PALLISTER & DONNELLY
[2017] FamCA 86
•23 February 2017
FAMILY COURT OF AUSTRALIA
| PALLISTER & DONNELLY | [2017] FamCA 86 |
| FAMILY LAW – PROPERTY SETTLEMENT – Where both parties contended for adjustment of their property interests – Where each party submitted for their superannuation interests to be treated as property – Where both parties acknowledged their contributions throughout the relationship should be assessed on a global basis – Where the respondent is terminally ill and will soon die – Where, for the remainder of his life, he will have no income other than interest paid on bank accounts – Where the applicant is in good health and remains in full-time employment – Where the applicant seeks an adjustment in her favour because the respondent’s imminent death renders his future needs negligible – Concluded a four percent differential in the parties’ percentage entitlements, favouring the respondent, is appropriate FAMILY LAW – PROPERTY – Contributions – Value of superannuation – Expert evidence – Where the respondent’s only capital contribution at or about the commencement of the parties’ relationship was his superannuation interest, the then value of which was in dispute – Value construed consistently with the respondent’s admissions in past proceedings against his former spouse |
| Family Law Act 1975 (Cth) ss 79, 90SF, 90SM Family Law Rules 2004 (Cth) |
| Bevan & Bevan (2013) 49 Fam LR 387 Bourke v Bourke [1998] FamCA 69 Burke v LFOT Pty Ltd (2002) 209 CLR 282 Grace v Grace [2012] NSWSC 976 Marriage of Coghlan (2005) 33 Fam LR 414 Norbis v Norbis (1986) 161 CLR 513 Parrott v Public Trustee of NSW (1994) FLC 92-473 Pierce v Pierce (1999) FLC 92-844 Stanfordv Stanford (2012) 247 CLR 108 Tasmanian Trustees Ltd & Gleeson (1990) FLC 92-156 Vetter v Lake Macquarie City Council (2001) 202 CLR 439 |
| APPLICANT: | Ms Pallister |
| RESPONDENT: | Mr Donnelly |
| FILE NUMBER: | CRC | 110 | of | 2014 |
| DATE DELIVERED: | 23 February 2017 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Newcastle |
| JUDGMENT OF: | Austin J |
| HEARING DATE: | 5 & 6 December 2016 & 13, 14 &15 February 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Duane |
| SOLICITOR FOR THE APPLICANT: | John R Quinn & Co |
| COUNSEL FOR THE RESPONDENT: | Mr Baston |
| SOLICITOR FOR THE RESPONDENT: | Lynn & Rowland Lawyers |
Orders
The Respondent is declared the sole legal and beneficial owner (as between the parties) of the real property situated at and commonly known as B Street, C Town, NSW (comprising Folio Identifier …) (“the property”) and the Applicant shall forthwith do all such acts and things and sign all documents as may be necessary to transfer to the Respondent all her right, title and interest in the property.
The Respondent shall indemnify and keep indemnified the Applicant against any and all past and future rates, taxes, statutory charges, mortgage repayments, and other outgoings and liabilities affecting or relating to the property.
The Applicant is declared the sole legal and beneficial owner (as between the parties) of the Respondent’s shareholding in D Pty Ltd and the Respondent shall forthwith do all such acts and things and sign all such documents as may be necessary to:
(a)Transfer to the Applicant all his right, title and interest in such shareholding;
(b)Resign any office he holds in D Pty Ltd;
(c)Indemnify and keep indemnified the Applicant against any liability in relation to or arising out of his shareholding in or directorship of D Pty Ltd; and
(d)If and when called upon by the Applicant in writing to do so, assist in the removal of the encumbrances (including, but not limited to, dealing numbers …34, …74, and …80) registered on the title of any real property owned by D Pty Ltd, including the real properties situated at and commonly known as the land adjoining E Street, F Town, NSW (being Lots 1 & 2 in DP …, Lots 3, 4, 5, 6 & 7 in DP …, and Lot 8 in DP …).
The parties shall forthwith do all such acts and things and sign all such documents as may be necessary to cause G Pty Ltd, as trustee for the G Superannuation Fund, to sell the real property situated at and commonly known as E Street, F Town, NSW (being Lots 9 & 10 in DP … and Lot 11 in DP …) (“the properties”) upon the following terms and conditions.
For the purpose of implementation of Order 4 hereof:
(a)Mr H, chartered accountant of I Town, NSW (or such other person upon whom the parties may agree in lieu thereof) is appointed as the trustee for sale (“the trustee”);
(b)The properties shall be listed for sale with the agent/s agreed between the parties, but in default of their agreement, the agent/s selected by the trustee;
(c)The solicitors acting on the sale shall be those agreed between the parties, but in default of their agreement, the solicitors selected by the trustee;
(d)The properties shall be listed for auction sale within 3 months of the date of these orders;
(e)The auctioneer, in the event of disagreement between the parties, shall be the auctioneer chosen by the trustee;
(f)The reserve price shall be as agreed between the parties, but in default of their agreement, the reserve price nominated by the auctioneer;
(g)In the event the properties are not sold by auction, or private negotiation within a further seven days, then the properties shall be submitted to successive auctions within further 3 months periods until sold, otherwise on the same terms and conditions as applied to the first auction;
(h)The parties are restrained from charging, mortgaging, or otherwise further encumbering the properties; and
(i)The Applicant shall do all such acts and things and sign all documents as may be necessary to remove any caveat lodged by her (including, but not limited to, dealing number AK…) on the title to the properties.
