Notaros and Houlis

[2014] FamCA 1254

FAMILY COURT OF AUSTRALIA

NOTAROS & HOULIS [2014] FamCA 1254

FAMILY LAW – PROPERTY – Settlement in relation to marriage – Where the husband and wife were married for six years and have one child – Where the husband’s brother and his wife loaned him money – Where pursuant to the Limitation Act 1969 (NSW) any action to enforce the loan is out of time – Where as a result of the unenforceable loan, the initial contributions by the husband were significantly greater than those by the wife – Where the major part of financial contributions over the relevant years were made by the husband – Where the wife made the overwhelming contribution to the welfare of the family – Where overall contributions are found to be 64 per cent by the husband and 36 per cent by the wife – Where the husband is older than the wife and faces health issues – Where the wife has not worked in paid employment for 11 years – Where the wife is the primary parent of the parties’ child – Where a 10 per cent s 75(2) adjustment is appropriate in favour of the wife – Where an order is made for the husband to receive 54 per cent and the wife to receive 46 per cent of the available property and superannuation.

Family Law Act 1975 (Cth) ss 75(2), 79(1),(2),(4)

Limitation Act 1969 (NSW) s 42

Bevan & Bevan (2013) FLC 93-545
Clauson and Clauson (1995) FLC 92-595; 18 Fam LR 693
Gosper and Gosper (1987) FLC 91-818
Kessey and Kessey (1994) FLC 92-495
Stanford v Stanford (2012) FLC 93-518

APPLICANT: Mr Notaros

RESPONDENT: Ms Houlis

FILE NUMBER: SYC 4867 of 2008

DATE DELIVERED: 11 December 2014

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Johnston J

HEARING DATE: 30 April, 1 May, 25 & 27 November 2014

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Gardiner

SOLICITOR FOR THE APPLICANT: Ross A Clarke & Associates

COUNSEL FOR THE RESPONDENT: Ms Lowson

SOLICITOR FOR THE RESPONDENT: Konstan Lawyers

Orders

1. That:

   (a)The husband shall forthwith do all things and sign all documents necessary to cause the sale of:

   (i)the property at I Street, Suburb F and the business conducted thereon called “X” as a going concern or if unable to be sold as a going concern within 3 months, individually ;

   (ii)the properties at 1 and 3 E Street, Suburb F;

   (b)The husband and the wife jointly manage the said sales;

   (c)The husband do all things and sign all documents necessary to remove the caveat on the Certificate of Title for the properties at 1 and 3 E Street, Suburb F;

   (d)Mr Y of R Real Estate be appointed by the husband and the wife to conduct the said sales;

   (e)In the first instance arrangements be made for the sales to be by way of private treaty at the earliest date at a price to be agreed between the parties and failing agreement at a price determined by the President of the New South Wales Division of the Australian Property Institute or his/her nominee;

   (f)In the event that the said properties are not sold by private treaty within a period of 4 months of the date of these orders, then the parties forthwith do all things necessary and sign all documents necessary to cause the properties to be sold by public auction at the earliest possible date at a reserve price to be agreed upon between the parties and failing such agreement at a reserve price to be determined by the President of the New South Wales Division of the Australian Property Institute or his/her nominee;

   (g)In the event the listing of the properties for sale by auction does not obtain any offers above the reserve price, Mr Y have liberty to negotiate with the highest tendered bidder for a sale within 5 percent of the reserve price;

   (h)In relation to the sale of the “X” business, the President of the New South Wales Division of the Australian Institute of Business Brokers or his/her nominee will be at liberty to nominate the price of the “X” business if the parties are unable to agree on a price;

   (i)The proceeds of sale of the properties and the business shall be paid as follows:

   (i)payment of agent’s commission, advertising expenses and legal expenses of the sale;

   (ii)payment of costs incurred, if any, in relation to the determination of the value or the selling price by the President of the New South Wales Division of the Australian Institute of Business Brokers (or any successor of it) or his/her nominee;

   (iii)payment of the BankWest mortgage;

   (iv)payment of $40 000 to the wife’s parents Mr and Ms HH; and

   (v)the balance then remaining to be paid as follows:

   -40.365 percent of the balance to the wife and 59.635 percent thereof to the husband.

2. That the husband and the wife are declared pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) to be the sole owners respectively of all other property and superannuation in their possession and/or control.

3. That the husband and the wife hereby release the other from all actions, proceedings, claims, demands, costs and expenses whatsoever and howsoever arising which either of them had or may have against the other for or by reason of or in respect of any act, cause, matter or thing.

4. That in the event that either party refuses or neglects to sign any document necessary to give effect to these orders, the Registrar be appointed pursuant to s 106A of the Act to execute such document in the name of the said party and to do all things necessary to give validity and operation to the document upon the Registrar being provided with verification of such refusal or failure by way of affidavit.

5. That all exhibits be released.

6. That the husband and the wife have leave to relist these proceedings by arrangement with the Associate to Johnston J in relation to the implementation of these orders.

7. That the above orders not commence operation until 19 December 2014.

8. That the husband and the wife have leave to relist these proceedings for the purpose only of submissions in relation to the form of the orders at any time until 18 December 2014.

