McConachie and McConachie

FAMILY COURT OF AUSTRALIA

MCCONACHIE & MCCONACHIE

[2007] FamCA 754

FAMILY LAW - PROPERTY SETTLEMENT - Written agreement between the parties subsequent to separation - Parties carried into effect most of the terms of the agreement - Global or asset-by-asset approach to contribution - Weight to be given to initial contribution many years before - Contributions during and after the marriage and after the written agreement - Loan by husband's father in writing to the husband early in the marriage but not likely to be collected now - Issue of the statute of limitations and the defence thereunder - section 75(2) factors including husband a director of company with girlfriend but not shareholder and access to loan account facilities - Long marriage

Family Law Act 1975 (Cth)

Aleksovski (1996) FLC 92-705; 20 Fam LR 894
Browne v Greeen (2002) FLC 93-115; 29 Fam LR 429
Commonwealth of Australia v Verwayen (1990) 70 CLR 394
Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143; 30 Fam LR 355
In the Marriage of Petersens (1981) FLC 91-095; (1981) 7 Fam LR 402
Kowaliw (1981) FLC 91-092
M and M (1998) FamCA 42
Money (1994) FLC 92-485
Norbis v Norbis (1986) 161 CLR 513; (1986) FLC 91-712
Ogilvie v Adams (1981) VR 1041
Pierce (1998) FLC 92-844
Woodcock and Woodcock (1997) FLC 92-739; 21 Fam LR 393
Woodland and Todd (2005) FLC 93-217; (2005) 33 Fam LR 177
Zalewski (2005) FLC 93-241; (2006) Fam LR 296

APPLICANT:

MRS MCCONACHIE

RESPONDENT:

MR MCCONACHIE

FILE NUMBER:

MLF

2424

2006

DATE DELIVERED:

31 July 2007

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

THE HONOURABLE JUSTICE CRONIN

HEARING DATE:

24, 25 & 26 JULY 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT:

MS STEWART

SOLICITOR FOR THE APPLICANT:

ARMSTRONG COLLINS & DELACY

COUNSEL FOR THE RESPONDENT:

MR O’SHANNESSY

SOLICITOR FOR THE RESPONDENT:

CLANCY & TRIADO

Orders

Property

That by 4.00pm on 1 November 2007 (the due date) the wife pay to the husband, the sum of $187,000 (the sum due).
That contemporaneously with the payment of the sum due:
(a)The husband, at the expense of the wife, transfer to the wife, all of his interest in the real property at A (“the [A] home”);
(b)The husband withdraw any caveat lodged by or on his behalf over the interests of the wife in the A home;
(c)The wife withdraw any caveat lodged by or on her behalf over the interests of the husband in the real properties at B and T (the husband’s real properties); and
(d)The wife relinquish any interest in the husband’s real properties.
In default of payment of the sum due by the due date, the husband have the right to acquire the interest of the wife in the A home by a payment to her of $203,000. To exercise his election to acquire the interest of the wife, the husband shall advise the solicitors for the wife in writing of that desire no later than 4 pm on 14 November 2007. If the election is so exercised, the payment of $203,000 shall be made to the wife no later than 4 pm on 30 November 2007 at which time, the wife shall transfer to the husband, at the expense of the husband, all of her interest in the A home and provide vacant possession to the husband on that date and time.
In default of payment of the sum due by the due date and upon the husband not electing to acquire the interest of the wife by 4 pm on 14 November 2007, then the husband and the wife forthwith thereafter do all things necessary to place the A home on the market for sale by public auction on terms to be agreed and in default of agreement on terms to be determined by an agent as an expert witness appointed by a registrar of the Court pursuant to Rule 15.46 of the Family Law Rules and upon the sale of the home, the proceeds be applied as follows:
(a) First, to pay all costs, commissions and expenses of the sale;
(b) Secondly, to pay the costs of the said single expert;
(c)Thirdly, to pay to the husband, a sum such that he receives 52.5 per cent of the pool of assets referred to in paragraph 104 of the reasons for judgment in these proceedings delivered this day together with interest on the outstanding sum pursuant to the Family Law Rules from 14 November 2007 until the payment; and
(d)Fourthly, the balance to the wife.
That for the purposes of paragraph 4(c) of these orders, the sum to be included in the pool of assets referred to in paragraph 104 of the said judgment is the net sum after payment of the items in paragraph 4(a) and (b) of these orders.
That the wife be responsible for, pay and indemnify the husband in respect of, the taxation arising from the capital gain received in respect of transfer to the husband of the B property.
That the husband be responsible for, pay and indemnify the wife in respect of any liability of either the husband and/or the wife to the husband’s father and F Pty. Ltd.
That the husband retain and the wife relinquish any interest in any superannuation entitlements of the husband.
That the wife retain and the husband relinquish any interest in any superannuation entitlements of the wife.
That the husband remove the container in the rear yard of the A home and its contents by 4 pm on 1 September 2007.
That each party otherwise retain and the other relinquish any interest in, all other property in the possession of such party as at this date.
That the application of the wife filed 24 November 2005 and the response of the husband filed 3 February 2006 be otherwise dismissed save as to any application for costs by either party.
That any issue as to costs be determined upon written submission to the Honourable Justice Cronin and any such application for such costs:
(a)be filed with the Associate to Justice Cronin by 4 pm on 17 August 2007, and
(b) be served upon the other party by that date.
That in the event that an application is made for costs by either party pursuant to paragraph 13 hereof, the other party shall have until 4 pm on 24 August 2007 to reply.
If no further application by either party is filed by the date referred to in paragraph 13, all applications shall be deemed to be dismissed.
That all proceedings be otherwise removed from the list of cases awaiting a hearing.

IT IS CERTIFIED

That pursuant to Rule 19.50 of the Family Law Rules it was reasonable to engage a lawyer as counsel.

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Honourable Justice Cronin delivered this day will for all publication and reporting purposes be referred to as McConachie and McConachie.

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLF 2424 of 2006

MRS MCCONACHIE

Applicant Wife

And

MR MCCONACHIE

Respondent Husband

REASONS FOR JUDGMENT

These are my reasons for orders in property proceedings between Mr and Mrs McConachie. I shall refer to the parties as husband and wife notwithstanding that they were divorced in August 2005.
In essence the case included arguments about:
(a)what liabilities should be treated as the joint responsibility of the parties;
(b)whether an unpaid debt to the husband’s father should be treated as a liability at all;
(c)what weight should be given to the respective contributions of the parties, including an initial financial contribution of some equity in the matrimonial home as far back as 1981, various compensation payments received by the parties during their time together, the respective homemaker roles affected by the wife’s depressive illness and a post-separation contribution of labour in the renovation of the matrimonial home;
(d)the effect of a written agreement between the parties as to the division of property not long after separation which was implemented;
(e)the adjustment for future economic disparity having regard to the matters set out in s 75(2) of the Family Law Act 1975 (Cth) (“the Act”).

Background

The husband is aged 46 years. He is a tradesman. He is now a manager for a company of which he is a director but in which he has no financial interest in the strict “ownership” sense. The company is “owned” by his girlfriend with whom he has had a relationship for something in the vicinity of four years but with whom he is not currently living. He has a stated income of something in excess of $62,000 per year but in these reasons, I shall deal with the benefits that he otherwise has in his capacity as a director.
The wife is aged 47. She is currently employed in an administrative position. She has held that for about two years and earns an income of $35,000 per annum.
Later in these reasons, I shall deal with the health of each of the parties. Each has significant difficulties.
There are two children of the marriage, E aged 23 and H aged 21. Although one of the girls lives at home with the wife, each is economically independent.
Unless otherwise stated, the statements of fact that I now set out are either common ground between the parties or findings that I make.

