Min & Orton (No 3)
[2024] FedCFamC1F 387
•6 June 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Min & Orton (No 3) [2024] FedCFamC1F 387
File number: SYC 1579 of 2021 Judgment of: HARPER J Date of judgment: 6 June 2024 Catchwords: FAMILY LAW – PROPERTY – Where wife seeks property division of 45 per cent in her favour pursuant to the Family Law Act 1975 (Cth) (“the Act”) – Where husband contends that it would not be just and equitable to make any adjustment – Where marriage was of short duration – Where husband brought in the majority of the assets at the commencement of the relationship – Where husband made sole financial contributions during the relationship – Where wife made modest homemaker contributions – Where parties entered into a financial agreement pursuant to s 90UB of the Act prior to cohabitation – Where the financial agreement ceased to be binding upon the parties’ marriage – Where the Court previously dismissed the husband’s application for rectification of the agreement – Whether the agreement relevant as evidence of the parties’ intentions and financial arrangements at the time it was drafted – Consideration of whether it would be just and equitable to make any property division – Where wife sought to argue that largesse by the husband during the relationship entitled her to a significant property adjustment – Where wife sought a Kennon adjustment and raised issues of non-disclosure – Dispute as to valuation evidence – Where wife holds 14 per cent of the assets if no property division effected – Court held not just and equitable to make any property division – In the alternative Court found that the wife would not receive a greater property division than 14 per cent. Legislation: Family Law Act 1975 (Cth) Pt VIII, ss 75, 79, 80, 81 Cases cited: Aitken & Aitken (2023) FLC 94-142; [2023] FedCFamC1A 69
AJO & GRO (2005) FLC 93-218; [2005] FamCA 195
Anson & Meek(2017) FLC 93-816; [2017] FamCAFC 257
Benson & Drury (2020) FLC 93-998; [2020] FamCAFC 303
Bevan & Bevan (2013) FLC 93-545; [2013] FamCAFC 116
Black and Kellner (1992) FLC 92-287; [1992] FamCA 2
Blatch v Archer (1774) 1 Cowp 63
Briese and Briese (1986) FLC 91-713; [1985] FamCA 23
Britt & Britt (2017) FLC 93-764; [2017] FamCAFC 27
C and C [1998] FamCA 143
Candle & Falkner (2021) FLC 94-069; [2021] FedCFamC1A 102
Chapman & Chapman (2014) FLC ¶93–592; [2014] FamCAFC 91
Chea & Sok (No 2) [2023] FedCFamC1F 1052
Cosola & Moretto (2023) FLC 94-143; [2023] FedCFamC1A 61
Dovgan & Dovgan [2021] FamCA 306
DW & GT (2005) FLC 93-217; [2005] FamCA 161
Gadhavi & Gadhavi [2023] FedCFamC1A 117
GBT v BJT [2005] FamCA 683
Grunseth & Wighton(2022) FLC 94-099; [2022] FedCFamC1A 132
Harris & Dewell (2018) FLC 93-839; [2018] FamCAFC 94
Jabour & Jabour (2019) FLC 93-898; [2019] FamCAFC 78
Keating & Keating (2019) FLC 93-894; [2019] FamCAFC 46
Kennon v Kennon (1997) FLC 92-757; [1997] FamCA 27
M and M [1998] FamCA 42
Mallet v Mallet (1984) 156 CLR 605; [1984] HCA 21
Marsh & Marsh (2014) FLC 93-576; [2014] FamCAFC 24
Martell v Martell (2023) 66 Fam LR 650; [2023] FedCFamC1A 71
Martin & Newton (2011) FLC 93-490; [2011] FamCAFC 233
Nagel v Clay (2020) 60 Fam LR 550; [2020] FamCA 326
NHC & RCH (2004) FLC 93-204; [2004] FamCA 633
Pierce v Pierce (1999) FLC 92-844; [1998] FamCA 74
Pukallus v Cameron (1982) 180 CLR 447; [1982] HCA 63
Rodgers & Rodgers (No 2) (2016) FLC 93-712; [2016] FamCAFC 104
Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85; [2016] HCA 47
Spalla & Spalla (2023) FLC 94-145; [2023] FedCFamC1A 87
Stanford & Stanford (2012) 247 CLR 108; [2012] HCA 52
Stella & Stella [2023] FedCFamC1F 1092
Stopford Malloy & Malloy [2021] FedCFamC1F 123
Trevi & Trevi (2018) FLC 93-858; [2018] FamCAFC 173
Waterman & Waterman (2017) FLC 93-762; [2017] FamCAFC 23
Wei v Xia (No 5) (2023) 67 Fam LR 421; [2023] FedCFamC1F 679
Weir and Weir (1993) FLC 92-338; [1992] FamCA 69
Welch & Abney (No 2) [2015] FamCA 1116
Woodcock v Woodcock (1997) FLC 92-739; [1997] FamCA 5
Zao & Lee [2019] FamCAFC 169
Division: Division 1 First Instance Number of paragraphs: 136 Date of hearing: 19-21 March 2024 Place: Sydney Solicitor for the Applicant: Mr Brown, Browns The Family Lawyers Counsel for the Respondent: Mr Ford with Mr Schonell Solicitor for the Respondent: Long Saad Woodbridge Lawyers ORDERS
SYC 1579 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS MIN
Applicant
AND: MR ORTON
Respondent
ORDER MADE BY:
HARPER J
DATE OF ORDER:
6 JUNE 2024
THE COURT ORDERS THAT:
1.The Applicant’s Initiating Application be dismissed.
2.The Respondent’s Response be dismissed.
3.If any party seeks costs, an application in the appropriate form supported by affidavit evidence is to be filed and served within 28 days of the date of these orders.
4.If no application for costs is filed within the time specified, there shall be no order as to costs.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Min & Orton has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
HARPER J:
INTRODUCTION
These are property proceedings between the applicant wife, Ms Min (“the wife”) and the respondent husband, Mr Orton (“the husband”).
BRIEF BACKGROUND
The husband was born in the United Kingdom in 1951 and is presently 73 years of age. The husband moved to Australian in 1970 and became an Australian citizen in 1997.
The wife was born in 1970 in Country D and is presently 54 years of age. The wife is an Australian citizen. She speaks five languages including English.
It was agreed that the parties met in late 2007 and commenced a relationship thereafter. They disputed when the relationship became serious, however it was a common position that cohabitation commenced in 2013. The parties married in 2014, separated on a final basis on 2 September 2020 and divorced in 2022.
There were no children of the relationship.
Both parties were previously married. The husband has two children from his former relationship, Ms E aged 46 years and Ms F aged 44 years.
The wife purchased G Street, Suburb H (“Suburb H”) in 1998 for around $220,000.
The husband purchased J Street, Suburb K (“Suburb K”) in 2007 for around $680,000.
The husband purchased L Street, Suburb M (“Suburb M”) in 2012 for around $650,000.
The husband established his business N Business, formerly under another name, in 2011. The husband is the sole director, secretary and shareholder of N1 Pty Ltd and N2 Pty Ltd (collectively “N Business”). These entities are corporate trustees of a number of trusts through which N Business is conducted. The business operates across a number of locations in Sydney. The husband established a number of trust structures related to N Business which will be referred to in this judgment where relevant.
The wife moved into Suburb K with the husband in 2013 and rented out Suburb H.
The wife worked in the service industry until they married in 2014 after which the wife ceased paid employment.
In August 2013 the parties entered into a financial agreement (“the Agreement”) which was expressed to be a Pt VIIIAB Financial Agreement pursuant to s 90UB of the Family Law Act 1975 (Cth) (“ the Act”) applying to parties in a relationship prior to marriage. Shortly after signing the Agreement the wife moved into Suburb K with the husband and rented out Suburb H.
Following separation, the wife moved into rental accommodation and husband paid the wife three payments of $25,000 on 27 August 2020, 2 September 2020 and 29 October 2020, totalling $75,000.
The husband continues to reside at Suburb K and work in N Business.
The wife resided in Country D with family between late 2022 and early 2023 and again from mid-2023 until early 2024. She continues to rent out Suburb H but is unemployed and in receipt of Centrelink payments. She is presently based in Country D but claimed in her oral evidence that she intends to return to Australia.
PROCEDURAL HISTORY
The wife commenced property proceedings in the Family Court of Australia (as it then was) on 8 March 2021. She sought division of the property pool pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) and spousal maintenance. The husband in his Response filed 17 May 2021, sought the rectification of the Agreement on the basis that it was mutually intended to apply during both the de facto relationship and a subsequent marriage.
Justice Rees dismissed the wife’s application for spousal maintenance and for summary dismissal of the husband’s Response on 12 July 2021 (Min & Oroton [2021] FamCA 502 (“Min [2021]”)).