Upon completion of the sale of the properties pursuant to Orders 4 and 5 hereof, the parties shall do all such acts and things and sign all documents as may be necessary to ensure disbursement of the sale proceeds as follows:
(a)First, to pay all costs, commissions, and expenses of the sale, including but not limited to the costs and disbursements of the trustee, the costs and disbursements of the solicitors, the costs and commissions of the real estate agent/s and auctioneer, any Council and water rates outstanding in respect of the properties, and any moneys outstanding under any mortgage registered on title to the properties; and
(b)Secondly, to pay the balance into the account of the G Superannuation Fund nominated in writing by the authorised officer of G Pty Ltd for the beneficial interest of the Respondent.
Unless otherwise provided:
(a)Each party shall be the sole legal and beneficial owner (as between the parties) of all other assets in their respective possession as at the date of these orders, and for that purpose bank accounts are deemed to be in the possession of the person named as the account holder and superannuation entitlements are deemed in the possession of the superannuant; and
(b)Each party shall be solely liable for and shall indemnify the other against any and all debts attaching or relating to the property in their respective possession and any debts in their respective sole names.
In the event of either party refusing or neglecting to sign within 7 days of a written request to do so any document necessary to implement the terms of these orders the Registrar of the Family Court of Australia in the Newcastle registry is empowered to execute such documents on behalf of the parties pursuant to s 106A of the Family Law Act.
Any and all other outstanding applications are dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Pallister & Donnelly has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT NEWCASTLE |
FILE NUMBER: CRC 110 of 2014
| Ms Pallister |
Applicant
And
| Mr Donnelly |
Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings concern the need for, and the form of, property settlement orders between two former de facto partners pursuant to Part VIIIAB of the Family Law Act 1975 (Cth) (“the Act”).
The existence of jurisdiction to determine the dispute was not the subject of any contest. The relationship existed in NSW, ended after 1 March 2009, and was of sufficient duration to attract jurisdiction under the relevant provisions of the Act. The respondent did not take issue with whether the proceedings were commenced within the prescribed limitation period.
The parties’ de facto relationship was about 15 years in duration and ended about five years ago. Their relationship began during 1997 and ended in either late 2011 or early 2012. There was some slight disagreement over the precise dates, but those discrepancies now make no appreciable difference. The parties initially separated in November 2004, but later reconciled and resumed cohabitation in late 2005, at which time they resumed their former domestic arrangements.
There were no children of the relationship and the parties lived together without dependents.
Both parties were formerly married and, following property settlements with their respective former spouses, each brought assets into the relationship, though some controversy surrounded the identity and value of their capital contributions.
The proceedings were transferred by the Federal Circuit Court to this Court in August 2016 and listed for trial in December 2016. The trial was commenced, but needed to be adjourned part-heard, and was completed in February 2017.
Evidence
The applicant relied upon:
(a)Her affidavit filed on 8 November 2016, the voluminous exhibit to which affidavit was separately tendered in evidence[1]; and
(b)Her financial statement filed on 8 November 2016.
[1] Exhibit W1
The respondent relied upon:
(a)His affidavit filed on 24 June 2016, the voluminous exhibit to which affidavit was separately tendered in evidence[2];
(b)His financial statement filed on 2 November 2016; and
(c)His affidavit filed on 8 February 2017.
[2] Exhibit H1
Substantial portions of the respondent’s affidavit evidence were struck out as a consequence of the applicant’s valid objections.
The respondent suffered from terminal illness during the litigation, which eventually prohibited him from speaking and required the appointment of a case guardian for him. The illness prevented his oral cross-examination and so procedural orders were made allowing him to be extensively interrogated in writing pursuant to Part 13.3 of the Family Law Rules 2004 (Cth) (“the Rules”). The questions posed and the answers he gave were reduced to writing and tendered in evidence.[3]
[3] Exhibits W6, W12
Legal principles
Orders under the Act altering the property interests of parties may only be made if the Court is first satisfied it is just and equitable to make such orders. It is necessary to begin that inquiry by identifying the existing legal and equitable property interests of the parties. It must not be assumed the parties’ rights to or interests in property are or should be different from those that then exist, or that a party has the right to have the parties’ property divided by reference to the statutory considerations (see Stanfordv Stanford (2012) 247 CLR 108 at [37]-[40], [50]). Although the High Court was dealing in Stanford with an application between spouses for property settlement pursuant to Part VIII of the Act, the principles apply equally to applications between de facto partners pursuant to Part VIIIAB of the Act.
It is permissible for the factors prescribed by s 90SM(4) (the counterpart to s 79(4)) to inform the inquiry under s 90SM(3) (the counterpart to s 79(2)) of the Act about the justice and equity of making property settlement orders (see Bevan & Bevan (2013) 49 Fam LR 387 at [83]-[89], [163], [169], [171]-[172]).
If and once determined it is just and equitable for the property interests of the parties to be altered, the process of evaluating the proper orders to make is dictated by the factors enumerated within s 90SM(4) of the Act. The court must necessarily identify and assess the parties’ contributions within the meaning of ss 90SM(4)(a)-(c) and then take account of the relevant matters referred to in ss 90SM(4)(d)-(g) and 90SF(3) of the Act.