IT IS NOTED that publication of this judgment by this Court under the pseudonym NOTAROS & HOULIS has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 4867 of 2008

Mr Notaros

Applicant

And

Ms Houlis

Respondent

REASONS FOR JUDGMENT

Introduction

1. Mr Notaros and Ms Houlis married in 2002 and separated in February 2008.  For convenience I shall refer to them as “the husband” and “the wife”.

2. They have been unable to resolve their dispute about their property and have asked this Court to determine a property settlement for them.

Applications

1. The husband seeks orders to the following effect:

   ·That he pay to the wife the sum of $192 342; and

   ·That otherwise the parties each retain their property and superannuation.

2. On the other hand the wife seeks orders to the following effect:

   ·That the husband pay to her the sum of $590 000;

   ·That the husband be solely responsible for payment of the liability of $134 930 to the wife’s parents;

   ·That to enable such sums to be paid the properties at E Street, Suburb F and I Street, Suburb F including the X business be sold and that payment of the above amounts be made from the net proceeds of sale; and

   ·That otherwise the parties retain their property and superannuation.

Background

1. The husband was born in 1950 and is 64 years of age.

2. The wife was born in 1966 and is 47 years of age.

3. They met in July 1999 and married in 2002.  After their marriage and until separation, the parties lived at the home of the husband’s mother at Suburb G.

4. At the time of marriage the wife owned a property at Suburb A which she had purchased for $100 000 in 1990 subject to a mortgage.  She was working at a retail store earning approximately $550 per week.  The wife also had a modest superannuation benefit.

5. At this time the husband was operating S Business which he owned. He also owned properties at 1 and 3 E Street, Suburb F subject to a mortgage of approximately $260 000 as well as an unregistered mortgage in favour of his brother B Notaros and his wife, I Street, Suburb F and a one third share of K Street, Suburb G. 

6. In approximately September 2003 the husband lodged a development application with G Council to renovate the I Street, Suburb F property for use as a hospitality business.  The previous year the husband had taken out a loan for $240 000 from M Investments Limited to assist in funding the development costs.  This loan was secured over the I Street property.

7. In September 2003 the wife sold her Suburb A property for $300 000. After discharging the mortgage over the property and paying costs the net proceeds of sale were $230 728. I accept that the wife had been reluctant to sell this property.

8. The wife had become pregnant and in September 2003 she left her employment with Store L.

9. In February 2004 the husband sold S Business for approximately $350 000 the net proceeds of sale being approximately $300 000.  From this time until October 2005 when the new X Business opened at Suburb F the husband was unemployed, as was the wife.

10. On 16 February 2004, the wife gave the husband a cheque for $220 000 which represented the major part of the net proceeds of sale of her Suburb A home unit.  This money was applied to the costs of developing the Suburb F business.

11. In 2004 the parties’ son O was born.

12. In July 2004 the wife received $11 700 long service leave/holiday pay from Store L.

13. On 31 June 2005 the wife’s parents advanced the parties $200 000 to fund further work on the business development project based on the agreement that it would be paid back within twelve months and at an interest rate of 8 percent per annum.  I shall refer to this again below.

14. In March 2005, the husband arranged for his mother, Mrs N to borrow $350 000 from M Investments Limited and Permanent Trustee Australia Limited on behalf of W Mortgage Trust, secured by mortgage against her home which she immediately made available to the husband to pay towards the costs of development of the business.  There is an issue about this and I shall refer to it again below.

15. In October 2005 the husband entered into a supplementary deed of loan with M Investments Limited.  The effect of the deed was to increase his level of indebtedness from $240 000 to $420 000.  The money was used towards funding the costs of the business development.

16. In October 2005 X Business opened at I Street, Suburb F.

17. In 2006 the loans, apart from that of the husband’s mother, were refinanced as an interest only loan through BankWest with a limit of $750 000. This refinancing was to reduce the interest payable thereon.  The security for the refinanced loan was I Street, Suburb F.  The wife asserted that she signed the loan documentation without being aware of its contents.

18. On 2 February 2008 the parties separated.  The wife moved out of the husband’s mother’s home with the parties’ son O and into her parents’ home at Suburb V.  The wife and the child have lived with the wife’s parents since separation.

19. The parties were divorced in 2009.

20. It is common ground that after separation the husband paid various sums of money to the wife’s parents to reduce his indebtedness to them.  I shall refer to this matter again below.

21. In August 2013, the husband entered into a loan agreement with his brothers Mr B Notaros and Mr J Notaros the effect of which was to acknowledge that the husband was responsible for their mother’s debt to W Mortgages in the amount of $353 091.88 and that the husband’s entitlement to a third of the net proceeds of sale of the property at K Street, Suburb G would be paid to discharge the mortgage over their mother’s home in favour of W Mortgages.  The K Street property was sold in mid-2014 to a company which had held an option to purchase it, namely Q Pty Limited.  The net proceeds of sale of K Street were paid equally to the husband’s two brothers and the mortgage over the husband’s mother’s home has been discharged.  There is an issue about this matter and I shall refer to it again below.

22. The husband has some health problems. I shall refer to these matters during my consideration of relevant s 75(2) matters below.