On 11 March 2022, Rees J held that the husband failed to establish that, at the time the Agreement was executed, there was a common intention that it would continue to operate if the parties married (Min & Orton [2022] FedCFamC1F 131 (“Min”)). Accordingly, Rees J dismissed his application for rectification of the Agreement. Consequently, there was no dispute it ceased to be a binding financial agreement upon the parties’ marriage.
The matter was originally listed for final hearing to commence on 9 August 2023 with an estimate of two days. The final hearing was vacated because the parties failed to make themselves ready to proceed. The matter was then listed to be heard in the Sydney Rolling List on 18 March 2024.
The parties attended a Judicial Settlement conference on 15 March 2024, however they were unable to come to a sensible resolution of their dispute and the final hearing took place between 18 and 20 March 2024 before me.
COMPETING PROPOSALS
The proposals of the parties were highly divergent. A joint balance sheet became Exhibit 12. Apart from the wife’s household contents which I will mention shortly, all the material disputes about the composition of the balance sheet related to assets or notional assets of the husband, particularly the value of N Business. I will deal with these later in these reasons.
The wife argued that contributions should be assessed 35 per cent to her and 65 per cent to the husband, with a 10 per cent adjustment in her favour having regard to the factors set out in s 75(2) of the Act, thereby claiming 45 per cent of the matrimonial pool.
The husband’s primary case is that there is no basis to conclude it would be just and equitable to make any adjustment of the parties’ property interests. His fallback position is that any property adjustment should be confined to a division of 15 per cent to the wife and 85 per cent to him, based on his version of the balance sheet.
MATERIAL RELIED UPON
The wife read and relied upon the following material according to her Case Outline filed 11 March 2024:
(1)Initiating Application filed 8 March 2021;
(2)The wife’s affidavit filed 15 February 2024;
(3)The wife’s affidavit filed 17 July 2023;
(4)The wife’s Financial Statement filed 15 February 2024;
(5)The affidavit of Ms O filed 17 July 2023; and
(6)The affidavit of Dr P filed 17 July 2023.
The wife was cross-examined and gave evidence with the assistance of an interpreter.
Ms O is a victim’s services counsellor and mental health social worker who was providing counselling services to the wife. Ms O was available for cross-examination but was ultimately not required. Ms O’s affidavit was read subject to a number of rulings on objections.
Dr P is the wife’s treating General Practitioner and sworn an affidavit in these proceedings. Dr P was not made available for cross-examination and I informed the parties I would not have regard to his evidence.
The husband read and relied upon the following material according to his Case Outline filed 11 March 2024:
(1)Response filed 17 May 2021;
(2)The husband’s affidavit filed 16 February 2024;
(3)The affidavit of Mr Q filed 17 July 2023; and
(4)The husband’s Financial Statement filed 29 February 2024.
The husband was cross-examined.
Both parties also sought to rely upon additional written submissions dated 21 March 2024, in addition to their oral submissions.
The material tendered and relied upon by the parties is set out at Schedule 1 at the conclusion of these reasons.
Expert Evidence
Mr R was jointly appointed by the parties on 23 June 2022 to value the husband’s interest in N Business and its associated entities. Mr R prepared an initial valuation report dated 14 October 2022. On 30 November 2023, the parties jointly instructed Mr R to prepare an updated report. He prepared an updated valuation dated 30 January 2024 and filed 11 March 2024.
The husband disputed Mr R’s initial valuation report dated 14 October 2022 and sought to rely on the affidavit of Mr Q filed 17 July 2023. Mr Q was and continues to be a finance professional for the husband in his personal capacity and for N Business.
Mr R was cross-examined. I will return to the issue of Mr R’s valuation evidence later in these reasons.
The affidavit of Mr Q was read subject to a number of objections and he was ultimately not required for cross-examination.
ALTERING PROPERTY INTERESTS - SECTION 79
Part VIII of the Act sets out the legislative provisions relating to property orders that may be sought when parties are or were married. The central provision is s 79 of the Act, which gives the Court power to make such orders for alteration of property interests as it considers appropriate.
Section 79(2) of the Act provides that:
The court must not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
Section 79(4) of the Act set outs the factors to be taken into account in considering what order, if any, should be made. These will be discussed in detail below.
Having regard to the language of both s 79(1) and s 79(2) of the Act, the Court is required to make orders which are not only “just and equitable” but also “appropriate” (Zao & Lee [2019] FamCAFC 169 at [48]; Aitken & Aitken (2023) FLC 94-142 at [59]). Section 80 grants specific powers to make a range of different orders to adjust property interests. Section 81 is relevant and reflects a policy of making orders which finally determine the financial relationship between the parties and avoid further proceedings, as far as practicable.
In Stanford & Stanford (2012) 247 CLR 108 (“Stanford”) the High Court made clear at [37] it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property.
The resolution of dispute as formulated by each party’s proposal is assisted by close consideration of fundamental propositions set out by the High Court in Stanford:
35.It will be recalled that s 79(2) provides that “[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order”. Section 79(4) prescribes matters that must be taken into account in considering what order (if any) should be made under the section. The requirements of the two sub-sections are not to be conflated. In every case in which a property settlement order under s 79 is sought, it is necessary to satisfy the court that, in all the circumstances, it is just and equitable to make the order.
36.The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds. And while the power given by s 79 is not “to be exercised in accordance with fixed rules”, nevertheless, three fundamental propositions must not be obscured.
37.First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to “altering the interests of the parties to the marriage in the property” (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests, the court is satisfied that it is just and equitable to make a property settlement order.
38.Secondly, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion. In Wirth v Wirth, Dixon CJ observed that a power to make such order with respect to property and costs “as [the judge] thinks fit”, in any question between husband and wife as to the title to or possession of property, is a power which “rests upon the law and not upon judicial discretion”. And as four members of this Court observed about proceedings for maintenance and property settlement orders in R v Watson; Ex parte Armstrong:
“The judge called upon to decide proceedings of that kind is not entitled to do what has been described as ‘palm tree justice’. No doubt he is given a wide discretion, but he must exercise it in accordance with legal principles, including the principles which the Act itself lays down”.
39.Because the power to make a property settlement order is not to be exercised in an unprincipled fashion, whether it is “just and equitable” to make the order is not to be answered by assuming that the parties’ rights to or interests in marital property are or should be different from those that then exist. All the more is that so when it is recognised that s 79 of the Act must be applied keeping in mind that “[c]ommunity of ownership arising from marriage has no place in the common law”. Questions between husband and wife about the ownership of property that may be then, or may have been in the past, enjoyed in common are to be “decided according to the same scheme of legal titles and equitable principles as govern the rights of any two persons who are not spouses”. The question presented by s 79 is whether those rights and interests should be altered.
40. Thirdly, whether making a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised “in accordance with legal principles, including the principles which the Act itself lays down”. To conclude that making an order is “just and equitable” only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.
41. Adherence to these fundamental propositions in exercising the power in s 79 gives due recognition to “the need to preserve and protect the institution of marriage” identified in s 43(1)(a) as a principle to be applied by courts in exercising jurisdiction under the Act. If the parties have made a financial agreement about the property of one or both of the parties that is binding under Pt VIIIA of the Act, then, subject to that Part, a court cannot make a property settlement order under s 79. But if the parties to a marriage have expressly considered, but not put in writing in a way that complies with Pt VIIIA, how their property interests should be arranged between them during the continuance of their marriage, the application of these principles accommodates that fact. And if the parties to a marriage have not expressly considered whether or to what extent there is or should be some different arrangement of their property interests in their individual or commonly held assets while the marriage continues, the application of these principles again accommodates that fact. These principles do so by recognising the force of the stated and unstated assumptions between the parties to a marriage that the arrangement of property interests, whatever they are, is sufficient for the purposes of that husband and wife during the continuance of their marriage. The fundamental propositions that have been identified require that a court have a principled reason for interfering with the existing legal and equitable interests of the parties to the marriage and whatever may have been their stated or unstated assumptions and agreements about property interests during the continuance of the marriage.
(Footnotes omitted) (Emphasis in original)
In relation to s 79(2), the High Court in Stanford held that the very fact of separation may lead to the ready satisfaction of the just and equitable requirement:
42. In many cases where an application is made for a property settlement order, the just and equitable requirement is readily satisfied by observing that, as the result of a choice made by one or both of the parties, the husband and wife are no longer living in a marital relationship. It will be just and equitable to make a property settlement order in such a case because there is not and will not thereafter be the common use of property by the husband and wife. No less importantly, the express and implicit assumptions that underpinned the existing property arrangements have been brought to an end by the voluntary severance of the mutuality of the marital relationship. That is, any express or implicit assumption that the parties may have made to the effect that existing arrangements of marital property interests were sufficient or appropriate during the continuance of their marital relationship is brought to an end with the ending of the marital relationship. And the assumption that any adjustment to those interests could be effected consensually as needed or desired is also brought to an end. Hence it will be just and equitable that the court make a property settlement order. What order, if any, should then be made is determined by applying s 79(4).
