Prosser and Prosser & Anor
[2020] FamCA 378
•22 May 2020
FAMILY COURT OF AUSTRALIA
| PROSSER & PROSSER AND ANOR | [2020] FamCA 378 |
| FAMILY LAW – PROPERTY – CONSTRUCTIVE TRUST – where the pool of assets is modest – where the Applicant purchased an investment property with marital assets during the relationship – where the Applicant’s adult sons discharged the mortgage over the property and the property was subsequently transferred to one of them – where the Court finds that an interest in the property is held on Constructive Trust for the Applicant and Respondent – where an adjustment is made in favour of the husband in consideration of s75(2) – where none of the three parties’ proposed orders achieve justice and equity |
| Family Law Act 1975 (Cth) ss 106B, 90AE, 75(2), 79(4) |
| Prosser & Prosser & Anor [2018] FamCA 1077 Hickey & Hickey (2003) FLC 93-143 Elias & Elias (1977) 3 Fam LR 11496 Zubcic & Zubcic & Anor (2019) FLC 93-918 Biltoft & Biltoft (1995) FLC 92-614 Stanford & Stanford [2012] HCA 52 Robb & Robb (1995) FLC 92-555 |
| APPLICANT: | Ms Prosser |
| FIRST RESPONDENT: | Mr A Prosser |
| SECOND RESPONDENT: | Mr J |
| FILE NUMBER: | BRC | 1320 | of | 2015 |
| DATE DELIVERED: | 22 May 2020 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Baumann J |
| HEARING DATE: | 25 & 26 February 2019, with final submissions received 24 April 2019 |
REPRESENTATION
| SOLICITOR FOR THE APPLICANT: | Mr A Cooper Cooper Family Law |
| COUNSEL FOR THE FIRST RESPONDENT: | Mr S Priestley |
| SOLICITOR FOR THE FIRST RESPONDENT: | Parker & Kissane |
| SOLICITOR FOR THE SECOND RESPONDENT: | Mr A Cooper Cooper Family Law |
Orders
That within fourteen (14) days, the parties shall confer and seek to reach agreement on a form of order which is consistent with the Reasons for Judgment delivered today.
That if the parties are unable to reach agreement, then by 12 June 2020 each party shall sent to the Associate to the Honourable Justice Baumann by email to ... the minute of order they say is consistent with the Reasons delivered.
That in the absence of either party seeking to be further heard, the Court shall consider competing draft minutes of order and pronounce an order, from Chambers, by 19 June 2020.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Prosser & Prosser has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT BRISBANE |
FILE NUMBER: BRC 1320 of 2015
| Ms Prosser |
Applicant
And
| Mr A Prosser |
First Respondent
And
| Mr J |
Second Respondent
REASONS FOR JUDGMENT
Introduction
The Applicant wife Ms Prosser and the First Respondent husband Mr A Prosser were married in 1996 after the wife immigrated to Australia from her native Country P to marry the husband.
The marriage ended with final separation on 1 October 2014 – 18 years later.
These proceedings were commenced by the wife in the Federal Circuit Court of Australia in February 2015, and although the pool is accepted to be modest, these proceedings were transferred to this Court on the basis of some asserted complexities relating to two related issues, namely:
a)the wife had joined as a party the husband’s son (from a previous marriage) Mr B Prosser, claiming he held interests in property on behalf of the husband. That claim was the subject of a successful application for summary dismissal, after which Mr B Prosser was removed as a party – see earlier Reasons Prosser & Prosser and Anor [2018] FamCA 1077) (“earlier Reasons”); and
b)the husband claims that a property at Suburb G (with an agreed value of $345,000) and registered at the time of the hearing in February 2019, in the sole name of Second Respondent, the wife’s son from a prior marriage, Mr J, is held by Mr J as constructive trustee in part or whole, for the wife and/or the husband.
The wife at the trial was represented by solicitor advocate Mr Cooper; the husband was represented by Counsel Mr Priestley and the son Mr J was unrepresented, although Mr Cooper’s final written submissions filed 9 April 2019 were advanced on behalf of both the wife and the son Mr J.
The Court regrets the delay in delivering these Reasons.
Issues to be determined
As all parties accept, it is a critical factor in this matter whether the Suburb G property (or an interest therein) forms any part of the divisible pool of assets available for alteration of interests, as between the husband and wife.
