PAMPLIN & PAMPLIN

FAMILY COURT OF AUSTRALIA

PAMPLIN & PAMPLIN

[2009] FamCA 1024

FAMILY LAW – PROPERTY SETTLEMENT – Determination of asset pool – Claims for add backs – Husband undertook high risk/high return lending practices – Husband said he kept the wife informed of lending practices – Wife asserted that she had very little knowledge of the details – Husband’s behaviour not reckless, wanton or wasteful – No add back of the investment losses – Equal division of available assets

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

C & C [1998] FamCA 143

APPLICANT:

Ms Pamplin

RESPONDENT:

Mr Pamplin

FILE NUMBER:

SYF

3838

2006

DATE DELIVERED:

30 October 2009

PLACE DELIVERED:

Brisbane

PLACE HEARD:

Sydney

JUDGMENT OF:

Warnick J

HEARING DATE:

14, 15, 16 and 18 September 2009

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Hodgson

SOLICITOR FOR THE APPLICANT:

Aitken Lawyers

COUNSEL FOR THE RESPONDENT:

Mr Campton

SOLICITOR FOR THE RESPONDENT:

Barkus Doolan Kelly

Orders

That the wife retain the following:
(a)Antiques in possession of the wife;
(b)All public company shares registered in the name of the wife including but not limited to:
(i)ANZ shares;
(ii)QBE shares;
(iii)Rio Tinto shares;
(iv)Westpac shares; and
(v)Woolworths shares.
(c)Volkswagon vehicle registration number ….
(d)St George Freedom Plus account number …
(e)St George Powersaver account number ….
(f)Commonwealth Bank, direct Investment account, account number ….
(g)Commonwealth bank, Streamline Account, account number ….
(h)AMP Retirement Savings Superannuation #....
(i)Australian Eligible Rollover Fund Superannuation #...9.
(j)Australian Eligible Rollover Fund Superannuation #...0.
(k)BT Lifetime Super Employee Plan #....
(l)CBA Life Personal Superannuation Fund #....
(m)All furniture, furnishings and effects in the wife’s possession.
That the husband retain the following:
(a)The husband’s interest in the property situated at and known as C property.
(b)Funds in bank accounts in the husband’s sole name or with another (other than the wife).
(c)Funds held to his entitlement in any superannuation fund.
(d)All furniture, furnishings and effects in the husband’s possession.
(e)The husband’s shareholdings in any private company or companies.
That within 21 days of the date of making these orders, the wife shall do all acts and things and sign all documents necessary to:
(a)Transfer to the husband, all her right title and interest in the account and funds standing to the credit of the account described as Cash Management call account …, with the Commonwealth Bank of Australia.
(b)Transfer all her right, title and interest in all her units in the W Company Trust to the husband.
(c)Assign to the husband all her right, title and interest in any loan account in her name with the W Company Trust.
(d)Pay the husband the sum of $40,875.00
That except as specifically provided for by any order to the contrary, as against the husband, the wife is the sole owner of and the husband has no interest in all property (including choses in action) of whatsoever nature and kind in the name, ownership and/or possession of the wife at the date of the making of this order including but not limited to order 1 herein.
That except as specifically provided for by any order to the contrary, as against the wife, the husband is the sole owner of and the wife has no interest in all property (including choses in action) of whatsoever nature and kind in the name, ownership and/or possession of the husband at the date of the making of this order including but not limited to orders 2 and 3 herein.
That except as specifically provided for by any order to the contrary:
(a)The husband hereby indemnifies the wife from and in respect of all actions, claims, suits and demands as may be made against the wife in relation to any and all liabilities in the name of the husband and the W Company Trust.
(b)The wife hereby indemnifies the husband from and in respect of all actions, claims, suits and demands as may be made against the husband in relation to any and all liabilities in the name of the wife.
Except as specifically provided for by any order to the contrary, each of the husband and the wife releases the other from all debts owing from one to the other.
That each party do all acts and things and execute all documents, authorities and writings as are necessary to give effect to all or any of these orders.
In the event that either party refuses or neglects to execute any deed or instrument necessary to give effect to these orders then the Registrar of the court be appointed pursuant to s 106A of the Family Law Act 1975 to execute such deed or instrument in the name of the defaulting party and to do all acts and things necessary to give validity and operation to the deed or instrument.
Within 14 days of receipt by or on behalf of the husband of any sum or benefit in repayment of debts owing to the husband, or husband and wife by each of Mr H, Mr S and Mr T, the husband pay or cause to be paid to the wife the sum equivalent to 50 percent of the value of each such sum or benefit received.
That the husband and wife be hereafter joint trustees of all of his, her and/or their entitlement to funds held by, with or payable by the Australian Scholarship Group, for the education of their two children or either of them.

IT IS NOTED that publication of this judgment under the pseudonym Pamplin & Pamplin is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYF 3838 of 2006

MS PAMPLIN

Applicant

And

MR PAMPLIN

Respondent

REASONS FOR JUDGMENT

The parties married and commenced cohabitation in May 1994, however the marriage broke down in about January 2004 and the parties were divorced in November 2005. Unfortunately, in the years between then and now, they have been unable to resolve issues about their financial affairs. In November 2006, the wife applied for orders by way of property settlement and these reasons are for the disposition of that application. The wife seeks a division of her version of “the matrimonial pool of assets”, 65 percent in her favour. The husband ultimately seeks a division of 65 percent in his favour, of his proposed “pool of assets”.
In the resolution of property settlement issues, the court must identify the property and financial resources of each party, and liabilities. A significant issue within that step in this case is the question of “add backs”, arising both from activities during the cohabitation and afterwards.
Next, the court must assess contributions relevant under s 79 of the Family Law Act 1975, within which assessment in this case, an important contention is a disparity in initial contributions.
Then, the court must assess s 75(2) factors and, finally, the justice and equity of the proposed orders.
The wife’s application also sought an order relating to child support. That application was not litigated before me and during submissions Mr Hodgson, counsel for the wife, sought and was granted leave to withdraw it.

CONTRIBUTIONS

Though often judgments in property settlement cases deal firstly with the construction of a table of assets and liabilities, in this case I commence with a discussion of contributions, as that enables a better appreciation of the significance of the assets later included in a table and facilitates an understanding of the issues about “add-backs”.

