Potter & Lloyd (No 2)
[2022] FedCFamC1F 284
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Potter & Lloyd (No 2) [2022] FedCFamC1F 284
File number(s): BRC 11323 of 2018 Judgment of: CAMPTON J Date of judgment: 4 May 2022 Catchwords: FAMILY LAW – PROPERTY – Final property adjustment pursuant to s 90SM of the Family Law Act 1975 (Cth). Legislation: Evidence Act 1995 (Cth) s 79
Family Law Act 1975 (Cth) ss 90SF 90SK, 90SM
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 7.08, 7.10
Federal Circuit Court Rules 2001 (Cth) r 15.09
Cases cited: Bevan & Bevan (2013) FLC 93-545; [2013] FamCAFC 116
Browne & Green (1999) FLC 92-873; [1999] FamCA 1483
Chorn & Hopkins (2004) FLC 93-204; [2004] FamCA 633
Franklin & Ennis [2019] FamCAFC 91
Gollings & Scott (2007) FLC 93-319; [2007] FamCA 397
Horrigan & Horrigan [2020] FamCAFC 2
Kowaliw & Kowaliw (1981) FLC 91-092; [1981] FamCA 70
Mallett & Mallett (1984) 156 CLR 605; [1984] HCA 21
Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17
Pierce & Pierce (1999) FLC 92-844; [1998] FamCA 74
Potter & Lloyd [2022] FedCFamC1F 214
Robb & Robb (1995) FLC 92-555; [1995] FamCA 136
Rosati & Rosati (1998) FLC 92-555; [1998] FamCA 38
Singerson & Joans [2014] FamCAFC 238
Stanford & Stanford (2012) 247 CLR 108; [2012] HCA 52
Warne & Warne (1982) FLC 91-247; [1982] FamCA 33
Weir & Weir (1993) FLC92-338; [1992] FamCA 69
Division: Division 1 First Instance Number of paragraphs: 181 Date of hearing: 23 – 24 March 2022 Place: Sydney Counsel for the Applicant: Litigant in person Counsel for the Respondent: Litigant in person ORDERS
BRC 11323 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR POTTER
Applicant
AND: MS LLOYD
Respondent
ORDER MADE BY:
CAMPTON J
DATE OF ORDER:
4 MAY 2022
THE COURT ORDERS THAT:
1.That within 90 days from the date of these orders the respondent shall do all such things as are necessary to:
(a)Pay to the applicant or as he may direct in writing the sum of $4,600.
(b)Cause the two H Bank mortgages secured upon the property at 1 E Street, Suburb B to be discharged; and
(c)Cause the H Bank mortgage and the ANZ mortgage secured upon 2 E Street, Suburb B to be discharged; and
(d)Cause the ANZ mortgage secure upon 3 E Street, Suburb B to be discharged.
2.That simultaneously upon compliance by the respondent with Order 1 the applicant shall do all such things and sign all such documents as may be necessary as prepared by the respondent at her expense to transfer to the respondent all his right and entitlement and interest in the properties at E Street, Suburb B.
3.That in the event the respondent fails or neglects to comply with Order 1 hereof, then forthwith upon such failure to comply the parties shall do all acts and things as are necessary to effect a sale of the properties at E Street, Suburb B for the best price reasonably obtainable in the following manner:
(a)List the said E Street, Suburb B properties for sale by public auction within 6 weeks from the date of default with such agent as the parties may agree to appoint and in default of agreement as to an agent within 7 days from the date of default with such agent as the President of the Real Estate Institute of Queensland shall appoint (“the agent”) the costs of and incidental to such appointment to be born equally by the parties as and when they fall due;
(b)The reserve price for the purpose of such auction shall be the price as mutually agreed upon by the parties and in absence of agreement being reached 14 days prior to the date of the scheduled auction at a reserve price nominated by the single expert real property valuer in these proceedings F Valuers with the costs of and incidental to such appointment and valuation to be born equally by the parties as and when they fall due.
(c)The parties shall instruct such solicitor or conveyancer they agree upon to have the conduct of the sale on behalf of both parties, or in the absence of agreement being reached within 7 days from the date of default they shall instruct such solicitor or conveyancer as may be appointed by the President of the Law Society of Queensland at that time with the costs of and incidental to such appointment being born equally by the parties as and when they fall due.
(d)The parties shall each execute a contract for sale in the form prepare by the solicitors or conveyancer having conduct of the sale at the sale price.
(e)The parties shall co-operate in every way with the auction agent (including but not limited to):
(i)Making the keys available to the agent
(ii)Allowing inspection of the Suburb B properties at all reasonable times as requested by the agent.
(iii)Doing or saying nothing to hinder or prevent the sales being effected
(iv)Signing all documents as requested by the agent in relation to the auction sale.
(f)In the event the bidding at the auction does not reach the reserve price the parties shall negotiate with the highest bidder or any other interested parties and effect a sale of each of the Suburb B properties at a price which is not more than 10 per cent below the reserve price or such other price as the parties may agree in writing.
(g)If any of the Suburb B properties remain unsold, the parties shall do all acts and things and sign all documents necessary to immediately relist unsold the Suburb B properties that remain unsold for public auction again on a date nominated by the listing agent and at such auction there shall be no reserve price unless otherwise agreed by the parties in writing.
4.Upon the settlement of the sale of each of the Suburb B properties the proceeds of sale will be applied in the following manner and priority:
(a)All costs and expenses including legal costs and disbursements, agents commission and auction fees, valuation fees as are due (including repayment of any such expenses as have been paid by either or both of the parties).
(b)In payment of an amount sufficient to discharge the mortgage on the property sold, being 1, 2 or 3 E Street.
(c)In payment of any amount required to discharge and/or adjust all council rates, water rates and strata levies in respect of each of the said Properties.
(d)In payment of any capital gains tax liability incurred by each of the parties upon the disposal of the Properties pursuant to this order;
(e)In payment of 6.02 per cent of the balance of proceeds of sale to the applicant.
(f)In payment of the balance to the respondent.
5.That within 14 days of the date of these orders the respondent shall do all such things as are necessary to make available to the applicant for collection by him at his expense at such reasonable times as are agreed the four unrestored motor vehicles in her possession or control.
6.Except as specifically provided for in these orders, each of the parties shall retain as against the other:
(a)All cash at bank invested by them
(b)Their respective superannuation entitlements
(c)All real property held by them
(d)All personal property of whatsoever in nature and kind in their possession or control.
7.In the event either party fails or neglects to execute any document to give effect to these orders, then the Registrar of the Court pursuant to s 106A of the Family Law Act 1975 (Cth) is empowered to execute such document in the name of the party in default upon being satisfied as to such failure or neglect by way of affidavit evidence so as to give validity and operation to these orders.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Potter & Lloyd has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
CAMPTON J:
INTRODUCTION
These are proceedings as to property adjustment pursuant to s 90SM of the Family Law Act 1975 (Cth) (“the Act”). The applicant is Mr Potter, born in 1974, currently aged 48 (“the applicant”). The respondent is Ms Lloyd, born on 1972, currently aged 50 (“the respondent”).
The applicant filed an Initiating Application on 3 October 2018. The respondent filed a Response to an Initiating Application on 28 November 2018.
The applicant contends that the parties commenced a de facto relationship in 2007 and that the relationship terminated in 2018. The respondent contends that the relationship commenced in 2008 and terminated in 2018. The affidavit evidence of each party was devoid of any evidentiary foundation supporting the dates asserted by each as to the commencement and termination of the de facto relationship. In submissions each party agreed that the differences contended to the date of commencement and termination of their relationship are not material to the s 90SM dispute. I am satisfied and find that the parties commenced a statutory de facto relationship not later than 2008 and terminated that relationship not earlier than mid-2018.
The parties have one child together, X, born in 2013 X was four years old at the date of separation. He is now eight years old.
Final consent orders as to his parenting were made on 18 November 2021 (“the parenting orders”). Those orders provide for the parents to have equal shared parental responsibility for X, for him to live with the mother and spend time with the father each alternate weekend from after school on Friday until 5.00 pm on Sunday during the school term, and to spend half of each school holiday with the father. The orders include provision for time-spent on special days, restraints and a mechanism for the parties to communicate with one another.
The respondent has three children of a former relationship, namely Mr G, Mr J and Mr K (collectively, “the respondent’s older children”). They completed school in 2008, 2010 and 2014 respectively. Currently, Mr G is 31 years old, Mr J is 28 years old and Mr K is 25 years old.
The parties lived together for about 10 and a half years. During parts of that period, the respondent’s children, Mr G, Mr J and Mr K also lived with them.
The applicant has two children from a previous relationship. It is uncontroversial that they lived in New Zealand with their mother and did not spend time with the applicant during the parties’ relationship.
The applicant and the respondent resided in Queensland for the duration of their relationship. The mandatory geographical requirement for the purposes of jurisdiction pursuant to s 90SK of the Act is satisfied.