23. The wife is endeavouring to become pregnant.  She has a relationship with a Mr P who is supporting the wife in the in vitro fertilisation program.  The wife continues to reside with her parents and Mr P continues to reside with his mother.  The wife said that Mr P would assist her in supporting their child but he proposes to continue living with his mother.

Credit

The husband

1. The husband was responsive to most questions during cross-examination.  On occasions he did not present a detailed recollection of matters, particularly in relation to financial matters.  

2. I accept that in relation to some areas of financial management, particularly in relation to the business, the husband relies on his accountant and does not fully understand some of the finer details which he leaves to his accountant. I do have the view, however that the husband understated the amount of cash received in the hospitality business. I shall refer to this matter again below.

3. The husband failed to disclose that the company Q Pty Limited had an option to purchase the property at K Street, Suburb F.  Of even more concern, the husband failed to disclose the existence of a bank account in the name of his mother which he used for business purposes. I shall refer to this matter again below.  This affects the confidence the Court would otherwise have concerning his evidence.

4. My view about the husband’s evidence overall is that in some areas it cannot be relied on.

The husband’s brother, Mr B Notaros

1. Mr B Notaros gave his evidence in a forthright and responsive manner.  He had a good recollection for details.  I do not hesitate to accept his evidence as truthful.

The wife

1. The wife was reasonably responsive in her answers to questions.  But she appeared to me to be somewhat begrudging in conceding matters which she perceived might assist the husband’s case even if those matters were accurate.

2. I had the impression of a witness who appeared to be more interested in promoting her own case rather than assisting the Court to arrive at the truth readily.  Having said this, however, I would not regard her evidence as being untruthful.

Loans from the Husband’s Brother and his Wife

1. The husband’s brother Mr B Notaros and his wife loaned the husband approximately $365 000 over a number of years which the husband used for the purpose of establishing and operating his first X business at Suburb G.  Mr B Notaros had an unregistered mortgage prepared in February 1993 between him and his wife Ms C Notaros on the one hand and the husband on the other.  This acknowledged that $335 000 was owed by the husband to his brother and sister-in-law (by that time the husband had repaid $30 000).  In March 1993 the husband’s brother and sister in law lodged a caveat against the titles to the husband’s properties at 1 and 3 E Street, Suburb F to secure this debt.

2. There have been some repayments made by the husband and the current amount outstanding is said to be approximately $300 000.

3. It was submitted on behalf of the wife that s 42 of the Limitation Act 1969 (NSW) (“Limitation Act”) renders this debt unenforceable. This section provides as follows:

   42      An action on a cause of action:

   (a)      to recover principal money secured by mortgage,

   (b)      …

   (c)      …

   is not maintainable by a mortgagee under the mortgage if brought after the expiration of a limitation period of twelve years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims.

4. The covenants in the mortgage include the following:

   The mortgagor will pay to the mortgagee the principal sum, or so much thereof as shall remain unpaid, on the 31st day of December 1995.

5. So the question to be determined, in my view, is whether the cause of action first accrued to the husband’s brother and sister in law immediately after 31 December 1995.

6. It was conceded on behalf of the husband that the money loaned by Mr B Notaros and Ms C Notaros to the husband is “principal money secured by mortgage” within the meaning of s 42 of the Limitation Act. 

7. It was also conceded that the cause of action did not arise upon demand because there was no reference to a demand in the mortgage.  The crux of the submission on behalf of the husband was that because the mortgage did not include a schedule of payments or a demand clause and because the loan was secured over the E Street properties the limitation period would commence when the E Street properties were sold.  It was submitted that because the E Street properties have not been sold the cause of action has not even commenced, let alone expired.

8. I must say I do not accept this submission.  It ignores the fact that the mortgage included the provision that the principal was to be paid on 31 December 1995. The submission is inconsistent with the clear words of this provision.  In my view, it is not supported by the evidence.

9. In my view, the submissions by learned counsel for the wife about this matter are correct.  As Ms Lowson submitted, the unregistered mortgage contained a provision that the husband would pay the principal sum to the husband’s brother and sister in law on 31 December 1995.  And as was further submitted, from this time the husband’s brother and sister in law had a cause of action against the husband for repayment of the principal sum. 

10. Accordingly, in my view, the cause of action arose from the end of 31 December 1995 and any action to enforce the loan would now be well out of time.  The consequence is that the loan by the husband’s brother and sister in law to the husband is unenforceable. 

11. The effect of this in these proceedings, in my view, is that the husband has brought into the marriage two properties which, rather than being encumbered by the debt, are not so encumbered.  The consequence of this will be reflected in the husband having made greater contributions by reason of him having greater equity in those properties than had the debt been enforceable.

The loan from the wife’s parents

1. As indicated above, in June 2005 the wife’s parents loaned the husband $200 000 at 8 per cent interest per annum to assist funding the business development. 

2. The husband said that he has repaid more than $165 000 of this loan as follows.  On 21 January 2008 he drew down $85 000 from the BankWest facility and paid this to the wife’s parents.  On 25 January 2008 he drew six bank cheques on the Commonwealth Bank to a total of $60 000 and pad these to the wife’s parents.  On 29 January 2008 he paid the wife’s parents five money orders to the total of $5000 and on 4 February 2008 he paid the wife’s parents $15 000 by Commonwealth Bank bank cheque.  He said he also paid them some cash.

