capacity into account, the court may make the order despite the terms of the trust deed. If the court does so, the order will have effect despite those terms (see section 90AC).

   (g)  if, as a result of the third party being accorded procedural fairness in relation to the making of the order, the third party raises any other matters--those matters;

   Note:       See paragraph (3)(c) for the requirement to accord procedural fairness to the third party.

   (h)  any other matter that the court considers relevant.”

8. The applicant’s material was confusing. His material and submissions at different times refers to both sections.

9. I suspect he wants an order under either or any section whereby his case is upheld.

10. Here I return to the issue of his asserted reactive depression, because it is connected to the orders sought by the husband under s.90AF and/or s.90AE.

11. He based his case for an order on his alleged lack of capacity to contract.

12. In his written submissions he said this:

    “The respondent husband had been given numerous ultimatums by the applicant wife, the effect of which was that the marriage would come to en end if the respondent did not acquiesce to the business venture.

    The applicant wife failed to rebut evidence that the respondent husband was suffering from reactive depression. The applicant wife failed to subpoena the respondent husband’s Psychologist, Ms B, for no apparent reason. The psychologists evidence would have shown that the respondent husband’s, “mind was not with his hand”, when executing various legal documents”.

13. The husband highlighted in bold the words in the quote. I do not know for what reason.

14. At this stage I think I must determine what undue influence is and it was stated in Louth v Diprose [1992]HCA 61(1992) 175 CLR 621, at page 4, referring to Deane J’s words in Commercial Bank of Australia Ltd v Amadio ((5)(1983) 151 CLR at p474): “Undue influence, like common law duress, looks to the quality of the consent or assent of the weaker party...” . For the purposes of this matter, that description suffices, and the husband claims he was in a position where the quality of his consent is questionable and he was the weaker party.

15. The wife disagrees with that position.

16. This statement of what undue influence is brings into focus a number of accepted procedures regarding evidence and the rules of this court.

17. It has been the case in living memory that the onus of proof falls on a party contending the truthfulness of a fact or set of facts.

18. The husband contends that he suffered a condition he calls reactive depression.

19. The onus then is his to prove that.

20. If that was not the case, how could the wife, or any party in her position, necessarily know who to subpoena or call to court to challenge the assertions?

21. But the husband proceeded on a fallacious view of the law. Even if the wife knew of the psychologist Ms B, a subpoena to give evidence would make Ms B her witness, requiring her to lead evidence-in-chief and preventing her cross-examining Ms B, that is, testing any claim which would obviously need testing when the wife’s case is that the husband freely signed all documents in contention.

22. Further, a psychologist, whose expertise is in the science dealing with the mind and mental processes, may not have the qualification to give expert evidence of incapacity where someone did not know the quality of his acts in signing legally binding documents tied to large borrowings and lease arrangements.

23. Such knowledge may fall into the area of a psychiatrist, whose expertise is that branch of medicine dealing with the diagnosis and treatment of mental disorders, because what is being alleged is a very serious condition where the husband states he has been deprived of the capacity to understand decisions. I could be incorrect in the type of expert required, but I am not incorrect in requiring expert evidence of the husband’s stated condition.

24. In any case, the husband stated he saw a psychiatrist and a psychologist.

25. The rules of this court, particularly r.4.05, requires a litigant to give all of their evidence, in admissible form, by affidavit, unless leave of the court is obtained. The rule refers to evidence-in-chief that must be contained in “an affidavit stating the facts relied on”. In plain simple language, the rule is amongst the most powerful in this Court’s rules, and states with simple clarity what is required with regard to evidence. 

26. Further, that the husband used the words his “mind was not with his hand” in inverted commas, suggests that there may be a report using those words and he purposely refused to put the material into evidence, setting some sort of trap for the wife if Ms B was subpoenaed.

    
    

    He seems to be relying or setting on some sort of trap if the wife did not subpoena Ms B. As I said, the wife would be prevented from testing the evidence by cross-examination because a subpoena would make Ms B the wife’s witness. This court does not work in a system which allows trial by ambush or trickery. I understand that the husband’s legal experience is in the criminal law jurisdiction when a defendant is allowed to reveal defence evidence for the first time during a criminal trial. The reason for that of course is that a person is innocent until proven guilty and their liberty is at stake, a completely different scenario from a civil matter.

27. Without agreement that he suffered the degree of depression whereby his capacity was impaired, as claimed, then he has the onus to produce his medical evidence.

28. That is all he had to do.

29. It cannot be taken that he was unaware of what he would have to prove, as his professional experience is that of a [omitted], whose currency is dealing in the law and evidence and whose training and experience is usually more than that required of a [omitted]. He was qualified to know at the very minimum that he had to prove a case, by relevant and admissible evidence.

30. This is what he has failed or refused to do.

31. He has produced nothing but a claim which in the circumstances must be viewed as a self-serving statement of the affairs he wants the court to accept.

32. Although he tried to put to the wife that he was erratic, a position she agreed with, that is not evidence that he suffered depression or incapacity. It would be different if the wife confirmed what he said about his lack of capacity to understand signatures on documents, but she did not.

33. It is not an answer to issues he raised about an on-going condition and incapacity to say the wife’s lawyers subpoenaed the wrong people.

34. A letter in the wife’s possession, from a Dr H to the husband’s general practitioner, Dr B, did not mention a condition called reactive depression.

35. But the husband’s case then took another turn - that a Dr Z told him he had reactive depression.

36. As I stated previously, I can only deal with a party’s evidence as I find it and while I assisted the husband to understand his case, I could not run his case as I could not run the wife’s case.