The wife contend that “the Court would not be persuaded that there is any equitable interest in the Suburb G unit to return to the list of assets and liabilities either by way of section 106B, or by way of constructive trust” (submissions at [50]). If the Court were to accept such proposition, then the wife submits the orders that achieve justice and equity between the husband and wife is simply that they retain “what is in their possession and or ownership, and make no adjustment for section 79” (submissions at [64]).
The husband, at paragraph 12 of his written submissions, claims a number of alternate possible courses:
a)The transfer of the property to the Third Respondent on 22 October 2014 should be set aside pursuant to s 106B of the Family Law Act 1975 (“the Act”); or
b)That a constructive trust be declared in respect of the Suburb G unit, by virtue of which it is held in whole or in part on behalf of the wife and/or husband; or
c)That the Court should use its power under s 90AE of the Act, to order the Applicant pay $172,500 (50% of the proceeds of value of the Suburb G unit) to the husband.
If the Court funds that some interest in the Suburb G unit exists as an equitable interest for the husband and wife, then the assessed interest would be included in the other property and interests of the husband and wife, as the first step in the usual four step process dictated by authorities such as Hickey & Hickey (2003) FLC 93-143.
The very modest “other” property and other interests that was available for orders of alteration (mostly superannuation) makes it abundantly clear how important the determination of how the facts relating to the Suburb G unit is in this case.
As a result, the Court will now examine the evidence and make findings about that property, and will then explain how the facts determined should be applied to the settled principles of law.
Before doing so, I observe that sadly the toxic nature of the post separation marital relationship and the lack of trust and respect for each other shaped the evidence both the husband and the wife offered to the Court. I am satisfied, as I discuss below, that the wife continues to hold strong feelings and views about the actions of the husband and Mr B Prosser whereby a 50% interest in a commercial property at F Street, E Town (“the F Street property”) was sold by the husband to Mr B Prosser, with settlement having occurred in November 2014.
I rely upon, but do not repeat the findings of fact made at paragraphs 12(a) to 12(p) of the earlier Reasons.
The fact that both the transfer from the husband to Mr B Prosser of the F Street property and the transfer from the wife to Mr J of the Suburb G unit on 22 October 2014, both took place within six weeks of final separation, only heightened the parties’ suspicions.
However, allowing for this environment between the parties, I did not regard either party as untruthful – rather I felt at times their perceptions on the historical events were shaped by their feelings that the other party had used their son to reduce the marital pool of assets. Where a difference of importance arises in the evidence, I explain why I have preferred one version of the evidence over the other.
Facts as found in respect of the Suburb G unit
Apart from the evidence of the husband and wife, both who were subject of cross-examination, Mr J and his brother Mr O gave evidence in the wife’s case. Mr B Prosser was the only other witness relied upon by the husband in his case. Mr B Prosser’s evidence essentially was an examination of banking records he undertook for his father to seek to support the assertion that the wife had misapplied funds.
In respect of the Suburb G unit I make the following findings:
a)During the course of the marriage, in 2007 the wife purchased the property at K Street, Suburb G for $335,000 (“the Suburb G unit”). The wife says she purchased the property “to provide my children Mr J and Mr O with a place to live whilst they attended university in Brisbane”. The wife says that at this time the husband “wanted to assist Mr B Prosser to acquire a property as well”;
b)At the time of the purchase, Mr O (born in 1986) was approximately 21 years of age and Mr J (born in 1988) was approximately 19 years of age;
c)It is clear from the wife’s evidence that at this time the husband and Mr B Prosser (who was six years older than Mr O) purchased the F Street property jointly. The history of that acquisition and sale is set out in the earlier Reasons and are not repeated now. Certainly, the wife felt that Mr B Prosser was getting “preferential treatment” over her sons;
d)The Suburb G unit was purchased solely in the name of the wife. The wife secured a mortgage of $268,000, with the balance of $67,000 together with legal expenses and stamp duty totalling $78,000 sourced as set out below. I find that the husband had inspected the Suburb G unit before the purchase and supported the wife acquiring the Suburb G unit in her name solely. The husband says he regarded the purchase as an investment, and it was not his intention, as the wife claims, that it was purchased for her sons’ ultimate ownership;
e)I am satisfied that the wife formed the view that she needed to control the earnings of her sons Mr O and Mr J from an early stage – even when they were delivering papers at school. When Mr O left school in 2004 and Mr J left school in 2006, I am satisfied they were high performing students able to undertake tertiary education which they both did at X University. Mr O and Mr J were supported through their education (neither required HECS) and living expenses in part from income paid to them from the business R Pty Ltd;