3. The wife said in her affidavit that $160 000 has been repaid and that approximately $127 750 remains owing to her parents.  

4. At the hearing the wife asserted that there was $134 930 outstanding to her parents, all but $40 000 of which was attributable to interest.

5. This is a difficult issue particularly because there were no affidavits filed by the wife’s parents.  There was no issue that $200 000 had been borrowed.

6. The wife annexed to her affidavit a statutory declaration signed by the husband and herself which acknowledged as at 28 June 2005 that the husband and the wife were borrowing $200 000 from an account in the names of the wife and her parents such to be repaid within a period of 12 months at a rate of 8 per cent interest paid on a monthly basis on a reducing balance where principal has been repaid.

7. There is no evidence from the wife’s parents to the effect that they are pressing for repayment of the loan although the wife asserted that they want the loan repaid with interest.

1. In my view, there must be some doubt about whether, whatever the outstanding balance might be, it is enforceable, given the time which has now passed.  But this point was not taken.  The submission on behalf of the husband was to the effect that the interest component ought not be included in the outstanding balance owing, the inference being that the husband would concede that a capital amount is outstanding.  I shall accept this as an admission against interest and bring the outstanding balance into the balance sheet at $40 000 which the wife asserted was the shortfall on capital repaid.

The loan from the husband’s mother

1. As indicated above, in 2005 the husband arranged for his mother to borrow $350 000 on mortgage registered against her home.  The husband wanted these funds to put towards the development of the business.  There is no issue that upon the funds becoming available the husband used these for development of the business.  He said that he required the loan monies because of the increase in costs of the development. 

2. It was submitted on behalf of the wife that these monies were a gift from the husband’s mother to the husband.  I do not accept this submission and even if I was to do so, it is difficult to see how this would advance the wife’s case.  This is because such a gift would be regarded as a contribution by or on behalf of the husband.

3. The effect of gifts by a relative to one of the parties to a marriage has been clear since the case of Gosper and Gosper (1987) FLC 91-818. In that case Fogarty J held that where a gift is made solely to the donor’s relative, that is a direct financial contribution solely to that party. A similar approach was taken by the Full Court in Kessey and Kessey (1994) FLC 92-495 where it was said that a contribution by a parent of a party to a marriage to the property of the marriage will be taken to be made by or on behalf of the party who is the child of the parent unless there is evidence which establishes it was not the intention of the parent to benefit only his or her child.

4. It is true that there is no affidavit by the husband’s mother about the matter.  But the husband said this was a loan arranged by him for the stated purpose.  The husband paid all the interest payments.  

5. I have no hesitation in accepting the truthfulness of the evidence of the husband’s brother Mr B Notaros.  He said his mother would not have made a gift to only one of her three sons and that his understanding was that the money advanced to the husband was a loan and not a gift. 

6. In my view the evidence supports the finding that the advance of the $350 000 by the husband’s mother borrowed on mortgage against her home was a loan to the husband not a gift.

7. As indicated above, the husband and his brothers entered into an agreement which provided in effect that the husband’s share of the proceeds of sale of the K Street property would be applied to repay the $350 000 loan and discharge the mortgage over their mother’s home.  This has been done.

8. The effect of this is that there is no longer an asset (the husband’s previous one-third interest in K Street) or a liability (the previous $350 000 loan) which it would be appropriate to include in the balance sheet in this judgment.

Alleged Loan to Mr T

1. The husband alleged that he has an outstanding debt to a Mr T, a plumber, drainer and gasfitter whom the husband said undertook work during the development of the new X Business.  The husband annexed to his affidavit a copy of an unsigned tax invoice dated 31 October 2005 apparently for plumbing work done at the business.

2. It is the husband who bears the onus of proof about this.  He did not file an affidavit by Mr T to support his assertions.  In my view, in the absence of further evidence, the husband has not established this alleged liability.  In any event, even if he had, given the age of this alleged unpaid liability I would have thought the Limitation Act would render it unenforceable.  

3. I do not propose to take this liability into account against the wife in these proceedings.

Valuation of the Hospitality Business

1. Ms U of Firm Z was appointed as single expert for the purpose of valuing the hospitality business.  Ms U is a chartered accountant with 15 years’ experience in audit and business advisory services, valuations, forensic accounting, family law, professional negligence and misconduct investigations, litigation consultation and support. 

2. Ms U prepared an initial valuation report dated 29 April 2014 in which she arrived at a valuation which included the value of the real estate occupied by the business at I Street, Suburb F as well as both of the E Street properties.  Ms U formed the opinion that no goodwill attached to the business. 

3. In these circumstances the parties agreed to instruct Ms U to prepare a supplementary report to provide her opinion about the value of the business excluding the value of the properties and any liabilities attaching to them as at both 30 June 2012 and 30 June 2013. 

4. Ms U prepared her supplementary report dated 1 May 2014 adopting the same valuation methodology as in the initial report.  This was the net assets methodology and Ms U arrived at a valuation as at 30 June 2012 for the business of $85 623 and as at 30 June 2013 at a $2800 deficiency.  Ms U said that the business did not generate sufficient profit to warrant any goodwill which is why she valued it on the basis of its assets. 

