Pezarro and Pezarro
[2007] FamCA 1474
•18 December 2007
FAMILY COURT OF AUSTRALIA
| PEZARRO & PEZARRO | [2007] FamCA 1474 |
| FAMILY LAW – PROPERTY DIVISION – Principles of determining the pool of property of the parties – Addbacks principles associated therewith – Chorn v. Hopkins – Third party intervenor alleging debt owed by one or both parties – Principles associated therewith including Part VIII AA of the Family Law Act 1975 – Binding Financial Agreement about maintenance – Part VIII A of the Family Law Act 1975 grounds on which the agreement might be set aside – Effect of one party owing a significant sum of money to a third party on distribution of property |
| Family Law Act 1975 (Cth) |
| APPLICANT: | Ms Pezarro |
| RESPONDENT: | Mr Pezarro |
| INTERVENOR: | Mr W |
| FILE NUMBER: | CAF 613 of 2003 |
| DATE DELIVERED: | 18 December 2007 |
| PLACE DELIVERED: | Canberra |
| JUDGMENT OF: | Faulks DCJ |
| HEARING DATE: | 24-27 October 2006 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Haughton |
| SOLICITOR FOR THE APPLICANT: | Ray Swift Moutrage and Associates |
| FOR THE RESPONDENT: | In person |
| FOR THE INTERVENOR: | In person |
Orders
It is ordered that:
(a) The husband pay to the wife the sum of $92,174 on or before 4pm on 18 March 2008.
(b)If the husband should fail to pay the said sum on or before the time indicated (or if he should earlier agree to do so) the husband will do all such things as may be necessary to cause the sale of the property at T, known as … being all of the land contained in Certificate of Title reference … and the improvements erected thereon.
(c)There be liberty on the part of the wife to apply about the terms of the sale.
(d)Irrespective of any other arrangements if the property should not be sold by private treaty on or before 18 June 2008, then the husband will forthwith do such things as are necessary to put the property up for sale by public auction.
(e)There be liberty to apply by either husband or wife about the terms of such auction sale.
Upon completion of the sale of the property the proceeds will be applied as follows:
(a)In payment of the costs of the sale, including real estate agents commission and legal fees in relation to the conveyance and the sale.
(b)The discharge of the mortgage of approximately $118,000 (at trial) over the property.
(c)In payment or in reservation of a sum sufficient to meet any liability for capital gains tax that may arise in relation to the sale of the property. The husband will instruct (at his own expense) Price, Waterhouse and Coopers to do a calculation of such capital gains tax for him and both parties will accept that calculation.
(d)Payment to the wife of such sum as represents 35 per cent of the total property pool as found by me in my reasons for judgment with the net proceeds of sale (after payment of costs, discharge of mortgage and capital gains tax) substituted for the $222,000 (the net value of the property used in the calculation of the property pool).
(a) Pursuant to paragraph 90MT(1)(b) of the Family Law Act 1975 whenever a splittable payment becomes payable to or on behalf of the husband Mr Pezarro from his interest in the Military Superannuation and Benefits Scheme (MSBS):
(i)The wife Ms Pezarro is entitled to be paid twenty two per cent (22%) of that splittable payment and;
(ii)There shall be a corresponding reduction in the entitlement which the husband would have had in the MSBS but for this order.
(b)The operative time for the orders will be four business days after service of sealed orders on the Trustee.
(c)The above order binds the Trustee or Trustees from time to time of the MSBS.
(a) Pursuant to part VIII AA of the Family Law Act 1975 the husband is declared to be the sole debtor as between him and the wife of the intervenor Mr W in these proceedings. The husband will keep safe and indemnify the wife in respect of any such liability.
(b)Each party will indemnify and keep the other indemnified against any debts in his or her name in particular the husband will indemnify the wife against any debt which may be due from him to S Pty Ltd (or any legal entity associated therewith) and to P Pty Ltd.
(c)In particular the wife will indemnify and keep the husband indemnified against any debts arising from or in relation to the company Z Pty Ltd or any entity associated therewith.
If all of the funds held in the Symons Phillips Solicitors trust fund (arising from the sale of the C property of the parties) on behalf of the parties have not been disbursed, the parties will cause those sums to be paid to them in the proportions of 35 per cent to the wife and 65 per cent to the husband.
The Financial Agreement entered into by the parties on 8 June 2006 is set aside.
Otherwise each of the properties is declared as against the other the owner both at law and in equity of any personal property in his or her possession or control.
All material produced subpoena which did not become the subject of exhibits will be returned by the Court to the persons producing it as soon as practicable.
Any material produced subpoena which became an exhibit will be returned by the Court at the expiration of the appeal period to the person producing it. Any material produced by a party which became the subject of an exhibit will be returned by the Court to the party at the expiration of the appeal period.
The matter be removed from the Pending Cases Inventory.
IT IS NOTED that publication of this judgment under the pseudonym Pezarro & Pezarro is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT CANBERRA |
FILE NUMBER: CAF 613 of 2003
| MS PEZARRO |
Applicant
And
| MR PEZARRO |
Respondent
And
| MR W |
Intervenor
REASONS FOR JUDGMENT
Foreword
This case concerned property proceedings between the applicant, Ms Pezarro, and the respondent, Mr Pezarro[1].
[1] Throughout this judgment from time to time reference will be made to the parties as the ‘husband’ and the ‘wife’, this is for convenience only and I do not wish to cause any offence to either party by doing so.
On 16 June 2006, the intervenor, Mr W, the wife’s step-father, was given leave to participate in these proceedings.
The matter proceeded to a final hearing on 24-27 October 2006, and the parties provided written submissions.
On 24 April 2007 the matter was brought back before me on my own motion because it was discovered that Exhibit F2 dated 27 October 2006 was purportedly a binding Financial Agreement which appeared to deal with the property of the parties. On that date it was agreed between the parties that I should look at this document which I have proceeded to do. In addition, consent orders of 8 June 2006 were also tendered and have become part of the evidence. No party sought to put other evidence before me or otherwise to reopen his or her case.
I wish also to record at this point my apology for the delay in delivery of judgment. I accept that the delay has undoubtedly caused the parties a level of emotional anguish and possibly some financial difficulty. I offer my sincere apologies.
Orders Sought
The orders sought by the wife are set out in Endnote 1.Endnote 1 The orders sought by the husband are set out in Endnote 2.Endnote 2 The orders sought by the third party are set out in Endnote 3.Endnote 3
Brief Background
The wife is 44 years of age and is not in paid employment. She received at trial a disability pension of $236 a week. The husband is 43 years of age and was also unemployed at the time of hearing. The parties commenced cohabitation in 1993 and married in July 1995. Close to the time of commencement of the relationship the husband had undergone a financial settlement with his former wife. The parties separated on a number of occasions during 2002 and 2003, particularly June 2003, during which period property proceedings were commenced and then withdrawn. Shortly after reconciliation, the husband went to India to work on a company called S Pty Ltd. The parties finally separated in early 2004, and were divorced on 2005. The parties do not have any children.
The husband considers September 2001 to be the date of separation because on that date, the wife commenced receiving Centrelink payments for illness and apparently represented herself as being separated.[2] I do not accept from the evidence presented that the parties separated in September 2001. The husband’s own evidence is “[w]e first separated in early February 2002 when the applicant left me”.[3] However, not a great deal turns upon the date of separation.
[2] Husband’s affidavit of 3 March 2006 at [6]
[3] Husband’s affidavit of 3 March 2006 at [12]
Procedural History
The wife originally sought to bring property proceedings in this Court by way of originating application on 16 April 2003. This application came on an interim basis on 24 April 2003, 5 May 2003 and on 26 May 2003, on which date the matter was expedited. The husband was ordered to pay the wife $200 per week in interim spousal maintenance. However, on 28 July 2003, all outstanding applications were withdrawn and dismissed.
The wife then sought to recommence proceedings by filing documents in this Court on 7 May 2004 seeking a property settlement. This application was heard on 13 September 2004 on which date interim Terms of Settlement were entered into. The interim Terms of Settlement provided for the sale of the parties’ property in C and,
2.…to cause the proceeds of sale to be distributed as follows:
(f)To reimburse the husband any monies paid by him for cleaning the property, noting that on the final hearing this sum will be a debt due to the husband by the wife;
(g)To pay to McGuiness Eley [the wife’s earlier solicitors] such sums as required to be paid to have caveat by that firm over the [C] property withdrawn (approximately $25,000 inclusive of interest)
(h)To pay by way of bank cheque to [Mr W], the sum of Fifty Thousand Dollars ($50,000), such cheque to be paid to [Mr W] or his agent on settlement;
(i)To pay to the husband by way of bank cheque the sum of $50,000;
(j)To pay by way of bank cheque the sum of Twenty Five Thousand Dollars ($25,000) to the husband’s mother […]…
The orders also provided for the sale of the property at H (Order 5), and for the wife to deliver up a Saab motor vehicle for sale with proceeds to be paid to “…[Mr W] in partial discharge of the parties’ liability to the said [Mr W] in relation to loans advanced in respect of the motor vehicle.” (Order 6)
Further consent orders were made on 4 April 2005 as well, which provided for the parties to withdraw $200 per week from the Symons Phillips Solicitors trust fund. Those orders also provided for the disbursement to the husband of $10,000 and $20,000 to the wife from the sale of the C property.