f)The wife, I find, was the bookkeeper for the business and made arrangements for payment of wages (not only for herself and the husband into joint and other accounts) but for Mr O and Mr J. I accept the evidence of the husband that Mr O and Mr J performed hardly any services for R Pty Ltd once they began living and studying in Brisbane, however the “wages” continued to be paid in the following nett amounts for the following tax years:
Mr J
Tax year ended 30 June
Nett amount
2007
$9,141
2008
$10,268
2009
$18,707
2010
$19,628
2011
$18,368
2012
$22,730
2013
$24,180
$123,022
During these periods for some of the years to 20 June 2013, smaller income amounts were received by Mr J including for tutoring. For the tax year ended 30 June 2014 and thereafter, Mr J having completed his studies, gained employment
Mr O
Tax year ended 30 June
Nett amount
2007
$10,041
2008
$10,268
2009
$67,212
2010
$17,368
2011
$11,760
$116,649
Mr O also, during these years, declared income to the Australian Taxation Office (“ATO”) for tutoring with employment to Y Organisation beginning in the 2009 tax year and generally increasing, such that by the tax year ended 2012, Mr O’s wages were a gross sum from Y Organisation of $53,161.
The figures in the above table are taken from “payment summaries” receives from the ATO (TAB 1 – Exhibit 1). However the reconciliation undertaken by Mr B Prosser (see paragraph 30) suggests total wages received by Mr O from R Pty Ltd was only $55,675 for the period. No explanation got was discrepancy was offered to the Court. As the figure for the 2009 tax year is so disproportionate I infer the ATO records produces are most likely an error – however the actual nett income for that year for Mr O from R Pty Ltd cannot be clearly ascertained.
g)The statements of nett income above received from R Pty Ltd, are taken from the ATO records produced by the wife and/or Mr O and Mr J. The husband conceded that as the sole director of R Pty Ltd, he signed the necessary financial statements and, relevantly, group certificates;
h)The evidence of Mr B Prosser after examination of a number of banking accounts (identified at paragraph 14 of his Affidavit) is that:
i)$104,065.28 had been transferred into the joint account of the husband and wife and between 29 December 2010 to 2 December 2014, $52,566.67 had been transferred from the joint account to the wife’s personal account;
ii)During the period 12 December 2010 to 21 October 2014 the sum of $20,517.63 was transferred from the husband’s streamline account to the joint account and then to the wife’s account;
iii)From 20 May 2014 to 27 September 2014, the sum of $19,288.76 was transferred from the ANZ business account to the joint account and then to the wife’s account and between 30 September 2014 to 5 November 2014 a sum of $5,530 was transferred from the husband’s personal account the wife’s account;
iv)Some smaller sums from other accounts were transferred in similar ways (see paragraphs 21, 22 and 25));
v)Cash withdrawals were identified as having been made as follows:
1.Joint account between 6 September 2014 and 17 November 2014 of $12,480; and
2.Husband’s ANZ credit card between 5 August 2014 and 22 January 2015 of $21,363.76.
vi)Although at paragraphs 29 to 31, Mr B Prosser asserts the amount of wages paid to Mr O and Mr J is less than set out above (at paragraph (f)), I prefer to adopt the amounts taken from the tax records. The difference is not readily explainable;
vii)At paragraph 37, Mr B Prosser says that:
“In total the sum of $236,987.28 was transferred into Ms Prosser’s personal account between December 2010 and December 2014. These transfers all originated as Company funds. Of the amount of $236,987.28 the sum of $173,013.87 was taken directly from R Pty Ltd and deposited through the Joint Account into Ms Prosser’s personal Account as follows:
i)
Ms Prosser’s Wages -
$41,154.00
ii)
Mr A Prosser’s Wages -
$41,619.00
iii)
CBA Business Account withdrawals
$52,566.87
iv)
Mr J Wages -
$37,674.00
$173,013.87”
i)In circumstances where the husband was involved in the business operations and left the bookkeeping to the wife, I am not satisfied that the intermingling of funds through the joint account should be given the character of “misappropriation” asserted in the husband’s case. The parties were married and it is far from unusual for business income to be diverted through personal accounts to meet the needs of the family unit;
j)I am satisfied however, that it is overly simplistic for the wife to assert, when really the sole source of income for the family was the business, that by funds ultimately being deposited into her personal account, they became her funds and that when those funds were used by her towards the Suburb G unit, that it was somehow a contribution by her. In my view, all the wife’s financial contributions to the Suburb G unit during the marriage must be regarded as a joint contribution by the husband and wife;
k)Accordingly, when the wife says (at paragraph 13) how the deposit of $78,000 for the Suburb G purchase was amassed, I find that those contributions should be seen as being:
i)$47,000 notionally from Mr O and Mr J; and
ii)$31,000 from the husband and wife.
