Owens and Owens (No.3)
[2010] FMCAfam 3
•14 April 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| OWENS & OWENS (No.3) | [2010] FMCAfam 3 |
| FAMILY LAW – Property Settlement – assets and liabilities – treatment of alleged debts to the husband's family – “add backs” – whether appropriate to add back to property pool moneys removed by husband and paid to his family after separation, purportedly as a loan repayments – where husband's evidence regarding alleged loans vague, inconsistent and generally unsatisfactory – where alleged loans found to be ex post facto reconstructions of earlier transactions or groups of transactions – where husband's financial relations with his family complex and lacking in transparency – where husband found to have formed intention to prevent wife from potentially making any substantial property settlement claim, and defeat any claim she may ultimately make – where financial contributions sourced in the husband's family nevertheless recognised as form of contribution by or on behalf of husband – weight to be given to unquantifiable financial contributions from husband's family. |
| Family Law Act 1975 (Cth) |
| B & B (2006) FamCA 883 Bremner (1995) FLC 92-560 Brice (2007) FamCA 170 C & C (1998) FamCA 143 Chang v Su (2002) FLC 93-117 Money (1994) FLC 92-485 Norbis (1986) FLC 91-712 Pierce (1998)24 FamLR 377 Reichstein (2006) FamCA 1422 Russell (1999) FLC 92-877 Townsend (1994) FLC 92-569 Waters & Jurek (1995) FLC 92-635 Whitely (1996) FLC 92-684 Williams (2007) FamCA 313 |
| Applicant: | MS OWENS |
| Respondent: | MR OWENS |
| File Number: | MLC 7175 of 2008 |
| Judgment of: | Walters FM |
| Hearing dates: | 8 – 12 & 22 – 24 November 2009 |
| Date of Last Submission: | 15 December 2009 |
| Delivered at: | Melbourne |
| Delivered on: | 14 April 2010 |
REPRESENTATION
| Counsel for the Applicant: | Ms R Teicher |
| Solicitors for the Applicant: | Mirabellas Solicitors |
| Counsel for the Respondent: | Mr M Testart |
| Solicitors for the Respondent: | Plaza Legal (until 12 January 2010) |
| Solicitors for the Respondent: | Respondent unrepresented from 12 January 2010 |
ORDERS
As and by way of partial property settlement:
(a)the husband and the wife do forthwith sign all such documents and do all such acts and things as shall be necessary to cause the moneys currently held on trust for the benefit of the parties (being the residue of the combined net proceeds of sale of the former matrimonial home and the investment property known as Unit 4 Property C ─ totalling approximately $568,153) to be divided between them as follows:
(i)firstly, $364,490 to the wife;
(ii)secondly, $203,663 to the husband;
(iii)thirdly, 45% of the balance (if any) to the wife; and
(iv)finally, the remainder (being 55% of the balance after the payments provided for in (i) and (ii) above, if any) to the husband.
(b)The husband do indemnify and keep indemnified the wife from all debts, liabilities and obligations of the wife relating to or arising out of –
(i)the proceedings commenced in the Supreme Court of Victoria (bearing no. 9637/2009, or any other number) between the executors of the will of the late Mr O as plaintiffs and the husband and the wife as defendants relating to moneys allegedly owed by the husband and the wife to the late Mr O or his estate;
(ii)any claim (of whatsoever nature) by the estate of the late Mr O, or by any other member or members of the husband's family (including, but not limited to, the husband's mother, sister, brother, brother-in-law and uncle), relating to moneys allegedly owed by the wife, or by the husband and the wife jointly, to the said estate or the said member or members of the husband's family, and any consequential or alternative relief relating to such claim,
and from all actions, proceedings, costs, claims and expenses in respect thereof.
(c)The husband do forthwith transfer and assign to the wife all his share and interest (if any) in the following:
(i)the Honda motor vehicle presently in the wife’s possession;
(ii)the wife's [Q] shares;
(iii)the furniture, chattels and effects presently in the wife's possession;
(iv)all moneys standing to the credit of the wife in any account in any bank, building society or other financial institution; and
(v)the wife's superannuation entitlements.
(d)The wife do forthwith transfer and assign to the husband all her share and interest (if any) in the following:
(i)the furniture, chattels and effects presently in the husband's possession; and
(ii)all moneys standing to the credit of the husband in any account in any bank, building society or other financial institution.
Pursuant to Rule 21.15 of the Federal Magistrates Court Rules2001, the Court certifies that it was reasonable for the parties to employ an advocate.
The proceedings otherwise be adjourned to a date to be fixed for the sole purpose of making a superannuation split order (intended to divide the parties’ superannuation entitlements equally between them in accordance with the reasons for judgment delivered this day).
AND THE COURT NOTES THAT:
The proposed superannuation split will involve the husband transferring $33,276.50 from his superannuation entitlements to the wife’s superannuation fund. The effect of the said superannuation split is that each party will then hold superannuation entitlements to the value of $88,276.50.
IT IS NOTED that publication of this judgment under the pseudonym Owens & Owens (No.3) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC7175 of 2008
| MS OWENS |
Applicant
And
| MR OWENS |
Respondent
REASONS FOR JUDGMENT
As Corrected
Preliminary comments and definitions
I have referred to my reasons delivered on 1 March 2010 – dealing with parenting issues and the second disqualification application – as "the parenting judgment".[1]
[1] See Owens (No..2) (2010) FMCAfam 2
As foreshadowed in the parenting judgment, these reasons deal with the issue of property settlement. They are to be read together with the parenting judgment. Thus, the two sets of reasons form a single judgment, as it were. Consequently, I shall not repeat most of the background information and relevant findings contained in the parenting judgment.
In these reasons, and unless otherwise indicated, all statements of fact comprise findings of fact.
Ms R Teicher appeared for the wife at trial. Mr M C Testart appeared for the husband. Throughout these reasons, and unless otherwise indicated, all references to Mr Testart are to Mr M C Testart.
I have referred to my reasons for dismissing the first disqualification application (which reasons were given orally on 17 September 2009, on an ex tempore basis, but not reduced to writing until later) as "the first disqualification judgment".[2]
[2] See Owens (2009) FMCAfam 1397
I have referred to the wife's final submissions as WFS. For reasons which were explained in the parenting judgment, the husband's final submissions were rejected when they were eventually supplied to the court.
The husband’s late father died in April 2009, some six months after these proceedings commenced. There was no, or no credible, evidence presented to the Court to explain why the husband’s late father could not have presented evidence regarding his financial arrangements with the husband (and, if appropriate, the wife) before his death.
I have referred to the estate of the husband’s late father as "the Estate". According to the husband, the sole beneficiary of the Estate is the husband's mother, but the will of the husband’s late father was not produced until very shortly before the commencement of the trial in November 2009 and, as appears below, it was never admitted into evidence.
I declined to allow the husband to rely upon certain affidavits which had been filed excessively late (given, among other things, that no explanation was ever provided for the late filing of the material, and that I had given the Estate leave to intervene in the proceedings in June 2009). Indeed, it was only during the trial that the husband sought (through Mr Testart) to produce the will himself. I declined to allow him to do so, given that he conceded that it was always within his power to obtain a copy of the will and produce it to the wife and that, notwithstanding his clear knowledge of his obligations in relation to disclosure, he had failed to do so. My ruling in this regard forms the subject of the second of the two extraordinary exchanges with
Mr Testart referred to in the parenting judgment.[3] The husband's evidence in relation to the production of the will was inconsistent and generally unsatisfactory.[4]
[3] See paragraph 150(j), (k), (l) and (m) of the parenting judgment
[4] See, for example, 24 November 2009 transcript, page 496
Introduction and overview of issues
I confirm that my findings regarding the parties’ credibility as it relates to property settlement issues are consistent with my findings regarding their credibility as recorded in the parenting judgment.[5] Relevantly, I confirm that the wife was an impressive witness (in relation to both parenting and property matters), and I have no hesitation in preferring her evidence where it conflicts with that of the husband.[6]
[5] See, for example, paragraph 7 of the parenting judgment
[6] See, for example, paragraphs 218 to 224 of the parenting judgment
One of the most extraordinary examples of evidence which reflected adversely on the husband's credibility was his statement (in paragraph 7 of his affidavit sworn 3 April 2009) that he holds "a Bachelor of [omitted] and Post Grad Diploma in [omitted]". The husband conceded in cross-examination that he holds neither of these qualifications, and that the statement in his affidavit to the effect that he does was simply untrue. He could give no explanation for his false statement.
There are other examples of the husband being less than open and frank. For example, he was cross examined about the accuracy of his financial statement filed in late 2008. He conceded that the amount recorded in the financial statement as representing his rental payments was inaccurate at that time. He also failed to make reference to his partner, with whom he was living, and whose presence in his household clearly affected his expenses.[7] The husband’s evidence in relation to his financial arrangements with his partner, like many other aspects of his evidence, was vague, inconsistent and generally unsatisfactory.[8]
[7] See 12 November 2009 transcript, page 281 and following
[8] See, for example, 24 November 2009 transcript, page 507-8
By way of further example, I refer to my discussion in the parenting judgment of the husband's actions surrounding what I described as "the brother's trust account".[9] The husband conceded that he did in fact have a VCAT order allowing him financial control of his brothers financial affairs – which order he obtained at or around the time this Court made its orders requiring the husband to retain such of the proceeds of sale of the warehouse unit (described elsewhere in these reasons as “Unit 4”) that might otherwise be payable to his brother; he also conceded that he did not oppose his brother's application to discharge the VCAT order, and that he did not notify the wife's solicitors that he was to be removed from his fiduciary position (and hence become unable to comply with the order of this Court to which he had consented).[10] In my opinion, the husband's actions at that time reflect a disturbing capacity on his part to act in an underhanded, or alternatively unprincipled and opportunist, manner – in spite of relevant court orders (which were made by consent). To the extent that the husband endeavoured to excuse his behaviour by blaming the stress he was under as a result of the death of his father, the ongoing proceedings in this Court and the serious injuries sustained by his brother in a motor vehicle accident, I reject such excuse and give it no weight. The husband did not suggest at any previous time that such stresses had adversely impacted on his capacity to behave rationally and responsibly. The excuse was raised well into the husband's
re-examination, and, I find, as a direct result of comments made by his counsel which were both clearly leading and wholly inappropriate.
I refer to pages 459 to 556 of the transcript of the hearing on
24 November 2009, and in particular to page 553. It was very clear – before the comments were made by counsel – that I had serious concerns about the husband's actions surrounding "the brother's trust account". Counsel's flagrantly leading comments followed almost immediately after I expressed my views in that regard.
[9] See paragraphs 53 to 58 of the parenting judgment
[10] See 24 November 2009 transcript, pages 549-53
As soon as counsel made the comments to which I have referred, it became inevitable that the husband, who is clearly an intelligent man, would effectively "take the hint". He did so, and, I find, tailored his evidence accordingly. His evidence in relation to this subject simply reinforces my view to the effect that the husband has the capacity to act in an unprincipled and opportunist manner, and is not reluctant to do so.