(Emphasis in original)
The High Court continued:
43. By contrast, the bare fact of separation, when involuntary, does not show that it is just and equitable to make a property settlement order. It does not permit a court to disregard the rights and interests of the parties in their respective property and to make whatever order may seem to it to be fair and just [citing Wirth v Wirth (1956) 98 CLR 228 at 231-232 per Dixon CJ; Hepworth v Hepworth (1963) 110 CLR 309 at 317-318 per Windeyer J].
(Footnotes inserted)
The Full Court in Bevan & Bevan (2013) FLC 93-545 (“Bevan”) at [73] also summarised three “fundamental propositions” laid down by the High Court in Stanford to provide “useful guidance to trial judges in approaching the task under s 79” as follows:
1.Determination of a just and equitable outcome of an application for property settlement begins with the identification of existing property interests (as determined by common law and equity);
2.The discretion conferred by the statute must be exercised in accordance with legal principles and must not proceed on an assumption that the parties’ interests in the property are or should be different from those determined by common law and equity;
3.A determination that a party has a right to a division of property fixed by reference only to the matters in s 79(4) and without separate consideration of s 79(2), would erroneously conflate what are distinct statutory requirements.
(Emphasis in original)
In many cases, the trial is conducted by both parties on the basis that it is just and equitable to make some form of adjustment. This will usually satisfy s 79(2). Here, it is not common ground that any adjustment should be made.
In property proceedings under the Act, the “four step process” has been almost ubiquitously employed to determine property adjustment application under Pt VIII:
(1)Identify and value, the parties’ property, liabilities and financial resources at the date of the hearing;
(2)Identify and assess the contributions of the parties as referred to in s 79 of the Act and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties, whether examined on a global approach or an asset by asset approach;
(3)Identify and assess the other factors relevant including, the matters referred to in s 75 of the Act and determine the adjustment (if any) to be made to the contribution entitlements at step two; and
(4)Consider the effect of the above and resolve what order is just and equitable in all the circumstances of the case.
The Full Court in Bevan at [72]–[73] has held that the decision in Stanford has not overruled the four step approach. However, the Full Court also emphasised that although the pre‑condition to making any order for property adjustment is a finding that it is just and equitable to do so in accordance with s 79(2) of the Act, such a finding does not form a threshold issue, nor must the requirements of s 79 be followed in a particular order. The way the husband presented his case, the question of the just and equitable requirement was raised before the fourth step. There is no requirement to consider the just and equitable requirement only at the fourth step. The Full Court said in Martin & Newton (2011) FLC 93-490 at [306]: “the requirement to make an order that is just and equitable permeates the entire decision making process, and it is not impermissible to consider it at an earlier point if the particular case requires it” (cited in Bevan at [62]).
However, it is clear that before reaching a conclusion about either s 79(2) or s 79(4) of the Act I must first identify the existing assets and liabilities of the parties.
ASSETS, LIABILITIES AND FINANCIAL RESOURCES
In relation to the disputed items on the balance sheet, I express my conclusions as follows, noting the reference to item numbers is a reference to the item number on Exhibit 12.
Items 3 and 4 are ANZ bank accounts held by the husband. For some reason their balance could not be agreed. No submissions were made about these items. I will accept the husband’s value in each case since they are his bank accounts.
There was no dispute about the value of the wife’s assets, except Item 17 being the wife’s household contents which she claimed were worth nothing, while the husband proposed a value of $15,000 on the basis that this was the same value given to his household contents. The husband pointed out that the wife pays $8,800 to a storage facility each year for storing “my stuff, my clothes, my shoes, all that” and “all my belongings” (Transcript 19 March 2024, p.89 lines 34–36). Apart from this, there was no secure basis in the evidence to give other than an arbitrary value the wife’s household contents. I accept they have some value. I infer from the cost of storage that the belongings stored are not insubstantial. I will give the same value of $15,000 to the household contents of both parties.
N Group
A significant difference arose about the value of N Group. The valuation expert, Mr R, initially valued the Group at $3,369,850 as at 30 June 2023. The husband challenged his evidence on the basis that it was wholly inadmissible for a number of reasons, including a failure to expose his reasoning and because Mr R used the values for the plant and equipment given by each component of the business in their balance sheets to reach his overall valuation.
The challenge to the use of the plant and equipment values was maintained despite it being undisputed that the balance sheets were provided by the husband, whether signed or in draft. They were not qualified in any way by the husband in evidence. He provided no other information to Mr R which could have allowed him to form a different view about the value of plant and equipment. The husband argued that Mr R’s valuation is entirely without probative value because he should have taken steps to ascertain the market value of the plant and equipment. The husband himself adduced no evidence of the market value nor did he provide any such evidence to Mr R. The husband put nothing to Mr R in cross-examination to the effect that the values should have been different. Mr R expressed the clear view that it was appropriate for the purposes of his valuation exercise to accept the values in the balance sheets. I am not persuaded any of the husband’s criticisms of Mr R have substance.
In cross-examination, Mr R’s attention was drawn to make good provisions in several of the leases which were owned by N Business. Taking them into account, he accepted that a reduction of about 10 per cent on the cost of fitout was appropriate, causing him to reduce his overall valuation to $2,926,360. The wife accepted this value. The husband put forward a lower value of $2,000,000. He argued that as owner and founder of the business he was better placed to put a market value on the plant and equipment. I see no reason to accept the husband’s value. Mr R adjusted his value when made aware of the make good provisions in the leases. I will include the value of N Business at $2,926,360.
S Property Timeshare – Item 20
There was no dispute that the wife has an interest in a time share property, which she referred to as a commercial premises. There was no evidence as to its value. The wife claimed it was worth nothing, but cost her $162 per month. She also said that she uses it to provide accommodation for her family when they travel to Australia. I will not include this item in the balance sheet with any value, but it appears to be a financial resource of the wife to some extent which I can take into account under s 75(2).
Notional Property
The disputes about Items 24, 25, 28 and 29 concern whether they should be added back as notional property of the husband. In respect of Item 25 it is agreed that the property should be added back, but the dispute is about the quantum.
In determining these disputes, it is important to bear in mind that property claimed to be “added back” no longer exists. Adding back non-existent property can have a distorting impact on the reality of property available to division. In Bevan, Bryant CJ and Thackray J observed:
79. We observe that “notional property”, which is sometimes “added back” to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them”, and thus is not amenable to alteration under s 79. It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage – and potentially an important part. As the question does not arise here, we need say nothing more on this topic, save to note that s 79(4) and in particular s 75(2)(o) gives ample scope to ensure a just and equitable outcome when dealing with the unilateral disposal of property.
Parties do not go into a state of suspended economic animation at separation and are entitled to reasonably conduct their affairs and expenditure post-separation in a manner that is consistent with properly getting on with their lives (M and M [1998] FamCA 42; C and C [1998] FamCA 143; NHC & RCH (2004) FLC 93-204 at [24] (“NHC & RCH”); Trevi & Trevi (2018) FLC 93-858 at [29]). An add back does not necessarily occur whenever a party has expended money realised from the disposition of assets that existed as at the date of separation; there needs to be some assessment of the reasonableness of the expenditure (AJO & GRO (2005) FLC 93-218 at [39]).
It is also well settled that adding back property is exceptional and may be appropriate where the parties have expended money on legal fees, where there has been a premature distribution of matrimonial assets, or ‘waste’ or wanton, negligent, or reckless dissipation of assets (Candle & Falkner (2021) FLC 94-069 at [52]–[58]). I repeat and adopt the statement of principle in Chea & Sok (No 2) [2023] FedCFamC1F 1052:
82. However, adding back property is a discretionary exercise and proper consideration must be given to existing interests in property. The Court must take the property of a party to the marriage “as it finds it” and adding back property reflects a decision that, exceptionally, in the particular circumstances of a case, justice and equity requires it. In cases that are not “exceptional” justice and equity can be achieved, not by adding back, but by taking up the same as a relevant s 75(2) factor which is, perhaps, technically more correct” (See Trevi & Trevi (2018) FLC 93-858 at [30] (“Trevi”); Vass v Vass (2015) 53 Fam LR 373 at [138]–[139]). Adding back emphasises that satisfying the respective requirements of s 79(2) and s 79(4) of the Act to do justice and equity can require an “accounting” or “balance sheet” exercise for the purposes of s 79(2) and s 79(4), “so as to include the value of the dissipated property or expended sums within the total value of the parties’ existing interests in property, and to credit the value of same against the assessed entitlement of the dissipating or spending party” (Trevi at [47] per Murphy J).
