PADFIELD & PADGETT
[2015] FCCA 2225
•18 August 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PADFIELD & PADGETT | [2015] FCCA 2225 |
| Catchwords: FAMILY LAW – Property – de facto relationship – extent of asset pool – non-disclosure – expenditure of funds ordered to be preserved – contributions – add backs. |
| Legislation: Family Law Act 1975 (Cth), ss.4, 44, 75, 79, 90SF, 90SM |
| Weir v Weir (1992) 110 FLR 403 Black & Kellner (1992) FLC 93-117 Stanford & Stanford (2012) FLC 93-518 Kowaliw & Kowaliw (1981) FLC 91-902 Bangi & Belov [2014] FamCA 8 Bateman & Bowe [2013] FamCA 253 |
| Applicant: | MS PADFIELD |
| Respondent: | MR PADGETT |
| File Number: | HBC 13 of 2014 |
| Judgment of: | Judge Baker |
| Hearing dates: | 27 and 28 April and 20 and 27 May 2015 |
| Date of Last Submission: | 27 May 2015 |
| Delivered at: | Hobart |
| Delivered on: | 18 August 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr Ayliffe, SC |
| Solicitors for the Applicant: | M+K Dobson Mitchell & Allport |
| Counsel for the Respondent: | Ms Burrows-Cheng |
| Solicitors for the Respondent: | Murdoch Clarke |
ORDERS
The respondent relinquish any right, title and interest he may have in the following to the intent that the applicant shall be the sole and absolute owner thereof:
(a)Proceeds of sale of Property P,
(a)The Honda motor vehicle,
(b)Any savings of the applicant,
(c)Any furniture or chattels in the applicant’s possession; and
(d)Any entitlement of the applicant to superannuation.
The applicant relinquish any right, title and interest she may have in the following to the intent that the respondent shall be the sole and absolute owner thereof:
(a)The Jeep,
(b)The (vehicle omitted),
(c)The motor bike,
(d)The caravan,
(e)The Nissan motor vehicle,
(f)The storage container,
(g)Any savings of the respondent,
(h)Any furniture and chattels in the respondent’s possession; and
(i)Any entitlement of the respondent to superannuation.
The respondent pay the applicant the sum of $66,365 within 45 days.
The respondent pay the applicant the sum of $12,695 within 45 days and the applicant forthwith discharge the (omitted) Bank Mastercard.
IT IS NOTED that publication of this judgment under the pseudonym Padfield & Padgett is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT HOBART |
HBC 13 of 2014
| MS PADFIELD |
Applicant
And
| MR PADGETT |
Respondent
REASONS FOR JUDGMENT
Introduction
These are property settlement proceedings between the parties pursuant to s.90SM of the Family Law Act 1975 (“the Act”). Leave was granted for the applicant to proceed out of time pursuant to s.44(6) of the Act.
The parties were in a de facto relationship for a period of six years and five months between May 2005 and October 2011. There are no children of the relationship.
The applicant is 41 years old and works full-time as a (occupation omitted). She lives in rental accommodation with her son Mr J, who is 20 years old. The respondent is 48 years old and has a business. He lives with a friend for part of the week and for the rest of the week, he pays rent to live on a block of land in a caravan.
At the start of cohabitation, the applicant was employed on a full-time basis as a (occupation omitted). The respondent was an undischarged bankrupt. He declared bankruptcy on 13 May 2005. He was discharged on 13 May 2008.
During 2005/2006, the respondent established a (business omitted)“(omitted)” and incorporated a company. He was not able to borrow any funds for the establishment and operation of the business. The applicant agreed to be a sole director. She undertook administrative tasks for the business.
When the parties started living together in 2005, the applicant purchased a property at Property P (“Property P”). The parties lived there during the relationship with the applicant’s son Mr J, who is now 20 years old.
At separation the parties had the following debts; a line of credit of $50,000; an overdraft of around $37,600 (amount owing when house sold); and a business credit card of at least $15,000, now approximately $12,650. The applicant took responsibility for these debts after separation.
On 18 December 2013, the respondent was awarded $425,000 and costs for damages for a personal injury claim. This claim arose from a motor vehicle accident on 24 September 2006. The sum of $414,593 was deposited into his (omitted) Bank account (omitted) on 13 January 2014.
On 3 March 2014, an interim order by consent was made that the respondent preserve $90,000 from his damages award pending the making of final property orders.
It was not disputed that, in breach of the order and without the consent or knowledge of the applicant, the respondent withdrew all the funds preserved by the consent order between 10 October 2014 and 21 November 2014.
On 30 June 2014, Property P was sold by the applicant for $415,000.00. The line of credit of $50,000 and the overdraft were paid from the house sale proceeds.
Proposals
The applicant proposed that she receive a cash payment of $90,000.00 and the respondent be ordered to discharge the joint Mastercard liability of the parties. It was also proposed that unless otherwise specified, each party retain the property currently in his or her possession and be solely liable for any liabilities associated with that property. This proposal was not made by an assessment of contributions on a percentage basis.
The respondent had sought a property adjustment on the basis of a division 85/15 per cent in his favour. This proposal changed after he expended the personal injury award. He then proposed that the applicant retain the net sale proceeds of Property P and her motor vehicle and that he retain the property in his possession and be liable for the joint credit card debt of $12,695.
Issues
The main issue was the extent of the pool. Central to this issue was the alleged expenditure by the respondent of the sum of $90,000 ordered to be preserved and the alleged expenditure of the balance of his personal injury award.
The extent of the parties’ contributions was also in issue.
Evidence
The applicant relied upon her affidavits filed 26 September 2014 and 4 March 2015 and her financial statements filed 10 January 2014 and 22 April 2015.
The respondent relied upon his affidavit filed 26 September 2014, and his financial statements filed 21 February 2014 and 20 April 2015.