Regrettably, the property settlement aspect of the proceedings was conducted (by both sides, but principally by the husband) in what can fairly be described as a shambolic manner. Attempts were made to approach the dispute on something of a microcosmic basis. The effect of such attempts was, by and large, to thoroughly confuse and complicate what should have been a relatively straightforward case. Put another way, both parties (but, again, principally the husband) lost sight of the wood for the trees.
By far the most time-consuming issue at trial was the husband's assertion that the parties owe his late father's estate (“the Estate”) an amount of approximately $230,000 (excluding interest, which the husband asserted was payable). In broad terms, the husband alleged that his late father made a number of loans to the parties at various times during their relationship. He alleged that the loans have not been fully repaid, and that interest is owing on the balance currently outstanding. The wife denied (or, alternatively, disputed or did not admit) that funds received from the husband's late father comprised loans. Indeed, all aspects of the husband's assertions regarding his financial relationship with his late father were disputed, in that the wife did not accept that any funds were owed to the Estate. Among other things, the wife argued that any loans from the husband's late father to the husband (if they exist) should be ignored for the purposes of the property settlement proceedings, because such loans are speculative or otherwise unenforceable, and because there was never any intention (on the part of the husband or his late father) that the loans (assuming that they exist) should be repaid.
I have said all that I want or need to say about the manner in which the case was conducted by the husband's counsel. The fact of the matter is, though, that the husband's case contained huge and obvious gaps, which could have and should have been plugged by relevant evidence at a very early stage. That such evidence was not obtained, or was not presented to the Court until the 11th hour and 59th minute (as it were) is telling.
In my opinion, the matters placed in dispute by the wife demanded some form of clear explanation from the husband’s late father (during his lifetime, of course – he died in April 2009, some six months after these proceedings commenced) and other members of the husband's family. Affidavits from them at an early stage – covering their financial dealings with the husband and the wife – might have assisted the husband's case. They might also have assisted the Court. Indeed, and as explained in the parenting judgment, as early as 23 June 2009 I gave the Estate leave to intervene in these proceedings (following submissions by counsel for the husband to the effect that it should be permitted to "have its say"). The Estate did not intervene (for reasons that were never explained). Instead, it apparently commenced proceedings against the parties (again, at the 11th hour) in the Victorian Supreme Court. Ms Teicher submitted, and I accept, that the actions of those associated with the Estate in commencing proceedings in another court "can only be seen as a strategic and cynical exercise on the part of the husband and/or the Estate to pressure the wife into capitulating to the husband's demands in these proceedings".
I refer to the discussion of the rule in Jones v Dunkel (1959) 101 CLR 298 in Cross on Evidence (loose leaf edition) at [1215] – where it is summarised (in part) as follows:[11]
… (Unexplained) failure by a party to give evidence, to call witnesses, or to tender documents or other evidence … may (not must) in appropriate circumstances lead to an inference that the uncalled evidence or missing material would not have assisted that party's case. … The appropriate circumstances exist where it was within the power of the party to tender the evidence which was not tendered …
… (The) rule has no application if the failure is explained. … But the explanation must be established by evidence and is not merely to be presumed from the passage of time ...
… (While) the rule … permits an inference that the untendered evidence would not have helped the party who failed to tender it, and entitles the trier of fact to take that into account in deciding whether to accept any particular evidence which relates to a matter on which the absent witness could have spoken, and the more readily to draw any inference fairly to be drawn from the other evidence by reason of the opponent being able to prove the contrary had the party chosen to give or call evidence, the rule does not permit an inference that the untendered evidence would in fact have been damaging to the party not tendering it. The rule cannot be employed to fill gaps in the evidence, or to convert conjecture and suspicion into inference. …
… (The) rule cannot be applied to the non-calling of a witness unless it would be natural for the party to call the witness, or the party might reasonably be expected to call a witness, or … the missing witness would be expected to be called by one party rather than another ...
A more liberal test is that the party fails to call evidence which that party was plainly in a position to have given or called.
[11] Quotations, references and footnotes omitted
The above summary of the rule in Jones v Dunkel is not comprehensive. For example, Cross on Evidence lists 10 or 11 components of or aspects to the rule. Still, the summary is sufficient for present purposes.
I do not suggest that the observations that I have recorded above necessarily comprise or lead to a strict application of the rule in Jones v Dunkel. Nevertheless, in my view it would have been natural for the husband to obtain affidavits from his family members (at least), and one would have expected them to have made themselves available to the husband for that purpose. I do not infer from the absence of this form of evidence that it would necessarily or inevitably have been damaging to the husband's case if it had in fact been obtained in a timely fashion and presented to the Court. I can and do infer, however, that it may not have helped the husband’s case. Even without that inference, however, I feel that the totality of the evidence before me compels me to reach the conclusions that I have expressed in these and the parenting judgment regarding husband's credibility, and his financial dealings with his family.
At the commencement of the trial 9 November 2009, I ruled that a number of documents filed by or on behalf of the husband could not be relied upon. I have dealt with this subject in the parenting judgment, and there listed the material that eventually formed part of the parties’ cases. The documents rejected were the husband's amended response and his affidavit in support, an affidavit sworn by the husband's mother, an affidavit sworn by the husband's sister, an affidavit sworn by the husband's brother, and an affidavit sworn by the husband's brother-in-law. All these documents were filed – in clear breach of previous procedural orders – on 5 November 2009. No adequate explanation was ever provided for the late filing of the material.
Mr Testart confirmed at the outset that the Estate had commenced proceedings against the husband and wife in the Supreme Court of Victoria in relation to the alleged loans. Again, no serious attempt was made to adjourn the proceedings to enable the Supreme Court proceedings to be dealt with (although Mr Testart suggested that it might be prudent to await the outcome of the Supreme Court proceedings). I emphasised that the Estate had been given leave to intervene in these proceedings as early as June 2009, and I explained clearly that if the proceedings were not adjourned, and if I proceeded to hear the case and make findings about the alleged debts, then the issue would likely be regarded as falling within the doctrine of res judicata; alternatively, the Estate would likely be met with an argument based on issue estoppel. When I invited Mr Testart to apply for an adjournment, he declined to do so – although he did make an application for an adjournment on the second day of the hearing (10 November 2009), after the wife had commenced evidence on the previous day. The application was dismissed.
The husband's family members who had sworn the affidavits that were disallowed (or some of them) were in court at the commencement of the hearing. I made it clear to counsel that I would consider any application to call them as witnesses when and if such application were made. Indeed, Mr Testart decided to "play it safe" and require those family members to comply with an order for witnesses out of court – just in case he was minded to call them at a later stage.[12] He did not elect to call them and their evidence was never presented to the Court.
[12] See the 11 November 2009 transcript, page 107; see also 23 November 2009 transcript, pages 391-2
Notices to admit facts, and “smoking guns”
Lengthy and detailed notices to admit facts (and authenticity of documents) were filed by the husband on 27 August 2009 and
21 October 2009. Unfortunately, the notices did little or nothing to refine or filter the more significant issues in the property settlement proceedings. They certainly did nothing to shorten the length of the trial. Notwithstanding the notices, and the wife's responses to them (in the form of notices of dispute filed 28 September 2009 and 5 November 2009), many of the husband assertions regarding the manner in which various loans were created remained incomprehensible.
To a large extent, the ineffectiveness of the notices to admit facts was a result of poor drafting. For example (and it is only one of a number of examples), paragraph 27 of the second notice to admit facts reads as follows:
That the loans and transfers referred to in paragraphs 19, 23 and 26 herein, formed a loan agreement between:
a) the (husband's) father; and
b) the husband and the wife
for the husband and wife to borrow the sum of $80,326 31 … to be repaid together with interest at the rate of 6%.
The paragraphs leading up to paragraph 27 (including paragraphs 19, 23 and 26) make no mention of the wife having any involvement whatsoever in the alleged "loan agreement". Similarly, they make no reference to the alleged interest rate of 6%. Further, the manner in which the alleged loan was supposed to have been created is simply incomprehensible (and the husband's evidence at trial did nothing to clarify matters). I would add that "loans and transfers" obviously cannot, of themselves, form "a loan agreement" in the manner apparently suggested in paragraph 27 of the second notice to admit facts.
In an (unsuccessful) effort to shorten the trial to some extent, I inquired of each party (during the course of his/her evidence) whether he/she had a "smoking gun" somewhere. By "smoking gun", I made it clear to the parties that I was referring to evidence that would demonstrate conclusively that funds which may have been provided to the parties by the husband’s late father were in fact loans (or, alternatively, gifts). Each conceded that there was no smoking gun, and that he/she had no such evidence.[13] For example, the following exchange occurred during the husband's cross examination:[14]
[13] See, in relation to the wife's concession, 11 November 2009 transcript, pages 195 to 200. The husband's concessions can be found in 23 November 2009 transcript, pages 422-3, 428-9 and 436 and in 24 November 2009 transcript, pages 520 and 547
[14] See 23 November 2009 transcript, page 422
WALTERS FM: … My understanding was, and we talked about smoking guns before … if there was - if (the husband) had bank statements, for example, that recorded regular payments to his father as repayment of loan or cheque butts that said repayment of loan or something, they would have all been produced before.
MR M TESTART: Yes.
WALTERS FM: And (the husband) said … right from day one to be fair to him, there is nothing recorded as a loan in his documents. But he says that was the arrangement with his father and says your client knew, maybe not chapter and verse, but she knew in broad terms the arrangement. So … one can take it, I think, that (documents are) not going to say repayment of loan anywhere, because that's been consistent evidence from the husband all the way through. … Is that correct, Mr Testart?
MR M TESTART: Yes. … And your Honour will be asked to infer from the circumstances, but neither party has a smoking gun … and that's why they are throwing rocks at each other because that's the best they can do with the circumstances.
WALTERS FM: It's a good comment. … (To the husband): Mr Owens, I think I asked your wife the same, but I assume you haven't got a smoking gun, either? Nowhere have you got some document that you can show to me which reveals a clear statement these were loans? In the end I have to do the best I can with the evidence I have got, but the same question as she was asked. There isn't a smoking gun there and when we look at these figures, even if you could find the cheque butts they wouldn't say repayment of loans. So we have to infer with what we have got?
HUSBAND: That’s correct.
WALTERS FM: Is that a fair comment?
HUSBAND: That’s correct.
A similar exchange occurred a short time later:[15]
[15] See 23 November 2009 transcript, page 436
WALTERS FM (to the husband) : Can we clarify ‑ is (the payment of interest to the husband’s late father) covered in the no smoking gun comment?
HUSBAND: That’s correct, yes.
…
WALTERS FM: There is just no other written document. That's my understanding of it.
MR M TESTART: Your Honour, there is no formal loan agreement … and the terms haven't been formalised in writing between the parties. It's an alleged loan that's verbal … and is part performed and the terms are to be inferred by the conduct. And so my client won't be able to assist the court with any … written record.
WALTERS FM: It is crystal clear that there are – and I think
Mr Owens has confirmed that on a number of occasions but if I am wrong, now is the time to speak up. There is no other document, no written document that he can produce, or probably that has been in existence, that talks about a loan or about interest attributing to it. Is that right?