Existing proprietary interests
After the evidence was closed, the parties jointly tendered a balance sheet that identified and valued their assets, liabilities, and superannuation interests.[4] The evidence contained within the balance sheet did not correlate with the evidence they respectively adduced in their financial statements so, where there was any discrepancy, the parties adopted the contents of the balance sheet and disavowed the contradictory evidence. The balance sheet disclosed a dispute over the valuation of the respondent’s superannuation interest,[5] but during final submissions the respondent expressly adopted the figure asserted by the applicant as the correct valuation to eliminate that dispute.
[4] Exhibit C
[5] Exhibit C, item 18
Ordinarily, the parties’ superannuation interests should be considered separately from their property interests (see Marriage of Coghlan (2005) 33 Fam LR 414 at 428-429), but both parties urged a different approach in this case. They each submitted for their superannuation interests to be treated as property, which course is taken for several reasons. First, the respondent’s superannuation interest is capable of immediate crystallisation as property because of his age (he is 67 years), if not because of his exigent medical circumstances. Second, the whole of the applicant’s superannuation interest was accrued after the parties’ relationship began, since she gave no evidence of having any superannuation before their cohabitation. Third, neither party sought any splitting order in respect of either superannuation interest.
The applicant’s assets, liabilities, and superannuation interests currently comprise:
No.
Assets
Value
Total
1a
B Street, C Town (50 per cent)
525,000
4
J Street, C Town (100 per cent)
1,115,000
5
K Street, L Town (100 per cent)
775,000
6
M Street, C Town (50 per cent)
197,500
7
Savings Acc
411
Sub-total
2,612,911
Liabilities
11
Mortgage (J Street) (100 per cent)
506,086
12
Mortgage (K Street) (100 per cent)
62,500
13
Mortgage (M Street) (50 per cent)
156,893
14a
Mortgage (B Street) (50 per cent)
224,547
15
Citibank credit card
11,160
Sub-total
961,186
Net assets
1,651,725
Superannuation
17
AMP
390,000
Net assets and superannuation
2,041,725
The respondent’s assets, liabilities, and superannuation interests currently comprise:
No.
Assets
Value
Total
1b
B Street, C Town (50 per cent)
525,000
2
Shares in D P/L (100 per cent)
350,000
3
Prima pleasure cruiser
100,000
8
Shares in G P/L (100 per cent)
44,280
9
German car
35,000
19
Residue of inheritance
60,343
Sub-total
1,114,623
Liabilities
14b
Mortgage (B Street) (50 per cent)
224,547
Sub-total
224,547
Net assets
890,076
Superannuation
18
G Superannuation Fund
1,425,000
Net assets and superannuation
2,315,076
In or about early 2016, the respondent received an inheritance of about $384,000 from the estate of his deceased father. It was agreed the respondent now retains only $60,343,[6] which sum is counted among the respondent’s assets, since it is cash and he can alienate it at will. The applicant contended for the spent remainder of the bequest, amounting to $323,657, to be notionally added-back as another of the respondent’s assets,[7] but the submission is rejected. The applicant conceded those monies were not spent recklessly or wantonly by the respondent, and further, she made no direct or indirect contribution to the respondent’s receipt of that bequest, which he received nearly four years after their final separation.
[6] Exhibit C, item 19
[7] Exhibit C, item 10
The respondent’s counsel contended in final submissions that the respondent’s car (item 9) was purchased with the inherited funds, but there was no evidence to support the submission. In fact, the evidence was inconsistent. The single expert who valued G Pty Ltd reported the corporation paid for the car in February 2016 and its cost was debited to the respondent’s director’s loan account.[8] Nevertheless, no adjustment is made to the value of the respondent’s shareholding in G Pty Ltd because such value was an agreed fact between the parties.
[8] Exhibit B
The respondent contended for a liability of $39,990 to be taken into account as his own debt,[9] but the submission is rejected. The liability is not, and could not ever be, personal to him. His superannuation interest is held within the G Superannuation Fund (“the Super Fund”). G Pty Ltd is the trustee of the Super Fund. He is the sole director of and the only shareholder in G Pty Ltd.[10] He is also the only member of the Super Fund.[11] The value of his superannuation interest is dependent upon the underlying value of the Super Fund assets, which are parcels of real estate. The respondent wants to sell the parcels of real estate to realise their current market value, with the net proceeds of sale then constituting his superannuation interest in a more liquid form, but the costs of any such sale will be a liability borne by the Super Fund, not him.
[9] Exhibit C, item 16
[10] Exhibit W8
[11] Exhibit W4
Section 90sm(3)
Both parties contended an adjustment of their property interests was warranted. They simply disagreed about the nature of the adjustment. Given they remain entangled in each other’s financial affairs by their joint ownership of valuable real estate and their joint liability for the loan secured by mortgage over that property, an adjustment of their property interests is required.
Sections 90sm(4) and 90sf(3)
Having concluded it would be just and equitable to adjust the parties’ property interests, it is necessary to now consider their respective contributions, recognised under s 90SM(4)(a)-(c) of the Act, and the factors prescribed by ss 90SM(4)(d)-(g) and 90SF(3) of the Act.