Both parties relied on the subpoenaed documents, which were tendered.
Credit of the Parties
The applicant was an impressive and reliable witness. Her evidence was not shaken during cross-examination.
On the other hand, the respondent gave evidence which was unsatisfactory, vague and misleading. He frequently changed his evidence and it was difficult to follow. He was not a credible witness. He was negative about the applicant and found it difficult to give her any credit for her contributions.
One example of his unreliable evidence was related to the purchase price of a Jeep. He said in his affidavit that he purchased it for $70,000. In his oral evidence he said he only paid $60,000, made up of a $5,000 deposit and a $55,000 cheque. He subsequently stated that the purchase price of the Jeep was $86,000, then $88,000. Subsequently, he said that he obtained a loan of around $25,000 from (omitted) Finance to assist in its purchase. Moments later in his evidence, he said the loan was $33,000 and he borrowed $23,000 from (omitted) Finance. Subsequently, the loan document from (omitted) Finance was tendered. It indicated that the loan was $26,961with interest charges of $6,776, a total debt of $33,733. The loan document indicated that the purchase price of the Jeep was $86,000.
One example of his unsatisfactory evidence was about his business and whether it is operational. He said that he had been “operating the business as best I can. I haven’t been able to do much with the business because of this court situation”.
He initially said that he had not actually undertaken any jobs, has only quoted a few and has made no financial gains. Then he stated that he “may have done some work for some clients, but it would have been a few years ago”. At one point he said that he is doing work and receiving money from clients. However, he then reverted to his previous evidence and said that whilst the business is operational, he has not had any jobs and has not received any money from clients. He confirmed that he has been managing the business up until this point, but said that he is limited in what he can do. He said that he is tired of chasing contractors to do work for him.
When he was asked whether the business is receiving money, he said; “the business is receiving money because …I’m receiving money from the business. The business has got money in it, in respect to having the loan of the money”.
When he was asked where the money from the business was going, he answered; “well, it pays its bills. It has got the personal bills and it has got its own obligations”.
When asked why he has a business at all, he said:
because I’ve still got to incorporate something and I’m trying to establish another company with (business omitted) and my accountant has just said to leave it in (business omitted) name until all this is cleaned up, basically, and I can still operate under (business omitted)
He was asked what he is getting paid to do. He answered:
I’m still spending time on trying to incorporate and establish and build blocks to a company [the new business he is trying to establish] – there’s communications. There’s establishment of setting things up. I’ve bought the container. I’ve got client communication that I’m dealing with in Queensland and in America – these building blocks are costing time and money to set up that that is where everything is still running under – incorporated with (business omitted). I would love to change it but the accountant is of the opinion that – no point going to the expense of spending with ASIC and everyone else in respect to that just to change a business name when we can still be doing what we need to do under the business that we’ve got – as in the business structure.
In answer to the proposition that he cannot be ‘working’ for his current business, he said, “it has been paying medical expenses as well”.
The following are examples of the respondent’s negativity about the applicant and his difficulty in giving her any credit.
The applicant worked in the business doing administrative work whilst working full time as a (occupation omitted), except for 9 months from January to September of 2009 when she worked full time for the business. He agreed this occurred. However, he took issue about whether her contributions were “successful”. He said that she did not put enough effort into chasing up bad debts.
The applicant was the main income producer while the business was starting. He initially said “we didn’t use her income to substantiate the business”. When he was referred to the Particulars of Claim in respect of his personal injury claim, $35,000 earned during the first year of business, he said “well, if the sums say that, yes…”
The Particulars of Claim read – “his increasing despondence and lack of recent income encroached increasingly on his relationship with his partner.”[1] He gave the applicant “not a credit, one bit” for supporting him psychologically during the 5 years they were together after his accident. This was despite the Particulars of Claim stating that he got so depressed that he contemplated suicide. The applicant lived through this. Yet the respondent said she did not, because she left. He could only give one example of her leaving, for a period of four months.
[1] At page 7, para 4.
He said:
She kept leaving every time pressure got too much. I had an operation. I came out of hospital. I was in business. I had a steel plate in my arm. I had 11 contractors I was trying to manage and she got up and left and went to her mother’s for 4 months and left me down at Property P.
The respondent agreed that the applicant made the first year of the business possible by being the sole director. However, he said “Ms Padfield was helpful in the fact that she was the signature, because I was bankrupt so I therefore couldn’t start my company again and she needed to be the piece of paper, in that sense. She was just a signature on a paper”.
Whenever the evidence of the parties conflict, I prefer the evidence of the applicant.
I find that the respondent has not presented his true financial position. He did not make full and frank disclosure of his financial affairs. The applicant subpoenaed his (omitted) Bank statements, due to his lack of disclosure. He could not explain his expenditure satisfactorily.
The respondent produced statements for one of his bank accounts at the hearing. He did not produce taxation records. His accountant did not give evidence. There was no explanation about what other bank accounts he has.
This is an appropriate case for the application of the Full Court decision in Weir v Weir[2] in which the Court said:
It seems to us that once it has been established that there has been a deliberate non-disclosure, which follows from his Honour’s findings in this case, then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature.[3]
[2] (1992) 110 FLR 403.
[3] Weir v Weir (1992) 110 FLR 403 at 407-408.
I also refer to the decision in Chang & Su[4], in which the Full Court listed the relevant authorities for the approach to be taken by the Court when a party is found to have failed to comply with their obligation to make full and frank disclosure. They include Black & Kellner;[5] Stein & Stein;[6] Mezzacappa & Mezzacappa[7] and Weir & Weir[8].
[4] [2002] FLC 93-117.
[5] (1992) FLC 93-117.
[6] (1985) FLC 91-779 at 75,676.