5. Ms U, during the course of her cross-examination, was asked by learned counsel for the wife to make a revised valuation based on additional hypothetical material.  It was suggested to Ms U that in fact the sales figures presented for her consideration and which informed her valuation were understated.  New estimated sales figures were provided to Ms U based on an analysis that the wife’s lawyers had undertaken of the business overdraft cheque account, other accounts and some estimates of cash which it was suggested the husband had understated.

6. It was suggested that if these new estimated sales figures were used by Ms U, this would change the valuation.  Ms U then applied the new sales figures to her methodology and arrived at theoretical valuations of goodwill implied for the financial years ending 30 June 2012 and 30 June 2013 of $72 952 and $56 292 respectively.

7. The difficulty I have with these figures, which I expressed when Ms U was taken to this exercise during cross-examination, is that in arriving at the figures, Ms U used the husband’s salary expressed in the accounts as being $31 200.  As I said at the time, one’s common sense would inform one that one would be extremely hard pressed to find someone willing to do what the husband does in managing the business, working approximately 90 hours per week for a salary of $31 200.

8. In my view, the exercise conducted by learned counsel for the wife in this regard was barren.  In all these circumstances I accept Ms U’s Supplementary Report of valuation and regard the business to have nominal value apart from the fact that it provides the husband with a living.

9. In any event, it matters little in these proceedings because, as I indicated during the hearing, I propose to make orders for sale of the business as the husband now proposes and this will reflect its value.

Cash received by the Hospitality Business

1. There was an issue about the extent to which the husband has accounted for cash received from patrons of X Business.

2. The husband said that details of all cash received have been entered into the business cash book. It became clear during the course of the husband’s cross-examination that this was not the case. Some of the cash details have been so entered and some of the cash has been used to pay business expenses.  The husband informed Ms U that only a very small amount, approximately $100 - $200 per week was used for urgent grocery purchases.  The husband said during cross-examination that he spent all of the cash on expenses.  I am satisfied that this has not been the case.

3. The lawyers representing the wife undertook a detailed analysis of the business cashbook, the overdraft cheque account and other accounts and upon the husband being questioned about these records it became clear that a considerable amount of cash money has not been accounted for.

4. It also became clear that on occasions the husband had drawn pay cheques in favour of various of his employees only to deposit those cheques to the bank account in the name of his mother and pay the employees in cash.

5. The consequence of all of this is that it is impossible to know how much cash has been generated by the business.  The husband said that it has been approximately 10 percent of the takings.  Even if this was correct, and I suspect it is an understatement, this would be an amount in excess of $50 000 each year.

6. The effects of this are several.  Firstly, it would appear that the husband has understated the business earnings to the Australian Taxation Office each year.  Secondly, the business revenue figures provided to the expert Ms U have been understated although as indicated above on the figures involved I am unpersuaded that this would have reflected a positive value for the business.  In addition, the husband has had the use of considerably more business funds than he deposed to.

The Husband’s Bartercard and BBX Liabilities

1. It was submitted on behalf of the wife that the Court should not regard these as legitimate business expenses.  This was on the basis that the husband failed to make a full and frank disclosure and that he has had the sole benefit of undisclosed cash.

2. I accept that the husband did not disclose the bank account in the name of his mother. I also accept that the husband has had the benefit of a considerable amount of cash. But I propose to take these matters into account pursuant to s 75(2) of the Act.

3. In these circumstances, and also because I propose to take into account all of the wife’s liabilities, including the outstanding debt to her parents and the personal loan for her legal fees, I shall include the husband’s Bartercard and BBX liabilities in the balance sheet.  I note also that these facilities have been used to pay some of the husband’s legal costs in these proceedings.  I propose to permit the wife’s personal loans for legal fees in these proceedings to be included in the balance sheet.  This reinforces my view that it is appropriate to also include the husband’s Bartercard and BBX liabilities.

The Applicable Law

1. Sub-section 79(1) of the Family Law Act 1975 (Cth) (“the Act”) provides to the effect that in property settlement proceedings the Court may make such order as it considers appropriate altering the interests of the parties to the marriage in the property.

2. Sub-section 79(2) provides that the Court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.

3. Sub-section 79(4) sets out various matters which must be taken into account in considering what order (if any) should be made under the section. These matters include direct and indirect contributions, financial and otherwise by or on behalf of a party or a child to the acquisition, conservation or improvement of any property of the parties, contributions by a party to the welfare of their family including as a homemaker or parent, relevant matters referred to in s 75(2) and the other matters referred to in s 79(4).

4. The operation of s 79 was the subject of consideration by the High Court in the case of Stanford v Stanford (2012) FLC 93-518.

5. In Stanford the majority said (at page 86,640) in referring to ss 79(2) and 79(4) as follows:

   35.… 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. … 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.

6. The High Court said that the first of these propositions is for the court to identify, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property.

7. The second is that although s 79 confers a broad power on the court, it is not a power that is to be exercised according to an unguided judicial discretion. It must be exercised in accordance with legal principles, including the principles which the Act itself lays down.

8. The High Court said that the third fundamental proposition is that the question of whether the 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 set out in s 79(4). 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.