THE CHRONOLOGY OF IMPORTANT EVENTS

The parties were married on 29 August 1981 and did not live together before that. They separated in December 2001 under the one roof and the husband left the home in March 2003.
In 1978, the husband had a serious motor vehicle accident as a result of which he spent 18 months in hospital. At that time, he was an apprentice tradesman and I accept that subsequent to the accident, he received regular payments of income from the Motor Accident Board. In addition to the payments of income, I accept that he received a lump sum of compensation but I shall return to the disputed details about that below.
The husband purchased the home at A prior to the marriage and it remained the matrimonial home throughout. That property is one of the assets in the pool for division. I shall also return to that issue below as the extent of the equity in that property at the time of the marriage is in dispute. Also in dispute is what other items the husband had.
At the time of the marriage, the wife was employed in an administrative capacity with the Victorian Public Service. She had little by way of assets.
In 1984, the husband had a second motor vehicle accident and received $16,000 by way of compensation for injuries.
In 1991, and for three years thereafter, the wife was quite ill with severe depression placing a large burden on the husband. At that time, the parties had two young children. I accept that this placed stress on the financial position in the household. The illness was sufficiently severe in 1993 for the wife to be hospitalised for three months.
In 1994, the wife had sufficiently recovered however to return to work on a part-time basis.
During all of these years, the husband and wife conducted the husband’s carpentry/building business in a partnership for taxation purposes which was later incorporated as M Pty Ltd. Both husband and wife were directors until 1995 when the wife resigned and the husband became a sole director. M Pty Ltd then changed its name to S & Co Pty Ltd. I shall return to the demise of S & Co below.
In 1997, as a result of a criminal compensation claim hearing arising out of incidents that occurred to the wife as a child and no doubt their subsequent consequences for her but also for the husband, each of the husband and wife was awarded a sum of money. Those sums were not just token payments. They indicate the recognition of the difficulties that the family must have been suffering in the years when the wife was significantly ill.
During the traumatic years around 1991, the husband’s father provided the sum of $25,000 which I accept was a loan. In the same year, there were two further payments of $5000 making a total in all of $35,000. I shall return to these subjects as well but I am satisfied that each payment was not a gift.
In February 1997, the husband and wife purchased B property from the wife’s parents. It was acquired as an investment property for $70,000 although I accept the wife’s mother’s unchallenged evidence that she and her late husband were paid $60,000. I also accept that the funds that the parties provided towards that acquisition was the sum of $17,000 which came from the sale of the motor vehicle that the parties then owned that had been bought with the funds provided in the first loan by the husband’s father.
During the relationship, the house at A was significantly renovated to the extent that I accept that it was almost doubled in size. Importantly, much of the work was done by the husband on weekends and evenings after work.
It was common ground otherwise that during the relationship apart from the disputed unusual financial contributions and the issue of the husband’s efforts for the care of the family during the wife’s illness to which I have referred, the parties otherwise made the best of what they could both in terms of income provided for the family and the role of homemaker and parent. I accept that for the majority of the marriage, the wife was otherwise significantly involved in the care of the family.

THE PARTIES’ AGREEMENT AFTER SEPARATION

As I have said, the husband left the home in March 2003 and over the ensuing months until the end of 2003, I accept that there were discussions between the parties about the resolution of their settlement of property. In December 2003, the husband and wife entered into a written agreement. The husband’s then partner prepared the document based upon what the husband told her. I accept that whilst the husband obtained some legal advice, it was certainly not comprehensive and possibly barely adequate. However, it seems to me that neither party obtained serious legal advice about what they were doing or the effects of the agreement.
The agreement itself was not in dispute. The wife signed the document in the presence of their neighbour.
The wife asserted that the husband badgered her. She alleged that he was aggressive and she was easily “overborne” by him. She said that she signed the agreement so that he would leave her alone and enable her to keep a roof over the heads of the children who were then aged nearly 18 and almost 20.
The husband disputes that he influenced the wife to enter into the agreement but having seen him in the witness box where at best I would describe him as “testy” and at worst at times rude, I accept the wife’s version. That is not to say however that what either party was doing was necessarily inappropriate.
Because of the fact that the parties have had to now resort to the Court to resolve their property dispute in circumstances where each has committed themselves to financial transactions subsequent to this agreement, it is important to understand exactly what the agreement said. The husband’s version sets it out succinctly as follows:
Essentially, the Financial Agreement provided:-
(a)The former matrimonial home, which was registered solely in my name as it had been acquired prior to the marriage, was to be placed in both our names as tenants in common in equal shares;
(b)The former matrimonial home was to be renovated with expenditure of approximately $50,000.00, which was to be funded by the use of equity in the [B] property;
(c)The Wife was entitled to continue to reside in the property for a period of up to two years after both children had permanently left the former matrimonial home. At that time, the property was to be sold with the parties each receiving 50 per cent of the net proceeds of sale;
(d)It was agreed that the [B] property, which was registered solely in the name of the Wife, had a net equity of $200,000.00. It was to be transferred to me and retained by me for my own use.
(e)The Wife was to receive $50,000.00 for the renovations to the former matrimonial home and a further $40,000.00 for her own personal use; both amounts to be funded with the equity available in the [B] property;
(f)The Wife was to retain the Holden Astra motor vehicle;
(g)The Wife was to retain the furniture and household effects in the former matrimonial home;
(h)I was to retain the tools of my trade;
(i)Each of us was to retain our respective superannuation entitlements;
(j)I was to continue to pay all reasonable household expenses, such as electricity, rates, gas, insurances, motor vehicle running costs, telephone, health insurance, school fees until January 2005, a period of two years after I left the former matrimonial home.
One of the contentious issues in this case to which I have already referred was the loans totalling $35,000 by the husband’s father. The agreement makes no reference to the liability of the husband in respect of that loan nor is it mentioned later in a finance application made by the husband. In part, that influences my decision to find that the husband might have felt some moral obligation to repay his father but did not expect to have to do so nor did his father pressure him in any real sense to make any commitment to make a repayment. I accept however that some payments were made. I also accept that a formal demand was made by the father but I shall return to those issues below.

THE ASSETS AT THE TIME OF THE AGREEMENT

In so far as it is relevant, as at the time of the agreement, I accept that the parties’ financial position was as follows:
·    Matrimonial home, equity of approximately $288,000
·    The B home, equity of $200,000
·    The husband’s business with a balance sheet equity of $26,000 approximately
·    The wife’s car
·    The husband’s boat
·    The parties’ respective superannuation entitlements
The wife asserted that the total asset pool at that time was $611,467.10. The husband’s view was that the net assets amounted to $554,216.35. The difference was in the disputed values that the parties put on the assets. To a very large degree, that issue does not affect my determination other than as I shall set out hereafter.

THE IMPLEMENTATION OF THE AGREEMENT

The flow-on of the agreement was that the matrimonial home was transferred to the wife and the husband as tenants in common. The B home was transferred to the husband against which he borrowed $200,000. He discharged the existing mortgage on B of $38,125.68. The former matrimonial home was secured by an overdraft and that was discharged to the extent of $12,335. That was the business overdraft for S & Co Pty Ltd. The husband then paid the wife the $40,000 referred to in the agreement. In addition, work renovating the matrimonial home was completed and $50,000 of the borrowed monies from the B property was used towards those expenses. One of the unfortunate consequences of this agreement was that the transfer of B from the name of the wife into the name of the husband triggered a capital gains event in the hands of the wife. That liability is dealt with in the pool of assets.
The dispute between the parties that culminated in this hearing then began. It is clear that the wife was unhappy with the outcome of the agreement. Neither party suggested in line with the Full Court decision in Woodcock[1] that the agreement was binding but in final address, the husband’s counsel reiterated what the husband had made clear in his evidence under cross-examination namely that he was “genuinely affronted that the agreement could be departed from”.
[1] (1997) FLC 92-739; 21 Fam LR 393
The dilemma I face is that the merging of the assets and the creation of liabilities along with the partial payments that have now been well and truly spent make the ultimate determination of this issue difficult. For example, the wife has spent much of the $40,000 and the husband has purchased with his partner, a property at T and renovated it. The husband has disposed of the interest he had in S & Co Pty Ltd.
To complicate matters further, the husband was charged with the criminal offence of arson in relation to a property owned by his now girlfriend. The full circumstances of that incident were not litigated before me and the only relevance to these proceedings was that the husband spent a significant amount of money on legal fees before pleading guilty and receiving a suspended sentence. In the normal course of events, one might simply say that as the events occurred after separation, they are not financial matters of any consequence but in the intermingling of financial resources in this case, they complicate things and I shall make findings about them.