Austin J held in Welch & Abney (No 2) [2015] FamCA 1116 at [35] (not disturbed on appeal on this question in Welch & Abney (2016) FLC 93-756 at [81]–[85]) that:
35. Any argument about the premature distribution of assets or the deliberate, reckless, negligent or wanton dissipation of assets can only ordinarily be relevant to the inquiry about the proper nature of the property adjustment orders to be made, once it is first determined that an adjustment of property interests is just and equitable. Consideration of such evidence is permissible when comparing the parties’ contributions under ss 79(4)(a)-(c) of the Act or otherwise pursuant to ss 79(4)(e) and 75(2)(o) of the Act. Such an approach is not novel (see Bevan at [78]-[79], [160]; Vass & Vass [2015] FamCAFC 51 at [138]-[139]).
As will become apparent, I am unable to conclude that an adjustment of property interests is just and equitable in this case. However, in light of the manner in which the wife argued her case, I consider it necessary also to assess contributions because, as will be explained, the assessment leads to no different conclusion. Therefore, I will determine the contest about add backs as part of the process of settling the balance sheet at this point in my reasons.
In addition to part of Item 25, the parties agreed that legal fees should be added back. The total of the disputed add backs is $1,705,412.
Item 24 is a total of $132,980 which the husband paid to his new partner, Ms T between 22 May 2022 and 19 February 2024. The husband did not dispute making these payments. The wife appeared to contend that they were wasteful. The husband conceded in cross-examination that during the period when he made the payments to Ms T he also refinanced the mortgage referred to by the parties as mortgage 2, though it is unclear whether this mortgage related to Suburb M or Suburb K, in February 2023 to inject $250,000 into N Business because it was suffering cashflow difficulties. The husband claimed the payments were made for services provided by Ms T. This evidence was not convincing. But the question is whether the expenditure was reasonable as part of the husband moving on with his life. One factor which may make it unreasonable is that, on a narrow view, the money paid to Ms T could have been saved and the borrowing to fund N Business could have been reduced. But there is no dispute that the husband provided almost all the financial contributions during the parties’ relationship, extending considerable largesse to the wife. He did so from his own assets and financial resources. I do not consider it unreasonable for him to support his post-separation relationship by extending financial largesse to his new partner. I am not persuaded that Item 24 should be included as notional property. To the extent necessary I will take it into account under s 79(4)(e).
The background to Item 25 is that N Business had premises spread over multiple storeys of a building located at U Street (“the U Street location”) which was compulsorily acquired by a government agency in 2022. The gross compensation for the compulsory acquisition was over $1,700,000. In his trial affidavit, the husband claimed the net payment received was about $1,250,000 once valuation fees, legal costs and other consultant’s fees and GST were paid. The entity eligible to receive the net compensation was the V Trust, a discretionary trust of which the corporate trustee is N1 Pty Ltd. However, the compensation payment was deposited into the trust account of the husband’s solicitors who then provided $1,200,000 to his daughter to enable her to buy a house. The husband agrees this amount should be added back onto the balance sheet.
But the wife claims a further $200,000 should be included, making the add back worth $1,400,000. The husband conceded that he had given no evidence in his affidavit as to how $200,000 of the compensation received in the 2023 financial year was disbursed. But he tendered documents which by the end of the trial showed that $550,000 of the compensation was paid in instalments into his solicitors’ trust account and from there was distributed to the V Trust, which was part of the N Business. Mr R in valuing N Business overall took account of the lease surrender fee of around $1,600,000 received by the V Trust in the financial year ended June 2022 (Affidavit of Mr R filed 11 March 2024, p.40 Table Q6), although he excluded it in reaching the value of Nil for the trust on a future maintainable earnings basis as at the date of valuation (Affidavit of Mr R filed 11 March 2024, Appendix 4(p)). So even though $1,200,000 was paid to the husband’s daughter, to add back any amount greater than this figure as notional property of the husband separately from the value of N Business would risk some double counting. I am not satisfied any more than $1,200,000 should be added back. I will include this amount as notional property of the husband.
By the end of the trial there was no dispute that Items 28 and 29 were borrowings by refinance or redraw which were paid into N Business. Accordingly, to include them as notional property would also risk double counting. They will be excluded.
Liabilities
For some reason the liability at Item 30 was not agreed. It is a mortgage liability of the husband, whose figure I will accept, noting it is marginally lower than the wife’s.
Item 32 is claimed as a liability on the balance sheet by the husband as an accrued taxation liability of $780,491 for the year ended June 2023. One reason for the size of this liability is that the husband treated the distribution of $1,200,000 which ultimately came into the hands of his daughter as a taxable receipt in his hands, that is, he accounted for the payment in his own tax return so that he bore the tax liability.
In Dovgan & Dovgan [2021] FamCA 306 at [316] I referred to what has been a usual practice regarding liabilities:
d) In most cases, according to the usual practice of the Court, a trial judge should make a finding, on the balance of probabilities, as to whether or not a tax liability exists, and if so in what amount. If it be found that such a liability exists, the Court should take it into account when calculating the nett amount available for distribution between the parties rather than use s 75(2) as a means of bringing to account a liability or potential liability: Campbell v Kuskey (1998) FLC 92-795 … [Rodgers & Rodgers (No 2) (2016) FLC 93-712] at [28] – [32]; …
But there is no rule of law that liabilities must be deducted from assets; the manner in which a particular liability should be treated is, ultimately, dependent upon the nature of the liability, the circumstances surrounding the liability, and the dictates of justice and equity shaped by each (Rodgers & Rodgers (No 2) (2016) FLC 93-712 at [36] and [40]).
The wife argued that the Court could not be satisfied that the taxation liability was real because it was inconsistent with the husband’s trial affidavit. On the contrary, I do not agree the asserted inconsistency is real. The husband evidence was basically consistent in that he clearly conceded in cross-examination that he intended to shoulder the taxation burden of the payment to his daughter of $1,200,000. It appears the payment was treated as a distribution to him from the V Trust and the payment to the daughter was a gift from him. The husband tendered an income tax Account Statement from the ATO issued on 6 February 2024 which showed an outstanding liability of $793,453.27. I find it is a real liability. He conceded that the total debit figure should be reduced to $780,491 because of a recent payment as at the date of trial.
The wife also argued that it should not be a liability in which she should share. In NHC & RCH at [71] the Full Court recognised that whether both parties should bear responsibility for taxation debts of one party to the marriage was to be decided by reference to what was just and equitable.
As already explained, it became plain that a proportion of the total tax liability of $780,491 was referrable to the husband assuming the liability for the trust distribution of $1,200,000 which was gifted to his daughter out of the compulsory acquisition compensation receivable by the V Trust. In this way $1,200,000 of capital was removed from the overall value of N Business after separation. This is one factor which suggests it would not be just and equitable for the wife to share in the debt. However, other factors militate in favour of the opposite conclusion. Importantly, the $1,200,000 has been added back into the balance sheet by agreement of the parties, as notional property of the husband. In addition, it was also clear the not all of the $780,491 was a tax liability referrable to the trust distribution. The husband’s accountant estimated the husband’s tax liability for 2022 was $117,510 in addition to a balance owing from 2021 of $117,336, and the evidence showed he owed $234,846 on 18 July 2023 which I infer was before the trust distribution was taken into account.
Therefore, the $780,491 will be included on the balance sheet as a liability of the husband.
Item 33 is a credit card debt of the husband in the amount of $11,995. No submissions were made as to why post separation credit card debt should be included on the balance sheet. I will exclude it.
Superannuation
Neither party sought to disturb the superannuation interests. No clear submissions were directed to the different figures for superannuation on Exhibit 12. I see no reason not to accept the husband’s figures for his superannuation interests and the value of the wife’s superannuation was agreed.
