Sinha and Sharma and Anor
[2019] FCCA 3244
•14 November 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SINHA & SHARMA & ANOR | [2019] FCCA 3244 |
| Catchwords: FAMILY LAW – Proceedings for parenting orders and final adjustment of property interests – parenting applications resolved by final consent orders – application for the adjustment of property interests – de facto relationship – relationship of long duration – just and equitable adjustment of property interests – where parties were persons of modest means at commencement of relationship – where parties accumulate significant property during the course of relationship – where respondent husband contends monies advanced by paternal mother were investment in family business – where paternal mother joined as second respondent – where claim by paternal mother for declaratory relief discontinued in the course of trial – where parties ultimately in substantial agreement as to property pool – whether monies expended by one party should be added back –springboard argument as to establishment of family business and acquisition and development of properties – erosion principle – alleged non-disclosure of funds – company’s future earning potential – treatment of Div. 7A taxation and capital gains liabilities – contributions – parties’ future earning capacity – spousal maintenance – interim property orders made by consent to enable husband to refinance so as to clear mortgage over matrimonial home and free up capital to make cash payment to the applicant wife – consent orders resolve application for removal of caveat – injunction restraining the respondent husband of disposing of any assets lifted to enable sale of properties – removal of injunction conditioned on contemporaneous removal of caveats to enable completion of property sales – parties agreed it is just and equitable to adjust property interests – direct and in direct contributions – final orders made. |
| Legislation: Evidence Act 1995 (Cth), s.140 Family Law Act 1975 (Cth), ss.4AA, 75, 79, 90SB, 90SF, 90SK, 90SM, 90ST, 90RA, 90WA, 106A |
| Cases cited: Aleksovski & Aleksovski (1996) FLC 92-705 Bowe & Bateman [2013] FamCA 253 Beklar & Beklar [2013] FamCA 327 Bevan & Bevan [2014] FamCAFC 19 Bulleen & Bulleen [2010] FamCA 187 Browne& Green (1999) FLC 92-873 Briginshaw v Briginshaw (1938) 60 CLR 336 NHC & RCH (2004) FLC 93-204 Holden & Wolff (2014) 52 Fam LR 60 In the Marriage of Rolfe[1979] FamCA 65 Jabour & Jabour [2019] FamCAFC 78 Johnson v Page (2007) FLC 93-344 Kowaliw & Kowaliw (1981) FLC 91-092 |
| Applicant: | MS SINHA |
| First Respondent: | MR SHARMA |
| Second Respondent: | MR SHARMA |
| File Number: | MLC 11669 of 2017 |
| Judgment of: | Judge A. Kelly |
| Hearing dates: | 27, 28 March, 23 April 2019 |
| Date of Last Submission: | 23 April 2019 |
| Delivered at: | Melbourne |
| Delivered on: | 14 November 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr T. Moisidis |
| Solicitors for the Applicant: | Kennedy Guy |
| Counsel for the First Respondent: | Mr A. Barbayannis |
| Solicitors for the First Respondent: | Mills Oakley |
| Counsel for the Second Respondent: | Mr R. Hoult |
| Solicitors for the Second Respondent: | Clancy & Triado |
ORDERS
By 4.00pm on Thursday, 28 November 2019, the parties file and serve a minute of proposed order giving effect to these reasons for judgment and indicating where they are agreed or disagreed on particular terms of that proposed order.
The proceeding is listed for mention at 10.00am on Monday, 16 December 2019.
The parties are at liberty to apply on short notice.
The costs of and incidental to the proceeding are reserved.
IT IS NOTED that publication of this judgment under the pseudonym Sinha & Sharma & Anor is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 11669 of 2017
| MS SINHA |
Applicant
And
| MR SHARMA |
First Respondent
And
| MR SHARMA |
Second Respondent
REASONS FOR JUDGMENT
Introduction
These reasons for judgment explain orders that are made in an application made under the Family Law Act 1975 (Cth) (Act) for an adjustment of property interests between the applicant wife and first respondent husband who were parties to a de facto relationship. In summary, the applicant pressed for an adjustment of their interests as to 65/35% in her favour while the first respondent pressed for an adjustment of 55/45% in his favour. The parties were agreed that it was just and equitable for a final adjustment of their interests. I have determined that their net Asset Pool is $1,735,271. I have concluded that there should be a proportionate adjustment of 53% to the first respondent and 47% to the applicant. Upon those substantive findings, the relief that should be granted will result in the wife retaining the matrimonial home, unencumbered, together with a payment of $97,227 against which the husband is entitled to set-off certain expenses of $35,436.
Background to parties’ claims
The applicant wife is aged 41 years and is described in her amended initiating application as being self-employed. Elsewhere, her evidence suggests that she is presently unemployed. However, she holds qualifications and is undertaking further study. She is in good health.
The first respondent husband is aged 38 years and is described in his amended response as being a company director. He too holds qualifications and is also in good health.
The parties relocated from India to Australia in … 2005 and commenced living together in a de facto relationship in April 2005, living in a property situate at Suburb GG which they rented.
In early 2007, they participated in a traditional wedding in City B, India.
After a relationship of some 12 years, the parties’ final separation occurred in July 2017 when the first respondent left the matrimonial home.
There is one child of the relationship, HH (Child), who is aged 12 years. The parties’ contested the parenting arrangements that were appropriate to be made by way of final orders; however, this contest was resolved in the course of the trial. Following the making of orders for a family report, the parties agreed in final parenting orders that see the Child spend 5 nights in each fortnight with her father.
The first respondent has re-partnered and now has an infant child.
As will appear, the resolution of the application for a final adjustment of property interests was complicated by the following matters:
a)over the course of their relationship, the parties have acquired a number of properties;
b)there has been the joinder of the paternal mother, who claimed declaratory relief respecting an alleged investment in the parties’ businesses;
c)the scale and significance of sums that the first respondent’s parents had advanced to their son is in issue;
d)the valuation of the business conducted by a company established by the first respondent for the purpose of operating his current business. This company, D Group Pty Ltd (ACN …) (D Group), was valued by an expert who was not cross-examined;
e)taxation liabilities (both capital gains tax and Div. 7A tax);
f)the expenses incurred for valuations of properties and the D Group.
Second respondent’s claim
It is convenient to dispose of this claim at the outset. On 13 February 2019, a judge of this court made orders granting leave for the first respondent’s mother, Mr Sharma, to intervene in the proceeding. To that end, she was added as a second respondent.
By her Response, the paternal mother sought orders pursuant to s 90SL of the Act for a declaration that her son held on trust for her 49% of the issued share capital in the D Group. She travelled from India to give evidence at trial and sought to support her claim for declaratory relief by an affidavit upon which she was cross-examined. To this affidavit, the second respondent exhibited two ‘mutual’ agreements, each of which had been certified by a notary in India. The paternal mother also identified the basis on which she sought to maintain that claim by her Outline of Case. To the extent that she participated at trial, she was ably represented by Mr Hoult of counsel.
The applicant contested the issue of the second respondent owning a 49% interest in the D Group and that the first respondent held an interest limited to 51% of the issued shares in that company. As emerged during cross-examination, the company’s ASIC records did not reflect the first and second respondent’s claims as to shareholding in the company. It was for this reason that the first and second respondents relied on the ‘mutual’ agreements that were allegedly signed before an Indian notary (who ultimately, was not called to give evidence).
The second respondent filed an affidavit on 12 March 2019 deposing to the mutual agreements made between the first and second respondents. Annexed to the affidavit was a mutual agreement made on 8 September 2007 and a further ‘mutual’ agreement made on 18 January 2012 which provided, that in the absence of the first respondent repaying the debt due under the first agreement, the second respondent would beneficially hold a 49% share in the D Group.
The second respondent further deposed that she sold her investment property in India for approximately AUD$245,000, so as to be able to assist her son to start a business in Australia. The second respondent also deposed that she had made certain loans to the first respondent and for which there was no formal agreement as follows:
a)on … 2008, the second respondent and her husband travelled to Australia and provided $40,000 to their son to enable him to start the company, O Pty Ltd;
b)on … 2009, the second respondent travelled to Australia and gifted an amount of $20,000 to her son to assist as he was struggling financially at the time; and
c)a loan of $35,000 was provided to assist her son to make a progress payment on the J Street, Suburb K property – this loan was subsequently repaid.
The second respondent gave evidence with the assistance of an interpreter in relation to certain funds that she had allegedly loaned to her son. She claimed that the applicant had knowledge of the second respondent’s 49% investment in the D Group and that she had agreed her mother in law’s investment was secure and that she would not make any claim against it. This was disputed by the applicant, who deposed in her trial affidavit that the mutual agreements between the first respondent and his mother were fabricated, that corruption was rife in India and it was common practice to pay money in exchange for forged documents.
In his trial affidavit, the first respondent deposed that in June 2017, the applicant sent him a text message acknowledging the second respondent’s 49% investment in the D Group and that she would not make a claim for this in the property settlement proceeding. However, no such text message was exhibited or adduced in evidence.
After the completion of the second respondent’s cross-examination, the parties agreed that she would not press her claim any further and, on 24 April 2019, it was dismissed, by consent. An immediate effect of the dismissal of that claim was to enlarge the size of the Asset Pool by an amount equal to 49% of the value of D Group.
Procedural history
On 9 November 2017 the applicant commenced a proceeding in this court seeking parenting orders together with orders for a final adjustment of property interests and spousal maintenance.
On 14 December 2017 the first respondent filed a Response that he amended on 21 December 2017.
Each of the parties filed an affidavit, Notice of Risk and Financial Statement.
On 18 December 2017, orders were made listing the proceeding for final hearing on 18 April 2019 and adjourning the matter to a mention on 16 February 2018. Interim orders were made by consent respecting property and the payment by the first respondent to the applicant of $3,000 per month by way of spousal maintenance.
Further orders were made by consent on 16 February 2018 respecting parenting matters.
By an Application in a Case filed on 3 August 2018, the first respondent sought a reduction in spousal maintenance, the return of a Motor Vehicle F and an Airport Watch List order in relation to the Child.
On 7 August 2018, orders were made to regulate the trial together with an order placing the Child on the Airport Watch List for two years.
By a further Application in a Case was filed on 21 December 2018, the first respondent sought orders that: the Child attend upon a family consultant; for his mother, Mr Sharma, to be granted leave to intervene in the proceeding, and; for the appointment of Mr G, of H Valuations, as single expert valuer to prepare an updated report of the value of the business, D Group.
On 1 March 2019, the applicant filed an Amended Initiating Application by which she refined her claim for final parenting orders, an adjustment of property interests and spousal maintenance.
On 13 March 2019, the first respondent filed an Amended Response particularising parenting, property and spousal maintenance orders.
Following the commencement of the trial, final parenting orders were made by consent on the 28 March 2019.
In the course of closing submissions on 23 April 2019, the parties also agreed in interim property orders regulating the sale of certain properties and for the proceeds of the sale to be held on trust pending determination of the application for an adjustment of property interests.