Little turns on the “gift” of $13,000 which the husband says he told the bank he gave to the wife. I infer that the bank, in advancing the mortgage funds to the wife, probably wanted to be satisfied that funds from the husband were not a loan.
l)As to the initial contribution of $47,000, I find that $36,000 came from Mr J and $11,000 came from Mr O – however, in reality, I find that the source of these funds were the husband and wife’s joint funds. There is no evidence that the funds came from the accumulated wages which, by the time of purchase of the unit in February 2007, had barely accumulated much. The fact that both Mr O and Mr J said to the bank the funds were “unconditional gifts” to their mother by them does not persuade me it was “their funds”. These were, I find, the funds of the husband and wife. On this basis, I find that the initial deposit of $78,000 should be seen as a contribution by the husband and wife to the acquisition totally by them;
m)
It is not disputed that all mortgage payments and utility payments were made by the wife – again from the sources earlier discussed. All rates to local City Council were paid by the husband and wife. As the
Suburb G unit was registered solely in the wife’s name, and for the period from acquisition until 2010 was rented, the nett rental income (before allowance for the mortgage instalments) of $21,508.01 (the wife’s Affidavit at paragraph 17) was revealed in her tax return. However, with mortgage payments of approximately $1,023 a fortnight ($26,598 per annum), the Suburb G unit was “negatively geared” and a tax benefit accrued for the wife. As she was, during this period, receiving a wage from R Pty Ltd it is fair to assume that she received some form of income tax refund from the time of the acquisition of the Suburb G unit, however the extent of such refund is unknown on the evidence produced to the Court. The wife admits to getting a personal tax benefit;
n)As a result, I find that before the discharge of the mortgage, which I deal with next, all contributions to the acquisition of the Suburb G unit and the mortgage and preservation came from the joint funds of the husband and wife. To the extent that in 2007 Mr O and Mr J may have had some small savings (from the paper run), the other benefits (including diverted family tax benefits) were really the parties’ funds and despite where they were deposited, remained the funds of the husband and wife in my view. In making this finding, I do not ignore the support that the husband wife provided the children Mr O and Mr J for their education;
o)In June 2014, the wife’s mortgage was approximately $240,000. She was in dispute with the Body Corporate. Mr O and Mr J were residing in the Suburb G unit rent free. If I accept the loan initially of $268,000 had reduced to approximately $240,000 at this time, in effect the parties’ contributions to the mortgage and rates meant that the reduction in the loan of $28,000 was entirely due to the their contributions. I so find. There is clear evidence that the loan was repaid and the wife says that “Mr O and Mr J agreed to combine their savings to repay the mortgage in order to prevent the bank from foreclosing on the Suburb G property”. At paragraph 23, the wife deposes to how the total sum of $238,515 was met essentially by August 2014 from the bank accounts of Mr O and Mr J. For the purposes of this analysis I make no distinction between the sums coming from the different bank accounts as all the interests of Mr O and Mr J have essentially now merged into the legal interest that Mr J now holds. Mr O does not seek an assessment of the interest he may personally hold – as a result of the arrangement or understanding which he has with his brother;
p)It therefore becomes important to make findings as to the true source of the funds contributed by both Mr J and Mr O to the repayment of the mortgage, which the wife claims was:
$110,000
from Mr J’s V Bank term deposit
$50,000
from Mr J’s W Bank term deposit
$70,000
from Mr J’s Commonwealth Bank accounts
$8,515
from Mr O and Mr J
$238,515.00
In this respect the evidence given by Mr O and Mr J must be considered, namely:
i)Mr J deposes in this Affidavit that between January 2010 and the end of 2014 he operated two Commonwealth Bank accounts. At paragraphs 17 to 22 Mr J gives details about how he accumulated savings to August 2011 of $70,000. Although I accept he lived frugally and was continuing to receive other support from his mother, the term deposit savings of $70,000 at that time almost entirely represented wages paid by R Pty Ltd not otherwise spent by him, together with some modest earnings from X University. As he continued to receive wages from R Pty Ltd until the 2013 tax year, I find that with the confusing transactions detailed at paragraphs 22 to 27, it is reasonable to find that the funds available for discharge of the mortgage came from Mr J through the wages from R Pty Ltd and other interest and earnings. In this respect, I note that he received nearly $24,000 of nett income in the 2014 tax year from employment other than R Pty Ltd;