[7] (1987) FLC 91-853.
[8] (1992) 110 FLR 403.
I also refer to K & K[9], in which Holden CJ found that the husband had not made full and frank disclosure of all the assets in his possession. His Honour was unable to quantify the extent of non-disclosure in monetary terms, but said it was likely to be significant and took it into account under s.75(2)(o). The Full Court in Gould & Gould[10] referred to the approach the trial judge could have adopted to take into account the husband’s non-disclosure in the case. The Full Court said:
Rather the appropriate approach for his Honour to have adopted in this case would have been to have increased the asset pool to take account of non-disclosure…alternatively, or even in addition, had his Honour been persuaded that on the balance of probabilities there existed assets other than those contained in the asset pool contained in his reasons, his Honour could have made some adjustment in favour of the wife on account of the husband’s non-disclosure pursuant to the provisions of s75(2)(o), as did Holden CJ in K & K.[11]
[9] [2003] FLC 93-135.
[10] [2007] FAMCA 609.
[11] Ibid at para 27.
The Full Court highlighted the absolute nature of the duty to disclose and stated that:
Whether the nondisclosure is wilful or accidental, is a result of misfeasance or malfeasance or nonfeasance, is beside the point. The duty to disclose is absolute. Where the court is satisfied the whole truth has not come out it might readily conclude the asset pool is greater than demonstrated. In those circumstances it may be appropriate to err on the side of generosity to the party who might be otherwise be seen to be disadvantaged by the lack of complete candour.[12]
[12] Ibid at para 25.
Relevant Law
Section 90SM(1) of the Act provides that in property settlement proceedings after the breakdown of a de facto relationship, the Court may make such order as it considers appropriate. Section 90SM(3) provides that “the court must not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.” Section 90SM(4) sets out the factors which the Court must take into account.
The principles set out by the High Court in Stanford & Stanford[13] equally apply to proceedings for property settlement after the end of a de facto relationship.
[13] (2012) FLC 93-518.
The Court must firstly consider whether it is just and equitable to make a property order by identifying the existing legal and equitable interests of the parties in the property. Having regard to those existing interests, the Court must be satisfied that it is just and equitable to make a property settlement order.[14]
[14] Stanford & Stanford (2012) FLC 93-518.
It has been a practice of courts to make “notional add backs” to a property pool in circumstances where there has been a unilateral disposition of property by one of the parties during the relationship or following separation. It might be asserted that the property still exists and should, therefore be considered as part of the existing property interests. In other circumstances, wastage such as gambling or extravagant living, might be asserted. In the decision of Kowaliw & Kowaliw[15] Baker J said as follows:
As a statement of general principle, I am firmly of the view that financial losses incurred by parties or either of them in the course of a marriage whether such losses result from a joint or several liability, should be shared by them (although not necessarily equally) except in the following circumstances:
(a) where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets, or
(b) where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in para. (a) and (b) above having economic consequences is clearly in my view relevant under sec. 75(2)(o) to applications for settlement of property instituted under the provisions of sec. 79. [16]
[15] (1981) FLC 91-902.
[16] Ibid at 76,644.
After the High Court decision of Stanford & Stanford[17], the treatment of property by the Court as “notional” when it no longer exists has become less common. In Bevan & Bevan[18] the Full Court discussed the practice of courts making “notional add-backs” to property to account for the unilateral disposal of assets. Bryant CJ and Thackeray J stated:
We observe that “notional property” which is sometimes added back to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them” and thus is not amenable to alteration under s79. It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage-and potentially an important part. As the question does not arise here, we need say nothing more on this topic, save to note that s79(4) and in particular s75(2)(o) gives ample scope to ensure a just and equitable outcome when dealing with the unilateral disposal of property.[19]
[17] (2012) FLC 93-518.
[18] (2013) FLC 93-545.
[19] Bevan and Bevan (2013) FLC 93-545 at para 79.
Justice Finn stated that it may well be that the current practice of (the so called “add backs”) should more strictly be considered in making findings under s.79(4)(e) (i.e s.75(2)).[20]
[20] Ibid at para 160.
A number of single instance decisions of the Family Court indicate a preferred mechanism for dealing with add backs under s.90SF(r), or s.75(2)(o) in respect of married parties.[21]
[21] See Eldred & Eldred [2015] FamCA 61, Watson & Ling [2013] FamCA 57 and Bangi & Belov [2014] FamCA 8.
In Watson & Ling, Murphy J noted the concept of “add back” can be recognised pursuant to s.75(2)(o) or it might be recognised within the assessment of contributions.[22]
[22] Watson & Ling [2013] FamCA 57 at para 33.
In Bateman & Bowe[23] Murphy J noted that add-backs are “the exception rather than the rule,”[24] and existing legal and equitable interests in property should be valued at the date of trial save in “exceptional circumstances.”[25]
[23] [2013] FamCA 253.
[24] Ibid at para 50.
[25] Ibid at para 35.
In Todd & Todd[26] Berman J after considering the various authorities about add-backs said:
Following Stanford, I consider that whilst it is still open to a Court to consider that the appropriate way forward is to add property back to the interest of each of the parties, such an outcome would be rarer and may well be restricted to those circumstances where there is a realistic possibility that the property might be retrieved. That is not the case here.[27]
[26] [2014] FamCA 101.
[27] Ibid at para 92.
In the decision of Vass & Vass[28] the Full Court noted as follows :
There is no error committed per se in adjusting the parties’ actual property interests by a calculation involving notionally adding back into the pool sums which have been dissipated by the parties. We reject any suggestion that the decision of Bevan & Bevan (2013) FLC 93 – 545 – 247CLR108 – is authority for any necessary contrary solution. Some statements made by the High Court may lead to the conclusion that references to “notional property” as have been referred to in decisions of this court and at first instance may need to be reconsidered.