Parties positions at trial
By her Amended Initiating Application filed on 1 March 2019, the applicant sought final orders for an adjustment of the parties’ property interests and spousal maintenance. No application was made in relation to child support. As concerned an adjustment of property interests, the applicant sought an order for the transfer to her, unencumbered, of the former matrimonial home, being a property situate at J Street, Suburb K, (J Street, Suburb K property) and for payment from the first respondent so as to effect a division to her of 65% of the matrimonial property pool and that the first respondent should thus retain a share equal to 35% of the pool. However, the cash payment sought by the applicant was the sum of $646,492. The applicant’s case then changed progressively.
By her Outline of Case, the applicant identified an Asset Pool comprising assets of $2.188m, liabilities of $116,000 and minimal superannuation. She confined her position to orders in relation to parenting matters and property interests with no mention being made of spousal maintenance. A further change occurred in closing submission.
Contextually, and as stated at the outset, I have found that the parties’ net Asset Pool is $1,735,271. It was agreed that the J Street, Suburb K property has a value of $690,000. Having regard to that value and the amount of the cash payment being sought by the applicant, a claim of $1,336,492 was being made by the applicant against a net Asset Pool of $1,735,271.
By his Further Amended Response filed on 13 March 2019, the first respondent sought final orders for an adjustment of the parties’ property interests so as to effect a division to him of 55% of the matrimonial property pool and that the applicant should thus retain a share equal to 45% of that pool.
By his Outline of Case the first respondent identified an Asset Pool comprising assets of $1.695m, liabilities of $383,000 and minimal superannuation.
An understanding of the parties competing proposals requires consideration of the background and circumstances of their relationship, assets and liabilities.
Evidence at trial
The applicant and the first respondent relied on their respective trial affidavits and financial statements.
The parties also adduced evidence from the following:
a)Mr G of H Valuations, business valuer;
b)Mr L, accountant;
c)Mr M, Indian advocate; and
d)Mr N, psychiatrist.
None of those other witnesses was cross-examined on their evidence and it is convenient, so far as is necessary, to address their evidence in the context of the particular topic which they have addressed.
Findings
The following findings are based upon an analysis of the parties’ affidavits, viva voce and documentary evidence and the inferences which I consider are properly made. The matters set out below include both matters that were common ground and my findings of fact upon particular issues. Where issues of dispute arose, I have addressed them separately in a later section of these reasons. In deciding disputed issues of fact, I have applied the civil standard of proof to the resolution of that issue.[1] The more serious the allegation, the more necessary it was that I took into account the gravity of the allegation in deciding whether it was made out.[2] Where the evidence does not permit the court to make an affirmative finding either way on a particular issue, the court is not bound to do so and may find that the party, which bears the onus of proof has failed to discharge it.[3] It is clear that the court may well accept some parts of a witness’s evidence and reject other parts of it.[4]
[1] Evidence Act 1995 (Cth), s 140.
[2]cf Evidence Act 1995 (Cth), sub-s 140(2); Johnson v Page (2007) FLC 93-344, [72]; Briginshaw v Briginshaw (1938) 60 CLR 336.
[3] Kuglioski v Metrobus (2004) 220 CLR 363.
[4] Jabour & Jabour [2019] FamCAFC 78, [110] and cases cited.
Overall, I found the applicant and first respondent to be combative witnesses, each equally frustrated with their inability to achieve a conclusion of their litigation. Their frustration was, it seemed, borne of an inability to obtain the concessions that they sought from the other in relation to their competing claims for a final adjustment of property interests. Yet, I found that they presented as essentially honest and reliable witnesses who did their best to deal with the questions that were asked of them. For those reasons, I have generally accepted their evidence. On occasion, there were clearly motivated by self-interest.
The parties’ evidence recounted much of the history of their relationship and addressed the issues that have been summarised above. The parties moved to Australia in early 2005 and commenced cohabitation in … of that year. Their traditional Indian marriage was celebrated in City B, India in … 2007.
Both parties studied at Victoria University. When the parties first met, the applicant was working at a business and in 2007, and first respondent worked as a labourer. The applicant later gained employment as a customer service officer and the first respondent had various other employment.
Relevantly, the parties had few assets of significance when they began cohabitation. The first respondent owned a vehicle valued at $3,000 and had savings of approximately $4,000. The applicant had modest personal effects.
From about 2007, the first respondent began to pursue various business opportunities.
By her affidavits, the applicant gave a variety of accounts as to alleged gifts made by the first respondent’s parents to the parties. It is not possible to determine the veracity of those accounts and I decline to do so. However, on the whole of the evidence it is clear that a large number of deposits were made by the second respondent to his bank account. Objectively, the making of those deposits to the first respondent’s personal account undermines the credibility of the claim that the monies were advanced to both of the parties.
By her trial affidavit, the applicant also deposed that the parties had regularly sent the first respondent’s parents money to assist them. She accepted that her parents-in-law were struggling financially and that these advances were usually for amounts of ~$300 and were made via Western Union Funds Transfer. She further deposed that these sums were transferred at monthly intervals during the last two years of the parties’ relationship. The applicant annexed certain transfer receipts to her affidavit. By his trial affidavit, the first respondent agreed that his parents were struggling financially and that he transferred money to their account so as to assist them. While not disputing the transfers, he explained those payments on the basis that, because they had financially assisted him, he felt a sense of responsibility to assist them financially. The first respondent’s evidence, which resonated with me, was that his mother had sold her investment property to assist him in his ventures and, in particular, that without that support, he would not have been in a position to purchase the D Group or any of the properties that are the subject of this proceeding.
As noted above, the second respondent adduced evidence of a mutual agreement, which, she claimed was made on 8 September 2007 pursuant to which she agreed to provide $130,000 from the sale of her investment property in City B and in consideration for which she was to receive 49% of the equity in the D Group. Over the period February 2008 to April 2009, the second respondent made a series of deposits amounting in aggregate to $155,280. Those deposits were said to include the sum of $130,000 together with a gift of $25,280 that was made by way of gift to her son. These monies were deposited to the first respondent’s ANZ Access Advantage Account # ….
On 28 March 2008, the first respondent borrowed $40,000 from his mother to establish a business. On … 2008, the first respondent incorporated O Pty Ltd, which he employed as the vehicle for this (the parties first), business venture. The applicant subsequently resigned from her employment at Employer JJ to assist the first respondent with the development and growth of the business. The parties operated the company but it ceased two months into trading. The first respondent claims, and it was not disputed, that this was due to the impact of the global financial crisis. The parties lost $20,000 as a result of that business venture.
The parties have purchased a number of properties.
In 2008, the first respondent purchased the J Street, Suburb K property as a block of vacant land and upon which the matrimonial home was constructed at a cost of $130,000 (matrimonial home). During 2009, the second respondent advanced monies to her son which were applied toward progress payments of $35,000 for the construction of their home.
Following the failure of O Pty Ltd, the first respondent obtained full time employment as a professional.
In 2009, the first respondent purchased a franchise business, P Pty Ltd. The first respondent applied $130,000 of the monies advanced by his mother to the purchase of this business. The business traded at a loss by reason of costs being extracted from the business by the franchisor. In early 2010, this business was sold for $225,000 with the proceeds of sale being applied for a variety of purposes including: (a) payment of $90,000 to avert litigation with the P Pty Ltd franchisor; (b) repayment of $35,000 to the husband’s mother; (c) establishment of the D Group business. It appears that before selling this franchise, the first respondent had established his business. That he did so may explain why a payment made to avoid litigation with that franchisor.
On 9 November 2009, the first respondent incorporated D Group as a company that would operate the business. An ASIC search reveals that the company trades as D Group. At incorporation, the first respondent was the sole director and shareholder. However, on 22 February 2010, the applicant became the sole director and shareholder. The decisions to change the control and ownership of the company may have been motivated by a desire to protect the assets comprised in this business from the prospect of litigation with P Pty Ltd. A further change in control apparently occurred on 31 May 2010 when, as was suggested, the applicant resigned as a director and the first respondent became the sole director. As appears below, further changes were to occur in 2017.
After the birth of the parties’ Child in … 2011, the applicant performed home duties and was the primary carer of the Child. The applicant does not currently perform paid employment but has been completing qualifications. The applicant expects to complete her studies by June 2019.
From late 2011, the first respondent’s mother requested repayment of the sum of $130,000 that had been advanced to her son. In the result, a further ‘mutual’ agreement was made pursuant to which the first and second respondents purported to clarify certain aspects of their business relationship, including that the parties acknowledged $130,000 had been advanced by the second respondent so as to enable the D Group to be established and that she held 49% of the issued share capital in that company with the remaining 51% being held by the first respondent. Although these matters were in contest, it is now unnecessary to making determinations as to the true state of affairs.
At all events (and as sometimes occurs), the assets of D Group were applied to the first respondent’s personal objects. In particular, a total sum of $304,300 was loaned by the company to the first respondent and applied by him to the purchase and development of certain properties. These monies were progressively loaned by the company to the first respondent over the period 2016 – 2017. The borrowing of those monies has raised tax consequences for the first respondent. The assets and liabilities generated as a result of the borrowing of those monies were so generated before final separation.
The properties that have since been purchased are as follows:
a)Q Street, Suburb R, in the State of Victoria, being the land more particularly described in certificate of tile, Volume …, Folio … (Q Street, Suburb R property).
b)S Street, Suburb T, in the State of Victoria, being the land more particularly described in certificate of tile, Volume …, Folio … (S Street, Suburb T property).
c)U Street, Suburb R, in the State of Victoria, being land that has now been sub-divided into three units (U Street, Suburb R property).
The Sharma Family Trust is registered proprietor of both the Suburb R and Suburb T properties, while the first respondent, who is registered as proprietor of the U Street, Suburb R property, has undertaken the redevelopment of that land and constructed three units upon it.
The properties described above are security for various loans that have been made for the purposes of their purchase and development. The quantum of those loans is substantial. Further, the purchase of those properties has also raised capital gains tax consequences.
The parties separated on 6 July 2017. Less than a week earlier, the applicant resigned as a director and shareholder in D Group. She denied signing any papers or knowing anything about such resignation. The first respondent’s evidence was that the papers were prepared by his accountant, Mr L, transmitted to the parties by email and that the parties, in accordance with their usual practice, attached their ‘electronic signatures’ to the documents before returning them to the accountant . Again, it was suggested that these changes were necessary for ‘asset protection’ reasons. From this date, the first respondent has remained the sole director and shareholder of the company. The applicant deposed in her trial affidavit that she had no knowledge of being removed from the directorship or shareholding of the company and had sought for the discovery of those documents which have not been provided to date. According to the applicant’s version, these events may have involved questionable conduct at the time of separation. The issue was not explored in any detail with the first respondent and importantly, Mr L was not cross-examined.