Conclusions and Assets Pool
According to my findings the balance sheet between the parties is as follows:
Ownership
Description
Agreed value
1
Husband
Suburb K
$1,600,000
2
Husband
Suburb M
$1,500,000
3
Husband
ANZ account #...21
$3,820
4
Husband
ANZ account #...42
$441
5
Wife
B Bank account #...12
$157
6
Wife
B Bank account #...39
$576
7
Wife
B Bank account #...39
$136
8
Wife
B Bank account #...90
$1,090
9
Wife
W Bank account #...28
$2,117
10
Wife
W Bank account #...08
$98
11
Wife
X Bank account #...60
$116
12
Husband
N Business
$2,926,360
13
Husband
Household contents
$15,000
14
Husband
Watches
$15,000
15
Husband
Motor Vehicle 1
$25,000
16
Wife
Suburb H
$650,000
17
Wife
Household contents
$15,000
18
Wife
Money in solicitor’s trust account
$9,754
19
Wife
Shares
$22,446
21
Husband
Shares
$50,613
22
Husband
Shares
$17,743
23
Husband
Funds held in CBA account #...29
$3,155
Total
$6,858,622
ADD BACKS
25
Husband
Money from compulsory acquisition of building located at U Street
$1,200,000
26
Husband
Legal fees
$529,630
27
Wife
Legal fees
$192,411
Total
$1,922,041
LIABILITIES
30
Husband
ANZ mortgage #...72
$331,321
31
Husband
ANZ mortgage #...99
$580,461
32
Husband
Income tax for the last financial year
$780,491
Total
$1,692,273
SUPERANNUATION
Member
Name of Fund
Type of Interest
Agreed value
34
Husband
Superannuation Fund 1
Accumulation
$0
35
Husband
Superannuation Fund 2
Accumulation
$5,634
36
Husband
Orton Superannuation Fund
Accumulation
$397
37
Wife
Superannuation Fund 3
Accumulation
$80,142
Total
$86,173
NET POOL (INCLUDING SUPERANNUATION):
$7,174,563
According to my findings therefore the net property pool is $7,174,563 (rounded) including notional property and superannuation. The wife holds net assets of $974,043 or 14 per cent (rounded) of the pool. The husband holds $6,200,520 or 86 per cent (rounded) of the pool.
In final submissions, counsel for the wife contended that a payment of $3,100,000 was needed to give the wife her entitlement. This was not explained clearly, and since the wife already holds assets worth $974,043, $3,100,000 would give her a percentage of the assets, well beyond her asserted claim.
SECTION 79(2)
Having identified the property interests of the parties, I return to the question whether any order adjusting property would be just and equitable in the circumstances of this case. Clearly, while the bare fact of involuntary separation will not be enough to justify a property adjustment order, the High Court’s statement of principle in Stanford (above at [42]) makes clear that the cessation of common use of property by the spouse parties, and their express or implicit assumptions that existing arrangements of marital property interests were sufficient or appropriate during the marriage, are some indication that a property adjustment order would be just and equitable. However, this is not determinative.
Clearly, since the expression “just and equitable” is a qualitative description of “a conclusion reached after examination of a range of potentially competing considerations”, and does not admit of exhaustive definition, the criteria of what is just and equitable for the purposes of s 79(2) are broad and largely indeterminate in the abstract. But the fundamental propositions stated in Stanford offer some guidance, including the long established starting point that the existing property interests are crucial, that there is no assumption that the parties’ rights to, or interests in, marital property are or should be different from those that exist at the time of trial and there is no assumption that either party has a right to a division of property (Stanford at [39]–[40]), as the husband emphasised.
Financial Agreement
This leads to a consideration of the Agreement. The husband argued the existence of the Agreement is significant in this regard, because it set out the assumptions of the parties about their property during the early relationship, during the marriage and after separation. In Bevan the Full Court explained the importance of the parties’ assumptions or agreements about how their property interests are arranged:
119. In our view, if the three “fundamental propositions” [in Stanford] can truly accommodate any consideration the parties gave to how their property interests should be arranged during the continuance of their marriage, they must also accommodate express consideration given to how those interests should be arranged after separation. Indeed, the argument for doing so is stronger, given that any mutual understanding is less likely to have been affected by extraneous influences that would be at work whilst their relationship was intact.
120. This is not to suggest that any understanding between spouses would be conclusive of any later dispute, since an agreement can only be conclusive when the s 90G(1) formalities are satisfied or when a s 90G(1B) declaration is made. Long experience in this jurisdiction teaches that there will be cases in which other factors will be present that would make it just and equitable to make an order inconsistent with a previous understanding, even one reached after separation. But the reasoning in Stanford makes clear that such an understanding would have to be a factor to be taken into account in deciding whether it would be just and equitable to make orders altering existing interests. This reasoning is entirely consistent with what was said by the Full Court in Woodcock v Woodcock (1997) FLC 92-739 at 83,968 to 83,969.
121. Once it is accepted that a prior agreement or representation is relevant to the justice and equity of the outcome, we consider that the period of time a party has allowed to elapse before making a claim inconsistent with that agreement or representation must also be a material factor …
So a written financial agreement, which is not binding so as to oust the Court’s jurisdiction, may still be relevant as evidence of what the parties intended and of the financial arrangements in place at the time it was made, and subsequently, but is not determinative (see also Woodcock v Woodcock (1997) FLC 92-739; DW & GT (2005) FLC 93-217; Spalla & Spalla (2023) FLC 94-145 at [31]).
In assessing the husband’s argument, one important matter is that he is bound by the determination of Rees J in Min. The wife raised this issue during the trial although she did not develop any argument about it in final submissions. As noted earlier, Min determined the husband’s application for rectification of the agreement. Rees J proceeded on the basis that he bore the onus of satisfying the Court that “it was the common intention of both of the husband and the wife that the Agreement into which they entered was to be operative both in the event of an end to their de facto relationship and also in the event that they married and the marriage ended” (at [17]). This required clear and convincing proof (Min at [15] citing Pukallus v Cameron (1982) 180 CLR 557).
Rectification requires proof of the actual common intention of each of the parties (Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 85 at [42] and [103] (“Simic”)). In Simic Keifel J (as she then was) pointed out that:
42. … This has often been referred to by intermediate appellate courts as the subjective intention of the parties. A court, in determining whether the burden of proof is discharged, may be said to view the evidence of intention objectively, in the sense that it does not merely accept what a party says was in his or her mind, but instead considers and weighs admissible evidence probative of intention …
43. It is not to be expected that parties to contractual negotiations will express themselves in terms of their intentions. It is therefore to be expected that proof to the necessary standard will usually require some manifestation of the intention of each party by their words or conduct and that the requisite common intention will be a matter of inference for the court from that evidence …
(Footnotes omitted)
In Simic, Gageler (as he then was), Nettle and Gordon JJ said:
104. The issue may be approached by asking – what was the actual or true common intention of the parties? There is no requirement for communication of that common intention by express statement, but it must at least be the parties' actual intentions, viewed objectively from their words or actions, and must be correspondingly held by each party.
(Footnotes omitted)
The husband failed to demonstrate that the parties had an actual common intention that the Agreement continued to operate once they were married to justify the equitable remedy of rectification.
In reaching this conclusion, Rees J had regard in part to the terms of the Agreement itself. Those terms provided clear indications that the parties intended their property to be kept separate before and after separation. Relevant terms which demonstrate this are:
(a)Recitals N, O and T are as follows:
N.Because of their mutual love for each other, [Mr Orton] and [Ms Min] want an Agreement to eliminate, as much as possible, any future impediment to their cohabitation and any failure which might arise from uncertainties as to their respective financial responsibilities to each other.
O [Mr Orton] and [Ms Min] intend their relationship to be permanent but nevertheless wish to define their financial rights and responsibilities during the relationship and marriage and subsequently in the event that they separate.
…
T. [Mr Orton] and [Ms Min] own separate property and want to protect both current and future separate property from any claim by the other party. [Mr Orton] and [Ms Min] want to provide that each of them shall retain full and complete control and right of their respective separate property and the appreciation in their values without interference or claim by the other party.
…
BB. Both parties want, unless otherwise stipulated in writing to retain their finances (bank accounts) separate as from the date hereof.
CC. Both parties want to protect their separate property from claims by each other if they separate.
(Exhibit 4, p.4–7)
(b)Clause 2 provides that the husband would pay the wife $50,000 if after two years the parties separated, or by clause 3, $100,000 if the separation occurred by reason of the husband “having an affair” or “posts his profile on a dating website” (Exhibit 4, p.9). Otherwise, the Agreement provides that each party would retain to the exclusion of the other their right interest and title in their separate property.
The separate property of the parties, together with agreed values at the date of the Agreement, are set out in the annexures to the Agreement and defined in Recital Z. This definition is specifically stated to include:
(i) the increasing value of all separate property whether the increase results from a combination of separate property or the personal efforts of a party or on a party’s behalf or other appreciation of the value of the separate property.
(Exhibit 4, p.7)
In Min Rees J also considered the evidence of the husband and the wife concerning their intentions:
18. I turn firstly to evidence of each of the husband and the wife as to their intentions and, relevantly, to the instructions they each gave their respective solicitors prior to entering the agreement.
19. The husband deposed that, before they started to live together, he said to the wife:
I want to protect my assets for my daughters, they are not for you if we break up or if I die, we need to do a pre-nup, called a BFA. You can get a solicitor to look at what I want. I know you want to get married, I won’t do it unless my assets are protected.
20.The wife disputes that evidence. She deposed that they had a conversation where the husband said to her:
If we are going to live together full-time you are going to need to sign an agreement.
and
won’t let you move in unless we do the agreement.