The decisions referred to seek to remind the Court that, however the exercise of discretion might seek to deal with property that is said to be the subject of “add back”, proper consideration must be given to existing interests in property, and the question posed by s79(2) as a separate enquiry from any adjustment to property interests by reference to s79(4) if a consideration of s79(2) reveals that it is just and equitable to alter existing interests in property.[29]
[28] [2015] FamCAFC 51.
[29] Ibid at para 138.
I shall turn to consider whether the property allegedly spent by the respondent is part of the existing legal or equitable interests of the parties and whether it is just and equitable to make an order.
Existing interests in Property in Dispute and notional add backs contended
The applicant asserted that the respondent had not expended the entire damages award received by him. It was submitted that there were therefore various alternatives which the Court could take. The Court could find that between $70,000 and around $100,000 has been hidden, and should be included in the pool. The applicant submitted another alternative, that the sum of $90,000 dissipated “egregiously” by the respondent should be added back.[30]
[30] Exhibit A11.
The respondent’s case was that the personal injury award funds have been expended and the parties should therefore retain their respective property and superannuation.
The respondent’s evidence about his expenditure of funds
In respect of the personal injury award of $414,593, the respondent agreed that from January 2014 to April 2015 he has “spent most of it now”. He “had a lot of expenses prior to my injury, which I can explain”. He stated “there was a lot of money that went out of that straight to people that were owed money that I had incurred debt for prior to that”. He added that he also had a lot of medical expenses and that some of this money also went into trying to start a new business.
The respondent gave evidence in his September 2014 affidavit, that from the settlement monies he still had, at that time, the sum of $190,000. He said he had purchased a Jeep for $70,000 and he used the balance for bills, which he had accumulated prior to the claim settling, and for supporting himself since. He said that the debts he has paid were as follows: –
ATO – $14,643 .78
(omitted) Finance – $1,016 .46
Public liability insurance – $773
ASIC – $535
(omitted) Bank business card – $7,400
United fuel – $1,050 .97
Mobile $190 .90
Child support – $2,584 .31
Electricity – $797
(omitted) – $920
Repayment to Mr T – $30,000
These sums total $129,911 ($59,911.42 and $70,000 for the Jeep).
Further in his affidavit he referred to the sum of $130,000, rather than the sum of $190,000, being the balance of his personal injuries settlement for division.
This was the extent of his evidence-in-chief about his expenditure of the damages award and his expenditure of $90,000, which was preserved by consent order. He did not give any oral evidence to update his expenditure since September 2014.
It was left to his cross-examination by Counsel for the applicant to obtain an explanation about his expenditure of the funds, and to attempt to ascertain what he had done with the preserved amount of $90,000.
When he was asked where the remaining $190,000 of compensation funds (referred to in paragraph 16 of the respondent’s affidavit at September 2014 as existent) was currently held, he said that it has been “broken down and paying for a vehicle [Jeep - $80,000 in total went to this, apparently out of these funds]…paid for my personal assets that I had.”
The respondent agreed with Counsel for the applicant that he spent $190,000 in six months. He said that he has records for the expenditures. When asked why he did not bring these records to Court, he replied that he assumed that because his bank had been subpoenaed, those records would be available to the Court.
He also said that as he has not been working, he has had to pay himself a wage out of these funds, which is not on the business transactions – “all the personal stuff doesn’t come into it as far as rent and other…that’s just business expenses”.
His evidence was therefore that he spent $130,000 (listed in para 16 of his affidavit), leaving $190,000 of his compensation monies at September 2014 ($320,000 total out of $414,593 received). He said that the remaining $94,593 of compensation has been spent on personal expenses such as his wage, day-to-day living and rent.
I asked the respondent to explain again how he had spent $190,000 since September 2014. At first, he said that the Jeep and the debt to Mr T were paid out of this money. It was pointed out to him that he said in his affidavit that these payments had already been made. He then listed the expenditure as set out in a letter from (omitted) Accounting,[31] and also mentioned:
· Medical expenses – in excess of $5,000
· Psychologist report – no amount given
· Personal wages – $20,000
· Personal rent – $27,000
[31] Exhibit R1.
In relation to the first column of Exhibit R1 (totalling $260,750), he agreed that most of that amount would have been spent before 26 September 2014 (date of affidavit), and therefore he could not account for the expenditure of the balance.
Counsel for the applicant subpoenaed the (omitted) Bank. The statements for the respondent’s accounts (omitted), (omitted), his business credit card (omitted) and home loan statements were produced. The (omitted) Bank statements for account number (omitted), in which the preserved sum of $90,000 was held, was also produced.
The respondent transferred funds between the accounts. Counsel for the applicant submitted that the total amount of money transferred from his accounts to his business account was $312,859. This was without any income from his business, from the date he received his compensation funds on 13 January 2014 to date, or to the last entry recorded in the accounts. Counsel submitted that $103,000 was therefore unaccounted for.
The applicant gave evidence that the respondent asked her to meet him at a park in (omitted). “He told me that he had $100,000 working away quietly for him”. He turned up in his new Jeep, and showed her photos of the new (vehicle omitted), which he had just purchased.
Counsel for the applicant put to the respondent that the sum of $103,000, calculated by Counsel as missing, is the $100,000 which he told the applicant he had “tucked away” on 1 July 2014. The respondent denied this. He asserted that this amount was broken down in the expenditure listed by his accountant, and it has been “incorporated into the company as well”. He asserted that “if you add the personal and business expenditures together, they add up”.
The respondent said that he was just letting the applicant know what he had to deal with, regarding their mediation, separation and debts. He disputed that he said the funds were “working away quietly” for him. He said this was made up of the $90,000 ordered to be quarantined, and he had about $10,000 in his bank. He denied that these funds were additional monies.