In respect of the disputed factual issues, I acknowledge that time dims memories but it also has the effect of creating difficulties because of the destruction of documents that otherwise corroborate the respective versions of parties. In this case, the problem was compounded by the fact that I accept that there has been a communication problem between the parties which I suspect has been exacerbated by the wife’s depressive illness at times and the husband’s frustration at the wife’s lack of interest at others.
In these reasons, in respect of all factual issues, I have determined the matter on the balance of probabilities which is the appropriate legal standard.

The respective applications

The wife filed an application on 24 November 2005 in which she sought the transfer of the former matrimonial home, an undefined cash payment and a $20,000 splitting order.
At the opening of her case, the wife moved significantly from that earlier position to suggest that she retain the former matrimonial home and that she pay to the husband $110,000 plus she would take on the responsibility for a capital gains tax liability which was agreed at $45,780. Depending upon what view one took of the total view of assets for division, the wife’s argument was that that was a division as to 60 per cent in her favour.
The husband filed his response on 3 February 2006 and he sought the sale of the former matrimonial home with the division as to 75 per cent to him and 25 per cent to the wife. He offered then to indemnify the wife in respect of liabilities save for the capital gains tax issue.
At the opening day of the hearing, the husband had filed an outline and summary of argument in which he put various scenarios which were dependent upon various conclusions as to the size of the pool of assets but there was an underlying theme that the wife was to pay to him somewhere between $274,000 and $324,000. Those various calculations put the division at somewhere between 65 per cent to 70 per cent in favour of the husband.

Positions

Counsel for the husband provided an aide memoir which is now Exhibit H4 setting out a variety of scenarios based on a pool of $300,339. That pool includes the whole of the existing loan from the husband’s father. In essence, the husband seeks a payment from the wife of between $186,000 and $288,000. Much depends upon the findings that I propose to make.
The wife provided an aide memoir which is marked Exhibit W6 and in her position, maintained that the maximum payment that should be made to the husband was $110,000. She stressed that from a contribution point of view, the difference between the parties was marginal but importantly, for the purposes of s 75(2) of the Act, the wife needed to keep the home and provide a roof over not only her head but that of their daughter.

The legal principle

In the process of a determination of the parties’ respective entitlements, a court is obliged by s 79(4) to 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) (of the Family Law Act) so far as they are relevant; and
(f)any other order made under the Family Law 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.
The four-step process taking those matters into account is, in my view, best set out in Hickey & Hickey & Attorney-General for the Commonwealth of Australia[2] where the Full Court said:
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.
[2] (2003) FLC 93-143 at 78,386; 30 Fam LR 355 at 370

The various assets

The parties agree that the house at A is worth $390,000.
They agree that the wife has retained a motor car worth $14,000.
They agreed to add the superannuation to the pool and to ensure consistency of approaches, agreed that the values I was to use were those as at 30 June 2006. In respect of the wife therefore, an amount of $23,943 was added to the pool and in respect of the husband, $56,070.

B property

The parties agreed on the value of the B property at $255,000. There is currently a mortgage encumbering that property which rounded off, amounts to $237,000. I have already mentioned that the B property is in the husband’s name alone, it having been transferred as a result of the agreement between the parties subsequent to separation to which I have earlier referred.
Two problems arise out of the B property. The first is that the transfer attracted capital gains tax as a result of the agreement because it was never sanctioned by a court. B was transferred from the wife’s name to the husband’s name and as it was not a principal place of residence, attracted capital gains tax. It is therefore common ground that one of the liabilities to be met from the pool of assets is that tax of $45,780. I have rounded that up to $46,000 because of on-going interest considerations.
The second problem associated with B is that although the equity in it is now $18,000, that is not reflective of the equity at the time of separation nor at the time that the agreement was executed. The wife argues that the husband’s personal activities unassociated with the marriage have reduced the equity and that I should add back such funds as would put into the pool of assets the sum of $55,000.
It is to be remembered that when the agreement was executed, the husband borrowed $200,000 which was used to pay $40,000 to the wife, $50,000 for renovations, $38,125 to discharge the existing loan on the B property and $12,335.55 to discharge the security over the former matrimonial home. There is an arithmetic error in the husband’s calculations because he says that there was a remaining amount of $58,447.74 used by him. Neither party exploited the issue but it is clear that if $200,000 was borrowed and those sums expended, there would have been $59,540 left over. However, for the sake of relying upon the evidence of the parties, I propose to use the figure referred to by the husband as $58,447.74.
That sum went towards the husband’s acquisition of the property at T. The equity in T is in the pool. The husband says that he spent $43,718 which left in his hands, precisely $14,729.74.
To compound problems however and only in the last 12 months, as a result of the husband being charged with the criminal offence to which I have referred, both husband and wife agreed that he could borrow funds secured against the B property to assist in meeting his legal fees associated with those charges. Accordingly, the refinancing of B property occurred. That is how the mortgage is now standing at $237,500. Having refinanced it, the husband says that the total sum available was then $30,830.38. He applied those funds towards not only his legal fees associated with the criminal charges but also on expenses associated with the B property. This latter issue was contentious because the property was an investment property which was untenanted for several months and I accept that a number of the improvements were done by sub-contractors of the company of which he is a director owned by the husband’s girlfriend. That gives rise to questions of why the husband may not have done the repairs himself in his capacity as a carpenter/builder and what tax benefit he either directly or indirectly received as a result of the girlfriend’s company arranging the sub-contracted repairs. There was no satisfactory evidence that I could determine as to the real effect of that expenditure but I accept the amount incurred was $13,241.28. Also from the sum obtained from the refinancing, I am satisfied that $7,347.78 was applied towards interest repayments on the mortgage. That also complicates the issue because of the fact that the mortgage was refinanced to assist the husband. Ultimately, there was $5000 left over.
This torturous exercise highlights the dilemma of trying to deal with the financial position at the time of an agreement as against the time of the hearing.
It was common ground that at least the $5000 remaining from the refinancing should be added to the pool and each party has done that. That does not resolve the issue of what equity should be in the pool for the division between the husband and the wife.
The husband was cross-examined about how, if his legal fees associated with the criminal trial exceeded $40,000, he could justify saying that B property contributed just over $5000 to those fees. His explanation was that he paid his legal fees as he went along using a credit card. That credit card was financed in one way or another through his director’s loan account or his wages.
It is impossible with any certainty to adopt the position of the value as at the date of hearing any more than the date of the agreement. That is because the use of the B property for the husband’s own purposes and its renovation presumably added value to the gross sum. There are also the blurred effects of the taxation benefits that the husband’s girlfriend’s company received. To use the date of the agreement means that the husband carries all of the liability but is required to put the total gross value of the property in the pool. To use the date of hearing value means that the wife who is putting back into the pool the money that she received from the agreement notwithstanding it has been spent, is prejudiced because the equity is now substantially less than what it might have otherwise been had the husband not had the benefit of using the equity.
In Woodcock v Woodcock[3] the Full Court considered the application of the doctrine of estoppel in property settlements and held that it does not operate to prevent the Court from exercising its jurisdiction under s 79 of the Act in circumstances where the parties had made their own private arrangements earlier. The Full Court made clear that it may well be relevant to take into account all of these private arrangements when determining the justice and equity issue under s 79. The Full Court in Woodland and Todd[4] set out succinctly what should happen where there was such an earlier agreement. It said:
39.In determining s 79 applications in circumstances where there has been an earlier agreement, it will often be necessary to consider what was the value of the parties’ assets at the time of the agreement, what their various contributions were to that time, and what might have been an appropriate s 75(2) adjustment. A consideration of these matters might well be necessary in order to provide a background to the parties’ understanding of what was a just and equitable settlement at the time. However, and perhaps more significantly, it would generally be necessary for the Court to acquaint itself with changes in the composition and value of the property pool, so that post-separation contributions can be assessed.
[3] op.cit
[4] (2005) FLC 93-217, (2005) 33 Fam LR 177
In M and M[5] Barker, Kay and Chisholm JJ said:
2.10It is well settled that save in exceptional circumstances a trial Judge should deal with the property as at the date of the hearing and make adjustments taking into account the various matters set out under s.79. (Wells v Wells (1977) FLC 90-285; Wardman v Hudson (1978) FLC 90-466; In the Marriage of Geyl 7 Fam LR 219) However, the particular justice of the case may make it appropriate to notionally add back assets which have been demonstrated to have been dissipated either during the marriage or post-separation. Normally it is necessary to demonstrate an appropriate basis for doing so, for example by wastage such as gambling or extravagant living. (Kowaliw v Kowaliw (1981) FLC 91-092; Fane-Thompson v Fane-Thompson (1981) FLC 91-053; Winnel v Winnel (1984) FLC 91-580; Townsend v Townsend (1995) FLC 92-569; Doherty v Doherty (1996) FLC 92-652) Additionally, because of the requirement for each party to bear their own costs, it is generally appropriate to add back to the pool of assets notionally any legal costs that have been spent on the litigation and to deal with the costs as a separate issue at the end of the litigation. (see Farnell(1996) FLC 92-681).
2.11There seems to be no appropriate basis for notionally adding back moneys that existed at separation but which have been subsequently spent on meeting reasonably incurred necessary living expenses. Neither the Family Law Act nor the case law require that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to continue to provide for their own support. Whether any expenditure so incurred is reasonable or extravagant is a matter that can be determined by the trial Judge.
[5] (1998) FamCA 42
Whilst I accept that the parties cannot go into a state of suspended economic animation, I do not accept that this is simply a case where the parties have used funds to provide for their own support.
I have endeavoured to set out what has happened to the equity in B property and in this case having regard to the fact that the husband has had that benefit subsequent to separation and the agreement specifically for his own benefit, I propose to use the wife’s suggested equity in the B property on the basis that had it not been for what the husband had spent on his own situation, there would have been $55,000 available for distribution. When the calculations are finitely done, the amount is actually $55,500. However, I will take into account for the purposes of s 75(2) of the Act, the fact that the husband has the obligation regardless of the circumstances under which the liability arose. I am obliged to do that in any event having regard to the requirement to look at the disparity between the parties’ capital interests arising out of the settlement.