HUSBAND: That’s correct, yes
During the course of his oral evidence, the husband conceded that he had not kept any records (himself) – of any nature whatsoever – recording payments from his late father to him (or the parties) or from him (or the parties) to his late father. The husband also conceded that not all payments that he made to his late father comprised interest payments.[16] In my opinion, it is extraordinary that the husband, who is clearly intelligent and well educated (even if he does not have the qualifications that he deposed to having) – and who is [employed in the law enforcement industry] – would not have recorded (in some detail, at least) and kept some form of running record or ledger identifying his current indebtedness (or alleged indebtedness) to his father. How else would the husband know what he must pay back to his father, or how much interest he should pay?[17] The lack of such record-keeping simply reinforces my view (expanded upon below) to the effect that the alleged loans were not, in fact, loans at all.
[16] See, for example, 23 November 2009 transcript, pages 403, 409 and 438
[17] See, for example, Exhibit W10, where the husband told the wife: "Prior to separation the vast majority of payments (of interest) were made in cash so I have no tracking"
Given the absence of clear, independent evidence regarding the nature of the husband's financial dealings with his late father (and with other family members), the husband's credibility is obviously a significant issue. His evidence was the only evidence presented regarding the precise nature of the relevant financial dealings. The wife's evidence was to the effect that, at all relevant times, she had no knowledge of the details of these dealings. She strongly denied that she was ever a party to any loan agreement – whether written or oral, and whether direct or indirect, as it were – involving the husband and his late father. She made it clear that all arrangements were left to the husband, and that he did not consult her about them.[18]
[18] See, for example, 11 November 2009 transcript, pages 133 and 147 and following
I have already recorded that I prefer the wife's evidence where it conflicts with that of the husband. Such a finding may not have impeded the husband's arguments to the effect (for example) that moneys received from his late father were loans, and that they were repayable, if the husband had conceded that the wife had no knowledge of the arrangements that he had made with his late father. But the husband asserted from any early stage that the wife was well aware that relevant transactions comprised loans between his late father (on the one hand) and the husband and the wife (on the other). In making such an assertion, the husband set up a very clear conflict between his evidence and the wife's evidence. I cannot know why the husband was minded to run his case on the basis that the wife was well aware that relevant transactions were loans when, I find, it is clear beyond argument that she was unaware of such alleged arrangements. I accept – without hesitation – her evidence in this regard, and reject the husband's evidence where it conflicts with that of the wife.[19]
[19] See, for example, the Court's comments in 11 November 2009 transcript, pages 168-9
I find that the husband was less than truthful when he asserted that the wife was a party to the alleged financial transactions with his late father, and when he asserted that she was aware that intra-family loans existed or had been created.
During the course of his oral evidence, the husband appeared to modify his earlier assertions to the effect that the wife was aware of various loan transactions. He suggested that the wife was aware of such transactions in very broad terms only, and conceded that she was unaware of many cash transactions or movements of cash that took place between his late father and himself. He also conceded that she was unaware of moneys moving (in cash) between the husband and his brother and the husband and his sister during the period of the relationship.[20]
[20] See, for example, 23 November 2009 transcript, page 459 tension
The husband's general lack of credibility (as discussed in these reasons, and in the parenting judgment), and his single-mindedness in pressing (or, alternatively, in instructing his counsel to press) arguments relating to the existence of loans which were clearly without merit, reinforce the conclusion that I have reached to the effect that no such loans ever existed. That is not to say, of course, that moneys were not provided to the parties (or to the husband) by the husband's late father, but the fact of the matter is that the preponderance of evidence did not get close to demonstrating that the husband's assertions regarding the existence of formal, enforceable loans should be accepted.
I would add that, during the course of her oral evidence, the wife said that the marriage was effectively over well before August 2007. Indeed, she said that the relationship was over by 2006 "at the very least". She said that the husband's relationship with his present partner commenced approximately 3 years before August 2007 and that, in those three years, she and the husband had "no relationship"; they were "like ships passing in the night".[21] I accept the wife's evidence in this regard, which evidence explains why the wife had so little knowledge of the more recent financial transactions in which the husband asserts that he was involved. Clearly, if the husband had not seen fit to involve the wife in any relevant sense in the transactions giving rise to the alleged loans early in the relationship, then it is even less likely that he would choose to involve her in the later transactions. Indeed, given the husband's character and personality (as I have described them in the parenting judgment, and elsewhere in these reasons), I find that he had no desire to be open and frank with her regarding financial matters and that, for at least a year or so prior to separation he was effectively preparing for the possibility of having to meet a substantial property settlement claim on the part of the wife. On the basis of all the evidence before me, I find that he prepared for that possibility by endeavouring to structure his then current financial arrangements, and recast his previous financial arrangements, in such a way as to give the impression that formal loans existed, when such was not the case. The complexity and lack of transparency surrounding the purchase of Unit 2 in the Property C development (see below) is a good example of the husband's approach in that regard. Even at that stage, it is likely that he had formed an intention to prevent the wife from potentially making any substantial claim by way of property settlement, and to defeat any claim that she may ultimately be minded to make.
[21] See 12 November 2009 transcript, page 231
It follows from the above that assertions such as those contained in paragraph 25 of the first notice to admit facts and paragraphs 27, 54, 64, 73, 76 and 80 of the second notice to admit facts should be rejected to the extent that they allege that the wife was a party to certain "agreements". I find, as well, that the assertions contained in those paragraphs should be rejected generally, because I simply do not believe much of the husband's evidence, and I certainly do not believe his evidence regarding the various alleged “loans”. I would add (although it has little to do with my findings regarding the husband's credibility and the non existence of the alleged loans) that the assertions in the paragraphs mentioned do not flow comfortably or logically from the propositions that precede them.
Property Settlement – The Law[22]
[22] This generic summary of the law relating to property settlement is reproduced from my decision in the matter of Kernahan [2007] FMCAfam 952
The general approach that should be adopted by the court in relation to a property settlement application has been described in many cases[23]. The court must first identify the property of the parties. It must then attribute a value to each item of property – usually as at the date of the hearing. Thereafter, it must assess the extent of each party’s contributions under the various sub-headings described in section 79(4) of the Family Law Act. Finally, the court must consider the financial resources, means and needs of the parties, and the other matters set out in section 75(2) so far as they are relevant. An adjustment of the amount due to each party by way of contribution is then made by reference to the section 75(2) factors. It is not essential, however, that such an adjustment take place. Generally speaking, an adjustment is made because one party has greater needs and the other has stronger means.
[23] See, for example, Pastrikos (1980) FLC 91-987, Lee-Steere (1985) FLC 91-626, Ferraro (1993) FLC 92-335, Clauson (1995) FLC 92-595 and Whitely (1996) FLC 92-684
In relation to the contributions of the parties under section 79(4) generally, it has been held that a “global” approach will usually be more convenient than an “asset by asset” approach – although the application of an asset by asset approach does not (of itself) amount to an error of law[24].
[24] See Norbis (1986) FLC 91-712
The section 75(2) factors are related to the process of arriving at a just and equitable result. It follows that there may be circumstances in which the justice and equity of the case, and the specific provisions of section 75(2), support an adjustment in a party’s favour for matters which cannot comfortably be described as being of financial or economic significance[25].
[25] See McMahon (1995) FLC 92-606, at 82,043
Under section 79(2), the court is required to be satisfied that the property settlement orders that it proposes to make are just and equitable – and not simply that the underlying percentage division of the net value of the parties’ property is appropriate. In other words, in the consideration of whether the overall result of property settlement proceedings is just and equitable, it is the justice and equity of the actual orders, and not of the percentage distribution, which must be considered[26].
[26] See Russell (1999) FLC 92-877
The overall process to be applied in property settlement cases is summarised by the Full Court in Hickey (2003) FLC 93-143, where their Honours said:[27]
The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s.79. That approach involves four inter-related steps. Firstly, the court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the court should identify and assess the contributions of the parties within the meaning of ss.79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the court should identify and assess the relevant matters referred to in ss.79(4)(d), (e), (f) and (g), including, because of s.79(4)(e), the matters referred to in s.75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case…
[27], paragraph 39
My view is that the testing of any proposed orders by reference to section 79(2) is not a fourth substantive step (properly so called) in the property settlement exercise.[28] In applying s.79(2), the court has power to adjust the form, structure or balance (for want of a better description) of the orders that it is minded to make in order to give effect to its conclusion as to the parties’ respective entitlements after the application of the first three steps mentioned in Hickey. In other words, the determination of the proportional or other distribution or division of the parties’ property between them must necessarily be concluded before the court considers the justice and equity of the actual orders that are to be utilised to give effect to that distribution or division.
[28] See OSF & OJK (2004) FLC 93-191
In B & B (2006) FamCA 883, Faulks DCJ said[29];
If the judge has properly carried out his or her functions in determining the factors under section 79(4) (including those applicable factors under section 75(2)), the result overall should be just and equitable within the terms of the Family Law Act 1975. Accordingly, if a judge on reviewing his or her deliberations in relation to the first three stages concludes that the result does not appear to accord with justice and equity, then it is likely that the earlier adjustments were wrong. This fourth stage is really a description of a judicial thought process rather than a third discretionary phase. I do not accept the proposition that there is a third discretionary phase un-associated with contributions and/or the financial circumstances of the parties (or the other matters under section 79(4)) which somehow permits a judge in accordance with his or her conception of justice and equity to vary determinations otherwise properly made in accordance with the first two discretionary assessments.
I accept that in some cases there may be a minor adjustment required, for example to enable a cash-poor litigant to retain some real estate when he or she has no capacity to make any payment to the other party. For my part, it seems to me that even that sort of adjustment is more appropriately incorporated into the first two discretionary phases.
[29] In paragraphs 105 & 106
In Brice (2007) FamCA 170, however, Kay J suggested – in a passage that is clearly obiter – that section 79(2) is itself a source of substantive power. His Honour continued[30];
If the sum of the parts created by section 79(4)(a), (b) and (c) contributions and section 79(4)(e) considerations adds up to too much or too little, then further adjustments may be made in order to meet the over-riding dictate that an order must not be made unless it is just and equitable.
[30], paragraph 19
For the reasons that I set out in OSF & OJK (2004) FLC 93-191 (and, in particular, in paragraphs 26 to 28 thereof), I prefer the analysis of Faulks DCJ in B & B to that of Kay J in Brice.
I would add that in the very recent decision of Norman [2010] FamCAFC 66, the Full Court held that the debate about the number and content of "steps" within the property settlement exercise –
59. … is best met by reference to the decision of the High Court in Mallett (1984) 156 CLR 605. There Gibbs CJ said at 608:
…[Parliament] has conferred on the court a very wide discretion to make such order as it thinks fit when it is satisfied that it is just and equitable that an order should be made (see sub-s (1) and (2) of s 79), although there are some broad principles to which the court is required to give effect, and some circumstances which it is required to take into account … The circumstances which the court is specifically required to take into account may be regarded as falling within two main classes. First, the court must consider the extent to which either party has in the past contributed to the acquisition, conservation or improvement of the property … Secondly, the court must consider all those circumstances which relate to the present and future needs, and to the means, resources and earning capacity, actual and potential, of the parties: see s. 79(4)(d) and s 75(2)(a)-(m) … The Act does not indicate the relative weight that should be given to different circumstances, or how a conflict between opposing considerations should be resolved – those things are left to the court’s discretion, which must, of course, be exercised judicially.