Initial contributions

At marriage the wife was 28 years old. She held a Bachelors degree. She worked in marketing on a salary package of $90,000.00 per annum.
The wife owned a unit at K, which she had bought in 1987 for $190,000.00. In cross-examination the wife recollected that a mortgage over the unit secured about $80,000.00 at marriage and that she had about $60,000.00-$70,000.00 cash. She remembered this as being a position from which she could virtually pay out the mortgage.
The husband contended that the wife had about $40,000.00 savings, but I accept the wife’s evidence, prompted as it was by her impression of being in a particular situation. The wife also had approximately $12,000.00 in superannuation.
Prior to marriage the husband had completed a Bachelor and a Masters degree. At marriage, the husband was 36 years of age. He was a manger with X Institution, on an annual salary of around $150,000.00 per annum.
Although he couched his description in different terms, the husband in effect said that at the commencement of the marriage, he contributed:
·$270,000.00 from sale in November 1993 of property at M.
·Savings of $83,000.00.
·Superannuation of $185,000.00. The husband worked at X Institution for 16 years, but only eighteen months of which was after marriage. He says that his contributions element was worth $75,000.00 at the time and that he does not know the worth of the defined benefit element. However, he has used a formula to calculate the worth and that exercise was not objected to.
·Commonwealth Bank shares of $133,280.00, subject to a debt of $95,000.00.
·A property at R , worth $500,000.00.
Against these assets, the husband had a debt of $265,000.00 which had been secured against the M property, but which was transferred to the R property.
Around the time of marriage, the husband sold the R property to the Pamplin Family Unit Trust for $500,000.00, which the trust borrowed. The husband and wife were unitholders in the trust.
I accept the husband’s evidence of his initial contributions.

Non-financial contributions

The parties’ first child, J, was born in March 1995. The wife ceased work at around the time of his birth and has not worked outside the home since that time. The parties’ second child, W was born in July 1996.
Although no concessions were made about the issue, neither party said much to suggest that, during cohabitation (as distinct from the period from separation to trial), and, leaving aside initial contributions, the wife’s roles as homemaker/ parent were other than equal to those of the husband in pursuit of financial reward and his (acknowledged) lesser contributions to homemaking/ parenting.
In her primary (filed 3 March 2008) affidavit, the wife sets out the detail of her child rearing. She had difficulties with asthma during her pregnancy with J, an absence of ready assistance in child rearing and the demands of two pregnancies close together. However, the main demands arose from behavioural and health difficulties of the children, some resulting in developmental delay. The end result of these difficulties for the mother was frequent attendance on a variety of medical and other related specialists and effort and vigilance on the mother’s part to provide the children with a particular diet.
At the time of marriage, the parties had purchased as their residence property at E. Another contribution of the wife arose when the parties decided to demolish the building on the E property and construct a new home. Planning commenced in late 1997 or early 1998. I accept the wife’s evidence of her involvement in that enterprise, which was a large and demanding one. Building of the new house began in about July 1999 and was completed in about November 2001.
The wife was also extensively involved in furnishing the new home. I do not regard the husband’s criticism of the amount expended by the wife in this regard as affecting the value of her contribution.
The wife refers to another contribution, though not a major one, assisting with some marketing for W Company, an enterprise involving tourism, about which more will be said later. The husband agreed with what the wife said of those contributions.

Financial activities

The husband’s employment

The husband left X Institution in around 1996. He was then unemployed for around seven months, but had received seven months termination pay. He found work with a property developer, Y Company, earning consulting fees of about $132,000.00 per annum. He established a private corporation, P Pty Ltd as a vehicle for his consulting fees. The husband remained with Y Company for about five years, during which he received small incremental increases in his annual fees.
When he stopped working for Y Company in around December 2000, the husband worked for a short period on a project which came to nothing, but in January 2001, he took on consulting work for a private building company and at the end of that year, he was approached by a Mr V who was establishing a property development enterprise under the banner, The O Group. The husband became employed as financial controller on $120,000.00 per annum, plus GST, he worked about three to four days per week. However, the O Group collapsed in about December 2003.
In February 2004, the husband commenced working as a general manager of sales on a salary of $120,000.00 per annum for a government body, but he was “let go” in early July 2004, during his probation period. By then, as seen, the parties had separated (January 2004) though they continued living under the same roof until July 2004.

Property and investment dealings

The E property was purchased for $800,000.00. Each party put in some of his/her savings and the husband contributed the funds received from the sale of the M property. The balance was borrowed.
The R property (as seen, owned by the husband before marriage and transferred to a trust) was rented out.
The husband sold the CBA shares in 1995 for $10.25 a share, for a total of about $164,000.00. After repayment of the loan and broker’s fees, around $72,000.00 remained.

(a) Mr H

The husband lent the money from the sale of his shares to one Mr H, in 1995. There was a written loan agreement that included a “mortgage” over a share. Subsequently, the husband lent Mr H a further $3,000.00 on the same terms as the major loan.
Mr H made only two payments of interest. Later, Mr H repaid $15,000.00 and later still, in 2002, repaid the balance of the original principle of $60,000.00, but has not paid interest except as noted. The husband calculated interest owing of $203,007.00 as at December 2007.
In her primary affidavit, the wife said of the investment with Mr H “I do not know the specific details of this investment. However there was a promise of a significant return on the investment in addition to interest accrued”.

(b) U Street

In around 1996, the husband, wife and a Mr L entered into a redevelopment project. The husband and wife provided loan capital to prepare and lodge an application for development approval. The parties borrowed $250,000.00 and the wife’s K property was used as security. The husband and wife sold “the investment” to Y Company in December 2002, receiving in total $350,000.00, the final payment in December 2003. These funds were used to reduce debt secured against the E property.
I accept the husband’s evidence that the wife was consulted before this investment was made and participated in it.

(c) Sale of the K property

This property was sold in 1997, with the initial intention of using proceeds towards the E property redevelopment. Net sale proceeds were around $325,000.00. However the proceeds were used to repay the advances obtained to invest in the U Street project. The balance went into the parties’ joint account.