The competing relief sought
By way of his Amended Initiating Application, the applicant sought “50 percent of the net property pool and add backs or such other percentage as the Court may order,” including that the applicant would receive in specie 2 E Street, Suburb B and that a superannuation splitting order “be made to enable the husband receive 50 percent of the net superannuation pool”.
At the commencement of the trial the applicant:
(a)Abandoned his relief by way of superannuation splitting order. He conceded that no notice of the proposed order had been provided to any superannuation trustee; and
(b)By oral application, absent objection, amended his relief whereby he sought an order that the respondent pay to him within one month the sum $600,000, and simultaneously upon receipt of that payment he would transfer to the applicant all his right entitlement and interest in the Suburb B properties, provided that the applicant refinanced the mortgages in the joint names of the parties secured upon the said properties.
By way of her Amended Response, the respondent sought an order that “the party’s interests in the total combined net property of the parties be altered so as to reflect a just and equitable division of the combined assets, liabilities and superannuation interests of the de facto wife and de facto husband.” She sought to retain her interest in the Suburb B properties and that the applicant transfer any interest he has in those properties to her within 60 days, she to “procure the release of the applicant from any liability including mortgage liabilities” in respect of the said properties.
The respondent opposed the payment of any adjusting sum to the applicant.
Each party sought that the other pay their costs.
Matters Agreed
During the course of the trial the parties agreed that:
(a)The respondent would retain her interest in the two restored motor vehicles, “Motor Vehicle 1” and “Motor Vehicle 2”; and
(b)The respondent would transfer and assign to the applicant all her right entitlement and interest in the four unrestored motor vehicles in her possession; and
(c)The applicant will transfer his interest in the Suburb B properties to the respondent provided that the respondent pay him any ordered adjustive sum within 90 days and she, simultaneously with such payment, will cause the mortgages secured upon the said property to be refinanced. In the event the respondent failed to comply with these conditions within such time frame the Suburb B properties are to be sold.
The issues
The significant disputes between the parties are:
(a)As to the identity and value of some of the assets, liabilities and superannuation benefits of the parties at the hearing, including notional add backs of property that no longer exist. Each party incorporated a draft working balance sheet in their respective case outline documents and in their affidavits;
(b)Identifying the fact of, extent of, and impact of, the financial, non-financial, and homemaking and parenting contributions made by the parties at the commencement of their relationship, during their relationship and subsequent to their separation, and then weighing those contributions;
(c)The respondent’s contention that the applicant had occasioned substantial losses by way of his renovation works occasioned to the property occupied by the parties during the relationship at L Street, Suburb M (“the Suburb M property”) and the two of the three Suburb B properties they acquired at E Street, Suburb B. The respondent cast her case in terms of a “negative contribution” made by the applicant to the property of the parties;
(d)The quantum of rent received by the respondent from the Suburb B properties after separation and the use and application of those funds;
(e)The current income and future income earning capacity of each party;
(f)The contribution by the applicant to the care and support of the children of the respondents prior marriage while they lived with the parties; and
(g)Compliance with the obligations of disclosure as to each parties relevant financial circumstances and pursuant to Court orders and directions.
The litigation history
On 6 December 2018, orders were made appointing Mr N of C Valuers as the single expert witness to value the Suburb M property and the Suburb B properties. The orders provided for Mr N to nominate a suitably qualified expert, being either a quantity surveyor or builder, to be appointed as a single expert witness to produce a report as to whether the renovation work the respondent alleges as performed by the applicant:
(a)Has been conducted in a tradesman like manner; and
(b)Whether rectification work is necessary; and
(c)The estimated costs of the rectification work.
The orders provided that a copy of that expert’s report be released to Mr N of C Valuers for use in completing the valuation reports on the properties. Pursuant to these orders, Mr N nominated O Engineers to prepare that report. A joint letter of instruction was sent to O Engineers by the parties on 23 September 2019. The report was released on 22 November 2019 (“the O Engineers report”). It noted that O Engineers were unable to conduct a cost analysis of the rectification work required for the properties.
Orders were made on 14 July 2020 for the applicant to provide a panel of three builders as proposed single expert witnesses to quantify the cost of rectification works on the properties, and for the respondent to select one of the proposed experts. On 23 July 2020 the applicant’s lawyers sent a letter to the respondent identifying three builders. The respondent selected one of the three nominated builders, P Pty Ltd, to inspect the Suburb M property and the Suburb B properties and to prepare a costing as to rectification works. The report was released on 21 September 2020 (“the P Pty Ltd report”).
On 12 November 2020 orders were made:
1.That the quote by [P Pty Ltd] is to be used for the purpose of valuation and or repairing the defects on all properties.
2.That the [P Pty Ltd] quotes be provided to [C Valuers] to assist in the completion of the valuation reports of all properties.
In January 2021, C Valuers declined to continue in its capacity as a single expert witness. By way of orders made on 3 August 2021, D Company were appointed as a replacement single expert witness pursuant to what was then r 15.09 of the Federal Circuit Court Rules 2001 (Cth) to value the parties’ real properties.
It was uncontroversial that after separation the respondent had retained all rents received from the Suburb B properties and was responsible to pay all of the outgoings in respect of the properties. On 3 August 2021 the following further orders were made:
Within fourteen (14) days of the date of these orders, the respondent must provide the applicant’s solicitors a written accounting for the rental received and expenses incurred for [properties 1, 2 and 3 E Street, Suburb B].
The respondent must continue to provide the applicant’s solicitors with up-to-date written accountings as described in Order 3 above once every month and no later than 4:00pm on the last business day of each calendar month.
On 31 August 2021 the applicant’s solicitors advised the respondent that D Company had been acquired by F Valuers.
On 10 September 2021 a joint letter of instruction was sent to F Valuers requesting a valuation of the Suburb B properties. That letter included the P Pty Ltd Report dated 21 September 2020.
On 12 October 2021 the parties engaged in a financial conciliation conference.
On 7 September 2021, P Pty Ltd updated their opinion as to the cost of rectification for 2 and 3 E Street of the Suburb B properties.
On 1 December 2021 the Court noted that the applicant may potentially seek to affect the interest of a third party of a property of which the respondent was a 50 per cent owner with her ex-husband, that the respondent is at law a 50 per cent owner and her ex-husband is the other 50 per cent owner and that the applicant will need to serve a copy of his Initiating Application on that third party to provide the third party with procedural and substantive fairness.
At a call over before the Alstergren CJ on 28 January 2022, orders were made as to the matter being listed for final hearing in the National Rolling List commencing on 23 March 2022, transferring the proceedings from the Federal Circuit and Family Court of Australia Division 2 to the Federal Circuit and Family Court of Australia Division 1, and making specific trial directions including the parties filing a single consolidated affidavit with reliance on earlier affidavits not being permitted.
DOCUMENTS RELIED UPON AND POSITION OF EACH PARTY
The applicant read and relied upon the following documents:
·Amended Initiating Application ,filed on 22 March 2022;
·Financial Statement, filed on 22 March 2022;
·Affidavit of the applicant, filed on 9 March 2022;
·Affidavit in reply of the applicant filed, on 22 March 2022; and
·Case Outline, filed on 22 March 2022 and marked as Exhibit “1”.
The respondent read and relied upon the following documents
·Amended Response to an Initiating Application, filed on 16 March 2022;
·Financial Statement, filed on 22 March 2022;
·Affidavit of Mr Q, filed on 16 March 2022;
·Affidavit of the respondent, filed on 18 March 2022; and
·Case Outline, filed 22 March 2022 and marked Exhibit 2.
·Minute of Final Orders sought, emailed to my chambers on 21 March 2022.
Objections were taken to the parts of the affidavits and determined at the commencement of the hearing. These reasons for judgment assume familiarity with the ex tempore judgment delivered on the first day of trial, being Potter & Lloyd [2022] FedCFamC1F 214, which, on the respondent’s objection, struck out further valuations unilaterally obtained by the applicant of the Suburb B properties served on the day prior to the trial.
The expert evidence
The expert evidence formed part of the exhibits to the affidavit of the respondent’s trial affidavit, being:
·F Valuers Valuation report for L Street, Suburb M dated 27 September 2021, including a retrospective valuation as at 1 January 2008 (“the Suburb M Street valuation”)
·F Valuers Valuation report for 1 E Street, Suburb B dated 28 September 2021 (“the 1 E Street valuation”)
·F Valuers Valuation report for 2 E Street, Suburb B dated 28 September 2021 (“the 2 E Street valuation”)
·F Valuers Valuation report for 3 E Street, Suburb B dated 28 September 2021 (“the 3 E Street valuation”)
·O Engineers Building report as to the Suburb B properties dated 22 November 2019 (“the O Engineers report”)
·P Pty Ltd Report as to likely costs of rectifications to each of the real properties dated 21 September 2020 (“the P Pty Ltd report”)
THE LAW
In determining claims for alteration of de facto property interests, I am required to:
(a)Make findings as to the identity and value of the property (including superannuation interests), liabilities, and financial resources of the parties, or either of them, at the time of the final hearing, and determine the legal and equitable interests of the parties in such property;
(b)Consider, identify and assess the contributions by the parties to the acquisition, conservation and/or improvement of their property, including financial and non-financial contributions and any contributions to the welfare of the family before, during and after the relationship came to an end; and
(c)After consideration of altering the interests in the property pool on the basis of contributions, to consider whether there should be any further adjustment to either of the parties on account of the matters set out in s 90SM(4)(d)-(g) of the Act, including any relevant considerations under s 90SF(3);
(d)Ensure that any order made is just and equitable.