T property

The next property which was contentious was the post-separation acquisition by the husband of a house at T. He acquired this, although in his own name, with his employer/partner Ms L. There is agreement that the property interest of the husband is worth $200,000 and the encumbrance affecting that interest is $150,000. This adds $50,000 to the pool of assets.
The husband was cross-examined about the T property because it has largely remained untenanted. The husband maintains and there was no evidence to the contrary, T property is in the hands of an estate agent for rental purposes and because of the Victorian drought, there is little interest in people renting the property in the particular area. It is also the husband’s long term ambition to live there in the future.
It was suggested to both the husband and Ms L that there was an arrangement between themselves that in the event that they parted company and went their own ways, the husband would retain the whole of the T property and Ms L would retain another property which is in her name alone. The husband and Ms L both denied that and maintained the position that the husband’s equity in the T property was $50,000. I accept the evidence of the husband and Ms. L on that matter. The controversy is that the T property was acquired for $401,000 in the name of the husband alone but with a joint mortgage through the X Company for $300,000. As I have already indicated, the husband provided $43,718 being money raised on the B property loan at the time of the agreement but then he borrowed a further $40,000 from F Pty Ltd. To complicate matters a little more, Ms L provided $40,000 that she also borrowed from her director’s loan account in F Pty Ltd. F Pty Ltd then undertook work through a local contractor expending $40,150.10.
As with the previous complicated trail in relation to the equity in B property, a similar problem arises here because the company of Ms L provided the funds to do the renovations. The renovations do not affect the financial picture here. The husband put in the money from B property and his F Pty Ltd loan and Ms. L put in her share and the renovation money through her loan account in F Pty Ltd. In so far as there was an increase in the value of the property, it is reflected in the gross value.
Accordingly, the equity of $50,000 was added to the pool.
Cross-examination of the husband was really directed to the fact that the husband had the benefit of being associated with a partner who had access to significant funds as well as taxation benefits and that went to the question of his true income and earning capacity. I shall turn to that below.

The husband’s relationship with Ms L

The husband said in his affidavit filed 17 July 2006 that Ms L was his “partner” and that they were then living together. The relationship commenced after separation.
F Pty Ltd is a company of which Ms L is the sole director and shareholder. The husband is a director but has no legal interest in it and declared, and it appeared unchallenged, that he was an employee. However, as a director, he had been using what was described as a director’s loan account to borrow funds from the company obviously with the permission of Ms L. I accept that the relationship between the husband and Ms L has now changed. He is still employed by the company but he no longer lives with her. I had the benefit of watching Ms L very carefully and she impressed me as being an astute and honest witness. When questioned about the future of the relationship, I accept that she honestly does not know just what will happen in the intimate or personal sense. It seems that it is in her interests for the current financial arrangement with the husband to continue as he fulfils the role of the only building supervisor in the company. She fulfils the administrative role and acknowledged that she did not have a “hands-on” position in relation to most job responsibilities.

THE BOAT

It was agreed that the husband’s boat and other personal items would be included in the pool at $7000.

S & CO PTY LTD

The next item was the inclusion of the sum of $15,537 being the net assets of S & Co Pty Ltd. The wife asserted that she had examined the balance sheet of the company which was completely under the control of the husband. This company ceased trading on 1 July 2004 when the husband took up a position as an employee of the company for whom he now works. To use his words, he “sold it as a shelf company” to his employer/partner and she in turn made use of the corporate entity and changed its name for her own purposes. The wife asserts that the husband has not accounted to her for the sale price of S & Co Pty Ltd and her information is entirely reliant upon records that she has searched with the ASIC. She referred in her affidavit to plant and equipment. The husband was asked what happened to things such as his tools that were in existence at separation. He pointed out that a container in which the plant and equipment was stored was broken into and the equipment stolen. Because of insurance costs, he said no claim was made notwithstanding that the insurance coverage related to the company. The wife also asserted in her affidavit that various sums of money were held in passbook accounts and she “assumed” that the money belonged to S & Co Pty Ltd.
Ms L was cross-examined about the tools issue and I accept her evidence that at various times, tools have been stolen from the company and depending upon their value, because of insurance premiums and insurance excess issues, claims were not made. She also supported the husband’s version that the company S & Co Pty Ltd was sold to her for $1.
The cessation of the S & Co Pty Ltd activities however still left the company with a bank account in credit. The wife wanted to add back all of the funds but ultimately acknowledged that some of the funds had been used for purposes associated with that business. For example, the husband’s director’s loan account with F Pty Ltd paid the tax for S & Co Pty Ltd after its closure. S & Co Pty Ltd then partly repaid the loan account of the husband to F Pty Ltd using its cash in the bank. Counsel for the wife asked the husband what was left now in S & Co Pty Ltd and he indicated that he thought that there was approximately $60. Whilst the husband might have been criticised for not having accurate records available for the clarification of the money trail, equally, this was a discovery issue that did not appear to have been undertaken by the wife.
Apart from the $60 conceded by the husband as still being in existence, there was no evidence as to what happened to the other funds, nor realistically could I determine what happened to the assets of S & Co Pty Ltd generally. Needless to say, I am satisfied that there is no asset of substance in existence now and in the circumstances, I cannot be satisfied to make an add-back to the pool of assets of any precise sum. I am not prepared to use the asserted balance sheet amount.

THE WIFE’S $40,000

The only other amount to be included in the pool was an agreed figure of $40,000 which was the sum of money that the wife received as part of the distribution from the husband under the agreement of 2003. In her affidavit, the wife said that the $40,000 was spent on a loan of $11,000 to the parties’ daughter, the renewal and replacement of household items and the subsidisation of her income to enable her to support herself and the children.
In respect of the three assertions, the wife acknowledged in her affidavit that the loan to H had been repaid in full and that those monies received back were then used to subsidise her living expenses.
In cross-examination, the wife acknowledged that she went on a holiday to the USA for 7 days and that at least $3000 was spent on that holiday. It was put to the wife that she failed to mention that intentionally because it would not help her case if it appeared that she was spending lavishly on an overseas holiday. The wife rejected that and I accept her explanation that it was an oversight. In any event, as the $40,000 is to be added back to the pool, in my view, it matters little.
On the same subject however, the wife referred to the fact that she used the sum to support herself and the children but it must be borne in mind that at that time, E was aged 19 and H was aged 17 years. The husband was paying school fees and in cross-examination, the wife conceded that he was paying the telephone bill and other accounts. The wife said that he did that without any query. There was some dispute and concern expressed by the wife when the husband ceased to pay the health insurance cover but in my view, having regard to the timing of when the husband stopped making the payments, it could hardly be said that he had any obligation to do so. Accordingly, I propose to add back $40,000 to the pool.