60. It is the mandatory legislative imperative (to reach a conclusion that is just and equitable) that drives the ultimate result. For all its usefulness and merit as a “disciplined approach” or a “structured process of reasoning” … the “three-step” or “four-step” approach merely illuminates the path to the ultimate result.
61. A structured approach is, of course, desirable and also provides to litigants and practitioners alike predictability in the manner in which cases will be dealt with and judgments delivered. But, that is not the same thing as a legal requirement, the failure to comply with which will result in appealable error. …
At the end of the day, the precise nature of the final step or stage in the property settlement exercise is of no significance in the present case. It is enough to record that the process involves the court metaphorically “stepping back” to consider whether the proposed orders (arrived at after the application of the first three steps described in Hickey) are just and equitable.
Property and Liabilities as at the date of trial
The first step in the property settlement exercise relates to the identification and valuation of the parties’ property at trial.
Subject to comments to be made later in these Reasons, I find that the parties’ property and liabilities are as follows:
Assets
Amount
Sub Total
1.
Proceeds from sale of former matrimonial home
$368,318.13
2.
Proceeds from sale of unit 4 Property C
$199,834.92
3.
Wife's Honda CRV motor vehicle
$10,000.00
4.
Wife's [Q] shares
$2,385.44
5.
Moneys paid out by the husband after the date of separation – being purported “loan repayments” (“Add back”)
$276,580.00
$857,118.49
6.
Wife's superannuation
$55,000.00
7.
Husband's superannuation
$121,553.00
$176,553.00
TOTAL
$1,033,671.49
It can be seen from the above that the total net value of the parties' property is $1,033,671.49 – of which $121,553 comprises the husband's superannuation entitlements and $55,000 comprises the wife's superannuation entitlements. “Add backs” comprise $276,580.
It was not in dispute that the parties' respective superannuation entitlements should be included in the overall "pool" of property available for distribution between them. In other words, neither party suggested that superannuation should be included in a separate list,[31] to be treated differently from the remaining items of property. Further, there was no suggestion that the parties' contributions to their superannuation interests should be treated or assessed any differently to their contributions to other items of property. In other words, a "global" approach was adopted.
[31] See C & C (2005) FLC 93-220,, at para.63
Agreed values, and items in dispute
The values to be attributed to most of the items of property comprising the pool were agreed. The only items in dispute were the following:
a)
An alleged liability described as Loan to the husband’s late father including interest in the husband's outline of case document. The husband recorded the value of the alleged loan (including interest) as $241,644, and asserted that it was a joint liability.
A note relating to the alleged liability reads:[32]
The husband’s late father made extensive loans to the parties to purchase an investment property and shares made initial contributions in the sum of $558,000 representing 75% of the property (sic). These loans have not been repaid.
b)Various amounts paid by the husband after the date of separation, which payments the husband asserted were loan repayments. The wife did not admit that the payments were in fact loan repayments, and argued that they should be added back into the pool of property available for distribution between the parties. Within this category are payments of $73,500 and $143,280 on or about 9 July 2008, $40,000 on 26 September 2007 and $19,800 on 23 June 2008. These payments total $276,580.
c)Various other payments by the husband (some before and some after separation), which the wife submitted should be added back into the pool of property available for distribution between the parties, including a payment of $10,000 to the husband’s partner in August 2008.
[32] See the husband's outline of case filed 19 June 2009,, the end of Part (D)
I have concluded that:
a)the alleged liability referred to in paragraph 53(a) above should not be taken into account as a liability;
b)the payments referred to in paragraph 53(b) above should indeed be added back as requested by the wife; and
c)the payments referred to in paragraph 53(c) above should not be added back.
The schedule set out above reflects my conclusions in that regard.
Before dealing with each of the alleged debt (or debts) and the add backs (which are clearly related), I reiterate that the usual practice in dealing with property settlement matters is to include all items of property, and all liabilities, in existence at the date of trial. There are, however, well recognised exceptions to that rule.
In Biltoft (1995) FLC 92-614, the Full Court said[33]:
A general practice has developed over the years that, in relation to applications pursuant to the provisions of s. 79, the Court ascertains the value of the property of the parties to a marriage by deducting from the value of their assets the value of their total liabilities. In the case of encumbered assets, the value thereof is ascertained by deducting the amount of the secured liability from the gross value of the asset. See Ascot Investments Pty Ltd v. Harper & Anor[34] where Gibbs J. (as he then was) pointed out[35] that the Court ''must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it'' . Where the assets are not encumbered and moneys are owed by the parties or one of them to unsecured creditors, the court ascertains the value of their property by deducting from the value of their assets the value of their total liabilities, including the unsecured liabilities. See Prince and Prince; General Credits Australia Limited (Intervenor); A-G for the State of Queensland (Intervening); A-G for the Commonwealth of Australia (Intervening)[36], where Evatt CJ said:[37]
... The Court may have to determine, as between the parties, the existence of a particular liability ….
The assessment of debts and liabilities is not necessarily arrived at by a strictly mathematical or accountancy approach in all cases. While some liabilities are charges upon the property which can be accurately assessed at a certain date, others are at large, or have not been precisely determined, e.g. tax liabilities …. In some cases the amount of the liability can only be estimated generally …. The Court can make an allowance for a particular liability if appropriate to do so. In some cases there are sufficient uncertainties as to the alleged liability to lead the Court to disregard it entirely or partly (e.g. a loan from a parent of the party not likely to be enforced; …). In other cases, the Court may take the view that because of the circumstances surrounding the incurring of the liability it ought in justice and equity to be wholly or partly disregarded in determining the appropriate order to make under sec. 79 as between the parties to the marriage. Such a result could be reached where a spouse had incurred a liability in deliberate or reckless disregard of the other party's potential entitlement under sec. 79 …. Complex issues can arise in regard to liabilities to third parties …
Of course, the Court cannot ignore the fact that there is or may be a liability; the effect is simply that it does not consider that the other spouse should be called upon to in effect 'contribute' to the liability by having that spouse's fair share in the parties' property reduced by virtue of its existence. The effect may be that the party who has incurred the liability will be left to meet it out of whatever funds remain to that party after satisfying the property order made under sec. 79 …
[33] all references removed
[34] (1981) 148 CLR 337
[35] at p.355
[36] (1984) FLC 91-501
[37] at p.79,076
The Full Court continued (at p.82,127):
Notwithstanding the general practice which has developed, the Court has indicated that it may properly determine not to take into account or to discount the value of an unsecured liability in certain circumstances. Such liabilities would include but are not limited to a liability which is vague or uncertain, if it is unlikely to be enforced or if it was unreasonably incurred…
There is no requirement that the rights of an unsecured creditor or a claim by a third party must be considered and dealt with prior to the Court making an order under s. 79, nor is there a rule of priority as between a creditor claimant and a spouse. Those rights, however, cannot be ignored. They must be recognised, taken into account and balanced against the rights of the spouse…
In a similar context, the question of how to deal with liabilities which have been "unreasonably incurred", or the loss of assets by a party prior to the trial in circumstances which can be regarded as reckless or unreasonable, usually leads to consideration of cases such as Kowaliw (1981) FLC 91-092 and Townsend (1994) FLC 92-569.
In Kowaliw, Baker J said (at page 76,643-4):
Marriage is for most couples an economic partnership. Married couples live together and work together with the ultimate object of purchasing a home, paying it off, acquiring other assets with the overall object of attaining a higher standard of living. The reported decisions in respect of applications for settlement of property under sec.79 of the Act are unanimous that both parties should share the economic fruits of a marriage, having regard to the provisions of sec. 79(4) and sec. 75(2), although not necessarily equally.
Is not, however, the converse equally sustainable? In other words, should not financial losses incurred by parties to a marriage or either of them, whether incurred jointly or severally, be shared by them in the same manner as the financial gains?
As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
In Browne v Green (1999) FLC 92-873, the Full Court said:
While care should probably be taken … not to elevate Baker J's statement (in Kowaliw) to "a principle", we are nonetheless satisfied that it is certainly is a well-accepted guideline within the jurisdiction which has received the endorsement of successive Full Courts.
I refer, as well, to the discussion of the Kowaliw principles in
AJO v GRO(2005) FLC 93-218 and C & C (2006) FLC 93-269.
In AJO v GRO, the Full Court referred to three clear, but broad, categories of cases where it was appropriate to notionally add assets back to the property pool, namely:
a)where the parties have expended money on legal fees;
b)where there has been a premature distribution of matrimonial assets; and
c)in the circumstances outlined in Kowaliw.
The purported "repayments" made by the husband and forming the subject of the amount of $276,580 added back into the pool of property available for distribution between the parties fall, I find, within the following categories:
a)They amounted to a premature distribution of matrimonial assets. In other words, because the alleged loans never existed, the funds should have been available for distribution between the parties in the usual way. That is not to say, of course, that each party's contributions to those funds (whether direct or indirect) will not be considered. Such contributions are obviously relevant, but the husband took steps to distribute to his family property in which the wife had a legitimate interest. I am well aware that the husband was alleging that the wife had no such interest, but the fact of the matter is that the husband's allegation that regard warranted careful scrutiny. The complexity of these proceedings and the details of the evidence discussed in these reasons – and the findings I have made (to the effect that loans, as such, never existed) – are testimony to the need for such scrutiny.
b)They amounted to the implementation of a course of conduct designed to reduce or minimise the size of the pool of property available for distribution between the parties. I have made strong findings elsewhere in these reasons regarding the husband's willingness to "rewrite history" in order to prevent the wife obtaining property to which, in the husband's opinion, she should have no entitlement, including a finding that the husband made a series of awkward attempts to construct or fabricate "loans" from whatever financial or other sources were available to him.
c)At the very least, they amounted to the husband acting recklessly or wantonly with funds that would otherwise have formed part of the pool of property available for distribution between the parties. I am well aware, and have discussed later in these reasons, the fact that the husband used some of the funds to purchase motor vehicles that his parents. Had his actions in purchasing these items been motivated primarily by love and respect for his parents, and had there been evidence that his parents were in need of the vehicles that he purchased and did not have sufficient resources to acquire them themselves, there is at least the possibility that the Court might regard the husband's actions as understandable, even if they were otherwise inappropriate. But the husband made it clear that the funds used to purchase the vehicles comprised first and foremost the repayment of alleged loans. If the loans are found to be nonexistent, then there can be no justification for the outflow of funds.