The balance sheet – conclusions identifying the property of the parties
By the time of the conclusion of the submissions the joint balance sheet was agreed except as to the following items that were not agreed appearing in bold as determined by me in the following table.
Ownership Description Applicant's Value Respondent's Value Determination Value ($) ASSETS 1 Wife L Street, Suburb M Property 402,500 0 Determined 402,500 2 Joint 1 E Street Suburb B 525,000 400,000 Agreed 400,000 3 Joint 2 E Street Suburb B 500,000 350,000 Agreed 350,000 4 Joint 3 E Street Suburb B 465,000 325,000 Agreed 325,000 5 Wife Motor Vehicle 2 10,000 10,000 Agreed 10,000 6 Wife Motor Vehicle 1 25,000 25,000 Agreed 25,000 7 Wife Unrestored motor vehicles 30,000 30,000 Agreed 30,000 8 Husband Motor Vehicle 3 30,000 30,000 Agreed 30,000 9 Wife Motor Vehicle 4 4,000 0 Determined 1,500 10 Husband Recreational Vehicle 1 500 500 Agreed to remove 0 11 Wife Cash at bank NK 1,000 Agreed 1,000 12 Husband Cash at Bank 0 1,000 Determined 0 13 Wife Motor Vehicle 5 NK 0 Determined 0 14 Husband Motor Vehicle 6 0 0 Determined 0 Total 1,992,000 1,172,500 1,575,000 Ownership Description Applicant's Value Respondent's Value Determination Value ($) ADDBACKS 15 Wife Nett rents received by wife post separation 135,000 0 Determined 0 16 Husband Superannuation add-back 20,000 20,000 Agreed 20,000 Total 155,000 20,000 20,000 Ownership Description Respondent's Value Determination Value ($) LIABILITIES 17 Wife Home mortgage - R Bank debt over Suburb M Property NK 118,000 Determined 300,000 18 Joint H Bank Mortgage secured on 1 E Street (#1) 65,289 65,289 Agreed 65,289 19 Joint H Bank Mortgage secured on 1 E Street (#2) 309,811 309,811 Agreed 309,811 20 Joint H Bank Mortgage secured on 2 E Street 253,252 253,252 Agreed 253,252 21 Joint ANZ Mortgage secured on 2 E Street 52,717 52,717 Agreed 52,717 22 Joint ANZ Mortgage secured on 3 E Street 231,258 231,258 Agreed 231,258 23 Wife Costs of rectification of defects - Suburb M Property - 607,500 Determined 0 24 Joint Costs of rectifications of defects – 3 E Street - 148,500 Determined 0 25 Joint Costs of rectifications of defects – 2 E Street - 147,500 Determined 0 26 Husband S Finance Card 6,000 0 Agreed to exclude 0 27 Husband T Finance credit card 6,000 0 Agreed to exclude 0 28 Joint Unpaid rates on Suburb B properties 20,000 28,282 Agreed 28,282 29 Joint Body corporate arrears on Suburb B properties 28,000 25,928 Agreed 30,000 30 Husband U Finance 28,000 28,000 Agreed 28,000 31 Husband Unpaid legal fees 77,182 NK Agreed to exclude 0 32 Husband Person loan from Ms V 60,000 NK Determined 0 33 Wife Loan from Mr Q for renovations 60,000 60,000 Agreed 60,000 34 Wife Loan from Mr Q - 20,000 Determined 20,000 35 Wife Capital Gains Tax (“CGT”) Liabilities 38,595 Agreed to exclude 0 Total 1,197,509 2,134,632 1,378,609 SUPERANNUATION Member Name of Fund Applicant's Value Respondent's Value Determination Value 35 Wife Super Fund 1 145,000 145,000 Agreed 145,000 36 Husband Super Fund 2 (including $10,000 draw down in 20-21) 20,000 20,000 Determined 10,000 37 Husband Super Fund 3 (including $10,000 draw down in 20-21) 45,000 45,000 Determined 35,000 Total 224,933 210,000 190,000 Total assets, add backs and superannuation $1,785,000
Total Liabilities $1,378,609
Net property available for adjustment $406,391
Item 1 – Respondent’s interest in the Suburb M property
The respondent’s affidavit evidence records that she is the joint owner of the Suburb M property at law with her prior husband, Mr W. The respondent and Mr W were divorced in 2008. The respondent gave evidence that they have not engaged in a “family law financial separation”. The respondent’s evidence is that she has not communicated with Mr W subsequent to the making of four sets of family violence orders restricting the conduct of Mr W, the most recent being made in September 2008.
The parties agreed that the current value of the property is $805,000 and the respondent’s one half interest at law is valued at $402,500.
The respondent contended that her interest in this property ought to be “notionally excluded from the pool of property available for adjustment.” In support of that exercise of discretion the respondent contended that:
(a)During the relationship, the applicant said to her that he would never seek monies from her arising from her interest in the Suburb M property. She identified paragraph 131 of her affidavit that recorded:
I always made it clear that my interest in the house would always be solely mine that would become my children’s inheritance. [The applicant] acknowledged this event during the time we were separated.
The respondent was not challenged on this evidence by the applicant during the course of her cross-examination.
(b)On 1 December 2021 the following notation was made by Judge Murdoch which supported her contention:
C.The [applicant] potentially seeks to effect the interests of a third party to a property of which the [respondent] at law is a 50 percent owner and her ex-husband is the other 50 percent owner.
D.The [applicant] will need to serve a copy of his Initiating Application upon that third party to provide that third party with procedural and substantive fairness.
It was not the subject of contest that the property identified in the notations was the Suburb M property. The applicant did not serve a copy of his Initiating Application or Amended Initiating Application on Mr W.
(c)On 28 January 2022 Chief Judge Alstergren listed the matter for final hearing in the National Rolling List commencing on 23 March 2022. A further order was made supported her contention:
5. No later than 21 days prior to the trial date, the applicant file and serve:
a.any Amended Initiating Application setting out with particularity and precision final orders sought.
As recorded earlier in these reasons the Amended Initiating Application of the Applicant filed 22 March 2022 did not seek any order adjusting in favour of the applicant any part of the respondent’s legal interest in the Suburb M property.
(d)In submissions, the respondent contended that the property is her “children’s home”, and that the applicant wants to “steal [her] children’s inheritance” which she perceived as “morally unfair”, labelling the respondent a “male gold digger”.
It was the applicant’s position that the orders made on 28 January 2022 did not provide for the respondent’s interest in the Suburb M property to be removed or quarantined from the pool of property for the purposes of the s 90SM determination. He submitted that the fact that it was valued by the single expert as part of the property of the parties was indicative of an appropriate exercise of a s 90SM discretion to include the respondent’s interest in that property in the pool for adjustment.
The applicant submitted an unfairness to him by way of the respondent’s contention. At paragraph 54 of his affidavit he said:
45.I say that to not include the [Suburb M] home in the property pool, then claim the [R Bank] loan against which was used essentially to carry out renovations to the [Suburb M] home, then to seek [the respondent’s] reduction on the basis of the [O Engineers] report because the work was not yet completed or was what she asked for but retrospectively she was not happy with the quality, is double-dipping.
The Court is obliged to make findings as to the property of the parties, or either of them, as at the date of the hearing (see Warne & Warne (1982) FLC 91-247).
The High Court in Norbis v Norbis (1986) 161 CLR 513 confirmed that contributions can be assessed by way of a global approach or an asset by asset approach, or by way of a combination of both. Both parties urged the assessment of contributions to be undertaken by way of a global approach.
It was part of each party’s case that the applicant undertook extensive renovation works by his own physical efforts and labour for a number of years altering the Suburb M property as recorded later in these reasons. The respondent said she paid for some of the materials used by the applicant in the renovations. Funds advanced by the respondent’s father met some renovation costs.
It is the respondent’s case that the renovations had a negative or adverse impact on the value of the property. The impact of those works is a different issue from whether it would be appropriate in the exercise of discretion to notionally exclude the Suburb M property from the pool of property considered for adjustment.
The evidence is uncontroversial that the parties maintained very separate financial identities until 2015, and thereafter the applicant deposited his income into the respondent’s bank account. The mortgage instalments and outgoings in respect of the Suburb M property were paid from the respondent’s bank account for each of the discrete periods from 2008 until 2015 and after 2015 until separation.