An examination of his various bank accounts indicated that when the respondent received the compensation funds, he deposited the full amount into his transaction account (omitted). He had withdrawn approximately $60,000 prior to 20 January 2014, the date on which he transferred the sum of $320,000 from (omitted) into his personal savings account (omitted). This withdrawal of $60,000 included a withdrawal on 14 January 2014 of $30,000, allegedly paid to Mr T (which is not accepted as indicated further in these Reasons). On 15 January 2014, a $15,000 transfer was made to (omitted) Bank A/c (“loan repayment” specified). It is not known what this payment was for. He had $33,000 left in the account on 20 January 2014. This amount was subsequently withdrawn.
The major purchases, withdrawals and expenditure after 20 January 2014, ascertained from the accounts and other evidence and not referred to in paragraph 16 of the respondent’s September 2014 affidavit (total $129,911), are as follows:
23 January 2014 – $8,859 (omitted) car care;
24 January 2014 – $10,831.51 payment to Tas. Collection for credit card (omitted);
25 January 2014 – $17,851 Nissan Ute loan payout;
3 March 2014 - $90,000 to account (omitted) (to be preserved)
June 2014 – $21,500 (vehicle omitted) purchase;
Sub Total $149,041 plus $129,911(September affidavit)
Total $278,952
The respondent said that he has living expenses of $712 per week, including rent of $37,024 per annum.
The respondent’s evidence in his September 2014 affidavit, that he had around $130,000 at that time, therefore appears to be correct.
(vehicle omitted) and Jeep Expenditure
The respondent asserted that the value of the (vehicle omitted) (“(vehicle omitted)”) was $21,500. His evidence was that he had spent $90,943 on the (vehicle omitted), rather than pay the business debts which the applicant had been paying. He said the (vehicle omitted) is “actually part of my business… there is a lot of money being chased in respect of unexpected expenses that we’re trying to recoup from the (vehicle omitted)”. He said that he is hoping to get back approximately $8,000.
The total for withdrawals from his accounts for the purchase of the (vehicle omitted) was $21,500 and the sum of $19,565 for parts and repairs. This amounted to a total of $41,065, not $90,943. The respondent’s explanation that this was because he paid most of it out of his personal money was unsatisfactory and did not explain the expenditure.
The respondent purchased the Jeep for $86,000 and obtained a loan of $33,737, the expenses on the loan are $562.29 per month. An examination of his accounts indicated that withdrawals for the Jeep were made on 21 March 2014; $5,000 withdrawal for a deposit and 27 March 2014; and $55,000 cash withdrawal from (omitted).
Counsel for the applicant submitted that the interest component of $6,776 added to the total amount of the loan should be disregarded. The loan is secured over the Jeep by a “chattel mortgage/bill of sale” and I consider that the total amount of the loan should be taken into account in the property division.[32]
[32] Exhibit R2.
By purchasing the (vehicle omitted) and expending funds on parts and by purchasing the Jeep and obtaining a loan, I consider that the respondent has acted recklessly and without any regard for the applicant’s entitlement. These purchases have had the effect of reducing the value of the property to be divided.[33]
[33] Kowaliw & Kowaliw (1981) FLC 91-902.
Consent Order made on 3 March 2014 to preserve the sum of $90,000
The respondent’s (omitted) Bank account (omitted) held the sum of $90,000, which was quarantined by consent in March 2014. He made the following withdrawals:
· 11 October 2014 – $11,126.51
· 22 October 2014 – $19,907.83
· 11 November 2014 – $5,000
· 21 November 2014 – $55,653
Total $91,687.40
The respondent made these withdrawals without informing the applicant. He said that he had spoken to his solicitor about his circumstances at the time, but not about his intention to make those withdrawals. He said that he did not deliberately disobey court orders and there were reasons behind those withdrawals. Those reasons were not explained by him.
He denied knowledge that the sum of $90,000 was put aside specifically for the payment of the $50,000 line of credit and the $40,000 overdraft in relation to his business. He also denied making the withdrawals in order to prevent any of the funds being awarded to the applicant by the Court.
During cross-examination, he was asked where the sum of $90,000 has gone. In response he said, “it’s actually absorbed in the caravan, it’s actually absorbed in lawyers’ costs…there is very little of that money gone into the (vehicle omitted)”.
He said that he did not spend the quarantined $90,000 on the (vehicle omitted), but said that “the money prior to that was spent on the (vehicle omitted)”.
The significant purchases made by the respondent from the date of the first withdrawal on 11 October 2014 to the end date of the bank statements produced, are:
22 October 2014 – $11,000 caravan
1December 2014 – $4,500 shipping container
The caravan and container with a total value of $15,500 are included in the property list for division. The respondent has not explained satisfactorily how he expended the balance of the funds.
I do not accept the respondent’s denial that he did not withdraw the preserved sum of $90,000 to prevent any of the funds from being awarded to the applicant. I consider that the respondent has acted without any regard for her entitlement and to minimise the value of the assets.
Mr T
During cross-examination, the respondent gave evidence that he borrowed $30,000 from Mr T, who is his friend, prior to being declared bankrupt in 2005. He said that he and his former business partner at the time had a verbal agreement with Mr T, for which there is no supporting documentation.
When he was asked whether Mr T put in a proof of debt on his bankruptcy, he answered that he would not have put in a proof of debt because it was a cash arrangement. He said “Mr T has a lot of cash, and he lent me that money and he waited a fairly long time to get it back.” On 14 January 2014, the respondent withdrew $30,000 cash from his (omitted) account. He said he used this money to repay Mr T, 9 years after the loan was made. He did not get a receipt from Mr T because “we had a gentleman’s agreement.”