On 2 May 2006 orders were made by Registrar Routh that the drawings by the parties from the trust account were to be increased from $200 to $400 per week until the Pre-Trial Conference on 26 May 2006.
On 8 June 2006 Registrar Routh conducted a conciliation conference between the parties. The wife’s solicitor was also present. Mr W, the third party, also attended. Consent orders were made at the conclusion of the conference.
On 15 June 2006 the wife filed an application seeking to have the consent orders set aside on the grounds that at the time she did not have the capacity to enter into the orders because she suffers from a bi-polar affective disorder.
On 16 June 2006 directions were made for the matter to be set down for hearing.
The matter then came on for hearing on 24-27 October 2006.[4]
[4] It was common ground that the application to review the Registrar’s orders had the automatic effect of setting aside the orders made. Aliter the contemporaneous financial agreement.
Credit
Credit assumed some significance in determining these proceedings. This is in part because of the confused and incomplete state of the evidence. Two of the parties represented themselves. They did the best that they could in rather difficult circumstances. The protracted length of the proceedings and associated failings of memory, and the wife’s asserted (and I say that with no disrespect, but only observe that there was no medical evidence of such) mental illness, being bipolar affective disorder all contributed to the difficulty in making sense of many of the assertions made and the evaluation of what each party proposed as evidence or what became evidence.
No party in these proceedings presented a complete and accurate account of the history between them. Each of the husband’s, the wife’s and the intervenor’s evidence at times lacked at times, credibility and consistency.
I have set out hereafter a catalogue of issues and my findings where I found I could make them. In some instances the evidence (or lack of it) would not properly permit a finding. In such cases the party asserting the material failed to satisfy the evidentiary onus and the assertion failed. In some cases this has had relatively significant consequences but ultimately I can only make decisions on the evidence (properly established) before me. The failure by one or more of the parties to be able to prove a fact or circumstances which may have materially affected the outcome is an unfortunate but ultimately inevitable consequence of a trial system with multiple issues.
Adjustment of Property Interests
In seeking to divide the property of the parties, I must undertake a four stage approach which requires me to identify and value the property of the parties, consider the parties’ contributions to the property, consider the factors set out in s 75(2) of the Family Law Act 1975 (the ‘Act’) and then, consider whether the proposed order and distribution is just and equitable.[5]
[5] See for example, Russell & Russell (1999) FLC ¶92-877 and Hickey & Hickey (2003) FLC ¶93-143
Intervenor’s Claim
Mr W filed an application on 24 May 2006 which was amended on 10 October 2006. It is clear from the interim Terms of Settlement of 13 September 2004 that Mr W had been involved financially with the parties and that this was acknowledged by the parties. In his application, Mr W sought that the Court declare that there is a debt owed to Mr W by the husband and wife in the sum of $331,005 as of 30 September 2006, including a sum of $53,986 in interest. He asserts that he lent the parties $321,204 for personal and business purposes.
This figure includes loans that he says were made between 9 May 2003 and 27 February 2004 to the applicant in the sum of $61,530.52.[6] The wife acknowledges that she received roughly around this amount of money (she says $58,980) but states
…I was unaware that this money was provided by [Mr W]. I considered myself to be reconciled with the respondent during this period. If I required money I would ring the respondent and request that he transfer money into my account.[7]
[6] Mr W’s affidavit of 24 May 2006 at [13] as corrected in his affidavit of 10 October 2006 at [20]
[7] Wife’s affidavit of 21 July 2006 at [38(e)]
However, Mr W goes on to state that he received $60,000 from the sale of the C property. $10,000 was reimbursed to Mr W after paying money into the wife’s solicitor’s trust account for her housing expenses and $50,000 went towards the $61,530.[8] The payment of $50,000 to Mr W from the proceeds of sale of the C property leaves a balance owing to him of $11,530 on that loan.
[8] Mr W’s affidavit of 10 October 2006 at [27]
The purported loans are assertedly constituted as follows:[9]
[9] Attachment LA6 of his affidavit of 10 October 2006
Item Amount Borrowed Amount Repaid Total Outstanding
(Including Interest)Saab $58,786.53 $29,024.76 $37,760.12 Ms Pezarro $86,530.52 $60,000 $36,444.55 Mr Pezarro $211,821.33 $13,794.00 $236,796.15 Mr & Ms Pezarro $35,508.33 $20,660.35 $20,065.89 $392,646.71 $123,479.11 $331,066.71
The Commonwealth Bank account statements (no 1361) of the wife demonstrate that between 22 July 2003 and 3 December 2003, Mr W transferred significant sums of money to the wife. These include amounts of $4,500, $1,400, $2,500, $1,500, $11,000, $15,000, $2,000, and $3,500.[10]
[10] See Exhibits W13-14
The wife asserts that this money was lent to her husband by Mr W and is not a joint loan. She does acknowledge that $15,000 was lent by Mr W to the parties for stamp duty on the C property. This is also acknowledged by the husband, who says that he wrote a cheque and gave it to the wife who never paid it to Mr W.[11]As I set out above I regard the $15,000 as a joint liability. I do not accept the husband’s allegation that (in effect) the wife retained the funds as proved.
[11] Husband’s affidavit of 3 March 2006 at [148]
List of issues
This was a matter in which there were many issues, many of which were not ultimately relevant to the determination I have to make. As I mentioned in my foreword, in a jurisdiction where there are many issues in each matter some are not capable of resolution by the Court on the evidence before it. Ultimately this must be the responsibility of those presenting the evidence to the Court. This situation is compounded when one or more of the litigants is self-represented and has an inadequate understanding of the laws of evidence or the way in which facts must be proved before the Court.
In this matter both the husband and Mr W in their final submissions in effect sought to add additional material which had not been before the Court. I must necessarily disregard assertions which do not find their way into evidence.
I deal with hereunder a list of matters which appear to be issues between the parties as identified by me from the proceedings. I cannot pretend that the list is exhaustive. It is comprehensive. To the extent that there are matters that are unresolved which represent on the part of any of the parties an assertion or claim and which does not receive a specific mention from me during the course of my reasons for judgment it should be concluded that there was not sufficient evidence to warrant a finding in favour of the person asserting the claim.
Was the house price agreed? [page 3 ln 25].
At page 83 line 47 on 26 October 2006 Ms Haughton for the wife admitted the value or conceded that the property is valued at least at the amount of $340,000.
No other valuation was proffered. I must proceed on the basis of the evidence before me including that concession.
Commonwealth Bank account $11,000 and $7,000 in trust fund [page 3 ln 36].
The $7,000 does not appear to feature in any of the submissions of the parties and I will disregard it. Nevertheless the $11,000 appears in the submissions of the wife as $11,991 with reference to Exhibit F2 paragraph H. This accords with the evidence in that it represented what was left of the money that had been refunded by the bank as a result of the husband’s complaint about the wife’s withdrawing funds. It remains as one of the assets of the parties.
Money received from N Company in 2002 [page 3 ln 30].
This was the subject of significant oral evidence in the long run and it is clear that the husband’s contractual earnings from N Company were paid into P Pty Ltd ([P Pty Ltd]). So far as I am able to gather from the evidence presented the arrangement was one designed for the mutual benefit of P Pty Ltd and the husband. Apparently P Pty Ltd had tax losses which might be utilised with the additional income presented by the husband and the husband in effect did not lose anything because he would still be paid what he would have been paid as an employee of P Pty Ltd. The arrangement from what evidence I had before me is unlikely to have been very satisfactory from the tax commissioner’s point of view but nevertheless that has little bearing on the arrangements between the parties. As appears hereafter although a certain amount of money was paid in by the husband, some money was taken out which was not readily explicable by reference to tax rates or anything else. In the end although it is clear that the husband was owed money (in one sense at least) by P Pty Ltd the precise amount is not easily identifiable - if at all, and in any event on the evidence of Mr W, if there is any residual amount due to the husband, then it is unlikely and probably unable to be repaid at present.
$239,860 husband owed by PPty Ltd [page 4 ln 38].
The comments I have made above in relation to 33 are apposite. I do not accept that this is an amount due from P Pty Ltd to the husband.
$192,000 paid in by husband in 2001 [page 5 ln 23].
The same relates to this matter. The money paid in by the husband came from N Company on some attributed provision of services. The validity of the arrangements does not matter for the purposes of this hearing. The consequences are in the long run, in my opinion, irrelevant to the outcome.
Husband never received wages from S Pty Ltd – Court is asked to find that the husband has failed to make full and frank disclosure about amount of money – could be significant [page 6 ln 5].
Each of the husband and wife asserted the other had failed to make a full and frank disclosure. I suspect they are both right. To say that the husband’s involvement with S Pty Ltd was unsatisfactorily explained and inadequately demonstrated would be something of an understatement.
In the end however, I am not satisfied (notwithstanding the persistent and skilled cross-examination of Ms Haughton) that the wife has demonstrated that there is anything other than suspicion about any residual interest the husband may have in S Pty Ltd. I suspect that, if notwithstanding the husband’s inadequate explanations, he does have some residual interest in the company in India, it is unlikely to be worth anything. Whatever it is worth, (if anything) that value has not been proved.