The disputed liabilities

I turn then to the question of the disputed liabilities. There are three of them.

The father’s loan

The first liability is a claim by the husband’s father which currently stands at $145,090. The husband’s version is quite precise and it is supported by his father. The wife’s evidence was that she knew the money was “provided” although she was unable to say at what point she became aware of the existence of the funds but otherwise could not recall two payments of $5000. When it was put to the wife that she was told by husband that the money had to be repaid, she said she could not recall that. She acknowledged that the husband told her that his father had provided the money for a car but then she added, it was a car that she did not want. There were also renovations of a kitchen that she was happy to have done. When queried about whether or not she was alleging that the money was given as a gift, she replied that it was not her allegation.
It seems that part of the dispute was the fact that the husband turned up one day with an expensive motor car which ultimately became her car on a day by day basis. She said she had already had a car that she was happy with and therefore there was no basis for the new one. She acknowledged the funds were used also for the purposes of the kitchen renovations. The contentious issue however was the motor car. The husband’s version was that he and the wife discussed at that time the purchase of a new car and jointly decided to borrow the funds from his parents. The difficulty I have with the husband’s version is that in his own affidavit, he acknowledges that the period from 1991 to 1994 was “particularly bad” for the wife because of her medical condition to the extent that she was unable to take care of the children properly. Whilst the wife was adamant that she did not agree to the purchase of the new motor car, she certainly acknowledged that she used it as her motor car thereafter. The dilemma is that whether or not there was a joint borrowing from the father, there is little doubt that the money was provided.
The husband’s evidence supported by his father is that some days after the loan was made, his father produced an agreement confirming that not only was the sum provided for the purchase of the motor car but that interest was to accrue at the rate of 14 per cent. The agreement attached to the husband’s affidavit has an extraordinary ring of commercial reality about it notwithstanding the father and son relationship. However, there is some confusion about the fact that the father refers in the first document to the fact that the money had been provided only some days prior to the document being prepared. However, I am satisfied that the money was provided in the middle of the year but not documented until much later.
The husband acknowledges that payments were not made initially because of the illness of the wife in late 1991 as well as his inability to make the payments. Time went by and repayments were made monthly during 1994. Again notwithstanding or perhaps because of the father and son relationship, no other payments were made by the husband but the father wrote to confirm his expectation of receiving repayment of the loan in full.
I have already made comment about the difficulty of lack of documentation and the memories of parties being blurred but I have also taken into account the fact that the husband’s father is now 82 years of age and clearly not well. He was required to give evidence and did so. He impressed me as a man who was really looking for some acknowledgement that he had made a significant contribution towards his son by virtue of having lent the money, even on a commercial basis, but had not claimed it back. That was obvious from the second piece of correspondence dated in 1996 when he made very clear suggestions to the husband that if he was not able to make the payments, then it would be appropriate for him to go to a bank and borrow the money commercially. Notwithstanding that, nothing occurred.
Counsel for the wife cross-examined the father. It was put to the father that he was not going to “sue” his son even if he could. The father’s response was:
I didn’t say that.
The father confirmed that he did not make the loan with the wife at all and that as far as he was concerned, the loan was personal to his son. He was given another opportunity to indicate that he would call in the loan even at this late stage and his response was:
It would depend on the circumstances at the time of his [the husband’s] obligations.
The father added to that that he had also helped the husband through the acquisition of the property at B. On the evidence, no funds were provided by the father but I inferred from what he said that he did not pursue his son for the car loan funds at the time of the acquisition of the B property on the basis that had he done so, B could never have been bought.
Counsel for the husband in re-examination bluntly asked the father whether he wanted the money repaid and his only response was that he would like the husband to continue to pay off the debt.
I think it was sad that the father was put into the position of having to give evidence in this case and my very strongly held impression is that he has waited all of these years allowing the compound interest meter to tick on and that if his son’s financial circumstances were such as they currently are, he would not pursue his son through the legal processes. Whilst there may be a morality issue here, I do not accept that he would take the steps to pursue the matter.
Counsel for the wife initially said that in any event, the debt was statute barred. In the end however, she accepted the husband’s position which is that whilst the statute of limitations in terms of time commences to run from the payment of the money to the debtor if the loan is repayable at call[6] but the reliance upon the defence of the debt being statute barred only arises if it is so pleaded upon an action being brought. There is therefore little relevance in the question of the debt potentially being statute barred. There was also an argument about the equitable doctrine of estoppel in relation to the same issue on the basis that the husband, by his conduct, could be estopped from relying upon the statute of limitations having regard to his acknowledgement of the debt albeit not in writing[7].
[6] See Ogilvie v Adams (1981) VR 1041
[7] see Commonwealth of Australia v Verwayen (1990) 70 CLR 394
None of these issues in reality is of any assistance in this case because I accept that the debt is not really expected to be repaid or enforced[8]. I do intend however to take it into account in a significant way as a contribution by or on behalf of the husband and to give it appropriate weight.
[8] see In the Marriage of Petersens (1981) FLC 91-095; (1981) 7 Fam LR 402

F Pty Ltd Loan Account

It has not been seriously suggested that the husband has an interest in F Pty Ltd. It is put by the wife however, that he uses the director’s loan account as if it was his own bank account. Whilst that may very well be so, I accept that at all times, he is obliged to refund whatever he borrows from the account. That can be seen in Exhibit W3.
In her affidavit filed 7 July 2006, the wife asserted that the director’s loan account claimed as a liability by the husband was:
money applied by [Ms L] to the purchase of [T property] and that including this as a separate liability is double dipping.
In her trial affidavit the wife said that how the husband organised his own affairs was his own business. To a very large degree this was true but highlights the problem of parties entering into a private agreement and then organising their affairs subsequently only to have to then face litigation to be determined under s 79 of the Act.
The husband set out succinctly in his affidavit that to acquire the T property, he borrowed $40,000 from the company and then used a further $11,000 of company funds to acquire a motor vehicle for the child H’s birthday. In his updating affidavit, the husband reiterated his earlier version that the monies were borrowed from the company and were expected to be repaid.
In September and November 2006, the solicitors then acting for the husband requested the wife to indicate what her position was in relation to the liability of the husband to the company but there was no response. Correspondence from the accountants for the company were annexed to the husband’s affidavit. There is some confusion in my mind as to where the various interest figures come from on the loan account. The agreement for the husband to repay the company requires it to carry interest at 7 per cent but other figures of 7.05 per cent and 7.55 per cent have been used by the company’s accountants. I propose to use 7 per cent as it is the apparent agreement between the husband and the company.
The fundamental question in relation to this liability is whether it is genuine. If it is genuine is it repayable? In my view, it is clearly a genuine loan and I accept that it is repayable.
The husband was cross-examined at length about these funds but I accept that the schedule of the loan account by the husband (Exhibit W3) corroborates what the husband says about where the money came from and where it went. As I have indicated, some of the money acquired from the loan account was actually repaid from money taken from the balance of the bank account of S & Co Pty Ltd.
By 30 June 2005, the only money that appeared to have been taken by way of the loan account source was the T property acquisition and H’s motor car save for $4000 that went towards the husband’s legal fees apparently associated with the criminal proceedings. I do not see that there is any justification for the wife being responsible for the liability associated with those legal fees. However, the fundamental issue for me is the fact that this loan account is apparent as at 30 June 2005. That is at a time when the proceedings had not been issued by the wife. They were not started until November 2005.
At the point of time that the interest was accruing on the loan account, I accept that the husband was paying the expenses towards the household under the agreement with the wife. By inference, he did not have the capacity to pay cash for H’s car and I do not see the acquisition of the interest in the T property irresponsible in the sense set out in Kowaliw[9] and Browne v Green[10].
[9] (1981) FLC 91-092
[10] (2002) FLC 93-115; (2002) 29 Fam LR 428
However, after 30 June 2005, Exhibit W3 shows that the husband was using the loan account for private purposes. He was also using it for valuation and accounting expenses associated with these proceedings. Notwithstanding the protestations of the husband about the fact that these latter expenses should be joint responsibilities, it is the starting point in s 117 of the Act that each party pay their own costs. Accordingly, I can see no justification for the wife being responsible for the private usage expenses after 30 June 2005. That gives rise to the dilemma though of the interest that was accruing on the loan account. No evidence was led as to the capacity of the husband to pay back the loan account at that time. He was cross-examined about his three financial statements filed in these proceedings and I accept that although he relied on Ms L o assist him in their preparation, all attempts to get a correct picture were made. Those financial statements show a decline in income and there was no other evidence produced to show that he had access to money that could have otherwise been used to refund the loan account.
Because of the interest which I accept should be at 7 per cent and no other sum, I propose to allow the liability to be fixed at 30 June 2005 in the sum of $55,449.76 less the $4000 of legal expenses and then calculate 7 per cent interest on that sum up until 30 June 2007. I have already mentioned that I am not including the S & Co account as an asset because I accept that those funds have been used and no longer exist. Those funds went through the loan account in part as well but I have made appropriate allowances for them. Thus, taking into account the 7 per cent interest, the figure which I will include in the pool for division as a liability, is the sum of $58,900.