(d) Ms B

In about 1998, the husband lent to a Ms B $50,000.00, apparently to be repaid within three months with $25,000.00 interest. The husband said that a written loan agreement covered the transaction. Ms B did not repay the capital, nor pay interest on time. The husband ultimately sued and about one and a half years after the due date, received $75,000.00.

(e) WM

Over 1999/2000, the husband lent one WM $25,000.00 on three separate occasions. No written agreements were entered into. On each occasion the husband received back his capital and $25,000.00 interest, within three to four months.

(f) Sale of the R property

This sale occurred in June 2000 for $675,000.00, which was brought into the family finances, reducing debt raised for the purchase of the E property, some of the costs of redeveloping it and for other expenses.

Investments subject to claims for “add-back” or the like

As to these investments the detail will be set out later. A brief description is included here, so that the chronological and financial context is apparent.

(g) W property

In the early 2000’s, the husband, wife and Mr L agreed to purchase a rural property at W, upon which were a number of heritage listed buildings. A corporate entity, N Pty Ltd was established in respect of the acquisition, though ultimately the actual vehicle used for the purchase was a unit trust with another corporation as trustee. Each of the husband and wife owned 25 percent of the units and Mr L the remainder. N Pty Ltd came to be used as the vehicle through which tours of the property were conducted.
W property was purchased for $1,400,000.00. The husband and wife invested $700,000.00, all borrowed. Settlement was in October 2002.
The “add-back” claimed with regard to this investment relates to adjustments of loan accounts which have occurred after separation.

(h) Mr S

The husband met Mr S in 1995/1996 when the husband was working at Y Company. They became friends. From late 1999 until April 2002, the husband (and, he said, the wife) provided, sometimes clearly by way of loan, at other times on an unclear basis, $600,000.00. Later, Mr S went bankrupt. No monies have been repaid, nor interest received.

O Group

When the husband worked for the O Group, he invested or loaned $250,000.00 to the group or its operator, a Mr V. This money was lost.

(j) Ms D and Mr & Mrs A

The husband was entitled to a 25 percent “spotter’s” fee for each investor he introduced to a project of the O Group, a set of Apartments. He introduced the investors abovenamed, but to persuade them, he guaranteed their commitment of $100,000.00 each and liability arising from other terms of the arrangement. When the O Group failed, the husband’s guarantees were called upon.

(k) Mr CS

In 2003, Mr CS sold the parties a water purifying system and both parties thought they saw in the retailing of that product an investment opportunity. They invested $80,000.00 which was lost, as was $11,000.00 which the husband was called upon to pay under a guarantee in respect of some office equipment.

(l) E property renovation and refinancing, loans from friends and relatives and drawdown on husband’s superannuation

As seen earlier, the redevelopment of E property began in about July 1999 and was completed in November 2001.
In October 2000, the husband was offered the alternative of transferring the defined benefit entitlement of his superannuation into an accumulation fund, which he did. As at June 2001, his interest was worth $481,740.00.
In simple terms, expanded upon later, in 2001 through to March 2002, the husband said that he drew from his superannuation $406,000.00 gross, $342,000.00 after tax. The husband said that about $300,000.00 towards E property came from his superannuation, but he also said that $90,000.00 was lent to Mr S.
The husband deposed that, apart from his superannuation, the E property redevelopment was funded by the proceeds of sale of the R property, savings, $20,000.00 given to him by his parents and about $800,000.00 borrowed from the Colonial Bank.
The husband also said, but only late in cross-examination, that he had borrowed at least $50,000.00 on each of a number of occasions from Mr V, to “get the house finished”. He said he paid high interest rates and there were no written loan agreements.
Subsequent to its completion, E property was valued and the parties refinanced with St George Bank, borrowing in total $1,800,000.00. This provided about $250,000.00 for investment, which was put into the O Group; $80,000.00 went to Mr CS, as well as $200,000.00 to reduce the parties’ borrowing for W property.

In September 2003, the husband borrowed $75,000.00 from his sister and brother-in-law. Between December 2003, when the husband was unemployed, and February 2004, the husband borrowed from a friend, Mr TC, $20,000.00 for the purpose of meeting interest commitments and completing the E redevelopment prior to sale. The husband also borrowed $100,000.00 from his parents who in turn borrowed the money. These various loans were repaid upon sale of the E property.
I accept the husband’s evidence about the wife’s knowledge of, and attitude towards, taking these loans.

Post-separation

As noted earlier, the parties lived separately under the one roof, in the E home, from January 2004 until 14 July that year.
When the parties vacated E property it was sold, for $4,448,000.00. The wife and children have lived in rented accommodation since.
From the proceeds of sale, a car was purchased for the wife. The husband retained a Mercedes motor vehicle. In about August 2004, the husband agreed that from the proceeds of sale of E property the wife receive $500,000.00. This the wife invested in shares.
At around the time of separation, the husband commenced work for the G Group, on consulting fees of $150,000.00 per annum.
The husband commenced cohabitation with Ms I in October 2004.
Until October 2006, the husband provided to the wife $2,200.00 maintenance per month. The husband also paid the school fees for the boys to attend a private school, as well as related expenses. The wife’s rent at $1,200.00 per week was paid from the joint account. After October 2006, the husband continued, until the end of 2007, to pay the children’s school fees, but he stopped other payments.
When the maintenance payments stopped, the wife commenced to sell shares for her living expenses and to fund legal expenses. She also sought an assessment of child support, but only received $335.11 via the Child Support Agency in February 2007. The net proceeds of share sales were $297,985.00 which included a profit of $80,854.00, the capital liquidated being $216,258.00. The wife acknowledged that, by trial she had also spent $286,046.00 from bank accounts held by the parties. She has also sold antiques worth $83,580.00, minus brokerage of $14,990.00.
As there was a downturn in the property development market, the husband left the G Group in July 2005, to work in the private equity market. He says that transactions are generated through a range of contacts he has. Generally he uses his financial skills to identify targets and help prepare them for sale/acquisition. He generally receives a proportion of the transaction fee, depending on his level of involvement. In the financial years ended 30 June 2006 and 30 June 2007 he earned gross fees of approximately $150,000.00 per year, for net income around $120,000.00. The husband’s earnings of more recent times have been much less.
In November 2006, the husband remarried, to Ms I. In September 2007, the husband and his wife Ms I purchased a home at C, for just over a million dollars. Between them they provided about $160,000.00 cash, the husband borrowed some money from his parents to bring his contribution to equal with that of his wife and about $807,000.00 was borrowed from Colonial Bank.
Initially by arrangement or acquiescence and, from 24 April 2007, pursuant to parenting orders, the children have lived mainly with the wife, but have regularly spent time with the father.
In about September 2007, the wife obtained employment as a merchandiser. She works approximately 14 hours per week. The hours increase, even double, during festive seasons.
Sometime after separation, but before the beginning of 2008, the mother’s mother gave three of her four children, including the wife, $100,000.00 each, as an advance on inheritance. The wife, fearful that the husband may make some claim upon it, informed her mother, who then asked for the money back and the wife returned it.
In 2009, school fees have been met from the joint account and each party has taken $5,000.00 per month from that account.