Mr T was unavailable to give evidence. The respondent said that he did not know he would need to give evidence. I do not accept this explanation. The respondent was represented by experienced solicitors throughout the proceedings. No affidavit of Mr T was filed at any time.
Counsel for the applicant submitted that a Jones v Dunkel [34] inference should be made against the respondent for not calling Mr T. I agree that such inference should be made. I infer that his evidence would not have assisted the respondent.[35]
[34] (1959) 101 CLR 298.
[35] Ibid.
I am not satisfied that the respondent paid the funds to Mr T.
I am of the view that it is more probable than not that the respondent has the sum of, at least $30,000 (the Mr T alleged payment) held in an account or accounts not disclosed. I will add back the sum of $30,000.
Conclusion about Property
This is a matter in which I consider that the extent of the assets is greater than demonstrated. I am unable to quantify the extent of the property which exists. The respondent’s conduct of the case and his failure to make full and frank disclosure meant that it was difficult to identify the assets. Apart from the sum of $30,000 which I will add back, I intend to make an adjustment in favour of the applicant and err on the side of generosity to her under s.90SF(3)(r). The respondent’s reckless expenditure will also be taken into account.
I find that the property of the parties is as follows:
Non-Superannuation
Proceeds of sale – Property P (A) $83,000
Honda (A) $12,500
Jeep (R) $60,000
(vehicle omitted) (R) $21,500
Motor Bike (R) $13,000
Nissan (R) $13,000
Caravan (R) $11,000
Storage Container (R) $ 4,763
Add Back (R) $30,000
$248,763
Business credit card $12,695
Jeep Loan $33,737
$46,432
Total $202,331
Superannuation
Superannuation (A) $109,000
Superannuation (R) $72,109
Total $181,109
Total non-superannuation
and superannuation $383,440
Is it Just and Equitable to make a property adjustment order?
The applicant sought orders for adjustment of property interests and contended that it would be just and equitable to make orders.
The parties were in a relationship for over six years.
Each party has made financial and non-financial contributions to the property. The applicant made an initial contribution of equity in real estate. She increased the mortgage secured on Property P to assist the respondent and his business. The respondent made non-financial contributions towards Property P. The parties’ financial affairs were intermingled. The applicant contended that she has contributed towards the respondent’s personal injury award.
I consider that it is just and equitable to make a property order pursuant to s.90SM(3).
Which Approach?
Both parties adopted a global approach. Their relationship continued for over six years. The parties did not separate their property. I consider this approach is appropriate in the circumstances.[36]
[36] Norbis & Norbis (1986) 161 CLR 513.
In respect of superannuation, there was no agreement about the approach. The applicant adopted a two pool approach. The respondent adopted a one pool approach. Neither party is seeking a splitting order in respect of the superannuation entitlements.
There was no evidence that the entitlements are property within the definition of s.4 of the Act. The entitlements are relatively substantial in terms of the other assets.
I am of the view that it is therefore appropriate for the superannuation entitlements of the parties to be included in two pools.[37]
[37] See C & C (2005) FLC 93-220.
Contributions
The applicant made an initial contribution of real estate in (omitted) with a net equity of around $140,000. Soon after cohabitation she purchased the property at Property P for $280,000 with a deposit of $140,000. She borrowed the balance from (omitted) Bank. She also borrowed an additional sum of $30,000 for repairs and renovations. The property was used as security for the business, for raising funds and securing an overdraft facility.
The respondent was an undischarged bankrupt at the date of cohabitation.
The applicant was the sole director of the (omitted) business. All lines of credit with the suppliers were in the applicant’s name. The credit card which the respondent used was in her name and further loans to facilitate the ongoing operation of the business were incurred in her name because the respondent was not able to borrow funds.
In 2008 and 2009, the business borrowed a total of $50,000, secured against the applicant’s home. This increased the applicant’s mortgage loan to $260,000.
In 2011, the business borrowed a further $40,000 by overdraft which was secured against the applicant’s home. The applicant refinanced the mortgage loan from (omitted) to the (omitted) Bank to enable this further borrowing.
During the relationship, the applicant paid all monthly mortgage repayments, the Council rates and insurance payments on her home.
The applicant undertook bookwork, data entry and client emailing for the business from 2005–2006 until 2009. She was not paid. The respondent also engaged a book keeping company.
It was discovered in late 2008 that the company employees were acting dishonestly and taking money from the business. Their services were terminated. In 2009 the applicant was struggling to do the book work, as well as working full-time as a (occupation omitted) . She took leave without pay from her (occupation omitted) job so that she could work for the business full-time from January until September. She was paid a wage during this period.
The business made losses of $26,014 in the 2010 financial year and $45,512 in the 2011 financial year.
The respondent received a minimum wage. The parties relied on the applicant’s income to meet their day-to-day expenses. The respondent regularly supplemented his income with director’s loans from the business.
The applicant ran the household and was responsible for most of the cooking, cleaning and washing, ironing and general household duties. She was also the primary carer for Mr J.
In relation to payment of Mr J’s school fees, the applicant gave evidence that the respondent never paid any school fees. I accept her evidence about this.
Both parties made non-financial contributions. The respondent renovated the home, including sanding, painting and gardening. He was assisted by the applicant. In 2011 they renovated the kitchen in Property P. The applicant paid for materials and the respondent paid the labour costs with the business credit card.
I refer to the decision of the Full Court of Pierce & Pierce.[38] The Full Court said:
In our opinion, it is not so much an 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, in this case of the husband, regard must be had to use made by the parties of that contribution. In the present case that use was a substantial contribution of the purchase of the matrimonial home.[39]
[38] [1999] FLC 92-844.
[39] Ibid at para 28.
I consider that during the relationship the applicant’s financial contributions including her initial contributions were substantially greater than those of the respondent.