ii)Mr O deposes at paragraphs 17 to 21 that by March 2012 his savings (represented by a term deposit) were $103,099.75 which he then deposited into his mother’s account on 26 April 2012. For completeness, but for reasons not clear, Mr J had also transferred to his mother his savings of $85,600 at the same time. On this basis, I find, at April 2012 the wife held funds from her sons (totalling $188,000 approximately). Although I accept Mr O also lived frugally as he claims and was continuing to receive support from his mother as earlier identified, (e.g. free rent from 2010), the overwhelming majority of the savings represented unexpended wages from R Pty Ltd to that point. Although I accept Mr O received other income, I think it more likely than not that income from tutoring and Y Organisation (which by the 2010 tax year had reached a level of $22,559 nett) was used to live on. Mr O supports the evidence of his brother and mother that the combined term deposits of $226,000 were used in the manner described.
q)I rely upon the findings made to determine that the funds used to discharge the mortgage of approximately $240,000 in 2014 were funds from Mr O and Mr J. It is necessary to make a finding about how the wages paid, which I have found represent the majority of the accumulated savings, should be treated. I discuss this topic below;
r)Post discharge of the mortgage and for a significant period before the hearing, the wife has occupied the Suburb G unit, owned by Mr J. Mr O deposes, at paragraph 30 of his Affidavit, that he and Mr J have paid the sum of $62,196.45 between 6 February 2017 and 30 March 2017 “to satisfy the arrears [of body corporate expenses] and to pay lawyers Ms Prosser engaged to prosecute her claims” because if they had not done so the Body Corporate managers had “threatened to commence bankruptcy proceedings against Ms Prosser, so they could sell the apartment to make good the arrears”. The evidence is quit scant on this dispute. If I accept that, after separation, the Body Corporate dispute escalated to such a level that over $60,000 was payable for arrears and legal expenses, I do not accept this can properly be seen as a further contribution by Mr O and Mr J – in circumstances where the Suburb G unit was transferred to Mr J by the wife “unencumbered” on 22 October 2014 – over two years before payments to the Body Corporate of a substantial amount were paid;
s)As I understand the husband’s case, he says that the payments for wages to Mr O and Mr J should not be treated as “their money”. Whilst I accept the evidence of Mr B Prosser that he commenced working with his father in 1997; completed his apprenticeship in 2003 and finished working for R Pty Ltd in 2010, it is not relevant in my view whether the three sons were treated the same or differently. I accept the wages said to be paid to Mr O and Mr J from R Pty Ltd were not earned in the “traditional sense”, as they were students living in Brisbane. However that is how the husband and wife agreed that the support for them be provided and certain tax benefits in distributing in this way were achieved - namely income not being distributed to either the husband or wife likely to be in a higher tax bracket. Whilst I accept the wife probably provided other funds available to her to support her sons (as most parents do without tax benefits), the continued savings of the majority of the “wages” paid to Mr O and Mr J was a clear and designed course of conduct. The husband knew, or ought to have known, funds were being paid as wages and although he was surprised they were being saved to the extent they were, it is not appropriate in my view (after the marriage has ended) to re-categorise the funds as joint funds (see Elias & Elias (1977) 3 Fam LR 11496)
Conclusions on funds used for Suburb G
Based on the findings made above, I find that the respective financial contributions made to the acquisition and maintenance of the Suburb G unit should, on balance, be assessed to the date of transfer on 22 October 2014 as:
i)
Husband and wife ($78,000 + $28,000)
$106,000
ii)
Mr O and Mr J
$240,000
I do not take into account the mortgage repayments because of the tax benefits achieved and because the reduction in the mortgage is taken into account.