9. And the High Court majority went on to say (at page 86,642) as follows:

   41.…  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.

Sub-Section 79(2)

1. As I have said above, s 79(2) of the Act provides:

   The court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.

2. In their recent decision in the case of Bevan & Bevan (2013) FLC 93-545 the Full Court (Bryant CJ and Thackray J) said as follows at page 87,234:

   In our view, it will be less likely that the separate issues arising under s 79(2) and s 79(4) will be conflated if judges refrain from evaluating contributions and other relevant factors in percentage or monetary terms until they have first determined that it would be just and equitable to make an order.

3. In the present case, the parties were married and they have a child.  Their financial circumstances are quite complicated, involving properties and a business, numerous bank accounts and various liabilities.  As indicated above, the wife owned a property and she sold this and gave the husband almost the entire net proceeds. 

4. If the Court did not make orders, the many unresolved issues between them would not be resolved and reflected in court orders.  And the result would be unfair, particularly to the wife. 

5. In these circumstances, in my view it would be just and equitable to make an order under s 79 of the Act.

The Parties’ Existing Legal and Equitable Interests in Property

1. The parties’ interests in property and superannuation are as follows:

$
1.         Husband’s property at I Street, Suburb F	1,075,000
2.         Husband’s property at 1 E Street, Suburb F	300,000
3.         Husband’s property at 3 E Street, Suburb F	500,000
4.         Husband’s Commercial Bank of Greece account	4,000
5.         Husband’s X Business	0
6.         Wife’s jewellery	500
7.         Wife’s Toyota motor vehicle	1,000
8.         Wife’s household contents	500
9.         Wife’s Beacon Super	28,000
_____________
$1,909,000

1. The liabilities are as follows:-

$
1.         Joint personal loan owed to Mr and Ms HH	40,000
2.         Husband’s BankWest mortgage	679,200
3.         Husband’s CBA Visa	36,010
4.         Husband’s Citibank Visa	44,303
5.         Husband’s CBA Overdraft	42,183
6.         Husband’s Bartercard	35,096
7.         Husband’s BBX	80,722
8.         Wife’s CBA Mastercard	37,000
9.         Wife’s St George Visa credit card	10,000
10.      Wife’s Coles Myer card	4,000
11.      Wife’s personal loans for legal fees	58,000
_____________
$1,066,514
Surplus	$842,486

Contributions

1. In my view, it is the case that the initial contributions by the husband were greater than those by the wife, and by a significant margin.  As I have said, the wife brought into the marriage her home unit at Suburb A and her modest superannuation.  But the husband brought in his S Business and his interests in the properties at E Street, I Street and K Street.  The husband had the liability for the approximately $260 000 mortgage.  

2. As indicated above, the husband’s debt to his brother Mr B Notaros and his wife is unenforceable and this has the effect that, as against the wife, the E Street properties come into the pool of assets unencumbered by that liability.  This makes the husband’s contributions significantly higher than they would have been if the debt had been enforceable.  Although there is no evidence of the relevant values of the properties at the time of marriage, just looking at the nature of the properties and their current values, including the fact that the wife netted approximately $230 000 from her home unit, the equity in the husband’s properties must have been greater than the wife’s equity in her home unit and her modest superannuation.

3. The husband borrowed very heavily in order to be able to develop his new X business at the I Street premises.  If things had turned out differently, this might be regarded as having been a sound investment.  But this appears not to have been so.  More than one million dollars has been paid to develop a business which in reality has delivered a marginal return and is now worth very little, other than that it continues to provide the husband with a modest living.  But nothing really turns on this in terms of contributions.

4. There was an issue about the extent to which the wife made a contribution towards the operation of the husband’s businesses.  It is common ground that the wife attended at the S Business several evenings a week.  The husband said that the wife did not undertake work at the business but merely socialised there.  The wife said that she undertook various tasks associated with the business.  The husband said that such assistance was infrequent and minimal.

5. I accept that the wife attended at the hospitality business and provided some assistance up to approximately April 2004 when she was in an advanced state of pregnancy.

6. In relation to the new X Business the wife said that she would visit the husband at the business with the parties’ son O and sometimes during such visits she would assist.  She said that on other occasions she would leave the child with her parents and go to the business and assist there.  The husband said that such assistance was minimal.  Again, I accept that the wife provided some assistance at this business but I have the view that it is more probable than not that the wife has overstated her contribution in this regard. 

7. I do accept the wife’s evidence that for some weeks she washed and ironed the linen for the business which was considerable because there were 120 seats.

8. It is the case that the major part of the financial contributions over the relevant years has been made by the husband.  As I have said, the wife contributed the net proceeds of sale of her home unit and she worked earning income until before the birth of the parties’ child O.

9. On the other hand, the wife has made the overwhelming contribution to the welfare of the family comprising the husband, the child and herself.  This is the way the parties arranged their affairs.  The husband spent most of his time at the businesses.  But I accept that following the child’s birth he was at home and gave a lot of assistance with the child.  Since opening the new business he came home for a few hours most days and assisted in the care of the child.

1. As also indicated above, the parties lived with the husband’s mother and no doubt she made contributions to them and the child and it is clear that the parties made contributions to her welfare although these matters are more appropriately considered pursuant to s 75(2) and I shall do so.