Was the money really lent by the third party? [page 8 ln 10].
The intervener in this matter did whatever he reasonably could to present his case to the Court. He presented as a person trying very hard to present his case honestly and as somewhat outraged by the attitude of the wife, his step daughter however his outrage was possibly to some extent misplaced. Notwithstanding the very high praise and trust that Mr W lavished upon the husband, Mr W’s involvement both in P Pty Ltd as its financial controller and in the husband’s affairs in India, by the advancement of money, demonstrated that his trust overcame any commercial reality or normal prudence. This is a characteristic admirable in a human being but not desirable in a man of business.
In the end, I am satisfied from the evidence particularly in the cross-examination of both the husband and Mr W that there is no evidence that any advance (other than $15,000 for which see hereafter) was made to both parties. I am satisfied on the evidence before me, including Mr W’s honest responses that he had no discussions about the loan as such with the wife although he believed she must have known about it. Money was advanced to the husband by Mr W and it did not constitute a gift but was rather a loan. I am unable on the evidence before me and on the submissions made to me to conclude whether at this point the loan is enforceable. It was asserted by Ms Haughton, as part of her submissions on behalf of the wife that at least some of the lending may be statute-barred or are unable to be enforced because they failed properly to comply with the provisions of relevant legislation. The agreement entered into between Mr W, his wife (wife’s mother) and the husband was retrospective and was more in the nature of an acknowledgement and a belated attempt to secure in some way the debt (or the advance to put it in more neutral terms) than had been originally contemplated.
The effect of this document may well be to require the husband (assuming that he is able to do so after the orders in this matter have been made) to provide some mortgage security over his T property. Certainly Mr W believes that that is what he should do.
The effect of my finding that the wife was not one of the borrowers of this sum leads inevitably in my opinion, to the conclusion that the husband could only give what he had to give when he entered into the agreement[12].
[12] The old maxim is: Nemo dat quod non habet
Consequently if the ex post facto agreement represents on his part a commitment to give security over the T property that cannot in equity (or in accordance with the terms of the Act to which I will return shortly) constitute some basis for binding the wife in relation to the division of property. Nevertheless if as a result of the orders made by me the husband finishes up with the T property it seems more likely then not, (but I make no finding or determination about it) that he would be left with an in personam obligation to provide a mortgage to Mr W over the T property.
It cannot be that one party to a marriage who has incurred a debt in whatever circumstances and even if for the benefit of both of the parties can unilaterally give precedence to that creditor by making a promise to in effect make that creditor a secured creditor thereby having the effect incidentally or intentionally or directly of diminishing the property pool by elevating the interests of that creditor over the interests of the other spouse.
Part VIII AA was inserted into the Act it would appear from the explanatory memorandum with a view to facilitating the enforcement of orders in circumstances where there was third party involvement. Whatever may have been the intent of the legislature, it is the duty of the Court to interpret and enforce that law as it was enacted. Section 90AD provides
For the purposes of this Part, a debt owed by a party to a marriage is to be treated as property for the purposes of paragraph (ca) of the definition of matrimonial cause in section 4.
Matrimonial cause in section 4 is defined as meaning
(ca)proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings:
(i) arising out of the marital relationship;
(ii) in relation to concurrent, pending or completed divorce or validity of marriage proceedings between those parties; or
(iii) in relation to the divorce of the parties to that marriage, the annulment of that marriage or the legal separation of the parties to that marriage...
This is a curiously extensive definition given that ordinarily speaking the Court does not have the power to divide the debts of the parties as such, given that s 79 provides that
(1)In property settlement proceedings, the court may make such order as it considers appropriate:
(a)in the case of proceedings with respect to the property of the parties to the marriage or either of them--altering the interests of the parties to the marriage in the property…
Property itself is defined in s 4 as
"property" , in relation to the parties to a marriage or either of them, means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.
The extended meaning becomes a little clearer in the context of s 90AE which provides for the sorts of orders that the Court may make binding a third party. Section 90AE provides
(1)In proceedings under section 79, the court may make any of the following orders:
(a)an order directed to a creditor of the parties to the marriage to substitute one party for both parties in relation to the debt owed to the creditor;
(b)an order directed to a creditor of one party to a marriage to substitute the other party, or both parties, to the marriage for that party in relation to the debt owed to the creditor;
(c)an order directed to a creditor of the parties to the marriage that the parties be liable for a different proportion of the debt owed to the creditor than the proportion the parties are liable to before the order is made;
(d)an order directed to a director of a company or to a company to register a transfer of shares from one party to the marriage to the other party.
(2)In proceedings under section 79, the court may make any other order that:
(a)directs a third party to do a thing in relation to the property of a party to the marriage; or
(b)alters the rights, liabilities or property interests of a third party in relation to the marriage.
(3)The court may only make an order under subsection (1) or (2) if:
(a)the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and
(b)if the order concerns a debt of a party to the marriage--it is not foreseeable at the time that the order is made that to make the order would result in the debt not being paid in full; and
(c)the third party has been accorded procedural fairness in relation to the making of the order; and
(d)the court is satisfied that, in all the circumstances, it is just and equitable to make the order; and
(e)the court is satisfied that the order takes into account the matters mentioned in subsection (4).
(4)The matters are as follows:
(a)the taxation effect (if any) of the order on the parties to the marriage;
(b)the taxation effect (if any) of the order on the third party;
(c)the social security effect (if any) of the order on the parties to the marriage;
(d)the third party's administrative costs in relation to the order;
(e)if the order concerns a debt of a party to the marriage--the capacity of a party to the marriage to repay the debt after the order is made;
Note:See paragraph (3)(b) for requirements for making the order in these circumstances.
Example:The capacity of a party to the marriage to repay the debt would be affected by that party's ability to repay the debt without undue hardship.
(f)the economic, legal or other capacity of the third party to comply with the order;
Example:The legal capacity of the third party to comply with the order could be affected by the terms of a trust deed. However, after taking the third party's legal capacity into account, the court may make the order despite the terms of the trust deed. If the court does so, the order will have effect despite those terms (see section 90AC).
(g)if, as a result of the third party being accorded procedural fairness in relation to the making of the order, the third party raises any other matters--those matters;
Note:See paragraph (3)(c) for the requirement to accord procedural fairness to the third party.
(h)any other matter that the court considers relevant.
It is to be noted in this matter that the provisions of s 90AE(3) have been complied with because the third party is in fact a party to the proceedings. There were in this matter others who may have been relevantly third parties but were not joined, were not given notice and it was not proposed that they should be given notice. Their interests are not affected by these proceedings and have not affected the outcome - for evidentiary reasons if no other.
It would have been open to me as a consequence of s 90AE to make an order directing Mr W to substitute the husband for the wife as the debtor in relation to any money owed to him. However that was an order sought both by the husband and Mr W in any event. Hence it is unnecessary for me to make any specific determination or order except one utilising that power in confirmation of what I am being asked to do.
At an early point in the proceeding the husband and Mr W were seeking that I make a declaration under s 78 of the Act that the wife was also a debtor of Mr W in relation to the money advanced by him. While it is unnecessary for me in the circumstances to make a decision about whether or not that section would be applicable, it seems to me that it would not. That section relates to the declaration of rights or title in relation to the property of the parties and it seems to me that notwithstanding the extended definition given to “property” in s 90AD it would be a curious and inapposite use of the term pursuant to s 78 to declare the debts and allocation thereof of the parties or to determine an external dispute in effect between a third party and one of the parties or both of the parties.
It is inherent in the determination of the pool of property of the parties that a court should make findings about the liabilities of the parties. That however does not in my opinion, in the ordinary course of events extend to resolving the terms of or the existence in effect of an external dispute between a third party and one or both of the parties to the marriage. Such proceedings may well have been possible generally when the validity of the cross-vesting legislation had not been discredited by the decision of the High Court in Wakim; ex parte McNally[13]. I believe that now the appropriate determination of such matters between third parties and the parties to the marriage ought properly to be resolved under Part VIII AA of the Act (subject possibly to some successful challenge to the validity of those provisions in the High Court at some point).
[13] (1999) 198 CLR 511
Accordingly for my purposes in these proceedings it is enough that I rely upon the provisions of s 90AE to declare that any debt that may be due by either of the parties to Mr W, the third party intervener, will be the responsibility of the husband save in so far a save for the sum of $15,000 advanced to the parties jointly the stamp duty in respect of the C property (in relation to this see hereafter)[14]. In making such an order I make no comment on or determine the validity or otherwise of the agreement between Mr W and the husband and the wife’s mother. I make no finding about precisely the amount due to Mr W from the husband although that amount as at the time of the trial was about $331,000 by agreement between them. The fact that the husband owes this amount of money to Mr W is a factor I ought properly to take into account under s 75(2) of the Act.
[14] Which has been repaid so far as I can determine on the evidence.