I attach significant weight to the initial funds provided by the applicant from the sale of (omitted) to purchase Property P. This property provided security for the business loans. The applicant enabled the respondent to establish the business. She supported him by doing administrative work, whilst she earned an income from her employment. The respondent’s injury occurred in 2007, which meant she was the main financial provider and homemaker.
The applicant had the benefit of living in the home after separation, whilst the respondent paid rent elsewhere.
After separation from October 2011 until June 2014, the applicant made post-separation contributions by paying the loan instalments in respect of the business loan, overdraft facility, and business credit card.
On 30 June 2014, Property P was sold by the applicant for $415,000.The proceeds of Property P were used to repay the business loan of $37,730. The mortgage of $239,900 and the overdraft were repaid. The mortgage had been increased during the relationship by $90,000.[40] The net proceeds of sale were $118,334. The applicant has spent $20,000 of these funds. She paid $8,000 for legal fees, $4,500 to discharge a personal loan and $5,000 towards Mr J’s university fees. The respondent did not contend that this was unreasonable or seek any add-backs.
[40] Applicant’s affidavit (filed 4 March 2015), at para 8.
The applicant has continued to pay the credit card, which was used for the business, due to the refusal of the respondent to accept that the debt relates to the business.
On 18 December 2013, the respondent was awarded $425,000 and costs for damages for a personal injury claim. There was no evidence of the components of the calculation of the net damages because the claim was settled. He received the sum of $414,593 in January 2014. This was a significant sum and was a major asset of the parties. It was the respondent’s financial contribution.[41]
[41] Aleksovski & Aleksovski (1996) FLC 92-705.
I have found that of the total of $414,593 received by the respondent, the value of the assets left for division total a net value of $119,526. The respondent owned the Nissan prior to receiving the award. He repaid a loan in respect of the Nissan of $17,851 from the personal injury funds, so the equity in it has arisen from the funds. The net property therefore remaining, and contributed by him from the funds, amounts to around 53 per cent of the existing non-superannuation property.
Counsel for the applicant relied on the decision of Danford & Danford.[42] This was a decision of the Full Court regarding an appeal from the trial Judge’s assessment of the husband’s significant financial contribution of a compensation payment and the way the trial Judge placed weight on the wife’s contributions after the husband’s accident. The trial Judge had referred to Williams v Williams,[43] a decision of the High Court in which an award of damages was considered. The High Court held:
when the property available for division between the parties represents an award of damages for pain, suffering and loss of amenity, it may be relevant, in some situations, to have regard to the circumstances relating to that award, but there is no general presumption that the award should be left out of account in determining what order should be made under s79 of the Family Law Act 1975 (Cth).[44]
[42] [2011] FamCAFC 54.
[43] (1985) FLC 91‑628.
[44] Ibid at 80, 93.
The Full Court noted that the trial Judge also referred to Aleksovski & Aleksovski[45] in which the majority held;
In our opinion, in most cases, a damages verdict arising from a personal injury claim, whenever received, is a contribution by the party who suffered the injury. It should not be considered in isolation, the reason that each and every contribution of each of the parties make to the relationship, must be weighed and considered at the same time.[46]
[45] (1996) FLC 92-705.
[46] Ibid at para 83.
The Full Court found that there was no error in respect of the weight placed by the trial judge on the wife’s contributions since the husband’s accident, which he described as “Herculean.”[47]
[47] Ibid at para 122.
In respect of post-separation contributions, in the decision of Marsh & Marsh[48] Murphy J noted:
The expression ‘post-separation contributions’ has of course, been used widely in many authorities within the context of discussions about the assessment of contributions. But importantly, it is not the fact of separation or when contributions are made that is the delineator. It remains crucial to analyse and weigh the nature, form and characteristics of all contributions across the whole of the period under consideration.[49]
[48] [2014] FamCAFC 24.
[49] Ibid at para 107.
In Aleksovski & Aleksovski[50] Kay J discussed the receipt by the wife of a personal injury award late in the marriage. His Honour said:
In my view whether the capital sum was acquired early in the marriage, in the midst of the marriage or late in the marriage, the same principles apply to it. The Judge must weigh up various areas of contribution. In a short marriage, significant weight might be given to a large capital contribution. In a long marriage, other factors often assume great significance and ought not be left almost unseen by eyes dazzled by the magnitude of recently acquired capital. A party may enter a marriage with a gold bar which sits in a bank vault for the entirety of the marriage. For 20 years the parties each strive for their mutual support and at the end of the 20 year marriage, they have the gold bar. In another scenario they enter the marriage with nothing, they strive for 20 years and on the last day the wife inherits a gold bar. In my view it matters little when the gold bar entered the relationship. What is important is to somehow give a reasonable value to all of the elements that go to making up the entirety of the marriage relationship. Just as early capital contribution is diminished by subsequent events during the marriage, late capital contribution which leads to an accelerated improvement in the value of the assets of the parties may also be given something less than directly proportional weight because of those other elements. [51]
[50] (1996) FLC 92-705.
[51] Ibid at para 83, 443.
Counsel for the applicant relied on the Full Court decision of Kane & Kane[52] in adopting an approach without considering percentages. Counsel for the respondent took the same approach.
[52] [2013] FamCAFC 205.
In this decision Faulks DCJ noted :
Nothing in s79 requires a trial judge (or for that matter the parties) to allocate a percentage entitlement of the property to each party in applying the criteria and requirements of s79. (And because of s79(4)(e) s75(2)). The articulation of such percentages is a practical tool whereby the parties and ultimately the trial judge indicate the weight and evaluation given to any contribution (or contributions in combination) or to any factor under s75(2) (or all factors in combination). While the allocation of percentages is a sensible and valuable tool, (particularly to promote consistency and predictability) it cannot be an objective in its self. Section 79 imposes no obligation on a Court to divide property or interests in property in accordance with some determined percentage.