THE PROPERTY OF THE PARTIES

Disputed items

Mr S’s debt

As seen earlier, the husband met Mr S in about 1995/96. It seems that in the following few years the husband lent money to Mr S from time to time and it was repaid.
Commencing in December 1999 the husband and, as seen, he said the wife, lent money to Mr S on 22 separate occasions. The dates and amounts are detailed in an annexure to the husband’s primary affidavit, filed 16 January 2008. The initial advance for $3,750.00 was to meet some personal expenses. Having regard to the modest amount, notwithstanding the purposes for which the sum was borrowed, I would not regard an unsecured loan in that amount, to a friend, as reckless.
It seems that Mr S was, like the husband, something of an entrepreneurial investor and, like the husband from time to time, suffered what the husband frequently described as “cash flow” problems.
However, the next two advances, made in February 2000 and totalling $120,000.00, were in respect of a proposal of Mr S to purchase a property in Sydney. Mr S proposed to obtain a tenant and on-sell. The husband’s evidence about the nature of his transaction with Mr S was unclear. At times he indicated that it was some sort of joint venture. He thought that there had been a written agreement between he and Mr S, but he could not find it. When the proposed tenant withdrew, Mr S’s deal did not proceed and Nr S had trouble obtaining the return of the funds from the property owner. The husband indicated that upon the collapse of Mr S’s proposal, the husband regarded his money as being repayable by Mr S as a loan. At some stage the husband became aware that Nr S had recovered some money from the property owner, but had put the recovered funds to his own uses rather than repay the husband.
Following this transaction, there was a series of advances over the next 18 months, the largest of which was $25,000.00 and many of which were under $10,000.00. Even though the husband indicated that some smaller amounts depicted in the annexure to his affidavit were actually parts of a larger loan, some payments on Mr S’s behalf were as small as a $358.00 payment to Telstra.
The husband was cross-examined at length about the fact that a number of these payments were apparently to defray quite small living expenses, including education expenses for Mr S’s children, and that the size and purpose of these payments must have alerted the husband to Mr S’s financial difficulty. In response, the husband repeatedly said that he was in regular discussion with Mr S about his financial activities and anticipated cash flow.
A return to loans of larger amount occurred in November 2001, (though the annexure to the husband’s affidavit shows March 2002). The husband lent $90,000.00 to Mr S to re-pay a Mr AD, who was threatening to bankrupt Mr S over the debt. Again, the husband was challenged about making such a loan, without security, when its purpose was to avoid bankruptcy.
In April 2002, the husband repaid his sister and brother-in-law $200,000.00. They had been lending to Mr S at the husband’s request. On 10 April 2002, the husband lent Mr S $50,000.00 to invest with the O Group. According to the husband, at the time Mr S had about $200,000.00 due from the O Group when settlements took place. The purpose of the advance was to secure some of those transactions.
A fact of some importance, in relation to the last two loans to Mr S, is that the husband provided the funds not from his own resources, but from the funds obtained on the refinancing of E property.
Mr Hodgson asked the husband why he did not seek security for any of the loans, particularly the larger ones. The husband indicated that he did not think Mr S had any worthwhile security to offer. Mr Hodgson also pressed the husband as to why he continued to lend when Mr S had defaulted in respect of earlier advances. Again, the husband replied that he was reassured by discussion with Mr S about his investments and expected returns.
I took from the husband’s responses that he was confronted with what he saw as the dilemma of either supporting Mr S to survive and, in turn increasing his chances of being repaid, or refusing support, increasing the prospect of Mr S’s financial failure.
Asked whether he would act in the same way managing someone else’s money, the husband said that it would depend upon the risk/return profile sought by the investor.
As to the wife’s involvement in and/or knowledge of the loans to Mr S, their purposes, arrangements relating to them and the prospects of repayment, in his primary affidavit, the husband deposed that:
243.[the wife] was fully aware at all material times we were lending money to [Mr S]. …
Later, he said that there were three distinct occasions when the wife was present during discussions about Mr S’s failure to pay on time. In particular, he deposed to the third of those occasions, being just after the last monies were advanced to Mr S, as follows:
247.On 13 April 2002, [Mr S], [the wife] and I met in my downstairs study at [E]. The loans to date were discussed at length and ultimately [the wife] signed a document also signed by myself and [Mr S], acknowledging the amount owed by [Mr S] to [the wife] and I. This document is attached and marked “Q”. This document was also provided to [Mr S’s] trustee in bankruptcy.
That document provided:
To:     [The husband] and [the wife]
[E property, NSW]
I, [Mr S] of [address] do hereby acknowledged that I have received, by way of “at call” loan, sums from [the husband] and [the wife] of [E] the sum of $600,000 by way of cheque, cash payments or payments directed to others. I acknowledge that principal and interest has previously been called but not paid. In recognition of this, I undertake to repay, no later than 31 December 2002 all fund borrowed and to apply an interest rate of 25%pa charged monthly on all funds advanced to date. If the loan continues to 31 December 2002 this should approximate $900,000. If not paid on this date interest is to continue to accrue.
I acknowledge that this personal debt is guaranteed by my personal company [AT] Pty Limited and I am the sole Director of [AT Pty Ltd].
…………………………….          …………………………………
[Mr S]  [Mr S]
  Sole Director
  [AT] Pty Limited.
13 April 2002
Underneath the text quoted are signatures designated to be those of Mr S personally and Mr S as “Sole Director” of AT Pty Limited. The typed date “13 April 2002” then appears. Hand-printed under the date is “WE AGREE TO EXTEND EXISTING LOAN(S) ON THE BASIS SET OUT ABOVE”.
Beneath are signatures described by the husband as those of himself and the wife and the hand-written date “13/4/02”.
The wife denied that she signed that document. She said she did not really become aware of the losses associated with Mr S until close to the end of the marriage. However, she remembered the meeting in April 2002. She said that she was busy attending to other matters, and she had very limited participation in discussion.
I accept that the wife first saw the document when it was put in front of her in cross-examination. Her reaction to the suggestion that the document bore her signature was spontaneous.
On the other hand, I thought the husband somewhat contrived in his oral evidence in volunteering, well after the question of whether the signature was that of the wife was initially raised with him in cross-examination, that the wife signed the document standing up, but bending over the document on a table. At that point, he was aware that a handwriting expert might be called.
A handwriting expert was called. His evidence was that the signature was not that of the wife.
Most tellingly however, the husband acknowledged that he had written what purported to be the wife’s signature on a proof of debt submitted to Mr S’s bankruptcy trustee. That evidence he gave with the benefit of a certificate under s 128 of the Evidence Act1995 (Cth). His denial of having signed the wife’s name on the 13 April 2002 document came before a warning could be given, and before the evidence concerning the proof of debt, and was not revisited.
I place some weight on the evidence of the handwriting expert which I accept, though would come to the conclusion about the signature purporting to be that of the wife on the 13 April 2002 document, irrespective of the handwriting expert’s evidence.
Notwithstanding the considerable attention paid to it, the issue about the wife’s signature seems to me of little if any weight with regard to the question of whether all or part of Mr S’s debt ought be included in the asset pool. The document in question was drawn up after the monies had been advanced. Those monies were, so far as one can tell, that of the husband and wife in any event, so the document adds nothing in that respect. The document does not seem to work against the wife, except in so far as the husband might have argued that it supported his claims about her prior knowledge of the advances. Whether she signed the document or not it does not go, in my view, to her state of knowledge as each advance was being made.
Based on the 13 April 2002 document, Mr Hodgson seeks that the sum of $900,000.00 be included in the asset pool. This represents the capital sum of $600,000.00 and interest. Interest at such a high rate might have been recovered, but was never property of the parties which they had and lost as was the $600,000.00 in capital. Even if persuaded to write back the capital, I would not be persuaded to write back interest in that amount.
Whether the capital ought be written back into the asset pool is considered later.