The applicant’s initial capital contributions were:
(a)Part ownership (52 per cent) of real property at C Town (N Street),[12] which the respondent admitted was then worth about $375,000;[13]
(b)Sole ownership of real property at C Town (J Street),[14] which she still owns. At the time, the property was encumbered by mortgage and the applicant had very little equity in it.[15] The respondent asserted the applicant acquired the property shortly after the parties began their relationship,[16] but even if that is correct it is still a contribution for which the applicant should be credited; and
(c)Another capital sum of $100,000 upon completion of her property settlement with her former spouse, which was invested.[17] She seemingly received the cash some point after the parties commenced cohabitation, but the contribution should not be overlooked.
[12] Applicant’s affidavit, paras 10(i), 11-18; Respondent’s second affidavit, para 7
[13] Respondent’s first affidavit, para 7
[14] Applicant’s affidavit, para 10(ii); Respondent’s first affidavit, para 15
[15] Applicant’s affidavit, paras 19-27
[16] Respondent’s first affidavit, paras 66-67
[17] Applicant’s affidavit, para 65
The applicant’s initial capital contributions therefore amounted to around $480,000. Although the applicant unsuccessfully tried to develop the first property (N Street) for many years and, upon its eventual sale, realised only minimal returns,[18] the value of the property as an initial contribution is not thereby diminished. The respondent did not contend otherwise. The second property (J Street) was substantially improved during the parties’ relationship and is now quite valuable, despite still being subject to an encumbrance.
[18] Applicant’s aff, paras 191-222; 303-313, 342-348; 353-361; 368-374; 379-381, 402-407
The respondent’s initial capital contributions were:
(a)Shares in D Pty Ltd (“D”), which had no appreciable value because the corporation’s liabilities exceeded its assets;[19]
(b)Shares in G Pty Ltd, which had no appreciable value because the corporation’s liabilities exceeded its assets;[20]
(c)Sole ownership of an encumbered real property at O Town but, when later sold in 2000, the proceeds were exhausted in payment of the encumbrance,[21] so inferentially the respondent enjoyed no equity in it; and
(d)His superannuation interest within the Super Fund, the then value of which was the subject of intense controversy.
[19] Respondent’s first affidavit, para 7(c); Respondent’s second affidavit, para 6(c)
[20] Respondent’s first affidavit, para 7(d); Respondent’s second affidavit, para 6(d)
[21] Respondent’s second affidavit, para 6(f)
The respondent also enjoyed proprietary interest in two parcels of real property at F Town at the commencement of cohabitation, but he transferred his interest in those properties to his former wife as part of their property settlement in 2000,[22] for which he received cash of $475,000 and which funds he used to retire debt of G Pty Ltd.[23] The effect of the influx of those funds was, however, for the respondent to prove and he failed to do so. There was no basis for any legitimate inference that reduction of G Pty Ltd’s debt had the correlative effect of increasing the value of the respondent’s shareholding in the corporation. For all that is known, reduction of its liabilities may still have left it in a state of near insolvency, where its debts exceeded its assets, albeit by a narrower margin.
[22] Respondent’s first affidavit, paras 7(a), 7(b); Respondent’s second affidavit, paras 6(a), 6(b)
[23] Respondent’s second affidavit, para 6(g); Exhibit W6, supplementary Q.20-25
All evidence must be weighed according to the proof which it is in the power of one side to have produced and the power of the other to have contradicted (see Vetter v Lake Macquarie City Council (2001) 202 CLR 439 at 454; Burke v LFOT Pty Ltd (2002) 209 CLR 282 at 330) and the respondent had all the power to adduce evidence about the historical financial performance of G Pty Ltd. Since at least the property settlement with his former spouse, the respondent has always been the sole director of and shareholder in G Pty Ltd. He could have adduced evidence of its solvency in the period between 1997 and 2000, but he did not do so. It was the applicant who tendered the tax returns for G Pty Ltd, but she only had the returns extending back to 2004.[24] It was only within the last few weeks that the respondent attended to lodgement of the last 15 years’ worth of tax returns for the Super Fund[25] and it was the applicant who tendered those tax returns as well.[26]
[24] Exhibit W2
[25] Respondent’s second affidavit, paras 15-17
[26] Exhibit W4
Details about the financial health of G Pty Ltd at or about the time the parties began their relationship are only evident from documents filed in the property settlement proceedings between the respondent and his former wife, which the applicant also tendered.[27] In those proceedings he admitted serious difficulty in raising finance to meet his financial obligations and to enable his retention of G Pty Ltd and its business. His re-finance entailed one of G Pty Ltd’s creditors extending its credit to approximately $1 million,[28] which liability the respondent deposed was at risk of being called-in only several months later in May 2000.[29] In such circumstances, the most likely inference is that the $475,000 paid to the respondent by his former wife to consummate their property settlement only stemmed the financial haemorrhage then experienced by G Pty Ltd. At the time, the respondent admitted his receipt of the $475,000 would still leave him in personal debt.[30] In the face of such evidence, despite some equivocation under interrogation,[31] the respondent conceded in final submissions he and G Pty Ltd were then experiencing financial trouble. The payment of $475,000 should not, therefore, be regarded as a capital contribution he made to bolster the parties’ financial position and he was correct to confess when interrogated that his only capital contribution at or about the commencement of the parties’ relationship was his superannuation interest,[32] which it is now necessary to analyse.