2. In my view, notwithstanding all the many contributions which each of the parties have made since the commencement of the marriage the difference between them in initial contributions while reduced has not been overcome.

3. It was submitted on behalf of the wife that the parties’ contributions were equal.  In my view, this cannot be correct given the disparity of initial contributions. 

4. It was submitted on behalf of the husband that his contributions overall should be assessed at 55 per cent.  But this was on the basis that the Court would allow the liability to the husband’s brother and sister-in-law of $300 000.  As indicated above, I have not included this for the reasons given.  As I have also said, the effect is that the husband’s contributions have been significantly greater than had this liability been allowed.

5. In all the circumstances, in my view, the parties’ contributions overall have been 64 per cent by the husband and 36 per cent by the wife.

s 75(2) matters

1. The husband is 64 years of age.  He is facing some issues concerning his health.  He previously had a polyp on his prostate gland and he has been managing Type 2 Diabetes.  At the commencement of the second stage of the hearing the husband thought that he had been diagnosed as suffering from a malignant tumour. Fortunately, during the course of the hearing, the husband’s specialist medical practitioner was able to interrupt his busy schedule of operations and provide the advice to the husband’s lawyers that in fact the husband was not suffering from a malignancy.  

2. This has been confirmed by a letter from the specialist, Dr LL, dated 21 November 2014 but only made available after the hearing concluded.  The medical opinion was that the husband had developed an abdominal inflammation and a pelvic mass which appeared to be a consequence of surgery which he had undergone some years previously.  His specialist described this as a most unusual situation and recommended that this would have to be monitored.  Dr LL said that the husband’s ability to work would remain as it is at present.  He said that the husband does have some intermittent pain which might affect his ability to concentrate and sit for any prolonged period of time, but apart from that Dr LL would not expect the husband to have any major disabilities.  No surgical intervention was planned and the condition was not a threat to his life expectancy.

3. The husband said that this condition has changed his previous commitment to wanting to continue to operate the X Business.  He has decided that in view of his state of health and other factors including not wishing to continue working the 90 hours per week at the business, which he has found to be necessary, as well as wanting to spend more time with the parties’ son, he now wishes to sell the business.

4. In these circumstances, it is somewhat more difficult to predict what the husband’s income-earning capacity might be.  He has worked in the hospitality industry for most of his working life.  There would appear to be no reason why the husband could not work as an employee in this industry for some years yet.  He would have the skills and experience to manage a hospitality business on an employed basis.  Perhaps he could do some waiting work or work behind a bar. 

5. On the other hand, the wife is almost 48 years of age and she is in reasonable health.  She has not worked in paid employment since 2003 although as indicated above, I accept that she has provided some assistance to the husband in the hospitality business.

6. Her income is $603 per week from government benefits including a carer’s allowance for her elderly mother and between $23 and $26 per week child support from the husband.

7. It is not clear whether she will be successful in conceiving another child as she is most anxious to do.  One would think that in the absence of having to attend to the particular requirements of a new baby, the wife ought to be able to undertake some paid employment.  And at this point in time the wife is not pregnant.

8. Accordingly, in all the circumstances, I would not assess her capacity for employment as being less than that of the husband.  And she is considerably younger than the husband which should offer her more years than him over which to earn income. 

9. The wife is the primary parent of the parties’ child O.  On all present indications she will have the responsibility for the major physical care of him and financial responsibility for him for many years yet. 

10. The husband has paid only a very modest amount of child support which had been assessed at $99 per month prior to May 2010.  Since May 2010 the husband did not pay child support until March 2014 from which time he has paid $107 per month.

11. The husband sold his old motor vehicle for $10 000 and has had the sole benefit of this money. I shall take this into account.  He has also had the sole use of an unquantifiable amount of cash money.  There is also an account which the husband said that his mother deposited approximately half the funds into account and the husband deposited the balance.  The husband said that the purpose of the account is to provide a fund for the child’s educational expenses.  I accept this.  The husband also has a financial resource in the form of taxation credits although there was no proper evidence of what value these credits might be to him in future, if at all.

12. As indicated above, the parties lived with the husband’s mother at her home during the marriage. Clearly the husband’s mother assisted the parties considerably and she also assisted in the care of the child. But the parties also did things for her. I take these matters into account pursuant to s 75(2)(o) of the Act.

13. The wife has a relationship with Mr P.  But they do not cohabit and it is far from clear at this stage whether their relationship will develop to the point of involving cohabitation.  The wife says that she has no expectation that they would do so.  The wife continues to live with her parents and on the evidence expects to continue to do so for the foreseeable future.  In the event that the wife was to become pregnant and deliver a child, Mr P has informed her that he would contribute towards the costs of their child.  Mr P has paid the $36 000 costs of the IVF program to date as well as advanced $20 000 to the wife towards her legal costs.

14. It was submitted on behalf of the husband that there would be no adjustment of property taking account of relevant s 75(2) matters.

15. On the other hand it was submitted on behalf of the wife that there should be a 10 per cent set-off in favour of the wife taking account of these matters.