O Group Investments

Though in his affidavit the husband describes an investment in an O Group project in around March 2002, in fact it seems the $250,000.00 “invested” was, as he also describes it, “a short term advance”. Mr V asked to borrow the money and said he would repay it in three to six months, with 20 percent interest per annum. There was no signed loan agreement. The husband said that he had documentation, but could not get it signed.
The husband said that he told the wife “[Mr V] wants us to lend the group $250,000.00 at 20 percent per annum for up to six months, when we settle our new loan with St George”. She said “this seems OK to me”. The husband further deposed:
236.At this stage of my involvement with the [O] Group, [the wife] and I were good friends with Mr [V] and his partner. [The wife] hosted a dinner party for them at the [E] property and the topic of loan was discussed after it had been made. [Mr V] said “you’ll do very well out of the loan”.
The husband said he “believed [O] Group to have sufficient equity to warrant such an investment”. The O Group defaulted. The precise amount lost to the O Investment was $255,620.00. The husband ascertained that what he thought was $1,000,000.00 of equity in the group was in fact debt to a third party.

Guarantees to Ms D and Mr & Mrs A

The husband said that during the latter part of 2002, Mr V required some short-term, equity style funding and was offering to pay 50 percent per annum interest on all funds, repayable within 18 months, and to provide a 25 percent spotters fee to the husband for all funds raised, to be paid on completion of the project.
The husband recommended this to friends, two of which accepted on the basis that the husband also guarantee the investment. These friends were Ms D and Mr & Mrs A.
Each of Ms D (in late 2002) and the As (in March 2003) invested $100,000.00. Written agreements contained a rescission option, which recorded that the vendor, O Apartments Pty Ltd and the purchaser had entered into a contract of sale for a unit in the development, but that the vendor had provided the purchaser with an option to rescind the purchase contract and receive a compensation payment. O Apartments (location 1) Pty Ltd, O Apartments (location 2) Pty Ltd, Mr V, and the husband were all guarantors of the obligations of the vendor contained in the rescission option.
It seems that when the O Group collapsed, Ms G and the As exercised their options to rescind. In a way which is not clear on the evidence, the husband apparently was able to exercise a right to purchase a unit under the agreement signed by the As but not to exercise any such right in Ms G’s stead. The on-sale of the unit that the husband acquired meant that the net loss in relation to the As was reduced to about $18,000.00. In his oral evidence, the husband suggested that the As’ arrangement, agreed to later than Ms G’s arrangement, was somehow different to the latter.
The wife said that only in early 2003 had she become aware of an investment that the husband had made with the O Group and she expressed the view that she wished she had been told before the investment was made. Around Christmas 2003, the husband told her that the money invested in O Group had probably been lost and that he had guaranteed the investments by the As and Ms G. I accept the wife’s evidence in this regard.

Mr CS

As earlier indicated, this investment arose in 2003 when the parties provided $80,000.00 and the husband also guaranteed commitments for a computer and photocopier. The parties are largely agreed on their mutual interest in investing in the business of retailing water purifying systems, operated by Mr CS and another. The wife however suggests that, though she was agreeable to the investment, she left the detail of it to the husband. As to that detail, the husband deposed:
Over a number of subsequent meetings between [Mr CS], his business partner and me, the outline of a transaction was developed and I wrote up a suitable agreement.
The husband further said:
225.I showed this agreement to [the wife]. It committed us to a maximum investment of $150,000.00 which was to be repaid within one year.
226.[The wife] said to me this looks good.
I accept the husband’s evidence.
When Mr CS did not honour the arrangement the parties attempted to involve the police.
The wife seeks an “add-back” in respect to the $80,000.00, but not the $11,000.00 paid to meet the guarantee in respect to the equipment.