For reasons which I set out below, I find that at the time of the hearing Mr J holds the legal interest in the Suburb G unit as to:
30.6% on behalf of the husband and wife
69.3% on behalf of Mr O and himself.
On this basis, and with an agreed valuation of $345,000, the sum of $105,570 shall be included in the pool of assets below, being the equitable interest the husband and wife have in the Suburb G unit.
I have determined that the interest on the findings of fact set out above should be determined as an equitable interest, and I adopt this finding rather than, as alternatively pleaded in effect by the husband as relief under s 103B of or s 90AE of the Act, because:
a)of the substantial (70%) contributions found to have been made by Mr O and Mr J, even though the transactions by the wife for “love and affection” to Mr J is suspicious, it does not fall within those categories of cases that it can be demonstrated that the sole or primary purpose of the transfer was to seek to deplete the available pool for the purposes of the s 79 proceedings. Furthermore, if the transaction was set aside, any interest in the Suburb G unit for the parties, on the findings I make, would necessarily need to be reduced after account for the contributions by Mr O and Mr J is made. In all respects therefore, a remedy under s 106B is not appropriate;
b)in respect of the claim under s 90AE, it is also not the appropriate remedy on the facts as found by me;
c)recently in Zubcic & Zubcic & Anor (2019) FLC 93-918, the Full Court succinctly identified the principles of equity to be applied if a finding of the creation of a constructive trust (rather than a resulting trust) is to be made when it was said that:
“76.In any event, a constructive trust differs from a resulting trust in that it is created by operation of law without reference to the intentions of the parties. The enquiry is not as to the actual or presumed intention of the parties, but rather as to whether, according to the principles of equity, it would be unconscionable to allow a legal owner of property to enjoy sole beneficial ownership of that property (Grefeld & Grefeld (2012) FLC 93-508 at [97] citing Muschinski v Dodds (1985) 160 CLR 583, at 614-617 and 620-621 and Baumgartner v Baumgartner (1987) 164 CLR 137, at 148-150).”
In my assessment, it would be “unconscionable” to allow Mr J to enjoy sole beneficial ownership of the Suburb G unit.
Pool of assets
Little attention in cross-examination and in the written submissions was given to the identification of assets and liabilities at the time of the hearing, or to contributions and s75(2) factors, such was the focus on the transactions relating to the Suburb G unit.
The reason for that focus was obviously so, because based on the wife’s Financial Statement filed 21 February 2019 and the husband’s Financial Statement filed 25 January 2019, and accepting statements of value were statements against interest, the respective assets were:
Wife –
Bank Accounts
$17,237
Motor Vehicle 1
$1,000
Superannuation
$29,490
$47,727
Husband –
Motor Vehicle 2
$5,000
2 machines (Item 43)
$20,000
$25,000
In respect of the wife’s superannuation her sworn evidence was that she held $29,490. During the trial a letter dated 13 February 2019 from the wife’s solicitor makes the bland claim the wife has “no funds in any superannuation account” (see Exhibit 5). This letter is seven days before the wife swore on oath that she dd. In my view her sworn evidence should be accepted and that was the husband’s submissions. In circumstances where she has (or had) that entitlement and where no explanation is offered by the wife how she used or reduced her superannuation, I include it in the pool.
The husband’s asserts outstanding credit card liabilities of $26,000, however it is not possible to determine on the evidence how this debt (for an aged pensioner) has accumulated since separation in October 2014. As a result that debt should be ignored as should the wife’s claimed credit card liability of $600.
The wife claims she owes “personal loans” to her sons as follows:
Mr J $81,022
Mr O $29,000
There is however a total absence of probative evidence as to how these liabilities have be incurred. Neither Mr J in the Affidavit he filed 24 January 2019 nor Mr O in his Affidavit filed 24 January 2019 assert their mother owes them any money. If they provided support to their mother, it could have been to assist her meeting legal expenses but this is speculation. No document evidencing one such loan is revealed to the Court. In view of the way in which the wife and her sons intermingled funds, I am not satisfied that such debts exist, and even if they did, I would not accept after so much financial support from their mother, that the children would ever seek to enforce or recover the funds from their mother. In any event, on the evidence she has no capacity to make payment as she has few assets. The debts as a result are ignored (Biltoft & Biltoft (1995) FLC 92-614).