In the circumstances I find that it would be artificial to exclude this item of property from the pool identified for adjustment between the parties having regard to the length of their relationship and the myriad of contributions made of a financial and non-financial nature directly and indirectly during that period of cohabitation, including as to the Suburb M property. The item will be included at the agreed value.
The introduction by the respondent of her interest in the Suburb M property to the pool available for adjustment and the use made of that contribution will be the subject of consideration in assessing contributions.
Items 2, 3 and 4 – The Suburb B properties
The respondent contended a finding as to the value of the properties as opined by the single expert F Valuers in the reports dated 28 September 2021. For the purposes of each of the three opinions, the parties provided to F Valuers in compliance with the orders and directions as identified earlier in these reasons the O Engineers report as to defects and the P Pty Ltd report as to the costs of rectifications
The applicant in his affidavit filed on 9 March 2022 exhibited three curb side “market assessments” conducted by CC Real Estate, dated 14 February 2022 for each of the Suburb B properties. He contended that the properties are valued at the current time at a sum greater than that opined by the F Valuers in each its September 2021 reports. I attach no weight to the curb side market appraisals. They do not comply with the provisions of r 7.08 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”). No application was made by the applicant to rely on them pursuant to r 7.10. They are hearsay documents. On their face they do not meet the requirements of s 79 of the Evidence Act 1995 (Cth).
The applicant by way of exhibits to his affidavit in reply served on the day prior to the commencement of the trial sought to rely upon further opinions he unilaterally obtained from F Valuers as to the value of each of the Suburb B properties. The relevant paragraphs and exhibits to the applicant’s affidavit filed 23 March 2022 were struck out as recorded earlier in these reasons.
During submissions the applicant accepted the values ascribed to each of the Suburb B properties as contended by the respondent. They will be included at those agreed values.
Item 9 – Motor Vehicle 4
This vehicle was not identified in the respondent’s Financial Statement. She conceded that she is the current registered owner of the vehicle. The respondent said in cross-examination that she had owned the vehicle for 15 years, it was deteriorating and frequently breaking down, “costing [her] money.” She said it had been gifted to her son and his girlfriend and that they had undertaken extensive repairs to it at their expense. The respondent did not explain the absence of this evidence from her affidavit. In the circumstances, I do not accept that she is no longer the legal owner of the vehicle or that it has been gifted. In submissions she conceded that the vehicle was valued between one and two thousand dollars. I will determine the value of the vehicle at the midpoint of that range, being $1,500.
Item 7 – Recreational Vehicle 1
The parties agreed that this had been disposed of by the respondent post separation to a broker and she had received $500 for its sale. They agreed during the course of submissions to remove the item from the balance sheet and for the $500 retained by the respondent to be taken into account. The item will be removed.
Item 11 – Respondent’s cash at bank
The respondent did not record any cash at bank in her financial statement. The respondent’s trial affidavit recorded cash at bank of $1000. It was agreed that she had disclosed to the applicant in the shadow of the hearing current cash at bank $1000. The item will be included at that amount.
Item 12 – Applicant’s cash at bank
The respondent recorded that she was currently unaware of the applicant’s cash at bank. She simply contended it was $1000. The applicant’s financial statement recorded he had no cash at bank. This issue is not the subject of cross-examination. The respondent’s contention was absent evidentiary foundation. It will be excluded.
Item 13 – Motor Vehicle 5
The respondent’s father gave unchallenged evidence as to this item. In his affidavit he said:
9.…the respondent was able to travel to [Y Town] where I was able to provide her with $20,000 cash to purchase a car as her [Motor Vehicle 4] was 15 years old, deteriorating and constantly breaking down.
10.The cash given for the car was NOT a loan and the car purchased is my car, for [the respondent] to use, until her financial situation improves.
11.The car is registered in [the respondent’s] name as it is illegal to register it in my name as I don’t reside in Qld.
The respondent’s father’s evidence is that he makes the vehicle available to his daughter by way of loan. In submissions the applicant conceded that, notwithstanding that the vehicle is registered the respondent’s name, she holds it for her father. The item will be excluded.
Item 14 – Motor Vehicle 6
The parties agreed that the vehicle had been disposed of and ought not to be an item in the balance sheet. It will be excluded.
Item 15 – Net rents received by respondent post separation
It is not controversial that the respondent has received the benefit from all rents from the Suburb B properties from the date of separation.
On 3 August 2021 Judge Jarret ordered that:
3.Within fourteen (14) days of the date of these orders, the respondent must provide the applicant solicitors a written accounting for the rental received and expenses incurred for [1, 2 and 3 E Street, Suburb B].
4.The respondent continue to provide the applicant solicitors with up-to-date written account as described in Order 3 above once every month an no later than 4.00pm on the last business day of each calendar month.
The applicant contends that the respondent produced only two of the relevant bank statements recording the receipt of rental funds. He submitted that his unchallenged evidence was that he requested disclosure of the leases for the three Properties and the respondent had failed to disclose them.
The applicant gave evidence by way of affidavit not challenged by the respondent that from the date of separation until 1 April 2019 (that is for a period of about nine months), he had observed from the respondent’s bank statements that she was receiving rent for 1 E Street at $370 per week, 2 E Street at $480 per week and 3 E Street at $490 per week, totalling $1,240 per week.
His affidavit recorded the following schedule:
50.The difference between the rents received by her and the mortgage rates paid by her are:
Rents received $246,760 Less mortgage payments made $108,231 Subtotal $138,529 Less rates paid $3,000 Subtotal $135,529 Less body corporate fees paid Nil Balance retained by Ms Lloyd $135,529
In the course of submissions he confirmed that the table in his affidavit was constructed in the following manner:
46.Working on the rents that [the respondent] was receiving in early 2019 without factoring in any increase in rental since then….I calculate the rent for the 3 properties from the date of separation until the date of the trial being in the order of $246,760.
(As it was recorded)
His evidence was that he had reviewed the respondent’s bank statements and totalled the payments made to H Bank and ANZ Bank in respect of the mortgages held over the properties, being $108,231. He said that he confirmed with City Z Council that the respondent had paid the rates on the Suburb B properties until April 2019 but that the rates are currently in arrears. He gave evidence, conceded by the respondent at trial, that the body corporate had commenced proceedings against the parties seeking recovery of outstanding strata fees and levies due on the Suburb B properties.
The respondent submitted that the F Valuers reports recorded the very poor condition of the Suburb B properties and that this in turn reflected the low rents received from the properties.
The respondent submitted that it was not appropriate to notionally add-back any of the income she had received from the Suburb B properties post separation. It was her case she had been left with the sole responsibility of “maintaining payment of all expenses and loans” in respect of the Suburb B properties while “working full time and being the sole carer for X”. The respondent gave evidence in her affidavit providing 115 items of disclosure by way of her solicitors from September 2018 to March 2019. She gave evidence as to solicitors she had retained in late 2018 and early 2019 corresponding with the applicant’s solicitors requesting that the applicant contribute to the liabilities in respect of the Suburb B properties. The applicant’s solicitors responded on 22 February 2019 advising that the applicant could “not financially afford to assist contributing to the properties or to X”. This evidence supported, at that time, a shortfall between rents and mortgage instalments, rates and other outgoings in respect of the Suburb B properties. The respondent gave evidence as to that shortfall being met from borrowings obtained from her father after April 2019. Her father’s unchallenged affidavit further supported this evidence.
The parties were in conflict, at least during 2019 calendar year, as to whether the Suburb B properties at that time were producing a surplus or a deficit on a periodic basis. The absence of cross-examination of the respondent and of her father on this subject matter as to the 2019 year supports the latter contention. The disclosure provided by the respondent in 2018 and 2019 on this subject matter was not explored during the course of the hearing. I find on the evidence available that it was more likely than not that in 2019 the properties were producing a net outflow or deficit.
The respondent in her affidavit put the applicant’s table into issue. She submitted that she had provided an account of the rental income received and the application of those funds in her affidavit.
The respondent gave evidence by way of a table in her affidavit:
Rent received $167,570 Mortgage Repayments $113,565.55 Unit Expenses $20,092.20 Balance spent on items in the Post Contributions by the Respondent Tables commencing paragraph 158 for the [Suburb M] property, [X] and [unrestored motor vehicles] $33,912.25
(As it was recorded)
During cross-examination the respondent conceded that none of the properties are the subject of written leases or tenancy agreements, and that all rents are paid in cash. No documentary or corroborative evidence was proffered to support her table.
The respondent’s table suggests that overall for the period after separation up until the date of the hearing there was a surplus of rent received over outgoings in respect of the Suburb B properties, notwithstanding there was a deficit in or about the 2019 period. She contended that any such surplus was applied to meet the mortgage instalments in respect of the Suburb M property and to meet X’s periodic support.
Neither party materially cross-examined the other as to the integrity of their respective tables.