[27] Exhibit W7
[28] Exhibit W7, document 7, Annexure A
[29] Exhibit W7, document 8
[30] Exhibit W7, document 8, paras 4-5
[31] Exhibit W12, Q.7, 13, 14, 26, 49
[32] Exhibit W6, Q.13
It was common ground the value of the respondent’s superannuation interest at or about the time the parties began their relationship was equivalent to the net value of the land owned by the Super Fund, since he acquired entitlement to the whole of the superannuation interest held within the Super Fund upon resolution of the property settlement with his former wife. There were, however, conflicts in the evidence about its value.
The respondent deposed in these proceedings that his superannuation interest was then worth $444,322, which sum reflected the value of real property beneficially owned by the Super Fund.[33] However, in the proceedings against his former wife, the respondent deposed his superannuation interest was then worth an estimated $300,000,[34] which was only one-half of the alleged value of the land owned by the Super Fund.[35] His apparent disavowal of that proposition when interrogated in these proceedings was false.[36] The respondent also deposed in the earlier proceedings that the Super Fund land was then worth $800,000,[37] but that evidence was not adopted as correct by his lawyers when they filed the Case Outline document for him in readiness for trial only a month later.[38]
[33] Respondent’s first affidavit, para 7(e)
[34] Exhibit W7, documents 1 and 3
[35] Exhibit W7, document 5, para 6, Annexure D; Exhibit W12, Q1-2
[36] Exhibit W12, Q.4, 43, 46, 47
[37] Exhibit W7, document 4, para 44
[38] Exhibit W7, document 6, section H
The applicant’s lawyers submitted the Super Fund’s actual total value was then $600,000 and, given the applicant accepts the respondent eventually brought into their relationship the whole of the superannuation interest, not merely one-half of it, she asserted his superannuation interest was then valued at $600,000.
The respondent contended otherwise. In these proceedings, a single expert witness valued the respondent’s superannuation interest in 1999 at between $805,164 and $827,476,[39] the higher value of which the respondent now wants to adopt as correct. Although the single expert was not ultimately cross-examined on his opinion evidence, less weight reposes in it than in the contemporaneous admissions made by the respondent in the former litigation about the value of the superannuation interest because he was then under a duty to make full and frank disclosure and to adduce reliable evidence. The opinion advanced by the single expert now, more than 17 years after the event, was expressly conditioned by his acknowledgement that his opinion is an “investigation into a retrospective commercial value” of the Super Fund property in circumstances where he is “not a certified property valuer” and he had “limited available information”.
[39] Exhibit B; Respondent’s second affidavit, para 21, Annexure KJD10
More grievous harm was caused to the single expert’s opinion evidence by other shortcomings. First, he was apparently ignorant of the respondent’s expert valuation of the Super Fund land in the former proceedings at $600,000.[40] Secondly, he rejected the efficacy of an historical valuation report in respect of the land prepared by a single expert witness in these proceedings. Thirdly, he relied upon a “kerbside valuation opinion” he unilaterally procured from a local real estate agent about the values of the unimproved land and the improvements built upon it, as at 1999. The single expert merely adopted the real estate agent’s opinion as his own opinion about the value of the respondent’s superannuation interest in 1999. In other words, his asserted opinion was not his opinion at all. It was the opinion of an unidentified real estate agent, whose qualifications and experience are unknown, in circumstances where the information and instructions with which he was furnished are undisclosed.
[40] Exhibit W7, document 5, para 6, Annexure D
Most probably, the respondent’s superannuation interest within the Super Fund was worth about $600,000 at or about the time the parties began their relationship and he should be credited with that amount as his capital contribution.
Once the parties began cohabitation, they maintained their individual employment and applied their income to various investments, including real property ventures, with the intention of their mutual financial advancement. Some of those ventures were individual and some were shared. Some were successful and some were not. They were financially bound together by joint loans and the use of their real properties as collateral security. To adopt the description used by the applicant, without demurrer by the respondent, they became “inextricably intertwined”.
Both parties acknowledged their contributions throughout the relationship should be assessed on a global basis, as is usual (see Norbis v Norbis (1986) 161 CLR 513 at 523, 532-533, 541), and it was therefore unnecessary to unpick the intricate details of their purchase, development, and sale of various properties, including those situated at and known as:
(a)P Street, C Town;
(b)K Street, Highway, L Town;
(c)Q Street, C Town, which was sub-divided into two separate properties then known as 9 and 10; and
(d)B Street, C Town.
Throughout the parties’ relationship, the applicant maintained full-time employment and the respondent maintained operation of the business conducted by G Pty Ltd.
During the period of their separation in 2004/2005, the parties voluntarily adjusted their financial interests. The applicant paid cash to the respondent in return for his transfer to her of his interest in an encumbered jointly-owned real property, so she became the sole legal proprietor of it.[41] The applicant deposed she paid the respondent $250,000, but it difficult to discern whether he admits receiving $250,000,[42] or alternatively, the greater sum of $275,000 as revealed by the registered transfer.[43] Regardless, both parties contended that transaction should have no bearing upon analysis of their present entitlements in these proceedings.