As noted above, the first respondent contended, and it was also in contest, that at about the time of separation, he received a text message from the applicant confirming that his mother’s 49% stake in D Group was secure and that she would make no claim against it. Given the dismissal of the second respondent’s claim for declaratory relief, it is unnecessary to determine the veracity of the parties’ competing positions on this issue. It is sufficient to note that the text message was not produced (despite attempts to secure production by way of discovery).
Since separation, the applicant has not re-partnered. The first respondent has re-partnered with Ms W aged 37 years. They now have one child, X, who was born on … 2018.
From the time of separation until at least January 2019, the first respondent encountered difficulty in obtaining spend time with his daughter. The applicant also gave her account of the first respondent’s conduct at this time. Without investigating the whole of the circumstances giving rise to this aspect of the matter, it appears that a recurrent theme was that the applicant withheld the Child from her father and that a number of applications were necessary in order to restore the Child’s spend time. Amongst those applications was that a family report be obtained. Surprisingly, the cost of this report is now in dispute.
In the course of the conduct of the proceeding, the first respondent has incurred substantial fees in obtaining valuations of the various assets. The applicant contests that these fees should be borne by her at all.
Jurisdiction in de facto property applications
65.Part VIIIAB of the Act concerns the subject, Financial matters relating to De Facto relationships, and is comprised of ss 90RA – 90WA. Division 2 of Part VIIIAB concerns amongst other things, alteration of property interests of parties to a de facto relationship. Subdivision C of Div. 2 in Part VIIIAB, which concerns declarations and alterations of property interests, is comprised of ss 90SK – 90ST.
The jurisdiction to make orders respecting the property of such parties is subject to a number of constraints that differ from parties to a marriage.
First, by para 90SB(a) the court may only make an order for the alteration of property interests where it is satisfied that, relevantly, the parties’ de facto relationship endured for a period exceeding two years, there is a child of the relationship or that the applicant had made substantial contributions to it: s 90SB. The expression de facto relationship is defined by s 4AA and exists where persons are not legally married, they are not related by marriage and, having regard to all the circumstances, they have a relationship as a couple. The circumstances relevant to the consideration of whether the parties have a relationship as a couple are listed in sub-s 4AA(2)(a)-(i) of the Act. The court is not required to make a particular finding in relation to any circumstance in deciding whether parties have a de facto relationship and may have regard to such matters and attach such weight to the circumstances as seems appropriate in the particular case.[5]
[5] Act, sub-s 4AA(3)-(4).
Secondly, by s 90SK a geographical requirement is placed upon the engagement of the power to alter property interests of such parties. Relevantly, the court must be satisfied that one or both of the parties was ordinarily resident in a participating jurisdiction, which includes (as is applicable in this case), the State of Victoria.[6]
[6] Act, ss 90RA(1)(a).
Accordingly, it is essential to the making of orders for an adjustment of interests in the property of parties to a de facto relationship that the court has been satisfied it has jurisdiction.[7]
[7]Norton & Locke (2013) FLC 93-567, [78]-[80] (Bryant, Murphy and Benjamin JJ); Holden & Wolff (2014) 52 Fam LR 60, [42] (Ainslie-Wallace, Ryan and Aldridge JJ).
I am satisfied that the court has jurisdiction in this case. The parties were parties to a de facto relationship. Their relationship was of some 12 years duration, a child was born of that relationship and they co-habited for many years. The applicant was ordinarily resident in Victoria when the proceeding was commenced and during the whole of their relationship. Further, I am satisfied that the applicant had made substantial contributions in relation to the de facto relationship and was resident in Victoria when the relationship broke down. Thus, the court has jurisdiction to make declarations and orders for an adjustment of property interests as sought by the parties in this proceeding.
Applicable principles
The alteration of property interests of parties to such a relationship is provided for by s 90SM of the Act. In proceedings with respect to the property of parties to a de facto relationship, the court is authorised by para 90SM(1)(a) to make such order as it considers appropriate. The power conferred by s 90SM is engaged only in a property settlement proceeding, being a proceeding with respect to the property of the parties or either of them. The power extends only to an adjustment of interests in the property of the parties.
When considering what order (if any) should be made in a property settlement proceeding, s 90SM(4) requires that the court take into account each of the seven matters addressed in paras (a)-(g). The circumstances which the court is required to take into account have been identified as falling within three broad categories: (1) the parties’ contributions of all kinds; (2) the parties’ present and future needs, means and resources, and earning capacity, actual and potential; (3) any other circumstance which justice requires be taken into account.
A settled approach[8] that is generally taken to the determination of a claim for adjustment of property interests under the Act entails a four-stage process as follows:
a)first, identifying the parties’ assets, liabilities and financial resources at the date of hearing; calculating the net value of their property;
b)secondly, ascertaining the parties’ contributions (both financial and non-financial), within the meaning of paras 79(4)(a)-(c) or 90SM(4)(a)-(c) (as the case requires), and then determining the contribution based entitlements of the parties, expressed as a percentage of the net value of their property;
c) thirdly, giving consideration to the other factors prescribed by paras 79(4)(d)-(g) or 90SM(4)(d)-(g) as the case requires, including the matters, so far as relevant, as referred to in s 75(2) or 90SF(3) so as to decide if any further adjustment to the percentage assessment of contributions is warranted;
d)fourthly, considering the overall effect of those findings and determinations and resolving what order is just and equitable in all of the circumstances.
[8]Hickey & Hickey; the Attorney General for the Commonwealth of Australia (2003) FLC 93-143, [39] (Nicholson CJ, Ellis and O’Ryan JJ).
A holistic approach should also be taken when deciding an application for adjustment of property interests. This approach permits that a global assessment may also be appropriate.
However, the four-stage process articulated in Hickey need not be followed rigidly: Bevan & Bevan.[9] The Full Court has affirmed that a holistic approach should be made when deciding an application under s 79: Wallis & Manning.[10] Where it is said that a holistic approach should be made, this is to be understood as permitting that a global re- assessment of the matter is appropriate. It is also to be understood as reinforcing the need to move beyond an assessment that is expressed purely in percentage terms and to consider the real impact, in money terms, as the critical issue in the case. In particular, where any additional allowance is to be made in favour of one party by reason of ss 75(2)/90SF(3) factors, regard may be had to the disparity in money terms of the effect of that additional allowance.[11]
[9] [2014] FamCAFC 19, [18]-[19] (Bryant CJ and Thackeray J), [97] (Finn J agreeing).
[10] [2017] FamCAFC 14, [23]; citing Dickons & Dickons (2012) 50 Fam LR 244, [24].
[11] Clauson & Clauson (1995) FLC 92-595, 81,911 (Barblett DCJ, Fogarty and Mushin JJ).
In short, the evaluation requires consideration of contributions both tangible (i.e. financial) and intangible (i.e. non-financial).[12]
[12] Bulleen & Bulleen [2010] FamCA 187 at [19]-[20], [26], [40] (Cronin J).
I apply these principles in the present case.
Adjustment is warranted
The parties were agreed that there should be an adjustment of their property interests. Having identified the parties’ existing property interests, I also consider that it is just and equitable that there should be a property adjustment of those interests between the parties.[13]
[13] Stanford and Stanford (2012) 247 CLR 108 (Stanford), [31], [44].
Such an adjustment is just and equitable because one or both of the parties have chosen that they should no longer continue to live together in their relationship. For that reason, the parties no longer have the common use of their property, toward the acquisition of which they have each made contributions over the period of their relationship. As a result, the express or implicit assumptions which underpinned their relationship, including that they would be able to consensually adjust their interests in such property, are at an end.[14] Accordingly, a just and equitable adjustment of their interests is therefore appropriate.
[14] Stanford, [41]-[42].
As the requirements of s 90SM(3) are satisfied, it is appropriate to turn to the further question of what order, if any, is appropriate to be made adjusting the parties’ property interests. Consideration is then required of the matters prescribed by s 90SM(4). I consider each in turn.
As noted, the supposed ambit of the disputed property adjustment was as follows: the applicant sought an adjustment of 65/35 in her favour, while the first respondent sought a 55/45 adjustment.
Disputes as to Asset pool
At the commencement of the trial, Mr Barbayannis, counsel for the first respondent proffered two excel spreadsheets designated: Scenario #1, Asset Pool as sought by the Husband and Scenario #2, Asset Pool as sought by the Wife respectively. Counsel was to be commended for this initiative. By the end of trial, a large number of concessions had been made which obviated the need to resolve many of the contested issues in relation to those two differing scenarios.
While the parties ultimately adopted the position that they were in general agreement in relation to their Asset Pool, there are some items as to which further consideration is required. In this regard, I am mindful that it is not the court’s function to conduct an audit of the parties’ relationship or of their finances: Pates & Pates.[15]
[15] [2018] FamCAFC 171 (Pates), [18] (Ryan, Aldridge and Austin JJ).
It is convenient to address each asset and liability (and, where required, to give my findings upon the items of property) which were in dispute.
Assets in dispute
By way of overview, it is apparent that the first respondent has demonstrated some aptitude as an entrepreneur. In his earlier ventures, he did not always succeed; however, most recently he has done so. To the extent that there was disagreement about particular assets and liabilities, I have addressed them below. When those matters have been addressed, it is possible to complete the identification of their Asset Pool.
Sums advanced by husband’s parents
The second respondent filed an affidavit on 13 March 2019 deposing to depositing the total sum of $155,280 into her son’s ANZ Access Advantage Account, ### …. The following deposits were made:
a)2 February 2009 $14,970
b)4 March 2009 $4,950
c)10 March 2009 $1,500
d)19 March 2009 $24,500
e)19 March 2009 $25,000
f)24 March 2009 $10,000
g)24 March 2009 $14,800
h)27 March 2009 $3,000
i)30 March 2009 $2,000
j)23 April 2009 $10,160
k)23 April 2009 $30,000
l)28 April 2009 $4,400
m)28 April 2009 $10,000.
Counsel for the applicant, Mr Moisidis, submitted that these cash advances by the second respondent should be considered as a gift by way of the equitable principle, presumption of advancement.
The monies were deposited to the first respondent’s bank account. There was insufficient evidence to support a finding of gift to both parties. Whether or not one was to accept the submission, it was not suggested that those monies did not represent an indirect contribution that had been made on behalf of the first respondent.
Part of the history of the parties’ dealings with the first respondent’s parents included that monies were also transferred by the parties to his parents. The applicant’s trial affidavit deposed that she was aware that the first respondent’s parents had become unable to afford some of their expenses and that the paternal father was largely unemployed. The evidence indicates that the first respondent transferred $300 per month to his parents from 2014 – 2017. This evidence was not adduced as indicating the first respondent was diverting funds for his benefit post- separation.
D Group
On 9 November 2009, the first respondent registered the company, D Group Pty Ltd (ACN …). The D Group is a franchise company. The D Group has five franchises located in Suburb KK, Suburb Y, Suburb LL, Suburb MM, and Suburb NN.