16. I accept the submission that there should be an adjustment in favour of the wife. In my view the most significant s 75(2) matter is the fact that on all indications to date, the wife is likely to have the major physical and financial responsibility for the child until he attains adulthood. This is a substantial responsibility and must be appropriately addressed to enable the Court to arrive at a just and equitable order. I also take into account the likelihood that the husband has had the sole use of a considerable amount of cash which he has failed to disclose in these proceedings, as well as the other matters referred to above.

17. In all the circumstance in my view it is appropriate to make an adjustment in favour of the wife.  It is a matter of determining the appropriate amount.

18. In the case of Clauson and Clauson (1995) FLC 92-595; 18 Fam LR 693 the Full Court of this Court indicated that trial judges need to consider the value of the adjustment in real terms. The Full Court said at FLC page 81,911 as follows:

    There is, we think, at times a tendency to assess s 75(2) factors in percentage terms without considering its real impact, and we think there is legitimacy in the views expressed in more recent times that the Court has tended to operate in this area within artificially delineated boundaries. That is, it appears almost to be inevitable that the s 75(2) factors will be assessed in a range between 10% and 20%. A number of cases will justify an assessment outside those parameters and in any event it is the real impact in money terms which is ultimately the critical issue.

19. An adjustment of 10 per cent of the available property and superannuation in favour of the wife would be a differential between the parties of 20 per cent, which is approximately $168 497. 

20. I accept this as the appropriate amount.  The just and equitable order will be achieved by orders which will result in the property and superannuation being divided between the parties 54 per cent to the husband and 46 per cent to the wife.

Conclusion and fourth step

1. The husband is to have 54 per cent of the property and superannuation available for division between the parties.  This is property with a value of $454 942 (54 percent of $842 486 = $454 942).

2. The husband has the following:

$
1.         I Street, Suburb F	1,075,000
2.         1 E Street, Suburb F	300,000
3.         3 E Street, Suburb F	500,000
4.         Commercial Bank of Greece account	4,000
_____________
$1,879,000

1. But the husband also has the following liabilities (including the $40 000 owing to the wife’s parents which I shall attribute to the husband because it can only be paid from his property):

$
1.         BankWest mortgage	679,200
2.         Joint personal loan owed to Mr and Ms HH	40,000
3.         CBA Visa	36,010
4.         Citibank Visa	44,303
5.         CBA Overdraft	42,183
6.         Bartercard	35,096
7.         BBX	80,722
_____________
$957,514

1. Therefore the husband has net property with a value of $921 486 ($1 879 000 - $957 514 = $921 486).

2. On the other hand the wife is to have 46 per cent of the available property and superannuation which is $387 544.

3. The wife has the following:

$
1.         Jewellery	500
2.         Toyota motor vehicle	1,000
3.         Household contents	500
4.         Beacon Super	28,000
_____________
$30,000

1. But, leaving aside the joint liability to the wife’s parents, the wife has the following liabilities:

$
1.         CBA Mastercard	37,000
2.         St George Visa credit card	10,000
3.         Coles Myer card	4,000
4.         Personal loans for legal fees	58,000
_____________
$109,000

1. Accordingly, the wife has a deficiency of $79 000 ($30 000 - $109 000 =

   
   

   $-79 000).

2. To achieve property and superannuation with a value of $387 554 the wife will require a payment of $466 544 ($387 544 + $79 000 = $466 544).  The money will have to come from a sale of the husband’s properties.

3. As I have said, the husband has property with a net value of $921 486.  If he was to pay the wife the sum of $466 544 the husband would have net property with a value of $454 942 ($921 486 - $466 544 = $454 942).

4. The sale of the property and business at I Street, Suburb F would clearly affect the husband’s capacity to earn income because he would no longer have the business from which to earn income.  In any event, the husband said that he is tired of operating the business and that he intends to sell it.

5. Upon sale of the properties and the business the husband would have a net amount of approximately $454 942.  The husband could use this as a deposit on another property or business or simply use the money towards his living expenses.  One would have thought he would be likely to continue residing with his mother.  As indicated above, in my view, the husband would have some capacity for earning income after he ceases to operate the business.

6. On the other hand, upon receipt of the payment of approximately $466 544 the wife could pay her legal costs and other liabilities and have a deposit for a modest home or funds to put towards the living costs of herself and the parties’ son O.

Orders

1. The husband said that he wanted to sell all the properties.

2. The husband will be required to sell the properties to enable production of sufficient funds to pay the wife as required by the orders.

3. From the net proceeds of sale will be paid the BankWest mortgage and the liability to the wife’s parents.

4. I have approached my determination of orders on the basis that the husband’s properties would be sold and from the proceeds would be paid the BankWest mortgage and the liability to the wife’s parents.  The equity in the properties on this basis would be $1 155 800 ($1 875 000 - value of the three properties) - $719 200 (BankWest and wife’s parents’ loan) = $1 155 800). 

5. The wife is to have $466 544 of this which is 40.365 per cent thereof.  The husband is to have the balance namely $689 256 which is 59.635 per cent thereof.

6. I propose to make the orders on the basis of these percentages which will enable the appropriate adjustment for rise and fall and costs of sale of the properties.

I certify that the preceding one hundred and fifty-one (151) paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Johnston delivered on 11 December 2014.

Associate:     

Date:              11 December 2014