Finally, it seems clear to me that the obligation of the husband to repay Mr W cannot and should not be subordinated to the division of property otherwise between the parties. In particular his liability should not be permitted to reduce the pool of property of the parties by restricting the possibility that the property in T might be sold to provide an adequate division of property between the husband and wife according to law.
Lest it be thought that these last comments would have the effect of, to some extent, eliminating Mr W’s benefit from being involved in these proceedings and having his debt recognised, I wish to point out that the evidence of Mr W was quite clearly that he did not expect an immediate repayment of the amount due to him but rather that the husband would, in accordance with Mr W’s high opinion of his honourable character, make arrangements for a steady repayment of the sum over a period. There is no doubt that the husband’s ability to do this may be impaired by the sale of his property at T or by the reduction in his equity in it. Nevertheless it is not the case that simply by intervention a creditor should be able to accomplish a preferred position. In each case it is a matter of balance and in this case the particular evidence of Mr W and the commitment of the husband to his repayment irrespective in effect of the outcome of these proceedings leads me to conclude that the decision I will formalise in orders in due course takes an appropriate account of the relevant matters.
There was no debt owed by Mr W except for $15,000 for the C property stamp duty [page 10 ln 8].
The wife acknowledged (perhaps extraordinarily but nevertheless clearly) that Mr W did advance $15,000 for stamp duty in relation to the C property. That sum therefore should represent the joint liability of the parties. In the overall scheme of things it is an insignificant amount but nevertheless it is important that where debts are acknowledged and approved they are taken into account.
There are three significant points in the parties’ relationship – October 2002 when the husband went to India, 2003 Family Court documents after the separation, and 2004 Family Court documents after the separation. The wife’s debts existed prior to these proceedings, and Mr W is seeking to take property which should be paid to the wife’s creditors eg banks etc. [page 12 lns 115-] “… the wife is effectively seeking that all of her debts be repaid before the property is divided up” [page 12 ln 40].
These matters raise significant questions about those sums that should be either taken into account or added back. The wife’s debts in relation to her business were the subject of highly unsatisfactory responses by her in cross-examination. Although a bundle of invoices alleged to have been due at the date of the trial were tendered after some to-ing and fro-ing, I was left with no confidence that any of the debts that were asserted to be due by her former company (and then logically by her) were either likely to be enforced or were even now being pursued. The husband’s persistent, if somewhat inelegant, cross-examination on these matters, in my opinion satisfactorily demonstrated this doubt. Accordingly, in the wife’s submissions the suggestion that there should be some account taken of $153,000 or thereabouts, for these debts as a joint liability of the parties is not in my opinion adequately proved and should be disregarded.
I wish however to make two further comments. First, ultimately it was for the wife to prove the debts (in a legal sense) if she wanted them taken into account. In my opinion she has failed to do so and I cannot make the finding in relation to those debts as she seeks. Secondly, if as seems probable, there were debts arising from the operation of Z Pty Ltd or one of its other manifestations, in my opinion these ought properly to be regarded as the joint debts of the parties. Although the husband was anxious to assert that this was some individual operation of the wife and that at least in part it occurred after separation it is clear that it was something that both the parties contemplated and prior to his departure to India was something that they had planned and indeed may have relied upon as providing income (this was misguided of course) while he was away. I am satisfied also from the e-mails, that I find were sent by the husband to the wife when he was away, that he was involved in the supporting of that business and properly encouraged her to incur debts in relation to it which he felt he would be able to repay from the proceeds of his own (subsequently to fail) business venture in India. The fact that a business fails does not mean it should remain the responsibility of one of the parties and short of there being waste (in a legal sense), or fraud or misappropriation of funds, the consequences of failure to succeed should be borne by the parties in the same way that either a predicted (or perhaps unpredicted) success in relation to a business should be shared.
Although the husband asserted from time to time in his evidence that the wife had in some way misapplied funds from Z Pty Ltd for her own purposes I am not satisfied that this is so and could not make such a finding particularly as to make such a finding in my opinion would import the Briginshaw[15] standard and I can say in relation thereto that I have no conviction that the alleged misappropriation occurred.
[15] Briginshaw v. Brigenshaw [1938] 60 CLR 336
In the light of my findings about Mr W’s debt and my failure to make any findings about these debts it is not necessary for me to consider the question raised in the Statement of Issues above, namely whether one debt or one set of debts should be preferred to another and the circumstances in which this might happen.
“You are right, your Honour, there will be a shortfall. The reality is that with what the wife owes her creditors, if the add backs were all added back then there wouldn’t be enough money to go around and the wife will just have to deal with that.” [page 13, ln 16].
The way in which findings have fallen in this matter will provide that there will be some money for division between the parties. It seems clear tragically that four days of court hearing together with many interlocutory proceedings and directions before the hearing have been principally over what amounted to $18,000 in a bank account however that does not take account of the equity in the T property or the superannuation of the husband and these are factors which must properly be ultimately accounted for.
Issue of the ‘binding Financial Agreement’ [page 18, ln 40].
The potential consequences of the possibility that there was a binding Financial Agreement between the parties caused me to reopen the proceedings. I received further submissions about this matter and it appears that the parties entered into two agreements, one providing for orders by consent and the second apparently a “binding Financial Agreement”. This information became available during the course of the hearing[16] if a binding Financial Agreement had been entered into by the parties pursuant to Part VIIIA and the relevant provisions of for example, s 90D, s 90DA, s 90G then the agreement could only be set aside in circumstances set out in s 90K.
[16] see page 18 of the transcript at ln 40
In summary, the provisions that would enable the Court to set aside a binding Financial Agreement are that such a setting aside can only occur if and only if the Court is satisfied
(a)the agreement was obtained by fraud…
(aa)either party to the agreement entered into the agreement:
(i) for the purpose… of defrauding or defeating a creditor…
(ii) with reckless disregard of the interests of a creditor…
(b)the agreement is void, voidable or unenforceable; or
(c)in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out; or
(d)[since the making of the agreement there has been a change relating to the care, welfare and development of a child]
(e)in respect of the making of a financial agreement--a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable…
It was originally asserted that any such agreement ought properly to be set aside because of the mental condition of the wife. This was not adequately proved during the course of proceedings and it would be impossible for me to make a finding which would bring the circumstances in which the agreement was entered into, within the provisions of s 90K(1)(b). For me to reach any conclusion about setting aside the agreement, if it were indeed a relevant agreement, in my opinion it would be necessary for me to apply the provision of s 90K(e) finding that the husband in the circumstances engaged in conduct that was unconscionable. No evidence was provided in fact about the circumstances in which the agreement was reached except that it was during the course of a conciliation conference conducted by a Registrar of this Court. It was not submitted to me that the husband’s conduct was unconscionable and even allowing for the difficulties in proving what occurred during the course of the conciliation conference no adequate evidence was provided about the way in which the agreement was reached, the nature of the state of mind of the parties at the relevant time and any external matters that may have borne upon the appropriateness of the agreement and the propriety of the agreement.
The Financial Agreement became part of the proceedings in the Court in April 2007 in Exhibit F2 which set out the terms of the agreement. The agreement is only about spouse maintenance and makes provision for the payment of the sum of just under $6,000 into a trust account to provide maintenance for the wife for a period of two years.
The agreement is certified in accordance with the provisions of s 90G of the Act signed by the parties and otherwise appears to conform to the provisions of Part VIIIA. However in circumstances where the contemporaneous entering into orders by consent in relation to property are not going to have an effect as the parties had intended at that point it seems to me to make the agreement unreasonable and potentially impracticable within the terms of s 90K(c). Accordingly, in my opinion, it is appropriate that that agreement should be set aside.
The matter proceeded on the basis that although the parties had signed Terms of Settlement on 8 June 2006 with the assistance of a Registrar the wife’s subsequent application in 15 June 2006 for a review of the Registrar’s order necessarily, and in my opinion inevitably, led to those orders being set aside and a consideration de novo of the issues between the parties.
Change of name of Z Pty Ltd to A Pty Ltd? (Ex 2) [page 72 ln 40].
The husband, I believe substantially in retaliation, sought to argue that the wife was likely to have substantial undisclosed funds either as a result of money channelled out of her business or alternatively in some undiscovered bank account. Indicative of this failure to disclose he suggested, were the changes of names of the company through which she operated. The wife’s explanation about the changes of names was somewhat vague but in the long run I am not at all convinced that there was anything sinister, untoward or malicious in the changes of names. Moreover there is no evidence, notwithstanding the husband’s insistence that I could properly and should properly reasonably draw an inference that the wife had secreted money away, that the wife has any undisclosed assets. I find that the wife has no such undisclosed assets in relation to her business operations.
Outstanding bills (MF14) [page 98, ln 35].
This is a matter that has been dealt with above and I have nothing further to add.
Husband’s failure to produce bank statements, tax returns and notices of assessment – failure to declare what it is that he has been doing recently [page 2, lns 28048].