In the most fundamental sense, the husband failed to satisfactorily explain why it was necessary for him to generate such a significant outflow of funds (totalling $276,580). He did not get close to adequately explaining (or even explaining in any comprehensible fashion) how it was that his financial dealings with his late father and other members of his family created a need for any funds to be repaid to anyone at any stage. In forensic terms, his real argument should have been a contributions-based argument, but that was not the way the husband elected to conduct the proceedings. Given the findings that I have made in these reasons, and in the parenting judgement, and absent any other satisfactory explanation from the husband, the Court must find that he inappropriately utilised the parties’ joint property in a manner that would make it unjust to the wife to ignore the fact that the husband had removed funds and not properly accounted for them.[38]
[38] See, by way of analogy, Whiterod & Taylor (2006) FLC 93-266 at paragraph 27
Full and frank disclosure
There can be no doubt that both parties have a clear obligation to make full and frank disclosure of their financial circumstances in a timely manner.[39].
[39] See Reichstein (2006) FamCA 1422, at paragraph 80.
The duty to make full and frank disclosure of one’s financial position has been set out in a number of cases determined by the Full Court over the years. Those cases were summarised in Chang v Su (2002) FLC 93-117. Full and frank disclosure is required as a matter of principle in proceedings between spouses or former spouses under the Family Law Act (see, for example, Oriolo (1985) FLC 91-653, Briese (1986) FLC 91-715 and Giunti (1986) FLC 91-759). Where the court cannot be satisfied as to the extent of a party’s property, it can be less cautious than might otherwise be the case when making relevant orders (see Mezzacappa (1987) FLC 91-853, Black & Kellner (1992) FLC 92-287 and Weir (1993) FLC 92-338).
The authorities referred to above reveal that a judge (or federal magistrate) is entitled to take a “robust view” in relation to findings regarding a party’s financial position (including a party’s capacity to meet any proposed order) where that party has failed to make full and frank disclosure of his/her financial position.[40]
[40] See Chang v Su, at paragraphs 71 an 72
In November 2002, the High Court dismissed an application by the husband in Chang v Su seeking special leave to appeal from the Full Court’s decision. In the course of argument, Callinan J observed:
It does not matter what the principle might be seen to be, a Court has to do the best it can. It does the best it can, having regard to the evidence that is adduced, and if the parties are not frank then naturally there is going to be a measure of imprecision about any findings that the Court can make.
In K & K (2002) FamCA 1150 (reported in (2003) FLC 93-135 – but not as to this issue) – the Full Court said:[41]
(It was submitted that certain cases discussed in the judgment) were authority for the proposition that where there was a finding of deliberate non-disclosure the Court could act more robustly in making findings adverse to the party who had actively misled it. We do not see that the principle should be so confined.
Whether the non-disclosure is wilful or accidental, or is a result of misfeasance, or malfeasance or nonfeasance, is beside the point. The duty to disclose is absolute. Where the Court is satisfied that the whole truth has not come out it might readily conclude the asset pool is greater than demonstrated. In those circumstances, it may be appropriate to err on the side of generosity to the party who might otherwise be seem to be disadvantaged by the lack of complete candour…
[41] at paragraphs 50 and 51.
I find (as is apparent from the matters contained in the first disqualification judgment and the parenting judgment) that the husband failed to make full and frank disclosure of his financial position in a timely fashion. Similarly, he failed to provide relevant documents (such as a copy of his late father's will) which were readily available to him.
The husband’s failure to make full and frank disclosure of his financial position in a timely fashion cannot be excused by some suggestion that he was unaware of or otherwise misunderstood his obligations. He and the wife were informed of those obligations in very clear terms, and on more than one occasion, at the preliminary hearing on 23 June 2009. I refer, for example, to the following exchange:[42]
WALTERS FM (to the husband): … let me explain the process to you. One often hears comments such as the one you made: "If there's anything else you want, just let me know." That's not what the process is about. The process is that you volunteer every single piece of paper that is currently in your possession or has ever been in your possession that relates in any way to your financial position or to the matters that are at issue in the proceedings.
HUSBAND: Yes.
WALTERS FM: You give until it hurts … and if there is any piece of paper that you look at or you think about and you ask yourself, "Is this relevant?" the answer is inevitably and always, "Yes, I disclose it," unless it is blindingly obvious that it has absolutely nothing to do with your financial position, your brother's financial position, your father's financial position or anything to do with the case at all. Do you understand?
HUSBAND: Yes.
WALTERS FM: So it's no good saying, "Well, I didn't know whether they wanted anything else. I've got other files. I didn't know whether you needed them." The lot gets produced.
HUSBAND: Yes.
WALTERS FM: If that means suitcases, then that's what gets produced. Do you understand?
HUSBAND: Yes.
[42] See 23 June 2009 transcript, page 14
Alleged loans – Preamble
I turn now to the alleged debt, and to the purported "loan repayments". Given the disjointed manner in which the case was conducted, and the husband's failure to file his closing submissions in a timely fashion (leading to them being rejected as described in the parenting judgment), it has not been easy to identify the basis of the husband's claim that the parties owed in the past, and continue to owe, significant amounts of money to the husband's late father (or the Estate), and perhaps to other members of the husband's family as well. In the circumstances, I have elected to approach the subject by dealing with such of the various transactions and alleged loans referred to in the husband's notices to admit facts as I consider relevant.
It is important to record, however, that the husband's case was less than consistent in its approach to the question of the alleged debt to the Estate. For example, in the husband's first affidavit (sworn 12 September 2008) – being an affidavit prepared by the husband himself, at a time when he was self represented – the husband presented a very different version of the genesis of the alleged debt from that reflected in the two notices to admit facts, and the version presented at trial. Significantly, in his first affidavit the husband made no mention of any interest being payable in respect of certain of the alleged loans comprising the alleged debt;[43] nor did he make mention of interest in his first financial statement (also prepared by the husband himself sworn on 12 September 2008).
[43] The husband asserts (in paragraph 19) that he paid interest (or some interest) in respect of the alleged loan relating to the Property C property, and in respect of certain small alleged loans, from the first half of 2007 (see paragraphs 24, 25 and 26)
There were numerous examples of the husband failing to make full and frank disclosure of documents available to him. He was certainly not prepared to inconvenience himself in order to provide the wife with information that she may have requested. By way of a relatively small example, in May 2008 the husband withdrew $3850 – in cash – from the parties' joint account. He asserted that it was paid to his brother-in-law (again, in cash) for electrical work associated with the construction of a small apartment over the garage at (I think) the former matrimonial home. After initially denying that the wife requested an invoice or receipt for the payment, the husband eventually conceded that the wife had indeed asked for an "itemised receipt". The wife's request was contained in email sent to the husband in March 2009. His response to the request was: "Yes, will do." But the husband did not provide the receipt, and he was unable to produce it at court.[44] He conceded, however, that it was within his power to have requested an itemised receipt at any time.
[44] See exhibit W15, and the 24 November 2009 transcript pages leading up to page 493
In re-examination, the husband was asked whether he had asked his brother-in-law for an invoice. He then proceeded to give a comparatively lengthy, non responsive answer. Clearly, the issue was not whether the payment that was made for electrical work was reasonable in itself, but why the husband had not complied with the wife's request to provide an itemised receipt.[45]
[45] See 24 November 2009 transcript, page 544
Again, before dealing with the transactions and alleged loans referred to by the husband, I will record that I reject any suggestion that the wife has somehow admitted that there were substantial debts owed by the husband and the wife to the husband's late father. Similarly, I reject any suggestion that the wife is somehow estopped or otherwise precluded from challenging the husband's assertions regarding the existence and quantum of the alleged loans. There is simply no evidence that would properly enable me to form such a view. To the extent that the husband may have said or inferred that the wife admitted or accepted the existence and/or quantum of the alleged loans, I do not accept his evidence in that regard. I find that the wife never admitted or accepted the existence and/or quantum of the alleged loans, and that any acknowledgements on her part that payments could or should be made to the husband's late father (or other members of the husband’s family) were given on the basis that she was then wholly unaware of the details of the husband's financial dealings with his family. For example, the wife deposed to her lack of knowledge regarding the husband's financial dealings with his late father in paragraphs 9, 10 and 11 of her affidavit sworn 21 July 2008 (being the first affidavit sworn by either party in these proceedings). In paragraph 14 of her affidavit, the wife said (regarding alleged loan payments made by the husband after the date of separation):
I did not provide permission for this money to be transferred to my husband's parents and I have never given any permission for moneys to be paid to his parents without first being provided with documentation as to what money, if any, is owing to his parents.
I acknowledge the existence of the wife's email to the husband dated
1 January 2008 (which is attached to the first notice to admit facts), but find that the wife's comments in the email cannot fairly be interpreted as an acknowledgement or concession on her part to the effect that there were then substantial debts owed by the parties to the husband's late father (or any other member of the husband’s family).
In broad terms, the husband asserted that, whenever he needed funds he would simply ask his father if he could “borrow” some. For example, the husband asserted that, although the parties could obtain finance from a financial institution to purchase the land upon which the former matrimonial home was built, they could not obtain finance to construct the home. For that reason, the husband asserted that he was obliged to borrow from family members in order to meet the costs of the construction of the former matrimonial home. Later on, and after his father retired and received his superannuation entitlement from [Q] (for whom he had worked for 20 or 30 years), the husband allegedly asked his father if he could use funds that his father had invested to reduce the parties’ mortgage. The husband asserted (again, in broad terms) that such an arrangement obliged the husband to pay his late father interest, but at a slightly lower rate than he would have been be obliged to pay a financial institution.[46]
[46] See, for example, 23 June 2009 transcript, page 8
The husband also asserted that he would “repay” his father money "whenever he had it", and – to the extent that I understood his evidence – that the payments made (during cohabitation, at least), were always interest payments, and not repayments of capital. The husband said that he would pay his father at irregular intervals (which could be monthly or quarterly). If a number of months had passed and no payments had been made, then, according to the husband, his father would ask him for money.[47]
[47] See, for example, 23 June 2009 transcript page 9
During the course of the hearing on 23 June 2009, the husband conceded that he had never recorded any of the alleged loans from his late father as part of his liabilities in any loan application that he had ever made to banks or other financial institutions. He conceded that he did not do so because (looking back at the matter) he wished to obtain a financial advantage by not mentioning the alleged loans.[48]
[48] See 23 June 2009 transcript, pages 6-7
It must be said that the purpose and composition of a number of the alleged loans appeared fluid (or, to put it another way, malleable). Exhibit W9 comprises an email from the husband to the wife's solicitor dated 13 April 2008. In the email, the husband purports to summarise the moneys "borrowed" from his late father. The list bears some resemblance to other descriptions of the alleged loan arrangements, but, if the husband’s case were to be accepted, is clearly (and unaccountably) inaccurate.
The husband's explanation for the proliferation of loans (being, in essence, that after much "digging", he was able to break down larger loans into their component parts, purportedly for the wife's benefit) was not credible.[49] If the alleged loans were clearly enforceable debts owed by the husband (or, perhaps, both parties) to his late father, and if the arrangements were as clear as the husband had asserted, then the husband would have known precisely how much was owed to his late father at, for example, the date of separation. I find that the husband's categorisation of the alleged loans into eight separate alleged loans was artificial, and intended to bolster his argument to the effect that the alleged transactions amounted, in fact, to the creation of real loans.