That having been said the evaluation and comparison of contributions (and also factors pursuant to s75(2)) is necessarily a difficult task because contributions of one sort, in one “sphere” of contribution, may be significantly different in kind from contributions in another.[53]
[53] Ibid at paras 3 and 4.
May and Johnston JJ agreed that s.79 does not require that a percentage of property be allocated to each party.
I acknowledge that s.79 and s.90SM do not require a court to divide property interests in accordance with a percentage. However, I agree with the obiter of Faulks CJ, that the articulation of percentages enables the trial judge to indicate the weight and assessment of contributions and any factor under s.75(2) or s.90SF(r).
In accordance with the Full Court decisions of Bolger & Headon[54] and Dickons & Dickons,[55] I shall adopt a holistic approach. I have assessed the contributions across the whole of the relationship and post-separation.
[54] [2014] FLC 93-575.
[55] [2012] FamCAFC 154.
I do not accept the applicant’s proposal, which would result in her receiving property to a value of 91 per cent of non-superannuation property. I do not accept the respondent’s proposal, which would result in the respondent receiving non-superannuation property to a value of 53 per cent.
Having regard to the relevant contribution factors, I assess a property adjustment which results in the applicant receiving property assessed at a percentage of 70/30 per cent in her favour.
I do not consider that the orders that I propose to make will have a significant impact on the income earning capacities of each party. I refer to the earning capacities of the parties below.
Section 90SM(4) (e)
Section 90SF(3) Factors
The applicant is in good health. She is 41 years old. She is employed as a (occupation omitted) and earns approximately $85,000 per annum. She lives with a new partner, who is a (occupation omitted). They share their living expenses.
The respondent is 48 years of age. He suffered a wrist injury in a motor vehicle accident and has some limitations as result. His ability to perform physical work has been affected. His Counsel tendered a medical report of Dr W, dated 27 June 2012. Dr W did not file an affidavit or an updated report. He did not give evidence. At the time of his report, Dr W was of the opinion that the respondent’s wrist injury and its sequelae have compromised his ability by 10 percent to work in the field to which he may have reasonably aspired.
Counsel for the respondent submitted that the respondent has not had the capacity to work since the accident, as a result of the injuries suffered and their effect on his mental state. This was in contrast to the respondent’s evidence that he is self-employed and is working in his business. He is in the process of changing the nature of the business to that of (business omitted) and associated products. He earns an income. I am unable to make a finding of the extent of the income.
The parties have their commitments set out in their financial statements. The applicant has weekly expenses of $1,491. The respondent has weekly expenses of $712.
The applicant shares her household expenses with her new partner.
The effect of the findings as to contributions is that the applicant will receive property to a value of $141,632 and the respondent will receive property to a value of $60,669. There is a large disparity of property between them.
I consider that while the disparity of property, the ages of the parties, the applicant’s longer period of earning capacity and her ability to accumulate further assets, favour an adjustment for the respondent.
However, this must be countered by a significant adjustment to the applicant under s.90SF(3)(r) due to the respondent’s non-disclosure and his reckless expenditure. In respect of his non-disclosure, he did not provide any bank statements until the day of trial. He did not explain his expenditure of the compensation funds and it was left to Counsel for the applicant to ascertain on what and how he had spent the funds.
The respondent embarked on a course of conduct, which had the effect of reducing the property available to the parties to be divided. He withdrew funds from his bank accounts with significant disregard to the applicant’s claim. He failed to comply with a consent order by withdrawing $90,000 within two months. He gave no explanation for doing so, or for most of that expenditure.
I consider that an adjustment of 10 per cent should be made in favour of the applicant. This equates to the sum of $20,233.
Superannuation
Both parties proposed that each should retain his and her respective entitlements.
The applicant had a superannuation entitlement of approximately $16,000 at the commencement of cohabitation.
During the relationship, the applicant made contributions to her superannuation. At separation the applicant’s superannuation entitlement amounted to approximately $55,000. As a result of her post-separation salary sacrifices, those entitlements have now increased and doubled to the current balance of approximately $109,000.
The respondent did not give any evidence about his contributions to superannuation.
Doing the best I can, I assess the applicant’s contributions as greater, due to her post separation contribution.
The applicant is seven years younger than the respondent and has a better capacity to increase her entitlement until retirement. Both parties have superannuation entitlements.
I am unable to make any finding about the respondent’s capacity to increase his superannuation, as I am unable to determine the extent of his income.
I consider that there should not be any adjustment. The orders sought by each party to retain their respective entitlements is just and equitable.
The effect of the orders which I will make are that the applicant will receive the following:
Proceeds of sale – Property P $83,000
Honda $12,500
Cash payment $66,365
Total $161,865
Superannuation $109,000
Total $270,865
The respondent will receive the following:
Jeep $60,000
(vehicle omitted) $21,500
Motor Bike $13,000
Nissan $13,000
Caravan $11,000
Storage Container $ 4,763
Funds added back $30,000
Total $153,263
Less cash payment $66,365
Cash payment
business credit card $12,695
Jeep Loan $33,737
Total $112,797
Total $40,466
Superannuation $72,109
Total $112,575
Overall, the applicant will receive non-superannuation and superannuation equal to 71 per cent of the total and the respondent will receive 29 per cent of the total. In the circumstances, I consider this is just and equitable.
I will order that the respondent make the cash payments to the applicant within 45 days as the respondent may need to sell property.
I am of the view that the orders which I will make are just and equitable.
I certify that the preceding one hundred and sixty-three (163) paragraphs are a true copy of the reasons for judgment of Judge Baker
Associate:
Date: 18 August 2015
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Remedies
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Restitution
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Fiduciary Duty
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