The Financial Statement of the respondent records current rental income for the properties of $1,080 per week and mortgage repayments to ANZ and H Bank in the sum of $1,114, being a shortfall of $34 per week. The rates and strata levies in respect of the Suburb B properties are currently accumulating arrears.
The Full Court in Chorn & Hopkins (2004) FLC 93-204 confirmed that “the concept of adding monies reasonably disposed of back into the pool ought to be the exception rather than the rule”. A party is entitled to reasonably conduct their affairs post separation in a manner that is consistent with properly getting on with their lives (see Gollings & Scott (2007) 37 Fam LR 428).
The applicant bears the onus of proof to establish a credible evidentiary foundation to enable findings to be safely made as to the quantification or value of his contended add back. The income value he records in his table is an estimate grounded from rental values prior to 1 April 2019. During exchanges at trial on the topic he said “it is my assumption that [the respondent’s] rent monies substantially exceed [her] expenses”, because he “simply [does] not know how [the respondent] financially survives”. He did not cross-examine the respondent on the values recorded in his table, or on the values recorded in her table, especially as to his value ascribed to rent received for the period from separation to 1 April 2019, or for the three year period from 1 April 2019 to the date of the trial.
That said, there is substance to the applicant’s complaint as to the respondent’s disclosures failures on this topic. The obligations of disclosure codified in the Rules are absolute. A party has a continuing obligation throughout the course of the litigation to make a full and frank disclosure of their financial position. The respondent did not comply with the order made on 3 August 2021 as recorded in these reasons, made some six months prior to the trial event. The asserted disclosure by way of her trial affidavit did not occur in a timely way. She had the capacity to be less opaque and provide a more timely and fulsome account of the particular rents and costs of each unit for each year since separation.
In Weir & Weir (1993) FLC92-338 (“Weir”) the Court stated at 79,593 that:
It seems to us that once it has been established that there has been a deliberate non-disclosure, which follows from his Honour’s findings in this case, then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature.
Whilst this general statement is often quoted, it is important to engage in the particular facts of the non-disclosure and the inferences that should be drawn from them. There are those cases where a finding of non-disclosure is no more than one which complicates the fact finding process (see Franklin & Ennis [2019] FamCAFC 91 at [9]). There are other cases where the nature and extent of the non-disclosure make the approach described in Weir thoroughly permissible.
The applicant has sought to obtain a comprehensive understanding as to the respondent’s use and application of rental funds she has received from jointly held properties post separation and of documents verifying those matters. An unfairness and prejudice to the applicant is generated by the respondent’s failure and neglect on this topic.
An analysis of the Full Court’s judgment of Bevan & Bevan (2013) FLC 93-545 promotes that it may be no longer appropriate to notionally add back property that no longer exists at the time of hearing. It is important to closely examine the evidence to establish whether doing so is necessary to achieve justice and equity between the parties.
The evidence on a whole on this topic is less than satisfactory. It appears to direct a finding as to the expenses incurred from the Suburb B properties being in excess of rental income received during the 2019 year and as to a surplus being produced from 2020 into 2022. In the circumstances it is unsafe to guess as to the quantum of the benefits retained by the respondent from the rents and hence inappropriate to notionally add back the value asserted by the applicant to the pool for adjustment. On her own evidence, overall, the respondent has retained the benefit of $33,912.25 from the Suburb B unit rents post separation. It was not the applicant’s case that the benefits received from the Suburb B properties remain as undisclosed assets or funds held by the respondent at the time of the trial. The item does not exist in a vacuum. As recorded later in these reasons, the quantum of child support paid by the applicant to the respondent over the three years since separation was in the range of $27 per week. The retention of the funds in the quantum conceded by the respondent and the use of those funds to meet the periodic costs of maintaining X and meeting the Suburb M mortgage payments resonates with a reasonable course in the post separation financial circumstances of each of the parties in getting on with their lives. I will take this item in account in the adjustment to the contribution findings.
Item 17 – R Bank loan secured over Suburb M property
The evidence of the respondent is that as between she and her former husband, she is solely responsible for the R Bank debt secured upon the Suburb M property. This evidence was not challenged by the applicant. It was agreed between the parties that the total value of that mortgage is currently $300,000. In the circumstances of the respondent’s interests in the Suburb M property being included as an asset in the pool of property available for adjustment between the parties, the value of her responsibility in respect of the mortgage ought also to be included.
Item 23 – Costs of rectification of defects to the Suburb M property
This value is the opinion contained in the P Pty Ltd report, being $607,500 to remedy the defects to the Suburb M property.
F Valuers opined that the Suburb M property is currently valued “as is” at $805,000. The F Valuers report records a partial refurbishment of the property. The expert identified the property’s interior and its exterior improvements to both be in poor condition. These observations were supported by photographs forming part of the report.
F Valuers took into account the O Engineers report, observing and recording the “extensive defects throughout the property which include and are no limited to, water egress/damage, faulty wiring, waterproofing issues, wood rot and termite damage.” The valuer recorded that “all issues are not compliant with building codes and standards and council approvals.” The valuer took into account the P Pty Ltd report recording a cost of $607,500 to remedy the defects.
The F Valuers report further recorded that:
…given the extent of the damage to the property and the cost to rectify, it is our opinion that the costs outweigh the overall value of the dwelling. On this basis we believe the highest and best use is we value the property at land value with the additional improvement of the pool shell and noted a cost of demolition of the existing property. We have therefore apportioned no value to the existing structure.
In circumstances where the impact of defects and the value of the rectification works as opined in the P Pty Ltd report to the Suburb M property have been taken into account by F Valuers in opining a value to that property “as is”. To include the rectification costs as a liability would be a “double count”. The item will be excluded.
Items 24 and 25 – Costs of rectification of defects to 2 and 3 E Street
F Valuers as the single property valuation expert opined as to the value of each of the properties 2 and 3 of the Suburb B properties “as is” at $350,00 and $325,000 respectively. The F Valuers reports identified the improvements and interior of both properties being in “poor condition”, and the supporting photos show water damage to the properties. For the purposes of the opinion as to the value of the subjects, F Valuers took into account both the O Engineers report and the P Pty Ltd report.
In circumstances where the impact of defects and the value of the rectification works as opined in the P Pty Ltd report to properties 2 and 3 have been taken into account by F Valuers in opining a value to these properties “as is”, it is unjust and inequitable to “double count” the rectification costs as a liability. These item will be excluded.
Items 26 and 27 – Credit card debts
The value of these liabilities were included in the applicant’s Financial Statement. The respondent did not put into issue the value of the current credit card debts. There was no evidence as to when the liabilities were incurred, or as to what was purchased or payments made that comprised the sum of each liability. During the course of submissions the applicant conceded that they ought to be removed from the balance sheet. The items will be removed. He requested that the liabilities be taken into account in consideration of the adjustment to the contributions findings.
Item 28 – Body corporate arrears on the Suburb B property
During the course of submissions both parties agreed that the current statement of claim issues by the body corporate is seeking to recover $30,000 from the parties.
Item 31 – Applicant’s unpaid legal fees
The applicant conceded during the course of submissions that in circumstances where his paid legal fees had not been included as an add back as the property of the parties it was not appropriate to include his unpaid legal fees as a liability to be adjusted as part of the s 90SM exercise. The item will be excluded. He submitted that the liability ought to be taken into account as part of the adjustment to the contribution findings.
Item 32 – Personal loan from Ms V
The applicant’s financial statement recorded that these funds had been received from Ms V and applied to meet his legal fees. There was no evidence from the applicant or from the lender as to the fact or terms of the contended loan. In circumstances where his paid legal fees are not included as an add back against him in the balance sheet he agreed that it is inequitable to include this loan liability. The item will be excluded.
Item 33 – Respondent’s personal loan from Mr Q
The respondent’s father gave evidence as to the provision by way of loan of $60,000 (made up in two tranches of $20,000 in April/May 2018 and $40,000 in December 2018) being applied towards renovations to the Suburb M property. The respondent’s father was not required for cross-examination. The applicant, notwithstanding the contents of his affidavit, conceded the fact of these loans and that they were repayable by the respondent to her father. The item will be included in circumstances where the Suburb M property is included in the property pool for adjustment.
Item 34 – Further personal loan from the respondent’s father
The respondent’s father gave evidence in his affidavit as to advancing a further sum of $20,000 by way of loan after June 2018 being applied by the respondent to meet the general cost of living expenses to pay the mortgage expenses and other outgoings in respect of the three Suburb B properties. The respondent gave similar evidence in her affidavit. The evidence of the respondent’s father and the respondent was not challenged in cross-examination. I find that the additional loan is payable and ought to be included in the balance sheet. It has been applied to maintain the property of the parties and to assist in the periodic support of X in circumstances where child support paid by the applicant post separation has been in the range of $27 per week and is currently $21 per week.