[41] Applicant’s affidavit, paras 290-294
[42] Exhibit W6, Q.77-79
[43] Respondent’s first affidavit, paras 9-10
Upon their final separation, the respondent remained in occupation of the jointly-owned property in which the parties last cohabited and he thereafter maintained the mortgage repayments. Otherwise, the parties retained the assets they individually owned. The business conducted by G Pty Ltd, which was the source of the respondent’s income, was wound-up in late 2015.[44] By then he was too ill to maintain the operation.
[44] Respondent’s first affidavit, paras 199-202, 209
Presently, the respondent is terminally ill. He conceded short life expectancy and in fact expects to die soon.[45] His oncologist expects that to occur within perhaps only weeks, but almost certainly within coming months, as he is no longer able to speak, swallow, or breathe normally.[46]
[45] Respondent’s first affidavit, para 4; Respondent’s second affidavit, para 10
[46] Respondent’s second affidavit, para 8, Annexure KJD3
For the remainder of his life he will have no income, other than interest paid on the credit balance of his banking accounts.[47] His income from the G Pty Ltd business ceased flowing in 2015 and since then he has lived off the inheritance he received from his late father’s estate in January 2016, which capital he will continue to deplete until his death. He is ineligible for welfare payments because of the value of his property and superannuation interests.[48] His current wife has modest means and her full-time care for him prevents her from working.[49]
[47] Respondent’s financial statement, paras 9-16.
[48] Respondent’s second affidavit, paras 213-215
[49] Respondent’s second affidavit, para 212
By comparison, the applicant is 54 years of age and admits to being “able bodied and in good health”.[50] She remains in full-time employment and earns gross income of about $1,794 per week, with extra fringe benefits of about $204 per week. She has additional income in the form of rent from a property she owns and will retain, which amounts to about $1,559 gross per week.[51] Even allowing for her asserted expenses, she admits surplus income of about $1,219 per week.[52] She enjoys ownership of property and superannuation with a combined net value of $2,041,725.
[50] Applicant’s affidavit, para 9
[51] Applicant’s financial statement, paras 3-16
[52] Applicant’s financial statement, paras 2, 16, 33
The applicant’s current husband is in full-time employment and has his own income stream of $3,642 per week.[53] The applicant took no issue with the assertion he also has shares worth in excess of $1,163,025 and a superannuation interest valued at $352,000.[54]
[53] Applicant’s financial statement, para 17
[54] Respondent’s first affidavit, paras 205-206
The applicant submitted for her entitlement to 62 per cent of the parties’ combined net property and superannuation interests (and hence, 38 per cent to the respondent) if the spent portion of the respondent’s inheritance is not notionally added-back to his assets, which it is not. She tendered a minute of the property settlement orders she ultimately proposed.[55]
[55] Exhibit W11
Conversely, the respondent submitted for his entitlement to 58 per cent of the parties’ combined net property and superannuation interests (and hence, 42 per cent to the applicant). He tendered a minute of the property settlement orders he ultimately proposed.[56]
[56] Exhibit H3
Eventually, it transpired that the parties’ dispute was quite narrow, despite their respective proposals being 20 per cent apart. They agreed their contributions during their cohabitation were equivalent, so the issues distilled to:
(a)The effect of the disparity between their respective initial capital contributions;
(b)Whether the respondent’s post-separation contributions were slightly superior to those of the applicant; and
(c)Whether any adjustment ought be made in favour of the applicant pursuant to the factors prescribed by ss 90SM(4)(d)-(g) and 90SF(3) of the Act and, if so, the quantum thereof.
Near to the beginning of their relationship, the applicant introduced assets worth about $480,000 and the respondent introduced a superannuation interest worth about $600,000. The significance of that disparity did not erode over time (see Pierce v Pierce (1999) FLC 92-844 at [23]-[30], [40]), but the weight attributable to their initial contributions decreased over the duration of their relationship because other subsequent contributions made by each of them also deserve appropriate weight. However, the weight attributable to the disparate capital contributions did not disappear altogether so as cause their overall contribution-based entitlements to be equal, as the applicant submitted.
The respondent contended his post-separation contributions slightly exceeded the applicant’s because he maintained mortgage repayments and utility payments on their jointly-owned property, but that ignored the fact he enjoyed exclusive occupation of the property. Although the applicant retained the rental income derived from one of her properties, she also maintained it. There was no proper basis upon which to differentiate their post-separation contributions, save for the respondent’s introduction in 2016 of the unspent $60,343 from the inheritance.
The applicant sought to argue for a sizable adjustment in her favour on account of the respondent’s imminent death rendering his future needs negligible by comparison, in aid of which submission she called upon various authorities (see Parrott v Public Trustee of NSW (1994) FLC 92-473; Tasmanian Trustees Ltd & Gleeson (1990) FLC 92-156). The applicant contended that, although rarely would a party be deprived of his or her proper share of property to atone for the other party’s future needs, in this case, the respondent’s short life expectancy warranted an adjustment on their contribution-based entitlements in her favour, which she quantified at between 10-12 per cent.