The renovation expenses

The wife seems to now accept that the husband’s claim for these expenses can be justified on the invoices but argues that the money will not be repaid to

F Pty Ltd by the husband. The work was done during the period prior to the proceedings being issued and presumably as a consequence of the agreement between the parties. Ms L was cross-examined about the fact that she had left the loan account sit without doing anything about it. The inference I was asked to draw was that it would not be called in and ultimately therefore, the husband would not have to repay the company.
I accept that Ms L was a forthright and honest witness and I have no reason to doubt what she said was correct. Her evidence was that at the end of each year, the books of accounts are trawled through for the purposes of picking up things that may have been missed and that is why the invoice was so late. I do not accept that the invoice was raised because of the fact that the wife had reneged on the agreement after separation. The agreement to renovate the home was that approximately $50,000 worth of work would be done and sadly, there has been an overrun by a significant amount of money. The amount claimed however, is for expenses rather than the husband’s labour which the company appears to have either ignored or written off. I accept that Ms L took her company responsibilities for taxation purposes seriously and at all times, this debt by the husband to the company has appeared in its accounts. No doubt there are some benefits for the company but it is impossible for me to quantify those and no evidence was led in respect of them. Ms L made it clear that the debt due by the husband to the company is to be repaid and I have no reason to doubt that it is a genuine debt. It is clearly a joint liability because of the fact that the renovations were done on the home and the equity in the home is otherwise in the pool. Accordingly, I propose to allow the full amount claimed by the husband as a joint liability.
As part of the respective financial positions of the parties, the wife claimed as a liability, the sum of $2000 owing on her credit card. The husband gave evidence that the wife had access to his banking account. In addition, the husband was paying a significant proportion of the household utilities. Notwithstanding the modest if not nominal sum involved, I do not think it is appropriate to include that liability as one for which both parties should be responsible.

The pool

The pool of assets and liabilities is therefore as follows:

ASSETS AND LIABILITIES

A home $390,000

Wife’s car  $ 14,000
B property  $255,000
T property  $200,000
Husband’s boat and chattels  $    7,000
  $866,000
Wife’s superannuation  $ 23,443
Husband’s superannuation  $ 56,070
  $945,513
Add back:
Payment to wife  $ 40,000
$985,513
           B property mortgage            $199,500
           T property mortgage  $150,000
           Capital Gains Tax  $ 46,000
           F Pty Ltd Directors’ Loan               $ 58,900
           Renovation Loan  $ 37,258       $491,658
  $493,855

Contribution

The wife acknowledged that at the commencement of the marriage, the husband was the registered proprietor of the now matrimonial home. She asserted however that it was subject to a mortgage. The husband conceded that he had borrowed money but only to the extent of $4000. It is common ground that corroborative documents no longer exist.
The wife set out in her affidavit[11] that contemporaneously with the registration of the transfer of land, a mortgage was secured over the property to the National Australia Bank in the sum of $45,000. That statement was clearly incorrect. On any examination of the mortgage document, it relates to a period 13 years later. The logic followed by the wife in her affidavit was that therefore there was a:
…negative equity of approximately $9000 shortly prior to our marriage.
[11] Para 7.1
That statement could not be justified on the basis that it was the best that could be done. It simply highlights the fact that the wife had no idea of what the true position was. I was puzzled as to why the assertion was made having regard to the fact that the affidavit was drawn by her solicitor who has been involved in the investigation of the matter throughout.
The husband’s version was that as a result of the accident that he had in 1978, he received $40,000 and in May 1980, purchased the home for $36,000 with the assistance of a $4000 mortgage. He then deposed to the fact that he had used the accident money for a variety of other items including air conditioning for his parents’ holiday home at G but in my view, none of those items are of any significance.
The husband was cross-examined about the equity in the home and it was put to him that he had “plucked out of the air” the figure of $36,000. He denied that.
The wife also pointed to the fact that a printout from the Motor Accidents Board showed no such sum of $40,000 but rather, payment of various loss of earnings and medical expenses.
To some extent, the issue was clarified when the husband obtained from Peter Mayberry an affidavit which has now been admitted as Exhibit H3. Mr Mayberry is a solicitor acting in personal injuries matters. He was able to say that the details referred to in the Motor Accidents Board periodic payment schedule were not the same as the lump sum personal injuries payment. He said that his recollection was that the husband received a “substantial” personal injuries settlement and although he did not commence the claim, he was involved in tidying it up at some stage. His recollection was reinforced by the fact that he also acted for the husband in respect of a second claim and was quite adamant that the first claim was greater than the second. No documentation now exists to support any of the precise details. I accept the husband’s version that he did have equity in the home to the extent of $36,000.
Whilst in relative terms today, $36,000 is very little money, I have taken into account that the $36,000 equity was 90 per cent of the value of the property. Importantly, the husband used his trades’ skill to commence a business which was then conducted throughout the marriage and the equity in the home was used as security for the conduct of the business. There is evidence also that the property was renovated a number of times and various funds were used for that purpose. The 1993 mortgage seems to be an example of that. Accordingly, I take the initial contribution into account in a significant way.

The father’s loan

I have already dealt with the loan issue in detail. The money provided by the husband’s father enabled the parties to acquire a new motor car. There was considerable discussion during the hearing about the fact that the wife did not want the motor vehicle as she thought that it was an unnecessary item as they already had a perfectly good motor car. However, the wife conceded that she was the one who thereafter drove the motor vehicle. In addition to the acquisition of the motor car, the parties also renovated the kitchen of the home.
As with the motor vehicle accident money, the money provided by the husband’s father was not large in relative terms but it was significant at the time. The motor car ultimately was sold and enabled the parties to acquire the B property. Apart from the money that came from the motor car, the balance for the B property was borrowed. It is clear that they could not have obtained the B property without the benefit of the motor vehicle equity. Furthermore, the B property subsequent to separation can be traced to the T property and as the equity in the T property is in the pool of assets, it is clearly traceable to the original money provided by the husband’s father. As with the equity in the original home, I treat the money provided by the husband’s father in a significant way as a contribution.
Both the original equity in the home and the money provided by the father were received a long time ago. In Pierce[12] the Full Court seemed to distance itself from the use of the word “erosion” which had been mentioned in the earlier decision of Fogarty J in Money[13]. The Full Court said:
In our opinion it is not so much a matter of erosion of contribution but a question of what weight is to be attached in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and wife.
[12] (1998) FLC 92-844 at 85,881
[13] (1994) FLC 92-485
I am also conscious of what Kay J said in Aleksovski[14] about the gold bar. Kay J made the observation that what was important was to give reasonable value to all of the elements that go to making up the entirety of the marriage relationship. That is the exercise that I am undertaking. It is important therefore that the parties understand that this is not a mathematical exercise but an assessment of the respective contributions and giving them weight.
[14] (1996) FLC 92-705, 20 Fam LR 894