21.The wife deposed that she had a number of conversations with the husband where she said she wanted to be married and he told her that he didn’t want to marry her. She deposed that he used expressions like “Once bitten, twice shy”. That evidence is consistent with the husband’s instructions to his solicitor on 27 May 2013.
The reference to the wife disputing the husband’s evidence is a reference to paragraph 10 of the wife’s affidavit sworn on 3 March 2022, and relied upon by the wife before Rees J and tendered by the husband in the final hearing before me (Exhibit 14). In that paragraph the wife denied the conversation and specifically the words “I know you want to get married, I won’t do it unless my assets are protected” (Exhibit 14, p.24). The husband repeated this version of his statement about the purpose of the agreement in exactly the same terms in his trial affidavit filed 9 February 2024 (at paragraph 22).
A significant matter for this judgment is that in cross-examination before me, the husband’s counsel put to the wife this same version of the conversation, set out at [19] in Min and paragraph 22 of the husband’s trial affidavit, and, rather than disputing it, the wife conceded the opposite and agreed the husband had spoken those words:
[COUNSEL FOR THE HUSBAND]: Yes. And, in fact, prior to moving into [Suburb K], [Mr Orton] said this to you …:
I want to protect my assets for my daughters. They are not for you if we break up or if I die. We need to do a prenup, called a BFA. You can get a solicitor to look at what I want. I know you want to get married. I won’t do it unless my assets are protected.
[COUNSEL FOR THE HUSBAND]: [The husband] said those words to you?
[THE WIFE]: Yes, he did say the word to me, but I – I – I just say, “If you love somebody, you will just be together. Not some prenuptial agreement”, and I was naive and I think, “[The husband] will love me forever”. So, “Okay. Whatever. I just sign it. Whatever”.
(Transcript 18 March 2024, p.47 line 32 to p.48 line 4)
Since Rees J found in Min there was insufficient proof of a common intention to rectify the Agreement in accordance with ordinary equitable principles, for present purposes the question is whether, nonetheless, evidence of the parties’ subjective understanding at the time it was executed is relevant to the determination of the s 79(2) requirement. In my view, those subjective intentions can properly be taken into account for this purpose in ways which are not inconsistent with the findings and decision in Min. This is particularly so because the High Court has made clear the criteria to decide what is just and equitable in a given case are broad and indeterminate and the expression connotes “a conclusion reached after examination of a range of potentially competing considerations” (Stanford at [36]).
What is of importance here is the extent to which the assumptions and expectations of each party were known to the other, even if they were not mutual and subjectively shared. As part of his argument that no adjustment should be made, and referring to the principles set forth in Stanford, the husband claimed that although the Agreement ceased to be binding under the Act upon the parties’ marriage, he at all times until the decision in Min believed that it was binding and recorded the parties’ mutual assumptions and expectations about property interest during the marriage and after separation. I note here that he has in fact commenced proceedings in the Supreme Court of NSW seeking damages for breach of duty by a solicitor who wrongly advised him that the Agreement would continue to be binding after the parties married.
The wife’s view seemed to be that once the Court found it was not binding under the Act, the Agreement became irrelevant. But she also made the somewhat incongruous submission that the Agreement’s irrelevance was shown by it being only directed to how the parties’ property should be arranged upon separation, thereby demonstrating some relevance to the post separation position.
She further submitted that whatever the intentions the parties at the time the Agreement was signed in August 2013, it provides no basis for concluding that their intentions were the same at the date of marriage in 2014. Her evidence was to the effect that she was indifferent to the terms of the Agreement. She claimed in evidence “I just sign it. I just so naive. I don’t know what’s it all about or I get 50,000, but I didn’t think of that. I just – when you marry somebody, you will be then (sic) together forever” (Transcript 18 March 2024, p.48 lines 24–26). By this I understood her to mean that she held assumptions or expectations about marriage which were vague but to which the Agreement did not speak.
She also claimed that she was pressured into signing the Agreement. She asserted her solicitor at the time just told her “sign here”, despite her claim that she did not understand the Agreement (Transcript 18 March 2024, p.49 line 45 to p.50 line 17). This evidence was unconvincing. It was undisputed the wife had legal advice which included multiple conferences, bargained for a higher entitlement under the Agreement if the husband had an affair, and plainly had her own property to fall back on. Despite her protestations that she believed marriage was “forever”, the terms of agreement clearly contemplated the possibility of adultery and separation. She quite clearly had a choice whether to sign the Agreement, with her own property to fall back on. I am satisfied she knew what its terms provided and was not indifferent to them.
Although Rees J found there was no mutual intention sufficient to justify rectification, this does not preclude a different finding, namely, that I do not accept the wife’s evidence that upon marriage her expectations and assumptions altered so that she believed the parties would no longer keep their “affairs separate” or would merge their property interests to any material extent, whatever the terms of the Agreement specified.
The husband argued that the parties had “scrupulously” adhered to the terms of the Agreement during the marriage. I do not accept this argument. For example, there was no dispute the husband had an affair, but paid the wife $75,000, not $100,000, as required by clause 3 of the Agreement. But I do not think that is determinative. Indeed, as explained later, it was clear that during the entire relationship, the parties had no joint accounts, the wife kept Suburb H and its income, while the husband held Suburb K and Suburb M, as well as his interest in and income from N Business. The parties did not intermingle their finances. Prior to its purchase, both parties claim they raised with the other the possibility that Suburb M would be jointly owned, but the other party declined. The wife pointed to this evidence as indicating that the parties flirted with the idea of jointly holding property or some merger of property interests. But in any event Suburb M was not bought jointly, it was purchased by the husband alone. This simply demonstrates how the parties ultimately in their conduct adhered to the basic position that property would be kept separate, as the Agreement also provided. This is consistent with a conclusion that the parties’ held mutual assumptions and expectations that their property would be kept separate during the marriage. The evidence about the reversal of her position referred to at [91]–[94] above, raises the possibility the wife held the same assumptions as the husband, despite her denials. However, it is unnecessary to express a concluded view about the mutuality of those assumptions.
More importantly, I infer the wife knew the Agreement set out what the husband believed were mutual assumptions and expectations about the arrangement of their property interests, before, during and after the marriage which he had held consistently prior to marriage, despite the brief and unconsummated flirtation with joint ownership of Suburb M. Even if the wife actually assumed and formed the expectation after marriage that the parties’ financial affairs were somehow merged, I am satisfied the wife knew the husband had a sharply different view and wanted to keep separate his assets and protect them, in particular, for his daughters. This conclusion is open on the basis of the probabilities of the evidence as a whole and in particular by reason of the wife’s concession in cross-examination (above at [93]). I do not accept the wife’s trial affidavit evidence that the husband merely said, “You cannot live with me unless you sign the agreement” (filed 11 July 2023, paragraph 10(e)). For the husband, asset protection was an express purpose of the Agreement, and a condition of getting married. According to her own evidence, at no time, either when the agreement was signed or during the marriage, did the wife make clear to him that she did not join in that express purpose or join in his stated intention to keep separate and protect his assets, for himself and his daughters. Indeed, she did not do this despite it becoming clear from her answers in cross-examination that she believed she should have been preferred over the husband’s daughter who received $1,200,000:
Treat me like this and then you bought a property for your daughter, 1.2, you know, and you’re not supposed to do that. You could have give it to me ...
(Transcript 18 March 2024, p.46 lines 17–19)
I conclude that the wife, by remaining silent, permitted the husband to believe that she accepted he wanted to protect his assets and provide for his daughters and keep them separate, using the Agreement. I find that the wife during the marriage knew the husband believed that the Agreement set out the assumptions, expectations and mutual understanding of the parties concerning the arrangement of their property interests and how they would be dealt with at separation. But if as she said, she did not care what the Agreement stipulated, she failed to make clear to the husband that she did not hold the same assumptions, expectations and mutual understanding. It is against that background that the husband made almost the entire financial contributions during the marriage, as discussed later in these reasons. In other words, the wife allowed the husband to provide an affluent lifestyle and financial largesse on the basis of what was, according to her, a mistaken belief on the part of the husband that the parties had a mutual understanding about keeping their property interests separate. This conclusion is one factor which informs an assessment of the justice and equity of any proposed adjustment to those interests.
Contributions
One important issue in determining the husband’s claim to no adjustment is the relationship between s 79(2) and s 79(4) of the Act. Stanford makes clear that the just and equitable requirement should not be conflated with the requirements of s 79(4). The submissions of the husband acknowledged an unresolved tension between the decisions of the Full Court in Bevan at [84]–[85] and Chapman & Chapman (2014) FLC 93–592 at [25]–[27] on the question of whether it is mandatory to consider the s 79(4) matters in reaching a separate conclusion about the s 79(2) requirement. I am satisfied that the more recent weight of authority counsels that the separate consideration for the purposes of s 79(2) can, among other things, take account of the matters requiring consideration in s 79(4), even if such consideration is not mandatory (Cosola & Moretto (2023) FLC 94-143 at [41]–[43]; Stella & Stella [2023] FedCFamC1F 1092). Accordingly, I consider it appropriate to discuss contributions and the matters referred to in s 79(4)(e) as part of determining separately whether the s 79(2) requirement is satisfied.