Initially, the first respondent was the sole director of the D Group. On 22 February 2010, the first respondent resigned and the applicant was appointed as sole director or in his place. On 31 May 2010 the roles reversed again. ASIC records show that the applicant was the sole director of D Group until 1 July 2017. As the parties separated on 6 July 2017, the applicant’s resignation as a director occurred five days prior to the parties’ final separation and the first respondent moving out of the matrimonial home. During cross-examination, the first respondent said that the reason there was a change in the D Group’s directorship was to protect the parties’ assets from any potential litigation by the P Pty Ltd franchisor. This evidence was unconvincing.
The first respondent, who is the sole director and shareholder of the company, maintained that this enterprise now only involved him. I do not accept that this was a venture that did not have the input and assistance of the applicant. Insofar as the first respondent has deposed that he was able to establish the D Group only after being advanced funds by his parents I accept that evidence. However, the two propositions are distinct. Each of them is of relevance to an evaluation of the issue of the parties’ contributions (whether direct or indirect).
The first respondent is currently the sole director of the D Group (and its only employee) and receives an income of $2,846 per week.
For the purposes of the proceeding,[16] the D Group was valued at $560,235. Upon dismissal of the second respondent’s claim for declaratory relief, the whole of that sum was included in the Asset Pool. While the parties accepted this conclusion, the monies that were paid by the second respondent also remain relevant in relation to contributions.
[16] Mr G’s independent valuation.
It is necessary to say something more of the D Group and observations that were made in the course of the valuation a little later.
Motor Vehicle F – claim by wife
Included in the Financial Statements of D Group is a depreciation schedule from which it appears that the parties had developed a taste for fine motor vehicles. Amongst the vehicles listed in that schedule are the following: Motor Vehicle Z, Motor Vehicle AA, Motor Vehicle OO and a Motor Cycle BB. The written down values of those vehicles may indicate that none of them are of significant value. The first respondent’s trial affidavit detailed the extensive monthly repayments on all vehicles (save a Motor Vehicle A) as amounting to ~$6,000. The first respondent’s evidence was that he cannot continue this lifestyle and needs to sell some of those vehicles. An available inference, which I draw, is that the parties had pursued a lifestyle that was not entirely consistent with their true financial position.
In addition, the applicant is in possession of a Motor Vehicle F that is the subject of motor vehicle finance from Bank of Melbourne. The borrower under that finance facility is the D Group. The sum due to discharge that facility is $132,930. The liability for that finance facility lies with D Group. Evidence adduced at trial indicated that, if the finance on that vehicle was repaid, the bank would claim no further interest in the vehicle. I infer that the equitable interest in the vehicle would then revert to D Group.
While the parties conducted the case on the basis that the vehicle was owned by the D Group, the proper inferences to be drawn from the evidence include that until that finance facility is repaid, the Bank of Melbourne held an interest in the Motor Vehicle F at least by way of security for repayment of the debt.
Despite those facts, the applicant seeks to retain that vehicle. The difficulty with that proposition is that it is the asset of the D Group. On the case run by the applicant, she sought to retain the Motor Vehicle F and let the large liability remain with the company. This was unrealistic for a number of reasons, including that the Motor Vehicle F motor vehicle had been taken into account in the business valuation of the single expert. The approach adopted by the applicant sought, at one and the same time, to include that asset in the valuation of D Group but to remove it as an asset that could be treated as though it belonged to the parties. The risk of double counting is obvious.
While the first respondent proffered a number of means by which the vehicle might have been transferred to the applicant, none of those options was under serious consideration or feasible on any view. On no view was it just or equitable to appropriate an asset (not belonging to either party) for the purposes of the adjustment of their private property interests and to transfer it to the applicant.
Add backs – funds withdrawn by the husband
An issue arose at trial that had not been detailed in either proposed Asset Pool (and was only mentioned in passing in the applicant’s Outline of Case) concerned whether there should be any add backs made to the Asset Pool in relation to monies that were variously taken in 2009 and shortly before the parties’ final separation in July 2017. Contextually, one of these transfers occurred roughly five weeks prior to the parties separating on a final basis.
The add backs related to the first respondent’s transfers of funds from his ANZ Access Advantage Account. In substance, the first respondent was the subject of criticism for having dealt with the following sums:
a)the first amount was a withdrawal of $123,010 on 28 April 2009 from his ANZ Access Advantage Account;
b)the second amount was a transfer of $150,000 to CC Real Estate on 28 April 2017 that was transferred back to the first respondent’s personal bank account between 30 January 2018 and 24 July 2018.
As to the first amount (withdrawal of $123,010 on 28 April 2009 from first respondent’s ANZ Access Advantage Account), counsel for the applicant cross-examined the first respondent as to this withdrawal of funds. From an entry contained in a bank statement adduced in evidence, a debit for the sum of $123,000 was noted as being “Card Entry at Bank Branch (sic)”, reducing the balance of the account to $1,177. It was submitted that the first respondent had not adequately explained why he had withdrawn an amount of $123,010 from that account or what happened to this amount. It was put that the first respondent failed to account and disclose properly as to what those monies were spent on and where they now were.
As to the second amount involved a transfer of $150,000 to CC Real Estate on 28 April 2017 and subsequent transfer to the first respondent’s personal bank between 30 January 2018 – 24 July 2018. The first respondent was criticised for having applied this amount for his legal fees of $76,337 and everyday living expenses. In his trial affidavit, the first respondent deposed to transferring the funds to CC Real Estate so as to “acquire a shareholding in a project” which did not proceed. CC Real Estate subsequently transferred the $150,000 back to the first respondent’s personal bank ANZ Access Advantage Account.
It is necessary to examine the applicable principles.
In deciding whether it is just and equitable that an order should be made adjusting property interests, the court must first identify the parties existing property interests. To do otherwise would be to approach the question posed by sub-s 79(2) in an unprincipled fashion. The question “is not to be answered by assuming that the parties’ rights to or interests in marital property are or should be different from those that then exist”.[17] Ordinarily, the Asset Pool is determined as at the date of trial. However, the conceptual (and perhaps forensic) difficulties presented by add backs may be addressed by adopting a date earlier than the trial date: Bateman v Bowe.[18]For good reason, the adoption of this course was not advocated by either party to this proceeding. Had the Asset Pool been determined, for example, in 2009, there would have been a diminution in the value of the other properties comprised in the pool at that date.
[17]Stanford (2012) 247 CLR 108, [37]-[39] (French CJ, Hayne, Kiefel and Bell JJ) (emphasis added); see also Bevan & Bevan [2013] FamCAFC 116, [50], [79] (Bryant CJ and Thackeray J), [155]-[156] (Finn J).
[18] [2013] FamCA 253, [32]-[35] (Murphy J). Such a course was not suggested in this case.
The need to identify the existing property interests arises because the power conferred by para 90SM(1)(a) is to make orders with respect to the ‘property’ of the parties to the marriage or either of them. Commonly, a problem is presented by the fact that one of the parties has unilaterally disposed of such assets, with the result that such property no longer exists. In that event, the property so disposed of is unlikely to constitute property of the parties to the marriage and, “thus is not amenable to alteration under s 79”.[19] It will be recalled that ‘property’ as defined under the Act means property to which the parties or one of them is entitled, whether in possession or reversion. Where property has been dissipated at the date of trial, it can no longer be identified as property to which either party is entitled. However, it is an entirely separate question as to what orders can be made.
[19] Bevan, supra [2013] FamCAFC 116, [79] (Bryant CJ and Thackeray J), [157]-[158] (Finn J).
One settled approach to the resolution of such property disposals has been notionally to add back the sum so withdrawn by one party. By this means, the court is enabled to assess the parties’ net assets as they would have been, but for the unilateral dissipation of the parties’ assets. The process of making notional add backs to an Asset Pool is perhaps akin to the reconstruction of a balance sheet by the inclusion of provisions in respect of assets or liabilities so as to present a true and fair view of the parties’ net Asset Pool as at the date of trial. Both liabilities and assets may be notionally adjusted where the justice of the case warrants such an approach. Adjustment is not made as of course.
Complex questions have arisen whether the ‘add back’ process is available as an exercise of power and by what means the court may address property that has been dissipated and no longer exists.[20] Part of that complexity arises from the operation of para 90SM(4)(a) which requires that account be taken of the parties’ contributions to property, irrespective of whether it has ceased to be property of the parties. That is, in deciding what order, if any, should be made, account must be taken of contributions (whether by way of acquisition, conservation or improvement of property), notwithstanding that such property has been sold or transferred before the date of trial. As para 90SM(4)(a) requires the court to take account of the contributions of a party respecting property which has ceased to exist, it follows that it is authorised to take into account property that one party has unilaterally appropriated or disposed of and which no longer exists. This does not mean that orders adjusting property may be made respecting property that does not exist. To the contrary, it is only to recognise that, in deciding what order (if any) should be made, para 90SM(4)(a) requires that account be taken of property that may no longer exist: see also para 90SS(1)(a)-(l).
[20] Beklar & Beklar [2013] FamCA 327, [134] (Ryan J).
Relatedly, it is not uncommon that, pending determination of a property settlement proceeding, parties will be driven to expend capital. In such cases, there is no appropriate basis for notionally adding back monies that have been spent on meeting reasonable living expenses. Neither the Act or case law “require the parties to go into a state of suspended economic animation once their marriage breaks down pending resolution of their financial arrangements. Parties are entitled to continue to provide for their own support. Whether any expenditure so incurred is reasonable or extravagant is a matter that can be determined by the trial judge”.[21]
[21] M & M [1998] FamCA 42, [2.11]; Tuckson & Elsey [2017] FamCAFC 145 [106].
In Vass & Vass,[22] the Full Court considered the resolution of issues presented by the husband having paid $50,000 purportedly in repayment of a loan to his parents and a further $25,000 in servicing a mortgage and personal living expenses. The Full Court held[23] that the process of undertaking a calculation of notionally adding back monies to an Asset Pool did not involve error per se, rejecting a suggestion that Bevan or Stanford, had held to the contrary.
[22] [2015] FamCAFC 51.
[23] [2015] FamCAFC 51, [138].
More recently, the Full Court affirmed that conceptually, the process of adding back may be an entirely permissible course: Rankin & Rankin.[24] As the result in that appeal demonstrates, the court retains a discretion as to what sum should be added back in all of the circumstances.
[24] [2017] FamCAFC 29, [57]-[58], [64]-[66]. (May, Thackeray and Aldridge JJ).