This case is almost a classic case study of the ways in which proceedings about discovery and disclosure can be thwarted by the procedures themselves, the inability of parties to understand or their incapacity to carry out the requests. Each of the parties employed a number of different solicitors in the course of the early part of the proceedings and when they parted company with those solicitors found that information that had been conveyed to one or the other was not necessarily transferred to the new legal representative and in some cases files were held subject to a lien until payment of outstanding fees. Accordingly, notwithstanding the most extensive process of investigation and discovery there was a failure on the part of both parties to produce relevant documents in some cases until the last day of the hearing. This was the subject of much finger pointing and blame allocation during the course of proceedings and in particular I am satisfied that the husband did fail to produce relevant material relating to quite a range of matters which were in issue between the parties. However, notwithstanding that failure I am satisfied, after having heard the evidence, that there is nothing that flows from this failure. I am not satisfied that the failure was deliberate and malicious and in the end it seems to me that there is little prospect if any, that there are undisclosed assets in India or elsewhere on the part of the husband. The sadness in this matter is that the parties have expended vast amounts of money in pursuing wild geese of little value.
Should the husband have any liability for the Z Pty Ltd debts? [page 60 ln 21].
Yes he should if they had been proved but they have not. (My comments above apply.)
Wife’s failure to properly disclose documents in relation to her debts in particular [page 72 lns 28-33].
Again my comments about discovery and the failure on the part of the wife to produce relevant information are relevant.
Evidence of husband – the valuation for P Pty Ltd is not $54,750 because there is a liability of $480,000 so it is minus $72,000? [page 87 ln 20].
The value of P Pty Ltd is the most difficult thing. No satisfactory evidence was supplied. The husband as he points out in his submissions made a number of offers to have an accountant from Price, Waterhouse and Coopers give evidence. I am not satisfied that even if the accountant had given evidence it would have clarified the matter particularly. The evidence of Mr W was that there was in the end no money in P Pty Ltd to pay out anything that might be due to the husband at the present point. Equally however, I believe that pages 83 and 84 of the transcript on 26 October 2006 reveal an agreement between the wife and the husband that the value of the shares of the husband in the company is $54,750[17]. It seems somewhat perverse that if the value of the company is arguably a negative because of the money that it owes that the shares in the company might be worth something. This conundrum was not seriously explored in cross-examination or in evidence. I am left with a significant uncertainty about the commercial viability of P Pty Ltd. Both the husband and to some extent Mr W have a vested interest in playing down the value of the company. Nevertheless it is clear that the company was at the time of the hearing a going concern and it is feasible in those circumstances that the shares might have a value to the relevant shareholder. Accordingly, a concession by the husband and wife as to the value is appropriate and I accept it.
[17] see particularly page 84 ln 46
Evidence of Mr J – husband says it was his employment contract to be paid against – Mr J says that there was never any intention to pay against it and that it was solely for raising investment in Australia [page 100].
The service agreement between the husband and S Pty Ltd or some variation thereof in India I suspect had some dubious purpose relevant more to the raising of money then to providing any income or securing any income for the husband. Nevertheless whatever may have been the purpose there is no asset generated by or arising from such agreement and, in my opinion, it can properly be disregarded.
Husband says that prior to 2002 he was not a director or shareholder but that that situation changed in 2004. The wife claims that this was always the case. The husband has 500 shares in S Pty Ltd (out of 2000 allocated shares) [page 103, ln 28].
The precise status of the husband’s shareholding is to some extent irrelevant in the light of the agreement between the husband and wife referred to above. I suspect that the affairs of the company have not been as religiously conducted as the regulations and the law requires. This does not bear upon the outcome of these proceedings however.
It appears that the N Company contract went through P Pty Ltd. The assertion is that the funds did not come back into the marriage. The husband acknowledges that he could not access P Pty Ltd’s accounts [page 105].
I have already commented to some extent on this matter. I am satisfied that the money from N Company went into P Pty Ltd and he got back a part of it. The money that came back out ought properly to be regarded as part of his contribution to the parties’ acquisition and maintenance of property.
At the time at which the husband went to India P Pty Ltd owed him money – including the initial start-up contribution. It is acknowledged by the husband that some of the money borrowed from Mr W relate to the investment into the company i.e. Mr W gives husband $41,000 which he puts into the company, he owes Mr W $41,000 and the company owes him $41,000 [page 106].
This arrangement occupied some time in oral evidence. In the end I am satisfied that it is irrelevant to the proceedings before the Court. Money went in. Money went out. In the end I do not believe it affects the outcome either of the relationship between the father and Mr W, the husband and P Pty Ltd or the contributions that the husband has made to the property of the parties.
In P Pty Ltd accounts there is an amount listed which appears to include the husband’s income under the N Company contract in the sum of $192,000 [page 109].
Whatever may appear in the books I am satisfied from the evidence of Mr W (who I am satisfied was being honest about this question) that it is improbable that any sum that might be due to the husband as a result of the strange N Company arrangements, is not likely to be recovered except to the extent that it has already been recovered. For reasons set out above this is irrelevant.
Annexure F to wife’s affidavit – husband’s loans to P Pty Ltd – assertion, denied by witness that loans of AP line of credit or capital investment relate to loans [page 112].
The same comments apply.
YH “without going through the source documents, he says he paid in $182,500 – or that was the amount that was the profit of the company if I can put it that way. He says he took out 90 and therefore there is 90 left in there somewhere”. According to Price Waterhouse and Coopers, the company owes the husband $41,918 [page 118].
The same comments apply to this lower amount said to be due to the husband.
Mr W invested $80,000 for S Pty Ltd – husband sys it was a personal loan for other things despite the parties having entered into a contract in November 2004 providing that $150,000 will be repaid by March 2005 [pages 125-126].
I have already made determinations about the nature of the relationship between Mr W and the husband and the arrangements between them. I accept Mr W’s view that he did not invest in the S Pty Ltd prospective deal except by providing funds to the husband.
Issue about money accessed by the wife while the husband was in India [pages 129-135].
The husband argued that the wife’s use of his bank account during the time he was in India was illegal and in any event inappropriate. I do not accept this. I accept the e-mails from the husband that the wife produced and which went into evidence both provided an authorisation and indeed an encouragement for the wife to utilise funds both for her own support and for that of her business.
In any event, even if this were not so and the funds were demonstrably funds of the husband and of the husband alone, the wife’s use of these funds for the purposes of maintaining herself would, in accordance with the principles set out in Chorn v. Hopkins[18], represent in so far as they were adequately explained, a pre-emptive but nevertheless appropriate application of funds for her own support.
[18] (2004) FLC ¶93-204
It is true that there is some doubt about the availability of a reasonable explanation and of the application of the funds to her own support. To the extent that the funds were expended for the purposes of the support of Z Pty Ltd I accept the wife’s submission that the e-mails from the husband constituted a sufficient authority and authorisation therefore and the comments I made previously about the success or failure of the Z Pty Ltd business are applicable.
$10,000 repaid to the husband’s mother of $12,000 for living expenses [page 143 lns 22-23].
I am not satisfied about how much money was lent by the husband’s mother to either or both of the parties. This is an example of a failure on the part of a party properly to provide appropriate evidence. The husband’s mother was apparently unavailable to give evidence and while there was some debate about the principles in Jones v. Dunkel[19]. In the end it is clear that money was repaid to a substantial extent leaving a relatively small amount outstanding and de minimus non curat lex.
[19] (1959) 101 CLR 298
Husband has taken more money out of the company than that disclosed previously in the previous year and a half prior to trial in the sum of $6-7,000 [page 145 lns 8-9] but contradicted himself [page 146 lns 6-5].
This contradiction is really of little import. In the overall scheme of things this really does not register. I disregard it.
$43,900 deposit from the C property came from N Company through P Pty Ltd [page 146] and stamp duty (allegedly to make up $60,000).
The husband clearly did not get his facts right about how much money went into the purpose of the C property. In the end it does not matter very much whether the money was spent on the deposit or on the deposit and the stamp duty as asserted by Ms Haughton. Nothing turns on it in the overall context of the matter.
Mr J lent the husband $8,860 [page 148].
I do not regard the evidence about the alleged loan as being satisfactory to prove that loan. In any event it does not bear upon the result. If the loan is outstanding I sincerely doubt that it will ever be called up.
April 2005 husband received $32,000 from the National Australia Bank (NAB) which was ‘illegally removed’ from his account [pages 150-151].
The $32,000 referred to, were funds repaid by the NAB after they had in effect stopped the wife’s cheque. There is no reason for an add-back or repayment of the funds from the wife have already been set out above and the balance of these funds is brought into account otherwise as to $11,900 (or thereabouts) included in the list of property.
The husband agreed that his application is that he keeps the house and superannuation [page 154].
This is not really an issue between the parties. It is really perhaps the exemplification of the strength of the husband’s view about the conduct of the wife. In essence he does not want her to have anything from the property settlement.
Section 90A(d) – Mr Y’s legal fees treated as property of the parties [page 167].
The arrival of Mr Y in the course of the proceedings was something of a surprise to me but represented an agreement which ultimately was really an example perhaps of s 90A(b). It does not affect any of the matters between the parties.
P Pty Ltd – when company formed, the husband, his three brothers and their mother each held 20 per cent of the company each. In November 1997, Mr W lent the company $250,000. An informal agreement was reached reducing each of the family’s share to 15 per cent and making Mr W’s share 25 per cent (at some later stage, one of the husband’s brothers took over their mother’s share – giving him formally, 40 per cent of the company) [page 184].