The husband clearly brought the great bulk of the assets to the relationship at cohabitation. The schedule to the Agreement is clear evidence of what the parties owned just prior to marriage. The husband brought all assets to the relationship, apart from Suburb H and the wife’s superannuation.
Where the marriage is relatively short, where there are no children and even where the parties’ contributions to their assets and to the welfare of the family from the commencement of the relationship to the time of the hearing are equal, a disparity between initial contributions can take on a critical importance (Anson & Meek (2017) FLC 93-816 at [181] (“Anson”); Grunseth & Wighton (2022) FLC 94-099 at [73]). The nature of a particular interest or interests in property and when and how it was acquired, utilised, improved or preserved may be very relevant (Anson at [31]). It is also true that in considering the weight to be attached to initial contributions, regard must be had to the use made by the parties of that contribution (Pierce v Pierce (1999) FLC 92-844 at [28]) and the impact of the husband’s initial contributions could only properly occur after assessing the totality of the parties’ contribution-based entitlement (Gadhavi & Gadhavi [2023] FedCFamC1A 117 at [30]).
As the husband submits, he overwhelmingly provided the financial support during the relationship. He paid daily expenses, leisure holiday and extravagances. The parties also lived together in Suburb K in accommodation provided by the husband. This was conceded by the wife.
The wife argued that therefore she was “in all practical ways completely financially dependent upon the husband during the relationship” and this was inconsistent with “the parties separately managing their own financial affairs” (Wife’s written submissions dated 21 March 2024, paragraph 11). While the husband’s largesse shows a degree of dependence by the wife, it was largesse which the husband chose to bestow and she chose to enjoy, while keeping the income from renting out Suburb H. I do not accept she was obliged to stop working, despite some suggestion the husband pressured her to do so, and according to her own evidence she was able to save the rental income from Suburb H.
It was the tenor of the wife’s argument in this regard that since she enjoyed the husband’s largesse because the parties were married, he should now be compelled to give her a substantial proportion of his assets, because they are separated and divorced. In other words, her financial dependence should be treated as one basis for the wife to receive a substantial proportion of the assets, as opposed to demonstrating the extent of the husband’s financial contributions. This is not a persuasive argument. Some integration of lives and financial arrangements is inevitable in a de facto relationship followed by a marriage. But this does not necessarily mean, and did not mean here, an attitude was manifested that the marriage constituted a practical union of both lives and property (Mallet v Mallet (1984) 156 CLR 605 at 640–641 (“Mallet”)). The contrary is clear on the evidence.
Together with the assets he brought to the relationship, N Business was the primary source of income which the husband provided for the parties during the marriage. This speaks against a conclusion in favour of equality of contributions, as Mason J in Mallet at 625:
No doubt a conclusion in favour of equality of contribution will be more readily reached where the property in issue is the matrimonial home or superannuation benefits or pension entitlements and the marriage is of long standing. It will be otherwise when the property in issue consists of assets acquired by one party whose ability and energy has enabled the establishment or conduct of an extensive business enterprise to which the other party has made no financial contribution and where that other party's role does not extend beyond that of homemaker and parent.
It is clear the wife made no financial contribution to N Business. On the contrary, as pointed out already, the business contributed the financial means for the husband and wife to enjoy an affluent lifestyle. Nonetheless, the wife claimed to have made contributions to the business, and which should be treated as significant, by:
(a)Cleaning vacated premises of the business;
(b)Assisting with presentation of the business premises;
(c)Assisting with staff placements;
(d)Decorating the business premises; and
(e)Inspecting possible premises to expand the husband’s business.
I accept that that the wife undertook some work of this nature. The husband denied the extent of the claimed contributions to the business. But the evidence showed the husband publicly praising the wife on one occasion for her work and support at an office function at N Business premises (Exhibit 3). Although the wife claimed the husband mentioned the possibility at one point, the wife was never added to the payroll. However, in the overall context of the N Business activities, the relative importance of such contributions is difficult to assess. I give them some weight.
Kennon v Kennon
I also consider here the argument of the wife that her contributions were made significantly more arduous because of abusive behaviour of the husband (Kennon v Kennon (1997) FLC 92-757). The focus is “not on the conduct per se, but on its effects on contributions” (Martell v Martell (2023) 66 Fam LR 650 at [24]). The relevant adverse effect can be inferred from the lay evidence of the parties without the need to call evidence to “quantify” it (Maine v Maine (2016) 56 Fam LR 500 at [47]–[52] (“Maine”); Britt & Britt (2017) FLC 93-764 at [74]–[75]; Keating & Keating (2019) FLC 93-894 at [27]–[43], [52]–[67]; Benson & Drury (2020) FLC 93-998 at [47]–[50]).
The conduct in question here is said to be domestic violence constituted by repeated derogatory taunts. The wife gave considerable detail. The husband in cross-examination conceded some taunts of this nature. The relationship was clearly fractious at times. The wife gave evidence that the husband’s taunts made her unhappy, made her life more difficult and made it more difficult to continue looking after the husband. She claimed that at times she felt trapped and hopeless. I found the wife’s evidence in this regard unconvincing. In her oral evidence I formed the impression her claims were overstated. I infer that the conduct of the husband made the contributions of the wife more difficult on occasion to some degree. But I am unable to find the conduct made her contributions significantly more difficult so as to justify any adjustment in her favour or otherwise support a conclusion that adjusting the parties’ existing property interests would be just and equitable.
Increases in Value
The wife argued that the increases in value of the parties’ real property and N Business should be treated as contributions by both parties. In Jabour & Jabour (2019) FLC 93-898 the Full Court said:
84. Finally, in relation to a sudden increase in the value of an asset unrelated to the efforts of the parties, such as a rezoning by the council or a lottery win, the authorities point to that increase being a contribution by both parties (or neither – it matters not which it is) (Zappacosta at 75,421; Wells at 76,529–76,530; Zyk at 82,515–82,516; and Hurst at [26]).
The increase in value of N Business cannot, on the evidence, be understood as “unrelated” to the efforts of the husband. As already explained, it was established and built by his efforts, even taking accounts of contributions of the wife, such as they were, referred to above at [110]–[111].
For the purposes of forming a view as to whether it is just and equitable to make any property adjustment order, I consider it appropriate otherwise to treat the increases in value of real property as contributions by neither party.
Disclosure
The wife made extensive submissions about deficiencies in the husband’s disclosure, accusing him of telling “half the story too late” (Wife’s written submissions dated 24 March 2024, paragraph 35).
It has been long recognised that the duty of disclosure enforces a high normative standard, fundamental to the integrity of this Court’s processes in financial cases under Pt VIII of the Act (Briese and Briese (1986) FLC 91-713; Black and Kellner (1992) FLC 92-287; Wei v Xia (No 5) (2023) 67 Fam LR 421 at [168] (“Wei”) (appeal dismissed: Wei & Xia [2024] FedCFamC1A 65)). The duty “is not some hollow guideline to which perfunctory lip service can be paid” (Nagel v Clay (2020) 60 Fam LR 550 at [76]). The duty continues until the proceedings are finalised and it is owed to opposing parties and the Court (Waterman & Waterman [2017] FLC 93-762 at [32]). On the other hand it is confined by relevance and practical considerations affecting the ability to disclose (Wei at [171]–[173]).
In Wei at [159]–[161] I pointed out that the evidentiary principle applied by courts and derived from Blatch v Archer (1774) 1 Cowp 63 (“Blatch v Archer”) has importance for the drawing of adverse inferences, and permits the Court to take into account the failure of a party to give or to call evidence in evaluating the evidence which is before the Court. It permits an assessment of the weight of evidence, unfavourable to the party against whom the principle is applied.
Non-disclosure warrants the Court being not unduly cautious about making findings in favour of the innocent party (Weir and Weir (1993) FLC 92-338; Harris & Dewell (2018) FLC 93-839 at [120]). In Wei I gave a summary, to which I adhere, of the possible consequences of failure in disclosure as follows, pointing out the correspondence with the principle in Blatch v Archer:
174. A failure to disclose in financial proceedings in this Court may lead to unfavourable inferences against the defaulting party very similar to the adverse inferences which may be drawn in accordance with the Blatch v Archer principle discussed above, in the sense of having the effect of discounting the evidence of the non-disclosing party. They are separate bases which can lead to the same or similar result.