In Beklar & Beklar,[25] Ryan J undertook a detailed examination of authority and identified the following principles:
[25] [2013] FamCA 327
a)financial losses should, in general, be shared whether or not they are a joint liability, except where the conduct of the party:
i)entailed a deliberate course of conduct designed to reduce or minimise the effective worth of the parties’ assets;
ii)was reckless, negligent or wanton so as to reduce or minimise the value of the parties’ assets;[26]
[26] [2013] FamCA 327, [131], citing Kowaliw & Kowaliw (1981) FLC ¶91-092.
b)such losses need not, however, be shared equally;[27]
c)complex and discretionary considerations may be involved in resolving issues whether: (i) a loss should be notionally added back; (ii) the amount could be characterised as a s 75(2) factor, or; (iii) it should be dealt with upon some other basis;[28]
d)where property has been dissipated by waste (by being damaged or sold at undervalue), a notional add back is allowable; [29];
e)a notional add back is not confined to waste; it is also allowable where identifiable items of property have been disposed of in a bona fide manner, where no, or no reasonable, explanation has been given for an assertion that the property no longer exists or it is suggested that it never existed; [30]
f)by contrast, the court will generally be more reluctant to add back monies that were expended upon reasonable living expenses; [31]
g)rather, monies that are shown to have been reasonably disposed of should not, absent exceptional circumstances be the subject of a notional add back. As to this, a finding of extravagant spending is a fact intensive inquiry in which the needs and income of the party will be relevant;[32]
h)absent exceptional circumstances, a trial judge should deal with the property existing as at the date of hearing; however, the justice of the case may make it appropriate to add back assets that have been dissipated during the marriage or post separation – such as by gambling or extravagant living; [33]
i)the treatment of legal fees is a matter falling for discretion[34]. Where the legal fees were funded by the early release of monies to enable a party to prosecute their property claim, they would normally be added back. To allow one party to apply their property toward legal fees may subvert the operation of s 117 of the Act; [35]
j)an alternative approach can be taken under para 75(2)(o) of the Act whereby an adjustment is made to require a party to account for monies that have been dissipated (e.g., by gambling losses). [36]
In a statement that echoed the principles in Mallet, Ryan J held that it would be wrong to elevate prior decisions on this topic as representing the normal (i.e presumptive) approach to be taken in such cases.[37]
[27][2013] FamCA 327, [132]-[133], citing Kowaliw, supra; Browne& Green (1999) FLC ¶92-873. In the latter case, the husband was held solely responsible for losses, despite the absence of any recklessness on his part.
[28] [2013] FamCA 327, [134].
[29] [2013] FamCA 327, [134] citing Townsend & Townsend (1995) FLC ¶92-569.
[30] [2013] FamCA 327, [135] citing B & B [2000] FamCA 1301.
[31] [2013] FamCA 327, [135] citing M & M [1998] Fam CA 42.
[32] [2013] FamCA 327, [137] citing C & C [1998] FamCA 143; see also at [140].
[33] [2013] FamCA 327, [136] citing M & M [1998] FamCA 42, [2.10].
[34] [2013] FamCA 327, [141] citing NHC & RCH (2004) FLC ¶93-204.
[35] [2013] FamCA 327, [143] citing DJM v JLM (1998) FLC ¶92-816.
[36][2013] FamCA 327, [145]-[146] citing De Angelis & De Angelis (2003) FLC ¶93-133.
[37] [2013] FamCA 327, [144].
The Full Court in Omacini[38] recognised “three clear categories” where the court has been willing to notionally add back property to a pool:
(a)where the parties have expended money on legal fees[39];
(b)where there has been a premature distribution of matrimonial assets[40]; and
(c)where one party has embarked on a course of conduct designed to reduce the value of matrimonial assets or has ‘acted recklessly, negligently or wantonly with matrimonial assets.’[41]
[38] Omacini & Omacini (2005) 191 FLR 317, [30].
[39] DJM & JLM [1998] FamCA 97; (1998) FLC 92-816.
[40] Townsend & Townsend [1994] FamCA 144; (1995) FLC 92-569.
[41] Kowaliw & Kowaliw [1981] FamCA 70; (1981) FLC 91-092, 76, 644.
In Omacini,[42] the Full Court cautioned that the judicial discretion to add back monies is not merely enlivened by a party who has expended money from the assets that existed as at the date of separation. To do so would be unduly simplistic. An assessment of the reasonableness of the expenditure is required. Reasonably incurred expenses will, in general, not be added back. The Full Court stated in M & M[43]:
There seems to be no appropriate basis for notionally adding back moneys that existed at separation but which have subsequently been spent on meeting reasonably incurred living expenses. Neither the Family Law Act nor the case law require that parties go into a state of suspended economic animation once their marriage breaks down pending the resolution of their financial arrangements. Parties are entitled to continue to provide for their own support. Whether any expenditure so incurred is reasonable or extravagant is a matter that can be determined by the trial judge.
[42] Omacini & Omacini (2005) 191 FLR 317, [39].
[43] M v M [1998] FamCA 42, [2.11].
As concerns legal fees, it seems that add backs are considered the “norm rather than the exception”. In DJM v JLM,[44] a Full Court held:
. . . s 117 provides that each party to proceedings under the Family Law Act shall bear their own costs unless the court otherwise orders. Failing to add back moneys expended by parties on costs frequently has the effect of defeating the policy of s 117 by permitting the pool of available assets for distribution between the parties to be diminished by any moneys that either of the parties have managed to spend on their costs up to the date of trial. We are of the view that the normal approach ought be to add costs already paid back into the pool. While there may be cases where that approach is inappropriate, the reasons why it is not taken ought normally be spelt out. We see no reason advanced in this case as to why the costs paid should have been kept out of the pool.
[44] DJM v JLM (1998) 23 Fam LR 396, [11.6].
In Talbot & Talbot,[45] a Full Court allowed that where a party had unilaterally disposed of property which no longer existed at trial, the justice of the case may entitle the court to take account of the property by notionally adding it back to the Asset Pool, pursuant to para 75(2)(o), or otherwise. The Full Court further held that each of those alternative approaches was a matter of discretion, the exercise of which required that account be taken of all relevant considerations, stating:[46]
. . . one of the most important of which was what the evidence revealed about expenditure from the account into which the funds were banked. That is because, amongst other things . . . “parties are entitled to reasonably conduct their affairs post-separation in a manner that is consistent with properly getting on with their lives.
The Full Court held that if money was to be added back some years after it had been spent, account must be taken of what the evidence revealed about what had been spent on ordinary living expenses and of the parties’ financial position more broadly.
[45] (2015) FLC ¶93-660, 80,377.
[46] (2015) FLC ¶93,660, 80,377, [51] citing Cerini & Cerini [1998] FamCA 143.
In Tuckson & Elsey,[47] a Full Court considered an appeal in which the wife had unilaterally sold a property, applying the proceeds of sale in repayment of a loan to her father. The appellant wife contended error by the trial judge in adding back the net proceeds of sale to the Asset Pool. Upholding this ground of appeal, the court identified error in the failure to consider how the proceeds had been spent or to determine whether such expenditure had been reasonable in the circumstances.[48] Critically, in that case, add backs were denied as the wife had borrowed from her father for her living expenses.
[47] [2017] FamCAFC 145.
[48] [2017] FamCAFC 145, [98], [110].
Counsel for the husband relied on Bateman & Bowe[49] where the court noted that add backs are “the exception rather than the rule.” So much may be accepted. However, to state the proposition at that level of generality ignores that in this case a substantial sum was conceded to have been spent on legal fees. In Bateman & Bowe[50], Murphy J recognised that in Omacini, the Full Court had accepted that add backs may occur in relation to: (a) legal fees; (b) the premature distribution of matrimonial assets and; (c) on account of waste. However, his Honour emphasised that a decision to add back sums to an Asset Pool was a quintessentially discretionary decision and it was not for the court to undertake that exercise as though conducting an audit. Murphy J held that in the circumstances of that case he was not prepared to add back a sum of $20,000 expended on legal fees since the parties’ post-separation conduct had involved other substantial expenditure. His Honour reasoned that it was neither just nor equitable to do so.
[49] [2013] FamCA 253.
[50] [2013] FamCA 253, [50]-[57].
Relatedly, in Bateman & Bowe[51] Murphy J also observed that far too commonly, applications for an adjustment of property interests were allowed to descend into an ex post facto audit of the parties’ financial affairs, particularly post-separation. As Mr Barbayannis correctly submitted, Murphy J confirmed, by reference to Norbis & Norbis,[52] that the process of determining the parties’ contributions was quintessentially not a mathematical exercise and stood in marked contrast to the frequent attempt to quantify by ‘dollar for dollar’ accounting the past actions of one or other of the parties. Those observations may be understood as explaining why the decision in relation to add backs is fundamentally one of discretion.
[51] [2013] FamCA 253, [53].
[52] (1986) 161 CLR 513.
Contrastingly, in Pate & Pate,[53] Ryan, Aldridge and Austin JJ examined the availability of add backs in circumstances where a party had applied monies standing to the credit of their bank account. The Full Court considered it to be misconceived to suggest that the party who did not own the account had a legal interest in it. The court held that the bank account from which the sum had been withdrawn was owned by the account holder and represented a debt owed by the bank to the holder.[54] On the facts of that appeal, the husband had been lawfully free to draw down on the account and was the owner of the assets so purchased (shares) without having to account to the wife for any capital gain or income derived. In short, the wife acquired no legal or equitable interest in those shares. Further, the position would have been no different had the account been held in joint names.[55]
[53] [2018] FamCAFC 171.
[54] [2018] FamCAFC 171, [30]-[31] citing Croton v The Queen (1967) 117 CLR 326, 330-1.
[55] [2018] FamCAFC 171, [32].
Despite those conclusions, the Full Court allowed that it would have been orthodox to have made some allowance by way of add backs for legal fees on the basis that this was to be regarded as a premature distribution of funds in which both parties had held an interest.[56] In dismissing this ground of appeal, the Full Court also recognised that the option of making an add back was not available since the quantum of the sum expended on legal fees was not proved by the evidence. As to this, their Honours observed that it was erroneous to approach the issue upon an assumed onus of proof since the “parties only bore the mutual onus of giving one another full and frank disclosure of their financial circumstances, but that onus does not entail an obligation to explain each and every item of expenditure and every bank account transaction after their separation.” At the same time, and recognising the forensic challenge that it entailed, the Full Court held that a party contending for an add back in respect of some item of expenditure bore the evidentiary burden of eliciting sufficient evidence to enable the add back to be quantified.[57] Absent sufficient particularisation, the ground of challenge failed and the proposed add back was refused.
[56] [2018] FamCAFC 171, [39] citing NHC &RCH (2004) FLC 93-204, [55]-[57].
[57] [2018] FamCAFC 171, [40].
Questions of notional add backs thus present a range of considerations.
Adapting the principles to the circumstances of the present case, I am not prepared to allow any add back in relation to the first respondent’s withdrawal of $123,010 on 28 April 2009 from his ANZ Access Advantage Account. As was observed in Pate & Pate, it was hardly surprising that the first respondent could not recall the historic detail of this 2009 transaction. The challenge to a 2009 transaction had the quality of an ex post facto audit of the parties’ financial affairs. It was open to the applicant to have investigated the detail of this issue before trial. Further, the first respondent gave evidence that the money had been invested in his business and no credible alternative was suggested by the applicant. More importantly, such other evidence as was adduced upon it supported the first respondent’s evidence. Specifically, the applicant’s trial affidavit deposed that the first respondent had paid $123,000 to purchase the P Pty Ltd franchise and had made that payment on 28 April 2009. Why this issue was pressed was not clear.