Significantly, any principles thought to arise from those authorities were premised on the proposition that the modesty of the property available for distribution between the parties enabled such a course to be justly and equitably taken. In Parrott, the total amount of net property available for distribution was only $91,154. In Tasmanian Trustees, the only significant asset was the former matrimonial home worth $60,500. The Full Court in both cases recognised that, in cases where the property pool was larger, quite different results might follow from application of the statutory provisions. The issue was addressed to similar effect in other authorities not mentioned in oral argument (see Bourke v Bourke [1998] FamCA 69 at [4.30]-[4.31]; Grace v Grace [2012] NSWSC 976 at [290]). This case is in a quite different category from those discussed in the authorities cited by the applicant. In this case, the combined net value of the parties’ assets and superannuation is $4,356,801, of which the applicant already enjoys ownership of 46.9 per cent.
The orders to be made, regardless of whether they bear closer correlation to those proposed by the applicant or respondent, will have no bearing on the applicant’s earning capacity (s 90SM(4)(d)), there were no children of their relationship and the orders will not otherwise affect them (s 90SM(4)(f)), no issue of child support arises (s 90SM(4)(g)), and no other aspect of the evidence persuasively justified any adjustment (ss 90SM(4)(e) and 90SF(3)).
Conclusions and orders
Having regard to the findings made and the parties’ submissions about their respective entitlements, the just and equitable division of their property and superannuation interests should result in the respondent’s entitlement to 52 per cent and the applicant’s entitlement to 48 per cent. A four per cent differential, which computes to about $174,272, is appropriate. The respondent’s initial capital contributions were slightly greater and he recently brought to account some $60,000 cash as an asset. Otherwise, their contributions were equivalent and the applicant was unable to demonstrate any legitimate basis for corrective adjustment.
Given the total net value of assets and superannuation interests is $4,356,801, the applicant’s 48 per cent share computes to $2,091,264 and the respondent’s 52 per cent share computes to $2,265,537.
The applicant already holds title, exclusively of the respondent, in property and superannuation (items 4, 5, 6, 7, 11, 12, 13, 15, and 17) with a net value of $1,741,272. Assuming, for the moment, she relinquishes her part ownership of the jointly-owned property in which the respondent lives, she needs to be paid an extra $349,992 in order to receive her proper entitlement.
However, the applicant wants to immediately acquire sole ownership of the jointly-owned property in which the respondent lives but, because she knows he wants to remain there for the remainder of his life,[57] she was prepared to postpone her own occupation of it for six months.[58] If she acquired sole proprietorship of the property, subject to its encumbrance, she would owe the respondent about $300,000. She might be able to raise such funds by her sale of some other asset, the re-finance of another asset, or a loan from her husband, but she did not explain how she would do so in evidence or submissions. Complications would foreseeably arise if, as the applicant proposed, she immediately acquired sole legal title to the property but allowed the respondent to remain in temporary occupation, since she proposed no ancillary orders to regulate the respondent’s future occupation of the property. Even though she proposed immediately taking over complete financial responsibility for it,[59] what would happen, for example, if she became dissatisfied with the standard of his maintenance of the property and wanted to eject him or he unexpectedly lives for more than the six months grace she was prepared to give him? It was not for the Court to fashion orders to deal with such potential complications not addressed by the parties.
[57] Respondent’s first affidavit, paras 220-221
[58] Exhibit W11, Orders 1-3
[59] Exhibit W11, Order 2
The applicant’s proposal about her acquisition of the jointly-owned property is rejected. The respondent has lived in the property continuously since the parties’ separation nearly five years ago and wants to remain. His desire is not unreasonable, given his illness. The applicant did not advance any reason why she wanted the property or had any better claim to it than the respondent. The respondent has a more compelling claim upon the property than the applicant.
The applicant expressly sought exclusive legal title in the respondent’s shareholding in D.[60] It was an agreed fact the respondent is the sole director of and shareholder in D. Its only asset is land, which the respondent has been trying to sell for some time.[61] He still wants the land sold and, because of his ill health, expects his wife will attend to it on his behalf.[62] Self-evidently, the respondent is no longer interested in either D or the land it owns, in which case he could have no logical objection to the applicant taking his shareholding in the corporation and replacing him as its sole director. That would provide her with sole ownership of the shareholding the parties agreed was worth $350,000, which sum is almost exactly the amount she is due to fulfil her entitlement. The $8 difference is de minimis.
[60] Exhibit W11, Order 4
[61] Respondent’s first affidavit, para 210
[62] Respondent’s second affidavit, para 10
The applicant adduced evidence that D could be liable for the payment of capital gains tax on any sale of the land it owns,[63] but that is not a persuasive consideration. She expressly sought control of the corporation and its land in full knowledge of that possibility and, in any event, she will not be obliged as the incoming director of and sole shareholder in the corporation to cause it to sell the land. It will be her choice. Even if she decides to sell the land, as the evidence revealed, the creation and quantum of any liability for capital gains tax will depend “on a number of factors” which were neither disclosed nor considered. Of course, any liability for such tax would lie with the corporation, not the applicant. If G Pty Ltd sells the land beneficially owned by the Super Fund, as the respondent presently plans and as the applicant wants, the Super Fund may similarly accrue some liability for capital gains tax. That will potentially diminish the value of the respondent’s superannuation interest. The parties will therefore be in similar positions.