[49] See, for example, 23 November 2009 transcript, page 425; see also 24 November 2009 transcript, page 542
Alleged loan #1 (totalling approximately $40,000)
In paragraph 33 of his first affidavit (sworn 12 September 2008) – being an affidavit prepared by the husband himself at a time when he was self represented – the husband deposed as follows:
Currently the balance of the loan owing to my father is $229,584.70 (Shares $40,000 + purchase of former matrimonial home $20,000 + Property C property $123,562.81 + other transfers and cash less repayments $46,021.89).
By the time the two notices to admit facts were filed, this seemingly simple summary had transmogrified: eight allegedly separate and identifiable loans now appeared in its place. Further, the husband asserted that a number of the alleged loans now bore interest at an agreed rate. As indicated above, the husband's first affidavit and financial statement only made limited and non-specific mention of certain of the alleged loans bearing interest.
Given the structure of the husband's first affidavit,, including paragraph 33 and the headings contained within the affidavit (being "Purchase of shares from the United States of America", "Purchase of the former matrimonial home", "Purchase of the Property C property" and "Other moneys received from and paid to my father") it is clear that the husband was asserting that the first alleged loan was for the purchase of US shares, and that $40,000 remained owing in relation to that loan.
In paragraph 10 of his first affidavit, the husband deposed as follows:
Between 1998 to 1999 my father loaned me $40,000 for the purchase of shares in the name of [D], an American company. I currently still hold these stocks. …
Nothing else was said about this alleged loan in the husband's first affidavit (save for mention of it in the summary in paragraph 33 of the affidavit).
In paragraph 8 of his affidavit sworn 17 June 2009, the husband deposed as follows:
On 12 December 1999 my father loaned me $15,000 and on
17 December 1999 $22,100 for my use to trade shares on the stock market. These loans were made prior to the marriage and shares were purchased by me. By agreement between the wife and I all shares were sold in June 2008. On 30 June 2008 I received the sum of $145,899.60 from the sale of the shares and I applied $143,280 and $73,500 from our joint accounts to part repayment of loans outstanding to my father's estate.
Although the parties did not marry until December 2000, they had commenced living together in or about June 1997. Thus, the first two transactions referred to in the passage quoted above occurred while the parties were cohabiting.
The wife did not dispute that the husband’s late father provided him with a total of $37,100 in December 1999. She did not concede, however, that the payments comprised loans.
The evidence reveals that the husband's late father borrowed the two amounts in order to pay them to the husband. In May 2001 he paid out the balance then outstanding, totalling approximately $28,550. He used funds from his superannuation entitlements in order to do so.
The husband's position at trial was that he and his late father "agreed in conversations" that the husband should be regarded as owing his late father the total amount of approximately $40,750 (comprising the sum of approximately $12,200,[50] being the total of the repayments made by the husband's late father towards the borrowed amount, together with the payout figure of approximately $28,550 referred to in the previous paragraph).
[50]The evidence regarding the terms of this alleged agreement was less than clear. Key terms such as the imposition of interest and the date for or conditions of repayment were never specified. To the extent that the husband asserted that such terms were agreed upon between his late father and himself, I reject his evidence in that regard. The fact of the matter is that the husband's evidence in relation to the arrangement was vague and inconsistent, and he had provided a number of explanations for the alleged debt (or given different descriptions of it) in his previous sworn material. The husband originally said that the debt related to the purchase of specific shares which he still owned as at December 2008. He later suggested that it related to the purchase of different shares, which were sold in June 2008. Later still, it was suggested that the alleged debt was part of larger transaction extending as far as 2003. The husband's evidence in relation to this alleged loan was confusing and wholly unsatisfactory.[51]
[51] See, for example, 23 November 2009 transcript, page 410-13
To further confuse matters, during the course of his evidence in June 2009, the husband said that this alleged loan was interest-free "until I could recoup that money from (the sale of shares that had been purchased in the United States) or could pay him back, whatever came first.” The terms were "very flexible".[52] He later said that "… the original $40,000, which I always refer to as the US loan, that was interest free, so … we were not paying any interest on that".[53]
[52] See 23 June 2009 transcript, page 8-9
[53] See 23 November 2009 transcript, page 440
I accept that the document headed "[Mr Owens’ Loan" (comprising part of exhibit W8) was probably prepared by the husband’s late father. I find, however, that it is almost incomprehensible. It was conceded by the husband in cross-examination that it was incomplete and inaccurate.[54] In my opinion, the husband was wholly unable to make sense of it. It is impossible to tell when the document was prepared, or to identify the source documents relied upon in its preparation. I accept that the husband did receive funds from his late father from time to time, but the evidence falls far short of the Court being able to conclude that the funds received were loans. Further, there is uncertainty about the amounts of money received from the husband's late father from time to time, the timing and characterisation of those amounts, and the quantum, sources and purpose of payments which the husband made to his late father, which payments clearly offset or reduce the alleged debt. For example, the husband was cross-examined about the alleged "repayments" (totalling $16,500) listed in paragraph 22 of the first notice to admit facts.[55] The husband said that the payments had not been referred to in any court document prior to the filing of the first notice to admit facts. Clearly, and because the husband conceded that he had not kept records of payments made to his father (and, indeed, payments that he had allegedly received from his father), the figures contained in this paragraph constitute a reconstruction of earlier events. The reconstruction must have involved some degree of guesswork, given that the husband's evidence was that any alleged repayments of loans were not recorded as such. Indeed most if not all of the alleged repayments were in cash. In addition, the husband said that the sole source upon which he relied to identify the payments referred to in paragraph 22 of the first notice to admit facts was the note comprising exhibit W8.[56] . Notwithstanding the fact that the alleged payments referred to in paragraph 22 were not matched by withdrawals from relevant bank accounts, the husband also insisted that he relied on the figures in exhibit W8 and then "reconciled them to the bank statements".[57] The husband conceded that there were a significant number of comparatively large cash withdrawals from relevant accounts during 2001. He asserted, however, that those not recorded in exhibit W8 as having been received by his late father must have been used for the construction of the former matrimonial home. At same time, he conceded that he had no records to prove that funds withdrawn were not paid to his late father.[58]
[54] See, for example, 23 November 2009 transcript, pages 403-6, and 410-13
[55] See 23 November 2009 transcript, pages 415-19
[56] See 23 November 2009 transcript, page 445
[57] See 23 November 2009 transcript, page 447; see also 24 November 2009 transcript, page 540
[58] See 23 November 2009 transcript, page 451
Ms Teicher also submitted (in paragraph 55 of WFS) that an amount of nearly $78,000 should be added back to the pool of available property. To reach that figure, she listed a number of seemingly unexplained and unrelated payments made by the husband between December 2007 and July 2008. Although the husband admitted the various payments, he was not cross examined on many of them. Notwithstanding the fact that the husband's evidence was generally vague and unsatisfactory, I am not prepared to assume that every unexplained transaction after separation was unnecessary or inappropriate in some way. Given the somewhat chaotic movement of funds into and out of accounts controlled by the husband, there is always the possibility of an offsetting transaction or payment being overlooked. Taking into account the whole of the evidence before me, I am not satisfied that it is appropriate to add the sum of approximately $78,000 back into the pool of available property. I am prepared to accept that it was used by the husband in an uncontroversial manner, even if some of it directly or indirectly benefited members of his family.
Ms Teicher submitted, in addition, that the amount of $10,000 that the husband transferred to his new partner on 7 August 2008 should be added back to the pool of available property. The husband asserted (to extent that I could understand his evidence) that this payment amounted to repayment to his partner of rent that she had paid. It is unclear to me, however, whether the husband was asserting that his partner had paid rent on his behalf or on her own behalf. The husband's partner did not give evidence. I have commented elsewhere regarding the husband's failure to make full and frank disclosure regarding his living and financial arrangements with his partner in his financial statement filed in late 2008.
In Gollings and Scott (2007) FLC 93-319, the Full Court said:
68. As a general rule once the parties have separated, subject to obligations of maintenance and support, and subject to the type of considerations described in Kowaliw … relating to waste, each party is entitled to get on with his or her life independent of the other. … It would not normally be appropriate some years after separation to require each of the parties to account for any moneys they had spent post-separation so as to determine whether or not that expenditure was reasonably necessary for their own self-support, and to the extent that it was not, to determine whether it would be proper to add it back into the pool of assets available for division between the parties….
69. In C & C (1998) FamCA 143, the Full Court … when examining some small add-backs into a pool of $3 million said:
45. … The provision of modest amounts of capital by parents to their adult children to enable the children to get a start in life is a normal experience in our society. In a case involving the magnitude of the assets of this case, in our view it is unreasonable to conduct a microscopic examination of each of the parties' items of post-separation expenditure with a view to determining whether or not it is appropriate that they be brought into account in dividing up the asset pool between them. The cases which deal with notional add-backs are generally examples of circumstances in which it would be clearly unjust and inequitable not to take those matters into account. ….
46. Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding moneys reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives. Providing modest support for their adult children or taking not inappropriate holidays for themselves seems to fit comfortably within that description.
70. This passage was cited with apparent approval by Finn, Kay and May JJ in Chorn and Hopkins at para 24.
Given that the payment to the husband's partner was made nearly a year after separation, I am prepared to treat it as a manifestation of the husband simply getting on with his life. Although the husband's evidence surrounding the alleged need for the payment was less than satisfactory, I am not comfortably able to reach any conclusion as to whether it was reasonably or unreasonably made. In such circumstances, it seems to me that the payment (being a post separation payment of a comparatively modest – although certainly not insignificant – amount of money should fall within "the rule rather than the exception" (to paraphrase the Full Court in C & C).
Lest it be suggested that I have adopted an inconsistent approach by declining to add back the $10,000 paid to the husband's partner whilst, at the same time, concluding that I should add back the amount of $40,000 used by the husband to purchase a car for his late father in September 2007 (and the amount of $19,800 used by the husband to purchase a car for his mother in June 2008), I will add that I see the two categories of payment as being very different:
a)Firstly, the two payments for the purchase of cars are significantly larger than the $10,000 payment.
b)Secondly, one of car purchases occurred almost immediately after separation while the other was, admittedly, made later – but still within approximately 10 months of separation.
c)Thirdly, the husband did not allege that the moneys used to purchase cars for his parents were provided out of natural love and affection for them, or because they needed funds to support themselves. The payments had nothing to do with the husband "getting on with his life". On the contrary, the husband asserted – through thick and thin – that the payments were no more and no less than repayments of the alleged loans (including interest on those alleged loans). Given that I have found that there were no such loans, I am of the view that it would be clearly unjust and inequitable if the payments were not added back along with the other purported "loan repayments".
The parties’ property settlement proposals
The wife's proposal at trial was, generally speaking, that the alleged loans should be ignored and that the property pool (including any add backs) should be divided on the basis of 70% to the wife and 30% to the husband. The way in which Ms Teicher arrived at these percentages was less than clear.