The question is more problematic in relation to the second amount, being the transfer of $150,000 to CC Real Estate on 28 April 2017 and the subsequent transfer back to the first respondent’s personal account in the period between 30 January 2018 to 24 July 2018. A number of observations may be made. First is that these monies were transferred before the date of separation from an account that was held with CC Real Estate. Secondly, before separation, they were then transferred to the first respondent’s account. Thirdly, they were expended by him in the period post-separation. Finally, they were applied for a variety of purposes, which relevantly included a sum of $76,337 for legal fees. By his trial affidavit, the first respondent objected to the total sum of $150,000 being added back. Otherwise, it is important to note that the first respondent did make detailed disclosure on oath of the sum of $150,000 being applied. By his trial affidavit, he deposed to the use of those funds for the following purposes: spousal maintenance; legal fees; tax liabilities; credit cards; living expenses; private school fees, business valuation fees and mortgage repayments. In this respect, I reject the applicant’s Chang & Su[58] submission.
[58] (2002) FLC 93-117.
The first respondent was not to be expected to live in an economic vacuum pending the trial and I refuse the add back application save as to the payment for legal fees. Having regard to the broad discretion that is to be applied, I allow that a sum of $75,000 be added to the Asset Pool.
Sharma Family trust
While there appeared to be some confusion between the parties relating to the amount that was in an account of the Sharma Family Trust at the date of separation, the only present relevance of the trust is that it holds title to certain of the properties the subject of the application.
Nothing further was said to make this trust of any other relevance.
Liabilities in dispute
Again, by the end of trial, there was very little in dispute.
Outstanding loan from second respondent – $40,000
Although there had been a question whether the husband had an extant liability to his mother of $40,000 this issue was not pursued.
Thus, it is now left out of account and is not included in the Asset Pool.
Credit card liabilities – $32,430
While these were in dispute, in the course of cross-examination, and upon being presented with relevant documents, the applicant accepted the subject credit card liabilities as at the date of separation.
Each of those liabilities was included in the Asset Pool.
Applicant’s tax liability – $19,500
The applicant has an outstanding tax liability of $19,500. It was submitted that this debt arose from a pre-separation disposition that was made to the applicant from the D Group and it was accepted that this was a liability that should be included in the Asset Pool.
It has accordingly been included in the parties’ agreed Asset Pool.
It was not clear why this liability was disputed, however, in the end result, it was accepted that it was a personal liability of the applicant.
The circumstance that this liability was included in the Asset Pool may raise the spectre of double recovery when quantifying a cash payment to the applicant. It is, of course, preferable that this risk be avoided.
Div 7A liability – $149,193
At the commencement of trial there was to dispute as to whether the first respondent had an extant liability under Div. 7A of the Income Tax Assessment Act 1936 (Cth) by reason of his having borrowed funds from the D Group. As noted, he had borrowed those monies for the purposes of various property developments.
It was necessary for the first respondent to call evidence from an accountant, Mr L so as to establish the nature and extent of these taxation liabilities. An aide memoire was provided in the course of closing submissions by which it was demonstrated that, when account was taken of the purchase price of the investment properties, there had been a shortfall of $374,473 which was required to be obtained. The document, which had earlier been provided during re-examination of the first respondent, was accepted by the applicant’s counsel as being accurate.[59] The first respondent’s case, which I accept, was that the shortfall was met by borrowing company funds and that the act of doing so attracted Div. 7A liabilities.
[59] The concession was properly made by Mr Moisidis and based upon source documents.
Ultimately, the liability was accepted, as it should always have been. The present case was to be distinguished from one in which tax liabilities may have remained unpaid as a deliberate course of conduct that was designed to reduce or minimise the Asset Pool or where a party had acted recklessly so as to destroy matrimonial property: cf Kowaliw v Kowaliw.[60] To the contrary, the Div. 7A liability has been incurred as part of a design that was directed to enlarging the size of the Asset Pool. The first respondent was not to be criticised for his endeavours. Indeed, on some authority, had these property ventures not been successful and those losses crystallised before separation, the losses may well have formed part of the Asset Pool.
[60] (1981) FLC 91-092, [10] (The Court).
In the present case, the value of the subject properties have increased since they were purchased and that has been in no small measure by the first respondent’s endeavours to redevelop them as, for example, by the efforts taken in constructing three units on the U Street, Suburb R property. I do not understand how it was open to the applicant to include the various properties as comprising part of the Asset Pool but to exclude the taxation liabilities from the pool and leave them with the first respondent. These observations apply equally to the CGT liability addressed below.
CGT – $151,450
At the commencement of trial, there was also dispute as to whether the first respondent had an extant liability for capital gains tax arising from the various property developments that he has undertaken.
It was necessary for the first respondent to call evidence from an accountant, Mr L so as to establish these taxation liabilities also. Mr L was then not required for cross-examination.
In the course of closing addresses there was some debate as to why CGT was payable upon one of the investment properties. The point was not developed and ultimately, the liability for CGT was accepted. I note that in Rosati & Rosati,[61] the Full Court recognised the variety of circumstances in which CGT liability may appropriately be taken into account. Critically, their Honours accepted that in cases where the sale of property by one party was effectively the quid pro quo for the other party retaining the matrimonial home, it was appropriate to allow for the inclusion of CGT in the Asset Pool. In the present case, the inclusion of the CGT liabilities was appropriate, particularly where the parties agreed in interim orders that would facilitate the early sale of certain investment properties, all of which Mr L considered would attract a CGT liability that would crystallise on sale of the properties. Those properties are being sold, in effect, to secure the applicant in the J Street, Suburb K property and to do so on the basis that it is holy unencumbered. Stop listening
[61] (1998) FLC 92-804, [6.30]-[6.36] (Ellis, Lindenmayer and Kay JJ).
It should not be overlooked that the first respondent incurred expense in proving matters that should have been uncontroversial. Nor should it be overlooked that the first respondent was not seeking to include the selling costs of the various properties that are to be sold.
Asset pool – existing property interests
Upon my determination of the issues in dispute and insofar as the Asset Pool was not already agreed, I have found that it comprised the following as at the date of trial:[62]
[62]No submission was made that a time other than the date of trial should be employed: Bateman v Bowe [2013] FamCA 253, [32]-[35] (Murphy J).
Asset Value Liability Equity D Group (100%) $560,235 Nil $560,235 U(1) Street, Suburb R $480,000 $480,000 U(2) Street, Suburb R $480,000 $480,000 U(3) Street, Suburb R $430,000 $430,000 Loan secured over U Street, Suburb R ($715,000) ($715,000) Q Street, Suburb R $600,000 ($358,800) $241,200 J Street, Suburb K $690,000 ($410,000) $280,000 S Street, Suburb T $880,000 ($717,347) $162,653 Wife's Furniture, Jewelry & accessories $28,350 Nil $28,350 Husband's Motor Vehicle A $23,000 Nil $23,000 Add Back (Legal fees) $75,000 Division 7A Taxation liability Nil ($149,193) ($149,193) CBA Credit Card* Nil ($10,994) ($10,994) BankWest Credit Card* Nil ($6,199) ($6,199) ANZ Credit Card* Nil ($7,628) ($7,628) Bank of Melb Credit Card* Nil ($7,609) ($7,609) CGT on U(1) Street, Suburb R Nil ($31,787) ($31,787) CGT on U(2) Street, Suburb R Nil ($31,787) ($31,787) CGT on U(3) Street, Suburb R Nil ($19,245) ($19,245) CGT on Q Street, Suburb R Nil ($26,225) ($26,225) Wife's Taxation Liability Nil ($19,500) ($19,500) Total $1,735,271 * Debt at separation
Put another way, the items comprised in this table above, reflects the parties’ agreement on all of those items and the inclusion of an add back of $75,000 on account of legal fees. Otherwise, I have rejected the applicant’s submissions as to the remaining matters that were in dispute.
Whilst the Asset Pool discloses a relatively large number of assets, the true equity in those assets is significantly diminished by the level of debt over many of the properties, nearly all of which is secured. To that end, the interim orders described above provided a mechanism by which the first respondent could clear substantial debt and provide a means by which there can be a final adjustment of property interests.
The net equity of the parties’ Asset Pool is thus $1,735,271.
Contributions – s 90SM(4)(a)-(c)
In the determination of what orders are just and equitable by way of adjustment of those interests, consideration is required of the parties’ contributions and the other matters posed by ss 90SM(4) and 90SF(3). My overall conclusions respecting each of these matters are addressed below. In considering what orders (if any) should be made adjusting property interests under s 90SM, the court shall take into account the financial contributions, direct and indirect, made by or on behalf of a party to the marriage: para 90SM(4)(a). In amplification of the concept of ‘financial contribution’, para 90SM(4)(a) explicitly includes each of the acquisition, conservation or improvement of such property.
The contributions made to a relationship includes those brought to, made during and those which were made post separation. While the parties’ submissions on these matters were focused upon particular issues of fact, I address each in turn.
Contributions at commencement of relationship
It was common ground that the parties had very few assets or liabilities at the commencement of their relationship. It follows that such assets and liabilities as may be the subject of adjustment under the Act were acquired by them during or following the end of the relationship.
As was correctly observed, at the commencement of their relationship, the parties lived in rented accommodation. At that time, they each had modest incomes and few savings of any note. The first respondent’s modest savings were applied to the purchase of household appliances, furniture and basic necessities.
The practice to express, in percentage terms, the parties’ contributions (financial and non-financial) is not to be misunderstood as the product of some precise mathematical formula. It is not and cannot be such a product where one of the integers in the assessment is the result of an evaluation of the parties’ non-financial (i.e. intangible) contributions.
It was implicit in the parties’ submissions that the court should approach the question of an adjustment of property interests on the basis that having regard to their relationship being of 12 years, equality should be the proper conclusion. I proceed on that basis.
Conclusion as to contributions
It is clearly inappropriate to adopt an over-zealous ascertainment of the parties’ contributions in adjusting their interests. What is required is the ascertainment and weighting of the parties’ contributions. The first task – ascertainment – is essentially a question of fact and I have made those findings above. The second – weighting – is quintessentially not a simple mathematical calculation based upon financial contributions.
As the authorities emphasise, it is the disparity in contributions which is important. While this disparity is frequently expressed in percentage terms, the underlying difficulty confronting this evaluative task arises from the need to make the ‘crucial’ comparison between fundamentally different activities. In short, while the parties’ financial contributions are capable of objective assessment, their non-financial contributions are more difficult to assess. For these reasons, it is quite inappropriate to retrospectively allocate a monetary worth to the parties’ non-financial contributions. To the contrary, it is necessary to evaluate in percentage terms the parties’ total contributions, both financial and non-financial, as were made initially, during the period, and following the end, of their relationship. They are not to be separately quantified.