Diminution in superannuation

Late in his cross-examination, Mr Hodgson was asking the husband questions about some cheque stubbs and bank statements that appeared to relate to expenditure from the husband’s superannuation. The husband offered that a stubb written to “cash” for $120,000.00 was repayment of loans provided by Mr V to complete the E redevelopment.
This evidence, argued Mr Hodgson, conflicted with the husband’s affidavit evidence about the expenditure of superannuation. Mr Hodgson further argued that, because this evidence had not been included in either of the husband’s affidavits relied upon, it should be disbelieved.
Despite the “lateness” of the husband’s evidence, and its uncertainty, I see no necessity to construct the conclusion for which Mr Hodgson contends. I accept that the husband’s memory was prompted by the question being asked of him at the time, about entries on cheque stubbs and other documents.
I also do not think the husband’s evidence inconsistent as asserted. If Mr V lent the husband money towards expenses of the E redevelopment and was repaid from superannuation, it is not incorrect to say that those superannuation funds went towards the E redevelopment.

Conclusions about Investment losses

The wife claims that the losses just discussed (summarised below), comprised of loans and investments, should be added back to the asset pool, and be effectively regarded as property distributed to the husband.

Mr S $900,000.00

O Goup $250,000.00

Guarantees $148,334.00

Mr CS $80,000.00

Diminution in superannuation $120,000.00

$1,498,334.00

Her claim raises two questions; classification of the husband’s conduct – whether it was wasteful, reckless or wanton, and that of the wife’s knowledge of, and attitude towards, the husband’s conduct.

Dealing with the latter question first, I observe that knowledge, or the lack of it, of itself may be of little moment. What is likely to matter more is, if the wife had knowledge, whether she impliedly or expressly agreed or acquiesced in what was done.
In this regard, the wife deposed in her primary affidavit:
18.While we were married our money was invested into various businesses and properties. [The husband] kept me informed of the broad detail of investment and business-related activities but I left the ultimate decision to [the husband’s] expertise as an investor, accountant and businessman. Often, the business and financial arrangements [the husband] put in place were more complex than I could understand. I was more than occupied with attending to the care of our two boys, building the new house and generally running the household.
And later:
118.[The husband] was also very entrepreneurial and I believed he was involved with a number of investments and businesses as I have outlined earlier in this affidavit.
Although the husband deals more specifically (than does the wife) with the issue of the wife’s knowledge, by deposing to information allegedly given to the wife in relation to particular investments, there is actually not much difference between what each party says, at a general level. The husband does not say that he always kept the wife informed of all details.
I think also that, notwithstanding the husband’s deception about the wife’s signature on documents relating to Mr S’s debt, his evidence relating to the content and timing of information given to the wife about other investments should not, because of that, be rejected in blanket fashion.
During extensive cross-examination about her knowledge of investments, the wife often was very unclear and, I thought, evasive in her answers.
I have, in discussing the losses, add-back of which is sought, already indicated acceptance of the version of one or other party about some aspects. In some instances that is because I regarded the particularity provided by the husband as not inconsistent with the wife’s broad statement of her knowledge, in others simply because I found one party more convincing, when tested on the point, than the other.
In my view, from early in the marriage, the wife had sufficient knowledge and understanding of the husband’s investment activities to appreciate they were often of an entrepreneurial character, involving high risk in search of high return. She was content to leave detail up to the husband. This conclusion I think exemplified by the Mr CS investment, late in the period of cohabitation.
As to the classification of the husband’s investment behaviour, I do not find it reckless, wanton or wasteful, because:
·There was a pattern of family members and friends lending to and borrowing from one another, without security, for a variety of purposes and reasons.
·The loans to Mr S were the focus of the wife’s case in this regard. Put to the husband that he had not followed prudent lending practice, the husband said he did not think what he did was out of the ballpark; it depended where you wanted to draw the line, though in hindsight he could see that “it” was a bad investment.
·The husband says that his expertise was in balance sheet management, structured funds, listed equities and property development. Expertise as a speculative lender or investor seeking high returns was not established.
·Therefore, whilst the investments seem to me highly speculative, even reckless, I have no evidence of the conduct of people with expertise in such a sphere.
·Even if relevant expertise had been established, the husband’s evidence about speculative lending practices would be the only evidence I have. The husband’s evidence exonerates himself.
I do not intend to “add-back” the investment losses.

Add-backs claimed in respect of events post-separation

Sale of antiques

As seen earlier, the wife sold antiques (net $68,590.00), she says, to provide funds for living expenses.
Though the husband conceded that, contrary to his case at the outset of trial, he would not seek a write back of the monies that the wife had received from the bank accounts or from the sale of shares he, in a sense, draws the line at the sale of antiques.
However, the evidence does not allow me to draw the line with that precision.
In my view, for the same reasoning for which the husband abandoned pursuit of add-backs of the other funds used by the wife post-separation it would not be appropriate to write back the monies received from the sale of antiques.
As the Full Court of this Court said in C & C [1998] FamCA 143:
46.Whilst not seeking to place a fetter upon the exercise of discretion of a trial judge in individual cases, it seems to us that the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule. The parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives. Providing modest support for their adult children or taking not inappropriate holidays for themselves seems to fit comfortably within that description.

Gift from wife’s mother and debts for legal fees to wife’s mother and brother

In her oral evidence the wife explained that she was not sure whether her mother would again gift $100,000.00 to her after the end of these proceedings (i.e. remake the gift received after separation, but returned by the wife to prevent the husband claiming any of it). The wife said that, though her mother had investments of around a million dollars, her worth had deteriorated because of the global financial crisis, since the gift was made. I accept that evidence. In my view it would be unfair to include a prospective gift – or return of a gift – in a table of assets for division. Even if such a possibility or probability was treated as property, it is highly questionable that the husband should receive a share of it, given its characteristics. I will address the prospect of a remade gift when assessing s 75(2) factors.
The wife said that in respect of the $40,000.00 loaned from her mother for her legal fees, there was no documentation and no interest payable but she expected that she would need to pay it back on completion, though she also said that was something that “we’ll have to decide”. She said she would have to pay her brother back the $64,733.00 he lent her for legal fees.
I see no reason to reject the wife’s evidence or inclusion of those debts in the calculation of net assets.