Item 36 and 37 – Applicant’s superannuation interests
The respondent contended that she had not received any disclosure as to the applicant’s superannuation entitlements since 2018. The contentions of the respondent as to the value of his entitlements in her affidavit arose from what she said was disclosed at a conciliation conference on 12 October 2021. She had not sought to issue a Form 6 Superannuation Information document to the trustees of either the applicant’s funds. The respondent conceded there was no evidence to support her contention that the applicant had a greater superannuation interest than he had recorded in his financial statement being $45,000 in Super Fund 3 and $20,000 in Super Fund 2.
During the course submissions the applicant said that he had recently disclosed a “screen shot” as to the value of each superannuation entitlement at the sums asserted by him in items 36 and 37. There was no evidence of this in his case, and no cross-examination of the applicant on this subject matter. It became evident during the course of the submissions that the values that the applicant had recorded of his superannuation by way of his Financial Statement included for each interest, $10,000 which was already withdrawn. In circumstances where an add back of the applicant’s superannuation withdrawn since separation is included at item 16 of the balance sheet, I will adopt the value of each of the applicant’s superannuation interests, as recorded in this Financial Statement, less the $10,000 withdrawn from each member entitlement.
Is it just and equitable to adjust property?
In Stanford & Stanford (2012) 247 CLR 108 the High Court observed that it is necessary for me to be satisfied that justice and equity will be achieved as part of the adjustment process pursuant to s 90SM of the Act. The requirements identified in the High Court are readily satisfied in this matter having regard to:
(a)The long period of the relationship of the parties and the myriad of contributions made over that period; and
(b)The parties’ relationship having broken down and them now living apart;
(c)The concession of each party as to property being adjusted to one another, by way of the transfer of the applicants interests in the Suburb B properties to the respondent and the transfer to the applicant of the four unregistered motor vehicles in the respondent’s possession; and
(d)Title to property needing to be changed or adjusted when consideration is given to the contribution and other factors identified below.
Neither party made submissions as to how to deal with their respective superannuation interests as part of the property adjustment process pursuant to s 90SM of the Act. The net value of the pool of property is modest, as are the parties’ superannuation interests. Neither party sought a superannuation splitting order. Each party contended a finding as to contribution based against a single pool of superannuation and non-superannuation property. The value of each superannuation entitlement has significantly increased since the commencement of the de facto relationship. In the circumstances, I will include the superannuation interests of the parties in a single pool of property.
Contributions
The applicant contended that at the commencement of cohabitation he had superannuation interests with Super Fund 2 and Super Fund 3 valued at about $10,000 and had some furniture. In his affidavit he said he had statements “evidencing [his] superannuation”. The respondent contends that the applicant entered into the relationship with a suitcase, a bed and $30,000 in credit card debt. There was no cross-examination of the applicant putting his evidence into issue. The respondent did not put the matters contained in her affidavit to the applicant. No documents were tendered supporting either party’s assertion. In the circumstances I find the direct initial financial contributions of the applicant were by way of his combined superannuation entitlements valued at about $10,000 and furniture.
The respondent contended she had superannuation interests valued at $20,000 as at cohabitation. The applicant disputed the respondent’s alleged value of her superannuation at the commencement of the parties’ cohabitation, saying that it was valued at $10,000. Again, there was no cross-examination of the respondent as to this matter, nor did either party tender documents supporting their assertion. In the circumstances I find that the respondent contributed superannuation to the value of $20,000.
F Valuers as the single real property valuation expert opined a retrospective value of the Suburb M property as at 1 January 2008 at $775,000. The respondent exhibited to her affidavit a statement from R Bank recording the mortgage debit value at 1 January 2008 of $241,117. It was the respondent’s evidence, absent challenge, that as between she and her ex-husband Mr W she was solely responsible for this mortgage balance. I find that the equity contributed by the respondent by way of her half interest in the Suburb M property as at 1 January 2008 was half of $775,000, being $387,500, less $241,117, hence $146,383.
The respondent further contended at the commencement of cohabitation she also contributed Motor Vehicle 4, a fully furnished Suburb M house and two motor vehicles including Motor Vehicle 1. There was no cross-examination of the respondent as to the value of these other direct financial contributions at the commencement of cohabitation. There was no documents to support her assertions, although they were not challenged by the applicant. In the circumstances I find that the respondent made the direct financial contributions at that time as she contends.
I find the respondent’s direct initial financial contributions at the commencement of cohabitation were substantially superior to those of the applicant. The contributions attract significant weight in circumstances when regard is had to the use of that direct initial financial contribution (see Pierce & Pierce (1999) FLC 92-844). The equity contributed by the respondent in the Suburb M property occupied by the parties throughout the period of cohabitation seeded the funds enabling the acquisition of the three Suburb B properties. I find that the parties would not have been able to acquire the Suburb B properties without the benefit of this direct initial financial contribution of the respondent.
The applicant contends that he worked full time at various electrical enterprises from late 2007 except for a period of two months on two occasions when he renovated properties 2 and 3 E Street at Suburb B.
The respondent says that the applicant was “in and out of employment” throughout the relationship and was “unemployed from early December 2017 until May 2018”. She records at paragraph 150 of her affidavit:
150.During this time, it was agreed that he would perform works on my house up until the end of January 2018 as we didn’t have the money to sustain [Mr Potter] being unemployed and continue paying the 4 property mortgages of approximately. $1.2 million dollars.
The respondent was not cross-examined on this evidence. I find the evidence to be more likely accurate than not.
It was uncontroversial by the end of the trial that the parties agreed that they maintained separate financial identities until 2015. The applicant initially paid to the respondent $200 per week board to cover his rent, food and utilities. This was increased to $230 per week in 2012. He agreed that he did not contribute directly to any other household expenses, including any loan repayments, rates, utilities or maintenance costs from 2008 until 2015.
The applicant did not give any evidence as to his annual income during any of the years of co-habitation. This disclosure failure restricts the weight to be attached to any contended direct financial contributions made by way of income by the applicant. The applicant does not give evidence to the application of the balance of his income over and above the value of the board he paid for the period from cohabitation from 2008 until 2015. The respondent makes complaint as to the applicant purchasing new vehicles for his use and undertaking extensive gambling during this period. The contended gambling was not the subject of cross-examination or quantified during the course of the hearing.
The respondent was in employment throughout the period of the relationship. The applicant gives evidence as to the respondent working at AA University from 2012 earning about $65,000 per annum, and I so find.
It was uncontroversial that from 2008 until 2015 the respondent alone paid the Suburb M mortgage, rates and all other household expenses, including food, utilities and maintenance costs. The payment by the applicant of his income into the respondents bank account from 2015 provided an indirect source of contributed funds for the respondent to pay the Suburb M mortgage, rates and other household expenses, including food, utilities and maintenance costs until separation.
The respondent’s case is that the parties “had no financial intermingling for the first eight years” I accept this evidence and so find. It is uncontroversial that at or about the time of the acquisition of the Suburb B properties the parties commenced to merge their financial identities. From that time the applicant’s wage was transferred into the respondent’s bank account. His payments of his income into the respondent’s account continued until separation. Subsequent to 2015 when his income was placed in the respondent’s account he made indirect contribution to those expenses.
I find the direct financial contributions of the respondent by way of her income from 2008 until 2015 was substantially superior to that of the applicant. This direct financial contribution attracts additional weight in favour of the respondent.
The applicant in 2012 purchased Recreational Vehicle 1 for $19,500 by way of a $23,000 personal loan. The evidence absent controversy was that it had not been used since late 2013. In 2015 on the parties merging their finances recorded later in these reasons the respondent paid out the balance of the loan of $6,000 by withdrawing on her Suburb M mortgage with R Bank. The recreational vehicle was sold by the respondent in July 2021 for $500.
The applicant in paragraph 65 of his affidavit gave evidence as to his physical efforts and labours by way of renovation works that he undertook on the Suburb M property commencing on 3 April 2011 and continuing until 10 May 2018, being a period of seven years. The parties resided in the Suburb M property throughout this period. The list of works are extensive and include a demolition and rebuild of the kitchen, installation of new roofing and fencing, complete renovations to two bathrooms, and significant restorations to the external façade of the property including the garden.
The applicant in his affidavit gives evidence as to work being done at the Suburb M property by other people including the respondent’s son Mr J, a plumber, a renderer and others. The respondent in cross-examination conceded that some works had been done by others.
The respondent in her affidavit and by way of cross-examination did not put into issue the particulars of the substantial and significant works to the works undertaken by the applicant to the Suburb M property.
The respondent contends that the work undertaken by the applicant at Suburb M were “illegal, dangerous and potentially life threatening.” During litigation the applicant contended his renovation work had increased the value of the Suburb M property. The respondent’s case was that it had substantially devalued the property.
The respondent’s contention that the applicant occasioned extensive damage to the Suburb M property and that works undertaken by the applicant were defective was confirmed in the expert O Engineers opinion that recorded:
The work viewed and defects noted, show a lack professional trade-like workmanship and are not up to the standards required by the Queensland Building and Construction Commission. There are also areas that are of structural concern as they are not compliant with council regulations and areas where there are no certifications for electricals, plumbing, waterproofing, glazing etc.