Mr Moisidis of counsel submitted that it was demonstrably unjust and inequitable to divide an Asset Pool of “effectively ~$1.66m” (as was then being suggested), and to give the applicant the J Street, Suburb K property and a small cash payment so as to leave the first respondent with “just under a million dollars.” Particularly was that said to be so where the applicant was unemployed and the first respondent’s business was “making gross fees of over $2 million a year.” To frame the determination of a just and equitable adjustment of property in those terms invited scrutiny. In particular, the quantum of the gross income derived by the business served to distract attention from the income that the first respondent actually received. It also distracted attention from consideration of the applicant’s final claim. In closing address, she sought a share of the Asset Pool equal to the value of the J Street, Suburb K property of $690,000 and a cash payment of $526,686 being a sum of $1,216,686. When that claim is assessed against a notional Asset Pool of $1.66m, it is apparent that the applicant was pressing a claim that was open to the very same criticism being levelled against the first respondent.
It was also submitted that the advances made on behalf of the first respondent’s parents should not be allowed to retain some sort of ‘dazzle’ as a gold bar that had been given to the first respondent.[93] It may be accepted that contributions made early in a relationship may attract the operation of an erosion principle having regard to later contributions and the length of the relationship: Clauson & Clauson;[94] Rosati & Rosati.[95] Equally, it should be accepted that contributions, especially initial contributions, may properly be characterised as providing “the financial springboard or base for the accretions to the parties’ property which have occurred over the period of the marriage”: Rosati & Rosati.[96] As observed above, many of the contributions made to the first respondent were made from the beginning of the relationship to 2009. More recently, in Jabour & Jabour[97] the Full Court observed that “the weight to be attached to an initial contribution must be assessed against the rubric of all of the contributions, both financial and non-financial, made by the parties over the course of their relationship.” I approach the case upon those principles. However, the present case may be distinguished from the result in Jabour inasmuch as the value of a particular asset in this pool has not been the subject of a radical increase in value as a result of some ‘fortuitous’ or ‘serendipitous’ revaluation.[98]
[93]I understood counsel to be referring to Aleksovski & Aleksovski (1996) FLC ¶92-705, 83,445 (Kay J diss’).
[94] (1995) FLC 92,595, 81,910 (Barblett D-JC, Fogarty and Mushin JJ).
[95] (1998) FLC 92-804, [6.16] (Ellis, Lindenmayer and Kay JJ) and cases cited.
[96] (1998) FLC 92-804, [6.21].
[97] [2019] FamCAFC 78, [55]; see also at [83], [136] (Alstergren CJ, Ryan and Aldridge JJ).
[98] [2019] FamCAFC 78, [85], [137].
Mr Barbayannis of counsel submitted there were two issues that fell for determination in the property proceeding. First was that the court needed to assess the financial contributions made for or on behalf of the first respondent, particularly in the circumstance that the quantum of his families’ contributions had never been disputed. Secondly, was whether the court should exercise its discretion in all of the circumstances as to make any allowance pursuant to s 90SF(3) of the Act.
As has been noted above, the applicant’s position changed throughout the course of trial. In the course of closing submissions, I observed that there had been a regrettable difficulty in that the goalposts appeared to move in ways which had not been clearly signalled. To be clear, this appeared to be the result of instructions.
The adjustment which is required
The authorities properly caution against evaluating an appropriate adjustment based on comparable cases. Instead, what is required is an evaluation of the precise similarities between the cases so as to identify consistency.[99] In this case, I was not referred to any authority as informing an appropriate adjustment of property interests in this case. To say as much is not intended as any form of criticism.
[99] Fields & Smith (2015) FLC ¶93-638 [71] – [73].
To apply the principles stated above, I accept that in a relationship of 12 years duration, equality may generally be an appropriate conclusion upon evaluation of the parties’ contributions of all kinds. However, I also consider that it is critical to focus upon, and give due recognition to the disparity in the contributions that were made by or on behalf of the parties. In particular, I cannot ignore that the first respondent’s family have made financial contributions that made a significant difference to the Asset Pool that has been created in this case. Upon the evidence, it is just and equitable to give due recognition and to characterise those contributions as having been made on behalf of the first respondent. There has been no suggestion other than that those contributions were substantial or that they did not find “their way into, and indeed formed the principal source of, the parties’ assets”: cf Rosati & Rosati.[100]
[100] (1998) FLC 92,804, [6.18] (The Court).
I have had regard to the disparity in money terms of the effect of an adjustment of the net Asset Pool on the basis that there would be an allowance as contended for by each of the parties as follows. On the parties’ competing positions, the disparity is shown to be:
a)upon an adjustment of the said sum of $1,735,271 as to:
i)65%, a sum of: $1,127,926
ii)35%, a sum of: $ 607,345
iii)a difference (i.e. disparity) of: $ 520,581
b)upon an adjustment of the said sum of $1,735,271 as to:
i)55%, a sum of: $ 954,399
ii)45%, a sum of: $ 780,872
iii)a difference (i.e. disparity) of: $ 173,527
There is a marked disparity between the parties proposed outcomes.
Adopting the applicant’s stated position (as distinct from the actual relief that she sought), there would be a differential of more than $500,000 in her favour if final orders were made upon the percentage allocation of the parties’ Asset Pool. When it is recalled that the purpose of expressing the parties’ share in their Asset Pool is to recognise all of the contributions that have been made by or on their behalf, and having regard to the settled principle that equality is a not an uncommon result of the evaluation of their contributions, the disparity in that result is neither just nor equitable in my view. By the time of closing submissions, the applicant had reduced her claim for a cash payment to a sum of $526,000. In the result, the claim for the total equity in the house and the cash payment being sought was for a sum in excess of the amount that was claimed by the Amended Initiating Application and Outline of Case (i.e. it was not for 65% of the Asset Pool as had been her claim).
I have also had regard to the disparity in the outcome on the basis proposed by the first respondent. On the basis of a 45/55% division, the disparity in money terms of the effect of a 10% differential between the parties’ interests in the Asset Pool was the sum of $173,527. As noted, that sum was less than the total amount of the contributions that had been made on his behalf.
Concerning the contributions addressed by ss 90SM(4)(a), (b) and (c), I have concluded that a property adjustment of the net Asset Pool should be made as to 45% to the applicant and 55% to the first respondent.
The applicant pressed, in effect, for a 15% increase by way of further allowance for s 90SF(3) factors (i.e. moving from a position of equality), whilst the first respondent pressed for no alteration from a 45/55% division of the Asset Pool based upon all contributions.
The dominant factor relied upon by the applicant was the parties’ income disparity. This is a factor which I have not ignored. However, it is to be weighed in the totality of the facts and circumstances of this case having regard, in particular, to the other matters for which the first respondent is accepting responsibility. The gravamen of the first respondent’s submission against the making of any further allowance for s 90SF(3) factors was that, although his higher income was conceded, account should also be taken for the added responsibilities that he had freely undertaken. Reliance was placed upon by his ongoing liability to meet the Child’s private school fees. It was also emphasised that the first respondent was accepting the financial burden of selling other properties so as to be able to provide the applicant with the home, debt free. To achieve this result requires that the first respondent will incur liabilities for: (a) servicing mortgages, statutory charges and like costs until settlement on the sales of those properties; (b) the costs of sale, including conveyancing; (c) agents commission’s; (d) taxes (both CGT and, in the circumstances, Div. 7 tax).
To my mind, there was validity in the first respondent’s submissions. Full Court authority recognises that there may be circumstances in which it is not at all obvious why an adjustment for s 90SF(3) factors would be required.[101] The first respondent has undertaken a number of obligations and will incur substantial costs in selling property in order that the applicant can retain the J Street, Suburb K property debt free. One consequence of doing so is that those properties will have been disposed of. Further, I accept that the assumption of educational obligations is ongoing and will undoubtedly increase as the Child progresses through her primary and secondary school education. Furthermore, having regard to the parties both having undertaken tertiary and post-tertiary study, I am prepared to assume the first respondent will provide ongoing support to his daughter should she follow the path taken by her father and mother. The Child’s living arrangements are not irrelevant with the shared care operating on a 9/5 fortnightly position, with a half of all holidays being shared. Those considerations weigh strongly in favour of a conclusion that there will be a balancing out of the higher income against the other financial responsibilities that the first respondent has undertaken and will continue to undertake for at least another decade.
[101] Jabour & Jabour [2019] FamCAFC 78, [134].
However, contrary to the submission of counsel for the first respondent, I consider that the court should exercise its discretion in all of the circumstances and make a small allowance pursuant to s 90SF(3). Applying the relevant factors in s 90SF(3), I consider it is just and equitable to make a further adjustment of 2% of that pool in favour of the applicant, resulting in an overall adjustment of property interests of 47% to the applicant and 53% to the first respondent. This will result in an additional sum of ~$34,700 being transferred to the applicant from the Asset Pool. As counsel for the applicant had submitted, the first respondent’s stated difficulty in meeting a myriad of financial commitments (secured and unsecured) was a consideration that weighed in favour of making some further adjustment. I agree. The applicant has been in receipt of spousal maintenance of $3,000 per month since February 2018. In circumstances where I have concluded that this order should be discharged, I am prepared to make a further small allowance in her favour. For the sake of comparison, the further allowance of ~$34,700 would equate to the provision of spousal maintenance for another 11 months from the date of final orders. Contextually, I note that the applicant was to complete her further tertiary study in June 2019 and that the child is now at school.
Finally, in arriving at a final determination, I have undertaken a review of the entirety of the facts and circumstances as presented in the evidence. I have done so for the purpose of reflecting, holistically, on what order is just and equitable in all of the circumstances.
Having reflected upon my findings, I remain satisfied that it is just and equitable for the parties’ existing property interests to be adjusted so as to divide that property 47% to the applicant and 53% to the first respondent. The net value of their Asset Pool is $1,735,271. Translating those conclusions to an adjustment of the parties property interests results as follows:
a.47% of $1,735,271 being the sum of: $815,577.
b.53% of $1,735,271 being the sum of: $919,694.
The disparity between those figures is $104,117.
Relief sought
As the authorities make clear, the question posed by s 90SM(2) of the Act as to whether it is just and equitable for there to be an adjustment of property interests is not to be conflated with the separate question of what relief should be granted: Whent & Marbrand.[102]
[102] [2018] FamCAFC 95, [21].
Concerning the framing of orders that are required to give effect to my conclusions, s 90SS, which concerns general powers of the court, confers a range of specific powers to make orders under Part VIIIAB, including orders: (a) for the payment of a lump sum; (b) imposing terms and conditions, and; (c) as may be necessary to do justice between the parties.[103] The section does not, in or of itself, provide an independent source of power to make orders otherwise than in accordance with s 90SM.[104] The court is not confined to the relief proposed by the parties and should consider what orders are appropriate so as to effect a just and equitable outcome.