Judgment creditor of N Pty Ltd

N Pty Ltd is in liquidation. There is a judgment debt against N Pty Ltd referable to a claim by a former de facto partner of Mr L. The husband says that N Pty Ltd has no assets available to meet the judgment debt.
I am not satisfied that the husband will be legally liable for and/or will pay the debt or his share of it. I therefore have not included any part of it in the calculations of net assets.

Debt to “Workcover” re “[CS Water]”

In connection with the investment with Mr CS, the husband became a shareholder and director of CS Water. In 2003, an employee of CS Water had made a claim which had ultimately settled, for an amount of over $11,000.00 The husband was contacted about this during 2008. The company had not taken out Workcover insurance. I accept that the directors became liable for the debt. Workcover has been able to recover around $3,000.00 from Mr CS. The husband says CS Water is no longer trading and has no assets. I include this debt in calculations on the basis that, more probably than not, the husband will be required to meet it.

Husband’s credit card debts and debt to his parents

The husband’s credit cards were basically reduced to nil balances upon the sale of the E property. The present debts are in respect of his living expenses post-separation.
Following the same reasoning which sees no addback in respect of the wife’s expenditure on living expenses, met from the sale of assets or the use of joint funds post-separation, it would be inconsistent not to include in the calculation of net assets the husband’s credit card debts. He has not had available to him the capital which the wife has had access to.
Though for the first few years after separation he earned a good income, until the end of 2006 he was contributing large amounts to the wife’s expenses and those of the children.
For the same reasons, I include the loan from his parents.

P Pty Ltd

P Pty Ltd has a negative balance sheet, to the extent of $15,810.00. This arises because the husband did not cause GST to be paid on earnings derived from the husband’s consultancies. I accept that the husband is personally liable for the shortfall.
Mr Hodgson argues that because the liability arose on earnings post-separation and because of the husband’s failure to pay GST as and when due, the debt should be excluded.
I will include the debt, in circumstances where, had the husband paid it the probability is that one of his other debts, credit card or to his parents, is likely to have increased. No case that he was wasteful post-separation was made out.

Loan account to W Co Trust

Since W’s acquisition, Mr L has been the active partner, residing at the property and conducting tours of it. A building has been constructed and other improvements made.
The husband deposed:
293.At the outset, I had agreed with [Mr L] that, as he had spent the best part of the year looking for the project, he will be entitled to a $120,000.00 “spotter’s” fee which would be credited to his loan account. Further, for his employment and work on the development of the property, he will be entitled to his board and $125,000.00 per year. Over five years, these fees accrued to a total of $625,000.00.
…
294.We also agreed that if there was insufficient cash flow through the [W] project, he would not be paid as he went along but financial statements of the company would record the amounts he is owed.
On 30 June 2005, the W project was refinanced. The wife did not wish to be included and so transferred her units to the husband, who now holds one-half.
Although considerable time was spent examining aspects of the W investment, in the end the issue is simply whether effect is given to the husband’s evidence of the 2005 rearrangement, including that that involved reducing his loan account to $966,573.00, to match that of Mr L.
Prior to the rearrangement, the parties’ loan account stood at $993,926.00 but, as seen, Mr L was entitled to unpaid management fees of $125,000.00 per annum for the preceding five years and the “spotter’s fee”.
I accept the husband’s evidence that Mr L abandoned his claim to the spotter’s fee and management fees, past and future and that the husband and Mr L agreed that their interest in the project be equal, a stance which included equalising the loan accounts, so that that of the husband reduced by about $27,000.00, to $966,573.00. It was only that difference which comprised the “add-back” issue. I see no reason to conclude that the arrangement has made the husband worse off, in respect of the investment overall, or that his agreement with the rearrangement was wasteful.

The absence of possible witnesses

Mr Hodgson made submissions about inferences that might be drawn from the absence of Mr L, Mr S and Mr L’s former defacto partner. However, I consider that where I have found in favour of the husband on issues about which any of these persons might have been able to give evidence, it is because I am satisfied the husband’s evidence was sufficient of itself. In a number of such instances, the wife did not really have a contrary case on point, but was more in the role of inquisitor.

Net assets

The asset table which I consider appropriate for division is:

Asset	Ownership	Value
Antiques	Wife	21,350.00
Contents	Husband	3,000.00
Contents	Wife	3,000.00
Bank account (50%) with Ms I	Husband	364.00
Bank accounts	Wife	4,839.00
CBA Cash Management Account	Joint	143,385.00
Units in W Company Trust	Joint	160,479.00
Loan account in W Co Trust	Joint	966,573.00
Share Portfolio	Wife	312,443.00
Loan to HS Projects	Husband	15,000.00
Car VW	Wife	45,000.00
C property (half interest)	Husband	502,500.00
Legal costs	Wife	438,124.00
Legal costs	Husband	137,169.00
TOTAL:	$2,753,226.00

Liabilities
P Pty Ltd	Husband	15,810.00
Bankwest W Loan (Half interest)	Husband	668,000.00
Colonial State Bank Line of Credit (Half interest)	Husband	403,500.00
Credit Cards	Husband	77,576.00
Mr & Mrs Pamplin	Husband	131,731.00
Debt to Workcover re CS Water	Husband	8,580.00
Debt to Mr TC (legal fees)	Husband	25,000.00
Debt to M & C (legal fees)	Wife	40,000.00
Debt to mother (legal fees)	Wife	40,000.00
Debt to brother (legal fees)	Wife	64,733.00	$1,474,930.00
TOTAL:	$1,278,296.00

As seen, the husbands has “claims” against Mr S and Mr H. He also gave evidence of having lent money to one Mr T in August 2004. With regard to that, he thought he might receive $65,000.00 within the next few months.
Neither party sought to include these claims as “property”, except in the sense that an “add-back” was sought in respect of money lent to Mr S. However, the husband proposed an order for the equal division between the parties of any monies recovered from these transactions and there seems no reason not to make such an order.