The husband's proposal at trial was that the alleged loans should be deducted from the property pool and that the residue should be divided on the basis of approximately 55% to 60% to the wife and the balance to the husband. He also asserted, of course, that there should be no add backs. Mr Testart conceded that contributions (in all their various guises) should be treated as being roughly equal, and that a relatively modest adjustment should be made in the wife's favour to take account of the section 75(2) factors (the most significant of which, according to Mr Testart, is the disparity in the parties’ earning capacities).
Mr Testart did not indicate what percentage split might be appropriate in the event of the Court concluding that the alleged loans were not, in fact, loans at all. He submitted, however, that in such a case significant weight should be given to a very large financial contribution made by on behalf of the husband. Similarly, he did not indicate what percentage split might be appropriate if the add backs were to be included.
Contributions
Having identified the pool of property available for distribution between the parties, I now turn to consider the second "step" of the property settlement exercise – namely, the identification and assessment of the parties' contributions in all their various guises.
In Bremner (1995) FLC 92-560 and Way (1996) FLC 92-702, the Full Court cited with approval a passage from the judgment of Fogarty J in Money (1994) FLC 92-485, as follows:
… an initial contribution by one party may be “eroded” to a greater or lesser extent by the later contributions of the other party, even though those later contributions do not necessarily at any particular point outstrip those of the other party.
In Pierce (1998) 24 FamLR 377 (at 385), the Full Court sought to put Fogarty J’s quotation “in its correct context”. After referring to an expanded passage from Fogarty J’s judgment in Money – in which his Honour said that: “… the respective contributions of the parties over a long period of marriage ‘offset’ the significance which might otherwise be attached to a greater initial contribution by one party” – the Full Court said:
In our opinion, it is not so much a matter of erosion of contribution but a question of what weight is to be attached, in all the circumstances, to the initial contribution. It is necessary to weigh the initial contributions by a party with all other relevant contributions of both the husband and the wife. In considering the weight to be attached to the initial contribution … regard must be had to the use made by the parties of that contribution.
The relevance of initial contributions has been discussed very recently in Williams (2007) FamCA 313. Before referring to dicta from Money and Pierce, the Full Court said[73]:
We think that there is force in the proposition that a reference to the value of an item as at the date of commencement of cohabitation without reference to its value to the parties at the time it was realised or its value to the parties at the time of trial, if still intact, may not give adequate recognition to the importance of its contribution to the pool of assets ultimately available for distribution between the parties. Thus, where the pool of assets available for distribution between the parties consists of, say, an investment portfolio or a block of land or a painting that has risen significantly in value as a result of market forces, it is appropriate to give recognition to its value at the time of hearing or the time it was realised rather than simply pay attention to its initial value at the time of commencement of cohabitation. But, in so doing, it is equally as important to give recognition to the myriad of other contributions that each of the parties has made during the course of their relationship.
[73] at paragraph 26
The husband conceded that, save for the alleged loans, the parties’ contributions (in all their various guises) were approximately equal. The wife submitted that contributions were equal, even if the alleged loans are ignored and the payments made by the husband after separation were added back into the pool.
Because both parties’ principal focus (in relation to property settlement, at least) was on the alleged loans, virtually no time was spent at trial on the parties’ respective contributions. I have, in effect, been left to my own devices to try to determine an appropriate split on the basis of contributions.
It seems clear that neither party had significant assets at the date of commencement of cohabitation in or about June 1997. Thereafter, and as indicated elsewhere in these reasons, I accept that the parties received injections of funds from the husband’s late father (and, perhaps, from other members the husband's family) from time to time. On the other hand, and as also indicated elsewhere in these reasons, I have no doubt that moneys flowed back from the husband to his late father (and to other members of the family) from time to time. Although the chaotic state of the evidence does not permit me to identify the funds that flowed in each direction with particularity (or, indeed, with any degree of precision at all), I am satisfied that, overall, the parties derived a significant benefit from the financial assistance that they received from the husband's family. So vague, inconsistent and lacking in credibility was the husband's evidence, and so single-minded was his determination to persuade the Court that his ex post facto, manipulative reconstructions of various (or parts of various) transactions amounted to loans (bearing interest, no less), that in a very real sense both parties seemed to lose sight of the wood for the trees. Put another way, neither party saw fit to properly and fairly analyse the true effect of what the husband's financial dealings with his family might have been.
Given the state of the evidence (as I have described it above), it is impossible to estimate the value to be attributed to the financial contributions having their genesis in the husband's family. It can only be done, it seems to me, by making what I consider to be a fair and reasonable assessment, in percentage terms, within the overall context of the parties’ contributions in the broadest sense.
According to the wife's outline of case document, the parties both worked during the relationship – the husband on a full-time basis, and the wife on a full time and then (after the birth of the children) on a part-time basis. During the course of the relationship the husband studied to obtain tertiary qualifications.
It would appear that the husband bought and sold shares during the relationship, but the evidence does not allow me to make findings as to the success or otherwise of this venture. Nor, I might add, does the evidence allow me to make findings about the true nature of the share trading ventures, including the involvement (or lack of involvement) of the husband's late father.
It is also clear that the husband, his brother and his late father were involved – in some way – in the acquisition of Units 2 and 4 and, perhaps, in the fitting out or redevelopment of Unit 4. Beyond that, the evidence does not allow me to make findings as to the success or otherwise of this venture. Nor am I able to make clear findings regarding the actual interrelationship of the husband, his brother his late father in the venture. Almost every aspect of this venture was confusing; hardly anything was transparent. Even the question of the true ownership of the two units was shrouded in an impenetrable mist of the husband's creation.
The sale of Unit 2 is in a similar category. Again, hardly anything was transparent, and the evidence does not allow me to make findings as to the real nature of the transaction, or the husband's true role in it.
I have no doubt whatsoever that it was the husband's intention to confuse and obfuscate all aspects of the various transactions that comprised or surrounded the alleged loans. In that, he succeeded.
A comparatively small issue arose in relation to Family Tax Benefit that the wife was obliged to repay. The husband conceded that the wife was required to repay the sum of $5,102. He also conceded that he was jointly responsible for the liability and that he agreed with the wife to pay one half of it. During cross-examination, the husband conceded that he had only paid approximately $390, leaving the wife to pay the remaining $4,712.[74] Ms Teicher pressed the court to take the wife's acceptance of responsibility for paying the lion's share of this debt into account as a post separation financial contribution. I have done so but, in the context of the current proceedings, it does not warrant anything more than a tiny, almost negligible adjustment of the weight to be attributed to the parties’ respective contributions.
[74] See 24 November 2009 transcript at pages 513-6
Other relatively insignificant issues arose in relation to the husband's minor business activities, being:
a)the purchase, modification and subsequent resale of iPhones; and
b)conducting or assisting in conducting what appears to be an event management entity known as [omitted].
In my opinion, the husband's activities associated with the iPhones venture and [event omitted] have no relevance to the overall determination of the property settlement issue. The wife was well aware that the husband was involved in the two activities, and there is no evidence that the husband derived a significant income from them. Nor is there any credible evidence that the husband wasted or misused (in any relevant sense) significant funds in pursuing them.
Although it was not dealt with at trial, the wife's income from teaching [omitted] was referred to during the hearing in June 2009. I find that the wife's activities in this regard are in the same category as the husband’s two ventures to which I have referred. In other words, they have no relevance to the overall determination of the property settlement issue, and there is no evidence that the wife derived a significant income from them. Further, there is no credible evidence that the wife wasted or misused (in any relevant sense) significant funds as a result of this activity.
In my opinion, and doing the best that I can with the evidence available to me, I find that the husband's financial contributions to the acquisition, conservation and improvement of the property of the parties from the date of commencement of cohabitation to the date of trial far outweighed those of the wife. His income was clearly greater than hers, and it was through him that the parties derived a clear (but unquantifiable) financial benefit from the husband's family.
Very little evidence was presented in relation to the issue of non-financial contributions to the acquisition, conservation and improvement of the parties’ property. As indicated above, the husband was involved in a number of ventures during the course of the relationship, and I have no doubt that he tried to make them successful. Quite what he did, however, is unclear. Unfortunately, he seems to have spent a great deal of time transferring moneys from one account to another (and, from time to time, back again).
The husband conceded that he and the wife made approximately equal contributions to the construction and fit out of the former matrimonial home. The wife did not dispute that assessment. Overall, I find that the parties’ non-financial contributions to the acquisition, conservation and improvement of their property – from the date of commencement of cohabitation to the date of trial – were approximately equal.
There can be no doubt that the wife was the primary home maker and caregiver for the children. I accept that she worked hard in that role, and that the husband's work commitments, and his involvement in the activities and ventures described elsewhere in these reasons, meant that she received less help and support from him than might otherwise have been the case. It seems clear that the relationship effectively ended at least a year before separation, and that, during that period, the wife received less emotional support and physical assistance from the husband than had previously been the case.
After separation, the husband did even less to provide the wife with emotional support and physical assistance. I refer, in this regard, to the parenting judgment. For example, the wife sent an email to the husband on 1 January 2008 in which, among other things, she asked him to spend more time with the children (for their sake, and, to an extent, for hers). Clearly, the husband did not spend as much time with the children as he could have spent during the period leading up to the commencement of these proceedings. I refer, as well, to the husband's unwillingness to assist the wife at the time of the sale of the former matrimonial home, making her role as homemaker and parent considerably more difficult and stressful than it should have been.
During the course of his cross examination of the wife, counsel for the husband insisted that she read out a substantial part of a lengthy email that she sent to the husband on 1 January 2008.[75] Counsel’s purpose in requiring her to read out the email was unclear. Its effect, however, was to distress the wife deeply, but quite unnecessarily. It was one of the lower points of a trial that contained many low points.
[75] See 11 November 2009 transcript, pages 161-5
In all the circumstances, I find that the wife's contributions to the welfare of the family (including in the role of homemaker and parent) – from the date of the commencement of the relationship to the date of trial – very significantly outweighed those of the husband.
I find that the wife’s very substantial contributions to the welfare of the family (including in the role of homemaker and parent) during the relationship and leading up to trial have served to offset, dilute or erode the significance of the financial contributions made by or behalf of (or directly or indirectly by) the husband – although certainly not completely.
In my opinion, and in all the circumstances (including the length of the period of cohabitation and the fact that the current net value of the property available – or notionally available – for distribution between the parties is approximately $1,034,000), I find that the husband's overall contributions (in all their various guises) were of greater significance or weight than those of the wife. That is so because of the very significant financial contributions made by or behalf of (or directly or indirectly by) the husband. I conclude that something between 65% and 67.5% of the overall property pool (including add backs) should be awarded to the husband on the basis of his contributions from the commencement of cohabitation to the date of trial. As it would be intellectually dishonest of me to choose either of those figures, I shall fix the midpoint (being 66.25%) as the appropriate allowance. It follows that 33.75% should be awarded to the wife.