37. Returning now to the s.90AE and 90AF, because of this is relevant to the consideration of these sections on the husband’s evidence, counsel for the wife submitted that the husband could not gain orders under those sections.

38. Counsel for the wife referred me to Rand & Ors v Rand & Ors [2008] FamCAFC 50 where it was held that each of the paragraphs in subsection (3) and (4) of s.90AF had to be addressed.

39. Adopting the wording of the section, he submitted in particular the court had to be satisfied that an order under s.90AF was reasonably necessary to effect a division of property between the husband and wife and that it was not foreseeable at the time of the order that the making of such order would result in the debt not being paid in full.

40. Between the trial on 21 July 2010 and 17 May 201, there was no new evidence that either party had made any effort to repay the debt to [S].

41. That indicates either they do not want to or that they do not have the financial ability to repay the debt, the identification of their situation not being necessary since I have to be assured that at the time I make an order affecting a third party, it would not be foreseeable that the debt would remain unpaid.

42. Lacking any new evidence as to efforts made to repay [S], I do not accept the husband’s submissions that he remains ready, willing and able to meet the mortgage debt if I make the orders he seeks.

43. There was no evidence to show he would be given a new loan to pay out [S], just assertion, which I do not accept as evidence of the truth or real state of affairs.

44. I was also referred by counsel to Crestin & Crestin and Ors [2007] FAMCA 1619, where it was stated that without such an order the proceedings between the parties would be thwarted, which is not the case here, and to Allan v Allan [2009] FAMCA 553, where Watts J, at 99, stated the: “section cannot be used to deprive a third party of its rights simply to benefit a party to the marriage and an order made under s.90AF(1)(a) FLA cannot be made to deprive a third party of its rights now in the mere hope that the third party’s claim will be met at some time in the future”.

45. Earlier, Watts J had referred to the risk that a married couple could have their property increased at the expense of a third party if mandatory requirements in the section were not met.

46. Going by the filing dates, the wife’s submission was filed on 21 July 2010 and the husband’s submission was filed 4 August 2010, yet the husband made no effort to answer the wife’s references to the cases.

47. On the evidence with regard to the husband’s alleged psychological condition and applying the law to it, I find that the requirements of s.90AF have not been met. There is no evidence to show it would be proper for an injunction to be granted as he seeks to prevent payment of debts by him, nor has he produced evidence according to the section.

48. If I am to apply s.90AE to the facts here, I do not think the husband understands what he is asking for.

49. The section allows a creditor to be substituted as a party and what he seeks is that the wife be ordered to pay the creditors, not him.

50. The section cannot be applied in these circumstances.

51. I am left then to consider the terms of s.75(2)(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”.

52. The wife wants the debts paid from the martial pool so that she can get on with life free of debt.

53. As to disclosure, the husband admitted not disclosing some documents, see line 26, page 22 of the transcript. But the allegations of disclosure went further, with even a Notice to Produce and requests failing to have any effect on the husband.

54. On the evidence pertaining to the relevant s.75(2) considerations, I would not make an adjustment from either party, but I would take into account the creditors claims and the position of the parties, by making orders to ensure the creditors be paid from the marital funds.

JUSTICE AND EQUITY

1. The justice and equity considerations are extremely important in this case. The pool is small, taking into account the creditors. Justice and equity, particularly relating to smaller pools, was addressed in H & T [2002] FMCAfam 209 where it was said: “Finally, in determining what order the court should make under section 79 the court must be satisfied in all the circumstances that it is just and equitable to make relevant orders. It is the justice and equity of the actual orders that the court must consider (see Russell v Russell (1999) FamCA 1875”.

2. The relevant statement in Russell v Russell, at paragraph 80, stated: “… because of the impact which the amended orders would have on the wife’s financial position, the making of those orders must be said to have required an independent exercise of discretion. It must be remembered that under s.79(2) of the Family Law Act, the Court is required to be satisfied that it is the order to be made which is just and equitable, not just the underlying percentage division of the net value of the parties' assets.  The Full Court took the opportunity to emphasise that in the consideration of whether the result is just and equitable, it is the justice and equity of the actual orders not of the percentage distribution which must be considered”.

3. I think I would be justified in finding that the husband has set out to delay the inevitable and that he knowingly made claims of incapacity, without such being evident or provable.

4. I am of the view that as a former [occupation omitted] he cannot claim he did not know he would have to prove his claims.

5. While I am critical of the husband for not disclosing vital financial information, he has also failed to disclose, or rather produce, evidence of his psychological situation, especially at the time he entered into various agreements and contracts and leases pertaining to the disputed debts. This is an issue which comes within the justice and equity consideration.

1. However, the wife does not ask for anything but an equal division.

2. The husband’s case was ill-prepared.

3. The wife also asks that each party retain their superannuation policies, counted in their share of an equal division.

4. Following the decision in D & D [2006] FLC 93 256, the superannuation position needs to be considered. In D & D it was said:

   “Consideration of the constitution or “mix” of the assets with which each party will be left with as a result of the proposed orders would seem a necessary, if not critical, factor in determining the justice and equity of the proposed orders in each case in which superannuation interests are involved”.

5. As no specific evidence based submission was made by the husband or relevant questions asked about the superannuation holdings, and as the husband has failed to make full disclosure, I will make an order to that effect.

6. For all of those reasons I will divide the assets and liabilities equally and as the husband did not direct questions to all of the orders the wife and creditors sought, or all the orders he sought, I will make orders in line with those sought by the wife and creditors.

I certify that the preceding two hundred and one (201) paragraphs are a true copy of the reasons for judgment of Coates FM.

Date:  2 June 2011