The determination of the legal and equitable interests of the parties is mandated by authority, and once identified the Court is required to consider whether it is just and equitable to make an order (Stanford & Stanford [2012] HCA 52). The nature of the parties’ marital breakdown and the case each conducted before me satisfy me that it is just and equitable to make an order.
For completeness therefore I find the pool of assets to be as follows:
Wife’s property and superannuation as set out above
$47,727
Husband’s property as set out above
$25,000
Equitable interest jointly held under the Constructive Trust relating to the Suburb Z Unit
$105,570
Total
$178,297
The wife has not established the husband holds other business equipment or interests, noting R Pty Ltd had been formally deregistered prior to the hearing after it was voluntarily wound up on 8 September 2016.
At paragraphs 86 to 105 the husband gave evidence, which I accept, that demonstrates the business entity R Pty Ltd became unprofitable, with significant debts outstanding particularly for equipment loans. The Financial Statements produced for the company (Exhibit 6) reveal that:
a)for the year to 30 June 2015 the company traded at a loss of $101,352 and for the period to 10 February 2016, the trading loss was $53,618;
b)the Balance Sheet reveals a deficit of liabilities over assets at 30 June 2015 of $818,439 and as at 10 February 2016 of $772,050;
c)these deficits would have been even greater as the major “assets” shown in the Balance Sheet were loans owed by the husband of over $480,000 (2015 year) and over $260,000 at time of voluntary winding up; as the husband has no assets, these loans were irrecoverable.
Contributions and s75(2) factors
As already noted, little attention in cross-examination or submissions was given to the evidence in chief of the parties on these issues, which are for consideration and assessment under s79(4) of the Act, being:
a)the wife dealt with contributions at paragraphs 56 to 90 and s75(2) factors at paragraphs 91 to 113.
b)the husband dealt with contributions at paragraphs 106 to 110 and s75(2) factors at paragraphs 114 to 120.
The modest pool means, in my view, the usual approach of seeking to determine percentages for the various steps of analysis, does not greatly assist. Rather I now set out various findings and then explain my conclusion.
In respect of contributions I find:
a)At cohabitation in 1996, after the wife immigrated to Australia from Country P to marry the husband, she came with few assets and almost immediately began TAFE courses, which she successfully completed.
b)The husband owned a property at C Street, D Town and operated his business through R Pty Ltd. It is not possible to determine the value of the husband’s nett initial contributions, however they were overwhelming.
c)The business, despite decisions to continue to borrow heavily which ultimately proved fatal to its probable survival, was the sole source of the income to support the family during the relationship.
d)I accept that the husband worked hard in the business where his skill set was valuable, but it is clear from an early stage the wife became the “bookkeeper” and the business is shown to have paid both parties wages (but it seems little superannuation). In fact a significant unpaid obligation for employee superannuation contributions remained at the time the company was wound up.
e)Whilst both the parties seek to blame the other for the business not surviving – the husband asserting the wife withdrew funds that should have been available for business operations and the wife asserting bad business decisions by the husband, particularly using real property to secure unmanageable debt (described by her as “negative contributions”) – in the end both of the parties I find were contributors to the business focus being lost. It is, of course, a very sad outcome that nothing was left in the end and it is not unusual in such circumstances, for a party to seek to blame the other party and accept little responsibility for their own actions. This case is such an example.
f)I accept the wife’s evidence on non-financial contributions as homemaker and business supporter.
g)There is no evidence that these parties, through the marriage, received the benefit of any extraordinary financial benefits through gifts, inheritances, lottery wins, personal injuries awards or the like.
h)Considering the length of the relationship, and the other contributions made from cohabitation the weight to be applied to the husband’s initial contributions would still, in my view, warrant a small adjustment in his favour.
With an eye to the factors set out in s75(2) I make the following findings:
a)The husband (aged 72 years) is 13 years older than the wife and now totally relied on the age pension. He enjoys reasonable health for a man of his age, but has no real earning capacity. The share of the modest pool he will receive under the orders proposed will not greatly improve his life. I accept he has spent considerable expenses on legal costs (see Exhibit 7).
b)Although the wife at the time of the hearing 12 months ago had lost her employment with AA company (see Exhibit 5), at age 59 and as she enjoys good health, I find she is likely to have a few years left where she is able to work and has demonstrated skills for employment. She has rent free accommodation offered by her sons (noting the husband’s Financial Statement did not reveal he was paying any rent as well at that time), and her share of the pool is not likely to sustain her. She had some superannuation of a modest amount that she could access after she turns 60 at the end of 2020 or has accessed.