For the reasons I have set out above, (although complicated and probably inappropriately executed) these arrangements do not affect the outcome because of the agreement between the husband and the wife.
Debt to Mr W reduced to $162,500 in April 2001 [page 187].
This transitional reduction in debt is largely irrelevant as a result of the findings that I have made about the agreement between the husband and Mr W about the amount currently due.
Submission that lack of valuation of P Pty Ltd should not hamper on a Weir v. Weir[20] basis YH determining that there is money in the company which the husband can withdraw – Mr W has been able to withdraw over $100,000 but Ms Haughton conceded that she never put the question to the husband [pages 217-218].
For similar reasons this does not have an effect on the outcome of the proceedings. Failure to ask the question really does not affect the outcome.
[20] (1993) FLC ¶92-338
The husband is owed $41,819 from P Pty Ltd [page 225].
This is a repetition of the earlier point. The money that might be due to the husband as a balance of money brought in from N Company or for any other reason is really not likely to be recoverable in the short term and should be disregarded for these purposes.
Property Pool
Disputed Items
The wife asserts that there is a NAB suspense account,[21] which is not included in the husband’s financial statement but was acknowledged by the husband during the hearing[22]. The husband asserts that the wife wrote cheques from the husband’s bank account and after he demanded the return of the money, the money was withheld from the sale of the properties and was returned to the husband on the order of the Court[23]. I find that there is a NAB account in the husband’s possession and that its balance at the time of hearing was $11,991.
[21] Annexure C to the Wife’s affidavit of 21 July 2006
[22] Transcript of 26 October 2006 at page 150, ln 40
[23] Husband’s affidavit of 3 March 2006 at [80]-[82]
Pages and pages of the parties’ written submissions and much of the cross-examination were directed to amounts that each of them asserted should be notionally added back into the pool. The law in relation to this matter is substantially dealt with in the Full Court decision Chorn & Hopkins[24]. Although legal fees in some cases seem to have acquired a peculiar significance[25] generally speaking the principle that I propose to apply in relation to the parties’ various allegations is that if there had been money that would have otherwise been available at the time of separation which was subsequently distributed pre-emptively either to one party or the other then this amount should be added back into the pool and notionally debited and debited against the party who received the advance. This applies to interim distributions by order as well as unilateral pre-emptive actions by one party or the other.
[24] (2004) FLC ¶93-204
[25] For example Farnell v. Farnell (1995) 20 FamLR 513
An exception is generally made on the basis that if the use of the money is “explained” then the actions of the parties may fall within the general proposition that parties are not expected simply to “cease living” as at the date of separation and are entitled to take a reasonable sum from the assets of the parties for the purposes of living. What is reasonable and what ultimately would be unfair as a depletion of the property pool are matters that require consideration in each case. Generally speaking if the approach taken is to add back any sums pre-emptively advanced and then to apply a debit against that party the principles of equity in relation to the property pool can be maintained. This approach might be ameliorated in so far as one of the parties has fewer assets and fewer opportunities to acquire assets than the other or less income, by a determination in a particular and appropriate case, that the sum should not be thereafter debited back against the party.
The property pool at this stage is as follows:
Husband’s house at T $340,000 Husband’s National Australia Bank account $1,635 P Pty Ltd (Husband’s 15 percent share) $54,750 Household contents in possession of Wife $3,000 Household contents in possession of Husband $1,000 Husband’s NAB suspense account $11,991[26] $412,376 [26] See comments hereafter about why in the end this comes out.
Addbacks or Interim Disbursement
Symons Phillips Trust Account
As at 14 February 2006 there were two sums being held in the trust accounts of Symons Phillips, which had balances of $27,905.19 from the proceeds of sale of the C property and $7,857.19 from the proceeds of sale of the H property.[27] When the trust account for the C property was opened there was a balance of $65,280.52. Under consent orders of 4 April 2005 the parties to withdraw $200 per week from the Symons Phillips Solicitors trust fund. On 2 May 2006 orders were made by Registrar Routh that the drawings by the parties from the trust account were to be increased from $200 to $400 per week. This money will by now have been distributed completely to the parties. As such, it will be notionally added back against each party ie, $32,640 each.
[27] Annexure C to the Wife’s affidavit of 21 July 2006 at [9]-[10]
Between 27 April 2005 – 14 February 2006 the wife received from the Symons Phillips Trust Account the sum of $17,900. The husband received during that period the sum of $16,300, with what appears to be an additional amount of $2000 to collect. Since that date, the parties have continued to receive $200 per week each. Therefore $17,900 is “debited” against the wife and $16,300 against the husband and $34,200 is added to the pool.
The amounts of money that the parties received from time to time are somewhat confusedly dealt with by the parties in their affidavits and in their evidence. However, there appears to be common ground at least about the destination of funds from the sale of the C property. I derive this commonality from the summary of the process in paragraph 169 of the husband’s submissions coupled with the table prepared by Ms Haughton for the wife following on from paragraph 92 of her submissions. I am satisfied from these submissions if not otherwise that the parties are agreed that from the proceeds of the sale of the C property in addition to the residual amounts paid out to the parties as set out above the following sums were paid:
(a)$46,632.49 to the wife for various amounts as set out in paragraph 169 of the husband’s submissions.
(b)$72,000 to the husband from the sale of the C property as set out in paragraph 169 of the husband’s submissions.
(c)$25,000 to the husband’s mother asserted by the husband to be in repayment of a loan (the husband asserts that this constituted a loan or repayment of a loan made by his mother previously). The wife in paragraph 39 of her affidavit, sworn on 21 July 2006 acknowledges that there was a loan of $8,000.00 but states in paragraph 40 that she was “only aware of approximately $8,000.00 owed to [the husband’s mother]”. While the evidence is to say at the least slim I am prepared in the circumstances to accept the husband’s sworn evidence that a total of $25,000 was borrowed from his mother and repaid. That sum should not be added back into the pool.
(d)$40,391.87. The husband’s overdraft which was paid from the C property. This represented in part money he took away and although it was asserted this should be added back in, at least in part because of the failure to allow the wife’s overdraft to be brought in to account as a liability of the parties it seems to me that the evidence equivocal though it is would suggest that the sums were applied in some way towards the common enterprises of the parties. Accordingly that amount should not in my opinion be added back in.
Other amounts that are asserted should be added back in are part of the money paid back by the NAB to the husband in April 2005. This was a refund by the bank of money that the wife had drawn out against the account. I accept that the husband had the benefit of that money and it should be added back in. However, the other amount sought to be added back in of $11,991, being the sum remaining in the bank account as acknowledged by the parties, would constitute double-counting and hence that should be eliminated from the pool of property. That amount was part of the refund so far as I am able to determine.
In addition I accept that the husband’s tax refund received during separation but relating to the year of income ended 30 June 2003 of $18,000 should be added back in. It is for the purposes of the hearing part of the income during cohabitation.
Adding in the ‘addbacks’ this gives a property pool of:
Husband’s house at T $340,000.00 Husband’s National Australia Bank account $1,635.00 P Pty Ltd (Husband’s 15 percent share) $54,750.00 Household contents in possession of Wife $3,000.00 Household contents in possession of Husband $1,000.00 Symons Phillips Trust Account addback for wife until 14 February 2006 $17,900.00 Symons Phillips Trust Account addback for husband until 14 February 2006 $16,300.00 Symons Phillips Trust Account addback for wife $32,640.00 Symons Phillips Trust Account addback for husband $32,640.00 Sale of the C property addback to wife $46,632.49 Addback sale of jewellery $1,000.00 Addback husband from sale of the C property $72,000.00 Addback money paid by NAB the husband April 2005 $32,920.82 Addback husband’s tax refund received for the year ended 30 June 2003 $18,000.00 $670,418.31
Superannuation
The value of the parties’ superannuation is as follows:
Wife’s REST Superannuation $711 Husband’s Military Superannuation and Benefits Scheme $164,781 Husband’s Mercer Fund $22,000 187,492
I find the funds to be so valued as at the date of the trial.
Any value that has accrued since that time ought reasonably in my opinion to be attributed to the individual efforts of the parties and can properly be disregarded for the purposes of this division of property.
Liabilities
The wife asserts that there is still a significant amount outstanding between the parties as a result of their business ventures, specifically Z Pty Ltd. She sets these out as follows:[28]
[28] These figures are set out in the wife’s financial statement as her share being a half – however, it appears from Exhibit 4 that the amounts set out by the wife as her half share are the totals outstanding
Telstra $3,823 [CM Lawyers] $4,533 [A Accountants] $2,745 [Ms TL] $3,069 AGC* $6,076 The Accounts Bookkeeper $1,650 [X] Pty Ltd $22,755 [I] Pty Ltd $165 ASIC $482 [E Company] $1,561 [O Accountants] $2,540 $49,399
*In cross-examination, the wife conceded that this debt was personal – transcript 25 October 2006, page 18, ln 6 – hence it is included as a personal debt below
These items do not appear to be conceded by the husband as being outstanding liabilities.