175. The line of authority concerning non-disclosure in financial proceedings under Pt VIII of the Act has also tended to concentrate upon the consequences of non-disclosure for ascertaining the property of the parties to the marriage. In other words, it is a specific type of inferential reasoning which comes into play for the purposes of identifying property of parties to a marriage, and then in justifying a robust approach to making just and equitable orders dividing that property. If there is persuasive evidence supporting a reasonably plausible conclusion of the existence of other undisclosed assets, it may be open to the Court to make a finding that such assets exist, or take account of the likely existence of other assets under s 79(4)(e) of the Act (s 75(2)(o) of the Act; HDM & MM [2006] FamCA 47 at [27]; Gould & Gould (2007) FLC 93-333 at [27]). Thus, the Court may be persuaded that it would be appropriate to make an order beyond the ascertained property; provided that any order made on this basis can be seen to achieve substantial justice relative to the subject non-disclosure (Hicks & Trustee of the Bankrupt Estate of Hicks (2021) FLC 94-006 at [87]), or all known assets should be awarded to the innocent party, on the basis that the party who refuses to disclose the assets is in fact hiding them (Chang v Su (2002) FLC 93-117 at [60]). But also the authorities show any inference that a defaulting party is hiding property must be founded upon established facts. Concluding that other assets exist is, like any other fact, a finding, or requires findings, of fact about which the Court must feel “an actual persuasion”.
In her submissions, the wife gave as one example a failure to explain the husband’s tax affairs and the increase in his tax liability. I have already discussed this above (see [68]–[76]). She also criticised his evidence about a loan to Y Pty Ltd. The husband did not remember clearly the circumstances but gave plausible evidence that it was for a business with a similar name to N Business which had some association with N Business, despite being owned by other individuals. The husband claimed those individuals were colleagues, which I accept. The wife further argued the husband was evasive about the $132,980 paid to Ms T, but, as discussed above, this was undisputed. The wife then argued that the husband gave no explanation of mortgage increases or redraws, discussed above at [64]. As pointed out there, it was clear by the end of the trial that those borrowings were injected into N Business.
The submissions of the wife about non-disclosure are overstated. By the time of trial, the wife had ample disclosed material to cross-examine the husband and extract concessions about where funds or property were applied after separation, and in relation to all the matters referred to in the previous paragraph. Meaningful inadequacy in disclosure is not clearly established merely because there appear to be gaps or incompleteness in the material disclosed (Wei at [356]). The question is ultimately one of demonstrating injustice to a vulnerable party in need of the protection of the duty to disclose (Stopford Malloy & Malloy [2021] FedCFamC1F 123 at [22]–[24]).
Ultimately, the wife made no submission that any specific adverse inference should be drawn against the husband about his evidence on a particular issue. Although the wife made submissions seeking to impugn the husband’s credit, she did not argue that the Court should discount particular evidence of the husband on a specific issue, or make a particular factual finding in her favour. Nor did she argue that the Court should find the husband had undisclosed property supporting an order beyond the ascertained property, or, for example, that all known assets should be awarded to her, to achieve substantial justice relative to the non-disclosure. Rather she made the rather vague and ill-defined submission that “the court ought not be ‘unduly cautious’ in making a property settlement adjustment in favour of the wife” (Wife’s written submissions dated 21 March 2024, paragraph 41). That submission does not obviously accord with authority and it is hard to know what it means. I am not satisfied that any deficiencies in disclosure warrant any particular finding adverse to the husband relative to the alleged non-disclosure.
Section 79(4)(e)
Since it is appropriate to have regard to the s 79(4) consideration in determining whether any order adjusting property interests is just and equitable, it follows, by reason of s 79(4)(e) that regard can be had to the s 75(2) factors.
The wife argued that there will remain a significant disparity in assets and financial resources between the parties. This will be correct if no adjustment is made. The husband will have N Business together with its income and his properties. The wife will have Suburb H and its income if she continues to live in Country D, although I note she professed an intention in cross-examination to return to live in Australia. She also, as mentioned earlier, retains an interest of indeterminate value in S Property Timeshare which she uses to provide accommodation for her family.
The wife has not worked for about 10 years. She submitted her skills are minimal. I do not entirely accept this submission. It is hard to reconcile with the evidence before Justice Rees in Min [2021] (at [18]) that the wife “has experience and qualification as a technician and speaks five languages, including English. She also has qualifications and experience in education […]”. The wife deposed that she had attempted to upskill and completed a course in 2021, however claimed that she was unable to secure employment in that field. The wife nevertheless accepted that she would be able to undertake unskilled employment.
She has some medical problems which may affect her capacity to work, but I am not satisfied she entirely lacks earning capacity.
A disparity in the parties’ income and earning capacity does not itself justify altering property interests where the marriage short, there are no children and the wife’s contributions are modest (GBT v BJT [2005] FamCA 683 at [64]; Marsh & Marsh (2014) FLC 93-576 at [169]).
I note here the husband’s claim, mentioned earlier, against his former solicitor concerning the deficiencies in the drafting of the Agreement. This is a claim in negligence, which if successful would result in damages. I am not in a position to express any sensible view about the likely outcome of those proceedings except to observe the measure of any damage would be substantially co-extensive with an outcome in the proceedings in this Court which diverged from the outcome if the Agreement had remained binding so as to oust the Court’s jurisdiction. Since I have concluded that no principled basis has been shown to disturb the parties’ existing property interests I do not consider the husband’s chose in action against his former solicitor to be of significance.
Conclusion
The relationship was relatively short. There was no child of the relationship. The husband brought all the material assets to the relationship, other than Suburb H. The parties kept their assets separate throughout the relationship. There was no practical union of lives and property. It was undisputed that the husband made almost the entire financial contributions during the relationship. The wife was enabled, not forced, to give up employment and lived a lifestyle provided by the husband before and during the marriage. She was able to save the income from Suburb H. He provided a lifestyle from which the wife benefitted, and which she embraced knowing he believed that the parties mutually understood their assets would be kept separate and that his assets were protected during the marriage by the Agreement and he wanted to protect them for his daughters. The wife never made clear to the husband that she did not hold the same assumptions or expectations. The wife made homemaker contributions and gave some assistance to the husband in N Business, but this was modest in my view. She made no financial contribution to the business. The husband has paid to the wife $75,000 since separation.
If no adjustment is made the wife will retain 14 per cent of the available assets. Taking account of all the matters discussed above, I consider leaving the current property interests of the parties undisturbed is just and equitable, while any adjustment in the wife’s favour above 14 per cent would not be so. The s 79(2) requirement is not satisfied. The wife’s application for property adjustment should be dismissed.
ALTERNATIVE APPROACH
Even if it be assumed in the wife’s favour that the just and equitable requirement is satisfied, an assessment of the matters in s 79(4)(a)–(e) leads to no different conclusion.
In light of the discussion above at [103]–[129], the wife’s claim to a contribution assessment of 30 per cent cannot be justified. If necessary, I would assess her contributions at 12 per cent, with an adjustment of two per cent for s 79(4)(e) factors. As pointed out the wife already holds 14 per cent of the available assets.
Accordingly, on this alternative basis, there is no occasion to adjust the property interests of the parties.
COSTS
Each party sought costs against the other. The wife has been substantially unsuccessful, but I will express no concluded view about costs at this point. I will make orders for any application for costs to be made within 28 days, In the absence of which there will be no order as to costs.
CONCLUSION
For all the foregoing reasons I am satisfied the orders set out at the commencement of these reasons should be made.
I certify that the preceding one hundred and thirty-six (136) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 6 June 2024
SCHEDULE 1 – MATERIAL TENDERED
Exhibit Label
Document
Tendered by
2
Financial Statements filed by the wife on 13 April 2022 and 8 March 2021
Husband
3
Video of the husband thanking the wife at an office opening
Wife
4
Husband’s tender bundle
Husband
5
Husband’s tax returns 2021-2022
Wife
A
Documents tendered during voir dire - pages 235, 334, 445, 533, 625 and 930 from Appendix 2 of Mr R’s expert report.
Husband
B
Documents tendered during voir dire - letters to Mr R dated 5 October 2022 and letter from Andrew Firth dated 14 October 2022
Husband
6
Pages 235, 334, 445, 533, 625 and 930 from Appendix 2 of Mr R’s expert report.
Husband
7
Bundle of leases
Husband
8
Letter to Mr R dated 5 October 2022 and Response from Mr R dated 28 October 2022
Husband
9
Wife’s abridged tender bundle
Wife
10
Costs notices of the parties
Wife
11
Documents produced in response to call relating to wife’s employment applications
Husband
12
Joint balance sheet
Joint
13
ANZ business advantage bank statements for N Business and V Trust
Husband
14
Affidavits of the wife dated 5 March 2021, 3 June 2021 and 3 March 2022
Husband
0
22
1