Contributions during the marriage

During the marriage, the wife received $23,000 as a result of criminal injuries that she had received. The husband received $10,000. I am satisfied that both of those sums of money were used for the benefit of the family in one form or another. Neither party was able to be absolutely clear as to what happened and I do not think it matters.
In 1984, the husband was involved in a second motor vehicle accident and he received $16,000 or thereabouts in July 1991. The wife was unable to give any detail about what occurred with this money and that is not surprising because at that period of time she was seriously ill. The husband’s evidence was that the amount was applied to the reduction of the home mortgage loan. That evidence was not challenged.
The husband also asserted that he received an inheritance of approximately $4000 from the estate of his late uncle and that that also went towards reducing the mortgage loan. No details as to when that occurred were provided and no corroborating material was produced. I accept the husband’s evidence however that the payment was received.
All of these financial contributions by both the husband and the wife are important. I am mindful also of the fact that the parties were both working in various capacities during their relationship and there is no suggestion of them wasting their money or living beyond their means. The only inference open to me is that they both worked in a dedicated way for the support of their family and provided their income and these sums of money appropriately for the benefit of the family. I have accepted the husband’s version of the receipt of these moneys as well as his version of what occurred with them primarily on the basis that the wife acknowledged in cross-examination that the husband was in charge of the finances. When the husband was challenged about the fact that he made decisions without consultation with the wife, he was vehement in his denials indicating that he had spoken to her on all occasions but she was just not interested. Whilst I do not accept that the wife was not interested, I do accept that as the relationship was not a happy one, it is probable that the husband organised the finances and made decisions without any great involvement of the wife. That is also consistent with the husband’s personality as described by Mr U.

Non-financial contributions during the marriage

The wife asserted that she was the primary homemaker and parent and said little more. Her evidence in respect to that was unchallenged. The husband pointed to the period between 1991 and 1994 as being a difficult time when the wife was unable to care for the children properly and he took time off work to assist her. He pointed to the fact that it was he who got up during the night if the children wanted something during their early years but I accept that that is a normal incident of parenting. The husband was working for most of the time during the marriage and the wife was working part time. There was clearly a period of time between 1991 and 1994 where the wife was not able to function properly as a result of which in 1993, she was hospitalised. Apart from that period however, it was not seriously suggested that she did not fulfil the homemaker and parent role. Apart from the unusual contributions to which I have already referred and those to which I shall turn relating to the period subsequent to separation, there was no serious suggestion that the husband and wife had not otherwise contributed equally in their own ways during the marriage.

Post the agreement between husband and wife

The wife maintained that after the agreement was signed in December 2003, the husband undertook significant renovation work to the home and the cost of that work has been covered by the liability that I have allowed in the pool. However, the husband has estimated and it was not seriously challenged, he had done 120 hours of labour that was not charged for by the company. I accept that. The husband asserted that the renovations were done at “the wife’s direction and insistence” but the wife’s version was that it was simply to make the house “liveable”. At paragraph 51 of the husband’s affidavit, a long list of items was set out and whilst the wife’s version was that this made the house “liveable”, I suspect that that was a jaundiced view. It was put by the wife that she had no involvement in these renovations. I do not accept that. I find that she did choose the floor coverings and that was without consultation with the husband. The husband asserts that the renovations were repainted in colours chosen by the wife. That evidence was unchallenged. The significance of this issue is the fact that the husband made the contribution and although no evidence was called about the value of that contribution, it must in some way be reflected in the value of the property which is currently in the pool.
In addition to that contribution, the husband also made various payments towards household utilities and support for the children. Although the wife indicated that the husband was remiss in fulfilling his obligations under the agreement, I accept the husband’s version that he fulfilled most of the obligations for the period that was intended under the agreement.

T Property

I have already dealt with the acquisition of T property in some detail and pointed to the fact that it was acquired in part as a result of the B property money. Although this was acquired well after separation and at a time when the husband had moved on with his life, the equity in T property is still clearly traceable back to the assets from within the marriage. I do not see that as a significant contribution post-separation by the husband.

Global approach

In Norbis v Norbis[15] the High Court held that the adoption of the asset by asset approach by a judge was a discretionary matter and that both the global approach and the asset by asset approaches were legitimate and that the circumstances of the approach dictate which is more convenient. The importance is that justice and equity are served by either approach. In Zalewski[16] Finn J whilst agreeing with the judgment of Coleman and Boland JJ added the following:
42.It is my impression that there are currently coming before the Court a significant number of cases in which the period between the parties’ separation and the hearing of their property settlement proceedings is substantial. The delay seems often to arise, at least in part, because the parties have initially reached some form of informal (or even formal) settlement from which one party later resiles (often for good reason). In these long separation periods, the parties will usually have built up substantial new assets or incurred substantial liabilities. In an endeavour to satisfy the parties that any orders which are eventually made by the Court in these somewhat complicated cases are just and equitable, it can, in my view, be very useful for Judges to assess contributions to property on an asset by asset basis.
[15] (1986) FLC 91-712
[16] (2005) FLC 93-241; (2006) Fam LR 296
Coleman and Boland JJ added a postscript to their judgment indicating that after preparing their reasons, they had had an opportunity to read Finn J’s judgment in draft form and agreed entirely with her Honour’s reasons. Their Honours however pointed out:
165.The assessment and comparison of contributions, both financial and non financial and the translation of that weighing and comparison is not and cannot generally be a strictly mathematical task, particularly in a marriage of long duration (see Norbis v Norbis (1986) 161 CLR 513 at 521-523 and G and G (1984) FLC 91-582 at 79,697).
This is a case in which I propose to use the global approach rather than the asset by asset approach because notwithstanding the various financial transactions subsequent to separation, the major contributions were made during the marriage to the assets that are in the pool. By adding back the wife’s $40,000 received under the agreement and the clearly traceable funds into the T property from the B property, it is appropriate in this case to use the global approach rather than the asset by asset approach. In my view, taking the global approach enables me to do justice to both parties.

Conclusion concerning contribution

I have given significant weight to the initial contribution of the husband notwithstanding the duration of the marriage and the various contributions made by the wife both in the financial area through her income and the compensation payments she received together with her non-financial contributions as a homemaker and parent which I find were greater than the husband. However, I find that the contributions of the husband are still significantly greater than those of the wife and I assess them as to 60 per cent to the husband and 40 per cent to the wife.

Section 75(2) factors

Section 75(2) requires a court when exercising its jurisdiction in respect of maintenance to take a number of matters into account. Section 79(4)(e) also requires the Court to take into account those matters so far as they are relevant.
Section 75(2) says:
(2)The matters to be so taken into account are:
(a)the age and state of health of each of the parties;
(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;
(c)      whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
(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;
(e)the responsibilities of either party to support any other person;
(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;
(g)      where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
(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;
(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;
(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;
(l)the need to protect a party who wishes to continue that party's role as a parent;
(m)if either party is cohabiting with another person--the financial circumstances relating to the cohabitation;
(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;
(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.
In Zalewski[17] at paragraph 184 Coleman and Boland JJ said:
The inclusion of the words “whose maintenance is under consideration” in ss 75(2)(j) and (k), prima facie, indicates the subsections relevance to spousal maintenance applications. However s 79(4)(e) does not limit consideration in proceedings under s 79 to any specific s 75(2) factors. The criterion to be applied under s 79(4)(e) is that the matters in s 75(2) must be relevant. It is necessary that assessment of contribution exercise under ss 79 (4)(a),(b) and (c) is not confused with the word “contributed” in s 75 (2)(j), the latter requiring the consideration of a contribution to a financial resource…
[17] ibid
There is no application for spousal maintenance here.
As I have earlier said, the husband is aged 46 and the wife 47. Neither enjoys good health. The importance of health affects their respective economic futures. The wife suffers from depression and chronic migraine both of which affect her ability to work. She points out in her affidavit that she has accrued sick leave but uses it when she is unwell. In addition, she has medication which is costly. It was not challenged that she has a limitation on what she can do for employment and in particular, she cannot be placed under stress. She is fortunate to have an understanding employer but acknowledges that she does not have career advancement prospects. Her medical practitioner however made the observation that her anxiety was related to not only her migraine headaches but also her financial position and her current relationship circumstances. I could not conclude that there is much prospect of her medical health improving even when these proceedings are concluded.