ASSESSMENT OF CONTRIBUTIONS

Though precise calculation is not possible, on the evidence I estimate that the initial contributions of the husband were in his favour, between three and four times those of the wife. Perhaps the primary significance of the husband’s initial contributions was that they featured strongly in the purchase of the E property, which ultimately was probably the most successful enterprise of the parties. However, I do not conclude that, without the husband’s initial contributions, the parties could not have bought E property. After all, the wife retained the K property after E property was purchased.
Moreover, the redevelopment of the E property was something in which the wife made a very significant, direct, non-financial contribution. As to the use made by each party of initial contributions, in the end, I would not see that the husband’s initial contributions were put to any more useful purposes than were those of the wife.
As to other contributions during a cohabitation of ten years, I am mindful that the husband’s parents gifted him $20,000.00. The other contributions that each party made, having regard to the husband’s considerable earnings from salary and the wife’s weighty contributions as homemaker/parent, were of such a nature that they weigh strongly in the overall assessment, which includes the initial contributions. In the absence of such weighty contributions during cohabitation, the initial contributions might have carried more significance than they ultimately do here.
As to the period post-separation to trial, the primary, non-financial child-rearing burden fell on the wife. Otherwise, she has in my view been able to draw generously on the parties’ assets. Overall, I would assess contributions up to trial at 60 percent to the husband and 40 percent to the wife.

SECTION 75(2) FACTORS

The wife is now 43 years of age.
This year, J was in year 7 and W in year 6. The children are involved in after school activities. The wife says that currently:
149. I only work casually…as I need to be available to care for my two children and closely monitor their condition, development, cater for their special diets, needs and after school activities. My attention is especially needed during school holidays.
In oral evidence, the wife indicated that she would continue to supervise the children, certainly until they were 16 years or so. I accept that evidence.
The wife receives around $376.00 weekly from her employment, $84.00 a week motor vehicle reimbursements and $120.00 a week for secretarial services from Mr BK. Currently she also receives about $337.00 per week dividends. She receives payments of government support of $243.00 per week. She estimates her total personal expenditure at $1,893.00 per week. This includes rent of $902.00 weekly.
The husband is 52 years of age, and, as seen, is a management consultant. In his later affidavit, filed 8 July 2009, the husband said that in the financial year ended 30 June 2008 his taxable income was $13,608.00. His gross income during the year ended 30 June 2009, totalled $14,655.00. He referred to the current global financial crisis as explaining his lack of work. In the last 18 months or so, he has made over 50 to 60 applications for employment. In that time he had obtained two interviews, one scheduled for a few days after the completion of the hearing. Although the husband was questioned about his income and outgoings, I accept what he says of his current circumstances. As to his costs of living, the husband may be advantaged by cohabitation with his present wife, but I think that a minor factor.
However, comparing earning capacities, I consider the husband considerably better off than the wife. Her availability is circumscribed for some years yet. As to her qualifications, she has been out of the work force for more than a decade. In forming a view of comparative capacities, I have not overlooked the currently difficult financial circumstances, the husband’s chequered work history in the last decade, and his age.
The husband said he spent time with the children every Wednesday night overnight, every Friday night to the Saturday, once a month for a full weekend and for designated times at holidays. Otherwise, the non-financial burden of child care falls on the wife and is likely to continue to do so for the balance of the infancy of each child.
As a consequence of the division of property, each party will have only fairly modest assets. They will cease living on joint funds. It is difficult to predict what child support might be payable by the husband, but I find that he is likely to pay towards the children’s support, if necessary, according to law.
Both parties are in good health, save that the wife says she suffers back problems caused by her employment.
In assessing s 75(2) factors, I consider the disparity in earning capacities and the probable primary child-care burden on the wife, the significant factors favouring an adjustment to her. However, in assessing any adjustment, I bear in mind that some of the disparity in earning capacity arises from the child rearing burden and of the limitations on the wife’s availability for employment arising from that.
The disparity in net assets based on the contributions factor is a lesser consideration also favouring adjustment to the wife. However, the impact of that factor is reduced by the prospect that the wife may receive a gift perhaps of $100,000.00 from her mother.
The above factors, I assess, require an adjustment in the wife’s favour of ten percent, leading to an equal division of property between the parties.

Proposed orders

50 percent of the net assets is $639,148. This the wife will receive, have received or retain:

Antiques	21,350.00
Contents	3,000.00
Bank accounts	4,839.00
Shares	312,443.00
VW vehicle	45,000.00
Paid legal fees	438,124.00 824,756.00

However, she will have debts to her mother, brother and M and C, totalling $144,733.00. Thus, she will have net $680,023.00. She will have to pay $40,875.00 to the husband, leaving her with her entitlement of $639,148.00 net.

The husband’s position will be:

Assets
Contents	3,000.00
Bank account	364.00
CBA cash management	143,385.00
Units in W Company Limited	160,479.00
Loan account W	966,573.00
Loan to HS project	15,000.00
C property interest	502,500.00
Legal costs	137,169.00
Cash payable by wife	40,875.00 1,969,345.00
Liabilities
P P/L	15,810.00
Bankwest W Loan	668,000.00
CSB	403,500.00
Credit cards	77,576.00
Mr & Mrs Pamplin	131,731.00
CS Water	8,580.00
Mr TC	25,000.00 1,330,197.00
639,148.00

ORDERS THAT ARE JUST AND EQUITABLE

The husband wishes to receive some of the antiques He has no particular attachment to them, but those sold by the wife were sold at greater than valuation and he wishes to share in the possibility that they are worth more than their valuation. On the other hand, the wife wishes to retain them because she uses them. I consider the wife should retain the antiques.
Otherwise, I consider no feature relating to the property to be divided or the impact of the proposed orders requires any adjustment to those orders for them to be just and equitable.
The wife should be able to promptly sell shares and pay the husband the cash adjustment.
The parties are willing for an entitlement with the Australian Scholarship Group to be held on trust for the education of the children.

I certify that the preceding one hundred and seventy (170) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Warnick.

Associate:

Date: 30 October 2009

[2009] FamCA 1024

30 October 2009

Key Legal Topics

Areas of Law

Family Law

Legal Concepts

Remedies

Costs

Mr S	$900,000.00
O Goup	$250,000.00
Guarantees	$148,334.00
Mr CS	$80,000.00
Diminution in superannuation	$120,000.00
$1,498,334.00