The wife sets out a series of her personal liabilities.[29] The wife’s solicitor had asserted that many of these debts had accrued when the parties lived together and should be taken to be joint debts. In support of this statement, Exhibit 4 consisted of a bundle of documents which appeared to be very old bills – with many of the debts accrued from 2002 and 2003, including the NAB Visas (which had the following balances in March 2004 - (no 445) $2,000 and (no 470) $8,250) and the Commonwealth Bank Visa card (9012) and (3068). However, it is not clear from the evidence which Commonwealth Bank Visa card the wife states still has an outstanding balance of $27,083.
[29] Wife’s Financial Statement, filed on 24 February 2006 and Exhibit 4
Personal loan to Mr [Croy] (wife’s father) $4,000 Personal loan to Ms [U] (wife’s friend) $2,000 American Express $22,260 National Australia Bank Visa (no […]0) $9,504 National Australia Bank Visa (no […]5) $3,000 Commonwealth Bank Visa* $27,083 Telstra $1,391 Telstra mobile $3,129 ACTEW AGL $3,679 […] Shop Rite $2,096 […] Shop Rite $628 […] Family Surgery $62 […] Festival $583 [K Company] $808 […] Investigation $3,736 AGC $6,076 [G lawyers] $374 [H Lawyers] $2,945 [B] Lawyers $275 [Conveyancing Service] $176 [Carder] and [Hurford] Solicitors $24,274 $118,079
*Bank accounts were tendered in relation to this debt and became Exhibit 4. On the original statement of 25 January 2003-24 February 2003, the wife had written “Monies owed by [Z] Pty Ltd” and on the letter of demand dated 3 February 2003, she had written “Personal Bill”.
The husband also has a series of personal liabilities, as set out below:
Mortgage on T property* $118,000 P Pty Ltd $74,031 Other loans $289,217 Legal fees to [Y Solicitors]** $6,504 $487,752
*The mortgage on the T property was agreed
**According to Minutes of Consent Orders made on 27 October 2006 – interest runs on this amount according to the rate specified in the Family Law Rules 2004
I have in part dealt with the various loans of the wife and to some extent the husband before. I am unsatisfied that any of the amounts due are likely to be recoverable or recovered from the parties with the obvious exception of both legal fees and the mortgage on the T property. Assertion is not necessarily proof and in the end my task is not to provide some form of book keeping exercise trawling through accounts and determining whether they are payable or not payable or statute barred or not statute barred or whether the parties or the creditor has given up I believe that properly I can take account of the mortgage on the T property. I can take account of the fact that the parties have paid legal fees and I have done that to some extent in the addbacks set out above. I can take account of the fact that the parties will have further legal fees and that the wife’s legal fees may exceed those of the husband because her employment of legal practitioners to assist her in the trial. However in my opinion those liabilities for fees should lie where they fall and I am not prepared to take into account for the purposes of these proceedings any other outstanding debts than the mortgage on the T property.
Accordingly the value of the pool of property is:
$670,418
-$118,000
$552,418
Contributions
Initial Contributions
In 1987 the husband commenced employment with the Defence Force, after completing a Bachelor degree, and worked there until 1999. During 1992 and 1995, he also undertook a Masters degree. After leaving the Defence Force in 1999, the husband commenced employment with N Company, and worked there until 2002 when he was made redundant.
The husband brought into the marriage a house in T, which was purchased in 1989, subject to a mortgage to the NAB, a minority (15%) interest in P Pty Ltd, superannuation with the Military Superannuation Benefits Scheme to which the husband had commenced contributions in 1988, leave entitlements, furniture and a car.
The husband asserts that the wife did not bring anything into the marriage.[30] She stated in her oral evidence that she brought in an inheritance from her grandmother.[31] Unless the wife inherited from both of her grandmothers (of which there is no evidence) this does not accord with the wife’s statement in her primary trial affidavit that “[s]hortly after the death of my Grandmother in 2002 I received an additional sum of approximately $32,000”,[32] in addition to a gift from an unnamed person of $10,000 in 2002. Mr W asserts that he provided the wife with some money from her aunt’s estate, of which he was the sole beneficiary in the sum of about $34,000.[33] In addition, he states that “[t]he gift of $10,000 from her grandmother E, was in March 2001. The inheritance of $31,250 from her grandmother E’s will was paid in July 2002.”[34] These sums according to the wife were used for her living expenses when the husband was in India, and for her business, Z Pty Ltd.[35] However, in an earlier affidavit, of 6 September 2004, Mr W states that “[t]hrough the time I have known [the wife] she has received two inheritances. The first was in two parts, $15,000 on 14 Sep 95 ($12,600 in cash). The second of $19,400 on 1 Dec 95 ($10,500 in cash).”[36] Although the parties commenced cohabitation in 1993, this time period would accord with about the time of marriage of the parties, and these amounts should be taken into account.
[30] Husband’s affidavit of 3 March 2006 at [41]
[31] Transcript 25 October 2006, page 22 at lns 39-40
[32] Wife’s affidavit of 21 July 2006 at [28]
[33] Mr W’s affidavit of 10 October 2006 at [11]
[34] Mr W’s affidavit of 10 October 2006 at [14]
[35] Wife’s affidavit of 21 July 2006 at [28]
[36] Mr W’s affidavit of 6 September 2004 at [5]
Contributions During Cohabitation
The wife states that when the parties commenced cohabitation, the husband had recently reached a property settlement with his former wife, and that he was in debt, and both parties worked to pay off the debt which they did between 1993 and about 1998-1999.[37]
[37] Wife’s affidavit of 21 July 2006 at [9]-[10]
At some point in the relationship the parties bought a Saab motor vehicle. The wife states that at the time at which this vehicle was purchased she “…owned a relatively new Magna”, but no evidence was produced that would support the assertion that the Magna was brought into the relationship by the wife.[38] Indeed, the husband asserts that the Magna was purchased by him as his company car.[39]
[38] Wife’s affidavit of 21 July 2006 at [11]
[39] Husband’s affidavit of 6 October 2006 at [28]
The wife asserts that during this period she made most of the homemaker contributions and that she worked for the first two years of the marriage as a sales assistant, then as a Consultant, then as a supervisor.[40] The husband asserts that the wife was receiving unemployment benefits during this period instead.[41] The wife’s Centrelink documents were never tendered to the Court and accordingly, I cannot make a finding on this.
[40] Wife’s affidavit of 21 July 2006 at [12]
[41] Husband’s affidavit of 3 March 2006 at [39]
The husband asserts that in July 2002 he received a redundancy payment from N Company for $60,621.[42] [This may form part of what is asserted by the wife that the husband took $80,000 to India with him when he left.] It is not a special contribution and represents the husband’s ongoing income.
[42] Husband’s affidavit of 3 March 2006 at [130]
In July 2002 the husband commenced employment with S Pty Ltd and left Australia for India. The husband had hoped that S Pty Ltd would be very successful in providing telecommunication services across India, and consequently, would pay him in accordance with his employment contract for US$12,500 per month. However, this was not the case, and consequently the husband returned to Australia in July 2003, and then returned to India in October 2003, and then returned again to Australia in about mid-2004. The husband asserts that he has not received any income from S Pty Ltd,[43] but the wife believes that the husband still has a large profitable share in the business. As a director of S Pty Ltd the husband may have had an allocated shareholding of 9,000 shares. However in the end there is no proof that, whatever the shareholding, it had any value.
[43] Husband’s affidavit of 3 March 2006 at [12]
During the marriage the parties purchased two properties, being the C property, in the Australian Capital Territory and an investment property at H, in the Australian Capital Territory. It appears to be the case that the wife’s inheritance from 1995 was used to purchase the property in H. The wife asserts that the parties also covered any shortfalls on the mortgage of the T property which was tenanted. This is denied by the husband. The property in C was in sold in April 2005 and various moneys disbursed to cover the mortgage, legal fees of the parties, $25,000 to the husband’s mother, and $60,000 to the husband, $60,000 to the intervenor, and $65,480 to the Symons Phillips Trust account. The H property was sold in December 2004 and moneys were largely disbursed to the NAB.
The wife asserts that she moved out of the property in C from approximately December 2002 until December 2003 and that property was tenanted, for which the husband received all of the income.[44]
[44] Wife’s affidavit of 21 July 2006 at [41]
In March or April 2001 the wife commenced a business called Z Pty Ltd, of which the wife was the sole director and shareholder. In order to establish the business the wife borrowed $57,000 from an overdraft over the matrimonial home, in both parties’ names. The company, and consequently the wife possibly has a liability for accumulated debts of $140,000.
During the relationship, the husband’s mother … asserts[45] that she lent the wife money, in the sum of $40,000 for which a partial payment was made by the interim Terms of Settlement of 13 September 2004 in the sum of $25,000, leaving a balance of $15,000. The wife acknowledges $8,000 was borrowed, but no more. I do not accept that any sum outstanding has been proved.
[45] Affidavit of 23 October 2006 at [3]
The husband asserts that he and the wife shared non-financial contributions such as housework.[46] The wife does not comment on such issues in her evidence. This is another example of where the evidence (I suppose more accurately the lack of evidence or its unsatisfactory nature) does not allow me to make a finding.