The husband has been treated for depression at various times as well over the years and is currently prescribed medication. He is also seeing a psychologist. The evidence of Mr U was not challenged. He said that the husband was suffering from a chronic Adjustment Disorder with Mixed Disturbance Emotions (anxiety and depression) and Conduct. Mr U said that the factors maintaining that problem were the ongoing pressures of these proceedings as well as work pressures. The husband also has physical disabilities precluding him from going to working as a tradesman. He is fortunate to have the supervisory role that he has. I accept that he faces an unknown future in respect of the supervisory role because it very much depends upon the relationship he has with Ms L. Because of the benefits that the husband has been receiving and I suspect will continue to receive as a result of the relationship with Ms L, I find that his income and earning capacity is significantly greater than the wife.
I have taken into account the fact that by the orders I propose it is probable that the wife will have to sell the home. In evidence, she indicated that she could borrow up to $140,000 but out of that sum, she has to pay the capital gains tax as well as her legal fees. Having regard to the findings that I have made it seems to me most probable that the house will be sold but as the wife desires strongly to keep it, I shall give her the opportunity by my orders. The husband appears to have a better property portfolio by virtue of the fact that he has the interest in the T and B properties. However both of those properties are significantly encumbered and T is a property in which he has an interest with Ms L. It is tempting to look at the two properties of the husband against the wife scrambling to try and keep the home but I am conscious that it is the underlying value that I am dealing with. In saying that, I am also conscious of the fact that by virtue of the wife taking the responsibility for the payment of the capital gains tax as a result of the transfer of the B property to the husband, the cost base for the husband, if he sells the B property in the future, is higher than it would otherwise be. However, by virtue of the global approach that I have taken, both parties are effectively paying the capital gains tax notwithstanding that it will be coming out the wife’s borrowings or the ultimate sale of the home. In my view, nothing turns on that issue.
I have also taken into account that the wife’s employment situation dictates the level at which she can earn. That is not the situation with the husband. Whilst the position as set out in his financial statements since the proceedings began in 2005 would suggest that his financial circumstances have declined, I am satisfied that his current income of $62,000 or thereabouts per annum is not a true reflection of his financial circumstances. Whilst I accept that that is what he is paid, he has the unusual position of being able to access funds for a variety of purposes through the company of Ms L but he also has the rental or the potential for rental from B and T properties.
Dealing firstly with the rental situation, I accept that the T property is difficult to rent out but that may be largely because of the current level of water in the nearby Weir. That situation may change. In respect of the B property, significant renovations have been undertaken to make the property more attractive. In respect of both of those properties being encumbered, there are taxation benefits for the husband.
The other significant financial benefit that the husband has is as a result of his directorship of F Pty Ltd. I found it very odd that he has no legal interest in the company but because of his responsibilities as a director, with the consent of the other director, he is able to use the company’s bank account to fund things for his own purpose. Unashamedly, he has to pay those funds back. However it is a benefit that the wife does not have. In cross-examination, it was put to Ms L that the company account was treated as if it was simply a bank account owned by the director and she denied that. I accept that. However, Ms L also conceded that the husband was entitled to use the funds because he was a director. I expressed at the time some puzzlement about that comment as clearly, the directors are responsible to the shareholders for the use of funds. There are also taxation consequences for borrowing money from the company and it must be done at commercial rates. Ms L indicated that she was very much aware of that situation and that everything was being done according to law. Notwithstanding all of that, I have little doubt that the husband has benefits more by virtue of the fact that he is in a relationship with Ms L and she sees some benefit not only in terms of retaining the relationship but also having him in the role of a supervisor in the company.
Combined with the rental from the two properties and the benefits that the husband is receiving by virtue of his position as a director of the company, I find that his income is closer to the equivalent of $90,000 rather than the $62,000 set out in his financial statement. For that reason, the husband is in a much stronger financial position than is the wife.
I find that neither party has the responsibility to support any other person and neither party is eligible for any pension, allowance or benefit.
I have taken into account the fact that each party has endeavoured to maintain the standard of living that they had prior to separation and no doubt as a result of my orders, that will probably change for the wife if she has to find alternative accommodation again.
I have also considered that this is a long marriage and the parties are unlikely to significantly change their financial positions in the future by virtue of their age and state of health.
When the proceedings commenced, the husband was living with Ms L. That relationship faltered only some months ago. I am quite satisfied that that did not occur in any sinister way for these proceedings. I had the benefit of watching Ms L in the witness box and she is clearly uncertain about the future of the relationship. At this stage, she finds herself with a difficult position of dealing with the husband as director of her company, employee and also intimate friend. I have already mentioned the benefits that the husband receives as a result of his position within the company and I do not intend to further take into account his relationship with Ms L.
I am quite satisfied also that the wife has not repartnered. There was some cross-examination of her about a relationship that she has embarked upon. She said that it is new and uncertain. It is the financial circumstances arising out of such a relationship that is relevant and I am satisfied that in her case, the wife does not receive the benefits nor is there any proposed likely change for her in the foreseeable future with such a relationship.
In so far as I am obliged to take into account the impact of my orders on the ability of a creditor to recover the debt, I say that I am satisfied that there will be sufficient funds available in the hands of the husband to pay F Pty Ltd any money that it is owed and as the husband is a director and Ms L has been involved in the proceedings, there can be no question of the company being disadvantaged. The same applies in respect of the husband’s father. He had the opportunity in the proceedings whilst giving evidence to say that he intended to take action against his son and did not do so. Furthermore, should he do so, the husband has the resources available to him from the case that he will receive from the wife to make an appropriate arrangement with his father.
Section 75(2)(n) requires me to take into account the terms of the orders that I propose to make in respect of the property of the parties. In this case, I propose to make an order that will provide the husband with more than the wife. Sadly and inevitably, that may mean the sale of the home and I propose to take into account in a global way the fact that the wife will probably have to rehouse herself and start again. If she decides not to do so, she will be saddled with a significant mortgage or debt and that is a factor that I can also take into account for the purposes of an adjustment between the parties.
I propose to make an adjustment of 7.5 per cent in favour of the wife. That therefore means an overall division of 52.5 per cent to the husband and 47.5 per cent to the wife.
Using the pool set out in paragraph 104, and rounding the figure to an even dollar, the wife is to pay the husband $187,000. Because I have provided for the liabilities in the pool to be joint responsibilities I have included in my orders various indemnities so that the wife will pay the capital gains tax and the husband will pay and be responsible for the F Pty Ltd debts.
The husband indicated that he also desired to buy the property and I have made provision in the order again rounding off the dollar figure to be paid to the wife in the event that the husband elects to acquire it in the event that the wife desires not to or is unable to pay out the husband.

The question of justice and equity

I have already pointed out that it is the underlying value of the adjustment that must be just and equitable. I am very conscious in this case that on a global basis, that each party has superannuation which will not vest for some time. That however applies to both parties and probably more so to the husband because of the fact that his superannuation is greater than that of the wife.
I am also conscious of the fact that the wife is taking as part of her entitlement the sum of $40,000 which has already been spent as a result of the agreement in 2003. The husband however is also carrying significant debt. When I exclude all of those unusual items, there will be very little difference between the parties in net financial terms and after each pays their legal expenses there will be very little left. However, having regard to the underlying need to reflect the greater contribution by the wife and adjustments as a result of the difference between the parties’ future economic circumstances, I say that these orders are just and equitable.

The container

There was a peripheral dispute between the parties about a container remaining on the property that the wife has wanted removed. The husband has agreed to remove it and I propose to make orders accordingly.

I certify that the preceding One Hundred and Fifty Two (152) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate:

Date: 31 July 2007

[2007] FamCA 754

31 July 2007

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