[63] Exhibit W9
The respondent has decided he should use his control of G Pty Ltd to cause its sale of the land it holds beneficially for the Super Fund.[64] To that end, he sought advice from a real estate agent about the sale, in one line, of the land owned by the Super Fund and the adjoining land owned by D.[65] The real estate agent envisaged the sale of all the land in one line, though its division into 11 individual lots remains feasible.[66] The single expert engaged to value the land owned by both the Super Fund and D reported that at least the Super Fund land might realise a higher sale price if sold in conjunction with the D land.[67] The applicant adopts the view that the value of all the land would be higher if it was all sold in one line and so she accordingly sought orders for the Super Fund land to be sold and the net proceeds of sale deposited in the Super Fund account for the respondent’s benefit.[68] She plainly envisages exercising her power as sole director of and shareholder in D to ensure its land is marketed for sale in one line with the Super Fund land in the hope of maximising the financial return for both parties.
[64] Respondent’s second affidavit, para 10
[65] Respondent’s second affidavit, para 12, Annexure KJD5
[66] Respondent’s second affidavit, Annexure KJD5
[67] Exhibit B
[68] Exhibit W11, Order 5
Given the respondent’s declared attitude, there could be no real controversy over an order compelling the sale of the Super Fund land, but it raises the question of who should have control of the sale. The respondent plainly cannot, because he is too ill. The need for an appointment of a case guardian for him in this litigation is testament to his lack of capacity. The respondent envisaged his wife could do it, as she will be the representative of his deceased estate, but there is a risk she will fall into dispute with the applicant. Conflict would likely arise if the applicant controlled D and its land and the respondent’s wife controlled G Pty Ltd and the Super Fund land. Nor is it a satisfactory solution to vest the applicant with control of the sale of the Super Fund land, since that sale is intended to benefit the Super Fund and hence the respondent and his beneficiaries, not the applicant. There would be a risk of the applicant making decisions to enhance the prospective sale price of the D land, potentially to the disadvantage of the Super Fund land.
The most attractive solution is to appoint an impartial trustee for the sale of the Super Fund land, who would owe a fiduciary duty to both parties. The single expert the parties engaged to report upon the value of G Pty Ltd, the Super Fund, and D is a chartered accountant, retired bankruptcy trustee, and retired liquidator. He is eminently qualified to accept the appointment and is willing to accept it, upon payment of reasonable fees for service.[69]
[69] Exhibit W10
There is no need to compel, by order, the wife’s sale of the D land because she believes in the mutual benefit of trying to sell all of the land in one line. For some unforeseen reason, it may become beneficial for the land parcels to be sold separately, so that prospect should not be foreclosed by the orders that mandate immediate sale of the D land.
Accordingly, the most equitable way to adjust the parties’ interests is to require:
(a)The applicant to transfer her interest in the jointly-owned real property at C Town to the respondent, in respect of which the respondent shall indemnify the applicant against any past and future liability;
(b)The respondent to transfer his shareholding in D to the applicant, to resign any office he holds in the corporation, and to indemnify the applicant against any liability associated with his conduct of the corporation (whereupon the applicant will become the putative owner of the D land);
(c)Appointment of the trustee to sell the Super Fund land and to ensure the deposit of the net proceeds of sale into the Super Fund for the benefit of the respondent;
(d)The parties’ removal of redundant encumbrances registered on title to the land owned by D and the Super Fund; and
(e)The parties to otherwise each retain their own assets, liabilities, and superannuation interests.
The applicant would then have assets and superannuation (items 2, 4, 5, 6, 7, 11, 12, 13, 15, and 17) with a net value of $2,091,272 (= 48 per cent + $8).
The respondent would then have assets and superannuation (items 1, 3, 8, 9, 14, 18, and 19) with a net value of $2,265,529 (= 52 per cent – $8).
The applicant sought an order that the respondent surrender to her, “in good order and condition”, certain nominated chattels.[70] The respondent deposed to his willingness to surrender some, but not all of those chattels to her.[71] Nonetheless, no such order is made for several reasons. First, the parties invited the Court to ignore their ownership of any household chattels,[72] even though they both deposed to ownership of some.[73] Secondly, if there is no genuine debate about it, the respondent can voluntarily surrender the chattels he retains to the applicant without the need for his compulsion under order. If that cannot be achieved consensually, it demonstrates the need for a prescriptive and enforceable order and none should be made because there was no cross-examination of the applicant, no interrogation of the respondent, and no submissions made about issues such as: which of the nominated chattels the respondent still retains, whether they are still in “good order and condition” to the applicant’s satisfaction, and whether some of them are really fixtures and not moveable chattels at all.[74] Making an order in the terms proposed by the applicant would almost certainly lead to dispute over its subsequent implementation and possibly the institution of enforcement proceedings. If the issue was not worth pursuing during the trial, the parties’ irreconcilable positions do not now deserve resolution in an arbitrary way upon untested evidence.
[70] Exhibit W11, Order 6
[71] Respondent’s first affidavit, para 191
[72] Exhibit C
[73] Applicant’s financial statement, para 42; Respondent’s financial statement, para 42
[74] Respondent’s first affidavit, paras 191-195
For those reasons, the orders set out at the commencement of these reasons represent a just and equitable division of the parties’ assets, liabilities, and superannuation interests.
I certify that the preceding sixty seven (67) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Austin delivered on 23 February 2017.
Associate:
Date: 23 February 2017
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Expert Evidence
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Remedies
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Statutory Construction
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