…It is our professional opinion that the work undertaken is below the acceptable standards required especially for this quality of home.
P Pty Ltd recorded in their updated report dated 7 September 2021 that the cost of rectification of the works undertaken at the Suburb M property and to ensure building certification and adherence with relevant building codes was $607,500.
The submission of the respondent is that the work undertaken by the applicant on the Suburb M property “severely devalued my home”. The respondent constructed her submission as to the impact of the works undertaken by the applicant to the Suburb M property as a negative contribution. I do not accept this is an appropriate categorisation of the impact of the works undertaken by the applicant to the Suburb M property. The Full Court in Kowaliw & Kowaliw (1981) FLC 91-092 (“Kowaliw”) per Baker J at 76,644 said that losses occasioned by conduct “where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets….. which has reduced or minimised their value” can be relevant in making a finding that the waste of property ought not be shared between the parties. In my view this is the principle through which the respondent’s complaint as to the adverse impact of the works undertaken by the applicant on the Suburb M property ought to be considered and assessed.
In the circumstances of this case and for the reasons that follow, it is unnecessary to make findings as to whether particular works at the Suburb M property were undertaken by the applicant or by others. In any event the evidence of the parties would not permit a safe finding to be made on that subject matter.
It was uncontroversial that the respondent paid for materials and on occasions paid other contractors. Additionally, $60,000 was advanced by the applicant’s father to meet the costs of some of the renovations.
It was the applicant’s evidence, absent challenge, that the respondent not only asked him to do the work but insisted he do the work. The respondent did not contest that the applicant undertook the work at the Suburb M property at the respondent’s request. In his affidavit in reply, the applicant said:
41.If [the respondent] is now unsatisfied as to the value of that work, then she had the option of pulling me off the work if she was unsatisfied. She knew that my trade was an electrical trades assistant. She knew that I was not licensed as a tiler or a gyprocker or any other trades. Yet she asked me to and insisted on me doing the work.
The respondent conceded in the course of her oral evidence that she during the relationship she made no complaint as to the fact of the works undertaken by the applicant to the Suburb M property or as to the quality of the workmanship producing the renovations to the property over a seven year period.
I do not find that the applicant acted in a negligent, reckless or wanton manner when conducting the works to the Suburb M property. As identified by the Full Court in Browne & Green (1999) FLC 92-873, there should be good and substantial reasons for departing from the principle that where there are economic losses incurred in a relationship, those losses should be shared, absent any negligence, recklessness or deliberate dissipation of assets by one party. In this matter it was not the case that the works were undertaken by the applicant with the respondent’s acquiescence while living in the Suburb M property over a period of seven years.
The evidence supports and I find that the substantial and significant works by the applicant to the Suburb M property over a period of seven years was a joint endeavour by the parties for the benefit of each of them, and is a significant contribution attracting weight in favour of the applicant. It is simply disingenuous for the respondent to have encouraged, directed, and observed these works over a period of years and to have sourced monies for their funding to thereafter not only criticise the fact and standard of the works, but to seek some advantage from their defective character in a property adjustment inquiry. I find that any guideline as to waste as identified in Kowaliw has no application in the circumstances of this case to the contended defective works occasioned to the property.
On 4 February 2015 the parties jointly acquired 3 E Street, Suburb B for $250,000. To fund the acquisition, $56,000 was withdrawn from the respondent’s R Bank facility secured on the Suburb M property to meet the cost of the deposit, stamp duty, legal fees, renovation materials and some mortgage repayments while renovations were undertaken on the property. The balance of the purchase price was funded by way of a mortgage from BB Finance. The BB Finance mortgage was refinanced later in 2015 with ANZ. Both parties were the borrowers for each of the loans and the mortgagors.
The parties purchased 2 E Street, Suburb B in June 2016 for $320,000. To fund the acquisition, $29,000 withdrawn from the respondent’s R Bank facility secured on the Suburb M property to meet the costs of deposit, stamp duty, legal fees and renovation materials from the R Bank mortgage. The balance was sourced from a loan obtained by the parties jointly, secured by way of mortgage on the property.
The parties purchased 1 E Street, Suburb B in June 2017 for $339,000. The purchase was funded by way of an $8,000 deposit withdrawn from the respondent’s R Bank facility secured on the Suburb M property. The balance was sourced by way of two mortgages from H Bank, obtained by the parties jointly.
At trial, the applicant agreed the sum of $118,000 had been drawn by the respondent on her R Bank mortgage secured upon the Suburb M property to acquire the Suburb B properties. The applicant conceded in cross-examination that he did not make any financial contribution to the acquisition of the properties.
I find that the acquisition of the properties was funded and enabled by the respondent’s use of her equity in the Suburb M property. As recorded earlier in these reasons, this is a significant contribution to be weighed in the respondent’s favour.
The applicant gave evidence as to the works undertaken by his own physical efforts to renovations on 2 and 3 E Street. Those included:
(a)Demolishing and replacing the kitchen of each property;
(b)Repainting the interior walls of the properties;
(c)Installing a new bathroom in each property;
(d)Addressing an asbestos issue in 3 E Street by “[battening] over the walls and [sheeting] them with gyprock”.
He said that he spent six weeks renovating 2 E Street “full-time” while he was not working, and about eight to 12 weeks renovating 3 E Street on weekends while he was working in paid employment, and that on occasions he spent “as much as 30 hours” working at 3 E Street on those weekends.
The respondent makes similar complaint as to the respondent’s work on the Suburb B properties as she makes in relation to that undertaken on the Suburb M property. It was her case that “the Suburb B properties have extensive damage incurred by the applicant thus devaluing the properties.” She cited the O Engineers report as providing support for that contention.
The O Engineers report identified a number of significant defects to each of 2 and 3 E Street, including wood root in door framings, poorly completely tiling and cracks to floor tiling, and poorly installed trims and fittings across the property including in the kitchen.
The applicant broadly accepted that 2 and 3 E Street are in poor condition, but said that a number of the defects identified in the O Engineers report did not result from his renovations but are the responsibility of the body corporate or are a product of weather issues or damage caused by tenants. He contended that certain other defects identified in the O Engineers report existed at the time of the acquisition of the Suburb B properties, including some corrosion to structural beams, missing finishings (locks, kitchen trims etc.) and damage to the plaster work.
The tenor of the respondent’s case was that she opposed the applicant undertaking the works to the properties. In direct contrast was the contents of her affidavit where she records that the applicant’s contribution to the works was “the labour of the renovation” and that her contribution was that she “shopped around on price for materials, physically supplied the materials…”.
For the same reasons as set out above, I find that the works undertaken on the 2 and 3 E Street properties were joint endeavours of both parties for the benefit of each of them, and represent a significant contribution on the applicant’s part. The respondent at least acquiesced, and on the evidence, more likely than not encouraged the applicant to engage in and undertake the renovations. It would be unjust to attribute any loss incurred by them to the applicant solely in the property adjustive process.
The applicant gave evidence as to he and the respondent sharing household tasks and he undertaking the majority if not all of the tasks maintaining the properties. The respondent contended that she too was involved in the “cooking, cleaning and all other domestic duties”. I find that each of the parties shared in household and domestic tasks at the Suburb M property and that the applicant undertook the maintenance and improvements of that property and the two Suburb B properties.
The applicant gave evidence as to “contributing equally to the care of our son X”. The respondent’s evidence was that she took maternity leave for an unspecified period after X’s birth to care for him and said that she was the “primary carer”. She otherwise gave no evidence on the parties’ contributions to the parenting of X during the relationship. Neither party was cross-examined on this subject matter. I find that each of the parties contributed to their capacity consistent with their employment to the care of X.
The applicant did not spend time with X for eight weeks after separation. He saw X twice in August and October of 2018 and then did not see him again for six months until April 2019. He then exercised supervised time from April 2019. From November 2019 he spent time with X on alternate weekends. I find the respondent’s parenting contribution in respect of X over the four years since separation was substantially superior to that of applicant.
It was uncontroversial that the respondent assumed the responsibility for management of the Suburb B properties after they were acquired, and the applicant has not made any contribution to any of the properties post-separation.
The amount of child support paid by applicant to respondent from June 2018 to March 2022 was $5,162, being effectively $27 per week. The respondent gave evidence as to she alone paying X’s kindergarten fees, school fees, school uniform costs and sporting lessons. The current child support of paid is $21.71 per week or $1,129 per year. I find that the quantum of child support paid by the applicant subsequent to the parties’ separation has been substantially less than would be commensurate with at least his current income and in those circumstances an additional contribution weighting in the financial support of X post separation falls in favour of the respondent.
The High Court in Mallett & Mallett (1984) 156 CLR 605 stressed that the analysis as to the contribution finding is to be sourced in the evidence rather than inferred in an absence of evidence.