Such a preliminary split effectively awards the husband the first 32.5% of the overall property pool, including add backs, in recognition (primarily) of the significance of the financial contributions to which I have referred; it splits the balance equally
Section 75(2) factors
So far, in considering the question of property settlement, I have dealt with the identification of the parties’ property and the question of their respective contributions. The Court has power to make an adjustment to a party’s property settlement entitlement based on such contributions in order to take account of, among other things, both parties’ respective means and needs. The Family Court has been critical of shorthand terms being used to describe this step in the property settlement exercise, preferring to refer to it simply as “the section 75(2) factors”[76] In essence, s.75(2) is concerned with the process of arriving at a just and equitable result.[77]
[76] See Clauson (1995) FLC 92-595.
[77] See, in that regard, Waters & Jurek (1995) FLC 92-635.
I have already recorded the age of each of the parties in the parenting judgment.
Both parties are in good health.
Both parties are gainfully employed, the husband on a full-time basis and the wife on a part-time basis. The wife has not worked on a full-time basis since the children were born.
The wife's annual income from paid employment is approximately $52,000. I find that, having regard to her commitments to the care of the children, she is working in accordance with her capacity.
In his financial statement filed in December 2008, the husband recorded that his gross income from his employment [in the law enforcement industry] was approximately $82,000 per annum – nearly 60% greater than the wife's income. At trial, the husband explained that his pay had reduced to approximately $76,000 per annum. During cross examination, he said that he had reduced his income by taking his full leave entitlement (being approximately 6 weeks), and by effectively buying another 30 days leave.[78] He said that he had put these arrangements in place in order to be able to spend more time with [Y]. He later conceded, however, that the arrangements were temporary and that he would be resuming full-time employment (or close to it) in the not too distant future.
[78] See 25 November 2009 transcript, page 567
I find that the husband has the capacity to earn not less than approximately $82,000 per annum.
The wife gave evidence that there is some uncertainty associated with her employment with [Q]. I accept her evidence in that regard, but it is sufficiently vague as to have no real impact on my assessment of the section 75(2) factors.
I have found that the husband has no legal obligation to repay the alleged debts. Similarly, I have found that the purported "loan repayments" paid by the husband after separation should be treated as a notional asset (and thereby made available for distribution between the parties). On the basis of the evidence before me, and taking into account the intermingling of finances within the husband's family to date, I have no doubt that he will be able to gain access to these funds (or equivalent funds from other family sources) whenever he is minded to do so. Because I have treated the purported "loan repayments" as property available for distribution, I have not taken them into account as a “resource” available to the husband.
The wife has primary responsibility for the parties’ children, [X] and [Y], who are, of course, both well under the age of 18 years. The husband will be spending time with them pursuant to the orders made on 29 January 2010. The parenting judgment deals with the arrangements that I have put in place for long term care of the children.
Neither party made any relevant submissions in relation to the commitments that are necessary for them to support themselves and the children. I accept that each has such commitments, but they are not a significant factor at this stage.
Neither party has the responsibility to support any other person. I have not ignored the fact that the husband's brother suffered a serious accident and that, at one stage, the husband became responsible for his financial affairs. The fact of the matter is, however, that the husband was removed from that role (without opposition on his part). There is no evidence before me to suggest that the husband continues to have the responsibility to support either his brother or, for example, his mother. Nor does the evidence reveal that he has any responsibility to support his current partner.
Both parties are entitled to a standard of living that is reasonable in all the circumstances. Having regard to their respective earning capacities and the orders that I propose to make in these proceedings, I anticipate that each will enjoy a reasonable standard of living.
I need not concern myself with the effect of my proposed orders on the ability of a creditor to recover his or her debt, because I have found that the alleged loans do not exist. The Estate could have intervened in these proceedings at any time. Indeed, I gave it leave to do so in June 2009. Instead of intervening, however, the husband's family members elected to swear affidavits in these proceedings which the Court ultimately declined to accept (for reasons set out elsewhere in these reasons and the parenting judgment). For much of the trial, certain of the husband's family members were present in the courtroom, or waited outside. Until fairly late in the trial, the door remained open for
Mr Testart to apply to call them as witnesses in support of the husband's case. He chose not to do so.
Instead of intervening in these proceedings, the Estate saw fit to commence proceedings in the Supreme Court of Victoria. I gave the husband fair warning at the very commencement of the trial that my findings in relation to the alleged loans might give rise to an issue estoppel binding on the Estate. Whether they have will be to others to determine. In order to adequately protect the wife, however, from what Ms Teicher described in WFS as "a strategic and cynical exercise on behalf of the husband and/or the Estate to pressure the wife into capitulating to the husband's demands in these proceedings" (which description I accept and adopt), I propose to make orders pursuant to which the husband is to indemnify the wife against any liability that she may have as a result of the current Supreme Court action, or as a result of other claims that may be made by members of the husband's family.
The duration of the marriage has not, in itself, affected the earning capacity of either party.
The wife wishes to continue her role as the children's primary caregiver. The husband wishes to continue to spend time with the children. Indeed, he applied for an equal shared care arrangement, but was unsuccessful in that regard. The orders made on 29 January 2010 define the time that the husband is to spend with the children. I recognise and accept the need to protect each party in his/her role as a parent.
The wife is not cohabiting with another person. The husband is cohabiting with his partner. The financial circumstances relating to that cohabitation are less than clear. I am unable to make any finding regarding the capacity of the husband's partner to contribute financially to their household. I am aware, however, that she has previously had paid employment and there is no evidence before me to suggest that she will not be able to obtain and maintain employment in the future. Neither party placed any weight on this factor.
The husband is paying child support at the rate assessed by the Child Support Agency. I am satisfied that he is making an appropriate contribution in that regard. If the wife has discomfort with the level of child support been paid by the husband, then she has the right to seek review of the same in the usual way.
In my opinion there are no other facts or circumstances which the justice of the case requires to be taken into account.
Conclusion in relation to section 75(2) factors
Having regard to all the evidence before me, I am persuaded that it is appropriate to make an adjustment on the basis of the s.75(2) factors.
I am so persuaded because the purpose of the s.75(2) adjustment is to assist the Court in the process of arriving at a just and equitable result. To refuse to make an adjustment in the present proceedings would be to run the risk of making orders which are neither just nor equitable.
In my opinion, the most significant of the s.75(2) factors are as follows:
a)the husband's income earning capacity is significantly greater than that of the wife; and
b)the wife will continue to be primarily responsible for caring for, supervising and supporting the children, although the husband will continue to spend time with them and provide financial assistance in the form of child support.
When I have regard to the above matters, together with all the other matters discussed under the general heading of the s.75(2) factors, I conclude that an appropriate adjustment of the parties' entitlements on the basis of contribution alone is to increase the wife's entitlement by something between 10% and 12.5%. Again, it would be intellectually dishonest of me to choose either of those figures, so I shall fix the midpoint (being 11.25%) as the appropriate allowance.
It follows that the overall distribution of the property between the parties should be on the basis of 45% (being 33.75% for contribution plus 11.25% to take account of the section 75(2) factors) to the wife and 55 per cent to the husband.
Just and equitable?
Under section 79(2), the court is required to be satisfied that the order to be made is just and equitable – and not simply that the underlying percentage division of the net value of the parties’ property is appropriate. In other words, in the consideration of whether the overall result of property settlement proceedings is just and equitable, it is the justice and equity of the actual orders, and not of the percentage distribution itself, which must be considered[79].
[79] see Russell (1999) FLC 92-877
Although I am of the view that the testing of any proposed orders by reference to s.79(2) is not a fourth substantive step (properly so called) in the property settlement exercise, and although I have considered the justice and equity of the overall “split” under the general heading of Conclusion as to s.75(2) factors, I propose to (metaphorically) step back and consider whether the outcome achieved by my consideration of the parties’ contributions and the s.75(2) factors has brought about a just and equitable result.
The Full Court has cautioned against assessing the s.75(2) factors in percentage terms, without considering the real impact of any proposed adjustment. In other words, the real impact in money terms is "the critical issue".[80]
[80] see Clauson (1995) FLC 92-596
In the present case, the s.75(2) adjustment equates to approximately $116,288 (being 11.25% of approximately $1,033,670). Such an adjustment creates a differential of 22.5% of the property pool (or approximately $232,575). I am satisfied that such an adjustment is proper. Indeed, I am also satisfied that the adjustment is proper when regard is had to the differential between the wife's overall entitlement (being 45%) and the husband's overall entitlement (being 55% per cent), which differential equates to 10% of the property pool (or approximately $103,367) in the husband's favour.
I am very conscious that justice and equity must be done to both parties, and I am satisfied that the split that I have proposed achieves that result. It is clear that the former matrimonial home and Unit 4 both been sold, and any mortgages encumbering discharged. It is also clear that the wife will be retaining her car, the [Q] shares and her superannuation entitlements. The husband will be retaining his superannuation and his entitlement to the moneys paid to his family in the form of the purported "loan repayments".
In other words, the husband will receive property to the value of $568,519 (being 55% of $1,033,671.49) and the wife will receive property to the value of $465,152 (being 45% of $1,033,671.49)
I note that the parties appear have agreed that there should be a superannuation split. The basis of the proposed superannuation split from the wife's point of view is unclear. The husband proposes that there be a superannuation split in such a manner as to equalise their superannuation entitlements (at $88,276.50 each). In my opinion, it is just and equitable – and clearly fair to both parties – to accede to the husband's proposal. Thus, in order to achieve a 45%/55% division of the property available for distribution between the parties, whilst at the same time dividing their superannuation entitlements equally, the wife will be entitled to:
a)her car (valued at $10,000);
b)her [Q] shares (valued at $2,385.44);
c)her superannuation entitlements (valued at $55,000);
d)an amount from the husband's superannuation entitlements by way of superannuation split intended to equalise the parties’ superannuation entitlement (being $33,276.50); and
e)$364,490 from the combined net proceeds of sale of the former matrimonial home and Unit 4 (totalling $568,153) presently held in trust.
It follows that the husband will entitled to:
a)the balance from the combined net proceeds of the former matrimonial home and Unit 4 – amounting to $203,663;
b)the moneys paid to his family in the form of the purported "loan repayments" (amounting to $276,580) and
c)the balance of his superannuation entitlements (amounting to $88,276.50), after having transferred $33,276.50 from his superannuation entitlements to the wife.
Orders
There is no evidence before me to the effect that the trustee or trustees of the relevant superannuation fund or funds has/have been accorded procedural fairness. As a result, I am unable to make orders implementing a superannuation split at this time. I propose to direct the parties to prepare orders in an agreed form to give effect to the provisions of this judgment as it relates to the superannuation split. In the meantime, I will make partial property settlement orders to give effect to the other provisions of this judgment.
The orders that I propose to make are set out (separately) at the commencement of these reasons.
I certify that the preceding two hundred and eighty-five (285) paragraphs are a true copy of the reasons for judgment of Walters FM
Associate: Suzette De La Motte
Date: 14 April 2010
Corrections
1. Paragraph 250, line 6 – “husband” was changed to “wife”.
In paragraph 8 of his affidavit sworn 17 June 2009, the husband asserted that his late father "made
37 interest payments totalling $12,728 which is still owing by me to his estate"
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