[103] see para 90SS(a), (i) and (k): cfKennon v Spry (2008) 238 CLR 366, [200] (Kiefel J).
[104] cf Hickey, (2003) FLC 93-143, [41]-[48].
By s 90ST of the Act, the court is obliged as far as is practicable, to make orders so as to achieve two objects: (1) to finally determine the financial relations of the parties; (2) to avoid further proceedings between them.
The making of final orders involves, in substance a division of the net Asset Pool is $1,735,271 in the proportions of 47/53% translates to an adjustment of property interests to the applicant of $815,577 and to the first respondent of $919,694.
It is then necessary to frame orders to give effect to those conclusions. In the making of final property orders, it is well recognised that it is desirable to make orders that avoid the sharing of particular assets: Norbis v Norbis.[105] Subject to the following, in order to secure the result that the applicant should receive 47% of the Asset Pool, my provisional view is that the Asset Pool should be adjusted as follows:
[105] (1986) 161 CLR 513, 521 (Mason and Deane JJ).
Applicant Property Adjustment J Street, Suburb K property 690,000 Furniture, jewelry and effects 28,350 Cash payment 97,227 Sub-total $815,577
I have expressed my reasons in terms of a provisional view because the scope of the first respondent’s obligation to make a cash payment of $97,227 (Cash Payment) to the applicant is subject to the following; namely, that the first respondent in turn sought that the applicant should:
(1) retain her taxation liability of $19,500. As I see it, this should not affect the matter greatly unless a final order is required to declare that the applicant is personally liable for payment of this tax. I would have thought such an order was unnecessary;
(2) bear her proportion of the expenses that were incurred in the conduct of the proceeding. I address this matter below.
The parties submitted a variety of orders that were said to be appropriate. To some extent, each of the parties has identified particular assets which, they contended or agreed, should be retained by them respectively. In particular, it was common ground that the applicant should retain the J Street, Suburb K property. On the case run by the parties, it was generally accepted that:
a)the applicant should receive the J Street, Suburb K property, unencumbered. In practical terms this entails the transfer of that property valued at $690,000 and the discharge of the mortgage over that property ($410,000); and
b)the first respondent should retain all other assets and liabilities, and responsibility for the disposal or retention of any other assets as the case required. Those other assets and liabilities have been set out in the Asset Pool above and are, to some extent, subsumed in the interim consent orders that provided for the sale of certain properties with the net proceeds of sale to be held in trust pending determination of this proceeding.
I address the proposed final orders in further detail below.
Expenses of trial evidence
The first respondent incurred various expenses in relation to the issues which required determination in the proceeding. Contextually, it will be recalled that the applicant had instituted a proceeding for an adjustment of property interests. At first sight, it was for her to establish her claim. Instead, the first respondent took the steps needed to adduce independent evidence, recognising the parties’ mutual desire that they finalise their relations and that the applicant’s financial circumstances precluded her from doing so. In the result, the first respondent undertook those steps, incurring the expense, in the first instance, of securing the independent evidence as to the following: valuation of the properties (C Pty Ltd), the business of D Group (H Valuations, Mr G) and for taxation issues (Mr L). He also bore the costs associated with the parties’ attempt at mediation and a family report.
Substantial expenses were incurred in relation to the proof of those matters without which the determination of the matter would have been made at best speculative in many respects. Faced with problems of those kinds, the court may well have been left with no choice but to make orders for the sale of all the properties and business in order to make an assessment of the true value of the net Asset Pool and from that position to make orders which effected a percentage allocation of the Asset Pool. Such an approach may well have attracted arguments that the immediate sale of all property (including the matrimonial home and business) was neither just nor equitable.
Despite those considerations, the applicant contested that she should bear any part of the expense associated with mediation, a family report, or in ascertaining values in relation to the properties, the business or for the various taxation liabilities that required consideration.
In the course of cross-examination, each of the expert’s costs was put to the applicant. The only expert, whose costs were put in issue were those of Mr L. Despite those concessions, the proposed orders annexed to the applicant’s closing written submissions proposed[106] that the first respondent be solely liable for the fees incurred in retaining Mr L and the costs of all valuations. Save for maintaining that position by the closing written submission, very little was further said as to why the first respondent should bear all of those costs.
[106] Wife’s proposed orders 7 and 9.
The absence of detailed submissions may be explained by the parties’ consent orders made on 18 December 2018. It was by those orders that the parties were agreed in a range of matters that were to be undertaken to secure that the matter was ready for trial including the conduct of mediation and valuations of properties and the business. Notably, the parties agreed as follows:
a)as to each of the property valuations, that the costs be borne in equal shares by the parties, but be paid in the first instance by the husband and be recouped upon the making of final property orders (Orders 3-4);
b)as to valuation of the D Group, that the costs be bornd in equal shares by the parties, but be paid in the first instance by the husband and be recouped upon the making of final property orders (Orders 5-6);
c)as to mediation, that the costs be borne in equal shares by the parties, but be paid in the first instance by the husband and be recouped upon the making of final property orders (Orders 9-10).
Somewhat surprisingly, the first respondent accepted that he would bear the entire costs of Mr L’s advice and evidence.
In my view, nothing was submitted as to why the first respondent should bear the whole of the remainder of the expert expenses. I have determined that the applicant should bear half of the expenditure that was properly and reasonably incurred in relation to the conduct of the litigation.
The total amount incurred by the first respondent was $86,272 made up as to: (1) Single experts and mediators fees: $47,118; (2) Mr N, supplementary report: $3,630; (3) Mr G, Updated Business valuation: $15,400; (4) C Pty Ltd, valuations: $5,318; (5) Financial Options, Business valuation reports: $14,806.
The claim for the applicant to bear one half of those expenses is allowed. The quantum of the applicant’s half share is $35,436.
Spousal maintenance
The first respondent’s trial affidavit addressed the claim for spousal maintenance and why, he said, he could not continue to pay it.
The proposed orders annexed to the applicant’s closing written submissions made no provision for spousal maintenance. As noted above, in the course of closing submissions it was confirmed that, having regard to the way in which the parties had run their case, the application for spousal should be seen as a consideration arising under s 90SF(3)(r).
Having been asked to decide, and decided, the application on that basis the application for further spousal maintenance should be dismissed.
Proposed final orders
Orders are required to give effect to the conclusions that I have reached. Although I have concluded that it is be preferable for the parties bring in minutes of proposed orders, they should address the following issues. I will make those final orders in chambers if they can be agreed, however, if not, the matter can be listed on short notice.
First, some previous property and spousal maintenance orders should be discharged. For the avoidance of doubt, this should address the interim order for spousal maintenance and the interim property orders pursuant to which certain properties were to be sold. To the extent that any of those sales are incomplete, this may require consideration.
Secondly, it was proposed that an order be made that the first respondent pay, or cause to be paid, the sum of the Cash Payment to the applicant within 30 days of final orders being made and that it be paid to Kennedy Guy, Lawyers, for and on her behalf. The first respondent proposed for payment within 30 days whereas the applicant was content to be paid within 60 days. The first respondent’s proposal should be accepted.
Thirdly, the quantum of that Cash Payment, or more precisely, the scope of the obligation to pay it should be conditioned upon:
a)the first respondent being entitled to set-off in diminution of his liability to make that payment, the sum of $35,436 representing the amount that I have determined the applicant should bear for expenditure that was incurred in relation to the litigation; and,
b)the applicant retaining her taxation liability of $19,500.
c)delivery of the Motor Vehicle F (Motor Vehicle F), in good order and condition, together with all and any keys, service books and other accessories relating to the vehicle (see below).
Fourthly, since the applicant has possession of the Motor Vehicle F, it may be necessary that D Group Pty Ltd (ACN …) be added as a third respondent to the proceeding. This will be necessary to secure the result that enforceable orders are made for the return of that vehicle. Once that has been done, an order can then be made that the vehicle be delivered up to the possession of D Group and that such delivery be conditioned on terms that it be returned in good order and condition as discussed above. Relatedly, an order is also required to condition the first respondent’s obligation to make the Cash Payment as being subject to delivery of that vehicle on the terms described above. With co-operation, it may be possible to avoid the making of such orders.
Fifthly, a series of orders were proposed and are required to secure the following results that are contemporaneous with the Cash Payment:
a)transfer to the applicant, title to the J Street, Suburb K property;
b)discharge of any mortgages at the expense of the mortgagor, including over the J Street, Suburb K property;
c)removal of all caveats at the applicant’s expense;
d)the applicant doing all acts and things and signing all documents as may be necessary for her to resign as trustee and any other position she may hold in the Sharma Family Trust (Trust) and to relinquish any and all rights and beneficial or other entitlements and benefits that she may have in the Trust, including an entitlement under any loan account standing to the credit of the applicant which she may otherwise be entitled to call upon;
e)the transfer by the applicant of any interest claimed in any property other than the J Street, Suburb K property;
f)pending completion of the obligations created by those orders, a declaration be made that the parties hold their respective interests in the properties upon trust pursuant to these orders.
While the parties were agreed in these matters, it is necessary that they each be addressed to the extent that is now required. In particular, having regard to the parties’ consent interim property orders, it is not presently clear what orders are actually now required in these respects in relation to any property other than the J Street, Suburb K property.[107]
[107] The husband’s proposed orders 9, 10 and 11 now appear largely redundant.
Sixthly, an order was proposed, and is required, that pending the discharge of mortgage over, and transfer to the applicant the title of the J Street, Suburb K property, the first respondent pay, or cause to be paid, the repayments pursuant to that mortgage as and when they fall due.
Seventhly, a series of ancillary orders were proposed that upon transfer of the J Street, Suburb K property, the applicant otherwise pay and indemnify the first respondent with respect to any liabilities of whatsoever nature and kind relating to the J Street, Suburb K property.
Eighthly, an order is proposed, and should be made, that the first respondent indemnify the applicant and keep her indemnified in relation to all and any liabilities in his personal name and/or the D Group or the Trust (Entities) including any and all taxation liabilities.[108]
[108] Husband’s proposed orders 13, 14,
Ninthly, the usual orders were proposed that each party retain for their sole use and benefit all assets in their respective names as described.[109]
[109] See, eg, the husband’s proposed orders 12(a)-(d), 15(a)-(d) and 17(a)-(f).
Tenthly, pursuant to s 90ST of the Act, the order should provide that it will finally determine the financial and other rights between the parties and avoid future proceedings between them. To the extent that it be necessary, I am prepared to make an order under s 106A of the Act.
Conclusion
The parties will be allowed a fixed period within which to file and serve a minute of proposed order indicating where they are agreed or disagreed. Insofar as they are agreed, I will make those final orders in chambers. Should there be disagreement, it will be necessary for the proceeding to be mentioned at a convenient time.
I express my gratitude to counsel for their assistance.
I certify that the preceding two hundred and seventy-eight (278) paragraphs are a true copy of the reasons for judgment of Judge A Kelly
Date: 14 November 2019.
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