The Full Court in Horrigan & Horrigan [2020] FamCAFC 2 emphasised that the proper approach to the assessment of contributions is:
35…well established that an assessment of contributions is not a mathematical exercise, but rather involves the identification and assessment of all of the parties respective contributions, in a holistic way across the course of the relationship and in the post separation period to the point of assessment
The applicant contended that his contributions were made predominantly throughout the relationship, and were identified as being:
(a)A contribution of “10 years’ worth of income”;
(b)His physical labour to improvements made to the Suburb M property and the Suburb B properties; and
(c)His role as a “business” partner in the acquisition and maintenance of the Suburb B properties.
The applicant contended a contribution of 45 per cent in his favour and 55 per cent to the respondent to the date of the hearing.
The respondent contended a contribution of 95 per cent in her favour and 5 per cent to the applicant to the date of the hearing
Implicit in the respondent’s case was a contention that there was a necessary nexus between the applicant’s contributions by way of his physical labours renovating the Suburb M and Suburb B properties and what ought to have been a positive shift in the value of those current items of real property so as to enable those contributions to be considered and for them to attract weight. I am unable to find favour with that submission.
The task of assessing contributions is undertaken by reference to the nature and form manifested by the circumstances of this particular relationship. I am mindful of what the Full Court said in Singerson & Joans [2014] FamCAFC 238 at [66] that for the purposes of s 90SM of the Act, there is nothing to suggest that any category of contribution needs to be quarantined and applied solely to particular assets. In my view the authorities require an evaluation of all contributions to the property of the parties, notwithstanding they may be different to categories of that property.
I am left with little doubt that, on the evidence, that each party to this relationship contributed differing qualities at different times. The evidence records their various roles that evolved over their 10 and a half year relationship dynamic.
Contributions are assessed as favouring the respondent as to 80 per cent and to the applicant 20 per cent. This will see a disparity of 60 per cent between the parties. Importantly, in dollar terms this equates to $81,278 to the applicant and $325,113 to the respondent, a difference of $243,835.
Adjustment to the contribution findings
The applicant is 48 years of age. He is in good health. He is employed as a tradesman earning a gross weekly income of $1,120, being $58,400 annually.
The respondent is 50 years of age. She submitted that she suffered from an injury in 2016 and that she anticipated that may impact on her ability to work on a full-time basis in the future. The applicant conceded in his material as to the respondent suffering an injury in 2016. The applicant concedes that the respondent is “10 per cent incapacitated in the neck and shoulders...” He also agreed that the respondent has a medical issue causing her to be constantly lethargic, suffers from major migraines and has issues with her iron levels. The respondent give evidence as to chronic back and neck pain. She receives chiropractic and physiotherapy, remedial massage and acupuncture for pain relief.
The respondent is employed as a professional at AA University. She earns a salary of approximately $1,290 gross per week, being about $67,000 per year. The respondent also receives rental income from the three Suburb B properties of about $1,080 per week, or $56,300 per year. It is her evidence that the properties currently produce a net annual loss.
I had no evidence before me as to the impact of respondent’s disabilities on her income earning capacity. She was unable to quantify the extent of that impact or the probability that would eventuate.
I find that the parties have a not dissimilar current income and future income earning capacity.
Each of the parties, by way of the contribution findings, receive the benefit of adjusted property. The respondent has had the benefit of the $500 received from the sale of the parties’ recreational vehicle as recorded above. I am mindful to take into account the value of the liabilities of each party not included in the balance sheet. The applicant’s liabilities due to his solicitors, by way of credit cards and funds due to his to his sister are contended by him to total $149,182. This factor attracts weight in favour of the applicant.
The respondent sought that the impregnated capital gains tax liability attached to the Suburb B properties be accounted for by way of an adjustment in her favour. The value of any potential impregnated CGT liability will be subject to any changes to the cost base occasioned by the improvements to the Suburb B properties. The value of that liability is unknown.
I am mindful of the Full Court’s decision in Rosati & Rosati (1998) FLC 92-804 that where the Court is not satisfied of the inevitability or probability of the sale of an asset but is satisfied that:
c.…there is a significant risk that the asset will have to be sold in the short to mid term, then the court, while not making allowance for the capital gains tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s 75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
The respondent in submissions said that she would be able to refinance the properties and that they will not be sold in the short to medium term. I have no evidence which would allow me to make a safe finding as to the strength of that submission but it was not disputed by the applicant. In those circumstances, I will take this factor into account in a holistic way in favour of the respondent but give it limited weight.
The applicant contends that the final parenting orders permit him to spend 27 per cent of the time per annum with X. The respondent contends whatever the percentage identified for child support purposes the applicant will at its highest spend time with X on alternate weekend from Friday to Sunday evenings during school term and half the school holidays. This factor attracts significant weight in favour of the respondent.
The applicant pays $21.70 per week to the mother by way of child support. This quantum is not commensurate with his income and capacity to contribute equitably to X’s future periodic costs of support. It is indicative, having regard to the quantum of child support paid by the applicant post separation, that the applicant will not in future pay meaningful child support. This factor attracts further weight in favour of the respondent.
The superannuation interests of the parties are included in a single pool of property.
The applicant gives evidence in his affidavit of contributions he made to the care, welfare, and development of the respondent’s older children of the kind identified in Robb & Robb (1995) FLC 92-555. At the time the parties commenced cohabitation, the respondent’s children were aged about 16, 13 and 10 respectively. At separation they were 23, 20 and 17. The applicant gave no evidence as to directly contributing towards expenses of the children, but said that he “fulfilled a lot of the usual roles that a stepfather would”, including being “around after work and on weekends to give them advice on things on a day to day basis, and to spend time with them” doing activities. The respondent minimised the role played by the applicant in the care of her older children, saying that he “never demonstrated the role of a step father”. I accept that the applicant provided some assistance to the respondent’s older children in circumstances where he was not legally obliged to, but that this assistance was limited.
I take into account and weigh in the applicant’s favour the disclosure failures of the respondent as to the quantum of the benefits she retained from the rents of the Suburb B properties as identified earlier in these reasons. As recorded earlier, her concession was as to a benefit of $33,912. I have already found that the respondent’s application of such sum as being towards the support of both herself and X, cast against the quantum of the applicant’s paid periodic child support, was reasonable in the circumstances of this case.
After consideration of the matters contained in s 90SM(4) (e to g) of the Act, I find a consideration holistically of these factors warrants an adjustment from the contribution findings in favour of the applicant of five per cent.
By way of cross-check the value of this adjustment in money terms is $20,320, a differential of $40,640.
CONCLUSION – JUST AND EQUITABLE
Accordingly, the applicant has an overall entitlement of 25 per cent of the pool of property identified in the Balance Sheet above. This equates to a sum of $101,598.
He currently has in his possession or will receive by way of agreed adjustments the following:
7 Husband Four unrestored motor vehicles 30,000 8 Husband Motor Vehicle 3 30,000 16 Husband Superannuation add back 20,000 36 Husband Super Fund 2 10,000 37 Husband Super Fund 4 35,000 Sub-total (net assets) 125,000 30 Husband Loan Owing to U Finance 28,000 Total 97,000
The applicant’s net position prior to any adjusting payment is $97,000, or 23.87 per cent of the net pool.
The adjusting amount the respondent is required to pay to him is $4,598 so as to achieve $101,598.
The respondent has an overall entitlement of $304,793. After adjusting to the applicant the sum of $4,598, she will retain 75 per cent of the property of the parties.
Standing back, I find that the distribution of the property of the parties in the terms identified above is appropriate and otherwise just and equitable. I will round the amount to be paid by the respondent to the applicant to $4,600.
As recorded earlier in these reasons there is no evidence as to the respondent’s ability to refinance the Suburb B properties and pay to the respondent the adjustive sum. If she is unable to meet her responsibilities, the Suburb B properties will be sold to give effect to the orders I shall make. The parties agreed that this default mechanism would be appropriate.
The Suburb B properties are collectively valued at $1,075,000. The five loans secured over the properties total $998,609 and therefore there is $76,391 equity in the properties prior to selling costs or the importation of any capital gains tax.
The adjustive sum owing to the applicant is $4,600. This equates to 6.02 per cent of the recorded equity in the Suburb B properties.
If the properties are to be sold in compliance with these orders any capital gain will crystalise. It is just and equitable that the resulting tax liability be paid from the proceeds of sale of the property prior to any percentage distribution as between the parties. All arrears on rates and strata fees in respect of the Suburb B properties ought be treated in a similar manner.
The parties agreed, and I find it reasonable in the circumstances, for the respondent to have a 90 day period to arrange her affairs so as to source funds to make the adjusting payment to the applicant and to refinance the mortgages on the Suburb B properties.
I will order accordingly.
I certify that the preceding one hundred and eighty-one (181) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Campton. Associate:
Dated: 4 May 2022
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