[46] Husband’s affidavit of 3 March 2006 at [93]
Contributions Post-Separation
At separation the wife sold her jewellery for a sum of about $1,000.[47] It is not clear however if this was jewellery accumulated by the parties during their marriage or jewellery that was owned by the wife solely. This is an admission against interest and I accept this figure.
[47] Wife’s affidavit of 21 July 2006 at [25]
Section 75(2) Factors
The husband at the time of hearing received $190 per week in rent and an additional $200 paid from the Symons Phillips Solicitors trust fund under consent orders.[48] Once orders are made distributing the trust fund, this will have the result of significantly reducing the husband’s income. The husband also states that he spends $370 of this each week in living expenses, which includes $180 in mortgage payments and $40 in rates and levies.
[48] Husband’s Financial Statement, filed on 3 March 2006
The wife was on a disability pension of $236 per week and $200 a week from the trust fund under the consent orders, and pays $375 per week in rent.[49] The wife also sets out in her financial statement her “necessary or desired” expenditure at $1,017 per week, including bill payments by instalment of $150 and cigarettes of $65. I chose not to accept the wife’s claim that her necessary expenditure is $1,017 a week including expenditure of $65 a week on cigarettes. As their Honours on the Full Court stated in Gibbons & Gibbons,
His Honour rejected the wife’s claim in the sum of $73 per week for cigarettes... In our view, it was open to his Honour to do so, without expressing any views as to the desirability or otherwise of the wife’s smoking. Whilst the wife was perfectly entitled to smoke if she wished, that was not an expense which his Honour was obliged to take into account when assessing the wife’s reasonable weekly needs.[50]
[49] Wife’s Financial Statement, filed on 24 February 2006
[50] Gibbons & Gibbons [2007] FamCA 26 at [126]
An important factor under s 75(2) is the husband’s continuing liability to Mr W which is in the sum of over $300,000. I accept this is a continuing liability and likely to be repaid from time to time if the husband is able to find employment.
I accept also that each of the parties has some other debts. It is likely that the wife still has some residual legal responsibility for what amount to quite substantial debts. Whether these debts were enforced against her or whether the company which she formerly owned has been liquidated or will be liquidated are factors not in evidence and I do not propose to speculate about it. I take account of the fact that she has some debts which may impede her ability to enter into future working arrangements even if her health will allow it.
I believe in contrast that the husband does have the ability to earn income at a reasonably high rate and will do so once these proceedings have finally been resolved.
Summary of Matters Relating to Contribution and Section 75(2)
Without evaluation of the T property at the time of commencement of cohabitation it is difficult to determine whether that contribution from the husband together with such other contributions as he has outlined is equal to or greater than the contributions received by the wife from Mr W (as a sort of surrogate legacy) and from other inheritances. Although the marriage was short it seems to me that there is little to be gained from trying to find distinctions between the size of those contributions. In my opinion, In default of there being satisfactory evidence, they should be regarded for these purposes, as equal.
During the course of the marriage it is clear that the husband contributed more financially on a day-to-day basis and in fact the wife’s failed business enterprise in Z Pty Ltd meant that she probably subtracted from the net wealth of the parties for a time. However much the same thing could be said for the husband’s foray to India, which in the end proved to be a total financial failure.
I am satisfied that the husband’s absences have meant that the wife has contributed more generally around the house, although in the absence of children this is probably not a strong element of contribution. I accept also that there were professional cleaners employed.
The post separation contributions do not in my opinion bear strongly upon my considerations.
Accordingly, in my opinion I should regard the contributions of each of the parties in this matter as equal.
So far as s 75(2) factors are concerned the factors favouring the husband outweigh those of the wife because of the substantial amount of money that he owes to Mr W. In my opinion these would cause an adjustment in his favour of 15 per cent or a differential between the parties of 30 per cent in relation to the non-superannuation property.
If I were to divide the property accordingly it would mean that the wife would receive $193,346 and the husband would receive $359,071. The husband would have allocated in this equation the property
Husband’s house at T (net) $222,000 Husband’s National Australia Bank account $1,635 P Pty Ltd (Husband’s 15 percent share) $54,750 Household contents in possession of Husband $1,000 Symons Phillips Trust Account addback for husband until 14 February 2006 $16,300 Symons Phillips Trust Account addback for husband $32,640 Addback husband from sale of the C property $72,000 Addback money paid by NAB the husband April 2005 $32,920 Addback husband’s tax refund received for the year ended 30 June 2003 $18,000 Total $451,245
and the wife would receive the following:
Household contents in possession of Wife $3,000 Symons Phillips Trust Account addback for wife until 14 February 2006 $17,900 Symons Phillips Trust Account addback for wife $32,640 Sale of the C property addback to wife $46,632 Addback sale of jewellery $1,000 Total $101,172
This means that the husband must pay the wife the sum of $92,174.
This would mean it seems inevitably that the property in T may need to be sold with the inherent consequences so far as the husband’s raising security for Mr W that I have mentioned.
Looking at the matter overall it seems that the marriage and these proceedings have been a disaster for both the parties. Whatever limited resources they had originally have been dissipated by bad or unlucky business decisions and these proceedings. I have no doubt that each of the parties will feel aggrieved by this decision as will Mr W. I am conscious that the decision that I have made does not provide much of substance for the future for either of the parties. Nevertheless I feel in the circumstances that it is just and equitable and will make orders accordingly.
In accordance with the principles set out in Coghlan &. Coghlan[51] I propose to treat the parties’ superannuation separately. I have outlined the values above and it is in this case appropriate and significant that the superannuation should be dealt with separately.
[51] (2005) FLC ¶93-220
Almost all of the husband’s superannuation entitlements accrued outside the marriage. It would appear that the husband had been a member of the MSBS Superannuation or a related organisation for about 18 years which means that probably only about 40 per cent of the contributions were made during the course of the marriage. This would suggest that it would be appropriate for the wife to have some part the husband’s superannuation entitlements but a relatively small part.
In her submissions for the wife Ms Haughton suggested that she should receive 40 per cent overall of the superannuation fund but none of the Mercer fund because no notice had been given to that fund. This led her to conclude that the wife should receive 45.45 per cent of the husband’s MSBS fund.
In my opinion the wife should receive 20 per cent overall - which is $36,800. This would represent about 22 per cent of the MSBS fund.
There are no particular factors arising from s 75(2) relating to the superannuation other than those mentioned hereafter. However, one factor that is important is that the wife’s superannuation entitlement is so small that it is important given her health there should be some payment to her in accordance with the apparent intention of the legislature in setting up the splitting option under the Act. In my opinion a determination that she receives 22 per cent as a splittable payment from the superannuation the MSBS fund is appropriate and just and equitable in the circumstances. I will make orders accordingly.
I certify that the preceding one hundred and forty eight (148) paragraphs are a true copy of the reasons for judgment of the Honourable Deputy Chief Justice Faulks
Associate
Date: 18 December 2007
Endnote 1
Wife’s Amended Application for Final Orders (filed 5 October 2006)
1.That the matrimonial asset pool, excluding superannuation, be divided on a 50%/50% basis.
2.That the superannuation entitlements of the parties be divided on a 60%/40% basis in favour of the respondent husband.
3.Any other Orders that this Honourable Court deems fit.
4.
Endnote 2
Husband’s Amended Response to an Application for Final Orders (filed 6 October 2006)
1.The parties do all things necessary and sign all necessary documents to provide the remaining proceeds of the H and C properties at Symons Phillips to the Husband.
2.The monies being about 11,991.02 held in a suspense account with the National Australia Bank be released to the Husband.
3.Outstanding account fee refunds held by the National Australia Bank being about $1,800 be released to the Husband.
4.Superannuation holdings being held by each party be retained by that party, being MSBS and mercer Funds for the Husband and REST fund for the wife.
5.The Wife do all things necessary to transfer to the Husband her share holding in the company known as “[Z] Pty Ltd” or any Company trading under that name.
6.The remaining property assets held by the wife be distributed between the husband and wife using the “pick a pile” method.
7.That legal costs expended by the husband through the wife filing her Withdrawal of Consent on 14 June 2006 be paid to the Husband by the Wife.
8.That subject to anything else in these orders otherwise than as required to give effect to these orders each party retain as against the other, sole ownership and possession of all property, monies, superannuation, choses in action to which the party is entitled and monies in the bank accounts in the name of the party.
9.The wife indemnify the husband and keep him indemnified with respects to any debts in her name, including but not limited to debts incurred relating to the company Z Pty Ltd.
10.Such Further orders as this court may think fit.
11.
Endnote 3
Intervenor’s Amended Application in a Case (filed 10 October 2006)
1.That the Court declare the a debt exists between the Lender, Mr W and the Borrowers, the husband and the wife in the amount of $331,005 as at 30 December 2006. This debt includes interest which has been calculated at the NAB Flexiplus Mortgage rate less 2% in the amount of $53,986.
2.That the whole debt be attributable to the Respondent husband, Mr Pezarro.
3.That the Court require the husband to do all things necessary to take a second mortgage on his property at T, Qld in favour of Mr W.
4.That the Court not agree to the splitting of the Respondent’s superannuation in recognition that the Property at T does not provide adequate security for the total loan.
0
3
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