These factors would justify a further modest adjustment to the husband which would not be significantly altered by the following two factors alluded to in the material under s75(2)(o) namely:
a)the way in which the wife used funds to support her adult children primarily, where at least the husband agreed to some support, but he says not the increased support of $500 (beyond $360); and
b)the support the husband’s business income, which should be regarded as joint income post cohabitation, was used for the support (including educational support through school fees etc.) of Mr O during his infancy (leaving home in 2004) and Mr J during his infancy (leaving home in 2007). This factor relies upon the statements of long standing enunciated in Robb & Robb (1995) FLC 92-555.
What orders achieve justice and equity
Considering the positions adopted by the parties (as set out at paragraphs 7 and 8 of these Reasons), the wife opposes the husband receiving anything from the only real valuable interest now found by the Court – namely the equitable interest in the Suburb G unit.
The husband essentially seeks funds – quantified at least by his s90AE claim of $172,500, being of the value of the Suburb G unit.
The third party, the current legal owner of the Suburb G unit, essentially wishes to retain the legal ownership without any claims by either his mother or the husband and for the removal of the Caveat lodged over it.
I do not regard any of the three parties proposed orders achieve justice and equity.
As a guide, on the pool identified at $178,297, I regard the husband should receive between 55% and 57.5%. This allows for some weighting for the findings above. Of course, with such a modest pool, the difference of at most 15% between the parties is only $26,700, but for people with no assets, I do not regard that sum as insignificant.
The only source of a payment to the husband, which I would order to be $75,000 is the Suburb G unit. However, all the evidence persuades me that the wife and her sons are “on the same page”. Their mother resides in the unit and would like to remain. Currently the unit is not the subject of any mortgage. A loan for Mr J of $75,000 over Suburb G supported if need be by the wife and Mr O would be, I find, even in the current environment obtainable (being less than 22% debt to equity).
The wife’s equitable interest in the unit, of course would notionally be reduced to around $30,000 however I am confident that Mr J, Mr O and the wife who would on my findings be parties with an interest in the unit, could work out or document their ongoing interests if they wished to.
I regard therefore, that an order which essentially:
c)Requires the husband to receive $75,000 – within 60 days;
d)Otherwise the husband and the wife retain all other property they own;
e)Removes the Caveat on Suburb G,
is a just, equitable and a fair outcome.
If Mr J is unable or unwilling to pay $75,000 to retain the full legal ownership of the Suburb G unit, then regrettably the property would need to be sold.
As this is an order which none of the parties may have anticipated, I propose to give them 14 days to agree on the terms of an order (which of course is not a “consent” order) otherwise I will hear submissions as to the form of order consistent with these Reasons.
I understand all parties have within their Applications and Responses, sought costs orders. I am mindful that Exhibit 7 reveals that costs incurred by the wife with her current lawyers are $18,465 and she had previous lawyers (including in Supreme Court proceedings), however the total costs incurred by her are unknown. The husband’s Costs Notification reveals legal costs incurred of $196,037.46, with further anticipated costs of $60,500 – a total of $256,000.
It bears mentioning that no cross-examination of the parties about the source of payment for these expenses occurred (if I accept their evidence about their perilous financial position), and so it remains yet another gap in the evidence.
I will, of course, allow parties to make further submissions as to costs, although on my findings it would be uncertain how either party would have the capacity to pay a contribution to the other parties’ costs (a relevant consideration under s117(2A)). My preliminary view is that the general rule under s117(1) should apply but there may be other factors of which I am unaware.
I make these comments mainly because these parties clearly need finality. I accept it is likely neither party will be entirely satisfied with the outcome, however the lack of any evidence of funds available to otherwise alter or adjust is a limitation. To the extent that the delay in delivery of these Reasons has exacerbated their inability to “move on” the Court again expresses its regret.
I make orders as set out at the commencement of these Reasons.
I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Baumann delivered on 22 May 2020.
Associate:
Date: 22 May 2020
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